Chapter 04 Mutual Funds and Other Investment Companies Answer
Key
Multiple Choice Questions
1.
Which one of the following statements regarding open-end mutual funds is false?
2.
Which one of the following statements regarding closed-end mutual funds is false?
3.
Which of the following functions do investment companies perform for their investors?
4.
Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of $17,000,000.
There were 24,300,000 shares in the fund at year-end. What was Multiple Mutual’s net
asset value?
5.
Growth Fund had year-end assets of $862,000,000 and liabilities of $12,000,000. There
were 32,675,254 shares in the fund at year-end. What was Growth Fund’s net asset
value?
6.
Diversified Portfolios had year-end assets of $279,000,000 and liabilities of $43,000,000. If
Diversified’s NAV was $42.13, how many shares must have been held in the fund?
7.
Pinnacle Fund had year-end assets of $825,000,000 and liabilities of $25,000,000. If
Pinnacle’s NAV was $32.18, how many shares must have been held in the fund?
8.
Most actively managed mutual funds, when compared to a market index such as the
Wilshire 5000,
9.
Pools of money invested in a portfolio that is fixed for the life of the fund are called
10.
Investors in closed-end funds who wish to liquidate their positions must
11.
Closed end funds are frequently issued at a ______ to NAV and subsequently trade at a
__________ to NAV.
12.
At issue, offering prices of open-end funds will often be
13.
Which of the following statements about real estate investment trusts is true?
14.
Which of the following statements about real estate investment trusts is true?
15.
Which of the following statements about money market mutual funds is true?
16.
In 2012 the proportion of mutual funds (based on total assets) specializing in common
stocks was
17.
In 2012 the proportion of mutual funds (based on total assets) specializing in bonds was
18.
In 2012 the proportion of mutual funds (based on total assets) specializing in money
market securities was
19.
In 2012 the proportion of hybrid (bond and stock) mutual funds (based on total assets)
was
20.
Management fees and other expenses of mutual funds may include
21.
The Profitability Fund had NAV per share of $17.50 on January 1, 2012. On December 31 of
the same year, the fund’s NAV was $19.47. Income distributions were $0.75, and the fund
had capital gain distributions of $1.00. Without considering taxes and transactions costs,
what rate of return did an investor receive on the Profitability Fund last year?
22.
The Yachtsman Fund had NAV per share of $36.12 on January 1, 2012. On December 31 of
the same year the fund’s NAV was $39.71. Income distributions were $0.64 and the fund
had capital gain distributions of $1.13. Without considering taxes and transactions costs,
what rate of return did an investor receive on the Yachtsman Fund last year?
23.
Investors’ Choice Fund had NAV per share of $37.25 on January 1, 2012. On December 31
of the same year the fund’s rate of return for the year was 17.3%. Income distributions
were $1.14, and the fund had capital gain distributions of $1.35. Without considering taxes
and transactions costs, what ending NAV would you calculate for Investors’ Choice?
24.
Which of the following is not an advantage of mutual funds?
25.
Which of the following would increase the net asset value of a mutual fund share,
assuming all other things remain unchanged?
26.
Which of the following characteristics apply to unit investment trusts?
I) Most are invested in fixed-income portfolios.
II) They are actively managed portfolios.
III) The sponsor pools securities, then sells public shares in the trust.
IV) The portfolio is fixed for the life of the fund.
27.
Jargon Rapid Growth is a mutual fund that has traditionally accepted funds from new
investors and issued new shares at net asset value. Jeremy Jargon manages the fund
himself and has become concerned that its level of assets has become too high for his
management abilities. He issues a statement that Jargon will no longer accept funds from
new investors, but will continue to accept additional investments from current
shareholders. Which of the following is true about Jargon Rapid Growth fund?
28.
As of 2012 which class of mutual funds had the largest amount of assets invested?
29.
Commingled funds are
30.
Which of the following is true regarding equity mutual funds?
I) They invest primarily in stock.
II) They may hold fixed-income securities as well as stock.
III) Most hold money market securities as well as stock.
IV) Two types of equity funds are income funds and growth funds.
31.
The fee that mutual funds use to help pay for advertising and promotional literature is
called a