When a Fund Manager Tries to Pick Stocks to Outperform

question 66

Multiple Choice

When a fund manager tries to pick stocks to outperform the market averages, the mutual fund is called a(n) :

• A) active fund.
• B) passive fund.
• C) random walk fund.
• D) loaded fund.

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Definitions:

Basis

The amount of investment in property for tax purposes, used to calculate gain or loss upon sale or disposition of the property.

Subchapter S

A designation of corporation that meets specific Internal Revenue Service criteria, allowing it to be taxed as a pass-through entity, avoiding double taxation.

Taxable Income

The portion of a person's or a company's income used to determine how much tax is owed to the government.

Book Income

The income reported by a corporation for financial reporting purposes, which may differ from taxable income calculated for tax purposes.