AMFI Model Test Paper

The Concept and Role of Mutual Funds

1. Which of the following is not a Mutual Fund characteristic?

d. Diversified portfolio
e. Careful research and monitoring of the market
f. Substantial capital
g. Expertise in stock market

2. Choose the advantage of Mutual Funds

h. Small amount of investment
i. Professional management
j. Risk diversification
k. All of the above

3. UTI was the only capital market intermediary for the period :
l. 1964 to 1987
m. 1963 to 1988
n. 1964 to 1992
o. None of the above

4. Mutual Funds can be defined as

p. a link between the saving public and the capital markets
q. an active participant in promoting good corporate governance, investor protection
r. a participant that has brought in liquidity into the financial system
s. All of the above

5. The ownership of a Mutual Fund belongs to

t. Board of Trustees
u. Sponsor
v. AMC
w. Unit-holders

6. A Mutual Funds’ investments are guided by

x. AMC
y. Board of Trustees
z. Investment objectives
aa. Unit-holders

7. In USA, a mutual fund is constituted as

bb. Trust
cc. Investment company
dd. Company
ee. None of the above

8. In India, a mutual fund is constituted as

ff. Trust
gg. Investment company
hh. Company
ii. None of the above

9. An investor should not invest in Mutual Fund, if

jj. his capital base is large and is able to monitor the stock market
kk. he is able to carry out detailed investment research
ll. Both of the above
 mm.None of the above

10. The advantage to a Mutual fund investor is

nn. The risk involved is diversified
oo. The investor can hold the diversified portfolio even with small investment
pp. Expertise in stock market is not required
qq. All of the above

11. The term professional management indicates

rr. investment management skills
ss. research of available investment options
tt. Both the above
uu. None of the above

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

vv. portfolio diversification
ww. reduction of risk
largevolumesoftrades
Noneoftheabove

13. Which of the following is not a disadvantage of investing through a Mutual Fund?
xx. No control overcosts
Liquidity and convenience
tailor-madeportfolio
Managing a portfoli of funds

14. The Mutual fund industry in India began in

1988
1964
1992
Noneoftheabove

15. Which of the following is untrue

UTI was set up in 1963
UTI was formed by RBI
UTI was established by an act of Parliament
UTI was not given a monopoly.

16. Which one has a largest investor base?

ULIP
yy. Mastershare of UTI
zz. US-64
aaa. SBI Magnum

17. Which is the first diversified equity investment scheme in India?

bbb.SBI Magnum
ccc. Master share
ddd.MEP-91
eee. Mastergain92

18. Which is the first Indian offshore fund?

fff. India Growth Fund
ggg.India Fund
hhh.India Infrastructure Fund
iii. None of the above
19. The first non-UTI mutual fund is
jjj. SBI MF
kkk.LIC MF
lll. Canbank MF
mmm.Indian Bank MF

20. Private sector funds were granted permission to enter the Mutual Fund industry in :
nnn.1992
ooo.1993
ppp.1988
qqq.1995

21. The organisation responsible for a comprehensive set of regulations for all mutual funds in India is:
rrr. RBI
sss. SEBI
ttt. AMFI
uuu.SHCIL

22. The 1999 Union Government Budget helped the Mutual fund industry by
vvv. regulating the practices in MF industry
www.exempting all mutual fund dividends from income tax in the hands of the investors.
xxx.Approving the code of ethics suggested by AMFI
yyy. None of the above

23. The mobilisation of funds by Mutual Fund industry is in the range of

zzz. 5% to 6% of GDS
aaaa.2% to 4% of GDS
bbbb.7% to 10% of GDS
cccc.25% to 40% of GDS

24. Which of the following is untrue as per recent studies?

dddd.UTI’s market share is increasing and private sector’s market share is decreasing
eeee.UTI’s market share is decreasing and private sector’s market share is increasing
ffff. The size of Mutual fund industry is increasing rapidly
gggg.The operations of Mutual fund industry are becoming complex day by day.

25. A load means

hhhh.a sum paid to the investors.
iiii. An expense charged to scheme/fund
jjjj. Sales charges
kkkk.None of the above

26. Mutual funds do not justify the need for paying commission to agents when the investors skip out of the
scheme before a specified period. In India, this practice is adopted by
llll. Agents voluntarily paying back the commission to the Mutual fund
mmmm.Trail commission is not paid to the agents
nnnn.None of the above
oooo.The whole of commission is paid to the agents

27. US-64 scheme of UTI is

pppp.traded on stock exchange
qqqq.fixed price of sale and repurchase
rrrr. traded through UTI as per the sales and repurchase price declared by UTI for a specified period.
ssss.None of the above

28. The AMFI objectives does not include the following

 tttt. to improve standards of mutual fund industry
uuuu.to regulate the stock markets along with SEBI in tandem
vvvv.to create awareness about mutual funds
wwww.to emphasise on ethical and moral trade practices

29. Load means :

xxxx.charge to scheme / fund
yyyy.charge paid by investor
zzzz.charge paid by AMC to SEBI
aaaaa.none of the above

30. What is not an advantage in investing in Mutual Funds against Equity;

bbbbb.Professional Management
ccccc.Diversification of Risk
ddddd.Reduction in cost
eeeee.Tailor made portfolios

31. A fund is doing direct marketing , but they can take the help of
fffff.Agents
ggggg.NBFC
hhhhh.Distributors company
iiiii. All of the above

32. Investment Mananger is

jjjjj. AMC
kkkkk.Custodian
lllll. Trustee
mmmmm.Sponsor

33. Appointment of brokers :

nnnnn.Trustees appoint brokers
ooooo.AMC appoints brokers
ppppp.Trustees ensure due diligence on the part of AMC for empanelment of brokers
qqqqq.B and C above

34. which of the entities can give loans against securities

rrrrr.UTI
sssss.Banks
ttttt. MF
uuuuu.None of the above

Chapter 2,3,4,5,6 &7 Offer Document and SEBI Regulations

Offer document as per Trust deed is issued by:

vvvvv.AMC
wwwww.Sponsors
xxxxx.Either of the above
yyyyy.Trustees

Investor has right to

zzzzz.Access to information
aaaaaa.Propotionate right in the beneficial ownership of the assets of the scheme
bbbbbb.Inspect documents
cccccc.All of the above
Initial expenses of an open-end schemes can be
dddddd.amortised over 10 years of the scheme
eeeeee.amortised over 5 years of the scheme
ffffff.cannot be amortised
gggggg.amortised over 3 years

Which of the following does not constitute the fundamental attributes of a scheme
hhhhhh.the scheme is income bearing
iiiiii.Investment policy of the scheme
jjjjjj.the names and addresses of the registrars and custodians
kkkkkk.None of the above

An application form is normally supplied with

llllll.Offer document
mmmmmm.Annual report
nnnnnn.Due diligence certificate
oooooo.Key information memorandum

A mutual fund unitholder can sue

pppppp.AMC
qqqqqq.Sponsor
rrrrrr.Trustees
ssssss.All of the above

A unitholder of assured returns fund, can sue in case the fund does not meet its obligation:
tttttt.AMC
uuuuuu.Sponsor
vvvvvv.the person/entity whose name is specifically mentioned in the Offer document as guarantor to
scheme.
wwwwww.Cannot sue

The investment and advisory fees for a fund with Rs.200 crores as average net assets is:
xxxxxx.2.5 crores
yyyyyy.2.25 crores
zzzzzz.2 crores
aaaaaaa.200 crores

As per SEBI guidelines, a security traded on 21st July, Rs.22, 23rd July, Rs.25 and 25th July, Rs.28 would
be valued on 28th July as:
bbbbbbb.25
ccccccc.23
ddddddd.28
eeeeeee.22.5

As per SEBI guidelines, a security is to be treated as untraded when

fffffff.security is never traded on stock exchange
ggggggg.security is not traded for 30 days
hhhhhhh.security is not traded for 60 days
iiiiiii.None of the above

Which of the following is true as per SEBI norms for debt investment?
jjjjjjj.Investment of rated investment grade of a company should not exceed 15% of NAV
 kkkkkkk.In case of rated as well as unrated but below investment grade, debt investment in a company
should not exceed 10% of NAV
lllllll.In any single company investment not to exceed 25% of NAV
mmmmmmm.All of the above

As per RBI guidelines, MMMF can invest in

nnnnnnn.Corporate bonds
ooooooo.Equity shares
ppppppp.G-sec of maturity less than 1 year
qqqqqqq.None of the above

Which of the following is not a criteria for sponsor?

rrrrrrr.Networth to be more than capital investment
sssssss.Sponsor should contribute 40% of the net assets
ttttttt.Sponsor should ensure that 20% of the fund’s assets should be invested in sponsor’s company.

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

uuuuuuu.The debt market is a wholesale market
vvvvvvv.There are large players like banks, financial institutions, mutual funds, etc
wwwwwww.Government securities are traded on a large scale
xxxxxxx.All of the above

AMC can directly approach the investors as well as take the help of
yyyyyyy.Individual agents
zzzzzzz.Banks and NBFC
aaaaaaaa.Distribution companies
bbbbbbbb.All of the above

SEBI guidelines for agents includes

cccccccc.Agents can sell products of a single mutual fund
dddddddd.Agents can sell products of mutual funds with whom he has entered into agreements.
eeeeeeee.Agents could be only individuals
ffffffff.No SEBI guidelines

A distributor is appointed by
gggggggg.Trustee
hhhhhhhh.AMC
iiiiiiii.Sponsor
jjjjjjjj.All of the above

As per SEBI guidelines, AMC is prohibited to undertake the following activity

kkkkkkkk.to be a trustee of some other mutual fund
llllllll.to provide advisory functions to pension and provident funds
mmmmmmmm.to look after the schemes of other mutual funds

A prospective investor, as per SEBI regulations can seek recourse to

nnnnnnnn.sue the trustees
oooooooo.sue the AMC
pppppppp.cannot seek recourse
qqqqqqqq.sue the SEBI

As per SEBI guidelines, a Due diligence certificate is not :

rrrrrrrr.signed by a Compliance Officer/ CEO/MD of the mutual fund
ssssssss.all legal formalities of a scheme are completed
tttttttt.attached to Annual report
 uuuuuuuu.forms part of Offer document

A mutual fund unit holder can seek redressal if his complaint is not entertained by the mutual fund
vvvvvvvv.AMC
wwwwwwww.Trustees
xxxxxxxx.SEBI
yyyyyyyy.RBI

If a unitholder does not agree with a merger of mutual fund / AMC with another mutual fund / AMC then
zzzzzzzz.he can opt for withdrawal in open-end scheme
aaaaaaaaa.he can opt for withdrawal only when SEBI allows so
bbbbbbbbb.he can opt for withdrawal in open-end or closed-end scheme
ccccccccc.None of the above

Which of the following is not true of Key Information Memorandum

ddddddddd.It is an abridged version of offer document
eeeeeeeee.It is not issued by AMC
fffffffff.It is supplied with application form
ggggggggg.It contains the terms of issue

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

hhhhhhhhh.unrated securities are not to be valued
iiiiiiiii.Bonds are valued at YTM
jjjjjjjjj.Equity shares are valued at closing price in the market on the valuation date
kkkkkkkkk.None of the above

The printing expenses of key information memorandum of an open end scheme can be
lllllllll.amortised over 5 years of the scheme
mmmmmmmmm.cannot be amortised
nnnnnnnnn.amortised over 10 years of the scheme
ooooooooo.None of the above

A scheme transfers the securities to another scheme under same AMC. Which is incorrect :
ppppppppp.The AMC can IST upto 4% the total value of holding in any inter-scheme transfer.
qqqqqqqqq.The securities are sold at market value + 10% add. Charges

The fund portfolio is submitted to SEBI by :

rrrrrrrrr.AMC Directors
sssssssss.Trustees
ttttttttt.Fund Manager
uuuuuuuuu.Sponsors

The fundamental attributes have to be mentioned in the offer document .

vvvvvvvvv.The scheme objective is clearly defined.
wwwwwwwww.Any subsequent change will be approved / informed to unitholders.
xxxxxxxxx.The nature of scheme is known.
yyyyyyyyy.All of the above.

Direct marketing involves all of the following except ;

zzzzzzzzz.Advertisement in newspapers
aaaaaaaaaa.Selling via employees
bbbbbbbbbb.Using distribution company of sponsor.
cccccccccc.Seminar presentation.
The disclosures regarding the load to be disclosed in offer document for open ended scheme
dddddddddd.Estimated load spread over 5 years including contingent deferred sales charge.
eeeeeeeeee.Details of initial issue expenses for scheme and other schemes launched during the last
fiscal by the AMC.
ffffffffff.Estimated annual recurring expenses as a percent of average weekly net assets.
gggggggggg.All of the above.

Initial issue expense limit is :

hhhhhhhhhh.6%
iiiiiiiiii.3%
jjjjjjjjjj.4%
kkkkkkkkkk.5%

Fundamental attributes to be changed ;

llllllllll.75% of unitholders consent for closed-ended schemes and informing unitholders of open-ended
schemes
mmmmmmmmmm.Approval of SEBI
nnnnnnnnnn.Approval of trustees
oooooooooo.All of the above

KIM is also available at

pppppppppp.Agents
qqqqqqqqqq.Banks
rrrrrrrrrr.Distribution Agencies
ssssssssss.All of the above

Which of the following qualifies as a SRO

tttttttttt.SEBI
uuuuuuuuuu.RBI
vvvvvvvvvv.BSE
wwwwwwwwww.AMFI

Unitholders expected a good return in past scheme but the expectations were not met. He can;
xxxxxxxxxx.sue the AMC
yyyyyyyyyy.sue the Trustee
zzzzzzzzzz.sue the Trust
aaaaaaaaaaa.None of the above.

Beneficial owner means :

bbbbbbbbbbb.owns part of Trust
ccccccccccc.own the company
ddddddddddd.owns units
eeeeeeeeeee.none of the above

Custodian is
fffffffffff.handling mere securities in terms of physical delivery and eventual safekeeping
ggggggggggg.holding financial dealings by holding its bank account
hhhhhhhhhhh.issuing and redeeming units of a mutual fund
iiiiiiiiiii.all of the above

Standard risk factors

jjjjjjjjjjj.Past performance of sponsor/AMC/MF is not indicative of the future performance of the Trust
 kkkkkkkkkkk.Risk arising from non-diversification
lllllllllll.Assured return scheme, if assurance until maturity it must be stated
mmmmmmmmmmm.All of the above

Which is not a fundamental attribute

nnnnnnnnnnn.Name / address of registrar
ooooooooooo.It is an income scheme
ppppppppppp.The scheme is for 10 years
qqqqqqqqqqq.65% on debt security.

Associate transaction can be performed by giving the following disclosures.

rrrrrrrrrrr.Policy for investing
sssssssssss.If invest more than 25% of its net assets
ttttttttttt.Business given to associate broker and distributors
uuuuuuuuuuu.All of the above

Who can invest in MF except

vvvvvvvvvvv.Banks
wwwwwwwwwww.NRI
xxxxxxxxxxx.FIIs
yyyyyyyyyyy.Foreign citizens

Non traded securities as per SEBI, when a security is not traded on any Stock Exchanges
zzzzzzzzzzz.60 days prior to valuation date
aaaaaaaaaaaa.30 days prior to valuation date
bbbbbbbbbbbb.Marked to market
cccccccccccc.None of the above.

As per SEBI, which is untrue in respect of non traded securities

dddddddddddd.Call money at cost + accrual
eeeeeeeeeeee.Non traded instruments will be valued at cost plus interest accrued
ffffffffffff.Untraded need not be valued
gggggggggggg.All of the above

Amortisation of initial issue expenses of closed-ended funds

hhhhhhhhhhhh.Weekly
iiiiiiiiiiii.Monthly
jjjjjjjjjjjj.Yearly
kkkkkkkkkkkk.End of the period

Investment is treated NPA

llllllllllll.if no returns are provided by way of interest for more than 2 years
mmmmmmmmmmmm.if no returns are provided by way of interest for more than 18 months
nnnnnnnnnnnn.if no returns are provided by way of interest for more than 1 years
oooooooooooo.all of the above

A mutual fund shall not invest

pppppppppppp.more than 5% of its NAV in the unlisted equity related instruments in case of OES
qqqqqqqqqqqq.more than 10% of its NAV in the unlisted equity related instruments in case of CES
rrrrrrrrrrrr.more than 10% of its NAV in equity related instruments of any company
ssssssssssss.all of the above
A mutual fund shall not invest

tttttttttttt.more than 15% of its NAV in rated debt instruments issued by a single issuer
uuuuuuuuuuuu.more than 10% of its NAV in un-rated debt instruments issued by a single issuer
vvvvvvvvvvvv.total investment in un-rated debt instruments shall not exceed 25% of the NAV
wwwwwwwwwwww.all of the above

Contigent deffered sales charges should not exceed

xxxxxxxxxxxx.4% of the redemption proceeds in the first year

yyyyyyyyyyyy.3% of the redemption proceeds in the second year
zzzzzzzzzzzz.2% of the redemption proceeds in the third year
aaaaaaaaaaaaa.1% of the redemption proceeds in the fourth year
bbbbbbbbbbbbb.all of the above

A scheme can be wound up if

ccccccccccccc.If 75 % of unitholder pass a resolution
ddddddddddddd.after repaying the amount due to the unitholder
eeeeeeeeeeeee.Disclosing reasons of winding up in two daily news papers having circulation all over
India and a vernacular newspaper circulating at the place where mutual fund is formed.
fffffffffffff.All of the above

Dividend received by the fund should be recognised

ggggggggggggg.on the date of declaration

hhhhhhhhhhhhh.on the date of receipt
iiiiiiiiiiiii.on the date of share is quoted on ex-dividend basis
jjjjjjjjjjjjj.none of the above

Identify the recurring expenses:

kkkkkkkkkkkkk.brokerage and transactions cost

lllllllllllll.marketing and selling expenses
mmmmmmmmmmmmm.registrar fees
nnnnnnnnnnnnn.all of the above

Purchase and sale of investment should be:

ooooooooooooo.recognised on the trade date

ppppppppppppp.on the settlement date
qqqqqqqqqqqqq.either of the a) and b )
rrrrrrrrrrrrr.none of the above

Chapter 8 & 9. Investment Management and Measuring & Evaluating Mutual Fund Performance.

Net Asset Value is

sssssssssssss.The value of each share or unit.
ttttttttttttt.The value of the total assets of the fund divided by total number of outstanding units
uuuuuuuuuuuuu.The value of investor’s part ownership in the fund
 vvvvvvvvvvvvv.All of the above

If the value of total assets of a fund is 12000 and the fund has issued 900 units, the NAV of the unit is:
wwwwwwwwwwwww.13.33
xxxxxxxxxxxxx.13.00
yyyyyyyyyyyyy.14.00
zzzzzzzzzzzzz.13.35

If the NAV per unit is 14.55 and the outstanding units of a fund are 1365 then the total assets of the fund are
aaaaaaaaaaaaaa.20000
bbbbbbbbbbbbbb.19860.75
cccccccccccccc.19861
dddddddddddddd.1986.75

An amount of Rs.300 becomes Rs.600 in 8 years. The annualised rate of return is:
eeeeeeeeeeeeee.12.5%
ffffffffffffff.9%
gggggggggggggg.Insufficient data
hhhhhhhhhhhhhh.100%

A closed-end scheme is quoted at discount to NAV in the stock exchange when

iiiiiiiiiiiiii.the markets are bearish
jjjjjjjjjjjjjj.the investor perceives the inability of the fund to maintain the NAV
kkkkkkkkkkkkkk.Assets are undervalued
llllllllllllll.None of the above

An asset of Rs.75000 bought in 1995 was sold in 1998 for Rs.125000. The inflationary index in 1995 and
1998 are 251 and 361 respectively. The sum liable for tax is:

mmmmmmmmmmmmmm.Insufficient data
nnnnnnnnnnnnnn.Rs 50000/-
oooooooooooooo.Rs 17131/-
pppppppppppppp.Rs 125000/-

When interest rate rises, Debt fund

qqqqqqqqqqqqqq.increases in value
rrrrrrrrrrrrrr.decreases in value
ssssssssssssss.is not affected by interest rate
tttttttttttttt.None of the above

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

uuuuuuuuuuuuuu.Value fund
vvvvvvvvvvvvvv.Growth fund
wwwwwwwwwwwwww.Balanced fund
xxxxxxxxxxxxxx.Equity diversified fund

A Mutual fund declares Re 1 as distribution. The income in the hands of unit holders is
yyyyyyyyyyyyyy.taxable at 20%
zzzzzzzzzzzzzz.not taxable in the hands of unitholders
aaaaaaaaaaaaaaa.Information is inadequate to assess tax liability
bbbbbbbbbbbbbbb.Income tax will be assessed as per unitholder’s liability
Why an investor should prefer investing in mutual funds to investing in equities
ccccccccccccccc.the investor’s objectives will be mostly met by mutual fund
ddddddddddddddd. the investor can diversify his portfolio
eeeeeeeeeeeeeee. professional management is not required
fffffffffffffff. reduced transaction costs are wiped out by management fees

What is true of the following?

a. A load increases value of NAV
b. A load is paid towards initial expenses
c. None of the above

Compounding of investment is best explained by

ggggggggggggggg.Balanced fund
hhhhhhhhhhhhhhh.Growth fund
iiiiiiiiiiiiiii.Value fund
jjjjjjjjjjjjjjj.Equity fund

An investor can assess his fund’s performance to

kkkkkkkkkkkkkkk.The performance of another mutual fund
lllllllllllllll.The performance of overall stock market
mmmmmmmmmmmmmmm.The performance of similar financial products and schemes available in the
market
nnnnnnnnnnnnnnn.All of the above

When is the value of stock not unlocked.

ooooooooooooooo.None of the below
ppppppppppppppp.when buy-back of shares takes place
qqqqqqqqqqqqqqq.when corporate restructuring of company
rrrrrrrrrrrrrrr.when there is a bull run in the market.

For choosing an appropriate benchmark. The following are required except

sssssssssssssss.The portfolio composition and size.
ttttttttttttttt.Investment objective
uuuuuuuuuuuuuuu.Historical data of Fund performance
vvvvvvvvvvvvvvv.Nature of investments

Comparison of Direct Equity and Mutual Fund Investment, which is true.

wwwwwwwwwwwwwww.A large capital required in MF as compared to direct investing.
xxxxxxxxxxxxxxx.Diversification is possible in Direct Equity as compared to MF.
yyyyyyyyyyyyyyy.Transaction costs with fund wipe out the profits as compared to equity.
zzzzzzzzzzzzzzz.The investment objective is possible through MF investing as against Direct Equity
investment.

Mainstream diversified debt funds is most affected by :

aaaaaaaaaaaaaaaa.Reinvestment risk
bbbbbbbbbbbbbbbb.Liquidity risk
cccccccccccccccc.Interest rate risk
dddddddddddddddd.Default risk

If yield falls, the Fund Manager will do all except;

eeeeeeeeeeeeeeee.Sell short maturity stocks and buy long maturity papers.
ffffffffffffffff.See that the funds average duration become longer than the market average duration.
gggggggggggggggg.Sell long duration stocks and buy short duration stocks.
hhhhhhhhhhhhhhhh.Sell low coupon stocks and buy high coupon stocks.

An investor purchased units in Mutual Fund in 1995 for Rs.75000/-. He sold the units in 1998 for
Rs.125000/- Cost of inflation in 1995 – 271 and in 1998-371
What is the captial gains.
iiiiiiiiiiiiiiii.22324.72
jjjjjjjjjjjjjjjj.19487.52
kkkkkkkkkkkkkkkk.70215.63
llllllllllllllll.None

A bond with a coupon of 9% when interest rates for similar maturities are 11% will sell at
mmmmmmmmmmmmmmmm.Above par
nnnnnnnnnnnnnnnn.Below par
oooooooooooooooo.At par
pppppppppppppppp.At a price which is not related to interest rates for similar maturities