Investment Fund Fees and Returns
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Questions and Answers

What is a characteristic of the Dow Jones Industrial Average?

  • It is a price-weighted index of 50 stocks. (correct)
  • It is a market capitalization-weighted index of 30 stocks.
  • It is a total return index of 40 stocks.
  • It is a dividend yield-weighted index of 30 stocks.

    • What is a seasoned equity offering?

  • When an issuer that has never had publicly-traded equity issues new shares to the public.
  • When an issuer that has never had publicly-traded debt issues new debt to the public.
  • When an issuer that already has publicly-traded equity issues new shares to the public. (correct)
  • When an issuer that has publicly-traded equity issues new bonds to the public.

    • What is true about hedge funds during the subprime mortgage crisis?

  • They were not affected by the crisis.
  • They experienced significant losses despite their ability to hedge. (correct)
  • They experienced significant losses due to their ability to hedge.
  • They did not experience any losses.

    • What type of fund must hold substantial cash reserves?

    <p>An open-end mutual fund.</p> Signup and view all the answers

    What is true about larger banks compared to smaller banks?

    <p>They have more core deposits and larger net interest margins.</p> Signup and view all the answers

    What is true about the strong form of efficient market hypothesis?

    <p>Private information is of no help in earning abnormally high returns.</p> Signup and view all the answers

    What is the combined percentage of the management fee and the 12b-1 fee?

    <p>2.25%</p> Signup and view all the answers

    What is the impact of a front load on the net annual rate of return?

    <p>It decreases the net annual rate of return</p> Signup and view all the answers

    How long can securities be preregistered under a shelf registration?

    <p>Up to three years</p> Signup and view all the answers

    What is the characteristic of bank assets compared to bank liabilities?

    <p>Shorter maturities and greater liquidity</p> Signup and view all the answers

    What is the largest owner of money market mutual funds?

    <p>Households</p> Signup and view all the answers

    Which of the following is not considered an abusive activity in mutual funds investing?

    <p>Indexing</p> Signup and view all the answers

    What is the typical ROA range for a well-run bank?

    <p>3–5 percent</p> Signup and view all the answers

    What is the correct hierarchy of claim seniority among bondholders, preferred stockholders, and common stockholders?

    <p>Bondholders, preferred stockholders, common stockholders</p> Signup and view all the answers

    What do the inside quotes represent on the NASDAQ system?

    <p>Lowest bid and highest ask</p> Signup and view all the answers

    What is the single largest asset category for a bank?

    <p>Loans</p> Signup and view all the answers

    What type of mutual funds typically invests in both common stock and long-term bonds?

    <p>Hybrid mutual funds</p> Signup and view all the answers

    What is the term for preregistering securities with the SEC for sale over the next two years?

    <p>Shelf registration</p> Signup and view all the answers

    What will happen to the fund's NAV per share if its total assets increase from $100 to $105 when the fund has 100 shares outstanding?

    <p>The NAV per share will rise from $1 to $1.05.</p> Signup and view all the answers

    Which of the following is the primary regulator of mutual funds?

    <p>SEC</p> Signup and view all the answers

    What is true about ETFs?

    <p>They are public investment pools regulated by the SEC.</p> Signup and view all the answers

    How do bank liabilities and assets compare in terms of maturity and liquidity?

    <p>Bank liabilities have shorter maturities and greater liquidity than bank assets.</p> Signup and view all the answers

    What would be evidence that the markets are not semi-strong form efficient?

    <p>Investors can earn abnormal returns using publicly-available financial information.</p> Signup and view all the answers

    What do stock prices reflect in a semi-strong efficient market?

    <p>All historic and current public information, but not inside information.</p> Signup and view all the answers

    What type of banking services involves providing check clearing, foreign exchange trading, and other services to other banks?

    <p>Correspondent banking</p> Signup and view all the answers

    What is the total value of the shares held by the open-end mutual fund?

    <p>$90,500</p> Signup and view all the answers

    What do open-end mutual funds guarantee to their investors?

    <p>To redeem investor's shares upon demand at the current NAV</p> Signup and view all the answers

    What type of fund has a fixed number of shares outstanding and is traded on an exchange?

    <p>Closed-end fund</p> Signup and view all the answers

    What is the primary responsibility of NYSE specialists?

    <p>All of the above</p> Signup and view all the answers

    What type of fund is the most common?

    <p>Equity fund</p> Signup and view all the answers

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