Mutual funds permitthose who desire to saveto pool their fundstogether for the purposeof purchasing financialinstruments with largedenominations. As aresult, the average fundmanagement costs arelower than they would beif individual savers tried tomanage their fundsindividually. This is anexample of OA. moral hazard.B. adverse selection.OC. asymmetric information.D. economies of scale.

A mutual fund is a type of investment vehicle that consists of a pool of different securities such…

Answered: Mutual funds

Business

Finance

Mutual funds

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter13: Investing In Mutual Funds, Etfs, And Real Estate

Section: Chapter Questions

Problem 5LO

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Would you expect a typical open-end fixed-income mutual fund to have higher or lower operating expenses than a fixed-income unit investment trust? Why?
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Description Activist funds need to devore more time and resources o invastments compared to most other fund strategies. What sdded risk doss this produce for sctivist funds?View Solution:
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The figures are for illustrative purposes and are not based on past performance with respect to the fund where your policy is linked. The investment returns used are for illustrative The returns are likely to change during the period. Also, the assumed returns do not represent the upper and lower limits of the actual return that may be realized. Values are calculated assuming the fund is earning 6%*, 8%* and 12%*. It is assumed that mode of payment is ANNUITY DUE.
Use the following to answer questions a. – f. a. What is the alpha for Fund B? b. Based on alpha, which fund displays superior performance? c. What is the Sharpe ratio for Fund B? d. Based on the Sharpe ratio, which fund displays superior performance? e. Suppose you are an investment counselor with a new client, Jonsey, and that Funds A and B are the only options available in Jonsey's company sponsored retirement account. Jonsey has no other investments. Which fund would you recommend, and why? f. What additional evidence would make you more confident in your recommendation, that is, more confident that the fund you recommend has the ability to perform in the future? (Hint: The answer has nothing to do with the Treynor Index.)