Intro to Personal Finance- Ch. 13- Mutual Funds – Flashcards
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For Individuals , stocks and bonds are safer choices than mutual funds because money is pooled from many investors for mutual funds.
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FALSE
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Many people invest in mutual funds through their retirement accounts
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TRUE
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In 2008, investors in the US could choose from more than 25,000 mutual funds
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FALSE
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Mutual funds may carry a risk that they will substantially decrease in value
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TRUE
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Mutual funds provide amateur management
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FALSE
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Most mutual funds are closed-end funds
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FALSE
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An exchange-traded fund has portfolio managers who actively research and select stocks and other securities
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FALSE
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An "A-fund" mutual fund may have a commission as high as 9.5 percent
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FALSE
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Fred wants to invest in a "no-load" fun. This means that the fund has no 12b-1 fees.
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FLASE
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An aggressive growth fund invests in companies with a long history of paying dividends
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FALSE
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The difference between a global stock fund and an international fund is that the global stock fund invests in companies throughout the world, including the US and the international fund invests outside the US
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TRUE
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Stephanie wants to invest in a mutual fund that invests in companies within the same industry. She should put her money into a regional fund.
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FALSE
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A socially responsible fund invests in companies that produce tobacco, nuclear energy, and weapons in order to influence the board to change the companies' mission statements.
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FALSE
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The return for an intermediate US government bond fund should be higher than for a junk bond fund
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FALSE
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A family of funds is a grouping of funds that all invest in bonds or all in stocks
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FALSE
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Open-end mutual funds have managers and closed-end funds do not
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FALSE
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Most managed mutual funds outperform the Standard & Poor's 500 stock index
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FALSE
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A 'good' fund manager has the ability to increase the share value when the economy is good and retain that value when the economy is bad
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TRUE
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If Ryan wants to invest in an S&P 500 index fund, he should not expect his fund to behave differently than the underlying index
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TRUE
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Brenda wants to invest in a fund that will outperform most others. On average, she would be better off to invest in an index fund instead of a managed closed-end fund
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TRUE
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The only way to get reliable information about mutual funds is to pay a fee for it.
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FALSE
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An investment company sponsoring a mutual fund must give potential investors an annual report
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FALSE
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A newspaper will provide more complete coverage of mutual funds compared to other sources
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FALSE
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Many people own mutual funds as part of a 401(k) plan
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TRUE
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A capitol gain distribution is the profit that usually results when investors sell shares that have increase in value
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FALSE
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Cynthia received an IRS Form 1099DIV. This form is sent at the end of each quarter to specify how much she received in dividends and capitol gain distributions
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FALSE
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A higer turnover ratio for a mutual fund can result in higher tax bills
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TRUE
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All of the following are advantages of a mutual fund EXCEPT
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C- Loads of up to 8.5 percent
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What percentage of all mutual funds are closed-end funds?
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A- 7 percent
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Which type of fund has the prices determined by factors of supply and demand like a stock?
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A- Closed-end funds
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Which of the following is a fund that invests in stocks or securities contained in an index?
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B- Exchange-traded funds
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Whose shares are issued and redeemed by the investment company at the request of investors?
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E- Open-end funds
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How is an ETF similar to a closed-end fund?
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E- All of the above
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Which of the following is unique for a closed-end fund?
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B- Its value is determined by supply and demand
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The net asset value is calculated as
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D- (current market value of portfolio - liabilities)/number of shares outstanding
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Many mutual funds charge a commission when they are purchased by investors. These are called:
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A- Load funds
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A load fund is allowed to collect a sales fee as high as
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D- 8.5 percent
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The average load charge for a mutual fund is
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C- 3-5 percent
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The average upfront charge for a no-load mutual funds is
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A- 0 percent
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A no-load mutual fund
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E- Can charge a 12b-1 fee of up to .25 percent of its assets
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A contingent deferred sales load is known as all of the following EXCEPT
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E- all of the above
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A fee charged to defray the costs of advertising and marketing for a mutual fund is called a _________ fee
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B- 12b-1
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Which of the following is NOT correct about the 12b-1 fee?
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D- it needs to be disclosed in the annual report but not in the prospectus
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Which class of shares charges a commission when shares are purchased?
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A- A
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Which class of shares charges a commission when withdrawals are made during the first five years?
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B- B
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Which class of shares does not charge a sales load or contingent deferred sales fee and charges a higher 12b-1 fee than the other classes?
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C- C
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Which of the following types of stock funds invests in stock issued by companies expecting higher than average revenue and earnings growth?
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B- Growth funds
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Which of the following types of stock funds invests in stock issued by companies with a long history of paying dividends?
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A- Equity income funds
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Which of the following stock funds invests in the same companies included in the S&P 500?
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C- Index funds
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Which of the following stock funds invests in stock issued by companies throughout the world outside of the US?
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D- international funds
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Which of the following stock funds invests in stock traded within one area of the world?
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E- Regional funds
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Sally wants to invest in a fund that only invests in stock. Which of the following will meet her needs?
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D- Midcap funds
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Thomas wants to invest in a fund that invests in stock, bonds, and money market instruments. Which of the following will meet his needs?
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Asset allocation funds
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Val wants to invest in a fund whose primary objective is to conserve principal, provide income, and provide long-term growth. Which of the following will best meet her needs?
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B- Balanced funds
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An example of a lifecycle fund is a fund that
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A- Assists investors with planning for retirement by a specific date
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Time is an important factor when evaluating a mutual fund for which of the following?
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C- the tenure of a fund manager
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Which of the following is NOT correct?
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E- A managed fund will outperform an index fund only 60 percent of the time.
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Which of the following is NOT a way one can access reliable information about mutual funds on the internet?
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C- Review blogs from amateur investors about their favorite mutual funds
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Professional advisory services provide detailed information on mutual funds. Which of the following is NOT a professional advisory service?
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A- Dun and Moody's
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Professional advisory services provide research on mutual funds in all of the following areas EXCEPT
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E- All of the above are included by professional advisory services
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Sally wants to invest in a mutual fund. The mutual fund must provide a(n)_____ to her.
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C- Prospectus
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Which of the following provides some information about mutual funds for free and more detailed information at a cost?
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E- Professional advisory services
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Which of the following provides a means of monitoring the value of your mutual fund investments, but not as much information as the other options listed to conduct a more complete evaluation?
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D- Newspapers
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Which of the following contains a letter from the president of the investment company, detailed financial information, a schedule of investments, and a letter from the fund's independent auditors?
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C-Mutual fund annual report
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How do mutual funds provide returns to their shareholders?
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D- All of the above
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Cash paid to shareholders that is NOT related to the sale of securities in the fund's portfolio is called
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B- Income dividend
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Payments to investors related to the sale of securities in the fund's portfolio are
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A- Capitol gain distributions
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When you sell your shares in a mutual fund, you may receive a profit called
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C- Capitol Gain
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Which of the following is true about mutual funds and taxes?
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C- Investment companies are required to send each share holder a year-end statement that specifies how much each received in dividends and capitol gain distribution
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If you hold mutual fund shares in your Roth IRA, the taxes will be
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B- Eliminated
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A problem with mutual fund is
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C- Being required to report reinvestment income dividends and capitol gain distributions on your federal tax return
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All of the following are valid ways to purchase mutual funds except
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E- All of the ways listed are valid
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Melinda wants to withdraw some money from her mutual fund. Which of the following is NOT an option available?
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E- Withdraw all principal and leave interest dividends and capitol gain distributions in the account
