47. If a mutual fund has multiple-class shares, which class typically has a front-end load?
48. The commission, or front-end load, paid when you purchase shares in mutual funds may
not exceed __________.
49. You are considering investing in one of several mutual funds. All the funds under
consideration have various combinations of front-end and back-end loads and/or 12b-1 fees. The
longer you plan on remaining in the fund you choose, the more likely you will prefer a fund with a
__________ rather than a __________, everything else equal.
50. 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 ____________.
51. The SEC requires funds to disclose:
I. After-tax returns for the past year
II. After-tax returns for the last 5-year period
III. The tax impact of portfolio turnover
52. SEC Rule 12b-1 allows managers of certain funds to deduct __________ expenses from
fund assets; however, these expenses may not exceed __________ of the fund’s average net
assets per year.
53. Consider a mutual fund with $300 million in assets at the start of the year and 12 million
shares outstanding. If the gross return on assets is 18% and the total expense ratio is 2% of the
year-end value, what is the rate of return on the fund?
54. Consider a no-load mutual fund with $200 million in assets and 10 million shares at the
start of the year and with $250 million in assets and 11 million shares at the end of the year.
During the year investors have received income distributions of $2 per share and capital gain
distributions of $.25 per share. Assuming that the fund carries no debt, and that the total expense
ratio is 1%, what is the rate of return on the fund?
55. Consider a no-load mutual fund with $400 million in assets, 50 million in debt, and 15
million shares at the start of the year and with $500 million in assets, 40 million in debt, and 18
million shares at the end of the year. During the year investors have received income distributions
of $.50 per share and capital gain distributions of $.30 per share. If the total expense ratio is .75%,
what is the rate of return on the fund?
56. Mutual fund returns may be granted pass-through status if _________________.
57. _____ is an example of an exchange-traded fund.
58. If you place an order to buy or sell a share of a mutual fund during the trading day, the
order will be executed at _____.
59. According to the
2011 Mutual Fund Fact Book,
_______ of total assets were in taxable
money market funds and _______ were tax-exempt money market funds.
60. 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.
61. In a recent study, Malkiel found that evidence of persistence in the performance of mutual
funds ________________ in the 1980s.
62. The ratio of trading activity of a portfolio to the assets of the portfolio is called the
____________.
63. Which of the following ETFs tracks the S&P 500 Index?
64. 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?
65. The difference between balanced funds and asset allocation funds is that _____.
66. The Wildwood Fund sells Class A shares with a front-end load of 5% and Class B shares
with a 12b-1 fee of 1% annually. If you plan to sell the fund after 4 years, are Class A or Class B
shares the better choice? Assume a 10% annual return net of expenses before the 12b-1 fee is
applied.
67. A mutual fund has total assets outstanding of $69 million. During the year the fund bought
and sold assets equal to $17.25 million. This fund’s turnover rate was _____.
68. Which type of investment fund is commonly known to invest in options and futures in
large scale?
69. Advantages of ETFs over mutual funds include all but which one of the following?
70. Harold has just taken his company public and owns a large quantity of restricted stock.
For purposes of diversification, what fund might he help create in order to diversify his holdings?
71. Which of the following funds is most likely to have a debt ratio of 70% or higher?
72. _______ have become the main way for investors to speculate in precious metals.
73. From 1971 to 2010 the average return on the Wilshire 5000 Index was _________ the return
of the average mutual fund.
74. An open-end fund has a NAV of $16.50 per share. The fund charges a 6% load. What is the
offering price?
75. The offer price of an open-end fund is $18 and the fund is sold with a front–end load of
5%. What is the fund’s NAV?
76. A mutual fund has $50 million in assets at the beginning of the year and 1 million shares
outstanding throughout the year. Throughout the year assets grow at 12%. The fund imposes a
12b-1 fee on all shares equal to 1%. The fee is imposed on year-end asset values. If there are no
distributions, what is the end–of-year NAV for the fund?
77. The assets of a mutual fund are $25 million. The liabilities are $4 million. If the fund has
700,000 shares outstanding and pays a $3 dividend, what is the dividend yield?
78. Which of the following funds are usually most tax-efficient?
79. You invest in a mutual fund that charges a 3% front-end load, 1% total annual fees, and a
2% back-end load, which decreases .5% per year. How much will you pay in fees on a $10,000
investment that does not grow if you cash out after 3 years of no gain?
80. 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?
81. 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 B
investment of $20,000 if you redeem shares with no growth in value?
82. You pay $21,600 to the Laramie Fund, which has a NAV of $18 per share at the beginning
of the year. The fund deducted a front-end load of 4%. The securities in the fund increased in
value by 10% during the year. The fund’s expense ratio is 1.3% and is deducted from year-end
asset values. What is your rate of return on the fund if you sell your shares at the end of the year?
83. Which one of the following statements about returns reported by mutual funds is
not
correct?
84. The top Morningstar mutual fund performance rating is ________.
85. 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?