Question 1

Mutual funds

Accepted Answer

A) are unregulated. 
B) are required to disclose the names of their portfolio managers in the prospectus. 
C) are not required to disclose any information about  their past performance. 
D) are exempt from all taxes. 
A) are unregulated. 
B) are required to disclose the names of their portfolio managers in the prospectus. 
C) are not required to disclose any information about  their past performance. 
D) are exempt from all taxes.

Question 2

​W hen interest rates decline, investors who want to earn a high return may ____ their investments in stock mutual funds and ____ their deposits in depository institutions.

Accepted Answer

A) reduce; reduce 
B) reduce; increase 
C) increase; reduce 
D) increase; increase 
A) reduce; reduce 
B) reduce; increase 
C) increase; reduce 
D) increase; increase

Question 3

Capital appreciation funds are suited to investors who are more willing to risk a possible loss in value.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following are most likely to invest in mortgages?

Accepted Answer

A) stock mutual funds 
B) real estate investment trusts 
C) Treasury bond funds 
D) money market funds 
A) stock mutual funds 
B) real estate investment trusts 
C) Treasury bond funds 
D) money market funds

Question 5

The majority of mutual fund assets are

Accepted Answer

A) common stocks. 
B) corporate bonds. 
C) U.S. government bonds. 
D) municipal bonds. 
A) common stocks. 
B) corporate bonds. 
C) U.S. government bonds. 
D) municipal bonds.

Question 6

Investors who invest in a multifund mutual fund essentially pay two layers of management fees.

Accepted Answer

A) True 
 B)False

Question 7

Closed-end fund managers must hold more cash than open-end mutual fund managers.

Accepted Answer

A) True 
 B)False

Question 8

Money market fund assets include all of the following, EXCEPT

Accepted Answer

A) stocks. 
B) repurchase agreements. 
C) Treasury bills. 
D) CDs. 
A) stocks. 
B) repurchase agreements. 
C) Treasury bills. 
D) CDs.

Question 9

Which of the following is NOT true regarding mutual funds?

Accepted Answer

A) They are a key financial intermediary. 
B) They provide an important service to individual investors seeking to invest funds. 
C) Most mutual funds use experienced portfolio managers, so investors do not have to manage the portfolio themselves. 
D) They provide a way for individual investors to diversify, but most individual investors are unable to afford the purchase of mutual fund shares. 
A) They are a key financial intermediary. 
B) They provide an important service to individual investors seeking to invest funds. 
C) Most mutual funds use experienced portfolio managers, so investors do not have to manage the portfolio themselves. 
D) They provide a way for individual investors to diversify, but most individual investors are unable to afford the purchase of mutual fund shares.

Question 10

Mutual fund managers seek securities that are very liquid so that they can easily sell them in the secondary market at any time.

Accepted Answer

A) True 
 B)False

Question 11

Most studies that assess mutual fund performance find that mutual funds almost always outperform a benchmark market index.

Accepted Answer

A) True 
 B)False

Question 12

Mutual funds composed of _____ bonds with high credit ratings allow investors in high tax brackets to avoid taxes while maintaining a low degree of ______.

Accepted Answer

A) Treasury; liquidity risk 
B) municipal; credit risk 
C) high-yield; credit risk 
D) international; exchange rate risk 
A) Treasury; liquidity risk 
B) municipal; credit risk 
C) high-yield; credit risk 
D) international; exchange rate risk

Question 13

Mutual funds must register with the U.S. Treasury and provide interested investors with a prospectus that discloses details about the components of the funds and the risks involved. 
 ​

Accepted Answer

A) True 
 B)False

Question 14

Hedge funds commonly use financial leverage, which can

Accepted Answer

A) magnify their returns and magnify their losses. 
B) magnify their returns and limit their losses. 
C) reduce their risk and limit their losses. 
D) magnify their returns and not affect their risk. 
A) magnify their returns and magnify their losses. 
B) magnify their returns and limit their losses. 
C) reduce their risk and limit their losses. 
D) magnify their returns and not affect their risk.

Question 15

Most closed-end funds invest in

Accepted Answer

A) bonds and other debt securities. 
B) money market securities. 
C) gold. 
D) derivatives. 
A) bonds and other debt securities. 
B) money market securities. 
C) gold. 
D) derivatives.

Exam 23: Mutual Fund Operations

Mutual funds

​W hen interest rates decline, investors who want to earn a high return may ____ their investments in stock mutual funds and ____ their deposits in depository institutions.

Capital appreciation funds are suited to investors who are more willing to risk a possible loss in value.

Which of the following are most likely to invest in mortgages?

The majority of mutual fund assets are

Investors who invest in a multifund mutual fund essentially pay two layers of management fees.

Closed-end fund managers must hold more cash than open-end mutual fund managers.

Money market fund assets include all of the following, EXCEPT

Which of the following is NOT true regarding mutual funds?

Mutual fund managers seek securities that are very liquid so that they can easily sell them in the secondary market at any time.

Most studies that assess mutual fund performance find that mutual funds almost always outperform a benchmark market index.

Mutual funds composed of _____ bonds with high credit ratings allow investors in high tax brackets to avoid taxes while maintaining a low degree of ______.

Mutual funds must register with the U.S. Treasury and provide interested investors with a prospectus that discloses details about the components of the funds and the risks involved. ​

Hedge funds commonly use financial leverage, which can

Most closed-end funds invest in

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

W hen interest rates decline, investors who want to earn a high return may their investments in stock mutual funds and their deposits in depository institutions.

Mutual funds composed of _ bonds with high credit ratings allow investors in high tax brackets to avoid taxes while maintaining a low degree of __.

Mutual funds must register with the U.S. Treasury and provide interested investors with a prospectus that discloses details about the components of the funds and the risks involved.