Question

. A mutual fund is owned by the investment advisory firm which manages the fund.

A) True

B) False

2. A contingent deferred sales charge is a backend load which is imposed when shares of some mutual funds are sold.

A) True

B) False

3. Mutual funds are only permitted to invest in U.S. securities.

A) True

B) False

4. Each prospective investor in a mutual fund must be supplied with a(n):

A) trust certificate.

B) stock certificate.

C) tax report.

D) investment advisory report.

E) prospectus.

5. A fund has an offering price of $43.60 and a frontend load of 4.5 percent. What is the NAV?

A) $40.16

B) $41.64

C) $44.09

D) $45.78

E) $46.03

6. The Oliver Mutual Fund had average net assets of $111 million for the year. It bought $13 million worth of securities and sold $11 million worth. What is the fund's turnover rate?

A) 8.54 times

B) 8.67 times

C) 9.25 times

D) 10.00 times

E) 0.0991 times

7. When an openend fund closes, the:

A) fund is converting into a closedend fund

B) final prices for the trading day are being calculated

C) fund ceases operations.

D) fund refuses to accept any new investors.

E) fund is finished trading for the day.

Answer 1

1) False, Each investor owns shares of the mutual fund, which represent a portion of its holdings.

2) True

3) False, It depends on the investment objective of the mutual fund. MF's can follow different strategies and some of them follow strategies to invest globally.

4) MF prospectus. It has complete detail of the risk and reward offered by MF scheme.

5) NAV = Offering price - Front end load = 43.60 - 43.60 * 4.5% = 43.60 - 1.96 = 41.64

6) Average net assets = $ 111 Million

Securities bought = $ 13 Million

Securities sold = $ 11 Million

Total Securities bought + sold = 13 + 11 = $ 24 Million

Average of securities transacted over the year = 24/2 = 12$ Million

Turnover Ratio= Average Net assets / Average of securites bought and sold in the year

= 111 / 12

= 9.25

7) Fund Ceases operation