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Exam 5: Mutual Funds, Hedge Funds, and Pension Funds

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Question 1

Multiple Choice

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Eveningstar open-end fund has 1,000 shares outstanding and has the following assets in its portfolio: 100 shares of Procter & Gamble (P&G) priced at $30.00, 300 shares of Intel priced at $50.00 and 200 shares of Microsoft priced at $60.00. The Morningstar closed-end fund has the following stocks in its portfolio: 300 shares of P&G and 300 shares of Microsoft. It has a total of 500 shares outstanding. What is the NAV of both funds?

A) $30.33 and $13.50.
B) $60.00 and $27.00.
C) $30.00 and $54.00.
D) $46.67 and $45.00.
E) $15.00 and $54.00.

F) B) and C)
G) B) and D)

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Question 2

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Worldwide investments in mutual funds have grown at a rate faster than in Canada and the United States over the last decade.

A) True
B) False

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Question 3

Multiple Choice

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These "more risky" hedge funds aim to profit from changes in global economies, typically brought about by shifts in government policy that impact interest rates.

One of the goals of mutual funds is to achieve superior diversification through fund and risk pooling compared to what individual investors can achieve.

Which of the following hedge fund objectives would be classified under the "risk avoidance" category?

The type of abusive activity that involves arrangements between mutual fund companies and brokerage houses is

The proportionate mix of total assets invested in long-term versus short-term mutual funds has varied over the last twenty years.

These types of funds mix hedge funds and other pooled investment vehicles.

The short-term mutual fund sector includes

A change from bank deposits to money market mutual funds typically allows an investor to benefit from higher yields, but with the cost of losing deposit insurance coverage.

The type of abusive activity that involves cases where investors were able to buy or sell mutual fund shares long after the price had been set each day is

The return from investing in mutual funds can include dividends, gains from the sale of the mutual fund assets, and gains from the sale of the mutual fund shares.

Historical evidence indicates that the benefits of greater management attention in load funds do not outweigh the disadvantages of the load fee.

As of 2013, the total investment in long-term mutual funds is less than the total investment in money market mutual funds.

Most individuals who invest in mutual funds for the first time realize that mutual fund investments carries some risk.

Equity mutual funds may contain common stock, but not preferred stock.

Open-end mutual funds

As of 2013, banks are not allowed to own or invest in mutual funds.

Mutual fund supermarkets often allow investors to purchase funds within large number of fund companies with no transaction fees.

Eveningstar open-end fund has 1,000 shares outstanding and has the following assets in its portfolio: 100 shares of Procter & Gamble (P&G) priced at $30.00, 300 shares of Intel priced at $50.00 and 200 shares of Microsoft priced at $60.00. The Morningstar closed-end fund has the following stocks in its portfolio: 300 shares of P&G and 300 shares of Microsoft. It has a total of 500 shares outstanding. Suppose Morningstar issues another 250 shares and purchases shares of Intel with the funds. What is its new NAV of Morningstar? (Assume the NAV found before the price change in P&G and Microsoft in the previous question) .