Question 1

Exchange-traded funds

Accepted Answer

ETFs are bought and sold in secondary markets, which means that investors can buy and sell shares of ETFs on stock exchanges just like they would with individual stocks. This distinguishes them from mutual funds, which are typically bought and redeemed directly with the fund company at the end of each trading day. ETFs can be shorted if an investor believes that the price will go down, so statement D is incorrect. While ETFs do typically invest in exchangeable securities, they may also hold other types of assets, so statement B is incomplete. Statement A is also incomplete, as ETFs can redeem their shares, but this is typically done through authorized participants rather than directly with individual investors.

Question 2

Asset allocation affects the investor's return by

Accepted Answer

Asset allocation affects the investor's return by determining how much of the portfolio is invested in different asset classes, thereby weighting the portfolio returns by the allocation.

Question 3

Asset allocation determines the proportion of a portfolio that should be invested in various classes of assets.

Accepted Answer

The answer of Asset allocation determines the proportion of a...

Question 4

If an investor purchases shares in a no-load fund for $36,receives cash distributions of $1,and redeems the shares after one year for $42,what is the percentage return on the investment?

Accepted Answer

The answer of If an investor purchases shares in a...

Question 5

If a closed-end investment company is selling for a discount

Accepted Answer

When a closed-end investment company is selling for a discount, its price is less than the net asset value (NAV). This means that the market price of the company's shares is undervalued compared to the total value of its assets. Investors can buy these shares at a lower price and potentially earn a profit when the market price eventually catches up with the NAV.

Question 6

Exchange-traded funds

Accepted Answer

ETFs are designed to track a specific index of securities, such as the S&P 500 or NASDAQ 100. They do not require investors to select individual stocks, and their performance may vary depending on the performance of the underlying index. They are not load funds, which are mutual funds that charge fees or commissions when bought or sold.

Question 7

Closed-end investment companies
1)have a fixed capital structure
2)issue new stock whenever an individual buys shares
3)may sell for a premium over net asset value
4)must sell for their net asset value

Accepted Answer

1. Closed-end investment companies have a fixed capital structure, meaning they issue a fixed number of shares at inception, which do not change.3. These shares may trade on the open market for a price that is either above (a premium) or below (a discount) their net asset value (NAV), depending on supply and demand dynamics.

Question 8

The net asset value of a closed-end investment company fund increases with

Accepted Answer

The net asset value (NAV) of a closed-end investment company fund is calculated as the total value of the fund's assets minus any liabilities, divided by the total number of shares outstanding. As the value of the fund's assets - which typically include stocks, bonds, and other securities - increases, so does the NAV. Therefore, when stock prices rise, the NAV of the fund also increases.

Question 9

The return a portfolio earns is affected by the allocation of the portfolio's assets.

Accepted Answer

The allocation of a portfolio's assets, such as stocks, bonds, and cash, can have a significant impact on the portfolio's overall return. Different asset classes have different levels of risk and return potential, and an investor's individual risk tolerance and investment goals will determine the appropriate allocation for their portfolio. A well-diversified portfolio with a balanced allocation of assets can help manage risk and potentially improve returns.

Question 10

Closed-end investment companies with beta coefficients less than 1.0

Accepted Answer

Closed-end investment companies with beta coefficients less than 1.0 have less systematic risk than the market, meaning they are less sensitive to overall market movements. This does not necessarily mean they have outperformed or underperformed the market.

Question 11

Asset allocation determines
1)the proportion of a portfolio that should be held in money market securities
2)the distribution of a portfolio between stocks and bonds
3)the allocation of a portfolio among classes of stock

Accepted Answer

Asset allocation involves deciding how to distribute investments across various asset classes, including money market securities, stocks, and bonds, as well as among different classes of stocks.

Question 12

Since closed-end investment companies acquire securities in efficient financial markets,they

Accepted Answer

The answer of Since closed-end investment companies acquire securities in...

Question 13

Asset allocation policy
1)has little impact on a portfolio's return
2)assures portfolio diversification
3)increases the costs associated with investing

Accepted Answer

Asset allocation policy significantly impacts a portfolio's return and does not inherently assure diversification or increase costs.

Question 14

The net asset value of shares in a closed-end investment company is $36.An investor buys the shares for $34 in the secondary market.The company distributes $1,and after one year,the net asset rises to $42.The investor sells the shares for $44 in the secondary market.
a.What is the discount?
 
b.What is the percentage return on the investment?

Accepted Answer

The answer of The net asset value of shares in...

Question 15

Many exchange-traded funds limit their portfolios to

Accepted Answer

Many exchange-traded funds (ETFs) track an index, which is an aggregate measure of stock prices, such as the S&P 500 or the Dow Jones Industrial Average.

Quiz 8: Closed-End Investment Companies

Exchange-traded funds

Asset allocation affects the investor's return by

Asset allocation determines the proportion of a portfolio that should be invested in various classes of assets.

If an investor purchases shares in a no-load fund for $36,receives cash distributions of $1,and redeems the shares after one year for $42,what is the percentage return on the investment?

If a closed-end investment company is selling for a discount

Exchange-traded funds

Closed-end investment companies 1) have a fixed capital structure 2) issue new stock whenever an individual buys shares 3) may sell for a premium over net asset value 4) must sell for their net asset value

The net asset value of a closed-end investment company fund increases with

The return a portfolio earns is affected by the allocation of the portfolio's assets.

Closed-end investment companies with beta coefficients less than 1.0

Asset allocation determines 1) the proportion of a portfolio that should be held in money market securities 2) the distribution of a portfolio between stocks and bonds 3) the allocation of a portfolio among classes of stock

Since closed-end investment companies acquire securities in efficient financial markets,they

Asset allocation policy 1) has little impact on a portfolio's return 2) assures portfolio diversification 3) increases the costs associated with investing

Many exchange-traded funds limit their portfolios to