1.

Commercial banks undertake off-balance-sheet activities NOT to

Select one:

a.

Hedge interest rate, credit, and foreign exchange risks

b.

Avoid deposit insurance premiums

c.

Avoid taxes

d.

Avoid reserve requirements

e.

Protect depositors

An investor purchases a mutual fund for $50. The fund pays dividends of $2.50, distributes a capital gain of $3, and charges a fee of $3 when the fund is sold one year later for $51.50. What is the net rate of return from this investment before tax?

a.

11%

b.

8%

c.

10.68%

d.

14%

e.

7.77%