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An open-ended mutual fund scheme is one in which
A{'text': 'Investors can transact with the fund only during the NFO', 'label': 'A'}
B{'text': 'The unit capital keeps changing as investors enter and exit', 'label': 'B'}
C{'text': 'The fund is compulsorily listed on a stock exchange', 'label': 'C'}
D{'text': 'Redemptions are permitted only at maturity', 'label': 'D'}
Answer & Solution
Correct answer: B. {'text': 'The unit capital keeps changing as investors enter and exit', 'label': 'B'}
1. An open-ended scheme stays open for on-going subscription and redemption after the NFO.
2. Fresh subscriptions create new units, raising unit capital.
3. Redemptions cancel existing units, lowering unit capital.
4. The unit capital therefore fluctuates daily; the scheme has no fixed maturity.
_Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 2 "Concept and Role of a Mutual Fund", §2.2.1_
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