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Which of the following is not an advantage of a mutual fund? A) Cheaper transactions costs...

Which of the following is not an advantage of a mutual fund?

A) Cheaper transactions costs

B) Diversification

C) Monitoring activities at lower costs

D) No default risk

E) All of these choices are correct

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Homework Answers

Answer #1

D) No default risk is the correct option. Mutual funds are exposed to default risk unless they are funds holding only government securities.

A is an advantage. Mutual funds have lower overall transaction costs because of their high volumes, which enables them to get lower costs from brokers

B is an advantage. Mutual funds diversify their portfolios across many sectors and securities.

C is an advantage. Monitoring cost is lower due to their reporting systems.

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