2009-Quiz 1 - Notes: 1. In terms of the functions they...

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Notes: 1. In terms of the functions they perform (risk, return ), mutual funds, index funds, closed-end funds, and exchange-traded funds are very similar . They differ in how they trade, their expenses, and taxes. Mutual funds and closed-end funds can be actively managed. Index funds are passive and most exchange-traded funds are also passively managed. 2. Open-end funds are also called mutual funds. 3. You lost points if you did not explain your answers. =================================== Fin 3144: Investments Quiz 1 (24 pts) Name: KEY 1. February 9, 2008: You are bullish on Telecom stock. The current market price is $50 per share and you have $5,000 of your own to invest. You borrow an additional $5,000 at an interest rate of 8% and buy 200 shares of stock at $50 each. February 9, 2009. Exactly one year has passed. How far does the price of Telecom have to fall for you to get a margin call if the maintenance margin is 30%? 2. Evaluate parts (a) to (d) below by stating whether you agree or disagree with each statement, clearly explaining your reasons in either case. Zero credit will be given for simple Agree/Disagree answers. (a) In the case of mutual funds, higher portfolio turnover increases trading expenses. (b) In the case of mutual funds, frequent trading decreases the tax liability of current mutual fund shareholders. (c) Closed-end funds usually trade at a premium or discount to the net asset value.
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2009-Quiz 1 - Notes: 1. In terms of the functions they...

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