NISM SERIES V A – MUTUAL FUND

DISTRIBUTORS V IMP REAL FFEL EAXM -

UPDATED QUESTIONS

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Question1 Which of these statement(s) is/are true?

A. In equity investments, the probability of losing money over a long term
is lesser than losing money in the short term
B. Fundamental Analysis consists of studying the financial statements of
a company and the candle stick charts
1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 None of the above

Correct Only A is correct

Answer
Answer Historically, equity investing has delivered higher returns than other
Explanation investment
avenues, most of the times, if one considers long investment periods.
Equity share prices generally fluctuate a lot, often without regard to
the business fundamentals. However, over long periods of time, the
share prices follow the fortunes of the firm. If the profits of the company
continue to grow over the years, the share price follows.
(In Fundamental Analysis, one does not study the charts like Candle Stick
chart etc. Study of charts is done in Technical Analysis)

Question2 How often does a mutual fund disclose the information on Total
Expense Ratio charged to a mutual fund scheme and where is this
published?
1 Daily - on the mutual fund website
2 Weekly - on the mutual fund website
3 Once a month in the fund Factsheet
4 Once a year when it makes the mandatory disclosures to SEBI and AMFI

Correct Daily - on the mutual fund website

Answer
Answer SEBI has mandated that the Asset Management Companies (AMCs) should
Explanation prominently disclose on a daily basis, the Total expense ratio (scheme-
wise, date- wise) of all schemes under a separate head – “Total Expense
Ratio of Mutual Fund Schemes” on their website.
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Question3 Identify the true statement with respect to Total Expense Ratio?
1 The AMC is not allowed to change the Total Expense Ratio of a scheme
during its
entire life time
2 The AMC can change the Total Expense Ratio and it need not be
communicated to
the unit holders as its an internal matter
3 The AMC can change the Total Expense Ratio and it has to be
communicated to all
the unit holders
4 There is no term as - Total Expense Ratio for a mutual fund scheme

Correct The AMC can change the Total Expense Ratio and it has to be
Answer communicated to all the unit holders
Answer As per SEBI regulations - The AMCs are required to send the update to the
Explanation investors
through email whenever there is a change in the expense ratio.
Question4 AMCs has to put in place a due diligence process to regulate distributors
who
.
1 has received commission received of over Rs. 25 Lakhs from a single
mutual fund
2 has raised AUM of over Rs. 25 crores from non-institutional investors
3 has presence in more than 20 locations
4 All of the above

Correct has presence in more than 20 locations

Answer
Answer SEBI has mandated AMCs to put in place a due diligence process to
Explanation regulate
distributors who
qualify any one of the following criteria:
a. Multiple point presence (More than 20 locations)
b. AUM raised over Rs. 100 crore across industry in the non-institutional
category
but including high networth individuals (HNIs)
c. Commission received of over Rs. 1 Crore p.a. across industry
d. Commission received of over Rs. 50 Lakhs from a single mutual fund
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Question5 What is the investment range for the mutual fund house to invest in debt
instruments for a Balanced Hybrid Fund?
1 20 percent and 40 percent
2 40 percent and 60 percent
3 10 percent and 30 percent
4 20 percent and 50 percent

Correct 40 percent and 60 percent

Answer
Answer Balanced Hybrid Fund: An open-ended balanced scheme investing in
Explanation equity and debt instruments. The investment in equity and equity related
instruments shall be between 40 percent and 60 percent of total assets
while investment in debt instruments shall be between 40 percent and 60
percent.
Question6 When is the Statement of Additional Information (SAI) updated ?
1 Every month
2 Before 10th of January and 10th of July every six months
3 Every three months
4 Before the end of 3 months of every financial year

Correct Before the end of 3 months of every financial year

Answer
Answer Updation of SAI - Regular update has to be done by the end of 3 months of
Explanation every financial year.
(Material changes have to be updated on an ongoing basis and uploaded
on the websites of the mutual fund and AMFI)
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Question7 Which is the first step that a mutual fund distributor should take in building
a mutual fund portfolio for his investors?
1 He should list the best performing funds for the investor to select
2 He should set the financial goals of the investor
3 He should invest the amount in a liquid fund and set a Systematic Transfer
Plan in good equity funds
4 He should list good equity funds with the lowest expense ratio for the
investor to select

Correct He should set the financial goals of the investor

Answer
Answer The selection of a mutual fund scheme for an investor will depend upon the
Explanation need that the investor has from the investment. The objective could be a
financial goal like reaching a certain level of wealth in a specified period of
time; or it could be funding a major expense related to an important life
event like education of one’s children or funding one’s retirement. The
sight of the goal must never be missed.
Therefore, the first step is to set the financial goals.

Question8 What is Indexation ?

1 Reduction of short and long term capital gains tax by using an index based
calculation
2 Benchmarking the index fund against a suitable index like Sensex / Nifty
3 Adjusting the cost of acquisition upwards to reflect the impact of inflation
4 Adjusting the cost of acquisition downward to reflect the impact of inflation

Correct Adjusting the cost of acquisition upwards to reflect the impact of inflation
Answer
Answer Indexation means that the cost of acquisition or the cost of purchase is
Explanation adjusted upwards to reflect the impact of inflation.
For eg. - A stock was purchased at Rs 100 and sold for Rs 150 after 5
years. The long term capital gains is Rs 50 on which tax is to paid. But
when adjusted for indexation (as per data released by Central Board of
Direct taxes every year), the capital gains will be reduced and the tax will
have to be paid on a lower amount.
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Question9 For which of the following fund can NSE’s MIBOR be used as an
benchmark?
1 ELSS Fund
2 Liquid Fund
3 5 year constant maturity G-sec fund
4 Long duration fund

Correct Liquid Fund

Answer
Answer NSE’s MIBOR (Mumbai Inter-Bank Offered Rate) is based on short
Explanation term money market. Liquid schemes invest in securities of upto 91 days’
maturity. Therefore, a short term money market benchmark such as NSE’s
MIBOR is suitable.

Question10 Which of these is a Passive Fund? A) Gold Sector Fund B) Gold Mining
Companies Fund C) Gold Exchange Traded Fund D) Gilt Funds
1 Both A and B
2 Only D
3 Only C
4 All A, B, C and D

Correct Only C
Answer
Answer Passive funds invest on the basis of a specified index; whose performance
Explanation it seeks to track. For eg. NIfty Index fund.

Exchange Traded Funds (traded on exchanges) are also passive funds that
generate returns in line with the index or benchmark.

So, from the above options, only Gold Exchange Traded Fund is a passive
fund.
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Question11 On which of the following factors does returns from an international fund
depend on?
1 Asset Class performance
2 Foreign currency exchange rates
3 Both 1 and 2

Correct Both 1 and 2

Answer
Answer When an Indian investor invests in equities abroad, he is essentially taking
Explanation two exposures:
• An exposure on the international equity market (asset class)
• An exposure to the exchange rate of the rupee. If the investor invests in
the US, and the US Dollar becomes stronger during the period of his
investment, he benefits; if the US Dollar weakens (i.e. Rupee becomes
stronger), he loses or the portfolio returns will be lower.

Question12 In which of the following cases is the transaction charge to be paid to

the mutual fund distributor, deducted from the gross investment of the
investor ?
1 When the investor purchases mutual fund units worth Rs 5000 through a
mutual fund distributor
2 When the investor purchases mutual fund units worth Rs 15000 through a
mutual fund distributor
3 When the investor purchases mutual fund units worth Rs 5000 through the
website of the mutual fund
4 When the investor purchases mutual fund units worth Rs 15000 through
the website of the mutual fund

Correct When the investor purchases mutual fund units worth Rs 15000 through
Answer a mutual fund distributor
Answer SEBI has allowed a transaction charge per subscription of Rs. 10,000/- and
Explanation above to be paid to distributors of the mutual fund products. However,
there shall be no transaction charges on direct investments. The
transaction charge, if any, is deducted by the AMC from the
subscription amount and paid to the distributor; and the balance amount
is invested.
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Question13 In case a fund manager is managing more than six funds, then
in all
Performance related advertisements.
1 the total number of schemes managed by him has to be disclosed
2 performance data need not be given
3 performance data of top 2 and bottom 2 schemes has to be disclosed
4 performance data of top 3 and bottom 3 schemes has to be disclosed

Correct performance data of top 3 and bottom 3 schemes has to be disclosed

Answer
Answer When the performance of a particular mutual fund scheme is advertised,
Explanation the advertisement shall also include the performance data of all the other
schemes managed by the fund managers of that particular scheme.
In case the number of schemes managed by a fund manager is more
than six, then the AMC may disclose the total number of schemes
managed by that fund manager along with the performance data of top
3 and bottom 3 schemes managed by that fund manager in all
performance related advertisements
Question14 At what price can investors buy or sell units of an open-ended fund after
the New Fund Offer?
1 The NAV of the mutual fund units
2 The New Fund Offer (NFO) price
3 The face value
4 The monthly average price

Correct The NAV of the mutual fund units

Answer
Answer Investors of an open ended fund can buy and sell mutual fund units as per
Explanation its current Net Asset Value - NAV price.
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Question15 Identify the true statement(s) with respect to Scheme Performance

Disclosures?
A) The data related to fund performance of all mutual funds is available on
the AMFI website
B) SEBI has mandated disclosure of performance data by all the AMCs
1 Only A is true
2 Only B is true
3 Both A and B are true
4 Both A and B are false

Correct Both A and B are true

Answer
Answer AMFI website (www.amfiindia.com) carries the performance data of all the
Explanation mutual fund schemes.
SEBI has mandated disclosure of performance data by all the asset
management companies (AMCs). These disclosures can be accessed
through certain scheme documents and website of the fund house.

Question16 When a dividend is paid, the NAV of the units to that extent.
1 rises
2 falls
3 There is no change

Correct falls
Answer
Answer In a dividend pay-out option, the fund declares a dividend from time to
Explanation time. When
a dividend is paid, the NAV of the units falls to that extent.
The reduced NAV, after a dividend pay-out is called ex-Dividend NAV.
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Question17 When compared to open ended funds, investors in close ended funds face
a higher level of .
1 Credit risk
2 Liquidity risk
3 Market risk
4 Investment risk

Correct Liquidity risk

Answer
Answer Investors may choose the close-ended funds only if they can keep the
Explanation money locked- in such schemes. Although they are listed on stock
exchanges, many a times there is very low liquidity / volumes and also the
price could be lower than NAV.
Anyone, who prefers liquidity option, should consider investing in
open- ended funds.

Question18 Can the fundamental attributes of scheme be changed? If yes - how?

1 Yes- but with the consent of 100% of the unit holders
2 Yes - with the permission of SEBI and AMFI
3 Yes - but this should be communicated to unit holders who should be
provided an option to exit the scheme
4 No - the fundamental attributes cannot be changed as it is based on these
attributes that investors have invested their money

Correct Yes - but this should be communicated to unit holders who should be
Answer provided an option to exit the scheme
Answer The trustees shall not permit a change in the fundamental attributes of the
Explanation scheme or any other change that will affect the interests of the unit
holders unless a written communication is sent to each unitholder, a
notice is given in the newspaper with national circulation and the
unitholders are given the option to exit at NAV without paying an exit
load.
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Question19 is considered as an Institutional Investor.

1 Non-Resident Indians
2 Trusts
3 Persons of Indian Origin (PIO)
4 High Networth Individuals

Correct Trusts
Answer
Answer Charitable Trusts / Private Trusts are considered as institutional investors.
Explanation
Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO) / HNIs are
individual
investors.
Question20 If a Segregated portfolio is created, it shall be effective from .
1 the day of credit event
2 seven days prior to the credit event
3 one year from the date of the credit event
4 the day that security was bought in the portfolio

Correct the day of credit event

Answer
Answer To ensure fair treatment to all investors in case of a credit event and to deal
Explanation with the liquidity risk, in December 2018, SEBI permitted creation of
segregated portfolio of debt and money market instruments by mutual
funds schemes. “Segregated portfolio” means a portfolio, comprising of
debt or money market instrument affected by a credit event, that has been
segregated in a mutual fund scheme.
Segregated portfolio shall be effective from the day of credit event.
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Question21 The empanelment of a mutual fund distributor by an Asset Management

Company can be terminated .
1 In case all the investors of the distributors shift to direct plans
2 When the term of empanelment is over
3 Any time by the AMC
4 All of the above

Correct Any time by the AMC

Answer
Answer The AMC has the power to terminate the empanelment of the mutual fund
Explanation distributor at any time.

Question22 The AMFI Code of Ethics (ACE) sets out .

1 The standards of good practices to be followed by the AMCs in their
operations and in their dealings with investors, intermediaries and the
public.
2 The standards of good practices to be followed by the AMCs in their
operations and in their dealings with mass media
3 The standards of good practices to be followed by mutual fund distributors
in their dealings with AMFI, AMCs and investors
4 The standards of good practices to be followed by fund managers in their
dealings with AMFI and investors

Correct The standards of good practices to be followed by the AMCs in their

Answer operations and in their dealings with investors, intermediaries and the
public.
Answer One of the objectives of the Association of Mutual Funds in India (AMFI) is
Explanation to promote the investors’ interest by defining and maintaining high ethical
and professional standards in the mutual fund industry.
The AMFI Code of Ethics (ACE) sets out the standards of good practices
to be followed by the Asset Management Companies (AMCs) in their
operations and in their dealings with investors, intermediaries and the
public.
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Question23 Who handles the appeals which are made against the rulings of SEBI ?
1 Company Law Board
2 AMFI
3 Securities Appellate Tribunal
4 High Court

Correct Securities Appellate Tribunal

Answer
Answer Persons aggrieved by an order of Adjudicating Officer passed under the
Explanation SEBI Act can prefer an appeal to Securities Appellate Tribunal (SAT)
under section 15T of the SEBI Act.

Question24 forms the basis of appointment of a distributor by an AMC.

1 SEBI approval
2 Agreement between the investor and the distributor
3 Power of attorney from the AMC
4 An agreement between the AMC and the Distributor

Correct An agreement between the AMC and the Distributor

Answer
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Question25 A mutual fund scheme can invest in the equity instruments of a

company.
1 5% of the net assets
2 10% of the net assets
3 15% of the net assets
4 25% of the net assets

Correct 10% of the net assets

Answer
Answer The SEBI Regulations provide for various limits to the kind of investments
Explanation that are possible in mutual fund schemes. One of the restriction is -
The Mutual Fund under all its schemes shall not own more than 10
percent of a company’s paid up capital bearing voting rights. Provided
no sponsor of a mutual fund, its associate or group company including
the Asset Management Company of the fund, through the schemes of the
mutual fund or otherwise, individually or collectively, directly or
indirectly, have 10 percent or more of the shareholding or voting rights in
the asset management company or the trustee company of any other
mutual fund.

Question26 Identify the false statement(s).

A) The best strategy in selecting a mutual fund scheme is that based on
its past performance
B) When an investor wants to redeem from a scheme, the distributor must
suggest redemption from the scheme with the maximum exit load
1 Only statement A is false
2 Only statement B is false
3 Both statements A and B are false

Correct Both statements A and B are false

Answer
Answer Experience has shown time and again, the top performers during one
Explanation period may not necessarily remain as a top performer forever or near the
other top performers and vice versa. In such a case, simply buying into a
scheme due to good returns in the recent past may not be a wise approach.
When an investor wants to redeem from a scheme, the distributor must
suggest redemption from the scheme with the minimum exit load.
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Question27 Which of the following statement is true with respect to 'Mark to Market' ?
1 Securities in the portfolio are valued at current market prices
2 Securities in the portfolio are valued at 52 week high prices
3 Securities in the portfolio are valued at 52 week low prices
4 Securities in the portfolio are valued at purchase price

Correct Securities in the portfolio are valued at current market prices

Answer
Answer The process of valuing each security in the investment portfolio of the
Explanation scheme at its current market value is called Mark to Market (MTM). The
mark-to-market valuation is done on a daily basis for calculation of daily
NAV of a mutual fund scheme.
Question28 Identify the TRUE statement(s)
a) In an Assured Return scheme, if the scheme is not able to pay the
assured return amount then the guarantor has to pay the same
b) Investor returns might vary from the scheme returns on account of
choices regarding investment schedule
c) The returns published in a mutual fund advertisement factor the entry
or exit load, as may be applicable.
1 'b' and 'c' are true
2 'a' and 'c' are true
3 'a' and 'b' are true
4 All 'a' , 'b' and 'c' are true

Correct 'a' and 'b' are true

Answer
Answer Mutual funds are not permitted to promise any returns, unless it is an
Explanation assured returns scheme. Assured returns schemes call for a guarantor who
is named in the SID. The guarantor will need to write out a cheque, if the
scheme is otherwise not able to pay the assured return.
Investor returns might vary from the scheme returns also on account of
choices regarding investment schedule, i.e., additional investment being
made during the period or redeeming a portion of the investment. In such
a case, for the same period investor’s returns may be different from the
published returns of the scheme.

The returns published in a mutual fund advertisement would be without

factoring the entry or exit load, as may be applicable.
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Question29 To measure the fund manager’s performance, the difference between

scheme’s actual return and its optimal return is calculated and this is
known as .
1 Alpha
2 Beta
3 Sharpe
4 Treynor

Correct Alpha
Answer
Answer The difference between a scheme’s actual return and its optimal return is
Explanation its Alpha—a measure of the fund manager’s performance. Alpha, therefore,
measures the performance of the investment in comparison to a suitable
market index. Positive alpha is indicative of outperformance by the fund
manager; negative alpha might indicate under-performance.

Question30 Who issues a due diligence certificate stating compliance with all legal
formalities at the time of making a new offer of mutual fund units?
1 Board of Trustees
2 AMC
3 Compliance Officer
4 Custodian

Correct AMC
Answer
Answer The cover page of Scheme Information Document (SID) has the following
Explanation standard clause - “The particulars of the Scheme have been prepared in
accordance with the
Securities and Exchange Board of India (Mutual Funds)
Regulations 1996, as amended till date, and filed with SEBI, along with a
Due Diligence Certificate from the AMC (Asset Management Company).
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Question31 A synopsis of the scheme related information documents is found in the .

1 Statement of Additional Information - SAI
2 Articles of Association
3 Trust Deed
4 Key Information Memorandum – KIM

Correct Key Information Memorandum - KIM

Answer
Answer Scheme Information Document (SID) and Statement of Additional
Explanation Information (SAI) contain the details of the particular scheme and the
statutory information about the mutual fund or AMC, that is offering the
scheme.
Key Information Memorandum - KIM is essentially a summary of the SID
and SAI. It contains the key points of these documents that are essential
for the investor to know to make a decision on the suitability of the
investment for their needs. It is more easily and widely distributed in the
market. As per SEBI regulations, every application form is to be
accompanied by the KIM.

Question32 What will happen if one of the joint holders of a mutual fund folio dies?
1 The folio will be cancelled and the amount refunded
2 The units will be transferred to nominee/s
3 The units will be transferred to heir of deceased holder
4 The units will continue to be held by surviving joint holders

Correct The units will continue to be held by surviving joint holders

Answer
Answer Transmission is the process of transferring units to the person entitled to
Explanation receive it in the event of the death of the unit holder. If a folio is jointly held
and has nominations, the right of the joint holder will be given priority.
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Question33 Identify the true statement(s) –

A) The nominee is the beneficial owner of the mutual fund units
B) Nomination does not create any title or beneficial interest in the units
in favour of the nominee after the death of the unit-holder
1 Only A is true
2 Only B is true
3 Both A and B are true
4 Both A and B are false

Correct Only B is true

Answer
Answer Nomination is only an authorization for the mutual fund to transfer the units
Explanation to the nominee in the event of demise of the unit-holder. The nominee
holds the units in trust for the legal heirs of the investor. It does not create
any title or beneficial interest in the units in favour of the nominee after the
death of the unit-holder.
An investor in a mutual fund scheme is the beneficial owner of the units
one has bought.
Question34 Which investor need not provide a PAN card at the time of making a mutual
fund investment ?
1 Investor who is investing up to Rs. 50,000 in a mutual fund scheme
(excluding SIPs) per year per mutual fund
2 Investor who is investing up to Rs. 50,000 in a mutual fund scheme
(including SIPs) per year per mutual fund
3 Investor who is investing up to Rs. 1,00,000 in a mutual fund scheme
(excluding SIPs) per year per mutual fund
4 Investor who is investing up to Rs. 1,00,000 in a mutual fund scheme
(including SIPs) per year per mutual fund

Correct Investor who is investing up to Rs. 50,000 in a mutual fund scheme

Answer (including SIPs) per year per mutual fund
Answer The following categories of investors are exempt from producing PAN:
Explanation - In case of transactions undertaken on behalf of Central/State government
and by officials appointed by the court.
- Investors residing in the state of Sikkim.
- UN entities/Multilateral agencies exempt from paying taxes/filing tax
returns in India.
- Investments (including SIPs and lump sum investments) in Mutual Fund
schemes upto Rs. 50,000/- per investor per year per mutual fund.
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Question35 The Securities Transaction Tax levied on re-purchase of units of debt

mutual funds is .
1 0.00%
2 0.03%
3 0.25%
4 STT is not applicable

Correct STT is not applicable

Answer
Answer STT is not applicable to transactions in debt securities or debt mutual fund
Explanation schemes.
When an investor sells units of an equity fund in the stock exchange, or
offers them for repurchase to the fund, he will have to incur Securities
Transaction Tax (STT) i.e. STT is applicable only on redemption/switch to
other schemes/sale of units of equity oriented mutual funds whether sold
on stock exchange or otherwise. STT is not applicable on purchase of
units of an equity scheme.

Question36 If a third party payment is to be made for subscribing to a mutual fund

scheme, then which of the following is/are essentially required?
1 The minimum investment has to be Rs. 50,000
2 The third party has to PAN details and also comply with the KYC norms
3 The third party should also have a folio with the mutual fund
4 All of the above

Correct The third party has to PAN details and also comply with the KYC norms
Answer
Answer Compliance with the KYC norms and providing the PAN details are
Explanation mandatory by the third party making the payment irrespective of the
amount involved.
The third party need not have a folio with the mutual fund.
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Question37 Which document has the statutory information about the mutual fund or
AMC, that is offering the scheme.
1 Scheme Information Document (SID)
2 Statement of Additional Information (SAI)
3 Red Herring Prospectus
4 Fund Fact Sheet

Correct Statement of Additional Information (SAI)

Answer
Answer Statement of Additional Information (SAI), has statutory information about
Explanation the mutual fund or AMC, that is offering the scheme. Therefore, a single SAI
is relevant for all the schemes offered by a mutual fund.
(Scheme Information Document (SID) has details of the particular scheme)

Question38 A minor has one more year to become a major. A 3 year SIP is started in the
minors folio. Which of the following statement is true in this case?
1 The SIP will be registered for 3 years
2 The SIP will be registered for only 2 years
3 The SIP will be registered for only 1 year till the investor attains majority
4 The SIP will be registered for 3 years from the date of attaining majority

Correct The SIP will be registered for only 1 year till the investor attains majority
Answer
Answer Standing instructions like Systematic Investment Plans (SIP) are registered
Explanation in a minor folio only till the date of the minor attaining majority, even
though the instructions may be for an extended period.

When the minor is approaching the age of majority, AMCs usually send
letters advising the guardian and the minor to submit the form along with
prescribed documents to change the status of the account/folio to
"major".
All SIP, STP, SWP and any other standing instruction registered in the
minor's account are suspended if the documents are not received by the
date when the minor attains majority.
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Question39 One of the objectives of is to undertake nationwide investor

awareness programme to promote proper understanding of the concept
and working of mutual funds
1 SEBI
2 BSE / NSE
3 AMFI
4 NISM

Correct AMFI
Answer
Answer Association of Mutual Funds in India (AMFI) is the association of all the
Explanation registered Asset Management Companies. One of the objectives of AMFI is
to undertake nationwide investor awareness programme to promote proper
understanding of the concept and working of mutual funds.

Question40 An investor already has a folio in a mutual fund scheme where he is a

joint holder. Now he wants to do additional investments in the same
scheme as a sole holder. How can he make the change?
1 He will have to do the investments under a new folio and select the mode
of holding as single
2 He can do the investments by mentioning the mode of holding in the
application as single to apply only for the fresh investments being made
3 He can do the investment by changing the mode of holding for the
additional units after the investment has been made.

Correct He will have to do the investments under a new folio and select the mode
Answer of holding as single
Answer Once a mutual fund folio is created as a jointly held account there can be
Explanation no change in the joint holders or mode of holding - except in the event of a
death.
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Question41 Identify the false statement(s) –

A) Share certificate is a physical asset
B) Debenture is a physical asset as the paper on which it is printed has
value
1 Statement A is false
2 Statement B is false
3 Both statements A and b are false

Correct Both statements A and b are false

Answer
Answer Shares and Debentures are not physical assets. They are financial assets.
Explanation
Physical assets include Gold, Building, Art etc.

Question42 is not a mutual fund distribution channel.

1 Branches of Public sector banks
2 Branches of Reserve Bank of India
3 Branches of Private sector banks
4 Branches of Foreign banks

Correct Branches of Reserve Bank of India

Answer
Answer Reserve Bank of India or its branches are not involved in the sales and
Explanation distribution of mutual fund products.
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Question43 Who applies to SEBI for the registration of a Mutual Fund?

1 The Asset Management Company (AMC)
2 Board of Trustees
3 The Sponsors
4 Chief Fund Manager

Correct The Sponsors

Answer
Answer The application to SEBI for registration of a mutual fund is made by the
Explanation sponsors.

Question44 A investor will prefer lower risk and will settle for a lower return.
1 Aggressive
2 Adventurous
3 Moderate
4 Conservative

Correct Conservative
Answer
Answer A conservative investor is someone who wants his money to grow but
Explanation does not want to risk his principle investment. Conservative investors
choose financial products that do not fluctuate much in value, such as
conservative mutual funds
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Question45 Mutual funds must publish their unaudited accounts once every six months
.
1 on the AMFI website
2 on the AMC website
3 on the SEBI website
4 in atleast two English newspaper

Correct on the SEBI website

Answer
Answer As per SEBI rules - The mutual fund shall before the expiry of one month
Explanation from the close of each half year, shall display the unaudited financial
results on AMC website, the advertisement in this reference will be
published by the fund in at least one English daily newspaper and one
regional language newspaper.

Question46 Decisions in Tactical Asset Allocation are taken on the basis of .

1 likely behaviour of the markets
2 risk profile of the investor
3 income level of the investor
4 All of the above

Correct likely behaviour of the markets

Answer
Answer In Tactical asset allocation the allocation between the asset categories
Explanation changes dynamically. The purpose of such an approach may be to take
advantage of the opportunities presented by various markets at different
points of time.
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Question47 What does financial goal setting involve?

1 Determination of risk profile
2 Estimating the amount required for a major life event
3 Determining asset allocation

Correct Estimating the amount required for a major life event

Answer
Answer The first step in financial goal setting is to identify events in life which will
Explanation require major funding - like child education, marriage, retirement etc.
Asset allocation / Risk profile are looked into later while deciding the
investments etc.

Question48 In a mutual fund application form, if 'Direct' is mentioned in the space

provided for ARN and the choice of regular plan is indicated then the
application will be considered as .
1 Direct plan application
2 Regular plan application
3 Incomplete and rejected
4 Incomplete and sent to the investor for completion

Correct Direct plan application

Answer
Answer Investors have the option to invest (purchase or subscribe to mutual fund
Explanation units) directly without routing the investment through a distributor (Direct
Plan). In this case, the investor must mention “Direct” in the space
provided in the application form for entering the AMFI Registration Number
(ARN).
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Question49 What is the time duration in which SEBI has to approve the scheme related
documents?
1 7 working days
2 3 working days
3 14 working days
4 SEBI does not approve the documents. It gives its observations

Correct SEBI does not approve the documents. It gives its observations
Answer
Answer SEBI does not approve or disapprove the Scheme Related Documents, it
Explanation gives its observations. The mutual fund needs to incorporate these
observations in these documents. Thus, the Documents in the market are
“vetted” by SEBI, and not approved by SEBI.

Question50 An existing bond fund will tend to lose value when market interest rates .
1 Rise
2 Fall
3 remains constant
4 are equal to yields

Correct Rise
Answer
Answer Suppose an investor has invested in a debt security that yields a return of 8
Explanation percent. Subsequently, yields in the market for similar securities rise to 9
percent. It stands to reason that the security, which was bought at 8
percent yield, is no longer such an attractive investment. It will therefore
lose value.
(Conversely, if the yields in the market go down, the debt security will
gain value. Thus, there is an inverse relationship between yields and
value of such debt securities, which offer a fixed rate of interest)
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Question51 In a Corporate Bond fund, the minimum investment in highest rated

corporate bonds is percent of the total assets.
1 50
2 60
3 70
4 80

Correct 80
Answer
Answer Corporate Bond Fund: An open-ended debt scheme predominantly
Explanation investing in AA+ and above rated corporate bonds. The minimum
investment in corporate bonds shall be 80 percent of total assets (only in
AA+ and above rated corporate bonds).

Question52 Mr. Suresh invests Rs 2,00,000 in a mutual fund with a face value of Rs 10
and NAV of Rs. 50. How many units will be allotted to him?
1 4000 units
2 20000 units
3 Will be lower than 4000 units due to entry load
4 Will be lower than 20000 units due to entry load

Correct 4000 units

Answer
Answer Units are allotted as per current NAV.
Explanation The NAV is Rs 50 and the amount invested is Rs 200000
Units allotted = 200000 / 50 = 4000
(Currently there is no entry load)
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Question53 Identify the true statement(s) –

A) Beta is a measure of risk only for equity schemes
B) Variance is a measure of risk for both debt and equity schemes
C) A fall in prices of the debt securities due to default etc is known as a
'credit event'
1 Only A and B are true
2 Only A and C are true
3 Only B and C are true
4 All A, B and C are true

Correct All A, B and C are true

Answer
Answer Variance as a measure of risk is relevant for both debt and equity schemes.
Explanation Beta as a measure of risk is relevant only for equity schemes.
In the debt markets, the credit risk arises on account of three things, viz.,
default, delay in payments, or rating downgrade. Any of these may result
in fall in prices of the concerned debt securities. Such an event is also
called a 'credit event'.
Identify the true statement(s) with respect to benchmark for mutual fund
Question54 schemes.
A) For International Equity fund, the ideal benchmark will be BSE 500
index as it is a very broad based index covering 500 companies
B) For Gold ETF, gold prices will be the ideal benchmark
1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 Neither A nor B are correct

Correct Only B is correct

Answer
Answer Gold price would be the benchmark for such Gold ETF funds.
Explanation
For International Funds - The benchmark would depend on where the
scheme proposes to invest. Thus, a scheme seeking to invest in China
might have a Chinese index as the benchmark and a scheme that would
invest largely in the US market
can have S&P 500 index as the appropriate benchmark.
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Question55 Which information has to be provided by a normal investor to be identified

as an existing investor in the mutual fund?
1 PAN
2 PEKRN
3 Folio Number
4 KYC acknowledgement

Correct Folio Number

Answer
Answer An existing investor can use the application form to make fresh purchases
Explanation in other schemes of the same mutual fund or even make additional
purchases in a scheme. In this case, the assigned folio number has to be
provided and all the personal information already captured under the folio
will apply to the new investment being made also.

(The investors who are exempt from providing a PAN for their Mutual
Fund investments, should quote their PAN Exempt KYC Reference No.
(PEKRN) obtained from KYC Registration Agency)

Who has the responsibility of overseeing legal compliance in a mutual

Question56 fund?
1 The Custodian
2 The Sponsors
3 The AMC
4 The Trustees

Correct The Trustees

Answer
Answer SEBI expects Trustees to perform a key role in ensuring legal compliances
Explanation and protecting the interest of investors.
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Question57 Identify the true statement(s) with respect to stamping of application for
Non Financial transactions of a mutual fund.
A) Time stamping is relevant
B) Date stamping is pertinent
C) Date and Time stamping is done
1 All A, B and C are true
2 Only A and B are true
3 Only B and C are true
4 Only A and C are true

Correct Only B and C are true

Answer
Answer Applications for non-financial transactions like change of address and
Explanation investor’s acknowledgement are date and time stamped. However, here
stamping of time is not relevant; the date stamping is pertinent
(relevant).
Question58 Commodities as an asset class does not include .
1 Art
2 Fibers
3 Spices
4 Energy products

Correct Art
Answer
Answer Art is not a commodity. It cannot be standardised. Its valued as per the
Explanation perception of buyer etc.
Fibers (eg. -Cotton yarn), Spices (eg.- Turmeric) and Energy Products ( eg. -
Oil) are all commodities.
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Question59 The units of a Close-ended mutual fund are traded

between the unit holders/investors and on the stock exchange.
1 The Mutual Fund
2 Other unit holders/investors
3 Specially appointed market makers to enhance liquidity
4 The Sponsors

Correct Other unit holders/investors

Answer
Answer Post-NFO, the sale and purchase transactions of a close ended fund
Explanation happen on the stock exchange between two different investors, and the
mutual fund is not involved in the transaction.

Question60 Where is the information regarding investor service centers, minimum

investment amount and how to make the purchases of mutual fund
mentioned?
1 Application Form
2 Nomination Form
3 Transaction Slip
4 Key Information Memorandum (KIM)

Correct Key Information Memorandum (KIM)

Answer
Answer KIM is a summary of Scheme Information Document (SID) and Statement of
Explanation Additional Information (SAI) where in all the details of the scheme are
mentioned.
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Question61 What does 'Asset Allocation' mean?

1 Allocating a portfolio to cash
2 Allocating various mutual funds to investors
3 Allocating units to unit holders
4 Allocating a portfolio to different asset classes

Correct Allocating a portfolio to different asset classes

Answer
Answer The basic meaning of asset allocation is to allocate an investor’s money
Explanation across asset categories (like Equity, Debt, Gold etc.) in order to achieve the
objective.

Question62 A mutual fund manager is planning to invest in Indian pharma companies

as these companies are setting up new manufacturing capacities. Identify
the investment style of the fund manager.
1 Value investment style
2 Cyclical investment style
3 Target investment style
4 Growth investment style

Correct Growth investment style

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

(Value investment style is an approach of picking up stocks, which are

priced lower than their intrinsic value)
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Question63 In which document is a commentary on the current state of economy and

markets is also generally provided?
1 Statement of Additional Information (SAI)
2 Key Information Memorandum (KIM)
3 Fund Fact Sheet
4 Scheme Information Document (SID)

Correct Fund Fact Sheet

Answer
Answer Apart from providing information about the schemes in the fund fact sheet,
Explanation AMCs may also provide periodic updates on markets and the economy. The
factsheet is also used by the fund manager to communicate their views on
the economy and the markets to the investors.

Question64 Which expenses can be charged by the AMC to a mutual fund scheme?
1 Expenses which are incurred to manage the fund
2 Expenses which are incurred to launch the fund
3 Expenses which are incurred by the AMC
4 Expenses which are incurred by the investors in buying the fund

Correct Expenses which are incurred to manage the fund

Answer
Answer Expenses for managing the fund are charged to the fund. Any expense
Explanation other than investment advisory fee and recurring expenses shall be borne
by the asset management company or trustee or sponsors.
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Question65 If one wants to know the General Risk Factors, then which document
should he read?
1 Fund Fact Sheet
2 Documents filed with SEBI
3 Key information memorandum (KIM)
4 Scheme Information Document (SID)

Correct Scheme Information Document (SID)

Answer
Answer The risks in the scheme are listed in the segment on Risk Factors in
Explanation Section I, Sub- section A of the Scheme Information Document (SID). This
section includes standard or general risk factors that affect all mutual fund
schemes.
Question66 To become a mutual fund distributor in India, one has to pass an exam
which is conducted by .
1 Securities and Exchange Board of India - SEBI
2 National Stock Exchange - NSE NCFM
3 National Institute of Securities Markets - NISM
4 Association of Mutual Funds in India – AMFI

Correct National Institute of Securities Markets - NISM

Answer
Answer Distributors need to pass the NISM certification Examination (NISM-Series-
Explanation V-A: Mutual Fund Distributors (MFD) Certification Examination) and register
with AMFI.
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Question67 When should the information under Foreign Account Tax Compliance Act
(FATCA) provided?
1 Only if the investment is made from a foreign bank account
2 Only if the place of birth is other than India
3 Only if an NRI is doing the investment
4 Only if the investor is a resident of USA or Europe

Correct Only if the place of birth is other than India

Answer
Answer For applicants, including guardians, whose country of
Explanation birth/citizenship/nationality/tax residency is other than India, the
application requires additional information under Foreign Account Tax
Compliance Act (FATCA).

Question68 Identify the false statement with respect to mutual fund scheme related
documents.
1 KIM and SID are two broad types of scheme documents
2 SID has details of the particular scheme
3 SAI has statutory information about the mutual fund
4 KIM is essentially a summary of the SID and SAI

Correct KIM and SID are two broad types of scheme documents
Answer
Answer Option 1 is wrong as Scheme Information Document (SID) and Statement of
Explanation Additional Information (SAI) are primarily the two important documents.
Key Information Memorandum (KIM) is a summary of SID and SAI.
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Question69 Short term capital loss can be set off against .

1 short term capital gains only
2 short term capital gain or long term capital gain
3 long term capital gains only
4 Short term capital loss cannot be set off

Correct short term capital gain or long term capital gain

Answer
Answer As per the Income Tax Act -
Explanation - Short term capital loss is to be set off against short term capital gain
or long term capital gain.
- Long term capital loss can only be set off against long term capital gain.
- Capital loss, short term or long term, cannot be set off against any other
head of income (e.g. salaries).

Question70 Identify the true statement with respect to 'Unclaimed Dividend' in mutual
fund schemes.
1 If the plan is a regular plan, then it is the distributors responsibility that the
investor claims the dues
2 It is the sole responsibility of the investor that he/she claims the dues
3 The Asset Management Company (AMC) is expected to make a continuous
effort to remind the investors through letters to claim their dues.
4 All of the above are true

Correct The Asset Management Company (AMC) is expected to make a continuous

Answer effort to remind the investors through letters to claim their dues.
Answer Right to unclaimed amounts- AMC is expected to make a continuous effort
Explanation to remind the investors through letters to claim their dues. The Annual
Report has to mention the unclaimed amount and the number of such
investors for each scheme.
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Question71 What is fixed in a Closed-end fund?

1 The Net Asset Value
2 The Rate of Return
3 The Unit Capital
4 The Market Price

Correct The Unit Capital

Answer
Answer Close-ended Schemes have an NFO Open Date and NFO Close Date. But,
Explanation they have no Scheme Re-opening Date, because the scheme does not sell
or re-purchase units. Whatever sale-purchase of units takes place is
between the investors on the stock exchange. So the unit capital of a
closed-end fund does not change.

Question72 Identify the true statement(s) –

A) An Addendum must accompany the KIM
B) Addendum is considered to be a part of the Scheme Related Documents
1 Only A is true
2 Only B is true
3 Both A and B are true
4 None of them are true

Correct Both A and B are true

Answer
Answer While the SID, SAI and KIM need to be updated periodically, the interim
Explanation changes are updated through the issuance of an Addendum. The
addendum is considered to be a part of the scheme related documents, and
must accompany the KIM.
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Question73 Which of the statement is true with respect to applicability of TDS in case
of capital gains from mutual fund units?
1 There is NIL TDS on capital gains in mutual fund for all investors
2 TDS is required to be deducted at 10 percent on all declared dividend
3 All capital gains from mutual fund investments are subject to TDS @ 10%
4 TDS is not applicable on capital gains for resident individuals but is
applicable for
Non Resident Individuals (NRI)

Correct TDS is not applicable on capital gains for resident individuals but is
Answer applicable for Non Resident Individuals (NRI)
Answer There is no TDS on re-purchase proceeds to resident investors. However,
Explanation for certain cases of non-resident investments, the same is applicable.
(TDS is required to be deducted at 10 percent on the dividend amount if it
exceeds Rs. 5,000)

Question74 Which transaction of an open ended fund is based on the Net Asset Value
(NAV) pricing?
1 Purchase of units
2 Redemption of units
3 Both purchase and redemption of units

Correct Both purchase and redemption of units

Answer
Answer Purchase and redemption of units are always done based on the NAV of the
Explanation scheme.
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Question75 A mutual fund scheme performance must always be measured relative to

the .
1 Asset class
2 Index
3 Investment objective
4 Benchmark

Correct Benchmark
Answer
Answer To know how well a mutual fund scheme is performing, it has to be
Explanation compared to a pre-defined comparable benchmark.
For eg. A midcap fund can be benchmarked / compared to Nifty Midcap 50
index.

Question76 In case of any conflict between the Principles of Fair Valuation and AMC's
Valuation Guidelines, .
1 The Valuation Guidelines will prevail
2 The Principles of Fair Valuation will prevail
3 Both are same so there will never be an conflict
4 SEBI will decide which is correct

Correct The Principles of Fair Valuation will prevail

Answer
Answer In order to ensure a fair treatment to all investors, SEBI has laid down
Explanation certain fair valuation principles of mutual fund schemes.
In case of any conflict between the Principles of Fair Valuation and
Valuation Guidelines, the Principles of Fair Valuation shall prevail.
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Question77 Which type of Hybrid Fund has the least exposure to equity?
1 Aggressive Hybrid Fund
2 Balanced Hybrid Fund
3 Conservative Hybrid Fund
4 Arbitrage Hybrid Fund

Correct Conservative Hybrid Fund

Answer
Answer An Hybrid fund is classified into Aggressive, Balanced and Conservative
Explanation depending on the equity exposure of the fund.
Conservative Hybrid Fund: An open-ended hybrid scheme investing
predominantly in debt instruments. Investment in debt instruments shall
be between 75 percent and 90 percent of total assets while
investment in equity instruments shall be between 10 percent and 25
percent of total assets.
Balanced Hybrid Fund: An open-ended balanced scheme investing in
equity and debt instruments. The investment in equity related
instruments shall be between 40 percent and 60 percent of total assets
while investment in debt instruments shall be between 40 percent and 60
percent
Aggressive Hybrid Fund: An open-ended hybrid scheme investing
predominantly in equity instruments. Investment in equity instruments
shall be between 65 percent and 80 percent of total assets while
investment in debt instruments shall be between 20 percent and 35
percent of total assets.

Question78 Who is NOT authorised to attest the documents submitted for Know Your
Customer compliance, in case originals are not produced at the time of
KYC?
1 Notary Public
2 Manager of a Scheduled Commercial Bank
3 Mutual Fund distributor
4 Gazetted Officer

Correct Mutual Fund distributor

Answer
Answer In the KYC process, the supporting documents (identity and address
Explanation proof) are verified with the original documents. Alternatively, the investor
can provide a True Copy attested by a Notary Public, Gazetted Officer
or Manager of a Scheduled
Commercial Bank.
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Question79 Which of these funds has the highest risk?

1 Index Funds
2 Diversified Equity fund
3 Long Duration Funds
4 Gilt Funds

Correct Diversified Equity fund

Answer
Answer In the Risk-Return Hierarchy of mutual funds, Equity funds are always
Explanation risker then Debt funds. So in the above question, Index fund and
Diversified Equity Fund (Equity funds) will be more riskier than Gilt fund
and Long Duration fund (Debt funds).
Among Index fund and Diversified Equity fund, the latter is usually more
risker than former.

Question80 Identify the true statement(s) - A) Individuals can register upto five bank
accounts with a mutual fund B) A Non-Individual can register upto ten
bank accounts with a mutual fund
1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 Both A and B are incorrect

Correct Both A and B are correct

Answer
Answer Mutual funds provide investors the facility to register multiple bank
Explanation accounts to facilitate receiving the redemption, dividends and any other
pay outs from the fund.
An individual investor can register up to five bank accounts and a non-
individual investor, ten.
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Question81 When there is a need to withdraw money from a scheme (i.e. repurchase /
redemption), the distributor must assess the implications of
and on
the investors portfolio.
1 entry loads and exit loads
2 capital gains tax and exit loads
3 capital gains tax and entry loads
4 entry loads and dividend tax

Correct capital gains tax and exit loads

Answer
Answer Both taxes and loads reduce investment returns. Therefore, it is important
Explanation for the distributor to consider these two aspects during
repurchases/redemptions. This means that when there is a need to
withdraw money from a scheme, the distributor must assess the
implications of capital gains tax and exit loads.

Question82 As per SEBI rules, commissions cannot be paid to .

1 Brokers of the stock exchange
2 Banks
3 Sponsor distributors
4 Investors

Correct Investors
Answer
Answer As per SEBI rules, a mutual fund distributor has to sign a declaration
Explanation mentioning - Undertake not to rebate commission back to investors, or
attract investors through temptation of rebate/gifts, pass back of
commission etc.
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Question83 Which of these statement(s) is/are TRUE?

A) If the mutual fund units are held in demat form, they cannot be
converted in to physical form
B) When a mutual fund is redeemed or when there is a dividend pay-out,
the amount will be credited to the bank account linked to the demat
account for those mutual fund investors who opt for demat units
1 Only A is correct
2 Only B is correct
3 Both A and B are correct

Correct Only B is correct

Answer
Answer The mutual fund investor has the option to convert the demat units into
Explanation physical form. This process is called re-materialisation.

Dividends and redemption proceeds will be credited directly to the bank

account via. electronic modes such as direct credit, NEFT, NACH facility.

Question84 A trader believes that he can always outperform the market. This is an
example of bias.
1 Recency
2 Overconfidence / Optimism
3 Herd Mentality
4 Anchoring

Correct Overconfidence / Optimism

Answer
Answer Overconfidence / Optimism bias refers to a person’s overconfidence in
Explanation one’s abilities or judgment. This leads one to believe that one is far better
than others at something, whereas the reality may be quite different. Under
the spell of such a bias, one tends to lower the guards and take on risks
without proper assessment.
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Question85 Identify the TRUE statement?

1 Mutual funds which are bank sponsored are regulated by RBI and not SEBI
2 SEBI and AMFI both regulate mutual funds in India
3 Stock Exchanges regulates mutual funds in India
4 SEBI regulates mutual funds in India

Correct SEBI regulates mutual funds in India

Answer
Answer Securities markets in India are regulated by the Securities and Exchange
Explanation Board of India(SEBI). It regulates, among other entities, mutual funds,
depositories, custodians and registrars and transfer agents in the country.

(AMFI is neither a regulatory body nor a Self-Regulatory Organisation)

Question86 An investor chooses a mutual fund scheme based on whether his / her

matches with that of the scheme.

1 Investment period
2 Investment objective
3 Investment strategy

Correct Investment objective

Answer
Answer Every scheme has a pre-announced investment objective. Investors invest
Explanation in a mutual fund scheme whose investment objective reflects their own
needs and preference.
The primary objective of various schemes stems from the basic needs of
an investor, viz., safety, liquidity, and returns.
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Question87 Among these funds, which will have the lowest Interest Rate Risk?
1 Money market fund
2 Diversified Equity Fund
3 Pharma Sector fund
4 Dynamic Bond Fund

Correct Money market fund

Answer
Answer Interest rate risk is the risk that an investment's value will change as a
Explanation result of a change in interest rates. Interest rate risk is always associated
with debt funds and not equity funds.
The interest rate risk varies for bonds with different maturities. Those
with longer maturity would witness higher price fluctuations in
comparison to those with shorter maturities. A money market fund is a
type of a mutual fund that invests in high quality, short term debt
instruments, cash and cash equivalents.

Question88 Mr. Sandesh invests Rs 75 lakh in a Gilt Fund and gives a local cheque at
3.30 pm. What will be the applicable NAV for allotment of units?
1 NAV of the business day on which the funds are available for utilisation
2 Same day NAV if received before cut off time.
3 Closing NAV of the next business day
4 Closing NAV of day immediately preceding the date of application

Correct NAV of the business day on which the funds are available for utilisation
Answer
Answer For all type of debt funds (except liquid funds), if the amount is above Rs. 2
Explanation lakh, irrespective of the time of receipt of application, NAV of the business
day on which the funds are available for utilisation without availing of
any credit facility before the cut-off time (3 pm) of that day is applicable.
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Question89 Identify the true statement(s) with respect to benchmark for Sector Funds.
A) Its ideal to benchmark a sector fund against an index representing the
respective sector
B) Its advisable to benchmark a sector fund against a diversified fund to
get the correct picture
1 Only A is true
2 Only B is true
3 Both A and B are true

Correct Only A is true

Answer
Answer A sector fund would invest in only the concerned sector so the benchmark
Explanation has to be a similar index. For eg. A Banking Sector fund can be
benchmarked against S&P BSE Bankex and an Infrastructure Fund can be
benchmarked against Nifty Infrastructure Index to get the correct picture.

Question90 From which of these can the mutual fund NOT distribute dividends?
1 Income accruals
2 Dividends which are received from equity investments
3 Realized gain from sale of investments
4 Unrealized appreciation in value of investments

Correct Unrealized appreciation in value of investments

Answer
Answer SEBI guidelines stipulate that dividends can be paid out of distributable
Explanation reserves. In the calculation of distributable reserves:
• All the profits earned are treated as available for distribution.
• Valuation gains are ignored. But valuation losses need to be adjusted
against the profits.
• That portion of sale price on new units, which is attributable to valuation
gains, is not available as a distributable reserve.
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Question91 Which of these documents is not required to be submitted for investing in

mutual funds by a charitable organisation?
1 List of authorized signatories
2 Trust deed
3 Board resolution
4 Memorandum and Articles of Association

Correct Memorandum and Articles of Association

Answer
Answer A Charitable Trust does not have any Memorandum and Articles of
Explanation Association. It has a Trust Deed.

Question92 In case the units are pledged, the unit holder .

1 can sell the units after the lockin period
2 cannot sell the units
3 cannot sell but can switch the units to another scheme
4 cannot do additional purchase

Correct cannot sell the units

Answer
Answer Once units are pledged, the Unit-holder/s cannot sell or switch-out the
Explanation pledged units, until the pledgee gives a written no-objection to release the
pledge.
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UPDATED QUESTIONS

Question93 If these is a breach of the Code of Conduct by an intermediary and

a second violation by the intermediary is proved then the registration of
the intermediary is
.
1 Not renewed
2 Cancelled
3 Suspended
4 Withheld

Correct Cancelled
Answer
Answer In the event of breach of the Code of Conduct by an intermediary, the
Explanation following sequence of steps is initiated by AMFI:
• Write to the intermediary and ask for an explanation within 3 weeks.
• In case explanation is not received within 3 weeks, or is not satisfactory,
AMFI will issue a warning letter indicating that any subsequent violation
will result in cancellation of AMFI registration.
• If there is a proved second violation by the intermediary, the registration
will be cancelled, and intimation sent to all AMCs.

Question94 A person who wants to retain liquidity in his investments will invest in .
1 ELSS Schemes
2 Fixed Deposits
3 PPFs
4 Liquid Funds

Correct Liquid Funds

Answer
Answer A person who wants liquidity should invest in liquid funds as they can be
Explanation redeemed very fast.
Equity linked saving schemes (ELSS) have a lock in period of three years
Fixed Deposits and Public Provident Fund (PPF) cannot be easily
enchashed before maturity.
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UPDATED QUESTIONS

Question95 What is the maximum percentage of holding can a single investor have in a
mutual fund scheme?
1 5%
2 10%
3 20%
4 25%

Correct 25%
Answer
Answer A Scheme/Plan shall have a minimum of 20 investors and no single
Explanation investor shall account for more than 25 percent of the corpus of the
Scheme/Plan.
Question96 In a Contra Fund, the minimum investment in equity & equity related
instruments shall be of total assets.
1 40 percent
2 50 percent
3 55 percent
4 65 percent

Correct 65 percent
Answer
Answer A contra fund is an open-ended equity scheme following contrarian
Explanation investment strategy. Minimum investment in equity & equity related
instruments shall be 65 percent of total assets.
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UPDATED QUESTIONS

Question97 The investors of a mutual fund can terminate the AMC or wind up a scheme
if
% or more of the unit holders agree to it.
1 50%
2 60%
3 70%
4 75%

Correct 75%
Answer
Answer Mutual fund Investors’ Rights & Obligations -
Explanation Rights to terminate appointment of an AMC : 75 percent of unit holders
can terminate the appointment of an AMC. Also, 75 percent of the unit
holders (unit holding) can pass a resolution to wind up a scheme.

Question98 Identify which statement is true?

1 Investors cannot hold the units of a mutual fund in fraction of 1 unit
2 Investors can hold the units of a mutual fund in fraction of 1 unit
3 Investors can hold the units of a mutual fund in market lots of 50 units
4 Investors can hold the units of a mutual fund in market lots of 100 units

Correct Investors can hold the units of a mutual fund in fraction of 1 unit
Answer
Answer Investors can hold their units even in a fraction of 1 unit.
Explanation
For example, a investor is holding 650 units in a dividend re-investment
scheme of a mutual fund. On announcement of dividend, when converted
into units, could result in say addition of 20.5 units. Thus his total holding
will become 650 + 20.5 = 670.50 units - which is a fraction.
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UPDATED QUESTIONS

Question99 In case of a securitized asset, will not be an originator to a Special

Purpose Vehicle (SVP) ?
1 housing finance company
2 non-banking finance company
3 commercial bank
4 RBI

Correct RBI
Answer
Answer A securitization transaction involves sale of receivables by the originator (a
Explanation commercial bank, non-banking finance company, housing finance
company, or a manufacturing/service company) to a Special Purpose
Vehicle (SPV), typically set up in the form of a trust. Investors are issued
rated Pass Through Certificates (PTCs), the proceeds of which are paid
as consideration to the originator.
In this manner, the originator, by selling his loan receivables to an SPV,
receives consideration from investors much before the maturity of the
underlying loans.

Question100 Zero coupon securities are securities that do not pay a regular interest,
but accumulate the interest, and pay it along with the principal when the
security matures- True or False ?
1 TRUE
2 FALSE

Correct TRUE
Answer