Thomas Wants to Invest in a Fund That Invests in Stock

question 27

Multiple Choice

Thomas wants to invest in a fund that invests in stock, bonds, and money market instruments. Which of the following will meet his needs?

• A) Asset allocation funds
• B) Aggressive growth funds
• C) Junk bond funds
• D) Midcap funds
• E) Short-term corporate bond funds

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Definitions:

Front-end Commission

A fee paid when purchasing shares of a mutual fund, upfront, which reduces the amount invested from the start.

Expense Ratio

The annual fee that all funds and exchange-traded funds charge their shareholders, expressed as a percentage of the fund's total assets.

Rate of Return

The gain or loss on an investment over a specified time period, expressed as a percentage of the investment's cost.

Exercise Price

The exercise price is the price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.