Which Statement Best Defines a Mutual Fund

question 170

Multiple Choice

Which statement best defines a mutual fund?

• A) It is a financial market where small firms agree to sell stocks and bonds to raise funds.
• B) It is a fund set aside by a local government to lend to small firms who want to invest in projects that are beneficial to the firm and community.
• C) It is an institution that sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit.
• D) It is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks and bonds.

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Definitions:

Adjusting Entry

An Adjusting Entry is a journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate period, ensuring that the financial statements reflect accurate and fair values.

Dishonored Note

A dishonored note is a promissory note that has not been paid by the maker at its maturity date.

Direct Write-Off Method

An accounting method where bad debts are charged against income at the time they are deemed irrecoverable, rather than being anticipated in advance.

Interest

Interest is the cost paid for borrowing money, typically expressed as a percentage of the amount borrowed over a certain period of time.