SIE: Exercise

Exercise

Answer the following questions.

1. 1. What is an important defining characteristic of a mutual fund?
2. A. The shares can be bought and sold on the primary, secondary, or OTC market.
3. B. Investors buy from and sell directly to the mutual fund; shares are newly issued to investors and expire once sold back to the fund.
4. C. Mutual funds provide diversification against systematic risk.
5. D. Mutual funds mostly focus on a particular industrial sector or geographic region.
6. 2. Which statements are true?
7. I. Growth funds have capital appreciation as their primary goal and have limited dividend payouts.
8. 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.
9. 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.
10. IV. Among bond funds, yield and risk vary.
11. A. I and II
12. B. II and IV
13. C. I and IV
14. D. II and III

Answer true or false.

1. 3. _____ Money market funds pay dividends based on prevailing long-term interest rates.

Fill in the blanks.

1. 4. _____ invest in companies that are believe