Question 1

The net asset value of a mutual fund is found by

Accepted Answer

A) subtracting the daily market value of the fund's asset portfolio from the previous days' value. 
B) dividing the cumulative value of all asset positions held by the fund by the total number of asset shares held by the fund. 
C) computing the daily market value of the fund's total asset portfolio and then dividing this amount by the number of mutual fund shares outstanding. 
D) comparing the daily market value of the fund's total asset portfolio with that of its peers. 
A) subtracting the daily market value of the fund's asset portfolio from the previous days' value. 
B) dividing the cumulative value of all asset positions held by the fund by the total number of asset shares held by the fund. 
C) computing the daily market value of the fund's total asset portfolio and then dividing this amount by the number of mutual fund shares outstanding. 
D) comparing the daily market value of the fund's total asset portfolio with that of its peers.

Question 2

As of 2015,the total investment in long-term mutual funds is less than the total investment in money market mutual funds.

Accepted Answer

A) True 
 B)False

Question 3

The SEC requires that prospectuses or advertisements regarding a mutual fund contain information that returns of the mutual fund carry some risk.

Accepted Answer

A) True 
 B)False

Question 4

New SEC rules call for shareholder reports to include

Accepted Answer

A) clear information to investors on brokerage commissions and discounts. 
B) information on how the fund compares with industry averages on fees and loads. 
C) information on eligibility for breakpoint discounts. 
D) All of the options. 
E) Only two of the options. 
A) clear information to investors on brokerage commissions and discounts. 
B) information on how the fund compares with industry averages on fees and loads. 
C) information on eligibility for breakpoint discounts. 
D) All of the options. 
E) Only two of the options.

Question 5

Class B shares of a mutual fund are typically charged a back-end load when the shares are redeemed.

Accepted Answer

A) True 
 B)False

Question 6

Short-term mutual funds invest solely in tax-exempt securities.

Accepted Answer

A) True 
 B)False

Question 7

The front-end or back-end loads charged by some mutual funds often are combined with 12b-1 fees.

Accepted Answer

A) True 
 B)False

Question 8

This practice is especially common in international funds as traders can exploit differences in time zones.

Accepted Answer

A) Directed brokerage. 
B) Insider trading. 
C) Late trading. 
D) Market timing. 
A) Directed brokerage. 
B) Insider trading. 
C) Late trading. 
D) Market timing.

Question 9

Mutual funds that are load funds use sales agents,and thus always have an up-front commission charge.

Accepted Answer

A) True 
 B)False

Question 10

An investor purchases fund shares with a 3 percent front-end load and expects to hold the shares for 10 years.The fund has a total fund expense ratio (including 12b-1 fees)of 1 percent per year.The annual total shareholder cost for this fund is _______ per year.

Accepted Answer

A) 3 percent 
B) 30 percent 
C) 0.3 percent 
D) 1.3 percent 
A) 3 percent 
B) 30 percent 
C) 0.3 percent 
D) 1.3 percent

Question 11

Match the following pieces of legislation with the function achieved by each regulation as stated in the question.
-Provides for the supervision of mutual fund share distributions.

Accepted Answer

A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act of 1940 
D) Investment Company Act of 1940 
E) Insider Trading and Securities Fraud Enforcement Act of 1988
F)Market Reform Act of 1990
G)National Securities Markets Improvement Act of 1996 
A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act of 1940 
D) Investment Company Act of 1940 
E) Insider Trading and Securities Fraud Enforcement Act of 1988
F)Market Reform Act of 1990
G)National Securities Markets Improvement Act of 1996

Question 12

Closed-end investment companies

Accepted Answer

A) have a variable number of shares based on demand. 
B) can trade at a price that is greater than,equal to,or less than the NAV. 
C) will trade at a different price as the number of shares of the fund changes. 
D) issues shares that cannot be sold;hence the term "closed." 
A) have a variable number of shares based on demand. 
B) can trade at a price that is greater than,equal to,or less than the NAV. 
C) will trade at a different price as the number of shares of the fund changes. 
D) issues shares that cannot be sold;hence the term "closed."

Question 13

Match the following pieces of legislation with the function achieved by each regulation as stated in the question.
-Requires a mutual fund to file a registration statement with the SEC.

Accepted Answer

A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act of 1940 
D) Investment Company Act of 1940 
E) Insider Trading and Securities Fraud Enforcement Act of 1988
F)Market Reform Act of 1990
G)National Securities Markets Improvement Act of 1996 
A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act of 1940 
D) Investment Company Act of 1940 
E) Insider Trading and Securities Fraud Enforcement Act of 1988
F)Market Reform Act of 1990
G)National Securities Markets Improvement Act of 1996

Question 14

Mutual fund shares that are offered for sale at the NAV without a front-end load,but which charge a combination of 12b-1 fees and a back-end load,and whose back-end load typically remains in effect for 6 to 8 years,are

Accepted Answer

A) Class A shares. 
B) Class B shares. 
C) Class C shares. 
D) Class D shares. 
A) Class A shares. 
B) Class B shares. 
C) Class C shares. 
D) Class D shares.

Question 15

The type of abusive activity that involves arrangements between mutual fund companies and brokerage houses is

Accepted Answer

A) market timing. 
B) late trading. 
C) directed brokerage. 
D) improper fee assessment. 
A) market timing. 
B) late trading. 
C) directed brokerage. 
D) improper fee assessment.

Question 16

The short-term mutual fund sector includes

Accepted Answer

A) money market mutual funds. 
B) hybrid funds. 
C) equity funds. 
D) bond funds. 
A) money market mutual funds. 
B) hybrid funds. 
C) equity funds. 
D) bond funds.

Question 17

Equity mutual funds may contain common stock,but not preferred stock.

Accepted Answer

A) True 
 B)False

Question 18

A change from commercial bank deposits to money market mutual funds typically allows an investor to benefit from higher yields,but with the cost of losing deposit insurance coverage.

Accepted Answer

A) True 
 B)False

Question 19

Worldwide investments in mutual funds have grown at a rate faster than in the United States over the last decade.

Accepted Answer

A) True 
 B)False

Question 20

The SEC now requires mutual fund portfolio managers to report their personal trading in individual stocks,but not in the portfolios they manage.

Accepted Answer

A) True 
 B)False

Exam 5: Financial Services: Mutual Fund and Hedge Fund Companies

The net asset value of a mutual fund is found by

As of 2015,the total investment in long-term mutual funds is less than the total investment in money market mutual funds.

The SEC requires that prospectuses or advertisements regarding a mutual fund contain information that returns of the mutual fund carry some risk.

New SEC rules call for shareholder reports to include

Class B shares of a mutual fund are typically charged a back-end load when the shares are redeemed.

Short-term mutual funds invest solely in tax-exempt securities.

The front-end or back-end loads charged by some mutual funds often are combined with 12b-1 fees.

This practice is especially common in international funds as traders can exploit differences in time zones.

Mutual funds that are load funds use sales agents,and thus always have an up-front commission charge.

An investor purchases fund shares with a 3 percent front-end load and expects to hold the shares for 10 years.The fund has a total fund expense ratio (including 12b-1 fees)of 1 percent per year.The annual total shareholder cost for this fund is _______ per year.

Match the following pieces of legislation with the function achieved by each regulation as stated in the question. -Provides for the supervision of mutual fund share distributions.

Closed-end investment companies

Match the following pieces of legislation with the function achieved by each regulation as stated in the question. -Requires a mutual fund to file a registration statement with the SEC.

Mutual fund shares that are offered for sale at the NAV without a front-end load,but which charge a combination of 12b-1 fees and a back-end load,and whose back-end load typically remains in effect for 6 to 8 years,are

The type of abusive activity that involves arrangements between mutual fund companies and brokerage houses is

The short-term mutual fund sector includes

Equity mutual funds may contain common stock,but not preferred stock.

A change from commercial bank deposits to money market mutual funds typically allows an investor to benefit from higher yields,but with the cost of losing deposit insurance coverage.

Worldwide investments in mutual funds have grown at a rate faster than in the United States over the last decade.

The SEC now requires mutual fund portfolio managers to report their personal trading in individual stocks,but not in the portfolios they manage.

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Firms and Investment Banks

Financial Services: Insurance Companies

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

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