Question 1

Socially responsible mutual funds are those whose managers have taken and passed a strict financial ethics test.

Accepted Answer

A) True 
 B)False

Question 2

Investing in one of which of the following funds will typically give you the least diversification?

Accepted Answer

A)   Growth funds
B)   Capital appreciation funds
C)   Equity income funds
D)   Sector fundsE) B) and C)
F) All of the above

Question 3

ETFs can represent the broad market or many individual sectors.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following characteristics is not true of closed-end funds?

Accepted Answer

A)   They offer guaranteed returns to shareholders.
B)   They do not repurchase shares from investors.
C)   They are bought and sold on stock exchanges.
D)   They may sell above or below NAV.E) A) and C)
F) None of the above

Question 5

A mutual fund that buys only the stocks of gold mining companies is a good example of a sector fund.

Accepted Answer

A) True 
 B)False

Question 6

Exchange-traded funds are known as ETFs.

Accepted Answer

A) True 
 B)False

Question 7

Because a mutual fund is already diversified with perhaps 100 or more different investments, further diversification is not recommended or necessary.

Accepted Answer

A) True 
 B)False

Question 8

A mutual fund that invests only in healthcare-related companies is an example of a(n) ________ fund.

Accepted Answer

The answer of A mutual fund that invests only in...

Question 9

Hedge funds, which are not regulated by the Securities and Exchange Commission, are only available to wealthy investors and are less risky than ordinary mutual funds.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a reason why index funds typically incur lower expenses than other mutual funds?

Accepted Answer

A)   Index funds are not actively managed.
B)   There are no expenses for research.
C)   The portfolio is revised infrequently, so transaction costs are low.
D)   The Securities and Exchange Commission sets a limit on index fund expenses.E) A) and B)
F) A) and C)

Question 11

List five considerations or characteristics when purchasing a mutual fund.

Accepted Answer

Investment objective, return, expense ratio, load or no-load, minimum investment amount, risk, types of stocks or bonds in the portfolio, prior history and financial condition of the fund, investment company.

Question 12

A stock mutual fund that pays higher than normal dividends is called a growth fund.

Accepted Answer

A) True 
 B)False

Question 13

Capital appreciation funds are mutual funds that focus on stocks that are expected to grow at a very high rate.

Accepted Answer

A) True 
 B)False

Question 14

A mutual fund is a diversified portfolio of stocks and/or bonds depending on what the manager has purchased.

Accepted Answer

A) True 
 B)False

Question 15

A stock mutual fund's prospectus typically states that the fund is subject to all of the following risks, except

Accepted Answer

A)   market risk.
B)   general decline in the stock market.
C)   substantial declines in individual stocks.
D)   default risk.E) A) and D)
F) B) and C)

Question 16

If a mutual fund's performance is the result of conditions in the general stock market, the fund is being affected by the ________ risk.

Accepted Answer

The answer of If a mutual fund's performance is the...

Question 17

A family of mutual funds is

Accepted Answer

A)   a group of funds all of which have the same objective.
B)   a number of funds with different objectives operated by one investment company.
C)   an arrangement whereby a number of competing investment companies pool their resources.
D)   quite rare in the mutual fund industry.E) A) and B)
F) A) and D) B

Question 18

When evaluating mutual funds which are investing in the same types of securities/markets, you should compare

Accepted Answer

A)   historical performance.
B)   management fees.
C)   12b-1 expenses.
D)   All of these factors should be considered.E) A) and B)
F) A) and C)

Question 19

Some mutual funds have much higher expenses or expense ratios than others, and this expense can affect your overall returns.

Accepted Answer

A) True 
 B)False  True

Question 20

The possibility that interest rates may rise is an example of

Accepted Answer

A)   political risk.
B)   exchange rate risk.
C)   interest rate risk.
D)   liquidity risk.E) B) and D)
F) B) and C)

Exam 17: Investing in Mutual Funds

Socially responsible mutual funds are those whose managers have taken and passed a strict financial ethics test.

Correct AnswerverifiedShow Answer

Investing in one of which of the following funds will typically give you the least diversification?

Correct AnswerverifiedShow Answer

ETFs can represent the broad market or many individual sectors.

Correct AnswerverifiedShow Answer

Which of the following characteristics is not true of closed-end funds?

Correct AnswerverifiedShow Answer

A mutual fund that buys only the stocks of gold mining companies is a good example of a sector fund.

Correct AnswerverifiedShow Answer

Exchange-traded funds are known as ETFs.

Correct AnswerverifiedShow Answer

Because a mutual fund is already diversified with perhaps 100 or more different investments, further diversification is not recommended or necessary.

Correct AnswerverifiedShow Answer

A mutual fund that invests only in healthcare-related companies is an example of a(n) ________ fund.

Correct AnswerverifiedShow Answer

Hedge funds, which are not regulated by the Securities and Exchange Commission, are only available to wealthy investors and are less risky than ordinary mutual funds.

Correct AnswerverifiedShow Answer

Which of the following is not a reason why index funds typically incur lower expenses than other mutual funds?

Correct AnswerverifiedShow Answer

List five considerations or characteristics when purchasing a mutual fund.

Correct AnswerverifiedInvestment objective, return, expense ratio, load or no-load, minimum investment amount, risk, types of stocks or bonds in the portfolio, prior history and financial condition of the fund, investment company.

A stock mutual fund that pays higher than normal dividends is called a growth fund.

Correct AnswerverifiedShow Answer

Capital appreciation funds are mutual funds that focus on stocks that are expected to grow at a very high rate.

Correct AnswerverifiedShow Answer

A mutual fund is a diversified portfolio of stocks and/or bonds depending on what the manager has purchased.

Correct AnswerverifiedShow Answer

A stock mutual fund's prospectus typically states that the fund is subject to all of the following risks, except

Correct AnswerverifiedShow Answer

If a mutual fund's performance is the result of conditions in the general stock market, the fund is being affected by the ________ risk.

Correct AnswerverifiedShow Answer

A family of mutual funds is

Correct AnswerverifiedB

When evaluating mutual funds which are investing in the same types of securities/markets, you should compare

Correct AnswerverifiedShow Answer

Some mutual funds have much higher expenses or expense ratios than others, and this expense can affect your overall returns.

Correct AnswerverifiedTrue

The possibility that interest rates may rise is an example of

Correct AnswerverifiedShow Answer

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Investment objective, return, expense ratio, load or no-load, minimum investment amount, risk, types of stocks or bonds in the portfolio, prior history and financial condition of the fund, investment company.

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B

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True

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