Question 1

Contingent deferred sales loads generally:

Accepted Answer

A)  apply until the shares you own are in the fund for 10 years or more.
B)  apply regardless of how long your shares have been invested.
C)  increase as the length of time you have been in the fund increases.
D)  decline gradually until there is no withdrawal fee.
E)  apply only for the first year funds are invested.F) B) and D)
G) B) and E)

Question 2

Joseph Carter is buying shares in a mutual fund that is investing in stocks all over the world,including the United States.What type of mutual fund is this?

Accepted Answer

A)  aggressive-growth fund
B)  equity income fund
C)  global fund
D)  international fund
E)  regional fundF) All of the above
G) D) and E)

Question 3

When Pete Mills went to withdraw $5,000 from the Nationwide Fidelity Mutual fund,he was informed that the fund would charge 5 percent of the amount withdrawn.What is the dollar amount of the withdrawal charge?

Accepted Answer

A)  $2,500
B)  $500
C)  $250
D)  $25
E)  $50F) None of the above
G) B) and E)

Question 4

Noelle Simon is buying shares in a mutual fund that only invests in companies located in Latin America.What type of mutual fund is this?

Accepted Answer

A)  aggressive growth fund
B)  equity income fund
C)  global fund
D)  international fund
E)  regional fundF) B) and C)
G) A) and E)

Question 5

Which one of the following statements is false?

Accepted Answer

A)  Many investors have found a wealth of information about mutual fund investments on the Internet.
B)  It is possible to obtain market values for a mutual fund by using the Internet.
C)  Most investment companies that sponsor mutual funds have a Web page.
D)  Professional advisory services are prohibited from discussing mutual funds on their Web pages.
E)  A mutual fund's Web site will provide information about how to open an account,current market quotes,and specific fund information.F) B) and D)
G) A) and C)

Question 6

Bob Newsome purchased 250 shares of the Northern Lights Growth Fund.The purchase cost was $30 per share.If this fund charges a 3 percent load,what is the commission amount he will pay the investment company?

Accepted Answer

A)  $3
B)  $30
C)  $300
D)  $225
E)  $250F) A) and E)
G) D) and E)

Question 7

Caroline Campbell is buying shares in a mutual fund that invests in bonds offered by foreign companies and governments.What type of mutual fund is she buying?

Accepted Answer

A)  junk bond fund
B)  intermediate corporate bond fund
C)  municipal bond fund
D)  short-term government bond
E)  world bond fundF) A) and C)
G) C) and D)

Question 8

Which of the following is a disadvantage associated with purchasing a mutual fund?

Accepted Answer

A)  difficulty of buying and selling shares
B)  aggressive or unethical sales personnel
C)  only one withdrawal option
D)  no distribution of income and capital gains
E)  all of items listed in the other answersF) B) and C)
G) A) and D)

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

While advisory services provide detailed information on common and preferred stocks,there are no advisory services that provide information on mutual funds.

Accepted Answer

A) True 
 B)False

Question 11

Income dividends are the earnings a fund pays to shareholders from its dividend and interest income.

Accepted Answer

A) True 
 B)False

Question 12

Which one of the following is not a withdrawal option for a mutual fund?

Accepted Answer

A)  withdrawing a specified,dollar amount each investment period
B)  liquidating,or "selling off" a certain number of shares each investment period
C)  withdrawing a fixed percentage of asset growth
D)  withdrawing all income that results from dividends and capital gains distributions
E)  withdrawing a stated amount and treating it as a short-term loanF) B) and C)
G) A) and E)

Question 13

Which one of the following statements is false?

Accepted Answer

A)  Investors purchase mutual funds for diversification.
B)  Investors purchase mutual funds because of their professional management.
C)  Investors who purchase mutual funds are guaranteed a higher rate of return than if they were to purchase comparable stocks and bonds directly.
D)  Professional mutual fund managers work for an investment company.
E)  Even the best portfolio managers sometimes make mistakes.F) B) and C)
G) None of the above

Question 14

The commission charge for purchasing fund shares that impose an up-front commission charge ____________ percent.

Accepted Answer

A)  averages 0.50 to 1
B)  averages 1 to 2
C)  averages 2 to 4
D)  averages 5 to 6 1/2
E)  may be as high as 8 1/2F) A) and D)
G) A) and E)

Question 15

A mutual fund that requires investors to make regular purchases over a specified period of time is called a:

Accepted Answer

A)  regular account.
B)  voluntary savings plan.
C)  contractual savings plan.
D)  minimum withdrawal plan.
E)  free contract plan.F) None of the above
G) C) and D)

Question 16

While mutual fund income dividends are subject to taxation,capital gain distributions are not subject to taxation.

Accepted Answer

A) True 
 B)False

Question 17

If you are seeking federally tax-exempt income,which type of mutual fund should you purchase?

Accepted Answer

A)  junk bond fund
B)  intermediate corporate bond fund
C)  municipal bond fund
D)  short-term government bond
E)  world bond fundF) B) and D)
G) None of the above

Question 18

The All-Star Basic Value Fund's portfolio is valued at $210 million.The fund has liabilities of $5 million,and the investment company sponsoring the fund has issued 16,400,000 shares.What is the fund's net asset value?

Accepted Answer

A)  $25.00
B)  $21.00
C)  $16.40
D)  $12.50
E)  $5.00F) A) and E)
G) A) and D)

Question 19

For a load fund,the average commission usually ranges between 3 and 5 percent of the purchase price.

Accepted Answer

A) True 
 B)False

Question 20

Because of up front commission charges,many financial experts and government agencies are critical of:

Accepted Answer

A)  regular accounts.
B)  voluntary savings plans.
C)  contractual savings plans.
D)  minimum withdrawal plans.
E)  free contract plans.F) A) and E)
G) B) and E)

Exam 16: Investing in Mutual Funds

Contingent deferred sales loads generally:

Correct AnswerverifiedShow Answer

Noelle Simon is buying shares in a mutual fund that only invests in companies located in Latin America.What type of mutual fund is this?

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Bob Newsome purchased 250 shares of the Northern Lights Growth Fund.The purchase cost was $30 per share.If this fund charges a 3 percent load,what is the commission amount he will pay the investment company?

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The commission charge for purchasing fund shares that impose an up-front commission charge ____________ percent.

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Which one of the following statements is false?

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Which one of the following statements is false?

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Which one of the following is not a withdrawal option for a mutual fund?

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Which of the following is a disadvantage associated with purchasing a mutual fund?

Correct AnswerverifiedShow Answer

Caroline Campbell is buying shares in a mutual fund that invests in bonds offered by foreign companies and governments.What type of mutual fund is she buying?

Correct AnswerverifiedShow Answer

For a load fund,the average commission usually ranges between 3 and 5 percent of the purchase price.

Correct AnswerverifiedShow Answer

When Pete Mills went to withdraw $5,000 from the Nationwide Fidelity Mutual fund,he was informed that the fund would charge 5 percent of the amount withdrawn.What is the dollar amount of the withdrawal charge?

Correct AnswerverifiedShow Answer

A mutual fund that requires investors to make regular purchases over a specified period of time is called a:

Correct AnswerverifiedShow Answer

Because of up front commission charges,many financial experts and government agencies are critical of:

Correct AnswerverifiedShow Answer

While mutual fund income dividends are subject to taxation,capital gain distributions are not subject to taxation.

Correct AnswerverifiedShow Answer

The All-Star Basic Value Fund's portfolio is valued at $210 million.The fund has liabilities of $5 million,and the investment company sponsoring the fund has issued 16,400,000 shares.What is the fund's net asset value?

Correct AnswerverifiedShow Answer

Joseph Carter is buying shares in a mutual fund that is investing in stocks all over the world,including the United States.What type of mutual fund is this?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

While advisory services provide detailed information on common and preferred stocks,there are no advisory services that provide information on mutual funds.

Correct AnswerverifiedShow Answer

Income dividends are the earnings a fund pays to shareholders from its dividend and interest income.

Correct AnswerverifiedShow Answer

If you are seeking federally tax-exempt income,which type of mutual fund should you purchase?

Correct AnswerverifiedShow Answer

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