business chapter 16 test

A mutual fund that invests in companies expecting higher-than-average revenue and earnings growth is called a(n) ________ fund.

growth

Which type of mutual fund invests in high-yield, high-risk corporate bonds?

junk bond fund

The turnover ratio of a mutual fund measures the:

percentage of a fund's holdings that have changed or "been replaced" during a 12-month period

Last month Nellie Jacobson's divorce became final. As part of the settlement, she received $150,000. She would like to invest in mutual funds, but since she is 62 years old, she is concerned with the safety of her "nest egg." Which of the following mutual funds would you recommend?

short-term U.S. government bond fund

Which one of the following statements is false?

there is no need to evaluate mutual fund investments, because investment companies hire the best professional managers they can to manage their funds

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.

true

The major reasons why investors purchase mutual funds are professional management and diversification.

true

Caroline Campbell is buying shares in a mutual fund that invests in bonds offered by foreign companies and governments. What type of mutual fund is she buying?

world bond fund

Mary Cooper just purchased 100 shares in the All-American Fund. The purchase cost for each share was $10. If this fund charges a 3 percent load, what is the total amount of commission she will pay the investment company?

$30 $100 shares × ($10 × 0.03) = $30

The Capitalist Mutual Fund's portfolio is valued at $40 million. The fund has liabilities of $2 million, and the investment company sponsoring the fund has issued 1,250,000 shares. What is the fund's net asset value?

$30.40 ($40 million − $2 million) / 1.25 million shares = $30.40

Tiffany Scott puts $8,000 into a load mutual fund. She knows that her up-front sales charge is 5%. How much of her money actually goes to buy shares in the mutual fund?

$7,600 $8,000 × 0.05 = $400; $8,000 − $400 = $7,600

The typical expense ratio for an index fund is:

0.50 percent or less

If the dollar amount of total return on your mutual fund is $165 and the original cost of your investment is $1,200, then what is your percentage of total return?

13.75 percent $165 / $1,200 = 0.1375 = 13.75 percent

The All-Star Basic Value Fund's portfolio is valued at $105 million. The fund has liabilities of $2.5 million, and the fund's net asset value is $6.25. What is the fund's number of shares outstanding?

16,400,000 ($105 million − $2.5 million) / $6.25 = 16.4 million = $16,400,000

Norma Rose is buying shares in a mutual fund that invests in foreign stocks sold in securities markets throughout the world, excluding the United States. What type of mutual fund is she buying?

International fund

Which of the following rates mutual funds from 1 to 5 stars on how well they have performed in comparison with similar funds?

Morningstar

During 2017, Lincoln Masters received income dividends of $850 and capital gain distributions of $540. Based on this information:

both amounts must be included as taxable income

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

day

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

equity income

Together, all the different management fees, 12b-1 fees, and additional operating costs for a specific fund are referred to as a(n):

expense ratio