Question 1

Mutual funds that include both non-U.S. stocks and U.S. stocks are called ____ funds.

Accepted Answer

A) global 
B) international 
C) combined 
D) mixed 
A) global 
B) international 
C) combined 
D) mixed

Question 2

The Securities and Exchange Commission has established rules that allow public firms to disclose their earnings exclusively to hedge funds a few days before announcing the earnings to the public.

Accepted Answer

A) True 
 B)False

Question 3

The ____ of a mutual fund indicates the value per share.

Accepted Answer

A) net asset value 
B) gross asset value 
C) net stock value 
D) net bond value 
E) None of these are correct. 
A) net asset value 
B) gross asset value 
C) net stock value 
D) net bond value 
E) None of these are correct.

Question 4

The net asset value of a mutual fund is estimated once every week.

Accepted Answer

A) True 
 B)False

Question 5

Index mutual funds are not traded throughout the day, while exchange-traded funds are.

Accepted Answer

A) True 
 B)False

Question 6

A mutual fund's performance is usually unrelated to market conditions.

Accepted Answer

A) True 
 B)False

Question 7

Closed-end funds may sometimes engage in a stock repurchase, in which they purchase shares on the exchange where the shares are listed.

Accepted Answer

A) True 
 B)False

Question 8

The returns on international stock mutual funds are affected only by foreign companies' stock prices and are independent of currency movements.

Accepted Answer

A) True 
 B)False

Question 9

Hedge funds that exceed a specified size must register with the

Accepted Answer

A) Securities and Exchange Commission (SE
C) . 
B) Federal Reserve. 
C) Office of Thrift Supervision. 
D) Federal Mutual Fund Board. 
A) Securities and Exchange Commission (SE
C) . 
B) Federal Reserve. 
C) Office of Thrift Supervision. 
D) Federal Mutual Fund Board.

Question 10

Which of the following statements is incorrect?

Accepted Answer

A) Mutual funds serve as a key financial intermediary. 
B) Managers of mutual funds do not analyze economic and industry trends. 
C) Because of their diversification, management expertise, and liquidity, mutual funds have grown at a rapid pace. 
D) Some mutual funds offer check-writing privileges. 
A) Mutual funds serve as a key financial intermediary. 
B) Managers of mutual funds do not analyze economic and industry trends. 
C) Because of their diversification, management expertise, and liquidity, mutual funds have grown at a rapid pace. 
D) Some mutual funds offer check-writing privileges.

Question 11

Exchange-traded funds can be

Accepted Answer

A) traded throughout the day. 
B) purchased on margin. 
C) sold short. 
D) All of these are correct. 
A) traded throughout the day. 
B) purchased on margin. 
C) sold short. 
D) All of these are correct.

Question 12

Venture capital funds typically invest in stocks of publicly traded companies.

Accepted Answer

A) True 
 B)False

Question 13

Mutual funds whose bonds have a ____ average time to maturity are ____ sensitive to interest rate fluctuations.

Accepted Answer

A) longer; less 
B) shorter; less 
C) shorter; more 
D) longer; less AND shorter; more 
A) longer; less 
B) shorter; less 
C) shorter; more 
D) longer; less AND shorter; more

Question 14

Equity REITs essentially represent fixed-income portfolios, so their market values are heavily influenced by interest rate movements.

Accepted Answer

A) True 
 B)False

Question 15

Exchange-traded funds (ETFs)

Accepted Answer

A) are traded on an exchange, and their share price changes throughout the day. 
B) invest only in bonds. 
C) are actively managed. 
D) None of these are correct. 
A) are traded on an exchange, and their share price changes throughout the day. 
B) invest only in bonds. 
C) are actively managed. 
D) None of these are correct.

Question 16

Which of the following statements is NOT correct?

Accepted Answer

A) ETFs are like index mutual funds in that the share price adjusts over time in response to changes in the index level. 
B) ETFs normally do not have capital gains and losses that must be distributed to shareholders. 
C) The portfolio management of both ETFs and index mutual funds is very complex. 
D) ETFs can be traded throughout the day. 
A) ETFs are like index mutual funds in that the share price adjusts over time in response to changes in the index level. 
B) ETFs normally do not have capital gains and losses that must be distributed to shareholders. 
C) The portfolio management of both ETFs and index mutual funds is very complex. 
D) ETFs can be traded throughout the day.

Question 17

Hedge funds

Accepted Answer

A) are typically organized as limited partnerships. 
B) were accused of making market conditions worse during the credit crisis because they commonly took short positions in the stock of financial institutions that held subprime mortgages. 
C) commonly rely heavily on financial leverage. 
D) generally charge both a management fee and an incentive fee. 
E) All of these are correct. 
A) are typically organized as limited partnerships. 
B) were accused of making market conditions worse during the credit crisis because they commonly took short positions in the stock of financial institutions that held subprime mortgages. 
C) commonly rely heavily on financial leverage. 
D) generally charge both a management fee and an incentive fee. 
E) All of these are correct.

Question 18

Shares of open-end mutual funds are purchased and sold on exchanges.

Accepted Answer

A) True 
 B)False

Question 19

Investors can sell exchange-traded funds short.

Accepted Answer

A) True 
 B)False

Question 20

Because money market funds contain instruments with short-term maturities, their market values are not very sensitive to movements in market interest rates.

Accepted Answer

A) True 
 B)False

Exam 23: Mutual Fund Operations

Mutual funds that include both non-U.S. stocks and U.S. stocks are called ____ funds.

The Securities and Exchange Commission has established rules that allow public firms to disclose their earnings exclusively to hedge funds a few days before announcing the earnings to the public.

The ____ of a mutual fund indicates the value per share.

The net asset value of a mutual fund is estimated once every week.

Index mutual funds are not traded throughout the day, while exchange-traded funds are.

A mutual fund's performance is usually unrelated to market conditions.

Closed-end funds may sometimes engage in a stock repurchase, in which they purchase shares on the exchange where the shares are listed.

The returns on international stock mutual funds are affected only by foreign companies' stock prices and are independent of currency movements.

Hedge funds that exceed a specified size must register with the

Which of the following statements is incorrect?

Exchange-traded funds can be

Venture capital funds typically invest in stocks of publicly traded companies.

Mutual funds whose bonds have a ____ average time to maturity are ____ sensitive to interest rate fluctuations.

Equity REITs essentially represent fixed-income portfolios, so their market values are heavily influenced by interest rate movements.

Exchange-traded funds (ETFs)

Which of the following statements is NOT correct?

Hedge funds

Shares of open-end mutual funds are purchased and sold on exchanges.

Investors can sell exchange-traded funds short.

Because money market funds contain instruments with short-term maturities, their market values are not very sensitive to movements in market interest rates.

Role of Financial Markets and Institutions

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Regulation

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Securities Operations

Insurance and Pension Fund Operations

Pension Fund Operations

Filters

Mutual funds whose bonds have a average time to maturity are sensitive to interest rate fluctuations.