Chapter 05 Financial Services: Mutual Funds and Hedge Funds

Chapter 05

Financial Services: Mutual Funds and Hedge Funds

True / False Questions

1. Mutual funds are financial intermediaries that invest in diversified portfolios of assets. 

True    False

2. Open-end mutual funds are the major type of mutual funds. 

True    False

3. Mutual funds achieve economies of scale for individual investors by realizing the benefits of lower transaction costs and commissions as compared to those incurred by individual investors. 

True    False

4. Commercial banks are not allowed to own or invest in mutual funds. 

True    False

5. Long-term mutual funds invest primarily in long-term, fixed-income securities such as corporate and/or government bonds. 

True    False

6. Short-term mutual funds invest solely in money market securities. 

True    False

7. Equity mutual funds may contain common stock, but not preferred stock. 

True    False

8. The proportionate mix of assets invested in long-term versus short-term mutual funds has varied over the last twenty years. 

True    False

9. A change from commercial bank deposits to money market mutual funds typically allows an investor to benefit from higher yields, but with the cost of losing deposit insurance coverage. 

True    False

10. Most individuals who invest in mutual funds for the first time realize that mutual fund investment carries some risk. 

True    False

11. One of the goals of mutual funds is to achieve superior diversification through fund and risk pooling compared to what individual investors can achieve. 

True    False

12. A mutual fund objective statement provides general information about the types of securities a mutual fund will hold as assets. 

True    False

13. In 1998, the SEC required that portions of mutual fund prospectuses must be written in easily understood "plain" English. 

True    False

14. The SEC requires that prospectuses or...