Question 1

Ethical conflicts may arise as a result of

Accepted Answer

A)  Incentive compensation schemes. 
B)  Soft dollar arrangements. 
C)  Marketing investment management services. 
D)  All of the above. 
E)  None of the above. 
A)  Incentive compensation schemes. 
B)  Soft dollar arrangements. 
C)  Marketing investment management services. 
D)  All of the above. 
E)  None of the above.

Question 2

Closed-end investment companies never sell at discounts to their NAV.

Accepted Answer

A) True 
 B)False

Question 3

Open-end and closed-end investment companies are similar in that both companies will repurchase shares on demand.

Accepted Answer

A) True 
 B)False

Question 4

On January 2,2003,you invest $100,000 in Righteous,a load fund that charges a fee of 7%.The fund's returns were 12.8% in 2003,13.9% in 2004,7.9% in 2005.On December 31,2005 you redeem all your Righteous shares.The dollar value is

Accepted Answer

A)  $12,800.00 
B)  $12,892.50 
C)  $100,000.00 
D)  $128,925.00 
E)  $10,000.00 
A)  $12,800.00 
B)  $12,892.50 
C)  $100,000.00 
D)  $128,925.00 
E)  $10,000.00

Question 5

Suppose you consider investing $10,000 in a load fund from which a fee of 3% is deducted and you expect the fund to earn 12% over the next year.Alternatively,you could invest in a no load fund which is expected to earn 10% and which takes a 0 percent redemption fee.Which is better and by how much?

Accepted Answer

A)  Load fund by $151 
B)  No load fund by $136 
C)  Funds are equal 
D)  No load fund by $421 
E)  Load fund by $115 
A)  Load fund by $151 
B)  No load fund by $136 
C)  Funds are equal 
D)  No load fund by $421 
E)  Load fund by $115

Question 6

If the Micro mutual fund was originated by selling $250,000 of stock at $10.00 per share.Calculate its current NAV if the fund consists of the following four stocks.
$$\begin{array} { c c c } 
\text { Stack } & \text { Gheras } & \text { Price } \
\hline Q & 9,500 & \$ 10.75 \
R & 7,200 & \$ 13.90 \
\text { S } & 4,50 [ & \$ 22.25 \
T & 6,800 & \$ 14.75
\end{array}$$

Accepted Answer

A)  $5.78 
B)  $10.00 
C)  $12.43 
D)  $16.11 
E)  $19.21 
A)  $5.78 
B)  $10.00 
C)  $12.43 
D)  $16.11 
E)  $19.21

Question 7

The total market value of all assets of a mutual fund divided by the number of shares of the fund is known as the net asset value.

Accepted Answer

A) True 
 B)False

Question 8

A money market fund would be likely to invest in a portfolio containing all of the following except

Accepted Answer

A)  Commercial paper. 
B)  Banker's acceptances. 
C)  U.S. Treasury bills. 
D)  Bank certificates of deposit. 
E)  U.S. Treasury notes. 
A)  Commercial paper. 
B)  Banker's acceptances. 
C)  U.S. Treasury bills. 
D)  Bank certificates of deposit. 
E)  U.S. Treasury notes.

Question 9

Which of the following is a characteristic of hedge funds?

Accepted Answer

A)  They are generally less restricted in how and where they can make investments. 
B)  They are more liquid than mutual fund shares. 
C)  They have no limitations on when and how often investment capital can be contributed or removed. 
D)  All of the above. 
E)  None of the above. 
A)  They are generally less restricted in how and where they can make investments. 
B)  They are more liquid than mutual fund shares. 
C)  They have no limitations on when and how often investment capital can be contributed or removed. 
D)  All of the above. 
E)  None of the above.

Question 10

Suppose you consider investing $1,000 in a load fund which charges a fee of 2%,and you expect the fund to earn 14% over the next year.Alternatively,you could invest in a no-load fund with similar risk that is expected to earn 9% and charges a 1/2 percent redemption fee.Which is better and by how much?

Accepted Answer

A)  Funds are equal 
B)  Load fund by $32.65 
C)  Load fund by $50.55 
D)  No-load fund by $64.55 
E)  No-load fund by $44.30 
A)  Funds are equal 
B)  Load fund by $32.65 
C)  Load fund by $50.55 
D)  No-load fund by $64.55 
E)  No-load fund by $44.30

Question 11

Open-end investment companies continue to sell and repurchase shares after their initial public offering.

Accepted Answer

A) True 
 B)False

Question 12

Diversifying a portfolio to eliminate unsystematic risk is one of the major benefits of investing in mutual funds.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following are guiding principles for ethical behavior in the asset management industry as put forward by the CFA Center for Financial Market Integrity?

Accepted Answer

A)  The interests of investment professional come first. 
B)  The preferred method for promoting fair and efficient markets is to set up a central oversight board. 
C)  Financial markets in various countries should develop high-quality standards for reporting financial information that reflect local customs. 
D)  Financial statements should be reported from the perspective of firm shareholders. 
E)  All of the above. 
A)  The interests of investment professional come first. 
B)  The preferred method for promoting fair and efficient markets is to set up a central oversight board. 
C)  Financial markets in various countries should develop high-quality standards for reporting financial information that reflect local customs. 
D)  Financial statements should be reported from the perspective of firm shareholders. 
E)  All of the above.

Question 14

An open-end investment company functions like any other public firm.

Accepted Answer

A) True 
 B)False

Question 15

In an investment company,the invested funds belong to many individuals.

Accepted Answer

A) True 
 B)False

Question 16

On January 2,2003,you invest $50,000 in the Lizbiz Mutual Fund,a load fund that charges a fee of 5%.The fund's returns were 14.6% in 2003,-6.4% in 2004,15.2% in 2005.On December 31,2005 you redeem all your shares.The dollar value is

Accepted Answer

A)  $66,722.27 
B)  $15,200.00 
C)  $58,695.74 
D)  $33,366.25 
E)  $10,000.00 
A)  $66,722.27 
B)  $15,200.00 
C)  $58,695.74 
D)  $33,366.25 
E)  $10,000.00

Question 17

Income distributions and capital gains distributions are the only source of returns for mutual funds.

Accepted Answer

A) True 
 B)False

Question 18

What type of funds are typically no-load funds that impose no penalty for early withdrawal and generally allow holders to write checks against their account?

Accepted Answer

A)  Mutual funds 
B)  Open-end funds 
C)  Closed-end funds 
D)  Money market funds 
E)  Balanced funds 
A)  Mutual funds 
B)  Open-end funds 
C)  Closed-end funds 
D)  Money market funds 
E)  Balanced funds

Question 19

Consider the Compliance Bond Fund that consists of the 7 bonds shown below and has no liabilities.
$\begin{array}{lcc}
\text { Company } & \text { Current Bond Value } & \text { \# Bonds } \
\hline \text { Komko } & 980 & 120 \
\text { Hijack } & 1010 & 150 \
\text { Mitsue } & 1200 & 100 \
\text { Smitsu } & 800 & 120 \
\text { Jones } & 600 & 150 \
\text { GMM } & 1000 & 150 \
\text { ATP } & 950 & 150
\end{array}$
If initially the value of the fund was $2,500,000 and the original shares were offered to the public with a NAV of $25 per share,what is the current NAV of the fund?

Accepted Answer

A)  $27.11 
B)  $25.00 
C)  $26.11 
D)  $21.67 
E)  $26.27 
A)  $27.11 
B)  $25.00 
C)  $26.11 
D)  $21.67 
E)  $26.27

Question 20

Fund of funds give investors access to hedge fund managers that might otherwise be unavailable to them.

Accepted Answer

A) True 
 B)False

Exam 24: Professional Money Management, alternative Assets, and Industry Ethics

Ethical conflicts may arise as a result of

Closed-end investment companies never sell at discounts to their NAV.

Open-end and closed-end investment companies are similar in that both companies will repurchase shares on demand.

On January 2,2003,you invest $100,000 in Righteous,a load fund that charges a fee of 7%.The fund's returns were 12.8% in 2003,13.9% in 2004,7.9% in 2005.On December 31,2005 you redeem all your Righteous shares.The dollar value is

Suppose you consider investing $10,000 in a load fund from which a fee of 3% is deducted and you expect the fund to earn 12% over the next year.Alternatively,you could invest in a no load fund which is expected to earn 10% and which takes a 0 percent redemption fee.Which is better and by how much?

If the Micro mutual fund was originated by selling $250,000 of stock at $10.00 per share.Calculate its current NAV if the fund consists of the following four stocks. Stack Gheras Price Q 9,500 \ 10.75 R 7,200 \ 13.90 S 4,50[ \ 22.25 T 6,800 \ 14.75

The total market value of all assets of a mutual fund divided by the number of shares of the fund is known as the net asset value.

A money market fund would be likely to invest in a portfolio containing all of the following except

Which of the following is a characteristic of hedge funds?

Open-end investment companies continue to sell and repurchase shares after their initial public offering.

Diversifying a portfolio to eliminate unsystematic risk is one of the major benefits of investing in mutual funds.

Which of the following are guiding principles for ethical behavior in the asset management industry as put forward by the CFA Center for Financial Market Integrity?

An open-end investment company functions like any other public firm.

In an investment company,the invested funds belong to many individuals.

On January 2,2003,you invest $50,000 in the Lizbiz Mutual Fund,a load fund that charges a fee of 5%.The fund's returns were 14.6% in 2003,-6.4% in 2004,15.2% in 2005.On December 31,2005 you redeem all your shares.The dollar value is

Income distributions and capital gains distributions are the only source of returns for mutual funds.

What type of funds are typically no-load funds that impose no penalty for early withdrawal and generally allow holders to write checks against their account?

Fund of funds give investors access to hedge fund managers that might otherwise be unavailable to them.

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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