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Question 1 of 10
1. Question
Which of the following are mutual funds that aim to hold stocks that have an undervalued price and tend to pay out dividends:
Correct
Value funds are mutual funds which aim to hold stocks that have an undervalued price and tend to pay out dividends. Since the share prices are undervalued, they are expected to rise in time and give the fund investors capital gains.
Incorrect
Value funds are mutual funds which aim to hold stocks that have an undervalued price and tend to pay out dividends. Since the share prices are undervalued, they are expected to rise in time and give the fund investors capital gains.
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Question 2 of 10
2. Question
Which of the following statements is (are) true for growth funds:
I. They aim to hold stocks that have an undervalued price and tend to pay out dividends.
II. They are suitable for aggressive investors who are comfortable with a high degree of risk.
III. These are less established companies that are growing fast
IV. They are more suitable for investors with a strong aversion to riskCorrect
Growth funds are only suitable for aggressive investors who are comfortable with a high degree of risk. Because growth funds invest in younger, less established companies that are growing fast, the risk with this type of fund is greater than that of investing in an index fund of established companies across the spectrum of the American economy.
Incorrect
Growth funds are only suitable for aggressive investors who are comfortable with a high degree of risk. Because growth funds invest in younger, less established companies that are growing fast, the risk with this type of fund is greater than that of investing in an index fund of established companies across the spectrum of the American economy.
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Question 3 of 10
3. Question
Which of the following are like index funds, are generally considered more conservative, and are more suitable for investors with a strong aversion to risk:
I. Combination mutual funds
II. Income Funds
III. Balanced funds
IV. Value fundsCorrect
Income funds, like index funds, are generally considered more conservative, and are more suitable for investors with a strong aversion to risk. Income funds are not designed for capital gains, or for spectacular contrarian plays, but for safe, predictable, steady income.
Incorrect
Income funds, like index funds, are generally considered more conservative, and are more suitable for investors with a strong aversion to risk. Income funds are not designed for capital gains, or for spectacular contrarian plays, but for safe, predictable, steady income.
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Question 4 of 10
4. Question
Which of the following statements is (are) false for Combination mutual funds?
I. They are a combination of growth funds and income funds
II. They invest in both stocks and bonds
III. Their objective is a balance between capital gains and income
IV. They have the investors with low tolerances to riskCorrect
Combination mutual funds are a cross between, or combination of, growth funds and income funds. In fact, they are often referred to as growth and income funds. They are not as risky as a pure growth fund, and not as conservative as a pure income fund, these funds are popular with investors who are seeking a balanced portfolio.
Incorrect
Combination mutual funds are a cross between, or combination of, growth funds and income funds. In fact, they are often referred to as growth and income funds. They are not as risky as a pure growth fund, and not as conservative as a pure income fund, these funds are popular with investors who are seeking a balanced portfolio.
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Question 5 of 10
5. Question
Balanced funds, unlike many mutual funds, invest in both stocks and bonds. For this reason, balanced mutual funds are also commonly known as:
Correct
Balanced funds, unlike many mutual funds, invest in both stocks and bonds. For this reason, balanced mutual funds are also commonly known as hybrid funds. The objective is a balance between capital gains and income.
Incorrect
Balanced funds, unlike many mutual funds, invest in both stocks and bonds. For this reason, balanced mutual funds are also commonly known as hybrid funds. The objective is a balance between capital gains and income.
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Question 6 of 10
6. Question
Which of the following funds are not usually suitable for investors with low tolerances to risk:
I. Balanced funds
II. Sector funds
III. Money market funds
IV. International fundsCorrect
International funds are not usually suitable for investors with low tolerances to risk. International funds can post spectacular gains, but the risks attendant to investing in foreign companies is very high.
Incorrect
International funds are not usually suitable for investors with low tolerances to risk. International funds can post spectacular gains, but the risks attendant to investing in foreign companies is very high.
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Question 7 of 10
7. Question
Those funds that deliberately choose stocks to achieve the same performance as a broad-based market index, (often the S&P 500), the portfolio will usually achieve roughly the same rate of return as the general market is also known as:
Correct
Index mutual funds are one of the more conservative mutual fund choices. Because these funds deliberately choose stocks to achieve the same performance as a broad based market index, (often the S&P 500), the portfolio will usually achieve roughly the same rate of return as the general market.
Incorrect
Index mutual funds are one of the more conservative mutual fund choices. Because these funds deliberately choose stocks to achieve the same performance as a broad based market index, (often the S&P 500), the portfolio will usually achieve roughly the same rate of return as the general market.
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Question 8 of 10
8. Question
Which of the following is the type of asset allocation fund that changes the investment allocation as the investor ages?
I. Life-cycle funds
II. Net asset value
III. Asset allocation funds
IV. International fundsCorrect
Life-cycle funds are a type of asset allocation fund that change the investment allocation as the investor ages. If the investor is younger, the allocation will involve stocks to increase risk, but as the investor ages, the allocation will involve more bonds to decrease risk.
Incorrect
Life-cycle funds are a type of asset allocation fund that change the investment allocation as the investor ages. If the investor is younger, the allocation will involve stocks to increase risk, but as the investor ages, the allocation will involve more bonds to decrease risk.
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Question 9 of 10
9. Question
If Investors use money market funds to park cash while they are out of the market. They receive which of the following:
I. Interest income
II. Maximum liquidity
III. Lower risk than with securities
IV. Net asset value is guaranteedCorrect
Investors use money market funds to park cash while they are out of the market. They receive interest income, and have maximum liquidity, and generally face lower risk than with securities. Money market interest rates are always changing, and the net asset value is always at one dollar, although this is not actually guaranteed.
Incorrect
Investors use money market funds to park cash while they are out of the market. They receive interest income, and have maximum liquidity, and generally face lower risk than with securities. Money market interest rates are always changing, and the net asset value is always at one dollar, although this is not actually guaranteed.
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Question 10 of 10
10. Question
Mutual funds must offer automatic reinvestment of distributions in order to be allowed to charge the maximum sales charge of the following percentage:
Correct
Mutual funds must offer automatic reinvestment of distributions in order to be allowed to charge the maximum sales charge of 8.5 percent. Additionally, many mutual funds that don’t charge the maximum also allow automatic reinvestment of distributions.
Incorrect
Mutual funds must offer automatic reinvestment of distributions in order to be allowed to charge the maximum sales charge of 8.5 percent. Additionally, many mutual funds that don’t charge the maximum also allow automatic reinvestment of distributions.