The Return on an Index Fund May Be Less Than

question 2

Multiple Choice

The return on an index fund may be less than the return on the index it represents because of all of the following except

• A)it may not own all the companies included in the index.
• B)the load charge.
• C)the expense ratio.
• D)excessive commissions on frequent trades by the fund.

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Definitions:

Competitive Price-Searcher

A market structure where firms have some control over the price because their products are differentiated, and consumers search for the best prices among competitors.

Long-Run Economic Profit

The excess revenue over costs, including opportunity costs and explicit costs, that a firm realizes when all inputs are considered variable, typically assumed in a period where firms can enter or exit the industry.

Potential Rivals

Companies or entities not currently in the market but possess the capability to enter and compete effectively.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market.