Question 1

Mutual funds that apportion their investments among common stocks and bonds are referred to as segregated funds.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following factors would not affect the relationship between an individual's investment goals and the goals of a mutual fund?

Accepted Answer

A)   the investor's age
B)   the investor's family situation
C)   the investor's income
D)   the investor's future earning power
E)   the investor's age, the investor's family situation, the investor's income, and the investor's future earning power would affect the relationship between an investor's investment goals and the goals of a mutual fund.F) A) and D)
G) C) and D)

Question 3

The commission charge for purchasing shares of a load fund that imposes an up-front commission charge can be as high as 8.5 percent. This fee:

Accepted Answer

A)   is sometimes referred to as the sales fee
B)   is paid every time investors buy (front-end load) 
C)   is paid every time investors sell (back-end load) 
D)   A and B are correct
E)   A, B and C are correctF) C) and E)
G) C) and D)

Question 4

Income dividends are the earnings a fund pays to shareholders after it has deducted expenses from its dividend and interest income.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a withdrawal option for a mutual fund?

Accepted Answer

A)   The investor may withdraw a specified, dollar amount each investment period.
B)   The investor may liquidate or "sell off" a certain number of shares each investment period.
C)   The investor can withdraw a fixed percentage of asset growth.
D)   The investor can withdraw all income that results from interest, dividends, and capital gains earned by the mutual fund during an investment period.
E)   The investor must wait five years, and then can withdraw 10 percent of the asset growth each year until the fund is exhausted.F) None of the above
G) B) and E)

Question 6

All mutual funds charge a management expense ratio (MER).

Accepted Answer

A) True 
 B)False

Question 7

A redemption fee is a 1 to 6 percent charge that shareholders pay when they withdraw their investment from a mutual fund.

Accepted Answer

A) True 
 B)False

Question 8

Last month Nissa Jacobson's divorce became final. As part of the settlement, she received $150,000. She would like to invest in mutual funds, but since she is 62 years old, she is concerned with the safety of her "nest egg." Which of the following mutual funds would you recommend?

Accepted Answer

A)   growth fund
B)   dividend fund
C)   money market fund
D)   international fund
E)   bond fundF) None of the above
G) A) and C)

Question 9

A no-load fund is a mutual fund in which no sales charge is paid by the individual investor to purchase shares.

Accepted Answer

A) True 
 B)False

Question 10

Tax information for mutual funds is reported as part of the year-end statement sent out by investment companies.

Accepted Answer

A) True 
 B)False

Question 11

Which of these is not a true statement?

Accepted Answer

A)   ETFs can be purchased through a broker.
B)   ETFs can be purchased on margin.
C)   ETFs can be sold short.
D)   ETFs have lower management expenses than conventional mutual funds.
E)   ETFs can be purchased through a broker, on margin, sold short, and have lower management expenses than conventional mutual funds.F) B) and D)
G) C) and D)

Question 12

A mutual fund that is eligible for tax credits is referred to as a labour sustenance venture capital corporation.

Accepted Answer

A) True 
 B)False

Question 13

Because of up front charges, many financial experts and government agencies are critical of

Accepted Answer

A)   regular accounts.
B)   voluntary savings plans
C)   contractual savings plans.
D)   minimum withdrawal plans.
E)   free contract plans.F) A) and E)
G) A) and B)

Question 14

Typically, you must invest at least $1,000 to open a mutual fund account.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is false?

Accepted Answer

A)   The purpose of investing in a closed-end or open-end mutual fund is to earn a financial return.
B)   Income dividends are the earnings that a fund pays to shareholders after it has deducted expenses from its dividend and interest income.
C)   Capital gain distributions are the payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio.
D)   It is possible to make money on a mutual fund by purchasing shares at a high price and then selling them at a low price at a later date.
E)   Real estate funds aim for long term growthF) B) and D)
G) None of the above

Question 16

Shares in a close-end fund are redeemed by the investment company at the request of the investor.

Accepted Answer

A) True 
 B)False

Question 17

The major reasons why investors purchase mutual funds are professional management and diversification.

Accepted Answer

A) True 
 B)False

Question 18

Exchange traded funds can be traded throughout the day at changing market prices.

Accepted Answer

A) True 
 B)False

Question 19

A mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called a(n)  ____________ fund.

Accepted Answer

A)   closed-end
B)   no-load
C)   load
D)   open-end
E)   convertibleF) A) and E)
G) A) and D)

Question 20

The Sage Mutual Fund's portfolio is valued at $120 million. The fund has liabilities of $10 million, and the investment company sponsoring the fund has issued 5,000,000 shares. What is the fund's net asset value per share?

Accepted Answer

A)   $2.00
B)   $5.00
C)   $12.00
D)   $22.00
E)   $24.00F) A) and E)
G) B) and D)

Exam 13: Investing in Mutual Funds

Typically, you must invest at least $1,000 to open a mutual fund account.

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Shares in a close-end fund are redeemed by the investment company at the request of the investor.

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Which of the following factors would not affect the relationship between an individual's investment goals and the goals of a mutual fund?

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A no-load fund is a mutual fund in which no sales charge is paid by the individual investor to purchase shares.

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The major reasons why investors purchase mutual funds are professional management and diversification.

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A mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called a(n) ____________ fund.

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Tax information for mutual funds is reported as part of the year-end statement sent out by investment companies.

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Last month Nissa Jacobson's divorce became final. As part of the settlement, she received $150,000. She would like to invest in mutual funds, but since she is 62 years old, she is concerned with the safety of her "nest egg." Which of the following mutual funds would you recommend?

Correct AnswerverifiedShow Answer

Income dividends are the earnings a fund pays to shareholders after it has deducted expenses from its dividend and interest income.

Correct AnswerverifiedShow Answer

Which of these is not a true statement?

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Because of up front charges, many financial experts and government agencies are critical of

Correct AnswerverifiedShow Answer

All mutual funds charge a management expense ratio (MER).

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Which of the following is not a withdrawal option for a mutual fund?

Correct AnswerverifiedShow Answer

Which of the following statements is false?

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Exchange traded funds can be traded throughout the day at changing market prices.

Correct AnswerverifiedShow Answer

Mutual funds that apportion their investments among common stocks and bonds are referred to as segregated funds.

Correct AnswerverifiedShow Answer

The commission charge for purchasing shares of a load fund that imposes an up-front commission charge can be as high as 8.5 percent. This fee:

Correct AnswerverifiedShow Answer

The Sage Mutual Fund's portfolio is valued at $120 million. The fund has liabilities of $10 million, and the investment company sponsoring the fund has issued 5,000,000 shares. What is the fund's net asset value per share?

Correct AnswerverifiedShow Answer

A redemption fee is a 1 to 6 percent charge that shareholders pay when they withdraw their investment from a mutual fund.

Correct AnswerverifiedShow Answer

A mutual fund that is eligible for tax credits is referred to as a labour sustenance venture capital corporation.

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