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FIN 400 Exam 1 Questions And Answers Latest Update
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FIN 400 Exam 1 Questions And Answers Latest Update
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2024/2025FIN 400 Exam 1 Questions And
Answers Latest Update
where do mutual funds fit into the wealth mgmt process ANS✔✔ indirect investments into asset
allocation
3 types of pooled investments ANS✔✔ mutual funds
exchange traded funds
hedge funds
2 potential advantages of MF/ETF compared to investing in securities ANS✔✔ 1. diversification is
easier and cheaper
2. "professional" money mgmt
2 broad categories of pooled investments based on investment style ANS✔✔ active and passive
active style ANS✔✔ attempt to outperform the mkt (S&P500) thru mkt timing and security
selection
More research and trading
(federated and american are 2 examples)
passive style ANS✔✔ attempt to replicate the mkt (S&P500)
also called "index"
factors to consider when deciding btwn active and passive styles ANS✔✔ turnover
expense ratio
top 1 0 sectors & top 10 holdings
,2024/2025
turnover ANS✔✔ the % of fund assets that are replaced (sold and repurchased) in a year
higher= more taxes paid
expense ratio ANS✔✔ (mgmt fees)
the % of fund assets that go to pay mgrs
reduces return to investors
top 1 0 sectors & top 10 holdings ANS✔✔ the % of fund assets allocated across various sectors/top
10 investments
characteristics of active style ANS✔✔ high turnover
higher expense ratio
higher % in one sector/top 10 holdings
less tax efficient
characteristics of passive style ANS✔✔ low turnover
lower expense ratio
lower % in one sector/top 10 holdings
more tax efficient
how do taxes play a role in choosing investment style ANS✔✔ tax efficiency is important when
fund is in a taxable acct
less of a concern when investment fund is in a tax-deferred/sheltered acct
factors to look at to asses tax consquences ANS✔✔ turnover rate
tax cost ratio (more reliable)
tax cost ratio ANS✔✔ the annual return, expressed as a %, that the investor loses to taxes
lower is better= more tax efficient
, 2024/2025
after the preferred investment style is chosen, what is the next decision that needs to be made (with
respect to asset classes) ANS✔✔ ?? #7
5 options to consider pertaining to domicile?? of investments ANS✔✔ 1. future
performance/returns
2. future volatility (range of returns)
3. correlation of returns with the mkt (S&P500)
4. govt policies
5. exchange rate risk
types of mutual funds available ANS✔✔ balanced
target date
sector
equity
bond
money mkt
balanced MF ANS✔✔ static mix of stocks and bonds
target date MF ANS✔✔ low risk, mix of stocks and bonds, based on age (not risk tolerance)
sector MF ANS✔✔ invest in specific sectors of the economy. Sector funds exist for such areas as
energy, medical technology,
computer technology, leisure, and defense. LESS DIVERSIFIED.
equity MF ANS✔✔ funds that invest the lion's share of the investment in stocks with high
dividend payments. Stocks can consist of common stock, preferred
stock or convertible stock
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