FIN 501 Study Guide - Money Market Fund, Investment Advisory, Capital Appreciation

Suppose an individual invests $20,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.0 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 1.0 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 15 percent each year paid on the last day of the year. If the investor reinvests the annual returns paid on the investment, calculate the annual return on the mutual funds over the two-year investment period.

A. The individuals actual investment, after the load fee is deducted:

B. Annual operating expenses:

C. Value of investment at end of year 1:

D. The investors return on the mutual fund investment after 1 year:

E. Value of investment at end of year 2:

F. Thus the investors annual return on the mutual fund over a 2 year period:

Suppose an individual invests $20,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.0 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 1.0 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 15 percent each year paid on the last day of the year. If the investor reinvests the annual returns paid on the investment, calculate the annual return on the mutual funds over the two-year investment period.

A. The individuals actual investment, after the load fee is deducted:

B. Annual operating expenses:

C. Value of investment at end of year 1:

D. The investors return on the mutual fund investment after 1 year:

E. Value of investment at end of year 2:

F. Thus the investors annual return on the mutual fund over a 2 year period:

Question 11

Advantages of mutual funds include

Question 12

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

Question 13

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

Question 14

Mutual funds that charge a load do so to compensate

Question 15

Your first task in selecting a mutual fund is to

Question 16

Taxes on annual earnings from mutual funds can be avoided

Question 17

Mutual funds permit automatic income reinvestment of

Question 18

The type of mutual fund that is not actively managed is called a(n) ____ fund.

Question 19

A mutual fund that does not assess a sales charge at the time of the investment purchase is called a ____ fund.

Question 20

Open-end mutual funds