1) It is not important to have a secondary market for mutual funds because:

a) investors hold the securities till maturity.b) investors trade between themselves.c) investors sell their shares back to the company.d) banks will cash their shares as long as they have accounts at the bank.

2) Which of the following ETFs (exchange traded fund) provides exposure to 500 U.S.large-capitalization companies?

a) Spiderb) Clubsc) Cubesd) Diamonds

3) If a mutual fund holds a substantial amount of Treasury bills, this is probably a(an):

a) tax-exempt fund.b) conservative bond fund.c) income fundd) money market mutual fund.

4) Which of the following statements regarding changes in bond prices relative to changes in market yields is true?

a) Short-term bond prices will increase more than long-term bond prices if market yields increase.b) Short-term bond prices will increase less than long-term bond prices if market yields decrease.c) Short-term bond prices will increase more than long-term bond prices if market yields decrease.d) Short-term bond prices will remain constant and long-term bond prices will increase if market yieldsdecrease.

5) All of the following are interchangeable terms except for:

a) discount rateb) coupon ratec) required rate of returnd) capitalization rate

6) What is the method of selling Treasury bills at less than face value called?

a) imputed basisb) par value methodc) discount basisd) STRIP basise) face value method

7) Municipal bonds that are secured by the full faith and credit of the issuer are referred to as which one of the following?

a) general obligation bondsb) local taxation bondsc) fully funded bondsd) revenue bondse) private activity bonds

8) Which one of the following statements correctly applies to STRIPS?

a) STRIPS securities pay a fixed-rate, semiannual interest payment.b) A 10-year T-bond is broken into 20 STRIPS securities.c) Treasury securities are broken into STRIPS securities by brokers.d) STRIPS securities pay a variable-rate, semiannual interest payment.e) All STRIPS securities taken from the same Treasury security must be registered to the same owner.

9) a fund that is basically an index fund that trades like a closed-end fund is called a(n):

a) open-end fund.b) money market fund.c) exchange-traded fund.d) mutual fund.e) depository receipt.

10) Shares in closed-end funds:

a) can be resold to the fund at any time.b) are more popular than shares in open-end funds.c) may sell for more than the NAV.d) are referred to as mutual fund shares.e) cannot be resold.

11) Which one of the following costs can a mutual fund shareholder avoid by holding shares for an extended period of time?

a) 12b-1 feeb) front-end loadc) management feed) contingent deferred sales chargee) trading costs

12) Debt issued by a trustee to purchase airplanes that will be leased to an airline would be classified as whichof the following?

a) collateral trust bondb) equipment trust certificatec) transportation bondd) mortgage bonde) rolling stock certificate

13) Which one of the following is an account used to provide for scheduled redemptions of outstanding bonds?

a) redemption fundb) sinking fundc) liquidation accountd) serial accounte) callable account

14) Capital gains are included in the return on an investment:

a) when either the investment is sold or the investment has been owned for at least one year.b) only if the investment is sold and the capital gain is realized.c) whenever dividends are paid.d) whether or not the investment is sold.e) only if the investment incurs a loss in value or is sold.

15) Marco Painting Supplies is a publicly-traded firm with 250,000 shares of stock outstanding. If the firm issues an additional 10,000 shares, those shares will be referred to as a(n):

a) supplemental offering.b) seasoned equity offering.c) initial public offer.d) market expansion offer.e) after-market underwriting.

16) Which one of the following states that investors cannot consistently earn positive excess returns?

a) efficient market hypothesisb) market return hypothesisc) current market hypothesisd) risk-return theorye) excess theory

17) Which one of the following statements is correct concerning mutual funds?

a) Mutual funds generally pay no taxes.b) Mutual funds are risk-free.c) Profits on the sale of mutual fund shares are tax-free.d) All mutual funds are diversified.e) Investments in mutual funds are guaranteed from loss by a private agency of the federal government.

18) A stoporder is similar to a limit order, except that once the set price is reached, the stop order:

a) is executed after all limit orders at the same price.b) becomes a limit order.c) goes to the end of the execution cue.d) immediately becomes a market order.stop order is similar to a limit order, except that once the set price is reached, the stop order

19) The most important feature of municipal bonds is:

a) the wide range of denominations and maturities.b) that the interest is not taxable by the federal government.c) the risk-free nature of this investment.d) its appeal to investors needing growth.e) All of the above are true.

20) Assume a $1,000 Treasury bill is quoted to pay 6% interest over a three-month period. What will be the price of the Treasury bill?

a) $940b) $970c) $980 d) $985 e) $990

21) Loaded funds generally outperform the no-load funds.

22) A 12b-1 fee is used to cover a fund's cost of distribution.

23) The indexes of The New York Stock Exchange, American Exchange, and NASDAQ are all price-weighted.

24) The prospectus is designed to provide a broad overview of the mutual fund, but is not required to discloseits investment focus or the investment style that it represents.

25) The major provisions in the bond agreement are spelled out in the bond debenture.