Question 1

Mutual fund supermarkets often allow investors to purchase funds within large number of fund companies with no transaction fees.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is the term 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?

Accepted Answer

A) High-water marks. 
B) Discount rates. 
C) Trade limits. 
D) Management fees. 
E) Low hurdle rates. 
A) High-water marks. 
B) Discount rates. 
C) Trade limits. 
D) Management fees. 
E) Low hurdle rates.

Question 3

As of 2015, hedge fund managers with assets more than $100 million are required to register with the SEC.

Accepted Answer

A) True 
 B)False

Question 4

Hedge funds are forbidden to sell a security short or to engage in arbitrage trading.

Accepted Answer

A) True 
 B)False

Question 5

The Securities Act of 1933 requires that a mutual fund furnish full and accurate information on all financial and corporate matters to prospective fund purchasers.

Accepted Answer

A) True 
 B)False

Question 6

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

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 7

The returns obtained by investors of mutual funds include the following except

Accepted Answer

A) interest income earned on assets. 
B) dividend income earned on assets. 
C) capital gains on assets sold by the fund. 
D) capital appreciation in the underlying value of the assets held in the portfolio. 
E) refunds of load charges and management fees. 
A) interest income earned on assets. 
B) dividend income earned on assets. 
C) capital gains on assets sold by the fund. 
D) capital appreciation in the underlying value of the assets held in the portfolio. 
E) refunds of load charges and management fees.

Question 8

All classes of mutual fund shares may legally charge an annual 12b-1 fee.

Accepted Answer

A) True 
 B)False

Question 9

Mutual funds that are load funds use sales agents, and thus always have an up-front commission charge.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is not true of passive mutual funds and passive ETFs?

Accepted Answer

A) use rules-based investing to track and index, typically by holding all of its constituent assets or an automatically selected representative sample of those assets. 
B) As of December 2017, passive funds accounted for 35% of combined U.S.mutual fund and ETF assets under management AUM. 
C) In the last five decades there has been a significant shift from passive toward more active investment strategies. 
D) passive funds have relatively lower costs associated with them. 
E) Due to greater regulatory focus on the fees of investment products have encouraged the financial industry to offer more low-cost passive products. 
A) use rules-based investing to track and index, typically by holding all of its constituent assets or an automatically selected representative sample of those assets. 
B) As of December 2017, passive funds accounted for 35% of combined U.S.mutual fund and ETF assets under management AUM. 
C) In the last five decades there has been a significant shift from passive toward more active investment strategies. 
D) passive funds have relatively lower costs associated with them. 
E) Due to greater regulatory focus on the fees of investment products have encouraged the financial industry to offer more low-cost passive products.

Question 11

An investor invests $100,000 in a mutual fund that has a 5 percent front-end load, charges a management fee of 0.5 percent, and a 12b-1 fee of 0.25 percent.The investor plans to leave the investment for one year.What is the dollar amount of the total shareholder cost?

Accepted Answer

A) $5,000. 
B) $5,500. 
C) $5,750. 
D) $750. 
E) $500. 
A) $5,000. 
B) $5,500. 
C) $5,750. 
D) $750. 
E) $500.

Question 12

Fees of load funds that are used to cover the costs of trading in securities are called 12b-1 fees.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) Distressed securities funds. 
B) Market neutral-arbitrage funds. 
C) Value funds. 
D) Short selling funds. 
E) Market timing funds. 
A) Distressed securities funds. 
B) Market neutral-arbitrage funds. 
C) Value funds. 
D) Short selling funds. 
E) Market timing funds.

Question 14

Mutual funds are financial intermediaries that invest in diversified portfolios of assets.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true about the values of most money market mutual fund shares?

Accepted Answer

A) They fluctuate heavily. 
B) Values are fixed at $1. 
C) Values are fixed at $100. 
D) They depend on market demand. 
E) They are considered closed-end funds. 
A) They fluctuate heavily. 
B) Values are fixed at $1. 
C) Values are fixed at $100. 
D) They depend on market demand. 
E) They are considered closed-end funds.

Question 16

Mutual funds often offer multiple share classes which differentiate between different methods of paying the sales loads and management fees.

Accepted Answer

A) True 
 B)False

Question 17

The first mutual fund was founded in this city in 1924.

Accepted Answer

A) New York, New York 
B) San Francisco, California 
C) Boston, Massachusetts 
D) London, England 
E) Paris, France 
A) New York, New York 
B) San Francisco, California 
C) Boston, Massachusetts 
D) London, England 
E) Paris, France

Question 18

Which of the following observations is true of open-end mutual funds?

Accepted Answer

A) They have a fixed number of shares outstanding. 
B) The value of shares changes with the demand for the fund by investors. 
C) Investors buy and sell shares on a stock exchange. 
D) The demand for shares determines the number outstanding. 
E) Shares may trade at a premium or discount. 
A) They have a fixed number of shares outstanding. 
B) The value of shares changes with the demand for the fund by investors. 
C) Investors buy and sell shares on a stock exchange. 
D) The demand for shares determines the number outstanding. 
E) Shares may trade at a premium or discount.

Question 19

The chief compliance officer of a mutual fund reports directly to the senior executives of the fund management company.

Accepted Answer

A) True 
 B)False

Question 20

The Securities Act of 1933 sets rules and procedures regarding a mutual fund's prospectus sent to potential investors.

Accepted Answer

A) True 
 B)False

Exam 5: Financial Services: Mutual Funds and Hedge Funds

Mutual fund supermarkets often allow investors to purchase funds within large number of fund companies with no transaction fees.

Which of the following is the term 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?

As of 2015, hedge fund managers with assets more than $100 million are required to register with the SEC.

Hedge funds are forbidden to sell a security short or to engage in arbitrage trading.

The Securities Act of 1933 requires that a mutual fund furnish full and accurate information on all financial and corporate matters to prospective fund purchasers.

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

The returns obtained by investors of mutual funds include the following except

All classes of mutual fund shares may legally charge an annual 12b-1 fee.

Mutual funds that are load funds use sales agents, and thus always have an up-front commission charge.

Which of the following statements is not true of passive mutual funds and passive ETFs?

An investor invests $100,000 in a mutual fund that has a 5 percent front-end load, charges a management fee of 0.5 percent, and a 12b-1 fee of 0.25 percent.The investor plans to leave the investment for one year.What is the dollar amount of the total shareholder cost?

Fees of load funds that are used to cover the costs of trading in securities are called 12b-1 fees.

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

Mutual funds are financial intermediaries that invest in diversified portfolios of assets.

Which of the following is true about the values of most money market mutual fund shares?

Mutual funds often offer multiple share classes which differentiate between different methods of paying the sales loads and management fees.

The first mutual fund was founded in this city in 1924.

Which of the following observations is true of open-end mutual funds?

The chief compliance officer of a mutual fund reports directly to the senior executives of the fund management company.

The Securities Act of 1933 sets rules and procedures regarding a mutual fund's prospectus sent to potential investors.

Why Are Financial Institutions Special

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