Unlock-NISM_5_A_-_MUTUAL_FUND_EXAM_-REAL_FEEL_MOCK_TEST.pdf

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION REAL FEEL MOCK EXAM
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THIS IS A MOCK EXAM TO TEST YOUR PREPARATIONS. PLEASE SOLVE THESE 100 QUESTIONS
IN 2 HOURS. THE ANSWERS ARE PROVIDED IN THE END.
Question 1 Even thought investment in Mutual Funds are subject to market risks,
an investor invests in an equity fund after reading the risk factors etc.
Due to a fall in the stock markets the value of the fund goes down
drastically. The investor ______.
(a) can get some remedy if he appeals to SEBI
(b) can get some remedy if he appeals to AMC
(c) cannot get any remedy from the AMC
(d) can get some remedy if he appeals to AMFI
Question 2 An investor gives a cheque of Rs 2 lacs for investing in a ELSS scheme at
2.30 pm at a Mutual Fund office. The NAV of which day will be
applicable to him ?
(a) NAV of the same day
(b) NAV of the next business day
(c) NAV of the day on which funds will be available
(d) None of the above
Question 3 Which of the below is a physical asset ?
(a) GOLD Exchange Traded Funds - ETF
(b) Real Estate Fund
(c) Building
(d) Debentures
Question 4 Which of the following is true with respect to Growth Option in Mutual
Fund schemes ?
(a) Dividend Distribution Tax is applicable
(b) The change in NAV captures the scheme performance
(c) Units rise or fall depending on the schemes performance
(d) The NAV falls as and when dividend is declared

Question 5 For calculating Capital Gains, investment in mutual funds for less then 1
year is considered as _______
(a) Long Term
(b) Medium Term
(c) Short Term
(d) Ultra Short Term
Question 6 Mutual funds are constituted as ______and therefore, they are governed
by the __________.
(a) Companies, Indian Companies Act
(b) NGOs, NGO Act
(c) Trusts, Indian Trusts Act
(d) Investment Agencies, SEBI Act
Question 7 If an Institutional Investor is making an application for investing in a
Mutual Fund, which additional document is required ?
(a) Bank Statements
(b) Audited Accounts for the last 3 years
(c) Approval letter from SEBI
(d) Board Resolution
Question 8 The investment objective of a ______________ might read as follows:To
generate capital appreciation from a portfolio of predominantly equity
related securities
(a) Balanced Fund
(b) Money Market Fund
(c) Diversified Equity Fund
(d) Arbitrage Fund
Question 9 A Board Resolution is not required for an institutional investor to invest
in Mutual Funds if the Memorandum and Articles of Association permit
it to do so - True or False ?
(a) TRUE
(b) FALSE

Question 10 Different investors have different investment needs and objectives. This
is the reason Mutual Fund offer different ________.
(a) Plans
(b) Options
(c) Schemes
(d) time horizons.
Question 11 Which of the following is a measure of market risk ?
(a) Beta Coefficient
(b) Sharpe Ratio
(c) Treynor Ratio
Question 12 A investors wishes to invest in debt mutual funds but wants high liquidity
- should he invest in Fixed Maturity Plans ?
(a) Yes
(b) No
Question 13 To do away with multiple KYC formalities with various intermediaries,
SEBI has mandated a unified KYC for the securities market through the
Depository Participants registered with SEBI - True or False ?
(a) TRUE
(b) FALSE
Question 14 Nomination facility is not available to investors holding the Mutual Fund
units jointly - True or False ?
(a) TRUE
(b) FALSE

Question 15 As per SEBI regulations, every application form is to be accompanied by
_____________.
(a) Key Information Memorandum (KIM)
(b) Scheme Information Document (SID)
(c) Addendum
(d) Statement of Additional Information
Question 16 Of the following documents, which is required to be appended to the
application form of a MF scheme ?
(a) Scheme Information Document - SID
(b) Statement of Additional Information - SAI
(c) Key Information Memorandum - KIM
(d) Addendum
Question 17 Gold Future Contracts ___________.
(a) are traded on the Commodity Exchanges
(b) are not standardised products
(c) can be bought through Mutual Funds
Question 18 All advertisements and Sales Literature containing an AMC(s)/Mutual
Fund ranking must prominently disclose, with respect to the ranking
___________.
(a) The name of the Ranking Entity and the criteria on which the ranking is based
(b) The number of AMC(s)/Mutual Funds in the category.
(c) The name of the category (e.g. income/growth)
(d) All of the above
Question 19 The trail commission paid by Mutual Funds to a distributor
____________.
(a) Is paid only for high valued transactions
(b) Is linked to the NAV
(c) Grows at a steady rate
(d) Is paid to the Corporate and Bank Distributors only

Question 20 Gilt funds and diversified debt funds should figure prominently in the
portfolio of_________ .
(a) Employed with small children
(b) Old couple with no family support
(c) Young married with no children
Question 21 An investor in an active fund bears a ________ cost for the fund
management, and takes a ________ risk.
(a) Higher, Lower
(b) Lower , Lower
(c) Higher , Higher
(d) Lower, Higher
Question 22 Of the below options, what is FALSE with respect to Arbitrage Funds ?
(a) Arbitrage Funds have Basis Risks
(b) Arbitrage Funds invest in Equity Markets
(c) Arbitrage Funds invest in both Spot and Futures Market
(d) Arbitrage Funds are more riskier than Sectoral Funds
Question 23 While selling mutual fund products of the distributors
group/affiliate/associates, the distributor shall make disclosure to the
customer regarding the conflict of interest arising from the distributor
selling such products - True or False ?
(a) TRUE
(b) FALSE
Question 24 A Mutual Fund scheme gave an annualised return of 9.86% and the
annualised Standard Deviation of the fund is 3.47. The current risk free
return is 8%. Calculate the Sharpe Ratio.
(a) 0.63
(b) 0.55
(c) 0.48
(d) 0.35

Question 25 Minimum duration of an interval period in an interval scheme/plan is
_______.
(a) 15 Days
(b) 30 Days
(c) 45 Days
(d) 60 Days
Question 26 All advertisements and Sales Literature containing an AMC(s)/Mutual
Fund ranking must prominently disclose ____________.
(a) The publisher of the ranking data.
(b) Criteria on which the ranking is based.
(c) The name of the Ranking Entity.
(d) All of the above
Question 27 The face value of a Mutual Fund unit in India is generally _____.
(a) Re 1
(b) Rs 10
(c) Rs 100
(d) Decided by AMFI
Question 28 Its compulsory to list units of _____________ on the stock exchange.
(a) Close Ended Fund
(b) ELSS Fund
(c) Gilt Fund
(d) Arbitrage Fund
Question 29 After payment of dividend the NAV comes down even in the Dividend
Reinvestment option - True or False ?
(a) TRUE
(b) FALSE

Question 30 Open-ended schemes, except ELSS, have to re-open for ongoing sale / re-
purchase within ______ business days of allotment.
(a) 3
(b) 5
(c) 10
(d) 12
Question 31 The Stock Exchanges which provide facilities for Mutual Fund trading
also do the functions of Mutual Fund RTAs. - True or False ?
(a) FALSE
(b) TRUE
Question 32 You have to construct a model portfolio for your client - which amongst
the following factors will you consider ?
(a) Clients Employment status
(b) Clients Risk Profile
(c) The size of portfolio
(d) All of above
Question 33 You are a mutual fund advisor. To whom would you advise investment of
more than 70 % of their funds in debt funds ?
(a) A 33 year old well employed with one son
(b) A 45 year old Executive Manager of a company who has 2 children
(c) Elderly couple with no children
(d) Young man working with Glaxo
Question 34 The Transaction Slips are used by __________.
(a) First time investors of Mutual Funds
(b) NFO Investors
(c) Relatives of Existing Investors
(d) Existing Investors

Question 35 In Liquid funds, simple annualised return method is used to show the
returns because ___________.
(a) Its a simpler way to calculate and investors understand it easily
(b) The investment made is fixed for 30 - 90 - 180 days
(c) The return is calculated over smaller time horizons
(d) The amount invested is usually small
Question 36 The _________________ maintains investor records.
(a) The specific fund accountants
(b) Registrars and Transfer Agents
(c) The Back Office of AMFI
(d) The Fund Manager and his team
Question 37 Cut-off timing guidelines are not applicable for _____.
(a) International Funds
(b) New Fund Offer (NFO)
(c) Both of the above
Question 38 To have a structured approach to Financial Planning and Investment
counseling, Financial Planners use Model Portfolios - True or False ?
(a) TRUE
(b) FALSE
Question 39 Every trust has beneficiaries - True or False ?
(a) TRUE
(b) FALSE
Question 40 Prediction of equity markets in the short run is easier than in the long
run - True or False ?
(a) TRUE
(b) FALSE

Question 41 The floating rate debt securities tend to hold their value, despite changes
in yield in the debt market - True or False ?
(a) TRUE
(b) FALSE
Question 42 A Mutual Fund scheme is know to distribute dividends from time to
time. Such MF can be used as a source of ___________.
(a) Good Capital Appreciation
(b) Regular Income
(c) Safety of Capital
(d) Tax Planning
Question 43 Stock selection is important in bottom-up approach - True or False ?
(a) TRUE
(b) FALSE
Question 44 Summary of SID - Scheme Information Document and SAI - Statement
of Additional Information is known as KIM - Key Information
Memorandum - True or False ?
(a) TRUE
(b) FALSE
Question 45 Young Age, Good Steady Job, an Adventurous streak etc are some
qualities of an investor who takes risks in investments - True or False ?
(a) TRUE
(b) FALSE
Question 46 AMC does not appoint the __________.
(a) Custodian
(b) R&T Agent
(c) Banker
(d) Distributor

Question 47 A Mutual Fund scheme has a portfolio of shares whose beta is less than
1. This indicates that the scheme is ___________.
(a) Very Very risk compared to the market
(b) Some what risky than the market
(c) Less risky than the market
(d) Equally risky as the market
Question 48 Mutual funds can accept cash to the tune of Rs _________ from small
investors.
(a) Rs 5000
(b) Rs 20000
(c) Rs 50000
(d) No cash can be accepted
Question 49 The cost of fund management are the highest in __________.
(a) Active Funds
(b) Passive Funds
(c) Index Funds
(d) None of the Above
Question 50 NAV of Equity funds is to be calculated upto ___ decimals.
(a) 1
(b) 2
(c) 3
(d) 4
Question 51 Exchange Traded Funds-ETF Gold regularly invest in good gold mining
companies - True or False ?
(a) TRUE
(b) FALSE

Question 52 The National Pension System (NPS) offers a wider portfolio choice than
Mutual Funds - True or False ?
(a) TRUE
(b) FALSE
Question 53 The amount which is paid to the distributor at the time the money is
invested in a scheme is called __________.
(a) Trail Commission
(b) Upfront Commission
(c) Rebate
(d) Fund Incentive
Question 54 Can recurring expenses be charged to a mutual fund scheme ?
(a) Yes, they can be charged.
(b) No, they cannot be charged.
Question 55 As per the provisions of the Income Tax Act - Short term capital loss is to
be set off against short term capital gain or long term capital gain - True
or False ?
(a) FALSE
(b) TRUE
Question 56 Which of the following should NOT be included in the Key Information
Memorandum ?
(a) The risks associated with the scheme
(b) The functions of Trustees and AMC
(c) The opening - closing dates of the NFO
(d) Minimum investments required and the cutoff time.
Question 57 Tier II account of the National Pension System is called the _________.
(a) Savings Account
(b) Pension Account

Question 58 Which one of the below mentioned document is not required for KYC
process ?
(a) PAN Card
(b) Address Proof
(c) Income Proof
(d) Identity Proof
Question 59 There are no penalties for breach of code of conduct as mandated by
AGNI - True or False ?
(a) TRUE
(b) FALSE
Question 60 The ______________ is the phase when the earning years usually starts.
(a) Young Unmarried
(b) Young Married
(c) Married with one children
(d) During graduation
Question 61 Which of the following is an important aspect of an OFFER
DOCUMENT ?
(a) To inform the investors about the AMC's views on Stock Markets
(b) To inform the investors on the performance of the scheme
(c) To provide a comparison of the schemes
(d) To inform the investors on the detailed information about the scheme
Question 62 An Index fund has an beta of 1 - State True or False ?
(a) TRUE
(b) FALSE
Question63 The strategy of Tactical Asset Allocation is considered to be a risky
strategy - True or False ?
(a) TRUE
(b) FALSE

Question 64 Which of the below expenses can be charged to a fund ?
(a) Expenses to manage a fund
(b) Expenses to launch a new fund
(c) Expenses done by the AMC
(d) Expenses done by the Investors
Question 65 Post the New Fund Offer, investors who wishes to buy units need to pay
______.
(a) the NFO price plus inflation rate
(b) the same price as NFO
(c) a price linked to the inflation index
(d) a price that is linked to its NAV.
Question 66 Mr. Deven gives his investment application form to the distributor at 10
am. The distributor then goes to the Mutual Fund office and submits this
application at 1 pm. What is the cut off time for this investment ?
(a) 10:00 AM
(b) 1:00 PM
Question 67 Mutual Funds are allowed to borrow __________.
(a) for long term investment purposes
(b) are not allowed to borrow at all
(c) to meet redemption requests or divdend payments.
(d) freely as per their investment objectives
Question 68 Relaxation in documentation requirements for micro-SIPs is available
for ___________.
(a) Non Resident Indians
(b) Non Individuals
(c) Hindu Undivided Family
(d) None of the Above

Question 69 Which is the re-opening date for a scheme ?
(a) The next working day after the close of a NFO
(b) The date when investors can go for re-purchase
(c) The date on which it lists on a Stock Exchange
(d) The date on which NFO opens
Question 70 On liquidity parameters, which is most liquid ?
(a) Equity Shares
(b) Bank Fixed Deposits
(c) Gold
(d) Real Estate
Question 71 ELSS schemes should contain the least amount of Ill Liquid Investments
- True or False ?
(a) TRUE
(b) FALSE
Question 72 Which of the following options form the basis of appointment of a
Mutual Fund distributor ?
(a) An agreement between the AMC and the Distributor
(b) Approval from SEBI
(c) Power of Attorney from the AMC
(d) An agreement with AMFI
Question 73 After deciding the model portfolio, Sharpe Ratio is used for finalizing the
schemes of Equity and Debt - True or False ?
(a) TRUE
(b) FALSE

Question 74 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the
last day of the month for all their schemes on their respective website on
or before the______ of the succeeding month
(a) 3rd day
(b) 7th day
(c) 10th day
(d) 15th day
Question 75 To achieve growth by investing in equity and equity related investments,
along with income generation by investing in debt and money market
instruments would be the investment objective of a
___________________.
(a) balanced scheme
(b) debt fund
(c) Sectoral Equity fund
(d) ELSS Fund
Question 76 The Absolute Return is calculated using the formula _________.
(a) (Cost Price - Sale Price ) / Sale Price
(b) (Sale Price / Cost Price) - 1
(c) (Sale Price - Cost Price) / Cost Price
(d) 1 - (Cost Price / Sale Price)
Question 77 Every trust has beneficiaries and the beneficiaries, in the case of a
mutual fund trust, are _____________.
(a) the Employees of the Mutual Fund Company
(b) the Trustees of the AMC
(c) the Chairperson and Managing Director of the AMC
(d) the investors who invest in various schemes of the mutual fund.
Question 78 Investments in Mutual Funds can be done only through a AMFI
authorided MF distributors - True or False ?
(a) TRUE
(b) FALSE

Question 79 Foreign nationals can invest in Indian mutual funds - True or False ?
(a) TRUE
(b) FALSE
Question 80 Many AMCs, distribution houses and mutual fund research houses offer
free tools in their website which can be used for evaluating a funds
performance - True or False ?
(a) TRUE
(b) FALSE
Question 81 Mr. Shah gives a local cheque at 4.30 pm of Rs 10 lacs at a Mutual Fund
office for investing in a Gilt Fund. Of which day will the NAV be
applicable to him ?
(a) NAV of the same day
(b) NAV of the next business day
(c) NAV of the day on which the funds will be available
Question 82 AMC directors are appointed with the permission of SEBI - True or
False?
(a) TRUE
(b) FALSE
Question 83 Minors are not legally eligible to contract, so for investing in Mutual
Funds they _________.
(a) have to become 18 years before investing
(b) can invest thro' their guardians
(c) can invest only in long term capital gain funds
(d) can invest in specific 'Minors Only' Mutual Funds

Question 84 Due to the popularity of cash less health insurance policies the liquidity
needs of the investors have reduced - True or False
(a) TRUE
(b) FALSE
Question 85 Investments owned by the scheme may be quoted in the market at higher
than the cost paid and these gains are called as __________.
(a) Valuation Gains
(b) Booked Gains
(c) Notional Gains
(d) Notional Losses
Question 86 Dividend Distribution Tax (DDT) on debt-oriented mutual fund schemes
for Corporate Investors is ____ + Surcharge + Education Cess
(a) 15%
(b) 30%
(c) 35%
(d) 40%
Question 87 At what rate is the Securities Transaction Tax charged on sale of units of
debt oriented mutual fund in a stock exchange ?
(a) 0.01%
(b) 0.10%
(c) 0.13%
(d) 0%
Question 88 An important feature of Growth Option is Tax Deferral - True or False ?
(a) TRUE
(b) FALSE

Question 89 Asset allocation means ____________.
(a) Distribution of Funds between Fund Managers in a Mutual Fund
(b) Distribution of funds between various persons after the death of a person
(c) Distribution of funds between various asset classes in a portfolio
(d) Distribution of funds between beneficiaries of an AMC
Question 90 A person wishes to avail of a loan. For which of the below options he
cannot get a loan ?
(a) To start a Pharma factory
(b) To buy a car of value above Rs 20 lacs
(c) To buy a high priced lottery ticket
(d) To buy a house in a Union Territory
Question 91 Investments in Mutual Funds are subject to market risks and therefore
do not provide any guarantee of Capital Growth / Protection - True or
False ?
(a) FALSE
(b) TRUE
Question 92 Loads and taxes pull the investor’s returns below that earned by the
Scheme - True or False ?
(a) TRUE
(b) FALSE
Question 93 The strategy of maintaining a constant ratio of asset allocation is know as
__________.
(a) Dynamic Asset Allocation
(b) Fixed Asset Allocation
(c) Flexible Asset Allocation
(d) SIP

Question 94 Investments in mutual fund units attract Wealth Tax if the investments
are over Rs 5 lacs - True or False ?
(a) TRUE
(b) FALSE
Question 95 Debt-oriented, close-ended / interval, schemes /plans need to disclose
their portfolio in their website every month, by the _____ working day of
the succeeding month.
(a) 3rd
(b) 10th
(c) 12th
(d) 15th
Question 96 If you are expecting interest rates (yields) to rise in the markets. Where
would you invest your money considering this forecast ?
(a) Long Terms Debt Funds
(b) Short Term Debt Funds
(c) Equity Funds
(d) Banking Sector Funds
Question 97 Condensed financial information for schemes launched in last 3 financial
years is mentioned in the ______________.
(a) Scheme Information Document (SID)
(b) Statement of Additional Information (SAI)
(c) Fact Sheet
(d) Prospectus
Question 98 The dividend received by a Mutual Fund investor will be taxed at a rate
of _____.
(a) 5%
(b) 10%
(c) 20%
(d) No tax on Mutual Fund Dividends in the hands of the investor

Question 99 A Mutual Fund investor can file a case against the ________ for breach
of trust.
(a) Mutual Fund
(b) Trustees
(c) Stock Exchange
(d) No, a MF investor cannot file a suit.
Question 100 Management fees cannot be charged by liquid schemes on funds parked
in short term deposits of commercial banks - True or False ?
(a) FALSE
(b) TRUE

ANSWERS TO REAL FEEL MOCK EXAM QUESTIONS :
Correct Answer 1 cannot get any remedy from the AMC
Correct Answer 2 NAV of the day on which funds will be available
Answer
Explanation
For all Equity and Debt funds (except Liquid funds) - For investment of
below Rs 2 lacs - NAV of the same day if received before 3 pm ( cut-off
time)
For investments of amount of Rs 2 lacs and above, irrespective of the time of
receipt of application, NAV of the business day on which the funds are
available for utilisation before the cut-off time of that day is applicable.
Correct Answer 3 Building
Correct Answer 4 The change in NAV captures the scheme performance
Answer
Explanation
In Growth Option, the NAV rises or falls depending on the schemes
performance.
No dividend is declared in Growth Option.
Correct Answer 5 Short Term
Correct Answer 6 Trusts, Indian Trusts Act
Correct Answer 7 Board Resolution

Correct Answer 8 Diversified Equity Fund
Answer
Explanation
A Diversified Equity Fund invests mainly in equity for long term capital
appreciation.
Correct Answer 9 FALSE
Correct Answer 10 Schemes
Answer
Explanation
MF's have various schemes like Large Cap Funds, Mid Cap Funds. Sectoral
Funds etc. to suit varied investment requirements.
(Plans and Options are Dividend / Growth etc. which form a part of the
scheme)
Correct Answer 11 Beta Coefficient
Correct Answer 12 No
Answer
Explanation
To do away with multiple KYC formalities with various intermediaries, SEBI
has mandated a unified KYC for the securities market through KYC
Registration Agencies registered with SEBI.

Answer
Explanation
Nomination facility is also available in the case of joint holding.
Every unit-holder will have to sign the nomination form. If one joint holder
dies, then the Units will continue to be held by the surviving joint holder/s.
If all joint holders dies, then the Units will be transferred to the nominee.
Correct Answer 15 Key Information Memorandum (KIM)
Answer
Explanation
As per SEBI regulations, every application form is to be accompanied by the
KIM.
KIM is essentially a summary of the SID and SAI. It is more easily and
widely distributed in the market.
Correct Answer 16 Key Information Memorandum – KIM
Answer
Explanation
KIM is essentially a summary of the SID and SAI.
KIM.
Correct Answer 17 are traded on the Commodity Exchanges
Correct Answer 18 All of the above
Correct Answer 19 Grows at a steady rate
Answer
Explanation
Dedicated MF distributors have accumulated a portfolio of loyal investors to
whom they offer superior service.
The trail commission on these investments ensures a steadily rising income
for the distributor. Additional investments from the same investors, and other
investors referred by the current investors, help them grow the portfolio.
Correct Answer 20 Old couple with no family support

Correct Answer 21 Higher , Higher
Correct Answer 22 Arbitrage Funds are more riskier than Sectoral Funds
Answer
Explanation
Arbitrage Funds make profits by using the price differences between two
markets - so they are the least risky among Equity Funds.
Sectoral Funds are the most risk funds as they are not diversified.
Arbitrage Funds have basis risk – the risk that both cash and F&O position
on a company cannot be reversed at the same time. During the time gap
between unwinding of the two positions, the market can move adverse to the
scheme.
Correct Answer 23 TRUE
Correct Answer 24 0.35
Answer
Explanation
The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation
ie. ( Return Earned - Risk free Return ) / Standard Deviation
0.536023055
0.354466859
0.35
Correct Answer 25 15 Days
Correct Answer 26 All of the above
Correct Answer 27 Rs 10
Answer
Explanation
As per the law, every unit has a face value of Rs. 10.
However, older schemes in the market may have a different face value.

Correct Answer 28 Close Ended Fund
Answer
Explanation
The NAV falls but the units increase as more units are allotted due to
Dividend Reinvestment.
Correct Answer 30 5
Answer
Explanation
Stock Exchanges does are not required to do the role of Registrars and
Transfer Agents (RTA).
Correct Answer 32 All of above
Correct Answer 33 Elderly couple with no children
Answer
Explanation
More Allocation to debt funds is recommended for senior citizens as they
carry the least amount of risk
Young people can take risks so they are advised to invest in Equity funds for
a long term.
Correct Answer 34 Existing Investors
Answer
Explanation
For a first time investment in a mutual fund Full application form is to be
filled .
Then once an investor has a folio with a mutual fund, subsequent investments
/ sale with the same mutual fund do not call for the full application form.
Only Transaction Slip needs to be filled and submitted.

Correct Answer 35 The return is calculated over smaller time horizons
Correct Answer 36 Registrars and Transfer Agents
Answer
Explanation
The RTA maintains investor records.
The appointment of RTA is done by the AMC. It is not compulsory to
appoint a RTA and the AMC can choose to handle this activity in-house.
Correct Answer 37 Both of the above
Answer
Explanation
The cut-off timing is not applicable for NFOs and International Schemes.
Answer
Explanation
Since investors’ risk appetites vary, a single portfolio cannot be suggested for
all.
Financial planners often work with model portfolios – the asset allocation
mix that is most appropriate for different risk appetite levels.
Answer
Explanation
Floating rate funds invest largely in floating rate debt securities i.e. debt
securities where the interest rate payable by the issuer changes in line with
the market.
Since the interest rate itself keeps adjusting in line with the market, these
floating rate debt securities tend to hold their value, despite changes in yield
in the debt market.

Correct Answer 42 Regular Income
Answer
Explanation
Stock selection is important in bottom-up approach.
In a top-down approach, sector allocation is the key decision.
Answer
Explanation
KIM is essentially a summary of the SID and SAI.
KIM. So KIM is more easily and widely distributed in the market.
Correct Answer 46 Custodian
Answer
Explanation
Although the AMC manages the schemes, custody of the assets of the scheme
is with a Custodian, who is appointed by the Trustees.
Correct Answer 47 Less risky than the market
Answer
Explanation
Beta is a measure of risk of a security or a portfolio. If the Beta more than 1,
this means the security or the portfolio will rise or fall more than the index.
Similarly if the Beta of a scrip or portfolio is less than 1, this means the
security or the portfolio will rise or fall less than the index.
Correct Answer 48 Rs 50000
Answer
Explanation
Mutual funds usually do not accept cash.
However for small investors, who may not be tax payers and may not have
PAN/bank accounts, are allowed cash transactions for purchase of units in
mutual funds to the extent of Rs. 50,000/- per investor, per mutual fund, per
financial year.

Correct Answer 49 Active Funds
Answer
Explanation
In Active Funds like Diversified Equity Funds, the Fund manager does a lot
of buying / selling. Also a lot of research work goes into it. So the cost of
fund management are higher.
Correct Answer 50 2
Answer
Explanation
NAV for equity and balanced funds is to be calculated upto at least 2 decimal
places.
NAV is to be calculated upto 4 decimal places in the case of index funds,
liquid funds and other debt funds.
Answer
Explanation
Gold Sector funds invest in gold mining companies. Gold ETF merely track
the gold prices.
Answer
Explanation
The NPS offers fewer portfolio choices than mutual funds.
Correct Answer 53 Upfront Commission
Correct Answer 54 Yes, they can be charged.
Answer
Explanation
Recurring Expenses can be charged to the scheme.
Since the recurring expenses drag down the NAV, SEBI has laid down the
expenses and their limits which can be charged to the scheme.

Answer
Explanation
Some key provisions of IT Act related to Capital Gains are:
• Capital loss, short term or long term, cannot be set off against any other
head of income (e.g. salaries)
• Short term capital loss is to be set off against short term capital gain or long
term capital gain
• Long term capital loss can only be set off against long term capital gain
Correct Answer 56 The functions of Trustees and AMC
Correct Answer 57 Savings Account
Answer
Explanation
National Pension System (NPS) has two types of accounts :
1. Tier I (Pension account), is non-withdrawable.
2. Tier II (Savings account) is withdrawable to meet financial contingencies.
Correct Answer 58 Income Proof
Answer
Explanation
As per 'AMFI Guidelines & Norms for Intermediaries' (AGNI) - In the event
of breach of the Code of Conduct by an intermediary the registration can be
cancelled after the set procedure is carried out.
Correct Answer 60 Young Unmarried
Correct Answer 61 To inform the investors on the detailed information about the scheme

Answer
Explanation
Beta is a measure of risk of a security or a portfolio as compared to the
market ie. Index.
Since an Index fund invests in shares which are a part of the index, the NAV
will rise or fall as per the movements of index. So the beta is 1.
Correct Answer 64 Expenses to manage a fund
Answer
Explanation
Earlier expenses to launch a fund were charged to the fund but now they
cannot.
Correct Answer 65 a price that is linked to its NAV.
Answer
Explanation
When a scheme is first made available for investment, it is called a ‘New
Fund Offer’ (NFO).
During the NFO, investors have the chance of buying the units at their face
value.
Post-NFO, when they buy into a scheme, they need to pay a price that is
linked to its NAV.
Correct Answer 66 1:00 PM
Answer
Explanation
The cut off time is when the investment is submitted to the PoA - Point of
Acceptance is relevant – not the time when the investor submits the
transaction request to the distributor.
Correct Answer 67 to meet redemption requests or divdend payments.
Answer
Explanation
As per SEBI regulations, MF borrowing is permitted only to meet the cash
flow needs of investor servicing viz. dividend payments or re-purchase
payments.

Correct Answer 68 Non Resident Indians
Answer
Explanation
Relaxation in documentation requirements for micro-SIPs is not available for
HUFs and non-individuals.
Such relaxation is available for NRIs.
Correct Answer 69 The date when investors can go for re-purchase
Answer
Explanation
Scheme Re-Opening Date – This is the date from which the investors can
offer their units for re-purchase to the scheme (at the re-purchase price); or
buy new units of the scheme (at the sale price).
Correct Answer 70 Equity Shares
Answer
Explanation
Open-ended scheme, which have a greater need for liquidity because
investors can offer their units for re-purchase at any time - should have the
least amount of ill liquid investments in their portfolio.
ELSS Schemes have a lockin period of three years - so the fund manager can
buy more illiquid investments if he feels there is great potential in them in the
long run.
Correct Answer 72 An agreement between the AMC and the Distributor
Correct Answer 74 10th day

Correct Answer 75 balanced scheme
Correct Answer 76 (Sale Price - Cost Price) / Cost Price
Answer
Explanation
Absolute Return or Simple Return is simply the change in the value of an
investment over a period of time.
Its not calculated on a yearly basis etc.
For eg - A person bought a MF at NAV 10 and sold it after 2 years at NAV
18, then the Absolute Return is :
18 - 10 / 10 = 0.8 or 80% absolute return
Correct Answer 77 the investors who invest in various schemes of the mutual fund.
Answer
Explanation
Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund
trust, are the investors who invest in various schemes of the mutual fund.
Answer
Explanation
Investors can directly invest in MF's by visiting the MF office and other Point
of Sales (POS).
Answer
Explanation
Foreign nationals are permitted to invest in Indian mutual funds, subject to
KYC.
Correct Answer 81 NAV of the day on which the funds will be available

Answer
Explanation
AMC directors are appointed with the permission of Trustees.
Correct Answer 83 can invest thro' their guardians
Answer
Explanation
Minors i.e. persons below the age of 18 are not legally eligible to contract,
they need to invest through their Parents/Lawful guardians.
Answer
Explanation
Earlier people use to save to meet medical emergencies. But due to cash less
medical insurance people keep less liquidity with them as the insurance
companies pay for the medical bills
Correct Answer 85 Valuation Gains
Answer
Explanation
Investments owned by the scheme may be quoted in the market at higher than
the cost paid and these are called valuation gains.
Similarly, there can be valuation losses when securities are quoted in the
market at a price below the cost at which the scheme acquired them.
Correct Answer 86 30%
Answer
Explanation
Tax on dividend distributed by debt-oriented mutual fund schemes is as
follows:
Others: 30% + Surcharge + Education Cess
Individuals and HUF: 25% + Surcharge + Education Cess
Correct Answer 87 0%
Answer
Explanation
STT is not applicable on transactions in debt or debt-oriented mutual fund
(including liquid fund) units.

Answer
Explanation
When an investor chooses the Growth Option, the gains are accumulated and
he need not pay tax on the gains each year.
Only when he sells the Mutual Fund he needs to pay the tax, if any.
Correct Answer 89 Distribution of funds between various asset classes in a portfolio
Answer
Explanation
The distribution of an investor’s portfolio between different asset classes is
called asset allocation.
For eg - If an investor wishes to invest Rs 10 lakhs - His funds can be divided
and invested in Equity, Debt and Gold - This is asset allocation.
Correct Answer 90 To buy a high priced lottery ticket
Correct Answer 93 Fixed Asset Allocation
Answer
Explanation
For eg - Balanced funds adopt a stable asset allocation policies, e.g. 55:45
between equity and debt at all times, are said to be operating within a fixed
asset allocation framework.
Answer
Explanation
Investments in mutual fund units are exempt from Wealth Tax. This is
irrespective of where the fund invests and the amount.

Correct Answer 95 3rd
Correct Answer 96 Short Term Debt Funds
Answer
Explanation
If it is expected that interest rates would go up, it would be safer to go with
Short Term Debt Funds. As the rates rise, the short-term bonds would mature,
allowing the fund manager to deploy the proceeds at higher rates.
On the contrary, as interest rates in the market goes down, debt securities gain
in value. Therefore, long term debt funds would be sensible in declining
interest rate scenarios.
Correct Answer 97 Statement of Additional Information (SAI)
Correct Answer 98 No tax on Mutual Fund Dividends in the hands of the investor
Answer
Explanation
The dividend received by an investor in a MF - be it Equity or Debt, is
exempt from tax.
Correct Answer 99 Trustees
Correct Answer
100
TRUE
Answer
Explanation
SEBI has stipulated annual limits on recurring expenses (including
management fees) for various Equity and Debt schemes.
However management fees cannot be charged by liquid schemes and other
debt schemes on funds parked in short term deposits of commercial banks.

Practice Question Banks also available for :
NISM
NISM Series I: Currency Derivatives Certification Exam
NISM Series V A: Mutual Fund Distributors Certification Exam
NISM Series VI: NISM Series VI - Depository Operations Certification Exam
NISM Series VII: Securities Operations and Risk Management
NISM Series VII: Equity Derivatives Certification Exam
NISM Series III A: Securities Intermediaries Compliance certification Exam
NISM Series X A : Investment Adviser (Level 1) Certification Exam
NISM Series X B: Investment Adviser (Level 2) Certification Exam
NCFM
NCFM Financial Markets: A Beginners Module
NCFM Capital Market (Dealers) Module
NCFM Derivative Market (Dealers) Module
BSE
Certificate on Security Market (BCSM)

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