博迪_投资学第九版_英文答案

CHAPTER 4: MUTUAL FUNDS AND

OTHER INVESTMENT COMPANIES

PROBLEM SETS

1. The unit investment trust should have lower operating expenses. Because the

investment trust portfolio is fixed once the trust is established, it does not have to pay portfolio managers to constantly monitor and rebalance the portfolio as

perceived needs or opportunities change. Because the portfolio is fixed, the unit investment trust also incurs virtually no trading costs.

2. a. Unit investment trusts: diversification from large-scale investing, lower

transaction costs associated with large-scale trading, low management fees,

predictable portfolio composition, guaranteed low portfolio turnover rate.

b. Open-end mutual funds: diversification from large-scale investing, lower

transaction costs associated with large-scale trading, professional management that may be able to take advantage of buy or sell opportunities as they arise, record keeping.

c. Individual stocks and bonds: No management fee, realization of capital gains

or losses can be coordinated with investors’ personal tax situations, portfolio can be designed to investor’s specific risk profile.

3. Open-end funds are obligated to redeem investor's shares at net asset value, and thus

must keep cash or cash-equivalent securities on hand in order to meet potential redemptions. Closed-end funds do not need the cash reserves because there are no redemptions for closed-end funds. Investors in closed-end funds sell their shares when they wish to cash out.

4. Balanced funds keep relatively stable proportions of funds invested in each asset

class. They are meant as convenient instruments to provide participation in a range of asset classes. Life-cycle funds are balanced funds whose asset mix generally depends on the age of the investor. Aggressive life-cycle funds, with larger

investments in equities, are marketed to younger investors, while conservative life-cycle funds, with larger investments in fixed-income securities, are designed for older investors. Asset allocation funds, in contrast, may vary the proportions invested in each asset class by large amounts as predictions of relative performance across classes vary. Asset allocation funds therefore engage in more aggressive market timing.