Question 1

As a result of the Wall Street Reform and Consumer Protection Act of 2010,

Accepted Answer

A) hedge fund advisers of pools greater than $100 million must register with the SEC. 
B) hedge funds with assets greater than $100 are subject to provisions of the Investment Company Act of 1940. 
C) hedge fund advisers of pools less than $100 are overseen by state regulators. 
D) it is possible that a large, risky hedge fund may be forced to be regulated by the Federal Reserve. 
E) All of the options are true.
Eveningstar open-end fund has 1,000 shares outstanding and has the following assets in its portfolio: 100 shares of Procter & Gamble (P&G) priced at $30.00, 300 shares of Intel priced at $50.00 and 200 shares of Microsoft priced at $60.00.The Morningstar closed-end fund has the following stocks in its portfolio: 300 shares of P&G and 300 shares of Microsoft.It has a total of 500 shares outstanding.
[Reference: 5-121] 
A) hedge fund advisers of pools greater than $100 million must register with the SEC. 
B) hedge funds with assets greater than $100 are subject to provisions of the Investment Company Act of 1940. 
C) hedge fund advisers of pools less than $100 are overseen by state regulators. 
D) it is possible that a large, risky hedge fund may be forced to be regulated by the Federal Reserve. 
E) All of the options are true.
Eveningstar open-end fund has 1,000 shares outstanding and has the following assets in its portfolio: 100 shares of Procter & Gamble (P&G) priced at $30.00, 300 shares of Intel priced at $50.00 and 200 shares of Microsoft priced at $60.00.The Morningstar closed-end fund has the following stocks in its portfolio: 300 shares of P&G and 300 shares of Microsoft.It has a total of 500 shares outstanding.
[Reference: 5-121] E

Question 2

The NAV of a closed-end investment company shares is determined at any point in time by

Accepted Answer

A) the number of shares available. 
B) the value of the outstanding shares owned by investors. 
C) the supply of the investment company's shares. 
D) the demand for the investment company's shares... 
E) the value of the underlying assets and the number of the investment company shares issued. 
A) the number of shares available. 
B) the value of the outstanding shares owned by investors. 
C) the supply of the investment company's shares. 
D) the demand for the investment company's shares... 
E) the value of the underlying assets and the number of the investment company shares issued. E

Question 3

A mutual fund objective statement provides general information about the types of securities a mutual fund will hold as assets.

Accepted Answer

A) True 
 B)False  True

Question 4

The largest asset category of mutual funds as of 2015 was

Accepted Answer

A) corporate equities. 
B) credit market instruments. 
C) U.S.government securities. 
D) corporate and foreign bonds. 
E) municipal securities. 
A) corporate equities. 
B) credit market instruments. 
C) U.S.government securities. 
D) corporate and foreign bonds. 
E) municipal securities.

Question 5

Most hedge funds are generalized and rely on hedge fund managers to assign general risk categories such as risky, more risky, and most risky.

Accepted Answer

A) True 
 B)False

Question 6

These types of funds mix hedge funds and other pooled investment vehicles.

Accepted Answer

A) Distressed securities funds. 
B) Macro funds. 
C) Value funds. 
D) Opportunistic funds. 
E) Fund of funds. 
A) Distressed securities funds. 
B) Macro funds. 
C) Value funds. 
D) Opportunistic funds. 
E) Fund of funds.

Question 7

The National Securities Markets Improvement Act of 1996 exempts mutual funds from oversight by state securities regulators and reduced their regulatory burden.

Accepted Answer

A) True 
 B)False

Question 8

Most individuals who invest in mutual funds for the first time realize that mutual fund investments carry some risk.

Accepted Answer

A) True 
 B)False

Question 9

The type of abusive activity that involves arrangements between mutual fund companies and brokerage houses is

Accepted Answer

A) market timing. 
B) late trading. 
C) directed brokerage. 
D) improper fee assessment. 
E) None of the options. 
A) market timing. 
B) late trading. 
C) directed brokerage. 
D) improper fee assessment. 
E) None of the options.

Question 10

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

Accepted Answer

A) Class A shares. 
B) Class B shares. 
C) Class C shares. 
D) Class D shares. 
E) either Class A or Class C shares. 
A) Class A shares. 
B) Class B shares. 
C) Class C shares. 
D) Class D shares. 
E) either Class A or Class C shares.

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

The proportionate mix of total assets invested in long-term versus short-term mutual funds has varied over the last twenty years.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following hedge fund objectives would be classified under the "more risky" category?

Accepted Answer

A) Distressed securities funds. 
B) Fund of funds. 
C) Opportunistic funds. 
D) Emerging markets funds. 
E) Special situations funds. 
A) Distressed securities funds. 
B) Fund of funds. 
C) Opportunistic funds. 
D) Emerging markets funds. 
E) Special situations funds.

Question 14

Which of the following hedge fund objectives would be classified under the "risk avoidance" category?

Accepted Answer

A) Special situations funds. 
B) Opportunistic funds. 
C) Fund of funds. 
D) Market timing funds. 
E) Value funds. 
A) Special situations funds. 
B) Opportunistic funds. 
C) Fund of funds. 
D) Market timing funds. 
E) Value funds.

Question 15

Suppose Morningstar issues another 250 shares and purchases shares of Intel with the funds.What is its new NAV of Morningstar? (Assume the NAV found before the price change in P&G and Microsoft in the previous question).

Accepted Answer

A) $39.20. 
B) $55.20. 
C) $34.40. 
D) $30.00. 
E) $34.00. [Refer to: 5-123] 
A) $39.20. 
B) $55.20. 
C) $34.40. 
D) $30.00. 
E) $34.00. [Refer to: 5-123]

Question 16

Mutual funds that purchase Treasury bills, bank negotiable certificates of deposit, commercial paper, and other short-term securities would be classified as

Accepted Answer

A) contractual institutions. 
B) investment institutions. 
C) money market funds. 
D) securities dealers. 
E) PC insurance companies. 
A) contractual institutions. 
B) investment institutions. 
C) money market funds. 
D) securities dealers. 
E) PC insurance companies.

Question 17

Approximately what percentage of retirement plan investments are held by institutional funds?

Accepted Answer

A) 20 percent 
B) 40 percent 
C) 6.0 percent 
D) 80 percent 
E) Zero percent 
A) 20 percent 
B) 40 percent 
C) 6.0 percent 
D) 80 percent 
E) Zero percent

Question 18

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?

Accepted Answer

A) $26.50 and $45.00. 
B) $13.25 and $13.00. 
C) $39.75 and $22.50. 
D) $53.00 and $45.00. 
E) $26.50 and $22.50. [Refer to: 5-123] 
A) $26.50 and $45.00. 
B) $13.25 and $13.00. 
C) $39.75 and $22.50. 
D) $53.00 and $45.00. 
E) $26.50 and $22.50. [Refer to: 5-123]

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

What is the NAV of both funds?

Accepted Answer

A) $30.33 and $13.50. 
B) $60.00 and $27.00. 
C) $30.00 and $54.00. 
D) $30.00 and $27.00. 
E) $15.00 and $54.00. [Refer to: 5-121] 
A) $30.33 and $13.50. 
B) $60.00 and $27.00. 
C) $30.00 and $54.00. 
D) $30.00 and $27.00. 
E) $15.00 and $54.00. [Refer to: 5-121]

Exam 5: Financial Services: Mutual Funds and Hedge Funds

As a result of the Wall Street Reform and Consumer Protection Act of 2010,

The NAV of a closed-end investment company shares is determined at any point in time by

A mutual fund objective statement provides general information about the types of securities a mutual fund will hold as assets.

The largest asset category of mutual funds as of 2015 was

Most hedge funds are generalized and rely on hedge fund managers to assign general risk categories such as risky, more risky, and most risky.

These types of funds mix hedge funds and other pooled investment vehicles.

The National Securities Markets Improvement Act of 1996 exempts mutual funds from oversight by state securities regulators and reduced their regulatory burden.

Most individuals who invest in mutual funds for the first time realize that mutual fund investments carry some risk.

The type of abusive activity that involves arrangements between mutual fund companies and brokerage houses is

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.

The proportionate mix of total assets invested in long-term versus short-term mutual funds has varied over the last twenty years.

Which of the following hedge fund objectives would be classified under the "more risky" category?

Which of the following hedge fund objectives would be classified under the "risk avoidance" category?

Suppose Morningstar issues another 250 shares and purchases shares of Intel with the funds.What is its new NAV of Morningstar? (Assume the NAV found before the price change in P&G and Microsoft in the previous question).

Mutual funds that purchase Treasury bills, bank negotiable certificates of deposit, commercial paper, and other short-term securities would be classified as

Approximately what percentage of retirement plan investments are held by institutional funds?

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?

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.

What is the NAV of both funds?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Insurance

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters