1. Mutual Fund Unit Review

2. 1. True or False:
The pricing of mutual funds are based on Net Asset Value (NAV)

3. 2. Which of the following is NOT one of the three ways you can gain income from a mutual fund:
Dividends in which the underlying shares pay a dividend
Capital Gains Distributions in which the manager sells the underlying shares for a profit
Dividend Gains Distributions in which the fund shares themselves pay a dividend
Capital Gains in which you sell your shares in the fund for a profit

4. 3. True or False:
Pricing of Exchange Traded Funds are based on Net Asset Value (NAV)

5. 4. True or False:
A mutual fund prospectus contains information about the fund’s current price?

6. 5. If the value of the underlying shares of a mutual fund are worth $150 million and there are 15 million shares of the fund outstanding, what does it cost to buy one share?
$5 per share
$10 per share
$15 per share
You can’t tell based on the info provided

7. 6. If the value of the underlying shares of an exchange traded fund are worth $150 million and there are 15 million shares of the fund outstanding, what does it cost to buy one share?
$5 per share
$10 per share
$15 per share
You can’t tell based on the info provided

8. 7. What are the most stars Morningstar gives to its top-rated funds?
One
Two
Three
Four
Five
Six

9. 8. True or False:
A load is a type of sales commission?

10. 9. True or False:
Management fees are a one-time charge to investors?

11. 10. In what year do you pay tax on a capital gains distribution you earn from the underlying shares in a mutual fund?
In the year in which the underlying shares are sold for a gain regardless of when you sell your fund shares
In the year in which you sell your fund shares regardless of when the underlying shares were sold for a gain
Never because capital gains distributions in a mutual fund are not taxable.
None of the above are correct

12. 11. True or False:
Some firms charge a redemption fee or deferred load when you sell your shares

13. 12. In what year do you pay tax on the dividends you earn from the underlying shares in a mutual fund?
In the year in which the dividend is paid regardless of when you sell your fund shares
In the year in which you sell your fund shares regardless of when the dividend was paid
Never because dividends in a mutual fund are not taxable.
None of the above are correct

14. 13. How do you calculate Net Asset Value (NAV)?
Number of the fund shares divided by the Value of the underlying assets
Number of the underlying shares divided by the value of the fund assets
Value of the underlying assets divided by the number of underlying shares
Value of the underlying assets divided by the number of fund shares

15. 14. True or False:
You should seek funds where the tenure of the manager is short (AOTBE).

16. 15. True or False:
12b-1 fees are advertising fees that are a one-time charge

17. 16. In what year do you pay tax on the capital gains you earn by selling your mutual fund shares?
In the year in which the underlying shares are sold for a gain regardless of when you sell your fund shares
In the year in which you sell your fund shares regardless of when the underlying shares were sold for a gain
Never because capital gains in a mutual fund are not taxable.
None of the above are correct

18. 17. You can buy mutual funds from:
The investment management company itself (e.g. Fidelity)
A broker (e.g. (Charles Schwab) who in turn buys them from the investment company for you
Either A or B
Neither A nor B

19. 18. What types of companies would be in a fund with this Morningstar Style Box?
Companies with a market cap greater than $1.5 Billion and higher potential for capital appreciation
Companies with a market cap less than $1.5 Billion and higher potential for dividend income
Companies with a market cap greater than $1.5 Billion and higher potential for dividend income
Companies with a market cap less than $1.5 Billion and higher potential for capital appreciation

20. 19. Which of the following is NOT an advantage a mutual fund has over buying stock:
Lower cost of entry
Professional Management
Diversification
More rapid growth potential
All of the above are advantages

21. 20. For an exchange traded fund, does a supply and demand price always equal NAV?

22. 21. Which of the following is NOT an advantage of buying funds from a broker?
One phone call to your broker enables you to buy funds from multiple companies
You receive consolidated statements reflecting all your funds
You avoid paying a commission
All of the above are advantages

23. 22. Which of the following would NOT be more actively managed:
A Latin American fund
A healthcare mutual fund
An index mutual fund
An aggressive growth fund

24. 23. What types of companies would be in a fund with this Morningstar Style Box?
Companies with a market cap greater than $1.5 Billion and higher potential for capital appreciation and dividends
Companies with a market cap greater than $1.5 Billion and higher potential for dividend income
Companies with a market cap greater than $5 Billion and potential for capital appreciation and dividend income
Companies with a market cap less than $5 Billion and higher potential for dividend income

25. 24. All of the following are disadvantages of a mutual fund has vs
24. All of the following are disadvantages of a mutual fund has vs. buying stock, except?
Can’t trade intraday
Funds have lower fees
Can’t do short selling
Can’t do margin buying
Can’t do limit orders

26. 25. True or False:
Exchange Traded Funds are traded on an exchange

27. 26. Which are more popular based on total dollars invested?
Mutual funds
Exchange traded funds

28. 27.Which are growing more rapidly based on the increase in number or increase in dollars of investment?
Mutual funds
Exchange traded funds

29. Final Jeopardy
Complete the Mutual Fund Categorization Sheet