Amfi New Questions Version 2

COMPREHENSIVE TEST – AMFI Chapter 1 Q.1 In India, the first mutual fund after UTI was launched by 1. Can bank mutual fund 3. SBI mutual fund 2. Morgan Stanley 4. LIC mutual fund Q.2 A Mutual Fund is a 1. Collective investment vehicle for the 2. Company that accepts fixed deposits purchase of securities on behalf of 3. Fund that issues bond and debentures investors. 4. None of the above Q.3 In India a mutual fund is a trust whereas in the USA it is 1. An investment company 3. A Society 2. A Trust 4. A Bank Q.4 Which of the following statement is TRUE? 1. Growth and risk are associated with 3. Both 1 & 2 equity funds 4. None of the above 2. Stability is associated with debt funds Q.5 Investment in an Equity Linked Savings Scheme (ELSS) 1. Entitles the investor to claim income 3. Automatically leads to investment in tax rebate equity shares 2. Requires the investment to be locked 4. All of these in for a period of 3 years Q.6 Mutual funds should be recommended as 1. Investments to achieve long-term 3. Investments to take advantages from goals stock market swings 2. A “get rich quick” investment option 4. All of these Q.7 In India, the public sector mutual funds came 3. After SEBI Regulation 1996 1. Before private sector funds & UTI 4. After SEBI Regulation 1996 but before 2. After UTI but before SEBI regulation private sector funds 1996 Q.8 Which one of the below is correct? 1. UTIMF was established by a special 3. UTIMF is not the first MF in India act of parliament 4. UTIMF was set up by Reserve Bank of 2. UTIMF voluntarily accepted guidelines India of SEBI Q9 Who published “Making Mutual Funds Work for you- The Investors Guide” 1. AMFI 3. RBI 2. SEBI 4. AMCs Q.10 A close ended mutual fund has a fixed 1. NAV 3. Rate of Return 2. Fund Size 4. Number of Distributors Q.11 Ownership of unit holders in mutual funds is 1. Mutual 3. Mutual and Beneficial 2. Beneficial 4. None of the above Q.12 Which of the following is most significant event during February 2003? 1. UTI Act repealed 3. UTI no longer has special legal status as a 2. UTI MF found trust established by Act of parliament. 4. All of the above Q.13 The Board of Trustee of the UTI does not have nominees from 1. RBI 3. IDBI 2. LIC 4. The Bombay Stock Exchange (BSE) Q.14 In the union budget 1999, which significant change was made? 1. Dividends were made tax free in the 3. Dividend distribution tax on all hands of unit holders. schemes were removed. 2. Capital Gain taxes were abolished. 4. All of these Q.15 A close ended scheme is quoted on the stock exchange at a discount to its NAV when 1. The markets are bearish 3. The assets of the fund are 2. Investors perceive that the fund will be undervalued unable to maintain the NAV 4. None of the above Q.16 AUM of Mutual Fund industry in year 2004-2005 was: (In crores) 1. 140000 3. 152000 2. 150000 4. 120000 Q.17 Which one is more diversified? 1. Fund A which invests in Shares in India 3. Both are equally diversified 2. Fund B which invests in shares in 4. Insufficient information India and USA both

Q.18 Q.19 Q.20 Q.21 Q.22

1. 2. Q.23

Q.24

Q.25

Q.26

Q.27 Q.28 Q.29

Q.30 Q.31

Q.32 Q.33

Q.34

Q.35

Which of the following is not a specialty fund? 1. Sector fund 3. Foreign securities fund 2. Mid cap /small cap fund 4. Gilt fund Where do Gilt funds invest? 1. Shares 3. Dated securities 2. Debentures 4. All of the above Fixed Term plan series are: 1. Closed ended 3. Not listed on stock exchange 2. Generally short term in nature 4. All of the above Which of the following is not the right classification of funds? 1. Pension and Insurance Funds 3. Load and No load funds 2. Open ended and closed ended funds 4. Tax free and Tax exempt funds The emergence of Private Funds in Indian Mutual Fund industry came in which Phase of Mutual Funds history? Phase 2 during the period 1987 to 1993 3. Phase 4 during the period 1996 to 1999 Phase 3 during the period 1993 to 1996 4. Phase 5 during the period 1999 to 2004 Mutual fund can benefit from economics of scale because of 1. Portfolio diversification 3. Large volume of trades 4. None of the above 2. Risk reduction Which of the following is incorrect? 1. An equity fund would invest in ordinary shares, preference shares and warrants 2. A bond fund would mainly buy debt instruments 3. An index fund is indexed to inflation index 4. A sector fund invests in the shares of companies in a particular industry A money market fund usually invests in 1. Government treasury bills of less than one year maturity 2. 6-month certificates of deposits of banks 3. The inter bank call money market 4. All of these Mutual fund pay commission to their agents: 1. As an incentive for having brought in an investor 2. As compensation for his before and after sales service to the investor 3. To off set any direct expenses that they may incur on sale of units 4. All of the above Which of the following has the lowest risk? 1. Liquid Fund (MMMF) 3. Diversified Debt Fund 2. Gilt Fund 4. Diversified Equity Fund The current Mutual Fund Regulations from SEBI was introduced in 1. 1992 3. 1996 2. 1994 4. 1998 Board of Trustees appoint Custodians for... 1. Making payment to bankers on behalf of the fund 2. Selling units of a mutual fund 3. Safekeeping of physical securities of the mutual fund or participating in any clearing system. 4. None of these Day to day investment management policies of a fund is determined by... 1. AMC 3. Investors 2. Trustees 4. Sponsors Shares, debentures, bonds, fixed deposits are the products normally issued by 1. Banks 3. Governments 2. Corporate 4. Mutual finds An investor in a close-ended fund can get his money back by selling his units: 1. Back to the fund 3. On a stock exchange where the fund is listed 2. Back to AMFI 4. To the agent who sold the units to the investor Small funds are... 1. Relatively easier to manage 3. Have limited holding 2. Achieve their objectives in more 4. All of these focused manner Stock markets investments in the market directly offer some advantages except... 1. Potential for high returns 3. Low risk 2. Liquidity through trading on the stock 4. The opportunity to capitalize on stock exchanges market fluctuations

Which of the following was the first Mutual Fund in India after UTI 1. Can Bank Mutual Fund 3. LIC Mutual Fund 2. SBI Mutual Fund 5. Indian Bank Mutual Fund

Q.36

Which of the following Mutual Fund was set up after 1963 but before 1987? 1. SBI Mutual Fund 3. LIC Mutual Fund 2. Can Bank Mutual Fund 4. None of the above

Q.37

Which of the following is true about Closed ended Mutual Funds? 1. It has fixed number of units only 3. It has fixed no. of units & fixed Unit capital 4. None of the above 2. It has fixed Unit Capital only

Q.38

By What name is the Phase of year 2004 onwards of mutual fund industry known? 1. Growth and SEBI Regulation 3. Emergence of Large & uniform industry 2. Emergence of Private funds 4. Consolidation & growth In case of an open ended Mutual Fund , which is true 1. All the times units can be allotted 3. Unconditionally exits at all times 2. Allotment at the time of NFO only 4. All of the above

Q.39

Q.40 Q.41

Mutual Fund is a: 1. Financial Intermediary 2. Bank Which is the Birth Place of Mutual Fund: 1. India 2. UK

3. 4. 3. 4.

NBFC Any of the above

USA Japan

Which of the following can be a true statement? 1. NAV of debt instruments fluctuates more that liquid 2. Gilt securities are less riskier that other debt securities 3. Equity is more risky 4. All of the above Q.43 Who is the seller of units in case of open ended schemes at all the times: 1. Mutual Fund 3. Distributors 2. Unit Holder 4. All of the above Q44. Where do Gilt Fund invest money ? 1. Bonds and Debentures 2. Money Market Papers only. 3. Equity and Debt both. 4. Government Securities of long term and Medium term maturities. Chapter 2 Q.1 Who is responsible for the redressal and handling of investor complaints? 1. Fund Trustees 3. Registrar 2. The AMC 4. SEBI Q.2 Shortfall in the case of assured returns schemes are met 1. By the Custodian 4. By the person’s entity guaranteeing 2. By the SEBI the return as per the offer document 3. By AMFI Q.3 Who is responsible for filing details of the fund’s portfolio with SEBI 1. Registrar of the fund 3. Custodian 2. Fund trustee 4. The Fund manager Q.4 Who is responsible for the interest of unit holders? 1. SEBI 3. Trustees 2. AMFI 4. AMC Q.5. For a person to qualify as a sponsor, he must 1. Contribute at least 40% of the AMC’s net worth 2. Should be carrying on business in financial services for at least 5 years prior to registration 3. Should have a sound financial track record 4. All of the above 5. None of the above Q.6 Board of Trustees appoint Custodians for 1. Making payment to bankers on behalf of the fund 2. Selling units of a mutual fund 3. Safe keeping of physical securities of the mutual fund or participating in any clearing system 4. None of the above Q.7 Which of the following is true about Fund sponsors? 1. Sponsors invest in the unit capital of fund 3. Sponsor invest in the AMC 2. Sponsor invest in the fund 4. All of the above Q.8 Which is FALSE? 1. A sponsor may act as distributor for AMC 3. Distributors serve also as investment 2. A sponsor can never act as a distributor advisors for the AMC 4. Distributors serve as fund sales persons Q.9 Sponsor of the fund: 1. Registers the fund with SEBI 3. Appoints the Trustees 2. Forms the Trust 4. Appoints a custodian Q.42

5. All of the above Q.10 1. 2. Q.11 1. 2. Q.12 1.

In case of merger of two AMC, 75% of the unit holders have to approve the merger in case of Open ended funds 3. Close ended funds Both open and close ended funds 4. None of the above Who is the primary guardian of unit holders' funds/assets The AMC 3. The Registrars The Trustees 4. The custodians

Which of the following is true about Sponsor of a mutual fund? Sponsor can be distributor of Mutual fund 2. Sponsor can’t be a distributor of mutual fund 3. Sponsor can be a Trustee The AMC 4. Sponsor can not be a custodian Q 13. What is the full form of ARN ? 1. Agent Registration number. 2. AMFI Registration number. 3. AMFI reconciliation number. 4. Agent Reconciliation number. Chapter 3 Q.1 When was SEBI founded? 1. 1990 3. 1992 2. 1991 4. 1994 Q.2 Which is a self – regulatory organization (SRO)? 1. Office of the public trustee 3. SEBI 2. Stock exchange 4. AMFI Q3 Mutual funds in India are required to follow the accounting policies laid down by: 1. AMFI 3. SEBI 2. RBI 4. All of the above Q.4 The fundamental attributes can be changed in an open-ended scheme by following methods 1. Informing all unit holders individually and offering them exit without any load 2. Voting of 75% of the unit holders. 3. Paper Advertisement in daily newspaper 4. Both 1 and 3. Q.5 AMFI was set up in 1995 with the objective to: 1. Promote the interests of mutual funds and unit-holders 2. Set ethical, commercial and professional standards in the industry 3. All of the above 4. None of the above Q.6 Bank owned Mutual Funds are supervised by 1. SEBI 3. Jointly by SEBI & RBI 2. RBI 4. AMFI Q.7 A Self Regulatory Organisation can regulate 1. All entities in the market 3. Its own members with total jurisdiction 2. Only its own members in a limited way 4. No entity at all Q.8 The role of AMFI in the mutual funds industry is not to 4. Increase public awareness of mutual funds 1. Promote the interests of the unit holders in the country 2. Set a Code of Ethics 3. Regulate mutual funds Q9. Which of the following is an example of Merger of two AMCs ? 1. Birla and Alliance 2. Zurich and HDFC 3. Apple and Birla 4. HB And Taurus. Q10. Which of the following is an example of Scheme Take over ? 1. Birla and Alliance 2.Zurich and HDFC 3.Apple and Birla 4.HB And Taurus. Q11. Which of the following is an example of AMC Take over ? 1.Birla and Alliance 2.Apple and Birla 3.HB And Taurus. 4. None of the above. Chapter 4 Q.1 What is Key Information Memorandum 1. It is an abridged version of the Offer Document and is provided with application form

2. It is a document that provides historical information about the fund 3. It is issued only by Private Sector mutual funds 4. It is a document that contains key disclosures which are not found in the Offer Document Q.2

One of the following is NOT required to be disclosed in the offer document. Which one? 1. Details of Sponsor/Trustees 4. Description of the scheme and investment 2. Investors rights and services objective 3. Performance of the other Mutual Funds

Q.3

The key information of memorandum of a mutual fund is available. 1. At the AMC’s office 3. At the branches of all banks 2. At the offices of authorized gents 4. (1) And (2) only Q.4 The application form for investing in a mutual fund is normally found in.... 1. The key information memorandum 4. The fund’s financial statements 2. With SEBI 3. Leading national newspapers Q.5 Offer Documents is updated every 1. Every 2 years. 3. Varies from scheme to scheme 2. Every year 4. Never updated Q.6 A Charitable Trust wants to invest in Mutual Funds. What would you do? 1. Accept the application from with the cheque 2. Refuse to accept the application 3. Refer to the Offer document of the scheme to confirm that a charitable trust is allowed to invest 4. Accept the application form, without the cheque, and forward it for final acceptance by the fund / AMC Q.7 Regular tracking of mutual funds performance can be done by …… 1. Newspapers, business periodicals, annual half-yearly and quarterly reports of the funds 2. Key information memorandum 3. The fund’s offer document 4. None of these. Q.8 The ideal source of information on investment plans & investor services offered by the fund is 1. Offer document 3. Financial journals 2. Advertisements about the scheme 4. The scheme’s annual report Q.9 The investor cannot plead ignorance of procedures while investing in a mutual fund because 1. Mutual fund is a risky investment 2. The law does not permit the investor to sue the trust 3. While applying the investors signs an agreement stating they have read and understood the terms and conditions 4. An investor is expected to be careful while investing 5. Mutual fund is based upon trust Q.10 As per SEBI guidelines, a due diligence certificate is not 1. Signed by a Compliance Officer of the mutual fund 3. Attached to Annual report 2. A certificate that all legal formalities of a scheme 4. A part of offer document are completed Q.11 An offer document contains an AMCs investor grievances history for the past 3. 3 fiscal year 1. 1 fiscal year 4. Six months 2. 2 fiscal year Q.12 Along with the application, it is mandatory to distribute 1. Offer document 3. Prospectus 2. Key information memorandum 4. None of the above Q.13 An offer document contains the summary of expenses history of all schemes for the past 1. 1 fiscal year 3. 3 fiscal year 2. 2 fiscal year 4. Six months Q.14 1. 2. 3. 4.

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 centers where redemption can be effected Indicate the redemption or repurchase price as at the end of the current fiscal year

Chapter 5 Q.1 A load means 1. An amount recovered from the registrar 2. An amount which is recovered from the investor Q.2 AMFI code of Ethics broadly covers

3. An amount paid to the broker by the fund 4. An amount paid by the fund to the regulator (SEBI)

1. 2. 3. 4. 5. Q.3 1. 2.

3. Q.4 1. 2. 3. 4. Q.5 1. 2. 3. 4. Q.6 1. 2. Q.7 1. 2. 3. Q.8 1. 2. 3. 4. Q.9 1. 2. 3. 4. Q.10 1. 2. 3. 4. Q.11 1. 2. 3. 4. Q.12 1. 2. 3. Q.13 1. 2. 3. 4. Q.14 1. 2. 3. 4. Q.15 1.

2. 3. 4.

Management of funds ought to be in the interest of the unit holder Adequate disclosures by the fund ought to be made to the unit holders Funds are urged to adopt to the professional selling practices All of these Only (1) & (2) If an investor failed to claim the redemption proceeds after 3 years of due date he has the right to receive an amount equal to Prevailing NAV 4. Zero. Face value of the unit 5. Due date NAV plus interest @ 15% p.a. NAV at end of 3 years after the due date One of the following is NOT an ethical practice for a good mutual fund agent which one Promising a particular rate of return in a scheme To discuss the financial and investment needs of the investor To explain the returns obtained by similar schemes of other AMCs To discuss with the investor the risks associated with the proposed investment Commission payable to agents by mutual fund is.. Based on the funds’ policy and discretion Based on SEBI guidelines on agent commissions Based on commissions paid by UTI to its agents Based on Regulations of the RBI Which of the following sales practices is prescribed by regulation? AMFI Code of Ethics 3. Mafia’s code of agents SEBI Advertising Code 4. None of the above Some funds pay of the commission up-front and the balance in phases. This practice is called Exit load 4. Trail commission Discounting 5. Phased commissioning Deferred contingent sales charge One of the following statements cannot be considered as the fundamental attribute of a scheme. Which one? The scheme is an Income-oriented scheme The scheme is open-end in nature Details on listing, repurchase and redemption of units The address and contact details of the registrars and custodians For a person to become an agent of a mutual fund, he must... Have passed class 12 exams Obtain approval from the main broker of the fund Be a university graduate Meet the requirements laid down by the concerned AMC The jurisdiction for resolving legal disputes concerning mutual funds is Given in the offer document/ key information memorandum Stated in the major stock exchanges Decided by company law board Decided by the BSE/NSE As on March 2002, in India a person can be appointed as an agent of a mutual fund if he Passes the AMFI test Signs an agreement with a fund on non- judicial stamp paper Both (1) and (2) has the knowledge about mutual funds Who cannot invest in a mutual fund in India? Provident funds 4. Non-resident Indians Non – banking finance companies 5. Overseas corporate bodies Foreign citizens 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 Contingent Deferred Sales Charge (CDSC) Is higher for investors who stay invested in the scheme longer Is lower for investors who stay invested in the scheme longer Is the same for all investors irrespective of how long they stay invested Is not allowed to be charged to mutual fund investors in India SEBI guidelines for agents includes Agents can sell products of a single mutual fund Agents can sell products of mutual funds with whom he has entered into agreements Agents could be only individuals None of the above

Q.16

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 1. Sue the AMC 3. Sue the agent 2. Sue the Trustees 4. None of the above

Q.17 1. 2. Q.18 1. 2. 3. 4. Q.19 1. 2. Q.20

Are Overseas Corporate Bodies allowed to invest in Mutual Funds? No 3. If Ministry of Finance approves Yes 4. If AMFI approves 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 Open ended schemes are sold by NSE 3. National Distributors Agencies of banks 4. Both 2 and 3 Which of the following decisions can not be taken by a Mutual fund unitholder? 1. Change of Load structure 3. Purchase and sell of securities 2. Point of entry and exit 4. 1 and 3rd Option Chapter 6 Q.1 The NAV of XYZ equity scheme is Rs. 10.50 on 3rd September 2002, if the fund charges 0.25% as the exit load, what would be the repurchase price for the investor? 1. 7.8750 3. 10.000 2. 13.1250 4. 10.4737 Q.2 An equity fund with weekly average net assets of Rs. 1400 crore may change maximum ongoing expenses (excluding issue/redemption expenses) to the extent of 1. Rs. 35.00 crore 3. Rs. 27.50 crore 2. Rs. 26.75 crore 4. 19.75 crore Q.3 If NAV of a scheme is 11 and entry load is 2%, what would be the number of units purchased by Rs. 100 1. Less than 10 3. More than 10 2. Equal to 10 4. None of the above Q.4 A close-end equity fund has average weekly net assets of Rs. 200 crores. As per the SEBI Regulation, the AMC can charge the fund with investment and advisory fees upto: 1. Rs. 2.25 crores 3. Rs. 2.5 crores 2. Rs. 2 crores 4. Rs. 3 crores Q.5 An open-ended fund was purchased when its NAV was Rs.22. One year later, its NAV was Rs.24. The annualized percent Nav change is. 1. 5.88% 3. 6.42% 2. 9.09% 4. Insufficient data Q.6 If NAV of 40 becomes 44. What is % annualized return? 1. 10% 3. 8% 2. 12 % 4. 14% Q.7 Which of the below is a short-term capital asset? 1. Unit of MF held for a period of not more than one year preceding the date of transfer 2. Unit of MF held for a period of less than one year preceding the date of transfer 3. Unit of MF held for a period of less than three years preceding the date of transfer 4. Unit of MF held for a period of not more than three years preceding the date of transfer Q.8 10 crore units were allotted in a scheme. 2.25% is the entry load charged and Rs.8 crore is the initial issue expenses incurred. What maximum can be charged as expenses towards entry load? 1. Rs. 8 crore 3. Rs. 2.25 crore 2. Rs. 6 crore 4. None of the above. Q.9 In a no load debt fund of corpus 200 Crores, what could be the maximum investment management charges? 1. 2 crore 4. 4.25 crore 2. 2.25 crore 5. 5.25 crore 3. 3.25 crore Q.10 Unit capital falls under which head in balance sheet? 1. Asset 3. Profit and Loss account 2. Liabilities 4. None of the above Q.11 If NAV of a scheme is Rs.12 and units allotted are 100, what will be the total asset of the scheme. 1. Less that Rs.1200 3. Exactly Rs. 1200 2. More than Rs. 1200 4. None of the above. Q.12 A non-traded equity is valued using ………. 1. Net worth per share

2. 3. 4. 5.

Valuation using capitalization earnings methods Average of (1) and (2) Average of (1) and (2) further discounted for illiquidity None of these.

Q.13 1. 2. 3. 4. Q.14 1. 2. 3.

Which of the following SEBI restrictions applies to a scheme’s investment in unlisted shares ? A closed-end scheme may invest a maximum of 10% of its NAV in unlisted shares An Open-end scheme may invest a maximum of 5% of its NAV in unlisted shares (1) & (2) above None of these As per SEBI, Non-Performing assets (NPA) of a mutual fund can be defined as... An equity which is trading below its par value An equity share which is yet to be listed on the stock exchange A debt security on which either interest or the principle or both amounts are due but not received for one quarter after the due date 4. None of these Q.15 An investor purchased units in an approved mutual fund on Juanuary’01 1998, for Rs.4, 00,000.00. He sold the units on December 15, 1999 for Rs.6, 00,000.00. Calculate the capital gains taxes paid by him without the benefit of indexation (ignore taxation). 1. Rs.20, 000.00 3. Zero 2. Rs.40, 000.00 4. Depends on the investor’s tax bracket Q.16 An open-end fund with 10000 units outstanding had the following items in its balance sheet: Investments at market value Rs. 100000/Other assets Rs. 20000/Current Liabilies Rs. 25000/Calculate the fund’s NAV per unit. 1. Rs. 9.50 3. Rs. 10 2. Rs. 12 4. Rs. 14.50 Q.17 Liabilities in the balance sheet of a mutual fund are 1. In the form of long-term loans 3. Combination of long term and short term 2. Strictly short term in nature 4. Not allowed as per regulations Q.18 A funds NAV is affected by 1. Purchase & sale of investment securities 3. Units sold or redeemed 2. Valuation of all investment securities held 4. All of the above Q.19 Which of the following expenses cannot be charged to the scheme 1. Audit fees 3. Winding costs for terminating the scheme 2. Costs related to investor communication 4. Penalties and fines for infraction of laws Q.20 As per SEBI guidelines, a security is to be treated as untraded when 1. Security is never traded on stock exchange 3. Security is not traded for 60 days 2. Security is not traded for 30 days 4. None of the above Q,21 NAV is 1. Book value/ no of outstanding units 3. Net asset/ outstanding units 2. Net value / initial allotted units 4. None Q.22 An investor invested 200 units at Rs. 12 . What will be the value of the asset after 1 year if the outstanding units at the end is 20000 units? 1. 2400 3. Insufficient Information 2. 1% of value of 20000 units 4. Book value of the asset / 20,000 units Q.23 10 crore units were allotted. Initial Issue expenses of Rs. 8 cr. Entry load 2.25%, no other expenses were incurred, there is no change in value of underlying assets, what will be NAV at time of reopening if the expenses is to be write off within 5 years 1. 10 3. 9.40 2. 9.775 4. 10.225 Q.24 Entry load is used for meeting 1. Distribution Expenses 3. None of the Above 2. Marketing & Promotion 4. both Q25. STT ( Securities Transaction Tax) is borne by which of the following 1. AMC 2. Trust 3. Investor 4. None of the above

Chapter 7 Q.1 1. 2. 3. 4.

Which of the following is TRUE of an automatic reinvestment (or a growth) plan? The growth plan allows for the 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 An investor who subscribes to the growth option under a scheme can later change to a dividend option

1. 5. Q.2 2. 3. 1.

Automatic All of theseReinvestment Plans Systematic Withdrawal Plans 4. All of these A Systematic Investment Plan. Systematic Transfer Plans Requires the investor to invest a fixed sum periodically 5. None of these

2. Enforces saving in a disciplined and phased manner Q6. 3. What is difference between SIP and ? Provides the benefit of Rupee CostVAP Averaging 1. systematic investment and VAP is Value averaging plan. 4. SIP All ofisthese 2. No Relation at all. Q.3 3. A systematic withdrawal plan isthat idealallows for: the investors flexibility with respect to amount and VAP is modified version of SIP 1. frequency Investors with growth as the main investment objective of investment. 2. Investors who wish investment to benefit from market fluctuations 4. SIP is systematic and VAP is withdrawl plan. 3. Investors who prefer a regular income stream Chapter 8 Investors who are not sure about themselves Q.1 4. Up to what extent unlisted equity shares can be held in an Equity fund? Q.4 1. 10% Mutual fund inEnded India do not offer in Closed fund 3. Both a and b 2. 5% in open ended fund 4. None of the above. Q.2 An interest-bearing bond with a higher coupon rate will have 1. Lower duration 3. Can not be determined 2. Higher duration 4. Insufficient information to answer Q.3 Value stocks are shares in companies........ 1. In mature industries 4. Over valued stocks 2. Expected to yield low growth in earnings 5. Which have high P/E ratio 3. (1) and (2) Q.4 A five year deep discount bond would 1. Pay interest on a yearly basis 3. Be redeemed on maturity at the face value 2. Pay interest on a quarterly basis which is higher that the issue price with no payment in between. 4. Offer yield tax free Q.5 What is the objective of an aggressive growth fund 1. Aggressive growth funds target at high capital appreciation and may adopt speculative strategies 2. Aggressive growth funds try to invest less in equity shares 3. Aggressive growth funds strive for stability as much as growth 4. Aggressive growth funds invest primarily in blue chip stocks Q.6 YTM can also be defined as bonds 1. IRR 3. Current yield 2. Coupon rate 4. Duration Q.7 Calculate the current yield on a G.Sec with at par value of Rs. 1000, coupon of 11% and market price of Rs. 1010. 1. 11.20% 3. 11.21% 2. 10.89% 4. 12.20% Q.8 The current market price of a 9% coupon bond, when other bonds of similar maturities pay 11% , will be 1. Above par 3. At par 2. Below par 4. Will be unrelated to other bonds Q.9 What is the most important factor that one should consider before investing in a company fixed deposit? 1. Interest rate on the deposit 3. Its credit rating 2. Assets against which the fixed deposit is 4. All of these secured 5. (1) and (3) Q.10 A debt portfolio is always exposed to 1. Interest rate risk 3. Equity price risk 2. Re-investment risk 4. (1) and (2) Q.11 An index fund managers tries 1. To beat the market by superior stock selection 2. To beat the market by superior market timing 3. To beat the market by superior asset allocation 4. None of these Q.12 Which of the following instruments would be the most volatile when interest rates fluctuate? 1. ICICI / IDBI bonds listed on the NSE 3. An equity mutual fund 2. PPF 4. A balanced fund Q.13 1. 2. 3. 4. Q.14 1. 2. Q.15 1.

Cyclical stocks command, Relatively lower P/E ratio, and have higher dividend payouts Relatively higher P/E ratio, and have higher dividend payouts Relatively higher P/E ratio, and have lower dividend payouts Relatively lower P/E ratio, and have lower dividend payouts A bond's rating indicates its 3. Inflation Risk Reinvestment risk 4. Interest-rate risk Default risk When interest rates rise, bond prices Also rise 2. Fall

3. Q.16 1. 2. Q.17 1. 2. Q.18 1. 2. 3. 4. Q.19 1. 2. Q.20 1. 2. Q.21 1. 2. Q.22

Are not affected 4. Fluctuate either up or down A mutual fund is not allowed to invest in the sponsor company, >25% of its net assets 3. Not at all >10% of its net assets 4. >5% of net assets Dividend yield for a stock is Dividend per share 3. Dividend per share to current market price 4. None of the above Dividend per face value Which of the following is applicable to the debt market in India? The debt market is a wholesale market There are large players like banks, financial institutions, mutual funds, etc Government securities are traded on a large scale All of the above Certificates of Deposits (CDs) are issued by Regional Rural Banks 3. Scheduled commercial banks Corporate 4. None of the above Current yield relates interest on a security to Its current market price 3. Its fair value Its face value 4. The current price of T-Bills A mutual fund may transfer investments from one scheme to another Not at all 3. At cost price At current market rates 4. At a fixed premium over market rate Which of the following measures are not taken by SEBI for protecting investors of mutual funds 1. Mandating minimum levels of diversification for mutual funds 2. Ensuring that the funds are not used to favour a few companies 3. Tracking the securities that each fund has Invested in 4. Ensuring that the funds are invested in approved securities only Q.23 In mutual fund investors' subscriptions are accounted for as 1. Liabilities 3. Unit Capital 2. Deposits 4. None of the above Q. 24 A call provision in a debt issue allows the issuer to a. Call out the names of the investor b. Redeem the debt on maturity c. Extend the tenure of the debt d. Redeem the debt before maturity. Q 25. 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. Q 26. 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. Chapter 9 Q.1 Portfolio characteristics of a fund can be judged by looking into Fund’s …… 1. Cash position 3. Portfolio turnover 2. Concentration for checking its largest 4. All of these holdings Q.2

Which benchmarks are used for evaluating fund performance? Stock market indices such as S&P CNX Nifty, Sensex Etc. Performance of other mutual funds Return offered by other financial products or investment options open to the investor All of these Q.3 Regular tracking of mutual fund’s performance can be done by......... 1. Newspapers, business periodicals, annual, 2. Key information Memorandum half-yearly and quarterly reports of the 3. The fund’s Offer Document fund 4. None of these Q.4 A portfolio turnover of 200 percent implies that......... 1. On an average a security stays in the portfolio for 6 months 2. On an average a security stays in the portfolio for 12 months 1. 2. 3. 4.

3. On an average a security stays in the portfolio for 36 months 4. On an average a security stays in the portfolio for 48 months Q.5 In order to decide an appropriate index as benchmark for an actively Traded fund, one should consider 1. Fund size and portfolio composition 3. Investment objective of the fund 2. Whether the fund is broad based or 4. All of these focused on specific type of securities 5. None of these Q.6 A fund has a front –load of 1% and back-end load of 0.5%. The investor enters at NAV of Rs.10 and exits at NAV of Rs.12.The return of investment earned by him is... 1. 20% 3. 18.5% 2. 18.22% 4. None of these Q.7 If a fund has a high P/E multiple, this fund is likely to be 1. Balanced fund 3. Money market fund 2. Growth fund 4. Cannot say from the available information Q.8 While benchmarking a fund’s performance relative to other mutual funds, it is important to... 1. Select funds with similar investment 3. Both of the above objectives 4. None of the above 2. Select funds of comparable size Q.9 How many scripts does Nifty constitute of 1. 40 3. 100 2. 30 4. None of the above Q.10 A high portfolio turnover in an equity fund means 1. The fund is very active in market 3. The fund may be quite risky 4. All of the above 2. Transaction costs are high Q.11 For evaluating sectoral funds, the preferred benchmark would be the 1. BSE Sensex 3. BSE 200 2. S&P CNX Nifty 4. S&P CNX Sectoral Indices Q.12 The most suitable measure of fund performance for all fund types is 1. NAV Change 3. Total Return with reinvestment 4. None of the above 2. Total Return Q.13 An investor can assess the performance of his mutual fund by comparing it with the performance of 1. Other mutual fund of the same type 3. Other financial products 2. The stock market 4. All of the above Q.14 The choice of an appropriate benchmark for evaluating a fund's performance depends on a. The fund manager c. SEBI b. The investment objective of the fund d. AMFI Q.15 When comparing a fund's performance with that of its peer group, the following cannot be compared 1. Two debt funds with 5 year maturities 2. A broad-based equity fund with an IT Sector Fund 3. A bond fund with a bond index 4. A government securities fund with a government security

Q.16

Analyst of Finance and operations are called 3. Fundamental Analyst 4. Quantitative Analyst Q.17 CRISIL evaluates what 1. Risk 3. Default possibility of the fund house 2. Performance of the different mutual funds 4. Performance of a particular fund Q 18. The Income Ratio is more suitable for evaluating the performance of 1. Equity Funds 2. Aggressive Growth Funds 3. Regular Income Funds 4. Index Funds. Q19. For which of the following funds, Portfolio Turnover Rate is highest? 1. Equity Funds 2. Income Funds 3. Liquid Funds 4. SEctoral Funds Chapter 10 Q.1 Fundamental qualities of a good financial planner are : 1. Building trust with the client by understanding their needs 2. Good knowledge of all financial products and taxation related issues 3. Balanced, independent and ethical thinking 4. All of the above

1. Chart analyst 2. Technical analyst

5. None of the above Financial Planning is 1. investing assets to receive the highest rate of return possible 2. is a process aimed at identifying financial needs of a client and planning investments that allows meeting future financial goals of the investor 3. keeping taxes as low as possible 4. planning to retire with the maximum income possible Q.3 During Reaping phase, the investor looks forward to ……… 1. Build wealth 3. Transfer his wealth 2. Cash out 4. All these Q.4 The process of making changes in asset allocation and specific investments is known as 1. Financial Planning 3. Timing the market 2. Stock Selection 4. Portfolio rebalancing Q.5 The objective of the financial planning is to ensure that ……… 1. Right amount of money is available in the right hands at the right point in future to achieve an individual’s financial goals 2. That tax payable is as low as possible 3. One understands that technicalities of the financial market 4. One does not require the expertise of the financial advisers Q.6 Direct investment in stock markets can be a bettter option over investing through mutual funds if: 1. The investor wants better returns than those offered by mututal funds 2. The investor has large capital, knowledge and resources for research 3. The investor has identified a bullish phase in the stock market 4. The investor wants to invest for the long term Q.7 What is incorrect of the following? 1. Value funds invest in overpriced stocks 3. Growth funds invest in overpriced stocks 2. Value funds invest in under priced stocks 4. None of the above. Q.8 Mutual funds should be recommended as. 1. Investments to achieve long term goals 3. Investments to take advantage from stock 2. A rich quick investment option market swings 4. All of these. Q.9 As a financial planner, which of your following clients would you strongly advise to start investing for retirement? 1. 26 year old unmarried executive with 2 yrs experience in a job 2. 30 year old executive supporting a family of wife, child and mother 3. 30 year old executive with his wife working as well 4. 31-year-old unmarried son of a wealthy businessman. Q.10 How does a financial planner help his client? 1. By picking up cheques and application forms from the client 2. By identifying client needs, recommending the correct asset allocation and providing him service, that would help investors in making investments 3. By researching and identifying individual stocks or bonds for the client’s portfolio 4. By tracking the economy and government policies. Q.11 After developing a financial plan for a client, financial planners should: 1. Leave it as it is, as a lot of time has been spent for developing it and executing it 2. Review it periodically – at regular intervals and / or when there is a substantial change in market conditions 3. Review it once in five years – there is no point in reviewing it more often since the client should take a long term view 4. None of the above Q.12 Financial planner’s income should be generally linked to: 1. Performance of the scheme he sells 3. A fixed annual fee 2. Man-hours spent with the client 4. None of the above Q.13 In developing a fund portfolio for any investor, the following steps are involved. The order in which these steps are to be followed is 1. Asset allocation, sector distribution, selection of fund managers and scheme 2. Sector distribution, asset allocation, selection of fund managers and scheme 3. Selection of fund managers/scheme, sector distribution and asset allocation 4. Sector distribution, selection of fund managers, asset allocation and schemes Q.14 One of the following should not be recommended by a financial planner as a sound investment objective?. 1. Saving for the client’s children’s education 2. Doubling the investment in 3 years 3. Purchase of a new car 4. Purchase of a new home Q.15 Financial planning for an investor should be re-evaluated when......... 1. Your client has just retired 2. Your client has just been divorced from his wife at age 40 3. Your client’s mutual funds portfolio shows substantial appreciation Q.2

4. Your client feels he has attained his financial goals Q.16 Which of the following statements is TRUE 1. Risk profile of a client remains constant through the life cycle 2. Two investors with the same risk profile would always have identical portfolios 3. All wealthy investors have exactly the same risk profile 4. The level of risk tolerance for most of the clients is fixed 5. None of the above statements is true Chapter 11 Q.1

The power of compounding is best realized by investing in: 1. Income funds with dividend option 3. Balanced funds with dividend option 2. Equity funds with growth/reinvestment 4. None of the above option

Q.2

Value averaging means

1. Keeping the target value of investment constant by investing the amount by which the investment value has gone down. 2. Investing the same amount of funds regularly 3. Investing in one lump sum amount 4. None of these Q.3

Compounding of interest is best explained by a 1. Balanced fund 2. Growth fund

3. Value fund 4. Income fund

Q.4

A criticism of rupee-cost averaging is 1. Investment is for the same amount at regular intervals 2. Over a period of time, the average purchase price will work out lower than if one tries to guess the market highs and lows 3. It does not tell you when to buy, sell or switch from one scheme to another 4. Rupee cost averaging has no serious shortcomings

Q.5

Which of the following strategies is an example of the combined approach of Rupee Cost and Value Averaging? When the investor sets a target value for his investments in an Equity fund When the investor invests a fixed sum each month in a Liquid Fund When the investor invests regularly in a Liquid Fund When the investor invests regularly in a Liquid Fund , sets a target for an Equity Fund, then invests more in Equity Fund if its value declines and books profits when its value exceeds the target value

1. 2. 3. 4. Q.6 1. 2. 3. 4.

The strategy advisable for an investor to maximize 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 from time to time Switch from poor performers to good performers

1. 2. 3. 4.

If you maintain a flexible ratio of asset allocation, would you Rebalance the Debt/Equity allocation periodically? Rebalance the Debt/Equity allocation very frequently? Generally avoid portfolio rebalancing? Keep fixed percentages of equity and debt investments at all times?

Q.7

Q.8

While deciding on an asset allocation strategy, the investor must consider ……… 1. The stage of his life 3. The purpose of making investment 2. His risk appetite 4. All of these

Q.9

Which of the following is the best investment option for the purpose of getting the maximum benefits of compounding? 1. 12% interest paid yearly 3. 3% interest paid every quarter 2. 6% interest paid every 6 months 4. 1% interest paid monthly

Q.10 Asset allocation of a portfolio should be re-evaluated every time there is change in the... (1) Family size and requirement (3) Dramatic change in the market condition (2) Job of the investor (4) All of these

Chapter 12 Q.1

Which Product category should be the core foundation of a financial plan? 1. Equities 3. Mutual Fund 2. Gold 4. None of these

Q.2

The biggest disadvantage of investment in real estate is 1. Less potential for capital appreciation 3. Depreciation in value as time passes 2. High purchase risk 4. Value gets eroded due to inflation

Q.3 1. 2. 3. 4.

Many investors prefer Bank deposits because. Bank deposits offer higher return other investment option They are considered safe and liquid. Bank deposits offer higher capital appreciation Bank deposits offer better tax rebates schemes

Q.4

Which of the following does not generally guarantee return or capital? 1. Bank Deposit 3. Units of Mutual fund 2. PPF 4. NSC

Q.5

While choosing between a bank deposit and a debt income fund, the investor must consider 1. Credit rating of bank 3. His investment objective and risk appetite 2. Quality of the mutual fund assets 4. All of these

Q.6 a) b) c) d)

Market risk can be effectively managed by: Investing with a short term horizon Investing in debt funds Investing in high price shares Investing regularly with a long term perspective to smoothen out the effects of volatility in market price

Q.7

RBI relief bonds are an attractive investment option for: a) High net worth individual investors c) Governments b) Small investors d) Mutual funds

Q.8

The biggest disadvantage of investment in real estate is 1. Less potential for capital appreciation 3. Depreciation in value as time passes 2. High purchase price 4. Value gets eroded due to inflation

Q.9

A small investor can build a diversified portfolio by Buying one share each of all listed companies Investing in a mutual fund Borrowing enough money to buy shares of well-managed companies None of the above Most individuals invest in life insurance policies for Risk protection 3. Easy liquidity Tax benefits 4. High returns The difference between debenture and bond is: Bonds are issued by corporations and debentures are issued by PSUs Bonds are unsecured and debentures are secured. Bonds are backed by loans and debentures are backed by assets None of the above. An income fund scheme invests in debenture of a company. What is the relationship of MF investor with that company. 1. Debenture holder 3. Creditor 2. Shareholder 4. No relationship

1. 2. 3. 4. Q.10 1. 2. Q.11 1. 2. 3. 4. Q.12

Q.13 Investor of bank deposit is called 1. Creditor 2. Unit holder

3. 4.

Shareholder Lender

Chapter 13 Q.1

If beta is higher than 1, the fund is: 1. Less volatile than market 2. More volatile than market

3. Equally volatile than market 4. No relation

Q.2

Volatility in a mutual fund portfolio is caused by ……… (1) Investment in blue chip stocks (3) Investment in high rated bonds (2) Idle cash lying with the fund (4) None of these

Q.3

Sharpe and Treynor Ratios are measures of : 1. Average return 2. Risk

Q.4 1. 2. 3. 4.

Which is a better investment option while selecting an equity fund? Ex Marks -75%, Beta – 0.9, Gross Dividend Yield 8% Either 1 or 3 Ex Marks – 80%, Beta- 0.9, Gross Dividend Yield – 8% Ex Marks – 90%, Beta- 0.8, Gross Dividend Yield – 9%

1. 2. 3. 4.

Ex Marks or ( a R Squared Factor) of a fund measures How much of a fund’s NAV movement is due to the market index movement How a fund’s NAV movement relates to the market index movement How much of a fluctuation has occurred in a fund’s NAV over a historical period. How many marks a Credit rating Agency accords to a fund.

Q.5

Q.6

3. Risk adjusted return 4. Beta of the portfolio

An investor asks you in what order he should list scheme with the least risk to the one with the highest Fund, 3. A Liquid Fund, 4. A IT Sector Fund. 1. 1,2,3,4 3. 2. 1,3,4,2 4.

the following schemes, going from the risk – 1. Balanced Fund, 2. A Stock Index 3,1,2,4 2,3,1,4

Chapter 14 Q.1 1. 2. 3. 4.

As per Jacob’s recommendation low risk fund portfolio is likely to have. 50% invested in Government Securities Funds and 50% invested in Money Market funds An equal split between Government Securities Funds, Growth Funds and Index Funds Equal investments in Aggressive Growth Funds, Value Funds, Sector Funds and Debt Fund A mix of Balanced and Growth

Q.2

For which of the following would you consider “ average maturity” as an important factor in selecting the right one for the investor ? 1. A debt fund 3. A money market or liquid fund 2. A balanced fund 4. Both a and b above

Q.3

1. 2. 3. 4.

A very high proportion of investment in all types of equity funds is advisable for investors In distribution phase 3. In transition phase In accumulation phase 4. Who are wealth preserving affluent individuals 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 All the funds can be invested in aggressive equity funds

1. 2. 3. 4.

Which of the following is recommended by Jacob for a Low Risk portfolio ? 50 % Growth and Income fund + 50% Money Market fund 50% Growth funds + 50% index fund 50% Government Securities fund + 50% Money Market fund 50% Sector Funds + 50 % Money Market fund

1. 2. Q.4

Q.5

1. Buying and selling securities ahead of doing the same transaction for the fund. 2. Buying and selling securities on the basis of privileged information available to the fund by persons who are insiders to the company. Chapter 15 of the above 3. Both 4. None of the above Q.1 Code of ethics should be followed by distributors as:

Q.3

Mutual funds in India are required by SEBI to : 1. prohibits their employees from personal trading in secondary markets. 2. allows all employees to trade freely in secondary markets without restrictions. 3. to establish a code of conduct and allow employees to do personal trading that conforms to SEBI guidelines. 4. allows employees to carry on personal trading as long as they abide by SEBI regulations.

Q.4

The detailed version of SEBI circular regarding code of conduct for distributors given by AMFI is known as: Ethics code 2. AGNI Front running 4. None of the Above

1. 2. Q.5

The regulation of Personal trading is applicable to :

1. 2. 3. 4.

Key Personnel of the AMC The directors of the trustee company Sponsor of the fund Only a and b

Thank You And All the Best for Your Exams POINTS to remember 1. Indira Vikas PAtra is preferred because you don’t have to disclose your identity to purchase that. Now it is becoming popular in urban markets. 2. Debt Funds are exposed to Interest rate risk, Reinvestment Risk, Call risk, Default Risk, Inflation risk and Liquidity risk. 3. Expense ratio is ratio of Total expenses to Net assets. It is indicators of funds efficiency and cost effectiveness. Most important in case of debt funds. 4. Fixed Asset Allocation and Flexible Asset Allocation. 5. AGNI – Amfi Guidelines and norms for intermediaries. 6. FIIs can invest in Mutual funds in India after taking approval from FIPB and RBI.