FIN380 Test 3 Hoffman ASU QUESTIONS WITH ANSWERS.

FIN380 Test 3 Hoffman ASU QUESTIONS |\ |\ |\ |\ |\ |\




WITH ANSWERS |\




Mutual Funds - CORRECT ANSWERS ✔✔-pools money from
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multiple investors |\




-the fund manager invests the money based upon the fund's
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objective


Why invest in mutual funds? - CORRECT ANSWERS ✔✔-
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Diversification from multiple securities |\ |\ |\




-professional management/expertise |\




-higher expected returns
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-smaller $ investment |\ |\




-Easy investing |\




How do you find a good mutual fund? - CORRECT ANSWERS ✔✔-
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Morningstar |\




-Moody's
-financial publications (WSJ, Consumer Reports, Money
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Magazine...) rate mutual funds on performance and fees. |\ |\ |\ |\ |\ |\ |\




NAV: net asset value - CORRECT ANSWERS ✔✔(market value of
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all owned securities - loans) /
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number of shares in the mutual fund
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,Open-end mutual fund (investment company): (vast majority of
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funds) - CORRECT ANSWERS ✔✔-mutual fund can sell an
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unlimited number of shares |\ |\ |\




-purchase shares through an agent/distributor of the mutual fund
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-mutual fund will buy back the shares |\ |\ |\ |\ |\ |\




Closed-end mutual fund (investment company): (very few funds)
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- CORRECT ANSWERS ✔✔-mutual fund can sell a limited number
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of shares |\




-shares trade on stock exchanges, buy and sell with other
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investors
-share price determined by NAV and supply & demand
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(shares typically trade at a slight discount from NAV)
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-no real advertising
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Mutual fund commissions/fees: - CORRECT ANSWERS ✔✔1. Load
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funds
2. No load funds
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3. Hidden load funds
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4. Management fee
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5. Maintenance fee
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Load funds - CORRECT ANSWERS ✔✔- mutual funds that charge a
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commission
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-up to 8½% on purchase (or 5% on sale)
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-*front end load* -pay commission when you purchase
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, -*back end load* -pay commission when you sell
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-*sliding fee scale* |\ |\




-*level load* -pay commission annually
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-*low load* -discounted commission (1-3%)
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No load funds - CORRECT ANSWERS ✔✔-mutual funds that do not
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charge a commission when you buy or sell
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Hidden load funds - CORRECT ANSWERS ✔✔- 12b-1 special fees
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for marketing and advertising (also called a distribution fee)
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-load funds can charge up to 1% annually
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-no load funds can charge up to .25% annually
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Management fee - CORRECT ANSWERS ✔✔- annual fee paid to |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


the mutual fund's money manager. Fee does not depend on
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fund's performance. (.5 - 1.5% fee based on total assets)
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Information about a mutual fund is found in its: - CORRECT |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


ANSWERS ✔✔prospectus. |\




-details
-class of shares |\ |\




-open or closed |\ |\




all the details about sales fees, management fees, 12b-1 fees are
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in the: - CORRECT ANSWERS ✔✔fee table
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