Question 1

Open-end mutual funds

Accepted Answer

A) require that NAV consider the amount of discount or premium in the share value. 
B) calculate the NAV several time each day based on the total value of assets held divided by the number of fund shares outstanding. 
C) may experience fluctuations in the number of shares outstanding on a daily basis. 
D) issues shares that can be traded among investors without involving the fund itself. 
E) None of the options is correct. 
A) require that NAV consider the amount of discount or premium in the share value. 
B) calculate the NAV several time each day based on the total value of assets held divided by the number of fund shares outstanding. 
C) may experience fluctuations in the number of shares outstanding on a daily basis. 
D) issues shares that can be traded among investors without involving the fund itself. 
E) None of the options is correct.

Question 2

The front-end load on these type of shares is charged on new sales and is not generally incurred when these shares are exchanged for another mutual fund within the same fund family.

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 3

The Securities Exchange Act of 1934 requires a mutual fund to file a registration statement with the SEC.

Accepted Answer

A) True 
 B)False

Question 4

The SEC proposed a comprehensive package of rule reforms designed to enhance effective liquidity risk management by open-end funds, including mutual funds and exchange-traded funds (ETFs).

Accepted Answer

A) True 
 B)False

Question 5

The number of funds and assets size of the mutual fund industry have grown dramatically since 1970 because of the introduction of

Accepted Answer

A) money market mutual funds in 1972. 
B) tax-exempt money market mutual funds in 1979. 
C) special-purpose equity, bond, and derivative funds. 
D) 401-k retirement plans sponsored by employers. 
E) All of the options. 
A) money market mutual funds in 1972. 
B) tax-exempt money market mutual funds in 1979. 
C) special-purpose equity, bond, and derivative funds. 
D) 401-k retirement plans sponsored by employers. 
E) All of the options.

Question 6

The practice that involves short-term trading of mutual funds seeking to take advantage of short-term discrepancies between the price of a mutual fund's shares and out-of-date values on the securities in the fund's portfolio is called

Accepted Answer

A) Market timing. 
B) Insider trading. 
C) Late trading. 
D) Directed brokerage. 
E) Spinning. 
A) Market timing. 
B) Insider trading. 
C) Late trading. 
D) Directed brokerage. 
E) Spinning.

Question 7

Hedge fund data such as assets held and trading activity

Accepted Answer

A) are primarily self-reported by the hedge fund. 
B) can be independently tracked by a regulatory agency. 
C) can be obtained from SEC filings. 
D) can be obtained from research agencies. 
E) All of the options. 
A) are primarily self-reported by the hedge fund. 
B) can be independently tracked by a regulatory agency. 
C) can be obtained from SEC filings. 
D) can be obtained from research agencies. 
E) All of the options.

Question 8

To what level should the price of Microsoft shares decline in order for the NAV of Morningstar fund to remain constant if the price of P&G rises to $40?

Accepted Answer

A) $60. 
B) $55. 
C) $50. 
D) $45. 
E) $40. [Refer to: 5-121] 
A) $60. 
B) $55. 
C) $50. 
D) $45. 
E) $40. [Refer to: 5-121]

Question 9

As a result of illegal and abusive activities in recent years, new rules and regulations were imposed on mutual fund companies in 2004.These rules were intended to

Accepted Answer

A) close legal loopholes that some fund managers had abused. 
B) improve fund governance. 
C) give investors more information about conflicts of interest. 
D) ensure the accuracy of information given to regulators. 
E) All of the options. 
A) close legal loopholes that some fund managers had abused. 
B) improve fund governance. 
C) give investors more information about conflicts of interest. 
D) ensure the accuracy of information given to regulators. 
E) All of the options.

Question 10

Hedge funds offer a high degree of privacy for their investors.

Accepted Answer

A) True 
 B)False

Question 11

The net asset value of a mutual fund is determined four times each business day.

Accepted Answer

A) True 
 B)False

Question 12

The SEC now requires mutual fund portfolio managers to report their personal trading in individual stocks, but not in the portfolios they manage.

Accepted Answer

A) True 
 B)False

Question 13

As of 2015, the total investment in long-term mutual funds is less than the total investment in money market mutual funds.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following laws appointed the National Association of Securities Dealers (NASD) to supervise mutual fund share distributions?

Accepted Answer

A) Securities Act of 1933. 
B) Securities Exchange Act of 1934. 
C) Investment Advisers Act. 
D) Investment Company Act. 
E) Market Reform Act of 1990. 
A) Securities Act of 1933. 
B) Securities Exchange Act of 1934. 
C) Investment Advisers Act. 
D) Investment Company Act. 
E) Market Reform Act of 1990.

Question 15

Which of the following is the regulation that allowed the SEC to restrict program trading when it deems necessary?

Accepted Answer

A) Securities Exchange Act. 
B) Investment Advisers Act. 
C) Investment Company Act. 
D) Insider Trading and Securities Fraud Enforcement Act. 
E) Market Reform Act. 
A) Securities Exchange Act. 
B) Investment Advisers Act. 
C) Investment Company Act. 
D) Insider Trading and Securities Fraud Enforcement Act. 
E) Market Reform Act.

Question 16

Most exchange traded funds (ETFs) are long-term mutual funds designed to replicate a particular market index.

Accepted Answer

A) True 
 B)False

Question 17

During the most recent financial crisis, almost 75 percent of hedge funds experienced losses.

Accepted Answer

A) True 
 B)False

Question 18

The net asset value of a mutual fund is found by

Accepted Answer

A) subtracting the daily market value of the fund's asset portfolio from the previous days' value. 
B) dividing the cumulative value of all asset positions held by the fund by the total number of asset shares held by the fund. 
C) computing the daily market value of the fund's total asset portfolio and then dividing this amount by the number of mutual fund shares outstanding. 
D) comparing the daily market value of the fund's total asset portfolio with that of its peers. 
E) subtracting expenses, commissions, and dividends from the fund's total asset portfolio. 
A) subtracting the daily market value of the fund's asset portfolio from the previous days' value. 
B) dividing the cumulative value of all asset positions held by the fund by the total number of asset shares held by the fund. 
C) computing the daily market value of the fund's total asset portfolio and then dividing this amount by the number of mutual fund shares outstanding. 
D) comparing the daily market value of the fund's total asset portfolio with that of its peers. 
E) subtracting expenses, commissions, and dividends from the fund's total asset portfolio.

Question 19

For mutual funds outside the United States, total amounts invested in this fund category topped the list in 2015.

Accepted Answer

A) Equity funds. 
B) Bond funds. 
C) Hybrid funds. 
D) Money market funds. 
E) Hedge funds. 
A) Equity funds. 
B) Bond funds. 
C) Hybrid funds. 
D) Money market funds. 
E) Hedge funds.

Question 20

Fees investors are charged to cover administration and shareholder services are called

Accepted Answer

A) 12b-1 fees. 
B) management fees. 
C) sales loads. 
D) preemptive taxes. 
E) transaction fees. 
A) 12b-1 fees. 
B) management fees. 
C) sales loads. 
D) preemptive taxes. 
E) transaction fees.

Exam 5: Financial Services: Mutual Funds and Hedge Funds

Open-end mutual funds

The front-end load on these type of shares is charged on new sales and is not generally incurred when these shares are exchanged for another mutual fund within the same fund family.

The Securities Exchange Act of 1934 requires a mutual fund to file a registration statement with the SEC.

The SEC proposed a comprehensive package of rule reforms designed to enhance effective liquidity risk management by open-end funds, including mutual funds and exchange-traded funds (ETFs).

The number of funds and assets size of the mutual fund industry have grown dramatically since 1970 because of the introduction of

The practice that involves short-term trading of mutual funds seeking to take advantage of short-term discrepancies between the price of a mutual fund's shares and out-of-date values on the securities in the fund's portfolio is called

Hedge fund data such as assets held and trading activity

To what level should the price of Microsoft shares decline in order for the NAV of Morningstar fund to remain constant if the price of P&G rises to $40?

As a result of illegal and abusive activities in recent years, new rules and regulations were imposed on mutual fund companies in 2004.These rules were intended to

Hedge funds offer a high degree of privacy for their investors.

The net asset value of a mutual fund is determined four times each business day.

The SEC now requires mutual fund portfolio managers to report their personal trading in individual stocks, but not in the portfolios they manage.

As of 2015, the total investment in long-term mutual funds is less than the total investment in money market mutual funds.

Which of the following laws appointed the National Association of Securities Dealers (NASD) to supervise mutual fund share distributions?

Which of the following is the regulation that allowed the SEC to restrict program trading when it deems necessary?

Most exchange traded funds (ETFs) are long-term mutual funds designed to replicate a particular market index.

During the most recent financial crisis, almost 75 percent of hedge funds experienced losses.

The net asset value of a mutual fund is found by

For mutual funds outside the United States, total amounts invested in this fund category topped the list in 2015.

Fees investors are charged to cover administration and shareholder services are called

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