Exam 6: Investment Companies: Mutual Funds

If an investor's excess return is negative,

Treasury bills are issued by state treasuries and have no risk of default.

High tax efficiency suggests that a fund's after-tax return is comparable to its before-tax return.

The cost of investing in a mutual fund includes 1. the loading charges 2. commissions when the fund buys and sells securities 3. management fees

An exit fee has the same impact of

In order to sell securities to the general public, a mutual fund must register its securities and prepare a prospectus detailing its objectives and costs to investors.

An exit fee (e.g., 3 percent)has the same impact on an investor's return as an equal load fee (e.g., 3 percent).

Which of the following is true?

An index fund seeks to duplicate an aggregate measure of the market or a segment of the market.

The Jensen index compares actual performance to the risk-adjusted required performance.

Investments in mutual funds permit the investor to avoid market risk.

Open-end investment companies

No-load funds with 12b-1 fees are able to charge their existing shareholders for marketing expenses.

Mutual funds report their returns on a before-tax basis.

The shares of load mutual fund sell for a discount from their net asset value.

When a seller executes a repurchase agreement, the seller agrees to repurchase the asset at a lower price.

Mutual funds with beta coefficients greater than 1.0

The per share net asset value of a mutual fund depends on the difference between the fund's assets and liabilities and the number of shares outstanding.

Which of the following is not a short-term, liquid asset?

The "load" fee charged by a mutual fund is paid when the shares are sold.