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NISM-Series-V-A: Mutual Fund Distributors Certification

** ** ** ! !** Examination
 NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
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mark exam with
50% as passing marks. In all 100 questions will be asked with NO negative marking. The
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 NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
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PRACTICE TEST NO. 2

Question1 Dividends which are paid by mutual funds can be paid out of .

(a) Profits of the Asset Management Company

(b) Mark to Market profits

(c) All realised and unrealised gains

(d) Distributable surplus only

Correct Distributable surplus only

Answer
Answer SEBI guidelines stipulate that dividends can be paid out of distributable reserves. In
Explanati the calculation of distributable reserves:
on
• All the profits earned (based on accrual of income and expenses as detailed above) are treated
as available for distribution.

• Valuation gains are ignored. But valuation losses need to be adjusted against the profits.

• That portion of sale price on new units, which is attributable to valuation gains, is not available
as a distributable reserve.

Question2 In case of a floater Fund, what is the Required Minimum Investment in floating
rate
investment of total assets invested ?
(a) 65%

(b) 45%

(c) 55%

(d) 75%

Correct Answer 65%

Answer Floater Fund in an open-ended debt scheme predominantly investing in floating

Explanation rate instruments (including fixed rate instruments converted to floating rate
exposures using swaps/derivatives).

Minimum investment in floating rate instruments (including fixed rate instruments

converted to floating rate exposures using swaps/derivatives) shall be 65 percent
of total assets.
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Question3 The NAV applicable for purchase in a gilt fund of Rs. 50 Lakhs if the cheque is
received after
2 pm will be .
(a) Same day NAV if received before cut off time.

(b) Closing NAV of day immediately preceding the date of application

(c) Closing NAV of the next business day

(d) NAV of the business day on which the funds are available for utilisation

Correct Answer NAV of the business day on which the funds are available for utilisation

Answer For all type of debt funds (except liquid funds), if the amount is above Rs. 2 lakh,
Explanation irrespective of the time of receipt of application, NAV of the business day on which
the funds are available for utilisation without availing of any credit facility before
the cut-off time (3 pm) of that day
is applicable.

Question4 Business model, experience and proficiency in the business is a compulsory

criteria for
empanelment and review of which of the following category of mutual fund
distributors?
(a) Institutional distributors who have points of presence in more than 10 locations

(b) Individual distributors who have points of presence in more than 10 locations

(c) Distributors who have received commission of over Rs. 1 Crore p.a. across
industry
(d) All of the above

Correct Answer Distributors who have received commission of over Rs. 1 Crore p.a. across
industry

Answer SEBI has mandated AMCs to put in place a due diligence process to regulate
Explanation distributors with respect to 'Business model, experience and proficiency in the
business' who qualify any one of the following criteria:

a. Multiple point presence (More than 20 locations)

b. AUM raised over Rs. 100 crore across industry in the non-institutional
category but including high networth individuals (HNIs)

c. Commission received of over Rs. 1 Crore p.a. across industry

d. Commission received of over Rs. 50 Lakhs from a single mutual fund

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Question5 A creditable benchmark of a mutual fund scheme should be in sync with the .
A. Size of scheme B. Investment objective of the scheme
C. Investment strategy of the scheme D. Expenses ratio of
the scheme E. Asset allocation pattern of the scheme
(a) B, C and E

(b) A, C and D

(c) B, D and E

(d) A and B

Correct Answer B, C and E

Answer A credible benchmark should meet the following requirements: It should be in sync
Explanation with (a) the investment objective of the scheme; (b) asset allocation pattern; and (c)
investment strategy of the scheme.

Question6 A mutual fund distributor cannot charge a transaction fee on which of these
transactions?
(a) Systematic Transfer Plan

(b) A new investor making a purchase in a mutual fund scheme

(c) An existing investor making a purchase in a mutual fund scheme

(d) Systematic Investment Plan (SIP)

Correct Answer Systematic Transfer Plan

Answer Transaction charges do not apply to transactions other than

Explanation purchases/subscriptions that result in fresh inflows.

Transactions like switches, systematic transfers, dividend transfers, dividend re-

investment are not eligible for transaction charges.
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Question7 Equity Linked Savings Schemes (ELSS) are eligible for deduction under Section
80C of the
Income Tax Act. However, such schemes have a lock-in period of from the
date of investment.
(a) 3 years from the date of allotment of each individual unit

(b) 3 years from the date of original investment even in case of subsequent
purchases
(c) 5 years from the date of allotment of each individual unit

(d) If tax exemption is NOT availed, there will not be any lock-in period

Correct Answer 3 years from the date of allotment of each individual unit

Answer The lockin period for an ELSS fund is 3 years from the date of allotment of
Explanation each individual unit.

So even for a SIP investment, each SIP will have a lockin for 3 years.

Question8 When is a Consolidated Account Statement (CAS) dispatched to the investor?

(a) When ever the investor asks for a CAS

(b) bi-monthly for dormant investors

(c) Every month, before the 10th working day of the following month

(d) When ever there is a transaction in the folio

Correct Answer Every month, before the 10th working day of the following month

Answer A Consolidated Account Statement (CAS) for each calendar month is sent by
Explanation post/email on or before 10th of the succeeding month provided there has been a
financial transaction in
the folio in the previous month.
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Question9 In which categories of stocks do Multi Cap equity funds invest in ?

(a) Mostly large cap stocks only of various companies

(b) Mostly mid cap stocks only of various companies

(c) Mostly small cap stocks only of various companies

(d) A mix of large, mid and small cap stocks

Correct Answer A mix of large, mid and small cap stocks

Answer Multi cap funds spread the investments across the market capitalization
Explanation spectrum in order to try and benefit from the opportunities across the market.
They invest in a mix of large, mid
and small market capitalisation stocks.

Question10 Which of the following information about mutual fund distributors who have
multiple
points of presence (more than 20 locations) must be disclosed by the AMCs? A)
Distributor- wise gross inflows and net inflows B) Average assets under
management C) Total commission and expenses paid to distributors
(a) B and C

(b) A and C

(c) A and B

(d) All A, B and C

Correct Answer All A, B and C

Answer For mutual fund distributors having multiple point of presence (More than 20
Explanation locations), mutual funds / AMCs need to disclose the total commission and
expenses paid to distributors, disclosures regarding distributor-wise gross inflows
(indicating whether the distributor is an associate or group company of the
sponsor(s) of the mutual fund), net inflows, average assets under management and
ratio of AUM to gross inflows on their respective website on a yearly basis.
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Question11 Multi Asset Allocation funds invest in at least asset classes with a
minimum
allocation of at least 10 percent in each class.
(a) 2

(b) 3

(c) 4

(d) 5

Correct Answer 3

Answer Multi Asset Allocation: An open-ended hybrid scheme investing in at least 3

Explanation asset classes with a minimum allocation of at least 10 percent each in all three
asset classes.

Question12 A bond issued by a company has a coupon of 7%. The interest rate in the market
for bonds
of similar tenor and credit quality is now 8%. An investor holding the bond will
see .

(a) The market price of the bond going up

(b) The market price of the bond going down

(c) The coupon of the bond going up

(d) No change in the market price

Correct Answer The market price of the bond going down

Answer In the above question, the interest rates have risen in the economy. If the coupon
Explanation (interest rate) rises, then the bond with lower coupon is no longer an attractive
investment. It will
therefore lose value.
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Question13 Return from a fund is 9% and the risk free rate is 5%, the Standard deviation is
3 & Beta is
1.6. What will be the numerator for calculating the Sharpe ratio?
(a) 3

(b) 6

(c) 1.6

(d) 4

Correct Answer 4

Answer The formula for Sharpe Ratio is : ( Return Earned - Risk free Return ) / Standard
Explanation Deviation

Here the Numerator is 'Return Earned - Risk free Return' and the Denominator is
'Standard Deviation'

Numerator = Return Earned - Risk free Return

=9-5=4

Question14 An mutual fund application form with multiple holders has to be signed by
.
(a) Any of the holders

(b) All the holders

(c) Only the first holder

(d) Only the first two holders

Correct Answer All the holders

Answer The application has to be signed by all the holders irrespective of the mode
Explanation of holding.
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Question15 Which type of transactions are allowed on a stock exchange platform for
mutual fund
trading? A - Redemptions B - Fresh subscription C - Additional purchases
(a) Only B

(b) A, B and C

(c) A and B

(d) B and C

Correct Answer A, B and C

Answer Investors can now transact in mutual fund units through the stock exchanges.
Explanation The units of close-ended funds and ETFs are compulsorily listed on at least one
stock exchange. At the same time, units of open-ended funds are also available
through special segments on
the stock exchanges.

Question16 When an investment is done by a minor, what is rule regarding Know Your
Customer (KYC)
requirement?
(a) No KYC is required

(b) It depends whether the investment is in equity funds or debt funds

(c) KYC will be required only if the transaction is thorough a stock exchange

(d) KYC of the guardian is required

Correct Answer KYC of the guardian is required

Answer An investment made for a minor (less than 18 years) is done through a guardian who
Explanation has to comply with the KYC and PAN requirements and all other formalities as if the
investment was
for themselves.
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Question17 For KYC verification, is not accepted as a photo identity documentation

for
Micro SIP’s.
(a) Credit Card

(b) Employee ID cards issued by companies registered with Registrar of Companies

(c) Card issued to National Pension System (NPS) subscribers

(d) Photo Debit Card

Correct Answer Credit Card

Answer Credit card is not accepted because it may not be backed up by a bank account.
Explanation

Question18 In an Arbitrage fund, the minimum investment in equity and equity related
instruments
shall be of total assets.
(a) 50 percent

(b) 55 percent

(c) 60 percent

(d) 65 percent

Correct Answer 65 percent

Answer Arbitrage Fund: An open-ended scheme investing in arbitrage opportunities. The

Explanation minimum investment in equity and equity related instruments shall be 65 percent
of total assets.
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Question19 The average net assets of a fund were Rs 800 crore and the
investment transactions of the
fund were Rs 1600 crore. Calculate the Portfolio Turnover Ratio.
(a) 10 times

(b) 0.5 times

(c) 2 times

(d) 20 times

Correct Answer 2 times

Answer Portfolio Turnover Ratio is calculated as Value of Purchase and Sale of Securities
Explanation during a period divided by the average size of net assets of the scheme during the
period.

= 1600 / 800 = 2

Question20 What is the investment of a constant amount at regular intervals in a mutual fund
scheme
called ?
(a) Systematic Withdrawal Plan

(b) Systematic Transfer Plan

(c) Value Investing

(d) Systematic Investment Plan

Correct Answer Systematic Investment Plan

Answer It is considered a good practice to invest regularly, particularly into volatile

Explanation markets such as equity markets. Systematic Investment Plan - SIP is an approach
where the investor invests
constant amounts at regular intervals.
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Question21 By mistake the ARN number is wrongly mentioned in the application form. How
will such
an application be processed?
(a) The application will be rejected

(b) It will be returned for rectification

(c) As an Direct Plan application

(d) As a Regular Plan, provided the error being corrected within a time frame

Correct Answer As a Regular Plan, provided the error being corrected within a time frame

Answer If the wrong ARN code is mentioned in the application form, then the
Explanation application will be processed as a Regular Plan. However, the AMC will contact
the investor/distributor for the right ARN code within 30 calendar days of the
receipt of the application form. If the error is
not rectified within these 30 days, the application will be reprocessed as a direct
application without charging any exit load.

Question22 A mutual fund has the policy of imposing an exit load of 2% for redemption upto
one year
and 1% for redemptions beyond one year. If an investor redeems 2000 units at
an NAV of Rs 40 at the end of six months from the date of investment, what will
be redemption amount receivable by the investor
(a) Rs. 76500

(b) Rs. 79200

(c) Rs. 80000

(d) Rs. 78400

Correct Answer Rs. 78400

Answer The investor has redeemed the units within a year of investment, so the exit
Explanation load applicable is 2%.

2000 units X Rs 40 = Rs 80000

Less 2% exit load : 2% of 80000 = 1600 Net amount = 80000 - 1600 = Rs. 78400
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Question23 Stamp duty is required to be paid for which of these mutual fund transactions?

A. New purchases B. Systematic Investment Plan (SIP) C. Dividend

reinvestment
D. Systematic Transfer Plan (STP)

(a) A,B and D

(b) Only A

(c) B and D

(d) A,B,C and D

Correct Answer A,B,C and D

Answer Stamp duty will be applicable to all transactions pertaining to scheme inflows:
Explanation
• Purchase

• Additional Purchase

• Dividend reinvestment

• Systematic Investment Plan (SIP)

• Systematic Transfer Plan (STP)

• Dividend Transfer Plan (DTP)

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Question24 Calculate the Treynor Ratio from the following data - Return from a mutual fund
scheme is
7.5 %. The beta is 0.62. The risk free rate of return is 6%.

(a) 11.60

(b) 4.77

(c) 3.08

(d) 2.42

Correct Answer 2.42

Answer Treynor Ratio = (Return Earned - Risk Free Return) / Beta

Explanation
= (7.5 - 6) / 0.62

= 1.5 / 0.62

= 2.42

Treynor Ratio is a risk premium per unit of risk. Higher the Treynor Ratio, better
the scheme is considered to be.
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Question25 Which strategy can be used to ensure that a mutual fund scheme is suitable
to the
investors need and situation ?
(a) Indexation

(b) Dividend Stripping

(c) Asset Allocation

(d) Tax harvesting

Correct Answer Asset Allocation

Answer Asset Allocation is a process of allocating money across various asset categories
Explanation in line with a stated objective which is as per the needs and situation of the
investor.

Question26 Where are the 'Standard Risk Factors' of a Mutual Fund scheme disclosed?

(a) Fund Fact Sheet

(b) Addendum

(c) Statement of Additional Information (SAI)

(d) Scheme Information Document (SID)

Correct Answer Scheme Information Document (SID)

Answer The Scheme Information Document (SID) highlights two broad categories of risks,
Explanation (1) Standard risk factors, and (2) Specific risk factors.

The standard risk factors are the risks that all mutual fund investments are
exposed to whereas there are certain risks specific to individual asset category.
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Question27 Which certification examination is mandated by SEBI for becoming a mutual

fund distributor in the India?

(a) NCFM Series VA Mutual Fund Distributors

(b) NISM Series VA Mutual Fund Distributors

(c) AMFI VA Mutual Fund Distributors

(d) SEBI VA Mutual Fund Distributors

Correct Answer NISM Series VA Mutual Fund Distributors

Answer Distributors need to pass the NISM certification Examination (NISM-Series- V-A:
Explanation Mutual Fund Distributors (MFD) Certification Examination) and register with AMFI
to become mutual
fund distributors in India.

Question28 Identify the TRUE statement - A) The AMC is not liable for any losses suffered by
the
foreign portfolio investors due to adverse currency movements B) The AMC
has to compensate to foreign portfolio investors for any losses suffered due to
adverse currency movements
(a) Only A

(b) Only B

(c) Both A and B

Correct Answer Only A

Answer The AMC does not manage currency risk for Foreign Portfolio Investors and it is
Explanation the sole responsibility of the Foreign Portfolio Investors to manage or reduce
currency risk on their own.

The Sponsor/Fund/Trustees/ AMC are not liable for any loss to Foreign Investors
arising from such changes in exchange rates.
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Question29 What can happen if an investor has an Overconfidence bias?

(a) He will make careful investment choices

(b) He will take higher risks in his investments

(c) His portfolio will have all good blue chip shares

(d) He will keep the risks low in his investment portfolio

Correct Answer He will take higher risks in his investments

Answer Overconfidence : This bias refers to a person’s overconfidence in one’s abilities or

Explanation judgment. This leads one to believe that one is far better than others at something,
whereas the reality may be quite different.

Under the spell of such a bias, one tends to lower the guards and take on risks
without proper assessment.

Question30 Which of these is an important criteria for choosing either Growth option or
Dividend
option in the same mutual fund scheme?
(a) Returns on the scheme

(b) Fund Manager

(c) Tax status of the investor

(d) Assets Managed by the scheme

Correct Answer Tax status of the investor

Answer Mutual funds offer options, whereby the investor can let the money grow in the
Explanation scheme for several years. By selecting such options, it is possible for the investor
to defer the tax liability.

So if the investor wants to differ his tax payments, he should choose the Growth
option.
However, if the tax liability of the investor is low, he can choose the dividend option
so that even the dividend can be tax free or taxed at a low rate every year.
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Question31 What should an investor see to evaluate the Consistency of Mutual Fund scheme
performance ?

(a) Point to Point

(b) Standard Deviation

(c) Discrete annual returns

(d) Beta

Correct Answer Discrete annual returns

Answer The discreet annual returns help in assessing the consistency of the fund’s
Explanation performance over different market scenarios.

Discretely compounded interest is calculated and added to the principal at specific

intervals (e.g., annually, monthly, or weekly). Continuous compounding uses a
natural log-based formula to calculate and add back accrued interest at the
smallest possible intervals.

Question32 Indian mutual funds cannot invest in .

(a) Real Estate

(b) Art

(c) Securitised Debt

(d) Gold

Correct Answer Art

Answer Investment in Art is not permitted for mutual funds

Explanation in India.
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Question33 What is the role of the custodian of a mutual fund?

(a) To issue statement of funds holding to the investors

(b) To execute the buy and sell orders in the stock market

(c) To keep the safe custody of the securities of the mutual fund scheme

(d) To issue account statements to the Mutual Fund unit holders

Correct Answer To keep the safe custody of the securities of the mutual fund scheme

Answer The custodian has custody of the assets of the fund. As part of this role, the
Explanation custodian needs to accept and give delivery of securities for the purchase and sale
transactions of the various schemes of the fund. Thus, the custodian settles all the
transactions on behalf of the mutual
fund schemes.

Question34 As per the Principles of fair valuation of mutual funds, the valuation of the
securities shall
be .
(a) done aggressively

(b) done conservatively

(c) always rising

(d) reflective of the realizable value of the securities

Correct Answer reflective of the realizable value of the securities

Answer As per Principle No.1 of SEBI's Fair Valuation Principles -

Explanation
The valuation of investments shall be based on the principles of fair valuation
i.e. valuation shall be reflective of the realizable value of the securities/assets. The
valuation shall be done in good faith and in true and fair manner through
appropriate valuation policies
and procedures.
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Question35 Identify the duty of a SPONSOR of a mutual fund - Guards

(a) the interest of the mutual fund unit holders Contributes to

(b) the capital of the Asset Management Company Looks after

(c) the day to day administration of the mutual fund Regularly

(d) report to SEBI on the working of the fund

Correct Answer Contributes to the capital of the Asset Management Company

Answer The application to SEBI for registration of a mutual fund is made by the sponsor.
Explanation Thereafter, the sponsor invests in the capital of the AMC.

Question36 Which of these documents have to be updated once in a year?

(a) Mandatory portfolio disclosures

(b) Scheme Information Document

(c) Fund factsheet

(d) All of the above

Correct Answer Scheme Information Document

Answer The Scheme Information Document (SID) of each scheme needs to updated once
Explanation every year, accordingly, the scheme performance numbers have to be updated as a
part of this exercise.

Mandatory portfolio disclosures are done every six months and Fund fact sheets
are published every month.
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Question37 Which amongst the following bias can lead to concentrated portfolio?

(a) Familiarity Bias

(b) Herd Mentality

(c) Overconfidence Bias

(d) Recency Bias

Correct Answer Familiarity Bias

Answer Familiarity Bias - An individual tends to prefer the familiar over the novel, as the
Explanation popular proverb goes, “A known devil is better than an unknown angel.” This leads an
investor to concentrate the investments in what is familiar, which at times
prevents one from exploring
better opportunities, as well as from a meaningful diversification.

Question38 Which of these documents is NOT required to be submitted by institutional

investors while
investing in mutual funds?
(a) Profit and Loss Statement

(b) PAN card copy

(c) List of authorised signatories

(d) Memorandum of Association and Articles of Association

Correct Answer Profit and Loss Statement

Answer A Profit and Loss Statement is not required to be submitted by an

Explanation institutional investor while making investments in mutual funds.
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Question39 Asset allocation must primarily match .

(a) Long term value creation

(b) Investment needs

(c) Financial goals

(d) Tax saving needs

Correct Answer Investment needs

Answer The investor’s need from the investment will determine the asset class that is most
Explanation suitable for the investor.

Along with the need from the investment, the investor’s ability to take risk and the
investor’s investment horizon is equally important to select the appropriate asset class.

Question40 is / are Non Financial transaction(s) in a mutual fund. A) Switch B) Pledge

of units C)
Nomination D) Transmission
(a) A, B and C

(b) B, C and D

(c) A, C and D

(d) C and D

Correct Answer B, C and D

Answer Pledge of units. Nomination and Transmission are Non Financial transactions in a
Explanation mutual fund.

A switch is a redemption from one scheme and a purchase into another

combined into one transaction and is a financial transaction.
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Question41 Floating interest rate is .

(a) A rate which is payable only on maturity

(b) Base Rate + Spread

(c) Prime rate of lending

(d) the yield on spread

Correct Answer Base Rate + Spread

Answer Interest rates on floating rate securities are specified as a “Base + Spread”.
Explanation
For example, 5-year G-Sec + 2 percent, this means that the interest rate that is
payable on the debt security would be 2 percent above whatever is the rate
prevailing in the market for
Government Securities of 5- year maturity.

Question42 A mutual fund has to report which of the following information of an investor who
comes
under the Foreign Account Tax Compliance Act (FATCA)?
(a) The entire investment value of all the folios of the investor

(b) The identity of the account holders

(c) The identity of the beneficial holders

(d) All of the above

Correct Answer All of the above

Answer To comply with the requirements of Foreign Account Tax Compliance Act (FATCA),
Explanation the mutual fund application form requires information to be provided if the
citizenship/nationality/place of birth/tax residency are places other than India for all
categories of investors, the entire investment value of all the folios held, the
identity of the investors and their direct and indirect beneficiaries and controlling
persons etc.
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Question43 The expenses on cannot be charged to the mutual fund scheme.

(a) Custodian fees

(b) Depreciation on fixed assets of the Asset Management Company

(c) Trustee Fees

(d) Marketing Expenses

Correct Answer Depreciation on fixed assets of the Asset Management Company

Answer The depreciation on fixed assets of the Asset Management Company cannot be
Explanation charged to a particular mutual fund scheme.

Question44 The loss booked from a equity investment of 18 months can be set off against
.
(a) Long term capital loss only

(b) Long term capital gain only

(c) Short term capital gain only

(d) Short term capital gain or long term capital gain

Correct Answer Long term capital gain only

Answer A capital gain or loss from an equity investment of more than than 12 months
Explanation is considered as Long term.

Long term capital loss can only be set off against long term capital gain.
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Question45 If a person has to trade in units of a closed-ended mutual fund on the stock
exchange
platform then the units have to be held in .
(a) Dematerialized form

(b) Physical form

Correct Answer Dematerialized form

Answer Trading in mutual fund units on stock exchange platform can be done only in
Explanation dematerialized form.

Schemes, where the money can be recovered from the mutual fund only on closure
of the scheme like a closed-ended fund, are compulsorily listed on a stock
exchange. In such schemes, the investor can sell the detmaterialzed units through
the stock exchange platform to
recover the prevailing value of the investment.

Question46 Which of these investors is/are exempted from proving PAN deatils for
investments in
Mutual Funds?
(a) Systematic investment plans, where annual investment does not exceed Rs
50000
(b) Investors residing in the state of Sikkim

(c) Transactions undertaken on behalf of Central/State government

(d) All of the above

Correct Answer All of the above

Answer The following categories of investors are exempt from producing PAN:
Explanation
- In case of transactions undertaken on behalf of Central/State government and by
officials appointed by the court.

- Investors residing in the state of Sikkim.

- UN entities/Multilateral agencies exempt from paying taxes/filing tax returns in India.

- Investments (including SIPs and lump sum investments) in Mutual Fund schemes
upto Rs. 50,000/- per investor per year per mutual fund.
 NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question47 SEBI Advertisement Code for Mutual Funds mentions the various guidelines to be
followed
by .
(a) the investors who are interpreting the performance of their investments

(b) the AMC’s while it is advertising the performance of their funds

(c) the distributors while advertising their various services

(d) the fund managers while monitoring the performance of the schemes they
manage

Correct Answer the AMC’s while it is advertising the performance of their funds

Answer There are various guidelines laid down by SEBI which have to follwed by the AMC
Explanation while it is advertising the performance of its funds.

For eg - a) Performance advertisement of mutual fund schemes shall be provided in

terms of CAGR for the past 1 year, 3 years, 5 years and since inception.

b) Where the scheme has been in existence for less than one-year, past
performance shall not be provided ..etc.

Question48 Which document will an investor look at if he has to know the fundamental
attributes of a
mutual fund scheme?
(a) Key Information Memorandum (KIM)

(b) Addendum

(c) Scheme Information Document (SID)

(d) Statement of Additional Information (SAI)

Correct Answer Scheme Information Document (SID)

Answer The Scheme Information Document contains the fundamental attributes of a

Explanation scheme under the 'Information about the scheme' column.
 NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question49 Return from a fund is 11.5% and the risk free rate is 7%, the Standard deviation
is 3 & Beta
is 1.9. What will be the denominator for calculating the Sharpe ratio?
(a) 4.5

(b) 3

(c) 1.9

(d) 11.5

Correct Answer 3

Answer The formula for Sharpe Ratio is : ( Return Earned - Risk free Return ) / Standard
Explanation Deviation

Here the Numerator is 'Return Earned - Risk free Return' and the Denominator is
'Standard Deviation'

So the Denominator is the Standard Deviation = 3

Question50 With respect to the procedure for getting empanelled as a mutual fund distributor
with
AMC, the applicant needs to sign a declaration for .
(a) Guarantee of adding a minimum of 5 investors every month

(b) declaring the rebates given back to the investors

(c) ensuring that all employees who are selling mutual funds will have more than on
ARN code
(d) Commitment to abide by statutory codes, guidelines and circulars

Correct Answer Commitment to abide by statutory codes, guidelines and circulars

Answer The applicant needs to sign a declaration which provides for, among other
Explanation conditions, the commitment to abide by instructions given, as also statutory
codes, guidelines and circulars.

==============

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 NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

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