Question

1.         A(n) ________________ mutual fund invests funds in short-term securities like Treasury bills, jumbo CDs, and commercial paper.

A.     REIT
B.      hybrid fund
C.      closed-end investment company
D.     equity mutual fund
E.      money market mutual fund

2.         A(n) __________________ has customer demand for the shares determining the number of shares outstanding.

A.     general partnership
B.      limited partnership
C.      open-end
D.     REIT
E.      closed-end

3.         A no-load mutual fund:

A.     has zero operating expenses.
B.      is typically marketed directly to customers, charging no commission.
C.      is a type that no longer exists.
D.     does not invest in common stocks.
E.      has a zero or negative rate of return in the most recent year.

4.         Fees considered “12b-1 fees” are:

A.     fees that investment companies must pay to the SEC.
B.      fees charged by some mutual funds, due to distribution and marketing costs.
C.      up-front “load” fees, charged by some mutual funds.
D.     back-end “load” fees, charged by some mutual funds.
E.      fees charged by mutual funds, to compensate the portfolio manager.

5.         Verysmall Mutual Fund’s investment portfolio is comprised of the following: 1,000 shares of General Mills (GIS, current price is $50 per share); 3,000 shares of Bank of America Corp (BAC, current price is $30 per share); and 2,500 shares of United Airlines Holdings (UAL), current price is $90 per share). Verysmall Mutual Fund has sold a total of 15,000 of its own shares to customers. What is Verysmall Mutual Fund’s net asset value?

A.     $21.00
B.      $24.33
C.      $41.67
D.     $40.56
E.      $125.00

Answer 1

1.E - Money market mutual fund invests in short term securities like Commercial papers, Treasury bills etc. These type of mutual funds limit their losses like credit risk , market risk, liquidity risk as these are short term and also provides investor with high returns.

2.C A open ended mutual fund scheme has a customer demand for the determining the number of shares outstanding because in case of open ended scheme investors can enter & exit anytime which changes the number of shares outstanding.

3.B A no load mutual fund charges no commission as it is marketed directly to customers.

4.B 12b-1 fee is charged by some mutual funds annually as distribution & marketing expenses often considered as operational expenses ranging between 0.25% to 0.75%.

5.B. NAV of the fund is per share market value of the fund, NAV of the very small mutual fund is computed as follows: