Question 1

What are the benefits that investment companies and mutual funds provide to the public?

Accepted Answer

a. Provide risk diversification by investing in a portfolio of assets.b. Denomination intermediation by allowing small minimum investments.c. Enhance liquidity of long-term investments.d. Increase economies of scale in investment management and reduce average transaction costs.e. Provide record keeping for tax purposes.

Question 2

REITs are open-end investment companies that invest in real estate.

Accepted Answer

A) True 
 B)False  False

Question 3

Closed-end investment companies stand ready to redeem their shares at their NAV less a management fee.

Accepted Answer

A) True 
 B)False  False

Question 4

The major investment of mutual funds is common stock.

Accepted Answer

A) True 
 B)False

Question 5

Money market mutual funds invest in commercial paper, large bank CDs, and short-term government securities.

Accepted Answer

A) True 
 B)False

Question 6

Closed-end investment companies' securities often sell at a discount to their NAV.

Accepted Answer

A) True 
 B)False

Question 7

Balanced funds generate higher proportion of income than growth and income funds and are less volatile.

Accepted Answer

A) True 
 B)False

Question 8

The National Securities Markets Improvement Act of 1996 assigned federal regulators sole jurisdiction over the structure and operations of mutual funds and mutual fund prospectuses.

Accepted Answer

A) True 
 B)False

Question 9

Arbitrage activities of hedge funds tend to increase capital market efficiency.

Accepted Answer

A) True 
 B)False

Question 10

Due to the ability to hedge, the investors of hedge funds experienced very minor losses in subprime mortgage crisis from 2007 to 2009.

Accepted Answer

A) True 
 B)False

Question 11

Class A mutual fund shares are always a poorer choice than Class B shares for a long term investor.

Accepted Answer

A) True 
 B)False

Question 12

Unlike mutual funds where their leverage is limited by regulation, hedge funds and REITs often have high leverage.

Accepted Answer

A) True 
 B)False

Question 13

Income funds are made up of portfolios of mortgage-backed securities only.

Accepted Answer

A) True 
 B)False

Question 14

When purchasing a load mutual fund, the NAV includes the load charge for purchasing the mutual funds.

Accepted Answer

A) True 
 B)False

Question 15

There is more money invested in hedge funds than in exchange‐traded funds, closed‐end funds, and unit investment trusts combined

Accepted Answer

A) True 
 B)False

Question 16

Mutual funds offer diversification and professional investment management for the fees charged.

Accepted Answer

A) True 
 B)False

Question 17

Arbitrage by hedge funds is the simultaneous buying and selling of a security or derivative of the security to exploit market pricing differentials.

Accepted Answer

A) True 
 B)False

Question 18

Load mutual fund shares may be sold back to the fund.

Accepted Answer

A) True 
 B)False

Question 19

Why have exchange-traded funds become popular in the last few years? Name one and specify what it tracks.

Accepted Answer

First introduced in 1989 at the Toronto

Question 20

REITs are exempt from federal income tax provided that they derive at least three-fourths of their income from operations related to real estate and pass through more than 90 percent of their net income to shareholders.

Accepted Answer

A) True 
 B)False

What are the benefits that investment companies and mutual funds provide to the public?

REITs are open-end investment companies that invest in real estate.

Closed-end investment companies stand ready to redeem their shares at their NAV less a management fee.

The major investment of mutual funds is common stock.

Money market mutual funds invest in commercial paper, large bank CDs, and short-term government securities.

Closed-end investment companies' securities often sell at a discount to their NAV.

Balanced funds generate higher proportion of income than growth and income funds and are less volatile.

The National Securities Markets Improvement Act of 1996 assigned federal regulators sole jurisdiction over the structure and operations of mutual funds and mutual fund prospectuses.

Arbitrage activities of hedge funds tend to increase capital market efficiency.

Due to the ability to hedge, the investors of hedge funds experienced very minor losses in subprime mortgage crisis from 2007 to 2009.

Class A mutual fund shares are always a poorer choice than Class B shares for a long term investor.

Unlike mutual funds where their leverage is limited by regulation, hedge funds and REITs often have high leverage.

Income funds are made up of portfolios of mortgage-backed securities only.

When purchasing a load mutual fund, the NAV includes the load charge for purchasing the mutual funds.

There is more money invested in hedge funds than in exchange‐traded funds, closed‐end funds, and unit investment trusts combined

Mutual funds offer diversification and professional investment management for the fees charged.

Arbitrage by hedge funds is the simultaneous buying and selling of a security or derivative of the security to exploit market pricing differentials.

Load mutual fund shares may be sold back to the fund.

Why have exchange-traded funds become popular in the last few years? Name one and specify what it tracks.

REITs are exempt from federal income tax provided that they derive at least three-fourths of their income from operations related to real estate and pass through more than 90 percent of their net income to shareholders.

An Overview of Financial Markets and Institutions

The Federal Reserve and Its Powers

The Fed and Interest Rates

The Level of Interest Rates

Bond Prices and Interest Rate Risk

The Structure of Interest Rates

Money Markets 1

Bond Markets

Mortgage Markets and Mortgagebacked Securities

Equity Markets

Derivatives Markets

International Markets

Commercial Bank Operations

International Banking

Regulation of Financial Institutions

Thrift Institutions and Finance Companies

Insurance Companies and Pension Funds

Investment Banking

Risk Management in Financial Institutions

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Exam 19: Investment Companies

What are the benefits that investment companies and mutual funds provide to the public?

REITs are open-end investment companies that invest in real estate.

Closed-end investment companies stand ready to redeem their shares at their NAV less a management fee.

The major investment of mutual funds is common stock.

Money market mutual funds invest in commercial paper, large bank CDs, and short-term government securities.

Closed-end investment companies' securities often sell at a discount to their NAV.

Balanced funds generate higher proportion of income than growth and income funds and are less volatile.

The National Securities Markets Improvement Act of 1996 assigned federal regulators sole jurisdiction over the structure and operations of mutual funds and mutual fund prospectuses.

Arbitrage activities of hedge funds tend to increase capital market efficiency.

Due to the ability to hedge, the investors of hedge funds experienced very minor losses in subprime mortgage crisis from 2007 to 2009.

Class A mutual fund shares are always a poorer choice than Class B shares for a long term investor.

Unlike mutual funds where their leverage is limited by regulation, hedge funds and REITs often have high leverage.

Income funds are made up of portfolios of mortgage-backed securities only.

When purchasing a load mutual fund, the NAV includes the load charge for purchasing the mutual funds.

There is more money invested in hedge funds than in exchange‐traded funds, closed‐end funds, and unit investment trusts combined

Mutual funds offer diversification and professional investment management for the fees charged.

Arbitrage by hedge funds is the simultaneous buying and selling of a security or derivative of the security to exploit market pricing differentials.

Load mutual fund shares may be sold back to the fund.

Why have exchange-traded funds become popular in the last few years? Name one and specify what it tracks.

REITs are exempt from federal income tax provided that they derive at least three-fourths of their income from operations related to real estate and pass through more than 90 percent of their net income to shareholders.

An Overview of Financial Markets and Institutions

The Federal Reserve and Its Powers

The Fed and Interest Rates

The Level of Interest Rates

Bond Prices and Interest Rate Risk

The Structure of Interest Rates

Money Markets 1

Bond Markets

Mortgage Markets and Mortgagebacked Securities

Equity Markets

Derivatives Markets

International Markets

Commercial Bank Operations

International Banking

Regulation of Financial Institutions

Thrift Institutions and Finance Companies

Insurance Companies and Pension Funds

Investment Banking

Risk Management in Financial Institutions

Filters