Question 1

A stock mutual fund that pays higher than normal dividends is called a growth fund.

Accepted Answer

A) True 
 B)False  False

Question 2

The return on an index fund may be less than the return on the index it represents because of all of the following except

Accepted Answer

A) it may not own all the companies included in the index. 
B) the load charge. 
C) the expense ratio. 
D) excessive commissions on frequent trades by the fund. 
A) it may not own all the companies included in the index. 
B) the load charge. 
C) the expense ratio. 
D) excessive commissions on frequent trades by the fund. D

Question 3

Before investing in a mutual fund,you should request and evaluate the fund's prospectus,which is available for a small charge.

Accepted Answer

A) True 
 B)False  False

Question 4

The net asset value (NAV)per share of a mutual fund is determined by the market value of securities owned minus liabilities divided by the number of mutual fund shares outstanding.

Accepted Answer

A) True 
 B)False

Question 5

An advantage of investing in mutual funds is that they all have the objective of preserving capital.

Accepted Answer

A) True 
 B)False

Question 6

Some mutual funds have much higher expenses or expense ratios than others,and this expense can affect your overall returns.

Accepted Answer

A) True 
 B)False

Question 7

No-load mutual funds sell directly to investors and charge a somewhat smaller management fee than load funds.

Accepted Answer

A) True 
 B)False

Question 8

On average,mutual funds have an expense ratio of about 3 percent.

Accepted Answer

A) True 
 B)False

Question 9

Treasury bond funds with short maturities have ________ default risk and ________ interest rate risk.

Accepted Answer

A) high; low 
B) high; high 
C) limited; high 
D) low; limited 
A) high; low 
B) high; high 
C) limited; high 
D) low; limited

Question 10

Mutual funds pool money from investors to purchase portfolios of investments.

Accepted Answer

A) True 
 B)False

Question 11

The possibility that the Fed may raise the discount rate is an example of

Accepted Answer

A) political risk. 
B) exchange rate risk. 
C) interest rate risk. 
D) liquidity risk. 
A) political risk. 
B) exchange rate risk. 
C) interest rate risk. 
D) liquidity risk.

Question 12

A breakdown of the fees and expenses of a mutual fund is not one of the items addressed in a prospectus.

Accepted Answer

A) True 
 B)False

Question 13

The ________ is the market value of the securities that a mutual fund has purchased minus any liabilities.

Accepted Answer

A) book value 
B) net asset value 
C) gross asset value 
D) net worth value 
A) book value 
B) net asset value 
C) gross asset value 
D) net worth value

Question 14

To calculate the NAV,the market value of the portfolio less liabilities is divided by the ________ to arrive at a per-share basis.

Accepted Answer

A) original number of shares 
B) shares currently issued by the fund 
C) maximum shares to be issued 
D) average number of shares in comparable funds 
A) original number of shares 
B) shares currently issued by the fund 
C) maximum shares to be issued 
D) average number of shares in comparable funds

Question 15

Which of the following expenses is usually the highest for a mutual fund?

Accepted Answer

A) Management fees 
B) Administrative fees 
C) 12-b-1 fees 
D) Referral fees 
A) Management fees 
B) Administrative fees 
C) 12-b-1 fees 
D) Referral fees

Question 16

Which of the following is not a true statement about mutual funds:

Accepted Answer

A) All have a minimum investment required. 
B) All have the same investment goals. 
C) The calculation of net asset value is the same. 
D) All have a management expense ratio. 
A) All have a minimum investment required. 
B) All have the same investment goals. 
C) The calculation of net asset value is the same. 
D) All have a management expense ratio.

Question 17

The difference between stock mutual funds and bond mutual funds lies in the percentage of stocks and bonds that each fund purchases.

Accepted Answer

A) True 
 B)False

Question 18

You are considering investing in a no-load mutual fund that focuses on growth stocks or in an index fund.The growth stocks had an annual return of 15 percent and expenses of 2 percent.The index fund had an annual return of 12 percent and expenses of 1 percent.Assuming equal risk,you should buy

Accepted Answer

A) the index fund. 
B) the growth fund. 
C) some of both. 
D) neither; the expenses are too high. 
A) the index fund. 
B) the growth fund. 
C) some of both. 
D) neither; the expenses are too high.

Question 19

Which of the following bond mutual funds has both the lowest default risk and interest rate risk?

Accepted Answer

A) Short-term Treasury 
B) Long-term Ginnie Mae 
C) Long-term corporate 
D) Short-term high yield 
A) Short-term Treasury 
B) Long-term Ginnie Mae 
C) Long-term corporate 
D) Short-term high yield

Question 20

Investors in high tax brackets will normally achieve higher performance by selecting mutual funds that generate

Accepted Answer

A) long-term dividends. 
B) long-term capital gains. 
C) long-term stock dividends. 
D) short-term capital gains. 
A) long-term dividends. 
B) long-term capital gains. 
C) long-term stock dividends. 
D) short-term capital gains.

Exam 17: Investing in Mutual Funds

A stock mutual fund that pays higher than normal dividends is called a growth fund.

The return on an index fund may be less than the return on the index it represents because of all of the following except

Before investing in a mutual fund,you should request and evaluate the fund's prospectus,which is available for a small charge.

The net asset value (NAV)per share of a mutual fund is determined by the market value of securities owned minus liabilities divided by the number of mutual fund shares outstanding.

An advantage of investing in mutual funds is that they all have the objective of preserving capital.

Some mutual funds have much higher expenses or expense ratios than others,and this expense can affect your overall returns.

No-load mutual funds sell directly to investors and charge a somewhat smaller management fee than load funds.

On average,mutual funds have an expense ratio of about 3 percent.

Treasury bond funds with short maturities have ________ default risk and ________ interest rate risk.

Mutual funds pool money from investors to purchase portfolios of investments.

The possibility that the Fed may raise the discount rate is an example of

A breakdown of the fees and expenses of a mutual fund is not one of the items addressed in a prospectus.

The ________ is the market value of the securities that a mutual fund has purchased minus any liabilities.

To calculate the NAV,the market value of the portfolio less liabilities is divided by the ________ to arrive at a per-share basis.

Which of the following expenses is usually the highest for a mutual fund?

Which of the following is not a true statement about mutual funds:

The difference between stock mutual funds and bond mutual funds lies in the percentage of stocks and bonds that each fund purchases.

You are considering investing in a no-load mutual fund that focuses on growth stocks or in an index fund.The growth stocks had an annual return of 15 percent and expenses of 2 percent.The index fund had an annual return of 12 percent and expenses of 1 percent.Assuming equal risk,you should buy

Which of the following bond mutual funds has both the lowest default risk and interest rate risk?

Investors in high tax brackets will normally achieve higher performance by selecting mutual funds that generate

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

Filters

Treasury bond funds with short maturities have default risk and interest rate risk.