Question 1

Mutual funds that allocate their investments among common stocks and bonds are referred to as small cap funds.

Accepted Answer

A) True 
 B)False

Question 2

The turnover ratio of a mutual fund measures the:

Accepted Answer

A)  length of time a manager has been in charge of the fund.
B)  amount of profit the fund earns from one investment period to the next.
C)  number of months the average investor holds the fund before selling.
D)  percentage of a fund's holdings that have changed or "been replaced" during a 12-month period.
E)  percentage of institutional investors who own the fund.

Question 3

The sales charge for purchasing shares in a load fund is ________ percent of the purchase price.

Accepted Answer

A)  an average of 0.50 to 1
B)  an average of 1 to 2
C)  an average of 2 to 4
D)  an average of 5 to 9 1/2
E)  as high as 8 1/2

Question 4

Who owns the most mutual funds?

Accepted Answer

A)  Investors less than 20 years old
B)  Investors between 18 and 36 years old
C)  Investors between 37 to 52 years old
D)  Investors between 53 to 71 years old
E)  Investors over 72 years old

Question 5

Which of the following is a source of detailed information for fund investments?

Accepted Answer

A)  Internet
B)  Professional advisory services
C)  The fund's annual report and prospectus
D)  Financial publications
E)  All of these

Question 6

Which one of the following statements is false regarding mutual funds and the internet?

Accepted Answer

A)  Many investors have found a wealth of information about mutual fund investments on the internet.
B)  It is possible to obtain current market values for a mutual fund by using the internet.
C)  Most investment companies that sponsor mutual funds have a websites.
D)  Professional advisory services are prohibited from discussing mutual funds on their websites.
E)  The investment companies' website will provide procedures for opening an account,how much money is required to open an account,and statistical information about individual funds.

Question 7

Contingent deferred sales loads may also be referred to as ________ loads.

Accepted Answer

A)  front-end
B)  back-end
C)  level
D)  purchase
E)  investiture

Question 8

A load fund is a mutual fund in which investors pay a commission either when they purchase shares.

Accepted Answer

A) True 
 B)False

Question 9

Which one of the following statements is false regarding exchange-traded funds?

Accepted Answer

A)  An exchange-traded fund generally invests in the stocks or securities contained in a specific stock or securities index.
B)  With an exchange-traded fund,an investor can purchase as little as one share.
C)  The majority of exchange-traded funds tend to mirror the performance of the index.
D)  A passively managed exchange-traded fund manager needs to make more decisions than an actively-managed mutual fund manager.
E)  No minimum dollar investment amount is required for exchange-traded funds.

Question 10

There are about ________ investment companies that offer exchange-traded funds.

Accepted Answer

A)  25
B)  50
C)  150
D)  1,900
E)  10,000

Question 11

Because of front-end commission charges,many financial experts and government regulatory agencies are critical of:

Accepted Answer

A)  regular accounts.
B)  voluntary savings plans.
C)  contractual savings plans.
D)  minimum withdrawal plans.
E)  free contract plans.

Question 12

Phyllis Payne is buying shares in a mutual fund that invests in companies with a long history of paying a dividend whose objective is to provide income to shareholders.What type of mutual fund is she buying?

Accepted Answer

A)  Aggressive growth fund
B)  Equity income fund
C)  Global stock fund
D)  International fund
E)  Regional fund

Question 13

Together,all the different management fees,12b-1 fees,and additional operating costs for a specific fund are referred to as a(n) :

Accepted Answer

A)  investment ratio.
B)  expense ratio.
C)  financial ratio.
D)  expense turnover.
E)  management ratio.

Question 14

Many financial planners recommend that investors choose a mutual fund with an expense ratio that is:

Accepted Answer

A)  1 percent or less.
B)  between 1 and 2 percent.
C)  between 2 and 3 percent.
D)  between 3 and 4 percent.
E)  over 4 percent.

Question 15

What percent of mutual funds receive a 5-star rating from Morningstar?

Accepted Answer

A)  5
B)  10
C)  15
D)  20
E)  25

Question 16

If you need your money in a short period of time,you should consider conservative investments with less risk.

Accepted Answer

A) True 
 B)False

Question 17

Over ________ investment companies offer open-end funds.

Accepted Answer

A)  100
B)  1,000
C)  3,000
D)  6,000
E)  9,000

Question 18

Which one of the following statements is false?

Accepted Answer

A)  As an investor,you should be concerned with how long a fund manager has been managing a mutual fund.
B)  The fund manager chooses when to buy and sell securities in the fund.
C)  If a manager has been managing a fund for 5 or 10 years,it is time to change managers and get someone with new ideas.
D)  The fund manager is responsible for choosing the securities that are contained in the fund.
E)  Managed funds have higher fees than index funds.

Question 19

Class C shares,with their ongoing higher 12b-1 fees,may be more expensive than Class A shares over a period of years.

Accepted Answer

A) True 
 B)False

Question 20

Caroline Campbell is buying shares in a mutual fund that invests in bonds offered by foreign companies and governments.What type of mutual fund is she buying?

Accepted Answer

A)  Junk bond fund
B)  Intermediate corporate bond fund
C)  Municipal bond fund
D)  Short-term government bond fund
E)  World bond fund

Exam 16: Investing in Mutual Funds

Many financial planners recommend that investors choose a mutual fund with an expense ratio that is:

Correct AnswerverifiedShow Answer

Class C shares,with their ongoing higher 12b-1 fees,may be more expensive than Class A shares over a period of years.

Correct AnswerverifiedShow Answer

If you need your money in a short period of time,you should consider conservative investments with less risk.

Correct AnswerverifiedShow Answer

Mutual funds that allocate their investments among common stocks and bonds are referred to as small cap funds.

Correct AnswerverifiedShow Answer

Caroline Campbell is buying shares in a mutual fund that invests in bonds offered by foreign companies and governments.What type of mutual fund is she buying?

Correct AnswerverifiedShow Answer

Together,all the different management fees,12b-1 fees,and additional operating costs for a specific fund are referred to as a(n) :

Correct AnswerverifiedShow Answer

Which of the following is a source of detailed information for fund investments?

Correct AnswerverifiedShow Answer

There are about ________ investment companies that offer exchange-traded funds.

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

Phyllis Payne is buying shares in a mutual fund that invests in companies with a long history of paying a dividend whose objective is to provide income to shareholders.What type of mutual fund is she buying?

Correct AnswerverifiedShow Answer

What percent of mutual funds receive a 5-star rating from Morningstar?

Correct AnswerverifiedShow Answer

Which one of the following statements is false regarding mutual funds and the internet?

Correct AnswerverifiedShow Answer

A load fund is a mutual fund in which investors pay a commission either when they purchase shares.

Correct AnswerverifiedShow Answer

The turnover ratio of a mutual fund measures the:

Correct AnswerverifiedShow Answer

Who owns the most mutual funds?

Correct AnswerverifiedShow Answer

The sales charge for purchasing shares in a load fund is ________ percent of the purchase price.

Correct AnswerverifiedShow Answer

Because of front-end commission charges,many financial experts and government regulatory agencies are critical of:

Correct AnswerverifiedShow Answer

Over ________ investment companies offer open-end funds.

Correct AnswerverifiedShow Answer

Contingent deferred sales loads may also be referred to as ________ loads.

Correct AnswerverifiedShow Answer

Which one of the following statements is false regarding exchange-traded funds?

Correct AnswerverifiedShow Answer

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