Personal Finance: Chapter 14-Ivy Tech Anderson
Benito placed $11,500 in a mutual fund with a 3.5% front-end load. How much money did he actually invest in the fund after accounting for the load?
$11,097.50
Haven has invested in a mutual fund. The net asset value at the time of purchase was $254.50 and he sells the fund two years later for $275.00. Additionally, during the time that he owns the mutual fund, he receives dividends of $12.50 and capital gain distributions of $15.75. What is Haven's return on this investment?
19.16%
Hedge fund managers charge very high fees, generally taking ________ of the assets under management (even when the fund loses money) along with ________ of the profits-and some take even more.
2 percent; 20 percent
Jessica purchased 100 shares in a mutual fund at an NAV of $23.45. She held the fund for one year and received a dividend of $2 during that time and a capital gains distribution of $4.22. What is her total percentage return if she sold her shares for an NAV of $27.10?
42%
At this point in time there are approximately __________ mutual funds that specialize in all different types of financial assets.
8,000
Mutual fund loads, or sales fees, can be as high as:
8.5%.
For your investment program, you have occasionally been holding a few stocks that you purchased from various brokers. Based on this, which advantages of mutual funds would be appealing to you?
A. Avoidance of bad brokers B. Professional management C. Diversification
Which of the following is a disadvantage to mutual fund investing?
A. On average they underperform the market returns. B. You cannot diversify away systematic risk. C. Costs may be high and vary dramatically from fund to fund. D. Not all mutual funds are truly safe
A balanced mutual fund is aimed at investors who want
A. steady income to live on. B. moderate stability in their investments. C. moderate growth in capital
Mutual fund shareholders directly own the fund's securities.
False
Which of the following statements is true regarding mutual fund load charges?
No-load funds perform just as well as load funds
Which of these is a decision factor you should use when evaluating different mutual fund investments?
Personal goals
Which of these is an advantage of mutual funds?
Professional management
An investment vehicle that pools investor funds and invests the proceeds in real estate or mortgages is known as a(n):
REIT
Mutual funds provide an inexpensive way for investors to diversify and gain access to professional management.
True
Which of these investments is an appropriate asset for a money market mutual fund to hold in its portfolio?
U.S. Treasury bills
Which type of risk can an investor effectively manage by investing in broadly diversified mutual funds?
Unsystematic risk
Why is it important to determine what investment goals you are trying to achieve before you invest in a mutual fund?
You must look for a mutual fund with the same or similar investment goals that you have in order to find an appropriate fund.
A(n) __________ fund will hold stocks, bonds and also preferred stock.
balanced
A __________ fund invests primarily in long-term debt.
bond
ETFs can be bought and sold:
during normal trading hours just like a stock.
A high risk, largely unregulated investment fund for wealthy investors is called a:
hedge fund.
A diversified stock mutual fund will help you eliminate the risk associated with:
holding individual assets.
A type of mutual fund that attempts to tailor its holdings to an investor's age and tolerance for risk is known as a(n):
life cycle fund.
One type of mutual fund does not endeavor to achieve the goals of a balance of bonds and stock or growth, income, and stability. Instead, it focuses on personal characteristics, such as age and risk tolerance, and your position in the financial life cycle. This is the
life cycle fund.
A sales commission charge on a mutual fund is referred to as a(n):
load.
Mutual fund advisors are compensated by:
management fees.
A description of a specific mutual fund that lists the fund's objectives, risks and other information is known as a(n):
mutual fund prospectus.
An investment vehicle that pools money from a number of investors and then invests those funds in stocks, bonds, or some financial asset is known as a(n):
mutual fund.
Tabitha is just beginning to develop her financial portfolio. She does not want to pay commissions to purchase shares in mutual funds, as her friend you would advise her to invest her dollars in ________ funds.
no-load
A mutual fund that does not charge a commission to own its shares is called a
no-load fund.
A mutual fund that does not charge any sales commission is called a:
no-load fund.
A type of mutual fund that can issue an unlimited number of mutual fund shares is known as a(n):
open-end fund.
A mutual fund ________ provides a description of the mutual fund including the fund's objectives and risk, its historical performance, its expenses, manager's history and other information.
prospectus
Mutual funds that typically invest at least 2/3rds of their assets in a specific industry are known as:
sector funds.
When an investor wants to sell shares in an open-end mutual fund they:
sell them back to the mutual fund at net asset value.
One measure of a mutual fund's trading activity is the:
turnover ratio.
An ________ is a fixed pool of securities, generally municipal bonds.
unit investment trust
A(n) ________ is a fixed pool of securities, generally municipal bonds, with each unit representing a proportionate ownership in that pool.
unit investment trust
