Question

1. What are examples of investment companies? Check all that apply: Closed-end funds Mutual funds Exchange-traded...

1. What are examples of investment companies? Check all that apply:

Closed-end funds

Mutual funds

Exchange-traded funds

Investment banks

2. Which functions do investment companies perform for their investors? Check all that apply:

Investment advice

Lower transaction costs

Asset management

Record keeping Diversification and divisibility

3. A back-end load is _____.

a redemption or "exit" fee incurred when you sell your shares

a commission or sales charge paid when you purchase the shares

the cost incurred by the mutual fund in operating the portfolio, including administrative expenses and advisory fees paid to the manager

an explicit bill received for the operating expenses

4. Which are advantages of ETFs over conventional mutual funds? Check all that apply:

ETFs offer a potential tax advantage.

ETFs can be bought on margin and sold short.

ETFs have lower expense ratios than actively managed mutual funds.

ETFs have lower risk than conventional mutual funds.

ETFs trade continuously on an exchange.

5. What is the average historical performance of actively managed equity funds compared to the Wiltshire 5000 index? Active funds have _____ the index on average, _____ adjusting the index returns for trading costs and management fees.

outperformed; after

outperformed; but only when not

underperformed, but only when not

underperformed; even after

Homework Answers

Answer #1

1.

Closed Ended funds

Mutual Funds

Exchange traded funds

Explanation:

All these options invest in the financial market

2.

Investment Advice

Asset Management

Explanation:

Investment companies provide these facilities to customers.

3.

a redemption or "exit" fee incurred when you sell your shares

Explanation:

Exit load fee is applied as percentage of Value of asset when one sells shares in mutual fund

4.

ETFs offer a potential tax advantage.

ETFs trade continuously on an exchange.

ETFs have lower expense ratios than actively managed mutual funds.

Explanation:

ETF are more cost effective than conventional mutual funds due to treatment of tax in ETF.

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