Question 1

Which of the following applies to hedge funds?

Accepted Answer

Hedge funds are typically less regulated than mutual funds and are not subject to the same level of oversight by securities commissions.

Question 2

If Rebecca's mutual fund has a sales charge schedule saying that if the fund is sold within the first year, the sales charge is 6 percent and if it is sold in the third year, the sales charge becomes 4.5 percent, Rebecca's mutual fund has a

Accepted Answer

The mutual fund with the sales charge schedule described in the question has a deferred sales charge, also known as a back-end load. This means that investors will pay a fee if they sell the fund within a certain period of time, typically a few years after purchasing the shares. In this case, the sales charge decreases as the holding period gets longer, which is typical of a deferred sales charge structure. This is different from a front-end load, where investors pay a fee at the time of purchase, or a no-load fund, which does not charge any sales fees.

Question 3

A mutual fund has a beginning balance of $100 million, earns interest of $10 million, receives dividends of $15 million, and has expenses of $5 million. Ten million shares are outstanding. Calculate the NAV.

Accepted Answer

The answer of A mutual fund has a beginning balance...

Question 4

The difference between the performances of two equity mutual funds during a particular period may be attributed to ________ rather than to the ________.

Accepted Answer

The sector in which the fund is investing has a significant impact on its performance, along with the skills of the manager. Interest rates and dividend returns may also play a role, but the sector and manager's abilities are typically the primary factors. "Some good news" is too vague and cannot be considered a likely contributing factor.

Question 5

Use of Financial Calculator TI BA II Plus required. The Toronto Stock Exchange (TSX)index had a value of 7000 in July 2003. On the same day in July 2007, the TSX index had a value of 12 500. You own an index fund that mirrors the returns of the TSX and has a current value of $36.50 per unit. If the historical return is the same, what will these units be worth three years from today? Ignore any fees or commissions.

Accepted Answer

The answer of Use of Financial Calculator TI BA II...

Question 6

If Becky is going to retire soon, which of the following funds is most appropriate for her?

Accepted Answer

Since Becky is planning to retire soon, she should choose a relatively low-risk investment option. Income funds typically invest in bonds, which offer a steady stream of income in the form of interest payments. This type of fund is a good choice for investors who are seeking consistent income and are not looking for significant growth in their portfolio.

Question 7

Discuss your choice of three similarities and three differences between segregated funds and mutual funds. Provide your own opinion as to the advantages or disadvantages of the choices you made.

Accepted Answer

The answer of Discuss your choice of three similarities and...

Question 8

Use of Financial Calculator TI BA II Plus required. You have just purchased a diversified portfolio of mutual funds by allocating $10 000 in each of a U.S. equity fund and a Canadian equity fund and by allocating $20 000 in a long-term bond fund. Long-term average annual returns on U.S. equities is 4.75 percent, on Canadian equities is 10.5 percent, and on bonds is 4.6 percent. What will your portfolio be worth in 20 years if these average rates hold true and you do not re-balance the mix?

Accepted Answer

The answer of Use of Financial Calculator TI BA II...

Question 9

Use of Financial Calculator TI BA II Plus required. You purchased $10 000 of a balanced fund in your RRSP 26 years ago for $14.38 per unit. It is currently worth $73.93 per unit. What was your annual rate of return?

Accepted Answer

1. Press "2nd" and then "CLR TVM" to clear any previous calculations. 
2. Input the initial investment as a negative number: -$10,000 
3. Input the present value as a positive number: $73.93 
4. Input the number of periods in years: 26 
5. Solve for the annual rate of return by pressing "CPT" and then "IRR". 
6. The calculator will display an annual rate of return of 6.5 percent.

Therefore, the correct answer is D) 6.5 percent.

Question 10

Use of Financial Calculator TI BA II Plus required. Which of the following nominal rates of return yields the highest effective annual return?

Accepted Answer

The answer of Use of Financial Calculator TI BA II...

Question 11

Discuss the implications of a no-load fund that will be held for 20 years and a fund that has a redemption fee that will be held for a similar period.

Accepted Answer

The answer of Discuss the implications of a no-load fund...

Question 12

Use of Financial Calculator TI BA II Plus required. The TSX index was valued at 1000 in 1984. Today (2008)it is valued at 13 144. What has been the annual return of the TSX over this time? (Assume that dates of valuation are the same.)

Accepted Answer

Using the financial calculator TI BA II Plus, we can calculate the annual return of the TSX over this period by using the following formula: 
Annual return = [(Ending value / Beginning value)^(1/number of years)] - 1 
Plugging in the values, we get:
Annual return = [(13,144 / 1,000)^(1/24)] -1 
Annual return = 0.113 -> 11.3%
Thus, the correct answer is option C, 11.3 percent.

Question 13

Which of the following funds uses leverage and short selling to enhance returns?

Accepted Answer

Hedge funds are known to use leverage and short selling techniques to potentially generate higher returns.

Question 14

Use of Financial Calculator TI BA II Plus required. In 1929 the Dow Jones Industrial Average was valued at 400. 80 years later the Dow is valued at 12 277. What would the return on U.S. index funds be over this period of time?

Accepted Answer

The correct answer is A because the return on U.S. index funds over this period of time would be 4 percent.

Question 15

Which of the following bond mutual funds has highest risk?

Accepted Answer

High-yield bond funds invest in lower-rated, high-risk corporate bonds, which means they have the potential for higher returns but also higher risk. Canadian bond funds and index funds tend to have lower risk, as they invest in high-quality government or corporate bonds with relatively predictable returns. Additionally, the long-term bond index fund may have slightly higher risk due to potential interest rate changes over the long term.

Question 16

If Betty has limited savings, very limited investment knowledge, and low income, which of the following funds would not be appropriate for her?

Accepted Answer

Hedge funds are typically only available to accredited investors who have a high net worth and a sophisticated understanding of investing. It would not be appropriate for Betty, who has limited savings and investment knowledge, to invest in a hedge fund. The other three funds, segregated funds, dividend funds, and balanced funds, could be appropriate for Betty depending on her specific financial goals and circumstances.

Question 17

What are the tax efficiencies of holding certain types of funds as a personal investment rather than holding them inside an RRSP?

Accepted Answer

The answer of What are the tax efficiencies of holding...

Question 18

What is the biggest advantage of an ETF over other funds?

Accepted Answer

ETFs (Exchange-Traded Funds) typically have lower Management Expense Ratios (MERs) compared to mutual funds due to their passive management structure, making them a cost-effective investment option.

Question 19

Which is the best reason for investing in mutual funds?

Accepted Answer

Diversification is the best reason for investing in mutual funds. By investing in a mutual fund, investors can own a diversified portfolio of stocks or bonds, which helps to reduce individual security risk. This also enables the investor to access a wider range of investments than they may be able to on their own. It is important to note that A, B, and C are not the best reasons for investing in mutual funds. Management expense ratios, while important, should not be the primary reason for choosing a mutual fund. It is also not always the case that portfolio managers outperform the market, and sector investment goals may not be appropriate for all investors.

Question 20

If Raymond does not want to pay any fees to invest in mutual funds, he should pick

Accepted Answer

No-load mutual funds do not charge any fees or commissions to buy or sell shares. This is the best choice for Raymond if he does not want to pay any fees to invest in mutual funds. Front-end load mutual funds charge a commission or fee when shares are purchased and back-end load mutual funds charge a commission or fee when shares are sold. Zero-fee mutual funds do not exist.

Quiz 14: Personal Investing - Investing in Mutual Funds

Which of the following applies to hedge funds?

If Rebecca's mutual fund has a sales charge schedule saying that if the fund is sold within the first year, the sales charge is 6 percent and if it is sold in the third year, the sales charge becomes 4.5 percent, Rebecca's mutual fund has a

A mutual fund has a beginning balance of $100 million, earns interest of $10 million, receives dividends of $15 million, and has expenses of $5 million. Ten million shares are outstanding. Calculate the NAV.

The difference between the performances of two equity mutual funds during a particular period may be attributed to rather than to the .

If Becky is going to retire soon, which of the following funds is most appropriate for her?

Discuss your choice of three similarities and three differences between segregated funds and mutual funds. Provide your own opinion as to the advantages or disadvantages of the choices you made.

Use of Financial Calculator TI BA II Plus required. You purchased $10 000 of a balanced fund in your RRSP 26 years ago for $14.38 per unit. It is currently worth $73.93 per unit. What was your annual rate of return?

Use of Financial Calculator TI BA II Plus required. Which of the following nominal rates of return yields the highest effective annual return?

Discuss the implications of a no-load fund that will be held for 20 years and a fund that has a redemption fee that will be held for a similar period.

Use of Financial Calculator TI BA II Plus required. The TSX index was valued at 1000 in 1984. Today (2008) it is valued at 13 144. What has been the annual return of the TSX over this time? (Assume that dates of valuation are the same.)

Which of the following funds uses leverage and short selling to enhance returns?

Use of Financial Calculator TI BA II Plus required. In 1929 the Dow Jones Industrial Average was valued at 400. 80 years later the Dow is valued at 12 277. What would the return on U.S. index funds be over this period of time?

Which of the following bond mutual funds has highest risk?

If Betty has limited savings, very limited investment knowledge, and low income, which of the following funds would not be appropriate for her?

What are the tax efficiencies of holding certain types of funds as a personal investment rather than holding them inside an RRSP?

What is the biggest advantage of an ETF over other funds?

Which is the best reason for investing in mutual funds?

If Raymond does not want to pay any fees to invest in mutual funds, he should pick