Mutual Funds Answers

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23

Why is too much diversification considered a negative thing when dealing in a mutual funds?

A
Higher diversification means that the mutual fund costs a lot more and doesn’t provide as much profit.
B
When there is too much diversification in a mutual fund, great success in a single stock doesn’t make much of a difference in the overall progress of the fund.
C
If there are too many different investments, it would be too hard to keep track of them and some would inevitably get lost in the system.
D
Greater diversification means a drastic increase in taxes, so most companies avoid overly diversifying the mutual fund.
24

Four years ago, Sam invested in Grath Oil. She bought three of its $1,000 par value bonds at a market price of 93.938 and with an annual coupon rate of 6.5%. She also bought 450 shares of Grath Oil stock at $44.11, which has paid an annual dividend of $3.10 for each of the last ten years. Today, Grath Oil bonds have a market rate of 98.866 and Grath Oil stock sells for $45.55 per share. Use the scenario above to select the best answer.

A
It is equally likely that the company would suspend paying interest on the bonds and dividends on the stock.
B
Both the coupon rate and the dividend rate are fixed and cannot change.
C
The bonds showed a higher percentage return than that of the stocks.
D
The amount of money received annually in interest (on the bonds) and in dividends (on the stocks) depends on the current market prices.
25

The two most important components in creating implied texture are _______________.

A
depth and space
B
tint and tone
C
shadow and light
D
tactility and shadowing
26

Drew has invested in Iwad Records. He owns three par value $1,000 bonds from them, which are currently selling for 99.773. He also owns 600 shares of Iwad Records stock, the current value of which is $5.28 per share. If, when Drew made his investment, Iwad Records bonds had a market price of 94.561 and stock in the same company sold for $5.00 per share, which investment has increased in value more, and by how much? (HINT: difference/original)

A
The value of Drew’s bonds has increased by $4.83 more than the value of his stocks.
B
The value of Drew’s bonds has increased by $9.87 more than the value of his stocks.
C
The value of Drew’s stocks has increased by $11.64 more than the value of his bonds.
D
The value of Drew’s stocks has increased by $34.92 more than the value of his bonds.
29

Why is too much diversification considered a negative thing when dealing in a mutual funds?

A
Higher diversification means that the mutual fund costs a lot more and doesn’t provide as much profit.
B
When there is too much diversification in a mutual fund, great success in a single stock doesn’t make much of a difference in the overall progress of the fund.
C
If there are too many different investments, it would be too hard to keep track of them and some would inevitably get lost in the system.
D
Greater diversification means a drastic increase in taxes, so most companies avoid overly diversifying the mutual fund.
31

Why does the government issue only bonds, while companies issue both stocks and bonds?

A
The US government does not involve itself in the stock market because it does not want to risk losing money if there should ever be a crash in the stock market.
B
Because the stock market is used as a form of gambling, the government refuses to associated itself with the stock market as a way to discourage gambling.
C
Stock in a company gives the holder part-ownership of the company, with voting rights on big decisions, and profits when the value goes up. The people already vote on happenings in the government and inherently have ownership of the government.
D
A stock is a part ownership in a company, and the leaders of the government won’t have the people owning the government.
33

Who sculpted the above work of art entitled, Mademoiselle Pogany.

Question illustration
A
Vincent van Gogh
B
Deborah Butterfield
C
Pablo Picasso
D
Constanin Brancusi
34

Mark buys 250 shares of stock in a fund with a net asset value of $25.17 and an offer price of $25.30. Mark wants to sell all of his shares when he can profit $1,000. If Mark sells his shares today, he would have proceeds of $7,300. Determine if Mark should sell his shares today and why.

A
Mark should not sell his shares because he would have a loss rather than a profit.
B
Mark should not sell his shares because he would not have as much profit as he’d like.
C
Mark should sell his shares because he will make the profit he wants to make.
D
There is not enough information given to know if Mark should sell his shares or not.
35

Bonds issued by Raxin Accounting have a total yield of 11.4% annually, while Raxin Accounting stocks have a total yield of 14.4% annually. If you invest $2,600 in Raxin Accounting bonds and $2,000 in Raxin Accounting stocks, which investment will have a greater return after nine years, and how much greater will it be?

A
The bonds will show a profit that is $75.60 greater than that of the stocks.
B
The bonds will show a profit that is $67.60 greater than that of the stocks.
C
The stocks will show a profit that is $8.00 greater than that of the bonds.
D
The stocks will show a profit that is $524.40 greater than that of the bonds.
37

Pablo Picasso’s Head of a Woman, is an example of a(n) ______________.

Question illustration
A
sculpture in the round
B
impasto
C
model
D
relief sculpture
38

Mark buys 250 shares of stock in a fund with a net asset value of $25.17 and an offer price of $25.30. Mark wants to sell all of his shares when he can profit $1,000. If Mark sells his shares today, he would have proceeds of $7,300. Determine if Mark should sell his shares today and why.

A
Mark should not sell his shares because he would have a loss rather than a profit.
B
Mark should not sell his shares because he would not have as much profit as he’d like.
C
Mark should sell his shares because he will make the profit he wants to make.
D
There is not enough information given to know if Mark should sell his shares or not.
40

Mark has invested in Evu Confectioners. He owns 220 shares of stock in Evu Confectioners, with each share costing him $14.79 apiece but paying a yearly dividend of $2.03. Mark also owns three par value $500 bonds from Evu Confectioners, each of which had a market value of 93.630 and which pay 8.8% interest. If Mark’s broker charges a commission of $55 per ten shares of stock bought or sold and a commission of 3% of the market value of each bond bought or sold, which aspect of Mark’s investment in Evu Confectioners has the greater percent yield, and how much greater is it?

A
The stocks have a yield 4.33 percentage points greater than that of the bonds.
B
The stocks have a yield 0.88 percentage points greater than that of the bonds.
C
The bonds have a yield 0.32 percentage points greater than that of the stocks.
D
The bonds have a yield 3.68 percentage points greater than that of the stocks.

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