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Exam 12: Mutual Funds: Professionally Managed Portfolios

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Question 31

Multiple Choice

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One advantage gained by investing in a bond fund rather than in individual bonds is the

A) ability to earn fully compounded rates of return.
B) government guarantee protecting the bond principal.
C) ability to earn a capital gain.
D) guarantee that the bonds will be held to maturity to avoid market fluctuations.

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Question 32

Multiple Choice

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A fund that is designed to match the performance of a measure such as the S & P 500 or the Russell 2000 is called a(n)

A) index fund.
B) targeted fund.
C) sector fund.
D) block fund.

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Question 33

Multiple Choice

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Information for ABC Fund is The market-based holding period return for ABC Mutual Fund is

Investors who seek triple (federal, state, and local) tax-free income should invest in ________ bond funds.

Like ordinary stocks, exchange traded funds (ETFs)can be sold short.

Much of the success of a mutual fund depends on the investment skills of the fund manager.

Income from ________ is exempt from federal income taxes?

Which of the following are advantages of bond funds over individual bonds? I.greater liquidity. II.maturities matched to the investor's time horizon III.automatic reinvestment of interest payments. IV.diversification

One characteristic of most index funds is that such funds typically

Ashley believes that the price of gas and oil is about to rise and energy company profits will follow.She should invest in

The ability to automatically buy additional fund shares using the dividend income generated by the fund is called a(n)

Most exchange-traded funds are index funds.

Investors in hedge funds have the legal status of

Funds that consistently earn above average rates of return also tend to charge higher sales commissions.

Mutual funds tend to outperform the market.

The primary objective of growth mutual funds is capital appreciation with a high level of current income.

Which of the following statements best describes the legal organization of mutual funds?

The mutual fund, and not the investor, is responsible for all income taxes on capital gains and dividends earned by the fund.

Every mutual fund has a stated investment objective.Disclosure of the investment objective is required by the SEC, and is used to classify a mutual fund into one of several categories.Briefly explain the investment objective of each of the following categories. (a)growth funds (b)aggressive growth funds (c)equity-income funds (d)balanced funds

As a general rule, the time to buy a closed-end mutual fund is when the fund's premium is approximately 5 percent higher than its past average.