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1)

A mutual fund is not a) A company that manages an investment portfolio. b) A portfolio of stocks, bonds and other securities. c) A pool of funds used to purchase securities on behalf of investors d) A collective investment vehicle.

a) Majority of Directors Trustee b) 50% of the Unitholders c) 45% of the Unitholders d) 60% of the Unitholders 11) a) b) c) d) 12) a) b) c) d) 13) a) b) c) d) 14) a) b) c) d) 15) a) b) c) d) 16) a) b) c) d)

of

the

a) b) c) d)

Which of the following is true? Some close end funds sell at a discount to their NAV, because Of high expense ratios Investors expect that current NAV cannot be sustained by future potential The repurchase price fixed by the fund is lower than the NAV Of the inherent risk of closed end funds. 3) If the entry load is 2% and the NAV is Rs. 10, then the investor will have to pay for 1000 units Rs. 15000 Rs. 8000 Rs. 12000 Rs. 10200 Which of the following Mutual Funds was not set up within the Phase 2:1987-1993? Canbank Mutual Fund Kothari Pioneer Mutual Fund SBI Mutual Fund LIC Mutual Fund

2)

The Asset Management Company shall make investment decisions solely in the interest of The sponsor The Trustee The Unit Holders Its Employees Mutual funds in India are set up as a Company Trust Partnership Association of Person Minimum number of independent directors on the board of asset management company is 50% 25% 75% Two-thirds Under the Indian Trusts Act, the interests of the unit-holders is safeguarded by A board of trustees A trustee company Either Neither The asset management company is appointed by SEBI Unit holders Sponsors Trustee Who needs to sign the trust deed with the trustee? Asset Management Company Sponsor Custodian All of the above Which of the following qualifies as a self-regulatory organization? SEBI RBI National Stock Exchange AMFI Whose consent is required to approve a change in the fundamental attributes of a closed end schemes? 50% of the unit holders 50% of the trustees 75% of the unit-holders None of the above Which schedule of SEBI (Mutual Fund) regulations 1996 specifies the contents of the Trust Deed? Eleventh Schedule Eighth Schedule First Schedule Third Schedule

a) b) c) d) 4) a) b) c) d) 5)

a) b) c) d)

Which of the following is not a benefit from a Mutual Fund? Investor has custody of securities where fund invests. Investor is able to diversify risk Investor can save costs Investor can get professional management to manage his money. 6) Which of the following has the lowest risk? Liquid Fund (MMMF) Gilt Fund Diversified debt fund Diversified equity fund The current Mutual Regulations from SEBI introduced in 1992 1994 1996 1998 Fund was

a) b) c) d) 7) a) b) c) d) 8) a) b) c) d) 9) a) b) c) d) 10)

17)
a) b) c) d)

18)

The sponsor of a mutual fund may be compared to: A director in a company The chief executive of a company The promoter of a company An equity shareholder of a company Issuing additional fresh units and redeeming the existing units of a mutual fund scheme is the role of: The custodian The transfer agent The trustees The bankers The appointment of AMC for the Mutual Fund can be terminated by

a) b) c) d) 19) a) b) c) d) 20)

In case of a dispute, against whom can the Unitholders initiate legal proceedings? a) Trust

b) Trustee c) AMC d) None of the above 21) a) b) c) d) Mutual Funds are regulated by RBI AMFI SEBI NSE The body to which investors may address their complaints is SEBI RBI IRDA NSE The first-time investor would be well-advised to refer to: Detailed Offer Document The Key Information Memorandum only. Either of the above None of the above Which of the following is true of the offer document? Investor gets all the information to evaluate the performance of the proposed scheme Investor gets useful information to evaluate the performance of the AMCs past schemes Investor does not get any information on services he can expect from the fund. Investor will not be able to assess the risks of the proposed scheme based on the offer document The Abridged Offer Document contains the address of the following: The Trustees of the Mutual Fund The Directors of the AMC The Registrar and Transfer Agents Options a & b Options b & c Validate the statement The investor is not obliged to read the offer document before investing in units of a scheme. Completely true Rarely true Completely false Partly false Offer documents have to be updated within One year from the date of Issue Two years from the date of issue Six months from the date of issue None of these The front page of the document contains Date of its publication Name and type of the fund Major objectives of the fund a&b offer

d) Advice from the distributor

30)
a) b) c) d) 31) a) b) c) d) 32) a) b) c) d) 33) a) b) c) d) 34)

Which of the following distribution channels is preferred by private mutual funds? Individual distributor Small distribution companies Established distribution companies The Internet Which of the following sales practices is prescribed by regulation? AMFI Code of Ethics SEBI Advertising Code AMFIs code for agents None of the above Risk factors may not be mentioned in Product launch advertisement Tombstone advertisement Performance advertisement All of the above advertisements An NRI holds units in a mutual fund. What should he do with his holding if he takes up a foreign citizenship? He redeems He continues He transfers the unit to his mother, who resides in India None of the above the the the the the the

22) a) b) c) d) 23) a) b) c) d) 24) a) b) c) d)

25) a) b) c) d) e) 26)

MF Regulations prescribe a) The minimum commission of distributor b) The maximum commission of distributor c) The minimum as well as maximum commission of distributor d) Neither the minimum nor maximum commission to distributor

35) a) b) c) d) 36)

Which of the most appropriate position under MF Regulations? Buyer beware Buyer is always right Seller is always right Seller is guilty unless proved right According to SEBIs code for mutual fund advertisement, for funds that have been in existence for more than a year, annualized returns have to be furnished for 1 yr, 3 yr, 5 yr. and since launch 1 yr, 5 yr and since launch 1 yr, 3 yr and since launch 1 yr, 3 yr and 5 yr

a) b) c) d) 27) a) b) c) d) 28) a) b) c) d) 29)

a) b) c) d) 37)

To a prospective investor the reliable source of pertinent information about a scheme is a) Financial Press b) Offer document c) AMFI Website

An open-end fund with 10,000 units outstanding had the following items in its balance sheet: Investment at market value Rs. 1,00,000 Current Assets Rs. 20,000 Current Liabilities Rs. 25,000 Calculate the funds NAV per unit. a) Rs. 9.5 b) Rs. 12 c) Rs. 10 d) Rs. 14.5 ([1,00,000 + 20,000 25,0000]/10,000) 38) A closed-end equity fund has average weekly net assets of Rs. 200

crores. As per SEBI Regulations, the AMC can charge the fund with investment and advisory fee upto: a) Rs. 2.25 crores b) Rs. 2 crores c) RS. 2.5 crores d) Rs. 3 crores (1.25% of 1st Rs. 100 crores of net assets and 1% of the balance) 39) An investor purchased units in a mutual fund in 1995 for Rs. 75000. He sold the units in 1998 for Rs. 125000. The cost inflation index for 1995 and 1998 are 281 (C) and 351(D) respectively. The capital gains chargeable to tax are: 64,957 31,317 50,000 75,000 [1,25,000(75000*351/281)] Income earned by a Mutual Fund registered with SEBI is exempt from Income-Tax as per section 10(23D) 10(33) Total Income is taxable @ 33.2% 88 Unit capital of a mutual fund scheme is Rs. 20 million; The market value of its investments is Rs. 55 million; The number of units is 1 million. The NAV is Rs. 20 Rs. 75 Rs. 55 Not possible to say Which of the following is untrue of the Automatic Reinvestment Plan? The plan allows for automatic reinvestment of all income and capital gains. Automatic reinvestment allows for the accumulation of additional units of the fund The major benefit of automatic reinvestment is the compounding of returns The benefit of automatic reinvestment is often lost, if reinvestment is subject to a heavy load Constraints imposed by most funds on check-writing include: Requirement of minimum account balance after withdrawal Specification of a minimum amount for which check can be issued Limit on the number of checks that are allowed to be issued in a month Both 1 and 2 above Which of the following is true of Systematic Withdrawal Plan (SWP)? It allows investors to make Systematic withdrawal from his fund It is suitable for investors seeking regular income SWP is similar to Monthly Income Plan Only 1 & 2

45) a) b) c) d) 46) a) b) c) d) 47) a) b) c) d)

Choose the correct Statement Alternative Investment Plans offered by fund allows investors: Freedom with respect to investing one time or at regular intervals Making transfers to different schemes with the same fund family Receiving income at specified intervals or accumulating distributions All the above The current market price of a 9% coupon bond, when other bonds of similar maturities pay 11% will be: Above par Below par At par will be unrelated to other bonds Yield and Price of a bond move: In opposite directions Together in the same direction In an unrelated fashion In line with the inflation index SEBI places a limit on a schemes investment in investment grade rated debt instruments of a single issuer, because: Even investment grade securities carry risks of default by borrower A scheme must diversify its holdings and thus reduce portfolio risk Investment Grade ratings cannot be solely relied upon SEBI wants to leave some for investment in non-investment grade securities by the scheme Technical Analysis tries to predict future movement of stock price by analyzing: The financial workings of a Company The stock price movements of a Company Both of the above None of the above An investor purchased an open-end fund when its NAV was Rs. 20. 16 months later, its NAV stood at Rs. 22. The percentage NAV change in the fund was: 8% 7% 7.5% 8.5% ({[2220]/20}/16)*12} *100 = 7.5% A unit of open-end fund was purchased when its NAV was Rs. 20. At year-end its NAV was Rs. 22. In the interim period, the fund made a distribution of Rs. 4 per unit when its NAV was Rs. 21. What was the simple Total Return of the Fund? 25% 30% 20% 31% ({4+[22-20]}/20)*100 = 30%) Which of the following is false?

a) b) c) d) 40) a) b) c) d) 41)

48)

a) b) c) d)

a) b) c) d)

42)
a) b) c) d)

49) a) b) c) d) 50)

43) a) b) c) d) 44) a) b) c) d)

a) b) c) d) 51)

a) b) c) d) 52)

a) ROI is a measure similar to Total Return with reinvestment of distributions b) Total Return with reinvestment of distributions assumes reinvestment at NAV on the distribution date c) As a measure of performance, Total Return with reinvestment of distributions seeks to overcome the shortcomings of simple Total Return d) Because of its simplicity, simple Total Return is preferred in practice to Total Return with reinvestment of distribution 53) Return can be annualized and compounded only if the Scheme has completed a) 30 days b) 12 months c) 6 months d) 24 months 54) a) b) c) d) 55) An equity scheme is 90 days old. To compute its yield, it can use absolute return simple annualized return compounded annualized return any of these

59) a) b) c) d) 60) a) b) c) d) 61) a) b) c) d) 62) a) b) c) d) 63) a) b) c) d) 64) a) b) c) d) 65) a) b) c) d)

A criticism of rupee-cost averaging is Investment is for the same amount at regular intervals Over a period of time, average per share price will be more than guessing the highs and lows It does not tell you when to buy, sell or switch from one scheme to another Rupee cost averaging has no serious shortcomings 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? SIP is best example of Rupee Cost Averaging Value Averaging Buy & Hold None of the above Direct investment in stock markets can be better option over investing through mutual funds if: The investor wants better returns than those offered by mutual funds The investor has large capital, knowledge and resources for research The investor has identified a bullish phase in the stock market The investor wants to invest for the long run An investor in need of regular income should not select: A bank deposit A debt fund An equity growth fund PPF Which of the following has the highest level of liquidity? Equity PPF Company fixed deposits Mutual Funds Which of the following should not be viewed primarily as an investment option? Mutual Funds Equity shares Life Insurance None of the above

Financial Planning is a) Investing funds to receive the highest rate of return possible b) Resorting to tax planning to keep taxes as low as possible c) Planning for retirement with the maximum income possible. d) Process of solving financial problems and reaching financial goals. Your client has won Rs. 1 crore in Karun Banega Crorepati. What would your suggestion be? Invest the entire amount without any delay in old economy stocks since they are back in favour Invest the entire amount immediately in an Equity Index Fundsince the index is at a historic low Invest in very safe liquid investment options and take the time needed to work out a financial plan Invest immediately in IT stocks, since their valuations are now considered to be attractively low Which one of the following portfolio is most risky? 75% Equity 25% debt 40% Equity 60% debt 60% Equity 40% debt 80% Equity 20% debt 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

56) a) b)

c)

d)

57) a) b) c) d) 58) a) b) c) d)

66)

An investor asks you in what order he should list the following schemes, going from the scheme with the least risk to the one with the one with the highest risk 1. A Balanced Fund, 2. A Stock Index Fund, 3. A Liquid (Money Market) Fund and 4. A Pharmaceuticals Sector Fund. a) 1, 2, 3, 4 b) 1, 3, 4, 2 c) 3, 1, 2, 4

d) 2, 3, 1, 4

c)

67)

Ex-Marks (or R-Squared factors) of a fund measures a) How much of a funds NAV movement is due to the market index movement b) How a funds NAV movement relates to the market index movement c) How much of a fluctuation has occurred in a funds NAV over a historical period d) How many marks a Credit rating Agency accords to a fund Which is better investment option whilst selecting an equity fund? a) Ex Marks 75%, Beta 0.9, Gross Dividend Yield 8% b) Either a or c c) Ex Marks 80%, Beta 0.9, Gross Dividend Yield 8% d) Ex Marks 90%, Beta 0.8, Gross Dividend Yield 9% What type of portfolio asset mix would recommend to your 55 year old client who plans to retire at age 58? Choose a portfolio that is the closest match to the investors needs. 40% in Equity Schemes and 60% in Balanced Funds. 40% in Equity Schemes and 60% in Debt Funds 20% in Equity Schemes, 20% in Liquid Funds and 60% in Debt Funds 100% in Monthly Income Statements For which of the following funds would you consider average maturity as an important factor in selecting the right one for the investor? A Debt Fund A Balanced Fund A Money Market or Liquid Fund Both a and b above

encourages them to refrain from rebating the commissions to such investors, but does not prohibit d) prohibits them from rebating the commissions back to all investors 73) Mutual funds in India are required by SEBI to a) prohibit their employees from personal trading in secondary markets b) allow all employees to trade freely in secondary markets without restrictions c) to establish a code of conduct and allow employees to do personal trading that conforms to SEBI guidelines d) allow employees to carry on personal trading as long as they abide by SEBI guidelines

68)

69)

a) b) c) d) 70)

a) b) c) d)

71)

Which of the following Portfolios would you recommend to a recently retired Couple? a) 35% in Conservative Equity Funds, 25% in moderately aggressive equity, 40% in money market funds. b) 30% in short term municipal funds, 35% long term municipal funds, 25% moderately aggressive equity, 10% in emerging growth equity c) 50% in aggressive equity fund, 25% in high Yield bond funds and growth and income funds, 25% in conservative money market funds d) Either 2 or 3 AMFI Code of Conduct for Intermediaries a) prohibits mutual fund distributors from accepting commissions from an investor who renew his investment in a scheme b) prohibits them from rebating the commission back to such investors

72)