Part 1 Practice Test Questions-Based On Facts Flashcards
The first ETF began in ___
1993 or 1995 if you ask IBF
a mutual fund’s financial highlights table contains information for the past ___.
10 years or less if the mutual fund is younger
Today, the average equity REIT has a ____ return correlation with the S&P 500.
moderately positive correlation (between .5-.7 appx)
FINRA does not permit mutual fund sales loads to exceed ___.
8.5%
Mutual funds generally list only their top ___ holdings.
10
Equities include which of the following (1) stocks, (2) commodities, (3) collectibles, and/or (4) real estate.
Only stocks and real estate if in REITs
Over the past 90-100 years-if the S&P 500 has averaged about 10% a year, how much of the 10% annualized return can be attributed to dividends?
about 40% … at least that’s possible to be deduced from p. 9
The vast majority of mutual fund sources use ___ to report fund turnover.
simple average turnover rate
Current SEC rules require that independent mutual fund board members make up at least ___ of the board.
40%
A fund’s turnover ratio is calculated by taking the ___ purchases or sales, and dividing that number by average ___ net assets.
lesser of; monthly
In 1981, the prime interest rate in the U.S. peaked at ___. This was the highest rate seen in the past ___ years.
21.5%; 100
The P/E for a stock is computed by dividing the price of a stock (the “P”) by the company’s annual earnings per share (the “E”). If a stock is trading at $20 per share and its earnings per share are $1, then the stock has a P/E of ___
20 ($20/$1).
A financial writer (Kopcke) found average annual trading costs for the lowest quintile of funds with the lowest costs to be ___ of assets annually.
.11%
The current price per square foot for U.S. homes for sale is roughly ___.
$233 according to Rocket Mortgage, but no options on practice test are close to this as of 10/28/24
From its then October 2007 peak to its March 2009 trough, the S&P 500 lost ___.
51% according to Practice test options … but closer to the mid/high 50s according to other sources.
Average annual turnover for EQUITY funds is approximately ___.
100%
There are 6 possible 1-time fees for a mutual fund.
1) ___ sales charge/load on purchases
2) ____ sales charge (charged for redeeming shares before a certain point)
3) ____ fee (these are capped at 2% and meant to make sure brokers get paid)
4) ___ fee (generic fee to defer costs for the fund)
5) ___ fee (charged for shareholders transferring to a fund within the same family; usually around $5-$10)
6) ___ fee ($10-$25 per year usually for shareholders having below a certain amount in a fund)
1) Front end
2) Back end/Deferred
3) Redemption
4) Purchase
5) Exchange
6) Account
Over the past 90+ years, the stock market’s P/B ratio has ranged from ___.
< 1 to 8
___ is unique among all mutual fund families because any and all profit goes right back to its shareholders (fund investors).
Vanguard
There are 3 broad categories of REITs.
1) ___ REITs are composed of income-producing real estate
2) ___ REITs tend to be more leveraged.
3) ___ REITs are self-explanatory.
1) Equity
2) Mortgage
3) Hybrid
A mutual fund’s financial highlights table can be found in the ___
prospectus
From 1926-2019, $1 inflated to ___.
$14.44 according to Fed … or $15 on test.
Excluding the fund itself, where else can you download a fund’s SAI?
EDGAR-the SEC’s Electronic Data Gathering And Retrieval system
From 1972-2018, $10,000 invested in the S&P 500 or equity REITs grew to ___.
$2.2 million plus
According to Morningstar’s 2020 U.S. Fund Fee Study, the average asset-weighted expense ratio of mutual funds has ___.
fell to 0.41% in 2020 from 0.93% in 2000.
How many ways is a fund’s turnover ratio commonly calculated?
There are three commonly used ways to calculate turnover: simple average, median, and asset-weighted.
The simple average turnover rate is what the vast majority of sources use when reporting turnover
All money market funds must have virtually all of their assets in fixed income securities maturing in ___ or less.
60 days
A mutual fund is either a ___ or ___ or ____.
corporation; trust; partnership
What does a fund’s statement of additional information contain that is NOT also detailed in the fund’s prospectus?
amount of brokerage fees paid (when fund positions change)
Mutual funds are permitted to list ___, plus any affiliate holdings representing >1% of the portfolio.
only their top 50 holdings
What is the most popular investment in the U.S., as measured by a percentage of net worth?
real estate
p. 13
The average mutual fund chief investment officer makes ___ per year.
$260,000
A fund averaging a 10% gross annual return and annual expenses of 1.00% would grow to ___ after 20 years, assuming a $10,000 initial investment.
$56,044
A mutual fund’s standardized fee table is found toward the beginning of the ___.
prospectus
The four MOST COMMON types of equity REITs are
1) ___ buildings
2) r____________
3) regional ___
4) ____ centers
But TEXT also lists “THE 3 TYPES of REITs are e____, m____, and h____.”
1) office
2) residential (apartments)
3) malls
4) shopping
equity; mortgage; hybrid
Since the 1950s, the 2 best-returning decades have been the 1950s ( ___ annualized) and the 1990s ( ___ annualized).
18.2%; 17.6%
A mutual fund’s financial highlights table can be found in the ___.
prospectus.
September 2010 was the 3nd time cotton traded for > $1 a pound since ___.
the Civil War
You can find a fund’s turnover ratio in the ___.
financial highlights table which is inside the prospectus and inside the latest financial statement
Close to ___ of all American families own a home.
2/3
The typical large cap mutual fund holds stocks with an average market capitalization of ___
$10+ billion
There is a/an ___ relationship between a bond’s current value and interest rate changes.
inverse
A mutual fund’s published expense ratio includes which of the following: (1) management fee, (2) admin fees, and/or (3) any 12b-1 fee.
All of 1-3
Looking at a table of long-term returns for the FHFA (single-family home index) vs. a REIT index, it is easy to conclude ___.
equity REITs have done better
Over the past 90+ years, the stock market’s P/E ratio (as measured by the S&P 500) has ranged from ___.
6-120 https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart
According to Dalbar, over the past 20 years, fund investors held shares for ___.
2-4 years according to page 13
Who oversees most mutual fund distribution activities?
the SEC
If a fund charges an exchange fee, such a fee is typically ___.
$5-10
Another name for return correlation is ____.
From 1976-2022, the return correlation between equity REITs and the S&P 500 ranged from ____.
serial correlation.
20-85%.
The first large oil field in Pennsylvania resulted in oil selling for $20 a barrel over 100 years ago. The next year, the per barrel oil price dropped to ___.
10 cents a barrel.
Current tax law requires capital gains dividends to be declared prior to _____ and distributed by _____.
Capital gains distributions are ____ in the year declared.
December 31; January 31 of the following year
taxable to shareholders
Total return figures are net of expenses but do not normally show ____
the impact of front-end loads or any redemption fees. p.56
From 1926 through 2018, $1 invested in the S&P 500 grew to ___.
$6,759
Of the 20 largest mutual fund companies, ___ is/are charging less on an asset-weighted basis than they were 15 years ago.
5
Another name for arithmetic mean is ___.
simple average
The Guess Right Ratio is associated with ___.
Dalbar
Corporate earnings are ___
not particularly stable. P. 8
