CFS CFS Mutual Funds & ETFs 1

Question 1

What is the primary difference between an open-end mutual fund and a closed-end fund?

Accepted Answer

Open-end funds issue new shares on demand; closed-end funds have a fixed share count traded on exchanges

Answer

Open-end funds continuously issue and redeem shares at NAV, while closed-end funds issue a fixed number of shares that trade on stock exchanges at market prices.

Question 2

The Net Asset Value (NAV) of a mutual fund is calculated as:

Accepted Answer

(Total assets minus total liabilities) divided by total shares outstanding

Answer

NAV equals the fund's total assets minus its liabilities, divided by the number of outstanding shares, calculated at the close of each trading day.

Question 3

Which share class of a mutual fund typically charges a front-end sales load at the time of purchase?

Accepted Answer

Class A shares

Answer

Class A shares charge an upfront sales load (typically 3–5.75%) deducted from the initial investment, but usually have lower ongoing expenses.

Question 4

What is a 12b-1 fee in a mutual fund?

Accepted Answer

An annual fee charged to fund assets for marketing and distribution expenses

Answer

The 12b-1 fee, named after the SEC rule that permits it, is an annual charge (up to 1%) deducted from fund assets to cover distribution and marketing costs.

Question 5

An ETF differs from a traditional mutual fund primarily in that ETFs:

Accepted Answer

Trade on stock exchanges throughout the day at market prices

Answer

ETFs trade on exchanges throughout the trading day like stocks, with prices fluctuating based on supply and demand, unlike mutual funds priced once at day's end.

CFS - Certified Fund Specialist Practice Test

CFS - Certified Fund Specialist Practice Test

CFS CFS Mutual Funds & ETFs 1