Multiple Choice
Which of the following pairs of expenses are typically considered variable expenses in accounting?
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1. Introduction to Accounting
Types of Accounting
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I am actively managed and usually come with higher fees. Which type of investment am I?
A
Exchange-traded fund (ETF)
B
Index fund
C
Actively managed mutual fund
D
Certificate of deposit (CD)
Verified step by step guidance1
Understand the key characteristics of each investment type mentioned in the problem: Exchange-traded funds (ETFs), Index funds, Actively managed mutual funds, and Certificates of deposit (CDs).
Recognize that actively managed mutual funds are managed by professional fund managers who actively make investment decisions to outperform the market, which typically results in higher fees compared to passively managed funds like ETFs or Index funds.
Differentiate between actively managed funds and passively managed funds. Passively managed funds, such as Index funds and many ETFs, aim to replicate the performance of a specific index and generally have lower fees.
Eliminate options that do not match the description of being actively managed and having higher fees. For example, Certificates of deposit (CDs) are fixed-income investments and not actively managed.
Conclude that the correct answer is 'Actively managed mutual fund' based on the description provided in the problem.
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