A Mutual Fund Typically Performs All of the Following Functions

question 81

Multiple Choice

A mutual fund typically performs all of the following functions, EXCEPT that it

• A) provides alternative risk-return options.
• B) eliminates unsystematic risk.
• C) provides diversification.
• D) derives a risk-adjusted performance that is consistently superior to risk-adjusted net return of the aggregate market.
• E) administers the account, keeps records, and provides timely information.

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Definitions:

Production Possibility Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, technology).

Absolute Advantage

The ability of an entity to produce a good or service more efficiently than its competitors, leading to greater output with the same resources.

Herring

A small, silver-colored fish commonly found in the temperate waters of the North Atlantic, a significant source of food globally.

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action or in the context of making a decision.