Question 1

Mutual fund performance studies have shown that most funds

Accepted Answer

A)  Have risks and returns that are inconsistent with their stated objectives. 
B)  Have risks and returns that are consistent with their stated objectives. 
C)  Do not have stated objectives. 
D)  Have experienced risk-adjusted returns above the market. 
E)  Have changed their objectives over time. 
A)  Have risks and returns that are inconsistent with their stated objectives. 
B)  Have risks and returns that are consistent with their stated objectives. 
C)  Do not have stated objectives. 
D)  Have experienced risk-adjusted returns above the market. 
E)  Have changed their objectives over time.

Question 2

An investment company is

Accepted Answer

A)  A corporation that handles the administrative functions for a fund. 
B)  A corporation that has its major assets in a portfolio of securities. 
C)  A corporation that invests in financial services firms. 
D)  Choices a and b. 
E)  Choices a and c. 
A)  A corporation that handles the administrative functions for a fund. 
B)  A corporation that has its major assets in a portfolio of securities. 
C)  A corporation that invests in financial services firms. 
D)  Choices a and b. 
E)  Choices a and c.

Question 3

Hedge funds are far less liquid than mutual fund shares.

Accepted Answer

A) True 
 B)False

Question 4

Suppose you consider investing $1,000 in a load fund which charges a fee of 2%, and you expect the fund to earn 11% over the next year. Alternatively, you could invest in a no-load fund with similar risk that is expected to earn 7% and charges a 1/2% redemption fee. Which is better and by how much?

Accepted Answer

A)  Funds are equal 
B)  No-load fund by $36.98 
C)  Load fund by $45.25 
D)  Load fund by $23.15 
E)  No-load fund by $15.52 
A)  Funds are equal 
B)  No-load fund by $36.98 
C)  Load fund by $45.25 
D)  Load fund by $23.15 
E)  No-load fund by $15.52

Question 5

On January 2, 2007, you invest $100,000 in the Jeffers Mutual Fund, a load fund that charges a fee of 5%. The fund's returns were -14.6% in 2007, -6.4% in 2008, 35% in 2009. On December 31, 2009, you redeem all your shares. The dollar value is:

Accepted Answer

A)  $95,600.57 
B)  $102,515.90 
C)  $83,297.75 
D)  $133,995.75 
E)  $100,000.00 
A)  $95,600.57 
B)  $102,515.90 
C)  $83,297.75 
D)  $133,995.75 
E)  $100,000.00

Question 6

The following are examples of mutual fund companies

Accepted Answer

A)  Common stock funds. 
B)  Bond funds. 
C)  Hedge funds. 
D)  Choices a and b. 
E)  Choices a, b and c. 
A)  Common stock funds. 
B)  Bond funds. 
C)  Hedge funds. 
D)  Choices a and b. 
E)  Choices a, b and c.

Question 7

A portfolio manager should be able to perform all of the following functions, except

Accepted Answer

A)  Determine risk-return preferences. 
B)  Eliminate systematic risk. 
C)  Maintain diversification ensuring a stabilized risk class. 
D)  Attempt to derive a risk-adjusted performance that is superior to the market. 
E)  Administer the account, keep records and provide timely information. 
A)  Determine risk-return preferences. 
B)  Eliminate systematic risk. 
C)  Maintain diversification ensuring a stabilized risk class. 
D)  Attempt to derive a risk-adjusted performance that is superior to the market. 
E)  Administer the account, keep records and provide timely information.

Question 8

An investment vehicle that acts like a mutual fund of hedge funds, and allows investors access to managers that might otherwise be unavailable is known as

Accepted Answer

A)  Managed futures funds 
B)  Long-short equity funds 
C)  Fund of funds 
D)  Private equity funds 
E)  Leveraged Buyouts (LBOs) 
A)  Managed futures funds 
B)  Long-short equity funds 
C)  Fund of funds 
D)  Private equity funds 
E)  Leveraged Buyouts (LBOs)

Question 9

The text offers a number of suggestions for investing in mutual funds. Which of the following is not such a suggestion?

Accepted Answer

A)  Choose only those mutual funds which are consistent with your objectives and constraints. 
B)  Invest in no-load funds whenever possible. 
C)  Avoid investing in index funds. 
D)  Use a dollar cost average strategy. 
E)  None of the above (that is, all are valid suggestions for investing in mutual funds) 
A)  Choose only those mutual funds which are consistent with your objectives and constraints. 
B)  Invest in no-load funds whenever possible. 
C)  Avoid investing in index funds. 
D)  Use a dollar cost average strategy. 
E)  None of the above (that is, all are valid suggestions for investing in mutual funds)

Question 10

Suppose Mega Mutual Fund owns only the 4 stocks shown below with no liabilities. $$\begin{array} { c c c } 
\text { Stack } & \text { Shares } & \text { Price } \
\hline \text { A } & 1800 & 15 \
B & 2200 & 11 \
\mathrm { C } & 2300 & 9 \
D & 1900 & 18
\end{array}$$ The fund originated by selling $300,000 of stock at $30.00 per share. What is its current NAV?

Accepted Answer

A)  $106.10 
B)  $12.94 
C)  $129.40 
D)  $10.61 
E)  None of the above. 
A)  $106.10 
B)  $12.94 
C)  $129.40 
D)  $10.61 
E)  None of the above.

Question 11

On January 2, 2007, you invest $10,000 in the Tiger Fund, a load fund that charges a fee of 6%. The fund's returns were 25% in 2007, 35% in 2008, -5% in 2009. On December 31, 2009, you redeem all your shares of Tiger. The dollar value is

Accepted Answer

A)  $5,200.89 
B)  $13,345.89 
C)  $7,931.25 
D)  $15,896.34 
E)  $8,646.91 
A)  $5,200.89 
B)  $13,345.89 
C)  $7,931.25 
D)  $15,896.34 
E)  $8,646.91

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

You are considering investing $50,000 in two mutual funds. The first fund is a load fund with a fee of 6% and you expect the fund to earn 11% over the next year. Alternatively, you could invest in a no load fund that is expected to earn 8% and has a 0.5% redemption fee. What fund has a higher return and how much more value will it have after the first year?

Accepted Answer

A)  Load fund by $1,360 
B)  Load fund by $580 
C)  No load fund by $580 
D)  No load fund by $1,560 
E)  No load fund by $1,820 
A)  Load fund by $1,360 
B)  Load fund by $580 
C)  No load fund by $580 
D)  No load fund by $1,560 
E)  No load fund by $1,820

Question 14

The main difference between a closed-end fund and an open-end fund is

Accepted Answer

A)  The way each is traded after the initial public offering. 
B)  There is no significant difference. 
C)  The minimum initial investment. 
D)  The type of allowable investments. 
E)  The way in which each is regulated by the SEC. 
A)  The way each is traded after the initial public offering. 
B)  There is no significant difference. 
C)  The minimum initial investment. 
D)  The type of allowable investments. 
E)  The way in which each is regulated by the SEC.

Question 15

Open-end mutual funds that charge a sales fee when the fund is initially offered to the investor are known as

Accepted Answer

A)  Balance funds. 
B)  Deferred sales loads. 
C)  Unit investment trusts. 
D)  Load funds. 
E)  Contingency funds. 
A)  Balance funds. 
B)  Deferred sales loads. 
C)  Unit investment trusts. 
D)  Load funds. 
E)  Contingency funds.

Question 16

Consider the Defiance Bond Fund that consists of the 3 bonds shown below and has no liabilities. $\begin{array}{lcc}
\text { Company } & \text { Current Bond Value } & \text { \# Bonds } \
\hline \text { Komko } & 980 & 120 \
\text { Hijack } & 1010 & 150 \
\text { Mitsue } & 1200 & 100
\end{array}$ If initially the value of the fund was $250,000 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)  $25.00 
B)  $38.91 
C)  $39.81 
D)  $31.98 
E)  $39.91 
A)  $25.00 
B)  $38.91 
C)  $39.81 
D)  $31.98 
E)  $39.91

Question 17

The offering price of a load fund equals the NAV of the fund

Accepted Answer

A)  Less an initial requirement. 
B)  Plus a sales charge. 
C)  Plus a sales charge and an administrative fee. 
D)  Less a negotiated discount. 
E)  At its stated value. 
A)  Less an initial requirement. 
B)  Plus a sales charge. 
C)  Plus a sales charge and an administrative fee. 
D)  Less a negotiated discount. 
E)  At its stated value.

Question 18

An example of an international fund would be one that consisted of investments in securities from

Accepted Answer

A)  Canada., Germany, and Japan. 
B)  Germany, Italy, and the U.K. 
C)  Canada, Korea, and Argentina. 
D)  All of the above. 
E)  None of the above. 
A)  Canada., Germany, and Japan. 
B)  Germany, Italy, and the U.K. 
C)  Canada, Korea, and Argentina. 
D)  All of the above. 
E)  None of the above.

Question 19

On January 2, 2007, you invest $10,000 in the W.O.W. Mutual Fund, a load fund that charges a fee of 5%. The fund's returns were 13.6% in 2007, 12.2% in 2008, 8.3% in 2009. On December 31, 2009, you redeem all your W.O.W. shares. The dollar value is

Accepted Answer

A)  $13,600.00 
B)  $13,664.13 
C)  $10,000.00 
D)  $131,136.40 
E)  $13,113.64 
A)  $13,600.00 
B)  $13,664.13 
C)  $10,000.00 
D)  $131,136.40 
E)  $13,113.64

Question 20

Open-end investment companies continue to sell and repurchase shares after their initial public offering.

Accepted Answer

A) True 
 B)False

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

Mutual fund performance studies have shown that most funds

An investment company is

Hedge funds are far less liquid than mutual fund shares.

Suppose you consider investing $1,000 in a load fund which charges a fee of 2%, and you expect the fund to earn 11% over the next year. Alternatively, you could invest in a no-load fund with similar risk that is expected to earn 7% and charges a 1/2% redemption fee. Which is better and by how much?

On January 2, 2007, you invest $100,000 in the Jeffers Mutual Fund, a load fund that charges a fee of 5%. The fund's returns were -14.6% in 2007, -6.4% in 2008, 35% in 2009. On December 31, 2009, you redeem all your shares. The dollar value is:

The following are examples of mutual fund companies

A portfolio manager should be able to perform all of the following functions, except

An investment vehicle that acts like a mutual fund of hedge funds, and allows investors access to managers that might otherwise be unavailable is known as

The text offers a number of suggestions for investing in mutual funds. Which of the following is not such a suggestion?

Suppose Mega Mutual Fund owns only the 4 stocks shown below with no liabilities. Stack Shares Price A 1800 15 B 2200 11 2300 9 D 1900 18 The fund originated by selling $300,000 of stock at $30.00 per share. What is its current NAV?

On January 2, 2007, you invest $10,000 in the Tiger Fund, a load fund that charges a fee of 6%. The fund's returns were 25% in 2007, 35% in 2008, -5% in 2009. On December 31, 2009, you redeem all your shares of Tiger. The dollar value is

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

The main difference between a closed-end fund and an open-end fund is

Open-end mutual funds that charge a sales fee when the fund is initially offered to the investor are known as

The offering price of a load fund equals the NAV of the fund

An example of an international fund would be one that consisted of investments in securities from

On January 2, 2007, you invest $10,000 in the W.O.W. Mutual Fund, a load fund that charges a fee of 5%. The fund's returns were 13.6% in 2007, 12.2% in 2008, 8.3% in 2009. On December 31, 2009, you redeem all your W.O.W. shares. The dollar value is

Open-end investment companies continue to sell and repurchase shares after their initial public offering.

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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