front 1 Which one of the following invests in a portfolio that is fixed for the life of the fund? A.mutual fund B.money market fund C.managed investment company D.unit investment trust | back 1 D |
front 2 ______ are partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis. A.Commingled funds B.Closed-end funds C.REITs D.Mutual funds | back 2 A |
front 3 A __________ is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds. A.commingled pool B.unit trust C.hedge fund D.money market fund | back 3 C |
front 4 Advantages of investment companies to investors include all but which one of the following? A. record keeping and administration | back 4 D |
front 5 5. Which of the following typically employ significant amounts of leverage? I. Hedge funds II. REITs III. Money market funds IV. Equity mutual funds A.I and II only B.II and III only C.III and IV only D.I, II, and III only | back 5 A |
front 6 The NAV of which funds is fixed at $1 per share? A. equity funds | back 6 B |
front 7 The two principal types of REITs are equity trusts, which _______________, and mortgage trusts, which _______________. A.invest directly in real estate; invest in mortgage and construction loans B.invest in mortgage and construction loans; invest directly in real estate C.use extensive leverage; distribute less than 95% of income to shareholders D.distribute less than 95% of income to shareholders; use extensive leverage | back 7 A |
front 8 A contingent deferred sales load is commonly called a ____. A.front-end load B.back-end load | back 8 B |
front 9 In the United States in 2014, there were approximately _______ mutual funds offered by fewer than _______ fund complexes. 12,000; 600 7,000; 100 8,000; 800 9,000; 300 | back 9 C |
front 10 10. Part B of a mutual fund prospectus contains information about: I. Fund holdings by directors and officers II. Front-end and back-end loads Securities held by the fund at the end of the fiscal year I only I and II only I and III only I, II, and III | back 10 C |
front 11 11. Mutual funds provide the following for their shareholders. A. diversification | back 11 D |
front 12 12. The average maturity of fund investments in a money market mutual fund is _______. slightly more than 1 month slightly more than 1 year about 9 months between 2 and 3 years | back 12 A |
front 13 13. Rank the following fund categories from most risky to least risky: I. Equity growth fund II. Balanced fund III. Sector fund IV. Money market fund IV, I, III, II III, II, IV, I I, II, III, IV III, I, II, IV | back 13 D |
front 14 14. Which of the following result in a taxable event for investors? I. Short-term capital gain distributions from the fund II. Dividend distributions from the fund Long-term capital gain distributions from the fund I only II only I and II only I, II, and III | back 14 D |
front 15 15. The type of mutual fund that primarily engages in market timing is called _______. a sector fund an index fund an ETF an asset allocation fund | back 15 D |
front 16 16. As of 2014, approximately _____ of mutual fund assets were invested in equity funds. 5% 52% 30% 12% | back 16 B |
front 17 17. As of 2014, approximately _____ of mutual fund assets were invested in bond funds. 22% 32% 37% 47% | back 17 A |
front 18 18. As of 2014, approximately _____ of mutual fund assets were invested in money market funds. 5% 18% 44% | back 18 B |
front 19 19. Management fees for open-end and closed-end funds typically range between _____ and _____. A. .2%; 1.5% B. .5%; 5% 2%; 5% 3%; 8% | back 19 A |
front 20 20. The primary measurement unit used for assessing the value of one's stake in an investment company is ___________________. net asset value average asset value gross asset value | back 20 A |
front 21 21. Net asset value is defined as ________________________. book value of assets divided by shares outstanding book value of assets minus liabilities divided by shares outstanding market value of assets divided by shares outstanding market value of assets minus liabilities divided by shares outstanding | back 21 D |
front 22 Assume that you have just purchased some shares in an investment company reporting $500 million in assets, $50 million in liabilities, and 50 million shares outstanding. What is the net asset value (NAV) of these shares? $12 $9 $10 | back 22 B |
front 23 Assume that you have recently purchased 100 shares in an investment company. Upon examining the balance sheet, you note that the firm is reporting $225 million in assets, $30 million in liabilities, and 10 million shares outstanding. What is the net asset value (NAV) of these shares? $25.50 $22.50 $19.50 | back 23 C |
front 24 24. The Vanguard 500 Index Fund tracks the performance of the S&P 500. To do so, the fund buys shares in each S&P 500 company __________. A. in proportion to the market value weight of the firm's equity in
the S&P 500 | back 24 A |
front 25 25. Which of the following is not a type of managed investment company? A. unit investment trusts | back 25 A |
front 26 26. Which of the following funds invest specifically in stocks of fast-growing companies? A. balanced funds | back 26 B |
front 27 27. A fund that invests in securities worldwide, including the United States, is called ______. an international fund an emerging market fund a global fund a regional fund | back 27 C |
front 28 28. The greatest percentage of mutual fund assets are invested in ________. bond funds equity funds hybrid funds money market funds | back 28 B |
front 29 29. Sponsors of unit investment trusts earn a profit by ___________________. deducting management fees from fund assets deducting a percentage of any gains in asset value selling shares in the trust at a premium to the cost of acquiring the underlying assets charging portfolio turnover fees | back 29 C |
front 30 30. Investors who want to liquidate their holdings in a unit investment trust may ___________________. sell their shares back to the trustee at a discount sell their shares back to the trustee at net asset value sell their shares on the open market sell their shares at a premium to net asset value | back 30 B |
front 31 31. Investors who want to liquidate their holdings in a closed-end fund may ___________________. sell their shares back to the fund at a discount if they wish sell their shares back to the fund at net asset value sell their shares on the open market sell their shares at a premium to net asset value if they wish | back 31 C |
front 32 32. __________ fund is defined as one in which the fund charges a sales commission to either buy into or exit from the fund. A load A no-load An index A specialized-sector | back 32 A |
front 33 33. Which of the following is a false statement regarding open-end mutual funds? They offer investors a guaranteed rate of return. They offer investors a well-diversified portfolio. They redeem shares at their net asset value. They offer low-cost diversification. | back 33 A |
front 34 34. __________ funds stand ready to redeem or issue shares at their net asset value. Closed-end Index Open-end Hedge | back 34 C |
front 35 35. Revenue sharing with respect to mutual funds refers to _________. fund companies paying brokers if the broker recommends the fund to investors allowing certain classes of investors to engage in market timing charging loads to new investors in a mutual fund directly marketing funds over the Internet | back 35 A |
front 36 36. Higher portfolio turnover: I. Results in greater tax liability for investors II. Results in greater trading costs for the fund, which investors have to pay for Is a characteristic of asset allocation funds I only II only I and II only I, II, and III | back 36 D |
front 37 37. Low-load mutual funds have front-end loads of no more than _____. 2% 3% 4% 5% | back 37 B |
front 38 38. Most real estate investment trusts (REITs) have a debt ratio of around _________. 10% 30% 50% 70% | back 38 D |
front 39 39. Measured by assets, about _____ of funds are money market funds. 15% 25% 40% | back 39 B |
front 40 40. Which of the following is not a type of real estate investment trust? I. Equity trust II. Debt trust III. Mortgage trust IV. Unit trust I and II only II only II and IV only I, II, and III | back 40 C |
front 41 41. ______________________ are often called mutual funds. Unit investment trusts Open-end investment companies Closed-end investment companies REITs | back 41 B |
front 42 42. Mutual funds account for roughly ______ of investment company assets. 30% 50% 70% 90% | back 42 D |
front 43 43. An official description of a particular mutual fund's planned investment policy can be found in the fund's _____________. prospectus indenture investment statement | back 43 A |
front 44 44. Mutual funds that hold both equities and fixed-income securities in relatively stable proportions are called ____________________. income funds balanced funds asset allocation funds index funds | back 44 B |
front 45 ______ are mutual funds that vary the proportions of funds invested in particular market sectors according to the fund manager's forecast of the performance of that market sector. A. Asset allocation funds | back 45 A |
front 46 46. Specialized-sector funds concentrate their investments in _________________. bonds of a particular maturity geographic segments of the real estate market government securities securities issued by firms in a particular industry | back 46 D |
front 47 47. If a mutual fund has multiple-class shares, which class typically has a front-end load? Class A Class B Class C Class I | back 47 A |
front 48 48. The commission, or front-end load, paid when you purchase shares in mutual funds may not exceed __________. 3.5% 6% 8.5% 10% | back 48 C |
front 49 You are considering investing in one of several mutual funds. All the funds under consideration have various combinations of front-end and back-end loads and/or 12b-1 fees. The longer you plan on remaining in the fund you choose, the more likely you will prefer a fund with a __________ rather than a __________, everything else equal. A. 12b-1 fee; front-end load | back 49 B |
front 50 Under SEC rules, the managers of certain funds are allowed to deduct charges for advertising, brokerage commissions, and other sales expenses directly from the fund assets rather than billing investors. These fees are known as ____________. direct operating expenses back-end loads | back 50 C |
front 51 51. The SEC requires funds to disclose: I. After-tax returns for the past year II. After-tax returns for the last 5-year period The tax impact of portfolio turnover I only I and II only I and III only I, II, and III | back 51 D |
front 52 SEC Rule 12b-1 allows managers of certain funds to deduct __________ expenses from fund assets; however, these expenses may not exceed __________ of the fund's average net assets per year. marketing; 1% marketing; 5% administrative; .5% administrative; 2% | back 52 A |
front 53 Consider a mutual fund with $300 million in assets at the start of the year and 12 million shares outstanding. If the gross return on assets is 18% and the total expense ratio is 2% of the year-end value, what is the rate of return on the fund? 15.64% 16% 17.25% | back 53 A |
front 54 Consider a no-load mutual fund with $200 million in assets and 10 million shares at the start of the year and with $250 million in assets and 11 million shares at the end of the year. During the year investors have received income distributions of $2 per share and capital gain distributions of $.25 per share. Assuming that the fund carries no debt, and that the total expense ratio is 1%, what is the rate of return on the fund? 11.19% 23.75% 24.64% | back 54 B |
front 55 Consider a no-load mutual fund with $400 million in assets, 50 million in debt, and 15 million shares at the start of the year and with $500 million in assets, 40 million in debt, and 18 million shares at the end of the year. During the year investors have received income distributions of $.50 per share and capital gain distributions of $.30 per share. If the total expense ratio is .75%, what is the rate of return on the fund? 12.09% 12.99% 8.25% | back 55 A |
front 56 56. Mutual fund returns may be granted pass-through status if _________________. virtually all income is distributed to shareholders the fund qualifies for pass-through status according to the U.S. tax code the fund is sufficiently diversified All of these options (All of the answers must be true for pass-through status to be granted.) | back 56 D |
front 57 57. _____ is an example of an exchange-traded fund. An SPDR or spider A samurai A Vanguard An open-end fund | back 57 A |
front 58 58. If you place an order to buy or sell a share of a mutual fund during the trading day, the order will be executed at _____. the NAV calculated at the market close at 4 pm New York time the real time NAV the NAV delayed 15 minutes the NAV calculated at the opening of the next day's trading | back 58 A |
front 59 According to the 2014 Mutual Fund Fact Book, _______ of total assets were in taxable money market funds and _______ were tax-exempt money market funds. 35%; 14% 12.3%; 75% 16.3%; 1.8% 5%; 47% | back 59 C |
front 60 In his 1970 study, Malkiel found that mutual funds that do well in one period have an approximately ________ chance of doing well in the subsequent-year period. 33% 52% 65% 85% | back 60 C |
front 61 61. In a recent study, Malkiel found that evidence of persistence in the performance of mutual funds ________________ in the 1980s. grew stronger remained about the same became slightly weaker virtually disappeared | back 61 D |
front 62 62. The ratio of trading activity of a portfolio to the assets of the portfolio is called the ____________. reinvestment ratio trading rate portfolio turnover tax yield | back 62 C |
front 63 63. Which of the following ETFs tracks the S&P 500 Index? Qubes Diamonds Vipers Spiders | back 63 D |
front 64 The Stone Harbor Fund is a closed-end investment company with a portfolio currently worth $300 million. It has liabilities of $5 million and 9 million shares outstanding. If the fund sells for $30 a share, what is its premium or discount as a percent of NAV? 9.26% premium 8.47% premium 9.26% discount | back 64 D |
front 65 65. The difference between balanced funds and asset allocation funds is that _____. balanced funds invest in bonds while asset allocation funds do not asset allocation funds invest in bonds while balanced funds do not balanced funds have relatively stable proportions of stocks and bonds while the proportions may vary dramatically for asset allocation funds balanced funds make no capital gain distributions and asset allocation funds make both dividend and capital gain distributions | back 65 C |
front 66 The Wildwood Fund sells Class A shares with a front-end load of 5% and Class B shares with a 12b-1 fee of 1% annually. If you plan to sell the fund after 4 years, are Class A or Class B shares the better choice? Assume a 10% annual return net of expenses before the 12b-1 fee is applied. Class A. Class B. There is no difference. | back 66 B |
front 67 A mutual fund has total assets outstanding of $69 million. During the year the fund bought and sold assets equal to $17.25 million. This fund's turnover rate was _____. 25% 28.5% 18.63% | back 67 A |
front 68 68. Which type of investment fund is commonly known to invest in options and futures in large scale? A. commingled funds REITs | back 68 B |
front 69 69. Advantages of ETFs over mutual funds include all but which one of the following? ETFs trade continuously, so investors can trade throughout the day. ETFs can be sold short or purchased on margin, unlike fund shares. ETF providers do not have to sell holdings to fund redemptions. ETF values can diverge from NAV. | back 69 D |
front 70 Harold has just taken his company public and owns a large quantity of restricted stock. For purposes of diversification, what fund might he help create in order to diversify his holdings? A. commingled funds REITs | back 70 A |
front 71 71. Which of the following funds is most likely to have a debt ratio of 70% or higher? A. bond fund | back 71 D |
front 72 72. _______ have become the main way for investors to speculate in precious metals. Strategic income funds Balanced funds Specialized-sector funds Exchange-traded funds | back 72 D |
front 73 73. From 1971 to 2013 the average return on the Wilshire 5000 Index was _________ the return of the average mutual fund. A. identical to B. .9% higher than C. .9% lower than D. 1.3% higher than | back 73 B |
front 74 74. An open-end fund has a NAV of $16.50 per share. The fund charges a 6% load. What is the offering price? $14.57 $15.95 $17.55 | back 74 C |
front 75 75. The offer price of an open-end fund is $18 and the fund is sold with a front-end load of 5%. What is the fund's NAV? $18.74 $17.10 $15.40 | back 75 B |
front 76 A mutual fund has $50 million in assets at the beginning of the year and 1 million shares outstanding throughout the year. Throughout the year assets grow at 12%. The fund imposes a 12b-1 fee on all shares equal to 1%. The fee is imposed on year-end asset values. If there are no distributions, what is the end-of-year NAV for the fund? $50 $55.44 $56.12 | back 76 B |
front 77 The assets of a mutual fund are $25 million. The liabilities are $4 million. If the fund has 700,000 shares outstanding and pays a $3 dividend, what is the dividend yield? 5% 10% 15% | back 77 B |
front 78 78. Which of the following funds are usually most tax-efficient? A. equity funds | back 78 C |
front 79 You invest in a mutual fund that charges a 3% front-end load, 1% total annual fees, and a 2% back-end load, which decreases .5% per year. How much will you pay in fees on a $10,000 investment that does not grow if you cash out after 3 years of no gain? $103 $219 $553 | back 79 D |
front 80 You invest in a mutual fund that charges a 3% front-end load, 1% total annual fees, and a 0% back-end load on Class A shares. The same fund charges a 0% front-end load, 1% total annual fees, and a 2% back-end load on Class B shares. What are the total fees in year 1 on a Class A investment of $20,000 with no growth in value? $658 $794 $885 | back 80 B |
front 81 You invest in a mutual fund that charges a 3% front-end load, 1% total annual fees, and a 0% back-end load on Class A shares. The same fund charges a 0% front-end load, 1% total annual fees, and a 2% back-end load on Class B shares. What are the total fees in year 1 on a Class B investment of $20,000 if you redeem shares with no growth in value? $596 $794 $885 | back 81 A |
front 82 You pay $21,600 to the Laramie Fund, which has a NAV of $18 per share at the beginning of the year. The fund deducted a front-end load of 4%. The securities in the fund increased in value by 10% during the year. The fund's expense ratio is 1.3% and is deducted from year-end asset values. What is your rate of return on the fund if you sell your shares at the end of the year? 4.35% 4.23% 6.45% | back 82 B |
front 83 83. Which one of the following statements about returns reported by mutual funds is not correct? A. Reported returns are net of management expenses. None of these options. (All of the items are included in reported returns.) | back 83 D |
front 84 84. The top Morningstar mutual fund performance rating is ________. five stars four stars three stars two stars | back 84 A |
front 85 You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD? 7.1% 7.45% 7.25% | back 85 D |
front 86 86. The five-star Morningstar rating implies A. superior returns compared to risk. | back 86 A |
front 87 87. Which type of fund is often priced at a significant discount to net asset value? A. open-end fund | back 87 B |
front 88 88. Which type of fund generally has the lowest average expense ratio? A. actively managed bond funds | back 88 C |
front 89 89. Approximately what percentage of assets held in equity funds in 2014 was in index funds? 20% 33% 50% | back 89 A |
front 90 90. Disadvantages of ETFs include all of the following except A. investors incur a bid-ask spread when purchasing. | back 90 C |