The
per share net asset value of the shares in a closed-end investment company
depends on the difference between the fund's assets and liabilities and the
number of shares outstanding.
True
False
False
As
a result of arbitrage, ETFs tend to sell for their net asset value.
True
False
False
A
hedge fund is a conservative type of mutual fund.
True
False
False
Since
ETFs mimic an index, they do not buy individual shares of stock.
True
False
False
A
hedge fund
|
|
A.
|
is a
public financial institution
|
|
|
B.
|
is open to a select number of individual
investors
|
|
|
C.
|
has its
shares registered with the Federal Reserve
|
|
|
D.
|
has
actively traded shares
|
Many
unit trusts are self-liquidating.
True
False
False
Examples
of capital gains include sales of
1. IRA accounts
2. stocks sold for a profit
3. real estate sold for a profit
1. IRA accounts
2. stocks sold for a profit
3. real estate sold for a profit
|
|
A.
|
1 and 3
|
|
|
B.
|
2 and 3
|
|
|
C.
|
1 and 2
|
|
|
D.
|
all of
the above
|
Which
of the following is included in an individual’s cash budget?
|
|
A.
|
home
mortgage owed
|
|
|
B.
|
credit card balances
|
|
|
C.
|
social security
payments
|
|
|
D.
|
common
stock
|
If
a closed-end investment company sells for a discount,
|
|
A.
|
its
price exceeds the net asset value
|
|
|
B.
|
dividend
income exceeds capital gains
|
|
|
C.
|
its price is less than the net asset value
|
|
|
D.
|
capital
gains exceed dividend income.
|
A
401(k) plan is a
|
|
A.
|
plan to
increase current tax-exempt income
|
|
|
B.
|
dividend
or interest enhancement plan
|
|
|
C.
|
tax-deferred retirement plan
|
|
|
D.
|
savings
plan for the retired
|
The
efficient market hypothesis says that no one can outperform the market.
True
False
False
If
an investor believes that financial markets are inefficient, that argues for
the individual to pursue a more active portfolio strategy.
True
False
False
When
a seller executes a repurchase agreement, the seller agrees to repurchase the
asset at a lower price.
True
False
False
The
Treynor index standardizes performance by the portfolio's beta.
True
False
False
Commercial
paper is
|
|
A.
|
a
short-term secured debt of a corporation
|
|
|
B.
|
a
long-term secured debt of a corporation
|
|
|
C.
|
a
long-term unsecured debt of a corporation
|
|
|
D.
|
a short-term unsecured debt of a
corporation
|
Funds
that perform well in one year tend to earn consistently higher returns in
subsequent years.
True
False
False
A
money market mutual fund is an illustration of a no-load fund.
True
False
False
Acquiring
shares in no load funds is one means to avoid 12b-1 fees.
True
False
False
If
an investor believes that financial markets are inefficient, that argues for
the individual to pursue a more active portfolio strategy and purchase
exchange-traded funds instead of individual stocks.
True
False
False
Hedge
fund strategies may include buying one stock while shorting another.
True
False
False
A
loading fee charged by a mutual fund does not apply to a closed-end investment
company.
True
False
False
The
shares of hedge funds are registered with the SEC.
True
False
False
Many
exchange-traded funds limit their portfolios to
|
|
A.
|
stocks included in an aggregate measure of
stock prices
|
|
|
B.
|
high
quality securities
|
|
|
C.
|
stocks
that respond to changes in consumer prices (the Consumer Price Index or CPI)
|
|
|
D.
|
stocks
and bonds of companies in a particular industry
|
If
a closed-end investment company specializes in the securities of one sector of
the economy, systematic risk is reduced.
True
False
False
Distributions
from a closed-end investment are subject to federal income taxation.
True
False
False
The
efficient market hypothesis requires
1. financial markets to be competitive
2. prices to adjust rapidly
3. prices of undervalued securities to fall
1. financial markets to be competitive
2. prices to adjust rapidly
3. prices of undervalued securities to fall
|
|
A.
|
1 and 3
|
|
|
B.
|
1 and 2
|
|
|
C.
|
all of
the above
|
|
|
D.
|
2 and 3
|
Securities
prices tend to adjust slowly as new information is disseminated in an
inefficient market.
True
False
False
Investing
in stocks purchased by insiders may generate superior investment results and
that is inconsistent with the strong form of the efficient market hypothesis.
True
False
False
Which
of the following is not illustrative of a tax-sheltered retirement plan?
|
|
A.
|
401(k)
plans
|
|
|
B.
|
life insurance
|
|
|
C.
|
Keogh
account
|
|
|
D.
|
IRAs
|
An
IRA is a tax-deferred pension plan for the self-employed.
True
False
False
An
index fund limits its portfolio to
|
|
A.
|
high
quality securities
|
|
|
B.
|
stocks
that respond to changes in the consumer prices (i.e., Consumer Price Index)
|
|
|
C.
|
stocks
of firms in a particular industry
|
|
|
D.
|
stocks included in an aggregate measure of stock prices
|
Acquiring
shares in no load funds is one means to avoid 12b-1 fees.
True
False
False
Beta
coefficients may be computed for investment companies and used to compute
risk-adjusted rates of return.
True
False
False
Empirical
studies of returns earned by mutual funds suggest they consistently outperform
the market.
True
False
False
The
S&P 500 stock index may be an inappropriate benchmark for a small-cap fund.
True
False
False
Investments
in mutual funds permit the investor to avoid market risk.
True
False
False
Which
of the following is a consideration when selecting a mutual fund?
1. portfolio turnover
2. 12b-1 fees
3. unrealized losses in the fund's portfolio
1. portfolio turnover
2. 12b-1 fees
3. unrealized losses in the fund's portfolio
|
|
A.
|
2 and 3
|
|
|
B.
|
1 and 2
|
|
|
C.
|
all of the above
|
|
|
D.
|
1 and 3
|
Short-term
capital losses are used to offset long-term losses for the purpose of taxation.
True
False
False
The
first exchange-traded funds (ETFs) were a type of index fund.
True
False
False
If
foreign securities markets are as efficient as U. S. securities markets, then
foreign investments may offer the U. S. investor no advantages over investing
in domestic securities.
True
False
False
Which
of the following is not a consideration for investing in real estate investment
trusts (REITs)?
|
|
A.
|
excessive
use of debt financing by some REITs
|
|
|
B.
|
fluctuating
interest rates affecting securities valuations
|
|
|
C.
|
fluctuations
in dividend payments
|
|
|
D.
|
the federal tax rate paid by the trust
|
The
portfolios of international funds
|
|
A.
|
stress
European securities
|
|
|
B.
|
exclude U. S. securities
|
|
|
C.
|
specialize
in the securities of one country
|
|
|
D.
|
are a
diversified mix of securities from all countries with security markets
|
Closed-end
investment companies with beta coefficients less than 1.0
|
|
A.
|
have less systematic risk than the market
|
|
|
B.
|
have
more systematic risk than the market
|
|
|
C.
|
have
outperformed the market
|
|
|
D.
|
have
underperformed the market
|
Hedge
funds follow investment strategies such as
|
|
A.
|
underwriting
new issues (IPOs)
|
|
|
B.
|
limiting
their portfolios to money market instruments
|
|
|
C.
|
shorting “overvalued” stocks while buying
“undervalued” stocks
|
|
|
D.
|
acquiring
shares in mutual funds
|
The
amount of an outstanding mortgage appears on the individual's balance sheet.
True
False
False
Which
of the following is excluded from an individual’s cash budget?
|
|
A.
|
retirement account
|
|
|
B.
|
alimony
|
|
|
C.
|
wages
and salary
|
|
|
D.
|
social
security tax payments
|
The
efficient market hypothesis suggests that the current prices of stocks reflect
what the investment community believes the stocks are worth.
True
False
False
According
to the efficient market hypothesis, purchasing high P/E stock should produce
higher returns.
True
False
False
An
individual's net worth is determined by subtracting liabilities from assets.
True
False
False
Which
of the following is true?
|
|
A.
|
Mutual funds report returns before
adjusting for taxes.
|
|
|
B.
|
Exchange-traded
funds exchange their portfolios.
|
|
|
C.
|
Small
cap funds cannot have load fees.
|
|
|
D.
|
12b-1
fees exceed a fund's NAV.
|
Commercial
paper is
|
|
A.
|
a short-term unsecured debt of a
corporation
|
|
|
B.
|
a
long-term unsecured debt of a corporation
|
|
|
C.
|
a
short-term secured debt of a corporation
|
|
|
D.
|
a
long-term secured debt of a corporation
|
In
order to sell securities to the general public, a mutual fund must register its
securities and prepare a prospectus detailing its objectives and costs to
investors.
True
False
False
Which
of the following is not an investment company?
|
|
A.
|
a commercial bank
|
|
|
B.
|
a money
market mutual fund
|
|
|
C.
|
an
index fund
|
|
|
D.
|
a
growth mutual fund
|
A
mutual fund has a fixed capital structure.
True
False
False
If
mutual funds make investments in efficient financial markets, they
|
|
A.
|
cannot
outperform the market consistently
|
|
|
B.
|
should not outperform the market
consistently
|
|
|
C.
|
will
underperform the market when securities prices decline
|
|
|
D.
|
primarily
bear unsystematic risk
|
Closed-end
investment companies
1. have a fixed capital structure
2. issue new stock whenever an individual buys shares
3. may sell for a premium over net asset value
4. must sell for their net asset value
1. have a fixed capital structure
2. issue new stock whenever an individual buys shares
3. may sell for a premium over net asset value
4. must sell for their net asset value
|
|
A.
|
1 and 3
|
|
|
B.
|
2 and 3
|
|
|
C.
|
1 and 4
|
|
|
D.
|
2 and 4
|
The
discount paid for the shares of a closed-end investment company is fixed by the
firm.
True
False
False
Exchange-traded
funds
|
|
A.
|
require
investors to select individual stocks
|
|
|
B.
|
are
illustrations of load funds
|
|
|
C.
|
mimic an index of securities
|
|
|
D.
|
consistently
outperform other funds
|
If
a closed-end investment company were liquidated, the investor should receive
the net asset value minus the cost of the liquidation.
True
False
False
Many
unit trusts are self-liquidating.
True
False
False
Real
estate investment trusts (REITs) are illustrative of a closed-end investment
company.
True
False
False
If
a closed-end investment company sells for a discount,
|
|
A.
|
its price is less than the net asset value
|
|
|
B.
|
its
price exceeds the net asset value
|
|
|
C.
|
capital
gains exceed dividend income.
|
|
|
D.
|
dividend
income exceeds capital gains
|
Contributions
to an IRA appear on the individual's estimate of cash receipts and
disbursements.
True
False
False
An
implication of the efficient market hypothesis is
|
|
A.
|
after
adjusting for risk, money market securities offer superior returns
|
|
|
B.
|
securities
prices are random determined
|
|
|
C.
|
few investors can expect to outperform the market
over a period of time
|
|
|
D.
|
stock
prices reflect historical information
|
Which
of the following is included in an individual’s cash budget?
|
|
A.
|
social security payments
|
|
|
B.
|
credit
card balances
|
|
|
C.
|
home
mortgage owed
|
|
|
D.
|
common
stock
|
Securities
must be sold before capital gains taxation applies.
True
False
False
If
the financial markets were not efficient,
|
|
A.
|
an investor may consistently outperform the
market
|
|
|
B.
|
prices
indicate the proper valuation of securities
|
|
|
C.
|
all
investors would profit
|
|
|
D.
|
prices
would adjust rapidly
|
The
process of financial planning requires the individual to
1. establish financial goals
2. identify and quantify the value of his or her assets
3. hire professional financial advisors
1. establish financial goals
2. identify and quantify the value of his or her assets
3. hire professional financial advisors
|
|
A.
|
1 and 2
|
|
|
B.
|
all of
the above
|
|
|
C.
|
2 and 3
|
|
|
D.
|
1 and 3
|
Beta
coefficients may be computed for investment companies and used to compute
risk-adjusted rates of return.
True
False
False
The
net asset value of a mutual fund rises when it distributes capital gains.
True
False
False
Commercial
paper is
|
|
A.
|
a
long-term secured debt of a corporation
|
|
|
B.
|
a
short-term secured debt of a corporation
|
|
|
C.
|
a
long-term unsecured debt of a corporation
|
|
|
D.
|
a short-term unsecured debt of a corporation
|
The
shares of a mutual often sell for discount from net asset value.
True
False
False
No-load
funds with 12b-1 fees are able to charge their existing shareholders for
marketing expenses.
True
False
False
If
an investment company were liquidated, the investor should receive the net
asset value.
True
False
False
The
net asset value of a stock mutual fund rises with
|
|
A.
|
higher stock prices
|
|
|
B.
|
lower
stock prices
|
|
|
C.
|
increased
liabilities
|
|
|
D.
|
larger
number of shares
|
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