Question 1

A mutual fund typically performs all of the following functions, EXCEPT that it

Accepted Answer

A)  provides alternative risk-return options. 
B)  eliminates unsystematic risk. 
C)  provides diversification. 
D)  derives a risk-adjusted performance that is consistently superior to risk-adjusted net return of the aggregate market. 
E)  administers the account, keeps records, and provides timely information. 
A)  provides alternative risk-return options. 
B)  eliminates unsystematic risk. 
C)  provides diversification. 
D)  derives a risk-adjusted performance that is consistently superior to risk-adjusted net return of the aggregate market. 
E)  administers the account, keeps records, and provides timely information.

Question 2

On January 2, 2017, you invest $10,000 in the Dog Mutual Fund, a load fund that charges a fee of 7 percent. The fund's returns were 12.8 percent in 2017, 13.9 percent in 2018, and 7.9 percent in 2019. On December 31, 2019, you redeem all your shares. The dollar value is

Accepted Answer

A)  $12,800.00. 
B)  $12,892.50. 
C)  $100,000.00. 
D)  $128,925.00. 
E)  $10,000.00. 
A)  $12,800.00. 
B)  $12,892.50. 
C)  $100,000.00. 
D)  $128,925.00. 
E)  $10,000.00.

Question 3

On January 2, 2017, you invest $10,000 in Megabucks Mutual Fund, a load fund that charges a fee of 2 percent. The fund's returns were 13 percent in 2017, 11 percent in 2018, and 8 percent in 2019. On December 31, 2019, you redeem all your shares. The dollar value is

Accepted Answer

A)  $13,600.00. 
B)  $13,275.51. 
C)  $13,297.67. 
D)  $13,995.75. 
E)  $10,000.00. 
A)  $13,600.00. 
B)  $13,275.51. 
C)  $13,297.67. 
D)  $13,995.75. 
E)  $10,000.00.

Question 4

Given the following fees and expected returns for fund X and assuming an initial investment of $1000, calculate the value of the investment at the end of five years.

Accepted Answer

A)  $1069.82 
B)  $1550.77 
C)  $1042.36 
D)  $1689.95 
E)  $1389.95 
A)  $1069.82 
B)  $1550.77 
C)  $1042.36 
D)  $1689.95 
E)  $1389.95

Question 5

Suppose you consider investing $10,000 in a load fund from which a fee of 3 percent is deducted and you expect the fund to earn 12 percent over the next year. Alternatively, you could invest in a no-load fund that is expected to earn 10 percent and which takes a 0 percent redemption fee. Which is better and by how much?

Accepted Answer

A)  load fund by $151 
B)  no load fund by $136 
C)  funds are equal 
D)  no load fund by $421 
E)  load fund by $115 
A)  load fund by $151 
B)  no load fund by $136 
C)  funds are equal 
D)  no load fund by $421 
E)  load fund by $115

Question 6

Which of the following is NOT an example of an alternative asset class?

Accepted Answer

A)  hedge funds 
B)  private equity 
C)  real estate 
D)  commodities 
E)  All of these are correct. 
A)  hedge funds 
B)  private equity 
C)  real estate 
D)  commodities 
E)  All of these are correct.

Question 7

When alternative assets of investors are pooled together into a single pool of assets,

Accepted Answer

A)  the collection of assets is formed as a limited partnership. 
B)  one or more general partners are responsible for running the organization. 
C)  the limited partners are only liable to the extent of their investments. 
D)  the limited partners provide most of the capital. 
E)  All of these are correct. 
A)  the collection of assets is formed as a limited partnership. 
B)  one or more general partners are responsible for running the organization. 
C)  the limited partners are only liable to the extent of their investments. 
D)  the limited partners provide most of the capital. 
E)  All of these are correct.

Question 8

Suppose Under Mutual Fund owns only the three stocks shown below with no liabilities.   The fund originated by selling $500,000 of stock at $50.00 per share. What is its current NAV?

Accepted Answer

A)  $12.53 
B)  $15.29 
C)  $152.90 
D)  $125.30 
E)  $150.50 
A)  $12.53 
B)  $15.29 
C)  $152.90 
D)  $125.30 
E)  $150.50

Question 9

In the case of closed-end investment companies, shares of the company

Accepted Answer

A)  are determined by the investment company. 
B)  can be bought from or sold to the investment company at the NAV. 
C)  are determined by supply and demand. 
D)  are traded like those of a private firm. 
E)  All of these are correct. 
A)  are determined by the investment company. 
B)  can be bought from or sold to the investment company at the NAV. 
C)  are determined by supply and demand. 
D)  are traded like those of a private firm. 
E)  All of these are correct.

Question 10

Management and advisory firms can advise clients on how to structure their own portfolios.

Accepted Answer

A) True 
 B)False

Question 11

Hedge funds that are organized as a limited partnership

Accepted Answer

A)  are less restricted in how they make investments than general partnership hedge funds. 
B)  typically have larger abnormal returns than general partnership hedge funds. 
C)  are usually less correlated with traditional asset class investments than general partnership hedge funds. 
D)  have less liquid investments than mutual funds. 
E)  have more liquid investments than mutual funds. 
A)  are less restricted in how they make investments than general partnership hedge funds. 
B)  typically have larger abnormal returns than general partnership hedge funds. 
C)  are usually less correlated with traditional asset class investments than general partnership hedge funds. 
D)  have less liquid investments than mutual funds. 
E)  have more liquid investments than mutual funds.

Question 12

What type of funds are typically no-load funds that impose no penalty for early withdrawal and generally allow holders to write checks against their account?

Accepted Answer

A)  mutual funds 
B)  open-end funds 
C)  closed-end funds 
D)  money market funds 
E)  balanced funds 
A)  mutual funds 
B)  open-end funds 
C)  closed-end funds 
D)  money market funds 
E)  balanced funds

Question 13

An open-end investment company is commonly referred to as a(n)

Accepted Answer

A)  balanced fund. 
B)  mutual fund. 
C)  money market fund. 
D)  accessible fund. 
E)  unit trust. 
A)  balanced fund. 
B)  mutual fund. 
C)  money market fund. 
D)  accessible fund. 
E)  unit trust.

Question 14

A money market fund would be likely to invest in a portfolio containing all of the following EXCEPT

Accepted Answer

A)  commercial paper. 
B)  banker's acceptances. 
C)  U.S. Treasury bills. 
D)  bank certificates of deposit. 
E)  U.S. Treasury notes. 
A)  commercial paper. 
B)  banker's acceptances. 
C)  U.S. Treasury bills. 
D)  bank certificates of deposit. 
E)  U.S. Treasury notes.

Question 15

Funds that normally contain a combination of common stock and fixed income securities are known as

Accepted Answer

A)  section 401(k) plans. 
B)  balanced funds. 
C)  contractual plans. 
D)  income funds. 
E)  flexible funds. 
A)  section 401(k) plans. 
B)  balanced funds. 
C)  contractual plans. 
D)  income funds. 
E)  flexible funds.

Question 16

The offering price for a share of a load fund equals the net asset value of the share.

Accepted Answer

A) True 
 B)False

Question 17

The market price of shares of a closed-end fund is typically determined by supply and demand.

Accepted Answer

A) True 
 B)False

Question 18

Agency conflicts always exist in the investment management business because the entire industry is based on handling someone else's money.

Accepted Answer

A) True 
 B)False

Question 19

In the case of open-end investment companies, shares of the company

Accepted Answer

A)  trade on the secondary market. 
B)  can be bought from or sold to the investment company at the NAV. 
C)  are determined by the investment company. 
D)  are bought without a sales fee. 
E)  show that no new investment dollars are available after the IPO. 
A)  trade on the secondary market. 
B)  can be bought from or sold to the investment company at the NAV. 
C)  are determined by the investment company. 
D)  are bought without a sales fee. 
E)  show that no new investment dollars are available after the IPO.

Question 20

A closed-end investment company is normally referred to as a mutual fund.

Accepted Answer

A) True 
 B)False

Exam 17: Professional Money Management, Alternative Assets, and Industry Ethics

A mutual fund typically performs all of the following functions, EXCEPT that it

On January 2, 2017, you invest $10,000 in the Dog Mutual Fund, a load fund that charges a fee of 7 percent. The fund's returns were 12.8 percent in 2017, 13.9 percent in 2018, and 7.9 percent in 2019. On December 31, 2019, you redeem all your shares. The dollar value is

On January 2, 2017, you invest $10,000 in Megabucks Mutual Fund, a load fund that charges a fee of 2 percent. The fund's returns were 13 percent in 2017, 11 percent in 2018, and 8 percent in 2019. On December 31, 2019, you redeem all your shares. The dollar value is

Given the following fees and expected returns for fund X and assuming an initial investment of $1000, calculate the value of the investment at the end of five years.

Which of the following is NOT an example of an alternative asset class?

When alternative assets of investors are pooled together into a single pool of assets,

Suppose Under Mutual Fund owns only the three stocks shown below with no liabilities. The fund originated by selling $500,000 of stock at $50.00 per share. What is its current NAV?

In the case of closed-end investment companies, shares of the company

Management and advisory firms can advise clients on how to structure their own portfolios.

Hedge funds that are organized as a limited partnership

What type of funds are typically no-load funds that impose no penalty for early withdrawal and generally allow holders to write checks against their account?

An open-end investment company is commonly referred to as a(n)

A money market fund would be likely to invest in a portfolio containing all of the following EXCEPT

Funds that normally contain a combination of common stock and fixed income securities are known as

The offering price for a share of a load fund equals the net asset value of the share.

The market price of shares of a closed-end fund is typically determined by supply and demand.

Agency conflicts always exist in the investment management business because the entire industry is based on handling someone else's money.

In the case of open-end investment companies, shares of the company

A closed-end investment company is normally referred to as a mutual fund.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Evaluation of Portfolio Performance

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