Question 1

Money market mutual funds invest in
1. commercial paper
2. repurchase agreements
3. corporate bonds

Accepted Answer

A) 1 and 2 
B) 1 and 3 
C) 2 and 3 
D) all of the above 
A) 1 and 2 
B) 1 and 3 
C) 2 and 3 
D) all of the above

Question 2

The S&P 500 stock index may be an inappropriate benchmark for a small-cap fund.

Accepted Answer

A) True 
 B)False

Question 3

If a mutual fund portfolio earned a return that exceeded the return on the S&P 500 stock index, you may conclude that the fund outperformed the market on a risk-adjusted basis.

Accepted Answer

A) True 
 B)False

Question 4

One means to adjust for risk is

Accepted Answer

A) standardize funds' returns by their beta coefficients 
B) compute their rates of return including both income and capital gain distributions 
C) standardize funds' costs by an aggregate index of mutual fund expenses 
D) to divide each funds' return by the return on the market 
A) standardize funds' returns by their beta coefficients 
B) compute their rates of return including both income and capital gain distributions 
C) standardize funds' costs by an aggregate index of mutual fund expenses 
D) to divide each funds' return by the return on the market

Question 5

Mutual fund A earned 10 percent while B earned 8 percent. The standard deviations of the returns were 10 percent and 7 percent, respectively. According to the Sharpe ratio, which fund performed better?

Accepted Answer

The Sharpe ratios are .10/.10=

Question 6

The Sharpe index assumes that portfolios are not well diversified.

Accepted Answer

A) True 
 B)False

Question 7

One of the major advantages associated with liquid money market securities is safety of principal.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a reason for selecting a mutual fund?

Accepted Answer

A) avoidance of market risk 
B) high tax efficiency 
C) charging 12b-1 fees instead of load fees 
D) often realizing portfolio gains 
A) avoidance of market risk 
B) high tax efficiency 
C) charging 12b-1 fees instead of load fees 
D) often realizing portfolio gains

Question 9

The income earned by a mutual fund is taxed through the stockholders' income tax returns.

Accepted Answer

A) True 
 B)False

Question 10

If mutual fund shares are purchased just prior to the fund's annual distribution, the investor becomes responsible for taxes on the distribution.

Accepted Answer

A) True 
 B)False

Question 11

A style portfolio manager offers two things:

Accepted Answer

A) investment skill and market timing 
B) the specific style combined with a low beta 
C) a high beta and investment timing 
D) investment skill combined with the style 
A) investment skill and market timing 
B) the specific style combined with a low beta 
C) a high beta and investment timing 
D) investment skill combined with the style

Question 12

Empirical studies of returns earned by investment companies indicate that

Accepted Answer

A) no funds outperform the market consistently 
B) most funds are less risky than the market 
C) most funds outperform the market consistently 
D) few funds outperform the market consistently 
A) no funds outperform the market consistently 
B) most funds are less risky than the market 
C) most funds outperform the market consistently 
D) few funds outperform the market consistently

Question 13

If mutual funds make investments in efficient financial markets, they

Accepted Answer

A) cannot outperform the market consistently 
B) should not outperform the market consistently 
C) will underperform the market when securities prices decline 
D) primarily bear unsystematic risk 
A) cannot outperform the market consistently 
B) should not outperform the market consistently 
C) will underperform the market when securities prices decline 
D) primarily bear unsystematic risk

Question 14

Acquiring shares in no load funds is one means to avoid 12b-1 fees.

Accepted Answer

A) True 
 B)False

Question 15

High portfolio turnover is associated with high tax efficiency.

Accepted Answer

A) True 
 B)False

Question 16

Mutual funds                  realized capital gains and income (e.g., dividends received)

Accepted Answer

A) retain 
B) reinvest 
C) distribute 
D) distribute or reinvest 
A) retain 
B) reinvest 
C) distribute 
D) distribute or reinvest

Question 17

The advantages offered by investment companies include
1. professional management
2. avoidance of income taxes by the investor
3. portfolio diversification

Accepted Answer

A) 1 and 2 
B) 1 and 3 
C) 2 and 3 
D) all of the above 
A) 1 and 2 
B) 1 and 3 
C) 2 and 3 
D) all of the above

Question 18

Index funds tend to track

Accepted Answer

A) the stock market as a whole 
B) the bond market 
C) a specific measure of the market 
D) the return on other index funds 
A) the stock market as a whole 
B) the bond market 
C) a specific measure of the market 
D) the return on other index funds

Question 19

A Eurodollar CD is a certificate of deposit issued in the United States by a foreign bank.

Accepted Answer

A) True 
 B)False

Question 20

An index fund limits its portfolio to

Accepted Answer

A) high quality securities 
B) stocks that respond to changes in the consumer prices (i.e., Consumer Price Index) 
C) stocks included in an aggregate measure of stock prices 
D) stocks of firms in a particular industry 
A) high quality securities 
B) stocks that respond to changes in the consumer prices (i.e., Consumer Price Index) 
C) stocks included in an aggregate measure of stock prices 
D) stocks of firms in a particular industry

Money market mutual funds invest in 1. commercial paper 2. repurchase agreements 3. corporate bonds

The S&P 500 stock index may be an inappropriate benchmark for a small-cap fund.

If a mutual fund portfolio earned a return that exceeded the return on the S&P 500 stock index, you may conclude that the fund outperformed the market on a risk-adjusted basis.

One means to adjust for risk is

Mutual fund A earned 10 percent while B earned 8 percent. The standard deviations of the returns were 10 percent and 7 percent, respectively. According to the Sharpe ratio, which fund performed better?

The Sharpe index assumes that portfolios are not well diversified.

One of the major advantages associated with liquid money market securities is safety of principal.

Which of the following is a reason for selecting a mutual fund?

The income earned by a mutual fund is taxed through the stockholders' income tax returns.

If mutual fund shares are purchased just prior to the fund's annual distribution, the investor becomes responsible for taxes on the distribution.

A style portfolio manager offers two things:

Empirical studies of returns earned by investment companies indicate that

If mutual funds make investments in efficient financial markets, they

Acquiring shares in no load funds is one means to avoid 12b-1 fees.

High portfolio turnover is associated with high tax efficiency.

Mutual funds realized capital gains and income (e.g., dividends received)

The advantages offered by investment companies include 1. professional management 2. avoidance of income taxes by the investor 3. portfolio diversification

Index funds tend to track

A Eurodollar CD is a certificate of deposit issued in the United States by a foreign bank.

An index fund limits its portfolio to

An Introduction to Investments

Securities Markets

The Time Value of Money

Financial Planning, Taxation and the Efficiency of Financial Markets

Risk and Portfolio Management

Closed-End Investment Companies, Real Estate Investment Trusts Reits, and Exchange-Traded Funds Etfs

Stock

The Valuation of Common Stock

Investment Returns and Aggregate Measures of Stock Markets

The Macroeconomic Environment for Investment Decisions

Behavioral Finance and Technical Analysis

The Bond Market

The Valuation of Fixed-Income Securities

Government Securities

Convertible Bonds and Convertible Preferred Stock

An Introduction to Options

Option Valuation and Strategies

Commodity and Financial Futures

Financial Planning and Investing in an Efficient Market Context

Filters

Exam 6: Investment Companies: Mutual Funds

Money market mutual funds invest in 1. commercial paper 2. repurchase agreements 3. corporate bonds

The S&P 500 stock index may be an inappropriate benchmark for a small-cap fund.

If a mutual fund portfolio earned a return that exceeded the return on the S&P 500 stock index, you may conclude that the fund outperformed the market on a risk-adjusted basis.

One means to adjust for risk is

Mutual fund A earned 10 percent while B earned 8 percent. The standard deviations of the returns were 10 percent and 7 percent, respectively. According to the Sharpe ratio, which fund performed better?

The Sharpe index assumes that portfolios are not well diversified.

One of the major advantages associated with liquid money market securities is safety of principal.

Which of the following is a reason for selecting a mutual fund?

The income earned by a mutual fund is taxed through the stockholders' income tax returns.

If mutual fund shares are purchased just prior to the fund's annual distribution, the investor becomes responsible for taxes on the distribution.

A style portfolio manager offers two things:

Empirical studies of returns earned by investment companies indicate that

If mutual funds make investments in efficient financial markets, they

Acquiring shares in no load funds is one means to avoid 12b-1 fees.

High portfolio turnover is associated with high tax efficiency.

Mutual funds realized capital gains and income (e.g., dividends received)

The advantages offered by investment companies include 1. professional management 2. avoidance of income taxes by the investor 3. portfolio diversification

Index funds tend to track

A Eurodollar CD is a certificate of deposit issued in the United States by a foreign bank.

An index fund limits its portfolio to

An Introduction to Investments

Securities Markets

The Time Value of Money

Financial Planning, Taxation and the Efficiency of Financial Markets

Risk and Portfolio Management

Closed-End Investment Companies, Real Estate Investment Trusts Reits, and Exchange-Traded Funds Etfs

Stock

The Valuation of Common Stock

Investment Returns and Aggregate Measures of Stock Markets

The Macroeconomic Environment for Investment Decisions

Behavioral Finance and Technical Analysis

The Bond Market

The Valuation of Fixed-Income Securities

Government Securities

Convertible Bonds and Convertible Preferred Stock

An Introduction to Options

Option Valuation and Strategies

Commodity and Financial Futures

Financial Planning and Investing in an Efficient Market Context

Filters