Chap004 - Chapter 4 Mutual Funds and Other Investment...

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Chapter 4 Mutual Funds and Other Investment Companies 68 Bodie, Investments, Sixth Edition Multiple Choice Questions 1. Which one of the following is not an objective of a stock mutual fund? A) Maximization of capital gains. B) growth C) growth and income D) income and security E) None of the above. Answer: E Difficulty: Easy Rationale: All of the above (A - D) may be objectives of different types of mutual funds. 2. 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. Answer: C Difficulty: Moderate Rationale: No investment offers a guaranteed rate of return. 3. Which one of the following statements regarding closed-end mutual funds is false? A) The funds invest in large volumes of several securities. 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. Answer: B Difficulty: Moderate Rationale: Closed-end funds are sold at the prevailing market price.
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Chapter 4 Mutual Funds and Other Investment Companies Bodie, Investments, Sixth Edition 69 4. Which of the following functions do mutual fund companies perform for their investors? A) Record keeping and administration B) Diversification and divisibility C) Professional management D) Lower transaction costs E) All of the above. Answer: E Difficulty: Easy Rationale: Mutual funds are attractive to investors because they offer all of the listed services. 5. 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 Answer: A Difficulty: Moderate Rationale: (457,000,000 - 17,000,000) / 24,300,000 = $18.11 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. Answer: C Difficulty: Moderate Rationale: ($279,000,000 43,000,000) / $42.13 = 5,601,708.996.
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Chapter 4 Mutual Funds and Other Investment Companies 70 Bodie, Investments, Sixth Edition 7. 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. Answer: D
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Chap004 - Chapter 4 Mutual Funds and Other Investment...

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