37
7) Investors are generally well advised to avoid mutual funds with
A) highly rated fund managers.
B) low fees and high tax efficiency.
C) consistently poor historical performance.
D) good performance in both up and down markets.
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
8) Returns on exchange traded funds may come from
I. capital gains.
II. dividends.
III. increases in the fund’s premium.
IV. decreases in the fund’s discount.
A) I and II only
B) III and IV 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 6
38
9) Which of the following are sources of income for an open-end mutual fund?
I. dividend and interest income
II. change in the discount or premium
III. capital gains
IV. change in NAV
A) I and III only
B) I, II and III only
C) I, III and IV only
D) II, III and IV only
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
10) Income distributed by a mutual fund from which one of the following sources receives a
preferential tax rate of 15%?
A) dividends on common stock
B) interest on bonds
C) dividends from most preferred stocks
D) dividends from REITs
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
11) Investment companies can inflate the percentage of funds that outperformed their
benchmark by
A) including unrealized capital gains.
B) closing funds that underperformed their benchmark.
C) using a different fiscal year than the benchmark.
D) assuming that investors automatically add to their holdings.
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
39
12) A mutual fund’s net asset value is determined by
A) demand for the fund based on the fund’s performance.
B) the fund manager’s reputation.
C) the value of the securities held by the fund.
D) all of the above.
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
13) Income from ________ is exempt from federal income taxes?
A) money market funds
B) municipal bond funds
C) government bond funds
D) REITs
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
14) Last year at this time, a mutual fund had an NAV of $26.40 per share. Over the past year
the fund paid dividends of $1.40 per share and had a capital gains distribution of $1.20 per
share. What is the holding period return assuming that the current NAV is $28.84?
A) 14.5%
B) 17.5%
C) 19.1%
D) 23.6%
managers
AACSB: 3 Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 6
40
15) A type of mutual fund investor who is primarily interested in high current income should
consider
A) Mortgage REITS.
B) Property REITS.
C) Growth funds.
D) Banking industry sector 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 6
16) Information for ABC Fund is
The market-based holding period return for ABC Mutual Fund is
A) -19.1%.
B) -14.6%.
C) 0.3%.
D) 9.4%.
managers
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
41
17) What is the average annual compound rate of return for a fund with the following values?
A) 10.5%
B) 10.8%
C) 25.6%
D) 32.3%
managers
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
18) In early January of 2015, Abigail invested $2,500 in shares of the Pathfinder Fund when the
NAV was $11.12. All dividends and capital gains are reinvested in the fund. At the end of
December, 2015 the NAV was $11.50 and she held 235.8 shares in her account. Her holding
period return was
A) 3.42%.
B) 8.47%.
C) 4.88%.
D) 7.81%.
managers
AACSB: 3 Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 6