Deck 4: Mutual Funds and Other Investment Companies

Question 1

Pinnacle Fund had year-end assets of $825,000,000 and liabilities of $25,000,000.If Pinnacle's NAV was $32.18, how many shares must have been held in the fund?

A)21,619,346.92
B)22,930,546.28
C)24,860,161.59
D)25,693,645.25

Answer 1

C

Question 2

Investors in closed-end funds who wish to liquidate their positions must

A)sell their shares through a broker.
B)sell their shares to the issuer at a discount to net asset value.
C)sell their shares to the issuer at a premium to net asset value.
D)sell their shares to the issuer for net asset value.

Answer 2

A

Question 3

Funds are commonly classified by

A)Investment policy
B)Asset allocation
C)Security type
D)NAV

Answer 3

A

Question 4

Which one of the following statements regarding closed-end mutual funds is false?

A)The funds always trade at a discount from NAV.
B)The funds redeem shares at their net asset value.
C)The funds offer investors professional management.
D)The funds always trade at a discount from NAV and redeem shares at their net asset value.

Question 5

Which one of the following statements regarding open-end mutual funds is false?

A)The funds redeem shares at net asset value.
B)The funds offer investors professional management.
C)The funds offer investors a guaranteed rate of return.
D)The funds redeem shares at net asset value and offer investors professional management.

Question 6

Investors' Choice Fund had NAV per share of $37.25 on January 1, 2016.On December 31 of the same year, the fund's rate of return for the year was 17.3%.Income distributions were $1.14, and the fund had capital gain distributions of $1.35.Without considering taxes and transactions costs, what ending NAV would you calculate for Investors' Choice?

A)$41.20
B)$33.88
C)$43.69
D)$42.03

Question 7

______ are balanced funds in which the asset mix can range from aggressive (primarily marketed to younger investors) to conservative (directed at older investors)

A)Hedge funds
B)Index funds
C)Equity funds
D)Life-cycle funds

Question 8

Which of the following is not an advantage of owning mutual funds?

A)They offer a variety of investment styles.
B)They offer small investors the benefits of diversification.
C)They treat income as "passed through" to the investor for tax purposes.
D)All of the options are advantages of mutual funds.

Question 9

The Profitability Fund had NAV per share of $17.50 on January 1, 2016.On December 31 of the same year, the fund's NAV was $19.47.Income distributions were $0.75, and the fund had capital gain distributions of $1.00.Without considering taxes and transactions costs, what rate of return did an investor receive on the Profitability Fund last year?

A)11.26%
B)15.54%
C)16.97%
D)21.26%

Question 10

Closed-end funds are frequently issued at a ______ to NAV and subsequently trade at a __________ to NAV.

A)discount; discount
B)discount; premium
C)premium; premium
D)premium; discount

Question 11

Most actively-managed mutual funds, when compared to a market index such as the Wilshire 5000,

A)beat the market return in all years.
B)beat the market return in most years.
C)exceed the return on index funds.
D)do not outperform the market.

Question 12

Which of the following statements about real estate investment trusts is true?

A)REITs invest in real estate or loans secured by real estate.
B)REITs raise capital by borrowing from banks and issuing mortgages.
C)REITs are similar to open-end funds, with shares redeemable at NAV.
D)REITs invest in real estate or loans secured by real estate and raise capital by borrowing from banks and issuing mortgages.

Question 13

A review of Canadian mutual funds by investment orientation at year-end 2017 shows that over half of assets were in

A)balanced funds
B)Index funds
C)Exchange traded funds
D)Hedge funds

Question 14

Which of the following statements about money market mutual funds is true?

A)They invest in commercial paper, CDs, and repurchase agreements.
B)They usually offer check-writing privileges.
C)They are highly leveraged and risky.
D)They invest in commercial paper, CDs, and repurchase agreements, and they usually offer check-writing privileges.

Question 15

Fund of Funds are:

A)Index funds
B)mutual funds that primarily invest in shares of other mutual funds.
C)Exchange traded funds
D)Hedge funds

Question 16

Diversified Portfolios had year-end assets of $279,000,000 and liabilities of $43,000,000.If Diversified's NAV was $42.13, how many shares must have been held in the fund?

A)43,000,000
B)6,488,372
C)5,601,709
D)1,182,203

Question 17

Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of $17,000,000.There were 24,300,000 shares in the fund at year end.What was Multiple Mutual's net asset value?

A)$18.11
B)$18.81
C)$69.96
D)$7.00

Question 18

At issue, offering prices of open-end funds will often be

A)less than NAV due to loads.
B)greater than NAV due to loads.
C)less than NAV due to limited demand.
D)greater than NAV due to excess demand.

Question 19

Growth Fund had year-end assets of $862,000,000 and liabilities of $12,000,000.There were 32,675,254 shares in the fund at year end.What was Growth Fund's net asset value?

A)$28.17
B)$25.24
C)$19.62
D)$26.01

Question 20

Pools of money invested in a portfolio that is fixed for the life of the fund are called

A)closed-end funds.
B)open-end funds.
C)unit investment trusts.
D)REITS.

Question 21

Assume that you purchased shares of High Flying mutual fund at a net asset value of $12.50 per share.During the year, you received dividend income distributions of $0.78 per share and capital gains distributions of $1.67 per share.At the end of the year, the shares had a net asset value of $13.87 per share.What was your rate of return on this investment?

A)29.43%
B)30.56%
C)31.19%
D)32.44%

Question 22

Assume that you purchased shares of a mutual fund at a net asset value of $10.00 per share.During the year, you received dividend income distributions of $0.05 per share and capital gains distributions of $0.06 per share.At the end of the year, the shares had a net asset value of $8.16 per share.What was your rate of return on this investment?

A)-18.24%
B)-16.1%
C)16.10%
D)-17.3%

Question 23

Assume that you purchased shares of a mutual fund at a net asset value of $14.50 per share.During the year, you received dividend income distributions of $0.27 per share and capital gains distributions of $0.65 per share.At the end of the year, the shares had a net asset value of $13.74 per share.What was your rate of return on this investment?

A)2.91%
B)3.07%
C)1.10%
D)1.78%

Question 24

A mutual fund had NAV per share of $23.00 on January 1, 2016.On December 31 of the same year, the fund's NAV was $23.15.Income distributions were $0.63, and the fund had capital gain distributions of $1.26.Without considering taxes and transactions costs, what rate of return did an investor receive on the fund last year?

A)11.26%
B)10.54%
C)8.87%
D)8.26%

Question 25

A mutual fund had NAV per share of $19.00 on January 1, 2016.On December 31 of the same year, the fund's NAV was $19.14.Income distributions were $0.57, and the fund had capital gain distributions of $1.12.Without considering taxes and transactions costs, what rate of return did an investor receive on the fund last year?

A)11.26%
B)10.54%
C)7.97%
D)8.26%
E)9.63%

Question 26

Which of the following is true regarding equity mutual funds? I) They invest primarily in stock.
II) They may hold fixed-income securities, as well as stock.
III) Most hold money market securities, as well as stock.
IV) Two types of equity funds are income funds and growth funds.

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

Question 27

A mutual fund had year-end assets of $750,000,000 and liabilities of $7,500,000.There were 40,000,000 shares in the fund at year end.What was the mutual fund's net asset value?

A)$9.63
B)$18.56
C)$16.42
D)$17.87

Question 28

A mutual fund had year-end assets of $560,000,000 and liabilities of $26,000,000.There were 23,850,000 shares in the fund at year end.What was the mutual fund's net asset value?

A)$22.87
B)$22.39
C)$22.24
D)$17.61

Question 29

A mutual fund had year-end assets of $250,000,000 and liabilities of $4,000,000.There were 3,750,000 shares in the fund at year end.What was the mutual fund's net asset value?

A)$92.53
B)$67.39
C)$63.24
D)$65.60

Question 30

The fee that mutual funds use to help pay for advertising and promotional literature is called a

A)front-end load fee.
B)back-end load fee.
C)operating expense fee.
D)12b-1 fee.

Question 31

Assume that you purchased 200 shares of Super Performing mutual fund at a net asset value of $21 per share.During the year, you received dividend income distributions of $1.50 per share and capital gains distributions of $2.85 per share.At the end of the year, the shares had a net asset value of $23 per share.What was your rate of return on this investment?

A)30.24%
B)25.37%
C)27.19%
D)22.44%

Question 32

A mutual fund had year-end assets of $327,000,000 and liabilities of $46,000,000.If the fund NAV was $30.48, how many shares must have been held in the fund?

A)11,354,751
B)8,412,642
C)10,165,476
D)9,165,414
E)9,219,160

Question 33

A mutual fund had year-end assets of $521,000,000 and liabilities of $63,000,000.If the fund NAV was $26.12, how many shares must have been held in the fund?

A)17,534,456
B)16,488,372
C)18,601,742
D)17,542,515

Question 34

A mutual fund had NAV per share of $26.25 on January 1, 2016.On December 31 of the same year, the fund's rate of return for the year was 16.4%.Income distributions were $1.27, and the fund had capital gain distributions of $1.85.Without considering taxes and transactions costs, what ending NAV would you calculate?

A)$27.44
B)$33.88
C)$24.69
D)$42.03

Question 35

A mutual fund had year-end assets of $465,000,000 and liabilities of $37,000,000.If the fund NAV was $56.12, how many shares must have been held in the fund?

A)4,300,000
B)6,488,372
C)8,601,709
D)7,626,515

Question 36

Patty O Furniture purchased 100 shares of Green Isle mutual fund at a net asset value of $42 per share.During the year, Patty received dividend income distributions of $2.00 per share and capital gains distributions of $4.30 per share.At the end of the year, the shares had a net asset value of $40 per share.What was Patty's rate of return on this investment?

A)5.43%
B)10.24%
C)7.19%
D)12.44%

Question 37

Which of the following would increase the net asset value of a mutual fund share, assuming all other things remain unchanged?

A)An increase in the number of fund shares outstanding
B)An increase in the fund's accounts payable
C)A change in the fund's management
D)An increase in the value of one of the fund's stocks An increase in the number of fund shares outstanding and an increase in the fund's accounts payable would decrease NAV, and a change in the fund's management would have an uncertain effect (and then only in the future).However, an increase in the value of one of the fund's stocks would increase NAV.

Question 38

A mutual fund had NAV per share of $16.75 on January 1, 2016.On December 31 of the same year, the fund's rate of return for the year was 26.6%.Income distributions were $1.79, and the fund had capital gain distributions of $2.80.Without considering taxes and transactions costs, what ending NAV would you calculate?

A)$17.44
B)$13.28
C)$14.96
D)$17.25
E)$16.62

Question 39

A mutual fund had year-end assets of $437,000,000 and liabilities of $37,000,000.If the fund NAV was $60.12, how many shares must have been held in the fund?

A)6,653,360
B)8,412,642
C)10,165,476
D)9,165,414

Question 40

A mutual fund had year-end assets of $700,000,000 and liabilities of $7,000,000.There were 40,150,000 shares in the fund at year end.What was the mutual fund's net asset value?

A)$9.63
B)$57.71
C)$16.42
D)$17.87
E)$17.26

Question 41

Of the following types of mutual funds, an investor who wishes to invest in a diversified portfolio of stocks worldwide (including the U.S.) should choose

A)international funds.
B)global funds.
C)regional funds.
D)emerging-market funds.

Question 42

A mutual fund had average daily assets of $4.7 billion in 2016.The fund sold $2.2 billion worth of stock and purchased $3.6 billion worth of stock during the year.The fund's turnover ratio is

A)37.5%.
B)22.6%.
C)15.3%.
D)46.8%.

Question 43

Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the MSCI France Index should choose

A)SPY.
B)EWJ.
C)EWQ.
D)IWM.

Question 44

Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the Wilshire 5000 should choose

A)SPY.
B)DIA.
C)QQQ.
D)IWM.
E)VTI.

Question 45

You purchased shares of a mutual fund at a price of $12 per share at the beginning of the year and paid a front-end load of 4.75%.If the securities in which the fund invested increased in value by 9% during the year, and the fund's expense ratio was 1.5%, your return if you sold the fund at the end of the year would be

A)4.75%.
B)3.54%.
C)2.65%.
D)2.39%.

Question 46

A mutual fund had average daily assets of $4.0 billion in 2016.The fund sold $1.5 billion worth of stock and purchased $1.6 billion worth of stock during the year.The fund's turnover ratio is

A)37.5%.
B)22%.
C)15%.
D)45%.

Question 47

You purchased shares of a mutual fund at a price of $20 per share at the beginning of the year and paid a front-end load of 6.0%.If the securities in which the fund invested increased in value by 10% during the year, and the fund's expense ratio was 1.5%, your return if you sold the fund at the end of the year would be

A)1.99%.
B)2.32%.
C)1.65%.
D)2.06%.

Question 48

Of the following types of mutual funds, an investor who wishes to invest in a diversified portfolio of foreign stocks (excluding the U.S.) should choose

A)international funds.
B)global funds.
C)regional funds.
D)emerging-market funds.

Question 49

A mutual fund had NAV per share of $36.15 on January 1, 2016.On December 31 of the same year, the fund's rate of return for the year was 14.0%.Income distributions were $1.16, and the fund had capital gain distributions of $2.12.Without considering taxes and transactions costs, what ending NAV would you calculate?

A)$37.93
B)$34.52
C)$44.69
D)$47.25

Question 50

A mutual fund had average daily assets of $2.0 billion in 2016.The fund sold $500 million worth of stock and purchased $600 million worth of stock during the year.The fund's turnover ratio is

A)27.5%.
B)12%.
C)15%.
D)25%.

Question 51

Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the S&P 500 should choose

A)SPY.
B)DIA.
C)QQQ.
D)IWM.

Question 52

A mutual fund had NAV per share of $37.12 on January 1, 2016.On December 31 of the same year, the fund's rate of return for the year was 11.0%.Income distributions were $2.26, and the fund had capital gain distributions of $1.64.Without considering taxes and transactions costs, what ending NAV would you calculate?

A)$37.93
B)$34.52
C)$37.30
D)$47.25

Question 53

Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the MSCI Japan Index should choose

A)SPY.
B)EWJ.
C)QQQQ.
D)IWM.

Question 54

Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the Dow Jones Industrials should choose

A)SPY.
B)DIA.
C)QQQQ.
D)IWM.

Question 55

You purchased shares of a mutual fund at a price of $17 per share at the beginning of the year and paid a front-end load of 5.0%.If the securities in which the fund invested increased in value by 12% during the year, and the fund's expense ratio was 1.0%, your return if you sold the fund at the end of the year would be

A)4.75%.
B)5.45%.
C)5.65%.
D)4.39%.

Question 56

Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the Russell 2000 should choose

A)SPY.
B)DIA.
C)QQQQ.
D)IWM.

Question 57

You purchased shares of a mutual fund at a price of $20 per share at the beginning of the year and paid a front-end load of 5.75%.If the securities in which the fund invested increased in value by 11% during the year, and the fund's expense ratio was 1.25%, your return if you sold the fund at the end of the year would be

A)4.33%.
B)3.44%.
C)2.45%.
D)6.87%.

Question 58

A mutual fund had average daily assets of $3.0 billion in 2016.The fund sold $600 million worth of stock and purchased $700 million worth of stock during the year.The fund's turnover ratio is

A)27.5%.
B)12%.
C)15%.
D)25%.
E)20%.

Question 59

Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the Nasdaq 100 should choose

A)SPY.
B)DIA.
C)QQQ.
D)IWM.