BUS 410 Mutual Funds and Hedge Funds || Questions and Correct
Detailed Answers
Mutual funds correct answers Financial institutions that pool the resources of many investors by
selling them shares of the funds and using the proceeds to buy stocks, bonds, or other securities
Shares of a mutual fund correct answers Each share represents a proportionate ownership of all
the securities owned by the fund
4 features of mutual funds correct answers Shares are not traded on exchanges
Investors purchase shares from the fund itself (or through a broker acting for the fund) instead of
from other investors
The price that investors pay for shares is the fund's net asset value plus any fees that the fund
may impose at the time of purchase
Shares are redeemable and investors can sell their shares back to the fund on any business day
3 reasons why mutual funds are an attractive investment choice correct answers Diversification
Professional management
Denomination intermediation
Diversification in relation to mutual funds correct answers Some investors find it less costly to
achieve diversification through ownership of mutual funds rather than through ownership of
individual stocks or bonds
Professional management in relation to mutual funds correct answers A mutual fund is usually
managed by an individual or a team choosing investments that best match the fund's objectives
These professionals manage the portfolio on a full-time basis, and buy and sell securities based
Detailed Answers
Mutual funds correct answers Financial institutions that pool the resources of many investors by
selling them shares of the funds and using the proceeds to buy stocks, bonds, or other securities
Shares of a mutual fund correct answers Each share represents a proportionate ownership of all
the securities owned by the fund
4 features of mutual funds correct answers Shares are not traded on exchanges
Investors purchase shares from the fund itself (or through a broker acting for the fund) instead of
from other investors
The price that investors pay for shares is the fund's net asset value plus any fees that the fund
may impose at the time of purchase
Shares are redeemable and investors can sell their shares back to the fund on any business day
3 reasons why mutual funds are an attractive investment choice correct answers Diversification
Professional management
Denomination intermediation
Diversification in relation to mutual funds correct answers Some investors find it less costly to
achieve diversification through ownership of mutual funds rather than through ownership of
individual stocks or bonds
Professional management in relation to mutual funds correct answers A mutual fund is usually
managed by an individual or a team choosing investments that best match the fund's objectives
These professionals manage the portfolio on a full-time basis, and buy and sell securities based
