NISM VA Practice Questions on Concept and Role of Mutual Fund

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Understanding the concept and role of mutual funds is essential for clearing the NISM Series V-A exam. These NISM VA Practice Questions are designed to test your knowledge of mutual fund basics, structure, benefits, and functioning through exam-oriented and application-based questions.

NISM VA Practice Questions (30 MCQs with Answer ) – Concept and Role of Mutual Fund

1. A mutual fund is best described as:

A. A bank deposit scheme
B. A pool of investor money invested in securities
C. A government savings plan
D. A fixed income instrument

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Answer: B
Explanation: Mutual funds pool money and invest in diversified assets.

2. The primary objective of mutual funds is to:

A. Guarantee returns
B. Provide loans
C. Pool and professionally manage investments
D. Eliminate risk

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Answer: C

3. Who manages the investments in a mutual fund?

A. Investors
B. Trustees
C. Fund manager
D. SEBI

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Answer: C

4. Diversification in mutual funds helps in:

A. Increasing returns
B. Reducing risk
C. Eliminating expenses
D. Guaranteeing profit

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Answer: B

5. A mutual fund investor receives:

A. Shares
B. Bonds
C. Units
D. Certificates

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Answer: C

6. Which entity sets up a mutual fund?

A. Trustee
B. Sponsor
C. AMC
D. Custodian

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Answer: B

7. AMC stands for:

A. Asset Management Company
B. Asset Monitoring Corporation
C. Account Management Company
D. Asset Market Control

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Answer: A

8. The trustee’s role is to:

A. Manage portfolio
B. Protect investor interest
C. Sell units
D. Calculate NAV

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Answer: B

9. Custodian is responsible for:

A. Selling units
B. Managing investors
C. Holding securities
D. Giving advice

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Answer: C

10. Which of the following is NOT a feature of mutual funds?

A. Diversification
B. Professional management
C. Guaranteed return
D. Liquidity

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Answer: C

11. Mutual funds help small investors by:

A. Providing loans
B. Offering market access
C. Eliminating risk
D. Fixing returns

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Answer: B

12. Mutual funds invest in:

A. Only equity
B. Only debt
C. Multiple asset classes
D. Only gold

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Answer: C

13. Which benefit allows easy entry and exit?

A. Diversification
B. Liquidity
C. Transparency
D. Taxation

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Answer: B

14. Transparency in mutual funds means:

A. Hidden charges
B. Regular disclosures
C. Fixed returns
D. No regulation

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Answer: B

15. Which option is suitable for investors without expertise?

A. Direct stock investing
B. Mutual funds
C. Trading
D. Derivatives

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Answer: B

16. A mutual fund reduces risk mainly through:

A. Tax saving
B. Diversification
C. High returns
D. Short-term investing

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Answer: B

17. Returns in mutual funds depend on:

A. Government guarantee
B. Market performance
C. Fixed rate
D. Bank policy

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Answer: B

18. Mutual funds are regulated by:

A. RBI
B. AMFI
C. SEBI
D. IRDAI

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Answer: C

19. Which is an advantage of mutual funds?

A. High risk always
B. Professional management
C. No liquidity
D. Fixed returns

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Answer: B

20. Which is a limitation of mutual funds?

A. Diversification
B. Liquidity
C. Market risk
D. Transparency

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Answer: C

21. Investors participate in mutual funds through:

A. Shares
B. Units
C. Bonds
D. Deposits

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Answer: B

22. Which entity holds the assets of mutual fund?

A. AMC
B. Sponsor
C. Custodian
D. Trustee

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Answer: C

23. Professional management refers to:

A. Investor decisions
B. Fund manager expertise
C. Government control
D. Broker advice

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Answer: B

24. Which of the following is NOT a role of mutual funds?

A. Risk elimination
B. Investment management
C. Wealth creation
D. Market participation

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Answer: A

25. Mutual fund investments are suitable for:

A. Experts only
B. Small and large investors
C. Only corporates
D. Only traders

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Answer: B

26. Which function is performed by AMC?

A. Protect investors
B. Manage investments
C. Hold securities
D. Regulate market

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Answer: B

27. A mutual fund provides convenience through:

A. Fixed returns
B. Systematic plans
C. No documentation
D. No risk

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Answer: B

28. Which is an example of mutual fund service?

A. Loan disbursement
B. SIP
C. Trading margin
D. Brokerage

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Answer: B

29. Mutual funds enable investors to:

A. Avoid market
B. Participate in markets
C. Eliminate loss
D. Fix returns

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Answer: B

30. Main role of mutual fund in economy is:

A. Lending money
B. Pooling savings into investments
C. Tax collection
D. Price control

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Answer: B

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