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    Quiz 4 Name: Ahmed Niaz Roll No.: 180762 Class: BSAF 5B

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    Ahmed Niaz
    Ahmed Niaz took a quiz on mutual funds for his BSAF 5B class. The document defines mutual funds as financial institutions that pool money from individuals and companies to invest in diversified portfolios. It notes that mutual funds provide opportunities for small investors to invest in liquid, diversified financial securities. The document then describes the main types of mutual funds as short-term funds like money market funds and long-term funds like equity, bond, index, and hybrid funds. It explains that a mutual fund investor purchases partial ownership of the fund company and its assets, and can earn returns from dividends, capital gains if securities are sold at a profit, or from an increase in the price of fund holdings.

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    Quiz 4 Name: Ahmed Niaz Roll No.: 180762 Class: BSAF 5B

    Uploaded by

    Ahmed Niaz
    48 views2 pages
    Ahmed Niaz took a quiz on mutual funds for his BSAF 5B class. The document defines mutual funds as financial institutions that pool money from individuals and companies to invest in diversified portfolios. It notes that mutual funds provide opportunities for small investors to invest in liquid, diversified financial securities. The document then describes the main types of mutual funds as short-term funds like money market funds and long-term funds like equity, bond, index, and hybrid funds. It explains that a mutual fund investor purchases partial ownership of the fund company and its assets, and can earn returns from dividends, capital gains if securities are sold at a profit, or from an increase in the price of fund holdings.

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    Ahmed Niaz took a quiz on mutual funds for his BSAF 5B class. The document defines mutual funds as financial institutions that pool money from individuals and companies to invest in diversified portfolios. It notes that mutual funds provide opportunities for small investors to invest in liquid, diversified financial securities. The document then describes the main types of mutual funds as short-term funds like money market funds and long-term funds like equity, bond, index, and hybrid funds. It explains that a mutual fund investor purchases partial ownership of the fund company and its assets, and can earn returns from dividends, capital gains if securities are sold at a profit, or from an increase in the price of fund holdings.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    48 views2 pages

    Quiz 4 Name: Ahmed Niaz Roll No.: 180762 Class: BSAF 5B

    Uploaded by

    Ahmed Niaz
    Ahmed Niaz took a quiz on mutual funds for his BSAF 5B class. The document defines mutual funds as financial institutions that pool money from individuals and companies to invest in diversified portfolios. It notes that mutual funds provide opportunities for small investors to invest in liquid, diversified financial securities. The document then describes the main types of mutual funds as short-term funds like money market funds and long-term funds like equity, bond, index, and hybrid funds. It explains that a mutual fund investor purchases partial ownership of the fund company and its assets, and can earn returns from dividends, capital gains if securities are sold at a profit, or from an increase in the price of fund holdings.

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    © All Rights Reserved
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    Ahmed Niaz 180762 BSAF 5B

    QUIZ 4
    Name: Ahmed Niaz
    Roll No.: 180762
    Class: BSAF 5B

    Definition:

    Mutual funds are financial institutions that pool the financial resources of individuals
    and companies and invest those resources in diversified portfolios of assets. A large
    portion of mutual funds sell new shares to investors and redeem outstanding shares
    on demand at their fair market values. They provide opportunities for small investors
    to invest in a liquid and diversified portfolio of financial securities. Hence, they can be
    viewed both as a financial institution and as a type of security investment. For small
    investors, mutual funds ab re also able to enjoy economies of scale by incurring
    lower transaction costs and commissions.

    Types of Mutual Fund:

    The mutual fund industry is usually considered to have two sectors: short-term funds
    and long-term funds. Long-term funds comprise equity funds, bond funds and hybrid
    funds. Short term funds comprise taxable money market mutual funds and tax-
    exempt money market mutual funds.
     Equity Funds
    Funds consisting of common and preferred stock securities.
     Bond Funds
    Funds consisting of fixed income securities with a maturity of over one year.
     Index Funds
    Funds consisting of stocks that correspond with a major market index.
     Hybrid Funds
    Funds consisting of both stock and bond securities.
     Money Market Mutual Funds
    Funds consisting of various mixes of those money market securities with an original
    maturity of less than one year.
     Income Funds
    Funds consisting of government and high quality corporate debt bonds which provide
    a steady cash flow to the investor.
    Ahmed Niaz 180762 BSAF 5B

    How Mutual Funds work:


    A mutual fund investor basically purchases a partial ownership of the mutual fund
    company and its assets, similar to buying a stock of a company. The main difference
    is that when an investor purchases a stock of a company, the business can have
    different natures however mutual fund companies solely have a business of making
    investments as opposed to offering different services or products to customers.
    There are three main ways a mutual funds investor earns a return:
    1. Income can be earned from dividends on stocks and interest on bonds held in
    the fund’s portfolio. A fund pays out nearly all of the income it receives over
    the year to fund owners in the form of a distribution. Investors are also given a
    choice to collects their earnings or re-invest the earnings and get more shares
    in return.
    2. If the fund sells securities that have increased in price, the fund has a capital
    gain
    3. If fund holdings increase in price but are not sold by the fund manager, the
    fund’s shares increase in price. You can sell your mutual fund shares for a
    profit in the market.

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