Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) I. 
B) II. 
C) III. 
D) IV.

Question 3

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

Accepted Answer

A) Be ultra-conservative,select fixed-income annuities. 
B) Be conservative,select money market funds. 
C) Be somewhat aggressive,particularly if you are a young person with a long investment horizon. 
D) Be ultra-aggressive,select risky investments and frequently time the markets.

Question 4

Open-end funds sometimes sell at a discount.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) is usually a good idea if you use your contributions to invest on your own. 
B) means that you give up an opportunity to double your money immediately. 
C) is a good idea if you are in a high tax bracket. 
D) is a good idea because most employers provide retirement plans anyway.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) 33.33%. 
B) 44.44%. 
C) 46.67%. 
D) 55.55%.

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

A real estate investment trust (REIT)is

Accepted Answer

A) an agreement between a buyer and seller,contingent upon the availability of financing. 
B) the loan document evidencing transfer of a property. 
C) a limited partnership investing in real estate. 
D) a type of closed-end investment company involved in real estate investment.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

An equity trust is

Accepted Answer

A) a contractual agreement to buy common stock. 
B) a REIT that specializes in mortgage lending. 
C) a mutual fund that holds REIT shares. 
D) a REIT that invests in real estate properties.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) open-end funds have no maturities,while closed-end funds are dissolved after a given number of years. 
B) shares of an open-end fund are bought and sold directly from or to the fund,while closed-end shares are bought and sold like the shares of any corporation. 
C) open-end shares can be purchased by the general public,while closed-end shares are available only to fund directors. 
D) closed-end funds control and manage open-end funds.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

When funds calculate their returns,they assume that all distributions

Accepted Answer

A) are withdrawn from the fund. 
B) are reinvested in shares of the fund. 
C) are reinvested in shares of a money market fund. 
D) are reinvested in shares of a market index fund.

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