Chapter 13—Investing in Mutual Funds
c. become owners of a widely diversified portfolio of securities.
d. deduct unrealized losses from their taxes.
e. do all of these.
85. The current market value of all the securities a mutual fund owns is called the
a. market value.
b. par value.
c. net asset value.
d. book value.
e. liquidation value.
86. Investors tend to use mutual funds for which of the following reasons
a. Diversification
b. Professional management
c. Financial returns
d. Convenience
e. All of these
87. A(n) ____ sells fund shares, either directly to the public or through certain authorized dealers.
a. investment advisor
b. custodian
c. transfer agent
d. distributor
e. money manager
Chapter 13—Investing in Mutual Funds
88. A(n) ____ actually runs the portfolio and makes the buy and sell decisions.
a. transfer agent
b. distributor
c. management company
d. investment advisor
e. custodian
89. Closed-end investment companies are characterized by
a. number of shares determined by demand.
b. price based on net asset value per share.
c. variable transaction costs.
d. availability for sale or purchase on security markets.
e. value dependent on quantity of shares held.
90. A closed-end investment company that invests in various types of real estate and mortgages is a
a. hybrid real estate investment trust.
b. blind pool syndicate.
c. real estate general partnership.
d. hybrid limited partnership.
e. mortgage real estate investment trust.
Chapter 13—Investing in Mutual Funds
91. Which of the following combines the operating characteristics of an open-end fund with some of the trading
characteristics of a closed-end fund?
a. Preferred fund
b. Common fund
c. Exchange-traded fund
d. Net-asset fund
e. Unit investment trust
92. A mutual fund’s NAV is its
a. normal average value.
b. nationally advertized value.
c. noted assessment vision.
d. net asset value.
e. none of these.
93. Which of the following are characteristic of exchange-traded mutual funds?
a. Traded on listed exchanges
b. Closed-end funds
c. Generally organized as sector funds
d. Actively managed funds
e. All of these
94. What type of REIT is most attractive to income-oriented investors?
a. Equity
b. Mortgage
c. Hybrid
Chapter 13—Investing in Mutual Funds
d. Unit trust
e. Exchange-traded
95. A mutual fund’s NAV is calculated
a. annually.
b. monthly.
c. at least once a day.
d. hourly.
e. none of these.
96. Redeeming your mutual fund shares might result in a charge called
a. a back-end load.
b. a front-end load.
c. a redemption tax.
d. a management fee.
e. none of these.
97. A no-load fund has no
a. sales charges.
b. administrative charges.
c. management charges.
d. tax charges.
e. 12b-1 fees.
Chapter 13—Investing in Mutual Funds
98. An annual fee charged by some mutual funds to cover marketing and distribution expenses is the
a. management fee.
b. back-end load.
c. transaction fee.
d. 12b-1 fee.
e. low-load.
99. Both load and no-load funds will always charge a
a. transaction fee.
b. 12b-1 fee.
c. management fee.
d. fee on the sale of the shares.
e. redemption fee.
100. A behavioral bias in mutual fund investing where investors view recent performance as overly indicative of a fund’s
future performance is known as
a. disposition effect.
b. narrow framing.
c. representativeness.
d. recency.
e. none of these.
Chapter 13—Investing in Mutual Funds
101. In The Wall Street Journal‘s listing of mutual funds, an “r” after the mutual fund name and before the NAV means
that the particular mutual fund has a ____ associated with it.
a. front-end load
b. back-end load
c. 12b-1 fee
d. management fee
e. none of these
102. In The Wall Street Journal‘s listing of mutual funds, a “t” after the mutual fund name and before the NAV means that
the particular mutual fund has a ____ associated with it.
a. front-end load
b. back-end load
c. 12b-1 fee
d. management fee
e. b and c
103. In The Wall Street Journal‘s listing of mutual funds, a “p” after the mutual fund name and before the NAV means
that the particular mutual fund has a ____ associated with it.
a. front-end load
b. back-end load
c. 12b-1 fee
d. management fee
e. none of these
104. The share price of a closed-end fund is determined by
a. its NAV.
Chapter 13—Investing in Mutual Funds
b. fund fees.
c. general supply-and-demand conditions.
d. its management fee.
e. a and c.
105. What would the NAV of an open-ended mutual fund priced at $10 be if the load is 4%?
a. $10.40
b. $10.00
c. $9.60
d. $9.40
e. $9.20
106. To be a true no-load fund, there can be a maximum ____ load and a maximum ____ 12(b)-1 fee.
a. 0%; 0.00%
b. 0%; 0.25%
c. 0%; 1.00%
d. 3%; 0.25%
e. 3%; 1.00%
107. The fund whose main objective is growth is known as a(n) ____ fund.
a. balanced
b. preferred stock
c. money market
d. index
e. none of these
Chapter 13—Investing in Mutual Funds
108. The fund whose main objective is to simply match the market known as a(n) ____ fund.
a. balanced
b. preferred stock
c. money market
d. index
e. none of these
109. A(n) ____ fund is quite speculative.
a. balanced
b. growth
c. equity income
d. aggressive growth
e. money market
110. A fund that invests only in a particular industry would be a ____ fund.
a. money market
b. maximum capital
c. sector
d. balanced
e. bond
Chapter 13—Investing in Mutual Funds
111. Which of the following bond mutual funds would provide tax-free income?
a. Government bond fund
b. Municipal bond fund
c. Convertible bond fund
d. Mortgage-backed bond fund
e. All of these
112. Socially responsible funds typically avoid investing in
a. environmentally sound companies.
b. alcohol and tobacco stocks.
c. car companies that do not promote safety.
d. fast food chains that sell meat.
e. all of these.
113. Index funds have provided competitive rates of return because
a. their costs are lower than other stock funds.
b. it is difficult to outperform the market.
c. they have very low turnover rates.
d. they are tax efficient.
e. all of these.
114. A(n) ____ fund invests primarily in a portfolio of common stocks for the income they provide.
a. balanced
b. money market
c. growth
Chapter 13—Investing in Mutual Funds
d. sector
e. equity-income
115. A mutual fund with an objective of both growth and income is a(n)
a. bond fund.
b. equity-income fund.
c. growth fund.
d. sector fund.
e. balanced fund.
116. A balanced fund that emphasizes growth in capital is called a(n)
a. bond and preferred stock fund.
b. diversified common stock fund.
c. equity-income fund.
d. money market fund.
e. growth-and-income fund.
117. ____ would not be a reason for purchasing mutual funds.
a. Diversification
b. Professional management
c. Tax advantage
d. Financial return
e. Convenience
Chapter 13—Investing in Mutual Funds
118. Most mutual funds allow investors to participate in
a. automatic reinvestment plans.
b. automatic investment plans.
c. DRIP plans.
d. a and b.
e. a and c.
119. The major advantage of mutual funds to the small investor is
a. diversification.
b. professional management.
c. low cost.
d. convenience.
e. liquidity.
120. Which of the following is not a source of mutual fund returns?
a. Dividend income
b. Capital gains
c. Changes in NAV
d. Changes in IDB
e. All of these are sources of mutual fund returns.
Chapter 13—Investing in Mutual Funds
121. Mutual funds do not offer
a. automatic reinvestment plans.
b. guaranteed performance.
c. regular income programs.
d. conversion privileges.
e. retirement plans.
122. The ____ is a service offered by mutual funds that helps investors earn compound interest on their investments.
a. retirement plan
b. automatic withdrawal plan
c. automatic reinvestment plan
d. conversion privilege
e. automatic investment plan
123. If you are a mutual fund investor who needs steady income, you might take advantage of a fund’s
a. retirement plans.
b. exchange privileges.
c. automatic reinvestment plans.
d. systematic withdrawal plans.
e. none of these.
124. An investment option that allows fund shareholders to funnel fixed amounts of money from their paychecks or bank
accounts automatically into a mutual fund is a(n)
a. automatic reinvestment plan.
b. automatic investment plan.
c. systemic withdrawal plan.
d. conversion privilege.
Chapter 13—Investing in Mutual Funds
e. retirement plan.
125. Future fund performance is the real key to investment success with mutual funds. One important element to examine
when attempting to predict a fund’s future performance is the
a. performance of other funds.
b. nature of the fund being considered.
c. future course of the market.
d. fund’s past performance.
e. all of these.
126. Value funds look for stocks with relatively all the following except
a. high dividend yields.
b. moderate amounts of leverage.
c. low P/E ratios.
d. rapid growth.
e. undiscovered companies.
127. Advantages of exchange-traded funds over mutual funds include all of the following except
a. narrow geographic region.
b. single foreign countries.
c. better diversification.
d. industry focus.
e. sector focus.