The cut-off time for equity funds is 3 pm. Since the application was submitted after 3 pm on Friday, the applicable NAV would be that of the next business day, which is Monday.Correct Answer 14 TRUE

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1
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LAST DAY REVISION EXAM1
Question 1 The basis of Fundamental Analysis is studying the companies Price

Volume chart and then taking a decision on buying/selling - True or False
?
(a) TRUE
(b) FALSE
Question 2 The average net asset of a Mutual Fund scheme is Rs 500 crores and the
investment transactions amounted to Rs 2000 crores in a year. What is
the average holding period of the investments ?
(a) 2 months
(b) 3 months
(c) 4 months
(d) 6 months
Correct Answer 1 FALSE
Answer Fundamental Analysis entails review of the company’s fundamentals viz.

Explanation financial statements, quality of management, competitive position in its
product / service market etc.
Technical analysts study price-volume charts of the company’s share prices.
Correct Answer 2 3 months
Answer Total Transactions = Rs 2000 cr

Explanation Avg Asset = Rs 500 cr
So 2000 / 500 = 4 times in a year the investments were churned
4 times a year = every 3 months.
Question 3 Which of the below is not a high risk fund ?

(a) Banking Sector Fund
(b) Diversified Equity Fund
(c) Income Fund
(d) Pharma Sector Fund
Question 4 Every investor should invest in as a part of his core

portfolio.
(a) Arbitrage Funds
(b) Diversified Equity Funds
(c) Sector Funds
(d) Thematic Funds
Correct Answer 3 Income Fund
Correct Answer 4 Diversified Equity Funds

Question 5 The NAV of a Mutual Fund scheme is Rs 180. If the exit load is 2%, what
will be the effective re-purchase price ?
(a) 176
(b) 176.4
(c) 177.5
(d) 177.8
Question 6 AMFI is the sole regulator of Mutual Funds in India - True or False ?
(a) TRUE
(b) FALSE
Correct Answer 5 176.4
Answer Rs 180 less 2%

Explanation 180 X 2 / 100 = 3.6
180-3.6 = 176.40
Answer SEBI is the regulator of MF's in India.

Explanation
Question 7 Long Term Capital Gain Tax in Debt Schemes is charged at .

(a) 20% with indexation
(b) 10% without indexation
(c) Lower of 1 and 2
(d) There is no tax on Debt Schemes
Question 8 A purchase transaction of a Mutual fund scheme is completed online by

an investor at 12.25 pm (web server time). The same is processed at 3.50
pm. What is the applicable cut-off time for this transaction?
(a) 12.25 pm
(b) 3.30 pm
(c) 3.50 pm
(d) Cut off time does not apply for online transaction
Correct Answer 7 20% with indexation

Answer Gains on debt mutual funds held for less than 36 months are treated as short
Explanation term capital gains and taxed as per the income tax slab of the investor.
Gains on debt mutual funds held for 36 months or more are treated as long-
term capital gains and taxed at the rate of 20% after indexation.
Correct Answer 8 12.25 pm
Answer For online transactions, the time as per the web server to which the instruction
Explanation goes, is used in determining the NAV for sale / re-purchase transactions.
Question 9 The Trustees have to take the consent of Unit Holders .

(a) when the trustee’s decide to wind up the scheme
(b) whenever required by 75% of the unit holders
(c) whenever required by SEBI in the interest of unit holders
(d) All of the above
Question 10 The date of applicability of the NAV is not dependent on .

(a) scheme in which the money is invested
(b) time at which the application is submitted
(c) place at which the application is submitted
Correct Answer 9 All of the above
Correct Answer 10 place at which the application is submitted

Question 11 The scheme in which physical gold is deposited in a bank and interest is
received on such deposit is known as .
(a) Loan against Gold scheme
(b) Gold Deposit Scheme
(c) Gold Transfer Scheme
(d) There is no such scheme
Question 12 No SEBI permission is required in appointing a Bank or a Stock Broker

as a Mutual Fund distributor - True or False ?
(a) TRUE
(b) FALSE
Correct Answer 11 Gold Deposit Scheme
Answer Gold deposit schemes are offered by some banks in India and are like a fixed
Explanation deposit in gold.
An investor depositing gold receives interest at regular intervals and on
maturity the gold of equivalent weight is returned.
Correct Answer 12 TRUE
Answer The AMC appoints its distributors as per the guidelines. No SEBI permission
Explanation is required for such appointments.
Question 13 Mr. Mohan gives an application for investment in an Equity fund at 3.29
pm on Friday at the AMC's office. Which will be the applicable NAV ?
(a) Fridays NAV
(b) Saturdays NAV
(c) Mondays NAV
(d) Highest NAV of the above three
Question 14 The Non Systematic Risk can be minimised by diversifying the portfolio -
True or False ?
(a) FALSE
(b) TRUE
Correct Answer 13 Mondays NAV
Answer For applications for an Equity Fund given after 3 pm, the next working days
Explanation NAV is considered.
Answer Non-systematic risk is unique to a company like risk arising out of change in
Explanation management or cheaper imports etc.
This can be minimised by diversification ie. investing in various companies of
different sectors.
(Systematic risk is integral to investing in the market; it cannot be avoided like
Political risks etc)
Question 15 Yield Spread is the additional risk premium that an investor gets for
bearing the credit risk - True Or False ?
(a) TRUE
(b) FALSE
Question 16 A Mutual Fund scheme issued 36 crore units to its investors in an NFO at
face value Rs 10. What is the unit capital of this scheme ?
(a) Rs 36 cr
(b) Rs 360 cr
(c) Rs 3600 cr
(d) None of the above
Answer Eg- Additional return offered by a non-government issuer ( like a Company),

Explanation above the yield that the government offers, is called yield spread. Better the
credit quality, lower the yield spread.
Correct Answer 16 Rs 360 cr
Answer Each unit is of Rs 10.

Explanation So 36 cr units X Rs 10 = Rs 360 cr
Question 17 Retirement Planning involves Tactical Asset Allocation - True or False ?

(a) TRUE
(b) FALSE
Question 18 Growth investment style entails investing in high growth stocks i.e. stocks
of companies that are likely to grow at the same pace as that of the
economy - True or False ?
(a) TRUE
(b) FALSE
Answer Tactical asset allocation is suitable only for seasoned investors operating with
Explanation large funds as it involves taking a bet on the market movements.
Strategic Asset Allocation is best suited for Retirement Planning as it
considers the age - risk factor.
Answer Growth investment style entails investing in high growth stocks i.e. stocks of
Explanation companies that are likely to grow much faster than the economy.
Question 19 An investor gives a cheque of Rs 1 lacs for investing in a Debt scheme at

3.30 pm at a Mutual Fund office. The NAV of which day will be
applicable to him ?
(a) NAV of the same day
(b) NAV of the next business day
(c) NAV of the day on which funds will be available
Question 20 The Entry / Exit Loads and Taxes do not have an impact on the returns to
the investors - True or False ?
(a) TRUE
(b) FALSE
Correct Answer 19 NAV of the next business day
Answer For all Equity and Debt funds (except Liquid funds) - For investment of Rs 2
Explanation lacs and below - NAV of the same day if received before 3 pm ( cut-off time).
If received after 3 pm then NAV of the next business day.
For investments of amount over Rs 2 lacs, irrespective of the time of receipt of
application, NAV of the business day on which the funds are available for
utilisation before the cut-off time of that day is applicable.
Answer Loads and taxes pull the investor’s returns below that earned by the Scheme.
Explanation
Question 21 The distribution of an investors portfolio between different asset classes is

called asset allocation - True or False ?
(a) TRUE
(b) FALSE
Question 22 Minors can invest in Mutual Funds - True or False ?

(a) TRUE
(b) FALSE
Answer Minors i.e. persons below the age of 18 are not legally eligible to contract, so
Explanation they need to invest through their Parents/Lawful guardians.
Question 23 Investments owned by the scheme may be quoted in the market at lower
price than the cost paid and these losses are called Notional Losses - True
or False ?
(a) TRUE
(b) FALSE
Question 24 One of the objective of is to interact with the Securities and

Exchange Board of India (SEBI) and to represent to SEBI on all matters
concerning the mutual fund industry.
(a) AMFI
(b) NSE / BSE
(c) Investor Forum
(d) Mutual Fund Distributors Association
Answer Investments owned by the scheme may be quoted in the market at lower than
Explanation the cost paid and these are called valuation losses.
Similarly, there can be valuation gains when securities are quoted in the
market at a price above the cost at which the scheme acquired them.
Correct Answer 24 AMFI

Question 25 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the
last day of the month for all their equity schemes on their respective
website on or before the third day of the succeeding month in a user-
friendly and downloadable format - True or False ?
(a) TRUE
(b) FALSE
Question 26 is the summary of SAI and SID

(a) New Fund Offer Application
(b) KIM
(c) Attachments to all Advertisements
Answer Its on or before the tenth day of the succeeding month.

Explanation
Correct Answer 26 KIM
Answer KIM ( Key Information Memorandum) is essentially a summary of the SID

Explanation (Scheme Information Document) and SAI (Statement of Additional
Information).
It is more easily and widely distributed in the market. As per SEBI
regulations, every application form is to be accompanied by the KIM.
New Fund Offer contains the complete SID and SAI.
Question 27 An investor in an active fund bears a cost for the fund

management, and takes a risk.
(a) Higher , Higher
(b) Lower , Lower
(c) Higher, Lower
(d) Lower, Higher
Question 28 Although invest in equity markets, the expected returns are in

line with liquid funds.
(a) Sectoral Funds
(b) Arbitrage Funds
(c) ELSS Funds
(d) Debt Funds
Correct Answer 27 Higher , Higher
Correct Answer 28 Arbitrage Funds
Answer Although Arbitrage funds are categorized as equity funds because they invest
Explanation in equity. In reality, the risks are arbitraged (i.e. cancelled out), normally
between the cash market and the F&O market.
The returns are lower – more in line with money market returns/liquid funds,
rather than equity market returns as there is no open position and the profit is
the price difference between two markets.
Question 29 An investor who wants wider portfolio choices should invest in Mutual
Funds when compared to National Pension System - True or False ?
(a) TRUE
(b) FALSE
Question 30 All advertisements and Sales Literature containing an AMC(s)/Mutual

Fund ranking must prominently disclose .
(a) The publisher of the ranking data.
(b) Criteria on which the ranking is based.
(c) The name of the Ranking Entity.
Answer The NPS offers fewer portfolio choices than mutual funds.
Explanation

Question 31 As per the Income Tax Act - which of the below option is True ?
(a) Capital loss, short term or long term, can be set off against any other head of
income
(b) Long term capital loss can be set off against long term and short term capital
gain
(c) Short Term Capital gains is a tax free income
(d) Short term capital loss is to be set off against short term capital gain or long
term capital gain
Question 32 An important objective of SEBI is to represent to the Government,

Reserve Bank of India and other bodies on all matters relating to the
Mutual Fund Industry - True or False ?
(a) TRUE
(b) FALSE
Correct Answer 31 Short term capital loss is to be set off against short term capital gain or long
term capital gain
Answer A few key provisions of the Income Tax Act are :

Explanation •Capital loss, short term or long term, cannot be set off against any other head
of income (e.g. salaries)
•Short term capital loss is to be set off against short term capital gain or long
term capital gain
•Long term capital loss can only be set off against long term capital gain
Answer An important objective of AMFI is to represent to the Government, Reserve

Explanation Bank of India and other bodies on all matters relating to the Mutual Fund
Industry
Question 33 If an Institutional Investor is making an application for investing in a

Mutual Fund, which additional document is required ?
(a) Audited Accounts for the last 3 years
(b) Bank Statements
(c) Board Resolution
(d) Approval letter from SEBI
Question 34 An investor gives a cheque of Rs 7 lacs at 4 pm at a Mutual Fund office

for investment in a Equity Fund. The NAV of which day will be
applicable to him ?
(a) Same day NAV
(c) NAV of the day on which the funds are available
Correct Answer 33 Board Resolution
Correct Answer 34 NAV of the day on which the funds are available
Answer For investments of amount over Rs 2 lacs, irrespective of the time of receipt of
Explanation application, NAV of the business day on which the funds are available for
For all Equity and Debt funds (except Liquid funds) - For investment of Rs 2
lacs and below - NAV of the same day if received before 3 pm ( cut-off time)
Question 35 If an investor feels that the trustees have not fulfilled their obligations,
then he can file a suit against the trustees for breach of trust - True or
False ?
(a) TRUE
(b) FALSE
Question 36 Pension Funds Regulatory and Development Authority (PFRDA) is the

regulator for the National Savings System.
(a) TRUE
(b) FALSE
Answer Pension Funds Regulatory and Development Authority (PFRDA) is the

Explanation regulator for the National Pension System.
Question 37 An elderly couple who have no immediate family members should ideally
invest in .
(a) ELSS Funds
(b) Debt Funds
(c) Sectoral Funds
(d) Blue Chip Equity Funds
Question 38 To source the data required to track the performance of mutual funds
most offer free tools on their websites for this purpose.
(a) AMC's
(b) Distribution Houses
(c) MF Research companies
Correct Answer 37 Debt Funds
Answer Debts funds carry the least amount of risk so they can be recommended to the
Explanation elderly couple.
The other funds are Equity oriented and carry huge market risks.
Answer An investor who wants to study the performance of a MF by collecting daily

Explanation NAV etc. from the newspapers can find it frustratingly time consuming.
However ready-made solutions are available in the market. Many AMCs,
distribution houses and mutual fund research houses offer free tools in their
website.
Question 39 Of the following documents, which is required to be appended to the

application form of a MF scheme ?
(a) Statement of Additional Information - SAI
(b) Addendum
(c) Scheme Information Document - SID
(d) Key Information Memorandum - KIM
Question 40 A regular dividend paying mutual fund scheme can be used for capital
appreciation - True or False ?
(a) FALSE
(b) TRUE
Correct Answer 39 Key Information Memorandum – KIM
Answer KIM is essentially a summary of the SID and SAI.

Explanation As per SEBI regulations, every application form is to be accompanied by the
KIM.
Answer A regular dividend paying mutual fund scheme can be used as a source of
Explanation regular income.
Question 41 Mutual Funds are constituted as Investment Companies in India - True

or False ?
(a) TRUE
(b) FALSE
Question 42 Recurring expenses cannot be charged to a Mutual Fund scheme as it drags

down the NAV - True or False ?
(a) TRUE
(b) FALSE
Answer Mutual funds are constituted as Trusts.and they are governed by the Indian
Explanation Trusts Act, 1882
Answer Recurring Expenses can be charged to the scheme.

Explanation Since the recurring expenses drag down the NAV, SEBI has laid down the
expenses and their limits which can be charged to the scheme.
Question 43 In the Scheme Information Document (SID), the condensed financial

information (for schemes launched in last 3 financial years) is mentioned -
True pr False ?
(a) FALSE
(b) TRUE
Question 44 Liquid schemes and other debt schemes regularly park funds in short
term deposits of commercial banks but cannot charge management fees
on these - True or False ?
(a) FALSE
(b) TRUE
Answer Condensed financial information (for schemes launched in last 3 financial

Explanation years) is mentioned in the Statement of Additional Information (SAI).
Answer Management fees cannot be charged by liquid schemes and other debt
Explanation schemes on funds parked in short term deposits of commercial banks.
Question 45 Cash less medical insurance schemes has led to .

(a) More Liquidity with investors
(b) Less Liquidity with investors
Question 46 Tax Deferral is a key feature of .

(a) Dividend Option
(b) Growth Option
(c) Arbitrage Fund
(d) Liquid Schemes
Correct Answer 45 Less Liquidity with investors
Answer Investors keep less liquidity ( ready money ) as the insurance companies settle
Explanation the medical bills directly.
Correct Answer 46 Growth Option

Question 47 Open-ended schemes have to re-open for sale / re-purchase within 5

business days of the allotment and that date is known as the Re-Opening
date - True or False ?
(a) TRUE
(b) FALSE
Question 48 The Custodian accepts and gives delivery of securities for the purchase
and sale transactions of the various schemes of the fund - True or False ?
(a) TRUE
(b) FALSE
Answer As per SEBI guidelines, NFOs [other than ELSS and RGESS] can remain
Explanation open for a maximum of 15 days.
Allotment of units or refund of moneys, should be done within 5 business days
of closure of the scheme and Open-Ended schemes have to re-open for sale /
re-purchase within 5 business days of the allotment.
Answer The custodian is responsible for settling all the transactions on behalf of the
Explanation mutual fund schemes.
Question 49 In the Mutual Fund industry - every AMC gives an ARN code number
which is renewed every three years - True or False ?
(a) True - this is as per SEBI rules
(b) False - AMFI issues the ARN code number.
Question 50 All advertisements and Sales Literature containing an AMC(s)/Mutual

Fund ranking must prominently disclose, with respect to the ranking
.
(a) The name of the Ranking Entity and the criteria on which the ranking is based
(b) The name of the category (e.g. income/growth)
(c) The number of AMC(s)/Mutual Funds in the category.
Correct Answer 49 False - AMFI issues the ARN code number.

Question 51 Mr. Shah gives a local cheque at 4.30 pm of Rs 10 lacs at a Mutual Fund
office for investing in a Gilt Fund. Of which day will the NAV be
applicable to him ?
(c) NAV of the day on which the funds will be available
Question 52 Due to the popularity of cash less health insurance policies the liquidity
needs of the investors have reduced - True or False
(a) TRUE
(b) FALSE
Correct Answer 51 NAV of the day on which the funds will be available
Answer For investments of amount over Rs 2 lacs, irrespective of the time of receipt of
Explanation application, NAV of the business day on which the funds are available for
For investment of Rs 2 lacs and below - NAV of the same day if received
before 3 pm ( cut-off time)
Answer Earlier people use to save to meet medical emergencies. But due to cash less
Explanation medical insurance people keep less liquidity with them as the insurance
companies pay for the medical bills
Question 53 Dividend Distribution Tax (DDT) on debt-oriented mutual fund schemes

for Corporate Investors is + Surcharge + Education Cess
(a) 15%
(b) 25%
(c) 30%
(d) 35%
Question 54 Different investors have different investment needs and objectives. This is
the reason Mutual Fund offer different .
(a) Plans
(b) Options
(c) Schemes
(d) time horizons.
Correct Answer 53 30%
Answer Tax on dividend distributed by debt-oriented mutual fund schemes is as

Explanation follows:
Others: 30% + Surcharge + Education Cess
Individuals and HUF: 25% + Surcharge + Education Cess
Correct Answer 54 Schemes
Answer MF's have various schemes like Large Cap Funds, Mid Cap Funds. Sectoral
Explanation Funds etc. to suit varied investment requirements.
(Plans and Options are Dividend / Growth etc. which form a part of the
scheme)
Question 55 A person wishes to avail of a loan. For which of the below options he
cannot get a loan ?
(a) To start a textile factory
(b) To buy a car of value above Rs 20 lacs
(c) To buy a high priced lottery ticket
(d) To buy a house in a Union Territory
Question 56 You are expecting interest rates (yields) to rise in the markets. Where
would you invest your money considering this forecast ?
(a) Long Terms Debt Funds
(b) Short Term Debt Funds
(c) Equity Funds
(d) Banking Sector Funds
Correct Answer 55 To buy a high priced lottery ticket
Correct Answer 56 Short Term Debt Funds
Answer If it is expected that interest rates would go up, it would be safer to go with
Explanation Short Term Debt Funds. As the rates rise, the short-term bonds would mature,
allowing the fund manager to deploy the proceeds at higher rates.
On the contrary, as interest rates in the market goes down, debt securities gain
in value. Therefore, long term debt funds would be sensible in declining
interest rate scenarios.
Question 57 As per the provisions of the Income Tax Act - Short term capital loss is to
be set off against short term capital gain or long term capital gain - True
or False ?
(a) TRUE
(b) FALSE
Question 58 For a Young Unmarried - which of the following phase is applicable ?

(a) Accumulation
(b) Distribution
(c) Transfer
Answer Some key provisions of IT Act related to Capital Gains are:

Explanation •Capital loss, short term or long term, cannot be set off against any other head
of income (e.g. salaries)
•Short term capital loss is to be set off against short term capital gain or long
term capital gain
•Long term capital loss can only be set off against long term capital gain
Correct Answer 58 Accumulation
Answer Accumulation is the stage when the investor gets to build his wealth.
Explanation It covers the earning years of the investor i.e. the phases of the life cycle from
Young Unmarried to Pre-Retirement.
Question 59 The prescribed ceiling for ill liquid investments is lower for ,
which have a greater need for liquidity because investors can offer their
units for re-purchase at any time.
(a) ELSS Schemes
(b) Close Ended Schemes
(c) Open Ended Schemes
(d) Debt Funds
Question 60 Which one of the below mentioned document is not required for KYC
process ?
(a) PAN Card
(b) Address Proof
(c) Income Proof
(d) Identity Proof
Correct Answer 59 Open Ended Schemes
Correct Answer 60 Income Proof

Question 61 A Mutual Fund scheme gave an annualised return of 9.86% and the
annualised Standard Deviation of the fund is 3.47. The current risk free
return is 8%. Calculate the Sharpe Ratio.
(a) 0.89
(b) 0.72
(c) 0.49
(d) 0.53
Question 62 Management fees cannot be charged by liquid schemes on funds parked

in short term deposits of commercial banks - True or False ?
(a) TRUE
(b) FALSE
Correct Answer 61 0.53
Answer The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation

Explanation ie. ( Return Earned - Risk free Return ) / Standard Deviation
(9.86 – 8) / 3.47
1.86/3.47
0.53
Answer SEBI has stipulated annual limits on recurring expenses (including

Explanation management fees) for various Equity and Debt schemes.
However management fees cannot be charged by liquid schemes and other
debt schemes on funds parked in short term deposits of commercial banks.
Question 63 In a scenario where interest rates are falling, it would be advisable to

invest in a debt fund rather than bank deposit - True or False ?
(a) TRUE
(b) FALSE
Question 64 The Pension Account of National Pension System (NPS) is known as

.
(a) Tier I
(b) Tier II
(c) Tier III
(d) Asset Class E
Answer As interest rates in the market goes down, debt securities gain in value.
Explanation Therefore, long term debt funds would be sensible in declining interest rate
scenarios.
Also if it is expected that interest rates would go up, it would be safer to go
with Short Term Debt Funds. As the rates rise, the short-term bonds would
mature, allowing the fund manager to deploy the proceeds at higher rates.
Correct Answer 64 Tier I
Answer Tier I A/c of the National Pension System (NPS) is the Pension account and
Explanation is non-withdrawable.
Tier II A/c is the Savings account and is withdrawable to meet financial
contingencies. An active Tier I account is a pre-requisite for opening a Tier II
account.
Question 65 In Liquid funds, simple annualised return method is used to show the
returns because .
(a) Its a simpler way to calculate and investors understand it easily
(b) The investment made is fixed for 30 - 90 - 180 days
(c) The return is calculated over smaller time horizons
(d) The amount invested is usually small
Question 66 You are a mutual fund advisor. To whom would you advise investment of
more than 70 % of their funds in debt funds ?
(a) A 33 year old well employed with one son
(b) A 45 year old Executive Manager of a company who has 2 children
(c) Elderly couple with no children
(d) Young man working with Glaxo
Correct Answer 65 The return is calculated over smaller time horizons
Answer In case of Money Market schemes and liquid plans, wherein investors have
Explanation very short investment horizon, the performance can be measured and
advertised by simple annualisation of yields.
Correct Answer 66 Elderly couple with no children
Answer More Allocation to debt funds is recommended for senior citizens as they
Explanation carry the least amount of risk
Young people can take risks so they are advised to invest in Equity funds for a
long term.
Question 67 The Stock Exchanges which provide facilities for Mutual Fund trading
also do the functions of Mutual Fund RTAs. - True or False ?
(a) TRUE
(b) FALSE
Question 68 The National Pension System (NPS) offers a wider portfolio choice than
Mutual Funds - True or False ?
(a) TRUE
(b) FALSE
Answer Stock Exchanges does are not required to do the role of Registrars and
Explanation Transfer Agents (RTA).
Answer The NPS offers fewer portfolio choices than mutual funds.
Explanation
Question 69 Investments owned by the scheme may be quoted in the market at higher
than the cost paid and these gains are called as .
(a) Valuation Gains
(b) Booked Gains
(c) Notional Gains
(d) Notional Losses
Question 70 Loads and taxes pull the investors returns below that earned by the
Scheme - True or False ?
(a) TRUE
(b) FALSE
Correct Answer 69 Valuation Gains
Answer Investments owned by the scheme may be quoted in the market at higher than
Explanation the cost paid and these are called valuation gains.
Similarly, there can be valuation losses when securities are quoted in the
market at a price below the cost at which the scheme acquired them.

Question 71 What is the full form of ASBA ?

(a) Application Supported by Blocked Amount
(b) Applicants Supporting Block Amount
(c) Application Supported by Bankers Acceptance
(d) Applications Superiority by Blocked Amount
Question 72 An investor gives a cheque of Rs 2 lacs for investing in a ELSS scheme at

2.30 pm at a Mutual Fund office. The NAV of which day will be
applicable to him ?
(c) NAV of the day on which funds will be available
Correct Answer 71 Application Supported by Blocked Amount
Correct Answer 72 NAV of the day on which funds will be available
Answer For all Equity and Debt funds (except Liquid funds) - For investments of
Explanation amount of Rs 2 lacs and above, irrespective of the time of receipt of
application, NAV of the business day on which the funds are available for
For investment of below Rs 2 lacs - NAV of the same day if received before 3
pm ( cut-off time)
Question 73 The dividend received by a Mutual Fund investor will be taxed at a rate
of .
(a) 5%
(b) 10%
(c) 20%
(d) No tax on Mutual Fund Dividends in the hands of the investor
Question 74 A investors wishes to invest in debt mutual funds but wants high liquidity
- should he invest in Fixed Maturity Plans ?
(a) Yes
(b) No
Correct Answer 73 No tax on Mutual Fund Dividends in the hands of the investor
Answer The dividend received by an investor in a MF - be it Equity or Debt, is

Explanation exempt from tax.
Correct Answer 74 No
Answer Fixed maturity plans are a kind of debt fund where the investment portfolio is
Explanation closely aligned to the maturity of the scheme.
AMCs tend to structure the scheme around pre-identified investments. So it
will not be easy to liquidate the FMPs.
Question 75 Once the New Fund Offer (NFO) of a Close Ended Fund has closed, a
person can buy the listed units of such close ended fund .
(a) At prices usually higher than NAV
(b) At prices usually lower than NAV
(c) At prices which can be higher or lower than NAV
(d) Units of a Close Ended Fund cannot be bought after NFO
Question 76 To achieve growth by investing in equity and equity related investments,

along with income generation by investing in debt and money market
instruments would be the investment objective of a
.
(a) debt fund
(b) balanced scheme
(c) ELSS Fund
(d) Sectoral Equity fund
Correct Answer 75 At prices which can be higher or lower than NAV
Answer After the NFO of a close ended fund, sale and purchase transactions happen
Explanation on the stock exchange between two different investors, and that the fund is not
involved in the transaction.
The transaction price is likely to be different from the NAV. Depending on the
demand-supply situation for the units of the scheme on the stock exchange, the
transaction price could be higher or lower than the prevailing NAV.
Correct Answer 76 balanced scheme

Question 77 Young Age, Good Steady Job, an Adventurous streak etc are some
qualities of an investor who takes risks in investments - True or False ?
(a) FALSE
(b) TRUE
Question 78 The peak of earning capacity of an investor reached during the pre-
retirement phase - True or False ?
(a) TRUE
(b) FALSE
Answer In the Accumulation stage, the investor gets to build his wealth. It covers the
Explanation earning years of the investor i.e. the phases of the life cycle from Young
Unmarried to Pre-Retirement.
Question 79 Investing in can be a risky prospect during periods of

Economic Turmoil.
(a) Gilt Securities
(b) Debt Funds
(c) Mid Cap Funds
(d) Large Cap Funds
Question 80 Asset allocation means .

(a) Distribution of Funds between Fund Managers in a Mutual Fund
(b) Distribution of funds between various asset classes in a portfolio
(c) Distribution of funds between various persons after the death of a person
(d) Distribution of funds between beneficiaries of an AMC
Correct Answer 79 Mid Cap Funds
Answer Mid Cap Stocks are intrinsically not as strong as the frontline (large cap)
Explanation stocks, so they become riskier during periods of economic turmoil.
Correct Answer 80 Distribution of funds between various asset classes in a portfolio
Answer The distribution of an investor’s portfolio between different asset classes is

Explanation called asset allocation.
For eg - If an investor wishes to invest Rs 10 lakhs - His funds can be divided
and invested in Equity, Debt and Gold - This is asset allocation.
Question 81 Debt-oriented, close-ended / interval, schemes /plans need to disclose their

portfolio in their website every month, by the working day of the
succeeding month.
(a) 3rd
(b) 10th
(c) 12th
(d) 15th
Question 82 Condensed financial information for schemes launched in last 3 financial

years is mentioned in the .
(a) Scheme Information Document (SID)
(b) Statement of Additional Information (SAI)
(c) Fact Sheet
(d) Prospectus
Correct Answer 81 3rd
Correct Answer 82 Statement of Additional Information (SAI)

Question 83 Post the New Fund Offer, investors who wishes to buy units need to pay
.
(a) the NFO price plus inflation rate
(b) the same price as NFO
(c) a price linked to the inflation index
(d) a price that is linked to its NAV.
Question 84 Every trust has beneficiaries - True or False ?

(a) TRUE
(b) FALSE
Correct Answer 83 a price that is linked to its NAV.
Answer When a scheme is first made available for investment, it is called a ‘New Fund
Explanation Offer’ (NFO).
During the NFO, investors have the chance of buying the units at their face
value.
Post-NFO, when they buy into a scheme, they need to pay a price that is
linked to its NAV.
Answer Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund
Explanation trust, are the investors who invest in various schemes of the mutual fund.
The Trust acts through its trustees. Therefore, the role of protecting the
interests of the beneficiaries (investors) is that of the Trustees.
Question 85 Investments in Mutual Funds are subject to market risks and therefore
do not provide any guarantee of Capital Growth / Protection - True or
False ?
(a) TRUE
(b) FALSE
Question 86 Mutual funds can accept cash to the tune of Rs from small
investors.
(a) No cash can be accepted by a MF
(b) Rs 50,000
(c) Rs 20,000
(d) Rs 5,000
Correct Answer 86 Rs 50,000
Answer Mutual funds usually do not accept cash.

Explanation However for small investors, who may not be tax payers and may not have
PAN/bank accounts, are allowed cash transactions for purchase of units in
mutual funds to the extent of Rs. 50,000/- per investor, per mutual fund, per
financial year.
Question 87 Gold Future Contracts .

(a) are traded on the Commodity Exchanges
(b) are not standardised products
(c) can be bought through Mutual Funds
Question 88 If a person wants to appeal against the ruling of SEBI, he can do so with
.
(a) RBI
(b) Commerce Ministry
(c) Company Law Board
(d) Securities Appellate Tribunal
Correct Answer 87 are traded on the Commodity Exchanges
Answer Gold futures contracts are traded in commodity exchanges like the National
Explanation Commodities Exchange (NCDEX) and Multi-Commodity Exchange (MCX).
The value of these contracts goes up or down in line with increases or
decreases in gold prices.
Correct Answer 88 Securities Appellate Tribunal
Answer Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the
Explanation Securities Appellate Tribunal (SAT).
Question 89 There are no penalties for breach of code of conduct as mandated by

AGNI - True or False ?
(a) TRUE
(b) FALSE
Question 90 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the
last day of the month for all their schemes on their respective website on
or before the of the succeeding month
(a) 3rd day
(b) 7th day
(c) 10th day
(d) 15th day
Answer As per 'AMFI Guidelines & Norms for Intermediaries' (AGNI) - In the event
Explanation of breach of the Code of Conduct by an intermediary the registration can be
cancelled after the set procedure is carried out.
Correct Answer 90 10th day

Question 91 Investments in Mutual Funds can be done only through a AMFI

authorised MF distributors - True or False ?
(a) TRUE
(b) FALSE
Question 92 Dividend Distribution Tax (DDT) on Equity oriented mutual fund

schemes for Corporate Investors is + Surcharge + Education Cess
(a) 10%
(b) 25%
(c) 30%
(d) NIL TAX
Answer Investors can directly invest in MF's by visiting the MF office and other Point
Explanation of Sales (POS).
Answer Tax on dividend distributed is for Individual / Domestic Companies and NRIS
Explanation for Equity oriented scheme is : 10% + 12% Surcharge + 4% cess = 11.648%
Question 93 Which of the following should NOT be included in the Key Information
Memorandum ?
(a) The risks associated with the scheme
(b) The functions of Trustees and AMC
(c) The opening - closing dates of the NFO
(d) Minimum investments required and the cutoff time.
Question 94 A Mutual Fund scheme is know to distribute dividends from time to time.
Such MF can be used as a source of .
(a) Good Capital Appreciation
(b) Regular Income
(c) Safety of Capital
(d) Tax Planning
Correct Answer 93 The functions of Trustees and AMC
Correct Answer 94 Regular Income

Question 95 A Board Resolution is not required for an institutional investor to invest

in Mutual Funds if the Memorandum and Articles of Association permit
it to do so - True or False ?
(a) TRUE
(b) FALSE
Question 96 At what rate is the Securities Transaction Tax charged on sale of units of
debt oriented mutual fund in a stock exchange ?
(a) 0.01%
(b) 0.10%
(c) 0.13%
(d) 0%
Answer A Board Resolution is required as an authorisation for the investing institution

Explanation to invest.
Answer STT is not applicable on transactions in debt or debt-oriented mutual fund

Explanation (including liquid fund) units.
Question 97 Summary of SID - Scheme Information Document and SAI - Statement of

Additional Information is known as KIM - Key Information
Memorandum - True or False ?
(a) TRUE
(b) FALSE
Question 98 What is the effect on bond prices when interest rates rises ?
(a) Bond prices rises
(b) Bond prices fall
(c) No effect on bond prices
(d) Can rise or fall depending on the performance of stock markets
Answer KIM is essentially a summary of the SID and SAI.

Explanation As per SEBI regulations, every application form is to be accompanied by the
KIM. So KIM is more easily and widely distributed in the market.
Correct Answer 98 Bond prices fall
Answer Lets take an example : An investor has invested in a bond that yields a return
Explanation of 9%.
Later, yields in the market for similar securities rise to 10%. So the bond,
which was bought at 9% yield, is no longer such an attractive investment. It
will therefore lose value.
Question 99 The strategy of Tactical Asset Allocation is considered to be a risky

strategy - True or False ?
(a) TRUE
(b) FALSE
Question 100 Mutual funds are constituted as and therefore, they are governed
by the .
(a) Companies, Indian Companies Act
(b) Trusts, Indian Trusts Act
(c) Investment Agencies, SEBI Act
(d) NGOs, NGO Act
Answer Tactical Asset Allocation is the strategy when the investor presumes the
Explanation likely behaviour of the market.
An investor who decides to go overweight on equities i.e. take higher
exposure to equities, because of expectations of buoyancy in industry and
share markets. Such strategies are very risky and can backfire.
Correct Answer Trusts, Indian Trusts Act

100
Practice Question Banks also available for :
NISM
NISM Series I: Currency Derivatives Certification Exam

NISM Series V A: Mutual Fund Distributors Certification Exam
NISM Series VI: NISM Series VI - Depository Operations Certification Exam
NISM Series VII: Securities Operations and Risk Management
NISM Series VII: Equity Derivatives Certification Exam
NISM Series III A: Securities Intermediaries Compliance certification Exam
NISM Series XA : Investment Adviser (Level 1) Certification Exam
NISM Series XB: Investment Adviser (Level 2) Certification Exam
NCFM
NCFM Financial Markets: A Beginners Module

NCFM Capital Market (Dealers) Module
NCFM Derivative Market (Dealers) Module
BSE
Certificate on Security Market (BCSM)


The cut-off time for equity funds is 3 pm. Since the application was submitted after 3 pm on Friday, the applicable NAV would be that of the next business day, which is Monday.Correct Answer 14 TRUE

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The cut-off time for equity funds is 3 pm. Since the application was submitted after 3 pm on Friday, the applicable NAV would be that of the next business day, which is Monday.Correct Answer 14 TRUE

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS

CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

LAST DAY REVISION EXAM1

Question 1 The basis of Fundamental Analysis is studying the companies Price

Correct Answer 1 FALSE

Answer Fundamental Analysis entails review of the company’s fundamentals viz.

Correct Answer 2 3 months

Answer Total Transactions = Rs 2000 cr

Question 3 Which of the below is not a high risk fund ?

Question 4 Every investor should invest in as a part of his core

Correct Answer 3 Income Fund

Correct Answer 4 Diversified Equity Funds

Correct Answer 5 176.4

Answer Rs 180 less 2%

Correct Answer 6 FALSE

Answer SEBI is the regulator of MF's in India.

Question 7 Long Term Capital Gain Tax in Debt Schemes is charged at .

Question 8 A purchase transaction of a Mutual fund scheme is completed online by

Correct Answer 7 20% with indexation

Correct Answer 8 12.25 pm

Question 9 The Trustees have to take the consent of Unit Holders .

Question 10 The date of applicability of the NAV is not dependent on .

Correct Answer 9 All of the above

Correct Answer 10 place at which the application is submitted

Question 12 No SEBI permission is required in appointing a Bank or a Stock Broker

Correct Answer 11 Gold Deposit Scheme

Correct Answer 12 TRUE

Correct Answer 13 Mondays NAV

Correct Answer 14 TRUE

Correct Answer 15 TRUE

Answer Eg- Additional return offered by a non-government issuer ( like a Company),

Correct Answer 16 Rs 360 cr

Answer Each unit is of Rs 10.

Question 17 Retirement Planning involves Tactical Asset Allocation - True or False ?

Correct Answer 17 FALSE

Correct Answer 18 FALSE

Question 19 An investor gives a cheque of Rs 1 lacs for investing in a Debt scheme at

Correct Answer 19 NAV of the next business day

Correct Answer 20 FALSE

Question 21 The distribution of an investors portfolio between different asset classes is

Question 22 Minors can invest in Mutual Funds - True or False ?

Correct Answer 21 TRUE

Correct Answer 22 TRUE

Question 24 One of the objective of is to interact with the Securities and

Correct Answer 23 FALSE

Correct Answer 24 AMFI

Question 26 is the summary of SAI and SID

Correct Answer 25 FALSE

Answer Its on or before the tenth day of the succeeding month.

Correct Answer 26 KIM

Answer KIM ( Key Information Memorandum) is essentially a summary of the SID

Question 27 An investor in an active fund bears a cost for the fund

Question 28 Although invest in equity markets, the expected returns are in

Correct Answer 27 Higher , Higher

Correct Answer 28 Arbitrage Funds

Question 30 All advertisements and Sales Literature containing an AMC(s)/Mutual

Correct Answer 29 TRUE

Correct Answer 30 All of the above

Question 32 An important objective of SEBI is to represent to the Government,

Answer A few key provisions of the Income Tax Act are :

Correct Answer 32 FALSE

Answer An important objective of AMFI is to represent to the Government, Reserve

Question 33 If an Institutional Investor is making an application for investing in a