A company that intends to invest in a mutual fund scheme needs to take approval from: Company Law Board SEBI

Registrar of Companies Board of Directors Answer Feedback: The Board of Directors have to approve the investments of a com pany in a mutual fund If the PE ratio is very high, it is likely that growth stocks would be Fairly valued Overvalued Illiquid Undervalued Answer Feedback: If the PE ratio is high, it means growth stocks are overvalued KYC norms have to be complied for which of the following mutual fund transaction s? All All All All purchase transactions of Rs.50,000 or more in value purchase transactions transactions of Rs.50,000 or more in value transactions

Answer Feedback: From Jan 1, 2011, KYC applies for all mutual fund transactions A mutual fund scheme was launched on October 15. 2010. When is the SID due for t he first regular update? March-11 January-11 January-12 March-12 Answer Feedback: SID has to be updated every March. But, for schemes launched in the second half of a financial year, time until the next, not following, March is allowed. The primary objective of creating a mutual fund trading platform on a stock exch ange is to Increase Increase Increase Increase the the the the cost of distribution number of products number of investors reach of mutual fund products

Answer Feedback: Trading of units in stock exchanges is intended to increase the reach of the funds, not the investors, products or costs The price of a closed end fund that is listed on a stock exchange tends to be: Unrelated to the NAV Equal to the NAV

Higher than the NAV Different from the NAV Answer Feedback: The price of a listed closed end fund depends on liquidity in t he market and can be different from the NAV Which one of the following is NOT appointed by the AMC? The The The The banker R&T agent custodian distributor

Answer Feedback: The custodian is not appointed by the AMC, but by the sponsor An investor sells his units in an equity-oriented fund after 6 months, for a pro fit. What is the taxability of this gain? Taxable Taxable Taxable Taxable at at at at 15% marginal rates 10% 20%

Answer Feedback: Gains from sale within one year is treated as short term capita l gain, taxable at 15% for an equity-oriented fund Which of the following constituents is responsible for executing the trades of t he fund manager on the stock exchange? R&T agents Custodian Brokers Banker Answer Feedback: Brokers execute the trades for the fund manager. The custodian settles them. Investments in mutual funds enable investors to reduce the risk in their portfol ios through: Market timing Stock selection Diversification Sector selection Answer Feedback: Risk in a portfolio is reduced through diversification An investor has sold his investments in a mutual fund two years after buying the units. The profits he earns are taxable _________________. as as at as long term capital gains short term capital gains a rate of 10% dividends

Answer Feedback: Gains from units sold after a year of purchase are treated as l ong term capital gains

Money market securities have a maturity period of: Less than 91 days Equal to 364 days Less than 182 days Less than or equal to 364 days Answer Feedback: All money market securities have maturity less than or equal to 364 days. Investments in equity funds can be expected to be: Risky in Riskless Riskless Risky in the long term in the short term in the long term the short term

Answer Feedback: Investments in equity are risky, especially in the short term The correct indicator of return to the investor would be: Return after expenses, load and tax Return after expenses Return after expenses and load Portfolio return Answer Feedback: Return to the investor is net, after expense, load and taxes The NAV for an equity fund purchase transaction will be applied based on: Date Date Date Date of of on of the application realization of cheque the time stamp the cheque

Answer Feedback: NAV applies for a equity fund transaction based on the time sta mp. The interest on bank deposits is: Fully taxable Fully exempt from tax Taxable up to a certain limit Exempt from tax up to a limit Answer Feedback: Interest from bank deposits is fully taxable When a fund launches a new scheme, it first takes the approval of SAT Sponsors Trustees AMFI Answer Feedback: All mutual fund schemes are approved by Trustees. AMFI, SAT or Sponsors do not have anything to do with scheme launches Which of the following funds will not be chosen by an investor who seeks liquidi ty?

Equity-linked saving schemes Liquid funds Diversified equity funds Open ended income funds Answer Feedback: Equity linked saving schemes have a 3-year lock-in and therefor e should not be chosen by an investor who seeks liquidity Asset class G in the NPS is suitable for investors who like to invest in: Government securities Equity Shares Bank deposits Debentures of companies Answer Feedback: Class G represents investment in government securities A loan can be taken to buy an asset provided: Rate Rate Rate Rate of of of of loan loan loan loan is is is is equal to rate of return on the asset greater than rate of return on the asset less than rate of return on the asset unrelated to rate of return on the asset

Answer Feedback: If the rate of return on an asset is higher than the rate of lo an, it may be worthwhile taking a loan to buy an asset According to the investment management agreement, what is the power the trustee holds with respect to an AMC? Trustee Trustee Trustee Trustee can can can can change the staff of the AMC deny fees to the AMC recapitalize the AMC change the AMC for non-performance

Answer Feedback: A trustee can change the AMC Alpha refers to: Beta Tracking error Sharpe ratio Excess return Answer Feedback: Alpha refers to return over and above the benchmark A fund of fund derives its NAV from other funds. Therefore it can publish its NA V by __________ 8 9 9 8 am am pm pm of of of of the the the the next next same same day. day. day. day.

Answer Feedback: Fund of funds can publish the NAV by 9 am of the next day The primary data used in fundamental analysis of equity is Trading volume

Financial information Stock prices Shareholding pattern Answer Feedback: Financial information is used in fundamental analysis AMFI has the powers with respect to registered ARN-holding distributors to: Issue notices Cancel registration Impose penalties All of the given options Answer Feedback: AMFI can issue notices, impose penalties and cancel registratio n of ARN holders. An individual investor chooses a dividend reinvestment option in a debt fund. Wh at is the DDT applicable to the dividends that are reinvested? DDT DDT DDT DDT applies only for dividend payout option does not apply applies at 12.5% applies at 20%

Answer Feedback: DDT applies for individuals at 12.5% for both dividend and rein vestment options in a debt fund An application for a gilt fund is received with a cheque for Rs. 2 crore at 11:0 0 AM. What is the applicable NAV? Same day Next day Previous day Day of cheque realisation Answer Feedback: For a debt fund, if the value of transaction is over Rs.1 cr, N AV applies on the date of realisation of the cheque. The assets of a fund are Rs. 200 cr. The current liabilities are Rs. 20 cr. The unit capital is Rs. 50 cr. and the face value per unit is Rs. 10. what is the NA V of the fund? Rs.44 Rs.32 Rs.36 Rs.40 Answer Feedback: NAV = (Assets less liabilities)/units. Units = Unit capital/Fac e value. NAV = ((200-20)/5) = 36 The track record of a fund can be used in evaluating funds that are: In existence for a long period In existence for a short period Small Large Answer Feedback: Track record can be used to choose funds that have been in exis

tence for a long period of time Risk factors needs not be carried in which of the following advertisements? NFO advertisement Advertisement of existing products Awards advertisement Tombstone advertisements Answer Feedback: Tombstone advertisements make statutory announcements. They car ry no product information or risk factors If you receive an application for investing in a mutual fund, which one of the f ollowing investors would you reject? OCBs PIOs HUFs NRIs Answer Feedback: OCBs are not eligible to invest in mutual funds If there is a loss from sale of mutual funds, this cannot be set off against ___ ________. any other head of income income from salary income from dividends and interest income from residential property Answer Feedback: Loss from sale of mutual funds cannot be set off against any ot her head of income Which of the following is an appropriate benchmark for a large cap equity fund? BSE S&P BSE S&P 200 CNX 500 CNX Index IT index index Nifty index

Answer Feedback: Nifty is an index of 50 large cap equity shares and is the appr opriate benchmark Which of the following NAVs of an equity fund is as per minimum regulatory requi rement? Rs. 12.45 Rs.12.452 Rs.12.4525 Rs.12 Answer Feedback: Equity fund NAVs have to be published to at least 2 decimal poi nts. That is the minimum requirement If unit holders seek a change in AMC, they should get the support of investors h olding __________

75% 40% 50% 25%

of of of of

the the the the

unit unit unit unit

capital. capital. capital. capital.

Answer Feedback: Unit holders controlling at least 75% of the unit capital shoul d vote for a change in AMC The AMFI code of conduct is: Not approved by SEBI Implemented only by AMFI Applicable only on voluntary basis Part of the SEBI Mutual fund regulation Answer Feedback: AMFI code of conduct has been included as part of regulation by SEBI An investor earns long term capital losses from his debt fund investments. He al so makes a long term gain from his MIP investments. Which of the following is tr ue? The loss can be Only short term The loss cannot The loss can be set off gains are available for set-off be set-off set off only against short term gains

Answer Feedback: Long term capital losses can be set off only against long term capital gains In order to be appointed as a constituent of a mutual fund, it is compulsory to be: Registered with SEBI Listed by Ministry of Company Affairs Certified by Amfi Approved by RBI Answer Feedback: All mutual fund constituents have to be registered with SEBI A company investing in a mutual fund is required to submit along with the applic ation: A A A A copy copy copy copy of of of of the the the the tax returns profit and loss account balance sheet board resolution

Answer Feedback: Companies have to submit the board resolutions approving the pu rchase A fund manager has sold his holdings while the markets are still going up and is holding cash as a defensive measure. How is the portfolio likely to perform if the markets correct?

Match the market Underperform Correlated to the market Outperform Answer Feedback: If fund manager is in cash and the market corrects, the portfol io will not lose as much as a the benchmark. An asset allocation that is not frequently revised is called: Flexible allocation Floating allocation Tactical allocation Fixed allocation Answer Feedback: Flexible allocation allows the proportion invested in assets to change with market value without revision. Money is paid by the insurer on the death of an insured person, to the _________ ___. proposer of children of nominees of wife of the the policy the deceased the deceased policy holder

Answer Feedback: The proceeds of a policy are paid to the nominees if the insure d person dies PAN is required for:The risk appetite of an investor can be expected to: Change Remain Change Change every year unchanged with age with new events

Answer Feedback: Risk appetite changes primarily with age of the investor All mutual fund transactions Purchase transactions above Rs50,000 NFO transactions Re-purchase transactions Answer Feedback: PAN is mandatory for all mutual fund transactions The return to the investor in a short term debt fund can be impacted by ________ __. market risk liquidity risk expense ratios cash risk Answer Feedback: A short term debt fund is impacted the most by expenses, since the market and liquidity risks are low in such products An investor who is conservative in his risk taking ability should avoid which of the following funds?

Liquid funds Monthly income plans Sector equity funds Diversified equity funds Answer Feedback: A conservative investor should avoid sector funds which can be risky, depending on how the sector performs The risk appetite of an investor can be expected to: Change Remain Change Change every year unchanged with age with new events

Answer Feedback: Risk appetite changes primarily with age of the investor CAGR is used to measure the returns from mutual funds for periods of ___________ _. more than five years less than one year equal to one year more than one year Answer Feedback: For periods more than one year, it is mandatory to use CAGR to measure returns If an investor uses the ASBA facility in NFO transactions, he makes the payment for units: Only on allotment of units Upfront in advance In installments Without making an application Answer Feedback: ASBA enables payment for units only after allotment An investor who is unwilling to invest in equity due to the perceived high risk may benefit from: A A A A small proportion in small proportion to complete allocation large proportion in a diversified equity fund a quick-gain trading portfolio to an all-debt portfolio a sector fund

Answer Feedback: Sector funds are equity trading are risky options. A small port ion in diversified equity is desirable for such investors An investor transaction is completed using the online facility of a mutual fund at 11:30 AM. It is processed at 4:00 PM. What is the applicable cut-off time for the transaction? 4:00 PM 11:30 AM

Cut-off time does not apply to such transactions 3:00 PM Answer Feedback: For online transactions, the time recorded on the system is use d to apply the NAV. It is 11:30 am in this case. If you had to choose the lowest risk option for your investor, which one of the following would you choose? Sector funds Equity funds Balanced funds based on flexible allocation Balanced funds based on fixed allocation Answer Feedback: A balanced fund with fixed allocation maintains the ratio betwe en debt and equity and is therefore less risky Which of the following entities cannot be sued by the investor? Trust Sponsor AMC Custodian Answer Feedback: Investors cannot sue the trust, for it represents the investors themselves Which of the following is NOT required to be disclosed to the investors in a mut ual fund? Portfolio of the scheme Annual report of the scheme Annual report of the AMC NAV of the schemes Answer Feedback: The annual report of the AMC need not be disclosed to unit hold ers Trail commission is paid on the basis of: Minimum value of the invested amount Original invested amount Face value of the invested amount Market value of the invested amount Answer Feedback: Trail is paid on the market value of the invested amount Securities transaction tax (STT) is payable by mutual fund investors on: Re-purchase of equity-oriented units Repurchase of all units Sale and repurchase of all units Sale of equity-oriented units Answer Feedback: STT is payable only on redemption or repurchase of equity orien ted funds

The amount of money remaining with a fund as unclaimed redemption is: Transferred to Transferred to Managed by the Managed by the SEBI. a trust immediately. fund for a specified period. fund until it is claimed.

Answer Feedback: Unclaimed redemptions have to be managed by the fund for a peri od of three years A financial goal, to be actionable has to be defined in terms of: Need and time Amount and need Needs and desires Amount and time Answer Feedback: A financial goal has to be defined in terms of time and money, to be acted upon The fund manager in a fund of fund scheme selects: Sectors Funds Stocks Bonds Answer Feedback: A fund of fund invests in other funds The risk in an equity fund can arise from the portfolio that holds: Stocks from several sectors Non-index stocks Higher proportion in a few sectors Less than 10% in a single stock Answer Feedback: A portfolio with high proportion in few sectors is concentrated and risky. Which of the following entities actually represents the mutual fund? The The The The sponsor custodian AMC trust

Answer Feedback: The mutual fund is structured as a trust. When investors buy units in an NFO, the amount mobilized by the fund is called: Average AUM Initial AUM Unit capital Managed capital Answer Feedback: NFO is usually priced at face value. The amount mobilised there fore is the unit capital An investor buying mutual fund units for the first time uses the:

Application form Transaction slip Switch form Statement of account Answer Feedback: Application forms are used for fresh purchase transactions A transaction slip can be used in a mutual fund transaction if: It is a first time transaction It is a transaction in an existing folio The value of the transaction is less than Rs.50000 It is a non-financial transaction Answer Feedback: To transact in an existing folio, transaction slip can be used Which of the following is a eligible for specific tax concessions? Post office deposits Company deposits PPF Corporate bonds Answer Feedback: There are no tax concessions on bonds and deposits. PPF interes t is exempt from tax If a scheme has a lock-in period, such information can be found in: SAI KYC MIN SID Answer Feedback: Scheme specific information is found in the SID An investor in NPS chooses the life cycle option. This means his asset allocatio n will be based on: Amount invested Risk profile Age Holding period Answer Feedback: In a life cycle option, the asset allocation changes with the a ge of the investor Which of the following funds is likely to have a high level of volatility in the NAV? Liquid fund Short term debt fund Long term gilt fund 91-day FMP Answer Feedback: The volatility of a debt fund increases with its maturity, a lo ng term gild fund is likely to have a high NAV volatility If a distributor invests his own funds in a mutual fund, which of the following

is true? He He He He cannot invest his own funds cannot earn commission on his investments can invest but only in a joint name cannot invest as a individual

Answer Feedback: A distributor cannot earn commissions on his own investments in a fund A value-based fund is likely to choose which type of stocks? High growth stocks High PE stocks High dividend value stocks Higher priced stocks Answer Feedback: Value based funds will choose low PE stocks with high dividend yield. When the interest rates are going down, the prices of debt securities are likely to: Cannot say Go down Go up Remain unchanged Answer Feedback: Interest rate and prices of debt securities are inversely relat ed Return from equity depends on: Economy factors All of the given options Industry factors Company factors Answer Feedback: Return from equity depends on economy, industry and company fac tors A mutual fund has been set up by a bank. Who is the regulator of the sponsor of such a fund? SEBI Ministry of Finance RBI AMFI Answer Feedback: The fund in this case is regulated by SEBI, but its sponsor, th e bank is regulated by RBI. The NAV of a fund is Rs. 40. The exit load is 1%. What is the re-purchase price per unit? Rs. 39.40 Rs.40.40 Rs.39.60 Rs.40

Answer Feedback: Repurchase price = NAV - (NAV x Load). =( 40 - (40 x 1%) = 40 0.40 = 39.60. If an investor conducts a mutual fund transaction on a stock exchange platform, which of the following is NOT true? The The The The transaction transaction transaction transaction may have to be sent to the R&T agent will be put through by a broker can be settled using a demat account has be conducted online

Answer Feedback: An exchange transaction is put through a broker, settled using demat or sent to R&T agent, but need not always be online The price of gold in the spot markets is Rs. 20,000 per 10 gms. It is expected t o go up to Rs.21,000. What is likely to happen to the price of gold futures? Do not change increased volatility Go down Go up Answer Feedback: If it is expected that price will go up, prices in the futures market will go up When an investor plans to will his wealth to his heirs, financial planning is: Not required Required only for tax purposes Required for the investor Required for the beneficiaries Answer Feedback: When wealth is planned to be passed on, financial planning is r equired for the beneficiaries The component that is common between offer documents of two schemes of the same mutual fund is: SAI SID MIN KIM Answer Feedback: SAI contains common information about the background of the fun d house. The primary objective of financial planning is to provide for: Tax saving Creating wealth Retirement Financial goals Answer Feedback: Financial planning focuses on providing for defined financial g oals

An investor in mutual funds faces the disadvantage of: Overload of choices Lock-in period Low flexibility in investing High cost of operations Answer Feedback: The cost of operations in a fund is low, flexibility is high an d not all funds have lock-in. Which of the following is a physical asset? Bank deposits Corporate bonds Title to property Equity shares Answer Feedback: Deposits, bonds and shares are financial assets. Property is a physical asset The focus on building a retirement corpus should be high ___________. closer to retirement much before retirement after retirement at retirement Answer Feedback: Retirement corpus needs to be built during the working years, m uch before retirement Profiling is done to ensure that investment options are chosen according to the ability of the investor to: Accumulate Expect returns Save Bear risks Answer Feedback: Profiling is done to assess the ability of the investor to bear risks If an investor redeems units from a fund, he is likely to receive an updated sta tement of account within: 7 days 30 days 10 days 15 days Answer Feedback: Statement of account for normal transactions has to be issued w ithin 10 working days An investor who saves for a large expense in a short period of time is likely to choose: A money back policy A term policy A ULIP

An endowment policy Answer Feedback: A money back policy is shorter in tenor compared to the other p olicies A purchase request for an equity fund was accepted at an AMC office on Wednesday , March 11 at 2:30 pm. What is the applicable NAV for the transaction? NAV NAV NAV NAV of of of of March March March March 11 12 10 9

Answer Feedback: Since the purchase request was on a working day before cut off time, same day NAV (NAV of March 11) applies. Which of the following is NOT found in an offer document? Fees and expenses of the scheme Existing schemes of the fund Key personnel of the fund Features of competing funds Answer Feedback: Offer documents only provide information about the fund making the offer not information about competing funds Which one of the following can change, without changing the fundamental attribut e of a fund? Lock-in period Investment Objective Fund manager Asset allocation Answer Feedback: The fund manager of a fund can change The limitation of investing in real estate, to a small investor is that The holding period is short Meets only income needs Requires higher investment outlay The liquidity is high Answer Feedback: Real estate investment requires higher investment outlay If flexible asset allocation is chosen, the ratio between the asset classes is l ikely to: Remain Change Change Remain fixed with market changes every year equal

Answer Feedback: Flexible allocation means the ratio between the assets changes with changes in market value Which of the following cannot be a appointed as a distributor of a mutual fund?

Individuals Sponsor Banks AMC employees Answer Feedback: AMC employees cannot be distributors Which of the following risks is not borne by FMP, who holds to maturity? Liquidity risk Default risk Credit risk Market risk Answer Feedback: FMP that is held to maturity does not bear market risks In the asset allocation decision, which step is the last one? Financial goal determination Asset allocation Scheme selection Return objective Answer Feedback: The determination of goal, objective and asset allocation is do ne first, and selection of scheme is done last What is the maximum number of AMCs with whom a mutual fund distributor can be em panelled? There is no maximum limit 5 20 10 Answer Feedback: There is no limit to the numbers of funds for which a distribut or can work A greater allocation to equity can be recommended to an investor in the: Accumulation phase Reaping phase Transition phase Distribution phase Answer Feedback: If the investor is in accumulation phase he can allocate a high er amount to equity An important benefit of SIPs is: Lower fund expenses High rates of return Rupee cost averaging Lower lock-in period Answer Feedback: SIP is a mode of transaction in a fund that reduces average cos t. The expense, return or lock-in do not change. The AMC's expenses to pay salaries to employees is borne by:

Distributors, AMC, not unit Trustees, not Unit holders,

not unit holders holders sponsors not the AMC

Answer Feedback: AMC expenses are borne out of the fee it earns and not charged to the fund Which of the following investment exhibits higher volatility in its value? Deposits Equity shares Bonds PPF Answer Feedback: Compared to bonds, deposits and PPF, the value of equity is mor e volatile An investor likes to assume high risks for higher returns. Which of the followin g funds would he prefer? Diversified equity fund Large cap fund Income fund Small cap growth fund Answer Feedback: A small cap growth fund has a higher risk-return ratio compared to a diversified, large cap or income fund The investment objective of an investor is to earn steady income. Which of the f ollowing funds is most likely to meet that objective? Sector equity fund Dynamic Bond Fund Diversified equity fund Equity index fund Answer Feedback: A fund that seeks to earn a steady income cannot be an equity f und, only a debt or bond fund

Accounting, Valuation & Taxation -3 % Financial Planning 0 % Fund Distribution & Channel Management 17 % Investor Services 5 % Legal & Regulatory Environment 0 % Mutual Fund Concepts 0 % Mutual Fund Structure & Constituents -6 % Offer Document 0 % Recommending Model Portfolios & Investment Plans Return, Risk & Fund Performance 0 % Scheme Selection -3 % Selecting the Right Investment Products 0 %

0 %