Finance Exam 3

Front 1

1. Corporate Bond
2. US Treasury Bond
3. Municipal Bond
These are all types of bonds: T/F?

Back 1

1. Corporate Bond
2. US Treasury Bond
3. Municipal Bond
Are all types of bonds.

Front 2

All types of treasury bonds: T/F?
1. Treasury Bills (T-Bills)
2. Treasury Notes (T- Notes)
3. Treasury Bonds (T-Bonds)

Back 2

True
1. Treasury Bills (T-Bills)
2. Treasury Notes (T- Notes)
3. Treasury Bonds (T-Bonds)

Front 3

True or False: With zero-coupon bonds, investors usually purchase these bonds at a deep discount.

Back 3

True

Front 4

True or False: An attractive feature of a Muni-bond is the interest is generally free from federal income tax.

Back 4

True

Front 5

Bonds are rated with numbers like 32: True or False?

Back 5

False. They're rated with letters, e.x: AAA

Front 6

True or False: As interest rates rise, bond prices move higher.

Back 6

FALSE

Front 7

ABC Company Bonds are trading on the open market. Currently the market yield rate or YTM is 8.5%. The coupon rate on the ABC Bonds are at 8.25%. These bonds mature in 10 years. What would be the price quote of these bonds:

Back 7

$99.75

Front 8

True or False: If you find a bunch of Bearer Bonds in your great-grandfather’s closet, you should not throw them away, since they may be worth a considerable amount of money.

Back 8

TRUE!

Front 9

True or False: If you buy a bond for $989 (price quote of $98.90), you have bought the bond at a premium.

Back 9

FALSE.

Front 10

True or False: Savings bonds are not marketable.

Back 10

True. You can't sell them.

Front 11

A Mutual Fund that raises money only once and offers only a fixed amount of shares is called a:

Back 11

Closed-end Fund

Front 12

Main Categories of Mutual Funds:

Back 12

1. Stock Funds
2. Money Market Funds
3. Bond Funds

Front 13

True/False: Mutual Funds are a way to invest in variety of stocks and/or bonds with no additional fees or charges.

Back 13

False.

Front 14

NAV:

Back 14

Net Allocation VALUE

Front 15

1. Front-end load
2. Back-end load
3. Contingent deferred sales change
4. Exchange fee
5. All of the above are fees that may be charged by the mutual fund: T/F?

Back 15

True:
1. Front-end load
2. Back-end load
3. Contingent deferred sales change
4. Exchange fee

Front 16

12-B1 Fees are the fees paid by a mutual fund for marketing, distribution expenses and certain shareholder services: True/False?

Back 16

True.

Front 17

True/False: The “Junk Ratio” is computed by dividing the value of the fund by the number of shares.

Back 17

FALSE. There is no such thing as junk ratio.

Front 18

The “NAV” is computed by taking the change in value plus the dividends all divided by the cost of the initial investment: True/False?

Back 18

False. The NAV is computed by dividing the value of the fund by the number of shares.

Front 19

True/False: The “Yield” or “Income Yield” is derived by dividing the total distribution per share by the price per share.

Back 19

False.

Front 20

True/False: The report that lists all of the fees of a mutual fund is called “The Prospectus”.

Back 20

True.

Front 21

Types of 401Ks:

Back 21

401, Roth 401, 403, 457

Front 22

Contributions are fixed: T/F?

Back 22

True.

Front 23

Rollover: 401 will NOT follow you from job to job.

Back 23

False.

Front 24

Define Vesting

Back 24

Vesting means that you're at a certain place for a certain time in order to pull the money that the firm has invested in you.

Front 25

You pay taxes when you pull money out on a tradition IRA account: T/F?

Back 25

True.

Front 26

ROTH IRA: You pay taxes up-front and nothing when you pull it out: T/F

Back 26

True.

Front 27

Percent of taxation when you out money from your IRA before you're 59.5

Back 27

10%

Front 28

Percent of taxation when you out money from your IRA before you're 70.5

Back 28

50%

Front 29

First question to ask your HR rep when you start a new job:

Back 29

Do you want to participate in a 401K plan?

Front 30

403(b) Plan is for ___________

Back 30

Charities and Education Entities

Front 31

Max dollar amount you could contribute to your IRA account in 2012:

Back 31

$5000 and an additional $1000 if you're over 50

Front 32

Contributions to IRAs may be tax deductible: T/F?

Back 32

True.

Front 33

Interest and growth in an IRA account is NOT tax deferred: True/False?

Back 33

False! It is tax deferred.

Front 34

Fund Yield Equation:

Back 34

Distribution Per Share / NAV

Front 35

Total Fund Percentage Return Equation:

Back 35

Change in Value + Dividends / Cost of Initial Investment

Front 36

Define: Load Fund

Back 36

Investors pay a commission (sales charge) up to 8.5% every time they purchase shares. This is sometimes called an “A” fund.

Front 37

Average Charge for a Load Fund:

Back 37

3 - 5% of the Fund

Front 38

Define: NO-load Fund

Back 38

Investors pay no sales charge up front.
You deal directly with the investment company via 800 numbers or websites, or from discount brokers.

Front 39

The "A" Fund

Back 39

Load Fund

Front 40

Front End Load Fund:

Back 40

The fees are charged up-front WITH the initial investment.

Front 41

Back-end Load Fund:

Back 41

Charged upon withdrawal of funds (1-5%).

Generally decreases on a sliding scale depending on the number of years shares are held.

Front 42

Define: Management Fee

Back 42

Charged yearly (.25%-1.5% average) based on a percentage of the fund’s asset value.

Front 43

(Mutual Funds) Expense Ratio:

Back 43

The total expenses associated with the management fees & operating costs of the fund

Front 44

Classification of Mutual Funds:

Back 44

Stock Funds/Equity Funds
Bond Funds
Money Market Funds
Balanced Funds