Question 1

When you decide to redeem shares in an open-end mutual fund, the only option is to sell a specific number of shares.

Accepted Answer

A) True 
 B)False

Question 2

Income dividends and capital gain distributions are:

Accepted Answer

A)  exempt from taxation. 
B)  subject to federal taxation. 
C)  subject to federal taxation after the first $1,000. 
D)  subject to federal taxation after the first $5,000. 
E)  subject to federal taxation after the first $10,000.

Question 3

Which one of the following is true with respect to closed-end funds?

Accepted Answer

A)  Shares are issued whenever an investor wants to purchase them. 
B)  Most of the funds today are closed-end. 
C)  Shares are traded on stock exchanges similar to stocks. 
D)  Shares always trade at NAV. 
E)  Investors redeem their shares by selling them directly to the fund.

Question 4

Because of professional management, there is no need for the individual investor to evaluate a mutual fund investment.

Accepted Answer

A) True 
 B)False

Question 5

Tiffany Scott puts $10,000 into a load mutual fund. She knows that her up-front sales commission is 6%. How much of her money actually goes to buy shares in the mutual fund?

Accepted Answer

A)  $10,000 
B)  $9,400 
C)  $600 
D)  $10,600 
E)  $950

Question 6

For a mutual fund, the typical yearly management fee ranges from 2.5 to 5 percent of the total dollar amount invested.

Accepted Answer

A) True 
 B)False

Question 7

The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential.

Accepted Answer

A) True 
 B)False

Question 8

Tisha Elmwood is buying shares in a mutual fund that avoids companies that do harm to people, animals, and the environment. What type of mutual fund is this?

Accepted Answer

A)  Socially responsible fund 
B)  Sector fund 
C)  Small-cap fund 
D)  Index fund 
E)  Growth fund

Question 9

Sharon Taylor uses all of her dividend income and capital gain distributions to purchase additional shares in her mutual fund. Which one of the following plans is she using?

Accepted Answer

A)  Regular account transaction 
B)  Voluntary savings plan 
C)  Contractual savings plan 
D)  Reinvestment plan 
E)  None of these are correct.

Question 10

Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.

Accepted Answer

A) True 
 B)False

Question 11

Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose price is expected to increase dramatically in a short period of time. What type of mutual fund is he purchasing?

Accepted Answer

A)  Aggressive growth fund 
B)  Equity income fund 
C)  Global fund 
D)  International fund 
E)  Regional fund

Question 12

Exchange-traded funds make-up about what percent of all mutual funds?

Accepted Answer

A)  5 
B)  8 
C)  12 
D)  15 
E)  25

Question 13

An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year.

Accepted Answer

A) True 
 B)False

Question 14

A mutual fund that invests in the common stocks of companies in the same industry is called a(n) ____________ fund.

Accepted Answer

A)  growth-income 
B)  income 
C)  sector 
D)  small-cap 
E)  money market

Question 15

When you invest in Class A shares, you pay a sales commission when you sell your mutual fund shares.

Accepted Answer

A) True 
 B)False

Question 16

A mutual fund that only invests in companies outside the United States is called a(n) ____________ fund.

Accepted Answer

A)  growth-income 
B)  income 
C)  international 
D)  industry 
E)  global

Question 17

For most mutual funds, the net asset value is calculated:

Accepted Answer

A)  yearly. 
B)  quarterly. 
C)  weekly. 
D)  daily. 
E)  hourly.

Question 18

Mary Cooper just purchased 100 shares in the All-American Fund. The purchase cost for each share was $20. If this fund charges a 5 percent load, what is the total amount of commission she will pay the investment company?

Accepted Answer

A)  $100 
B)  $1,000 
C)  $2,000 
D)  $200 
E)  $1

Question 19

A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n) ____________ fund.

Accepted Answer

A)  balanced 
B)  equity income 
C)  industry 
D)  sector 
E)  money market

Question 20

Which one of the following statements is true?

Accepted Answer

A)  Most mutual funds are managed funds. 
B)  The role of a fund manager is not important because the investment company is always changing managers. 
C)  You should ignore fees when comparing mutual funds. 
D)  Managed funds are usually index funds. 
E)  A team of managers is always better than a single fund manager.

Exam 16: Investing in Mutual Funds

When you decide to redeem shares in an open-end mutual fund, the only option is to sell a specific number of shares.

Income dividends and capital gain distributions are:

Which one of the following is true with respect to closed-end funds?

Because of professional management, there is no need for the individual investor to evaluate a mutual fund investment.

Tiffany Scott puts $10,000 into a load mutual fund. She knows that her up-front sales commission is 6%. How much of her money actually goes to buy shares in the mutual fund?

For a mutual fund, the typical yearly management fee ranges from 2.5 to 5 percent of the total dollar amount invested.

The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential.

Tisha Elmwood is buying shares in a mutual fund that avoids companies that do harm to people, animals, and the environment. What type of mutual fund is this?

Sharon Taylor uses all of her dividend income and capital gain distributions to purchase additional shares in her mutual fund. Which one of the following plans is she using?

Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.

Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose price is expected to increase dramatically in a short period of time. What type of mutual fund is he purchasing?

Exchange-traded funds make-up about what percent of all mutual funds?

An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year.

A mutual fund that invests in the common stocks of companies in the same industry is called a(n) ____________ fund.

When you invest in Class A shares, you pay a sales commission when you sell your mutual fund shares.

A mutual fund that only invests in companies outside the United States is called a(n) ____________ fund.

For most mutual funds, the net asset value is calculated:

Mary Cooper just purchased 100 shares in the All-American Fund. The purchase cost for each share was $20. If this fund charges a 5 percent load, what is the total amount of commission she will pay the investment company?

A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n) ____________ fund.

Which one of the following statements is true?