Question 1

Why do investors purchase mutual funds instead of purchasing stocks, bonds, or other investments on their own?

Accepted Answer

The major reasons why investors purchase...

Question 2

Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.

Accepted Answer

A) True 
 B)False

Question 3

Because of professional management, there is no need for the individual investor to evaluate a mutual fund investment.

Accepted Answer

A) True 
 B)False

Question 4

In order to sell shares in a closed-end fund, an investor must wait until the investment company is ready to repurchase the investor's shares.

Accepted Answer

A) True 
 B)False

Question 5

For a load fund, the average commission usually ranges between 3 and 5 percent of the purchase price for investments under $10,000.

Accepted Answer

A) True 
 B)False

Question 6

In a newspaper quotation, which of the following letters would indicate if a mutual fund has a redemption charge?

Accepted Answer

A)   N
B)   R
C)   FR
D)   B
E)   Z.F) B) and C)
G) A) and E)

Question 7

A mutual fund that aims for capital gains is:

Accepted Answer

A)   a balanced asset allocation fund
B)   a bond fund
C)   an equity or common stock fund
D)   a specialty fund
E)   an ethical fundF) A) and D)
G) C) and D)

Question 8

The diversification of mutual funds spells safety, because an occasional loss incurred with one investment is usually offset by gains from other investments.

Accepted Answer

A) True 
 B)False

Question 9

For a load fund, the average commission usually ranges between 1 and 3 percent of the purchase price for investments under $10,000.

Accepted Answer

A) True 
 B)False

Question 10

Index funds are bought at end-of-day prices.

Accepted Answer

A) True 
 B)False

Question 11

To purchase shares in an open-end fund, you may use four options: regular accounts, voluntary savings plans, contractual savings plans and reinvestment plans.

Accepted Answer

A) True 
 B)False

Question 12

Typically, you must invest at least $250 to open a mutual fund account.

Accepted Answer

A) True 
 B)False  True

Question 13

Which of the following is not a true statement?

Accepted Answer

A)   Many investors have found a wealth of information about mutual fund investments on the Internet.
B)   It is possible to obtain market quotes for a mutual fund by using the Internet.
C)   Most investment companies that sponsor mutual funds have a Web page.
D)   It is impossible to obtain online information about a mutual fund by accessing the Web page for one of the professional advisory services.
E)   A mutual fund's Web site will provide information about how to open an account, current market quotes, and other important information about a specific fund.F) A) and D)
G) A) and C)

Question 14

Marisa Callaghan just purchased 100 shares in the All-Inclusive Fidelity Fund. The purchase cost for each share was $30. If this fund charges a 6 percent load, what is the total amount of commission she will pay the investment company?

Accepted Answer

A)   $3,000
B)   $1,800
C)   $180
D)   $2,000
E)   It is impossible to calculate Ms. Callaghan's total investment with this informationF) A) and B)
G) D) and E)

Question 15

While mutual fund income dividends are subject to taxation, capital gain distributions are not subject to taxation.

Accepted Answer

A) True 
 B)False

Question 16

When one investment company manages a group of mutual funds, it is called a(n) :

Accepted Answer

A)   exchange fund.
B)   family of funds.
C)   diversification fund.
D)   versatility fund.
E)   group of funds.F) None of the above
G) B) and E) B

Question 17

Morgan Phelps just purchased 200 shares in the Green Fidelity Fund. The purchase cost for each share was $40. If this fund charges a 6 percent load, what is the total amount of commission he will pay the investment company?

Accepted Answer

A)   $200
B)   $240
C)   $400
D)   $480
E)   No commission is chargedF) C) and D)
G) C) and E) D

Question 18

A mutual fund that invests in the common stocks of companies in the same industry is called a(n)  ____________ fund.

Accepted Answer

A)   specialty
B)   income
C)   growth-income
D)   small-cap
E)   money marketF) None of the above
G) D) and E)

Question 19

An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year.

Accepted Answer

A) True 
 B)False

Question 20

A mutual fund that requires investors to make regular purchases over a specified period of time is called a

Accepted Answer

A)   regular account.
B)   voluntary savings plan.
C)   contractual savings plan.
D)   minimum withdrawal plan.
E)   free contract plan.F) C) and E)
G) A) and B)

Exam 13: Investing in Mutual Funds

Why do investors purchase mutual funds instead of purchasing stocks, bonds, or other investments on their own?

Correct AnswerverifiedThe major reasons why investors purchase...View AnswerShow Answer

Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.

Correct AnswerverifiedShow Answer

Because of professional management, there is no need for the individual investor to evaluate a mutual fund investment.

Correct AnswerverifiedShow Answer

In order to sell shares in a closed-end fund, an investor must wait until the investment company is ready to repurchase the investor's shares.

Correct AnswerverifiedShow Answer

For a load fund, the average commission usually ranges between 3 and 5 percent of the purchase price for investments under $10,000.

Correct AnswerverifiedShow Answer

In a newspaper quotation, which of the following letters would indicate if a mutual fund has a redemption charge?

Correct AnswerverifiedShow Answer

A mutual fund that aims for capital gains is:

Correct AnswerverifiedShow Answer

The diversification of mutual funds spells safety, because an occasional loss incurred with one investment is usually offset by gains from other investments.

Correct AnswerverifiedShow Answer

For a load fund, the average commission usually ranges between 1 and 3 percent of the purchase price for investments under $10,000.

Correct AnswerverifiedShow Answer

Index funds are bought at end-of-day prices.

Correct AnswerverifiedShow Answer

To purchase shares in an open-end fund, you may use four options: regular accounts, voluntary savings plans, contractual savings plans and reinvestment plans.

Correct AnswerverifiedShow Answer

Typically, you must invest at least $250 to open a mutual fund account.

Correct AnswerverifiedTrue

Which of the following is not a true statement?

Correct AnswerverifiedShow Answer

Marisa Callaghan just purchased 100 shares in the All-Inclusive Fidelity Fund. The purchase cost for each share was $30. If this fund charges a 6 percent load, what is the total amount of commission she will pay the investment company?

Correct AnswerverifiedShow Answer

While mutual fund income dividends are subject to taxation, capital gain distributions are not subject to taxation.

Correct AnswerverifiedShow Answer

When one investment company manages a group of mutual funds, it is called a(n) :

Correct AnswerverifiedB

Morgan Phelps just purchased 200 shares in the Green Fidelity Fund. The purchase cost for each share was $40. If this fund charges a 6 percent load, what is the total amount of commission he will pay the investment company?

Correct AnswerverifiedD

A mutual fund that invests in the common stocks of companies in the same industry is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year.

Correct AnswerverifiedShow Answer

A mutual fund that requires investors to make regular purchases over a specified period of time is called a

Correct AnswerverifiedShow Answer

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