Chapter 10
Name__________________________________________
Section 10.4 – Investing in Mutual Funds (15 pts)
1. Whether you choose a closed-end or open-end mutual funds, you can gain/earn income in what three ways
(be sure to give a brief explanation)? (6 pts)
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2. When you buy and sell mutual funds, you have several options such as the NYSE, mutual fund supermarkets
that are available through brokerage firms, and investment companies. When you buy from investment
companies, there are several ways to do so. For each of the statements below, indicate whether the purchase
describes a regular account transaction, voluntary savings plan, payroll deduction plan, contractual savings
plan, or a reinvestment plan. (5 pts)
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With your approval the investment company will deduct a certain amount from your paycheck each
month and invest it in your mutual fund – can be used to invest money in 401(k) or IRA
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Any income dividends or capital gain distributions will be automatically reinvested to buy additional
shares of mutual funds – usually no additional sales charges or commissions, great way to add to your
portfolio
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You can make smaller purchases than the minimum required, but you must commit to making regular
purchases – great way to save for long-term goals
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Make regular purchases over a specified time and will pay penalty fees if you do not – experts
disapprove because many investors lose money this way
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You can decide how much to invest and when to invest it – most popular and least complicated
3. When you invest in mutual funds, there are several ways to take out your money. With some funds, one
option is to just sell the shares on the stock exchange or in the over-the-counter market. Other funds allow
you to write checks to withdraw the money. However, if you have $5,000 or more invested into mutual
funds, there are four additional ways to withdraw the money. Briefly explain each of the ways. (4 pts)
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Investment Period Withdrawal
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Investment Period Liquidation
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Asset Growth Withdrawal
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Dividend and Distribution Withdrawal