Question 1

____ are beneficial for investors who want to invest in tax-exempt securities.

Accepted Answer

A) Municipal bond funds 
B) Growth and income funds 
C) International and global funds 
D) Money market funds 
A) Municipal bond funds 
B) Growth and income funds 
C) International and global funds 
D) Money market funds

Question 2

Which of the following statements is NOT correct?

Accepted Answer

A) Exchange-traded funds (ETFs)are designed to mimic particular stock indexes and are traded on a stock exchange. 
B) ETFs have very high expense ratios. 
C) ETFs differ from most open-end and closed-end funds in that they are not actively managed. 
D) One disadvantage of ETFs is that each purchase of additional shares must be done through the exchange where they are traded. 
A) Exchange-traded funds (ETFs)are designed to mimic particular stock indexes and are traded on a stock exchange. 
B) ETFs have very high expense ratios. 
C) ETFs differ from most open-end and closed-end funds in that they are not actively managed. 
D) One disadvantage of ETFs is that each purchase of additional shares must be done through the exchange where they are traded.

Question 3

Money market funds commonly invest in

Accepted Answer

A) stocks. 
B) real estate. 
C) commercial paper. 
D) U.S. Treasury bonds. 
E) None of these are correct. 
A) stocks. 
B) real estate. 
C) commercial paper. 
D) U.S. Treasury bonds. 
E) None of these are correct.

Question 4

Shares of exchange-traded funds can be sold _________, and shares of open-end mutual funds can be sold _________.

Accepted Answer

A) at any time during trading hours; at any time via private trading networks 
B) only at the end of the day; at any time during trading hours 
C) at any time via private trading networks; at any time during trading hours 
D) at any time during trading hours; only at the end of the day 
A) at any time during trading hours; at any time via private trading networks 
B) only at the end of the day; at any time during trading hours 
C) at any time via private trading networks; at any time during trading hours 
D) at any time during trading hours; only at the end of the day

Question 5

Funds that are designed to mimic particular stock indexes and are traded on a stock exchange are known as

Accepted Answer

A) index mutual funds. 
B) exchange-traded funds. 
C) money market funds. 
D) None of these are correct. 
A) index mutual funds. 
B) exchange-traded funds. 
C) money market funds. 
D) None of these are correct.

Question 6

Hedge funds try to obtain an information advantage by using expert networks, whereby they hire consultants with expertise in specific industries.

Accepted Answer

A) True 
 B)False

Question 7

Mutual funds with ____ expense ratios tend to ____ other funds that have a similar investment objective.

Accepted Answer

A) lower; underperform 
B) higher; outperform 
C) lower; outperform 
D) lower; underperform AND higher; outperform 
A) lower; underperform 
B) higher; outperform 
C) lower; outperform 
D) lower; underperform AND higher; outperform

Question 8

____ trade at one-tenth of the S&P 500 value.

Accepted Answer

A) Spiders 
B) Cubes 
C) Diamonds 
D) World Equity Benchmark Shares 
A) Spiders 
B) Cubes 
C) Diamonds 
D) World Equity Benchmark Shares

Question 9

The net asset value (NAV)is estimated each day by first determining the market value of all securities comprising the mutual fund. 
 ​

Accepted Answer

A) True 
 B)False

Question 10

To cover managerial and other expenses, mutual funds typically charge

Accepted Answer

A) management fees of less than 2 percent of total assets per year. 
B) commissions of 8 to 10 percent on purchases or sales of securities. 
C) management fees of more than 10 percent of total assets per year. 
D) a one-time load of 5 percent upon the initial investment in the mutual fund. 
A) management fees of less than 2 percent of total assets per year. 
B) commissions of 8 to 10 percent on purchases or sales of securities. 
C) management fees of more than 10 percent of total assets per year. 
D) a one-time load of 5 percent upon the initial investment in the mutual fund.

Question 11

The majority of closed-end funds invest in

Accepted Answer

A) derivatives. 
B) bonds and other debt securities. 
C) stocks representing a particular sector or country. 
D) international equity securities. 
A) derivatives. 
B) bonds and other debt securities. 
C) stocks representing a particular sector or country. 
D) international equity securities.

Question 12

If investors sell their mutual fund shares after the net asset value of the fund increases, the investors benefit from

Accepted Answer

A) share price appreciation. 
B) capital gains distribution. 
C) dividends. 
D) split net asset value. 
A) share price appreciation. 
B) capital gains distribution. 
C) dividends. 
D) split net asset value.

Question 13

The ____ of a mutual fund represents the price at which shares can be purchased from the mutual fund.

Accepted Answer

A) gross asset value 
B) net asset value 
C) net stock value 
D) net bond value 
A) gross asset value 
B) net asset value 
C) net stock value 
D) net bond value

Question 14

A front-end load is a withdrawal fee assessed when you withdraw money from the mutual fund.

Accepted Answer

A) True 
 B)False

Question 15

Portfolio managers are hired by the mutual fund to invest in a portfolio of securities that satisfies the desires of investors. 
 ​

Accepted Answer

A) True 
 B)False

Question 16

Diversification among types of mutual funds usually does little to reduce the volatility of returns on the overall investment.

Accepted Answer

A) True 
 B)False

Question 17

The number of exchange-traded funds has declined in recent years because the cost of managing them was excessive.

Accepted Answer

A) True 
 B)False

Question 18

The composition of an asset allocation fund

Accepted Answer

A) includes nontraditional assets such as derivative securities and global real estate. 
B) is fixed and does not change with market conditions. 
C) is designed to automatically change as the investor ages. 
D) is adjusted by the fund's managers in response to expectations and economic conditions. 
A) includes nontraditional assets such as derivative securities and global real estate. 
B) is fixed and does not change with market conditions. 
C) is designed to automatically change as the investor ages. 
D) is adjusted by the fund's managers in response to expectations and economic conditions.

Question 19

Which of the following is  NOT  disclosed in a mutual fund prospectus?

Accepted Answer

A) the minimum amount of investment required 
B) the investment objective of the mutual fund 
C) the fees incurred by the mutual fund 
D) All of the above are disclosed. 
A) the minimum amount of investment required 
B) the investment objective of the mutual fund 
C) the fees incurred by the mutual fund 
D) All of the above are disclosed.

Question 20

Based on the market value of total assets, which is the dominant type of mutual fund?

Accepted Answer

A) high-yield (junk)bond funds 
B) hybrid funds 
C) stock funds 
D) taxable bond funds 
E) municipal bond funds 
A) high-yield (junk)bond funds 
B) hybrid funds 
C) stock funds 
D) taxable bond funds 
E) municipal bond funds

Exam 23: Mutual Fund Operations

____ are beneficial for investors who want to invest in tax-exempt securities.

Which of the following statements is NOT correct?

Money market funds commonly invest in

Shares of exchange-traded funds can be sold _________, and shares of open-end mutual funds can be sold _________.

Funds that are designed to mimic particular stock indexes and are traded on a stock exchange are known as

Hedge funds try to obtain an information advantage by using expert networks, whereby they hire consultants with expertise in specific industries.

Mutual funds with ____ expense ratios tend to ____ other funds that have a similar investment objective.

____ trade at one-tenth of the S&P 500 value.

The net asset value (NAV)is estimated each day by first determining the market value of all securities comprising the mutual fund. ​

To cover managerial and other expenses, mutual funds typically charge

The majority of closed-end funds invest in

If investors sell their mutual fund shares after the net asset value of the fund increases, the investors benefit from

The ____ of a mutual fund represents the price at which shares can be purchased from the mutual fund.

A front-end load is a withdrawal fee assessed when you withdraw money from the mutual fund.

Portfolio managers are hired by the mutual fund to invest in a portfolio of securities that satisfies the desires of investors. ​

Diversification among types of mutual funds usually does little to reduce the volatility of returns on the overall investment.

The number of exchange-traded funds has declined in recent years because the cost of managing them was excessive.

The composition of an asset allocation fund

Which of the following is NOT disclosed in a mutual fund prospectus?

Based on the market value of total assets, which is the dominant type of mutual fund?

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

Shares of exchange-traded funds can be sold _, and shares of open-end mutual funds can be sold _.

Mutual funds with expense ratios tend to other funds that have a similar investment objective.

The net asset value (NAV)is estimated each day by first determining the market value of all securities comprising the mutual fund.

Portfolio managers are hired by the mutual fund to invest in a portfolio of securities that satisfies the desires of investors.