Quiz 3 (Form A) Name: 1. Mutual funds that invest in US securities as well as in foreign securities are known as: a. International Funds b. Global Funds c. Country Funds d. Regional Funds 2. Which of the following is not a type of managed investment company? a. Unit investment trusts b. Closed-end funds c. Open-end funds d. Hedge funds 3. A majority of closed-end funds a. trade at a premium to NAV b. trade at a discount to NAV c. trade at the same price as NAV d. sell and redeem shares from investors at the NAV 4. Which of the following is a false statement regarding open-end mutual funds? a. The fund investors are liable for taxes on any capital gains and divided distributions b. They are listed on a major stock exchange c. The fund investors buy and redeem shares at NAV d. They provide an easy way to obtain diversification 5. With respect to mutual funds, late trading refers to the practice of ________. a. trading after the close of U.S. markets but before foreign markets have closed b. trading after the close of foreign markets, but before U.S. markets have closed c. accepting buy or sell orders after the market closes at NAV that has already been determined for the day d. paying capital gains distributions to certain investors only after paying privileged investors first 6. Which of the following funds are likely to generate highest tax liabilities for investors? a. actively managed mutual funds with high turnover b. actively managed mutual funds with low turnover c. index funds d. exchange traded funds 7. Suppose that over the same time period two portfolios have the same average return and the same standard deviation of return, but portfolio A has a higher beta than portfolio B. According to the Treynor measure, the performance of portfolio A __________. a. is better than the performance of portfolio B b. is the same as the performance of portfolio B c. is poorer than the performance of portfolio B d. cannot be measured since there is no data on the alpha of the portfolio 8. The __________ calculates the reward to risk trade-off by dividing the average portfolio excess return by the portfolio standard deviation. a. Sharpe measure b. Treynor measure c. Jensen measure d. Information ratio 9. A fund outperformed the benchmark by 1.5%. In looking at the fund's investment breakdown you see that the fund overweighed equities relative to the benchmark and the average return on the fund's equity portfolio was slightly lower than the equity benchmark return. The excess performance for this fund is probably due to _______________. a. the asset allocation decision b. better sector weightings in the equity portfolio c. the security selection ability d. a combination of better asset allocation and security selection 10. A portfolio generates an annual return of 13%, a beta of 0.7 and a standard deviation of 17%. The market index return is 11% and has a standard deviation of 21%. What is Jensen's alpha of the portfolio if the risk free rate is 5%? a. 1.7% b. 3.8% c. 6.9% d. 7.8% Jensen’s alpha = 13% - [5% + 0.7*(11% - 5%)] = 3.8%
