Question 1

On January 1,2005,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 2005,8% in 2006,3% in 2007.If you redeem all your shares on December 31,2007,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 C

Question 2

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)   Both a and c
E)   All of the above. E

Question 3

All investment companies charge an annual

Accepted Answer

A)   12b-1 fee.
B)   Marketing and distribution.
C)   Management fee.
D)   Maintenance fee.
E)   Market adjustment. C

Question 4

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.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

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 percent 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

Question 8

On January 2,2003,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 2003,13.9% in 2004,7.9% in 2005.On December 31,2005 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

Question 9

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, 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 10

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 11

The 12b-1 plan 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)   0.75
D)   1.00
E)   1.50

Question 12

Suppose NBT Mutual Fund has no liabilities and owns only three stocks with the following number of shares and respective market prices.
$$\begin{array} { c c c } 
\text { Stack } & \text { dheres } & \text { Price } \
\hline \mathbf { X } & \text { 7900 } & 16 \
\mathrm { Y } & 8100 & 15 \
Z & 9200 & 12
\end{array}$$
The fund originated by selling $500,000 of stock at $100.00 per share.What is its current NAV?

Accepted Answer

A)   $0.72
B)   $14.33
C)   $15.21
D)   $71.66
E)   None of the above

Question 13

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.

Question 14

On January 2,2003,you invest $50,000 in A Mutual Fund,a load fund that charges a fee of 7%.The fund's returns were 12.8% in 2003,13.9% in 2004,7.9% in 2005.On December 31,2005 you redeem all your shares in A.The dollar value is

Accepted Answer

A)   $64,462.57
B)   $644,625.70
C)   $50,000.00
D)   $6,446.25
E)   $10,000.00

Question 15

High Portfolio turnover lowers mutual fund costs.

Accepted Answer

A) True 
 B)False

Question 16

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.

Question 17

A major question in modern finance regarding closed-end investment companies is

Accepted Answer

A)   Why do these funds sell at discounts?
B)   Why do the discounts differ between funds?
C)   What are the returns available to investors from funds that sell at a large discount?
D)   Choices a and b only
E)   All of the above

Question 18

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
$\begin{array}{lccccc}
\text { Investment } & \mathrm{E} \text { (Return) } & \text { Load } & 12 \mathrm{~b}-1 \text { fee } & \text { Rear-end load } & \text { Years } \
\mathrm{Y} & 8 \% & 0 \% & 0.50 \% & 3 \% & 5 \text { year }
\end{array}$

Accepted Answer

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

Question 19

Suppose you consider investing $5,000 in a load fund from which a fee of 8% 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 percent redemption fee.Which is better and by how much?

Accepted Answer

A)   Load fund by $320.50
B)   Load fund by $575.50
C)   Funds are equal
D)   No load fund by $320.50
E)   No load fund by $575.50

Question 20

In the case of investment companies

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.

Exam 24: Professional Money Management, alternative Assets, and Industry Ethics

On January 1,2005,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 2005,8% in 2006,3% in 2007.If you redeem all your shares on December 31,2007,what is the dollar value?

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

All investment companies charge an annual

Net asset value (NAV) is determined by

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

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

On January 2,2003,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 2003,13.9% in 2004,7.9% in 2005.On December 31,2005 you redeem all your shares.The dollar value is

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

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.

The 12b-1 plan permits funds to deduct as much as ____ percent of average net asset per year to cover distribution costs,brokers' commissions,and general marketing expenses.

Mutual fund performance studies have shown that most funds

On January 2,2003,you invest $50,000 in A Mutual Fund,a load fund that charges a fee of 7%.The fund's returns were 12.8% in 2003,13.9% in 2004,7.9% in 2005.On December 31,2005 you redeem all your shares in A.The dollar value is

High Portfolio turnover lowers mutual fund costs.

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

A major question in modern finance regarding closed-end investment companies is

Suppose you consider investing $5,000 in a load fund from which a fee of 8% 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 percent redemption fee.Which is better and by how much?

In the case of investment companies