Exercise
Choose the Best Answer
- 1. What is an important defining characteristic of a mutual fund company?
- A. The shares are readily bought and sold on the primary, secondary, or OTC market.
- B. Investors buy from and sell directly to the mutual fund company; shares are newly issued to investors and expire once sold back to the company.
- C. Mutual funds provide diversification against systematic risk.
- D. Mutual funds mostly focus on a particular industrial sector or geographic region.
- 2. Which statements are true?
- I. Growth funds have capital appreciation as their primary goal and have limited dividend payouts.
- II. Value funds invest in companies whose stocks are trading for a relatively high value; that is, the price to earnings ratio is relatively high.
- III. Any lifecycle fund can be recommended for an investor of any age, because such funds are designed to provide payouts throughout a person’s lifecycle.
- IV. Among bond funds, yield and risk vary.
- A. I and II
- B. II and IV
- C. I and IV
- D. II and III
