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Finance Flashcards

Personal Finance Chapter 13

Aggressive growth funds typically buy stocks with high price/earnings ratios and stocks with volatile price fluctuations. True
Indexed funds have high realized capital gains False
A mutual fund allows investors to become owners of a widely diversified portfolio of securities.
Asset allocation funds invest in stocks, bonds, and money market securities. True
A balanced fund that emphasizes growth in capital is called a(n) growth-and-income fund.
Back-end load funds offer more liquidity to investors than no-load funds. False
Mutual funds do not offer guaranteed performance
Expected cash flows from real estate investments are determined by rent.depreciation.taxes.
Exchange-traded funds can create new shares to meet demand. True
A(n) ____ fund is quite speculative. aggressive growth
A closed-end investment company that invests in various types of real estate and mortgages is a hybrid real estate investment trust.
A guarantee of expected fund’s future performance is its past performance. False
Financial leverage is less of a factor in real estate investment returns than with other types of investments. False
More people invest in mutual funds than in any other type of investment product. True
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. back-end load12b-1 fee
Investors tend to use mutual funds for which of the following reasons DiversificationProfessional managementFinancial returnsConvenience
Value funds look for stocks with relatively all the following except Rapid growth
A mutual fund is owned by the management company. False
Balanced funds invest in a proportionate amount of common and preferred stocks and bonds. True
Dividend income and capital gains distributions are taxed at identical tax rates. FALSE
What would the NAV of an open-ended mutual fund priced at $10 be if the load is 4%? $9.60
If you are a mutual fund investor who needs steady income, you might take advantage of a fund’s systematic withdrawal plans.
Exchange-traded mutual funds are actually closed-end mutual funds. False
By using automatic reinvestment plans, dividend and capital gains are used to automatically buy additional shares in the fund. true
A no-load fund has no charge to sell you shares.
Generally speaking, socially responsible funds abstain from investing in alcohol, gambling, or tobacco stocks. true
Asset allocation funds invest entirely in U.S. and foreign stocks and bonds. False
An open-end investment company is commonly known as a mutual fund. True
Which of the following bond mutual funds would provide tax-free income? Municipal bond fund
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
Loads are transaction charges for mutual funds. True
A downside of investing in income property is maintenance costs
A closed-end investment company can create an unlimited number of shares. False
The lower the R2, the closer the relationship between an ETF and its associated target index. False
A(n) ____ sells fund shares, either directly to the public or through certain authorized dealers. distributor
While ETFs offer many of the benefits of mutual funds, they have the tax-timing disadvantages not present with otherwise comparable mutual funds. False
Index funds are actively managed. False
A mutual fund with an objective of both growth and income is a(n) balanced fund.
The objective of bond and money market funds is growth. False
The major advantage of mutual funds to the small investor is diversification
The primary purpose of investing in income property is to produce an attractive annual cash flow. True
An annual fee charged by some mutual funds to cover marketing and distribution expenses is the 12b-1 fee
What type of REIT is most attractive to income-oriented investors? mortgage
The fund whose main objective is growth is known as a(n) ____ fund. none of these(balanced, preferred stock, money market, index)
A hybrid REIT would invest only in real estate mortgages. False
With open-end mutual funds, investors cannot lose more than they invested. True
A technology fund is an example of a sector fund. 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
ETFs are set up to protect investors from capital gains taxes better than most mutual funds can. True
Which of the following are characteristic of exchange-traded mutual funds? Traded on listed exchanges
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
A fund that invests only in a particular industry would be a ____ fund. Sector
A mutual fund prospectus is required to fully disclose all fund fees and expenses. true
Most mutual funds allow investors to participate in automatic reinvestment plans.automatic investment plans.
Growth funds are mutual funds designed for short-term investing. False
A(n) ____ actually runs the portfolio and makes the buy and sell decisions. management company
Socially responsible funds typically avoid investing in alcohol and tobacco stocks.
Advantages of exchange-traded funds over mutual funds include all of the following except better diversification
Mutual fund conversion privileges can often be exercised online. true
Balanced funds invest in a mix of utility and growth equities. False
Both load and no-load funds will always charge a management fee
Closed-end mutual funds can trade at either a discount or a premium from their net asset value. True
Index funds have provided competitive rates of return because -their costs are lower than other stock funds.-it is difficult to outperform the market.-they have very low turnover rates.-they are tax efficient
Equity-income funds emphasize capital appreciation in their investment goals. False
A mutual fund’s NAV is calculated atleast once a day
The approximate yield on a mutual fund depends only on the fund’s dividend income and capital gains distributions False
The major benefit to small investors of mutual funds is diversification. True
Spiders and Diamonds are examples of ETFs. True
Exchange-traded funds have characteristics of both closed-end and open-end funds. True
Real estate depreciation is considered a tax shelter. true
All no-load funds charge an upfront fee to purchase shares of a mutual fund. False
The current market value of all the securities a mutual fund owns is called the net asset value
Which of the following is not a source of mutual fund returns? changes in IDB
The share price of a closed-end fund is determined by -its NAV.-general supply-and-demand conditions.
____ would not be a reason for purchasing mutual funds. tax advantage
The major reason that investors use mutual funds is their contractual plans, which force regular investing. False
Load fees charged on mutual funds help insure that the fund is well managed and that the investor’s yields will be greater than those on no-load funds. False
A mutual fund’s NAV is its net asset value
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
Open-ended mutual funds can be traded on an intraday basis. FALSE
Low-load funds do not charge a commission upon initial purchase. False
Another name for a mutual fund is an open-end investment company.
Speculating in raw land is a low-risk investment approach False
The fund whose main objective is to simply match the market known as a(n) ____ fund. index
A mutual fund’s price per share will increase if its underlying holdings increase in value. True
There are more closed-end investment companies than there are open-end companies. False
Sector funds concentrate their holdings in specific targeted markets. True
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.
The ____ is a service offered by mutual funds that helps investors earn compound interest on their investments. automatic reinvestment plan
The price an investor can sell his shares of an open-end mutual fund is the net asset value. True
To be a true no-load fund, there can be a maximum ____ load and a maximum ____ 12(b)-1 fee. 0%; 0.25%
The price per share of a closed-end investment fund could be lower than its NAV. True
The expected cash flows of a real estate investment are determined by rent, depreciation, and taxes. True
Redeeming your mutual fund shares might result in a charge called a back-end load
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.
A mutual fund always provides active professional investment management. False
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.
Money funds are high in both liquidity and risk. False
Closed-end investment companies are characterized by availability for sale or purchase on security markets.
A(n) ____ fund invests primarily in a portfolio of common stocks for the income they provide. equity-income
Asset allocation funds invest money in -stocks-bonds-real estate
A real estate investment trust that invests only in mortgages is called an equity trust. False
Investors select and purchase securities held within mutual funds. False
The individual manager of a mutual fund has little to do with a fund’s success. False
If a mutual fund provides for automatic reinvestment, the reinvested dividends will not be taxed until the shares are redeemed. False
Closed-end mutual funds companies buy their shares back from investors at NAV. false
The most important advantage of a mutual fund is pooled diversification. true
Index funds, while trying to match market performance, consistently underperform market benchmarks. False
Global mutual funds can invest both in domestic and international stocks. True
For most investors, the best way to deal in foreign securities is through an international mutual fund. True
A fund’s prospectus would provide information about a fund’s fee structure. True
All mutual funds have management fees. True
An example of a commercial property is a(n) office building.shopping mall.warehouse.hotel
Closed-ended mutual funds are guaranteed, they cannot lose value. False
Value funds typically invest in stocks that do not pay dividends and have a high price/earnings ratio False
It is almost impossible to lose money in a mutual fund as the result of fraud or the mutual fund company’s bankruptcy. True
An investor with a small amount of money should stick to using load funds instead of no-load funds. False
The size of a mutual fund’s management fee is related to the fund’s performance. False
Growth-and-income funds invest most of their capital in common stocks. True
First-time real estate investors should consider investing in commercial properties. False
Asset allocation funds concentrate on one type of investment. False
Mutual funds do not offer guaranteed performance
Mutual funds may be classified by the types of securities they purchase. True
When evaluating a real estate investment, the main consideration is changes in the property value. False
The primary investment objective of bond funds is income. True
A 12b-1 fee can only be charged by a load mutual fund. False
A mutual fund cannot charge more than 6.5 percent in total sales charges and fees. False
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
ETFs often distribute large capital gains to their shareholders. False
Open-ended mutual funds companies buy their shares back from investors at NAV. True
Advantages of exchange traded funds over mutual funds include a broader market focus. False

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