Q&A Hero

Q: When the value of the U.S. dollar rises relative to foreign currencies, foreign goods become more expensive for U.S. consumers, and they spend less money on imports.

Q: During recessions, it is common for imports to increase because people buy more cheap foreign goods.

Q: Every year since 1980, the U.S. has imported more goods than it has exported.

Q: The U.S. government has had only ten years between 1977 and 2007 where a surplus occurred because government revenues were greater than expenditures.

Q: One sign that the recession beginning in 1990 was very painful was that many large companies such as AT&T, IBM, and GM announced significant reductions in their work forces.

Q: Various industries are so different that no common factors exist among them for purposes of analysis.

Q: Leading indicators change direction in advance of general business conditions and are of prime importance to investors who want to forecast rising profits and stock prices.

Q: Leading indicators tend to give longer warnings before peaks than troughs.

Q: The fact that many studies have found a significant relationship between the money supply and stock prices has been quite helpful to investors.

Q: The composite index of leading indicators has shown little variation in its ability to predict.

Q: The most widely used tool of monetary policy is open-market operations.

Q: Purchasing securities in open-market operations by the Federal Reserve has the same effect as increasing reserve requirements.

Q: Monetary policy can be implemented very quickly to reinforce fiscal policy, or, when necessary, to offset the effects of fiscal policy.

Q: In the last few years (since 2006), the trade deficit has increased dramatically.

Q: Real GDP and the Consumer Price Index appear to move up and down together.

Q: The change in real GDP is often inversely related to inflation.

Q: A federal deficit will always expand the money supply.

Q: An increase in reserve requirements by the Federal Reserve would decrease the money supply.

Q: Fiscal policy involves government spending and taxation policies.

Q: The goals of the Employment Act of 1946 all respond favorably to the same economic stimulus.

Q: Surpluses have a tendency to reduce economic growth.

Q: The valuation process begins with an industry analysis.

Q: Fundamental analysis relies on forecasts of economic, industry, and company variables.

Q: Subjective beliefs and judgments are usually eliminated from economic forecasts.

Q: Slow, steady, predictable growth in the money supply over the long-term is a positive sign of economic growth.

Q: Coincident indicators are of major importance to investors because they accurately predict the timing of business cycle changes.

Q: The U.S. budget deficit has been steadily growing since the beginning of 2001 because of the recession, tax cuts, and the war in Iraq.

Q: Between 1977 and 2007, the U.S. government budget has showed a surplus in only a few years.

Q: It is possible for any gain in real GDP to be completely offset by the rate of inflation.

Q: When comparing international growth in real GDP between 2000 and 2009 among the United States, Japan, China, Germany, and the United Kingdom, the United States clearly is at the top of the group of countries.

Q: The Federal Reserve Board of Governors controls money supply and interest rates through its monetary policy.

Q: President George W. Bush took office in January of 2001 and inherited a crumbling economy that went into recession in March of 2001.

Q: During President Reagan's first term, the three-year tax cut and negotiated cuts in government spending reduced inflation dramatically and sparked growth in the GDP, but also boosted the federal deficit to record levels.

Q: An economic forecast will usually start with an analysis of the government's economic plan.

Q: Past information, when extrapolated without adjustment into the future, will provide an accurate forecast.

Q: A fund is set up to charge a load. Its net asset value is $17.70 and its offer price is $18.60. What percentage of the offer price does the load represent? A.4.84% B.5.08% C.16.74% D.15.93% E.20.67%

Q: A fund is set up to charge a load. Its net asset value is $17.70 and its offer price is $18.60. What is the dollar value of the load (commission)? A.$18.60 B.$17.70 C.$.95 D.$.90 E.$.50

Q: Exchange-Traded Funds offer the investor many advantages over open-end and closed-end mutual funds. Which of the following are comparative advantages? A.There are global and international funds to choose B.There are over 80 broad-based domestic equity index funds C.They are bought and sold like common stocks D.All of the above are comparative advantages

Q: One disadvantage of investing through mutual funds is A.that they provide time savings. B.that there are more than 8,100 to choose from. C.the professional management. D.too much diversification.

Q: When a mutual fund you own buys and sells securities in its portfolio, A.you are responsible for paying taxes on the net gains and losses incurred. B.the mutual fund is responsible for paying the taxes before distributing your share of the net gains. C.the IRS does not levy taxes on mutual funds. D.you have a choice on whether to pay taxes on the gains during the current year, or to pay the taxes over a five-year period.

Q: When you buy a mutual fund, you: A.may be purchasing a fund that has unrealized capital gains on stocks held in the portfolio. You could be liable for the taxes if the fund sells those shares. B.may be purchasing a fund that has unrealized capital losses on stocks held in the portfolio. You could be liable for the taxes if the fund sells those shares. C.will not have any tax consequences on assets owned by the fund before you purchased the mutual fund. D.Two of the above are correct

Q: The Hirt & Block mutual fund has assets of $147 million, liabilities of $7 million and 7 million shares outstanding. The shares trade at $21.60 per share. What is the percentage load fee? A.2.85% B.6.00% C.7.41% D.8.00%

Q: The Hirt & Block mutual fund has assets of $147 million, liabilities of $7 million and 7 million shares outstanding. What is the net asset value per share? A.$20 per share B.$21 per share C.$22 per share D.None of the above

Q: The growth fund category of funds would include: A.equity growth funds and aggressive growth. B.dividend paying equities with growing dividends. C.convertible securities that are convertible into growth stocks. D.funds that specialize in a high growth industry, such as technology.

Q: Which of the following is not a disadvantage of investing in mutual funds? A.They do not outperform the market as a group B.Some mutual funds may be expensive to purchase C.Mutual funds provide more diversification than investing in individual securities. D.With 5,000 funds to choose from, the selection of a fund is just as difficult as selecting an individual stock

Q: Mutual funds have several disadvantages. Which of the following would apply? A.Diversification of assets reduces risk B.Mutual funds allow an investor to choose an international portfolio with high risk C.Mutual funds, on average, do not outperform the market D.No-load funds minimize transaction costs

Q: A characteristic of a closed-end fund is that: A.it stands ready at all times to sell the investor new shares or buy back the old ones. B.the method of purchase is the stock exchange or over-the-counter market. C.the closed-end fund does not deal with shareholders. D.it trades shares at the Net Asset Value.

Q: Under dollar-cost averaging, the investor buys a: A.fixed dollar's worth of a given security regardless of the security's price or the current market outlook. B.floating dollar's worth of a given security regardless of the security's price or the current market outlook. C.fixed dollar's worth of any security. D.None of the above

Q: The following are all characteristics of money market funds, except: A.they invest in short-term securities. B.they are no-load. C.they have check writing privileges. D.they do not require minimum deposits.

Q: The difference between a load fund and a no-load fund is that: A.no-load funds do not charge commissions, and are sold directly by the investment company. B.load funds do not charge commissions, and are sold directly by the investment company. C.no-load funds charge higher commissions than load funds. D.no-load funds charge lower commissions than load funds.

Q: Characteristics of mutual funds with a goal of investing in growth companies include everything except: A.different investors can pool their money. B.the money is invested in stable companies, with an objective of strong dividend income. C.funds not included in the mutual fund are placed in short-term T-bills to earn interest. D.the money is invested in stable companies' common stock.

Q: Which of the following shareholder services is a taxable event? A.Safekeeping B.Automatic reinvestment C.Pre-authorized check plan D.Exchange privilege

Q: Sector funds offer A.good diversification. B.high loss/reward potential. C.stable returns. D.None of the above

Q: Yields on money market funds are closely associated with: A.short-term interest rates. B.the prime rate. C.long-term interest rates. D.None of the above

Q: Reliable sources of information about mutual funds include all of the following, except: A.Forbes. B.Lipper. C.Morningstar. D.All of the above are good sources

Q: A back-end load fund has: A.no charge upon purchase, but a fixed charge upon sale. B.a smaller charge on purchase, and another small charge again on sale. C.no charge upon purchase, and a declining charge, based on time owned, on sale. D.Two of the above

Q: A closed-end fund might trade at a premium due to: A.the quality of fund management. B.an upcoming dividend payable to the portfolio. C.an impending stock split in the portfolio. D.a closed-end fund would never trade at a premium.

Q: One can purchase shares in a closed-end mutual fund A.from shareholders. B.directly from the fund at all times. C.directly from the fund at inception. D.A and C

Q: Mutual funds which provide tax-free income are ________ and certain types of ________________. A.stock funds; bond funds B.money market funds; balanced funds C.municipal bond funds; money market funds D.none of the above

Q: ___________ invest entirely in short-term securities, and are particularly popular during periods of high short-term interest rates. A.Index funds B.Balanced funds C.Mutual stock funds D.Money market funds

Q: A mutual fund in which the portfolio is weighted exactly like the Standard and Poor's 500 Index, or any other market measure is called: A.a stock fund. B.a balanced fund. C.an index fund. D.a market fund.

Q: ________ have a fixed supply of shares, which often trade at a discount from the market value of assets held. A.Stock funds B.Bond funds C.Closed-end funds D.Open-end funds

Q: In a closed-end mutual fund, shares are traded: A.through brokers. B.on an exchange. C.between shareholders. D.B and C

Q: Investment company shares that trade on stock exchanges just like common stock and are essentially funds that mimic some index are: A.open-end mutual funds. B.exchange-traded funds. C.money market funds. D.load funds traded on stock exchanges. E.index mutual funds.

Q: Exchange-Traded Funds (ETFs): A.are predominantly traded on the New York Stock Exchange. B.create an opportunity for investors to own foreign stock. C.are open-end mutual funds. D.are load funds traded on stock exchanges.

Q: Which is not an advantage of exchange-traded funds (ETFs)? A.Their expense ratios are lower than mutual funds B.Because they imitate an index, there are no real research costs C.They can be bought and sold all day long at a price that is almost exactly the net asset value of the stocks in the index D.The assets in the portfolio are marked to market continuously E.They are open-ended funds that have reasonably low sales expenses

Q: Direct sources of return on a mutual fund investment include: A.dividends distributed. B.interest accumulated. C.stock market appreciation. D.dividends distributed and stock market appreciation.

Q: By using dollar-cost averaging, A.the investor is attempting to beat the market. B.the investor buys when prices are favorable only. C.the investor invests a fixed amount at regular intervals, at current market prices. D.None of the above

Q: Federal income tax on investment income and capital gains of a mutual fund: A.must always be paid by both the fund and the shareholder. B.must be paid only by the shareholder. C.is not required of the fund if it distributes at least 90% of its net investment income and capital gains. D.is not required either of the fund or of its shareholders.

Q: The mutual fund prospectus provides information about A.the fund's investment objectives. B.shareholder services. C.the current portfolio. D.All of the above

Q: Funds that invest in specific industries, such as energy, leisure, or defense, are called: A.balanced funds. B.industry funds. C.sector funds. D.specialty funds.

Q: A fund investing in T-bills, Eurodollar deposits, commercial paper, and repurchase agreements is probably a: A.money market fund. B.balanced fund. C.sector fund. D.growth fund.

Q: A load is: A.a commission paid to a selling agent. B.paid directly from investors' capital. C.typically 3% to 4% on a stock fund. D.A and B

Q: A closed-end fund might trade for less than net asset value if: A.the fund has a poor record of prior performance. B.it is a new fund trying to attract new investors. C.it is heavily invested in an unpopular industry. D.A and C

Q: Net asset value A.is the value of the securities minus the liabilities, divided by the number of shares outstanding. B.is the price at which the shares of a closed-end fund trade. C.is the value of the fund's year's earnings, divided by the total amount invested in the fund. D.A and B

Q: A closed-end fund versus an open-end fund refers to: A.whether there is a substantial penalty for early withdrawal. B.the maturity date of the shares. C.how the shares are distributed and redeemed. D.the limitation of upside potential and downside risk.

Q: Advantages of mutual funds include: A.mutual funds outperform the market, on average. B.efficient diversification. C.exceptionally low level of risk. D.All of the above

Q: Bond mutual funds can be divided into corporate, government, and municipal funds.

Q: Index funds are created to imitate a popular stock index such as the S&P 500 Index.

Q: As of 2009, no-load funds made up close to 65% of all mutual fund assets.