Which One of the Following Is False Regarding Mutual Fund

question 54

Multiple Choice

Which one of the following is false regarding mutual fund investments?

• A)Mutual funds invest in a variety of securities.
• B)Diversification provided by a mutual fund reduces risk.
• C)The goals of one mutual fund investor may differ from those of another.
• D)Since mutual fund managers are professionals,there is no need for the investor to evaluate a mutual fund.
• E)Mutual fund investments range from very conservative to extremely speculative investments.

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Definitions:

Positive Externality

A benefit that is enjoyed by a third-party as a result of an economic transaction.

Negative Externalities

Unintended adverse effects of an economic activity on unrelated third parties; they represent a failure of the market to fully account for the impacts of transactions.

Social Planner

A hypothetical figure in economic theories who makes decisions designed to allocate resources efficiently and achieve social welfare objectives.

Private Cost

The expenses that a company or an individual incurs as a result of its economic activity, excluding any external costs.