Exam 13: Investing in Mutual Funds and Real Estate

Selling your back-end load mutual fund shares might result in a charge called the:

Generally speaking, socially responsible funds (SRFs) abstain from investing in alcohol, gambling, or tobacco stocks.

Exchange-traded funds (ETFs) are often the most cost-effective choice for investors who:

Tom takes a loan of $60,000 at 4% annual interest to purchase a property worth $100,000. He earns an annual income of $10,000 after expenses but before interest and income taxes are deducted. If the income tax rate is 30%, calculate Tom's leveraged return on the real estate investment. (Show all work. Round the answer to the nearest whole number.)

Having money taken at regular intervals from your paycheck and put into a mutual fund is an example of:

Leverage involves:

Conversion privileges allow investors to switch from one mutual fund to another within a:

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Usually, the management firm of a mutual fund also serves as the [ custodian | investment advisor ] of the fund.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. There are [ more | fewer ] mutual funds in existence today than there are stocks listed on all the stock exchanges in the United States.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. You [ could | could not ] switch your investments from your Fidelity income fund to a Fidelity growth fund by making a phone call.

Mike has decided to purchase a real estate property that is expected to generate a net operating income (NOI) of $63,000 per year. With a 9% cap rate, the property would have an estimated value of:

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Distributions derived from dividends earned on a mutual fund's common stock holdings are [ subject to the preferential tax rate of 15% or 20% or less | taxed as ordinary income ].

Aggressive growth funds often buy stocks with high price/earnings (P/E) multiples and stocks with volatile price fluctuations.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Exchange-traded funds (EFTs) tend to have [ lower | higher ] expense ratios than mutual funds.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. If you choose to have your mutual fund dividends automatically reinvested, you [ may defer taxes on the dividends until you redeem some shares | still owe taxes for the year the dividends are paid ].

Mutual funds typically offer more diversification and less risk than investing in one or two individual securities.

_____ are highly speculative investments that seek large profits from capital gains.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Growth funds [ do  | do not ] involve a fair amount of risk exposure.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The primary investment objective of bond funds is [ growth | income ].

The idea of a mutual fund is based on the idea of pooled diversification.