If interest rates fall, a bond issuer may decide to pay off (or "retire") its debt and issue new bonds that pay a lower rate. When this happens, the fund may not be able to reinvest the proceeds in an investment with a high return or yield. This is an example of:
A. Credit risk in bond funds
B. Prepayment risk in bond funds
C. Interest rate risk in bond funds
D. All of these
Money market funds bond funds (also called "fixed income" funds) , and stock funds (also called equity funds) are the categories of:
A. Mutual funds
B. Professionally managed portfolio
C. Hedge funds
D. None of these
___________ have relatively low risks, compared to other mutual funds.
A. Stock funds
B. Hedge funds
C. Money funds
D. Both B and C
End users need to hedge the prices at which they can purchase these commodities for instance:
A. A University might want to lock in the price at which it purchases electricity to supply its air conditioning units for upcoming summer months
B. An airline wants to lock in the price of the jet fuel it needs to purchase in order to satisfy the peak in seasonal demand for travel
C. A cotton producer wants to hedge his exposure to changes in the price of fertilizers or his end product (cotton)
D. Only A and B
I- A gold producers wants to hedge his losses attributable to a fall in the price of gold for his current gold inventory. II- A cattle farmer wants to hedge his exposure to changes in the price of his livestock These are the examples of __________ who need to manage their exposure to fluctuations in the prices of their commodities.
A. Hedgers
B. Producers
C. Speculators
D. None of these
All of these are disadvantages of mutual funds EXCEPT:
A. Cost despite negative returns
B. Liquidity
C. Lack of control
D. Price uncertainty
Investors typically cannot ascertain the exact makeup of a fund's portfolio at any given time, nor can they directly influence which securities the fund manager buys and sells or the timing of those trades. This is because of _______ in mutual funds.
A. Price uncertainty
B. Lack of control
C. Costs despite negative returns
D. All of these
One fund may invest on mostly established "blue chip" (Companies that pay regular dividends). Another fund may invest in newer technology companies that pay no dividends but that may have more potential for growth. These are the examples of:
A. Mutual funds
B. Index funds
C. Stock funds
D. Bond funds
Mutual funds provide an attractive investment choice because they generally offer the following feature/s:
A. Professional Management
B. Diversification
C. Affordability
D. All of these
Close-end funds are traded on:
A. A primary market
B. Secondary market
C. Tertiary market
D. Are not traded anywhere
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