Scenario: You are 30 years old and single. You have a moderate risk investment philosophy. You are interested in long-term investing, but you do not have sufficient funds to buy a variety of investments to be fully diversified and you do not feel you have the expertise to make good choices. Read the statements and indicate whether each statement is true or false.
Statement False True
Mutual funds don't distribute dividends; rather, they generate income
by creating capital gains
A fund's exchange privilege allows a fund investor to exchange shares
between different funds within the same family of funds.
If you name a beneficiary, your mutual fund investment can be
transferred to an heir without going through probate.
Given your moderate risk investment philosophy, you would be best served by investing in a mutual fund with:.
a. an income objective.
b. a growth objective.
c. both a growth and an income objective.
Rank the following three types of funds from lowest to highest levels of risk and return. Use a 1 to denote the lowest level of risk/return and 3 to indicate the highest levels.
Type of mutual fund Risk level
Growth and income funds
Long-term corporate bond funds
Aggressive growth funds