Question 1

Because an index mutual fund is a mirror image of a specific index,the dollar value of a share in an index fund increases when the index increases.

Accepted Answer

A) True 
 B)False

Question 2

When Pete Mills went to withdraw $5,000 from the Nationwide Fidelity Mutual fund,he was informed that the fund would charge 5 percent of the amount withdrawn.What is the dollar amount of the withdrawal charge?

Accepted Answer

A)  $2,500
B)  $500
C)  $250
D)  $25
E)  $50

Question 3

During 2008,Lincoln Masters received income dividends of $850 and capital gain distributions of $540.Based on this information:

Accepted Answer

A)  both amounts must be included as taxable income.
B)  only the dividends are taxable.
C)  only the capital gains are taxable.
D)  both amounts are tax-exempt.
E)  both amounts are taxed at a rate of 5 percent.

Question 4

Melanie Davis is getting ready to purchase shares in a mutual fund.The fund will charge her a sales charge only if she redeems her shares within a stated period of time.What type of shares is she buying?

Accepted Answer

A)  Class A
B)  Class B
C)  Class C
D)  Either class A or B
E)  Either class B or C

Question 5

Class C shares,with their ongoing higher 12b-1 fees,may be more expensive than Class A or Class B shares over a long period of time.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following statements is false?

Accepted Answer

A)  As an investor, you should be concerned with how long a fund manager has been managing a mutual fund.
B)  The fund manager chooses when to buy and sell securities in the fund.
C)  If a manager has been managing a fund for 5 or 10 years, it is time to change managers and get someone with new ideas.
D)  The fund manager is responsible for choosing the securities that are contained in the fund.
E)  Managed funds have higher fees than index funds.

Question 7

Phyllis Payne is buying shares in a mutual fund that invests in companies with a long history of paying a dividend whose objective is to provide income to shareholders.What type of mutual fund is she buying?

Accepted Answer

A)  Aggressive growth fund
B)  Equity income fund
C)  Global fund
D)  International fund
E)  Regional fund

Question 8

Another name for a mutual fund that charges a contingent deferred sales load is a ____________ fund.

Accepted Answer

A)  A
B)  B
C)  C
D)  D
E)  E

Question 9

Which one of the following statements is false regarding mutual funds and the Internet?

Accepted Answer

A)  Many investors have found a wealth of information about mutual fund investments on the internet.
B)  It is possible to obtain current market values for a mutual fund by using the internet.
C)  Most investment companies that sponsor mutual funds have a web page.
D)  Professional advisory services are prohibited from discussing mutual funds on their web pages.
E)  The investment companies' website will provide procedures for opening an account, how much money is required to open an account, and statistical information about individual funds.

Question 10

You should consider your tolerance for risk before investing in mutual funds.

Accepted Answer

A) True 
 B)False

Question 11

Sloan Richards is buying shares in a mutual fund that invests in companies with a total capitalization of less than $1 billion.What type of mutual fund is this?

Accepted Answer

A)  Socially responsible fund
B)  Sector fund
C)  Small-cap fund
D)  Index fund
E)  Growth fund

Question 12

If the dollar amount of total return on your mutual fund is $195 and the original cost of your investment is $1,400,then what is your percentage of total return?

Accepted Answer

A)  14.00 percent
B)  19.50 percent
C)  7.18 percent
D)  13.92 percent
E)  9.13 percent

Question 13

A municipal bond fund:

Accepted Answer

A)  is too risky for most investors.
B)  invests in mutual bonds.
C)  invests in bonds that are backed by the federal government.
D)  is a risk-free investment.
E)  invests solely in Treasury bonds.

Question 14

An investment company sponsoring a mutual fund must give potential investors a:

Accepted Answer

A)  12b
B)  prospectus.
C)  disclosure/evaluation form.
D)  redemption fee sheet.
E)  annual report.

Question 15

The fund manager is ultimately responsible for a fund's success,because he/she decides when to buy or sell securities in the fund.

Accepted Answer

A) True 
 B)False

Question 16

Investors in an open-end fund are free to buy and sell shares at the net asset value.

Accepted Answer

A) True 
 B)False

Question 17

The potential return on any investment should be indirectly related to the risk the investor assumes.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following funds would be considered the safest investment?

Accepted Answer

A)  Growth fund
B)  Money market fund
C)  Sector fund
D)  Asset allocation fund
E)  High-yield bond fund

Question 19

Norma Rose is buying shares in a mutual fund that invests in foreign stocks sold in securities markets throughout the world,excluding the United States.What type of mutual is she buying?

Accepted Answer

A)  Aggressive growth fund
B)  Equity income fund
C)  Global fund
D)  International fund
E)  Regional fund

Question 20

Martin Campbell wants to invest in mutual funds,but is also worried about diversification.Which fund would you recommend to him?

Accepted Answer

A)  Income fund
B)  Long-term corporate bond fund
C)  U.S.government bond fund
D)  Midcap fund
E)  A fund of funds

Exam 16: Investing in Mutual Funds

When Pete Mills went to withdraw $5,000 from the Nationwide Fidelity Mutual fund,he was informed that the fund would charge 5 percent of the amount withdrawn.What is the dollar amount of the withdrawal charge?

Correct AnswerverifiedShow Answer

During 2008,Lincoln Masters received income dividends of $850 and capital gain distributions of $540.Based on this information:

Correct AnswerverifiedShow Answer

Which one of the following statements is false regarding mutual funds and the Internet?

Correct AnswerverifiedShow Answer

An investment company sponsoring a mutual fund must give potential investors a:

Correct AnswerverifiedShow Answer

Norma Rose is buying shares in a mutual fund that invests in foreign stocks sold in securities markets throughout the world,excluding the United States.What type of mutual is she buying?

Correct AnswerverifiedShow Answer

Because an index mutual fund is a mirror image of a specific index,the dollar value of a share in an index fund increases when the index increases.

Correct AnswerverifiedShow Answer

Class C shares,with their ongoing higher 12b-1 fees,may be more expensive than Class A or Class B shares over a long period of time.

Correct AnswerverifiedShow Answer

Another name for a mutual fund that charges a contingent deferred sales load is a ____________ fund.

Correct AnswerverifiedShow Answer

Which one of the following funds would be considered the safest investment?

Correct AnswerverifiedShow Answer

A municipal bond fund:

Correct AnswerverifiedShow Answer

The fund manager is ultimately responsible for a fund's success,because he/she decides when to buy or sell securities in the fund.

Correct AnswerverifiedShow Answer

Martin Campbell wants to invest in mutual funds,but is also worried about diversification.Which fund would you recommend to him?

Correct AnswerverifiedShow Answer

Melanie Davis is getting ready to purchase shares in a mutual fund.The fund will charge her a sales charge only if she redeems her shares within a stated period of time.What type of shares is she buying?

Correct AnswerverifiedShow Answer

Investors in an open-end fund are free to buy and sell shares at the net asset value.

Correct AnswerverifiedShow Answer

Sloan Richards is buying shares in a mutual fund that invests in companies with a total capitalization of less than $1 billion.What type of mutual fund is this?

Correct AnswerverifiedShow Answer

The potential return on any investment should be indirectly related to the risk the investor assumes.

Correct AnswerverifiedShow Answer

You should consider your tolerance for risk before investing in mutual funds.

Correct AnswerverifiedShow Answer

If the dollar amount of total return on your mutual fund is $195 and the original cost of your investment is $1,400,then what is your percentage of total return?

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

Phyllis Payne is buying shares in a mutual fund that invests in companies with a long history of paying a dividend whose objective is to provide income to shareholders.What type of mutual fund is she buying?

Correct AnswerverifiedShow Answer

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