Question 1

High Portfolio turnover lowers mutual fund costs.

Accepted Answer

A) True 
 B)False

Question 2

The closed-end fund index is

Accepted Answer

A)  Value weighted and based on market values. 
B)  Value weighted and based on NAVs. 
C)  Price weighted and based on market values. 
D)  Price weighted and based on NAVs. 
E)  Equally weighted and based on market values. 
A)  Value weighted and based on market values. 
B)  Value weighted and based on NAVs. 
C)  Price weighted and based on market values. 
D)  Price weighted and based on NAVs. 
E)  Equally weighted and based on market values.

Question 3

On January 2, 2007, you invest $100,000 in Righteous, a load fund that charges a fee of 7%. The fund's returns were 12.8% in 2007, 13.9% in 2008, and 7.9% in 2009. On December 31, 2009, you redeem all your Righteous 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 4

All investment companies charge an annual

Accepted Answer

A)  Redemption fee. 
B)  Marketing and distribution. 
C)  Management fee. 
D)  Maintenance fee. 
E)  Market adjustment. 
A)  Redemption fee. 
B)  Marketing and distribution. 
C)  Management fee. 
D)  Maintenance fee. 
E)  Market adjustment.

Question 5

A no-load fund imposes a substantial sales charge and sells shares at their NAV.

Accepted Answer

A) True 
 B)False

Question 6

An investment management 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 7

Which of the following are guiding principles for ethical behavior in the asset management industry as put forward by the CFA Center for Financial Market Integrity?

Accepted Answer

A)  The interests of investment professional come first. 
B)  The preferred method for promoting fair and efficient markets is to set up a central oversight board. 
C)  Financial markets in various countries should develop high-quality standards for reporting financial information that reflect local customs. 
D)  Financial statements should be reported from the perspective of firm shareholders. 
E)  All of the above. 
A)  The interests of investment professional come first. 
B)  The preferred method for promoting fair and efficient markets is to set up a central oversight board. 
C)  Financial markets in various countries should develop high-quality standards for reporting financial information that reflect local customs. 
D)  Financial statements should be reported from the perspective of firm shareholders. 
E)  All of the above.

Question 8

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 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 9

In an investment company, the invested funds belong to many individuals.

Accepted Answer

A) True 
 B)False

Question 10

The primary purpose of government regulations and voluntary standards in the professional asset management industry is to ensure that managers deal with all investors fairly and equitably and that information about investment performance is accurately reported.

Accepted Answer

A) True 
 B)False

Question 11

On January 2, 2007, you invest $50,000 in the Lizbiz Mutual Fund, a load fund that charges a fee of 5%. The fund's returns were 14.6% in 2007, -6.4% in 2008, 15.2% in 2009. On December 31, 2009, you redeem all your shares. The dollar value is

Accepted Answer

A)  $66,722.27 
B)  $15,200.00 
C)  $58,695.74 
D)  $33,366.25 
E)  $10,000.00 
A)  $66,722.27 
B)  $15,200.00 
C)  $58,695.74 
D)  $33,366.25 
E)  $10,000.00

Question 12

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 13

Given the following fees and expected returns for fund Y, assuming an initial investment of $1000 calculate the value of the investment at the end of 5 years. $\begin{array}{cccccc}
\text { Investment } & \text { E(Return) } & \text { Load } & \text { fee } & \text { Rear-end load } & \text { Years } \
\hline \mathrm{Y} & 8 \% & 0 \% & 0.50 \% & 3 \% & 5 \text { years }
\end{array}$

Accepted Answer

A)  $1069.82 
B)  $1550.77 
C)  $1642.36 
D)  $1389.95 
E)  $1362.59 
A)  $1069.82 
B)  $1550.77 
C)  $1642.36 
D)  $1389.95 
E)  $1362.59

Question 14

Suppose you consider investing $15,000 in a load fund from which a fee of 5% is deducted and you expect the fund to earn 12% over the next year. Alternatively, you could invest in a no load fund which is expected to earn 10% and which takes a 1/2% redemption fee. Which is better and by how much?

Accepted Answer

A)  Load fund by $318.45 
B)  No load fund by $457.50 
C)  Funds are equal 
D)  Load fund by $415.10 
E)  No load fund by $211.51 
A)  Load fund by $318.45 
B)  No load fund by $457.50 
C)  Funds are equal 
D)  Load fund by $415.10 
E)  No load fund by $211.51

Question 15

Which of the following is a characteristic of hedge funds?

Accepted Answer

A)  They are generally less restricted in how and where they can make investments. 
B)  They are more liquid than mutual fund shares. 
C)  They have no limitations on when and how often investment capital can be contributed or removed. 
D)  All of the above. 
E)  None of the above. 
A)  They are generally less restricted in how and where they can make investments. 
B)  They are more liquid than mutual fund shares. 
C)  They have no limitations on when and how often investment capital can be contributed or removed. 
D)  All of the above. 
E)  None of the above.

Question 16

Market index funds attempt to match the composition and performance of a specified market indicator series.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following are functions that a portfolio manager should perform for clients?

Accepted Answer

A)  Determine investment objectives and constraints, diversify the portfolio, eliminate tax payments. 
B)  Determine investment objectives, diversify the portfolio, maintain ethical standards and eliminate tax payments. 
C)  Determine investment objectives and constraints, diversify the portfolio, and maintain ethical standards. 
D)  Determine constraints, diversify the portfolio, and eliminate tax payments. 
E)  Determine investment objectives and constraints, diversify the portfolio, eliminate tax payments, and achieve risk adjusted return superior to the relevant benchmark. 
A)  Determine investment objectives and constraints, diversify the portfolio, eliminate tax payments. 
B)  Determine investment objectives, diversify the portfolio, maintain ethical standards and eliminate tax payments. 
C)  Determine investment objectives and constraints, diversify the portfolio, and maintain ethical standards. 
D)  Determine constraints, diversify the portfolio, and eliminate tax payments. 
E)  Determine investment objectives and constraints, diversify the portfolio, eliminate tax payments, and achieve risk adjusted return superior to the relevant benchmark.

Question 18

A portfolio is generally managed by the board of directors of an investment company.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is an approach to asset management?

Accepted Answer

A)  Management and advisory firms 
B)  Investment companies 
C)  Strategic management 
D)  Choices a and b only 
E)  All of the above 
A)  Management and advisory firms 
B)  Investment companies 
C)  Strategic management 
D)  Choices a and b only 
E)  All of the above

Question 20

The market price of a closed-end investment company has generally been

Accepted Answer

A)  5 to 20% below the NAV. 
B)  25 to 35% below the NAV. 
C)  Equal to the NAV (within a 2% range). 
D)  5 to 20% above the NAV. 
E)  25 to 35% above the NAV. 
A)  5 to 20% below the NAV. 
B)  25 to 35% below the NAV. 
C)  Equal to the NAV (within a 2% range). 
D)  5 to 20% above the NAV. 
E)  25 to 35% above the NAV.

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

High Portfolio turnover lowers mutual fund costs.

The closed-end fund index is

On January 2, 2007, you invest $100,000 in Righteous, a load fund that charges a fee of 7%. The fund's returns were 12.8% in 2007, 13.9% in 2008, and 7.9% in 2009. On December 31, 2009, you redeem all your Righteous shares. The dollar value is

All investment companies charge an annual

A no-load fund imposes a substantial sales charge and sells shares at their NAV.

An investment management company is

Which of the following are guiding principles for ethical behavior in the asset management industry as put forward by the CFA Center for Financial Market Integrity?

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

In an investment company, the invested funds belong to many individuals.

The primary purpose of government regulations and voluntary standards in the professional asset management industry is to ensure that managers deal with all investors fairly and equitably and that information about investment performance is accurately reported.

On January 2, 2007, you invest $50,000 in the Lizbiz Mutual Fund, a load fund that charges a fee of 5%. The fund's returns were 14.6% in 2007, -6.4% in 2008, 15.2% in 2009. On December 31, 2009, you redeem all your shares. The dollar value is

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

Given the following fees and expected returns for fund Y, assuming an initial investment of $1000 calculate the value of the investment at the end of 5 years. Investment E(Return) Load fee Rear-end load Years 8\% 0\% 0.50\% 3\% 5 years

Suppose you consider investing $15,000 in a load fund from which a fee of 5% is deducted and you expect the fund to earn 12% over the next year. Alternatively, you could invest in a no load fund which is expected to earn 10% and which takes a 1/2% redemption fee. Which is better and by how much?

Which of the following is a characteristic of hedge funds?

Market index funds attempt to match the composition and performance of a specified market indicator series.

Which of the following are functions that a portfolio manager should perform for clients?

A portfolio is generally managed by the board of directors of an investment company.

Which of the following is an approach to asset management?

The market price of a closed-end investment company has generally 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

Filters