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What is the minimum percentage of funds that SEBI mandates AMCs to invest in arbitrage strategies for a fund to be classified as an Arbitrage fund?

35%

50%

65%

80%

Qn. 2 / 7

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What is the key characteristic of a pure arbitrage trade, such as spot-futures arbitrage, in terms of risk and outcome?

High risk, unpredictable outcome

Low risk, predictable outcome

Moderate risk, predictable outcome

High risk, predictable outcome

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What is the typical investment strategy for the remaining portion of funds (outside the mandated arbitrage portion) in an Arbitrage fund?

Long-term equity investments

Real estate investments

Debt funds

Commodities trading

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What is the primary factor that can introduce volatility into an Arbitrage fund's performance?

Fluctuations in the stock market

Changes in interest rates

The debt component of the portfolio

Geopolitical events

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What is considered the 'real arbitrage' in an arbitrage fund, according to the text?

Exploiting price differences between cash and futures markets

Profiting from discrepancies in international markets

The tax advantage of being treated as an equity fund while behaving like a debt fund

Taking advantage of short-term market inefficiencies

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What is the phenomenon called when the price of a stock in the cash market and its corresponding futures contract converge to the same value on the expiry date?

Futures convergence

Spot-futures parity

Cash-futures convergence

Arbitrage equilibrium

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What is the term used to describe the difference between the price of a stock in the cash market and its corresponding futures contract?

Premium

Discount

Spread

Basis