Exam 13: Investing in Mutual Funds

Asset allocation funds invest in stocks,bonds,and cash.

Choose the word or phrase in [ ] which will correctly complete the statement.Select "a" for the first item,"b" for the second item,and "c" if neither item will correctly complete the statement. -A [global | international] fund invest exclusively in foreign securities.

The most important advantage of a mutual fund is pooled diversification.

Choose the word or phrase in [ ] which will correctly complete the statement.Select "a" for the first item,"b" for the second item,and "c" if neither item will correctly complete the statement. -"Mutual Fund" technically refers to [an open-end | a closed-end] investment company.

The fund whose main objective is growth is known as a(n)_____ fund.

Index funds have high realized capital gains.

Advantages of exchange traded funds over mutual funds include all of the following except:

Value funds typically invest in stocks that do not pay dividends and have a high price/earnings ratio.

Choose the word or phrase in [ ] which will correctly complete the statement.Select "a" for the first item,"b" for the second item,and "c" if neither item will correctly complete the statement. -The net asset value (NAV)indicates the guaranteed price at which you could [buy | redeem] your mutual fund shares in a load fund.

Spiders and Diamonds are examples of ETFs.

By using automatic reinvestment plans,dividend and capital gains are used to automatically buy additional shares in the fund.

Choose the word or phrase in [ ] which will correctly complete the statement.Select "a" for the first item,"b" for the second item,and "c" if neither item will correctly complete the statement. -The securities owned by a mutual fund are in the custody of [the management company | an independent bank].

For most investors,the best way to deal in foreign securities is through an international mutual fund.

A mutual fund's price per share will increase if its underlying holdings increase in value.

Choose the word or phrase in [ ] which will correctly complete the statement.Select "a" for the first item,"b" for the second item,and "c" if neither item will correctly complete the statement. -The funds that invest in tax-exempt securities are known as [convertible \ municipal] bond funds.

Load fund charges a fee at the time of purchase.

Choose the word or phrase in [ ] which will correctly complete the statement.Select "a" for the first item,"b" for the second item,and "c" if neither item will correctly complete the statement. -Mutual funds must value their securities [monthly | daily].

A real estate investment trust that invests only in mortgages is called an equity trust.

The fund whose main objective is to simply match the market is known as a(n)_____ fund.

Choose the word or phrase in [ ] which will correctly complete the statement.Select "a" for the first item,"b" for the second item,and "c" if neither item will correctly complete the statement. -Indexed funds are [actively | passively] managed pools of investments.