*Tarakki does not mean guaranteed future returns
Quick Wit – Chapter-wise Chapter 1 Concept & Role of Mutual Fund 1. The Number of Mutual Fund scheme in India is about: A. 100 B. 500 C. 800 D. 2000 2. Open- ended schemes generally offer exit option to investors through a stock exchange. A. True B. False 3. Sector funds invest in a diverse range of sectors. A. True B. False 4. A. B.
High Yield bond schemes invest in junk bounds. True False 5. A. B. C. D.
Investment objective is closely linked to: Scheme Option Plan SIP
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 1
Chapter 2 Fund Structure & Constituents 1. A. B. C. D.
The assets of the Mutual fund are held by AMC Trustees Custodian Registrar
2. A. B. C. D.
Minimum net worth requirement for AMC is Rs. 10 crore Rs. 5 crore Rs. 4 crore Rs. 2 crore
3. A. B.
AMC directors are appointed with the permission of Trustee True False
4. A. B. C. D.
Most investor service centres are offices of Trustees Registrar Custodian Fund Accountant
5. A. B.
Fund accounting activity of a scheme is to be compulsorily outsourced True False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 2
Chapter 3 Legal & Regulatory Environment 1. A. B. C. D.
SEBI regulates Mutual Funds Depositories Registrar & Transfer Agents All the above
2. A. B.
Investment objective defines the broad investment charter True False
3. A. B. C. D.
Statement of Account is to be sent to investors within __days of NFO closure 3 5 7 15
4. A. B. C. D.
Within__days of dividend declaration, warrants will have to be sent to investors. 7 10 15 30
5. A. B.
Unit holders can hold their units in demat form True False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 3
Chapter 4 Offer Document 1. A. B. C. D.
NFOs other than ELSS can be open for a maximum of 7 days 10 days 15 days 30 days
2. Legally, SAI is part of the SID A. True B. False 3. Offer documents of fund schemes are approved by SEBI A. True B. False 4. A. B. C. D.
Application form is attached to SID SAI KIM None of the above
5. KIM has to be updated every 6 months A. True B. False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 4
Chapter 5 Fund Distribution & Channel Management Practices
1. A. B. C. D.
Institutional distributors build reach through Employees Agents Sub-brokers Any of the above
2. A. B. C. D.
The maximum initial commission that an AMC can pay to distributors is : Nil 0.05% 1% 2%
3. The distributor can change a fee from the investor A. True B. False 4. Stock exchange brokers are permitted to distribute mutual funds without the requirement of passing the certifying test A. True B. False 5. Trail commissions are linked to valuation of portfolio in the market A. True B. False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 5
Chapter 6 Accounting, Valuation & Taxation 1. Net assets of a scheme is nothing but its investment portfolio A. True B. False 2. A. B. C. D.
The difference between NAV and re-purchase price is Entry Lord Exit Lord Expense Dividend Stripping
3. A. B. C. D.
NAV of income funds is to be calculated upto __ decimals 4 3 2 1
4. Securities Transaction Tax is applicable to Equity Schemes A. True B. False 5. Wealth tax is payable at applicable rates on equity Mutual fund units A. True B. False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 6
Chapter 7 Investor Services 1. Foreign nationals are freely permitted to invest in Indian Mutual funds A. True B. False 2. PAN Card is compulsory for all mutual fund investment above Rs. 50,000, including SIPs A. True B. False 3. A. B. C. D.
Investment in mutual fund can be made using Cheque / DD Remittance ASBA Any of the above
4. A. B. C. D.
Cut-off timing guidelines are not applicable for NFOs International Funds Both the above None of the above
5. STP is a combination of SIP & SWP A. True B. False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 7
Chapter 8 Return, Risk & Performance of Funds 1. Fundamental analysis is a evaluation of the strength of the company’s price –volume charts. A. True B. False 2. In a top –down approach ,sector allocation precedes stock selection A. True B. False 3. A. B. C. D.
Which of the following is a truly international asset class? Real Estate Equity Debt Gold
4. Loads & taxes may account for the difference between scheme returns & investor returns. A. True B. False 5. A. B. C. D.
The most appropriate measure of returns for a scheme in existence for several years is. Simple Return Dividend Return Annualised Return CAGR
6. A. B. C. D.
Risk can be measured by Variance Standard Deviation Beta Any of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 8
Chapter 9 Scheme Selection 1. Equity markets are more predictable in the long term than the short. A. True B. False 2. Arbitrage funds are meant to give better equity risk exposure A. True B. False 3. A. B. C. D.
The comparable for liquid scheme is Equity scheme Balanced Scheme Gilt Fund Savings Bank account
4. Which of the following aspects of portfolio would investor in a debt scheme give most importance? A. Sector selection B. Stock selection C. Weighted Average Maturity D. Number of securities in portfolio 5. Mutual fund ranking & rating AMCunt to the same. A. True B. False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 9
Chapter 10 Selecting the Right Investment Products for Investors 1. More than 50% of the wealth of Indians is held in physical assets A. True B. False 2. Gold Futures are superior to ETF Gold as a vehicle for life –long investment in gold. A. True B. False 3. As regards Wealth tax, ETF Gold is superior to physical gold. A. True B. False 4. A. B. C. D.
The new Pension Scheme is regulated by SEBI IRDA PFRDA AMFI
5. An investor under the new pension scheme can choose which of the following asset classes? A. Equities B. Corporate debt C. Government Securities D. Any of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 10
Chapter 11 Helping Investors with Financial Planning 1. A. B. C. D.
Today’s costs can be translated into future requirement of funds using the formula: A = P * ( 1+ 1)n A = P / ( 1+ 1)n P=An*(1+I) P=An*(1+I)
2. A. B. C. D.
Providing funds for a daughter’s marriage is an example of Goal – oriented Financial Plan Comprehensive Financial Plan Financial Goal None of the above
3. According to the Certified Financial Planner – Board of Standards ( USA ), the first stage in financial planning is A. Analyse & Evaluate Client’s Financial Status B. Establish & Define the Client - Planner Relationship C. Gather Client Data , Define Client Goals D. Develop & Present Financial Planning Recommendations & / or Options 4. A. B. C. D.
Investor can get into long term investment commitments in Distribution Phase Transition Phase Inter – generational Phase Accumulation Phase
5. Distribution phase of Wealth Cycle is a parallel of retirement phase of life cycle A. True B. False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 11
Chapter 12 Recommending Model Portfolios & Financial Plans 1. A. B. C. D.
Risk appetite of investors is assessed through Risk Appetizers Asset Allocators Risk Profilers Financial Plan
2. The objective of asset allocation is risk management A. True B. False 3. A. B. C. D.
The asset allocation that is worked out for an investor based on risk profiling is called Tactical Asset Allocation Fixed Asset Allocation Flexible Asset Allocation Strategic Asset Allocation
4. Model portfolios are a waste of financial planners A. True B. False 5. A. B. C. D.
How much equity would you suggest for a young well settled unmarried individual? 100% 80% 60% 40%
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 12
Answers – Quick Wit
1-c
1-c
1-d
1-c
1-d
1-b
1-b
1-b
1-a
1-a
1-a
1-c
Mutual
Chapter 1 Concept & Role of a Mutual Fund 2-b 3-b 4-b 5-a Chapter 2 Fund Structure & Constituents 2-a 3-a 4-b 5-b Chapter 3 Legal & Regulatory Environment 2-a 3-b 4-d 5-a Chapter 4 Offer Document 2-a 3-b 4-c 5-b Chapter 5 Fund Distribution & Channel Management Practices 2-a 3-a 4-b 5-a Chapter 6 Accounting, Valuation & Taxation 2-b 3-a 4-a 5-b Chapter 7 Investor Services 2-a 3-d 4-c 5-a Chapter 8 Return, Risk and Performance of Funds 2-a 3-d 4-a 5-d Chapter 9 Scheme Selection 2-b 3-d 4-c 5-b Chapter 10 Selecting the Right Investment Products for Investors 2-b 3-a 4-c 5-d Chapter 11 Helping Investors with Financial Planning 2-c 3-b 4-d 5-a Chapter 12 Recommending Model Portfolios & Financial Plans 2-a 3-d 4-b 5-b
Funds
Distributor
Certification
Examination
v.Jun2010
6-d
Page 13
Practice Tests
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 14
AMFI Practice Test Series A 1)
A mutual fund is not a) A company that manages an investment portfolio b) A portfolio of stocks, bonds and other securities c) A pool of funds used to purchase securities on behalf of investors d) A collective investment vehicle
2)
Which of the following is true? Some close end funds sell at a discount to their NAV, because a) Of high expense ratios b) Investors expect that current NAV cannot be sustained by future potential c) The repurchase price fixed by the fund is lower than the NAV d) Of the inherent risk of closed end funds
3)
If the exit load is 2% and the NAV is Rs. 10, then upon redemption of 1000 units, the investor will receive a) Rs. 12000 b) Rs. 8000 c) Rs. 9800 d) Rs. 10200
4)
Which of the following Mutual Funds was not set up within the Phase 2:1987-1993? a) Canbank Mutual Fund b) Kothari Pioneer Mutual Fund c) SBI Mutual Fund d) LIC Mutual Fund
5)
Which of the following is not a benefit from a Mutual Fund? a) Investor has custody of securities where fund invests. b) Investor is able to diversify risk c) Investor can save costs d) Investor can get professional management to manage his money.
6)
Which of the following has the lowest risk? a) Liquid Fund (MMMF) b) Gilt Fund c) Diversified debt fund d) Diversified equity fund
7)
The current Mutual Fund Regulations from SEBI was introduced in a) 1992 b) 1994 c) 1996 d) 1998
8)
The sponsor of a mutual fund may be compared to: a) A director in a company b) The chief executive of a company c) The promoter of a company d) An equity shareholder of a company
9)
Issuing additional fresh units and redeeming the existing units of a mutual fund scheme is the role of: a) The custodian b) The transfer agent c) The trustees d) The bankers
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 15
10)
The appointment of AMC for the Mutual Fund can be terminated by a) Majority of Directors of the Trustee b) 50% of the Unitholders c) 45% of the Unitholders d) 60% of the Unitholders
11)
The Asset Management Company shall make investment decisions solely in the interest of a) The Sponsor b) The Trustee c) The Unit Holders d) Its Employees
12)
Mutual funds in India are set up as a a) Company b) Trust c) Partnership d) Association of Person
13)
Minimum number of independent directors on the board of asset management company is a) 50% b) 25% c) 75% d) Two-thirds
14)
Under the Indian Trusts Act, the interests of the unit-holders is safeguarded by a) A board of trustees b) A trustee company c) Either d) Neither
15)
The asset management company is appointed by a) SEBI b) Unit holders c) Sponsors d) Trustee
16)
Who needs to sign the trust deed with the trustee? a) Asset Management Company b) Sponsor c) Custodian d) All of the above
17)
Which of the following qualifies as a self-regulatory organization? a) SEBI b) RBI c) National Stock Exchange d) AMFI
18)
Whose consent is required to approve change in fundamental attributes of a closed end scheme? a) 50% of the unit holders b) 50% of the trustees c) 75% of the unit-holders d) None of the above
19)
Which schedule of SEBI (Mutual Fund) regulations 1996 specifies the contents of the Trust Deed? a) Eleventh Schedule b) Eighth Schedule c) First Schedule d) Third Schedule
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 16
20)
In case of a dispute, against whom can the Unitholders initiate legal proceedings? a) Trust b) Trustee c) AMC d) None of the above
21)
Mutual Funds are regulated by a) RBI b) AMFI c) SEBI d) NSE
22)
The body to which investors may address their complaints is a) SEBI b) RBI c) IRDA d) NSE
23)
The first-time investor would be well-advised to refer to: a) Detailed Offer Document b) The Key Information Memorandum only. c) Either of the above d) None of the above
24)
Which of the following is true of the offer document? a) Investor gets all the information to evaluate the performance of the proposed scheme b) Investor gets useful information to evaluate the performance of the AMC’s past schemes c) Investor does not get any information on services he can expect from the fund. d) Investor will not be able to assess the risks of the proposed scheme based on the offer document
25)
The Abridged Offer Document contains the address of the following: a) The Trustees of the Mutual Fund b) The Directors of the AMC c) The Registrar and Transfer Agents d) Options a & b e) Options b & c
26)
Validate the statement – The investor is not obliged to read the offer document before investing in units of a scheme. a) Completely true b) Rarely true c) Completely false d) Partly false
27)
Offer documents have to be updated within a) One year from the date of Issue b) Two years from the date of issue c) Six months from the date of issue d) None of these
28)
The front page of the offer document contains a) Date of its publication b) Name and type of the fund c) Major objectives of the fund d) a & b
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 17
29)
To a prospective investor the reliable source of pertinent information about a scheme is a) Financial Press b) Offer document c) AMFI Website d) Advice from the distributor
30)
Which of the following distribution channels is preferred by private mutual funds? a) Individual distributor b) Small distribution companies c) Established distribution companies d) The Internet
31)
Which of the following sales practices is prescribed by regulation? a) AMFI Code of Ethics b) SEBI Advertising Code c) AMFI’s code for agents d) None of the above
32)
Risk factors may not be mentioned in a) Product launch advertisement b) Tombstone advertisement c) Performance advertisement d) All of the above advertisements
33)
An NRI holds units in a mutual fund. What should he do with his holding if he takes up a foreign citizenship? a) He redeems b) He continues c) He transfers the unit to his mother, who resides in India d) None of the above
34)
MF Regulations prescribe a) The minimum commission of the distributor b) The maximum commission of the distributor c) The minimum as well as the maximum commission of the distributor d) Neither the minimum nor the maximum commission to the distributor
35)
Which of the most appropriate position under MF Regulations? a) Buyer beware b) Buyer is always right c) Seller is always right d) Seller is guilty unless proved right
36)
According to SEBI’s code for mutual fund advertisement, for funds that have been in existence for more than a year, annualized returns have to be furnished for a) 1 yr, 3 yr, 5 yr. and since launch b) 1 yr, 5 yr and since launch c) 1 yr, 3 yr and since launch d) 1 yr, 3 yr and 5 yr
37)
An open-end fund with 10,000 units outstanding had the following items in its balance sheet: Investment at market value Rs. 1,00,000 Current Assets Rs. 20,000 Current Liabilities Rs. 25,000 Calculate the fund’s NAV per unit. a) Rs. 9.5 b) Rs. 12 c) Rs. 10 d) Rs. 14.5
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 18
38)
A closed-end equity fund has average weekly net assets of Rs. 200 crores. As per SEBI Regulations, the AMC can charge the fund with investment and advisory fee upto: a) Rs. 2.25 crores b) Rs. 2 crores c) RS. 2.5 crores d) Rs. 3 crores
39)
An investor purchased units in a mutual fund in 1995 for Rs. 75000. He sold the units in 1998 for Rs. 125000. The cost inflation index for 1995 and 1998 are 281 (C) and 351(D) respectively. The capital gains chargeable to tax are: a) 64,957 b) 31,317 c) 50,000 d) 75,000
40)
Income earned by a Mutual Fund registered with SEBI is exempt from Income-Tax as per section a) 10(23D) b) 10(33) c) Total Income is taxable @ 33.2% d) 88
41)
Unit capital of a mutual fund scheme is Rs. 20 million; the market value of its investments is Rs. 55 million; The number of units is 1 million. The NAV is a) Rs. 20 b) Rs. 75 c) Rs. 55 d) Not possible to say
42)
Which of the following is untrue of the Automatic Reinvestment Plan? a) The plan allows for automatic reinvestment of all income and capital gains. b) Automatic reinvestment allows for the accumulation of additional units of the fund c) The major benefit of automatic reinvestment is the compounding of returns d) The benefit of automatic reinvestment is often lost, if reinvestment is subject to a heavy load
43)
Constraints imposed by most funds on check-writing include: a) Requirement of minimum account balance after withdrawal b) Specification of a minimum amount for which check can be issued c) Limit on the number of checks that are allowed to be issued in a month d) Both 1 and 2 above
44)
Which of the following is true of Systematic Withdrawal Plan (SWP)? a) It allows investors to make Systematic withdrawal from his fund b) It is suitable for investors seeking regular income c) SWP is similar to Monthly Income Plan d) Only 1 & 2
45)
Choose the correct Statement – Alternative Investment Plans offered by fund allows investors: a) Freedom with respect to investing one time or at regular intervals b) Making transfers to different schemes with the same fund family c) Receiving income at specified intervals or accumulating distributions d) All the above
46)
The current market price of a 9%—coupon bond, when other bonds of similar maturities pay 11% will be: a) Above par b) Below par c) At par d) Will be unrelated to other bonds
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 19
47)
Yield and Price of a bond move: a) In opposite directions b) Together in the same direction c) In an unrelated fashion d) In line with the inflation index
48)
SEBI places a limit on a scheme’s investment in “investment grade rated” debt instruments of a single issuer, because: a) Even investment grade securities carry risks of default by borrower b) A scheme must diversify its holdings and thus reduce portfolio risk c) Investment Grade ratings cannot be solely relied upon d) SEBI wants to leave some for investment in “non-investment grade” securities by the scheme
49)
Technical Analysis tries to predict future movement of stock price by analyzing: a) The financial workings of a Company b) The stock price movements of a Company c) Both of the above d) None of the above
50)
An investor purchased an open-end fund when its NAV was Rs. 20. 16 months later, its NAV stood at Rs. 22. The percentage NAV change in the fund was: a) 8% b) 7% c) 7.5% d) 8.5%
51)
A unit of open-end fund was purchased when its NAV was Rs. 20. At year-end its NAV was Rs. 22. In the interim period, the fund made a distribution of Rs. 4 per unit when its NAV was Rs. 21. What was the simple Total Return of the Fund? a) 25% b) 30% c) 20% d) 31%
52)
Which of the following is false? a) ROI is a measure similar to Total Return with reinvestment of distributions b) Total Return with reinvestment of distributions assumes reinvestment at NAV on the distribution date c) As a measure of performance, Total Return with reinvestment of distributions seeks to overcome the shortcomings of simple Total Return d) Because of its simplicity, simple Total Return is preferred in practice to Total Return with reinvestment of distribution Return can be annualized and compounded only if the Scheme has completed a) 30 days b) 12 months c) 6 months d) 24 months
53)
54)
An equity scheme is 90 days old. To compute its yield, it can use a) Absolute return b) Simple annualized return c) Compounded annualized return d) Any of these
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 20
55)
Financial Planning is a) Investing funds to receive the highest rate of return possible b) Resorting to tax planning to keep taxes as low as possible c) Planning for retirement with the maximum income possible. d) Process of solving financial problems and reaching financial goals.
56)
Your client has won Rs. 1 crore in “Kaun Banega Crorepati”. What would your suggestion be? a) Invest the entire amount without any delay in “old economy” stocks—since they are back in favour b) Invest the entire amount immediately in an Equity Index Fund—since the index is at a historic low c) Invest in very safe liquid investment options and take the time needed to work out a financial plan d) Invest immediately in IT stocks, since their valuations are now considered to be attractively low
57)
Which one of the following portfolio is most risky? a) 75% Equity — 25% debt b) 40% Equity — 60% debt c) 60% Equity — 40% debt d) 80% Equity — 20% debt
58)
The strategy advisable for an investor to maximize investment return in the long run is: a) Buy and hold on to investments for a long time b) Liquidate poorly performing investments from time to time c) Liquidate good performing investments from time to time d) Switch from poor performers to good performers
59)
A criticism of rupee-cost averaging is a) Investment is for the same amount at regular intervals b) Over a period of time, average per share price will be more than guessing the highs and lows c) It does not tell you when to buy, sell or switch from one scheme to another d) Rupee cost averaging has no serious shortcomings
60)
If you maintain a flexible ratio of asset allocation, would you a) Rebalance the Debt/Equity allocation periodically? b) Rebalance the Debt/Equity allocation very frequently? c) Generally avoid portfolio rebalancing? d) Keep fixed percentages of equity and debt investments at all times?
61)
SIP is best example of a) Rupee Cost Averaging b) Value Averaging c) Buy & Hold d) None of the above
62)
Direct investment in stock markets can be better option over investing through mutual funds if: a) The investor wants better returns than those offered by mutual funds b) The investor has large capital, knowledge and resources for research c) The investor has identified a bullish phase in the stock market d) The investor wants to invest for the long run
63)
An investor in need of regular income should not select: a) A bank deposit b) A debt fund c) An equity growth fund d) PPF
64)
Which of the following has the highest level of liquidity? a) Equity b) PPF c) Company fixed deposits d) Mutual Funds
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 21
65)
Which of the following should not be viewed primarily as an investment option? a) Mutual Funds b) Equity shares c) Life Insurance d) None of the above
66)
An investor asks you in what order he should list the following schemes, going from the scheme with the least risk to the one with the one with the highest risk — 1. A Balanced Fund, 2. A Stock Index Fund, 3. A Liquid (Money Market) Fund and 4. A Pharmaceuticals Sector Fund. a) 1, 2, 3, 4 b) 1, 3, 4, 2 c) 3, 1, 2, 4 d) 2, 3, 1, 4
67)
Ex-Marks (or R-Squared factors) of a fund measures a) How much of a fund’s NAV movement is due to the market index movement b) How a fund’s NAV movement relates to the market index movement c) How much of a fluctuation has occurred in a fund’s NAV over a historical period d) How many marks a Credit rating Agency accords to a fund
68)
Which is better investment option whilst selecting an equity fund? a) Ex Marks – 75%, Beta – 0.9, Gross Dividend Yield – 8% b) Either a or c c) Ex Marks – 80%, Beta – 0.9, Gross Dividend Yield – 8% d) Ex Marks – 90%, Beta – 0.8, Gross Dividend Yield – 9%
69)
What type of portfolio asset mix would recommend to your 55 year old client who plans to retire at age 58? Choose a portfolio that is the closest match to the investor’s needs. a) 40% in Equity Schemes and 60% in Balanced Funds. b) 40% in Equity Schemes and 60% in Debt Funds c) 20% in Equity Schemes, 20% in Liquid Funds and 60% in Debt Funds d) 100% in Monthly Income Statements
70)
For which of the following funds would you consider “average maturity” as an important factor in selecting the right one for the investor? a) A Debt Fund b) A Balanced Fund c) A Money Market or Liquid Fund d) Both ‘a’ and ‘b’ above
71)
Which of the following Portfolios would you recommend to a recently retired Couple? a) 35% in Conservative Equity Funds, 25% in moderately aggressive equity, 40% in money market funds. b) 30% in short term municipal funds, 35% long term municipal funds, 25% moderately aggressive equity, 10% in emerging growth equity c) 50% in aggressive equity fund, 25% in high Yield bond funds and growth and income funds, 25% in conservative money market funds d) Either 2 or 3
72)
AMFI Code of Conduct for Intermediaries a) prohibits mutual fund distributors from accepting commissions from an investor who renew his investment in a scheme b) Prohibits them from rebating the commission back to such investors c) Encourages them to refrain from rebating the commissions to such investors, but does not prohibit d) Prohibits them from rebating the commissions back to all investors
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 22
73)
Mutual funds in India are required by SEBI to a) Prohibit their employees from personal trading in secondary markets b) Allow all employees to trade freely in secondary markets without restrictions c) To establish a code of conduct and allow employees to do personal trading that conforms to SEBI guidelines d) Allow employees to carry on personal trading as long as they abide by SEBI guidelines
74)
A Charitable Trust wanted to invest in Mutual Funds. What would you do? a) Accept the application form with cheque b) Refuse to accept the application c) Refer to the offer document of the scheme to confirm that a charitable trust is allowed to invest d) Accept the application form, without the cheque, and forward it for financial acceptance by the fund/ AMC Contingent Deferred Sales Charge (CDSC) a) Is higher for investors who stay invested in the schemes longer b) Is lower for investors who stay invested in the scheme longer c) Is the same for all investors irrespective of how long they stay invested d) Is not allowed to be charged to mutual fund investors in India
75)
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 23
ANSWERS Test A
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 Q25
Mutual
Funds
A B D B A A C C B A C B A C D B C C D B C A A B E
Distributor
Q26 Q27 Q28 Q29 Q30 Q31 Q32 Q33 Q34 Q35 Q36 Q37 Q38 Q39 Q40 Q41 Q42 Q43 Q44 Q45 Q46 Q47 Q48 Q49 Q50
Certification
C B D B C B B A D A A A A B A D D D D D B A B B C
Q51 Q52 Q53 Q54 Q55 Q56 Q57 Q58 Q59 Q60 Q61 Q62 Q63 Q64 Q65 Q66 Q67 Q68 Q69 Q70 Q71 Q72 Q73 Q74 Q75
Examination
B D B A D C D D C C A B C D C C A D C D A D C C B
v.Jun2010
Page 24
AMFI Practice Test Series B
1. Which of the following is generally true for a growth stock? a. Steady capital appreciation and steady dividends yields b. High capital appreciation and high dividend yields c. High capital appreciation but low dividend yields d. Steady capital appreciation but high dividend yields 2. A fund's declared NAV does not include loads a. True b. False 3. All expenses and income accrued upto the valuation date shall be considered for valuation. Some minor expenses need not be so accrued, provided their affect on the NAV is not more than: a. 2% b. 1.5% c. 0.5% d. 1% 4. When a scheme with assured returns is being launched, which of the following need not be published in the offer document? a. Means of fulfilling the guarantee b. Information for all schemes launched by the fund in the past c. Comparison with other mutual funds d. Investment objective 5. NAV of a fund is 14, Exit Load is 1.5%. Calculate the price at which the investor will be able to redeem 500 units. 6. The NAV of each scheme should be updated on AMFI's website a. Every quarter b. Every month c. Every hour d. Every day 7. NAV of a scheme is 20. Exit Load is 1.5%. What will be the price at which the investor will be able to sell units? 8. Which of the following would you suggest if your client suddenly wins Rs. 1 cr in a game show? a. Invest the whole amount in equity directly b. Invest half in equity mutual funds and the other half in debt mutual funds c. Invest in a money market mutual fund till the time he decides on the use of the money d. Spend, gift and invest as per his wish
9. Which of the following are not true for ELSS? a. Investor can claim an income tax benefit b. There is a lock-in period before investment can be withdrawn c. There are no specific restrictions on investment objectives for the fund managers d. These funds cannot invest in shares of listed companies
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 25
10. The prospectus of the OD containing the details of a new scheme is first registered with a. AMFI a. SEBI b. BSE c. Ministry of Finance
11. A no-load fund is one in which? a. Entry load is not charged b. Exit load in not charged c. Entry load as well as exit load is not charged d. The initial issue expenses are not charged to the investor 12. If the NAV of an open-ended fund increased from Rs. 16 to Rs. 20 in 6 months, the absolute return is a. 6.00% b. 34.60% c. 25.00% d. 37.50% 13. A Mutual fund can benefit from economies of scale because of: a. Indirect investment b. Large volumes of trade c. Portfolio diversification d. Fund manager 14. The structure, which is required to be followed by mutual funds in India, is laid down by: a. Finance ministry b. SEBI c. Fund Sponsor d. AMFI 15. The Board of trustees of a mutual fund a. Act as a protector of investor’s interest b. Directly manage the portfolio of securities c. Do not have the right to dismiss the AMC d. Cannot supervise and direct the working of the AMC 16. The fund sponsor has to contribute: a. Nothing to the AMC b. The total Net Worth of the AMC c. At least 40% of the AMC’s net worth d. Exactly 50% of the net worth of AMC 17. Special Privileges of erstwhile UTI include a. Assured return schemes b. Guarantees c. Ability to take/make loans d. All of the above 18. The most important factor to look for when investing in a corporate fixed deposit is the a. Yield b. Rate of interest c. Credit rating of the deposit d. None of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 26
19. Risk arising from a scheme’s investment objective/strategy and proposed asset allocation is a. Not a risk at all b. Common to all schemes c. Specific to that scheme d. Not applicable to debt funds
20. The role of AMFI in the MF industry is not to: a. Promote the interest of the unit holders b. Set a code of ethics c. Regulate mutual funds d. Increase public awareness of MFs in the country 21. Loads are recovered a. From agents and distributors b. As a fixed amount each year c. At the time of investor’s entry or exit d. None of the above 22. Which of the following is true about the fundamental attributes of a scheme? a. Investment objectives of a scheme are not a fundamental attribute b. These can be changed after informing investors and taking approval from SEBI and Trustees c. OD need not be updated after change in fundamental attributes of a scheme d. All are false 23. Investments made by mutual fund on behalf of investors are accounted as a. Assets b. Liabilities c. Capital d. None of the above 24. The NAV of an Open-ended scheme is 15. What can be the maximum entry load charged to the investor? a. 2.25% of 10 b. 2.25% of 15 c. 7% of 15 Nil d. 7% of 10 25. A high portfolio turnover for a fund indicates a. That the fund is active b. Higher transaction cost c. Both of the above d. None of the above 26. Which of the following is not an equity instrument? a. Preference shares b. Equity warrants c. Ordinary debentures d. Convertible debentures 27. Retired investors should a. Not draw down on their capital b. Not invest in securities which bear risk of capital erosion c. Continue holding some proportion of their holdings in equity growth funds d. Never invest in equity
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 27
28. The code of conduct may be put in place by: a. AMFI b. Board of Trustees c. Directors of AMC d. All of the above 29. The expense ratio is not affected by: a. Fund size b. Average account size c. Portfolio composition d. Stock market conditions 30. Which of the following transaction cost are not quantified in the offer document? a. Brokerage commission b. Dealer spread c. Custodian fee d. Registrar fee 31. A small investor can build a diversified portfolio by a. Buying one share each of all listed companies b. Investing in a mutual fund c. Borrowing enough money to buy shares of well-managed companies d. None of the above 32. The liquidity needs of an investor are met through a. Equity funds b. Index funds c. Money market funds d. Sector funds 33. Which of the following is not false about a mutual fund a. Open ended funds can be sold in secondary markets b. Close ended funds do not have a fixed tenure c. Open ended funds do not calculate their NAV on every business day d. The NAV of a close ended fund has to be calculated at least once in a week 34. An investor should be advised to avoid investing in a debt fund with a a. Lower rated portfolio and higher expense ratio b. Higher rated portfolio and lower expense ratio c. Lower rated portfolio and lower expense ratio d. Higher rated portfolio and higher expense ratio 35. A self-regulatory organization can a. Regulate all entities in the market b. Regulate only its own members in a limited way c. Regulate its own members with total jurisdiction d. Regulate no one 36. Systematic Withdrawal Plan allows investors to get back the principal amounts invested in addition to the income on investment a. True b. False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 28
37. UTI was set up by a. SEBI b. AMFI c. A special Act d. RBI 38. Constraints imposed by most funds on check writing are a. Account balance should not fall below the minimum capital required b. Checks issued must be for at least the minimum amount specified c. Number of checks per month must not exceed a specified number d. Both a & b above 39. An owner of preference shares is given which of the following rights a. Voting rights b. Fixed dividend income from post-tax profits c. Voting rights and unlimited dividend income d. No guaranteed rights 40. Market capitalisation of a company is calculated by multiplying the number of outstanding shares by a. Rs.10 b. Face value of each share c. Current market value of each share d. Dividend yield 41. Shares of companies with large capital market capitalisation a. Have greater growth potential b. Are more liquid c. Are not available d. None of the above 42. In case of a fund scheme merger or take-over a. High court approval may not be necessary b. SEBI approval is a must c. All unit holders must be informed d. All of the above 43. What is the statistics used in validating Beta? a. Standard deviation b. Beta c. Ex-marks d. Sharpe ratio 44. As a financial planner, which of the following would you suggest for a person who can take a moderate risk? a. Aggressive growth fund b. Aggressive equity fund c. Diversified equity fund d. Sectoral fund
45. A growth fund manager would apply the following strategies: a. Invest in those companies that would give more returns than the average returns in the industry. b. Invest in companies having a large equity base. c. Invest in companies coming out with new “Initial public offers’ d. All of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 29
46. An active style of portfolio management includes the following: a. Application of ‘Systematic transfer plan’ in various schemes of a fund. b. Undertake macroeconomic analysis to determine profitable investment trends. c. Invest in companies with high market capitalization d. All of the above. 47. What would be the maximum initial issue expenses charged from the investors, if the amount mobilized from a mutual fund NFO is Rs. 50 crore? a. Rs. 5 crore b. Rs. 2 crore c. Rs. 3 crore d. Rs. 1 crore 48. When interest rates for similar maturities bonds are 11.5%, bond with a 8% coupon rate will become: a. More attractive b. Less attractive c. At par d. The price is unrelated to the interest rates for similar securities. 49. What would be a suitable benchmark to evaluate a closed-end debt fund? a. BSE Sensex b. I-sec’s Si-bex c. Crisil Composite Bond Fund Index d. S & P CNX Nifty 50. Financial planning involves the achievement of following objectives: a. Buying a home b. Purchase of a new car c. Planning for retirement d. All of the above 51. What is Bogle’s suggestion regarding the ‘rule of thumb’ for asset allocation? a. 50% equity and 50% debt b. 60% equity and 40% debt c. An investor’s allocation to debt should be equal to his age. d. Investor should not do any re-balancing of his/her portfolio. 52. What should be the recommended portfolio for an investor who is risk averse in his transition phase? a. Higher allocation to equity funds b. Higher allocation to debt instruments c. Investments only in equity d. He should not invest anywhere 53. Which of the following is true? a. SEBI does not allow the investor to pledge his mutual fund units in favor of a financial institution b. An investor cannot redeem his mutual fund holding in part. c. The frequency of investment offered for SIP varies from one fund to another. d. All of the above 54. What is the proof that the investor has invested in mutual fund units? a. The investors receive units commensurate with the investment made. b. Investors get an account statement, showing their holdings and their price. c. The receipt of money acts as the proof d. None of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 30
55. What is the maximum time given to the Asset management company to give their reply after the observations made by SEBI to a new fund scheme filed with it? a. 2 months b. 3 months c. 4 months d. 6 months 56. How would you convince a first-time investor who is risk-averse to invest in mutual funds in comparison to a bank deposit? a. Mutual funds is the right choice to grow your wealth at a fast pace b. Mutual fund has the likelihood of giving more growth than the bank deposit as the investment is in a diversified portfolio of securities. c. Investment in Mutual fund doubles your money in 3 years. d. All of the above 57. Bogle’s suggestion for debt is based on: a. Age b. Wealth c. Family size d. None 58. Govt. securities are valued for computing NAV by: a. AMFI b. RBI c. SEBI d. MOF 59. Who cannot distribute mutual funds in India? a. Regional office b. SEBI c. Post Office d. Foreign Bank e. PSU Bank
60. Who cannot distribute mutual funds in India? a. Directors of AMC b. Trustee c. Employee of AMC d. Sponsor 61. Who cannot distribute mutual funds in India? a. RBI b. PSU Bank c. Foreign Bank d. All of the above 62. An important part of transaction cost is: a. Stamp duty b. Custodian fee c. Registrar fee d. Commission
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 31
63. Best option for power of compounding is: a. 12% yearly b. 6% half-yearly c. 3% quarterly d. 1% monthly 64. For tax implication computation, a client should a. Read the OD b. Consult tax consultant c. AMC will take care d. Clarify with IT Dept 65. Who registers the mutual fund with the SEBI? a. AMC b. Trustee c. Sponsor d. Investment manager 66. A client’s financial plan should not be reviewed when a. The client has just retired b. The client has just been divorced at age 40 c. The client feels he has attained his financial goals d. The client’s mutual fund portfolio shows appreciation 67. NAV means: a. (Market Value of Assets – Liabilities) / number of units outstanding b. (Book Value of Assets – Liabilities) / number of units outstanding c. Unit capital / number of units outstanding d. Net assets / initial number of units 68. If an investor needs income, he should select funds with: a. Low expense ratio b. High expense ratio c. Low current yield d. High current yield 69. When interest rate rises, bond price a. Is not affected b. Fluctuates up or down c. Also rises d. Falls 70. The AMFI is governed by: a. RBI b. Ministry of Finance c. A board of directors elected from among members of AMFI d. SEBI 71. A fund that charges a load is better than a no-load fund a. True b. False
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 32
72. Documents available to investors for inspection do not include a. Memorandum and Articles of Association of AMC b. Consent of auditors and legal advisors c. Investment management reports d. Reports based on which actual investments are made 73. A passive fund has the following feature a. A passive fund tracks the index b. A passive fund matches the performance if the index c. A passive fund selects the stocks that are present in the index d. All of the above 74. Where do Gilt Funds Invest? a. Shares b. Debentures c. Dated Securities d. None of the above 75. Which of the following Mutual Fund was setup after 1963 but before 1987? a. SBI Mutual Fund b. Can Bank Mutual Fund c. LIC Mutual Fund d. None of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 33
ANSWERS Test B
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 Q25
Mutual
Funds
A A D D 6895 D 19.7 C D A D C B B A C D C C C C A A C B
Distributor
Q26 Q27 Q28 Q29 Q30 Q31 Q32 Q33 Q34 Q35 Q36 Q37 Q38 Q39 Q40 Q41 Q42 Q43 Q44 Q45 Q46 Q47 Q48 Q49 Q50
Certification
C C D D A B C D B B A C D B C B D D C A B C B B D
Q51 Q52 Q53 Q54 Q55 Q56 Q57 Q58 Q59 Q60 Q61 Q62 Q63 Q64 Q65 Q66 Q67 Q68 Q69 Q70 Q71 Q72 Q73 Q74 Q75
Examination
C B C B D B A B B B A D D B C D A D D C B D D C D
v.Jun2010
Page 34
AMFI Practice Test Series C 1. Insider trading means: a. Personal trading transactions done by anyone associated with a Mutual Fund b. Personal transaction done by anyone with knowledge of the fund decision in the security c. Personal trading transaction without prior approval of the AMC d. Personal trading transaction done by an insider of an AMC/Fund 2.
Fund merger involving 2 or more schemes of different AMCs requires consent of unit holders with X% voting rights. X is: a. 50 b. 100 c. 51 d. 75
3. What makes mutual fund the single most important financial instrument as a financial planner? a. Mutual Funds help in portfolio diversification and risk reduction b. Mutual Funds help in doubling investment c. Both the above d. None of the above 4. Select which of the following is an example of unethical behaviour? a. Fund distributor buying shares that he knows are part of the fund portfolio recommended to investors b. Fund employee buying shares that he knows the fund has decided to buy c. Fund trustee owning a share portfolio of his own d. Fund manager buying shares in his own name 5. A mutual fund launches a new scheme. 10 crore units are issued. An entry load of 2.25% of the face value during the New Fund Offer period is mentioned in the Offer Document. Issue expenses are 8 cr. How much of this would be borne by the scheme? a. 6 cr b. 3.75 cr c. 2.25 cr d. 8 cr 6. Which of the following is true? a. KIM is abridged offer document b. OD is abridged shareholder agreement c. KIM is abridged Investment Management Agreement d. OD is abridged KIM 7. What is the portfolio recommended for Young Married Single Income Family with 2 School-going Kids a. 35% - Diversified Equity Fund, 15% - Sector Funds, 15% - Gold ETF, 15% - Diversified Debt & 20% - Liquid Fund b. 35% - Diversified Equity Fund, 10% - Sector Funds, 15% - Gold ETF, 30% - Diversified Debt & 10% - Liquid Fund c. 50% - Diversified Equity Fund, 20% - Sector Funds, 10% - Gold ETF, 10% - Diversified Debt & 10% - Liquid Fund d. 15% - Diversified Equity Fund, 10% - Sector Funds, 30% - Gold ETF, 30% - Diversified Debt & 15% - Liquid Fund
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 35
8. Role of the custodian is: a. Managing the fund’s distribution channel b. Making investments on behalf of the Fund Managers c. Handling payment of investments with bankers d. Safe keeping of securities or participating in the clearing system on behalf of the mutual fund 9. A person enters a fund at NAV of 22. 18 months later the NAV is 24. The annualized percent change in NAV is: a. 9% b. 5.56% c. 9.09% d. 6.06% 10. During the reaping phase the investor looks to: a. Building wealth b. Cashing out c. Transferring wealth d. All of the above 11. In the offer document “unit & offer” describes the nature and significant attributes of the units under offer. Which of the following is not covered under this: a. Minimum amount to be raised b. Period under which refund should be carried out c. Circumstances under which refund may take place d. Maximum target amount to be raised 12. A mutual fund is: a. A partnership b. A pass through vehicle c. A private trust d. An association of persons 13. Only one of the following is required to pass the AMFI examination: a. Trustees b. Officers of SEBI working in the Mutual Fund department c. Employees in a call center dealing with mutual fund investors d. Fund managers 14. An investor claims that the PPF is a superior instrument to Mutual Funds. An argument to defend investment in a Mutual Fund over PPF is: a. Mutual Fund will surely yield a better return than PPF b. A mutual fund offers the potential for higher income and capital appreciation c. The capital investment is safer in a Mutual Fund d. A Mutual Fund investment is less volatile 15. An NRI wishes to invest in a Mutual Fund. Which of the following is true? a. He cannot apply has he will be paying in Foreign Currency b. Need not take individual permission as RBI has granted general permission in this regard c. The investor has to apply to RBI seeking permission as he will be paying in foreign currency d. Cannot apply as it is open to Indian residents only
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 36
16. The cut-off time for redemption request kept by an AMC is 3:00 pm. An application for redemption received at 3:01pm a. Redemption will be based on next day NAV but no exit load will be charged b. Redemption will be based on next day NAV c. Applicant will be asked to resubmit the request 10 am the next day d. The same day NAV will apply since the gap is less than 30 minutes from cut-off time 17. Duration of a bond means the percent change in: a. Price with change in yield b. Price as a result of stock market fluctuations c. Price with change in coupon rate d. None of the above 18. Where would you place a 53 years old executive planning to retire at age 60? a. Sudden wealth stage b. Reaping stage c. Accumulation stage d. Transition stage 19. The OD should indicate the management of the fund. The management doesn’t include: a. Name of trustees b. Name of the Fund Manager c. Business experience of the key personnel of the AMC d. Registration number of the custodian 20. Small funds: a. Are relatively easier to manage b. Achieve their objectives in a more focused manner c. Have limited holding of securities d. All of the above 21. OD must contain information about unit holder transaction expenses. Which of the following is not an item under this? a. Repurchase load b. Initial issue expenses c. Max sales load d. Switchover load 22. An open ended scheme can change its fundamental attributes: a. By allowing unit holders to exit scheme after 6 months without exit load b. After obtaining prior approval from SEBI c. By obtaining consent of 75% of unit holders d. Informing each unit holder individually and allowing exit without exit load 23. The total net assets of a fund scheme increased from 100 cr to 120 cr. Of this, 5 cr was unrealized gain. The number of units is 10 cr. The maximum dividend per unit the scheme can declare is: a. Rs 2 b. Rs 1.50 c. Rs. 0.50 d. Rs. 1 24. Fund manager with investment philosophy of growth investing, looks for: a. Companies with above average profits and growth in earnings b. Companies with large equity base c. Companies which are likely to go for public issue d. All of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 37
25. “Making mutual funds work for you – the investor’s guide” was published by: a. SEBI b. AMFI c. UTI d. Investor Education and Protection Fund 26. An Investor invested in the UTI Money market Mutual Fund. To see the relevant financial statements, she should read: a. Financial statement of the schemes managed by UTI trustee b. Annual report of AMFI c. Annual report of SEBI d. Financial statement of the UTI AMC 27. As per investment company institute, AMFI equivalent in the US, corporate bond funds have higher risk than: a. Money Market funds b. Index funds c. Aggressive funds d. Growth funds 28. MF can invest in unlisted securities within SEBI approved limits, including: a. Unlisted company’s shares b. Units of venture capital funds c. Both the above d. None of the above 29. A grandfather wants to make an investment for a newborn grandson. Which is the most suitable investment? a. Index funds b. Income funds c. Money market funds d. Gilt funds 30. The ratio which divides risk premium by Standard Deviation is: a. Sharpe Ratio b. Treynor Ratio c. Bogle Ratio d. Jensen Ratio 31. The following is not required on the cover page of the OD? a. Date on which approved by trustees b. Earliest closing date for New Fund Offer c. Date the NFO closes d. Date the NFO opens 32. The NAV of a fund is 35. Exit Load is 0.50%. How many units should Ms Monica redeem to withdraw Rs. 50,000/-? 33. NAV of a fund is 48. Exit Load is 1%. Calculate the price at which the investor will be able to purchase 2000 units.
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 38
34. Which of the following expenses cannot be charged to the scheme a. Audit fees b. Costs related to investor communication c. Winding costs for terminating the scheme d. Penalties and fines for infraction of laws 35. The valuation norm for non-investment grade, performing assets is done: a. On YTM basis using the Crisil valuation methodology b. On YTM basis with 25% discount c. At 25% discount to face value d. At face value 36. Valuation norms for non-traded securities should be disclosed a. At the end of every financial year b. Every quarter c. In the offer document at the time of launch of the scheme d. Should not be disclosed, being confidential information 37. As per SEBI guidelines, a security is to be treated as untraded when a. Security is never traded on stock exchange b. Security is not traded for 30 days c. Security is not traded for 60 days d. None of the above 38. Ex-marks with 100% could be for the following fund: a. Growth fund b. Index fund c. Value fund d. Balanced fund 39. A high turnover rate for a fund indicates a. High transaction costs b. Greater efficiency c. High returns to the investor d. A rising market 40. An investor can assess the performance of his mutual fund by comparing it with the performance of a. Other mutual fund of the same type b. The stock market c. Other financial products d. All of the above 41. If the NAV of an open-ended fund was Rs. 16 at the beginning of the year and Rs.22 after 13 months, the annualized change in NAV is a. 6.0% b. 34.6% c. 40.6% d. 37.5% 42. The choice of an appropriate benchmark for evaluating a fund’s performance depends on a. The fund manager b. The investment objective of the fund c. SEBI d. AMFI
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 39
43. When comparing a fund’s performance with that of its peer group, the following cannot be compared a. Two debt funds with 5 year maturities b. A broad-based equity fund with an IT Sector Fund c. A bond fund with bond index d. A government securities fund with a government security 44. Which of the following is false? a. ROI is a measure similar to Total Return with Reinvestment of distribution b. Total Return with Reinvestment of distributions assumes reinvestment at NAV on the distribution date c. As a measure of performance, Total Return with Reinvestment of distribution seeks to overcome the shortcomings of simple Total Return d. Because of its simplicity, simply Total Return is preferred in practice to Total Return with Reinvestment of distribution 45. Financial planning allows a person a. To become a billionaire b. To achieve financial goals through proper management of finances c. To invest in foreign countries d. None of the above 46. Financial Planning comprises a. Defining a client’s profile and goals b. Recommending appropriate asset allocation c. Monitoring financial planning recommendations d. All of the above 47. Financial planning does not include a. Enabling investors to define financial goals b. Assessing the investors risk and return requirements c. Recommending an appropriate asset allocation d. Selecting securities that will be included in the investor’s portfolio 48. A small investor can build a diversified portfolio by a. Buying one share each of the listed companies b. Investing in a mutual fund c. Borrowing enough money to buy shares of well-managed companies d. None of the above 49. Direct investment in stock market can be a better option than investing through mutual funds if the investor a. Wants better returns than those offered by mutual funds b. Has large capital, knowledge and resource for research c. Has identified a bullish phase in the stock market d. Wants to invest for the long term 50. The reason for popularity of Indira Vikas Patra was a. Rural investors b. Investors in high tax bracket c. Urban investors d. Investors who want to protect their identity
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 40
51. Most individuals invest in life Insurance policies for a. Risk protection b. Tax benefits c. Easy liquidity d. High returns 52. Which of the following about PPF is false? a. Investments have to be made from taxable income of the relevant year. b. Investments once made cannot be withdrawn until maturity. c. Both interest and principal are tax free in the year of withdrawal d. Investments enjoy tax benefits under Section 80c of the IT Act. 53. The difference between debenture and bond is: a. Bonds are issued by corporations and debentures are issued by PSUs. b. Bonds are unsecured and debentures are secured. c. Bonds are backed by loans and debentures are backed by assets d. None of the above
54. A criticism of rupee-cost averaging is a. Investment is for the same amount at regular intervals b. Over a period of time, the average purchase price will work out lower than if one ties to guess the market highs and lows c. It does not tell you when to buy, sell or switch from one scheme to another d. Rupee cost averaging has no serious shortcomings
55. A high proportion of investment in income funds is required by a. Accumulating investors b. Affluent investors c. Investors in the inter-generational transfer phase d. Investors in the distribution phase 56.
Mutual fund can benefit from economics of scale because of a. Portfolio diversification b. Risk reduction c. Large volume of trades d. None of the above
57.
Equity Linked Savings Scheme does not have which of the following features? a. It entitles the unit holder to tax benefits b. The investment is locked in for 3 years c. A minimum stated level of investments is made in equity and equity related instruments d. None of the above
58.
The Custodian of a mutual fund: a. Is appointed for safekeeping of securities b. Need not be an entity independent of the sponsors c. Not required to be receive deliveries with SEBI d. Does not give or receive deliveries of physical securities
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 41
59.
As per SEBI guidelines, a due diligence certificate is not a. Signed by a Compliance Officer of the mutual fund b. A certificate that all legal formalities of a scheme are completed c. Attached to Annual report d. A part of offer document
60.
SEBI does not require the following to be included in the offer document issued by a mutual fund a. Details of the Sponsor and the AMC b. Description of the Scheme & investment objective/strategy c. Investors’ Rights and Services d. Performance of other mutual funds
61.
Mutual funds do not justify the need for paying commission to agents when the investors skip out of the scheme before a specified period. In India this practice is adopted by a. Agents voluntarily paying back the commission to the Mutual fund b. Trail commission is not paid to the agents c. None of the above d. The whole of commission is paid to the agents
62.
Distributors or agents a. Can distribute several mutual funds simultaneously b. Cannot appoint sub-agents or sub-brokers c. Should be only individuals not companies or banks d. Should not be an employee or associate of the AMC
63.
The AMFI code of ethics does not cover the following prescriptions a. Adequate disclosures should be made to the investors b. Funds should be managed in accordance with stated investment objectives c. Conflict of interest should be avoided in dealings with directors or employees d. Each investment decision should be approved by investors
64.
Contingent Deferred Sales Charge (CDSC) a. Is higher for investors who stay invested in the scheme longer b. Is lower for investors who stay invested in the scheme longer c. Is the same for all investors irrespective of how long they stay invested d. Is not allowed to be charged to mutual fund investors in India.
65.
A Debt fund distributes 10% dividend. How much tax does the investor have to pay on this dividend? a. 10% b. 12% c. 20% d. None
66.
A value manger does not look for a. Stocks that are currently undervalued in the market b. Stocks whose worth will be recognized by the market in the long term c. High current yield d. Long term capital appreciation
67.
As per SEBI, mutual funds can borrow for short term to the extend of a. Total net assets b. 50% of net assets c. 25% of net assets d. 20% of net assets
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 42
68.
A mutual fund is not allowed to invest in the sponsor company, a. > 25% of its net assets b. > 10% of its net assets c. Not at all d. > 5% of net assets
69.
Liabilities in the balance of a mutual fund are a. In the form of long-term loans b. Strictly short term in Nature c. Combination of long term and short term d. Not allowed as per regulations
70.
A fund’s investments at market value total Rs. 700 crores, Total liabilities stand at Rs. 50 lacs and the number of units outstanding is 28 Crores. What is the NAV? a. Rs. 30.19 b. Rs. 24.98 c. Rs. 32.15 d. Rs. 40.49
71.
For valuation of traded securities, which of the following is not true? a. The security is valued at the last quoted price b. The security is valued on the basis of earnings capitalization c. Making to market is applied d. If the security has not been traded on valuation date, the trading price on any previous date may be used, provided that date is not more than 30 days prior to valuation date.
72.
For evaluating sectoral funds, the preferred benchmark would be the a. BSE Sensex b. S&P CNX Nifty c. BSE 200 d. S&P CNX Sectoral Indices
73.
The Expense Ratio as a measure of a fund’s performance is defined as a. Total expenses and average net assets b. Total expenses and total asset c. Average expenses and average net assets d. None of the above
74.
Within an asset class, which individual security to invest in should be decided by a. The financial planner b. The investor himself c. A professional fund manager d. An objective advisor
75.
Flexible asset allocation means a. Continuously changing the ratio of various assets in the portfolio b. Not doing any re-balancing and letting the profits run c. Active switching d. None of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 43
ANSWERS TEST C
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 Q25
Mutual
Funds
A D A B A A B D D B D B C B B B A D D D B A B A B
Distributor
Q26 Q27 Q28 Q29 Q30 Q31 Q32 Q33 Q34 Q35 Q36 Q37 Q38 Q39 Q40 Q41 Q42 Q43 Q44 Q45 Q46 Q47 Q48 Q49 Q50
A A A A A A 1435,75 96000 D A B B B A D B B B B B D D B B B
Certification
Q51 Q52 Q53 Q54 Q55 Q56 Q57 Q58 Q59 Q60 Q61 Q62 Q63 Q64 Q65 Q66 Q67 Q68 Q69 Q70 Q71 Q72 Q73 Q74 Q75
Examination
B B B C D C D A C A D B D B D C D A B B B D A C B
v.Jun2010
Page 44
AMFI Practice Test Series D
Q1. Which of the following is not a role of mutual funds? a. Livelihood for a large number of employees and distributors b. Promoting overall economic development c. Helping investors speculate and earn large returns d. Help build the capital markets Q2. Suggested portfolio for a couple in their 60s with no family support a. 35% diversified equity, 15% gold ETF, 15% Gilt, 15% Diversified Debt and 20% Liquid b. 50% diversified equity, 20% gold ETF, 10% Gilt, 15% Diversified Debt and 5% Liquid c. 15% diversified equity, 10% gold ETF, 30% Gilt, 30% Diversified Debt and 15% Liquid d. 35% diversified equity, 10% Sector, 15% gold ETF, 30% Diversified Debt and 10% Liquid Q3. Diversification means a. A bird in hand is better than 2 in the bush b. The devil you know is better than the devil you don’t c. Don’t put all your eggs in one basket d. Save for the rainy day Q4. Who among the following is not allowed to invest in MFs in India? a. Non Resident India b. Foreign nationals c. Other Mutual Funds registered in India d. Religious and charitable trusts Q5. Which of the following is not a regulatory body in India? a. SEBI b. RBI c. AMFI d. IRDA Q6. Which of the following are permissible investments for mutual funds in India? a. International equity b. Commodities c. Real estate d. Only b and c Q7. Which of the following is not a pre-requisite for a sponsor? a. Earned profit in 3 out of previous 5 years b. Latest net worth more than capital contributed to AMC c. Been in financial services business for at least 7 years d. Needs min 40% shareholding of the capital of AMC Q8. The advantage that MFs offer over FDs is: a. Higher return potential b. Higher returns in a falling interest regime c. Tax benefits d. Switches e. All the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 45
Q9. Which of the following is true about ETFs? a. open-ended index funds traded on the stock exchange b. Market makers quote buying and selling prices at all times c. Investors buy and sell at market prices d. ETFs are more cost effective than normal index funds e. All the above Q10. “To generate income by investing predominantly in a wide range of debt and money market securities” is an example of a scheme’s: a. Investment objective b. Investment policy c. Investment strategy d. Investment regulation Q11. A suggested strategy in case of an investor has a windfall gain: a. Invest in long term equity to maximize returns b. Invest in fixed deposit for a year and take the decision later c. Invest in a liquid scheme and then start an STP into an equity scheme d. Invest 50% in real estate and balance 50% in bank deposits Q12. Which of the following is a parameter for debt fund selection? a. Regular income yield portfolio b. Fund age c. Scheme running expenses d. Ranking and rating e. All the above Q13. Which of the following is correct? 1. Stocks of gold companies move in tandem with gold prices 2. Stocks of gold companies may rise or decline faster than gold prices a. Only 1 b. Only 2 c. Both d. Neither
Q14. Select the correct statement a. RTA appointment is not compulsory b. Auditors of AMC accounts can be the same as auditors of scheme account c. Both are correct d. Neither is correct Q15. Which of the following is true about gold funds a. Gold ETF NAV moves in line with gold prices b. Gold Sector Fund NAV moves in line with gold prices c. Both are correct d. Neither is correct
Q16. Comment on the risk appetite of a person with a steady job? a. better risk appetite b. Lower risk appetite c. Depends on extent of loans d. Depends on number of dependents
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 46
Q17. The following is not a stage in wealth cycle of an individual a. Distribution stage b. Transition Stage c. Farming stage d. Accumulation stage Q18. The following is not prescribed as part of 6-step financial planning process prescribed by FPSB, USA: a. Analyze and evaluate client’s financial status b. Help clients segregate active and passive income c. Develop and present financial planning considerations and/or options d. Implement the financial planning recommendations Q19. Select the correct statement a. AGNI applies to distributors of mutual funds b. ACE applies to employees of AMC c. Both are correct d. Neither is correct Q20. Which of the following is true for mutual funds in India? a. Refunds must be sent within 5 business days of closure of NFO b. Statement of account must be sent within 5 business days of closure of NFO c. Both are correct d. Neither is correct Q21. Due diligence certificate is signed by the a. Board of Trustees b. CEO of the AMC c. Security Analyst d. Compliance Officer Q22. What is the role of the custodian? a. Maintain records of investors and unit-holding b. Manage day to day affairs of the schemes c. Safekeeping of assets of the scheme d. None of the above Q23. Which of the following is true for selecting a debt fund? 1. In a declining interest rate scenario, it is sensible to go with long-term debt funds 2. In a rising interest rate scenario, it is safer to go with short-term funds. a. Only 1 b. Only 2 c. Both d. Neither Q24. Which of the following is true for NFOs? a. NFO can remain open for a maximum of 15 days b. Allotment of units must be done within 15 days of closure c. Open-ended funds open for repurchase within 15 days of the allotment d. All the above Q25. The following is not a KYC document. a. Identity Proof b. Income Proof c.PAN Card d. Address Proof
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 47
Q26. An investor claims proceeds 1 year after maturity. Which of the following is payable? a. Payment based on prevailing NAV b. Payment based on NAV at maturity c. Payment based on NAV at the end of 3 years d. No claim is payable since the money is deposited in investor education fund Q27. Which of the following may be an indicator of unsteady investment style? a. Fund Size b. Frequent subscription and redemption by investors c. Fluctuation in market prices of portfolio securities d. Frequent buying and selling of securities Q28. Where can one find info about list of eligible investors? a. KIM b. ‘Who can invest’ section of the OD c. ‘Investor Rights’ in OD d. SAI
a. b. c. d.
Q29. Which of the following is true about ELSS schemes? 3 year lock-in period Tax benefit under section 80c Guarantee of superior performance than diversified equity Only a and b above
Q30. “Because all swans you have seen are white, it does not mean that black swans do not exist” suggests a. Black swan population is decreasing rapidly b. Ignorance is bliss c. Abnormal events may be rare but bring unknown and large amount of risk d. The devil you know is better than the devil you don’t Q31. Select the correct statement. a. Fundamental analysis helps in making long term investment decisions b. Technical analysis is useful for short-term speculative calls c. Technical analysts are also called chartists d. All the above Q32. Which of the following is true of investor rights? a. Scheme can be would up by a resolution passed by unit-holders b. Investors can file a suit against trustees c. Investors can sue the trust d. Only a, b and c above e. All the above Q33. Which of the following is correct? a. Unit Certificate is like a pass book detailing account balances b. Unit certificates are transferable c. Both are correct d. Neither is correct
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 48
Q34. Which of the following is correct? a. SIP works on the principle of Rupee Cost Averaging b. In case of debt schemes, re-purchase is preferable over dividends c. Both are correct d. Neither is correct Q35. Which of the following is true about FMPs a. Money is accepted only during NFO b. Invest in securities with maturity coinciding with maturity of the scheme c. Comparable to investments in fixed deposits d. All the above e. Only a and b above Q36. Which of the following is true? a. In floaters, issuer pays higher interest when market yields go up b. Of interest rates are expected to fall, exposure to long term fixed debt is recommended c. Long term securities fluctuate more than short term ones d. All the above Q37. Which of the following is not true? a. Passive funds have lower running expenses than active funds b. Active funds are designed to mirror the performance of an index c. Investors expect better performance from an active fund d. Active fund managers have flexibility to choose investment portfolio Q38. Which of the following is not true about open (or close) ended schemes? a. Entry and exit permitted at any time b. No fixed maturity c. Unit capital changes d. Investors can buy units from the stock exchange Q39. Which of the following is not a scheme selection principle for equity schemes? a. Time horizon b. Fund size c. Portfolio turnover d. Market capitalization of stocks e. None of the above Q40. 20:25 Rule states that a. Scheme must have max 20% holding by one investor and min 25 investors in any scheme b. Scheme must have max 25% holding by one investor and min 20 investors in any scheme c. Scheme must have max 20% holding in any one security and min 25 securities in any scheme d. Scheme must have max 25% holding in any one security and min 20 securities in any scheme
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 49
Q41. Select the correct statement 1. Higher the credit risk - higher the likely yield 2. Higher the rating - lower the likely yield. a. Only 1 is correct b. Only 2 is correct c. Both are correct d. Neither is correct Q42. Which of the following is not a factor for benchmark selection in an equity fund? a. Scheme type b. Choice of investment universe c. Choice of portfolio concentration d. Underlying exposure e. None of the above
Q43. Which of the following is true for leveraging by mutual funds? a. Mutual fund scheme cannot borrow more than 20% of its assets b. Borrowing cannot be for more than 6 months c. Borrowing is permitted to meet the cash flow needs of investor servicing viz. dividend payment or repurchase payments d. All the above Q44. Which of the following is not true about growth Investing a. Investing in frontline stocks b. Identifying companies whose growth potential has not been recognized by the market c. Identifying companies with above average return potential d. Identifying stocks with generally higher valuations Q45. Which of the following is true for benchmarks? a. should be aligned to the investment objective b. Should be calculated by an independent agency in a transparent manner and published regularly c. Usually created by stock exchanges, credit rating agencies, security research houses or financial publications d. All the above Q46. Which of the following is true for NAV? a. Higher the interest, dividend and capital gains, higher the NAV b. Higher the appreciation in investment portfolio, higher the NAV c. Lower the expenses, higher the NAV d. All the above Q47. SEBI Advertising Code stipulates that a. Schemes cannot offer any indicative yield b. Ranking of schemes must be based on compounded annualized yield c. Ranking of non-liquid schemes must be based on yields for a period of at least one year d. All the above Q48. Which of the following cannot be a basis for filing legal proceedings against an MF scheme? a. Change in fundamental attributes b. Lack of awareness about disclosures in OD because it is a lengthy document c. Inaccurate disclosure in OD d. None of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 50
Q49. Which of the following is not an advantage of mutual fund investing? a. Diversification b. Assurance of returns c. Economies of scale d. Professional management Q50. Sharpe and Treynor Ratios are measures of: a. Absolute Return b. Relative Return c. Risk-adjusted return d. Risk free return Q51. Which of the following is not a part of profitability metric calculation of a mutual fund? a. Valuation gains and losses b. Scheme expenses c. Dividend income d. None of the above Q52. NAV is impacted only when actual sale and purchase of securities is effective. a. True b. False Q53. What is the maximum permissible recurring expense limit for index schemes? a. 2.25% b. 2.50% c. 0.75% d. 1.50% Q54. Select the incorrect statement 1. When rupee strengthens, returns of gold portfolio rises 2. When rupee weakens, the returns of gold portfolio falls. a. Only 1 b. Only 2 c. Both d. Neither Q55. Short term capital gain refers is applicable to a. Holding period upto 12 months b. Holding period less 12 months c. Only equity funds d. Only debt funds Q56. Which of the following can be treated as short-term debt security? a. Treasury Bill b. Commercial Paper c. Corporate Bond d. Only a an b above Q57. Select the right statement in context of SEBI guidelines: a. NAV of index funds is calculated upto 4 decimal places b. NAV of equity funds is calculated upto 4 decimal places c. Both are correct d. Neither is correct
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 51
Q58. Which of the following is false about the Offer Document? a. OD has two parts – the SID and SAI b. SAI is relevant for all schemes of a mutual fund c. SID is a scheme-specific document d. OD is approved by SEBI Q59. Modified Duration is a better measure of interest rate sensitivity than Weighted Average Maturity. a. True b. False. Q60. Select the correct statement a. Trustee company is exempt from tax b. Mutual fund is liable to corporate tax c. dividend distribution tax is applicable to equity schemes d. STT is payable only in equity funds Q61. Which of the following is an example of a synthetic index? a. NSE Nifty b. CRISIL BalanCEX c. 65% BSE Sensex plus 35% I-Bex d. CRISIL Debt Hybrid Index - 75:25 Q62. Cut-off timings are not applicable to a. Liquid Schemes b. Equity Schemes on re-opening after the NFO c. NFO and International Purchases d. None of the above Q63. Which of the following is a benefit of ASBA? a. Money moves out of account only on allotment b. Exact amount of money is transferred from the account c. Transactions above 50,000 are compulsory d. Only a & b above Q64. Which of the following is not a feature of zero coupon security? a. Issued at a discount to the face value b. No interest is paid during the term c. The face value is paid on maturity d. has tenor of upto 1 year Q65. Which of the following is true for Dividend Re-investment option? a. Dividend Distribution tax is not applicable b. NAV declines c. Dividend is received in the bank account d. The number of units remains the same Q66. What is the prescribed cut-off in case of sale for other than liquid schemes more than 1 cr a. Closing NAV of the next business day b. Closing NAV of date the application is received c. Closing NAV of the day the funds are available for utilization d. Closing NAV of the day preceding the next business day
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 52
Q67. Which of the following true for set-off of capital gains? a. ST Capital losses can be set off against LT capital gains b. ST Capital losses can be set off against ST capital gains c. LT Capital losses can be set off against LT capital gains d. All are true Q68. Which of the following is a not permitted as an expense charged to a scheme? a. Advertising and commissions b. Depreciation on fixed assets c. Depository fee d. Service tax Q69. Which of the following is true? a. KIM is to be updated at least once a year b. SAI is to be updated at end of 3 months of every financial year c. SID is updated within 6 months of each financial year d. All the above e. Only a and b above
Q70. The profitability metric does not include: a. Realized capital gains and losses b. Valuation gains and losses c. Interest and dividend income d. AMC’s expenses Q71. Which of the following is true? a. The AMC is bound by the acts of the distributors b. The distributor is bound by the acts of its agents/sub-brokers c. Both are correct d. Neither is correct
Q72. Which of the following measures sensitivity of returns? a. Standard Deviation b. Beta c. Alpha d. Variance Q73. Select the correct statement 1. Beta of an index fund is 1 2. Stocks with beta more than 1 fall more than the market A. B. C. D.
Only 1 is correct Only 2 is correct Both are correct Both are incorrect
Q74. Which of the following is true? a. Capital Guarantee funds with non-sovereign debt investment carry credit risk b. Liquid schemes carry portfolio concentration risk c. Junk bond schemes invest in securities of poor credit quality d. All the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 53
Q75. Which of the following is a key risk in dividend yield funds? a. Concentration risk b. Liquidity risk c. Arbitrage risk d. None of the above
Mutual
Funds
Distributor
Certification
Examination
v.Jun2010
Page 54
ANSWERS TEST D
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 Q25
Mutual
Funds
C C C B C D C E E A C E B A A A C B C C D C C A B
Distributor
Q26 Q27 Q28 Q29 Q30 Q31 Q32 Q33 Q34 Q35 Q36 Q37 Q38 Q39 Q40 Q41 Q42 Q43 Q44 Q45 Q46 Q47 Q48 Q49 Q50
Certification
A D B D C D D D C D D B D B E C E D B D D D B B C
Q51 Q52 Q53 Q54 Q55 Q56 Q57 Q58 Q59 Q60 Q61 Q62 Q63 Q64 Q65 Q66 Q67 Q68 Q69 Q70 Q71 Q72 Q73 Q74 Q75
Examination
D B D C A D B D A D C C D D B C D B E D B B C D D
v.Jun2010
Page 55
