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FIN 326 - Chapter 17 Smartbook
Terms in this set (76)
A(n) ______ provides opportunities for small investors to invest in a liquid and diversified portfolio of financial securities at a lower price per unit of risk than could be achieved by investing in individual securities.
Mutual funds are especially advantageous to small investors because they make it possible for them to create diversified asset portfolios with
low transaction costs.
Another major driver for growth in the mutual fund industry in recent decades has been the
rise in retirement funds under management by mutual funds.
The mutual fund industry is highly concentrated, with the top ______ companies that sponsor mutual funds holding about ______ percent of the industry assets.
Long-term bond funds are exposed primarily to ______ risk.
Firms that pool the financial resources of individuals and companies and invest those resources in diversified portfolios of assets are called
True or false: A major reason for the large movement of funds to money market mutual funds during the 2008-2009 financial crisis was the insurance extended to these funds temporarily by the U.S. Treasury.
During the 1970s, ______ were introduced as an alternative to bank deposits, causing the number of funds and industry asset size to grow dramatically.
money market mutual funds
When the interest rate spread between MMMF's and bank deposits is ______, money flows from the banks to the MMMF's.
Mutual funds that maintain a predetermined risk level are called
In 2019, the number of families headed by a person with less than a college degree investing in mutual funds was
The mutual fund industry is the ______ of the financial institutions in the U.S. by asset size.
The mutual fund industry is usually considered to have two sectors: ______ funds and ______ funds.
During the 2008-2009 financial crisis, equity funds experienced ______, while U.S. government money market funds experienced ______.
substantial outflows; record highs
The primary disadvantage of money market mutual funds over bank deposits is
no FDIC insurance.
True or false: Due to market supply and demand, it is possible for closed-end funds to trade at a price above or below their net asset value.
The majority of both long-term and short-term mutual funds are owned by
Like closed-end funds, unit investment trusts issue a ______ number of shares.
Seeing opportunity for profit, ______ and ______ are entering the business of managing mutual funds.
banks; insurance companies
Regulations require that mutual fund managers specify the investment objectives of their funds in a(n) ______ available to prospective investors.
Sector, or industry-specific funds, are exposed to ______ risk and ______ risk.
Studies have shown that index funds ______ active funds in most categories.
A mutual fund for which the number of shares outstanding fluctuates daily with the amount of share redemptions and new purchases is said to be
ETF's are legally classified as ______ funds, but have a ______ number of shares outstanding at any time.
A key difference between unit investment trusts (UIT) and open-end and closed-end funds is that UITs
have termination dates.
A large financial institution that stands ready to create and redeem ETF shares at their NAV in the primary market at the end of each trading day is called a(n)
The fund objective described in the ______ provides general information about the types of securities the mutual fund holds as assets.
The ______ is calculated once at the end of each trading day and is used to settle all of that day's fund trades.
net asset value
Long-term mutual funds in which fund managers buy securities in proportions similar to those included in a specified major stock index are called
Load funds presumably provide the investor with more personal attention and advice on fund selection than no-load funds, which ______ translate into better performance.
usually does not
Long-term mutual funds that are designed to replicate a particular market index and that trade on secondary markets are called
A fee charged to mutual fund investors to meet distribution expenses and shareholder servicing costs is called a
The ______ are the only investors allowed to interact directly with an ETF fund. They are the ______ market makers in ETF's.
authorized participants; primary
Mutual fund shares that charge a back-end load, an annual 12b-1 fee, and convert to Class A shares after a period of time are called
Class B shares.
The return for the investor from investing in mutual fund shares reflects three aspects of the underlying portfolio of mutual fund assets, which are
income and dividends earned on the fund assets.
capital gains earned on the fund assets.
capital appreciation from the profitable investment of new funds.
Just prior to the financial crisis in 2007, ______ represented 70 percent of total long-term mutual fund asset portfolios.
Money market mutual funds invest primarily in financial securities having a maturity of
under 1 year.
A mutual fund that assesses a one-time sales charge to the share buyer is called a
Under ______ rules, the 12b-1 fees that may be charged to mutual fund investors are capped.
The Insider Trading and Securities Fraud Enforcement Act of 1988 required mutual funds to develop mechanisms and procedures to avoid
insider trading abuses.
Mutual fund shares that represent the traditional means of paying for investment advice by charging a front-end load and an annual 12b-1 fee are called
Class A shares.
By 2019, corporate equities represented only about ______ percent of total long-term mutual fund asset portfolios, a drop from their pre-crisis levels.
Deceptive fund management practices that use share classes and 12b-1 fees to trick investors into believing they are buying no-load funds are referred to as
improperly assessed fees.
Consumer-oriented money market mutual funds set their per share value at $1.00 and adjust the investor's ______ as fluctuations in fund value occur due to interest rate changes, default risk and capital gains or losses.
number of shares
To insulate the mutual fund Chief Compliance Officer from undue internal pressure or influence, SEC regulations require that only the ______ can fire this officer.
fund's board of directors
A mutual fund that does not assess a one-time sales charge to the share buyer is called a
Amendments adopted by the SEC in 2009 imposed new requirements on mutual fund companies regarding the language, format, and delivery of the fund
The ______ is the primary regulator of mutual funds.
True or false: As part of mutual fund reforms adopted by the SEC in 2014, the value of shares in institutional prime money market funds is now allowed to float with the value of the share assets, and is no longer fixed at $1.00.
Non-U.S. mutual funds suffered ______ losses during the financial crisis than/as U.S. funds.
Buying or selling of mutual fund shares long after the price had been set at the 4:00 pm U.S. market close is called
The worldwide mutual fund market is most active in those countries that have the most sophisticated
To ensure that SEC rules governing mutual funds are enforced, the SEC required in 2004 that mutual funds hire ______ to monitor compliance with the rules.
Chief Compliance Officers
True or false: Hedge funds are generally subjected to more regulation than mutual funds.
As part of improved disclosure rules imposed on mutual funds by the SEC as of 2004, mutual fund companies must provide clear information to investors on (pick two)
brokerage commissions and discounts.
up-front sales charges.
An "accredited investor" must have a net worth of over ______ or have an annual income of at least ______.
As part of mutual fund reforms adopted by the SEC in 2014, money market mutual funds were given the approval to impose ______ and ______ on funds during times of financial stress to address risks of investor runs on those funds.
liquidity fees; redemption gates
The fastest growing sector in the U.S. financial institutions industry throughout the 1990s and into the 2000s was
Some more risky hedge funds will ______ and ______ to hedge against a decline in their equity portfolios.
short equities; short stock indexes
After the U.S., the country that has the highest dollar value of assets invested in open-end mutual funds is
Hedge funds that are more traditional and similar to mutual funds are classified as
Investment pools that invest funds only for wealthy individuals and other institutional investors are called
Some risk-avoidance hedge funds use a ______ strategy, in which hedging strategies are used to reduce market risk.
Historically, hedge funds have avoided regulations by limiting the number of investors to ______ who must be deemed to be ______.
less than 100; accredited investors
In 2008, at the depth of the financial crisis, the average hedge fund returned about ______ percent, while the S&P500 returned ______ percent.
Hedge fund managers generally charge two types of fees: ______ fees and ______ fees.
Hedge funds that are the most aggressive and may produce profits in many types of market environments are classified as
Moderate risk funds generally favor a ______ investment strategy.
More traditional hedge funds that emphasize consistent but moderate returns while avoiding risk are classified as
True or false: During the financial crisis of 2008, most hedge funds experienced losses, though many funds still managed to outperform market indexes like the S&P 500.
A minimum annualized performance benchmark that must be realized before a performance fee may be assessed is called a
Offshore hedge funds and their distributions are not subject to ______ or ______.
U.S. income taxes; U.S. estate taxes
The 2010 Wall Street Reform and Consumer Protection Act required hedge fund advisors with private pools of capital exceeding ______ in assets to register with the SEC as investment advisors and become subject to all rules which apply to registered advisors.
Some risk-avoidance hedge funds focus primarily on the stable returns from ______ rather than on ______.
income; capital gains
Hedge funds located outside of the United States and structured under foreign laws are designated as
offshore hedge funds.
Hedge funds operate under two exemptions from SEC registration requirements, which are that they are exempt if the fund has
only investors who are accredited.
less than 100 investors.
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