47. owning mutual funds enables the investor to receive all of the following exc

Question

47. owning mutual funds enables the investor to receive all of the following except :

a. any service offered by the fund

b. professional management service and advise

c. diversification of investments

d. control over the investment portfolio

48. two mutual funds were recently quoted as follows :
Philadelphia fund BID 7.73 ASK 7.73

Pittsburgh Fund BID 11.09 ASK 11.09

Gives these quotes, which of the following are true:

Neither fund charges a commission

Pitsburg is a no load fund

Philadelphia is a no load fund

The information is not sufficient to determine the answer

49. if two variables do not have a strong (linear) relationship, the correlation coefficient between the two variables will be closest to :

a. 0

b. -1

c. +1

50. diversification can reduce portfolio risk only if the security return correlation is :

a. equal to +1

b. less than +1

c. zero

d. more than +1

Explanation / Answer

47)

Owning a mutual fund does not provide the investor to have control over his portfolio . He mandates the portfolio manager to control his investments based on his risk return metrics.

So Answer : d)

48)

As both the funds have same Bid and ask value ie there is no spread, neither charges a commission.

Answer : a)

49)

If two variables have strong linear relationship then the correlation between them is +1 or closest to +1.

Answer : c)

50)

In order to have perfect diversification, it is ideal to have securities which a negative correlation or if the correlation is less than zero. From the above option, one stands to benefit any time if the asset added to a portfolio has correlation less than 1 or if it is zero, it is near perfect.

So Answer : C)

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