Question 1

While reviewing mutual fund reports, Allen noticed that a fund was reported as "closed". What is the primary reason for closing a fund?

Accepted Answer

A) all issued shares have been sold 
B) the fund is suffering a loss 
C) the NAV has declined noticeably 
D) the fund has grown too large 
E) the fund is underperforming its peers 
A) all issued shares have been sold 
B) the fund is suffering a loss 
C) the NAV has declined noticeably 
D) the fund has grown too large 
E) the fund is underperforming its peers

Question 2

Which one of the following correctly applies to hedge funds?

Accepted Answer

A) are highly liquid 
B) must be highly diversified 
C) are available to the general public 
D) include a vast array of investment objectives 
E) include limited investment options 
A) are highly liquid 
B) must be highly diversified 
C) are available to the general public 
D) include a vast array of investment objectives 
E) include limited investment options

Question 3

The High Growth Technology Fund has an NAV of $37.23 and a 2.4% front-end load. What is the offering price?

Accepted Answer

A) $34.84 
B) $35.36 
C) $36.34 
D) $36.53 
E) $38.15 
A) $34.84 
B) $35.36 
C) $36.34 
D) $36.53 
E) $38.15

Question 4

You want to purchase shares in a fund and ensure that your money does not support firms that harm the environment. Which type of fund should you purchase?

Accepted Answer

A) international fund 
B) income fund 
C) tax-managed fund 
D) index fund 
E) social conscience fund 
A) international fund 
B) income fund 
C) tax-managed fund 
D) index fund 
E) social conscience fund

Question 5

Which one of the following statements is correct concerning mutual funds?

Accepted Answer

A) Mutual funds generally pay no taxes. 
B) Mutual funds are risk-free. 
C) Profits on the sale of mutual fund shares are tax-free. 
D) All mutual funds are diversified. 
E) Investments in mutual funds are guaranteed from loss by a private agency of the federal government. 
A) Mutual funds generally pay no taxes. 
B) Mutual funds are risk-free. 
C) Profits on the sale of mutual fund shares are tax-free. 
D) All mutual funds are diversified. 
E) Investments in mutual funds are guaranteed from loss by a private agency of the federal government.

Question 6

A hedge fund:

Accepted Answer

A) may charge relatively high fees. 
B) must be registered if there are ten or more investors. 
C) is generally structured as a corporation. 
D) is limited to $1 million in assets. 
E) is complicated to legally establish. 
A) may charge relatively high fees. 
B) must be registered if there are ten or more investors. 
C) is generally structured as a corporation. 
D) is limited to $1 million in assets. 
E) is complicated to legally establish.

Question 7

A mutual fund is created by which one of the following parties?

Accepted Answer

A) a fund's shareholders 
B) a fund's board of directors 
C) the SEC 
D) an investment advisory firm 
E) a discount broker 
A) a fund's shareholders 
B) a fund's board of directors 
C) the SEC 
D) an investment advisory firm 
E) a discount broker

Question 8

One year ago, Allison purchased 350 shares of a mutual fund which has a front-end load of 5.25%. The NAV at the time of purchase was $31. Today, the NAV is $34. The fund had total annual expenses of 1.65%. There were no fund distributions this past year. What is Allison's rate of return for the year?

Accepted Answer

A) −1.10% 
B) 3.92% 
C) 4.23% 
D) 4.76% 
E) 5.00% 
A) −1.10% 
B) 3.92% 
C) 4.23% 
D) 4.76% 
E) 5.00%

Question 9

The Market Stability Fund owns the following stocks:
$\begin{array}{ccc}
\text { Stock } & \text { Shares } & \text { Price } \
\text { A } & 8,790 & \$ 49 \
\text { B } & 6,700 & \$ 39 \
\text { C } & 4,200 & \$ 55
\end{array}$

The fund has no liabilities and has 57,600 shares outstanding. What is the NAV?

Accepted Answer

A) $14.72 
B) $14.88 
C) $15.47 
D) $15.95 
E) $16.02 
A) $14.72 
B) $14.88 
C) $15.47 
D) $15.95 
E) $16.02

Question 10

A tax-exempt money market fund has an annual return of 3.76%. What is your equivalent taxable rate if you are in a 28% marginal tax bracket?

Accepted Answer

A) 3.15% 
B) 3.38% 
C) 5.22% 
D) 6.11% 
E) 6.81% 
A) 3.15% 
B) 3.38% 
C) 5.22% 
D) 6.11% 
E) 6.81%

Question 11

You invested $4,500 in a mutual fund 38 months ago when the NAV of the fund was $31.80. You have not acquired or sold any shares since that time. Today, the NAV is $30.84. The fund charges contingent deferred sales charges of 6%, 5%, 4%, 3%, 2%, 2%, and 1% if the shares are redeemed within the first 7 years, respectively. How much money will you receive if you redeem your shares today?

Accepted Answer

A) $4,183.86 
B) $4,233.23 
C) $4,344.00 
D) $4,448.15 
E) $4,501.91 
A) $4,183.86 
B) $4,233.23 
C) $4,344.00 
D) $4,448.15 
E) $4,501.91

Question 12

During the 2007-2009 financial crisis, some money market funds had large losses in their holdings, which resulted in the NAV dropping below $1 a share. This is referred to as:

Accepted Answer

A) breaking the bank. 
B) breaking the buck. 
C) underfunding liabilities. 
D) marking to market. 
E) negative NAV. 
A) breaking the bank. 
B) breaking the buck. 
C) underfunding liabilities. 
D) marking to market. 
E) negative NAV.

Question 13

The Emerging Fund is a new closed-end fund which just offered its shares to the public. The fund raised $75 million and each share sold for $20. The fee for the fund promoter was 3.75% of the initial proceeds. What was the value of your initial $21,500 purchase before the shares began trading in the marketplace?

Accepted Answer

A) $18,430 
B) $18,532 
C) $19,040 
D) $19,500 
E) $20,694 
A) $18,430 
B) $18,532 
C) $19,040 
D) $19,500 
E) $20,694

Question 14

Which one of the following characteristics best fits an index fund?

Accepted Answer

A) market outperformer 
B) high expenses 
C) passively managed 
D) dividend oriented 
E) high turnover rate 
A) market outperformer 
B) high expenses 
C) passively managed 
D) dividend oriented 
E) high turnover rate

Question 15

Which one of the following types of funds invests in both stocks and bonds and actively attempts to time the market?

Accepted Answer

A) income 
B) convertible 
C) flexible portfolio 
D) balanced 
E) insured 
A) income 
B) convertible 
C) flexible portfolio 
D) balanced 
E) insured

Question 16

The Stone Wall Fund has an offer price of $43.20 and a front-end load of 2.5%. What is the net asset value?

Accepted Answer

A) $42.12 
B) $42.75 
C) $42.83 
D) $43.90 
E) $45.05 
A) $42.12 
B) $42.75 
C) $42.83 
D) $43.90 
E) $45.05

Question 17

Which one of the following is a common characteristic of a closed-end fund but not of an open-end fund?

Accepted Answer

A) professional management 
B) annual fees 
C) stated objective 
D) discounted price 
E) taxable distributions 
A) professional management 
B) annual fees 
C) stated objective 
D) discounted price 
E) taxable distributions

Question 18

One year ago, you purchased 421 shares of a mutual fund when both the offering price and the NAV were $10.80 a share. Today, the NAV is $10.64 after today's distribution of $1.48 per share in short-term gains. There is no long-term gain distribution. What is your rate of return?

Accepted Answer

A) 10.99% 
B) 12.04% 
C) 12.22% 
D) 14.29% 
E) 14.41% 
A) 10.99% 
B) 12.04% 
C) 12.22% 
D) 14.29% 
E) 14.41%

Question 19

A taxable money market fund has an annual return of 3.27%. What is the equivalent aftertax yield if the tax rate is 24%?

Accepted Answer

A) 2.49% 
B) 3.37% 
C) 4.62% 
D) 5.87% 
E) 13.62% 
A) 2.49% 
B) 3.37% 
C) 4.62% 
D) 5.87% 
E) 13.62%

Question 20

A closed-end fund has total assets of $379 million and liabilities of $640,000. There are 36 million shares outstanding. What is the premium or discount if the shares are currently selling for $9.85 each?

Accepted Answer

A) 7.46% discount 
B) 6.28% discount 
C) 6.94% discount 
D) 6.80% premium 
E) 7.46% premium 
A) 7.46% discount 
B) 6.28% discount 
C) 6.94% discount 
D) 6.80% premium 
E) 7.46% premium

While reviewing mutual fund reports, Allen noticed that a fund was reported as "closed". What is the primary reason for closing a fund?

Which one of the following correctly applies to hedge funds?

The High Growth Technology Fund has an NAV of $37.23 and a 2.4% front-end load. What is the offering price?

You want to purchase shares in a fund and ensure that your money does not support firms that harm the environment. Which type of fund should you purchase?

Which one of the following statements is correct concerning mutual funds?

A hedge fund:

A mutual fund is created by which one of the following parties?

The Market Stability Fund owns the following stocks: Stock Shares Price A 8,790 \ 49 B 6,700 \ 39 C 4,200 \ 55 The fund has no liabilities and has 57,600 shares outstanding. What is the NAV?

A tax-exempt money market fund has an annual return of 3.76%. What is your equivalent taxable rate if you are in a 28% marginal tax bracket?

During the 2007-2009 financial crisis, some money market funds had large losses in their holdings, which resulted in the NAV dropping below $1 a share. This is referred to as:

Which one of the following characteristics best fits an index fund?

Which one of the following types of funds invests in both stocks and bonds and actively attempts to time the market?

The Stone Wall Fund has an offer price of $43.20 and a front-end load of 2.5%. What is the net asset value?

Which one of the following is a common characteristic of a closed-end fund but not of an open-end fund?

One year ago, you purchased 421 shares of a mutual fund when both the offering price and the NAV were $10.80 a share. Today, the NAV is $10.64 after today's distribution of $1.48 per share in short-term gains. There is no long-term gain distribution. What is your rate of return?

A taxable money market fund has an annual return of 3.27%. What is the equivalent aftertax yield if the tax rate is 24%?

A closed-end fund has total assets of $379 million and liabilities of $640,000. There are 36 million shares outstanding. What is the premium or discount if the shares are currently selling for $9.85 each?

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 4: Mutual Funds and Other Investment Companies

While reviewing mutual fund reports, Allen noticed that a fund was reported as "closed". What is the primary reason for closing a fund?

Which one of the following correctly applies to hedge funds?

The High Growth Technology Fund has an NAV of $37.23 and a 2.4% front-end load. What is the offering price?

You want to purchase shares in a fund and ensure that your money does not support firms that harm the environment. Which type of fund should you purchase?

Which one of the following statements is correct concerning mutual funds?

A hedge fund:

A mutual fund is created by which one of the following parties?

The Market Stability Fund owns the following stocks: Stock Shares Price A 8,790 \ 49 B 6,700 \ 39 C 4,200 \ 55 The fund has no liabilities and has 57,600 shares outstanding. What is the NAV?

A tax-exempt money market fund has an annual return of 3.76%. What is your equivalent taxable rate if you are in a 28% marginal tax bracket?

During the 2007-2009 financial crisis, some money market funds had large losses in their holdings, which resulted in the NAV dropping below $1 a share. This is referred to as:

Which one of the following characteristics best fits an index fund?

Which one of the following types of funds invests in both stocks and bonds and actively attempts to time the market?

The Stone Wall Fund has an offer price of $43.20 and a front-end load of 2.5%. What is the net asset value?

Which one of the following is a common characteristic of a closed-end fund but not of an open-end fund?

One year ago, you purchased 421 shares of a mutual fund when both the offering price and the NAV were $10.80 a share. Today, the NAV is $10.64 after today's distribution of $1.48 per share in short-term gains. There is no long-term gain distribution. What is your rate of return?

A taxable money market fund has an annual return of 3.27%. What is the equivalent aftertax yield if the tax rate is 24%?

A closed-end fund has total assets of $379 million and liabilities of $640,000. There are 36 million shares outstanding. What is the premium or discount if the shares are currently selling for $9.85 each?

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters