Question 1

What does a hurdle rate specified by a hedge fund indicate?

Accepted Answer

A) The maximum number of investors possible in the fund that would allow it to avoid regulations. 
B) The minimum amount required to be invested in the fund. 
C) The net worth criterion for an individual to be deemed an "accredited investor." 
D) The highest net asset value that the fund has previously achieved,above which the manager receives a performance fee. 
E) The minimum annualized performance benchmark that must be realized before a performance fee can be assessed. 
A) The maximum number of investors possible in the fund that would allow it to avoid regulations. 
B) The minimum amount required to be invested in the fund. 
C) The net worth criterion for an individual to be deemed an "accredited investor." 
D) The highest net asset value that the fund has previously achieved,above which the manager receives a performance fee. 
E) The minimum annualized performance benchmark that must be realized before a performance fee can be assessed.

Question 2

For individual investors purchasing exchange traded funds (ETFs),which of the following is the most important entity that plays a key role in the primary market for ETF shares?

Accepted Answer

A) Authorized participants (APs)that interact with the ETF directly 
B) Managers of the ETF assets 
C) Market exchange officials overseeing trading in the ETF 
D) The National Association of Securities Dealers (NASDs)that clears the trade 
A) Authorized participants (APs)that interact with the ETF directly 
B) Managers of the ETF assets 
C) Market exchange officials overseeing trading in the ETF 
D) The National Association of Securities Dealers (NASDs)that clears the trade

Question 3

The National Securities Markets Improvement Act of 1996 exempts mutual funds from oversight by state securities regulators and reduced their regulatory burden.

Accepted Answer

A) True 
 B)False

Question 4

Historical evidence indicates that the benefits of greater management attention in load funds do not outweigh the disadvantages of the load fee.

Accepted Answer

A) True 
 B)False

Question 5

One of the goals of mutual funds is to achieve superior diversification through fund and risk pooling compared to what individual investors can achieve.

Accepted Answer

A) True 
 B)False

Question 6

These types of funds mix hedge funds and other pooled investment vehicles.

Accepted Answer

A) Distressed securities funds. 
B) Macro funds. 
C) Value funds. 
D) Opportunistic funds. 
E) Fund of funds. 
A) Distressed securities funds. 
B) Macro funds. 
C) Value funds. 
D) Opportunistic funds. 
E) Fund of funds.

Question 7

Mutual fund supermarkets often allow investors to purchase funds within large number of fund companies with no transaction fees.

Accepted Answer

A) True 
 B)False

Question 8

These "more risky" hedge funds aim to profit from changes in global economies,typically brought about by shifts in government policy that impact interest rates.

Accepted Answer

A) Distressed securities funds. 
B) Macro funds. 
C) Value funds. 
D) Opportunistic funds. 
A) Distressed securities funds. 
B) Macro funds. 
C) Value funds. 
D) Opportunistic funds.

Question 9

Hedge fund data such as assets held and trading activity

Accepted Answer

A) are primarily self-reported by the hedge fund. 
B) can be independently tracked by a regulatory agency. 
C) can be obtained from SEC filings. 
D) can be obtained from research agencies. 
A) are primarily self-reported by the hedge fund. 
B) can be independently tracked by a regulatory agency. 
C) can be obtained from SEC filings. 
D) can be obtained from research agencies.

Question 10

The proportionate mix of total assets invested in long-term versus short-term mutual funds has varied over the last twenty years.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is the regulation that allowed the SEC to restrict program trading when it deems necessary?

Accepted Answer

A) Securities Exchange Act. 
B) Investment Advisers Act. 
C) Investment Company Act. 
D) Insider Trading and Securities Fraud Enforcement Act. 
E) Market Reform Act. 
A) Securities Exchange Act. 
B) Investment Advisers Act. 
C) Investment Company Act. 
D) Insider Trading and Securities Fraud Enforcement Act. 
E) Market Reform Act.

Question 12

The largest asset category of mutual funds as of 2015 was

Accepted Answer

A) corporate equities. 
B) credit market instruments. 
C) U.S.government securities. 
D) corporate and foreign bonds. 
A) corporate equities. 
B) credit market instruments. 
C) U.S.government securities. 
D) corporate and foreign bonds.

Question 13

An investor invests $100,000 in a mutual fund that has a 5 percent front-end load,charges a management fee of 0.5 percent,and a 12b-1 fee of 0.25 percent.The investor plans to leave the investment for one year.What is the dollar amount of the total shareholder cost?

Accepted Answer

A) $5,000. 
B) $5,500. 
C) $5,750. 
D) $750. 
A) $5,000. 
B) $5,500. 
C) $5,750. 
D) $750.

Question 14

Most hedge funds rely on the specific expertise of the fund manager.

Accepted Answer

A) True 
 B)False

Question 15

What agency acts as the distributor or "clearinghouse" for mutual fund transactions?

Accepted Answer

A) SEC. 
B) NASD. 
C) FedWire. 
D) NYSE. 
A) SEC. 
B) NASD. 
C) FedWire. 
D) NYSE.

Question 16

Eveningstar open-end fund has 1,000 shares outstanding and has the following assets in its portfolio: 100 shares of Procter & Gamble (P&G)priced at $30.00,300 shares of Intel priced at $50.00 and 200 shares of Microsoft priced at $60.00.The Morningstar closed-end fund has the following stocks in its portfolio: 300 shares of P&G and 300 shares of Microsoft.It has a total of 500 shares outstanding. 
-To what level should the price of Microsoft shares decline in order for the NAV of Morningstar fund to remain constant if the price of P&G rises to $40?

Accepted Answer

A) $60. 
B) $55. 
C) $50. 
D) $45. 
A) $60. 
B) $55. 
C) $50. 
D) $45.

Question 17

The practice that involves short-term trading of mutual funds seeking to take advantage of short-term discrepancies between the price of a mutual fund's shares and out-of-date values on the securities in the fund's portfolio is called

Accepted Answer

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

Question 18

Open-end mutual funds

Accepted Answer

A) require that NAV consider the amount of discount or premium in the share value. 
B) calculate the NAV several time each day based on the total value of assets held divided by the number of fund shares outstanding. 
C) may experience fluctuations in the number of shares outstanding on a daily basis. 
D) issues shares that can be traded among investors without involving the fund itself. 
A) require that NAV consider the amount of discount or premium in the share value. 
B) calculate the NAV several time each day based on the total value of assets held divided by the number of fund shares outstanding. 
C) may experience fluctuations in the number of shares outstanding on a daily basis. 
D) issues shares that can be traded among investors without involving the fund itself.

Question 19

Which of the following laws appointed the National Association of Securities Dealers (NASDs)to supervise mutual fund share distributions?

Accepted Answer

A) Securities Act of 1933. 
B) Securities Exchange Act of 1934. 
C) Investment Advisers Act. 
D) Investment Company Act. 
A) Securities Act of 1933. 
B) Securities Exchange Act of 1934. 
C) Investment Advisers Act. 
D) Investment Company Act.

Question 20

Approximately what percentage of retirement plan investments are held by institutional funds?

Accepted Answer

A) 20 percent 
B) 40 percent 
C) 60 percent 
D) 80 percent 
A) 20 percent 
B) 40 percent 
C) 60 percent 
D) 80 percent

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

What does a hurdle rate specified by a hedge fund indicate?

For individual investors purchasing exchange traded funds (ETFs),which of the following is the most important entity that plays a key role in the primary market for ETF shares?

The National Securities Markets Improvement Act of 1996 exempts mutual funds from oversight by state securities regulators and reduced their regulatory burden.

Historical evidence indicates that the benefits of greater management attention in load funds do not outweigh the disadvantages of the load fee.

One of the goals of mutual funds is to achieve superior diversification through fund and risk pooling compared to what individual investors can achieve.

These types of funds mix hedge funds and other pooled investment vehicles.

Mutual fund supermarkets often allow investors to purchase funds within large number of fund companies with no transaction fees.

These "more risky" hedge funds aim to profit from changes in global economies,typically brought about by shifts in government policy that impact interest rates.

Hedge fund data such as assets held and trading activity

The proportionate mix of total assets invested in long-term versus short-term mutual funds has varied over the last twenty years.

Which of the following is the regulation that allowed the SEC to restrict program trading when it deems necessary?

The largest asset category of mutual funds as of 2015 was

An investor invests $100,000 in a mutual fund that has a 5 percent front-end load,charges a management fee of 0.5 percent,and a 12b-1 fee of 0.25 percent.The investor plans to leave the investment for one year.What is the dollar amount of the total shareholder cost?

Most hedge funds rely on the specific expertise of the fund manager.

What agency acts as the distributor or "clearinghouse" for mutual fund transactions?

The practice that involves short-term trading of mutual funds seeking to take advantage of short-term discrepancies between the price of a mutual fund's shares and out-of-date values on the securities in the fund's portfolio is called

Open-end mutual funds

Which of the following laws appointed the National Association of Securities Dealers (NASDs)to supervise mutual fund share distributions?

Approximately what percentage of retirement plan investments are held by institutional funds?

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