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Exam 17: Professional Money Management, Alternative Assets, and Industry Ethics

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Question 31

Multiple Choice

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An investment company is

A) A corporation that handles the administrative functions for a fund.
B) A corporation that has its major assets in a portfolio of securities.
C) A corporation that invests in financial services firms.
D) Choices a and b.
E) Choices a and c.

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Question 32

Multiple Choice

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A portfolio manager should be able to perform all of the following functions, except

A) Determine risk-return preferences.
B) Eliminate systematic risk.
C) Maintain diversification ensuring a stabilized risk class.
D) Attempt to derive a risk-adjusted performance that is superior to the market.
E) Administer the account, keep records and provide timely information.

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Question 33

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An example of an international fund would be one that consisted of investments in securities from

You are considering investing $50,000 in two mutual funds. The first fund is a load fund with a fee of 6% and you expect the fund to earn 11% over the next year. Alternatively, you could invest in a no load fund that is expected to earn 8% and has a 0.5% redemption fee. What fund has a higher return and how much more value will it have after the first year?

Suppose you consider investing $1,000 in a load fund which charges a fee of 2%, and you expect the fund to earn 11% over the next year. Alternatively, you could invest in a no-load fund with similar risk that is expected to earn 7% and charges a 1/2% redemption fee. Which is better and by how much?

The following are examples of mutual fund companies

Open-end investment companies continue to sell and repurchase shares after their initial public offering.

The text offers a number of suggestions for investing in mutual funds. Which of the following is not such a suggestion?

The main difference between a closed-end fund and an open-end fund is

On January 2, 2007, you invest $100,000 in the Jeffers Mutual Fund, a load fund that charges a fee of 5%. The fund's returns were -14.6% in 2007, -6.4% in 2008, 35% in 2009. On December 31, 2009, you redeem all your shares. The dollar value is:

Open-end mutual funds that charge a sales fee when the fund is initially offered to the investor are known as

Consider the Defiance Bond Fund that consists of the 3 bonds shown below and has no liabilities. $\begin{array}{lcc}\text { Company } & \text { Current Bond Value } & \text { \# Bonds } \\\hline \text { Komko } & 980 & 120 \\\text { Hijack } & 1010 & 150 \\\text { Mitsue } & 1200 & 100\end{array}$ If initially the value of the fund was $250,000 and the original shares were offered to the public with a NAV of $25 per share, what is the current NAV of the fund?

On January 2, 2007, you invest $10,000 in the W.O.W. Mutual Fund, a load fund that charges a fee of 5%. The fund's returns were 13.6% in 2007, 12.2% in 2008, 8.3% in 2009. On December 31, 2009, you redeem all your W.O.W. shares. The dollar value is

Management and advisory firms can advise clients on how to structure their own portfolios.

The offering price of a load fund equals the NAV of the fund

On January 2, 2007, you invest $10,000 in the Tiger Fund, a load fund that charges a fee of 6%. The fund's returns were 25% in 2007, 35% in 2008, -5% in 2009. On December 31, 2009, you redeem all your shares of Tiger. The dollar value is

Hedge funds are far less liquid than mutual fund shares.

An investment vehicle that acts like a mutual fund of hedge funds, and allows investors access to managers that might otherwise be unavailable is known as

Suppose Mega Mutual Fund owns only the 4 stocks shown below with no liabilities. $\begin{array} { c c c } \text { Stack } & \text { Shares } & \text { Price } \\\hline \text { A } & 1800 & 15 \\B & 2200 & 11 \\\mathrm { C } & 2300 & 9 \\D & 1900 & 18\end{array}$ The fund originated by selling $300,000 of stock at $30.00 per share. What is its current NAV?

Mutual fund performance studies have shown that most funds