Question 1

Hedge funds charge expense fees and performance fees. The average performance fee on hedge funds is ____________.

Accepted Answer

A) 5 percent 
B) 10 percent 
C) 15 percent 
D) 20 percent 
E) 25 percent

Question 2

Hybrid mutual funds normally invest significant amounts in

Accepted Answer

A) common stock. 
B) commercial paper. 
C) long-term bonds. 
D) treasury bills. 
E) both common stock and long-term bonds.

Question 3

An open-end mutual fund owns 1,500 shares of Krispy Kreme priced at $12. The fund also owns 1,000 shares of Ben & Jerry's priced at $43,and 2,000 shares of Pepsi priced at $50. The fund itself has 3,500 of its own shares outstanding. What is the NAV of a fund's share?

Accepted Answer

A) $66 
B) $56 
C) $46 
D) $36 
E) $26

Question 4

A money market mutual fund's total assets increase from $100 to $105 when the fund has 100 shares outstanding. Which of the following will happen?

Accepted Answer

A) The fund's NAV will rise from $100 to $105. 
B) The fund's NAV per share will rise from $1 to $1.05. 
C) The fund will issue a total of five new shares. 
D) The fund's NAV will fall 5 percent. 
E) The fund will close to new investors.

Question 5

ETFs have several advantages over index funds,including the ability to
I. trade throughout the day at continuously updated prices.
II. purchase ETF shares on margin.
II. sell ETF shares short.
IV. sell the shares back to the fund.

Accepted Answer

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

Question 6

The largest proportion of long-term mutual fund assets is held by ___________________.

Accepted Answer

A) bank trusts and estates 
B) the household sector 
C) nonfinancial corporate business 
D) private pension funds 
E) life insurance firms

Question 7

You are considering purchasing shares in a typical mutual fund that has three classes of shares outstanding: Class A,Class B,and Class C. If you purchase Class A shares,you will pay

Accepted Answer

A) a back-end load and no 12b-1 fees. 
B) a front-end load and a small 12b-1 fee. 
C) no front-end load but a back-end load. 
D) a back-end load and full 12b-1 fees.

Question 8

You wish to invest $17,445 in a mutual fund with a NAV of $26.03. The fund charges a front-end load of 4.50 percent. How many fund shares will you receive?

Accepted Answer

A) 595 
B) 640 
C) 616 
D) 668 
E) 628

Question 9

The market value of a fund's net assets divided by the number of mutual fund shares outstanding is called the NAV of the fund.

Accepted Answer

A) True 
 B)False

Question 10

A fund has a NAV of $30 per share but the shares are currently selling for $32. This fund must be

Accepted Answer

A) an open-ended fund. 
B) a closed-end fund. 
C) a balanced fund. 
D) an aggressive growth fund. 
E) a money market mutual fund.

Question 11

Hedge funds can short sell securities,whereas most mutual funds cannot.

Accepted Answer

A) True 
 B)False

Question 12

What is the purpose of index funds?
 How does this differ from other equity mutual funds?
 Why are index funds growing in popularity?

Accepted Answer

The answer of What is the purpose of index funds?
...

Question 13

A hedge fund that goes long in a convertible bond and short in the equity of the same firm is employing a market neutral arbitrage strategy.

Accepted Answer

A) True 
 B)False

Question 14

Why is it important to regulate the mutual fund industry?

Accepted Answer

The answer of Why is it important to regulate the...

Question 15

You have $16,000 to invest in a mutual fund with a NAV = $45. You choose a fund with a 4 percent front load,a 1 percent management fee,and a 0.25 percent 12b-1 fee. Assume that the management and 12b-1 fees are charged on year-end assets. The gross annual return on the fund's shares was 9 percent. What was your net annual rate of return to the nearest basis point?

Accepted Answer

A) 3.33 percent 
B) 7.64 percent 
C) 6.25 percent 
D) 4.52 percent 
E) 4.64 percent

Question 16

You have $12,500 to invest and you are considering investing in Fund X. The fund charges a front-end load of 3 percent and an annual expense fee of 2.25 percent of the ending asset value over the year. You believe the fund's gross rate of return will be 8 percent per year. If you make the investment,what should your investment be worth in one year?

Accepted Answer

A) $12,125.20 
B) $13,095.00 
C) $12,654.80 
D) $12,800.36 
E) $13,162.50

Question 17

Hedge funds and REITS often employ significant amounts of leverage,but standard open-end mutual funds do not.
Mutual fund leverage is limited by regulation.

Accepted Answer

A) True 
 B)False

Exam 17: Investment Companies

Hedge funds charge expense fees and performance fees. The average performance fee on hedge funds is ____________.

Hybrid mutual funds normally invest significant amounts in

An open-end mutual fund owns 1,500 shares of Krispy Kreme priced at $12. The fund also owns 1,000 shares of Ben & Jerry's priced at $43,and 2,000 shares of Pepsi priced at $50. The fund itself has 3,500 of its own shares outstanding. What is the NAV of a fund's share?

A money market mutual fund's total assets increase from $100 to $105 when the fund has 100 shares outstanding. Which of the following will happen?

ETFs have several advantages over index funds,including the ability to I. trade throughout the day at continuously updated prices. II. purchase ETF shares on margin. II. sell ETF shares short. IV. sell the shares back to the fund.

The largest proportion of long-term mutual fund assets is held by ___________________.

You are considering purchasing shares in a typical mutual fund that has three classes of shares outstanding: Class A,Class B,and Class C. If you purchase Class A shares,you will pay

You wish to invest $17,445 in a mutual fund with a NAV of $26.03. The fund charges a front-end load of 4.50 percent. How many fund shares will you receive?

The market value of a fund's net assets divided by the number of mutual fund shares outstanding is called the NAV of the fund.

A fund has a NAV of $30 per share but the shares are currently selling for $32. This fund must be

Hedge funds can short sell securities,whereas most mutual funds cannot.

What is the purpose of index funds? How does this differ from other equity mutual funds? Why are index funds growing in popularity?

A hedge fund that goes long in a convertible bond and short in the equity of the same firm is employing a market neutral arbitrage strategy.

Why is it important to regulate the mutual fund industry?

Hedge funds and REITS often employ significant amounts of leverage,but standard open-end mutual funds do not. Mutual fund leverage is limited by regulation.