WorksheetsInvestment Instruments Part II
Total questions: 19
Worksheet time: 10mins
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
What is a unique tax requirement for a REIT to maintain its status?
It must hold at least 90% foreign real estate
It must distribute at least 90% of its taxable income to shareholders
It must invest solely in residential properties
It must pay no dividends
Why are REITs commonly placed in tax-deferred accounts like IRAs?
To avoid foreign exchange risk
Because REIT dividends are always tax-free
To defer taxes on ordinary income they generate
To qualify for early retirement withdrawals
Which of the following is NOT typically held within REIT portfolios?
Hotels
Office buildings
Data centers
Mutual fund shares
One of the main ways a REIT generates income for investors is:
Through short selling real estate
From rental income on its properties
From bond coupon payments
By issuing municipal debt
What is the primary advantage of investing in a mutual fund?
Guaranteed profits.
Professional management of the fund.
Ability to withdraw money at any time without penalty.
Fixed interest rates.
What is a mutual fund?
A government-provided pension.
A private savings account.
An investment vehicle made up of a pool of money collected from many investors.
A type of insurance product.
Why is it important to consider the expense ratio when investing in mutual funds?
It represents the potential profit of the fund.
It is the fee that the fund charges for management, administrative fees, and other costs.
It indicates the fund's past performance.
It is a measure of the fund's risk level.
Who manages a mutual fund?
A government official
A professional money manager
A certified public accountant
A bank teller
The price of the mutual fund (that is determined by the total value of the securities in the portfolio, divided by the number of the fund's outstanding shares) is known as its
net asset value
cost basis
value index
commissions and fees
