Class Test- 1

Year 1; Semester 1: Mutual Fund Agent

Total Marks: 100
Total Time: 1 Hour & 30 Minutes

Chapter 1: Concept & Role of Mutual Fund

Instruction: Please encircle the correct Answer.

1. The number of mutual fund schemes in India is about:

A. 100 B. 500 C. 800 D. 2000
2. Open-ended schemes generally offer exit option to investors through a stock exchange
A. True B. False
3. Sector funds invest in a diverse range of sectors
A. True B. False
4. High yield bond schemes invest in junk bonds
A. True B. False
5. Investment objective is closely linked to
A. Scheme B. Option C. Plan D. SIP
6. Investments in mutual funds enable investors to reduce the risk in their portfolios through:
A. Diversification B. Market timing C. Stock selection D. Sector selection
7. If an investor in a closed end fund seeks liquidity, he can:
A. not redeem units before maturity B. Redeem units at ISCs
C. Sell the units on a stock exchange D. Redeem units with the fund
8. An investor in mutual funds faces the disadvantage of:
A. High cost of operations B. Lock-in period
C. Low flexibility in investing D. Overload of choices
9. When investors buy units in an NFO, the amount mobilized by the fund is called:
A. Managed capital B. Initial AUM C. Average AUM D. Unit capital
10. A close-ended mutual fund has a fixed
A. NAV B. Fund size C. Rate of return D. Number of distributors
11. 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
12. A mutual fund is not
A. Owned jointly by all investors
B. A company that manages investment portfolios of high net worth individuals
C. A pool of funds used to purchase securities on behalf of investors
D. A collective investment vehicle

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13. The most important advantage of a money market mutual fund is
A. Quick capital appreciation B. High regular income
C. Safety of principal D. No loads
14. Debt funds target
A. Low risk and stable income B. Protection of principal
C. High growth with risk D. Long term capital appreciation
15. A mutual fund is:
A. a partnership B. a pass through vehicle
C. a private trust D. an association of persons
16. Which one is more diversified?
A. Fund A which invests in Shares in India B. Fund B which invests in shares in India and USA both
C. Both are equally diversified D. Insufficient information
17. An investor should not invest in a mutual fund if
A. His capital base is large
B. He is able to carry out detailed investment research and monitor the stock market
C. Both the above D. None of the above
18. A gilt fund is a special type of fund that invests
A. In very high quality equity only B. In instruments issued by companies with a sound track record
C. In short term securities D. In government securities only
19. Of the following fund types the highest risk is associated with
A. Balance Funds B. Gilt Funds C. Equity Growth Funds D. Debt Funds
20. The NAV of a Mutual Fund
A. Is always constant B. Keeps going up at a steady rate
C. Fluctuates with market price movements D. Cannot go down at all
21. An open ended Mutual fund is one that has
A. An option to invest in any kind of security B. Units available for sales and purchase at all times
C. An upper limit on its NAV D. A fixed fund size
22. Units from an open ended mutual fund are bought from
A. on the stock exchange B. The fund itself C. AMFI D. The distributor
23. When an investor subscribes to a mutual fund -
A. The investor gets a share in the upside of the asset management company
B. The investor buys a part of the assets or pool of funds outstanding at that time
C. His share in the assets of the fund cannot be determined
24. Which of the following statements is true?
A. Open-end schemes have variable unit capital B. Open end schemes can be listed in the
stock market
C. Closed-end schemes can offer re-purchase facility D. All the above
E. Only (a) and (c)
25. The following are benefits of mutual funds
A. Portfolio diversification B. Reduction of transaction costs C. Liquidity D. All the above
26. The following is not a benefit of mutual funds-
A. Investor has custody of securities where fund invests
B. Investor is able to diversify risk C. Investor can save on costs
27. The following are disadvantages of investing in mutual funds
A. No control over costs B. No tailor made portfolios C. Both the above D. None of the above
28. Open end funds are
A. Obliged to sell new units at all times B. Normally sell new units at all times
C. Do not sell new units

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29. Closed end funds are
A. Are listed in the stock exchanges B. Can offer re-purchase facility C. All the above D. None of the above
30. Which of the following statements is true?
A.Open end funds have variable unit capital B. Closed end funds have relatively constant capital
C. Open end funds can be listed in the stock market D. All the above E. A & B
31. Which of the following is true -
A. ‘High yield debt fund’ is another name for ‘Junk bond fund’ B. High yield debt funds are popular in India
C. High yield debt funds are not possible in India within current regulations
D. A and B E. A and C
32. Fixed term plans
A. Are essentially closed-end in nature B. Have to necessarily offer sale and re-purchase prices
C. Do not have a determinable tenor D. None of the above
33. During new fund offer (NFO) Units of an open – ended fund are purchased from the
A. Broker B. The mutual Fund itself C. Depository D. Stock Exchange
34. Ownership of the mutual fund by the unit holders is
A. Beneficial. B. Mutual and beneficial. C. Individual D. Mutual
35. Directly investing in equity shares is better then investing in equity shares through a mutual fund
because of
A. Tailor – made portfolio B. Absence of Distribution expense
C. Control over costs D. All of the above.
36. Identify the CORRECT statements?
A. Investing in a mutual fund is likely to be less risky compared to directly investing in the market.
B. A mutual fund enables a small investor build a diversified portfolio
C. Investment in a mutual fund offers more liquidity. D. All are correct.
37. When you invest in an open-ended mutual fund scheme, which of the following decisions is /are not
taken by you?
A. Which share to buy and which share to sell?
B. What prospective changes would be made to the load structure?
C. At what NAV you should exit? D. The first two decisions.
38. The correct description of a mutual fund is
A. It is a company B. it is a development financial institution
C. It is a financial intermediary D. it is non-banking finance company
39. An open end fund
A. is open for one-time sale of fixed number of units
B. offers repurchase facility subject to certain obvious conditions
C. is always obliged to keep issuing new units at all times
D. offers repurchase facility unconditionally at all times
40. A gilt fend is a special type of fund that invests
A. in dated securities only B. in very high quality equity only
C. Mainly in very high quality corporate bonds D. mainly in high quality money market instruments
41. Which classification of mutual funds does not exits?
A. Pension fund or provident fund B. Closed – end or open – end
C. Load fund or no load fund D. Active fund or passive fund
42. Which of the following is NOT a characteristic of mutual fund
A. Pooling of investments B. market risk C. Uniform unit holder rights D. Safety of principal
43. Each unit holder of a mutual fund is
A. a creditor to that mutual fund B. a debtor to that mutual fund
C. a trustee of that mutual fund D. part owner of the assets of that mutual fund
44. Mutual funds offer the portfolio diversification. This is best expressed by the statement.
A. do not put all eggs in one basket B. one bird in hand is better than two in the bush
C. What goes up must come down D. risk and return always goes hand in hand
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45. Fund A invests in shares of companies in India. Fund B invests in shares of companies in India and
USA. We can say that
A. Definitely A is more diversified than B B. Definitely A and B are well-diversified
C. We need more information to identify which of them is better diversified
D. Definitely B is more diversified than A
46. A close ended mutual fund has a fixed
A. market value of assets under management B. net asset value per unit.
C. unit capital and number of units D. number of units.
47. A mutual fund is not
A. A portfolio of stocks, bonds and other securities B. A company that manages investment portfolios
C. A pool of funds used to purchase securities on behalf of investors
D. A collective investment vehicle
48. Mutual fund can benefit from economics of scale because of
A. Portfolio diversification B. Risk reduction C. Large volume of tradesD. None of the above
49. Equity Linked Savings Scheme does not have which of the following features?
A. It entitles the unit holder to tax rebate B. The investment is locked in for 3 years
C. A minimum stated level of investments is made in equity and equity related instruments
D. None of the above
50. An actively managed equity fund expects to
A. Be able to beat the benchmarks B. Earn the same returns as the benchmark
C. Have no benchmarks D. Under-perform when compared with the benchmark
51. In India proportion of mutual fund AUM in comparison to bank deposits is
A. 2% B. 10% C. 25% D. 100%
52. Which classification of mutual fund does not exist?
A. Closed end or open end B. Load fund or no load fund
C. Pension fund or insurance fund D. Active fund or passive fund
53. A close-ended scheme is quoted on the stock exchange at a discount to its NAV when
A. The markets are bearish B. Investors perceive that the fund will be unable to maintain the NAV
C. The assets of the fund are undervalued D. None of the above
54. A passive fund has the following feature
A. A passive fund tracks the index B. A passive fund matches the performance of the index
C. A passive fund selects the stocks that are present in the index D. All of the above
55. Direct investment in stock market can be a better option than investing through mutual funds if the
investor
A. Wants better returns than those offered by mutual funds
B. Has large capital, knowledge and resources for research
C. Has identified a bullish phase in the stock market D. Wants to invest for the long term
56. Passive fund is expected to
A. Beat the return of the index B. Furnish the returns of the market index
C. Keep the costs low D. Both B and C
57. Mutual funds can also act as a market stabilizer, in countering large inflows or outflows from the
foreign investors.
A. True B. False
58. The scheme earns interest income or dividend income on the investments it holds. Further, when it
purchases and sells investments, it earns capital gains or incurs capital lossess. These are called
__________________ or _____________ as the case may be.
A. Interest Income, Dividend Income. B. Realized Capital Gains, Realized Capital Losses.
C. Valuation Gains , Valuation Lossess D. Scheme Expenses, Scheme Profits.

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59. Which of the following statement(s) are FALSE
A. Investments owned by the scheme may be quoted in the market at higher than the cost paid. Such
gains in values on securities held are called valuation gains.
B. There can be Valuation losses when securities are quoted in the market at a price below the cost at
which the scheme acquired them.
C. Only A is correct while B is partially not correct. D. None of the above.
60. When a scheme is first made available for investment, it is called
A. New Fund Offer(NFO) B. Post NFO C. Purchase Fund Now(PFN) D. Permanent Account Number.
61. Which of the following option is not available?
A. Dividend Payout. B. Dividend Re-investment. C. Growth. D. Valuation Gains.
62. Which of the following is correct?
A. The relative size of mutual fund companies is assessed by their assets under management (AUM).
B. When a scheme is first launched, assets under management would be the amount mobilized from
investors. Therefore, if the scheme has a positive profitability metric, its AUM goes up, a negative
profitability metric will pull it down.
C. If the scheme pays any money to the investors, either as dividend or as consideration for buying back
the units of investors, the AUM falls.
D. All of the above.
63. The advantage of Professional Management in Mutual Fund is
A. Investing in line with the investment objective. B. investing based on adequate, research.
C. ensuring that prudent investment process is followed. D. All of the above.
64. Those investments, whose value the investor cannot easily realize in the market, are technically
called ______________ and may result in losses for the investor.
A. False Savings B. Illiquid Investments. C. Excess Investments. D. None of the above.
65. Mutual Funds are not liable to pay tax on the income they earn. If the same income were to be earned
by the investor directly, then tax may have to be paid in the same financial year. This advantage in
mutual fund investment is known as.
A. Tax Benefits B. Investment Comfort C. Regulatory Comfort D. Tax Deferral
66. Which is the facility that helps investor invest amounts regularly in mutual funds?
A. Systematic Investment Plan (SIP). B. Systematic Withdrawal Plan (SWP)
C. Systematic Transfer Plan (STP) D. None of the above.
67. Which is the facility that helps investor withdraw amounts regularly in mutual funds?
A. Systematic Investment Plan (SIP). B. Systematic Withdrawal Plan (SWP)
C. Systematic Transfer Plan (STP) D. None of the above.
68. Which is the facility that helps investor move moneys between different kinds of schemes regularly
in mutual funds?
A. Systematic Investment Plan (SIP). B. Systematic Withdrawal Plan (SWP)
C. Systematic Transfer Plan (STP) D. None of the above.
69. Which funds combine features of both open-ended and close-ended schemes. They are largely
close-ended, but become open-ended at pre-specified intervals?
A. Active Funds. B. Passive Funds. C. Hybrid Funds. D. Interval Funds.
70. Which Fund have an investment charter that provides for a reasonable level of investment in both
debt and equity?
A. Active Funds. B. Passive Funds. C. Hybrid Funds. D. Interval Funds.
71. Which fund invest in a mix of government and non-government debt securities?
A. Gilt funds. B. Diversified Debt funds. C. Junk bond Schemes D. Fixed Maturity Plans.
72. Which of the following is not a feature of Floating rate fund?
A. It invests largely in debt securities where the interest rate payable by the issuer changes in line with the
market.
B. the NAVs of such schemes fluctuate lesser that debt funds that invest more in debt securities offering a
fixed rate of interest.
C. Both the above. D. None of the above.
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73. Liquid schemes invest only in debt securities where the moneys will be repaid with
A. 180 days B. 364 days C. 91 days D. All of the above
74. Which of the following is an example of Sector fund?
A. Infrastructure fund B. Media and Entertainment Fund C. Banking Fund. D. E.L.S.S
75. The NAV of Equity Income/Dividend Yield Schemes are expected to fluctuate lesser than other
categories of equity schemes.
A. True B. False
76. Arbitrage Funds take contrary positions in different markets/securities, such that the risk is
neutrllized, but a return is earned. Most arbitrage funds take contrary positions between the equity
market and the futures and options market. These are designed to help investors to take positions or
protect their risk in some other security, such as an equity share.
B. True B. False
77. Which of the following is/are Hybrid funds?
A. Liquid Funds B. Monthly Income Plan C. Capital Protected Schemes D. Both B and C
78. In which formats Gold Funds can be structured?
A. Gold Exchange Traded Fund B. Gold Sector Funds. C. Gold ETF-FOF D. All of the above
79. Real Estate Funds invest in
A. Bonds B. Government Securities C. Real Estates D. All of the above.
80. Commodities as an asset class include
A. Food Crops like wheat and chana B. spices like pepper and turmeric
C. fibres like cotton D. All of the above
81. Commodities as an asset class include
A. Industrial metals like copper and aluminium B. Energy products like oil and natural gas
C. precious metals(bullion) like gold and silver D. All of the above
82. In India, mutual fund schemes are not permitted to invest in commodities. Therefore, the commodity
funds in the market are in the nature of Commodity Sector Funds, i.e. funds that invest in shares of
companies that are into commodities.
A. True B. False
83. International funds invest abroad. They are often structured as feeder funds linked to a host fund.
A. True B. False
84. The fund manager in a fund of fund scheme selects:
A. Bonds B. Sectors C. Stocks D. Funds
85. In order to facilitate buy and sell units of ETF in the stock exchange, mutual funds appoints some
intermediaries whose job is to offer price quote for buying and selling units at all times are called
A. Traders B. Jobbers C. Market Makers D. Investors

86. When the investments owned by the scheme are quoted higher than the cost paid in the market,
such gains in value on securities held are known as
A. Capital Gain B. Valuation Gain C. Capital Loss D. Valuaton Loss.

87. Post NFO the investors have the following options

A. They pay a price that is not linked to NAV
B. They pay a price that may or may not be linked to NAV
C. They pay a price that is linked to NAV

88. The systematic approaches offered by mutual funds to promote an investment discipline for long
term wealth creation are
A. SIP, STP B. SIP, STP, SWP C. SIP, SWP D. None of the above

89. The unit holder has influence over what securities or investments the scheme would buy.
A. True B. False

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90. The unit capital in an open ended fund keeps changing on a regular basis
A. >NAV B. =NAV C. <NAV D. Any of the Above

91. The role of the fund manager is increased in deciding on the investments in index schemes
A. True B. False

92. The performance of passive funds tend to mirror the concerned index
A. True B. False

93. That mutual fund which has an investment charter that provides for a reasonable level of
investment in both equity and debt
A. Junk bond B. Liquid scheme C. Fixed maturity plan D. Hybrid fund

94. Those funds that invest only in only treasury bills and government securities
A. Diversified debt securities B. Equity schemes C. Junk bonds D. Gilt funds

95. Gilt funds are those funds that which do not have credit risk
A. True B. False

96. The funds that invest in debt securities where the interest rate payable by the issuer changes
in line with market
A. Floating rate funds B. Liquid schemes C. Sector funds D. Gilt funds

97. Liquid schemes or money market scheme are a variant of debt schemes that invest only in
debt securities where the money will be repaid within 100 days.
A. True B. False

98. Thematic funds are those funds that invest in line with an investment theme
A. True B. False

99. Which of the below statements is the best representative of sector funds
A. Sector funds invest in two to three specified sectors B. Sector funds invest in many sectors
C. Sector funds invest only in one specific sector D. A & B

100. The fund that takes contrary positions in different markets/securities such that the risk is
neutralized and return is earned are called
A. Dividend yield schemes B. Sector funds C. Thematic funds D. Arbitrage funds

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