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Which of these investments may be long term? Check all that apply.
a)savings accounts 
b)mutual funds
c)bonds
d)retirement funds 
e)commodities

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Nestor Rutherford
Nestor RutherfordLv2
4 Mar 2020

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Question 11

Advantages of mutual funds include

A.

professional management.
B.

all of these.
C.

liquidity.
D.

diversification.

Question 12

Which of the following types of investment companies operates much like an index fund?

A.

exchange-traded fund
B.

unit investment trust
C.

closed-end fund
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REIT

Question 13

A common stock fund that invests in only one industry is called a(n) ____ fund.

A.

maximum capital gains
B.

growth and income
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index
D.

sector

Question 14

Mutual funds that charge a load do so to compensate

A.

fund managers.
B.

brokers.
C.

shareholders.
D.

the SEC.

Question 15

Your first task in selecting a mutual fund is to

A.

review your investment policy.
B.

locate sources of comparative performance data.
C.

eliminate funds inappropriate for your investment goals.
D.

screen and compare funds that meet your investment criteria.

Question 16

Taxes on annual earnings from mutual funds can be avoided

A.

while those amounts are kept in an IRS-qualified retirement account.
B.

as long as the mutual shares are not sold.
C.

while those amounts are kept in an IRS-qualified retirement account and if those earnings are interest from municipal bonds.
D.

if those earnings are interest from municipal bonds.

Question 17

Mutual funds permit automatic income reinvestment of

A.

ordinary income dividend distribution.
B.

none of these.
C.

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capital gains distribution.

Question 18

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A.

emerging market
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money market
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index
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sector

Question 19

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A.

back-end load
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front-end load
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low-load
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no-load

Question 20

Open-end mutual funds

A.

make up about 75 percent of all mutual funds.
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are sold only through brokers.
C.

are sold at their current net asset value.
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are sold to other investors on a secondary market.

Eileen Ponders Mutual Funds

Eileen Mahurin is the director of a major charitable organization in Knoxville, Tennessee. A single mother of one young child, she earns what could best be described as a modest income. Because charitable organizations aren’t known for their generous retirement programs, Eileen has decided it would be best for her to do a little investing on her own. She’d like to set up a program to supplement her employer’s retirement program and, at the same time, provide some funds for her child’s college education (which is still 12 years away). Although her income is modest, Eileen believes that with careful planning, she could probably invest about $250 a quarter, and she hopes to increase this amount over time. Eileen now has about $15,000 in a bank savings account, which she’s willing to use to kick off this program. In view of her investment objectives, she isn’t interested in taking a lot of risk. Because her knowledge of investments extends no further than savings accounts, series EE bonds, and a little bit about mutual funds, she approaches you for some investment advice.

Critical Thinking Questions

In view of Eileen’s long-term investment goals, do you think mutual funds or ETFs are the more appropriate investment vehicle for her?

Do you think that she should use her $15,000 savings to start a mutual fund or an ETF investment program?

What type of mutual fund or ETF investment program would you set up for Eileen? In your answer, discuss the types of funds you’d consider, the investment objectives you’d set, and any investment services (such as withdrawal plans) you’d seek. Would taxes be an important consideration in your investment advice? Explain.

Do you think some type of real estate investment would make sense for Eileen? If so, what type would you suggest? Explain.

The Reverend Mark Thomas is the minister of a church in the San Diego area. He is married, has one young child, and earns a �modest income.� Because religious organizations are not notorious for their generous retirement programs, the reverend has decided he should do some investing on his own. He would like to set up a program that enables him to supplement the church�s retire-ment program and at the same time provide some funds for his child�s college education (which is still some 12 years away). He is not out to break any investment records but wants some backup to provide for the long-run needs of his family.Although he has a modest income, Mark Thomas believes that with careful planning, he can probably invest about $250 a quarter (and, with luck, increase this amount over time). He cur-rently has about $15,000 in a savings account that he would be willing to use to begin this pro-gram. In view of his investment objectives, he is not interested in taking a lot of risk. Because his knowledge of investments extends to savings accounts, Series EE savings bonds, and a little bit about mutual funds, he approaches you for some investment advice.

Questions

a. In light of Mark�s long-term investment goals, do you think mutual funds are an appropriate investment vehicle for him?

b. Do you think he should use his $15,000 savings to start a mutual fund investment program?

c. What type of mutual fund investment program would you set up for the reverend? Include in your answer some discussion of the types of funds you would consider, the investment objectives you would set, and any investment services (e.g., withdrawal plans) you would seek. Would taxes be an important consideration in your investment advice? Explain.

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