Investments Mini-Quiz: Mutual Funds

  1. Which of the following statements concerning investment companies is (are) correct?
    1. A closed-end company has a fixed number of shares outstanding.
    2. An open-end company has a variable number of shares outstanding.
    3. The shares of both closed-end and open-end companies trade at their net asset values.

      1. I only
      2. I and II only
      3. II and III only
      4. I, II, and III

  2. All the following statements concerning various types of investment companies are correct EXCEPT:
    1. A growth fund tends to invest extensively in growth stocks.
    2. An income fund tends to invest extensively in income stocks.
    3. A balanced fund would likely own a substantial percentage of its assets in municipal bonds.
    4. A money market fund would be likely to have most of its funds invested in securities with less than one year to maturity.

  3. All the following are among the generally recognized advantages of mutual fund ownership EXCEPT:
    1. Diversification
    2. Full-time professional management
    3. Only a modest initial investment required
    4. The typical fund achieves yield results which exceed that of the general market

  4. Which of the following statements correctly distinguishes between most open-end and most closed-end investment companies?
    1. An open-end company offers a specified number of shares; a closed-end company does not.
    2. A closed-end company pays dividends; an open-end company does not.
    3. A closed-end company pays dividends; an open-end company does not.
    4. Shares of an open-end company may sell at a discount to NAV; shares of a closed-end company don’t.

  5. Which of the following statements concerning mutual funds are correct?
    1. They provide diversification for investors who have only a small amount to invest.
    2. From the initial purchase of mutual fund shares, an investor is assured of a minimum income level and a stated redemption price.
    3. They eliminate systematic risk.
    4. Their earnings are exempt from federal income taxes at the corporate level.

      1. I and II only
      2. I and IV only
      3. II and III only

  6. Which of the following statements concerning open-end investment companies are correct?
    1. They may issue new shares continuously.
    2. They must redeem shares based on net asset value.
    3. They utilize financial leverage extensively to achieve their objective.

      1. I and II only
      2. I and III only
      3. II and III only
      4. I, II and III

  7. Which of the following statements concerning all mutual funds is correct?
    1. They are conduits through which income passes to shareholders tax-free.
    2. They continually sell and redeem their shares.
    3. The portfolio of securities held by these funds is usually selected by the board of directors.

  8. Which of the following statements concerning closed-end investment companies is correct?
    1. Investors must sell their shares to the funds when they liquidate their investment.
    2. The capitalization of these funds is constantly changing.
    3. Share prices are determined by the forces of supply and demand.

  9. Which of the following considerations are important for investors to consider in selecting a mutual fund?
    1. Sales charges, fees and 12b-1 charges.
    2. Services such as exchange privileges.
    3. Size of the fund.
    4. Thickness of the prospectus.

      1. I and IV only
      2. I,II, and III only
      3. I, II and IV only
      4. II, III and IV only

  10. Which of the following services is provided for shareholders of mutual funds?
    1. Exchange privileges among a family of mutual funds
    2. IRA and Keogh plans
    3. Income tax record-keeping and tax information on dividends and capital gains
    4. Professional management

      1. I and IV only
      2. I, II, and IV only
      3. I, III, and IV only
      4. II, III and IV only
      5. I, II, III and IV

  11. Which of the following statements concerning a unit investment trust is correct?
    1. It has an unmanaged portfolio.
    2. It usually consists of common stocks.
    3. It is usually appropriate for young people.
    4. It requires constant attention of management.

  12. All the following are important tax considerations for investments in mutual funds EXCEPT:
    1. Excessive portfolio turnover
    2. Unrealized capital appreciation in portfolio
    3. Timing of capital gains distributions in IRAs
    4. Designation of actual shares redeemed


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