Exam 17: Investment Companies

Mutual funds pay federal income taxes on dividends they receive from their investments.​

Mutual funds distribute earned income and realized capital gains.

Investments in mutual funds reduce the systematic risk associated with investing in stocks.​

The managers of mutual funds have tended to outperform the market consistently.​

Investments in investment companies reduce​

A "no load" fund is a mutual fund with no fees.​

Purchases of shares in mutual funds reduce systematic and unsystematic risk.​

The value of shares in bond funds tends to rise with an increase in interest rates.​

If an investor purchases shares in a no load fund for $36, receives cash distributions of $1.27 and sells the shares after one year for $41.29, what is the percentage return on the investment?​

An exchange-traded fund's portfolio seeks to duplicate the performance of a specified index.​

One of the major advantages associated with investing in mutual funds is potential diversification.​

The sales commission associated with purchasing mutual funds is called a "loading" fee.​

Advantages of investing in mutual funds include​

Income earned by a mutual fund is​

The shares of mutual funds are bought​

An index fund seeks to outperform a specific stock index like the S&P 500.

U.S. mutual funds may not hold foreign securities.​

An exchange-traded fund's shares are bought and sold in the secondary markets such as the NYSE.

​a. An investor purchases shares in a no load mutual fund for its net asset value of $26 and during the year receives cash distributions of $1. After one year the investor redeems the shares for $32. What is the percentage return on the investment? ​ a. and b. The net asset value of shares in a closed-end investment company is $26. An investor buys the shares for $23 in the secondary market. During the year the company distributes $1. After one year, the net asset rises to $32, and the investor sells the shares for $34 in the secondary market. What is the percentage return on the investment? ​ b., the net asset value rises from $26 to $32 and the company distributed $1. Why are the percentage returns different? ​ c. In both

Mutual funds do not pay income taxes.​