NISM Series V B: Mutual Fund Foundation Certificate - Free Demo

Explanation:

Inflation erodes the purchasing power of money over time. So, to calculate the future requirement of money, we need to account for the effects of inflation. The formula for future value with inflation is:

Future Value = Present Value × (1 + Inflation Rate)^n

Where:

• Present Value = Rs. 50,000

• Inflation Rate = 10% (expressed as 0.10)

• n = number of years, which is 3 in this case

Plugging in the values:

Future Value = 50000 × (1 + 0.10)^3 = 50000 × (1.10)^3 = 50000 × 1.331 ≈ 66550

So, the future requirement of money would be approximately Rs. 66,550.

Explanation:

Interest income is the main source of returns from conventional debt investments, making up a greater portion compared to capital gains or other types of income.

Explanation:

Gold is widely regarded as a safe haven asset class due to several factors. Firstly, gold has intrinsic value and is considered a store of wealth throughout history. It’s often seen as a hedge against inflation and currency devaluation because its value tends to hold relatively stable or increase during economic uncertainty or periods of financial instability.

Secondly, gold is not directly tied to the performance of financial markets like stocks or bonds, which makes it less susceptible to market volatility. During times of geopolitical tensions or economic crises, investors often flock to gold as a safe haven asset to protect their wealth.

Overall, gold’s historical significance, perceived intrinsic value, and its role as a hedge against economic uncertainty contribute to its status as a safe haven asset class.

Explanation:

Divisibility refers to the ease with which an investment can be divided into smaller units or sold without significantly impacting its market value. When evaluating investment products, assessing divisibility as part of liquidity considerations is essential. Liquidity refers to how quickly and easily an investment can be converted into cash without affecting its price.

High divisibility means an investment can be easily sold or divided into smaller portions, increasing its liquidity. This liquidity is crucial because it allows investors to access their funds when needed, respond to changing financial circumstances, or take advantage of investment opportunities without incurring significant costs or price disruptions.

Therefore, divisibility should be evaluated as part of liquidity assessment when considering investment options.

Explanation:

The Net Asset Value (NAV) of a mutual fund indicates how much money can be generated per unit of the fund if the scheme is liquidated.

Explanation:

True.

Each mutual fund scheme must have a stated investment objective. This objective outlines the fund’s goals, strategy, and the types of securities it will invest in. It serves as a guide for investors to understand the fund’s intended purpose, risk profile, and expected returns. Having a clear investment objective helps investors make informed decisions and ensures transparency in the fund’s operations. Therefore, it is a regulatory requirement for mutual funds to have a stated investment objective.

Explanation:

The advantage of mutual funds is “Economies of scale,” which allows them to achieve cost efficiencies by pooling funds from multiple investors and reducing transaction costs and expenses.

Explanation:

Transparency in mutual funds is high because regulatory authorities mandate detailed disclosure of information about holdings, performance, fees, and expenses. This transparency ensures investors have access to accurate and timely information to make informed investment decisions.

Explanation:

The beneficiaries of a mutual fund trust in India are the unitholders.

Unitholders are the investors who contribute funds to the mutual fund by purchasing units of the fund. As beneficiaries of the trust, they hold ownership interests in the mutual fund and are entitled to the benefits and returns generated by the fund’s investments. The mutual fund operates for the benefit of its unitholders, and the fund manager’s primary responsibility is to manage the fund’s assets in a manner that aligns with the interests of the unitholders. Therefore, the unitholders are the ultimate beneficiaries of the mutual fund trust.

Explanation:

The Asset Management Company (AMC) is responsible for the day-to-day management of the mutual fund. This includes making investment decisions, buying and selling securities, managing the fund’s portfolio, and implementing the investment strategy outlined in the fund’s objectives. The AMC employs fund managers and other professionals who are responsible for managing the fund’s assets in line with the investment mandate and regulatory guidelines. Therefore, the AMC plays a crucial role in the operational management of the mutual fund.

Explanation:

The simple mutual fund schemes that the new cadre of distributors can distribute are as follows:
– Fixed Maturity Plans
– Index Schemes
Diversified Equity Schemes shall be Large Cap oriented and well diversified schemes and shall not include the following;
– Thematic / Sector funds
– Small Cap, Mid Cap or Micro Cap Fund
– Concentrated Funds i.e. number of stocks less than 30 as per offer document

Explanation:

The AMC arranges for the requisite offices and infrastructure, engages employees, provides for the requisite software, handles advertising and sales promotion, and interacts with regulators and various service providers.

Explanation:

A Financial plan has to be reviewed at regular intervals to accomadate the clients current financial situation and his needs.

Explanation:

Winning lotteries, unexpected inheritance of wealth, unusually high capital gains earned – all these are instances of sudden wealth. However, given the human nature of frittering away such sudden wealth, the financial planner can channelize the wealth into investments, for the long term benefit of the investor’s family.

Explanation:

The investment policy gets into details of how the portfolio is proposed to be distributed between different types of assets (also called asset allocation).

For example: Equities 80 to 100% – Debt 0-20%.

Explanation:

Research studies have proved that the equity returns have outperformed the returns of most other forms of investments in the long term.

Explanation:

Investor needs to pay wealth tax every year, on his physical gold holding.

However, investment in mutual fund schemes is exempt from wealth tax.

Explanation:

As per SEBI guidelines, NFOs [other than ELSS and RGESS] can remain open for a maximum of 15 days.

Allotment of units or refund of moneys, should be done within 5 business days of closure of the scheme and Open-Ended schemes have to re-open for sale / re-purchase within 5 business days of the allotment.

Explanation:

KYC requirements have to be complied with, by both, investor and PoA holder.

Explanation:

Re Purchase (Redemption) Price = Applicable NAV less Exit load (if any)

= 40 less 1%

= 40 – 0.40

= 39.60