65. The largest asset category of mutual funds as of 2009 was
66. The type of abusive activity that involves cases where investors were able to buy or sell mutual fund shares
long after the price had been set each day is
67. The type of abusive activity that involves arrangements between mutual fund companies and brokerage
houses is
68. As a result of illegal and abusive activities in recent years, new rules and regulations were imposed on
mutual fund companies in 2004. These rules were intended to
69. Duties of the newly required chief compliance officers include
70. New SEC rules call for shareholder reports to include
71. Net asset value is found by
73. The NAV of a closed-end investment company shares is determined at any point in time by
74. Which of the following observations is true of a no-load fund?
75. The front-end load on these type of shares is charged on new sales and is not generally incurred when these
shares are exchanged for another mutual fund within the same fund family.
76. Identify the primary regulator(s) of mutual funds.
77. What agency acts as the distributor or “clearinghouse” for mutual fund transactions?
78. Which of the following is the regulation that allowed the SEC to restrict program trading when it deems
necessary?
79. Which of the following is the practice that involves short-term trading of mutual funds seeking to take
advantage of short- term discrepancies between the price of a mutual fund’s shares and out-of–date values on the
securities in the fund’s portfolio?
80. Which practice is especially common in international funds as traders can exploit differences in time zones?
81. Which process refers to the process of determining the value of mutual fund shares each per day?
82. Which act appointed the National Association of Securities Dealers (NASD) to supervise mutual fund share
distributions?
83. Which of the following is true about the values of most money market mutual fund shares?
84. An investor purchases fund shares with a 3 percent front-end load and expects to hold the shares for 10
years. The annualized sales load incurred by the investor is _______ per year.
85. An investor purchases fund shares with a 3 percent front-end load and expects to hold the shares for 10
years. The fund has a total fund expense ratio (including 12b-1 fees) of 1 percent per year. The annual total
shareholder cost for this fund is _______ per year.
86. For mutual funds outside the United States, total amounts invested in this fund category topped the list in
2009.
87. Which of the following observations concerning hedge funds is NOT true?
88. To be deemed “accredited”, an investor must have
89. The hedge fund industry is built on the theory that
90. Hedge fund data
91. Which of the following hedge fund objectives would be classified under the “more risky” category?
92. Which of the following hedge fund objectives would be classified under the “moderate risk” category?
93. Which of the following hedge fund objectives would be classified under the “risk avoidance” category?
94. These “more risky” hedge funds aim to profit from changes in global economies, typically brought about by
shifts in government policy that impact interest rates.
95. These types of funds mix hedge funds and other pooled investment vehicles.
96. 75 percent of all hedge funds are located in
97. Which of the following is common to both hedge funds and mutual funds?
98. What does a hurdle rate specified by a hedge fund indicate?
99. Which of the following are used to link the hedge fund manager’s incentives more closely to those of the
fund investors and to reduce the manager’s incentive to increase the risk of trades?
100. Match the following pieces of legislation with the function achieved by each regulation as stated in
questions 100 to 109.
1. Requires a mutual fund to set rules and
procedures regarding the fund’s prospectus sent
Insider Trading and
Securities Fraud
2. Provides for the supervision of mutual fund
3. Requires mutual funds to develop
mechanisms and procedures to avoid insider
Market Reform Act of
4. Allows the SEC to introduce circuit breakers
Securities Exchange Act
5. Sets rules to prevent conflicts of interest,
fraud, and excessive fees or charges for fund
6. Requires a mutual fund to furnish full and
accurate information on all financial and
corporate matters to prospective fund
National Securities
Markets Improvement Act of
7. Regulates the activities of mutual fund
Securities Exchange Act
8. Exempts mutual fund sellers from oversight
9. Makes the purchase and sale of mutual fund
10. Requires a mutual fund to file a registration
Securities Exchange Act
101. What is the NAV of both funds?
102. To what level should the price of Microsoft shares decline in order for the NAV of Morningstar fund to
remain constant if the price of P&G rises to $40?
103. If Eveningstar issues another 250 shares and purchases 150 shares of Intel, what is its new NAV?
104. If the price of P&G shares rises to $35 and the price of Microsoft falls to $40.00, what is the new NAV of
both funds? Assume Eveningstar has 1,000 shares outstanding, and 300 shares of Intel.