Mutual Funds

Q U E S T I O N   1 :
What percentage of mutual funds routinely fail to beat the performance of the S&P 500 index?
	a)	10%
	b)	75%
	c)	0%
	d)	40%
Q U E S T I O N   2 :
Why are municipal bond funds appealing to investors in high tax brackets?
	a)	They usually multiply wealth exponentially.
	b)	The government considers investment in these funds to be charitable contributions.
	c)	Income from many bond funds is tax exempt.
	d)	They make for superb cocktail party conversation.
Q U E S T I O N   3 :
An investor seeking a fund that generally buys cheap, unnoticed companies would be best served by which type of fund?
	a)	Value
	b)	Bond
	c)	Growth
	d)	Garage sale
Q U E S T I O N   4 :
What is the primary investing advantage to owning one share of a mutual fund as opposed to one share of a single stock?
	a)	A diversified portfolio
	b)	Tax-free holdings
	c)	Lunch with a portfolio manager
	d)	Guaranteed returns
Q U E S T I O N   5 :
What is an expense ratio?
	a)	The percentage of a fund's net assets under management that go to the fund's cost of doing business.
	b)	The amount of taxes fund owners are required to pay for ownership.
	c)	A sales charge tacked onto the price of a mutual fund that ostensibly serves as a commission.
	d)	A fund's net asset value divided by the number of stocks held in a fund.
Q U E S T I O N   6 :
How can a fund manager's preference for the rapid-fire buying and selling of stocks hurt shareholders?
	a)	Fund managers are only allowed 100 trades per year by SEC law.
	b)	Funds with high turnover average negative returns over a five-year period.
	c)	Short-term gains are taxed as income and the tax bill is passed on to shareholders.
	d)	Stock trading within a fund is likely to incur a sales load.
Q U E S T I O N   7 :
Why are money-market funds stable investments and a good bet for those who might need cash in the short term?
	a)	The Treasury Secretary is the portfolio manger for most money-market funds.
	b)	They invest in ultra-short-term securities issued by banks, the government or top-notch companies and are completely liquid.
	c)	They restrict buying to stocks in the Dow 30.
	d)	They always beat inflation.
Q U E S T I O N   8 :
Besides their mandate to mimic the performance of a large segment of the market, what makes index funds particularly efficient investments?
	a)	They require at least a two-year investment commitment.
	b)	They never carry loads.
	c)	They carry low fees and tax burdens.
	d)	Fund managers generally manage index funds more actively.
Q U E S T I O N   9 :
Mutual funds offer diversification and convenience, but they're still risky. Why?
	a)	Funds are subject to market instability and investor whimsy.
	b)	Mutual fund companies frequently fold, leaving investors high and dry.
	c)	Fund managers are typically high school dropouts who couldn't get jobs as financial journalists.
	d)	Funds aren't required to even file documents with the SEC.
Q U E S T I O N   10 :
Why would investors buy an international fund rather than a couple dozen international stocks?
	a)	International governments tax U.S. individual investors much more severely than fund managers.
	b)	Research on foreign companies is often scarce and international fund managers have resources to value foreign companies that are not easily accessible to most individuals.
	c)	It is nearly impossible for individuals to buy foreign stocks.
	d)	International funds come with a money-back guarantee.
Q U E S T I O N   11 :
When considering a fund's 'load,' investors are generally best served by...
	a)	Paying only 'front-end loads,' i.e., a percentage of their investment to the fund company upon the purchase of shares.
	b)	Opting for a 'back-end load,' which allows shareholders to pay smaller commissions for longer-term holdings.
	c)	Paying no load at all unless there is an extremely compelling performance reason that dictates otherwise.
	d)	Paying only half of the listed load and hoping the manager forgets about the rest.