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Exam 4: Mutual Funds and Other Investment Companies

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Question 1

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Consider a mutual fund with $300 million in assets at the start of the year and 12 million shares outstanding. If the gross return on assets is 18% and the total expense ratio is 2% of the year-end value, what is the rate of return on the fund?

A) 15.64%
B) 16%
C) 17.25%
D) 17.5%

E) None of the above
F) C) and D)

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Question 2

Multiple Choice

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In a recent study, Malkiel found that evidence of persistence in the performance of mutual funds ________ in the 1980s.

A) grew stronger
B) remained about the same
C) became slightly weaker
D) virtually disappeared

E) A) and C)
F) All of the above

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Question 3

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The assets of a mutual fund are $25 million. The liabilities are $4 million. If the fund has 700,000 shares outstanding and pays a $3 dividend, what is the dividend yield?

The offer price of an open-end fund is $18 and the fund is sold with a front-end load of 5%. What is the fund's NAV?

The NAV of which funds is fixed at $1 per share?

An open-end fund has a NAV of $16.50 per share. The fund charges a 6% load. What is the offering price?

The primary measurement unit used for assessing the value of one's stake in an investment company is ________.

Assume that you have recently purchased 100 shares in an investment company. Upon examining the balance sheet, you note that the firm is reporting $225 million in assets, $30 million in liabilities, and 10 million shares outstanding. What is the net asset value (NAV) of these shares?

You invest in a mutual fund that charges a 3% front-end load, 1% total annual fees, and a 0% back-end load on Class A shares. The same fund charges a 0% front-end load, 1% total annual fees, and a 2% back-end load on Class B shares. What are the total fees in year 1 on a Class B investment of $20,000 if you redeem shares with no growth in value?

A mutual fund has total assets outstanding of $69 million. During the year the fund bought and sold assets equal to $17.25 million. This fund's turnover rate was ________.

According to the 2017 Mutual Fund Fact Book, ________ of total assets were in taxable money market funds and ________ were tax-exempt money market funds.

Which type of fund generally has the lowest average expense ratio?

Which of the following is not a type of managed investment company?

An official description of a particular mutual fund's planned investment policy can be found in the fund's ________.

Which of the following funds are usually most tax-efficient?

From 1971 to 2013 the average return on the Wilshire 5000 Index was ________ the return of the average mutual fund.

Consider a no-load mutual fund with $200 million in assets and 10 million shares at the start of the year and with $250 million in assets and 11 million shares at the end of the year. During the year investors have received income distributions of $2 per share and capital gain distributions of $.25 per share. Assuming that the fund carries no debt, and that the total expense ratio is 1%, what is the rate of return on the fund?

________ funds stand ready to redeem or issue shares at their net asset value.

Mutual funds that hold both equities and fixed-income securities in relatively stable proportions are called ________.

The ratio of trading activity of a portfolio to the assets of the portfolio is called the ________.