#1
Which of the following is NOT a type of mutual fund?
Savings fund
ExplanationA savings fund is not a recognized type of mutual fund.
#2
What is the primary objective of a growth fund?
To maximize capital appreciation
ExplanationGrowth funds aim to achieve maximum capital appreciation.
#3
Which type of mutual fund typically invests in a mix of stocks, bonds, and other securities?
Balanced fund
ExplanationBalanced funds invest in a mix of stocks, bonds, and other securities.
#4
In mutual fund terminology, what does 'load' refer to?
The commission or fee paid when buying or selling shares
ExplanationLoad refers to the commission or fee incurred when buying or selling mutual fund shares.
#5
What does 'asset allocation' refer to in mutual fund management?
The distribution of fund investments across different asset classes
ExplanationAsset allocation refers to spreading fund investments across various asset classes.
#6
What does 'benchmark index' mean in the context of mutual funds?
A standard against which the fund's performance is compared
ExplanationBenchmark index serves as a standard for comparing fund performance.
#7
Which type of mutual fund invests primarily in fixed-income securities such as bonds?
Bond fund
ExplanationBond funds primarily invest in fixed-income securities like bonds.
#8
What does 'rebalancing' refer to in mutual fund investing?
Adjusting the portfolio to maintain desired asset allocation
ExplanationRebalancing involves adjusting the portfolio to maintain desired asset allocation.
#9
What is the Net Asset Value (NAV) of a mutual fund?
The price per share of the mutual fund
ExplanationNAV represents the price per share of the mutual fund.
#10
Which investment strategy aims to buy and hold a diversified portfolio of securities for the long term?
Buy and hold
ExplanationBuy and hold strategy involves long-term holding of a diversified portfolio.
#11
What does the expense ratio of a mutual fund represent?
The percentage of fund assets deducted annually for fund expenses
ExplanationExpense ratio represents the annual deduction percentage for fund expenses.
#12
What is an advantage of investing in an ETF (Exchange-Traded Fund) over a traditional mutual fund?
ETFs offer higher liquidity
ExplanationETFs provide greater liquidity compared to traditional mutual funds.
#13
Which investment strategy involves investing in securities that have performed poorly in the past, in anticipation of their future performance improvement?
Contrarian investing
ExplanationContrarian investing involves buying securities with poor past performance, expecting future improvement.
#14
Which of the following is true about a closed-end mutual fund?
It trades on an exchange like a stock
ExplanationClosed-end mutual funds trade on exchanges similar to stocks.
#15
What does 'reinvestment risk' refer to in mutual fund investing?
The risk of declining interest rates affecting future returns
ExplanationReinvestment risk pertains to decreased future returns due to declining interest rates.
#16
Which investment strategy involves investing in securities that are currently undervalued by the market?
Value investing
ExplanationValue investing involves buying undervalued securities.
#17
What is the role of a custodian in mutual fund operations?
To safeguard fund assets and handle settlements
ExplanationCustodians ensure safety of fund assets and manage settlements.
#18
Which of the following is a type of mutual fund fee charged to cover administrative and marketing expenses?
12b-1 fee
ExplanationThe 12b-1 fee covers administrative and marketing expenses of mutual funds.
#19
Which investment strategy focuses on investing in companies that consistently pay high dividends?
Income investing
ExplanationIncome investing targets companies with consistent high dividend payments.
#20
What is the primary advantage of investing in a passively managed index fund?
Lower expense ratios
ExplanationPassively managed index funds offer lower expense ratios.
#21
What is the 'turnover ratio' of a mutual fund?
The rate at which the fund's assets are bought and sold within a year
ExplanationTurnover ratio indicates the frequency of buying and selling fund assets within a year.
#22
What does 'systematic investment plan (SIP)' mean in the context of mutual funds?
Investing a fixed amount at regular intervals
ExplanationSIP involves investing fixed amounts at regular intervals.
#23
Which investment strategy involves selecting securities based on their past performance relative to their peers?
Momentum investing
ExplanationMomentum investing picks securities based on past relative performance.
#24
What does the Sharpe ratio measure?
Volatility-adjusted return
ExplanationThe Sharpe ratio measures the risk-adjusted return.
#25
What is the concept of 'alpha' in mutual fund performance evaluation?
The risk-adjusted return compared to a benchmark
ExplanationAlpha represents the risk-adjusted return relative to a benchmark.