Question 1

At the end of 2012 there were over ________ separate mutual funds with total assets over ________.

Accepted Answer

A)  800; $10 trillion 
B)  7,500; $13 trillion 
C)  10,000; $10 trillion 
D)  1,000; $7 trillion 
A)  800; $10 trillion 
B)  7,500; $13 trillion 
C)  10,000; $10 trillion 
D)  1,000; $7 trillion B

Question 2

One factor explaining the rapid growth in mutual funds is that they are financial intermediaries that are not regulated by the federal government.

Accepted Answer

A) True 
 B)False  False

Question 3

Hedge funds have a minimum investment requirement of between $100,000 and $20 million,with the typical minimum investment being $1 million.

Accepted Answer

A) True 
 B)False  True

Question 4

Discuss the four primary classes of mutual funds available to investors.

Accepted Answer

The four primary classes of mutual funds

Question 5

Late trading and market timing

Accepted Answer

A)  allow large, favored investors in a mutual fund to profit at the expense of other investors in the fund. 
B)  hurt ordinary investors by increasing the number of fund shares and diluting the fund's net asset value. 
C)  are both A and B of the above. 
D)  are none of the above. 
A)  allow large, favored investors in a mutual fund to profit at the expense of other investors in the fund. 
B)  hurt ordinary investors by increasing the number of fund shares and diluting the fund's net asset value. 
C)  are both A and B of the above. 
D)  are none of the above.

Question 6

The Securities Acts of 1933 and 1934 did not

Accepted Answer

A)  regulate the activities of investment funds. 
B)  require funds to register with the SEC. 
C)  include antifraud rules covering the purchase and sale of fund shares. 
D)  apply to investment funds. 
A)  regulate the activities of investment funds. 
B)  require funds to register with the SEC. 
C)  include antifraud rules covering the purchase and sale of fund shares. 
D)  apply to investment funds.

Question 7

When investors switch between funds within the same fund family,mutual funds may charge

Accepted Answer

A)  a contingent deferred sales charge. 
B)  a redemption fee. 
C)  an exchange fee. 
D)  12b-1 fees. 
E)  an account maintenance fee. 
A)  a contingent deferred sales charge. 
B)  a redemption fee. 
C)  an exchange fee. 
D)  12b-1 fees. 
E)  an account maintenance fee.

Question 8

Over the past twenty years,mutual fund fees have ________,largely because ________.

Accepted Answer

A)  fallen; SEC fee disclosure rules have led to greater competition 
B)  risen; investors have learned that funds with high fees provide better performance 
C)  risen; there has been collusion between large mutual fund companies 
D)  fallen; advances in information technology have lowered transaction costs 
A)  fallen; SEC fee disclosure rules have led to greater competition 
B)  risen; investors have learned that funds with high fees provide better performance 
C)  risen; there has been collusion between large mutual fund companies 
D)  fallen; advances in information technology have lowered transaction costs

Question 9

Most mutual funds are structured in two ways.The most common structure is a(n)________ fund,from which shares can be redeemed at any time at a price that is tied to the asset value of the fund.A(n)________ fund has a fixed number of nonredeemable shares that are traded in the over-the-counter market.

Accepted Answer

A)  closed-end; open-end 
B)  open-end; closed-end 
C)  no-load; closed-end 
D)  no-load; load 
E)  load; no-load 
A)  closed-end; open-end 
B)  open-end; closed-end 
C)  no-load; closed-end 
D)  no-load; load 
E)  load; no-load

Question 10

All ________ are open-end investment funds that invest only in money market securities.

Accepted Answer

A)  Stock funds 
B)  Bond funds 
C)  Money market mutual funds 
D)  all of the above 
A)  Stock funds 
B)  Bond funds 
C)  Money market mutual funds 
D)  all of the above

Question 11

Over ________ of the total daily volume in stocks is due to institutions initiating trades.

Accepted Answer

A)  70% 
B)  50% 
C)  25% 
D)  90% 
A)  70% 
B)  50% 
C)  25% 
D)  90%

Question 12

What is the difference between an open-end and a closed-end mutual fund?

Accepted Answer

An open-end and a closed-end mutual fund

Question 13

The net asset value of a mutual fund is the average market price of the stocks,bonds,and other assets the fund owns.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is most likely to be a no-load fund?

Accepted Answer

A)  Value funds 
B)  Hedge funds 
C)  Growth funds 
D)  Index funds 
A)  Value funds 
B)  Hedge funds 
C)  Growth funds 
D)  Index funds

Question 15

The increase in the number of defined contribution pension funds has slowed the growth of mutual funds.

Accepted Answer

A) True 
 B)False

Question 16

How does the governance structure of mutual funds lead to asymmetric information and conflicts of interest?

Accepted Answer

The governance structure of mutual funds

Question 17

Several academic research studies show that investors earn higher returns by investing in mutual funds that charge higher fees.

Accepted Answer

A) True 
 B)False

Question 18

Late trading is the practice of allowing orders received ________ to trade at the ________ net asset value.

Accepted Answer

A)  before 4:00 pm; 4:00 pm 
B)  after 4:00 pm; 4:00 pm 
C)  after 4:00 pm; next day's 
D)  before 4:00 pm; previous day's 
A)  before 4:00 pm; 4:00 pm 
B)  after 4:00 pm; 4:00 pm 
C)  after 4:00 pm; next day's 
D)  before 4:00 pm; previous day's

Question 19

Equity funds can be placed in which class according to the Investment Company Institute?

Accepted Answer

A)  Capital appreciation funds 
B)  World funds 
C)  Total return funds 
D)  All of the above 
A)  Capital appreciation funds 
B)  World funds 
C)  Total return funds 
D)  All of the above

Question 20

The near collapse of Long Term Capital Management was caused by

Accepted Answer

A)  the high management fees charged by the fund's two Nobel Prize winners. 
B)  the fund's high leverage ratio of 20 to 1. 
C)  a sharp decrease in the spread between corporate bonds and Treasury bonds. 
D)  a sharp increase in the spread between corporate bonds and Treasury bonds. 
E)  the fund's shift away from a market-neutral investment strategy. 
A)  the high management fees charged by the fund's two Nobel Prize winners. 
B)  the fund's high leverage ratio of 20 to 1. 
C)  a sharp decrease in the spread between corporate bonds and Treasury bonds. 
D)  a sharp increase in the spread between corporate bonds and Treasury bonds. 
E)  the fund's shift away from a market-neutral investment strategy.

Exam 20: The Mutual Fund Industry

At the end of 2012 there were over ________ separate mutual funds with total assets over ________.

One factor explaining the rapid growth in mutual funds is that they are financial intermediaries that are not regulated by the federal government.

Hedge funds have a minimum investment requirement of between $100,000 and $20 million,with the typical minimum investment being $1 million.

Discuss the four primary classes of mutual funds available to investors.

Late trading and market timing

The Securities Acts of 1933 and 1934 did not

When investors switch between funds within the same fund family,mutual funds may charge

Over the past twenty years,mutual fund fees have ________,largely because ________.

All ________ are open-end investment funds that invest only in money market securities.

Over ________ of the total daily volume in stocks is due to institutions initiating trades.

What is the difference between an open-end and a closed-end mutual fund?

The net asset value of a mutual fund is the average market price of the stocks,bonds,and other assets the fund owns.

Which of the following is most likely to be a no-load fund?

The increase in the number of defined contribution pension funds has slowed the growth of mutual funds.

How does the governance structure of mutual funds lead to asymmetric information and conflicts of interest?

Several academic research studies show that investors earn higher returns by investing in mutual funds that charge higher fees.

Late trading is the practice of allowing orders received ________ to trade at the ________ net asset value.

Equity funds can be placed in which class according to the Investment Company Institute?

The near collapse of Long Term Capital Management was caused by

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

At the end of 2012 there were over separate mutual funds with total assets over .

Over the past twenty years,mutual fund fees have ,largely because .

Late trading is the practice of allowing orders received to trade at the net asset value.