NISM - Mutual Fund Question Bank

7/27/2019 NISM - Mutual Fund Question Bank

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The Role of SEBI in control of Mutual Fund in India

1. An investor pays money to purchase units in a mutual fund. After deducting the entry load, remaining money isa) Invested in a well-diversified portfolio of securities as per the investment objectiveb) Maintained in a ban as fi!ed depositc) Invested in land, building, plant and machinery re"uired for the mutual fundd) #sed to pay the management fee and other recurring e!penses of the fund

Ans$ a

%. &et Asset 'alue per unit meansa) (oo value of assets liabilities)*#nits outstanding,b) #nit capital * #nits outstandingc) &et assets dividend by Initial number of unitsd) (Maret value of assets +iabilities)*#nits outstanding

Ans$ d

. hen you place deposit with a ban, u becomea) borrower from the banb) a lender to the banc) a shareholder of the ban

d) a unit holder in the ban Ans$b

. /uring new fund offer (&0) #nits open - ended fund are purchased from

a) A roer b) 2he mutual 0und itself c) A depositoryd) 3toc 4!change

Ans$b

5. wnership of the mutual fund by the unit holders is

a) eneficial.b) Mutual and beneficial.c) Individual

d) Mutual Ans$b

6. /irectly investing in e"uity shares is better then investing in e"uity shares through a mutual fund because of

a) 2ailor - made portfoliob) Absence of /istribution e!pensec) 7ontrol over costsd) All of the above.

Ans$d

8. Mutual fund schemes in India follow accounting policies laid down bya) 34Ib) Institute of 7hartered Accounts of Indiac) Indian 2rust Act 19:%

d) Association of Mutual 0unds in India Ans$a

:. 2he value of funds net assets is ;s. 1<<<.2here are 1<< units outstanding. Mr. 3ingh owns units. 2he 'alue of his ownership isa) ;s.<<b) ;s.<c) ;s.d) &ot =ossible to calculate unless more information is given

Ans$b9. A person who purchase debentures issued by a company is a lender to the company. An income fund invests in debenturesissuedby a company. A unit holder of this income fund

a) Is a lender to the company> ..

b) Is a share holder in that company

c) ?as no relationship to that company



d) Is a creditor to that company Ans$c

1<. =rivate sector was permitted to enter themutual fund industry in India in the year a) 199

b) 196c) 19:8

d) 1996 Ans$a

11. In India the first mutual fund was established.a) before 34I regulation 1996b) before #2I was established in196c) after 34Iregulation 1996d) when public sector mutual funds were established in 19:8

Ans$a

1%. 2he Assets under management in the Indian mutual fund industry as at end of financial year %<<-%<<5 was close toa) ;s 15 cr b) ;s.15<cr c) ;s.15<<cr d) ;s 15*<<<cr

Ans$ d1. Identify the 7orrect statements.

a) Investing in a mutual fund is liely to be less risy compared to directly investing in the maret.b) A mutual fund enables a small investor build a diversified portfolioc) Investment in a mutual fund offers more li"uidity.d) All are correct.

Ans$d

1. hen you invest in an open-ended mutual fund scheme, which of the following decisions is fare not taen by you@a) hich share to buy and which share to sell@b) hat prospective changes would be made to the load structure@c) At what &A ' you should e!itd) 2he first two decisions.

Ans$d

15. 2he correct description of a mutual fund isa) It is a companyb) It is a development financial institutionc) It is a financial intermediaryd) It is non-baning finance company

Ans$c

16. 2he birth place of Mutual 0unds isa) #b) Bapanc) 7anadad) #3A

Ans$d

18. Important development (s) that too place in the Indian mutual fund industry 0ebruary %<< was*werea) ;epealing$ of #2I Actb) 4stablishment of #2IM0c) 7reation of level playing fieldd) all of the above.

Ans$d

1:. /istributors are re"uired to abide by a code of conduct as prescribed by 34I. 2his code is based ona) AC&Ib) AM0Ic) A;&d) A&MI

Ans$a

19. An open end fund

a) is open for one-time sale of fi!ed number of units



b) offers repurchase facility subject to certain obvious conditionsc) is always obliged to eep issuing new units at all timesd) offers repurchaD facility unconditionally at all times

Ans$d

%<. A gilt fund is a special type of fund that investsa) in dated securities onlyb) in very high "uality e"uity onlyc) Mainly in very high "uality corporate bondsd) mainly in high "ualitymoney maret instruments

Ans$a

%1. 2he period from %<< onwards is nown in the Indian mutual funds industry asa) =eriod of consolidation and growthb) 4mergence of large and uniform industryc) 4mergence of private fundsd) 4ntry of public sector funds.

Ans $ a

%%. 2he union budget 1999 is considered important for the Indian mutual fund industry becausea) It made #2I at par with other mutual funds.

b) It abolished the distinction between short - term capital gain and long - term capital gain for mutual fund unit holders.

c) It e!empted all mutual fund dividends from income ta! in the hands of unit holdersd) It removed ta! on capital gains and dividends in the hands of units holders

Ans$c

%. 2he 3econd mutual fund in India was established bya) 3Ib) 7anara anc) Morgan 3tanleyd) +I7

Ans$a

%. hich is 7orrect@a) #2IM0 was established by an Act of =arliamentb) #2IM0 has voluntarily adopted 34I ;egulationsc) #2IM0 launched #3 6d) #2IM0 was not the first mutual fund in India

Ans$d

%5. A person who analysis shares based on finances and operations of the company is nown asa)7hartistb)=ortfolio analystc)2echnical Analystd)0undamental Analyst

Ans$ d

%6. hat is an >4"uity arrant>@a) It is nothing but an 4"uity share of a companyb) It.is a debit instrument that offers fi!ed interest ratec) It is an instrument that gives the holder the right to purchasee"uity shares in a company at fi!ed price in futured) &one of the above

Ans$ c

%8. hich of the following 34I restrictions applies to a schemeEs investment in unlisted shares@a) A 7lose ended -ended scheme may invest a ma!imum of 1<F of its &A' in unlisted sharesb) An open-end scheme may invest a ma!imum of 5F of its &A' in unlisted sharesc) (a)and (b)aboved) &one of the above

Ans$c

%:. ?ow would you measure the performance of an 4"uity Inde! 0und@a) 2here is no need to benchmar an e"uity inde! fundb) y comparing it with return on Covernment securitiesc) y 7omparing its performance with a money maret mutual fundd) y comparing its performance with the Inde! it is designed to trac

Ans$d



%9. In an open-ended fund &A ' per unit is ;s.11 4ntry load is %F An Investor invests ;s.11< she will geta) less then 1< unitsb) 1< units

c) more than 1< unitsd) 11 units

Ans$a

<. #nits from an open-ended mutual fund are bought froma) &34b) AM0Ic) 34Id) Agencies appointedby the AM7

Ans$d

1. A bond with a coupon rate of 9F when current coupons for bonds of similar maturities are 11F will sell$a) At a price which is not related to interest rates for similar maturitiesb) Above face valuec) at face valued) below face value

Ans$d

%. /istributors need to abide by rules and good conduct towards investors, becausea) AM0I code of conduct re"uires them to do sob) 2he AM7 they represent re"uires them to do soc) Cood conduct means good business for themd) 0or all of the above reasons

Ans$d. Insider trading means$a) =ersonal trading transaction done by anyone with nowledge of the fund decisions in the concerned securityb) =ersonal trading transaction done by an insider of the AM7 *fundc) =ersonal trading transaction done by anyone associated with the fundd) =ersonal trading transaction done without prior approval of the AM7

Ans$ a

. ;esponsibility to ensure ethical behavior on part of all mutual fund participants finally rests ona) 0und 2rusteesb) 34Ic) AM0Id) /istributors

Ans$a

5. 0und ?ouse ratings by 7;I3ll.., can be used by distributorsa) to now 7;I3ll..Es opinion on the fund management practices and over all management "uality of an AM7 * fund houseb) to now ris of default by the AM7 * 0und housec) to evaluate the performance of the schemes managed by the AM7 * 0#&/ ?#34d) to compare the performance of the schemes managed by different fund houses

Ans$a

6. Asset allocation of a portfolio should be reevaluated every time there is change in thea) 0amily siGe and re"uirementb) maret conditionc) Bob of the investor d) All of the above

Ans$d

8. hen would you review the financial plans of your client@a) henever the investorEs personal circumstances of financial goals changeb) henever stoc maret prices fall sharplyc) 3hortly before the filling of the Income 2a! returns of your clientd) 4ach year at the time of the presentation of the Covernment budget

Ans$a

:. A five-year deep discount bound would@



a) =ay interest on a "uarterly basisb) =ay interest on a yearly basisc) e redeemed on maturity at the face value which is higher than the issue price with no payments in betweenEd) ould offer yield ta! free income

Ans$c

9. 3harpe and 2reynor rations are measures of a) Average returnb) ;isc) ris adjusted return

d) beta of the portfolio Ans$c

<. Bacob recommend of the following ris allocation for a low ris portfolio$a) 5<F govt. 3ecurities fund H 5<F Money Maret fundsb) 5<F govt. 3ecurities fund H 5<F Inde! fundc) 5<F govt. 3ecurities fund H 5<F international fundsd) 5<F govt. 3ecurities fund H 5<F aggressive growth funds

Ans$a

1. hich classification of mutual funds does not e!ist@a) =ension fund or provident fund

b) 7losed - end or open - end

c) +oad fund or no load fund

d) Active fund or passive fund.. Ans$a

%. #nit capital is found in thea) +iability side of schemeEs balance sheetb) Asset side of the balance sheetc) ;evenue accountd) 4"ualiGation account

Ans$a

. A sponsor of a mutual fund

a) can act as the distributor of the mutual fund .

b) cannot act as the distributor of the mutual fundc) can act as the trustee of the mutual fundd) can act as the custodian of the mutual fund

Ans$a

. 2o create investor awareness about mutual funds, a boolet titled >Maing Mutual 0und or for you - 2he Investors Cuide> waspublished bya) 34Ib) AM0Ic) #nit 2rust of Indiad) Investor 4ducation and =rotection fund

Ans$b

5. /istributors will find the information on performance of a scheme as compare to its benchmar in thea) ey information Memorandumb) ffer /ocumentc) 0und Advertisementsd) All of the above

Ans$d

6. 34I guidelines on personal investment and trading apply toa) AM7 employees and fund trusteesb) nly AM7 employeesc) nly fund trusteeEsd) anyone concerned with the funds

Ans$a8. 2he >+oad> charged to an investor in a mutual fund goes to meet thea) 3elling and distribution e!pensesb) e!penses of AM0Ic) =rinting stationery and posting e!pensesd) mareting and sales promotion e!penses

Ans$a

:. hich of the following statements is an ade"uate description of reality@



a) hen compared to gilt funds, securities in debt funds have higher ris of defaultb) Crowth and ris are associated with e"uity fundsc) /ebt fund have higher &A' fluctuation when compared to money marets fundsd) All these statements describe reality ade"uately

Ans$d9. hich of the following is true@a) A fund sponsor can contribute to the initial corpus of the trustb) A fund sponsor can contribute to the capital of the AM7c) A fund sponsor can invest in his own fundEs schemesd) All of the above

Ans$d

5<. A unit holder purchased %<< units of a mutual fund at &A ' of ;s.1%, each. 2here was no entry load. 2he fund purchasedsecurities worth ;s.%<< using this money. After one year the fund had %<,<<< units. 2he value of unit holders holding in that mutualfund would bea) ;s.%<<b) 1F of the value of fundEs portfolio >at> the timec) 1F of the net assets of the fund at that timed) cannot say with the given data

Ans$c

51. hich of the following is &2 a characteristic of mutual funda) =ooling of investmentsb) Maret risc) #niform unit holder rightsd) 3afety of principal

And$d

5%. hich of the following is incorrect@a) A value fund tries to see out fundamentally sound companies whose shares are currently overpriced in the maretb) A balanced fund hold assets more or less in e"ual proportions between debt *money maret securities and e"uitiesc) A growth fund would invest in the e"uity shares of c companies whose earning are e!pected to rise at an above average rated) A fund that invests only in A34A& countries is an e!ample of specialty fund

Ans$a

5. 2he annualiGed value of contingent differed sales charge woulda) Increase if the investor stays with the fund longerb) ;emain content regardless of how long the investor stays with the fundc) /ecrease if the investor stays with the fund longer

d) &one of the above. Ans$ c

5. hich is * are the characteristic(s)of fi!ed term plans noticed in the Indian mutual fund industry@

a) 7lose - ended

b) Maturity shorter than one year c) &ot listed on stoc e!changed) all of these

Ans$d

55. 4ach unit holder of a mutual fund is

a) a creditor to that mutual fundb) .a debtor to that mutual fundc) a trustee of that mutual fund

d) part owner of the assets of that mutual fund Ans$d

56. Mutual funds offer the advantage of portfolio diversification. 2his is best e!pressed by the statementa) do not eep all eggs in one basetb) one bird in hand is better than tow in the bushc) what goes up must come downd) ris and return always go hand in hand

Ans$a

58. 0und A invests in shares of companies in India. 0und invests in shares of companies in India and #3A we can say thata) /efinitely A is more diversified than b) /efinitely A and are welldiversifiedc) e need more information to identify which of them is better diversifiedd) /efinitely is more diversified than A

Ans$d



5:. 'alue averaging means$a) Investing the same amount of funds regularlyb) Investing in one lump sum amountc) eeping the target value of investment constant by investing the amount by which the investment value has gone downd) &one of the above

Ans$c

59. A fund has to eta of greater than 1.2his means.a) 2he fund is more volatile than the maretb) 2he fund is as volatile as the maret.c) 2he fund is less volatile than the maretd) &one of the above.

Ans$a

6<. 0or a small investor in India, which of the following is e!pected to have a higher level of li"uidly@a) 4"uity shares in an unlisted companyb) /ebenture issued by a companyc) #nit of an open-ended M0d) ;eal estate.

Ans$c

6%. A close ended mutual fund has a fi!eda) Maret value of assets under managementb) &et asset value per unit.c) #nit capital and number of unitsd) &umber of units.

Ans$c

6. An open end scheme can change its fundamental attributes.a) by obtaining the consent of 85F of unit-holders at leastb) by allowing unit-holders to e!it the scheme after si! months without any e!it loadc) by informing each unit-holder individually of the proposed change and by allowing units holders to e!it the scheme withoutany e!it loadd) After obtaining prior approval from 34I

Ans$c

6. If an investor failed to claim the redemption proceeds after years of due date he has right to receive an amount e"ual toa) =revailing &A'b) 0ace value of the unitc) /ue date &A' plus interest 15F p.a.d) &A' at the end of three years after the due date

Ans$d

65. ;ight to timely service includesa) the right to obtain information from trustees that may have adverse bearing on their investmentb) 2he right to nominate a person in whom all the beneficial ownership rights in the units will vest in the event of dethc) ;ight to receive dividend warrants in < days from the date of declarationd) ;ight to receive a copy of the annual financial statement of the fund.

Ans$c

66. Jield curve is a graph that shows.a) Jields of various e"uities of various firmb) Jield from mutual funds.c) Jields of various bonds of various maturities using one set of bonds such as Covt 3ecurityd) &one of the above

Ans$c

68. A unit of an open-end fund was purchased when is &A' was ;s <*-At year end, its &A' was ;s . 2he percentage annualiGedchange in &A' I3.a) 1%.<<Fb) 1<.<<Fc) %5.<<Fd) 15.<<F

Ans$b



6:. As per 34I (Mutual 0und) ;egulation, who acts as the protector of unit-holderEs interest@a) 2rusteesb) 34Ic) Ministry of 0inanced) 7ompliance officer

Ans$a

69. A no load scheme of mutual fund has weely average net assets of %<<7r it can charge ma!imum investment management feeof

a) .%5 7r b) %.5 7r c) % 7r d) 5 7r

Ans$a

8< #nits of mutual fund are short term capital assets if a) 2hey are held for not more then twelve months proceeding the date of transfer.b) 2hey are held for less than twelve months proceeding the date of transfer.c) 2hey are held for not more than three years proceeding the date of transfer.d) 2hey are held for less than three years proceeding the date of transfer.

Ans$a

81. An investor has opted for a 3ystematic 2ransfer =lan. 2his means.a) he can transfer on a periodic basis a specified amount from one scheme to another b) he is re"uired to invest a fi!ed sum periodicallyc) the investment would provide the benefit of rupee cost averagingd) ?e can transfer on a periodic basis a specified amount from the scheme to his ban account

Ans$a

8%. hich of the following is &2 re"uired to appear on the cover page of the offer document@a) /ate new fund offer opensb) /ate new fund offer closesc) 4arliest closing date (if any) for the new fund offer

d) /ate on which approved by trustees. Ans$d

8. A mutual fund launched a new scheme. It issued 1< crores units. 2he offer document mentioned entry load of %.%5F of facevalue during the &ew 0und ffer period issue e!penses were ;s : crores. ?ow much of this is borne out of entry load@a) ;s. %.%5 7r b) ;s. 6 7r c) ;s : 7r d) ;s .85 7r

Ans$a

8.A mutual fund launched a new scheme. It issued 1< crores units. 2he offer document mentioned entry load of %.%5F of face valueduring the new fund offer period. Issue e!penses were ;s.: crores. If initial issue e!pense is amortiGed over 5 years period. hatwould be the opening &A ' per unit if management fees and other recurring e!penses are Kero@ Assume that there are nofluctuations in value of underlying assets.

a) 9.999: 8b) 1<.<<<< f

c) 9.<<<d) 9.885

Ans$a

85. 2he full form of A;& is $a) AM0IEs ;egistration &umber b) Agents ;egistration &umber c) Application ;eceipt &umber d) &one of the Above

Ans$a

86. ho bears 322 in case of 4"uity Mutual 0unds@a) AM7

b) Investor



c) 2rustd) 3ponsor

Ans$b

88. hat is 0ull 0orm of AC&I@a) Agents gross net Incomeb) AM0I Cuidelines and &orms for Intermediariesc) A;MIEs Ceo &uclear Injector

d) &one of the above Ans$b8:. A closed-end mutual fund has a fi!ed$a) &A'b) 2enurec) ;ate of returnd) &umber of distributors

Ans$b

89. 2he limit on ma!imum entry or e!it load that a fund can charge is determined by the $a) AM7b) 34Ic) AM=Id) Agents based on demand for the fund

Ans$b

:<. 2he amount re"uired to buy 1<< units of a scheme having an entry load of 1.5F and &A' of ;s.%< isa) ;s.%<<<b) ;s.%<15c) ;s.19:5d) ;s.%<<

Ans$d

:1. In a gilt fund the money is invested in$a) In very high "uality e"uity onlyb) In instruments issued by companies with a sounci trac recordc) In short-term secutitiesd) In government securities only

Ans$d

:%. 2he highest ris is associated with with of the following ind of fundsa) alanced 0undsb) Cilt0undsc) 4"uity Crowth 0undsd) /ebt 0unds

Ans$c:. 2he &A' of a mutual funda) Is always constantb) eeps going up at a steady ratec) 0luctuates with maret price movementsd) 7annot go down at all

Ans$c

:. An open-end mutual fund is one that has$

a) An option to invest in any ind of securityb) #nits available for sale and repurchase at all timesc) An upper limit on its &A'd) A fi!ed fund siGe

Ans$b

:5. An investor in a closed-end mutual fund can get money bac before maturity by selling units$a) ac to the fundb) 2o a special trust at &A'c) n a stoc e!change where the fund is listedd) 2o the agent through which he*she subscribed to the units of the fund

Ans$c

:6. 2he >load> charged to an investor in a mutual fund isa) 4ntry fee

b) 7ost of the paper on which the unit certificates are printed



c) 2he fee the agent charges to the investor d) 2he e!penses incurred for mareting and selling a mutual fund scheme

Ans$d

:8. A mutual fund is owned bya) 2he Covt of Indiab) 34Ic) All its investors

d) AM0I Ans$c

::. #nits from an open-end bought froma) A stoc e!changeb) 2he fund itself c) AM0Id) 2he ans mutual fund are

Ans$b

:9. A mutual fund is nota) wned jointly by all investorsb) A company that manages investment portfolios of high net worth individualsc) A pool of funds used to purchase securities on behalf of investorsd) A collective investment vehicle

Ans$b

9<. >+oad> cannot be recovereda) At the time of the investorEs entry into the fundb) As a fi!ed amount each year c) At the time, the investor e!its the fundd) 0rom the fundEs distribution agent

Ans$d

91. 2he most important attribute of a money maret mutual fund isa) Luic capital appreciationb) ?igh regular incomec) 3afety of principald) &o loads

Ans$c

9%. 3ome closed-end funds are "uoted at a discount to their &A' becausea) f high e!pense ratios.b) Investors do not e!pect the current &A' to be sustained in futurec) 2he repurchase price fi!ed by the fund in lower than the &A'd) f the inherent ris involved in investing in such type of funds

Ans$b

9. 2he &A' of each scheme should be updated on AM0IEs websitea) 4very "uarter b) 4very monthc) 4very hour d) 4very day

Ans$ d

9. /ebt funds targeta) +ow ris and stable incomeb) =rotection of principalc) ?igh growth with risd) +ong term capital appreciation

Ans$a

95. In which of the following investment is not made by debt fundsa) Covernment debt instrumentsb) 7orporate paper c) 0inancial institutionsE bondsd) 4"uity of private companies

Ans$d

96. hich of the following riss do not affect a pure debt fund



a) /efault by issuer on payment of interest or pimcipalb) =rice fluctuations of the debt securitiesc) 3hare price movementsd) Interest volatility

Ans$c

98. Assured return or guaranteed income plans are essentiallya) ?ybrid fundsb) Crowth 0undsc) /ebt funds

d) 3ector funds monthly Ans$c

9:. A 0i!ed 2erm =lan (02=) or a 0i!ed Maturity =lan (0M=) isa) An open-end fundb) A closed-end fundc) A fi!ed term ban depositd) A fi!ed term corporate bond

Ans$b

99. &A's of e"uity funds are not affected bya) 3toc maret movementsb) 4vents affecting the industry*sector in which the fund has investedc) ?appenings in the companies in which the fund has investedd) ;eal estate prices

Ans$d

1<<. 2he highest potential for capital appreciation is offered bya) /ebt fundsb) Cilt fundsc) Crowth fundsd) alanced funds

Ans$c

1<1.hich of the following are not true for 4"uity +ined 3avings 3chemes@a) Investors can claim an income ta! benefit

b) 2here is a loc-in period before investment can be withdrawnc) 2here are not specific restrictions on investment objectives for the fund managersd) 2hese funds cannot invest in shares of listed companies

Ans$d

1<%. hich of the following is not true for Inde! 0undsa) 2hese funds invests in the shares that constitute a specific inde!b) 2he investment in shares is in the same proportion as in the inde!c) 2hese funds aim to minimise the tracing error d) 2hese funds are not diversified

Ans$d

1<.A no-load fund is one in whicha) 2he entry load is not chargedb) 2he e!it load is not charged

c) 2he entry load as well as e!it load is not chargedd) 2he initial issue e!penses are not charged to the investor

Ans$d

1<. 7/37 stands for$a) 7ontingent /eferred 3ales 7hargeb) 7ommission and /iscounts 3tructure 7ommitteec) 7ommonly /isclosed 7ommissiond) 7ompounded and /iscounted 3ales 7ommitment 3ales

Ans$ a

1<5. 7/37 is a ind of $a) 4ntry loadb) 4ntry load, which varies with holding period of an investor c) 4!it load, which varies with the holding period of an investor

d) &one of the above



Ans$c

1<6. hich of the following is not true about a mutual funda) 2he mutual fund is owned by all the investorsb) Mutual fund gives a diversified portfolio to investorsc) 2he objectives of investors of a mutual fund are diversed) 2he mutual funds do not invest in real estate

Ans$c

1<8. hich of the following is not an advantage of a mutual fund

a) =rofessional management at lower costsb) /iversification of portfolioc) +i"uidityd) &one of the above

Ans$d

1<:. hich of the following is not false about a mutual fund@a) pen ended funds can be sold in secondary maretb) 7losed ended fund do not have a fi!ed tenurec) pen ended funds do not calculate their &A' on every business dayd) 2he &A' of a closed ended fund has to be calculated at least once in a wee

Ans$d

1<9. A mutual fund can benefit from economies of scale because of a) Indirect Investmentb) +arge volumes of tradec) =ortfolio diversificationd) 0und manager

Ans$b

11<. ho is the primary guardian of unit holders funds@a) 2he AM7b) 2he 3ponsor c) 2he 2rusteesd) 2he 7ustodians

Ans$d

111. hich of the following is not applicable if the schemes of one mutual fund are taen over by another mutual funda) 2he schemesE offer documents have to be changed and updated

b) 2here is a change in the AM7 of the schemes that are taen over c) 2here is a change in the sponsor of the schemes that are taen over d) 2he schemes have to wound up compulsorily

Ans$d

11%. hich of the following investment option does not give the benefit of compoundinga) Crowth optionb) /ividend payout optionc) /ividend ;einvestment optiond) &one of the above

Ans$b

11. 2he structure which is re"uired to be followed by mutual funds in India is laid down bya) 0inancial Ministryb) 3ecurities 4!change oard of India (34I)

c) 0und 3ponsor d) Association of Mutual 0unds of India (AM0I)

Ans$b .

11. 2he oard of 2rustees of a mutual fund$e) Act as a protector of investors interestsf) /irectly manage the portfolio of securitiesg) /o not have the right to dismiss the AM7h) 7annot supervise and direct the woring of the AM7

Ans$a

115. 2he AM7 of a mutual fund cannota) #ndertae advisory services or financial consultingb) Invest the funds in government paper c) Indulge in an activity not related to financial services

d) Invest the funds in listed securities



Ans$c

116. 2he board of trustees which manages a mutual fund is appointed bya) 2he 0inance Ministryb) 2he ;Ic) 34Id) 2he sponsor of that mutual fund

Ans$d

118. 2he custodian of a mutual fund$

a) Is appointed for safeeeping of securitiesb) &eed not be an entity independent of the sponsorsc) Is not re"uired to be registered with 34I.d) /oes not give or receive deliveries of physical securities

Ans$a

11:. 2ransfer Agents of a mutual fund are not responsible for a) Issuing and redeeming units of the mutual fundb) #pdating investor recordsc) =reparing transfer documentsd) Investing the funds in securities marets .>..E

Ans$d

119. 2he fund sponsor has to contributea) &othing to the AM7b) 2he total networth of the AM7c) AtIeast <F of the AM7Es networthd) 4!actly 5<F

Ans$c

1%<. In India, Mutual 0unds are formed asa) A public limited companyb) A trustc) A private limited companyd) A society

Ans$b

1%1. Issuing and redeeming units of a mutual fund is the rolea) 2he custodian

b) 2he registrar transfer agentc) 2he trusteesd) 2he baners

Ans$b

1%%. 2he fund sponsors should financial trac record of a) 8 yearsb) 1% monthsc) 5 yearsd) years

Ans$c

1%. 2he networth of an asset management companya) 3hould be greater than ;s.1<< 7roresb) 7an be decided by the 3ponsor

c) 3hould be ;s. 1< 7rotes at all timesd) 3hould be atIeast ;s. 1< 7rores at all times

Ans$d

1%. 2he agreement between the 2rustees and the AM7 is nown asa) 2rust /eedb) Investment Management Agreementc) Agreement to manage =ortfoliod) AM7 appointment letter

Ans$d

1%5. 2he regulations which govern the woring of mutual funds in India isa) 34I Act , 199%b) 7ompanies Act, 1956c) Income 2a! Act, 1961

d) 34I (Mutual 0unds) ;egulations, 1996



Ans$d

1%6. 2he highest authority among the following)is thea) 34Ib) 7ompany +aw oardc) ;Id) Ministry of 0inance

Ans$d

1%8. 2he entity that 34I does not regulate is

a) 3hare registrarsb) Mutual fundsc) 3toc e!changesd) &on-baning finance companies

Ans$d

1%:. AM7 has to file its annual statements witha) Association of Mutual 0unds in India (AM0I)b) ;egistrar of 7ompanies (;o7)c) AgentsE Associationd) #2I

Ans$b

1%9. A closed-end scheme is not governed bya) 4!change ;ules of the stoc e!change where it is listedb) +isting Agreement between the fund and the stoc e!change ..c) Cuidelines issued by the Ministry of 7ommerced) =rovisions of 7ompanies Act, 1956 relating to transactions in securities

Ans$ c

1<. 2he largest corpus of investible funds in India is witha) an-owned mutual fundsb) =rivate 3ector mutual fundsc) #2Id) Insurance 7ompanies

Ans$c

11. 2he oard of 2rustees of the #2I does not have nominees froma) ;I

b) +I7c) I/Id) 2he ombay 3toc 4!change (34)

Ans$d

1%. #2I 7annota) =rovide corporate financeb) 4ngage in real estate and property development businessc) =rovide merchant baning servicesd) Invest in securities

Ans$b

1. 2he >7apital> of a scheme does not includea) #nit capitalb) ;eserves

c) orrowingd) &etworth of the AM7

Ans$d

1. hich of the following is an 3; (3elf ;egulatory rganiGation)a) &34b) 34Ic) AM0Id) ;I

Ans$a

15. A 3elf ;egulatory rganiGation cana) ;egulate all entities in the maretb) ;egulate only its own members in a limited wayc) ;egulate its own members with total jurisdiction

d) ;egulate no one



Ans$b

16. 2he amount of authority enjoyed by a self regulatory organiGation is defined bya) 2he ape! regulatory authorityb) 7ompany law boardc) Its own membersd) ;I

Ans$a

18. 2he role of AM0I in the mutual funds industry is not to

a) =romote the interests of the unitholdersb) 3et a 7ode of 4thicsc) ;egulate mutual fundsd) Increase public awareness of mutual funds in the country

Ans$c

1:. 2he rights of investors in a mutual fundscheme are laid down in ..a) 2he ffer /ocument of that schemeb) Luarterly ;eportsc) Annual ;eportsd) Mareting brochures

Ans$a

19. #nit holders of a scheme do not have the right toa) =roportionate ownership schemeEs assetsb) /ividend declared for that schemec) /ividend declared for other schemes of the mutual fundd) All of the above

Ans$c

1<. After dividend declaration, unit-holders are entitled to receive dividend within a period of a) ne weeb) <-daysc) %-days

d) 3i! wees Ans$b

11. #nit holdersE right to information does not includea) btaining from the trustees any information having an adverse effect on their investmentsb) Inspecting major documents of a fundc) ;eceiving of a copy of the annual financial statements of that fundd) Approving investment decisions of the fund

Ans$d

1%. #nit-holders aggreived by a mutual fund or an AM7 can get redressed froma) 7onsumer 7ourtsb) 34Ic) AM0Id) ;I

Ans$b

1. 2he responsibilities of a unit-holder do not include$a) Monitoring his investments carefullyb) eing aware of information that affects his investment in a major wayc) 7arefully studying the offer documentd) 2aing decisions about where the fund managers should invest

Ans$d

1. #2I was set up bya) 34Ib) AM0Ic) A special actd) ;I

Ans$ c



15. Investors have the right to receive interest from the AM7 if redemption proceeds are not despatched within a period of $a) A monthb) 1 daysc) 1 woring daysd) 1< woring days

Ans$d

16. After closure of the initial offer an open ended scheme, on going sales and repurchases must start withina) ne weeb) < days

c) 5 daysd) 1:< days

Ans$b

18. 2he prospectus or ffer /ocument containing the details of a new scheme is first registered with thea) AM0Ib) 34Ic) ombay 3toc 4!changed) Ministry of 0inance

Ans$b

1:. 2he offer document issued by mutual funds does not serve the purpose of a) Announcing the launch of the schemeb) Civing detailed information about the schemec) 4!plaining the ris factors of the schemed) Civing the fund managerEs investment outloo for the ne!t "uarter

Ans$d

19. 2he offer document of a closed-end fund is issueda) 4very year b) nly once at the time of issuec) 4very "uarter d) 4very si! months

Ans$b

15<. hich of the following is true about the E> 0undamental attributes of a schemea) Investment objectives of a scheme is not a fundamental attribute

b) 2hey can be changed after informing investors and taing approval from 34I and trusteesc) ffer document need not be updated after change in fundamental attribute of a schemed) All are false

Ans$b

151. 34I does not re"uire the following to be included in the offer document issued by a mutual funda) /etails of the 3ponsor and the AM7b) /escription of the 3cheme investment objective*strategyc) InvestorsE ;ights and 3ervicesd) =erformance of other mutual funds

Ans$d

15%. Eey Information MemorandumE isa) An abridged version of the offer documentb) 2he Memorandum Articles of Association of the AM7

c) A sheet containing historical &A's of other schemes of the same mutual fundd) Annual ;eport of the AM7

Ans$a

15. 2he offer document for a scheme remains valid even if a) 2he AM7 is reconstitutedb) 4ntry or e!it loads are changedc) 2he schemeEs &A' changesd) &ew plans are added to e!isting schemes

Ans$ c

15. 2he offer document of an open ended fund has to be fully revised and updateda) 4very si! monthsb) nce in two yearsc) 4very "uarter

d) 4very month



Ans$b

155. An addendum giving details of material change in the offer document should be circulated toa) /istributors*broersb) #nit holdersc) 34Id) All of the above

Ans$d

156.hich of the following is not true for offer documents of open-end schemes

a) It is first issued at the time the scheme is launchedb) It is registered with 34Ic) It has to be revised every monthd) It contains all important disclosures that a mutual fund is re"uired to mae

Ans$c

158. 2he most important source of information for a prospective investor in mutual fund isa) ffer documentb) Annual ;eport of the AM7c) 4conomic 2imesd) AM0I &ewsletter

Ans$a15:. hich the following is not falsea) 2he offer document need not be studied by an investor before investing in a schemeb) 2he offer document is not a legal documentc) A change in ey personnel of the AM7 does not necessitate a revision of the offer documentd) If fresh litigation cases or adjudication proceedings are referred by 34I against the fund sponsors or a company associated withthe sponsors, then the offer document needs to be revised

Ans$ d

159. 2he legal responsibility for the accuracy of the statements made in the offer document lies witha) 34Ib) AM7c) AM0Id) 7ompany +aw oard

Ans$b

16<. 2he following need not be covered in a ey Information Memoranduma) ;is 0actors

b) pening and earliest 7losing /ate of the initial offer c) /isclaimer 7laused) 0unctions and responsibilities of the sponsor, trustees, AM7 and 7ustodion responsibilities

Ans$ d

161. 2he front page of an offer document need not cover a) pening, closing and earliest closing date of the offer b) /isclaimer clausec) +egal and regulator complianced) =rice of units

Ans$ c

16%. 3tandard ris ractors are the onea) hich are uniformly applicable for any mutual fund scheme Nb) /ifferent for different schemes

c) hich are made by a >standards> committeed) &one of the above

Ans$ a

16. 2he ris of a schemeEs &A' moving up or down on the basis of capital maret movements isa) An investment attributeb) 3cheme specific risc) 3tandard risd) 7redit ris

Ans$c

16. =ast performance of a sponsor*AM7 mutual fund is not indicative of the future performance of the scheme. 2his isa) &ot trueb) A standard ris factor for all schemesc) A scheme-specific ris factor

d) Applicable only to gilt funds



Ans$b

165. ;is arising from objective*strategy allocation isa) &ot a ris at allb) 7ommon to all schemesc) 3peicific to that schemed) &ot applicable to debt funds

Ans$c

166. If the AM7 is managing a fund for the first time, this information can be found in

a) &ewspapersb) 34Ic) AM0I &ewsletter d) ffer document

Ans$d

168. A compliance officer a) 7ertifies that the information contained in the offer document is true and fair b) elongs to 34Ic) 7annot certify that the AM7Es legal and procedural obligations are fulfilledd) 7annot be appointed by the AM7

Ans$a

16:. 2he due diligence certificate that must be submitted to 34I along with the draft offer document is generally signed by thea) 2rusteesb) 3ponsor c) 7ompliance officer d) 7hair-person of 34I

Ans$ c

169. A due diligence certificate does not certify thata) 2he draft offer document forwarded to 34I is in accordance with 34I regulationsb) All legal re"uirements connected with launching of the scheme have been complied withc) /isclosures made in the offer document are true, fair and ade"uated) 2he AM7 guarantees a good performance

Ans$d

18<. Information on estimated e!penses to be incurred by a scheme is not found in the offer documenta) 2his is true

b) 2his is falsec) 2his depends on the mutual fundd) 2his depends on 2rustees

Ans$b

181. 2he functions and duties of the sponsor, AM7, trustees and custodian of the mutual fund are listed ina) ffer document onlyb) ey information memorandum onlyc) oth offer document and ey information memorandumd) &one of the above

Ans$ a

18%. 2he following information about the constitution of the mutual fund is found in the offer documenta) Activities of the sponsor b) 3ummary of trust deed provisions

c) &ame and addresses of the board of trusteesd) All of the above

Ans$d

18. 2he investment objectives of a mutual fund schemea) Are of no relevance to the investor b) 3hould be the same as his own investment objectivesc) 7hange with maret movementsd) 7hange with change in the AM7Es ey personnel

Ans$b

18. 2he investment policies listed out in the offer document of a fund do not includea) 2he type of securities in which the scheme will invest principallyb) Asset allocation patternc) =olicy of diversification

d) 2he specific securities in which the fund will invest



Ans$d

185. 0or assured return schemes, information about the guarntorEs net worth which justifies the guarantorEs ability to meet anyshortfalls in the returns assured under the scheme can be found ina) 2he offer documentb) 2he ey information memorandumc) oth a) and b)d) &one of the above

Ans$c186. 2he names and bacground of ey personnel of the AM7

a) &eed not be disclosed to investorsb) Are of no relevance as they may changec) Are disclosed in the offer documentd) Are declared in newspaper advertisements

Ans$c

188. ffer related information re"uired to be listed in the offer document and ey information memorandum includesa) /ates of allotment and despatch of certificatesb) =rocedure for transfer transmission of unitsc) oth the aboved) &either of the above

Ans$d

18:. In the offer document, funds are re"uired to mae disclosures regarding the financial results of the sponsor for thea) +ast one financial year b) 0irst % financial yearsc) +ast financial year,sd) +ast % calender years

Ans$c

189. 2he following does not form a part of the investment procedure described in an offer documenta) 'arious plans under the scheme (e.g. dividend reinvestment plan)b) Minimum initial (and subse"uent) investmentc) /etails of who can investd) /etails of other competing mutual funds

Ans$d

1:<. A schemeEs policy on dividends and distributiona) Is decided by the fund manager as per the maret outloo

b) 7an be changed to suit the re"uirements of the AM7c) &eed not be consistentd) 3hould be disclosed at the time of initial launch

Ans$d

1:1. 34I restricts mutual fund investments in companies forming part of the same group as the AM7. 2his is$a) 0alseb) In the interest of investor protectionc) Applied only to some mutual funds, not alld) &ot favourable to investors at all

Ans$b

1:%. As a part of borrowing policy, the following need not be disclosed in an offer documenta) =urpose and circumstances of borrowingb) ;egulatory limits on borrowing

c) =otential ris to AM7 and unit holdersd) &ames of lenders

Ans$d

1:. 'aluation norms for non-traded securities should be discloseda) At the end of every financial year b) 4very "uarter c) In the offer document at the time of launch of the schemed) 3hould not be disclosed, being confidential information

Ans$c

1:. =rocedure for redemption or repurchase need nota) e described in the offer documentb) Include how redemption or repurchase price of units would be determinedc) Include names of centres where redemption can be effected

d) Indicate the redemption or repurchase price as at the end of the current fiscal year



Ans$d

1:5. 2a! treatment of investments does nota) 0orm a section in the offer documentb) /escribe the ta! elements applicable to investors who invest in the fundc) 0orm a section in the ey information memorandumd) ffer ta! advice to investors

Ans$d

1:6. /ocuments available to investors for inspection do not include

a) Memorandum and Articles of Association of AM7b) 2rust /eedc) 0inal Accounts of the AM7d) ;eports based on which actual investments are made

Ans$d

1:8. ho among the following is not eligible to invest in M0 in Indiaa) Indian 7ompaniesb) ansc) Individualsd) 0oreign 7itiGens

Ans$d

1::. hich of the following is not true$a) 7ompanies can invest in mutual fund schemesb) ;egistered societies can invest in mutual fund schemesc) &;I can not invest in mutual fundd) ?#0 can invest in mutual fund

Ans$c

1:9. 2he most important lin between Mutual 0und and Investors isa) Covernmentb) 34Ic) 0und distributorsd) AM0I

Ans$ c

19<. ho among the following are not Institutional Investors@a) ans

b) ;esident Individualsc) =rovident 0undsd) &on aning 0inance 7ompanies

Ans$b

191.hich of the following is true regarding mutual fund agents*intermediariesa) It is compulsory for to invest in mutual funds through agent*intermediaryb) Agents have to be registered with AM0Ic) nly males are allowed to be agentsd) Agents can pass bac the commissions to investors invest in through

Ans$b

19%.Cenerally, which category of investors are less aware about mutual funds and hence, need more advicea) &on aning 0inance 7ompaniesb) Insurance 7ompanies

c) 0oreign Institutional Investorsd) Individuals

Ans$d

19.hich of the following document a Mutual 0und distributor needs to refer to find out eligible category of investors in a particular Mutual 0und 3chemea) 34I ;egulations Manualb) AM0I booletc) ffer documentd) ;I Cuidelines

Ans$c

19. Mutual 0und agents*distributors are not allowed toa) 3ell financial products other than mutual fundsb) 3ell schemes of more than one mutual fund

c) =ass bac the commissions earned to the investors



d) or anywhere else Ans$c

195.4merging of new channel for mareting of Mutual 0und in India isa) Insurance 7ompaniesb) ansc) Lualified Mutual 0und agentsd) /irect 3ales agents of respective mutual funds

Ans$b196.2he following are not termed as sales practices>

a) Agents commissionb) efore-and after-sales service to investorsc) Advertising of schemesd) 3toc broing

Ans$d

198. Agents are compensated by mutual fundsa) 2hrough salariesb) 2hrough commissionsc) 2hrough an annual feed) &ot in cash but in ind

Ans$b

19:.In India the minimum or ma!imum commissions payable to distributors is decided bya) /istributorsb) AM7c) 34Id) 2rustees of the mutual funds

Ans$b

199. 4!cess distribution e!penses are to be borne by thea) AM7b) unit holderOsc) 34Id) AM0I

Ans$a

%<<. 2rail commission means payinga) &o commission at all , >,

b) 2he entire commission up-frontc) 7ommission in phases during the holding period of investor d) 2he entire commission after five years

Ans$ c

%<1. Along with the application form, it is mandatory to attacha) Investment rebateb) ffer documentc) ey information memorandumd) &one of the above

Ans$ c

%<%. 2o sell funds effetively, an agent need nota) e fully aware of the important characterstics of the schemeb) now hiw*her clientEs ris profile

c) Cive after sales serviced) ffer large investment rebates

Ans$d

%<. 0or investors to correctly compare performance of different funds 34IEs advertising codes includea) #niform computation of yieldsb) #niform presentations of dividendsc) Identical time periodsd) All of the above

Ans$d

%<. 34IEs advertising code mandate that performance calculations in a fundEs advertisement should be based ona) 2he &A'b) 2he &34 0ifty Inde!c) 2he 343ense!




Ans$a

%<5. An agent can offer and sell a fundsEs units ata) Any price he choosesb) A price determined by competition among agentsc) A price based on demand for that fundEs unitsd) 2he public offering price currently in effect

Ans$d

%<6. 2he terms of appointment of a broer by a fund are

a) +aid down by 34Ib) +aid down by AM0Ic) &ot uniform to all fundsd) &one of the above

Ans$ c

%<8. 2he code of ethics for mutual funds published by AM0Ia) Is mandatoryb) Is in the form of recommended practicesc) Is unfavourable to investorsd) /oes not cover distribution and selling practices

Ans$b

%<:. hich of the following distribution channels is preferred by private mutual fundsa) Individual Agentsb) 3mall /istribution companiesc) 4stablished distribution companiesd) 2he internet

Ans$c

%<9. hich of the following sales practice is prescribed by regulationa) AM0I 7ode of 4thicsb) 34I Advertisingc) AM0IEs 7ode for Agentsd) &one of the above practices is

Ans$b

%1<. In a mutual fund investorsE subscriptions> are accounted for asa) +iabilities

b) /epositsc) #nit capitald) &one of the above

Ans$c

%11. Investments made by a mutual fund on behalf. of investors are accounted asa) Assetsb) +iabilitiesc) 7apitald) &one of the above

Ans$a

%1%. +iabilities in the balance sheet of a mutual fund area) In the form of long-term loansb) 3trictly short term in nature

c) 7ombination of long term and short termd) &ot allowed as per regulations

Ans$b

%1. &et Asset 'alue (&A') of a mutual fund scheme is defined asa) Assets minus liabilitiesb) Assets per unitc) Assets minus liabilities per unitd) &one of the above

Ans$c

%1. 2he day on which &A'is calculated by a fund is nown asa) 7omputation dateb) 'aluation datec) ;ecord date

d) oo closure date



Ans$b

%15. A funds &A' is affected bya) =urchase and sale of investment securitiesb) 'aluation of all investment securities heldc) Accrual of income or e!pensed) All of the above

Ans$d

%16. hen computing &A' of fund 34I re"uires accrual of major e!penses to be accounted

a) Luarterlyb) Annuallyc) n a day to day basisd) hen actually paid

Ans$c

%18. If a mutual fund calculates &A' daily, it will include all the transaction concluded up toa) +ast weeb) +ast two daysc) =revious dayd) 2hat day

Ans$d

%1:. 0or a open-end fund, the repurchase price should not be lower thana) &A'b) 95F of &A'c) 9F of &A'd) 98F of &A'

Ans$c

%19. 0or a closed-end fund, the repurchase price should not be lower thana) &A'b) 95Fof&A'c) 9F of&A'd) 98F of&A'

Ans$b

%%<. 0or a open-end fund, the sale price should not bea) ?igher than &A'

b) ?igher than 1<8F of &A'c) +ower than 1<8F of ;epurchase priced) 4"ual to &A'

Ans$b

%%1. 0or a no-load fund, the AM7 can change an investment management fee not e!ceedinga) .5<Fb) .<LFc) %.%5Fd) <.5<F

Ans$ c

%%%. 2he &A' of 3cheme is 5<.hat can be the ma!imum entry load charged to the investor a) ;s.%.%5b) ;s..<

c) ;s. .5<d) ;s.8.<<

Ans$c

%%. hich of the following e!penses cannot be charged to the schemea) Audit feesb) 7osts related communicationc) inding costs for terminating the schemed) =enalties and fines for infraction of laws to investor

Ans$d

%%. 0or an open ended scheme, initial issue e!pensesa) 7an be amortised over a period of 1< yearsb) 7an be amortised over a period not e!ceeding 5 yearsc) 7an not be recovered from investors

d) 7an be amortised over the life of the scheme



Ans$b%%5. 0or a closed end scheme, initial issue e!pensesa) 7an be amortised over a period of 1< yearsb) 7an be amortised over a period not e!ceeding 5 yearsc) 7an not be recovered from investorsd) 7an be amortised over the life of the scheme

Ans$d

%%6. 3cheme-wise annual report of a mutual fund need not bea) 3ent to all unit-holders

b) 0orwarded to 34Ic) =ublished as an advertisementd) 3toc e!changes

Ans$d

%%8. Mutual funds have to value their investmentsa) At purchase priceb) n a mar-to-maret basisc) At par d) At boo value

Ans$b

%%:. A closed-end has average weely net assets of s %<< crore.As per 34I regulations, the AM7 can charge the fund withinvestment and advisory fees upto$a) ;s %.%5 croreb) ;s %.<< crorec) ;s %.5< crored) ;s .<< crore

Ans$ a

%%9. 0or a open ended scheme, the repurchase price can not bea) +ower than 9F of the &A 'b) +ower than 9F of the 3ale pricec) oth (a) and (b)d) &one of the above

Ans$c

%<. =rofit and loss on sale of securities of a mutual fund has to be calculated on the basis of

a) +I0 Methodb ) Average 7ost Methodc) 0I0 methodd) Any of the above

Ans$b

%1. hich of the following is not true above dividends of a mutual funda) /ividends are ta!free in the hands of investorsb) /ebt mutual funds have to pay dividend distribution ta!c) /ividends can be paid out of unrealiGed profits of the mutual fundsd) 4"uity mutual funds do not have to pay dividend distribution ta!

Ans$c

%%. 2he ma!imum amount of initial issue e!penses that can be recovered from the investors is limited toa) ;s. 1< 7rores

b) %.%5Fof&A'c) 6F of the amount mobiliGed during &0d) #nlimited

Ans$c

%. Mutual funds have to value their investmentsa) At purchase priceb) n a mar-to-maret basisc) At par d) At boo value

Ans$b

%. If the average annual assets of a e"uity mutual fund scheme are ;s.1,<<< 7rore, then what will be the ma!imum amount ofannual recurring e!penses chargeable as per 34I guidelines$a) ;s. 6 7r

b) ;s. %<.5< 7r



c) ;s. %.%5 7r d) As per actual

Ans$b%5. As per 34I (Mutual 0und) ;egulations ,1996 an asset shall be classified as &=A if a) Interest warrant bounces twiceb) 2he issuer refuses to repay interestc) If the interest*installment becomes overdue for a period of 1:< daysd) If the interest*installment becomes overdue for a period of one "uarter

Ans$d

%6. hich of the following is not a treatment of &=Aa) Accrual of income < &=A has to be stoppedb) Income accrued but not received on the asset classified as &= A has to be providedc) &A' has to be reduced by 1Fd) =rovision has to be made for the principal due in a graded manner

Ans$c

%8. +isted e"uity shares are to be valued at$a) 2he average price of the share in &34b) 2he lowest price of the day in 34c) 7ost price or current maret price whichever is lower d) 2he last traded price in the stoc e!change where the security is principally traded

Ans$d

%:. As per 34I regulations for valuation of investments held by mutual funds, a security is considered >non-traded> when ita) ?as not been traded for 6< days prior to valuationb) ?as not been traded for < days prior to valuationc) Is not listed on any stoc e!changed) Is held by the mutual fund without buying or selling

Ans$b

%9. A 3ystematic ithdrawal =lan (3=) allows investorsa) 2o invest a fi!ed amount at regular intervalsb) 2o withdraw a fi!ed amount at regular intervalsc) 2o save ta!d) 2o get compound returns

Ans$b

%<. hich of the following is untrue of an automatic reinvestment plan@

a) 2he plan allows for automatic reinvestmentof

all income and capital gainsb) Automatic reinvestment allows for accumulation of additional units of the fundc) 2he major benefit of automatic reinvestment is compoundingd) Its benefit is often lost on account of the heavy load charge on the reinvestment

Ans$ d

%1. 7onstraints imposed by most funds on chec writing are$a) Account balance should not fall below the minimum capital re"uiredb) 7hecs issued must be for at least the minimum amount specifiedc) &umber of checs per month must not e!ceed a specified number d) oth a b above

Ans$d

%%. 2he investor is given which of the following as proof of purchasea) #nit certificates

b) An account statementc) A pass bood) &one of the above

Ans$b

%. 2he ma!imum number of joint holders can be$a) %b) c) d) #nlimited

Ans$b

%. In case of joint holding, on redemption, the proceeds are paid to thea) &omineeb) +ast holder

c) 0irst holder



d) As per the re"uest of all the holders Ans$c

%5. 4ach investor is mandatory re"uired to give details of which of the following in his application forma) &omineeb) 4-mail Addressc) an Accountd) =A&

Ans$c

%6. It is compulsory to "uote =A& number a) If the investor has =A&b) If the investment is ;s. 1 +ac or morec) If the investment is ;s. 5<<<< or mored) If the investor is liable to pay ta! in that year

Ans$ c

%8. 3ystematic Investment plan has the following advantagea) Investor can start investments with amounts as low as ;s. 5<< or ;s. 1<<< per monthb) Investor gets the habbit of investingc) Investor reaps the benefits of ;upee 7ost Averagingd) All of the above

Ans$d

%:. If an investor switches from one scheme to another scheme within the same mutual funda) &o load will be chargedb) nly entry load will be charged in the new schemec) nly e!it load will be charged in the old schemed) /epends on AM7 and varies between different AM7

Ans$ d

%9. 3ystematic 2ransfer =lan allows investors toa) 2ransfer amount from one mutual fund to another mutual fund at regular intervalsb) 2ransfer amount from one scheme to another with in the same mutual fundc) 2ransfer amount from one scheme to his ban accountd) 2ransfer dividends of one scheme to another

Ans$b

%5<. hich of the following is true about 3ystematic Investment =lan

a) 3I= does not give the benefit of rupee cost averagingb) 32= in one scheme can be effectively used to get the benefit of 3I= in another schemec) 3I= tells an investor when to invest and when to e!it from a schemed) All are false

Ans$b

%51. hich of the following is not an e"uity instrument@a) =reference sharesb) 4"uity warrantsc) rdinary debenturesd) 7onvertible debentures

Ans$c

%5%. 2he drawbac of an ordinary share isa) =ossibility of capital appreciation

b) wnership privilege of the companyc) /ividend incomed) &o guaranteed income or security

Ans$d

%5. An owner of preference shares is given which of the following rightsa) 'oting rightsb) 0i!ed dividend income from post-ta! profitsc) 'oting rights and unlimited dividend incomed) &o guaranteed rights

Ans$b

%5. Maret capitaliGation of a company is calculated by multiplying the number of outstanding shares bya) ;s. 1<b) 0ace value of each share

c) 7urrent maret value of each share



d) /ividend yield Ans$c

%55. 2he =rice 4arnings (=*4) ;atio is calculated using$a) Maret price and dividendb) Maret price and earning per sharec) Maret capitalisation and dividendd) Maret price and face value

Ans$b

%56. A company whose earnings are strongly related to the state of economy is nown asa) 4conomy stocsb) 7yclical 3tocsc) 'alue 3tocsd) Crowth stocs

Ans$b

%58. hich of the following is generally true for a growth stoca) 3teady capital appreciation and steady dividends yieldsb) ?igh capital appreciation and high dividend yieldsc) ?igh capital appreciation and low dividend yieldsd) 3teady capital appreciation and high dividend yields

Ans$c

%5:. 3hares of companies with large capital maret capitaliGationa) ?ave greater growth potentialb) Are more li"uidc) Are not availabled) &one of the above

Ans$b

%59. /ividend yield for a stoc isa) /ividend per shareb) /ividend per face valuec) /ividend per share maret priced)&one of the above to current

Ans$c

%6<. 'alue stocs

a) ?ave high current dividend yieldb) Jield high growth in earningsc) Are currently under valuedd) &one of the above

Ans$c

%61. 2o generate better return than the return on inde! is the objective of a) =assive fund manager b) An active fund manager c) All fund managersd) &on-fund manager

Ans$b

%6%. A passive fund manager a) ;esearches stocs e!tensively

b) /oes not buy and sell stocs oftenc) /oes not have to go through the process of stoc selectiond) /oes not have to trac stocs

Ans$ c

%6. A fund manager managing an inde! funda) ?as to eep fund e!penses lowb) ?as to research stocsc) /oes not have to balance his portfoliod) &one of the above

Ans$a

%6. A growth manager loos for a) ?igh current incomeb) #ndervalued stocs

c) Above average earnings growth



d) &one of the above Ans$ c

%65. 0undamental analysis involvesa) 7hecing the foundations of the companyEs factory buildingb) ;esearch into the operations and finances of the companyc) 3tudying the companyEs share pricesd) &one of the above

Ans$b

%66. hich of the following is not considered for technical analysisa) ?istorical data on the companyEs share priceb) 2he company sharesE trading volumec) 7urrent maret sentimentd) 2he companyEs regulatory environment

Ans$d

%68. 0undamental analysis forms the basis to decidea) hen to buy a given shareb) hether to buy a given share or notc) hether to use technical analysis or "uantitative analysisd) hether the companyEs factory can withstand earth"uaes

Ans$b

%6:. 2echnical analysis guides the decision ona) hether to buy or sellb) 2he right time to buy or sellc) hether companyEs technical personnel are ade"uately "ualifiedd) &one of the above

Ans$b

%69. hich of the following is not an investment philosophya) 7apitalising on economic cyclesb) 0ocussing on growth sectorsc) Maret capitalisationd) 0inding value stocs

Ans$c%8<. hen e!pecting a fall in maret price, fund managers can reduce the loss in portfolio value bya) 3peculating

b) &ot buying and selling shares at all for some daysc) #sing e"uity derivativesd) Civing 2' interviews to improve sentiment

Ans$c

%81. 4"uity derivative instruments area) 3haresb) ondsc) 7ontractsd) &otes

Ans$c

%8%. In a mutual fund, the overall decision on allocating money to particular industries*sectors are taen bya) 4"uity analystsb) 0und managers

c) 3ecurity dealerd) 2rustees

Ans$b

%8. 7ontinuous tracing of the companies in which a mutual fund has invested is done bya) 7ontinuous tracing systemsb) 4"uity analystsc) 2rusteesd) 3ecurity dealers

Ans$b

%8. 3ecurity dealers of a mutual funda) Cuard the cabin of the fund manager b) 4!ecute buy and sell orders for the fundc) /ecide which shares to buy or sell




Ans$b%85. /ebt seurities bought at a discount to their face value are generally >a) Interest bearingb) Kero coupon bondsc) =aying interest at a floating rated) &one of the above

Ans$b

%86. 2he largest proportion of trades done in the wholesale debt maret is accounted bya) Mutual funds

b) 0oreign bansc) Indian bansd) 0inancial institutions

Ans$c

%88. 7ertificates of /eposits (7/s) are issued bya) ;egional ;ural ansb) 7orporatesc) 3cheduled commercial bansd) &one of the above

Ans$c

%8:. 7ommercial =aper is issued by 7orporate bodiesa) 2o meet short-term woring capital re"uirementsb) 2o finance the ac"uisition of long term capital assetsc) 2o retire long term debtd) 2o pay dividend

Ans$a

%89. 2he yield on 2reasury ill (2-ill) is determined bya) 2he Covernment of Indiab) Auctionc) 2he 3tate Covernmentsd) 0loating rate method

Ans$b

%:<. 7oupon of a debt security refers to

a) A piece of paper attached to the certificateb) 2he return on investor would earnc) 2he rate of interest paid on par valueof the bondd) &one of the above

Ans$ c

%:1. A call provision in a debt issue allows the issuer toa) 7all out the names of the investorsb) ;edeem the debt on maturityc) 4!tend the tenure of the debtd) ;edeem the debt before maturity

Ans$d

%:%. A put provision in a debt issue allowsa) Investor to put away the certificates in safe deposit vaults

b) Investors to redeem debt prior to maturityc) Issuers to redeem debt prior to maturityd) Investors to e!tend the tenure of debt

Ans$b

%:. 7urrent yield relates interest on a security toa) Its current maret priceb) Its face valuec) Its fair valued) 2he current price of 2-ills

Ans$a

%:. 2o compare bonds with different coupon rates, maturities and prices, investors would use$a) 7urrent yieldb) 2echnical analysis

c) Jield to maturity



d) 0undamental analyis Ans$ c%:5. hen interest rates rise, prices of e!isting bondsa) Also riseb) 0allc) Are not affectedd) 0luctuate either up or down

Ans$b

%:6. Jield curve is also nown as

a) 7urve of Interestb) 2erm 3tructure of Interest ;atesc) 7urve that yieldsd) &one of the above

Ans$b

%:8. An important indicator of e!pected trends in interest rates isa) 2he 4conomic 2imesb) 2he 3ense!c) 2he Jield 7urved) 2he 7hief MinisterEs 3peech

Ans$ c

%::. It may not be possible to reinvest interest received at the same rate as principal. 2his is nown asa) ;einvestment risb) Inflation risc) Interest-rate risd) 7all ris

Ans$ a

%:9. A bondEs rating indicates itsa) ;einvestment risb) 7redit risc) Inflation risd) Interest-rate ris

Ans$b

%9<. If a bond cannot be sold at a price near its value, it means that investment in this bond has

a) ?igh li"uidity risb) ?igh default risc) +ow li"uidity risd) Inflation ris

Ans$a

%91. 2he additional yield re"uired to account for the ris of default by the borrower is nown asa) Jield plusb) Jield spreadc) Jield e!trad) Jield premium

Ans$b

%9%. A high credit rating does not meana) ?igh yield spread

b) ?igh perceived safetyc) +ow yield spreadd) +ow ris premium

Ans$a

%9. If 1<-year government securities yields 1<F and a 1<-Jear fi!ed deposit in a company yields 1%F, the yield spread isa) 1%Fb) %%Fc) 1<Fd) %F

Ans$d

%9. 2he >duration> of a coupon-bearing bond isa) +onger than its maturityb) +ess than its maturity

c) 4"ual to its maturity



d) 2he "uality of paper used for the certificate Ans$b

%95. An accurate measure of the sensitivity of a debt portfolio to changes in interest rate is thea) Jield curveb) 7redit rating of each securityc) /uration of the portfoliod) 7urrent yield

Ans$ c

%96. 0or an open ended scheme, investment in unlisted sharesa) 7an not be lower than 1<F of net assetsb) 3hould be e"ual to investment is listed sharesc) 7an not e!ceed 5F of net assetsd) 7an not e!ceed 1<F of net assets

Ans$ c

%98. Investment policies of a mutual fund are determined bya) 2he fund manager b) 2he AM7 managementc) 2he mareting department based on what distributors wantd) 2he investors

Ans$b%9:. hich of the following measures are not taen by 34I for protecting investors of mutual fundsa) Mandating minimum levels of diversification for mutual fundsb) 4nsuring that the funds are not used to favour a few companiesc) 2racing the securities that each fund has invested ind) 4nsuring that the funds are invested in approved securities only

Ans$c

%99. As per 34I norms, a fundEs investments, in the e"uity shares of anyone company are restricted toa) %5F of &et Assetsb) 1<F of &et Assetsc) 5<F of &et Assetsd) 1<<F of &et Assets

Ans$b

<<. Mutual funds are allowed to lend

a) +oansb) 3ecuritiesc) =hysical assetsd) &one of the above

Ans$b

<1. In case of listed securities of group companies of the sponsor, mutual fund is not allowed to invest more thana) %5F of its net assetsb) 1<F of its net assetsc) At alld) 5F of net assets

Ans$ a

<%. A mutual fund may transfer investments from one scheme to another a) &ot at all

b) At current maret ratesc) At cost priced) At a fi!ed premium over maret rate

Ans$b

<. Interest ;ate ;is for an Indian debt fund can be reduced by usinga) 0uturesb) ptionsc) Interest ;ate 3wapsd) &one of the above

Ans$ c<. hen interest rates for similar maturitiesE bonds are 11F, bond with a 9F coupon rate will sella) Above par b) elow par c) At par

d) At a price unrelated to the interest rates for similar securities



Ans$b<5.Inter scheme transfers are allowed by 34I, provideda) 3uch transfers happen on delivery basis at maret pricesb) 3uch transfer do not result in significantly altering the investment objectives of the schemesc) 3uch transfer is not of illi"uid securities, as defined in the valuation.normsd) All the above conditions are satisfied

Ans$d

<6. 2he Indian debt maret is largelya) holesale in nature

b) ;etail in naturec) /ominated by &;Isd) All of the above

Ans$a

<8. hich of the following is true regarding borrowing powers of a mutual funda) A mutual fund can not borrow at allb) A mutual fund can borrow only up to %<F of net assetsc) A mutual fund can borrow for a ma!imum period of one year d) A mutual fund can borrow for investment purposes

Ans$b

<:. If the duration of a bond is years, and the yield increases by 1F, then the bond price willa) &ot changeb) Increase by nearly %Fc) Increase by nearly Fd) /ecrease by nearly %F

Ans$d

<9. If the &A' of an open-end fund increased from ;s.16 to ;s.%< in 6 months, the absolute return isa) 6.<<Fb) .6<Fc) %5.<<Fd) 8.5<F

Ans$c

1<. 7hange in &A'as a measure of fund performance is more suitable for a) Crowth fundsb) Income fundsc) 0unds with withdrawal plansd) &one of the above

Ans$a

11. 2he difference between change in &A' method and total return as measures of fund performance isa) &oneb) 2otal return method taes dividend into account while change in &A' does notc) 2otal return method does not tae &A's into accountd) 2otal return method does not tae the time period into account

Ans$b

1%. 2he most suitable measure performance for all fund types isa) &A' 7hangeb) 2otal ;eturnc) 2otal ;eturn with reinvestment methodd) &one of the above of fund dividend

Ans$c

1. 2he e!pense ratio used for measuring fund performance is an indicator of a) =roduct maret conditionb) Crowth in the economyc) =revalent maret practicesd) 2he fundEs efficiency

Ans$d1. 2he 4!pense ;atio as a measure of a fundEs performance is defined by a fundEs PE.a) 2otal e!penses and average net assets

b) 2otal e!penses and total assets



c) Average e!penses and average net assetsd) &one of the above

Ans$ a

15. hile computing the 4!pense ;atio for a fund, the transaction cost for buying and selling securities are not included in the funde!penses becausea) 2hese are not borne by investorsb) As per accounting policies, these are capitaliGed and are not shown as e!penses at allc) AM7 wants to show lower e!pense ratiosd) 2he statement is not correct

Ans$b

16. 2he 4!pense ;atio is of least importance in which of the followinga) /ebt fundb) Inde! fundc) 4"uity fundd) +i"uid fund

Ans$c

18. 2he 4!pense ;atio is not affected bya) 0und siGeb ) Average account siGec) =ortfolio compositiond) 3toc maret conditions

Ans$d

1:. 2he Income ;atio as a measure of a fundEs performance is defined by the fundEsa) 2otal income and total assetsb) &et investment income and net assetsc) 2otal income and net assetsd) &one of the above

Ans$b19. 2he Income ;atio is more suitable for evaluating the performance of a) 4"uity 0undsb) Crowth 0unds

c) ;egular Income 0undsd) Inde! 0unds Ans$c

%<. =ortfolio turnover rate refers to

a) ;atio of sales to the net assets of the fundb) ;atio of purchases to the net assets of the fundc) ;atio of sales or purchases( which ever is lower) to net assets of the fundd) ;atio of sales or purchases( which ever is higher) to net assets of the fund

Ans$c

%1. =ortfolio turnover rate of a fund measures thea) 3iGe of the fundEs portfoliob) Amount of buying and selling done by the fundc) 2he average number of units sold by the fund in one day

d) &one of the above Ans$b

%%. A high turnover rate for a fund indicatesa) ?igh transaction costsb) Creater efficiencyc) ?igh returns to the investor d) A rising maret

Ans$a

%.2urnover rates would be most relevant to analyGe the performance of a) 4"uity fundsb) Inde! fundsc) /ebt fundsd) 'alue funds most relevant to

Ans$ a



%. 2ransaction costs includea) All e!penses related to purchase and sale of securitiesb) All e!penses charged to the fundc) /istribution e!pensesd) &one of the above

Ans$ a%5.hich of the following are not included in 2ransaction costs@a) roerage*commissionsb) 3tamp duty on transfers

c) Agent commissionsd) &one of the above

Ans$c

%6. hich of the following transaction costs are not "uantified in the offer documenta) roerge commissionsb) /ealer spreadsc) 7ustodianEs feesd) ;egistrarEs fees

Ans$b

%8. As per 34I, mutual funds can borrow for short term to the e!tent of a) 2otal net assetsb) 5<F of net assetsc) %5F of net assetsd) %<F of net assets

Ans$d

%:. n 1 Ian ,< &A' was ;s. %<*-.n 1 April,< fund declared dividend of 1%F.n 1 /ec,< &A ' was ;s. %%.:<. hat is thereturn as per total return method.a) %<Fb) <Fc) 1%Fd) 1:F

Ans$ a

%9. 2he choice of an appropriate benchmar for evaluating a fundEs performance depends ona) 2he fund manager b) 2he investment objective and the asset allocation pattern of the fundc) 34Id) AM0I

Ans$b

<.An actively managed e"uity fund e!pects toa) e able to beat the benchmar returnsb) 4arn the same returns as the benchmarc) ?ave no benchmarsd) #nder perform when compared with the benchmar

Ans$a

1.2o evaluate a closed-end debt-fund, a suitable benchmar would be

a) 34 3ense!b) I-3ecEs I-4Qc) Interest on ban fi!ed deposits of similar maturityd) 3= 7&Q /efty

Ans$c

%.hen comparing performance of two funds, the following need not be similar a) ;is profilesb) Investment objectivesc) 0und siGed) 0und managers

Ans$ d. hich of the following is false@a) ;I is a measure similar to 2otal ;eturn with /ividend ;einvestmentb) 2otal ;eturn with /ividend ;einvestment assumes reinvestment at &A' on the dividend distribution date



c) As a measure of performance, 2otal ;eturn with /ividend ;einvestment. sees to overcome the shortcomings of simple 2otalreturnd) ecause of its simplicity, simple 2otal ;eturn is preferred in practice to 2otal ;eturn with /ividend ;einvestment

Ans$d

. 2o choose an appropriate benchmar for a scheme, all of the following are re"uired e!cepta) 2he composition and siGe of the portfoliob) 2he investment objectivec) ?istorical data of fund performanced) 2he nature of investments

Ans$ c

5. hen comparing a fundEs performance with that of its peer group, the following cannot be compareda) 2wo debt funds with 5 year maturitiesb) A broad-based e"uity fund with an I2 3ector 0undc) a bond fund with a bondd) A government securities fund with a government security

Ans$b

6. hich of the following is true about returnsa) ;elative returns are important than absolute returns for mutual fundsb) ?istorical average is a good pro!y for e!pected returnsc) ;is arises when actual returns are different from e!pected returnsd) All of the above

Ans$d

8. 3tandard deviation is a measure of a) Maret risb) 2otal risc) 7redit risd) ;e-investment ris

Ans$b

:. eta co-eficient is a measure of a) Maret risb) 2otal risc) 7redit risd) ;e-investment ris

Ans$a

9. hen comparing fund performance with peer group fundsa) 2he age of funds should be sameb) 2he AM7s should have same net worthc) 3iGe and composition of the portfolios should be comparabled) All of the above

Ans$c

<. hich of the following is not a 34I regulation on returnsa) 3tandard measurements have to be used for computation of returnsb) ;eturns for a period of less than 1 year have to be annualiGedc) ;eturns for 1, and 5 years, or since inception which ever is later is to be providedd) 7AC; to be used for funds which are more than 1 year old

Ans$b

1. 2he Income ;atio as a measure of a fundEs performance is defined by the fundEsa) 2otal income and total assetsb) &et investment income and net assetsc) 2otal income and net assetsd) &one of the above

Ans$b

%. n 1 Ban ,< &A' was ;s. 1%*-. n 1 April,< fund declared dividend of 1F which was reinvested at the e!-dividend &A' of;s.l*-, n 1 /ec,< &A' was ;s. %<. hat is the return as per total return with dividend reinvestment methoda) 85Fb) %5.Fc) :.Fd) 9.F

Ans$ c

. If the &A ' of a scheme grows from ;s. 1< to ;s. < in three years, what is the compounded annual growth rate@



a) 1<Fb) 1<<Fc) 5:.8Fd) :.8F

Ans$c

. &A' of a fund increased from ;s.1% to ;s.15 in si! months. hat is the annualiGed rate of return as per 7hange in &A'method@a) %5Fb) 1<<F

c) 5<Fd) 85F

Ans$c

5. Assets under management of a fund at the end of year are 1%5 7r. 2he Average &et assets of the fund are ;s. 1<< cr and thetotal e!penses of the fund in that year are ;s. %.5 7r. hat is the e!pense ratio@a) %.<<Fb) %.5<Fc) 1.%5Fd) %5.<<F

Ans$b

6. If there is an entry load in a scheme, the investors return .a) ill increase to the e!tent of loadb) ill not change because there will not be any e!it loadc) ill reduce to the e!tent of loadd) &one of the above

Ans$c

8. 2he rule of 8% is used toa) 7alculate entry load of a schemeb) 7alculate the period in which an investment will double at a given rate of returnc) 7alculate the rate at which money will grow to double in a given periodd) both b and c

Ans$d

:. 2he major sources of return to an investor from investment in mutual funds area) Interest and capital appreciationb) /ividend and rentc) /ividend and capital appreciationd) /ividend

Ans$c

9. hich of the following is of no relevance in evaluating a fundEs performancea) 2he performance of the stoc maret as a wholeb) 2he performance of other mutual fundsc) 2he returns given by other comparable financial productsd) 2he change in wholesale price inde!

Ans$d

5<. 2he basis of genuine investment advice should bea) 2he current maret situationb) 2he agent commissions paid by different funds .c) 0inancial planning to suit the investorEs needsd) =lanning to complete the agentEs annual targets

Ans$ c

51. 0inancial goals do not includea) uying a homeb) inning a sports gold medalc) =lanning for retirementd) 3aving for childEs education

Ans$b



5%. 0inancial planning helps a persona) 2o become a billionaireb) 2o achieve financial goals through proper management of financesc) 2o invest in foreign countriesd) &one of the above

Ans$b

5. hich of the following wors with an investor on his overall financial situationa) 2a! Advisor b) 0inancial =lanner

c) Insurance Agentd) 0inancial Advisor

Ans$b

5. 0inancial planners and their clients shouldfocus ona) Allocating funds to asset classesbased on objectives (e.g. debt, e"uityetc.)b) Allocating funds to individualsecuritiesc) 2racing stocs which they feel havepotentiald) &one of the above

Ans$a55. ithin an asset class, which individual security to invest in should be decided bya) 2he financial planner b) 2he investor himself c) A professional fund manager d) An objective advisor

Ans$ c

56. 0inancial =lanning comprisesa) /efining a clientEs profile and goalsb) ;ecommending appropriate asset allocationc) Monitoring financial recommendationsd) All of the above

Ans$d

58. 0inancial planning is relevant for a) ?igh networth individualsb) lder clientsc) 2a! and estate planningd) All of the above

Ans$b

5:. 2he constraint on financial planning due to insufficient resources can be remedied to some e!tent bya) /ecreasing the standard of livingb) /isciplining childrenc) /isciplined monthly budgetingd) &one of the above

59. In the dividend reinvestment option >the number of units held by an investor increases because of a) Crowth in net asset value i.e. capital appreciationb) ;einvestment of dividend which is lie compoundingc) Interest received on the fundEs assetsd) &one of the above

Ans$b

6<. hich of the following lets an investor boo profits in a rising maret and increase holdings in a falling mareta) 0i!ed ;atio of Asset Allocationb) 0le!ible ;atio of Asset Allocationc) Investment without any asset allocation pland) uy and ?old 3trategy

Ans$a

61. A 0le!ible ;atio of Asset Allocation means



a) 7ontinuously changing the ratio of various assets in the portfoliob) &ot doing any re-balancing and letting the profits runc) Activeswitchingd) &one of the above

Ans$b

6%. 2he strategy advisable for an investor to ma!imiGe investment return in the long run isa) uy and hold on to investments for a long timeb) +i"uidate poorly performing investments from time to timec) +i"uidate good performing investments fro time to time

d) 3witch from poor performers to good performers Ans$d

6. A criticism of rupee-cost averaging is a) Investment is for the same amount at regular intervalsb) ver a period of time, the average purchase price will wor out higher than if one tries to guess the maret highs and lowsc) It does not inform an investor when to buy, sell or switch from one scheme to another d) ;upee cost averaging has no serious shortcomings

Ans$ c

6. In India, individual investors do not have direct access toa) 7apital maret instrumentsb) ;eal estatec) ulliond) Money maret instruments

Ans$ d

65. hich of the following represent indirect investments@a) Investment in a mutual fundb) Investment in sharesc) Inestment in ban depositd) Investment in post office schemes

Ans$a

66. hich of the following investment products do not give guarantee for return or capitala) an depositsb) =ubic provident fund (==0)c) &ational 3avings 7ertificates (&37)d) #nits of a mutual fund

Ans$ d

68. 2he biggest advantage of investment in gold isa) ?igh returnsb) ?igh appreciation in valuec) +ow =urchase priced) ?edge against inflation

Ans$d

6:. 2he biggest disadvantage of investment in real estate isa) +ess potential appreciationb) ?igh purchase pricec) /epreciation in value as time passesd) 'alue gets eroded due to inflation for capital

Ans$b

69. hich of the following is not an advantage of ban deposits@a) +i"uidityb) ?igh perceived safetyc) +ow entry priced) ?igh yield after ta!

Ans$d

8<. +isting of shares at a stoc e!change ensuresa) Cuaranteed returnsb) +ong term capital appreciationc) +ow risd) ?igh li"uidity

Ans$d



81. 2he rate of interest paid by a company on debentures issued by it depends ona) 2he stoc maret situationb) 34I guidelinesc) 2he companyEs credit ratingd) 2he amount of money being raied

Ans$ c

8%. hich of the following is not a characteristic of company fi!ed depositsa) A higher rate of interestb) ?igher ris

c) #nfavourable effect of ta!d) 'ery high li"uidity

Ans$d

8. hich of the following is untrue for =ublic =rovident 0und 3chemesa) 2he interest is ta!-freeb) =ost-ta! returns are attractivec) +i"uidity is rather lowd) &one of the above

Ans$d dira 'ias =atra is an investment product popular witha) ;ural investorsb) Investors in high ta! bracetc) #rban investorsd) ;is taing investors

Ans$c

85. Annual contribution to =ublic =rovident 0und should bea) ;s.1<<<<b) etween 1<< and ;s.6<<<<c) etween ;s.6<< and ;s.1<<<d) &one of the above

Ans$b

86. 2he maturity period of ;I ;elief onds isa) 5 yearsb) 6 yearsc) 8 years

d) : years Ans$a

88. 2he amount an insurance company would pay to the nominee if a policyholder died is nown as thea) =remiumb) 3um assuredc) 0ace valued) ;eal value

Ans$b

8:. Most individuals invest in life insurance policies for a) ;ris protectionb) 2a! benefitsc) 4asy li"uidityd) ?igh returns 7E ..

Ans$b

89. /ividends distributed by mutual funds area) 2a!ed at sourceb) 2a!ed in the hands of the investorsc) 3ubject to capital gains ta!d) 2a!-free in the hands of the investor

Ans$ d

:<. Investing through mutual fund is a better option than investing directly in the stoc maret becausea) Identifying stocs is a difficult processb) Agents get commissions on mutual fund investmentc) ;eturned are guaranteed by mutual fundsd) All of the above

Ans$a



:1. A small investor can build a diversified portfolio bya) uying one share each of all listed companiesb) Investing in a mutual fundc) orrowing enough money to buy shares of well-managed companiesd) &one of the above

Ans$b

:%. hich of the following is not an advantage of mutual fund investment over direct investmenta) ?igher li"uidityb) +ower transaction costs

c) Creater convenienced) Cuaranteed returns

Ans$d

:. 2here is no contractual guarantee for repayment of principal or interest to an investor ina) an depositb) /ebt fundc) 3ecured debenturesd) All of the above

Ans$b

:. hich of the following debt investments is not rateda) 7orporate ondsb) 7ommercial =aper c) 7ompany /epositd) /ebt mutual fund

Ans$d

:5. /irect investment in stoc maret can be a better option than investing through mutual funds if the investor a) ants better returns than those offered by mutual fundsb) ?as large capital, nowledge an resources for researchc) ?as identified a bullish phase in the stoc maretd) ants to invest for the long term

Ans$b

:6. /eciding on strategies such as cost averaging, value averaging, active switching, all depend on thea) 3toc maret situation on dateb) Amount of money to be investedc) InvestorEs ris tolerance

d) =hase through which the economy is passing Ans$ c

:8. Creater returns come only from assuring higher r iss, and a higher ris portfolio guarantees higher returnsa) 2rueb) 0alsec) -d) -

Ans$b

::. 2he ris tolerance of an investors is independent of a) ?is ageb) ?is incomec) 2he stoc maret movementsd) ?is job security

Ans$c

:9. A sectoral fund is aa) +ow ris fundb) Moderate ris fundc) ?igh ris fundd) +ow-to-moderate ris fund

Ans$c9<. International funds invest in various countries therefore they are low ris fundsa) 2rueb) 0alsec)d) -

Ans$b

91. 3hort 2erm bond funds are



a) +ow ris fundsb) Moderate ris fundsc) ?igh risd) &one of the above

Ans$b

9%. As compared to a fund with fluctuating total returns, a fund with stable positive earningsa) Cives higher returnsb) Is less risyc) Cives lower returns

d) Is more risy Ans$b

9. >;is> is e"uated witha) 'olatility of earningsb) +evel of earningsc) 2he number of investors in a fundd) 2he number of schemes of a fund family

Ans$a

9. 'olatility of an e"uity fund portfolio is independent of thea) ind of stocs in the portfoliob) /egree of diversification of the portfolioc) 0und managerEs success at maret timingd) &umber of investors in the scheme

Ans$d

95. 4"uity price riss area) 7ompany specificb) Maret levelc) 3ector specificd) All of the above

Ans$d96. /iversification reducesa) 7ompany specific risb) Maret risc) oth of the aboved) &one of the above

Ans$a

98. hich of the following is most risy@a) Investing in a money maret mutual fundb) Investing in an inde! fundc) 3hort term investment in an e"uity fundd) +ong term investment in an e"uity fund

Ans$c

9:. A fund with a high beta coefficient gives greater returns in a rising maret, and is more risy in a falling mareta) 2rueb) 0alsec) -d) -

Ans$a

99. hich of the following is a disadvantage of 3tandard /eviation as a measure of risa) 3tandard /eviation measures total ris, not just maret risb) It is based on past returns, which does not necessarily indicate further performancec) It is an independent number d) All types of funds can be measured with standard deviation

Ans$b

<<. 2he role of an advisor is toa) =oint out the features and benefits of various investments optionsb) ?elp the investor develop the right approach to investingc) ;ecommend some investment option availabled) ffer adhoc advise whenever the investor has surplus money available

Ans$b



<1. ne of the most effective ways to invest through mutual funds is toa) /evelop a model portfoliob) uy a few units of every mutual fund scheme availablec) Invest all the money in one fund schemed) Invest all the money in different schemes of the same fund family

Ans$a

<%. Mutual fund investors should be advised to e!pecta) +ow post ta! returnsb) /ramatic results

c) etter returns than available optiond) nly realistic wealth accumulation goals every other

Ans$d

<. Asset Allocation isa) eeping certificates of the physical securities in proper placesb) Allocation the available money to all the securities availablec) Allocating the right proportion of funds to e"uity, debt and money maret securitiesd) &one of the above

Ans$c

<. nce a financial advisor wors out ideal Asset Allocation, it can be used for all his investorsa) 2rueb) 0alsec) -d) -

Ans$b

<5. 2he li"uidity needs of an investor througha) 4"uity 0undsb) Inde! 0undsc) Money Maret 0undsd) 3ector 0unds are met

Ans$c

<6. A retired person generally needs a greater proportiona) /ebt fundsb) 4"uity fundsc) Money Maret funds

d) All of the above > .. Ans$a

<8. 2o satisfy a young investorEs need for growth,a greater proportion of investment should be advised ina) Cilt fundsb) Income 0undsc) 4"uity Crowth fundsd) +i"uid funds

Ans$c

<:. A very high proportion of investment in all types of e"uity funds is advisable for investorsa) In distribution phaseb) In accumulation phasec) In transition phased) ho are wealth preserving affluent individuals

Ans$b

<9. 2he transition phase of an investorEs wealth cycle is when thea) 0inancial goals have been already metb) 2he investor has retiredc) 0inancial goals are approachingd) Investor suddenly gets a windfall

Ans$c

1<. A high proportion of investment in income funds is re"uired bya) Accumulating investorsb) Affluent investorsc) Investors in the inter-generational transfer phased) Investors in the distribution phase

Ans$d



11. ;etired investors shoulda) &ot draw down on their capitalb) &ot invest in securities which bear ris of capital erosionc) 7ontinue holding some portion of their holding in e"uity growth fundsd) &ever invest in e"uity

Ans$b

1%.0or older investors who want to transfer their wealtha) &o financial planning is re"uiredb) 2he right investment strategy depends upon who the beneficiaries are

c) 2he right investment strategy depends upon the state of the stoc maretd) All the funds can be invested in aggressive e"uity funds

Ans$b

1. Investors who ac"uire sudden wealtha) 7an speculate with all the ac"uire, money in the stoc maretsb) 3hould not use any of the new wealth to invest in e"uityc) 3hould tae the effect of ta!es into accountd) &eed not pay any ta!es on the newly ac"uired wealth as it is not a part of their regular income

Ans$c

1. Among the following, which is more important for an investor a) 3iGe of the fundb) 0unds suitability for an investor c) =ast performance of the fundd) 0und Manager

Ans$b

15. 3tructural characteriGation of an e"uity fund includea) 7osts of investingb) 2he specific securities in which the fund has investedc) 2he number of employees of the AM7d) All of the above

Ans$b

16. An e"uity fund can be said to be concentrated whena) hen it invests in only in two or three stocsb) hen it invests in may companies of the same sector c) hen top ten holdings account for more than 5<F of net assets invested

d) hen top ten holdings account for more than %5F of net assets invested Ans$c

18. 2he siGe of the maret capitaliGation of a fundEs e"uity holdings is inversely proportional to thea) ;eturns that can be e!pected from the fundb) +evel of ris assumed by the fundc) 3tate of the stoc maretd) All of the above

Ans$b

1:. A steady holding of investments in an e"uity fundEs portfolio indicatesa) +ong-term orientationb) +ower transaction costsc) oth the aboved) &one of the above

Ans$c

19. 4!-Mars of an e"uity fund measures itsa) =erformanceb) ;isc) oth the aboved) &one of the above

Ans$a

%<. eta of an e"uity fund measures itsa) =erformanceb) ;isc) oth the aboved) &one of the above

Ans$b



%1. 2he best e"uity fund, relative to others, would havea) ?igher 4! Mars, lower eta and higher Cross /ividend Jieldb) ?igher 4! Mars, higher eta and higher Cross /ividend Jieldc) +ower 4! Mars, lower eta and lower Cross /ividend Jieldd) +ower 4! Mars, higher eta and higher Cross /ividend Jield

Ans$a

%%. /ebt schemes are popular becausea) 2he Indian 3toc Maret is always going downb) 2he returns are more predictable

c) Most investors are always in debtd) All of the above

Ans$b

%. Jield-to-maturity of a debt fundEs portfolio gives an indication of a) 7urrent incomeb) 2otal returnc) +i"uidityd) All of the above

Ans$b

%. 7ompared to e"uity funds, income margins for debt funds area) &arrowb) ?igher c) 2he samed) Almost nil

Ans$a

%5. 2he differentiating factor among debt funds of comparable maturity and "uality isa) Cross yieldsb) 7ostsc) 0und aged) 2enure of the fund manager

Ans$a

%6. As per current regulations, dividend distribution ta! should be taen into in to account when computing net returns froma) 4"uity fundsb) /ebt fundsc) oth the above

d) &oneof

the above Ans$b

%8. ;unning a money maret mutual fund re"uires more of

a) 7redit analysis sillsb) 4"uity analysis sillsc) =atienced) 2rading sills

Ans$d

%:. Investors should be advised to avoid investing in a debt fund with aa) +ower rated portfolio and higher e!pense ratiob) ?igher rated portfolio and lower e!pense ratioc) +ower rated portfolio and lower e!pense ratiod) ?igher rated portfolio and higher e!pense ratio

Ans$a

%9. An ideal money maret mutual fund must havea) +ower returnsb) +ower e!pense ratioc) +ow "uality of investmentsd) All the above

Ans$b

<. 7ircumstances that might cause an investor to change the composition of his portfolioa) 7yclical changes in economyb) #nforeseen economic change affecting the portfolioEs preferred sectorsc) oth the aboved) &one of the above

Ans$c



1. If a charitable trust approaches a distribute for investment in a mutual fund, the distributor shoulda) Accept the application without wasting timeb) ;eject the application outrightc) ;efer to the offer documentd) Accept the application as a direct application

Ans$c

%. An application form for investment in a mutual fund is available along witha) 2he offer documentb) 2he abridged annual report

c) 2he ey information memorandumd) A ban challan

Ans$c

. An 4!-Mar of 1<<F is possible for a) A growth fundb) An aggressive growth fundc) An inde! fundd) A balanced fund

Ans$ c

. f the following, which type of fund would have a higher PIE multiple in comparison to the average maret multiplea) A 'alue 0undb) A Crowth 0undc) An Inde! 0undd) 7ould be any of the above three, one cannot generaliGe

Ans$b

5. hich of the following is not true as per 34I ;egulations@a) Investment in rated debt securities of a single issuer should not e!ceed 15F of net assetsb) 2otal investment in unrated debt securities of a single issuer should not e!ceed %5F of net assetsc) 2otal investment in unrated debt securities below investment grade should not e!ceed %5F of &A 'd) 2otal investment in rated debt securities below investment grade should not e!ceed %5F of net assets

Ans$b

6. A Money Maret Mutual 0und is most liely to invest ina) 7orporate ondsb) 4"uity 3haresc) Covernment 3ecurities with maturity less than 1 year

d) All of the above Ans$c

8. f the following, which would be more suitable for a retiree with a modest ris appetitea) 'alue 0undb) /iversified 4"uity 0undc) Crowth 0undd) alanced 0und

Ans$ d

:. As per ogle, asset allocation for younger investors in accumulation phase phase should bea) %<F e"uityR :<F debtb) 8<F e"uityR <F debtc) 5<F e"uityR 5<F debtd) d :<F e"uityR %<F debt

Ans$d

9. hich of the following is true for 4"uity +ined 3avings 3cheme (4+33)a) A ta! rebate is available to investors in these schemesb) 2he investment has to be loced in for yearsc) 2he minimum amount for availing ta! rebate is fi!edd) All of the above

Ans$d

<. 2he most important factor loo for when investing in a corporate fi!ed deposit is thea) Jieldb) ;ate of interestc) 7redit rating of the depositd) &one of the above

Ans$c



1. 2he most important reason for an investor to prefer a ban deposit to a mutual fund isa) 2he creditworthiness of the banb) ecause the ban does not invest in securitiesc) 2hat the ban offers a guaranteed) All of the above

Ans$a

%. hen selling a mutual fund, a good agent would never a) /escribe the past performance of the schemeb) 7ompare the fund with other mutual funds

c) Assure a rate of returnd) 7ompare the fund with other financial products

Ans$ c

. hich of the following is the first step in financial planninga) Asset Allocationb) 3election of fundc) 3tudying the features of a schemed) 3etting up financial objectives

Ans$ d

. hy should one buy an insurance policy@a) It gives high current returnsb) It gives good capital appreciation over its termc) It should be bought due to the need for insurance and not as an investmentd) All of the above

Ans$ c

5. Investors who follow the fi!ed Asset Allocation approacha) Maintain balance in their portfolio by li"uidating some investments from the asset class which has given higher return andreinvesting in the other asset class which has lower returnb) Are not disciplinedc) Increase their e"uity position when e"uity prices tend to climbd) &one of the above

Ans$ a

6. An investor should not invest in a mutual fund if a) ?e e!pects a customiGed portfoliob) ?e is able to carry out detailed investment research and monitor the stoc maret

c) oth the aboved) &one of the above Ans$c8.As per ogle, asset allocation for older investors in accumulation phase should bea) <F e"uityR 8<F debtb) <F e"uityR 6<F debtc) 5<F e"uityR 5<F debtd) 8<F e"uityR <F debt

Ans$d

:. 0rom whom can a unit-holder see redressal if his compalint is not entertained by the mutual funda) AM7b) oard of 2rusteesc) 34Id) ;I

Ans$ c

9. An investor wishes to switch between a money maret mutual fund and an e"uity fund. hat would you advise him@a) It would be better to stic to one type of fund, the one that meets his investment objective.b) ?e should eep switching parts of his investment from the e"uity fund to the money maret fund as the maret rises and switchbac to the e"uity fund when the maret fallsc) ?e should switch from the money maret fund to the e"uity fund in a rising maret and switch bac to money maret fund whenthemaret fallsd) none of the above

Ans$b

5<. hich of the following characteriGe the fund that a ris averse investor should choosea) Cross dividend yield 15F eta 1.5,4!-Mars 9<b) Cross dividend yeidl 1<F, eta 1,4!-Mars 8<

c) Cross dividend yeild 11F, eta <.9,4!-Mars :<



d) Cross dividend yield 1%F, eta EEE14!-Mars :< Ans$c

51. A mainstream diversified debt fund is most affected bya) ;e-investment risb) +i"uidity risc) Interest rate risd) /efault ris

Ans$c

5%. If yield is e!pected to fall, a debt fund manager will do all of the following e!cepta) 3ell short maturity securities and buy long maturity securitiesb) 3ee that the fundEs average duration becomes longer than the maretEs average durationc) 3ell long duration securities and buy short duration securitiesd) 3ell high coupon securities and buy low coupon securities

Ans$c

5. In which type of schemes should an unmarried professional woring in ?++ investa) 3cheme investing :<F in debt securitiesb) 5<F in e"uity funds and 5<F in income fundsc) At least 85F in e"uity funds having a higher =I4 ;atio than the maretd) All the money in a balanced fund

Ans$c

5. As per ogle, asset allocation for younger investors in distribution phase should bea) :<F e"uityR %<F debtb) 6<F e"uityR <F debtc) 5<F e"uityR 5<F debtd) d 1<<F e"uityR <F debt

Ans$b

55. ne of your friends who has invested in a mutual fund is about to get Australian citiGenship. hat would you advise@a) ?e should transfer the investment to his relativeb) ?e should get ;I approval for continuingc) ?e can continue to hold as =I are allowed to invest in mutual funds in Indiad) ?e should immediately redeem his investment since foreign citiGens are not eligible investors

Ans$c56. hich of the following is not a part of life cycle stage of an investor a) 7hildhood stage

b) 7ollege stagec) =re-retirement staged) =ost-retirement stage

Ans$b58. In which of the following the investor may need income from their investment and can not save further a) 2ransition stageb) Accumulation stagec) ;eaping staged) &one of the above

Ans$c

5:. A wealth creating affluent investor is liely to invest ina) 4"uity instruments and e"uity mutual fundsb) Coldc) 0i!ed deposits

d) /ebt funds or fi!ed income securities. Ans$a

59. hich of the following would you suggest if your client suddenly wins ;s 1 7r in a Came show .a) Invest whole amount in e"uity directlyb) Invest half in e"uity mutual funds and the other half in debt mutual fundsc) Invest in money maret mutual fund till the time he decides on the use of the moneyd) 3pend, gift and invest as per his wish

Ans$c

6<. hich of the following will result in higher percentage of e"uity than in debt during bullish phase of the e"uity maretsa) 0i!ed Asset Allocationb) 0le!ible Asset Allocationc) both a bd) neither a nor b

Ans$b



61. hich of the following is not a step to develop a model portfolio for an investor a) /evelop goalsb) /iscuss with clients relativesc) /etermine asset allocationd) /etermine sector distribution

Ans$b

6%. As per ogle, asset allocation for older investors in distribution phase should bea) %<F e"uityR :<F debt

b) <F e"uityR 6<F debtc) 5<F e"uityR 5<F debtd) <F e"uityR 1<<F debt

Ans$c

6. hich of the following is not a case of sudden wealth surge stagea) Jour client wins ;s. 1 7r in lotteryb) Jour client receives property and other assets worth 5 7r as inheritance from his unclec) Jour clients gets a yearly bonus of ;s. 5 lacd) All of the above

Ans$c

6. A wealth preserving affluent investor is liely to invest ina) /irect 4"uityb) ;eal 4statec) Crowth fundsd) /ebt funds or fi!ed income securities

Ans$d

65. hich of the following is false about fi!ed asset allocationa) It means maintaining the same ratio between various components of the portfoliob) It involves rebalancing the portfolio in a disciplined mannerc) It means that the portfolio would never be rebalancedd) It involves periodic review and returning to the original allocation

Ans$c

66. hich of the following is not a relevant criteria to select an e"uity funda) =ercentage of cash in portfoliob) 7oncentration of portfolio

c) Maret capitaliGation of the fundd) 2he interest rate environment Ans$d

68. hich of the following is not true about the buy and hold strategya) It is preferred by a many investorsb) It does not involve rebalancingc) It is very beneficial as investors may e!it from poor performers and invest in better onesd) All of the above

Ans$c

6:. hich of the following is not a relevant criteria to select a debt funda) 4!pense ;atiob) 2otal returnc) 7redit "uality

d) eta Ans$d

69. hich of the following is true about an e"uity fund selectiona) 0und with higher percentage in cash should be selectedb) 0unds with low maret capitaliGation have more li"uidityc) 2rac record of fund managers is not importantd) 0unds with higher !-mars are more diversified and have lower ris

Ans$d

8<. 2o reduce interest rate ris a debt mutual fund investor should invest ina) 0unds having higher yieldsb) 0unds having lower average maturityc) 0unds having higher average maturityd) 0unds with lower e!pense ratio

Ans$b



81. hich of the following is an important criteria to select a money maret funda) =ortfolio turnover b) /uration of the fundc) 2he e!pense ratiod) All of the above

Ans$d

8%. hich of the following is true about BacobEs Model =ortfolio for investors in accumulation phasea) Investment in diversified e"uity should be around15F -<F

b) Investment in income and gilt funds should be around 65F - :<Fc) Investment in li"uid funds should be around 5Fd) &one of the above

Ans$d

8. hich of the following is true about BacobEs Model =ortfolio for investors in distribution phasea) Investment in diversified e"uity should be around 15F -<Fb) Investment in income and gilt funds should be around 15F -<Fc) Investment in li"uid funds should be around 15F -< Fd) &one of the above

Ans$a

8. hich of the following would you recommend to Mr. 3harma who wants to invest ;s. lac for three monthsa) an 0i!ed /epositb) A /ebt fund having duration of yearsc) A +i"uid 0undd) A alanced 0und

Ans$c

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NISM - Mutual Fund Question Bank