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Mutual Fund Basics Quiz

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Questions and Answers

What is a mutual fund?

A direct investment in stocks and bonds by individual investors

A collective investment vehicle that pools money from multiple investors and invests in various financial instruments (correct)

A government-regulated savings account for long-term investments

A type of insurance policy that guarantees returns on investment

How are the income and gains generated from a mutual fund scheme distributed?

Based on the amount of initial investment by each investor

Equally amongst the investors regardless of expenses and levies

Proportionately amongst the investors after deducting applicable expenses and levies (correct)

Only to the fund managers as part of their compensation

In what form are mutual funds established in India?

In the form of a Trust under Indian Trust Act, 1882 (correct)

As government entities under the Ministry of Finance

As private partnerships under SEBI regulations

As publicly traded companies on the stock exchange

Who manages the investments in a mutual fund?

<p>Professional fund managers</p> Signup and view all the answers

What is the purpose of calculating a scheme’s “Net Asset Value” or NAV?

<p>To distribute income/gains proportionately amongst the investors</p> Signup and view all the answers

Study Notes

Mutual Funds

A mutual fund is a type of investment vehicle that pools money from many investors to invest in a variety of assets, such as stocks, bonds, or commodities.

Distribution of Income and Gains

Income and gains generated from a mutual fund scheme are distributed to the unit holders in proportion to the number of units held by them.

Establishment of Mutual Funds in India

Mutual funds in India are established in the form of a trust, which is a fiduciary relationship between the mutual fund and its unit holders.

Investment Management

Investments in a mutual fund are managed by a professional fund manager, who is responsible for making investment decisions on behalf of the unit holders.

Net Asset Value (NAV)

The purpose of calculating a scheme's Net Asset Value (NAV) is to determine the value of each unit of the mutual fund, which is the total value of the scheme's assets minus its liabilities, divided by the total number of outstanding units.

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Description

Test your knowledge of mutual funds with this quiz. Explore the basics of mutual fund investment, including how they collect and invest money, the role of professional fund managers, and the types of securities they typically invest in.