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Chapter 17: Q. 24 (page 426)

What is an index fund?

Short Answer

Expert verified

It is an investment strategy that employs a rules-based fund.

Step by step solution

01

Definition of Mutual fund.

A mutual fund is indeed a collection of assets from several different types of investors.

02

Explanation of solution.

An indexing fund is a type of mutual fund that is intended to follow established guidelines in order to monitor a specific set of trends. Investors do not have to be concerned and can focus on analyzing the stocks. Their investment will be in line with the current trend. S&P 500 is the most popular index fund in the United States, and it is based on S&P Dow Jones Indices' criteria.

They are a collection of firms whose stocks are classified in groups based on their size, qualities, and income. Overall, and has a more diverse portfolio with lower fees and operational costs because companies who do not follow the rules are removed from the fund, and there is no need for active management to inspect and track things.

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Most popular questions from this chapter

From a firm’s point of view, how is a bond similar to a bank loan? How are they different?

Calculate the equity each of these people has in his or her home:

a. Fred just bought a house for \(200,000 by putting 10% as a down payment and borrowing the rest from the bank.

b. Freda bought a house for \)150,000 in cash, but if she were to sell it now, it would sell for \(250,000.

c. Frank bought a house for \)100,000. He put 20% down and borrowed the rest from the bank. However, the value of the house has now increased to \(160,000 and he has paid off \)20,000 of the bank loan.

How much money do you have to put into a bank account that pays 10% interest compounded annually to have $10,000 in ten years?

What are the most common ways for start-up firms to raise financial capital?

What is a mutual fund?
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