ch 13
In The Wall Street Journal's listing of mutual funds, a "p" after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it.
12b-1 fee
Another name for a mutual fund is
An open-end investment company
A mutual fund allows investors to
Become owners of a widely diversified portfolio of securities
What would the NAV of an open-ended mutual fund priced at $10 be if the load is 4%?
$9.60
To be a true no-load fund, there can be a maximum ____ load and a maximum ____ 12(b)-1 fee.
0%; 0.25%
An annual fee charged by some mutual funds to cover marketing and distribution expenses is the
12b-1 fee
A 12b-1 fee can only be charged by a load mutual fund. T/F?
FALSE
A closed-end investment company can create an unlimited number of shares. T/F?
FALSE
A mutual fund always provides active professional investment management. T/F?
FALSE
A mutual fund cannot charge more than 6.5 percent in total sales charges and fees. T/F?
FALSE
A real estate investment trust that invests only in mortgages is called an equity trust. T/F?
FALSE
Advantages of exchange traded funds over mutual funds include a broader market focus. T/F?
FALSE
Indexed funds have high realized capital gains. T/F?
FALSE
A fund's prospectus would provide information about a fund's fee structure. T/F?
TRUE
All mutual funds have management fees. T/F?
TRUE
Which of the following are characteristic of exchange-traded mutual funds?
Traded on listed exchanges
Redeeming your mutual fund shares might result in a charge called
a back-end load
In The Wall Street Journal's listing of mutual funds, a "t" after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it
a back-end load and a 12b-1 fee (both b and c)
A(n) ____ fund is quite speculative.
aggressive growth
The ____ is a service offered by mutual funds that helps investors earn compound interest on their investments.
automatic reinvestment plan
Closed-end investment companies are characterized by
availability for sale or purchase on security markets
In The Wall Street Journal's listing of mutual funds, an "r" after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it.
back-end load
A mutual fund with an objective of both growth and income is a(n)
balanced fund
Advantages of exchange-traded funds over mutual funds include all of the following except
better diversification
Which of the following is not a source of mutual fund returns?
changes in IDB
A no-load fund has no
charge to sell your shares
A(n) ____ sells fund shares, either directly to the public or through certain authorized dealers.
distributor
The major advantage of mutual funds to the small investor is
diversification
Mutual funds do not offer
guaranteed performance
A closed-end investment company that invests in various types of real estate and mortgages is a
hybrid real estate investment trust.
The fund whose main objective is to simply match the market known as a(n) ____ fund.
index
A(n) ____ actually runs the portfolio and makes the buy and sell decisions.
management company
Both load and no-load funds will always charge a
management fee
Which of the following bond mutual funds would provide tax-free income?
municipal bond fund
A mutual fund's NAV is its
net asset value
The fund whose main objective is growth is known as a(n) ____ fund.
none of these ( balanced, preferred stock, index, money market
Expected cash flows from real estate investments are determined by
rent, depreciation, and taxes
Balanced funds invest in a mix of utility and growth equities. T/F?
FALSE
While ETFs offer many of the benefits of mutual funds, they have the tax-timing disadvantages not present with otherwise comparable mutual funds. T/F?
FALSE
The current market value of all the securities a mutual fund owns is called the
NAV
An open-end investment company is commonly known as a mutual fund. T/F?
TRUE
The primary investment objective of bond funds is income. T/F?
TRUE
The primary purpose of investing in income property is to produce an attractive annual cash flow. T/F?
TRUE
With open-end mutual funds, investors cannot lose more than they invested. T/F?
TRUE
____ would not be a reason for purchasing mutual funds.
Tax Advantage
Socially responsible funds typically avoid investing in
alcohol and tobacco stocks
An example of a commercial property is a(n)
all of these
Investors tend to use mutual funds for which of the following reasons
all of these
Which of the following combines the operating characteristics of an open-end fund with some of the trading characteristics of a closed-end fund?
an ETF
An investment option that allows fund shareholders to funnel fixed amounts of money from their paychecks or bank accounts automatically into a mutual fund is a(n)
an automatic investment plan
A balanced fund that emphasizes growth in capital is called a(n)
growth-and-income fund.
The share price of a closed-end fund is determined by
its NAV and general supply and demand conditions ( both a and c)
Value funds look for stocks with relatively all the following except
rapid growth
Asset allocation funds invest money in
stocks, bonds, real estate
If you are a mutual fund investor who needs steady income, you might take advantage of a fund's
systematic withdrawal plans.
Index funds have provided competitive rates of return because
their costs are lower than other stock funds. it is difficult to outperform the market they have very low turnover rates. they are tax efficient. (ALL OF THE ABOVE)
Asset allocation funds invest in stocks, bonds, and money market securities. T/F?
TRUE
Global mutual funds can invest both in domestic and international stocks. T/F?
TRUE
A mutual fund's NAV is calculated
at-least once per day
Most mutual funds allow investors to participate in
automatic investment and REinvestment plans
A behavioral bias in mutual fund investing where investors view recent performance as overly indicative of a fund's future performance is known as
representativeness
An investor with a small amount of money should stick to using load funds instead of no-load funds. T/F?
FALSE
Asset allocation funds invest entirely in U.S. and foreign stocks and bonds. T/F?
FALSE
Back-end load funds offer more liquidity to investors than no-load funds. T/F?
FALSE
Closed-end mutual funds companies buy their shares back from investors at NAV. T/F?
FALSE
Dividend income and capital gains distributions are taxed at identical tax rates. T/F?
FALSE
Equity-income funds emphasize capital appreciation in their investment goals. T/F?
FALSE
Exchange-traded mutual funds are actually closed-end mutual funds. T/F?
FALSE
Index funds, while trying to match market performance, consistently underperform market benchmarks. T/F?
FALSE
Investors select and purchase securities held within mutual funds T/F?
FALSE
It is almost impossible to lose money in a mutual fund as the result of fraud or the mutual fund company's bankruptcy. T/F?
FALSE
Low-load funds do not charge a commission upon initial purchase. T/F?
FALSE
The individual manager of a mutual fund has little to do with a fund's success. T/F?
FALSE
The lower the R2, the closer the relationship between an ETF and its associated target index. T/F?
FALSE
The major reason that investors use mutual funds is their contractual plans, which force regular investing. T/F?
FALSE
The objective of bond and money market funds is growth. T/F?
FALSE
The size of a mutual fund's management fee is related to the fund's performance. T/F?
FALSE
Value funds typically invest in stocks that do not pay dividends and have a high price/earnings ratio. T/F?
FALSE
When evaluating a real estate investment, the main consideration is changes in the property value. T/F?
FALSE
A mutual fund prospectus is required to fully disclose all fund fees and expenses. T/F?
TRUE
A mutual fund's price per share will increase if its underlying holdings increase in value. T/F?
TRUE
A technology fund is an example of a sector fund. T/F?
TRUE
Aggressive growth funds typically buy stocks with high price/earnings ratios and stocks with volatile price fluctuations. T/F?
TRUE
Balanced funds invest in a proportionate amount of common and preferred stocks and bonds. T/F?
TRUE
By using automatic reinvestment plans, dividend and capital gains are used to automatically buy additional shares in the fund. T/F?
TRUE
Conversion privileges allow investors to exchange one fund's shares for that of another, as long as the funds are in the same fund family. T/F?
TRUE
Dividend income, capital gains distributions, and changes in the fund's share price are all sources of return for a mutual fund. T/F?
TRUE
ETFs are set up to protect investors from capital gains taxes better than most mutual funds can. T/F?
TRUE
Generally speaking, socially responsible funds abstain from investing in alcohol, gambling, or tobacco stocks. T/F?
TRUE
More people invest in mutual funds than in any other type of investment product. T/F?
TRUE
Open-ended mutual funds companies buy their shares back from investors at NAV. T/F?
TRUE
Sector funds concentrate their holdings in specific targeted markets. T/F?
TRUE
Spiders and Diamonds are examples of ETFs. T/F?
TRUE
The expected cash flows of a real estate investment are determined by rent, depreciation, and taxes. T/F?
TRUE
The most important advantage of a mutual fund is pooled diversification. T/F?
TRUE
The net asset value (NAV) per share is found by dividing the market value of the fund's securities less the fund's liabilities by the number of shares outstanding. T/F?
TRUE
The price an investor can sell his shares of an open-end mutual fund is the net asset value. T/F?
TRUE
The price per share of a closed-end investment fund could be lower than its NAV. T/F?
TRUE
A fund that invests only in a particular industry would be a ____ fund.
sector
