Investments Chapter 4

4. Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of $17,000,000. There were 24,300,000 shares in the fund at year-end. What was Multiple Mutual's Net Asset Value? A. $18.11 B. $18.81 C. $69.96 D. $7.00 E. $181.07

A. $18.11

47. A mutual fund had NAV per share of $26.25 on January 1, 2009. On December 31 of the same year the fund's rate of return for the year was 16.4%. Income distributions were $1.27 and the fund had capital gain distributions of $1.85. Without considering taxes and transactions costs, what ending NAV would you calculate? A. $27.44 B. $33.88 C. $24.69 D. $42.03 E. $16.62

A. $27.44

23. Investors' Choice Fund had NAV per share of $37.25 on January 1, 2009. On December 31 of the same year the fund's rate of return for the year was 17.3%. Income distributions were $1.14 and the fund had capital gain distributions of $1.35. Without considering taxes and transactions costs, what ending NAV would you calculate for Investors' Choice? A. $41.20 B. $33.88 C. $43.69 D. $42.03 E. $46.62

A. $41.20

54. Of the following types of ETFs, an investor that wishes to invest in a diversified portfolio that tracks the S&P 500 should choose A. SPY. B. DIA. C. QQQQ. D. IWM. E. VTI.

A. SPY.

53. Of the following types of mutual funds, an investor that wishes to invest in a diversified portfolio of foreign stocks (excluding the U.S.) should choose A. international funds. B. global funds. C. regional funds. D. emerging market funds. E. ETFs because mutual funds do not exist that will provide the desired objective.

A. international funds.

10. Investors in closed-end funds who wish to liquidate their positions must A. sell their shares through a broker. B. sell their shares to the issuer at a discount to Net Asset Value. C. sell their shares to the issuer at a premium to Net Asset Value. D. sell their shares to the issuer for Net Asset Value. E. hold their shares to maturity.

A. sell their shares through a broker.

37. A mutual fund had year-end assets of $560,000,000 and liabilities of $26,000,000. There were 23,850,000 shares in the fund at year end. What was the mutual fund's Net Asset Value? A. $22.87 B. $22.39 C. $22.24 D. $17.61 E. $19.25

B. $22.39

32. Patty O'Furniture purchased 100 shares of Green Isle mutual fund at a net asset value of $42 per share. During the year Patty received dividend income distributions of $2.00 per share and capital gains distributions of $4.30 per share. At the end of the year the shares had a net asset value of $40 per share. What was Patty's rate of return on this investment? A. 5.43% B. 10.24% C. 7.19% D. 12.44% E. 9.18%

B. 10.24%

55. Of the following types of ETFs, an investor that wishes to invest in a diversified portfolio that tracks the Dow Jones Industrials should choose A. SPY. B. DIA. C. QQQQ. D. IWM. E. VTI.

B. DIA.

50. A mutual fund had NAV per share of $37.12 on January 1, 2009. On December 31 of the same year the fund's rate of return for the year was 11.0%. Income distributions were $2.26 and the fund had capital gain distributions of $1.64. Without considering taxes and transactions costs, what ending NAV would you calculate? A. $37.93 B. $34.52 C. $37.30 D. $47.25 E. $36.28

C. $37.30

7. Pinnacle Fund had year-end assets of $825,000,000 and liabilities of $25,000,000. If Pinnacle's NAV was $32.18, how many shares must have been held in the fund? A. 21,619,346.92 B. 22,930,546.28 C. 24,860,161.59 D. 25,693,645.25 E. 26,124,567.73

C. 24,860,161.59

6. Diversified Portfolios had year-end assets of $279,000,000 and liabilities of $43,000,000. If Diversified's NAV was $42.13, how many shares must have been held in the fund? A. 43,000,000 B. 6,488,372 C. 5,601,709 D. 1,182,203 E. 5,402,761

C. 5,601,709

26. Which of the following characteristics apply to unit investment trusts? I) Most are invested in fixed-income portfolios. II) They are actively managed portfolios. III) The sponsor pools securities, then sells public shares in the trust. IV) The portfolio is fixed for the life of the fund. A. I and IV B. I and II C. I, III, and IV D. I, II, and III E. I, II, III, and IV

C. I, III, and IV

1. Which one of the following statements regarding open-end mutual funds is false? A. The funds redeem shares at net asset value. B. The funds offer investors professional management. C. The funds offer investors a guaranteed rate of return. D. The funds offer investors professional management and a guaranteed rate of return. E. The funds redeem shares at net asset value and offer investors professional management.

C. The funds offer investors a guaranteed rate of return.

5. Growth Fund had year-end assets of $862,000,000 and liabilities of $12,000,000. There were 32,675,254 shares in the fund at year-end. What was Growth Fund's Net Asset Value? A. $28.17 B. $25.24 C. $19.62 D. $26.01 E. $21.56

D. $26.01

31. The fee that mutual funds use to help pay for advertising and promotional literature is called a A. front-end load fee. B. back-end load fee. C. operating expense fee. D. 12b-1 fee. E. structured fee.

D. 12b-1 fee.

21. The Profitability Fund had NAV per share of $17.50 on January 1, 2009. On December 31 of the same year the fund's NAV was $19.47. Income distributions were $0.75 and the fund had capital gain distributions of $1.00. Without considering taxes and transactions costs, what rate of return did an investor receive on the Profitability fund last year? A. 11.26% B. 15.54% C. 16.97% D. 21.26% E. 9.83%

D. 21.26%

41. A mutual fund had year-end assets of $465,000,000 and liabilities of $37,000,000. If the fund NAV was $56.12, how many shares must have been held in the fund? A. 4,300,000 B. 6,488,372 C. 8,601,709 D. 7,626,515 E. 7,146,972

D. 7,626,515

25. Which of the following would increase the net asset value of a mutual fund share, assuming all other things remain unchanged? A. An increase in the number of fund shares outstanding B. An increase in the fund's accounts payable C. A change in the fund's management D. An increase in the value of one of the fund's stocks E. A decrease in the value of one of the fund's stocks

D. An increase in the value of one of the fund's stocks

14. Which of the following statements about Real Estate Investment Trusts is true? A. REITs may be equity trusts or mortgage trusts. B. REITs are usually highly leveraged. C. REITs are similar to closed-end funds. D. REITs may be equity trusts or mortgage trusts, are usually highly leveraged, and are similar to closed-end funds. E. REITs may be equity trusts or mortgage trusts and are similar to closed-end funds.

D. REITs may be equity trusts or mortgage trusts, are usually highly leveraged, and are similar to closed-end funds.

2. Which one of the following statements regarding closed-end mutual funds is false? A. The funds sometimes trade at a discount from NAV. B. The funds are sold at the prevailing market price. C. The funds offer investors professional management. D. The funds redeem shares at their NAV. E. The funds sometimes trade at a premium to NAV.

D. The funds redeem shares at their NAV.

8. Most actively managed mutual funds, when compared to a market index such as the Wilshire 5000, A. beat the market return in all years. B. beat the market return in most years. C. exceed the return on index funds. D. do not generally outperform the market. E. always underperform the market.

D. do not generally outperform the market.

11. Closed end funds are frequently issued at a ______ to NAV and subsequently trade at a __________ to NAV. A. discount, discount B. discount, premium C. premium, premium D. premium, discount E. No consistent relationship has been observed.

D. premium, discount

61. A mutual fund had average daily assets of $3.0 billion in 2009. The fund sold $600 million worth of stock and purchased $700 million worth of stock during the year. The fund's turnover ratio is ___. A. 27.5% B. 12% C. 15% D. 25% E. 20%

E. 20%

45. A mutual fund had NAV per share of $19.00 on January 1, 2009. On December 31 of the same year the fund's NAV was $19.14. Income distributions were $0.57 and the fund had capital gain distributions of $1.12. Without considering taxes and transactions costs, what rate of return did an investor receive on the fund last year? A. 11.26% B. 10.54% C. 7.97% D. 8.26% E. 9.63%

E. 9.63%

30. Which of the following is true regarding equity mutual funds? I) They invest primarily in stock. II) They may hold fixed-income securities as well as stock. III) Most hold money market securities as well as stock. IV) Two types of equity funds are income funds and growth funds. A. I and IV B. I, III, and IV C. I, II, and IV D. I, II, and III E. I, II, III, and IV

E. I, II, III, and IV

13. Which of the following statements about Real Estate Investment Trusts is true? A. REITs invest in real estate or loans secured by real estate. B. REITs raise capital by borrowing from banks and issuing mortgages. C. REITs are similar to open-end funds, with shares redeemable at NAV. D. All of the above are true. E. REITs invest in real estate or loans secured by real estate and raise capital by borrowing from banks and issuing mortgages.

E. REITs invest in real estate or loans secured by real estate and raise capital by borrowing from banks and issuing mortgages.

3. Which of the following functions do investment companies perform for their investors? A. Record keeping and administration B. Diversification and divisibility C. Professional management D. Lower transaction costs E. Record keeping and administration, diversification and divisibility, professional management, and lower transaction costs

E. Record keeping and administration, diversification and divisibility, professional management, and lower transaction costs

15. Which of the following statements about Money Market Mutual Funds is true? A. They invest in commercial paper, CDs, and repurchase agreements. B. They usually offer check-writing privileges. C. They are highly leveraged and risky. D. All of the above are true. E. They invest in commercial paper, CDs, and repurchase agreements and usually offer check-writing privileges.

E. They invest in commercial paper, CDs, and repurchase agreements and usually offer check-writing privilege

20. Management fees and other expenses of mutual funds may include A. front-end loads. B. back-end loads. C. 12b-1 charges. D. front-end loads and back-end loads. E. front-end loads, back-end loads, and 12b-1 charges.

E. front-end loads, back-end loads, and 12b-1 charges.

33. Assume that you purchased 200 shares of Super Performing mutual fund at a net asset value of $21 per share. During the year you received dividend income distributions of $1.50 per share and capital gains distributions of $2.85 per share. At the end of the year the shares had a net asset value of $23 per share. What was your rate of return on this investment? A. 30.24% B. 25.37% C. 27.19% D. 22.44% E. 29.18%

A. 30.24%

44. A mutual fund had year-end assets of $437,000,000 and liabilities of $37,000,000. If the fund NAV was $60.12, how many shares must have been held in the fund? A. 6,653,360 B. 8,412,642 C. 10,165,476 D. 9,165,414 E. 9,219,160

A. 6,653,360

27. Jargon Rapid Growth is a mutual fund that has traditionally accepted funds from new investors and issued new shares at net asset value. Jeremy Jargon manages the fund himself and has become concerned that its level of assets has become too high for his management abilities. He issues a statement that Jargon will no longer accept funds from new investors, but will continue to accept additional investments from current shareholders. Which of the following is true about Jargon Rapid Growth fund? A. Jargon used to be an open-end fund but has now become a closed-end fund. B. Jargon has always been an open-end fund and will remain an open-end fund. C. Jargon has always been a closed-end fund and will remain a closed-end fund. D. Jargon is an open-end fund but would change to a closed-end fund if it wouldn't accept additional funds from current investors. E. Jargon is violating SEC policy by refusing to accept new investors.

B. Jargon has always been an open-end fund and will remain an open-end fund.

52. Of the following types of mutual funds, an investor that wishes to invest in a diversified portfolio of stocks worldwide (including the U.S.) should choose A. international funds. B. global funds. C. regional funds. D. emerging market funds. E. ETFs because mutual funds do not exist that will provide the desired objective.

B. global funds.

12. At issue, offering prices of open-end funds will often be A. less than NAV due to loads and commissions. B. greater than NAV due to loads and commissions. C. less than NAV due to limited demand. D. greater than NAV due to excess demand. E. less than or greater than NAV with no apparent pattern.

B. greater than NAV due to loads and commissions.

24. Which of the following is not an advantage of mutual funds? A. They offer a variety of investment styles. B. They offer small investors the benefits of diversification. C. They treat income as "passed through" to the investor for tax purposes. D. They offer a variety of investment styles, offer small investors the benefits of diversification, and treat income as "passed through" to the investor for tax purposes and all are advantages of mutual funds. E. They offer a variety of investment styles, offer small investors the benefits of diversification, and treat income as "passed through" to the investor for tax purposes and all are advantages of mutual fund but non of these are advantages of mutual funds.

C. They treat income as "passed through" to the investor for tax purposes.

9. Pools of money invested in a portfolio that is fixed for the life of the fund are called A. closed-end funds. B. open-end funds. C. unit investment trusts. D. REITS. E. redeemable trust certificates.

C. unit investment trusts.

51. Differences between hedge funds and mutual funds are that A. hedge funds are only subject to minimal SEC regulation. B. hedge funds are typically open only to wealthy or institutional investors. C. hedge fund managers can pursue strategies not available to mutual funds such as short selling, heavy use of derivatives, and leverage. D. hedge funds are commonly structured as private partnerships. E. hedge funds are only subject to minimal SEC regulation, are typically open only to wealthy or institutional investors, fund managers can pursue strategies not available to mutual funds such as short selling, heavy use of derivatives, and leverage, and are commonly structured as private partnerships.

E. hedge funds are only subject to minimal SEC regulation, are typically open only to wealthy or institutional investors, fund managers can pursue strategies not available to mutual funds such as short selling, heavy use of derivatives, and leverage, and are commonly structured as private partnerships.

29. Commingled funds are A. amounts invested in equity and fixed-income mutual funds. B. funds that may be purchased at intervals of 3, 6, or 12 months at the discretion of management. C. amounts invested in domestic and global equities. D. closed-end funds that may be repurchased only once every two years at the discretion of mutual fund management. E. partnerships of investors that pool their funds, which are then managed for a fee.

E. partnerships of investors that pool their funds, which are then managed for a fee.