Question 1

The Investment Company Act of 1940

Accepted Answer

A)  Contains various anti-fraud provisions and record keeping and reporting requirements for fund advisors. 
B)  Regulates broker-dealers. 
C)  Requires federal registration of all public offerings of securities. 
D)  Regulates the structure and operations of mutual funds. 
E)  Contains a code of ethics and standards of professional conduct. 
A)  Contains various anti-fraud provisions and record keeping and reporting requirements for fund advisors. 
B)  Regulates broker-dealers. 
C)  Requires federal registration of all public offerings of securities. 
D)  Regulates the structure and operations of mutual funds. 
E)  Contains a code of ethics and standards of professional conduct.

Question 2

Management and advisory firms can advise clients on how to structure their own portfolios.

Accepted Answer

A) True 
 B)False

Question 3

On January 2,2003,you invest $10,000 in Megabucks Mutual Fund,a load fund that charges a fee of 2%.The fund's returns were 13% in 2003,11% in 2004,8% in 2005.On December 31,2005 you redeem all your shares.The dollar value is

Accepted Answer

A)  $13,600.00 
B)  $13,275.51 
C)  $13,297.67 
D)  $13,995.75 
E)  $10,000.00 
A)  $13,600.00 
B)  $13,275.51 
C)  $13,297.67 
D)  $13,995.75 
E)  $10,000.00

Question 4

An investment management company is

Accepted Answer

A)  A corporation that handles the administrative functions for a fund. 
B)  A corporation that has its major assets in a portfolio of securities. 
C)  A corporation that invests in financial services firms. 
D)  a and b. 
E)  a and c. 
A)  A corporation that handles the administrative functions for a fund. 
B)  A corporation that has its major assets in a portfolio of securities. 
C)  A corporation that invests in financial services firms. 
D)  a and b. 
E)  a and c.

Question 5

Market index funds attempt to match the composition and performance of a specified market indicator series.

Accepted Answer

A) True 
 B)False

Question 6

Calculate the annual rate of return for a mutual fund with the following fees and expected returns
$$\begin{array} { l c c c c } 
\text { Investment } & E ( \text { Return } ) & \text { Laad } & 12 \mathrm {~b} - 1 \mathrm { Eee } & \text { Years Hele } \
\text { Mutual Fund } & 7 \% & 4 \% & 0.50 \% & 7 \text { years }
\end{array}$$

Accepted Answer

A)  4.95% 
B)  5.0% 
C)  5.85% 
D)  2.5% 
E)  6.55% 
A)  4.95% 
B)  5.0% 
C)  5.85% 
D)  2.5% 
E)  6.55%

Question 7

What is the offering price for a mutual fund with a NAV of $36.50 and a load of 4 percent?

Accepted Answer

A)  $34.78 
B)  $35.51 
C)  $35.77 
D)  $36.50 
E)  $37.96 
A)  $34.78 
B)  $35.51 
C)  $35.77 
D)  $36.50 
E)  $37.96

Question 8

Convertible arbitrage hedge funds profit from disparities in the relationship between prices for convertible bonds and fixed-income bonds.

Accepted Answer

A) True 
 B)False

Question 9

Hedge funds are far less liquid than mutual fund shares.

Accepted Answer

A) True 
 B)False

Question 10

On January 2,2003,you invest $10,000 in the Tiger Fund,a load fund that charges a fee of 6%.The fund's returns were 25% in 2003,35% in 2004,-5% in 2005.On December 31,2005 you redeem all your shares of Tiger.The dollar value is

Accepted Answer

A)  $5,200.89 
B)  $13,345.89 
C)  $7,931.25 
D)  $15,896.34 
E)  $8,646.91 
A)  $5,200.89 
B)  $13,345.89 
C)  $7,931.25 
D)  $15,896.34 
E)  $8,646.91

Question 11

Consider X Bond Fund which consists of the 5 bonds shown below with no liabilities.
$\begin{array}{lcc}
\text { Company } & \text { Current Bond Value } & \text { \# Bonds } \
\hline \text { Komko } & 980 & 120 \
\text { Hijack } & 1010 & 150 \
\text { Mitsue } & 1200 & 100 \
\text { Smitsu } & 800 & 120 \
\text { Innes } & 600 & 150
\end{array}$
If initially the value of the fund was $1,000,000 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)  $25.00 
B)  $27.68 
C)  $25.68 
D)  $28.76 
E)  $26.78 
A)  $25.00 
B)  $27.68 
C)  $25.68 
D)  $28.76 
E)  $26.78

Question 12

In a convertible arbitrage strategy hedge fund managers attempt to

Accepted Answer

A)  Generate profits by taking advantage of convertible bond pricing disparities caused by changing market events. 
B)  Generate profits by taking advantage of disparities in the relationship between prices for convertible bonds and the underlying common stock. 
C)  Generate profits by taking advantage of disparities in the relationship between prices for convertible bonds and the underlying common stock option. 
D)  All of the above. 
E)  None of the above. 
A)  Generate profits by taking advantage of convertible bond pricing disparities caused by changing market events. 
B)  Generate profits by taking advantage of disparities in the relationship between prices for convertible bonds and the underlying common stock. 
C)  Generate profits by taking advantage of disparities in the relationship between prices for convertible bonds and the underlying common stock option. 
D)  All of the above. 
E)  None of the above.

Question 13

Funds that attempt to provide current income,safety of principal and liquidity are known as

Accepted Answer

A)  Balanced funds. 
B)  Flexible funds. 
C)  Income funds. 
D)  Money market funds. 
E)  Index funds. 
A)  Balanced funds. 
B)  Flexible funds. 
C)  Income funds. 
D)  Money market funds. 
E)  Index funds.

Question 14

Exhibit 24.1
Use the Information Below for the Following Problem(S)
Suppose ABC Mutual fund owned only 4 stocks as follows:
 $$\begin{array} { c c c } 
\text { Stack } & \text { Ahires } & \text { PriEe } \
\hline W & 2500 & \$ 11 \
X & 2100 & 14 \
Y & 270 & 23 \
Z & 1900 & 15
\end{array}$$
-Refer to Exhibit 24.1.What is the offering price for the fund if the NAV is $25.25 and the load is 6 percent?

Accepted Answer

A)  $26.19 
B)  $23.74 
C)  $25.25 
D)  $26.77 
E)  $24.13 
A)  $26.19 
B)  $23.74 
C)  $25.25 
D)  $26.77 
E)  $24.13

Question 15

Investing in emerging markets can be viewed as a global application of

Accepted Answer

A)  Fixed-income arbitrage. 
B)  Convertible arbitrage. 
C)  Merger arbitrage. 
D)  Distressed opportunistic strategies. 
E)  Equity market neutral. 
A)  Fixed-income arbitrage. 
B)  Convertible arbitrage. 
C)  Merger arbitrage. 
D)  Distressed opportunistic strategies. 
E)  Equity market neutral.

Question 16

A closed-end investment company is normally referred to as a mutual fund.

Accepted Answer

A) True 
 B)False

Question 17

The market price of a closed-end investment company has generally been

Accepted Answer

A)  5 to 20 percent below the NAV. 
B)  25 to 35 percent below the NAV. 
C)  Equal to the NAV (within a 2 percent range). 
D)  5 to 20 percent above the NAV. 
E)  25 to 35 percent above the NAV. 
A)  5 to 20 percent below the NAV. 
B)  25 to 35 percent below the NAV. 
C)  Equal to the NAV (within a 2 percent range). 
D)  5 to 20 percent above the NAV. 
E)  25 to 35 percent above the NAV.

Question 18

When the offer price and the NAV of a mutual fund are equal it is an indication that

Accepted Answer

A)  The fund's assets are in equilibrium. 
B)  The fund is trading at par. 
C)  It is strictly a coincidence. 
D)  The fund has no initial fee. 
E)  The fund is backloaded. 
A)  The fund's assets are in equilibrium. 
B)  The fund is trading at par. 
C)  It is strictly a coincidence. 
D)  The fund has no initial fee. 
E)  The fund is backloaded.

Question 19

Consider the Defiance Bond Fund that consists of the 3 bonds shown below and has no liabilities.
$\begin{array}{lcc}
\text { Company } & \text { Curent Bond Value } & \text { \# Bonds } \
\hline \text { Komko } & 980 & 120 \
\text { Hijack } & 1010 & 150 \
\text { Miteme } & 1200 & 100
\end{array}$
If initially the value of the fund was $250,000 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)  $25.00 
B)  $38.91 
C)  $39.81 
D)  $31.98 
E)  $39.91 
A)  $25.00 
B)  $38.91 
C)  $39.81 
D)  $31.98 
E)  $39.91

Question 20

The gross return of closed-end investments companies has typically been

Accepted Answer

A)  10-20 percent less than their NAV. 
B)  10-15 percent less than their NAV. 
C)  Less than the net return. 
D)  About the same as the net return. 
E)  None of the above 
A)  10-20 percent less than their NAV. 
B)  10-15 percent less than their NAV. 
C)  Less than the net return. 
D)  About the same as the net return. 
E)  None of the above

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

The Investment Company Act of 1940

Management and advisory firms can advise clients on how to structure their own portfolios.

On January 2,2003,you invest $10,000 in Megabucks Mutual Fund,a load fund that charges a fee of 2%.The fund's returns were 13% in 2003,11% in 2004,8% in 2005.On December 31,2005 you redeem all your shares.The dollar value is

An investment management company is

Market index funds attempt to match the composition and performance of a specified market indicator series.

Calculate the annual rate of return for a mutual fund with the following fees and expected returns Investment E( Return ) Laad 12-1 Years Hele Mutual Fund 7\% 4\% 0.50\% 7 years

What is the offering price for a mutual fund with a NAV of $36.50 and a load of 4 percent?

Convertible arbitrage hedge funds profit from disparities in the relationship between prices for convertible bonds and fixed-income bonds.

Hedge funds are far less liquid than mutual fund shares.

On January 2,2003,you invest $10,000 in the Tiger Fund,a load fund that charges a fee of 6%.The fund's returns were 25% in 2003,35% in 2004,-5% in 2005.On December 31,2005 you redeem all your shares of Tiger.The dollar value is

In a convertible arbitrage strategy hedge fund managers attempt to

Funds that attempt to provide current income,safety of principal and liquidity are known as

Exhibit 24.1 Use the Information Below for the Following Problem(S) Suppose ABC Mutual fund owned only 4 stocks as follows: Stack Ahires PriEe W 2500 \ 11 X 2100 14 Y 270 23 Z 1900 15 -Refer to Exhibit 24.1.What is the offering price for the fund if the NAV is $25.25 and the load is 6 percent?

Investing in emerging markets can be viewed as a global application of

A closed-end investment company is normally referred to as a mutual fund.

The market price of a closed-end investment company has generally been

When the offer price and the NAV of a mutual fund are equal it is an indication that

The gross return of closed-end investments companies has typically been

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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