Mutual funds
14. Which of the following is not an attribute of mutual funds.
Guaranteed returns
17. A charge to purchase mutual fund shares is frequently called:
A sales load
8. Dollar cost averaging is:
An approach in which you invest the same amount of money in a fund at regular intervals
10. Mutual funds are insured by the Federal Deposit Insurance Corporation.
False
19. If you invest in a long-term bond fund with an average maturity of 10 years, you must hold the fund shares for at least 10 years.
False
20. Dividends and capital gains distributions from mutual funds holding common stocks in a taxable account are not taxable if they are reinvested in additional fund shares at the time of distribution.
False
21. The most ideal time to buy a mutual fund in a taxable account is late in the calendar year in order to capture pending capital gain distributions.
False
3. Common stocks always provide higher returns than bonds and money market investments.
False
If interest rates decline, the price of a bond or bond fund will generally:
Increase
15. Which type of investment has generally offered the best protection against inflation over long periods of time?
Stocks
12. The best predictor of future mutual fund performance is:
The expense ratio
11. If two mutual funds hold the same securities, but one has higher operating expenses than the other one, which of the following statements is true?
The fund with the lower expenses will have a higher return
A mutual fund's performance is best measured by
Total return
7. The goal of an index fund is to
Track the investment return of a specific stock index or bond index
13. If you only own U.S. stocks in your portfolio, you can reduce your overall risk by adding international stocks
True
16. Income earned on municipal bonds or dividends paid by municipal bond funds are generally exempt from federal taxes.
True
22. Most objective financial advisors suggest no load mutual funds and index mutual funds due to their superior performance
True
6. A fund's after tax return may be influenced by
a) The fund's pre-tax return b) The fund's buying and selling of securities c) The fund's distribution of capital gains and dividends
9. From 1926 to 2013, the average total return per year for large cap U.S. stocks was around
b) *10%
18. Generally, a portfolio that has 80% invested in common stocks would be best suited for:
b) *A 35 year old saving for retirement
2. If a fund charges an expense ratio of 1% for the current year:
b) *Your fund returns will be reduced by 1% in the current year
4. When you invest in an employer's retirement savings plan such as a 401-K, your contributions are taxed... :
d) *When you withdraw them during retirement
