Personal Financial Planning Ch 13 Investing in Mutual Funds

exchanged-traded fund (ETF)

A fund that invests in the stocks or other securities contained in s specific stock or securities index, and whose shares are traded on a securities exchange or over the counter.

turnover ratio

A ratio that measures the percentage of a fund's holdings that have changed or "been replaced" during a 12-month period of time.

reinvestment plan

A service provided by an investment company in which shareholder income dividends and capital gain distributions are automatically reinvested to purchase additional shares of the fund.

David invested $18,000 in the American Funds Euro-Pacific Growth fund. This fund charges a sales charge of 6.22%. What is the dollar amount of the sales charge to purchase shares? $933.00 $1,119.60 $9,000.00 $16,880.40 $289,389.07

$1,119.60 -------------------------- 18,000 x 6.22% = 1119.6

Joseph purchased 100 shares of ABCD Growth fund for $10.00 per share for a total investment of $1,000. At the end of one year, he sold his investment for $11.20 per share. What is his total capital gain? $1.20 $10.00 $11.00 $100.00 $120.00

$120.00 -------------- 11.20 - 10.00 = 1.20 100 x 1.20 = 120

As part of his 401(k) retirement plan at work, Ken Lowery invests 5.5 percent of his salary each month in the Capital Investments Lifecycle Fund. At the end of this year, Ken's 401(k) account has a dollar value of $22,100. If the fund charges a 12b-1 fee of 0.6 percent, what is the amount of the fee? (Round your answer to 2 decimal places.) 12b-1 fee $

$132.6 ------------ 22,100 x 0.6% = 132.6

Crystal Ventures Mutual Fund contains stocks and securities valued at $476 million. The fund has liabilities that total to $6.3 million and the fund has issued 31 million shares. What is the Net Asset Value? $476 $6.30 $15.15 $15.35 $15.55

$15.15 -------------------- 476 - 6.3 = 469.7 / 31 = 15.1516129

Lesley purchased 250 mutual fund shares at $18 per share. Lesley decided to sell her shares after the price increased to $29 per share. What is Lesley's capital gain? $300 $2,500 $2,750 $4,500 $7,250

$2,750 ---------------------- 29 - 18 = 11 250 x 11 = 2750

Taliyah invested $21,000 in the American Funds Euro-Pacific Growth fund. This fund charges a sales charge of 4.35%. What is the net amount available for investment? $20,086.50 $14,086.50 $10,500.00 $913.50 $652.50

$20,086.50 --------------------- 21,000 x 4.35% = 913.5 21,000 -913.5 = 20,086.5

When Jill Thompson received a large settlement from an automobile accident, she chose to invest $138,500 in the Vanguard 500 Index Fund. This fund has an expense ratio of 0.18 percent. What is the amount of the fees that Jill will pay this year? (Round your answer to 2 decimal places.) Annual fee $

$249.30 ------------- 138,500 x 0.18% - 249.3

Francesca withdrew $7,000 from B shares that she owned in the Already Been Counted mutual fund within one year of her purchase. If she must pay a 5% contingent deferred sales fee, what will her total fee be? $0 $3.50 $35.00 $350.00 $3,500.00

$350.00

As Bart Brownlee approached retirement, he decided the time had come to invest some of his nest egg in a conservative fund. He chose the Franklin Utilities Fund. If he invests $150,000 and the fund charges a 4.25 percent load when shares are purchased, what is the amount of commission that Bart must pay? Commission (load) $

$6,375 ---------------- 150,000 x 4.25% = 6375

Francesca withdrew $7,000 from B shares that she owned in the Already Been Counted mutual fund within one year of her purchase. If she must pay a 5% contingent deferred sales fee, what amount will she actually receive? $350 $6,650 $7,000 $7,350 $7,500

$6,650 -------------------- 7000 x 5% = 350 7000 - 350 = 6,650

The Anderson Balanced mutual fund charges a sales load of 4.85%. If you invest $15,000, how much must you pay in commissions? $4.85 $485.00 $600.00 $727.50 $750.00

$727.50

The value of Mike Jackson's shares in the New Frontiers Technology Fund is $10,800. The management fee for this particular fund is 0.8 percent of the total asset value. Calculate the management fee Mike must pay this year. (Round your answer to 2 decimal places.) Management fee $

$86.4 ------------------ 10,800 x 0.8% = 86.4

closed-end fund

A mutual fund whose shares are issued by an investment company only when the fund is organized.

contingent deferred sales load

A 1 to 5 percent charge that shareholders pay when they sell shares in a mutual fund.

12b-1 fee

A fee that an investment company levies to defray the costs of advertising and marketing a mutual fund.

family of funds

A group of mutual funds managed by one investment company.

load fund

A mutual fund in which investors pay a commission (as high as 8.5 percent) every time they purchase shares.

no-load fund

A mutual fund in which the individual investor pays no sales charge.

open-end fund

A mutual fund whose shares are issued and redeemed by the investment company at the request of investors.

According to the example in the video, what is located at the top of the Morningstar research report for the Vanguard 500 Index Fund? The fund's current net asset value (NAV) Total assets and expenses Fees and turnover Fund name and symbol All of the above are located at the top of the example in the video.

All of the above are located at the top of the example in the video.

All of the following are valid ways to purchase open-end mutual funds except A regular account transaction. A voluntary savings plan. A contractual savings plan. A reinvestment plan. All of the ways listed are valid purchase options.

All of the ways listed are valid purchase options.

How do mutual funds provide returns to their shareholders? Income dividends. Capital gain distributions. Capital gains. All of these. None of these.

All of these.

All of the following are true of capital gains distributions, except: Capital gains distributions are payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio. Capital gains distributions are commonly paid twice a year. Capital gains distributions are typically paid once a year. Capital gains distributions are taxed as long-term capital gains regardless of how long you own shares in the fund. The majority of exchange-traded funds don't usually pay end-of-the-year capital gain distributions.

Capital gains distributions are commonly paid twice a year.

According to the video, what are the other fees that fund investors must consider in addition to a load charge? Contingent Deferred Sales Load Management Fee 16e-1 Fee Contingent Deferred Sales Load and Management Fee Contingent Deferred Sales Load, Management Fee, and 16e-1 Fee

Contingent Deferred Sales Load and Management Fee

Which of the following determine the prices for shares for closed-end funds? Factors of supply and demand Value of stocks and other investments contained in the fund's portfolio Interest rates Investor expectations Factors of supply and demand, Value of stocks and other investments contained in the fund's portfolio, and Investor expectations

Factors of supply and demand, Value of stocks and other investments contained in the fund's portfolio, and Investor expectations

Which of the following types of stock funds invests in stock issued by companies expecting higher-than-average revenue and earnings growth? Equity income funds Growth funds Index funds International funds Regional funds

Growth funds

All of the following are ways that investors can make money by investing in closed-end funds, exchange-traded funds, or open-end funds, except: Income Dividends Capital Gains Distributions Capital Gains Income Dividends and Capital Gains Distributions Income Dividends, Capital Gains Distributions, and Capital Gains

Income Dividends, Capital Gains Distributions, and Capital Gains

According to the example in the video, what factors are located on the right side of the Morningstar research report for the Vanguard 500 Index Fund? Information about the performance of the stock Information regarding Morningstar risk measures Information about the investments of the fund in the "Style Map" section Information about the performance of the stock and Information about the investments of the fund in the "Style Map" section Information regarding Morningstar risk measures and Information about the investments of the fund in the "Style Map" section

Information regarding Morningstar risk measures and Information about the investments of the fund in the "Style Map" section

All of the following are tabs that you can get more information from at the top of the report, except: Fund Analysis Stewardship Ratings and Risk Interest Rates Performance

Interest Rates

Which of the following provides up-to-date information quickly without having to make a trip to the library? Financial publications Internet Mutual fund annual report Newspapers Professional advisory services

Internet

Which of the following contains a letter from the president of the investment company, detailed financial information, a schedule of investments, and a letter from the fund's independent auditors? Financial publications Internet Mutual fund annual report Newspapers Professional advisory services

Mutual fund annual report

mutual fund

Pools the money of many investors -- its shareholders -- to invest in a variety of securities.

expense ratio

The amount that investors pay for all of a mutual fund's management fees and operating costs.

net asset value (NAV)

The current market value of the securities contained in the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding.

income dividends

The earnings a fund pay from its dividend and interest income.

All of the following are true of open-ended funds, except: The major disadvantage of open-ended funds is the cost of buying and selling shares. An open-end fund is a mutual fund whose shares are issued and redeemed by the investment company at the request of investors. Most open-end funds provide their investors with a wide variety of services. Shares of open-end funds have a variety of costs. The price you pay for a share in an open-end fund is referred to as the net-asset value.

The major disadvantage of open-ended funds is the cost of buying and selling shares.

capital gain distributions

The payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio.

Assume that one year ago, you bought 400 shares of a mutual fund for $31 a share, you received a $0.55 per-share capital gain distribution during the past 12 months, and the market value of the fund is now $35 a share. a. Calculate the total return for your $12,400 investment. Total return $ b. Calculate the percentage of total return for your $12,400 investment. (Enter your answer as a percent rounded to 2 decimal places.) Percent of total return %

a. Total return $1,820 ------------------------ 35 - 31 = 4 + .55 = 4.55 x 400 = 1820 b. Percent of total return 14.6% ------------------------ 1820 / 12,400 = 0.146774194 round 2 decimal = 14.6

Sally wants to invest in a mutual fund. The mutual fund must provide a(n) ____ to her as a potential investor. analysis from a financial publication past performance report prospectus quarterly report summary report

prospectus