Question 1

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 2

The Securities Exchange Act of 1934 requires a mutual fund to file a registration statement with the SEC.

Accepted Answer

A) True 
 B)False

Question 3

Match the following pieces of legislation with the function achieved by each regulation as stated in 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 
D) Investment Company Act 
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 
D) Investment Company Act 
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 4

If the price of P&G shares rises to $35 and the price of Microsoft falls to $40.00, what is the new NAV of both funds?

Accepted Answer

A) $26.50 and $45.00. 
B) $13.25 and $13.00. 
C) $39.75 and $22.50. 
D) $53.00 and $45.00. 
E) $26.50 and $22.50. 
A) $26.50 and $45.00. 
B) $13.25 and $13.00. 
C) $39.75 and $22.50. 
D) $53.00 and $45.00. 
E) $26.50 and $22.50.

Question 5

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 6

An open-ended fund has stocks of three companies: 200 shares of IBM currently valued at $50.00, 100 shares of GE currently values at $20 and 100 shares of Digital currently valued at $30. The fund has 500 shares outstanding. What is the net asset value (NAV) of the fund?

Accepted Answer

A) $30.00. 
B) $60.00. 
C) $120.00. 
D) $12.00. 
E) $37.50. 
A) $30.00. 
B) $60.00. 
C) $120.00. 
D) $12.00. 
E) $37.50.

Question 7

For mutual funds outside the United States, total amounts invested in this fund category topped the list in 2012.

Accepted Answer

A) Equity funds. 
B) Bond funds. 
C) Hybrid funds. 
D) Money market funds. 
E) Hedge funds. 
A) Equity funds. 
B) Bond funds. 
C) Hybrid funds. 
D) Money market funds. 
E) Hedge funds.

Question 8

Match the following pieces of legislation with the function achieved by each regulation as stated in question
-Allows the SEC to introduce circuit breakers to halt trading on exchanges.

Accepted Answer

A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act 
D) Investment Company Act 
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 
D) Investment Company Act 
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 9

As of 2012, Commercial banks are not allowed to own or invest in mutual funds.

Accepted Answer

A) True 
 B)False

Question 10

Match the following pieces of legislation with the function achieved by each regulation as stated in question
-Requires a mutual fund to furnish full and accurate information on all financial and corporate matters to prospective fund purchasers.

Accepted Answer

A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act 
D) Investment Company Act 
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 
D) Investment Company Act 
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 11

In 1998, the SEC required that portions of mutual fund prospectuses must be written in easily understood "plain" English.

Accepted Answer

A) True 
 B)False

Question 12

As of 2012, 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 13

The net asset value of a mutual fund is determined four times each business day.

Accepted Answer

A) True 
 B)False

Question 14

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 15

The return from investing in mutual funds can include dividends, gains from the sale of the mutual fund assets, and gains from the sale of the mutual fund shares.

Accepted Answer

A) True 
 B)False

Question 16

Fees investors are charged to cover administration and shareholder services are called

Accepted Answer

A) 12b-1 fees. 
B) management fees. 
C) sales loads. 
D) preemptive taxes. 
E) transaction fees. 
A) 12b-1 fees. 
B) management fees. 
C) sales loads. 
D) preemptive taxes. 
E) transaction fees.

Question 17

Most individuals who invest in mutual funds for the first time realize that mutual fund investments carries some risk.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following hedge fund objectives would be classified under the "moderate risk" category?

Accepted Answer

A) Distressed securities funds. 
B) Market neutral-arbitrage funds. 
C) Value funds. 
D) Short selling funds. 
E) Market timing funds. 
A) Distressed securities funds. 
B) Market neutral-arbitrage funds. 
C) Value funds. 
D) Short selling funds. 
E) Market timing funds.

Question 19

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

Question 20

Which of the following are used to link the hedge fund manager's incentives more closely to those of the fund investors and to reduce the manager's incentive to increase the risk of trades?

Accepted Answer

A) High-water marks. 
B) Discount rates. 
C) Trade limits. 
D) Management fees. 
E) Low hurdle rates. 
A) High-water marks. 
B) Discount rates. 
C) Trade limits. 
D) Management fees. 
E) Low hurdle rates.

Exam 5: Financial Services: Mutual Funds and Hedge Funds

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

The Securities Exchange Act of 1934 requires a mutual fund to file a registration statement with the SEC.

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

If the price of P&G shares rises to $35 and the price of Microsoft falls to $40.00, what is the new NAV of both funds?

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

An open-ended fund has stocks of three companies: 200 shares of IBM currently valued at $50.00, 100 shares of GE currently values at $20 and 100 shares of Digital currently valued at $30. The fund has 500 shares outstanding. What is the net asset value (NAV) of the fund?

For mutual funds outside the United States, total amounts invested in this fund category topped the list in 2012.

Match the following pieces of legislation with the function achieved by each regulation as stated in question -Allows the SEC to introduce circuit breakers to halt trading on exchanges.

As of 2012, Commercial banks are not allowed to own or invest in mutual funds.

Match the following pieces of legislation with the function achieved by each regulation as stated in question -Requires a mutual fund to furnish full and accurate information on all financial and corporate matters to prospective fund purchasers.

In 1998, the SEC required that portions of mutual fund prospectuses must be written in easily understood "plain" English.

As of 2012, the total investment in long-term mutual funds is less than the total investment in money market mutual funds.

The net asset value of a mutual fund is determined four times each business day.

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

The return from investing in mutual funds can include dividends, gains from the sale of the mutual fund assets, and gains from the sale of the mutual fund shares.

Fees investors are charged to cover administration and shareholder services are called

Most individuals who invest in mutual funds for the first time realize that mutual fund investments carries some risk.

Which of the following hedge fund objectives would be classified under the "moderate risk" category?

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?

Which of the following are used to link the hedge fund manager's incentives more closely to those of the fund investors and to reduce the manager's incentive to increase the risk of trades?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Insurance

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

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