Chapter 24
Mutual Fund Operations
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1. A mutual fund's board of directors is responsible for:
a. monitoring management.
b. establishing procedures.
c. generally ensuring that the fund is properly serving its shareholders.
d. all of the above
2. A mutual fund prospectus contains the:
a. maximum amount of investment allowed.
b. return on the fund over the last 10 years.
c. exposure of the fund to various types of risk.
d. The prospectus contains all of the above.
3. A mutual fund has 30 million shares issued to investors. It currently has a market value of $700 million. The fund's net asset value (NAV) is $_________ per share.
a. 23.33
b. 42.86
c. 2.33
d. none of the above
4. Which of the following is not a mutual fund classification?
a. equity funds
b. bond funds
c. money market funds
d. All of the above are mutual fund classifications.
5. ________ funds are the most dominant form of mutual fund.
a. Bond
b. Stock
c. Money market
d. Hybrid
6. ___________ funds are willing to repurchase the shares they sell from investors at any time.
a. Load
b. No-load
c. Open-end
d. Closed-end
7. When a closed-end fund's market price per share is _______ than the NAV per share, the fund is priced at a _______.
a. more; discount
b. less; premium
c. less; discount
d. Answers a and b are correct.
8. _______ funds are composed of stocks that have potential for very high growth but may also be unproven.
a. Growth
b. Capital appreciation
c. Growth and income
d. Global
9. ________ funds focus on a group of companies sharing a particular characteristic.
a. Growth
b. Index
c. Specialty
d. Growth and income
10. A(n) _________ fund invests in a portfolio of different mutual funds.
a. multifund
b. income
c. tax-free
d. Internet
11. _____________ is(are) clearly the dominant asset maintained by mutual funds.
a. Preferred stock
b. Common stock
c. Corporate bonds
d. Treasury bonds
12. Most studies that assess mutual fund performance find that mutual funds:
a. outperform the market.
b. perform the same as the market.
c. underperform the market.
d. none of the above.
13. From an investor's viewpoint, money market funds have a _____ level of credit risk and a ______ level of interest rate risk.
a. high; high
b. low; low
c. low; high
d. high; low
14. Investors share the gains or losses generated by a mutual fund.
a. True.
b. False.
15. The net asset value (NAV) computation ignores dividends.
a. True.
b. False.
16. A mutual fund's performance is usually closely related to market conditions.
a. True.
b. False.
17. Equity REITs invest in mortgage and construction loans.
a. True.
b. False.
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