Exam 6: Investment Companies: Mutual Funds

Mutual funds reduce unsystematic risk but not systematic risk.

If an investment company were liquidated, the investor should receive the net asset value.

A high beta coefficient for a mutual fund is desirable if the investor is seeking a conservative investment.

Commercial paper is generally

Money market mutual funds acquire short-term money market instruments such as commercial paper.

An index fund seeks to duplicate the composition of an index such as the S&P 500.

Funds that perform well in one year earn consistently higher returns in subsequent years.

Empirical studies of returns earned by mutual funds suggest they consistently outperform the market.

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

A mutual fund with a beta coefficient of 0.8

The shares of no-load mutual funds sell for their net asset value.

The only costs associated with investing in a mutual fund are the commissions to buy and sell the shares.

The net asset value of a mutual fund rises when it distributes capital gains.

Which of the following is a consideration when selecting a mutual fund? 1. portfolio turnover 2. 12b-1 fees 3. unrealized losses in the fund's portfolio

Beta coefficients may be computed for investment companies and used to compute risk-adjusted rates of return.

The Sharpe index standardizes performance by the portfolio's beta.

Which of the following should not have default risk?

Rates of return reported by mutual funds

A small cap fund has total assets of less than $100 million.

Investment companies pay no taxes on their earnings.