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Mutual Funds Class 10 Questions and Answers provides important questions with simple and easy-to-understand answers on mutual funds. It covers key concepts such as mutual fund schemes, investors, fund managers, risk, returns, and diversification. These questions are useful for Class 10 students for understanding the topic, revision, and exam preparation.
Mutual Funds Class 10 Questions and Answers
Q. Investment decisions in a mutual fund are made by fund managers who have the expertise, information and knowledge to make better decisions than what a typical individual investor may be able to make. Identify the advantage of investing in mutual fund in this statement. (CBSE 2024-25)
(A) Diversification
(B) Liquidity
(C) Flexibility
(D) Professional Management
Answer: (D) Professional Management
Q. “Portfolio Management Services” could be offered only by intermediaries having specific approval of _________ for PMS. (CBSE 2024-25)
(A) SEBI
(B) RBI
(C) NSDL
(D) NSE
Answer: (A) SEBI
Q. These funds invest in companies spread across sectors. These funds are generally meant for risk-averse investors who want a diversified portfolio across sectors. (CBSE COMP 2024-25)
(A) Sector Fund
(B) Equity or Growth Fund
(C) Diversified Fund
(D) Index Fund
Answer: (C) Diversified Fund
Q. These funds invest primarily in equity shares of companies in a particular business sector or industry (CBSE 2023-24)
(a) Growth Fund
(b) Diversified Fund
(c) Sector Fund
(d) Index Fund
Answer: (c) Sector Fund
Q. are specialised form of mutual funds that invest in extremely short-term fixed income instruments. (CBSE 2022-23)
(a) Liquid Funds
(b) Public Provident Funds
(c) Growth Funds
(d) Debts Funds
Answer: (a) Liquid Funds
Q. Define the following terms : (CBSE 2022-23)
(a) Active fund Management
Answer: Active Fund Management is a method in which the fund manager actively makes investment decisions. The fund manager selects securities based on research, analysis and market conditions to earn better returns.
(b) Index Fund
Answer: An Index Fund is a mutual fund that invests in the same securities and proportion as a market index such as Nifty. Its objective is to provide returns similar to the market index.
(c) Value Investment Strategy
Answer: Value Investment Strategy is an investment approach in which investors buy shares that are undervalued in the market. They expect the shares to increase in value in the future.
(d) Net Asset Value
Answer: Net Asset Value (NAV) is the net value of a mutual fund’s assets after deducting liabilities. It is calculated by dividing the net assets of the fund by the number of units outstanding.
Q. “Effective fund allocation is vital for a company’s financial stability and growth. Companies can strategically utilise funds in several key areas : investing in fixed assets such as machinery, buildings or technology that enhance operational efficiency; managing working capital to ensure smooth day-to-day operations and meet short-term obligations and repaying debt to reduce interest expenses and improve the overall financial position. Thoughtful investment in these areas not only supports immediate needs but also lays a solid foundation for long-term success.” (CBSE 2025-26)
(a) In the context of the paragraph, what are the various types of applications of fund ? Explain one of them.
Answer: The various applications of funds are:
- Fixed Assets
- Investments
- Current Assets, Loans and Advances
- Miscellaneous Expenditure and Losses
Fixed Assets:
Fixed assets are assets acquired for long-term use in business operations. Examples include land, buildings, plant and machinery.
(b) Why is the application of funds important for a company’s financial health?
Answer: Application of funds is important because it shows how a company uses its funds for creating assets and running business operations. Proper utilization of funds improves efficiency, growth and financial stability.
Q. Mutual Fund offers investors an alternate investment route to invest in asset classes such as equity, debt, real estate, securities with benefit of a diversified portfolio managed by professional investment managers. Investor can invest in a diversified portfolio with small amount as low as & 500. Investors will find it difficult to bring meaningful diversification to a self-managed portfolio with such a small amount. Investment decisions in a mutual fund are made by fund manager who have expertise, information and knowledge to make better decisions than what a typical individual investor may be able to make. (CBSE 2023-24)
(a) Mention assets in which mutual fund invests.
Answer: Mutual funds invest in:
- Equity Shares
- Bonds and Debentures
- Commercial Paper
- Government Securities
(b) Describe any three benefits of investing in Mutual Fund.
Answer:
- Professional Management: Mutual funds are managed by experienced fund managers.
- Risk Diversification: Investment is spread across many securities, reducing risk.
- Small Investment: Investors can invest even with a small amount of money.
Q. Expand the term ‘ETF’. (CBSE 2021-22)
Answer: ETF stands for Exchange Traded Fund.
Q. Explain the various types of risk in investing in mutual fund. (CBSE 2024-25)
Answer:
- Market Risk: If the overall stock or bond market falls, the value of mutual fund investments may decrease.
- Non-Market Risk: Poor performance or bad news relating to a particular company can reduce the value of the fund.
- Interest Rate Risk: When interest rates rise, bond prices fall, which may negatively affect debt mutual funds.
- Credit Risk: If a company fails to pay interest or principal on bonds, the value of the mutual fund may decline.
Q. What is a Portfolio ? (CBSE COMP 2024-25)
Answer: A Portfolio is a collection of different investment assets owned by an investor. It may include shares, bonds, mutual funds, fixed deposits, gold and other investments. A portfolio helps investors achieve their financial goals.
Q. Distinguish between ‘open-end fund’ and ‘close-end fund’. (CBSE COMP 2024-25)
Answer:
| Open-ended Fund | Close-ended Fund |
|---|---|
| Investors can buy and redeem units at any time. | Investors can enter only during the initial offer period. |
| It has no fixed maturity period. | It has a fixed maturity period. |
| It provides high liquidity. | Liquidity is available mainly through stock exchanges. |
| NAV is declared regularly and units are continuously available. | Units are generally listed and traded on stock exchanges. |
Q. Name the regulatory body for Mutual Funds. (CBSE 2021-22)
Answer: The regulatory body for Mutual Funds in India is the Securities and Exchange Board of India (SEBI).
Q. “Every mutual fund investor enjoys certain rights under SEBI’s laws and rules and fund houses are bound to extend those rights to their investors.” Describe any four rights that are available to a mutual fund holder as per SEBI regulations on Mutual Fund. (CBSE 2021-22)
Answer: A mutual fund holder has the following rights:
- To receive unit certificates or statements of account within the prescribed period.
- To receive information about the investment objectives, policies and financial position of the scheme.
- To receive dividend and redemption proceeds within the prescribed time limit.
- To receive important disclosures and information that may affect their investment.
- To send complaints to SEBI regarding grievances against mutual funds. (Any four).
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