Q 1.

When should an investor adopt a strategy of limiting equity

exposure to index funds ?
In the Accumulation phase
In the Retirement phase
In the Sudden wealth phase
None of the above
CORRECT ANSWER:

In the Retirement phase

Explanation:
Retirement Phase - This is the stage when the investor needs the funds that have
been accumulated over time. Hence, investors in this stage would move the funds
to asset classes that meet their need for easy access to funds or regular periodic
income as the case may be.

So, the investor will invest more in debt / liquid funds and very less in equity
funds.

Q 2. State True or False - The Thematic funds will always have a

wider exposure than Sector funds.
True
False
CORRECT ANSWER:

True

Explanation:
Thematic funds invest in line with an investment theme. For example, an
infrastructure thematic fund might invest in shares of companies that are into
infrastructure construction plus in toll-collection, cement, steel, telecom, power
etc.

The investment is thus more broad-based than a sector fund.

Sector funds invest in only a specific sector. For example, a banking sector fund
will invest in only shares of banking companies.
Q 3. The mechanism used to ensure that the cutoff timing is
strictly followed is called _________.
Stamp time
Time verification
Time stamping
Auditing
CORRECT ANSWER:

Time stamping

Explanation:
The NAV that is applicable to a transaction depends, among other things, on the
day and time at which the transaction request was received at the official point of
acceptance. It is therefore very critical to record the time at which a transaction
was received and use this information to determine the applicable NAV for a
transaction.

Time stamping is the process by which a stamp is put with details like date and
exact time of receipt etc. on the transaction form.

Q 4. The auditor appointed to audit the scheme accounts is the

same as the auditor of the AMC accounts - State True or
False?
True
False
CORRECT ANSWER:

False

Explanation:
The auditor appointed to audit the scheme accounts needs to be different from
the auditor of the AMC.
While the scheme auditor is appointed by the Trustees, the AMC auditor is
appointed by the AMC.
Q 5. When the interest rates are rising, the bond funds which have
short average maturity are more likely to outperform - State
True or False?
True
False
CORRECT ANSWER:

True

Explanation:
Short-term debt funds help earn higher interest income in a rising interest rate
scenario.

(Bonds are essentially loans. If prevailing interest rates on loans, including bonds, are rising,
bond investors tend to demand the higher yielding bonds to make more money on their bond
investments)

Long term debt funds help investors earn higher returns from capital gains in
falling interest rate scenario.

Q 6. Can an investor transact directly through the websites of

some mutual fund companies?
Yes, they can buy / sell units on the MFs website
No, this is not allowed in India
CORRECT ANSWER:

Yes, they can buy / sell units on the MFs website

Explanation:
The internet gave an opportunity to mutual funds to establish direct contact with
investors.

Investors can now access the website of the mutual fund and deal directly with
the fund.
Q 7. Investors in India are usually highly organised in managing
their financial transactions and taking decisions related to
Financial Planning - State True or False?
True
False
CORRECT ANSWER:

False

Explanation:
Most investors are either not organized, or lack the ability to make the
calculations required for financial planning. A financial planner’s service is
therefore invaluable in helping people realize their needs and aspirations.

Q 8. Usually, active funds give higher returns as investors bear a

higher fund management expense - State True or False?
False
True
CORRECT ANSWER:

False

Explanation:
Higher fund management does not mean better performance.

Also, some time passive funds like index funds can give better returns than active
funds due to the fund managers wrong analysis.

Q 9. A person gets sudden wealth by winning a big lottery. Which

of the below options is NOT advisable for him ?
Investment in STP for investing in equities
Investment in liquid fund for a short period
Investment of the full amount in equities
Revisiting his financial plan
CORRECT ANSWER:

Investment of the full amount in equities

 Explanation:
In situations of 'Sudden Wealth', it is advisable to initially block the money by
investing in a liquid scheme.

An STP (Systematic Transfer Plan) from the liquid schemes into equity schemes
will help the long-term wealth creation process.

One should not invest 100% of the amount in equities at one go.

Q Which of the following is an important aspect of an OFFER

10.
DOCUMENT?
To inform the investors about the AMC's views on Stock
Markets
To inform the investors on the performance of the scheme
To provide a comparison of the schemes
To inform the investors on the detailed information about the
scheme
CORRECT ANSWER:

To inform the investors on the detailed information about the scheme

Q Mr. A has a small business and will generally need more

11.
allocation to liquid funds than Mr. B, who is senior manager
with a multinational company. - State True or False?
True
False
CORRECT ANSWER:

True

Explanation:
Mr. A may need funds for his business anytime so will allocate more amount to
liquid funds.

Mr. B has a good high paying job, so he has a regular flow of money in form of
salary. He will generally have no liquidity problems so will invest less in liquid
funds and more in growth funds.
Q The distributors are mainly compensated through …………..by
12.
the mutual funds.
commissions
salaries
portfolio profits
annual fees
CORRECT ANSWER:

commissions

Explanation:
Agents receive commissions on the amount mobilized by them.

Two kinds of commission are earned by distributors on their mobilization

- Upfront Commission and Trail commission.

Q An investor gives a local cheque of Rs 3 crore for investment

13.
in Gilt scheme at 11.30 am. What would be the applicable NAV
for this investment ?
The closing NAV of the day preceding the date of application
The closing NAV of the next working day
The closing NAV of the application day
The NAV of the business day on which the funds are available
for utilisation
CORRECT ANSWER:

The NAV of the business day on which the funds are available for utilisation

Explanation:
Vide SEBI circular dated September 17, 2020, it was decided that with respect to
purchase of units of MF schemes - both Debt and Equity (except liquid and
overnight schemes), closing NAV of the day shall be applicable, on which the
funds are available for utilisation irrespective of the size and time of receipt of
such application.

Until now, investors who gave a cheque for below Rs 2,00,000 got the same day’s
NAV, while those putting more got the NAV of the day when the cheque was
realised.
Q When the Capital Base of an investor rises, his or her risk
14.
appetite will tend to ____ .
decrease
increase
remain same
change randomly
CORRECT ANSWER:

increase

Explanation:
Higher the capital base, better the ability to financially take the downsides that
come with risk.

For e.g. - A person with a capital of Rs 1 crore can take more risks than a person
with Rs 10000.

Q The Offer Document will NOT give any information on

15.
________ .
The risk factors of the scheme
The name of stocks in which the scheme is likely to invest
Investment objectives of the scheme
The features of the portfolio of the scheme
CORRECT ANSWER:

The name of stocks in which the scheme is likely to invest

Explanation:
Decision on the stocks to invest is a closed-door procedure and is decided by the
fund managers in association with the research and analysis team.

Q Which of the below investors will require the approval of

16.
board before investing in mutual funds ?
Non Resident investors
Institutional investors
High Net worth investors
Retail investors
 CORRECT ANSWER:

Institutional investors

Explanation:
Authorisation will be required from the board for the institution to invest. This is
typically in the form of a Board Resolution.

Q State True or False - Gilt schemes have more risks than liquid
17.
schemes as their NAV fluctuates more due to changes in the
yield market.
True
False
CORRECT ANSWER:

True

Explanation:
Gilt schemes, which invest in only long-term government securities, have a
higher price risk because their NAV can fluctuate a lot more, on account of
changes in yield in the market. Greater the proportion of longer maturity
securities in the portfolio, higher would be the fluctuation in NAV.

Q The stock exchanges which provide mutual fund trading

18.
facilities also have to provide for settlement guarantee - State
True or False?
True
False
CORRECT ANSWER:

False

Explanation:
Stock Exchanges trading facility for MFs is essentially an order routing system
between the investors and the AMC, the exchanges do not offer Settlement
Guarantee.

Responsibility for settlement is that of the AMC.

Q By investing in mutual funds an investor uses the services of
19.
______ .
a professional actuary
a professional insurance agent
a professional investment manager
a professional tax planner
CORRECT ANSWER:

a professional investment manager

Explanation:
Mutual Funds employ professional investment experts to manage the money of
investors by investing in suitable stocks / debt etc.

Q In which type of fund is the risk of investor not selecting the

20.
correct sector maximum ?
Thematic Funds
Sector Funds
Arbitrage Funds
Index Funds
CORRECT ANSWER:

Sector Funds

Explanation:
Sector funds suffer from concentration risk - the entire exposure is to a single
sector. If that sector does poorly, then the scheme returns are seriously affected.
Sector funds are considered to carry the highest risk among the equity mutual
funds.

Q Tactical Asset Allocation is suitable only for seasoned

21.
investors operating with large investible surpluses - State
True or False?
True
False
CORRECT ANSWER:

True
 Explanation:
Tactical Asset Allocation is the decision that comes out of calls on the likely
behaviour of the market.

It is suitable only for seasoned investors operating with large investible

surpluses.

Q At which price a Close Ended fund can be sold ?

22.
At a price higher than NAV
At a price lower than NAV
At a price same as NAV
At a price which can be higher or lower or same as NAV
CORRECT ANSWER:

At a price which can be higher or lower or same as NAV

Explanation:
The only way to sell a Close Ended fund before the fund closing date is by selling
it on the stock exchange where it is traded

Prices on the stock exchange for a fund can be higher or lower or same
depending on the demand / supply / liquidity etc.

Q …………is not a fair selling practice by a mutual fund

23.
distributor.
Informing the investor of the various investment options
Carefully understanding the clients financial needs
Encouraging the churning of investments
Giving personalised after sales service
CORRECT ANSWER:

Encouraging the churning of investments

Explanation:
Churning means frequent buying and selling.

Encouraging over transacting and churning of Mutual Fund investments to earn

higher commissions by MF agents is a bad practice.
Q When compared to Goal based financial planning,
24.
Comprehensive financial planning requires more time
commitment - State True or False?
True
False
CORRECT ANSWER:

True

Explanation:
A comprehensive financial plan calls for significantly more time commitment on
the part of both the investor and the financial planner.

The comprehensive financial plan captures the estimated inflows from various
sources, and estimated outflows for various financial goals, including post-
retirement living expenses. The plan can go several decades into the future.

Q The NAV of a mutual fund unit changes every day due to

25.
changes in _______ .
number of investors in the mutual fund
market value of the mutual fund portfolio
the size of the portfolio
the units remaining in the portfolio
CORRECT ANSWER:

market value of the mutual fund portfolio

Explanation:
The formula for calculating Net Asset Value -

NAV = (Current value of investments held + Income accrued + Current assets –

Current liabilities – Accrued expenses / No. of outstanding units

So, when the current value of investment held (ie. market value of portfolio)
changes, the NAV will also change.
Q Which one is the Self-Regulatory Organisation (SRO) for the
26.
mutual fund industry ?
SEBI
Sponsors
Trustees
None of the above
CORRECT ANSWER:

None of the above

Explanation:
The Mutual Funds industry in India is in the process of getting an SRO to oversee
its distributors.

(AMFI is not an SRO)

Q Which of the following have the highest credit risk?

27.
Money Market Fund
Junk Bond
G-Sec Fund
Income Fund
CORRECT ANSWER:

Junk Bond

Explanation:
Junk bonds are a type of bond that carries a higher risk of default. The issuer of
such bonds may not have the adequate cash flow to pay regular interest or repay
the principal amount to the bondholders at the time of maturity.

The bonds issued by financially struggling companies are termed junk bonds but
they pay higher returns to make them attractive to investors.
Q Condensed financial information for schemes launched in last
28.
3 financial years is mentioned in the ______________.
Scheme Information Document (SID)
Statement of Additional Information (SAI)
Fact Sheet
Prospectus
CORRECT ANSWER:

Statement of Additional Information (SAI)

Explanation:
Section I of the SAI gives complete details of the constituents of the mutual fund-
-Sponsors, AMC and Trustee Company, of service providers {Custodian,
Registrar & Transfer Agent, Statutory Auditor, Fund Accountant (if outsourced)
and Collecting Bankers}.

This includes their experience, condensed financial information (for schemes

launched in last 3 financial years), key personnel, rights and obligations and other
information the investor may require to evaluate the investment.

Q What is the investment range in equity instruments for a

29.
Conservative hybrid fund?
Between 20 percent and 30 percent of total assets
Between 30 percent and 40 percent of total assets
Between 10 percent and 25 percent of total assets
Between 5 percent and 20 percent of total assets
CORRECT ANSWER:

Between 10 percent and 25 percent of total assets

Explanation:
Conservative Hybrid Fund is an open-ended hybrid scheme investing
predominantly in debt instruments.

Investment in debt instruments shall be between 75 percent and 90 percent of

total assets while investment in equity and equity instruments shall be between
10 percent and 25 percent of total assets.
Q The NFO price of a mutual fund scheme was Rs. 10 and its
30.
current Net Asset Value (NAV) is Rs. 8. What would happen if
the transactions were to happen at NFO price?
The new investors as well as the existing investors in this
scheme would stand to lose
The new investors as well as the existing investors in this
scheme would stand to gain
The new investors stand to gain at the cost of existing investors
The new investors stand to lose at the cost of existing
investors
CORRECT ANSWER:

The new investors stand to lose at the cost of existing investors

Explanation:
If the transactions are taking place at Rs 10 instead of the current NAV of Rs. 8,
the new investors will stand to lose as they will have to pay a higher price to buy
the units. The existing investors will be at an advantage as they can sell their
units at a higher price of Rs 10 instead of Rs 8.

Q Mr. Anand has Rs. 5 lakhs to invest but he may need money in
31.
the short term. In which of these funds should he NOT invest?
Liquid Fund
Money-market fund
Index fund
Overnight fund
CORRECT ANSWER:

Index fund

Explanation:
When an investor needs money in the short term, he should invest in debt funds
like liquid funds, money market funds, overnight fund etc. where he can withdraw
money without any risk of capital loss.

He should not invest in an Index fund as its an equity fund and there can be
possibility of losses in the short term due to stock market fluctuations.
Q Identify which among the following is the first step in the
32.
sequence of creating a mutual fund product?
Launching the New Fund Offer (NFO)
Filing of Scheme Information Document (SID) with SEBI for
observation
Launch of advertising and public relations campaigns by AMC
Approval of Trustees and AMC board for the new product and
drafting of SID
CORRECT ANSWER:

Approval of Trustees and AMC board for the new product and drafting of SID

Explanation:
Units in a mutual fund scheme are offered to investors for the first time by a New
Fund Offer (NFO). The following are a few key steps leading to the NFO:

1. AMC decides on a scheme to take to the market. This is decided on the basis
of inputs from the Chief Investment Officer (CIO) and the Chief Marketing Officer
(CMO)

2. AMC prepares the Scheme Information Document (SID) for the NFO. This needs
to be approved by the Trustees and the Board of Directors (BoD) of the AMC.

3. The documents are then filed with SEBI.

4. The AMC decides on a suitable timetable for the issue. launches its advertising
and public relations campaigns etc

5. The Scheme Documents and Application Forms are distributed to market

intermediaries, and circulated in the market so that investors can apply in the
NFO.

Q Identify the TRUE statement with respect to Time Horizon to

33.
the financial goal.
Longer the horizon to the goal, the ability to take risk is higher
Longer the horizon to the goal, the ability to take risk is lower
Shorter the horizon to the goal, the ability to take risk is higher
Time horizon has no link to financial goals
CORRECT ANSWER:

Longer the horizon to the goal, the ability to take risk is higher
 Explanation:
Investment time horizon: As against the investor’s age, one should consider the
time horizon to the respective financial goal for which one is investing. Longer
the horizon to the goal, the ability to take risk is higher, whereas one may avoid
risks when the goal is in the near future.

Q Mutual funds CANNOT distribute income / dividend out of

34.
______ .
Dividends which are received from equity investments
Unrealised appreciation in value of investments
Income accruals
Realised gains from sale of investments
CORRECT ANSWER:

Unrealised appreciation in value of investments

Explanation:
SEBI guidelines stipulate those dividends can be paid out of distributable
reserves. In the calculation of distributable reserves:

- All the profits earned (based on the accrual of income and expenses as detailed
above) are treated as available for distribution.

- Valuation gains are ignored. But valuation losses need to be adjusted against
the profits.

- That portion of the sale price on new units, which is attributable to valuation
gains, is not available as a distributable reserve.

Since the investments in the portfolio are not yet sold, the gains in them are on
paper - they are not realised. They will be realized when those investments are
sold.
Q State whether the statement is True or False - Investment in
35.
Income Distribution cum Capital Withdrawal re-investment
option grows faster than Growth option as the investor gets
additional units.
It’s true for all categories of mutual fund schemes
Its false for all categories of mutual fund schemes
Its true only for equity funds
It depends on whether the fund is open-end or close-end
CORRECT ANSWER:

Its false for all categories of mutual fund schemes

Explanation:
In a Re-investment of Income Distribution cum capital withdrawal plan, the NAV
declines to the extent of dividend. The resulting NAV is called ex- dividend NAV.

However, the investor does not receive the dividend in his bank account; the
amount is re-invested in the same scheme and additional units are allotted to the
investor. The reinvestment happens at the ex-dividend NAV. The amount invested
in the fund remains the same. Only the units increases and NAV decreases.

Therefore, the growth is same for the Growth Option and Income Distribution cum
Capital Withdrawal Re-investment option.

Q How will the AMC /R&T agent process an application for

36.
subscribing to mutual fund units if the ARN is wrongly
mentioned in it?
It will be processed as a direct plan application
It will be rejected as incomplete application
It will be considered as an incomplete application and sent back
for completion
It will be treated as a regular plan subject to the error being
corrected in the required time frame
CORRECT ANSWER:

It will be treated as a regular plan subject to the error being corrected in the
required time frame
 Explanation:
If the wrong ARN code is mentioned in the application form, then the application
will be processed as a Regular Plan.

However, the AMC will contact the investor/distributor for the right ARN code
within 30 calendar days of the receipt of the application form. If the error is
not rectified within these 30 days, the application will be reprocessed as a direct
application without charging any exit load.

Q A Closed-end fund will have a _______ .

37.
Fixed Dividend pay-out ratio
Fixed Unit Capital
Fixed Net Asset Value (NAV)
Fixed Asset Under Management (AUM)
CORRECT ANSWER:

Fixed Unit Capital

Explanation:
Close-ended Schemes have an NFO Open Date and NFO Close Date. But, they do
not have a Scheme Re-opening Date, because the scheme does not sell or re-
purchase units. Whatever sale-purchase of units takes place is between the
investors on the stock exchange.

Since post-NFO sale and purchase of units happen to or from counter-party in

the stock exchange–and not to or from the scheme–the unit capital of the scheme
remains stable or fixed

(The number of units issued by a scheme multiplied by its face value (Rs. 10) is
the capital of the scheme–its Unit Capital)

(In an Open-End scheme, the ongoing entry and exit of investors imply that the
unit capital in an open-ended fund would keep changing on a regular basis)
Q What would be the impact on an International fund investing
38.
in US stocks when the US Dollar appreciates against Indian
Rupee?
The NAV of the scheme in Indian Rupees will appreciate
The NAV of the scheme in Indian Rupees will depreciate
No impact on the fund as its investing in stocks and not
currency
CORRECT ANSWER:

The NAV of the scheme in Indian Rupees will appreciate

Explanation:
When an Indian investor invests in equities abroad, he is essentially taking two
exposures:

- An exposure on the international equity market.

- An exposure to the exchange rate of the rupee.

If the investor invests in the US, and the US Dollar becomes stronger during the
period of his investment, he benefits; if the US Dollar weakens (i.e., Rupee
becomes stronger), he loses or the portfolio returns will be lower.

Q Identify the FALSE statement/s: 1. A mutual fund investing

39.
across many countries will keep its benchmark index which is
based on US equity markets 2. For Gold ETF, gold prices will
be the ideal benchmark
Only 1 is false
Only 2 is false
Both 1 and 2 are false
CORRECT ANSWER:

Only 1 is false

Explanation:
The benchmark would depend on where the scheme proposes to invest. Thus, a
scheme seeking to invest in China might have the Shanghai Composite Index
(Chinese index) as the benchmark. S&P 500 may be appropriate for a scheme that
would invest largely in the US market. A scheme that seeks to invest across a
number of countries, can structure a synthetic index that would be a blend of the
indices relevant to the countries where it proposes to invest.
 Gold ETF NAVs closely track the price of gold since it reflects the value of gold
held in custody for the units issued. Therefore, gold price would be the
benchmark for such funds.

Q The ……………is used by the fund manager to communicate

40.
their views on the economy and the markets to the investors
Key Information Memorandum (KIM)
Statement of Additional Information (SAI)
Scheme Information Document (SID)
Fund Factsheet
CORRECT ANSWER:

Fund Factsheet

Explanation:
The fund factsheets are an official source of information of the fund’s objective,
performance, portfolio and basic investment requirements issued by the fund
house each month. The factsheet is also used by the fund manager to
communicate their views on the economy and the markets to the investors and
other observers such as research analysts, rating agencies and media.

Q SEBI has to approve the Scheme Related Documents in

41.
______ .
7 days
15 days
1 month
SEBI does not approve the Scheme Related Documents. It only
gives its observations
CORRECT ANSWER:

SEBI does not approve the Scheme Related Documents. It only gives its
observations

Explanation:
SEBI does not approve or disapprove the Scheme Related Documents, it gives
its observations. The mutual fund needs to incorporate these observations in
these documents. Thus, the documents in the market are “vetted” by SEBI, and
not approved by SEBI.
Q When has the investor in mutual funds provide information
42.
under the Foreign Account Tax Compliance Act (FATCA) ?
When the investment is made through a foreign bank account
When the investor's folio was a NRI account before change
When the investor's place of birth is other than India
When the investor is a resident of USA or UK only
CORRECT ANSWER:

When the investor's place of birth is other than India

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

Q Key Information Memorandum (KIM) and Scheme Information

43.
Document (SID) are two broad types of scheme documents -
State whether True or False?
True
False
CORRECT ANSWER:

False

Explanation:
Scheme Information Document (SID) and Statement of Additional Information
(SAI) are primarily the two important documents.

Key Information Memorandum (KIM) is a summary of SID and SAI.

Q As per SEBI guidelines,………. is/are vested with the

44.
responsibility of developing indices as benchmark for debt
mutual fund schemes.
AMFI
Research and rating agencies
The mutual fund themselves
The risk management department of the AMC's
CORRECT ANSWER:
Research and rating agencies
 Explanation:
As per the SEBI guidelines, the benchmark for debt (and balanced schemes)
should be developed by research and rating agencies recommended by AMFI.

CRISIL, ICICI Securities and NSE have developed various such indices.

Q All transactions of purchase and sale of securities by key

45.
personnel of the AMC, who are directly involved in investment
operations shall be disclosed to the compliance officer of the
member at least on _______ .
Weekly basis
Monthly basis
Half-Yearly basis
Yearly basis
CORRECT ANSWER:

Half-Yearly basis

Explanation:
As per the AMFI Code of Ethics - All transactions of purchase and sale of
securities by key personnel who are directly involved in investment operations
shall be disclosed to the compliance officer of the member at least on half yearly
basis and subsequently reported to the Board of Trustees if found having conflict
of interest with the transactions of the fund.

Q The benchmark for a debt mutual fund scheme could be

46.
chosen on the basis of Scheme Type and Scheme Size. - State
whether True or False?
True
False
CORRECT ANSWER:

False

Explanation:
Scheme type and Choice of investment universe drive the choice of benchmark
in debt schemes.
 For e.g. - Liquid schemes invest in securities of up to 91 days’ maturity.
Therefore, a short-term money market benchmark such as NSE’s MIBOR or
CRISIL Liquid Fund Index is suitable.

Choice of Investment Universe Gilt funds invest only in Government securities.

Therefore, indices based on Government Securities are appropriate. Debt funds
that invest in a wide range of Government and Non-Government securities need
to choose benchmarks that are calculated based on a diverse mix of debt
securities.

The size of the scheme is immaterial.

Q Which of the following do not impact the calculation of Net

47.
Asset Value (NAV) ?
Change in value of investments held by the scheme
Daily accrual of expenses
Daily accrual of income
Change in the number of investors in the fund
CORRECT ANSWER:

Change in the number of investors in the fund

Explanation:
While calculating the daily NAV, apart from the change in value of investments,
the actual and accrued income and expenses are also taken into account. These
also affect the calculation of NAV.

Change in the number of investors can affect the Asset Under Management (AUM)
of a scheme but it won’t affect the NAV.

(A scheme cannot show better profits by delaying payments. While calculating

profits, all the expenses that relate to a period need to be considered, irrespective
of whether or not the expense has been paid. In accounting language, this is
called the accrual principle. Similarly, any income that relates to the period will
boost profits, irrespective of whether or not it has been actually received in the
bank account. This again is in line with the accrual principle)

Q Dividing an individual’s portfolio allocation between Core

48.
portfolio and Satellite portfolio is dependent on the risk profile
of the investor - State whether True or False?
True
False
CORRECT ANSWER:
True
 Explanation:
Ideally an investor's portfolio should be divided into Core and Satellite portfolios.
The core portfolio will be invested according to the long-term needs of the
investor and the satellite portfolio will be invested to take advantage of expected
short-term market movements.

However, the division between core and satellite portfolios will depend upon each
investor’s profile. Conservative investors may like a very small proportion of their
overall portfolio to be managed tactically and an investor comfortable with taking
higher risk may have an even higher exposure to tactical investments.

Q Can an investor redeem any amount from a Segregated

49.
Portfolio. If Yes, than what are the restrictions?
There is no restriction on redemptions from a Segregated
Portfolio
Only 25 % of the value of current investments can be redeemed
from a Segregated Portfolio
Only 50 % of the value of current investments can be redeemed
from a Segregated Portfolio
An investor cannot redeem any amount from a Segregated
Portfolio from the AMC
CORRECT ANSWER:

An investor cannot redeem any amount from a Segregated Portfolio from the
AMC

Explanation:
“Segregated portfolio” means a portfolio, comprising of debt or money market
instrument affected by a credit event, that has been segregated in a mutual fund
scheme.

No redemption or subscription is allowed in the segregated portfolio.

However, in order to facilitate exit to unitholders in segregated portfolio, AMC

shall enable listing of units of segregated portfolio on the recognized stock
exchange.
Q Which of these can be a benchmark for a Banking Fund?
50.
S&P BSE FMCG Index
S&P BSE Auto
S&P BSE Bankex
S&P BSE 500
CORRECT ANSWER:

S&P BSE Bankex

Explanation:
The S&P BSE Bankex index comprises constituents of the S&P BSE 500 that are
classified as members of the banks sector as defined by the BSE industry
classification system

Q For units of Equity Linked Savings Scheme (ELSS), the lock-in

51.
period is ______ .
three years from the date of original investment, even in case of
subsequent purchases by SIP
three years from the date of original investment for each
individual unit for purchases made by SIP
There is no lock-in period if tax exemption is claimed
CORRECT ANSWER:

three years from the date of original investment for each individual unit for
purchases made by SIP

Explanation:
If one is investing in ELSS through SIP then each investment would be locked-in
from the date of the respective investment. The lock-in for the entire amount
would not get over on completion of 3 years from the date of the first SIP
instalment.
Q Which distributor will be covered under the due diligence
52.
process of the Asset Management Company as mandated by
SEBI?
A distributor who has presence in more than 10 locations
A distributor who has AUM of over Rs. 100 crores from non-
institutional investors
A distributor who has received commission of over Rs 25 lakhs
from one mutual fund
All of the above
CORRECT ANSWER:

A distributor who has AUM of over Rs. 100 crores from non-institutional
investors

Explanation:
SEBI has mandated AMCs to put in place a due diligence process to regulate
distributors who qualify any one of the following criteria:

- Multiple point presence (More than 20 locations)

- AUM raised over Rs. 100 crores across the industry in the non-institutional
category but including high net worth individuals (HNIs)

- The commission received of over Rs. 1 Crore p.a. across industry

- The commission received of over Rs. 50 Lakhs from a single mutual fund

Q While the SID, SAI and KIM need to be updated periodically,

53.
the interim changes are updated by the AMC through the
issuance _______ .
Fact Sheet
Director's Report
Auditor's Report
Addendum
CORRECT ANSWER:

Addendum

Explanation:
While the SID, SAI and KIM need to be updated periodically, the interim changes
are updated through the issuance of addendum. The addendum is considered to
be a part of the scheme related documents and must accompany the KIM.
Q What does a higher portfolio turnover imply?
54.
It implies higher transaction costs
It implies higher capital gains
It implies lower capital gains
It implies a long term orientation of the fund
CORRECT ANSWER:

It implies higher transaction costs

Explanation:
Portfolio Turnover is the value of Purchase and Sale of Securities during a period
in a mutual fund scheme.

Purchase and sale of securities entails broking costs for the scheme. Frequent
churning of the portfolio would add to the transaction costs.

Q Mr. Ashu holds his mutual fund units in Demat form. If he

55.
wants to change his nominee or his bank account, he has to
contact the……….and complete the required procedure.
Stock Exchange
Depository Participant
R&T agent of the mutual fund
AMC / Mutual fund
CORRECT ANSWER:

Depository Participant

Explanation:
All details such as an address, bank account details, nomination for the units
held in DEMAT FORM is according to the information available in the depository’s
records.

Any changes to the said information have to be made by contacting his

depository participant.
Q Identify the TRUE statement with respect to a Gilt Fund?
56.
The minimum investment in G-secs (as a percentage of total
assets) is 70%
The minimum investment in G-secs (as a percentage of total
assets) is 75%
The minimum investment in G-secs (as a percentage of total
assets) is 80%
The minimum investment in G-secs (as a percentage of total
assets) is 85%
CORRECT ANSWER:

The minimum investment in G-secs (as a percentage of total assets) is 80%

Explanation:
Gilt Fund is an open-ended debt scheme investing in government securities
across maturity. The minimum investment in G-secs is defined to be 80 percent
of total assets (across maturity).

Q What is the Net Asset Value (NAV) after dividend payment

57.
called?
ex-Dividend NAV
ex-Load NAV
cum-Dividend NAV
Net - NAV
CORRECT ANSWER:

ex-Dividend NAV

Explanation:
After a dividend pay-out, the reduced NAV is called ex-Dividend NAV.

(After a dividend is announced, and until it is paid out, it is referred to as cum-

Dividend NAV)
Q Identify the true statement as per AMFI’s Code of Conduct for
58.
Intermediaries of Mutual Funds.
Intermediaries should rebate some of the commission received
by them to the investors
Intermediaries should abstain from making negative statements
about any Asset Management Company or scheme
Intermediaries should split applications so that they can earn
higher transaction charges
CORRECT ANSWER:

Intermediaries should abstain from making negative statements about any

Asset Management Company or scheme

Explanation:
One of the clauses under AMFI’s Code of Conduct for Intermediaries of Mutual
Funds is - Abstain from making negative statements about any AMC or scheme
and ensure that comparisons, if any, are made with similar and comparable
products along with complete facts.

Q Which of these statements is true with respect to a Switch

59.
transaction?
Switch transaction is allowed only after one year from date of
purchase
Switch transaction is similar to a purchase transaction
Switch transaction is similar to a sale transaction
Switch transaction is a redemption from one mutual fund
scheme and simultaneous purchase in to another scheme
CORRECT ANSWER:

Switch transaction is a redemption from one mutual fund scheme and

simultaneous purchase in to another scheme

Explanation:
A switch is a redemption from one scheme and a purchase into another combined
into one transaction.

For example, investors who believe that equity markets have peaked and want to
book profits can switch out from an equity scheme and switch into a short-term
debt fund.
Q Which of these statement is TRUE with respect to Cut-off
60.
timings?
Cut-off timings are prescribed by SEBI from time to time
Cut-off timings are agreed upon between the AMC and the
Collection centres
Cut-off timings are different from AMC to AMC
Cut-off timings are different for different RTAs
CORRECT ANSWER:

Cut-off timings are prescribed by SEBI from time to time

Explanation:
SEBI has prescribed cut-off timing to determine the applicable NAV and these
timings are uniformly applicable for all mutual funds.

Q …………..risk arises because of difference in price movement

61.
of the derivative vis-a-vis that of the security being hedged.
Model Risk
Basis Risk
Market Liquidity Risk
Credit Risk
CORRECT ANSWER:

Basis Risk

Explanation:
Basis Risk arises due to a difference in the price movement of the derivative vis-
à-vis that of the security being hedged.

Q Identify the TRUE statement(s): a. A diversified index will have

62.
a Beta of 1 b. Unsystematic risk can be measured by Beta c. A
portfolio which has Beta of less than 1 is less risky than the
market
a and b
a and c
b and c
Only b
 CORRECT ANSWER:
a and c
Explanation:
The diversified stock index, by definition, has a Beta of 1. Companies or schemes,
whose beta is more than 1, are seen as riskier than the market. Beta less than 1
is indicative of a company or scheme that is less risky than the market.

The risks that impact the entire economy are known as systematic risks. The
company specific risks are also known as unsystematic risks. Systematic risk is
measured by its Beta.

Q The indices based on Government securities will be an

63.
appropriate benchmark for which type of funds?
Credit Risk Funds
Gilt Funds
Money Market Funds
Liquid Funds
CORRECT ANSWER:

Gilt Funds

Explanation:
Gilt funds invest only in Government securities. Therefore, indices based on
Government Securities are the appropriate benchmark.

Q Mr. X has invested Rs. 2,00,000 in a 370-day FMP and on

64.
maturity he received Rs. 2,15,832. What is the capital gain in
this transaction?
Rs. 7916
Rs. 13750
Rs. 15832
Insufficient Data
CORRECT ANSWER:

Rs. 15832

Explanation:
Capital Gains is calculated as the difference between the sum invested and the
sum realized when the units are sold / matured.

So, in the above question, capital gain is Rs 215832 - 200000 = Rs. 15832
Q Identify from the following what is not considered as a
65.
scheme fundamental attribute?
Type of scheme
Investment objective
Investment pattern
Name of fund manager
CORRECT ANSWER:

Name of fund manager

Explanation:
The fund manager and his/her name is not a fundamental attribute of a scheme.

Q Mr. A is an existing investor in a mutual fund scheme and he

66.
is now investing Rs. 5000 in the direct plan of the scheme.
What will be his net investment in the scheme after
considering the transaction charges?
Rs. 4950
Rs. 4900
Rs. 4875
Rs. 5000
CORRECT ANSWER:

Rs. 5000

Explanation:
Each mutual fund has to offer two plans to the investors, viz., regular plan and
direct plan. In a regular plan the investment is through a mutual fund distributor
and in a Direct plan, the investor purchases units directly from the fund.

There are no transaction charges on direct investments.

Q In which of these cases will the 'lock-in' in a retirement fund
67.
be lower than the prescribed 5 years ?
When the retirement age is earlier than 5 years from the date of
investment
When the age of the investor at the time of making initial
investment is not less than 50 years
When the targeted corpus is achieved before 5 years
All of the above
CORRECT ANSWER:

When the retirement age is earlier than 5 years from the date of investment

Explanation:
Retirement Fund is an open-ended retirement solution-oriented scheme having
a lock-in of 5 years or till retirement age (whichever is earlier). Scheme having a
lock-in for at least 5 years or till retirement age whichever is earlier.

Q Distributors can 'opt-out' of charging transaction charges

68.
_____ .
at AMC level
at investor level
at scheme level
at distributor level
CORRECT ANSWER:

at distributor level

Explanation:
Distributors have the option of opting out of charging transaction charges. But
such opting out shall be applicable only at distributor level. This means that the
distributor cannot choose to charge transaction charge from one investor and
not from another.

Q ……………… invest in those securities which have maturity

69.
matching the maturity of the scheme.
Fixed Maturity Plans
Exchange Traded Funds
ELSS Funds
High Yield Funds
CORRECT ANSWER:

Fixed Maturity Plans

 Explanation:
Fixed Maturity Plans are a kind of close-ended debt fund where the duration of
the investment portfolio is closely aligned to the maturity of the scheme.

Fixed Maturity Plan is ideal when the investor’s investment horizon is in sync with
the maturity of the scheme, and the investor is looking for a more predictable
return than any conventional debt scheme, and a return that is generally superior
to what is available in a fixed deposit.

Q A person wants to create a synthetic index. Guide him as to in

70.
which of these categories the weightage of equity index would
be the lowest?
Super aggressive hybrid fund
Aggressive hybrid fund
Balanced hybrid fund
Conservative hybrid fund
CORRECT ANSWER:

Conservative hybrid fund

Explanation:
In a CRISIL Conservative Hybrid Fund, the equity component will be only 25% and
Debt will be 75%. In Aggressive Hybrid Fund, the ratio of Equity and Debt is 75%
and 25% and in a Balanced Hybrid Fund, the ratio is 50% and 50%.

Q What are the guidelines issued by AMFI for intermediaries

71.
known as?
SEBI Brokers and Intermediaries guidelines
Know Your Distributor guidelines
AMFI Guidelines & Norms for Intermediaries (AGNI)
CORRECT ANSWER:

AMFI Guidelines & Norms for Intermediaries (AGNI)

Explanation:
AMFI has framed a set of guidelines and code of conduct for intermediaries
(known as AMFI Guidelines & Norms for Intermediaries (AGNI)), consisting of
individual agents, brokers, distribution houses and banks engaged in selling of
mutual fund products.
Q Identify the true statement with respect to measuring returns
72.
for Mutual Funds schemes. 1. Simple Return can be calculated
using the formula: Sale Price - Cost Price / Sale Price 2.
Compounded Annual Growth Rate 'CAGR' technique has been
prescribed by SEBI when dividend is paid and compounding
is to be considered 3. CAGR is the recognized standard for
calculating returns for investment horizon of greater than or
equal to 1 year
1 and 2
2 and 3
3 and 1
1,2 and 3
CORRECT ANSWER:

2 and 3

Explanation:
1. Simple Return can be calculated with the following formula: Sale Price - Cost
Price / Cost Price

2. Whenever a dividend is paid – and compounding is to be considered - the

CAGR technique (or the reinvestment method, as some call it) prescribed by SEBI
is used

3. The return is calculated using CAGR if the holding period is over one year. If
returns are less than one year, than Simple Return is calculated

Q Identify the TRUE statement. 1. Retail investors can buy units

73.
of Gold ETF 2. Banks as well as Mutual Funds, both offer gold
deposit schemes 3. Gold ETF is a closed ended fund and so
the holdings are not for perpetuity
Only statement 1 is true
Only statement 2 is true
Only statement 3 is true
All 1,2 and 3 are true
CORRECT ANSWER:

Only statement 1 is true

 Explanation:
Gold ETF's can be easily bought by retail investors as the minimum traded
quantity is 1-unit i.e., 1 gram.

The Gold deposit scheme is offered only by banks to mobilise the idle gold in the
country and put it in productive use and to provide the customer an opportunity
to earn interest on the idle gold holdings. All Exchange Traded Fund are open-
ended schemes.

Q The minimum investment limit in equity/equity related

74.
instruments of large cap companies for a Large Cap mutual
fund scheme is …………. of total assets.
70%
80%
85%
90%
CORRECT ANSWER:

80%

Explanation:
A Large Cap Fund is an open-ended equity scheme predominantly investing in
large cap stocks. As per SEBI rules on asset allocation, the minimum investment
in equity and equity related instruments of large cap companies shall be 80
percent of total assets

Q A board resolution for investing in a mutual fund scheme is

75.
compulsorily required by _______ .
Non Resident Indians - NRIs
Hindu Undivided Family - HUF
Institutional Investors
Minors
CORRECT ANSWER:

Institutional Investors

Explanation:
Institutional investors require a authorisation for the investing in any security /
asset etc. This is typically in the form of a Board Resolution.
Q …………. can be used in lieu of dividend payouts.
76.
Systematic Withdrawal Plan (SWP)
Systematic Transfer Plan (STP)
Systematic Investment Plan (SIP)
Total Redemption
CORRECT ANSWER:

Systematic Withdrawal Plan (SWP)

Explanation:
Mutual funds make it convenient for investors to manage their SWPs by
registering the amount, periodicity (generally, monthly) and period for their SWP.

Some schemes even offer the facility of transferring only the appreciation or the
dividend. In this option, the withdrawal is not fixed but will vary depending upon
the availability of appreciation in the specific investment chosen by the investor.

Q What is the maximum permissible limit of investment a single

77.
investor can have in a scheme?
5% of the corpus
10% of the corpus
20% of the corpus
25% of the corpus
CORRECT ANSWER:

25% of the corpus

Explanation:
As per SEBI rules, a Scheme/Plan shall have a minimum of 20 investors and no
single investor shall account for more than 25 percent of the corpus of the
Scheme/Plan(s).
Q Which of these statement(s) is/are TRUE? 1. There cannot be
78.
a price impact on mutual fund units due to portfolio
rebalancing and/or liquidity demands on account of
redemptions. 2. Market liquidity of mutual fund units can get
impacted on account of company/sector related events
Only 1
Only 2
Both 1 and 2
CORRECT ANSWER:

Only 2

Explanation:
Liquidity Risk is one of the general risk factors involved in Mutual Fund
investments.

The liquidity of investments made in the Scheme may be restricted by trading

volumes, settlement periods and transfer procedures. Although the investment
universe constitutes securities which will have high market liquidity, there is a
possibility that market liquidity could get impacted on account of
company/sector/general market related events and there could be a price impact
on account of portfolio rebalancing and/or liquidity demands on account of
redemptions.

Q Where should the change in status of an individual from a

79.
Resident to a Non-Resident Indian updated for mutual fund
investments?
It should be updated with the Registrar and Transfer Agent
It should be updated with the KYC Registration Agency
It should be updated with the directly with the Mutual Fund
It can be updated with any of the three options provided
CORRECT ANSWER:

It should be updated with the KYC Registration Agency

Explanation:
The KYC Registration Agency (KRA) prescribes a 'Change Form' to be used to
register change, if any, in the information provided at the time of the Know Your
Customer (KYC) process. These include: • Change in Name • Change in Status/
Nationality • Change in PAN • Change in permanent address or address for
correspondence etc.
Q The Asset Management Company primarily compensates the
80.
mutual fund distributors through ________ .
Commissions
Salaries
Salary + Commission
Share in AMC's profit
CORRECT ANSWER:

Commissions

Explanation:
The mutual fund distributor earns revenue in the form of commission income for
distribution of the mutual fund products/schemes. The commission may be
linked to either the transaction (Upfront commission) or to the assets under
management (Trail Commission).

Q The choice of benchmark for a Debt Scheme could be chosen

81.
on the basis of: 1. Scheme Size 2. Scheme Type 3. Investment
Universe
Both 1 and 2
Both 2 and 3
Both 1 and 3
All 1,2 and 3
CORRECT ANSWER:

Both 2 and 3

Explanation:
Scheme type and Choice of investment universe drive the choice of benchmark
in debt schemes.

For eg - Liquid schemes invest in securities of up to 91 days’ maturity. Therefore,

a short-term money market benchmark such as NSE’s MIBOR or CRISIL Liquid
Fund Index is suitable.

Choice of Investment Universe Gilt funds invest only in Government securities.

Therefore, indices based on Government Securities are appropriate. Debt funds
that invest in a wide range of Government and Non-Government securities need
to choose benchmarks that are calculated based on a diverse mix of debt
securities.

The size of the scheme is immaterial.

Q What is the investment in equity and equity related
82.
instruments in a Balanced Hybrid Fund?
Between 20% to 30% of total assets
Between 10% to 20% of total assets
Between 40% to 60% of total assets
Between 60% to 80% of total assets
CORRECT ANSWER:

Between 40% to 60% of total assets

Explanation:
Balanced Hybrid Fund is an open-ended balanced scheme investing in equity and
debt instruments. The investment in equity and equity related instruments shall
be between 40 percent and 60 percent of total assets while investment in debt
instruments shall be between 40 percent and 60 percent.

Q For which mutual fund distributors is a due diligence process

83.
mandated by SEBI?
A mutual fund distributor who services more than 25 investors
A mutual fund distributor who receives commission of over Rs.
50 Lakhs from a single mutual fund
A mutual fund distributor who brings in investments from
investors of over Rs. 1 crore for a single mutual fund
All of the above
CORRECT ANSWER:

A mutual fund distributor who receives commission of over Rs. 50 Lakhs from
a single mutual fund

Explanation:
SEBI has mandated AMCs to put in place a due diligence process to regulate
distributors who qualify any one of the following criteria:

a. Multiple point presence (More than 20 locations)

b. AUM raised over Rs. 100 crores across industry in the non-institutional
category but including high net worth individuals (HNIs)

c. Commission received of over Rs. 1 Crore p.a. across industry

d. Commission received of over Rs. 50 Lakhs from a single mutual fund.

Q Identify the TRUE statements - A) Unsystematic risk is
84.
measured by its Beta B) The diversified stock index has a
Beta of 1 C) An investment with a beta of 0.7 will move 7
percent when markets move by 10 percent
A and B are true
B and C are true
A and C are true
All A, B and C are true
CORRECT ANSWER:

B and C are true

Explanation:
1) Systematic risk is measured by its Beta

2) The diversified stock index, by definition, has a Beta of 1. Schemes, whose

beta is more than 1, are seen as riskier than the market. Beta less than 1 is
indicative of a scheme that is less risky than the market.

3) An investment with a beta of 0.7 will move 7 percent when markets move by
10 percent. This applies to increase as well as fall in values. An investment with
a beta of 1.2 will move by 12 percent both on the upside and downside when
markets move (up/down) by 10 percent.

Q As per SEBI Code of Conduct, mutual fund schemes

85.
portfolios should be managed in the interest of _______ .
Trustees
Sponsors
Brokers
All classes of unit holders
CORRECT ANSWER:

All classes of unit holders

Explanation:
As per SEBI Code of Conduct - Trustees and asset management companies shall
carry out the business and invest in accordance with the investment objectives
stated in the scheme related documents and take investment decision solely in
the interest of unitholders.
Q The Key Information Memorandum (KIM) is an abridged
86.
version of which of these documents?
The yearly statement of the portfolio of the fund
The half yearly statement of the financial statement of the fund
The annual accounts of the fund
Scheme related documents SID and SAI
CORRECT ANSWER:

Scheme related documents SID and SAI

Explanation:
KIM is essentially a summary of the Scheme Information Document - SID and
Statement of Additional Information -SAI. Scheme related documents consist of
SID and SAI.

It contains the key points of these documents that are essential for the investor
to know to make a decision on the suitability of the investment for their needs.

Q Investments have to be made only through authorized

87.
signatories for investments by _______ .
Institutional investors
Hindu Undivided Family (HUF)
Non Resident Indians (NRI)
High net worth individuals (HNI)
CORRECT ANSWER:

Institutional investors

Explanation:
Since institutional investors are not natural persons, authorised individuals
invest on behalf of the institution.

Authorisation for the investing institution to invest is typically in the form of a

Board Resolution.
Q If an investor claims his unclaimed redemption amount after 3
88.
years than the payment will be based on the ________ .
average of the NAVs i.e. current NAV and NAV at the time of
original redemption
current NAV
NAV at the end of three years
NAV at the time of original redemption
CORRECT ANSWER:

NAV at the end of three years

Explanation:
Recovery of unclaimed amounts by the investors is as follows:

• If the investor claims the money within 3 years, then payment is based on
prevailing NAV i.e., after adding the income earned on the unclaimed money.

• If the investor claims the money after 3 years, then payment is based on the NAV
at the end of 3 years.

Q Identify the factor which must be considered to determine the

89.
asset allocation for an investor?
Financial goals of the investor and his financial situation
AUM of the scheme
Scheme expenses
Past performance of the scheme
CORRECT ANSWER:

Financial goals of the investor and his financial situation

Explanation:
Asset Allocation is allocation aligned to the financial goals of the individual. It
considers the returns required from the portfolio to achieve the goals, given the
time horizon available for the corpus to be created and the risk profile of the
individual.
Q Identify which of these is a function of Association of Mutual
90.
Funds in India’s (AMFI)?
To calculate the correct NAVs
To make available the AUM, NAV and other important data of
the mutual fund industry
To regulate and control insider trading
To manage the Investor Protection Fund
CORRECT ANSWER:

To make available the AUM, NAV and other important data of the mutual
fund industry

Explanation:
AMFI makes available the AUM, NAV and other important data of the mutual fund
industry on its website.

(Calculation of NAV is the duty of the mutual fund / SEBI regulates insider trading
/ Stock exchanges manage the Investor protection fund)

Q An investor is interested in buying some units of a Close

91.
ended fund after the NFO is over. How can he buy the same?
He can buy the units on the stock exchange from market
makers appointed by the mutual fund
He can buy the units on the stock exchange from other
investors who were allotted the units and are interested in selling
He can buy the units from the mutual fund itself when they open
the sale at periodic intervals as announced by the fund
He cannot buy units of a close ended fund
CORRECT ANSWER:

He can buy the units on the stock exchange from other investors who were
allotted the units and are interested in selling

Explanation:
A close-ended scheme offers liquidity through its listing on a stock exchange.
Unit holders who are interested in selling can offer their quotes and new investors
can buy them.
Q Identify the true statement with respect to investments in
92.
mutual funds through Stock Exchanges?
Stock exchanges have now become another important channel
for mutual fund companies to sell their units to investors
One can buy mutual fund units on stock exchange but cannot
sell them on stock exchange
The mutual fund units purchased through a stock exchange
have a mandatory lock-in period of 30 days
None of the above are true
CORRECT ANSWER:

Stock exchanges have now become another important channel for mutual
fund companies to sell their units to investors

Explanation:
SEBI has facilitated buying and selling of the units of mutual funds through the
stock exchanges. Exchanges have developed mutual fund transaction engines
for the purpose. The low cost and deeper reach of the stock exchange network
enables increased level of participation of retail investors in mutual funds.

Q In case of…………., the Net Asset Value has to be declared for

93.
up to 4 decimal points.
Mid Cap and Small Cap Funds
Liquid Funds
Aggressive Hybrid Funds
ELSS Funds
CORRECT ANSWER:

Liquid Funds

Explanation:
NAV is to be calculated up to 4 decimal places in the case of index funds, liquid
funds and other debt funds.

(NAV for equity and balanced funds is to be calculated up to at least 2 decimal

places)
Q Identify the FALSE statement(s) - A - Authorised signatories
94.
have to sign the request for transactions of institutional
investors in mutual funds B - Even if the Memorandum of
Association and Articles of Association does not permit
invest in mutual funds, the company can invest in mutual fund
on the basis of a Board Resolution
Statement A is false
Statement B is false
Both statements A and b are false
CORRECT ANSWER:

Statement B is false

Explanation:
1. A company cannot invest in mutual funds if its incorporation documents (
(Memorandum of Association and Articles of Association) do not provide for
investments of this type.

2. The mutual fund can allow transactions only if the transaction form/slip
carries the signature of any (one or more, as required) of the authorised
signatories.

Q On what basis will the payment be made to an investor who

95.
claims his erstwhile unclaimed redemption amount within
three years?
The amount paid will based on the prevailing NAV after adding
the income earned on the unclaimed profits
The amount paid will based on the NAV at the time of original
redemption plus income earned on the unclaimed amount
The amount paid will based on the NAV at the time of original
redemption plus income earned on the unclaimed amount and
deducting any penalty on the same
The amount paid will based on the average of the NAV at the
time original redemption and todays NAV after accounting for
income earned and penalty if any
CORRECT ANSWER:

The amount paid will based on the prevailing NAV after adding the income
earned on the unclaimed profits
 Explanation:
Recovery of unclaimed amounts by the investors is as follows:

• If the investor claims the money within 3 years, then payment is based on
prevailing NAV i.e., after adding the income earned on the unclaimed money.

• If the investor claims the money after 3 years, then payment is based on the
NAV at the end of 3 years.

Q The form for registering a change in the default bank account

96.
has to be signed _____ .
by the first holder only
by all the holders of the folio
according to the mode of holding of the folio
by all the holders of the bank account
CORRECT ANSWER:

according to the mode of holding of the folio

Explanation:
The form for registering the change in default bank account has to be signed
according to the mode of holding of the folio.

Q Some of the costs incurred by the Asset Management

97.
Companies to manage the mutual fund schemes can be
charged to …………….in proportion to their holding of units in
the scheme.
Distributors
Stock Brokers
Unit holders
Independent Financial Advisors
CORRECT ANSWER:

Unit holders

Explanation:
All the investor's money is pooled together in a scheme. Costs incurred for
managing the scheme are shared by all the Unit-holders in proportion to their
holding of units in the scheme.
Q Identify the FALSE statement. 1. Arbitrage funds can invest in
98.
both Futures/Options(F&O) and cash markets 2. The only
objective of an Arbitrage fund is to provide capital
appreciation 3. Arbitrage funds have lower risk compared to
Equity Funds
Only 1
Only 2
Both 2 and 3
Both 1 and 3
CORRECT ANSWER:

Only 2

Explanation:
Arbitrage funds work on the mispricing of equity shares in the spot and futures
market. The fund manager simultaneously buys shares in the cash market and
sells it in futures or derivatives markets. The difference in the cost price and the
selling price is the return you earn.

Their risk level is comparable with that of a pure debt fund. The returns from an
Arbitrage fund are comparable to a debt fund. There is no capital appreciation.

Q When can mutual funds charge an additional expense of

99.
0.30% of daily net assets of the scheme?
If the new inflows from beyond top 30 cities are at least (a) 30
percent of gross new inflows in the scheme or (b) 15 percent of the
average assets under management (year to date) of the scheme,
whichever is higher
If the new inflows from beyond top 30 cities are at least (a) 20
percent of gross new inflows in the scheme or (b) 5 percent of the
average assets under management (year to date) of the scheme,
whichever is higher
If the new inflows from beyond top 15 cities are at least (a) 25
percent of gross new inflows in the scheme or (b) 15 percent of the
average assets under management (year to date) of the scheme,
whichever is higher
If the new inflows from beyond top 15 cities are at least (a) 10
percent of gross new inflows in the scheme or (b) 5 percent of the
average assets under management (year to date) of the scheme,
whichever is higher
 CORRECT ANSWER:

If the new inflows from beyond top 30 cities are at least (a) 30 percent of
gross new inflows in the scheme or (b) 15 percent of the average assets
under management (year to date) of the scheme, whichever is higher

Explanation:
In addition to the normal expenses limit, the following expenses may be charged
to the scheme:

If the new inflows from beyond top 30 cities are at least:

(a) 30 percent of gross new inflows in the scheme or

(b) 15 percent of the average assets under management (year to date) of the
scheme

whichever is higher, funds can charge additional expense of up to 0.30 percent

of daily net assets of the scheme.

Q Mrs. Neeta needs Rs. 5,00,000 in 3 years from now. The

100.
interest rate is 6%. By which formula can we calculate the
amount which is required to be invested today to achieve the
goal?
500000 * (1+0.06)*3
500000 / (1+0.06)^3
500000 / (1+0.06)*3
500000 * (1- 0.06)^3
CORRECT ANSWER:

500000 / (1+0.06) ^3\

Explanation:
Present value formula = F / (1 + r) ^ n

Where F is the future value (500000); r is the rate of interest (6% p.a.); and n is the
number of years (3)

= 500000 / (1+0.06) ^3