Question 1

Which one of the following characteristics best fits an index fund?

Accepted Answer

A)  market outperformer
B)  high expenses
C)  passively managed
D)  dividend oriented
E)  high turnover rate C

Question 2

The Market Stability Fund owns the following stocks:  The fund has no liabilities and has 57,600 shares outstanding.What is the NAV?

Accepted Answer

A)  $14.72
B)  $14.88
C)  $15.47
D)  $15.95
E)  $16.02 E

Question 3

You are investing $8,000 in a mutual fund that charges a 4.50 percent front-end load.The offering price is $24.70 a share.What will your investment be worth immediately after your shares are purchased?

Accepted Answer

A)  $7,520
B)  $7,640
C)  $8,000
D)  $8,360
E)  $8,420 B

Question 4

You invest $4,300 in a money market fund at the beginning of the year.The fund's assets appreciate by 3.2 percent over the year.How many shares of the fund do you own at the end of the year?

Accepted Answer

A)  4,300.00 shares
B)  4,437.60 shares
C)  4,529.60 shares
D)  4,682.40 shares
E)  4,700.00 shares

Question 5

One year ago,you purchased 421 shares of a mutual fund when both the offering price and the NAV were $10.80 a share.Today,the NAV is $10.64 after today's distribution of $1.48 per share in short-term gains.There is no long-term gain distribution.What is your rate of return?

Accepted Answer

A)  10.99 percent
B)  12.04 percent
C)  12.22 percent
D)  14.29 percent
E)  14.41 percent

Question 6

Matt owns 724.08 shares of a fund which has a current NAV of $41.04.He has owned all of these shares for 3.3 years.The fund charges a contingent deferred sales charge which starts at 5 percent for the first year and declines by 1 percent each year.How much cash will he receive if he redeems all of his shares today?

Accepted Answer

A)  $29,121.92
B)  $29,709.36
C)  $30,334.82
D)  $30,647.55
E)  $31,023.14

Question 7

The Exploratory Fund is a new closed-end fund which just offered its shares to the public.The fund raised $65 million and each share sold for $10.The fee for the fund promoter was 6.5 percent of the initial proceeds.What was the value of your initial $20,000 purchase before the shares began trading in the marketplace?

Accepted Answer

A)  $18,400
B)  $18,700
C)  $19,100
D)  $20,000
E)  $21,300

Question 8

Which one of the following trading symbols is associated with the ETF on the S&P 500 index?

Accepted Answer

A)  DIA
B)  QQQQ
C)  SPY
D)  SPX
E)  DIAX

Question 9

A closed-end fund has total assets of $379 million and liabilities of $640,000.There are 36 million shares outstanding.What is the premium or discount if the shares are currently selling for $9.85 each?

Accepted Answer

A)  7.46 percent discount
B)  6.28 percent discount
C)  6.94 percent discount
D)  6.80 percent premium
E)  7.46 percent premium

Question 10

One year ago,you purchased $6,000 worth of a mutual fund at an offering price of $38.10 a share.Today,the fund distributed $0.20 in short-term gains and $1.04 in long-term gains.The current offering price is $41.80.The fund has a front-end load of 5 percent and total annual operating expenses of 1.25 percent.What is your rate of return on this investment?

Accepted Answer

A)  2.87 percent
B)  3.54 percent
C)  6.06 percent
D)  7.48 percent
E)  9.91 percent

Question 11

The High Yield Money Market Fund returned 5.20 percent for the last year.Currently,you own 9,134 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 12

A fund that is basically an index fund that trades like a closed-end fund is called a(n):

Accepted Answer

A)  open-end fund.
B)  money market fund.
C)  exchange-traded fund.
D)  mutual fund.
E)  depository receipt.

Question 13

One year ago,Allison purchased 350 shares of a mutual fund which has a front-end load of 5.25 percent.The NAV at the time of purchase was $30.Today,the NAV is $33.The fund had total annual expenses of 1.65 percent.There were no fund distributions this past year.What is Allison's rate of return for the year?

Accepted Answer

A)  -1.10 percent
B)  -1.04 percent
C)  4.23 percent
D)  4.76 percent
E)  5.00 percent

Question 14

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

Question 15

A fee that is charged at the time mutual fund shares are purchased by an investor is called a:

Accepted Answer

A)  contingent deferred sales charge.
B)  12b-1 fee.
C)  back-end load.
D)  front-end load.
E)  issuance charge.

Question 16

You invested $9,000 in a mutual fund when the offering price was $31.50 and the NAV was $30.20.This purchase was made one year ago today.Today,the fund distributed a total of $1.55 in long-term gains and $0.85 in short-term gains.The current offering price is $33.42 and the NAV is $32.08.What is your return for the year?

Accepted Answer

A)  4.35 percent
B)  6.37 percent
C)  7.58 percent
D)  9.46 percent
E)  10.80 percent

Question 17

The Aggressive Eastern Fund sold $167 million of assets during the year and purchased $162 million of new assets.The average daily assets of the fund were $248 million.What is the turnover rate?

Accepted Answer

A)  .62
B)  .65
C)  .67
D)  .97
E)  1.03

Question 18

You want to purchase a security that tracks the S&P 500.What types of securities can you purchase to accomplish this goal?
 Which type of security would you purchase and why would you choose that security over your other options?

Accepted Answer

The answer of You want to purchase a security that...

Question 19

At the beginning of the year,you invested $4,000 in a no-load mutual fund with a NAV of $20.00.At the end of the year,the fund distributed $1.06 in short-term earnings and $3.10 in long-term earnings.The end of year NAV was $19.42.What was your annual rate of return on this investment?

Accepted Answer

A)  -5.90 percent
B)  -1.86 percent
C)  11.80 percent
D)  15.36 percent
E)  17.90 percent

Question 20

What are the two best reasons for considering a load fund?

Accepted Answer

A)  lack of good no-load funds and superior market performance
B)  preference for a particular fund manager or a specialized type of fund
C)  superior market performance and preferential tax treatment
D)  tax-free income and superior fund managers
E)  no management fees and a particular fund manager

Exam 4: Mutual Funds and Other Investment Companies