Investment Jobs Mutual Fund Investment 3

Question 1

How does a closed-end fund differ from an open-end fund?

Accepted Answer

It trades on an exchange at a market price that can differ from NAV

Answer

Closed-end funds have a fixed share count and trade on exchanges, often at a premium or discount to NAV.

Question 2

What is a money market mutual fund designed to do?

Accepted Answer

Preserve capital and provide liquidity with low risk

Answer

Money market funds invest in short-term, high-quality debt to preserve capital and stay liquid.

Question 3

A back-end load (contingent deferred sales charge) is paid when?

Accepted Answer

When shares are sold, often declining over time

Answer

A back-end load is charged at redemption and typically decreases the longer shares are held.

Question 4

What is a balanced fund?

Accepted Answer

A fund mixing stocks and bonds in one portfolio

Answer

Balanced funds hold both equities and fixed income to balance growth and income.

Question 5

Why might an index fund have a lower expense ratio than an active fund?

Accepted Answer

It requires less research and trading to track an index

Answer

Passive index funds simply mirror an index, reducing management and trading costs.

Investment Practice Test