Question 1

The increase in the number of defined contribution pension funds has slowed the growth of mutual funds.

Accepted Answer

A) True 
 B)False

Question 2

The primary purpose of loads is to provide compensation for sales brokers.

Accepted Answer

A) True 
 B)False

Question 3

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 4

The Securities Acts of 1933 and 1934 did not

Accepted Answer

A) regulate the activities of investment funds. 
B) require funds to register with the SEC. 
C) include antifraud rules covering the purchase and sale of fund shares. 
D) apply to investment funds. 
A) regulate the activities of investment funds. 
B) require funds to register with the SEC. 
C) include antifraud rules covering the purchase and sale of fund shares. 
D) apply to investment funds.

Question 5

________ funds are the simplest type of investment funds to manage.

Accepted Answer

A) Balanced 
B) Global equity 
C) Growth 
D) Index 
A) Balanced 
B) Global equity 
C) Growth 
D) Index

Question 6

Which of the following is most likely to be a no-load fund?

Accepted Answer

A) value funds 
B) hedge funds 
C) growth funds 
D) index funds 
A) value funds 
B) hedge funds 
C) growth funds 
D) index funds

Question 7

The net asset value of a mutual fund is the average market price of the stocks, bonds, and other assets the fund owns.

Accepted Answer

A) True 
 B)False

Question 8

Mutual funds offer investors all of the following except

Accepted Answer

A) greater-than-average returns. 
B) diversified portfolios. 
C) lower transaction costs. 
D) professional investment management. 
A) greater-than-average returns. 
B) diversified portfolios. 
C) lower transaction costs. 
D) professional investment management.

Question 9

The dollar amount invested in mutual funds is about the same as the total assets of all commercial banks at the beginning of 2004.

Accepted Answer

A) True 
 B)False

Question 10

Discuss the four primary classes of mutual funds available to investors.

Accepted Answer

The four primary classes of mutual funds

Question 11

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 12

What benefits do mutual funds offer investors?

Accepted Answer

The answer of What benefits do mutual funds offer investors?...

Question 13

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 14

The largest share of assets held by money market mutual funds is

Accepted Answer

A) Treasury bills. 
B) certificates of deposit. 
C) commercial paper. 
D) repurchase agreements. 
A) Treasury bills. 
B) certificates of deposit. 
C) commercial paper. 
D) repurchase agreements.

Question 15

A deferred-load mutual fund charges a commission

Accepted Answer

A) when shares are purchased. 
B) when shares are sold. 
C) both when shares are purchased and when they are sold. 
D) when shares are redeemed. 
A) when shares are purchased. 
B) when shares are sold. 
C) both when shares are purchased and when they are sold. 
D) when shares are redeemed.

Question 16

Mutual funds hold about ________ of financial intermediaries' total assets.

Accepted Answer

A) one-sixth 
B) one-fourth 
C) one-half 
D) two-thirds 
A) one-sixth 
B) one-fourth 
C) one-half 
D) two-thirds

Question 17

Late trading and market timing

Accepted Answer

A) allow large, favored investors in a mutual fund to profit at the expense of other investors in the fund. 
B) hurt ordinary investors by increasing the number of fund shares and diluting the fund's net asset value. 
C) are both A and B of the above. 
D) are none of the above. 
A) allow large, favored investors in a mutual fund to profit at the expense of other investors in the fund. 
B) hurt ordinary investors by increasing the number of fund shares and diluting the fund's net asset value. 
C) are both A and B of the above. 
D) are none of the above.

Question 18

A mutual fund's board of directors picks the securities that will be held and makes buy and sell decisions.

Accepted Answer

A) True 
 B)False

Question 19

How did money market mutual funds originate and why did they become especially popular in the late 1970s and early 1980s?

Accepted Answer

Money market mutual funds originated in

Question 20

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.

Exam 20: The Mutual Fund Industry

The increase in the number of defined contribution pension funds has slowed the growth of mutual funds.

The primary purpose of loads is to provide compensation for sales brokers.

The majority of mutual fund assets are now owned by

The Securities Acts of 1933 and 1934 did not

________ funds are the simplest type of investment funds to manage.

Which of the following is most likely to be a no-load fund?

The net asset value of a mutual fund is the average market price of the stocks, bonds, and other assets the fund owns.

Mutual funds offer investors all of the following except

The dollar amount invested in mutual funds is about the same as the total assets of all commercial banks at the beginning of 2004.

Discuss the four primary classes of mutual funds available to investors.

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

What benefits do mutual funds offer investors?

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

The largest share of assets held by money market mutual funds is

A deferred-load mutual fund charges a commission

Mutual funds hold about ________ of financial intermediaries' total assets.

Late trading and market timing

A mutual fund's board of directors picks the securities that will be held and makes buy and sell decisions.

How did money market mutual funds originate and why did they become especially popular in the late 1970s and early 1980s?

Mutual funds

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 Why Are They so Damaging to the Economy

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

Savings Associations and Credit Unions

Finance Companies

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