Ch.10: Risk, Return and Performance of Funds

What is the primary purpose of a mutual fund choosing an appropriate benchmark index?

Which of the following characteristics is least important for an appropriate benchmark index used to evaluate the performance of an actively managed equity mutual fund?

A mutual fund's portfolio has a Beta of 0.75. If the overall market index (benchmark) increases by 10%, what is the expected approximate change in the value of the fund's portfolio, based solely on its Beta?

An investor invested in a growth option of an equity mutual fund. Over the past year, the fund's NAV increased from Rs. 100 to Rs. 110. During the same period, the fund also declared a dividend of Rs. 2 per unit. What is the total return for the investor for that year?

An investor holds a well-diversified portfolio consisting of several mutual funds. Which risk-adjusted performance measure would be most appropriate for evaluating the individual funds within this larger, diversified portfolio, and why?

Which of the following would NOT typically be considered a component of a mutual fund's 'total return' for an equity-oriented scheme?

While diversification helps reduce unsystematic risk, it cannot entirely eliminate all forms of risk in a portfolio. Which of the following types of risk is generally considered least affected by increasing the number of diverse securities in a portfolio?

In the context of debt funds, 'Duration' is a crucial measure used to assess:

An investor wants to reduce the impact of company-specific news or events (e.g., a single company's product recall or management scandal) on their investment portfolio. What strategy should they primarily focus on?

A high portfolio turnover ratio in an equity mutual fund typically indicates:

Which of the following statements regarding the Expense Ratio of a mutual fund is NOT true?

How does a higher expense ratio generally affect an investor's net return from a mutual fund?

If a mutual fund delivers a nominal return of 12% in a year, and the inflation rate for the same period is 5%, what is the approximate real return generated by the fund?

In a rising interest rate environment, which category of debt mutual funds is generally expected to experience the highest negative impact on its Net Asset Value (NAV) due to interest rate risk?

A large-cap equity fund has a Sharpe Ratio of 0.85 and a Beta of 1.10. The market's Sharpe Ratio is 0.70. The fund's Information Ratio is 0.40. Which statement best interprets these metrics for an investor considering adding this fund to a well-diversified portfolio?

The Sharpe Ratio is a widely used measure for risk-adjusted returns. However, it may provide a misleading picture when evaluating funds with:

Which of the following is a limitation of using Beta as a sole risk measure for a poorly diversified mutual fund?

An investor bought units of a mutual fund at an NAV of ₹50 and redeemed them after 6 months at an NAV of ₹55. There were no dividends distributed during this period. What is the absolute return generated by the investment?

For a well-diversified equity mutual fund, which risk measure is most appropriate for assessing its sensitivity to overall market movements?

In the context of performance attribution for an equity mutual fund, which of the following best describes the 'selection effect'?

When evaluating the performance of a diversified equity mutual fund that primarily invests in the largest companies listed on the National Stock Exchange of India, which of the following would generally be considered the most appropriate benchmark?

What is the primary purpose of using a benchmark index when evaluating the performance of a mutual fund?

Which performance metric specifically focuses on a fund's return in excess of a risk-free rate, per unit of downside deviation, making it particularly useful for investors concerned about negative volatility?

A fund manager consistently achieves high returns but also takes on significant non-systematic risk. Which performance measure would likely penalize this fund more heavily compared to others, assuming the market risk is constant?

In mutual fund performance analysis, what does the term 'drawdown' primarily refer to?

A high portfolio turnover ratio for an equity mutual fund generally indicates which of the following?

Which of the following components are typically included when calculating the 'Total Return' of an equity mutual fund scheme?

For a debt mutual fund, the total return primarily comprises which two components?

An investor invests ₹10,000 in a mutual fund on January 1, 2023, and redeems the investment for ₹11,500 on June 30, 2023. What is the absolute return generated by this investment?

An investor invests in a mutual fund for a period of 8 months and wants to know their fund's performance. Which of the following return measures would be most appropriate to calculate for this period?

An investor made multiple staggered investments into a mutual fund scheme over a period of three years and also redeemed some units partially before the final redemption. Which measure of return would be most appropriate to calculate the investor's personalized return from these cash flows?

If a mutual fund's Beta is 0.8, what does this imply about its sensitivity to market movements?

An equity mutual fund has a Beta of 1.2. If the broader market (represented by the benchmark index) is expected to rise by 10%, and the risk-free rate is 5% with a market risk premium of 8%, what is the expected return of the fund according to the Capital Asset Pricing Model (CAPM)?

Which of the following statements best describes the concept of 'Beta' in the context of an equity mutual fund?

An investor is evaluating two actively managed equity funds. Fund A is highly diversified, while Fund B holds a concentrated portfolio of a few stocks. To best assess the fund manager's skill in generating excess return for Fund B, which risk-adjusted measure would be most appropriate?

A fund manager is particularly concerned about avoiding significant losses during market downturns. Which risk-adjusted return measure would be most suitable to evaluate this manager's performance, as it specifically focuses on downside risk?

A mutual fund scheme reports a positive Jensen's Alpha. What does this generally suggest about the fund manager's performance?

Fund X has a Sharpe Ratio of 0.8, while Fund Y has a Sharpe Ratio of 1.2. Both funds operate in the same market and are compared against the same risk-free rate. What does this information primarily suggest about Fund Y compared to Fund X?

Which of the following best describes systematic risk in the context of mutual fund investments?

Which of the following factors is considered 'unsystematic risk' for a diversified equity mutual fund?

Which type of return calculation provides a continuous series of returns over a specific period, thereby smoothing out point-to-point volatility and offering a better perspective on consistent performance?

A fund house calculates the 99% 1-day Value at Risk (VaR) for its equity fund portfolio as ₹1 crore. What does this imply?

If a mutual fund scheme has a Beta coefficient of 1.2, what does this primarily indicate about its volatility relative to the market benchmark?