NISM SERIES VA

INDEX

Chapter Topic Page No.

1 Investment Landscape 2

2 Concept and Role of Mutual Fund 4

3 Legal Structure of Mutual Funds in India 21

4 Legal Regulatory Framework 23

5 Scheme Related Information 25

6 Fund Distribution and Channel Management Practices 31

7 Net Asset Value, Total Expense Ratio and Pricing of Units 34

8 Taxation 37

9 Investor Services 41

10 Risk, Return and Performance of Funds 50

11 Mutual Fund Scheme Performance 53

12 Mutual Fund Scheme Selection 56

13 Numericals 58

14 Additional Questions – 1 65

15 Additional Questions – 2 129

1
 1. INVESTMENT LANDSCAPE
1. Investors decide first and then look for data to support their views. Which kind of behavioural bias is this?
a) Confirmation Bias
b) Recency Bias
c) Familiarity Bias
d) Herd Mentality

Correct Answer a) Confirmation Bias

2. What needs to be evaluated for risk profiling?

a) The need to take risks

b) The ability to take risks
c) The willingness to take risks
d) All of the Above

Correct Answer d) All of the Above

3. Which allocation gives an opportunity to take an advantage of a market fluctuation?

a) Strategic Asset Allocation

b) Tactical Asset Allocation
c) Both (a) & (b)
d) None of the Above

Correct Answer b) Tactical Asset Allocation

4. If the interest rate moved down, the price of the bond would have moved –

a) up
b) Down
c) Remained the Same
d) Equal to Face Value

Correct Answer a) up

5) The percentage target is also called as the __________

a) Strategic asset Allocation

b) Tactical asset Allocation
c) Rebalancing
d) Both (a) & (b)

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Correct Answer a) Strategic asset Allocation

6) The returns on investment without factoring inflation is called ____________

a) Real Rate of Return

b) Nominal Rate of Return
c) Interest Rate Risk
d) Market Risk Rate

Correct Answer b) Nominal Rate of Return

7) Which of the following measures one may consider as a strategy / strategies for management of
investment risks?

a) Avoid
b) Take a position to benefit from some event / development
c) Diversify
d) All of the Above

Correct Answer d) All of the Above

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 2. CONCEPT AND ROLE OF MUTUAL FUND

1. Which of the below is not a high-risk fund?

a) Banking Sector Fund
b) Diversified Equity Fund
c) Income Fund
d) Pharma Sector Fund

Correct Answer 1 Income Fund

2. Every investor should invest in as a part of his core portfolio.

a) Arbitrage Funds
b) Diversified Equity Funds
c) Sector Funds
d) Thematic Funds

Correct Answer 2 Diversified Equity Funds

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

Correct Answer 3 Gold Deposit Scheme

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

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

Correct Answer 4 False

Answer Explanation Growth Investment Style entails investing in high growth stock i.e., stocks of
companies that are likely to grow much faster than the economy.

5. An investor in an active fund bears a cost for the fund management, and takes a risks.
a) Higher, Higher
b) Lower, Higher
c) Higher, Lower
d) Lower, Lower

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 Correct Answer 5 Higher, Higher

6. Although invest in equity markets, the expected returns are in line with liquid funds.
a) Sectoral Funds
b) Arbitrage Funds
c) ELSS Funds
d) Debt Funds

Correct Answer 6 Arbitrage Funds

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

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

Correct Answer 7 FALSE

Answer Explanation A regular dividend paying mutual fund scheme can be used as a source of regular
income.

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

a) FALSE
b) TRUE

Correct Answer 8 TRUE

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

9. Tax Deferral is a key feature of .

a) Dividend Option
b) Growth Option
c) Arbitrage Fund
d) Liquid Schemes

Correct Answer 9 Growth Option

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10. Different investors have different investment needs and objectives. This is the reason Mutual Fund
offer different
a) Plans
b) Options
c) Schemes
d) time horizons

Correct Answer 10 Schemes

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

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

Correct Answer 11 Short Term Debt Funds

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

12. The prescribed ceiling for ill liquid investments is lower for , which have a greater need for
liquidity because investors can offer their units for re-purchase at any time.
a) ELSS Schemes
b) Close Ended Schemes
c) Open Ended Schemes
d) Debt Funds
Correct Answer 12 Open Ended Schemes

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

Correct Answer 13 TRUE

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

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 Also if it is expected that interest rates would go up, it would be safer to go
with Short Term Debt Funds. As the rates rise, the short-term bonds would
mature, allowing the fund manager to deploy the proceeds at higher rates.

14. Loads and taxes pull the investors returns below that earned by the Scheme - True or False?
a) TRUE
b) FALSE

Correct Answer 14 TRUE

15. An investor wishes to invest in debt mutual funds but wants high liquidity - should he invest in Fixed
Maturity Plans?
a) Yes
b) No
Correct Answer 15 No
Answer Explanation Fixed maturity plans are a kind of debt fund where the investment portfolio is
closely aligned to the maturity of the scheme.
AMCs tend to structure the scheme around pre-identified investments. So it will
not be easy to liquidate the FMPs.

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

Correct Answer 16 At prices which can be higher or lower than NAV

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

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

Correct Answer 17 balanced scheme

18. Investing in can be a risky prospect during periods of Economic Turmoil.

a) Gilt Securities
b) Debt Funds

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c) Mid Cap Funds
d) Large Cap Funds

Correct Answer 18 Mid Cap Funds

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

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

Correct Answer 19 a price that is linked to its NAV.

Answer Explanation When a scheme is first made available for investment, it is called a „New Fund
Offer‟ (NFO).
During the NFO, investors have the chance of buying the units at their face value.
Post-NFO, when they buy into a scheme, they need to pay a price that is linked to
its NAV.

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

Correct Answer 20 TRUE

21. Gold Future contracts

a) are traded on the Commodity Exchanges
b) are not standardised products
c) can be bought through Mutual Funds
d) None of the above

Correct Answer 21 are traded on the Commodity Exchanges

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

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

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Correct Answer 22 Regular Income

23. What is the effect on bond prices when interest rates rises?
a) Bond prices rises
b) Bond prices fall
c) No effect on bond prices
d) Can rise or fall depending on the performance of stock markets

Correct Answer 23 Bond prices fall

Answer Explanation Lets take an example : An investor has invested in a bond that yields a return of
9%.
Later, yields in the market for similar securities rise to 10%. So the bond, which
was bought at 9% yield, is no longer such an attractive investment. It will
therefore lose value.

24. Coupon of a debt security generally means the interest rate payable - True or False ?
a) TRUE
b) FALSE

Correct Answer 24 TRUE

25. Dividend is under the Dividend Reinvestment Plan.

a) Reinvested in the scheme at the Ex-Dividend NAV to buy additional units
b) Reinvested in the scheme at the Cum Dividend NAV to buy additional units
c) Accumulated and paid at the end of financial year
d) Accumulated and paid once a specific amount is accumulated

Correct Answer 25 Reinvested in the scheme at the Ex Dividend NAV to buy additional units

26. Which of the following is true with respect to Gold ETF's ?

a) STT will be charged on trading in Gold ETFs on a stock exchange
b) Dividends if any will be subject to Dividend Distribution Tax but will be Tax Free in the hands of the
investor.
c) Indexation benefit, irrespective of the holding period can be availed by the investors of Gold ETF's
d) Gold ETF's attract wealth tax

Correct Answer 26 Dividends if any will be subject to Dividend Distribution Tax but will be Tax Free
in the hands of the investor.

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

Correct Answer 27 FALSE

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

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

Correct Answer 28 TRUE

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

29. SIP works on two main principles which are -

a) Rupee Cost Averaging and Power of Compounding
b) Rupee Cost Averaging and Dividend Accumulation
c) Rupee Cost Averaging and Timely Profit Booking
d) Rupee Cost Averaging and Investment Discipline

Correct Answer 29 Rupee Cost Averaging and Investment Discipline

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

Correct Answer 30 FALSE

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

Correct Answer 31 does not provide any guarantee of capital protection

32. Long term debt funds would be sensible in declining interest rate scenarios - True or False?
a) TRUE
b) FALSE

Correct Answer 32 TRUE

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

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

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Correct Answer 33 More risky than the market
Answer Explanation Beta is a measure of risk of a security or a portfolio. If the Beta more than 1, this
means the security or the portfolio will rise or fall more than the index.
Simillary if the Beta of a scrip or portfolio is less than 1, this means the security or
the portfolio will rise or fall less than the index.

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

Correct Answer 34 FALSE

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

35. An Index fund has an beta of 1 - State True or False?

a) FALSE
b) TRUE

Correct Answer 35 TRUE

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

36. Is Real Estate Fund a physical asset or a financial asset?

a) Physical Asset
b) Financial Asset

Correct Answer 36 Financial Asset

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

Correct Answer 37 FALSE

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

38. cannot invest in Gold Mining Companies

a) Gold Sector Fund

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b) Gold ETF
c) Tax Saving ELSS Fund
d) Balanced Fund

Correct Answer 38 Gold ETF

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

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

Correct Answer 39 FALSE

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

40. Mutual Fund offer various plans/options in accordance to the risk profile of the investor - True or False ?
a) TRUE
b) FALSE

Correct Answer 40 FALSE

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

41. Which of the below is a physical asset?

a) GOLD Exchange Traded Funds – ETF
b) Real Estate Fund
c) Building
d) Debentures

Correct Answer 41 Building

42. A Mutual Fund scheme has a portfolio of shares whose beta is less than 1. This indicates that the scheme
is .
a) Very risky compared to the market
b) Somewhat risky than the market
c) Less risky than the market
d) Equally risky as the market

Correct Answer 42 Less risky than the market

Answer Explanation Beta is a measure of risk of a security or a portfolio. If the Beta more than 1, this
means the security or the portfolio will rise or fall more than the index. Similarly
if the Beta of a scrip or portfolio is less than 1, this means the

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 security or the portfolio will rise or fall less than the index.

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

Correct Answer 43 Equities

44. On liquidity parameters, which is most liquid?

a) Equity Shares
b) Gold
c) Bank FD
d) Real Estate

Correct Answer 44 Equity Shares

Answer Explanation Liquidity - which means the ease of buying and selling. Equity Shares are most
easy to buy and sell.

45. Prediction of equity markets in the short run is easier than in the long run - True or False ?
a) TRUE
b) FALSE

Correct Answer 45 FALSE

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

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

Correct Answer 46 Arbitrage Funds are more riskier than Sectoral Funds
Answer Explanation Arbitrage Funds make profits by using the price differences between two markets
- so they are the least risky among Equity Funds.
Sectoral Funds are the most risk funds as they are not diversified. Arbitrage Funds
have basis risk – the risk that both cash and F&O position on a company cannot
be reversed at the same time. During the time gap between unwinding of the two
positions, the market can move adverse to the scheme.

47. Which of the following is true with respect to Growth Option in Mutual Fund schemes ?

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a) The change in NAV captures the scheme performance
b) Units rise or fall depending on the scheme’s performance
c) The NAV falls as and when dividend is declared
d) Dividend Distribution Tax is applicable

Correct Answer 47 The change in NAV captures the scheme performance

Answer Explanation In Growth Option, the NAV rises or falls depending on the schemes performance.
No dividend is declared in Growth Option.

48. Gold ETF's are meant only for FI's and FII's - True or False?
a) TRUE
b) FALSE

Correct Answer 48 FALSE

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

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

Correct Answer 49 TRUE

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

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

Correct Answer 50 Diversified Equity Fund

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

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

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d) Arbitrage Fund

Correct Answer 51 Diversified debt scheme

52. An important feature of Growth Option is Tax Deferral - True or False ?

a) TRUE
b) FALSE

Correct Answer 52 TRUE

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

53. Exchange Traded Funds-ETF Gold regularly invest in good gold mining companies - True or False ?
a) TRUE
b) FALSE

Correct Answer 53 FALSE

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

54. The face value of a Mutual Fund unit in India is generally .

a) Rs 1
b) Rs 10
c) Rs 100
d) Decided by AMFI

Correct Answer 54 Rs 10
Answer Explanation As per the law, every unit has a face value of Rs. 10.
However, older schemes in the market may have a different face value.

55. Usually Diversified Equity funds are safer than Diversified Debt funds - True or False ?
a) TRUE
b) FALSE

Correct Answer 55 FALSE

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

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

Correct Answer 56 TRUE

Answer Explanation For Close Ended schemes the fund makes arrangements for the units to be traded,

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

57. is a short-term Government security?

a) Commercial Paper
b) Certificate of deposit
c) Fixed Deposit
d) T Bill

Correct Answer 57 T Bill

Answer Explanation Treasury Bills (T Bills) are short term debt instruments issued by the Reserve
Bank of India on behalf of the Government of India.
Commercial Papers are short term securities (upto 1 year) issued by companies.

58. Due to the Index scheme's performance could be higher or lower than that of the benchmark.
a) Market Volatility
b) Bull Run
c) Tracking Error
d) Systematic Risks

Correct Answer 58 Tracking Error

Answer Explanation Gaps between the scheme performance, and that of the benchmark, are called
tracking errors. An index fund manager would seek to minimize the tracking
error. Due to the tracking error, the scheme performance could be higher or lower
than that of the benchmark.

59. To achieve growth by investing in equity and equity related investments, balanced with income
generation by investing in debt and money market instruments' - is the likely investment objective of a
Diversified Debt Scheme - State True or False?
a) TRUE
b) FALSE

Correct Answer 59 FALSE

Answer Explanation This is the likely objective of a BALANCED SCHEME.
The investment objective of a diversified debt scheme could be: “To generate
income by investing predominantly in a wide range of debt and money market
securities”

60. Which amongst the following has the highest to lowest risk sequence?
a) Capital Protection Oriented Funds - Monthly Income Plans - Balanced Funds (Flexible Allocation)
b) Monthly Income Plans - Balanced Funds (Fixed Allocation) - Balanced Funds (Flexible Allocation)

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c) Capital Protection Oriented Funds - Balanced Funds (Flexible Allocation) - Monthly Income Plans
d) Balanced Funds (Flexible Allocation) - Monthly Income Plans - Capital Protection Oriented Funds

Correct Answer 60 Balanced Funds (Flexible Allocation) - Monthly Income Plans - Capital
Protection Oriented Funds
Answer Explanation The risk hierarchy of the above mentioned schemes ( Highest to Lowest )
is : Balanced Funds (Flexible Allocation) - Balanced Funds (Fixed
Allocation) - Monthly Income Plans - Capital Protection Oriented Funds

61. In a market correction ie. when market falls, the can decline much more than .
a) Value Funds , Growth Funds
b) Growth Funds , Value Funds
c) Index Funds , Sectoral Funds
d) None of the above

Correct Answer 61 Growth Funds , Value Funds

62. invests mainly in Corporate Bonds.

a) Diversified Equity Schemes
b) Diversified Debt Schemes (Income Funds)
c) Nifty Index Funds
d) Gold Funds

Correct Answer 62 Diversified Debt Schemes (Income Funds)

63. A monthly income is assured in a MIP - Monthly Income Plan - State True or False?
a) TRUE
b) FALSE

Correct Answer 63 FALSE

Answer Monthly Income Plan tries to declare a dividend every month; however the
Explanation same is not assured as MIP has an element of equity in its portfolio.

64. Mr. Gupta invests Rs 1 crore in a Gilt Mutual Fund scheme and gives a local cheque at 1 pm. Which will
be the applicable NAV for allotment of units to Mr. Gupta?
a) Closing NAV of the day on which the application was made
b) NAV of the business day on which the funds are available for utilization before the cut-off time of that
day is applicable.
c) Next business day NAV
d) Closing NAV of the day immediately preceding the application day

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Correct Answer 64 NAV of the business day on which the funds are available for utilisation before
the cut-off time of that day is applicable.
Answer Explanation For all Equity oriented funds and Debt funds (except liquid funds) if the
transaction is more than Rs. 2 lakhs : Irrespective of the time of receipt of
application, NAV of the business day on which the funds are available for
utilisation before the cut-off time of that day is applicable. (If it is below Rs 2
lakhs - Same day NAV if received before cut off time ie. 3 pm)

65. Fund Age is an more important criteria to be studied while investing in .

a) Debt Schemes
b) Equity Schemes
c) Treasury Bonds
d) None of the above

Correct Answer 65 Equity Schemes

Answer Explanation A Mutual fund scheme with a long history has a track record that can be studied
before deciding on investments. Fund age is very important for equity schemes,
where there are more investment options, and divergence in performance of
schemes within the same category tends to be more.

66. Which schemes of a Mutual Fund offer the advantages of diversity of asset classes in a single scheme?
a) ELSS Schemes
b) Index Schemes
c) Balanced Schemes
d) Debt Schemes

Correct Answer 66 Balanced Schemes

Answer Explanation A balanced scheme invests in a mix of equity and debt securities and offers
advantages of both the asset classes

67. A Flexible Asset Allocation scheme is an example of Passive Investment strategy - State True or False ?
a) TRUE
b) FALSE

Correct Answer 67 FALSE

Answer Explanation A Flexible Asset Allocation scheme switches a large part of their portfolio
between debt and equity, depending on the views of the fund manager on the
respective markets. This is a very active investment strategy and not a passive one.
Passive funds invest on the basis of a specified index, whose performance it seeks
to track.

68. An investor does not wish to take any equity exposure- so investing in Monthly Income Plan (MIP)
schemes will be a good option for him - State True or False ?

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a) TRUE
b) FALSE

Correct Answer 68 FALSE

Answer Explanation MIP also invests a small portion of its funds in equity. So investors, who do not
wish to take any equity exposure, should opt for a regular debt fund.

69. An index fund manager would seek to minimize the .

a) Delta Error
b) R Squared factor
c) Tracking Error
d) Arbitrage between Cash and Future markets

Correct Answer 69 Tracking Error

Answer Explanation Gaps between the scheme performance, and that of the benchmark, are called
tracking errors. Since Index funds are benchmarked to an index like Sensex, Nifty
etc, the fund manager will try to minimise the difference in returns (tracking error)
of his fund and the benchmark.

70. The main advantage of investing in a Mutual Fund is

a) Portfolio Diversification
b) Portfolio Concentration
c) Portfolio Balancing
d) None of the above

Correct Answer 70 Portfolio Diversification

Answer Explanation Even a small investment in a mutual fund scheme can give investors a
diversified investment portfolio.

71. A major factor affecting the rate of interest of a corporate deposit is

a) the assets it has
b) the market share its product has
c) the profits of the company
d) the credit rating assigned to it

Correct Answer 71 the credit rating assigned to it

Answer Explanation The interest rate offered by Corporate Deposits depends on the credit rating
assigned to it. Higher the credit risk, higher is likely to be the interest rates
offered.

72. Mutual funds offer facilities that help investor invest constant amounts regularly through a
a) Systematic Withdrawal Plan
b) Systematic Transfer Plan

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 c) Systematic Saving Plan
d) Systematic Investment Plan

Correct Answer 72 Systematic Investment Plan

73. If an investor wishes to beat the benchmark and is also ready to bear the risks, then he should opt for
Actively managed funds - State True or False ?
a) TRUE
b) FALSE

Correct Answer 73 TRUE

Answer Explanation Actively managed funds are funds where the fund manager has the flexibility to
choose the investment portfolio. The fund manager invests in better performing
sectors so that the returns are better than the benchmark index. However this
strategy could also give lower or negative returns if the fund managers predictions
go wrong.

74. Floating rate debt securities tend to hold their values, even if interest rates fluctuate - State True or
False?
a) TRUE
b) FALSE

Correct Answer 74 TRUE

Answer Explanation A debt instrument with a variable interest rate is known as a “floater” - a floating
rate note‟s interest rate is tied to a benchmark. Floating rate debt securities tend to
hold their values, even if interest rates fluctuate

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 3. LEGAL STRUCTURE OF MUTUAL FUND IN INDIA

1) Who makes the application to SEBI for registration of a mutual fund?

a) Sponsor
b) Registrar
c) Custodian
d) Both (b) & (c)

Correct Answer a) Sponsor

2) The Asset Management Company is required to invest not less than ___________of the amount which
would be raised in the New Fund Offer or Rs. _________ whichever is less in such option of the scheme as
may be specified by SEBI.

a) 2%, 10 Lacs
b) 1%, 50 Lacs
c) 2%, 50 Lacs
d) 1%, 10 Lacs

Correct Answer b) 1%, 50 Lacs

3) Which of the options from the following are the depositories in India?
a) NSE, BSE
b) NSDL, CDSL
c) Both (a) & (b)
d) None of the Above

Correct Answer b) NSDL, CDSL

4) The RTA maintains investor records as well as allots or redeems units, processes purchase/ redemption /
switch requests, dividends etc.

a) True
b) False

Correct Answer a) True

5) Which of the Following is rated by a credit rating Agency?

a) Equity Shares

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b) Equity Oriented Mutual Funds
c) Debt Funds
d) All of the Above

Correct Answer c) Debt Funds

6) AMFI is a regulatory body & a Self – Regulatory Organisation (SRO)

a) True
b) False

Correct Answer b) False

7) After passing NISM Certification Examination (NISM Series V A Mutual Fund Distributors (MFD)
Certification Examination), what is the next step from the following?

a) Get Directly Engaged with Selling Mutual Funds

b) Register with AMFI
c) Register with an AMC
d) None of the Above

Correct Answer b) Register with AMFI

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 4. LEGAL AND REGULATORY FRAMEWORK

1. AGNI (AMFI Guidelines & Norms for Intermediaries) is ____________

a) Code of conduct for intermediaries

b) Rules & Regulations
c) Terms & Conditions
d) None of the Above

Correct Answer a) Code of conduct for intermediaries

2. AGNI (AMFI Guidelines & Norms for Intermediaries) is mandated by ____________

a) Association of Mutual Funds in India (AMFI)

b) AMFI & Securities Exchange Board of India (SEBI)
c) Reserve Bank of India
d) SEBI

Correct Answer a) Association of Mutual Funds in India (AMFI)

3. The Mutual Fund Investor can pledge the units

a) True
b) False

Correct Answer a) True

4) AMFI instructs with ___________ on all issues related to Mutual Fund Industry

a) Reserve Bank of India

b) Securities & Exchange Board of India (SEBI)
c) Government
d) All of the Above

Correct Answer d) All of the Above

5) Association of Mutual Funds in India (AMFI) is not a Self-Regulatory Organization (SRO)

a) True
b) False

Correct Answer a) True

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6) Annual report of Asset Management Company (AMC) should necessarily mention the unclaimed amount
& the number of such investors for each scheme.

a) True
b) False

Correct Answer a) True

7) At the time of New Fund Offer (NFO), which document is compulsorily filed with SEBI?

a) Scheme Information Document

b) Statement of Additional information
c) Annual Report
d) Memorandum & Articles of Association

Correct Answer a) Scheme Information Document

8) Code of ethics for employees of Asset Management Company (AMC) is described by ______

a) Association of Mutual Funds in India (AMFI)

b) AMFI & Securities Board of India (SEBI)
c) Internal Audit Team
d) Trustee

Correct Answer a) Association of Mutual Funds in India (AMFI)

9) Which of the following statements is ‘False’ with respect to SEBI’s Advertising Code for mutual funds?
a) No celebrities shall form part of the advertisement
b) Advertisements can carry any slogan that is exaggerated or unwarranted or slogan that is inconsistent with
or unrelated to the nature and risk and return profile of the product.
c) No advertisement shall directly or indirectly discredit other advertisements or make unfair comparisons.
d) Both (a) & (b)

Correct Answer Advertisements can carry any slogan that is exaggerated or unwarranted or slogan
that is inconsistent with or unrelated to the nature and risk and return profile of the
product.

10) The Fund FactSheet Provides data such as –

a) SIP returns of the particular scheme
b) Portfolio allocation to different sectors & securities
c) PE Ratio, Beta & other risk measures
d) All of the Above
Correct Answer All of the Above

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 5. SCHEME RELATED INFORMATION

1. AMFI is the sole regulator of Mutual Funds in India - True or False?

a) TRUE
b) FALSE

Correct Answer 1 FALSE

Answer SEBI is the regulator of MF's in India.
Explanation

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

Correct Answer 2 AMFI

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

Correct Answer 3 FALSE

Answer An important objective of AMFI is to represent to the Government, Reserve
Explanation Bank of India and other bodies on all matters relating to the Mutual Fund
Industry

3. Mutual Funds are constituted as Investment Companies in India - True or False ?

a) TRUE
b) FALSE

Correct Answer 4 FALSE

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

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

Correct Answer 5 TRUE

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 Answer The custodian is responsible for settling all the transactions on behalf of the mutual
Explanation fund schemes.

6. Every trust has beneficiaries - True or False ?

a) TRUE
b) FALSE

Correct Answer 6 TRUE

Answer Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust,
Explanation are the investors who invest in various schemes of the mutual fund.
The Trust acts through its trustees. Therefore, the role of protecting the interests
of the beneficiaries (investors) is that of the Trustees.

7. Mutual funds are constituted as and therefore, they are governed by the .
a) Companies, Indian Companies Act
b) Trusts, Indian Trusts Act
c) Investment Agencies, SEBI Act
d) NGOs, NGO Act

Correct Answer 7 Trusts, Indian Trusts Act

8. AMC does not appoint the .

a) R&T Agent
b) Custodian
c) Banker
d) Distributor

Correct Answer 8 Custodian

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

9. Who is responsible for implementation of uniform KYC.

a) The Mutual Funds thro' their PoAs
b) Registrars
c) Depository Participants
d) KYC Registration Agencies

Correct Answer 9 KYC Registration Agencies

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

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10. The maintains investor records.
a) Registrars and Transfer Agents
b) The specific fund accountants
c) The Back Office of AMFI
d) The Fund Manager and his team

Correct Answer 10 Registrars and Transfer Agents

Answer The RTA maintains investor records.
Explanation The appointment of RTA is done by the AMC. It is not compulsory to appoint a
RTA and the AMC can choose to handle this activity in-house.

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

Correct Answer 11 AMFI

12. Who receives and delivers securities on behalf of the Mutual Fund ?
a) Authorised Stock Brokers
b) The AMC to which the fund belongs
c) Custodian
d) Merchant Bankers

Correct Answer 12 Custodian

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

13. To create the investment portfolio for a particular scheme of a Mutual Fund, the fund manager takes
into account .
a) the age and income of the investors
b) the risk profile of the investors
c) the investment objective of the scheme
d) All of the above

Correct Answer 13 the investment objective of the scheme

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

14. Advertisements regarding Mutual Fund schemes shall not contain statements which directly or by
implication or by omission may mislead the investor - State True or False ?
a) TRUE
b) FALSE

Correct Answer 14 TRUE

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

15. Who holds the securities purchased by a Mutual Fund ?

a) The AMC
b) The Fund Manager
c) The Broker through whom the transaction was done
d) The Custodian

Correct Answer 15 The Custodian

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

16. Mutual Fund distributors are appointed by .

a) The AMC
b) SEBI
c) The Trustees
d) The Custodian

Correct Answer 16 The AMC

Answer The appointment as the distributor will be at the sole discretion of the AMC and
Explanation will be subject to written confirmation by AMC.

17. The mutual fund schemes sale and purchase of investments are executed by the in the stock
market.
a) Operator
b) AMC
c) Dealer
d) Sponsor

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 Correct Answer 17 Dealer
Answer The various dealers of a Stock Broker buy and sell shares as per the orders of the
Explanation Mutual Fund.

18. A Mutual Fund Trust must have beneficiaries - State True or False ?
a) TRUE
b) FALSE

Correct Answer 18 TRUE

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

19. is responsible for settlement of Mutual Fund transactions which are executed on
the Stock Exchanges.
a) AMC
b) Stock Exchange
c) Clearing House
d) AMFI

Correct Answer 19 AMC

Answer A Stock Exchange is essentially an order routing system between the investors
Explanation and the AMC, the exchanges do not offer Settlement Guarantee.
Responsibility for settlement is that of the AMC.

20. SEBI has been given the responsibility to develop a cadre of well-trained agent-distributors for
Mutual Funds - State True of False?
a) TRUE
b) FALSE

Correct Answer 20 FALSE

Answer It is the objective of AMFI to develop a cadre of well-trained agent-
Explanation distributors and to implement a programme of training and certification for all
intermediaries and others engaged in the industry.

21. Which statement is TRUE ?

a) SEBI regulates the Mutual Fund industry in India
b) The Mutual Fund industry is largely unregulated in India
c) The Stock Exchanges regulate the Mutual Fund industry in India
d) Bank sponsored Mutual Funds are regulated by Banks and not SEBI

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 Correct Answer 21 SEBI regulates the Mutual Fund industry in India
Answer SEBI is the regulatory authority for securities markets in India. It regulates,
Explanation among other entities, mutual funds, depositories, custodians and registrars &
transfer agents in the country.

22. Who makes the application to SEBI for registration of a Mutual Fund ?
a) The AMC
b) The Trust
c) The Sponsor
d) The Fund Manager

Correct Answer 22 The Sponsor

Answer The application to SEBI for registration of a mutual fund is made by the
Explanation sponsor/s. Afterwards, the sponsor invests in the capital of the AMC.

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 6. FUND DISTRIBUTION AND CHANNEL MANAGEMENT PRACTICES
1. A distributor needs different AMFI Registration Numbers (ARN) for each Asset Management Company
(AMC)?
a) True
b) False

Correct Answer b) False

2. A Mutual Fund distributor is paid trail commission for –

a) First 5 years of investment done by investor
b) First 5 years of investment done by investor
c) First 5 years of investment done by investor
d) As long as investor holds the investment

Correct Answer d) As long as investor holds the investment

3. Agents are compensated by Mutual Funds

a) Through Salaries
b) Through Commission
c) Through an annual fee
d) Nit in cash but in kind

Correct Answer b) Through Commission

4. ARN refers to ________

a) Agent Registration Number
b) AMFI Registration Number
c) Application Registration Number
d) Account Registration Number
Correct Answer b) AMFI Registration Number

5. Commission paid at the time of investment is called _________

a) Upfront Commission
b) Rebate
c) Trail

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d) AUM retention fee

Correct Answer a) Upfront Commission

6. Distributors do not get Commission on self-business.

a) True
b) False

Correct Answer a) True

7) GST is payable by any person making taxable supplies of goods/services and whose annual turnover
exceeds Rs. _______

a) 10 Lakhs
b) 20 Lakhs
c) 30 Lakhs
d) 50 Lakhs

Correct Answer b) 20 Lakhs

8) Accordingly, the AMC / MF is liable to pay GST under reverse charge on commission paid to
unregistered distributors.

a) True
b) False

Correct Answer a) True

9) Stock brokers are permitted to distribute Mutual Fund without passing the certifying exam.

a) True
b) False

10) Trail commission is linked to valuation of portfolio in the market

a) True
b) False

Correct Answer a) True

11) Who amongst the following are not distributors for Mutual Funds?

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a) Branches of public sector bank
b) Branches of private sector bank
c) Branches of RBI
d) National Distributors

Correct Answer c) Branches of RBI

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 7. NET ASSET VALUE, TOTAL EXPENSE RATIO AND PRICING OF UNITS
1. As per the fair valuation principles laid out by SEBI, it is important to disclose the valuation policy in
a) Fund FactSheet
b) Statement of Additional information
c) Statement of Accounts
d) The fair value principles are not to be put in public

Correct Answer e) Statement of Additional information

2) Higher the appreciation in the investment portfolio, ___________ would be the NAV.
a) Higher
b) Lower
c) Depending on its Scheme

Correct Answer a) Higher

3) Which of the Following Expenses are charged to a Mutual Fund Scheme?

a) audit fees
b) custodian fees
c) in case of a capital-oriented scheme, rating fees
d) All of the Above

Correct Answer d) All of the Above

4) While investing in liquid schemes, index fund scheme and exchange traded funds, the
total expense ratio of the scheme including weighted average of the total expense
ratio levied by the underlying scheme(s) shall not exceed _______ per cent of the daily net assets of the
scheme.

a) 1
b) 2
c) 2.25
d) 1.50

Correct Answer a) 1

5) AMC can charge investment and advisory fees on the segregated portfolio.

a) True
b) False

Correct Answer b) False

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6) While investing a minimum of sixty-five per cent of assets under management in equity oriented schemes
as per scheme information document, the total expense ratio of the scheme including weighted average of
the total expense ratio levied by the underlyingscheme(s) shall not exceed ___________ percent of the daily
net assets of the scheme.

a) 1
b) 2
c) 2.25
d) 1.50

Correct Answer c) 2.25

7) NAV is to be calculated up to ____________ decimal places in the case of index funds, liquid funds and
other debt funds.

a) 1
b) 2
c) 3
d) 4

Correct Answer d) 4

8) Once a stock exchange has been selected for valuation of a particular security,
reasons for change of the exchange _____________

a) is not required for reporting by the AMC

b) shall be recorded in writing by the AMC
c) shall be disclosed only to the members of the company
d) shall be disclosed only to the SEBI

Correct Answer b) shall be recorded in writing by the AMC

9) When a security is not traded on any stock exchange for a period of _______ prior to the valuation date,
the scrip must be treated as a ‘non-traded’ scrip.

a) 30 Days
b) 15 Days
c) 6 months
d) 1 years

Correct Answer a) 30 Days

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10) In respect of convertible debentures and bonds, the non-convertible and
convertible components shall be valued separately.

a) True
b) False

Correct Answer a) True

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 8. TAXATION

1. Long Term Capital Gain Tax is Debt Schemes is charged at .

a) 20% with indexation
b) 10% without indexation
c) Lower of 1 and 2
d) There is no tax on Debt Schemes

Correct Answer 1 20% with indexation

Answer Explanation In the case of Long-Term Capital Gain, investor pays 20% with
indexation.

2. As per the Income Tax Act - which of the below option is True?
a) Capital loss, short term or long term, can be set off against any other head of income
b) Long term capital loss can be set off against long term and short-term capital gain
c) Short Term Capital gains is a tax-free income
d) Short term capital loss is to be set off against short term capital gain or long-term capital gain

Correct Answer 2 Short term capital loss is to be set off against short term capital gain or long
term capital gain

Answer A few key provisions of the Income Tax Act are :

Explanation • Capital loss, short term or long term, cannot be set off against any other
head of income (e.g. salaries)
• Short term capital loss is to be set off against short term capital gain or
long term capital gain
• Long term capital loss can only be set off against long term capital gain

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

Correct Answer 3 30%

Answer Tax on dividend distributed by debt-oriented mutual fund schemes is as follows:
Explanation Others: 30% + Surcharge + Education Cess
Individuals and HUF: 25% + Surcharge + Education Cess

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

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 Correct Answer 4 TRUE

Answer Some key provisions of IT Act related to Capital Gains are:

Explanation • Capital loss, short term or long term, cannot be set off against any other head of
income (e.g. salaries)
• Short term capital loss is to be set off against short term capital gain or long term
capital gain
• Long term capital loss can only be set off against long term capital gain

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

Correct Answer 5 10%

Answer Tax on dividend distributed is payable at 10% on dividend distributed by

Explanation equity-oriented mutual fund schemes.

6. At what rate is the Securities Transaction Tax charged on sale of units of debt oriented mutual fund in a
stock exchange?
a) 0.01%
b) 0.10%
c) 0.13%
d) 0%

Correct Answer 6 0%

Answer STT is not applicable on transactions in debt or debt-oriented mutual fund (Including
Explanation liquid fund) units.

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

.
a) Dividend Income
b) Tax Savings
c) Capital Gains
d) Interest Received

Correct Answer 7 Capital Gains

8. Investors in equity oriented schemes of mutual fund have to pay STT while buying the units.
a) 0.10%
b) 0.13%

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c) 0.001%
d) NIL

Correct Answer 8 0.001%

Answer STT of 0.001% is levied by government (Ministry of Finance) When you

Explanation decide to Buy or sell mutual fund units of an equity fund.

9. The dividend received by a Mutual Fund investor will be taxable?

a) TRUE
b) FALSE

Correct Answer 9 True

10. In a flexible asset allocation scheme of a mutual fund the investors are not sure of their taxation liability
- True or False?
a) FALSE
b) TRUE

Correct Answer 10 TRUE

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

11. All type of Mutual Funds, be it Debt or Equity, have to pay the Securities Transaction Tax (STT) - State
True or False?
a) FALSE
b) TRUE

Correct Answer 11 FALSE

Answer STT is applicable only on equity shares, derivatives and equity mutual fund units.
Explanation It is not applicable on transactions in debt or debt-oriented mutual fund (including
liquid fund) units.

12. Are Long Term Capital Gains of Equity Mutual Funds exempt from Tax - State True or False?
a) FALSE
b) TRUE

Correct Answer 12 False

Answer The Long term capital gains are taxed @10% over and above the gain of ₹ 1 Lakh.
Explanation

13. Amongst the following options, which of the following is TRUE ?

a) STT is paid on purchase of the units of Equity Mutual Funds through a stock exchange
b) STT is paid on purchase of the units of Equity Mutual Funds from the fund house
c) STT is paid on repurchase / redemption of the units of Equity Mutual Funds

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d) STT is paid on purchase of the units of Debt Mutual Funds

Correct Answer 13 STT is paid on repurchase / redemption of the units of Equity Mutual Funds
Answer Securities Transaction Tax (STT) is applicable on sale / redemption transactions
Explanation in units of equity mutual fund schemes.
There is no STT on Debt funds.

14. The Dividend Distribution Tax for liquid schemes on Individuals and HUF is
+ Surcharge + Education Cess.
a) 15%
b) 20%
c) 25%
d) 30%

Correct Answer 14 25%

Answer Dividend Distribution Tax (DDT) is as follows: Individuals and HUF: 25%
Explanation + Surcharge + Education Cess Others: 30% + Surcharge + Education Cess

15. What is the full form of:-

a) Terminal Expense Range
b) Total Expense Ratio
c) Total External Ratio
d) Terminal Expense ratio

Correct Answer 15 Total Expense Ratio

16. GST on all the fees other than investment and advisory fees shall be charged to the
Scheme within the_______ limit of TER.
a) Minimum
b) Prescribed
c) Maximum
d) None of the above

Correct Answer 16 Maximum

17. Stamp-duty is required to be paid for issue and transfer of mutual fund units with effect from
_________.
a) 1st July 2019
b) 1st March 2020
c) 1st July 2020
d) 31st March 2021

Correct Answer 17 1st July 2020.

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 9. INVESTOR SERVICES
1. Investments in Mutual Funds can be made using _________

a) Application Supported by Blocked Amount (ASBA)

b) Cash
c) Remittance
d) All of the Above

Correct Answer d) All of the Above

2. Systematic Transfer Plan (STP) is the combination of SWP & SIP.

a) True
b) False

Correct Answer a) True

3. What is the fastest way of remitting funds on real time basis?

a) National Electronic Funds Transfer (NEFT)

b) Real Time Gross Settlement (RTGS)
c) Demand Draft
d) Cheque

Correct Answer Real Time Gross Settlement (RTGSS)

4. If a client is investing Rs. 1 Crore at 2.30 pm through cheque in GILT Fund, then which day’s Net Asset
Value will he get?

a) Same day’s closing NAV

b) Next Day NAV
c) Previous Day NAV
d) NAV of the day when funds are realised

Correct Answer NAV of the day when funds are realized

5. If a client is investing Rs. 1.5 Lacs at 2.30 pm through cheque in GILT Fund, then which day’s Net Asset
Value will he get?

a) Same day’s closing NAV

b) Next Day NAV
c) Previous Day NAV
d) NAV of the day when funds are realised

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Correct Answer a) Same day’s closing NAV

6) Investor invests Rs. 50 Lacs at 3.15 Pm with a local cheque for funds other than liquid scheme, which
NAV will investor get?

a) Same day’s closing NAV

b) Next Day NAV
c) Previous Day NAV
d) NAV of the day when funds are realised

Correct Answer d) NAV of the day when funds are realized

7) An investor is doing a liquid Investment. Fund is available & time is 12.30 pm. NAV would be applicable
for the _________

a) Closing NAV of the day immediately preceding the next business day
b) Closing NAV of the day immediately preceding the date of application
c) Next Day NAV
d) Same Day

Correct Answer b) Closing NAV of the day immediately preceding the date of application

8) ___________ is a payment facility that investors can use to authorize their bank to process debits to their
specified bank account raised by a specified mutual fund for purchase of units.

a) OTM
b) YTM
c) KIM
d) None of the Above

Correct Answer a) OTM

9) Entry Load is banned in NFO.

a) True
b) False

Correct Answer a) True

10) In a 1:3 bonus issue, the investor is allotted _______

a) 1 new unit (free) for every 3 units already held

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b) 3 new units (free) for every 1 unit already held
c) 4 new units (free) for every 1 unit already held
d) 2 new units (free) for every 1 unit already held

Correct Answer b) 3 new units (free) for every 1 unit already held

11) Which of the following Categories are eligible to invest in Mutual Funds?

a) Resident Indian adult individuals, Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO), Hindu
Undivided Families (HUFs), Minor (through Guardian) & Foreign Investors
b) Resident Indian adult individuals, Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO), Hindu
Undivided Families (HUFs) & Minor (through Guardian)
c) Resident Indian adult individuals, Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO), Minor
(through Guardian) & Foreign Investors
d) Resident Indian adult individuals, Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO), Hindu
Undivided Families (HUFs) & Foreign Investors

Correct Answer Resident Indian adult individuals, Non-Resident Indians (NRIs)/Persons of Indian
Origin (PIO), Hindu Undivided Families (HUFs), Minor (through Guardian) &
Foreign Investors

12) Units in Mutual Funds will be redeemed on a First-in-First-Out (FIFO) basis.

a) True
b) False

Correct Answer b) Rs. 50,000

13) MFs/AMCs shall ensure that total subscription through e-wallets for an investor is restricted to Rs.
________ per investor per financial year.

a) Rs. 40,000
b) Rs. 50,000
c) Rs. 1,00,000
d) Rs. 1,50,000

Correct Answer b) Rs. 50,000

14. A purchase transaction of a Mutual fund scheme is completed online by an investor at 12.25 pm (web
server time). The same is processed at 3.50 pm. What is the applicable cut-off time for this transaction?
a) 12.25 pm
b) 3.30 pm
c) 3.50 pm

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d) Cut off time does not apply for online transaction

Correct Answer 12.25 pm

Answer For online transactions, the time as per the web server to which the instruction
Explanation goes, is used in determining the NAV for sale / re-purchase transactions.

15. The date of applicability of the NAV is not dependent on .

a) scheme in which the money is invested
b) time at which the application is submitted
c) place at which the application is submitted
d) All of the above

Correct Answer place at which the application is submitted

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

Correct Answer Mondays NAV

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

17. An investor gives a cheque of Rs1lacs for investing in a Debt scheme at 3.30 pm at a Mutual Fund
office. The NAV of which day will be applicable to him ?
a) NAV of the same day
b) NAV of the next business day
c) NAV of the day on which funds will be available
d) None of the above

Correct Answer NAV of the next business day

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

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

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

19. Minors can invest in Mutual Funds - True or False?

a) TRUE
b) FALSE

Correct Answer TRUE

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

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

Correct Answer FALSE

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

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

Correct Answer Board Resolution

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

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

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

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 a) TRUE
b) FALSE

Correct Answer TRUE

Answer Explanation As per SEBI guidelines, NFOs [other than ELSS and RGESS] can remain open for
a maximum of 15 days.
Allotment of units or refund of moneys, should be done within 5 business days of
closure of the scheme and Open-Ended schemes have to re-open for sale / re-
purchase within 5 business days of the allotment.

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

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

25. Which one of the below mentioned document is not required for KYC process?
a) PAN Card
b) Address Proof
c) Income Proof
d) Identity Proof

Correct Answer Income Proof

26. What is the full form of ASBA?

a) Application Supported by Blocked Amount
b) Applicants Supporting Block Amount
c) Application Supported by Bankers Acceptance
d) Applications Superiority by Blocked Amount

Correct Answer Application Supported by Blocked Amount

27. Mutual funds can accept cash to the tune of Rs___ from small investors.
a) No cash can be accepted by a MF
b) Rs 50,000
c) Rs 20,000
d) Rs 5,000

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Correct Answer Rs 50,000
Answer Explanation Mutual funds usually do not accept cash. However for small investors, who
may not be tax payers and may not have PAN/bank accounts, are allowed cash
transactions for purchase of units in mutual funds to the extent of Rs. 50,000/- per
investor, per mutual fund, per financial year.

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

Correct Answer 10th day

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

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

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

Correct Answer FALSE

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

31. Relaxation in documentation requirements for micro-SIPs is not available for .

a) Non-Resident Indians
b) Hindu Undivided Family
c) Individuals
d) All of the above

Correct Answer Hindu Undivided Family

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

32. The benefit of is that the money goes out of the investors bank account only on allotment.

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 a) ABSA
b) AABS
c) ASBA
d) ASAB

Correct Answer ASBA

Answer Explanation ASBA - Application Supported by Blocked Amount.

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

Correct Answer FALSE

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

34. Open-ended schemes, except ELSS, have to re-open for ongoing sale / re- purchase within business
days of allotment.
a) 3
b) 5
c) 10
d) 30

Correct Answer 5

35. The Transaction Slips are used by .

a) First time investors of Mutual Funds
b) NFO Investors
c) Existing Investors
d) Relatives of Existing Investors

Correct Answer Existing Investors

Answer Explanation For a first time investment in a mutual fund Full application form is to be filled.
Then once an investor has a folio with a mutual fund, subsequent investments/ sale
with the same mutual fund do not call for the full application form. Only
Transaction Slip needs to be filled and submitted.

36. Mr. Singh gives a redemption request in a liquid fund scheme at 2 pm. What would be the applicable
NAV for this re-purchase?
a) Closing NAV of the same day
b) Closing NAV of the next working day
c) Closing NAV of the previous working day
d) Closing NAV of the day preceding the next business day

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Correct Answer 25 Closing NAV of the previous working day
Answer Explanation NAV of day immediately preceding the next business day, if received before cut
off time i.e. 3:00 PM. And Next business day NAV for applications received after
cut off time.

37. Who can attest the copies of supporting documents in the KYC procedure?
a) Gazetted Officer
b) Manager of a Scheduled Commercial Bank
c) Notary Public
d) All of the above

Correct Answer 26 All of the above

Answer Explanation KYC documents can be attested by a Notary Public, Gazetted Officer or Manager
of a Scheduled Commercial Bank.

38. The facility of ASBA - 'Application Supported by Blocked Amount' is mainly for additional purchase
of Mutual Funds units - State True or False ?
a) TRUE
b) FALSE

Correct Answer 27 FALSE

Answer Explanation ASBA can only be used for IPO's of equity shares and NFO's of Mutual Funds. It
cannot be used for additional purchase.

39. In Mutual Fund transaction through a Stock Exchange,

a) the units are offered at a higher price than the NAV
b) the units are allotted by the RTA (Registrar and Transfer Agents)
c) only fresh purchase of units are allowed and not additional purchase
d) All of the above

Correct Answer 28 the units are allotted by the RTA (Registrar and Transfer Agents)
Answer Explanation The Stock Exchanges only offer a transaction platform and the allotment of units
etc. is done by the RTA.
Also fresh subscriptions in a mutual fund, as well as additional purchases are
possible. Similarly, redemptions are permitted on a Stock Exchange.

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 10. RISK, RETURN AND PERFORMANCE OF FUND
1. Performance of fund must always be measured relative to the _______.
a) Investment objective
b) Index
c) Benchmark
d) Asset class

Correct Answer 1 Benchmark

2. Mutual funds are not permitted to use derivatives for hedging?

a) True
b) False

Correct Answer 2 True

3. Risk can be measured by

a) Standard deviation
b) Beta
c) Variance
d) Any of the above

Correct Answer 3 Any of the above

4. Which fund has the highest risk?

a) index fund
b) balanced fund
c) arbitrage fund
d) sector fund

Correct Answer 4 Sector fund

5. Risk adjusted return is measured by

a) Standard Deviation
b) Sharp ratio
c) Treynor ratio
d) Both b & c

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Correct Answer 5 Both b & c

6. Benchmark of sectoral fund investing in banking sector would be ______.

a) BSE Bankex
b) Nifty Junior
c) S&P 500
d) NIFTY 50

Correct Answer 6 Both BSE Bankex

7. ___________ style is an approach of picking up stocks, which are priced lower that their intrinsic value,
based on fundamental analysis.
a) Growth investment
b) Value investment
c) Top Down
d) Bottom Up

Correct Answer 7 Value investment

8. ______ style entails investing in high growth stocks i.e stocks of companies that are likely to grow much
faster than the market.
a) Growth investment
b) Value investment
c) Top Down
d) Bottom Up

Correct Answer 8 Growth investment

9. Debt securities that are to mature within ______ are called money market security.
a) 91 days
b) a year
c) 180 days
d) 2 years

Correct Answer 9 A year

10. Which fund has the highest risk?

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a) Liquid
b) Fixed Maturity Plan
c) Dynamic Bond Fund
d) Monthly Income Plan

Correct Answer 10 Monthly Income Plan

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 11. MUTUAL FUND SCHEME PERFORMANCE
1. A credible benchmark should meet the following requirements: It should be in sync with:-
a) the investment objective of the scheme
b) asset allocation pattern
c) investment strategy of the scheme
d) All of the above

Correct Answer All of the above

2. Choice of benchmark is simplest for an________.

a) index fund
b) equity fund
c) debt fund
d) hybrid fund

Correct Answer index fund

3. what is the full form of PRI?

a) Price Return variant of an Index
b) Price return index
c) Price risk index
d) performance risk index

Correct Answer Price Return Index

4. Selection of a benchmark for the scheme of a mutual fund to be in alignment with the investment
objective, asset allocation pattern and investment strategy of the scheme.
a) True
b) False

Correct Answer True

5. Mutual funds should use a composite_____ figure of the performance of the PRI benchmark (till the date
from which TRI is available) and the TRI (subsequently) to compare the performance of their scheme in
case TRI is not available for that particular period.
a) XIRR
b) CAGR

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c) RRR
d) None of the above

Correct Answer True

6. Which of the following drive the choice of benchmark in equity schemes?

a) scheme type
b) choice of investment universe
c) portfolio concentration and underlying exposure
d) All of the above

Correct Answer All of the above

7. As per the SEBI guidelines, the benchmark for debt (and balanced schemes) should be developed by
research and rating agencies recommended by ______.
a) RBI
b) SEBI
c) NSDL
d) AMFI

Correct Answer AMFI

8. Relative returns comparison is one approach towards evaluating the performance of the ____ of a scheme.
a) fund manager
b) fund
c) mutual fund company
d) market share

Correct Answer fund manager

9. Sharpe ratio is a indicates ________________ returns

a) risk-adjusted
b) high
c) both of the above
d) none of the above

Correct Answer Risk - adjusted

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10. The difference between a scheme’s actual return and its optimal return is its Alpha.
a) True
b) False

Correct Answer True

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 12. MUTUAL FUND SCHEME SELECTION
1. The core portfolio will be Invested According to long term needs and goals of the investor
a) True
b) False

Correct Answer 1 true

2. The satellite portfolio will be invested to take advantage of expected short term market movements.
a) True
b) False

Correct Answer 2 True

3. They exposure to _______ can be increased when inflation is higher or there is political, economic and
fiscal uncertainties.
a) balance fund
b) gold fund
c) sector funds
d) monthly income fund

Correct Answer 3 gold funds

4. ______ are suitable for investors looking for exposure to an asset class without the risk associated with
fund manager selection and strategies
a) Active fund
b) Passive fund
c) Both of the Above
d) None of the above

Correct Answer 4 passive funds

5. Long term guilt funds will do well when interest rates are expected to decline.
a) True
b) False

Correct Answer 5 True

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6. Equity markets are more predictable in long term then short term.
a) True
b) False

Correct Answer 6 True

7. Ratio calculated based on churning of the portfolio by the mutual fund scheme is called
a) Portfolio liquidity ratio
b) Portfolio churning ratio
c) Portfolio turnover ratio
d) Any of the above

Correct Answer 7 Portfolio turnover ratio

8. Arbitrage Fund are not meant for equity risk exposure.

a) True
b) False

Correct Answer 8 True

9. The comparable for a liquid scheme is

a) Equity scheme
b) Balance scheme
c) Saving bank account
d) Guilt fund

Correct Answer 9 Saving bank account

10. The investor in the debt scheme who completely wants to eliminate investment in equity should invest in
monthly income plan.
a) True
b) False

Correct Answer 10 False

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

a) 2 months
b) 3 months
c) 4 months
d) 6 months

Correct Answer 1 3 months

Answer Total Transactions = Rs 2000 cr Avg Asset = Rs

Explanation 500 cr
So 2000 / 500 = 4 times in a year the investments were churned
4 times a year = every 3 months.

2. The NAV of a Mutual Fund scheme is Rs 180. If the exit load is 2%, what will be the effective re-
purchase 0price?
a) 176
b) 176.4
c) 177.5
d) 177.8

Correct Answer 2 176.4

Answer Explanation Rs 180 less 2%

180 X 2 / 100 = 3.6
180-3.6 = 176.40

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

Correct Answer 3 TRUE

Answer Eg- Additional return offered by a non-government issuer ( like a Company),

Explanation above the yield that the government offers, is called yield spread. Better the
credit quality, lower the yield spread.

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

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 Correct Answer 4 Rs 360 cr

Answer Explanation Each unit is of Rs 10.

So 36 cr units X Rs 10 = Rs 360 cr

5. A Mutual Fund scheme gave an annualised return of 9.86% and the annualised Standard Deviation of the
fund is 3.47. The current risk free return is 8%. Calculate the Sharpe Ratio.
a) 0.89
b) 0.72
c) 0.49
d) 0.536

Correct 0.536
Answer 5
Answer The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation ie. ( Return
Explanation Earned - Risk free Return ) / Standard Deviation 0.536023055

6. What is the NAV if the value of stocks in a Mutual Fund scheme is Rs 100 cr, Value of Bonds is Rs 10
cr, Value of Money Market Instruments is Rs 25 cr, Dividend Accrued but not received is Rs 3 cr and Fees
payable is Rs 5 cr. The number of outstanding units is 75 lacs.

a) 173.33
b) 177.33
c) 184
d) 186.74

Correct Answer 6 177.33

Answer NAV = (Value of stocks + Value of bonds + Value of money market
Explanation instruments + Dividend accrued but not received + Interest accrued but not
received – Fees payable) / No. of outstanding units
= 100 cr + 10 cr + 25 cr + 3 cr + 0 - 5 cr / 75 lacs
= 133 cr / 75 lacs
= 177.33

7. An investor holds 5000 units of a scheme and this scheme announces a 1 : 5 bonus. How many more
units will be allotted to the investor?
a) 25000
b) 10000
c) 5000
d) 1000

Correct Answer 7 1000

Answer Bonus Ratio 1 : 5

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

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

Correct Answer 8 Rs 70

Answer Explanation PE Ratio = Market Price / EPS

7 = Market Price / 10 Market Price = 7 x 10
= 70

9. The Absolute Return is calculated using the formula .

a) (Sale Price - Cost Price) / Cost Price
b) (Cost Price - Sale Price ) / Sale Price
c) (Sale Price / Cost Price) – 1
d) 1 - (Cost Price / Sale Price)

Correct Answer 9 (Sale Price - Cost Price) / Cost Price

Answer Absolute Return or Simple Return is simply the change in the value of an
Explanation investment over a period of time.
Its not calculated on a yearly basis etc.
For eg - A person bought a MF at NAV 10 and sold it after 2 years at NAV 18,
then the Absolute Return is :
18 - 10 / 10 = 0.8 or 80% absolute return

10. The price of a company's share is Rs 100 on the stock market. The EPS of this company is Rs 10.
What is the PE ratio ?
a) Rs 1000
b) Rs 100
c) Rs 10
d) Insufficient Data

Correct Answer 10 Rs 10

Answer Explanation PE Ratio = Market Price / EPS

= 100 / 10
= 10

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

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 Correct Answer 11 198

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

12. Which of the following is a measure of market risk ?

a) Beta Coefficient
b) Sharpe Ratio
c) Treynor Ratio
d) None of the above

Correct Answer 17 Beta Coefficient

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

Correct Answer 13 Rs 128

Answer Explanation PE Ratio = Market Price / EPS

16 = Market Price / 8 Market Price = 16 x 8
= 128

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

a) 3%
b) 5%
c) 7.50%
d) 10%

Correct Answer 14 5%
Answer Treynor Ratio measures the returns earned in excess of that which would have
Explanation earned on a riskless investment.
Treynor Ratio Formula :
(Return earned on the Scheme - Risk Free Rate) / Beta of the Scheme
= (10 - 7.5) / 0.5
= 5%

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

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outstanding units:3 cr
a) 75.83
b) 80.77
c) 76.16
d) 79.17

Correct 76.16
Answer 15
Answer NAV = (Value of stocks + Value of money market instruments + Dividend accrued but
Explanation not received + Amount receivable on sale of shares – Amount payable on purchases of
shares – Fees payable) / No. of outstanding units

= 200 cr + 25 cr + 10 cr + 5 cr - 10.5 cr - 1 cr / 3 cr
= 76.16

16. The current market value of the stocks of a Mutual Fund scheme portfolio is Rs 12 cr and the current
liabilities are 7 cr. The unit capital is Rs 10 cr and the face value per unit is Rs 10. What is the current
NAV of this scheme
a) Rs 10
b) Rs 12
c) Rs 19
d) Rs 5

Correct Answer 16 Rs 5

Answer Current Valuation is Rs 12 cr less Rs 7 cr (current liability) = Rs 5 cr Thus

Explanation
the Rs 10 cr unit capital has now become Rs 5 cr ie. 50 % fall

So the Rs 10 NAV when the scheme was launched has now fallen by 50% to Rs
5.
17. Mrs. Reena purchases MF units at NAV Rs 13. After 500 days , she redeems it at NAV Rs 15.70.
What is the compounded rate of return ?
a) 13.69%
b) 14.70%
c) 15.00%
d) 15.88%

Correct Answer 17 14.70%

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 Answer The formula to find Compounded Rate of Return
Explanation [ ( End Price / Bgn Price) ^ (1/n) ] -1 End

Price = 15.70 , Begin Price = 13

n = time. We have to find yearly return so 500 / 365 = 1.369 So

[( 15.70/13 )^ 1/1.369] – 1

= (1.207 ^ 0.73) – 1

On the scientific calculator of your computer type 1.207 then use x^y key and then
type 0.73 = 1.147
1.147 - 1 = .147 x 100 = 14.7 %
18. A company has a Earning Per Share (EPS) of Rs 10 and Price to Earning (PE) ratio of 20. What will be
the market price of this company?
a) Rs 2
b) Rs 20
c) Rs 200
d) Rs 2000

Correct Answer 18 Rs 200

Answer Price to Earnings Ratio (P/E Ratio) = Market Price / EPS Market Price =
Explanation PE X EPS.
= 20 x 10 = Rs 200

19. Returns Earned : 10%, Risk Free Return : 12%, Standard Deviation : 0.5. Calculate the Sharpe Ratio.
a) 4
b) -4
c) 10
d) 0.75

Correct Answer 19 -4
Answer The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation ie. (
Explanation Return Earned - Risk free Return ) / Standard Deviation
= (10 - 12) / 0.5
= -2 / 0.5
=-4
(Sharpe Ratio will be negative if Return Earned is lower than Risk Free
Returns)

20. An investor buys an equity mutual fund scheme at NAV Rs 11 on 15 April. On 15 September the NAV
was Rs 12.50. What is the simple return on the scheme in this period?
a) 7.45%
b) 9.00%
c) 12.00%
d) 13.66%

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 Correct Answer 20 13.66 %
Answer We have to use the Holding Period formula ie. :
Explanation [ {End Price - Begin Price + Income (If Any)} / (Begin Price) ]
= [ ( 12.50 - 11 + 0) / 11 ]
= 0.1366
0.1366 x 100 = 13.66%

21. Mr. Suresh invests Rs 30000 in an equity fund. The face value of this scheme is Rs 10 and the NAV is
Rs 14. How many units will be alloted to Mr. Suresh assuming there is no entry load ?
a) 3000
b) 2142.8571
c) 3147.8744
d) 2411.1574

Correct Answer 21 2142.8571

Answer Mutual Fund units are allotted as per the current NAV. Rs 30000 / Rs 14 =
Explanation 2142.8571 units

22. Network Ltd has a share capital of Rs 100 crores and accumulated reserves of Rs 40 crores. What will
be the BOOK VALUE of its share if it has issued a total of 10 crore shares ?
a) Rs 10
b) Rs 40
c) Rs 14
d) Rs 21

Correct Answer 22 Rs. 14

Answer Book Value per Share: Net Worth / No. of equity shares
Explanation (Net worth = share capital plus reserves minus accumulated losses) In the
above question :
Net Worth = 100 cr + 40 cr = Rs 140 cr Book Value
= 140 cr / 10 cr
= Rs 14.

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 ADDITIONAL QUESTIONS - 1
1. The guideline issued by AMFI for intermediaries are known as.
a) AGNI
b) ACE
c) AMFI
d) none of above
Correct Answer: AGNI
2. The investment in MF portfolio are valued at
a) Face value of portfolio
b) cost of investment
c) Market value of portfolio
d) Book value of portfolio
Correct Answer: Market value of portfolio
3. Exit loads are generally lower for large investors.
a) TRUE
b) FALSE
Correct Answer: FALSE
4. Time stamping arrangement is must at..
a) Offices of distributors
b) AMC offices
c) Bank distributor's branch
d) Offices declared as point of acceptance
Correct Answer: Offices declared as point of acceptance
5. Unaudited accounts of the scheme must be published through
a) monthly fact sheet
b) Only at AMFI website
c) Once every six month in one national & Regional news paper
d) Only on AMC's website
Correct Answer: Once every six month in one national & Regional news paper
6. Capital gain or loss from mutual fund investment are classified as a short-term investment are if sold
within
a) 9 months
b) 6 months
c) 12 months
d) 13 months

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Correct Answer: 12 months
7. Liquid funds can not charge management fees of funds parked in a short term bank deposits.
a) TRUE
b) FALSE
Correct Answer: TRUE
8. STT is charged on
a) Equity share trading
b) Derivatives trading
c) Equity MF
d) All of the above
Correct Answer: All of the above
9. Which of the following is not required for KYC norms.
a) Proof of investment
b) Proof of Identity
c) Proof of address
d) All of the above
Correct Answer: Proof of investment
10. The information on minimum investment amount, investor's service centers, and how to make purchase
is provided in.
a) Application form
b) Nomination Form
c) KIM
d) None of the above
Correct Answer: KIM
11. Which of the following document is not require to be submitted by charitable trust to invest in MF?
a) Trust deed
b) List of authorized signatories
c) Board resolution and Memorandum and article of association
d) certificate of registration
Correct Answer: Board resolution and Memorandum and article of association
12. SIP is a good investment strategy because..
a) Investor gets units at a discount to NAV
b) It offers benefits of rupee cost averaging
c) It helps regular income for investor
d) No load investment don

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Correct Answer: It offers benefits of rupee cost averaging
13. Offering for repurchase, constant amounts worth of units at regular interval basis is called
a) SIP
b) STP
c) SWP
d) Value Investment
Correct Answer: SWP
14. A company's PE ratio may be low because it is unlikely to replicate it's past performance
a) TRUE
b) FALSE
Correct Answer: TRUE
15. Fundamental analysts are called "Chartists"
a) TRUE
b) FALSE
Correct Answer: FALSE
16. In case of equity fund, if fund has higher allocation to cash in bullish market the performance is likely
to..
a) Be comparable to that of benchmark index
b) Be worse than benchmark return
c) Better than benchmark return
d) Can’t say
Correct Answer: Be worse than benchmark return
17. During the period of turmoil, gold prices
a) Go down
b) Go up
c) Remain steady
d) Mirror equities
Correct Answer: Go Up
18. Difference between scheme's actual return and optimal return for it's risk is
a) Sharpe
b) Treynor
c) Alpha
d) Spread
Correct Answer: Alpha

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19. While evaluating return for an index fund across a peer group, which of the following is more important?
a) BETA Coefficient
b) Past performance
c) Tracking error
d) R-squared
Correct Answer: Tracking error
20. Balance funds are for
a) Aggressive investors
b) highly aggressive investor
c) Moderate conservative
d) Highly conservative
Correct Answer: Highly conservative
21. The lower risk among equity fund is
a) Index Fund
b) Value Fund
c) Dividend yield fund
d) Growth fund
Correct Answer: Dividend yield fund
22. Probabilities of losing money in equity is negligible if investment horizon is for at least
a) 6 months
b) 5 years
c) 1 years
d) 3 years
Correct Answer: 5 years
23. Returns in international fund is dependent on
a) Exchange rates
b) Asset class performance
c) Both of the above
d) None of the above
Correct Answer: Both of the above
24. Mutual funds in India are not permitted to invest in
a) Gold
b) Real estate
c) Art
d) Secularized debt
Correct Answer: Art

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25. A value fund is expected to have ________ exposure to front line stocks
a) Entire
b) High
c) Half of it's
d) Low
Correct Answer: Low
26. Index funds are safer because their NAV does not go down
a) TRUE
b) FALSE
Correct Answer: FALSE
27. Which of the followings are least comparable
a) Liquid and Savings account
b) Liquid and Current account
c) ETF and Index fund
d) GILT and Sector fund
Correct Answer: GILT and Sector fund
28. An investor seeking capital appreciation, having high risk tolerance and long term horizon must invest in
a) Bonds
b) Bank FD
c) Real-Estate
d) PPF
Correct Answer: Real-Estate
29. Credit rating enables an investors to judge the
a) Duration of loan
b) Extent of securities against the borrowing
c) Risk of default by borrower
d) Interest rate risk
Correct Answer: Risk of default by borrower
30. Which of the following is not government saving scheme?
a) Infrastructure Bonds
b) RBI Bonds
c) POST
d) KVP
Correct Answer: Infrastructure Bonds

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31. An investor looking for capital appreciation, having a high risk tolerance and long tem horizon must
invest in
a) Bank FD
b) Equity
c) Bonds
d) Gold
Correct Answer: Equity
32. Which of the followings is physical asset?
a) Securised debt
b) Real estate
c) Real estate fund
d) Gold future
Correct Answer: Real Estate
33. In new pension scheme(NPS) Tier I account new pension scheme is called pension account
a) TRUE
b) FALSE
Correct Answer: True
34. Investor in MF can choose asset class but not investment manager
a) TRUE
b) FALSE
Correct Answer: TRUE
35. Financial Planning Involves
a) Helping client to select the out performing stock
b) Assessing the clients financial information
c) Advising client to invest only in secured investments
d) None of the above
Correct Answer: Assessing the clients financial information
36. Value stocks Have
a) high current dividend
b) Yield high growth in earning
c) Are currently under valued
d) None of the above
Correct Answer: Are currently under valued
37. A better performance than the return on index is given by

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a) Passive fund manager
b) An active fund manager
c) All fund managers
d) Non fund manager
Correct Answer: An active fund manager
38. Emerging or new channel for distributors/marketing of mutual funds in India is
a) Internet
b) Stock Exchange
c) All of the above
d) None of the above
Correct Answer: All of the above
39. Trail commission means paying
a) No commission at all
b) The entire commission upfront
c) Part of commission up front and balance in phases
d) The entire commission after five years
Correct Answer: Part of commission up front and balance in phases
40. Agents are compensated by mutual funds
a) Through salaries
b) Through commission
c) Through an annual fees
d) Not in cash but in kind
Correct Answer: Through commission
41. Which of the following are self regulatory organization(SRO)
a) BSE
b) SEBI
c) AMFI
d) RBI
Correct Answer: BSE
42. A passive fund manager
a) Researches stocks extensively
b) Does not buy and sell stocks often
c) Does not have to go through the process of stock selection
d) Does not have to track stocks
Correct Answer: Does not have to go through the process of stock selection
43. Debt securities bought at a discount to their face value are generally

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a) Interest bearing
b) Zero coupon bonds
c) Paying interest at a floating rate
d) None of the above
Correct Answer: Zero coupon bonds
44. When interest rates rise, bond prices
a) Also rise
b) Are not affected
c) Falls
d) Fluctuate either up or down
Correct Answer: Falls
45. A trail commission is justified when
a) An investor cancels his investment
b) The investor redeems his investment in a very short time
c) An agent invests his own money, not that of client
d) An Agent retain the Investment
Correct Answer: An Agent retain the Investment
46. Risk adjusted return is measured by
a) Sharpe ratio
b) Standard deviation
c) Treynor ratio
d) A&C
Correct Answer: A & C
47. Intra-day trading can be done on the basis of-
a) Fundamental analysis
b) Technical analysis
c) Economic analysis
d) Political analysis
Correct Answer: Technical Analysis
48. Mid cap stocks are risky in the time of
a) Boom
b) Recession/Economic turmoil
c) Political instability
d) All of the above
Correct Answer: Recession/Economic turmoil
49. Who Appoints the AMC

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a) Custodian
b) R&T
c) Trustee
d) Distributors
Correct Answer: Trustee
50. Which of the following has lowest risk
a) Liquid fund (mmmf)
b) Gilt funds
c) Diversified debt fund
d) Diversified equity fund
Correct Answer: Liquid fund (mmmf)
51. What of the following is not a reason for investor to prefer mutual fund over Bank FD
a) Tax benefits
b) Possibility of capital gain
c) Deposit insurance
d) Investment convenience
Correct Answer: Deposit insurance
52. Need of Life insurance in life is
a) Must
b) Not required
c) Can be done without
d) None of above
Correct Answer: Must
53. All investor have similar requirements at similar stage in the life/wealth cycle
a) TRUE
b) FALSE
Correct Answer: FALSE
54. Name of asset allocation strategy if it is fixed @ 50 %
a) Tactical Allocation
b) Strategic Allocation
c) A&B
d) None of above
Correct Answer: Strategic Allocation
55. Model portfolio should be determined based on commission income possibility for distributor
a) TRUE

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b) FALSE
Correct Answer: FALSE
56. Which of the following is true for model portfolio
a) Stipulated by SEBI
b) Guaranteed by AMC
c) Decided by financial planner
d) Common across industry
Correct Answer: Decided by financial planner
57. As the no of earning member in a family increases risk appetite
a) Increases
b) Decreases
c) Stays constant
d) None of above
Correct Answer: Increases
58. Equity investment through sip can be suggested for investor looking for
a) Long term growth
b) Short term target
c) Portfolio churning
d) Tax benefit
Correct Answer: Long term growth
59. How to compare index fund
a) performance
b) expenses
c) Tracking error
d) None of above
Correct Answer: Tracking error
60. What type of bond fund carries least interest rate risk
a) Short term bonds
b) Long term Bonds
c) Mid term Bonds
d) All of above
Correct Answer: Short term bonds
61. Arbitrage fund are not equity fund
a) TRUE
b) FALSE

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Correct Answer: FALSE
62. Which of the following is true for FMP
a) NAV do not fluctuate
b) Capital Guaranteed
c) Fixed income
d) None of above
Correct Answer: None of the above
63. Index funds are_____________fund
a) Passive fund
b) Active fund
c) Both
d) None of above
Correct Answer: Passive fund
64. The role of insurance is more critical for physical assets than financial assets
a) TRUE
b) FALSE
Correct Answer: TRUE
65. The investment portfolio is created based on
a) Market views of fund manager
b) Investment objective of fund
c) risk appetite of investor
d) profile of unit holder
Correct Answer: Investment objective of fund
66. Commodities as an asset class does not include
a) Food crops
b) Industrial metals
c) Real Estate
d) Gold
Correct Answer: Real Estate
67. Subsequent to NFO, open ended funds are
a) open for purchase by existing investor & new investor
b) open for purchase only for existing investor
c) available on stock market
d) None of above
Correct Answer: open for purchase by existing investor & new investor

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68. If a fund seeks to grow in value overtime it can be said that it's investment objective is
a) capital appreciation
b) safety of capital
c) Capital adequacy
d) Regular income
Correct Answer: capital appreciation
69. Hybrid funds are invested in
a) across equity market capitalization
b) International markets
c) both equity and debt
d) None of above
Correct Answer: both equity and debt
70. Mutual fund are constituted in India as
a) Companies
b) Trusts
c) Partnerships
d) NGO
Correct Answer: Trusts
71. Mutual Fund sponsor can be compared to
a) Depositor of a company
b) Company director
c) Promoter of Company
d) CEO of a company
Correct Answer: Promoter of Company
72. Which of the following is not a function of R&T agent
a) Creating maintaining and updating the investor record
b) Updating unit capital of fund
c) Processing dividends & redemption payouts to investors
d) Settling investment transaction of the fund
Correct Answer: Settling investment transaction of the fund
73. The first step of financial planning is
a) Evaluating the various alternatives
b) data gathering and goal setting
c) establishing the client planner relationship
d) Plan Review
Correct Answer: establishing the client planner relationship

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74. In case of market correction _______ , takes more hit than _______ Fund.
a) Growth , Value
b) Momentum , Value
c) Value , Growth
d) Growth , momentum
Correct Answer: Value , Growth
75. At time of NFO, which document compulsorily filed with SEBI
a) SID
b) SAI
c) Annual Report
d) Memorandum and Articles of Association
Correct Answer: SID
76. Collection and payment of fund is a responsibility of
a) Custodian
b) R&T
c) Banker
d) AMC
Correct Answer: R&T
77. Other than Indian residents, rest have to also comply RBI regulations
a) TRUE
b) FALSE
Correct Answer: TRUE
78. Which of the following not included in KIM
a) Details of Key personal of AMC
b) Tax benefit of MF
c) Expense and Load structure of scheme
d) Due diligence certificate of AMC
Correct Answer: Due diligence certificate of AMC
79. Low PE indicates that stock is cheap and you should buy it
a) TRUE
b) FALSE
Correct Answer: TRUE
80. Which of the following need not be included in KIM?
a) Detail of sponsor

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b) Minimum investment amount and cut off time
c) Risk profile of the scheme
d) Opening and closing dates of NFO
Correct Answer: Detail of sponsor
81. As per income tax act, Arbitrage Funds are taxed as per debt scheme
a) TRUE
b) FALSE
Correct Answer: FALSE
82. Which is purely treated as an international asset
a) Equity
b) Gold
c) Real Estate
d) Debt
Correct Answer: Gold
83. Transfer of security from one scheme to another scheme is allowed in MF
a) TRUE
b) FALSE
Correct Answer: TRUE
84. Calculate the sales price of a unit when NAV is 15 and exit load 1%
a) 15
b) 14.85
c) 15.15
d) 15.5
Correct Answer: 15
85. Who allots Amfi Registration Number?
a) AMFI
b) SEBI
c) AMC
d) none of the above
Correct Answer: AMFI
86. Which distribution channel don't have a huge branch network?
a) Institution
b) Corporate distributor
c) Bank
d) IFA

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Correct Answer: IFA
87. Last step in the process of designing model portfolio
a) Sector selection
b) Asset allocation
c) Scheme selection
d) Client selection
Correct Answer: Scheme selection
88. Goal based approach of financial planning focuses on
a) Risk profiling
b) Achievement of the goal of investors
c) Tax liability of investors
d) Investible surplus of the investor
Correct Answer: Achievement of the goal of investors
89. What is the indicator of the risk adjusted performance ratio?
a) Beta
b) Standard Deviation
c) Sharpe's Ratio
d) Variance
Correct Answer: Sharpe's Ratio
90. Interest Rate sensitivity in Bond fund depends on
a) Credit Profile
b) Avg Maturity
c) YTM
d) Current Yield
Correct Answer: Avg Maturity
91. Index against which performance of a fund is measured, is called
a) Tracking Error
b) Benchmark
c) Investment objective
d) Ex-mark
Correct Answer: Benchmark
92. FMP are essentially a closed ended Scheme
a) TRUE
b) FALSE
Correct Answer: TRUE

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93. The information regarding Which category of investors can invest in MF, is given in
a) Offer document
b) SAI
c) MIN
d) SIN
Correct Answer: Offer Document
94. Asset allocation means
a) Putting all eggs in Same basket
b) Investing according to Market
c) Investing in different assets
d) Investing only in Equity Gold and Silver
Correct Answer: Investing in different assets
95. Asset allocation should be in line with
a) Financial Goal
b) Age of Client
c) Risk Appetite
d) All of the above
Correct Answer: All of the above
96. A young investor having objective of capital appreciation should invest in
a) GILT
b) Liquid
c) Equity
d) Debt
Correct Answer: Equity
97. In NPS class-C predominantly invests in
a) Equity
b) Debt
c) Gold
d) Real Estate
Correct Answer: Debt
98. Fund's risk relative to market is measured by
a) tracking error
b) Sharps' Ratio
c) Treynor
d) Beta
Correct Answer: Beta

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99. Which one is false about debenture
a) Issued by PSU
b) High credit risk
c) It has maturity
d) Duration is greater than 1 yr
Correct Answer: Issued by PSU
100. Which function AMC can't do in house
a) Custodian
b) Accounting
c) Distribution
d) Fund management
Correct Answer: Custodian
101. Value of Bond goes down when
a) Interest rate goes down
b) Interest rate goes up
c) IRR goes down
d) YTM goes down
Correct Answer: Interest rate goes up
102. Institutional distributors needs to be
a) Registered with SEBI
b) Registered with AMFI
c) Listed on stock exchange
d) All of Above
Correct Answer: Registered with AMFI
103. Standard risk are
a) Uncommon to all
b) Common to all
c) Specific to a scheme
d) Systematic
Correct Answer: Common to all
104. Request for purchase can be made
a) In units and amount
b) In units only
c) In units or amounts
d) In amount only
Correct Answer: In amounts only

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105. In NPS investors get choice of the asset class but don't get choice of investment manager
a) TRUE
b) FALSE
Correct Answer: FALSE
106. According to the asset allocation rule, equity exposure should be equal to
a) Age
b) 100-age
c) Age-100
d) 100.00%
Correct Answer: 100-Age
107. Mutual fund is made up of
a) Pool of trustees fund
b) Pool of institutional investors
c) Pool of investment managers
d) Pool of investment money
Correct Answer: Pool of investment money
108. Who can not invest in mutual funds?
a) Foreign companies
b) Banks
c) insurance companies
d) NBFC
Correct Answer: Foreign Companies
109. KIM has to be updated
a) Twice in a year
b) Quarterly
c) Once in a year
d) Once in two year
Correct Answer: Once in a year
110. Which of the following is more risky?
a) Liquid fund
b) Index fund
c) growth fund
d) gilt fund
Correct Answer: Growth Fund
111. Material changes in KIM need to be updated

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a) once in a year
b) Half yearly
c) Whenever material changes take place
d) Once in two year
Correct Answer: Whenever material changes take place
112. Trail commission to advisor helps in –
a) Retaining the investor for long term
b) Portfolio Churning
c) New client acquisition
d) None of the above
Correct Answer: Retaining the investor for long term
113. Exit load __________ Is
a) Same for all schemes
b) Is same for all amc's
c) Varies from investor to investor
d) Varies from scheme to scheme
Correct Answer: Varies from scheme to scheme
114. Which fund is an actively managed fund?
a) Index fund
b) Diversified equity fund
c) Growth fund
d) B&C
Correct Answer: B & C
115. Arrange in correct sequence
a) Risk profile, fund allocation, portfolio construction
b) Risk profile, portfolio construction, fund allocation
c) Portfolio construction, risk profile, fund allocation
d) Fund allocation. risk profile, portfolio construction
Correct Answer: Risk profile, portfolio construction, fund allocation
116. Which of the following is against the ethics & Code of conduct guide line of AMFI
a) Churning investor's money to get better returns
b) All the associates of a distributor should be amfi approved
c) Keeping the interest of all unit holders
d) All of the above
Correct Answer: Churning investor's money to get better returns
117. Minimum contribution of a sponsor in an AMC should be-

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a) 50.00%
b) 60.00%
c) 40.00%
d) 25.00%
Correct Answer: 40.00%
118. PAN card is not required in case of-
a) NRI
b) Minor & Senior Citizen
c) Corporate institution & trust
d) None of the above
Correct Answer: None of the above
119. FMP can give better interest than a Bank Deposit.
a) TRUE
b) FALSE
Correct Answer: TRUE
120. The insurance associated with new pension schemes are regulated by-
a) PFRDA + IRDA
b) IRDA
c) PFRDA
d) None of the above
Correct Answer: PFRDA
121. In India mutual funds are-
a) Govt. institutions
b) Company
c) Trust
d) NBFC
Correct Answer: Trust
122. KIM is attached with?
a) Transaction slip
b) Application Form
c) Both A and B
d) Neither a nor b
Correct Answer: Application Form
123. Which is technical analysis-
a) Volume & price behaviour

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b) Mark to market
c) book value analysis
d) all of the above
Correct Answer: Volume & price behaviour
124. Who keeps detail report of transaction-
a) Custodian
b) AMC
c) R&T
d) Distributor
Correct Answer: R & T
125. Formula to find out the Standard Deviation in excel is
a) stdev
b) sd
c) stddev
d) stddv
Correct Answer: stdev
126. If beta of a scheme is less than one the the fund is-
a) More risky compare to market
b) Less risky compare to market
c) neither risky nor profitable
d) beta doesn't make any impact on scheme performance
Correct Answer: Less risky compare to market
127. Fund management cost is more in-
a) Passive fund
b) Gilt fund
c) Liquid fund
d) Active fund
Correct Answer: Active Fund
128. KYC is required for-
a) Guardian in case of minor
b) HUF
c) Sole proprietorship firm
d) All of the above
Correct Answer: All of the above
129. KYC is compulsory –

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a) For every investment
b) 50000
c) 50000 and above
d) first time investment
Correct Answer: For every investment
130. In case of breach of Code of conduct license is canceled by-
a) AMFI
b) SEBI
c) Sponsor
d) AMC
Correct Answer: AMFI
131. The P/E ratio is an important measure of a company's anticipated performance. it is calculated using.
a) Market price and dividend
b) Market price and earning per share
c) Market capitalization and dividend
d) Market price and face value
Correct Answer: Market price and earning per share
132. Which one of the following is not an eligible investor?
a) Insurance Companies
b) Govt Institutions
c) Foreign Citizens
d) Provident Fund
Correct Answer: Foreign Citizens
133. For a customer holding units in demat , the AMC also requires to do his KYC?
a) TRUE
b) FALSE
Correct Answer: FALSE
134. On doing risk profiling which asset allocation does it give?
a) Strategic Asset Allocation
b) Fixed Asset Allocation
c) Flexible Asset Allocation
d) Tactical Asset Allocation
Correct Answer: Strategic Asset Allocation
135. How is company fixed deposit compare to bank fixed deposit?
a) Low Risk

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b) Highly Volatile
c) Less Safe
d) Lower Return
Correct Answer: Less Safe
136. A conservative investor need not be advised to invest in?
a) Gilt Fund
b) Liquid Fund
c) High Yield Bond Fund
d) Short Term Plan
Correct Answer: High Yield Bond Fund
137. The New Pension scheme is both regulated IRDA and PFRDA as it has an insurance component?
a) TRUE
b) FALSE
Correct Answer: FALSE
138. Which is the fastest way of remitting funds on real time basis?
a) NEFT
b) D/D
c) SWIFT
d) RTGS
Correct Answer: RTGS
139. Companies issuing short term debt is called
a) CD
b) Tbills
c) Debentures
d) CP
Correct Answer: CP
140. Within a category one can decide on investments based on Sharpe Ratio
a) TRUE
b) FALSE
Correct Answer: TRUE
141. Which of the below is not in a Transition phase?
a) Buying of house
b) Providing for daughter marriage
c) Shifting of job for higher income
d) Providing for foreign study for son

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Correct Answer: Shifting of job for higher income
142. The NAV of scheme is impacted by?
a) No of Investors
b) Unit Capital
c) Market Value of Portfolio
d) Size of Fund
Correct Answer: Market Value of Portfolio
143. Technical analysis is projecting trend based on human behaviour?
a) TRUE
b) FALSE
Correct Answer: TRUE
144. Expense ratio is most important in case of
a) Index Fund
b) Offshore Fund
c) Active Fund
d) Fund of Fund
Correct Answer: Index Fund
145. Code of ethics for employees of AMC is described by
a) SEBI
b) AMFI
c) Internal Audit Team
d) Trustee
Correct Answer: AMFI
146. Index fund can give better returns from its Benchmark.
a) TRUE
b) FALSE
Correct Answer: FALSE
147. Investor selects an MF based on
a) Investment Philosophy
b) Investment Strategy
c) Investment Policy
d) Investment Objective
Correct Answer: Investment Objective
148. Risk May be defined as

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a) Asset Allocation
b) High Transaction Cost
c) Financial Loss
d) Portfolio Rebalancing
Correct Answer: Financial Loss
149. If a minor Invests Rs 10,000 in MF, KYC is needed or not
a) KYC for Minor is needed only if investment exceeds Rs 20000
b) KYC for Minor is needed only if investment exceeds Rs 50000
c) If investor is a minor, KYC should be of his guardian even for a single rupee investment
d) KYC is not at all required for minors
Correct Answer: If investor is a minor, KYC should be of his guardian even for a single rupee investment
150. Since Preparation of WILL is a long process, it has to be avoided
a) TRUE
b) FALSE
Correct Answer: False
151. ______ Allots the ARN Number
a) AMC
b) SEBI
c) NISM
d) AMFI
Correct Answer: AMFI
152. Application for MF would be rejected if paid in
a) Cheque
b) DD
c) Cash
d) Bankers cheque
Correct Answer: Cash
153. Mutual Fund Investor can't pledge units
a) TRUE
b) FALSE
Correct Answer: FALSE
154. Which one is called cum-dividend NAV?
a) NAV on the date when trustee approves dividend
b) NAV of the date when notice is issued to meet trusteed to finalize dividend
c) NAV after the date of dividend

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d) None of the above
Correct Answer: NAV on the date when trustee approves dividend
155. When scheme is first launched and investor invests in MF... it is called
a) NFO
b) IPO
c) Purchase
d) Re-Purchase
Correct Answer: NFO
156. KIM Document is a summary of
a) SID
b) SAI
c) OD
d) SID+SAI
Correct Answer: SID + SAI
157. Company's Earning per share would be indicated by following
a) P/E Ratio
b) Current Ratio
c) EPS
d) Leverage Ration
Correct Answer: EPS
158. Beta of Index would be
a) Less than 1
b) Equals to 1
c) more than 1
d) None of the above
Correct Answer: Equals to 1
159. While evaluating return for an index fund across a peer group, which of the following is more
important
a) Beta Coefficient
b) Past performance
c) Tracking error
d) R-Squared
Correct Answer: Tracking Error
160. Liquidity risk is highest in
a) Mid Cap stocks

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b) Front Line Stocks
c) Index Stocks
d) Gilt Security
Correct Answer: Mid Cap stocks
161. Investor can sue the trust for breach of trust
a) TRUE
b) FALSE
Correct Answer: FALSE
162. What remains constant in a close ended fund ?
a) Unit
b) Capital NAV
c) Both
Correct Answer: Unit
163. According to the Certified Financial Planner - Board of Standards (USA), the third stage in Financial
Planning is
a) Establish and Define the client planner relationship
b) Gather client data
c) Define client goals
d) Analyse and Evaluate Client's Financial Status
Correct Answer: Analyse and Evaluate Client's Financial Status
164. Commodity as an asset class does not include
a) Fiber
b) Spices
c) Energy
d) Art
Correct Answer: Art
165. 5 star fund indicates
a) Lowest Expense ratio
b) Lowest Load
c) Highest Performance
d) Best Portfolio
Correct Answer: Highest Performance
166. Investor should invest in MF with few offices as office expense is charged to the fund
a) TRUE
b) FALSE

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Correct Answer: FALSE
167. NAV changes with
a) Number of investor
b) Number of Units remaining invested
c) Size of Portfolio
d) Market value of the portfolio
Correct Answer: Market value of the portfolio
168. Investor select an MF based on matching
a) Investment Philosophy
b) Investment Policy
c) Investment Objective
d) Investment Strategy
Correct Answer: Investment Objective
169. Indian investor in a US $ based fund benefit when $ becomes
a) Weak
b) Strong
c) Euro Becomes Weak
d) Steady
Correct Answer: Strong
170. Securities of a fund are held by
a) Custodian
b) AMC
c) R&T
d) Broker
Correct Answer: Custodian
171. Which of the following is with drawable in NPS
a) Tier I
b) Tier II
c) Tier III
d) Tier IV
Correct Answer: Tier II
172. Mutual fund is exempted from Wealth Tax
a) TRUE
b) FALSE
Correct Answer: FALSE

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173. Which of the distribution channel does not have wide branch network
a) Bank
b) Distribution House
c) Broking company
d) IFA
Correct Answer: IFA
174. Which of the following is not a function of R&T
a) Process Dividend and redemption
b) Maintain the records
c) Settling investors transaction of fund
d) Calculation of NAV
Correct Answer: Calculation of NAV
175. AMFI interacts with _______ on all issues related to MF industry
a) RBI
b) SEBI
c) Govt
d) All of the above
Correct Answer: SEBI
176. High portfolio turnover ratio implies
a) High Cost
b) Low Expense
c) High return
d) Non Performance
Correct Answer: High Cost
177. Since preparation of WILL is a long process, it has to be avoided
a) TRUE
b) FALSE
Correct Answer: FALSE
178. Benefit of Demat a/c is that
a) Direct credit of bonus units
b) Single contact point for change of address
c) Single point for portfolio valuation
d) All of the above
Correct Answer: All of the above
179. Among equity fund , growth fund has highest risk

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a) TRUE
b) FALSE
Correct Answer: FALSE
180. What determines the interest rate sensitivity
a) Credibility
b) Quality
c) YTM
d) Avg. Maturity
Correct Answer: Avg. Maturity
181. Fundamental Analyst are also called " Chartist"
a) TRUE
b) FALSE
Correct Answer: FALSE
182. Fundamental Analyst's decision are base on
a) EPS in dollar
b) Trialling EPS
c) Historic EPS
d) Projected EPS
Correct Answer: Projected EPS
183. Debenture is physical asset because the paper has some value
a) TRUE
b) FALSE
Correct Answer: FALSE
184. Investing in Gold ETF helps
a) Guarantees high return
b) Not permitted in India
c) Provide risk cover
d) Reduce storage cost and risk
Correct Answer: Reduce storage cost and risk
185. Childhood and transition are similar stage of LIFE cycle and WEALTH cycle stage
a) TRUE
b) FALSE
Correct Answer: FALSE
186. Investor with a long term investment horizon for growth are likely to invest in

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a) Equity Fund
b) ST Debt Fund
c) Income fund
d) liquid Fund
Correct Answer: Equity Fund
187. Approval of SEBI is needed to appoint a person as Trustee
a) TRUE
b) FALSE
Correct Answer: TRUE
188. What is the drawback of PPF
a) One withdrawal at the end of Seventh Year
b) Interest and Withdrawals are not taxable
c) Half yearly Compounded interest
d) Not Guaranteed by Govt
Correct Answer: One withdrawal at the end of Seventh Year
189. Commission paid at the time of investment are called
a) Upfront Commission
b) Rebate
c) Trail
d) AUM Retention Fee
Correct Answer: Upfront Commission
190. Investors in NPS can choose asset class but not fund managers
a) TRUE
b) FALSE
Correct Answer: FALSE
191. Settlement responsibility in BSE / NSE Platform are with
a) AMC
b) Clearing House
c) Concerned Stock Exchange
d) Member
Correct Answer: Member
192. Which of the following information does time stamp include
a) Machine Identifier
b) location code
c) Serial No

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d) All of the above
Correct Answer: All of the above
193. Closed ended fund has
a) Fixed AUM
b) Fixed Unit Capital
c) Fixed NAV
d) Assured Dividend
Correct Answer: Fixed Unit Capital
194. Father wants to start his business, this is
a) Asset Allocation
b) Financial Goal
c) Appreciation
d) Financial Planning
Correct Answer: Financial Goal
195. SIP is called RCA (Rupee Cost Averaging)
a) TRUE
b) FALSE
Correct Answer: TRUE
196. Liquidity risk arises in
a) Closed ended fund
b) Open ended fund
c) Gold
d) Debt
Correct Answer: Closed ended fund
197. The name and background of key personnel in AMC
a) Are not included in SID
b) Declared on MF website
c) Are included in SAI
d) Are not relevant so not disclosed
Correct Answer: Are included in SAI
198. STCG in GOLD is applicable if the holding period is less than
a) 12 months
b) 36 months
c) 6 months
d) 9 months

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Correct Answer: 36 Months
199. _______ allots the ARN number
a) AMC
b) AMFI
c) SEBI
d) NISM
Correct Answer: AMFI
200. Role of Credit rating agencies is highest in
a) Debt Fund
b) Gold Fund
c) Real Estate Fund
d) Equity
Correct Answer: Debt Fund
201. Cut-off time are
a) Agreed between AMC & Distributor
b) Different for every RTA
c) Prescribed by SEBI
d) Different from AMC to AMC
Correct Answer: Prescribed by SEBI
202. Money market in which MF invests are regulated by
a) AMFI
b) SEBI
c) RBI
d) Stock exchange
Correct Answer: RBI
203. Gilt fund is a good alternative to Capital Appreciation
a) TRUE
b) FALSE
Correct Answer: FALSE
204. Which of the following is growth asset
a) Savings a/c
b) Current A/c
c) Real Estate
d) Govt Security
Correct Answer: Real Estate

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205. Which is prohibited in AMC's Code of ethics
a) Inter Scheme transfer
b) Front Running
c) Security transaction through associated broker
d) Distributor of MF through AMC
Correct Answer: Front Running
206. Loads are applicable to
a) Transfer of Closed ended Scheme
b) Redemption
c) Purchase and redemption
d) Purchase
Correct Answer: Redemption
207. Bank on receipt of money from abroad issue
a) IEC
b) FIRC
c) MIN + Folio
Correct Answer: FIRC
208. Standard risk factors are
a) Not market risk
b) Specific to scheme
c) not relevant to investor
d) common to all scheme
Correct Answer: common to all scheme
209. Unit holders are entitled to
a) Receive information that can effect their investment
b) protection of capital even if market goes down
c) Sue the MF or Trust
d) Assured return even if there is no guarantee
Correct Answer: Receive information that can effect their investment
210. Appropriate benchmark to large cap
a) BSE small cap index
b) Sensex
c) BSE 500
d) BSE Mid cap Index
Correct Answer: Sensex

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211. If market crashes after bull run which fund is more safer
a) Growth
b) Value
c) Sector
d) Theme
Correct Answer: Value
212. Mutual Fund transaction on stock exchange are governed by stock exchange redressal system
a) TRUE
b) FALSE
Correct Answer: FALSE
213. Which one is called Cum-Dividend-NAV?
a) NAV on the date when trustee approves dividend
b) NAV of the date when notice is issued to meet the trustees to finalize the dividend
c) NAV after the date of dividend
d) None of the above
Correct Answer: NAV on the date when trustee approves dividend
214. IF Gold price appreciates investors should invest in
a) Gold sector fund
b) Gold ETF
c) Index Fund
d) Gilt edge Security
Correct Answer: Gold ETF
215. An investor looking to select a hybrid fund with tax benefits must choose.
a) Conservative MIP
b) Balance fund Equity oriented
c) Balance fund Debt oriented
d) Aggressive MIP
Correct Answer: Balance fund Equity oriented
216. Encroachment risk is higher for
a) Land
b) Building
c) Gold
d) Art
Correct Answer: Land
217. Unaudited report has to be published in newspaper every

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a) 3 months
b) 6 months
c) 12 months
d) 3 financial year
Correct Answer: 6 months
218. Tax differal is advantage
a) Growth
b) Dividend payout
c) Dividend reinvest
d) Capital gain
Correct Answer: Capital gain
219. The expense ratio is affected by
a) Fund size
b) Average account size
c) Portfolio composition
d) Stock market conditions
Correct Answer: Fund size
220. In a mutual fund investors subscription are accounted for as
a) Liabilities
b) Unit capital
c) Deposits
d) None of the above
Correct Answer: Unit capital
221. Fund of Fund scheme invest in-
a) Mutual Fund scheme
b) International fund
c) Index fund
d) Gilt fund
Correct Answer: Mutual Fund scheme
222. A scheme can distribute dividend on its-
a) Realized profit
b) Profit after tax
c) realized & non realized profit
d) none of the above
Correct Answer: Realized profit
223. A newly married couple should invest into –

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a) Debt fund
b) Balance fund
c) Equity fund
d) Liquid Funds
Correct Answer: Equity fund
224. If an investor wants to invest in Mutual fund through exchange platform he can buy from
a) Existing investor
b) Broker
c) AMC
d) Distributor
Correct Answer: Broker
225. Standard risk factors are
a) Changes from scheme to scheme.
b) Common for all scheme
c) Both
d) None of above
Correct Answer: Common for all scheme
226. The presence of market makers provide liquidity in case of ETF
a) TRUE
b) FALSE
Correct Answer: TRUE
227. Which of the following is true with respect to the automatic reinvestment plan?
a) It allows the investor to reinvest the amount of dividend
b) It ensures that the investor reaps the benefit of compounding
c) Some funds allow the investor the invest the dividend in the other schemes also
d) All of the above
Correct Answer: All of the above
228. Which of the following is not true for Exchange Traded Funds (ETF)?
a) ETF combines the best features of open end and closed end
b) Its pricing is linked to the index
c) It offers the investors the benefit of flexibility of holding a single share as well as the diversification and
cost efficiency of index
d) ETFs recover heavy load from the investors
Correct Answer: ETFs recover heavy load from the investors
229. In which of the following the investor generally bears the highest expenses?

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a) Exchange traded funds
b) Balanced funds
c) Commodity funds
d) Fund of funds
Correct Answer: Fund of funds
230. Which of the following is not the advantage of mutual funds?
a) Reduction of transaction costs
b) Convenience and flexibility
c) Tailor made portfolio
d) Liquidity
Correct Answer: Tailor made portfolio
231. Investor who wants long term exposure to gold should opt for
a) ETF Gold
b) Gold Sector Fund
c) Gold Future
d) Jewellery's
Correct Answer: ETF Gold
232. Which is the short term Govt Security
a) Commercial Paper
b) T-Bills
c) Certificate of Deposit
d) Gilt
Correct Answer: T-Bills
233. Which is the most Illiquid Asset?
a) Gold
b) Equity
c) Debt
d) Real state
Correct Answer: Real state
234. Bank lends against
a) Pledged units
b) Dividend
c) Nomination
d) Redemption
Correct Answer: Pledged units
235. SID is approved by

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a) Investor
b) Sponsor
c) AMC and Trustee
d) Custodian
Correct Answer: AMC and Trustee
236. Cut-off time for NAV
a) decided by AMC
b) same for all scheme
c) by trustee
d) Prescribed by SEBI
Correct Answer: Prescribed by SEBI
237. preparation of WILL is pessimistic exercise, so it is better to avoid
a) TRUE
b) FALSE
Correct Answer: FALSE
238. Which document is not required for institutional investor
a) P & L account
b) Memorandum of the articles of association
c) PAN card
d) Authorized signatory list
Correct Answer: P & L account
239. Who promotes MF
a) Sponsor
b) custodian
c) AMC
d) Trustee
Correct Answer: Sponsor
240. Liquidity risk is highest in
a) Mid cap stocks
b) Front line stocks
c) Index stock
d) Gilt security
Correct Answer: Mid cap stocks
241. A unit holder is not responsible for
a) reading OD

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b) selecting stocks in a portfolio of the mutual fund scheme
c) regular monitoring
d) investment awareness of risk factors
Correct Answer: selecting stocks in a portfolio of the mutual fund scheme
242. Accepted standard for return calculation in financial market is
a) abs return
b) CAGR
c) total return
d) simple annualized return
Correct Answer: CAGR
243. STT is applicable on
a) Purchase of debt fund
b) Redemption of debt fund
c) Redemption of equity fund
d) All of above
Correct Answer: Redemption of equity fund
244. Mr A holds 1200 units , scheme declares 1:3 bonus. How many units will Mr A gets
a) 300
b) 400
c) 3600
d) depends on NAV
Correct Answer: 3600
245. Corporate deposit interest rate depends on
a) liability of borrower
b) asset of borrower
c) credit rating
d) profit of borrower
Correct Answer: Credit rating
246. The value of investment in mutual funds
a) Increase gradually every day
b) Change with the value of the investment portfolio
c) Decrease gradually every day
d) Be volatile in long-term
Correct Answer: Change with the value of the investment portfolio
247. The first ever mutual fund scheme in India was launched in

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a) 1964
b) 1951
c) 1970
d) 1994
Correct Answer: 1964
248. Investors buy units of open-ended funds during the continuous offer at the
a) NFO price
b) Market Price
c) Both
d) none of the above
Correct Answer: Market Price
249. The investment objective of which of these funds would be to seek capital appreciation?
a) Dividend yield fund
b) Growth Fund
c) Liquid Fund
d) Income Fund
Correct Answer: Growth Fund
250. If we have a view that gold price will appreciate, which mutual fund scheme should we invest in?
a) Gold sector
b) Gilt edged securities
c) Index fund
d) Gold ETF
Correct Answer: Gold ETF
251. One of the advantage if ETF is..
a) Investor can see where his money is invested
b) These schemes can generate higher returns than mutual fund
c) Investors can buy of sell units on stock exchanges at price that closely track valuation at that time.
d) ETF offer tax benefits
Correct Answer: Investors can buy of sell units on stock exchanges at price that closely track valuation at
that time.
252. Mutual funds are constituted in India as a..
a) Companies
b) Trust
c) Partnership firms
d) NGO
Correct Answer: Trust

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253. Mutual fund sponsor can be compared to ..
a) A depositor in company
b) A company director
c) Promoter of a company
d) CEO
Correct Answer: Promoter of a company
254. Which of these entities enables collection and payment of fund.
a) Broker
b) Banker
c) R&T Agents
d) Custodian
Correct Answer: R&T Agents
255. The constituents of mutual fund are appointed with the approval of ..
a) Sponsor
b) Trustees
c) SEBI
d) AMC
Correct Answer: Sponsor
256. Bank sponsored mutual funds are also regulated by
a) AMFI
b) Stock Exchanges
c) RBI
d) SEBI
Correct Answer: RBI
257. AMFI code of ethics prescribes that mutual fund scheme portfolios should be managed in interest of
a) Identified class of unit holder
b) All classes of unit holders
c) Retail individual
d) Institutional unit holders
Correct Answer: All classes of unit holders
258. To achieve growth by investing in equity and equity related investments, balanced with income
generation by investing in debt and money market instruments is likely to be the investment objective of
___________ .
a) Equity fund
b) Money market fund
c) Balance fund

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d) Debt Fund
Correct Answer: Balance Fund
259. Annual report of AMC should necessarily mention the unclaimed amount and the number of such
investors for each scheme.
a) TRUE
b) FALSE
Correct Answer: TRUE
260. Unit holders enjoy rights to the asset of the funds...
a) According to the plan chooses by them
b) As per decided by trustees
c) equally for all holders
d) In proportion of holding
Correct Answer: In proportion of holding
261. Which of the following is not a mandatory services standard as per SEBI
a) Periodic disclosure of the fund's holding
b) Periodic disclosure of AMC'c accounts
c) On-line purchase and sells of units
d) Dispatch of dividend within 30 days
Correct Answer: On-line purchase and sells of units
262. Which of the following is the function of an offer document
a) To enable comparison of MFs
b) To give the FM's commentary on market
c) To report the performance of scheme
d) To give investors information about scheme
Correct Answer: To give investors information about scheme
263. Which of the following contain detail information on the portfolio characteristics and operational
features of a scheme?
a) Key Information of Memorandum
b) Statement of additional information.
c) Scheme information document
d) Addendum
Correct Answer: Scheme information document
264. Which of the following is not fundamental attribute of scheme?
a) Investment objective
b) Name ff Fund Manager

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c) Investment Pattern
d) Type of risk profile
Correct Answer: Name ff Fund Manager
265. Which of the following is a synopsis of the offer document?
a) Trust deed
b) Memorandum of Association
c) Statement of additional information
d) Key information of memorandum
Correct Answer: Key information of memorandum
266. The format of KIM
a) Given by SEBI
b) Given by AMFI
c) Varies to fund to fund
d) By Stock Exchange
Correct Answer: Given by SEBI
267. Some MF companies allow investors to transact through their website.
a) TRUE
b) FALSE
Correct Answer: TRUE
268. There is no need for educational qualification to be MF advisor.
a) TRUE
b) FALSE
Correct Answer: FALSE
269. Distributors are compensated by mutual fund companies primarily through..
a) Salaries
b) Annual fees
c) Share in AMC's profit
d) Commission
Correct Answer: Commission
270. Which of the following statement is true?
a) Distributors do not get upfront commission on self business but they get trail commission
b) Distributors do not get trail commission on self business but get upfront commission
c) Distributors get upfront and trail on self business
d) Distributors do not get upfront and trail on self business

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Correct Answer: Distributors do not get upfront and trail on self business
271. AMFI code of ethics prescribes that mutual fund schemes portfolios should be managed in the interest
of
a) identified special classes of unit holders
b) all classes of unit holders
c) retail individual class
d) None of above
Correct Answer: all classes of unit holders
272. If the investor wishes to change the distributor
a) He will need to give written request to the fund house
b) he needs to give the NOC from previous distributor
c) AMC may allow or disallow
d) All of above
Correct Answer: He will need to give written request to the fund house
273. Investor can sue the trust for breach of trust
a) TRUE
b) FALSE
Correct Answer: FALSE
274. Since NFO is a marketing decision ,CIO has limited role in deciding it's structure
a) TRUE
b) FALSE
Correct Answer: FALSE
275. Info provided in the SAI
a) addendum made in the scheme
b) Updation in OD
c) Updation in KIM
d) None of above
Correct Answer: addendum made in the scheme
276. Which of the following form a part of fundamental attributes of a fund
a) Fund manager
b) Investment objective of fund
c) Load
d) None of above
Correct Answer: Investment objective of fund

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277. What remains constant in closed ended fund?
a) Unit capital
b) NAV
c) both
d) None of the above
Correct Answer: Unit capital
278. Where do high-yield funds invest?
a) Junk Bonds
b) Gilt fund
c) Equity growth Fund
d) Treasury bills
Correct Answer: Junk Bonds
279. High yield bond schemes invest in junk bonds?
a) TRUE
b) FALSE
Correct Answer: TRUE
280. Which ratio measures risk-adjusted return?
a) Sharpe Ratio
b) Treynor ratio
c) Both
d) None of the above
Correct Answer: Both
281. Which funds have features of both open ended & close ended?
a) Interval Fund
b) Balance Fund
c) Sector Fund
d) Thematic Fund
Correct Answer: Interval Fund
282. Which approach is used by Fund managers for picking up the Value stocks.
a) Bottom up approach
b) Top down
c) Both
d) None of the above
Correct Answer: Bottom up approach
283. Can liquid funds invest in short term bank fixed deposit?

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a) Yes
b) No
Correct Answer: Yes
284. Expenses in fund of funds?
a) Less then direct Investment in scheme
b) More than direct investment in scheme
c) Equal to direct investment in scheme
d) None
Correct Answer: More than direct investment in scheme
285. Which fund has highest risk?
a) Liquid
b) Income
c) G-securities
d) Liquid Plus
Correct Answer: Income
286. Childhood & transition phase is common in life cycle & wealth cycle?
a) TRUE
b) FALSE
Correct Answer: False
287. What is not mandatory in application form?
a) Occupation
b) Status of Individual
c) Mode of holding
d) PAN
Correct Answer: Occupation
288. Is KIM a synopsis of offer document?
a) TRUE
b) FALSE
Correct Answer: TRUE
289. Who can distribute mutual fund through stock exchange?
a) Equity Broker with out certification
b) NISM certified & AMFI registered member
c) Both
d) None

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Correct Answer: NISM certified & AMFI registered member
290. What is the beta of index fund?
a) 1
b) More than 1
c) Less than 1
d) None of the above
Correct Answer: 1
291. Who is keeps the custody of security of Mutual Fund?
a) AMC
b) R&T
c) Custodian
d) Sponsor
Correct Answer: Custodian
292. AMFI is a SRO?
a) TRUE
b) FALSE
Correct Answer: FALSE
293. AGNI is
a) Code of Conduct For Intermediaries
b) Rules & Regulations
c) Terms & Conditions
d) None of the above
Correct Answer: Code of Conduct For Intermediaries
294. NFO opening and closing detail mention in
a) KIM
b) SID
c) OD
d) All of above
Correct Answer: All of above
295. KIM is to updated
a) Once in quarter
b) Once in month
c) Once in year
d) Weekly
Correct Answer: Once in a year

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296. Recurring expenses includes
a) Investment advisory fee
b) Charged by the AMC, R&T fee
c) Marketing and selling fee
d) All of above
Correct Answer: All of above
297. Offer Document of Mutual Fund is approved by SEBI
a) TRUE
b) FALSE
Correct Answer: FALSE
298. Stock exchange brokers are permitted to distribute MF after passing the certifying exam
a) TRUE
b) FALSE
Correct Answer: TRUE
299. Which documents are needed for KYC?
a) PAN card
b) Address proof
c) Photo id proof
d) All of above
Correct Answer: All of above
300. Which id proof is not valid identity proof for KYC (individual)
a) Credit card
b) Address proof
c) Driving license
d) All of the above
Correct Answer: Credit Card
301. For additional purchase
a) Only transaction slip to be filled
b) Transaction slip with purchase cheque
c) Only cheque
d) None of the above
Correct Answer: Transaction slip with purchase cheque
302. Which of the following entities reaches MF product beyond geographical locations
a) The Brokers

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b) The Custodian
c) The Distributer
d) R & T Agents
Correct Answer: The Distributer
303. SEBI is sole regulatory authority for MF are answerable
a) TRUE
b) FALSE
Correct Answer: TRUE
304. Where the investor desires to hold MF unit in DMAT form the AMC will still be required to Perform
KYC to such investors
a) TRUE
b) FALSE
Correct Answer: FALSE
305. Offer document enable investor to compare the of MF scheme with another MF scheme
a) TRUE
b) FALSE
Correct Answer: FALSE
306. which of the following investors belong to institutional group?
a) HUF
b) NRI
c) Proprietary firm
d) FII
Correct Answer: FII
307. Performance advertisement
a) Shall identify Nature of scheme
b) shall only advertise compounded annualise yield Calculated using the prescribe procedure
c) shall mention the dividend declared or paid in Rs per unit along with face value of each unit of that
scheme and the prevailing NAV at the time of Declaration of Dividend
d) All of the above
Correct Answer: All of the above
308. Benefits of STP is
a) Paper work is minimized
b) Idle funds situation reduced
c) Both
d) None

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Correct Answer: Both
309. Floating Rate Interest is?
a) government yield+ spread
b) yield spread
c) base + spread
d) payable only on maturity
Correct Answer: base + spread
310. Market price of which of the following investment instruments will fluctuates more?
a) Long Tenor debt
b) Short tenor Debt
c) Floating Rate Securities
d) Debentures
Correct Answer: Long Tenor debt
311. Asset considered for Asset Allocation ideally be
a) Similar
b) only Physical
c) Only Financial Asset
d) Mix of different kind of Asset
Correct Answer: Mix of different kind of Asset
312. Which of the following is most unlikely to have a model portfolio with 20% alloacation to sector fund?
a) Young Executive early in his career
b) Well Placed Mid Level Executive
c) Investor in Distribution Phase
d) Senior Executive with Well Settled Children
Correct Answer: Investor in Distribution Phase
313. A distributor can be empaneled by AMC only if
a) Such distributor and its representative has/have cleared certifying Exam
b) Such distributor is approved by AMFI
c) Such Distributor is registered with Stock Exchange
d) Approved by SEBI
Correct Answer: Such distributor and its representative has/have cleared certifying Exam
314. AGNI is mandated by?
a) AMFI
b) AMFI and SEBI
c) RBI
d) SEBI

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Correct Answer: AMFI
315. Junk Bond Scheme is also be known as High Yeild Scheme?
a) TRUE
b) FALSE
Correct Answer: TRUE
316. According to Some studies Asset Allocations and Investment Policy can better explain the portfolio
performance as compared to Stock selection and Investment Timing?
a) TRUE
b) FALSE
Correct Answer: TRUE
317. Which Of the following benefits of starting Health Inurance Policy early?
a) Higher Money Back after 5 years
b) Protection against Insurance Company rejecting claim on the ground of pre-existing illness
c) Both
d) None
Correct Answer: Protection against Insurance Company rejecting claim on the ground of pre-existing illness
318. Which of the gollowing is Government Savings Scheme?
a) Infrastrucure Bond
b) RBI releif Bond
c) Post Office recurring Deposit
d) All of the above
Correct Answer: Post Office recurring Deposit
319. Relaxation from Documetation required for MICRO SIP is available for
a) Only Individuals other than NRIs and PIOs
b) Individual Including NRI and PIOs
c) Individuals Including NRI but not PIOs
d) Individuals including PIOs but not NRIs
Correct Answer: Individuals Including NRI but not PIOs
320. Intial Phase of Life Cycle is Accumulation?
a) TRUE
b) FALSE
Correct Answer: TRUE
321. Life insurance is meant for
a) Tax planning

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b) Risk protection
c) Investment
d) Savings
Correct Answer: Risk protection
322. Real Estate mutual fund is
a) Beyond means of retail investor's
b) Provided benefits of real estate & MF investing
c) Are popular investment options
d) Are not easy to liquidate
Correct Answer: Provided benefits of real estate & MF investing
323. Black swan refer to
a) Probabilities of large losses
b) MF ratings
c) Kind of offer documents
d) Incentive to distributer
Correct Answer: Probabilities of large losses
324. A five star rating in MF schemes indicates that
a) Lowest expense ratio
b) Lowest load
c) Demonstrate superior performance
d) Best portfolio
Correct Answer: Demonstrate superior performance
325. Which of the bond fund carries least amount of interest risk
a) Dynamic bond
b) G-sec fund
c) Income fund
d) Money market fund
Correct Answer: Money market fund
326. Asset allocation must primarily based on
a) Investment needs
b) Insurance needs
c) Taxation needs
d) Financial goals
Correct Answer: Financial Goals
327. Faced with the financial difficulties a family is likely to do all this except following

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a) Move to a larger house in a better locality
b) Economise Expenses
c) Wife starts working
d) Husband takes additional part time job
Correct Answer: Economise Expenses
328. Pre-retirement stage
a) Annual investment amount gets reduced
b) Parents reach towards peak of their earning capacity
c) Saving for retirement gets minimized
d) Saving for investment is not required
Correct Answer: Parents reach towards peak of their earning capacity
329. Teir I account of new pension scheme is called pension account?
a) TRUE
b) FALSE
Correct Answer: TRUE
330. Income tax allows setting of certain types of capital gain losses against certain type of Income which of
the following is true in case of such provision.
a) Capital losses can be offset again salary
b) Long term capital losses from equity MF can Be offset against long term gain from property
c) Short term capital losses can be offset against dividend income for the year In which the loss has
occurred
d) Long term capital losses in equity MF is not available for setting of against business or Salary income
Correct Answer: Long term capital losses in equity MF is not available for setting of against business or
Salary income
331. The __________ is the main driver of returns in a mutual fund scheme.
a) Return
b) Profit of invested company
c) Portfolio
d) None of the above
Correct Answer: Return
332. Fundamental Analysis entails review of the company's
a) Financial Statements
b) Quality of Management
c) Competitive Position
d) All of the above
Correct Answer: All of the above

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333. ___________________ ratio indicates how much investors in the share market are prepared to pay (to
become owners of the company ) , in relation to the company's earnings
a) Earnings per Share
b) Price to Earnings ratio
c) Book Value Per Share
d) Price to Book Value
Correct Answer: Price to Earnings ratio
334. A ____________ fund maintains a portfolio that is in line with the passive fund .
a) Active fund
b) Index Fund
c) Equity fund
d) Debt fund
Correct Answer: Index Fund
335. Value investment style is an approach of picking up stocks which are valued __________ , based on
fundamental analysis .
a) Lower
b) High
c) Medium
d) A&B
Correct Answer: Lower
336. Which is approach is also called stock picking .
a) Top – down Approach
b) Bottom – up Approach
c) Either A & B
d) None Of the above
Correct Answer: Bottom – up Approach
337. If the proceeds on redemption are higher than the amount invested then it is called __________ .
a) Capital Gain
b) Capital Loss
c) No Profit No Loss
d) None Of the above
Correct Answer: Capital Gain
338. Treasury Bills are short term debt instruments issued by the ____________ on behalf of the Goverment
of India.
a) SEBI
b) RBI

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c) Central Government
d) State Government
Correct Answer: RBI
339. Commercial papers are short term Debt Securities issued by corporates.
a) TRUE
b) FALSE
Correct Answer: TRUE
340. Credit rating companies are like _______________ .
a) CRISIL
b) ICRA
c) CARE & FITCH
d) All of the Above
Correct Answer: All of the above
341. Higher the credit risk, lower is likely to be the yield on the debt security.
a) TRUE
b) FALSE
Correct Answer: FALSE
342. Which of the following are derivative _______________ .
a) Forwards
b) Futures
c) Options and swaps
d) All of the above
Correct Answer: All of the above
343. __________ funds take Positions that are contrary to the market.
a) Thematic Funds
b) Mid cap funds
c) Contra funds
d) Dividend yield funds
Correct Answer: Contra Funds
344. Liquid schemes, which invest in securities of up 91 days maturity , have the _________ risk amongest
all kinds of schemes .
a) Higher
b) Lowest
c) Zero
d) None of the above

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Correct Answer: Lowest
345. What is MIBOR?
a) Mumbai Inter – Bank Offered Rate
b) Money Inter – Bank offered Rate
c) Mutual Inter – Bank offered rate
d) Multiple Inter – bank Offred rate
Correct Answer: Mumbai Inter – Bank Offered Rate
346. To convert the demat units into physical from. This process is called re-materialisation.
a) TRUE
b) FALSE
Correct Answer: TRUE
347. RTGS refers to _______________ .
a) Real time Growth Settlement
b) Real Time Gross Settlement
c) Real Technique Gross Settlement
d) Real Technique Growth Settlement
Correct Answer: Real Time Gross Settlement
348. What is ASBA _____________ .
a) Application Supported by Blocked Account
b) Application Supported by Blocked Acknowledgement
c) Application Supported by Blocked Amount
d) None of the above
Correct Answer: Application Supported by Blocked Amount
349. NSE's Mutua; Fund platform is called NEAT MFSS.
a) TRUE
b) FALSE
Correct Answer: TRUE
350. Risk can be measured by
a) variance
b) Standard Deviation
c) Beta
d) Any of the above
Correct Answer: Any of the above
351. SEBI has Facilitated buying and selling of mutual fund units through the stock exchanges.

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a) TRUE
b) FALSE
Correct Answer: TRUE
355. ARN REFERS TO _____________ .
a) Agent registration Number
b) AMFI Registration Number
c) Application Registration Number
d) Account Registration Number
Correct Answer: AMFI Registration Number
356. No single investor shall account for more than 20% of the corpus of the scheme/plans.
a) TRUE
b) FALSE
Correct Answer: TRUE
357. The asset management company shall confirm that a due diligence certificate is signed by the
____________ .
a) Compliance officer
b) Chif executive officer
c) Managing Director
d) Any of the above
Correct Answer: Compliance officer
358. Offer documents of mutual fund schemes are approved by SEBI.
a) TRUE
b) FALSE
Correct Answer: FALSE
359. _______________ regulates mutual funds, depositories, custodians and registrars & transfer agents in
the country.
a) RBI
b) SEBI
c) AMFI
d) All of the above
Correct Answer: SEBI
360. The objectives of AMFI is/are ____________ .
a) To recommend and Promote best business practices
b) To interact with the securities and Exchange Board of India (SEBI)
c) To represent to the Government, Reserve bank of India

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d) All of the above
Correct Answer: All of the above
361. To generate income by investing predominantly in wide range of debt and money market securities “ is
an objective of _________ .
a) Diversify equity Scheme
b) Diversify Debt Scheme
c) balanced scheme
d) None
Correct Answer: Diversify Debt Scheme
362. Institutional Distributors Build Reach through
a) Employees
b) Agents
c) Sub Brokers
d) Any of the Above
Correct Answer: Any of the Above
363. The distributor can charge fees from the Investor
a) TRUE
b) FALSE
Correct Answer: TRUE
364. The difference between NAV and repurchase price is
a) Entry Load
b) Exit Load
c) Expense
d) Dividend Stripping
Correct Answer: Exit Load
365. NAV of Income Funds is to be calculated upto _______ decimals
a) 4
b) 3
c) 2
d) 1
Correct Answer: 4
366. Investments in Mutual Fund can be made using
a) Cheque/DD
b) Remittance
c) ASBA

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d) Any of the Above
Correct Answer: Any of the above
367. STP is the combination of SIP and SWP
a) TRUE
b) FALSE
Correct Answer: TRUE
368. In a Top Down approach, sector allocation precedes stock selection
a) TRUE
b) FALSE
Correct Answer: TRUE
369. Loads and taxes may account for the difference between scheme return and investor return
a) TRUE
b) FALSE
Correct Answer: TRUE
370. Mutual Fund Ranking and rating amount to same
a) TRUE
b) FALSE
Correct Answer: FALSE
371. Which of the following aspects of portfolio would an investor in a debt scheme give more importance.
a) Sector Selection
b) Stock Selection
c) Weighted Average Maturity
d) No of Securities in portfolio
Correct Answer: Weighted Average Maturity
372. The comparable for a Liquid Scheme is
a) Equity Scheme
b) Balanced Scheme
c) Gilt Fund
d) Savings Bank Account
Correct Answer: Savings Bank Account
373. Providing Funds for daughter's Marriage is an example of
a) Goal Oriented Financial Plan
b) Comprehensive Financial Plan

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c) Financial Goal
d) None of the above
Correct Answer: Financial Goal
374. Distribution phase of Wealth Cycle is a parallel of retirement phase of life cycle
a) TRUE
b) FALSE
Correct Answer: TRUE
375. In case of NPS investor can choose which of the asset class of the following
a) Equity
b) Corporate Debt
c) government Securities
d) All of the above
Correct Answer: All of the above
376. New Pension Scheme is regulated by
a) PFRDA
b) IRDA
c) PFRDA+IRDA
d) None of this
Correct Answer: PFRDA
377. What % of the total wealth of Indian People is in physical asset
a) More than 10%
b) More than 25%
c) More than 50%
d) All of the above
Correct Answer: More than 50 %
378. PFRDA refers to
a) Private Fund Regulatory and Development Authority
b) Provident Fund Regulatory and Development Authority
c) Pension Fund Regulatory and Development Authority
d) None of the above
Correct Answer: Pension Fund Regulatory and Development Authority
379. Investment in a Financial Assets can be productive for the economy
a) TRUE
b) FALSE

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Correct Answer: TRUE
380. NCDEX refers to
a) National Contract Exchange
b) National Currency Exchange
c) National Commodity Exchange
d) National Conversion Exchange
Correct Answer: National Commodity Exchange
381. In case of the buying of the Gold Future Contract, entire value of the Gold has to be paid
a) TRUE
b) FALSE
Correct Answer: FALSE
382. ------exempted from the Wealth Tax
a) Gold Deposit Scheme
b) MF
c) Both A and B
d) None of this
Correct Answer: Both A and B
383. Many investors invest money in Bank FD and not in Debt market because
a) Lack of Interest
b) Lack of awareness
c) Lack of Money
d) Lack of confidence
Correct Answer: Lack of awareness
384. Interest earned in Bank FD is Taxable each year
a) TRUE
b) FALSE
Correct Answer: TRUE
385. The primary objective of the Financial Planner is to make available the right amount of money at the
right time.
a) TRUE
b) FALSE
Correct Answer: True
386. The third stage of the wealth cycle is
a) Accumulation

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b) Transition
c) Reaping
d) Intergenerational Transfer
Correct Answer: Intergenerational Transfer
387. In many health insurance policies, the customer has to bear the expenses and that can get reimbursed
from the Insurance company
a) TRUE
b) FALSE
Correct Answer: TRUE
388. Risk appetite ---------- as no of dependant member increases
a) Decreases
b) Increases
c) No change
d) Any of the above
Correct Answer: Decreases
389. Many-------have made available the risk profiling tool on their web sites
a) AMCs
b) Research Houses
c) Both
d) None of this
Correct Answers: Both
390. ------is the decision outcome based on the market behaviour
a) Tactical Asset Allocation
b) Strategic Asset Allocation
c) Flexible Asset Allocation
d) Fixed Asset Allocation
Correct Answer: Tactical Asset Allocation
391. Many Financial advisor work on the Model Portfolio
a) TRUE
b) FALSE
Correct Answer: TRUE
392. Which are the aspects that affect the Risk profiling of the investors?
a) Family Information
b) Financial Information
c) Personal Information

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d) All of the above
Correct Answer: All of the above

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 ADITIONAL QUESTIONS - 2

1. The Trustees have to take the consent of Unit Holders .

a) When the trustee’s decide to wind up the scheme
b) whenever required by 75% of the unit holders
c) whenever required by SEBI in the interest of unit holders
d) All of the above

Correct Answer 1 All of the above

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

Correct Answer 2 TRUE

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

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

Correct Answer 3 FALSE

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

Explanation

4. All advertisements and Sales Literature containing an AMC(s)/Mutual Fund ranking must prominently
disclose .
a) The publisher of the ranking data.
b) Criteria on which the ranking is based.
c) The name of the Ranking Entity.
d) All of the above
Correct Answer 4 All of the above

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

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Correct Answer 5 All of the above

Answer An investor who wants to study the performance of a MF by collecting daily NAV
Explanation etc. from the newspapers can find it frustratingly time consuming.
However ready-made solutions are available in the market. Many AMCs,
distribution houses and mutual fund research houses offer free tools in their
website.

6. Recurring expenses cannot be charged to a Mutual Fund scheme as it drags down the NAV - True or
False?
a) TRUE
b) FALSE

Correct Answer 6 FALSE

Answer Recurring Expenses can be charged to the scheme.

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

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

Correct Answer 7 False - AMFI issues the ARN code number.

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

Correct Answer 8 All of the above

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

Correct Answer 9 TRUE

Answer SEBI has stipulated annual limits on recurring expenses (including

Explanation management fees) for various Equity and Debt schemes.
However management fees cannot be charged by liquid schemes and other
debt schemes on funds parked in short term deposits of commercial banks.

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10. The Stock Exchanges which provide facilities for Mutual Fund trading also do the functions of Mutual
Fund RTAs. - True or False?
a) TRUE
b) FALSE
Correct Answer FALSE
Stock Exchanges does are not required to do the role of Registrars & Transfer
Answer
Explanation

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

Correct Answer 11 FALSE

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

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

Correct Answer 12 FALSE

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

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

Correct Answer 13 FALSE

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

Explanation invest.

14. ARN means .

a) Applicant Registration Number
b) AMFI Recognition Number
c) AMFI Registration Number

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d) Agent Registration Number

Correct Answer 14 AMFI Registration Number

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

Correct Answer 15 FALSE

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

Correct Answer 16 TRUE

17. The maximum expenses including the management expenses that can be charged by Index and ETF
schemes is .
a) 1%
b) 1.50%
c) 2%
d) 2.50%

Correct Answer 17 1%

18. Trail commission is calculated on the Average Net Assets of the investors -True or False ?
a) TRUE
b) FALSE

Correct Answer 18 TRUE

Answer The trail commission is normally paid by the AMC on a quarterly basis and it is
Explanation calculated on net assets.
So the distributors benefit from increase in net assets arising out of valuation gains
in the market.
19. Its compulsory for the Mutual Fund to list its Close Ended schemes on the Stock Exchange - True or
False ?
a) TRUE
b) FALSE

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 Correct Answer 19 TRUE

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

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

Correct Answer 20 FALSE

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

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

Correct Answer 21 No

Answer As per the law, every unit has a face value of ₹10.
Explanation

22. The cost of fund management are the highest in .

a) Passive Funds
b) Active Funds
c) Index Funds
d) None of the Above

Correct Answer 22 Active Funds

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

23. Which of the below expenses can be charged to a fund ?

a) Expenses to manage a fund
b) Expenses to launch a new fund
c) Expenses done by the AMC
d) Expenses done by the Investors

Correct Answer 23 Expenses to manage a fund

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 Answer Earlier expenses to launch a fund were charged to the fund but now they cannot.
Explanation

24. The amount which was paid to the distributor at the time the money is invested in a scheme is called
.
a) Trail Commission
b) Upfront Commission
c) Rebate
d) Fund Incentive

Correct Answer 24 Upfront Commission

25. Expenses incurred to launch a new fund can be charged to the fund - True or False ?
a) TRUE
b) FALSE

Correct Answer 25 FALSE

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

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

Correct Answer 26 TRUE

27. The trail commission paid by Mutual Funds to a distributor

.
a) Is paid only for high valued transactions
b) Is linked to the NAV
c) Grows at a steady rate
d) Is paid to the Corporate and Bank Distributors only

Correct Answer 27 Grows at a steady rate

Answer Dedicated MF distributors have accumulated a portfolio of loyal investors to

Explanation whom they offer superior service.
The trail commission on these investments ensures a steadily rising income for
the distributor. Additional investments from the same investors, and other
investors referred by the current investors, help them grow the portfolio.

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

Correct Answer 28 TRUE

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

Correct Answer 29 cannot get any remedy from the AMC

30. Can recurring expenses be charged to a mutual fund scheme ?

a) Yes, they can be charged.
b) No, they cannot be charged.

Correct Answer 30 Yes, they can be charged.

Answer Recurring Expenses can be charged to the scheme.

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

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

Correct Answer 31 True

Answer The Stock Brokers get their commissions by charging brokerages on MF

Explanation transactions done through them on the Stock Exchange platform.

32. Management fees cannot be charged by liquid schemes and other debt schemes on funds parked in
short-term deposits of commercial banks - State True or False ?
a) TRUE
b) FALSE

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 Correct Answer 32 TRUE

33. The trustees / AMC cannot make any change in the fundamental attributes of a scheme, unless
approval is received from
a) Unit holders
b) SEBI
c) Sponsor
d) Fund Manager of that scheme

Correct Answer 33 Unit holders

Answer The trustees / AMC cannot make any change in the fundamental attributes of a
Explanation scheme, unless a written communication about the proposed change is sent to
each Unit-holder and their approval is sought.
The Dissenting unit-holders are given the option to exit at the prevailing Net
Asset Value.

34. Mutual Fund distributors receive commission on investments made by their clients as well as on the
investments they make for themselves in their own name - State True or False ?
a) TRUE
b) FALSE

Correct Answer 34 FALSE

Answer Distributors get commission on investments made through them by their clients.
Explanation However, no commission is payable on their own investments.

35. Amongst the given options, which will require a due diligence process by the AMC ?
a) If a distributor receives commission of over Rs. 50 lakhs from a single Mutual Fund/AMC
b) If he gets funds of more than Rs 1 crore for a single Mutual Fund
c) If he receives commissions of over Rs. 10 crore p.a. across industry
d) All of the above

Correct If a distributor receives commission of over Rs. 50 lakhs from a single Mutual Fund/AMC
Answer 35

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 Answer Due diligence is mandatory if commission and expenses paid to distributors who satisfy
Explanation one or more of the following conditions with respect to non-institutional (retail and HNI)
investors:
i. Multiple point of presence (More than 20 locations)

ii. AUM raised over Rs. 100 crore across industry in the non-institutional category
but including high networth individuals (HNIs).
iii. Commission received of over Rs. 1 crore p.a. across industry
iv. Commission received of over Rs. 50 lakhs from a single Mutual Fund/AMC.

36. Dormant investors are those investors who have not transacted during the previous months.
a) 3
b) 6
c) 12
d) 24

Correct Answer 36 6 Months

37. To maintain neutrality, all AMC's have same commission structure with respect to commissions payable
to distributors - State True or False ?
a) TRUE
b) FALSE

Correct Answer 37 FALSE

Answer The commission structures vary between AMCs.
Explanation Even for the same AMC, different commissions are applicable for different kinds
of schemes.

38. When an investor gives an request for a new purchase in a MF scheme, it has to be made specifying the
.
a) Lots
b) Units
c) Amount
d) All of the above

Correct Answer 38 Amount

Answer Purchase request in a MF scheme can only be given specifying the amount the
Explanation investor will be investing. The units allotted will depend on the NAV of the date
of allotment.

39. As per the AMFI Code of Ethics, an AMC has to disclose which amongst the following information to

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its unit holders?
a) Unit holders investment pattern
b) portfolio turnover
c) transactions of purchase and sale of securities entered into with any of their associates
d) All of the above

Correct Answer 39 All of the above

Answer As per the AMFI Code of conduct, the AMC has to disclose the investment
Explanation objectives, investment policies, financial position and general affairs of the
scheme, investment pattern, portfolio details, ratios of expenses to net assets and
total income, portfolio turnover, transactions of purchase and sale of
securities entered into with any of their associates or any significant unit holder
etc. to the unit holders.

40. The valuation of Illiquid securities held by a Mutual Fund is done as per .
a) the last traded price of that security on BSE or NSE
b) the norms prescribed by SEBI to arrive at a fair valuation
c) the average price of bid and ask quotation
d) the lowest price calculated as per the above three methods

Correct Answer 40 the norms prescribed by SEBI to arrive at a fair valuation

Answer Non traded securities/Illiquid securities are valued "in good faith" by the asset
Explanation management company on the basis of the valuation principles laid down by SEBI.

41. In the event of delays in dispatching dividend warrants or redemption cheques, the penalties payable to
the investors will be charged to the scheme expenses - State True or False ?
a) TRUE
b) FALSE

Correct Answer 41 FALSE

Answer In the event of delays in dispatching dividend warrants or redemption cheques,
Explanation the AMC has to pay the unit-holder, interest at the rate of 15% p.a. This
expense has to be borne by the AMC and it cannot be charged to the
scheme

42. The main document which authorizes a company to invest in a particular Mutual Fund scheme is .
a) The Articles of Association
b) The Memorandum of Association
c) Shareholder Resolution
d) Specific Board Resolution

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 Correct Answer 42 Specific Board Resolution
Answer The Board resolution authorizes the company to invest in mutual fund
Explanation schemes.

43. As per SEBI rules, the NAV has to be published , in at least daily newspapers having
circulation all over India.
a) daily , 4
b) weekly , 2
c) daily , 2
d) weekly , 4

Correct Answer 43 daily , 2

44. The additional Total Income Ratio (TER) on account of inflows from beyond top 15 cities so charged
shall be clawed back in case the same is redeemed within a period of from the date of investment.
a) 6 months
b) 9 months
c) 1 year
d) 2 years

Correct Answer 44 1 year

45. How the distributors compensated by the Mutual Funds?

a) Primarily through commissions
b) Primarily through salaries
c) Primarily through fixed annual fees plus commissions
d) Primarily through a salaries plus variable commissions

Correct Answer 45 Primarily through commissions

46. AGNI stands for - AMFI Guidelines for New Investors - State True or False ?
a) TRUE
b) FALSE

Correct Answer 46 FALSE

Answer The full form of AGNI is - AMFI Guidelines and Norms for Intermediaries.
Explanation

47. If a charitable trust wishes to invest in a Mutual Fund, which amongst the following document is not
required to be submitted?
a) Memorandum and Articles of Association
b) Trust Deed

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c) Board Resolution authorizing the investments
d) List of authorized signatories

Correct Answer 47 Memorandum and Articles of Association

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

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