Chapter 13 Review

  1. To purchase shares in an open-end fund, you may use four options, regular accounts, voluntary savings plans, contractual savings plans and reinvestment plans.
  2. True
  3. False
  4. In a newspaper quotation, NAV stands for “not accessible value.”
  5. True
  6. False
  7. Tax information for mutual funds is reported as part of the year-end statement or IRS Form 1099-DIV.
  8. True
  9. False
  10. All information related to management fees, contingent deferred sales fees, 12b-1 fees, and other expenses are contained in a mutual fund’s fee table.
  11. True
  12. False
  13. Which of the following statements is false?
  14. Investors purchase mutual funds for diversification.
  15. Investors purchase mutual funds because of professional management.
  16. Investors who purchase mutual funds are guaranteed a higher rate of return than a comparable investment in stocks or bonds.
  17. Professional mutual fund managers pick the securities included in a mutual fund.
  18. Even the best portfolio managers sometimes make mistakes.
  19. Although mutual funds are popular among individual investors, most people do not use them as part of an IRA or retirement account.
  20. True
  21. False
  22. Typically, you must invest at least $10,000, to open a mutual fund account.
  23. True
  24. False
  25. Many financial planners recommend that investors pick a mutual fund with an expense ratio that is
  26. 1 percent or less.
  27. between 1 and 2 percent.
  28. between 2 and 3 percent
  29. between 3 and 4 percent.
  30. over 4 percent.
  1. Over many years, index funds have outperformed almost ____ percent of all managed funds.
  2. 100
  3. 85
  4. 70
  5. 50
  6. 40
  7. A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n) ______fund.
  8. Balanced
  9. Equity income
  10. Industry
  11. Sector
  12. Money market
  13. Approximately ______percent of all mutual funds are open-end funds.
  14. 5
  15. 6
  16. 30
  17. 72
  18. 93
  19. Class C shares, because of their ongoing, higher 12-b1 fees, are often more expensive than Class A or Class B shares over a long period of time.
  20. True
  21. False
  22. The average management fee for all mutual funds is
  23. Less than 0.25 percent.
  24. 0.25 percent to 0.50 percent.
  25. 0.50 to 1.25 percent.
  26. 1.25 to 2.50 percent.
  27. 2.50 to 5.00 percent
  28. The managers of mutual funds tailor their investment portfolios to the investment objectives of their customers.
  29. True
  30. False
  31. Mary Cooper just purchased 100 shares in the All-American Fidelity Fund. The purchase cost for each share was $20. If this fund charges a 5 percent load, what is the total amount of commission she will pay the investment company?
  32. $100
  33. $1,000
  34. $2,000
  35. $2,100
  36. It is impossible to calculate Ms. Cooper’s total investment with this information.
  1. A load fund is a mutual fund in which investors pay a commission every time they sell and redeem shares.
  2. True
  3. False
  4. While mutual fund income dividends are subject to taxation, capital gain distribution are not subject to taxation.
  5. True
  6. False
  7. A fee that some investment companies charge for marketing and distributing a mutual fund is called a
  8. 14A-1 fee.
  9. 12b-1 fee.
  10. 18-2 fee
  11. 21-AB fee.
  12. None of the above answers are correct.
  13. A 1 to 5 percent fee that investors pay when they withdraw their investment from a mutual fund is called a(n)
  14. withdrawal fee.
  15. sales fee.
  16. contingent deferred sales load.
  17. unload fee.
  18. load fee.
  19. In a newspaper quotation, the letter “P” means a 12b-1 distribution fee is charged.
  20. True
  21. False

Chapter 13 Review

Personal Finance 1200-C