FIN 501 CHAPTERS 11,12,13 SPRING SEMESTER 2026 TEST QUESTIONS WITH
ACCURATE SOLUTIONS
The required return on a bond is equal to
A) the real rate of return plus a risk premium plus an expected inflation premium.
B) the real rate of return plus the coupon rate plus an inflation rate.
C) the risk-free rate plus a risk premium plus an expected inflation premium.
D) the real rate plus a risk premium.
A
During the 75-year market cycle of 2009-2014, in which category of funds did a majority of
funds outperform the market average?
A) large cap funds
B) small cap equity funds
C) real estate funds
D) none of the above
D
Which of the following statements best describes the legal organization of mutual funds?
A) Funds are organized as a single entity that handles all functions such as custody and
investment decisions.
B) Funds split their basic functions such as record keeping and investment decisions
among two or more companies.
C) Funds are owned by the company that manages them.
D) A distributor keeps track of investment and redemption requests from shareholders and
maintains other shareholder records.
,B
Advantages of index funds include which of the following?
I. Low management fees.
II. They outperform most actively managed funds.
III. They have a balanced mix of stocks and bonds.
IV. Securities in the portfolio are selected by professional analysts.
I and II only
Mutual fund investors delegate all of the following decisions to the fund's managers
EXCEPT
A) which companies and industries to invest in.
B) when to buy and sell individual stocks.
C) how many securities to hold in the portfolio.
D) how to allocate investments among different classes of assets such as stocks, bonds,
cash and real estate.
D
Nearly all mutual funds operate as regulated investment companies. This means that
A) they are no-load funds.
B) portfolio decisions are mandated by government authorities.
C) they do not pay taxes on their income.
D) their investments are guaranteed by the FDIC.
C
,An open-end investment company
A) is involved in all trades of its shares.
B) sells shares at a discounted NAV price.
C) trades like a stock on the exchanges.
D) has a set number of shares.
A
The net asset value of a mutual fund increased from $12.03 to $13.53, but its price per
share increased by only $1.26. This information indicates that the fund
A) paid out $1 in capital gains.
B) paid out $1 in dividends.
C) is a closed-end fund.
D) is an open-end fund.
C
Which of the following characteristics apply to closed-end mutual funds?
I. unlimited number of outstanding shares
II. transactions are between shareholders
III. Market prices may be higher or lower than NAV.
IV. Fund will repurchase shares at any time.
II and III only
, Which of the following characteristics apply to exchange-traded funds (ETFs)?
I. unlimited number of outstanding shares
II. typically track the performance of some index
III. market prices reflect demand for the fund rather than NAV.
IV. shares are purchased from and redeemed by the investment company managing the
fund.
I and II only
Closed-end funds
A) hold a portfolio whose size and content are fixed when the fund opens.
B) are subject to both front loads and redemption fees.
C) are purchased directly from the funds' manager.
D) are traded at NAV.
A
Open end mutual funds may charge which of the following fees?
I. A front-end load at the time of purchase.
II. A back-end load when shares are sold.
III. Annual fees based on marketing and distribution costs.
IV. Annual performance fees up to 20% of increases in net asset value.
I, II and III only
ACCURATE SOLUTIONS
The required return on a bond is equal to
A) the real rate of return plus a risk premium plus an expected inflation premium.
B) the real rate of return plus the coupon rate plus an inflation rate.
C) the risk-free rate plus a risk premium plus an expected inflation premium.
D) the real rate plus a risk premium.
A
During the 75-year market cycle of 2009-2014, in which category of funds did a majority of
funds outperform the market average?
A) large cap funds
B) small cap equity funds
C) real estate funds
D) none of the above
D
Which of the following statements best describes the legal organization of mutual funds?
A) Funds are organized as a single entity that handles all functions such as custody and
investment decisions.
B) Funds split their basic functions such as record keeping and investment decisions
among two or more companies.
C) Funds are owned by the company that manages them.
D) A distributor keeps track of investment and redemption requests from shareholders and
maintains other shareholder records.
,B
Advantages of index funds include which of the following?
I. Low management fees.
II. They outperform most actively managed funds.
III. They have a balanced mix of stocks and bonds.
IV. Securities in the portfolio are selected by professional analysts.
I and II only
Mutual fund investors delegate all of the following decisions to the fund's managers
EXCEPT
A) which companies and industries to invest in.
B) when to buy and sell individual stocks.
C) how many securities to hold in the portfolio.
D) how to allocate investments among different classes of assets such as stocks, bonds,
cash and real estate.
D
Nearly all mutual funds operate as regulated investment companies. This means that
A) they are no-load funds.
B) portfolio decisions are mandated by government authorities.
C) they do not pay taxes on their income.
D) their investments are guaranteed by the FDIC.
C
,An open-end investment company
A) is involved in all trades of its shares.
B) sells shares at a discounted NAV price.
C) trades like a stock on the exchanges.
D) has a set number of shares.
A
The net asset value of a mutual fund increased from $12.03 to $13.53, but its price per
share increased by only $1.26. This information indicates that the fund
A) paid out $1 in capital gains.
B) paid out $1 in dividends.
C) is a closed-end fund.
D) is an open-end fund.
C
Which of the following characteristics apply to closed-end mutual funds?
I. unlimited number of outstanding shares
II. transactions are between shareholders
III. Market prices may be higher or lower than NAV.
IV. Fund will repurchase shares at any time.
II and III only
, Which of the following characteristics apply to exchange-traded funds (ETFs)?
I. unlimited number of outstanding shares
II. typically track the performance of some index
III. market prices reflect demand for the fund rather than NAV.
IV. shares are purchased from and redeemed by the investment company managing the
fund.
I and II only
Closed-end funds
A) hold a portfolio whose size and content are fixed when the fund opens.
B) are subject to both front loads and redemption fees.
C) are purchased directly from the funds' manager.
D) are traded at NAV.
A
Open end mutual funds may charge which of the following fees?
I. A front-end load at the time of purchase.
II. A back-end load when shares are sold.
III. Annual fees based on marketing and distribution costs.
IV. Annual performance fees up to 20% of increases in net asset value.
I, II and III only
