Chap004_Text bank(1)

Chap004_Text bank(1) - Chapter 04 - Mutual Funds and other...

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Chapter 04 - Mutual Funds and other Investment Companies Chapter 04 Mutual Funds and other Investment Companies Multiple Choice Questions 4-1
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1. Which one of the following statements regarding open-end mutual funds is false? A. The funds redeem shares at net asset value. B. The funds offer investors professional management. C. The funds offer investors a guaranteed rate of return. D. B and C. E. A and B. No investment offers a guaranteed rate of return. Difficulty: Moderate 2. Which one of the following statements regarding closed-end mutual funds is false? A. The funds always trade at a discount from NAV. B. The funds redeem shares at their net asset value. C. The funds offer investors professional management. D. A and B. E. None of the above. Closed-end funds are sold at the prevailing market price. Difficulty: Moderate 4. Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of $17,000,000. There were 24,300,000 shares in the fund at year-end. What was Multiple Mutual's Net Asset Value? A. $18.11 B. $18.81 C. $69.96 D. $7.00 E. $181.07 (457,000,000 - 17,000,000) / 24,300,000 = $18.11 Difficulty: Moderate
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Chapter 04 - Mutual Funds and other Investment Companies 6. Diversified Portfolios had year-end assets of $279,000,000 and liabilities of $43,000,000. If Diversified's NAV was $42.13, how many shares must have been held in the fund? A. 43,000,000 B. 6,488,372 C. 5,601,709 D. 1,182,203 E. None of the above. ($279,000,000 - 43,000,000) / $42.13 = 5,601,708.996. Difficulty: Moderate 8. Most actively managed mutual funds, when compared to a market index such as the Wilshire 5000, A. beat the market return in all years. B. beat the market return in most years. C. exceed the return on index funds. D. do not outperform the market E. None of the above is a correct statement. Most actively managed mutual funds fail to equal the return earned by index funds, possibly due to higher transactions costs. Difficulty: Easy 9. Pools of money invested in a portfolio that is fixed for the life of the fund are called A. closed-end funds. B. open-end funds. C. unit investment trusts. D. REITS. E. redeemable trust certificates. Unit investment trusts are funds that invest in a portfolio, often fixed-income securities, and hold it to maturity. Difficulty: Easy 4-3
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10. Investors in closed-end funds who wish to liquidate their positions must A. sell their shares through a broker. B. sell their shares to the issuer at a discount to Net Asset Value. C. sell their shares to the issuer at a premium to Net Asset Value. D. sell their shares to the issuer for Net Asset Value.
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Chap004_Text bank(1) - Chapter 04 - Mutual Funds and other...

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