Question 1

All mutual funds charge a management expense ratio (MER).

Accepted Answer

A) True 
 B)False

Question 2

A mutual fund that invests in investment grade corporate and government debt is called a(n)  ____________ fund.

Accepted Answer

A)  balanced
B)  equity
C)  segregated
D)  income
E)  bondF) B) and E)
G) A) and D)

Question 3

Which of the following statements is false?

Accepted Answer

A)  The purpose of investing in a closed-end or open-end mutual fund is to earn a financial return.
B)  Income dividends are the earnings that a fund pays to shareholders after it has deducted expenses from its dividend and interest income.
C)  Capital gain distributions are the payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio.
D)  It is possible to make money on a mutual fund by purchasing shares at a high price and then selling them at a low price at a later date.
E)  Real estate funds aim for long term growthF) A) and C)
G) A) and B)

Question 4

A load fund is a mutual fund in which investors pay a commission every time they sell or redeem shares.

Accepted Answer

A) True 
 B)False

Question 5

Last month Nissa Jacobson's divorce became final.As part of the settlement, she received $150,000.She would like to invest in mutual funds, but since she is 62 years old, she is concerned with the safety of her "nest egg." Which of the following mutual funds would you recommend?

Accepted Answer

A)  growth fund
B)  dividend fund
C)  money market fund
D)  international fund
E)  bond fundF) A) and E)
G) A) and D)

Question 6

Investors in both closed-end and open-end funds can make money by purchasing shares at a low price and then selling them at a higher price.

Accepted Answer

A) True 
 B)False

Question 7

Larry Bander purchased 280 shares of the New Horizons Growth Fund.The net asset value for each share at the time of purchase was $27.If this fund charges a 3.5 percent load, what is the commission amount he will pay the investment company?

Accepted Answer

A)  $27.00
B)  $9.80
C)  $264.60
D)  $100
E)  $280.00F) A) and C)
G) C) and D)

Question 8

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) B) and D)
G) B) and E)

Question 9

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 10

What type of fund seeks to aim for capital gains and, as such, are invested almost entirely in common shares?

Accepted Answer

A)  Money market
B)  Mortgage
C)  Bond
D)  Dividend
E)  EquityF) None of the above
G) All of the above

Question 11

Which of the following statements is false?

Accepted Answer

A)  Most investors in mutual funds will tell you that the most important consideration in evaluating a mutual fund is long-term performance.
B)  It is possible to compare a fund's long-term performance with the performance of the TSE 300 stock index.
C)  The length of time a fund's manager has been managing a fund should not be considered when evaluating a fund because the investment company has the right to replace a fund manager.
D)  Long-term performance should not be the only factor that you consider in evaluating a mutual fund.
E)  Information on a fund's long-term performance is available in its prospectus and in other sources of financial information.F) C) and E)
G) D) and E)

Question 12

What is step 2 of the common steps used by investors to evaluate mutual funds?

Accepted Answer

A)  Perform a financial checkup to make sure you are ready to invest.
B)  Obtain the money you need to purchase mutual funds.
C)  Determine your investment objectives.
D)  Find a fund with an objective that matches your objective.
E)  Evaluate, evaluate, and evaluate any mutual fund before buying or selling.F) A) and D)
G) A) and C)

Question 13

Which of the following publications does not provide readers with an annual survey of mutual funds?

Accepted Answer

A)  Canadian Business
B)  Report on Business
C)  Canada's Guide to Quality Mutual Funds
D)  IE: Money
E)  The EconomistF) B) and E)
G) B) and D)

Question 14

The major reasons why investors purchase mutual funds are professional management and diversification.

Accepted Answer

A) True 
 B)False

Question 15

Exchange traded funds can be traded throughout the day at changing market prices.

Accepted Answer

A) True 
 B)False

Question 16

What is step 3 of the common steps used by investors to evaluate mutual funds?

Accepted Answer

A)  Perform a financial checkup to make sure you are ready to invest.
B)  Obtain the money you need to purchase mutual funds.
C)  Determine your investment objectives.
D)  Find a fund with an objective that matches your objective.
E)  Evaluate, evaluate, and evaluate any mutual fund before buying or selling.F) A) and D)
G) A) and B)

Question 17

What type of fee is a front-end or back-end fee?

Accepted Answer

A)  Load fund
B)  No-load fund
C)  Front-end load
D)  Back-end load
E)  Management feeF) A) and D)
G) All of the above

Question 18

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 B)
G) C) and E)

Question 19

A mutual fund in which no sales charge is paid by the individual investor is called a(n)  ____________ fund.

Accepted Answer

A)  closed-end
B)  open-end
C)  load
D)  no-load
E)  convertible fund.F) D) and E)
G) B) and E)

Question 20

Income dividends and capital gain distributions are

Accepted Answer

A)  exempt from taxation.
B)  subject to federal taxation.
C)  subject to federal taxation after the first $1,000.
D)  subject to federal taxation after the first $2,000.
E)  subject to federal taxation after the first $8,000.F) D) and E)
G) B) and E)

Exam 13: Investing in Mutual Funds

Which of the following statements is false?

Correct AnswerverifiedShow Answer

The major reasons why investors purchase mutual funds are professional management and diversification.

Correct AnswerverifiedShow Answer

Larry Bander purchased 280 shares of the New Horizons Growth Fund.The net asset value for each share at the time of purchase was $27.If this fund charges a 3.5 percent load, what is the commission amount he will pay the investment company?

Correct AnswerverifiedShow Answer

What type of fund seeks to aim for capital gains and, as such, are invested almost entirely in common shares?

Correct AnswerverifiedShow Answer

A mutual fund that invests in investment grade corporate and government debt is called a(n) ____________ fund.

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

Which of the following publications does not provide readers with an annual survey of mutual funds?

Correct AnswerverifiedShow Answer

A load fund is a mutual fund in which investors pay a commission every time they sell or redeem shares.

Correct AnswerverifiedShow Answer

What is step 2 of the common steps used by investors to evaluate mutual funds?

Correct AnswerverifiedShow Answer

What type of fee is a front-end or back-end fee?

Correct AnswerverifiedShow Answer

A mutual fund in which no sales charge is paid by the individual investor is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

Last month Nissa Jacobson's divorce became final.As part of the settlement, she received $150,000.She would like to invest in mutual funds, but since she is 62 years old, she is concerned with the safety of her "nest egg." Which of the following mutual funds would you recommend?

Correct AnswerverifiedShow Answer

Investors in both closed-end and open-end funds can make money by purchasing shares at a low price and then selling them at a higher price.

Correct AnswerverifiedShow Answer

Exchange traded funds can be traded throughout the day at changing market prices.

Correct AnswerverifiedShow Answer

All mutual funds charge a management expense ratio (MER).

Correct AnswerverifiedShow Answer

Which of the following is not a true statement?

Correct AnswerverifiedShow Answer

Income dividends and capital gain distributions are

Correct AnswerverifiedShow Answer

What is step 3 of the common steps used by investors to evaluate mutual funds?

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

Which of the following statements is false?

Correct AnswerverifiedShow Answer

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