Quiz on Mutual Funds and Hedge Funds

Funds that specialize in municipal bonds and certain types of real estate to minimize tax liabilities are called hybrid funds.

• True

• False

Hedge funds can short sell securities, whereas most mutual funds cannot.

• True

• False

A hedge fund that goes long in a convertible bond and short in the equity of the same firm is employing a market neutral arbitrage strategy.

• True

• False

The shares of a closed-end fund with market value of assets of $200 million and 2 million shares outstanding will always trade at a market value of $100 per share.

• True

• False

If you invest $10,000 in a mutual fund with a NAV of $50 per share and a 5.5% back-end load, you will receive less than 200 shares in the fund.

• True

• False

Because of their ability to hedge, the subprime mortgage crisis did not cause any significant losses to hedge funds.

• True

• False

Offshore hedge funds are not subject to taxation on fund distributions nor to U.S. estate taxes.

• True

• False

The market value of a fund's net assets divided by the number of mutual fund shares outstanding is called the NAV of the fund.

• True

• False

Open-end fund shares often trade at a discount or premium relative to NAV.

• True

• False

Load funds typically provide investors with higher rates of return and offer more services such as check writing, transfers between funds, etc., than no load funds.

• True

• False