Question 1

From a risk standpoint, stocks are considered the riskiest investments, followed by mutual funds, preferred stock, and ETFs. Bonds represent a lower-risk investment.

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Question 2

A mutual fund pools investors' money and then buys stocks and bonds in many companies in accordance with the purpose of the fund.

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Question 3

Most mutual funds provide investors an opportunity to buy shares directly without using a stockbroker.

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Question 4

When comparing the investments of different mutual funds, little variation in the risk level exists.

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Question 5

Mutual funds offer small investors an opportunity to diversify their investments.

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Question 6

Index funds invest in one specific type of investment; for example, an index fund might only invest in income stocks, companies whose stocks pay dividends.

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Question 7

Small investors can spread the risk of investing by purchasing shares of mutual funds or ETFs.

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Question 8

We calculate the mutual fund's NAV (Net Asset Value) by dividing the total market value of the fund, by the number of shared outstanding.

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Question 9

The investor always pays a fee when purchasing a share of a mutual fund.

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Question 10

Last year Alexis landed her first professional job after graduating from college. She also started her first investment account. Having met with several brokers before choosing someone to work with, Alexis wanted to make certain that her investment choices would provide for long-term growth, yet satisfy her concern for diversification. The person who won her business prepared an asset allocation plan that would start her account by investing in several index funds. Her adviser has offered her a sound way to combine the concern for diversification since index funds are a sensible way for Alexis to start.

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Question 11

U.S. investors have invested $13 trillion in mutual funds.

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Question 12

Most investment advisors put mutual funds high on the list of recommended investments for experienced investors, but consider them too risky for beginning investors.

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Question 13

Exchange traded funds are like mutual funds because these funds permit the investor to buy shares of a collection of several stocks or shares of a collection of stocks and bonds, but, unlike mutual funds, they are traded during the day on the exchanges.

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Question 14

Every time someone sells a stock believing the price has reached its maximum, someone else buys it believing the price will go still higher.

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Question 15

A mutual fund's purpose is rapid investment growth, not to provide diversification for investors.

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Question 16

On a mutual fund quotation, the Net Asset Value (NAV) = the number of persons who are investing in the fund.

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Question 17

A mutual fund that carries a load will require the investor to pay a commission, only if the fund appreciates in price.

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Question 18

When investing in mutual funds, the investor will buy shares of a fund that consists of stocks or bonds; the fund will hold shares of many companies.

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Question 19

The degree of risk in mutual fund investments remains nearly the same from one fund to the next.

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Question 20

A no-load mutual fund charges no commission fees to buy or sell its shares.

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Quiz 19: Using Securities Markets for Financing and Investing Opportunities