Student name:__________

1) Which one of the following statements regarding open-end mutual funds is false?
A) The funds redeem shares at net asset value.
B) The funds offer investors professional management.
C) The funds offer investors a guaranteed rate of return.
D) The funds redeem shares at net asset value and offer investors professional
management.

2) Which one of the following statements regarding closed-end mutual funds is false?
A) The funds always trade at a discount from NAV.
B) The funds redeem shares at their net asset value.
C) The funds offer investors professional management.
D) The funds always trade at a discount from NAV and redeem shares at their net asset
value.
E) None of the options are correct.

3) Which of the following functions do investment companies perform for their investors?
A) Record keeping and administration
B) Diversification and divisibility
C) Professional management
D) Lower transaction costs
E) All of the options.

4) Multiple Mutual Funds had year-end assets of $460,000,000 and liabilities of $25,000,000.
There were 25,700,000 shares in the fund at year end. What was Multiple Mutual's net asset
value?
A) $18.11
B) $18.81
C) $69.96
D) $16.93
E) $181.07
5) Growth Fund had year-end assets of $862,000,000 and liabilities of $12,000,000. There were
32,675,254 shares in the fund at year end. What was Growth Fund's net asset value?
A) $28.17
B) $25.24
C) $19.62
D) $26.01
E) $21.56

6) Diversified Portfolios had year-end assets of $297,000,000 and liabilities of $59,000,000. If

Diversified's NAV was $33.04, how many shares must have been held in the fund?
A) 43,000,000
B) 7,203,500
C) 5,601,709
D) 1,182,203

7) Pinnacle Fund had year-end assets of $825,000,000 and liabilities of $25,000,000. If

Pinnacle's NAV was $32.18, how many shares must have been held in the fund?
A) 21,619,346.92
B) 22,930,546.28
C) 24,860,161.59
D) 25,693,645.25

8) Most actively-managed mutual funds, when compared to a market index such as the Wilshire
5000,
A) beat the market return in all years.
B) beat the market return in most years.
C) exceed the return on index funds.
D) do not outperform the market.
9) Pools of money invested in a portfolio that is fixed for the life of the fund are called
A) closed-end funds.
B) open-end funds.
C) unit investment trusts.
D) REITS.
E) redeemable trust certificates.

10) Investors in closed-end funds who wish to liquidate their positions must
A) sell their shares through a broker.
B) sell their shares to the issuer at a discount to net asset value.
C) sell their shares to the issuer at a premium to net asset value.
D) sell their shares to the issuer for net asset value.
E) hold their shares to maturity.

11) Closed-end funds are frequently issued at a ______ to NAV and subsequently trade at a
__________ to NAV.
A) discount; discount
B) discount; premium
C) premium; premium
D) premium; discount
E) No consistent relationship has been observed.

12) At issue, offering prices of open-end funds will often be

A) less than NAV due to loads.
B) greater than NAV due to loads.
C) less than NAV due to limited demand.
D) greater than NAV due to excess demand.
E) less than or greater than NAV with no apparent pattern.
13) Which of the following statements about real estate investment trusts is true?
A) REITs invest in real estate or loans secured by real estate.
B) REITs raise capital by borrowing from banks and issuing mortgages.
C) REITs are similar to open-end funds, with shares redeemable at NAV.
D) REITs invest in real estate or loans secured by real estate and raise capital by
borrowing from banks and issuing mortgages.
E) All of the options are true.

14) Which of the following statements about real estate investment trusts is true?
A) REITs may be equity trusts or mortgage trusts.
B) REITs are usually highly leveraged.
C) REITs are similar to closed-end funds.
D) REITs may be equity trusts or mortgage trusts and are usually highly leveraged.
E) All of the options are true.

15) Which of the following statements about money market mutual funds is true?
A) They invest in commercial paper, CDs, and repurchase agreements.
B) They invest in specific industries
C) They are highly leveraged and risky.
D) They invest in commercial paper, CDs, and repurchase agreements, and they invest in
specific industries.
E) All of the options are true.

16) A review of Canadian mutual funds by investment orientation at year-end 2017 shows that
over half of assets were in
A) balanced funds
B) Index funds
C) Exchange traded funds
D) Hedge funds
E) Bond funds
17) ______ are balanced funds in which the asset mix can range from aggressive (primarily
marketed to younger investors) to conservative (directed at older investors)
A) Hedge funds
B) Index funds
C) Equity funds
D) Life-cycle funds
E) Target-maturity funds

18) Fund of Funds are:

A) Index funds
B) mutual funds that primarily invest in shares of other mutual funds.
C) Exchange traded funds
D) Hedge funds
E) Balanced funds

19) Funds are commonly classified by

A) Investment policy
B) Asset allocation
C) Security type
D) NAV
E) return

20) Management fees and other expenses of mutual funds may include
A) front-end loads.
B) back-end loads.
C) 12b-1 charges.
D) front-end and back-end loads.
E) front-end loads, back-end loads, and 12b-1 charges.
21) The Profitability Fund had NAV per share of $15.30 on January 1, 2016. On December 31 of
the same year, the fund's NAV was $18.65. Income distributions were $0.75, and the fund
had capital gain distributions of $1.00. Without considering taxes and transactions costs,
what rate of return did an investor receive on the Profitability Fund last year?
A) 11.26%
B) 15.54%
C) 33.33%
D) 21.26%
E) 9.83%

22) The Yachtsman Fund had NAV per share of $36.12 on January 1, 2016. On December 31 of
the same year, the fund's NAV was $39.71. Income distributions were $0.55, and the fund
had capital gain distributions of $1.20. Without considering taxes and transactions costs,
what rate of return did an investor receive on the Yachtsman Fund last year?
A) 22.92%
B) 14.78%
C) 14.39%
D) 18.52%
E) 14.84%

23) Investors' Choice Fund had NAV per share of $37.25 on January 1, 2016. On December 31
of the same year, the fund's rate of return for the year was 17.3%. Income distributions were
$1.14, and the fund had capital gain distributions of $1.35. Without considering taxes and
transactions costs, what ending NAV would you calculate for Investors' Choice?
A) $41.20
B) $33.88
C) $43.69
D) $42.03
E) $46.62
24) Which of the following is not an advantage of owning mutual funds?
A) They offer a variety of investment styles.
B) They offer small investors the benefits of diversification.
C) They treat income as "passed through" to the investor for tax purposes.
D) All of the options are advantages of mutual funds.
E) None of the options are an advantage of mutual funds.

25) Which of the following would increase the net asset value of a mutual fund share, assuming
all other things remain unchanged?
A) An increase in the number of fund shares outstanding
B) An increase in the fund's accounts payable
C) A change in the fund's management
D) An increase in the value of one of the fund's stocks

26) Global Funds are

A) amounts invested in equity and fixed-income mutual funds.
B) funds that may be purchased at intervals of 3, 6, or 12 months at the discretion of
management.
C) amounts invested in domestic and global equities.
D) closed-end funds that may be repurchased only once every two years at the discretion
of mutual fund management.
E) mutual funds that invest in securities worldwide.

27) Which of the following is true regarding equity mutual funds?

I) They invest primarily in stock.
II) They do no hold fixed-income securities, only stock.
III) Most hold money market securities, as well as stock.
IV) Two types of equity funds are income funds and growth funds.
A) I and IV
B) I, III, and IV
C) I, II, and IV
D) I, II, and III
E) I, II, III, and IV
28) The fee that mutual funds use to help pay for advertising and promotional literature is called
a
A) front-end load fee.
B) back-end load fee.
C) operating expense fee.
D) 12b-1 fee.
E) structured fee.

29) Fun Furniture purchased 100 shares of Blue Isle mutual fund at a net asset value of $33 per
share. During the year, Patty received dividend income distributions of $2.50 per share and
capital gains distributions of $4.30 per share. At the end of the year, the shares had a net asset
value of $31 per share. What was Patty's rate of return on this investment?
A) 5.43%
B) 10.24%
C) 14.55%
D) 12.44%
E) 9.18%

30) Assume that you purchased 200 shares of Super Performing mutual fund at a net asset value
of $21 per share. During the year, you received dividend income distributions of $1.50 per
share and capital gains distributions of $2.85 per share. At the end of the year, the shares had
a net asset value of $23 per share. What was your rate of return on this investment?
A) 30.24%
B) 25.37%
C) 27.19%
D) 22.44%
E) 29.18%
31) Assume that you purchased shares of High Flying mutual fund at a net asset value of $15.75
per share. During the year, you received dividend income distributions of $0.78 per share and
capital gains distributions of $1.67 per share. At the end of the year, the shares had a net asset
value of $16.82 per share. What was your rate of return on this investment?
A) 29.43%
B) 30.56%
C) 31.19%
D) 32.44%
E) 22.35%

32) Assume that you purchased shares of a mutual fund at a net asset value of $14.50 per share.
During the year, you received dividend income distributions of $0.27 per share and capital
gains distributions of $0.65 per share. At the end of the year, the shares had a net asset value
of $13.74 per share. What was your rate of return on this investment?
A) 2.91%
B) 3.07%
C) 1.10%
D) 1.78%
E) -1.18%

33) Assume that you purchased shares of a mutual fund at a net asset value of $12.50 per share.
During the year, you received dividend income distributions of $0.15 per share and capital
gains distributions of $0.10 per share. At the end of the year, the shares had a net asset value
of $10.05 per share. What was your rate of return on this investment?
A) -17.60%
B) -16.1%
C) 16.10%
D) -17.3%
E) 17.3%
34) A mutual fund had year-end assets of $560,000,000 and liabilities of $26,000,000. There
were 23,850,000 shares in the fund at year end. What was the mutual fund's net asset value?
A) $22.87
B) $22.39
C) $22.24
D) $17.61
E) $19.25

35) A mutual fund had year-end assets of $250,000,000 and liabilities of $4,000,000. There were
3,750,000 shares in the fund at year end. What was the mutual fund's net asset value?
A) $92.53
B) $67.39
C) $63.24
D) $65.60
E) $17.46

36) A mutual fund had year-end assets of $735,000,000 and liabilities of $8,450,000. There were
42,350,000 shares in the fund at year end. What was the mutual fund's net asset value?
A) $9.63
B) $17.16
C) $16.42
D) $17.87
E) $17.26

37) A mutual fund had year-end assets of $750,000,000 and liabilities of $7,500,000. There were
40,000,000 shares in the fund at year end. What was the mutual fund's net asset value?
A) $9.63
B) $18.56
C) $16.42
D) $17.87
E) $17.26
38) A mutual fund had year-end assets of $465,000,000 and liabilities of $37,000,000. If the fund
NAV was $56.12, how many shares must have been held in the fund?
A) 4,300,000
B) 6,488,372
C) 8,601,709
D) 7,626,515
E) None of these options are correct.

39) A mutual fund had year-end assets of $521,000,000 and liabilities of $63,000,000. If the fund
NAV was $26.12, how many shares must have been held in the fund?
A) 17,534,456
B) 16,488,372
C) 18,601,742
D) 17,542,515

40) A mutual fund had year-end assets of $528,000,000 and liabilities of $52,000,000. If the fund
NAV was $48.82, how many shares must have been held in the fund?
A) 11,354,751
B) 8,412,642
C) 9,750,000
D) 9,165,414
E) 9,219,160

41) A mutual fund had year-end assets of $437,000,000 and liabilities of $37,000,000. If the fund
NAV was $60.12, how many shares must have been held in the fund?
A) 6,653,360
B) 8,412,642
C) 10,165,476
D) 9,165,414
E) 9,219,160
42) A mutual fund had NAV per share of $19.00 on January 1, 2016. On December 31 of the
same year, the fund's NAV was $19.14. Income distributions were $0.57, and the fund had
capital gain distributions of $1.12. Without considering taxes and transactions costs, what
rate of return did an investor receive on the fund last year?
A) 11.26%
B) 10.54%
C) 7.97%
D) 8.26%
E) 9.63%

43) A mutual fund had NAV per share of $23.00 on January 1, 2016. On December 31 of the
same year, the fund's NAV was $23.15. Income distributions were $0.63, and the fund had
capital gain distributions of $1.26. Without considering taxes and transactions costs, what
rate of return did an investor receive on the fund last year?
A) 11.26%
B) 10.54%
C) 8.87%
D) 8.26%
E) 9.63%

44) A mutual fund had NAV per share of $36.75 on January 1, 2016. On December 31 of the
same year, the fund's rate of return for the year was 15.3%. Income distributions were $1.27,
and the fund had capital gain distributions of $1.85. Without considering taxes and
transactions costs, what ending NAV would you calculate?
A) $27.44
B) $33.88
C) $24.69
D) $39.25
E) $16.62
45) A mutual fund had NAV per share of $16.75 on January 1, 2016. On December 31 of the
same year, the fund's rate of return for the year was 26.6%. Income distributions were $1.79,
and the fund had capital gain distributions of $2.80. Without considering taxes and
transactions costs, what ending NAV would you calculate?
A) $17.44
B) $13.28
C) $14.96
D) $17.25
E) $16.62

46) A mutual fund had NAV per share of $36.15 on January 1, 2016. On December 31 of the
same year, the fund's rate of return for the year was 14.0%. Income distributions were $1.16,
and the fund had capital gain distributions of $2.12. Without considering taxes and
transactions costs, what ending NAV would you calculate?
A) $37.93
B) $34.52
C) $44.69
D) $47.25
E) $36.28

47) A mutual fund had NAV per share of $39.27 on January 1, 2016. On December 31 of the
same year, the fund's rate of return for the year was 11.0%. Income distributions were $2.20,
and the fund had capital gain distributions of $1.50. Without considering taxes and
transactions costs, what ending NAV would you calculate?
A) $37.93
B) $39.89
C) $37.30
D) $47.25
E) $36.28
48) Of the following types of mutual funds, an investor who wishes to invest in a diversified
portfolio of stocks worldwide (including the U.S.) should choose
A) international funds.
B) global funds.
C) regional funds.
D) emerging-market funds.

49) Of the following types of mutual funds, an investor who wishes to invest in a diversified
portfolio of foreign stocks (excluding the U.S.) should choose
A) international funds.
B) global funds.
C) regional funds.
D) emerging-market funds.

50) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio
that tracks the S&P 500 should choose
A) SPY.
B) DIA.
C) QQQ.
D) IWM.
E) VTI.

51) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio
that tracks the Dow Jones Industrials should choose
A) SPY.
B) DIA.
C) QQQQ.
D) IWM.
E) VTI.
52) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio
that tracks the Nasdaq 100 should choose
A) SPY.
B) DIA.
C) QQQ.
D) IWM.
E) VTI.

53) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio
that tracks the Russell 2000 should choose
A) SPY.
B) DIA.
C) QQQQ.
D) IWM.
E) VTI.

54) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio
that tracks the Wilshire 5000 should choose
A) SPY.
B) DIA.
C) QQQ.
D) IWM.
E) VTI.

55) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio
that tracks the MSCI Japan Index should choose
A) SPY.
B) EWJ.
C) QQQQ.
D) IWM.
E) VTI.
56) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio
that tracks the MSCI France Index should choose
A) SPY.
B) EWJ.
C) EWQ.
D) IWM.
E) VTI.

57) A mutual fund had average daily assets of $3.0 billion in 2016. The fund sold $600 million
worth of stock and purchased $700 million worth of stock during the year. The fund's
turnover ratio is
A) 27.5%.
B) 12%.
C) 15%.
D) 25%.
E) 20%.

58) A mutual fund had average daily assets of $2.0 billion in 2016. The fund sold $500 million
worth of stock and purchased $600 million worth of stock during the year. The fund's
turnover ratio is
A) 27.5%.
B) 12%.
C) 15%.
D) 25%.
E) 20%.

59) A mutual fund had average daily assets of $4.0 billion in 2016. The fund sold $1.5 billion
worth of stock and purchased $1.6 billion worth of stock during the year. The fund's turnover
ratio is
A) 37.5%.
B) 22%.
C) 15%.
D) 45%.
E) 20%.
60) A mutual fund had average daily assets of $4.7 billion in 2016. The fund sold $2.2 billion
worth of stock and purchased $3.6 billion worth of stock during the year. The fund's turnover
ratio is
A) 37.5%.
B) 22.6%.
C) 15.3%.
D) 46.8%.
E) 20.7%.

61) You purchased shares of a mutual fund at a price of $18 per share at the beginning of the
year and paid a front-end load of 5%. If the securities in which the fund invested increased in
value by 11% during the year, and the fund's expense ratio was 1.25%, your return if you
sold the fund at the end of the year would be
A) 4.26.
B) 3.44%.
C) 2.45%.
D) 6.87%.
E) 4.90

62) You purchased shares of a mutual fund at a price of $12 per share at the beginning of the
year and paid a front-end load of 4.75%. If the securities in which the fund invested increased
in value by 9% during the year, and the fund's expense ratio was 1.5%, your return if you
sold the fund at the end of the year would be
A) 4.75%.
B) 3.54%.
C) 2.65%.
D) 2.39%.
63) You purchased shares of a mutual fund at a price of $17 per share at the beginning of the
year and paid a front-end load of 4.0%. If the securities in which the fund invested increased
in value by 12% during the year, and the fund's expense ratio was 1.0%, your return if you
sold the fund at the end of the year would be
A) 4.75%.
B) 6.56%.
C) 5.65%.
D) 4.39%.
E) $5.20

64) You purchased shares of a mutual fund at a price of $20 per share at the beginning of the
year and paid a front-end load of 3.5%. If the securities in which the fund invested increased
in value by 9% during the year, and the fund's expense ratio was 1.25%, your return if you
sold the fund at the end of the year would be
A) 1.99%.
B) 2.32%.
C) 3.98%
D) 2.06%.
E) None of the options are correct.

65) The phrase _____ is used to describe ETFs that, like actively managed mutual funds, attempt
to outperform passive indexes.
A) Non-transparent
B) growth
C) value
D) hedge

66) A type of REIT that invests primarily in construction loans would be classified as a _____
A) mortgage trust.
B) equity trust.
C) revocable trust.
D) bond trust.
E) construction trust.
67) Compared to mutual funds, hedge funds may use the following strategy.
A) Growth
B) Value
C) Sector specialization
D) Significant leverage

68) Compared to mutual funds, hedge funds may require investors to

A) Cover transaction costs
B) Lock-up their investment for an extended period of time
C) Invest in a mixture of equities, debt, and international securities
D) Use specific trading protocols
Answer Key
Test name: chapter 4

1) C
2) D
3) E
4) D
5) D
6) B
297000000-59000000/33.04 = 7203390

7) C
8) D
9) C
10) A
11) D
12) B
13) D
Real estate investment trusts invest in real estate or real-estate-secured loans. They may raise
capital from banks and by issuing mortgages. They are similar to closed-end funds, and shares
are typically exchange traded.

14) E
Real estate investment trusts invest in real estate or real-estate-secured loans. They may raise
capital from banks and by issuing mortgages. They are similar to closed-end funds and shares are
typically exchange traded.

15) A
Money market mutual funds invest in commercial paper, CDs, repurchase agreements, and other
money market securities. They usually offer check-writing privileges. Their NAV is fixed at $1
per share.

16) A
17) D
18) B
19) A
20) E
21) C
22) B
(39.71 + 0.55 + 1.2-36.12) /36.12 = 14.78%

23) A
24) C
25) D
An increase in the number of fund shares outstanding and an increase in the fund's accounts
payable would decrease NAV, and a change in the fund's management would have an uncertain
effect (and then only in the future). However, an increase in the value of one of the fund's stocks
would increase NAV.

26) E
27) B
I, III, and IV

28) D
A front-end load fee and back-end load fee are used to compensate the sales force, and an
operating expense fee is used to cover operating expenses. Rule 12b-1 allows a small fee to
cover advertising and promotion.

29) C
(31 + 4.3 + 2.5-33) / 33 = 14.55%

30) A
31) E
(16.82 + 1.67 + 0.78-15.75) / 15.75 = 22.35%

32) C
33) A
0.1 + 0.15 + 10.05-12.5 / 12.5 = -17.6%

34) B
35) D
36) B
(735000000- 8450000) / 42350000 = 17.1558

37)B
38)D
39)A
40)C
528000000- 52000000 / 48.82 = 9750102
 A
41)
E
42)
C
43)
D
44)
NAV1 = (0.153*36.75) + 36.75 - 1.85 - 1.27 = 39.2527

45) E
46) A
47) B
NAV1 = (0.11*39.27) + 39.27 - 2.20 - 1.50 = 39.89

48)B
49)A
50)A
51)B
DIA tracks the DJIA.

52) C
53) D
IWM tracks the Russell 2000.

54) E
55) B
EWJ tracks the MSCI Japan Index.

56) C
EWQ tracks the MSCI France Index.

57) E
58) D
59) A
60) D
61) A
(18(1-0.05)(1.11-0.0125)-18)/18 = 4.26%

62) D
63) B
(17(1-0.04)(1.12-0.01)-17)/17 = 6.56%

64) C
(20(1-0.035)(1.09-0.0125))-20/20 = 3.98%

65) A
Non-transparent.

66) A
mortgage trust.

67) C
Sector specialization.

68) B
Lock-up their investment for an extended period of time.