Question 1

The New American Enterprise Mutual Fund's portfolio is valued at $120 million. The fund has liabilities of $4 million, and the investment company sponsoring the fund has issued 5,800,000 shares. What is the fund's net asset value?

Accepted Answer

A)   $120
B)   $58
C)   $40
D)   $30
E)   $20F) D) and E)
G) B) and D)

Question 2

Phyllis Payne is buying shares in a mutual fund that invests in companies with a long history of paying a dividend. What type of mutual fund is she buying?

Accepted Answer

A)   Aggressive growth fund
B)   Equity income fund
C)   Global fund
D)   International fund
E)   Regional fundF) A) and B)
G) C) and D)

Question 3

When one investment company manages a group of mutual funds, it is called a(n) :

Accepted Answer

A)   family of funds.
B)   exchange fund.
C)   diversification fund.
D)   versatility fund.
E)   asset allocation fund.F) None of the above
G) A) and E)

Question 4

The turnover ratio of a mutual fund measures the:

Accepted Answer

A)   length of time a manager has been in charge of the fund.
B)   amount of profit the fund earns from one investment period to the next.
C)   number of months the average investor holds the fund before selling.
D)   percentage of a fund's holdings that have changed during a 12-month period.
E)   percentage of institutional investors who own the fund.F) B) and C)
G) A) and E)

Question 5

As a shareholder in a mutual fund, you should receive a(n) :

Accepted Answer

A)   annual report.
B)   12b-1 report.
C)   annual prospectus.
D)   annual summary report from the president of the investment company.
E)   copy of the annual mutual funds report containing a summary of the professional advisory services comments.F) A) and B)
G) C) and D)

Question 6

The average management fee for all mutual funds is:

Accepted Answer

A)   less than 0.25 percent.
B)   0.25 percent to 0.50 percent.
C)   0.50 to 1 percent.
D)   1.25 to 2.50 percent.
E)   2.50 to 5.00 percent.F) A) and B)
G) B) and E) C

Question 7

Which of the following is an advantage of an exchange traded fund (ETF) ?

Accepted Answer

A)   No minimum investment amount
B)   Buying and selling shares through a broker at any time at the current market price
C)   Low management fees
D)   Using limit orders to both buy and sell
E)   All of these are advantages of ETFs.F) B) and E)
G) A) and D)

Question 8

Which type of mutual fund invests primarily in corporate bonds with maturities between 5 and 10 years?

Accepted Answer

A)   Junk bond fund
B)   Intermediate corporate bond fund
C)   Municipal bond fund
D)   Short-term government bond
E)   World bond fundF) All of the above
G) A) and C)

Question 9

The most popular and least complicated method of purchasing shares in an open-end mutual fund is through a:

Accepted Answer

A)   regular account transaction.
B)   voluntary savings plan.
C)   contractual savings plan.
D)   minimum withdrawal plan.
E)   free contract plan.F) D) and E)
G) All of the above

Question 10

A mutual fund in which shares are issued only when the fund is organized is called a(n)  ____________ fund.

Accepted Answer

A)   closed-end
B)   open-end
C)   load
D)   no-load
E)   convertibleF) A) and E)
G) A) and D)

Question 11

Will Hopkins is getting ready to purchase shares in a mutual fund. He will have to pay an upfront sales commission to purchase these shares. What type of shares is he buying?

Accepted Answer

A)   Class A
B)   Class B
C)   Class C
D)   Either class A or B
E)   Either class B or CF) C) and D)
G) A) and B)

Question 12

Louise Prescott is buying shares in a mutual fund that invests in companies 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 B)
G) B) and D)

Question 13

Nathan Fuller is buying shares in a mutual fund that invests in the same companies as those found in the S&P 500 and in roughly the same proportion. What type of mutual fund is he buying?

Accepted Answer

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

Question 14

When an investor purchases shares in a load fund, the average sales charge is usually between ____________ percent.

Accepted Answer

A)   0.5 to 2
B)   1 and 3
C)   3 and 5
D)   5 and 7
E)   4 and 6F) A) and B)
G) C) and D) C

Question 15

Cindy and John Appleby just inherited $30,000 and would like to invest the money in a conservative mutual fund. Since they have never invested in mutual funds, they ask for your help. In your own words, describe the sources of information available for evaluating a mutual fund investment.

Accepted Answer

The following factors can be used to eva...

Question 16

Over many years, the majority of managed mutual funds outperform the Standard & Poor's stock index.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following assets would typically be included in an asset allocation fund?

Accepted Answer

A)   Stocks
B)   Bonds
C)   Fixed-income securities
D)   Money market instruments
E)   All of these would typically be part of an asset allocation fund.F) A) and D)
G) C) and D)

Question 18

Which one of the following funds would be considered the safest investment?

Accepted Answer

A)   Growth fund
B)   Money market fund
C)   Sector fund
D)   Asset allocation fund
E)   High-yield bond fundF) B) and D)
G) A) and E)

Question 19

Which of the following options can a mutual fund investor use to purchase shares in an open-end fund?

Accepted Answer

A)   Regular accounts
B)   Voluntary savings plan
C)   Contractual savings plan
D)   Reinvestment plan
E)   All of these are ways to purchase shares in an open-end fund.F) A) and B)
G) All of the above E

Question 20

During 2008, Lincoln Masters received income dividends of $850 and capital gain distributions of $540. Based on this information:

Accepted Answer

A)   both amounts must be included as taxable income.
B)   only the dividends are taxable.
C)   only the capital gains are taxable.
D)   both amounts are tax-exempt.
E)   both amounts are taxed at a rate of 5 percent.F) C) and D)
G) B) and C)

Exam 16: Investing in Mutual Funds

The New American Enterprise Mutual Fund's portfolio is valued at $120 million. The fund has liabilities of $4 million, and the investment company sponsoring the fund has issued 5,800,000 shares. What is the fund's net asset value?

Correct AnswerverifiedShow Answer

Phyllis Payne is buying shares in a mutual fund that invests in companies with a long history of paying a dividend. What type of mutual fund is she buying?

Correct AnswerverifiedShow Answer

When one investment company manages a group of mutual funds, it is called a(n) :

Correct AnswerverifiedShow Answer

The turnover ratio of a mutual fund measures the:

Correct AnswerverifiedShow Answer

As a shareholder in a mutual fund, you should receive a(n) :

Correct AnswerverifiedShow Answer

The average management fee for all mutual funds is:

Correct AnswerverifiedC

Which of the following is an advantage of an exchange traded fund (ETF) ?

Correct AnswerverifiedShow Answer

Which type of mutual fund invests primarily in corporate bonds with maturities between 5 and 10 years?

Correct AnswerverifiedShow Answer

The most popular and least complicated method of purchasing shares in an open-end mutual fund is through a:

Correct AnswerverifiedShow Answer

A mutual fund in which shares are issued only when the fund is organized is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

Will Hopkins is getting ready to purchase shares in a mutual fund. He will have to pay an upfront sales commission to purchase these shares. What type of shares is he buying?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Nathan Fuller is buying shares in a mutual fund that invests in the same companies as those found in the S&P 500 and in roughly the same proportion. What type of mutual fund is he buying?

Correct AnswerverifiedShow Answer

When an investor purchases shares in a load fund, the average sales charge is usually between ____________ percent.

Correct AnswerverifiedC

Cindy and John Appleby just inherited $30,000 and would like to invest the money in a conservative mutual fund. Since they have never invested in mutual funds, they ask for your help. In your own words, describe the sources of information available for evaluating a mutual fund investment.

Correct AnswerverifiedThe following factors can be used to eva...View AnswerShow Answer

Over many years, the majority of managed mutual funds outperform the Standard & Poor's stock index.

Correct AnswerverifiedShow Answer

Which of the following assets would typically be included in an asset allocation fund?

Correct AnswerverifiedShow Answer

Which one of the following funds would be considered the safest investment?

Correct AnswerverifiedShow Answer

Which of the following options can a mutual fund investor use to purchase shares in an open-end fund?

Correct AnswerverifiedE

During 2008, Lincoln Masters received income dividends of $850 and capital gain distributions of $540. Based on this information:

Correct AnswerverifiedShow Answer

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C

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C

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The following factors can be used to eva...
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E

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