The Impact of Front-End Load Fees on Investment Returns

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Which types of investment companies are classified by the Investment Company Act of 1940?

Mutual funds and ETFs
Unit investment trusts and ETFs
Unit investment trusts and mutual funds
Closed-end funds and open-end funds (correct)

What is the purpose of the Investment Company Act of 1940?

To enforce financial regulations
To regulate investment companies and protect investors (correct)
To encourage investment in ETFs
To promote the formation of mutual funds

What is the total value of assets managed by U.S.-registered investment companies at year-end 2023?

$28.9 trillion (correct)
$28.9 million
$28.9 quadrillion
$28.9 billion

What percentage of U.S. households are invested in funds?

54.7% (B) Signup and view all the answers

What is the main advantage of investing in mutual funds and ETFs?

Diversification (B) Signup and view all the answers

What is an important factor to consider when investing in mutual funds and ETFs?

Investment company structure (D) Signup and view all the answers

What is the most common reason for households to invest in funds?

Retirement (A) Signup and view all the answers

According to the text, what is the median number of mutual funds owned?

3 (A) Signup and view all the answers

What percentage of US-registered investment company total net assets were held by equity funds at year-end 2022?

57% (A) Signup and view all the answers

Which type of funds are sold at premium or discount to NAV to other investors?

Closed-end funds (D) Signup and view all the answers

Which investment companies have a fixed number of shares issued and can be bought or sold on an exchange?

Closed-end funds (A) Signup and view all the answers

What is the formula for calculating the price per share when the NAV is $13 and the front-end load is 4%?

P = 13 + 0.96(P) (B) Signup and view all the answers

What percentage of mutual fund and ETF assets were managed by the five largest firms at year-end 2022?

55% (D) Signup and view all the answers

What was the total net assets in US-registered investment companies at year-end 2022?

$28.9 trillion (D) Signup and view all the answers

Which of the following fees affect return calculations?

Both front-end and back-end load fees (D) Signup and view all the answers

What is the formula to calculate the price you get when you sell a fund with a back-end load fee?

Price = NAV * (1 - back-end load fee) (A) Signup and view all the answers

What is the formula to calculate the gross return of a fund with a back-end load fee?

Gross return = NAV * (1 - back-end load fee) (B) Signup and view all the answers

What is the formula to calculate the gross return of a fund with annual expenses (expense ratio)?

Gross return = NAV * (1 - annual expenses) (B) Signup and view all the answers

What is the formula to calculate the gross return for an investor in a fund over n periods?

Gross return = (1 + r - f - b)^n (C) Signup and view all the answers

What is the formula to calculate the gross return for an investor in a CD over n periods?

Gross return = (1 + r)^n (A) Signup and view all the answers

What are some advantages of mutual funds?

All of the above (D) Signup and view all the answers

Which one of these is a disadvantage of investing in ETFs?

You pay the bid-ask spread when trading an ETF (A) Signup and view all the answers

What is the main difference between hedge funds and mutual funds?

Hedge funds use more speculative strategies, while mutual funds use little leverage or short-selling (B) Signup and view all the answers

What is the main advantage of investing in mutual funds?

Mutual funds offer high liquidity (C) Signup and view all the answers

What is the main disadvantage of investing in hedge funds?

Hedge funds have heavy regulation (A) Signup and view all the answers

What is the main difference between ETFs and closed-end funds?

ETFs offer high liquidity, while closed-end funds do not (B) Signup and view all the answers

What is the main advantage of investing in closed-end funds?

Closed-end funds can generate higher returns compared to ETFs (C) Signup and view all the answers

Which asset classes make up most of the ETF universe?

Managed investment companies (D) Signup and view all the answers

Which asset classes make up most of the mutual fund universe?

ETFs (B) Signup and view all the answers

How do loads affect the return of mutual funds?

Loads decrease the return of mutual funds (A) Signup and view all the answers