| 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. |
