Question 1

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. E

Question 2

As of 2013, 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  False

Question 3

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

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

Historical evidence indicates that the benefits of greater management attention in load funds do not outweigh the disadvantages of the load fee.

Accepted Answer

A) True 
 B)False

Question 7

One of the goals of mutual funds is to achieve superior diversification through fund and risk pooling compared to what individual investors can achieve.

Accepted Answer

A) True 
 B)False

Question 8

A change from bank deposits to money market mutual funds typically allows an investor to benefit from higher yields, but with the cost of losing deposit insurance coverage.

Accepted Answer

A) True 
 B)False

Question 9

Worldwide investments in mutual funds have grown at a rate faster than in Canada and the United States over the last decade.

Accepted Answer

A) True 
 B)False

Question 10

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. 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. 
A) $39.20. 
B) $55.20. 
C) $34.40. 
D) $30.00. 
E) $34.00.

Question 11

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 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) All of these. 
E) calculate the NAV based on the total value of assets held divided by the number of fund shares outstanding and may experience fluctuations in the number of shares outstanding on a daily basis 
A) require that NAV consider the amount of discount or premium in the share value. 
B) calculate the NAV 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) All of these. 
E) calculate the NAV based on the total value of assets held divided by the number of fund shares outstanding and may experience fluctuations in the number of shares outstanding on a daily basis

Question 12

As of 2013, banks are not allowed to own or invest in mutual funds.

Accepted Answer

A) True 
 B)False

Question 13

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. 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) $46.67 and $45.00. 
E) $15.00 and $54.00. 
A) $30.33 and $13.50. 
B) $60.00 and $27.00. 
C) $30.00 and $54.00. 
D) $46.67 and $45.00. 
E) $15.00 and $54.00.

Question 14

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

Question 15

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 16

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 17

These "more risky" hedge funds aim to profit from changes in global economies, typically brought about by shifts in government policy that impact interest rates.

Accepted Answer

A) Distressed securities funds. 
B) Macro funds. 
C) Value funds. 
D) Opportunistic funds. 
E) Market timing funds. 
A) Distressed securities funds. 
B) Macro funds. 
C) Value funds. 
D) Opportunistic funds. 
E) Market timing funds.

Question 18

The return from investing in mutual funds can include dividends, gains from the sale of the mutual fund assets, and gains from the sale of the mutual fund shares.

Accepted Answer

A) True 
 B)False

Question 19

Equity mutual funds may contain common stock, but not preferred stock.

Accepted Answer

A) True 
 B)False

Question 20

The short-term mutual fund sector includes

Accepted Answer

A) money market mutual funds. 
B) hybrid funds. 
C) equity funds. 
D) bond funds. 
E) tax-exempt municipal bond funds. 
A) money market mutual funds. 
B) hybrid funds. 
C) equity funds. 
D) bond funds. 
E) tax-exempt municipal bond funds.

Exam 5: Mutual Funds, Hedge Funds, and Pension Funds

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

As of 2013, the total investment in long-term mutual funds is less than the total investment in money market mutual funds.

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

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

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

Historical evidence indicates that the benefits of greater management attention in load funds do not outweigh the disadvantages of the load fee.

One of the goals of mutual funds is to achieve superior diversification through fund and risk pooling compared to what individual investors can achieve.

A change from bank deposits to money market mutual funds typically allows an investor to benefit from higher yields, but with the cost of losing deposit insurance coverage.

Worldwide investments in mutual funds have grown at a rate faster than in Canada and the United States over the last decade.

Open-end mutual funds

As of 2013, banks are not allowed to own or invest in mutual funds.

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

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

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

These "more risky" hedge funds aim to profit from changes in global economies, typically brought about by shifts in government policy that impact interest rates.

The return from investing in mutual funds can include dividends, gains from the sale of the mutual fund assets, and gains from the sale of the mutual fund shares.

Equity mutual funds may contain common stock, but not preferred stock.

The short-term mutual fund sector includes

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