Question 1

If money market fund managers expect interest rates to increase, they will ____ their average asset maturity.

Accepted Answer

A) not adjust 
B) shorten 
C) lengthen 
D) shorten (if the expected change is small)or lengthen (if the expected change is large) 
A) not adjust 
B) shorten 
C) lengthen 
D) shorten (if the expected change is small)or lengthen (if the expected change is large)

Question 2

Money market funds invest mostly in

Accepted Answer

A) stocks. 
B) long-term bonds. 
C) real estate. 
D) short-term securities. 
A) stocks. 
B) long-term bonds. 
C) real estate. 
D) short-term securities.

Question 3

Which of the following statements is NOT correct?

Accepted Answer

A) Commercial paper is commonly purchased by money market funds. 
B) Money market funds usually have a low level of credit risk. 
C) Money market funds tend to have lower interest rate risk than bond funds. 
D) If money market fund managers expect interest rates to decrease, they should use funds generated from maturing securities to purchase new securities with shorter maturities. 
A) Commercial paper is commonly purchased by money market funds. 
B) Money market funds usually have a low level of credit risk. 
C) Money market funds tend to have lower interest rate risk than bond funds. 
D) If money market fund managers expect interest rates to decrease, they should use funds generated from maturing securities to purchase new securities with shorter maturities.

Question 4

Large mutual funds can exert some control over the management of firms because they commonly are the largest shareholders.

Accepted Answer

A) True 
 B)False

Question 5

Hedge funds commonly engage in short selling. 
 ​

Accepted Answer

A) True 
 B)False

Question 6

Hedge funds are more heavily regulated than mutual funds.

Accepted Answer

A) True 
 B)False

Question 7

_______ are promoted strictly by the mutual fund of concern and do not involve a sales charge.

Accepted Answer

A) Closed-end funds 
B) Load mutual funds 
C) No-load mutual funds 
D) Open-end mutual funds 
A) Closed-end funds 
B) Load mutual funds 
C) No-load mutual funds 
D) Open-end mutual funds

Question 8

When at least two-thirds of a bond mutual fund's portfolio consists of bonds rated below Baa by Moody's or BBB by Standard and Poor's, the fund is called a ____ fund.

Accepted Answer

A) growth 
B) capital appreciation 
C) high-yield bond 
D) leveraged bond 
E) None of these are correct. 
A) growth 
B) capital appreciation 
C) high-yield bond 
D) leveraged bond 
E) None of these are correct.

Question 9

Which of the following statements is NOT correct?

Accepted Answer

A) Investors can purchase shares directly from an open-end fund at any time. 
B) The number of shares of an open-end fund is always changing. 
C) Open-end funds typically maintain some cash on hand in case investments exceed redemptions. 
D) There are many different categories of open-end mutual funds. 
A) Investors can purchase shares directly from an open-end fund at any time. 
B) The number of shares of an open-end fund is always changing. 
C) Open-end funds typically maintain some cash on hand in case investments exceed redemptions. 
D) There are many different categories of open-end mutual funds.

Question 10

Which of the following statements is NOT correct?

Accepted Answer

A) A mutual fund is usually run by an investment company. 
B) Mutual funds with lower expense ratios tend to outperform other funds with a similar investment objective. 
C) For each mutual fund, all expenses charged and reflected in the expense ratio are always valid. 
D) The SEC requires that a majority of the directors of a mutual fund board be independent. 
A) A mutual fund is usually run by an investment company. 
B) Mutual funds with lower expense ratios tend to outperform other funds with a similar investment objective. 
C) For each mutual fund, all expenses charged and reflected in the expense ratio are always valid. 
D) The SEC requires that a majority of the directors of a mutual fund board be independent.

Question 11

Mutual funds composed of stocks that have potential for very high growth, but may also be unproven, are called

Accepted Answer

A) income funds. 
B) capital appreciation funds. 
C) specialty funds. 
D) dividend funds. 
A) income funds. 
B) capital appreciation funds. 
C) specialty funds. 
D) dividend funds.

Question 12

Equity real estate investment trusts invest

Accepted Answer

A) in mortgage and construction loans. 
B) directly in properties. 
C) in common stocks issued by construction companies. 
D) in common stocks issued by real estate brokerage firms. 
A) in mortgage and construction loans. 
B) directly in properties. 
C) in common stocks issued by construction companies. 
D) in common stocks issued by real estate brokerage firms.

Question 13

Equity REITs are sometimes purchased to hedge against inflation, as rents and property values tend to rise with inflation.

Accepted Answer

A) True 
 B)False

Question 14

____ funds sell shares to wealthy individuals and financial institutions and use the proceeds to invest in securities.

Accepted Answer

A) Growth 
B) Open-end 
C) Capital appreciation 
D) Hedge 
E) Specialty 
A) Growth 
B) Open-end 
C) Capital appreciation 
D) Hedge 
E) Specialty

Question 15

If a mutual fund distributes at least ____ percent of its taxable income to shareholders, the fund is exempt from taxes on dividends, interest, and capital gains distributed to shareholders.

Accepted Answer

A) ​25 
B) ​50 
C) ​75 
D) ​90 
A) ​25 
B) ​50 
C) ​75 
D) ​90

Question 16

Mutual funds that are willing to repurchase their shares from investors at any time are referred to as

Accepted Answer

A) closed-end funds. 
B) load mutual funds. 
C) no-load mutual funds. 
D) open-end mutual funds. 
A) closed-end funds. 
B) load mutual funds. 
C) no-load mutual funds. 
D) open-end mutual funds.

Question 17

Private equity funds use most of their money to invest in stocks of publicly traded companies. 
 ​

Accepted Answer

A) True 
 B)False

Question 18

A mutual fund consisting only of stocks of firms that are in a specific industry is an example of a ____ fund.

Accepted Answer

A) specialty 
B) growth 
C) capital appreciation 
D) growth and income 
A) specialty 
B) growth 
C) capital appreciation 
D) growth and income

Question 19

Investors who feel capable of making their own investment decisions normally prefer to invest in load funds instead of no-load funds.

Accepted Answer

A) True 
 B)False

Question 20

A mutual fund prospectus is not required to disclose the

Accepted Answer

A) minimum amount of investment required. 
B) return on the fund since its inception in comparison to the returns of other funds in its category. 
C) investment objective of the mutual fund. 
D) exposure of the mutual fund to various types of risk. 
E) fees incurred by the mutual fund and passed on to investors. 
A) minimum amount of investment required. 
B) return on the fund since its inception in comparison to the returns of other funds in its category. 
C) investment objective of the mutual fund. 
D) exposure of the mutual fund to various types of risk. 
E) fees incurred by the mutual fund and passed on to investors.

Exam 23: Mutual Fund Operations

If money market fund managers expect interest rates to increase, they will ____ their average asset maturity.

Money market funds invest mostly in

Which of the following statements is NOT correct?

Large mutual funds can exert some control over the management of firms because they commonly are the largest shareholders.

Hedge funds commonly engage in short selling. ​

Hedge funds are more heavily regulated than mutual funds.

_______ are promoted strictly by the mutual fund of concern and do not involve a sales charge.

When at least two-thirds of a bond mutual fund's portfolio consists of bonds rated below Baa by Moody's or BBB by Standard and Poor's, the fund is called a ____ fund.

Which of the following statements is NOT correct?

Which of the following statements is NOT correct?

Mutual funds composed of stocks that have potential for very high growth, but may also be unproven, are called

Equity real estate investment trusts invest

Equity REITs are sometimes purchased to hedge against inflation, as rents and property values tend to rise with inflation.

____ funds sell shares to wealthy individuals and financial institutions and use the proceeds to invest in securities.

If a mutual fund distributes at least ____ percent of its taxable income to shareholders, the fund is exempt from taxes on dividends, interest, and capital gains distributed to shareholders.

Mutual funds that are willing to repurchase their shares from investors at any time are referred to as

Private equity funds use most of their money to invest in stocks of publicly traded companies. ​

A mutual fund consisting only of stocks of firms that are in a specific industry is an example of a ____ fund.

Investors who feel capable of making their own investment decisions normally prefer to invest in load funds instead of no-load funds.

A mutual fund prospectus is not required to disclose the

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

Hedge funds commonly engage in short selling.

Private equity funds use most of their money to invest in stocks of publicly traded companies.