Basics and Evolution of Mutual Funds

A mutual fund is not

A company which manages an investment portfolio A portfolio of stocks, bonds and other securities A pool of funds used to purchase securities on behalf of investors A collective investment vehicle

In India a mutual fund is constituted as

A) partnership firm B) trust c) company D) government corporation

Mutual Funds can be defined as

A) a link between the saving public and the capital markets

B) " an active participant in promoting good corporate governance, investor protection" C) a participant that has brought in liquidity into the financial system D) all of the above
4

" In USA, a mutual fund is constituted as"

A) trust
B) investment company C) company D) none of the above

UTI was the only capital market intermediary

A) 1964 to 1988. B) 1963 to 1988. C) 1964 to 1992. D) None of the above

Unit holder of a MF owns

A) share in AMC
B) proportionate ownership C) no ownership

D) none

Which was the first diversified equity investment scheme in India?

A) SBI magnum
B) master share C) MEP-91

D) mastergain92

Which of the following started the first nonUTI mutual fund ?

A) financial institutions
B) co-operative societies C) public sector banks D) private sector banks

Which of the following has the largest investor base?

A) ulip

B) mastershare of uti
C) us-64 D) sbi magnum

10

US-64 of UTI :
a) Is quoted in the stock market
b) Has fixed price of sale / repurchase c) Its sale / repurchase price is declared by UTI for a specific period d) Its Price is determined by market forces

11

Which is the first Indian offshore fund?

a) India Growth Fund
b) India Fund c) India Infrastructure Fund

d) None of the above

12

Which of the following is untrue

A) UTI was set up in 1963

B) UTI was formed by RBI C) UTI was established by an act of parliament D) UTI was not given a monopoly

13

A close ended mutual fund has a fixed

A) NAV
B) fund size C) rate of return D) number of distributors

14

Which of the following is not a Mutual Fund characteristic?

a) Diversified portfolio
b) Careful research and monitoring of the market c) Substantial capital

d) Expertise in stock market

15

Which of the following benefits are not available in a Mutual Fund

A) diversification
B) tax efficiency C) ability to construct the desired portfolio D) professional fund management

16

The following characteristic is not present in an open end fund

A) facility to the investor to buy or sell back units to the fund B) regular declaration of NAV C) regular disclosure of portfolio D) A fixed unit corpus for the life of the scheme

17

Index funds aim to :

A) beat all market indices B) beat a specific market index C) track a specified index subject to a small tracking error D) invest in well researched stock to beat the popular indices

18

Which of the following statements is false

A) gilt funds have the least credit risk among various types of funds B) gilt funds nav will not fluctuate irrespective of interest rate movements C) gilt funds would not face the risk of defaulting unless the government defaults on its payments

D) gilt funds are ideal for investors whose prime aim is capital preservation with highest safety of principal amount.

19

How is UTI different from other MFs ?

A) Can borrow internally and abroad B) Can hire, lease

C) Can underwrite
D) All of the above

20

UTIs Traditional Debt Strategy has been

A) Credit Selection.

B) Duration Management.

C) Buy and Hold.

D) Prepayment Prediction

21

The 1999 Union Government Budget helped the Mutual fund industry by :
A) Regulating the practices of the MF industry
B) Approve the Code of Ethics suggested by AMFI C) Exempting all mutual fund dividends from income tax in the hands of investors

D) None of the above

22

Mutual Funds Conceptual Framework

A sponsor of a mutual fund may be compared to

A) a director in a company
B) a chief executive of a company C) a promoter of a company

D) An equity shareholder in a company

24

The Indian Trust Act provides for the following structure/s A) board of trustees, which will safeguard the interests of the beneficiaries
B) trustee company, which will safeguard the interests of the beneficiaries C) both the above D) none of the above

25

Mutual funds in India can invest in -

A) transferable securities in the capital and money markets

B) gold C) real-estate D) all of the above

26

As per SEBI guidelines, investments by all funds of an AMC in equity shares or equity related instruments of a single company are restricted to

A) 25% of nav B) 10% of nav C) 5% of nav D) no restriction from sebi

27

The following entities may be allowed by funds to act as their agents

A) individual agents B) banks C) distribution companies D) all of the above

28

If a unitholder does not agree to merger, he/she

A) is allowed to exit only in ces

B) is allowed to exit only in oes C) is allowed to exit in oes and ces

D) is allowed to exit only by sebi

29

A Trustee can be a Trustee of another mutual fund if

A) sebi approval is obtained
B) he/she is an independent trustee in both mutual funds

C) the sponsor has no objections

D) cannot be a trustee of another mutual fund

30

The AMFI objectives does not include the following

A) to improve standards of mutual fund industry
B) to regulate the stock markets along with sebi in tandem

C) to create awareness about mutual funds

D) to emphasize on ethical and moral trade practices

31

If a unit holder does not agree with a merger of mutual fund / AMC with another mutual fund / AMC then he/she can??

A) opt for withdrawal in open-end scheme

B) opt for withdrawal only when sebi allows so C) opt for withdrawal in open-end or closed-end scheme D) none of the above

32

The NAV of each scheme should be updated on AMFI's website

A) every quarter
B) every month C) every hour D) every day

33

SEBI restricts mutual fund investments in companies forming part of the same group as the AMC. This is :

A) not true
B) in the interest of investor protection C) applied only to some mutual funds, not all D) not favorable to investors at all

34

What is the minimum stake that a sponsor needs to hold in the Asset Management Company?

A) no stake required

B) 25%
C) 40% D) 50%

35

The minimum number of trustees who need to be independent persons is -

A) one-third

B) two-thirds
C) three-fourths D) one-half

36

Which of the following is not a right of the trustee

A) To appoint the AMC with prior approval of SEBI

B) approve each of the schemes floated by the AM C) ask SEBI to audit AMC to ensure compliance with regulations D) take remedial action if they believe the conduct of the AMC is not in accordance with SEBI regulations

37

Issuing and redeeming the units of a mutual fund is the role of :

A) the custodian B) the transfer agent C) the trustees D) the bankers

38

Which of the following statements is false?

A) a custodian may be an associate company of the sponsors B) a custodian is required to be registered with sebi C) a custodian handles securities in terms of physical delivery and safe keeping D) the custodian is appointed by the board of trustees
39

What does disclosure norms in case of Borrowing policy of the Mutual Fund Consist of ?
A) circumstances under which borrowings will be resorted to
B)regulatory limits on borrowings C)expected sources of borrowing and possible collateral used if any ,

D)all of the above

40

Which of the following additional activity can an Asset Management Company undertake?

A) advisory services
B) financial consulting C) both the above D) none of the above

41

LEGAL AND REGULATORY ENVIRONMENT

Which of the following is a self-regulatory organization

A) SEBI B) RBI C) NATIONAL STOCK EXCHANGE D) AMFI

43

The SEBI(Mutual Fund) Regulations came into being in the year :

A) 1994
B) 1992 C) 1996 D) 1997

44

The organization responsible for a comprehensive set of regulations for all mutual funds in India is:
A) RBI
B) SEBI C) AMFI

D) SHCIL

45

Unit-holders have the right to inspect

A) Trust Deed
B) Investment Management Agreement C) Memorandum and Articles of association of AMC

D) all the above

46

The responsibilities of a unit-holder do not include :

a) b)

Monitor his investments carefully

Being aware of information that affects his investment in a major way

c)
d)

Carefully studying the offer document

Taking decisions about where the fund managers should invest

47

A mutual fund unit holder can sue

A) AMC
B) SPONSOR C) TRUSTEES D) ALL OF THE ABOVE

48

A close-ended scheme of a mutual fund is not governed by

A) exchange rules of the stock exchange where it is listed
B) listing agreement between the fund and the stock exchange C) guidelines issued by the ministry of commerce D) companies act provisions relating to transactions in securities
49

A transfer in the management of a close ended scheme does not require the consent of
A) Unit holders with 75% voting rights
B) Sebi C) Trustees D) Amc

50

For a scheme to be able to change its fundamental attributes it must obtain the consent of
A) 50% of unit-holders B) 50% of trustees C) 75% of unit-holders D) none of the above

51

Which of the following is not a unit-holders right

a) Proportionate right in beneficial ownership of a schemes assets b) Obtain from the trustees information that may have an adverse beaming on their investment c) Inspect major documents like trust deed, AMC Agreement, Custodian Agreement, etc. d) Be informed of any planned sale of scripts held in the portfolio
52

In case of guarantee of an Assured Return who is responsible for meeting the shortfall in case the return is not achieved :
A) The AMC B) The fund manager C) The trustees

D) The sponsor

53

Which of the following organisation should an investor approach in case of grievance against a mutual fund ?
A) CONSUMER PROTECTION COURT
B) COMPANY LAW BOARD C) AMFI D) SEBI
54

Which of the following information does a fund need not release to SEBI on a periodic basis?

A) copies of audited annual statements of accounts for each scheme B) copies of six-monthly un-audited accounts
C) reasons for sale/purchase of funds holdings D) quarterly portfolio statement

55

Stock exchanges are regulated by which of the following?

A) SELF REGULATED

B) SEBI

C) AMFI
D) RBI

56

Bank owned Mutual Funds are supervised by

A) SEBI B) AMFI C) RBI D) BOTH A AND C

57

What % of investors must agree, to demand that a scheme be wound up?

A) 75% B) A simple majority

C) Only Trustees can wind up a scheme

D) 25%

58

Half-Yearly Portfolio Statement has to be published or circulated to the Unit holders within

A) 2 months from the close of each half-year B) 1 month from the close of each half-year C) 15 days from the close of each half-year D) none of the above

59

MUTUAL FUND ACCOUNTING

The expenses charged to a fund are calculated on

A) average weekly net assets B) average monthly net assets C) average quarterly net assets D) year end net assets

61

Transaction costs include all expenses related to trading such as

A) Brokerage commissions paid
B) Stamp duty on transfers C) Registrars and custodians fees D) All of the above

62

The load charged to an investor in a mutual fund is :

A) The entry fee
B) The expenses incurred by fund managers for marketing a scheme C) Cost of paper on which unit certificates are printed D) The fee the agent charges to the investor
63

What is mark to market?

a) Valuing investments at cost price

b)Valuing investments at market price

c)Valuing investments at cost or market price whichever is lower

d)Valuing investments at cost or market price whichever is higher
64

Expense ratio is defined as

A) Net investment income/net assets for the period b) Total assets of fund/total investment

c) Ratio of total expenses to average net assets of the fund d) Ratio of total expenses to NAV of the fund

65

"Load is

a) A charge borne by Fund

b) A charge borne by AMC c) A charge borne by investor d) A charge borne by Trustees

66

Recurring Expenses include

a) Penalties and fines

b) Interest on delayed payment to unit holders c) Depreciation on fixed assets d) Marketing and selling expenses of a scheme

67

The rate of wealth tax on mutual fund units is

a) b) c) d) 10% 20% 30% MF units are exempt from wealth tax

68

A debt security will be categorized as a thinly traded security if trading value during 30 days prior to valuation date is less than :
a) 10 crores
b) 15 crores

c) 20 crores
d) 5 crores

69

Which one of the following is not a component of book value per share ?

A) Share capital B) Secured loans

C) Reserves and Surplus

D) Outstanding Share Capital

70

A security having term to maturity less than 182 days to be valued on :

a) Last traded price

b) Amortised - purchase yield

c) Amortised - last traded yield

d) Amortised - straight line basis

71

In Index funds the expenses are low because

a) The fund manager does not want a large tracking error b) The equity research expenses are not incurred c) SEBI regulations stipulate lower expenses for index funds d) To complete against the actively managed funds

72

An open-end fund with 10,000 units outstanding had the following items on its balance sheet: Investments at market value Rs 100,000 Other 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
73

Calculations

NAV = (Market value of investments + Receivables + Other accrued income + Other assets) (Accrued expenses + Other payables + Other liabilities) / No. of Units outstanding as at the NAV date (Rs 100,000 + Rs 20,000) (Rs 25,000) / 10,000 = Rs 9.5

74

If a fund has Rs.110 Crores Corpus and 11 crores Units its NAV is

a) Rs.11
b) Rs. 9 c) Rs. 10 d) Rs. 10.75

75

A fund charges 2% entry load its NAV is Rs.15. An investor invests Rs.15,000. How many units will he/she get ?
a) b) 1,000 980.39

c)
d)

980
1020.40

76

Calculations
The correct answer is B as : Rs 15,000 / (15 + {2% of 15}) = Rs 15,000 / (15 + 0.3) = 980.39

77

A fund charges 1.5% exit load. An investor holds 1000 units. The investor wants to redeem today and the NAV is Rs.20. What amount will he/she get ?
a) b) c) d) 20,000 20,300 17,000 19,700

78

Calculations
The correct answer is D as : 1000 x (20 {1.5% of 20}) = 1000 x (20 0.3} = 19,700

79

An open-end fund was purchased when its NAV was Rs 20 . Sixteen months later, its NAV was Rs 22. The annualised NAV change is :
a) 8% b) 7%

c) 7.5%
d) 8.5%

80

Calculations

The correct answer is c) as : ({[2/20] /16} x 12) x 100 = 7.5%

81

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 advisory fees upto:

a) Rs. 2.25 crores

b) Rs 2 crores
c) Rs 2.5 crores d) Rs 3 crores
82

Calculations
The correct answer is A because : 1.25 crores of 1st Rs.100 crores of net assets and 1% of the balance = Rs. 2.25 crores.

83

An equity fund has Rs 1000 crores average weekly net assets under management, the maximum expenses it can charge to the fund is:

a) Rs. 25 crores

b) Rs. 20.50 crores

c) Rs. 22.5 crores d) Rs. 60 crores

84

Calculations
The correct alternative is b) as : {2.5% of Rs 100 crores}+{2.25% of Rs 300 crores}+{2.0% of Rs 300 crores}+{1.75% of Rs 300 crores} = Rs 20.50 crores

85

A debt fund has Rs 1500 crores average weekly net assets under management, the maximum expenses it can charge to the fund is:
a) Rs. 20.50 crores b) c) d) Rs. 25.50 crores Rs. 28.00 crores Rs. 29.25 crores

86

An open-end scheme floated on load basis may charge its initial issue expenses to the scheme as follows:
a) Full amount on the first day

b) Amortise the expenses over the first 10 years

c) Amortise the expenses over the first 5 years

d) Amortise the expenses over the first 3 years

87

The value of non-traded securities is assessed in which of the following ways

A) A good faith basis B) The last traded price

C) Evaluated by SEBI
D) Average share price of its competitors

88

Investment of up to Rs.10,000 in an equity linked savings scheme(ELSS) qualifies for tax rebate of

A) 20% B) 15% C) 25% D) 10%

89

An investment of Rs.100,000 with Rs.10,000 in an equity linked savings scheme(ELSS) and the rest in an Infrastructure scheme would get a tax rebate of :
A) Rs. 25,000 B) Rs. 10,000 C) Rs.18,000 D) Rs.40,000

90

Calculations

(20% of Rs.10,000) + (20% of Rs.80,000) = Rs.18,000

91

What is the rate of tax on Long Term Capital Gains in case of MF units ?
A) 20% after indexation B) 10% without indexation C) Either A or B D) Higher than A or B

92

A Mutual fund declares Re 1 as distribution.The income in the hands of unit holders is

a) taxable at 20%
b) not taxable in the hands of unitholders c) Information is inadequate to assess tax liability d) Income tax will be assessed as per unitholders liability
93

Which of the following is not true as per SEBI norms?

a) unrated securities are not to be valued
b) Bonds are valued at YTM c) Equity shares are valued at closing price in the market on the valuation date d) Benchmarking for Valuation used

94

The accounting policies of a fund should be in accordance with

a) GAAP
b)SEBI regulations c) ICAI Guidelines d) American GAAP

95

Liabilities in the balance sheet of a mutual fund are a) In the form of long-term loans
b) Strictly short term in nature c) Combination of long term and short term d) Not allowed as per regulations

96

Investments made by a mutual fund on behalf of investors are accounted as

Assets
Liabilities Capital None of the above

97

Measuring & Evaluating Fund Performance

An investor can assess his funds performance to

a) The performance of another mutual fund
b)The performance of overall stock market c) The performance of similar financial products and schemes available in the market d) All of the above

99

An equity scheme is 90 days old. To compute yield, it can use

a) Absolute returns b) Simple annualized returns c) Compounded annualized returns d) All of the above

100

A unit of an open-ended fund was purchased when its NAV was Rs 20. At year end, its NAV was Rs 22. In the interim period the dividend distribution was Rs 4 per unit. The funds simple total return was
a) 25% b) 30% c) 20% d) 31%

101

Calculations

b) is the correct answer because : [(4+2)/20] x 100 = 30%

102

The maximum term to maturity of Money Market Instruments is

a) 1 year b) 6 months c) 3 months d) 1 month

103

"Duration" refers to
a) Change in valuation of debt and equity with respect to change in interest rates
b) Change in valuation of debt securities with respect to change in interest rates c) Change in valuation of debt securities with respect to change in BSE sensex

d) Term to maturity of any debt instruments

104

Dividend Yield of a Company is the ratio of :

a) Dividend per share upon Face Value per share

b) Dividend per share upon Book Value per share c) Dividend per share upon Market Price per share d) Dividend per share upon replacement cost per share

105

In the case of a rating downgrade, the yield applicable to the instruments downgraded would
a) Rise b) Fall c) Remain the same d) The two are not related

106

The income earned such as Dividend & Interest by the schemes of a Mutual Fund are to be accounted on :
a) Accrual basis b) Receipt basis c) Combination of both d) None of the above

107

Returns in terms of NAV growth should be interpreted in light of

a) Investment objective of the fund
b) Current market conditions c) Alternative investment returns d) All of the above

108

Benefit of economies of scale is reaped by Mutual Funds because of

a) portfolio diversification
b) reduction of risks c) large volumes of trades

d) None of the above

109

The mobilization of funds by Mutual Fund industry is in the range of

a) 5% to 6% of GDS
b) 2% to 4% of GDS c) 7% to 10% of GDS

d) 25% to 40% of GDS

110

The largest corpus of investable funds in India is with

a) Bank-owned mutual funds
b) Private Sector mutual funds c) UTI d) Insurance Companies

111

The largest proportion of trades done in the wholesale debt market is accounted for by a) Mutual funds
b) Foreign banks c) Indian banks

d) Financial institutions

112

Portfolio turnover rate of a fund measures the

a) Size of the fund's portfolio
b) Amount of buying and selling done by the fund c) The average number of units sold by the fund in one day

d) None of the above

113

When comparing a fund's performance with that of its peer group,the following cannot be compared
a) b)

Two debt funds with 5 year maturities

A broad-based equity fund with an IT Sector Fund

c)
d)

A bond fund with a bond

A government securities fund with a government security

114

When comparing performance of two funds, the following need not be similar
a)
b) c) d)

Risk profiles
Investment objectives Fund size Fund managers

115

A person would prefer a bank deposit to a mutual fund only when :

A)The investor has no considerations for other investment aspects other than safety
B) The returns on bank deposits are high C) The yield on mutual funds are higher than bank deposits D) None of the above
116

The responsibilities of a unit-holder do not include :

a) b)

Monitor his investments carefully

Being aware of information that affects his investment in a major way

c)
d)

Carefully studying the offer document

Taking decisions about where the fund managers should invest

117

The most important reason for an investor to prefer a bank deposit to a Mutual fund is
a)
b)

The credit worthiness of the bank

Because the bank does not invest in securities That the bank offers a guarantee All of the above

c) d)

118

Investment Management

A Certificate of Deposit is issued by

A) Government B) Corporates C) Banks D) Trusts

120

Commercial Paper is issued by

A) Mutual funds B) Banks C) PSUs D) Corporates

121

A Mutual Funds investments are guided by

A) AMC
B) Board of trustees C) Investment objectives D) Unit-Holders

122

Index funds fall under the category of :

A) Active fund management

B) Passive fund management C) Either of the two D) None of the above

123

Which of the following debt investments need not be rated

a)
b) c) d)

Corporate bonds
Commercial paper Company deposit Debt fund

124

Yield curve is also known as

a)
b) c) d)

Curve of Interest
Term Structure of Interest Rates Curve that yields None of the above

125

Which of the following is not true about passive portfolio management ?

A) their objective is to offer a return that is equal to the return on a selected market index

B) the choice of the sample of stocks is important

C) the fund manager does not have to keep fund expenses as low as possible

D) the fund manager does not have to go through process of stock selection
126

Which of the following is not a balanced fund ?

a) 90% equity 10% debt

b) 65% equity 35% debt c) 35% equity 65% debt d) 50% equity 50% debt

127

Maximum permissible investment by a mutual fund in money market securities during the first 6 months from allotment of units in an IPO is -

a) 100 per cent b) 60 per cent

c) 50 per cent
d) Depends on whether it is an equity scheme or a debt scheme

128

Which of the following is applicable to the debt market in India ?

A) The debt market is a wholesale market

B) There are large players like banks, financial institutions and mutual funds C) Government securities are traded on a large scale

D) All of the above

129

Which of these issuers cannot issue Certificates of Deposit?

a) Scheduled Commercial Banks b) NBFCs c) Regional Rural Banks d) Financial Institutions

130

Market Capitalization refers to :

a) Total turnover of a Company

b) Employee turnover in a Company c) Total external debt outstanding of the Company d) Total number of equity shares outstanding multiplied by market price of shares

131

For debt schemes, SEBI restricts the investment in rated investment grade debt instruments by a single issuer to
a) 25% of NAV b) 15% of NAV c) 10% of NAV d) 5% of NAV

132

A bond with a coupon rate of 9% when interest rates for similar maturities are 11% will sell
a) Above par

b) Below par
c) At par d) At a price which is not related to interest rates for similar maturities

133

At what rate is Tax deducted at source in Bank Fixed Deposits in case of a Resident Indian ?

a) 10 b) 10.2

c) 20.4
d) 30

134

Yield and price of a bond move

a) In opposite directions b) Together in the same directions c) In an unrelated fashion d) In accordance with the inflation index

135

Treasury bills are issued by

a) A companys treasury department b) Nationalized banks c) RBI on behalf of the Government d) PSUs

136

How many PPF Accounts can a single person open as per the prevailing laws ?

a) 2 b) 3 c) 1 d) 4

137

A bond with face value Rs. 1000 and coupon rate of 10% is quoted in the market at Rs 1200. The current yield on this bond is :

a) 10% b) 8% c) 8.33% d) 30%

138

Calculations

The correct answer is c) as : {10% x 1000 / 1200} = 8.33%

139

A mutual fund under all its schemes taken together will not own more than ___% of listed shares of companies in the same group as the sponsor
a) 5%
b) 10% c) 15% d) 25%

140

The most important factor to look for in case of corporate fixed deposits is :

A) Credit rating of deposit and of the company

B) The yield C) The rate of return D) None of the above

141

Can one scheme of a mutual fund invest in another scheme of the same AMC
a) No b) With prior permission of SEBI c) Yes. Up to 10% of the net assets of the fund

d) Yes. Up to 5% without charging any fees

142

Can a mutual fund transfer investments from one scheme to another

a) Yes. Only with prior approval of SEBI b) No c) Yes. Only up to 10% of total investments d) Yes. Provided the transfer is at the current market rate

143

MFs can trade in derivatives subject to which of these conditions

A) Only for hedging and portfolio balancing.

B) Must disclose to investors that they will be using derivatives. C) MFs can not trade in derivatives without special permission D) Both A and B
144

Value funds invest in :

A) Equity shares with high p/e ratio B) Equity shares with low p/e ratio

C) Equity shares of companies which stand for value based business practices
D) None of the above

145

Short term maturities are considered to be

A) Less than 5 years B) Less than 1 month

C) Less than 1 year

D) Less than 5 months

146

Equity Linked Savings Scheme has the following feature

a) It entitles the unit holder for tax rebate
b) The investment is locked in for 3 years c) A minimum stated level of investments is made in equity related instruments d) All of the above

147

Which of the following is true as per SEBI norms for debt investment?
a) Investment of rated investment grade of a company should not exceed 15% of NAV
b) In case of rated as well as unrated but below investment grade, debt investment in a company should not exceed 10% of NAV d) For all companies investment not to exceed 25% of NAV d) All of the above
148

The additional yield required to account for the risk of default by the borrower is known as
a) Yield plus
b) Yield spread c) Yield extra d) Yield premium

149

Fund Distribution & Sales Practices

Mutual funds in India are open to investment by all of the following except

A) FIIs registered with SEBI

B) Foreign citizens/entities C) Non-Resident Indians (NRIs) D) Overseas Corporate Bodies (OCBs)

151

Mutual fund having its own direct marketing can market the product through

A) BANKS & FIS B) DISTRIBUTORS

C) EMPLOYEES
D) ALL OF THE ABOVE.

152

Commissions are not paid to distributors for

a) Any out of pocket expenses incurred which attracting investors

b) For bringing in the investors to the fund

c) To provide extra returns to the investors d) all of the above.

153

Which of the following sales practices is prescribed by regulation ?

A) AMFI Code of Ethics

B) SEBI Advertising Code

C) AMFIs Code for Agents

D) None of the above

154

Commission to agents is decided by

A) concerned MF
B) SEBI C) AMFI D) RBI

155

An agent's appointment by a fund

a)
b)

Requires SEBI's approval

Is a lengthy and cumbersome process Is mandatory preceded by an AMFI test

c)

d)

Does not require any approval

156

An NRI holds Units in a Mutual Fund. What should he do with his holding if he takes up a foreign citizenship?

A) he redeems
B) he continues

C) he transfers the units to his mother, who resides in india

D) none of the above

157

Securities Dealers have the following function in an AMC:

A) take investment decisions B) formulate investment proposals C) execute trades on behalf of the fund D) none of the above

158

Excess distribution expenses are to be borne by the A) AMC

B) unit holders C) SEBI D) AMFI

159

An agent can offer and sell a fund's units at

A) Any price he/she chooses
B) A price determined by competition among agents

C) A price based on demand for that fund's units

D) The public offering price currently in effect
160

AMFI code of ethics broadly covers the following areas

a) management of the fund ought to be in the interest of the unit-holders
b) high standards of service are expected from funds

c) both a and b
d) neither a nor b

161

A good agent will never sell on consideration of

a) Past record of the scheme
b) Comparative features of other MFs c) assured rate of dividend d) None

162

The Offer Document

Offer document is issued by

A) AMC
B) Sponsor C) Either of the above D) None of the above

164

Filing fees for Offer Document with SEBI is :

A) Rs. 25,000 per Offer Document

B) Rs. 25,000 per Scheme C) Rs. 10,000 per Scheme D) Rs. 10,000 per Offer Document

165

A Constant performance review can be made from all these except

A) NEWSPAPER
B) OFFER DOCUMENT C) RESEARCH PAPER

D) NEWSLETTER

166

Which is not true about KIM

A) KIM is a concise format offer document

B) KIM is given by AMC C) KIM shows the health of a fund D) none of the above

167

The following do not form a part of the investment procedure described in an offer document

A) various plans under the scheme (e.G.Dividend reinvestment plan)

B) minimum initial (and subsequent) investment C) details of who can invest D) details of other competing mutual funds

168

The front page of an offer document need not cover

A) opening, closing and earliest closing date of the offer
B) disclaimer clause C) legal and regulator compliance D) price of units

169

Key Information Memorandum is

A) An abridged version of the offer document

B) The memorandum & articles of association of the AMC C) A sheet containing historical navs of other fund schemes C) annual report of the AMC
170

An addendum giving details of material change in the offer documents should be circulated to

A) DISTRIBUTORS/BROKERS
B) UNIT HOLDERS C) SEBI D) ALL OF THE ABOVE

171

A disclosure should be made in the offer document if an AMC has invested more than the following percentage of its net assets in group companies

A) 50%
B) 40% C) 25% D) 10%

172

The prospectus of a close-ended fund is issued

A) Every year
B) Only once at the time of issue C) Every quarter D) Every six months

173

Which of the following is not true for offer documents of open-ended schemes

A) It is first issued at the time the scheme is launched

B) It is registered with SEBI C) It has to be revised periodically D) It need not be revised at all

174

Which of the following information would not be available in mutual fund offer document

A) details of the sponsor and the amc

B) description of the scheme and the investment objective C) historical statistics D) statistics of funds of other amcs in the same class of funds

175

An offer document needs to be published

A) at the time of launching the scheme
B) whenever there is any material change C) offer document once published cannot be printed subsequently D) none of the above

176

The following are not required to be disclosed in the abridged offer document

A) initial issue expenses

B) annual recurring expenses

C) transaction expenses
D) none of the above

177

In case of assured schemes which information is not required to be given in offer document
A) means of meeting the guarantee
B) all past schemes with their returns C) comparison to other funds / mf D) disclosure about the investment objective

178

Investor Services

Unit holders are entitled to receive dividend warrants within

a) 21 days b) 42 days c) 45 days d) 30 days

180

A Systematic Investment Plan is the best example of

a) Rupee Cost Averaging b) Value averaging c) Buy & Hold d) None of the above

181

Most equity scheme Unit holders redeem their units

a) Zero times per year b) Five times per year c) Twelve times per year d) Nine times per year

182

To meet redemption payments the Mutual Fund can :

A) borrow 10% of the net assets of the scheme for 1 year

B) borrow 15% of the net assets of the scheme for 1.5 years C) borrow 20% of the net assets of the scheme for 0.5 years D) borrow 5% of the net assets of the scheme for 2 years

183

Which is untrue regarding Loans against Mutual Fund units?

A) Sebi regulation permits the mutual funds to give

loans against their units B) Sebi regulation prohibits mutual funds themselves from giving loan against units C) Several banks lend to investors against mutual fund units held by them

D) Banks are usually inclined to sanction higher amount against unit holding in liquid schemes
184

A difference between AIPs and VAPs is

A) No difference
B) Only AIP offers Rupee cost averaging C) Only VAP is contractually binding D) Only AIP is contractually binding

185

If an AMC fails to honor a redemption request within 10 working days then the interest payable to unit holders is
a) 10% per annum

b) prevailing RBI rate at time of request c) 0 d) 15% per annum

186

An investor can ask for

a) Trust deed
b) Memorandum c) Offer document d) All

187

Which of the following is untrue of an automatic reinvestment plan ?

a)

The plan allows for 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 The benefit of automatic reinvestment is often lost on account of the heavy load charge on the reinvestment

b)

c)

d)

188

Tax benefits from investment in Mutual Funds

A fund acquires 100 shares in Company A for Rs 5000, it buys another 150 shares in the same Company for Rs 7000. Later it sells 50 shares for Rs 3500. What is the gain/loss on the sale?

a) b) c) d)
190

Rs. 1100 Rs. 1000 Rs. 1167 Rs. 1500

Calculations
The correct answer is a) as because : Average cost price of 1 share = 12,000/250 = Rs 48 Sale price of 1 share = 3,500/50 = Rs 70 Hence, Total gain on sale = 22 x 50 = Rs 1100

191

Tax law definition of Capital Gains is

A) Sale consideration Cost of Acquisitions B) Sale consideration + (Cost of Acquisitions + Cost of Improvements) C) Cost of transfer D) Sale Consideration (Cost of Acquisition + Cost of Improvements + Cost of transfer)
192

An investor purchased units in a mutual fund in 1995 units1000 for Rs 75,000. He sold the units in 1998 1000 units for Rs 125,000. The cost inflation index for 1995 and 1998 are 281 & 351 (D) resp. The capital gain chargeable to tax is : a) Rs. 64,957 b) Rs. 31,317

c) Rs. 50,000
d) Rs. 75,000
193

Calculations

The correct alternative is b) as : 125,000 (75,000*351/281) = 31,317

194

An investor purchased 5000 units of a mutual fund on June 15 , 1995 for Rs. 12.50. He sold them on April 14 , 1999 for Rs. 45.75. What are the capital gains chargeable to tax? ( Cost of Inflation Index for 1995-1996 was 281 and for 1999-2000 was 389) A. Rs 142,250 B. Rs.142,350 C. Rs.142,450 D. Rs.142,550

195

An investor purchased 2000 units of a mutual fund on April 1 , 1992 for Rs 10.50. He sold them on April2, 2000 for Rs. 26.75. What are the capital gains chargeable to tax? ( Cost of Inflation Index for 1992-1993 was 223 and for 2000-2001 was 406)
A. Rs. 15, 230 B. Rs. 15, 240 C. Rs. 15, 250 D. Rs. 15, 260

196

An investor purchased 5000 units of a mutual fund on May 6 , 1998 for Rs. 15.50. He sold them on April15, 1999 for Rs. 25.75. What are the capital gains chargeable to tax? ( Cost of Inflation Index for 1998-1999 was 351 and for 1999-2000 was 389) A. Rs. 51, 250

B. Rs. 52, 250

C. Rs. 53, 350 D. Rs. 54, 450

197

An investor purchased 2000 units of a mutual fund on March 31, 1992 for Rs. 10.50. He sold them on April 2 , 1993 for Rs 14.75. What are the capital gains chargeable to tax? ( Cost of Inflation Index for 1991- 1992 was 199 and for 1993-1994 was 244 )

A. Rs. 3560 B. Rs. 3660 C. Rs. 3760 D. Rs. 3860

198

An investor purchased 1000 units of a mutual fund on April 15 , 1996 for Rs. 13.75. He sold them on April 25 , 1999 for Rs. 32.75. What are the capital gains chargeable to tax? What is the amount of capital gains tax that he will pay ? ( Cost of Inflation Index for 1996-1997 was 305 and for 1999-2000 was 389)
A. 19000 and 1995

B. 15210 and 3194

C. 18250 and 1995

D. 18250 and 3194

199

An investor purchased 1000 units of a mutual fund on April 10 , 1998 for Rs 23.50. He sold them on June 14, 2000 for Rs.34.50. What are the capital gains chargeable to tax? (Cost of Inflation Index for 1998-99 was 351 and for 2000-01 was 406)
A. Rs.7100

B. Rs.7200
C. Rs.7300 D. Rs.7400

200

An investor purchased purchased 5000 units of a mutual fund on September 20, 1998 for Rs 14.50. He sold them on April 1 , 2000 for Rs 28.65. What are the Capital gains gains chargeable to tax? What is the amount of capital gains tax that he will pay? ( Cost of Inflation Index for 1998-99 was 351 and for 2000-01 was 406) A. Rs. 70750 and 7428.75

B. Rs. 59400 and 12484

C. Rs. 59500 and 12484 D. Rs. 59500 and 12474

201

Financial Planning

What is Financial Planning?

Identifying the varying needs for money. Planning ones saving and investment in a manner the enables one to achieve the prespecified goal. Both of the above. None of the above.

203

Who is a professional financial planner?

Understands the universe of investment options. Well informed on the risk and return attributes of investment options. Advises investors in financial planning and enables them to choose the right option suiting their risk profile. All of the above

204

What are the attributes of a good financial planner?

Sound understanding of the universe of investment products, their risk and return attributes, past performance, and the behaviour of portfolios of asset classes. Good grounding in tax planning and estate planning. Ability to convert life-cycles of investors into needs and preferences for financial products. All of the above.

205

How can mutual funds help in financial planning?

Offers a range of products which can be combined to create tailor-made solutions for the needs of investors. It focuses on asset allocation, rather than the individual securities. The fund portfolios are driven by pre-stated investment objectives. All of the above.

206

What are the steps involved in Financial Planning?

Establish and define the relationship with the client. Define clients goal. Understand ability to save and need for cash flows. Understand the risk tolerance of clients. Understand the tax liability and requirements of clients. Create asset allocation path. Review and rebalancing.

207

Important responsibilities of investors in the financial planning exercise?

Should set measurable financial goals. Should understand the impact of financial decisions on their cash flows and their income.

Should be willing to revise and re-balance their portfolios with

changing market conditions, performance and their changing

needs.

Investors benefit immensely by starting early and being systematic and disciplined in their approach.

208

What is wealth cycle classification of investors?

STAGE FINANCIAL NEEDS INVESTMENT PREFERENCES

Accumulation stage Investing for long term identified financial goals

Transition stage Near term needs for funds as pre-specified needs draw closer Higher liquidity requirements

Growth options and long term products. High risk appetite

Liquid and medium term investments. Lower risk appetite Liquid and medium term investments. Preference for income and debt products

Reaping stage

Inter-generational transfer

Long term investment of inheritance

Low liquidity needs. Ability to take risk and invest for the long term
Wealth preservation. Preference for low risk products

Sudden wealth surge

Medium to long term

209

What are the investment products available to investors?

Physical assets and financial assets.

Equity and Debt.

Government securities and non-government

securities.

All of the above.

None of the above.

210

The basis of genuine investment advice should be

a)
b)

The current market situation

The agent commissions paid by different funds Financial planning to suit the investor's situation

c)

d)

Planning to complete the agent's annual targets

211

What are the other investment instruments issued by govt, available to retail investors?

Public Provident Fund (PPF).

RBI Relief Bonds.

Other government schemes.

Indira Vikas Patra

Kisan Vikas Patra

Post office saving

212

Public Provident Fund ( PPF ):

15 year deposit product offered through banks. Interest fixed by government and is paid on monthly balances. Minimum investment of Rs. 100 per year has to be made. Maximum investment has been recently capped at Rs. 60,000 per year. Tax benefits under section 88 of the IT Act are available. - 20% tax rebate on investment made up to Rs. 60,000, is available for investors with taxable income of upto Rs. 1.5 lakh per annum.

213

Contd: ( PPF )

Investors with taxable income above Rs.1.5 lakh and below Rs. 5 lakh, can invest upto Rs.60,000 and avail a tax rebate of 10%. No tax rebate are allowed for investors with taxable income above Rs.5 lakhs.

Both interest receipts and withdrawal of principal are exempt from tax.
Limited liquidity is available. Investors can draw upto 50% of their 4th year balances, from the 7th year onwards.

214

RBI Relief Bonds :

Issued by banks on behalf of the RBI, these bonds

are borrowing of the central government.

Interest is fixed by the government and is paid

semi-annually.

Interest income is fully exempt from tax.

Transferable by endorsement and delivery.

215

Other Government Schemes :

Indira Vikas Patra & Kisan Vikas Patra : Instruments with fixed interest issued by central government, and sold by post office. Interest is taxable. Investor identity is protected and investment in cash is possible. Post office saving and Recurring deposits : Both are government guaranteed deposits, with fixed rate of interest. Not transferable. Attractive for their safety and cash investment options.

216

What are the principles of financial planning that investors should use in creating their investment strategy?

Harness the power of compounding.

Start investing early.

Have realistic expectations. Invest regularly.

217

What are the financial planning strategies that can be recommended to investors?

Rupee cost averaging.

Value averaging.
Jacobs rebalancing strategy. Grahams 50:50 portfolio re-balancing.

218

What is Bogles strategic asset allocation?

Older investors in the distribution phase: 50% equity : 50% debt 60% equity : 40% debt 70% equity : 30% debt Younger investors in the distribution phase: -

Older investors in the accumulation phase:

Younger investors in the accumulation phase:

80% equity : 20% debt

219

The steps in developing a model portfolio for an investor?

Develop long term goals.

Determine asset allocation.

Determine sector distribution.

Select specific fund managers and their schemes.

220

Model portfolios recommended for investors according to their life cycle stages:

Young unmarried professionals :

50% in aggressive equity funds. 25% in high yield bond funds, growth and income funds. 25% in conservative money market funds.

Young couple with 2 incomes and 2 children:

10% in money market funds. 30% in aggressive equity funds. 25% in high yield bond funds and long term growth funds. 35% in municipal bond funds.

221

Contd:

Older couple single Income :

30% in short term municipal funds 35% in long term municipal funds 25% in moderately aggressive equity 10% emerging growth equity

Recently retired couple :

35% in conservative equity funds for capital preservation /

income 25% in moderately aggressive equity for modest capital growth 40% in money market funds

222

What is the recommended portfolio for investors in accumulation phase?

Diversified Equity : Sector and balanced funds 65 80% Income and gilt funds : 15 30%

Liquid funds and bank deposits :

5%

223

What is the recommended portfolio for investors in distribution phase?

Diversified Equity and balanced funds: 15 30% Income funds : 65 80%

Cash funds :
5%

224

What are the steps in selection of an equity fund?

Classify into broad categories that signify their risk and return characteristics.

Classify the funds on the basis of their fund manager style.

Evaluate the performance of the scheme. Understand the structural characteristics of the scheme:

Size of the fund Fund age Portfolio managers experience Costs of investing

225

Understand the portfolio characteristics of the scheme.

What are the steps in selection of a bond fund?

Fund age and size.

Relative yield.
Costs. Quality of the portfolio. Average maturity.

226

What are the steps in selection of a money market fund?

Lower expense ratios. Higher credit quality of the portfolio Yield

227

An open ended mutual fund is one that has

a) an option to invest in any kind of security

b) units available for sale and repurchase at all times c) an upper limit on its NAV

d) a fixed fund size

228

"Because the fund stands ready to redeem units at any time, units in an open-end fund are always worth their"
a) Net Asset Value
b) Asset Revenue. c) Selling price

d) Par value.

229

A mutual funds balance sheet on the liability side has

a) Single class of capital
b) Two classes of capital c) Debt and equity

d) Only debt

230

A 55 year old retired person with 25% equity and moderate risk appetite should be advised to invest in:
a) Balance fund
b) Value fund c) Diversified equity fund d) Growth fund

231

A 55 year old retiree is in stage

a) Accumulation stage
b) Growth stage c) Distribution stage d) Income stage

232

Which one of the following statement is false?

a) Beta of 1 means the fund moves along with the market.

b) Higher beta portfolios gives higher return in bull market and higher loss in the bear market. c) Lower beta portfolio gives lower returns in the bull market and lower loss in the bear market

d) Higher beta portfolios gives lower return in bull market and lower loss in the bear market
233

A Fixed Term Plan Series is

a) An open-ended fund
b) A close-ended fund c) A fixed term bank deposit d) A fixed term corporate bond

234

A value manager does not look for

a) Stocks that are currently undervalued in the market

b) Stocks whose worth will be recognized by the market in the long term c) High current yield d) Long term capital appreciation

235

Fundamental analysis involves

a) Checking the foundations of the company's factory building

b) Research into the operations and finances of the company c) Studying the company's share prices d) None of the above

236

When expecting a fall in market price, fund managers can reduce the loss in portfolio value by
a) Speculating b) Not buying and selling shares at all for some days

c) Using equity derivatives

d) Giving TV Interviews to improve sentiment

237

Continuous tracking of the companies in which a mutual fund has invested in equities is done by
a) Continuous tracking systems
b) Equity analysts c) Trustees

d) Security dealers

238

The transition phase of an investors wealth cycle is when

a)

The financial goals have been already met

The investor has retired

b)

c)
d)

Financial goals are approaching

Investor suddenly gets a windfall

239

An actively managed equity fund expects to

a)
b)

Be able to beat the benchmarks

Earn the same returns as the benchmark Have no benchmarks Under perform when compared with the benchmark

c) d)

240

An investor approaches you to build his portfolio.How will you build it?

a) Selection of sector, selection of fund managers and schemes, classification of assets"

b) " Classification of assets, Selection of sector, selection of fund managers and schemes" c) " Selection of fund managers and schemes, Selection of sector, Classification of assets"

d) " Selection of sector, classification of assets, selection of fund managers and schemes"
241

Recommending Financial Strategies to Investors

A criticism of Rupee Cost Averaging is:

a) Investment is for the same amount at regular intervals b) Over a period of time, average per share price will be more than guessing highs and lows c) It does not tell you when to buy, sell or switch from one scheme to another d) Rupee Cost Averaging has no serious shortcomings

243

Value investment means

a) investing based on attractiveness of sector.

b) investing based on P/E of company as compared to an industry. c) investing with the intention of unlocking an intrinsic value.

d) investing in companies that have good dividend yield

244

" When interest rates rise, a Debt fund"

a) increases in value b) decreases in value

c) is not affected by interest rate

d) None of the above

245

Which of the following is not a characteristic of company fixed deposits

a) A higher rate of interest
b) Higher risk c) Unfavorable effect of tax d) Very high liquidity

246

If an investor failed to claim his redemption proceeds within 3 years, he can claim the proceeds at
a) b) c)

Par
Prevailing NAV The NAV on the date he has applied for redemption 15% below the prevailing NAV

d)

247

Which of the following is not considered for technical analysis

a)

Historical data on the company's share price

The company shares trading volume

b)

c)
d)

Current market sentiment

The companys regulatory environment

248

A put provision in a debt issue allows

a)

Investor to put away the certificates in safe deposit vaults

Investors to redeem debt prior to maturity Issuers to redeem debt prior to maturity Investors to extend the tenure of debt

b)

c)

d)

249

To compare bonds with different coupon rates, maturities and prices, investors would use:

a)
b) c) d)

Current yield
Technical analysis Yield to maturity Fundamental analysis

250

A high P/E multiple in comparison to average market multiple could be of a

a) Value fund

b) Growth fund c) Balanced fund

d) Equity diversified fund

251

"For which of the following instruments is credit rating desirable?"

a) Treasury bills issued by the Government of India
b) Medium term dated securities issued by the Government of India

c) Insurance policies issued by the LIC

d) Debentures issued by the private corporate sector

252

A credit selection debt strategy is defined as the following:

A) Buying high yielding debt securities that give

adequate returns on the overall portfolio.

B) Altering average duration of bonds depending on market predictions. C) Buy/Sell in anticipation of change in credit rating
D) None of the above
253

According to Bogle, the strategic allocation for older investors in accumulation phase should ideally be

a) 50/50 b) 60/40 c) 70/30 d) 80/20

254

Quantitative Analysis may use :

a) Share price data b) Mathematical models c) Financial performance data d) All of the above

255

Selecting the Right Investment Products for Investors

Factors to be considered while investing in an equity fund are

a) Past Returns b) Portfolio Managers experience c) Cost of investing d) All of the above

257

Arrange the fund types starting from lowest risk to highest risk
1) 2) 3) 4) Sector funds Balanced fund Diversified equity fund Money Market fund b 4, 3, 2, 1 d 3, 4, 2, 1

a 4, 2, 3, 1 c - 3, 2, 1, 4

258

What is the risk profile of a fund having 35% exposure to equities ?

a) Low
b) Moderate c) Aggressive d) Very Aggressive

259

What is the risk measure of a debt fund ?

A) Duration = Weighted average maturity of debt instruments

B) Duration= Longer and shorter maturity / 2 C) Duration= Weighted average of credit rating

D) Duration = Weighted average beta of the debt funds

260

A high portfolio turnover means :

A) The fund is very active in the market B) Transaction costs are high

C) A high risk is involved as per the investment objectives D) All of the above

261

A longer maturity has the following impact on its price risk in case of interest rate fluctuation
a) Risk increases with longer maturity b) Risk decreases with longer maturity c) Price risk depends solely on credit rating of the issuer d) None of the above

262

What is the measure of market risk?

a) Mean
b) Beta c) Standard Deviation d) Alpha

263

The most significant risk in a well-diversified debt scheme is -

a) Re-investment risk
b) Credit risk

c) Interest rate risk

d) Liquidity risk

264

The following investments are not affected by price risk in case of interest rate movement
a) Company debentures b) Institutional bonds c) Mutual funds d) Floating rate bonds

265

Ex-Marks (or R-Squared factor) 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

266

Ex-marks with 100 % could be for the following fund:

a) Growth fund
b) Index fund c) Value fund d) Balanced fund

267

Past performance of a sponsor/AMC mutual fund is not indicative of the future performance of the scheme. This is
a) Not true
b) A standard risk factor for all schemes c) A scheme-specific risk factor d) Applicable only to gilt funds

268

There is no contractual guarantee for repayment of principal or interest to an investor

a)
b) c) d)

Bank deposit
Debt fund Secured debentures All of the above

269

Equity price risks are

a)
b) c) d)

Company specific
At Market level Sector specific All of the above

270

It may not be possible to reinvest interest received at the same rate as principal. This is known as
a)
b) c) d)

Reinvestment risk
Inflation risk Interest-rate risk Call risk

271

As compared to a fund with fluctuating total returns, a fund with stable positive earnings

a)
b) c) d)

Gives higher returns

Is less risky Gives lower returns Is more risky

272

Which of these credit ratings signifies "Highest Safety"?

a) A b) AA+ c) AAA d) AA

273

Equity Warrants differ from Stock Options in that :

a) They are compulsorily converted into equity while

options are not b) They are issued by the company while stock options are not c) They do not have a predetermined conversion price like options. d) None of the above
274

MMMF is most likely to invest in :

A) Corporate bonds B) Equity shares

C) Rated instruments
D) G-Sec of less than 1 years maturity

275

Which of the following are not Speciality Funds?

a) Sectoral Funds b) Corporate Bond Fund c) Gilt Fund d) Income Fund

276

An equity fund that aims to capture the most actively traded stocks invests in

a) small cap stocks b) large cap stocks c) technology stocks d) all of the above

277

Historically, benchmarking of Funds in India was done by comparing

a) Bank Interest Rates in India b) US Interest Rates c) Either of the two d) Neither of the two

278

The steps involved in selection of Equity fund are

a) " Selection of sector, selection of fund managers

and schemes, classification of assets"

b) " Classification of assets, Selection of sector, selection of fund managers and schemes" c) " Selection of fund managers and schemes, Selection of sector, Classification of assets"

d) " Selection of sector, classification of assets, selection of fund managers and schemes"
279

"In which of the following markets, can individuals not participate directly?"

a) Call money market

b) Badla market at the BSE c) Equity market at the NSE d) Debt market at the NSE

280

Which of the following is not true for Index Funds

a) These funds invests in the shares that constitute a specific index
b) The investment in shares is in the same proportion as in the index c) These funds take only the overall market risk d) These funds are not diversified
281

Indira Vikas Patra is an investment product popular with

a) Rural investors
b) Investors in high tax bracket c) Urban investors d) Risk taking investors

282

The tenure of an Indira Vikas Patra is

a)
b) c) d)

7 years
6 years 5 years 3 years

283

The amount an insurance company would pay to the nominee if a policyholder died is known as the
a)
b) c) d)

Premium
Sum assured Face value Real value

284

Which of the following is generally true for a growth stock

a)

Steady capital appreciation and steady dividends yields High capital appreciation and high dividend yields High capital appreciation but low dividend yields Steady capital appreciation but high dividend yields

b)

c)

d)

285

The biggest disadvantage of investment in real estate is

a)

Less potential for capital appreciation

High purchase price Depreciation in value as time passes

b) c)

d)

Value gets eroded due to inflation

286

A Fund that stands ready to buy and sell units at any time is a :

a) Closed-end fund
b) Open stock fund c) Mutual closed fund

d) Open -end fund.

287

Which of the following is not a common classification group for stocks?

A) Cyclical stocks

B) Recovery stocks

C) Growth stocks
D) Value stocks

288

The difference between ordinary and preference shares is

A) Preference shares dont pay any dividend

B) Preference shares entitle the holder to fixed dividends subject to availability of profits after tax C) Only ordinary shares entitle the holder to voting rights D) Both B and C
289

An Investor in a close-ended mutual fund can get his/her money back by selling his/her units
a) back to the fund
b) to a special trust at NAV c) on a stock exchange where the fund is listed

d) to the agent through which he/she subscribed to the units of the fund

290

Government Securities typically pay interest

a) Annually b) Quarterly c) Do not pay interest d) Semi-annually

291

Money market instruments do not cover :

a) Commercial paper & Certificate of Deposit b) Call & Notice money c) Treasury Bills d) Government Securities having 10 year maturity

292

Debentures differ from fixed deposits in respect of

a) Interest rates b) Security c) Liquidity d) End use of funds

293

Which of the following are important criteria for comparison of fund performance ?

a) Portfolio composition
b) Maturity profile c) Fund size d) All the above

294

A 25 year old MBA has joined as Management Trainee in HLL. He approaches you for advice on investing his monthly savings. The investments are long term in nature. What asset allocation would your suggest? a) 100% investment in equity schemes b) Investment in bank and company deposits c) 70/30 allocation between equity and debt schemes d) 100% investment in debt schemes
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Two funds A & B have identical returns history. Fund A has a higher standard deviation than fund B. Which fund is suitable for a risk averse investor?
a) Fund A b) Fund B c) The above information has no relevance to the risk measure of funds d) Since the data is only for the past period, once cannot draw conclusion based on it
296

Which is a better investment option whilst selecting an equity fund?

a) Ex Marks- 80%, Beta- 0.9, Gross Dividend Yield- 8% b) Ex Marks- 90%, Beta- 0.8, Gross Dividend Yield- 9%

c) Ex Marks- 75%, Beta- 0.9, Gross Dividend Yield- 8%

d) Either 1 or 3

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There are 2 equity funds A & B with beta co-efficient of 0.70 & 1.30 resp. A risk averse investor seeks your advice on the choice between these 2 funds. Which would you suggest:

a) Fund A b) Fund B c) 50:50 allocation between the 2 funds d) None of the above

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Which of the following Fixed Deposit can be recommended to investor ?

a) Company giving highest returns without Rating b) Company giving moderate returns with highest Ratings c) Company paying maximum brokerage d) Well Known companies FD

299

For which of the following funds would you consider average maturity as an important factor in selecting the right one for the investor ?
A) A Debt Fund B) A Balanced Fund C) A Money Market or Liquid Fund

D) Both A and C

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An investor in need of regular income should not select :

A)A bank deposit
B) A debt fund

C) An equity growth fund

D) PPF

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