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AMFI Mutual Fund Concept and Role of a Mutual Fund — practice questions

Explore 15 free Concept and Role of a Mutual Fund questions in AMFI Mutual Fund Mutualfunds. Open each question or exercise to read its content, reference answers and available explanation.

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Concept and Role of a Mutual Fund questions and exercises with answers

Showing questions 1–15 of 15.

The legal form under which a mutual fund is set up in India is aRead the answer and worked solution →The face value of a single unit of a mutual fund scheme in India is typicallyRead the answer and worked solution →Which of the following best describes the Net Asset Value of a scheme?Read the answer and worked solution →The daily process of valuing every security in a scheme portfolio at its current market price is calledRead the answer and worked solution →An open-ended mutual fund scheme is one in whichRead the answer and worked solution →A close-ended scheme provides post-NFO liquidity to investors mainly throughRead the answer and worked solution →Interval funds are best described as schemes thatRead the answer and worked solution →Which of the following is a limitation of investing through mutual funds?Read the answer and worked solution →An Equity Linked Savings Scheme (ELSS) carries a mandatory lock-in period ofRead the answer and worked solution →Under SEBI categorisation, a Large Cap fund invests predominantly in stocks rankedRead the answer and worked solution →An Aggressive Hybrid Fund is required to invest in equity and equity related instruments in the range ofRead the answer and worked solution →A Liquid Fund invests only in debt and money market securities with a maximum residual maturity ofRead the answer and worked solution →An Ultra-Short Duration Fund holds a portfolio with Macaulay duration betweenRead the answer and worked solution →Which SEBI scheme category has a lock-in of 5 years or till retirement, whichever is earlier?Read the answer and worked solution →An Index Fund or Exchange Traded Fund tracking a specified index must invest at leastRead the answer and worked solution →

Worked practice questions

The legal form under which a mutual fund is set up in India is a

  1. Trust
  2. Partnership firm
  3. Company
  4. Cooperative society
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Correct answer: A. Trust

1. SEBI (MF) Regulations, 1996 define a mutual fund as a fund established in the form of a trust. 2. The trust raises money by selling units to the public under one or more schemes. 3. The pooled money is invested in securities in line with a stated objective. 4. A partnership firm, company or cooperative society are not permitted legal forms for an Indian mutual fund. _Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 2 "Concept and Role of a Mutual Fund", §2.1_

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The face value of a single unit of a mutual fund scheme in India is typically

  1. Rs. 1
  2. Rs. 10
  3. Rs. 100
  4. Rs. 1,000
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Correct answer: B. Rs. 10

1. Every scheme unit carries a fixed face value used for accounting. 2. The workbook records the typical face value as Rs. 10 per unit. 3. Multiplying units issued by face value gives the scheme's unit capital. 4. The other rupee figures are not the standard face value. _Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 2 "Concept and Role of a Mutual Fund", §2.1.4_

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Which of the following best describes the Net Asset Value of a scheme?

  1. Face value of one unit issued today
  2. Original issue price of a unit in the NFO
  3. Fair worth per unit at current market prices
  4. Total assets minus sponsor initial stake
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Correct answer: C. Fair worth per unit at current market prices

1. NAV is defined as the true worth of one unit of the scheme. 2. It equals the net realisable value per unit if all holdings were sold today. 3. Face value stays fixed at Rs. 10 and is unrelated to daily NAV changes. 4. NAV is computed daily using mark-to-market prices of scheme holdings. _Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 2 "Concept and Role of a Mutual Fund", §2.1.4_

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More Mutualfunds topics

Legal Structure of Mutual Funds