978-0134083308 Chapter 12 Part 4

Unlock access to all the studying documents.

View Full Document

12.5 Learning Goal 5

1) Mutual funds are used extensively as retirement investments.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 5

2) Investors should select mutual funds that match their personal investment goals and provide

the services they desire.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 5

3) Mutual funds are popular instruments for speculation and short-term trading.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: New Question

Learning Goal: Learning Goal 5

4) Funds that charge higher sales commissions. consistently earn above average rates of return.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Revised

Learning Goal: Learning Goal 5

5) Mutual funds and exchanged-traded funds are available to meet the goals of both aggressive

and conservative investors.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: New Question

Learning Goal: Learning Goal 5

6) An investor who wants to use mutual funds as a storehouse of value should invest in

A) high-yield corporate bond funds and growth funds.

B) growth funds and equity-income funds.

C) equity-income funds and long-term bond funds.

D) money funds and short-term bond funds.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 5

7) Investors use mutual funds for which of the following reasons?

I. to accumulate wealth

II. to minimize risk

III. as a speculative vehicle

IV. as a storehouse of value

A) I and II only

B) II, III and IV only

C) I, II and IV only

D) I, II, III and IV

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 5

8) Tax laws allow investors to hold mutual funds in which of the following types of retirement

plans?

I. ordinary IRAs

II. Roth IRAs

III. 401-K plans

IV. Keogh plans

A) I and II only

B) II, III and IV only

C) I, II and IV only

D) I, II, III and IV

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 5

9) Which of the following accurately describe reasons for investing in mutual funds?

I. to effectively control the timing of capital gains for tax purposes

II. to achieve portfolio diversification at a reasonable cost

III. to invest in unfamiliar sectors or geographic regions

IV. to outperform the market

A) I and IV only

B) II and III only

C) I, II and III only

D) I, II, III and IV

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 5

10) Reasons to invest in mutual fund include

I. a wide range of services such as automatic reinvestment and systematic withdrawal plans.

II. minimizing the time and effort spent choosing securities.

III. rates of return that consistently beat the market averages.

IV. participation in a variety of tax sheltered and tax deferred retirement programs.

A) I and II only

B) II, III and IV only

C) I, II and IV only

D) I, II, III and IV

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 5

11) A mutual fund is generally more tax efficient when it has a ________ turnover rate and a

________ dividend yield.

A) low; low

B) low; high

C) high; low

D) high; high

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 5

12) Investors seeking tax-exempt income should invest in

A) index funds.

B) government bond funds.

C) municipal bond funds.

D) money market funds.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: New Question

Learning Goal: Learning Goal 5

13) Mutual funds can be used in which of the following tax exempt or tax deferred plans?

I. self-directed retirement plans (SEPS)

II. traditional IRAs

III. Roth IRAs

IV. 401-K accounts

A) I, II, and IV only

B) I and IV only

C) II and III only

D) I, II, III and IV

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: New Question

Learning Goal: Learning Goal 5

12.6 Learning Goal 6

1) Both capital gains and dividend income from mutual funds are taxable in the year in which

they are earned unless the mutual fund is held in a tax-sheltered plan.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: New Question

Learning Goal: Learning Goal 6

2) Both realized and unrealized capital gains from mutual fund investments are currently

taxable for individual income tax purposes.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 6

3) Only realized capital gains from mutual fund investments are currently taxable for individual

income tax purposes.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 6

4) Both the performance of the overall stock market as well as the skills of the mutual fund

manager affect the performance of a mutual fund.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: Previous Edition

Learning Goal: Learning Goal 6

5) Unrealized capital gains or losses will have no effect on a mutual fund’s net asset value.

managers

AACSB: 8 Application of knowledge (Able to translate knowledge of business and management

into practice)

Question Status: New Question

Learning Goal: Learning Goal 6

6) Last year, Sue purchased a closed-end mutual fund that was trading at $42 and had an NAV

of $38. Sue sold the fund today when the NAV is $44 and the market price is $43. The fund

paid $1 in dividends over the past year. What is the Sue’s holding period return?

A) 4.8%

B) 7.1%

C) 11.6%

D) 18.4%

managers

AACSB: 3 Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 6