Question 1

You invested $7,000 in a mutual fund 28 months ago when the NAV of the fund was $22.30.You have not acquired or sold any shares since that time.Today,the NAV is $21.50.The fund charges a contingent deferred sales charge of 6,5,4,3,2,2,and 1 percent if the shares are redeemed within the first 7 years,respectively.How much money will you receive if you redeem your shares today?

Accepted Answer

A)  $6,178.86 
B)  $6,275.23 
C)  $6,355.00 
D)  $6,478.92 
E)  $6,508.91

Question 2

Which type of stock fund focuses primarily on current income?

Accepted Answer

A)  growth and income 
B)  small-company 
C)  equity income 
D)  capital appreciation 
E)  growth

Question 3

To determine the actual objective of a fund,you should primarily refer to the:

Accepted Answer

A)  fund's objective statement. 
B)  fund's prospectus. 
C)  portfolio holdings. 
D)  sales literature. 
E)  portfolio manager's comments in the annual report.

Question 4

The High Yield Money Market Fund returned 6.60 percent for the last year.Currently,you own 8,901.1 shares of this fund.If you invested in this fund one year ago,what was the amount of your original investment?

Accepted Answer

A)  $8,350.00 
B)  $8,402.38 
C)  $8,682.51 
D)  $8,750.00 
E)  $9,650.03

Question 5

A tax exempt money market fund has an annual return of 3.76 percent.What is your equivalent taxable rate if you are in a 28 percent marginal tax bracket?

Accepted Answer

A)  3.15 percent 
B)  3.38 percent 
C)  5.22 percent 
D)  6.11 percent 
E)  6.81 percent

Question 6

Today,you are selling shares of an open-end mutual fund and will be charged a CDSC of 3 percent.The price you will receive per share is equal to:

Accepted Answer

A)  103 percent of the opening NAV. 
B)  97 percent of the opening offering price. 
C)  97 percent of the closing NAV. 
D)  103 percent of the closing offering price. 
E)  the closing offering price.

Question 7

You want to purchase shares in a fund and also ensure that your money does not support firms that harm the environment.Which type of fund should you purchase?

Accepted Answer

A)  international fund 
B)  income fund 
C)  tax-managed fund 
D)  index fund 
E)  social conscience fund

Question 8

Jack has managed to save $1,000 and wants to start investing.The financial markets make him nervous as he has very limited financial resources.Which one of the following types of funds is probably best for Jack at this time?

Accepted Answer

A)  sector 
B)  aggressive growth 
C)  social conscience 
D)  high yield 
E)  balanced

Question 9

Western States Mutual Fund sold $89.5 million of assets during the year and purchased $82 million of new assets.The average daily assets of the fund were $273 million.What is the fund's turnover rate for the year?

Accepted Answer

A)  0.25 
B)  0.27 
C)  0.30 
D)  0.33 
E)  1.07

Question 10

A hedge fund may charge a special performance fee which commonly ranges from:

Accepted Answer

A)  10 to 15 percent of NAV. 
B)  15 to 20 percent of the fund's profits. 
C)  20 to 30 percent of NAV. 
D)  20 to 40 percent of the market price. 
E)  20 to 40 percent of the fund's profits.

Question 11

You want to buy 1,200 shares of a mutual fund that has an NAV of $27.80.The fund charges a 3.75 percent front-end load.How much will you have to spend to make this purchase?

Accepted Answer

A)  $34,659.74 
B)  $35,913.00 
C)  $36,953.37 
D)  $37,333.33 
E)  $38,445.60

Question 12

Which type of fund should you purchase if you are interested in investing primarily in countries that have relatively new stock markets?

Accepted Answer

A)  international fund 
B)  emerging markets fund 
C)  social conscience fund 
D)  global fund 
E)  sector fund

Question 13

The Exploratory Fund is a new closed-end fund which just offered its shares to the public.The fund raised $66.5 million and each share sold for $10.The fee for the fund promoter was 5.75 percent of the initial proceeds.What was the value of your initial $22,000 purchase before the shares began trading in the marketplace?

Accepted Answer

A)  $18,400 
B)  $18,700 
C)  $19,100 
D)  $20,000 
E)  $20,735

Question 14

Which of the following will exempt a hedge fund from registering with the SEC?

Accepted Answer

A)  offering shares to the general public 
B)  being in existence for more than two years 
C)  limiting sales to individual investors 
D)  locking up investor's money for at least two years 
E)  exceeding $25 million in assets

Question 15

The value of a load mutual fund's assets less its liabilities,divided by the number of shares outstanding is referred to as the fund's:

Accepted Answer

A)  net asset value. 
B)  offering price. 
C)  open-end value. 
D)  closed-end value. 
E)  prime value.

Question 16

Which of the following can you do with an ETF that you cannot do with an open-end fund?
I.sell at mid-day prices
II.short sell
III.buy options on them
IV.resell

Accepted Answer

A)  I and III only 
B)  II and III only 
C)  III and IV only 
D)  I, II, and III only 
E)  I, II, III, and IV

Question 17

ETFs are:

Accepted Answer

A)  limited to diversified index funds. 
B)  generally held until they mature. 
C)  sponsored primarily by large investment banks. 
D)  based on market-cap-weighted indexes only. 
E)  claims on shares held in a trust.

Question 18

Contingent deferred sales charges:

Accepted Answer

A)  are applied at the time fund shares are purchased. 
B)  are applied only to front-end load funds. 
C)  are charged on an annual basis to cover distribution and marketing costs. 
D)  are no longer permissible. 
E)  can be avoided.

Question 19

The Blue Star Fund has assets with a market value of $10.6 million and liabilities of $607,000.What is the net asset value if there are 185,000 shares outstanding?

Accepted Answer

A)  $54.02 
B)  $55.00 
C)  $56.67 
D)  $57.18 
E)  $58.25

Question 20

Which one of the following is a common characteristic of a closed-end fund but not of an open-end fund?

Accepted Answer

A)  professional management 
B)  annual fees 
C)  stated objective 
D)  discounted price 
E)  taxable distributions

Exam 4: Mutual Funds and Other Investment Companies