1)Which of the following is an appropriate benchmark for a large cap equity fund?

BSE 200 ndex

BSE 500 index

S&P CNX T index

S&P CNX Nifty index

Answer Feedback: Nifty is an index of 50 large cap equity shares and is the appropriate benchmark

2
2) The track record of a fund can be used in evaluating funds that are:


Large

n existence for a short period

n existence for a long period

Small

Answer Feedback: Track record can be used to choose funds that have been in existence for a long
period of time

3) Which of the following is a physical asset?


Bank deposits

Corporate bonds

Equity shares

Title to property

Answer Feedback: Deposits, bonds and shares are financial assets. Property is a physical asse

4) Asset class G in the NPS is suitable for investors who like to invest in:


Equity Shares

Debentures of companies

Bank deposits

Government securities

Answer Feedback: Class G represents investment in government securities
5) Which of the following NAVs of an equity fund is as per minimum regulatory requirement?


Rs. 12.45

Rs.12.452

Rs.12.4525

Rs.12

Answer Feedback: Equity fund NAVs have to be published to at least 2 decimal points. That is the
minimum requiremen




) When an investor plans to will his wealth to his heirs, financial planning is:


Required only for tax purposes

Required for the investor

Not required

Required for the beneficiaries

Answer Feedback: When wealth is planned to be passed on, financial planning is required for the
beneficiaries

7) Profiling is done to ensure that investment options are chosen according to the ability of the
investor to:


Save

Accumulate

Bear risks

Expect returns

Answer Feedback: Profiling is done to assess the ability of the investor to bear risks

8) f you receive an application for investing in a mutual fund, which one of the following investors
would you reject?


POs

HUFs

NRs

OCBs

Answer Feedback: OCBs are not eligible to invest in mutual funds

9) An investor in mutual funds faces the disadvantage of:


Overload of choices

Low flexibility in investing

Lock-in period

High cost of operations

Answer Feedback: There are too many funds to choose from, which is a disadvantage, or a overload
of choices

10) An investor likes to assume high risks for higher returns. Which of the following funds would he
prefer?


Large cap fund

Diversified equity fund

ncome fund

Small cap growth fund

Answer Feedback: A small cap growth fund has a higher risk-return ratio compared to a diversified,
large cap or income fund
11) The correct indicator of return to the investor would be:


Return after expenses and load

Return after expenses

Portfolio return

Return after expenses, load and tax

Answer Feedback: Return to the investor is net, after expense, load and taxes

12) f a distributor invests his own funds in a mutual fund, which of the following is true?


He cannot invest as a individual

He can invest but only in a joint name

He cannot earn commission on his investments

He cannot invest his own funds

Answer Feedback: A distributor cannot earn commissions on his own investments in a fund

13) KYC norms have to be complied for which of the following mutual fund transactions?


All transactions of Rs.50,000 or more in value

All purchase transactions of Rs.50,000 or more in value

All transactions

All purchase transactions

Answer Feedback: From Jan 1, 2011, KYC applies for all mutual fund transactions


14) What is the maximum number of AMCs with whom a mutual fund distributor can be empanelled?


10

20

5

There is no maximum limit

Answer Feedback: There is no limit to the numbers of funds for which a distributor can work


15) Alpha refers to:


Tracking error

Excess return

Beta

Sharpe ratio

Answer Feedback: Alpha refers to return over and above the benchmark




1) Risk factors needs not be carried in which of the following advertisements?


NFO advertisement

Awards advertisement

Tombstone advertisements

Advertisement of existing products

Answer Feedback: Tombstone advertisements make statutory announcements. They carry no product
information or risk factors

17) An investor sells his units in an equity-oriented fund after months, for a profit. What is the
taxability of this gain?


Taxable at 20%

Taxable at 10%

Taxable at 15%

Taxable at marginal rates

Answer Feedback: Gains from sale within one year is treated as short term capital gain, taxable at
15% for an equity-oriented fund

18) The component that is common between offer documents of two schemes of the same mutual
fund is:


SD

KM

SA

MN

Answer Feedback: SA contains common information about the background of the fund house

19) An investor buying mutual fund units for the first time uses the:


Transaction slip

Application form

Statement of account

Switch form

Answer Feedback: Application forms are used for fresh purchase transactions

20) Which of the following is NOT required to be disclosed to the investors in a mutual fund?


NAV of the schemes

Annual report of the scheme

Annual report of the AMC

Portfolio of the scheme

Answer Feedback: The annual report of the AMC need not be disclosed to unit holders


21) An investor who is conservative in his risk taking ability should avoid which of the following
funds?


Monthly income plans

Sector equity funds

Liquid funds

Diversified equity funds

Answer Feedback: A conservative investor should avoid sector funds which can be risky, depending
on how the sector performs

22) The assets of a fund are Rs. 200 cr. The current liabilities are Rs. 20 cr. The unit capital is Rs.
50 cr. and the face value per unit is Rs. 10. what is the NAV of the fund?


Rs.44

Rs.32

Rs.3

Rs.40

Answer Feedback: NAV = (Assets less liabilities)/units. Units = Unit capital/Face value. NAV = ((200-
20)/5) = 3

23) Which of the following entities actually represents the mutual fund?


The custodian

The trust

The sponsor

The AMC

Answer Feedback: The mutual fund is structured as a trust

24) nvestments in equity funds can be expected to be:

Riskless in the short term

Risky in the short term

Risky in the long term

Riskless in the long term

Answer Feedback: nvestments in equity are risky, especially in the short term

25) A greater allocation to equity can be recommended to an investor in the:

Accumulation phase

Transition phase

Distribution phase

Reaping phase

Answer Feedback: f the investor is in accumulation phase he can allocate a higher amount to equity

2) AMF has the powers with respect to registered ARN-holding distributors to:


All of the given options

Cancel registration

ssue notices

mpose penalties

Answer Feedback: AMF can issue notices, impose penalties and cancel registration of ARN holders

27) f an investor redeems units from a fund, he is likely to receive an updated statement of account
within:


15 days

10 days

7 days

30 days

Answer Feedback: Statement of account for normal transactions has to be issued within 10 working
days

28) f an investor conducts a mutual fund transaction on a stock exchange platform, which of the
following is NOT true?


The transaction may have to be sent to the R&T agent

The transaction has be conducted online

The transaction can be settled using a demat account

The transaction will be put through by a broker

Answer Feedback: An exchange transaction is put through a broker, settled using demat or sent to
R&T agent, but need not always be online

29) f an investor in a closed end fund seeks liquidity, he can:

Sell the units on a stock exchange

Redeem units at SCs

Redeem units with the fund

not redeem units before maturity

Answer Feedback: Closed end funds can be sold before maturity only by selling at the stock exchange

30) A company that intends to invest in a mutual fund scheme needs to take approval from:


Company Law Board

SEB

Board of Directors

Registrar of Companies

Answer Feedback: The Board of Directors have to approve the investments of a company in a mutual
fund

31) The NAV of a fund is Rs. 40. The exit load is 1%. What is the re-purchase price per unit?


Rs.40

Rs.39.0

Rs.40.40

Rs. 39.40

Answer Feedback: Repurchase price = NAV - (NAV x Load). =( 40 - (40 x 1%) = 40 - 0.40 = 39.0

32) An investor who saves for a large expense in a short period of time is likely to choose:


An endowment policy

A term policy

A ULP

A money back policy

Answer Feedback: A money back policy is shorter in tenor compared to the other policies

33) An investor earns long term capital losses from his debt fund investments. He also makes a
long term gain from his MP investments. Which of the following is true?


The loss can be set off

Only short term gains are available for set-off

The loss cannot be set-off

The loss can be set off only against short term gains

Answer Feedback: Long term capital losses can be set off only against long term capital gains

34) The primary objective of creating a mutual fund trading platform on a stock exchange is to


ncrease the number of products

ncrease the cost of distribution

ncrease the reach of mutual fund products

ncrease the number of investors

Answer Feedback: Trading of units in stock exchanges is intended to increase the reach of the funds,
not the investors, products or costs

35) f you had to choose the lowest risk option for your investor, which one of the following would
you choose?


Balanced funds based on flexible allocation

Equity funds

Sector funds

Balanced funds based on fixed allocation

Answer Feedback: A balanced fund with fixed allocation maintains the ratio between debt and equity
and is therefore less risky

3) Which of the following funds will not be chosen by an investor who seeks liquidity?


Open ended income funds

Diversified equity funds

Equity-linked saving schemes

Liquid funds

Answer Feedback: Equity linked saving schemes have a 3-year lock-in and therefore should not be
chosen by an investor who seeks liquidity

37) An individual investor chooses a dividend reinvestment option in a debt fund. What is the DDT
applicable to the dividends that are reinvested?


DDT does not apply

DDT applies at 12.5%

DDT applies at 20%

DDT applies only for dividend payout option

Answer Feedback: DDT applies for individuals at 12.5% for both dividend and reinvestment options in
a debt fund

38) Which one of the following can change, without changing the fundamental attribute of a fund?


Fund manager

nvestment Objective

Lock-in period

Asset allocation

Answer Feedback: The fund manager of a fund can change

39) Return from equity depends on:

ndustry factors

Economy factors

All of the given options

Company factors

Answer Feedback: Return from equity depends on economy, industry and company factors

40) The price of a closed end fund that is listed on a stock exchange tends to be:


Higher than the NAV

Unrelated to the NAV

Equal to the NAV

Different from the NAV

Answer Feedback: The price of a listed closed end fund depends on liquidity in the market and can be
different from the NAV

41) The return to the investor in a short term debt fund can be impacted by __________.


market risk

liquidity risk

expense ratios

cash risk

Answer Feedback: A short term debt fund is impacted the most by expenses, since the market and
liquidity risks are low in such products

42) The fund manager in a fund of fund scheme selects:


Stocks

Bonds

Funds

Sectors

Answer Feedback: A fund of fund invests in other funds

43) An investor transaction is completed using the online facility of a mutual fund at 11:30 AM. t is
processed at 4:00 PM. What is the applicable cut-off time for the transaction?


3:00 PM

11:30 AM

4:00 PM

Cut-off time does not apply to such transactions

Answer Feedback: For online transactions, the time recorded on the system is used to apply the NAV.
t is 11:30 am in this case.

:estion 44
44) f unit holders seek a change in AMC, they should get the support of investors holding
__________


75% of the unit capital.

25% of the unit capital.

50% of the unit capital.

40% of the unit capital.

Answer Feedback: Unit holders controlling at least 75% of the unit capital should vote for a change in
AMC

45) According to the investment management agreement, what is the power the trustee holds with
respect to an AMC?


Trustee can change the AMC for non-performance

Trustee can recapitalize the AMC

Trustee can change the staff of the AMC

Trustee can deny fees to the AMC

Answer Feedback: A trustee can change the AMC

4) The AMC's expenses to pay salaries to employees is borne by:

Trustees, not sponsors

AMC, not unit holders

Distributors, not unit holders

Unit holders, not the AMC

Answer Feedback: AMC expenses are borne out of the fee it earns and not charged to the fund

47) Money is paid by the insurer on the death of an insured person, to the ____________.


nominees of the deceased

children of the deceased

proposer of the policy

wife of the policy holder

Answer Feedback: The proceeds of a policy are paid to the nominees if the insured person dies

48) A company investing in a mutual fund is required to submit along with the application:


A copy of the profit and loss account

A copy of the tax returns

A copy of the balance sheet

A copy of the board resolution

Answer Feedback: Companies have to submit the board resolutions approving the purchase

49) A mutual fund scheme was launched on October 15. 2010. When is the SD due for the first
regular update?


March-12

March-11

January-12

January-11

Answer Feedback: SD has to be updated every March. But, for schemes launched in the second half
of a financial year, time until the next, not following, March is allowed

50) CAGR is used to measure the returns from mutual funds for periods of ____________.


less than one year

equal to one year

more than one year

more than five years

Answer Feedback: For periods more than one year, it is mandatory to use CAGR to measure returns

51) A mutual fund has been set up by a bank. Who is the regulator of the sponsor of such a fund?


SEB

AMF

RB

Ministry of Finance

Answer Feedback: The fund in this case is regulated by SEB, but its sponsor, the bank is regulated
by RB

52) Which of the following risks is not borne by FMP, who holds to maturity?


Credit risk

Default risk

Market risk

Liquidity risk

Answer Feedback: FMP that is held to maturity does not bear market risks

53) An investor has sold his investments in a mutual fund two years after buying the units. The
profits he earns are taxable _________________.


as short term capital gains

at a rate of 10%

as long term capital gains

as dividends

Answer Feedback: Gains from units sold after a year of purchase are treated as long term capital
gains

54) n order to be appointed as a constituent of a mutual fund, it is compulsory to be:

Certified by Amfi

Approved by RB

Registered with SEB

Listed by Ministry of Company Affairs

Answer Feedback: All mutual fund constituents have to be registered with SEB

55) Which of the following constituents is responsible for executing the trades of the fund manager
on the stock exchange?


Brokers

R&T agents

Custodian

Banker

Answer Feedback: Brokers execute the trades for the fund manager. The custodian settles them

5) When the interest rates are going down, the prices of debt securities are likely to:


Remain unchanged

Go up

Go down

Cannot say

Answer Feedback: nterest rate and prices of debt securities are inversely related

57) A transaction slip can be used in a mutual fund transaction if:


t is a first time transaction

t is a transaction in an existing folio

t is a non-financial transaction

The value of the transaction is less than Rs.50000

Answer Feedback: To transact in an existing folio, transaction slip can be used

58) An asset allocation that is not frequently revised is called:

Flexible allocation

Tactical allocation

Fixed allocation

Floating allocation

Answer Feedback: Flexible allocation allows the proportion invested in assets to change with market
value without revision

59) The focus on building a retirement corpus should be high ___________.

much before retirement

after retirement

closer to retirement

at retirement

Answer Feedback: Retirement corpus needs to be built during the working years, much before
retiremen

0) f there is a loss from sale of mutual funds, this cannot be set off against ___________.


income from dividends and interest

income from salary

any other head of income

income from residential property

Answer Feedback: Loss from sale of mutual funds cannot be set off against any other head of income

1) Trail commission is paid on the basis of:


Minimum value of the invested amount

Original invested amount

Market value of the invested amount

Face value of the invested amount

Answer Feedback: Trail is paid on the market value of the invested amoun

2) The amount of money remaining with a fund as unclaimed redemption is:

Managed by the fund until it is claimed.

Transferred to a trust immediately.

Transferred to SEB.

Managed by the fund for a specified period.

Answer Feedback: Unclaimed redemptions have to be managed by the fund for a period of three
years

3) The risk appetite of an investor can be expected to:

Change with new events

Remain unchanged

Change every year

Change with age

Answer Feedback: Risk appetite changes primarily with age of the investor

4) When investors buy units in an NFO, the amount mobilized by the fund is called:


nitial AUM

Average AUM

Unit capital

Managed capital

Answer Feedback: NFO is usually priced at face value. The amount mobilised therefore is the unit
capital


5) f an investor uses the ASBA facility in NFO transactions, he makes the payment for units:


n installments

Upfront in advance

Without making an application

Only on allotment of units

Answer Feedback: ASBA enables payment for units only after allotment


) which of the following cannot be a appointed as a distributor of a mutual fund?


Banks

Sponsor

ndividuals

AMC employees

Answer Feedback: AMC employees cannot be distributors

7) Money market securities have a maturity period of:


Equal to 34 days

Less than or equal to 34 days

Less than 91 days

Less than 182 days

Answer Feedback: All money market securities have maturity less than or equal to 34 days

8) The AMF code of conduct is:

Part of the SEB Mutual fund regulation

Not approved by SEB

mplemented only by AMF

Applicable only on voluntary basis

Answer Feedback: AMF code of conduct has been included as part of regulation by SEB

9) The limitation of investing in real estate, to a small investor is that

The holding period is short

The liquidity is high

Requires higher investment outlay

Meets only income needs

Answer Feedback: Real estate investment requires higher investment outlay

70) The NAV for an equity fund purchase transaction will be applied based on:


Date of the cheque

Date of the application

Date on the time stamp

Date of realization of cheque

Answer Feedback: NAV applies for a equity fund transaction based on the time stamp

71) f flexible asset allocation is chosen, the ratio between the asset classes is likely to:


Remain fixed

Change with market changes

Remain equal

Change every year

Answer Feedback: Flexible allocation means the ratio between the assets changes with changes in
market value

72) When a fund launches a new scheme, it first takes the approval of


Trustees

Sponsors

AMF

SAT

Answer Feedback: All mutual fund schemes are approved by Trustees. AMF, SAT or Sponsors do not
have anything to do with scheme launches

73 )An investor in NPS chooses the life cycle option. This means his asset allocation will be based
on:


Amount invested

Risk profile

Age

Holding period

Answer Feedback: n a life cycle option, the asset allocation changes with the age of the investor

74) A fund of fund derives its NAV from other funds. Therefore it can publish its NAV by
__________


8 am of the next day.

9 pm of the same day.

8 pm of the same day.

9 am of the next day.

Answer Feedback: Fund of funds can publish the NAV by 9 am of the next day

75) n the asset allocation decision, which step is the last one?


Financial goal determination

Scheme selection

Return objective

Asset allocation

Answer Feedback: The determination of goal, objective and asset allocation is done first, and
selection of scheme is done last

7) The interest on bank deposits is:

Exempt from tax up to a limit

Fully exempt from tax

Fully taxable

Taxable up to a certain limit

Answer Feedback: nterest from bank deposits is fully taxable

77) The risk in an equity fund can arise from the portfolio that holds:


Non-index stocks

Higher proportion in a few sectors

Less than 10% in a single stock

Stocks from several sectors

Answer Feedback: A portfolio with high proportion in few sectors is concentrated and risky

78) f a scheme has a lock-in period, such information can be found in:


SA

MN

SD

KYC

Answer Feedback: Scheme specific information is found in the SD

79) Which of the following investment exhibits higher volatility in its value?


PPF

Equity shares

Deposits

Bonds

Answer Feedback: Compared to bonds, deposits and PPF, the value of equity is more volatile

80) Which of the following funds is likely to have a high level of volatility in the NAV?


Short term debt fund

Liquid fund

91-day FMP

Long term gilt fund

Answer Feedback: The volatility of a debt fund increases with its maturity, a long term gild fund is
likely to have a high NAV volatility

81) Which of the following is NOT found in an offer document?

Fees and expenses of the scheme

Existing schemes of the fund

Key personnel of the fund

Features of competing funds

Answer Feedback: Offer documents only provide information about the fund making the offer not
information about competing funds

82) An important benefit of SPs is:

Lower lock-in period

High rates of return

Lower fund expenses

Rupee cost averaging

Answer Feedback: SP is a mode of transaction in a fund that reduces average cost. The expense,
return or lock-in do not change.

83) Which of the following is a eligible for specific tax concessions?

Post office deposits

PPF

Company deposits

Corporate bonds

Answer Feedback: There are no tax concessions on bonds and deposits. PPF interest is exempt from
tax

84) The investment objective of an investor is to earn steady income. Which of the following funds is
most likely to meet that objective?


Equity index fund

Sector equity fund

Diversified equity fund

Dynamic Bond Fund

Answer Feedback: A fund that seeks to earn a steady income cannot be an equity fund, only a debt or
bond fund

85) A financial goal, to be actionable has to be defined in terms of:

Amount and need

Amount and time

Needs and desires

Need and time

Answer Feedback: A financial goal has to be defined in terms of time and money, to be acted upon

8) Which one of the following is NOT appointed by the AMC?


The custodian

The R&T agent

The distributor

The banker

Answer Feedback: The custodian is not appointed by the AMC, but by the sponsor

87) A value-based fund is likely to choose which type of stocks?

High dividend value stocks

Higher priced stocks

High growth stocks

High PE stocks

Answer Feedback: Value based funds will choose low PE stocks with high dividend yield.

88) f the PE ratio is very high, it is likely that growth stocks would be


lliquid

Overvalued

Undervalued

Fairly valued

Answer Feedback: f the PE ratio is high, it means growth stocks are overvalued

89) Securities transaction tax (STT) is payable by mutual fund investors on:


Sale of equity-oriented units

Sale and repurchase of all units

Re-purchase of equity-oriented units

Repurchase of all units

Answer Feedback: STT is payable only on redemption or repurchase of equity oriented funds

90) A fund manager has sold his holdings while the markets are still going up and is holding cash as
a defensive measure. How is the portfolio likely to perform if the markets correct?


Underperform

Correlated to the market

Match the market

Outperform

Answer Feedback: f fund manager is in cash and the market corrects, the portfolio will not lose as
much as a the benchmark

91) An application for a gilt fund is received with a cheque for Rs. 2 crore at 11:00 AM. What is the
applicable NAV?


Next day

Previous day

Same day

Day of cheque realisation

Answer Feedback: For a debt fund, if the value of transaction is over Rs.1 cr, NAV applies on the date
of realisation of the cheque

92) A loan can be taken to buy an asset provided:


Rate of loan is unrelated to rate of return on the asset

Rate of loan is equal to rate of return on the asset

Rate of loan is less than rate of return on the asset

Rate of loan is greater than rate of return on the asset

Answer Feedback: f the rate of return on an asset is higher than the rate of loan, it may be worthwhile
taking a loan to buy an asse

93) The price of gold in the spot markets is Rs. 20,000 per 10 gms. t is expected to go up to
Rs.21,000. What is likely to happen to the price of gold futures?


Do not change

Go up

increased volatility

Go down

Answer Feedback: f it is expected that price will go up, prices in the futures market will go up

94) A purchase request for an equity fund was accepted at an AMC office on Wednesday, March 11
at 2:30 pm. What is the applicable NAV for the transaction?


NAV of March 10

NAV of March 11

NAV of March 12

NAV of March 9

Answer Feedback: Since the purchase request was on a working day before cut off time, same day
NAV (NAV of March 11) applies

95) PAN is required for:

Purchase transactions above Rs50,000

Re-purchase transactions

All mutual fund transactions

NFO transactions

Answer Feedback: PAN is mandatory for all mutual fund transactions

9) The primary data used in fundamental analysis of equity is

Shareholding pattern

Trading volume

Financial information

Stock prices

Answer Feedback: Financial information is used in fundamental analysis

97) The primary objective of financial planning is to provide for:

Retirement

Financial goals

Tax saving

Creating wealth

Answer Feedback: Financial planning focuses on providing for defined financial goals

98) Which of the following entities cannot be sued by the investor?


AMC

Sponsor

Trust

Custodian

Answer Feedback: nvestors cannot sue the trust, for it represents the investors themselve

99) nvestments in mutual funds enable investors to reduce the risk in their portfolios through:


Market timing

Diversification

Sector selection

Stock selection

Answer Feedback: Risk in a portfolio is reduced through diversification

100) An investor who is unwilling to invest in equity due to the perceived high risk may benefit from:


A small proportion to a quick-gain trading portfolio

A large proportion in a sector fund

A small proportion in a diversified equity fund

A complete allocation to an all-debt portfolio

Answer Feedback: Sector funds are equity trading are risky options. A small portion in diversified
equity is desirable for such investors