MBA 621 Final Exams Questions &
Answers Verified 100% Correct
Explain the general difference in the composition of pension portfolios managed by
trusts versus insurance companies.
Pension portfolios managed by trusts offer potentially higher returns than insured plans
and have a higher degree of risk. This difference occurs because assets managed by
insurance companies (insured plans) are owned by insurance companies and are designed
to create annuities.
Mutual funds
investment companies that sell shares and use the proceeds to manage a portfolio of securities.
compare mutual funds to depository institutions
Like depository institutions, mutual funds repackage proceeds from individuals to
make investments
Unlike bank deposits, mutual funds represents partial ownership
Mutual funds adhere to a variety of federal and state regulations
MF's must register with SEC
Funds must provide a prospectus to investors
Disclosure since 1993 of manager's name and length of time employed in that
position Must disclose performance
Information contained in a prospectus
The minimum amount of investment required
The investment objective of the fund
The return on the fund over the past year, the past three years and the the past five years
,The exposure of the fund to various types of risk
Services the fund offers
The fees incurred and passed on to investors
Estimating the net asset value
Net asset value is the value per share
Estimated daily
Determine the market value of all the securities in the fund
Any interest or dividends added in
Expenses subtracted
Divide by the number of shares
Distributions to shareholders or returns to stockholders can take three forms
Pass on any earned income from dividend or coupon payments as a dividend
Distribute the capital gains from the sale of securities in the fund
Mutual fund price appreciation
As market price goes up, NAV increase
Shareholders benefit if they sell shares
Mutual fund classifications depend on the type of securities the fund invests in and can
include
Stock or equity mutual funds
Bond mutual funds
Money market mutual funds
Management of mutual funds
Managers invest in a portfolio of securities to meet the needs of investors
Cover management costs with fees
Managers adjust the composition of their portfolios in response to market and economic
conditions
, Research on stock mutual fund performance
Using return only is not valid
Mutual funds typically do not outperform the market
Include risk and expenses
Money market funds are portfolios of short-term assets
Can include check-writing privileges for
investors Number of checks per month may be
restricted Shareholders get periodic statements
Liquid
Risk of money market funds
Credit risk minimized by the short-term nature of maturities
Returns for money market funds fall as interest rates in the economy fall
Expected returns are low relative to stock and bond funds
Consistent positive returns over time
Lower credit risk
Lower interest rate risk
Regulation of money market funds
Securities Act of 1933 requires funds provide full information to investors via a prospectus
Investment Company Act of 1940 contains restrictions to prevent conflicts of interest between
investors and mangers
Financial problems experienced by Long-Term Capital Management (LTCM)
Hedge funds sell shares to wealthy investors and financial institutions
Historically unregulated
Invest in derivatives, sell stock short and combine borrowing to magnify returns
Classifications of Real Estate Investment Trusts
Answers Verified 100% Correct
Explain the general difference in the composition of pension portfolios managed by
trusts versus insurance companies.
Pension portfolios managed by trusts offer potentially higher returns than insured plans
and have a higher degree of risk. This difference occurs because assets managed by
insurance companies (insured plans) are owned by insurance companies and are designed
to create annuities.
Mutual funds
investment companies that sell shares and use the proceeds to manage a portfolio of securities.
compare mutual funds to depository institutions
Like depository institutions, mutual funds repackage proceeds from individuals to
make investments
Unlike bank deposits, mutual funds represents partial ownership
Mutual funds adhere to a variety of federal and state regulations
MF's must register with SEC
Funds must provide a prospectus to investors
Disclosure since 1993 of manager's name and length of time employed in that
position Must disclose performance
Information contained in a prospectus
The minimum amount of investment required
The investment objective of the fund
The return on the fund over the past year, the past three years and the the past five years
,The exposure of the fund to various types of risk
Services the fund offers
The fees incurred and passed on to investors
Estimating the net asset value
Net asset value is the value per share
Estimated daily
Determine the market value of all the securities in the fund
Any interest or dividends added in
Expenses subtracted
Divide by the number of shares
Distributions to shareholders or returns to stockholders can take three forms
Pass on any earned income from dividend or coupon payments as a dividend
Distribute the capital gains from the sale of securities in the fund
Mutual fund price appreciation
As market price goes up, NAV increase
Shareholders benefit if they sell shares
Mutual fund classifications depend on the type of securities the fund invests in and can
include
Stock or equity mutual funds
Bond mutual funds
Money market mutual funds
Management of mutual funds
Managers invest in a portfolio of securities to meet the needs of investors
Cover management costs with fees
Managers adjust the composition of their portfolios in response to market and economic
conditions
, Research on stock mutual fund performance
Using return only is not valid
Mutual funds typically do not outperform the market
Include risk and expenses
Money market funds are portfolios of short-term assets
Can include check-writing privileges for
investors Number of checks per month may be
restricted Shareholders get periodic statements
Liquid
Risk of money market funds
Credit risk minimized by the short-term nature of maturities
Returns for money market funds fall as interest rates in the economy fall
Expected returns are low relative to stock and bond funds
Consistent positive returns over time
Lower credit risk
Lower interest rate risk
Regulation of money market funds
Securities Act of 1933 requires funds provide full information to investors via a prospectus
Investment Company Act of 1940 contains restrictions to prevent conflicts of interest between
investors and mangers
Financial problems experienced by Long-Term Capital Management (LTCM)
Hedge funds sell shares to wealthy investors and financial institutions
Historically unregulated
Invest in derivatives, sell stock short and combine borrowing to magnify returns
Classifications of Real Estate Investment Trusts
