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Exam 12: Mutual Funds and Exchange-Traded Funds

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Question 51

Multiple Choice

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The commission charged when shares of an open-end mutual fund are purchased is called a

A) management fee.
B) back-end load.
C) front-end load.
D) 12(b) -1 fee.

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Question 52

Multiple Choice

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One characteristic of 12(b) -1 charges is that they are payable

A) only in years that the mutual fund shows an increase in net asset value.
B) each year regardless of the performance of the mutual fund.
C) only during the first year the fund is owned.
D) only when shares in the fund are sold.

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Question 53

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Socially responsible funds only hold stocks of companies that meet the fund's ethical guidelines.

A mutual fund is generally more tax efficient when it has a ________ turnover rate and a ________ dividend yield.

The number of shares available in an exchange-traded fund (ETF)can be increased or decreased according to demand for the shares.

Nearly all mutual funds operate as regulated investment companies.This means that

Which one of the following statements concerning mutual funds is correct?

Reasons to invest in mutual fund include I.a wide range of services such as automatic reinvestment and systematic withdrawal plans. II.minimizing the time and effort spent choosing securities. III.rates of return that consistently beat the market averages. IV.participation in a variety of tax sheltered and tax deferred retirement programs.

Index fund investors should purchase at least two funds with the same objective to assure proper diversification.

Systematic withdrawal plans from mutual funds usually require a minimum investment of at least $100,000.

What are some of the advantages of investing through mutual funds? Name at least three.

An open-end investment company

Which of the following are advantages of international funds? I.greater diversification II.potentially higher returns III.income is taxed at a lower rate IV.ease of investing compared to buying individual foreign securities

Closed-end funds and exchange-traded-funds (ETFs)are both liquidated by selling them on the open market.

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

The discount or premium on a closed-end mutual fund can be as much as 25 percent.

Returns on exchange traded funds may come from I.capital gains. II.dividends. III.increases in the fund's premium. IV.decreases in the fund's discount.

Income distributed by a mutual fund from which one of the following sources receives a preferential tax rate of 15%?

One drawback of investing in mutual funds is the

Mutual funds are used extensively as retirement investments.