Question 1

Tisha Elmwood is buying shares in a mutual fund that avoids companies that do harm to people, animals, and the environment. What type of mutual fund is this?

Accepted Answer

A)   Socially responsible fund
B)   Sector fund
C)   Small-cap fund
D)   Index fund
E)   Growth fundF) None of the above
G) A) and E)

Question 2

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

Accepted Answer

A)   Shares are issued whenever an investor wants to purchase them.
B)   Most of the funds today are closed-end.
C)   Shares are traded on stock exchanges similar to stocks.
D)   Shares always trade at NAV.
E)   Investors redeem their shares by selling them directly to the fund.F) A) and B)
G) A) and E)

Question 3

For a mutual fund, the typical yearly management fee ranges from 2.5 to 5 percent of the total dollar amount invested.

Accepted Answer

A) True 
 B)False

Question 4

For most mutual funds, the net asset value is calculated:

Accepted Answer

A)   yearly.
B)   quarterly.
C)   weekly.
D)   daily.
E)   hourly.F) B) and C)
G) A) and B)

Question 5

A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n)  ____________ fund.

Accepted Answer

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

Question 6

Tiffany Scott puts $10,000 into a load mutual fund. She knows that her up-front sales commission is 6%. How much of her money actually goes to buy shares in the mutual fund?

Accepted Answer

A)   $10,000
B)   $9,400
C)   $600
D)   $10,600
E)   $950F) A) and B)
G) A) and C)

Question 7

Sharon Taylor uses all of her dividend income and capital gain distributions to purchase additional shares in her mutual fund. Which one of the following plans is she using?

Accepted Answer

A)   Regular account transaction
B)   Voluntary savings plan
C)   Contractual savings plan
D)   Reinvestment plan
E)   None of these are correct.F) B) and E)
G) A) and B)

Question 8

Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose price is 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 fund
D)   International fund
E)   Regional fundF) A) and D)
G) A) and C)

Question 9

Exchange-traded funds make-up about what percent of all mutual funds?

Accepted Answer

A)   5
B)   8
C)   12
D)   15
E)   25F) A) and D)
G) A) and C)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which one of the following statements is true?

Accepted Answer

A)   Most mutual funds are managed funds.
B)   The role of a fund manager is not important because the investment company is always changing managers.
C)   You should ignore fees when comparing mutual funds.
D)   Managed funds are usually index funds.
E)   A team of managers is always better than a single fund manager.F) None of the above
G) B) and E)

Question 12

A mutual fund that invests in the common stocks of companies in the same industry is called a(n)  ____________ fund.

Accepted Answer

A)   growth-income
B)   income
C)   sector
D)   small-cap
E)   money marketF) B) and C)
G) All of the above

Question 13

Mary Cooper just purchased 100 shares in the All-American Fund. The purchase cost for each share was $20. If this fund charges a 5 percent load, what is the total amount of commission she will pay the investment company?

Accepted Answer

A)   $100
B)   $1,000
C)   $2,000
D)   $200
E)   $1F) C) and E)
G) B) and D)

Question 14

An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year.

Accepted Answer

A) True 
 B)False

Question 15

When you invest in Class A shares, you pay a sales commission when you sell your mutual fund shares.

Accepted Answer

A) True 
 B)False

Question 16

Income dividends and capital gain distributions are:

Accepted Answer

A)   exempt from taxation.
B)   subject to federal taxation.
C)   subject to federal taxation after the first $1,000.
D)   subject to federal taxation after the first $5,000.
E)   subject to federal taxation after the first $10,000.F) C) and D)
G) All of the above

Question 17

Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.

Accepted Answer

A) True 
 B)False

Question 18

Because of professional management, there is no need for the individual investor to evaluate a mutual fund investment.

Accepted Answer

A) True 
 B)False

Question 19

A mutual fund that only invests in companies outside the United States is called a(n)  ____________ fund.

Accepted Answer

A)   growth-income
B)   income
C)   international
D)   industry
E)   globalF) B) and E)
G) B) and C)

Question 20

The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential.

Accepted Answer

A) True 
 B)False

Exam 16: Investing in Mutual Funds

Because of professional management, there is no need for the individual investor to evaluate a mutual fund investment.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

For most mutual funds, the net asset value is calculated:

Correct AnswerverifiedShow Answer

An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year.

Correct AnswerverifiedShow Answer

A mutual fund that invests in the common stocks of companies in the same industry is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For a mutual fund, the typical yearly management fee ranges from 2.5 to 5 percent of the total dollar amount invested.

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Mary Cooper just purchased 100 shares in the All-American Fund. The purchase cost for each share was $20. If this fund charges a 5 percent load, what is the total amount of commission she will pay the investment company?

Correct AnswerverifiedShow Answer

When you invest in Class A shares, you pay a sales commission when you sell your mutual fund shares.

Correct AnswerverifiedShow Answer

A mutual fund that only invests in companies outside the United States is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

Tisha Elmwood is buying shares in a mutual fund that avoids companies that do harm to people, animals, and the environment. What type of mutual fund is this?

Correct AnswerverifiedShow Answer

Exchange-traded funds make-up about what percent of all mutual funds?

Correct AnswerverifiedShow Answer

Sharon Taylor uses all of her dividend income and capital gain distributions to purchase additional shares in her mutual fund. Which one of the following plans is she using?

Correct AnswerverifiedShow Answer

Income dividends and capital gain distributions are:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.

Correct AnswerverifiedShow Answer

Tiffany Scott puts $10,000 into a load mutual fund. She knows that her up-front sales commission is 6%. How much of her money actually goes to buy shares in the mutual fund?

Correct AnswerverifiedShow Answer

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