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CA Final Mutual Funds — practice questions

Explore 56 free Mutual Funds questions in CA Final Strategicfinancialmanagement. Open each question or exercise to read its content, reference answers and available explanation.

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Mutual Funds questions and exercises with answers

Showing questions 1–30 of 56.

What is the basic way a mutual fund operates?Read the answer and worked solution →Which legal document describes a mutual fund's investment objective and permitted investments?Read the answer and worked solution →A fund that tracks a stock index without trying to beat it is which kind?Read the answer and worked solution →Which funds seek to outperform stock market indices but generally charge higher fees?Read the answer and worked solution →In an open-end fund, at what price are shares purchased from and sold to the issuer?Read the answer and worked solution →Where are shares of a closed-end fund sold?Read the answer and worked solution →Which is an advantage of a mutual fund over direct stock picking?Read the answer and worked solution →Why does a mutual fund's diversification help an investor?Read the answer and worked solution →Which is a disadvantage of mutual funds compared with ETFs?Read the answer and worked solution →Why can mutual funds suffer a 'cash drag'?Read the answer and worked solution →Who receives the management fee of a mutual fund?Read the answer and worked solution →What does it mean when a management fee has 'breakpoints'?Read the answer and worked solution →Which type of fund generally charges a lower management fee?Read the answer and worked solution →A front-end load is best described as a charge paid when what happens?Read the answer and worked solution →An investor puts $10,000 in a fund with a 5% front-end load. How much is actually invested in the fund?Read the answer and worked solution →A fund's public offering price equals NAV plus what?Read the answer and worked solution →A fund has NAV of $38 per share and a front-end load of $2 per share. What is the public offering price?Read the answer and worked solution →A back-end load is charged when the investor does what?Read the answer and worked solution →A back-end load that declines with holding time is called what?Read the answer and worked solution →An investor redeems 1,000 units at NAV of $25 and pays a 2% back-end load. What does the investor receive?Read the answer and worked solution →What is the U.S. 12b-1 fee?Read the answer and worked solution →Who pays a 12b-1 fee, and what does it affect?Read the answer and worked solution →A fund can charge up to what percent in distribution fees and still call itself 'no-load'?Read the answer and worked solution →Which cost is paid by a fund to buy or sell securities in its portfolio?Read the answer and worked solution →Securities transaction costs of a fund are normally positively correlated with what?Read the answer and worked solution →What does a custodian bank do for a mutual fund?Read the answer and worked solution →Which fund service charge covers computing the net asset value?Read the answer and worked solution →The transfer agent of a fund is paid for doing what?Read the answer and worked solution →How is the expense ratio of a mutual fund defined?Read the answer and worked solution →A fund incurred recurring expenses of $1.2 million on average net assets of $200 million. What is its expense ratio?Read the answer and worked solution →

Worked practice questions

What is the basic way a mutual fund operates?

  1. It pools money from many investors to buy securities
  2. It lends a single investor's money to one company
  3. It insures bank deposits against default losses
  4. It issues government bonds directly to the public
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Correct answer: A. It pools money from many investors to buy securities

A fund collects small contributions from many investors into one pool and uses it to buy a portfolio of securities.

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Which legal document describes a mutual fund's investment objective and permitted investments?

  1. Balance sheet
  2. Prospectus
  3. Partnership deed
  4. Audit memorandum
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Correct answer: B. Prospectus

The prospectus sets out the objective, approach and the types of securities the fund may hold.

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A fund that tracks a stock index without trying to beat it is which kind?

  1. Actively managed fund
  2. Closed-end hedge fund
  3. Passive index fund
  4. Leveraged inverse fund
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Correct answer: C. Passive index fund

Index funds are passively managed and simply replicate the performance of the index they follow.

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