Explanation:

Retirement Phase – This is the stage when the investor needs the funds that have been accumulated over time. Hence, investors in this stage would move the funds to asset classes that meet their need for easy access to funds or regular periodic income as the case may be. So the investor will invest more in debt/liquid funds and very less in equity funds.

Explanation:

Thematic funds invest in line with an investment theme. For example, an infrastructure thematic fund might invest in shares of companies that are into infrastructure construction plus in toll-collection, cement, steel, telecom, power, etc. The investment is thus more broad-based than a sector fund. Sector funds invest in only a specific sector. For example, a banking sector fund will invest in only shares of banking companies.

Explanation:

The NAV that is applicable to a transaction depends, among other things, on the day and time at which the transaction request was received at the official point of acceptance. It is therefore very critical to record the time at which a transaction was received and use this information to determine the applicable NAV for a transaction. Time stamping is the process by which a stamp is put with details like date and exact time of receipt etc. on the transaction form.

Explanation:

The auditor appointed to audit the scheme accounts needs to be different from the auditor of the AMC. While the scheme auditor is appointed by the Trustees, the AMC auditor is appointed by the AMC.

Explanation:

Short-term debt funds help earn higher interest income in a rising interest rate scenario. (Bonds are essentially loans. If prevailing interest rates on loans, including bonds, are rising, bond investors tend to demand higher-yielding bonds to make more money on their bond investments). Long-term debt funds help investors earn higher returns from capital gains in falling interest rate scenarios.

Explanation:

The internet gave an opportunity to mutual funds to establish direct contact with investors. Investors can now access the website of the mutual fund and deal directly with the fund.

Explanation:

Most investors are either not organized, or lack the ability to make the calculations required for financial planning. A financial planner’s service is therefore invaluable in helping people realize their needs and aspirations.

Explanation:

Higher fund management does not mean better performance. Also some time passive funds like index funds can give better returns than active funds due to the fund managers’ wrong analysis.

Explanation:

In situations of ‘Sudden Wealth’, it is advisable to initially block the money by investing in a liquid scheme. An STP (Systematic Transfer Plan) from the liquid schemes into equity schemes will help the long-term wealth creation process. One should not invest 100% of the amount in equities in one go.

Explanation:

Scheme Information Document (SID), Statement of Additional Information (SAI) and Key Information Memorandum (KIM) are part of the Offer Documents. These give detailed information about the mutual fund scheme.

Explanation:

Mr. A may need funds for his business anytime so will allocate more amount to liquid funds. Mr. B has a good high-paying job, so he has a regular flow of money in the form of salary. He will generally have no liquidity problems so will invest less in liquid funds and more in growth funds.

Explanation:

Agents receive commissions on the amount mobilized by them.

Explanation:

Vide SEBI circular dated September 17, 2020, it was decided that with respect to purchase of units of MF schemes – both Debt and Equity (except liquid and overnight schemes), closing NAV of the day shall be applicable, on which the funds are available for utilization irrespective of the size and time of receipt of such application.

Until now, investors who gave a cheque for below Rs 2,00,000 got the same day’s NAV, while those putting more got the NAV of the day when the cheque was realised.

Explanation:

The higher the capital base, the better the ability to financially take the downsides that come with risk. For eg – A person with a capital of Rs 1 crore can take more risks than a person with Rs 10,000.

Explanation:

The decision on the stocks to invest in is a closed-door procedure and is decided by the fund managers in association with the research and analysis team.

Explanation:

Authorisation will be required from the board for the institution to invest. This is typically in the form of a Board Resolution.

Explanation:

Gilt schemes, which invest in only long term government securities, have a higher price risk because their NAV can fluctuate a lot more, on account of changes in yield in the market. Greater the proportion of longer maturity securities in the portfolio, higher would be the fluctuation in NAV.

Explanation:

Stock Exchanges trading facility for MFs is essentially an order routing system between the investors and the AMC, the exchanges do not offer Settlement Guarantee. Responsibility for settlement is that of the AMC.

Explanation:

Mutual Funds employ professional investment experts to manage the money of investors by investing in suitable stocks/debt etc.

Explanation:

Sector funds suffer from concentration risk – the entire exposure is to a single sector. If that sector does poorly, then the scheme returns are seriously affected. Sector funds are considered to carry the highest risk among the equity mutual funds.

Explanation:

Tactical Asset Allocation is the decision that comes out of calls on the likely behaviour of the market. It is suitable only for seasoned investors operating with large investible surpluses.

Explanation:

The only way to sell a Close Ended fund before the fund closing date is by selling it on the stock exchange where it is traded. Prices on the stock exchange for a fund can be higher or lower or the same depending on the demand/supply/liquidity etc.

Explanation:

Churning means frequent buying and selling. Encouraging over-transacting and churning of Mutual Fund investments to earn higher commissions by MF agents is a bad practice.

Explanation:

A comprehensive financial plan calls for significantly more time commitment on the part of both the investor and the financial planner. The comprehensive financial plan captures the estimated inflows from various sources, and estimated outflows for various financial goals, including post-retirement living expenses. The plan can go several decades into the future.

Explanation:

The formula for calculating Net Asset Value –

NAV = (Current value of investments held + Income accrued + Current assets – Current liabilities – Accrued expenses / No. of outstanding units

So when the current value of the investment held (ie. the market value of the portfolio) changes, the NAV will also change.

Explanation:

The Mutual Funds industry in India is in the process of getting an SRO to oversee its distributors (AMFI is not an SRO).

Explanation:

Junk bonds are a type of bond that carries a higher risk of default. The issuer of such bonds may not have the adequate cash flow to pay regular interest or repay the principal amount to the bondholders at the time of maturity. The bonds issued by financially struggling companies are termed junk bonds but they pay higher returns to make them attractive to investors.

Explanation:

Section I of the SAI gives complete details of the constituents of the mutual fund–Sponsors, AMC and Trustee Company, of service providers {Custodian, Registrar & Transfer Agent, Statutory Auditor, Fund Accountant (if outsourced) and Collecting Bankers}. This includes their experience, condensed financial information (for schemes launched in the last 3 financial years), key personnel, rights and obligations, and other information the investor may require to evaluate the investment.

Explanation: 

Conservative Hybrid Fund is an open-ended hybrid scheme investing predominantly in debt instruments. Investment in debt instruments shall be between 75 percent and 90 percent of total assets while investment in equity and equity instruments shall be between 10 percent and 25 percent of total assets.

Explanation:

If the transactions are taking place at Rs 10 instead of the current NAV of Rs. 8, the new investors will stand to lose as they will have to pay a higher price to buy the units. The existing investors will be at an advantage as they can sell their units at a higher price of Rs 10 instead of Rs 8.

Explanation:

When an investor needs money in the short term, he should invest in debt funds like liquid funds, money market funds, overnight fund etc. where he can withdraw money without any risk of capital loss. He should not invest in an Index fund as its an equity fund and there can be possibility of losses in the short term due to stock market fluctuations.

Explanation: 

Units in a mutual fund scheme are offered to investors for the first time by a New Fund Offer (NFO). The following are a few key steps leading to the NFO :

1. AMC decides on a scheme to take to the market. This is decided based on inputs from the Chief Investment Officer (CIO) and the Chief Marketing Officer (CMO).

2. AMC prepares the Scheme Information Document (SID) for the NFO. This needs to be approved by the Trustees and the Board of Directors (BoD) of the AMC.

3. The documents are then filed with SEBI.

4. The AMC decides on a suitable timetable for the issue. launches its advertising and public relations campaigns etc.

5. The Scheme Documents and Application Forms are distributed to market intermediaries and circulated in the market so that investors can apply in the NFO.

Explanation:

Investment time horizon : As against the investor’s age, one should consider the time horizon to the respective financial goal for which one is investing. Longer the horizon to the goal, the ability to take risks is higher, whereas one may avoid risks when the goal is shortly.

 Explanation:

SEBI guidelines stipulate those dividends can be paid out of distributable reserves. In the calculation of distributable reserves:

– All the profits earned (based on the accrual of income and expenses as detailed above) are treated as available for distribution.

– Valuation gains are ignored. However valuation losses need to be adjusted against the profits.

– That portion of the sale price on new units, which is attributable to valuation gains, is not available as a distributable reserve. Since the investments in the portfolio are not yet sold, the gains in them are on paper – they are not realised. They will be realized when those investments are sold.

Explanation:

In a Re-investment of Income Distribution cum capital withdrawal plan, the NAV declines to the extent of dividend. The resulting NAV is called ex-dividend NAV. However, the investor does not receive the dividend in his bank account; the amount is re-invested in the same scheme and additional units are allotted to the investor. The reinvestment happens at the ex-dividend NAV. The amount invested in the fund remains the same. Only the units increase and NAV decreases. Therefore the growth is the same for the Growth Option and Income Distribution cum Capital Withdrawal Re-investment option.

Explanation:

If the wrong ARN code is mentioned in the application form, then the application will be processed as a Regular Plan. However, the AMC will contact the investor/distributor for the right ARN code within 30 calendar days of the receipt of the application form. If the error is not rectified within these 30 days, the application will be reprocessed as a direct application without charging any exit load.

Explanation:

Close-ended Schemes have an NFO Open Date and an NFO Close Date. But, they do not have a Scheme Re-opening Date, because the scheme does not sell or re-purchase units. Whatever sale-purchase of units takes place is between the investors on the stock exchange. Since the post-NFO sale and purchase of units happen to or from counter-party in the stock exchange–and not to or from the scheme–the unit capital of the scheme remains stable or fixed (The number of units issued by a scheme multiplied by its face value (Rs. 10) is the capital of the scheme–it’s Unit Capital) (In an Open-End scheme, the ongoing entry and exit of investors imply that the unit capital in an open-ended fund would keep changing regularly).

Explanation:

When an Indian investor invests in equities abroad, he is essentially taking two exposures:

– An exposure on the international equity market.

– An exposure to the exchange rate of the rupee.

If the investor invests in the US, and the US Dollar becomes stronger during the period of his investment, he benefits; if the US Dollar weakens (i.e., the Rupee becomes stronger), he loses or the portfolio returns will be lower.

Explanation:

The benchmark would depend on where the scheme proposes to invest. Thus, a scheme seeking to invest in China might have the Shanghai Composite Index (Chinese index) as the benchmark. S&P 500 may be appropriate for a scheme that would invest largely in the US market. A scheme that seeks to invest across several countries, can structure a synthetic index that would be a blend of the indices relevant to the countries where it proposes to invest. Gold ETF NAVs closely track the price of gold since they reflect the value of gold held in custody for the units issued. Therefore, the gold price would be the benchmark for such funds.

Explanation:

The fund factsheets are an official source of information of the fund’s objective, performance, portfolio and basic investment requirements issued by the fund house each month. The factsheet is also used by the fund manager to communicate their views on the economy and the markets to the investors and other observers such as research analysts, rating agencies, and media.

Explanation:

SEBI does not approve or disapprove the Scheme Related Documents, it gives its observations. The mutual fund needs to incorporate these observations in these documents. Thus, the documents in the market are “vetted” by SEBI, and not approved by SEBI.

Explanation:

For applicants, including guardians, whose country of birth/citizenship/nationality/tax residency is other than India, the application requires additional information under the Foreign Account Tax Compliance Act (FATCA).

Explanation:

Scheme Information Document (SID) and Statement of Additional Information (SAI) are primarily the two important documents. Key Information Memorandum (KIM) is a summary of SID and SAI.

Explanation:

As per the SEBI guidelines, the benchmark for debt (and balanced schemes) should be developed by research and rating agencies recommended by AMFI. CRISIL, ICICI Securities and NSE have developed various such indices.

Explanation:

As per the AMFI Code of Ethics – All transactions of purchase and sale of securities by key personnel who are directly involved in investment operations shall be disclosed to the compliance officer of the member at least on half yearly basis and subsequently reported to the Board of Trustees if found having conflict of interest with the transactions of the fund.

Explanation:

Scheme type and Choice of investment universe drive the choice of benchmark in debt schemes. For eg – Liquid schemes invest in securities of up to 91 days’ maturity. Therefore, a short-term money market benchmark such as NSE’s MIBOR or CRISIL Liquid Fund Index is suitable. Choice of Investment Universe Gilt funds invest only in Government securities. Therefore, indices based on Government Securities are appropriate. Debt funds that invest in a wide range of Government and Non-Government securities need to choose benchmarks that are calculated based on a diverse mix of debt securities. The size of the scheme is immaterial.

Explanation:

While calculating the daily NAV, apart from the change in the value of investments, the actual and accrued income and expenses are also taken into account. These also affect the calculation of NAV. Change in the number of investors can affect the Asset Under Management (AUM) of a scheme but it won’t affect the NAV. (A scheme cannot show better profits by delaying payments. While calculating profits, all the expenses that relate to a period need to be considered, irrespective of whether or not the expense has been paid. In accounting language, this is called the accrual principle. Similarly, any income that relates to the period will boost profits, irrespective of whether or not it has been received in the bank account. This again is in line with the accrual principle).

Explanation:

Ideally, an investor’s portfolio should be divided into Core and Satellite portfolios. The core portfolio will be invested according to the long-term needs of the investor and the satellite portfolio will be invested to take advantage of expected short-term market movements. However, the division between core and satellite portfolios will depend upon each investor’s profile. Conservative investors may like a very small proportion of their overall portfolio to be managed tactically and an investor comfortable with taking a higher risk may have an even higher exposure to tactical investments.

Explanation:

“Segregated portfolio” means a portfolio, comprising debt or money market instruments affected by a credit event, that has been segregated in a mutual fund scheme. No redemption or subscription is allowed in the segregated portfolio. However, to facilitate exit to unitholders in segregated portfolios, AMC shall enable the listing of units of segregated portfolios on the recognized stock exchange.

Explanation:

The S&P BSE Bankex index comprises constituents of the S&P BSE 500 that are classified as members of the banks sector as defined by the BSE industry classification system.

Explanation:

If one is investing in ELSS through SIP then each investment would be locked in from the date of the respective investment. The lock-in for the entire amount would not get over on completion of 3 years from the date of the first SIP installment.

Explanation:

SEBI has mandated AMCs to put in place a due diligence process to regulate distributors who qualify any one of the following criteria:

– Multiple point presence (More than 20 locations).

– AUM raised over Rs. 100 crores across the industry in the non-institutional category including high net worth individuals (HNIs).

– The commission received of over Rs. 1 Crore p.a. across the industry.

– The commission received of over Rs. 50 Lakhs from a single mutual fund.

Explanation:

While the SID, SAI, and KIM need to be updated periodically, the interim changes are updated through the issuance of addendum. The addendum is considered to be a part of the scheme-related documents and must accompany the KIM.

Explanation:

Portfolio Turnover is the value of Purchase and Sale of Securities during a period in a mutual fund scheme. The purchase and sale of securities entails broking costs for the scheme. Frequent churning of the portfolio would add to the transaction costs.

Explanation:

All details such as an address, bank account details, nomination for the units held in DEMAT FORM is according to the information available in the depository’s records. Any changes to the said information have to be made by contacting his depository participant.

Explanation:

Gilt Fund is an open-ended debt scheme investing in government securities across maturity. The minimum investment in G-secs is defined to be 80 percent of total assets (across maturity).

Explanation:

After a dividend pay-out, the reduced NAV is called ex-dividend NAV. (After a dividend is announced, and until it is paid out, it is referred to as cum-Dividend NAV).

Explanation:

One of the clauses under AMFI’s Code of Conduct for Intermediaries of Mutual Funds is to abstain from making negative statements about any AMC or scheme and ensure that comparisons, if any, are made with similar and comparable products along with complete facts.

Explanation:

A switch is a redemption from one scheme and a purchase into another combined into one transaction. For example, investors who believe that equity markets have peaked and want to book profits can switch out from an equity scheme and switch to a short-term debt fund.

Explanation:

SEBI has prescribed cut-off timing to determine the applicable NAV and these timings are uniformly applicable for all mutual funds.

Explanation:

Basis Risk arises due to a difference in the price movement of the derivative vis-à-vis that of the security being hedged.

Explanation:

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

The risks that impact the entire economy are known as systematic risks. The company specific risks are also known as unsystematic risks. Systematic risk is measured by its Beta.

Explanation:

Gilt funds invest only in Government securities. Therefore, indices based on Government Securities are the appropriate benchmark.

Explanation:

Capital Gains is calculated as the difference between the sum invested and the sum realized when the units are sold / matured.

So in the above question, capital gain is Rs 215832 – 200000 = Rs. 15,832

Explanation:

The fund manager and his/her name is not a fundamental attribute of a scheme.

Explanation:

Each mutual fund has to offer two plans to the investors, viz., regular plan and direct plan. In a regular plan the investment is through a mutual fund distributor and in a Direct plan, the investor purchases units directly from the fund. There are no transaction charges on direct investments.

Explanation:

Retirement Fund is an open-ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier). Scheme having a lock-in for at least 5 years or till retirement age whichever is earlier.

Explanation:

Distributors have the option of opting out of charging transaction charges. But such opting out shall be applicable only at distributor level. This means that the distributor cannot choose to charge transaction charge from one investor and not from another.

Explanation:

Fixed Maturity Plans are a kind of close-ended debt fund where the duration of the investment portfolio is closely aligned to the maturity of the scheme.

Fixed Maturity Plan is ideal when the investor’s investment horizon is in sync with the maturity of the scheme, and the investor is looking for a more predictable return than any conventional debt scheme, and a return that is generally superior to what is available in a fixed deposit.

Explanation:

In a CRISIL Conservative Hybrid Fund, the equity component will be only 25% and Debt will be 75%.

In Aggressive Hybrid Fund, the ratio of Equity and Debt is 75% and 25%, and in a Balanced Hybrid Fund, the ratio is 50% and 50%.

Explanation:

AMFI has framed a set of guidelines and code of conduct for intermediaries (known as AMFI Guidelines & Norms for Intermediaries (AGNI)), consisting of individual agents, brokers, distribution houses and banks engaged in selling of mutual fund products.

Explanation:

1. Simple Return can be calculated with the following formula : Sale Price – Cost Price / Cost Price

2. Whenever a dividend is paid – and compounding is to be considered – the CAGR technique (or the reinvestment method, as some call it) prescribed by SEBI is used

3. The return is calculated using CAGR if the holding period is over one year. If returns are less than one year, than Simple Return is calculated.

Explanation:

Gold ETF’s can be easily bought by retail investors as the minimum traded quantity is 1 unit ie. 1 gram.

The Gold deposit scheme is offered only by banks to mobilise the idle gold in the country and put it in productive use and to provide the customer an opportunity to earn interest on the idle gold holdings.

All Exchange Traded Fund are open-ended schemes.

Explanation:

A Large Cap Fund is an open-ended equity scheme predominantly investing in large cap stocks. As per SEBI rules on asset allocation, the minimum investment in equity and equity related instruments of large cap companies shall be 80 percent of total assets.

Explanation:

Institutional investors require a authorisation for the investing in any security / asset etc. This is typically in the form of a Board Resolution.

Explanation:

Mutual funds make it convenient for investors to manage their SWPs by registering the amount, periodicity (generally, monthly) and period for their SWP.

Some schemes even offer the facility of transferring only the appreciation or the dividend. In this option, the withdrawal is not fixed but will vary depending upon the availability of appreciation in the specific investment chosen by the investor.

Explanation:

As per SEBI rules, a Scheme/Plan shall 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:

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 which 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:

The KYC Registration Agency (KRA) prescribes a ‘Change Form’ to be used to register change, if any, in the information provided at the time of the Know Your Customer (KYC) process. These include:

• Change in Name

• Change in Status/ Nationality

• Change in PAN

• Change in permanent address or address for correspondence etc.

Explanation:

The mutual fund distributor earns revenue in the form of commission income for the distribution of the mutual fund products/schemes. The commission may be linked to either the transaction (Upfront commission) or to the assets under management (Trail Commission).

Explanation:

Scheme type and Choice of investment universe drive the choice of benchmark in debt schemes.

For eg – Liquid schemes invest in securities of up to 91 days’ maturity. Therefore, a short-term money market benchmark such as NSE’s MIBOR or CRISIL Liquid Fund Index is suitable.

Choice of Investment Universe Gilt funds invest only in Government securities. Therefore, indices based on Government Securities are appropriate. Debt funds that invest in a wide range of Government and Non-Government securities need to choose benchmarks that are calculated based on a diverse mix of debt securities. The size of the scheme is immaterial.

Explanation:

Balanced Hybrid Fund is an open-ended balanced scheme investing in equity and debt instruments. The investment in equity and equity-related instruments shall be between 40% and 60% of total assets while investment in debt instruments shall be between 40% and 60%.

Explanation:

SEBI mandates a due diligence process for mutual fund distributors who are registered with the regulatory authority. This process ensures that distributors assess investor suitability, provide necessary disclosures, and act in the best interest of clients. It aims to enhance transparency and protect investors’ interests in the mutual fund market.

Explanation:

1) Systematic risk is measured by its Beta

2) The diversified stock index, by definition, has a Beta of 1. Schemes, whose beta is more than 1, are seen as more risky than the market. Beta less than 1 is indicative of a scheme that is less risky than the market.

3) An investment with a beta of 0.7 will move 7 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.

Explanation:

As per SEBI Code of Conduct – Trustees and asset management companies shall carry out the business and invest in accordance with the investment objectives stated in the scheme related documents and take investment decision solely in the interest of unitholders.

Explanation:

KIM is essentially a summary of the Scheme Information Document – SID and Statement of Additional Information -SAI. Scheme-related documents consist of SID and SAI. It contains the key points of these documents that are essential for the investor to know to decide on the suitability of the investment for their needs.

Explanation:

Since institutional investors are not natural persons, authorized individuals invest on behalf of the institution. Authorization for the investing institution to invest is typically in the form of a Board Resolution.

Explanation:

Recovery of unclaimed amounts by the investors is as follows:

• If the investor claims the money within 3 years, then payment is based on prevailing NAV i.e. after adding the income earned on the unclaimed money.

• If the investor claims the money after 3 years, then payment is based on the NAV at the end of 3 years.

Explanation:

Asset Allocation is allocation aligned to the financial goals of the individual. It considers the returns required from the portfolio to achieve the goals, given the time horizon available for the corpus to be created and the risk profile of the individual.

Explanation:

AMFI makes available the AUM, NAV and other important data of the mutual fund industry on its website.

(Calculation of NAV is the duty of the mutual fund / SEBI regulates insider trading / Stock exchanges manage the Investor protection fund).

Explanation:

A close-ended scheme offers liquidity through its listing on a stock exchange. Unit holders who are interested in selling can offer their quotes and new investors can buy them.

Explanation:

SEBI has facilitated buying and selling of the units of mutual funds through the stock exchanges. Exchanges have developed mutual fund transaction engines for the purpose. The low cost and deeper reach of the stock exchange network enables an increased level of participation of retail investors in mutual funds.

Explanation:

NAV is to be calculated up to 4 decimal places in the case of index funds, liquid funds, and other debt funds. (NAV for equity and balanced funds is to be calculated up to at least 2 decimal places).

Explanation:

1. A company cannot invest in mutual funds if its incorporation documents ( (Memorandum of Association and Articles of Association) do not provide for investments of this type.

2. The mutual fund can allow transactions only if the transaction form/slip carries the signature of any (one or more, as required) of the authorized signatories.

Explanation:

Recovery of unclaimed amounts by the investors is as follows:

• If the investor claims the money within 3 years, then payment is based on prevailing NAV i.e. after adding the income earned on the unclaimed money.

• If the investor claims the money after 3 years, then payment is based on the NAV at the end of 3 years.

Explanation:

The form for registering the change in default bank account has to be signed according to the mode of holding of the folio.

Explanation:

All the investor’s money is pooled together in a scheme. Costs incurred for managing the scheme are shared by all the Unit-holders in proportion to their holding of units in the scheme.

Explanation:

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:

In addition to the normal expenses limit, the following expenses may be charged to the scheme :

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 expenses of up to 0.30 percent of the daily net assets of the scheme.

Explanation:

Present value formula = F / (1 + r) ^ n

Where F is the future value (500000) ; r is the rate of interest (6% p.a.); and n is the number of years (3)

= 500000 / (1+0.06)^3