Question 1

Another name for lifecycle funds is:

Accepted Answer

A)  balanced funds.
B)  funds of funds.
C)  target-date funds.
D)  asset allocation funds.
E)  money market funds.F) None of the above
G) A) and C)

Question 2

The Capitalist Mutual Fund's portfolio is valued at $40 million.The fund has liabilities of $2 million,and the investment company sponsoring the fund has issued 1,250,000 shares.What is the fund's net asset value?

Accepted Answer

A)  $200.00
B)  $30.40
C)  $20.00
D)  $12.50
E)  $1.00F) A) and E)
G) None of the above

Question 3

Most open-end funds provide their investors with which service?

Accepted Answer

A)  Opportunity to buy and sell shares on request
B)  Payroll deduction program
C)  Automatic reinvestment program
D)  Automatic withdrawal program
E)  All of theseF) C) and E)
G) A) and D)

Question 4

Which one of the following funds would be considered the safest investment?

Accepted Answer

A)  Growth fund
B)  Money market fund
C)  Sector fund
D)  Asset allocation fund
E)  High-yield bond fundF) A) and D)
G) B) and D)

Question 5

For a mutual fund,the annual management fee is a fixed percentage of the fund's total liabilities.

Accepted Answer

A) True 
 B)False

Question 6

The most popular and least complicated method of purchasing shares in an open-end mutual fund is through a:

Accepted Answer

A)  regular account transaction.
B)  voluntary savings plan.
C)  contractual savings plan.
D)  minimum withdrawal plan.
E)  free contract plan.F) C) and D)
G) A) and D)

Question 7

Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose prices are expected to increase dramatically in a short period of time.What type of mutual fund is he purchasing?

Accepted Answer

A)  Aggressive growth fund
B)  Equity income fund
C)  Global stock fund
D)  International fund
E)  Regional fundF) C) and D)
G) B) and D)

Question 8

A fee that investors pay when they withdraw their investment from a mutual fund is called a:

Accepted Answer

A)  withdrawal fee.
B)  12b.
C)  contingent deferred sales load.
D)  front-end load.
E)  management fee.F) C) and E)
G) A) and C)

Question 9

Which one of the following statements is false?

Accepted Answer

A)  Investors purchase mutual funds for diversification.
B)  Investors purchase mutual funds because of their professional management.
C)  Investors who purchase mutual funds are guaranteed a higher rate of return than if they were to purchase comparable stocks and bonds directly.
D)  Professional fund managers work for an investment company.
E)  Even the best portfolio managers sometimes make mistakes.F) All of the above
G) C) and D)

Question 10

Morningstar rates mutual funds from the lowest to the highest using ________ stars.

Accepted Answer

A)  2
B)  3
C)  4
D)  5
E)  6F) All of the above
G) C) and D)

Question 11

Within a family of funds,charges for exchanges generally are small for each transaction,and the fee may be as low as ________ per transaction.

Accepted Answer

A)  $1
B)  $5
C)  $10
D)  $15
E)  $20F) B) and D)
G) B) and E)

Question 12

A mutual fund that invests in stocks and bonds with the primary objectives of conserving principal,providing income,and long-term growth is called a(n) ________ fund.

Accepted Answer

A)  balanced
B)  growth
C)  industry
D)  income
E)  money marketF) A) and C)
G) D) and E)

Question 13

When you decide to redeem shares in an open-end mutual fund,the only option is to sell off a specific number of shares.

Accepted Answer

A) True 
 B)False

Question 14

The typical expense ratio for an index fund is:

Accepted Answer

A)  0.50 percent or less.
B)  between 0.50 and 1 percent.
C)  between 1 and 2 percent.
D)  between 2 and 3 percent.
E)  over 5 percent.F) A) and C)
G) B) and D)

Question 15

Over many years,the majority of managed mutual funds outperform the Standard & Poor's 500 stock index.

Accepted Answer

A) True 
 B)False

Question 16

All details related to management fees,sales fees,12b-1 fees,and other expenses are contained in a mutual fund's prospectus.

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following is true with respect to closed-end funds?

Accepted Answer

A)  An unlimited number of shares are available to investors.
B)  Most of the investment companies today offer closed-end funds.
C)  Shares are traded on security exchanges similar to stocks.
D)  The share prices are determined by their NAV.
E)  Investors can never sell shares to another investor.F) A) and B)
G) A) and E)

Question 18

Why do Americans invest in mutual funds?

Accepted Answer

A)  Saving for someone's education
B)  Saving for emergencies
C)  Using funds to reduce taxable income
D)  Saving for retirement
E)  All of theseF) B) and C)
G) C) and D)

Question 19

Which one of the following statements is false?

Accepted Answer

A)  The responsibility for choosing the right mutual fund rests with the individual investor.
B)  Professional fund managers do make mistakes.
C)  Investors should evaluate their investments on a regular basis.
D)  There is no need to evaluate mutual fund investments,because investment companies hire the best professional managers they can to manage their funds.
E)  Individual investors should be involved in choosing a mutual fund,because they know how the objectives of a mutual fund match their own investment objectives.F) D) and E)
G) A) and B)

Question 20

Which of the following rates mutual funds from 1 to 5 stars on how well they have performed in comparison with similar funds?

Accepted Answer

A)  Money
B)  Bloomberg's Businessweek
C)  Morningstar
D)  Lipper
E)  Value LineF) B) and E)
G) A) and E)

Exam 16: Investing in Mutual Funds

The most popular and least complicated method of purchasing shares in an open-end mutual fund is through a:

Correct AnswerverifiedShow Answer

Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose prices are expected to increase dramatically in a short period of time.What type of mutual fund is he purchasing?

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

The Capitalist Mutual Fund's portfolio is valued at $40 million.The fund has liabilities of $2 million,and the investment company sponsoring the fund has issued 1,250,000 shares.What is the fund's net asset value?

Correct AnswerverifiedShow Answer

Most open-end funds provide their investors with which service?

Correct AnswerverifiedShow Answer

All details related to management fees,sales fees,12b-1 fees,and other expenses are contained in a mutual fund's prospectus.

Correct AnswerverifiedShow Answer

Which of the following rates mutual funds from 1 to 5 stars on how well they have performed in comparison with similar funds?

Correct AnswerverifiedShow Answer

When you decide to redeem shares in an open-end mutual fund,the only option is to sell off a specific number of shares.

Correct AnswerverifiedShow Answer

A fee that investors pay when they withdraw their investment from a mutual fund is called a:

Correct AnswerverifiedShow Answer

The typical expense ratio for an index fund is:

Correct AnswerverifiedShow Answer

A mutual fund that invests in stocks and bonds with the primary objectives of conserving principal,providing income,and long-term growth is called a(n) ________ fund.

Correct AnswerverifiedShow Answer

Morningstar rates mutual funds from the lowest to the highest using ________ stars.

Correct AnswerverifiedShow Answer

Why do Americans invest in mutual funds?

Correct AnswerverifiedShow Answer

Another name for lifecycle funds is:

Correct AnswerverifiedShow Answer

For a mutual fund,the annual management fee is a fixed percentage of the fund's total liabilities.

Correct AnswerverifiedShow Answer

Which one of the following is true with respect to closed-end funds?

Correct AnswerverifiedShow Answer

Within a family of funds,charges for exchanges generally are small for each transaction,and the fee may be as low as ________ per transaction.

Correct AnswerverifiedShow Answer

Over many years,the majority of managed mutual funds outperform the Standard & Poor's 500 stock index.

Correct AnswerverifiedShow Answer

Which one of the following funds would be considered the safest investment?

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

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