Multiple choice

Compared to equity funds, income margins for debt funds are

  1. narrow

  2. higher

  3. the same

  4. almost nil
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Debt funds have narrow income margins compared to equity funds because they primarily earn interest income from fixed-income securities, which typically offer modest, predictable returns. Equity funds have much wider potential margins through capital appreciation, dividends, and the growth potential of stocks, which can generate significantly higher (or more volatile) returns over time. Debt fund margins are compressed by the competitive nature of fixed-income markets and the relatively stable, lower-risk profile of their underlying securities.

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