DCM 3102 INVESTMENT OPTIONS AND MUTUAL FUNDS AUG – SEP 2025

Description

SESSION	JULY-AUG 2025
PROGRAM	BACHELOR  OF COMMERCE (B.COM)
SEMESTER	V
COURSE CODE & NAME	DCM 3102 INVESTMENT OPTIONS AND MUTUAL FUNDS

 

 

Set – 1

 

Q1. Elaborate on the factors that influence investment decisions.   10    

Ans 1.

Factors Influencing Investment Decisions

Investment decisions refer to the process by which an investor selects where, when, and how to allocate financial resources to earn returns while managing risks. Every investor, whether an individual or institution, evaluates multiple factors before committing funds to various assets such as equities, bonds, real estate, or mutual funds. These decisions are influenced by

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Q2. Attempt the following questions- 10

1. Illustrate the impact of inflation on returns from investment. 3
2. Mr. Sridhar wants to invest ₹75,000 for two (2) years. The bank offers him a fixed deposit at 6.5% per annum, compounded annually. However, if he withdraws the FD before maturity, a penalty of 1% on the interest rate is charged. Alternatively, he may invest the same amount in equity shares, which have no guaranteed return.

Assume that Sridhar needs the funds after 1 year, and that the equity market gives an 8% return over that period. Capital gains up to ₹1,00,000 are tax-free, if held for one year or more.

Calculate the following-

(a) The amount he will receive if he withdraws the FD after 1 year.

(b) The amount he will receive from equity investment after 1 year.

(c) Compare both options in terms of liquidity and tax advantage.  2+2+3        

Ans 2.

1. Impact of Inflation on Returns from Investment

Inflation refers to the persistent rise in the general price level of goods and services over time, reducing the purchasing power of money. It significantly affects investment returns because the real value of the money earned through investments declines as prices increase. Therefore, when evaluating investments, it is essential to distinguish between nominal returns (the stated rate of return) and real returns (returns adjusted for inflation).

The real rate of return can be calculated using the formula:

Real Return = Nominal Return – Inflation Rate.

 

 

Q3. Explain and differentiate between Fundamental Analysis and Technical Analysis done for investments in equity. 5+5    

Ans 3.

Fundamental Analysis and Technical Analysis in Equity Investments

Investors use analytical tools to evaluate equity investments and predict stock performance. Two primary approaches—Fundamental Analysis and Technical Analysis—help investors make informed decisions. While both aim to assess the value and profitability of stocks, they differ in methodology, objectives, and data interpretation.

Fundamental Analysis

Fundamental Analysis involves studying a company’s intrinsic value by analyzing economic,

 

 

Set – 2

 

Q4. Elaborate on the derivative contracts of Forwards and Futures. 10

Ans 4.

Derivative Contracts: Forwards and Futures

Derivative contracts are financial instruments whose value is derived from an underlying asset such as stocks, bonds, currencies, commodities, or market indices. They are used for hedging, speculation, and arbitrage purposes. Among the different types of derivatives, forward contracts and futures contracts are the most widely used. Both involve an agreement to buy or sell an asset at a predetermined price on a future date but differ in standardization,

 

Q5. Investment in real estate is often considered safe, yet it carries unique risks. In the light of this statement, explain the major advantages and limitations of investing in real estate.

Ans 5.

Advantages and Limitations of Investing in Real Estate

Real estate investment involves purchasing property such as land, residential or commercial buildings, and rental spaces to earn income or capital appreciation. It is traditionally perceived as one of the safest investment options due to its tangible nature and long-term value appreciation. However, despite its perceived stability, real estate carries unique risks

 

 

Q6. Attempt the following questions-10

1. Briefly explain the management and regulatory framework of mutual funds in India. 5
2. Explain the concept of entry load and exit load in mutual funds, clarifying the impact of these charges on investors’ returns. 5

Ans 6.

1. Management and regulatory framework of mutual funds in India

Mutual funds in India operate under a structured management and regulatory framework designed to protect investors and ensure transparency. A mutual fund is a financial vehicle that pools money from investors and invests it in a diversified portfolio of securities such as equities, bonds, or money market instruments.

Management Framework

Every mutual fund operates under a three-tier structure consisting of: