Financial Markets and Instruments

Gilt fund is a mutual fund that invests in several different types of medium and long-term Govt. securities in addition to top quality corporate debt. Gilts originated in Britain.

A mutual fund is a mechanism for pooling resources by issuing units to the investors and investing funds in securities, in accordance with objectives as disclosed in the offer document. Mutual fund units are issued to the investors in accordance with a quantum of money invested by them. Investors of mutual funds are known as unit holders.

Market risk is the risk of losses in positions arising from movements in market prices.There is no unique classification as each classification may refer to different aspects of market risk like equity risk, commodity price risk, currency risk, liquidity risk and interest risk, etc. However, loan default risk is the chance that companies or individuals will be unable to pay the required payments on their debt obligations. Thus, option 3 is the correct answer.

It was held that until the bill has been accepted, the drawer is the principal debtor and after acceptance, the drawee or acceptor is the principal debtor and the drawer becomes secondarily liable.

It has been prescribed that the plan of realisation of assets shall not exceed five years from the date of acquisition of asset. Thus, option 4 gives the wrong information.

Mutual funds offer diverse investment schemes: open-ended (can buy/sell anytime), close-ended (fixed maturity), and growth-oriented (capital appreciation). This variety allows investors to choose based on liquidity needs and investment horizon. All these types coexist in the mutual fund industry.

Knot is not a finance related term. So, this is the correct choice.

Sole proprietary concerns can be started easily with small amount of capital.

Deferred annuity is an annuity under which the annuity payment period is scheduled to begin at some future date. They enable people to increase their income stream later in life for less money because the insurance company is not on the hook as long when income payments are deferred.

There are three important elements in the computation of premium. They are mortality, expenses of management and expected yield on its investment.

A financial asset is a non-physical asset whose value derives from a contractual claim, such as stocks, bonds, or bank deposits. Shares represent ownership in a company and are classic financial assets. Gold, silver, and land are physical or real assets, not financial assets.

Growth funds focus on capital appreciation by investing primarily in equities with high growth potential, making them ideal for businessmen who typically have higher risk appetite and longer investment horizons. Income and balanced funds suit conservative investors, while taxation funds are for tax planning.

Participatory Notes (PNs/P-Notes) are instruments used by investors or hedge funds that are not registered with the SEBI (Securities and Exchange Board of India) to invest in Indian securities. Participatory notes are instruments that derive their value from an underlying financial instrument such as an equity share and hence the word ‘derivative instruments’.

Reserve & Surplus belong to shareholders because Reserve & Surplus arise from profit. Profit is the earning of the owners.

According to this theory, dividend decision is irrelevant as far as the valuation of the firm is concerned.