Which of the Following Is an Advantage of an Indexed

question 72

Multiple Choice

Which of the following is an advantage of an indexed equity mutual fund relative to a managed equity fund?

• A) Indexed funds generally have better stock pickers.
• B) Indexed funds engage in more detailed research.
• C) Indexed funds have lower operating costs because they engage in less stock trading.
• D) Indexed funds earn a significantly higher rate of return than a broad portfolio that represents the entire stock market.

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Definitions:

Loanable Funds

The money available for borrowing in the financial markets, often coming from savings and influenced by interest rates.

Real Rate of Interest

The interest rate adjusted for inflation, reflecting the true cost of borrowing money and the real yield for savers.

Nominal Rate of Interest

The stated interest rate of a bond or loan without adjusting for inflation, representing the actual percentage that borrowers pay to lenders.

Inflation Rate

The percentage increase in the general price level of goods and services in an economy over a period of time.