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Chapter 17: Q. 23 (page 426)

What is a mutual fund?

Short Answer

Expert verified

It is a well-managed financial instrument in which individuals invest their money and the funds manage their capital.

Step by step solution

01

Introduction

A financial investment is an asset to put money in with the expectation of it growing in value.

02

Explanation of solution.

A mutual fund is a professionally managed investment vehicle that takes money from clients, invests it on their behalf, and charges a nominal fee is charged. It is issued by a number of companies that are experts in the field of investment. This sort of investing is suitable for those who want to invest their money but lack market understanding. The fund gathers funds from all investors and invests them in a variety of asset classes, including debt, equities, and liquid assets. Profits or losses have always been shared by all participants.

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Most popular questions from this chapter

The Darkroom Windowshade Company has 100,000 shares of stock outstanding. The investors in the firm own the following numbers of shares: investor 1 has 20,000 shares; investor 2 has 18,000 shares; investor 3 has 15,000 shares; investor 4 has 10,000 shares; investor 5 has 7,000 shares; and investors 6 through 11 have 5,000 shares each. What is the minimum number of investors it would take to vote to change the company's top management? If investors 1 and 2 agree to vote together, can they be certain of always getting their way in how the company will be run?

What is a mutual fund?

Many retirement funds charge an administrative fee each year equal to 0.25% on managed assets. Suppose that Alexx and Spenser each invest $5,000 in the same stock this year. Alexx invests directly and earns 5% a year. Spenser uses a retirement fund and earns 4.75%. After 30 years, how much more will Alexx have than Spenser?

Is investing in housing always a very safe

investment?

Which has a higher average return over time: stocks, bonds, or a savings account? Explain your answer.
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