How Well Do You Know Mutual Funds? Score 10/10 On This Financial IQ Quiz!

A mutual fund is a financial instrument in which investors pool their money to invest in securities like stocks, bonds, and money market instruments. It is managed by an Asset Management Company (AMC) with professional experts who aim to grow the collective money and meet the fund's investment objectives. They optimise the returns while managing the risk through careful asset allocation.

There are different types of mutual funds in India. Some of the most popular types of mutual funds are equity funds, debt funds, hybrid funds, index funds, sector funds, tax-saving funds, liquid funds, gilt funds, gold funds, thematic funds, overnight funds, money market funds, etc. There are two modes of investing in these mutual funds: lump sum investment and SIP. 

Speaking of taxation on mutual funds, you are liable to pay capital gains tax when you sell your mutual fund units based on the period of holding. In the Union Budget 2024, the Finance Ministry announced that investors in mutual funds will be taxed on short-term capital gains and long-term capital gains tax accordingly. 

Now let us see how well you know mutual funds in India. We have compiled 10 MCQs on GK questions to test your general awareness about the history of mutual funds, basic terminology, and taxation figures. 

This GK Quiz Will Test Your Knowledge About Mutual Funds. Ready?

Q1. Which of the following is the regulator of mutual funds in India?

A. ICICI

B. RBI

C. SEBI

D. CIBIL

Answer: C. SEBI 

Explanation: The Securities Exchange Board of India (SEBI) is the regulator of mutual funds in India. 

Q2. SIP is ___________.

A. Single Investment Payment

B. Savings Insurance Plan

C. Systematic Investment Plan

D. Stock Index Portfolio

Answer: C. Systematic Investment Plan

Explanation: A systematic investment plan (SIP) in mutual funds allows investors to invest a fixed amount of money at regular, predetermined intervals, like monthly, weekly, or daily, rather than a large lump sum at once.

Q3. Does an investor need an active Demat account to invest in mutual funds?

A. True

B. False

Answer: B. False

Explanation: No demat account is required for mutual fund investing in India.

Q4. What was the first mutual fund in the world?

A. Unit Trust of India (UTI)

B. Vanguard 500 Index Fund

C. Massachusetts Investors Trust (MIT)

D. Eendragt Maakt Magt

Answer: C. Massachusetts Investors Trust (MIT)

Explanation: Massachusetts Investors Trust (MIT) is considered the first modern, open-end mutual fund with redeemable shares. It was launched on 21st March 1924 in Boston, USA. Edward C. Johnson II, an investment banker, was the person who devised this financial instrument.

Q5. Which was the first mutual fund in India?

A. State Bank of India mutual fund

B. Canara Bank mutual fund

C. Unit Trust of India (UTI)

D. ICICI mutual fund

Answer: C. Unit Trust of India (UTI)

Explanation: The Unit Trust of India (UTI) was the first mutual fund in India. A parliamentary act was passed in February 1964 to create UTI. The first-ever mutual fund scheme in India was Unit Scheme 1964 (US-64).

Q6. Which among the following was the first public sector bank to launch a mutual fund?

A. Indian Bank

B. Canara Bank

C. Central Bank of India

D. State Bank of India

Answer: D. State Bank of India

Explanation: Until 1987, UTI held a monopoly in the mutual fund market. But In June 1987, the State Bank of India (SBI), a public sector bank, launched the SBI Mutual Fund. Soon after, other public banks like Canara Bank, Punjab National Bank, and Indian Bank followed the suit.  

Q7. What is the full form of NAV?

A. Net Assessment Value

B. Net Asset Value

C. Net Amount Value

D. Negotiable Asset Volume

Answer: B. Net Asset Value

Explanation: Net Asset Value (NAV) is the per-unit market price for a particular mutual fund. It is calculated by subtracting the fund's total liabilities from its total assets and dividing it by the number of outstanding units.

Q8. What is the long-term capital gains tax on equity mutual funds in India?

A. 10 per cent

B. 20 per cent

C. 12.5 per cent

D. 30 per cent

Answer: C. 12.5 per cent

Explanation: Long-term capital gains tax (LTCG) on equity mutual funds held over 12 months in India is 12.5 per cent on gains exceeding Rs. 1.25 lakh in a financial year. Whereas the short-term capital gains tax (STCG) on equity mutual funds sold within 12 months is 20 per cent. While STCG on debt mutual funds are taxed as per your regular income tax slab rate.

Q9. What is XIRR in context of mutual funds?

A. Extended Internal Rate of Return

B. Extra Investment Return Ratio

C. Expected Initial Return Rate

D. Exchange Issued Return Report

Answer: A. Extended Internal Rate of Return

Explanation: Extended Internal Rate of Return (XIRR) is a metric used in mutual funds to calculate the actual annualised return of an investment, taking into account multiple transactions (both inflows and outflows) and the time of transaction. It is particularly used for SIP (systematic investment plan) or SWP (systematic withdrawal plan).

Q10. What does CAGR stand for?

A. Compounded Annual Growth Returns

B. Compound Annual Growth Rate

C. Cumulative Annual Growth Rate

D. Common Annual Growth Rate

Answer: B. Compound Annual Growth Rate

Explanation: Compound Annual Growth Rate is the average annual rate of return for an investment over time, taking compounding into effect. 

You may also like...

How Well Do You Know the Indian Budget? Test Your Financial IQ With This GK Quiz!