Question 1

A mutual fund that invests in common stocks of rapidly growing corporations with higher-than-average revenue and earnings growth is called a(n) ____________ fund.

Accepted Answer

A)  balanced
B)  growth
C)  industry
D)  income
E)  money marketF) B) and E)
G) None of the above

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

An investment company sponsoring a mutual fund must give potential investors a(n) :

Accepted Answer

A)  12b-1 report.
B)  prospectus.
C)  disclosure/evaluation form.
D)  redemption fee sheet.
E)  annual report.F) C) and D)
G) A) and B)

Question 4

Because of professional management,there is no need for the individual investor to evaluate a mutual fund investment.

Accepted Answer

A) True 
 B)False

Question 5

Henrietta Marston plans to retire in the year 2050.She is considering a fund that will be more aggressive now and become more conservative as she approaches retirement.Which of the following funds would you recommend to her?

Accepted Answer

A)  equity income fund
B)  regional fund
C)  sector fund
D)  lifecycle fund
E)  fund of fundsF) B) and D)
G) C) and E)

Question 6

When an investor purchases shares in a load fund,the average sales charge is usually between ____________ percent.

Accepted Answer

A)  0.5 to 2
B)  1 and 3
C)  3 and 5
D)  5 and 7
E)  4 and 6F) A) and C)
G) A) and B)

Question 7

Which of the following is an advantage of an exchange traded fund (ETF) ?

Accepted Answer

A)  no minimum investment amount
B)  buying and selling shares through a broker at any time at the current market price
C)  low management fees
D)  using limit orders to both buy and sell
E)  all of the other answersF) D) and E)
G) C) and E)

Question 8

The most popular and least complicated method of purchasing shares in an open- end mutual fund is through a:

Accepted Answer

A)  regular account transaction.
B)  voluntary savings plan.
C)  contractual savings plan.
D)  minimum withdrawal plan.
E)  free contract plan.F) A) and E)
G) B) and E)

Question 9

A mutual fund that invests in investment-grade corporate debt with maturities between 5 and 10 years is called a(n) ____________ fund.

Accepted Answer

A)  long-term bond
B)  growth
C)  sector
D)  income
E)  intermediate corporate bondF) C) and D)
G) A) and D)

Question 10

Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose price is expected to increase dramatically in a short period of time.What type of mutual fund is he purchasing?

Accepted Answer

A)  aggressive growth fund
B)  equity income fund
C)  global fund
D)  international fund
E)  regional fundF) C) and D)
G) A) and D)

Question 11

For a mutual fund,the typical yearly management fee ranges from 2.5 to 5 percent of the total dollar amount invested.

Accepted Answer

A) True 
 B)False

Question 12

The Capitalist Mutual Fund's net asset value is $26.25.The fund has liabilities of $3 million and 1,600,000 shares have been issued.What is the value of the fund's portfolio?

Accepted Answer

A)  $42 million
B)  $45 million
C)  $50 million
D)  $39 million
E)  $36 millionF) B) and C)
G) D) and E)

Question 13

An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year.

Accepted Answer

A) True 
 B)False

Question 14

In late 2009,there were over 12,000 mutual funds,and the number continues to increase each year.

Accepted Answer

A) True 
 B)False

Question 15

Last month Nellie 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)  small cap fund
C)  high-yield bond fund
D)  international fund
E)  short-term U.S.bond fundF) C) and D)
G) A) and B) E

Question 16

Sloan Richards is buying shares in a mutual fund that invests in companies that have a market capitalization of less than $2 billion.What type of mutual fund is this?

Accepted Answer

A)  socially responsible fund
B)  sector fund
C)  small-cap fund
D)  index fund
E)  growth fundF) A) and E)
G) C) and D) C

Question 17

Income dividends and capital gain distributions are:

Accepted Answer

A)  exempt from taxation.
B)  subject to federal taxation.
C)  subject to federal taxation after the first $1,000.
D)  subject to federal taxation after the first $5,000.
E)  subject to federal taxation after the first $10,000.F) A) and D)
G) A) and C)

Question 18

Mary Cooper just purchased 100 shares in the All-American Fund.The purchase cost for each share was $20.If this fund charges a 5 percent load,what is the total amount of commission she will pay the investment company?

Accepted Answer

A)  $100
B)  $1,000
C)  $2,000
D)  $200
E)  $1F) D) and E)
G) A) and D)

Question 19

For most mutual funds,the net asset value is calculated:

Accepted Answer

A)  yearly.
B)  quarterly.
C)  weekly.
D)  daily.
E)  hourly.F) B) and E)
G) A) and C)

Question 20

The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential.

Accepted Answer

A) True 
 B)False

Exam 16: Investing in Mutual Funds

A mutual fund that invests in common stocks of rapidly growing corporations with higher-than-average revenue and earnings growth is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

An investment company sponsoring a mutual fund must give potential investors a(n) :

Correct AnswerverifiedShow Answer

Because of professional management,there is no need for the individual investor to evaluate a mutual fund investment.

Correct AnswerverifiedShow Answer

Henrietta Marston plans to retire in the year 2050.She is considering a fund that will be more aggressive now and become more conservative as she approaches retirement.Which of the following funds would you recommend to her?

Correct AnswerverifiedShow Answer

When an investor purchases shares in a load fund,the average sales charge is usually between ____________ percent.

Correct AnswerverifiedShow Answer

Which of the following is an advantage of an exchange traded fund (ETF) ?

Correct AnswerverifiedShow Answer

The most popular and least complicated method of purchasing shares in an open- end mutual fund is through a:

Correct AnswerverifiedShow Answer

A mutual fund that invests in investment-grade corporate debt with maturities between 5 and 10 years is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose price is expected to increase dramatically in a short period of time.What type of mutual fund is he purchasing?

Correct AnswerverifiedShow Answer

For a mutual fund,the typical yearly management fee ranges from 2.5 to 5 percent of the total dollar amount invested.

Correct AnswerverifiedShow Answer

The Capitalist Mutual Fund's net asset value is $26.25.The fund has liabilities of $3 million and 1,600,000 shares have been issued.What is the value of the fund's portfolio?

Correct AnswerverifiedShow Answer

An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year.

Correct AnswerverifiedShow Answer

In late 2009,there were over 12,000 mutual funds,and the number continues to increase each year.

Correct AnswerverifiedShow Answer

Last month Nellie 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 AnswerverifiedE

Sloan Richards is buying shares in a mutual fund that invests in companies that have a market capitalization of less than $2 billion.What type of mutual fund is this?

Correct AnswerverifiedC

Income dividends and capital gain distributions are:

Correct AnswerverifiedShow Answer

Mary Cooper just purchased 100 shares in the All-American Fund.The purchase cost for each share was $20.If this fund charges a 5 percent load,what is the total amount of commission she will pay the investment company?

Correct AnswerverifiedShow Answer

For most mutual funds,the net asset value is calculated:

Correct AnswerverifiedShow Answer

The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential.

Correct AnswerverifiedShow Answer

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False

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E

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C

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