Question 1

The larger the number of shares traded in a stock transaction,the lower the transaction costs per share.

Accepted Answer

A) True 
 B)False

Question 2

At the beginning of 2013,mutual funds held about ________ of the U.S.stock market was held by mutual funds.

Accepted Answer

A)  30% 
B)  50% 
C)  10% 
D)  70% 
A)  30% 
B)  50% 
C)  10% 
D)  70%

Question 3

Money market mutual funds originated when the brokerage firm Merrill Lynch offered its customers an account from which funds could be taken to purchase securities and into which funds could be deposited when securities were sold.

Accepted Answer

A) True 
 B)False

Question 4

Conflicts arise in the mutual funds industry because ________ cannot effectively monitor ________.

Accepted Answer

A)  investment advisers; directors 
B)  directors; shareholders 
C)  shareholders; investment advisers 
D)  investment advisers; stocks that will outperform the overall market 
A)  investment advisers; directors 
B)  directors; shareholders 
C)  shareholders; investment advisers 
D)  investment advisers; stocks that will outperform the overall market

Question 5

What are the five benefits of mutual funds?

Accepted Answer

1. Diversification: Mutual funds pool mo

Question 6

Describe the practices of late trading and market timing and explain how these practices harm a mutual fund's shareholders.

Accepted Answer

Late trading and market timing are both

Question 7

Government bonds are essentially default risk-free,________ returns.

Accepted Answer

A)  and will yield high 
B)  and will yield the highest 
C)  but will have relatively low 
D)  none of the above 
A)  and will yield high 
B)  and will yield the highest 
C)  but will have relatively low 
D)  none of the above

Question 8

The majority of mutual fund assets are now owned by

Accepted Answer

A)  individual investors. 
B)  institutional investors. 
C)  fiduciaries. 
D)  business organizations. 
E)  retirees. 
A)  individual investors. 
B)  institutional investors. 
C)  fiduciaries. 
D)  business organizations. 
E)  retirees.

Question 9

Mutual funds

Accepted Answer

A)  pool the resources of many small investors by selling these investors shares and using the proceeds to buy securities. 
B)  allow small investors to obtain the benefits of lower transaction costs in purchasing securities. 
C)  provide small investors a diversified portfolio that reduces risk. 
D)  do all of the above. 
E)  do only A and B of the above. 
A)  pool the resources of many small investors by selling these investors shares and using the proceeds to buy securities. 
B)  allow small investors to obtain the benefits of lower transaction costs in purchasing securities. 
C)  provide small investors a diversified portfolio that reduces risk. 
D)  do all of the above. 
E)  do only A and B of the above.

Question 10

How is an index fund different from the other four primary investment objective classes for mutual funds?

Accepted Answer

An index fund is a type of mutual fund w

Question 11

Which of the following is a feature of index funds?

Accepted Answer

A)  They have lower fees. 
B)  They select and hold stocks to match the performance of a stock index. 
C)  They do not require managers to select stocks and decide when to buy and sell. 
D)  All of the above. 
A)  They have lower fees. 
B)  They select and hold stocks to match the performance of a stock index. 
C)  They do not require managers to select stocks and decide when to buy and sell. 
D)  All of the above.

Question 12

Discuss the proposals that have been made to reduce the conflict of interest abuses in the mutual funds industry.

Accepted Answer

Several proposals have been made to redu

Question 13

Measured by assets,the most popular type of bond fund is the ________ bond fund.

Accepted Answer

A)  state municipal 
B)  strategic income 
C)  government 
D)  high-yield 
A)  state municipal 
B)  strategic income 
C)  government 
D)  high-yield

Question 14

How is a mutual fund's net asset value calculated?

Accepted Answer

A mutual fund's net asset value (NAV) is

Question 15

________ intermediation means that small investors can pool their funds with other investors to purchase high face value securities.

Accepted Answer

A)  Liquidity 
B)  Financial 
C)  Denomination 
D)  Share 
A)  Liquidity 
B)  Financial 
C)  Denomination 
D)  Share

Question 16

Which of the following is an advantage to investors of an open-end mutual fund?

Accepted Answer

A)  Once all the shares have been sold, the investor does not have to put in more money. 
B)  The investors can sell their shares in the over-the-counter market with low transaction fees. 
C)  The fund agrees to redeem shares at any time. 
D)  The market value of the fund's shares may be higher than the value of the assets held by the fund. 
A)  Once all the shares have been sold, the investor does not have to put in more money. 
B)  The investors can sell their shares in the over-the-counter market with low transaction fees. 
C)  The fund agrees to redeem shares at any time. 
D)  The market value of the fund's shares may be higher than the value of the assets held by the fund.

Question 17

Market timing

Accepted Answer

A)  takes advantage of time differences between the east and west coasts of the United States. 
B)  takes advantage of arbitrage opportunities in foreign stocks. 
C)  takes advantage of the time lag between the receipt and execution of orders. 
D)  is discouraged by the stiff fees mutual funds charge every investor for buying and then selling shares on the same day. 
A)  takes advantage of time differences between the east and west coasts of the United States. 
B)  takes advantage of arbitrage opportunities in foreign stocks. 
C)  takes advantage of the time lag between the receipt and execution of orders. 
D)  is discouraged by the stiff fees mutual funds charge every investor for buying and then selling shares on the same day.

Question 18

Open-end mutual funds are more common than closed-end funds.

Accepted Answer

A) True 
 B)False

Question 19

________ bonds combine stocks into one fund.

Accepted Answer

A)  Hybrid 
B)  Money market 
C)  Municipal 
D)  Equity 
A)  Hybrid 
B)  Money market 
C)  Municipal 
D)  Equity

Question 20

What benefits do mutual funds offer investors?

Accepted Answer

Mutual funds:
The mutual funds are a spe

Exam 20: The Mutual Fund Industry

The larger the number of shares traded in a stock transaction,the lower the transaction costs per share.

At the beginning of 2013,mutual funds held about ________ of the U.S.stock market was held by mutual funds.

Money market mutual funds originated when the brokerage firm Merrill Lynch offered its customers an account from which funds could be taken to purchase securities and into which funds could be deposited when securities were sold.

Conflicts arise in the mutual funds industry because ________ cannot effectively monitor ________.

What are the five benefits of mutual funds?

Describe the practices of late trading and market timing and explain how these practices harm a mutual fund's shareholders.

Government bonds are essentially default risk-free,________ returns.

The majority of mutual fund assets are now owned by

Mutual funds

How is an index fund different from the other four primary investment objective classes for mutual funds?

Which of the following is a feature of index funds?

Discuss the proposals that have been made to reduce the conflict of interest abuses in the mutual funds industry.

Measured by assets,the most popular type of bond fund is the ________ bond fund.

How is a mutual fund's net asset value calculated?

________ intermediation means that small investors can pool their funds with other investors to purchase high face value securities.

Which of the following is an advantage to investors of an open-end mutual fund?

Market timing

Open-end mutual funds are more common than closed-end funds.

________ bonds combine stocks into one fund.

What benefits do mutual funds offer investors?

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

Conflicts arise in the mutual funds industry because cannot effectively monitor .