PERSONAL FINANCE CHAPTER 16

The major reasons why investors purchase mutual funds are professional management and diversification. True
Because of professional management, there is no need for the individual investor to evaluate a mutual fund investment. False
Which one of the following statements is false? Investors who purchase mutual funds are guaranteed a higher rate of return than if they were to purchase comparable stocks and bonds directly.
Which one of the following statements is false? A passively-managed exchange-traded fund manager needs to make more decisions than an actively-managed mutual fund manager.
There are about _____ exchange-traded funds. 775
Mutual funds that apportion their investments among common stocks and bonds are referred to as small-cap funds. False
High-yield bond funds are sometimes referred to as junk bond funds. True
A mutual fund that invests in common stocks and bonds with the primary objectives of conserving capital, providing income, and long-term growth is called a(n) ____________ fund. balanced
A mutual fund that invests in common stocks of rapidly growing corporations with higher-than-average revenue and earnings growth is called a(n) ____________ fund. growth
A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n) ____________ fund. equity income
The fund manager is ultimately responsible for a fund’s success. True
Because an index fund is a mirror image of a specific index, the dollar value of a share in an index fund increases when the index increases. True
An investment company sponsoring a mutual fund must furnish shareholders a prospectus each year. False
Which one of the following statements is true? Most mutual funds are managed funds.
Which one of the following statements is false? There is no need to evaluate mutual fund investments because investment companies hire the best professional managers they can to manage their funds.
Investors in closed-end, exchange-traded funds, and open-end funds can make money by purchasing shares at a low price and then selling them at a higher price. True
Although mutual funds are popular among individual investors, most people do not use them as part of an IRA or retirement account. False
Which of the following statements is false? The only way to make money on a mutual fund is by selling shares at a higher price than was initially paid for them.
During 2008, Lincoln Masters received income dividends of $850 and capital gain distributions of $540. Based on this information: both amounts must be included as taxable income.
Income dividends and capital gain distributions are: subject to federal taxation.

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