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28 Sep 2019

Question 11

Advantages of mutual funds include

A.
professional management.

B.
all of these.

C.
liquidity.

D.
diversification.

Question 12

Which of the following types of investment companies operates much like an index fund?

A.
exchange-traded fund

B.
unit investment trust

C.
closed-end fund

D.
REIT

Question 13

A common stock fund that invests in only one industry is called a(n) fund.

A.
maximum capital gains

B.
growth and income

C.
index

D.
sector

Question 14

Mutual funds that charge a load do so to compensate

A.
fund managers.

B.
brokers.

C.
shareholders.

D.
the SEC.

Question 15

Your first task in selecting a mutual fund is to

A.
review your investment policy.

B.
locate sources of comparative performance data.

C.
eliminate funds inappropriate for your investment goals.

D.
screen and compare funds that meet your investment criteria.

Question 16

Taxes on annual earnings from mutual funds can be avoided

A.
while those amounts are kept in an IRS-qualified retirement account.

B.
as long as the mutual shares are not sold.

C.
while those amounts are kept in an IRS-qualified retirement account and if those earnings are interest from municipal bonds.

D.
if those earnings are interest from municipal bonds.

Question 17

Mutual funds permit automatic income reinvestment of

A.
ordinary income dividend distribution.

B.
none of these.

C.
both ordinary income dividend distributions and capital gains distributions.

D.
capital gains distribution.

Question 18

The type of mutual fund that is not actively managed is called a(n) fund.

A.
emerging market

B.
money market

C.
index

D.
sector

Question 19

A mutual fund that does not assess a sales charge at the time of the investment purchase is called a fund.

A.
back-end load

B.
front-end load

C.
low-load

D.
no-load

Question 20

Open-end mutual funds

A.
make up about 75 percent of all mutual funds.

B.
are sold only through brokers.

C.
are sold at their current net asset value.

D.
are sold to other investors on a secondary market.

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28 Sep 2019

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Related questions

You recently graduated from college and accepted a job at M&D, Inc. The HR manager informs you about the companyâs new 401 (k) plan. A 401 (k) plan is a tax deferred retirement plan, meaning that no current taxes are paid on the money deposited. For example, assuming a $30,000 salary per year and a $1,500 contribution to your 401 (k), the taxable income is reduced to $28,500. No taxes will be due on any capital gains or plan income while you are invested in the plan, but you will pay taxes when you withdraw the money at retirement. You can contribute up to 15% of your salary to the plan and the company has a 5% match program. This means that the company will match your contribution dollar for dollar up to 5% of your salary, but you must contribute to get the match. The 401(k) plan has several options for investments, most of which are mutual funds. When you purchase shares in a mutual fund, you are actually purchasing partial ownership of the fundâs assets, similar to purchasing shares of stock in a company. The return of the fund is the weighted average of the return of the assets owned by the fund, minus any expenses, with the largest expense being the management fee paid to managers to manage the fund. The retirement investments options offered by M&D are as follows:

a) Company stock. (stock in M&D) The company is currently privately held and its stock is appraised annually. You will be purchasing the stock at a 20% discount from the appraised value. The company is expected to go public in 3 to 5 years. If you need to sell the stock before the company becomes public, the company would buy it back at the then-current appraised value.

b) Vanguard S&P500 Index Fund. This mutual fund tracks the S&P 500 index, so its return is approximately the return on the S&P 500 minus the expenses. Vanguard charges expenses of 0.2% of assets per year

c) Vanguard Small Cap Fund. This fund primarily invests in small capitalization stocks. As such, the returns of the fund are more volatile. The fund charges 1.7% of assets in expenses per year.

d) Vanguard Large Cap Fund. This fund invests primarily in large capitalization stocks of the US companies. The fund manager has outperformed the market in 7 of the last ten years. The fund charges 1.5% in expenses.

Questions:

1. What advantages/disadvantages do the mutual funds offer compared to company stock for your retirement investing?

2. The company matches your contributions up to 5% of your salary. What return on your investment does this represent? What does your answer suggest about matching programs?

3. What are the advantages / disadvantages of choosing Vanguard Large Cap Fund over the Vanguard S&P 500 Index Fund?

4. Why would you consider investing in the Vanguard Small Cap Fund? How do the expenses charged by the fund affect your decision to invest in the fund?

salmonworm477

Eurodollars are U.S. dollars that have been deposited in

	a.	foreign branches of U.S. banks
	b.	foreign subsidiaries
	c.	foreign banks
	d.	foreign banks and foreign branches of U.S. banks

10 points

QUESTION 2

A savings and loan association is an example of which type of financial intermediary?

	a.	commercial bank
	b.	investment company
	c.	finance company
	d.	thrift institution

10 points

QUESTION 3

Finance companies obtain a significant amount of their funds by

	a.	pooling funds
	b.	issuing their own debt securities
	c.	issuing their own equity securities
	d.	accepting both demand and time deposits

10 points

QUESTION 4

When an investor purchases shares in a no-load common stock mutual fund, she is using a(n)

	a.	primary intermediary
	b.	broker
	c.	financial intermediary
	d.	over-the-counter market

10 points

QUESTION 5

In an efficient capital market, corporate diversification is ____.

	a.	of great benefit
	b.	inexpensive
	c.	unnecessary
	d.	of benefit to corporate managers

10 points

QUESTION 6

Changes in the tax code that slow down depreciation, ____ the present value of investment cash flows and, therefore, make the investment ____ desirable.

	a.	increase, more
	b.	increase, less
	c.	decrease, less
	d.	decrease, more

10 points

QUESTION 7

Christy purchased 100 shares of Good Idea stock for $48 last year. Yesterday she sold the stock for $45. If she received $4 in dividends during the time she held the security, what is her holding period return?

	a.	-6.30%
	b.	14.60%
	c.	8.30%
	d.	2.08%

10 points

QUESTION 8

Lear purchased 100 shares of Quitcha Twitchin Anti-inch Cream stock at $30 per share last year and sold them eleven months later for $24 per share. The shares split 2 for 1 shortly after Lear purchased the stock. If the stock paid $0.25 per share in dividends last year, what is Lear's holding period return?

	a.	6.17%
	b.	61.67%
	c.	21.67%
	d.	-19.17%

10 points

QUESTION 9

All of the following are financial intermediaries EXCEPT:

	a.	loan sharks
	b.	commercial banks
	c.	investment companies
	d.	thrift institutions

10 points

QUESTION 10

Trading on the NYSE is conducted by members of the exchange. The members that execute orders and act as agents on behalf of their clients are::

	a.	Floor Brokers
	b.	SEC Agents
	c.	Exchange Runners
	d.	Designated Market Makers

10 points

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coffeebutterfly395

Question 5

1. Which of the following does not have default risk?

	a.	Money market mutual funds.
	b.	Commercial paper.
	c.	Negotiable certificates of deposit.
	d.	U.S. Treasury bills.

2 points

Question 6

1. The spread is the:

	a.	Difference between the bid and ask prices.
	b.	Commission charged by the broker.
	c.	Difference between the purchase and sale prices.
	d.	Difference between the commissions charged by full-service and discount brokers.

3 points

Question 7

1. Securities regulations protect investors by:

	a.	Requiring disclosures of information by firms.
	b.	Stopping investors from buying overpriced stock.
	c.	Reducing competition among brokers.
	d.	Establishing commission schedules.

3 points

Question 8

1. If a stock is bought on margin:

	a.	The full amount of the cost of the investment is borrowed.
	b.	The commissions on the investment are increased.
	c.	The cost of the investment is reduced.
	d.	The interest on the borrowed funds is set by the SEC.

3 points

Question 9

1. Sarbanes-Oxley, the latest important securities law:

	a.	Reduces potential conflicts between securities analysts and investment bankers.
	b.	Legalizes the sale of securities by investment brokers.
	c.	Requires corporate boards of directors to own stock.
	d.	Mandates that security analysts file their recommendations with the SEC.

2 points

Question 10

1. Which of the following are true about the present value of a dollar?

1. It increases as the interest rate increases.

2. It decreases as the interest rate increases.

3. It increases as the time period increases.

4. It decreases as the time period increases.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

3 points

Question 11

1. Time value concepts may not be used to determine:

	a.	The present value of an annuity.
	b.	The margin required on a stock purchase.
	c.	The future value of $100 deposited in a bank.
	d.	The present value of a lump sum.

2 points

Question 12

1. What is the marginal tax rate?

	a.	The tax rate paid on investment gains from items purchased on margin.
	b.	The tax rate paid on an additional dollar of taxable income.
	c.	The margin required on a stock purchase.
	d.	The present value of a lump sum.

2 points

Question 13

1. Examples of capital gains include sales of which of the following?

1. IRA accounts.

2. Stocks sold for a profit.

3. Real estate sold for a profit.

	a.	1 and 2.
	b.	1 and 3.
	c.	2 and 3.
	d.	All of these choices.

3 points

Question 14

1. With a Roth IRA, the individual:

	a.	May deduct annual contributions.
	b.	Earns tax-free income.
	c.	Defers taxes.
	d.	Avoids estate taxes.

2 points

Question 15

1. Sources of unsystematic risk include which of the following?

1. A firms financing decisions.

2. A firms operations.

3. Fluctuating market prices.

	a.	1 and 2.
	b.	1 and 3.
	c.	2 and 3.
	d.	All of these choices.

2 points

Question 16

1. For diversification to reduce risk:

	a.	The returns on the individual securities should be highly correlated.
	b.	The prices of the stocks should be stable.
	c.	The returns on the individual securities should be negatively correlated.
	d.	One firm should offer dividends and the other should offer capital gains.

2 points

Question 17

1. Which of the following are true about beta coefficients?

1. They are a measure of systematic risk.

2. They relate the return on an individual security to the return on the market.

3. They measure the variability of an assets return.

	a.	1 and 2.
	b.	1 and 3.
	c.	2 and 3.
	d.	All of these choices.

3 points

Question 18

1. Which of the following does an efficient portfolio do?

1. Maximizes risk for a given return.

2. Minimizes risk for a given return.

3. Maximizes return for a given level of risk.

4. Minimizes return for a given level of risk.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

3 points

Question 19

1. The security market line does not:

	a.	Indicate the relationship between risk and return.
	b.	Relate the market return and beta to a stock's return.
	c.	Identify the optimal portfolio for the investor.
	d.	Use beta coefficients as a measure of risk.

3 points

Question 20

1. Mutual funds ____ realized capital gains and income (for example, dividends received):

	a.	Retain.
	b.	Reinvest.
	c.	Distribute.
	d.	Distribute or reinvest.

2 points

Question 21

1. An index fund limits its portfolio to:

	a.	High quality securities.
	b.	Stocks that respond to changes in the consumer price index.
	c.	Stocks included in an aggregate measure of stock prices.
	d.	Stocks of firms in a particular industry.

2 points

Question 22

1. Mutual funds with beta coefficients greater than 1.0:

	a.	Have outperformed the market.
	b.	Have underperformed the market.
	c.	Have more systematic risk than the market.
	d.	Have less systematic risk than the market.

3 points

Question 23

1. Which of the following will tend to cause a stock's price to fall?

1. The firms beta declines.

2. The firms beta increases.

3. The risk-free rate declines.

4. The risk-free rate increases.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

2 points

Question 24

1. The use of P/E ratios to select stocks suggests that:

	a.	High P/E stocks should be purchased.
	b.	Low P/E ratio stocks are overvalued.
	c.	A stock should be purchased if it is selling near its historic low P/E.
	d.	A stock should be purchased if it is selling near its historic high P/E.

2 points

Question 25

1. What does the efficient market hypothesis require?

1. Financial markets to be competitive.

2. Prices to adjust rapidly.

3. Prices of undervalued securities to fall.

	a.	1 and 2.
	b.	1 and 3.
	c.	2 and 3.
	d.	All of these choices.

3 points

Question 26

1. Which of the following does the strong form of the efficient market hypothesis suggest?

1. Inside information will not lead to superior investment results.

2. Inside information will lead to superior investment results.

3. Studying financial statements will not lead to superior investment results.

4. Studying financial statements will lead to superior investment results.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

3 points

Question 27

1. Which of the following is the least broad-based measure of stock prices?

	a.	NASDAQ market index.
	b.	Dow Jones industrial average.
	c.	S&P 500 stock index.
	d.	AMEX market value index.

3 points

Question 28

1. What is dollar-cost averaging?

	a.	Periodically buying a round lot of stock.
	b.	Periodically investing a specified dollar amount in a stock.
	c.	A means to increase the average cost basis.
	d.	A means to ensure a positive return.

2 points

Question 29

1. Stock dividends cause:

	a.	The price of a share of stock to rise.
	b.	The price of a share of stock to fall.
	c.	The value of the firm to rise.
	d.	The value of the firm to fall.

2 points

Question 30

1. Which of the following occurs when a stock has a two-for-one split?

	a.	The price of the stock doubles.
	b.	The firm's assets increase.
	c.	The firm's liabilities decrease.
	d.	The par value of the stock is reduced.

3 points

Question 31

1. Dividend reinvestment plans offer which of the following advantages?

1. Deferment of federal income taxes.

2. A convenient means to accumulate shares.

3. Dollar-cost averaging.

	a.	1 and 2.
	b.	1 and 3.
	c.	2 and 3.
	d.	2.

3 points

Question 32

1. When the Federal Reserve seeks to expand the money supply, it:

	a.	Sells securities.
	b.	Buy securities.
	c.	Runs a deficit.
	d.	Runs a surplus.

2 points

Question 33

1. The sum of cash, currency, and demand deposits is:

	a.	M1.
	b.	M2.
	c.	M3.
	d.	M4.

3 points

Question 34

1. If the Federal Reserve lowers the target federal funds rate:

	a.	The discount rate rises.
	b.	Liquidity in the banking system is increased.
	c.	Security prices fall.
	d.	Required reserves are also decreased.

3 points

Question 35

1. The anticipation of inflation suggests that the investor should:

	a.	Buy bonds.
	b.	Anticipate higher interest rates.
	c.	Avoid real estate investments.
	d.	Sell stocks of gold companies.

3 points

Question 36

1. The current ratio is unaffected by:

	a.	Using cash to pay a dividend.
	b.	The collection of an account receivable.
	c.	Selling inventory for a profit.
	d.	Selling bonds and using the funds to finance inventory.

2 points

Question 37

1. Which of the following are true as the debt ratio increases?

1. Fewer assets are debt financed.

2. More assets are debt financed.

3. The ratio of debt equity increases.

4. The ratio of debt equity decreases.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

2 points

Question 38

1. The technical approach suggests that future stock prices are forecasted by:

	a.	Past stock rates.
	b.	Financial ratios.
	c.	Accounting statements.
	d.	Monetary policy.

2 points

Question 39

1. The Dogs of the Dow strategy:

	a.	Forecasts the direction of the Dow Jones averages.
	b.	Suggests buying the Dow stocks with the highest dividend yields.
	c.	Outperforms the S&P 500.
	d.	Suggests buying the lowest-priced Dow stocks.

3 points

Question 40

1. Behavioral finance combines aspects from which two fields in an attempt to identify human traits that affect investment decisions?

	a.	Accounting and finance.
	b.	Finance and psychology.
	c.	Physics and finance.
	d.	Finance and marketing.

ochrewalrus157

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	A.	professional management.
	B.	all of these.
	C.	liquidity.
	D.	diversification.

	A.	exchange-traded fund
	B.	unit investment trust
	C.	closed-end fund
	D.	REIT

	A.	review your investment policy.
	B.	locate sources of comparative performance data.
	C.	eliminate funds inappropriate for your investment goals.
	D.	screen and compare funds that meet your investment criteria.

	A.	while those amounts are kept in an IRS-qualified retirement account.
	B.	as long as the mutual shares are not sold.
	C.	while those amounts are kept in an IRS-qualified retirement account and if those earnings are interest from municipal bonds.
	D.	if those earnings are interest from municipal bonds.

	A.	ordinary income dividend distribution.
	B.	none of these.
	C.	both ordinary income dividend distributions and capital gains distributions.
	D.	capital gains distribution.

	A.	make up about 75 percent of all mutual funds.
	B.	are sold only through brokers.
	C.	are sold at their current net asset value.
	D.	are sold to other investors on a secondary market.