AMFI Practice Test

Series B

1. Which of the following is generally true for a growth stock?

a. Steady capital appreciation and steady dividends yields
b. High capital appreciation and high dividend yields
c. High capital appreciation but low dividend yields
d. Steady capital appreciation but high dividend yields

2. A fund's declared NAV does not include loads

a. True
b. False

3. All expenses and income accrued upto the valuation date shall be considered for valuation. Some
minor expenses need not be so accrued, provided their affect on the NAV is not more than:
a. 2%
b. 1.5%
c. 0.5%
d. 1%

4. When a scheme with assured returns is being launched, which of the following need not be
published in the offer document?
a. Means of fulfilling the guarantee
b. Information for all schemes launched by the fund in the past
c. Comparison with other mutual funds
d. Investment objective
5. NAV of a fund is 14, Entry Load is 2.25%. Calculate the price at which the investor will be able to
500 purchase units.

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

a. Every quarter
b. Every month
c. Every hour
d. Every day

7. NAV of a scheme is 20. Exit Load is 1.5%. What will be the price at which the investor will be able
to sell units?

8. Which of the following would you suggest if your client suddenly wins Rs. 1 cr in a game show
a. Invest the whole amount in equity directly
b. Invest half in equity mutual funds and the other half in debt mutual funds
c. Invest in a money market mutual fund till the time he decides on the use of the money
d. Spend, gift and invest as per his wish

9. Which of the following are not true for ELSS?

a. Investor can claim an income tax benefit
b. There is a lock-in period before investment can be withdrawn
c. There are no specific restrictions on investment objectives for the fund managers
d. These funds cannot invest in shares of listed companies

10. The prospectus of the OD containing the details of a new scheme is first registered with
a. AMFI
a. SEBI
b. BSE
c. Ministry of Finance

11. A no-load fund is one in which?

 a. Entry load is not charged
b. Exit load in not charged
c. Entry load as well as exit load is not charged
d. The initial issue expenses are not charged to the investor

12. If the NAV of an open-ended fund increased from Rs. 16 to Rs. 20 in 6 months, the absolute
return is
a. 6.00%
b. 34.60%
c. 25.00%
d. 37.50%

13. A Mutual fund can benefit from economies of scale because of:
a. Indirect investment
b. Large volumes of trade
c. Portfolio diversification
d. Fund manager

14. The structure, which is required to be followed by mutual funds in India, is laid down by:
a. Finance ministry
b. SEBI
c. Fund Sponsor
d. AMFI

15. The Board of trustees of a mutual fund

a. Act as a protector of investor’s interest
b. Directly manage the portfolio of securities
c. Do not have the right to dismiss the AMC
d. Cannot supervise and direct the working of the AMC

16. The fund sponsor has to contribute:

a. Nothing to the AMC
b. The total Net Worth of the AMC
c. At least 40% of the AMC’s net worth
d. Exactly 50% of the net worth of AMC

17. Special Privileges of erstwhile UTI include

a. Assured return schemes
b. Guarantees
c. Ability to take/make loans
d. All of the above

18. The most important factor to look for when investing in a corporate fixed deposit is the
a. Yield
b. Rate of interest
c. Credit rating of the deposit
d. None of the above

19. Risk arising from a scheme’s investment objective/strategy and proposed asset allocation is
a. Not a risk at all
b. Common to all schemes
c. Specific to that scheme
d. Not applicable to debt funds

20. The role of AMFI in the MF industry is not to:

a. Promote the interest of the unit holders
 b. Set a code of ethics
c. Regulate mutual funds
d. Increase public awareness of MFs in the country

21. Loads are recovered

a. From agents and distributors
b. As a fixed amount each year
c. At the time of investor’s entry or exit
d. None of the above

22. Which of the following is true about the fundamental attributes of a scheme
a. Investment objectives of a scheme are not a fundamental attribute
b. These can be changed after informing investors and taking approval from SEBI and Trustees
c. OD need not be updated after change in fundamental attributes of a scheme
d. All are false

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

a. Assets
b. Liabilities
c. Capital
d. None of the above

24. The NAV of an Open-ended scheme is 15. What can be the maximum entry load charged to the
investor?
a. 2.25% of 10
b. 2.25% of 15
c. 7% of 15
d. 7% of 10

25. A high portfolio turnover for a fund indicates

a. That the fund is active
b. Higher transaction cost
c. Both of the above
d. None of the above

26. Which of the following is not an equity instrument?

a. Preference shares
b. Equity warrants
c. Ordinary debentures
d. Convertible debentures

27. Retired investors should

a. Not draw down on their capital
b. Not invest in securities which bear risk of capital erosion
c. Continue holding some proportion of their holdings in equity growth funds
d. Never invest in equity

28. The code of conduct may be put in place by:

a. AMFI
b. Board of Trustees
c. Directors of AMC
d. All of the above

29. The expense ratio is not affected by:

a. Fund size
b. Average account size
c. Portfolio composition
d. Stock market conditions
30. Which of the following transaction cost are not quantified in the offer document?
a. Brokerage commission
b. Dealer spread
c. Custodian fee
d. Registrar fee

31. A small investor can build a diversified portfolio by

a. Buying one share each of all listed companies
b. Investing in a mutual fund
c. Borrowing enough money to buy shares of well-managed companies
d. None of the above

32. The liquidity needs of an investor are met through

a. Equity funds
b. Index funds
c. Money market funds
d. Sector funds

33. Which of the following is not false about a mutual fund

a. Open ended funds can be sold in secondary markets
b. Close ended funds do not have a fixed tenure
c. Open ended funds do not calculate their NAV on every business day
d. The NAV of a close ended fund has to be calculated at least once in a week

34. An investor should be advised to avoid investing in a debt fund with a

a. Lower rated portfolio and higher expense ratio
b. Higher rated portfolio and lower expense ratio
c. Lower rated portfolio and lower expense ratio
d. Higher rated portfolio and higher expense ratio

35. A self-regulatory organization can

a. Regulate all entities in the market
b. Regulate only its own members in a limited way
c. Regulate its own members with total jurisdiction
d. Regulate no one

36. Systematic Withdrawal Plan allows investors to get back the principal amounts invested in
addition to the income on investment
a. True
b. False

37. UTI was set up by

a. SEBI
b. AMFI
c. A special Act
d. RBI

38. Constraints imposed by most funds on check writing are

a. Account balance should not fall below the minimum capital required
b. Checks issued must be for at least the minimum amount specified
c. Number of checks per month must not exceed a specified number
d. Both a & b above

39. An owner of preference shares is given which of the following rights

a. Voting rights
b. Fixed dividend income from post-tax profits
c. Voting rights and unlimited dividend income
d. No guaranteed rights
40. Market capitalisation of a company is calculated by multiplying the number of outstanding shares
by
a. Rs.10
b. Face value of each share
c. Current market value of each share
d. Dividend yield

41. Shares of companies with large capital market capitalisation

a. Have greater growth potential
b. Are more liquid
c. Are not available
d. None of the above

42. In case of a fund scheme merger or take-over

a. High court approval may not be necessary
b. SEBI approval is a must
c. All unit holders must be informed
d. All of the above

43. What is the statistics used in validitating Beta?

a. Standard deviation
b. Beta
c. Ex-marks
d. Sharpe ratio

44. As a financial planner, which of the following would you suggest for a person who can take a
moderate risk
a. Aggressive growth fund
b. Aggressive equity fund
c. Diversified equity fund
d. Sectoral fund

45. A growth fund manager would apply the following strategies:

a. Invest in those companies that would give more returns than the average returns in the
industry.
b. Invest in companies having a large equity base.
c. Invest in companies coming out with new “Initial public offers’
d. All of the above

46. An active style of portfolio management includes the following:

a. Application of ‘Systematic transfer plan’ in various schemes of a fund.
b. Undertake macroeconomic analysis to determine profitable investment trends.
c. Invest in companies with high market capitalization
d. All of the above.

47. What would be the maximum initial issue expenses charged from the investors, if the amount
mobilized from a mutual fund NFO is Rs. 50 crore.
a. Rs. 5 crore
b. Rs. 2 crore
c. Rs. 3 crore
d. Rs. 1 crore

48. When interest rates for similar maturities bonds are 11.5%, bond with a 8% coupon rate will
become:
a. More attractive
b. Less attractive
c. At par
d. The price is unrelated to the interest rates for similar securities.
49. What would be a suitable benchmark to evaluate a closed-end debt fund?
a. BSE Sensex
b. I-sec’s Si-bex
c. Crisil Composite Bond Fund Index
d. S & P CNX Nifty

50. Financial planning involves the achievement of following objectives:

a. Buying a home
b. Purchase of a new car
c. Planning for retirement
d. All of the above

51. What is Bogle’s suggestion regarding the ‘rule of thumb’ for asset allocation?
a. 50% equity and 50% debt
b. 60% equity and 40% debt
c. An investor’s allocation to debt should be equal to his age.
d. Investor should not do any re-balancing of his/her portfolio.

52. What should be the recommended portfolio for an investor who is risk averse in his transition
phase?
a. Higher allocation to equity funds
b. Higher allocation to debt instruments
c. Investments only in equity
d. He should not invest anywhere

53. Which of the following is true?

a. SEBI does not allow the investor to pledge his mutual fund units in favor of a financial
institution
b. An investor cannot redeem his mutual fund holding in part.
c. The frequency of investment offered for SIP varies from one fund to another.
d. All of the above

54. What is the proof that the investor has invested in mutual fund units?
a. The investors receive units commensurate with the investment made.
b. Investors get an account statement, showing their holdings and their price.
c. The receipt of money acts as the proof
d. None of the above

55. What is the maximum time given to the Asset management company to give their reply after the
observations made by SEBI to a new fund scheme filed with it?
a. 2 months
b. 3 months
c. 4 months
d. 6 months

56. How would you convince a first-time investor who is risk-averse to invest in mutual funds in
comparison to a bank deposit?
a. Mutual funds is the right choice to grow your wealth at a fast pace
b. Mutual fund has the likelihood of giving more growth than the bank deposit as the investment
is in a diversified portfolio of securities.
c. Investment in Mutual fund doubles your money in 3 years.
d. All of the above

57. Bogle’s suggestion for debt is based on:

a. Age
b. Wealth
 c. Family size
d. None

58. Govt. securities are valued for computing NAV by:

a. AMFI
b. RBI
c. SEBI
d. MOF

59. Who cannot distribute mutual funds in India?

a. Regional office
b. SEBI
c. Post Office
d. Foreign Bank
e. PSU Bank

60. Who cannot distribute mutual funds in India?

a. Directors of AMC
b. Trustee
c. Employee of AMC
d. Sponsor

61. Who cannot distribute mutual funds in India?

a. RBI
b. PSU Bank
c. Foreign Bank
d. All of the above

62. An important part of transaction cost is:

a. Stamp duty
b. Custodian fee
c. Registrar fee
d. Commission

63. Best option for power of compounding is:

a. 12% yearly
b. 6% half-yearly
c. 3% quarterly
d. 1% monthly

64. For tax implication computation, a client should

a. Read the OD
b. Consult tax consultant
c. AMC will take care
d. Clarify with IT Dept

65. Who registers the mutual fund with the SEBI?

a. AMC
b. Trustee
c. Sponsor
d. Investment manager

66. A client’s financial plan should not be reviewed when

a. The client has just retired
b. The client has just been divorced at age 40
c. The client feels he has attained his financial goals
d. The client’s mutual fund portfolio shows appreciation
67. NAV means:
a. (Market Value of Assets – Liabilities) / number of units outstanding
b. (Book Value of Assets – Liabilities) / number of units outstanding
c. Unit capital / number of units outstanding
d. Net assets / initial number of units

68. If an investor needs income, he should select funds with:

a. Low expense ratio
b. High expense ratio
c. Low current yield
d. High current yield

69. When interest rate rises, bond price

a. Is not affected
b. Fluctuates up or down
c. Also rises
d. Falls

70. The AMFI is governed by:

a. RBI
b. Ministry of Finance
c. A board of directors elected from among members of AMFI
d. SEBI

71. A fund that charges a load is better than a no-load fund

a. True
b. False

72. Documents available to investors for inspection do not include

a. Memorandum and Articles of Association of AMC
b. Consent of auditors and legal advisors
c. Investment management reports
d. Reports based on which actual investments are made

73. A passive fund has the following feature

a. A passive fund tracks the index
b. A passive fund matches the performance if the index
c. A passive fund selects the stocks that are present in the index
d. All of the above

74. Where do Gilt Funds Invest?

a. Shares
b. Debentures
c. Dated Securities
d. None of the above

75. Which of the following Mutual Fund was setup after 1963 but before 1987?
a. SBI Mutual Fund
b. Can Bank Mutual Fund
c. LIC Mutual Fund
d. None of the above
ANSWERS

1 a 31 b 61 a
2 a 32 c 62 d
3 d 33 d 63 d
4 d 34 b 64 b
5 514.32 35 b 65 c
6 d 36 a 66 d
7 19.70 37 c 67 a
8 c 38 d 68 d
9 d 39 b 69 d
10 a 40 c 70 c
11 d 41 b 71 b
12 c 42 d 72 d
13 b 43 d 73 d
14 b 44 c 74 c
15 a 45 a 75 d
16 c 46 b
17 d 47 c
18 c 48 b
19 c 49 b
20 c 50 d
21 c 51 c
22 a 52 b
23 a 53 c
24 c 54 b
25 b 55 d
26 c 56 b
27 c 57 a
28 d 58 b
29 d 59 b
30 a 60 b