20-31 and explanations if applicable

20) A mutual fund that levies a commission when shares are sold is said to have a) a back-end load. b) a front-end load. c) a negative net asset value. d) a management fee. 21) One characteristic of 12(b)-1 charges is that they are payable a) only during the first year the fund is owned. b) only when the fund is sold. c) each year regardless of the performance of the mutual fund. d) only in years that the mutual fund shows an increase in net asset value. A fund which invests exclusively in energy stocks is an example of a) an income fund. b) an international fund. c) a company fund. 22) sector fund. One characteristic of index funds is that such funds typically a) have a very low cost structure with respect to management fees and transaction fees. b) produce a large dollar amount of realized capital gains every year c) are designed to "beat the market." d) charge high front-end loads. 23) 24) Last year at this time, Karen King bought 100 shares of an open-end mutual fund at $7.50 per share. Over the past year the fund has paid dividends of 90 cents per share and had a capital gains distribution of 80 cents per share. What is Karen's holding period return assuming that the current offer price is $8.50 and the NAV is $8.20? a) 2590 b) 32% c) 36% d) 40% 25) When issuing preferred stock, the issuing company typically agrees that it will pay preferred stockholders a) a dividend that is a certain percentage higher than the dividend payable to common stockholders b) the dividend payable to common stockholders, plus a special conversion bonus. c) a fixed level of quarterly dividends, and that such payments will take priority over common stock dividends. d) a fixed level of semi-annual dividends, and that such payments are to be paid only if dividends are also paid to common stockholders. You own 100 shares of Forjan, Inc. common stock. The market is expected to be flat for the next two quarters. What is the best thing to do? a) Buy a straddle. c) Sell a call. e) Sell a straddle. 26) b) d) Buy a call. Buy a put. 27) Which of the following describe(s) a call option purchased by an investor? 1. An investment that allows the owner to sell shares of stock with no time restriction. 2. An investment that allows the owner to buy shares of stock with no time restriction. 3. An investment that allows the owner to sell shares of stock at a specific price. 4. An investment that allows the owner to buy shares of stock at a specific price. a) 1 only b) 2 only c) 4 only d) 1 and3 e) 2 and 4 28) If Dave buys a put option for $3 with an exercise price of $32 and a call option of $6, with an exercise price of $42 for the same time and for the same stock, which of the following is/are true? 1. The largest loss Dave can sustain is $9. 2. At a market price of $31 Dave will lose $2. 3. At a market price of $45 Dave will lose $6 a) 1 only b) 2 only c) 3 only d) 1 and 3 e) 2 and 3 Baylor stock is currently selling for $63/share. A call option for this security has an exercise price of $65/share and can be purchased for $4/share. The option expires in 3 months. Which of the following below best describes the option? a) In-the-money. b) At-the money c) Out-of-the-money. 29) d) e) By-the-money. These phases do not apply to options Which of the following strategies could be considered a protective strategy? a) Purchasing a call option on a stock you own. b) Selling a naked call. c) Buying a put on a stock already owned. d) Buying a put on a stock you sold short. e) Selling a call against a stock you sold short. 30) Bob Simple is a paper maker who purchases lumber from tree farmers around his state. If Jim Bob is concerned with rising lumber prices, what type of hedge position should he enter into? 31) a) a short hedge; Simple should buy lumber futures contracts to protect against rising b) c) d) e) lumber prices. A short hedge; Simple should sell lumber futures contracts to protect against rising lumber prices. A long hedge; Simple should buy lumber futures contracts to protect against rising lumber prices. A long hedge; Simple should sell lumber futures contracts to protect against rising lumber prices. A long hedge; Simple should buy lumber futures contracts to protect against increasing supplies of lumber