Question 1

A load fee is a(n):

Accepted Answer

A)  type of income tax. 
B)  management fee. 
C)  origination fee. 
D)  sales charge. 
A)  type of income tax. 
B)  management fee. 
C)  origination fee. 
D)  sales charge.

Question 2

Global funds tend to hold a higher percentage of their portfolio in U.S. securities than do international funds.

Accepted Answer

A) True 
 B)False

Question 3

To qualify as a regulated investment company, a fund must distribute at least 50 percent of its taxable income to the shareholders.

Accepted Answer

A) True 
 B)False

Question 4

A 2 plus 20 fee structure for a hedge fund means that the fund:

Accepted Answer

A)  takes 2% of any returns over 20%. 
B)  charges 2% of AUM and takes 20 percent of profits. 
C)  charges a 2% load and a 20% management fee. 
D)  charges a 20% load and a 2% management fee. 
A)  takes 2% of any returns over 20%. 
B)  charges 2% of AUM and takes 20 percent of profits. 
C)  charges a 2% load and a 20% management fee. 
D)  charges a 20% load and a 2% management fee.

Question 5

The two largest fund supermarkets are:

Accepted Answer

A)  Merrill Lynch and Charles Schwab. 
B)  Edward D. Jones and Vanguard. 
C)  Vanguard and Fidelity. 
D)  Charles Schwab and Fidelity. 
A)  Merrill Lynch and Charles Schwab. 
B)  Edward D. Jones and Vanguard. 
C)  Vanguard and Fidelity. 
D)  Charles Schwab and Fidelity.

Question 6

In investments, ETF stands for:

Accepted Answer

A)  European Trading Fund. 
B)  Exchange-Traded Fund. 
C)  Equal-weighted Treasury Fund. 
D)  Excellent Trust Fund. 
A)  European Trading Fund. 
B)  Exchange-Traded Fund. 
C)  Equal-weighted Treasury Fund. 
D)  Excellent Trust Fund.

Question 7

Approximately 85 percent of money market assets are in non-taxable funds.

Accepted Answer

A) True 
 B)False

Question 8

It is not important to have a secondary market for mutual funds because:

Accepted Answer

A)  investors hold the securities until maturity. 
B)  investors trade between themselves. 
C)  investors sell their shares back to the company. 
D)  banks will convert investor shares to cash for bank customers. 
A)  investors hold the securities until maturity. 
B)  investors trade between themselves. 
C)  investors sell their shares back to the company. 
D)  banks will convert investor shares to cash for bank customers.

Question 9

What are the main differences between a closed-end and an open-end investment company?

Accepted Answer

A closed-end investment company has a fi

Question 10

Which of the following ETFs (exchange traded funds) provides exposure to 500 U.S. large-capitalization companies?

Accepted Answer

A)  Spider 
B)  Clubs 
C)  Cubes 
D)  Diamonds 
A)  Spider 
B)  Clubs 
C)  Cubes 
D)  Diamonds

Question 11

In the mutual fund industry, the most common performance measure is a hypothetical rate of return that assumes performance is constant over the entire period and is known as the:

Accepted Answer

A)  cumulative total return. 
B)  average annual total return. 
C)  total indexed return. 
D)  compounded geometric return. 
A)  cumulative total return. 
B)  average annual total return. 
C)  total indexed return. 
D)  compounded geometric return.

Question 12

Which of the following is not true regarding money market funds?

Accepted Answer

A)  They charge no sales charge, redemption fee, or management fee. 
B)  Their maximum average maturity is 90 days. 
C)  Normally, there are no capital gains or losses on their shares. 
D)  They represent a relatively low risk investment. 
A)  They charge no sales charge, redemption fee, or management fee. 
B)  Their maximum average maturity is 90 days. 
C)  Normally, there are no capital gains or losses on their shares. 
D)  They represent a relatively low risk investment.

Question 13

Does one mutual fund provide all the diversification that an investor needs?

Accepted Answer

A single fund typically has many (perhap

Question 14

Briefly explain the fees charged by mutual funds.

Accepted Answer

Load fees are sales charges, m

Question 15

What is the difference between the insurance offered by the Securities Investor Protection Corporation (SIPC) and that offered by the Federal Deposit Insurance Corporation (FDIC)?

Accepted Answer

The FDIC insures accounts at b

Question 16

Both open-end and closed-end investment company shares may sell at a discount from NAV.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements regarding mutual funds is true?

Accepted Answer

A)  Higher-performing funds generally have higher expenses. 
B)  Bond funds generally have higher expenses than stock funds. 
C)  Index funds generally have higher expenses than non-index funds. 
D)  Lower performing funds generally have higher expenses. 
A)  Higher-performing funds generally have higher expenses. 
B)  Bond funds generally have higher expenses than stock funds. 
C)  Index funds generally have higher expenses than non-index funds. 
D)  Lower performing funds generally have higher expenses.

Question 18

Investors desiring no-load funds must generally seek them out since there is no sales force.

Accepted Answer

A) True 
 B)False

Question 19

Would you recommend that a 65-year old retiree invest all of her retirement assets in an income fund?

Accepted Answer

No. The retiree should hold a

Question 20

All else the same, investors should prefer a hedge fund with a 2 plus 20 structure to a fund with a 1.5 plus 15 structure.

Accepted Answer

A) True 
 B)False

Exam 3: Indirect Investing

A load fee is a(n):

Global funds tend to hold a higher percentage of their portfolio in U.S. securities than do international funds.

To qualify as a regulated investment company, a fund must distribute at least 50 percent of its taxable income to the shareholders.

A 2 plus 20 fee structure for a hedge fund means that the fund:

The two largest fund supermarkets are:

In investments, ETF stands for:

Approximately 85 percent of money market assets are in non-taxable funds.

It is not important to have a secondary market for mutual funds because:

What are the main differences between a closed-end and an open-end investment company?

Which of the following ETFs (exchange traded funds) provides exposure to 500 U.S. large-capitalization companies?

In the mutual fund industry, the most common performance measure is a hypothetical rate of return that assumes performance is constant over the entire period and is known as the:

Which of the following is not true regarding money market funds?

Does one mutual fund provide all the diversification that an investor needs?

Briefly explain the fees charged by mutual funds.

What is the difference between the insurance offered by the Securities Investor Protection Corporation (SIPC) and that offered by the Federal Deposit Insurance Corporation (FDIC)?

Both open-end and closed-end investment company shares may sell at a discount from NAV.

Which of the following statements regarding mutual funds is true?

Investors desiring no-load funds must generally seek them out since there is no sales force.

Would you recommend that a 65-year old retiree invest all of her retirement assets in an income fund?

All else the same, investors should prefer a hedge fund with a 2 plus 20 structure to a fund with a 1.5 plus 15 structure.

Understanding Investments

Investment Alternatives

Securities Markets and Market Indexes

How Securities Are Traded

The Risk and Return From Investing

Portfolio Theory

Portfolio Selection and Asset Allocation

Capital Market Theory and Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economymarket Analysis

Sectorindustry Analysis

Company Analysis

Technical Analysis

Bond Yields and Prices

Bonds: Analysis and Strategy

Options

Futures Contracts

Managing Your Financial Assets

Evaluation of Investment Performance

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