#1
Which of the following is NOT a type of mutual fund?
Derivative fund
ExplanationDerivative funds are not a recognized type of mutual fund.
#2
What is Net Asset Value (NAV) of a mutual fund?
The total market value of a fund's investments divided by the number of outstanding shares
ExplanationNAV represents the per-share value of a mutual fund.
#3
Which of the following is a characteristic of open-end mutual funds?
They can issue and redeem shares at any time
ExplanationOpen-end mutual funds offer liquidity by allowing investors to buy and sell shares at any time.
#4
What is the front-end load fee of a mutual fund?
A fee charged when buying shares of the fund
ExplanationFront-end load fees are applied at the time of purchasing shares in a mutual fund.
#5
What does the term 'load' refer to in the context of mutual funds?
The commission paid to a broker for buying or selling shares
ExplanationLoad refers to the sales charge or commission associated with buying or selling mutual fund shares.
#6
Which of the following is a disadvantage of investing in mutual funds?
Lack of control over investment decisions
ExplanationInvestors in mutual funds have limited control over the specific assets in which the fund invests.
#7
What is the 'expense ratio' of a mutual fund?
The percentage of assets deducted annually to cover fund expenses
ExplanationExpense ratio indicates the portion of an investor's assets used to cover operating expenses of the mutual fund.
#8
What is the difference between a mutual fund and an exchange-traded fund (ETF)?
ETFs can be bought and sold throughout the trading day like stocks, while mutual funds are only priced and traded once per day
ExplanationETFs offer intraday trading flexibility, whereas mutual funds are traded at the end-of-day NAV.
#9
What is the 'trailing commission' associated with mutual funds?
A fee paid to brokers for providing ongoing advice and service to investors
ExplanationTrailing commissions compensate brokers for ongoing services provided to investors who hold mutual fund shares.
#10
What is the significance of the Sharpe ratio in evaluating mutual funds?
It measures the risk-adjusted return of the fund
ExplanationSharpe ratio assesses the risk-adjusted performance of a mutual fund by comparing its returns to its volatility.
#11
What does the term 'style drift' refer to in the context of mutual funds?
The tendency of fund managers to deviate from the fund's stated investment objectives
ExplanationStyle drift occurs when fund managers stray from the fund's established investment strategy.