108 Vipul'sTM Mutual Fund OhjectiveQuestions

Monagement (BFM) (4) You are investing for I09

your
interested retirement
UNIT- I| would be
in a fund 20 years hence. You
most
objective is focused on whose
Objective Questions (A) long-term growth. investment
(B) capital conservation.
(C) income generation.
(A) Multiple Choice Questions: (D) a balance of
Some
(1) Mutual funds that sell shares directly to dividends. growth but
repurchase shares investors want to sell investors and
are called (5) Which of the
mostly high
funds. following
the lowest risk and stock
return? funds would probably have
(A) open-market
(A) International funds
(B) open-end
(B) Capital
(C) closed-end
(D) fair value
appreciation funds
(C) Equity income funds
(2) On January 1, you invest (D) Sector funds
$10,000 in an open-end mutual (6)
fund selling for $25 per share that has a 2% load, 1.59% Which of the following funds would
management fee and 1% 12b-1 expenses. If the fund NAV highest potential risk and return? probably have the
appreciates to $28 by the time you sell it on (A) Index funds
what was your return on December 31. representing the entire stock market
(A) 9.76%
investment? (B) Capital appreciation funds
(B) 11.2% (C) Equity income funds
(C) 8.7% (D) Balanced growth and
(D) 14% income funds
(7) Investing in one of
(3) You are which of the following funds will
considering
that focuses investing in a no-load mutual fund
on growth
typically giveyou the least diversification?
growth stock fund had stocks or in an index
an annual fund. The (A) Growth funds
expenses of 2%. The index fund had return of 15% and
an annual return of
(B) Capital appreciation funds
12% and expenses of 1%. (C) Equity income funds
should
(A)
buy Assuming equal risk, you (D) Sector funds
the index fund.
(B) the growth (8) An investor who wants to invest in a
particular sector but
(C) some of furnd. does not have strong opinions about which stocks to
both. purchase within that sector would be likely to choose
(D) neither; the expenses are too (A) balanced growth and income fund.
high.
(B) mid-cap fund.
 DbjectiveQuestions
Vipul'sM Mutual Fund Management (BFM) Which of the
(C) exchange-traded fund that represents that particular
(13)
lowest followingbond mutual funds has
default risk and the both the
sector.
(A) Short-term Treasury lowest interest rate risk?
(D) growth fund. (B) Long-term Ginnie Mae
(9) When the global financial forecast calls for recession i (C) Long-term corporate
China and Europe, you should consider investing in
(A) a global fund.
(D) Short-term high yield
(B) an international fund. (14) Investors can earn a return on an
mutual fund in all of the investment in a stock
(C) adomestic large cap fund.
(A)
following
interest distributions.
ways except
(D) a global bond fund.
(B) dividend distributions.
(10) If you are investing for the "long-term" and are interested
in capital appreciation and comfortable with increased (C) capital gains distributions.
risk levels, you should consider (D) redeeming shares.
(A) global bond fund; international bond fund (15) The susceptibility of a mutual fund's performance to
(B) growth fund; small cap fund general stock market conditions is known as
() international index fund; gkobal index fund (A) interest rate risk.
(D) junk bond fund; domestic equity income fund (B) market risk.
(11) A mutual fund must distribute to investors in (C) exchange risk.
the same year as earned.
(D) corporate risk.
(A) dividends
(16) In deciding if a no-load mutual fund is a good investment
of the following
(B) profits for you you should carefully consider all
(C) capital gains except
(D) Both AandCare correct. (A) the fund's investment objective.
(12) Which of the following bond mutual funds has both (B) the fund's previous managers.
the highest default risk and the highest interest rate (C) the fund's investment strategy.
risk?
level.
(A) Long-term Treasury (D) your risk tolerance
(17) From the perspective.of investors, the most important
(B) Short-term Ginnie Mae mutual
the prospectus of a
in
(C) Short-term corporate expense statistic mentioned
fund is the
(D) Long-term high-yield
(A) gross profit margin ratio.
(B) expense ratio.
 Management (BFM) (22)
The best invrestment strategy is to
|2 Vipul'sTM Mutual Fund
diversify across stock and bond mutual funds with
(C) times interest earned ratio. different objectives.
(D) growth rate.
performance is to o hold only bond mutual funds with bonds frOm US.
(18) The best way to predict a mutualfund's corporations.
(A) ask your stockbroker.
(C) buy only one or two stock mutual funds.
(B) look it up on the Internet.
(D) buy individual stocks in one sector and bonds of
(C) look at past performance. Companies in a different secto.
to the
(D) study the investment strategy as it relates offered by some brokerage firms that
current economicconditions. (23) An arrangement
enables investors to diversify among various mutual
(19) A stock mutual fund's prospectus typically states that the
fund issubject to all of the following risks except funds and receive summary statenent information is
called a
(A) market risk.
(A) mutual fund firmn.
(B) general decline in the stock market.
(C) substantial declines in individual stocks. (B) mutual fund security.
(D) default risk. (C) mutual fund supermarket.
(20) When evaluating a mutual fund prior to deciding to (D) mutual fund family.
about hedge funds is
invest, you should consider (24) Which of the following statements
(A) the breadth of the stocks in which the fund is not true?
investing individuals and financial
(A) They sell shares to wealthy
(B) the industry or industries in which the fund is institutions.
investing. (B) They charge high management
fees.
(C) performance through the financial crisis in 2008 initial investment.
2010. (C) They require a large
little risk.
(D) both factors in both A andB, above. (D) They are exposed to very retirement and general
to save for
(21) A mutual fund is a good investment for (25) When you begin mutual funds
wealth building, it is wise to invest in
"rainy day" funds, while a mutual fund is a
good type of investment for funds earmarked for because
diversification.
retirement in 25 years. (A) they provide instant
(A) municipal bond; corporate income expensive than brokers.
(B) they are less value.
(B) money market; global growth they generally do not decrease in
(C)
(C) diverse equity; money market are correct.
(D) AIl of the above (6 - B); (7 - D);
(D) short term junk bond; long term junk bond (2 - A): (3 - B): (4 - A): (5 - C);
(13 - A); (14 - A);
LAns,: (1 - B); B: (11 - D); (12 - D);
o-CO; (9 - C): (10 -
 objectiveQuestions
||4 Vipui!TM Mutual Fund Management (BFMI
(5) As per SEBI,
(15 - B): (16 - B): (17 - B); (18 - D); (19 - D); (20 - D); (21 - B);
(22 - A); (23 - C): (24 - D): (25 - A))
(B) Multiple Choice Questions:
(a) An Non-Performing assets
fund can be defined as
equity which is (NPA- mutual
of a
(1) Scheme A has 2.5% entry load, Scherme B has none, N
(b) An equity trading
share which below its par value
is yet to
scheme has an exit load. How much more
annual exchange be listed on the
will be A have to deliver to mnatch B's performance jf p returns (c) A debt stock
delivers 12% annual returns. security
principle or both
on which
either interest or the
(a) 2.5% amounts
for one quarter after are
the due datedue but not received
(b) 12% (d) None of these
(c) 14.87% (6) A systematic withdrawal plan is ideal for:
(d) 2.87% Ia) Investors with
growth as the main
(2) If YTM increases objective investment
(a) Future Value of Cash Flows goes down (b) Investors who wish to
fluctuations benefit from market
(b) Present Value of Cash Flows goes up
(c) Present Value of Cash Flows goes down (c) Investors who prefer a regular income stream
(d) Future Value of Cash Flows goes up (d)Investors who are not sure about themselves
(3) If an investor failed to claim the redemption (7) A five year deep discount bond would
proceeds
after 3 years of due date he has the right to receive an (a) Pay interest on a yearly basis
amount equal to
(b) Pay interest on a quarterly basis
(a) Prevailing NAV
(c) Be redeemed on maturity at the face value which is
(b) Face value of the unit higher than the issue price with no payment in
(c) NAVat end of 3 years after the due date between
(d) Zero. (d) Offer yield tax free
(4) Which of the below is a short-term capital asset? (8) An index fund managers tries
(a) Unit of MF held for a period of not more than one (a) To beat the market by superior stock selection
year preceding the date of transfer (b) To beat the market by superior market timing
(b) Unit of MF held for a period of less than one year
(c) To beat the market bysuperior asset allocation
preceding the date of transfer (d) None of these
(c) Unit of MF held for a period of less than three years instruments would be the most
preceding the date of transfer 2Which of the following
volatile when interest rates fluctuate?
(d) Unit of MF held for a period of not more than three on the NSE
(a) ICICI / IDBIbonds listed
years preceding the date of trarnsfer
 Questions
Vipul'sH Mutual Fund Management (BFM)
|16 (14) Investors who value safety the
(b) PPF over mutual funds. most cho0se
(c) An equity mutual
fund ac
(d) A balanced fund
Compounding
interest. enables investors toearn On

- a); (4 - b): (5 - c); (6 - c); (7 - c); A6) Rupee cost

(Ans.: (1 - a); (2 - c); (3 averaging means investing
(8- b); (9 - a)) amount periodically.
(C) Fill in the blanks: [Ans.: (1 - zero); (2 - scheme
(1) If the fundamental
attributes of a scheme have to be holding period); (5 - 93%); specific); (3 - first holder);
(6 - trust); (7 - Greater);
exit at
changed, unit holders have a right to (8 - Index); (9 - Lower); (10 - Higher); (11 - 1%);(12 -
load. (13 - Accumulation); (14 - Bank
deposits); Average);
(15 - interest);
shares, it has to state th: (16-Fixed)]
(2) If a schemeinvests in unlisted
as a
risk factor. State whether the following statement are True or False:
(D)
(3) If 3 investors hold units jointly, redemption proceeds (1) Among equity funds, risk is highest for index funds.
are payable to Growth option is for those investors who are looking
of the (2)
(4) Trail commissions depend on for capital appreciation.
investor.
(3) In case of Dividend Reinvestment option, the investor
(5) Repurchase price cannot be less than of sale chooses to reinvest the dividend in the scheme.
price. (4) Equity Mutual fund investors have to bear Securities
(6) Investors cannot sue the Transaction Tax (STT).
(7) Returns from small cap companies are found to be (5)
Even bond mutual funds with little or no default risk
than returns from large cap companies. have interest rate risk.
(8) A passive fund invests in the same securities, in the (6) Choosing a mutual fund or an investment company
same proportion as in an involves reviewing past performance and also
(9) If interest rates go down, price of bonds will go comparing fees and expenses charged.
(7) Before investing in a mutual fund, you should request
available
(10) If yield curve is sloping up, long term rates are and evaluate the fund's prospectus, which is
than short-term rates.
for a small charge.
of a mutual fund
(11) Ifduration of a bone is 2 years and interest rates fall by (8) A breakdown of the fees and expenses
50 basis points, the price willgo up by. %. prospectus.
is not one of the items addressed in a
(12) Investments are to be valued at COst for offers several different
(9) When an investment company
determining profit or loss on sale of securities.
mutual funds, its name is printed in bold in the listings
stage prefer long term but individual funds are not
(13) Investors in
investments.
risky in financial newspapers,
listed.
|I8 Vipul'sM Mutual Fund ObjectiveQuestions
(10) Because a mutual fund is Management (BFM)
already diversified with (28)
Whether the scheme is open or closed end is
|19

perhaps 100 or more different fundamental attribute. a

diversification is not recommendedinvestments,
(11)
or
necessary. further
Value averaging enables investor to earn
I0) A prospective investor cannot seek any remedies
than rupee cost averaging. better returns Investors have tO approve changes in the fundamental
attributes of a scheme.
(12) SIPs help investors to do rupee cost
averaging. (31) If duration is high, interest rate risk is high.
(13) Older investors in accumulation phase have
investment in equity, than older greater (32) If yield spread is higher, credit risk is higher.
distribution phase. investors in (92) Tf current yield has tallen, interest rates have gone up.
(14) Flexible asset allocation strategy will lead to (34) If YTM increases, bond price will decrease.
exposure in equity for investors in accumulation higher
phase (35) A passive fund is never re-balanced.
(15) Fund selection is the last stage in Return for periods less than a year cannot be
portfolio. developing a model (36)
annualized.
(16) Fund age is an important criterion
than debt funds. for equity rather (37) Risk is measured by standard deviation.
(17) Growth and risk are (38) Investors in corporate fixed deposit should focus on
associated with equity funds. credit risk of the product.
(18)
Diversification enables reduction of risk. (39) PPF investment in a year cannot exceed Rs. 70,000.
(19) In the re-investment
option,
the investor is constant. number of units held by (40) Retail investors cannot invest in Government securities.

(20) A liquid fund does not (41) Closed end funds were usually trading at discount to
usually invest in equities. NAV. (April19)
(21) A gilt fund invests is AAA
(22) The
rated securities only. (42) The money market mutual funds are regulated by SEBI.
transaction costs of a mutual fund are lower than (April19)
direct investing by investors. date. (April 19)
(23) (43) Open ended funds have maturity
Gilt funds do not invest in liquid. (April 19)
(24) The investment pattern of treasury bills.
ascheme has to be
(44) Closed ernded funds are highly
corporate securities. (April 19)
on the cover page. disclosed (45) Gilt funds invest in
(April19)
(25) If a scheme has limited liquidity, this has (46) Sectoral funds are highly risky.
to be
stated as actively managed funds. (Oct. 19)
standard risk factor. (47) Index funds are
(Oct. 19)
(26) If the scheme on offer is the first scheme of the (48) Sectoral funds are least risky.
fund, this has to be stated as a mutual helpful for portfolio diversification.
scheme specific risk (49) Gold ETF is
factor. (Oct. 19)
(27) Investment pattern of the ended funds are highly liquid. (Oct. 19)
attribute.
schemne is a fundamental (50) Open
 120 Vipul's" Mutual Fund Management (BFM)
(Ans.: (1 - False); (2 - True); (3- True); (4 - True); (5 - True):
(6 - True): (7 - False); (8 - False); (9 - False); (10 - False).
(11 - True); (12 - True); (13 - True); (14 - True); (15 - True).
(16 - True); (17 - True); (18 - True); (19 - False); (20 - Trup).
(21 - False): (22 - True); (23 - False); (24 - False); (25 - False).
(26 - Triue); (27 - True); (28 - True); (29 - T'rue); (30 -
(31 - True); (32 - True); (33 - False); (34 - False).
(36 - Triue); (37 - True); (38 - True); (39 - True); (35 - False):
(41 - False); (42 - True); (43 - True); (40 - False):
(46 - False); (47- False); (48 - False); (44 - False); (45 - True):
True); (49 - True); (50 - True)]
(E) Multiple Choice
Questions: (April 19)
Column 'A"
(a) Fund-To-Fund Column 'B'
(i) Attracts investment
Scheme from
(b) Offshore fund foreign markets
(ii)
(c) Quant Fund
Combination of
Debt Mutual fund Equity and
(iii) scheme
(a) Passively Follows Market Index
Funds Managed (iv) Combination of
(e) Hybrid Fund and Debt Fund Equity Fund
(v)
(f) Gilt Fund (Oct.
AlDecision
gorithmic Buy and Sell
(g) Tax Saving 19)(vi) Government Securities
(Oct. 19) Fund (vii) 3year lock in
(h) Balanced Fund period
(Oct. 19) (viii) Mixture of
[Ans.: (a - v); (b - debt fund equity fund and
(h - vi)] i); (c -ii); (d - ii); (e -
iv); (f - vi): (g -
vi);

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