NISM SERIES V B - MUTUAL FUND

FOUNDATION EXAM
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

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TEST DETAILS – The NISM Mutual Fund Foundation Module exam is a 50 mark exam with 50% as passing marks.
The question paper will consist of 50 multiple choice questions. There is no negative marking. The time duration is
120 Minutes.

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 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

PRATICE TEST NO. 4

Question 1 A greater portion of returns from conventional debt investments is

generally through ________ .

(a) Capital gain

(b) Dividend income

(c) Inflation

(d) Interest income

Question 2 The investment objective, policy and strategy of the Mutual Fund scheme
are mentioned in the Scheme Information Document (SID) - State True
or False ?

(a) Pledge

(b) ABSA

(c) Nomination

(d) Demat

Correct Answer 1 Interest income

Answer In Debt schemes the major source of revenue is the interest income earned.
Explanation

Correct Answer 2 Nomination

 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 3 Mutual Fund schemes are first offered to investors through _______ .

(a) AMFI

(b) New Fund Offer

(c) Initial Public Offer

(d) SEBI

Question 4 A significant benefit of open-end schemes is ________ .

(a) Better portfolio

(b) Low cost

(c) Liquidity

(d) Superior returns

Correct Answer 3 New Fund Offer

Answer When a scheme is open for investment for a limited period, initially, it is
Explanation called a New Fund Offer (NFO).

Correct Answer 4 Liquidity

Answer The significant benefit that open-end funds offer is liquidity viz. the option of
Explanation getting back the current value of the unit-holding from the scheme.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 5 All financial goals are taken together in ________ .

(a) SIP

(b) Portfolio Management

(c) Comprehensive financial plan

(d) Goal-oriented planning

Question 6 Investors return is different from scheme return to the extent of _______.

(a) Load

(b) Scheme running expenses

(c) AMC fees

(d) MTM

Correct Answer 5 Comprehensive financial plan

Answer The dividend that the investor receives from any mutual fund scheme is tax-
Explanation free in his hands.

Correct Answer 6 Load

Answer When investors redeem their units held in open-end schemes, the Re-
Explanation purchase Price can be lower than NAV. The difference is called exit load.
(Under the current regulatory environment, entry load is not permitted)
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 7 Maximum ability to take risk is in _________ phase.

(a) accumulation

(b) Transition

(c) Reaping

(d) Inter-Generational Transfer

Question 8 Securities Transaction Tax (STT) is paid on _______ of equity shares /

equity fund.

(a) purchase

(b) sale

(c) both purchase and sale

(d) No STT is paid

Correct Answer 7 Accumulation

Answer Accumulation stage is when 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. Here he can take the maximum risk.

Correct Answer 8 sale

Answer When an investor sells units of an equity fund in the stock exchange, or offers
Explanation them for re-purchase to the fund, he will have to incur STT of 0.001% on the
value of the transaction.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 9 What is the applicable NAV for Equity schemes where subscription
application above Rs 2 lakh is received ?

(a) Closing NAV of application date

(b) Closing NAV of next business day

(c) Closing NAV of the day on which the funds are available for utilization

(d) None of the above

Question 10 The earning years start in which phase of life cycle ?

(a) Married with Young Children

(b) Young Married

(c) Young Unmarried

(d) Pre-Retirement

Correct Answer 9 Closing NAV of the day on which the funds are available for utilization

Correct Answer 10 Young Unmarried

Answer The earning years start in the Young Unmarried phase of life cycle. A few get
Explanation on to high-paying salaries early in their career. Others toil their way upwards.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 11 Consolidated Account Statement (CAS) is sent on or before the _____ of

every calendar month, where there is a financial transaction in the folio
in the previous month.

(a) 5th

(b) 10th

(c) 12th

(d) 15th

Question 12 Can a single person be appointed fund manager for multiple schemes of a
Mutual Fund ?

(a) Yes

(b) No

Correct Answer 11 10th

Correct Answer 12 Yes.

Answer As per SEBI regulations, every scheme requires a fund manager, though the
Explanation same fund manager may manage multiple schemes.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 13 Investment in specific schemes of mutual funds like __________ , can be

reduced from the investors income that is liable to tax and can be used
for tax saving.

(a) Gilt Funds

(b) Equity Linked Savings Schemes - ELSS

(c) Liquid Funds

(d) Balance Funds

Question 14 A New Fund Offer can remain open for a maximum of ______ .

(a) 10 days

(b) 15 days

(c) 20 days

(d) 30 days

Correct Answer 13 Equity Linked Savings Schemes - ELSS

Correct Answer 14 15 days

Answer Under the SEBI guidelines, NFOs other than ELSS and RGESS can remain
Explanation open for a maximum of 15 days.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 15 Is it compulsory in Micro SIPs for the investors have to give a declaration
stating that they do not have any existing Micro SIPs which together with
the current application will result in aggregate investments exceeding Rs
50,000 in a year ?

(a) Yes, its compulsory

(b) No, there is no such compulsion

Question 16 In order to minimize the possibility of losing money in equity

investments, it is advisable for the investor to spread his investment
across different industries (sectors). This is known as _______ .

(a) financial planning

(b) diversification

(c) portfolio management

(d) arbitrage

Correct Answer 15 Yes, its compulsory

Correct Answer 16 diversification

 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 17 Key Information Memorandum (KIM) contains which of the following

points ?

(a) Risk Profile of Scheme

(b) Dividend Policy

(c) Loads and expenses

(d) All of the above

Question 18 The R&T agent performs the role of calculating the NAV, by collecting
information about the assets and liabilities of each scheme - State True or
False ?

(a) TRUE

(b) FALSE

Correct Answer 17 All of the above

Answer Some of the points covered in KIM are as follows:
Explanation - Name of the AMC, mutual fund, Trustee, Fund Manager and scheme
- Dates of Issue Opening, Issue Closing & Re-opening for Sale and Re-
purchase
- Plans and Options under the scheme
- Risk Profile of Scheme
- Price at which Units are being issued and minimum amount / units for initial
purchase, additional purchase and re-purchase
- Benchmark
- Dividend Policy
- Performance of scheme and benchmark over last 1 year, 3 years, 5 years and
since inception.
- Loads and expenses
- Contact information of Registrar for taking up investor grievances

Correct Answer 18 FALSE

Answer The fund accountant performs the role of calculating the NAV, by collecting
Explanation information about the assets and liabilities of each scheme.
The AMC can either handle this activity in-house, or engage a service
provider.
.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 19 An investor invests Rs 25000 in a Mutual Fund NFO in Jan 2016. How
many units will he be allotted?

(a) 5000

(b) 250

(c) 2500

(d) Insufficient data

Question 20 The client needs to be physically present, for the intermediary to confirm
his / her In Person Verification during the KYC process - State True or
False ?

(a) TRUE

(b) FALSE

Correct Answer 19 2500

Answer As per SEBI's current regulations, all MF NFO's shall have a face value of Rs
Explanation 10.
so Rs 25000 / 10 = 2500 units will be allotted to the investor.

Correct Answer 20 TRUE

 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 21 The last step of a Financial Plan as per Certified Financial Planner
Board of Standards (USA) is ________ .

(a) Monitor the Financial Planning Recommendations

(b) Analyse and Evaluate Client's Financial Status

(c) Implement the Financial Planning Recommendations

(d) Develop and Present Financial Planning Recommendations and / or Options

Question 22 In _________ option, the Mutual Fund declares a dividend.

(a) Growth

(b) Dividend pay-out

(c) Dividend re-investment

(d) Both 2 and 3

Correct Answer 21 Monitor the Financial Planning Recommendations

Answer Certified Financial Planner – Board of Standards (USA) proposes the
Explanation following steps in financial planning:
- Establish and Define the Client-Planner Relationship
- Gather Client Data, Define Client Goals
- Analyse and Evaluate Client's Financial Status
- Develop and Present Financial Planning Recommendations and / or Options
- Implement the Financial Planning Recommendations
- Monitor the Financial Planning Recommendations

Correct Answer 22 Both 2 and 3

Answer In a growth option, the scheme does not declare a dividend. So the entire
Explanation investment performance is captured in its NAV.
In a dividend option, the scheme declares a dividend from time to time. Since
dividend comes out of net assets of the scheme, the NAV of the dividend
option goes down after a dividend. This reduced NAV is called ex-dividend
NAV. The dividend option can have two sub-options:
- Dividend pay-out, where dividend is paid to the investor.
- Dividend re-investment, where dividend is declared but retained in the
scheme. Instead of money, the investor is given new units against the
dividend.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 23 _______ is a phase of the wealth cycle when financial goals are in the
horizon.

(a) Inter-Generational Transfer

(b) Transition

(c) Accumulation

(d) Reaping / Distribution

Question 24 Statement of Additional Information (SAI) contains the statutory

information about the mutual fund that is offering the scheme - State
True or False ?

(a) TRUE

(b) FALSE

Correct Answer 23 Transition

Answer Transition is a phase when financial goals are in the horizon. E.g. house to be
Explanation purchased, children’s higher education / marriage approaching etc. Given the
impending requirement of funds, investors tend to increase the proportion of
their portfolio in liquid assets viz. money in bank, liquid schemes etc.

Correct Answer 24 TRUE

Answer Mutual Fund Offer Documents have two parts:
Explanation - Scheme Information Document (SID), which has details of the scheme
- Statement of Additional Information (SAI), which has statutory information
about the mutual fund that is offering the scheme.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

Question 25 A diversified mutual fund scheme that manages its credit risk well can
generate superior returns, as compared to a Gilt Fund - State True or
False ?

(a) TRUE

(b) FALSE

Correct Answer 25 TRUE

Answer Diversified debt funds invest in a mix of government securities (which are
Explanation safer) and non-government securities (which offer higher yields, but are
subject to credit risk). A diversified mutual fund scheme that manages its
credit risk well can generate superior returns, as compared to a Gilt Fund.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4

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NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 4