FIN 320 STUDY EXAM GUIDE 2025/2026 QUESTIONS AND
SOLUTIONS GRADED A+ TIP
✔✔What is the value of a share of preferred stock that pays a $5 annual dividend if the
required return to investors is 9%? - ✔✔$55.56
✔✔A call provision gives the bond issuer the: - ✔✔Right to force investors to sell the
bond back to the firm
✔✔A common trait of preferred stock is__________. - ✔✔cumulative dividends
✔✔A company may elect to set aside money in a sinking fund that will be used to: -
✔✔pay off a bond issue at maturity.
✔✔When the market rate of interest increases the value of a preferred stock: - ✔✔falls.
✔✔The most attractive feature of a municipal bond is: - ✔✔tax exempt status.
✔✔What is the yield to maturity (YTM) for a $1,000 par value bond selling for $1,100
that matures in 5 years and pays a 10% coupon one time a year? - ✔✔7.5%
✔✔A type of mutual fund that attempts to tailor its holdings to an investor's age and
tolerance for risk is known as a(n): - ✔✔life cycle fund.
✔✔Haven has invested in a mutual fund. The net asset value at the time of purchase
was $254.50 and he sells the fund two years later for $275.00. Additionally, during the
time that he owns the mutual fund, he receives dividends of $12.50 and capital gain
distributions of $15.75. What is Haven's return on this investment? - ✔✔19.16%
✔✔When an investor wants to sell shares in an open-end mutual fund they: - ✔✔sell
them back to the mutual fund at net asset value.
✔✔An investment vehicle that pools investor funds and invests the proceeds in real
estate or mortgages is known as a(n): - ✔✔REIT
✔✔An investment vehicle that pools money from a number of investors and then invests
those funds in stocks, bonds, or some financial asset is known as a(n): - ✔✔mutual
fund.
✔✔ETFs can be bought and sold: - ✔✔during normal trading hours just like a stock
✔✔A diversified stock mutual fund will help you eliminate the risk associated with: -
✔✔holding individual assets.
, ✔✔At this point in time there are approximately __________ mutual funds that
specialize in all different types of financial assets. - ✔✔8,000
✔✔A(n) __________ fund will hold stocks, bonds and also preferred stock. -
✔✔balanced
✔✔Mutual funds that typically invest at least 2/3rds of their assets in a specific industry
are known as: - ✔✔sector funds.
✔✔Mutual fund loads, or sales fees, can be as high as: - ✔✔8.5%.
✔✔Which of these is an advantage of mutual funds? - ✔✔Professional management
✔✔A(n) __________ cannot issue new shares in response to investor demand. -
✔✔closed-end fund
✔✔A sales commission charge on a mutual fund is referred to as a(n): - ✔✔load.
✔✔Mutual fund advisors are compensated by: - ✔✔management fees
✔✔Jessica purchased 100 shares in a mutual fund at an NAV of $23.45. She held the
fund for one year and received a dividend of $2 during that time and a capital gains
distribution of $4.22. What is her total percentage return if she sold her shares for an
NAV of $27.10? - ✔✔42%
✔✔A __________ fund invests primarily in long-term debt. - ✔✔bond
✔✔A high risk, largely unregulated investment fund for wealthy investors is called a: -
✔✔hedge fund.
✔✔One measure of a mutual fund's trading activity is the: - ✔✔turnover ratio.
✔✔A description of a specific mutual fund that lists the fund's objectives, risks and other
information is known as a(n): - ✔✔mutual fund prospectus.
✔✔Benito placed $11,500 in a mutual fund with a 3.5% front-end load. How much
money did he actually invest in the fund after accounting for the load? - ✔✔$11,097.50
✔✔Which of these is a decision factor you should use when evaluating different mutual
fund investments? - ✔✔Personal goals
SOLUTIONS GRADED A+ TIP
✔✔What is the value of a share of preferred stock that pays a $5 annual dividend if the
required return to investors is 9%? - ✔✔$55.56
✔✔A call provision gives the bond issuer the: - ✔✔Right to force investors to sell the
bond back to the firm
✔✔A common trait of preferred stock is__________. - ✔✔cumulative dividends
✔✔A company may elect to set aside money in a sinking fund that will be used to: -
✔✔pay off a bond issue at maturity.
✔✔When the market rate of interest increases the value of a preferred stock: - ✔✔falls.
✔✔The most attractive feature of a municipal bond is: - ✔✔tax exempt status.
✔✔What is the yield to maturity (YTM) for a $1,000 par value bond selling for $1,100
that matures in 5 years and pays a 10% coupon one time a year? - ✔✔7.5%
✔✔A type of mutual fund that attempts to tailor its holdings to an investor's age and
tolerance for risk is known as a(n): - ✔✔life cycle fund.
✔✔Haven has invested in a mutual fund. The net asset value at the time of purchase
was $254.50 and he sells the fund two years later for $275.00. Additionally, during the
time that he owns the mutual fund, he receives dividends of $12.50 and capital gain
distributions of $15.75. What is Haven's return on this investment? - ✔✔19.16%
✔✔When an investor wants to sell shares in an open-end mutual fund they: - ✔✔sell
them back to the mutual fund at net asset value.
✔✔An investment vehicle that pools investor funds and invests the proceeds in real
estate or mortgages is known as a(n): - ✔✔REIT
✔✔An investment vehicle that pools money from a number of investors and then invests
those funds in stocks, bonds, or some financial asset is known as a(n): - ✔✔mutual
fund.
✔✔ETFs can be bought and sold: - ✔✔during normal trading hours just like a stock
✔✔A diversified stock mutual fund will help you eliminate the risk associated with: -
✔✔holding individual assets.
, ✔✔At this point in time there are approximately __________ mutual funds that
specialize in all different types of financial assets. - ✔✔8,000
✔✔A(n) __________ fund will hold stocks, bonds and also preferred stock. -
✔✔balanced
✔✔Mutual funds that typically invest at least 2/3rds of their assets in a specific industry
are known as: - ✔✔sector funds.
✔✔Mutual fund loads, or sales fees, can be as high as: - ✔✔8.5%.
✔✔Which of these is an advantage of mutual funds? - ✔✔Professional management
✔✔A(n) __________ cannot issue new shares in response to investor demand. -
✔✔closed-end fund
✔✔A sales commission charge on a mutual fund is referred to as a(n): - ✔✔load.
✔✔Mutual fund advisors are compensated by: - ✔✔management fees
✔✔Jessica purchased 100 shares in a mutual fund at an NAV of $23.45. She held the
fund for one year and received a dividend of $2 during that time and a capital gains
distribution of $4.22. What is her total percentage return if she sold her shares for an
NAV of $27.10? - ✔✔42%
✔✔A __________ fund invests primarily in long-term debt. - ✔✔bond
✔✔A high risk, largely unregulated investment fund for wealthy investors is called a: -
✔✔hedge fund.
✔✔One measure of a mutual fund's trading activity is the: - ✔✔turnover ratio.
✔✔A description of a specific mutual fund that lists the fund's objectives, risks and other
information is known as a(n): - ✔✔mutual fund prospectus.
✔✔Benito placed $11,500 in a mutual fund with a 3.5% front-end load. How much
money did he actually invest in the fund after accounting for the load? - ✔✔$11,097.50
✔✔Which of these is a decision factor you should use when evaluating different mutual
fund investments? - ✔✔Personal goals
