Question 1

Marcie is seeking interest income for two years but wants to ensure that her investment is as safe as possible.Which type of mutual fund best fits her requirements?

Accepted Answer

A)  Junk bond fund
B)  Intermediate corporate bond fund
C)  Growth fund
D)  Short-term government bond fund
E)  World bond fundF) C) and D)
G) A) and B)

Question 2

Martin Campbell wants to invest in mutual funds,but is also worried about diversification.Which fund would you recommend to him?

Accepted Answer

A)  Income fund
B)  Long-term corporate bond fund
C)  U) S.government bond fund
D)  Midcap fund
E)  A fund of fundsF) A) and B)
G) All of the above E

Question 3

Income dividends and capital gain distributions are:

Accepted Answer

A)  exempt from taxation.
B)  subject to federal taxation.
C)  subject to federal taxation after the first $1,000.
D)  subject to federal taxation after the first $5,000.
E)  subject to federal taxation after the first $10,000.F) B) and D)
G) All of the above

Question 4

Tax information for mutual funds is reported as part of the year-end statement and on an IRS Form 1099 DIV.

Accepted Answer

A) True 
 B)False  True

Question 5

Sloan Richards is buying shares in a mutual fund that invests in companies with a total capitalization of less than $2 billion.What type of mutual fund is this?

Accepted Answer

A)  Socially responsible fund
B)  Sector fund
C)  Small cap fund
D)  Index fund
E)  Growth fundF) B) and D)
G) B) and E)

Question 6

When you invest in Class A shares,you pay a sales charge when you sell your mutual fund shares.

Accepted Answer

A) True 
 B)False

Question 7

For most mutual funds,the net asset value is calculated at the close of trading each:

Accepted Answer

A)  year.
B)  quarter.
C)  week.
D)  day.
E)  hour.F) A) and B)
G) A) and C)

Question 8

Investors in an open-end fund are free to buy and sell shares at the net asset value.

Accepted Answer

A) True 
 B)False

Question 9

The Capitalist Mutual Fund's net asset value is $25.The fund has liabilities of $2.5 million and 1,500,000 shares have been issued.What is the value of the fund's portfolio?

Accepted Answer

A)  $25 million
B)  $40 million
C)  $50 million
D)  $37 million
E)  $15 millionF) B) and D)
G) B) and E)

Question 10

Which of the following would be found in a mutual fund's prospectus?

Accepted Answer

A)  Statement describing the risk factors associated with the fund
B)  Description of the fund's past performance
C)  Information about the fund's management
D)  The process for buying and selling shares in the fund
E)  All of these would be found in a prospectus.F) A) and B)
G) A) and C)

Question 11

A mutual fund whose shares are issued and redeemed by the investment company at the request of investors is called a ________ fund.

Accepted Answer

A)  closed-end
B)  open-end
C)  load
D)  no-load
E)  convertibleF) All of the above
G) A) and E)

Question 12

Louise Prescott is buying shares in a mutual fund that invests in larger,well-established companies that are expecting higher-than-average revenues and earnings growth.What type of mutual fund is she buying?

Accepted Answer

A)  Socially responsible fund
B)  Sector fund
C)  Small cap fund
D)  Index fund
E)  Growth fundF) A) and D)
G) A) and E)

Question 13

Which one of the following statements is true?

Accepted Answer

A)  Most mutual funds are managed funds.
B)  How long the present fund manager has been managing the fund is irrelevant.
C)  You should ignore fees when comparing mutual funds.
D)  Managed funds are usually index funds.
E)  A team of managers is always better than a single fund manager.F) All of the above
G) A) and B)

Question 14

Investors in closed-end funds,exchange-traded funds,and open-end funds can make money by purchasing shares at a low price and then selling them at a higher price.

Accepted Answer

A) True 
 B)False  True

Question 15

Which of the following is not an advantage of investing in mutual funds?

Accepted Answer

A)  Ease of buying and selling shares
B)  Ongoing management fees and 12b-1 fees
C)  Professional management
D)  Diversification
E)  Multiple withdrawal optionsF) All of the above
G) A) and E)

Question 16

A mutual fund:

Accepted Answer

A)  is a way of investing in a single stock.
B)  offers safety through diversification because a loss in one investment is usually offset by gains in other investments within the fund.
C)  is insured by the FDIC.
D)  is not an investment that is increasing in popularity.
E)  is professionally managed so investors need not monitor fund results.F) A) and D)
G) All of the above

Question 17

Which of the following is an example of an exchange-traded fund (commonly referred to as ETF) that is available to track an index?

Accepted Answer

A)  Midcap stocks
B)  Small cap stocks
C)  Fixed-income securities
D)  Commodities
E)  All of these are correctF) A) and B)
G) A) and C)

Question 18

Typically,you must invest at least $15,000 to open a mutual fund account.

Accepted Answer

A) True 
 B)False

Question 19

The current market value of a mutual fund's portfolio minus the mutual fund's liabilities equals a figure,that when divided by the number of shares outstanding,results in the:

Accepted Answer

A)  book value.
B)  outstanding balance.
C)  LIBOR rate.
D)  net asset value.
E)  accounting value.F) A) and D)
G) All of the above

Question 20

A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n) ________ fund.

Accepted Answer

A)  balanced
B)  equity income
C)  industry
D)  sector
E)  money marketF) B) and E)
G) C) and D)

Exam 16: Investing in Mutual Funds

Marcie is seeking interest income for two years but wants to ensure that her investment is as safe as possible.Which type of mutual fund best fits her requirements?

Correct AnswerverifiedShow Answer

Martin Campbell wants to invest in mutual funds,but is also worried about diversification.Which fund would you recommend to him?

Correct AnswerverifiedE

Income dividends and capital gain distributions are:

Correct AnswerverifiedShow Answer

Tax information for mutual funds is reported as part of the year-end statement and on an IRS Form 1099 DIV.

Correct AnswerverifiedTrue

Sloan Richards is buying shares in a mutual fund that invests in companies with a total capitalization of less than $2 billion.What type of mutual fund is this?

Correct AnswerverifiedShow Answer

When you invest in Class A shares,you pay a sales charge when you sell your mutual fund shares.

Correct AnswerverifiedShow Answer

For most mutual funds,the net asset value is calculated at the close of trading each:

Correct AnswerverifiedShow Answer

Investors in an open-end fund are free to buy and sell shares at the net asset value.

Correct AnswerverifiedShow Answer

The Capitalist Mutual Fund's net asset value is $25.The fund has liabilities of $2.5 million and 1,500,000 shares have been issued.What is the value of the fund's portfolio?

Correct AnswerverifiedShow Answer

Which of the following would be found in a mutual fund's prospectus?

Correct AnswerverifiedShow Answer

A mutual fund whose shares are issued and redeemed by the investment company at the request of investors is called a ________ fund.

Correct AnswerverifiedShow Answer

Louise Prescott is buying shares in a mutual fund that invests in larger,well-established companies that are expecting higher-than-average revenues and earnings growth.What type of mutual fund is she buying?

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Investors in closed-end funds,exchange-traded funds,and open-end funds can make money by purchasing shares at a low price and then selling them at a higher price.

Correct AnswerverifiedTrue

Which of the following is not an advantage of investing in mutual funds?

Correct AnswerverifiedShow Answer

A mutual fund:

Correct AnswerverifiedShow Answer

Which of the following is an example of an exchange-traded fund (commonly referred to as ETF) that is available to track an index?

Correct AnswerverifiedShow Answer

Typically,you must invest at least $15,000 to open a mutual fund account.

Correct AnswerverifiedShow Answer

The current market value of a mutual fund's portfolio minus the mutual fund's liabilities equals a figure,that when divided by the number of shares outstanding,results in the:

Correct AnswerverifiedShow Answer

A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n) ________ fund.

Correct AnswerverifiedShow Answer

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