Mutual Funds, Fee Transparency, and Competition

1. Define the following terms used in the reading:
   1. S&P 500 index fund
   2. distribution fees

2. What are mutual funds? What varieties of mutual funds are available?

3. How do mutual funds benefit investors?

4. Based on the four characteristics of highly competitive markets, how competitive is the mutual fund industry?

5. Why is an S&P 500 stock index fund like a pure standard good? What does evidence on returns for these funds suggest about information available to investors?

6. What are the different types of mutual fund fees? What proposals are under consideration for improving the disclosure of these fees?

Source: "Mutual Funds, Fee Transparency, and Competition." John B. Carlson, Eduard A. Pelz, and Erkin Y. Sahinoz, Federal Reserve Bank of Cleveland Economic Commentary, March 1, 2004, pp. 1-3.