Question 1

Although exchange traded funds (ETFs) can be traded throughout the day, they cannot be purchased on margin or sold short.

Accepted Answer

A) True 
 B)False

Question 2

What does a hurdle rate specified by a hedge fund indicate?

Accepted Answer

A) The maximum number of investors possible in the fund that would allow it to avoid regulations. 
B) The minimum amount required to be invested in the fund. 
C) The net worth criterion for an individual to be deemed an "accredited investor." 
D) The highest net asset value that the fund has previously achieved, above which the manager receives a performance fee. 
E) The minimum annualized performance benchmark that must be realized before a performance fee can be assessed. 
A) The maximum number of investors possible in the fund that would allow it to avoid regulations. 
B) The minimum amount required to be invested in the fund. 
C) The net worth criterion for an individual to be deemed an "accredited investor." 
D) The highest net asset value that the fund has previously achieved, above which the manager receives a performance fee. 
E) The minimum annualized performance benchmark that must be realized before a performance fee can be assessed.

Question 3

Which of the following observations concerning hedge funds is NOT true?

Accepted Answer

A) They are pooled investment vehicles. 
B) Historically, they were not required to register with the SEC. 
C) Historically, they were subject to virtually no regulatory oversight. 
D) They usually take significant risk. 
E) They have to disclose their activities to third parties. 
A) They are pooled investment vehicles. 
B) Historically, they were not required to register with the SEC. 
C) Historically, they were subject to virtually no regulatory oversight. 
D) They usually take significant risk. 
E) They have to disclose their activities to third parties.

Question 4

Mutual fund share distributions and transactions are supervised and cleared by the National Mutual Fund Association (NMFA).

Accepted Answer

A) True 
 B)False

Question 5

Regarding the relative asset size and asset growth rate of mutual fund sectors between 1980 and 2015,

Accepted Answer

A) long-term funds had more assets at the end of 2015, but short-term funds had grown at a faster rate since 1980. 
B) long-term funds had more assets at the end of 2015, and long-term funds had grown at a faster rate since 1980. 
C) short-term funds had more assets at the end of 2015, but long-term funds had grown at a faster rate since 1980. 
D) short-term funds had more assets at the end of 2015, and short-term funds had grown at a faster rate since 1980. 
E) More than one of the above is correct. 
A) long-term funds had more assets at the end of 2015, but short-term funds had grown at a faster rate since 1980. 
B) long-term funds had more assets at the end of 2015, and long-term funds had grown at a faster rate since 1980. 
C) short-term funds had more assets at the end of 2015, but long-term funds had grown at a faster rate since 1980. 
D) short-term funds had more assets at the end of 2015, and short-term funds had grown at a faster rate since 1980. 
E) More than one of the above is correct.

Question 6

Which of the following is one of the characteristics of household mutual fund owners as of 2015?

Accepted Answer

A) The typical fund-owning household has $103,000 invested. 
B) 49 percent of the families are headed by someone without a college degree. 
C) The median age of mutual fund holders is 51. 
D) 80 percent have funds invested through an employer-sponsored retirement fund. 
E) All of the options. 
A) The typical fund-owning household has $103,000 invested. 
B) 49 percent of the families are headed by someone without a college degree. 
C) The median age of mutual fund holders is 51. 
D) 80 percent have funds invested through an employer-sponsored retirement fund. 
E) All of the options.

Question 7

As of 2015, Commercial banks are not allowed to own or invest in mutual funds.

Accepted Answer

A) True 
 B)False

Question 8

The SEC requires mutual funds to disclose the risk to investors of frequent trading in fund shares.

Accepted Answer

A) True 
 B)False

Question 9

New SEC rules call for shareholder reports to include

Accepted Answer

A) clear information to investors on brokerage commissions and discounts. 
B) information on how the fund compares with industry averages on fees and loads. 
C) information on eligibility for breakpoint discounts. 
D) All of the options. 
E) Only two of the options. 
A) clear information to investors on brokerage commissions and discounts. 
B) information on how the fund compares with industry averages on fees and loads. 
C) information on eligibility for breakpoint discounts. 
D) All of the options. 
E) Only two of the options.

Question 10

Class C shares of a mutual fund usually convert to Class A shares after some length of time which may be as long as 6 to 8 years.

Accepted Answer

A) True 
 B)False

Question 11

Open-end mutual funds are the major type of mutual funds.

Accepted Answer

A) True 
 B)False

Question 12

The largest proportion of assets of money market mutual funds in 2015 was

Accepted Answer

A) security repos. 
B) time and savings deposits. 
C) checkable deposits and currency. 
D) credit market instruments. 
E) foreign deposits. 
A) security repos. 
B) time and savings deposits. 
C) checkable deposits and currency. 
D) credit market instruments. 
E) foreign deposits.

Question 13

An open-ended fund has stocks of three companies: 200 shares of IBM currently valued at $50.00, 100 shares of GE currently values at $20 and 100 shares of Digital currently valued at $30.The fund has 500 shares outstanding.What is the net asset value (NAV) of the fund?

Accepted Answer

A) $30.00. 
B) $60.00. 
C) $120.00. 
D) $12.00. 
E) $37.50. 
A) $30.00. 
B) $60.00. 
C) $120.00. 
D) $12.00. 
E) $37.50.

Question 14

Retirement funds under management of mutual funds are approximately what percentage of total mutual fund assets?

Accepted Answer

A) One-tenth 
B) One-quarter 
C) One-half 
D) Three-quarters 
E) Zero. 
A) One-tenth 
B) One-quarter 
C) One-half 
D) Three-quarters 
E) Zero.

Question 15

As a result of trading and fee assignment abuses by the mutual fund industry, the SEC established new rules regarding fund governance and conflicts of interest in 2004 and 2005.

Accepted Answer

A) True 
 B)False

Question 16

The process used to determine the value of mutual fund shares each per day is known as

Accepted Answer

A) Directed brokerage. 
B) Marking-to-market. 
C) Late trading. 
D) Market timing. 
E) Spinning. 
A) Directed brokerage. 
B) Marking-to-market. 
C) Late trading. 
D) Market timing. 
E) Spinning.

Question 17

An investor purchases fund shares with a 3 percent front-end load and expects to hold the shares for 10 years.The fund has a total fund expense ratio (including 12b-1 fees) of 1 percent per year.The annual total shareholder cost for this fund is _______ per year.

Accepted Answer

A) 3 percent 
B) 30 percent 
C) 0.3 percent 
D) 1.3 percent 
E) 1 percent 
A) 3 percent 
B) 30 percent 
C) 0.3 percent 
D) 1.3 percent 
E) 1 percent

Question 18

The debate and research regarding the advantages of load funds versus no-load funds has revealed that

Accepted Answer

A) the proportion of total assets invested in load funds has decreased over the last 20 years and became less than the assets in no-load funds in 2002. 
B) the cost of the load may not be worth the attention and advice given to investors. 
C) most mutual fund companies offer the majority of their funds as no-load funds. 
D) a load fee should be annualized over the holding period of the fund shares. 
E) All of the options. 
A) the proportion of total assets invested in load funds has decreased over the last 20 years and became less than the assets in no-load funds in 2002. 
B) the cost of the load may not be worth the attention and advice given to investors. 
C) most mutual fund companies offer the majority of their funds as no-load funds. 
D) a load fee should be annualized over the holding period of the fund shares. 
E) All of the options.

Question 19

Mutual funds are required to hire chief compliance officers whose job is to monitor whether the mutual fund company follows exchange and regulatory rules.

Accepted Answer

A) True 
 B)False

Question 20

In 1998, the SEC required that portions of mutual fund prospectuses must be written in easily understood "plain" English.

Accepted Answer

A) True 
 B)False

Exam 5: Financial Services: Mutual Funds and Hedge Funds

Although exchange traded funds (ETFs) can be traded throughout the day, they cannot be purchased on margin or sold short.

What does a hurdle rate specified by a hedge fund indicate?

Which of the following observations concerning hedge funds is NOT true?

Mutual fund share distributions and transactions are supervised and cleared by the National Mutual Fund Association (NMFA).

Regarding the relative asset size and asset growth rate of mutual fund sectors between 1980 and 2015,

Which of the following is one of the characteristics of household mutual fund owners as of 2015?

As of 2015, Commercial banks are not allowed to own or invest in mutual funds.

The SEC requires mutual funds to disclose the risk to investors of frequent trading in fund shares.

New SEC rules call for shareholder reports to include

Class C shares of a mutual fund usually convert to Class A shares after some length of time which may be as long as 6 to 8 years.

Open-end mutual funds are the major type of mutual funds.

The largest proportion of assets of money market mutual funds in 2015 was

An open-ended fund has stocks of three companies: 200 shares of IBM currently valued at $50.00, 100 shares of GE currently values at $20 and 100 shares of Digital currently valued at $30.The fund has 500 shares outstanding.What is the net asset value (NAV) of the fund?

Retirement funds under management of mutual funds are approximately what percentage of total mutual fund assets?

As a result of trading and fee assignment abuses by the mutual fund industry, the SEC established new rules regarding fund governance and conflicts of interest in 2004 and 2005.

The process used to determine the value of mutual fund shares each per day is known as

An investor purchases fund shares with a 3 percent front-end load and expects to hold the shares for 10 years.The fund has a total fund expense ratio (including 12b-1 fees) of 1 percent per year.The annual total shareholder cost for this fund is _______ per year.

The debate and research regarding the advantages of load funds versus no-load funds has revealed that

Mutual funds are required to hire chief compliance officers whose job is to monitor whether the mutual fund company follows exchange and regulatory rules.

In 1998, the SEC required that portions of mutual fund prospectuses must be written in easily understood "plain" English.

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Insurance

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters