Question 1

Approximately what percentage of assets held in equity funds in 2017 was in index funds?

Accepted Answer

A)  20% 
B)  33% 
C)  50% 
D)  60% 
A)  20% 
B)  33% 
C)  50% 
D)  60%

Question 2

Low-load mutual funds have front-end loads of no more than ________.

Accepted Answer

A)  2% 
B)  3% 
C)  4% 
D)  5% 
A)  2% 
B)  3% 
C)  4% 
D)  5%

Question 3

Measured by assets, about ________ of funds are money market funds.

Accepted Answer

A)  25% 
B)  17% 
C)  40% 
D)  60% 
A)  25% 
B)  17% 
C)  40% 
D)  60%

Question 4

Management fees for open-end and closed-end funds typically range between ________ and ________.

Accepted Answer

A)  .2%; 2.0% 
B)  .5%; 5% 
C)  2%; 5% 
D)  3%; 8% 
A)  .2%; 2.0% 
B)  .5%; 5% 
C)  2%; 5% 
D)  3%; 8%

Question 5

Rank the following fund categories from most risky to least risky:
I. Equity growth fund
II. Balanced fund
III. Sector fund
IV. Money market fund

Accepted Answer

A)  IV, I, III, II 
B)  III, II, IV, I 
C)  I, II, III, IV 
D)  III, I, II, IV 
A)  IV, I, III, II 
B)  III, II, IV, I 
C)  I, II, III, IV 
D)  III, I, II, IV

Question 6

________ are often called mutual funds.

Accepted Answer

A)  Unit investment trusts 
B)  Open-end investment companies 
C)  Closed-end investment companies 
D)  REITs 
A)  Unit investment trusts 
B)  Open-end investment companies 
C)  Closed-end investment companies 
D)  REITs

Question 7

Mutual funds provide the following for their shareholders.

Accepted Answer

A)  diversification 
B)  professional management 
C)  record keeping and administration 
D)  all of these options 
A)  diversification 
B)  professional management 
C)  record keeping and administration 
D)  all of these options

Question 8

Which type of fund is often priced at a significant discount to net asset value?

Accepted Answer

A)  open-end fund 
B)  closed-end fund 
C)  hedge fund 
D)  ETF 
A)  open-end fund 
B)  closed-end fund 
C)  hedge fund 
D)  ETF

Question 9

You invest in a mutual fund that charges a 3% front-end load, 1% total annual fees, and a 0% back-end load on Class A shares. The same fund charges a 0% front-end load, 1% total annual fees, and a 2% back-end load on Class B shares. What are the total fees in year 1 on a Class A investment of $20,000 with no growth in value?

Accepted Answer

A)  $658 
B)  $794 
C)  $885 
D)  $902 
A)  $658 
B)  $794 
C)  $885 
D)  $902

Question 10

The Stone Harbor Fund is a closed-end investment company with a portfolio currently worth $300 million. It has liabilities of $5 million and 9 million shares outstanding. If the fund sells for $30 a share, what is its premium or discount as a percent of NAV?

Accepted Answer

A)  9.26% premium 
B)  8.47% premium 
C)  9.26% discount 
D)  8.47% discount 
A)  9.26% premium 
B)  8.47% premium 
C)  9.26% discount 
D)  8.47% discount

Question 11

________ have become the main way for investors to speculate in precious metals.

Accepted Answer

A)  Strategic income funds 
B)  Balanced funds 
C)  Specialized-sector funds 
D)  Exchange-traded funds 
A)  Strategic income funds 
B)  Balanced funds 
C)  Specialized-sector funds 
D)  Exchange-traded funds

Question 12

Which one of the following statements about returns reported by mutual funds is not correct?

Accepted Answer

A)  Reported returns are net of management expenses. 
B)  Reported returns are net of 12b-1 fees. 
C)  Reported returns are net of brokerage fees paid on the fund's trading activity. 
D)  None of these options. (All of the items are included in reported returns.) 
A)  Reported returns are net of management expenses. 
B)  Reported returns are net of 12b-1 fees. 
C)  Reported returns are net of brokerage fees paid on the fund's trading activity. 
D)  None of these options. (All of the items are included in reported returns.)

Question 13

Investors who want to liquidate their holdings in a unit investment trust may ________.

Accepted Answer

A)  sell their shares back to the trustee at a discount 
B)  sell their shares back to the trustee at net asset value 
C)  sell their shares on the open market 
D)  sell their shares at a premium to net asset value 
A)  sell their shares back to the trustee at a discount 
B)  sell their shares back to the trustee at net asset value 
C)  sell their shares on the open market 
D)  sell their shares at a premium to net asset value

Question 14

Under SEC rules, the managers of certain funds are allowed to deduct charges for advertising, brokerage commissions, and other sales expenses directly from the fund assets rather than billing investors. These fees are known as ________.

Accepted Answer

A)  direct operating expenses 
B)  back-end loads 
C)  12b-1 charges 
D)  front-end loads 
A)  direct operating expenses 
B)  back-end loads 
C)  12b-1 charges 
D)  front-end loads

Question 15

A fund that invests in securities worldwide, including the United States, is called ________.

Accepted Answer

A)  an international fund 
B)  an emerging market fund 
C)  a global fund 
D)  a regional fund 
A)  an international fund 
B)  an emerging market fund 
C)  a global fund 
D)  a regional fund

Question 16

The commission, or front-end load, paid when you purchase shares in mutual funds may not exceed ________.

Accepted Answer

A)  3.5% 
B)  6% 
C)  8.5% 
D)  10% 
A)  3.5% 
B)  6% 
C)  8.5% 
D)  10%

Question 17

In his 1970 study, Malkiel found that mutual funds that do well in one period have an approximately ________ chance of doing well in the subsequent-year period.

Accepted Answer

A)  33% 
B)  52% 
C)  65% 
D)  85% 
A)  33% 
B)  52% 
C)  65% 
D)  85%

Question 18

You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD?

Accepted Answer

A)  7.1% 
B)  7.45% 
C)  7.25% 
D)  7.85% 
A)  7.1% 
B)  7.45% 
C)  7.25% 
D)  7.85%

Question 19

________ are partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis.

Accepted Answer

A)  Commingled funds 
B)  Closed-end funds 
C)  REITs 
D)  Mutual funds 
A)  Commingled funds 
B)  Closed-end funds 
C)  REITs 
D)  Mutual funds

Question 20

The five-star Morningstar rating implies

Accepted Answer

A)  superior returns compared to risk. 
B)  superior risk compared to return. 
C)  lowest turnover compared to peers. 
D)  lowest fees compared to peers. 
A)  superior returns compared to risk. 
B)  superior risk compared to return. 
C)  lowest turnover compared to peers. 
D)  lowest fees compared to peers.

Exam 4: Mutual Funds and Other Investment Companies

Approximately what percentage of assets held in equity funds in 2017 was in index funds?

Low-load mutual funds have front-end loads of no more than ________.

Measured by assets, about ________ of funds are money market funds.

Management fees for open-end and closed-end funds typically range between ________ and ________.

Rank the following fund categories from most risky to least risky: I. Equity growth fund II. Balanced fund III. Sector fund IV. Money market fund

________ are often called mutual funds.

Mutual funds provide the following for their shareholders.

Which type of fund is often priced at a significant discount to net asset value?

The Stone Harbor Fund is a closed-end investment company with a portfolio currently worth $300 million. It has liabilities of $5 million and 9 million shares outstanding. If the fund sells for $30 a share, what is its premium or discount as a percent of NAV?

________ have become the main way for investors to speculate in precious metals.

Which one of the following statements about returns reported by mutual funds is not correct?

Investors who want to liquidate their holdings in a unit investment trust may ________.

Under SEC rules, the managers of certain funds are allowed to deduct charges for advertising, brokerage commissions, and other sales expenses directly from the fund assets rather than billing investors. These fees are known as ________.

A fund that invests in securities worldwide, including the United States, is called ________.

The commission, or front-end load, paid when you purchase shares in mutual funds may not exceed ________.

In his 1970 study, Malkiel found that mutual funds that do well in one period have an approximately ________ chance of doing well in the subsequent-year period.

You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD?

________ are partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis.

The five-star Morningstar rating implies

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Risk, Return, and the Historical Record

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Evaluating Investment Performance

International Diversification

Hedge Funds

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Filters

Management fees for open-end and closed-end funds typically range between and .