Why a retail investor is recommended to invest through a mutual fund in a stock exchange?<br>1. Mutual funds invest funds in a diversified portfolio of securities, thus reducing the risk of the investor.<br>2. Mutual funds are managed by financial experts.<br>3. Mutual funds promise high returns to the investors of the fund.

Which of the following are the different functions that are performed by the financial markets?
1. Determination of the prices where financial markets help in price discovery of various financial instruments.
2. Mobilization of the funds
3. Providing an opportunity to different investors to buy or sell their respective financial instrument at the fair value that is prevailing in market.
4. Providing the various types of information to traders that help in decision making.
5. The sharing of the risk with investors.

A

2, 3 and 5

B

1, 2 and 3

C

3 and 4

D

1, 2, 3, 4 and 5

What is a mutual fund?
1. A type of collective investment scheme that pools money from many investors and invests it in stocks, bonds or other money market instruments.
2. It is a subsidiary of a bank or financial company created specially to raise money to be invested in a particular industry such as housing, infrastructure, etc.
3. When several banks and financial companies come together and create a common pool of money to fund mega infrastructural project like bridges, roads, power plants, etc., the common pool is known as mutual fund.

A

Only 3

B

All 1, 2 and 3

C

Only 1

D

Only 2

Risk on a stock portfolio which cannot be eliminated or reduced by placing it in diversified portfolio is classified as

A

diversifiable risk

B

market risk

C

stock risk

D

portfolio risk

Risk on a stock portfolio which can be reduced by placing it in diversified portfolio is classified as

A

stock risk

B

portfolio risk

C

diversifiable risk

D

market risk

Consider the following statements.
1. Foreign institutional investors have been allowed to invest in mutual funds.
2. The main objective of SEBI is to protect the investors.
3. Private placement is the route, through which promoter's contribution is mobilised by a public company.
4. RBI lays down the guidelines governing the capital market operation.
Which of the statement(s) given above is/are correct?

A

Both 1 and 2

B

2, 3 and 4

C

1, 2 and 3

D

1, 3 and 4

Directions : In each of the following questions a statement is given, followed by two conclusions. Give answer :

Statements : Our securities investments carry market risk. Consult your investment advisor or agent before investing.

Conclusions :
I. One should not invest in securities.
II. The investment advisor calculates the market risk with certainty.

A

Only conclusion I follows

B

Only conclusion II follows

C

Either I or II follows

D

Neither I nor II follows

E

Both I and II follow

A. stocks, bonds and short-term money market instruments, B. that pools money from many investors and invests in,C. is a professionally managed collective investment scheme, D. a mutual fund, considered a moderately risk-free investment tool,

A

DCBA

B

ACBD

C

BDAC

D

ABCD

Stock with large amount of contribution of risk in a diversified portfolio is represented by

A

high beta and standard deviation

B

high beta, low standard deviation

C

low beta, low standard deviation

D

low beta, low variance

Consider the following statements.
1. UTI is established by an Act of Parliament in 1964. So, UTI does not come under the SEBI regulations for mutual funds.
2. Mutual fund organisations can invest their mobilised funds abroad.
Which of the statement(s) given above is/are correct?

A

Only 1

B

Only 2

C

Both 1 and 2

D

Neither 1 nor 2

Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are______________.

A

perfectly positively correlated with each other

B

perfectly independent of each other

C

perfectly negatively correlated with each other

D

of the same category, eg blue chips