Explanation:

Suppose an investor has invested in a debt security that yields a return of 7 percent. Subsequently, yields in the market for similar securities rise to 8 percent. It stands to reason that the security, which was bought at 7 percent yield, is no longer such an attractive investment. It will therefore lose value.

Explanation:

The yield on Gilt (Govt. securities) is generally the lowest in the market for a given tenor. Since non-Government issuers can default, they tend to offer higher yields for the same tenor.

The difference between the yield on Gilt and the yield on a non-Government Debt security is called its credit spread.

Explanation:

The investor enjoys the profits as well as bears the losses of his investments in Mutual Funds.

Explanation:

Fundamental analysis is a study of the business and financial statements of a firm. It does not study the charts like the Candle-Stick charts.

Charts are studied by the Technical analysts.

Explanation:

The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation

ie. ( Return Earned – Risk free Return ) / Standard Deviation

= (8.3 – 5) / 0.6

= 3.3 / 0.6

= 5.5

Explanation:

Irrespective of the time of receipt of application, for all equity oriented funds and debt funds (except liquid funds) in respect of transaction of any amount, the applicable NAV will be NAV of the business day on which the funds are available for utilisation.

Explanation:

The application to SEBI for registration of a mutual fund is made by the Sponsor(s).

The Sponsors then appoints the Trustees.

The operations of the mutual fund trust are governed by a Trust Deed, which is executed between the sponsors and the trustees.

Explanation:

While empaneling with an AMC, the mutual fund distributor applicant signs a declaration which gives power to the AMC to terminate the empanelment at any time.

Explanation:

As per the SEBI Advertisement Code for Mutual Funds – No celebrities shall form part of the advertisement.

(AMFI can use celebrities but individual mutual funds cannot use celebrities)

Explanation:

As per the AMFI Code of Ethics for Mutual Funds :

Members shall in respect of transactions of purchase and sale of securities entered into with any of their associates or any significant unitholder :

1. Submit to the Board of Trustees details of such transactions, justifying its fairness to the scheme

2. Disclose to the unitholders details of the transaction in brief through annual and half yearly reports.

Explanation:

SEBI has facilitated buying and selling of the units of open-ended mutual funds through the stock exchanges. The low cost and deeper reach of the stock exchange network enable an increased level of participation of retail investors in mutual funds.

Mutual fund units can be bought and sold on stock exchange and they do not have a lock-in period except some funds like ELSS.

Explanation:

Risk Profilers usually revolve around investors answering a few questions, based on which the risk appetite score gets generated.

The risk profilers try to ascertain the risk appetite of the investor so that one does not sell mutual fund schemes that carry a higher risk than what the investor can handle.

Explanation:

The Income distribution cum capital withdrawal (dividend) pay-out option seems attractive for investors wanting a regular income. It should however be kept in mind that even in a mutual fund scheme with a monthly pay-out option, dividend declaration is a function of distributable surplus. If there is no surplus to distribute, dividend cannot be declared.

Therefore, the investor is not assured of dividend in the scheme even when there is a monthly dividend option.

Explanation:

For Non-resident investors, payment is made by the AMC in Rupees. In case the investment has been made on a repatriable basis, and the investor wishes to transfer the money abroad, the costs associated with converting the rupees into any foreign currency would be to the account of the investor.

Proceeds of investments made on a repatriable basis can be credited to an NRE or FCNR account, as required by the investor.

Explanation:

Mutual funds can charge additional TER if the new inflows are from beyond top 30 cities (subject to some conditions)

However, the additional TER on account of inflows from beyond the top 30 cities so charged shall be credited back to the scheme in case the said inflows are redeemed within a period of 1 year from the date of investment.

Explanation:

Liquidity Risk is one of the general risk factor involved in Mutual Fund investments.

The liquidity of investments made in the Scheme may be restricted by trading volumes, settlement periods and transfer procedures. Although the investment universe constitutes securities that will have high market liquidity, there is a possibility that market liquidity could get impacted on account of company/sector/general market-related events and there could be a price impact on account of portfolio rebalancing and/or liquidity demands on account of redemptions.

Explanation:

In Active Equity Funds the fund manager does a lot of buying / selling which result in higher transaction costs. Also a lot of research work goes into it. So the cost of fund management are higher.

Equity Index Funds or Passive Equity funds invest in a portfolio that mimics a market index. There is no selection risk in index funds because the fund manager has no role in creating the portfolio. For this reason, the costs that an index fund is allowed to charge is also lower since there are no research or other fund management expenses.

Explanation:

Statement of Additional Information (SAI), which has statutory information about the mutual fund or AMC, that is offering the scheme like the Constituents of the mutual fund, Rights of Unit-holders, Investment Valuation Norms, Rights of Unit-holders etc.

It does not contain information on scheme returns etc. This information is available in the Mutual Fund Fact Sheet.

Explanation:

One of the role and function of AMFI is : To undertake a nationwide investor awareness programme to promote proper understanding of the concept and working of mutual funds.

Thus, mutual fund distributors are not solely responsible for spreading investor awareness.

As per the AMFI Guidelines & Norms for Intermediaries (AGNI), the intermediary has a right of appeal to AMFI.

Explanation:

A Closed-ended mutual fund will not have a Re-opening date. They offer liquidity through its listing on a stock exchange. Investors who which to invest or exit can do it through a stock exchange broker.

Explanation:

Comparing the Expense Ratio of different schemes is imperative for investors looking for the best liquid mutual fund. These schemes more or less earn similar returns. Hence, a fund with a high expense ratio will significantly reduce the returns generated.

For example, suppose two funds deliver returns of 5% and 5.5%, respectively. Let’s say the expense ratio of the first fund is 0.2%, and the second fund is 0.8%. Therefore, the actual yield will be 4.8% and 4.7%. Hence, a fund with a lower expense ratio may be more profitable for an investor.

Explanation:

An independent financial advisor, a bank or a distribution company will sell mutual fund schemes of various mutual fund houses as per their clients requirements and other considerations.

However, an institutional sales team of an Asset Management Company will sell schemes only of the single mutual fund house which has appointed it.

Explanation:

AMC is expected to make a continuous effort to remind the investors through letters to claim their uncliamed amounts.

AMC can recover investment management and advisory fees on management of these unclaimed amounts, at a maximum rate of 0.50 percent per annum.

Explanation:

Average Holding Period = 12 (months) / Portfolio Turnover Ratio

Here the portfolio turnover ratio is 25 percent i.e. 25/100 = 0.25

Average Holding Period = 12 / 0.25 = 48 months = 4 Years

Explanation:

The points of acceptance for mutual fund transactions have time stamping machines with tamper-proof seal.

Opening the machine for repairs or maintenance is permitted only by vendors or nominated persons of the mutual fund. Such opening of the machine has to be properly documented and reported to the Trustees.

Explanation:

As experience has shown time and again, the top performers during one period may not necessarily remain as a top performer forever or near the other top performers. In such a case, simply buying into a scheme due to good returns in the recent past may not be a wise approach.

The mutual fund advertisements use the disclaimer: “Past performance may or may not be sustained in future”.

Explanation:

Updation of Scheme Documents—Regulatory provisions :

In case of change in fundamental attributes in terms of Regulation, an addendum to the existing SID shall be issued and displayed on AMC website immediately.

In case of other changes in SID, the AMC shall be required to issue an addendum and display the same on its website immediately.

Explanation:

Arbitrage Fund is nn open-ended scheme investing in arbitrage opportunities.

Arbitrage funds work on the mispricing of equity shares in the spot and futures market. The fund manager simultaneously buys shares in the cash market and sells it in futures or derivatives markets. The difference in the cost price and the selling price is the return you earn.

Their risk level is comparable with that of a pure debt fund. The returns from an Arbitrage fund is comparable to a debt fund. There is no capital appreciation.

Explanation:

Sectoral fund is an open-ended equity scheme investing in a specific sector such as bank; power etc.

The minimum investment in equity and equity related instruments of a particular sector/ theme shall be 80 percent of total assets.

Explanation:

The familiarity bias is when investors tend to invest in what they know and are comfortable with.

An individual tends to prefer the familiar over the novel, as the popular proverb goes, “A known devil is better than an unknown angel.” This leads an investor to concentrate the investments in what is familiar, which at times prevents one from exploring better opportunities, as well as from a meaningful diversification. As a result, investors are not diversified across multiple sectors and types of investments.

Explanation:

A major role of AMFI involves the registration of mutual fund distributors, by allotting them AMFI Registration Number (ARN), which is mandatory for becoming a mutual fund distributor.

Explanation:

The investors have no control, over the investment management of the mutual fund. It is in this context that SEBI has laid down regulations pertaining to investment universe, restrictions and portfolio diversification for investment by mutual fund schemes.

Such regulations intend to control the risks taken by the mutual fund managers.

Explanation:

Company fixed deposits are considered to risky when compared to bank fixed deposits due to the credit risk. A company is a private entity and may default in payment of interest and principal amount. A bank is much more safer than a private company and so its fixed deposits are more safer to invest.

Explanation:

As per the procedure for getting empaneled as a mutual fund distributor with AMC, one of the requirement is :

The applicant needs to sign a declaration, which provides for the following –

Commitment to abide by instructions given, as also statutory codes, guidelines and circulars.

Explanation:

Mutual funds provide investors the facility to register multiple bank accounts to facilitate receiving the redemption, dividends and any other payouts from the fund. An individual investor can register up to five bank accounts. One of the accounts is designated as the default account, and unless otherwise specified all credits are made to this account by the mutual fund.

Investors can change the default bank account at any time by instructing the AMC to do so.

Explanation:

The mutual fund trust is created by one or more Sponsors, who are the main persons behind the mutual fund business.

The sponsor is the promoter of the mutual fund. The sponsor brings in capital and creates a mutual fund trust and sets up the AMC.

The sponsor makes an application for registration of the mutual fund and contributes at least 40% of the net worth of the AMC. In other words, every MF needs a sponsor before it can commence operations.

Explanation:

Different investors have different financial goals at different age levels. In fact, investors in the same age group may also have different goals. Their financial situations may also differ.

At the same time, many of the financial goals may pertain to the whole families and not just an individual. In such cases, it may not be prudent to categorize investors on the basis of age alone.

Explanation:

Mutual funds usually do not accept cash. Small investors, who may not be taxpayers and may not have PAN/bank accounts, such as farmers, small traders/businessmen/workers are allowed cash transactions for the purchase of units in mutual funds to the extent of Rs. 50,000/-per investor, per mutual fund, per financial year.

This facility is available only for resident individuals, sole proprietorships and minors investing through their guardians.

PIO is not among the eligible investors.

Explanation:

As per the rights and responsibilities of Trustees –

The trustees shall not permit a change in the fundamental attributes of the scheme, the trust or fees and expenses or any other change that will affect the interests of the unitholders unless written communication is sent to each unitholder, a notice is given in the newspaper with national circulation and the unitholders are given the option to exit at NAV without paying an exit load.

Explanation:

The applicable redemption guidelines for mutual funds are set out in SEBI (Mutual Funds) Regulations, 1996 and as amended from time to time.

Explanation:

Trail commission is always calculated on the current NAV.

The current total value of investments in the above question is Rs. 28 X 5000 units = Rs. 1,40.000

Trail commission for the day = Current value X trail commission rate p.a./365

= 1,40,000 X 1% / 365 days

= 1400 / 365 = Rs. 3.8356

Explanation:

Every mutual fund scheme/plan should have a minimum of 20 investors and no single investor shall account for more than 25 percent of the corpus of the Scheme/Plan(s).

Explanation:

In a Systematic Transfer Plan (STP), the amount that is withdrawn from a scheme (called the source scheme) is re-invested in some other scheme (called the target scheme) of the same mutual fund.

Explanation:

A Growth fund is a mutual fund which invests in the stocks and aims at achieving capital appreciation through the investment of funds in growth stocks.

Explanation:

Fund management is the most critical function in an Asset Management Company. The main function of this team is to invest the investors’ money in line with the stated objective of the scheme and to manage the same effectively.

Explanation:

A close-ended scheme offers liquidity through its listing on a stock exchange.

Typically, towards the maturity of the scheme, the market price converges towards the NAV.

Explanation:

The appointment of the AMC for the Mutual Fund can be terminated by majority of the Directors of the Trustee Board or by 75 percent of the Unitholders of the Scheme.

Explanation:

Jensen’s Alpha is used to determine the abnormal return of a security or portfolio of securities over the theoretical expected return.

It is a risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio’s or investment’s beta and the average market return.

Explanation:

AMC(s) can charge GST, as per applicable Taxation Laws, to the schemes within the limits prescribed under SEBI (Mutual Fund) Regulations.

– GST on fees paid on investment management and advisory fees shall be charged to the scheme in addition to the overall limits specified as per the Total Expense Ratio (TER) provisions.
– The commission payable to the distributors of mutual funds may be subject to GST, as applicable in case of the ARN holder. Such tax cannot be charged to the scheme.

Explanation:

The appointment of Registrar and Transfer Agent (RTA) is done by the AMC. However, It is not compulsory to appoint an RTA. The AMC can choose to handle this activity in-house.

AMC cannot be a custodian or a broker. An independent custodian ensures that the securities are indeed held in the scheme for the benefit of investors, which is an important control aspect.

Explanation:

In a fraction – Eg. 21 / 38 , the number above the line (21) is called the Numerator and the number below the line (the bottom number 38) is called the Denominator

The formula for Sharpe Ratio is : ( Return Earned – Risk free Return ) / Standard Deviation

Here the Numerator is ‘Return Earned – Risk free Return’ and the Denominator is ‘Standard Deviation’

So the Denominator is the Standard Deviation which is given as 0.75

Explanation:

Banks, NBFCs and other financiers often lend money against the pledge of Units by the Unitholder.

Once units are pledged, the Unit-holder/s cannot sell or switch out the pledged units, until the pledgee gives a written no-objection to release the pledge.

Explanation:

Transmission is the process of transferring units to the person entitled to receive them in the event of the death of the unitholder.

In case of joint holding, if the first holder passes away, the second holder is substituted as the first holder.

Explanation:

Explanation:

Explanation:

If there is an Entry load on a mutual fund scheme then while calculating the scheme returns, the initial value of the net asset value (NAV) is taken as NAV PLUS entry load as the purchase value increases due to entry load.

If there is an exit load on a scheme then while calculating the scheme returns, the later value of the Net Asset Value (NAV) is taken as NAV minus the exit load as the sale value decreases due to the exit load.

Explanation:

Short-selling is the sale of shares or securities that the seller does not own at the time of trading. Instead, he borrows it from someone who already owns it. Later, the short seller buys back the stock/security he shorted and returns the stock/security to the lender to close out the loan. The inherent risks are Counterparty risk and liquidity risk of the stock/security being borrowed. The security being short sold might be illiquid or become illiquid and covering of the security might occur at a much higher price level than anticipated, leading to losses.

Securities Lending is lending of securities through an approved intermediary to a borrower under an agreement for a specified period with the condition that the borrower will return equivalent securities of the same type or class at the end of the specified period along with the corporate benefits accruing on the securities borrowed. There are risks inherent in securities lending, including the risk of failure of the other party. Such failure can result in a possible loss of rights to the collateral, the inability of the approved intermediary to return the securities deposited by the lender and the possible loss of corporate benefits accruing thereon.

Explanation:

Credit card is not accepted because it may not be backed up by a bank account.

Explanation:

Beta measures the fluctuation in periodic returns in a scheme, as compared to fluctuation in periodic returns of a diversified stock index (representing the market) over the same period.

The diversified stock index, by definition, has a Beta of 1. Companies or schemes, whose beta is more than 1, are seen as riskier than the market. Beta less than 1 is indicative of a company or scheme that is less risky than the market.

An investment with a beta of 0.8 will move 8 percent when markets move by 10 percent. This applies to increase as well as fall in values. An investment with a beta of 1.2 will move by 12 percent both on the upside and downside when markets move (up/down) by 10 percent.

Beta as a measure of risk is relevant only for equity schemes.

Explanation:

To ensure fair treatment to all investors in case of a credit event and to deal with the liquidity risk, in December 2018, SEBI permitted creation of segregated portfolio of debt and money market instruments by mutual funds schemes. “Segregated portfolio” means a portfolio, comprising of debt or money market instrument affected by a credit event, that has been segregated in a mutual fund scheme.

The Net Asset Value (NAV) of the segregated portfolio shall be declared on a daily basis.

Explanation:

Experience has shown time and again, the top performers during one period may not necessarily remain as a top performer forever or near the other top performers and vice versa. In such a case, simply buying into a scheme due to good returns in the recent past may not be a wise approach.

In order to evaluate various mutual fund schemes, it is important to consider the scheme’s investment objective and strategy. Both of these can help one understand what to expect from the scheme. The suitability of a mutual fund scheme to an investor depends upon the features of the scheme and matching it to the needs of the investor from the investment. Therefore, one cannot ignore the investment objectives of the scheme.

Explanation:

Indexation means that the cost of acquisition or the cost of purchase is adjusted upwards to reflect the impact of inflation.

Explanation:

In addition to the regular limits, the following expenses may be charged to the scheme:

i. Brokerage and transaction cost which are incurred for the purpose of execution of trade up to 0.12 percent of trade value in case of cash market transactions and 0.05 percent of trade value in case of derivatives transactions.

ii. If the new inflows from beyond top 30 cities are at least a) 30 percent of gross new inflows in the scheme or b) 15 percent of the average assets under management (year to date) of the scheme, whichever is higher, funds can charge the additional expense of up to 0.30 percent of the daily net assets of the scheme.

Explanation:

A ‘Fund Of Funds’ (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. An FOF Scheme of a primarily invests in the units of another Mutual Fund scheme.

Explanation:

A securitization transaction involves sale of receivables by the originator (a commercial bank, non-banking finance company, housing finance company, or a manufacturing/service company) to a Special Purpose Vehicle (SPV), typically set up in the form of a trust. Investors are issued rated Pass Through Certificates (PTCs), the proceeds of which are paid as consideration to the originator. (RBI will not be an originator)

In this manner, the originator, by selling his loan receivables to an SPV, receives consideration from investors much before the maturity of the underlying loans.

Explanation:

A Multi-Cap fund invests in Large Cap, Mid Cap and Small Cap stocks as per proportions stipuated by SEBI.

The Nifty500 index represents top 100 large cap companies, top 150 Mid-cap companies and top 150 small cap companies. Therefore, it can be a good benchmark for a Multi-Cap fund.

The BSE Sesex has 30 large cap stocks from various sectors and it can be good benchmark for a large cap fund and not for a multi cap fund.

Explanation:

While an investor is expected to read all the scheme related documents, circulation of the same along with the application forms is too difficult and costly, especially if the printed forms are to be distributed.

In order to ensure the investor gets access to sufficient information in spite of such a constraint, a Key Information Memorandum (KIM) is mandatorily circulated along with the application form.

Explanation:

Each AMC is required to publish a scheme performance dashboard on its website, and update it on a regular basis. The scheme performance data is also available on the AMFI website

AMFI website (www.amfiindia.com) carries the performance data of all the mutual fund schemes.This is an exhaustive resource and one can access the same for various different periods, and fund categories.

Explanation:

Within the SID, there is an important section on fundamental attributes of a scheme with following parameters :

1. Type of a scheme

2. Investment Objective

3. Terms of Issue

Exit loads do not form a part of the fundamental attributes of a mutual fund scheme.

Explanation:

The basic meaning of asset allocation is to allocate an investor’s money across asset categories in order to achieve some objective. In reality, most investors’ portfolios would have the money allocated across various asset categories. However, in many such cases, the same may be done without any process or rationale behind it.

Asset Allocation is a process of allocating money across various asset categories in line with a stated objective. The underlined words are very important. First, it is a “process”, which always involves several steps, and those steps should not be ignored or skipped. Second, the whole idea behind asset allocation is to achieve some objective. Whichever approach one selects, one must go through the steps of the process in order to achieve the objective.

Explanation:

The Foreign Account Tax Compliance Act (FATCA) is a US law that aims to combat tax evasion by US persons opening accounts offshore. It enhances due diligence and information reporting requirements for both individual and entity accounts. On July 9, 2015, India signed Inter-Governmental Agreement (IGA) with the USA for implementation of FATCA.

This is applicable to all financial institutions including mutual funds.

To comply with the requirements of the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) provisions, financial institutions, including mutual funds, are required to undertake a due diligence process to identify foreign reportable accounts and collect such information as required under the said provisions and report the same to the US Internal Revenue Service/any other foreign government or to the Indian Tax Authorities for onward transmission to the concerned foreign authorities.

Explanation:

Interest rate risk is the risk that an investment’s value will change as a result of a change in interest rates.

The interest rate risk varies for bonds with different maturities. Those with longer maturity would witness higher price fluctuations in comparison to those with shorter maturities.

Similarly short term debt funds will have lower interest rate risk when compared to longer term debt funds.

In the above question, Liquid funds have the shortest duration and so will have less adverse effect of interest rate risk when compared to Money market funds and Medium term bond funds.

Explanation:

Disclosure of the valuation policy and procedures approved by the Board of the AMC shall be made in Statement of Additional Information, on the website of the AMC to ensure transparency of valuation norms to be adopted by asset management company.

The responsibility of true and fairness of valuation and correct NAV shall be of the Asset Management Company, irrespective of disclosure of the approved valuation policies and procedures.

Explanation:

1. A systematic transaction (like SIP etc) can be stopped.

2. Assuming the scheme is profitable, the re-purchase ensures that some of the profits are being regularly encashed by the investor.

Explanation:

Liquid funds are least risky as they invest in high quality debt instruements.

Corporate Bond Funds are little more risky as they predominantly invest in AA+ and above rated corporate bonds.

Credit Risk Funds are much more risky as they invest in below highest rated corporate bonds. The minimum investment in corporate bonds shall be 65 percent of total assets only in AA (excludes AA+ rated corporate bonds) and below rated corporate bonds.

Explanation:

Employees of Asset Management Companies (AMCs) cannot become mutual fund distributors.

Explanation:

rail commission is always calculated on the current NAV.

The current total value of investments in the above question is Rs. 43 X 5000 units = Rs. 2,15.000

Trail commission for the day = Current value X trail commission rate p.a./365

= 215000 X 1% / 365 days

= 2150 / 365 = Rs. 5.8904

Explanation:

As per the SEBI rules of valuation for equity shares : The securities shall be valued at the last quoted closing price on the stock exchange.

(When the securities are traded on more than one recognised stock exchange, the securities shall be valued at the last quoted closing price on the stock exchange where the security is principally traded. It would be left to the asset management company to select the appropriate stock exchange)

Explanation:

Every mutual fund scheme/plan should have a minimum of 20 investors and no single investor shall account for more than 25 percent of the corpus of the Scheme/Plan(s).

Explanation:

Transmission is the process of transferring units to the person entitled to receive it in the event of the death of the unit holder.

In case of transmission, before the transfer is effected, the mutual fund will insist on the KYC documentation from the nominee, death certificate of the deceased unit-holder, and an indemnity against future problems for the mutual fund arising out of the transfer.

Explanation:

Fixed deposits usually give a low rate of return and when adjusted against inflation, the return can sometimes be very low or even negative. This will not help in building her retirement corpus.

Smita is a young investor and has plenty of time in her hand. So she should invest in growth stocks / equity mutual funds rather than fixed deposits.

Explanation:

Once the first holder’s PAN is validated for KYC, the address provided in the KYC form will override the information provided in the application form.

Explanation:

1) Applications for non-financial transactions like change of address are stamped. However, here stamping of time is not relevant; the data stamping is pertinent.

2) Applications are sequentially numbered from the first number of the machine to the last number of the machine, before a new numbering cycle is started for the machine. The daily time stamping of application does not start with serial 1.

3) The points of acceptance have time stamping machines with tamper-proof seal. Opening the machine for repairs or maintenance is permitted only by vendors or nominated persons of the mutual fund. Such opening of the machine has to be properly documented and reported to the Trustees.

Explanation:

Dormant means not-active.

Investors who have not transacted during the previous 6 months in a mutual fund are considered dormant investors.

Explanation:

Investors can choose to change their distributor or opt for direct investing.

This needs to be done through a written request by the investor. In such cases, AMCs will need to comply,
without insisting on any kind of ‘No Objection Certificate’ from the existing distributor.

Explanation:

As per the Income Tax Act –

– Short term capital loss is to be set off against short term capital gain or long term capital gain.
– Long term capital loss can only be set off against long term capital gain.
– Capital loss, short term or long term, cannot be set off against any other head of income (e.g. salaries).

Explanation:

Units are allotted as per the current NAV.

The amount invested divided by the NAV will give the units allotted.

Rs 30,000 / 76.45 = 392.41

Explanation:

To comply with the requirements of Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) provisions, financial institutions, including mutual funds, are required to undertake due diligence process to identify foreign reportable accounts and collect such information as required under the said provisions and report the same to the US Internal Revenue Service/any other foreign government or to the Indian Govt / Tax Authorities for onward transmission to the concerned foreign authorities.

Explanation:

All of the above can invest in Indian mutual funds.

Explanation:

The expenses on software development is not for a particular scheme but for the AMC as a whole and cannot be charged to a particular scheme.

Explanation:

The trustees shall ensure that all transactions entered into by the AMC are in compliance with the regulations and the scheme’s objectives and intent.

Explanation:

NAV is to be calculated upto 4 decimal places in the case of index funds, liquid funds and other debt funds.

Accounts of the mutual fund schemes need to be maintained independent of the accounts of the AMC. The auditor appointed to audit the mutual fund scheme accounts needs to be different from the auditor of the AMC.

Explanation:

Both taxes and loads reduce investment returns. Therefore, it is important for the distributor to consider these two aspects during repurchases/redemptions. This means that when there is a need to withdraw money from a scheme, the distributor must assess the implications of capital gains tax and exit loads.

When an investor wants to redeem from a scheme, the distributor must suggest redemption from the scheme with the minimum exit load.

Explanation:

SEBI guidelines stipulate dividends can be paid out of distributable reserves.

Mark-to-market gains are on paper – they are not realised. They will be realized when those investments are sold. So these cannot be included in distributable reserves

Also Valuation gains are ignored. But valuation losses need to be adjusted against the profits.

This conservative approach to calculating distributable reserves ensures that dividend is paid out of real and realized profits, after providing for all possible losses.

Explanation:

One of the most popular documents from the mutual fund is the monthly Fund Factsheet. This document is extensively used by investors, fund distributors, fund rating agencies, research analysts, media and others to access information about the various schemes of the mutual fund.

Explanation:

The (FATCA) is a US law that aims to combat tax evasion by US persons opening accounts offshore. It enhances due diligence and information reporting requirements for both individual and entity accounts. On July 9, 2015, India signed Inter-Governmental Agreement (IGA) with the USA for implementation of FATCA.

This is applicable to all financial institutions including mutual funds.

Explanation:

Sectoral fund is an open-ended equity scheme investing in a specific sector such as bank; power etc.

The minimum investment in equity and equity related instruments of a particular sector/ theme shall be 80 percent of total assets.

Explanation:

Liquid Fund is an open-ended liquid scheme whose investment is into debt and money market securities with a maturity of up to 91 days only.

An investor seeking the lowest risk ought to go for a liquid scheme. However, the returns in such instruments are low. These schemes are suitable for investors looking for a product to park their funds for very short periods (up to 91 days).

Explanation:

As per the AMFI Code of Ethics for Mutual Funds :

Members shall in respect of transactions of purchase and sale of securities entered into with any of their associates or any significant unitholder :

1. Submit to the Board of Trustees details of such transactions, justifying its fairness to the scheme

2. Disclose to the unitholders details of the transaction in brief through annual and half yearly reports

Explanation:

Mutual funds can charge additional TER if the new inflows are from beyond top 30 cities (subject to some conditions).

However, the additional TER on account of inflows from beyond the top 30 cities so charged shall be credited back to the scheme in case the said inflows are redeemed within a period of 1 year from the date of investment.