1- Which of the following is a default option for most mutual funds? A) Automatic reinvestment of dividends and interest income. B) Automatic investment of a fixed sum each month. C) Automatic conversion from aggressive to conservative funds as clients approach retirement. D) Automatic withdrawal of a fixed amount each month.
2- Mutual funds often report returns as the growth of $10,000 over a period of time. These returns assume that A) all dividends and capital gains are reinvested. B) all dividends and capital gains are withdrawn. C) all dividends and capital gains are reinvested after deductions for income taxes. D) the investor contributes money to the fund on a regular basis through an automatic investment plan.
3- The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as A) portfolio revision. B) market timing. C) red herring baiting. D) dollar cost averaging.
4- An American call option gives the owner A) the right to buy or sell the stock at the strike price on or before the expiration date. B) the right but not the obligation to buy the stock at the strike price on or before the expiration date. C) the right and the obligation to buy the stock at the strike price on or before the expiration date. D) the right but not the obligation to sell the stock at the strike price on or before the expiration date.