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Finance Flashcards

Personal Finance, Chapter 13

The major advantage of mutual funds to the small investor is diversification
In The Wall Street Journal’s listing of mutual funds, a “t” after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it. b and c
Value funds look for stocks with relatively all the following except rapid growth
The approximate yield on a mutual fund depends only on the fund’s dividend income and capital gains distributions. False
A mutual fund’s NAV is its net asset value
A fund’s prospectus would provide information about a fund’s fee structure. True
A(n) ____ actually runs the portfolio and makes the buy and sell decisions. management company
A closed-end investment company can create an unlimited number of shares. False
A mutual fund prospectus is required to fully disclose all fund fees and expenses. True
A balanced fund that emphasizes growth in capital is called a(n) growth and income fund
Financial leverage is less of a factor in real estate investment returns than with other types of investments. False
The fund whose main objective is growth is known as a(n) ____ fund. index
Growth-and-income funds invest most of their capital in common stocks. True
Spiders and Diamonds are examples of ETFs. True
A technology fund is an example of a sector fund. True
Generally speaking, socially responsible funds abstain from investing in alcohol, gambling, or tobacco stocks. True
A no-load fund has no charge to sell you shares
Exchange-traded funds have characteristics of both closed-end and open-end funds. True
The share price of a closed-end fund is determined by a and c
Most mutual funds allow investors to participate in a and b
The lower the R2, the closer the relationship between an ETF and its associated target index. False
Investors tend to use mutual funds for which of the following reasons all of these
A(n) ____ fund invests primarily in a portfolio of common stocks for the income they provide. equity-income
Advantages of exchange-traded funds over mutual funds include all of the following except better diversification
The net asset value (NAV) per share is found by dividing the market value of the fund’s securities less the fund’s liabilities by the number of shares outstanding. True
Asset allocation funds invest entirely in U.S. and foreign stocks and bonds. False
Aggressive growth funds typically buy stocks with high price/earnings ratios and stocks with volatile price fluctuations. True
By using automatic reinvestment plans, dividend and capital gains are used to automatically buy additional shares in the fund. True
While ETFs offer many of the benefits of mutual funds, they have the tax-timing disadvantages not present with otherwise comparable mutual funds. False
Redeeming your mutual fund shares might result in a charge called a back-end load
Closed-end investment companies are characterized by availability for sale or purchase on security markets
The major reason that investors use mutual funds is their contractual plans, which force regular investing. False
Which of the following bond mutual funds would provide tax-free income? municipal bond fund
An investor with a small amount of money should stick to using load funds instead of no-load funds. False
An investment option that allows fund shareholders to funnel fixed amounts of money from their paychecks or bank accounts automatically into a mutual fund is a(n) automatic investment plan
There are more closed-end investment companies than there are open-end companies. False
Future fund performance is the real key to investment success with mutual funds. One important element to examine when attempting to predict a fund’s future performance is the future course of the market
A fund that invests only in a particular industry would be a ____ fund. sector
The price per share of a closed-end investment fund could be lower than its NAV. True
In The Wall Street Journal’s listing of mutual funds, a “p” after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it. 12b-1 fee
What type of REIT is most attractive to income-oriented investors? mortgage
Indexed funds have high realized capital gains. False
Advantages of exchange traded funds over mutual funds include a broader market focus. False
A mutual fund cannot charge more than 6.5 percent in total sales charges and fees. False
Open-ended mutual funds companies buy their shares back from investors at NAV. True
The expected cash flows of a real estate investment are determined by rent, depreciation, and taxes. True
Global mutual funds can invest both in domestic and international stocks. True
In The Wall Street Journal’s listing of mutual funds, an “r” after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it. back-end load
____ would not be a reason for purchasing mutual funds. tax advantage
Dividend income and capital gains distributions are taxed at identical tax rates. False
Balanced funds invest in a proportionate amount of common and preferred stocks and bonds. True
It is almost impossible to lose money in a mutual fund as the result of fraud or the mutual fund company’s bankruptcy. True
Low-load funds do not charge a commission upon initial purchase. False
The primary investment objective of bond funds is income. True
The current market value of all the securities a mutual fund owns is called the net asset value
A closed-end investment company that invests in various types of real estate and mortgages is a hybrid real estate investment trust
Mutual funds do not offer guaranteed performance
With open-end mutual funds, investors cannot lose more than they invested. True
The fund whose main objective is to simply match the market known as a(n) ____ fund. index
Value funds typically invest in stocks that do not pay dividends and have a high price/earnings ratio. False
Index funds are actively managed. False
Asset allocation funds invest money in all of these
An open-end investment company is commonly known as a mutual fund. True
Which of the following are characteristic of exchange-traded mutual funds? traded on listed exchanges
A mutual fund allows investors to become owners of a widely diversified portfolio of securities
The primary purpose of investing in income property is to produce an attractive annual cash flow. True
Socially responsible funds typically avoid investing in alcohol and tobacco stocks
The objective of bond and money market funds is growth. False
A mutual fund’s price per share will increase if its underlying holdings increase in value. True
Open-ended mutual funds can be traded on an intraday basis. False
An annual fee charged by some mutual funds to cover marketing and distribution expenses is the 12b-1 fee
Which of the following is not a source of mutual fund returns? changes in IDB
The size of a mutual fund’s management fee is related to the fund’s performance. False
What would the NAV of an open-ended mutual fund priced at $10 be if the load is 4%? $9.60
All no-load funds charge an upfront fee to purchase shares of a mutual fund. False
Index funds have provided competitive rates of return because all of these
All mutual funds have management fees. True
The ____ is a service offered by mutual funds that helps investors earn compound interest on their investments. automatic reinvestment plan
A(n) ____ fund is quite speculative. aggressive growth
Conversion privileges allow investors to exchange one fund’s shares for that of another, as long as the funds are in the same fund family. True
More people invest in mutual funds than in any other type of investment product. True
Equity-income funds emphasize capital appreciation in their investment goals. False
A mutual fund’s NAV is calculated at least once a day
First-time real estate investors should consider investing in commercial properties. False
Exchange-traded funds can create new shares to meet demand. True
Another name for a mutual fund is an open-end investment company
Mutual fund conversion privileges can often be exercised online. True
A downside of investing in income property is maintenance costs
A behavioral bias in mutual fund investing where investors view recent performance as overly indicative of a fund’s future performance is known as representativeness
Exchange-traded mutual funds are actually closed-end mutual funds. False
Asset allocation funds concentrate on one type of investment. False
Growth funds are mutual funds designed for short-term investing. False
If you are a mutual fund investor who needs steady income, you might take advantage of a fund’s systematic withdrawal plans.
For most investors, the best way to deal in foreign securities is through an international mutual fund. True
If a mutual fund provides for automatic reinvestment, the reinvested dividends will not be taxed until the shares are redeemed. False
ETFs are set up to protect investors from capital gains taxes better than most mutual funds can. True
A(n) ____ sells fund shares, either directly to the public or through certain authorized dealers. distributor
The price an investor can sell his shares of an open-end mutual fund is the net asset value. True
A mutual fund with an objective of both growth and income is a(n) balanced fund
To be a true no-load fund, there can be a maximum ____ load and a maximum ____ 12(b)-1 fee. 0%; 0.25%
Both load and no-load funds will always charge a management fee
A real estate investment trust that invests only in mortgages is called an equity trust. False
Which of the following combines the operating characteristics of an open-end fund with some of the trading characteristics of a closed-end fund? exchange-traded fund
An example of a commercial property is a(n) all of these
Money funds are high in both liquidity and risk. False
Expected cash flows from real estate investments are determined by all of these
A 12b-1 fee can only be charged by a load mutual fund. False
Closed-end mutual funds companies buy their shares back from investors at NAV. False
The major benefit to small investors of mutual funds is diversification. True
Dividend income, capital gains distributions, and changes in the fund’s share price are all sources of return for a mutual fund. True
A mutual fund is owned by the management company. False
Speculating in raw land is a low-risk investment approach. False
Closed-end mutual funds can trade at either a discount or a premium from their net asset value. True

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