Q-1 Which of the following is not true? (a) Mutual funds invest the funds collected from investors (b) If there is an opportunity to gain mutual fund borrow and invest (c) Mutual funds borrow to meet redemption demands (d) None of the above. (2 mark) Q-2 An open-end scheme can change its fundamental attributes (a) By obtaining the consent of 75% of unit- holders at least (b) By allowing unit-holders to exit the scheme after six months without any exit load (c) By informing each unit-holder individually of the proposed change and by allowing units holders to exit the scheme without any exit load (d) After obtaining prior approval from SEBI. (2 mark) Q-3 In the union budget 1999, which significant change was made? (a) Dividends were made tax free in the hands of unit holders. (b) Capital Gain taxes were abolished. (c) Dividend distribution tax on all schemes was removed (d) All of the above. (1 mark) Q-4 Which of the following is true? (a) A fund sponsor can contribute to the initial corpus of the trust (b) A fund sponsor can contribute to the capital of the AMC (c) A fund sponsor can invest in his own fund's schemes (d) All of the above. (1 mark) Q-5 The Board of Trustees of a mutual fund (a) Act as a protector of investor’s interests (b) Directly manage the portfolio of securities (c) Do not have the right to dismiss the AMC (d) Cannot supervise and direct the working of the AMC. (2 mark) Q-6 The entity that SEBI does not regulate is (a) Share registrars (b) Mutual funds (c) Stock exchanges (d) Non-banking finance companies. (1 mark) Q-7 A closed-end scheme is not governed by (a) Exchange Rules of the stock exchange where it is listed (b) Listing Agreement between the fund and the stock exchange (c) Guidelines issued by the Ministry of Commerce (d) Provisions of Companies Act, 1956 relating to transactions in securities. (2 mark) Q-8 The structure, which is required to be followed by mutual funds in India, is laid down by (a) Financial Ministry (b) Fund Sponsor (c) Securities & Exchange Board of India (SEBI) (d) Association of Mutual Funds of India (AMFI).
(1 mark) Q-9 SEBI does not require the following to be included in the offer document issued by a mutual fund (a) Details of the Sponsor and the AMC (b) Description of the Scheme & investment objective/strategy (c) Investors' Rights and Services (d) Performance of other mutual funds. (2 mark) Q-10 The offer document for a scheme remains valid even if (a) The AMC is reconstituted (b) Entry or exit loads are changed (c) The scheme's NAV changes (d) New plans are added to existing schemes. (1 mark) Q-11 The offer document of a closed-end fund is revised (a) Every two-year (b) Every year (c) Every six months (d) Not required. (1 mark) Q-12 Mutual Fund agents/distributors are not allowed to (a) Sell financial products other than mutual funds (b) Sell schemes of more than one mutual fund (c) Pass back the commissions earned to the investors (d) Work anywhere else. (2 mark) Q-13 The code of ethics for mutual funds published by AMFI (a) Is mandatory for all funds (b) Is in the form of recommended practices (c) Is harsh to the investors (d) Does not cover distribution and selling. (1 mark) Q-14 Now a day there has started the aggressive advertisement campaigns, which are expensive to the funds. It may happen that the fund has made expenses more than the specified limit; the excessive expenses will be passed to (a) The investors (b) The AMC (c) The advertising agencies (d) The sponsor. (2 mark) Q-15 Valuation norms for non-traded securities should be disclosed (a) At the end of every financial year (b) Every quarter (c) In the offer document at the time of launch of the scheme (d) Should not be disclosed, being confidential information. (2 mark) Q-16 If NAV of a scheme is Rs.12 and units allotted are 100, what will be the total asset of the scheme? (a) Less that Rs.1200
(b) (c) (d)
More than Rs. 1200 Exactly Rs. 1200 None of the above.
(2 mark) Q-17 Which of the following is true of an automatic reinvestment (or a growth) plan? (a) The growth plan allows for the automatic reinvestment of all income and capital gains (b) Automatic reinvestment allows for accumulation of additional units of the fund. (c) The major benefit of automatic reinvestment is compounding (d) An investor who subscribes to the growth option under a scheme can later change to a dividend option (e) All of these. (2 mark) Q-18 Equity derivative instruments are (a) Shares (b) Bonds (c) Contracts (d) Notes. (1 mark) Q-19 In a mutual fund, the overall decision on allocating money to particular industries/ sectors are taken by (a) Equity analysts (b) Fund managers (c) Security dealer (d) Trustees. (1 mark) Q-20 Fundamental analysis involves (a) Checking the foundations of the company's factory building (b) Research into the operations and finances of the company (c) Studying the company's share prices (d) None of the above. (2 mark) Q-21 When comparing performance of two funds, the following need not be similar (a) Risk profiles (b) Investment objectives (c) Fund size (d) Fund managers. (1 mark) Q-22 An interest-bearing bond with a higher coupon rate will have (a) Lower duration (b) Higher duration (c) Can not be determined (d) Insufficient information to answer. (1 mark) Q-23 A put provision in a debt issue allows (a) Investor to put away the certificate in safe deposits (b) Investors to redeem debt prior to maturity (c) Issuers to redeem debt prior to maturity (d) Investors to extend the tenure of debt. (2 mark)
Q-24 Yield curve is also known as (a) Curve of Interest (b) Term Structure of Interest Rate (c) Curve that yields (d) None of the above. (1 mark) Q-25 Change in NAV as a measure of fund performance is more suitable for (a) Growth funds (b) Income funds (c) Funds with withdrawal plans (d) None of the above. (1 mark) Q-26 Which of the following is true about returns? (a) Relative returns are important than absolute returns for mutual funds (b) Historical average is a good proxy for expected returns (c) Risk arises when actual returns are different from expected returns (d) All of the above. (2 mark) Q-27 Portfolio characteristics of a fund can be judged by looking into Fund's (a) Cash position (b) Concentration for checking its largest holdings (c) Portfolio turnover (d) All of these (1 mark) Q-28 When comparing fund performance with peer group funds (a) The age of funds should be same (b) The size of the portfolio should be comparable (c) Size and composition of the portfolios should be comparable (d) All of the above. (1 mark) Q-29 The process of making changes in asset allocation and specific investments is known as (a) Financial Planning (b) Stock Selection (c) Timing the market (d) Portfolio rebalancing. (1 mark) Q-30 Financial Planning comprises (a) Defining a client's profile and goals (b) Recommending appropriate asset allocation (c) Monitoring financial recommendations (d) All of the above. (1 mark) Q-31 Financial planning is relevant for (a) High net worth individuals (b) Older clients (c) Tax and estate planning (d) All of the above.
(1 mark) Q-32 As a good financial planner, you should avoid applying the normal Life Cycle Model to your client who is (a) A 25-year-old unemployed person (b) A 60-year-old person who has just retired (c) A Well-known 32 years old cricketer (d) A 35-year-old unmarried person. (2 mark) Q-33 A criticism of rupee-cost averaging is (a) Investment is for the same amount at regular intervals (b) Over a period of time, the average purchase price will work out higher than if one tries to guess the market highs and lows (c) It does not inform an investor when to buy, sell or switch from one scheme to another (d) Rupee cost averaging has no serious shortcomings. (2 mark) Q-34 The rate of interest paid by a company on debentures issued by it depends on (a) The stock market situation (b) SEBI guidelines (c) The company's credit rating (d) The amount of money being raised. (1 mark) Q-35 Which of the following is untrue for Public Provident Fund Schemes? (a) The interest is tax-free (b) Post-tax returns are attractive (c) Liquidity is rather low (d) None of the above. (1 mark) Q-36 Diversification reduces (a) Company specific risk (b) Market risk (c) Sector specific risk (d) Both (a) and (c) above.. (1 mark) Q-37 "Risk" is equated with (a) Volatility of earnings (b) Level of earnings (c) The number of investors in a fund (d) The number of schemes of a fund family. (1 mark) Q-38 Sharpe and Treynor Ratios are measures of (a) Average return (b) Risk (c) Risk adjusted return (d) Beta of the portfolio. (1 mark) Q-39 The differentiating factor among debt funds of comparable maturity and quality is (a) Gross yields (b) Costs
Fund age Tenure of the fund manager. (1 mark)
Q-40 To reduce interest rate risk a debt mutual fund investor should invest in (a) Funds having higher yields (b) Funds having lower average maturity (c) Funds having higher average maturity (d) Funds with lower expense ratio (2 mark) Q-41 Which of the following is an important criterion to select a money market fund (a) Portfolio turnover (b) Duration of the fund (c) The expense ratio (d) All of the above. (1 mark) Q-42 A wealth preserving affluent investor is likely to invest in (a) Direct Equity (b) Real Estate (c) Growth funds (d) Debt funds or fixed income securities. (1 mark) Q-43 Which of the following is not a relevant criterion to select a debt fund (a) Expense Ratio (b) Total return (c) Credit quality (d) Beta. (1 mark) Q-44 Which of the following is not a sudden wealth stage for an investor? (a) He wins a lottery of Rs.5 lakh (b) He wins a horse race of Rs. 5 lakh (c) He gets Rs. 5 lakh in heir (d) He gets yearly bonus of Rs.5 lakh. (2 mark) Q-45 The best equity fund, relative to others, would have (a) Higher Ex Marks, lower Beta and higher Gross Dividend Yield (b) Higher Ex Marks, higher Beta and higher Gross Dividend Yield (c) Lower Ex Marks, lower Beta and lower Gross Dividend Yield (d) Lower Ex Marks, higher Beta and higher Gross Dividend Yield 25% of NAV. (2 mark) Q-46 Indira Vikas Patra is an investment product popular with (a) Rural investors (b) Investors in high tax bracket (c) Urban investors (d) Risk taking investors. (1 mark) Q-47 Annual contribution to Public Provident Fund should be (a) Rs.10,000 (b) Between Rs.500 and Rs.60,000
Between Rs.600 and Rs.1,000 None of the above. (2 mark)
Q-48 Value averaging means (a) Keeping the target value of investment constant (b) Investing the same amount of funds regularly (c) Investing in one lump sum amount (d) None of the above. (1 mark) Q-49 For which of the following funds, Portfolio Turnover Rate is highest? (a) Equity Funds (b) Income Funds (c) Liquid Funds (d) Sectoral Funds. (1 mark) Q-50 An investor can assess the performance of his mutual fund by comparing it with the performance of (a) Other mutual fund of the same type (b) The stock market (c) Other financial products (d) All of the above. (2 mark) Q-51 The additional yield required to account for the risk of default by the borrower is known as (a) Yield plus (b) Yield spread (c) Yield extra (d) Yield premium. (1 mark) Q-52 An owner of preference shares is given which of the following rights (a) Voting rights (b) Fixed dividend income from post-tax profits (c) Voting rights and unlimited dividend income (d) No guaranteed rights. (2 mark) Q-53 The day on which NAV is calculated by a fund is known as (a) Computation date (b) Valuation date (c) Record date (d) Book closure date. (1 mark) Q-54 A compliance officer (a) Certifies that the information contained in the offer document is true and fair (b) Belongs to SEBI (c) Cannot certify that the AMC's legal and procedural obligations are fulfilled (d) Cannot be appointed by the AMC. (2 mark) Q-55 Unit-holders aggrieved by a mutual fund or an AMC can get redressed from (a) Consumer Courts
(b) (c) (d)
SEBI AMFI RBI.
(1 mark) Q-56 In case of merger of two AMC, 75% of the unit holders have to approve the merger in case of (a) Open ended funds (b) Close ended funds (c) Both open and close ended funds (d) None of the above. (1 mark) Q-57 The KIM is made available with the application form because (a) It will be costlier to AMC to distribute it with every application (b) It is an abridged version of the offer document (c) Most individual investors find it more cumbersome to study such detailed document (d) All of the above. (2 mark) Q-58 Which of the following is not the offer related information? (a) Investment procedure (b) Name of the company where the funds will be allocated (c) Group companies transaction (d) Borrowing policy. (1 mark) Q-59 Which of the following information is not published on the cover page of the offer document? (a) Name of the mutual fund (b) Type of the scheme (c) Price of units (d) Risk factors. (1 mark) Q-60 As on March 31 2005 how many individuals were registered with AMFI? (a) 49,837 (b) 24,850 (c) 3,232 (d) 1,946. (1 mark) Q-61 If the scheme is in existence for less than a year, the performance may be advertised in terms of (a) Annualized return (b) Total return (c) Compounded return (d) None of the above. (2 mark) Q-62 The distributor will execute every transaction on behalf of the customer, in case of any error (a) Client can ask for the distributor to make well the losses (b) Client can sue the distributor for the incorrect advise (c) Client has no recourse to the distributor (d) All of the above. (1 mark) Q-63 Which of the following is/are true with respect to the distributor commission?
(a) (b) (c) (d)
Distributor can claim the commission for the investment made by his client Distributor can also claim the commission for his own investments Distributors can also rebate the commission to increase the client base All of the above. (2 mark)
Q-64 Which of the following will affect the NAV of a fund? (a) (b) (c) (d) Purchase and sale of securities Valuation of the securities Units sold and redeemed All of the above.
(2 mark) Q-65 Trustees of a fund hold unit-holder's money in a fiduciary capacity. This means (a) Trustees hold the money of unit-holder for the purpose of investment but unit-holders are "beneficial owners" of the investment (b) Money invested by unit-holders is owned by the fund (c) Money invested by the unit-holders is owned by the sponsor (d) Money invested by the unit-holders is owned by SEBI (2 mark) Q-66 The management fees should be accrued on (a) Daily basis (b) Weekly basis (c) Monthly basis (d) Annual basis. (1 mark) Q-67 For all the schemes except the liquid schemes the cut-off time is (a) 8.00 a.m. (b) 12.30 p.m. (c) 2.00 p.m. (d) 3.00 p.m. (2 mark) Q-68 The fund with the weekly average net assets of Rs.500 crore can charge investment management and advisory fees of Rs. (a) 4.00 crore (b) 4.25 crore (c) 5.00 crore (d) 5.25 crore. (2 mark) Q-69 Within how many days of the close of the each half-year, the fund shall publish its unaudited financial results? (a) 5 (b) 10 (c) 15 (d) 30. (1 mark) Q-70 In case the trading of the security is suspended up to 30 days, which price is to be used for the valuation purpose? (a) Average price of the last 26 weeks (b) Last traded price
Independent valuation is to be done None of the above. (2 mark)
ANSWERS: B A-1 C A-2 D A-3 D A-4 A A-5 D A-6 C A-7 C A-8 D A-9 C A-10 D A-11 C A-12 B A-13 B A-14 C A-15 B A-16 E A-17 C A-18 B A-19 B A-20 D A-21 A A-22 C A-23 B A-24 A A-25 D A-26 D A-27 D A-28 D A-29 D A-30 D A-31 C A-32 C A-33 C A-34 B A-35
A-36 A-37 A-38 A-39 A-40 A-41 A-42 A-43 A-44 A-45 A-46 A-47 A-48 A-49 A-50 A-51 A-52 A-53 A-54 A-55 A-56 A-57 A-58 A-59 A-60 A-61 A-62 A-63 A-64 A-65 A-66 A-67 A-68 A-69 A-70
D A C B B C D D D A C D A C D B B B A B B D B D B B D A D A A D D D B