1. Mutual funds are financial intermediaries that invest in diversified portfolios of assets.
2. Open-end mutual funds are the major type of mutual funds.
3. Mutual funds achieve economies of scale for individual investors by realizing the benefits of lower
transaction costs and commissions as compared to those incurred by individual investors.
4. Commercial banks are not allowed to own or invest in mutual funds.
5. Long-term mutual funds invest primarily in long-term, fixed-income securities such as corporate and/or
government bonds.
6. Short-term mutual funds invest solely in money market securities.
7. Equity mutual funds may contain common stock, but not preferred stock.
8. The proportionate mix of assets invested in long-term versus short-term mutual funds has varied over the last
twenty years.
9. A change from commercial bank deposits to money market mutual funds typically allows an investor to
benefit from higher yields, but with the cost of losing deposit insurance coverage.
10. Most individuals who invest in mutual funds for the first time realize that mutual fund investment carries
some risk.
11. One of the goals of mutual funds is to achieve superior diversification through fund and risk pooling
compared to what individual investors can achieve.
12. A mutual fund objective statement provides general information about the types of securities a mutual fund
will hold as assets.
13. In 1998, the SEC required that portions of mutual fund prospectuses must be written in easily understood
“plain” English.
14. The SEC requires that prospectuses or advertisements regarding a mutual fund contain information that
returns of the mutual fund carry some risk.
15. The return from investing in mutual funds can include dividends, gains from the sale of the mutual fund
assets, and gains from the sale of the mutual fund shares.
16. The net asset value of a mutual fund is a value determined by an end-of-day marking-to-market process.
17. Load funds use sales agents, and thus usually have an up-front commission charge.
18. Fees of load funds that are used to cover the costs of trading in securities are called 12b-1 fees.
19. Since 2002, the amount of assets invested in load funds have exceeded those invested in no-load funds.
20. Mutual fund supermarkets often allow investors to purchase funds within large number of fund companies
with no transaction fees.
21. The front-end or back-end loads charged by some mutual funds often are combined with 12b-1 fees.
22. Mutual funds often offer multiple share classes which differentiate between different methods of paying
brokers for services.
23. Class B shares of a mutual fund are typically charged a back-end load when the shares are redeemed.
24. Class C shares of a mutual fund usually convert to Class A shares after some length of time which may be
as long as 6 to 8 years.
25. All classes of mutual fund shares may legally charge an annual 12b-1 fee.
26. Historical evidence indicates that load funds perform better than no-load funds.
27. Historical evidence indicates that the benefits of greater management attention in load funds do not
outweigh the disadvantages of the load fee.
28. The total investment in long-term mutual funds is less than the total investment in money market mutual
funds.
29. The Securities Act of 1933 requires that a mutual fund furnish full and accurate information on all financial
and corporate matters to prospective fund purchasers.
30. The Securities Exchange Act of 1934 requires a mutual fund to file a registration statement with the SEC.
31. The Securities Act of 1933 sets rules and procedures regarding a mutual fund’s prospectus sent to potential
investors.
32. Mutual fund share distributions and transactions are supervised and cleared by the National Association of
Securities Dealers (NASD).
33. The Investment Advisors Act of 1940 sets out rules to prevent conflicts of interest, fraud, and excessive fees
or charges for mutual fund shares.
34. The National Securities Markets Improvement Act of 1996 exempts mutual funds from oversight by state
securities regulators.
35. Directed brokerage is a trading abuse where a mutual fund and a brokerage agree to promote sales of certain
funds in exchange for orders of specific stocks and bonds.
36. As a result of trading and fee assignment abuses by the mutual fund industry, the SEC established new rules
regarding fund governance and conflicts of interest.
37. The SEC requires mutual fund portfolio managers to report their personal trading in individual stocks, but
not in the portfolios they manage.
38. The SEC requires mutual funds to disclose the risk to investors of frequent trading in fund shares.
39. Mutual funds are required to hire chief compliance officers whose job is to monitor whether the mutual fund
company follows exchange and regulatory rules.
40. The chief compliance officer of a mutual fund reports directly to the senior executives of the fund
management company.
41. Worldwide investments in mutual funds have grown at a rate faster than in the United States over the last
decade.
42. The rate of investing in mutual funds tends to be positively correlated with economic activity in the U.S.,
but is negatively correlated with economic activity in other countries.
43. U.S. mutual fund companies have made significant progress in entering Japan and Europe.
44. The number of funds and assets size of the mutual fund industry have grown dramatically since 1970
because of the introduction of
45. The long-term mutual fund sector includes
46. The short-term mutual fund sector includes
47. Open-end mutual funds guarantee
48. As compared to purchasing an individual stock, a no-load mutual fund investor will usually get
49. Regarding the relative asset size and asset growth rate of mutual fund sectors,
50. Which of the following is one of the characteristics of household mutual fund owners as of 2009?
51. The returns obtained by investors of mutual funds include the following except
52. Closed-end investment companies
53. Open-end mutual funds
54. An open-ended fund has stocks of three companies: 200 shares of IBM currently valued at $50.00, 100
shares of GE currently values at $20 and 100 shares of Digital currently valued at $30. The fund has 500 shares
outstanding. What is the net asset value (NAV) of the fund?
55. A mutual fund that charges investors a fee similar to a commission charge is called a
56. The debate and research regarding the advantages of load funds versus no-load funds has revealed that
57. 12b-1 fees
58. Fees investors are charged to cover administration and shareholder services are called
59. An investor invests $100,000 in a mutual fund that has a 5 percent front-end load, charges a management
fee of 0.5 percent, and a 12b-1 fee of 0.25 percent. The investor plans to leave the investment for one year.
What is the dollar amount of the total shareholder cost?
60. Mutual fund shares that are offered for sale at the NAV without a front-end load, but which charge a
combination of 12b-1 fees and a back-end load, and whose back-end load typically remains in effect for 6 to 8
years, are
61. A mutual fund has the following share characteristics: Shares are offered at the NAV with no front-end load,
a 12b-1 fee of 1 percent is charged, a back-end load of 1 percent is charged only if the shares are sold by the
investor within one year of purchase, and the shares do not convert to any other class of shares. These shares
would be classified as
62. The largest proportion of assets of money market mutual funds in 2009 was
63. Money market mutual funds are subject to
64. Mutual funds that purchase Treasury bills, bank certificates of deposit, commercial paper, and other
short-term securities would be classified as