Portfolio Management MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Portfolio Management, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Portfolio Management MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Portfolio Management mcq questions that explore various aspects of Portfolio Management problems. Each MCQ is crafted to challenge your understanding of Portfolio Management principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Portfolio Management MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Portfolio Management. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Portfolio Management knowledge to the test? Let's get started with our carefully curated MCQs!

Portfolio Management MCQs | Page 6 of 10

Discover more Topics under IC 89 Management Accounting

Q51.
Why might investors consider moving higher up the risk ladder for fixed income investments?

a.

To guarantee returns

b.

To avoid any risk

c.

To achieve capital appreciation

d.

To ensure short maturity periods

Discuss
Answer: (c).To achieve capital appreciation Explanation:Moving higher up the risk ladder in fixed income investments, such as investing in bond funds and Fixed Maturity Plans (FMPs), can provide opportunities for capital appreciation, although returns are not guaranteed.
Q52.
What is a potential drawback of Company Fixed Deposits and NCDs?

a.

Low return

b.

Guaranteed returns

c.

Higher risk of default

d.

Short lock-in period

Discuss
Answer: (c).Higher risk of default Explanation:Company Fixed Deposits and Non-Convertible Debentures (NCDs) may offer higher returns but carry a higher risk of default, making them suitable only for investors with the requisite risk appetite.
Q53.
What is one of the prime reasons for the historical popularity of bank Fixed Deposits (FDs)?

a.

Guaranteed returns

b.

High capital protection

c.

Lack of knowledge about other products

d.

Short-term investment horizon

Discuss
Answer: (c).Lack of knowledge about other products Explanation:One of the prime reasons for the historical popularity of bank FDs is the lack of knowledge among investors about other products that may offer comparable or better returns in some respects.
Q54.
What is the primary objective of Fixed Maturity Plans (FMPs)?

a.

Guaranteed returns

b.

Capital appreciation

c.

High liquidity

d.

Benefit of high interest income

Discuss
Answer: (d).Benefit of high interest income Explanation:Fixed Maturity Plans (FMPs) aim to invest in debt securities with high yields and provide the benefit of high interest income to investors by staying invested until maturity.
Q55.
How do Fixed Maturity Plans (FMPs) differ from traditional Fixed Deposits (FDs)?

a.

Guarantee of returns

b.

Open-end nature

c.

Fixed term of investment

d.

Low-risk profile

Discuss
Answer: (b).Open-end nature Explanation:FMPs are closed-end debt schemes with a fixed term of investment, unlike traditional Fixed Deposits (FDs), which may provide a guarantee of returns and are open-end in nature.
Q56.
What is the tax treatment of Fixed Maturity Plans (FMPs)?

a.

Tax-free returns

b.

Capital gains tax on withdrawal

c.

No tax benefits

d.

Indexation benefit for investments over a year

Discuss
Answer: (d).Indexation benefit for investments over a year Explanation:FMPs get tax treatment similar to debt mutual funds. Investments in FMPs with a duration of more than a year provide indexation benefits to compensate for the impact of inflation on real income.
Q57.
Why are short-term debt funds considered a good option for stable and higher returns?

a.

Guaranteed returns

b.

Higher volatility

c.

Outperformance compared to equity market

d.

Longer lock-in period

Discuss
Answer: (c).Outperformance compared to equity market Explanation:Short-term debt funds are considered a good option for stable and higher returns as they have outperformed the equity market in the past by delivering returns higher than the benchmark Sensex.
Q58.
What is a key consideration for investors in Fixed Maturity Plans (FMPs)?

a.

Liquidity

b.

Premature withdrawal options

c.

Maturity date

d.

Daily NAV fluctuations

Discuss
Answer: (c).Maturity date Explanation:Investors in Fixed Maturity Plans (FMPs) should consider the maturity date, as these funds do not allow redemption before maturity, and staying invested till maturity is essential to realize their full potential. Premature withdrawal may result in lower yields or even losses.
Q59.
Why are returns in Fixed Maturity Plans (FMPs) considered indicative and not assured?

a.

Guarantee of returns

b.

Dependence on instrument returns

c.

Fixed interest rate

d.

Tax implications

Discuss
Answer: (b).Dependence on instrument returns Explanation:Returns in Fixed Maturity Plans (FMPs) are considered indicative because they depend on the returns of the instruments that FMPs invest in, and they do not provide a guarantee of returns like Fixed Deposits (FDs).
Q60.
What is a characteristic of Fixed Maturity Plans (FMPs) that makes them suitable for low-risk attractive yield investments?

a.

Guaranteed returns

b.

Indicative returns

c.

Indexation benefit

d.

Spreading over a year or beyond

Discuss
Answer: (d).Spreading over a year or beyond Explanation:Fixed Maturity Plans (FMPs) are considered suitable for low-risk attractive yield investments, especially for those spreading over a year or beyond, where returns are usually higher than many prevailing debt products.
Page 6 of 10