1. Which of the following characteristics apply to mutual funds? (1) Fixed capitalization. (2) Shares (or units) are bought and sold at NAV. (3) Shares (or units) are redeemed by the fund (or trust). (4) Shares (or units) are can be sold in the market.

a. 2 and 3.

b. 1, 2, & 3.

c. 2, 3 & 4.

d. 1, 2, 3 & 4.

1. EC is considering adding a mutual fund to her diversified portfolio. Which of the following is the best choice based on risk and return?

a. Mutual fund A: expected return of 12%, beta of 1.3.

b. Mutual fund B: expected return of 14%, beta of 1.2.

c. Mutual fund C: expected return of 16%, beta of 1.2.

d. Mutual fund D: expected return of 15%, beta of 0.9.