Exam 20: The Mutual Fund Industry

Most mutual funds are structured in two ways. The most common structure is a(n)________ fund, from which shares can be redeemed at any time at a price that is tied to the asset value of the fund. A(n)________ fund has a fixed number of nonredeemable shares that are traded in the over-the-counter market.

Whether a fund is organized as a closed- or an open-end fund, is will have the same basic organizational structure.

Which of the following is not a proposal to deal with abuses in the mutual fund industry?

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

How does the governance structure of mutual funds lead to asymmetric information and conflicts of interest?

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.

All ________ are open-end investment funds that invest only in money market securities.

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

________ enables mutual funds to consistently outperform a randomly selected group of stocks.

One factor explaining the rapid growth in mutual funds is that they are financial intermediaries that are not regulated by the federal government.

From largest to smallest in terms of total assets, the four classes of mutual funds are

People who take their money out of insured bank deposits to invest in uninsured money market mutual funds have ________ risk because money market funds invest in ________ assets.

Mutual funds are regulated under four federal laws designed to protect investors.

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

Retirement funds account for about 31% Of all mutual fund assets.

When investors switch between funds within the same fund family, mutual funds may charge

At the end of 2009 there were over ________ separate mutual funds with total assets over ________.

________ means the investors can convert their investment into cash quickly at a low cost.

Over the past twenty years, mutual fund fees have ________, largely because ________.

________ bonds combine stocks into one fund.