Mutual Fund Operations

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Question 1
Free
Multiple Choice

Which of the following statements is incorrect?

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A

Mutual funds serve as a key financial intermediary.

B

Managers of mutual funds do not analyze economic and industry trends.

C

Because of their diversification, management expertise, and liquidity, mutual funds have grown at a rapid pace.

D

Some mutual funds offer check-writing privileges.

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Question 2
Free
Multiple Choice

To cover managerial and other expenses, mutual funds typically charge

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A

management fees of less than 2 percent of total assets per year.

B

commissions of typically 8 to 10 percent on purchases or sales of securities.

C

management fees of typically more than 10 percent of total assets per year.

D

a one-time load of 5% upon the initial investment in the mutual fund.

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Question 3
Free
Multiple Choice

Mutual funds that are willing to repurchase their shares from investors at any time are referred to as

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A

closed-end funds.

B

load mutual funds.

C

no-load mutual funds.

D

open-end mutual funds.

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Question 4
Free
Multiple Choice

Most closed-end funds invest in

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A

stock and bonds.

B

money market securities.

C

gold.

D

derivatives.

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Question 5
Free
Multiple Choice

Exchange-traded funds (ETFs)?

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A

are traded on an exchange, and their share price changes throughout the day.

B

represent only bonds.

C

are actively managed.

D

None of the above is correct.

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Question 6
True/False

Shares of open-end mutual funds are purchased and sold on exchanges.

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True
False
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Question 7
Multiple Choice

Mutual funds

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A
are unregulated.
B
are required to disclose the names of their portfolio managers in the prospectus.
C
are not required to disclose any information about their past performance.
D
are exempt from all taxes.
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Question 8
Multiple Choice

Which of the following is not disclosed in a mutual fund prospectus?

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A
the minimum amount of investment required
B
the investment objective of the mutual fund
C
the fees incurred by the mutual fund
D
All of the above are disclosed.
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Question 9
True/False

The net asset value of a mutual fund is estimated once every week.

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True
False
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Question 10
Multiple Choice

Mutual funds with ____ expense ratios tend to ____ others that have a similar investment objective.

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A
lower; underperform
B
higher; outperform
C
lower; outperform
D
A and B
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Question 11
True/False

A front-end load is a withdrawal fee assessed when you withdraw money from the mutual fund.

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True
False
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Question 12
Multiple Choice

Money market funds invest mostly in

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A
stocks.
B
long-term bonds.
C
real estate.
D
short-term securities.
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Question 13
Multiple Choice

If investors sell their mutual fund shares after the net asset value of the fund increases, the return is called

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A
share price appreciation.
B
capital gains distribution.
C
dividends.
D
split net asset value.
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Question 14
Multiple Choice

Mutual funds composed of stocks that have potential for very high growth, but may also be unproven, are called

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A
income funds.
B
capital appreciation funds.
C
specialty funds.
D
dividend funds.
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Question 15
Multiple Choice

Mutual funds composed of bonds that offer periodic coupon payments are

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A
income funds.
B
specialty funds.
C
dividend funds
D
growth funds.
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Question 16
Multiple Choice

Mutual funds whose bonds have a ____ average time to maturity are ____ sensitive to interest rate fluctuations.

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A
longer; less
B
shorter; less
C
shorter; more
D
A and C
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Question 17
Multiple Choice

An investor who believes that technology stocks will perform well but does not want to select individual technology stocks might invest in:

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A
Spiders.
B
Webs.
C
Cubes.
D
Diamonds.
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Question 18
Multiple Choice

Mutual funds that include both non-U.S. stocks and U.S. stocks are called ____ funds.

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A
global
B
foreign
C
combined
D
mixed
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Question 19
Multiple Choice

A mutual fund consisting only of stocks of firms that are in a specific industry is an example of a ____ fund.

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A
specialty
B
growth
C
capital appreciation
D
growth and income
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Question 20
Multiple Choice

The majority of mutual fund assets are in the form of

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A
common stocks.
B
preferred stocks.
C
U.S. government bonds.
D
municipal bonds.
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