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B Com Exam  >  B Com Tests  >  Indian Financial System  >  Test: Mutual Funds - B Com MCQ

Test: Mutual Funds - B Com MCQ


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10 Questions MCQ Test Indian Financial System - Test: Mutual Funds

Test: Mutual Funds for B Com 2024 is part of Indian Financial System preparation. The Test: Mutual Funds questions and answers have been prepared according to the B Com exam syllabus.The Test: Mutual Funds MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Mutual Funds below.
Solutions of Test: Mutual Funds questions in English are available as part of our Indian Financial System for B Com & Test: Mutual Funds solutions in Hindi for Indian Financial System course. Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free. Attempt Test: Mutual Funds | 10 questions in 10 minutes | Mock test for B Com preparation | Free important questions MCQ to study Indian Financial System for B Com Exam | Download free PDF with solutions
Test: Mutual Funds - Question 1
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What is the purpose of a mutual fund?

Detailed Solution for Test: Mutual Funds - Question 1
A mutual fund is an investment vehicle that collects funds from many investors and invests them in assets and securities such as stocks, bonds, or money market instruments. The purpose of a mutual fund is to produce capital gains and income for the fund investors by professionally managing the portfolio of investments.
Test: Mutual Funds - Question 2
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What is the role of an asset management company (AMC) in a mutual fund?

Detailed Solution for Test: Mutual Funds - Question 2
An asset management company (AMC) is responsible for managing a mutual fund. The AMC hires a professional money manager who buys and sells securities in line with the fund's stated objective. The AMC's role is to manage the fund's capital and investments, ensuring that they align with the fund's investment objectives.
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Test: Mutual Funds - Question 3
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What is the meaning of a mutual fund's expense ratio?

Detailed Solution for Test: Mutual Funds - Question 3
A mutual fund's expense ratio is the summation of its advisory fee or management fee and its administrative costs. This ratio represents the percentage of the fund's assets that are used to cover the fund's operating expenses. It includes fees such as management fees, administrative costs, and other expenses incurred by the fund.
Test: Mutual Funds - Question 4
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What is the advantage of investing in a mutual fund?
Detailed Solution for Test: Mutual Funds - Question 4
One of the advantages of investing in a mutual fund is diversification and professional management. Mutual funds invest in a diversified portfolio of securities across different industries and asset classes. This helps to spread the risk and minimize the impact of any individual investment. Additionally, mutual funds are managed by professionals who have expertise and experience in selecting and managing investments, which can potentially lead to better returns.
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What is the purpose of categorizing mutual funds into different types?
Detailed Solution for Test: Mutual Funds - Question 5
The purpose of categorizing mutual funds into different types is to provide a wide variety of investment options for investors. Different investors have different investment objectives and risk appetites. By categorizing mutual funds into different types, investors can choose the funds that align with their investment goals and preferences. This allows investors to have more control over their investment decisions and tailor their portfolios according to their needs.
Test: Mutual Funds - Question 6
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What is the difference between a front-end load and a back-end load in a mutual fund?
Detailed Solution for Test: Mutual Funds - Question 6
A front-end load is a fee assessed at the time of the initial purchase of mutual fund shares. It is deducted from the investor's investment amount. On the other hand, a back-end load is a fee assessed when selling mutual fund shares. It is deducted from the sale proceeds. The main difference is the timing of when the fee is assessed.
Test: Mutual Funds - Question 7
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What is the meaning of an equity mutual fund?
Detailed Solution for Test: Mutual Funds - Question 7
An equity mutual fund is a fund that invests primarily in stocks. These funds aim to provide capital appreciation over the medium to long term. The fund manager selects stocks of companies that are expected to grow in value, with the objective of generating higher returns for investors. Equity mutual funds carry a higher level of risk compared to other types of funds but also have the potential for higher returns.
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What is the purpose of a debt mutual fund?
Detailed Solution for Test: Mutual Funds - Question 8
The purpose of a debt mutual fund is to invest in fixed income securities such as bonds, government securities, and corporate debentures. These funds aim to provide a stable income to investors with low risk. Debt mutual funds are suitable for investors who prioritize income generation and capital preservation. While they may offer lower returns compared to equity funds, they also carry lower risk.
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What is the meaning of a balanced fund?
Detailed Solution for Test: Mutual Funds - Question 9
A balanced fund is a type of mutual fund that invests in a mix of equities and fixed income securities. The equity portion provides growth potential, while the fixed income portion provides stability in returns. The objective of a balanced fund is to provide investors with current income and the potential for long-term growth. This type of fund offers a balanced approach to investing, suitable for investors who want a combination of income and capital appreciation.
Test: Mutual Funds - Question 10
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What is the meaning of an index fund?
Detailed Solution for Test: Mutual Funds - Question 10
An index fund is a type of mutual fund that attempts to reproduce the performance of a specific index, such as the BSE Sensex or the NSE 50. The portfolio of an index fund consists of the same stocks that constitute the index, in the same proportion. The goal of an index fund is to match the returns of the index it tracks. This type of fund is passively managed and typically has lower expenses compared to actively managed funds.
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