Question 1

Mutual funds that invest in a variety of smaller, lesser-known companies that offer higher growth potential are referred to as sector funds.

Accepted Answer

A) True 
 B)False

Question 2

Typically, you must invest at least $15,000 to open a mutual fund account.

Accepted Answer

A) True 
 B)False

Question 3

Because an index fund is a mirror image of a specific index, the dollar value of a share in an index fund increases when the index increases.

Accepted Answer

A) True 
 B)False

Question 4

What is the most common reason given by mutual fund owners for investing in funds?

Accepted Answer

A)   To reduce taxable income
B)   Saving for someone's education
C)   Saving for emergencies
D)   Saving for retirement
E)   Saving for a new carF) B) and D)
G) A) and C)

Question 5

There are about _____ exchange-traded funds.

Accepted Answer

A)   25
B)   50
C)   150
D)   775
E)   1,000F) A) and D)
G) C) and D)

Question 6

If an investor uses a reinvestment plan to invest income dividends and capital-gain distributions:

Accepted Answer

A)   then both the income dividends and capital-gain distributions are tax-exempt.
B)   only the income dividends are tax-exempt.
C)   only the capital-gain distributions are tax-exempt.
D)   both the income dividends and capital-gain distributions are currently taxable.
E)   then both the income dividends and capital-gain distributions will be tax-deferred.F) B) and C)
G) D) and E)

Question 7

A contingent deferred sales load is a 1 to 5 percent charge that shareholders pay when they withdraw their investment from a mutual fund.

Accepted Answer

A) True 
 B)False

Question 8

A contingent deferred sales load, which is a charge that shareholders pay when they withdraw their investment from a mutual fund, can be as low as 1 percent and as high as ___ depending on how long you own the mutual fund before making a withdrawal.

Accepted Answer

A)   3 percent
B)   5 percent
C)   7 percent
D)   10 percent
E)   15 percentF) None of the above
G) All of the above

Question 9

Class C shares, because of their ongoing, higher 12b-1 fees, are often more expensive than Class A or Class B shares over a long period of time.

Accepted Answer

A) True 
 B)False

Question 10

When Pete Mills went to withdraw $5,000 from the Nationwide Fidelity Mutual fund, he was informed that the fund would charge 5 percent of the amount withdrawn. What is the dollar amount of the withdrawal charge?

Accepted Answer

A)   $2,500
B)   $500
C)   $250
D)   $25
E)   $50F) A) and D)
G) B) and E)

Question 11

A 1 to 5 percent fee that investors pay when they withdraw their investment from a mutual fund is called a:

Accepted Answer

A)   withdrawal fee.
B)   12b-1 fee.
C)   contingent deferred sales load.
D)   front-end load.
E)   management fee.F) A) and D)
G) C) and D)

Question 12

Mutual funds that apportion their investments among common stocks and bonds are referred to as small-cap funds.

Accepted Answer

A) True 
 B)False

Question 13

To purchase shares in an open-end fund, you may use four options: regular accounts, voluntary savings plans, contractual savings plans, and reinvestment plans.

Accepted Answer

A) True 
 B)False

Question 14

Joseph Carter is buying shares in a mutual fund that is investing in stocks all over the world, including the United States. What type of mutual fund is this?

Accepted Answer

A)   Aggressive-growth fund
B)   Equity income fund
C)   Global fund
D)   International fund
E)   Regional fundF) A) and C)
G) None of the above

Question 15

Marcie is seeking interest income but wants to ensure that her investment is as safe as possible. Which type of mutual fund best fits her requirements?

Accepted Answer

A)   Junk bond fund
B)   Intermediate corporate bond fund
C)   Municipal bond fund
D)   Short-term government bond
E)   World bond fundF) D) and E)
G) A) and D)

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

A no-load fund is a mutual fund in which no sales charge is paid by the individual investor to buy or sell shares.

Accepted Answer

A) True 
 B)False

Question 18

A mutual fund that invests in common stocks and bonds with the primary objectives of conserving capital, providing income, and long-term growth is called a(n)  ____________ fund.

Accepted Answer

A)   balanced
B)   growth
C)   industry
D)   income
E)   money marketF) A) and B)
G) A) and E)

Question 19

Sloan Richards is buying shares in a mutual fund that invests in companies that have a market capitalization of less than $2 billion. What type of mutual fund is this?

Accepted Answer

A)   Socially responsible fund
B)   Sector fund
C)   Small-cap fund
D)   Index fund
E)   Growth fundF) C) and D)
G) None of the above

Question 20

Which of the following statements is false?

Accepted Answer

A)   The purpose of investing in a closed-end, exchange-traded fund or open-end mutual fund is to earn a financial return.
B)   Income dividends are the earnings that a fund pays to shareholders from its dividend and interest income.
C)   Capital gain distributions are the payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio.
D)   The only way to make money on a mutual fund is by selling shares at a higher price than was initially paid for them.
E)   All of these statements are true.F) All of the above
G) C) and D)

Exam 16: Investing in Mutual Funds

A contingent deferred sales load, which is a charge that shareholders pay when they withdraw their investment from a mutual fund, can be as low as 1 percent and as high as ___ depending on how long you own the mutual fund before making a withdrawal.

Correct AnswerverifiedShow Answer

A contingent deferred sales load is a 1 to 5 percent charge that shareholders pay when they withdraw their investment from a mutual fund.

Correct AnswerverifiedShow Answer

When Pete Mills went to withdraw $5,000 from the Nationwide Fidelity Mutual fund, he was informed that the fund would charge 5 percent of the amount withdrawn. What is the dollar amount of the withdrawal charge?

Correct AnswerverifiedShow Answer

To purchase shares in an open-end fund, you may use four options: regular accounts, voluntary savings plans, contractual savings plans, and reinvestment plans.

Correct AnswerverifiedShow Answer

Class C shares, because of their ongoing, higher 12b-1 fees, are often more expensive than Class A or Class B shares over a long period of time.

Correct AnswerverifiedShow Answer

Sloan Richards is buying shares in a mutual fund that invests in companies that have a market capitalization of less than $2 billion. What type of mutual fund is this?

Correct AnswerverifiedShow Answer

Joseph Carter is buying shares in a mutual fund that is investing in stocks all over the world, including the United States. What type of mutual fund is this?

Correct AnswerverifiedShow Answer

Marcie is seeking interest income but wants to ensure that her investment is as safe as possible. Which type of mutual fund best fits her requirements?

Correct AnswerverifiedShow Answer

Because an index fund is a mirror image of a specific index, the dollar value of a share in an index fund increases when the index increases.

Correct AnswerverifiedShow Answer

There are about _____ exchange-traded funds.

Correct AnswerverifiedShow Answer

A 1 to 5 percent fee that investors pay when they withdraw their investment from a mutual fund is called a:

Correct AnswerverifiedShow Answer

A mutual fund that invests in common stocks and bonds with the primary objectives of conserving capital, providing income, and long-term growth is called a(n) ____________ fund.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Mutual funds that apportion their investments among common stocks and bonds are referred to as small-cap funds.

Correct AnswerverifiedShow Answer

Mutual funds that invest in a variety of smaller, lesser-known companies that offer higher growth potential are referred to as sector funds.

Correct AnswerverifiedShow Answer

If an investor uses a reinvestment plan to invest income dividends and capital-gain distributions:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Typically, you must invest at least $15,000 to open a mutual fund account.

Correct AnswerverifiedShow Answer

A no-load fund is a mutual fund in which no sales charge is paid by the individual investor to buy or sell shares.

Correct AnswerverifiedShow Answer

What is the most common reason given by mutual fund owners for investing in funds?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified