unit 7 Flashcards
The broadest index covering U.S. markets is which of these?
Bloomberg Barclays Aggregate Bond
Russel 2000
Wilshire 5000
S&P 500
Originally tracking over 5,000 stocks, the Wilshire 5000 covers all of the companies listed on the major stock markets, including companies of all sizes across all industries.
Your client, Dana McRae, has no investment experience. She just retired and won’t be in a high tax bracket. She also is concerned about volatility of her investments. She is more concerned about preserving her principal than getting a high rate of return. Which of the follow would you recommend?
A) A long-term U.S. government bond mutual fund
B) A money market mutual fund investing in short-term debt from city and county governments in her state
C) A newly issued U.S. Treasury bond
D) A money market mutual fund investing in short-term corporate debt
(D) The money market funds have a stable $1 value, but she doesn’t need the municipal money market because she isn’t in a high tax bracket. The other two options will have significant volatility
Which of the following risks is not a nonsystematic risk?
A) Legislative risk
B) Business risk
C) Interest rate risk
D) Default risk
(C) Interest rate changes impact the price of all debt securities, meaning that its is a systematic risk. The others listed here are examples of nonsystematic risks.
Your client, Janice Thomas, is an active trader and wants to invest in a managed equity portfolio that she can trade intraday. Which of the following should you recommend?
A) A mutual fund
B) An exchange-traded fund (ETF)
C) An exchange-traded note (ETN)
D) A closed end fund
(D) A closed end fund is actively traded and most of them are equity funds. They trade on the exchanges like stocks. Mutual funds can be equity funds and can be actively managed, but because they only trade once per day, they are not good for active trading. ETF are actively traded but are not actively managed. ETNs are debt securities, not equities.
Closed Ended fund vs ETF
(check book)
