Exam 12: Mutual Fundsother Pooling Arrangements: Simplifying, Maybe Improving Investment Performance

One performance measure of a mutual fund is to determine the growth of a given amount of investment,assuming all fund distributions are used to buy more shares of the fund.

Consider the following assets: I.Treasury Strips,II.Coupon Treasury bonds,III.growth stocks,and IV.medium quality corporate bonds.An aggressive investor seeking high current income would prefer

Which statement below is false with respect to your investment style in a 401(k)plan?

Open-end funds sometimes sell at a discount.

Choosing not to participate in a 401(k)retirement plan in which the employer matches the employee contributions

Cautious investors who need income are likely to prefer high quality corporate bonds.

An equity trust invests in equity securities,such as common stocks.

Because of income tax considerations,it makes sense to own high current-return investments in a 401(k)plan and high future-return investments outside the plan.

A "spider" is an example of a broad market exchange-traded fund.

Allen Fund had NAV values of $9,$10,and $12 at the beginning,middle,and end of last year,respectively.It made a $1.00 per share distribution at mid-year.The average annual total return of the fund for the year is

A fund with a beta of 0.6 earned a return of 8%.During the same period of time the market return was 12%,which means the fund manager outperformed the market.

A real estate investment trust (REIT)is

In comparison to an investment in common stock,a limited partnership investment offers greater liquidity.

An equity trust is

You cannot buy an open-end fund at a premium or discount.

One difference between open-end and closed-end funds is that

Broad market exchange-traded funds,while useful,have not gained wide popularity with investors.

A real estate investment trust (REIT)is a type of closed-end investment company.

In selecting mutual funds for the 401(k)plan,it is prudent to limit your investment to one fund,particularly if the fund had an outstanding return in the previous year.

When funds calculate their returns,they assume that all distributions