30 Questions
What is a characteristic of the Dow Jones Industrial Average?
It is a price-weighted index of 50 stocks.
What is a seasoned equity offering?
When an issuer that already has publicly-traded equity issues new shares to the public.
What is true about hedge funds during the subprime mortgage crisis?
They experienced significant losses despite their ability to hedge.
What type of fund must hold substantial cash reserves?
An open-end mutual fund.
What is true about larger banks compared to smaller banks?
They have more core deposits and larger net interest margins.
What is true about the strong form of efficient market hypothesis?
Private information is of no help in earning abnormally high returns.
What is the combined percentage of the management fee and the 12b-1 fee?
2.25%
What is the impact of a front load on the net annual rate of return?
It decreases the net annual rate of return
How long can securities be preregistered under a shelf registration?
Up to three years
What is the characteristic of bank assets compared to bank liabilities?
Shorter maturities and greater liquidity
What is the largest owner of money market mutual funds?
Households
Which of the following is not considered an abusive activity in mutual funds investing?
Indexing
What is the typical ROA range for a well-run bank?
3–5 percent
What is the correct hierarchy of claim seniority among bondholders, preferred stockholders, and common stockholders?
Bondholders, preferred stockholders, common stockholders
What do the inside quotes represent on the NASDAQ system?
Lowest bid and highest ask
What is the single largest asset category for a bank?
Loans
What type of mutual funds typically invests in both common stock and long-term bonds?
Hybrid mutual funds
What is the term for preregistering securities with the SEC for sale over the next two years?
Shelf registration
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?
The NAV per share will rise from $1 to $1.05.
Which of the following is the primary regulator of mutual funds?
SEC
What is true about ETFs?
They are public investment pools regulated by the SEC.
How do bank liabilities and assets compare in terms of maturity and liquidity?
Bank liabilities have shorter maturities and greater liquidity than bank assets.
What would be evidence that the markets are not semi-strong form efficient?
Investors can earn abnormal returns using publicly-available financial information.
What do stock prices reflect in a semi-strong efficient market?
All historic and current public information, but not inside information.
What type of banking services involves providing check clearing, foreign exchange trading, and other services to other banks?
Correspondent banking
What is the total value of the shares held by the open-end mutual fund?
$90,500
What do open-end mutual funds guarantee to their investors?
To redeem investor's shares upon demand at the current NAV
What type of fund has a fixed number of shares outstanding and is traded on an exchange?
Closed-end fund
What is the primary responsibility of NYSE specialists?
All of the above
What type of fund is the most common?
Equity fund
Test your understanding of investment funds by calculating the net annual rate of return considering front load, management fee, and 12b-1 fee. Also, learn about shelf registration and its benefits for firms.
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