Mutual Funds and Individual Investment Constraints

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Questions and Answers

What is one of the factors influencing the investment strategy of insurance companies?

  • Cash Reserve Ratio (CRR ratio)
  • Timing and amount of future claims (correct)
  • Interest rate spreads
  • Statutory Liquidity Ratio (SLR ratio)

Which type of funds are usually initiated by a non-refundable capital contribution and managed by trustees for specific purposes?

  • Endowment funds (correct)
  • Pension funds
  • Banks
  • Insurance companies

What is the main source of income for banks?

  • Cash Reserve Ratio (CRR ratio)
  • Statutory Liquidity Ratio (SLR ratio)
  • Premiums from policyholders
  • Interest rate spreads (correct)

What distinguishes assurance or endowment policies from term insurance policies?

<p>Higher premiums (D)</p> Signup and view all the answers

In the context of large organizations, which investor group typically forms a substantial portion of various financial instrument investors?

<p>Pension funds (A)</p> Signup and view all the answers

Why do individuals often prefer mutual funds over managing investments themselves?

<p>Individuals have limited knowledge of investment outlook and struggle to keep up with changes in the economic environment. (A)</p> Signup and view all the answers

How are professionals managing mutual funds compensated?

<p>By receiving remuneration linked to the performance of the funds. (B)</p> Signup and view all the answers

What is a key characteristic of mutual funds that distinguishes them from individual investment strategies?

<p>They pool investors' money and invest according to pre-specified parameters. (D)</p> Signup and view all the answers

Why are pension funds created by employers or employee unions?

<p>To manage the retirement funds of employees. (D)</p> Signup and view all the answers

In what way do mutual funds benefit individual investors in terms of profit distribution?

<p>Profits are distributed among individual investors according to their holdings in the fund. (D)</p> Signup and view all the answers

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