Chapter 6

Question 1

Investment company with a fixed number of shares that are bought and sold in the secondary securities market

Answer 1

Closed end company investment company

Question 2

An mutual fund; an investment company from which investors buy shares and to which they resell them.

Answer 2

Open-end investment company

Question 3

An open-end investment company

Answer 3

Mutual fund

Question 4

The asset value of a share in an investment company; total assets minus total abilities divided by the number of shares outstanding

Answer 4

Net asset value (NAV)

Question 5

Sales charge levied by mutual funds

Answer 5

Load fee

Question 6

A mutual fund that does not charge a commission for buying or selling shares

Answer 6

No-load mutual fund

Question 7

A mutual fund that charges a commission to purchase or sell its shares

Answer 7

Load fund

Question 8

Investors who go against the consensus concerning investment strategy

Answer 8

Contrarians

Question 9

A mutual fund whose portfolio seeks to duplicate an index of stock prices

Answer 9

Index fund

Question 10

Mutual funds that specialize in short term securities

Answer 10

Money market mutual funds

Question 11

Short-term securities such as treasury bills, negotiable certificates of deposit or commercial paper

Answer 11

Money market instruments

Question 12

Short-term debt of the federal government

Answer 12

U.S. treasury bill

Question 13

A certificate of deposit in which the rate and the term are individually negotiated by the bank and the lender and which may be bought and sold

Answer 13

Negotiable certificate of deposit (Jumbo CD)

Question 14

Time deposit in a foreign bank and denominated in dollars

Answer 14

Eurodollar certificate of deposit (Eurodollar CD)

Question 15

Short-term promissory notes issued by the most creditworthy corporations

Answer 15

Commercial paper

Question 16

Sale of a short term security in which the seller agrees to buy back the security at a specified price

Answer 16

Repurchase agreement

Question 17

Short-term promissory note guaranteed by a bank.

Answer 17

Bankers acceptance

Question 18

Short-term government security secured by expected tax revenues

Answer 18

Tax anticipation note

Question 19

Fees that a mutual fund may charge to cover marketing and advertising expenses

Answer 19

12b-1 fees

Question 20

A measure of performance that compares the realized return with the return that should have been earned for the amount of risk borne by the investor.

Answer 20

Jensen performance index (alpha)

Question 21

Risk adjusted measure of performance that standardizes the return in excess of the risk-free rate by the portfolios systematic risk

Answer 21

Treynor performance index