Chapter 1

Q.1 In India, the first mutual fund after UTI was launched by

Q.2

1.
2.
3.
4.
1.
2.
3.
4.

Q.3
1.
2.
3.
4.

An investment company
A Trust
A Society
A Bank
Which of the following statement is TRUE?

1.
2.
3.
4.

Growth and risk are associated with equity funds

Stability is associated with debt funds
Both 1 & 2
None of the above
Investment in an Equity Linked Savings Scheme (ELSS)

1.
2.
3.
4.

Entitles the investor to claim income tax rebate

Requires the investment to be locked in for a period of 3 years
Automatically leads to investment in equity shares
All of these
Mutual funds should be recommended as

Q.4

Q.5

Q.6
1.
2.
3.
4.
Q.7 In

Q.8

Q9

Can bank mutual fund

Morgan Stanley
SBI mutual fund
LIC mutual fund
A Mutual Fund is a
Collective investment vehicle for the purchase of securities on behalf of investors.
Company that accepts fixed deposits
Fund that issues bond and debentures
None of the above
In India a mutual fund is a trust whereas in the USA it is

Investments to achieve long-term goals

A get rich quick investment option
Investments to take advantages from stock market swings
All of these
India, the public sector mutual funds came

1.
2.
3.
4.

Before private sector funds and UTI

After UTI but before SEBI regulation 1996
After SEBI Regulation 1996
After SEBI Regulation 1996 but before private sector funds
Which one of the below is correct?

1.
2.
3.
4.

UTIMF was established by a special act of parliament

UTIMF voluntarily accepted guidelines of SEBI
UTIMF is not the first MF in India
UTIMF was set up by Reserve Bank of India
Who published Making Mutual Funds Work for you- The Investors Guide

1.
2.
3.
4.

AMFI
SEBI
RBI
AMCs

Q.10

A close ended mutual fund has a fixed

1.

NAV

2.

Fund Size

3.

Rate of Return

4.

Number of Distributors

Q.11Ownership of unit holders in mutual funds is

1.
2.
3.
4.
Q.12
1.
2.
3.
4.

Mutual
Beneficial
Mutual and Beneficial
None of the above
Which of the following is most significant event during February 2003?
UTI Act repealed
UTI MF found
UTI no longer has special legal status as a trust established by Act of parliament.
All of the above.

Q.13
1.
2.
3.
4.

The Board of Trustee of the UTI does not have nominees from
RBI
LIC
IDBI
The Bombay Stock Exchange (BSE)

Q.14

In the union budget 1999, which significant change was made?

1.
2.
3.
4.
Q.15
1.
2.
3.
4.

Dividends were made tax free in the hands of unit holders.

Capital Gain taxes were abolished.
Dividend distribution tax on all schemes were removed.
All of these
A close ended scheme is quoted on the stock exchange at a discount to its NAV when
The markets are bearish
Investors perceive that the fund will be unable to maintain the NAV
The assets of the fund are undervalued
None of the above

Q.16

AUM of Mutual Fund industry in year 2004-2005 was: (In crores)

1.
2.
3.
4.
Q.17

140000
150000
152000
120000
Which one is more diversified?

1.
2.
3.
4.
Q.18

Fund A which invests in Shares in India

Fund B which invests in shares in India and USA both
Both are equally diversified
Insufficient information.
Which of the following is not a specialty fund?

1.
2.
3.
4.
Q.19
1.
2.
3.
4.
Q.20

Sector fund
Mid cap /small cap fund
Foreign securities fund
Gilt fund
Where do Gilt funds invest?
Shares
Debentures
Dated securities
All of the above
Fixed Term plan series are:

1.
2.
3.
4.
Q.21

Closed ended
Generally short term in nature
Not listed on stock exchange
All of the above
Which of the following is not the right classification of funds?

1. Pension and Insurance Funds

2. Open ended and closed ended funds
3. Load and No load funds
4. Tax free and Tax exempt funds.
Q.22
The emergence of Private Funds in Indian Mutual Fund industry came in which Phase
of Mutual Funds history ?
1.
2.

Phase 2 during the period 1987 to 1993

Phase 3 during the period 1993 to 1996

3.
4.
Q.23

Phase 4 during the period 1996 to 1999

Phase 5 during the period 1999 to 2004

Mutual fund can benefit from economics of scale because of

1.

Portfolio diversification

2.

Risk reduction

3.
4.
Q.24

Large volume of trades

None of the above
Which of the following is incorrect?

1.
2.
3.
4.
Q.25

An equity fund would invest in ordinary shares, preference shares and warrants
A bond fund would mainly buy debt instruments
An index fund is indexed to inflation index
A sector fund invests in the shares of companies in a particular industry
A money market fund usually invests in

1.
2.
3.
4.
Q.26

Government treasury bills of less than one year maturity

6-month certificates of deposits of banks
The inter bank call money market
All of these
Mutual fund pay commission to their agents:

1.
2.
3.
4.

As an incentive for having brought in an investor

As compensation for his before and after sales service to the investor
To off set any direct expenses that they may incur on sale of units
All of the above

Q.27

Which of the following has the lowest risk?

1.
2.
3.
4.
Q.28

Liquid Fund (MMMF)

Gilt Fund
Diversified Debt Fund
Diversified Equity Fund
The current Mutual Fund Regulations from SEBI was introduced in

1.
2.
3.
4.
Q.29

1992
1994
1996
1998
Board of Trustees appoint Custodians for...

1.
2.
3.
4.
Q.30

Making payment to bankers on behalf of the fund

Selling units of a mutual fund
Safekeeping of physical securities of the mutual fund or participating in any clearing system.
None of these
Day to day investment management policies of a fund is determined by...

1.
2.
3.
4.
Q.31

AMC
Trustees
Investors
Sponsors
Shares, debentures, bonds, fixed deposits are the products normally issued by

1.
2.
3.
4.
Q.32
1.
2.
3.
4.
Q.33
1.
2.
3.
4.
Q.34
1.
2.
3.
4.

Banks
Corporate
Governments
Mutual finds
An investor in a close-ended fund can get his money back by selling his units:
Back to the fund
Back to AMFI
On a stock exchange where the fund is listed
To the agent who sold the units to the investor
Small funds are...
Relatively easier to manage
Achieve their objectives in more focused manner
Have limited holding
All of these
Stock markets investments in the market directly offer some advantages except...
Potential for high returns
Liquidity through trading on the stock exchanges
Low risk
The opportunity to capitalize on stock market fluctuations

Chapter 2
Q.1

Who is responsible for the redresseal and handling of investor complaints?

1.
2.
3.
4.

Q.2

Fund Trustees
The AMC
Registrar
SEBI
Shortfall in the case of assured returns schemes are met

1.
2.
3.
4.
Q.3

By
By
By
By

the Custodian
the SEBI
AMFI
the persons entity guaranteeing the return as per the offer document

Who is responsible for filing details of the funds portfolio with SEBI
1.
2.
3.
4.

Registrar of the fund

Fund trustee
Custodian
The Fund manager

Q.4

Who is responsible for the interest of unit holders?

1.
2.
3.
4.
Q.5.

SEBI
AMFI
Trustees
AMC
For a person to qualify as a sponsor, he must

1.
2.
3.
4.
5.
Q.6

Contribute at least 40% of the AMCs net worth

Should be carrying on business in financial services for at least 5 years prior to registration
Should have a sound financial track record
All of the above
None of the above
Board of Trustees appoint Custodians for

1.
2.
3.
4.
Q.7

Making payment to bankers on behalf of the fund

Selling units of a mutual fund
Safe keeping of physical securities of the mutual fund or participating in any clearing system
None of the above
Which of the following is true about Fund sponsors?

1.
2.
3.
4.

Sponsors invest in the unit capital of the fund

Sponsor invest in the fund
Sponsor invest in the AMC
All of the above

Q.8 Which is FALSE?

1.
2.
3.
4.

A sponsor may act as a distributor for the AMC

A sponsor can never act as a distributor for the AMC
Distributors serve also as investment advisors
Distributors serve as fund sales persons
Sponsor of the fund:

1.
2.
3.
4.
5.

Registers the fund with SEBI

Forms the Trust
Appoints the Trustees
Appoints a custodian
All of the above

Q.9

Q.10

In case of merger of two AMC, 75% of the unit holders have to approve the merger in
case of

1.
2.
3.
4.
Q.11

Open ended funds

Both open and close ended funds
Close ended funds
None of the above
Who is the primary guardian of unit holders' funds/assets

1.

The AMC

2.

The Trustees

3.

The Registrars

4. The custodians
Chapter 3
Q.1

When was SEBI founded?

1.
2.
3.
4.

Q.2

1990
1991
1992
1994
Which is a self regulatory organization (SRO)?

1.
2.
3.

Office of the public trustee

Stock exchange
SEBI

4.

AMFI

Q3

Mutual funds in India are required to follow the accounting policies laid down by:
1.
2.
3.
4.

AMFI
RBI
SEBI
All of the above

Q.4

The fundamental attributes can be changed in an open-ended scheme by following

methods
1.
2.
3.
4.

Q.5

Informing all unit holders individually and offering them exit without any load
Voting of 75% of the unit holders.
Paper Advertisement in daily newspaper
Both 1 and 3.
AMFI was set up in 1995 with the objective to:

1.
2.
3.
4.
Q.6

Promote the interests of mutual funds and unit-holders

Set ethical, commercial and professional standards in the industry
All of the above
None of the above
Bank owned Mutual Funds are supervised by

1.
2.
3.
4.
Q.7

SEBI
RBI
Jointly by SEBI & RBI
AMFI
A Self Regulatory Organisation can regulate

1.

All entities in the market

2.

Only its own members in a limited way

3.

Its own members with total jurisdiction

4.

No entity at all
The role of AMFI in the mutual funds industry is not to

1.

Promote the interests of the unit holders

2.

Set a Code of Ethics

Q.8

3. Regulate mutual funds

4. Increase public awareness of mutual funds in the country
Chapter 4
Q.1 What is Key Information Memorandum
1.
2.
3.
4.
Q.2

is
is
is
is

an abridged version of the Offer Document and is provided with application form
a document that provides historical information about the fund
issued only by Private Sector mutual funds
a document that contains key disclosures which are not found in the Offer Document

One of the following is NOT required to be disclosed in the offer document. Which one?
1.
2.
3.
4.

Q.3

Details of Sponsor/Trustees
Investors rights and services
Performance of the other Mutual Funds
Description of the scheme and investment objective
The key information of memorandum of a mutual fund is available.

1.
2.
3.
4.
Q.4

Q.5

It
It
It
It

At the AMCs office

At the offices of authorized gents
At the branches of all banks
(1) And (2) only
The application form for investing in a mutual fund is normally found in....

1.
2.
3.
4.

The key information memorandum

With SEBI
Leading national newspapers
The funds financial statements
Offer Documents is updated every

1.
2.
3.
4.

Every 2 years.
Every year
Varies from scheme to scheme
Never updated

Q.6

A Charitable Trust wants to invest in Mutual Funds. What would you do?
1.
2.
3.
4.

Accept the application from with the cheque

Refuse to accept the application
Refer to the Offer document of the scheme to confirm that a charitable trust is allowed to invest
Accept the application form, without the cheque, and forward it for final acceptance by the fund /
AMC

Q.7

Regular tracking of mutual funds performance can be done by

1.
2.
3.
4.

Q.8

Newspapers, business periodicals, annual half-yearly and quarterly reports of the funds
Key information memorandum
The funds offer document
None of these.
The ideal source of information on investment plans and investor services offered by
the fund is...

1.
2.
3.
4.

Offer document
Advertisements about the scheme
Financial journals
The schemes annual report
The investor cannot plead ignorance of the procedures while investing in a mutual
fund because

1.
2.
3.

Mutual fund is a risky investment

The law does not permit the investor to sue the trust
While applying the investors signs an agreement stating they have read and understood the
terms and conditions
An investor is expected to be careful while investing
Mutual fund is based upon trust

Q.9

4.
5.
Q.10

As per SEBI guidelines, a due diligence certificate is not

1.

Signed by a Compliance Officer of the mutual fund

2.

A certificate that all legal formalities of a scheme are completed

3.

Attached to Annual report

4.

A part of offer document

Q.11

An offer document contains an AMCs investor grievances history for the past

1.

1 fiscal year

2.

2 fiscal year

3.

3 fiscal year

4.

Six months

Q.12

Along with the application, it is mandatory to distribute

1.

Offer document

2.

Key information memorandum

3.

Prospectus

4.
Q.13

None of the above

An offer document contains the summary of expenses history of all schemes for the
past

1.

1 fiscal year

2.

2 fiscal year

3.

3 fiscal year

4.
Q.14

Six months
Procedure for redemption or repurchase need not

1.

Be described in the offer document

2.

Include how redemption or repurchase price of units would be determined

3.

Include names of centers where redemption can be effected

4.

Indicate the redemption or repurchase price as at the end of the current fiscal year

Chapter 5
Q.1

A load means
1.
2.
3.
4.

Q.2

An
An
An
An

amount
amount
amount
amount

recovered from the registrar

which is recovered from the investor
paid to the broker by the fund
paid by the fund to the regulator (SEBI)

AMFI code of Ethics broadly covers

1.

Management of funds ought to be in the interest of the unit holder

2.
3.
4.
5.
Q.3

If an investor failed to claim the redemption proceeds after 3 years of due date he has
the right to receive an amount equal to
1.
2.
3.
4.
5.

Q.4

Q.5

Adequate disclosures by the fund ought to be made to the unit holders

Funds are urged to adopt to the professional selling practices
All of these
Only (1) & (2)

Prevailing NAV
Face value of the unit
NAV at the end of three years after the due date
Zero.
Due date NAV plus interest @ 15% p.a.
One of the following is NOT an ethical practice for a good mutual fund agent which one

1.
2.
3.
4.

Promising a particular rate of return in a scheme

To discuss the financial and investment needs of the investor
To explain the returns obtained by similar schemes of other AMCs
To discuss with the investor the risks associated with the proposed investment
Commission payable to agents by mutual fund is..

1. Based on the funds policy and discretion

2. Based on SEBI guidelines on agent commissions
3. Based on commissions paid by UTI to its agents
4. Based on Regulations of the RBI
Q.6 Which of the following sales practices is prescribed by regulation?

Q.7

1.
2.
3.
4.

AMFI Code of Ethics

SEBI Advertising Code
Mafias code of agents
None of the above
Some funds pay of the commission up-front and the balance in phases. This practice is
called

1.
2.
3.
4.
5.

Exit load
Discounting
Deferred contingent sales charge
Trail commission
Phased commissioning

Q.8

One of the following statements cannot be considered as the fundamental attribute of

a scheme. Which one?
1.
2.
3.
4.

Q.9

The scheme is an Income-oriented scheme

The scheme is open-end in nature
Details on listing, repurchase and redemption of units
The address and contact details of the registrars and custodians
For a person to become an agent of a mutual fund, he must...

1.
2.
3.
4.

Have passed class 12 exams

Obtain approval from the main broker of the fund
Be a university graduate
Meet the requirements laid down by the concerned AMC

Q.10The jurisdiction for resolving legal disputes concerning mutual funds is

1.
2.
3.
4.
Q.11
1.
2.
3.
4.
Q.12
1.
2.
3.
4.
5.
Q.13

Given in the offer document/ key information memorandum

Stated in the major stock exchanges
Decided by company law board
Decided by the BSE/NSE
As on March 2002, in India a person can be appointed as an agent of a mutual fund if
he
Passes the AMFI test
Signs an agreement with a fund on non- judicial stamp paper
Both (1) and (2)
has the knowledge about mutual funds
Who cannot invest in a mutual fund in India?
Provident funds
Non banking finance companies
Foreign citizens
Non-resident Indians
Overseas corporate bodies
The AMFI code of ethics does not cover the following prescriptions

1.

Adequate disclosures should be made to the investors

2.

Funds should be managed in accordance with stated investment objectives

3.

Conflict of interest should be avoided in dealings with directors or employees

4.

Each investment decision should be approved by investors

Q.14

Contingent Deferred Sales Charge (CDSC)

1.

Is higher for investors who stay invested in the scheme longer

2.

Is lower for investors who stay invested in the scheme longer

3.

Is the same for all investors irrespective of how long they stay invested

4.
Q.15

Is not allowed to be charged to mutual fund investors in India

SEBI guidelines for agents includes

1.

Agents can sell products of a single mutual fund

2.

Agents can sell products of mutual funds with whom he has entered into agreements

3.
4.
Q.16

Agents could be only individuals

None of the above
An investor buys units in a fund that has given excellent returns in the past, but his
expectations are not met, as the fund does not perform well this year. The investor
can

1.

Sue the AMC

2.

Sue the Trustees

3.

Sue the agent

4.
Q.17

None of the above

Are Overseas Corporate Bodies allowed to invest in Mutual Funds?

1.

No

2.

Yes

3.
4.
Q.18

If Ministry of Finance approves

If AMFI approves
Documents available to investors for inspection do not include

1.

Memorandum and Articles of Association of AMC

2.

Consent of auditors and legal advisors

3.

Investment management reports

4. Reports based on which actual investments are made

Chapter 6
The NAV of XYZ equity scheme is Rs. 10.50 on 3 rd September 2002, if the fund charges
0.25% as the exit load, what would be the repurchase price for the investor?

Q.1

Q.2

1.
2.
3.
4.

7.8750
13.1250
10.000
10.4737
An equity fund with weekly average net assets of Rs. 1400 crore may change maximum
ongoing expenses (excluding issue/redemption expenses) to the extent of

1.
2.
3.
4.

Rs. 35.00 crore

Rs. 26.75 crore
Rs. 27.50 crore
19.75 crore
If NAV of a scheme is 11 and entry load is 2%, what would be the number of units
purchased by Rs. 100.

1.
2.
3.
4.

Less than 10
Equal to 10
More than 10
None of the above
A close-end equity fund has average weekly net assets of Rs. 200 crores. As per the
SEBI Regulation, the AMC can charge the fund with investment and advisory fees upto:

1.
2.
3.
4.

Rs.
Rs.
Rs.
Rs.

Q.3

Q.4

Q.5

2.25 crores
2 crores
2.5 crores
3 crores

An open-ended fund was purchased when its NAV was Rs.22. One year later, its NAV
was Rs.24. The annualized percent Nav change is.

Q.6

Q.7

Q.8

1.
2.
3.
4.

5.88%
9.09%
6.42%
Insufficient data
If NAV of 40 becomes 44. What is % annualized return?

1.
2.
3.
4.

10%
12 %
8%
14%
Which of the below is a short-term capital asset?

1.
2.
3.
4.

Unit of MF held for a period of not more than one year preceding the date of transfer
Unit of MF held for a period of less than one year preceding the date of transfer
Unit of MF held for a period of less than three years preceding the date of transfer
Unit of MF held for a period of not more than three years preceding the date of transfer
10 crore units were allotted in a scheme. 2.25% is the entry load charged and Rs.8
crore is the initial issue expenses incurred. What maximum can be charged as
expenses towards entry load?

1.
2.
3.
4.

Rs. 8 crore
Rs. 6 crore
Rs. 2.25 crore
None of the above.

Q.9

In a no load debt fund of corpus 200 Crores, what could be the maximum investment
management charges?
1.
2.
3.
4.
5.

2 crore
2.25 crore
3.25 crore
4.25 crore
5.25 crore

Q.10Unit capital falls under which head in balance sheet?

1.
2.
3.
4.
Q.11
1.
2.
3.
4.
Q.12
1.
2.
3.
4.
5.

Asset
Liabilities
Profit and Loss account
None of the above
If NAV of a scheme is Rs.12 and units allotted are 100, what will be the total asset of
the scheme.
Less that Rs.1200
More than Rs. 1200
Exactly Rs. 1200
None of the above.
A non-traded equity is valued using .
Net worth per share
Valuation using capitalization earnings methods
Average of (1) and (2)
Average of (1) and (2) further discounted for illiquidity
None of these.

Q.13

Which of the following SEBI restrictions applies to a schemes investment in unlisted

shares ?

1.
2.
3.
4.
Q.14

A closed-end scheme may invest a maximum of 10% of its NAV in unlisted shares
An Open-end scheme may invest a maximum of 5% of its NAV in unlisted shares
(1) & (2) above
None of these
As per SEBI, Non-Performing assets (NPA) of a mutual fund can be defined as...

1.
2.
3.
4.
Q.15

1.
2.
3.
4.

An equity which is trading below its par value

An equity share which is yet to be listed on the stock exchange
A debt security on which either interest or the principle or both amounts are due but not received
for one quarter after the due date
None of these
An investor purchased units in an approved mutual fund on Juanuary01 1998, for Rs.4,
00,000.00. He sold the units on December 15, 1999 for Rs.6, 00,000.00. Calculate the
capital gains taxes paid by him without the benefit of indexation (ignore taxation).
Rs.20, 000.00
Rs.40, 000.00
Zero
Depends on the investors tax bracket

Q.16

An open-end fund with 10000 units outstanding had the following items in its balance
sheet:
Investments at market value Rs. 100000/Other assets Rs. 20000/Current Liabilies Rs. 25000/Calculate the funds NAV per unit.

1.
2.
3.
4.
Q.17

Rs. 9.50
Rs. 12
Rs. 10
Rs. 14.50
Liabilities in the balance sheet of a mutual fund are

1.

In the form of long-term loans

2.

Strictly short term in nature

3.

Combination of long term and short term

4.
Q.18

Not allowed as per regulations

A funds NAV is affected by

1.

Purchase and sale of investment securities

2.

Valuation of all investment securities held

3.

Units sold or redeemed

4.

All of the above

Q.19

Which of the following expenses cannot be charged to the scheme

1.

Audit fees

2.

Costs related to investor communication

3.

Winding costs for terminating the scheme

4.
Q.20

Penalties and fines for infraction of laws

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

1.

Security is never traded on stock exchange

2.

Security is not traded for 30 days

3.
4.

Security is not traded for 60 days

None of the above

Chapter 7
Q.1

Which of the following is TRUE of an automatic reinvestment (or a growth) plan?

1.
2.
3.
4.
5.

Q.2

The growth plan allows for the 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
An investor who subscribes to the growth option under a scheme can later change to a dividend
option
All of these
A Systematic Investment Plan.

1.
2.
3.
4.

Requires the investor to invest a fixed sum periodically

Enforces saving in a disciplined and phased manner
Provides the benefit of Rupee Cost Averaging
All of these
A systematic withdrawal plan is ideal for:

1.
2.
3.
4.

Investors with growth as the main investment objective

Investors who wish to benefit from market fluctuations
Investors who prefer a regular income stream
Investors who are not sure about themselves
Mutual fund in India do not offer

1.
2.
3.
4.

Nomination and transfer facilities

Redemption of units
Loans against units
Providing periodic statements to unit holders regarding their transactions

Q.3

Q.4

Q.5

NAV of a scheme helps in deciding an investor whether he should go

for..........

1. Automatic Reinvestment Plans

2. Systematic Withdrawal Plans
3. Systematic Transfer Plans
4. All of these
5. None of these
Chapter 8
Q.1

Up to what extent unlisted equity shares can be held in an Equity fund?

1.
2.
3.
4.

10% in Closed Ended fund

5% in open ended fund
Both a and b
None of the above.

Q.2 An interest-bearing bond with a higher coupon rate will have

Q.3

1.
2.
3.
4.

Lower duration
Higher duration
Can not be determined
Insufficient information to answer
Value stocks are shares in companies........

1.
2.
3.
4.
5.

In mature industries
Expected to yield low growth in earnings
(1) and (2)
Over valued stocks
Which have high P/E ratio

Q.4 A five year deep discount bond would

1.
2.
3.
4.
Q.5
1.
2.
3.
4.

Pay interest on a yearly basis

Pay interest on a quarterly basis
Be redeemed on maturity at the face value which is higher that the issue price with no payment
in between.
Offer yield tax free
What is the objective of an aggressive growth fund
Aggressive
Aggressive
Aggressive
Aggressive

growth
growth
growth
growth

funds
funds
funds
funds

target at high capital appreciation and may adopt speculative strategies

try to invest less in equity shares
strive for stability as much as growth
invest primarily in blue chip stocks

Q.6 YTM can also be defined as bonds

Q.7

1.
2.
3.
4.

IRR
Coupon rate
Current yield
Duration
Calculate the current yield on a G.Sec with at par value of Rs. 1000, coupon of 11% and
market price of Rs. 1010.

1.
2.
3.
4.

11.20%
10.89%
11.21%
12.20%
The current market price of a 9% coupon bond, when other bonds of similar maturities
pay 11% , will be

1.
2.
3.
4.

Above par
Below par
At par
Will be unrelated to other bonds
What is the most important factor that one should consider before investing in a
company fixed deposit?

Q.8

Q.9

1. Interest rate on the deposit

2. Assets against which the fixed deposit is secured
3. Its credit rating
4. All of these
5. (1) and (3)
Q.10
1.
2.
3.
4.

A debt portfolio is always exposed to

Interest rate risk
Re-investment risk
Equity price risk
(1) and (2)

Q.11
1.
2.
3.
4.
Q.12
1.
2.
3.
4.
Q.13
1.
2.
3.
4.
Q.14

An index fund managers tries

To beat the market by superior stock selection
To beat the market by superior market timing
To beat the market by superior asset allocation
None of these
Which of the following instruments would be the most volatile when interest rates
fluctuate?
ICICI / IDBI bonds listed on the NSE
PPF
An equity mutual fund
A balanced fund
Cyclical stocks command,
Relatively
Relatively
Relatively
Relatively

lower P/E ratio, and have higher dividend payouts

higher P/E ratio, and have higher dividend payouts
higher P/E ratio, and have lower dividend payouts
lower P/E ratio, and have lower dividend payouts

A bond's rating indicates its

1.

Reinvestment risk

2.

Default risk

3.
4.

Inflation risk
Interest-rate risk

Q.15
When interest rates rise, bond prices
Also rise
1.

Fall

2.

Are not affected

3.

Fluctuate either up or down

Q.16

A mutual fund is not allowed to invest in the sponsor company,

1.

>25% of its net assets

2.

>10% of its net assets

3.

Not at all

4.

>5% of net assets

Q.17

Dividend yield for a stock is

1.

Dividend per share

2.

Dividend per face value

3.
4.

Dividend per share to current market price

None of the above

Q.18

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

1.

The debt market is a wholesale market

2.

There are large players like banks, financial institutions, mutual funds, etc

3.
4.
Q.19

Government securities are traded on a large scale

All of the above
Certificates of Deposits (CDs) are issued by

1.

Regional Rural Banks

2.

Corporate

3.

Scheduled commercial banks

4.
Q.20

None of the above

Current yield relates interest on a security to

1.

Its current market price

2.

Its face value

3.

Its fair value

4.

The current price of T-Bills

Q.21

A mutual fund may transfer investments from one scheme to another

1.

Not at all

2.

At current market rates

3.

At cost price

4.
Q.22

At a fixed premium over market rate

Which of the following measures are not taken by SEBI for protecting investors of
mutual funds

1.

Mandating minimum levels of diversification for mutual funds

2.

Ensuring that the funds are not used to favour a few companies

3.

Tracking the securities that each fund has Invested in

4.

Ensuring that the funds are invested in approved securities only

Q.23

In mutual fund investors' subscriptions are accounted for as

1.

Liabilities

2.

Deposits

3.

Unit capital

4. None of the above

Chapter 9
Q.1

Portfolio characteristics of a fund can be judged by looking into Funds

1.
2.
3.
4.

Q.2

Cash position
Concentration for checking its largest holdings
Portfolio turnover
All of these
Which benchmarks are used for evaluating fund performance?

1.
2.
3.
4.
Q.3

Stock market indices such as S&P CNX Nifty, Sensex Etc.

Performance of other mutual funds
Return offered by other financial products or investment options open to the investor
All of these
Regular tracking of mutual funds performance can be done by.........

1.
2.
3.
4.
Q.4

Newspapers, business periodicals, annual, half-yearly and quarterly reports of the fund
Key information Memorandum
The funds Offer Document
None of these
A portfolio turnover of 200 percent implies that.........

1.
2.
3.
4.
Q.5 In
1.
2.
3.
4.
5.
Q.6

On an average a security stays in the portfolio for 6 months

On an average a security stays in the portfolio for 12 months
On an average a security stays in the portfolio for 36 months
On an average a security stays in the portfolio for 48 months
order to decide an appropriate index as benchmark for an actively
Traded fund, one should consider
Fund size and portfolio composition
Whether the fund is broad based or focused on specific type of securities
Investment objective of the fund
All of these
None of these
A fund has a front load of 1% and back-end load of 0.5%. The investor enters at NAV
of Rs.10 and exits at NAV of Rs.12.The return of investment earned by him is...

1.
2.
3.
4.

20%
18.22%
18.5%
None of these

Q.7 If a fund has a high P/E multiple, this fund is likely to be

1.
2.
3.
4.

Balanced fund
Growth fund
Money market fund
Cannot say from the available information

Q.8

While benchmarking a funds performance relative to other mutual funds, it is

important to...
1.
2.
3.
4.

Select funds with similar investment objectives

Select funds of comparable size
Both of the above
None of the above

Q.9 How many scripts does Nifty constitute of

1.
2.
3.
4.
Q.10

40
30
100
None of the above
A high portfolio turnover in an equity fund means

1.

The fund is very active in market

2.

Transaction costs are high

3.
4.

The fund may be quite risky

All of the above

Q.11

For evaluating sectoral funds, the preferred benchmark would be the

1.

BSE Sensex

2.

S&P CNX Nifty

3.

BSE 200

4.

S&P CNX Sectoral Indices

Q.12

The most suitable measure of fund performance for all fund types is

1.

NAV Change

2.

Total Return

3.
4.

Total Return with reinvestment

None of the above

Q.13

An investor can assess the performance of his mutual fund by comparing it with the
performance of

1.

Other mutual fund of the same type

2.

The stock market

3.

Other financial products

4.

All of the above

Q.14

The choice of an appropriate benchmark for evaluating a fund's performance depends

on

a.

The fund manager

b.

The investment objective of the fund

c.

SEBI

d.

AMFI

Q.15

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

1.

Two debt funds with 5 year maturities

2.

A broad-based equity fund with an IT Sector Fund

3.

A bond fund with a bond index

4.

A government securities fund with a government security

Chapter 10
Q.1

Fundamental qualities of a good financial planner are :

1.
2.
3.

Building trust with the client by understanding their needs

Good knowledge of all financial products and taxation related issues
Balanced, independent and ethical thinking

4.
5.

All of the above

None of the above
Financial Planning is

Q.2
1.
2.
3.
4.

investing assets to receive the highest rate of return possible

is a process aimed at identifying financial needs of a client and planning investments that allows
meeting future financial goals of the investor
keeping taxes as low as possible
planning to retire with the maximum income possible

Q.3 During Reaping phase, the investor looks forward to

1.
2.
3.
4.
Q.4

The process of making changes in asset allocation and specific investments is known
as
1.
2.
3.
4.

Q.5

Financial Planning
Stock Selection
Timing the market
Portfolio rebalancing
The objective of the financial planning is to ensure that

1.

Q.6

Build wealth
Cash out
Transfer his wealth
All these

2.
3.
4.

Right amount of money is available in the right hands at the right point in future to achieve an
individuals financial goals
That tax payable is as low as possible
One understands that technicalities of the financial market
One does not require the expertise of the financial advisers
Direct investment in stock markets can be a bettter option over investing through
mutual funds if:
1. The
2. The
3. The
4. The

Q.7

investor
investor
investor
investor

wants better returns than those offered by mututal funds

has large capital, knowledge and resources for research
has identified a bullish phase in the stock market
wants to invest for the long term

What is incorrect of the following?

1.
2.
3.
4.

Q.8

Value funds invest in overpriced stocks

Value funds invest in under priced stocks
Growth funds invest in overpriced stocks
None of the above.
Mutual funds should be recommended as.

1.
2.
3.
4.
Q.9

Investments to achieve long term goals

A rich quick investment option
Investments to take advantage from stock market swings
All of these.
As a financial planner, which of your following clients would you strongly advise to
start investing for retirement?

1.
2.
3.
4.

26 year old
30 year old
30 year old
31-year-old

unmarried executive with 2 yrs experience in a job

executive supporting a family of wife, child and mother
executive with his wife working as well
unmarried son of a wealthy businessman.

Q.10How does a financial planner help his client?

1.
2.
3.
4.
Q.11
1.
2.
3.
4.

By picking up cheques and application forms from the client

By identifying client needs, recommending the correct asset allocation and providing him service,
that would help investors in making investments
By researching and identifying individual stocks or bonds for the clients portfolio
By tracking the economy and government policies.
After developing a financial plan for a client, financial planners should:
Leave it as it is, as a lot of time has been spent for developing it and executing it
Review it periodically at regular intervals and / or when there is a substantial change in market
conditions
Review it once in five years there is no point in reviewing it more often since the client should
take a long term view
None of the above

Q.12
1.
2.
3.
4.
Q.13
1.
2.
3.
4.

Financial planners income should be generally linked to :

Performance of the scheme he sells
Man-hours spent with the client
A fixed annual fee
None of the above
In developing a fund portfolio for any investor, the following steps are involved. The
order in which these steps are to be followed is
Asset allocation, sector distribution, selection of fund managers and scheme
Sector distribution, asset allocation, selection of fund managers and scheme
Selection of fund managers/scheme, sector distribution and asset allocation
Sector distribution, selection of fund managers, asset allocation and schemes

Q.14

One of the following should not be recommended by a financial planner as a sound

investment objective?.

1.
2.
3.
4.
Q.15

Saving for the clients childrens education

Doubling the investment in 3 years
Purchase of a new car
Purchase of a new home
Financial planning for an investor should be re-evaluated when.........

1.
2.
3.
4.
Q.16

Your
Your
Your
Your

client has just retired

client has just been divorced from his wife at age 40
clients mutual funds portfolio shows substantial appreciation
client feels he has attained his financial goals

Which of the following statements is TRUE

1. Risk profile of a client remains constant through the life cycle

2. Two investors with the same risk profile would always have identical portfolios
3. All wealthy investors have exactly the same risk profile
4. The level of risk tolerance for most of the clients is fixed
5. None of the above statements is true
Chapter 11
Q.1

The power of compounding is best realized by investing in:

1. Income funds with dividend option

2. Equity funds with growth/reinvestment option
3. Balanced funds with dividend option
4. None of the above
Q.2 Value averaging means
1.

Q.3

2.
3.
4.

Keeping the target value of investment constant by investing the amount by which the
investment value has gone down.
Investing the same amount of funds regularly
Investing in one lump sum amount
None of these

1.

Compounding of interest is best explained by a

Balanced fund

2.

Growth fund

3.

Value fund

4.

Income fund

Q.4 A criticism of rupee-cost averaging is

1.
2.
3.
4.
Q.5

Investment is for the same amount at regular intervals

Over a period of time, the average purchase price will work out lower than if one tries to guess
the market highs and lows
It does not tell you when to buy, sell or switch from one scheme to another
Rupee cost averaging has no serious shortcomings
Which of the following strategies is an example of the combined approach of Rupee
Cost and Value Averaging?

1.
2.
3.
4.

When the investor sets a target value for his investments in an Equity fund
When the investor invests a fixed sum each month in a Liquid Fund
When the investor invests regularly in a Liquid Fund
When the investor invests regularly in a Liquid Fund , sets a target for an Equity Fund, then
invests more in Equity Fund if its value declines and books profits when its value exceeds the
target value
The strategy advisable for an investor to maximize investment return in the long run
is:

1.
2.

Buy and hold on to investments for a long time

Liquidate poorly performing investments from time to time

Q.6

3.
4.
Q.7

Liquidate good performing investments from time to time

Switch from poor performers to good performers
If you maintain a flexible ratio of asset allocation, would you

1.
2.
3.
4.

Rebalance the Debt/Equity allocation periodically?

Rebalance the Debt/Equity allocation very frequently?
Generally avoid portfolio rebalancing?
Keep fixed percentages of equity and debt investments at all times?
While deciding on an asset allocation strategy, the investor must consider

1.
2.
3.
4.

The stage of his life

His risk appetite
The purpose of making investment
All of these
Which of the following is the best investment option for the purpose of getting the
maximum benefits of compounding?

1.
2.
3.
4.

12% interest paid yearly

6% interest paid every 6 months
3% interest paid every quarter
1% interest paid monthly

Q.8

Q.9

Q.10
(1)
(2)
(3)
(4)

Asset allocation of a portfolio should be re-evaluated every time there is change in

the...
Family size and requirement
Job of the investor
Dramatic change in the market condition
All of these

hapter 12
Q.1

Which Product category should be the core foundation of a financial plan?

1.
2.
3.
4.

Q.2

The biggest disadvantage of investment in real estate is

1.
2.
3.
4.

Q.3

Q.4
1.
2.
3.
4.
Q.5

Bank deposits offer higher return other investment option

They are considered safe and liquid.
Bank deposits offer higher capital appreciation
Bank deposits offer better tax rebates schemes
Which of the following does not generally guarantee return or capital?
Bank Deposit
PPF
Units of Mutual fund
NSC
While choosing between a bank deposit and a debt income fund, the investor must
consider

1.
2.
3.
4.

Credit rating of bank

Quality of the mutual fund assets
His investment objective and risk appetite
All of these
Market risk can be effectively managed by:

a)
b)
c)
d)

Investing with a short term horizon

Investing in debt funds
Investing in high price shares
Investing regularly with a long term perspective to smoothen out the effects of volatility in market
price
RBI relief bonds are an attractive investment option for:

a)
b)
c)
d)

High net worth individual investors

Small investors
Governments
Mutual funds
The biggest disadvantage of investment in real estate is

Q.7

Q.8

Less potential for capital appreciation

High purchase risk
Depreciation in value as time passes
Value gets eroded due to inflation
Many investors prefer Bank deposits because.

1.
2.
3.
4.

Q.6

Equities
Gold
Mutual Fund
None of these

Q.9

1.

Less potential for capital appreciation

2.

High purchase price

3.

Depreciation in value as time passes

4.

Value gets eroded due to inflation

A small investor can build a diversified portfolio by

1.

Buying one share each of all listed companies

2.

Investing in a mutual fund

3.

Borrowing enough money to buy shares of well-managed companies

4.

None of the above

Q.10

Most individuals invest in life insurance policies for

a.

Risk protection

b.

Tax benefits

c.

Easy liquidity

d.

High returns

Q.11

The difference between debenture and bond is:

a.

Bonds are issued by corporations and debentures are issued by PSUs.

b.

Bonds are unsecured and debentures are secured.

c.

Bonds are backed by loans and debentures are backed by assets

d. None of the above.

Chapter 13
Q.1

Q.2

If beta is higher than 1, the fund is:

1.
2.
3.
4.

Less volatile than market

More volatile than market
Equally volatile than market
No relation
Volatility in a mutual fund portfolio is caused by

(1)
(2)
(3)
(4)

Investment in blue chip stocks

Idle cash lying with the fund
Investment in high rated bonds
None of these

Q.3

Sharpe and Treynor Ratios are measures of :

1.
2.
3.
4.

Q.4

Average return
Risk
Risk adjusted return
Beta of the portfolio
Which is a better investment option while selecting an equity fund?

1.
2.
3.
4.
Q.5

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

Either 1 or 3
Ex Marks 80%, Beta- 0.9, Gross Dividend Yield 8%
Ex Marks 90%, Beta- 0.8, Gross Dividend Yield 9%
Ex Marks or ( a R Squared Factor) of a fund measures

1.
2.
3.
4.
Q.6

How
How
How
How

much of a funds NAV movement is due to the market index movement

a funds NAV movement relates to the market index movement
much of a fluctuation has occurred in a funds NAV over a historical period.
many marks a Credit rating Agency accords to a fund.

An investor asks you in what order he should list the following schemes, going from the
scheme with the least risk to the one with the highest risk 1. Balanced Fund, 2. A
Stock Index Fund, 3. A Liquid Fund, 4. A IT Sector Fund.
1.
2.
3.
4.

1,2,3,4
1,3,4,2
3,1,2,4
2,3,1,4

Chapter 14
Q.1

As per Jacobs recommendation low risk fund portfolio is likely to have.

1.
2.
3.
4.
Q.2

50% invested in Government Securities Funds and 50% invested in Money Market funds
An equal split between Government Securities Funds, Growth Funds and Index Funds
Equal investments in Aggressive Growth Funds, Value Funds, Sector Funds and Debt Fund
A mix of Balanced and Growth
For which of the following would you consider average maturity as an important
factor in selecting the right one for the investor ?

1.
2.
3.
4.
Q.3

A debt fund
A balanced fund
A money market or liquid fund
Both a and b above
A very high proportion of investment in all types of equity funds is advisable for
investors

1.

In distribution phase

2.

In accumulation phase

3.

In transition phase

4. Who are wealth preserving affluent individuals

Q.4
For older investors who want to transfer their wealth
No financial planning is required
1.

The right investment strategy depends upon who the beneficiaries are

2.

The right investment strategy depends upon the state of the stock market

3. All the funds can be invested in aggressive equity funds

Chapter 15
Q.1

Code of ethics should be followed by distributors as:

1.
2.
3.
4.

It is required by AMFI
It is required by AMC
Business increases
All of the above

Q.2 What is insider trading?

1.
2.
3.
4.
Q.3

Buying and selling securities ahead of doing the same transaction for the fund.
Buying and selling securities on the basis of privileged information available to
persons who are insiders to the company.
Both of the above
None of the above

the fund by

Mutual funds in India are required by SEBI to :

1.
2.
3.
4.

Q.4

prohibits their employees from personal trading in secondary markets.

allows all employees to trade freely in secondary markets without restrictions.
to establish a code of conduct and allow employees to do personal trading that conforms to SEBI
guidelines.
allows employees to carry on personal trading as long as they abide by SEBI regulations.
The detailed version of SEBI circular regarding code of conduct for distributors given
by AMFI is known as:

1.
2.
3.
4.

Ethics code
AGNI
Front running
None of the above

Birth place of mutual fund