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Multiple Choice Quiz
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1.
Mutual fund investors will incur tax liability only when they sell the funds.
A)True
B)False
2.
The 12b-1 fees of a Mutual fund are for ______________________.
A)management compensation
B)401(k) management
C)marketing and promotion costs
D)selling and buying securities
3.
Investors can buy or sell their shares of exchange trade funds only once a day.
A)True
B)False
4.
Mutual funds that provide investors with current income, liquidity and principal safety are called ____________________ funds.
A)money market
B)safe
C)income
D)balanced
5.
A real estate investment trust is similar to a _________________.
A)open-end fund
B)closed-end fund
C)hedge fund
D)index fund
6.
Mutual funds with a higher turnover rate will generally result in _________________.
A)a higher after-tax return to investors
B)lower expenses
C)a higher risk
D)a lower after-tax return to investors
7.
What is the rate of return on a mutual fund that has $500 million in assets at the start of the year, 20 million shares outstanding, a gross return on assets of 12%, and a total expense ratio of 2%?
A)10%
B)12%
C)14%
D)There is not sufficient information to answer this question.
8.
Many closed-end funds sell at _________________.
A)a premium
B)full value
C)a discount
D)half price
9.
Mutual funds perform the function of _______________ for their shareholders.
A)tax preparation
B)diversification
C)return guarantee
D)All of the above
10.
A mutual fund reports $150 million in assets, $25 million in liabilities, and has 12.5 million shares outstanding. What is the Net Asset Value (NAV) of these shares?
A)$10
B)$15
C)$20
D)$25
11.
Hedge funds are special mutual funds that specialize in hedging strategies.
A)True
B)False
12.
Exchange trade funds allow investors to trade _______________.
A)index portfolios
B)NYSE funds
C)global funds
D)underlying portfolios
13.
Late trading in mutual funds refers to trading _______________.
A)before the market opens
B)after 9 a.m.
C)later than 3 p.m.
D)after the market closes
14.
The offering price of a front-end load mutual fund is _______________.
A)the NAV plus the sales charge
B)the NAV minus the sales charge
C)NAV X (1 - sales charge)
D)NAV X (1 + sales charge)
15.
Which of the following expenses is(are) included in the operating expense of a mutual fund?
A)12b-1 fees.
B)Sales charges.
C)Management fees.
D)All of the above are included.





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