Practice Questions for AMFI Test
A close-ended mutual fund has a fixed :
NAV
fund size
rate of return
number of distributors
The maximum load that a fund can charge is determined by the :
AMC
SEBI
AMFI
distribution agents based on demand for the fund
The amount required to buy 100 units of a scheme having an entry load of 1.5% and NAV of Rs.20 is :
Rs.2000
Rs.2015
Rs.1985
Rs.2030
A gilt fund is a special type of fund that invests :
in very high quality equity only
in instruments issued by companies with a sound track record
in short-term securities
in government securities only
Of the following fund types, the highest risk is associated with
Balanced Funds
Gilt Funds
Equity Growth Funds
Debt Funds
The NAV of a mutual fund:
is always constant
keeps going up at a steady rate
fluctuates with market price movements
cannot go down at all
An open-ended mutual fund is one that has:
an option to invest in any kind of security
units available for sale and repurchase at all times
an upper limit on its NAV
a fixed fund size
An investor in a close-ended mutual fund can get his/her money back by selling his/her units:
back to the fund
to a special trust at NAV
on a stock exchange where the fund is listed
to the agent through which he/she subscribed to the units of the fund
The "load" charged to an investor in a mutual fund is
entry fee
cost of the paper on which the unit certificates are printed
the fee the agent charges to the investor
the expenses incurred by fund managers for marketing a mutual fund scheme
A mutual fund is owned by
the Govt. of India
SEBI
all its investors
AMFI
Units from an open-ended mutual fund are bought
on a stock exchange
from the fund itself
from AMFI
from a stock broker
A mutual fund is not
owned jointly by all investors
a company that manages investment portfolios of high networth individuals
a pool of funds used to purchase securities on behalf of investors
a collective investment vehicle
"Load" cannot be recovered
at the time of the investor's entry into the fund
as a fixed amount each year
at the time the investor exits the fund
from the fund's distribution agent
The most important advantage of a money market mutual fund is
quick capital appreciation
high regular income
safety of principal
no loads
Some close-ended funds are quoted at a discount to their NAV because
of high expense ratios
investors do not expect the current NAV to be sustained in future
the repurchase price fixed by the fund in lower than the NAV
of the inherent risk involved in investing in such type of funds
The NAV of each scheme should be updated on AMFI's website
every quarter
every month
every hour
every day
Debt funds target
low risk and stable income
protection of principal
high growth with risk
long term capital appreciation
In which of the following do debt funds not invest
government debt instruments
corporate paper
financial institutions' bonds
equity of private companies
Which of the following risks do not affect a debt fund
default by issuer on payment of interest or principal
price fluctuations of the debt securities
share price movements
interest volatility
Assured return or guaranteed monthly income plans are essentially
Hybrid funds
Growth Funds
Debt/Income funds
Sector funds
A Fixed Term Plan Series is
an open-ended fund
a close-ended fund
a fixed term bank deposit
a fixed term corporate bond
NAVs of equity funds are not affected by
Stock market movements
Events affecting the industry/sector in which the fund has invested
Happenings in the companies in which the fund has invested
real estate prices
The greatest potential for growth in capital is offered by
debt funds
gilt funds
growth funds
balanced funds
A Systematic Withdrawal Plan, allows investors to get back the principal amounts invested in addition to the income on investment
True
False
Which of the following is untrue of an automatic reinvestment plan?
The plan allows for automatic reinvestment of all income and capital gains
Automatic reinvestment allows for accumulation of additional units of the fund
The major benefit of automatic reinvestment is compounding
The benefit of automatic reinvestment is often lost on account of the heavy load charge on the reinvestment
Constraints imposed by most funds on check writing are:
Account balance should not fall below the minimum capital required
Checks issued must be for at least the minimum amount specified.
Number of checks per month must not exceed a specified number
Both a & b above
The performance of a fund is largely measured by the success of
the marketing function
the operations function
the portfolio market function
none of the above
Generally invest in
unlisted
market-traded
thinly traded
privately placed
Which of the following is not an equity instrument
preference shares
equity warrants
ordinary debentures
convertible debentures
The drawback of an ordinary share is
possibility of capital appreciation
ownership privilege of the company
guaranteed dividend income
no guaranteed income or security
An owner of preference shares is given which of the following rights
voting rights
fixed dividend income from post-tax profits
voting rights and unlimited dividend income
no guaranteed rights
Market capitalisation of a company is calculated by multiplying the number of outstanding shares by
R.10
Face value of each share
Current market value of each share
dividend yield
The Price/Earnings (P/E) Ratio is an important measure of a company's anticipated performance. It is calculated using:
Market price and dividend
Market price and earning per share
Market capitalisation and dividend
Market price and face value
A company whose earnings are strongly related to the state of economy is known as
Economy stocks
Cyclical Stocks
Value Stocks
Growth stocks
A Growth stock refers to shares of a company whose earnings are projected to grow at the normal market rates
True
False
Which of the following is generally true for a growth stock?
steady capita appreciation and steady dividends yields
high capital appreciation and high dividend yields
high capital appreciation but low dividend yields
steady capital appreciation but high dividend yields
Shares of companies with large capital market capitalisation
have greater growth potential
are more liquid
are not available
none of the above
Dividend yield for a stock is
dividend per share
dividend per face value
dividend per share to current market price
none of the above
Value stocks
have high current dividend yield
yield high growth in earnings
are currently under valued
none of the above
A better performance than the return on index is given by
passive fund manager
an active fund manager
all fund managers
non fund manager
A change in key personnel especially the fund manager of an AMC does not necessitate a revision of the offer document
True
False
If fresh litigation cases or adjudication proceedings are referred by SEBI against the fund sponsors or a company associated with the sponsors, then the offer document needs to be revised
True
False
The offer document need not be revised if the management or the controlling interest in the AMC change
True
False
An AMC cannot explain adverse variations between expense estimates for the scheme on offer and actual expenses for past schemes in
financial newspapers
business channels on TV
the offer document
AMFI newsletter
Information on estimated expenses to be incurred by a scheme is not found in the offer document, but in brochures of the fund
True
False
When comparing a fund's performance with that of its peer group, the following cannot be compared
Two debt funds with 5 year maturities
A broad-based equity fund with an IT Sector Fund
A bond fund with a bond
A government securities fund with a government security
An AMC must explain adverse variation between expense estimates for the scheme on offer and actual
expenses for past schemes in
financial newspapers
business channels on TV
offer document
AMFI Newsletter
Information on estimated expenses to be incurred by a scheme is not found in the offer document, but in brochures of the fund
True
False
The offer document and key information memorandum contain financial information for
all schemes of all mutual funds in the capital market
all schemes launched by the particular fund during the last 3 fiscal years
none of the schemes
companies in which investment is proposed
The functions and responsibilities of the sponsor, AMC, trustees and custodian of the mutual fund are listed in
offer document only
key information memorandum
both offer document and key information memorandum
none of the above
Information about trusteeship fees is included in the offer document but not in the
key information memorandum
True
False
The following information about the constitution of the mutual fund is found in both the offer document and key information memorandum
activities of the sponsor
summary of trust deed provisions
name and addresses of the board of trustees
all of the above
The investment objectives of the fund an investor selects for investment
are of no relevance
should be the same as his own investment objectives
change with market movements
change with change in the AMC's key personnel
The investment policies listed out in the
offer document of a fund do not include
the type of securities in which the scheme will invest principally
asset allocation pattern
policy of diversification
the specific securities in which the fund will invest
If a scheme's name implies that it will invest primarily in a particular type of security or in certain industry/sector, then it should invest at least the following percentage of its total assets in the indicated type of security/industry/sector
100%
80%
65%
40%
For assured return schemes, information about the guarantor's net worth which justifies the guarantor's ability to meet any shortfalls in the returns assured under the scheme can be found in
the offer document
the key information memorandum
both (a) and (b)
none of the above
The names and background of key personnel of the AMC
need not be disclosed to investors
are of no relevance as they may change
are disclosed in the offer document
are declared in newspaper advertisements
The minimum amount to be raised, and the maximum target amount
are not known before the offer is concluded
can be decided based on investor response to the offer
are defined as per SEBI Regulations before the offer is made
need not be disclosed in the offer document
The circumstances for refund of investment in the initial offer and period within which refund must be carried out are not
specified in the offer document, but only on the application
True
False
Offer related information required to be listed in the offer document and key information memorandum includes
dates of opening, closing, earliest closing, allotment and despatch of certificates
procedure for transfer and transmission of units
both the above
neither of the above
In the offer document, funds are required to make disclosures summarizing associate transactions and their impact on the performance of the scheme for the last
one fiscal year
2 fiscal years
3 fiscal years
5 fiscal years
The circumstances under which a scheme shall be wound up are to be described in the offer document at the time of the initial launch of the scheme itself
True
False
The following do not form a part of the investment procedure described in an offer document
various plans under the scheme (e.g. dividend reinvestment plant)
minimum initial (and subsequent) investment
details of who can invest
details of other competing mutual funds
A scheme's policy on dividends and distribution
is decided by the fund manager as per is market outlook
can be changed to suit the requirements of the AMC
need not be consistent
should be disclosed at the time of initial launch
SEBI restricts mutual fund investments in companies forming part of the same group as the AMC. This is:
not true
in the interest of investor protection
applied only to some mutual funds, not all
not favourable to investors at all
A disclosure should be made in the offer document if an AMC has invested more than the following percentage of its net assets in group companies
50%
40%
25%
10%
Mutual funds are allowed to borrow
freely to meet their requirements
for investment purposes
only to meet redemption demands
not allowed at all
As a part of borrowing policy, the following need not be disclosed in an offer document
purpose and circumstances of borrowing
regulatory limits on borrowing
potential risk to AMC and unit-holders
names of lenders
Valuation norms for non-traded securities should be disclosed
at the end of every financial year
every quarter
in the offer document at the time of launch of the scheme
should not be disclosed, being confidential information
Procedure for redemption or repurchase need not
be described in the offer document
include how redemption or repurchase price of units would be determined
include names of centres where redemption can be effected
indicate the redemption or repurchase price as at the end of the current fiscal year
The fund need not describe its accounting policies in the offer document as these are of no use to an investor
True
False
The accounting policies of a fund should be in accordance with
GAAP
SEBI regulations
ICAI Guidelines
American GAAP
Tax treatment of investments does not
form a section in the offer document
describe the tax elements applicable to investors who invest in the fund
form a section in the key information memorandum
offer tax advice to investors
Documents available to investors for inspection do not include
Memorandum and Articles of Association of AMC
consent of auditors and legal advisors
investment management reports
reports based on which actual investments are made
Investors' rights under a scheme are
uniform for all schemes of all funds
not defined
listed in the offer document
available with stock exchanges
The offer document for a scheme should describe how the NAV of the scheme is to be computed
True
False
An offer document contains an AMC's investor grievance's history for the past
one fiscal year
2 fiscal years
3 fiscal years
six months
Any pending cases or penalties levied on the sponsors or AMC should be disclosed in
the offer document
True
False
Who among the following are not eligible to invest in MF
Indian Companies
Banks
Non Banking Finance Companies
Foreign Citizens
NRIs are eligible to invest in Mutual Funds
True
False
The most important link between Mutual Fund and Investors is
Government
SEBI
Fund distributors
AMFI
Are Overseas Corporate Bodies allowed to invest in Mutual Funds
No
Yes
if Ministry of Finance approves
if AMFI approves
Who among the following are not Institutional Investors
Banks
Resident Individuals
Provident Funds
Non Banking Finance Companies
It is compulsory to use fund agents/intermediaries for investing MFs
True
False
Generally, which category of investors need advice for Investing in Mutual Funds
Non Banking Finance Companies
Insurance Companies
Foreign Institutional Investors
Individuals
Most eligible investors of Mutual Funds can broadly be grouped into either individual or institutional investors
True
Ȁ ⸀Ā Ā ĀĀ ЀĀ ȀȀ⸀Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ Ā Ā Ā Ā Ā ĀĀഀ ЀĀ ȀȀ⸀Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ False
Commission rates or loads applicable to big investors and small investors are
same
different
not charges to either
none of the above
What document Mutual Fund distributors need to refer for finding out eligible category of investors in a particular Mutual Fund Scheme
SEBI Regulations Manual
AMFI booklet
Offer document
RBI Guidelines
As per AMFI figures, how many agents approximately, are there in India selling Mutual Funds
50000
100000
75000
150000
Which Mutual Fund has majority of the agents selling its Mutual Fund units in India
LIC Mutual Fund
UTI Mutual Fund
SBI Mutual Fund
None of the above
Mutual Fund agents/distributors are not allowed to sell Financial Products other than Mutual Funds
True
False
Are Mutual Fund agents/distributors in India required to pass any examination to qualify to sell Mutual Fund Units
Yes, a test conducted by AMFI
Yes, a test conducted by SEBI
No
a Post Graduate university course
How many major distributor Companies are there in India selling Mutual Fund units
approximately 9
approximately 11
approximately 10
approximately 25
The offer document is not a legal document
True
False
A copy of all changes in the offer document has to be filed with SEBI
True
False
The legal responsibility for the accuracy of the statements made in the offer document lies with
SEBI
the AMC
AMFI
the Company Law Board
Though the offer document of a scheme is prepared as per SEBI Regulations and is filed with SEBI, SEBI does not certify the accuracy or adequacy of the document
True
False
The following need not be covered in a Key Information Memorandum
Risk Factors
Opening, Closing and earliest Closing Date of the offer
Disclaimer Clause
Functions and responsibilities of the sponsor, trustees, AMC and Custodian responsibilities
The front page of an offer document need not cover
opening, closing and earliest closing date of the offer
disclaimer clause
legal and regulator compliance
price of units
A "glossary" of Defined Terms must be included in the offer document
True
False
Standard risk factors are not
market driven
common to all schemes
of relevance to novice investors
new to a regular investor
The risk of a scheme's NAV moving up or down on the basis of capital market movements is a standard risk factor
True
False
Past performance of a sponsor/AMC mutual fund is not indicative of the future performance of the scheme. This is
not true
a standard risk factor for all schemes
a scheme-specific risk factor
applicable only to gilt funds
Risk arising from a scheme's investment objective/strategy and proposed asset allocation is
not present
common to all schemes
specific to that scheme
not applicable to debt funds
In an assured returns scheme, if assurance is only for a limited period, it must be stated in the offer document that there is no guarantee for sustaining the assured return for the remaining duration of the scheme
True
False
If the AMC is managing a fund for the first time, this information can be found in
newspapers
SEBI
AMFI Newsletter
Offer document
A compliance officer
stands guarantee to the information contained in the offer document
belongs to SEBI
cannot certify that the AMC's legal and procedural obligations are fulfilled
cannot be appointed by the AMC
The due diligence certificate that must be submitted to SEBI along with the draft offer
document cannot be signed by
the managing director of the AMC
an executive director of the AMC
the compliance officer
Investor relations officer
A due diligence certificate does not certify that
the draft offer document forwarded to SEBI is in accordance with SEBI regulations
all legal requirements connected with launching of the scheme have been complied with
disclosures made in the offer document are true, fair and adequate
the AMC guarantees a good performance
In developed countries, an important Mutual Fund marketing channel is through
Insurance Companies
Banks
Non-Banking Finance Companies
Retail Distributors
Emerging or new channel for distributors/marketing of Mutual Fund in India is
Insurance Companies
Banks
Qualified Mutual Fund agents
Direct Sales agents of respective mutual funds
Mutual Funds often use their own employees to mobilise funds from
retail investors
High Networth individuals/institutional investors
all investors
foreign investors
Retail distribution channels are a critical element in the distribution of mutual funds in India
True
False
"Sales Practices" cover the following areas
desirable marketing practices
agents' responsibilities to the investor
ethical code of conduct
all of the above
The following are not termed as "sales practices"
agents commission
before-and after-sales service to investors
advertising of schemes
stock broking
Sales practices are never mandated by regulators, but arise from convention only
True
False
Agents are compensated by mutual funds
through salaries
through commissions
through an annual fee
not in cash but in kind
In India the minimum or maximum
commissions payable to distributors are not prescribed by law, but are decided using the fund's own discretion
True
False
Lowest commissions are paid on
Equity funds
tax benefit schemes of mutual funds
debt funds
long-term investments in mutual funds
Excess distribution expenses are to be borne by the
AMC
unit holders
SEBI
AMFI
To cover fund distribution expenses, open ended funds
charge a fee from agents
charge entry and exit loads from investors
create a reserve
sell investments
Trail commission means paying
no commission at all
the entire commission up-front
part of the commission up-front and the balance in phases
the entire commission after five years
Sub-brokers serve as agents of the principal broker and a mutual fund is not answerable for their activities
True
False
In India, Mutual fund agents' rate and services are at present defined by
SEBI rules
stock exchange bye-laws
AMFI rules
convention
Along with the application, it is mandatory to distribute
investment rebate
offer document
key information memorandum
none of the above
To sell funds effectively, an agent need
not
be fully aware of the important characteristics of the scheme
know his/her client's risk profile
give after sales service
offer large investment rebates
For investors to correctly compare performance of different funds SEBI's advertising codes include
uniform computation of yields
uniform presentations of dividends
identical time periods
all of the above
SEBI's advertising code mandate that all performance calculations in a fund's advertisement should be based
NAV
the NSE Fifty Index
the BSE Sensex
none of the above
An agent's appointment by a fund
requires SEBI's approval
is a lengthy and cumbersome process
is mandatorily preceded by an AMFI test
does not require any approval
An investor does not have recourse to his agent in case of errors, problems or the quality of the investment
True
False
An agent can offer and sell a funds's units at
any price he chooses
a price determined by competition among agents
a price based on demand for that fund's units
the public offering price currently in effect
All buy orders through an agent do not become valid till the fund accepts and confirms the orders
True
False
When an agent purchases, offers or sells units, ensuring compliance with applicable regulations is the responsibility of
the fund
the agent
AMFI
SEBI
The terms of appointment of a broker by a fund are
laid down by SEBI
laid down by AMFI
not uniform to all funds
none of the above
The code of ethics for mutual funds published by AMFI
is mandatory
is in the form of recommended practices
is unfavourable to investors
does not cover distribution and selling practices
The AMFI code of ethics does not cover the following prescriptions
Adequate disclosures should be made to the investors
Funds should be managed in accordance with stated investment objectives
conflict of interest should be avoided in dealings with directors or employees
each investment decision should be approved by investors
Distribution and sales practices are only partly regulated by SEBI at present
True
False
Which of the following distribution channels is preferred by private mutual funds
Individual Agents
Small Distribution companies
established distribution companies
the Internet
Which of the following sales practices is prescribed by regulation
AMFI Code of Ethics
SEBI Advertising
AMFI's Code for Agents
None of the above
In a mutual fund investors' subscriptions are accounted for as
liabilities
deposits
unit capital
none of the above
Investments made by a mutual fund on behalf of investors are accounted as
assets
liabilities
capital
none of the above
Liabilities in the balance sheet of a mutual fund are
in the form of long-term loans
strictly short term in nature
combination of long term and short
term
not allowed as per regulations
Net Asset Value (NAV) of a mutual fund scheme is defined as the schemes
assets minus liabilities
assets per unit
assets minus liabilities per unit
none of the above
The day on which NAV is calculated by a fund is known as
computation date
valuation date
record date
book closure date
A funds NAV is affected by
Purchase and sale of investment securities
valuation of all investment securities held
units sold or redeemed
all of the above
When computing NAV of fund SEBI requires accrual of major expenses to be accounted
quarterly
annually
on a day to day basis
when actually paid
If a fund calculates NAV daily, it will include all the transaction concluded up to
last week
last two days
previous day
today
For a open-ended fund,the repurchase price should not be lower than
NAV
95% of NAV
93% of NAV
97% of NAV
For a close-ended fund, the repurchase price should not be lower than
NAV
95% of NAV
93% of NAV
97% of NAV
For a scheme that has a load, the AMC can change an investment management fee not exceeding
1.50%
2.00%
1.25%
0.50%
Initial expenses of launching schemes should not exceed
15% of amount received
10% of amount raised
6% of amount raised
5% of the amount raised
Which of the following expenses cannot be charged to the scheme
Audit fees
costs related to investor communication
winding costs for terminating the scheme
penalties and fines for infraction of laws
Which of the following are not true for Equity Linked Savings Schemes?
Investors can claim an income tax rebate
There is a lock-in period before investment can be withdrawn
There are not specific restrictions on investment objectives for the fund managers
These funds cannot invest in equity
Which of the following is not true for Index Funds
These funds invests in the shares that constitute a specific index
The investment in shares is in the same proportion as in the index
These funds take only the overall market risk
These funds are not diversified
The structure which is required to be followed by mutual funds in India is laid down by
Financial Ministry
Securities & Exchange Board of India
(SEBI)
Fund Sponsor
Association of Mutual Funds of India (AMFI)
The Board of Trustees of a mutual fund:
act as a protector of investors' interests
directly manage the portfolio of securities
do not have the right to dismiss the
AMC
cannot supervise and direct the working of the AMC
The AMC of a mutual fund cannot
undertake advisory services or financial consulting
cannot invest the funds in government paper
act as a trustee of more than one mutual fund
cannot invest the funds in securities
The trust that manages a mutual fund is appointed by
The Finance Ministry
R.B.I
SEBI
The sponsor of that mutual fund
The custodian of a mutual fund:
is appointed for safekeeping of securities
need not be an entity independent of the sponsors
not required to be registered with SEBI
does not give or receive deliveries of physical securities
Transfer Agents of a mutual fund are not responsible for
issuing and redeeming units of the mutual fund
updating investor records
preparing transfer documents
investing the funds in securities markets
Distributors or agents
can distribute several mutual funds simultaneously
cannot appoint sub-agents or sub-brokers
should be only individuals not companies or banks
should not be an employee or associate of the AMC
A transfer in the management of a close-ended scheme does not require the consent of
unit holders with 75% voting rights
SEBI
Trustees
AMC
The fund sponsor has to contribute
nothing to the AMC
the total networth of the AMC
atleast 40% of the AMC's networth
exactly 50%
The sponsor of a mutual fund may be compared to
a director in a Company
the Chief Executive of a Company
Promoter of a Company
an equity shareholder in a Company
Issuing and redeeming units of a mutual fund is the role
the custodian
the transfer agent
the trustees
the bankers
The fund sponsors should have a sound financial track record of
7 years
12 months
5 years
3 years
The networth of an asset management company should be greater than
Rs.100 Crores
can be decided by the Sponsor
should be atleast Rs. 10 Crores at all times
should be greater than Rs.10 Crores
The AMC and directors are answerable to
Stock Exchanges
The Board of Trustees
Agents and distributors
Stock Brokers
The role of an AMC is to act as 13. promoters
14. investment managers
15. distribution agents
16. regulators
A change in the following key people does not materially impact the performance of the fund
Fund sponsors
Trustees of the fund
Fund Manager
Members of the AMFI Committee
To transfer the management of a scheme from one AMC to another, the consent of the following is required
SEBI
Unit holders
both SEBI and unit holders
none of the above
As per SEBI's principles, the AMC and the Board of Trustees of a fund should belong to the same sponsors
True
False
After UTI, the first mutual funds were started by
private sector banks
public sector banks
financial institutions
non-banking finance companies
The highest authority among the following is the
SEBI
Company Law Board
RBI
Ministry of Finance
The entity that SEBI does not regulate is
share registrars
mutual funds
stock exchanges
non-banking finance companies
The accounts and all other records of an AMC are filed with
AMFI
Registrar of Companies
Agents' Association
UTI
A close-ended scheme of a mutual fund is not governed by
Exchange Rules of the stock exchange where it is listed
Listing Agreement between the fund and the stock exchange
guidelines issued by the Ministry of Commerce
Companies Act provisions relating to transactions in securities
The entry of mutual funds in India was initiated by mutual funds set up by
Public Sector Banks
Private Sector mutual funds
Unit Trust of India
mutual funds set up by insurance companies
For a close-ended scheme to change its fundamental attributes, it must obtain the consent of
50% of unit holders
50% of trustees
75% of unit holders
none of the above
The largest corpus of investable funds in India is with
Bank-owned mutual funds
Private Sector mutual funds
UTI
Insurance Companies
The Board of Trustees of the UTI does not have nominees from
RBI
LIC
IDBI
The Bombay Stock Exchange (BSE)
UTI Cannot provide
corporate finance
engage in real estate and property development business
provide merchant banking services
invest in securities
The "Capital" of a scheme does not include
unit capital
reserves
borrowing
networth of the AMC
Which of the following are Self Regulatory Organisations
Bombay Stock Exchange
SEBI
AMFI
RBI
A Self Regulatory Organisation can regulate
all entities in the market
only its own members in a limited way
its own members with total jurisdiction
no entity at all
The amount of authority enjoyed by a
11. self-regulatory organisation is defined by
12. the apex regulatory authority
13. company law board
14. its own members
15. RBI
The role of AMFI in the mutual funds industry is not to
promote the interests of the unit holders
set a Code of Ethics
regulate mutual funds in
crease public awareness of mutual funds in the country
The rights of investors in a mutual fund scheme are laid down in
the Offer Document of that scheme
Quarterly Reports
Annual Reports
marketing brochures
Unit holders of a mutual fund scheme do not have a right to
proportionate ownership of the
scheme's assets
dividend declared for that scheme
dividend declared for other schemes of the mutual funds
income declared under that scheme
After dividend declaration, unit-holders are entitled to receive dividend within
one week
one month
42 days
six weeks
Unit holders' right to information does not include
obtaining from the trustees any information having an adverse effect on their investments
inspecting major documents of a fund
receiving of a copy of the annual financial statements of that fund
approving investment decisions of the fund
Shortfalls in the case of assured returns schemes are met
by sponsors of such schemes
only if the offer document specifically provided such a guarantee by a named sponsor
the Government of India
AMFI
Unit-holders aggrieved by a Fund or AMC can get redressed from
Consumer Courts
SEBI
AMFI
RBI
If the Directors of an AMC commit fraud, Unit-holders investments' cannot be protected by the Department of Company Affairs and the Company Law Board
True
False
The responsibilities of a unit-holder do not include:
Monitor his investments carefully
being aware of information that affects his investment in a major way
carefully studying the offer document
taking decisions about where the fund managers should invest
UTIs scheme US-64 falls under the purview of SEBI
True
False
UTI was set up by
SEBI
AMFI
A special act
RBI
Bank owned Mutual Funds are supervised by
SEBI
RBI
jointly by SEBI & RBI
AMFI
Investor does not have the right to receive any interest from an AMC if his redemption proceeds are not despatched within 10 working days
True
False
If an investor failed to claim his redemption proceeds within 3 years, he can claim the proceeds at
Par
Prevailing NAV
the on the date he has applied for redemption
15% below the prevailing NAV
After closure of the initial offer an open ended scheme, on going sales and
repurchases must start within
One week
30 days
45 days
180 days
For scheme to be able to change its fundamental attributes, it must obtain the consent of
50% of the unit holders
50% of the trustees
75% of the unit holders
none of the above
The prospectus or Offer Document containing the details of new scheme is first registered with the
AMFI
SEBI
Bombay Stock Exchange
Ministry of Finance
The offer document issued by mutual funds does not serve the purpose of
announcing the scheme
giving detailed information about the scheme
inviting the the investors
giving the fund manager's investment outlook for the next quarter
The prospectus of a close-ended fund is issued
every year
only once at the time of issue
every quarter
every six months
Fundamental attributes of scheme
do not include the objective of the scheme
can be changed without the investor's approval or knowledge
include the terms of the scheme
are not necessary for deciding whether to invest in the scheme or not
The offer document
contains the terms of issue
gives no information relevant for making an investment decision
is not the operating document describing the scheme
cannot be called a reference document
SEBI does not require the following to be included in the offer document issued by a mutual fund
details of the Sponsor and the AMC
Description of the Scheme & investment objective/strategy
Investors' Rights and Services
Performance of other mutual funds
'Key Information Memorandum' is
an abridged version of the offer document
the Memorandum & Articles of Association of the AMC
a sheet containing historical NAVs of other fund schemes
Annual Report of the AMC
The offer document for a scheme remains valid even if
the AMC is reconstituted
entry or exit load are changed
the scheme's NAV changes
new plans are added to existing schemes
The offer document has to be fully revised and updated
every six months
once in two years
every quarter
every month
An addendum giving details of material change in the offer document should be circulated
distributors/brokers
unit holders
SEBI
all of the above
Which of the following is not true for offer documents of open-ended schemes
it is first issued at the time the scheme is launched
it is registered with SEBI
it has to be revised periodically
it need not be revised at all
All important disclosures that the mutual fund is required to make, by regulation, are contained in the offer document
True
False
The offer document issued when an
open-ended scheme is launched is valid for all times, until amended
True
False
216 The most important source of information for a prospective investor is
offer document
Annual Report of the AMC
Economic Times
AMFI Newsletter
217 The offer document need not be studied by an investor before investing in a scheme
True
False
218 The offer document is not a legal document
True
False
219 Initial issue expenses are charged to a scheme in the first year itself
True
False
220 Scheme-wise annual report of a mutual fund need not be
sent to all unit-holders
forwarded to SEBI
published as an advertisement
stock exchanges
221 Mutual funds value their investments
at purchase price
on a mark-to-market basis
at par
at book value
222 Investors are totally exempt from paying any tax on the dividend income they receive from mutual funds
True
False
Income distributed to unit-holders by a debt fund is liable to dividend distribution tax
True
False
A close-ended has average weekly net assets of Rs 200 crore.As per SEBI regulations, the AMC can charge the fund with investment and advisory fees upto:
Rs 2.25 crore
Rs 2.00 crore
Rs 2.50 crore
Rs 3.00 crore
225 A passive fund manager
researches stocks extensively
does not buy and sell stocks often
does not have to go through the process of stock selection
does not have to track stocks
226 A fund manager managing an index fund
has to keep fund expenses low
does not have to research stocks
does not have to balance his portfolio
none of the above
227 A growth manager looks for
high current income
undervalued stocks
above average earnings growth
none of the above
228 A value manager does not look for
stocks that are currently undervalued in the market
stocks whose worth will be recognised by the market in the long term
high current yield
long term capital appreciation
229 From an investor's viewpoint, the most important is
a fund's investment style
performance of the fund
the fund manager's judgement
none of the above
230 Fundamental analysis involves
checking the foundations of the company's factory building
research into the operations and finances of the company
studying the company's share prices
none of the above
Which of the following is not considered for technical analysis
historical data on the company's share price
the company shares' trading volume
current market sentiment
the company's regulatory environment
Quantitative analysis is more likely to be done to evaluate a particular sector or industry rather than any specific stock
True
False
Fundamental analysis forms the basis to decide
when to buy a given share
whether to buy a given share or not
whether to use technical analysis or quantitative analysis
whether the company's factory can withstand earthquakes
Technical analysis guides the decision on
whether to buy or sell
the right time to buy or sell
whether company's technical personnel are adequately qualified
none of the above
Which of the following is not an investment philosophy
capitalising on economic cycles
focusing on growth sectors
capitalisation
finding value stocks
When expecting a fall in market price, fund managers can reduce the loss in portfolio value by
speculating
not buying and selling shares at all for some days
using equity derivatives
giving TV interviews to improve sentiment
Equity derivative instruments are
shares
bonds
contracts
notes
A futures contract allows one to buy or sell the underlying shares, but need not result in delivery
True
False
Derivatives cannot be based on market indices
True
False
In a mutual fund, the overall decisions on allocating money to particular industries/sectors are taken by
equity analysts
fund managers
security dealers
trustees
Continuous tracking of the companies in which a mutual fund has invested is done by
continuous tracking systems
equity analysts
trustees
security dealers
Security dealers of a mutual fund
guard the cabin of the fund manager
execute buy and sell orders for the fund
decide which shares to buy or sell
none of the above
As per SEBI's requirements each scheme of a mutual fund should have a different fund manager
True
False
Debt securities bought at a discount to their face value are generally
interest bearing
zero coupon bonds
paying interest at a floating rate
none of the above
In India, a large part of debt securities pay interest on
a floating rate basis
a fixed rate plus a variable portion
a fixed rate
zero coupon basis
The Indian debt market is largely wholesale in nature
True
False
In the wholesale debt market, the largest proportion of trading is seen in
Government Securities
Corporate Bonds
T-Bills
PSU Bonds
The largest proportion of trades done in the wholesale debt market is accounted by
mutual funds
foreign banks
Indian banks
financial institutions
Certificates of Deposits (CDs) are issued
by
Regional Rural Banks
Corporates
Scheduled commercial banks
none of the above
Commercial Paper is issued by Corporate bodies
to meet short-term working capital requirements
to finance the acquisition of long term capital assets
to retire long term debt
to pay dividend
Government securities are issued through the RBI
True
False
The yield on Treasury Bill (T-Bill) us determined by
the Government of India
auction
the State Governments
floating rate method
Which of the following are not normally found in the portfolio of a debt fund
long-dated Government Securities
Corporate debentures
bonds issued by financial institutions
certificates of deposit issued by banks
Which of the following do not represent the amount an investor of a debt security will be paid upon maturity
par value
face value
fair value
redemption value
Coupon of a debt security refers to
a piece of paper attached to the certificate
the return on investor would earn
the amount rate of interest paid on par value of the bond
none of the above
Which of the following do not apply to the term 'maturity' of a debt security?
the date on which the certificates becomes old
the term of the bond
the date of redemption
the date on which the issuer has to repay the amount
Call or put provisions are used to modify the fixed maturity of debt securities
True
False
A call provision in a debt issue allows the issuer to
call out the names of the investors
redeem the debt on maturity
extend the tenure of the debt
redeem the debt before maturity
A put provision in a debt issue allows
investor to put away the certificates in safe deposit vaults
investors to redeem debt prior to maturity
issuers to redeem debt prior to maturity
investors to extend the tenure of debt
Current yield relates interest on a security to
its current market price
its face value
its fair value
the current price of T-Bills
To compare bonds with different coupon rates, maturities and prices, investors would
use:
current yield
technical analysis
yield to maturity
fundamental analysis
When interest rates rise, bond prices 19. also rise
20. fall
21. are not affected
22. fluctuate either up or down
Yield curve is also known as
Curve of Interest
Term Structure of Interest Rates
Curve that yields
none of the above
An important indicator of expected trends in interest rates is
The Economic Times
the Sensex
the Yield Curve
the Chief Minister's Speech
It may not be possible to reinvest interest received at the same rate as principal. This is known as
reinvestment risk
inflation risk
interest-rate risk
call risk
A bond's rating indicates its
reinvestment risk
default risk
inflation risk
interest-rate risk
If a bond cannot be sold at a price near its value, it means that investment in this bond has
high liquidity risk
high default risk
low liquidity risk
inflation risk
The additional yield required to account for the risk of default by the borrower is known as
yield plus
yield spread
yield extra
yield premium
A high credit rating does not mean
high yield spread
high perceived safety
low yield spread
low risk premium
If 10-year government securities Neil 10% and a 10-Year fixed deposit in a company yields 12%, the yield spread is
12%
22%
10%
2%
The "duration" of an interest-bearing bond is
longer than its maturity
less than its maturity
equal to its maturity
the quality of paper used for the certificate
A bond with a coupon of 9% when interest rates for similar maturities are 11% will sell
above par
below par
at par
at a price unrelated to the prevailing interest rate
Changes in foreign exchange rates have no bearing on interest rates
True
False
Inflation and interest rates are inversely proportional
True
False
Investment policies of a mutual fund are determined by
the fund manager
the AMC management
the marketing department based on what distributors want
the investors
Which of the following measures are not taken by SEBI for protecting investors of mutual funds
mandating minimum levels of diversification for mutual funds
ensuring that the funds are not used to favour a few companies
tracking the securities that each fund has invested in
ensuring that the funds are invested in approved securities only
As per SEBI norms, a fund's investments, in the equity shares of any one company are restricted to
25% of NAV
10% of NAV
50% of NAV
100% of NAV
A mutual fund manager is not allowed to sell short when he expects a crash in the market
True
False
In a mutual fund, having many schemes, al securities bought can be held in a general account and transferred later to various schemes to attain certain profit or loss objectives
True
False
A mutual fund may invest in short-term deposits of scheduled commercial banks
True
False
Mutual funds are allowed to lend
loans
securities
physical assets
none of the above
In case of listed securities of group companies of the sponsor, mutual fund is not allowed to invest
25% of its net assets
10% of its net assets
at all
>5% of net assets
A mutual fund may transfer investments from one scheme to another
not at all
at current market rates
at cost price
at a fixed premium over market rate
Interest Rate Risk for an Indian debt fund can be reduced by using
Futures
Options
Interest Rate Swaps
none of the above
The Interest Rate Forecasting Unit of a debt fund is generally manned by
technicians
statisticians
economists & econometricians
accountants
AMCs need not maintain records in support of each investment decision
True
False
When interest rates for similar maturities' bonds are 11%, bond with a 9% coupon rate will sell
above par
below par
at par
at a price unrelated to the interest rates for similar securities
The most suitable measure for a fund's performance does not depend on the
type of fund
investment objective of the fund
financial market conditions
amount invested by investor
If the NAV of an open-ended fund was Rs.16 at the beginning of the year and Rs.22 after 13 months, the annualised change in NAV is
6.0%
34.6%
40.6%
37.5%
Change in NAV as a measure of fund performance is more suitable for
growth funds
income funds
funds with withdrawal plans
none of the above
The difference between NAV change and total return as measures of fund performance is
none
total return takes dividend into account while NAV change does not
total return does not take NAVs into account
total return does not take the time period into account
The most suitable measure of fund performance for all fund types is
NAV Change
Total Return
Total Return with reinvestment
none of the above
The expense ratio used for measuring fund performance is an indicator of
product market condition
growth in the economy
prevalent market practices
the fund's efficiency
The Expense Ratio as a measure of a fund's performance is defined by a fund's
total expenses and average net assets
total expenses and total assets
average expenses and average net assets
none of the above
While computing the Expense Ratio for a fund, brokerage commissions on the fund's transactions are not included in the fund expenses
True
False
The Expense Ratio is not of utmost importance in case of
Debt fund
Index fund
Equity fund
Bond fund
The Expense Ratio is not affected by
fund size
average account size
portfolio composition
stock market conditions
The Income Ratio as a measure of a fund's performance is defined by the fund's
total income and total assets
net investment income and net assets
total income and net assets
none of the above
The Income Ratio is more suitable for evaluating the performance of
Equity Funds
Growth Funds
Regular Income Funds
Index Funds
Portfolio turnover rate of a fund measure
the
size of the fund's portfolio
amount of buying and selling done by the fund
the average number of units sold by the fund in one day
none of the above
A high turnover rate for a fund indicates
high transaction costs
greater efficiency
high returns to the investor
a rising market
Turnover rates would be most relevant to analyse the performance of
equity funds
growth funds
debt funds
value funds
Transaction costs include
all expenses related to trading
all expenes charged to the fund
distribution expenses ab. none of the above
Which of the following are not included in Transaction costs?
brokerage commissions
stamp duty on transfers
custodians fees
ab. agent commissions
Which of the following transaction costs are not quantified in the offer document
brokerage commissions
dealer spreads
custodian's fees
registrar's fees
The size of a fund has no bearing on its performance
True
False
As per SEBI, mutual funds can borrow for short term to the extent of
total net assets
50% of net assets
25% of net assets
20% of net assets
Which of the following is of no relevance in evaluating a fund's performance
The performance of the stock market as a whole
The performance of other mutual funds
The returns given by other comparable financial products
ab. The change in wholesale price index
The choice of an appropriate benchmark for evaluating a fund's performance depends on
the fund manager
the investment objective of the fund
SEBI
AMFI
An actively managed equity fund expects
to
be able to beat the benchmarks
earn the same returns as the benchmark
aa. have no benchmarks
ab. underperform when compared with the benchmark
For evaluating funds, the preferred benchmark would be the
BSE Sensex
S&P CNX Nifty
BSE 200
ab. S&P CNX Sectoral Indices
To evaluate a close-ended debt-fund, a suitable benchmark would be
BSE Sensex
I-Sec's I-BEX
interest on bank fixed deposits of similar maturity
S&P CNX Defty
When comparing performance of two funds, the following need not be similar
Risk profiles
Investment objectives
Fund size
Fund managers
Which of the following is false?
ROI is a measure similar to Total Return with Reinvestment of distribution
Total Return with Reinvestment of distributions assumes reinvestment at NAV on the distribution date
As a measure of performance, Total Return with Reinvestment of distribution seeks to overcome the shortcomings of simple Total Return
Because of its simplicity, simple Total Return is preferred in practice to Total Return with Reinvestment of distribution
The basis of genuine investment advice should be
23. the current market situation
24. the agent commissions paid by different funds
25. financial planning to suit the investor's situation
26. planning to complete the agent's annual targets
Financial goals do not include
buying a home
winning a sports gold medal
planning for retirement
saving for child's education
Financial planning allows a person
to become a billionaire
to achieve financial goals through proper management of finances
to invest in foreign countries
none of the above
Financial plans do not alter in any way the amount of tax an investor pays as the tax is on his income
True
False
Which of the following works with an investor on his overall financial situation
Tax Advisor
Financial Planner
Insurance Agent
Financial Advisor
A financial planner takes responsibility for the financial well-being of his/her clients
True
False
Financial planners and their clients should focus on
allocating funds to asset classes (e.g. debt, equity etc.)
allocating funds to individual securities
tracking stocks which they feel have potential
none of the above
Within an asset class, which individual security to invest in should be decided by
the financial planner
the investor himself
a professional fund manager
an objective advisor
Financial Planning comprises
defining a client's profile and goals
recommending appropriate asset allocation
monitoring financial planning recommendations
all of the above
Financial planning is relevant only for high networth individuals
True
False
Financial planning does work for older clients
True
False
326 Financial planning is primarily tax planning
True
False
327 In financial planning, all responsibility ends with the financial planner and the client has no responsibilities
True
False
328 The constraint on financial planning due to insufficient investable resources can be remedied to some extent by
decreasing the standard of living
disciplining children
disciplined monthly budgeting
none of the above
329 In the growth option offered by mutual funds, the number of units held by an investor increases because of
growth in net asset value i.e. capital appreciation
reinvestment of dividend which is like compounding
interest received on the fund's assets
none of the above
330 To maximise returns on investment, once an investor buys into a fund, he/she should hold on to it no matter what happens
True
False
331 If an investor keeps investing a fixed amount at regular intervals, the average cost of his purchases will always be less than if he makes investment at irregular periods
True
False
Which of the following lets an investor book profits in a rising market and increase
holdings in a falling market
Fixed Rates of Asset Allocation
Flexible Ratio of Asset Allocation
Investment without any asset allocation plan
Buy and Hold Strategy
A Flexible Ratio of Asset Allocation means
continuously changing the ratio of various assets in the portfolio
not doing any re-balancing and letting the profits run
active switching ab. none of the above
The strategy advisable for an investor to maximise investment return in the long run is
buy and hold on to investments for a long time
liquidate poorly performing investments from time to time
liquidate good performing investments fro time to time
switch from poor performers to good performers
A criticism of rupee-cost averaging is
Investment is for the same amount at regular intervals
Over a period of time, the average purchase price will work out higher than if one tries to guess the market highs and lows
It does not tell you when to buy, sell or switch from one scheme to another
Rupee cost averaging has no serious shortcomings
In India, individual investors do not have direct access to
capital market instruments
real estate
bullion
money market instruments
Which of the following entities can given loans against securities
UTI
Banks
Mutual funds
none of the above
Which of the following investment
products do not give guarantee for return or capital
Bank deposits
Pubic provident fund (PPF)
National Savings Certificates (NSC)
Units of a mutual fund
The biggest advantage of investment in gold is
High returns
High appreciation in value
Low Purchase price
Hedge against inflation
The biggest disadvantage of investment in real estate is
Less potential for capital appreciation
High purchase price
Depreciation in value as time passes ab. Value gets eroded due to inflation
Which of the following is not an advantage of bank deposits?
Liquidity
High perceived safety
Low entry price
High yield after tax
Listing of shares at a stock exchange ensures
guaranteed returns
long term capital appreciation
low risk
high liquidity
The rate of interest paid by a company on debentures issued by it depends on
the stock market situation
SEBI guidelines
the company's credit rating
the amount of money being raised
Which of the following is not a characteristic of company fixed deposits
A higher rate of interest
higher risk
unfavourable effect of tax
very high liquidity
Which of the following is untrue for
Public Provident Fund Schemes
The interest is tax-free
Post-tax returns are attractive
Liquidity is rather low
none of the above
Indira Vikas Patra is an investment product popular with
rural investors
investors in high tax bracket
urban investors
risk taking investors
Finance Acts of 2000 and 2001 have reduced tax-free interest on Public Provident Fund to
12%
10.5%
9%
aa. 11%
348 Most individuals invest in life insurance policies for
risk protection
tax benefits
easy liquidity
high returns
Annual contribution to Public Provident Fund should be
Rs.10000
between 100 and Rs.6000
between Rs.600 and Rs.1000
none of the above
The current yield on Indira Vikas Patra works out to
10.5%
11%
10%
9%
The tenure of an Indira Vikas Patra is
7 years
6 years
5 years ab. 3 years
The maturity period of RBI Relief Bonds
is
5 years
ab. 6 years
ac. 7 years
ad. 8 years
The annual yield on RBI Relief Bonds is ac. 9.5%
ad. 9.5% before tax ae. 8.5% before tax af. 8.5% after tax
Individual investors do not normally invest in Government Securities because
ac. individual investors re not allowed to invest in Government Securities
ad. the amount required for investment is very large
ae. safety of principal is not guaranteed af. none of the above
The amount an insurance company would pay to the nominee if a policyholder died is known as the
aa. premium
ab. sum assured
ac. face value
ad. real value
Dividends distributed by mutual funds
are
aa. taxed at source
ab. taxed in the hands of the investors ac. are subject to capital gains tax ad. are tax-free in the hands of the
investor
Investing through mutual fund is a better option than investing directly in the stock market because
identifying stocks is a difficult process
agents get commissions on mutual fund investment returned are guaranteed by mutual funds
all of the above
A small investor can build a diversified portfolio by
buying one share each of all listed companies
ab. investing in a mutual fund
ac. borrowing enough money to buy shares of well-managed companies
ad. none of the above
Which of the following is not an advantage of mutual fund investment over
direct investment
ac. Higher liquidity
ad. Lower transaction costs ae. Greater convenience af. guaranteed returns
There is no contractual guarantee for repayment of principal or interest to an investor in
aa. bank deposit
ab. debt fund
ac. secured debentures
ad. all of the above
Which of the following debt investments is not rated
ac. Corporate Bonds ad. Commercial Paper ae. Company Deposit af. Debt Fund
Gold and real estate are attractive investment options only in high inflation economies
ac. True ad. False
Direct investment in stock market can be a better option than investing through mutual funds if the investor
wants better returns than those offered by mutual funds
ab. has large capital, knowledge and resources for research
ac. has identified a bullish phase in the stock market
ad. wants to invest for the long term
Deciding on strategies such as long-term compounding, cost averaging, value averaging, active switching, all depend on the
aa. stock market situation on date
ab. amount of money to be invested ac. investor's risk tolerance
ad. phase through which the economy is passing
Financial Planning involves
aa. studying financial management ab. managing the risks of investing ac. financing the client's investments ad. none of the above
Greater returns come only from assuring higher risks, and a higher risk portfolio guarantees higher returns
aa. True
ab. False
The risk tolerance of an investors is independent of
aa. his age
ab. his income
ac. the stock market movements ad. his job security
A sector fund is a aa. low risk fund
ab. moderate risk fund
ac. high risk fund
ad. low-to-moderate risk fund
International funds invest in various and so are low risk funds
True
False
Investment in gold is a hedge against inflation but investment in a precious metal fund falls in the high risk category
True
ab. False
By their very nature, growth funds are considered as high risk funds
aa. True
ab. False
Short Term bond funds are aa. low risk funds
ab. moderate risk funds
ac. high risk
ad. of the above depending on the market
The risk level of commodity funds is
high risk category
determined by the commodity price movements
cannot be specified ab. low risk category
As compared to a fund with fluctuating total returns, a fund with stable positive earnings
gives higher returns
is less risky
gives lower returns
is more risky
"Risk" is equated with
volatility of earnings
level of earnings
the number of investors in a fund
the number of schemes of a fund family
Volatility of an equity fund portfolio is independent of the
kind of stocks in the portfolio
ab. degree of diversification of the portfolio
ac. fund manager's success at market timing
ad. number of investors in the scheme
Equity price risks are
company specific
market level
sector specific ab. all of the above
Diversification reduces
company specific risk ab. market level risk
ac. both of the above ad. none of the above
Which of the following is most risky?
Investing in a money market mutual fund
Investing in an index fund
Short term investment in an equity fund
ab. Long term investment in an equity fund
A fund with a high beta coefficient gives greater returns in a rising market, and is more risky in a falling market
aa. True
ab. False
Which of the following is a disadvantage of Standard Deviation as a measure of risk
Standard Deviation measures total risk, not just market risk
It is based on past returns, which does not necessarily indicate further performance
It is an independent number
All types of funds can be measured with standard deviation
The role of an agent is to
point out the features and benefits of various investments options
ab. help the investor develop the right approach to investing
ac. recommend some investment option available
ad. offer ad hoc advise whenever the investor has surplus money available
One of the most effective ways to invest through mutual funds is to
develop a model portfolio
buy a few units of every mutual fund scheme available
invest all the money in one fund scheme
ab. invest all the money in different schemes of the same fund family
Mutual fund should be advised to expect ac. low post tax returns
ad. dramatic results
ae. better returns than every other available option
af. only realistic wealth accumulation goals
Asset Allocation is
keeping certificates of the physical securities in proper places
ab. allocation the available money to all the securities available
ac. allocating the right proportion of funds to equity, debt and money market securities
ad. none of the above
Once a financial advisor works out ideal Asset Allocation, it can be used for all investors whom he/she advises
aa. True
ab. False
387. Asset distribution among equity, debt
and money market securities should correspond to the investors' need for capital growth, income and liquidity
True
False
The liquidity needs of an investor are met through
Equity Funds
ab. Index Funds
ac. Money Market Funds
ad. Sector Funds
A retired person generally needs a greater proportion of
aa. Debt funds
ab. Equity funds
ac. Money Market funds
ad. All of the above
To satisfy a young investor's need for growth, a greater proportion of investment should be advised in
aa. Gilt funds
ab. Income Funds
ac. Equity Growth funds
ad. Liquid funds
A very high proportion of investment in all types of equity funds is advisable for investors
ac. in distribution phase ad. in accumulation phase ae. in transition phase
af. who are wealth preserving affluent individuals
The transition phase of an investor's wealth cycle is when
the financial goals have been already met
the investor has retired
financial goals are approaching ab. investor suddenly gets a windfall
A high proportion of investment in income funds is required by
accumulating investors
ab. affluent investors
ac. investors in the inter-generational transfer phase
ad. investors in the distribution phase
Retired investors should
not draw down on their capital
not invest in securities which bear risk of capital erosion
continue holding a major portion of their holding in equity growth funds
ab. never invest in equity
For older investors who want to transfer their wealth
no financial planning is required
the right investment strategy depends upon who the beneficiaries are
the right investment strategy depends upon the state of the stock market
ab. all the funds can be invested in aggressive equity funds
Investors who acquire sudden wealth
can speculate with all the acquired money in the stock markets
should not use any of the new wealth to invest in equity
should take the effect of taxes into account
need not pay any taxes on the newly acquired wealth as it is not a part of their regular income
Only if a specialty offshore fund has consistently given very good performance, it can be considered for investment by a retiree
True
False
Past performance should not be solely relied on for selecting a fund
ab. True ac. False
Between the past performance of a fund and its suitability for an investor, past performance is more important
True
ab. False
Structural characterisations of an equity fund include
aa. costs of investing
ab. the specific securities in which the fund has invested
ac. the number of employees of the AMC ad. all of the above
An equity fund's age and size are irrelevant when selecting a fund for
investment
ac. True
ad. False
The charge to an investor at the time of he redeems his units from the fund is known as
ae. recovery charge af. repurchase load ag. redemption weight ah. exit load
The load amount charged to a scheme over a period of time is called
ag. entry load ah. exit load
ai. deferred load aj. no-load
Contingent Deferred Sales Charge (CDSC) ag. is higher for investors who stay
invested in the scheme longer ah. is lower for investors who stay invested in the scheme longer
ai. is the same for all investors irrespective of how long they stay invested
aj. is not allowed to be charged to mutual fund investors in India
405 A fund's declared NAV does not include loads
ae. True
af. False
Which of the following fund types are comparable
ae. An aggressive equity fund and a money market mutual fund
af. A value fund and a government securities fund
ag. A bond fund and a debt fund
ah. A diversified equity fund and a debt fund
Who is the primary guardian of unitholders' funds/assets
ae. The AMC
af. The Trustees
ag. The Registrars
ah. The custodians
In case of a fund merger or Take-over ag. High Court approval may not be
necessary
ah. SEBI approval is a must
ai. all unitholders must be informed aj. all of the above
Units of a money market mutual fund can be issued to
ae. individuals af. banks ag. trusts
ah. all of the above
Though Indian mutual funds have restrictions on borrowings (only20% of net assets and for six months only) which are to meet cash needs for redemption only, UTI is allowed to borrow within more relaxed norms
ag. True ah. False
An equity fund can be said to be concentrated when
ae. when it invests in only in two or three stocks
af. when it invests in may companies of the same sector
ag. when top ten holdings account for more than 50% of net assets invested
ah. when top ten holdings account for more than 25% of net assets invested
The size of the market capitalisation of a fund's equity holdings is inversely proportional to the returns that
ae. can be expected from the fund af. level of risk assumed by the fund ag. state of the stock market
ah. all of the above
A steady holding of investments in an equity fund's portfolio indicates
ae. long-term orientation af. lower transaction costs ag. both the above
ah. none of the above
Ex-Mark of an equity fund measures its ae. performance
af. risk
ag. both the above ah. none of the above
Beta of an equity fund measures its ac. performance
ad. risk
ae. both the above af. none of the above
The best equity fund, relative to others, would have
ae. higher Ex Marks, lower Beta and higher Gross Dividend Yield
af. higher Ex Marks, higher Beta and higher Gross Dividend Yield
ag. lower Ex Marks, lower Beta and lower Gross Dividend Yield
ah. lower Ex Marks, higher Beta and higher Gross Dividend Yield
When selecting equity funds for investing, those at the top of the performance rankings should be avoided
ae. True af. False
A debt fund's age and size are not important when selecting a fund for investment
True
False
Debt schemes are popular because
ac. the Indian Stock Market is always going down
ad. the returns are more predictable ae. most investors are always in debt af. all of the above
Yield-to-maturity of a debt fund's portfolio is more important when the investment objective is
ac. current income ad. total return ae. liquidity
af. all of the above
Compared to equity funds, income margins for debt funds are
ae. narrow
af. higher
ag. the same
ah. almost nil
Debt funds with long-term investments carry higher risk of capital loss
ac. True ad. False
The differerentiating factor among debt funds of comparable maturity and quality is
aa. gross yields
ab. costs
ac. fund age
ad. tenure of the fund manager
Distribution tax should be taken into into account when computing net returns from
aa. equity funds
ab. debt funds
ac. both the above
ad. none of the above
All debt fund investors are exposed to risk of principal loss
ae. True af. False
Running a money market mutual fund requires more of
ac. credit analysis skills ad. equity analysis skills ae. patience
af. trading skills
Which is the most important in selecting debt fund for better return
ae. past performance af. level of interest rates ag. fund expertise
ah. the securities in which it has invested
Investors should be advised to avoid investing in a debt fund with a
ac. lower rated portfolio and higher expense ratio
ad. higher rated portfolio and lower expense ratio
ae. lower rated portfolio and lower expense ratio
af. lower rated portfolio and higher
expense ratio
An ideal money market mutual fund must
have
ac. lower returns
ad. lower expense ratio
ae. low quality of investments af. all the above
Circumstances that might cause an investor to change the composition of his portfolio
cyclical changes in economy
unforeseen economic changes affecting the portfolio's preferred sectors
both the above ab. none of the above
If a charitable trust approaches a distributor with an application for investment in a mutual fund, the distributor should
ae. accept the application without wasting time
af. reject the application outright ag. refer to the offer document
ah. accept the application as a direct application
An application form for investment in a mutual fund is available with
ac. the offer document
ad. the abridged annual report
ae. the key information memorandum af. a bank challan
An aggrieved unit-holder of a mutual fund can sue
ag. the AMC ah. the trustees
ai. the sponsor if returns have been guaranteed by them
aj. none of the above
As per SEBI regulations for valuation of investments held by mutual funds, a security is considered "non-traded" when it
ae. has not been traded for 60 days prior to valuation
af. has not been traded for 30 days prior to valuation
ag. is not listed on any stock exchange
ah. is held by the mutual fund without buying or selling
An Ex-Mark of 100% is possible for ac. a growth fund
ad. an aggressive growth fund ae. an index fund
af. a balanced fund
A trail commission is justified when ab. an investor cancels his investment ac. the investor redeems his investment
in a very short time
ad. an agent invests his own money, not that of a client
ae. an agent sells many mutual funds
Of the following, which type of fund would have a higher P/E multiple in comparison to the average market multiple
ae. A Value Fund af. A Growth Fund ag. An Index Fund
ah. Could be any of the above three, one cannot generalise
Which of the following is not true as per SEBI Regulations for Debt Funds?
ae. Investment in rated debt securities of a single issuer should not exceed 15% of NAV
af. Total investment in unrated debt securities of a single issuer should not exceed 25% of NAV
ag. Total investment in unrated debt securities below investment grade should not exceed 25% of NAV
ah. Total investment in rated debt securities below investment grade should not exceed 25% of NAV
A Money Market Mutual Fund is most likely to invest in
ae. Corporate Bonds af. Equity Shares
ag. Government Securities with maturity less than 1 year
ah. All of the above
Of the following, which would be suitable for a retiree with a modest risk appetite
ag. Value Fund
ah. Diversified Equity Fund
ai. Growth Fund
aj. Balanced Fund
A high portfolio turnover for a fund indicates
ac. that the fund is active ad. higher transaction costs ae. both the above
af. none of the above
Unit Trust of India's US-64 Scheme ae. is listed on stock exchanges af. has a fixed price for sale and
repurchase
ag. has its sale and repurchase price declared periodicaly by UTI
ah. has its price determined by market forces
The Indian debt market
ac. is Wholesale in nature
ad. comprises large players like financial institutions and banks
ae. witnesses large scale trading in government securities
af. all of the above
A fund that charges a load is better than a no-load fund
ac. True ad. False
An AMC can approach investors either directly or with the help of
aa. individual agents
ab. banks and non-banking finance companies
ac. distribution companies
ad. all of the above
Which of the following is true for Equity Linked Savings Scheme (ELSS)
A tax rebate is available to investors in these schemes
ab. The investment has to be locked in for 3 years
ac. The minimum amount for investment is fixed
ad. All of the above
447. A prospective investor
ad. has the same status as a unit-holder of a fund
ae. can sue the AMC/trustee af. has no legal recourse ag. all of the above
An investor can assess the performance of his mutual fund by comparing it with the performance of
ac. other mutual fund of the same type ad. the stock market
ae. other financial products af. all of the above
Unrated securities in the portfolio of a mutual fund are not to be valued
ae. True af. False
An exit load guarantees a higher return aa. True
ab. False
451 Bonds held in the portfolio of a mutual
fund are valued at yield to maturity
ae. True
af. False
452 The Valuation of non-traded equity shares is done at the trading price 30 days prior to valuation date
ai. True
aj. False
If a unit-holder does not agree to the merger of his fund with another, he has not exit option
ak. True al. False
The most important factor look for when investing in a corporate fixed deposit is the
ak. yield
al. rate of interest
am.credit rating of the deposit an. none of the above
The most important reason for an investor to prefer a bank deposit to a mutual fund is
ag. the credit worthiness of the bank ah. because the bank does not invest in
securities
ai. that the bank offers a guarantee aj. all of the above
456. A deep discount bond
ai. is always sold at a discount to its issue price
aj. bears interest annually
ak. is redeemed at a price much higher than issue price
al. bears interest at varying interests
A mutual fund in India is a ai. body corporate
aj. company ak. trust
al. an asset management company
When selling a mutual fund, a good agent would never
ak. describe the past performance of the scheme
al. compare the fund with other mutual funds
am.assure a rate of return
an. compare the fund with other financial products
An investor buys one unit of a fund at an NAV of Rs.20. He receives a dividend of Rs.3 when the NAV is Rs.21. The unit is redeemed at an NAV of Rs.22. Total Return is
ai. 25.71% aj. Rs.27.51 ak. 21.27% al. Rs.21.75
A fund sells 100 units of face value Rs.10/- at an NAV of Rs.12.25. How much would be credited to unit capital?
ai. Rs.1225 aj. Rs.225 ak. Rs.1000
al. none of the above
When a scheme with assured returns is being launched, which of the following need not be published in the offer document?
ai. Means of fulfilling the guarantee
aj. Information for all schemes launched by the fund in the past
ak. comparison with other mutual funds al. Investment objective
Mutual fund units can be distributed by ai. trustees of the fund
aj. the AMC
ak. Non-banking finance companies al. banks
A debt fund distributes 10% dividend. How much tax does the investor have to pay on this dividend?
ai. 10% aj. 12% ak. 20% al. None
A debt fund distributes a 10% dividend. How much tax does the fund have to pay?
ai. 10% aj. 12% ak. 10.2% al. None
How many scrips is the NIFTY constitutes of
ag. 40 ah. 100 ai. 30
aj. none of the above
Which of the following is the first step in financial planning
ai. Asset Allocation aj. Selection of fund
ak. Studying the features of a scheme al. None of the above
Why should one buy an insurance policy? ag. It gives high current returns
ah. It gives good capital appreciation over its term
ai. It should be bought due to the need for insurance and not as an investment
aj. All of the above
SEBI Regulations for Mutual Funds were formulated in
aa. 1992
ab. 1993
ac. 1995
ad. 1996
Expenses incurred by a fund for printing of Key Information Memorandum can be amortised over
ag. 10 Yrs ah. 5 Yrs ai. 15 Yrs
aj. Cannot be amortised
A mutual funds' investments are guided by the
ag. AMC
ah. Board of Trustees
ai. Investment Objectives aj. Unit holders
UTI was the only mutual fund for the period
ai. 1984 to 1988 aj. 1963 to 1988 ak. 1964 to 1992
al. none of the above
Investors who follow the fixed Asset Allocation approach
ae. maintain balance in their portfolio by liquidating a part of the position in the asset class which has given higher return and reinvesting in the other asset class which has lower return
af. are not disciplined
ag. increase their equity position when equity prices tend to climb
ah. none of the above
An investor should not invest in a mutual fund if
ae. his capital base is large
af. he is able to carry out detailed investment research and monitor the stock market
ag. both the above ah. none of the above
Mutual fund can benefit from economies of scale because of
ae. portfolio diversification af. risk reduction
ag. large volume of trades ah. none of the above
Which of the following is a disadvantage suffered by a mutual fund investor?
ag. High liquidity
ah. diversification
ai. no tailor made portfolio
aj. low investment
A disadvantage suffered by mutual fund investor is that he has no control over the costs of investing
ag. True ah. False
Which of the following statements about UTI is untrue
ai. It was set up in 1963 aj. It was formed by RBI
ak. It was established by an act of Parliament
al. It was not given a monopoly status
Which scheme has the largest investor base?
ag. ULIP
ah. UTI Mastershare ai. US-64
aj. SBI Magnum
Which was the first diversified equity investment scheme in India
ag. SBI Magnum ah. UTI Mastershare ai. MEP-91
aj. Mastergain-92
The private sector was granted permission to enter the mutual fund industry in
ac. 1992 ad. 1993 ae. 1998 af. 1995
The first non-UTI mutual fund was
ai. SBI MF
aj. LIC MF
ak. Canbank MF
al. Indian Bank MF
The organisation responsible for a comprehensive set of regulations for all mutual funds in India is
ag. RBI ah. SEBI
ai. AMFI
aj. SHCIL
The 1999 Union Government Budget helped the Mutual Fund industry by
ak. regulating the industry practices
al. exempting all mutual fund dividends in the hands of investors from income tax
am.approving the code of ethics formulated by AMFI
an. doing away with all regulations for mutual funds
During the period 1992-99, the mobilisation of funds by the mutual fund industry was about
ai. 5% - 6% of gross domestic savings aj. 2% - 4% of gross domestic savings ak. 7% - 10% of gross domestic savings al. 25% - 40% of gross domestic savings
Which of the following about Public Providend Fund (PPF) are untrue
ag. 50% of the balance of the 4th year can be withdrawn in the 7th year
ah. The interest is tax free
ai. The rate of interest is 12% p.a. aj. contributions upto Rs.60000 are
eligible for tax rebate
A close-ended scheme is quoted on the stock exchange at a discount to its NAV when
af. the markets are bearish
ag. investors perceive that the fund will be unable to maintain the NAV
ah. the assets of the fund are undervalued ai. none of the above
Which of the following is a fundamental attribute of a mutual fund scheme
ai. The names and addresses of the registrars and custodians
aj. The nature of the scheme being income bearing
ak. The specified stocks in the scheme's portfolio
al. The name and address of the compliance officer
Offer Document of a mutual fund is
ai. required by investors
aj. required by the AMC for its own reference
ak. required as per SEBI regulations al. not mandatory as per SEBI
The units of a scheme being sold and repurchases as per the procedure laid down is one of the fundamental attributes of a scheme
ai. True aj. False
The steps involved in the selection of an equity fund for investment are
ak. sector selection, asset classification, selection of fund managers and schemes
al. sector selection, selection of fund managers and schemes, asset classification
am.asset classification, sector selection, selection of fund managers and schemes
an. selection of fund managers and schemes, sector selection, asset classification
Compounding of interest is best explained by a
ag. balanced fund ah. growth fund ai. value fund aj. income fund
From whom can a unit-holder seek redressal if his complaint is not entertained by the mutual fund
ai. AMC
aj. Board of Trustees ak. SEBI
al. RBI
An investor wishes to switch between a money market mutual fund and an equity fund. What would you advise him?
ag. It would be better to stick to one type of fund, the one that meets his investment objective.
ah. He should keep switching parts of his investment from the equity fund to the money market fund as the market rises and switch back to the equity
fund when the market falls
ai. He should switch from the money market fund to the equity fund in a rising market and switch back to money market fund when the market falls
aj. none of the above
For choosing an appropriate benchmark to measure a scheme's performance, all of the following are required except
ae. the composition and size of the portfolio
af. the investment objective
ag. historical data of fund performance ah. the nature of investments
Which of the following characterise the fund that a risk averse investor should choose
ae. Gross dividend yield 15% Beta 1.5, Ex-Marks 90
af. Gross dividend Neil 10%, Beta 1, Ex-Marks 70
ag. Gross dividend yield 11%, Beta 0.9, Ex-Marks 80
ah. Gross dividend yield 12%, Beta 1.2, Ex-Marks 80
A mainstream diversified debt fund is most affected by
ae. reinvestment risk af. liquidity risk
ag. interest rate risk ah. default risk
If yields fall, a debt fund manager will do all of the following except
ah. sell short maturity securities and buy long maturity securities
ai. see that the fund's average duration becomes longer than the market's average duration
aj. sell long duration securities and buy short duration securities
ak. sell high coupon securities and buy low coupon securities
In which type of schemes should an unmarried professional working HLL invest
ag. Scheme investing 80% in debt securities
ah. 50% in equity funds and 50% in income funds
ai. 90% in equity funds having a higher P/E Ratio than the market
aj. all the money in a balanced fund
An investor buys units in a fund that has given excellent returns in the past, but his expectations are not met as the fund does not perform well this year. The investor can
ag. sue the AMC ah. sue the Trustees ai. sue the agent aj. none of the above
A fund's investments at market value total Rs.700 crores, Total liabilities stand at Rs.50 lacs and the number of units outstanding is Rs.28 Crores. What is the NAV
ac. Rs.30.19 ad. Rs.24.98 ae. Rs.32.15 af. Rs.40.49
Answers to Practice Question
Q. Ans Q. No Ans Q. No Ans Q. No Ans Q. No Ans
No
1 b 51 a 101 d 151 c 201 b
2 b 52 d 102 a 152 d 202 d
3 d 53 b 103 b 153 d 203 b
4 d 54 d 104 c 154 d 204 d
5 c 55 c 105 a 155 b 205 b
6 c 56 c 106 d 156 a 206 c
7 b 57 c 107 a 157 c 207 a
8 c 58 c 108 d 158 d 208 d
9 d 59 b 109 d 159 a 209 a
10 c 60 d 110 b 160 d 210 c
11 b 61 c 111 b 161 a 211 b
12 b 62 a 112 c 162 d 212 d
13 d 63 d 113 a 163 c 213 d
14 c 64 d 114 d 164 c 214 a
15 b 65 b 115 d 165 b 215 a
16 d 66 c 116 b 166 d 216 a
17 b 67 c 117 b 167 c 217 b
18 d 68 d 118 a 168 b 218 b
19 c 69 c 119 c 169 b 219 b
20 c 70 d 120 a 170 d 220 d
21 b 71 b 121 b 171 c 221 b
22 d 72 b 122 c 172 b 222 a
23 c 73 d 123 a 173 b 223 b
24 a 74 d 124 d 174 d 224 a
25 d 75 c 125 c 175 d 225 c
26 d 76 a 126 d 176 b 226 a
27 c 77 c 127 d 177 c 227 c
28 b 78 a 128 a 178 c 228 c
29 c 79 d 129 d 179 c 229 b
30 d 80 a 130 a 180 c 230 b
31 b 81 c 131 d 181 d 231 d
32 c 82 b 132 a 182 b 232 a
33 b 83 b 133 b 183 d 233 b
34 b 84 b 134 c 184 c 234 b
35 b 85 d 135 b 185 b 235 c
36 c 86 a 136 d 186 a 236 c
37 b 87 b 137 a 187 c 237 c
38 c 88 c 138 c 188 a 238 a
39 a 89 b 139 b 189 d 239 b
40 b 90 b 140 c 190 b 240 b
41 b 91 b 141 a 191 d 241 b
42 a 92 c 142 b 192 b 242 b
43 b 93 c 143 c 193 b 243 a
44 c 94 b 144 b 194 a 244 b
45 b 95 a 145 d 195 d 245 c
46 b 96 b 146 c 196 b 246 a
47 c 97 a 147 d 197 c 247 a
48 b 98 d 148 c 198 c 248 c
49 B 99 c 149 b 199 b 249 c
50 A 100 a 150 c 200 a 250 a
Answers to Practice Question for AMFI Test
A A A A A
Q. No n Q. No n Q. No n Q. No n Q. No n
s s s s s
251 a 301 a 351 b 401 b 451 a
252 b 302 a 352 a 402 c 452 b
253 d 303 a 353 d 403 c 453 b
254 c 304 d 354 b 404 b 454 c
255 c 305 b 355 b 405 a 455 a
256 a 306 b 356 d 406 c 456 c
257 a 307 d 357 a 407 c 457 c
258 d 308 d 358 b 408 d 458 c
259 b 309 b 359 d 409 d 459 a
260 a 310 a 360 b 410 a 460 c
261 c 311 d 361 d 411 c 461 c
262 b 312 c 362 a 412 b 462 d
263 b 313 d 363 b 413 c 463 d
264 c 314 d 364 c 414 a 464 c
265 a 315 c 365 b 415 b 465 d
266 b 316 b 366 b 416 a 466 a
267 a 317 b 367 c 417 a 467 c
268 b 318 b 368 c 418 a 468 d
269 a 319 b 369 b 419 b 469 b
270 d 320 a 370 a 420 b 470 c
271 b 321 a 371 b 421 a 471 b
272 b 322 c 372 b 422 a 472 a
273 b 323 d 373 a 423 a 473 c
274 b 324 b 374 b 424 b 474 c
275 b 325 a 375 a 425 a 475 c
276 c 326 b 376 d 426 d 476 a
277 b 327 b 377 d 427 c 477 d
278 a 328 c 378 a 428 a 478 c
279 b 329 b 379 c 429 b 479 b
280 a 330 b 380 a 430 c 480 b
281 b 331 a 381 b 431 c 481 a
282 a 332 a 382 b 432 c 482 b
283 b 333 b 383 a 433 c 483 b
284 c 334 d 384 d 434 b 484 a
285 c 335 c 385 c 435 c 485 c
286 b 336 d 386 b 436 b 486 b
287 b 337 b 387 a 437 b 487 b
288 d 338 d 388 c 438 b 488 c
289 c 339 d 389 a 439 c 489 a
290 a 340 b 390 c 440 d 490 c
291 b 341 s 391 b 441 c 491 b
292 c 342 d 392 c 442 c 492 c
293 d 343 c 393 d 443 d 493 b
294 a 344 d 394 b 444 b 494 c
295 a 345 d 395 b 445 d 495 c
296 c 346 c 396 c 446 d 496 c
297 d 347 b 397 b 447 a 497 c
298 b 348 b 398 a 448 d 498 c
299 c 349 b 399 b 449 b 499 d
300 b 350 a 400 b 450 b 500 b
A close-ended mutual fund has a fixed :
NAV
fund size
rate of return
number of distributors
The maximum load that a fund can charge is determined by the :
AMC
SEBI
AMFI
distribution agents based on demand for the fund
The amount required to buy 100 units of a scheme having an entry load of 1.5% and NAV of Rs.20 is :
Rs.2000
Rs.2015
Rs.1985
Rs.2030
A gilt fund is a special type of fund that invests :
in very high quality equity only
in instruments issued by companies with a sound track record
in short-term securities
in government securities only
Of the following fund types, the highest risk is associated with
Balanced Funds
Gilt Funds
Equity Growth Funds
Debt Funds
The NAV of a mutual fund:
is always constant
keeps going up at a steady rate
fluctuates with market price movements
cannot go down at all
An open-ended mutual fund is one that has:
an option to invest in any kind of security
units available for sale and repurchase at all times
an upper limit on its NAV
a fixed fund size
An investor in a close-ended mutual fund can get his/her money back by selling his/her units:
back to the fund
to a special trust at NAV
on a stock exchange where the fund is listed
to the agent through which he/she subscribed to the units of the fund
The "load" charged to an investor in a mutual fund is
entry fee
cost of the paper on which the unit certificates are printed
the fee the agent charges to the investor
the expenses incurred by fund managers for marketing a mutual fund scheme
A mutual fund is owned by
the Govt. of India
SEBI
all its investors
AMFI
Units from an open-ended mutual fund are bought
on a stock exchange
from the fund itself
from AMFI
from a stock broker
A mutual fund is not
owned jointly by all investors
a company that manages investment portfolios of high networth individuals
a pool of funds used to purchase securities on behalf of investors
a collective investment vehicle
"Load" cannot be recovered
at the time of the investor's entry into the fund
as a fixed amount each year
at the time the investor exits the fund
from the fund's distribution agent
The most important advantage of a money market mutual fund is
quick capital appreciation
high regular income
safety of principal
no loads
Some close-ended funds are quoted at a discount to their NAV because
of high expense ratios
investors do not expect the current NAV to be sustained in future
the repurchase price fixed by the fund in lower than the NAV
of the inherent risk involved in investing in such type of funds
The NAV of each scheme should be updated on AMFI's website
every quarter
every month
every hour
every day
Debt funds target
low risk and stable income
protection of principal
high growth with risk
long term capital appreciation
In which of the following do debt funds not invest
government debt instruments
corporate paper
financial institutions' bonds
equity of private companies
Which of the following risks do not affect a debt fund
default by issuer on payment of interest or principal
price fluctuations of the debt securities
share price movements
interest volatility
Assured return or guaranteed monthly income plans are essentially
Hybrid funds
Growth Funds
Debt/Income funds
Sector funds
A Fixed Term Plan Series is
an open-ended fund
a close-ended fund
a fixed term bank deposit
a fixed term corporate bond
NAVs of equity funds are not affected by
Stock market movements
Events affecting the industry/sector in which the fund has invested
Happenings in the companies in which the fund has invested
real estate prices
The greatest potential for growth in capital is offered by
debt funds
gilt funds
growth funds
balanced funds
A Systematic Withdrawal Plan, allows investors to get back the principal amounts invested in addition to the income on investment
True
False
Which of the following is untrue of an automatic reinvestment plan?
The plan allows for automatic reinvestment of all income and capital gains
Automatic reinvestment allows for accumulation of additional units of the fund
The major benefit of automatic reinvestment is compounding
The benefit of automatic reinvestment is often lost on account of the heavy load charge on the reinvestment
Constraints imposed by most funds on check writing are:
Account balance should not fall below the minimum capital required
Checks issued must be for at least the minimum amount specified.
Number of checks per month must not exceed a specified number
Both a & b above
The performance of a fund is largely measured by the success of
the marketing function
the operations function
the portfolio market function
none of the above
Generally invest in
unlisted
market-traded
thinly traded
privately placed
Which of the following is not an equity instrument
preference shares
equity warrants
ordinary debentures
convertible debentures
The drawback of an ordinary share is
possibility of capital appreciation
ownership privilege of the company
guaranteed dividend income
no guaranteed income or security
An owner of preference shares is given which of the following rights
voting rights
fixed dividend income from post-tax profits
voting rights and unlimited dividend income
no guaranteed rights
Market capitalisation of a company is calculated by multiplying the number of outstanding shares by
R.10
Face value of each share
Current market value of each share
dividend yield
The Price/Earnings (P/E) Ratio is an important measure of a company's anticipated performance. It is calculated using:
Market price and dividend
Market price and earning per share
Market capitalisation and dividend
Market price and face value
A company whose earnings are strongly related to the state of economy is known as
Economy stocks
Cyclical Stocks
Value Stocks
Growth stocks
A Growth stock refers to shares of a company whose earnings are projected to grow at the normal market rates
True
False
Which of the following is generally true for a growth stock?
steady capita appreciation and steady dividends yields
high capital appreciation and high dividend yields
high capital appreciation but low dividend yields
steady capital appreciation but high dividend yields
Shares of companies with large capital market capitalisation
have greater growth potential
are more liquid
are not available
none of the above
Dividend yield for a stock is
dividend per share
dividend per face value
dividend per share to current market price
none of the above
Value stocks
have high current dividend yield
yield high growth in earnings
are currently under valued
none of the above
A better performance than the return on index is given by
passive fund manager
an active fund manager
all fund managers
non fund manager
A change in key personnel especially the fund manager of an AMC does not necessitate a revision of the offer document
True
False
If fresh litigation cases or adjudication proceedings are referred by SEBI against the fund sponsors or a company associated with the sponsors, then the offer document needs to be revised
True
False
The offer document need not be revised if the management or the controlling interest in the AMC change
True
False
An AMC cannot explain adverse variations between expense estimates for the scheme on offer and actual expenses for past schemes in
financial newspapers
business channels on TV
the offer document
AMFI newsletter
Information on estimated expenses to be incurred by a scheme is not found in the offer document, but in brochures of the fund
True
False
When comparing a fund's performance with that of its peer group, the following cannot be compared
Two debt funds with 5 year maturities
A broad-based equity fund with an IT Sector Fund
A bond fund with a bond
A government securities fund with a government security
An AMC must explain adverse variation between expense estimates for the scheme on offer and actual
expenses for past schemes in
financial newspapers
business channels on TV
offer document
AMFI Newsletter
Information on estimated expenses to be incurred by a scheme is not found in the offer document, but in brochures of the fund
True
False
The offer document and key information memorandum contain financial information for
all schemes of all mutual funds in the capital market
all schemes launched by the particular fund during the last 3 fiscal years
none of the schemes
companies in which investment is proposed
The functions and responsibilities of the sponsor, AMC, trustees and custodian of the mutual fund are listed in
offer document only
key information memorandum
both offer document and key information memorandum
none of the above
Information about trusteeship fees is included in the offer document but not in the
key information memorandum
True
False
The following information about the constitution of the mutual fund is found in both the offer document and key information memorandum
activities of the sponsor
summary of trust deed provisions
name and addresses of the board of trustees
all of the above
The investment objectives of the fund an investor selects for investment
are of no relevance
should be the same as his own investment objectives
change with market movements
change with change in the AMC's key personnel
The investment policies listed out in the
offer document of a fund do not include
the type of securities in which the scheme will invest principally
asset allocation pattern
policy of diversification
the specific securities in which the fund will invest
If a scheme's name implies that it will invest primarily in a particular type of security or in certain industry/sector, then it should invest at least the following percentage of its total assets in the indicated type of security/industry/sector
100%
80%
65%
40%
For assured return schemes, information about the guarantor's net worth which justifies the guarantor's ability to meet any shortfalls in the returns assured under the scheme can be found in
the offer document
the key information memorandum
both (a) and (b)
none of the above
The names and background of key personnel of the AMC
need not be disclosed to investors
are of no relevance as they may change
are disclosed in the offer document
are declared in newspaper advertisements
The minimum amount to be raised, and the maximum target amount
are not known before the offer is concluded
can be decided based on investor response to the offer
are defined as per SEBI Regulations before the offer is made
need not be disclosed in the offer document
The circumstances for refund of investment in the initial offer and period within which refund must be carried out are not
specified in the offer document, but only on the application
True
False
Offer related information required to be listed in the offer document and key information memorandum includes
dates of opening, closing, earliest closing, allotment and despatch of certificates
procedure for transfer and transmission of units
both the above
neither of the above
In the offer document, funds are required to make disclosures summarizing associate transactions and their impact on the performance of the scheme for the last
one fiscal year
2 fiscal years
3 fiscal years
5 fiscal years
The circumstances under which a scheme shall be wound up are to be described in the offer document at the time of the initial launch of the scheme itself
True
False
The following do not form a part of the investment procedure described in an offer document
various plans under the scheme (e.g. dividend reinvestment plant)
minimum initial (and subsequent) investment
details of who can invest
details of other competing mutual funds
A scheme's policy on dividends and distribution
is decided by the fund manager as per is market outlook
can be changed to suit the requirements of the AMC
need not be consistent
should be disclosed at the time of initial launch
SEBI restricts mutual fund investments in companies forming part of the same group as the AMC. This is:
not true
in the interest of investor protection
applied only to some mutual funds, not all
not favourable to investors at all
A disclosure should be made in the offer document if an AMC has invested more than the following percentage of its net assets in group companies
50%
40%
25%
10%
Mutual funds are allowed to borrow
freely to meet their requirements
for investment purposes
only to meet redemption demands
not allowed at all
As a part of borrowing policy, the following need not be disclosed in an offer document
purpose and circumstances of borrowing
regulatory limits on borrowing
potential risk to AMC and unit-holders
names of lenders
Valuation norms for non-traded securities should be disclosed
at the end of every financial year
every quarter
in the offer document at the time of launch of the scheme
should not be disclosed, being confidential information
Procedure for redemption or repurchase need not
be described in the offer document
include how redemption or repurchase price of units would be determined
include names of centres where redemption can be effected
indicate the redemption or repurchase price as at the end of the current fiscal year
The fund need not describe its accounting policies in the offer document as these are of no use to an investor
True
False
The accounting policies of a fund should be in accordance with
GAAP
SEBI regulations
ICAI Guidelines
American GAAP
Tax treatment of investments does not
form a section in the offer document
describe the tax elements applicable to investors who invest in the fund
form a section in the key information memorandum
offer tax advice to investors
Documents available to investors for inspection do not include
Memorandum and Articles of Association of AMC
consent of auditors and legal advisors
investment management reports
reports based on which actual investments are made
Investors' rights under a scheme are
uniform for all schemes of all funds
not defined
listed in the offer document
available with stock exchanges
The offer document for a scheme should describe how the NAV of the scheme is to be computed
True
False
An offer document contains an AMC's investor grievance's history for the past
one fiscal year
2 fiscal years
3 fiscal years
six months
Any pending cases or penalties levied on the sponsors or AMC should be disclosed in
the offer document
True
False
Who among the following are not eligible to invest in MF
Indian Companies
Banks
Non Banking Finance Companies
Foreign Citizens
NRIs are eligible to invest in Mutual Funds
True
False
The most important link between Mutual Fund and Investors is
Government
SEBI
Fund distributors
AMFI
Are Overseas Corporate Bodies allowed to invest in Mutual Funds
No
Yes
if Ministry of Finance approves
if AMFI approves
Who among the following are not Institutional Investors
Banks
Resident Individuals
Provident Funds
Non Banking Finance Companies
It is compulsory to use fund agents/intermediaries for investing MFs
True
False
Generally, which category of investors need advice for Investing in Mutual Funds
Non Banking Finance Companies
Insurance Companies
Foreign Institutional Investors
Individuals
Most eligible investors of Mutual Funds can broadly be grouped into either individual or institutional investors
True
Ȁ ⸀Ā Ā ĀĀ ЀĀ ȀȀ⸀Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ Ā Ā Ā Ā Ā ĀĀഀ ЀĀ ȀȀ⸀Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ Ā ᜀ False
Commission rates or loads applicable to big investors and small investors are
same
different
not charges to either
none of the above
What document Mutual Fund distributors need to refer for finding out eligible category of investors in a particular Mutual Fund Scheme
SEBI Regulations Manual
AMFI booklet
Offer document
RBI Guidelines
As per AMFI figures, how many agents approximately, are there in India selling Mutual Funds
50000
100000
75000
150000
Which Mutual Fund has majority of the agents selling its Mutual Fund units in India
LIC Mutual Fund
UTI Mutual Fund
SBI Mutual Fund
None of the above
Mutual Fund agents/distributors are not allowed to sell Financial Products other than Mutual Funds
True
False
Are Mutual Fund agents/distributors in India required to pass any examination to qualify to sell Mutual Fund Units
Yes, a test conducted by AMFI
Yes, a test conducted by SEBI
No
a Post Graduate university course
How many major distributor Companies are there in India selling Mutual Fund units
approximately 9
approximately 11
approximately 10
approximately 25
The offer document is not a legal document
True
False
A copy of all changes in the offer document has to be filed with SEBI
True
False
The legal responsibility for the accuracy of the statements made in the offer document lies with
SEBI
the AMC
AMFI
the Company Law Board
Though the offer document of a scheme is prepared as per SEBI Regulations and is filed with SEBI, SEBI does not certify the accuracy or adequacy of the document
True
False
The following need not be covered in a Key Information Memorandum
Risk Factors
Opening, Closing and earliest Closing Date of the offer
Disclaimer Clause
Functions and responsibilities of the sponsor, trustees, AMC and Custodian responsibilities
The front page of an offer document need not cover
opening, closing and earliest closing date of the offer
disclaimer clause
legal and regulator compliance
price of units
A "glossary" of Defined Terms must be included in the offer document
True
False
Standard risk factors are not
market driven
common to all schemes
of relevance to novice investors
new to a regular investor
The risk of a scheme's NAV moving up or down on the basis of capital market movements is a standard risk factor
True
False
Past performance of a sponsor/AMC mutual fund is not indicative of the future performance of the scheme. This is
not true
a standard risk factor for all schemes
a scheme-specific risk factor
applicable only to gilt funds
Risk arising from a scheme's investment objective/strategy and proposed asset allocation is
not present
common to all schemes
specific to that scheme
not applicable to debt funds
In an assured returns scheme, if assurance is only for a limited period, it must be stated in the offer document that there is no guarantee for sustaining the assured return for the remaining duration of the scheme
True
False
If the AMC is managing a fund for the first time, this information can be found in
newspapers
SEBI
AMFI Newsletter
Offer document
A compliance officer
stands guarantee to the information contained in the offer document
belongs to SEBI
cannot certify that the AMC's legal and procedural obligations are fulfilled
cannot be appointed by the AMC
The due diligence certificate that must be submitted to SEBI along with the draft offer
document cannot be signed by
the managing director of the AMC
an executive director of the AMC
the compliance officer
Investor relations officer
A due diligence certificate does not certify that
the draft offer document forwarded to SEBI is in accordance with SEBI regulations
all legal requirements connected with launching of the scheme have been complied with
disclosures made in the offer document are true, fair and adequate
the AMC guarantees a good performance
In developed countries, an important Mutual Fund marketing channel is through
Insurance Companies
Banks
Non-Banking Finance Companies
Retail Distributors
Emerging or new channel for distributors/marketing of Mutual Fund in India is
Insurance Companies
Banks
Qualified Mutual Fund agents
Direct Sales agents of respective mutual funds
Mutual Funds often use their own employees to mobilise funds from
retail investors
High Networth individuals/institutional investors
all investors
foreign investors
Retail distribution channels are a critical element in the distribution of mutual funds in India
True
False
"Sales Practices" cover the following areas
desirable marketing practices
agents' responsibilities to the investor
ethical code of conduct
all of the above
The following are not termed as "sales practices"
agents commission
before-and after-sales service to investors
advertising of schemes
stock broking
Sales practices are never mandated by regulators, but arise from convention only
True
False
Agents are compensated by mutual funds
through salaries
through commissions
through an annual fee
not in cash but in kind
In India the minimum or maximum
commissions payable to distributors are not prescribed by law, but are decided using the fund's own discretion
True
False
Lowest commissions are paid on
Equity funds
tax benefit schemes of mutual funds
debt funds
long-term investments in mutual funds
Excess distribution expenses are to be borne by the
AMC
unit holders
SEBI
AMFI
To cover fund distribution expenses, open ended funds
charge a fee from agents
charge entry and exit loads from investors
create a reserve
sell investments
Trail commission means paying
no commission at all
the entire commission up-front
part of the commission up-front and the balance in phases
the entire commission after five years
Sub-brokers serve as agents of the principal broker and a mutual fund is not answerable for their activities
True
False
In India, Mutual fund agents' rate and services are at present defined by
SEBI rules
stock exchange bye-laws
AMFI rules
convention
Along with the application, it is mandatory to distribute
investment rebate
offer document
key information memorandum
none of the above
To sell funds effectively, an agent need
not
be fully aware of the important characteristics of the scheme
know his/her client's risk profile
give after sales service
offer large investment rebates
For investors to correctly compare performance of different funds SEBI's advertising codes include
uniform computation of yields
uniform presentations of dividends
identical time periods
all of the above
SEBI's advertising code mandate that all performance calculations in a fund's advertisement should be based
NAV
the NSE Fifty Index
the BSE Sensex
none of the above
An agent's appointment by a fund
requires SEBI's approval
is a lengthy and cumbersome process
is mandatorily preceded by an AMFI test
does not require any approval
An investor does not have recourse to his agent in case of errors, problems or the quality of the investment
True
False
An agent can offer and sell a funds's units at
any price he chooses
a price determined by competition among agents
a price based on demand for that fund's units
the public offering price currently in effect
All buy orders through an agent do not become valid till the fund accepts and confirms the orders
True
False
When an agent purchases, offers or sells units, ensuring compliance with applicable regulations is the responsibility of
the fund
the agent
AMFI
SEBI
The terms of appointment of a broker by a fund are
laid down by SEBI
laid down by AMFI
not uniform to all funds
none of the above
The code of ethics for mutual funds published by AMFI
is mandatory
is in the form of recommended practices
is unfavourable to investors
does not cover distribution and selling practices
The AMFI code of ethics does not cover the following prescriptions
Adequate disclosures should be made to the investors
Funds should be managed in accordance with stated investment objectives
conflict of interest should be avoided in dealings with directors or employees
each investment decision should be approved by investors
Distribution and sales practices are only partly regulated by SEBI at present
True
False
Which of the following distribution channels is preferred by private mutual funds
Individual Agents
Small Distribution companies
established distribution companies
the Internet
Which of the following sales practices is prescribed by regulation
AMFI Code of Ethics
SEBI Advertising
AMFI's Code for Agents
None of the above
In a mutual fund investors' subscriptions are accounted for as
liabilities
deposits
unit capital
none of the above
Investments made by a mutual fund on behalf of investors are accounted as
assets
liabilities
capital
none of the above
Liabilities in the balance sheet of a mutual fund are
in the form of long-term loans
strictly short term in nature
combination of long term and short
term
not allowed as per regulations
Net Asset Value (NAV) of a mutual fund scheme is defined as the schemes
assets minus liabilities
assets per unit
assets minus liabilities per unit
none of the above
The day on which NAV is calculated by a fund is known as
computation date
valuation date
record date
book closure date
A funds NAV is affected by
Purchase and sale of investment securities
valuation of all investment securities held
units sold or redeemed
all of the above
When computing NAV of fund SEBI requires accrual of major expenses to be accounted
quarterly
annually
on a day to day basis
when actually paid
If a fund calculates NAV daily, it will include all the transaction concluded up to
last week
last two days
previous day
today
For a open-ended fund,the repurchase price should not be lower than
NAV
95% of NAV
93% of NAV
97% of NAV
For a close-ended fund, the repurchase price should not be lower than
NAV
95% of NAV
93% of NAV
97% of NAV
For a scheme that has a load, the AMC can change an investment management fee not exceeding
1.50%
2.00%
1.25%
0.50%
Initial expenses of launching schemes should not exceed
15% of amount received
10% of amount raised
6% of amount raised
5% of the amount raised
Which of the following expenses cannot be charged to the scheme
Audit fees
costs related to investor communication
winding costs for terminating the scheme
penalties and fines for infraction of laws
Which of the following are not true for Equity Linked Savings Schemes?
Investors can claim an income tax rebate
There is a lock-in period before investment can be withdrawn
There are not specific restrictions on investment objectives for the fund managers
These funds cannot invest in equity
Which of the following is not true for Index Funds
These funds invests in the shares that constitute a specific index
The investment in shares is in the same proportion as in the index
These funds take only the overall market risk
These funds are not diversified
The structure which is required to be followed by mutual funds in India is laid down by
Financial Ministry
Securities & Exchange Board of India
(SEBI)
Fund Sponsor
Association of Mutual Funds of India (AMFI)
The Board of Trustees of a mutual fund:
act as a protector of investors' interests
directly manage the portfolio of securities
do not have the right to dismiss the
AMC
cannot supervise and direct the working of the AMC
The AMC of a mutual fund cannot
undertake advisory services or financial consulting
cannot invest the funds in government paper
act as a trustee of more than one mutual fund
cannot invest the funds in securities
The trust that manages a mutual fund is appointed by
The Finance Ministry
R.B.I
SEBI
The sponsor of that mutual fund
The custodian of a mutual fund:
is appointed for safekeeping of securities
need not be an entity independent of the sponsors
not required to be registered with SEBI
does not give or receive deliveries of physical securities
Transfer Agents of a mutual fund are not responsible for
issuing and redeeming units of the mutual fund
updating investor records
preparing transfer documents
investing the funds in securities markets
Distributors or agents
can distribute several mutual funds simultaneously
cannot appoint sub-agents or sub-brokers
should be only individuals not companies or banks
should not be an employee or associate of the AMC
A transfer in the management of a close-ended scheme does not require the consent of
unit holders with 75% voting rights
SEBI
Trustees
AMC
The fund sponsor has to contribute
nothing to the AMC
the total networth of the AMC
atleast 40% of the AMC's networth
exactly 50%
The sponsor of a mutual fund may be compared to
a director in a Company
the Chief Executive of a Company
Promoter of a Company
an equity shareholder in a Company
Issuing and redeeming units of a mutual fund is the role
the custodian
the transfer agent
the trustees
the bankers
The fund sponsors should have a sound financial track record of
7 years
12 months
5 years
3 years
The networth of an asset management company should be greater than
Rs.100 Crores
can be decided by the Sponsor
should be atleast Rs. 10 Crores at all times
should be greater than Rs.10 Crores
The AMC and directors are answerable to
Stock Exchanges
The Board of Trustees
Agents and distributors
Stock Brokers
The role of an AMC is to act as 13. promoters
14. investment managers
15. distribution agents
16. regulators
A change in the following key people does not materially impact the performance of the fund
Fund sponsors
Trustees of the fund
Fund Manager
Members of the AMFI Committee
To transfer the management of a scheme from one AMC to another, the consent of the following is required
SEBI
Unit holders
both SEBI and unit holders
none of the above
As per SEBI's principles, the AMC and the Board of Trustees of a fund should belong to the same sponsors
True
False
After UTI, the first mutual funds were started by
private sector banks
public sector banks
financial institutions
non-banking finance companies
The highest authority among the following is the
SEBI
Company Law Board
RBI
Ministry of Finance
The entity that SEBI does not regulate is
share registrars
mutual funds
stock exchanges
non-banking finance companies
The accounts and all other records of an AMC are filed with
AMFI
Registrar of Companies
Agents' Association
UTI
A close-ended scheme of a mutual fund is not governed by
Exchange Rules of the stock exchange where it is listed
Listing Agreement between the fund and the stock exchange
guidelines issued by the Ministry of Commerce
Companies Act provisions relating to transactions in securities
The entry of mutual funds in India was initiated by mutual funds set up by
Public Sector Banks
Private Sector mutual funds
Unit Trust of India
mutual funds set up by insurance companies
For a close-ended scheme to change its fundamental attributes, it must obtain the consent of
50% of unit holders
50% of trustees
75% of unit holders
none of the above
The largest corpus of investable funds in India is with
Bank-owned mutual funds
Private Sector mutual funds
UTI
Insurance Companies
The Board of Trustees of the UTI does not have nominees from
RBI
LIC
IDBI
The Bombay Stock Exchange (BSE)
UTI Cannot provide
corporate finance
engage in real estate and property development business
provide merchant banking services
invest in securities
The "Capital" of a scheme does not include
unit capital
reserves
borrowing
networth of the AMC
Which of the following are Self Regulatory Organisations
Bombay Stock Exchange
SEBI
AMFI
RBI
A Self Regulatory Organisation can regulate
all entities in the market
only its own members in a limited way
its own members with total jurisdiction
no entity at all
The amount of authority enjoyed by a
11. self-regulatory organisation is defined by
12. the apex regulatory authority
13. company law board
14. its own members
15. RBI
The role of AMFI in the mutual funds industry is not to
promote the interests of the unit holders
set a Code of Ethics
regulate mutual funds in
crease public awareness of mutual funds in the country
The rights of investors in a mutual fund scheme are laid down in
the Offer Document of that scheme
Quarterly Reports
Annual Reports
marketing brochures
Unit holders of a mutual fund scheme do not have a right to
proportionate ownership of the
scheme's assets
dividend declared for that scheme
dividend declared for other schemes of the mutual funds
income declared under that scheme
After dividend declaration, unit-holders are entitled to receive dividend within
one week
one month
42 days
six weeks
Unit holders' right to information does not include
obtaining from the trustees any information having an adverse effect on their investments
inspecting major documents of a fund
receiving of a copy of the annual financial statements of that fund
approving investment decisions of the fund
Shortfalls in the case of assured returns schemes are met
by sponsors of such schemes
only if the offer document specifically provided such a guarantee by a named sponsor
the Government of India
AMFI
Unit-holders aggrieved by a Fund or AMC can get redressed from
Consumer Courts
SEBI
AMFI
RBI
If the Directors of an AMC commit fraud, Unit-holders investments' cannot be protected by the Department of Company Affairs and the Company Law Board
True
False
The responsibilities of a unit-holder do not include:
Monitor his investments carefully
being aware of information that affects his investment in a major way
carefully studying the offer document
taking decisions about where the fund managers should invest
UTIs scheme US-64 falls under the purview of SEBI
True
False
UTI was set up by
SEBI
AMFI
A special act
RBI
Bank owned Mutual Funds are supervised by
SEBI
RBI
jointly by SEBI & RBI
AMFI
Investor does not have the right to receive any interest from an AMC if his redemption proceeds are not despatched within 10 working days
True
False
If an investor failed to claim his redemption proceeds within 3 years, he can claim the proceeds at
Par
Prevailing NAV
the on the date he has applied for redemption
15% below the prevailing NAV
After closure of the initial offer an open ended scheme, on going sales and
repurchases must start within
One week
30 days
45 days
180 days
For scheme to be able to change its fundamental attributes, it must obtain the consent of
50% of the unit holders
50% of the trustees
75% of the unit holders
none of the above
The prospectus or Offer Document containing the details of new scheme is first registered with the
AMFI
SEBI
Bombay Stock Exchange
Ministry of Finance
The offer document issued by mutual funds does not serve the purpose of
announcing the scheme
giving detailed information about the scheme
inviting the the investors
giving the fund manager's investment outlook for the next quarter
The prospectus of a close-ended fund is issued
every year
only once at the time of issue
every quarter
every six months
Fundamental attributes of scheme
do not include the objective of the scheme
can be changed without the investor's approval or knowledge
include the terms of the scheme
are not necessary for deciding whether to invest in the scheme or not
The offer document
contains the terms of issue
gives no information relevant for making an investment decision
is not the operating document describing the scheme
cannot be called a reference document
SEBI does not require the following to be included in the offer document issued by a mutual fund
details of the Sponsor and the AMC
Description of the Scheme & investment objective/strategy
Investors' Rights and Services
Performance of other mutual funds
'Key Information Memorandum' is
an abridged version of the offer document
the Memorandum & Articles of Association of the AMC
a sheet containing historical NAVs of other fund schemes
Annual Report of the AMC
The offer document for a scheme remains valid even if
the AMC is reconstituted
entry or exit load are changed
the scheme's NAV changes
new plans are added to existing schemes
The offer document has to be fully revised and updated
every six months
once in two years
every quarter
every month
An addendum giving details of material change in the offer document should be circulated
distributors/brokers
unit holders
SEBI
all of the above
Which of the following is not true for offer documents of open-ended schemes
it is first issued at the time the scheme is launched
it is registered with SEBI
it has to be revised periodically
it need not be revised at all
All important disclosures that the mutual fund is required to make, by regulation, are contained in the offer document
True
False
The offer document issued when an
open-ended scheme is launched is valid for all times, until amended
True
False
216 The most important source of information for a prospective investor is
offer document
Annual Report of the AMC
Economic Times
AMFI Newsletter
217 The offer document need not be studied by an investor before investing in a scheme
True
False
218 The offer document is not a legal document
True
False
219 Initial issue expenses are charged to a scheme in the first year itself
True
False
220 Scheme-wise annual report of a mutual fund need not be
sent to all unit-holders
forwarded to SEBI
published as an advertisement
stock exchanges
221 Mutual funds value their investments
at purchase price
on a mark-to-market basis
at par
at book value
222 Investors are totally exempt from paying any tax on the dividend income they receive from mutual funds
True
False
Income distributed to unit-holders by a debt fund is liable to dividend distribution tax
True
False
A close-ended has average weekly net assets of Rs 200 crore.As per SEBI regulations, the AMC can charge the fund with investment and advisory fees upto:
Rs 2.25 crore
Rs 2.00 crore
Rs 2.50 crore
Rs 3.00 crore
225 A passive fund manager
researches stocks extensively
does not buy and sell stocks often
does not have to go through the process of stock selection
does not have to track stocks
226 A fund manager managing an index fund
has to keep fund expenses low
does not have to research stocks
does not have to balance his portfolio
none of the above
227 A growth manager looks for
high current income
undervalued stocks
above average earnings growth
none of the above
228 A value manager does not look for
stocks that are currently undervalued in the market
stocks whose worth will be recognised by the market in the long term
high current yield
long term capital appreciation
229 From an investor's viewpoint, the most important is
a fund's investment style
performance of the fund
the fund manager's judgement
none of the above
230 Fundamental analysis involves
checking the foundations of the company's factory building
research into the operations and finances of the company
studying the company's share prices
none of the above
Which of the following is not considered for technical analysis
historical data on the company's share price
the company shares' trading volume
current market sentiment
the company's regulatory environment
Quantitative analysis is more likely to be done to evaluate a particular sector or industry rather than any specific stock
True
False
Fundamental analysis forms the basis to decide
when to buy a given share
whether to buy a given share or not
whether to use technical analysis or quantitative analysis
whether the company's factory can withstand earthquakes
Technical analysis guides the decision on
whether to buy or sell
the right time to buy or sell
whether company's technical personnel are adequately qualified
none of the above
Which of the following is not an investment philosophy
capitalising on economic cycles
focusing on growth sectors
capitalisation
finding value stocks
When expecting a fall in market price, fund managers can reduce the loss in portfolio value by
speculating
not buying and selling shares at all for some days
using equity derivatives
giving TV interviews to improve sentiment
Equity derivative instruments are
shares
bonds
contracts
notes
A futures contract allows one to buy or sell the underlying shares, but need not result in delivery
True
False
Derivatives cannot be based on market indices
True
False
In a mutual fund, the overall decisions on allocating money to particular industries/sectors are taken by
equity analysts
fund managers
security dealers
trustees
Continuous tracking of the companies in which a mutual fund has invested is done by
continuous tracking systems
equity analysts
trustees
security dealers
Security dealers of a mutual fund
guard the cabin of the fund manager
execute buy and sell orders for the fund
decide which shares to buy or sell
none of the above
As per SEBI's requirements each scheme of a mutual fund should have a different fund manager
True
False
Debt securities bought at a discount to their face value are generally
interest bearing
zero coupon bonds
paying interest at a floating rate
none of the above
In India, a large part of debt securities pay interest on
a floating rate basis
a fixed rate plus a variable portion
a fixed rate
zero coupon basis
The Indian debt market is largely wholesale in nature
True
False
In the wholesale debt market, the largest proportion of trading is seen in
Government Securities
Corporate Bonds
T-Bills
PSU Bonds
The largest proportion of trades done in the wholesale debt market is accounted by
mutual funds
foreign banks
Indian banks
financial institutions
Certificates of Deposits (CDs) are issued
by
Regional Rural Banks
Corporates
Scheduled commercial banks
none of the above
Commercial Paper is issued by Corporate bodies
to meet short-term working capital requirements
to finance the acquisition of long term capital assets
to retire long term debt
to pay dividend
Government securities are issued through the RBI
True
False
The yield on Treasury Bill (T-Bill) us determined by
the Government of India
auction
the State Governments
floating rate method
Which of the following are not normally found in the portfolio of a debt fund
long-dated Government Securities
Corporate debentures
bonds issued by financial institutions
certificates of deposit issued by banks
Which of the following do not represent the amount an investor of a debt security will be paid upon maturity
par value
face value
fair value
redemption value
Coupon of a debt security refers to
a piece of paper attached to the certificate
the return on investor would earn
the amount rate of interest paid on par value of the bond
none of the above
Which of the following do not apply to the term 'maturity' of a debt security?
the date on which the certificates becomes old
the term of the bond
the date of redemption
the date on which the issuer has to repay the amount
Call or put provisions are used to modify the fixed maturity of debt securities
True
False
A call provision in a debt issue allows the issuer to
call out the names of the investors
redeem the debt on maturity
extend the tenure of the debt
redeem the debt before maturity
A put provision in a debt issue allows
investor to put away the certificates in safe deposit vaults
investors to redeem debt prior to maturity
issuers to redeem debt prior to maturity
investors to extend the tenure of debt
Current yield relates interest on a security to
its current market price
its face value
its fair value
the current price of T-Bills
To compare bonds with different coupon rates, maturities and prices, investors would
use:
current yield
technical analysis
yield to maturity
fundamental analysis
When interest rates rise, bond prices 19. also rise
20. fall
21. are not affected
22. fluctuate either up or down
Yield curve is also known as
Curve of Interest
Term Structure of Interest Rates
Curve that yields
none of the above
An important indicator of expected trends in interest rates is
The Economic Times
the Sensex
the Yield Curve
the Chief Minister's Speech
It may not be possible to reinvest interest received at the same rate as principal. This is known as
reinvestment risk
inflation risk
interest-rate risk
call risk
A bond's rating indicates its
reinvestment risk
default risk
inflation risk
interest-rate risk
If a bond cannot be sold at a price near its value, it means that investment in this bond has
high liquidity risk
high default risk
low liquidity risk
inflation risk
The additional yield required to account for the risk of default by the borrower is known as
yield plus
yield spread
yield extra
yield premium
A high credit rating does not mean
high yield spread
high perceived safety
low yield spread
low risk premium
If 10-year government securities Neil 10% and a 10-Year fixed deposit in a company yields 12%, the yield spread is
12%
22%
10%
2%
The "duration" of an interest-bearing bond is
longer than its maturity
less than its maturity
equal to its maturity
the quality of paper used for the certificate
A bond with a coupon of 9% when interest rates for similar maturities are 11% will sell
above par
below par
at par
at a price unrelated to the prevailing interest rate
Changes in foreign exchange rates have no bearing on interest rates
True
False
Inflation and interest rates are inversely proportional
True
False
Investment policies of a mutual fund are determined by
the fund manager
the AMC management
the marketing department based on what distributors want
the investors
Which of the following measures are not taken by SEBI for protecting investors of mutual funds
mandating minimum levels of diversification for mutual funds
ensuring that the funds are not used to favour a few companies
tracking the securities that each fund has invested in
ensuring that the funds are invested in approved securities only
As per SEBI norms, a fund's investments, in the equity shares of any one company are restricted to
25% of NAV
10% of NAV
50% of NAV
100% of NAV
A mutual fund manager is not allowed to sell short when he expects a crash in the market
True
False
In a mutual fund, having many schemes, al securities bought can be held in a general account and transferred later to various schemes to attain certain profit or loss objectives
True
False
A mutual fund may invest in short-term deposits of scheduled commercial banks
True
False
Mutual funds are allowed to lend
loans
securities
physical assets
none of the above
In case of listed securities of group companies of the sponsor, mutual fund is not allowed to invest
25% of its net assets
10% of its net assets
at all
>5% of net assets
A mutual fund may transfer investments from one scheme to another
not at all
at current market rates
at cost price
at a fixed premium over market rate
Interest Rate Risk for an Indian debt fund can be reduced by using
Futures
Options
Interest Rate Swaps
none of the above
The Interest Rate Forecasting Unit of a debt fund is generally manned by
technicians
statisticians
economists & econometricians
accountants
AMCs need not maintain records in support of each investment decision
True
False
When interest rates for similar maturities' bonds are 11%, bond with a 9% coupon rate will sell
above par
below par
at par
at a price unrelated to the interest rates for similar securities
The most suitable measure for a fund's performance does not depend on the
type of fund
investment objective of the fund
financial market conditions
amount invested by investor
If the NAV of an open-ended fund was Rs.16 at the beginning of the year and Rs.22 after 13 months, the annualised change in NAV is
6.0%
34.6%
40.6%
37.5%
Change in NAV as a measure of fund performance is more suitable for
growth funds
income funds
funds with withdrawal plans
none of the above
The difference between NAV change and total return as measures of fund performance is
none
total return takes dividend into account while NAV change does not
total return does not take NAVs into account
total return does not take the time period into account
The most suitable measure of fund performance for all fund types is
NAV Change
Total Return
Total Return with reinvestment
none of the above
The expense ratio used for measuring fund performance is an indicator of
product market condition
growth in the economy
prevalent market practices
the fund's efficiency
The Expense Ratio as a measure of a fund's performance is defined by a fund's
total expenses and average net assets
total expenses and total assets
average expenses and average net assets
none of the above
While computing the Expense Ratio for a fund, brokerage commissions on the fund's transactions are not included in the fund expenses
True
False
The Expense Ratio is not of utmost importance in case of
Debt fund
Index fund
Equity fund
Bond fund
The Expense Ratio is not affected by
fund size
average account size
portfolio composition
stock market conditions
The Income Ratio as a measure of a fund's performance is defined by the fund's
total income and total assets
net investment income and net assets
total income and net assets
none of the above
The Income Ratio is more suitable for evaluating the performance of
Equity Funds
Growth Funds
Regular Income Funds
Index Funds
Portfolio turnover rate of a fund measure
the
size of the fund's portfolio
amount of buying and selling done by the fund
the average number of units sold by the fund in one day
none of the above
A high turnover rate for a fund indicates
high transaction costs
greater efficiency
high returns to the investor
a rising market
Turnover rates would be most relevant to analyse the performance of
equity funds
growth funds
debt funds
value funds
Transaction costs include
all expenses related to trading
all expenes charged to the fund
distribution expenses ab. none of the above
Which of the following are not included in Transaction costs?
brokerage commissions
stamp duty on transfers
custodians fees
ab. agent commissions
Which of the following transaction costs are not quantified in the offer document
brokerage commissions
dealer spreads
custodian's fees
registrar's fees
The size of a fund has no bearing on its performance
True
False
As per SEBI, mutual funds can borrow for short term to the extent of
total net assets
50% of net assets
25% of net assets
20% of net assets
Which of the following is of no relevance in evaluating a fund's performance
The performance of the stock market as a whole
The performance of other mutual funds
The returns given by other comparable financial products
ab. The change in wholesale price index
The choice of an appropriate benchmark for evaluating a fund's performance depends on
the fund manager
the investment objective of the fund
SEBI
AMFI
An actively managed equity fund expects
to
be able to beat the benchmarks
earn the same returns as the benchmark
aa. have no benchmarks
ab. underperform when compared with the benchmark
For evaluating funds, the preferred benchmark would be the
BSE Sensex
S&P CNX Nifty
BSE 200
ab. S&P CNX Sectoral Indices
To evaluate a close-ended debt-fund, a suitable benchmark would be
BSE Sensex
I-Sec's I-BEX
interest on bank fixed deposits of similar maturity
S&P CNX Defty
When comparing performance of two funds, the following need not be similar
Risk profiles
Investment objectives
Fund size
Fund managers
Which of the following is false?
ROI is a measure similar to Total Return with Reinvestment of distribution
Total Return with Reinvestment of distributions assumes reinvestment at NAV on the distribution date
As a measure of performance, Total Return with Reinvestment of distribution seeks to overcome the shortcomings of simple Total Return
Because of its simplicity, simple Total Return is preferred in practice to Total Return with Reinvestment of distribution
The basis of genuine investment advice should be
23. the current market situation
24. the agent commissions paid by different funds
25. financial planning to suit the investor's situation
26. planning to complete the agent's annual targets
Financial goals do not include
buying a home
winning a sports gold medal
planning for retirement
saving for child's education
Financial planning allows a person
to become a billionaire
to achieve financial goals through proper management of finances
to invest in foreign countries
none of the above
Financial plans do not alter in any way the amount of tax an investor pays as the tax is on his income
True
False
Which of the following works with an investor on his overall financial situation
Tax Advisor
Financial Planner
Insurance Agent
Financial Advisor
A financial planner takes responsibility for the financial well-being of his/her clients
True
False
Financial planners and their clients should focus on
allocating funds to asset classes (e.g. debt, equity etc.)
allocating funds to individual securities
tracking stocks which they feel have potential
none of the above
Within an asset class, which individual security to invest in should be decided by
the financial planner
the investor himself
a professional fund manager
an objective advisor
Financial Planning comprises
defining a client's profile and goals
recommending appropriate asset allocation
monitoring financial planning recommendations
all of the above
Financial planning is relevant only for high networth individuals
True
False
Financial planning does work for older clients
True
False
326 Financial planning is primarily tax planning
True
False
327 In financial planning, all responsibility ends with the financial planner and the client has no responsibilities
True
False
328 The constraint on financial planning due to insufficient investable resources can be remedied to some extent by
decreasing the standard of living
disciplining children
disciplined monthly budgeting
none of the above
329 In the growth option offered by mutual funds, the number of units held by an investor increases because of
growth in net asset value i.e. capital appreciation
reinvestment of dividend which is like compounding
interest received on the fund's assets
none of the above
330 To maximise returns on investment, once an investor buys into a fund, he/she should hold on to it no matter what happens
True
False
331 If an investor keeps investing a fixed amount at regular intervals, the average cost of his purchases will always be less than if he makes investment at irregular periods
True
False
Which of the following lets an investor book profits in a rising market and increase
holdings in a falling market
Fixed Rates of Asset Allocation
Flexible Ratio of Asset Allocation
Investment without any asset allocation plan
Buy and Hold Strategy
A Flexible Ratio of Asset Allocation means
continuously changing the ratio of various assets in the portfolio
not doing any re-balancing and letting the profits run
active switching ab. none of the above
The strategy advisable for an investor to maximise investment return in the long run is
buy and hold on to investments for a long time
liquidate poorly performing investments from time to time
liquidate good performing investments fro time to time
switch from poor performers to good performers
A criticism of rupee-cost averaging is
Investment is for the same amount at regular intervals
Over a period of time, the average purchase price will work out higher than if one tries to guess the market highs and lows
It does not tell you when to buy, sell or switch from one scheme to another
Rupee cost averaging has no serious shortcomings
In India, individual investors do not have direct access to
capital market instruments
real estate
bullion
money market instruments
Which of the following entities can given loans against securities
UTI
Banks
Mutual funds
none of the above
Which of the following investment
products do not give guarantee for return or capital
Bank deposits
Pubic provident fund (PPF)
National Savings Certificates (NSC)
Units of a mutual fund
The biggest advantage of investment in gold is
High returns
High appreciation in value
Low Purchase price
Hedge against inflation
The biggest disadvantage of investment in real estate is
Less potential for capital appreciation
High purchase price
Depreciation in value as time passes ab. Value gets eroded due to inflation
Which of the following is not an advantage of bank deposits?
Liquidity
High perceived safety
Low entry price
High yield after tax
Listing of shares at a stock exchange ensures
guaranteed returns
long term capital appreciation
low risk
high liquidity
The rate of interest paid by a company on debentures issued by it depends on
the stock market situation
SEBI guidelines
the company's credit rating
the amount of money being raised
Which of the following is not a characteristic of company fixed deposits
A higher rate of interest
higher risk
unfavourable effect of tax
very high liquidity
Which of the following is untrue for
Public Provident Fund Schemes
The interest is tax-free
Post-tax returns are attractive
Liquidity is rather low
none of the above
Indira Vikas Patra is an investment product popular with
rural investors
investors in high tax bracket
urban investors
risk taking investors
Finance Acts of 2000 and 2001 have reduced tax-free interest on Public Provident Fund to
12%
10.5%
9%
aa. 11%
348 Most individuals invest in life insurance policies for
risk protection
tax benefits
easy liquidity
high returns
Annual contribution to Public Provident Fund should be
Rs.10000
between 100 and Rs.6000
between Rs.600 and Rs.1000
none of the above
The current yield on Indira Vikas Patra works out to
10.5%
11%
10%
9%
The tenure of an Indira Vikas Patra is
7 years
6 years
5 years ab. 3 years
The maturity period of RBI Relief Bonds
is
5 years
ab. 6 years
ac. 7 years
ad. 8 years
The annual yield on RBI Relief Bonds is ac. 9.5%
ad. 9.5% before tax ae. 8.5% before tax af. 8.5% after tax
Individual investors do not normally invest in Government Securities because
ac. individual investors re not allowed to invest in Government Securities
ad. the amount required for investment is very large
ae. safety of principal is not guaranteed af. none of the above
The amount an insurance company would pay to the nominee if a policyholder died is known as the
aa. premium
ab. sum assured
ac. face value
ad. real value
Dividends distributed by mutual funds
are
aa. taxed at source
ab. taxed in the hands of the investors ac. are subject to capital gains tax ad. are tax-free in the hands of the
investor
Investing through mutual fund is a better option than investing directly in the stock market because
identifying stocks is a difficult process
agents get commissions on mutual fund investment returned are guaranteed by mutual funds
all of the above
A small investor can build a diversified portfolio by
buying one share each of all listed companies
ab. investing in a mutual fund
ac. borrowing enough money to buy shares of well-managed companies
ad. none of the above
Which of the following is not an advantage of mutual fund investment over
direct investment
ac. Higher liquidity
ad. Lower transaction costs ae. Greater convenience af. guaranteed returns
There is no contractual guarantee for repayment of principal or interest to an investor in
aa. bank deposit
ab. debt fund
ac. secured debentures
ad. all of the above
Which of the following debt investments is not rated
ac. Corporate Bonds ad. Commercial Paper ae. Company Deposit af. Debt Fund
Gold and real estate are attractive investment options only in high inflation economies
ac. True ad. False
Direct investment in stock market can be a better option than investing through mutual funds if the investor
wants better returns than those offered by mutual funds
ab. has large capital, knowledge and resources for research
ac. has identified a bullish phase in the stock market
ad. wants to invest for the long term
Deciding on strategies such as long-term compounding, cost averaging, value averaging, active switching, all depend on the
aa. stock market situation on date
ab. amount of money to be invested ac. investor's risk tolerance
ad. phase through which the economy is passing
Financial Planning involves
aa. studying financial management ab. managing the risks of investing ac. financing the client's investments ad. none of the above
Greater returns come only from assuring higher risks, and a higher risk portfolio guarantees higher returns
aa. True
ab. False
The risk tolerance of an investors is independent of
aa. his age
ab. his income
ac. the stock market movements ad. his job security
A sector fund is a aa. low risk fund
ab. moderate risk fund
ac. high risk fund
ad. low-to-moderate risk fund
International funds invest in various and so are low risk funds
True
False
Investment in gold is a hedge against inflation but investment in a precious metal fund falls in the high risk category
True
ab. False
By their very nature, growth funds are considered as high risk funds
aa. True
ab. False
Short Term bond funds are aa. low risk funds
ab. moderate risk funds
ac. high risk
ad. of the above depending on the market
The risk level of commodity funds is
high risk category
determined by the commodity price movements
cannot be specified ab. low risk category
As compared to a fund with fluctuating total returns, a fund with stable positive earnings
gives higher returns
is less risky
gives lower returns
is more risky
"Risk" is equated with
volatility of earnings
level of earnings
the number of investors in a fund
the number of schemes of a fund family
Volatility of an equity fund portfolio is independent of the
kind of stocks in the portfolio
ab. degree of diversification of the portfolio
ac. fund manager's success at market timing
ad. number of investors in the scheme
Equity price risks are
company specific
market level
sector specific ab. all of the above
Diversification reduces
company specific risk ab. market level risk
ac. both of the above ad. none of the above
Which of the following is most risky?
Investing in a money market mutual fund
Investing in an index fund
Short term investment in an equity fund
ab. Long term investment in an equity fund
A fund with a high beta coefficient gives greater returns in a rising market, and is more risky in a falling market
aa. True
ab. False
Which of the following is a disadvantage of Standard Deviation as a measure of risk
Standard Deviation measures total risk, not just market risk
It is based on past returns, which does not necessarily indicate further performance
It is an independent number
All types of funds can be measured with standard deviation
The role of an agent is to
point out the features and benefits of various investments options
ab. help the investor develop the right approach to investing
ac. recommend some investment option available
ad. offer ad hoc advise whenever the investor has surplus money available
One of the most effective ways to invest through mutual funds is to
develop a model portfolio
buy a few units of every mutual fund scheme available
invest all the money in one fund scheme
ab. invest all the money in different schemes of the same fund family
Mutual fund should be advised to expect ac. low post tax returns
ad. dramatic results
ae. better returns than every other available option
af. only realistic wealth accumulation goals
Asset Allocation is
keeping certificates of the physical securities in proper places
ab. allocation the available money to all the securities available
ac. allocating the right proportion of funds to equity, debt and money market securities
ad. none of the above
Once a financial advisor works out ideal Asset Allocation, it can be used for all investors whom he/she advises
aa. True
ab. False
387. Asset distribution among equity, debt
and money market securities should correspond to the investors' need for capital growth, income and liquidity
True
False
The liquidity needs of an investor are met through
Equity Funds
ab. Index Funds
ac. Money Market Funds
ad. Sector Funds
A retired person generally needs a greater proportion of
aa. Debt funds
ab. Equity funds
ac. Money Market funds
ad. All of the above
To satisfy a young investor's need for growth, a greater proportion of investment should be advised in
aa. Gilt funds
ab. Income Funds
ac. Equity Growth funds
ad. Liquid funds
A very high proportion of investment in all types of equity funds is advisable for investors
ac. in distribution phase ad. in accumulation phase ae. in transition phase
af. who are wealth preserving affluent individuals
The transition phase of an investor's wealth cycle is when
the financial goals have been already met
the investor has retired
financial goals are approaching ab. investor suddenly gets a windfall
A high proportion of investment in income funds is required by
accumulating investors
ab. affluent investors
ac. investors in the inter-generational transfer phase
ad. investors in the distribution phase
Retired investors should
not draw down on their capital
not invest in securities which bear risk of capital erosion
continue holding a major portion of their holding in equity growth funds
ab. never invest in equity
For older investors who want to transfer their wealth
no financial planning is required
the right investment strategy depends upon who the beneficiaries are
the right investment strategy depends upon the state of the stock market
ab. all the funds can be invested in aggressive equity funds
Investors who acquire sudden wealth
can speculate with all the acquired money in the stock markets
should not use any of the new wealth to invest in equity
should take the effect of taxes into account
need not pay any taxes on the newly acquired wealth as it is not a part of their regular income
Only if a specialty offshore fund has consistently given very good performance, it can be considered for investment by a retiree
True
False
Past performance should not be solely relied on for selecting a fund
ab. True ac. False
Between the past performance of a fund and its suitability for an investor, past performance is more important
True
ab. False
Structural characterisations of an equity fund include
aa. costs of investing
ab. the specific securities in which the fund has invested
ac. the number of employees of the AMC ad. all of the above
An equity fund's age and size are irrelevant when selecting a fund for
investment
ac. True
ad. False
The charge to an investor at the time of he redeems his units from the fund is known as
ae. recovery charge af. repurchase load ag. redemption weight ah. exit load
The load amount charged to a scheme over a period of time is called
ag. entry load ah. exit load
ai. deferred load aj. no-load
Contingent Deferred Sales Charge (CDSC) ag. is higher for investors who stay
invested in the scheme longer ah. is lower for investors who stay invested in the scheme longer
ai. is the same for all investors irrespective of how long they stay invested
aj. is not allowed to be charged to mutual fund investors in India
405 A fund's declared NAV does not include loads
ae. True
af. False
Which of the following fund types are comparable
ae. An aggressive equity fund and a money market mutual fund
af. A value fund and a government securities fund
ag. A bond fund and a debt fund
ah. A diversified equity fund and a debt fund
Who is the primary guardian of unitholders' funds/assets
ae. The AMC
af. The Trustees
ag. The Registrars
ah. The custodians
In case of a fund merger or Take-over ag. High Court approval may not be
necessary
ah. SEBI approval is a must
ai. all unitholders must be informed aj. all of the above
Units of a money market mutual fund can be issued to
ae. individuals af. banks ag. trusts
ah. all of the above
Though Indian mutual funds have restrictions on borrowings (only20% of net assets and for six months only) which are to meet cash needs for redemption only, UTI is allowed to borrow within more relaxed norms
ag. True ah. False
An equity fund can be said to be concentrated when
ae. when it invests in only in two or three stocks
af. when it invests in may companies of the same sector
ag. when top ten holdings account for more than 50% of net assets invested
ah. when top ten holdings account for more than 25% of net assets invested
The size of the market capitalisation of a fund's equity holdings is inversely proportional to the returns that
ae. can be expected from the fund af. level of risk assumed by the fund ag. state of the stock market
ah. all of the above
A steady holding of investments in an equity fund's portfolio indicates
ae. long-term orientation af. lower transaction costs ag. both the above
ah. none of the above
Ex-Mark of an equity fund measures its ae. performance
af. risk
ag. both the above ah. none of the above
Beta of an equity fund measures its ac. performance
ad. risk
ae. both the above af. none of the above
The best equity fund, relative to others, would have
ae. higher Ex Marks, lower Beta and higher Gross Dividend Yield
af. higher Ex Marks, higher Beta and higher Gross Dividend Yield
ag. lower Ex Marks, lower Beta and lower Gross Dividend Yield
ah. lower Ex Marks, higher Beta and higher Gross Dividend Yield
When selecting equity funds for investing, those at the top of the performance rankings should be avoided
ae. True af. False
A debt fund's age and size are not important when selecting a fund for investment
True
False
Debt schemes are popular because
ac. the Indian Stock Market is always going down
ad. the returns are more predictable ae. most investors are always in debt af. all of the above
Yield-to-maturity of a debt fund's portfolio is more important when the investment objective is
ac. current income ad. total return ae. liquidity
af. all of the above
Compared to equity funds, income margins for debt funds are
ae. narrow
af. higher
ag. the same
ah. almost nil
Debt funds with long-term investments carry higher risk of capital loss
ac. True ad. False
The differerentiating factor among debt funds of comparable maturity and quality is
aa. gross yields
ab. costs
ac. fund age
ad. tenure of the fund manager
Distribution tax should be taken into into account when computing net returns from
aa. equity funds
ab. debt funds
ac. both the above
ad. none of the above
All debt fund investors are exposed to risk of principal loss
ae. True af. False
Running a money market mutual fund requires more of
ac. credit analysis skills ad. equity analysis skills ae. patience
af. trading skills
Which is the most important in selecting debt fund for better return
ae. past performance af. level of interest rates ag. fund expertise
ah. the securities in which it has invested
Investors should be advised to avoid investing in a debt fund with a
ac. lower rated portfolio and higher expense ratio
ad. higher rated portfolio and lower expense ratio
ae. lower rated portfolio and lower expense ratio
af. lower rated portfolio and higher
expense ratio
An ideal money market mutual fund must
have
ac. lower returns
ad. lower expense ratio
ae. low quality of investments af. all the above
Circumstances that might cause an investor to change the composition of his portfolio
cyclical changes in economy
unforeseen economic changes affecting the portfolio's preferred sectors
both the above ab. none of the above
If a charitable trust approaches a distributor with an application for investment in a mutual fund, the distributor should
ae. accept the application without wasting time
af. reject the application outright ag. refer to the offer document
ah. accept the application as a direct application
An application form for investment in a mutual fund is available with
ac. the offer document
ad. the abridged annual report
ae. the key information memorandum af. a bank challan
An aggrieved unit-holder of a mutual fund can sue
ag. the AMC ah. the trustees
ai. the sponsor if returns have been guaranteed by them
aj. none of the above
As per SEBI regulations for valuation of investments held by mutual funds, a security is considered "non-traded" when it
ae. has not been traded for 60 days prior to valuation
af. has not been traded for 30 days prior to valuation
ag. is not listed on any stock exchange
ah. is held by the mutual fund without buying or selling
An Ex-Mark of 100% is possible for ac. a growth fund
ad. an aggressive growth fund ae. an index fund
af. a balanced fund
A trail commission is justified when ab. an investor cancels his investment ac. the investor redeems his investment
in a very short time
ad. an agent invests his own money, not that of a client
ae. an agent sells many mutual funds
Of the following, which type of fund would have a higher P/E multiple in comparison to the average market multiple
ae. A Value Fund af. A Growth Fund ag. An Index Fund
ah. Could be any of the above three, one cannot generalise
Which of the following is not true as per SEBI Regulations for Debt Funds?
ae. Investment in rated debt securities of a single issuer should not exceed 15% of NAV
af. Total investment in unrated debt securities of a single issuer should not exceed 25% of NAV
ag. Total investment in unrated debt securities below investment grade should not exceed 25% of NAV
ah. Total investment in rated debt securities below investment grade should not exceed 25% of NAV
A Money Market Mutual Fund is most likely to invest in
ae. Corporate Bonds af. Equity Shares
ag. Government Securities with maturity less than 1 year
ah. All of the above
Of the following, which would be suitable for a retiree with a modest risk appetite
ag. Value Fund
ah. Diversified Equity Fund
ai. Growth Fund
aj. Balanced Fund
A high portfolio turnover for a fund indicates
ac. that the fund is active ad. higher transaction costs ae. both the above
af. none of the above
Unit Trust of India's US-64 Scheme ae. is listed on stock exchanges af. has a fixed price for sale and
repurchase
ag. has its sale and repurchase price declared periodicaly by UTI
ah. has its price determined by market forces
The Indian debt market
ac. is Wholesale in nature
ad. comprises large players like financial institutions and banks
ae. witnesses large scale trading in government securities
af. all of the above
A fund that charges a load is better than a no-load fund
ac. True ad. False
An AMC can approach investors either directly or with the help of
aa. individual agents
ab. banks and non-banking finance companies
ac. distribution companies
ad. all of the above
Which of the following is true for Equity Linked Savings Scheme (ELSS)
A tax rebate is available to investors in these schemes
ab. The investment has to be locked in for 3 years
ac. The minimum amount for investment is fixed
ad. All of the above
447. A prospective investor
ad. has the same status as a unit-holder of a fund
ae. can sue the AMC/trustee af. has no legal recourse ag. all of the above
An investor can assess the performance of his mutual fund by comparing it with the performance of
ac. other mutual fund of the same type ad. the stock market
ae. other financial products af. all of the above
Unrated securities in the portfolio of a mutual fund are not to be valued
ae. True af. False
An exit load guarantees a higher return aa. True
ab. False
451 Bonds held in the portfolio of a mutual
fund are valued at yield to maturity
ae. True
af. False
452 The Valuation of non-traded equity shares is done at the trading price 30 days prior to valuation date
ai. True
aj. False
If a unit-holder does not agree to the merger of his fund with another, he has not exit option
ak. True al. False
The most important factor look for when investing in a corporate fixed deposit is the
ak. yield
al. rate of interest
am.credit rating of the deposit an. none of the above
The most important reason for an investor to prefer a bank deposit to a mutual fund is
ag. the credit worthiness of the bank ah. because the bank does not invest in
securities
ai. that the bank offers a guarantee aj. all of the above
456. A deep discount bond
ai. is always sold at a discount to its issue price
aj. bears interest annually
ak. is redeemed at a price much higher than issue price
al. bears interest at varying interests
A mutual fund in India is a ai. body corporate
aj. company ak. trust
al. an asset management company
When selling a mutual fund, a good agent would never
ak. describe the past performance of the scheme
al. compare the fund with other mutual funds
am.assure a rate of return
an. compare the fund with other financial products
An investor buys one unit of a fund at an NAV of Rs.20. He receives a dividend of Rs.3 when the NAV is Rs.21. The unit is redeemed at an NAV of Rs.22. Total Return is
ai. 25.71% aj. Rs.27.51 ak. 21.27% al. Rs.21.75
A fund sells 100 units of face value Rs.10/- at an NAV of Rs.12.25. How much would be credited to unit capital?
ai. Rs.1225 aj. Rs.225 ak. Rs.1000
al. none of the above
When a scheme with assured returns is being launched, which of the following need not be published in the offer document?
ai. Means of fulfilling the guarantee
aj. Information for all schemes launched by the fund in the past
ak. comparison with other mutual funds al. Investment objective
Mutual fund units can be distributed by ai. trustees of the fund
aj. the AMC
ak. Non-banking finance companies al. banks
A debt fund distributes 10% dividend. How much tax does the investor have to pay on this dividend?
ai. 10% aj. 12% ak. 20% al. None
A debt fund distributes a 10% dividend. How much tax does the fund have to pay?
ai. 10% aj. 12% ak. 10.2% al. None
How many scrips is the NIFTY constitutes of
ag. 40 ah. 100 ai. 30
aj. none of the above
Which of the following is the first step in financial planning
ai. Asset Allocation aj. Selection of fund
ak. Studying the features of a scheme al. None of the above
Why should one buy an insurance policy? ag. It gives high current returns
ah. It gives good capital appreciation over its term
ai. It should be bought due to the need for insurance and not as an investment
aj. All of the above
SEBI Regulations for Mutual Funds were formulated in
aa. 1992
ab. 1993
ac. 1995
ad. 1996
Expenses incurred by a fund for printing of Key Information Memorandum can be amortised over
ag. 10 Yrs ah. 5 Yrs ai. 15 Yrs
aj. Cannot be amortised
A mutual funds' investments are guided by the
ag. AMC
ah. Board of Trustees
ai. Investment Objectives aj. Unit holders
UTI was the only mutual fund for the period
ai. 1984 to 1988 aj. 1963 to 1988 ak. 1964 to 1992
al. none of the above
Investors who follow the fixed Asset Allocation approach
ae. maintain balance in their portfolio by liquidating a part of the position in the asset class which has given higher return and reinvesting in the other asset class which has lower return
af. are not disciplined
ag. increase their equity position when equity prices tend to climb
ah. none of the above
An investor should not invest in a mutual fund if
ae. his capital base is large
af. he is able to carry out detailed investment research and monitor the stock market
ag. both the above ah. none of the above
Mutual fund can benefit from economies of scale because of
ae. portfolio diversification af. risk reduction
ag. large volume of trades ah. none of the above
Which of the following is a disadvantage suffered by a mutual fund investor?
ag. High liquidity
ah. diversification
ai. no tailor made portfolio
aj. low investment
A disadvantage suffered by mutual fund investor is that he has no control over the costs of investing
ag. True ah. False
Which of the following statements about UTI is untrue
ai. It was set up in 1963 aj. It was formed by RBI
ak. It was established by an act of Parliament
al. It was not given a monopoly status
Which scheme has the largest investor base?
ag. ULIP
ah. UTI Mastershare ai. US-64
aj. SBI Magnum
Which was the first diversified equity investment scheme in India
ag. SBI Magnum ah. UTI Mastershare ai. MEP-91
aj. Mastergain-92
The private sector was granted permission to enter the mutual fund industry in
ac. 1992 ad. 1993 ae. 1998 af. 1995
The first non-UTI mutual fund was
ai. SBI MF
aj. LIC MF
ak. Canbank MF
al. Indian Bank MF
The organisation responsible for a comprehensive set of regulations for all mutual funds in India is
ag. RBI ah. SEBI
ai. AMFI
aj. SHCIL
The 1999 Union Government Budget helped the Mutual Fund industry by
ak. regulating the industry practices
al. exempting all mutual fund dividends in the hands of investors from income tax
am.approving the code of ethics formulated by AMFI
an. doing away with all regulations for mutual funds
During the period 1992-99, the mobilisation of funds by the mutual fund industry was about
ai. 5% - 6% of gross domestic savings aj. 2% - 4% of gross domestic savings ak. 7% - 10% of gross domestic savings al. 25% - 40% of gross domestic savings
Which of the following about Public Providend Fund (PPF) are untrue
ag. 50% of the balance of the 4th year can be withdrawn in the 7th year
ah. The interest is tax free
ai. The rate of interest is 12% p.a. aj. contributions upto Rs.60000 are
eligible for tax rebate
A close-ended scheme is quoted on the stock exchange at a discount to its NAV when
af. the markets are bearish
ag. investors perceive that the fund will be unable to maintain the NAV
ah. the assets of the fund are undervalued ai. none of the above
Which of the following is a fundamental attribute of a mutual fund scheme
ai. The names and addresses of the registrars and custodians
aj. The nature of the scheme being income bearing
ak. The specified stocks in the scheme's portfolio
al. The name and address of the compliance officer
Offer Document of a mutual fund is
ai. required by investors
aj. required by the AMC for its own reference
ak. required as per SEBI regulations al. not mandatory as per SEBI
The units of a scheme being sold and repurchases as per the procedure laid down is one of the fundamental attributes of a scheme
ai. True aj. False
The steps involved in the selection of an equity fund for investment are
ak. sector selection, asset classification, selection of fund managers and schemes
al. sector selection, selection of fund managers and schemes, asset classification
am.asset classification, sector selection, selection of fund managers and schemes
an. selection of fund managers and schemes, sector selection, asset classification
Compounding of interest is best explained by a
ag. balanced fund ah. growth fund ai. value fund aj. income fund
From whom can a unit-holder seek redressal if his complaint is not entertained by the mutual fund
ai. AMC
aj. Board of Trustees ak. SEBI
al. RBI
An investor wishes to switch between a money market mutual fund and an equity fund. What would you advise him?
ag. It would be better to stick to one type of fund, the one that meets his investment objective.
ah. He should keep switching parts of his investment from the equity fund to the money market fund as the market rises and switch back to the equity
fund when the market falls
ai. He should switch from the money market fund to the equity fund in a rising market and switch back to money market fund when the market falls
aj. none of the above
For choosing an appropriate benchmark to measure a scheme's performance, all of the following are required except
ae. the composition and size of the portfolio
af. the investment objective
ag. historical data of fund performance ah. the nature of investments
Which of the following characterise the fund that a risk averse investor should choose
ae. Gross dividend yield 15% Beta 1.5, Ex-Marks 90
af. Gross dividend Neil 10%, Beta 1, Ex-Marks 70
ag. Gross dividend yield 11%, Beta 0.9, Ex-Marks 80
ah. Gross dividend yield 12%, Beta 1.2, Ex-Marks 80
A mainstream diversified debt fund is most affected by
ae. reinvestment risk af. liquidity risk
ag. interest rate risk ah. default risk
If yields fall, a debt fund manager will do all of the following except
ah. sell short maturity securities and buy long maturity securities
ai. see that the fund's average duration becomes longer than the market's average duration
aj. sell long duration securities and buy short duration securities
ak. sell high coupon securities and buy low coupon securities
In which type of schemes should an unmarried professional working HLL invest
ag. Scheme investing 80% in debt securities
ah. 50% in equity funds and 50% in income funds
ai. 90% in equity funds having a higher P/E Ratio than the market
aj. all the money in a balanced fund
An investor buys units in a fund that has given excellent returns in the past, but his expectations are not met as the fund does not perform well this year. The investor can
ag. sue the AMC ah. sue the Trustees ai. sue the agent aj. none of the above
A fund's investments at market value total Rs.700 crores, Total liabilities stand at Rs.50 lacs and the number of units outstanding is Rs.28 Crores. What is the NAV
ac. Rs.30.19 ad. Rs.24.98 ae. Rs.32.15 af. Rs.40.49
Answers to Practice Question
Q. Ans Q. No Ans Q. No Ans Q. No Ans Q. No Ans
No
1 b 51 a 101 d 151 c 201 b
2 b 52 d 102 a 152 d 202 d
3 d 53 b 103 b 153 d 203 b
4 d 54 d 104 c 154 d 204 d
5 c 55 c 105 a 155 b 205 b
6 c 56 c 106 d 156 a 206 c
7 b 57 c 107 a 157 c 207 a
8 c 58 c 108 d 158 d 208 d
9 d 59 b 109 d 159 a 209 a
10 c 60 d 110 b 160 d 210 c
11 b 61 c 111 b 161 a 211 b
12 b 62 a 112 c 162 d 212 d
13 d 63 d 113 a 163 c 213 d
14 c 64 d 114 d 164 c 214 a
15 b 65 b 115 d 165 b 215 a
16 d 66 c 116 b 166 d 216 a
17 b 67 c 117 b 167 c 217 b
18 d 68 d 118 a 168 b 218 b
19 c 69 c 119 c 169 b 219 b
20 c 70 d 120 a 170 d 220 d
21 b 71 b 121 b 171 c 221 b
22 d 72 b 122 c 172 b 222 a
23 c 73 d 123 a 173 b 223 b
24 a 74 d 124 d 174 d 224 a
25 d 75 c 125 c 175 d 225 c
26 d 76 a 126 d 176 b 226 a
27 c 77 c 127 d 177 c 227 c
28 b 78 a 128 a 178 c 228 c
29 c 79 d 129 d 179 c 229 b
30 d 80 a 130 a 180 c 230 b
31 b 81 c 131 d 181 d 231 d
32 c 82 b 132 a 182 b 232 a
33 b 83 b 133 b 183 d 233 b
34 b 84 b 134 c 184 c 234 b
35 b 85 d 135 b 185 b 235 c
36 c 86 a 136 d 186 a 236 c
37 b 87 b 137 a 187 c 237 c
38 c 88 c 138 c 188 a 238 a
39 a 89 b 139 b 189 d 239 b
40 b 90 b 140 c 190 b 240 b
41 b 91 b 141 a 191 d 241 b
42 a 92 c 142 b 192 b 242 b
43 b 93 c 143 c 193 b 243 a
44 c 94 b 144 b 194 a 244 b
45 b 95 a 145 d 195 d 245 c
46 b 96 b 146 c 196 b 246 a
47 c 97 a 147 d 197 c 247 a
48 b 98 d 148 c 198 c 248 c
49 B 99 c 149 b 199 b 249 c
50 A 100 a 150 c 200 a 250 a
Answers to Practice Question for AMFI Test
A A A A A
Q. No n Q. No n Q. No n Q. No n Q. No n
s s s s s
251 a 301 a 351 b 401 b 451 a
252 b 302 a 352 a 402 c 452 b
253 d 303 a 353 d 403 c 453 b
254 c 304 d 354 b 404 b 454 c
255 c 305 b 355 b 405 a 455 a
256 a 306 b 356 d 406 c 456 c
257 a 307 d 357 a 407 c 457 c
258 d 308 d 358 b 408 d 458 c
259 b 309 b 359 d 409 d 459 a
260 a 310 a 360 b 410 a 460 c
261 c 311 d 361 d 411 c 461 c
262 b 312 c 362 a 412 b 462 d
263 b 313 d 363 b 413 c 463 d
264 c 314 d 364 c 414 a 464 c
265 a 315 c 365 b 415 b 465 d
266 b 316 b 366 b 416 a 466 a
267 a 317 b 367 c 417 a 467 c
268 b 318 b 368 c 418 a 468 d
269 a 319 b 369 b 419 b 469 b
270 d 320 a 370 a 420 b 470 c
271 b 321 a 371 b 421 a 471 b
272 b 322 c 372 b 422 a 472 a
273 b 323 d 373 a 423 a 473 c
274 b 324 b 374 b 424 b 474 c
275 b 325 a 375 a 425 a 475 c
276 c 326 b 376 d 426 d 476 a
277 b 327 b 377 d 427 c 477 d
278 a 328 c 378 a 428 a 478 c
279 b 329 b 379 c 429 b 479 b
280 a 330 b 380 a 430 c 480 b
281 b 331 a 381 b 431 c 481 a
282 a 332 a 382 b 432 c 482 b
283 b 333 b 383 a 433 c 483 b
284 c 334 d 384 d 434 b 484 a
285 c 335 c 385 c 435 c 485 c
286 b 336 d 386 b 436 b 486 b
287 b 337 b 387 a 437 b 487 b
288 d 338 d 388 c 438 b 488 c
289 c 339 d 389 a 439 c 489 a
290 a 340 b 390 c 440 d 490 c
291 b 341 s 391 b 441 c 491 b
292 c 342 d 392 c 442 c 492 c
293 d 343 c 393 d 443 d 493 b
294 a 344 d 394 b 444 b 494 c
295 a 345 d 395 b 445 d 495 c
296 c 346 c 396 c 446 d 496 c
297 d 347 b 397 b 447 a 497 c
298 b 348 b 398 a 448 d 498 c
299 c 349 b 399 b 449 b 499 d
300 b 350 a 400 b 450 b 500 b
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