UnAttempted

CORRECT ANSWER:

True

Explanation:

Floating rate funds invest largely in floating rate debt

securities i.e. debt securities where the interest rate payable
by the issuer changes in line with the market.

Since the interest rate itself keeps adjusting in line with the
market, these floating rate debt securities tend to hold their
value, despite changes in yield in the debt market.

Out of 100 questions 100 are un attempted.

Q 1. An investor purchases through a distributor 5000 units of a

mutual fund scheme at a NAV of Rs 25. The current NAV of
the scheme is Rs 43. What will be the trail commission for
today if the trail commission rate is 1% per annum.
Rs. 2150
Rs. 33.1854
Rs. 3.4246
Rs. 5.8904

UnAttempted
 CORRECT ANSWER:

Rs. 5.8904

Explanation:

Trail commission is always calculated on the current NAV.

The current total value of investments in the above question

is Rs. 43 X 5000 units = Rs. 2,15.000

Trail commission for the day = Current value X trail

commission rate p.a./365

= 215000 X 1% / 365 days

= 2150 / 365 = Rs. 5.8904

Q 2. According to guidelines given by SEBI, every mutual fund

scheme should have a minimum of ____ investors.
10
20
25
50

UnAttempted

CORRECT ANSWER:
 20

Explanation:
Every mutual fund scheme/plan should have a minimum of 20
investors and no single investor shall account for more than
25 percent of the corpus of the Scheme/Plan(s).

Q 3. Smita is a young investor and her parents advice her to

invest in fixed deposits of banks so that these funds can be
used for her retirement. If Smita follows her parents advice,
what risk does she face?
She has to select the correct bank which is financially
strong
There is a high risk of default in her portfolio
There is a risk of low returns
There is no risk as fixed deposits are quiet safe

UnAttempted

CORRECT ANSWER:

There is a risk of low returns

Explanation:

Fixed deposits usually give a low rate of return and when

adjusted against inflation, the return can sometimes be very
low or even negative. This will not help in building her
retirement corpus.
 Smita is a young investor and has plenty of time in her hand.
So she should invest in growth stocks / equity mutual funds
rather than fixed deposits.

Q 4. Investors who have not transacted during the previous ______

are known as dormant investors.
15 months
12 months
9 months
6 months

UnAttempted

CORRECT ANSWER:

6 months

Explanation:
Dormant investors are those who have not transacted for
previous six months.

Q 5. Mr. Mohit has filled up a application form for subscribing to a

mutual fund scheme. However the address mentioned in the
application form is different from the address provided at the
time of KYC compliance. Which address will be included in
the mutual funds records once the KYC compliance is
validated?
The address provided for KYC compliance
The address provided in the application form
Mr. Mohit can indicate which address is correct
The ddress provided in the application form will be used
 for all communications

UnAttempted

CORRECT ANSWER:

The address provided for KYC compliance

Explanation:
Once the first holder’s PAN is validated for KYC, the address
provided in the KYC form will override the information
provided in the application form.

Q 6. Who uses the information collected under the Foreign

Account Tax Compliance Act (FATCA)?
Foreign Government or foreign agencies
Indian Government
Indian Tax authorities
All of the above

UnAttempted

CORRECT ANSWER:

All of the above

Explanation:
To comply with the requirements of Foreign Account Tax
Compliance Act (FATCA) and Common Reporting Standards
(CRS) provisions, financial institutions, including mutual
 funds, are required to undertake due diligence process to
identify foreign reportable accounts and collect such
information as required under the said provisions and report
the same to the US Internal Revenue Service/any other
foreign government or to the Indian Govt / Tax Authorities
for onward transmission to the concerned foreign
authorities.

Q 7. Which of these entities can invest in Indian mutual funds? A)

Foreign portfolio investor B) Insurance company C) Salaried
individual
Only C
A and B
B and C
All A, B and C

UnAttempted

CORRECT ANSWER:

All A, B and C

Explanation:

All of the above can invest in Indian mutual funds.

Q 8. Identify the TRUE statements with respect to Transmission of

mutual fund units - A) Before the transfer is effected, the
mutual fund will insist for an indemnity against future
problems for the mutual fund arising out of the transfer B)
Before the transfer is effected, the mutual fund will not insist
 on the death certificate of the deceased unit-holder C) Before
the transfer is effected, the mutual fund will insist on the KYC
documentation from the nominee
A and B are true
B and C are true
A and C are true
All A, B and C are true

UnAttempted

CORRECT ANSWER:

A and C are true

Explanation:
Transmission is the process of transferring units to the
person entitled to receive it in the event of the death of the
unit holder.

In case of transmission, before the transfer is effected, the

mutual fund will insist on the KYC documentation from the
nominee, death certificate of the deceased unit-holder, and
an indemnity against future problems for the mutual fund
arising out of the transfer.

Q 9. Which of these is NOT a function of Registrars and Transfer

Agents ?
Maintaining investors records
Processing redemption and dividend payouts
Analysing mutual fund performance and making it
available to investors
Updating unit capital of fund
 UnAttempted

CORRECT ANSWER:

Analysing mutual fund performance and making it available

to investors

Explanation:

The Registrars and Transfer Agents (RTAs) maintain investor

records.

The functions of the RTA include processing of purchase

and redemption transactions of the investor and dealing with
the financial transactions of receiving funds for purchases
and making payments for redemptions, dividends etc,
updating the unit capital of the scheme to reflect these
transactions, updating the information in the
individual records of the investor, called folios, keeping the
investor updated about the status of their investment
account and information related to the investment.

Q The NAV of an equity fund is Rs. 76.45 and the face value is
10. Rs. 10. An investor invests Rs 30,000. How many units will be
allotted to him? (There is no entry load)
1866.43
477
392.41
3000

UnAttempted
 CORRECT ANSWER:

392.41

Explanation:

Units are allotted as per the current NAV.

The amount invested divided by the NAV will give the units
allotted.

Rs 30,000 / 76.45 = 392.41

Q AMFI Code of Ethics states that _______ cannot become a

11. distributor of mutual fund.
Banks
HNIs
Employees of AMC
Empanelled distributors

UnAttempted

CORRECT ANSWER:

Employees of AMC

Explanation:
 Employees of Asset Management Companies (AMs) cannot
become mutual fund distributors.

Q Identify the TRUE statement -

12. The mutual fund investor has the complete freedom to
change the distributor any time he wants
Once an investor had invested through a distributor, he
cannot change the distributor
Once an investor had invested by online method, he
cannot change the distributor
Once an investor had invested through a distributor, he
cannot invest directly with the mutual fund house

UnAttempted

CORRECT ANSWER:

The mutual fund investor has the complete freedom to

change the distributor any time he wants

Explanation:
Investors can choose to change their distributor or opt for
direct investing.

This needs to be done through a written request by the

investor. In such cases, AMCs will need to comply,
without insisting on any kind of ‘No Objection Certificate’
from the existing distributor.

Q Indentify the true statement(s) - A) A systematic transaction

13. cannot be cancelled B) Assuming a mutual fund scheme is
 profitable then the investors can keep encashing some
profits through a Systematic Withdrawal Plan
Only A is true
Only B is true
Both A and B are true

UnAttempted

CORRECT ANSWER:

Only B is true

Explanation:
1. A systematic transaction (like SIP etc) can be stopped.

2. Assuming the scheme is profitable, the re-purchase

ensures that some of the profits are being regularly
encashed by the investor.

Q The expenses of _______ cannot be charged to a mutual fund

14. scheme.
custodian fees
software development
registrar services for transfer of units sold
GST - Goods and Service tax

UnAttempted

CORRECT ANSWER:

software development
 Explanation:

The expenses on software developement is not for a

particular scheme but for the AMC as a whole and cannot be
charged to a particular scheme.

Q Identify the false statement(s). A) When an investor wants to

15. redeem from a scheme, the distributor must suggest
redemption from the scheme with the maximum exit load B)
The mutual fund distributors can ignore the impact of exit
load at the time of repurchase
Only statement A is false
Only statement B is false
Both statements A and B are false

UnAttempted

CORRECT ANSWER:

Both statements A and B are false

Explanation:
Both taxes and loads reduce investment returns. Therefore,
it is important for the distributor to consider these two
aspects during repurchases/redemptions. This means that
when there is a need to withdraw money from a scheme, the
distributor must assess the implications of capital gains tax
and exit loads.

When an investor wants to redeem from a scheme, the

 distributor must suggest redemption from the scheme with
the minimum exit load.

Q Indicate which of these funds have the lowest to highest risk

16. sequence? A) Liquid Fund B) Credit Risk Fund C) Corporate
Bond Fund
B-C-A
C-A-B
A-B-C
A-C-B

UnAttempted

CORRECT ANSWER:

A-C-B

Explanation:

Liquid funds are least risky as they invest in high quality debt
instruements.

Corporate Bond Funds are little more risky as they

predominantly invest in AA+ and above rated corporate
bonds.

Credit Risk Funds are much more risky as they invest in

below highest rated corporate bonds. The minimum
investment in corporate bonds shall be 65 percent of total
assets only in AA (excludes AA+ rated corporate bonds) and
below rated corporate bonds.
Q Identify the FALSE statement(s) - A) For Index funds, the NAV
17. is calculated upto 4 decimal points B) The AMC and a mutual
fund scheme of the AMC can have the same auditor
Only A is false
Only B is false
Both A and B are false

UnAttempted

CORRECT ANSWER:

Only B is false

Explanation:
NAV is to be calculated upto 4 decimal places in the case of
index funds, liquid funds and other debt funds.

Accounts of the mutual fund schemes need to be maintained

independent of the accounts of the AMC. The auditor
appointed to audit the mutual fund scheme accounts needs
to be different from the auditor of the AMC.

Q Long term capital loss from an investment can be set off

18. against _____ .
short term capital gains only
short term capital gain or long term capital gain
long term capital gains only
long term capital loss cannot be set off
 UnAttempted

CORRECT ANSWER:

long term capital gains only

Explanation:

As per the Income Tax Act -

- Short term capital loss is to be set off against short term

capital gain or long term capital gain.
- Long term capital loss can only be set off against long term
capital gain.
- Capital loss, short term or long term, cannot be set off
against any other head of income (e.g. salaries).

Q Which of these statements are TRUE with respect to time

19. stamping on mutual fund documents? A) Time stamping is
relevant for non-financial mutual fund transactions B) The
daily time stamping of application does not start with serial 1
C) Breakdown of time stamping process or breaking of seal
is mandated to be duly recorded and reported to the
Trustees
A and B are true
B and C are true
A and C are true
A, B and C are true

UnAttempted

CORRECT ANSWER:
 B and C are true

Explanation:
1) Applications for non-financial transactions like change of
address are stamped. However, here stamping of time is not
relevant; the data stamping is pertinent.

2) Applications are sequentially numbered from the first

number of the machine to the last number of the machine,
before a new numbering cycle is started for the machine. The
daily time stamping of application does not start with serial 1.

3) The points of acceptance have time stamping machines

with tamper-proof seal. Opening the machine for repairs or
maintenance is permitted only by vendors or nominated
persons of the mutual fund. Such opening of the machine has
to be properly documented and reported to the Trustees.

Q ________ ensures that the information contained in the

20. scheme related documents (SID and SAI) are fully complied
with.
The Trustees
The Sponsor
The Fund Manager
The AMC

UnAttempted

CORRECT ANSWER:
 The Trustees

Explanation:
The trustees shall ensure that all transactions entered into by
the AMC are in compliance with the regulations and the
scheme’s objectives and intent.

Q Cut-off timing guidelines are not applicable for _____.

21. International Funds
New Fund Offer (NFO)
Both of the above
None of the above

UnAttempted

CORRECT ANSWER:

Both of the above

Explanation:

The cut-off timing is not applicable for NFOs and

International Schemes.

Q Registrar and Transfer Agency function must be independent

22. of the Asset Management Company, and it cannot be
retained in-house. State whether this statement is True or
False.
 True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

Mutual funds can have their in-house Registrar and Transfer

agency.

Q Today’s costs can be translated into future requirement of

23. funds using the formula:
A = P / (1 + i)^n
A = P X (1 + i)^n
P = A^n X (1 + i)
P = A^n X (1 + i)^n

UnAttempted

CORRECT ANSWER:

A = P X (1 + i)^n

Explanation:
 The costs in today’s terms, can to be translated into the
rupee requirement in future. This is done using the
formula A = P X (1 + i)^n

where :

A = Rupee requirement in future

P = Cost in today’s terms
i = Rate of inflation
n = Number of years into the future, when the expense will be
incurred.

Q Investments in mutual fund are allowed using _____.

24. ASBA
Cheque / DD
Remittance
Any of the above

UnAttempted

CORRECT ANSWER:

Any of the above

Q The Income Tax Act allows setting-off of the short term

25. capital loss against long term capital gains. State whether
True or False.
True
False

UnAttempted

CORRECT ANSWER:
 True

Explanation:

As per Income Tax rules -

Short term capital loss can be set off against short term
capital gain or long term capital gain.

Long term capital loss can only be set off against long term
capital gain.

Q The purchasing power of currency changes on account of

26. which of the following?
Diversification
Inflation
Compound interest
Asset allocation

UnAttempted

CORRECT ANSWER:

Inflation

Explanation:
Inflation, or price inflation is the general rise in the prices of
various commodities, products, and services that we
consume. Inflation erodes the purchasing power of the
 money.

Q ________________ is a basis to select the better scheme in

27. Index Funds.
Tracking Error
Beta
5 year performance
Fund Managers past record

UnAttempted

CORRECT ANSWER:

Tracking Error

Explanation:

The difference between an index fund’s return and the

market return is the tracking error.

An index fund manager would seek to minimize the tracking

error. Because of the tracking error, the scheme
performance could be higher or lower than that of the
benchmark.

Q Investors’ KYC details are stored in the server of _____.

28. AMFI
AMC
KRA
SEBI
 UnAttempted

CORRECT ANSWER:

KRA

Explanation:

KRA means KYC Registration Agency

The KRA after checking the KYC details uploads the details in
the server of any centralised KRA.

Q Tactical Asset Allocation is the decision that comes out of

29. calls on the likely behaviour of the market - True or False ?
False
True

UnAttempted

CORRECT ANSWER:

True

Explanation:

Tactical Asset Allocation is the decision that comes out of

 calls on the likely behaviour of the market.

An investor who decides to go overweight on equities

because of expectations of a rise in share markets, is taking
a tactical asset allocation call.

Q Investors have the right to specify upto ___ nominees for their
30. mutual fund investment folios.
1
2
3
4

UnAttempted

CORRECT ANSWER:

Explanation:
The investors can appoint upto 3 nominees, who will be
entitled to the ‘Units’ in the event of the demise of the
investors. The investor can also specify the percentage
distribution between the nominees. If no distribution is
indicated, then an equal distribution between the nominees
will be presumed.

Q Lower the expenses of a Mutual Fund, lower would be the

31. NAV - True or False ?
True
False
 UnAttempted

CORRECT ANSWER:

False

Explanation:

NAV is basically the value of Portfolio less the MF expenses.

So Lower the expenses, higher would be the NAV.

Q ____________ have to make additional disclosures related to

32. credit evaluation policy, sectors and types of investments in
the offer document.
ELSS Funds
Debt Funds
Sectoral Funds
Equity Funds

UnAttempted

CORRECT ANSWER:

Debt Funds

Q PAN No. and KYC documentation is compulsory for mutual

33. fund investments with the only exception of _________.
ELSS Funds
 Micro SIPs
Gilt Funds
Government Mutual Funds

UnAttempted

CORRECT ANSWER:

Micro SIPs

Explanation:

Micro-SIPs - SIPs where annual investment (12 month rolling

or April-March financial year) does not exceed Rs 50,000.

Q How many (maximum) bank accounts can a resident

34. individual investor register with a mutual fund folio?
1
2
3
5

UnAttempted

CORRECT ANSWER:

5
 Explanation:
Mutual funds provide investors the facility to register multiple
bank accounts to facilitate receiving the redemption,
dividends and any other pay outs from the fund. An
individual investor can register up to five bank accounts and
a non-individual investor, ten.

Q NAV of Equity funds is to be calculated upto ___ decimals.

35. 1
2
3
4

UnAttempted

CORRECT ANSWER:

Explanation:

NAV for equity and balanced funds is to be calculated upto at

least 2 decimal places.

NAV is to be calculated upto 4 decimal places in the case of

index funds, liquid funds and other debt funds.

Q Beta as a risk measure is relevant for ___________.

36. Only Equity Schemes
 Only Debt Schemes
Both Equity and Debt schemes
FMP's

UnAttempted

CORRECT ANSWER:

Only Equity Schemes

Explanation:

Beta as a measure of risk is relevant only for equity schemes.

The diversified stock index, by definition, has a Beta of 1.

Companies or schemes, whose beta is more than 1, are seen
as more risky than the market.

Beta less than 1 is indicative of a company or scheme that is

less risky than the market

Q Which of the following is a truly international asset class?

37. Gold
Equity Share
Real Estate
Debt

UnAttempted

CORRECT ANSWER:
 Gold

Q Liquid schemes are a variant of debt schemes that invest

38. only in debt securities of upto 60-days maturity - True or
False ?
True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

Liquid schemes are a variant of debt schemes that invest

only in short term debt securities. They can invest in debt
securities of upto 91 days maturity.

Q STP is a combination of SIP and SWP - True or False ?

39. True
False

UnAttempted

CORRECT ANSWER:
 True

Explanation:

In a STP ( Systematic Transfer Plan ), the amount that is

withdrawn from a scheme is re-invested in some other
scheme of the same mutual fund.

Thus, it operates as a SWP ( Systematic Withdrawal Plan )

from the first scheme, and a SIP ( Systematic Investment Plan
) into the second scheme.

Q Which among the following investment avenues does not

40. offer income on a regular basis?
Stocks
Real estate
Debentures
Physical Gold

UnAttempted

CORRECT ANSWER:

Physical Gold

Explanation:
Stocks offer regular income in the form of dividends, Real
estate gives rent and Debentures give interest.
 Physical gold give no regular return.

Q What minimum percentage of the mutual fund scheme corpus

41. must be invested in equity and related instruments in case of
Equity Linked Savings Schemes (ELSS)?
65 percent
70 percent
80 percent
95 percent

UnAttempted

CORRECT ANSWER:

80 percent

Explanation:
The ELSS notification requires that atleast 80 percent of the
ELSS funds should be invested in equity and equity-linked
securities.

Q The difference between NAV and re-purchase price is

42. _______.
Exit Load
Entry Load
Commission of the MF Agent
Dividend Stripping
 UnAttempted

CORRECT ANSWER:

Exit Load

Explanation:

The difference between the NAV and Re-purchase Price is

called the “exit load”.

If the NAV of a scheme is Rs 20.00 per unit, and it were to

charge exit load of 1%, the Re-purchase Price would be Rs
20 – 1% i.e. Rs 19.80.

Q The asset allocation that is worked out for an investor based

43. on risk profiling is called _______.
Strategic Asset Allocation
Fixed Asset Allocation
Tactical Asset Allocation
Flexible Asset Allocation

UnAttempted

CORRECT ANSWER:

Strategic Asset Allocation

 Explanation:

Risk profiling is key to deciding on the strategic asset

allocation.

For eg - If the investor is an retired/old person he should have

more debt in his portfolio.

Q For calculating Capital Gains, investment in mutual funds for

44. less then 1 year is considered as _______
Long Term
Medium Term
Short Term
Ultra Short Term

UnAttempted

CORRECT ANSWER:

Short Term

Q Interval funds combine features of both open-ended and

45. close-ended schemes - True or False ?
False
True

UnAttempted

CORRECT ANSWER:
 True

Explanation:
Interval funds combine features of both open-ended and
close-ended schemes. They are largely close-ended but
become open-ended at pre-specified intervals.

Q A Mutual Fund wants to launch a new scheme with a Face

46. Value of Rs 50. Will it get the required permissions ?
Yes
No

UnAttempted

CORRECT ANSWER:

No

Explanation:

As per the law, every unit has a face value of Rs. 10.

Q The ARN number is assigned by _________.

47. The AMC
SEBI
AMFI
 Stock Exchange

UnAttempted

CORRECT ANSWER:

AMFI

Q Arbitrage Funds have BASIS risks - True or False ?

48. True
False

UnAttempted

CORRECT ANSWER:

True

Explanation:

Arbitrage fund have basis risk ie. the risk that both cash and
F&O position on a company cannot be reversed at the same
time. During the time gap between unwinding of the two
positions, the market can move adverse to the scheme.

Q Recurring expenses cannot be charged to a Mutual Fund

49. scheme as it drags down the NAV - True or False ?
True
False
 UnAttempted

CORRECT ANSWER:

False

Explanation:

Recurring Expenses can be charged to the scheme.

Since the recurring expenses drag down the NAV, SEBI has
laid down the expenses and their limits which can be charged
to the scheme.

Q Which amongst the following asset categories can also be

50. purchased for consumption purposes apart from
investment?
Bonds
Real estate
Debentures
Stocks

UnAttempted

CORRECT ANSWER:

Real estate
 Explanation:
One may invest in a residential property and give it on rent to
generate income. This is investment. At the same
time, one may also buy a flat to live in–for residential
purpose. Such a self-occupied house may not be an
investment.

Q Mutual Funds cannot accept cash from investors for

51. investing in their schemes - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

Mutual funds usually do not accept cash.

However for small investors, who may not be tax payers and
may not have PAN/bank accounts, such as farmers, small
traders/businessmen/workers are allowed cash transactions
for purchase of units in mutual funds to the extent of Rs.
50,000/- per investor, per mutual fund, per financial year.

Q All the records of the investors of a Mutual Fund are

52. maintained by the Fund Manager - True or False ?
 True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

The RTA - Registrar and Transfer Agents maintains investor

records. Sometimes the AMC itself does this activity.

Q An important objective of SEBI is to represent to the

53. Government, Reserve Bank of India and other bodies on all
matters relating to the Mutual Fund Industry - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:
 An important objective of AMFI is to represent to the
Government, Reserve Bank of India and other bodies on all
matters relating to the Mutual Fund Industry

Q SEBI approval is required for an AMC to appoint a distributor

54. - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

No SEBI approval is required. A person has to clear the exam

and get an AMFI number. Based on this number AMC signs
an agreement with the individulas / companies and appoint
them distributors.

Q The Price Earning (PE) Ratio of a company is 7 and its

55. Earning Per Share is Rs 10. What is the Market Price of this
company ?
Rs 49
Rs 70
Rs 700
Rs 10
 UnAttempted

CORRECT ANSWER:

Rs 70

Explanation:

PE Ratio = Market Price / EPS

7 = Market Price / 10

Market Price = 7 x 10

= 70

Q In the _____________ stage, a persons earning capacity

56. reaches his peak.
Young Married
Pre Retirement
Young Unmarried
Retirement

UnAttempted

CORRECT ANSWER:

Pre Retirement
 Explanation:

In the Accumulation stage, the investor gets to build his

wealth. It covers the earning years of the investor i.e. the
phases of the life cycle from Young Unmarried to Pre-
Retirement.

Q For an investor to get a quick sense of the level of risk

57. involved in a mutual fund scheme, SEBI suggested a
simplified framework known as ______.
Risk factors
Investor’s risk profile
Risk-o-meter
Fact sheet

UnAttempted

CORRECT ANSWER:

Risk-o-meter

Explanation:

Market regulator SEBI has a system of product labelling in

place that ensures the investor makes investments in mutual
fund schemes that correspond to the investor’s risk profile.
The product labelling of mutual funds is based on the
concept of ‘Riskometer’ and this meter depicts the level of
risk in any specific mutual fund scheme.
 The Riskometer depicted risk areas like - Low, Moderately
Low, Moderate, Moderately High and High Risk.

Q An investor gives a cheque of Rs 1 lacs for investing in a Debt

58. scheme at 3.30 pm at a Mutual Fund office. The NAV of which
day will be applicable to him ?
NAV of the same day
NAV of the next business day
NAV of the day on which funds will be available
None of the above

UnAttempted

CORRECT ANSWER:

NAV of the next business day

Explanation:

For all Equity and Debt funds (except Liquid funds) - For
investment of Rs 2 lacs and below - NAV of the same day if
received before 3 pm ( cut-off time). If received after 3 pm
then NAV of the next business day.

For investments of amount over Rs 2 lacs, irrespective of the

time of receipt of application, NAV of the business day on
which the funds are available for utilisation before the cut-off
 time of that day is applicable.

Q As per the Income Tax Act - which of the below option is True
59. ?
Capital loss, short term or long term, can be set off against
any other head of income
Long term capital loss can be set off against long term and
short term capital gain
Short Term Capital gains is a tax free income
Short term capital loss is to be set off against short term
capital gain or long term capital gain

UnAttempted

CORRECT ANSWER:

Short term capital loss is to be set off against short term

capital gain or long term capital gain

Explanation:
A few key provisions of the Income Tax Act are :

• Capital loss, short term or long term, cannot be set off

against any other head of income (e.g. salaries)
• Short term capital loss is to be set off against short term
capital gain or long term capital gain
• Long term capital loss can only be set off against long term
capital gain

Q Of the following documents, which is required to be

60. appended to the application form of a MF scheme ?
Statement of Additional Information - SAI
Addendum
Scheme Information Document - SID
Key Information Memorandum - KIM

UnAttempted

CORRECT ANSWER:

Key Information Memorandum - KIM

Explanation:

KIM is essentially a summary of the SID and SAI.

As per SEBI regulations, every application form is to be

accompanied by the KIM.

Q Pension Funds Regulatory and Development Authority

61. (PFRDA) is the regulator for the National Savings System.
True
False

UnAttempted

CORRECT ANSWER:

False
 Explanation:

Pension Funds Regulatory and Development Authority

(PFRDA) is the regulator for the National Pension System.

Q Every trust has beneficiaries and the beneficiaries, in the

62. case of a mutual fund trust, are _____________.
the Trustees of the AMC
the investors who invest in various schemes of the mutual
fund.
the Employees of the Mutual Fund Company
the Chairperson and Managing Director of the AMC

UnAttempted

CORRECT ANSWER:

the investors who invest in various schemes of the mutual

fund.

Explanation:

Every trust has beneficiaries. The beneficiaries, in the case

of a mutual fund trust, are the investors who invest in various
schemes of the mutual fund.

Q All advertisements and Sales Literature containing an

63. AMC(s)/Mutual Fund ranking must prominently disclose
____________.
The publisher of the ranking data.
Criteria on which the ranking is based.
The name of the Ranking Entity.
All of the above

UnAttempted

CORRECT ANSWER:

All of the above

Q The Entry / Exit Loads and Taxes do not have an impact on

64. the returns to the investors - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

Loads and taxes pull the investor’s returns below that earned
by the Scheme.
Q Relaxation in documentation requirements for micro-SIPs is
65. not available for _______.
Non Resident Indians
Hindu Undivided Family
Individuals
All of the above

UnAttempted

CORRECT ANSWER:

Hindu Undivided Family

Explanation:

Relaxation in documentation requirements for micro-SIPs is

not available for HUFs and non-individuals. Such relaxation is
available for individuals / NRIs.

Q Expenses incurred to launch a new fund can be charged to

66. the fund - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

False
 Explanation:

Initial Issue Expenses are one-time expenses that come up

when the scheme is offered for the first time (NFO).

These need to be borne by the AMC and cannot be charged

(either one time or deferred) to the scheme.

Q Usually Diversified Equity funds are safer than Diversified

67. Debt funds - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

Under normal circumstances Equity Funds are always riskier

than Debt Funds.

Q An investor purchases through a distributor 20000 units of a

68. mutual fund scheme at a NAV of Rs 65. The current NAV of
the scheme is Rs 62. What will be the trail commission for
today if the trail commission rate is 1% per annum.
 Rs. 35.6164
Rs. 33.9726
Rs. 19.5543
Rs. 28.1217

UnAttempted

CORRECT ANSWER:

Rs. 33.9726

Explanation:

Trail commission is always calculated on the current NAV.

The current total value of investments in the above question

is Rs. 62 X 20000 units = Rs. 12,40.000

Trail commission for the day = Current value X trail

commission rate p.a./365

= 12,40,000 X 1% / 365 days

= 12400 / 365 = Rs. 33.9726

Q In case a fund manager is managing more than six funds,

69. then performance data of top ___ and bottom___ schemes
has to be disclosed in all performance related
advertisements.
2,2
3,3
4,4
 6,6

UnAttempted

CORRECT ANSWER:

3,3

Explanation:
When the performance of a particular mutual fund scheme is
advertised, the advertisement shall also include the
performance data of all the other schemes managed by the
fund managers of that particular scheme.

In case the number of schemes managed by a fund manager

is more than six, then the AMC may disclose the total number
of schemes managed by that fund manager along with the
performance data of top 3 and bottom 3 schemes managed
by that fund manager in all performance
related advertisements

Q Gold Future Contracts ___________.

70. are traded on the Commodity Exchanges
are not standardised products
can be bought through Mutual Funds
None of the above

UnAttempted

CORRECT ANSWER:
 are traded on the Commodity Exchanges

Explanation:

Gold futures contracts are traded in commodity exchanges

like the National Commodities Exchange (NCDEX) and Multi-
Commodity Exchange (MCX).

The value of these contracts goes up or down in line with

increases or decreases in gold prices.

Q Identify the TRUE statement(s) with respect to risk levels in

71. mutual funds? A) Corporate bond funds are relatively more
riskier than Credit risk fund B) The NAV of Gilt funds
generally fluctuate more than NAV of Liquid funds due to
changes in yield
Only A is true
Only B is true
A and B are true
A and B are false

UnAttempted

CORRECT ANSWER:

Only B is true

Explanation:
 1) Credit risk funds are more riskier than Corporate bond
funds as they invest in bonds which are rated lower

2) Gilt funds invest in longer term debt securities as

compared to liquid funds, so the changes in yields will have a
larger impact on them.

Q A Mutual Fund scheme is known to distribute dividends from

72. time to time. Such MF can be used as a source of ___________.
Good Capital Appreciation
Regular Income
Safety of Capital
Tax Planning

UnAttempted

CORRECT ANSWER:

Regular Income

Q ‘Once it is finalized, a mutual fund scheme’s benchmark

73. cannot be changed at a later date.’ State whether the
statement is True or False.
True
False

UnAttempted

CORRECT ANSWER:
 False

Explanation:
The fund may choose to change the benchmark. This could
be for various reasons. For instance, the investment
objective of the scheme may change, or the construction of
the index may change, or a better index may become
available in the market.

Q As per the provisions of the Income Tax Act - Short term

74. capital loss is to be set off against short term capital gain or
long term capital gain - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

True

Explanation:
Some key provisions of IT Act related to Capital Gains are:

• Capital loss, short term or long term, cannot be set off

against any other head of income (e.g. salaries)
• Short term capital loss is to be set off against short term
capital gain or long term capital gain
• Long term capital loss can only be set off against long term
capital gain
Q Which of the following is a measure of fluctuation in periodic
75. returns in an equity mutual fund scheme?
Variance
Modified duration
Jensen’s Alpha
Sharpe ratio

UnAttempted

CORRECT ANSWER:

Variance

Explanation:
Variance measures the fluctuation in periodic returns of a
scheme, as compared to its own average return.

Q A Mutual Fund investor can file a case against the ________

76. for breach of trust.
Mutual Fund
Trustees
Stock Exchange
No, a MF investor cannot file a suit.

UnAttempted

CORRECT ANSWER:

Trustees
 Explanation:

If an investor feels that the trustees have not fulfilled their

obligations, then he can file a suit against the trustees for
breach of trust.

Q Prediction of equity markets in the short run is easier than in

77. the long run - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

In the long run, equity markets are a good barometer of the

real economy.

In the short run, markets can get over-optimistic or over-

pessimistic, leading to spells of greed and fear and so are
very unpredictable in the short term.

Q Which of the following regulates mutual funds in India?

78. Asset Management Companies
Securities and Exchange Board of India
 Board of Trustees of mutual funds
Association of Mutual Funds in India

UnAttempted

CORRECT ANSWER:

Securities and Exchange Board of India

Explanation:
Securities markets in India are regulated by the Securities
and Exchange Board of India (SEBI). It regulates, among
other entities, mutual funds, depositories, custodians and
registrars and transfer agents (RTAs) in the country.

Q The investment objective of a ______________ might read as

79. follows: “To generate capital appreciation from a portfolio of
predominantly equity related securities”
Money Market Fund
Balanced Fund
Arbitrage Fund
Diversified Equity Fund

UnAttempted

CORRECT ANSWER:

Diversified Equity Fund

Explanation:
 A Diversified Equity Fund invests mainly in equity for long
term capital appreciation.

Q Of the below options, what is FALSE with respect to

80. Arbitrage Funds ?
Arbitrage Funds have Basis Risks
Arbitrage Funds invest in Equity Markets
Arbitrage Funds invest in both Spot and Futures Market
Arbitrage Funds are more riskier than Sectoral Funds

UnAttempted

CORRECT ANSWER:

Arbitrage Funds are more riskier than Sectoral Funds

Explanation:

Arbitrage Funds make profits by using the price differences

between two markets - so they are the least risky among
Equity Funds.

Sectoral Funds are the most risk funds as they are not
diversified.

Arbitrage Funds have basis risk – the risk that both cash and
F&O position on a company cannot be reversed at the same
time. During the time gap between unwinding of the two
positions, the market can move adverse to the scheme.
Q The amount which is paid to the distributor at the time the
81. money is invested in a scheme is called __________.
Trail Commission
Upfront Commission
Rebate
Fund Incentive

UnAttempted

CORRECT ANSWER:

Upfront Commission

Q The cost of fund management are the highest in __________.

82. Passive Funds
Active Funds
Index Funds
None of the Above

UnAttempted

CORRECT ANSWER:

Active Funds

Explanation:

In Active Funds like Diversified Equity Funds, the Fund

 manager does a lot of buying / selling. Also a lot of research
work goes into it. So the cost of fund management are
higher.

Q Many AMCs, distribution houses and mutual fund research

83. houses offer free tools in their website which can be used for
evaluating a funds performance - True or False ?
True
False

UnAttempted

CORRECT ANSWER:

True

Q Which of the following options form the basis of appointment

84. of a Mutual Fund distributor ?
An agreement between the AMC and the Distributor
Approval from SEBI
Power of Attorney from the AMC
An agreement with AMFI

UnAttempted

CORRECT ANSWER:

An agreement between the AMC and the Distributor

 Explanation:
Empanelment with the AMC (or enrolment as an agent of an
empanelled distributor) is compulsory to be able to sell
mutual fund schemes and earn the commissions.

Q The Stock Exchanges which provide facilities for Mutual Fund

85. trading also do the functions of Mutual Fund RTAs. - True or
False ?
True
False

UnAttempted

CORRECT ANSWER:

False

Explanation:

Stock Exchanges does are not required to do the role of

Registrars and Transfer Agents (RTA).

Q Open-ended schemes, except ELSS, have to re-open for

86. ongoing sale / re-purchase within ______ business days of
allotment.
3
5
10
30
 UnAttempted

CORRECT ANSWER:

Q The trail commission paid by Mutual Funds to a distributor

87. ____________.
Is paid only for high valued transactions
Is linked to the NAV
Grows at a steady rate
Is paid to the Corporate and Bank Distributors only

UnAttempted

CORRECT ANSWER:

Is linked to the NAV

Explanation:

Trail Commission is calculated on net assets so the

distributors benefit from increase in net assets arising out of
valuation gains in the market.

If the value of portfolio rises the trail commission also rises.

Q Mutual funds can accept cash to the tune of Rs _________

88. from small investors who do not have a PAN.
 No cash can be accepted by a MF
Rs 50,000
Rs 20,000
Rs 5,000

UnAttempted

CORRECT ANSWER:

Rs 50,000

Explanation:

Mutual funds usually do not accept cash.

However for small investors, who may not be tax payers and
may not have PAN/bank accounts, such as farmers, small
traders/businessmen/workers are allowed cash transactions
for purchase of units in mutual funds to the extent of Rs.
50,000/- per investor, per mutual fund, per financial year.

Q Asset allocation means ____________.

89. Distribution of Funds between Fund Managers in a Mutual
Fund
Distribution of funds between various asset classes in a
portfolio
Distribution of funds between various persons after the
death of a person
Distribution of funds between beneficiaries of an AMC
 UnAttempted

CORRECT ANSWER:

Distribution of funds between various asset classes in a

portfolio

Explanation:

The distribution of an investor’s portfolio between different

asset classes is called asset allocation.

For eg - If an investor wishes to invest Rs 10 lakhs - His funds

can be divided and invested in Equity, Debt and Gold - This is
asset allocation.

Q Which of the given statements below aptly fit the description

90. of actively managed funds ?
Increased role of fund manager and high running cost
Decreased role of fund manager and high running cost
Decreased role of fund manager and low running cost
Increased role of fund manager and low running cost

UnAttempted

CORRECT ANSWER:

Increased role of fund manager and high running cost

Q Identify the difference between Sharpe Ratio and Treynor
91. Ratio.
Both are same
Sharpe Ratio uses Standard Deviation for its calculations
whereas Treynor Ratio uses Beta
Sharpe Ratio is used for underperforming schemes
whereas Treynor Ratio is used for outperforming schemes

UnAttempted

CORRECT ANSWER:

Sharpe Ratio uses Standard Deviation for its calculations

whereas Treynor Ratio uses Beta

Explanation:

Sharpe ratio is calculated as : (Rs minus Rf) ÷ Standard

Deviation

Treynor Ratio is calcualted as : (Rs minus Rf) ÷ Beta

(Rf - risk-free rate of return and Rs is the actual return

earned).

Q Gold ETF's are meant only for FI's and FII's - True or False ?
92. True
False

UnAttempted
 CORRECT ANSWER:

False

Explanation:

Gold Exchange Traded Funds (ETF) can be bought even by

retail investors in small quantities like one unit (one gram).

Q As per SEBI regulations, every application form is to be

93. accompanied by _____________.
Key Information Memorandum (KIM)
Scheme Information Document (SID)
Addendum
Statement of Additional Information

UnAttempted

CORRECT ANSWER:

Key Information Memorandum (KIM)

Explanation:

As per SEBI regulations, every application form is to be

accompanied by the KIM.

KIM is essentially a summary of the SID and SAI. It is more

 easily and widely distributed in the market.

Q What are the benefits of Dematerialisation? A) No

94. inconvenience of safekeeping paper certificates B)
Reduction in paper work C) Auto credit of bonus units etc.
A and C
B and C
A and B
All A, B and C

UnAttempted

CORRECT ANSWER:

All A, B and C

Explanation:
Dematerialisation is a process whereby an investor’s holding
of investments in physical form (paper), is converted into a
digital record.

The investor benefits from a demat account are as follows:

• Less paperwork in buying or selling the mutual fund units,

and correspondingly, accepting or giving delivery of the
units.
• Direct credit of bonus and rights units that the investor is
entitled to, into the investor’s demat account.
• Change of address or other details need to be given only to
the Depository Participant, instead of separately providing it
to every company/mutual fund where the investor has
invested and holds demat units.
• Consolidate all investments in mutual funds, direct equity,
 debentures and others under one account.

Q Dividend Distribution Tax (DDT) on Equity oriented mutual

95. fund schemes for Corporate Investors is ____ .
10%
25%
30%
NIL TAX

UnAttempted

CORRECT ANSWER:

NIL TAX

Explanation:

In the Union Budget presented by the Finance Minister in

February 2020, the dividend distribution tax has been done
away with.

Q The Market Value of a scheme is Rs 579 crores. Dividend

96. accrued but not received is Rs 18 crore. The Expenses
payable are Rs 3 crore. The total number of outstanding units
is 300 lakhs. What is the NAV of the scheme ?
188
198
208
 218

UnAttempted

CORRECT ANSWER:

198

Explanation:

Total Market Value = Rs 579 crore

Add Dividend Accrued of Rs 18 crore

Less Expenses Payable of Rs 3 crore

Divided by Units 300 lakhs

= 198 NAV

Q Minors are not legally eligible to contract, so for investing in

97. Mutual Funds they _________.
have to become 18 years before investing
can invest thro' their guardians
can invest only in long term capital gain funds
can invest in specific 'Minors Only' Mutual Funds

UnAttempted

CORRECT ANSWER:
 can invest thro' their guardians

Explanation:

Minors i.e. persons below the age of 18 are not legally

eligible to contract, they need to invest through their
Parents/Lawful guardians.

Q A person wishes to avail of a loan. For which of the below

98. options he cannot get a loan ?
To start a textile factory
To buy a car of value above Rs 20 lacs
To buy a high priced lottery ticket
To buy a house in a Union Territory

UnAttempted

CORRECT ANSWER:

To buy a high priced lottery ticket

Q The ______________ is the phase when the earning years

99. usually starts.
Young Unmarried
Young Married
Married with one children
During graduation
 UnAttempted

CORRECT ANSWER:

Young Unmarried

Q “To generate income by investing predominantly in a wide

100. range of debt and money market securities” - this could be
the investment objective of a ________
Diversified debt scheme
Diversified equity scheme
ELSS Scheme
Arbitrage Fund

UnAttempted

CORRECT ANSWER:

Diversified debt scheme

Out of 100 questions 100 are un attempted.

Q 1. The stock exchanges which provide mutual fund trading

facilities also have to provide for settlement guarantee -
State True or False ?
True
False