Application

Investments Exam 2 Solution

October 22, 2009

1. A fee that is charged at the time mutual fund shares are purchased by an investor is called:

A. contingent deferred sales charge.

B. 12b-1 fee.

C. back-end load.

D. front-end load.

E. issuance charge.

2.  Money market mutual funds do which one of the following? 

A. offer a guaranteed rate of return

B. invest in securities that mature in 90 days or less

C. provide a risk-free means of investing

D. invest only in government bonds

E. trade for $10 a share

3. You recently purchased a fund at a price of $39.97 per share. The NAV at the time of purchase was $40.67. You must have purchased a(n) _____ fund. 

A. closed-end

B. global

C. bond

D. index

E. asset allocation

4. An ETF is best described as: 

A. an index fund that trades like a closed-end fund.

B. a closed-end fund that trades like a stock.

C. a sector fund that trades like a bond.

D. an index fund that trades only at the end of each day.

E. an international fund that trades like a domestic stock.

5. Which one of the following statements related to stock indexes is correct? 

A. The index divisor increases in value whenever a stock in the index undergoes a stock split.

B. A value-weighted index includes both dividends and capital gains.

C. The S&P 500 index is value-weighted.

D. The DJIA is value-weighted.

E. Index staleness is more apt to be a problem for the DJIA than for the Wilshire 5000.

6. A mutual fund has an NAV of $11.39 with 268,300 shares outstanding. What is the value of the fund's assets if it has $211,400 in liabilities? 

A. $2,844,537

B. $2,911,018

C. $3,055,937

D. $3,187,019

E. $3,267,337

Assets = $11.39 x 268,300 + $211,400 = $3,267,337

7. The Market Stability Fund owns the...