n NISM Certifications
V-A NISM Series V-A
Medium

Which of these statement(s) is/are TRUE? (1) There cannot be a price impact on mutual fund units due to portfolio rebalancing and/or liquidity demands on account of redemptions. (2) Market liquidity of mutual fund units can get impacted on account of company/sector-related events.

Practice question from NISM Series V A - Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Only 1

  2. Only 2

    Correct answer

  3. C

    Both 1 and 2

Why this is the answer

Market liquidity of mutual fund units can be affected by external events, including company or sector-specific occurrences. For example, a major company news event or a sectoral crisis could reduce liquidity. However, there can be a price impact on mutual fund units due to portfolio rebalancing or redemption demands, so the first statement is incorrect.

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