Chapter 17 – Professional Money Management, Alternative Assets, and Industry Ethics
c.
are determined by supply and demand.
d.
are traded like those of a private firm.
e.
All of these are correct.
59. The following are examples of mutual fund companies:
a.
private equity.
b.
bond funds.
c.
hedge funds.
d.
venture capital.
e.
buyout-oriented private equity.
Exhibit 24.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Suppose ABC Mutual fund owned only four stocks as follows:
Shares
Price
2500
$11
2100
14
2700
23
1900
15
60. Refer to Exhibit 24.1. The fund originated by selling $100,000 of stock at $10.00 per share. What is its current NAV?
a.
$1.47
b.
$14.75
Chapter 17 – Professional Money Management, Alternative Assets, and Industry Ethics
c.
$16.03
d.
$27.62
e.
$234.12
61. Refer to Exhibit 24.1. What is the offering price for the fund if the NAV is $25.25 and the load is 6 percent?
a.
$26.19
b.
$23.74
c.
$25.25
d.
$26.77
e.
$24.13
62. Suppose Mega Mutual Fund owns only the four stocks shown below with no liabilities.
Shares
Price
1800
15
2200
11
2300
9
1900
18
The fund originated by selling $300,000 of stock at $30.00 per share. What is its current NAV?
a.
$106.10
b.
$12.94
c.
$129.40
d.
$10.61
Chapter 17 – Professional Money Management, Alternative Assets, and Industry Ethics
e.
$16.94
63. Suppose Under Mutual Fund owns only the three stocks shown below with no liabilities.
Shares
Price
2900
15
3100
14
3200
12
The fund originated by selling $500,000 of stock at $50.00 per share. What is its current NAV?
a.
$12.53
b.
$15.29
c.
$152.90
d.
$125.30
e.
$150.50
64. Suppose you consider investing $1,000 in a load fund which charges a fee of 2 percent, and you expect the fund to
earn 14 percent over the next year. Alternatively, you could invest in a no-load fund with similar risk that is expected to
earn 9 percent and charges a 1/2 percent redemption fee. Which is better and by how much?
a.
funds are equal
b.
load fund by $32.65
c.
load fund by $50.55
d.
no-load fund by $64.55
e.
no-load fund by $44.30
65. Suppose you consider investing $1,000 in a load fund that charges a fee of 2 percent, and you expect the fund to earn
11 percent over the next year. Alternatively, you could invest in a no-load fund with similar risk that is expected to earn 7
percent and charges a 1/2 percent redemption fee. Which is better and by how much?
a.
funds are equal
b.
no-load fund by $36.98
c.
load fund by $45.25
d.
load fund by $23.15
e.
no-load fund by $15.52
66. Suppose you consider investing $15,000 in a load fund from which a fee of 5 percent is deducted and you expect the
fund to earn 12 percent over the next year. Alternatively, you could invest in a no-load fund that is expected to earn 10
percent and which takes a 1/2 percent redemption fee. Which is better and by how much?
a.
load fund by $318.45
b.
no load fund by $457.50
c.
funds are equal
d.
load fund by $415.10
e.
no load fund by $211.51
67. Suppose you consider investing $10,000 in a load fund from which a fee of 3 percent is deducted and you expect the
fund to earn 12 percent over the next year. Alternatively, you could invest in a no-load fund that is expected to earn 10
percent and which takes a 0 percent redemption fee. Which is better and by how much?
a.
load fund by $151
b.
no load fund by $136
c.
funds are equal
d.
no load fund by $421
e.
load fund by $115
68. Suppose you consider investing $5,000 in a load fund from which a fee of 8 percent is deducted and you expect the
fund to earn 12 percent over the next year. Alternatively, you could invest in a no-load fund that is expected to earn 10
percent and which takes a 1/2 percent redemption fee. Which is better and by how much?
a.
load fund by $320.50
b.
load fund by $575.50
c.
funds are equal
d.
no load fund by $320.50
e.
no load fund by $575.50
69. On January 2, 2017, you invest $10,000 in Megabucks Mutual Fund, a load fund that charges a fee of 2 percent. The
fund’s returns were 13 percent in 2017, 11 percent in 2018, and 8 percent in 2019. On December 31, 2019, you redeem all
your shares. The dollar value is
a.
$13,600.00.
b.
$13,275.51.
c.
$13,297.67.
Chapter 17 – Professional Money Management, Alternative Assets, and Industry Ethics
d.
$13,995.75.
e.
$10,000.00.
70. On January 2, 2017, you invest $50,000 in the Lizbiz Mutual Fund, a load fund that charges a fee of 5 percent. The
fund’s returns were 14.6 percent in 2017, −6.4 percent in 2018, and 15.2 percent in 2019. On December 31, 2019, you
redeem all your shares. The dollar value is
a.
$66,722.27.
b.
$15,200.00.
c.
$58,695.74.
d.
$33,366.25.
e.
$10,000.00.
71. $100,000.00.On January 2, 2017, you invest $100,000 in the Jeffers Mutual Fund, a load fund that charges a fee of 5
percent. The fund’s returns were −14.6 percent in 2017, −6.4 percent in 2018, and 35 percent in 2019. On December 31,
2019, you redeem all your shares. The dollar value is
a.
$95,600.57.
b.
$102,515.90.
c.
$83,297.75.
d.
$133,995.75.
e.
$100,000.00.
72. On January 2, 2017, you invest $10,000 in the Tiger Fund, a load fund that charges a fee of 6 percent. The fund’s
returns were 25 percent in 2017, 35 percent in 2018, and −5 percent in 2019. On December 31, 2019, you redeem all your
shares of Tiger. The dollar value is
a.
$5,200.89.
b.
$13,345.89.
c.
$7,931.25.
d.
$15,896.34.
e.
$8,646.91.
73. On January 2, 2017, you invest $10,000 in the W.O.W. Mutual Fund, a load fund that charges a fee of 5 percent. The
fund’s returns were 13.6 percent in 2017, 12.2 percent in 2018, and 8.3 percent in 2019. On December 31, 2019, you
redeem all your W.O.W. shares. The dollar value is
a.
$13,600.00.
b.
$13,664.13.
c.
$10,000.00.
d.
$131,136.40.
e.
$13,113.64.
74. On January 2, 2017, you invest $10,000 in the Dog Mutual Fund, a load fund that charges a fee of 7 percent. The
fund’s returns were 12.8 percent in 2017, 13.9 percent in 2018, and 7.9 percent in 2019. On December 31, 2019, you
redeem all your shares. The dollar value is
a.
$12,800.00.
b.
$12,892.50.
c.
$100,000.00.
d.
$128,925.00.
e.
$10,000.00.
75. On January 2, 2017, you invest $50,000 in A Mutual Fund, a load fund that charges a fee of 7 percent. The fund’s
returns were 12.8 percent in 2017, 13.9 percent in 2018, and 7.9 percent in 2019. On December 31, 2019, you redeem all
your shares in A. The dollar value is
a.
$64,462.57.
b.
$644,625.70.
c.
$50,000.00.
d.
$6,446.25.
e.
$10,000.00.
76. On January 2, 2017, you invest $100,000 in Righteous, a load fund that charges a fee of 7 percent. The fund’s returns
were 12.8 percent in 2017, 13.9 percent in 2018, and 7.9 percent in 2019. On December 31, 2019, you redeem all your
Righteous shares. The dollar value is
a.
$12,800.00.
b.
$12,892.50.
c.
$100,000.00.
d.
$128,925.00.
Chapter 17 – Professional Money Management, Alternative Assets, and Industry Ethics
e.
$10,000.00.
77. Consider the Defiance Bond Fund that consists of the three bonds shown below and has no liabilities.
Current Bond Value
# Bonds
980
120
1010
150
1200
100
If initially the value of the fund was $250,000 and the original shares were offered to the public with a NAV of $25 per
share, what is the current NAV of the fund?
a.
$25.00
b.
$38.91
c.
$39.81
d.
$31.98
e.
$39.91
78. Consider X Bond Fund which consists of the five bonds shown below with no liabilities.
Current Bond Value
# Bonds
980
120
1010
150
1200
100
800
120
600
150
Chapter 17 – Professional Money Management, Alternative Assets, and Industry Ethics
If initially the value of the fund was $1,000,000 and the original shares were offered to the public with a NAV of $25 per
share, what is the current NAV of the fund?
a.
$25.00
b.
$27.68
c.
$25.68
d.
$28.76
e.
$26.78
79. Consider the Compliance Bond Fund that consists of the seven bonds shown below and has no liabilities.
Current Bond Value
# Bonds
980
120
1010
150
1200
100
800
120
600
150
1000
150
950
150
If initially the value of the fund was $2,500,000 and the original shares were offered to the public with a NAV of $25 per
share, what is the current NAV of the fund?
a.
$27.11
b.
$25.00
c.
$26.11
d.
$21.67
e.
$26.27
80. Given the following fees and expected returns for fund X and assuming an initial investment of $1000, calculate the
value of the investment at the end of five years.
Investment
E(Return)
Load
12b-1 fee
Rear-end load
Years
X
10%
2.5%
0.25%
0%
5 years
a.
$1069.82
b.
$1550.77
c.
$1042.36
d.
$1689.95
e.
$1389.95
81. Given the following fees and expected returns for fund Y and assuming an initial investment of $1000, calculate the
value of the investment at the end of five years.
Investment
E(Return)
Load
12b-1 fee
Rear-end load
Years
Y
8%
0%
0.50%
3%
5 years
a.
$1069.82
b.
$1550.77
c.
$1642.36
d.
$1362.59
82. Calculate the annual rate of return for a mutual fund with the following fees and expected returns.
Investment
E(Return)
Load
12b-1 fee
Years Held
Mutual Fund
7%
4%
0.50%
7 years
Chapter 17 – Professional Money Management, Alternative Assets, and Industry Ethics
a.
4.95%
b.
5.0%
c.
5.85%
d.
2.5%
e.
6.55%
83. If the Micro mutual fund was originated by selling $250,000 of stock at $10.00 per share. Calculate its current NAV if
the fund consists of the following four stocks.
Shares
Price
9,500
$10.75
7,200
$13.90
4,500
$22.25
6,800
$14.75
a.
$5.78
b.
$10.00
c.
$12.43
d.
$16.11
e.
$19.21
84. What is the offering price for a mutual fund with a NAV of $22.50 and a load of 5 percent?
a.
$21.38
b.
$21.79
c.
$22.50