Synonyms
More meanings
Tip: select a single word for meaning & synonyms.
Select multiple words normally to copy text.
Financial Markets: NBSE Class 10 Financial Literacy notes
Here, you will find summaries, questions, answers, textbook solutions, pdf, extras, MCQs etc. of (Nagaland Board) NBSE Class 10 Financial Literacy Chapter 7: Financial Markets. These solutions, however, should be only treated as references and can be modified/changed.
Summary
In this chapter, we learn about mutual funds as a popular investment vehicle for investors seeking diversification and professional management. A mutual fund is a professionally managed collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and other securities. The fund manager is responsible for making investment decisions on behalf of the investors, taking the responsibility of investing in stocks and shares after due analysis and research.
Investors prefer mutual funds for various reasons, including the convenience of leaving research and analysis to the professional fund management team, and the diversification they offer by investing in a variety of shares, bonds, and other securities across different companies and sectors. This diversification helps reduce the overall risk of the portfolio.
A New Fund Offer (NFO) is the launch of a new mutual fund scheme, inviting investors to put their money into the scheme by subscribing to its units. Before investing in a mutual fund, it is important for investors to read the Offer Document (OD) as it contains all the material information required to make an informed decision, including risk factors, dividend policy, investment objectives, expenses, fund manager’s experience, and historical performance of other schemes by the fund.
The process of investing in an NFO involves filling out an application form, reading the Offer Document or Key Information Memorandum (KIM), and submitting a cheque or demand draft. The application is then forwarded to the Register and Transfer Agent (RTA), who captures the information, sends the cheque to the bank, and creates units for the investor.
Investors have certain rights and obligations. They are mutual, beneficial, and proportional owners of the scheme’s assets, and the investments are held by the trust in a fiduciary capacity. They have the right to receive dividends within 30 days of declaration and to obtain relevant information from the trustees. They can also inspect documents, receive audited annual reports, wind up a scheme, be informed about changes in the fundamental attributes of a scheme, and approach the investor relations officer for grievance redressal. In case an investor does not get an appropriate solution, they can approach the investor grievance cell of SEBI.
Textual questions and answers
Choose the correct answer (MCQs)
1. A mutual fund is a professionally managed type of ______.
Answer: A. Collective investment scheme
2. A ________ takes the responsibility of investing in stocks and shares after due analysis and research.
Answer: C. Mutual Fund
3. ________ is like an invitation to the investors to put their money into the mutual fund scheme by subscribing to its units.
Answer: C. NFO
4. In case the investor does not get appropriate solution, he can approach the investor grievance cell of ________.
Answer: C. SEBI
5. The Offer Document contains all the material information that the investor would require to make an informed decision such as ________.
Answer: C. Both (a) & (b)
Fill in the blanks (Can be used as MCQs in exams)
1. Mutual funds have a ________ who invests the money on behalf of the investors.
Answer: Fund manager
2. The ________ contains all the material information that the investor would require to make an informed decision.
Answer: Offer Document
3. ______ have a right to be informed about changes in the ________ attributes of a scheme.
Answer: Investors, fundamental
4. Investors can approach the investor relations officer for ________.
Answer: Grievance redressal
5. Investors are mutual, beneficial, and proportional owners of the scheme’s ________.
Answer: Assets
Extra/additional questions and answers (MCQs)
Q1. A mutual fund is a type of ________ investment scheme.
A. Individual B. Collective C. Personal D. Exclusive
Answer: B. Collective
Q2. In a mutual fund, money is pooled from many investors and invested in stocks, bonds, and ________.
A. Real estate B. Artwork C. Short-term money market instruments D. Cryptocurrency
Answer: C. Short-term money market instruments
Q3. The professional who invests the money on behalf of the investors in a mutual fund is called a ________.
A. Stockbroker B. Financial planner C. Fund manager D. Investment banker
Answer: C. Fund manager
Q4. One reason why investors prefer mutual funds is because they offer ________.
A. Guaranteed returns B. Diversification C. Fixed interest rates D. Tax exemptions
Answer: B. Diversification
Q5. The launch of a new mutual fund scheme is known as a ________.
A. IPO B. MFO C. NFO D. PFO
Answer: C. NFO
Q6. To invest in an NFO, the investor must fill a ________.
A. Spreadsheet B. Ledger C. Form D. Contract
Answer: C. Form
Q7. The investor should read the ________ before investing in a mutual fund scheme.
A. Prospectus B. Offer Document C. Investment strategy D. Mutual fund guide
Answer: B. Offer Document
Q8. In case the investor does not read the Offer Document, they must read the ________.
A. Annual report B. Key Information Memorandum C. Mutual fund brochure D. Investment policy statement
Answer: B. Key Information Memorandum
Q9. After the investor submits the form and cheque, these documents are forwarded to the ________.
A. AMC B. SEBI C. RTA D. Mutual fund company
Answer: C. RTA
Q10. Investors are ________ and proportional owners of the scheme’s assets.
A. Individual B. Joint C. Mutual D. Sole
Answer: C. Mutual
Q11. In case of dividend declaration, investors have a right to receive the dividend within ________ days of declaration.
A. 10 B. 30 C. 45 D. 60
Answer: B. 30
Q12. On redemption request, the AMC must dispatch the redemption proceeds within ________ working days.
A. 5 B. 10 C. 15 D. 20
Answer: B. 10
Q13. Investors can obtain relevant information from the ________ and inspect documents.
A. Fund manager B. Distributor C. Trustees D. SEBI
Answer: C. Trustees
Q14. A scheme can be wound up if unit holders representing ________ of scheme’s assets pass a resolution.
A. 50% B. 75% C. 80% D. 90%
Answer: B. 75%
Q15. Investors have a right to be informed about changes in the ________ attributes of a scheme.
A. Secondary B. Fundamental C. Optional D. Minor
Answer: B. Fundamental
Q16. For grievance redressal, investors can first approach the ________.
A. Distributor B. SEBI C. Investor relations officer D. Fund manager
Answer: C. Investor relations officer
Q17. If the investor does not get an appropriate solution for their grievance, they can approach the investor grievance cell of ________.
A. RBI B. SEBI C. IRDAI D. PFRDA
Answer: B. SEBI
Q18. The Offer Document (OD) contains all the ________ information that the investor would require.
A. General B. Promotional C. Material D. Trivial
Answer: C. Material
Q19. The abridged version of the Offer Document is known as the ________.
A. Summary Document B. Key Information Memorandum C. Abridged Prospectus D. Investor’s Guide
Answer: B. Key Information Memorandum
Q20. The minimum investment amount in mutual fund units is fairly low, around ________ or so.
A. 100 B. 500 C. 1,000 D. 5,000
Answer: B. 500
Q21. Mutual funds units can also be purchased ________ through intermediaries.
A. In person B. By mail C. On-line D. By phone
Answer: C. On-line
Q22. The investment management agreement is one of the documents investors can inspect, along with the trust deed, annual reports, and ________.
A. Offer documents B. Fund prospectus C. Investment policy statement D. Financial statements
Answer: A. Offer documents
Q23. The RTA captures the information from the application form and sends the cheque to the ________.
A. Investor B. Bank C. AMC D. Mutual fund company
Answer: B. Bank
Q24. After the cheque is cleared, the RTA creates ________ for the investor.
A. Bonds B. Stocks C. Units D. Dividends
Answer: C. Units
Q25. The process of investing in an NFO also applies to schemes that are available for subscription on an ________ basis.
A. Annual B. Monthly C. On-going D. Quarterly
Answer: C. On-going
Q26. Mutual funds can accept cash up to a ________ level.
A. Minimum B. Maximum C. Permissible D. Predefined
Answer: C. Permissible
Q27. If the AMC fails to dispatch redemption proceeds within 10 working days, it has to pay ________.
A. A penalty B. An interest C. A fine D. A fee
Answer: B. An interest
Q28. The applicable NAV for unclaimed redemption proceeds depends on when the investor ________ the redemption proceeds.
A. Requests B. Receives C. Claims D. Redeems
Answer: C. Claims
Q29. The ________ is a legal relationship of confidence or trust between two or more parties.
A. Fiduciary duty B. Power of attorney C. Investment management agreement D. Agency relationship
Answer: A. Fiduciary duty
Q30. The investor can also sue the ________ in case their grievance is not resolved.
A. AMC B. Fund manager C. Distributor D. Trustees
Answer: D. Trustees
