Quiz on Mutual Funds

Which of the following statements is incorrect?

• Mutual funds serve as a key financial intermediary.

• Managers of mutual funds do not analyze economic and industry trends.

• Because of their diversification, management expertise, and liquidity, mutual funds have grown at a rapid pace.

• Some mutual funds offer check-writing privileges.

No-load mutual funds are normally promoted by ______. Load funds are promoted by ______.

• registered representatives of a brokerage firm; registered representatives of a brokerage firm

• registered representatives of a brokerage firm; the mutual fund of concern

• the mutual fund of concern; registered representatives of a brokerage firm

• the mutual fund of concern; the mutual fund of concern

To cover managerial expenses, mutual funds typically charge

• management fees of 1 to 2 percent of total assets per year.

• commissions of typically 8 to 10 percent of transaction market value per year.

• management fees of typically more than 10 percent of total assets per year.

• commissions of typically 3 to 5 percent of the transaction market value per year.

Mutual funds that are willing to repurchase their shares from investors at any time are referred to as

• closed-end mutual funds.

• load mutual funds.

• no-load mutual funds.

• open-end mutual funds.

Mutual funds that do not repurchase their shares from investors are

• closed-end mutual funds.

• load mutual funds.

• no-load mutual funds.

• open-end mutual funds.

Most closed-end funds invest in

• stock and bonds.

• money market securities.

• gold.

• derivatives.

Exchange-traded funds are like open-end funds in the sense that

• their shares are traded on an exchange, and their share price changes throughout the day.

• they have a fixed number of shares.

• they are not actively managed.

• none of the above

Hedge funds differ from open-end mutual funds in the sense that

• they require a much smaller initial investment.

• they are open to additional investments at any time.

• they do not accommodate investors who want to sell their shares back to the fund.

• they invest in very limited set of securities.

Investing in mutual funds is different from depositing money in a depository institution in that it represents partial ownership, whereas deposits represent a form of credit.

• True

• False

Mutual funds

• are unregulated.

• are required to disclose the names of their portfolio managers in the prospectus.

• must disclose their performance record over the past 20 years.

• are exempt from all taxes.