BA218 Ch.15 HW

You can see from the table that the market value of the fund's assets is ___ . If the fund has $8,793.85 in liabilities and 3,000 shares outstanding, the net asset value (NAV) of a share in this mutual fund is ___ .

$175,877.00 ; $55.69

Open-end mutual funds are the most common type of investment company. Which of the following statements characterize these funds? Check all that apply. 1. Make automatic reinvestment easy 2. Allow shareholders to convert shares from one fund to another within the same fund family 3. Always publicly traded on exchanges 4. Good choices only if you have lots of capital to invest 5. Convenient to own but difficult to set up 6. Many allow holders to purchase additional shares in increments as small as $50 7. Allow shareholders to convert shares to other funds within fund families for small or no fees 8. Not traded on exchanges 9. Easy to set up but difficult to manage (in terms of paperwork and taxes) 10. Issue fixed numbers of shares upon their creation and none afterwards

1, 2, 6, 7, & 8

Some investment companies have products that are similar in many ways to open-end funds—with differences that can make them desirable for investors. REITs are a special kind of ___ fund that invests in a portfolio specifically focused on ___ .

closed-end ; real estate

Some investment companies have products that are similar in many ways to open-end funds—with differences that can make them desirable for investors. ETFs are a special kind of ___ fund that invests in a portfolio structured like an indexed fund, but is ___ .

closed-end ; traded on exchanges

Growth and Income Objective Lorenzo is a recent college graduate who plans to invest $300 from each monthly paycheck in a mutual fund. He is interested in a fund that balances current income and capital gains, but with an emphasis on capital gains, so he buys $2,000 worth of ___ shares. He would also like to put some money into a fund that invests solely in foreign securities; therefore, he purchases ___ shares as well.

growth and income fund ; international fund

Growth Objective Janis is a mother who already holds a diversified portfolio of conservative investments. She is looking to invest the money she received from a bonus at work in a mutual fund that invests in stocks with market capitalization of more than $10 billion. She decides to purchase ___ shares.

large-cap fund

Income Objective 1. Manuel is a retiree with no children who is looking to purchase a mutual fund that will provide a relatively safe investment as well as regular income payments. Among mutual funds with an income objective, Manuel can either buy shares in ___ , which invest in CDs, government securities, and short-term obligations issued by corporations, or he can invest in ___ for a slightly higher current income return and the potential for capital appreciation as well. 2. Within the category of bond funds are even more specific options. Manuel decides to buy shares in a fund that invests in Treasury issues maturing in five to ten years, known as ___ bonds. He is also collecting income from shares he already owns in a ___ fund, a type of fund that invests in high-yield, high-risk corporate bonds.

1. money market funds ; bond funds 2. intermediate government ; junk bond

Income Objective 1. Mitch is nearing retirement and is looking to purchase a mutual fund that will provide a relatively safe investment as well as regular income payments. Among mutual funds with an income objective, Mitch can either buy shares in ___ , which invest in CDs, government securities, and short-term obligations issued by corporations, or he can invest in ___ for a slightly higher current income return and the potential for capital appreciation as well. 2. Within the category of bond funds are even more specific options. Mitch decides to buy shares in a fund that invests in Treasury issues maturing in more than ten years, known as ___ ___ bonds. He is also collecting income from shares he already owns in a ___ fund, a type of fund that invests in securities issued by agencies such as Fannie Mae and Freddie Mac.

1. money market funds ; bond funds 2. long-term ; government ; municipal bond

2. Characteristics of mutual funds

Characteristics of Open-End Mutual Funds

6. The process of selecting a mutual fund

David, a 22-year-old recent college graduate, recently received $1,000 from his grandmother. He plans to make additional monthly deposits of $300, with the goal of saving enough to buy a home within 15 years. The following statements represent the different things David must consider before choosing a mutual fund (not in the correct order). Complete each statement by choosing the appropriate words or phrases, and then indicate which step in the process of choosing a mutual fund it reflects.

One feature common to all of the above mutual funds is the systematic withdrawal plan. Based on the characteristics of the investors above, this feature would be of most interest to ___ .

Mitch

3. Mutual fund objectives

When choosing a mutual fund, one of the most important things to consider is your investment objective. Mutual funds are classified into the following three categories: income, growth, and growth and income. The following exercises feature examples of three investors, each with one of the stated goals. Complete the paragraphs to illustrate your understanding of each mutual fund category