Student name:__________

1) Which one of the following statements regarding open-end mutual funds is false?

A) The funds redeem shares at net asset value.

B) The funds offer investors professional management.
C) The funds offer investors a guaranteed rate of return.
D) The funds redeem shares at net asset value and offer investors professional
management.

2) Which one of the following statements regarding closed-end mutual funds is false?

A) The funds always trade at a discount from NAV.

B) The funds redeem shares at their net asset value.
C) The funds offer investors professional management.
D) The funds always trade at a discount from NAV and redeem shares at their net asset
value.
E) None of the options are correct.

3) Which of the following functions do investment companies perform for their investors?

A) Record keeping and administration

B) Diversification and divisibility
C) Professional management
D) Lower transaction costs
E) All of the options.

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4) Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of
$17,000,000. There were 24,300,000 shares in the fund at year end. What was Multiple Mutual's
net asset value?

A) $18.11
B) $18.81
C) $69.96
D) $7.00
E) $181.07

5) Growth Fund had year-end assets of $862,000,000 and liabilities of $12,000,000. There
were 32,675,254 shares in the fund at year end. What was Growth Fund's net asset value?

A) $28.17
B) $25.24
C) $19.62
D) $26.01
E) $21.56

6) Diversified Portfolios had year-end assets of $279,000,000 and liabilities of $43,000,000.

If Diversified's NAV was $42.13, how many shares must have been held in the fund?

A) 43,000,000
B) 6,488,372
C) 5,601,709
D) 1,182,203

7) Pinnacle Fund had year-end assets of $825,000,000 and liabilities of $25,000,000. If

Pinnacle's NAV was $32.18, how many shares must have been held in the fund?

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 A) 21,619,346.92
B) 22,930,546.28
C) 24,860,161.59
D) 25,693,645.25

8) Most actively-managed mutual funds, when compared to a market index such as the
Wilshire 5000,

A) beat the market return in all years.

B) beat the market return in most years.
C) exceed the return on index funds.
D) do not outperform the market.

9) Pools of money invested in a portfolio that is fixed for the life of the fund are called

A) closed-end funds.
B) open-end funds.
C) unit investment trusts.
D) REITS.
E) redeemable trust certificates.

10) Investors in closed-end funds who wish to liquidate their positions must

A) sell their shares through a broker.

B) sell their shares to the issuer at a discount to net asset value.
C) sell their shares to the issuer at a premium to net asset value.
D) sell their shares to the issuer for net asset value.

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 E) hold their shares to maturity.

11) Closed-end funds are frequently issued at a ______ to NAV and subsequently trade at a
__________ to NAV.

A) discount; discount
B) discount; premium
C) premium; premium
D) premium; discount
E) No consistent relationship has been observed.

12) At issue, offering prices of open-end funds will often be

A) less than NAV due to loads.

B) greater than NAV due to loads.
C) less than NAV due to limited demand.
D) greater than NAV due to excess demand.
E) less than or greater than NAV with no apparent pattern.

13) Which of the following statements about real estate investment trusts is true?

A) REITs invest in real estate or loans secured by real estate.

B) REITs raise capital by borrowing from banks and issuing mortgages.
C) REITs are similar to open-end funds, with shares redeemable at NAV.
D) REITs invest in real estate or loans secured by real estate and raise capital by
borrowing from banks and issuing mortgages.
E) All of the options are true.

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14) Which of the following statements about real estate investment trusts is true?

A) REITs may be equity trusts or mortgage trusts.

B) REITs are usually highly leveraged.
C) REITs are similar to closed-end funds.
D) REITs may be equity trusts or mortgage trusts and are usually highly leveraged.
E) All of the options are true.

15) Which of the following statements about money market mutual funds is true?

A) They invest in commercial paper, CDs, and repurchase agreements.

B) They usually offer check-writing privileges.
C) They are highly leveraged and risky.
D) They invest in commercial paper, CDs, and repurchase agreements, and they usually
offer check-writing privileges.
E) All of the options are true.

16) In 2018, the proportion of US mutual funds (based on total assets) specializing in
common stocks was

A) 21.7%.
B) 28.0%.
C) 55.0%.
D) 73.4%.
E) 63.5%.

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17) In 2018, the proportion of mutual funds (based on total assets) specializing in bonds was

A) 21.7%.
B) 28.0%.
C) 54.1%.
D) 73.4%.
E) 63.5%.

18) In 2018, the proportion of mutual funds (based on total assets) specializing in money
market securities was

15.2%.

A) 21.7%.
B) 28.0%.
C) 54.1%.
D) 73.4%.
E) 15.2%.

19) In 2018, the proportion of US hybrid (bond and stock) mutual funds (based on total
assets) was

A) 21.7%.
B) 28.0%.
C) 54.1%.
D) 8.1%.
E) 22.6%.

20) Management fees and other expenses of mutual funds may include

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 A) only front-end loads.
B) onlyback-end loads.
C) only 12b-1 charges.
D) only front-end and back-end loads.
E) front-end loads, back-end loads, and 12b-1 charges.

21) The Profitability Fund had NAV per share of $17.50 on January 1, 2018. On December
31 of the same year, the fund's NAV was $19.47. Income distributions were $0.75, and the fund
had capital gain distributions of $1.00. Without considering taxes and transactions costs, what
rate of return did an investor receive on the Profitability Fund last year?

A) 11.26%
B) 15.54%
C) 16.97%
D) 21.26%
E) 9.83%

22) The Yachtsman Fund had NAV per share of $36.12 on January 1, 2018. On December 31
of the same year, the fund's NAV was $39.71. Income distributions were $0.64, and the fund had
capital gain distributions of $1.13. Without considering taxes and transactions costs, what rate of
return did an investor receive on the Yachtsman Fund last year?

A) 22.92%
B) 17.68%
C) 14.39%
D) 18.52%
E) 14.84%

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23) Investors' Choice Fund had NAV per share of $37.25 on January 1, 2018. On December
31 of the same year, the fund s rate of return for the year was 17.3%. Income distributions were
$1.14, and the fund had capital gain distributions of $1.35. Without considering taxes and
transactions costs, what ending NAV would you calculate for Investors' Choice?

A) $41.20
B) $33.88
C) $43.69
D) $42.03
E) $46.62

24) Which of the following is not an advantage of owning mutual funds?

A) They offer a variety of investment styles.

B) They offer small investors the benefits of diversification.
C) They treat income as "passed through" to the investor for tax purposes.
D) All of the options are advantages of mutual funds.
E) None of the options are an advantage of mutual funds.

25) Which of the following would increase the net asset value of a mutual fund share,
assuming all other things remain unchanged?

A) An increase in the number of fund shares outstanding

B) An increase in the fund's accounts payable
C) A change in the fund's management
D) An increase in the value of one of the fund's stocks

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26) Which of the following characteristics apply to unit investment trusts?
I) Most are invested in fixed-income portfolios.II) They are actively-managed portfolios.III)
The sponsor pools securities, then sells public shares in the trust.IV) The portfolio is fixed for the
life of the fund.

A) I and IV
B) I and II
C) I, III, and IV
D) I, II, and III
E) I, II, III, and IV

27) As of 2018, which class of mutual funds had the largest amount of assets invested?

A) Equity funds
B) Bond funds
C) Mixed asset classes, such as asset allocation funds
D) Money market funds
E) Global funds

28) Commingled funds are

A) amounts invested in equity and fixed-income mutual funds.

B) funds that may be purchased at intervals of 3, 6, or 12 months at the discretion of
management.
C) amounts invested in domestic and global equities.
D) closed-end funds that may be repurchased only once every two years at the
discretion of mutual fund management.
E) partnerships of investors that pool their funds, which are then managed for a fee.

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29) Which of the following is true regarding equity mutual funds? I) They invest primarily
in stock.II) They may hold fixed-income securities, as well as stock.III) Most hold money market
securities, as well as stock.IV) Two types of equity funds are income funds and growth funds.

A) I and IV
B) I, III, and IV
C) I, II, and IV
D) I, II, and III
E) I, II, III, and IV

30) The fee that mutual funds use to help pay for advertising and promotional literature is
called a

A) front-end load fee.

B) back-end load fee.
C) operating expense fee.
D) 12b-1 fee.
E) structured fee.

31) Patty O Furniture purchased 100 shares of Green Isle mutual fund at a net asset value of
$42 per share. During the year, Patty received dividend income distributions of $2.00 per share
and capital gains distributions of $4.30 per share. At the end of the year, the shares had a net
asset value of $40 per share. What was Patty's rate of return on this investment?

A) 5.43%
B) 10.24%
C) 7.19%
D) 12.44%
E) 9.18%

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32) Assume that you purchased 200 shares of Super Performing mutual fund at a net asset
value of $21 per share. During the year, you received dividend income distributions of $1.50 per
share and capital gains distributions of $2.85 per share. At the end of the year, the shares had a
net asset value of $23 per share. What was your rate of return on this investment?

A) 30.24%
B) 25.37%
C) 27.19%
D) 22.44%
E) 29.18%

33) Assume that you purchased shares of High Flying mutual fund at a net asset value of
$12.50 per share. During the year, you received dividend income distributions of $0.78 per share
and capital gains distributions of $1.67 per share. At the end of the year, the shares had a net
asset value of $13.87 per share. What was your rate of return on this investment?

A) 29.43%
B) 30.56%
C) 31.19%
D) 32.44%
E) 29.18%

34) Assume that you purchased shares of a mutual fund at a net asset value of $14.50 per
share. During the year, you received dividend income distributions of $0.27 per share and capital
gains distributions of $0.65 per share. At the end of the year, the shares had a net asset value of
$13.74 per share. What was your rate of return on this investment?

A) 2.91%
B) 3.07%
C) 1.10%
D) 1.78%

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 E) −1.18%

35) Assume that you purchased shares of a mutual fund at a net asset value of $10.00 per
share. During the year, you received dividend income distributions of $0.05 per share and capital
gains distributions of $0.06 per share. At the end of the year, the shares had a net asset value of
$8.16 per share. What was your rate of return on this investment?

A) −18.24%
B) −16.1%
C) 16.10%
D) −17.3%
E) 17.3%

36) A mutual fund had year-end assets of $560,000,000 and liabilities of $26,000,000. There
were 23,850,000 shares in the fund at year end. What was the mutual fund's net asset value?

A) $22.87
B) $22.39
C) $22.24
D) $17.61
E) $19.25

37) A mutual fund had year-end assets of $250,000,000 and liabilities of $4,000,000. There
were 3,750,000 shares in the fund at year end. What was the mutual fund's net asset value?

A) $92.53
B) $67.39
C) $63.24
D) $65.60

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 E) $17.46

38) A mutual fund had year-end assets of $700,000,000 and liabilities of $7,000,000. There
were 40,150,000 shares in the fund at year end. What was the mutual fund's net asset value?

A) $9.63
B) $57.71
C) $16.42
D) $17.87
E) $17.26

39) A mutual fund had year-end assets of $750,000,000 and liabilities of $7,500,000. There
were 40,000,000 shares in the fund at year end. What was the mutual fund's net asset value?

A) $9.63
B) $18.56
C) $16.42
D) $17.87
E) $17.26

40) A mutual fund had year-end assets of $465,000,000 and liabilities of $37,000,000. If the
fund NAV was $56.12, how many shares must have been held in the fund?

A) 4,300,000
B) 6,488,372
C) 8,601,709
D) 7,626,515
E) None of these options are correct.

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41) A mutual fund had year-end assets of $521,000,000 and liabilities of $63,000,000. If the
fund NAV was $26.12, how many shares must have been held in the fund?

A) 17,534,456
B) 16,488,372
C) 18,601,742
D) 17,542,515

42) A mutual fund had year-end assets of $327,000,000 and liabilities of $46,000,000. If the
fund NAV was $30.48, how many shares must have been held in the fund?

A) 11,354,751
B) 8,412,642
C) 10,165,476
D) 9,165,414
E) 9,219,160

43) A mutual fund had year-end assets of $437,000,000 and liabilities of $37,000,000. If the
fund NAV was $60.12, how many shares must have been held in the fund?

A) 6,653,360
B) 8,412,642
C) 10,165,476
D) 9,165,414
E) 9,219,160

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44) A mutual fund had NAV per share of $19.00 on January 1, 2018. On December 31 of the
same year, the fund's NAV was $19.14. Income distributions were $0.57, and the fund had
capital gain distributions of $1.12. Without considering taxes and transactions costs, what rate of
return did an investor receive on the fund last year?

A) 11.26%
B) 10.54%
C) 7.97%
D) 8.26%
E) 9.63%

45) A mutual fund had NAV per share of $23.00 on January 1, 2018. On December 31 of the
same year, the fund's NAV was $23.15. Income distributions were $0.63, and the fund had
capital gain distributions of $1.26. Without considering taxes and transactions costs, what rate of
return did an investor receive on the fund last year?

A) 11.26%
B) 10.54%
C) 8.87%
D) 8.26%
E) 9.63%

46) A mutual fund had NAV per share of $26.25 on January 1, 2018. On December 31 of the
same year, the fund's rate of return for the year was 16.4%. Income distributions were $1.27, and
the fund had capital gain distributions of $1.85. Without considering taxes and transactions costs,
what ending NAV would you calculate?

A) $27.44
B) $33.88
C) $24.69
D) $42.03

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 E) $16.62

47) A mutual fund had NAV per share of $16.75 on January 1, 2018. On December 31 of the
same year, the fund's rate of return for the year was 26.6%. Income distributions were $1.79, and
the fund had capital gain distributions of $2.80. Without considering taxes and transactions costs,
what ending NAV would you calculate?

A) $17.44
B) $13.28
C) $14.96
D) $17.25
E) $16.62

48) A mutual fund had NAV per share of $36.15 on January 1, 2018. On December 31 of the
same year, the fund's rate of return for the year was 14.0%. Income distributions were $1.16, and
the fund had capital gain distributions of $2.12. Without considering taxes and transactions costs,
what ending NAV would you calculate?

A) $37.93
B) $34.52
C) $44.69
D) $47.25
E) $36.28

49) A mutual fund had NAV per share of $37.12 on January 1, 2018. On December 31 of the
same year, the fund's rate of return for the year was 11.0%. Income distributions were $2.26, and
the fund had capital gain distributions of $1.64. Without considering taxes and transactions costs,
what ending NAV would you calculate?

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 A) $37.93
B) $34.52
C) $37.30
D) $47.25
E) $36.28

50) Differences between hedge funds and mutual funds are that

A) hedge funds are only subject to minimal SEC regulation.

B) hedge funds are typically open only to wealthy or institutional investors.
C) hedge fund managers can pursue strategies not available to mutual funds, such as
short selling, heavy use of derivatives, and leverage.
D) hedge funds are commonly structured as private partnerships.
E) All of the options.

51) Of the following types of mutual funds, an investor who wishes to invest in a diversified
portfolio of stocks worldwide (including the U.S.) should choose

A) international funds.
B) global funds.
C) regional funds.
D) emerging-market funds.

52) Of the following types of mutual funds, an investor who wishes to invest in a diversified
portfolio of foreign stocks (excluding the U.S.) should choose

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 A) international funds.
B) global funds.
C) regional funds.
D) emerging-market funds.

53) Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the S&P 500 should choose

A) SPY.
B) DIA.
C) QQQ.
D) IWM.
E) VTI.

54) Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the Dow Jones Industrials should choose

A) SPY.
B) DIA.
C) QQQQ.
D) IWM.
E) VTI.

55) Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the Nasdaq 100 should choose

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 A) SPY.
B) DIA.
C) QQQ.
D) IWM.
E) VTI.

56) Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the Russell 2000 should choose

A) SPY.
B) DIA.
C) QQQQ.
D) IWM.
E) VTI.

57) Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the Wilshire 5000 should choose

A) SPY.
B) DIA.
C) QQQ.
D) IWM.
E) VTI.

58) Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the MSCI Japan Index should choose

A) SPY.

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 B) EWJ.
C) QQQQ.
D) IWM.
E) VTI.

59) Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the MSCI France Index should choose

A) SPY.
B) EWJ.
C) EWQ.
D) IWM.
E) VTI.

60) A mutual fund had average daily assets of $3.0 billion in 2018. The fund sold $600
million worth of stock and purchased $700 million worth of stock during the year. The fund's
turnover ratio is

A) 27.5%.
B) 12%.
C) 15%.
D) 25%.
E) 20%.

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61) A mutual fund had average daily assets of $2.0 billion in 2018. The fund sold $500
million worth of stock and purchased $600 million worth of stock during the year. The fund's
turnover ratio is

A) 27.5%.
B) 12%.
C) 15%.
D) 25%.
E) 20%.

62) A mutual fund had average daily assets of $4.0 billion in 2018. The fund sold $1.5 billion
worth of stock and purchased $1.6 billion worth of stock during the year. The fund's turnover
ratio is

A) 37.5%.
B) 22%.
C) 15%.
D) 45%.
E) 20%.

63) A mutual fund had average daily assets of $4.7 billion in 2018. The fund sold $2.2 billion
worth of stock and purchased $3.6 billion worth of stock during the year. The fund's turnover
ratio is

A) 37.5%.
B) 22.6%.
C) 15.3%.
D) 46.8%.
E) 20.7%.

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64) You purchased shares of a mutual fund at a price of $20 per share at the beginning of the
year and paid a front-end load of 5.75%. If the securities in which the fund invested increased in
value by 11% during the year, and the fund's expense ratio was 1.25%, your return if you sold
the fund at the end of the year would be

A) 4.33%.
B) 3.44%.
C) 2.45%.
D) 6.87%.

65) You purchased shares of a mutual fund at a price of $12 per share at the beginning of the
year and paid a front-end load of 4.75%. If the securities in which the fund invested increased in
value by 9% during the year, and the fund's expense ratio was 1.5%, your return if you sold the
fund at the end of the year would be

A) 4.75%.
B) 3.54%.
C) 2.65%.
D) 2.39%.

66) You purchased shares of a mutual fund at a price of $17 per share at the beginning of the
year and paid a front-end load of 5.0%. If the securities in which the fund invested increased in
value by 12% during the year, and the fund's expense ratio was 1.0%, your return if you sold the
fund at the end of the year would be

A) 4.75%.
B) 5.45%.
C) 5.65%.
D) 4.39%.

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67) You purchased shares of a mutual fund at a price of $20 per share at the beginning of the
year and paid a front-end load of 6.0%. If the securities in which the fund invested increased in
value by 10% during the year, and the fund's expense ratio was 1.5%, your return if you sold the
fund at the end of the year would be

A) 1.99%.
B) 2.32%.
C) 1.65%.
D) 2.06%.
E) None of the options are correct.

68) The phrase _____________________ is used to describe ETFs that, like actively
managed mutual funds, attempt to outperform passive indexes.

A) non-transparent
B) growth
C) value
D) hedge

69) These kind of money market funds must calculate net asset values, which may differ
from $1.00.

A) Prime
B) Prime institutional
C) Government
D) Cash equivalents

70) A type of REIT that invests primarily in construction loans would be classified as a
______________.

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 A) mortgage trust
B) equity trust.
C) revocable trust
D) bond trust
E) All of the options are true.

71) Compared to mutual funds, hedge funds may use the following strategy.

A) Growth
B) Value
C) Sector specialization
D) Significant leverage

72) Compared to mutual funds, hedge funds may require investors to _______________.

A) Cover transaction costs

B) Lock-up their investment for an extended period of time
C) Invest in a mixture of equities, debt, and international securities
D) Use specific trading protocols

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Answer Key

Test name: CH4

1) C
2) D
3) E
4) A
5) D
6) C
7) C
8) D
9) C
10) A
11) D
12) B
13) D
14) E
15) D
16) C
17) A

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18) E
19) D
20) E
21) D
22) E
23) A
24) C
25) D
26) C
27) A
28) E
29) E
30) D
31) B
32) A
33) B
34) C
35) D
36) B
37) D
38) E

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39) B
40) D
41) A
42) E
43) A
44) E
45) C
46) A
47) E
48) A
49) C
50) E
51) B
52) A
53) A
54) B
55) C
56) D
57) E
58) B
59) C

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60) E
61) D
62) A
63) D
64) B
65) D
66) B
67) A
68) A
69) B
70) A
71) D
72) B

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