Mutual Funds

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Chapter 04
Mutual Funds and Other Investment Companies

Multiple Choice Questions 1. Which one of the following invests in a portfolio that is fixed for the life of the fund?
A. Mutual fund
B. Money market fund
C. Managed investment company
D. Unit investment trust 2. ______ are partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis.
A. Commingled funds
B. Closed-end funds
C. REITs
D. Mutual funds 3. A __________ is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds.
A. commingled pool
B. unit trust
C. hedge fund
D. money market fund 4. Advantages of investment companies to investors include all but which one of the following?
A. Record keeping and administration
B. Low cost diversification
C. Professional management
D. Guaranteed rates of return 5. Which of the following typically employ significant amounts of leverage?
I. Hedge funds
II. REITs
III. Money market funds
IV. Equity mutual funds
A. I and II only
B. II and III only
C. III and IV only
D. I, II and III only 6. The NAV of which funds is fixed at $1 per share?
A. Equity funds
B. Money market funds
C. Fixed income funds
D. Commingled funds 7. The two principal types of REITs are equity trusts which _______________ and mortgage trusts which _______________.
A. invest directly in real estate; invest in mortgage and construction loans
B. invest in mortgage and construction loans; invest directly in real estate
C. use extensive leverage; distribute less than 95% of income to shareholders
D. distribute less than 95% of income to shareholders; use extensive leverage 8. A contingent deferred sales charge is commonly called a ____.
A. front-end load
B. back-end load
C. 12b-1 charge
D. top end sales commission 9. In the U.S. there are approximately _______ mutual

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