Question 1

Which of the following fund types would likely have the lowest turnover?

Accepted Answer

A)  Capital appreciation funds. 
B)  Index funds. 
C)  Social conscience funds. 
D)  Corporate bond funds. 
E)  International stock funds. 
A)  Capital appreciation funds. 
B)  Index funds. 
C)  Social conscience funds. 
D)  Corporate bond funds. 
E)  International stock funds.

Question 2

Which of the following funds is likely to be the most volatile?

Accepted Answer

A)  Money market fund. 
B)  Balanced fund. 
C)  Capital appreciation fund. 
D)  Asset allocation fund. 
E)  Emerging market fund. 
A)  Money market fund. 
B)  Balanced fund. 
C)  Capital appreciation fund. 
D)  Asset allocation fund. 
E)  Emerging market fund.

Question 3

Balanced funds aim to: I) broaden diversification
II) provide current income
III) conserve principal
IV) maximize capital gains

Accepted Answer

A)  I and IV. 
B)  II and III. 
C)  II, III and IV. 
D)  I, II and III. 
E)  I, II, III and IV. 
A)  I and IV. 
B)  II and III. 
C)  II, III and IV. 
D)  I, II and III. 
E)  I, II, III and IV.

Question 4

You invested $3,000 in a mutual fund just slightly less than four years ago when the NAV of the fund was $12.50. Today, the NAV has risen to $15.40. Over the four years, you obtained an additional 31.52 shares by reinvesting your fund distributions. The fund has no front-end load, but charges a contingent deferred sales charges of 6% the first year with the percentage of the charge decreasing by 1% each year. How much money will you receive if you redeem your shares today?

Accepted Answer

A)  $4,008.13 
B)  $4,196.76 
C)  $4,055.97 
D)  $4,014.35 
E)  $4,582.18 
A)  $4,008.13 
B)  $4,196.76 
C)  $4,055.97 
D)  $4,014.35 
E)  $4,582.18

Question 5

A(n) ___________ fund avoids investments in tobacco, alcohol, gambling, and similar companies.

Accepted Answer

A)  sin 
B)  growth 
C)  social conscience 
D)  equity 
E)  balance 
A)  sin 
B)  growth 
C)  social conscience 
D)  equity 
E)  balance

Question 6

Which of the following is not a characteristic generally associated with hedge funds?

Accepted Answer

A)  Ability of fund to utilize a high degree of leverage 
B)  Ability of fund to sell short 
C)  Guaranteed redemption of shares immediately upon shareholder's request 
D)  Minimally regulated 
E)  Vast array of investment options 
A)  Ability of fund to utilize a high degree of leverage 
B)  Ability of fund to sell short 
C)  Guaranteed redemption of shares immediately upon shareholder's request 
D)  Minimally regulated 
E)  Vast array of investment options

Question 7

Which of the following is not a mutual fund company share?
 $$\begin{array} { r r r } 
& \text { NAV } & \text { Offering Price } \
\text { A. } & \$ 16.85 & \$ 16.75 \
\text { B. } & \$ 14.25 & \$ 14.50 \
\text { C. } & \$ 12.00 & \$ 12.55 \
\text { D. } & \$ 10.95 & \$ 10.95
\end{array}$$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
E)  None of the above. 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
E)  None of the above.

Question 8

Under current tax laws companies pay income tax on their earnings for the year. Mutual funds are organized similar to other companies such as IBM and Microsoft yet pay no tax on income if the fund meets certain criteria. Why?

Accepted Answer

The tax-exempt status of mutual funds is

Question 9

The dollar amount per share of a front-end load is the ___________ minus the ___________.

Accepted Answer

A)  sales price; NAV 
B)  offer price; NAV 
C)  NAV; negotiated price 
D)  sales price; offer price 
E)  NAV; offer price 
A)  sales price; NAV 
B)  offer price; NAV 
C)  NAV; negotiated price 
D)  sales price; offer price 
E)  NAV; offer price

Question 10

The total asset value of a fund minus the liabilities divided by the number of shares outstanding is called the fund's ____________.

Accepted Answer

A)  NAV 
B)  RRSP 
C)  ETF 
D)  GDP 
E)  EVA 
A)  NAV 
B)  RRSP 
C)  ETF 
D)  GDP 
E)  EVA

Question 11

Which of the following are annual mutual fund expenses?
I. Management fees.
II. RRSP trustee fees.
III. DSC.
IV. Switch fees.

Accepted Answer

A)  I only. 
B)  II and III only. 
C)  II and IV only. 
D)  I and II only. 
E)  I, II, and III only. 
A)  I only. 
B)  II and III only. 
C)  II and IV only. 
D)  I and II only. 
E)  I, II, and III only.

Question 12

Which type of fund should you purchase if you are interested in investing primarily in countries that have relatively new stock markets?

Accepted Answer

A)  international fund. 
B)  emerging market fund. 
C)  social conscience fund. 
D)  global fund. 
E)  sector. 
A)  international fund. 
B)  emerging market fund. 
C)  social conscience fund. 
D)  global fund. 
E)  sector.

Question 13

Special fees are charged for certain funds and under certain conditions. They include

Accepted Answer

A)  trustee fee 
B)  account set-up fee 
C)  short-term trading fee 
D)  processing fee 
E)  all of the above 
A)  trustee fee 
B)  account set-up fee 
C)  short-term trading fee 
D)  processing fee 
E)  all of the above

Question 14

___________ is the combination of operating expenses and other charges expressed as a ratio of total assets in a mutual fund.

Accepted Answer

A)  Trading expense 
B)  Maintenance expense 
C)  MER 
D)  Fixed cost 
E)  DSC 
A)  Trading expense 
B)  Maintenance expense 
C)  MER 
D)  Fixed cost 
E)  DSC

Question 15

The primary difference between an index fund and an exchange traded fund (ETF) is the

Accepted Answer

A)  Higher expenses associated with the ETF 
B)  Fact that you can short sell an index fund, but not an ETF 
C)  Fact that you pay commission to purchase an index fund, but not an ETF 
D)  Greater variety of industry-specific offerings provided by index funds as compared to ETFs 
E)  Fact that ETFs are traded like stocks throughout the trading period 
A)  Higher expenses associated with the ETF 
B)  Fact that you can short sell an index fund, but not an ETF 
C)  Fact that you pay commission to purchase an index fund, but not an ETF 
D)  Greater variety of industry-specific offerings provided by index funds as compared to ETFs 
E)  Fact that ETFs are traded like stocks throughout the trading period

Question 16

RRSP eligible mutual funds

Accepted Answer

A)  must be traded on a Canadian stock exchange. 
B)  must be sold by a Canadian broker. 
C)  must be invested in Canadian government securities. 
D)  must be issued by a Canadian bank. 
E)  none of the above. 
A)  must be traded on a Canadian stock exchange. 
B)  must be sold by a Canadian broker. 
C)  must be invested in Canadian government securities. 
D)  must be issued by a Canadian bank. 
E)  none of the above.

Question 17

4 months ago, you purchased 800 shares of a mutual fund at an offering price of $46.50 a share. The find imposes a front-end load of 4% and has a total annual expense of 0.95%. The NPV of the fund today is $48.63. There were no fund distributions or dividends. What was your holding period return on this investment?

Accepted Answer

A)  4.77% 
B)  5.11% 
C)  4.95% 
D)  3.96% 
E)  4.58% 
A)  4.77% 
B)  5.11% 
C)  4.95% 
D)  3.96% 
E)  4.58%

Question 18

Which of the following is a drawback of diversification?

Accepted Answer

A)  Spreading your investment over many securities may limit your chances for a large return. 
B)  The value of a diversified fund could decrease and be worth less than the original investment 
C)  Fees associated with diversification are not worth the possible benefits of diversification. 
D)  Diversification offers no extra safety as all stock go up in the long term. 
E)  None of the above. 
A)  Spreading your investment over many securities may limit your chances for a large return. 
B)  The value of a diversified fund could decrease and be worth less than the original investment 
C)  Fees associated with diversification are not worth the possible benefits of diversification. 
D)  Diversification offers no extra safety as all stock go up in the long term. 
E)  None of the above.

Question 19

If you redeem a large quantity of ETF shares, you will:

Accepted Answer

A)  Receive the underlying stock 
B)  Be paid in cash on the second trading day following the trade date 
C)  Need to do so over a period of time rather than all in one day 
D)  Be paid in cash immediately 
E)  Pay a redemption fee based on the size of the transaction 
A)  Receive the underlying stock 
B)  Be paid in cash on the second trading day following the trade date 
C)  Need to do so over a period of time rather than all in one day 
D)  Be paid in cash immediately 
E)  Pay a redemption fee based on the size of the transaction

Question 20

Are ETFs only for stocks?

Accepted Answer

By no means the statement is true. ETFs

Which of the following fund types would likely have the lowest turnover?

Which of the following funds is likely to be the most volatile?

Balanced funds aim to: I) broaden diversification II) provide current income III) conserve principal IV) maximize capital gains

A(n) ___________ fund avoids investments in tobacco, alcohol, gambling, and similar companies.

Which of the following is not a characteristic generally associated with hedge funds?

Which of the following is not a mutual fund company share? NAV Offering Price A. \ 16.85 \ 16.75 B. \ 14.25 \ 14.50 C. \ 12.00 \ 12.55 D. \ 10.95 \ 10.95

Under current tax laws companies pay income tax on their earnings for the year. Mutual funds are organized similar to other companies such as IBM and Microsoft yet pay no tax on income if the fund meets certain criteria. Why?

The dollar amount per share of a front-end load is the _ minus the _.

The total asset value of a fund minus the liabilities divided by the number of shares outstanding is called the fund's ____________.

Which of the following are annual mutual fund expenses? I. Management fees. II. RRSP trustee fees. III. DSC. IV. Switch fees.

Which type of fund should you purchase if you are interested in investing primarily in countries that have relatively new stock markets?

Special fees are charged for certain funds and under certain conditions. They include

___________ is the combination of operating expenses and other charges expressed as a ratio of total assets in a mutual fund.

The primary difference between an index fund and an exchange traded fund (ETF) is the

RRSP eligible mutual funds

Which of the following is a drawback of diversification?

If you redeem a large quantity of ETF shares, you will:

Are ETFs only for stocks?

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

Exam 5: Mutual Funds

Which of the following fund types would likely have the lowest turnover?

Which of the following funds is likely to be the most volatile?

Balanced funds aim to: I) broaden diversification II) provide current income III) conserve principal IV) maximize capital gains

A(n) ___________ fund avoids investments in tobacco, alcohol, gambling, and similar companies.

Which of the following is not a characteristic generally associated with hedge funds?

Which of the following is not a mutual fund company share? NAV Offering Price A. \ 16.85 \ 16.75 B. \ 14.25 \ 14.50 C. \ 12.00 \ 12.55 D. \ 10.95 \ 10.95

Under current tax laws companies pay income tax on their earnings for the year. Mutual funds are organized similar to other companies such as IBM and Microsoft yet pay no tax on income if the fund meets certain criteria. Why?

The dollar amount per share of a front-end load is the ___________ minus the ___________.

The total asset value of a fund minus the liabilities divided by the number of shares outstanding is called the fund's ____________.

Which of the following are annual mutual fund expenses? I. Management fees. II. RRSP trustee fees. III. DSC. IV. Switch fees.

Which type of fund should you purchase if you are interested in investing primarily in countries that have relatively new stock markets?

Special fees are charged for certain funds and under certain conditions. They include

___________ is the combination of operating expenses and other charges expressed as a ratio of total assets in a mutual fund.

The primary difference between an index fund and an exchange traded fund (ETF) is the

RRSP eligible mutual funds

Which of the following is a drawback of diversification?

If you redeem a large quantity of ETF shares, you will:

Are ETFs only for stocks?

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

The dollar amount per share of a front-end load is the _ minus the _.