投资学第7版Test Bank答案 04

投资学第7版TestBank 答案 八年级地理上册填图题岩土工程勘察试题省略号的作用及举例应急救援安全知识车间5s试题及答案 04MultipleChoiceQuestions1.Whichoneofthefollowingstatementsregardingopen-endmutualfundsisfalseA)Thefundsredeemsharesatnetassetvalue.B)Thefundsofferinvestorsprofessionalmanagement.C)Thefundsofferinvestorsaguaranteedrateofreturn.D)BandC.E)AandB.Answer:CDifficulty:ModerateRationale:Noinvestmentoffersaguaranteedrateofreturn.2.Whichoneofthefollowingstatementsregardingclosed-endmutualfundsisfalseA)ThefundsalwaystradeatadiscountfromNAV.B)Thefundsredeemsharesattheirnetassetvalue.C)Thefundsofferinvestorsprofessionalmanagement.D)AandB.E)Noneoftheabove.Answer:DDifficulty:ModerateRationale:Closed-endfundsaresoldattheprevailingmarketprice.3.WhichofthefollowingfunctionsdomutualfundcompaniesperformfortheirinvestorsA)RecordkeepingandadministrationB)DiversificationanddivisibilityC)ProfessionalmanagementD)LowertransactioncostsE)Alloftheabove.Answer:EDifficulty:EasyRationale:Mutualfundsareattractivetoinvestorsbecausetheyofferallofthelistedservices.4.MultipleMutualFundshadyear-endassetsof$457,000,000andliabilitiesof$17,000,000.Therewere24,300,000sharesinthefundatyear-end.WhatwasMultipleMutual'sNetAssetValueA)$B)$C)$D)$E)$Answer:ADifficulty:ModerateRationale:(457,000,000-17,000,000)/24,300,000=$5.GrowthFundhadyear-endassetsof$862,000,000andliabilitiesof$12,000,000.Therewere32,675,254sharesinthefundatyear-end.WhatwasGrowthFund'sNetAssetValueA)$B)$C)$D)$E)$Answer:DDifficulty:ModerateRationale:(862,000,000-12,000,000)/32,675,254=$6.DiversifiedPortfolioshadyear-endassetsof$279,000,000andliabilitiesof$43,000,000.IfDiversified'sNAVwas$,howmanysharesmusthavebeenheldinthefundA)43,000,000B)6,488,372C)5,601,709D)1,182,203E)Noneoftheabove.Answer:CDifficulty:ModerateRationale:($279,000,000-43,000,000)/$=5,601,.7.PinnacleFundhadyear-endassetsof$825,000,000andliabilitiesof$25,000,000.IfPinnacle'sNAVwas$,howmanysharesmusthavebeenheldinthefundA)21,619,346,92B)22,930,C)24,860,D)25,693,E)Noneoftheabove.Answer:CDifficulty:ModerateRationale:($825,000,000-25,000,000)/$=24,860,.8.Mostactivelymanagedmutualfunds,whencomparedtoamarketindexsuchastheWilshire5000,A)beatthemarketreturninallyears.B)beatthemarketreturninmostyears.C)exceedthereturnonindexfunds.D)donotoutperformthemarketE)Noneoftheaboveisacorrectstatement.Answer:DDifficulty:EasyRationale:Mostactivelymanagedmutualfundsfailtoequalthereturnearnedbyindexfunds,possiblyduetohighertransactionscosts.9.PoolsofmoneyinvestedinaportfoliothatisfixedforthelifeofthefundarecalledA)closed-endfunds.B)open-endfunds.C)unitinvestmenttrusts.D)REITS.E)redeemabletrustcertificates.Answer:CDifficulty:EasyRationale:Unitinvestmenttrustsarefundsthatinvestinaportfolio,oftenfixed-incomesecurities,andholdittomaturity.10.Investorsinclosed-endfundswhowishtoliquidatetheirpositionsmustA)selltheirsharesthroughabroker.B)selltheirsharestotheissueratadiscounttoNetAssetValue.C)selltheirsharestotheissueratapremiumtoNetAssetValue.D)selltheirsharestotheissuerforNetAssetValue.E)holdtheirsharestomaturity.Answer:ADifficulty:ModerateRationale:Closed-endfundsharesaresoldonorganizedexchangesthroughabroker.11.Closedendfundsarefrequentlyissuedata______toNAVandsubsequentlytradeata__________toNAV.A)discount,discountB)discount,premiumC)premium,premiumD)premium,discountE)Noconsistentrelationshiphasbeenobserved.Answer:DDifficulty:ModerateRationale:Closed-endfundsaretypicallyissuedatapremiumtoNetAssetValueandsubsequentlytradeatadiscount.12.Atissue,offeringpricesofopen-endfundswilloftenbeA)lessthanNAVduetoloadsandcommissions.B)greaterthanNAVduetoloadsandcommissions.C)lessthanNAVduetolimiteddemand.D)greaterthanNAVduetoexcessdemand.E)lessthanorgreaterthanNAVwithnoapparentpattern.Answer:BDifficulty:DifficultRationale:Open-endfundsareredeemableondemandatNAVsotheyshouldneversellforlessthanNAV.However,loadsandcommissionscanincreasethepriceaboveNAV.13.WhichofthefollowingstatementsaboutRealEstateInvestmentTrustsistrueA)REITSinvestinrealestateorloanssecuredbyrealestate.B)REITSraisecapitalbyborrowingfrombanksandissuingmortgages.C)REITSaresimilartoopen-endfunds,withsharesredeemableatNAV.D)Alloftheabovearetrue.E)BothAandBaretrue.Answer:EDifficulty:ModerateRationale:RealEstateInvestmentTrustsinvestinrealestateorreal-estate-securedloans.Theymayraisecapitalfrombanksandbyissuingmortgages.Theyaresimilartoclosed-endfundsandsharesaretypicallyexchangetraded.14.In2004theproportionofmutualfundsspecializingincommonstockswasA)%B)%C)%D)%E)%Answer:CDifficulty:ModerateRationale:SeeTable.15.In2004theproportionofmutualfundsspecializinginbondswasA)%B)%C)%D)%E)%Answer:ADifficulty:ModerateRationale:SeeTable.16.In2004theproportionofmutualfundsspecializinginmoneymarketsecuritieswasA)%B)%C)%D)%E)%Answer:CDifficulty:ModerateRationale:SeeTable.17.ManagementfeesandotherexpensesofmutualfundsmayincludeA)front-endloads.B)back-endloads.C)12b-1charges.D)AandBonly.E)A,BandC.Answer:EDifficulty:EasyRationale:Allofthelistedexpensesmaybeincludedinthecostofowningamutualfund.18.TheProfitabilityFundhadNAVpershareof$onJanuary1,2005.OnDecember31ofthesameyearthefund'sNAVwas$.Incomedistributionswere$andthefundhadcapitalgaindistributionsof$.Withoutconsideringtaxesandtransactionscosts,whatrateofreturndidaninvestorreceiveontheProfitabilityfundlastyearA)%B)%C)%D)%E)%Answer:DDifficulty:ModerateRationale:R=($-+.75+/$=%19.TheYachtsmanFundhadNAVpershareof$onJanuary1,2005.OnDecember31ofthesameyearthefund'sNAVwas$.Incomedistributionswere$andthefundhadcapitalgaindistributionsof$.Withoutconsideringtaxesandtransactionscosts,whatrateofreturndidaninvestorreceiveontheYachtsmanFundlastyearA)%B)%C)%D)%E)%Answer:EDifficulty:ModerateRationale:R=($-+.64+/$=%20.Investors'ChoiceFundhadNAVpershareof$onJanuary1,2005.OnDecember31ofthesameyearthefund'srateofreturnfortheyearwas%.Incomedistributionswere$andthefundhadcapitalgaindistributionsof$.Withoutconsideringtaxesandtransactionscosts,whatendingNAVwouldyoucalculateforInvestors'ChoiceA)$B)$C)$D)$E)$Answer:ADifficulty:ModerateRationale:.173=(P-$++/$;P=$21.WhichofthefollowingisnotanadvantageofmutualfundsA)Theyofferavarietyofinvestmentstyles.B)Theyoffersmallinvestorsthebenefitsofdiversification.C)Theytreatincomeas"passedthrough"totheinvestorfortaxpurposes.D)A,BandCarealladvantagesofmutualfunds.E)NeitherAnorBnorCareadvantagesofmutualfunds.Answer:CDifficulty:EasyRationale:Adisadvantageofmutualfundsisthatinvestmentincomeispassedthroughfortaxpurposesandinvestorsmaythereforelosetheabilitytoengageintaxmanagement.22.Whichofthefollowingwouldincreasethenetassetvalueofamutualfundshare,assumingallotherthingsremainunchangedA)anincreaseinthenumberoffundsharesoutstandingB)anincreaseinthefund'saccountspayableC)achangeinthefund'smanagementD)anincreaseinthevalueofoneofthefund'sstocksE)adecreaseinthefund's12b-1feeAnswer:DDifficulty:Easy23.WhichofthefollowingcharacteristicsapplytounitinvestmenttrustsI)Mostareinvestedinfixed-incomeportfolios.II)Theyareactivelymanagedportfolios.III)Thesponsorpoolssecurities,thensellspublicsharesinthetrust.IV)Theportfolioisfixedforthelifeofthefund.A)IandIVB)IandIIC)I,III,andIVD)I,II,andIIIE)I,II,III,andIVAnswer:CDifficulty:Moderate24.JargonRapidGrowthisamutualfundthathastraditionallyacceptedfundsfromnewinvestorsandissuednewsharesatnetassetvalue.JeremyJargonmanagesthefundhimselfandhasbecomeconcernedthatitslevelofassetshasbecometoohighforhismanagementabilities.HeissuesastatementthatJargonwillnolongeracceptfundsfromnewinvestors,butwillcontinuetoacceptadditionalinvestmentsfromcurrentshareholders.WhichofthefollowingistrueaboutJargonRapidGrowthfundA)Jargonusedtobeanopen-endfundbuthasnowbecomeaclosed-endfund.B)Jargonhasalwaysbeenanopen-endfundandwillremainanopen-endfund.C)Jargonhasalwaysbeenaclosed-endfundandwillremainaclosed-endfund.D)Jargonisanopen-endfundbutwouldchangetoaclosed-endfundifitwouldn'tacceptadditionalfundsfromcurrentinvestors.E)JargonisviolatingSECpolicybyrefusingtoacceptnewinvestors.Answer:BDifficulty:Moderate25.AsofDecember31,2004,whichclassofmutualfundshadthelargestamountofassetsinvestedA)stockfundsB)bondfundsC)mixedassetclassessuchasassetallocationfundsD)moneymarketfundsE)globalfundsAnswer:ADifficulty:EasyRationale:SeeTable.26.CommingledfundsareA)amountsinvestedinequityandfixed-incomemutualfunds.B)fundsthatmaybepurchasedatintervalsof3,6,or12monthintervalsatthediscretionofmanagement.C)amountsinvestedindomesticandglobalequities.D)closed-endfundsthatmayberepurchasedonlyonceeverytwoyearsatthediscretionofmutualfundmanagement.E)partnershipsofinvestorsthatpooltheirfunds,whicharethenmanagedforafee.Answer:EDifficulty:Easy27.WhichofthefollowingistrueregardingequitymutualfundsI)Theyinvestprimarilyinstock.II)Theymayholdfixed-incomesecuritiesaswellasstock.III)Mostholdmoneymarketsecuritiesaswellasstock.IV)Twotypesofequityfundsareincomefundsandgrowthfunds.A)IandIVB)I,III,andIVC)I,II,andIVD)I,II,andIIIE)I,II,III,andIVAnswer:EDifficulty:Moderate28.ThefeethatmutualfundsusetohelppayforadvertisingandpromotionalliteratureiscalledaA)front-endloadfee.B)back-endloadfee.C)operatingexpensefee.D)12b-1fee.E)structuredfee.Answer:DDifficulty:Easy29.PattyO'Furniturepurchased100sharesofGreenIslemutualfundatanetassetvalueof$42pershare.DuringtheyearPattyreceiveddividendincomedistributionsof$pershareandcapitalgainsdistributionsof$pershare.Attheendoftheyeartheshareshadanetassetvalueof$40pershare.WhatwasPatty'srateofreturnonthisinvestmentA)%B)%C)%D)%E)%Answer:BDifficulty:ModerateRationale:R=($40-42+2+/$42=%30.Assumethatyoupurchased200sharesofSuperPerformingmutualfundatanetassetvalueof$21pershare.Duringtheyearyoureceiveddividendincomedistributionsof$pershareandcapitalgainsdistributionsof$pershare.Attheendoftheyeartheshareshadanetassetvalueof$23pershare.WhatwasyourrateofreturnonthisinvestmentA)%B)%C)%D)%E)%Answer:ADifficulty:ModerateRationale:R=($23-21++/$21=%31.AssumethatyoupurchasedsharesofHighFlyingmutualfundatanetassetvalueof$pershare.Duringtheyearyoureceiveddividendincomedistributionsof$pershareandcapitalgainsdistributionsof$pershare.Attheendoftheyeartheshareshadanetassetvalueof$pershare.WhatwasyourrateofreturnonthisinvestmentA)%B)%C)%D)%E)%Answer:BDifficulty:ModerateRationale:R=($=%32.Assumethatyoupurchasedsharesofamutualfundatanetassetvalueof$pershare.Duringtheyearyoureceiveddividendincomedistributionsof$pershareandcapitalgainsdistributionsof$pershare.Attheendoftheyeartheshareshadanetassetvalueof$pershare.WhatwasyourrateofreturnonthisinvestmentA)%B)%C)%D)%E)%Answer:CDifficulty:ModerateRationale:R=($=%33.Assumethatyoupurchasedsharesofamutualfundatanetassetvalueof$pershare.Duringtheyearyoureceiveddividendincomedistributionsof$pershareandcapitalgainsdistributionsof$pershare.Attheendoftheyeartheshareshadanetassetvalueof$pershare.WhatwasyourrateofreturnonthisinvestmentA)%B)%C)%D)%E)%Answer:DDifficulty:ModerateRationale:R=($=%34.Amutualfundhadyear-endassetsof$560,000,000andliabilitiesof$26,000,000.Therewere23,850,000sharesinthefundatyearend.Whatwasthemutualfund'sNetAssetValueA)$B)$C)$D)$E)$Answer:BDifficulty:ModerateRationale:(560,000,000-26,000,000)/23,850,000=$35.Amutualfundhadyear-endassetsof$250,000,000andliabilitiesof$4,000,000.Therewere3,750,000sharesinthefundatyear-end.Whatwasthemutualfund'sNetAssetValueA)$B)$C)$D)$E)$Answer:DDifficulty:ModerateRationale:(250,000,000-4,000,000)/3,750,000=$36.Amutualfundhadyear-endassetsof$700,000,000andliabilitiesof$7,000,000.Therewere40,150,000sharesinthefundatyear-end.Whatwasthemutualfund'sNetAssetValueA)$B)$C)$D)$E)$Answer:EDifficulty:ModerateRationale:(700,000,000-7,000,000)/40,150,000=$37.Amutualfundhadyear-endassetsof$465,000,000andliabilitiesof$37,000,000.IfthefundNAVwas$,howmanysharesmusthavebeenheldinthefundA)4,300,000B)6,488,372C)8,601,709D)7,626,515E)Noneoftheabove.Answer:DDifficulty:ModerateRationale:($465,000,000-37,000,000)/$=7,626,515.38.Amutualfundhadyear-endassetsof$521,000,000andliabilitiesof$63,000,000.IfthefundNAVwas$,howmanysharesmusthavebeenheldinthefundA)17,534,456B)16,488,372C)18,601,742D)17,542,515E)Noneoftheabove.Answer:ADifficulty:ModerateRationale:($521,000,000-63,000,000)/$=17,534,456.39.Amutualfundhadyear-endassetsof$327,000,000andliabilitiesof$46,000,000.IfthefundNAVwas$,howmanysharesmusthavebeenheldinthefundA)11,354,751B)8,412,642C)10,165,476D)9,165,414E)9,219,160Answer:EDifficulty:ModerateRationale:($327,000,000-46,000,000)/$=9,219,160.40.AmutualfundhadNAVpershareof$onJanuary1,2005.OnDecember31ofthesameyearthefund'sNAVwas$.Incomedistributionswere$andthefundhadcapitalgaindistributionsof$.Withoutconsideringtaxesandtransactionscosts,whatrateofreturndidaninvestorreceiveonthefundlastyearA)%B)%C)%D)%E)%Answer:EDifficulty:ModerateRationale:R=($-+.57+/$=%41.AmutualfundhadNAVpershareof$onJanuary1,2005.OnDecember31ofthesameyearthefund'srateofreturnfortheyearwas%.Incomedistributionswere$andthefundhadcapitalgaindistributionsof$.Withoutconsideringtaxesandtransactionscosts,whatendingNAVwouldyoucalculateA)$B)$C)$D)$E)$Answer:ADifficulty:ModerateRationale:.164=(P-$++/$;P=$42.AmutualfundhadNAVpershareof$onJanuary1,2005.OnDecember31ofthesameyearthefund'srateofreturnfortheyearwas%.Incomedistributionswere$andthefundhadcapitalgaindistributionsof$.Withoutconsideringtaxesandtransactionscosts,whatendingNAVwouldyoucalculateA)$B)$C)$D)$E)$Answer:EDifficulty:ModerateRationale:.266=(P-$++/$;P=$43.AmutualfundhadNAVpershareof$onJanuary1,2005.OnDecember31ofthesameyearthefund'srateofreturnfortheyearwas%.Incomedistributionswere$andthefundhadcapitalgaindistributionsof$.Withoutconsideringtaxesandtransactionscosts,whatendingNAVwouldyoucalculateA)$B)$C)$D)$E)$Answer:ADifficulty:ModerateRationale:.14=(P-$++/$;P=$44.DifferencesbetweenhedgefundsandmutualfundsarethatA)hedgefundsareonlysubjecttominimalSECregulation.B)hedgefundsaretypicallyopenonlytowealthyorinstitutionalinvestors.C)hedgefundsmanagerscanpursuestrategiesnotavailabletomutualfundssuchasshortselling,heavyuseofderivatives,andleverage.D)hedgefundsattempttoexploittemporarymisalignmentsinsecurityvaluations.E)alloftheaboveAnswer:EDifficulty:Moderate45.Ofthefollowingtypesofmutualfunds,aninvestorthatwishestoinvestinadiversifiedportfolioofstocksworldwide(includingthe.)shouldchooseA)internationalfunds.B)globalfunds.C)regionalfunds.D)emergingmarketfunds.E)noneoftheabove.Answer:BDifficulty:Moderate46.Ofthefollowingtypesofmutualfunds,aninvestorthatwishestoinvestinadiversifiedportfolioofforeignstocks(excludingthe.)shouldchooseA)InternationalfundsB)GlobalfundsC)RegionalfundsD)EmergingmarketfundsE)NoneoftheaboveAnswer:ADifficulty:Moderate47.OfthefollowingtypesofEFTs,aninvestorthatwishestoinvestinadiversifiedportfoliothattrackstheS&P500shouldchooseA)SPY.B)DIA.C)QQQ.D)IWM.E)VTI.Answer:ADifficulty:Moderate48.OfthefollowingtypesofEFTs,aninvestorthatwishestoinvestinadiversifiedportfoliothattrackstheDowJonesIndustrialsshouldchooseA)SPY.B)DIA.C)QQQ.D)IWM.E)VTI.Answer:BDifficulty:Moderate49.OfthefollowingtypesofEFTs,aninvestorthatwishestoinvestinadiversifiedportfoliothattrackstheNasdaq100shouldchooseA)SPY.B)DIA.C)QQQ.D)IWM.E)VTI.Answer:CDifficulty:Moderate50.OfthefollowingtypesofEFTs,aninvestorthatwishestoinvestinadiversifiedportfoliothattrackstheRussell2000shouldchooseA)SPY.B)DIA.C)QQQ.D)IWM.E)VTI.Answer:DDifficulty:Moderate51.OfthefollowingtypesofEFTs,aninvestorthatwishestoinvestinadiversifiedportfoliothattrackstheWilshire5000shouldchooseA)SPY.B)DIA.C)QQQ.D)IWM.E)VTI.Answer:EDifficulty:Moderate52.Amutualfundshadaveragedailyassetsof$billionin2005.Thefundsold$600millionworthofstockandpurchased$700millionworthofstockduringtheyear.Thefundsturnoverratiois___.A)%B)12%C)15%D)25%E)20%Answer:EDifficulty:ModerateRationale:600,000,000/3,000,000,000=20%53.Amutualfundshadaveragedailyassetsof$billionon2005.Thefundsold$500millionworthofstockandpurchased$600millionworthofstockduringtheyear.Thefundsturnoverratiois___.A)%B)12%C)15%D)25%E)20%Answer:DDifficulty:ModerateRationale:500,000,000/2,000,000,000=25%54.Amutualfundshadaveragedailyassetsof$billionon2005.Thefundsold$billionworthofstockandpurchased$billionworthofstockduringtheyear.Thefundsturnoverratiois____________.A)%B)22%C)15%D)45%E)20%Answer:ADifficulty:ModerateRationale:1,500,000,000/4,000,000,000=%55.Youpurchasedsharesofamutualfundatapriceof$20pershareatthebeginningoftheyearandpaidafront-endloadof%.Ifthesecuritiesinwhichthefindinvestedincreasedinvalueby11%duringtheyear,andthefundsexpenseratiowas%,yourreturnifyousoldthefundattheendoftheyearwouldbe____________.A)B)C)D)E)NoneoftheaboveAnswer:BDifficulty:DifficultRationale:{[$20*.9425*/$20=%56.Youpurchasedsharesofamutualfundatapriceof$12pershareatthebeginningoftheyearandpaidafront-endloadof%.Ifthesecuritiesinwhichthefundinvestedincreasedinvalueby9%duringtheyear,andthefundsexpenseratiowas%,yourreturnifyousoldthefundattheendoftheyearwouldbe____________.A)B)C)D)E)NoneoftheaboveAnswer:DDifficulty:DifficultRationale:{[$12*.9525*/$12=%57.Youpurchasedsharesofamutualfundatapriceof$17pershareatthebeginningoftheyearandpaidafront-endloadof%.Ifthesecuritiesinwhichthefindinvestedincreasedinvalueby12%duringtheyear,andthefundsexpenseratiowas%,yourreturnifyousoldthefundattheendoftheyearwouldbe____________.A)B)C)D)E)NoneoftheaboveAnswer:BDifficulty:DifficultRationale:{[$17*.95*/$17=%EssayQuestions58.Listanddescribethemoreimportanttypesofmutualfundsaccordingtotheirinvestmentpolicyanduse.Difficulty:ModerateAnswer:Someofthemoreimportantfundtypes,classifiedbyinvestmentpolicy,are:MoneyMarketFunds-Thesefundsinvestinmoneymarketsecurities.Theyusuallyoffercheck-writingfeaturesandNAVisfixedat$1pershare,sothattherearenotaximplicationsassociatedwithredemptionofshares.Theyprovidelowrisk,relativelylowreturnandhighliquidity.EquityFunds-Thesefundsinvestprimarilyinstock,althoughtheymayholdothertypesofsecuritiesatthemanager'sdiscretion.Theymayalsoholdsomemoneymarketsecuritiestoprovideliquidityforshareredemption.Typicalobjectivesarecapitalgain,growth,growthandincome,income,andincomeandsecurity.BondFunds-Thesefundsspecializeinfixed-incomesecuritiessuchascorporatebonds,Treasurybonds,mortgage-backedsecuritiesormunicipalbonds.Thesefundsmayspecializebymaturityorcreditriskaswell.BalancedFunds-Thesefundsmaysubstituteforaninvestor'sentireportfolio.Theyholdamixoffixed-incomeandequitysecurities.Incomefundstrytomaintainsafetyofprincipalbutachieveliberalcurrentincome,whilebalancedfundsseektominimizerisk.AssetAllocationFunds-Thesefundsalsoholdbothstocksandbonds,butvarytheproportionsinaccordwiththeportfoliomanager'sforecastoftherelativeperformanceofeachsector.Thesefundsareengagedinmarkettimingandarethereforehigherrisk.IndexFunds-Thesefundstrytomatchtheperformanceofabroadmarketindex.Theybuysharesinsecuritiesincludedinaparticularindexinproportiontothesecurity'srepresentationinthatindex.Indexfundsarealow-costwayforsmallinvestorstopursueapassiveinvestmentstrategy.SpecializedSectorFunds-Thesefundsconcentrateonaparticularindustryorindustries.Heldalone,theyarenotwelldiversifiedandmaybehigherrisk.Thequestionisdesignedtotestthestudent'sknowledgeofthevarioustypesoffundsavailableandtheirsuitabilityfordifferentneeds.59.Discussthetaxationofmutualfundincome.Difficulty:DifficultAnswer:Investmentreturnsofmutualfundsaregranted"pass-throughstatus"underthe.taxcode,meaningthattaxesarepaidonlybytheinvestorinthemutualfund,notbythefunditself.Theincomeistreatedaspassedthroughtotheinvestoraslongasallincomeisdistributedtoshareholders.Investorswillpaytaxesattheappropriateratedependingonthetypeofincome.Onedrawbackisthatinvestorscannottimethesaleofsecuritiesformaximumtaxadvantage,unlessthefundsareheldintax-deferredretirementaccounts.Thepurposeofthequestionistodeterminewhetherstudentsunderstandthetaxdifferencesofowningmutualfundsascomparedtoindividualinvestments.60.WhatisanExchange-tradedfundGivetwoexamplesofspecificETFs.Whataresomeadvantagestheyhaveoverordinaryopen-endmutualfundsWhataresomedisadvantagesDifficulty:DifficultAnswer:ETFsallowinvestorstotradeindexportfolios.Someexamplesarespiders(SPDR),whichtracktheS&P500index,diamonds(DIA),whichtracktheDowJonesIndustrialAverage,andqubes(QQQ),whichtracktheNASDAQ100index.OtherexamplesarelistedinTable4-3.(ItisanticipatedthattheremaysoonbeETFsthattrackactivelymanagedfundsaswelladthecurrentonesthattrackindexes.)Advantages-1.ETFsmaybeboughtandsoldduringthetradingdayat