Question 1

In the case of closed-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 supply and demand. 
D)  Choices a and c. 
E)  Choices b and c. 
A)  Trade on the secondary market. 
B)  Can be bought from or sold to the investment company at the NAV. 
C)  Are determined by supply and demand. 
D)  Choices a and c. 
E)  Choices b and c.

Question 2

The total market value of all assets of a mutual fund divided by the number of shares of the fund is known as the net asset value.

Accepted Answer

A) True 
 B)False

Question 3

Hedge funds have no limitations on when and how often capital can be contributed or removed from the partnership.

Accepted Answer

A) True 
 B)False

Question 4

Given the following fees and expected returns for fund X, assuming an initial investment of $1000 calculate the value of the investment at the end of 5 years. $\begin{array}{cccccc}
\text { Investment } & \mathrm{E} \text { (Return) } & \text { Load } & \text { fee } & \text { Rear-end load } & \text { Years } \
\hline \mathrm{X} & 10 \% & 2.5 \% & 0.25 \% & 0 \% & 5 \text { years }
\end{array}$

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

On January 2, 2007, you invest $10,000 in the Dog Mutual Fund, a load fund that charges a fee of 7%. The fund's returns were 12.8% in 2007, 13.9% in 2008, 7.9% in 2009. On December 31, 2009, 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 6

On January 1, 2007, you invest $20,000 in Libby Mutual Fund, a load fund that charges a fee of 2.5%. The fund's returns were 9% in 2007, 8% in 2008, and 3% in 2009. If you redeem all your shares on December 31, 2009, what is the dollar value?

Accepted Answer

A)  $24,250.32 
B)  $24,000.32 
C)  $23,644.06 
D)  $23,195.17 
E)  $21,501.80 
A)  $24,250.32 
B)  $24,000.32 
C)  $23,644.06 
D)  $23,195.17 
E)  $21,501.80

Question 7

Consider the Compliance Bond Fund that consists of the 7 bonds shown below and has no liabilities. $$\begin{array} { l c c } 
\text { Campany } & \text { Current Band Value } & \# \text { Bunds } \
\hline \text { Komka } & 980 & 120 \
\text { Hijack } & 1010 & 150 \
\text { Mitsue } & 1200 & 100 \
\text { Smitsu } & 800 & 120 \
\text { Janes } & 600 & 150 \
\text { GMM } & 1000 & 150 \
\text { ATP } & 950 & 150
\end{array}$$ If initially the value of the fund was $2,500,000 and the original shares were offered to the public with a NAV of $25 per share, what is the current NAV of the fund?

Accepted Answer

A)  $27.11 
B)  $25.00 
C)  $26.11 
D)  $21.67 
E)  $26.27 
A)  $27.11 
B)  $25.00 
C)  $26.11 
D)  $21.67 
E)  $26.27

Question 8

Net asset value (NAV) is determined by

Accepted Answer

A)  The total market value of all its assets multiplied by the number of fund shares outstanding. 
B)  The total market value of all its assets divided by the number of fund shares outstanding. 
C)  The total market value of all its assets divided by the number of shareholders. 
D)  Supply and demand for the investment company stock in the secondary market. 
E)  Supply and demand for the investment company stock in the primary market. 
A)  The total market value of all its assets multiplied by the number of fund shares outstanding. 
B)  The total market value of all its assets divided by the number of fund shares outstanding. 
C)  The total market value of all its assets divided by the number of shareholders. 
D)  Supply and demand for the investment company stock in the secondary market. 
E)  Supply and demand for the investment company stock in the primary market.

Question 9

The returns received by the average individual investor on funds managed by investment companies will probably be superior to the average results for a specific U.S. or international market.

Accepted Answer

A) True 
 B)False

Question 10

Soft dollars are generated when

Accepted Answer

A)  A manager commits to paying a higher than normal brokerage fee in exchange for additional bundled services. 
B)  A manager commits to paying a higher than normal brokerage fee in exchange for secretarial services. 
C)  A manager commits to paying a higher than normal brokerage fee in exchange for office equipment. 
D)  All of the above. 
E)  None of the above. 
A)  A manager commits to paying a higher than normal brokerage fee in exchange for additional bundled services. 
B)  A manager commits to paying a higher than normal brokerage fee in exchange for secretarial services. 
C)  A manager commits to paying a higher than normal brokerage fee in exchange for office equipment. 
D)  All of the above. 
E)  None of the above.

Question 11

What is the offering price for a mutual fund with a NAV of $22.50 and a load of 5%?

Accepted Answer

A)  $21.38 
B)  $21.79 
C)  $22.50 
D)  $23.63 
E)  $27.50 
A)  $21.38 
B)  $21.79 
C)  $22.50 
D)  $23.63 
E)  $27.50

Question 12

Calculate the annual rate of return for a mutual fund with the following fees and expected returns. $\begin{array}{lcccc}
\text { Investment } & \text { E(Return) } & \text { Load } & \text { fee } & \text { Years Held } \
\hline \text { Mutual Fund } & 7 \% & 4 \% & 0.50 \% & 7 \text { years }
\end{array}$

Accepted Answer

A)  4.95% 
B)  5.0% 
C)  5.85% 
D)  2.5% 
E)  6.55% 
A)  4.95% 
B)  5.0% 
C)  5.85% 
D)  2.5% 
E)  6.55%

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

In a convertible arbitrage strategy hedge fund managers attempt to

Accepted Answer

A)  Generate profits by taking advantage of convertible bond pricing disparities caused by changing market events. 
B)  Generate profits by taking advantage of disparities in the relationship between prices for convertible bonds and the underlying common stock. 
C)  Generate profits by taking advantage of disparities in the relationship between prices for convertible bonds and the underlying common stock option. 
D)  All of the above. 
E)  None of the above. 
A)  Generate profits by taking advantage of convertible bond pricing disparities caused by changing market events. 
B)  Generate profits by taking advantage of disparities in the relationship between prices for convertible bonds and the underlying common stock. 
C)  Generate profits by taking advantage of disparities in the relationship between prices for convertible bonds and the underlying common stock option. 
D)  All of the above. 
E)  None of the above.

Question 15

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)  Canadian Treasury bills. 
D)  Bank certificates of deposit. 
E)  Canadian Treasury notes. 
A)  Commercial paper. 
B)  Banker's acceptances. 
C)  Canadian Treasury bills. 
D)  Bank certificates of deposit. 
E)  Canadian Treasury notes.

Question 16

In the case of private management firms

Accepted Answer

A)  Investors deal with a fund company and do not have separate accounts tailored to their specific needs. 
B)  Investors deal with a fund company and have separate accounts tailored to their specific needs. 
C)  Investors deal with an asset manager and do not have separate accounts tailored to their specific needs. 
D)  Investors deal with an asset manager have separate accounts tailored to their specific needs. 
E)  None of the above. 
A)  Investors deal with a fund company and do not have separate accounts tailored to their specific needs. 
B)  Investors deal with a fund company and have separate accounts tailored to their specific needs. 
C)  Investors deal with an asset manager and do not have separate accounts tailored to their specific needs. 
D)  Investors deal with an asset manager have separate accounts tailored to their specific needs. 
E)  None of the above.

Question 17

Suppose Under Mutual Fund owns only the 3 stocks shown below with no liabilities. $$\begin{array} { c c c } 
\text { Stack } & \text { Shares } & \text { Price } \
\hline \mathbf { A } & 2900 & 15 \
\mathrm {~B} & 3100 & 14 \
\mathrm { C } & \mathbf { 3 2 0 0 } & 12
\end{array}$$ 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)  None of the above. 
A)  $12.53 
B)  $15.29 
C)  $152.90 
D)  $125.30 
E)  None of the above.

Question 18

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 the above are examples of alternative asset classes. 
A)  Hedge funds 
B)  Private equity 
C)  Real estate 
D)  Commodities 
E)  All of the above are examples of alternative asset classes.

Question 19

The low-load fund permits funds to deduct as much as ____ percent of average net asset per year to cover distribution costs, brokers' commissions, and general marketing expenses.

Accepted Answer

A)  0.25 
B)  0.50 
C)  3.00 
D)  1.00 
E)  1.50 
A)  0.25 
B)  0.50 
C)  3.00 
D)  1.00 
E)  1.50

Question 20

The gross return of closed-end investments companies has typically been

Accepted Answer

A)  10-20% less than their NAV. 
B)  10-15% less than their NAV. 
C)  Less than the net return. 
D)  About the same as the net return. 
E)  None of the above. 
A)  10-20% less than their NAV. 
B)  10-15% less than their NAV. 
C)  Less than the net return. 
D)  About the same as the net return. 
E)  None of the above.

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

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

The total market value of all assets of a mutual fund divided by the number of shares of the fund is known as the net asset value.

Hedge funds have no limitations on when and how often capital can be contributed or removed from the partnership.

Given the following fees and expected returns for fund X, assuming an initial investment of $1000 calculate the value of the investment at the end of 5 years. Investment (Return) Load fee Rear-end load Years 10\% 2.5\% 0.25\% 0\% 5 years

On January 2, 2007, you invest $10,000 in the Dog Mutual Fund, a load fund that charges a fee of 7%. The fund's returns were 12.8% in 2007, 13.9% in 2008, 7.9% in 2009. On December 31, 2009, you redeem all your shares. The dollar value is

On January 1, 2007, you invest $20,000 in Libby Mutual Fund, a load fund that charges a fee of 2.5%. The fund's returns were 9% in 2007, 8% in 2008, and 3% in 2009. If you redeem all your shares on December 31, 2009, what is the dollar value?

Net asset value (NAV) is determined by

The returns received by the average individual investor on funds managed by investment companies will probably be superior to the average results for a specific U.S. or international market.

Soft dollars are generated when

What is the offering price for a mutual fund with a NAV of $22.50 and a load of 5%?

Calculate the annual rate of return for a mutual fund with the following fees and expected returns. Investment E(Return) Load fee Years Held Mutual Fund 7\% 4\% 0.50\% 7 years

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

In a convertible arbitrage strategy hedge fund managers attempt to

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

In the case of private management firms

Suppose Under Mutual Fund owns only the 3 stocks shown below with no liabilities. Stack Shares Price 2900 15 3100 14 12 The fund originated by selling $500,000 of stock at $50.00 per share. What is its current NAV?

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

The low-load fund permits funds to deduct as much as ____ percent of average net asset per year to cover distribution costs, brokers' commissions, and general marketing expenses.

The gross return of closed-end investments companies has typically been

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Securities Markets and the Economy

Efficient Capital Markets

An Introduction to Portfolio Management

Asset Pricing Models: Capm and Apt

Economic and Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

An Introduction to Derivative Markets and Securities

Derivatives: Analysis and Valuation

Equity Portfolio Management Strategies

Bond Portfolio Management Strategies

Evaluation of Portfolio Performance

Analysis of Financial Statements

An Introduction to Security Valuation

Web Appendix: A Review of Statistics and the Security Market Line

Web Appendix: A Review of Statistics and the Security Market Line

Appendix: Objectives and Constraints of Institutional Investors

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