Question 1

____ are received as current income while one owns shares in a mutual fund.

Accepted Answer

When an investor owns shares in a mutual fund, they receive both ordinary income dividend distributions and capital gains distributions as current income. Ordinary income dividend distributions are the earnings from the mutual fund's investments in dividends and interest, while capital gains distributions are the profits from the sale of securities within the mutual fund's portfolio. Therefore, option A is the correct answer. Option B is incorrect as capital growth is not received as current income, but rather as an increase in the value of the mutual fund's shares. Option C is also incorrect as it only mentions capital gains distributions and capital growth, leaving out the important ordinary income dividend distributions. Option D is also incorrect as it only mentions dividend distributions, leaving out the capital gains distributions.

Question 2

There are approximately ____ open-end mutual funds in the United States.

Accepted Answer

The answer of There are approximately ____ open-end mutual funds...

Question 3

A switching privileges on mutual funds allows shareholders to exchange shares of one mutual fund for shares of

Accepted Answer

Switching privileges on mutual funds typically allow shareholders to exchange shares of one mutual fund for shares of any other mutual fund in the same family of funds. This allows investors to adjust their investment portfolios within a certain fund family without incurring additional fees or taxes. Therefore, the correct answer is (C) any mutual fund in the same family of funds.

Question 4

Which of the following allows you to easily move funds from one mutual fund to another managed by the same investment company?

Accepted Answer

An exchange privilege allows an investor to easily move funds from one mutual fund to another managed by the same investment company. This is a convenient way to adjust your portfolio without incurring fees or taxes associated with selling and buying individual funds. Automatic reinvestment, rotation, and stock swap are not related to moving funds between mutual funds in the same investment company.

Question 5

Mutual fund investors must pay federal income taxes on

Accepted Answer

Mutual fund investors are required to pay federal income taxes on ordinary income dividend distributions, capital gains distributions, and capital gains from selling their shares. Ordinary income dividend distributions are generated from interest and short-term capital gains, while capital gains distributions result from the sale of securities within the mutual fund's portfolio. When an investor sells their mutual fund shares for a profit, they are required to pay capital gains taxes on the difference between the purchase price and the sale price. Therefore, all three options are taxable events for mutual fund investors.

Question 6

A mutual fund's ______ can allow investors to have amounts as low $25 per month transferred from their bank account to purchase shares.

Accepted Answer

The automatic investment program allows investors to regularly contribute small amounts of money, sometimes as low as $25, to purchase shares in a mutual fund. This helps investors with limited funds to invest regularly and grow their investment portfolio over time.

Question 7

There are approximately ____ mutual fund families in the United States.

Accepted Answer

There are approximately 400 mutual fund families in the United States, which collectively offer a wide range of investment options across various asset classes.

Question 8

Investing in a mutual fund rather than an individual stock reduces

Accepted Answer

Investing in a mutual fund reduces random risk, also known as unsystematic risk, because it diversifies investments across various assets, minimizing the impact of any single asset's poor performance.

Question 9

Net asset value increases when

Accepted Answer

Net asset value (NAV) of a mutual fund is calculated by dividing the total assets of the fund by the number of outstanding shares. Therefore, the NAV increases when the value of the underlying securities held by the fund increases. Choice B is incorrect because gains realized on the underlying securities are paid out to shareholders as dividends, which do not affect the NAV of the fund. Choice C is incorrect because while attracting new money from investors may increase the total assets of the fund, it also increases the number of outstanding shares, which keeps the NAV unchanged.

Question 10

Compute the net asset value for a share of a mutual fund with the following characteristics:
​
Market value of assets:
$177,000,000
Market value of liabilities:
$12,000,000
Number of shares outstanding:
7,250,000

Accepted Answer

Net asset value (NAV) = (Market value of assets - Market value of liabilities) / Number of shares outstanding

= ($177,000,000 - $12,000,000) / 7,250,000
= $22.76

Therefore, the correct answer is B.

Question 11

Advantages of mutual funds include

Accepted Answer

Mutual funds offer several advantages, including diversification, which helps reduce risk by spreading investments across various assets; professional management, where fund managers make investment decisions on behalf of investors; and liquidity, allowing investors to buy or sell their shares of the fund with relative ease.

Question 12

The Amalgamated Fund has assets with a market value of $25 million dollars,liabilities of $1 million dollars and 10 million shares outstanding.Its net asset value is

Accepted Answer

The net asset value (NAV) is calculated by subtracting the fund's liabilities from its assets and then dividing by the number of shares outstanding. So, NAV = ($25 million - $1 million) / 10 million shares = $24 million / 10 million shares = $2.40.

Question 13

Open-end mutual fund shares have good liquidity because

Accepted Answer

The fund company will buy back the shares whenever requested, which provides good liquidity for open-end mutual fund shares. Option A is not entirely accurate as open-end mutual fund shares do not always act like a bank account. Option C is also not entirely accurate as some open-end mutual funds may have redemption fees. Option D may not always be true as it depends on the current market conditions and demand for the particular mutual fund.

Question 14

Realized net capital gains that a mutual fund pays out to its investors are called ____ distributions.

Accepted Answer

Realized net capital gains that a mutual fund pays out to its investors are called capital gains distributions. This is the only option that correctly describes this type of distribution. Ordinary income dividends refer to dividends paid out from a company's earnings, interest refers to the income earned on loans or bonds, and rent refers to income earned from property.

Question 15

Compute the net asset value for a share of a mutual fund with the following characteristics:
​
Market value of assets:
$6,257,562,000
Market value of liabilities:
$123,800,000
Number of shares outstanding:
134,430,000

Accepted Answer

The answer of Compute the net asset value for a...

Question 16

Compounding is attained in mutual fund investing through

Accepted Answer

Compounding in mutual fund investing is often achieved through automatic reinvestment of dividends. When dividends are reinvested, they are used to purchase additional shares of the mutual fund, which can then generate more income and potentially increase in value over time. This allows investors to benefit from the power of compounding, where their earnings can earn additional earnings. Frequent buying and selling of shares (A) can create tax consequences and fees that can hinder compounding. Minimizing account fees (B) can help improve returns, but it alone does not lead to compounding. Using leverage (C) can increase both returns and risks, and may not be practical or suitable for all investors.

Question 17

Mutual fund investors expect to profit from their investments through the receipt of mutual fund dividends and

Accepted Answer

Mutual fund investors can profit from capital gains when the value of the fund's shares increases and they sell them back at a higher price.

Question 18

Sylvia owns 100 shares of Maxima Growth mutual fund.In December she received a check for $50,payment of ordinary income dividend distributions and capital gains distributions.Sylvia also noticed in her daily newspaper listings that Maxima Growth is now worth $2 per share more than what she purchased it for at the beginning of the year.How much will Sylvia's holdings in Maxima Growth add to her taxable income for the year assuming she decides not to sell the fund this year?

Accepted Answer

The $50 received from ordinary income dividend distributions and capital gains distributions is taxable income. The increase in share value ($2 per share increase on 100 shares = $200) is not taxable until the shares are sold.

Question 19

Automatic dividend reinvestment

Accepted Answer

Automatic dividend reinvestment allows the investor to use the dividends earned to buy additional shares of the same stock or mutual fund, which compounds the share ownership over time. This can lead to an increase in the overall value of the investment. However, it does not necessarily defer taxes on the income earned, and it could potentially reduce investment yields if the investor would prefer to receive the dividend income as cash. It is not a requirement for all mutual fund companies, as some offer the option for investors to receive their dividends in cash instead of reinvesting them.

Question 20

Which of the following is (are) a unique advantage(s) of investing in a family of funds?

Accepted Answer

Exchange privileges within a family of funds allow investors to switch between different funds under the same fund family, often without incurring additional charges, providing flexibility and convenience in managing investments.

Quiz 15: Mutual Funds and Exchange Traded Funds

____ are received as current income while one owns shares in a mutual fund.

There are approximately ____ open-end mutual funds in the United States.

A switching privileges on mutual funds allows shareholders to exchange shares of one mutual fund for shares of

Which of the following allows you to easily move funds from one mutual fund to another managed by the same investment company?

Mutual fund investors must pay federal income taxes on

A mutual fund's ______ can allow investors to have amounts as low $25 per month transferred from their bank account to purchase shares.

There are approximately ____ mutual fund families in the United States.

Investing in a mutual fund rather than an individual stock reduces

Net asset value increases when

Compute the net asset value for a share of a mutual fund with the following characteristics: Market value of assets: $177,000,000 Market value of liabilities: $12,000,000 Number of shares outstanding: 7,250,000

Advantages of mutual funds include

The Amalgamated Fund has assets with a market value of $25 million dollars,liabilities of $1 million dollars and 10 million shares outstanding.Its net asset value is

Open-end mutual fund shares have good liquidity because

Realized net capital gains that a mutual fund pays out to its investors are called ____ distributions.

Compute the net asset value for a share of a mutual fund with the following characteristics: Market value of assets: $6,257,562,000 Market value of liabilities: $123,800,000 Number of shares outstanding: 134,430,000

Compounding is attained in mutual fund investing through

Mutual fund investors expect to profit from their investments through the receipt of mutual fund dividends and

Automatic dividend reinvestment

Which of the following is (are) a unique advantage(s) of investing in a family of funds?

Quiz 15: Mutual Funds and Exchange Traded Funds

____ are received as current income while one owns shares in a mutual fund.

There are approximately ____ open-end mutual funds in the United States.

A switching privileges on mutual funds allows shareholders to exchange shares of one mutual fund for shares of

Which of the following allows you to easily move funds from one mutual fund to another managed by the same investment company?

Mutual fund investors must pay federal income taxes on

A mutual fund's ______ can allow investors to have amounts as low $25 per month transferred from their bank account to purchase shares.

There are approximately ____ mutual fund families in the United States.

Investing in a mutual fund rather than an individual stock reduces

Net asset value increases when

Compute the net asset value for a share of a mutual fund with the following characteristics: ​ Market value of assets: $177,000,000 Market value of liabilities: $12,000,000 Number of shares outstanding: 7,250,000

Advantages of mutual funds include

The Amalgamated Fund has assets with a market value of $25 million dollars,liabilities of $1 million dollars and 10 million shares outstanding.Its net asset value is

Open-end mutual fund shares have good liquidity because

Realized net capital gains that a mutual fund pays out to its investors are called ____ distributions.

Compute the net asset value for a share of a mutual fund with the following characteristics: ​ Market value of assets: $6,257,562,000 Market value of liabilities: $123,800,000 Number of shares outstanding: 134,430,000

Compounding is attained in mutual fund investing through

Mutual fund investors expect to profit from their investments through the receipt of mutual fund dividends and

Automatic dividend reinvestment

Which of the following is (are) a unique advantage(s) of investing in a family of funds?

Compute the net asset value for a share of a mutual fund with the following characteristics: Market value of assets: $177,000,000 Market value of liabilities: $12,000,000 Number of shares outstanding: 7,250,000

Compute the net asset value for a share of a mutual fund with the following characteristics: Market value of assets: $6,257,562,000 Market value of liabilities: $123,800,000 Number of shares outstanding: 134,430,000