Which of the Following Statements Is Incorrect

question 26

Multiple Choice

Which of the following statements is incorrect?

• A) A mutual fund is usually run by an investment company.
• B) Mutual funds with lower expense ratios tend to outperform other funds with a similar investment objective.
• C) For each mutual fund, all expenses charged and reflected in the expense ratio are always valid.
• D) The SEC requires that a majority of the directors of a mutual fund board be independent.

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Definitions:

Operating Lease

A contract that allows for the use of an asset but does not transfer ownership of the asset to the lessee.

Capital Lease

A financial agreement where a lessee gains significant property rights, making it similar to owning the asset, for accounting purposes.

Direct Financing Lease

A type of lease agreement where the lessor effectively finances the leased asset for the lessee, recognizing interest income over the lease term.

Interest Expense

The cost incurred by an entity for borrowed funds, reflected as a financial charge in the income statement over the period of borrowing.