Question 1

Use the following two columns of items to answer the matching questions below:
-open-end mutual funds

Accepted Answer

A) funds that sell shares directly to investors and repurchase the shares when investors wish to sell them 
B) annual expenses per share divided by the net asset value of a mutual fund 
C) funds that sell directly to investors and do not charge a fee 
D) amount by which a closed-end fund's share price in the secondary market is above the fund's NAV 
E) market value of the securities that a mutual fund has purchased minus any liabilities owed 
A) funds that sell shares directly to investors and repurchase the shares when investors wish to sell them 
B) annual expenses per share divided by the net asset value of a mutual fund 
C) funds that sell directly to investors and do not charge a fee 
D) amount by which a closed-end fund's share price in the secondary market is above the fund's NAV 
E) market value of the securities that a mutual fund has purchased minus any liabilities owed

Question 2

You may purchase an open-end no-load mutual fund in all of the following ways except

Accepted Answer

A)  over the phone. 
B)  by U.S. mail. 
C)  over the Internet. 
D)  from a broker. 
A)  over the phone. 
B)  by U.S. mail. 
C)  over the Internet. 
D)  from a broker.

Question 3

Use the following two columns of items to answer the matching questions below:
-no-load mutual fund

Accepted Answer

A) funds that sell shares directly to investors and repurchase the shares when investors wish to sell them 
B) annual expenses per share divided by the net asset value of a mutual fund 
C) funds that sell directly to investors and do not charge a fee 
D) amount by which a closed-end fund's share price in the secondary market is above the fund's NAV 
E) market value of the securities that a mutual fund has purchased minus any liabilities owed 
A) funds that sell shares directly to investors and repurchase the shares when investors wish to sell them 
B) annual expenses per share divided by the net asset value of a mutual fund 
C) funds that sell directly to investors and do not charge a fee 
D) amount by which a closed-end fund's share price in the secondary market is above the fund's NAV 
E) market value of the securities that a mutual fund has purchased minus any liabilities owed

Question 4

Which of the following is not included in the prospectus?

Accepted Answer

A)  Redemption fee 
B)  Expenses including management fees 
C)  Expenses including advertising and marketing fees 
D)  Advice on when to buy and sell 
A)  Redemption fee 
B)  Expenses including management fees 
C)  Expenses including advertising and marketing fees 
D)  Advice on when to buy and sell

Question 5

The possibility that interest rates may rise 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 6

What would be the tax consequence of owning a mutual fund that made distributions of $600 resulting from short-term capital gains and $800 resulting from long-term capital gains assuming a 30% tax bracket and a 10% capital gains rate?

Accepted Answer

A)  $420 
B)  $140 
C)  $300 
D)  $260 
A)  $420 
B)  $140 
C)  $300 
D)  $260

Question 7

Stock brokers typically do not recommend no-load funds because

Accepted Answer

A)  the return is lower than on load funds and brokers want to sell only the best funds to their clients. 
B)  federal law prohibits brokers from selling no-load funds. 
C)  no-load funds do not pay a fee to the broker for selling them. 
D)  there is no secondary market for them. 
A)  the return is lower than on load funds and brokers want to sell only the best funds to their clients. 
B)  federal law prohibits brokers from selling no-load funds. 
C)  no-load funds do not pay a fee to the broker for selling them. 
D)  there is no secondary market for them.

Question 8

Which of the following is not true of global and international bond funds?

Accepted Answer

A)  They may be subject to interest rate risk. 
B)  They may be subject to exchange rate risk. 
C)  Their expenses may be higher than those of domestic bond funds. 
D)  They are especially attractive to investors in high tax bracket. 
A)  They may be subject to interest rate risk. 
B)  They may be subject to exchange rate risk. 
C)  Their expenses may be higher than those of domestic bond funds. 
D)  They are especially attractive to investors in high tax bracket.

Question 9

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

Accepted Answer

A)  All require a minimum investment. 
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 require a minimum investment. 
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 10

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 11

Use the following two columns of items to answer the matching questions below:
-net asset value

Accepted Answer

A) funds that sell shares directly to investors and repurchase the shares when investors wish to sell them 
B) annual expenses per share divided by the net asset value of a mutual fund 
C) funds that sell directly to investors and do not charge a fee 
D) amount by which a closed-end fund's share price in the secondary market is above the fund's NAV 
E) market value of the securities that a mutual fund has purchased minus any liabilities owed 
A) funds that sell shares directly to investors and repurchase the shares when investors wish to sell them 
B) annual expenses per share divided by the net asset value of a mutual fund 
C) funds that sell directly to investors and do not charge a fee 
D) amount by which a closed-end fund's share price in the secondary market is above the fund's NAV 
E) market value of the securities that a mutual fund has purchased minus any liabilities owed

Question 12

You are investing for your retirement 20 years hence.You would be most interested in a fund whose investment objective is focused on

Accepted Answer

A)  long-term growth. 
B)  capital conservation. 
C)  income generation. 
D)  a balance of some growth but mostly high dividends. 
A)  long-term growth. 
B)  capital conservation. 
C)  income generation. 
D)  a balance of some growth but mostly high dividends.

Question 13

Mutual funds that receive dividends and capital gains must distribute these to investors in the same year.

Accepted Answer

A) True 
 B)False

Question 14

A mutual fund has a beginning balance of $100 million,earns interest of $10 million,receives dividends of $15 million,and has expenses of $5 million.If 10 million shares are outstanding,what is the NAV?

Accepted Answer

A)  $10.50 
B)  $11.00 
C)  $12.00 
D)  $12.50 
A)  $10.50 
B)  $11.00 
C)  $12.00 
D)  $12.50

Question 15

On the average,actively managed mutual funds have an expense ratio of about

Accepted Answer

A)  1.5%. 
B)  2.5%. 
C)  3%. 
D)  5%. 
A)  1.5%. 
B)  2.5%. 
C)  3%. 
D)  5%.

Question 16

Use the following two columns of items to answer the matching questions below:
-premium

Accepted Answer

A) funds that sell shares directly to investors and repurchase the shares when investors wish to sell them 
B) annual expenses per share divided by the net asset value of a mutual fund 
C) funds that sell directly to investors and do not charge a fee 
D) amount by which a closed-end fund's share price in the secondary market is above the fund's NAV 
E) market value of the securities that a mutual fund has purchased minus any liabilities owed 
A) funds that sell shares directly to investors and repurchase the shares when investors wish to sell them 
B) annual expenses per share divided by the net asset value of a mutual fund 
C) funds that sell directly to investors and do not charge a fee 
D) amount by which a closed-end fund's share price in the secondary market is above the fund's NAV 
E) market value of the securities that a mutual fund has purchased minus any liabilities owed

Question 17

The amount by which a closed-end fund's share price in the secondary market is below the fund's NAV is called the

Accepted Answer

A)  market value. 
B)  premium. 
C)  discount. 
D)  par value. 
A)  market value. 
B)  premium. 
C)  discount. 
D)  par value.

Question 18

Investors can earn a return on an investment in a stock mutual fund in all of the following ways except

Accepted Answer

A)  interest distributions. 
B)  dividend distributions. 
C)  capital gains distributions. 
D)  redeeming shares. 
A)  interest distributions. 
B)  dividend distributions. 
C)  capital gains distributions. 
D)  redeeming shares.

Question 19

A mutual fund is a diversified portfolio of stocks and/or bonds depending on what the manager has purchased.

Accepted Answer

A) True 
 B)False

Question 20

The amount by which a closed-end fund's share price in the secondary market is above the fund's NAV is called the

Accepted Answer

A)  market value. 
B)  premium. 
C)  discount. 
D)  par value. 
A)  market value. 
B)  premium. 
C)  discount. 
D)  par value.

Exam 17: Investing in Mutual Funds

Use the following two columns of items to answer the matching questions below: -open-end mutual funds

You may purchase an open-end no-load mutual fund in all of the following ways except

Use the following two columns of items to answer the matching questions below: -no-load mutual fund

Which of the following is not included in the prospectus?

The possibility that interest rates may rise is an example of

What would be the tax consequence of owning a mutual fund that made distributions of $600 resulting from short-term capital gains and $800 resulting from long-term capital gains assuming a 30% tax bracket and a 10% capital gains rate?

Stock brokers typically do not recommend no-load funds because

Which of the following is not true of global and international bond funds?

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

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

Use the following two columns of items to answer the matching questions below: -net asset value

You are investing for your retirement 20 years hence.You would be most interested in a fund whose investment objective is focused on

Mutual funds that receive dividends and capital gains must distribute these to investors in the same year.

A mutual fund has a beginning balance of $100 million,earns interest of $10 million,receives dividends of $15 million,and has expenses of $5 million.If 10 million shares are outstanding,what is the NAV?

On the average,actively managed mutual funds have an expense ratio of about

Use the following two columns of items to answer the matching questions below: -premium

The amount by which a closed-end fund's share price in the secondary market is below the fund's NAV is called the

Investors can earn a return on an investment in a stock mutual fund in all of the following ways except

A mutual fund is a diversified portfolio of stocks and/or bonds depending on what the manager has purchased.

The amount by which a closed-end fund's share price in the secondary market is above the fund's NAV is called the

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

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Integrating the Components of a Financial Plan

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