FCS 340 Financial
Management Final
Questions and
answers
Closed-end: - answer A mutual fund whose shares are issued by an
investment company only when the fund is organized.
Open-end: - answer A mutual fund whose shares are issued and
redeemed by the investment company at the request of investors.
What is net asset value? How is the net asset value calculated? - answer
The current market value of the securities contained in the mutual funds
portfolio minus the mutual funds liabilities divided by the number of
shares outstanding.
NAV= - answer Value of the fund's portfolio - liabilities
Number of shares outstanding
Load fund:. - answer A mutual fund in which investors pay a commission
every time they purchase shares.
No-load fund: - answer A mutual fund in which the individual investor
pays no sales charge.
What is a contingent deferred sales load? - answer A 1-5% charge that
shareholders pay when they sell shares in a mutual fund.
,How much can you expect to pay in management fees for most mutual
funds? - answer .25-1.5% of fund's net asset value is the RANGE. 0.5-1%
is the AVERAGE
What is a 12b-1 fee? - answer A fee that an investment company levies to
defray that costs of advertising and marketing a mutual fund.
What is expense ratio? - answer The amount that investors pay for all of
a mutual fund's management fees and operating expenses.
8. Why do investors purchase mutual funds? - answer 2 Reasons:
Professional Management & Diversification
9. Is there a significant difference between the performance of a load fund
and a no-load fund? Explain. - answer There is no significant difference in
performance. It is just up to you if you want to pay the cost of sales
commission that comes with a load fund.
10. What do experts recommend investors to look for in expense ratio? -
answer Expense ratio of 1% or less.
11. What is an equity income fund? - answer Investment in stocks issued
by companies with a long history of paying dividends - provides income to
shareholders.
12. What type of mutual fund would you recommend for an elderly person
who is concerned about the safety of his or her investment? - answer
Equity income fund
13. What is a growth fund? - answer Investment in companies expecting
higher than average revenue and earnings growth - tend to invest in
large, well established companies.
14. What is an asset allocation fund? - answer Asset allocation funds
invest in different asset classes. These can include: stocks, bonds, fixed
, income securities and money market instruments. These funds seek high
total return by maintaining precise amounts within each type of asset.
15. What are index funds? How do their performance compare to managed
funds? - answer Index funds invest in the same companies included in an
index (like the Dow Jones Industrial Average or the Nasdaq 100 Index).
Index funds should provide approximately the same performance as the
index. They are cheaper to manage and have lower management fees and
expense ratios.
16. How can an investor make money with mutual funds? - answer Shares
in a fund are sold, the profit from the increase in value is called capital
gain.
17. What is a "family of funds?" - answer "Family of funds" exists when
one investment company manages a group of mutual funds.
18. How can you get information about various mutual funds? - answer
The internet. (Yahoo! Finance Website, investment companies web pages,
online research reports for mutual funds)
19. What mutual fund earnings are considered taxable income? - answer
Income dividends
20. What is the most popular method of purchasing open-end mutual
funds? - answer Through a regular account transaction
21. What are the misconceptions about retirement planning? - answer
you have plenty of time to start saving for retirement, saving just a little
bit won't help, you'll spend less money when you retire, your retirement
will only last 15 years, you can depend on Social Security and a company
pension plan to pay your basic living expenses, your pension benefits will
increase to keep pace with inflation, your employer's health insurance
plan and Medicare will cover all your medical expenses when you retire.
Contractual- - answer require you to make regular purchases over a
specified period of time (usually 10 to 15 years).
Management Final
Questions and
answers
Closed-end: - answer A mutual fund whose shares are issued by an
investment company only when the fund is organized.
Open-end: - answer A mutual fund whose shares are issued and
redeemed by the investment company at the request of investors.
What is net asset value? How is the net asset value calculated? - answer
The current market value of the securities contained in the mutual funds
portfolio minus the mutual funds liabilities divided by the number of
shares outstanding.
NAV= - answer Value of the fund's portfolio - liabilities
Number of shares outstanding
Load fund:. - answer A mutual fund in which investors pay a commission
every time they purchase shares.
No-load fund: - answer A mutual fund in which the individual investor
pays no sales charge.
What is a contingent deferred sales load? - answer A 1-5% charge that
shareholders pay when they sell shares in a mutual fund.
,How much can you expect to pay in management fees for most mutual
funds? - answer .25-1.5% of fund's net asset value is the RANGE. 0.5-1%
is the AVERAGE
What is a 12b-1 fee? - answer A fee that an investment company levies to
defray that costs of advertising and marketing a mutual fund.
What is expense ratio? - answer The amount that investors pay for all of
a mutual fund's management fees and operating expenses.
8. Why do investors purchase mutual funds? - answer 2 Reasons:
Professional Management & Diversification
9. Is there a significant difference between the performance of a load fund
and a no-load fund? Explain. - answer There is no significant difference in
performance. It is just up to you if you want to pay the cost of sales
commission that comes with a load fund.
10. What do experts recommend investors to look for in expense ratio? -
answer Expense ratio of 1% or less.
11. What is an equity income fund? - answer Investment in stocks issued
by companies with a long history of paying dividends - provides income to
shareholders.
12. What type of mutual fund would you recommend for an elderly person
who is concerned about the safety of his or her investment? - answer
Equity income fund
13. What is a growth fund? - answer Investment in companies expecting
higher than average revenue and earnings growth - tend to invest in
large, well established companies.
14. What is an asset allocation fund? - answer Asset allocation funds
invest in different asset classes. These can include: stocks, bonds, fixed
, income securities and money market instruments. These funds seek high
total return by maintaining precise amounts within each type of asset.
15. What are index funds? How do their performance compare to managed
funds? - answer Index funds invest in the same companies included in an
index (like the Dow Jones Industrial Average or the Nasdaq 100 Index).
Index funds should provide approximately the same performance as the
index. They are cheaper to manage and have lower management fees and
expense ratios.
16. How can an investor make money with mutual funds? - answer Shares
in a fund are sold, the profit from the increase in value is called capital
gain.
17. What is a "family of funds?" - answer "Family of funds" exists when
one investment company manages a group of mutual funds.
18. How can you get information about various mutual funds? - answer
The internet. (Yahoo! Finance Website, investment companies web pages,
online research reports for mutual funds)
19. What mutual fund earnings are considered taxable income? - answer
Income dividends
20. What is the most popular method of purchasing open-end mutual
funds? - answer Through a regular account transaction
21. What are the misconceptions about retirement planning? - answer
you have plenty of time to start saving for retirement, saving just a little
bit won't help, you'll spend less money when you retire, your retirement
will only last 15 years, you can depend on Social Security and a company
pension plan to pay your basic living expenses, your pension benefits will
increase to keep pace with inflation, your employer's health insurance
plan and Medicare will cover all your medical expenses when you retire.
Contractual- - answer require you to make regular purchases over a
specified period of time (usually 10 to 15 years).
