FINA 3317 - Chapter 17 | Questions with 100% Verified Answers
| Latest Update 2026/2027
Question: Open-end mutual funds guarantee:
Answer: to redeem investor's shares upon demand at the current NAV.
Question: Hedge funds charge expense fees and performance fees. The average performance fee on hedge
funds is ____________.
Answer: 20 percent
Question: ETFs are a direct competitor to ___________.
Answer: index funds
Question: As the economy weakens, one would expect investment in ____________ funds to increase and
investment in _____________ funds to decrease, all else held constant.
Answer: money market mutual; equity
Question: Hybrid mutual funds normally invest significant amounts in:
Answer: both common stock and long-term bonds.
Question: Money market mutual funds (MMMFs) have caused disintermediation at banks at times. This is
because MMMFs:
Answer: sometimes pay higher interest rates than bank deposits.
Question: Actively managed funds find it difficult to consistently earn higher risk-adjusted returns than a broad
stock market index. The difference in return between actively managed funds and passively managed index
funds can be explained by which of the following? I. Lower expense ratios for index funds II. Higher turnover
ratios for index funds III. Differences in returns in sectors of the market and the overall market return
Answer: I and III only
Question: By type of fund, there are more ______________ funds than any other.
Answer: equity
Question: The largest proportion of long-term mutual fund assets is held by ___________________.
Answer: the household sector
Question: The market value of a mutual fund's assets divided by the number of fund shares outstanding is
equal to the:
Answer: NAV
Question: Rank the following in asset size from largest to smallest in 2019. I. Mutual funds II. Insurance
companies III. Depository institutions
Answer: I, III, II
, Question: You have $10,000 to invest and you are considering investing in a fund. The fund charges a
front-end load of 5.75 percent and an annual expense fee of 1.25 percent of the average asset value over the
year. You believe the fund's gross rate of return will be 11 percent per year. If you make the investment, what
should your investment be worth in one year?
Answer: $10,337.46
Question: A fund has an NAV of $30 per share but the shares are currently selling for $32. This fund must be:
Answer: a closed-end fund.
Question: An open-end mutual fund owns 1,500 shares of Krispy Kreme priced at $12. The fund also owns
1,000 shares of Ben & Jerry's priced at $43, and 2,000 shares of Pepsi priced at $50. The fund itself has 3,500
of its own shares outstanding. What is the NAV of a fund's share?
Answer: $46
Question: You have $16,000 to invest in a mutual fund with an NAV = $45. You choose a fund with a 4 percent
front load, a 1 percent management fee, and a 0.25 percent 12b-1 fee. Assume that the management and
12b-1 fees are charged on year-end assets. The gross annual return on the fund's shares was 9 percent. What
was your net annual rate of return to the nearest basis point?
Answer: 3.33%
Question: Investors pay load charges to receive:
Answer: advice on which fund to buy.
Question: A money market mutual fund's total assets increase from $100 to $105 when the fund has 100
shares outstanding. Which of the following will happen?
Answer: The fund will issue a total of five new shares.
Question: The primary regulator of mutual funds is the:
Answer: SEC
Question: You have $12,500 to invest and you are considering investing in Fund X. The fund charges a
front-end load of 3 percent and an annual expense fee of 2.25 percent of the ending asset value over the year.
You believe the fund's gross rate of return will be 8 percent per year. If you make the investment, what should
your investment be worth in one year?
Answer: $12,800.36
Question: You have $15,000 to invest in a mutual fund. You choose a fund with a 3.5 percent front load, a 1.75
percent management fee, and a 0.5 percent 12b-1 fee. Assume, for simplicity, that the management and
12b-1 fees are charged on year-end assets. The gross annual return on the fund's shares was 12.50 percent.
What was your net annual rate of return to the nearest basis point?
Answer: 6.12%
Question: Which one of the following fund types is likely to have the lowest annual expense ratio?
Answer: Index funds
Question: A(n) ___________ fund must hold substantial cash reserves in order to meet fund redemptions from
shareholders.
Answer: open-end mutual
| Latest Update 2026/2027
Question: Open-end mutual funds guarantee:
Answer: to redeem investor's shares upon demand at the current NAV.
Question: Hedge funds charge expense fees and performance fees. The average performance fee on hedge
funds is ____________.
Answer: 20 percent
Question: ETFs are a direct competitor to ___________.
Answer: index funds
Question: As the economy weakens, one would expect investment in ____________ funds to increase and
investment in _____________ funds to decrease, all else held constant.
Answer: money market mutual; equity
Question: Hybrid mutual funds normally invest significant amounts in:
Answer: both common stock and long-term bonds.
Question: Money market mutual funds (MMMFs) have caused disintermediation at banks at times. This is
because MMMFs:
Answer: sometimes pay higher interest rates than bank deposits.
Question: Actively managed funds find it difficult to consistently earn higher risk-adjusted returns than a broad
stock market index. The difference in return between actively managed funds and passively managed index
funds can be explained by which of the following? I. Lower expense ratios for index funds II. Higher turnover
ratios for index funds III. Differences in returns in sectors of the market and the overall market return
Answer: I and III only
Question: By type of fund, there are more ______________ funds than any other.
Answer: equity
Question: The largest proportion of long-term mutual fund assets is held by ___________________.
Answer: the household sector
Question: The market value of a mutual fund's assets divided by the number of fund shares outstanding is
equal to the:
Answer: NAV
Question: Rank the following in asset size from largest to smallest in 2019. I. Mutual funds II. Insurance
companies III. Depository institutions
Answer: I, III, II
, Question: You have $10,000 to invest and you are considering investing in a fund. The fund charges a
front-end load of 5.75 percent and an annual expense fee of 1.25 percent of the average asset value over the
year. You believe the fund's gross rate of return will be 11 percent per year. If you make the investment, what
should your investment be worth in one year?
Answer: $10,337.46
Question: A fund has an NAV of $30 per share but the shares are currently selling for $32. This fund must be:
Answer: a closed-end fund.
Question: An open-end mutual fund owns 1,500 shares of Krispy Kreme priced at $12. The fund also owns
1,000 shares of Ben & Jerry's priced at $43, and 2,000 shares of Pepsi priced at $50. The fund itself has 3,500
of its own shares outstanding. What is the NAV of a fund's share?
Answer: $46
Question: You have $16,000 to invest in a mutual fund with an NAV = $45. You choose a fund with a 4 percent
front load, a 1 percent management fee, and a 0.25 percent 12b-1 fee. Assume that the management and
12b-1 fees are charged on year-end assets. The gross annual return on the fund's shares was 9 percent. What
was your net annual rate of return to the nearest basis point?
Answer: 3.33%
Question: Investors pay load charges to receive:
Answer: advice on which fund to buy.
Question: A money market mutual fund's total assets increase from $100 to $105 when the fund has 100
shares outstanding. Which of the following will happen?
Answer: The fund will issue a total of five new shares.
Question: The primary regulator of mutual funds is the:
Answer: SEC
Question: You have $12,500 to invest and you are considering investing in Fund X. The fund charges a
front-end load of 3 percent and an annual expense fee of 2.25 percent of the ending asset value over the year.
You believe the fund's gross rate of return will be 8 percent per year. If you make the investment, what should
your investment be worth in one year?
Answer: $12,800.36
Question: You have $15,000 to invest in a mutual fund. You choose a fund with a 3.5 percent front load, a 1.75
percent management fee, and a 0.5 percent 12b-1 fee. Assume, for simplicity, that the management and
12b-1 fees are charged on year-end assets. The gross annual return on the fund's shares was 12.50 percent.
What was your net annual rate of return to the nearest basis point?
Answer: 6.12%
Question: Which one of the following fund types is likely to have the lowest annual expense ratio?
Answer: Index funds
Question: A(n) ___________ fund must hold substantial cash reserves in order to meet fund redemptions from
shareholders.
Answer: open-end mutual
