M5A3 - SMARTBOOK CHP 15-17

The 12b-1 fee of a mutual fund cannot exceed _____ % of the fund's assets per year.

1

A contingent deferred sales load can range from ___% to ___% of withdrawals depending on how long you own the fund before making the withdrawal.

1 5

The average load charge for mutual funds is between ___% and ___%

2 5

Shareholders in mutual funds can receive a return on their investment in one of ____ ways

3

A price quote of 79 means: 79 x face value. 7.9% of face value. 79% of face value. 790% of face value.

79% of face value.

The maximum sales fee on a load fund is ______%. 6 1/2 7 1/2 8 1/2 9 1/2

8 1/2

Bonds that are judged to be of the best quality would have which rating? 1A III or iii AAA or Aaa 1

AAA or Aaa

Class ______ mutual funds have a commission charge when the money is withdrawn during the first five years.

B

According to Standard & Poor's, bond issues in default would have which rating? C B D F

D

_____ REITs own or operate income-producing real estate.

Equity

True or false: To purchase a closed-end mutual fund, you would purchase shares directly from the mutual fund company at any time.

False

Which of the following is not a way to obtain an annual report? Visit the corporation's website. Contact the corporation. Go to your local bank.

Go to your local bank.

Which of the following is true about an open-end mutual fund? The shares are bought and sold on a major stock exchange. A fixed number of shares are issued at the launch of the fund. Shares are issued and redeemed by the investment company at the request of investors. It needs no professional management.

Shares are issued and redeemed by the investment company at the request of investors.

True or false: Asset allocation or diversification is the process of spreading your assets among several different types of investments.

True

Net Asset Value (NAV)*

Value of fund's portfolio - liabilities / number of shares outstanding

The process of spreading your assets among several different types of investments to lessen risk is called ______. differentiating model strategic model spread model asset allocation

asset allocation

A mortgage bond is a corporate bond secured by various ____ of the issuing ____

assets firm, company, or corporation

A call feature allows the corporation to buy outstanding bonds from current bondholders ______ the ______ date

before maturity

A strategy where investors divide their investment dollars among bonds that mature at regular intervals in order to balance risk and return is called a(n): asset webbing. bond ladder. asset allocation. bond allocation.

bond ladder.

An ______ -end fund issues shares only when it is organized and its shares are usually traded on a stock exchange.

closed

The three general types of mutual funds are _______-end, _______-traded, and open-end funds

closed exchange

The key difference between exchange-traded and closed-end funds is: closed-end funds have lower fees than exchange-traded funds. closed-end funds are actively managed by portfolio managers, while exchange-traded funds are invested in the stocks of a certain index. closed-end funds are no-loads, while exchange-traded funds charge a sales commission for each transaction.

closed-end funds are actively managed by portfolio managers, while exchange-traded funds are invested in the stocks of a certain index.

A corporation's written pledge to repay a specified amount of money with interest is called a ______. maturity date corporate bond bond indenture face value

corporate bond

The financing for a foreclosure may be more _____ and _____ than financing your primary residence.

difficult expensive

When an investor holds legal title to a property, the investment is called a _____ investment in real estate

direct

With the passive nature of managing an _____

exchange

Professional management is less of a concern with exchange-traded funds because: exchange-traded funds invest in the stocks of an index, so very little management is needed. exchange-traded funds invest in other mutual funds so very little day-to-day trading is necessary.

exchange-traded funds invest in the stocks of an index, so very little management is needed.

A higher mutual fund turnover ratio often results in higher fund _____

expenses or costs

There may be differences in how interest is paid when comparing Treasury securities and ______. common stocks federal agency debt instruments corporate bonds federal government debt instruments

federal agency debt instruments

The U.S. treasury is an example of a: federal agency publication with information on mortgages. federal agency publications with information on bonds. mortgage broker.

federal agency publications with information on bonds.

A mutual _____ is an investment company that pools investors' money to invest in various securities.

fund

Exchange-traded funds invest in the stocks or securities contained in a specific stock or securities

index

A corporate bond is a corporation's written pledge to repay a specified amount of money along with ______

interest

Federal agency debt issues have a slightly higher risk than government securities therefore a slightly higher _____ rate or rate of return.

interest

The "stated" advantage of paying the up-front charge for a ____ mutual fund is because the salespeople will explain the advantages of the fund and make investment recommendations to suit your objectives.

load

The net asset value is calculated by dividing the current ____ value of the fund's portfolio (reduced by liabilities) by the number of outstanding shares.

market

Face value is the dollar amount the bondholder will receive at the bond's _____ date

maturity

For a corporate bond, the date on which the corporation is to repay the borrowed money is called ______. corporate repayment bond indenture maturity date corporate buy back

maturity date

For a bond, the maturity date is the date on which the corporation is to repay the borrowed

money

Subordinated debentures are sometimes preferred by investors because: of financially backed stock prices. they are backed by federal law. of higher interest rates. of lower risk

of higher interest rates.

A real estate investment trust (REIT) is a firm that ____ investment funds and invests them in real estate or to make construction or mortgage loans.

pools, combines, consolidates, aggregates, or collects

Which of the following are reasons why investors choose mutual funds? Multiple select question. professional management diversification guaranteed returns depository insurance

professional management diversification

A ______ bond is registered in the owner's name.

registered

A bond ladder is where an investor seeks to balance ____ and return

risk

A municipal bond is a debt security issued by a ______ or local municipal _____

state government

Which type of investment often returns more than other investment alternatives like bonds, yet it is also more risky? certificates of deposit life insurance stocks bonds

stocks

A _____ debenture bond is an unsecured bond that gives bondholders a claim secondary to that of other debenture bondholders.

subordinated

Over the entire life of the bond, there will be: four sources of income. two sources of return. one source of return. three sources of return.

two sources of return.

The rate of return earned by an investor who holds a bond for a stated period of time is called ______. dividend yield return on invested capital interest yield yield

yield

If a mutual fund's portfolio is valued at $500 million while there are liabilities of $6 million, what would be the NAV if there were 30 million shares outstanding? $0.16 $16.47 $32.93 $1.65

$16.47 (500,000,000 - 6,000,000) 494,000,000 / 30,000,000

Which of the following is the correct formula for NAV?* cost of portfolio/number of shares outstanding cost of assets less liabilities (market value of portfolio less liabilities)/number of shares outstanding market value of shares divided by number of shares outstanding

(market value of portfolio less liabilities)/number of shares outstanding

If you are investing $10,000 in a mutual fund that charges a sales load, and when you look at your statement you see your beginning balance is $9,425. How much was the sales load (as a percent of invested funds)? 5% 5.75% 6.1% 6.0%

5.75% 10,000 − 9,425)/10,000 = 0.0575

If a mutual fund's portfolio is valued at $500 million while there are liabilities of $100 million, what would be the NAV if there were 30 million shares outstanding? $.130 $133 $1.33 $13.33

500,000,000 - 100,000,000 = 400,000,000 /30,000,000

_______ traded funds invest in the stocks or securities contained in a specific stock or securities index.

Exchange

Which of the following is a "stated" advantage of load mutual funds? The investment performance track record is better with load funds. The sales force will explain the fund and offer advice on when to buy and sell. Because it is a load fund, it has lower operating expenses than no-loads.

The sales force will explain the fund and offer advice on when to buy and sell.

Which of the following are reasons why corporations sell bonds? Multiple select question. They find it difficult to sell stock. They want to abide by federal regulations. They use interest as a tax break. They need money to finance ongoing activities. They don't like meeting stock requirements outlined in the stock selling index.

They find it difficult to sell stock. They use interest as a tax break. They need money to finance ongoing activities.

True or false: A 12b-1 fee helps cover the costs of distributing, marketing, and commissions paid to the brokers of a mutual fund.

True

True or false: A no-load fund does not have a sales charge.

True

True or false: Land and buildings that produce lease or rental income are called commercial properties.

True

True or false: The advantage for an investor to trade bonds through an online broker is discounted commissions on trades.

True

A major disadvantage of investing in exchange-traded funds is: limit orders are not allowed. rates of return are low in comparison to other funds. minimum investments are high. a commission is incurred both upon the purchase and the sale of shares.

a commission is incurred both upon the purchase and the sale of shares.

A typical bond transaction would not include: a normal minimum commission between $5 and $25. cheaper commissions if you buy or sell a number of bonds. advice and information from your discount broker. sales executed by full-service, discount, or online brokerage firms.

advice and information from your discount broker.

Municipal bonds are used to finance which of the following? Multiple select question. airports toll roads schools not-for-profit organizations corporations

airports toll roads schools

Which of the following best defines a mutual fund? a mutual savings bank that takes in deposits and invests in government securities a union of depositors that make their shares available for loans and investments an investment company that pools investors' money to invest in various securities an investment club that meets and decides how to invest members money

an investment company that pools investors' money to invest in various securities

When shares are sold back to the investment company that sponsors the fund, the fund is ______. an exchange-traded fund an open-end fund a closed-end fund

an open-end fund

Business periodicals and federal agency publications are two additional sources of information that can be valuable when evaluating ______. mortgages loans banks bonds

bonds

Corporations may sell ____ in an attempt to raise money for ongoing activities.

bonds

Unlike stocks and mutual funds, which investment type is known for safety? options penny stocks bonds stop losses

bonds

A feature that allows the corporation to call in or buy outstanding bonds from current bondholders before the maturity date is a: call fund. call feature. sinking feature. sinking fund

call feature.

Which of the following are typical types of mutual funds? Multiple select question. closed-end closed-traded open exchange open-end exchange-traded

closed-end open-end exchange-traded

A syndicate can be organized as a ______. sole proprietorship corporation limited partnership trust

corporation limited partnership trust

A _____ is a corporate bond that is backed only by the reputation of the issuing company.

debenture

A contingent _____ _____ load is a 1% to 5% charge that shareholders pay when they withdraw their investment from a mutual fund.

deferred sales

The dollar amount the bondholder will receive at the bond's maturity is called ______. maturity value corporate bond total face value

face value

Most open-end funds provide their investors with the ability to change shares in one fund to another fund within the same ______. family investment objective market stock exchange

family

Interest paid on U.S. government securities is taxable for ______ income tax purposes, but is exempt from _____ and local taxation.

federal state

If the corporation fails to make either interest payments or repayment at maturity, debenture bondholders become: specific creditors. top dollar creditors. general creditors. bottom dollar creditors.

general creditors.

The major objective of equity income funds is to provide: income to shareholders. long-term capital gains to shareholders. income from home equity loans owned by the fund. capital gains each year to shareholders.

income to shareholders.

Over the life of a bond there are two sources of return: _______ received from the purchase date until maturity and the repayment of the ______ value of the bond

interest face, original, or principal

U.S. treasuries are a very low-risk investment that many investors use to allocate their investments and bring their overall risk down. Because of this low risk, there is also a low _____ rate

interest, return, or growth

Which is used to provide up-to-date price, research, and lower commission for bonds? live bidding internet library agents

internet

In financing a foreclosure, one must be aware of all of the following except: second or third mortgages. unpaid liens. location of the property. unpaid taxes.

location of the property.

A corporate bond secured by various assets of the issuing firm is called a: debenture bond. benture bond. convertible bond. mortgage bond.

mortgage bond.

An _____ -load mutual fund does not have a sales charge.

no

The advantages of investing in an exchange-traded fund (ETF) include: Multiple select question. speculative techniques, such as selling short, are prohibited, making this a safer investment. no minimum investment amount. shares can be bought and sold anytime during the day rather than at the close of business. lower transaction fees. the price you pay or receive is calculated once per day, which is less confusing.

no minimum investment amount. shares can be bought and sold anytime during the day rather than at the close of business. lower transaction fees.

With a(n) ____ -end fund, the shares are issued and redeemed by the investment company at the request of the investors rather than purchased and sold on securities exchanges.

open

Some of the services offered by open-end mutual funds include investing through ____ deduction programs and automatic _____ programs

payroll reinvestment

Bond quotations are given as a ______ of face value.

percentage, %, or percent

Yield to maturity is a calculation that takes into account the relationship among a bond's maturity value, the time to maturity, the current ______ , and the dollar amount of ______

price or value interest

Aggressive growth funds seek: rapid growth by purchasing stocks whose price is expected to increase dramatically in a short period of time. long-term growth by purchasing stocks whose price is expected to increase during a three- to five-year time frame. moderate growth by purchasing stocks whose price is expected to increase dramatically in a short period of time.

rapid growth by purchasing stocks whose price is expected to increase dramatically in a short period of time.

A bond that is registered in the owner's name by the issuing company is called a ______. registered bond bearer bond unregistered bond zero-coupon bond

registered bond

Commercial property includes land and buildings that produce lease or ____ income

rental

Three ways that the internet can help you invest in bonds are: Multiple select question. higher commission. by gaining a competitive advantage. research information online. price information. lower commission with online trades.

research information online. price information. lower commission with online trades.

Yield is the percentage rate of _____ earned by an investor who holds a _____ for a stated period of time.

return or interest bond

People often select mutual funds for all of these reasons except: they have plenty of money to diversify on their own. they lack the expertise to select the stock on their own. they want a professional investment manager selecting their investments. they want a larger return than a savings account.

they have plenty of money to diversify on their own.

The easiest way to obtain an annual report is to go to the corporation's _____. This method allows you access to information any time that is convenient for you.

website

Class B shares have a commission charge when the money is _______ during over the first five years.

withdrawn

Global stock funds invest in stocks of companies throughout the _____ , including the United States.

world

A yield calculation that takes into account the relationship among a bond's maturity value, the time to maturity, the current price, and the dollar amount of interest is called ______. yield to maturity time to maturity time value of money

yield to maturity