NISM VA SOLVED PAPER
Marked in YELLOW are the correct answers
Marked in Blue are the points that elaborate on the logic behind the answer
1) KIM is a condensed version of SID and SAI
True/False
KIM – KEY INFORMATION MEMORANDUM
SID – SCHEME INFORMATION DOCUMENT
SAI – STATEMENT OF ADDITIONAL INFORMATION
2) MUTUAL FUND OFFER DOCUMENTS HAVE ____PARTS
CHOICES – 1/2/3/4
ANSWER – 2 PARTS (SID AND SAI)
3) A financial planner planning for his client to buy a house would do all of the below except:
Put him onto the best home loan company
Scout for the best deal
Explain the mathematics of EMI to the client
Discourage him from taking the loan saying that it is unwise to incur debts
4) A Balanced fund has to have atleast_____ % in equities
50% / 75% / 65% / 85%
5) Avg maturity of bonds held in a liquid fund is
More than 91 days/ Less than 91 days/ Between 61-91 days/ More than one yr
6) Winning a lottery is an example of
Accumulation/Sudden wealth/Inter generational transfer
7) All other things being very similar among two index funds, the most important measure to decide between two index funds being considered (for investment) is
Tracking error/ Fund Manager’s years of experience/ minimum applicn amt/ None of the above
8) Credit risk in a bond means
Risk of inflation/Risk of interest variation/Risk of default
9) Difference in interest rates between a Govt bond and a corporate bond is called
Duration/convexity/yield spread/delta
10) Investor gives applicn to invest to distributor at 10am and distributor hands over the same to fund house at 11 am. The timestamping will indicate what time?
10am/11am/12pm/3pm
11) KIM to be updated every 6m/1yr/18m/3 yrs
12) The most efficient mode of investing for a gold investor among the foll choices is
Gold sector fund/gold futures/gold options/Gold ETF
13) Closed ended funds can theoretically be bought on the stock exchanges after the NFO – True/False
14) Offer document needs to be approved by
TRUSTEES/AMC/CIO/CMO
15) For NAV calculation, share prices are valued
At closing price on BSE
At the last traded price on a reputed stock exchange
At the average of last 30 days closing price on NSE
Any of these depending on the convenience of the agency calculating the NAV
16) Interest component of bonds that form part of a bond fund portfolio are accounted for in the following way when NAV is computed:
As per accrual of interest
Only if the interest is actually paid out to the scheme holding the bonds
Any of these depending on the convenience of the agency calculating the NAV
None of the above
17) In a scheme, Unit capital = Rs 10 cr, face value = Rs 10/unit, Assets = Rs 12 cr, Liabilities = Rs 1 cr. What is the NAV ?
CHOOSE THE CORRECT CHOICE - Rs 110/Rs 11/Rs 19/ Rs 190
REMEMBER – UNIT CAPITAL = NUM OF UNITS * FACE VALUE
FACE VALUE IS ALWAYS Rs 10
So, NUM OF UNITS = 1 crore units
NAV = assets – liabilities/num of units = 12-1/1 = 11 Rs
18) SID contains data relating to statutory information relating to the fund house offering the scheme – True/False (IT CONTAINS SCHEME SPECIFIC DETAILS)
19) Investing in gold ETF is like investing in a closed ended fund – True/False
20) STCG Tax for equity is______ + Surcharge + Education Cess....... choose from the foll choices - 15%/20%/22%/25%
21) R &T agent does not
Update addresses when investors shift addresses
Change nominees whenever investors indicate new preference for nomination
Inform investor rgds performance of the scheme in which s/he is invested
22) Custodian calculates Tax liability/calculates NAV/Keeps secure gold and securities that are part of the schemes of the AMC/sends accounts statements to investors
23) For a share, EPS = Rs 5, P/E ratio = 10. Price of share is Rs 30/50/70/100
24) For institutional investors there is no question of nomination- True/False
25) For institutional investors, the foll is an important part of KYC –
Bank stmnt/ Memorandum of Association/ profitability projections/nature of business in which it is involved
26) When growth stocks get OVERHEATED/OVERVALUED, then _____style of investing makes sense
GROWTH STYLE/VALUE STYLE
REMEMBER – THE STUDY MATERIAL SAYS THAT “In the initial phases of a bull run, growth
stocks deliver good returns. Subsequently, when the market heats up, value picks end up being safer”.
27) Fundamental analysis takes note of price and volume movement of shares – True/False
REMEMBER - It is technical analysis that makes use of price and volume to predict future prices of shares
28) When interest rates rise, NAVs of actively managed debt funds also rise – True/False
Remember the inverse relationship between interest rates and NAVs of bond funds
29) The Mutual Fund would update the current expense ratios on the website within ____working days mentioning the effective date of the change
5 days/7days/2days/10days
30) KIM must report Past performance of funds – True/False
REMEMBER – KIM MUST CONTAIN
• Name of the AMC, mutual fund, Trustee, Fund Manager and
Scheme • Dates of Issue Opening, Issue Closing & Re-opening for Sale
and Re-purchase • Plans and Options under the scheme • Risk Profile of Scheme
• Price at which Units are being issued and minimum amount / units for initial purchase, additional purchase and re-purchase • Bench Mark • Dividend Policy • Performance of scheme and benchmark over last 1 year, 3
years, 5 years and since inception * Loads and expenses
31) The Asset Mgmt company shall confirm that the due diligence certificate is signed by
COMPLIANCE OFFICER/CEO/MD/ANY OF THESE
32) Investment in MF units involves investment risks such as
TRADING VOLUMES/SETTLEMENT RISK/LIQUIDITY RISK/ALL THESE
33) A person is likely to be at his peak earning during Pre retirement/when he just starts earning/ midway
34) It is only after doing asset allocation that an investor will (ideally) choose exact debt or equity scheme in which to invest – True/False
35) MFs in India are constituted as
NGO/CORPORATES/PARTNERSHIPS/TRUSTS
36) A fund manager modifies the proportion of debt and equity in a balanced fund based on some important likely political news and rebalances his portfolio - he is following which mode of operation?
Tactical allocation and fixed asset allocation
Strategic allocation and fixed asset allocation
Strategic allocation and variable asset allocation
Tactical allocation and variable asset allocation
37) Stock specific selection irrespective of study of macro variables in the stock mkt is an example of top down approach – True/False
38) Large cap fund’s benchmark for performance comparison is which index ?
BSE 30 /BSE 200/BSE 500/BSE 1000
39) As the number of dependents increases in a family, the risk taking capacity of the family increases – True/False
40) % change equals
(SALE PRICE – COST PRICE)*100 /COST PRICE
(COST PRICE – SALE PRICE)*100 /COST PRICE
(SALE PRICE – COST PRICE)*100 /SALE PRICE
(COST PRICE – SALE PRICE)*100 /SALE PRICE
REMEMBER, FOR ANY PARAMETER, the % CHANGE = (NEW-OLD)*100/OLD
41) NAVs should be published in atleast in ___newspapers ____
4, daily
4, every alternate day
2, every alternate day
2, daily
42) MF distributors are covered under Banking act/ AMFI act/ AGNI/SEBI act
43) In kyc, THIS ONE PROOF IS NOT NEEDED
Proof of networth/wealth
Address proof
PAN proof
44) To minimise risk, you would tell an investor who is in______stage to invest in index fund
CHOICES – pre retirement/start of career/midway in career
45) Once NFO is over, then during period of continuous repurchase, an investor can exit by selling open ended MF scheme’s units on - stock exchange/back to the fund house/neither
46) Tier 1 of NPS is called SAVINGS ACCOUNT – TRUE/FALSE
Remember - Tier II is withdrawable to meet financial contingencies. So this makes it similar to a savings account. Tier 1 accumulation must necessarily be paid out as an annuity to the investor. Even if you did not know the answer, knowing that Tier II is withdrawable to meet financial contingencies would have helped you choose the correct answer
47) NPS is managed by – pension fund managers/AMCs/SEBI/RBI
48) Sponsor must have positive networth for last ____ years – choices are: 1/3/5/7
49) The parent of AMC is sponsor/trustee/custodian/R&T agent
50) Which of the foll is the most important parameter in a financial goal ? Amount targeted to be accumulated/time frame to accumulate the amt/both/neither
51) Dividend distribution tax on debt funds is
35%/10%/29%/18%
52) A floating rate scheme largely manages to be less volatile during periods of heavy variation in interest rates – TRUE/FALSE
53) Cut off time for a liquid fund investment for applicant to avail of previous working day’s NAV is – 12pm/1pm/2pm/3pm
54) Bonus units and units issued on reinvestment of dividends shall
not be subject to entry and exit load.
TRUE/FALSE
55) Investor pays broker a small margin and indulges in trading in futures market. This is an example of hedging/arbitrage/leveraging/none of these
56) ELSS schemes have lockin of ___ years – choices are: 1/3/5/10 years
57) STT (SECURITIES TRANSACTION TAX) is payable while interaction with the mutual fund house during
redemption from equity scheme
investing in equity scheme
redemption from debt scheme
investing in debt scheme
REMEMBER THERE IS NO STT IN DEBT SCHEMES AND STT IS LEVIED for equity funds in the following cases: STT on the value of the transactions of sale (0.125%) and purchase (0.125%) of units in the stock exchange; or on re-purchase (0.25%) of the units by the AMC
58) Exposure to international funds can be had thru investing in international funds – TRUE/FALSE
59) While investing in international funds, an investors returns get affected by
Forex rate variations/absolute returns abroad/both of these/none of these
60) Risk of theft is maximum in gold/shares/land/all of these
61) Thematic fund is more broad based than sector fund – TRUE/FALSE
62) Investors can sue the AMC’s trust – TRUE/FALSE
REMEMBER – THEY CAN SUE THE TRUSTEES AND NOT THE TRUST
63) SWP = SIP + STP – TRUE/FALSE
CORRECT ANS IS: STP = SWP + SIP
64) The auditor appointed to audit the scheme accounts needs to be
different from the auditor of the AMC- true/false
Remember - While the scheme auditor is appointed by the Trustees, the AMC
auditor is appointed by the AMC.
65) If stock market crashes then the trail income for a distributor who has sold an equity fund to an investor also comes down – TRUE/FALSE
True !! REMEMBER, TRAIL IS PAID AS A %AGE OF THE VALUE OF THE FUND.
VALUE OF THE FUND VARIES AS THE STOCK MARKET RISES OR FALLS
Trail commission is, calculated as a percentage of the net assets attributable to the Units sold by the distributor. The trail commission is normally paid by the AMC on a quarterly basis. Since it is calculated on net assets, distributors benefit from increase in net assets arising out of valuation gains in the market. If mkt falls, he suffers as his trail commission also comes down.
66) Which of the following websites DOES NOT track Mutual Fund Performance :
REMEMBER - CDSL WEBSITE IS RELATED TO KYC FORMALITIES
Mutual funds have made an arrangement with CDSL Ventures Ltd (CVL), a wholly owned subsidiary of Central Depository Services (India) Ltd. (CDSL), to make it convenient for mutual fund investors to comply with the documentation requirements.
67) Demat a/c is compulsory for investing in MFs – TRUE/FALSE
68) ASBA stands for
Application Supported by Blocked Amount
Amount Supported by Blocked Application
Application Supported by Blocked Applicant
None of these
69) ______ funds take positions that are contrary to the market.
Sector/value/contra/diversified
70) Gold is a truly international asset – TRUE/FALSE
71) If someone earns a good pension, it will make a significant difference to his retirement planning
TRUE/FALSE
72) Who decides on a scheme to take to market ?
TRUSTEES/AMC/CIO/CMO
73) No single investor shall account for more than 20% of the corpus of the scheme
TRUE/FALSE
CORRECT ANSWER - The Scheme/Plan shall have a minimum of 20 investors and no
single investor shall account for more than 25% of the corpus of the scheme/plan
74) If a scheme is launched in the first 6 months of the financial year
(say, April 2010), then the first update of the SID is due within ______
months of the end of the financial year (i.e. by June 2011).
Choices - 2/6/5/3
ANSWER IS 3 MONTHS
75) Dividend distribution tax in equity funds after APRIL 1, 2018
Does not exist
Equals 10% with surcharge
Equals 15% with surcharge
Equals 20% with surcharge
76)Contents of SAI are
Condensed financial information/rights of unit holders/investment valuation norms/all these
77) SEBI launches its advertising and public relations campaigns to make investors aware of NFOs
True/False
78) Contents of KIM are ____
Plans and options under the scheme/Risk profile of scheme/dividend policy/all these
NOTE
Contents of KIM
Some of the key items are as follows:
• Name of the AMC, mutual fund, Trustee, Fund Manager and
scheme
• Dates of Issue Opening, Issue Closing & Re-opening for Sale
and Re-purchase
• Plans and Options under the scheme
• Risk Profile of Scheme
• Price at which Units are being issued and minimum amount /
units for initial purchase, additional purchase and re-purchase
• Bench Mark
• Dividend Policy
• Performance of scheme and benchmark over last 1 year, 3 yrs, 5yrs and since inception
79) The mutual fund shall publish a complete statement of the scheme portfolio and the unaudited financial results, within _____month from the close of each half year (i.e. 31st March and 30th September), by way of an advertisement at least, in one National English daily and one
regional newspaper in the local language
choices – 1/3/6/12
80) Draft SID is a public document, available for viewing in SEBI’s
website (www.sebi.gov.in) for ______ working days.
CHOICES – 2/15/21/30
81) A father wanting his son to start a business but not having idea of time frame or capital required to setup the business has
A financial goal/ An aspiration/A well thought out plan
82) The offer documents in the market are vetted by
SEBI/SPONSOR/DIRECTOR/AMC
NOTE -
While SEBI does not approve or disapprove Offer Documents, it gives its observations. The mutual fund needs to incorporate these observations in the Offer Document that is offered in the market. Thus, the Offer Documents in the market are “vetted” by SEBI, though SEBI does not formally “approve” them.
83) In case of open ended schemes, the NAV shall be calculated for all business days and released to the Press. In case of closed ended schemes, the NAV shall be calculated at least _______and released to the Press.
Once a month
once a week
once every fortnight
Once in 10 days
84) A Scheme/Plan shall have a minimum of 20 investors and no single investor shall account for more than 25% of the corpus of the Scheme/Plan(s). However, if such limit is breached during the NFO of the Scheme, the Fund will endeavour to ensure that within a period of _______ or the end of the succeeding calendar quarter from the close of the NFO of the Scheme, whichever is earlier, the Scheme complies with these two conditions.
3 months/ 6 months/ 9 months/12 months
85) Name, age, qualification and experience of the fund manager to the scheme to be disclosed. The experience of the fund manager should include last ____years experience
10/5/12/15
86) Which of these has lowest risk
Gilt fund / Sector fund/ Liquid fund/Diversified equity fund
87) Arbitrage funds are classified FOR TAXATION PURPOSES as
Debt funds/liquid funds/hybrid funds/equity funds
88) Investment in overseas securities shall be made in accordance
with the requirements stipulated by _________ from time to time
only SEBI/only RBI/SEBI and RBI/ neither
89) Investors in any scheme
Must always have guarantee that their capital will never get eroded
Must understand that they are subject to market risk and scheme risk
Will always get a constant return
Sue the AMC if they are disappointed with the return they earn
90) As an AMC, you received a 48 lac cheque in a debt scheme at 2:30pm. On that day the debt market was working. The investor will receive the following NAV for the transaction:
NAV at 2:30 pm/ NAV at 3 pm/ NAV at 3:30 pm/NAV on the date of realisation of the cheque
91) Beta of a scheme is 1.2. It is
Less risky compared to the market/ More risky compared to the market/As risky as the market
Has no co-relation to the market
92) Indexation for debt funds if applicable if one holds the debt fund for a minimum of
24 months/ 48 months/36 months/60 months
93) An FMP is launched on December 10, 2017. To avail of indexation 4 times, what should be the earliest date of maturity.
December 10, 2020
December 10, 2021
April 1, 2021
April 1, 2020
94) NAV is to be calculated upto _____ decimal places in the case of index funds, liquid funds and other debt funds and _____ in case of balanced and equity funds
CHOICES – 3/4/2/1
ANSWER - NAV is to be calculated upto 4 decimal places in the case of index funds, liquid funds and other debt funds and NAV for equity and balanced funds is to be calculated upto at
least 2 decimal places.
95) From 1.4.2018 onwards, which of the following is true if the asset is held for more than 365 days?
Tax on equity and equity funds = 10% of all profits booked in that Financial year
Tax on equity and equity funds = 15% of all profits booked in that Financial year
Tax on equity and equity funds = 10% of all profits booked in that Financial year beyond 2 lacs
Tax on equity and equity funds = 10% of all profits booked in that Financial year beyond 1 lac
96) Basis risk exists in Arbitrage funds – True/False
THE ANSWER IS “TRUE” - IT IS THE RISK THAT ONE MAY NOT BE ABLE TO REVERSE THE POSITION IN CASH AND FUTURES SEGMENT AT THE SAME TIME – CLEARLY MENTIONED IN THE STUDY MATERIAL
