Mutual Funds vs Hedge Funds Quiz

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What is the major difference between open-ended and closed-end mutual funds?

Open-ended funds can sell new shares to investors and redeem outstanding shares on demand, while closed-end funds issue a fixed number of shares through an IPO and do not create new shares. (correct)

Open-ended funds do not create new shares, while closed-end funds can sell new shares to investors and redeem outstanding shares on demand.

Open-ended funds cannot be bought and sold on a stock exchange, while closed-end funds can issue new shares through an IPO.

Open-ended funds issue a fixed number of shares through an IPO, while closed-end funds can sell new shares to investors and redeem outstanding shares on demand.

What advantage do mutual funds have in terms of transaction costs and commissions compared to individual investors buying securities directly?

Mutual funds generally incur higher transaction costs and commissions compared to individual investors.

Mutual funds have no advantage over individual investors in terms of transaction costs and commissions.

Mutual funds can generate greater economies of scale by incurring lower transaction costs and commissions than individual investors. (correct)

Mutual funds do not incur any transaction costs or commissions, unlike individual investors.

Which statement accurately describes hedge funds?

Hedge funds are investment pools that focus on small investors and diversify risk by pooling financial resources from individuals and companies.

Hedge funds primarily invest in government securities and are open to all types of investors.

Hedge funds are investment pools that solicit funds from wealthy individuals and other investors, investing these funds on their behalf. Their investments are restricted to more wealthy clients. (correct)

Hedge funds are similar to mutual funds but primarily invest in stocks and do not accept investments from commercial banks.

What type of investors do hedge funds primarily accept investments from?

Wealthy individuals and other investors Signup and view all the answers

How do closed-end funds raise capital for their initial investments?

By issuing a fixed number of shares through a single initial public offering (IPO) Signup and view all the answers

What characteristic differentiates open-ended mutual funds from closed-end mutual funds?

Open-ended mutual funds can sell new shares to investors and redeem outstanding shares on demand, while closed-end funds issue a fixed number of shares through an IPO and do not create new shares. Signup and view all the answers

What type of investors do hedge funds target?

High-net-worth investors Signup and view all the answers

Which type of mutual fund includes both bond and stock securities?

Hybrid funds Signup and view all the answers

What type of risk is predominant for short-term funds?

Interest rate risk Signup and view all the answers

What type of investors own the majority of both long- and short-term funds?

Small investors Signup and view all the answers

What do money market mutual funds provide an alternative investment to?

Interest-bearing deposits at commercial banks Signup and view all the answers

What does the spread earned on MMMF investments relative to deposits indicate?

Potential attractiveness of MMMFs versus deposits Signup and view all the answers

What benefit do fund managers obtain by pooling investments from a large number of small investors?

Lower transaction costs and reduced research and monitoring activities Signup and view all the answers

What type of risk is more systematic or market based for long-term equity funds?

Market risk Signup and view all the answers

Mutual Funds vs Hedge Funds Quiz

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