Question : Assertion: Mutual funds pool funds from multiple investors to invest in diversified portfolios.
Reason: Mutual funds are only invested in a single type of financial instrument.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Assertion is false, but the reason is true.
Correct Answer: Assertion is true, but the reason is false.
Solution : The correct answer is (c) Assertion is true, but the reason is false.
The assertion is true. Mutual funds do indeed pool funds from multiple investors to invest in diversified portfolios, which can include a variety of financial instruments such as stocks, bonds, money market instruments, and more. The diversification helps spread risk and potentially enhance returns.
The reason is false. Mutual funds are not limited to investing in a single type of financial instrument. In fact, one of the key advantages of mutual funds is their ability to invest in a diversified portfolio of various financial instruments, as mentioned above. They offer investors exposure to a wide range of assets, providing diversification and risk management benefits.
