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:

Capital Flight

The large-scale exodus of financial assets and capital from a country due to economic instability, political unrest, or unfavorable policies.

Capital Mobility

The ease with which capital or financial assets can move between countries or markets.

Arbitrage

The practice of buying and selling assets to profit from price differences in different markets.

Trade Policies

Laws and regulations enacted by governments to manage international trade, designed to protect domestic industries, control exports and imports, and foster economic growth.