Investment Instruments Part II

Which of the following is a key advantage of mutual funds for individual investors?

• Ability to trade throughout the day

• Guaranteed returns

• Access to professional management

• No fees of any kind

What is a “no-load” mutual fund?

• A fund with no dividend payouts

• A fund that tracks an index

• A fund that does not charge a sales fee

• A fund that invests only in government bonds

Mutual funds typically provide:

• Exposure to one single stock

• High leverage trading strategies

• Access to a diversified pool of assets

• Real estate ownership

A switching fee in mutual funds refers to:

• A tax penalty on dividends

• A fee for exchanging mutual funds within the same company

• The cost of changing financial advisors

• The charge applied for early redemption

A primary advantage of ETFs over mutual funds is:

• Guaranteed outperformance of the index

• Fixed NAV at all times

• Intraday trading flexibility

• Absence of any fees

What does SPY represent in the context of ETFs?

• A bond mutual fund

• A foreign currency ETF

• A diversified ETF that tracks the S&P 500

• A fund that holds only government bonds

Which statement is true about passive ETFs?

• They are actively managed with frequent stock selection

• They attempt to outperform the index

• They track a specific market index with low fees

• They focus only on short-term government bonds

What is a potential risk when buying small, less-known ETFs?

• High dividend payments

• Tracking the index too closely

• Liquidity risk

• Too much exposure to mutual funds

How are ETFs typically taxed compared to mutual funds?

• They are tax-exempt

• They offer special deductions

• Similar taxation, depending on asset type and account location

• They always receive capital gains treatment

Which of the following best describes a REIT?

• A trust that manages mutual funds

• A stock fund that focuses on dividend growth

• A company that owns and operates income-generating real estate

• A type of short-term bond fund