1 ) A mutual fund is not

a) A company that manages an investment portfolio.

b) A portfolio of stocks, bonds and other securities.

c) A pool of funds used to purchase securities on behalf of investors

d) A collective investment vehicle.

2) Which of the following is true?

Some close end funds sell at a discount to their NAV, because

a) Of high expense ratios

b) Investors expect that current NAV cannot be sustained by future potential

c) The repurchase price fixed by the fund is lower than the NAV

d) Of the inherent risk of closed end funds.

3) If the entry load is 2% and the NAV is Rs. 10, then the investor will have to pay for 1000 units

a) Rs. 15000

b) Rs.8000

c) Rs. 12000

d) Rs.10200

4) Which of the following Mutual Funds was not set up within the Phase 2:1987-1993?

a) Can bank Mutual Fund

b) Kothari Pioneer Mutual Fund

c) SBI Mutual Fund

d) L1C Mutual Fund

5) Which of the following is not a benefit from a Mutual Fund?

a) Investor has custody of

securities where fund invests.

b) Investor is able to diversify risk

c) Investor can save costs

d) Investor can get professional management to manage his money,

Which of the following has the lowest risk?

a) Liquid Fund (MMMF)

b) Gilt Fund

c) Diversified debt fund

d) Diversified equity fund

The current Mutual Fund

Regulations from SEBI was

introduced in

a) 1992

b) 1994

c) 1996

d) 1998

6)

7)

8)

The sponsor of a mutual fund may be compared to:

a) A director in a company

b) The chief executive of a company

c) The promoter of a company

d) An equity shareholder of a

company

Issuing additional fresh units and redeeming the existing units of a mutual fund scheme is the role of:

a) The custodian

b) The transfer agent

c) The trustees

d) The bankers

9)

10) The appointment of AMC for the Mutual Fund can be terminated by

a) Majority of Directors of the

Trustee

b) 50% of the Unitholders

c) 45% of the Unitholders

d) 60% of the Unitholders

11) The Asset Management Company shall make investment decisions solely in the interest of

a) The sponsor

b) The Trustee

c) The Unit Holders

d) Its Employees

12) Mutual funds in India are set up as

a

a) Company

b) Trust

c) Partnership

d) Association of Person

13) Minimum number of independent directors on the board of asset management company is

a) 50%

b) 25%

c) 75%

d) Two-thirds

14) Under the Indian Trusts Act, the interests of the unit-holders is safeguarded by

a) A board of trustees

b) A trustee company

c) Either

d) Neither

15) The asset management company is

appointed by

a) SEBI

b) Unit holders

c) Sponsors

d) Trustee

16)

Who needs to sign the trust deed with the trustee?

Asset Management Company Sponsor

Custodian

All of the above

Which of the following qualifies as a self-regulatory organization?

SEBI RBI

National Stock Exchange AMFI

a) b) c) d)

17)

a) b) c) d)

18)

Whose consent is required to approve a change in the fundamental attributes of a closed end schemes?

50% of the unit holders 50% of the trustees

75% of the unit-holders None of the above

Which schedule of SEBI (Mutual Fund) regulations 1996 specifies the contents of the Trust Deed?

Eleventh Schedule Eighth Schedule First Schedule Third Schedule

a) b) c) d)

19)

a) b) c) d)

20)

21)

a) b) c) d)

22)

23)

24)

25)

d) e)

26)

a) b) c) d)

In case of a dispute, against whom can the Unitholders initiate legal proceedings?

Trust Trustee AMC

None of the above

Mutual Funds are regulated by RBI

AMFI

SEBI

NSE

The body to which investors may address their complaints is

SEBI

RBI

IRDA

NSE

The first-time investor would be well-advised to refer to:

Detailed Offer Document

The Key Information

Memorandum only.

Either of the above

None of the above

Which of the following is true of the offer document?

Investor gets all the information to evaluate the performance of the proposed scheme

Investor gets useful information to evaluate the performance of the AMC's past schemes

Investor does not get any information on services he can expect from the fund.

Investor will not be able to assess the risks of the proposed scheme based on the offer document

The Abridged Offer Document contains the address of the following:

The Trustees of the Mutual Fund

The Directors of the AMC

The Registrar and Transfer Agents

Options a £I: b

Options b £I: c

Validate the statement - The investor is not obliged to read the offer document before investing in units of a scheme.

Completely true Rarely true Completely false Partly false

a) b) c) d)

a) b)

c) d)

a)

b)

c)

d)

a)

b) c)

a) b) c) d)

27) Offer documents have to be updated within

a) One year from the date of Issue

b) Two years from the date of issue

c) Six months from the date of issue

d) None of these

28) The front page of the offer document contains

Product launch advertisement Tombstone advertisement Performance advertisement All of the above advertisements

An NRI holds units in a mutual fund. What should he do with his holding if he takes up a foreign citizenship?

He redeems He continues

He transfers the unit to his mother, who resides in India None of the above

MF Regulations prescribe

The minimum commission of the distributor

The maximum commission of the distributor

The minimum as well as the maximum commission of the

distributor

Neither the minimum nor the maximum commission to the distributor

Which of the most appropriate position under MF Regulations?

Buyer beware

Buyer is always right Seller is always right

Seller is guilty unless proved right

36) According to SEBI's code for mutual fund advertisement, for funds that have been in existence for more than a year, annualized returns have to be furnished for

a) 1 yr, 3 yr, 5 yr. and since

launch

b) 1 yr, 5 yr and since launch

c) 1 yr, 3 yr and since launch

d) 1 yr, 3 yr and 5 yr

29)

a) b) c) d)

30)

31)

32)

33)

34)

a)

35)

2

a) b) c) d)

Date of its publication

Name and type of the fund Major objectives of the fund a£tb

To a prospective investor the reliable source of pertinent information about a scheme is

Financial Press Offer document AMFI Website

Advice from the distributor

Which of the following distribution channels is preferred by private mutual funds?

Individual distributor

Small distribution companies

Established distribution

companies

The Internet

Which of the following sales practices is prescribed by regulation?

AMFI Code of Ethics SEBI Advertising Code AMFI's code for agents None of the above

Risk factors may not be mentioned

a) b) c)

d)

a) b) c) d)

in

a) b) c) d)

a) b) c)

d)

b)

c)

d)

a) b) c) d)

37) An open-end fund with 10,000 units outstanding had the following items in its balance sheet:

Investment at market value Rs. 1,00,000

Current Assets Rs_ 20,000

Current Liabilities Rs_ 25,000

Calculate the fund's NAV per unit-

a) Rs. 9.5

b) Rs. 12

c) Rs. 10

d) Rs. 14.5

([1,00,000 + 20,000 - 25,0000]/10,000)

38) A closed-end equity fund has average weekly net assets of Rs. 200 crores. As per SEBI Regulations, the AMC can charge the fund with investment and advisory fee upto:

a) Rs. 2.25 crores

b) Rs. 2 crores

c) RS_ 2_5 crores

d) Rs_ 3 crores

(1-25% of 1" Rs. 100 crores of net assets and 1% of the balance)

39) An investor purchased units in a mutual fund in 1995 for Rs. 75000_ He sold the units in 1998 for Rs. 125000_ The cost inflation index for 1995 and 1998 are 281 (C) and 351 (D) respectively, The capital gains chargeable to tax are:

a) 64,957

b) 31,317

c) 50,000

d) 75,000 [1,25,000-(75000*351/281 )]

40) Income earned by a Mutual Fund registered with SEBI is exempt from Income- Tax as per section

a) 10(23D)

b) 10(33)

c) Total Income is taxable @ 33_2%

d) 88

41)

Unit capital of a mutual fund scheme is Rs. 20 million; The market value of its investments is Rs. 55 million; The number of units is 1 million. The NAV is

Rs_ 20 Rs_ 75 Rs_ 55

Not possible to say

Which of the following is untrue of the Automatic Reinvestment Plan?

The plan allows for automatic reinvestment of all income and capital gains,

Automatic reinvestment allows for the accumulation of additional units of the fund

The major benefit of automatic reinvestment is the compounding of returns

The benefit of automatic reinvestment is often lost, if reinvestment is subject to a heavy load

Constraints imposed by most funds on check-writing include:

a) b) c) d)

42)

a)

b)

c)

d)

43)

44)

45)

46)

47)

a) b) c) d)

48)

49)

3

a)

Requirement of minimum

account balance after

withdrawal

Specification of a minimum amount for which check can be issued

Limit on the number of checks that are allowed to be issued in a month

Both 1 and 2 above

Which of the following is true of Systematic Withdrawal Plan (SWP)?

It allows investors to make Systematic withdrawal from his fund

It is suitable for investors seeking regular income

SWP is similar to Monthly Income Plan

Only 1 £t 2

Choose the correct Statement - Alternative Investment Plans offered by fund allows investors:

Freedom with respect to investing one time or at regular intervals

Making transfers to different schemes with the same fund family

Receiving income at specified intervals or accumulating distributions

All the above

The current market price of a 9%coupon bond, when other bonds of similar maturities pay 11 % will be:

Above par Below par At par

will be unrelated to other bonds

Yield and Price of a bond move:

In opposite directions Together in the same direction In an unrelated fashion

In line with the inflation index

SEBI places a limit on a scheme's investment in "investment grade rated" debt instruments of a single issuer, because:

Even investment grade securities carry risks of default by borrower

A scheme must diversify its holdings and thus reduce portfolio risk

Investment Grade ratings

cannot be solely relied upon SEBI wants to leave some for investment in "non-investment grade" securities by the scheme

Technical Analysis tries to predict future movement of stock price by analyzing:

The financial workings of a Company

The stock price movements of a Company

Both of the above None of the above

b)

c)

d)

a)

b)

c) d)

a)

b)

c)

d)

a) b) c) d)

a)

b)

c)

d)

a)

b)

c) d)

50)

51)

52)

a)

53)

54)

55)

a)

56)

a) b) c) d)

An investor purchased an open-end fund when its NAV was Rs. 20. 16 months Later, its NAV stood at Rs. 22. The percentage NAV change in the fund was:

8% 7% 7.5% 8.5%

({[22-20]/20}/16)*12} *100 = 7.5% A unit of open-end fund was purchased when its NAV was Rs. 20. At year-end its NAV was Rs. 22. In the interim period, the fund made a distribution of Rs. 4 per unit when its NAV was Rs. 21. What was the simpLe TotaL Return of the Fund?

25% 30% 20% 31%

({4+[22-20]}/20)*100 = 30%)

Which of the foLLowing is faLse?

ROI is a measure similar to TotaL Return with reinvestment of distributions

TotaL Return with reinvestment of distributions assumes reinvestment at NAV on the distribution date

As a measure of performance, TotaL Return with reinvestment of distributions seeks to overcome the shortcomings of simpLe TotaL Return

Because of its simplicity, simple Total Return is preferred in practice to Total Return with reinvestment of distribution

Return can be annualized and compounded onLy if the Scheme has compLeted

30 days

12 months 6 months 24 months

An equity scheme is 90 days oLd. To compute its yieLd, it can use absolute return

simpLe annuaLized return compounded annuaLized return any of these

FinanciaL PLanning is

Investing funds to receive the highest rate of return possibLe Resorting to tax pLanning to keep taxes as Low as possibLe PLanning for retirement with the maximum income possibLe. Process of solving financial problems and reaching financial goals.

Your client has won Rs. 1 crore in "Karun Banega Crorepati". What wouLd your suggestion be?

Invest the entire amount without any deLay in "old economy" stocks-since they are back in favour

a) b) c) d)

b)

c)

d)

a) b) c) d)

a) b) c) d)

b)

c)

d)

a)

57)

58)

59)

60)

61)

a) b) c) d)

62)

4

b)

Invest the entire amount immediateLy in an Equity Index Fund-since the index is at a historic Low

Invest in very safe liquid investment options and take the time needed to work out a financial plan

Invest immediateLy in IT stocks, since their vaLuations are now considered to be attractiveLy Low

Which one of the foLLowing portfoLio is most risky?

75% Equity - 25% debt 40% Equity - 60% debt 60% Equity - 40% debt 80% Equity - 20% debt

The strategy advisabLe for an investor to maximize investment return in the Long run is:

Buy and hoLd on to investments for a Long time

Liquidate poorLy performing investments from time to time Liquidate good performing investments from time to time Switch from poor performers to good performers

A criticism of rupee-cost averaging

c)

d)

a) b) c) d)

a)

b)

c)

d)

is

a)

Investment is for the same amount at reguLar intervaLs Over a period of time, average per share price wiLL be more than guessing the highs and Lows

It does not tell you when to buy, sell or switch from one scheme to another

Rupee cost averaging has no serious shortcomings

If you maintain a flexibLe ratio of asset aLLocation, wouLd you RebaLance the Debt/Equity allocation periodicaLLy? RebaLance the Debt/Equity allocation very frequently? Generally avoid portfolio rebalancing?

Keep fixed percentages of equity and debt investments at aLL times?

SIP is best exampLe of Rupee Cost Averaging VaLue Averaging

Buy 8: HoLd

None of the above

Direct investment in stock markets can be better option over investing through mutuaL funds if:

The investor wants better returns than those offered by mutuaL funds

The investor has large capital, knowledge and resources for research

The investor has identified a buLLish phase in the stock market

b)

c)

d)

a)

b) c) d)

a)

b)

c)

63)

64)

65)

a) b) c) d)

66)

a) b) c) d)

67)

68)

69)

d)

The investor wants to invest for the long run

An investor in need of regular income should not select:

A bank deposit A debt fund

An equity growth fund PPF

Which of the following has the highest level of liquidity?

Equity PPF

Company fixed deposits Mutual Funds

Which of the following should not be viewed primarily as an investment option?

Mutual Funds Equity shares

Life Insurance None of the above

a) b) c) d)

a) b) c) d)

An investor asks you in what order he should list the following schemes, going from the scheme with the least risk to the one with the one with the highest risk - 1. A Balanced Fund, 2. A Stock Index Fund, 3. A Liquid (Money Market) Fund and 4. A Pharmaceuticals Sector Fund.

1,2,3,4 1,3,4,2 3,1,2,4 2,3, 1,4

a)

Ex-Marks (or R-Squared factors) of a fund measures

How much of a fund's NAV movement is due to the market index movement

How a fund's NAV movement relates to the market index movement

How much of a fluctuation has occurred in a fund's NAV over a historical period

How many marks a Credit rating Agency accords to a fund

Which is better investment option whilst selecting an equity fund?

Ex Marks - 75%, Beta - 0.9, Gross Dividend Yield - 8%

Either a or c

Ex Marks - 80%, Beta - 0.9, Gross Dividend Yield - 8%

Ex Marks - 90%, Beta - 0.8, Gross Dividend Yield - 9%

What type of portfolio asset mix would recommend to your 55 year old client who plans to retire at age 58? Choose a portfolio that is the closest match to the investor's needs.

40% in Equity Schemes and 60% in Balanced Funds.

40% in Equity Schemes and 60% in Debt Funds

20% in Equity Schemes, 20% in Liquid Funds and 60% in Debt Funds

b)

c)

d)

a)

b) c)

d)

a)

b)

c)

70)

a) b) c) d)

71)

72)

73)

5

d)

100% in Monthly Income Statements

For which of the following funds would you consider "average maturity" as an important factor in selecting the right one for the investor?

A Debt Fund

A Balanced Fund

A Money Market or Liquid Fund Both 'a' and 'b' above

a)

Which of the following Portfolios would you recommend to a recently retired Couple?

35% in Conservative Equity Funds, 25% in moderately aggressive equity, 40% in money market funds.

30% in short term municipal funds, 35% long term municipal funds, 25% moderately aggressive equity, 10% in emerging growth equity

50% in aggressive equity fund, 25% in high Yield bond funds and growth and income funds, 25% in conservative money market funds

Either 2 or 3

AMFI Code of Conduct for Intermediaries

prohibits mutual fund distributors from accepting comrmssions from an investor who renew his investment in a scheme

prohibits them from rebating the commission back to such investors

encourages them to refrain from rebating the commissions to such investors, but does not prohibit

prohibits them from rebating the commissions back to all investors

b)

c)

d)

a)

b)

c)

d)

Mutual funds in India are required by SEBI to

a) prohibit their employees from personal trading in secondary markets

b) allow all employees to trade freely in secondary markets without restrictions

c) to establish a code of conduct and allow employees to do personal trading that conforms to SEBI guidelines

d) allow employees to carry on personal trading as long as they abide by SEBI guidelines