NISM Series Mutual Fund V-A Exam Crack

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS CERTIFICATION EXAM PRACTICE TEST 1

Question 1 (a) (b) (c) (d)

The fund manager of an Index fund will try to . Beat the benchmark by selecting high growth stocks Beat the benchmark by Asset Allocation Beat the benchmark by using Fundamental and Technical Analysis None of the above


is a short term Government Security. Certificates of Deposit Treasury Bills Commercial Papers All of the above

Correct Answer 1 Answer Explanation


None of the above An index fund manager would seek to minimize the tracking error betwwen his fund and the benchmark index. The stock selection will be strictly as per the composition of the benchmark index.

Treasury Bills Treasury Bills are short term debt instruments issued by the Reserve Bank of India on behalf of the Government of India. Certificates of Deposit are issued by Banks Commercial Papers issued by Companies

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS CERTIFICATION EXAM


Question 4 (a) (b)



Calculate the Net Assets of a Fund if the market value of portfolio is Rs.1000 crores and the current liabilities are Rs 50 crores ? Rs 1050 cr Rs 1000 cr Rs 950 cr Rs 50 cr

Commodity Sector funds are also a kind of Equity Funds - True or False ? TRUE FALSE

Rs 950 cr Current Asset Value - Current Liabilities = Net Assets Rs 1000 cr - Rs 50 cr = Rs 950 cr

TRUE Commodity Sector funds invest in Equity Shares of various companies associated with the Commodity Sector. For eg- Oil Companies, Farming Companies etc.



STT is not charged on ELSS Funds Arbitrage Funds Gold ETF Diversified Equity Fund


The Fund Manager of a ' Fund of Fund ' has to select the Right Stocks Sectors Funds All of the above

Correct Answer 5

Gold ETF

Correct Answer 6

Funds

.

.




Where the scheme has been in existence for less than performance shall not be provided or advertised. half one two three

To meet the needs of of regular income, one can use the Mutual Fund.

facility of a

SIP STP SWP FMP

Correct Answer 7

one

Correct Answer 8

SWP

Answer Explanation

year, past

SWP - Systematic Withdrawal Plan gives the investor an option to sell units at a regular intervals to meet his liquidity need etc.



Question 10

Mr and Mrs Gupta wants to make their son a pilot. This is an example of _. Financial Planning Asset Allocation Aspiration Setting Financial Goals

An investor has 1000 units of a scheme which declares a 1: 2 bonus. The NAV Ex Bonus becomes Rs 30. How much does the investor has to pay to get the additional units as per the allotment due to him?

(a) (b) (c) (d)

Rs 30,000 Rs 15,000 Rs 5,000 NIL

Correct Answer 9

Aspiration

Answer Explanation


Parents wants their son to become a Pilot is an aspiration. In order to realize this, formal education expenses, training expenses and various other expenses need to be incurred over a number of years. The estimated financial commitments towards these expenses become financial goals. The financial goals must be defined in terms of time horizon and the amount of money required to fund the goal. Financial planning is a planned and systematic approach to provide for the financial goals that will help people realise their needs and aspirations.

NIL NIL as Bonus units are allotted free of cost.



Risk Profile of an investor is affected by the nature of job the regularity of his income Psyche of the investor All of the above

Question 12

The maximum commission payable to a Mutual Fund distributor for his own investment is

(a) (b) (c) (d)

1% 1.50% 2.50% NIL

Correct Answer 11

All of the above

Correct Answer 12

NIL

Answer Explanation

_.

Commission is payable to the distributors to mobilise money from their clients. No commission – neither upfront nor trail – is payable to the distributor for their own investments (self business).



Asset allocation means investing in Financial Assets Physical Assets Both Financial and Physical Assets Either Financial or Physical Asset

Question 14

'Past Performance is not indicative of future performance' - This statement _.

(a) (b)

should be a standard risk factor for all schemes should be present in all performance related advertisement of Mutual Fund

(c) (d)

should be only for some specific schemes where this statement is valid both 1 and 2



Both Financial and Physical Assets Asset Allocation can be both in Financial Assets like Equity, Debt etc and Physical Assets like Gold, Real Estate etc.

both 1 and 2 Past performance of the Sponsor/AMC/Mutual Fund does not guarantee future performance of the scheme is a standard risk factor.






system helps the investors book profit in rising markets and increase holdings in a falling market. Strategic Asset Allocation Fixed Asset Allocation Flexible Asset Allocation Tactical Asset Allocation

The benchmark for a Gilt fund investing in Government Securities with maturities ranging from 3 to 7 years is . Si-Bex Mi-Bex Li-Bex None of the above

Fixed Asset Allocation Fixed Asset Allocation for eg. are used by Balance Funds (say) 65 : 35 ratio in Equity and Debt. If Equity market rises, the fund manager sells equity and buys debt to maintain the fixed ratio and vice versa.

Mi-Bex ICICI Securities and Finance Company Limited (Isec) has been maintaining ICICI Securities Sovereign Bond Index (i-BEX) since 1994 representing gilts market. In order to meet specific needs of market participants, it has also been maintaining short-maturity index (Si-BEX) comprising securities maturing in one to three years, medium maturity index (Mi-BEX) comprising securities maturing in three to seven years, and long-maturity index (Li-BEX) comprising securities maturing later than seven years since March 1996. These three new indices along with a composite index, which is an average of Si-BEX, Mi-BEX and Li-BEX were chosen by AMFI as benchmark gilt indices for mutual fund schemes.



Question 18

(a) (b) (c) (d)


Correct Answer 18

are largely close-ended, but become open ended at prespecified intervals. ELSS Funds Sectoral Funds Interval Funds Close Ended Funds

While calculating profits, all the expenses that relate to a period need to be considered, irrespective of whether or not the expense has been paid. This principal is referred to as? Accrual system Legal entity system Double entry system None of the above

Interval Funds Interval Funds are largely close-ended, but become open ended at prespecified intervals. For instance, an interval scheme might become openended between January 1 to 15, and July 1 to 15, each year. Minimum duration of an interval period in an interval scheme/plan is 15 days. No redemption/repurchase of units are allowed except during the specified transaction period (the period during which both subscription and redemption may be made to and from the scheme). Accrual system




Correct Answer 19 Answer Explanation Correct Answer 20

The systematic approaches offered by mutual funds to promote an investment discipline for long term wealth creation are _. SIP, SWP SIP, STP SIP, STP, SWP None of the above

What is a process whereby an investors holding of investments in physical form (paper) is converted into a digital record? Re-materialization Dematerialization KYC None of the above

SIP, STP, SWP Systematic Investment Plan, Systematic Transfer Plan and Systematic Withdrawal Plan.

Dematerialization


Question 21 (a) (b)

Legally SAI is part of the SID - True or False ? TRUE FALSE

Question 22

The principle of caveat emptor (let the buyer beware) applies to mutual fund investments - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 21

TRUE

Answer Explanation

Correct Answer 22

In practice, SID and SAI are two separate documents, though the legal technicality is that SAI is part of the SID.

TRUE


Question 23 (a) (b)

Question 24

Dividend warrants have to be sent to investors within 30 days of dividend declaration - True or False ? TRUE FALSE

In the top-down approach, sector allocation precedes stock selection True or False ?

(a) (b)

TRUE FALSE

Correct Answer 23

TRUE

Correct Answer 24

TRUE

Answer Explanation

In a top down approach, the portfolio manager decides how to distribute the investible corpus between countries and sectors. Thereafter, the good stocks within the identified sectors are selected for investment. Thus sector allocation is a key decision. In a bottom-up approach, not much importance is given to the countryallocation and sector-allocation. If a stock is good, it is picked for investment.



Investment objective is closely linked to Plan Scheme Option Maturity


The Mutual Fund application form is attached to the KIM SAI SID AMC Memorandum



.

_.

Scheme Every scheme has a pre-announced investment objective. When investors invest in a mutual fund scheme, they are effectively buying into its investment objective.

KIM KIM is a summary of the SID and SAI. It is more easily and widely distributed in the market. As per SEBI regulations, every application form is to be accompanied by the KIM.




style is an approach of picking up stocks, which are valued lower, based on fundamental analysis. Dividend Yield Value Investing Growth Investing Top Down Approach

Which of the following is a truly international asset class? Gold Equity Share Real Estate Debt

Correct Answer 27

Value Investing

Correct Answer 28

Gold



Question 30 (a) (b)

have to make additional disclosures related to credit evaluation policy, sectors and types of investments in the offer document. ELSS Funds Debt Funds Sectoral Funds Equity Funds

The specialty of a Sector Fund is that it invests in various economic sectors - True or False ? FALSE TRUE

Correct Answer 29

Debt Funds

Correct Answer 30

FALSE

Answer Explanation

Sector Funds are sector specific and invest in various companies of a specific sector - for eg. Banking Sector Fund will invest in shares of various Banks.


Question 31

(a) (b)

Question 32

Investors can choose to change their distributor or go direct and AMCs will need to comply after getting a 'No Objection Certificate' from the existing distributor - True or False ? TRUE FALSE

Mutual funds in India are governed by SEBI (Mutual Fund) Regulations, 1996 - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 31

FALSE

Answer Explanation

Correct Answer 32

Investors can choose to change their distributor or go direct. In such cases, AMCs will need to comply, without insisting on No Objection Certificate from the existing distributor.

TRUE



Cut-off timing guidelines are not applicable for International Funds New Fund Offer (NFO) Both of the above None of the above

Question 34

Liquid schemes are a variant of debt schemes that invest only in debt securities of up to 60-days maturity - True or False ?

(a) (b)


Correct Answer 34

.

TRUE FALSE

Both of the above The cut-off timing is not applicable for NFOs and International Schemes.

TRUE



NFO's for ELSS schemes can remain open for 10 15 20 30

Question 36

Today’s costs can be translated into future requirement of funds using the formula:

(a) (b) (c) (d)


Correct Answer 36

days

A = P / (1 + i)^n A = P X (1 + i)^n P = A^n X (1 + i) P = A^n X (1 + i)^n

30 In the case of ELSS / RGESS schemes, the offering period shall be not be more than 30 days. Schemes other than ELSS and RGESS (Rajiv Gandhi Equity Saving Scheme) can remain open for subscription for a maximum of 15 days. A = P X (1 + i)^n


Question 37 (a) (b)




Fundamental analysis is evaluation of the strength of the companies pricevolume charts - True or False ? TRUE FALSE

Every trust has beneficiaries and the beneficiaries, in the case of a mutual fund trust, are . the Trustees of the AMC the investors who invest in various schemes of the mutual fund. the Employees of the Mutual Fund Company the Chairperson and Managing Director of the AMC

FALSE Technical analysis is evaluation of the strength of the company’s pricevolume charts. Fundamental Analysis is the study of the company’s fundamentals - financial statements, quality of management, competitive position in its product / service market etc.

the investors who invest in various schemes of the mutual fund. Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust, are the investors who invest in various schemes of the mutual fund.


Question 39

(a) (b)

Question 40 (a) (b)

In case of Money Market schemes or cash and liquid plans, wherein investors have very short investment horizon, the performance can be advertised by simple animalization of yields - True or False ? TRUE FALSE

Arbitrage Funds have BASIS risks - True or False? TRUE FALSE

Correct Answer 39

TRUE

Correct Answer 40

TRUE

Answer Explanation

Arbitrage fund have basis risk ie. the risk that both cash and F&O position on a company cannot be reversed at the same time. During the time gap between unwinding of the two positions, the market can move adverse to the scheme


PRACTICE TEST 2 Question 1 (a) (b) (c) (d)

Question 2 (a) (b)


Correct Answer 2

The Risk Free Return of a scheme is 7% , the beta is 1.6 and the actual return earned is 9 %. What is the Treynor Ratio of this scheme? 1.25 2.5 1.00074 2

In a MF scheme, loads for big investors and small investors are different True or False ? TRUE FALSE

1.25 Treynor Ratio = Return Earned - Risk Free Return / Beta = 9 - 7 / 1.6 = 2 / 1.6 = 1.25 Treynor Ratio is a risk premium per unit of risk. Higher the Treynor Ratio, better the scheme is considered to be.

FALSE



Financial Planning involves . Assessing the clients financial details Investing clients money in high growth stocks Investing clients money in 100% secured investments Helping clients to evade taxes

Question 4

Investors in the Funds.

(a) (b) (c) (d)

should allot a higher proportion to Income

Accumulation Phase Distribution Phase Inter generational transfer phase Sudden Wealth category

Correct Answer 3

Assessing the clients financial details

Correct Answer 4

Distribution Phase

Answer Explanation

Reaping / Distribution the stage when the investor needs regular money. Hence, investors in this stage need to have higher allocation to income generating assets. It is the parallel of retirement phase in the Life Cycle.




When a person wins a big lottery (sudden wealth) he should . He should take riskier bets on Stock Markets so that he can grow his money faster He should not at all invest in Equity He should look into the taxation aspect No need to look into taxation as sudden wealth is not his regular income

Liquid schemes invest in securities of upto 31 61 91 181

Correct Answer 5

He should look into the taxation aspect

Correct Answer 6

61

days maturity,


Question 7 (a) (b)

Question 8 (a) (b)

As per SEBI rules an AMC can manage the schemes of more than one Mutual Fund - True or False ? TRUE FALSE

The last stage in developing a model portfolio is Fund selection - True or False ? TRUE FALSE

Correct Answer 7

FALSE

Correct Answer 8

TRUE






Applications in NFO made using ASBA have to pay the money _. 50% in advance and balance on allotment of units 25% in advance and balance on allotment of units 10% in advance and balance on allotment of units Only on allotment of units

The details of the names and their background of key personnel of an AMC is found in . SID SAI AMFI Guide MF Advertisements

Only on allotment of units Application Supported by Blocked Amount (ASBA) is a facility where the investment application is accompanied by an authorization to the bank to block the amount in the investor’s bank account. The money goes out of the investor’s bank account only on allotment. SAI SAI - Statement of Additional Information contains - Information about Sponsors, AMC and Trustee Company (includes contact information, shareholding pattern, responsibilities, names of directors and their contact information, profiles of key personnel, and contact information of service providers and Collecting Bankers}



Question 12 (a) (b)



The NAV of a Mutual Fund Scheme is Rs. 20 and the Exit Load is 1%. What will be the sale price of this scheme ? Rs 19.80 Rs 20 Rs 20.20 Rs 22

The prices of ETF varies during the day - True or False ? TRUE FALSE

Rs 20 There is no entry load so the sale price will be the same as NAV price ie. Rs 20. In the above question, the Repurchase price / Redemption price will be lower due to the exit load. TRUE ETF or Exchange Traded Funds are listed on the Stock Exchanges and are bought and sold during trading hours. The prices fluctuate as per the demand Supply and other factors. For eg -Gold ETF.


Question 13 (a) (b)




Nomination facility is not available to investors holding the Mutual Fund units jointly - True or False ? TRUE FALSE

Which of the following details is not required to be mentioned in the KIM ? Benchmark for the scheme Financial summary of the sponsor Composition of the portfolio Risk profile

FALSE Nomination facility is also available in the case of joint holding. Every unit-holder will have to sign the nomination form. If one joint holder dies, then the Units will continue to be held by the surviving joint holder/s. If all joint holders dies, then the Units will be transferred to the nominee.

Financial summary of the sponsor Key Information Memorandum (KIM) is essentially a summary of the SID and SAI and contains mostly the information of the scheme.


Question 15 (a) (b)




Value stocks are those stocks which are valued at a higher price based on fundamental analysis - True or False ? FALSE TRUE

Mutual Funds can use Derivatives for Re-Balancing the portfolio Hedging against risk Leveraging Both 1 and 2

.

FALSE Value investment style is an approach of picking up stocks, which are valued lower, based on fundamental analysis. The belief is that the market has not appreciated some aspect of the value in a company’s share – and hence it is cheap. When the market recognizes the intrinsic value, then the price would shoot up. Such stocks are called value stocks. Both 1 and 2 Mutual funds are permitted to use derivatives for hedging against risk or rebalancing the portfolio, but not for leveraging. Investment in derivatives would have to be specifically permitted in the Offer Document. If not already provided for in the offer document, approval of investors would need to be taken, before the scheme can invest in derivatives. Mutual Funds are barred from writing options. They can buy options.



FMP's are usually offered as Close Ended Funds Interval Funds Open Ended Funds None of the above

Question 18

The mechanism used to ensure that the cutoff timing is strictly followed is called .

(a) (b) (c) (d)

Stamp time Time verification Time stamping Auditing

Correct Answer 17

Close Ended Funds

Correct Answer 18

Time stamping

.



The true worth of a unit of a scheme is also known as Unit capital NAV NFO Mutual fund scheme

Question 20

What refers to the cost of acquisition that is adjusted upwards to reflect the impact of inflation?

(a) (b) (c) (d)

Indexation Marginal rate of tax Education cess None of the above

Correct Answer 19

NAV

Correct Answer 20

Indexation

Answer Explanation

.

Indexation means that the cost of acquisition is adjusted upwards to reflect the impact of inflation. The government comes out with an index number for every financial year to facilitate this calculation. Indexation benefit is available only in case of long term capital gains and not short term capital gains.


Question 21 (a) (b)

Question 22 (a) (b)



Mutual funds are liable to pay tax on the income they earn - True or False ? TRUE FALSE

AMC directors are appointed with the permission of SEBI - True or False? FALSE TRUE

FALSE Mutual funds are not liable to pay tax on the income they earn.

FALSE AMC directors are appointed with the permission of Trustees.


Question 23 (a) (b)




The investor cannot pledge the units of a Mutual Fund as a security to a financer - True or False ? TRUE FALSE

PAN No. and KYC documentation is compulsory for mutual fund investments with the only exception of _. ELSS Funds Micro SIPs Gilt Funds Government Mutual Funds

FALSE The investor can pledge the units as a security to a financier.

Micro SIPs Micro-SIPs - SIPs where annual investment (12 month rolling or April-March financial year) does not exceed Rs 50,000.



Risk appetite of investors is assessed through Asset Allocators Financial Plan Risk Profilers Risk Appetizers

Question 26

Trail commissions are linked to valuation of portfolio in the market - True or False ?

(a) (b)



.

TRUE FALSE

Risk Profilers Risk Profilers usually revolve around investors answering a few questions, based on which the risk appetite score gets generated.

TRUE Trail Commission is calculated on net assets so the distributors benefit from increase in net assets arising out of valuation gains in the market. If the value of portfolio rises the trail commission also rises.



NAV of income funds is to be calculated upto 1 2 3 4

Question 28

For life-long investment in gold one should prefer Gold Futures as against Gold ETF - True or False ?

(a) (b)



decimals.

TRUE FALSE

4 NAV is to be calculated upto 4 decimal places in the case of index funds, liquid funds and other debt funds. NAV for equity and balanced funds is to be calculated upto at least 2 decimal places. FALSE Gold futures contracts are traded in commodity exchanges and have an expiry date. Gold ETF's on the other hand have no expiry date. They can be bought and the delivery takes place in Demat Form which can be held as long as you want.


Question 29 (a) (b)




Tactical Asset Allocation is the decision that comes out of calls on the likely behaviour of the market - True or False ? FALSE TRUE

is a basis to select the better scheme in Index Funds. Tracking Error Beta 5 year performance Fund Managers past record

TRUE Tactical Asset Allocation is the decision that comes out of calls on the likely behaviour of the market. An investor who decides to go overweight on equities because of expectations of a rise in share markets, is taking a tactical asset allocation call. Tracking Error The difference between an index fund’s return and the market return is the tracking error. An index fund manager would seek to minimize the tracking error. Because of the tracking error, the scheme performance could be higher or lower than that of the benchmark.






The maximum initial commission that an AMC can pay to distributors is . 0.10% 0.50% 2.50% NIL

The asset allocation that is worked out for an investor based on risk profiling is called . Strategic Asset Allocation Fixed Asset Allocation Tactical Asset Allocation Flexible Asset Allocation

NIL As per the new rules : Upfront commission to distributors will be paid by the investor directly to the distributor, based on his assessment of various factors including the service rendered by the distributor.

Strategic Asset Allocation Risk profiling is key to deciding on the strategic asset allocation. For eg - If the investor is an retired/old person he should have more debt in his portfolio.


Question 33

If the fund manager of a debt fund is expecting the interest rates to rise, he will .

(a) (b) (c) (d)

increase the exposure to longer term fixed rate debt securities switch the portfolio towards a higher proportion of floating rate instruments The fund Manager cannot do much as all his money is generally fully invested None of the above

Question 34

SEBI regulates Mutual Funds as well as Registrars and Transfer Agents True or False ?

(a) (b)



TRUE FALSE

switch the portfolio towards a higher proportion of floating rate instruments When interest rates rise, the current debt instruments become less valuable. So by buying Floating Rate instruments ( floating rate i.e. a rate linked to some other rate that may be prevailing in the market ) he can be relatively safer. TRUE SEBI regulates Mutual Funds , Registrars and Transfer Agents, Depositories, Stock Brokers etc.


Question 35 (a) (b)




The main objective of asset allocation is risk management - True or False ? TRUE FALSE

Beta as a risk measure is relevant for Only Equity Schemes Only Debt Schemes Both Equity and Debt schemes FMP's

.

TRUE The distribution of an investor’s portfolio between different asset classes like Equity, Debt, Gold etc is called asset allocation. Asset Allocation is basically using the old proverb - ‘Don’t put all your eggs in one basket’ to guide investments and managing the risks.

Only Equity Schemes Beta as a measure of risk is relevant only for equity schemes. The diversified stock index, by definition, has a Beta of 1. Companies or schemes, whose beta is more than 1, are seen as more risky than the market. Beta less than 1 is indicative of a company or scheme that is less risky than the market


Question 37 (a) (b)

Stock selection is important in bottom-up approach - True or False ? TRUE FALSE

Question 38

New Application Form has to be filled in by the existing investor having a folio no. for fresh investment in the same Mutual Fund - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 37

TRUE

Answer Explanation


Stock selection is important in bottom-up approach. In a top-down approach, sector allocation is the key decision.

FALSE Once an investor has a folio with a mutual fund, subsequent investments with the same mutual fund do not call for the full application form and documentation. Only transaction slip needs to be filled, and submitted with the requisite payment.



Accumulation is the phase applicable to Young Unemployed Young Unmarried 10th Pass Retired Manager

Question 40

SEBI approval is required for an AMC to appoint a distributor - True or False ? TRUE FALSE

(a) (b)



.

Young Unmarried Accumulation is the stage when the investor gets to build his wealth. It covers the earning years of the investor i.e. the phases of the life cycle from Young Unmarried to Pre-Retirement.

FALSE No SEBI approval is required. A person has to clear the exam and get an AMFI number. Based on this number AMC signs an agreement with the individulas / companies and appoint them distributors.




Which of the following need not be disclosed to the Mutual Fund investor ? The Annual Report of the Scheme Portfolio of the Scheme The Annual Report of AMC The Names of Fund Managers

What is the amount required to buy 500 units at NAV Rs 46 if the entry load is 1%. Rs 23000 Rs 23230 Rs 23330 Rs 23385

Correct Answer 1

The Annual Report of AMC

Correct Answer 2

Rs 23230

Answer Explanation

500 units X Rs 46 = Rs 23000 Rs 23000 + 1% = Rs 23230.


Question 3

(a) (b) (c) (d)


is the process where all the financial goals of a person are taken together, and the investment strategies worked out on that basis. Tactical Financial Planning Comprehensive Financial planning Strategical Financial Planning Goal Oriented Financial Planning

Variance as a measure of risk is relevant for Equity Schemes Debt Schemes both debt and equity schemes. FMP's

Correct Answer 3

Comprehensive Financial planning

Correct Answer 4

both debt and equity schemes.

Answer Explanation

.

Variance as a measure of risk is relevant for both debt and equity schemes. Standard deviation is equal to the square root of variance.


Question 5

(a) (b) (c) (d)



Correct Answer 6

An investor buys a Mutual Fund scheme at NAV Rs 20 in Jan 2012. The scheme declares a dividend of Rs 2. In May 2012, the investor sells all the units at NAV Rs 15. What is the capital loss available for exemption ? Rs 2 Rs 3 No capital loss available for exemption as its a short term loss None of the above

Of the following attributes, which one you cannot consider while investing in Mutual Funds ? Guaranteed Return Professional Management Low Transaction Cost Diversification

Rs 3 Buying Price Rs 20 Less Dividend Received Rs 2 So net buying cost Rs 18 Sold at Rs 15 So net loss (18-15) = Rs 3

Guaranteed Return


Question 7 (a) (b)

As per SEBI rules, SAI will contain the information regarding the Fund and SID will contain information specific to the scheme - True or False ? TRUE FALSE


is considered as a safe heaven among all asset classes. Debt Equity Gold Real Estate

Correct Answer 7

TRUE

Correct Answer 8

Gold

Answer Explanation

Gold is seen as a safe haven asset class. Therefore, whenever there is political or economic turmoil, gold prices shoot up.






Investors generally bear higher fund management expenses in . Diversified Equity Fund Sectoral Equity Fund Fund of Funds ELSS Funds

Which of the below investments can be used for tax benefits ? Fixed Deposits in Nationalised Banks PPF Post Office Deposits Investments in Balanced Funds

Fund of Funds A Fund of Funds invest in other funds. So it has to bear two costs - its own fund management expenses and the fund management expenses of the funds in which it invests.

PPF PPF Deposits can be used for Tax Savings under Section 80C of the Income Tax Act.


Question 11

As per SEBI regulations, a Mutual Fund can leverage / borrow money under which of the foll condition(s) ?

(a) (b) (c)

A mutual fund scheme cannot borrow more than 20% of its net assets The borrowing cannot be for more than 6 months The borrowing is permitted only to meet the cash flow needs of investor servicing

(d)

All of the above


The portfolio composition and operational features of a scheme are mentioned in the SAI SID Addendum None of the above

Correct Answer 11

All of the above

Correct Answer 12

SID



Which of the below option is true wrt. PPF ? There is no upper limit of investments in PPF PPF interest is Tax free One can withdraw money after one of starting a PPF Account Minors cannot open PPF Account

Question 14

In case of joint holding under the 'either or survivor' option, only the first holder has to be KYC compliant - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 13

PPF interest is Tax free

Correct Answer 14

FALSE

Answer Explanation

Any new investor, Joint holders, Power of Attorney holders, Donors and Guardian (in case of minors) have to comply with the KYC formalities.



Question 16 (a) (b)



An investor is interested in high liquidity. Which fund will he NOT choose ? Diversified Equity Fund ELSS Fund Debt Fund Open ended funds

The interest received from a Bank Fixed Deposit is fully taxable - True or False ? TRUE FALSE

ELSS Fund Equity Linked Saving Schemes - ELSS ie Tax Saving Schemes have a lockin period of 3 years. So they will not be preferred by an investor seeking high liquidity.

TRUE Bank FD interest is fully taxable. However if the investor does not fall in the tax bracket then its not taxed.


Question 17 (a) (b) (c)

An interval fund is . It is largely open ended and becomes close ended at pre-specified intervals It is largely close ended and becomes open ended at pre-specified intervals None of the above

Question 18

The difference between the NAV and the repurchase price is known as?

(a) (b) (c) (d)


Correct Answer 18

Entry load Exit load Load None of the above

It is largely close ended and becomes open ended at pre-specified intervals Interval funds combine features of both open-ended and close ended schemes. They are largely close-ended, but become open ended at pre-specified intervals. The benefit for investors is that, unlike in a purely close-ended scheme, they are not completely dependent on the stock exchange to be able to buy or sell units of the interval fund. Exit load



The reduced NAV value after dividend payout is called Cum dividend NAV Ex dividend NAV Dividend payout Dividend NAV

Question 20

The dividend the investor receives from an equity oriented scheme is taxfree for the investor - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 19

Ex dividend NAV

Correct Answer 20

TRUE

.



Question 22 (a) (b)

Technical analysts study the pricevolume charts of a company because . Is based on investor sentiment It predicts future share price To decide support levels, resistance levels, breakouts All of the above

STP is a combination of SIP and SWP - True or False ? TRUE FALSE

Correct Answer 21

To decide support levels, resistance levels, breakouts

Correct Answer 22

TRUE

Answer Explanation

In a STP ( Systematic Transfer Plan ), the amount that is withdrawn from a scheme is re-invested in some other scheme of the same mutual fund. Thus, it operates as a SWP ( Systematic Withdrawal Plan ) from the first scheme, and a SIP ( Systematic Investment Plan ) into the second scheme.


Question 23 (a) (b)


Open-ended schemes generally offer exit option to investors through a stock exchange. TRUE FALSE

The most appropriate measure of returns for a scheme in existence for several years is . CAGR Annualised Return Dividend Return Simple Return

Correct Answer 23

FALSE

Correct Answer 24

CAGR

Answer Explanation

CAGR - Compounded Annual Growth Rate.




invest on the basis of a specified index, whose performance it seeks to track. Arbitrage Funds Active Funds Passive Funds ELSS Funds

In mutual funds, the assets are held by Fund Manager of that scheme Registrar and Transfer Agents Custodian Trustees

Correct Answer 25

Passive Funds

Correct Answer 26

Custodian

Answer Explanation

.

The custodian has custody of the assets of the fund. Also as a part of this role, the custodian needs to accept and give delivery of securities of the various schemes of the fund.


Question 27

According to the Certified Financial Planner “ Board of Standards (USA), the first stage in financial planning is .

(a) (b) (c) (d)

Gather Client Data, Define Client Goals Develop and Present Financial Planning Recommendations and / or Options Analyse and Evaluate Client’s Financial Status Establish and Define the Client-Planner Relationship

Question 28

Investments in mutual fund units attract Wealth Tax if the investments are over Rs 5 lacs - True or False ?

(a) (b)



TRUE FALSE

Establish and Define the Client-Planner Relationship The steps in creating a comprehensive financial plan, as proposed by the Certified Financial Planner – Board of Standards (USA) are as follows: • Establish and Define the Client-Planner Relationship • Gather Client Data, Define Client Goals • Analyse and Evaluate Client’s Financial Status • Develop and Present Financial Planning Recommendations and / or Options • Implement the Financial Planning Recommendations • Monitor the Financial Planning Recommendations

FALSE Investments in mutual fund units are exempt from Wealth Tax. This is irrespective of where the fund invests and the amount.


Question 29 (a) (b)

Question 30

Brokers of recognised Stock exchanges can distribute mutual funds without the requirement of passing the certifying test - True or False ? TRUE FALSE

If an investor wants to invest a sum of below Rs 20000 in cash in a Mutual Fund then PAN card is not required - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 29

FALSE

Answer Explanation


All distributors of Mutual Funds have to clear the test.

TRUE Small investors investing in cash, upto Rs. 20,000 per mutual fund per financial year do not need to provide PAN Card. This is subject to compliance with Prevention of Money Laundering Act, 2002 and SEBI Circulars on Anti Money Laundering (AML)


Question 31 (a) (b)



Correct Answer 32

To save on Wealth Tax one should invest in Gold ETF rather than physical gold - True or False ? TRUE FALSE

For calculating Capital Gains, investment in mutual funds for less then 1 year is considered as Long Term Medium Term Short Term Ultra Short Term

TRUE Investment in physical gold may attract wealth tax but investments in Gold ETF mutual funds are exempt from wealth tax.

Short Term


Question 33

(a) (b)

Question 34

While choosing an Option in a Mutual Fund scheme, taxation and liquidity needs are a major factor in deciding which option ( Growth or Dividend Payout) to go for - True or False ? FALSE TRUE

Lower the expenses of a Mutual Fund, lower would be the NAV - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 33

TRUE

Correct Answer 34

FALSE

Answer Explanation

NAV is basically the value of Portfolio less the MF expenses. So Lower the expenses, higher would be the NAV.


Question 35 (a) (b)

Question 36

In the National Pension System, Tier I (Pension account), is withdrawable - True or False ? TRUE FALSE

Investment in physical gold or real estate may attract wealth tax in case of direct investors, but investments in Gold ETF and real estate mutual funds are exempt from wealth tax - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 35

FALSE

Answer Explanation


In the National Pension System Tier I (Pension account), is nonwithdrawable. Tier II (Savings account) is withdrawable to meet financial contingencies. Also an active Tier I account is a pre-requisite for opening a Tier II account. TRUE Investments in mutual fund units are exempt from Wealth Tax. This is irrespective of where the fund invests.






As SEBI has banned NAV.

, the Sale Price of a MF unit is the same as

Entry Load Exit Load Commission Refund SIP Transaction Charges

In which of the below funds is the investor unsure of his taxation liability ? Sectoral Fund ELSS Fund Gilt Fund Flexible Asset Allocation Fund

Entry Load For eg - If the NAV of a MF unit is Rs 50 and entry load was 1% then the unit was sold to the investors at Rs 50 + 1 % ie. Rs 50.50. Now with the ban on entry loads the Sale price is equal to NAV ( Rs 50 in above example) Flexible Asset Allocation Fund The fund manager of a Flexible Asset Allocation scheme can switch a large part of their portfolio between debt and equity, depending on their view on the respective markets. So the investors do not know whether they are investing in a debt scheme or an equity scheme and so are unsure of the taxation.


Question 39 (a) (b)

Question 40

(a) (b)



Securities Transaction Tax is not applicable on transactions in debtoriented mutual funds - True or False ? TRUE FALSE

Mr. Mahesh gives his investment application form to the distributor at 10 am. The distributor then goes to the Mutual Fund office and submits this application at 1 pm. What is the cut off time for this investment ? 1:00 PM 10:00 AM

TRUE STT is not applicable on transactions in debt or debt-oriented mutual fund (including liquid fund) units.

1:00 PM The cut off time is when the investment is submitted to the PoA - Point of Acceptance is relevant – not the time when the investor submits the transaction request to the distributor.

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS CERTIFICATION EXAM – PRACTICE TEST 4

PRACTICE TEST 4 Question 1 (a) (b)

Question 2

Entry and exit loads are not charged to Bonus units and units issued on reinvestment of dividends - True or False ? FALSE TRUE

The Mutual Fund scheme which switches its portfolio among Equity and Debt based on market condition is Strategic Asset Allocation Scheme True or False ?

(a) (b)

TRUE FALSE

Correct Answer 1

TRUE

Correct Answer 2

FALSE

Answer Explanation

Balanced schemes which switch a large part of their portfolio between debt and equity, depending on their view on the respective markets are called Flexible Asset Allocation scheme. Strategic Asset Allocation is as per the risk profile of the individual. For eqAged persons are advised less investment in Equities and more in Debt.



Mutual Funds are allowed to borrow . for long term investment purposes to meet redemption requests or dividend payments. are not allowed to borrow at all freely as per their investment objectives

Question 4

Mr. Rahul is an investor in a Mutual Fund scheme and wishes to do additional purchases in the same scheme by giving a post dated cheque. Is this acceptable? Yes No

(a) (b)



to meet redemption requests or dividend payments. As per SEBI regulations, MF borrowing is permitted only to meet the cash flow needs of investor servicing viz. dividend payments or re-purchase payments.

No The cheque cannot be post-dated except for future installments under SIP.


Question 5

(a) (b) (c) (d)

Question 6 (a) (b)


Correct Answer 6

Mr Himanshu wants to withdraw Rs 20000 from his mutual fund. The NAV is Rs 30 and the exit load is 1%. How many units will he have to redeem ? 658.7 687.9 725.4 673.4

An investor has to get an No Objection Certificate (NOC) from his old distributor if he wishes to change to a new distributor - True or False ? TRUE FALSE

673.4 Each unit is value at Rs 30. Less Exit load of 1% = 0.30 So the net value of each unit is 30 - 0.30 = 29.70 Mr Himanshu wants Rs 20000 So 20000 / 29.70 = 673.40 units.

FALSE


Question 7 (a) (b)

Question 8 (a) (b)



The applicable NAV can be decided by the time stamp which has been put by the distributor - True or False ? TRUE FALSE

Gilt funds are considered to be the safest among debt funds - True or False ? TRUE FALSE

FALSE The time stamps put at the official Points of Acceptance (PoAs) are only valid for deciding the applicable NAV.

TRUE Gilt funds invest in only treasury bills and government securities, which do not have a credit risk Since the government is unlikely to default on its obligations, Gilts Funds are viewed as very safe.



The fastest way to transfer funds is SWIFT NEFT RTGS All of the above

Question 10

The Mutual Funds shall provide the Account Statement to the Unitholders who have not transacted during the last months prior to the date of generation of account statements three six (c)

(a) (b) nine (d) twelve


Correct Answer 10

_.

RTGS RTGS (Real Time Gross Settlement) transfers are instantaneous. NEFT (National Electronic Funds Transfer) transfers are batched together in the banking system, and effected at various times during the day. SWIFT transfers (for transfers from abroad) tend to pass through multiple banks in different geographies, and multiple levels within the same bank, resulting in delays. six


Question 11

(a) (b)




During the strong bull phase in the stock markets the Growth Stocks perform well but eventually its the Value Stock which will give good returns - True or False ? TRUE FALSE

The STT payable on sale of equity shares in a stock exchange is 0.17% 0.10% 0.01% 0.13%

.

TRUE Growth investment style entails investing in high growth stocks i.e. stocks of companies that are likely to grow much faster than the economy. However, in the event of a market correction, these stocks tend to decline more. Value investment style is an approach of picking up stocks, which are valued lower, based on fundamental analysis. The belief is that the market has not appreciated some aspect of the value in a company’s share – and hence it is cheap. When the market recognizes the intrinsic value, then the price would shoot up.

0.10% STT payable on purchase / sale of equity shares in stock exchange is 0.1% STT payable on sale of futures & options in stock exchange is 0.01%





Correct Answer 14

In case of repurchase by a unit holder, the final redemption price is . The NAV NAV - Entry Load NAV - Exit Load NAV + Exit Load

Securities Transaction Tax is applicable on Gold ETF transactions Equity transactions Debt transactions All of the above

.

NAV - Exit Load In the case of an open-ended scheme, the unit will be bought back by the scheme at the NAV less Exit Load. SEBI legislations prescribe a maximum exit load of 7%; in practice, it was rarely above 5%, which too was applicable only if investors exited from the scheme within a year of investment. Equity transactions



Returns in gold as an asset class depends on Strength of the rupee Global Prices of Gold Indian gold exports Both 1 and 2

Question 16

If units are held by 3 unit holders jointly, the redemption proceeds will be paid _.

(a) (b) (c) (d)


Correct Answer 16

.

to the first holder equally to all the holders as per the declaration signed in the application form to the nominee

Both 1 and 2 Political or economic turmoil, large purchase / sale of gold by big countries have an effect on global gold prices. Also when the rupee becomes stronger, the same foreign currency can be bought for fewer rupees. Therefore, the same gold price (denominated in foreign currency), translates into a lower rupee value for the gold portfolio. This pushes down the returns in the gold fund. A weaker rupee, on the other hand, pushes up the rupee value of the gold portfolio, and consequently the returns in gold would be higher.

to the first holder



Question 18

(a) (b)

Gilt funds and diversified debt funds should figure prominently in the portfolio of . Employed with small children Old couple with no family support Young married with no children None of the above

When the mutual fund scheme pays any money to the investors, either as dividend or consideration for buying back the units of investors, the AUM decreases - True or False ? TRUE FALSE

Correct Answer 17

Old couple with no family support

Correct Answer 18

TRUE


Question 19 (a) (b)


Every mutual fund scheme does not have a pre-announced investment objective - True or False ? TRUE FALSE

What is the formula to calculate the value of NAV of the mutual fund ? Unit-holders Funds in the Scheme * No. of Units Unit-holders Funds in the Scheme Ã· No. of Units Profits earned in the Scheme Ã· No. of Units Assets of the Scheme Ã· No. of Units

Correct Answer 19

FALSE

Correct Answer 20

Unit-holders Funds in the Scheme Ã· No. of Units


Question 21 (a) (b)

Question 22 (a) (b)



Benchmarking helps in assessing under-performance or out-performance - True or False ? TRUE FALSE

Unit holders can hold their units in demat form - True or False ? TRUE FALSE

TRUE How well or how bad did a scheme perform can be assessed by comparing its performance to a pre-defined comparable – ie. benchmark – against which the scheme can be compared. TRUE Investors can choose to hold the Units in dematerialised form. The mutual fund / AMC co-ordinates with the RTA and Depository to facilitate this.



The difference between NAV and re-purchase price is Exit Load Entry Load Commission of the MF Agent Dividend Stripping


Risk can be measured by Standard Deviation Beta Variance Any of the Above


Correct Answer 24

.

.

Exit Load The difference between the NAV and Re-purchase Price is called the “exit load”. If the NAV of a scheme is Rs 20.00 per unit, and it were to charge exit load of 1%, the Re-purchase Price would be Rs 20 – 1% i.e. Rs 19.80. Any of the Above


Question 25 (a) (b)



Correct Answer 26

Securities Transaction Tax is applicable to Equity Schemes - True or False ? TRUE FALSE

National Pension System can invest in Equity Funds Government Securities Corporate Debt All of the above

.

TRUE Mutual funds are exempt from tax. However, Securities Transaction Tax (STT) is applicable on sale / redemption transactions in units of equity mutual fund schemes. All of the above


Question 27 (a) (b)

Question 28 (a) (b)


Correct Answer 28

To get above average yields, High yield bond schemes invest in junk bonds - True or False ? TRUE FALSE

AMFI is an industry body, but not a self-regulatory organization - True or False ? FALSE TRUE

TRUE Junk bond schemes or high yield bond schemes invest in bonds of companies that are of poor credit quality.

TRUE


Question 29 (a) (b)

Question 30 (a) (b)

There is no Tax Deducted at Source (TDS) on dividend payments or repurchase payments of Mutual Funds for Indian investors - True or False ? TRUE FALSE

The Minimum networth requirement for AMC is Rs 100 crores - True or False ? TRUE FALSE

Correct Answer 29

TRUE

Correct Answer 30

FALSE

Answer Explanation

AMC should have networth of at least Rs 10 crore.



Investor can get into long term investment commitments in Inter-generational Phase Accumulation Phase Distribution Phase Transition Phase


Investors KYC details are stored in the server of AMFI AMC KRA SEBI



.

.

Accumulation Phase Accumulation is the stage when the investor gets to build his wealth. It covers the earning years of the investor i.e. the phases of the life cycle from Young Unmarried to Pre-Retirement KRA KRA means KYC Registration Agency The KRA after checking the KYC details uploads the details in the server of any centralised KRA.


Question 33 (a) (b)



Correct Answer 34

Interval funds combine features of both open-ended and close-ended schemes - True or False ? FALSE TRUE

Investments in mutual fund are allowed using ASBA Cheque / DD Remittance Any of the above

_.

TRUE Interval Funds are largely close-ended, but become open-ended at pre-specified intervals.

Any of the above


Question 35 (a) (b)



Its due to loads and taxes that there is a difference between scheme returns and investor returns - True or False ? FALSE TRUE

Statement of Account is to be sent to investors within closure. 3 5 10 30

days of NFO

TRUE Loads like Exit Load and Taxes like STT reduce the scheme returns.

5


Question 37 (a) (b)

Question 38

Distribution phase of Wealth Cycle is a parallel of Retirement phase of Life Cycle - True or False ? TRUE FALSE

Dividend Distribution Tax (DDT) on debt-oriented mutual fund schemes for Individual and HUF Investors is + Surcharge + Education Cess

(a) (b) (c) (d)

10% 25% 30% NIL

Correct Answer 37

TRUE

Answer Explanation

Correct Answer 38

Reaping / Distribution is the stage when the investor needs regular money. Hence, investors in this stage need to have higher allocation to income generating assets. It is the parallel of retirement phase in the Life Cycle. 25%



The ARN number is assigned by The AMC SEBI AMFI Stock Exchange

Question 40

No commission neither upfront nor trail is payable to the distributor for their own investments (self business) - State True or False ?

(a) (b)

TRUE FALSE

Correct Answer 39

AMFI

Correct Answer 40

TRUE

Answer Explanation

.

Commission is payable to the distributors to mobilise money from their clients. Hence, no commission is payable to the distributor for their own investments.



Question 2 (a) (b)



NRI cannot make a repartriable investment in Mutual Funds using a Demand Draft Investment by Demand Draft is not allowed in MF's He can make such investment subject to approval from RBI He can make such investments by providing FIRC certificate from his bankers None of the above

When an investor chooses a particular scheme of a Mutual Fund, its basically because he can get the portfolio of his choice - True or False ? TRUE FALSE

He can make such investments by providing FIRC certificate from his bankers FIRC - Foreign Inward Remittance Certificate

FALSE The investor has no say in deciding the portfolio of a MF scheme. Its the Fund Managers prerogative as to which stocks to buy and sell or change the portfolio.



The trust cannot be sued by the unit holders because the funds are managed by the AMC and not the trust the trust is a notional entity members of the trust are usually very trusted people all of the above

Question 4

In case a Mutual Fund scheme is winded up and some of the illiquid securities are sold after a period of two years, the funds so received are to be .

(a) (b) (c) (d)



.

kept by the Mutual Fund under the head 'Other Profits' transferred to the Investor Education Fund paid to the old investors transferred to AMFI and to be used for Mutual Fund promotional activities

the trust is a notional entity Under the law, a trust is a notional entity. Therefore, investors cannot sue the trust. However if an investor feels that the trustees have not fulfilled their obligations, then he can file a suit against the trustees for breach of trust. transferred to the Investor Education Fund If the amounts received on sale of illiquid securities are substantial, and recovered within 2 years, then the amount is to be paid to the old investors In other cases, the amount is to be transferred to the Investor Education Fund maintained by each mutual fund.




The Mutual Fund AMC shall take investment decisions solely in the interest of . The AMC employees The MF unit holders The Trustees AMFI

is/are responsible for overall investments of the fund. The Senior Fund Manager The Chief Investment Officer The Trustees The Sponsors

Correct Answer 5

The MF unit holders

Correct Answer 6

The Chief Investment Officer

Answer Explanation

Chief Investment Officer (CIO) is responsible for overall investments of the fund. Fund managers assist the CIO.


Question 7

(a) (b) (c) (d)



Correct Answer 8

The market value of investments of a Mutual Fund scheme is Rs 350 crore and the total liabilities are Rs 27 crores. The number of units of face value 10 are 20 crores. What is the NAV of this scheme ? 14.35 15.75 16.15 17.35

The benefit of subsrcibing to health insurance early in ones life is . At later age insurance companies may reject the claim on the pretext of preexisting illness. Premium at a young age is low Both of the above None of the above

16.15 Market Value of Investments = 350 crore Less - Liabilities 27 crore Divided by units 20 crore NAV = 16.15

Both of the above



The role of Banker Custodian Transfer Agent Depositories

Question 10

Payment of tax on the interest received from a Bank deposit can be deferred until its actually received - True or False ?

(a) (b)

Correct Answer 9


is to issue and redeem units of a Mutual Fund.

TRUE FALSE

Transfer Agent

FALSE Tax on Bank Deposit interest has to be paid as and when accrued.



Question 12

A Pharma Sector fund should invest atleast companies. 50% 65% 90% There is no such limitation

A Mutual Fund scheme gave an annualised return of 12.3% and the annualised Standard Deviation of the fund is 5.46. The current risk free return is 9%. Calculate the Sharpe Ratio.

(a) (b) (c) (d)

0.60 0.75 0.88 1.24

Correct Answer 11

65%

Answer Explanation


in shares of pharma

When a scheme’s name implies investment in a particular kind of security or sector, it should have a policy that provides for investing at least 65% of its corpus in that security or sector.

0.6 The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation ie. ( Return Earned - Risk free Return ) / Standard Deviation (12.3 – 9) / 5.46 = 0.60



Question 14 (a) (b)

cannot invest in Mutual Funds through the Micro SIP route. HUF Corporates Persons of Indian Origin (PIO) residing abroad All of the above

In an Open Ended fund the pool of money always remain constant - True or False ? TRUE FALSE

Correct Answer 13

All of the above

Correct Answer 14

FALSE

Answer Explanation

In an Open Ended fund the pool of money is fluctuating. This is due to regular Inflows and Outflows of funds because of purchase and sale of units by the investors.




Distribution Expenses in excess of what is specified by SEBI has to be borne by . Unit holders AMFI AMC Fund Manager

In which kind of funds can the investors enter and exit at any time even after the NFO Close Ended Funds Open Ended Funds Both 1 and 2 None of the above

Correct Answer 15

AMC

Correct Answer 16

Open Ended Funds


Question 17 (a)

Which of the following expenses cannot be charged to the scheme? Fees of various service providers, such as Trustees, AMC, Registrar & Transfer Agents, Custodian and auditor

(b) (c)

Penalties and fines for infraction of laws Selling expenses including scheme advertising and commission to the distributors Expenses on investor communication, account statements, dividend / redemption cheques / warrants

(d)


Some proportion of assets in a scheme are maintained in liquid form when Dividend has to be paid Market is overheated There are re-purchase expectations All of the above

Correct Answer 17

Penalties and fines for infraction of laws

Correct Answer 18

All of the above




When a scheme is first launched the assets under management would be . Higher than the fund mobilized from the investors Lower than the fund mobilized from the investors Would be equal to the funds mobilized from the investors Would be fixed at Rs 500 crores

After a NFO (New Fund Offer) the investors have which of the following options ? They pay a price that is linked to NAV They pay a price that is not linked to NAV They pay a price that may or may not be linked to NAV None of the above

Correct Answer 19

Would be equal to the funds mobilized from the investors

Correct Answer 20

They pay a price that is linked to NAV

Answer Explanation

Once the NFO is over, any investor who wants to buy units of this MF scheme has to buy at the prevailing NAV.



Investments in mutual funds can be made by Cheque/DD Remittances ASBA Any of the above


The comparable for a liquid scheme is Balanced Scheme Equity scheme Savings Bank account Gilt Fund

Correct Answer 21

Any of the above

Correct Answer 22

Savings Bank account

.

.


Question 23 (a) (b)




Evaluating a scheme and investing in it is an art, not a science - True or False ? TRUE FALSE

If the fund manager is expecting the interest rates to fall, then the manager would buy fixed rate instruments of shorter tenor would buy floating rate instruments would buy longer term fixed rate debt securities. None of the above

TRUE Quantitative measures like yearly returns etc. are based on historical performance, which may or may not be replicated in future. So evaluating a MF scheme is more of an art than a science.

would buy longer term fixed rate debt securities. When the interest rates fall, the current debt instruements of longer duration become more valuable.






Institutional Mutual Fund Distributors build their reach through . Agents Employees Sub Brokers All of the Above

In India, most investor service centres are offices of AMC's Registrars and Transfer Agents Stock Brokers Custodians

.

All of the Above Institutional Mutual Fund Distributors like Banks, Stock Brokers etc. usually appoint Agents and Subbrokers and also employ people to sell Mutual Fund schemes.

Registrars and Transfer Agents In India, most investor service centres are offices of Registrars and Transfer Agents like CAMS.


Question 29 (a) (b)

Mutual fund 'ranking' and 'rating' are one and the same - True or False ? TRUE FALSE

Question 30

Investment objective defines the broad investment charter - True or False ? TRUE FALSE

(a) (b)


FALSE Ranking generally means the rank of the fund among other similar funds in a quarter. This depends on the returns of the funds and such ranking can change regularly. Ratings are given to funds by MF research agencies depending on the long term returns and various other parameters. The ratings can be five star, four star etc.

Correct Answer 30 TRUE Answer Explanation

Investment Objective defines the broad investment charter. For example - A balanced scheme can have an investment objective like: “To achieve growth by investing in equity and equity related investments, balanced with income generation by investing in debt and money market instruments”



NFOs ( except ELSS and RGESS ) can be open for a maximum of 10 days 15 days 20 days 30 days

Question 32

Net assets of a scheme are same as its investment portfolio. - True or False ? TRUE FALSE

(a) (b)



_.

15 days Schemes other than ELSS and RGESS (Rajiv Gandhi Equity Saving Scheme) can remain open for subscription for a maximum of 15 days. In the case of ELSS / RGESS schemes, the offering period shall be not be more than 30 days. FALSE Net asset includes the amounts originally invested, the profits booked in the scheme, as well as appreciation in the investment portfolio. It goes up when the market goes up, even if the investments have not been sold.


Question 33 (a) (b)


Correct Answer 33 Answer Explanation Correct Answer 34 Answer Explanation

One limitation of mutual funds is the lack of portfolio customization True or False ? TRUE FALSE

NAV of Equity funds is to be calculated upto 1 2 3 4

decimals.

TRUE An investor in a MF scheme cannot instruct the portfolio of securities he would want to have. He has to go along with the fund managers decisions. 2 NAV for equity and balanced funds is to be calculated upto at least 2 decimal places. NAV is to be calculated upto 4 decimal places in the case of index funds, liquid funds and other debt funds.


Question 35 (a) (b)


STT is not applicable on transactions in debt or debt-oriented mutual fund or Liquid Fund units. TRUE FALSE

Risks in mutual fund schemes would depend on the liquidity of the portfolio nature of portfolio outside liabilities all of the above

Correct Answer 35

TRUE

Correct Answer 36

all of the above

.



Question 38 (a) (b)

of the Unit-holders can pass a resolution to wind-up a scheme. 25% 50% 60% 75%

Mutual Funds cannot accept cash from investors for investing in their schemes - True or False ? TRUE FALSE

Correct Answer 37

75%

Correct Answer 38

FALSE

Answer Explanation

Mutual funds usually do not accept cash. However for small investors, who may not be tax payers and may not have PAN/bank accounts, are allowed cash transactions for purchase of units in mutual funds to the extent of Rs. 20,000/- per investor, per mutual fund, per financial year.



What is the Absolute Return for a Mutual Fund investor if he had bought at NAV 20 and sold at NAV 40 after two years ? 100% 50% 25% Insufficient Data

Question 40

strategy is supposed to be a risky strategy of asset allocation.

(a) (b) (c) (d)



Strategic Asset Allocation Tactical Asset Allocation Both 1 and 2 None of the above

100% Absolute Return or Simple Return is simply the change in the value of an investment over a period of time. Its not calculated on a yearly basis etc. In the above example - A person bought a MF at NAV 20 and sold it after 2 years at NAV 40, then the Absolute Return is : (Sale Price - Buy Price / Buy Price) X 100 40 - 20 / 20 = 1 or 100% absolute return Tactical Asset Allocation Tactical Asset Allocation is the strategy when the investor presumes the likely behaviour of the market and goes over weight on equities. This is very risky. Strategic Asset Allocation is as per risk profile of an individual depending on the individuals age etc. This is a safer strategy.


PRACTICE TEST 6 Question 1

According to the Certified Financial Planner “ Board of Standards (USA), the last stage in financial planning is .

(a)

Develop and Present Financial Planning Recommendations and / or Options

(b) (c) (d)

Monitor the Financial Planning Recommendations Implement the Financial Planning Recommendations Establish and Define the Client-Planner Relationship

Question 2 (a)

Which of the below statement is FALSE with respect to objectives of AMFI ? To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry.

(b) (c)

To regulate the Mutual Fund Industry To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies.

(d)

To develop a cadre of well-trained Agent distributors



Monitor the Financial Planning Recommendations The steps in creating a comprehensive financial plan, as proposed by the Certified Financial Planner – Board of Standards (USA) are as follows: • Establish and Define the Client-Planner Relationship • Gather Client Data, Define Client Goals • Analyse and Evaluate Client’s Financial Status • Develop and Present Financial Planning Recommendations and / or Options • Implement the Financial Planning Recommendations • Monitor the Financial Planning Recommendations To regulate the Mutual Fund Industry SEBI is the regulator of Mutual Funds in India.


Question 3

(a) (b)




A Mutual Fund has several schemes running. To avoid more backoffice work etc. it can put funds of all the schemes in a single bank account True or False ? TRUE FALSE

The benchmark for a Gilt fund investing in Government Securities with maturities ranging from 1 to 3 years is . Si-Bex Mi-Bex Li-Bex None of the above

FALSE The funds of each scheme has to be maintained in a different Bank Account.

Si-Bex ICICI Securities and Finance Company Limited (Isec) has been maintaining ICICI Securities Sovereign Bond Index (i-BEX) since 1994 representing gilts market. In order to meet specific needs of market participants, it has also been maintaining short-maturity index (Si-BEX) comprising securities maturing in one to three years, medium maturity index (Mi-BEX) comprising securities maturing in three to seven years, and long-maturity index (LiBEX) comprising securities maturing later than seven years since March 1996. These three new indices alongwith a composite index, which is an average of Si-BEX, Mi-BEX and Li-BEX were chosen by AMFI as benchmark gilt indices for mutual fund schemes.


Question 5 (a) (b)


Floating rate debt market securities generally hold their value despite changes in the yields in the debt market - True or False ? TRUE FALSE

Dividend warrants have to be dispatched to investors within declaration of the dividend. 10 15 30 45

Correct Answer 5

TRUE

Correct Answer 6

30

days of


Question 7

(a) (b) (c) (d)

The Market Value of a scheme is Rs 240 crores. Dividend accrued but not received is Rs 30 crore. The Expenses payable are Rs 10 crore. The total number of outstanding units is 120 lakhs. What is the NAV of the scheme ? 175.8 216.66 224.7 311.74


Which of the following is not a benefit of investing in a Mutual Fund ? Diversification of Risk Professional Management of Funds Time and cost savings Custody of his share of the portfolio in his demat account


Correct Answer 8 Answer

216.66 Total Market Value = Rs 240 crore Add Dividend Accrued of Rs 30 crore Less Expenses Payable of Rs 10 crore Divided by Units 120 lakhs = 216.66 NAV Custody of his share of the portfolio in his demat account Explanation

Mutual Fund investors do not get shares in their demat account.


Question 9 (a) (b)

AMFI is a Self Regulatory Organization (SRO) - True or False ? FALSE TRUE

Question 10

Mr. Mohit invested Rs 5000 in a Mutual Fund on 1 Jan 2011 and when he redeemed on 31 Dec 2012 he got Rs 12000. Calculate the CAGR.

(a) (b) (c) (d)

54.90% 69.75% 70.80% 125%

Correct Answer 9

FALSE

Answer Explanation


Mutual Funds in India have not constituted any SRO for themselves. Therefore, they are directly regulated by SEBI. AMCs in India are members of AMFI, an industry body that has been created to promote the interests of the mutual funds industry. AMFI is not an SRO.

54.90% Formula for calculating Compounded Annual Growth Rate : CAGR = { Ending Value / Beginning Value } ^ ( 1 / No. of years) - 1. = { 12000 / 5000 } ^ 1 / 2 - 1 = {2.4} ^ 0.5 - 1 On the scientific calculator of your computer type 14000 then press x^y the .5 = 1.549 - 1 = .549 x 100 = 54.90%


Question 11 (a) (b)

FMP dividends are Tax Free - True or False ? TRUE FALSE

Question 12

In the National Pension System -NPS, the investor is allotted a . Special NPS number PRAN QNPSN MANN

(a) (b) (c) (d)

Correct Answer 11

TRUE

Correct Answer 12

PRAN

Answer Explanation

PRAN - Personal Retirement Account Number.


Question 13 (a) (b)


Investors of debt oriented mutual funds do not have to pay STT - True or False ? TRUE FALSE

' Not more than 25% of the Net Assets will be invested in the Derivatives Market' - This statement best describes . Investment Interest Investment Objective Investment Policy Investment Strategy

Correct Answer 13

TRUE

Correct Answer 14

Investment Policy

Answer Explanation

Investment objective defines the broad investment charter. Investment policy describes in greater detail, the kind of portfolio that will be maintained. Investment strategies are decided on a day-to-day basis by the senior management of the AMC.


Question 15

(a)

A Mutual Fund scheme has equity shares of ICICI Bank in its portfolio. For calculation of NAV, which of the following prices will be considered ? The closing price of ICICI Bank on Regional Stock Exchanges on the day of calculation of NAV

(b)

The closing price of ICICI Bank on BSE / NSE on the day of calculation of NAV

(c)

The Average trading price on Regional Stock Exchanges on the day of calculation of NAV

(d)

The Average trading price on BSE/NSE on the day of calculation of NAV

Question 16

Minimum duration of an interval period in an interval scheme/plan is . 15 Days 30 Days 45 Days 60 Days

(a) (b) (c) (d)

Correct Answer 15

The closing price of ICICI Bank on BSE / NSE on the day of calculation of NAV

Correct Answer 16

15 Days


Question 17 (a) (b)



Correct Answer 18

The unit capital in an open ended fund keeps changing on a regular basis - True or False ? TRUE FALSE

People who are better able to take the downside that comes with risk are those who have a . Daring and adventurous psyche Multi-skilled and qualified professionals Regular source of income All of the above

TRUE Additional Investments and Withdrawals happen on a daily basis in an open ended mutual fund. So the unit capital keeps changing.

All of the above


Question 19 (a) (b)



The unit holder who has given his money to the Mutual Fund can decide what securities or investments the scheme would buy - True or False ? TRUE FALSE

The advantages of mutual funds are : Liquidity Economics of scale Both 1 and 2 None of the above

FALSE The unit holder can never decide which investments the fund should buy. The Fund Manager / Concerned Authority decided on the investments.

Correct Answer 20

Both 1 and 2



Question 24 (a) (b)



Which of the following aspects of portfolio would an investor in a debt scheme give most importance? Number of securities in portfolio Weighted Average Maturity Stock selection Sector selection

The NSEs platform for Mutual Fund trading is called NEAT MFSS True or False ? TRUE FALSE

Weighted Average Maturity Longer the maturity of a debt security, higher would be its interest rate sensitivity. Therefore, weighted average maturity of debt securities in a scheme’s portfolio is indicative of the interest rate sensitivity of a scheme. (Also in the above question all the other three options are related to Equity Fund) TRUE MFSS : Mutual Fund Service System.



Question 26

is the regulator for the National Pension System. AMFI COMMERCE MINISTRY SEBI PFRDA

The Mutual Fund distributor can charge a fee from the investor - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 25

PFRDA

Answer Explanation


Pension Funds Regulatory and Development Authority (PFRDA) is the regulator for the National Pension System.

TRUE As per new rules : Upfront commission to distributors will be paid by the investor directly to the distributor, based on his assessment of various factors including the service rendered by the distributor.



Question 28 (a) (b)


Correct Answer 28

The STT charged on Purchase of Equity Share in a Stock Exchange is . 0.01% 0.10% 1% 2.50%

Mutual funds are constituted as Trusts - True or False ? FALSE TRUE

0.10% STT ie. Securities Transaction Tax on purchase or sale of equity shares in stock exchange is 0.1% STT on sale of futures & options in stock exchange is 0.01% TRUE


Question 29 (a) (b)



Correct Answer 30

Fundamental analysis can be effectively used for Intra Day Trading True or False ? TRUE FALSE

Its compulsory to list units of ELSS Fund Close Ended Fund Gilt Fund Arbitrage Fund

on the stock exchange.

FALSE It is generally agreed that longer term investment decisions are best taken through a fundamental analysis approach. Technical analysis is generally used for shorter term speculative decisions, including intra-day trading. Close Ended Fund



KIM has to be updated every three months six months one year five year

Question 32

Generally long term investment decisions taken through fundamental analysis and for shorter term speculative decisions, including intra-day trading one uses Technical Analysis - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 31

one year

Answer Explanation


.

KIM is to be updated at least once a year.

TRUE It is generally agreed that longer term investment decisions are best taken through a fundamental analysis approach. Technical analysis is generally used for shorter term speculative decisions, including intra-day trading.


Question 33 (a) (b)

Question 34

Fund accounting activity of a scheme has be 100% outsourced - True or False ? TRUE FALSE

Offer documents of mutual fund schemes are approved by SEBI - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 33

FALSE

Correct Answer 34

FALSE

Answer Explanation

Offer Documents in the market are “vetted” by SEBI, though SEBI does not formally “approve” them.



Question 36 (a) (b)



assumes that all dividend payouts are re-invested in the scheme at the ex-dividend NAV. Compounded Returns Compounded Annual Growth Rate Annualised Returns Simple Returns

Nomination and Pledge options are not available for mutual fund investors - True or False ? TRUE FALSE

Compounded Annual Growth Rate Whenever a dividend is paid – and compounding is to be considered - the CAGR - Compounded Annual Growth Rate - technique prescribed by SEBI is used. This calculation is based on an assumption that the dividend would be reinvested in the same scheme at the ex-dividend NAV. FALSE Nomination and Pledge options are available for mutual fund investors.


Question 37 (a) (b)



Day to day management of the MF schemes is handled by the Trustees True or False ? FALSE TRUE

Redemption / re-purchase cheques would need to be dispatched to investors within working days from the date of receipt of request. 2 3 5 10

FALSE Day to day management of the schemes is handled by an AMC. The AMC is appointed by the sponsor or the Trustees. 10


Question 39 (a) (b)

Question 40

ELSS schemes should contain the least amount of Ill Liquid Investments - True or False ? TRUE FALSE

Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the Ministry of Finance - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 39

FALSE

Answer Explanation


Open-ended scheme, which have a greater need for liquidity because investors can offer their units for re-purchase at any time - should have the least amount of ill liquid investments in their portfolio. ELSS Schemes have a lockin period of three years - so the fund manager can buy more illiquid investments if he feels there is great potential in them in the long run. FALSE Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the Securities Appellate Tribunal (SAT).

-

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS CERTIFICATION V.IMP LAST DAY REVISION EXAM

LAST DAY REVISION EXAM 1

Question 1

(a) (b)

Question 2

(a) (b) (c) (d)



The basis of Fundamental Analysis is studying the companies Price Volume chart and then taking a decision on buying/selling - True or False ? TRUE FALSE

The average net asset of a Mutual Fund scheme is Rs 500 crores and the investment transactions amounted to Rs 2000 crores in a year. What is the average holding period of the investments ? 2 months 3 months 4 months 6 months

FALSE Fundamental Analysis entails review of the company’s fundamentals viz. financial statements, quality of management, competitive position in its product / service market etc. Technical analysts study price-volume charts of the company’s share prices. 3 months Total Transactions = Rs 2000 cr Avg Asset = Rs 500 cr So 2000 / 500 = 4 times in a year the investments were churned 4 times a year = every 3 months.

-



Which of the below is not a high risk fund ? Banking Sector Fund Diversified Equity Fund Income Fund Pharma Sector Fund

Question 4

Every investor should invest in portfolio. Arbitrage Funds Diversified Equity Funds Sector Funds Thematic Funds

(a) (b) (c) (d)

Correct Answer 3

Income Fund

Correct Answer 4

Diversified Equity Funds

as a part of his core

-



Question 6 (a) (b)



The NAV of a Mutual Fund scheme is Rs 180. If the exit load is 2%, what will be the effective re-purchase price ? 176 176.4 177.5 177.8

AMFI is the sole regulator of Mutual Funds in India - True or False ? TRUE FALSE

176.4 Rs 180 less 2% 180 X 2 / 100 = 3.6 180-3.6 = 176.40

FALSE SEBI is the regulator of MF's in India.

-



Long Term Capital Gain Tax is Debt Schemes is charged at 20% with indexation 10% without indexation Lower of 1 and 2 There is no tax on Debt Schemes

Question 8

A purchase transaction of a Mutual fund scheme is completed online by an investor at 12.25 pm (web server time). The same is processed at 3.50 pm. What is the applicable cut-off time for this transaction?

(a) (b) (c) (d)



.

12.25 pm 3.30 pm 3.50 pm Cut off time does not apply for online transaction

Lower of 1 and 2 In the case of Long Term Capital Gain, investor pays tax at the lower of the following: - 10% plus surcharge plus education cess, without indexation - 20% plus surcharge plus education cess, with indexation 12.25 pm For online transactions, the time as per the web server to which the instruction goes, is used in determining the NAV for sale / re-purchase transactions.

-



The Trustees have to take the consent of Unit Holders when the trustee’s decide to wind up the scheme whenever required by 75% of the unit holders whenever required by SEBI in the interest of unit holders All of the above


The date of applicability of the NAV is not dependent on scheme in which the money is invested time at which the application is submitted place at which the application is submitted All of the above

Correct Answer 9

All of the above

Correct Answer 10

place at which the application is submitted

.

.

-



Question 12 (a) (b)



The scheme in which physical gold is deposited in a bank and interest is received on such deposit is known as . Loan against Gold scheme Gold Deposit Scheme Gold Transfer Scheme There is no such scheme

No SEBI permission is required in appointing a Bank or a Stock Broker as a Mutual Fund distributor - True or False ? TRUE FALSE

Gold Deposit Scheme Gold deposit schemes are offered by some banks in India and are like a fixed deposit in gold. An investor depositing gold receives interest at regular intervals and on maturity the gold of equivalent weight is returned.

TRUE The AMC appoints its distributors as per the guidelines. No SEBI permission is required for such appointments.

-



Question 14 (a) (b)



Mr. Mohan gives an application for investment in an Equity fund at 3.29 pm on Friday at the AMC's office. Which will be the applicable NAV ? Fridays NAV Saturdays NAV Mondays NAV Highest NAV of the above three

The Non Systematic Risk can be minimised by diversifying the portfolio True or False ? FALSE TRUE

Mondays NAV For applications for an Equity Fund given after 3 pm, the next working days NAV is considered.

TRUE Non-systematic risk is unique to a company like risk arising out of change in management or cheaper imports etc. This can be minimised by diversification ie. investing in various companies of different sectors. (Systematic risk is integral to investing in the market; it cannot be avoided like Political risks etc)

-


Question 15 (a) (b)




Yield Spread is the additional risk premium that an investor gets for bearing the credit risk - True Or False ? TRUE FALSE

A Mutual Fund scheme issued 36 crore units to its investors in an NFO at face value Rs 10. What is the unit capital of this scheme ? Rs 36 cr Rs 360 cr Rs 3600 cr None of the above

TRUE Eg- Additional return offered by a non-government issuer ( like a Company), above the yield that the government offers, is called yield spread. Better the credit quality, lower the yield spread.

Rs 360 cr Each unit is of Rs 10. So 36 cr units X Rs 10 = Rs 360 cr

-


Question 17 (a) (b)

Retirement Planning involves Tactical Asset Allocation - True or False ? TRUE FALSE

Question 18

Growth investment style entails investing in high growth stocks i.e. stocks of companies that are likely to grow at the same pace as that of the economy - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 17

FALSE

Answer Explanation


Tactical asset allocation is suitable only for seasoned investors operating with large funds as it involves taking a bet on the market movements. Strategic Asset Allocation is best suited for Retirement Planning as it considers the age - risk factor.

FALSE Growth investment style entails investing in high growth stocks i.e. stocks of companies that are likely to grow much faster than the economy.

-


Question 19

(a) (b) (c) (d)

Question 20 (a) (b)



An investor gives a cheque of Rs 1 lacs for investing in a Debt scheme at 3.30 pm at a Mutual Fund office. The NAV of which day will be applicable to him ? NAV of the same day NAV of the next business day NAV of the day on which funds will be available None of the above

The Entry / Exit Loads and Taxes do not have an impact on the returns to the investors - True or False ? TRUE FALSE

NAV of the next business day For all Equity and Debt funds (except Liquid funds) - For investment of Rs 2 lacs and below - NAV of the same day if received before 3 pm ( cut-off time). If received after 3 pm then NAV of the next business day. For investments of amount over Rs 2 lacs, irrespective of the time of receipt of application, NAV of the business day on which the funds are available for utilisation before the cut-off time of that day is applicable.

FALSE Loads and taxes pull the investor’s returns below that earned by the Scheme.

-


Question 21 (a) (b)

Question 22 (a) (b)

The distribution of an investors portfolio between different asset classes is called asset allocation - True or False ? TRUE FALSE

Minors can invest in Mutual Funds - True or False ? TRUE FALSE

Correct Answer 21

TRUE

Correct Answer 22

TRUE

Answer Explanation

Minors i.e. persons below the age of 18 are not legally eligible to contract, so they need to invest through their Parents/Lawful guardians.

-


Question 23

(a) (b)

Question 24

(a) (b) (c) (d)


Correct Answer 24

Investments owned by the scheme may be quoted in the market at lower price than the cost paid and these losses are called Notional Losses - True or False ? TRUE FALSE

One of the objective of is to interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry. AMFI NSE / BSE Investor Forum Mutual Fund Distributors Association

FALSE Investments owned by the scheme may be quoted in the market at lower than the cost paid and these are called valuation losses. Similarly, there can be valuation gains when securities are quoted in the market at a price above the cost at which the scheme acquired them.

AMFI

-


Question 25

(a) (b)




Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the last day of the month for all their equity schemes on their respective website on or before the third day of the succeeding month in a userfriendly and downloadable format - True or False ? TRUE FALSE

is the summary of SAI and SID New Fund Offer Application KIM Attachments to all Advertisements None of the above

FALSE Its on or before the tenth day of the succeeding month.

KIM KIM ( Key Information Memorandum) is essentially a summary of the SID (Scheme Information Document) and SAI (Statement of Additional Information). It is more easily and widely distributed in the market. As per SEBI regulations, every application form is to be accompanied by the KIM. New Fund Offer contains the complete SID and SAI.

-



Question 28

An investor in an active fund bears a management, and takes a risk. Higher , Higher Lower , Lower Higher, Lower Lower, Higher

Although invest in equity markets, the expected returns are in line with liquid funds.

(a) (b) (c) (d)

Sectoral Funds Arbitrage Funds ELSS Funds Debt Funds

Correct Answer 27

Higher , Higher

Correct Answer 28

Arbitrage Funds

Answer Explanation

cost for the fund

Although Arbitrage funds are categorized as equity funds because they invest in equity. In reality, the risks are arbitraged (i.e. cancelled out), normally between the cash market and the F&O market. The returns are lower – more in line with money market returns/liquid funds, rather than equity market returns as there is no open position and the profit is the price difference between two markets.

-


Question 29 (a) (b)



An investor who wants wider portfolio choices should invest in Mutual Funds when compared to National Pension System - True or False ? TRUE FALSE

All advertisements and Sales Literature containing an AMC(s)/Mutual Fund ranking must prominently disclose . The publisher of the ranking data. Criteria on which the ranking is based. The name of the Ranking Entity. All of the above

TRUE The NPS offers fewer portfolio choices than mutual funds.

All of the above

-


Question 31 (a)

As per the Income Tax Act - which of the below option is True ? Capital loss, short term or long term, can be set off against any other head of income

(b)

Long term capital loss can be set off against long term and short term capital gain

(c) (d)

Short Term Capital gains is a tax free income Short term capital loss is to be set off against short term capital gain or long term capital gain

Question 32

(a) (b)

Correct Answer 31

Answer Explanation


An important objective of SEBI is to represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry - True or False ? TRUE FALSE

Short term capital loss is to be set off against short term capital gain or long term capital gain A few key provisions of the Income Tax Act are : • Capital loss, short term or long term, cannot be set off against any other head of income (e.g. salaries) • Short term capital loss is to be set off against short term capital gain or long term capital gain • Long term capital loss can only be set off against long term capital gain FALSE An important objective of AMFI is to represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry

-



Question 34

(a) (b) (c) (d)

If an Institutional Investor is making an application for investing in a Mutual Fund, which additional document is required ? Audited Accounts for the last 3 years Bank Statements Board Resolution Approval letter from SEBI

An investor gives a cheque of Rs 7 lacs at 4 pm at a Mutual Fund office for investment in a Equity Fund. The NAV of which day will be applicable to him ? Same day NAV NAV of the next business day NAV of the day on which the funds are available None of the above

Correct Answer 33

Board Resolution

Correct Answer 34

NAV of the day on which the funds are available

Answer Explanation

For investments of amount over Rs 2 lacs, irrespective of the time of receipt of application, NAV of the business day on which the funds are available for utilisation before the cut-off time of that day is applicable. For all Equity and Debt funds (except Liquid funds) - For investment of Rs 2 lacs and below - NAV of the same day if received before 3 pm ( cut-off time)

-


Question 35

(a) (b)

Question 36

If an investor feels that the trustees have not fulfilled their obligations, then he can file a suit against the trustees for breach of trust - True or False ? TRUE FALSE

Pension Funds Regulatory and Development Authority (PFRDA) is the regulator for the National Savings System.

(a) (b)

TRUE FALSE

Correct Answer 35

TRUE

Correct Answer 36

FALSE

Answer Explanation

Pension Funds Regulatory and Development Authority (PFRDA) is the regulator for the National Pension System.

-






An elderly couple who have no immediate family members should ideally invest in . ELSS Funds Debt Funds Sectoral Funds Blue Chip Equity Funds

To source the data required to track the performance of mutual funds most offer free tools on their websites for this purpose. AMC's Distribution Houses MF Research companies All of the above

Debt Funds Debts funds carry the least amount of risk so they can be recommended to the elderly couple. The other funds are Equity oriented and carry huge market risks. All of the above An investor who wants to study the performance of a MF by collecting daily NAV etc. from the newspapers can find it frustratingly time consuming. However ready-made solutions are available in the market. Many AMCs, distribution houses and mutual fund research houses offer free tools in their website.

-



Question 40 (a) (b)



Of the following documents, which is required to be appended to the application form of a MF scheme ? Statement of Additional Information - SAI Addendum Scheme Information Document - SID Key Information Memorandum - KIM

A regular dividend paying mutual fund scheme can be used for capital appreciation - True or False ? FALSE TRUE

Key Information Memorandum – KIM KIM is essentially a summary of the SID and SAI. As per SEBI regulations, every application form is to be accompanied by the KIM. FALSE A regular dividend paying mutual fund scheme can be used as a source of regular income.

-


Question 41 (a) (b)

Question 42

Mutual Funds are constituted as Investment Companies in India - True or False ? TRUE FALSE

Recurring expenses cannot be charged to a Mutual Fund scheme as it drags down the NAV - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 41

FALSE

Answer Explanation


Mutual funds are constituted as Trusts.and they are governed by the Indian Trusts Act, 1882

FALSE Recurring Expenses can be charged to the scheme. Since the recurring expenses drag down the NAV, SEBI has laid down the expenses and their limits which can be charged to the scheme.

-


Question 43

(a) (b)

Question 44

In the Scheme Information Document (SID), the condensed financial information (for schemes launched in last 3 financial years) is mentioned True pr False ? FALSE TRUE

Liquid schemes and other debt schemes regularly park funds in short term deposits of commercial banks but cannot charge management fees on these - True or False ?

(a) (b)

FALSE TRUE

Correct Answer 43

FALSE

Answer Explanation


Condensed financial information (for schemes launched in last 3 financial years) is mentioned in the Statement of Additional Information (SAI).

TRUE Management fees cannot be charged by liquid schemes and other debt schemes on funds parked in short term deposits of commercial banks.

-


Question 45 (a) (b)

Cash less medical insurance schemes has led to More Liquidity with investors Less Liquidity with investors


Tax Deferral is a key feature of Dividend Option Growth Option Arbitrage Fund Liquid Schemes


Correct Answer 46

.

_.

Less Liquidity with investors Investors keep less liquidity ( ready money ) as the insurance companies settle the medical bills directly.

Growth Option

-


Question 47

(a) (b)

Question 48 (a) (b)



Open-ended schemes have to re-open for sale / re-purchase within 5 business days of the allotment and that date is known as the Re-Opening date - True or False ? TRUE FALSE

The Custodian accepts and gives delivery of securities for the purchase and sale transactions of the various schemes of the fund - True or False ? TRUE FALSE

TRUE As per SEBI guidelines, NFOs [other than ELSS and RGESS] can remain open for a maximum of 15 days. Allotment of units or refund of moneys, should be done within 5 business days of closure of the scheme and Open-Ended schemes have to re-open for sale / re-purchase within 5 business days of the allotment. TRUE The custodian is responsible for settling all the transactions on behalf of the mutual fund schemes.

-


Question 49 (a) (b)

Question 50

(a) (b) (c) (d)

In the Mutual Fund industry - every AMC gives an ARN code number which is renewed every three years - True or False ? True - this is as per SEBI rules False - AMFI issues the ARN code number.

All advertisements and Sales Literature containing an AMC(s)/Mutual Fund ranking must prominently disclose, with respect to the ranking . The name of the Ranking Entity and the criteria on which the ranking is based The name of the category (e.g. income/growth) The number of AMC(s)/Mutual Funds in the category. All of the above

Correct Answer 49

False - AMFI issues the ARN code number.

Correct Answer 50

All of the above

-


Question 51

(a) (b) (c) (d)

Question 52 (a) (b)



Mr. Shah gives a local cheque at 4.30 pm of Rs 10 lacs at a Mutual Fund office for investing in a Gilt Fund. Of which day will the NAV be applicable to him ? NAV of the same day NAV of the next business day NAV of the day on which the funds will be available None of the above

Due to the popularity of cash less health insurance policies the liquidity needs of the investors have reduced - True or False TRUE FALSE

NAV of the day on which the funds will be available For investments of amount over Rs 2 lacs, irrespective of the time of receipt of application, NAV of the business day on which the funds are available for utilisation before the cut-off time of that day is applicable. For investment of Rs 2 lacs and below - NAV of the same day if received before 3 pm ( cut-off time) TRUE Earlier people use to save to meet medical emergencies. But due to cash less medical insurance people keep less liquidity with them as the insurance companies pay for the medical bills

-



Question 54 (a) Options (c) Schemes (d)



Dividend Distribution Tax (DDT) on debt-oriented mutual fund schemes for Corporate Investors is + Surcharge + Education Cess 15% 25% 30% 35%

Different investors have different investment needs and objectives. This is the reason Mutual Fund offer different . Plans (b)

time horizons.

30% Tax on dividend distributed by debt-oriented mutual fund schemes is as follows: Others: 30% + Surcharge + Education Cess Individuals and HUF: 25% + Surcharge + Education Cess Schemes MF's have various schemes like Large Cap Funds, Mid Cap Funds. Sectoral Funds etc. to suit varied investment requirements. (Plans and Options are Dividend / Growth etc. which form a part of the scheme)

-




A person wishes to avail of a loan. For which of the below options he cannot get a loan ? To start a textile factory To buy a car of value above Rs 20 lacs To buy a high priced lottery ticket To buy a house in a Union Territory

You are expecting interest rates (yields) to rise in the markets. Where would you invest your money considering this forecast ? Long Terms Debt Funds Short Term Debt Funds Equity Funds Banking Sector Funds

Correct Answer 55

To buy a high priced lottery ticket

Correct Answer 56

Short Term Debt Funds

Answer Explanation

If it is expected that interest rates would go up, it would be safer to go with Short Term Debt Funds. As the rates rise, the short-term bonds would mature, allowing the fund manager to deploy the proceeds at higher rates. On the contrary, as interest rates in the market goes down, debt securities gain in value. Therefore, long term debt funds would be sensible in declining interest rate scenarios.

-


Question 57

(a) (b)




As per the provisions of the Income Tax Act - Short term capital loss is to be set off against short term capital gain or long term capital gain - True or False ? TRUE FALSE

For a Young Unmarried - which of the following phase is applicable ? Accumulation Distribution Transfer None of the above

TRUE Some key provisions of IT Act related to Capital Gains are: • Capital loss, short term or long term, cannot be set off against any other head of income (e.g. salaries) • Short term capital loss is to be set off against short term capital gain or long term capital gain • Long term capital loss can only be set off against long term capital gain Accumulation Accumulation is the stage when the investor gets to build his wealth. It covers the earning years of the investor i.e. the phases of the life cycle from Young Unmarried to Pre-Retirement.

-


Question 59

(a) (b) (c) (d)


The prescribed ceiling for ill liquid investments is lower for , which have a greater need for liquidity because investors can offer their units for re-purchase at any time. ELSS Schemes Close Ended Schemes Open Ended Schemes Debt Funds

Which one of the below mentioned document is not required for KYC process ? PAN Card Address Proof Income Proof Identity Proof

Correct Answer 59

Open Ended Schemes

Correct Answer 60

Income Proof

-


Question 61

(a) (b) (c) (d)

Question 62 (a) (b)



A Mutual Fund scheme gave an annualised return of 9.86% and the annualised Standard Deviation of the fund is 3.47. The current risk free return is 8%. Calculate the Sharpe Ratio. 0.89 0.72 0.49 0.35

Management fees cannot be charged by liquid schemes on funds parked in short term deposits of commercial banks - True or False ? TRUE FALSE

0.35 The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation ie. ( Return Earned - Risk free Return ) / Standard Deviation 0.536023055 0.354466859 0.35 TRUE SEBI has stipulated annual limits on recurring expenses (including management fees) for various Equity and Debt schemes. However management fees cannot be charged by liquid schemes and other debt schemes on funds parked in short term deposits of commercial banks.

-


Question 63 (a) (b)




In a scenario where interest rates are falling, it would be advisable to invest in a debt fund rather than bank deposit - True or False ? TRUE FALSE

The Pension Account of National Pension System (NPS) is known as . Tier I Tier II Tier III Asset Class E

TRUE As interest rates in the market goes down, debt securities gain in value. Therefore, long term debt funds would be sensible in declining interest rate scenarios. Also if it is expected that interest rates would go up, it would be safer to go with Short Term Debt Funds. As the rates rise, the short-term bonds would mature, allowing the fund manager to deploy the proceeds at higher rates. Tier I Tier I A/c of the National Pension System (NPS) is the Pension account and is non-withdrawable. Tier II A/c is the Savings account and is withdrawable to meet financial contingencies. An active Tier I account is a pre-requisite for opening a Tier II account.

-






In Liquid funds, simple annualised return method is used to show the returns because . Its a simpler way to calculate and investors understand it easily The investment made is fixed for 30 - 90 - 180 days The return is calculated over smaller time horizons The amount invested is usually small

You are a mutual fund advisor. To whom would you advise investment of more than 70 % of their funds in debt funds ? A 33 year old well employed with one son A 45 year old Executive Manager of a company who has 2 children Elderly couple with no children Young man working with Glaxo

The return is calculated over smaller time horizons In case of Money Market schemes and liquid plans, wherein investors have very short investment horizon, the performance can be measured and advertised by simple annualisation of yields.

Elderly couple with no children More Allocation to debt funds is recommended for senior citizens as they carry the least amount of risk Young people can take risks so they are advised to invest in Equity funds for a long term.

-


Question 67 (a) (b)

Question 68

The Stock Exchanges which provide facilities for Mutual Fund trading also do the functions of Mutual Fund RTAs. - True or False ? TRUE FALSE

The National Pension System (NPS) offers a wider portfolio choice than Mutual Funds - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 67

FALSE

Answer Explanation


Stock Exchanges does are not required to do the role of Registrars and Transfer Agents (RTA).

FALSE The NPS offers fewer portfolio choices than mutual funds.

-



Question 70 (a) (b)


Correct Answer 70

Investments owned by the scheme may be quoted in the market at higher than the cost paid and these gains are called as . Valuation Gains Booked Gains Notional Gains Notional Losses

Loads and taxes pull the investors returns below that earned by the Scheme - True or False ? TRUE FALSE

Valuation Gains Investments owned by the scheme may be quoted in the market at higher than the cost paid and these are called valuation gains. Similarly, there can be valuation losses when securities are quoted in the market at a price below the cost at which the scheme acquired them. TRUE

-



What is the full form of ASBA ? Application Supported by Blocked Amount Applicants Supporting Block Amount Application Supported by Bankers Acceptance Applications Superiority by Blocked Amount

Question 72

An investor gives a cheque of Rs 2 lacs for investing in a ELSS scheme at 2.30 pm at a Mutual Fund office. The NAV of which day will be applicable to him ? NAV of the same day NAV of the next business day NAV of the day on which funds will be available None of the above

(a) (b) (c) (d)

Correct Answer 71

Application Supported by Blocked Amount

Correct Answer 72

NAV of the day on which funds will be available

Answer Explanation

For all Equity and Debt funds (except Liquid funds) - For investments of amount of Rs 2 lacs and above, irrespective of the time of receipt of application, NAV of the business day on which the funds are available for utilisation before the cut-off time of that day is applicable. For investment of below Rs 2 lacs - NAV of the same day if received before 3 pm ( cut-off time)

-



Question 74 (a) (b)



The dividend received by a Mutual Fund investor will be taxed at a rate of _. 5% 10% 20% No tax on Mutual Fund Dividends in the hands of the investor

A investors wishes to invest in debt mutual funds but wants high liquidity - should he invest in Fixed Maturity Plans ? Yes No

No tax on Mutual Fund Dividends in the hands of the investor The dividend received by an investor in a MF - be it Equity or Debt, is exempt from tax.

No Fixed maturity plans are a kind of debt fund where the investment portfolio is closely aligned to the maturity of the scheme. AMCs tend to structure the scheme around pre-identified investments. So it will not be easy to liquidate the FMPs.

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Question 76

(a) (b) (c) (d)


Correct Answer 76

Once the New Fund Offer (NFO) of a Close Ended Fund has closed, a person can buy the listed units of such close ended fund . At prices usually higher than NAV At prices usually lower than NAV At prices which can be higher or lower than NAV Units of a Close Ended Fund cannot be bought after NFO

To achieve growth by investing in equity and equity related investments, along with income generation by investing in debt and money market instruments would be the investment objective of a . debt fund balanced scheme ELSS Fund Sectoral Equity fund

At prices which can be higher or lower than NAV After the NFO of a close ended fund, sale and purchase transactions happen on the stock exchange between two different investors, and that the fund is not involved in the transaction. The transaction price is likely to be different from the NAV. Depending on the demand-supply situation for the units of the scheme on the stock exchange, the transaction price could be higher or lower than the prevailing NAV. balanced scheme

-


Question 77 (a) (b)

Question 78

Young Age, Good Steady Job, an Adventurous streak etc are some qualities of an investor who takes risks in investments - True or False ? FALSE TRUE

The peak of earning capacity of an investor reached during the preretirement phase - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 77

TRUE

Correct Answer 78

TRUE

Answer Explanation

In the Accumulation stage, the investor gets to build his wealth. It covers the earning years of the investor i.e. the phases of the life cycle from Young Unmarried to Pre-Retirement.

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Investing in Economic Turmoil.

can be a risky prospect during periods of

Gilt Securities Debt Funds Mid Cap Funds Large Cap Funds

Asset allocation means _. Distribution of Funds between Fund Managers in a Mutual Fund Distribution of funds between various asset classes in a portfolio Distribution of funds between various persons after the death of a person Distribution of funds between beneficiaries of an AMC

Mid Cap Funds Mid Cap Stocks are intrinsically not as strong as the frontline (large cap) stocks, so they become riskier during periods of economic turmoil.

Distribution of funds between various asset classes in a portfolio The distribution of an investor’s portfolio between different asset classes is called asset allocation. For eg - If an investor wishes to invest Rs 10 lakhs - His funds can be divided and invested in Equity, Debt and Gold - This is asset allocation.

-


Question 81

(a) (b) (c) (d)


Debt-oriented, close-ended / interval, schemes /plans need to disclose their portfolio in their website every month, by the working day of the succeeding month. 3rd 10th 12th 15th

Condensed financial information for schemes launched in last 3 financial years is mentioned in the . Scheme Information Document (SID) Statement of Additional Information (SAI) Fact Sheet Prospectus

Correct Answer 81

3rd

Correct Answer 82

Statement of Additional Information (SAI)

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Question 84 (a) (b)



Post the New Fund Offer, investors who wishes to buy units need to pay . the NFO price plus inflation rate the same price as NFO a price linked to the inflation index a price that is linked to its NAV.

Every trust has beneficiaries - True or False ? TRUE FALSE

a price that is linked to its NAV. When a scheme is first made available for investment, it is called a ‘New Fund Offer’ (NFO). During the NFO, investors have the chance of buying the units at their face value. Post-NFO, when they buy into a scheme, they need to pay a price that is linked to its NAV. TRUE Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust, are the investors who invest in various schemes of the mutual fund. The Trust acts through its trustees. Therefore, the role of protecting the interests of the beneficiaries (investors) is that of the Trustees.

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Question 85

(a) (b)


Investments in Mutual Funds are subject to market risks and therefore do not provide any guarantee of Capital Growth / Protection - True or False ? TRUE FALSE

Mutual funds can accept cash to the tune of Rs investors. No cash can be accepted by a MF Rs 50,000 Rs 20,000 Rs 5,000

Correct Answer 85

TRUE

Correct Answer 86

Rs 20,000

Answer Explanation

from small

Mutual funds usually do not accept cash. However for small investors, who may not be tax payers and may not have PAN/bank accounts, are allowed cash transactions for purchase of units in mutual funds to the extent of Rs. 20,000/- per investor, per mutual fund, per financial year.

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Gold Future Contracts . are traded on the Commodity Exchanges are not standardised products can be bought through Mutual Funds None of the above

Question 88

If a person wants to appeal against the ruling of SEBI, he can do so with .

(a) (b) (c) (d)



RBI Commerce Ministry Company Law Board Securities Appellate Tribunal

are traded on the Commodity Exchanges Gold futures contracts are traded in commodity exchanges like the National Commodities Exchange (NCDEX) and Multi-Commodity Exchange (MCX). The value of these contracts goes up or down in line with increases or decreases in gold prices.

Securities Appellate Tribunal Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the Securities Appellate Tribunal (SAT).

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Question 89 (a) (b)

Question 90

(a) (b) (c) (d)


Correct Answer 90

There are no penalties for breach of code of conduct as mandated by AGNI - True or False ? TRUE FALSE

Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the last day of the month for all their schemes on their respective website on or before the of the succeeding month 3rd day 7th day 10th day 15th day

FALSE As per 'AMFI Guidelines & Norms for Intermediaries' (AGNI) - In the event of breach of the Code of Conduct by an intermediary the registration can be cancelled after the set procedure is carried out. 10th day

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Question 91 (a) (b)




Investments in Mutual Funds can be done only through a AMFI authorised MF distributors - True or False ? TRUE FALSE

Dividend Distribution Tax (DDT) on Equity oriented mutual fund schemes for Corporate Investors is + Surcharge + Education Cess 10% 25% 30% NIL TAX

FALSE Investors can directly invest in MF's by visiting the MF office and other Point of Sales (POS).

NIL TAX Tax on dividend distributed is not payable on dividend distributed by equityoriented mutual fund schemes. Its payable only on Debt oriented funds.

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Which of the following should NOT be included in the Key Information Memorandum ? The risks associated with the scheme The functions of Trustees and AMC The opening - closing dates of the NFO Minimum investments required and the cutoff time.

A Mutual Fund scheme is know to distribute dividends from time to time. Such MF can be used as a source of . Good Capital Appreciation Regular Income Safety of Capital Tax Planning

Correct Answer 93

The functions of Trustees and AMC

Correct Answer 94

Regular Income

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Question 95

(a) (b)

Question 96

A Board Resolution is not required for an institutional investor to invest in Mutual Funds if the Memorandum and Articles of Association permit it to do so - True or False ? TRUE FALSE

At what rate is the Securities Transaction Tax charged on sale of units of debt oriented mutual fund in a stock exchange ?

(a) (b) (c) (d)

0.01% 0.10% 0.13% 0%

Correct Answer 95

FALSE

Answer Explanation


A Board Resolution is required as an authorisation for the investing institution to invest.

0% STT is not applicable on transactions in debt or debt-oriented mutual fund (including liquid fund) units.

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Question 97

(a) (b)




Summary of SID - Scheme Information Document and SAI - Statement of Additional Information is known as KIM - Key Information Memorandum - True or False ? TRUE FALSE

What is the effect on bond prices when interest rates rises ? Bond prices rises Bond prices fall No effect on bond prices Can rise or fall depending on the performance of stock markets

TRUE KIM is essentially a summary of the SID and SAI. As per SEBI regulations, every application form is to be accompanied by the KIM. So KIM is more easily and widely distributed in the market. Bond prices fall Lets take an example : An investor has invested in a bond that yields a return of 9%. Later, yields in the market for similar securities rise to 10%. So the bond, which was bought at 9% yield, is no longer such an attractive investment. It will therefore lose value.

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Question 99 (a) (b)

The strategy of Tactical Asset Allocation is considered to be a risky strategy - True or False ? TRUE FALSE

Question 100

Mutual funds are constituted as by the .

(a) (b) (c) (d)

Companies, Indian Companies Act Trusts, Indian Trusts Act Investment Agencies, SEBI Act NGOs, NGO Act


Correct Answer 100

and therefore, they are governed

TRUE Tactical Asset Allocation is the strategy when the investor presumes the likely behaviour of the market. An investor who decides to go overweight on equities i.e. take higher exposure to equities, because of expectations of buoyancy in industry and share markets. Such strategies are very risky and can backfire.

Trusts, Indian Trusts Act



Question 1 (a) (b)


Beta is a measure of Market Risk and Standard Deviation is a measure of Total Risk - True or False ? TRUE FALSE

ARN means . Applicant Registration Number AMFI Recognition Number AMFI Registration Number Agent Registration Number

Correct Answer 1

TRUE

Correct Answer 2

AMFI Registration Number


Question 3 (a) (b)

Coupon of a debt security generally means the interest rate payable True or False ? TRUE FALSE

Question 4 Dividend is under the Dividend Reinvestment Plan. (a) Reinvested in the scheme at the Ex Dividend NAV to buy additional units (b) Reinvested in the scheme at the Cum Dividend NAV to buy additional units (c) (d)

Accumulated and paid at the end of financial year Accumulated and paid once a specific amount is accumulated

Correct Answer 3

TRUE

Correct Answer 4

Reinvested in the scheme at the Ex Dividend NAV to buy additional units



In Fundamental Analysis one has to study Competitive position of the company in the industry The financials of the company The Management of the company All of the above

Question 6

Returns for periods which are less than one year cannot be annualised True or False ?

(a) (b)

TRUE FALSE

Correct Answer 5

All of the above

Correct Answer 6

TRUE

.


Question 7 (a) (b)


Fixed Asset Depreciation and Software Development Expenses can be charged to the scheme - True or False ? TRUE FALSE

Which of the following is true with respect to Gold ETF's ? STT will be charged on trading in Gold ETFs on a stock exchange Dividends if any will be subject to Dividend Distribution Tax but will be Tax Free in the hands of the investor. Indexation benefit, irrespective of the holding period can be availed by the investors of Gold ETF's Gold ETF's attract wealth tax

Correct Answer 7

FALSE

Correct Answer 8

Dividends if any will be subject to Dividend Distribution Tax but will be Tax Free in the hands of the investor.



Which of the following is true with respect of a Model Portfolio ? Its designed by AMC Its designed by SEBI Its designed by a Financial Planner Its designed by the Fund Manager

Question 10

When investing in Equity, the majority of gains generally come through .

(a) (b) (c) (d)

Dividend Income Tax Savings Capital Gains Interest Received

Correct Answer 9

Its designed by a Financial Planner

Correct Answer 10

Capital Gains

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Question 11 (a) (b)




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The NAV of Gold Sector Fund directly influenced by the current gold prices - True or False ? TRUE FALSE

Accumulation Phase is the stage . when the investor gets to build his wealth covers the earning years of the investor of the life cycle from Young Unmarried to Pre-Retirement All of the above

FALSE The Gold Sector funds invests in companies which are into Gold Mining etc. So the NAV is directly influenced by the profits of such companies.

All of the above Accumulation is the stage when the investor gets to build his wealth. It covers the earning years of the investor i.e. the phases of the life cycle from Young Unmarried to Pre-Retirement.

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Question 14

(a) (b)


Correct Answer 14

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Which of the below payment instrument is not accepted for Mutual Fund purchases ? Cheque from the applicants bank account Cheque from the applicants brothers bank account. Both are majors. Demand Draft Pay Order

In case the fundamental attributes of a scheme are changed, the dissenting unit-holders can exit at the current NAV without any exit load - True or False ? TRUE FALSE

Cheque from the applicants brothers bank account. Both are majors. Third-party cheques are not accepted except in special cases such as grandparents/parents making payments not exceeding Rs. 50,000 on behalf of a minor etc.

TRUE

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AMC does not appoint the R&T Agent Custodian Banker Distributor

Question 16

An investor holds 5000 units of a scheme and this scheme announces a 1 : 5 bonus. How many more units will be allotted to the investor ?

(a) (b) (c) (d)



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25000 10000 5000 1000

Custodian Although the AMC manages the schemes, custody of the assets of the scheme is with a Custodian, who is appointed by the Trustees.

1000 Bonus Ratio 1 : 5 Which means for every 5 units, 1 bonus unit will be allotted. So for 5000 units : 1000 more units will be allotted

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Question 17 (a) (b)

Question 18

After payment of dividend the NAV comes down even in the Dividend Reinvestment option - True or False ? TRUE FALSE

The maximum expenses including the management expenses that can be charged by Index and ETF schemes is .

(a) (b) (c) (d)

1% 1.50% 2% 2.50%

Correct Answer 17

TRUE

Answer Explanation

Correct Answer 18

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The NAV falls but the units increase as more units are allotted due to Dividend Reinvestment.

1.50%

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Question 19 (a) (b)



Correct Answer 20

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Trail commission is calculated on the Average Net Assets of the investors -True or False ? TRUE FALSE

SIP works on two main principles which are Rupee Cost Averaging and Power of Compounding Rupee Cost Averaging and Dividend Accumulation Rupee Cost Averaging and Timely Profit Booking Rupee Cost Averaging and Investment Discipline

-

TRUE The trail commission is normally paid by the AMC on a quarterly basis and it is calculated on net assets. So the distributors benefit from increase in net assets arising out of valuation gains in the market. Rupee Cost Averaging and Investment Discipline

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Question 21 (a) (b)

Question 22

Units of Fixed Maturity Plans (FMP) are allotted in Demat form only True or False ? TRUE FALSE

Investors in equity oriented schemes of mutual fund have to pay STT while buying the units.

(a) (b) (c) (d)

0.10% 0.13% 0.00% NIL

Correct Answer 21

FALSE

Correct Answer 22

NIL

Answer Explanation

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No Securities Transaction Tax is payable on buying a MF unit. 0.001% STT is payable on sale of a MF unit.

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Complete the sentence - Investments in Mutual Funds are subject to market risks and so . provide protection against a significant downfall provide insurance does not provide any guarantee of capital protection provide capital protection through diversification

The Price Earning (PE) Ratio of a company is 7 and its Earning Per Share is Rs 10. What is the Market Price of this company ? Rs 49 Rs 70 Rs 700 Rs 10

Correct Answer 23

does not provide any guarantee of capital protection

Correct Answer 24

Rs 70

Answer Explanation

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PE Ratio = Market Price / EPS 7 = Market Price / 10 Market Price = 7 x 10 = 70

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Question 25

(a) (b)

Question 26

Once the NFO of an Open ended Mutual Fund ( other than ELSS ) is over and the allotment is done, the scheme has to reopen for sale / repurchase in 7 business days - True or False ? FALSE TRUE

Long term debt funds would be sensible in declining interest rate scenarios - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 25

FALSE

Answer Explanation


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Open-ended schemes, other than ELSS, have to re-open for ongoing sale / repurchase within 5 business days of allotment.

TRUE As yields in the market goes down, debt securities gain in value. Therefore, long term debt funds would be sensible in declining interest rate scenarios.

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A Mutual Fund scheme has a portfolio of shares whose beta is more than 1. This indicates that the scheme is . More risky than the market Less risky than the market Equally risky as the market None of the above

Relaxation in documentation requirements for micro-SIPs is not available for . Non Resident Indians Hindu Undivided Family Individulas All of the above

More risky than the market Beta is a measure of risk of a security or a portfolio. If the Beta more than 1, this means the security or the portfolio will rise or fall more than the index. Simillary if the Beta of a scrip or portfolio is less than 1, this means the security or the portfolio will rise or fall less than the index.

Hindu Undivided Family Relaxation in documentation requirements for micro-SIPs is not available for HUFs and non-individuals. Such relaxation is available for NRIs.

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The benefit of is that the money goes out of the investors bank account only on allotment. ABSA AABS ASBA ASAB

The highest risk appetite is a characteristic of A well qualified young person with a steady job A non qualified young person with a steady job A family man with many dependents A retired person

.

ASBA ASBA - Application Supported by Blocked Amount.

A well qualified young person with a steady job Young, well qualified and multi-skilled professionals can afford to take more risk.

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In the Young Married Pre Retirement Young Unmarried Retirement

Question 32

For next 30 days after a New Fund Offer closes, an investor can buy units at face value - True or False ?

(a) (b)



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stage, a persons earning capacity reaches his peak.

TRUE FALSE

Pre Retirement In the Accumulation stage, the investor gets to build his wealth. It covers the earning years of the investor i.e. the phases of the life cycle from Young Unmarried to Pre-Retirement.

FALSE Post-NFO, when investors buy into a scheme, they need to pay a price that is linked to its NAV.

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Question 33

(a) (b)

Question 34 (a) (b)

As regards cut-off timing, the time when it is submitted to the Points of Acceptance PoA is relevant and not the time when the investor submits the transaction request to the distributor - True or False ? TRUE FALSE

There is an direct relationship between yields/interest rates and value of debt securities/bonds - True or False ? TRUE FALSE

Correct Answer 33

TRUE

Correct Answer 34

FALSE

Answer Explanation

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There is an inverse relationship between yields and value of such debt securities. When interest rates rise the bond value falls as the existing bonds become less attractive. Similarly when interest rate fall the existing bonds value rises.

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Question 35 (a) (b)

An Index fund has an beta of 1 - State True or False ? FALSE TRUE

Question 36 (a) (b)

Is Real Estate Fund a physical asset or a financial asset ? Physical Asset Financial Asset


Correct Answer 36

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TRUE Beta is a measure of risk of a security or a portfolio as compared to the market ie. Index. Since an Index fund invests in shares which are a part of the index, the NAV will rise or fall as per the movements of index. So the beta is 1. Financial Asset

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Question 37 (a) (b)

Gold ETF's cannot be bought by retail investors - True or False ? FALSE TRUE

Question 38

To generate capital appreciation from a portfolio of predominantly equity related securities would be the investment objective of a balanced fund - True or False ? TRUE FALSE

(a) (b)



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FALSE Gold ETF's can be easily bought by retail investors as the minimum traded quantity is 1 unit ie. 1 gram.

FALSE “To generate capital appreciation from a portfolio of predominantly equity related securities” would be the investment objective of a Diversified Equity Fund.

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Question 39 (a) (b)

Question 40

The Tier I account of the National Pension System (NPS) is the Pension Account and is non withdrawable - True or False ? TRUE FALSE

Its compulsory for the Mutual Fund to list its Close Ended schemes on the Stock Exchange - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 39

TRUE

Answer Explanation


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Pension Funds Regulatory and Development Authority (PFRDA) is the regulator for the National Pension System. There will be two types of accounts in this • Tier I (Pension account), is non-withdrawable. • Tier II (Savings account) is withdrawable to meet financial contingencies.

TRUE Listing of Close Ended schemes is compulsory . Therefore, after the NFO, investors who want to buy or sell units can do it through the Stock Exchange.

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Question 41 (a) (b)

Question 42

All the records of the investors of a Mutual Fund are maintained by the Fund Manager - True or False ? TRUE FALSE

In Financial Planning of an individual - Model Portfolios are part of a structured approach to investment counseling - True or False.

(a) (b)

TRUE FALSE

Correct Answer 41

FALSE

Answer Explanation


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The RTA - Registrar and Transfer Agents maintains investor records. Sometimes the AMC itself does this activity.

TRUE Since investors’ risk appetites vary, a single portfolio cannot be suggested for all. Financial planners often work with model portfolios – the asset allocation mix that is most appropriate for different risk appetite levels.

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Who is responsible for implementation of uniform KYC. The Mutual Funds thro' their PoAs Registrars Depository Participants KYC Registration Agencies


cannot invest in Gold Mining Companies. Gold Sector Fund Gold ETF Tax Saving ELSS Fund Balanced Fund



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KYC Registration Agencies To do away with multiple KYC formalities with various intermediaries, SEBI has mandated a unified KYC for the securities market through KYC Registration Agencies registered with SEBI.

Gold ETF Gold ETF merely tracks the gold prices. It does not invest in any Gold Mining Company. All other funds can invest in Gold Mining Companies as per the fund strategy.

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Question 45 (a) (b)

Question 46

One should not invest in Government Securities during periods of economic turmoil. State True or False ? TRUE FALSE

Mutual Fund offer various plans/options in accordance to the risk profile of the investor - True or False ?

(a) (b)

TRUE FALSE

Correct Answer 45

FALSE

Answer Explanation


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One should not invest in Mid Cap and Small Cap stocks during periods of economic turmoil as these stocks are fundamentally weak.

FALSE MF's have various schemes like Large Cap Funds, Mid Cap Funds. Sectoral Funds etc. to suit varied investment requirements. (Plans and Options like Dividend / Growth etc. form a part of the scheme)

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Question 47 (a) (b)

Question 48 (a) (b)



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A Mutual Fund wants to launch a new scheme with a Face Value of Rs 50. Will it get the required permissions ? Yes No

The dividend received by a Mutual Fund investor will be taxed at a rate of 12.5% - True or False ?. TRUE FALSE

No As per the law, every unit has a face value of Rs. 10.

FALSE Mutual Fund dividend is exempt from tax in the hands of the investor.

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Which of the below is a physical asset ? GOLD Exchange Traded Funds - ETF Real Estate Fund Building Debentures


The cost of fund management are the highest in Passive Funds Active Funds Index Funds None of the Above

Correct Answer 49

Building

Correct Answer 50

Active Funds

Answer Explanation

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In Active Funds like Diversified Equity Funds, the Fund manager does a lot of buying / selling. Also a lot of research work goes into it. So the cost of fund management are higher.

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Correct Answer 52

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A Mutual Fund scheme has a portfolio of shares whose beta is less than 1. This indicates that the scheme is . Very Very risk compared to the market Some what risky than the market Less risky than the market Equally risky as the market

Why do we need Financial Planners ? because people are not aware of investment avenues because people do not have the time because people do not know their financial goals all of the above

Less risky than the market Beta is a measure of risk of a security or a portfolio. If the Beta more than 1, this means the security or the portfolio will rise or fall more than the index. Similarly if the Beta of a scrip or portfolio is less than 1, this means the security or the portfolio will rise or fall less than the index. all of the above

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Which of the below expenses can be charged to a fund ? Expenses to manage a fund Expenses to launch a new fund Expenses done by the AMC Expenses done by the Investors

Question 54

The amount which is paid to the distributor at the time the money is invested in a scheme is called _.

(a) (b) (c) (d)


Correct Answer 54

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Trail Commission Upfront Commission Rebate Fund Incentive

Expenses to manage a fund Earlier expenses to launch a fund were charged to the fund but now they cannot.

Upfront Commission

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Open-ended schemes, except ELSS, have to re-open for ongoing sale / repurchase within business days of allotment. 3 5 10 30

The is the phase when the earning years usually starts. Young Unmarried Young Married Married with one children During graduation

Correct Answer 55

5

Correct Answer 56

Young Unmarried

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The Transaction Slips are used by First time investors of Mutual Funds NFO Investors Existing Investors Relatives of Existing Investors

Question 58

Which of the following is an important aspect of an OFFER DOCUMENT ? To inform the investors about the AMC's views on Stock Markets To inform the investors on the performance of the scheme To provide a comparison of the schemes To inform the investors on the detailed information about the scheme

(a) (b) (c) (d)


Correct Answer 58

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Existing Investors For a first time investment in a mutual fund Full application form is to be filled . Then once an investor has a folio with a mutual fund, subsequent investments / sale with the same mutual fund do not call for the full application form. Only Transaction Slip needs to be filled and submitted. To inform the investors on the detailed information about the scheme

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Question 59

(a) (b) (c) (d)


An investor who has a long term view and is looking for capital appreciation and also has high risk tolerance should opt for investments in . Gold Equities Fixed Deposits High interest bearing junk bonds

Relaxation in documentation requirements for micro-SIPs is available for . Non Resident Indians Non Individuals Hindu Undivided Family None of the Above

Correct Answer 59

Equities

Correct Answer 60

Non Resident Indians

Answer Explanation

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Relaxation in documentation requirements for micro-SIPs is not available for HUFs and non-individuals. Such relaxation is available for NRIs.

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The Absolute Return is calculated using the formula (Sale Price - Cost Price) / Cost Price (Cost Price - Sale Price ) / Sale Price (Sale Price / Cost Price) - 1 1 - (Cost Price / Sale Price)


On liquidity parameters, which is most liquid ? Equity Shares Gold Bank Fixed Deposits Real Estate



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(Sale Price - Cost Price) / Cost Price Absolute Return or Simple Return is simply the change in the value of an investment over a period of time. Its not calculated on a yearly basis etc. For eg - A person bought a MF at NAV 10 and sold it after 2 years at NAV 18, then the Absolute Return is : 18 - 10 / 10 = 0.8 or 80% absolute return Equity Shares Liquidity - which means the ease of buying and selling. Equity Shares are most easy to buy and sell.

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Question 63 (a) (b)




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Prediction of equity markets in the short run is easier than in the long run - True or False ? TRUE FALSE

Mr Pratap wants to send his son for Medical Education. Which of the options below will best suited to him for financing the education ? Use his credit card to pay the fees Sell his house and move into a rental accommodation Take an educational loan Take a personal loan

FALSE In the long run, equity markets are a good barometer of the real economy. In the short run, markets can get over-optimistic or over-pessimistic, leading to spells of greed and fear and so are very unpredictable in the short term.

Take an educational loan The interest rate on educational loans are quiet low and will be best suited to his needs.

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Question 65

(a) (b)




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To do away with multiple KYC formalities with various intermediaries, SEBI has mandated a unified KYC for the securities market through the Depository Participants registered with SEBI - True or False ? TRUE FALSE

Of the below options, what is FALSE with respect to Arbitrage Funds ? Arbitrage Funds have Basis Risks Arbitrage Funds invest in Equity Markets Arbitrage Funds invest in both Spot and Futures Market Arbitrage Funds are more riskier than Sectoral Funds

FALSE To do away with multiple KYC formalities with various intermediaries, SEBI has mandated a unified KYC for the securities market through KYC Registration Agencies registered with SEBI.

Arbitrage Funds are more riskier than Sectoral Funds Arbitrage Funds make profits by using the price differences between two markets - so they are the least risky among Equity Funds. Sectoral Funds are the most risk funds as they are not diversified. Arbitrage Funds have basis risk – the risk that both cash and F&O position on a company cannot be reversed at the same time. During the time gap between unwinding of the two positions, the market can move adverse to the scheme.

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Which of the following is true with respect to Growth Option in Mutual Fund schemes ? The change in NAV captures the scheme performance Units rise or fall depending on the schemes performance The NAV falls as and when dividend is declared Dividend Distribution Tax is applicable

A Mutual Fund investor can file a case against the of trust.

for breach

Mutual Fund Trustees Stock Exchange No, a MF investor cannot file a suit.

The change in NAV captures the scheme performance In Growth Option, the NAV rises or falls depending on the schemes performance. No dividend is declared in Growth Option. Trustees If an investor feels that the trustees have not fulfilled their obligations, then he can file a suit against the trustees for breach of trust.

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Question 69 (a) (b)

Question 70

Expenses incurred to launch a new fund can be charged to the fund True or False ? TRUE FALSE

Many AMCs, distribution houses and mutual fund research houses offer free tools in their website which can be used for evaluating a funds performance True or False ?

(a) (b)

TRUE FALSE

Correct Answer 69

FALSE

Answer Explanation

Correct Answer 70

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Initial Issue Expenses are one-time expenses that come up when the scheme is offered for the first time (NFO). These need to be borne by the AMC and cannot be charged (either one time or deferred) to the scheme. TRUE

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The maintains investor records. Registrars and Transfer Agents The specific fund accountants The Back Office of AMFI The Fund Manager and his team

Question 72

The price of a company's share is Rs 100 on the stock market. The EPS of this company is Rs 10. What is the PE ratio ?

(a) (b) (c) (d)



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( \\\\\\

Rs 1000 Rs 100 Rs 10 Insufficient Data

Registrars and Transfer Agents The RTA maintains investor records. The appointment of RTA is done by the AMC. It is not compulsory to appoint a RTA and the AMC can choose to handle this activity in-house. Rs 10 PE Ratio = Market Price / EPS = 100 / 10 = 10

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Question 73 (a) (b)

Gold ETF's are meant only for FI's and FII's - True oe False ? TRUE FALSE

Question 74

As per SEBI regulations, every application form is to be accompanied by .

(a) (b) (c) (d)



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Key Information Memorandum (KIM) Scheme Information Document (SID) Addendum Statement of Additional Information

FALSE Golds Exchange Traded Funds (ETF) can be bought even by retail invetors in small quantities like one unit (one gram).

Key Information Memorandum (KIM) As per SEBI regulations, every application form is to be accompanied by the KIM. KIM is essentially a summary of the SID and SAI. It is more easily and widely distributed in the market.

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Question 76

(a) (b) (c) (d)

Which of the following options form the basis of appointment of a Mutual Fund distributor ? An agreement between the AMC and the Distributor Approval from SEBI Power of Attorney from the AMC An agreement with AMFI

The Market Value of a scheme is Rs 579 crores. Dividend accrued but not received is Rs 18 crore. The Expenses payable are Rs 3 crore. The total number of outstanding units is 300 lakhs. What is the NAV of the scheme ? 188 198 208 218

Correct Answer 75

An agreement between the AMC and the Distributor

Correct Answer 76

198

Answer Explanation

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Total Market Value = Rs 579 crore Add Dividend Accrued of Rs 18 crore Less Expenses Payable of Rs 3 crore Divided by Units 300 lakhs = 198 NAV

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Which of the following is a measure of market risk ? Beta Coefficient Sharpe Ratio Treynor Ratio None of the above

Question 78

The trail commission paid by Mutual Funds to a distributor . Is paid only for high valued transactions Is linked to the NAV Grows at a steady rate Is paid to the Corporate and Bank Distributors only

(a) (b) (c) (d)

Correct Answer 77

Beta Coefficient

Correct Answer 78

Grows at a steady rate

Answer Explanation

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Dedicated MF distributors have accumulated a portfolio of loyal investors to whom they offer superior service. The trail commission on these investments ensures a steadily rising income for the distributor. Additional investments from the same investors, and other investors referred by the current investors, help them grow the portfolio.

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The Price Earning ie. PE Ratio of a company is 16 and its Earning Per Share is Rs 8. What is the Market Price of this company ? Rs 2 Rs 16 Rs 74 Rs 128

The strategy of maintaining a constant ratio of asset allocation is know as _. Dynamic Asset Allocation Fixed Asset Allocation Flexible Asset Allocation SIP

Rs 128 PE Ratio = Market Price / EPS 16 = Market Price / 8 Market Price = 16 x 8 = 128

Fixed Asset Allocation For eg - Balanced funds adopt a stable asset allocation policies, e.g. 55:45 between equity and debt at all times, are said to be operating within a fixed asset allocation framework.

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Question 81

(a) (b) (c) (d)

Question 82

(a) (b)

One of the objective of is to disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies. Stock Exchanges SEBI AMFI CCAI

While selling mutual fund products of the distributors group/affiliate/associates, the distributor shall make disclosure to the customer regarding the conflict of interest arising from the distributor selling such products - True or False ? TRUE FALSE

Correct Answer 81

AMFI

Correct Answer 82

TRUE

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Question 83 (a) (b)

Question 84

After deciding the model portfolio, Sharpe Ratio is used for finalizing the schemes of Equity and Debt - True or False ? TRUE FALSE

To have a structured approach to Financial Planning and Investment counseling, Financial Planners use Model Portfolios - True or False ?

(a) (b)

FALSE TRUE

Correct Answer 83

TRUE

Answer Explanation


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True. As it help decide optimum securities within the asset class.


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Question 85 (a) (b)

Tier II account of the National Pension System is called the Pension Account Savings Account

Question 86

In a flexible asset allocation scheme of a mutual fund the investors are not sure of their taxation liability - True or False ?

(a) (b)



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.

FALSE TRUE

Savings Account National Pension System (NPS) has two types of accounts : 1. Tier I (Pension account), is non-withdrawable. 2. Tier II (Savings account) is withdrawable to meet financial contingencies.

TRUE The fund manager of a Flexible Asset Allocation scheme can switch a large part of their portfolio between debt and equity, depending on their view on the respective markets. So the investors do not know whether they are investing in a debt scheme or an equity scheme and so are unsure of the taxation.

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Question 87 (a) (b)

Question 88

(a) (b) (c) (d)



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The floating rate debt securities tend to hold their value, despite changes in yield in the debt market - True or False ? TRUE FALSE

The investment objective of a might read as follows:To generate capital appreciation from a portfolio of predominantly equity related securities Money Market Fund Balanced Fund Arbitrage Fund Diversified Equity Fund

TRUE Floating rate funds invest largely in floating rate debt securities i.e. debt securities where the interest rate payable by the issuer changes in line with the market. Since the interest rate itself keeps adjusting in line with the market, these floating rate debt securities tend to hold their value, despite changes in yield in the debt market.

Diversified Equity Fund A Diversified Equity Fund invests mainly in equity for long term capital appreciation.

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Question 89

(a) (b) (c) (d)


To generate income by investing predominantly in a wide range of debt and money market securities - this could be the investment objective of a Diversified debt scheme Diversified equity scheme ELSS Scheme Arbitrage Fund

Minors are not legally eligible to contract, so for investing in Mutual Funds they . have to become 18 years before investing can invest thro' their guardians can invest only in long term capital gain funds can invest in specific 'Minors Only' Mutual Funds

Correct Answer 89

Diversified debt scheme

Correct Answer 90

can invest thro' their guardians

Answer Explanation

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Minors i.e. persons below the age of 18 are not legally eligible to contract, they need to invest through their Parents/Lawful guardians.

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Question 91 (a) (b)

An important feature of Growth Option is Tax Deferral - True or False ? TRUE FALSE


Who receives and delivers securities on behalf of the Mutual Fund ? Authorised Stock Brokers The AMC to which the fund belongs Custodian Merchant Bankers



Cllp\righl

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TRUE When an investor chooses the Growth Option, the gains are accumulated and he need not pay tax on the gains each year. Only when he sells the Mutual Fund he needs to pay the tax, if any.

Custodian The custodian has custody of the assets of the fund. The custodian accepts and gives delivery of securities for the purchase and sale transactions of the various schemes of the fund. Thus, the custodian settles all the transactions on behalf of the mutual fund schemes.

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Question 93 (a) (b)

Question 94

(a) (b) (c) (d)


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Exchange Traded Funds-ETF Gold regularly invest in good gold mining companies - True or False ? TRUE FALSE

Even thought investment in Mutual Funds are subject to market risks, an investor invests in an equity fund after reading the risk factors etc. Due to a fall in the stock markets the value of the fund goes down drastically. The investor . can get some remedy if he appeals to SEBI can get some remedy if he appeals to AMC can get some remedy if he appeals to AMFI cannot get any remedy from the AMC

FALSE Gold Sector funds invest in gold mining companies. Gold ETF merely track the gold prices.

cannot get any remedy from the AMC

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Question 95 (a) (b)

Can recurring expenses be charged to a mutual fund scheme ? Yes, they can be charged. No, they cannot be charged.


The face value of a Mutual Fund unit in India is generally Rs 1 Rs 10 Rs 100 Decided by AMFI

Correct Answer 95

Answer Explanation


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.

Yes, they can be charged. Recurring Expenses can be charged to the scheme. Since the recurring expenses drag down the NAV, SEBI has laid down the expenses and their limits which can be charged to the scheme.

Rs 10 As per the law, every unit has a face value of Rs. 10. However, older schemes in the market may have a different face value.

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Which is the re-opening date for a scheme ? The next working day after the close of a NFO The date when investors can go for re-purchase The date on which it lists on a Stock Exchange The date on which NFO opens

Question 98

You have to construct a model portfolio for your client - which amongst the following factors will you consider ? Clients Employment status Clients Risk Profile The size of portfolio All of above

(a) (b) (c) (d)


Correct Answer 98

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The date when investors can go for re-purchase Scheme Re-Opening Date – This is the date from which the investors can offer their units for re-purchase to the scheme (at the re-purchase price); or buy new units of the scheme (at the sale price).

All of above

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Question 99 (a) (b)

Question 100 (a) (b)



Usually Diversified Equity funds are safer than Diversified Debt funds True or False ? TRUE FALSE

Units of Close Ended Mutual Funds can be bought / sold on the Stock Exchange - True or False ? FALSE TRUE

FALSE

Under normal circumstances Euity Funds are always riskier than Debt Funds.

TRUE For Close Ended schemes the fund makes arrangements for the units to be traded, post-NFO in a stock exchange. This is done through a listing of the scheme in a stock exchange. Such listing is compulsory for close-ended schemes. Therefore, after the NFO, investors who want to buy or sell Units will have to find a seller or buyer for those units in the stock exchange.



Question 1

The size of equity portfolio of an young unmarried investor is determined by .

(a)

Liquidity needs

(b)

Lifestyle

(c)

Income levels

(d)

All of the above

Question 2

To create the investment portfolio for a particular scheme of a Mutual Fund, the fund manager takes into account .

(a)

the age and income of the investors

(b)

the risk profile of the investors

(c)

the investment objective of the scheme

(d)

All of the above

Correct Answer 1

All of the above

Correct Answer 2

the investment objective of the scheme

Answer Explanation

A MF scheme has thousands of investors with different risk profiles. So devising a portfolio which will suit all will not be possible. A fund manager has to focus on the investment objective of the scheme / fund and invest accordingly.


Question 3

A Mutual Fund scheme gives a return of 10 % and the beta of that scheme is 0.5. The risk free return is 7.5%. What is the Treynor Ratio of this scheme ?

(a)

3%

(b)

5%

(c)

7.50%

(d)

10%

Question 4

If the interest rates are rising, the bond funds with short maturity instruments are more likely to outperform - State True or False ?

(a)

TRUE

(b)

FALSE

5% Treynor Ratio measures the returns earned in excess of that which would have earned on a riskless investment. Treynor Ratio Formula : (Return earned on the Scheme - Risk Free Rate) / Beta of the Scheme


= (10 - 7.5) / 0.5 = 5%

TRUE Bond prices rises when interest rates fall and fall when interest rate rises. The degree of impact of change in debt fund NAV depends on the tenure of the securities held in a portfolio. As a rule, long term bonds are more sensitive to interest rate movements than short term bond funds. If interest rates rise, short term bond funds will benefit more (as compared to long term bond funds) and if interst rates fall, the long term bond funds will benefit more.


\


While deciding on investments for his clients, what should be the right sequence ?

Question 5 (a)

Selection of Scheme - Risk Profiling - Making a Model Portfolio

(b)

Risk Profiling - Making a Model Portfolio - Selection of Scheme

(c)

Making a Model Portfolio - Risk Profiling - Selection of Scheme

(d)

Selection of Scheme - Making a Model Portfolio - Risk Profiling

Question 6

The AMC pays commission to Mutual Fund Agents, but no such commission is paid to stock brokers who trade in mutual funds on the Stock Exchange platform - State True or False ?

(a)

TRUE

(b)

FALSE

Risk Profiling - Making a Model Portfolio - Selection of Scheme

Correct Answer 5

It is a good practice to first understand the risk exposure that is appropriate

Answer Explanation

for an investor, then decide how the investor‟s investments should be distributed between different asset classes and make a model portfolio. Once this is over, select the good schemes most suitable as per the model portfolio. True

Correct Answer 6

The Stock Brokers get their commissions by charging brokerages on MF transactions done through them on the Stock Exchange platform.

Answer Explanation

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Question 7

Calculate the NAV for the following information : Value of stock 200 cr, Value of money market instruments - Rs 25 cr, Dividend accrued but not received - Rs 10 cr, Amount receivable on sale of shares - Rs 5 cr, Amount payable on purchase of shares: Rs. 10.5 cr, Fees payable - Rs 1 cr. No. of outstanding units:3 cr

(a)

75.83

(b)

80.77

(c)

76.16

(d)

79.17

Question 8

Very good returns can be expected from long term debt funds if the interest rates are falling - State True or False ?

(a)

TRUE

(b)

FALSE

76.16 Correct Answer 7 NAV = (Value of stocks + Value of money market instruments + Dividend accrued but Answer Explanation not received + Amount receivable on sale of shares – Amount payable on purchases of shares – Fees payable) / No. of outstanding units = 200 cr + 25 cr + 10 cr + 5 cr - 10.5 cr - 1 cr / 3 cr = 76.16

TRUE Correct Answer 8 As interest rates in the market goes down, debt securities gain in value. Answer Explanation Therefore, long term debt funds would be sensible in declining interest rate scenarios. Also if it is expected that interest rates would go up, it would be safer to go with Short Term Debt Funds. As the rates rise, the short-term bonds would mature, allowing the fund manager to deploy the proceeds at higher rates.

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. Question 9

The Standard Risk Factors of a Mutual Fund scheme are disclosed in the Statement of Additional Information (SAI) - State True or False ?

(a)

TRUE

(b)

FALSE

Question 10

An investor invests in equity shares of Gold Mining company. The share price of such gold mining company depend upon .

(a)

the efficiency of the gold mining company's operations

(b)

the gold prices

(c)

the gold reserves

(d)

all of the above


FALSE The Standard Risk Factors of a Mutual Fund scheme are disclosed in the Scheme Information Document (SID).


all of the above The equity prices will be effected by all three options - 1) better efficiency will lead to better profits 2) higher gold prices - better profits 3) more reserves - more production - better profits and vice versa.

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Question 11

Amongst the following options,

(a)

Gold

(b)

Real Estate

(c)

Shares

(d)

Bank Fixed Deposits

Question 12

is the most illiquid.

To calculate the Unit Capital of a Mutual Fund scheme, we have to multiply the face value with the number of units - State True or False ?

(a)

TRUE

(b)

FALSE

Correct Answer 11

Real Estate


TRUE The investment that an investor makes in a scheme is translated into a certain number of „Units‟ in the scheme. The number of units multiplied by its face value (Rs. 10) is the capital of the scheme – its Unit Capital.

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Question 13

Advertisements regarding Mutual Fund schemes shall not contain statements which directly or by implication or by omission may mislead the investor State True or False ?

(a)

TRUE

(b)

FALSE

Question 14

Management fees cannot be charged by liquid schemes and other debt schemes on funds parked in short-term deposits of commercial banks - State True or False ?

(a)

TRUE

(b)

FALSE


TRUE As per the SEBI Regulations related to Sales Practices- Advertisements shall not be so designed as likely to be misunderstood or likely to disguise the significance of any statement. Advertisements shall not contain statements which directly or by implication or by omission may mislead the investor.

Correct Answer 14

TRUE

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Question 15

While doing an asset allocation for an investor, which amongst the following factors will have the least importance ?

(a)

RBI's announcement that there could be huge recession

(b)

RBI's announcements of changes in interest rates

(c)

Bonus issued by one of the MF schemes

(d)

Changes in prices of equity shares

Question 16

An investor can convert his Mutual Fund units into demat form but again converting the demat unit into physical form is not allowed - State True or False ?

(a)

TRUE

(b)

FALSE


Bonus issued by one of the MF schemes The purpose of asset allocation is not to enhance returns, but to reduce the risk. Bonus issue is just a book entry and will have no effect on asset allocation.


FALSE The investor also has the option to convert the demat units into physical form. This process is called re-materialisation.

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Question 17

Who holds the securities purchased by a Mutual Fund ?

(a)

The AMC

(b)

The Fund Manager

(c)

The Broker through whom the transaction was done

(d)

The Custodian

Question 18

is the process of determining the ability of an investor to bear losses from various investments.

(a)

Delta Hedgeing (b)

Asset Allocation (c) Portfolio Churning (d) Risk Profiling


The Custodian While the AMC manages the investments of the scheme, the assets of the scheme are held by the Custodian.

Correct Answer 18

Risk Profiling Risk profiling is an approach to understand the risk appetite of investorsand is an essential pre-requisite to advise investors on their investments.

Answer Explanation

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Question 19

Which is the ideal investment class for an investor who wishes to have an hedge against inflation and has a long term perspective ?

(a)

Bluechip Equity Shares

(b)

Gold

(c)

Real Estate

(d)

Government Bonds

Question 20

The trustees / AMC cannot make any change in the fundamental attributes of a scheme, unless approval is received from

(a)

Unit holders

(b)

SEBI

(c)

Sponsor

(d)

Fund Manager of that scheme


Gold Higher inflation means a weakening rupee which also leads to rise in gold prices. So Gold is the best bet to hedge against inflation.


Unit holders The trustees / AMC cannot make any change in the fundamental attributes of a scheme, unless a written communication about the proposed change is sent to each Unit-holder and their approval is sought. The Dissenting unit-holders are given the option to exit at the prevailing Net Asset Value.

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Question 21

The current market value of the stocks of a Mutual Fund scheme portfolio is Rs 12 cr and the current liabilities are 7 cr. The unit capital is Rs 10 cr and the face value per unit is Rs 10. What is the current NAV of this scheme ?

(a)

Rs 10

(b)

Rs 12

(c)

Rs 19

(d)

Rs 5

Question 22

is a short term Government security.

(a)

Commercial Paper

(b)

Certificate of deposit

(c)

Fixed Deposit

(d)

T Bill


Rs 5 Current Valuation is Rs 12 cr less Rs 7 cr (current liability) = Rs 5 cr Thus the Rs 10 cr unit capital has now become Rs 5 cr ie. 50 % fall So the Rs 10 NAV when the scheme was launched has now fallen by 50% to Rs 5.


T Bill Treasury Bills (T Bills) are short term debt instruments issued by the Reserve Bank of India on behalf of the Government of India. Commercial Papers are short term securities (upto 1 year) issued by companies.

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Question 23

If a family is facing financial problems, which amongst the following options it is NOT likely to choose ?

(a)

The wife can start working

(b)

The husband takes up part time job on Sundays

(c)

They economise on their expenses

(d)

They move to a better locality buy buying a new house

Question 24

Mutual Fund distributors are appointed by

(a)

The AMC

(b)

SEBI

(c)

The Trustees

(d)

The Cutodian

.

Correct Answer 23

They move to a better locality buy buying a new house


The AMC The appointment as the distributor will be at the sole discretion of the AMC and will be subject to written confirmation by AMC.

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Question 25

All type of Mutual Funds, be it Debt or Equity, have to pay the Securities Transaction Tax (STT) - State True or False ?

(a)

FALSE

(b)

TRUE

Question 26

Due to the Index scheme's performance could be higher or lower than that of the benchmark.

(a)

Market Volatility

(b)

Bull Run

(c)

Tracking Error

(d)

Systematic Risks

FALSE

Correct Answer 25

STT is applicable only on equity shares, derivatives and equity mutual fund units. It is not applicable on transactions in debt or debt-oriented mutual fund (including liquid fund) units.

Answer Explanation

Tracking Error Gaps between the scheme performance, and that of the benchmark, are called tracking errors. An index fund manager would seek to minimize the tracking error. Due to the tracking error, the scheme performance could be higher or lower than that of the benchmark.


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Question 27

For those investors who find it difficult to pay insurance premium, Money Back Policy are an ideal investment option - State True or False ?

(a)

TRUE

(b)

FALSE

Question 28

A Mutual Fund Trust is exempt from Tax - State True or False ?

(a)

FALSE

(b)

TRUE


FALSE Money back policy provides life coverage during the term of policy and the maturity benefits are paid in installments. Its ideal for individuals who need regular income at their disposal and fulfill their financial goals uninterrupted.


TRUE The mutual fund trust is exempt from tax. The trustee company however pays tax in the normal course on its profits.

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Question 29

Mrs. Reena purchases MF units at NAV Rs 13. After 500 days , she redeems it at NAV Rs 15.70. What is the compounded rate of return ?

(a)

13.69%

(b)

14.70%

(c)

15.00%

(d)

15.88%

Question 30

To achieve growth by investing in equity and equity related investments, balanced with income generation by investing in debt and money market instruments' - is the likely investment objective of a Diversified Debt Scheme - State True or False ?

(a)

TRUE

(b)

FALSE


14.70% The formula to find the CAGR - Compunded Annual Growth Rate holding period return is : [ ( End Price / Bgn Price) ^ (1/n) ] -1 End Price = 15.70 , Begin Price = 13 n = time. We have to find yearly return so 500 / 365 = 1.369 So [( 15.70/13 )^ 1/1.369] – 1 = (1.207 ^ 0.73) – 1 On the scientific calculator of your computer type 1.207 then use x^y key and then type 0.73 = 1.147 1.147 - 1 = .147 x 100 = 14.7 %


FALSE This is the likely objective of a BALANCED SCHEME. The investment objective of a diversified debt scheme could be: “To generate income by investing predominantly in a wide range of debt and money market securities”

\


Question 31

Amongst the below given options, which one is NOT an example of Transition Phase ?

(a)

house to be purchased

(b)

trying to get a better job

(c)

children's higher education

(d)

marriage approaching

Question 32

Which amongst the following has the highest to lowest risk sequence ?

(a)

Capital Protection Oriented Funds - Monthly Income Plans - Balanced Funds (Flexible Allocation)

(b)

Monthly Income Plans - Balanced Funds (Fixed Allocation) - Balanced Funds (Flexible Allocation)

(c)

Capital Protection Oriented Funds - Balanced Funds (Flexible Allocation) Monthly Income Plans

(d)

Balanced Funds (Flexible Allocation) - Monthly Income Plans - Capital Protection Oriented Funds


trying to get a better job Transition is a phase when financial goals are in the horizon. As funds will be soon required, investors tend to increase the proportion of their portfolio in liquid assets.

Correct Answer 32

Balanced Funds (Flexible Allocation) - Monthly Income Plans - Capital Protection Oriented Funds The risk hierarchy of the above mentioned schemes ( Highest to Lowest ) is : Balanced Funds (Flexible Allocation) - Balanced Funds (Fixed Allocation) Monthly Income Plans - Capital Protection Oriented Funds

Answer Explanation

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Question 33

The mutual fund schemes sale and purchase of investments are executed by the in the stock market.

(a)

Operator

(b)

AMC

(c)

Dealer

(d)

Sponsor

Question 34

Mutual Fund distributors receive commission on investments made by their clients as well as on the investments they make for themselves in their own name - State True or False ?

(a)

TRUE

(b)

FALSE

Correct Answer 33

Dealer The various dealers of a Stock Broker buy and sell shares as per the orders of the Mutual Fund.

Answer Explanation

FALSE Distributors get commission on investments made through them by their clients. However, no commission is payable on their own investments.


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Question 35

Amongst the following options, which of the following is TRUE ?

(a)

STT is paid on purchase of the units of Equity Mutual Funds through a stock exchange

(b)

STT is paid on purchase of the units of Equity Mutual Funds from the fund house

(c)

STT is paid on repurchase / redemption of the units of Equity Mutual Funds

(d)

STT is paid on purchase of the units of Debt Mutual Funds

Question 36

The Scheme Information Document (SID) is approved by

(a)

SEBI

(b)

AMC and the Board of Trustees

(c)

Sponsors

(d)

Stock Exchanges

.


STT is paid on repurchase / redemption of the units of Equity Mutual Funds Securities Transaction Tax (STT) is applicable on sale / redemption transactions in units of equity mutual fund schemes. There is no STT on Debt funds.

Correct Answer 36

AMC and the Board of Trustees

Scheme Information Document and Statement of Additional Information are the part of Offer Documents AMC prepares the Offer Document for the NFO. This needs to be approved by the Trustees and the Board of Directors of the AMC. SEBI does not approve or disapprove Offer Documents, it gives its observations and these are incorporated.

Answer Explanation

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Question 37

In the

stage, the investor needs regular money.

(a)

Reaping / Distribution

(b)

Transition

(c)

Accumulation

(d)

Inter-Generational Transfer

Question 38

Amongst the given options, which will require a due diligence process by the AMC ?

(a)

If a distributor receives commission of over Rs. 50 lakhs from a single Mutual Fund/AMC

(b)

If he gets funds of more than Rs 1 crore for a single Mutual Fund

(c)

If he receives commissions of over Rs. 10 crore p.a. across industry

(d)

All of the above

Correct Answer 37 Reaping / Distribution In the Reaping phase the investor needs regular money. It is the parallel of Answer retirement phase in the Life Cycle. Explanation Investors in this stage need to have higher allocation to income generating assets. If a distributor receives commission of over Rs. 50 lakhs from a single Mutual Fund/AMC Correct Answer 38 Due diligence is mandatory if commission and expenses paid to distributors who satisfy Answer Explanation one or more of the following conditions with respect to non-institutional (retail and HNI) investors: i. Multiple point of presence (More than 20 locations) ii. AUM raised over Rs. 100 crore across industry in the non-institutional category but including high networth individuals (HNIs). iii. Commission received of over Rs. 1 crore p.a. across industry iv. Commission received of over Rs. 50 lakhs from a single Mutual Fund/AMC.

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Question 39

A Mutual Fund Trust must have beneficiaries - State True or False ?

(a)

TRUE

(b)

FALSE

Question 40

In a market correction ie. when market falls, the more than .

(a)

Value Funds , Growth Funds

(b)

Growth Funds , Value Funds

(c)

Index Funds , Sectoral Funds

(d)

None of the above

can decline much

TRUE

Correct Answer 39

Every trust has beneficiaries. In the case of a mutual fund trust, the beneficiaries are the investors who invest in various schemes of the mutual fund.

Answer Explanation

Correct Answer 40

Growth Funds , Value Funds

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Question 41

invests mainly in Corporate Bonds.

(a)

Diversified Equity Schemes

(b)

Diversified Debt Schemes (Income Funds)

(c)

Nifty Index Funds

(d)

Gold Funds

Question 42

Dormant investors are those investors who have not transacted during the previous months.

(a)

3

(b)

6

(c)

12

(d)

24

Correct Answer 41

Diversified Debt Schemes (Income Funds)

Correct Answer 42

6

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Question 43

What would you suggest to an investor having a long term horizon and looking for high growth ?

(a)

Long term Debt Funds

(b)

Treasury Bonds

(c)

Liquid Funds

(d)

Equity Funds

Question 44

To maintain neutrality, all AMC's have same commission structure with respect to commissions payable to distributors - State True or False ?

(a)

TRUE

(b)

FALSE

Correct Answer 43 Equity Funds Equity as an investment avenue has proved to give the best returns over a Answer long term period. Explanation

FALSE The commission structures vary between AMCs. Even for the same AMC, different commissions are applicable for different kinds of schemes.


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Question 45

When an investor gives an request for a new purchase in a MF scheme, it has to be made specifying the .

(a)

Lots

(b)

Units

(c)

Amount

(d)

All of the above

Question 46

As per the AMFI Code of Ethics, an AMC has to disclose which amongst the following information to its unit holders ?

(a)

Unit holders investment pattern

(b)

portfolio turnover

(c)

transactions of purchase and sale of securities entered into with any of their associates

(d)

All of the above


Amount Purchase request in a MF scheme can only be given specifying the amount the investor will be investing. The units allotted will depend on the NAV of the date of allotment.


All of the above As per the AMFI Code of conduct, the AMC has to disclose the investment objectives, investment policies, financial position and general affairs of the scheme, investment pattern, portfolio details, ratios of expenses to net assets and total income, portfolio turnover, transactions of purchase and sale of securities entered into with any of their associates or any significant unit holder etc. to the unit holders.

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Question 47

Foreign investors can invest in equity schemes of MFs registered with SEBI after completing KYC process - State True or False ?

(a)

TRUE

(b)

FALSE

Question 48

The valuation of Illiquid securities held by a Mutual Fund is done as per .

(a)

the last traded price of that security on BSE or NSE

(b)

the norms prescribed by SEBI to arrive at a fair valuation

(c)

the average price of bid and ask quotation

(d)

the lowest price calculated as per the above three methods

Correct Answer 47

TRUE


the norms prescribed by SEBI to arrive at a fair valuation Non traded securities/Illiquid securities are valued "in good faith" by the asset management company on the basis of the valuation principles laid down by SEBI.

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Question 49

Consolidated Account Statement (CAS) has to dispatched to the investors .

(a)

only when the investors sends an request for it

(b)

on a monthly basis, before the 10th of the succeeding month

(c)

for every transaction for every folio

(d)

quarterly for dormant investors

Question 50

In the event of delays in dispatching dividend warrants or redemption cheques, the penalties payable to the investors will be charged to the scheme expenses - State True or False ?

(a)

TRUE

(b)

FALSE


on a monthly basis, before the 10th of the succeeding month A Consolidated Account Statement (CAS) for each calendar month will have to be sent by post/email on or before 10th of the succeeding month. If there are no transactions, then a six monthly CAS can be sent.


FALSE In the event of delays in dispatching dividend warrants or redemption cheques, the AMC has to pay the unit-holder, interest at the rate of 15% p.a. This expense has to be borne by the AMC and it cannot be charged to the scheme

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Question 51

In which phase would an financial planner suggest his client to go for equity investments through SIP ?

(a)

Inter-Generational Transfer Phase

(b)

Accumulation Phase

(c)

Transition Phase

(d)

Reaping / Distribution Phase

Question 52

The main document which authorises a company to invest in a particular Mutual Fund scheme is .

(a)

The Articles of Association

(b)

The Memorandum of Association

(c)

Share holder Resolution

(d)

Specific Board Resolution


Accumulation Phase Accumulation Phase is the stage when the investor gets to build his wealth. It covers the earning years of the investor i.e. the phases of the life cycle from Young Unmarried to Pre-Retirement. So long term investments in equity through SIP will be preferred. Transition is a phase when financial goals are in the horizon. For eg approaching marriage expenses. Reaping / Distribution Phase is when the investor needs regular money. It is the parallel of retirement phase in the Life Cycle. Inter-Generational Transfer Phase is when the investor starts thinking about orderly transfer of wealth to the next generation, in the event of death.

Correct Answer 52

Specific Board Resolution The Board resolution authorises the company to invest in mutual fund schemes.

Answer Explanation

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Question 53

A company has a Earning Per Share (EPS) of Rs 10 and Price to Earning (PE) ratio of 20. What will be the market price of this company ?

(a)

Rs 2

(b)

Rs 20

(c)

Rs 200

(d)

Rs 2000

Question 54

As per SEBI rules, the NAV has to be published daily newspapers having circulation all over India.

(a)

daily , 4

(b)

weekly , 2

(c)

daily , 2

(d)

weekly , 4


Rs 200 Price to Earnings Ratio (P/E Ratio) = Market Price / EPS Market Price = PE X EPS. = 20 x 10 = Rs 200

Correct Answer 54

daily , 2

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, in at least


Question 55

Mr. Singh gives a redemption request in a liquid fund scheme at 2 pm. What would be the applicable NAV for this re-purchase ?

(a)

Closing NAV of the same day

(b)

Closing NAV of the next working day

(c)

Closing NAV of the previous working day

(d)

Closing NAV of the day preceding the next business day

Question 56

Returns Earned : 10%, Risk Free Return : 12%, Standard Deviation : 0.5. Calculate the Sharpe Ratio.

(a)

4 (b)

-4 (c) 10 (d) 0.75


Closing NAV of the same day For Equity Oriented Funds, Debt funds and Liquid funds , if the redemption request is received before 3 pm, then the same days closing NAV is applicable. If received after 3 pm then the next business day's NAV is applicable.


-4 The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation ie. ( Return Earned - Risk free Return ) / Standard Deviation = (10 - 12) / 0.5 = -2 / 0.5 =-4 (Sharpe Ratio will be negative if Return Earned is lower than Risk Free Returns) \


Question 57

A monthly income is assured in a MIP - Monthly Income Plan - State True or False ?

(a)

TRUE

(b)

FALSE

Question 58

The additional Total Income Ratio (TER) on account of inflows from beyond top 15 cities so charged shall be clawed back in case the same is redeemed within a period of from the date of investment.

(a)

6 months

(b)

9 months

(c)

1 year

(d)

2 years


FALSE Monthly Income Plan tries to declare a dividend every month; however the same is not assured as MIP has an element of equity in its portfolio.

Correct Answer 58

1 year

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Question 59

How the distributors compensated by the Mutual Funds ?

(a)

Primarily through commissions

(b)

Primarily through salaries

(c)

Primarily through fixed annual fees plus commissions

(d)

Primarily through a salaries plus variable commissions

Question 60

AGNI stands for - AMFI Guidelines for New Investors - State True or False ?

(a)

TRUE

(b)

FALSE

Correct Answer 59

Primarily through commissions


FALSE The full form of AGNI is - AMFI Guidelines and Norms for Intermediaries.

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Question 61

Mr. Gupta invests Rs 1 crore in a Gilt Mutual Fund scheme and gives a local cheque at 1 pm. Which will be the applicable NAV for allotment of units to Mr. Gupta ?

(a)

Closing NAV of the day on which the application was made

(b)

NAV of the business day on which the funds are available for utilisation before the cut-off time of that day is applicable.

(c)

Next business day NAV

(d)

Closing NAV of the day immediately preceding the application day.

Question 62

is responsible for settlement of Mutual Fund transactions which are executed on the Stock Exchanges.

(a)

AMC

(b)

Stock Exchange

(c)

Clearing House

(d)

AMFI

Correct Answer 61

NAV of the business day on which the funds are available for utilisation before the cut-off time of that day is applicable. For all Equity oriented funds and Debt funds (except liquid funds) if the transaction is more than Rs. 2 lakhs : Irrespective of the time of receipt of application, NAV of the business day on which the funds are available for utilisation before the cut-off time of that day is applicable.

Answer Explanation

(If it is below Rs 2 lakhs - Same day NAV if received before cut off time ie. 3 pm) AMC A Stock Exchange is essentially an order routing system between the investors and the AMC, the exchanges do not offer Settlement Guarantee. Responsibility for settlement is that of the AMC.


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Question 63

Does SEBI specify the language in which the Scheme Information Document (SID) is to be provided by Mutual Funds ? State Yes or No.

(a)

Yes

(b)

No

Question 64

Fund Age is an more important criteria to be studied while investing in .

(a)

Debt Schemes (b)

Equity Schemes (c) Treasury Bonds (d) None of the above


No SEBI does not approve or disapprove Offer Documents, it basically gives its observations. The mutual fund needs to incorporate these observations in the Offer Document. Thus, the Offer Documents in the market are “vetted” by SEBI, though SEBI does not formally “approve” them. Since investors are not experts of finance or law, the SID and SAI are prepared in simple language, and in clear, concise and easy to understand style.


Equity Schemes A Mutual fund scheme with a long history has a track record that can be studied before deciding on investments. Fund age is very important for equity schemes, where there are more investment options, and divergence in performance of schemes within the same category tends to be more.

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Question 65

SEBI has been given the responsibility to develop a cadre of well-trained agent-distributors for Mutual Funds - State True of False ?

(a)

TRUE

(b) FALSE

Question 66

Mr. Rohit approaches his Financial Planner to help him get a home loan. Which amongst the following options will the financial planner NOT do ?

(a)

He will contact some home loan financers to get details

(b)

He will advise Mr. Rohit not to go for home loan as its unethical to borrow money to buy a home

(c)

He will inform Mr. Rohit about the current scene in the home loan market like the interest rates charged etc.

(d)

He will ask Mr Rohit to contact an expert on home loans

FALSE

Correct Answer 65

It is the objective of AMFI to develop a cadre of well-trained agentdistributors and to implement a programme of training and certification for all intermediaries and others engaged in the industry.

Answer Explanation

Correct Answer 66

He will advise Mr. Rohit not to go for home loan as its unethical to borrow money to buy a home Taking an home loan is not at all unethical.

Answer Explanation

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Question 67

Risk appetite increases as the number of earning members

(a)

decreases

(b)

increases

(c)

becomes zero

(d)

None of the above

Question 68

.

Which schemes of a Mutual Fund offer the advantages of diversity of asset classes in a single scheme ?

(a)

ELSS Schemes

(b)

Index Schemes

(c)

Balanced Schemes

(d)

Debt Schemes


increases More earning members means more income and so the risk taking capacity increases.


Balanced Schemes A balanced scheme invests in a mix of equity and debt securities and offers advantages of both the asset classes.

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Question 69

Investors in Mutual Fund are not responsible for

(a)

monitoring their investments regularly

(b)

checking the risk factors before investing

(c)

reading the offer documents carefully

(d)

taking investment decisions of behalf of the fund manager

Question 70

.

Asset Class E of National Pension System (NPS) can invest in

(a)

predominantly equity market instruments

(b)

Debt securities other than Government Securities

(c)

Government Securities

(d)

all of the above

.

Correct Answer 69 taking investment decisions of behalf of the fund manager Investors need to note that their investment is governed by the principle of Answer caveat emptor i.e. let the buyer beware. An investor is presumed to have read Explanation the Offer Document, checked the risk factors etc. However an investor cannot ask / instruct the fund manager to buy / sell particular security. predominantly equity market instruments

Correct Answer 70

National Pension System : -Asset Class E: Investment in predominantly equity market instruments -Asset Class C: Investment in Debt securities other than Government Securities -Asset Class G: Investments in Government Securities

Answer Explanation

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Question 71

Which statement is TRUE ?

(a)

SEBI regulates the Mutual Fund industry in India

(b)

The Mutual Fund industry is largely unregulated in India

(c)

The Stock Exchanges regulate the Mutual Fund industry in India

(d)

Bank sponsored Mutual Funds are regulated by Banks and not SEBI.

Question 72

While making a Comprehensive Financial Plan,

.

(a)

High time commitment is required from the investor / client

(b)

High time commitment is required from the planner

(c)

High time commitment is required both from the client and planner

(d)

Not much time commitment as all the planning is done in the computer


SEBI regulates the Mutual Fund industry in India SEBI is the regulatory authority for securities markets in India. It regulates, among other entities, mutual funds, depositories, custodians and registrars & transfer agents in the country.


High time commitment is required both from the client and planner A comprehensive financial plan calls for significantly more time commitment on the part of both the investor and the financial planner. The steps in creating a comprehensive financial plan are as follows: Establish and Define the Client-Planner Relationship Gather Client Data, Define Client Goals Analyse and Evaluate Client‟s Financial Status Develop and Present Financial Planning Recommendations and / or Options Implement the Financial Planning Recommendations Monitor the Financial Planning Recommendations -These require significant time commitments from both planner and investor.

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Question 73

A Flexible Asset Allocation scheme is an example of Passive Investment strategy - State True or False ?

(a)

TRUE

(b)

FALSE

Question 74

Asset Class C of the National Pension System (NPS) can invest in Government Debt Securities - State True or False ?

(a)

TRUE

(b)

FALSE

Correct Answer 73

FALSE

Answer Explanation

A Flexible Asset Allocation scheme switches a large part of their portfolio between debt and equity, depending on the views of the fund manager on the respective markets. This is a very active investment strategy and not a passive one. Passive funds invest on the basis of a specified index, whose performance it seeks to track.


FALSE Asset Class C can invest in Debt securities other than Government Securities.

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Question 75

Mr. Nayak is an investor having a low risk tolerance and is looking for income. He should ideally invest in _.

(a)

Equity

(b)

Insurance

(c)

Bank Deposits

(d)

Property

Question 76

If a charitable trust wishes to invest in a Mutual Fund, which amongst the following document is not required to be submitted ?

(a)

Memorandum and Articles of Association

(b)

Trust Deed

(c)

Board Resolution authorising the investments

(d)

List of authorised signatories

Correct Answer 75

Bank Deposits


Memorandum and Articles of Association A Charitable Trust does not have any Memorandum and Articles of Association. It has a Trust Deed.

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Question 77

An investor does not wish to take any equity exposure- so investing in Monthly Income Plan (MIP) schemes will be a good option for him - State True or False ?

(a)

TRUE

(b)

FALSE

Question 78

Who makes the application to SEBI for registration of a Mutual Fund ?

(a)

The AMC

(b)

The Trust

(c)

The Sponsor

(d)

The Fund Manager


FALSE MIP also invests a small portion of its funds in equity. So investors, who do not wish to take any equity exposure, should opt for a regular debt fund.


The Sponsor The application to SEBI for registration of a mutual fund is made by the sponsor/s. Afterwards, the sponsor invests in the capital of the AMC.

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Question 79

An index fund manager would seek to minimize the

(a)

Delta Error

(b)

R Squared factor

(c)

Tracking Error

(d)

Arbitrage between Cash and Future markets

Question 80

.

is not a source of information about investors who are eligible to invest in a particular Mutual Fund scheme.

(a)

Scheme Annual Report

(b)

SID -Scheme Information Document

(c)

SAI -Statement of Additional Information

(d)

KIM -Key Information Memorandum


Tracking Error Gaps between the scheme performance, and that of the benchmark, are called tracking errors. Since Index funds are benchmarked to an index like Sensex, Nifty etc, the fund manager will try to minimise the difference in returns (tracking error) of his fund and the benchmark.


Scheme Annual Report A MF Scheme annual report shows the performance of the scheme, the portfolio etc. It does not gives information on eligible investors.

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Question 81

Who can attest the copies of supporting documents in the KYC procedure ?

(a)

Gazetted Officer

(b)

Manager of a Scheduled Commercial Bank

(c)

Notary Public

(d)

All of the above

Question 82

An investor buys an equity mutual fund scheme at NAV Rs 11 on 15 April. On 15 September the NAV was Rs 12.50. What is the simple return on the scheme in this period ?

(a)

7.45%

(b)

9.00%

(c)

12.00%

(d)

13.77%


All of the above KYC documents can be attested by a Notary Public, Gazetted Officer or Manager of a Scheduled Commercial Bank.


12% We have to use the Holding Period formula ie. : [ {End Price - Begin Price + Income (If Any)} / (Begin Price) ] = [ ( 12.50 - 11 + 0) / 12.50 ] = 0.12 0.12 x 100 = 12%

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Question 83

The facility of ASBA - 'Application Supported by Blocked Amount' is mainly for additional purchase of Mutual Funds units - State True or False ?

(a)

TRUE

(b)

FALSE

Question 84

Risk Appetite is influenced by which financial factor(s) ?

(a)

Capital Base

(b)

Regularity of Income

(c)

Both 1 and 2

(d)

None of the above


FALSE ASBA can only be used for IPO's of equity shares and NFO's of Mutual Funds. It cannot be used for additional purchase.


Both 1 and 2 Higher the capital base, better the ability to financially take the downsides that come with risk. People earning regular income can take more risk than those with unpredictable income streams.

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Question 85

Mutual Funds gives more investment options as compared to National Pension System - State True or False ?

(a)

TRUE

(b)

FALSE

Question 86

The OFFER DOCUMENT does not contain

(a)

the projected returns of the scheme

(b)

the statutory information about the mutual fund

(c)

the tax implications for investors

(d)

the scheme objectives

.


TRUE There are several restrictions in investments for the NPS and so it offers fewer portfolio choices than mutual funds..

Correct Answer 86

the projected returns of the scheme

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Question 87

Mr. Suresh invests Rs 30000 in an equity fund. The face value of this scheme is Rs 10 and the NAV is Rs 14. How many units will be alloted to Mr. Suresh assuming there is no entry load ?

(a)

3000

(b)

2142.8571

(c)

3147.8744

(d)

2411.1574

Question 88

The main advantage of investing in a Mutual Fund is

(a)

Portfolio Diversification

(b)

Portfolio Concentration

(c)

Portfolio Balancing

(d)

None of the above

.


2142.8571 Mutual Fund units are allotted as per the current NAV. Rs 30000 / Rs 14 = 2142.8571 units


Portfolio Diversification Even a small investment in a mutual fund scheme can give investors a diversified investment portfolio.

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Question 89

To calculate the Standard Deviation, which amongst the following functions of MS Excel have to be used ?

(a)

SD

(b)

SDV

(c)

VAR

(d)

STDEV

Question 90

A major factor affecting the rate of interest of a corporate deposit is

(a)

the assets it has

(b)

the market share its product has

(c)

the profits of the company

(d)

the credit rating assigned to it

Correct Answer 89

STDEV


the credit rating assigned to it The interest rate offered by Corporate Deposits depends on the credit rating assigned to it. Higher the credit risk, higher is likely to be the interest rates offered.

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.


Question 91

Network Ltd has a share capital of Rs 100 crores and accumulated reserves of Rs 40 crores. What will be the BOOK VALUE of its share if it has issued a total of 10 crore shares ?

(a)

Rs 10

(b)

Rs 40

(c)

Rs 14

(d)

Rs 21

Question 92

The details and information provided in Scheme Information Document (SID) and Statement of Additional Information (SAI) are _.

(a)

applicable only for closed ended schemes

(b)

applicable only for open ended schemes

(c)

common for all schemes - open or close ended

(d)

applicable only for a particular scheme


applicable only for a particular scheme Book Value per Share: Net Worth / No. of equity shares (Net worth = share capital plus reserves minus accumulated losses) In the above question : Net Worth = 100 cr + 40 cr = Rs 140 cr Book Value = 140 cr / 10 cr = Rs 14.

Correct Answer 92

Custodian

Answer Explanation

SID and SAI form a part of the Offer Document which gives the details of a New Fund Offer ie. when a new scheme is launched in the market. Thus every scheme will have its own SID and SAI as per the investment objectives etc. of that particular scheme.

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Question 93

What is the NAV if the value of stocks in a Mutual Fund scheme is Rs 100 cr, Value of Bonds is Rs 10 cr, Value of Money Market Instruments is Rs 25 cr, Dividend Accrued but not received is Rs 3 cr and Fees payable is Rs 5 cr. The number of outstanding units is 75 lacs.

(a)

173.33

(b)

177.33

(c)

184

(d)

186.74

Question 94

In Mutual Fund transaction through a Stock Exchange,

(a)

the units are offered at a higher price than the NAV

(b)

the units are allotted by the RTA (Registrar and Transfer Agents)

(c)

only fresh purchase of units are allowed and not additional purchase

(d)

All of the above

.


177.33 NAV = (Value of stocks + Value of bonds + Value of money market instruments + Dividend accrued but not received + Interest accrued but not received – Fees payable) / No. of outstanding units = 100 cr + 10 cr + 25 cr + 3 cr + 0 - 5 cr / 75 lacs = 133 cr / 75 lacs = 177.33


the units are allotted by the RTA (Registrar and Transfer Agents) The Stock Exchanges only offer a transaction platform and the allotment of units etc. is done by the RTA. Also fresh subscriptions in a mutual fund, as well as additional purchases are possible. Similarly, redemptions are permitted on a Stock Exchange.

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Question 95

Mutual funds offer facilities that help investor invest constant amounts regularly through a .

(a)

Systematic Withdrawal Plan

(b)

Systematic Transfer Plan

(c)

Systematic Saving Plan

(d)

Systematic Investment Plan

Question 96

The Dividend Distribution Tax on Individuals and HUF is + Education Cess.

(a)

15%

(b)

20%

(c)

25%

(d)

30%

Correct Answer 95

Systematic Investment Plan


25% Dividend Distribution Tax (DDT) is as follows: Individuals and HUF: 25% + Surcharge + Education Cess Others: 30% + Surcharge + Education Cess

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+ Surcharge


If an investor wishes to beat the benchmark and is also ready to bear the risks, then he should opt for Actively managed funds - State True or False ?

Question 97 (a)

TRUE

(b)

FALSE

Higher the Capital Base,

Question 98

the Risk Appetite.

(a)

Higher

(b)

Lower

(c)

Capital base has no effect on risk appetite

(d)

No change

TRUE

Correct Answer 97

Actively managed funds are funds where the fund manager has the flexibility to choose the investment portfolio. The fund manager invests in better performing sectors so that the returns are better than the benchmark index. However this strategy could also give lower or negative returns if the fund managers predictions go wrong.

Answer Explanation

Correct Answer 98

Higher

Answer Explanation

Higher the capital base, better the ability to financially take the downsides that come with risk - so the risk appetite is higher.

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Question 99

Floating rate debt securities tend to hold their values, even if interest rates fluctuate - State True or False ?

(a)

TRUE

(b)

FALSE

Question 100

Asset Class G of National Pension System (NPS) can invest in

(a)

Debt securities other than Government Securities

(b)

Predominantly equity market instruments

(c)

Government Securities

(d)

all of the above

Correct Answer 99

.

TRUE A debt instrument with a variable interest rate is known as a “floater” - a floating rate note‟s interest rate is tied to a benchmark. Floating rate debt securities tend to hold their values, even if interest rates fluctuate

Answer Explanation

Correct Answer 100

Government Securities National Pension System : -Asset Class G: Investments in Government Securities -Asset Class E: Investment in predominantly equity market instruments -Asset Class C: Investment in Debt securities other than Government Securities

Answer Explanation

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS CERTIFICATION REAL FEEL MOCK EXAM

THIS IS A MOCK EXAM TO TEST YOUR PREPARATIONS. PLEASE SOLVE THESE 100 QUESTIONS IN 2 HOURS. THE ANSWERS ARE PROVIDED IN THE END.

Question 1

(a) (b) (c) (d)

Question 2

(a) (b) (c) (d)

Even thought investment in Mutual Funds are subject to market risks, an investor invests in an equity fund after reading the risk factors etc. Due to a fall in the stock markets the value of the fund goes down drastically. The investor . can get some remedy if he appeals to SEBI can get some remedy if he appeals to AMC cannot get any remedy from the AMC can get some remedy if he appeals to AMFI

An investor gives a cheque of Rs 2 lacs for investing in a ELSS scheme at 2.30 pm at a Mutual Fund office. The NAV of which day will be applicable to him ? NAV of the same day NAV of the next business day NAV of the day on which funds will be available None of the above


Which of the below is a physical asset ? GOLD Exchange Traded Funds - ETF Real Estate Fund Building Debentures

Question 4

Which of the following is true with respect to Growth Option in Mutual Fund schemes ?

(a) (b) (c) (d)

Dividend Distribution Tax is applicable The change in NAV captures the scheme performance Units rise or fall depending on the schemes performance The NAV falls as and when dividend is declared



For calculating Capital Gains, investment in mutual funds for less then 1 year is considered as Long Term Medium Term Short Term Ultra Short Term

Question 6

Mutual funds are constituted as by the .

(a) (b) (c) (d)

Companies, Indian Companies Act NGOs, NGO Act Trusts, Indian Trusts Act Investment Agencies, SEBI Act


Question 8

(a) (b) (c) (d)

Question 9

(a) (b)

and therefore, they are governed

If an Institutional Investor is making an application for investing in a Mutual Fund, which additional document is required ? Bank Statements Audited Accounts for the last 3 years Approval letter from SEBI Board Resolution

The investment objective of a might read as follows:To generate capital appreciation from a portfolio of predominantly equity related securities Balanced Fund Money Market Fund Diversified Equity Fund Arbitrage Fund

A Board Resolution is not required for an institutional investor to invest in Mutual Funds if the Memorandum and Articles of Association permit it to do so - True or False ? TRUE FALSE



Different investors have different investment needs and objectives. This is the reason Mutual Fund offer different . Plans Options Schemes time horizons.


Which of the following is a measure of market risk ? Beta Coefficient Sharpe Ratio Treynor Ratio None of the above

Question 12

A investors wishes to invest in debt mutual funds but wants high liquidity - should he invest in Fixed Maturity Plans ?

(a) (b)

Question 13

(a) (b)

Question 14 (a) (b)

Yes No

To do away with multiple KYC formalities with various intermediaries, SEBI has mandated a unified KYC for the securities market through the Depository Participants registered with SEBI - True or False ? TRUE FALSE

Nomination facility is not available to investors holding the Mutual Fund units jointly - True or False ? TRUE FALSE




As per SEBI regulations, every application form is to be accompanied by . Key Information Memorandum (KIM) Scheme Information Document (SID) Addendum Statement of Additional Information

Of the following documents, which is required to be appended to the application form of a MF scheme ? Scheme Information Document - SID Statement of Additional Information - SAI Key Information Memorandum - KIM Addendum


Gold Future Contracts . are traded on the Commodity Exchanges are not standardised products can be bought through Mutual Funds None of the above

Question 18

(a)

All advertisements and Sales Literature containing an AMC(s)/Mutual Fund ranking must prominently disclose, with respect to the ranking . The name of the Ranking Entity and the criteria on which the ranking is based

(b) (c) (d)

The number of AMC(s)/Mutual Funds in the category. The name of the category (e.g. income/growth) All of the above


The trail commission paid by Mutual Funds to a distributor . Is paid only for high valued transactions Is linked to the NAV Grows at a steady rate Is paid to the Corporate and Bank Distributors only




Gilt funds and diversified debt funds should figure prominently in the portfolio of . Employed with small children Old couple with no family support Young married with no children None of the above

An investor in an active fund bears a management, and takes a risk.

cost for the fund

Higher, Lower Lower , Lower Higher , Higher Lower, Higher


Of the below options, what is FALSE with respect to Arbitrage Funds ? Arbitrage Funds have Basis Risks Arbitrage Funds invest in Equity Markets Arbitrage Funds invest in both Spot and Futures Market Arbitrage Funds are more riskier than Sectoral Funds

Question 23

While selling mutual fund products of the distributors group/affiliate/associates, the distributor shall make disclosure to the customer regarding the conflict of interest arising from the distributor selling such products - True or False ?

(a) (b)

Question 24

(a) (b) (c) (d)

TRUE FALSE

A Mutual Fund scheme gave an annualised return of 9.86% and the annualised Standard Deviation of the fund is 3.47. The current risk free return is 8%. Calculate the Sharpe Ratio. 0.63 0.55 0.48 0.35




Minimum duration of an interval period in an interval scheme/plan is . 15 Days 30 Days 45 Days 60 Days

All advertisements and Sales Literature containing an AMC(s)/Mutual Fund ranking must prominently disclose . The publisher of the ranking data. Criteria on which the ranking is based. The name of the Ranking Entity. All of the above


The face value of a Mutual Fund unit in India is generally Re 1 Rs 10 Rs 100 Decided by AMFI


Its compulsory to list units of Close Ended Fund ELSS Fund Gilt Fund Arbitrage Fund

Question 29

After payment of dividend the NAV comes down even in the Dividend Reinvestment option - True or False ?

(a) (b)

TRUE FALSE

.

on the stock exchange.



Question 31 (a) (b)




Open-ended schemes, except ELSS, have to re-open for ongoing sale / repurchase within business days of allotment. 3 5 10 12

The Stock Exchanges which provide facilities for Mutual Fund trading also do the functions of Mutual Fund RTAs. - True or False ? FALSE TRUE

You have to construct a model portfolio for your client - which amongst the following factors will you consider ? Clients Employment status Clients Risk Profile The size of portfolio All of above

You are a mutual fund advisor. To whom would you advise investment of more than 70 % of their funds in debt funds ? A 33 year old well employed with one son A 45 year old Executive Manager of a company who has 2 children Elderly couple with no children Young man working with Glaxo

The Transaction Slips are used by First time investors of Mutual Funds NFO Investors Relatives of Existing Investors Existing Investors

.



In Liquid funds, simple annualised return method is used to show the returns because . Its a simpler way to calculate and investors understand it easily The investment made is fixed for 30 - 90 - 180 days The return is calculated over smaller time horizons The amount invested is usually small


The maintains investor records. The specific fund accountants Registrars and Transfer Agents The Back Office of AMFI The Fund Manager and his team


Cut-off timing guidelines are not applicable for International Funds New Fund Offer (NFO) Both of the above None of the above

Question 38

To have a structured approach to Financial Planning and Investment counseling, Financial Planners use Model Portfolios - True or False ? TRUE FALSE

(a) (b)

.

Question 39 (a) (b)

Every trust has beneficiaries - True or False ? TRUE FALSE

Question 40

Prediction of equity markets in the short run is easier than in the long run - True or False ?

(a) (b)

TRUE FALSE


Question 41 (a) (b)


The floating rate debt securities tend to hold their value, despite changes in yield in the debt market - True or False ? TRUE FALSE

A Mutual Fund scheme is know to distribute dividends from time to time. Such MF can be used as a source of . Good Capital Appreciation Regular Income Safety of Capital Tax Planning

Question 43 (a) (b)

Stock selection is important in bottom-up approach - True or False ? TRUE FALSE

Question 44

Summary of SID - Scheme Information Document and SAI - Statement of Additional Information is known as KIM - Key Information Memorandum - True or False ?

(a) (b)

Question 45 (a) (b)


TRUE FALSE

Young Age, Good Steady Job, an Adventurous streak etc are some qualities of an investor who takes risks in investments - True or False ? TRUE FALSE

AMC does not appoint the Custodian R&T Agent Banker Distributor

.




A Mutual Fund scheme has a portfolio of shares whose beta is less than 1. This indicates that the scheme is . Very Very risk compared to the market Some what risky than the market Less risky than the market Equally risky as the market

Mutual funds can accept cash to the tune of Rs investors.

from small

Rs 5000 Rs 20000 Rs 25000 No cash ca be accepted


The cost of fund management are the highest in Active Funds Passive Funds Index Funds None of the Above


NAV of Equity funds is to be calculated upto 1 2 3 4

Question 51

Exchange Traded Funds-ETF Gold regularly invest in good gold mining companies - True or False ?

(a) (b)

TRUE FALSE

.

decimals.


Question 52 (a) (b)


The National Pension System (NPS) offers a wider portfolio choice than Mutual Funds - True or False ? TRUE FALSE

The amount which is paid to the distributor at the time the money is invested in a scheme is called _. Trail Commission Upfront Commission Rebate Fund Incentive

Question 54 (a) (b)

Can recurring expenses be charged to a mutual fund scheme ? Yes, they can be charged. No, they cannot be charged.

Question 55

As per the provisions of the Income Tax Act - Short term capital loss is to be set off against short term capital gain or long term capital gain - True or False ? FALSE TRUE

(a) (b)


Question 57 (a) (b)

Which of the following should NOT be included in the Key Information Memorandum ? The risks associated with the scheme The functions of Trustees and AMC The opening - closing dates of the NFO Minimum investments required and the cutoff time.

Tier II account of the National Pension System is called the Savings Account Pension Account

.



Question 59 (a) (b)

Which one of the below mentioned document is not required for KYC process ? PAN Card Address Proof Income Proof Identity Proof

There are no penalties for breach of code of conduct as mandated by AGNI - True or False ? TRUE FALSE


The is the phase when the earning years usually starts. Young Unmarried Young Married Married with one children During graduation

Question 61

Which of the following is an important aspect of an OFFER DOCUMENT ? To inform the investors about the AMC's views on Stock Markets To inform the investors on the performance of the scheme To provide a comparison of the schemes To inform the investors on the detailed information about the scheme

(a) (b) (c) (d)

Question 62 (a) (b)

An Index fund has an beta of 1 - State True or False ? TRUE FALSE

Question63

The strategy of Tactical Asset Allocation is considered to be a risky strategy - True or False ?

(a) (b)

TRUE FALSE



Which of the below expenses can be charged to a fund ? Expenses to manage a fund Expenses to launch a new fund Expenses done by the AMC Expenses done by the Investors

Question 65

Post the New Fund Offer, investors who wishes to buy units need to pay .

(a) (b) (c) (d)

Question 66

(a) (b)

the NFO price plus inflation rate the same price as NFO a price linked to the inflation index a price that is linked to its NAV.

Mr. Deven gives his investment application form to the distributor at 10 am. The distributor then goes to the Mutual Fund office and submits this application at 1 pm. What is the cut off time for this investment ? 10:00 AM 1:00 PM


Mutual Funds are allowed to borrow . for long term investment purposes are not allowed to borrow at all to meet redemption requests or divdend payments. freely as per their investment objectives

Question 68

Relaxation in documentation requirements for micro-SIPs is available for .

(a) (b) (c) (d)

Non Resident Indians Non Individuals Hindu Undivided Family None of the Above



Which is the re-opening date for a scheme ? The next working day after the close of a NFO The date when investors can go for re-purchase The date on which it lists on a Stock Exchange The date on which NFO opens


On liquidity parameters, which is most liquid ? Equity Shares Bank Fixed Deposits Gold Real Estate

Question 71

ELSS schemes should contain the least amount of Ill Liquid Investments - True or False ?

(a) (b)


Question 73 (a) (b)

TRUE FALSE

Which of the following options form the basis of appointment of a Mutual Fund distributor ? An agreement between the AMC and the Distributor Approval from SEBI Power of Attorney from the AMC An agreement with AMFI

After deciding the model portfolio, Sharpe Ratio is used for finalizing the schemes of Equity and Debt - True or False ? TRUE FALSE


Question 74

(a) (b) (c) (d)

Question 75

(a) (b) (c) (d)

Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the last day of the month for all their schemes on their respective website on or before the of the succeeding month 3rd day 7th day 10th day 15th day

To achieve growth by investing in equity and equity related investments, along with income generation by investing in debt and money market instruments would be the investment objective of a . balanced scheme debt fund Sectoral Equity fund ELSS Fund


The Absolute Return is calculated using the formula (Cost Price - Sale Price ) / Sale Price (Sale Price / Cost Price) - 1 (Sale Price - Cost Price) / Cost Price 1 - (Cost Price / Sale Price)

Question 77

Every trust has beneficiaries and the beneficiaries, in the case of a mutual fund trust, are .

(a) (b) (c) (d)

Question 78 (a) (b)

.

the Employees of the Mutual Fund Company the Trustees of the AMC the Chairperson and Managing Director of the AMC the investors who invest in various schemes of the mutual fund.

Investments in Mutual Funds can be done only through a AMFI authorided MF distributors - True or False ? TRUE FALSE


Question 79 (a) (b)

Foreign nationals can invest in Indian mutual funds - True or False ? TRUE FALSE

Question 80

Many AMCs, distribution houses and mutual fund research houses offer free tools in their website which can be used for evaluating a funds performance - True or False ?

(a) (b)

Question 81

(a) (b) (c) (d)

Question 82 (a) (b)


TRUE FALSE

Mr. Shah gives a local cheque at 4.30 pm of Rs 10 lacs at a Mutual Fund office for investing in a Gilt Fund. Of which day will the NAV be applicable to him ? NAV of the same day NAV of the next business day NAV of the day on which the funds will be available None of the above

AMC directors are appointed with the permission of SEBI - True or False? TRUE FALSE

Minors are not legally eligible to contract, so for investing in Mutual Funds they . have to become 18 years before investing can invest thro' their guardians can invest only in long term capital gain funds can invest in specific 'Minors Only' Mutual Funds


Question 84 (a) (b)




Question 88 (a) (b)

Due to the popularity of cash less health insurance policies the liquidity needs of the investors have reduced - True or False TRUE FALSE

Investments owned by the scheme may be quoted in the market at higher than the cost paid and these gains are called as . Valuation Gains Booked Gains Notional Gains Notional Losses

Dividend Distribution Tax (DDT) on debt-oriented mutual fund schemes for Corporate Investors is + Surcharge + Education Cess 15% 30% 35% 40%

At what rate is the Securities Transaction Tax charged on sale of units of debt oriented mutual fund in a stock exchange ? 0.01% 0.10% 0.13% 0%

An important feature of Growth Option is Tax Deferral - True or False ? TRUE FALSE



Asset allocation means _. Distribution of Funds between Fund Managers in a Mutual Fund Distribution of funds between various persons after the death of a person Distribution of funds between various asset classes in a portfolio Distribution of funds between beneficiaries of an AMC

Question 90

A person wishes to avail of a loan. For which of the below options he cannot get a loan ?

(a) (b) (c) (d)

Question 91

(a) (b)

Question 92 (a) (b)


To start a Pharma factory To buy a car of value above Rs 20 lacs To buy a high priced lottery ticket To buy a house in a Union Territory

Investments in Mutual Funds are subject to market risks and therefore do not provide any guarantee of Capital Growth / Protection - True or False ? FALSE TRUE

Loads and taxes pull the investor’s returns below that earned by the Scheme - True or False ? TRUE FALSE

The strategy of maintaining a constant ratio of asset allocation is know as _. Dynamic Asset Allocation Fixed Asset Allocation Flexible Asset Allocation SIP


Question 94 (a) (b)

Question 95

(a) (b) (c) (d)




Investments in mutual fund units attract Wealth Tax if the investments are over Rs 5 lacs - True or False ? TRUE FALSE

Debt-oriented, close-ended / interval, schemes /plans need to disclose their portfolio in their website every month, by the working day of the succeeding month. 3rd 10th 12th 15th

If you are expecting interest rates (yields) to rise in the markets. Where would you invest your money considering this forecast ? Long Terms Debt Funds Short Term Debt Funds Equity Funds Banking Sector Funds

Condensed financial information for schemes launched in last 3 financial years is mentioned in the . Scheme Information Document (SID) Statement of Additional Information (SAI) Fact Sheet Prospectus

The dividend received by a Mutual Fund investor will be taxed at a rate of _. 5% 10% 20% No tax on Mutual Fund Dividends in the hands of the investor



Question 100 (a) (b)

A Mutual Fund investor can file a case against the of trust.

for breach

Mutual Fund Trustees Stock Exchange No, a MF investor cannot file a suit.

Management fees cannot be charged by liquid schemes on funds parked in short term deposits of commercial banks - True or False ? FALSE TRUE


ANSWERS TO REAL FEEL MOCK EXAM QUESTIONS :

Correct Answer 1

cannot get any remedy from the AMC

Correct Answer 2

NAV of the day on which funds will be available

Answer Explanation

For all Equity and Debt funds (except Liquid funds) - For investment of below Rs 2 lacs - NAV of the same day if received before 3 pm ( cut-off time) For investments of amount of Rs 2 lacs and above, irrespective of the time of receipt of application, NAV of the business day on which the funds are available for utilisation before the cut-off time of that day is applicable.

Correct Answer 3

Building

Correct Answer 4

The change in NAV captures the scheme performance

Answer Explanation

In Growth Option, the NAV rises or falls depending on the schemes performance. No dividend is declared in Growth Option.

Correct Answer 5

Short Term

Correct Answer 6

Trusts, Indian Trusts Act

Correct Answer 7

Board Resolution



Diversified Equity Fund A Diversified Equity Fund invests mainly in equity for long term capital appreciation.

Correct Answer 9

FALSE

Correct Answer 10

Schemes

Answer Explanation

MF's have various schemes like Large Cap Funds, Mid Cap Funds. Sectoral Funds etc. to suit varied investment requirements. (Plans and Options are Dividend / Growth etc. which form a part of the scheme)

Correct Answer 11

Beta Coefficient

Correct Answer 12

No


FALSE To do away with multiple KYC formalities with various intermediaries, SEBI has mandated a unified KYC for the securities market through KYC Registration Agencies registered with SEBI.





FALSE Nomination facility is also available in the case of joint holding. Every unit-holder will have to sign the nomination form. If one joint holder dies, then the Units will continue to be held by the surviving joint holder/s. If all joint holders dies, then the Units will be transferred to the nominee.

Key Information Memorandum (KIM) As per SEBI regulations, every application form is to be accompanied by the KIM. KIM is essentially a summary of the SID and SAI. It is more easily and widely distributed in the market.

Key Information Memorandum – KIM KIM is essentially a summary of the SID and SAI. As per SEBI regulations, every application form is to be accompanied by the KIM.

Correct Answer 17

are traded on the Commodity Exchanges

Correct Answer 18

All of the above

Correct Answer 19

Grows at a steady rate

Answer Explanation

Correct Answer 20

Dedicated MF distributors have accumulated a portfolio of loyal investors to whom they offer superior service. The trail commission on these investments ensures a steadily rising income for the distributor. Additional investments from the same investors, and other investors referred by the current investors, help them grow the portfolio.

Old couple with no family support


Correct Answer 21

Higher , Higher

Correct Answer 22

Arbitrage Funds are more riskier than Sectoral Funds

Answer Explanation

Arbitrage Funds make profits by using the price differences between two markets - so they are the least risky among Equity Funds. Sectoral Funds are the most risk funds as they are not diversified. Arbitrage Funds have basis risk – the risk that both cash and F&O position on a company cannot be reversed at the same time. During the time gap between unwinding of the two positions, the market can move adverse to the scheme.

Correct Answer 23

TRUE

Correct Answer 24

0.35

Answer Explanation

The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation ie. ( Return Earned - Risk free Return ) / Standard Deviation 0.536023055 0.354466859 0.35

Correct Answer 25

15 Days

Correct Answer 26

All of the above

Correct Answer 27

Rs 10

Answer Explanation

As per the law, every unit has a face value of Rs. 10. However, older schemes in the market may have a different face value.


Correct Answer 28

Close Ended Fund

Correct Answer 29

TRUE

Answer Explanation

The NAV falls but the units increase as more units are allotted due to Dividend Reinvestment.

Correct Answer 30

5

Correct Answer 31

FALSE

Answer Explanation

Stock Exchanges does are not required to do the role of Registrars and Transfer Agents (RTA).

Correct Answer 32

All of above


Elderly couple with no children More Allocation to debt funds is recommended for senior citizens as they carry the least amount of risk Young people can take risks so they are advised to invest in Equity funds for a long term.

Correct Answer 34

Existing Investors

Answer Explanation

For a first time investment in a mutual fund Full application form is to be filled . Then once an investor has a folio with a mutual fund, subsequent investments / sale with the same mutual fund do not call for the full application form. Only Transaction Slip needs to be filled and submitted.


Correct Answer 35

The return is calculated over smaller time horizons

Correct Answer 36

Registrars and Transfer Agents

Answer Explanation



The RTA maintains investor records. The appointment of RTA is done by the AMC. It is not compulsory to appoint a RTA and the AMC can choose to handle this activity in-house.

Both of the above The cut-off timing is not applicable for NFOs and International Schemes.


Correct Answer 39

TRUE

Correct Answer 40

FALSE

Correct Answer 41

TRUE

Answer Explanation

Floating rate funds invest largely in floating rate debt securities i.e. debt securities where the interest rate payable by the issuer changes in line with the market. Since the interest rate itself keeps adjusting in line with the market, these floating rate debt securities tend to hold their value, despite changes in yield in the debt market.


Correct Answer 42

Regular Income

Correct Answer 43

TRUE

Answer Explanation


Stock selection is important in bottom-up approach. In a top-down approach, sector allocation is the key decision.

TRUE KIM is essentially a summary of the SID and SAI. As per SEBI regulations, every application form is to be accompanied by the KIM. So KIM is more easily and widely distributed in the market.

Correct Answer 45

TRUE

Correct Answer 46

Custodian

Answer Explanation



Although the AMC manages the schemes, custody of the assets of the scheme is with a Custodian, who is appointed by the Trustees.

Less risky than the market Beta is a measure of risk of a security or a portfolio. If the Beta more than 1, this means the security or the portfolio will rise or fall more than the index. Similarly if the Beta of a scrip or portfolio is less than 1, this means the security or the portfolio will rise or fall less than the index.

Rs 20000 Mutual funds usually do not accept cash. However for small investors, who may not be tax payers and may not have PAN/bank accounts, are allowed cash transactions for purchase of units in mutual funds to the extent of Rs. 20,000/- per investor, per mutual fund, per financial year.






Active Funds In Active Funds like Diversified Equity Funds, the Fund manager does a lot of buying / selling. Also a lot of research work goes into it. So the cost of fund management are higher.

2 NAV for equity and balanced funds is to be calculated upto at least 2 decimal places. NAV is to be calculated upto 4 decimal places in the case of index funds, liquid funds and other debt funds.

FALSE Gold Sector funds invest in gold mining companies. Gold ETF merely track the gold prices.

FALSE The NPS offers fewer portfolio choices than mutual funds.

Correct Answer 53

Upfront Commission

Correct Answer 54

Yes, they can be charged.

Answer Explanation

Recurring Expenses can be charged to the scheme. Since the recurring expenses drag down the NAV, SEBI has laid down the expenses and their limits which can be charged to the scheme.



TRUE Some key provisions of IT Act related to Capital Gains are: • Capital loss, short term or long term, cannot be set off against any other head of income (e.g. salaries) • Short term capital loss is to be set off against short term capital gain or long term capital gain • Long term capital loss can only be set off against long term capital gain

Correct Answer 56

The functions of Trustees and AMC

Correct Answer 57

Savings Account

Answer Explanation

National Pension System (NPS) has two types of accounts : 1. Tier I (Pension account), is non-withdrawable. 2. Tier II (Savings account) is withdrawable to meet financial contingencies.

Correct Answer 58

Income Proof

Correct Answer 59

FALSE

Answer Explanation

As per 'AMFI Guidelines & Norms for Intermediaries' (AGNI) - In the event of breach of the Code of Conduct by an intermediary the registration can be cancelled after the set procedure is carried out.

Correct Answer 60

Young Unmarried

Correct Answer 61

To inform the investors on the detailed information about the scheme



TRUE Beta is a measure of risk of a security or a portfolio as compared to the market ie. Index. Since an Index fund invests in shares which are a part of the index, the NAV will rise or fall as per the movements of index. So the beta is 1.

Correct Answer 63

TRUE

Correct Answer 64

Expenses to manage a fund

Answer Explanation




Earlier expenses to launch a fund were charged to the fund but now they cannot.

a price that is linked to its NAV. When a scheme is first made available for investment, it is called a ‘New Fund Offer’ (NFO). During the NFO, investors have the chance of buying the units at their face value. Post-NFO, when they buy into a scheme, they need to pay a price that is linked to its NAV.

1:00 PM The cut off time is when the investment is submitted to the PoA - Point of Acceptance is relevant – not the time when the investor submits the transaction request to the distributor.

to meet redemption requests or divdend payments. As per SEBI regulations, MF borrowing is permitted only to meet the cash flow needs of investor servicing viz. dividend payments or re-purchase payments.




Non Resident Indians Relaxation in documentation requirements for micro-SIPs is not available for HUFs and non-individuals. Such relaxation is available for NRIs.

The date when investors can go for re-purchase Scheme Re-Opening Date – This is the date from which the investors can offer their units for re-purchase to the scheme (at the re-purchase price); or buy new units of the scheme (at the sale price).

Correct Answer 70

Equity Shares

Correct Answer 71

FALSE

Answer Explanation

Open-ended scheme, which have a greater need for liquidity because investors can offer their units for re-purchase at any time - should have the least amount of ill liquid investments in their portfolio. ELSS Schemes have a lockin period of three years - so the fund manager can buy more illiquid investments if he feels there is great potential in them in the long run.

Correct Answer 72

An agreement between the AMC and the Distributor

Correct Answer 73

TRUE

Correct Answer 74

10th day


Correct Answer 75

balanced scheme

Correct Answer 76

(Sale Price - Cost Price) / Cost Price

Answer Explanation




Absolute Return or Simple Return is simply the change in the value of an investment over a period of time. Its not calculated on a yearly basis etc. For eg - A person bought a MF at NAV 10 and sold it after 2 years at NAV 18, then the Absolute Return is : 18 - 10 / 10 = 0.8 or 80% absolute return

the investors who invest in various schemes of the mutual fund. Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust, are the investors who invest in various schemes of the mutual fund.

FALSE Investors can directly invest in MF's by visiting the MF office and other Point of Sales (POS).

TRUE Foreign nationals are permitted to invest in Indian mutual funds, subject to KYC.

Correct Answer 80

TRUE

Correct Answer 81

NAV of the day on which the funds will be available








FALSE AMC directors are appointed with the permission of Trustees.

can invest thro' their guardians Minors i.e. persons below the age of 18 are not legally eligible to contract, they need to invest through their Parents/Lawful guardians.

TRUE Earlier people use to save to meet medical emergencies. But due to cash less medical insurance people keep less liquidity with them as the insurance companies pay for the medical bills

Valuation Gains Investments owned by the scheme may be quoted in the market at higher than the cost paid and these are called valuation gains. Similarly, there can be valuation losses when securities are quoted in the market at a price below the cost at which the scheme acquired them.

30% Tax on dividend distributed by debt-oriented mutual fund schemes is as follows: Others: 30% + Surcharge + Education Cess Individuals and HUF: 25% + Surcharge + Education Cess

0% STT is not applicable on transactions in debt or debt-oriented mutual fund (including liquid fund) units.




TRUE When an investor chooses the Growth Option, the gains are accumulated and he need not pay tax on the gains each year. Only when he sells the Mutual Fund he needs to pay the tax, if any.

Distribution of funds between various asset classes in a portfolio The distribution of an investor’s portfolio between different asset classes is called asset allocation. For eg - If an investor wishes to invest Rs 10 lakhs - His funds can be divided and invested in Equity, Debt and Gold - This is asset allocation.

Correct Answer 90

To buy a high priced lottery ticket

Correct Answer 91

TRUE

Correct Answer 92

TRUE

Correct Answer 93

Fixed Asset Allocation

Answer Explanation


For eg - Balanced funds adopt a stable asset allocation policies, e.g. 55:45 between equity and debt at all times, are said to be operating within a fixed asset allocation framework.

FALSE Investments in mutual fund units are exempt from Wealth Tax. This is irrespective of where the fund invests and the amount.


Correct Answer 95

3rd

Correct Answer 96

Short Term Debt Funds

Answer Explanation

If it is expected that interest rates would go up, it would be safer to go with Short Term Debt Funds. As the rates rise, the short-term bonds would mature, allowing the fund manager to deploy the proceeds at higher rates. On the contrary, as interest rates in the market goes down, debt securities gain in value. Therefore, long term debt funds would be sensible in declining interest rate scenarios.

Correct Answer 97

Statement of Additional Information (SAI)

Correct Answer 98

No tax on Mutual Fund Dividends in the hands of the investor

Answer Explanation

Correct Answer 99


The dividend received by an investor in a MF - be it Equity or Debt, is exempt from tax.

Trustees

TRUE SEBI has stipulated annual limits on recurring expenses (including management fees) for various Equity and Debt schemes. However management fees cannot be charged by liquid schemes and other debt schemes on funds parked in short term deposits of commercial banks.

NISM Series Mutual Fund V-A Exam Crack

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