Question 1

The five-star Morningstar rating implies

Accepted Answer

A)   superior returns compared to risk.
B)   superior risk compared to return.
C)   lowest turnover compared to peers.
D)   lowest fees compared to peers.E) A) and C)
F) A) and B)

Question 2

A fund that invests in securities worldwide, including the United States, is called ________.

Accepted Answer

A)   an international fund
B)   an emerging market fund
C)   a global fund
D)   a regional fundE) B) and D)
F) A) and B)

Question 3

Under SEC rules, the managers of certain funds are allowed to deduct charges for advertising, brokerage commissions, and other sales expenses directly from the fund assets rather than billing investors. These fees are known as ________.

Accepted Answer

A)   direct operating expenses
B)   back-end loads
C)   12b-1 charges
D)   front-end loadsE) A) and B)
F) B) and C)

Question 4

You invest in a mutual fund that charges a 3% front-end load, 1% total annual fees, and a 0% back-end load on Class A shares. The same fund charges a 0% front-end load, 1% total annual fees, and a 2% back-end load on Class B shares. What are the total fees in year 1 on a Class A investment of $20,000 with no growth in value?

Accepted Answer

A)   $658
B)   $794
C)   $885
D)   $902E) B) and C)
F) A) and B)

Question 5

________ are often called mutual funds.

Accepted Answer

A)   Unit investment trusts
B)   Open-end investment companies
C)   Closed-end investment companies
D)   REITsE) None of the above
F) B) and D)

Question 6

Investors who want to liquidate their holdings in a unit investment trust may ________.

Accepted Answer

A)   sell their shares back to the trustee at a discount
B)   sell their shares back to the trustee at net asset value
C)   sell their shares on the open market
D)   sell their shares at a premium to net asset valueE) A) and B)
F) None of the above

Question 7

Which type of fund is often priced at a significant discount to net asset value?

Accepted Answer

A)   open-end fund
B)   closed-end fund
C)   hedge fund
D)   ETFE) All of the above
F) B) and C)

Question 8

The Stone Harbor Fund is a closed-end investment company with a portfolio currently worth $300 million. It has liabilities of $5 million and 9 million shares outstanding. If the fund sells for $30 a share, what is its premium or discount as a percent of NAV?

Accepted Answer

A)   9.26% premium
B)   8.47% premium
C)   9.26% discount
D)   8.47% discountE) All of the above
F) A) and D)

Question 9

________ have become the main way for investors to speculate in precious metals.

Accepted Answer

A)   Strategic income funds
B)   Balanced funds
C)   Specialized-sector funds
D)   Exchange-traded fundsE) A) and C)
F) B) and D)

Question 10

Measured by assets, about ________ of funds are money market funds.

Accepted Answer

A)   25%
B)   17%
C)   40%
D)   60%E) A) and C)
F) A) and B)

Question 11

Low-load mutual funds have front-end loads of no more than ________.

Accepted Answer

A)   2%
B)   3%
C)   4%
D)   5%E) A) and D)
F) A) and C)

Question 12

The commission, or front-end load, paid when you purchase shares in mutual funds may not exceed ________.

Accepted Answer

A)   3.5%
B)   6%
C)   8.5%
D)   10%E) None of the above
F) All of the above

Question 13

Mutual funds provide the following for their shareholders.

Accepted Answer

A)   diversification
B)   professional management
C)   record keeping and administration
D)   all of these optionsE) C) and D)
F) B) and D)

Question 14

________ are partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis.

Accepted Answer

A)   Commingled funds
B)   Closed-end funds
C)   REITs
D)   Mutual fundsE) A) and D)
F) A) and C)

Question 15

Which one of the following statements about returns reported by mutual funds is not correct?

Accepted Answer

A)   Reported returns are net of management expenses.
B)   Reported returns are net of 12b-1 fees.
C)   Reported returns are net of brokerage fees paid on the fund's trading activity.
D)   None of these options. (All of the items are included in reported returns.) E) A) and B)
F) B) and C)

Question 16

You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD?

Accepted Answer

A)   7.1%
B)   7.45%
C)   7.25%
D)   7.85%E) None of the above
F) A) and B)

Question 17

Rank the following fund categories from most risky to least risky:
I. Equity growth fund
II. Balanced fund
III. Sector fund
IV. Money market fund

Accepted Answer

A)   IV, I, III, II
B)   III, II, IV, I
C)   I, II, III, IV
D)   III, I, II, IVE) C) and D)
F) B) and C)

Question 18

In his 1970 study, Malkiel found that mutual funds that do well in one period have an approximately ________ chance of doing well in the subsequent-year period.

Accepted Answer

A)   33%
B)   52%
C)   65%
D)   85%E) A) and B)
F) A) and C)

Question 19

Approximately what percentage of assets held in equity funds in 2017 was in index funds?

Accepted Answer

A)   20%
B)   33%
C)   50%
D)   60%E) A) and B)
F) None of the above

Question 20

Management fees for open-end and closed-end funds typically range between ________ and ________.

Accepted Answer

A)   .2%; 2.0%
B)   .5%; 5%
C)   2%; 5%
D)   3%; 8%E) All of the above
F) C) and D)

Exam 4: Mutual Funds and Other Investment Companies

A fund that invests in securities worldwide, including the United States, is called ________.

Correct Answer
verified

Low-load mutual funds have front-end loads of no more than ________.

Correct Answer
verified

Mutual funds provide the following for their shareholders.

Correct Answer
verified

The five-star Morningstar rating implies

Correct Answer
verified

You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD?

Correct Answer
verified

Investors who want to liquidate their holdings in a unit investment trust may ________.

Correct Answer
verified

Under SEC rules, the managers of certain funds are allowed to deduct charges for advertising, brokerage commissions, and other sales expenses directly from the fund assets rather than billing investors. These fees are known as ________.

Correct Answer
verified

Correct Answer
verified

Measured by assets, about ________ of funds are money market funds.

Correct Answer
verified

Management fees for open-end and closed-end funds typically range between and .

Correct Answer
verified

Approximately what percentage of assets held in equity funds in 2017 was in index funds?

Correct Answer
verified

________ are partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis.

Correct Answer
verified

The commission, or front-end load, paid when you purchase shares in mutual funds may not exceed ________.

Correct Answer
verified

________ are often called mutual funds.

Correct Answer
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Rank the following fund categories from most risky to least risky: I. Equity growth fund II. Balanced fund III. Sector fund IV. Money market fund

Correct Answer
verified

________ have become the main way for investors to speculate in precious metals.

Correct Answer
verified

Which type of fund is often priced at a significant discount to net asset value?

Correct Answer
verified

Which one of the following statements about returns reported by mutual funds is not correct?

Correct Answer
verified

In his 1970 study, Malkiel found that mutual funds that do well in one period have an approximately ________ chance of doing well in the subsequent-year period.

Correct Answer
verified

The Stone Harbor Fund is a closed-end investment company with a portfolio currently worth $300 million. It has liabilities of $5 million and 9 million shares outstanding. If the fund sells for $30 a share, what is its premium or discount as a percent of NAV?

Correct Answer
verified

Exam 4: Mutual Funds and Other Investment Companies

A fund that invests in securities worldwide, including the United States, is called ________.

Correct AnswerverifiedShow Answer

Low-load mutual funds have front-end loads of no more than ________.

Correct AnswerverifiedShow Answer

Mutual funds provide the following for their shareholders.

Correct AnswerverifiedShow Answer

The five-star Morningstar rating implies

Correct AnswerverifiedShow Answer

You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD?

Correct AnswerverifiedShow Answer

Investors who want to liquidate their holdings in a unit investment trust may ________.

Correct AnswerverifiedShow Answer

Under SEC rules, the managers of certain funds are allowed to deduct charges for advertising, brokerage commissions, and other sales expenses directly from the fund assets rather than billing investors. These fees are known as ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Measured by assets, about ________ of funds are money market funds.

Correct AnswerverifiedShow Answer

Management fees for open-end and closed-end funds typically range between ________ and ________.

Correct AnswerverifiedShow Answer

Approximately what percentage of assets held in equity funds in 2017 was in index funds?

Correct AnswerverifiedShow Answer

________ are partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis.

Correct AnswerverifiedShow Answer

The commission, or front-end load, paid when you purchase shares in mutual funds may not exceed ________.

Correct AnswerverifiedShow Answer

________ are often called mutual funds.

Correct AnswerverifiedShow Answer

Rank the following fund categories from most risky to least risky: I. Equity growth fund II. Balanced fund III. Sector fund IV. Money market fund

Correct AnswerverifiedShow Answer

________ have become the main way for investors to speculate in precious metals.

Correct AnswerverifiedShow Answer

Which type of fund is often priced at a significant discount to net asset value?

Correct AnswerverifiedShow Answer

Which one of the following statements about returns reported by mutual funds is not correct?

Correct AnswerverifiedShow Answer

In his 1970 study, Malkiel found that mutual funds that do well in one period have an approximately ________ chance of doing well in the subsequent-year period.

Correct AnswerverifiedShow Answer

The Stone Harbor Fund is a closed-end investment company with a portfolio currently worth $300 million. It has liabilities of $5 million and 9 million shares outstanding. If the fund sells for $30 a share, what is its premium or discount as a percent of NAV?

Correct AnswerverifiedShow Answer

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Management fees for open-end and closed-end funds typically range between and .

Correct Answer
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