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Personal Finance Chapter 13
Terms in this set (131)
Aggressive growth funds typically buy stocks with high price/earnings ratios and stocks with volatile price fluctuations.
Indexed funds have high realized capital gains
A mutual fund allows investors to
become owners of a widely diversified portfolio of securities.
Asset allocation funds invest in stocks, bonds, and money market securities.
A balanced fund that emphasizes growth in capital is called a(n)
Back-end load funds offer more liquidity to investors than no-load funds.
Mutual funds do not offer
Expected cash flows from real estate investments are determined by
Exchange-traded funds can create new shares to meet demand.
A(n) ____ fund is quite speculative.
A closed-end investment company that invests in various types of real estate and mortgages is a
hybrid real estate investment trust.
A guarantee of expected fund's future performance is its past performance.
Financial leverage is less of a factor in real estate investment returns than with other types of investments.
More people invest in mutual funds than in any other type of investment product.
In The Wall Street Journal's listing of mutual funds, a "t" after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it.
Investors tend to use mutual funds for which of the following reasons
Value funds look for stocks with relatively all the following except
A mutual fund is owned by the management company.
Balanced funds invest in a proportionate amount of common and preferred stocks and bonds.
Dividend income and capital gains distributions are taxed at identical tax rates.
What would the NAV of an open-ended mutual fund priced at $10 be if the load is 4%?
If you are a mutual fund investor who needs steady income, you might take advantage of a fund's
systematic withdrawal plans.
Exchange-traded mutual funds are actually closed-end mutual funds.
By using automatic reinvestment plans, dividend and capital gains are used to automatically buy additional shares in the fund.
A no-load fund has no
charge to sell you shares.
Generally speaking, socially responsible funds abstain from investing in alcohol, gambling, or tobacco stocks.
Asset allocation funds invest entirely in U.S. and foreign stocks and bonds.
An open-end investment company is commonly known as a mutual fund.
Which of the following bond mutual funds would provide tax-free income?
Municipal bond fund
Which of the following combines the operating characteristics of an open-end fund with some of the trading characteristics of a closed-end fund?
Loads are transaction charges for mutual funds.
A downside of investing in income property is
A closed-end investment company can create an unlimited number of shares.
The lower the R2, the closer the relationship between an ETF and its associated target index.
A(n) ____ sells fund shares, either directly to the public or through certain authorized dealers.
While ETFs offer many of the benefits of mutual funds, they have the tax-timing disadvantages not present with otherwise comparable mutual funds.
Index funds are actively managed.
A mutual fund with an objective of both growth and income is a(n)
The objective of bond and money market funds is growth.
The major advantage of mutual funds to the small investor is
The primary purpose of investing in income property is to produce an attractive annual cash flow.
An annual fee charged by some mutual funds to cover marketing and distribution expenses is the
What type of REIT is most attractive to income-oriented investors?
The fund whose main objective is growth is known as a(n) ____ fund.
none of these
(balanced, preferred stock, money market, index)
A hybrid REIT would invest only in real estate mortgages.
With open-end mutual funds, investors cannot lose more than they invested.
A technology fund is an example of a sector fund.
In The Wall Street Journal's listing of mutual funds, an "r" after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it.
ETFs are set up to protect investors from capital gains taxes better than most mutual funds can.
Which of the following are characteristic of exchange-traded mutual funds?
Traded on listed exchanges
The net asset value (NAV) per share is found by dividing the market value of the fund's securities less the fund's liabilities by the number of shares outstanding
A fund that invests only in a particular industry would be a ____ fund.
A mutual fund prospectus is required to fully disclose all fund fees and expenses.
Most mutual funds allow investors to participate in
automatic reinvestment plans.
automatic investment plans.
Growth funds are mutual funds designed for short-term investing.
A(n) ____ actually runs the portfolio and makes the buy and sell decisions.
Socially responsible funds typically avoid investing in
alcohol and tobacco stocks.
Advantages of exchange-traded funds over mutual funds include all of the following except
Mutual fund conversion privileges can often be exercised online.
Balanced funds invest in a mix of utility and growth equities.
Both load and no-load funds will always charge a
Closed-end mutual funds can trade at either a discount or a premium from their net asset value.
Index funds have provided competitive rates of return because
-their costs are lower than other stock funds.
-it is difficult to outperform the market.
-they have very low turnover rates.
-they are tax efficient
Equity-income funds emphasize capital appreciation in their investment goals.
A mutual fund's NAV is calculated
atleast once a day
The approximate yield on a mutual fund depends only on the fund's dividend income and capital gains distributions
The major benefit to small investors of mutual funds is diversification.
Spiders and Diamonds are examples of ETFs.
Exchange-traded funds have characteristics of both closed-end and open-end funds.
Real estate depreciation is considered a tax shelter.
All no-load funds charge an upfront fee to purchase shares of a mutual fund.
The current market value of all the securities a mutual fund owns is called the
net asset value
Which of the following is not a source of mutual fund returns?
changes in IDB
The share price of a closed-end fund is determined by
-general supply-and-demand conditions.
____ would not be a reason for purchasing mutual funds.
The major reason that investors use mutual funds is their contractual plans, which force regular investing.
Load fees charged on mutual funds help insure that the fund is well managed and that the investor's yields will be greater than those on no-load funds.
A mutual fund's NAV is its
net asset value
In The Wall Street Journal's listing of mutual funds, a "p" after the mutual fund name and before the NAV means that the particular mutual fund has a ____ associated with it.
Open-ended mutual funds can be traded on an intraday basis.
Low-load funds do not charge a commission upon initial purchase.
Another name for a mutual fund is
an open-end investment company.
Speculating in raw land is a low-risk investment approach
The fund whose main objective is to simply match the market known as a(n) ____ fund.
A mutual fund's price per share will increase if its underlying holdings increase in value.
There are more closed-end investment companies than there are open-end companies.
Sector funds concentrate their holdings in specific targeted markets.
Future fund performance is the real key to investment success with mutual funds. One important element to examine when attempting to predict a fund's future performance is the
future course of the market.
The ____ is a service offered by mutual funds that helps investors earn compound interest on their investments.
automatic reinvestment plan
The price an investor can sell his shares of an open-end mutual fund is the net asset value.
To be a true no-load fund, there can be a maximum ____ load and a maximum ____ 12(b)-1 fee.
The price per share of a closed-end investment fund could be lower than its NAV.
The expected cash flows of a real estate investment are determined by rent, depreciation, and taxes.
Redeeming your mutual fund shares might result in a charge called
a back-end load
An investment option that allows fund shareholders to funnel fixed amounts of money from their paychecks or bank accounts automatically into a mutual fund is a(n)
automatic investment plan.
A mutual fund always provides active professional investment management.
A behavioral bias in mutual fund investing where investors view recent performance as overly indicative of a fund's future performance is known as
Money funds are high in both liquidity and risk.
Closed-end investment companies are characterized by
availability for sale or purchase on security markets.
A(n) ____ fund invests primarily in a portfolio of common stocks for the income they provide.
Asset allocation funds invest money in
A real estate investment trust that invests only in mortgages is called an equity trust.
Investors select and purchase securities held within mutual funds.
The individual manager of a mutual fund has little to do with a fund's success.
If a mutual fund provides for automatic reinvestment, the reinvested dividends will not be taxed until the shares are redeemed.
Closed-end mutual funds companies buy their shares back from investors at NAV.
The most important advantage of a mutual fund is pooled diversification.
Index funds, while trying to match market performance, consistently underperform market benchmarks.
Global mutual funds can invest both in domestic and international stocks.
For most investors, the best way to deal in foreign securities is through an international mutual fund.
A fund's prospectus would provide information about a fund's fee structure.
All mutual funds have management fees.
An example of a commercial property is a(n)
Closed-ended mutual funds are guaranteed, they cannot lose value.
Value funds typically invest in stocks that do not pay dividends and have a high price/earnings ratio
It is almost impossible to lose money in a mutual fund as the result of fraud or the mutual fund company's bankruptcy.
An investor with a small amount of money should stick to using load funds instead of no-load funds.
The size of a mutual fund's management fee is related to the fund's performance.
Growth-and-income funds invest most of their capital in common stocks.
First-time real estate investors should consider investing in commercial properties.
Asset allocation funds concentrate on one type of investment.
Mutual funds do not offer
Mutual funds may be classified by the types of securities they purchase.
When evaluating a real estate investment, the main consideration is changes in the property value.
The primary investment objective of bond funds is income.
A 12b-1 fee can only be charged by a load mutual fund.
A mutual fund cannot charge more than 6.5 percent in total sales charges and fees.
Conversion privileges allow investors to exchange one fund's shares for that of another, as long as the funds are in the same fund family.
ETFs often distribute large capital gains to their shareholders.
Open-ended mutual funds companies buy their shares back from investors at NAV.
Advantages of exchange traded funds over mutual funds include a broader market focus.
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