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Ch 17 1

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The University of Texas - Pan American
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1/11
Jan vela
Jose lerma
1. What is a mutual fund? In what sense is it a financial institution? (LG 17-1)
A mutual fund represents a pool of economic assets received from people and businesses,
that's invested withinside the cash and capital markets. This procedure represents every
other approach for financial savers to channel finances to businesses and authorities
gadgets that want greater finances.
2. What are long-term mutual funds? In what assets do these funds usually invest? What
factors caused the strong growth in this type of fund during the 1990s and the decline
in growth in the early and late 2000s? (LG 17-2)
Long-Term Funds can be described as the ones budget that are geared toward making an
investment in securities having an unique adulthood for a length of twelve months or
greater. Long-time period Investors are prepurported to provide you with the cash to have
greater marketplace danger with their budget. These are mutual budget that are invested
in debt securities intended for long-time period and numerous cash marketplace
instruments. The purpose of those budget is to generate the earnings from interest. The
budget which might be predominantly used are prepurported to consist of debt securities
like company bonds. The different manner of producing the earnings in long-time period
budget is with the aid of using manner of capital appreciation that is depending on
elements which might be taken into consideration macroeconomic in nature. These
elements might also additionally consist of the price of interest , liquidity, and the extent
inflation . These are taken into consideration as a terrific replacement for the buyers who
do now no longer need to take a lot danger even as reaching their monetary goals .
Financial securities consisting of Mutual Funds or ETF's, Municipal Bonds , Inflation
Protected Securities (TIPS ), Saving Bonds & Treasury Bonds may be termed as
examples of -time period mutual budget. There became Vivid Decline withinside the
fairness marketplace withinside the yr 2000. It became especially because of shareholder
offerings presented with the aid of using mutual budget consist of the unfastened change
of budget among a mutual fund company's budget, programmed making an investment
Check-writing privileges on many cash marketplace budget and a few bond budget ,
automated reinvestment of dividends and automated withdrawals

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2/11
Jan vela
Jose lerma
3. Using the data in Table 172, discuss the growth and ownership holdings over the last
36 years of long-term funds versus money market funds. (LG 17-2)
As in desk 17-2 , in 1990 extra investments had been made in fairness mutual price range
ensuing withinside the upward thrust of the proportion cost at some point of the 1990s. In
1999 a few 74.2 percentage of all mutual price range' belongings had been in long time
price range and had been owned and held through them, even as the last 25.eight
percentage had been in cash marketplace mutual fund. In the early 2000s because the
hobby charge has grown up, the financial system weakened and inventory go back fell
due to this cash marketplace fund improved in comparison to that of increase of long-
time period price range and changed into owned and held through cash marketplace fund.
In 2002, round percentage of all mutual fund belongings had been long time price range,
and the last price range, 37.nine percentage had been in cash marketplace mutual fund.
the mid-2000s, the financial system grew and inventory cost improved, as a end result
this, the proportion of long-time period price range grew to 72.1 percentage in 2007 even
as cash marketplace price range fell to 27.nine percentage in 2007 withinside the 2009
monetary disaster and because of the fall apart in inventory price, a pointy drop changed
into integrated long time mutual fund activity . Equity price range had been downgraded
even as cash marketplace price range had been upgraded to 59.1 and 40.nine percentage
respectively But the treasury prolonged authorities Insurance on all cash marketplace
price range quickly 2009 because the financial system and inventory marketplace
recovered , the proportion of fairness price range grown returned to 69.1 percentage even
as cash marketplace price range fell to 31.nine percentage .
4. What are the economic reasons for the existence of mutual funds? (LG 17-1)
One predominant monetary motive for the lifestyles of mutual price range is the capacity
to acquire diversification via chance pooling for small investors. By pooling investments
from a massive range of small investors, fund managers are capable of preserve well-
different portfolios of assets.

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Jan vela
Jose lerma
5. What is the difference between an open-end mutual fund and a closed-end fund?
What is the difference between an open-end mutual fund and a unit investment trust?
(LG 17-3)
A mutual fund is an tool of investments which pool the cash of numerous Investors and
Invest cash in diverse securities collectively . Small investors, who aren't succesful to
spend money on capital marketplace can Invest via mutual budget and get entry to the
inventory marketplace. Open- ended scheme approach a scheme of mutual fund which
gives gadgets on the market with out specifying any length for redemption. On the
alternative hand, near-ended scheme is one wherein the duration of redemption is
specified. Unit funding agree with is a type of fund which bought the everlasting amount
of redeemable stocks which can be changing on a hard and fast execution date. Like near
stop budget, generally difficulty honestly in constant wide variety of stocks
6. What change in regulatory guidelines occurred in 2009 that had the primary purpose
of giving investors a better understanding of the risks and objectives of a mutual
fund? (LG 17-4)
In March 2009, the SEC followed amendments to the shape utilized by mutual finances
to check in below the Investment Company Act of 1940 and to provide their securities
below the Securities Act of 1933 so as to decorate the disclosures which can be supplied
to mutual fund investors.
7. How is the net asset value (NAV) of a mutual fund determined? What is meant by the
term marked-to-market daily? (LG 17-5)
Net Asset Value is the marketplace cost of every possession percentage of the mutual
fund. The general marketplace cost of the fund is decided through summing the full cost
of every asset withinside the fund. The cost of every asset may be discovered through
multiplying the wide variety of stocks of the asset through the corresponding rate of the
asset. Dividing this general fund cost through the wide variety of stocks withinside the
mutual fund will provide the NAV for the fund. The NAV is calculated on the cease of

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Jan vela Jose lerma 1. What is a mutual fund? In what sense is it a financial institution? (LG 17-1) A mutual fund represents a pool of economic assets received from people and businesses, that's invested withinside the cash and capital markets. This procedure represents every other approach for financial savers to channel finances to businesses and authorities gadgets that want greater finances. 2. What are long-term mutual funds? In what assets do these funds usually invest? What factors caused the strong growth in this type of fund during the 1990s and the decline in growth in the early and late 2000s? (LG 17-2) Long-Term Funds can be described as the ones budget that are geared toward making an investment in securities having an unique adulthood for a length of twelve months or greater. Long-time period Investors are prepurported to provide you with the cash to have greater marketplace danger with their budget. These are mutual budget that are invested in debt securities intended for long-time period and numerous cash marketplace instruments. The purpose of those budget is to generate the earnings from interest. The budget which might be predominantly used are prepurported to consist of debt securities like company bonds. The different manner of producing the earnings in long-time period budget is with the aid of using manner of capital appreciation that is depending on elements which might be taken into consideration macroeconomic in nature. These elements might also ...
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