Module 11

Imagine that a mutual fund company has $10 million in assets and $9.5 million in liabilities. If there are 100,000 shares of the fund, what is the net asset value per share? (This NAV per share will also be its price.) A. $5 B. $10 C. $100 D. $200 E. $1000

A. $5

All of the following are typically characteristics of an exchange-traded fund EXCEPT: A. Active asset management B. Have low or no minimum investment amount C. Are traded on securities exchanges or over-the-counter markets D. Appeal to investors because of their relatively low costs E. Typically designed to reflect market indexes

A. Active asset management

Shares of mutual funds come in different classes, depending on how and when sales charges are incurred. Which of the following share classes tends to impose the highest front-load, that is, commission charged when the shares are purchase? A. Class A B. Class B C. Class C D. Class D E. Class E

A. Class A

Which of the following is typically NOT one of the major investment objectives used to categorize mutual funds? A. Development B. Income C. Growth D. Income and Growth E. Capital preservation

A. Development

Imagine that you want to invest $1,000 in a new mutual fund that is highly recommended to you by your stockbroker. There is a front-end load of 5%. In the course of the next year, the value of the fund goes up 10%. Approximately how much money do you have in your account? A. $950 B. $1045 C. $1065 D. $1095 E. $1200

B. $1045

The mutual fund fees that are used to compensate salespeople and pay some marketing and advertising expenses are called: A. 4f B. 12b-1 C. 78s D. 401k E. 527-10

B. 12b-1

Which of the following terms corresponds best to the following definition: a mutual fund that issues a fixed number of shares at inception that are not repurchased by the issuing company but are traded on a secondary market (like the New York Stock Exchange) based on supply and demand for the shares: A. Open-End Fund B. Closed-End Fund C. Externally-Traded Fund D. Diamond Investment Trust E. Non-Returnable Investment Trust

B. Closed-End Fund

Here's a question that requires a little thought: When an employee is automatically enrolled in a retirement savings plan but fails to specify how the savings should be invested, employers would be best fulfilling their fiduciary duty if they placed the employees savings into which of the following types of mutual funds: A. Socially responsible B. Lifecycle C. Midcap D. Sector E. Aggressive growth

B. Lifecycle

This question takes a little bit of thought, too: A church would probably find which of the following types of mutual funds particularly attractive for its investments: A. Growth B. Socially responsible C. Microcap D. Gold E. Lifecycle

B. Socially responsible

When evaluating mutual funds, it is important to know how often a fund manager buys and sells the stocks, bonds, or other assets that make up the fund. The more transactions, the more expenses there are, and these expenses are passed on to the fund's customers. The percentage of a fund's holdings that change or are replaced each year is called the: A. Changeover index B. Turnover rate C. Liquidity ratio D. Volatility index E. Flux formula

B. Turnover rate

The SEC requires that mutual funds provide investors with information about a fund's expense charges via the expense ratio. Which of the following statements is TRUE regarding these expenses? A. They cover loads but not management fees B. They include loads but not fund operating costs C. They are higher for actively-managed funds than passively-managed ones D. They tend to fall when a fund's value falls E. They are higher for index funds than non-index funds

C. They are higher for actively-managed funds than passively-managed ones

A year ago, Phyllis Peterson purchased 100 shares of Fidelity's Contrafund for $50 each. During the year, her total return from dividends was $1 per share, and there were no capital gains distributions. At the end of the year, the shares were worth $54 each. What was Phyllis' RATE (percentage) of return? Begin my calculating her total return. A. $1 B. 1% C. 5% D. 10% E. 15%

D. 10%

All of the following have been major, recent trends in mutual fund investing EXCEPT: A. Growth in assets in exchange traded funds B. Decline in fees and expenses C. Growth in no-load funds D. Decline in passively managed funds E. Growth in target-date funds

D. Decline in passively managed funds

What is the name of the type of mutual fund that invests in certificates of deposit, government securities, and other very safe and liquid assets? This type of mutual fund is low risk and low return. A. Small cap B. Balanced C. Municipal D. Money market E. Index

D. Money market

There are many types of mutual funds and exchange traded funds, but as an entire group, their primary and defining benefit relative to other types of investments is which of the following: A. Hybridization B. Voting rights C. Government insurance D. Low management costs E. Diversification

E. Diversification