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Personal Finance Exam Review

Personal Finance Exam Review - Personal Finance Exam Review...

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Personal Finance Exam Review Chapter 15 Mutual Funds Mutual Fund: investment company that pools funds obtained by selling shares to investors and makes investments to achieve the financial goal of income or growth, or both. Net asset value (NAV): price one pays to buy a share of a mutual fund; it is the per-share value of the mutual fund, assets- liabilities over number of shares Mutual Fund Dividend: income paid to investors out of profits that the mutual fund has earned from its investments. The dividend represents both ordinary income dividend distributions and capital gains distributions. Ordinary income dividend distributions: occur when the fund pays out dividend income and interest it has received from securities it owns. Capital Gains Distribution: represent the net gains that fund realizes when it sells securities that were held in the fund’s portfolio. Mutual funds distribute capital gains once a year, even though the gains occur throughout the year whenever securities are sold at a profit. Open-end Mutual Fund: issue redeemable shares the investors purchase directly from the fund instead of purchasing the investors on a stock market. They are always ready to sell new shares of ownership and to buy back previously sold shares at the fund’s current NAV. Fund Investment Advisers: access to best research, select, buy, sell, and monitor the performance of the securities purchased Exchange privilege, transfer privilege: permits mutual fund shareholders to easily swap shares on a dollar-for –dollar basis for shares in another mutual fund managed by the same mutual fund family Income Objective: invests in securities that pay regular income in dividends or interest, buying a mutual fund with low expenses Money Market Funds: invest in highly liquid, relatively safe securities with very short maturities, such as CDs, government securities, and commercial paper Bond funds:
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