2

An investor transaction is completed using the online facility of a mutual fund at 11:30 AM. It is processed at 4:00

PM. What is the applicable cut-off time for the transaction? 

4:00 PM

11:30 AM

Cut-off time does not apply to such transactions

3:00 PM

Answer Feedback: For online transactions, the time recorded on the system is used to apply the NAV. It is 11:30

am in this case.

If flexible asset allocation is chosen, the ratio between the asset classes is likely to: 

Remain fixed

Change every year

Remain equal

Change with market changes

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

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

more than one year

more than five years

less than one year

equal to one year

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

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

Meets only income needs

Requires higher investment outlay

The liquidity is high

The holding period is short

Answer Feedback: Real estate investment requires higher investment outlay

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

Equity shares

Deposits

Bonds

PPF

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

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

Debentures of companies

Government securities

Equity Shares

Bank deposits

Answer Feedback: Class G represents investment in government securities

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

Existing schemes of the fund

Features of competing funds

Key personnel of the fund

Fees and expenses of the scheme

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

competing funds

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

Date on the time stamp

Date of realization of cheque

Date of the cheque

Date of the application

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

Return from equity depends on: 

All of the given options

Company factors

Industry factors

Economy factors

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

An investor sells his units in an equity-oriented fund after 6 months, for a profit. What is the taxability of this gain? 

Taxable at 10%

Taxable at marginal rates

Taxable at 15%

Taxable at 20%

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

equity-oriented fund

A fund manager has sold his holdings while the markets are still going up and is holding cash as a defensive

measure. How is the portfolio likely to perform if the markets correct? 

Correlated to the market

Outperform

Underperform

Match the market

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

benchmark

AMFI has the powers with respect to registered ARN-holding distributors to: 

Cancel registration

Impose penalties

Issue notices

All of the given options

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

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

Transferred to a trust immediately.

Managed by the fund for a specified period.

Transferred to SEBI.

Managed by the fund until it is claimed.

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

Investments in mutual funds enable investors to reduce the risk in their portfolios through: 

Market timing

Stock selection

Sector selection

Diversification

Answer Feedback: Risk in a portfolio is reduced through diversification

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

taxable _________________. 

as long term capital gains

as short term capital gains

as dividends

at a rate of 10%

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

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

income from salary

any other head of income

income from residential property

income from dividends and interest

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

Which of the following entities actually represents the mutual fund? 

The custodian

The AMC

The sponsor

The trust

Answer Feedback: The mutual fund is structured as a trust.

According to the investment management agreement, what is the power the trustee holds with respect to an

AMC? 

Trustee can deny fees to the AMC

Trustee can change the staff of the AMC

Trustee can recapitalize the AMC

Trustee can change the AMC for non-performance

Answer Feedback: A trustee can change the AMC

Trail commission is paid on the basis of: 

Original invested amount

Minimum value of the invested amount

Face value of the invested amount

Market value of the invested amount

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

Which of the following constituents is responsible for executing the trades of the fund manager on the stock

exchange? 

Custodian

R&T agents

Brokers

Banker

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

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

PIOs

HUFs

OCBs

NRIs

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

The interest on bank deposits is: 

Fully exempt from tax

Exempt from tax up to a limit

Fully taxable

Taxable up to a certain limit

Answer Feedback: Interest from bank deposits is fully taxable

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

Needs and desires

Amount and time

Amount and need

Need and time

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

If an investor conducts a mutual fund transaction on a stock exchange platform, which of the following is NOT

true? 

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

The transaction can be settled using a demat account

The transaction will be put through by a broker

The transaction has be conducted online

Answer Feedback: An exchange transaction is put through a broker, settled using demat or sent to R&T agent, but

need not always be online

PAN is required for: 

All mutual fund transactions

NFO transactions

Purchase transactions above Rs50,000

Re-purchase transactions

Answer Feedback: PAN is mandatory for all mutual fund transactions

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

March-12

January-12

January-11

March-11

Answer Feedback: SID has to be updated every March. But, for schemes launched in the second half of a financial

year, time until the next, not following, March is allowed.

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

Initial AUM

Average AUM

Managed capital

Unit capital

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

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

Application form

Switch form

Transaction slip

Statement of account

Answer Feedback: Application forms are used for fresh purchase transaction

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

He cannot invest his own funds

He cannot invest as a individual

He can invest but only in a joint name

He cannot earn commission on his investments

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

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

8 am of the next day.

9 am of the next day.

8 pm of the same day.

9 pm of the same day.

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

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

There is no maximum limit

5

20

10

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

Which of the following is a physical asset? 

Equity shares

Title to property

Corporate bonds

Bank deposits

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

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

Upfront in advance

Without making an application

Only on allotment of units

In installments

Answer Feedback: ASBA enables payment for units only after allotment

If an investor in a closed end fund seeks liquidity, he can: 

Sell the units on a stock exchange

Redeem units with the fund

not redeem units before maturity

Redeem units at ISCs

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

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

Trustees, not sponsors

Distributors, not unit holders

Unit holders, not the AMC

AMC, not unit holders

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

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

cash risk

market risk

expense ratios

liquidity risk

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

are low in such products

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

Sponsors

AMFI

SAT

Trustees

Answer Feedback: All mutual fund schemes are approved by Trustees. AMFI, SAT or Sponsors do not have

anything to do with scheme launches

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

Increase the reach of mutual fund products

Increase the cost of distribution

Increase the number of products

Increase the number of investors

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

investors, products or costs

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

PPF

Company deposits

Corporate bonds

Post office deposits

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

If unit holders seek a change in AMC, they should get the support of investors holding __________ 

25% of the unit capital.

75% of the unit capital.

40% of the unit capital.

50% of the unit capital.

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

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

The R&T agent

The banker

The custodian

The distributor

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

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

Higher than the NAV

Unrelated to the NAV

Equal to the NAV

Different from the NAV

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

from the NAV

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

Rs.40.40

Rs.39.60

Rs.40

Rs. 39.40

Answer Feedback: Repurchase price = NAV - (NAV x Load). =( 40 - (40 x 1%) = 40 - 0.40 = 39.60.

Money market securities have a maturity period of: 

Less than or equal to 364 days

Less than 182 days

Equal to 364 days

Less than 91 days

Answer Feedback: All money market securities have maturity less than or equal to 364 days.

The correct indicator of return to the investor would be: 

Return after expenses and load

Return after expenses

Return after expenses, load and tax

Portfolio return

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

The investment objective of an investor is to earn steady income. Which of the following funds is most likely to

meet that objective? 

Sector equity fund

Equity index fund

Dynamic Bond Fund

Diversified equity fund

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

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

Banks

AMC employees

Sponsor

Individuals

Answer Feedback: AMC employees cannot be distributors

In order to be appointed as a constituent of a mutual fund, it is compulsory to be: 

Certified by Amfi

Registered with SEBI

Listed by Ministry of Company Affairs

Approved by RBI

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

The fund manager in a fund of fund scheme selects: 

Funds

Stocks

Bonds

Sectors

Answer Feedback: A fund of fund invests in other funds

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

Next day

Previous day

Same day

Day of cheque realisation

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

of the cheque.

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

It is a transaction in an existing folio

It is a non-financial transaction

The value of the transaction is less than Rs.50000

It is a first time transaction

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

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

NFO advertisement

Advertisement of existing products

Awards advertisement

Tombstone advertisements

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

or risk factors

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

Holding period

Age

Amount invested

Risk profile

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

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

Transition phase

Accumulation phase

Reaping phase

Distribution phase

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

Investments in equity funds can be expected to be: 

Risky in the short term

Risky in the long term

Riskless in the long term

Riskless in the short term

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

A loan can be taken to buy an asset provided: 

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

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

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

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

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

to buy an asset

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

NAV of the schemes

Annual report of the scheme

Annual report of the AMC

Portfolio of the scheme

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

A purchase request for an equity fund was accepted at an AMC office on Wednesday, March 11 at 2:30 pm.

What is the applicable NAV for the transaction? 

NAV of March 10

NAV of March 11

NAV of March 9

NAV of March 12

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

March 11) applies.

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

Monthly income plans

Diversified equity funds

Liquid funds

Sector equity funds

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

sector performs

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

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

All purchase transactions

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

All transactions

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

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

Balanced funds based on fixed allocation

Sector funds

Equity funds

Balanced funds based on flexible allocation

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

therefore less risky

An asset allocation that is not frequently revised is called: 

Flexible allocation

Fixed allocation

Tactical allocation

Floating allocation

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

revision

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

In existence for a long period

Large

Small

In existence for a short period

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

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

30 days

15 days

10 days

7 days

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

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

Market risk

Default risk

Liquidity risk

Credit risk

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

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

nominees of the deceased

children of the deceased

proposer of the policy

wife of the policy holder

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

In the asset allocation decision, which step is the last one? 

Return objective

Scheme selection

Asset allocation

Financial goal determination

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

is done last

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

Short term debt fund

91-day FMP

Liquid fund

Long term gilt fund

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

high NAV volatility

If the PE ratio is very high, it is likely that growth stocks would be 

Overvalued

Undervalued

Fairly valued

Illiquid

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

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

Bear risks

Accumulate

Expect returns

Save

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

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

Board of Directors

Company Law Board

SEBI

Registrar of Companies

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

An individual investor chooses a dividend reinvestment option in a debt fund. What is the DDT applicable to the

dividends that are reinvested? 

DDT applies at 20%

DDT applies at 12.5%

DDT applies only for dividend payout option

DDT does not apply

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

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

KIM

MIN

SAI

SID

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

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

SEBI

Ministry of Finance

RBI

AMFI

Answer Feedback: The fund in this case is regulated by SEBI, but its sponsor, the bank is regulated by RBI.

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

High PE stocks

High growth stocks

Higher priced stocks

High dividend value stocks

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

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

Trust

Custodian

AMC

Sponsor

Answer Feedback: Investors cannot sue the trust, for it represents the investors themselves

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

at retirement

closer to retirement

much before retirement

after retirement

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

The price of gold in the spot markets is Rs. 20,000 per 10 gms. It is expected to go up to Rs.21,000. What is

likely to happen to the price of gold futures? 

Go up

Go down

Do not change

increased volatility

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

The AMFI code of conduct is: 

Part of the SEBI Mutual fund regulation

Implemented only by AMFI

Applicable only on voluntary basis

Not approved by SEBI

Answer Feedback: AMFI code of conduct has been included as part of regulation by SEBI

The assets of a fund are Rs. 200 cr. The current liabilities are Rs. 20 cr. The unit capital is Rs. 50 cr. and the face

value per unit is Rs. 10. what is the NAV of the fund? 

Rs.40

Rs.36

Rs.32

Rs.44

Answer Feedback: NAV = (Assets less liabilities)/units. Units = Unit capital/Face value. NAV = ((200-20)/5) = 36

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

Required only for tax purposes

Required for the beneficiaries

Not required

Required for the investor

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

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

Investment Objective

Fund manager

Lock-in period

Asset allocation

Answer Feedback: The fund manager of a fund can change

Alpha refers to: 

Beta

Excess return

Sharpe ratio

Tracking error

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

If a scheme has a lock-in period, such information can be found in: 

SAI

KYC

MIN

SID

Answer Feedback: Scheme specific information is found in the SID

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

Diversified equity funds

Equity-linked saving schemes

Open ended income funds

Liquid funds

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

investor who seeks liquidity

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

A small proportion to a quick-gain trading portfolio

A large proportion in a sector fund

A small proportion in a diversified equity fund

A complete allocation to an all-debt portfolio

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

for such investors

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

Diversified equity fund

Large cap fund

Small cap growth fund

Income fund

Answer Feedback: A small cap growth fund has a higher risk-return ratio compared to a diversified, large cap or

income fund

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

Sale and repurchase of all units

Re-purchase of equity-oriented units

Sale of equity-oriented units

Repurchase of all units

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

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

S&P CNX IT index

S&P CNX Nifty index

BSE 500 index

BSE 200 Index

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

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

Non-index stocks

Less than 10% in a single stock

Stocks from several sectors

Higher proportion in a few sectors

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

The primary data used in fundamental analysis of equity is 

Stock prices

Shareholding pattern

Trading volume

Financial information

Answer Feedback: Financial information is used in fundamental analysis

The primary objective of financial planning is to provide for: 

Tax saving

Financial goals

Creating wealth

Retirement

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

An investor in mutual funds faces the disadvantage of: 

Low flexibility in investing

Lock-in period

High cost of operations

Overload of choices

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

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

A money back policy

A term policy

An endowment policy

A ULIP

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

Which of the following NAVs of an equity fund is as per minimum regulatory requirement? 

Rs. 12.45

Rs.12.4525

Rs.12.452

Rs.12

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

requirement

An investor earns long term capital losses from his debt fund investments. He also makes a long term gain from

his MIP investments. Which of the following is true? 

The loss can be set off

The loss can be set off only against short term gains

Only short term gains are available for set-off

The loss cannot be set-off

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

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

Go up

Remain unchanged

Go down

Cannot say

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

An important benefit of SIPs is: 

Rupee cost averaging

Lower lock-in period

High rates of return

Lower fund expenses

Answer Feedback: SIP is a mode of transaction in a fund that reduces average cost. The expense, return or lock-in

do not change.

The risk appetite of an investor can be expected to: 

Change with age

Remain unchanged

Change every year

Change with new events

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

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

A copy of the profit and loss account

A copy of the tax returns

A copy of the board resolution

A copy of the balance sheet

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