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Exam 16: Investing in Mutual Funds

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Question 71

Multiple Choice

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Which of the following options can a mutual fund investor use to purchase shares in an open-end fund?

A) Regular account transaction
B) Voluntary savings plan
C) Contractual savings plan
D) Reinvestment plan
E) All of these are ways to purchase shares in an open-end fund.

F) B) and C)
G) C) and E)

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Question 72

Multiple Choice

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Which of the following invests in U.S.Treasury securities?

A) Junk bond fund
B) Intermediate U.S.bond fund
C) Municipal bond fund
D) Short-term corporate bond fund
E) World bond fund

F) D) and E)
G) B) and E)

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Question 73

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Which of the following is an advantage of an exchange-traded fund?

When Pete Mills went to withdraw $3,000 from the Nationwide Fidelity Mutual fund,he was informed that the fund would charge 4 percent of the amount withdrawn.What is the dollar amount of the withdrawal charge?

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

The potential return on any investment should be indirectly related to the risk the investor assumes.

Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.

A mutual fund that provides tax-free interest income is referred to as a long-term U.S.bond fund.

Tiffany Scott puts $8,000 into a load mutual fund.She knows that her up-front sales charge is 5%.How much of her money actually goes to buy shares in the mutual fund?

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

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

Although mutual funds are popular among individual investors,most people do not use them as part of an IRA or retirement account.

Melanie Davis is getting ready to purchase shares in a mutual fund.The fund will charge her a one-time back-end load fee only if she redeems her shares within a stated period of time (usually 5 years) .What type of shares is she buying?

Which of the following seeks high total return by maintaining precise amounts within each of the various types of asset that the fund invests in?

Contingent deferred sales loads generally:

The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential,financial reward,or security.

A mutual fund in which no sales charge is paid by the individual investor is called a(n) ________ fund.

While mutual fund income dividends are subject to taxation,capital gain distributions are not subject to taxation.

Cindy and John Appleby just inherited $30,000 and would like to invest the money in a conservative mutual fund.Since they have never invested in mutual funds,they ask for your help.Describe the sources of information available for evaluating a mutual fund investment.

When one investment company manages a group of mutual funds,it is called a: