Q&A Hero

Q: Which one of the following types of funds invests in both stocks and bonds and actively attempts to time the market? A. income B. convertible C. flexible portfolio D. balanced E. insured

Q: Jim has managed to save $1,000 and wants to start investing. The financial markets make him nervous as he has very limited financial resources. Which one of the following types of funds is probably best for Jim at this time? A. sector B. aggressive growth C. social conscience D. high yield E. balanced

Q: Rose wants to invest in a bond fund. She is a very conservative investor with a high marginal tax rate. Which one of the following types of bond funds might be most suited for her situation? A. high-yield corporate B. long-term world C. short-term municipal D. single-state corporate E. mortgage

Q: Which one of the following types of bond funds tends to have the highest level of risk? A. short-term government B. intermediate-term corporate C. treasury D. high-yield E. single-state municipal

Q: Which one of the following is the distinguishing characteristic of a municipal bond fund? A. high-yield B. federally tax-free income C. mortgage backed D. short-term E. low quality

Q: Which one of the following is a general characteristic of a tax-managed fund? A. low turnover rate B. concentration on income-producing securities C. high level of realized capital gains D. higher trading costs than average funds E. matching of dividend income to capital gains

Q: You want to purchase shares in a fund and also ensure that your money does not support firms that harm the environment. Which type of fund should you purchase? A. international fund B. income fund C. tax-managed fund D. index fund E. social conscience fund

Q: Which one of the following characteristics best fits an index fund? A. market outperformer B. high expenses C. passively managed D. dividend oriented E. high turnover rate

Q: A fund which tracks the S&P 500 would best be classified as which type of fund? A. sector B. global C. equity income D. index E. growth

Q: A sector fund: A. tends to perform consistently from one year to the next. B. is usually highly diversified. C. rarely outperforms other types of funds. D. concentrates on investing in one industry or one commodity. E. is best evaluated by its past performance.

Q: Which type of fund should you purchase if you are interested in investing primarily in countries that have relatively new stock markets? A. international fund B. emerging markets fund C. social conscience fund D. global fund E. sector fund

Q: The primary difference between an international fund and a global fund is the fact that: A. a global fund invests in U.S. stocks while an international fund does not. B. an international fund invests in U.S. stocks while a global fund does not. C. all international funds are country specific while global funds are not. D. global funds may opt to be country or region specific while international funds may not. E. international funds tend to be more geographically diversified than global funds.

Q: Small-cap funds: A. generally focus on dividend-paying stocks. B. focus more on capital appreciation than on current income. C. are defined as the smallest 20 percent of all funds based on total asset value. D. are defined as the 20 percent of funds with the smallest NAVs. E. are generally also classified as equity income funds.

Q: Which type of stock fund focuses primarily on current income? A. growth and income B. small-company C. equity income D. capital appreciation E. growth

Q: Which type of stock fund focuses on maximizing share price appreciation? A. growth and income B. large-company C. equity income D. capital appreciation E. growth

Q: To determine the actual objective of a fund, you should primarily refer to the:A. fund's objective statement.B. fund's prospectus.C. portfolio holdings.D. sales literature.E. portfolio manager's comments in the annual report.

Q: Money market mutual funds:A. must be valued at $1 a share or more.B. invest only in certificates of deposit.C. produce income that is always tax-exempt.D. can provide "triple-tax-free" income.E. are insured by the FDIC.

Q: The net asset value of a money market mutual fund: A. is dependent upon the value of the fund's assets. B. is guaranteed to be $1 a share. C. fluctuates as new shares are issued and old shares are redeemed. D. varies inversely with market interest rates. E. is insured by the sponsoring investment advisory firm.

Q: Money market mutual funds do which one of the following? A. offer a guaranteed rate of return B. invest in securities that mature in 90 days or less C. provide a risk-free means of investing D. invest only in government bonds E. trade for $10 a share

Q: What are the two best reasons for considering a load fund? A. lack of good no-load funds and superior market performance B. preference for a particular fund manager or a specialized type of fund C. superior market performance and preferential tax treatment D. tax-free income and superior fund managers E. no management fees and a particular fund manager

Q: Which one of the following is NOT included in the fee table found in a mutual fund prospectus? A. 12b-1 fee B. turnover rate C. redemption fee percentage D. management fee E. front-end load

Q: Mutual fund trading costs:A. are computed as a percentage of a fund's assets.B. are generally set at a flat amount per year.C. generally include a bonus fee for outperforming an index.D. increase in direct relation to the turnover rate.E. are the costs paid to brokers in the form of sales commissions.

Q: Contingent deferred sales charges:A. are applied at the time fund shares are purchased.B. are applied only to front-end load funds.C. are charged on an annual basis to cover distribution and marketing costs.D. are no longer permissible.E. can be avoided.

Q: Assume a mutual fund is a pure no-load fund. Which of the following costs should an investor still expect to incur? I. contingent deferred sales charge II. management fee III. trading costs IV. redemption fee A. I, II, and III only B. II and III only C. II, III, and IV only D. I, II, III, and IV E. none of the costs listed

Q: When the offering price and the NAV are the same, you know that a mutual fund is not charging which one of the following fees? A. 12b-1 fee B. front-end load C. management fee D. contingent deferred sales charge E. trading costs

Q: Which one of the following costs can a mutual fund shareholder avoid by holding shares for an extended period of time? A. 12b-1 fee B. front-end load C. management fee D. contingent deferred sales charge E. trading costs

Q: Today, you are selling shares of an open-end mutual fund and will be charged a CDSC of 3 percent. The price you will receive per share is equal to:A. 103 percent of the opening NAV.B. 97 percent of the opening offering price.C. 97 percent of the closing NAV.D. 103 percent of the closing offering price.E. the closing offering price.

Q: The income earned by a regulated investment company is: A. exempt from all taxation. B. taxed only at the state and local level. C. taxed only at the federal level. D. taxable income for the fund. E. taxable income for the fund's shareholders.

Q: An investment company will be treated as a "regulated investment company" by the Internal Revenue Service provided that it: I. invests almost all of its assets in bonds, stocks, and other securities. II. invests solely in U.S. securities. III. does not invest more than two percent of its assets in any one security. IV. passes all its realized investment income through to its shareholders. A. I and III only B. I and IV only C. II and III only D. I, II, and IV only E. I, III, and IV only

Q: Investment advisory firms generally provide which of the following services to a mutual fund? I. marketing II. record keeping III. investment research IV. tax payment A. I only B. II and III only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV

Q: Mutual funds are generally created to: A. provide tax shelters for investors. B. generate fees for an advisory firm. C. eliminate investment risk. D. avoid taxes. E. avoid regulation.

Q: A mutual fund is created by which one of the following parties? A. fund shareholders B. fund's board of directors C. SEC D. investment advisory firm E. discount broker

Q: A mutual fund is owned by: A. its shareholders. B. a management company. C. a financial institution. D. the fund's board of directors. E. a mutual fund family.

Q: Shares in closed-end funds: A. can be resold to the fund at any time. B. are more popular than shares in open-end funds. C. may sell for more or less than the NAV. D. are referred to as mutual fund shares. E. cannot be resold.

Q: Which one of the following statements correctly relates to closed-end funds? A. Closed-end funds must sell at the NAV or above. B. The number of shares outstanding changes on a daily basis as shares are sold and repurchased. C. Shares in closed-end funds must be held until the funds mature. D. Once a fund closes, a new investor is unable to purchase shares in that fund. E. Shares of closed-end funds trade just like stocks.

Q: Which one of the following statements is correct concerning an open-end mutual fund which charges a front-end load? A. The number of shares outstanding was fixed at the time the fund was created. B. If an investor wishes to sell her shares, she must do so by selling to another investor. C. The NAV exceeds the offering price. D. The load is expressed as a percentage of the NAV. E. Investors receive the NAV when shares are sold.

Q: Which one of the following statements is correct concerning mutual funds? A. Mutual funds generally pay no taxes. B. Mutual funds are risk-free. C. Profits on the sale of mutual fund shares are tax-free. D. All mutual funds are diversified. E. Investments in mutual funds are guaranteed from loss by a private agency of the federal government.

Q: Which of the following are three key advantages of mutual funds? A. diversification, taxes, high initial investments B. low initial investments, professional management, diversification C. liquidity, high initial investments, diversification D. professional management, high initial investments, taxes E. costs, diversification, liquidity

Q: Which one of the following describes an investment company that generally has an unrestricted investment strategy and is not accessible to the general public? A. mutual fund B. open-end fund C. closed-end fund D. exchange-traded fund E. hedge fund

Q: A fund that is basically an index fund that trades like a closed-end fund is called a(n): A. open-end fund. B. money market fund. C. exchange-traded fund. D. mutual fund. E. depository receipt.

Q: An open-end fund which invests solely in short-term debt obligations is called a(n) _____ mutual fund. A. growth B. stock C. money market D. asset allocation E. balanced

Q: The turnover for a mutual fund refers to: A. the length of time an average investor holds fund shares. B. a measure of trading activity. C. replacing the fund's investment manager. D. the annual change in the number of shares outstanding. E. the percentage change in the ownership of fund shares.

Q: A 12b-1 fee is a fee charged by a mutual fund: A. at the time shares are issued. B. if shares are sold within a stated period of time. C. to cover trading costs. D. to pay the fund's managers. E. to cover marketing costs.

Q: A fee that is charged at the time mutual fund shares are purchased by an investor is called a: A. contingent deferred sales charge. B. 12b-1 fee. C. back-end load. D. front-end load. E. issuance charge.

Q: The value of a load mutual fund's assets less its liabilities, divided by the number of shares outstanding is referred to as the fund's: A. net asset value. B. offering price. C. open-end value. D. closed-end value.

Q: An investment company that issues a fixed number of shares which can only be resold in the open stock market is called a(n) _____ fund. A. hedge B. closed-end C. open-end D. public E. market

Q: An investment company that will repurchase shares at any time is called a(n) _____ fund. A. hedge B. closed-end C. open-end D. public E. exchange traded

Q: An investment company: A. specializes in investing funds on behalf of a financial institution. B. is a closed-end fund that invests in real estate. C. pools funds from individual investors. D. is a specific type of a bank. E. is a specialized form of a joint stock company.

Q: A 7 percent coupon bond has a face value of $1,000 and pays interest annually. The current yield is 6.8 percent. What is the current price of this bond?A. $971.43B. $978.41C. $1,068.00D. $1,029.41E. $1,104.00

Q: A $1,000 face value bond has a 6.85 percent semi-annual coupon and sells for $980.00. What is the current yield? A. 6.75 percent B. 6.82 percent C. 6.89 percent D. 6.99 percent E. 6.61 percent

Q: A 7.5 percent coupon bond is currently quoted at 89.3 and has a face value of $1,000. What is the amount of each semi-annual coupon payment if you own three (3) of these bonds? A. $56.25 B. $75.00 C. $100.46 D. $112.50 E. $200.93

Q: You own twelve (12) 6.25 percent coupon bonds with a total maturity value of $12,000. How much will you receive every six months as an interest payment? A. $213.50 B. $375.00 C. $427.00 D. $540.00 E. $750.00

Q: Use these option quotes to answer this question:What was the prior day's closing price on the 50 call option on JL stock?A. $4.45B. $4.75C. $5.05D. $5.10E. $5.30

Q: Use these option quotes to answer this question:What price will you receive (per underlying share) if you sell the 47.50 call option on JL stock?A. $4.80B. $5.00C. $5.90D. $6.00E. $6.10

Q: Use these option quotes to answer this question:The price you will pay (per underlying share) to buy the 50 call option on JL stock is:A. $4.75.B. $4.80.C. $5.00.D. $5.90.E. $6.00.

Q: Options expire on the _____ of the expiration month.A. last trading dayB. 3rd FridayC. last FridayD. Saturday following the 3rd FridayE. Saturday following the last Friday

Q: The seller of a naked call is betting that the price of the underlying asset will:A. decrease.B. increase.C. decrease and then increase prior to the expiration date.D. will remain constant for a period of time and then increase prior to the expiration date.E. have no effect on the value of the call.

Q: You will earn a profit as the owner of a call option if the price of the underlying asset: A. decreases. B. remains constant or decreases. C. remains constant. D. remains constant or increases. E. increases.

Q: When a put option is exercised, the: A. seller of the option receives the strike price. B. seller of the option receives the option premium. C. buyer of the option sells the underlying asset and receives the option premium. D. buyer of the option pays the option premium and receives the underlying asset. E. seller of the option must buy the underlying asset and pay the strike price.

Q: An American call option grants the holder the right to:A. sell the underlying security at the strike price on or before the expiration date.B. sell the underlying asset at the strike price only on the expiration date.C. buy the underlying asset at or below the exercise price on or before the expiration date.D. buy the underlying asset at the exercise price only on the expiration date.E. buy the underlying security at a stated price on or before the expiration date.

Q: A European put option grants the holder the right to:A. buy the underlying security at a stated price at any time up to and including the expiration date.B. sell the underlying security at the strike price on or before the expiration date.C. sell the underlying asset at the strike price only on the expiration date.D. buy the underlying asset at or below the exercise price on or before the expiration date.E. buy the underlying asset at the exercise price on the expiration date.

Q: If you are willing to sell a stock and wish to receive the option premium you should: A. buy a call. B. sell a call. C. buy a put. D. sell a put. E. either sell a call or buy a put.

Q: If you are willing to buy a stock and you wish to receive the option premium you should: A. buy a call. B. sell a call. C. buy a put. D. sell a put. E. either sell a call or buy a put.

Q: If you want the right, but not the obligation, to sell a stock at a specified price you should: A. buy a call. B. sell a call. C. buy a put. D. sell a put. E. either sell a call or buy a put.

Q: If you want the right, but not the obligation, to buy a stock at a specified price you should: A. buy a call. B. sell a call. C. buy a put. D. sell a put. E. either sell a call or buy a put.

Q: Use the following wheat futures quotes to answer this question.What price would you have paid today per bushel for the Mar 08 wheat futures contract if you bought the contract at the final price of the day?A. $10.8010B. $10.8025C. $10.9320D. $10.9325E. $11.0960

Q: Use the following wheat futures quotes to answer this question.What are the lowest and highest prices per bushel at which the March 08 wheat futures contract sold today?A. $10.9320; $10.9340B. $10.9325; $10.9350C. $10.6300; $10.9320D. $10.6300; $10.9340E. $10.6300; $10.9350

Q: Use the following wheat futures quotes to answer this question.By how much did today's settlement price per bushel for the Mar 08 wheat futures contract increase over the prior day's settlement price?A. $0.3020B. $0.3025C. $30.20D. $30.25E. $30.50

Q: Investing in a futures contract:A. guarantees a sale but not a sale price.B. can be profitable for both the buyer and the seller simultaneously.C. guarantees the buyer a profit on the contract.D. creates a gain for one party without causing a loss for the other party.E. can be offset by taking an opposing position.

Q: Harvest Fields sold ten September futures contracts on oats. Harvest Fields will: A. pay for the oats in September. B. take delivery of the oats in September. C. pay for the oats now and take delivery in September. D. receive payment now and deliver in September. E. both receive payment and deliver in September.

Q: Which of the following are generally included in a standardized futures contract? I. delivery date II. quantity to be delivered III. specific item to be delivered IV. delivery location A. I and II only B. I, II, and III only C. II, III, and IV only D. I, III, and IV only E. I, II, III, and IV

Q: At the time a futures contract is written:A. the underlying asset is specifically identified.B. the buyer pays a good faith deposit to the seller.C. the current market price of the underlying asset becomes the contract price.D. the current market price of the underlying asset must be less than the agreed upon futures price.E. the buyer is granted the right, but not the obligation, to exercise the contract.

Q: Futures contracts:A. require payment in full at the time the contract is written.B. can be resold.C. establish the quantity to be exchanged but not the date of the exchange.D. establish both the quantity to be exchanged and the exchange date but not the price.E. are primary financial assets.

Q: Uptown Jewelers purchased a futures contract on 200 ounces of gold to be exchanged 3-months from now. As the contract holder, Uptown Jewelers:A. has the right, but not the obligation, to purchase 200 ounces of gold 3 months from now.B. has the obligation to purchase 200 ounces of gold at the market price three months from now.C. has an obligation to buy 200 ounces of gold but only if the price of gold increases within the next 3 months.D. is expecting the price of gold to decrease and thus is locking in a selling price.E. will profit if the price of gold is higher three months from now.

Q: Great Lakes Farm agreed this morning to sell General Mills 25,000 bushels of wheat six months from now at a price per bushel of $9.75. This is an example of a: A. call option. B. put option. C. futures contract. D. money market security. E. fixed-income security.

Q: Which one of the following is a derivative asset? A. common stock B. option contract C. government bond D. preferred stock E. corporate bond

Q: Use the following stock quotes to answer this question:What is today's closing price per share of Buy Rite stock?A. $82.13B. $101.13C. $821.30D. $1,011.30E. $1,049.00

Q: Use the following stock quotes to answer this question:How many whole shares of Ditch Digger stock traded today?A. 11,298B. 112,980C. 11,298,006D. 112,980,060E. 1,129,800,600

Q: Preferred stock:A. is a type of corporate debt.B. is treated like debt for tax purposes.C. is listed in the liabilities section of a balance sheet.D. has a stated dividend but no stated liquidation value.E. is treated like equity for both tax and accounting purposes.

Q: Preferred stock: A. represents the residual ownership of a corporation. B. is generally issued only by new firms that are small in size. C. has a fixed maturity date similar to a bond. D. dividends can be skipped at the discretion of the company president. E. may or may not be cumulative.