Funds Intermediate: Asset Allocation Mutual Funds

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Which of the following is not one of the basic instruments of asset allocation?
Choose wisely. There is only one correct answer.
Annuities. Through a combination of cash, bonds, and common stocks, mutual funds afford an investor diversification and professional management.
2.
A 12b-1 fee is used to offset reduced sales charges and to cover some of the administrative costs of a mutual fund.
Choose wisely. There is only one correct answer.
True. A 12b-1 fee, which is assessed annually, is based on the fund's total net asset value, and is used to offset reduced sales charges and to cover some of the administrative costs of the fund.
3.
Investors using the multifund approach to asset allocation are interested in _______.
Choose wisely. There is only one correct answer.
Taking advantage of particular fund managers or families. Investors are interested in taking advantage of the management expertise of particular fund managers to duplicate specific historical performances.
4.
A growth or aggressive-growth mutual fund typically invests almost entirely for _______.
Choose wisely. There is only one correct answer.
Capital appreciation. The growth or aggressive-growth fund typically invests almost entirely for capital appreciation despite that the road to long-term growth is paved with short-term risks and possible losses in principal.
5.
Active allocation adopts a buy-and-hold strategy.
Choose wisely. There is only one correct answer.
False. Passive, not active, allocation is a strategy in which the investor does little to alter his or her mix of investments, adopting a buy-and-hold philosophy.