PRACTICE SET-2 50Q

Q 1. As per SEBI regulations, a mutual fund scheme should have at least ________
investors.
● 10
● 15
● 20
● 25

Q 2. Mutual fund units issued against purchase transactions would be subject to levy of
stamp duty at ______ of the amount invested.
● 0.5%
● 0.05%
● 0.005%
● 0.01%

Q 3. To whom does the profits or losses made by the mutual fund belong?
● The investors
● The Asset Management Company
● Fund Managers
● Trustees

Q 4. What action has to be taken before deleting a default bank account from the
registered bank account in a mutual fund folio?
● A new folio will have to be opened with the same joint holding as the new default
account
● Another account has to be designated as the default bank account
● All the nominees of the mutual fund scheme have to sign on the change form
irrespective of the mode of holding

Q 5. The Asset Management Companies have to disclose the Total Expense Ratios
(TER) of the various schemes on their websites on a ______ basis.
● Daily
● Weekly
● Monthly
● Annual
Q 6. Financial goals have to be defined in terms of _______ .
● Time horizon and external funds required
● Costs and economic policies
● Aspiration and desires
● Time horizon and money needed

Q 7. If the sale and purchase transactions for a year amounted to Rs. 10,000 crore, and
the average size of net assets is Rs. 5,000 crore, this means that investments are held
in the portfolio, on an average for ________ .
● 2 months
● 3 months
● 6 months
● 12 months

Q 8. Investors tend to extrapolate the current event into the future and expect a repeat.
This is an example of ________ bias.
● Overconfidence
● Recency
● Herd Mentality
● Familiarity

Q 9. ________ is a proper benchmark for a balanced hybrid scheme.

● CRISIL Hybrid 75+25 , Conservative Index
● CRISIL Hybrid 25+75 , Aggressive Index
● CRISIL Hybrid 50+50 , Moderate Index

Q 10. Long Duration debt scheme invests in debt instruments with Macaulay duration
_____ . between
● 1 year and 3 years
● below 1 year
● greater than 7 years
● 6 months and 12 months

Q 11. When the asset allocation is maintained as a constant ratio by regular rebalancing
of portfolio, it is known as ________ .
● Dynamic asset allocation
● Flexible asset allocation
● Fixed asset allocation
● Variable asset allocation
Q 12. For which of these documents is Time Stamping mandatory?
● Payment instrument only
● Application form only
● Transaction slip for buying additional units
● Both for Application form / transaction slip and payment instrument

Q 13. Segregated portfolio means _________ .

● a portfolio which is kept aside for a ‘rainy day’ or contingency fund
● a portfolio which is created out of debt or money market securities affected
by a credit event
● a portfolio which is left after removing poor credit quality papers
● All of the above

Q 14. What is the purpose of ‘credit enhancement’ in case of securitised transaction?

● Payment of higher coupon
● Generating capital gain
● Higher credit worthiness

Q 15. Banks and NBFC's can lend money against ________ of mutual fund units.
● Nomination
● Redemption
● Pledge
● All of the above

Q 16. Whom should the investor approach if his complaint is not resolved by the Asset
Management Company (AMC) ?
● Securities and Exchange Board of India (SEBI)
● Custodian Company
● Law Board
● Ombudsman

Q 17. Inflation Risk is also referred as _______ .

● Credit Risk
● Liquidity Risk
● Purchasing Power Risk

Q 18. Which of these statement(s) is/are FALSE?

 ● If an investor holds his investments in a debt fund for more than three years, the
capital gain will be considered as a long term capital gain
● As the purchase and re-purchase is done with the mutual fund, the investor
does not have to pay any capital gain tax
● Both 'a' and 'b' are false

Q 19. Long term capital gains is NOT taxed in which of these funds?
A. Balanced Advantage Funds
B. Balanced Funds
C. Diversified Equity Funds
● Both A and B
● Only C
● Only A
● Capital gains from all types of mutual funds are taxed subject to certain
conditions

Q 20. In whose beneficial interest is a mutual fund managed?

● Trustees
● Unit holders
● Sponsors
● AMC

Q 21. The loss booked from a debt investment of 15 months can be set off against
________ .
● Long term capital loss
● Short term capital loss
● Short term capital gain or long term capital gain
● It cannot be set-off

Q 22. Which of these statements are false?

A) While evaluating schemes, the Expense Ratio will matter much more in Debt Funds
than Equity mutual funds.
B) A mutual fund with a long track record is always better for investments as it would
give higher returns in the future
C) Ultra short term debt funds always invest in high credit quality debt securities
● A and B are false
● B and C are false
● A and C are false
● All A, B and C are false
Q 23. Ultra-short-term debt scheme invests in debt and money market instruments with
Macaulay duration between __________ .
● 1 to 3 months
● 3 to 6 months
● 6 to 12 months
● 1 year to 3 years

Q 24. Which of these is a physical asset?

● Bank Deposits
● Units by Real Estate investment Trusts
● Real estate
● Shares in physical form

Q 25. A mutual fund scheme’s NAV is said to be cum-dividend from the ________ .
● date the dividend is announced till it is paid out
● date the dividend is paid
● date unit holders approve the dividend
● date of notice of meeting

Q 26. The expenses which can be charged by an Asset Management Company to a

Mutual Fund scheme are limited by _____ .
● Fund Managers
● Sponsors
● Investors
● SEBI

Q 27. What is the portfolio of a 'Fund of Funds' made up of ?

● Money market securities
● Equity stocks
● Debt securities
● Mutual Fund schemes

Q 28. Identify the TRUE statement.

● While calculating scheme returns for an investor, if there is an entry load, then
the initial value of the Net Asset Value (NAV) is taken as NAV minus Entry Load
● While calculating scheme returns for an investor, if there is an exit load,
then the later value of the Net Asset Value (NAV) is taken as NAV minus Exit
Load
Q 29. Identify the TRUE statements -
A) A mutual fund scheme with a beta of less than 1 is less risky than market
B) The diversified stock index has a Beta of 1
C) Unsystematic risk is measured by its Beta
● Only A is true
● B and C are True
● A and B are True
● All A, B and C are True

Q 30. The New Fund Offer dates are published in the _______ .
● Both Key Information Memorandum and Scheme Information Document
● Statement of Additional Information (SAI)
● Key Information Memorandum (KIM)
● Scheme Information Document (SID)

Q 31. Which of the below statements is a important advantage of a Exchange Traded

Fund (ETF) ?
● A person can closely track the current valuation of an ETF and buy/sell the
units on a stock exchange at those prices
● ETFs generally give higher returns than other Mutual Funds
● An investor in an ETF can have a control on where his money can be invested
● All of the above

Q 32. As per AMFI’s code of ethics, an Asset Management Company has to disclose
which of the following scheme related information to the unit holders?
A. Investment Pattern
B. Annual portfolio turnover
C. Annual securities transactions
● Only B
● A and B
● B and C
● A, B and C

Q 33. In which of these options can an investor expect a cash flow in his bank account?
● Bonus
● Dividend Payout
● Dividend Reinvestment
● Growth
Q 34. Which statement is FALSE with reference to risk appetite?
● Risk appetite can be assessed by risk profiling
● Preferred risk appetite is different from ideal risk appetite
● Risk appetite indicates level of risk that investor is comfortable with
● People of same age will have same risk appetite

Q 35. If an investor wants to get updated monthly performance and portfolio data on
mutual funds, which of the following documents should he read?
● Scheme Information Document (SID)
● Fund Fact Sheet
● Key Information Memorandum (KIM)
● Statement of Additional Information (SAI)

Q 36. For how long is the trail commission paid to the mutual fund distributor?
● For the first one year only
● For the first three years only
● For the first ten years only
● Till the money is held in the fund

Q 37. Identify the TRUE statement/s -

● Rolling return are the average annualized returns calculated for alternate holding
period
● Holding period returns (HPR) do not provide an accurate picture of returns
of fund if its initial value is too high or low.
● Both 1 and 2
● None of the above

Q 38. What is asset allocation?

● Deciding which and how many mutual fund schemes to invest in
● Finalizing which mutual fund schemes would deliver the highest returns in future
● Deciding how to invest money across various asset categories in line with
one’s risk profile, financial objectives and current situation
● Deciding which asset category would outperform the others and investing in it

Q 39. Which of these funds has the highest risk ?

● Gilt funds
● Index funds
● Money market funds
● Sector funds
Q 40. Which of these statement(s) is/are FALSE with respect to Benchmarks?
A) Portfolio concentration is an important factor while selecting a benchmark for an
equity mutual fund
B) Choice of investment universe is not an important factor while selecting an
appropriate benchmark for debt mutual funds
● Only A is false
● Only B is false
● Both A and B are false

Q 41. The opening of time stamping machine needs to be documented and reported to
_______ .
● Sponsors
● Trustees
● SEBI
● Asset Management Company

Q 42. What is negative Alpha?

● It is indicative of outperformance by the fund manager
● It is indicative of under-performance by the fund manager
● It is indicative of over-hedging by the fund manager
● It is indicative of under-hedging by the fund manager

Q 43. Securities and Exchange Board of India (SEBI) functions does not include which
of the following?
● Regulation of Stock Exchanges
● Enforcing compliance of its regulations
● Making regulations for the Mutual Fund industry
● Approving the fund managers which have been appointed by the AMC

Q 44. _____ is not a fair selling practice by a mutual fund distributor.

● Informing the investor of the various investment options
● Carefully understanding the clients financial needs
● Encouraging the churning of investments
● Giving personalised after sales service
Q 45. Identify the TRUE statement.
A) While calculating scheme returns for an investor, if there is an entry load, then the
initial value of the Net Asset Value (NAV) is taken as NAV plus Entry Load
B) While calculating scheme returns for an investor, if there is an exit load, then the later
value of the Net Asset Value (NAV) is taken as NAV plus Exit Load
● Only A
● Only B
● Both A and B

Q 46. Once a New Fund Offer closes, an open ended mutual fund is open for purchases____ .
● by existing investors only
● by existing investors on the stock exchange platform only
● by both existing and new investors on the stock exchange platform only
● by both existing and new investors

Q 47. An investor in India is investing in US Dollar based funds. He/She will benefit
when ______ .
● The US Dollar becomes weaker
● The US Dollar becomes stronger
● The US Dollar reamins steady

Q 48. How is the redemption transaction of a mutual fund priced?

● NAV plus exit load
● NAV minus exit load
● NAV plus entry load
● NAV minus entry load

Q 49. Identify the TRUE statement with respect to 'Tracking Error'.

A. Tracking error is calculated as the standard deviation of the excess returns generated by the fund
B. While comparing different index funds, one should invest in a fund with high tracking error
● Only A is true
● Ony B is true
● Both A and B are true

Q 50. Investments are carried at ________ in a mutual fund portfolio.

● Market Value
● Face Value
● Book Value
● Cost Value