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NISM Mutual Fund Distributors Test 1

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NISM Mutual Fund Distributors Test 1

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Sindhoor Bhat

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS

PRACTICE TEST NO. 1

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

PRACTICE TEST NO. 1

Question1 As per SEBI regulations, a mutual fund scheme should have at least investors.

(a) 10

(b) 15

(d) 25

Correct Answer 20

Answer As per SEBI, a Mutual Fund Scheme/Plan shall have a minimum of 20 investors and no single investor
Explanation shall account for more than 25 percent of the corpus of the Scheme/Plan(s).

Question2 Mutual fund units issued against purchase transactions would be subject to levy of stamp
duty at _ of the amount invested.

(a) 0.5%

(b) 0.05%

(d) 0.01%

Correct Answer 0.005%

Answer Explanation With effect from July 1, 2020, mutual fund units issued against purchase transactions (whether
through lump-sum investments or SIP or STP or switch-ins or dividend reinvestment) would be
subject to levy of stamp duty @ 0.005% of the amount invested.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question3 To whom does the profits or losses made by the mutual fund belong?

(a) The investors

(b) The Asset Management Company

(c) Fund Managers

(d) Trustees

Correct Answer The investors

Answer Explanation The money received from investors is invested by the mutual fund scheme in a portfolio
of securities as per the stated investment objective. Profits or losses, as the case might
be, belong to the investors or unit holders.

No other entity involved in the mutual fund in any capacity participates in the scheme’s profits
or losses. They are all paid a fee or commission for the contributions they make to launching
and operating the schemes.

Question4 What action has to be taken before deleting a default bank account from the registered
bank account in a mutaul fund folio?

(a) A new folio will have to be opened with the same joint holding as the new default account

(b) Another account has to be designated as the default bank account

Correct Answer Another account has to be designated as the default bank account

Answer Explanation If the default bank account is being deleted from the list of registered accounts, then before
that another account has to be designated as the default bank account.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question5 The Asset Management Companies have to disclose the Total Expense Ratios (TER) of the
various schemes on their websites on a basis.

(a) Daily

(b) Weekly

(d) Annual

Correct Answer Daily

Answer Explanation One of the important factors that impacts the scheme’s NAV is the Total Expense Ratio
(TER), charged to the scheme. Though, the same is very tightly regulated through SEBI
regulations, the investor should know about the scheme expense ratio.

SEBI has mandated that the Asset Management Companies (AMCs) should prominently disclose
on a daily basis, the Total expense ratio (scheme-wise, date-wise) of all schemes on their
website. The same must also be published on AMFI website.

Question6 Financial goals have to be defined in terms of _ _.

(a) Time horizon and external funds required

(b) Costs and economic policies

(c) Aspiration and desires

(d) Time horizon and money needed

Correct Answer Time horizon and money needed

Answer Explanation The first step in goal setting is to identify events in life which will require funding like -
marriage, education, buying a vehicle etc. The next step is to assign priorities - which of these
events are more important than the others

After that, one needs to assign a timeline as well as amount of funding required at the time of
such events.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question7 If the sale and purchase transactions for a year amounted to Rs. 10,000 crore, and the
average size of net assets is Rs. 5,000 crore, this means that investments are held in the
portfolio, on an average for .

(a) 2 months

(b) 3 months

(d) 12 months

Correct Answer 6 months

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

= Rs. 10,000 crore ÷ Rs. 5,000 crore = 2 or 200 percent

This means that investments are held in the portfolio, on an average for 12 months ÷ 2 i.e. 6
months.

Question8 Investors tend to extrapolate the current event into the future and expect a repeat. This is
an example of _ bias.

(a) Overconfidence

(b) Recency

(c) Herd Mentality

(d) Familiarity

Correct Answer Recency

Answer Explanation Recency bias : The impact of recent events on decision making can be very strong. This applies
equally to positive and negative experiences. Investors tend to extrapolate the event into the
future and expect a repeat. A bear market or a financial crisis lead people to prefer safe assets.
Similarly, a bull market makes people allocate more than what is advised for risky assets. The
recent experience overrides analysis in decision making.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question9 is a proper benchmark for a balanced hybrid scheme.

(a) CRISIL Hybrid 75+25 , Conservative Index

(b) CRISIL Hybrid 25+75 , Aggressive Index

(c) CRISIL Hybrid 50+50 , Moderate Index

Correct Answer CRISIL Hybrid 50+50 , Moderate Index

Answer Explanation CRISIL blended indices for hybrid funds :

Aggressive Hybrid Fund - CRISIL Hybrid 25+75 , Aggressive Index

Balanced Hybrid Fund - CRISIL Hybrid 50+50 , Moderate Index

Conservative Hybrid Fund - CRISIL Hybrid 75+25 , Conservative Index

Question10 Long Duration debt scheme invests in debt instruments with Macaulay duration .

(a) between 1 year and 3 years

(b) below 1 year

(c) greater than 7 years

(d) 6 months and 12 months.

Correct Answer greater than 7 years

Answer Explanation Macaulay Duration is the weighted average of the time to receive the cash flows from a bond.

Long Duration Fund : An open-ended debt scheme investing in debt and money
market instruments with Macaulay duration greater than 7 years.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question11 When the asset allocation is maintained as a constant ratio by regular rebalancing of
portfolio, it is known as _.

(a) Dynamic asset allocation

(b) Flexible asset allocation

(c) Fixed asset allocation

(d) Variable asset allocation

Correct Answer Fixed asset allocation

Answer Explanation For eg - If a fund has a fixed asset allocation of 50:50 for Debt and Equity and if equity
valuation rises by 10%, then as per the fixed asset allocation strategy, 10% of equity portfolio
will be sold and debt will be bought so that the debt equity valuation will be 50:50.

Question12 For which of these documents is Time Stamping mandatory?

(a) Payment instrument only

(b) Application form only

(c) Transaction slip for buying additional units

(d) Both for Application form / transaction slip and payment instrument

Correct Answer Both for Application form / transaction slip and payment instrument

Answer Explanation Time stamping is mandatory for all financial transactions in mutual funds like purchase,
redemption etc. The application form, the payment instrument etc. have to be time and date
stamped.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question13 Segregated portfolio means _.

(a) a portfolio which is kept aside for a â€˜rainy dayâ€™ or contingency fund

(b) a portfolio which is created out of debt or money market securities affected by a credit
event

(d) All of the above

Correct Answer a portfolio which is created out of debt or money market securities affected by a credit
event

Answer Explanation To ensure fair treatment to all investors in case of a credit event and to deal with the liquidity
risk, in December 2018, SEBI permitted creation of segregated portfolio of debt and money
market instruments by mutual funds schemes.

“Segregated portfolio” means a portfolio, comprising of debt or money market instrument

affected by a credit event, that has been segregated in a mutual fund scheme.

Question14 What is the purpose of ‘credit enhancement’ in case of securitised transaction?

(a) Payment of higher coupon

(b) Generating capital gain

(c) Higher credit worthiness

Correct Answer Higher credit worthiness

Answer Explanation in securitisation transactions, it is possible to work towards a target credit rating, which could
be much higher than the originator’s own credit rating. This is possible through a mechanism
called “Credit enhancement”. The process of “Credit enhancement” is fulfilled by filtering the
underlying asset classes and applying selection criteria, which further diminishes the risks
inherent for a particular asset class.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question15 Banks and NBFC's can lend money against of mutual fund units.

(a) Nomination

(b) Redemption

(d) All of the above

Correct Answer Pledge

Answer Explanation Banks, NBFCs and other financiers often lend money against pledge of Units by the Unit holder.

This is effected through a Pledge Form executed by the unit-holder (pledger). The form has a
provision for specifying the party in whose favour the units are pledged (pledgee).

Question16 Whom should the investor approach if his complaint is not resolved by the Asset
Management Company (AMC) ?

(a) Securities and Exchange Board of India (SEBI)

(b) Custodian

(c) Company Law Board

(d) Ombudsman

Correct Answer Securities and Exchange Board of India (SEBI)

Answer Explanation In the event of any issue with the AMC or mutual fund scheme, the investor can first
approach the AMC Investor Service Centre. If the issue is not redressed, even after taking it up
at senior levels in the AMC, then the investor can write to SEBI (through SCORES) with the
complaint details. SEBI Complaint Redress System (SCORES) is a web based centralized
grievance redress system of SEBI. SCORES enables investors to lodge, follow up on their
complaints and track the status of redressal of such complaints online.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question17 Inflation Risk is also referred as .

(a) Credit Risk

(b) Liquidity Risk

(c) Purchasing Power Risk

Correct Answer Purchasing Power Risk

Answer 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.

Inflation risk is also referred to as purchasing power risk, is the risk that inflation will
undermine the real value of cash flows made from an investment.

Question18 Which of these statement(s) is/are FALSE?

(a) If an investor holds his investments in a debt fund for more than three years, the capital
gain will be considered as a long term capital gain

(b) As the purchase and re-purchase is done with the mutual fund, the investor does not have
to pay any capital gain tax

(c) Both 'a' and 'b' are false

Correct Answer As the purchase and re-purchase is done with the mutual fund, the investor does not have
to pay any capital gain tax

Answer Explanation The difference between the purchase price of the units and the selling price of the units would
be treated as capital gain and such capital gains are subject to tax.

(Long-term is defined as holding period of more than three years in case of non-equity
oriented funds like debt funds, whereas the same is more than 1 year in case of equity-oriented
funds)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question19 Long term capital gains is NOT taxed in which of these funds?

A. Balanced Advantage Funds B. Balanced Funds C. Diversified Equity Funds

(a) Both A and B

(b) Only C

(d) Capital gains from all types of mutual funds are taxed subject to certain conditions

Correct Answer Capital gains from all types of mutual funds are taxed subject to certain conditions

Answer Explanation Capital gains from Equity, Debt and Hybrid funds are taxable subject to certain conditions like
the holding period etc.

Question20 In whose beneficial interest is a mutual fund managed?

(a) Trustees

(b) Unit holders

(d) AMC

Correct Answer Unit holders

Answer Explanation An investor (unit holder) in a mutual fund scheme is the beneficial owner of the units one has
bought. The mutual fund is managed for the beneficial interest of the unit holders.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question21 The loss booked from a debt investment of 15 months can be set off against _.

(a) Long term capital loss

(b) Short term capital loss

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

(d) It cannot be set-off

Correct Answer Short term capital gain or long term capital gain

Answer Explanation A capital gain or loss from an investment of less than 3 years in a debt instrument is considered
as Short term.

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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question22 Which of these statements are false? A) While evaluating schemes, the Expense Ratio will
matter much more in Debt Funds than Equity mutual funds. B) A mutual fund with a long
track record is always better for investments as it would give higher returns in the future C)
Ultra short term debt funds always invest in high credit quality debt securities

(a) A and B are false

(b) B and C are false

(c) A and C are false

(d) All A, B and C are false

Correct Answer B and C are false

Answer Explanation 1) Any cost is a drag on investor’s returns. Investors need to be particularly careful about
the cost structure of debt schemes, because in the normal course, debt returns can be
much lower than equity schemes. So expense ratio is more critical for debt funds

2) The mutual fund advertisements use the disclaimer: “Past performance may or may not
be sustained in future”. There is a reason for that. As experience has shown time and again,
the top performers during one period may not necessarily remain as a top performer forever
or near the other top performers and vice versa. In such a case, simply buying into a scheme
due to good returns in the recent past may not be a wise approach.

3) When the limits are not tightly defined, the fund manager may assume an active role in
managing the risk, e.g. an ultra-short term debt fund may take credit risk, since the SEBI
regulations only define the permitted maturity profile, which indicates how much interest rate
risk the scheme can take.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question23 Ultra-short-term debt scheme invests in debt and money market instruments with
Macaulay duration between .

(a) 1 to 3 months

(b) 3 to 6 months

(d) 1 year to 3 years

Correct Answer 3 to 6 months

Answer Explanation Macaulay Duration is the weighted average of the time to receive the cash flows from a bond.

An open ended ultra-short-term debt scheme invests in debt and money market instruments
with Macaulay duration between 3 months and 6 months.

Question24 Which of these is a physical asset?

(a) Gold futures

(b) Real estate fund

(c) Real estate

(d) Mortgaged backed securities

Correct Answer Real estate

Answer Explanation Real estate means physical property in the form of land and buildings.

Real estate funds, Gold futures and Mortgaged backed securities are all financial assets.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question25 A mutual fund scheme’s NAV is said to be cum-dividend from the .

(a) date the dividend is announced till it is paid out

(b) date the dividend is paid

(c) date unit holders approve the dividend

(d) date of notice of meeting

Correct Answer date the dividend is announced till it is paid out

Answer Explanation When a dividend is announced, and until it is paid out, it is referred to as cum-Dividend NAV.

Question26 The expenses which can be charged by an Asset Management Company to a Mutual Fund
scheme are limited by _.

(a) Fund Managers

(b) Sponsors

(d) SEBI

Correct Answer SEBI

Answer Explanation The expenses which can be charged and the expense ratios etc. are mentioned in the SEBI
Mutual Fund Regulations, 1996 which the AMC's have to adhere to.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question27 What is the portfolio of a 'Fund of Funds' made up of ?

(a) Money market securities

(b) Equity stocks

(c) Debt securities

(d) Mutual Fund schemes

Correct Answer Mutual Fund schemes

Answer Explanation Fund of funds is a mutual fund which utilises its pool of resources to invest in various other
kinds of mutual funds available in the market. It does not directly invest in equity or debt
securities.

Question28 Identify the TRUE statement.

(a) While calculating scheme returns for an investor, if there is an entry load, then the initial
value of the Net Asset Value (NAV) is taken as NAV minus Entry Load

(b) While calculating scheme returns for an investor, if there is an exit load, then the later
value of the Net Asset Value (NAV) is taken as NAV minus Exit Load

Correct Answer While calculating scheme returns for an investor, if there is an exit load, then the later
value of the Net Asset Value (NAV) is taken as NAV minus Exit Load

Answer Explanation If there is an entry load on a scheme then while calculating the scheme returns, the initial value
of the Net Asset Value (NAV) is taken as NAV plus the Entry load as the cost of purchase
increases due to the entry load. So entry load has to be added to the NAV and not subtracted.

For redemptions, instead of the later value of NAV (which is used for calculating scheme
returns), the amount actually received/receivable by the investor (i.e. NAV minus Exit Load, if
any) would need to be used.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question29 Identify the TRUE statements – A) A mutual fund scheme with a beta of less than 1 is less
risky than market B) The diversified stock index has a Beta of 1 C) Unsystematic risk is
measured by its Beta

(a) Only A is true

(b) B and C are True

(c) A and B are True

(d) All A, B and C are True

Correct Answer A and B are True

Answer Explanation Beta measures the fluctuation in periodic returns in a scheme, as compared to fluctuation
in periodic returns of a diversified stock index (representing the market) over the same period.

The diversified stock index, by definition, has a Beta of 1. Schemes, whose beta is more than 1,
are seen as more risky than the market. Beta less than 1 is indicative of a scheme that is less
risky than the market.

Systematic risk is measured by its Beta

Question30 The New Fund Offer dates are published in the .

(a) Both Key Information Memorandum and Scheme Information Document

(b) Statement of Additional Information (SAI)

(c) Key Information Memorandum (KIM)

(d) Scheme Information Document (SID)

Correct Answer Both Key Information Memorandum and Scheme Information Document

Answer Explanation SID has information on relevant NFO dates (opening, closing, re-opening)

KIM is essentially a summary of the SID and SAI. It contains the key points of the offer
document including the dates of Issue Opening, Issue Closing & Re-opening for Sale and Re-
purchase
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question31 Which of the below statements is a important advantage of a Exchange Traded Fund
(ETF) ?

(a) A person can closely track the current valuation of an ETF and buy/sell the units on a stock
exchange at those prices

(b) ETFs generally give higher returns than other Mutual Funds

(d) All of the above

Correct Answer A person can closely track the current valuation of an ETF and buy/sell the units on a stock
exchange at those prices

Answer Explanation ETFs are passive funds whose portfolio replicates an index or benchmark such as an equity
market index or a commodity index.

The units of the ETF are traded at real time prices that are linked to the changes in the
underlying index.

The market price also tracks the NAV very closely.

Question32 As per AMFI’s code of ethics, an Asset Management Company has to disclose which of the
following scheme related information to the unit holders?

A. Investment Pattern B. Annual portfolio turnover C. Annual securities transactions

(a) Only B

(b) A and B

(d) A, B and C

Correct Answer A and B

Answer Explanation Asset Management Company (AMC) shall disclose to unit holders investment pattern, portfolio
details, ratios of expenses to net assets and total income and portfolio turnover wherever
applicable in respect of schemes on annual basis.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question33 In which of these options can an investor expect a cash flow in his bank account?

(a) Bonus

(b) Dividend Payout

(c) Dividend Reinvestment

(d) Growth

Correct Answer Dividend Payout

Answer Explanation Only if the investor chooses Dividend Payout option in his mutual fund investments, the money
will flow into his bank account when ever the mutual fund pays the dividend.

In a growth option, dividend is not declared. Therefore, nothing is received in the bank account

In a dividend re-investment option, the investor does not receive the dividend in his bank
account; the amount is reinvested in the same scheme and additional units are allotted to the
investor.

In a bonus issue, the investor does not pay anything. The fund allots new units for free.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question34 Which statement is FALSE with reference to risk appetite?

(a) Risk appetite can be assessed by risk profiling

(b) Preferred risk appetite is different from ideal risk appetite

(d) People of same age will have same risk appetite

Correct Answer People of same age will have same risk appetite

Answer Explanation One of the common factors that many people use to evaluate the investor’s risk profile is
the investor’s age. It is popularly believed that younger investors have the potential for
taking higher risks compared to old people.

However, this may not be correct as different investors have different financial goals at
different age levels. In fact, investors in the same age group may also have different goals. Their
financial situations may also differ. In such cases, it may not be prudent to categorize investors
on the basis of age alone.

Question35 If an investor wants to get updated monthly performance and portfolio data on mutual
funds, which of the following documents should he read?

(a) Scheme Information Document (SID)

(b) Fund Fact Sheet

(c) Key Information Memorandum (KIM)

(d) Statement of Additional Information (SAI)

Correct Answer Fund Fact Sheet

Answer Explanation The fund fact sheet plays a vital role in giving updated information on the mutual fund schems
and usually is published on a monthly basis by all the fund houses.

Factsheet is not a statutory requirement.

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question36 For how long is the trail commission paid to the mutual fund distributor?

(a) For the first one year only

(b) For the first three years only

(c) For the first ten years only

(d) Till the money is held in the fund

Correct Answer Till the money is held in the fund

Answer Explanation A mutual fund distributor is paid trail commission for as long as the investor’s money is held in
the fund.

Question37 Identify the TRUE statement/s -

(a) Rolling return are the average annualized returns calculated for alternate holding period

(b) Holding period returns (HPR) do not provide an accurate picture of returns of fund if its
initial value is to high or low.

(c) Both 1 and 2

(d) None of the above

Correct Answer Holding period returns (HPR) do not provide an accurate picture of returns of fund if its
initial value is to high or low.

Answer Explanation Holding period returns is calculated for a fixed period such as one month, three months,
one year, three years or since inception. Holding period returns may not present an accurate
picture of the returns from a fund if the initial value or the end value used for calculation was
too high or low.

To eliminate this impact rolling returns are calculated. Rolling returns is the average annualized
return calculated for multiple consecutive holding periods in an evaluation period.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question38 What is asset allocation?

(a) Deciding which and how many mutual fund schemes to invest in

(b) Finalizing which mutual fund schemes would deliver the highest returns in future

(c) Deciding how to invest money across various asset categories in line with one’s risk profile,
financial objectives and current situation

(d) Deciding which asset category would outperform the others and investing in it

Correct Answer Deciding how to invest money across various asset categories in line with one’s risk profile,
financial objectives and current situation

Answer Explanation Asset Allocation is a process of allocating money across various asset categories in line with
a stated objective.

The basic meaning of asset allocation is to allocate an investor’s money across asset categories
in order to achieve same objective.

Question39 Which of these funds has the highest risk ?

(a) Gilt funds

(b) Index funds

(c) Money market funds

(d) Sector funds

Correct Answer Sector funds

Answer Explanation The sector funds invest in stocks belonging to just one sector of the economy, in order to
take advantages within the said sector. The examples of such funds are: Pharma fund or
Banking fund.

Sector funds are very risky because of the concentration in one sector. If the sector
underperforms then the scheme’s returns is likely to be poor.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question40 Which of these statement(s) is/are FALSE with respect to Benchmarks?

A) Portfolio concentration is an important factor while selecting a benchmark for an equity

mutual fund B) Choice of investment universe is not an important factor while selecting an
appropriate benchmark for debt mutual funds

(a) Only A is false

(b) Only B is false

(c) Both A and B are false

Correct Answer Only B is false

Answer Explanation Choice of investment universe is important and drives the choice of benchmark in debt
schemes.

For eg - Liquid schemes invest in securities of upto 91 days’ maturity. Therefore, a short term
money market benchmark such as NSE’s MIBOR or CRISIL Liquid Fund Index is suitable. Non-
liquid schemes can use other type indices depending on the nature of their portfolio.

Question41 The opening of time stamping machine needs to be documented and reported to _.

(a) Sponsors

(b) Trustees

(d) Asset Management Company

Correct Answer Trustees

Answer Explanation The points of acceptance for mutual fund transactions 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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question42 What is negative Alpha?

(a) It is indicative of outperformance by the fund manager

(b) It is indicative of under-performance by the fund manager

(c) It is indicative of over-hedging by the fund manager

(d) It is indicative of under-hedging by the fund manager

Correct Answer It is indicative of under-performance by the fund manager

Answer Explanation The difference between a scheme’s actual return and its optimal return is its Alpha—a measure
of the fund manager’s performance.

Alpha, therefore, measures the performance of the investment in comparison to a suitable

market index. Positive alpha is indicative of outperformance by the fund manager; negative
alpha might indicate under-performance.

Question43 Securities and Exchange Board of India (SEBI) functions does not include which of the
following?

(a) Regulation of Stock Exchanges

(b) Enforcing compliance of its regulations

(c) Making regulations for the Mutual Fund industry

(d) Approving the fund managers which have been appointed by the AMC

Correct Answer Approving the fund managers which have been appointed by the AMC

Answer Explanation An approval of SEBI is not required by the AMC while appointing the fund managers.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question44 is not a fair selling practice by a mutual fund distributor.

(a) Informing the investor of the various investment options

(b) Carefully understanding the clients financial needs

(c) Encouraging the churning of investments

(d) Giving personalised after sales service

Correct Answer Encouraging the churning of investments

Answer Explanation Churning means frequent buying and selling.

Encouraging over transacting and churning of Mutual Fund investments to earn higher
commissions by MF agents is a bad practice.

Question45 Identify the TRUE statement. A) While calculating scheme returns for an investor, if there is
an entry load, then the initial value of the Net Asset Value (NAV) is taken as NAV plus Entry
Load B) While calculating scheme returns for an investor, if there is an exit load, then the
later value of the Net Asset Value (NAV) is taken as NAV plus Exit Load

(a) Only A

(b) Only B

(c) Both A and B

Correct Answer Only A

Answer Explanation If there is an exit load on a scheme then while calculating the scheme returns, the later value of
the Net Asset Value (NAV) is taken as NAV minus the exit load as the sale value decreases due
to the exit load.

So exit load has to be subtracted from the NAV and not added.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question46 Once a New Fund Offer closes, an open ended mutual fund is open for purchases
_.

(a) by existing investors only

(b) by existing investors on the stock exchange platform only

(d) by both existing and new investors

Correct Answer by both existing and new investors

Answer Explanation An Open Ended mutual fund can be purchased by both new and existing investors through the
traditional way or through stock exchanges.

Question47 An investor in India is investing in US Dollar based funds. He/She will benefit when _.

(a) The US Dollar becomes weaker

(b) The US Dollar becomes stronger

(c) The US Dollar reamins steady

Correct Answer The US Dollar becomes stronger

Answer Explanation If the investor invests in the US, and the US Dollar becomes stronger during the period of his
investment, he/she will benefit.

For eg. - An investor buys USD 1000 worth of units in a US mutual fund when the exchange rate
was Rs 75 for 1 USD. So his investment is Rs 75000

If USD becomes stronger against India Rupee and rises to Rs. 77 and he sells USD 1000 worth of
units, his realisation in Indian rupees is 1000 x 77 = Rs 77000. So he earns Rs 2000

(This is assuming all other factors like the NAV of the mutual fund remaining the same)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question48 How is the redemption transaction of a mutual fund priced?

(a) NAV plus exit load

(b) NAV minus exit load

(c) NAV plus entry load

(d) NAV minus entry load

Correct Answer NAV minus exit load

Answer Explanation Schemes are permitted to keep the re-purchase Price lower than the NAV. The
difference between the NAV and re-purchase Price is called the “exit load”.

If the NAV of a scheme is Rs. 11.00 per unit, and it were to charge exit load of 1 percent, the re-
purchase Price would be Rs. 11 – 1 percent on Rs. 11 i.e. Rs. 10.89.

Question49 Identify the TRUE statement with respect to 'Tracking Error'. A. Tracking error is calculated
as the standard deviation of the excess returns generated by the fund B. While comparing
different index funds, one should invest in a fund with high tracking error

(a) Only A is true

(b) Ony B is true

(c) Both A and B are true

Correct Answer Only A is true

Answer Explanation Tracking error is a measure of the consistency of the out-performance of the fund
manager relative to the benchmark. The tracking error has to be low for a consistently out-
performing fund.

While investing in an Index Fund, one should invest in a fund with the lowest tracking error.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 1

Question50 Investments are carried at in a mutual fund portfolio.

(a) Market Value

(b) Face Value

(c) Book Value

(d) Cost Value

Correct Answer Market Value

Answer Explanation Investments are taken at their market value. This is done, to ensure that sale and re-purchase
transactions are effected at the true worth of the unit, including the gains on the investment
portfolio.

The process of valuing each security in the investment portfolio of the scheme at its
current market value is called ‘mark to market’ i.e. marking the securities to their market value.

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

PRACTICE TEST NO. 2

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

(a) Profits of the Asset Management Company

(b) Mark to Market profits

(c) All realised and unrealised gains

(d) Distributable surplus only

Correct Distributable surplus only

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

• Valuationgainsareignored. Butvaluationlossesneedtobeadjustedagainsttheprofits.

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

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

(b) 45%

(d) 75%

Correct Answer 65%

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

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

Minimum investment in floating rate instruments (including fixed rate instruments

converted to floating rate exposures using swaps/derivatives) shall be 65 percent
of total assets.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question3 The NAV applicable for purchase in a gilt fund of Rs. 50 Lakhs if the cheque is
received after
2 pm will be .
(a) Same day NAV if received before cut off time.

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

(c) Closing NAV of the next business day

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

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

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

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

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

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

Correct Answer Distributors who have received commission of over Rs. 1 Crore p.a. across
industry
Answer SEBI has mandated AMCs to put in place a due diligence process to regulate
Explanation distributors with respect to 'Business model, experience and proficiency in the
business' who qualify any one of the following criteria:

a. Multiple point presence (More than 20 locations)

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

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

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

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

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

(b) A, C and D

(d) A and B

Correct Answer B, C and E

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

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

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

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

(d) Systematic Investment Plan (SIP)

Correct Answer Systematic Transfer Plan

Answer Transaction charges do not apply to transactions other than

Explanation purchases/subscriptions that result in fresh inflows.

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

investment are not eligible for transaction charges.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question7 Equity Linked Savings Schemes (ELSS) are eligible for deduction under Section
80C of the
Income Tax Act. However, such schemes have a lock-in period of from the
date of investment.
(a) 3 years from the date of allotment of each individual unit

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

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

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

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

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

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

(a) When ever the investor asks for a CAS

(b) bi-monthly for dormant investors

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

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

Answer A Consolidated Account Statement (CAS) for each calendar month is sent by
Explanation post/email on or before 10th of the succeeding month provided there has been a
financial transaction in
the folio in the previous month.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question9 In which categories of stocks do Multi Cap equity funds invest in ?

(a) Mostly large cap stocks only of various companies

(b) Mostly mid cap stocks only of various companies

(c) Mostly small cap stocks only of various companies

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

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

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

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

(b) A and C

(d) All A, B and C

Correct Answer All A, B and C

Answer For mutual fund distributors having multiple point of presence (More than 20
Explanation locations), mutual funds / AMCs need to disclose the total commission and
expenses paid to distributors, disclosures regarding distributor-wise gross inflows
(indicating whether the distributor is an associate or group company of the
sponsor(s) of the mutual fund), net inflows, average assets under management and
ratio of AUM to gross inflows on their respective website on a yearly
basis.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question11 Multi Asset Allocation funds invest in at least asset classes with a
minimum
allocation of at least 10 percent in each class.
(a) 2

(b) 3

(d) 5

Correct Answer 3

Answer Multi Asset Allocation: An open-ended hybrid scheme investing in at least 3 asset
Explanation classes with a minimum allocation of at least 10 percent each in all three asset
classes.

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

(b) The market price of the bond going down

(c) The coupon of the bond going up

(d) No change in the market price

Correct Answer The market price of the bond going down

Answer In the above question, the interest rates have risen in the economy. If the coupon
Explanation (interest rate) rises, then the bond with lower coupon is no longer an attractive
investment. It will
therefore lose value.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question13 Return from a fund is 9% and the risk free rate is 5%, the Standard deviation is 3
& Beta is
1.6. What will be the numerator for calculating the Sharpe ratio?
(a) 3

(b) 6

(d) 4

Correct Answer 4

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

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

Numerator = Return Earned - Risk free Return

=9-5=4

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

(b) All the holders

(c) Only the first holder

(d) Only the first two holders

Correct Answer All the holders

Answer The application has to be signed by all the holders irrespective of the mode of
Explanation holding.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question15 Which type of transactions are allowed on a stock exchange platform for mutual
fund
trading? A - Redemptions B - Fresh subscription C - Additional purchases
(a) Only B

(b) A, B and C

(d) B and C

Correct Answer A, B and C

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

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

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

(d) KYC of the guardian is required

Correct Answer KYC of the guardian is required

Answer An investment made for a minor (less than 18 years) is done through a guardian who
Explanation has to comply with the KYC and PAN requirements and all other formalities as if the
investment was
for themselves.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question17 For KYC verification, is not accepted as a photo identity documentation

for
Micro SIP’s.
(a) Credit Card

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

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

(d) Photo Debit Card

Correct Answer Credit Card

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

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

(b) 55 percent

(d) 65 percent

Correct Answer 65 percent

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

Explanation minimum investment in equity and equity related instruments shall be 65 percent of
total assets.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question19 The average net assets of a fund were Rs 800 crore and the investment
transactions of the
fund were Rs 1600 crore. Calculate the Portfolio Turnover Ratio.
(a) 10 times

(b) 0.5 times

(d) 20 times

Correct Answer 2 times

Answer Portfolio Turnover Ratio is calculated as Value of Purchase and Sale of

Explanation Securities during a period divided by the average size of net assets of the scheme
during the period.

= 1600 / 800 = 2

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

(b) Systematic Transfer Plan

(c) Value Investing

(d) Systematic Investment Plan

Correct Answer Systematic Investment Plan

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

Explanation markets such as equity markets. Systematic Investment Plan - SIP is an approach
where the investor invests
constant amounts at regular intervals.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question21 By mistake the ARN number is wrongly mentioned in the application form. How
will such
an application be processed?
(a) The application will be rejected

(b) It will be returned for rectification

(c) As an Direct Plan application

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

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

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

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

(b) Rs. 79200

(c) Rs. 80000

(d) Rs. 78400

Correct Answer Rs. 78400

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

2000 units X Rs 40 = Rs 80000

Less 2% exit load : 2% of 80000 = 1600 Net amount = 80000 - 1600 = Rs. 78400
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question23 Stamp duty is required to be paid for which of these mutual fund transactions?

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

reinvestment
D. Systematic Transfer Plan (STP)

(a) A,B and D

(b) Only A

(d) A,B,C and D

Correct Answer A,B,C and D

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

• Additional Purchase

• Dividend reinvestment

• Systematic Investment Plan (SIP)

• Systematic Transfer Plan (STP)

• Dividend Transfer Plan (DTP)

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

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

(a) 11.60

(b) 4.77

(d) 2.42

Correct Answer 2.42

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

Explanation
= (7.5 - 6) / 0.62

= 1.5 / 0.62

= 2.42

Treynor Ratio is a risk premium per unit of risk. Higher the Treynor Ratio, better the
scheme is considered to be.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question25 Which strategy can be used to ensure that a mutual fund scheme is suitable to
the
investors need and situation ?
(a) Indexation

(b) Dividend Stripping

(c) Asset Allocation

(d) Tax harvesting

Correct Answer Asset Allocation

Answer Asset Allocation is a process of allocating money across various asset

Explanation categories in line with a stated objective which is as per the needs and situation
of the investor.

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

(a) Fund Fact Sheet

(b) Addendum

(c) Statement of Additional Information (SAI)

(d) Scheme Information Document (SID)

Correct Answer Scheme Information Document (SID)

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

The standard risk factors are the risks that all mutual fund investments are exposed
to whereas there are certain risks specific to individual asset category.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question27 Which certification examination is mandated by SEBI for becoming a mutual fund
distributor in the India?

(a) NCFM Series VA Mutual Fund Distributors

(b) NISM Series VA Mutual Fund Distributors

(c) AMFI VA Mutual Fund Distributors

(d) SEBI VA Mutual Fund Distributors

Correct Answer NISM Series VA Mutual Fund Distributors

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

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

(b) Only B

(c) Both A and B

Correct Answer Only A

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

The Sponsor/Fund/Trustees/ AMC are not liable for any loss to Foreign Investors
arising from such changes in exchange rates.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question29 What can happen if an investor has an Overconfidence bias?

(a) He will make careful investment choices

(b) He will take higher risks in his investments

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

Correct Answer He will take higher risks in his investments

Answer Overconfidence : This bias refers to a person’s overconfidence in one’s abilities or judgment.
Explanation This leads one to believe that one is far better than others at something, whereas
the reality may be quite different.

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

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

(b) Fund Manager

(c) Tax status of the investor

(d) Assets Managed by the scheme

Correct Answer Tax status of the investor

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

So if the investor wants to differ his tax payments, he should choose the Growth
option.
However, if the tax liability of the investor is low, he can choose the dividend option
so that even the dividend can be tax free or taxed at a low rate every year.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question31 What should an investor see to evaluate the Consistency of Mutual Fund scheme
performance ?

(a) Point to Point

(b) Standard Deviation

(c) Discrete annual returns

(d) Beta

Correct Answer Discrete annual returns

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

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

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

Question32 Indian mutual funds cannot invest in .

(a) Real Estate

(b) Art

(c) Securitised Debt

(d) Gold

Correct Answer Art

Answer Investment in Art is not permitted for mutual funds in

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

Question33 What is the role of the custodian of a mutual fund?

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

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

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

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

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

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

(b) done conservatively

(c) always rising

(d) reflective of the realizable value of the securities

Correct Answer reflective of the realizable value of the securities

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

Explanation
The valuation of investments shall be based on the principles of fair valuation
i.e. valuation shall be reflective of the realizable value of the securities/assets. The
valuation shall be done in good faith and in true and fair manner through
appropriate valuation policies
and procedures.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question35 Identify the duty of a SPONSOR of a mutual fund -

(a) Guards the interest of the mutual fund unit holders

(b) Contributes to the capital of the Asset Management Company

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

Correct Answer Contributes to the capital of the Asset Management Company

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

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

(a) Mandatory portfolio disclosures

(b) Scheme Information Document

(c) Fund factsheet

(d) All of the above

Correct Answer Scheme Information Document

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

Mandatory portfolio disclosures are done every six months and Fund fact sheets
are published every month.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question37 Which amongst the following bias can lead to concentrated portfolio?

(a) Familiarity Bias

(b) Herd Mentality

(c) Overconfidence Bias

(d) Recency Bias

Correct Answer Familiarity Bias

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

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

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

(b) PAN card copy

(c) List of authorised signatories

(d) Memorandum of Association and Articles of Association

Correct Answer Profit and Loss Statement

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

Explanation investor while making investments in mutual funds.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question39 Asset allocation must primarily match .

(a) Long term value creation

(b) Investment needs

(c) Financial goals

(d) Tax saving needs

Correct Answer Investment needs

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

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

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

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

(b) B, C and D

(d) C and D

Correct Answer B, C and D

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

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

combined into one transaction and is a financial transaction.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question41 Floating interest rate is .

(a) A rate which is payable only on maturity

(b) Base Rate + Spread

(c) Prime rate of lending

(d) the yield on spread

Correct Answer Base Rate + Spread

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

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

(b) The identity of the account holders

(c) The identity of the beneficial holders

(d) All of the above

Correct Answer All of the above

Answer To comply with the requirements of Foreign Account Tax Compliance Act (FATCA),
Explanation the mutual fund application form requires information to be provided if the
citizenship/nationality/place of birth/tax residency are places other than India for all
categories of investors, the entire investment value of all the folios held, the
identity of the investors and their direct and indirect
beneficiaries and controlling persons etc.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question43 The expenses on cannot be charged to the mutual fund scheme.

(a) Custodian fees

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

(c) Trustee Fees

(d) Marketing Expenses

Correct Answer Depreciation on fixed assets of the Asset Management Company

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

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

(b) Long term capital gain only

(c) Short term capital gain only

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

Correct Answer Long term capital gain only

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

Long term capital loss can only be set off against long term capital gain.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

Question45 If a person has to trade in units of a closed-ended mutual fund on the stock
exchange
platform then the units have to be held in .
(a) Dematerialized form

(b) Physical form

Correct Answer Dematerialized form

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

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

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

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

(d) All of the above

Correct Answer All of the above

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

- Investors residing in the state of Sikkim.

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

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

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

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

(c) the distributors while advertising their various services

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

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

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

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

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

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

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

(b) Addendum

(c) Scheme Information Document (SID)

(d) Statement of Additional Information (SAI)

Correct Answer Scheme Information Document (SID)

Answer The Scheme Information Document contains the fundamental attributes of a scheme
Explanation under the 'Information about the scheme' column.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
2

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

(b) 3

(d) 11.5

Correct Answer 3

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

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

So the Denominator is the Standard Deviation = 3

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

(b) declaring the rebates given back to the investors

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

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

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

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NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

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TEST DETAILS – The NISM MUTUAL FUND DISTRIBUTORS CERTIFICATION EXAM is a 100 mark exam
with 50% as
passing marks. In all 100 questions will be asked with NO negative marking. The time duration is 2 hours.

PRACTICE TEST NO. 3

Question1 When the distributors are empanelled, the mutual funds should categorize
the
customer relationship and transactions in which of the following ways ?
(a) Advisory , Sale
(b) Advisory , Execution
(c) Financial Planning, Distribution
(d) Priority Sale, Retail Sale

Correct Advisory , Execution

Answer
Answer Customer relationship and transactions shall be categorized as:
Explanation
a. Advisory – where a distributor represents to offer advice while
distributing the product, it will be subject to the principle of ‘appropriateness’
of products to that customer category.

b. Execution Only – in case of transactions that are not booked as

‘advisory’
Question2 Which of these is a key advantage of Exchange Traded Funds (ETFs) ?
(a) ETFs generally give higher returns than normal funds
(b) ETFs offer tax benefits
(c) Investors can control the money they have invested as to where the ETF
can invest
(d) Investors can buy or sell ETFs on a stock exchange at prices which are
close to
current valuations

Correct Investors can buy or sell ETFs on a stock exchange at prices which are
Answer close to current valuations
Answer Exchange Traded Funds (ETFs) are passive funds whose portfolio
Explanation replicates an index
or benchmark such as an equity market index or a commodity index.
The units of the ETF are traded at real time prices that are linked to the
changes in the underlying index.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question3 State True or False - Long term capital loss can only be set off against
long term
capital gain.
(a) TRUE
(b) FALSE

Correct TRUE
Answer
Answer Long term capital loss can only be set off against long term capital gain
Explanation

Short term capital loss is to be set off against short term capital gain or
long term capital gain

Question4 There are no SEBI regulations regarding the minimum or maximum

commission that distributors can earn - State True or False ?
(a) TRUE
(b) FALSE

Correct TRUE
Answer
Answer There are no SEBI regulations regarding the minimum or maximum
Explanation commission that
distributors can earn.
However, SEBI has laid down limits on what the total expense
(including commission) in a scheme can be.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question5 The actual performance of an index fund can be better or worse than its
benchmark
due to .
(a) Arbitrage error
(b) Tracking error
(c) Systematic risk
(d) Investment objective

Correct Tracking error

Answer
Answer An index scheme mirrors the index. The fund manager of an index fund
Explanation invests in
the same securities which are in the index and in the same ratio /
weightage. However there could be some minor difference and that is due
to Tracking Error.
Question6 The main purpose why SEBI has issued norms for investments by
mutual fund schemes is to .
(a) get better returns by mutual fund schemes
(b) improve the credit ratings of the mutual fund schemes
(c) protect the interests of the mutual fund investors
(d) protect the interests of the mutual fund industry

Correct protect the interests of the mutual fund investors

Answer
Answer Securities and Exchange Board of India (SEBI), has mandated strict
Explanation checks and
balances in the structure of mutual funds and their activities. Mutual fund
investors benefit from such protection.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question7 What is the tax applicable on the income earned by the mutual fund
schemes?
(a) Income earned by a mutual fund is exempt from taxes
(b) 10 percent plus surcharge and cess
(c) It is a function of the marginal rate of tax applicable to the respective
investor in the
mutual fund scheme
(d) It is a function of the type of income since dividends, short term capital
gains and
long term capital gains attract different tax rates

Correct Income earned by a mutual fund is exempt from taxes

Answer
Answer As perthe prevailing tax laws in India, a mutual fund’s income is exempt from
Explanation income tax, since mutual funds are constituted as trusts in India for the
benefits of the unit holders.

(Income earned by the unit holders ie. mutual fund investors is taxable)

Question8 Which of the below investors will require the approval of board before
investing in mutual funds ?
(a) Non Resident investors
(b) Institutional investors
(c) High Networth investors
(d) Retail investors

Correct Institutional investors

Answer
Answer Authorisation will be required from the board for the institution to invest.
Explanation This is
typically in the form of a Board Resolution.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question9 When compared to Goal based financial planning, Comprehensive

financial planning
requires more time commitment - State True or False ?
(a) TRUE
(b) FALSE

Correct TRUE
Answer
Answer A comprehensive financial plan calls for significantly more time
Explanation commitment on the
part of both the investor and the financial planner.
The comprehensive financial plan captures the estimated inflows from
various sources, and estimated outflows for various financial goals,
including post- retirement living expenses. The plan can go several
decades into the future.

Question10 Which of these expenses can be charged to a fund ?

(a) Office salaries of fund management team
(b) Rent of the AMC registered office
(c) AMC general administration expenses
(d) Custodian and Fund Administrator fees

Correct Custodian and Fund Administrator fees

Answer
Answer Custodian and Fund Administrator fees can be charged to the fund.
Explanation
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question11 Mr. X invests in a liquid fund at 4 pm and the funds are not available for
investments the same day. What will be the applicable NAV in this case
for allotment of units ?
(a) Closing NAV of the day preceding the day funds are available
(b) Closing NAV of the day the funds are available
(c) Closing NAV of the day immediately preceding the date of application
(d) Closing NAV of the day of the date of application

Correct Closing NAV of the day preceding the day funds are available
Answer
Answer For Liquid Funds - Irrespective of the time of receipt of applications,
Explanation where the
funds are not available for utilisation before the cut-off time, without
availing any credit facility, closing NAV of the day immediately
preceding the day on which the funds are available for utilisation.

Question12 Which tax is payable on the redemption of units of Equity Oriented fund
?
(a) Dividend distribution tax
(b) Securities transaction tax
(c) Wealth tax
(d) Alternate dividend tax

Correct Securities transaction tax

Answer
Answer STT is payable on sale of units of equity oriented mutual fund.
Explanation
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question13 Arrange these funds according to their risk sequence - highest to lowest.
(a) Capital protection oriented, Flexible allocation, Monthly income plan
(b) Flexible allocation, Monthly income plan, Capital protection oriented
(c) Monthly income plan, Capital protection oriented, Fixed allocation
(d) Monthly income plan, Fixed allocation, Capital protection oriented

Correct Flexible allocation, Monthly income plan, Capital protection oriented

Answer
Answer The risk sequence is (highest risk to low risk)
Explanation
Flexible Allocation - Fixed Allocation - Monthly Income Plans - Capital
Protection funds.

Question14 On every new business day in the morning the time stamping
machine is set to serial number 1 and the application received on
that day are affixed with time stamp and serial number starting from
1 - State True or False ?
(a) TRUE
(b) FALSE

Correct FALSE
Answer
Answer Applications are sequentially numbered from the first number of the
Explanation 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. It
starts with the number subsequent to the day before's last number.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question15 A company wishes to invest a specific scheme of a Mutual Fund. Which

document
authorises it to do so ?
(a) The Memorandum of Association
(b) The Articles of Association
(c) Share holders resolution
(d) Specific Board resolution

Correct Specific Board resolution

Answer
Answer The a specific resolution has to be passed in Board of Directors meeting
Explanation for
investments in a MF scheme.
Question16 The auditor appointed to audit the scheme accounts is the same as the
auditor of the AMC accounts - State True or False ?
(a) TRUE
(b) FALSE

Correct FALSE
Answer
Answer The auditor appointed to audit the scheme accounts needs to be different
Explanation from the
auditor of the AMC.
While the scheme auditor is appointed by the Trustees, the AMC auditor is
appointed by the AMC.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question17 Which of the following cycle will a financial planner not consider ?
(a) Business cycle
(b) Karma cycle
(c) Wealth cycle
(d) Life cycle

Correct Karma cycle

Answer
Answer Karma Cycle is related to birth and rebirth of an individual and is not
Explanation related to
financial planning.
Question18 Which of these is NOT a function of SEBI ?
(a) Giving approvals to the appointment of fund managers
(b) Making regulations for the Mutual Fund industry
(c) Regulating Stock Exchanges
(d) Enforcing compliance of its regulations

Correct Giving approvals to the appointment of fund managers

Answer
Answer SEBI does not play any role in appointment of Fund Managers.
Explanation
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question19 Where are the New Fund Offer dates mentioned ?

(a) Key Information Memorandum - KIM
(b) Scheme Information Document - SID
(c) Statement of Additional Information - SAI
(d) Both SID and KIM

Correct Both SID and KIM

Answer
Answer SID has information on -
Explanation
- Open-ended / Close-ended / Interval (the scheme structure)
- Equity / Balanced / Income / Debt / Liquid / ETF (the expected nature of
scheme
portfolio)
It also mentions the face value of the Units being offered, relevant NFO
dates
(opening, closing, re-opening), date of SID, name of the mutual fund, and
name and contact information of the AMC and trustee company.
KIM is essentially a summary of the SID and SAI. It contains the key
points of the offer document including the dates of Issue Opening, Issue
Closing & Re-opening for Sale and Re-purchase

Question20 The party in whose favour the Units are pledged is called a .
(a) Pledger
(b) Pledgee
(c) Pledge
(d) Pledion

Correct Pledgee
Answer
Answer The unit holder is the Pledger
Explanation
The party in whose favour the Units are pledged is called the Pledgee.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question21 In which of the following cases can Goods and Service Tax (GST) be
charged to the
mutual fund scheme over and above the Total Expense Ratio of the
scheme?
(a) GST applicable on any fees must be within the Total Expense Ratio
(b) GST applicable on distributor commission only can be charged to the
scheme over
and above the Total Expense Ratio
(c) GST applicable on AMC fees as well as distributor commission can be
charged to the
scheme over and above the Total Expense Ratio
(d) GST applicable on AMC fees only can be charged to the scheme over and
above the
Total Expense Ratio

Correct GST applicable on AMC fees only can be charged to the scheme over and
Answer above the Total Expense Ratio
Answer AMC(s) can charge GST, as per applicable Taxation Laws, to the schemes
Explanation within the
limits prescribed under SEBI (Mutual Fund) Regulations.
- GST on fees paid on investment management and advisory fees shall
be charged to the scheme in addition to the overall limits specified as
per the Total Expense Ratio (TER) provisions.
- The commission payable to the distributors of mutual funds may be
subject to GST,
as applicable in case of the ARN holder. Such tax cannot be charged to the
scheme.

Question22 The dividends is declared on units which are under a lien will be paid to .
(a) the unit holder only
(b) the lien holder only
(c) the unit holder or lien holder as per the agreement
(d) the unit holder or lien holder as per the terms of issue of mutual fund units
Correct the unit holder or lien holder as per the agreement
Answer
Answer The dividend pay-outs declared on units under lien may be paid to the unit
Explanation holder or
the lender (lien holder) depending upon the agreement.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question23 Which of these is an advantage of Mutual Funds?

(a) Portfolio Customization
(b) Choice Overload
(c) Control Over Costs
(d) Economies of scale

Correct Economies of scale

Answer
Answer Large investment corpus of a mutual fund leads to various other
Explanation economies of scale.
For instance, costs related to investment research and office space gets
spread across investors. Further, the higher transaction volume makes it
possible to negotiate better terms with brokers, bankers and other
service providers.
Limitations of Mutual Fund -
Lack of Portfolio Customization - A unitholder cannot influence what
securities or investments the scheme would invest into.
Choice Overload - There are multiple mutual fund schemes offered
by several mutual fund houses and multiple
options within those schemes which makes it difficult for investors to
choose
between them.
No Control Over Costs - An individual investor has no control over the
costs in a scheme

Question24 What is the maximum number of joint holders allowed per mutual fund
application?
(a) 3
(b) 4
(c) 5
(d) 6
Correct 3
Answer
Answer The maximum number of joint holders allowed per mutual fund application
Explanation is three.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question25 Risk profile of an investor is influenced by .

A) the need to take risks B) the willingness to take risks C) the ability to
take risks
(a) Only C
(b) A and B
(c) A and C
(d) All A, B and C

Correct All A, B and C

Answer
Answer The investor’s risk appetite is a function of three things—the need to take risks,
Explanation the
ability to take risks, and the willingness to take risks.
Thus, an understanding of the risk profile and the investment risks
associated with various mutual fund schemes would be essential for
deciding the asset allocation in an investor’s portfolio.

Question26 Fund Age is an more important criteria to be studied while investing in .

(a) Debt Schemes
(b) Equity Schemes
(c) Treasury Bonds
(d) None of the above

Correct Equity Schemes

Answer
Answer A Mutual fund scheme with a long history has a track record that can be
Explanation studied
before deciding on investments.
Fund age is very important for equity schemes, where there are more
investment options, and divergence in performance of schemes within
the same category tends to be more.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question27 Consolidated Account Statement (CAS) has to dispatched to the investors

.
(a) only when the investors sends an request for it
(b) on a monthly basis, before the 10th of the succeeding month
(c) for every transaction for every folio
(d) quarterly for dormant investors

Correct on a monthly basis, before the 10th of the succeeding month

Answer
Answer A Consolidated Account Statement (CAS) for each calendar month will
Explanation have to be
sent by post/email on or before 10th of the succeeding month.
If there are no transactions, then a six monthly CAS can be sent.

Question28 Dormant investors are those investors who have not transacted during the
previous
months.
(a) 3
(b) 6
(c) 12
(d) 24

Correct 6
Answer
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question29 is responsible for settlement of Mutual Fund transactions which

are
executed on the Stock Exchanges.
(a) AMC
(b) Stock Exchange
(c) Clearing House
(d) AMFI

Correct AMC
Answer
Answer A Stock Exchange is essentially an order routing system between the
Explanation investors and
the AMC, the exchanges do not offer Settlement Guarantee.
Responsibility for settlement is that of the AMC.

Question30 Calculate the NAV for the following information :

Value of stock 200 cr, Value of money market instruments - Rs 25 cr,

Dividend accrued but not received - Rs 10 cr, Amount receivable on
sale of shares - Rs 5 cr, Amount payable on purchase of shares: Rs.
10.5 cr, Fees payable - Rs 1 cr. No. of outstanding units:3 cr

(a) 75.83
(b) 80.77
(c) 76.16
(d) 79.17

Correct 76.16
Answer
Answer NAV = (Value of stocks + Value of money market instruments + Dividend
Explanation accrued
but not received + Amount receivable on sale of shares – Amount
payable on purchases of shares – Fees payable) / No. of outstanding
units
= 200 cr + 25 cr + 10 cr + 5 cr - 10.5 cr - 1 cr / 3 cr

76.16
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question31 Only individuals are allowed to distribute mutual funds in India. State
whether True
or False.
(a) TRUE
(b) FALSE

Correct FALSE
Answer
Answer Mutual funds are distributed in India to the investors through multiple
Explanation channels,
viz., individual mutual fund distributors, bank branches, national
distributors through their branches or their sub-agents, post offices, and
directly by the AMCs.
Question32 Which amongst the following has the highest to lowest risk sequence ?
(a) Capital Protection Oriented Funds - Monthly Income Plans - Balanced
Funds
(Flexible Allocation)
(b) Monthly Income Plans - Balanced Funds (Fixed Allocation) - Balanced
Funds (Flexible
Allocation)
(c) Capital Protection Oriented Funds - Balanced Funds (Flexible Allocation) -
Monthly
Income Plans
(d) Balanced Funds (Flexible Allocation) - Monthly Income Plans - Capital
Protection
Oriented Funds

Correct Balanced Funds (Flexible Allocation) - Monthly Income Plans - Capital

Answer Protection Oriented Funds
Answer The risk hierarchy of the above mentioned schemes is :
Explanation
( Highest to Lowest )
Balanced Funds (Flexible Allocation) - Balanced Funds (Fixed
Allocation) - Monthly Income Plans - Capital Protection Oriented Funds
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question33 Mutual funds offer facilities that help investor invest constant amounts
regularly
through a .
(a) Systematic Withdrawal Plan
(b) Systematic Transfer Plan
(c) Systematic Saving Plan
(d) Systematic Investment Plan

Correct Systematic Investment Plan

Answer

Question34 An investor can convert his Mutual Fund units into demat form but again
converting the demat unit into physical form is not allowed - State True or
False ?
(a) TRUE
(b) FALSE

Correct FALSE
Answer
Answer The investor also has the option to convert the demat units into physical
Explanation form. This
process is called re-materialisation.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question35 Amongst the following options, which of the following is TRUE ?

(a) STT is paid on purchase of the units of Equity Mutual Funds through a
stock
exchange
(b) STT is paid on purchase of the units of Equity Mutual Funds from the fund
house
(c) STT is paid on repurchase / redemption of the units of Equity Mutual
Funds
(d) STT is paid on purchase of the units of Debt Mutual Funds

Correct STT is paid on repurchase / redemption of the units of Equity Mutual

Answer Funds
Answer Securities Transaction Tax (STT) is applicable on sale / redemption
Explanation transactions in
units of equity mutual fund schemes.
There is no STT on Debt funds.

Question36 Management fees cannot be charged by liquid schemes and other debt
schemes on funds parked in short-term deposits of commercial banks -
State True or False ?
(a) TRUE
(b) FALSE

Correct TRUE
Answer
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question37 Floating rate debt securities tend to hold their values, even if interest rates
fluctuate
- State True or False ?
(a) TRUE
(b) FALSE

Correct TRUE
Answer
Answer A debt instrument with a variable interest rate is known as a “floater” - a
Explanation floating
rate note’s interest rate is tied to a benchmark.
Floating rate debt securities tend to hold their values, even if interest rates
fluctuate
Question38 Mutual Funds gives more investment options as compared to
National Pension System - State True or False ?
(a) TRUE
(b) FALSE

Correct TRUE
Answer
Answer There are several restrictions in investments for the NPS and so it offers
Explanation fewer
portfolio choices than mutual funds.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question39 A Mutual Fund scheme gives a return of 10 % and the beta of that scheme
is 0.5. The
risk free return is 7.5%. What is the Treynor Ratio of this scheme ?
(a) 3%
(b) 5%
(c) 7.50%
(d) 10%

Correct 5%
Answer
Answer Treynor Ratio measures the returns earned in excess of that which would
Explanation have
earned on a riskless investment.
Treynor Ratio Formula :

(Return earned on the Scheme - Risk Free Rate) / Beta of the Scheme

= (10 - 7.5) / 0.5

= 0.5 x 100 = 5%

Question40 The mutual fund scheme’s sale and purchase of investments are executed
by the
in the stock market.
(a) Operator
(b) AMC
(c) Dealer
(d) Sponsor

Correct Dealer
Answer
Answer The various dealers of a Stock Broker buy and sell shares as per the
Explanation orders of the
Mutual Fund.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question41 The size of equity portfolio of a young unmarried investor is determined

by
.
(a) Liquidity needs
(b) Lifestyle
(c) Income levels
(d) All of the above

Correct All of the above

Answer

Question42 A major factor affecting the rate of interest of a corporate deposit is .

(a) the assets it has
(b) the market share its product has
(c) the profits of the company
(d) the credit rating assigned to it

Correct the credit rating assigned to it

Answer
Answer The interest rate offered by Corporate Deposits depends on the credit
Explanation rating
assigned to it. Higher the credit risk, higher is likely to be the interest
rates offered.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question43 is the process of determining the ability of an investor to

bearlosses
from various investments.
(a) Delta Hedging
(b) Asset Allocation
(c) Portfolio Churning
(d) Risk Profiling

Correct Risk Profiling

Answer
Answer Risk profiling is an approach to understand the risk appetite of investors
Explanation and is an
essential pre-requisite to advise investors on their investments.
Question44 Amongst the following options, is the most illiquid.
(a) Gold
(b) Real Estate
(c) Shares
(d) Bank Fixed Deposits

Correct Real Estate

Answer
Answer Illiquid means which cannot be sold easily.
Explanation

From the above options, Real Estate or Property cannot be sold easily as
compared to others.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question45 Higher the Capital Base, the Risk Appetite.

(a) Higher
(b) Lower
(c) Capital base has no effect on risk appetite
(d) No change

Correct Higher
Answer
Answer Higher the capital base, better the ability to financially take the
Explanation downsides that
come with risk - so the risk appetite is higher.
Question46 invests mainly in Corporate Bonds.
(a) Diversified Equity Schemes
(b) Diversified Debt Schemes (Income Funds)
(c) Nifty Index Funds
(d) Gold Funds

Correct Diversified Debt Schemes (Income Funds)

Answer
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question47 As per the AMFI Code of Ethics, an AMC has to disclose which amongst
the following
information to its unit holders ?
(a) Unit holders investment pattern
(b) portfolio turnover
(c) transactions of purchase and sale of securities entered into with any of
their
associates
(d) All of the above

Correct All of the above

Answer
Answer As per the AMFI Code of conduct, the AMC has to disclose the investment
Explanation objectives, investment policies, financial position and general affairs of
the scheme, investment pattern, portfolio details, ratios of expenses to
net assets and total income, portfolio turnover, transactions of
purchase and sale of securities entered into with any of their
associates or any significant unit holder etc. to the unit holders.

Question48 Mutual Fund distributors receive commission on investments made by

their clients as well as on the investments they make for themselves in
their own name - State True or False ?
(a) TRUE
(b) FALSE

Correct FALSE
Answer
Answer Distributors get commission on investments made through them by their
Explanation clients.
However, no commission is payable on their own investments.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

Question49 The details and information provided in Scheme Information Document

(SID) and
Statement of Additional Information (SAI) are .
(a) applicable only for closed ended schemes
(b) applicable only for open ended schemes
(c) common for all schemes - open or close ended
(d) applicable only for a particular scheme

Correct applicable only for a particular scheme

Answer
Answer SID and SAI form a part of the Offer Document which gives the details of
Explanation a New
Fund Offer ie. when a new scheme is launched in the market.
Thus every scheme will have its own SID and SAI as per the investment
objectives etc. of that particular scheme.

Question50 A Mutual Fund Trust must have beneficiaries - State True or False ?
(a) TRUE
(b) FALSE

Correct TRUE
Answer
Answer Every trust has beneficiaries. In the case of a mutual fund trust, the
Explanation beneficiaries are the investors who invest in various schemes of the
mutual fund.
===================
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
3

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

PRACTICE TEST NO. 4

Question1 In which of the following transactions a transaction charge can be deducted?

(a) Online purchases
(b) Systematic transfer plan (STP) transaction
(c) Purchases of Rs 10000 or more
(d) Purchase made on stock exchanges

Correct Answer Purchases of Rs 10000 or more

Answer A transaction charge is paid to distributors for investments of Rs. 10,000 and over.
Explanation

The transaction charge will be deducted from the gross investments of the investor
and paid to the distributor and the balance shall be invested.

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

investment is not eligible for transaction charges. Similarly, purchases or
subscriptions routed through the stock exchange are not eligible for transaction
charges.

Question2 There are various risk profiling tools available on the internet. A financial planner
can use any of these as risk profiling is just a process - State True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Risk profiling is an approach to understand the risk appetite of investors - an
Explanation essential pre-requisite to advise investors on their investments.

There are various factors which have influence on risk appetite.

Internet risk profiling tools are useful pointers, but it is important to understand the
robustness of such tools before using them in the practical world. Some of the tools
featured in websites have their limitations. So these tools cannot be always used.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question3 What is the relationship between Interest Rates and Real Estate prices ?
(a) Rise in interest rates lead to fall in real estate prices
(b) Fall in interest rates lead to fall in real estate prices

Correct Answer Rise in interest rates lead to fall in real estate prices
Answer When interest rates rises and money becomes expensive, these is less demand for
Explanation real estate - therefore this softens the real estate market.

When money is cheap and easily available, more people buy real estate. This pushes
up real estate values.

Question4 The unaudited accounts of the Mutual Fund schemes must be published once in
every six months .
(a) on the AMC website
(b) on the AMFI website
(c) in a minimum of 2 newspapers
(d) All of the above

Correct Answer in a minimum of 2 newspapers

Answer The mutual fund shall publish a complete statement of the scheme portfolio and the
Explanation unaudited financial results, within one month from the close of each half year, by
way of an advertisement at least, in one National English daily and one regional
newspaper in the language of the region where the head office of the mutual fund is
located.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question5 STT is on transactions in debt or debt-oriented mutual fund (including

liquid fund) units.
(a) applicable
(b) not applicable

Correct Answer not applicable

Answer STT is applicable only on equity transactions.
Explanation

Question6 Amit does not have a PAN Card. He wishes to invest Rs 1 lakh in a mutual fund
scheme. He does not fall into any exempt investor category. In which way can he
invest ?
(a) He cannot invest as PAN Card is mandatory
(b) He can sign up for a SIP and get an exemption from the requirements of a PAN card
(c) He can provide additional prescribe photo proofs like the Aadhaar , Voter Id etc.

Correct Answer He cannot invest as PAN Card is mandatory

Answer Permanent Account Number (PAN) Card with photograph is mandatory for all
Explanation applicants except those who are specifically exempt from obtaining PAN.

The following categories of investors are exempt from producing PAN:

o In case of transactions undertaken on behalf of Central/State government and by

officials appointed by court.
o Investors residing in the state of Sikkim.
o UN entities/Multilateral agencies exempt from paying taxes/filing tax returns in
India.
o Investments (including SIPs) in Mutual Fund schemes upto Rs.50,000/- per
investor per year per mutual fund.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question7 Which document is NOT required for the KYC process by a mutual fund investor ?
(a) Proof of Income
(b) Proof of Address
(c) Proof of Identity
(d) PAN Card

Correct Answer Proof of Income

Answer For the KYC process (for establishing proof of identity and address) following
Explanation documents are required:

- Permanent Account Number (PAN) Card

- Proof of Address such as Passport, Voter’s Id etc.

Question8 One of the disclosure which an AMC has to make is .

(a) the commission paid to the distributors in the financial year on the website of AMC
(b) the distributor wise amount mobilised in the financial year on the website of AMC
(c) the annual report (scheme wise) and the abridged summary on the website of AMC
(d) All of the above

Correct Answer the annual report (scheme wise) and the abridged summary on the website of AMC
Answer The Annual Report of the AMC has to be displayed on the website of the mutual
Explanation fund. The Scheme-wise Annual Report will mention that unit-holders can ask for a
copy of the AMC’s Annual Report.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question9 What exception is made for investments by Systematic Invest Plans, if the annual
investment is below Rs 50000 ?
(a) KYC is not required to be done
(b) Photo identity is not required
(c) PAN Card is not required
(d) None of the above

Correct Answer PAN Card is not required

Answer Providing Permanent Account Number (PAN) is compulsory for all mutual fund
Explanation investments. Exception has been made for Micro-SIPs i.e. SIPs where annual
investment (12 month rolling or April-March financial year) does not exceed Rs
50,000.

Question10 Which is the most appropriate measure of evaluating how closely an index fund is
tracking its benchmark?
(a) Total Expense Ratio (TER)
(b) Assets Under Management (AUM)
(c) Tracking error
(d) Treynor ratio

Correct Answer Tracking error

Answer Tracking error is a measure of the consistency of the out-performance of the fund
Explanation manager relative to the benchmark. Earlier it was used as a measure of how closely
an index fund tracked the returns from the benchmark to which it was indexed.

Now, the tracking error is used to measure how consistently a fund is able to out-
perform its benchmark.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question11 A company has a Earning Per Share (EPS) of Rs 5 and Price to Earning (PE) ratio of
30. What will be the market price of the shares of this company ?
(a) Rs. 0.60
(b) Rs. 6
(c) Rs. 150
(d) Rs. 75

Correct Answer Rs. 150

Answer Price to Earnings Ratio (P/E Ratio) = Market Price / EPS
Explanation

So Market Price = PE X EPS

= 30 x 5

= Rs 150

Question12 What would be the most appropriate benchmark for a short term debt scheme ?
(a) 10 year dated GoI security
(b) 3 year dated GoI security
(c) 1 year T-Bill
(d) No such benchmark exists

Correct Answer 1 year T-Bill

Answer Appropriate Benchmarks :
Explanation

Equity scheme - Sensex or Nifty

Long term debt scheme - 10 year dated GoI security

Short-term debt fund - 1 year T-Bill

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question13 Monthly Income Plan (MIPs) have no exposure to Equity - State True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer MIPs havean elementof equityinits portfolio to give aboostto the fund’s
Explanation return. This can typically range from 5 percent to 30 percent.

Question14 Who issues the 'Certificate of Deposit' ?

(a) Government
(b) Multinationals
(c) Banks
(d) Mutual Funds

Correct Answer Banks

Answer Certificates of Deposit are issued by Banks (for 7 days to 1 year) or Financial
Explanation Institutions (for 1 to 3 years)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question15 Which of the below is /are FUNDAMENTAL ATTRIBUTES of a scheme ?

(a) The type of scheme
(b) Investment objective(s) of the scheme
(c) Terms of the issue
(d) All of the above

Correct Answer All of the above

Answer The Offer Document is the most important sources of information on the core
Explanation aspects of the scheme called its fundamental attributes. The fundamental attributes
of the scheme includes:

• Thetype of scheme ie. Openended / Close ended /Equity/ Balanced etc

• Investment objective(s) ie. Growth / Income etc
• Terms of the issue ie. listing /repurchase / redemption etc.

Question16 The first step in developing a model portfolio is _ .

(a) Deciding the size of portfolio
(b) Selection of the Mutual Fund schemes
(c) Setting of goals
(d) None of the above

Correct Answer Setting of goals

Answer Steps for developing a Model Portfolio -
Explanation

a. Enable your investor identify his investment needs and goals.

b. Understand the various financial products – their risk, return, liquidity and
maturity profile.

c. Combine the features of financial products with the investors’ financial needs and
determine appropriate mix of investments, technically referred to as asset
allocation.

d. Suggest suitable mutual fund schemes within the asset choices.

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question17 If the ARN code is not mentioned and choice of plan is not indicated in the
application form, then the application will be .
(a) processed as a Direct Plan application
(b) rejected
(c) processed as a Regular Plan application
(d) treated as incomplete application and will be returned to the investor for
completion

Correct Answer processed as a Direct Plan application

Answer If the ARN code is not mentioned and choice of plan is not indicated then the
Explanation application will be processed as a Direct Plan application.

Question18 Which of these assets has the highest risk of loss through theft ?
(a) Real Estate
(b) Mutual Fund units
(c) Shares and Debentures
(d) Gold

Correct Answer Gold

Answer Gold suffers one of the highest risks of loss through theft.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question19 Which of the below is used to measure risk-adjusted performance ?

(a) Sharpe Ratio
(b) Standard Deviation
(c) R-squared
(d) Beta Coefficient

Correct Answer Sharpe Ratio

Answer Some important measures of risk-adjusted returns are Sharpe Ratio, Treynor Ratio,
Explanation Alpha etc.

(Higher the Sharpe Ratio, better the scheme is considered to be)

Question20 With respect to model portfolio for Senior Citizens, it will not have any exposure to
equity - State True or false ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer As per model portfolio for couple in their seventies, with no immediate family
Explanation support :

- 15 percent diversified equity index scheme; 10 percent gold ETF, 30 percent

diversified debt fund, 30 percent MIP, 15 percent liquid schemes.

This shows some exposure can be taken in equities.

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question21 What is the Total Expense Ratio for an Index fund or an ETF?
(a) Total Expense Ratio shall not exceed 1.00 per cent of the daily net assets.
(b) Total Expense Ratio shall not exceed 2.00 per cent of the daily net assets.
(c) Total Expense Ratio shall not exceed 1.5 per cent of the daily net assets.
(d) Total Expense Ratio shall not exceed 0.50 per cent of the daily net assets.

Correct Answer Total Expense Ratio shall not exceed 1.00 per cent of the daily net assets.
Answer In case of an Index fund scheme or Exchange traded fund (ETF), the total expense
Explanation ratio of the scheme including the investment and advisory fees shall not exceed 1.00
per cent of the daily net assets.

Question22 If an investor in a Multicap Fund wants to know the industry wise allocation of the
funds then which document should he refer to?
(a) Fund Factsheet
(b) SID and SAI
(c) Investment management agreement
(d) Annual accounts of the AMC

Correct Answer Fund Factsheet

Answer One of the most popular document from the mutual fund is the monthly Fund
Explanation Factsheet. This document is extensively used by investors, fund distributors, fund
rating agencies, research analysts, media and others to access information about
the various schemes of the mutual fund.

In the factsheet, security wise as well as industry / sector wise allocation is provided
for equity schemes.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question23 Commodities as an asset class does not include _ .

(a) Food Crops
(b) Industrial Metals
(c) Gold
(d) Real Estate

Correct Answer Real Estate

Answer Real Estate is not a commodity as it cannot be standardised.
Explanation

Food crops ( Rice, wheat), Industrial Metals (Copper, Nickel) and Gold are all
commodities.

Question24 Indentify which of these statements is / are FALSE ? A) Banks and mutual funds both
offer the Gold Deposit Scheme B) Gold ETFs are closed ended funds
(a) Only A is false
(b) Only B is false
(c) Both A and B are false

Correct Answer Both A and B are false

Answer The Gold deposit scheme is offered only by banks to mobilise the idle gold in the
Explanation country and put it in productive use and to provide the customer an opportunity to
earn interest on the idle gold holdings.

All Exchange Traded Fund are open-ended schemes.

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question25 An investor in debt oriented mutual receives the benefit of on long term
capital gains. A) Indexation B) Tax exemption
(a) Only A
(b) Only B
(c) Both A and B

Correct Answer Only A

Answer Indexation means that the cost of acquisition or the cost of purchase is adjusted
Explanation upwards to reflect the impact of inflation.

An investor in long term debt funds receives the benefit of indexation buy they are
not exempted from paying long term capital gains tax.

Question26 Foreign investors can invest in equity schemes of MFs registered with SEBI after
completing KYC process - State True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question27 To maintain neutrality, all AMC's have same commission structure with respect to
commissions payable to distributors - State True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer The commission structures vary between AMCs.
Explanation

Even for the same AMC, different commissions are applicable for different kinds of
schemes.

Question28 The valuation of Illiquid securities held by a Mutual Fund is done as per .
(a) the last traded price of that security on BSE or NSE
(b) the norms prescribed by SEBI to arrive at a fair valuation
(c) the average price of bid and ask quotation
(d) the lowest price calculated as per the above three methods

Correct Answer the norms prescribed by SEBI to arrive at a fair valuation

Answer Non traded securities/Illiquid securities are valued "in good faith" by the asset
Explanation management company on the basis of the valuation principles laid down by SEBI.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question29 If a charitable trust wishes to invest in a Mutual Fund, which amongst the following
document is not required to be submitted ?
(a) Memorandum and Articles of Association
(b) Trust Deed
(c) Board Resolution authorising the investments
(d) List of authorised signatories

Correct Answer Memorandum and Articles of Association

Answer A Charitable Trust does not have any Memorandum and Articles of Association. It
Explanation has a Trust Deed.

Question30 Advertisements regarding Mutual Fund schemes shall not contain statements which
directly or by implication or by omission may mislead the investor - State True or
False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer As per the SEBI Regulations related to Sales Practices- Advertisements shall not be
Explanation so designed as likely to be misunderstood or likely to disguise the significance of any
statement. Advertisements shall not contain statements which directly or by
implication or by omission may mislead the investor.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question31 Risk appetite increases as the number of earning members .

(a) decreases
(b) increases
(c) becomes zero
(d) None of the above

Correct Answer increases

Answer More earning members means more income and so the risk taking capacity
Explanation increases.

Question32 Mr. Gupta invests Rs 1 crore in a Gilt Mutual Fund scheme and gives a local cheque
at 1 pm. Which will be the applicable NAV for allotment of units to Mr. Gupta ?
(a) Closing NAV of the day on which the application was made
(b) NAV of the business day on which the funds are available for utilisation before the
cut-off time of that day is applicable.
(c) Next business day NAV
(d) Closing NAV of the day immediately preceding the application day.

Correct Answer NAV of the business day on which the funds are available for utilisation before the
cut-off time of that day is applicable.
Answer For all Equity oriented funds and Debt funds (except liquid funds) if the transaction
Explanation is more than Rs. 2 lakhs : 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.

(If it is below Rs 2 lakhs - Same day NAV if received before cut off time ie. 3 pm)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question33 The facility of ASBA - 'Application Supported by Blocked Amount' is mainly for
additional purchase of Mutual Funds units - State True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer ASBA can only be used for IPO's of equity shares and NFO's of Mutual Funds. It
Explanation cannot be used for additional purchase.

Question34 Which is the ideal investment class for an investor who wishes to have an hedge
against inflation and has a long term perspective ?
(a) Bluechip Equity Shares
(b) Gold
(c) Real Estate
(d) Government Bonds

Correct Answer Gold

Answer Higher inflation means a weakening rupee which also leads to rise in gold prices. So
Explanation Gold is the best bet to hedge against inflation.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question35 As per SEBI rules, the NAV has to be published , in at least daily
newspapers having circulation all over India.
(a) daily , 4
(b) weekly , 2
(c) daily , 2
(d) weekly , 4

Correct Answer daily , 2

Question36 While making a Comprehensive Financial Plan, .

(a) High time commitment is required from the investor / client
(b) High time commitment is required from the planner
(c) High time commitment is required both from the client and planner
(d) Not much time commitment as all the planning is done in the computer

Correct Answer High time commitment is required both from the client and planner
Answer A comprehensive financial plan calls for significantly more time commitment on the
Explanation part of both the investor and the financial planner.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question37 Investors in Mutual Fund are not responsible for .

(a) monitoring their investments regularly
(b) checking the risk factors before investing
(c) reading the offer documents carefully
(d) taking investment decisions of behalf of the fund manager

Correct Answer taking investment decisions of behalf of the fund manager

Answer Investors need to note that their investment is governed by the principle of caveat
Explanation emptor i.e. let the buyer beware. An investor is presumed to have read the Offer
Document, checked the risk factors etc.

However an investor cannot ask / instruct the fund manager to buy / sell particular
security.

Question38 If an investor wishes to beat the benchmark and is also ready to bear the risks, then
he should opt for Actively managed funds - State True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Actively managed funds are funds where the fund manager has the flexibility to
Explanation choose the investment portfolio. The fund manager invests in better performing
sectors so that the returns are better than the benchmark index.

However this strategy could also give lower or negative returns if the fund managers
predictions go wrong.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question39 The AMC pays commission to Mutual Fund Agents, but no such commission is paid
to stock brokers who trade in mutual funds on the Stock Exchange platform - State
True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer The AMC does not pay the brokers any commission on the trades through them on
Explanation the Stock Exchange platform. The Stock Brokers get their commissions from the
investor by charging brokerages on MF transactions.

Question40 While doing an asset allocation for an investor, which amongst the following factors
will have the least importance ?
(a) RBI's announcement that there could be huge recession
(b) RBI's announcements of changes in interest rates
(c) Bonus issued by one of the MF schemes
(d) Changes in prices of equity shares

Correct Answer Bonus issued by one of the MF schemes

Answer The purpose of asset allocation is not to enhance returns, but to reduce the risk.
Explanation

Bonus issue is just a book entry and will have no effect on asset allocation.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question41 ‘To achieve growth by investing in equity and equity related investments, balanced
with income generation by investing in debt and money market instruments’• - is
the likely investment objective of a Diversified Debt Scheme - State True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer This is the likely objective of a BALANCED SCHEME.
Explanation

The investment objective of a diversified debt scheme could be: “To generate
income by investing predominantly in a wide range of debt and money market
securities”

Question42 Risk Appetite is influenced by which financial factor(s) ?

(a) Capital Base
(b) Regularity of Income
(c) Both 1 and 2
(d) None of the above

Correct Answer Both 1 and 2

Answer Higher the capital base, better the ability to financially take the downsides that
Explanation come with risk.

People earning regular income can take more risk than those with unpredictable
income streams.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question43 Amongst the below given options, which one is NOT an example of Transition Phase
?
(a) house to be purchased
(b) trying to get a better job
(c) Children’s higher education
(d) marriage approaching

Correct Answer trying to get a better job

Answer Transition is a phase when financial goals are in the horizon.
Explanation

As funds will be soon required, investors tend to increase the proportion of their
portfolio in liquid assets.

Question44 The Scheme Information Document (SID) prepared by the AMC is approved by
.
(a) SEBI
(b) Board of Trustees
(c) Sponsors
(d) Stock Exchanges

Correct Answer Board of Trustees

Answer Scheme Information Document and Statement of Additional Information are the
Explanation part of Offer Documents

AMC prepares the Offer Document for the NFO. This needs to be approved by the
Trustees and the Board of Directors of the AMC.

SEBI does not approve or disapprove Offer Documents, it gives its observations and
these are incorporated.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question45 Due to the Index scheme's performance could be higher or lower than
that of the benchmark.
(a) Market Volatility
(b) Bull Run
(c) Tracking Error
(d) Systematic Risks

Correct Answer Tracking Error

Answer Gaps between the scheme performance, and that of the benchmark, are called
Explanation tracking errors.

An index fund manager would seek to minimize the tracking error. Due to the
tracking error, the scheme performance could be higher or lower than that of the
benchmark.

Question46 The trustees / AMC cannot make any change in the fundamental attributes of a
scheme, unless approval is received from
(a) Unit holders
(b) SEBI
(c) Sponsor
(d) Fund Manager of that scheme

Correct Answer Unit holders

Answer The trustees / AMC cannot make any change in the fundamental attributes of a
Explanation scheme, unless a written communication about the proposed change is sent to each
Unit-holder and their approval is sought.

The Dissenting unit-holders are given the option to exit at the prevailing Net Asset
Value.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question47 The current market value of the stocks of a Mutual Fund scheme portfolio is Rs 12 cr
and the current liabilities are 7 cr. The unit capital is Rs 10 cr and the face value per
unit is Rs 10. What is the current NAV of this scheme ?
(a) Rs 10
(b) Rs 12
(c) Rs 19
(d) Rs 5

Correct Answer Rs 5
Answer Current Valuation is Rs 12 cr less Rs 7 cr (current liability) = Rs 5 cr
Explanation

Thus the Rs 10 cr unit capital has now become Rs 5 cr ie 50 % fall

So the Rs 10 NAV when the scheme was launched has now fallen by 50% to Rs 5.

Question48 While deciding on investments for his clients, what should be the right sequence ?
(a) Selection of Scheme - Risk Profiling - Making a Model Portfolio
(b) Risk Profiling - Making a Model Portfolio - Selection of Scheme
(c) Making a Model Portfolio - Risk Profiling - Selection of Scheme
(d) Selection of Scheme - Making a Model Portfolio - Risk Profiling

Correct Answer Risk Profiling - Making a Model Portfolio - Selection of Scheme

Answer It is a good practice to first understand the risk exposure that is appropriate for an
Explanation investor, then decide how the investor’s investments should be distributed between
different asset classes and make a model portfolio. Once this is over, select the good
schemes most suitable as per the model portfolio.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
PRACTICE TEST NO. 4

Question49 What is the NAV if the value of stocks in a Mutual Fund scheme is Rs 100 cr, Value of
Bonds is Rs 10 cr, Value of Money Market Instruments is Rs 25 cr, Dividend Accrued
but not received is Rs 3 cr and Fees payable is Rs 5 cr. The number of outstanding
units is 75 lacs.
(a) 173.33
(b) 177.33
(c) 184
(d) 186.74

Correct Answer 177.33

Answer NAV = (Value of stocks + Value of bonds + Value of money market instruments +
Explanation Dividend accrued but not received + Interest accrued but not received – Fees
payable) / No. of outstanding units

= 100 cr + 10 cr + 25 cr + 3 cr + 0 - 5 cr / 75 lacs

= 133 cr / 75 lacs

= 177.33

Question50 Mrs. Reena purchases MF units at NAV Rs 13. After 500 days , she redeems it at NAV
Rs 15.70. What is the compounded rate of return ?
(a) 13.69%
(b) 14.70%
(c) 15.00%
(d) 15.88%

Correct Answer 14.70%

Answer The formula to find the CAGR - Compunded Annual Growth Rate holding period
Explanation return is :

[ ( End Price / Bgn Price) ^ (1/n) ] -1

End Price = 15.70, Begin Price = 13

n = time. We have to find yearly return so 500 / 365 = 1.369

So [( 15.70/13 )^ 1/1.369] – 1 = 0.147218937

On the scientific calculator of your computer type 1.207 then use x^y key and then
type 0.73 = 1.147

1.147 - 1 = .147 x 100 = 14.7 %

NISM SERIES V A – MUTUAL FUNDDISTRIBUTORS
PRACTICE TEST NO. 4

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DISTRIBUTORS PRACTICE TEST NO.
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NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

PRACTICE TEST NO. 5

Question1 The full form of AGNI is .
(a) AMFI Guidelines for New Investors
(b) AMFI Guidelines for New issues and Investments
(c) AMFI Guidelines for Nominations and Investments
(d) AMFI Guidelines and Norms for Intermediaries

Correct Answer AMFI Guidelines and Norms for Intermediaries

Answer The full form of AGNI is - AMFI Guidelines and Norms for Intermediaries.
Explanation

Question2 When the Capital Base of an investor rises, his or her risk appetite will tend to .
(a) decrease
(b) increase
(c) remain same
(d) change randomly

Correct Answer increase

Answer Higher the capital base, better the ability to financially take the downsides that
Explanation come with risk.

For eg - A person with a capital of Rs 1 crore can take more risks than a person
with Rs 10000.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question3 An investor gives a local cheque of Rs 3 crore for investment in Gilt scheme at 11.30
am. What would be the applicable NAV for this investment ?
(a) The closing NAV of the day preceding the date of application
(b) The closing NAV of the next working day
(c) The closing NAV of the application day
(d) The NAV of the business day on which the funds are available for utilization

Correct Answer The NAV of the business day on which the funds are available for utilisation
Answer Applicable NAV For all Debt Funds (except Liquid Funds) in respect of transaction
Explanation equal to or more than Rs. 2 lakhs - Irrespective of the time of receipt of
application, NAV of the business day on which the funds are available for
utilisation without availing of any credit facility before the cut-off time of that day
is applicable.
Question4 Which of the below documents can be inspected by the unit holder ?
(a) Trust Deed
(b) Custodial Services Agreement
(c) Investment Management Agreement
(d) All of the above

Correct Answer All of the above

Answer Unit-holders have the right to inspect key documents such as the Trust Deed,
Explanation Investment Management Agreement, Custodial Services Agreement,
RTA agreement and Memorandum & Articles of Association of the
AMC.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question5 'Statement of Additional Information' SAI contains information which is

(a) meant only for Close Ended Schemes
(b) applicable for all schemes
(c) applicable only for Open Ended Schemes
(d) meant only for one particular scheme

Correct Answer applicable for all schemes

Answer The Offer Document have two parts:
Explanation
a) Scheme Information Document (SID), which has details of the particular scheme

b) Statement of Additional Information (SAI), which has statutory information

about the mutual fund, that is offering the scheme.

A single SAI is relevant for all the schemes offered by a mutual fund.

Question6 After the New Fund Offer, units of the Close Ended fund can be bought and sold
through .
(a) Close Ended fund cannot be bought and sold till the closure of term
(b) the offices / branches of the respective AMC's
(c) the bank in which the unit holder has an account
(d) Stock Exchanges

Correct Answer Stock Exchanges

Answer A close-ended scheme offers liquidity through a listing in a stock exchange.
Explanation
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question7 The facility of Application Supported by Blocked Amount (ASBA) can be used for
.
(a) application for additional purchase of MF units
(b) applications by SIP
(c) application for New Fund Offers (NFO)
(d) Fresh purchase by a new investor of an existing scheme

Correct Answer application for New Fund Offers (NFO)

Answer Application Supported by Blocked Amount (ASBA) - This is a facility where the
Explanation investment application in a New Fund Offer (NFO) is accompanied by an
authorization to the bank to block the amount of the application money in the
investor’s bank account.

The benefit of ASBA is that the money goes out of the investor’s bank account only
on allotment. Until then, it keeps earning interest for the investor.

Question8 Investors in India are usually highly organised in managing their financial
transactions and taking decisions related to Financial Planning - State True or
False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Most investors are either not organized, or lack the ability to make the calculations
Explanation required for financial planning. A financial planner’s service is therefore invaluable
in helping people realize their needs and aspirations.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question9 For those investors who find it difficult to pay for insurance cover, Money back
policy is recommended - State True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Money back policy provides life coverage during the term of policy and the
Explanation maturity
benefits are paid in installments. Its ideal for individuals who need regular
income at their disposal and fulfill their financial goals uninterrupted.
Question10 indicates how much money can be generated per unit of mutual fund in
case the scheme is liquidated.
(a) Market price
(b) Exit load
(c) Asset Under Management
(d) Net Asset Value

Correct Answer Net Asset Value

Answer The true worth of a unit of the mutual fund scheme is otherwise called Net Asset
Explanation Value (NAV) of the scheme.

The NAV is also the net realizable value per unit in case the scheme is to be
liquidated–how much money could be generated if all the holdings of the scheme
are sold and converted into cash.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question11 A person gets sudden wealth by winning a big lottery. Which of the below options is
NOT advisable for him ?
(a) Investment in STP for investing in equities
(b) Investment in liquid fund for a short period
(c) Investment of the full amount in equities
(d) Revisiting his financial plan

Correct Answer Investment of the full amount in equities

Answer In situations of 'Sudden Wealth', it is advisable to initially block the money by
Explanation investing in a liquid scheme.

An STP (Systematic Transfer Plan) from the liquid schemes into equity schemes
will help the long term wealth creation process.

One should not invest 100% of the amount in equities at one go.

Question12 Can Indian mutual funds invest in Real Estate ?

(a) Yes
(b) No

Correct Answer Yes

Answer Real Estate Mutual Funds scheme means a mutual fund scheme that invests directly
Explanation or indirectly in real estate assets or other permissible assets in accordance with the
SEBI (Mutual Funds) Regulations, 1996

So Mutual Funds can invest in real estate directly but currently they are mostly into
buying real estate related stocks or in Real Estate Investment Trusts - which invests
in property directly.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question13 At which price a Close Ended fund can be sold ?

(a) At a price higher than NAV
(b) At a price lower than NAV
(c) At a price same as NAV
(d) At a price which can be higher or lower or same as NAV

Correct Answer At a price which can be higher or lower or same as NAV

Answer The only way to sell a Close Ended fund before the fund closing date is by selling it
Explanation on the stock exchange where it is traded

Prices on the stock exchange for a fund can be higher or lower or same depending
on the demand / supply / liquidity etc.

Question14 Which one is the Self Regulatory Organisation (SRO) for the mutual fund industry
?
(a) SEBI
(b) Sponsors
(c) Trustees
(d) None of the above

Correct Answer None of the above

Answer The Mutual Funds industry in India is in the process of getting an SRO to oversee
Explanation its
distributors.
(AMFI is not an SRO)
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question15 Can an investor transact directly through the websites of some mutual fund
companies?
(a) Yes, they can buy / sell units on the MFs website
(b) No, this is not allowed in India

Correct Answer Yes, they can buy / sell units on the MFs website
Answer The internet gave an opportunity to mutual funds to establish direct contact with
Explanation investors.

Investors can now access the website of the mutual fund and deal directly with the
fund.

Question16 Investments owned by the scheme may be quoted in the market at higher than the
cost paid. Such gains in values on securities held are called .
(a) valuation gains
(b) Notional gains
(c) valuation losses
(d) Notional losses

Correct Answer valuation gains

Answer Investments owned by the scheme may be quoted in the market at higher than the
Explanation cost paid. Such gains in values on securities held are called valuation gains.

Similarly, there can be valuation losses when securities are quoted in the market
at a price below the cost at which the scheme acquired them.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question17 The sponsor needs to contribute a minimum of the net worth of the AMC.
(a) 25%
(b) 40%
(c) 50%
(d) 66%

Correct Answer 40%

Question18 What is the 'Goal Based approach to Financial Planning' focused on ?

(a) To generate a limited amount of money
(b) An investment plan which is focused on a specific goal
(c) An investment plan with a specific risk profile
(d) A specific option of investment

Correct Answer An investment plan which is focused on a specific goal

Answer Goal Based approach to Financial Planning is a financial plan for a specific goal.
Explanation For
example - Investments which will be used for higher studies of a child.
An alternate approach is a “comprehensive financial plan” where all the financial
goals of a person are taken together, and the investment strategies worked out on
that basis.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question19 As per the common disclosure - Investments in mutual funds are subject to market
risks and therefore .
(a) will provide insurance
(b) will not provide guarantee of returns or capital protection
(c) will provide guarantee of returns
(d) will guarantee capital protection in the long run

Correct Answer will not provide guarantee of returns or capital protection

Answer There is NO guarantee of returns or capital protection in a Mutual Fund.
Explanation

Question20 The distributors are mainly compensated through by the mutual funds.
(a) commissions
(b) salaries
(c) portfolio profits
(d) annual fees

Correct Answer commissions

Answer Agents receive commissions on the amount mobilized by them.
Explanation

Two kinds of commission are earned by distributors on their mobilization - Upfront

Commission and Trail commission.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question21 A summary of the scheme related information documents is found in the .

(a) Statement of Additional Information (SAI)
(b) Key Information Memorandum - KIM
(c) Fact Sheet
(d) Addendum

Correct Answer Key Information Memorandum - KIM

Answer Scheme Information Document (SID) and Statement of Additional Information
Explanation (SAI)
contain the details of the particular scheme and the statutory information about
the mutual fund or AMC, that is offering the scheme.
Key Information Memorandum - KIM is essentially a summary (synopsis) of the
SID and SAI. It contains the key points of these documents that are essential for
the investor to know to make a decision on the suitability of the investment for
their needs. It is more easily and widely distributed in the market. As
per SEBI regulations, every application form is to be accompanied by the KIM.

Question22 The credit rating of a bond migrates from AAA to AA+. Determine what will the
impact of this migration on the market price of the bond ?
(a) Bond price will rise
(b) Bond price will fall
(c) No change in the bond price
(d) The price can rise or fall depending on the market conditions

Correct Answer Bond price will fall

Answer Fixed income securities are exposed to rating migration risk, which could impact
Explanation the
price on account of change in the credit rating.
For example: One notch downgrade of a AAA rated issuer to AA+ will have a
negative impact on the price of the security and vice-versa for an upgrade of a
AA+
issuer.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question23 Mr. Shah gives a local cheque at 2.30 pm of Rs 30 lacs for investment in an Equity
Scheme. Which will be the applicable NAV for allotment of units to Mr. Shah ?
(a) NAV of the business day on which the funds are available for utilisation
(b) Closing NAV of the next business day
(c) Closing NAV of day immediately preceding the date of application
(d) Same day NAV if received before cut off time.

Correct Answer NAV of the business day on which the funds are available for utilisation
Answer Applicable NAV for purchases of Equity oriented funds and debt funds (except
Explanation liquid funds) in respect of transaction equal to or more than Rs. 2 lakhs - -
Irrespective of the time of receipt of application, NAV of the business day on
which the funds are available for utilisation

Question24 A Segregated Portfolio be created out of a debt fund scheme when .

(a) there is a credit event
(b) a change occurs in the fund management team
(c) interest rates move down
(d) interest rates move up

Correct Answer there is a credit event

Answer “Segregated portfolio” means a portfolio, comprising of debt or money market
Explanation instrument affected by a credit event, that has been segregated in a mutual fund
scheme.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question25 Mutual funds have to follow the regulations of Reserve Bank of India (RBI) for
investments in .
(a) Securities market
(b) Gold
(c) Money market
(d) Commodity market

Correct Answer Money market

Answer RBI regulates the money market and foreign exchange market in the country.
Explanation Therefore, mutual funds need to comply with RBI’s regulations
regarding investment in the money market, investments outside the country etc.

Question26 With which agency are the mutual fund distributors registered?
(a) Securities and Exchange Board of India
(b) Fund Accounting Team
(c) Depositories
(d) Association of Mutual Funds in India

Correct Answer Association of Mutual Funds in India

Question27 Investment objective is closely linked to .

(a) Plan
(b) Scheme
(c) Option
(d) Maturity

Correct Answer Scheme

Answer Every scheme has a pre-announced investment objective.
Explanation
When investors invest in a mutual fund scheme, they are effectively buying into its
investment objective.

Question28 In the top-down approach, sector allocation precedes stock selection - True or False
?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer In a top down approach, the portfolio manager decides how to distribute the
Explanation investible corpus between countries and sectors. Thereafter, the good stocks
within the identified sectors are selected for investment. Thus sector allocation is a
key decision.

In a bottom-up approach, not much importance is given to the country-allocation

and sector-allocation. If a stock is good, it is picked for investment.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question29 At what price are the bonus units issued to the unitholder?
(a) The bonus units are allotted free of cost
(b) At the prevailing NAV divided by the bonus ratio
(c) The price is decided by the AMC in consultation with the trustees
(d) At the prevailing NAV

Correct Answer The bonus units are allotted free of cost

Answer In a bonus issue, the investor does not pay anything. The fund allots new units for
Explanation free. Thus, in a 1:3 bonus issue, the investor is allotted 1 new unit (free) for every 3
units already held by the investor.

Question30 Which ofthefollowingcannotbeconsidered forthe purposeofselecting a

scheme’s benchmark?
(a) Scheme’s asset allocation pattern
(b) Mutual fund scheme’s investment objective
(c) Scheme’s past returns
(d) Investment strategy of the MF scheme

Correct Answer Scheme’s past returns

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

The schemes past performance is not considered while selecting the benchmark.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question31 The specialty of a Sector Fund is that it invests in various economic sectors - True or
False ?
(a) FALSE
(b) TRUE

Correct Answer FALSE

Answer Sector Funds are sector specific and invest in various companies of a sepecific sector
Explanation - for eg. Banking Sector Fund will invest in shares of various Banks.

Question32 Investors have bought 20 crore units of a mutual fund scheme at Rs. 10 each. The
scheme has thus mobilized 20 crore units X Rs. 10 per unit i.e. Rs 200 crore. An
amount of Rs. 140 crore is invested in equities. The balance amount of Rs 60
crore, mobilized from investors, was placed in bank deposits. Interest and
dividend receivable (accrued but yet not received) by the scheme is Rs 8 crore,
scheme expenses payable (accrued but not paid yet) is Rs 4 crore. Calculate the
scheme’s NAV per unit.

(a) Rs. 10.00

(b) Rs. 20.00
(c) Rs. 10.20
(d) Rs. 20.40

Correct Answer Rs. 10.20

Answer NAV = (Current value of investments held + Income accrued + Current assets –
Explanation Current liabilities – Accrued expenses) / No. of outstanding units

Current Value of investments is Rs 140 crores in equities + Rs 60 crores in bank

deposits = Rs 200 crores

Income accrued = Rs 8 crores , Accrued expenses = Rs 4 crores

Thus NAV = 200 cr + 8 cr - 4 cr / 20 cr

= 204 cr / 20 cr = Rs. 10.20

NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question33 style is an approach of picking up stocks, which are valued

lower, based on fundamental analysis.
(a) Dividend Yield
(b) Value Investing
(c) Growth Investing
(d) Top Down Approach

Correct Answer Value Investing

Question34 Which of the following statements is True?

(a) Hindu Undivided Families (HUFs) are not allowed to invest in mutual fund schemes
(b) Minors cannot invest in mutual fund schemes
(c) Foreign investors can invest in Indian mutual fund schemes, provided they have
completed the Know-Your-Client (KYC) formalities

Correct Answer Foreign investors can invest in Indian mutual fund schemes, provided they have
completed the Know-Your-Client (KYC) formalities
Answer Foreign investors can invest in equity schemes of MFs registered with SEBI
Explanation after completing KYC process.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question35 Day to day management of the MF schemes is handled by the Trustees - True or
False ?
(a) FALSE
(b) TRUE

Correct Answer FALSE

Answer Day to day management of the schemes is handled by an AMC.
Explanation

The AMC is appointed by the sponsor or the Trustees.

Question36 Which of the following is an advantage of mutual funds?

(a) Convenience to buy stocks and bonds directly from the mutual fund
(b) Customized portfolio
(c) Economies of scale

Correct Answer Economies of scale

Answer Large investment corpus of a mutual fund leads to various other economies of scale.
Explanation For instance, costs related to investment research and office space gets spread
across investors.

Further, the higher transaction volume makes it possible to negotiate better terms
with brokers, bankers and other service providers.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question37 If the fund manager is expecting the interest rates to fall, then the manager
(a) would buy fixed rate instruments of shorter tenor
(b) would buy floating rate instruments
(c) would buy longer term fixed rate debt securities.
(d) None of the above

Correct Answer would buy longer term fixed rate debt securities.
Answer When the interest rates fall, the current debt instruments of longer duration
Explanation become more valuable.

Question38 If the fund manager of a debt fund is expecting the interest rates to rise, he will
.
(a) increase the exposure to longer term fixed rate debt securities
(b) switch the portfolio towards a higher proportion of floating rate instruments
(c) The fund Manager cannot do much as all his money is generally fully invested
(d) None of the above

Correct Answer switch the portfolio towards a higher proportion of floating rate instruments
Answer When interest rates rise, the current debt instruments become less valuable.
Explanation

So by buying Floating Rate instruments ( floating rate i.e. a rate linked to some
other rate that may be prevailing in the market ) he can be relatively safer.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question39 For life-long investment in gold one should prefer Gold Futures as against Gold
ETF -
True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Gold futures contracts are traded in commodity exchanges and have an expiry date.
Explanation

Gold ETF's on the other hand have no expiry date. They can be bought and the
delivery takes place in Demat Form which can be held as long as you want.

Question40 Each mutual fund scheme must have a stated investment objective. State whether
True or False.
(a) TRUE
(b) FALSE

Correct Answer TRUE

Question41 The maximum initial commission that an AMC can pay to distributors is .
(a) 0.10%
(b) 0.50%
(c) 2.50%
(d) NIL

Correct Answer NIL

Answer As per the new rules : Upfront commission to distributors will be paid by the
Explanation investor directly to the distributor, based on his assessment of various factors
including the service rendered by the distributor.

Question42 KIM has to be updated every .

(a) three months
(b) six months
(c) one year
(d) five year

Correct Answer one year

Answer KIM is to be updated at least once a year.
Explanation
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question43 Mutual funds in India are governed by SEBI (Mutual Fund) Regulations, 1996 -
True
or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Question44 is the regulator for the National Pension System.

(a) AMFI
(b) COMMERCE MINISTRY
(c) SEBI
(d) PFRDA

Correct Answer PFRDA

Answer Pension Funds Regulatory and Development Authority (PFRDA) is the regulator
Explanation for
the National Pension System.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question45 Which of the following statements is True with respect to celebrity endorsement for
mutual funds?
(a) Celebrities can endorse only on-going mutual fund schemes
(b) Celebrities can endorse only NFOs
(c) SEBI has permitted celebrity endorsements for promotion of individual mutual
fund
schemes
(d) SEBI has permitted celebrity endorsement at the industry level for the purpose of
increasing the awareness of mutual funds

Correct Answer SEBI has permitted celebrity endorsement at the industry level for the purpose of
increasing the awareness of mutual funds
Answer SEBI has permitted celebrity endorsements at industry level for the purpose
Explanation of increasing awareness of Mutual Funds as a financial product category with a
few restrictions like - The celebrity endorsements shall not promote a scheme of a
particular Mutual Fund or be used as a branding exercise of a Mutual Fund
house/AMC etc.

Question46 The transparency levels in mutual funds are very low. State whether True or False.
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer The structure of the mutual funds and the regulations by SEBI have ensured that
Explanation investors get full transparency about their investments.

There are three essential places from where the investor can get
enough information for taking informed decisions, viz., scheme related
documents
(SID, SAI, and KIM), portfolio disclosures, and the NAV of the scheme.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question47 If an investor wants to invest a sum of below Rs 50000 in cash in a Mutual Fund
then
PAN card is not required - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Small investors, who may not be tax payers and may not have PAN/bank accounts,
Explanation 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.

This is subject to compliance with Prevention of Money Laundering Act, 2002 and
SEBI Circulars on Anti Money Laundering (AML) and other applicable AML
rules, regulations and guidelines.

Question48 What is the maximum Total Expense Ratio chargeable in case of index funds?
(a) It depends as the TER changes in line with the size of the scheme
(b) Any amount that the AMC may deem appropriate
(c) 1 percent of the daily net assets
(d) 1.5 percent of the daily net assets

Correct Answer 1 percent of the daily net assets

Answer In case of an index fund scheme or exchange traded fund, the total expense ratio
Explanation of the scheme including the investment and advisory fees shall not exceed 1.00 per
cent of the daily net assets.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

Question49 Whose KYC needs to be completed in case of an application by a minor?

(a) The minor
(b) The guardian
(c) Any family member of the minor
(d) No KYC is required in case of applications by minors

Correct Answer The guardian

Answer An investment made for a minor (less than 18 years) is done through a guardian
Explanation who complies with the KYC and PAN requirements and all other formalities as if
the investment was for themselves.

Question50 AMFI is an industry body, but not a self-regulatory organization - True or False ?
(a) FALSE
(b) TRUE

Correct Answer TRUE

Answer Asset Management Companies in India are members of Association of Mutual
Explanation Funds
in India (AMFI), an industry body that has been created to promote the interests
of the mutual funds industry.
AMFI is neither a regulatory body nor a Self-Regulatory Organisation (SRO).

=================
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS PRACTICE TEST NO.
5

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LAST DAY REVISION TEST NO. 1

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

LAST DAY REVISION TEST NO. 1

Question 1 Mutual funds today are benchmarked to the Total Return variant of an Index (TRI)
and not to Price Return variant of an Index (PRI). What is the advantage of TRI over
PRI? A) It ensures that the performance comparison is fair B) Increases transparency
(a) Only A
(b) Only B
(c) Both A and B

Correct Answer Both A and B

Answer Earlier, the Mutual Fund schemes were benchmarked to the Price Return variant of
Explanation an Index (PRI). PRI only captures capital gains of the index constituents. Now the
mutual fund schemes are benchmarked to the Total Return variant of an Index
(TRI). The Total Return variant of an index takes into account all dividends/interest
payments that are generated from the basket of constituents that make up the
index in addition to the capital gains.
Such a change was required to ensure that the performance comparison is [Link]
shift to TRI has been
another one in the direction of increasing transparency of mutual funds.

Question 2 Suresh see's that his friends are investing in a finance scheme which is promising
very high returns (a ponzi scheme). He also blindly invests in the same scheme.
Which bias is Suresh exhibiting?
(a) Herd mentality
(b) Loss Aversion
(c) Confidence bias
(d) Anchoring

Correct Answer Herd mentality

Answer In behavioral finance, Herd Mentality bias refers to investors’ tendency to follow
Explanation and copy what other investors are doing. They are largely influenced by emotion
and instinct, rather than by their own independent analysis.
This often works against investors interests in the financial markets.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 3 In which of these funds is Securities Transaction Tax (STT) not charged?
(a) Fixed Maturity Plans (FMPs)
(b) Equity index ETFs
(c) ELSS - Equity Linked Savings Scheme
(d) Blue chip equity funds

Correct Answer Fixed Maturity Plans (FMPs)

Answer Securities Transaction Tax is not applicable to transactions in debt securities or debt
Explanation mutual fund schemes.
Fixed Maturity Plans are close-ended debt funds and STT is not applicable on them.

Question 4 An International Fund is investing in US stocks . What would be the impact on it if

US Dollar depreciates against the Indian Rupee?
(a) The NAV of the scheme in Indian Rupees will depreciate
(b) The NAV of the scheme in Indian Rupees will appreciate
(c) No impact on the fund as its investing in stocks and not currency

Correct Answer The NAV of the scheme in Indian Rupees will depreciate
Answer International Equity funds :
Explanation
When an Indian investor invests in equities abroad, he is essentially taking two
exposures:
• An exposure on the international equity market.
• An exposure to the exchange rate of the rupee. If the investor invests in the US,
and the US Dollar becomes stronger during the period of his investment, he
benefits; if the US Dollar weakens (i.e. Rupee becomes stronger), he loses or the
portfolio returns will be lower.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 5 How can an investor remit money in an Indian mutual fund from abroad?
(a) Through Society for Worldwide Interbank Financial Telecommunication (SWIFT)
(b) Through Immediate Payment Service (IMPS)
(c) Through Real time gross settlement (RTGS)
(d) Through National electronic funds transfer (NEFT)

Correct Answer Through Society for Worldwide Interbank Financial Telecommunication (SWIFT)
Answer For investments in mutual funds, remittance can be made directly to the bank
Explanation account of the scheme through Real Time Gross Settlement (RTGS)/National
Electronic Funds Transfer (NEFT) facilities (for transfers within India) or SWIFT
transfer (for transfers from abroad).
SWIFT transfers tend to pass through multiple banks in different geographies, and
multiple levels within the same bank, resulting in delays.

Question 6 Which of these statement(s) is / are TRUE ?

A) The Asset Management Company (AMC) is not accountable for the procedures
for detecting incorrect valuation
B) It is mandatory for the AMC to disclose the valuation policy
(a) Only A is true
(b) Only B is true
(c) Both A and B are true
(d) Both A and B are false

Correct Answer Only B is true

Answer The responsibility of true and fairness of valuation and correct NAV shall be of the
Explanation Asset Management Company, irrespective of disclosure of the approved valuation
policies and procedures.
Disclosure of the valuation policy and procedures approved by the Board of the
AMC shall be made in Statement of Additional Information, on the website of the
AMC to ensure transparency of valuation norms to be adopted by asset
management company.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 7 When is the Scheme Information Document (SID) updated?

(a) Every year
(b) Every month
(c) Every two years
(d) As per AMC decision

Correct Answer Every year

Answer Scheme Information Document (SID) is updated every year.
Explanation

Question 8 In case of Exchange Traded Funds (ETFs) , the minimum investment in securities of a
particular index (which is being replicated/ tracked) shall be percent of total
assets.
(a) 100
(b) 95
(c) 85
(d) 75

Correct Answer 95
Answer Index Funds/Exchange Traded Fund are open-ended scheme replicating/tracking
Explanation a specific index. The minimum investment in securities of a particular index (which
is being replicated/ tracked) shall be 95 percent of total assets.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 9 Identify the TRUE statement with respect to benchmark for Gold ETFs.
(a) CRISIL Gilt fund index is widely used as a benchmark for Gold ETFs
(b) Gold ETFs are benchmarked against gold prices
(c) There can be no benchmark for Gold ETFs
(d) Internationally it is proven that there is no need of any type of benchmark for Gold
ETFs

Correct Answer Gold ETFs are benchmarked against gold prices

Answer Gold price would be the benchmark for Gold Exchange Traded Funds (ETFs).
Explanation

Question 10 Mr. Sonu reads about the risk factors given in the offer document and invests in an
equity mutual fund scheme. After a few days the stock market crashes and NAV of
the equity fund goes down. What can Mr. Sonu do in such a situation?
(a) He can appeal to SEBI and get a remedy
(b) He can get a remedy from the AMC
(c) He is not likely to get any remedy from the AMC
(d) He is likely to get a remedy from the trustees of the AMC

Correct Answer He is not likely to get any remedy from the AMC
Answer The offer document of a mutual fund cleary states that - 'Mutual fund investments
Explanation are subject to market risks'.
When the fund invests in equity market where prices fluctuate a lot, the NAV of the
fund is likely to witness huge fluctuations. So the AMC nor SEBI nor anyone else can
offer a remedy. The fluctuations are a part of equity markets.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 11 As per SEBI's mandate, AMCs has to put in place a due diligence process to regulate
distributors. Which of these mutual fund distributors would not be subjected to the
due diligence process?
(a) AUM raised of Rs. 60 crore across industry in the non-institutional category
(b) Commission received of over Rs. 125 lakhs p.a. across industry
(c) Multiple point presence in more than 25 locations
(d) Commission received of over Rs. 75 Lakhs from a single mutual fund

Correct Answer AUM raised of Rs. 60 crore across industry in the non-institutional category
Answer SEBI has mandated AMCs to put in place a due diligence process to regulate
Explanation distributors who
qualify any one of the following criteria:
a. Multiple point presence (More than 20 locations)
b. AUM raised over Rs. 100 crore across industry in the non-institutional category
but including high networth individuals (HNIs)
c. Commission received of over Rs. 1 Crore p.a. across industry
d. Commission received of over Rs. 50 Lakhs from a single mutual fund
In the above question, the mutual fund distributor has raised an AUM of Rs 60
crores across industry in the non-institutional category, which is less than Rs 100
crores as per point (a) above.

Question 12 The interim changes in an mutual fund scheme are updated to the investors through
.
(a) Key Information Memorandum (KIM)
(b) Statement of Additional Information (SAI)
(c) Addendum
(d) Scheme Information Document (SID)

Correct Answer Addendum

Answer While the SID, SAI and KIM need to be updated periodically, the interim changes are
Explanation updated through the issuance of Addendum.
The addendum is considered to be a part of the scheme related documents, and
must accompany the KIM.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 13 Which of these is NOT included in the Key Information Memorandum (KIM) ?
(a) Dates of Issue Opening, Issue Closing and Re-opening
(b) Investment Objective
(c) Risk profile of the scheme
(d) Functions of the sponsor, trustee and AMC

Correct Answer Functions of the sponsor, trustee and AMC

Answer Some of the key items contained in the KIM are as follows:
Explanation
• Name of the AMC, mutual fund, Trustee, Fund Manager and scheme
• Dates of Issue Opening, Issue Closing and Re-opening for Sale and Re-purchase
• Investment Objective
• Asset allocation pattern of the scheme
• Risk profile of the scheme i.e. a snapshot of the risk to the principal invested,
the suitable investment horizon for investment and the type of securities that the
scheme will invest in.
• Plans and Options
• Benchmark Index
• Dividend Policy
• Performance of scheme and benchmark over last 1 year, 3 years, 5 years and
since inception.
• Expenses of the scheme
• Information regarding registration of investor grievances

Question 14 Which of these investors is allowed to do a nomination?

(a) Only SIP investors
(b) Only Equity Mutual Fund investors
(c) Only Institutional Investors
(d) Only Individual Investors

Correct Answer Only Individual Investors

Answer Only individual investors can make a nomination.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 15 In which of these options will the unit balance increase in the mutual fund investors
folio without any transaction being done by the investor?
(a) Redemption
(b) Dividend Re-investment option
(c) Dividend Payout option
(d) Growth option

Correct Answer Dividend Re-investment option

Answer In a Dividend Re-investment option, the investor does not receive the dividend in
Explanation his bank account; the amount is reinvested in the same scheme and additional units
are allotted to the investor.
(The reinvestment happens at the ex-dividend NAV)

Question 16 In India, the Mutual funds are constituted as .

(a) Limited Company
(b) Non-Government Organisation
(c) Self Regulatory Organisations
(d) Trusts

Correct Answer Trusts

Answer Mutual funds are constituted as Trusts. Therefore, they are governed by the Indian
Explanation Trusts Act, 1882
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 17 is the risk of mis-pricing or improper valuation of derivatives.

(a) Counterparty Risk
(b) Model Risk
(c) Basis Risk
(d) Credit risk

Correct Answer Model Risk

Answer Model Risk is the risk of mis-pricing or improper valuation of derivatives.
Explanation

Question 18 Which of these funds are suitable for investors who have a long term investment
horizon and are looking for growth?
(a) Income Funds
(b) Long duration funds
(c) Equity funds
(d) Liquid funds

Correct Answer Equity funds

Answer Although equities as an asset class are volatile investments but over a long duration
Explanation of time they tend to give good growth.
Income funds, Long duration funds and Liquid funds are all debt funds the returns
from them will only be the interest received. They are more for security and steady
returns and not for growth.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 19 What is the investment objective of a mutual fund which seeks to grow in value
over a period of time?
(a) Capital Adequacy
(b) Capital Appreciation
(c) Safety of Capital
(d) Regular Returns

Correct Answer Capital Appreciation

Answer Equity funds generally grow in value over a period of time and their investment
Explanation objective is - To generate capital appreciation/income from a
portfolio, predominantly invested in equity and equity related instruments

Question 20 The minimum investment in G-Secs (as a percentage of total assets) in case of a Gilt
Fund is .
(a) 90%
(b) 95%
(c) 80%
(d) 75%

Correct Answer 80%

Answer An Gilt fund is open-ended debt scheme investing in government securities
Explanation across maturity. The minimum investment in G-secs is defined to be 80 percent of
total assets (across maturity).
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 21 Investors can choose to change their distributor or go direct and AMCs will need to
comply after getting a 'No Objection Certificate' from the existing distributor - True
or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Investors can choose to change their distributor or go direct.
Explanation
In such cases, AMCs will need to comply, without insisting on No Objection
Certificate from the existing distributor.

Question 22 Dividend warrants have to be sent to investors within 30 days of dividend

declaration - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 23 The principle of caveat emptor (let the buyer beware) applies to mutual fund
investments - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer The principle of caveat emptor (let the buyer beware) applies to mutual fund
Explanation investments. So, the unit-holder cannot seek legal protection on the grounds of not
being aware, especially when it comes to the provisions of law, and matters fairly
and transparently stated in the Offer Document.

Question 24 Passive funds are safe, as the NAV of such funds do not go down even when the
respective markets fall. State whether this is True or False.
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Passive funds are those funds in which the fund manager has no say on the selection
Explanation of stocks or strategies etc. He has to invest as per the index which the fund follows -
for eg - NSE Nifty fund.
Passive funds cannot be said to be safe as if the index falls, the NAV of these funds
will also fall.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 25 As SEBI has banned , the Sale Price of a MF unit is the same as NAV.
(a) Entry Load
(b) Exit Load
(c) Commission Refund
(d) SIP Transaction Charges

Correct Answer Entry Load

Answer For eg - If the NAV of a MF unit is Rs 50 and entry load was 1% then the unit was
Explanation sold to the investors at Rs 50 + 1 % ie. Rs 50.50.
Now with the ban on entry loads the Sale price is equal to NAV ( Rs 50 in above
example)

Question 26 The fund that takes contrary positions in different markets/securities such that the
risk is neutralized and return is earned are called .
(a) Thematic funds
(b) Dividend yield schemes
(c) Arbitrage funds
(d) Sector funds

Correct Answer Arbitrage funds

Answer Arbitrage funds take opposite positions in different markets / securities, such that
Explanation the risk is neutralized, but a return is earned. For instance, by buying a share in BSE,
and simultaneously selling the same share in the NSE at a higher price.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 27 While choosing an Option in a Mutual Fund scheme, taxation and liquidity needs are
a major factor in deciding which option ( Growth or Dividend Payout) to go for -
True or False ?
(a) FALSE
(b) TRUE

Correct Answer TRUE

Question 28 In the non-equity oriented funds, the rate of long term capital gains tax is .
(a) 10 percent with indexation
(b) 10 percent without indexation
(c) 20 percent with indexation
(d) 20 percent without indexation

Correct Answer 20 percent with indexation

Answer The rate of tax on long term capital gains from non-equity-oriented funds is 20%
Explanation with indexation.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 29 Benchmarking helps in assessing under-performance or out-performance - True or

False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer How well or how bad did a scheme perform can be assessed by comparing its
Explanation performance to a pre-defined comparable – ie. benchmark – against which the
scheme can be compared.

Question 30 Which of the following type of analysis tracks the price and volume data related to
trading in the security?
(a) Situation analysis
(b) Technical analysis
(c) Fundamental analysis
(d) Quantitative analysis

Correct Answer Technical analysis

Answer Technical Analysts believe that price behaviour of a share over a period of time
Explanation throws up trends for the future
direction of the price. Technical Analysts therefore study price-volume charts of the
company’s shares to decide support levels, resistance levels etc.
(Fundamental analysis is a study of the business and financial statements of a firm
in order to identify securities suitable for the strategy of the schemes as well as
those with high potential for investment returns and where the risks are low.)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 31 The Mutual Fund application form is attached to the .

(a) KIM
(b) SAI
(c) SID
(d) AMC Memorandum

Correct Answer KIM

Answer KIM is a summary of the SID and SAI. It is more easily and widely distributed in the
Explanation market.
As per SEBI regulations, every application form is to be accompanied by the KIM.

Question 32 AMC directors are appointed with the permission of SEBI - True or False?
(a) FALSE
(b) TRUE

Correct Answer FALSE

Answer AMC directors are appointed with the permission of Trustees.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 33 Who handles the day-to-day management of the mutual fund?

(a) Unit holders
(b) Mutual Fund Trustees
(c) Registrar and Transfer Agency
(d) Asset Management Company

Correct Answer Asset Management Company

Answer Day to day management of the schemes is handled by an Asset
Explanation Management Company (AMC). The AMC is appointed by the sponsor or the
Trustees.

Question 34 Stock selection is important in bottom-up approach - True or False ?

(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Stock selection is important in bottom-up approach.
Explanation
In a top-down approach, sector allocation is the key decision.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 35 In mutual funds, the assets are held by .

(a) Fund Manager of that scheme
(b) Registrar and Transfer Agents
(c) Custodian
(d) Trustees

Correct Answer Custodian

Answer The custodian has custody of the assets of the fund.
Explanation
Also as a part of this role, the custodian needs to accept and give delivery of
securities of the various schemes of the fund.

Question 36 Statement of Account is to be sent to investors within days of NFO closure.

(a) 3
(b) 5
(c) 10
(d) 30

Correct Answer 5
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 37 An investor invested in scheme A when the scheme’s NAV was Rs. 120 per unit. The
investor redeemed the investments at the NAV of Rs. 135. Calculate the simple
return.
(a) 10.00 percent
(b) 12.50 percent
(c) 15.00 percent
(d) 11.11 percent

Correct Answer 12.50 percent

Answer We have to use the Holding Period formula ie. :
Explanation
[ {End Price - Begin Price + Income (If Any)} / (Begin Price) ]
= [ ( 135 - 120) / 120 ]
0.125
0.125 x 100 = 12.50%

Question 38 Risk appetite of investors is assessed through .

(a) Asset Allocators
(b) Financial Plan
(c) Risk Profilers
(d) Risk Appetizers

Correct Answer Risk Profilers

Answer Risk Profilers usually revolve around investors answering a few questions, based on
Explanation which the risk appetite score gets generated.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 39 Mutual funds are allowed to charge differential exit loads based on the amount of
investment.
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer While charging exit loads, no distinction will be made among unit holders on the
Explanation basis of the amount of subscription.

Question 40 Generally long term investment decisions taken through fundamental analysis and
for shorter term speculative decisions, including intra-day trading one uses
Technical Analysis - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer It is generally agreed that longer term investment decisions are best taken through
Explanation a fundamental analysis approach.

Technical analysis is generally used for shorter term speculative decisions, including
intra-day trading.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 41 Which amongst the following is a measure of risk-adjusted returns of mutual fund
scheme?
(a) Standard deviation
(b) Beta
(c) Variance
(d) Sharpe ratio

Correct Answer Sharpe ratio

Answer Sharpe ratio is a very commonly used measure of risk-adjusted returns.
Explanation

Question 42 Nomination and Pledge options are not available for mutual fund investors - True or
False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Nomination and Pledge options are available for mutual fund investors.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 43 What is real rate of return?

(a) Return that the investor gets after adjusting inflation
(b) Return that the investor gets after adjusting the risks
(c) Return that the investor gets after taxes
(d) Return that the investor gets after payment of all expenses

Correct Answer Return that the investor gets after adjusting inflation
Answer The returns on investment without factoring inflation is known as “nominal rate”.
Explanation However, when this number is adjusted for inflation, one gets “real rate of return”.

Question 44 Fundamental analysis is evaluation of the strength of the company’s price-volume

charts - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Technical analysis is evaluation of the strength of the company’s price-volume
Explanation charts.
Fundamental Analysis is the study of the company’s fundamentals - financial
statements, quality of management, competitive position in its product / service
market etc.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 45 Trail commissions are linked to valuation of portfolio in the market - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Trail Commission is calculated on net assets so the distributors benefit from
Explanation increase in net assets arising out of valuation gains in the market.
If the value of portfolio rises the trail commission also rises.

Question 46 What is the Absolute Return for a Mutual Fund investor if he had bought at NAV 20
and sold at NAV 40 after two years ?
(a) 100%
(b) 50%
(c) 25%
(d) Insufficient Data

Correct Answer 100%

Answer Absolute Return or Simple Return is simply the change in the value of an investment
Explanation over a period of time.
Its not calculated on a yearly basis etc.
In the above example - A person bought a MF at NAV 20 and sold it after 2 years at
NAV 40, then the Absolute Return is :
(Sale Price - Buy Price / Buy Price) X 100
40 - 20 / 20 = 1 or 100% absolute return
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 47 In the Scheme Information Document (SID), the condensed financial information
(for schemes launched in last 3 financial years) is mentioned - True pr False ?
(a) FALSE
(b) TRUE

Correct Answer FALSE

Answer Condensed financial information (for schemes launched in last 3 financial years) is
Explanation mentioned in the Statement of Additional Information (SAI).

Question 48 Tax Deferral is a key feature of .

(a) Dividend Option
(b) Growth Option
(c) Arbitrage Fund
(d) Liquid Schemes

Correct Answer Growth Option

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 49 Mr. Mahesh gives his investment application form to the distributor at 10 am. The
distributor then goes to the Mutual Fund office and submits this application at 1
pm. What is the cut off time for this investment ?
(a) 1:00 PM
(b) 10:00 AM

Correct Answer 1:00 PM

Answer The cut off time is when the investment is submitted to the PoA - Point of
Explanation Acceptance is relevant – not the time when the investor submits the transaction
request to the distributor.

Question 50 Accumulation is the phase applicable to .

(a) Young Unemployed
(b) Young Unmarried
(c) 10th Pass
(d) Retired Manager

Correct Answer Young Unmarried

Answer Accumulation is the stage when the investor gets to build his wealth.
Explanation
It covers the earning years of the investor i.e. the phases of the life cycle from Young
Unmarried to Pre-Retirement.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 51 The distribution of an investor’s portfolio between different asset classes is called
asset allocation - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Question 52 cannot invest in Gold Mining Companies.

(a) Gold Sector Fund
(b) Gold ETF
(c) Tax Saving ELSS Fund
(d) Balanced Fund

Correct Answer Gold ETF

Answer Gold ETF merely tracks the gold prices. It does not invest in any Gold Mining
Explanation Company.

All other funds can invest in Gold Mining Companies as per the fund stratergy.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 53 For next 30 days after a New Fund Offer closes, an investor can buy units at face
value - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Post-NFO, when investors buy into a scheme, they need to pay a price that is linked
Explanation to its NAV.

Question 54 Is Real Estate Fund a physical asset or a financial asset ?

(a) Physical Asset
(b) Financial Asset

Correct Answer Financial Asset

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 55 If an Institutional Investor is making an application for investing in a Mutual Fund,

which additional document is required ?
(a) Audited Accounts for the last 3 years
(b) Bank Statements
(c) Board Resolution
(d) Approval letter from SEBI

Correct Answer Board Resolution

Question 56 strategy is supposed to be a risky strategy of asset allocation.

(a) Strategic Asset Allocation
(b) Tactical Asset Allocation
(c) Both 1 and 2
(d) None of the above

Correct Answer Tactical Asset Allocation

Answer Tactical Asset Allocation is the strategy when the investor presumes the likely
Explanation behaviour of the market and goes over weight on equities. This is very risky.
Strategic Asset Allocation is as per risk profile of an individual depending on the
individuals age etc. This is a safer strategy.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 57 As regards cut-off timing, the time when it is submitted to the Points of Acceptance
PoA is relevant, not the time when the investor submits the transaction request to
the distributor - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Question 58 An elderly couple who have no immediate family members should ideally invest in
.
(a) ELSS Funds
(b) Debt Funds
(c) Sectoral Funds
(d) Blue Chip Equity Funds

Correct Answer Debt Funds

Answer Debts funds carry the least amount of risk so they can be recommended to the
Explanation elderly couple.
The other funds are Equity oriented and carry huge market risks.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 59 To source the data required to track the performance of mutual funds most
offer free tools on their websites for this purpose.
(a) AMC's
(b) Distribution Houses
(c) MF Research companies
(d) All of the above

Correct Answer All of the above

Answer An investor who wants to study the performance of a MF by collecting daily NAV
Explanation etc. from the newspapers can find it frustratingly time consuming.
However ready-made solutions are available in the market. Many AMCs,
distribution houses and mutual fund research houses offer free tools in their
website.

Question 60 Gold ETF's cannot be bought by retail investors - True or False ?

(a) FALSE
(b) TRUE

Correct Answer FALSE

Answer Gold ETF's can be easily bought by retail investors as the minimum traded quantity
Explanation is 1 unit ie. 1 gram.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 61 Mutual Fund offer various plans/options in accordance to the risk profile of the
investor - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer MF's have various schemes like Large Cap Funds, Mid Cap Funds. Sectoral Funds etc.
Explanation to suit varied investment requirements.
(Plans and Options like Dividend / Growth etc. form a part of the scheme)

Question 62 The dividend received by a Mutual Fund investor will be taxed at a rate of 12.5% -
True or False ?.
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer As per the Union Budget presented by the Finance Minister in February 2020, the
Explanation dividend distribution tax has been done away with, whereas the dividend
would henceforth be added to the taxable income of the assessee for the year. This
means, the dividends would be taxable in the hands of the recipient at the
applicable tax rate.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 63 An Index fund has an beta of 1 - State True or False ?

(a) FALSE
(b) TRUE

Correct Answer TRUE

Answer Beta is a measure of risk of a security or a portfolio as compared to the market ie.
Explanation Index.
Since an Index fund invests in shares which are a part of the index, the NAV will rise
or fall as per the movements of index. So the beta is 1.

Question 64 ‘Please read the scheme related documents carefully’ - which documents does this
line refer to?
(a) Scheme Information Document and Statement of Additional Information
(b) Statement of Additional Information and fund fact sheet
(c) Trust deed and Key Information Memorandum
(d) Scheme Information Document and audited balance sheet of the Asset
Management Company

Correct Answer Scheme Information Document and Statement of Additional Information

Answer “Mutual fund investments are subject to market risks. Please read the scheme
Explanation related documents carefully before investing.” - The scheme related documents
are Scheme Information Document (SID) and Statement of Additional Information
(SAI).
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 65 Long term debt funds would be sensible in declining interest rate scenarios - True or
False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer As yields in the market goes down, debt securities gain in value.
Explanation
Therefore, long term debt funds would be sensible in declining interest rate
scenarios.

Question 66 Which of the below expenses can be charged to a fund ?

(a) Expenses to manage a fund
(b) Expenses to launch a new fund
(c) Expenses done by the AMC
(d) Expenses done by the Investors

Correct Answer Expenses to manage a fund

Answer Earlier expenses to launch a fund were charged to the fund but now they cannot.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 67 The Transaction Slips are used by .

(a) First time investors of Mutual Funds
(b) NFO Investors
(c) Existing Investors
(d) Relatives of Existing Investors

Correct Answer Existing Investors

Answer For a first time investment in a mutual fund Full application form is to be filled .
Explanation
Then once an investor has a folio with a mutual fund, subsequent investments / sale
with the same mutual fund do not call for the full application form. Only Transaction
Slip needs to be filled and submitted.

Question 68 While selling mutual fund products of the distributor’s group/affiliate/associates,

the distributor shall make disclosure to the customer regarding the conflict of
interest arising from the distributor selling such products - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 69 Mutual funds are constituted as and therefore, they are governed by the
.
(a) Companies, Indian Companies Act
(b) Trusts, Indian Trusts Act
(c) Investment Agencies, SEBI Act
(d) NGOs, NGO Act

Correct Answer Trusts, Indian Trusts Act

Question 70 Relaxation in documentation requirements for micro-SIPs is available for

.
(a) Non Resident Indians
(b) Non Individulas
(c) Hindu Undivided Family
(d) None of the Above

Correct Answer Non Resident Indians

Answer Relaxation in documentation requirements for micro-SIPs is not available for HUFs
Explanation and non-individuals.
Such relaxation is available for NRIs.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 71 Every trust has beneficiaries - True or False ?

(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust,
Explanation are the investors who invest in various schemes of the mutual fund.
The Trust acts through its trustees. Therefore, the role of protecting the interests of
the beneficiaries (investors) is that of the Trustees.

Question 72 arises due to a difference in the price movement of the derivative vis-Ã -
vis that of the security being hedged.
(a) Model Risk
(b) Interest rate risk
(c) Counterparty Risk
(d) Basis Risk

Correct Answer Basis Risk

Answer Basis Risk arises due to a difference in the price movement of the derivative vis-à-vis
Explanation that of the security being hedged.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 73 What is the restriction on a mutual fund scheme investing in the equity instruments
of a company?
(a) 2% of the net assets
(b) 5% of the net assets
(c) 7.5% of the net assets
(d) 10% of the net assets

Correct Answer 10% of the net assets

Answer The Mutual Fund under all its schemes shall not own more than 10 percent of
Explanation a company’s paid up capital bearing voting rights. Provided no sponsor of a
mutual fund, its associate or group company including the Asset Management
Company of the fund, through the schemes of the mutual fund or otherwise,
individually or collectively, directly or indirectly, have 10 percent or more of the
shareholding or voting rights in the asset management company or the trustee
company of any other mutual fund.

Question 74 A Board Resolution is not required for an institutional investor to invest in Mutual
Funds if the Memorandum and Articles of Association permit it to do so - True or
False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer A Board Resolution is required as an authorisation for the investing institution to
Explanation invest.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 75 There is no Tax Deducted at Source (TDS) on dividend payments or re-purchase

payments of Mutual Funds for Indian investors - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer In case of dividends from mutual fund schemes, even for resident Indians, TDS is
Explanation applicable.

There is no TDS on re-purchase proceeds to resident investors.

Question 76 ‘To achieve growth by investing in equity and equity related investments, along with
income generation by investing in debt and money market instruments’ ,• would be
the investment objective of a .
(a) debt fund
(b) balanced scheme
(c) ELSS Fund
(d) Sectoral Equity fund

Correct Answer balanced scheme

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 77 Which of the following is an important aspect of an OFFER DOCUMENT ?

(a) To inform the investors about the AMC's views on Stock Markets
(b) To inform the investors on the performance of the scheme
(c) To provide a comparison of the schemes
(d) To inform the investors on the detailed information about the scheme

Correct Answer To inform the investors on the detailed information about the scheme

Question 78 At what rate is the Securities Transaction Tax charged on sale of units of debt
oriented mutual fund in a stock exchange ?
(a) 0.01%
(b) 0.10%
(c) 0.13%
(d) 0%

Correct Answer 0%
Answer STT is not applicable on transactions in debt or debt-oriented mutual fund (including
Explanation liquid fund) units.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 79 The strategy of maintaining a constant ratio of asset allocation is know as

.
(a) Dynamic Asset Allocation
(b) Fixed Asset Allocation
(c) Flexible Asset Allocation
(d) SIP

Correct Answer Fixed Asset Allocation

Answer For eg - Balanced funds adopt a stable asset allocation policies, e.g. 55:45 between
Explanation equity and debt at all times, are said to be operating within a fixed asset allocation
framework.

Question 80 That mutual fund which has an investment charter that provides for a reasonable
level of investment in both equity and debt is known as .
(a) Fixed maturity plan
(b) Hybrid fund
(c) ELSS Fund
(d) Liquid Fund

Correct Answer Hybrid fund

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 81 Investments in Mutual Funds can be done only through a AMFI authorided MF
distributors - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Investors can directly invest in MF's by visiting the MF office and other Point of Sales
Explanation (POS).

Question 82 Who receives and delivers securities on behalf of the Mutual Fund ?
(a) Authorised Stock Brokers
(b) The AMC to which the fund belongs
(c) Custodian
(d) Merchant Bankers

Correct Answer Custodian

Answer The custodian has custody of the assets of the fund. The custodian accepts and gives
Explanation delivery of securities for the purchase and sale transactions of the various schemes
of the fund.
Thus, the custodian settles all the transactions on behalf of the mutual fund
schemes.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 83 Even thought investment in Mutual Funds are subject to market risks, an investor
invests in an equity fund after reading the risk factors etc. Due to a fall in the stock
markets the value of the fund goes down drastically. The investor .
(a) can get some remedy if he appeals to SEBI
(b) can get some remedy if he appeals to AMC
(c) can get some remedy if he appeals to AMFI
(d) cannot get any remedy from the AMC

Correct Answer cannot get any remedy from the AMC

Question 84 Which of the following is a measure of market risk ?

(a) Beta Coefficient
(b) Sharpe Ratio
(c) Treynor Ratio
(d) None of the above

Correct Answer Beta Coefficient

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 85 You are expecting interest rates (yields) to rise in the markets. Where would you
invest your money considering this forecast ?
(a) Long Terms Debt Funds
(b) Short Term Debt Funds
(c) Equity Funds
(d) Banking Sector Funds

Correct Answer Short Term Debt Funds

Answer If it is expected that interest rates would go up, it would be safer to go with Short
Explanation Term Debt Funds. As the rates rise, the short-term bonds would mature, allowing
the fund manager to deploy the proceeds at higher rates.
On the contrary, as interest rates in the market goes down, debt securities gain in
value. Therefore, long term debt funds would be sensible in declining interest rate
scenarios.

Question 86 Which of the following scheme categories would be considered the least risky in
terms of credit risk?
(a) Dynamic bond
(b) Gilt fund
(c) Corporate bond fund
(d) Credit risk fund

Correct Answer Gilt fund

Answer A Gilt fund invests only in Government Securities and therefore is virtually risk free.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 87 The peak of earning capacity of an investor reached during the pre-retirement phase
- True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer In the Accumulation stage, 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.

Question 88 In Liquid funds, simple annualised return method is used to show the returns
because .
(a) Its a simpler way to calculate and investors understand it easily
(b) The investment made is fixed for 30 - 90 - 180 days
(c) The return is calculated over smaller time horizons
(d) The amount invested is usually small

Correct Answer The return is calculated over smaller time horizons

Answer In case of Money Market schemes and liquid plans, wherein investors have very
Explanation short investment horizon, the performance can be measured and advertised by
simple annualisation of yields.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 89 An investor who has a long term view and is looking for capital appreciation and
also has high risk tolerance should opt for investments in .
(a) Gold
(b) Equities
(c) Fixed Deposits
(d) High interest bearing junk bonds

Correct Answer Equities

Question 90 The strategy of Tactical Asset Allocation is considered to be a risky strategy - True or
False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Tactical Asset Allocation is the strategy when the investor presumes the likely
Explanation behaviour of the market.
An investor who decides to go overweight on equities i.e. take higher exposure to
equities, because of expectations of buoyancy in industry and share markets. Such
strategies are very risky and can backfire.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 91 If a person wants to appeal against the ruling of SEBI, he can do so with .
(a) RBI
(b) Commerce Ministry
(c) Company Law Board
(d) Securities Appellate Tribunal

Correct Answer Securities Appellate Tribunal

Answer Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the Securities
Explanation Appellate Tribunal (SAT).

Question 92 Once the New Fund Offer (NFO) of a Close Ended Fund has closed, a person can buy
the listed units of such close ended fund .
(a) At prices usually higher than NAV
(b) At prices usually lower than NAV
(c) At prices which can be higher or lower than NAV
(d) Units of a Close Ended Fund cannot be bought after NFO

Correct Answer At prices which can be higher or lower than NAV

Answer After the NFO of a close ended fund, sale and purchase transactions happen on the
Explanation stock exchange between two different investors, and that the fund is not involved in
the transaction.
The transaction price is likely to be different from the NAV. Depending on the
demand-supply situation for the units of the scheme on the stock exchange, the
transaction price could be higher or lower than the prevailing NAV.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 93 For a Young Unmarried - which of the following phase is applicable ?

(a) Accumulation
(b) Distribution
(c) Transfer
(d) None of the above

Correct Answer Accumulation

Question 94 Investing in can be a risky prospect during periods of Economic

Turmoil.
(a) Gilt Securities
(b) Debt Funds
(c) Mid Cap Funds
(d) Large Cap Funds

Correct Answer Mid Cap Funds

Answer Mid Cap Stocks are intrinsically not as strong as the frontline (large cap) stocks, so
Explanation they become riskier during periods of economic turmoil.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 95 is a Non-Diversifiable risk

(a) Unsystematic Risk
(b) Systematic Risk

Correct Answer Systematic Risk

Answer The risks that impact the entire economy are known as Systematic risks. For eg -
Explanation Inflation in the economy is a systematic risk that impacts all the businesses within
the country. Such risks cannot be reduced through diversification by the fund
manager or investor.
The risks that impact the specific company are called company specific
or unsystematic risks. For example, a labour strike in a manufacturing plant is a
company specific risk. The company specific risks can be reduced by a fund manager
through diversification across diverse set of companies.

Question 96 A investors wishes to invest in debt mutual funds but wants high liquidity - should
he invest in Fixed Maturity Plans ?
(a) Yes
(b) No

Correct Answer No
Answer Fixed maturity plans are a kind of debt fund where the investment portfolio is
Explanation closely aligned to the maturity of the scheme.
AMCs tend to structure the scheme around pre-identified investments. So it will not
be easy to liquidate the FMPs.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 97 To do away with multiple KYC formalities with various intermediaries, SEBI has
mandated a unified KYC for the securities market through the Depository
Participants registered with SEBI - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer To do away with multiple KYC formalities with various intermediaries, SEBI has
Explanation mandated a unified KYC for the securities market through KYC Registration Agencies
registered with SEBI.

Question 98 Which of the following is true with respect to Growth Option in Mutual Fund
schemes ?
(a) The change in NAV captures the scheme performance
(b) Units rise or fall depending on the schemes performance
(c) The NAV falls as and when dividend is declared
(d) Dividend Distribution Tax is applicable

Correct Answer The change in NAV captures the scheme performance

Answer In Growth Option, the NAV rises or falls depending on the schemes performance.
Explanation
No dividend is declared in Growth Option.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

Question 99 A Mutual Fund scheme gave an annualised return of 9.86% and the annualised
Standard Deviation of the fund is 3.47. The current risk free return is 8%. Calculate
the Sharpe Ratio.
(a) 0.89
(b) 0.72
(c) 0.49
(d) 0.53

Correct Answer 0.53

Answer The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation
Explanation
ie. ( Return Earned - Risk free Return ) / Standard Deviation
0.536023055
0.536023055
0.53

Question 100 The floating rate debt securities tend to hold their value, despite changes in yield in
the debt market - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Floating rate funds invest largely in floating rate debt securities i.e. debt securities
Explanation 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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 1

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

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LAST DAY REVISION TEST NO. 2

Question 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.
(a) Rs. 2150
(b) Rs. 33.1854
(c) Rs. 3.4246
(d) Rs. 5.8904

Correct Answer Rs. 5.8904

Answer Trail commission is always calculated on the current NAV.
Explanation
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

Question 2 According to guidelines given by SEBI, every mutual fund scheme should have a
minimum of investors.
(a) 10
(b) 20
(c) 25
(d) 50

Correct Answer 20
Answer Every mutual fund scheme/plan should have a minimum of 20 investors and no
Explanation single investor shall account for more than 25 percent of the corpus of the
Scheme/Plan(s).
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 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?
(a) She has to select the correct bank which is financially strong
(b) There is a high risk of default in her portfolio
(c) There is a risk of low returns
(d) There is no risk as fixed deposits are quiet safe

Correct Answer There is a risk of low returns

Answer Fixed deposits usually give a low rate of return and when adjusted against inflation,
Explanation 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.

Question 4 Investors who have not transacted during the previous are known as
dormant investors.
(a) 15 months
(b) 12 months
(c) 9 months
(d) 6 months

Correct Answer 6 months

Answer Dormant investors are those who have not transacted for previous six months.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 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?
(a) The address provided for KYC compliance
(b) The address provided in the application form
(c) Mr. Mohit can indicate which address is correct
(d) The ddress provided in the application form will be used for all communications

Correct Answer The address provided for KYC compliance

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

Question 6 Who uses the information collected under the Foreign Account Tax Compliance Act
(FATCA)?
(a) Foreign Government or foreign agencies
(b) Indian Government
(c) Indian Tax authorities
(d) All of the above

Correct Answer All of the above

Answer To comply with the requirements of Foreign Account Tax Compliance Act (FATCA)
Explanation 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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 7 Which of these entities can invest in Indian mutual funds?

A) Foreign portfolio investor B) Insurance company C) Salaried individual
(a) Only C
(b) A and B
(c) B and C
(d) All A, B and C

Correct Answer All A, B and C

Answer All of the above can invest in Indian mutual funds.
Explanation

Question 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) A and B are true
(b) B and C are true
(c) A and C are true
(d) All A, B and C are true

Correct Answer A and C are true

Answer Transmission is the process of transferring units to the person entitled to receive it
Explanation 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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 9 Which of these is NOT a function of Registrars and Transfer Agents ?

(a) Maintaining investors records
(b) Processing redemption and dividend payouts
(c) Analysing mutual fund performance and making it available to investors
(d) Updating unit capital of fund

Correct Answer Analysing mutual fund performance and making it available to investors
Answer The Registrars and Transfer Agents (RTAs) maintain investor records.
Explanation
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.

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

Correct Answer 392.41

Answer Units are allotted as per the current NAV.
Explanation
The amount invested divided by the NAV will give the units allotted.
Rs 30,000 / 76.45 = 392.41
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 11 AMFI Code of Ethics states that cannot become a distributor of mutual
fund.
(a) Banks
(b) HNIs
(c) Employees of AMC
(d) Empanelled distributors

Correct Answer Employees of AMC

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

Question 12 Identify the TRUE statement -

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

Correct Answer The mutual fund investor has the complete freedom to change the distributor any
time he wants
Answer Investors can choose to change their distributor or opt for direct investing.
Explanation
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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 13 Indentify the true statement(s) –

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

Correct Answer Only B is true

Answer 1. A systematic transaction (like SIP etc) can be stopped.
Explanation
2. Assuming the scheme is profitable, the re-purchase ensures that some of the
profits are being regularly encashed by the investor.

Question 14 The expenses of cannot be charged to a mutual fund scheme.

(a) custodian fees
(b) software development
(c) registrar services for transfer of units sold
(d) GST - Goods and Service tax

Correct Answer Software development

Answer The expenses on software development is not for a particular scheme but for the
Explanation AMC as a whole and cannot be charged to a particular scheme.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 15 Identify the false statement(s).

A) When an investor wants to 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
(a) Only statement A is false
(b) Only statement B is false
(c) Both statements A and B are false

Correct Answer Both statements A and B are false

Answer Both taxes and loads reduce investment returns. Therefore, it is important for the
Explanation 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.

Question 16 Indicate which of these funds have the lowest to highest risk sequence?
A) Liquid Fund B) Credit Risk Fund C) Corporate Bond Fund
(a) B-C-A
(b) C-A-B
(c) A-B-C
(d) A-C–B

Correct Answer A-C-B

Answer Liquid funds are least risky as they invest in high quality debt instruements.
Explanation
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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 17 Identify the FALSE statement(s) –

A) For Index funds, the NAV is calculated upto 4 decimal points
B) The AMC and a mutual fund scheme of the AMC can have the same auditor
(a) Only A is false
(b) Only B is false
(c) Both A and B are false

Correct Answer Only B is false

Answer NAV is to be calculated upto 4 decimal places in the case of index funds, liquid
Explanation 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.

Question 18 Long term capital loss from an investment can be set off against .
(a) short term capital gains only
(b) short term capital gain or long term capital gain
(c) long term capital gains only
(d) long term capital loss cannot be set off

Correct Answer long term capital gains only

Answer As per the Income Tax Act -
Explanation
- 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).
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Question 19 Which of these statements are TRUE with respect to time 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) A and B are true
(b) B and C are true
(c) A and C are true
(d) A, B and C are true

Correct Answer B and C are true

Answer 1) Applications for non-financial transactions like change of address are stamped.
Explanation 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.

Question 20 ensures that the information contained in the scheme related documents
(SID and SAI) are fully complied with.
(a) The Trustees
(b) The Sponsor
(c) The Fund Manager
(d) The AMC

Correct Answer The Trustees

Answer The trustees shall ensure that all transactions entered into by the AMC are in
Explanation compliance with the regulations and the scheme’s objectives and intent.
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Question 21 Cut-off timing guidelines are not applicable for _ .

(a) International Funds
(b) New Fund Offer (NFO)
(c) Both of the above
(d) None of the above

Correct Answer Both of the above

Answer The cut-off timing is not applicable for NFOs and International Schemes.
Explanation

Question 22 Registrar and Transfer Agency function must be independent of the Asset
Management Company, and it cannot be retained in-house. State whether this
statement is True or False.
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Mutual funds can have their in-house Registrar and Transfer agency.
Explanation
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Question 23 Today’s costs can be translated into future requirement of funds using the formula:
(a) A = P / (1 + i)^n
(b) A = P X (1 + i)^n
(c) P = A^n X (1 + i)
(d) P = A^n X (1 + i)^n

Correct Answer A = P X (1 + i)^n

Answer The costs in today’s terms, can to be translated into the rupee requirement
Explanation 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.

Question 24 Investments in mutual fund are allowed using .

(a) ASBA
(b) Cheque / DD
(c) Remittance
(d) Any of the above

Correct Answer Any of the above

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Question 25 The Income Tax Act allows setting-off of the short term capital loss against long
term capital gains. State whether True or False.
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer As per Income Tax rules -
Explanation
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.

Question 26 The purchasing power of currency changes on account of which of the following?
(a) Diversification
(b) Inflation
(c) Compound interest
(d) Asset allocation

Correct Answer Inflation

Answer Inflation, or price inflation is the general rise in the prices of various commodities,
Explanation products, and services that we consume. Inflation erodes the purchasing power of
the money.
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Question 27 is a basis to select the better scheme in Index Funds.

(a) Tracking Error
(b) Beta
(c) 5 year performance
(d) Fund Managers past record

Correct Answer Tracking Error

Answer The difference between an index fund’s return and the market return is the tracking
Explanation 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.

Question 28 Investor’s KYC details are stored in the server of .

(a) AMFI
(b) AMC
(c) KRA
(d) SEBI

Correct Answer KRA

Answer KRA means KYC Registration Agency
Explanation
The KRA after checking the KYC details uploads the details in the server of any
centralised KRA.
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Question 29 Tactical Asset Allocation is the decision that comes out of calls on the likely
behaviour of the market - True or False ?
(a) FALSE
(b) TRUE

Correct Answer TRUE

Answer Tactical Asset Allocation is the decision that comes out of calls on the likely
Explanation 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.

Question 30 Investors have the right to specify upto nominees for their mutual fund
investment folios.
(a) 1
(b) 2
(c) 3
(d) 4

Correct Answer 3
Answer The investors can appoint upto 3 nominees, who will be entitled to the ‘Units’ in the
Explanation 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.
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Question 31 Lower the expenses of a Mutual Fund, lower would be the NAV - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer NAV is basically the value of Portfolio less the MF expenses. So Lower the expenses,
Explanation higher would be the NAV.

Question 32 have to make additional disclosures related to credit evaluation

policy, sectors and types of investments in the offer document.
(a) ELSS Funds
(b) Debt Funds
(c) Sectoral Funds
(d) Equity Funds

Correct Answer Debt Funds

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Question 33 PAN No. and KYC documentation is compulsory for mutual fund investments with
the only exception of .
(a) ELSS Funds
(b) Micro SIPs
(c) Gilt Funds
(d) Government Mutual Funds

Correct Answer Micro SIPs

Answer Micro-SIPs - SIPs where annual investment (12 month rolling or April-March
Explanation financial year) does not exceed Rs 50,000.

Question 34 How many (maximum) bank accounts can a resident individual investor register
with a mutual fund folio?
(a) 1
(b) 2
(c) 3
(d) 5

Correct Answer 5
Answer Mutual funds provide investors the facility to register multiple bank accounts to
Explanation 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.
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Question 35 NAV of Equity funds is to be calculated upto decimals.

(a) 1
(b) 2
(c) 3
(d) 4

Correct Answer 2
Answer NAV for equity and balanced funds is to be calculated upto at least 2 decimal places.
Explanation
NAV is to be calculated upto 4 decimal places in the case of index funds, liquid funds
and other debt funds.

Question 36 Beta as a risk measure is relevant for .

(a) Only Equity Schemes
(b) Only Debt Schemes
(c) Both Equity and Debt schemes
(d) FMP's

Correct Answer Only Equity Schemes

Answer Beta as a measure of risk is relevant only for equity schemes.
Explanation
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
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Question 37 Which of the following is a truly international asset class?

(a) Gold
(b) Equity Share
(c) Real Estate
(d) Debt

Correct Answer Gold

Question 38 Liquid schemes are a variant of debt schemes that invest only in debt securities of
upto 60-days maturity - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Liquid schemes are a variant of debt schemes that invest only in short term debt
Explanation securities. They can invest in debt securities of upto 91 days maturity.
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Question 39 STP is a combination of SIP and SWP - True or False ?

(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer In a STP ( Systematic Transfer Plan ), the amount that is withdrawn from a scheme is
Explanation 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.

Question 40 Which among the following investment avenues does not offer income on a regular
basis?
(a) Stocks
(b) Real estate
(c) Debentures
(d) Physical Gold

Correct Answer Physical Gold

Answer Stocks offer regular income in the form of dividends, Real estate gives rent and
Explanation Debentures give interest.
Physical gold give no regular return.
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Question 41 What minimum percentage of the mutual fund scheme corpus must be invested in
equity and related instruments in case of Equity Linked Savings Schemes (ELSS)?
(a) 65 percent
(b) 70 percent
(c) 80 percent
(d) 95 percent

Correct Answer 80 percent

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

Question 42 The difference between NAV and re-purchase price is .

(a) Exit Load
(b) Entry Load
(c) Commission of the MF Agent
(d) Dividend Stripping

Correct Answer Exit Load

Answer The difference between the NAV and Re-purchase Price is called the “exit load”.
Explanation
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.
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Question 43 The asset allocation that is worked out for an investor based on risk profiling is
called .
(a) Strategic Asset Allocation
(b) Fixed Asset Allocation
(c) Tactical Asset Allocation
(d) Flexible Asset Allocation

Correct Answer Strategic Asset Allocation

Answer Risk profiling is key to deciding on the strategic asset allocation.
Explanation
For eg - If the investor is an retired/old person he should have more debt in his
portfolio.

Question 44 For calculating Capital Gains, investment in mutual funds for less then 1 year is
considered as
(a) Long Term
(b) Medium Term
(c) Short Term
(d) Ultra Short Term

Correct Answer Short Term

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Question 45 Interval funds combine features of both open-ended and close-ended schemes -
True or False ?
(a) FALSE
(b) TRUE

Correct Answer TRUE

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

Question 46 A Mutual Fund wants to launch a new scheme with a Face Value of Rs 50. Will it get
the required permissions ?
(a) Yes
(b) No

Correct Answer No
Answer As per the law, every unit has a face value of Rs. 10.
Explanation
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Question 47 The ARN number is assigned by .

(a) The AMC
(b) SEBI
(c) AMFI
(d) Stock Exchange

Correct Answer AMFI

Question 48 Arbitrage Funds have BASIS risks - True or False ?

(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Arbitrage fund have basis risk ie. the risk that both cash and F&O position on a
Explanation 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.
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Question 49 Recurring expenses cannot be charged to a Mutual Fund scheme as it drags down
the NAV - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

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

Question 50 Which amongst the following asset categories can also be purchased for
consumption purposes apart from investment?
(a) Bonds
(b) Real estate
(c) Debentures
(d) Stocks

Correct Answer Real estate

Answer One may invest in a residential property and give it on rent to generate income. This
Explanation 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.
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Question 51 Mutual Funds cannot accept cash from investors for investing in their schemes -
True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Mutual funds usually do not accept cash.
Explanation
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.

Question 52 All the records of the investors of a Mutual Fund are maintained by the Fund
Manager - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer The RTA - Registrar and Transfer Agents maintains investor records. Sometimes the
Explanation AMC itself does this activity.
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Question 53 An important objective of SEBI is to represent to the Government, Reserve Bank of

India and other bodies on all matters relating to the Mutual Fund Industry - True or
False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

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

Question 54 SEBI approval is required for an AMC to appoint a distributor - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer No SEBI approval is required. A person has to clear the exam and get an AMFI
Explanation number. Based on this number AMC signs an agreement with the individulas /
companies and appoint them distributors.
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Question 55 The Price Earning (PE) Ratio of a company is 7 and its Earning Per Share is Rs 10.
What is the Market Price of this company ?
(a) Rs 49
(b) Rs 70
(c) Rs 700
(d) Rs 10

Correct Answer Rs 70
Answer PE Ratio = Market Price / EPS
Explanation
7 = Market Price / 10
Market Price = 7 x 10
= 70

Question 56 In the stage, a persons earning capacity reaches his peak.

(a) Young Married
(b) Pre Retirement
(c) Young Unmarried
(d) Retirement

Correct Answer Pre Retirement

Question 57 For an investor to get a quick sense of the level of risk involved in a mutual fund
scheme, SEBI suggested a simplified framework known as .
(a) Risk factors
(b) Investor’s risk profile
(c) Risk-o-meter
(d) Fact sheet

Correct Answer Risk-o-meter

Answer SEBI has a system of product labeling in place that ensures the investor makes
Explanation investments in mutual fund schemes that corresponds to the investors risk profile.
The product labeling of mutual funds is based on the concept of ‘Risk-o-meter’ and
this meter depicts the level of risk in any specific mutual fund scheme.
The ‘Risk-o-meter’ depicts risk areas like – Low, Moderately Low, Moderate,
Moderately high and High risk.

Question 58 An investor gives a cheque of Rs 1 lacs for investing in a Debt scheme at 3.30 pm at a
Mutual Fund office. The NAV of which day will be applicable to him ?
(a) NAV of the same day
(b) NAV of the next business day
(c) NAV of the day on which funds will be available
(d) None of the above

Correct Answer NAV of the next business day

Answer For all Equity and Debt funds (except Liquid funds) - For investment of Rs 2 lacs and
Explanation 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.
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Question 59 As per the Income Tax Act - which of the below option is True ?
(a) Capital loss, short term or long term, can be set off against any other head of
income
(b) Long term capital loss can be set off against long term and short term capital gain
(c) Short Term Capital gains is a tax free income
(d) Short term capital loss is to be set off against short term capital gain or long term
capital gain

Correct Answer Short term capital loss is to be set off against short term capital gain or long term
capital gain
Answer A few key provisions of the Income Tax Act are :
Explanation
• 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

Question 60 Of the following documents, which is required to be appended to the application

form of a MF scheme ?
(a) Statement of Additional Information - SAI
(b) Addendum
(c) Scheme Information Document - SID
(d) Key Information Memorandum – KIM

Correct Answer Key Information Memorandum - KIM

Answer KIM is essentially a summary of the SID and SAI.
Explanation
As per SEBI regulations, every application form is to be accompanied by the KIM.
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Question 61 Pension Funds Regulatory and Development Authority (PFRDA) is the regulator for
the National Savings System.
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Pension Funds Regulatory and Development Authority (PFRDA) is the regulator for
Explanation the National Pension System.

Question 62 Every trust has beneficiaries and the beneficiaries, in the case of a mutual fund
trust, are .
(a) the Trustees of the AMC
(b) the investors who invest in various schemes of the mutual fund.
(c) the Employees of the Mutual Fund Company
(d) the Chairperson and Managing Director of the AMC

Correct Answer the investors who invest in various schemes of the mutual fund.
Answer Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust,
Explanation are the investors who invest in various schemes of the mutual fund.
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Question 63 All advertisements and Sales Literature containing an AMC(s)/Mutual Fund ranking
must prominently disclose .
(a) The publisher of the ranking data.
(b) Criteria on which the ranking is based.
(c) The name of the Ranking Entity.
(d) All of the above

Correct Answer All of the above

Question 64 The Entry / Exit Loads and Taxes do not have an impact on the returns to the
investors - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Loads and taxes pull the investor’s returns below that earned by the Scheme.
Explanation
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Question 65 Relaxation in documentation requirements for micro-SIPs is not available for

.
(a) Non Resident Indians
(b) Hindu Undivided Family
(c) Individuals
(d) All of the above

Correct Answer Hindu Undivided Family

Answer Relaxation in documentation requirements for micro-SIPs is not available for HUFs
Explanation and non-individuals. Such relaxation is available for NRIs.

Question 66 Expenses incurred to launch a new fund can be charged to the fund - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Initial Issue Expenses are one-time expenses that come up when the scheme is
Explanation 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.
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Question 67 Usually Diversified Equity funds are safer than Diversified Debt funds - True or False
?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Under normal circumstances Equity Funds are always riskier than Debt Funds.
Explanation

Question 68 An investor purchases through a distributor 20000 units of a 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 train commission rate is 1% per annum.
(a) Rs. 35.6164
(b) Rs. 33.9726
(c) Rs. 19.5543
(d) Rs. 28.1217

Correct Answer Rs. 33.9726

Answer Trail commission is always calculated on the current NAV.
Explanation
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

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Question 69 In case a fund manager is managing more than six funds, then performance data of
top and bottom schemes has to be disclosed in all performance related
advertisements.
(a) 2,2
(b) 3,3
(c) 4,4
(d) 6,6

Correct Answer 3,3

Answer When the performance of a particular mutual fund scheme is advertised,
Explanation 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

Question 70 Gold Future Contracts .

(a) are traded on the Commodity Exchanges
(b) are not standardised products
(c) can be bought through Mutual Funds
(d) None of the above

Correct Answer are traded on the Commodity Exchanges

Answer Gold futures contracts are traded in commodity exchanges like the National
Explanation 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.
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Question 71 Identify the TRUE statement(s) with respect to risk levels in 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
(a) Only A is true
(b) Only B is true
(c) A and B are true
(d) A and B are false

Correct Answer Only B is true

Answer 1) Credit risk funds are more riskier than Corporate bond funds as they invest in
Explanation 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.

Question 72 A Mutual Fund scheme is know to distribute dividends from time to time. Such MF
can be used as a source of .
(a) Good Capital Appreciation
(b) Regular Income
(c) Safety of Capital
(d) Tax Planning

Correct Answer Regular Income

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Question 73 ‘Once it is finalized, a mutual fund scheme’s benchmark cannot be changed at a

later date’ - State whether the statement is True or False?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer The fund may choose to change the benchmark. This could be for various reasons.
Explanation 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.

Question 74 As per the provisions of the Income Tax Act - Short term capital loss is to be set off
against short term capital gain or long term capital gain - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Answer Some key provisions of IT Act related to Capital Gains are:
Explanation
• 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
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Question 75 Which of the following is a measure of fluctuation in periodic returns in an equity

mutual fund scheme?
(a) Variance
(b) Modified duration
(c) Jensen’s Alpha
(d) Sharpe ratio

Correct Answer Variance

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

Question 76 A Mutual Fund investor can file a case against the for breach of trust.
(a) Mutual Fund
(b) Trustees
(c) Stock Exchange
(d) No, a MF investor cannot file a suit.

Correct Answer Trustees

Answer If an investor feels that the trustees have not fulfilled their obligations, then he can
Explanation file a suit against the trustees for breach of trust.
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Question 77 Prediction of equity markets in the short run is easier than in the long run - True or
False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer In the long run, equity markets are a good barometer of the real economy.
Explanation
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.

Question 78 Which of the following regulates mutual funds in India?

(a) Asset Management Companies
(b) Securities and Exchange Board of India
(c) Board of Trustees of mutual funds
(d) Association of Mutual Funds in India

Correct Answer Securities and Exchange Board of India

Answer Securities markets in India are regulated by the Securities and Exchange Board of
Explanation India (SEBI). It regulates, among other entities, mutual funds,
depositories, custodians and registrars and transfer agents (RTAs) in the country.
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Question 79 The investment objective of a might read as follows: ‘To generate

capital appreciation from a portfolio of predominantly equity related securities’.
(a) Money Market Fund
(b) Balanced Fund
(c) Arbitrage Fund
(d) Diversified Equity Fund

Correct Answer Diversified Equity Fund

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

Question 80 Of the below options, what is FALSE with respect to Arbitrage Funds ?
(a) Arbitrage Funds have Basis Risks
(b) Arbitrage Funds invest in Equity Markets
(c) Arbitrage Funds invest in both Spot and Futures Market
(d) Arbitrage Funds are more riskier than Sectoral Funds

Correct Answer Arbitrage Funds are more riskier than Sectoral Funds
Answer Arbitrage Funds make profits by using the price differences between two markets -
Explanation 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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 81 The amount which is paid to the distributor at the time the money is invested in a
scheme is called .
(a) Trail Commission
(b) Upfront Commission
(c) Rebate
(d) Fund Incentive

Correct Answer Upfront Commission

Question 82 The cost of fund management are the highest in .

(a) Passive Funds
(b) Active Funds
(c) Index Funds
(d) None of the Above

Correct Answer Active Funds

Answer In Active Funds like Diversified Equity Funds, the Fund manager does a lot of buying
Explanation / selling. Also a lot of research work goes into it. So the cost of fund management
are higher.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 83 Many AMCs, distribution houses and mutual fund research houses offer free tools in
their website which can be used for evaluating a funds performance - True or False ?
(a) TRUE
(b) FALSE

Correct Answer TRUE

Question 84 Which of the following options form the basis of appointment of a Mutual Fund
distributor ?
(a) An agreement between the AMC and the Distributor
(b) Approval from SEBI
(c) Power of Attorney from the AMC
(d) An agreement with AMFI

Correct Answer An agreement between the AMC and the Distributor

Answer Empanelment with the AMC (or enrolment as an agent of an empanelled
Explanation distributor) is compulsory to be able to sell mutual fund schemes and earn the
commissions.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 85 The Stock Exchanges which provide facilities for Mutual Fund trading also do the
functions of Mutual Fund RTAs. - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Stock Exchanges does are not required to do the role of Registrars and Transfer
Explanation Agents (RTA).

Question 86 Open-ended schemes, except ELSS, have to re-open for ongoing sale / re-purchase
within business days of allotment.
(a) 3
(b) 5
(c) 10
(d) 30

Correct Answer 5
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 87 The trail commission paid by Mutual Funds to a distributor .

(a) Is paid only for high valued transactions
(b) Is linked to the NAV
(c) Grows at a steady rate
(d) Is paid to the Corporate and Bank Distributors only

Correct Answer Is linked to the NAV

Question 88 Mutual funds can accept cash to the tune of Rs _ from small investors.
(a) No cash can be accepted by a MF
(b) Rs 50,000
(c) Rs 20,000
(d) Rs 5,000

Correct Answer Rs 50,000

Question 89 Asset allocation means .

(a) Distribution of Funds between Fund Managers in a Mutual Fund
(b) Distribution of funds between various asset classes in a portfolio
(c) Distribution of funds between various persons after the death of a person
(d) Distribution of funds between beneficiaries of an AMC

Correct Answer Distribution of funds between various asset classes in a portfolio

Answer The distribution of an investor’s portfolio between different asset classes is called
Explanation 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.

Question 90 Which of the given statements below aptly fit the description of actively managed
funds ?
(a) Increased role of fund manager and high running cost
(b) Decreased role of fund manager and high running cost
(c) Decreased role of fund manager and low running cost
(d) Increased role of fund manager and low running cost

Correct Answer Increased role of fund manager and high running cost
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 91 Identify the difference between Sharpe Ratio and Treynor Ratio.
(a) Both are same
(b) Sharpe Ratio uses Standard Deviation for its calculations whereas Treynor Ratio
uses Beta
(c) Sharpe Ratio is used for underperforming schemes whereas Treynor Ratio is used
for outperforming schemes

Correct Answer Sharpe Ratio uses Standard Deviation for its calculations whereas Treynor Ratio
uses Beta
Answer Sharpe ratio is calculated as : (Rs minus Rf) ÷ Standard Deviation
Explanation
Treynor Ratio is calcualted as : (Rs minus Rf) ÷ Beta
(Rf - risk-free rate of return and Rs is the actual return earned).

Question 92 Gold ETF's are meant only for FI's and FII's - True or False ?
(a) TRUE
(b) FALSE

Correct Answer FALSE

Answer Gold Exchange Traded Funds (ETF) can be bought even by retail investors in small
Explanation quantities like one unit (one gram).
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 93 As per SEBI regulations, every application form is to be accompanied by

.
(a) Key Information Memorandum (KIM)
(b) Scheme Information Document (SID)
(c) Addendum
(d) Statement of Additional Information

Correct Answer Key Information Memorandum (KIM)

Answer As per SEBI regulations, every application form is to be accompanied by the KIM.
Explanation
KIM is essentially a summary of the SID and SAI. It is more easily and widely
distributed in the market.

Question 94 What are the benefits of Dematerialisation?

A) No inconvenience of safekeeping paper certificates
B) Reduction in paper work
C) Auto credit of bonus units etc.
(a) A and C
(b) B and C
(c) A and B
(d) All A, B and C

Correct Answer All A, B and C

Answer Dematerialisation is a process whereby an investor’s holding of investments in
Explanation 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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 95 Dividend Distribution Tax (DDT) on Equity oriented mutual fund schemes for
Corporate Investors is .
(a) 10%
(b) 25%
(c) 30%
(d) NIL TAX

Correct Answer NIL TAX

Answer In the Union Budget presented by the Finance Minister in February 2020, the
Explanation dividend distribution tax has been done away with.

Question 96 The Market Value of a scheme is Rs 579 crores. Dividend 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 ?
(a) 188
(b) 198
(c) 208
(d) 218

Correct Answer 198

Answer Total Market Value = Rs 579 crore
Explanation
Add Dividend Accrued of Rs 18 crore
Less Expenses Payable of Rs 3 crore
Divided by Units 300 lakhs
NAV = 198
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 97 Minors are not legally eligible to contract, so for investing in Mutual Funds they
.
(a) have to become 18 years before investing
(b) can invest thro' their guardians
(c) can invest only in long term capital gain funds
(d) can invest in specific 'Minors Only' Mutual Funds

Correct Answer can invest thro' their guardians

Answer Minors i.e. persons below the age of 18 are not legally eligible to contract, they
Explanation need to invest through their Parents/Lawful guardians.

Question 98 A person wishes to avail of a loan. For which of the below options he cannot get a
loan ?
(a) To start a textile factory
(b) To buy a car of value above Rs 20 lacs
(c) To buy a high priced lottery ticket
(d) To buy a house in a Union Territory

Correct Answer To buy a high priced lottery ticket

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Question 99 The is the phase when the earning years usually starts.
(a) Young Unmarried
(b) Young Married
(c) Married with one children
(d) During graduation

Correct Answer Young Unmarried

Question 100 ‘To generate income by investing predominantly in a wide range of debt and money
market securities’• - this could be the investment objective of a
(a) Diversified debt scheme
(b) Diversified equity scheme
(c) ELSS Scheme
(d) Arbitrage Fund

Correct Answer Diversified debt scheme

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 2

Practice Question Banks also available for :

NISM

NISM Series I: Currency Derivatives Certification Exam

NCFM

NCFM Financial Markets: A Beginners Module

NCFM Capital Market (Dealers) Module
NCFM Derivative Market (Dealers) Module

BSE

Certificate on Security Market (BCSM)

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

LAST DAY REVISION TEST NO. 3

Question1 The stock exchanges which provide mutual fund trading facilities also have to provide for
settlement guarantee - State True or False ?
(a) True
(b) False

Correct Answer False

Answer Explanation Stock Exchanges trading facility for MFs is essentially an order routing system between the
investors and the AMC, the exchanges do not offer Settlement Guarantee.
Responsibility for settlement is that of the AMC.

Question2 is not a fair selling practice by a mutual fund distributor.

(a) Informing the investor of the various investment options
(b) Carefully understanding the clients financial needs
(c) Encouraging the churning of investments
(d) Giving personalised after sales service

Correct Answer Encouraging the churning of investments

Answer Explanation Churning means frequent buying and selling.
Encouraging over transacting and churning of Mutual Fund investments to earn higher
commissions by MF agents is a bad practice.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question3 Who appoints the trustees of a Mutual Fund ?

(a) RBI
(b) SEBI
(c) Sponsor
(d) AMC

Correct Answer Sponsor

Answer Explanation The sponsor appoints the Trustees.
The operations of the mutual fund trust are governed by a Trust Deed, which is executed
between the sponsors and the trustees.

Question4 is/are included in the Key Information Memorandum (KIM).

(a) Name of the fund manager, trustees etc.
(b) Performance of schemes
(c) Asset allocation plan
(d) All of the above

Correct Answer All of the above

Answer Explanation KIM is essentially a summary of the SID and SAI. It contains the key points of the offer
document that are essential for the investor to know to make a decision on the suitability of
the investment for their needs.
All the above details and more are included in the KIM.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question5 Who cannot invest in Mutual Funds in India ?

(a) Minors
(b) HUFs
(c) NRIs
(d) All of the above

Correct Answer Minors

Answer Explanation Minors i.e. persons below the age of 18, are not legally eligible to enter into a contract. They
need to invest through their guardians.
Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) can invest in Indian MFs as
per guidelines.

Question6 State True or False - The Thematic funds will always have a wider exposure than Sector
funds.
(a) True
(b) False

Correct Answer True

Answer Explanation Thematic funds invest in line with an investment theme. For example, an infrastructure
thematic fund might invest in shares of companies that are into infrastructure construction plus
in toll-collection, cement, steel, telecom, power etc.
The investment is thus more broad-based than a sector fund.
Sector funds invest in only a specific sector. For example, a banking sector fund will invest in
only shares of banking companies.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question7 The difference between the yield on Gilt and the yield on a non-Government Debt security
is called its .
(a) YTM
(b) Credit Spread
(c) Yield to Call
(d) Risk Spread

Correct Answer Credit Spread

Answer Explanation The yield on Gilt (Govt. securities) is generally the lowest in the market for a given tenor. Since
non-Government issuers can default, they tend to offer higher yields for the same tenor.
The difference between the yield on Gilt and the yield on a non-Government Debt security is
called its credit spread.

Question8 Gold futures contract .

(a) are traded in commodity exchanges
(b) are not standardized contracts
(c) are available through mutual funds
(d) None of the above

Correct Answer are traded in commodity exchanges

Answer Explanation Gold futures contracts are standardised and are traded in commodity exchanges like the
National Commodities Exchange (NCDEX).
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question9 From the listed below, has the highest credit risk .
(a) High yield funds
(b) ELSS Funds
(c) Gilt funds
(d) Index funds

Correct Answer High yield funds

Answer Explanation Junk bond schemes or high yield bond schemes invest in securities that have a lower credit
rating indicating poor credit quality. This leads to high credit risk / default risk.

Question10 What is the role of the custodian ?

(a) To issue account statements to the MF unit holders
(b) To keep the safe custody of the securities of the mutual fund scheme
(c) To issue statement of funds holding to the investors
(d) To execute the buy and sell orders in the stock market

Correct Answer To keep the safe custody of the securities of the mutual fund scheme
Answer Explanation The custodian has custody of the assets of the fund. As part of this role, the custodian needs to
accept and give delivery of securities for the purchase and sale transactions of the various
schemes of the fund. Thus, the custodian settles all the transactions on behalf of the mutual
fund schemes.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question11 Usually active funds give higher returns as investors bear a higher fund management
expense - State True or False ?
(a) False
(b) True

Correct Answer False

Answer Explanation Higher fund management does not mean better performance.
Also some time passive funds like index funds can give better returns than active funds due to
the fund managers wrong analysis.

Question12 By investing in mutual funds an investor uses the services of .

(a) a professional actuary
(b) a professional insurance agent
(c) a professional investment manager
(d) a professional tax planner

Correct Answer a professional investment manager

Answer Explanation Mutual Funds employ professional investment experts to manage the money of investors by
investing in suitable stocks / debt etc.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question13 In which type of fund is the risk of investor not selecting the correct sector maximum ?
(a) Thematic Funds
(b) Sector Funds
(c) Arbitrage Funds
(d) Index Funds

Correct Answer Sector Funds

Answer Explanation Sector funds suffer from concentration risk - the entire exposure is to a single sector. If that
sector does poorly, then the scheme returns are seriously affected. Sector funds are considered
to carry the highest risk among the equity mutual funds.

Question14 investment style involves buying stocks which are valued lower as per
fundamental analysis.
(a) Tactical
(b) Growth
(c) Cyclical
(d) Value

Correct Answer Value

Answer Explanation Value investment style is an approach of picking up stocks, which are priced lower than their
intrinsic value, based on fundamental analysis.
The belief is that the market has not appreciated some aspect of the value in a company’s share
– and hence it is cheap. When the market recognizes the intrinsic value, then the price would
shoot up.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question15 When the interest rates are rising, the bond funds which have short average maturity are
more likely to outperform - State True or False ?
(a) True
(b) False

Correct Answer True

Answer Explanation Short-term debt funds help earn higher interest income in a rising interest rate scenario.
( Bonds are essentially loans. If prevailing interest rates on loans, including bonds, are
rising, bond investors tend to demand the higher yielding bonds to make more money on
their bond investments )
Long term debt funds help investors earn higher returns from capital gains in falling
interest rate scenario.

Question16 Tactical Asset Allocation is suitable only for seasoned investors operating with large
investible surpluses - State True or False ?
(a) True
(b) False

Correct Answer True

Answer Explanation Tactical Asset Allocation is the decision that comes out of calls on the likely behaviour of the
market.
It is suitable only for seasoned investors operating with large investible surpluses.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question17 The Offer Document will NOT give any information on .

(a) The risk factors of the scheme
(b) The name of stocks in which the scheme is likely to invest
(c) Investment objectives of the scheme
(d) The features of the portfolio of the scheme

Correct Answer The name of stocks in which the scheme is likely to invest
Answer Explanation Decision on the stocks to invest is a closed door procedure and is decided by the fund managers
in association with the research and analysis team.

Question18 The dividend declared on units under lien is paid to .

(a) always to the lien holder
(b) always to the unit holder
(c) the lien holder or the unit holder as per the agreement
(d) Units under lien do not receive any dividends

Correct Answer the lien holder or the unit holder as per the agreement
Answer Explanation The dividend pay-outs declared on units under lien may be paid to the unitholder or the lender
depending upon the agreement.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question19 An ongoing bond fund will lose value when the interest rates in the market .
(a) Rise
(b) Fall
(c) remains same
(d) will be equal to yields

Correct Answer Rise

Answer Explanation Suppose an investor has invested in a debt security that yields a return of 7 percent.
Subsequently, yields in the market for similar securities rise to 8 percent. It stands to reason
that the security, which was bought at 7 percent yield, is no longer such an attractive
investment. It will therefore lose value.

Question20 The mechanism used to ensure that the cutoff timing is strictly followed is called
.
(a) Stamp time
(b) Time verification
(c) Time stamping
(d) Auditing

Correct Answer Time stamping

Answer Explanation The NAV that is applicable to a transaction depends, among other things, on the day and
time at which the transaction request was received at the official point of acceptance. It
is therefore very critical to record the time at which a transaction was received and use
this information to determine the applicable NAV for a transaction.
Time stamping is the process by which a stamp is put with details like date and exact time of
receipt etc. on the transaction form.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question21 The lock in for Equity Linked Savings Scheme (ELSS Funds) is .
(a) 1 year
(b) 2 years
(c) 3 years
(d) 5 years

Correct Answer 3 years

Answer Explanation Equity Linked Savings Schemes (ELSS) are diversified equity funds that offer tax benefits to
investors under section 80 C of the Income Tax Act.
The investment is subject to lock-in for a period of 3 years during which it cannot be redeemed,
transferred or pledged.

Question22 gives the investor exposure to international assets.

(a) Index funds
(b) ELSS Fund
(c) International Funds
(d) Arbitrage Funds

Correct Answer International Funds

Answer Explanation International funds invest in markets outside India, by holding certain foreign securities in their
portfolio.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question23 Which of the following is an important aspect of an OFFER DOCUMENT?

Correct Answer To inform the investors on the detailed information about the scheme

Question24 Mr. A has a small business and will generally need more allocation to liquid funds than Mr.
B, who is senior manager with a multinational company. - State True or False ?
(a) True
(b) False

Correct Answer True

Answer Explanation Mr. A may need funds for his business anytime so will allocate more amount to liquid funds.
Mr. B has a good high paying job, so he has a regular flow of money in form of salary. He will
generally have no liquidity problems so will invest less in liquid funds and more in growth
funds.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question25 When should an investor adopt a strategy of limiting equity exposure to index funds ?
(a) In the Accumulation phase
(b) In the Retirement phase
(c) In the Sudden wealth phase
(d) None of the above

Correct Answer In the Retirement phase

Answer Explanation Retirement Phase - This is the stage when the investor needs the funds that have been
accumulated over time. Hence, investors in this stage would move the funds to asset classes
that meet their need for easy access to funds or regular periodic income as the case may be.
So the investor will invest more in debt / liquid funds and very less in equity funds.

Question26 State True or False - Gilt schemes have more risks than liquid schemes as their NAV
fluctuates more due to changes in the yield market.
(a) True
(b) False

Correct Answer True

Answer Explanation Gilt schemes, which invest in only long term government securities, have a higher price risk
because their NAV can fluctuate a lot more, on account of changes in yield in the market.
Greater the proportion of longer maturity securities in the portfolio, higher would be the
fluctuation in NAV.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question27 As the Unit Certificates are non-transferable, they do not offer any real transactional
convenience for the Unit-holder - State True or False ?
(a) True
(b) False

Correct Answer True

Answer Explanation Since Unit Certificates are non-transferable, they do not offer any real transactional
convenience for the Unit-holder. However, if a Unit-holder asks for it, the AMC is bound to
issue the Unit Certificate within 5 working days of receipt of request

Question28 One of the below options is a function of AMFI - which one ?

(a) To manage the investor protection fund
(b) To compute the NAV
(c) To make available the data on AUM, NAV and other data of the mutual fund industry
(d) To regulate insider trading

Correct Answer To make available the data on AUM, NAV and other data of the mutual fund industry
Answer Explanation AMFI publishes the AUM, NAVs etc. on its website.
(Investor Protection fund is managed as per SEBI guidelines, NAVs are calculated by the AMCs
and SEBI regulates insider trading)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question29 With respect to KIM - Key Information Memorandum, which of the following statement is
NOT true ?
(a) KIM is basically an abridged version of the offer document
(b) KIM basically contains only the names of Sponsor, Trust and AMC and not their functions
(c) The KIM is attached to each and every mutual fund application form
(d) KIM has to be provided only if the investors ask for it

Correct Answer KIM has to be provided only if the investors ask for it
Answer Explanation KIM is essentially a summary of the SID and SAI. It contains the key points of the offer
document that are essential for the investor to know to make a decision on the suitability of
the investment for their needs. It is more easily and widely distributed in the market. As per
SEBI regulations, every application form is to be accompanied by the KIM.

Question30 When a Mutual fund scheme makes profits or losses, these profits and losses belong to
.
(a) The AMC
(b) The Trustees
(c) The Fund Manager
(d) The Investor

Correct Answer The Investor

Answer Explanation The investor enjoys the profits as well as bears the losses of his investments in Mutual Funds.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question31 The NAV of a mutual fund unit changes every day due to changes in .
(a) number of investors in the mutual fund
(b) market value of the mutual fund portfolio
(c) the size of the portfolio
(d) the units remaining in the portfolio

Correct Answer market value of the mutual fund portfolio

Answer Explanation The formula for calculating Net Asset Value -
NAV = (Current value of investments held + Income accrued + Current assets – Current liabilities
– Accrued expenses / No. of outstanding units
So when the current value of investment held (ie. market value of portfolio) changes, the NAV
will also change.

Question32 A board resolution for investing in a mutual fund scheme is compulsorily required by
.
(a) Non Resident Indians - NRIs
(b) Hindu Undivided Family - HUF
(c) Institutional Investors
(d) Minors

Correct Answer Institutional Investors

Answer Explanation Institutional investors require a authorisation for the investing in any security / asset etc. This is
typically in the form of a Board Resolution.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question33 Identify the TRUE statements –

A) Unsystematic risk is measured by its Beta
B) The diversified stock index has a Beta of 1
C) An investment with a beta of 0.7 will move 7 percent when markets move by 10 percent

(a) A and B are true

(b) B and C are true
(c) A and C are true
(d) All A, B and C are true

Correct Answer B and C are true

Answer Explanation 1) Systematic risk is measured by its Beta

2) The diversified stock index, by definition, has a Beta of 1. Schemes, whose beta is more than
1, are seen as more risky than the market. Beta less than 1 is indicative of a scheme that is less
risky than the market.

3) An investment with a beta of 0.7 will move 7 percent when markets move by 10 percent.
This applies to increase as well as fall in values. An investment with a beta of 1.2 will move by
12 percent both on the upside and downside when markets move (up/down) by 10 percent.

Question34 The Asset Management Company primarily compensates the mutual fund distributors
through .
(a) Commissions
(b) Salaries
(c) Salary + Commission
(d) Share in AMC's profit

Correct Answer Commissions

Answer Explanation The mutual fund distributor earns revenue in the form of commission income for distribution of
the mutual fund products/schemes. The commission may be linked to either the transaction
(Upfront commission) or to the assets under management (Trail Commission).
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question35 Identify the true statement as per AMFI’s Code of Conduct for Intermediaries of Mutual
Funds.
(a) Intermediaries should rebate some of the commission received by them to the investors
(b) Intermediaries should abstain from making negative statements about any Asset
Management Company or scheme
(c) Intermediaries should split applications so that they can earn higher transaction charges

Correct Answer Intermediaries should abstain from making negative statements about any Asset
Management Company or scheme
Answer Explanation One of the clause under AMFI’s Code of Conduct for Intermediaries of Mutual Funds is -
Abstain from making negative statements about any AMC or scheme and ensure that
comparisons, if any, are made with similar and comparable products along with complete facts.

Question36 What is the maximum permissible limit of investment a single investor can have in a
scheme?
(a) 5% of the corpus
(b) 10% of the corpus
(c) 20% of the corpus
(d) 25% of the corpus

Correct Answer 25% of the corpus

Answer Explanation As per SEBI rules, a Scheme/Plan shall 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).
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question37 Which of these statement is TRUE with respect to Cut-off timings?

(a) Cut-off timings are prescribed by SEBI from time to time
(b) Cut-off timings are agreed upon between the AMC and the Collection centers
(c) Cut-off timings are different from AMC to AMC
(d) Cut-off timings are different for different RTAs

Correct Answer Cut-off timings are prescribed by SEBI from time to time
Answer Explanation SEBI has prescribed cut-off timing to determine the applicable NAV and these timings are
uniformly applicable for all mutual funds.

Question38 In case of , the Net Asset Value has to be declared for upto 4 decimal points.
(a) Mid Cap and Small Cap Funds
(b) Liquid Funds
(c) Aggressive Hybrid Funds
(d) ELSS Funds

Correct Answer Liquid Funds

Answer Explanation NAV is to be calculated upto 4 decimal places in the case of index funds, liquid funds and other
debt funds.
(NAV for equity and balanced funds is to be calculated upto at least 2 decimal places)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question39 The Key Information Memorandum (KIM) is an abridged version of which of these
documents?
(a) The yearly statement of the portfolio of the fund
(b) The half yearly statement of the financial statement of the fund
(c) The annual accounts of the fund
(d) Scheme related documents

Correct Answer Scheme related documents

Answer Explanation KIM is essentially a summary of the Scheme Information Document -SID and Statement of
Additional Information -SAI. Scheme related documents consist of SID and SAI.
It contains the key points of these documents that are essential for the investor to know to
make a decision on the suitability of the investment for their needs.

Question40 Distributors can 'opt-out' of charging transaction charges .

(a) at AMC level
(b) at investor level
(c) at scheme level
(d) at distributor level

Correct Answer at distributor level

Answer Explanation Distributors have the option of opting out of charging transaction charges. But such opting out
shall be applicable only at distributor level. This means that the distributor cannot choose to
charge transaction charge from one investor and not from another.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question41 What is the Net Asset Value (NAV) after dividend payment called?
(a) ex-Dividend NAV
(b) ex-Load NAV
(c) cum-Dividend NAV
(d) Net - NAV

Correct Answer ex-Dividend NAV

Answer Explanation After a dividend pay-out, the reduced NAV is called ex-Dividend NAV.

(After a dividend is announced, and until it is paid out, it is referred to as cum-Dividend NAV)

Question42 invest in those securities which have maturity matching the maturity of the
scheme.
(a) Fixed Maturity Plans
(b) Exchange Traded Funds
(c) ELSS Funds
(d) High Yield Funds

Correct Answer Fixed Maturity Plans

Answer Explanation Fixed Maturity Plans are a kind of close-ended debt fund where the duration of the investment
portfolio is closely aligned to the maturity of the scheme.
Fixed Maturity Plan is ideal when the investor’s investment horizon is in sync with the maturity
of the scheme, and the investor is looking for a more predictable return than any conventional
debt scheme, and a return that is generally superior to what is available in a fixed deposit.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question43 When can mutual funds charge an additional expense of 0.30% of daily net assets of the
scheme?
(a) If the new inflows from beyond top 30 cities are at least (a) 30 percent of gross new inflows
in the scheme or (b) 15 percent of the average assets under management (year to date) of
the scheme, whichever is higher
(b) If the new inflows from beyond top 30 cities are at least (a) 20 percent of gross new inflows
in the scheme or (b) 5 percent of the average assets under management (year to date) of
the scheme, whichever is higher
(c) If the new inflows from beyond top 15 cities are at least (a) 25 percent of gross new inflows
in the scheme or (b) 15 percent of the average assets under management (year to date) of
the scheme, whichever is higher
(d) If the new inflows from beyond top 15 cities are at least (a) 10 percent of gross new inflows
in the scheme or (b) 5 percent of the average assets under management (year to date) of
the scheme, whichever is higher

Correct Answer If the new inflows from beyond top 30 cities are at least (a) 30 percent of gross new inflows
in the scheme or (b) 15 percent of the average assets under management (year to date) of
the scheme, whichever is higher
Answer Explanation In addition to the normal expenses limit, the following expenses may be charged to scheme -
If the new inflows from beyond top 30 cities are at least :
(a) 30 percent of gross new inflows in the scheme or
(b) 15 percent of the average assets under management (year to date) of the scheme
whichever is higher, funds can charge additional expense of up to 0.30 percent of daily net
assets of the scheme.

Question44 can be used in lieu of dividend payouts.

(a) Systematic Withdrawal Plan (SWP)
(b) Systematic Transfer Plan (STP)
(c) Systematic Investment Plan (SIP)
(d) Total Redemption

Correct Answer Systematic Withdrawal Plan (SWP)

Answer Explanation Mutual funds make it convenient for investors to manage their SWPs by registering the
amount, periodicity (generally, monthly) and period for their SWP.
Some schemes even offer the facility of transferring only the appreciation or the dividend. In
this option, the withdrawal is not fixed but will vary depending upon the availability of
appreciation in the specific investment chosen by the investor.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question45 Which of these statements is true with respect to a Switch transaction?

(a) Switch transaction is allowed only after one year from date of purchase
(b) Switch transaction is similar to a purchase transaction
(c) Switch transaction is similar to a sale transaction
(d) Switch transaction is a redemption from one mutual fund scheme and simultaneous
purchase in to another scheme

Correct Answer Switch transaction is a redemption from one mutual fund scheme and simultaneous
purchase in to another scheme
Answer Explanation A switch is a redemption from one scheme and a purchase into another combined into one
transaction.
For example, investors who believe that equity markets have peaked and want to book profits
can switch out from an equity scheme and switch into a short-term debt fund.

Question46 Some of the costs incurred by the Asset Management Companies to manage the mutual
fund schemes can be charged to in proportion to their holding of units in the
scheme.
(a) Distributors
(b) Stock Brokers
(c) Unit holders
(d) Independent Financial Advisors

Correct Answer Unit holders

Answer Explanation All the investor's money is pooled together in a scheme. Costs incurred for managing the
scheme are shared by all the Unit-holders in proportion to their holding of units in the scheme.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question47 What are the guidelines issued by AMFI for intermediaries known as?
(a) SEBI Brokers and Intermediaries guidelines
(b) Know Your Distributor guidelines
(c) AMFI Guidelines & Norms for Intermediaries (AGNI)

Correct Answer AMFI Guidelines & Norms for Intermediaries (AGNI)

Answer Explanation AMFI has framed a set of guidelines and code of conduct for intermediaries (known as AMFI
Guidelines & Norms for Intermediaries (AGNI)), consisting of individual agents, brokers,
distribution houses and banks engaged in selling of mutual fund products.

Question48 Identify the TRUE statement(s) for an Equity Linked Saving Scheme (ELSS). 1. In Dividend
Reinvestment option of an ELSS fund, the units acquired on account of dividend would be
free from any lock-in 2. In Dividend Reinvestment option of an ELSS fund, the units
acquired on account of dividend would be subject to a three year lock in from the date of
allotment 3. ELSS cannot pay any dividend as its under lock-in
(a) Only 1
(b) Only 2
(c) Only 3
(d) Only 2 and 3

Correct Answer Only 2

Answer Explanation If one opts for dividend reinvestment plan, each time a dividend is reinvested, the same would
also attract a 3-year lock-in.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question49 Where should the change in status of an individual from a Resident to a Non-Resident
Indian updated for mutual fund investments?
(a) It should be updated with the Registrar and Transfer Agent
(b) It should be updated with the KYC Registration Agency
(c) It should be updated with the directly with the Mutual Fund
(d) It can be updated with any of the three options provided

Correct Answer It should be updated with the KYC Registration Agency

Answer Explanation The KYC Registration Agency (KRA) prescribes a 'Change Form' to be used to register change, if
any, in the information provided at the time of the Know Your Customer (KYC) process. These
include: • Change in Name • Change in Status/ Nationality • Change in PAN • Change in
permanent address or address for correspondence etc.

Question50 The choice of benchmark for a Debt Scheme could be chosen on the basis of : 1. Scheme
Size 2. Scheme Type 3. Investment Universe
(a) Both 1 and 2
(b) Both 2 and 3
(c) Both 1 and 3
(d) All 1,2 and 3

Correct Answer Both 2 and 3

Answer Explanation Scheme type and choice of investment universe drive the choice of benchmark in debt
schemes. The size of the scheme is immaterial.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question51 On what basis will the payment be made to an investor who claims his erstwhile unclaimed
redemption amount within three years?
(a) The amount paid will based on the prevailing NAV after adding the income earned on the
unclaimed profits
(b) The amount paid will based on the NAV at the time of original redemption plus income
earned on the unclaimed amount
(c) The amount paid will based on the NAV at the time of original redemption plus income
earned on the unclaimed amount and deducting any penalty on the same
(d) The amount paid will based on the average of the NAV at the time original redemption and
todays NAV after accounting for income earned and penalty if any

Correct Answer The amount paid will based on the prevailing NAV after adding the income earned on the
unclaimed profits
Answer Explanation Recovery of unclaimed amounts by the investors is as follows:

• If the investor claims the money within 3 years, then payment is based on prevailing NAV i.e.
after adding the income earned on the unclaimed money.

• If the investor claims the money after 3 years, then payment is based on the NAV at the end
of 3 years.

Question52 The indices based on Government securities will be an appropriate benchmark for which
type of funds?
(a) Credit Risk Funds
(b) Gilt Funds
(c) Money Market Funds
(d) Liquid Funds

Correct Answer Gilt Funds

Answer Explanation Gilt funds invest only in Government securities. Therefore, indices based on
Government Securities are the appropriate benchmark.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question53 Identify the true statement with respect to investments in mutual funds through Stock
Exchanges?
(a) Stock exchanges have now become another important channel for mutual fund companies
to sell their units to investors
(b) One can buy mutual fund units on stock exchange but cannot sell them on stock exchange
(c) The mutual fund units purchased through a stock exchange have a mandatory lock-in
period of 30 days
(d) None of the above are true

Correct Answer Stock exchanges have now become another important channel for mutual fund companies
to sell their units to investors
Answer Explanation SEBI has facilitated buying and selling of the units of mutual funds through the stock exchanges.
Exchanges have developed mutual fund transaction engines for the purpose. The low cost and
deeper reach of the stock exchange network enables increased level of participation of retail
investors in mutual funds.

Question54 In which of these cases will the 'lock-in' in a retirement fund be lower than the prescribed 5
years ?
(a) When the retirement age is earlier than 5 years from the date of investment
(b) When the age of the investor at the time of making initial investment is not less than 50
years
(c) When the targeted corpus is achieved before 5 years
(d) All of the above

Correct Answer When the retirement age is earlier than 5 years from the date of investment
Answer Explanation Retirement Fund is an open-ended retirement solution-oriented scheme having a lock-in of 5
years or till retirement age (whichever is earlier). Scheme having a lock-in for at least 5 years or
till retirement age whichever is earlier.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question55 Mr. X has invested Rs. 2,00,000 in a 370 day FMP and on maturity he received Rs. 2,15,832.
What is the capital gain in this transaction?
(a) Rs. 7916
(b) Rs. 13750
(c) Rs. 15832
(d) Insufficient Data

Correct Answer Rs. 15832

Answer Explanation Capital Gains is calculated as the difference between the sum invested and the sum realized
when the units are sold / matured.
So in the above question, capital gain is Rs 215832 - 200000 = Rs. 15832

Question56 Identify the FALSE statement. 1. Arbitrage funds can invest in both Futures/Options(F&O)
and cash markets 2. The only objective of an Arbitrage fund is to provide capital
appreciation 3. Arbitrage funds have lower risk compared to Equity Funds
(a) Only 1
(b) Only 2
(c) Both 2 and 3
(d) Both 1 and 3

Correct Answer Only 2

Answer Explanation Arbitrage funds work on the mispricing of equity shares in the spot and futures market. The
fund manager simultaneously buys shares in the cash market and sells it in futures or
derivatives markets. The difference in the cost price and the selling price is the return you earn.
Their risk level is comparable with that of a pure debt fund. The returns from an Arbitrage fund
is comparable to a debt fund. There is no capital appreciation.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question57 Which of these statement(s) is/are TRUE?

1. There cannot be a price impact on mutual fund units due to portfolio rebalancing and/or
liquidity demands on account of redemptions.
2. Market liquidity of mutual fund units can get impacted on account of company/sector
related events
(a) Only 1
(b) Only 2
(c) Both 1 and 2

Correct Answer Only 2

Answer Explanation Liquidity Risk is one of the general risk factor involved in Mutual Fund investments.
The liquidity of investments made in the Scheme may be restricted by trading volumes,
settlement periods and transfer procedures. Although the investment universe constitutes
securities which will have high market liquidity, there is a possibility that market liquidity could
get impacted on account of company/sector/general market related events and there could be
a price impact on account of portfolio rebalancing and/or liquidity demands on account of
redemptions.

Question58 Identify from the following what is not considered as a scheme fundamental attribute?
(a) Type of scheme
(b) Investment objective
(c) Investment pattern
(d) Name of fund manager

Correct Answer Name of fund manager

Answer Explanation The fund manager and his/her name is not a fundamental attribute of a scheme.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question59 Mr. A is an existing investor in a mutual fund scheme and he is now investing Rs. 5000 in
the direct plan of the scheme. What will be his net investment in the scheme after
considering the transaction charges?
(a) Rs. 4950
(b) Rs. 4900
(c) Rs. 4875
(d) Rs. 5000

Correct Answer Rs. 5000

Answer Explanation Each mutual fund has to offer two plans to the investors, viz., regular plan and direct plan. In a
regular plan the investment is through a mutual fund distributor and in a Direct plan, the
investor purchases units directly from the fund.
There are no transaction charges on direct investments.

Question60 Investments have to be made only through authorized signatories for investments by
.
(a) Institutional investors
(b) Hindu Undivided Family (HUF)
(c) Non Resident Indians (NRI)
(d) High net worth individuals (HNI)

Correct Answer Institutional investors

Answer Explanation Since institutional investors are not natural persons, authorised individuals invest on behalf of
the institution.
Authorisation for the investing institution to invest is typically in the form of a Board
Resolution.
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Question61 As per SEBI Code of Conduct, mutual fund schemes portfolios should be managed in the
interest of .
(a) Trustees
(b) Sponsors
(c) Brokers
(d) All classes of unit holders

Correct Answer All classes of unit holders

Answer Explanation As per SEBI Code of Conduct - Trustees and asset management companies shall carry out the
business and invest in accordance with the investment objectives stated in the scheme related
documents and take investment decision solely in the interest of unitholders.

Question62 The form for registering a change in the default bank account has to be signed .
(a) by the first holder only
(b) by all the holders of the folio
(c) according to the mode of holding of the folio
(d) by all the holders of the bank account

Correct Answer according to the mode of holding of the folio

Answer Explanation The form for registering the change in default bank account has to be signed according to the
mode of holding of the folio.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question63 For which mutual fund distributors is a due diligence process mandated by SEBI?
(a) A mutual fund distributor who services more than 25 investors
(b) A mutual fund distributor who receives commission of over Rs. 50 Lakhs from a single
mutual fund
(c) A mutual fund distributor who brings in investments from investors of over Rs. 1 crore for a
single mutual fund
(d) All of the above

Correct Answer A mutual fund distributor who receives commission of over Rs. 50 Lakhs from a single
mutual fund
Answer Explanation SEBI has mandated AMCs to put in place a due diligence process to regulate distributors who
qualify any one of the following criteria:
a. Multiple point presence (More than 20 locations)
b. AUM raised over Rs. 100 crore across industry in the non-institutional category but including
high networth individuals (HNIs)
c. Commission received of over Rs. 1 Crore p.a. across industry
d. Commission received of over Rs. 50 Lakhs from a single mutual fund.

Question64 Mrs. Neeta needs Rs. 5,00,000 in 3 years from now. The interest rate is 6%. By which
formula can we calculate the amount which is required to be invested today to achieve the
goal?
(a) 500000 * (1+0.6)*3
(b) 500000 / (1+0.6)^3
(c) 500000 / (1+0.6)*3
(d) 500000 * (1- 0.6)^3

Correct Answer 500000 / (1+0.6)^3

Answer Explanation Present value formula = F / (1 + r) ^ n
Where F is the future value (500000) ; r is the rate of interest (6% p.a.); and n is the number of
years (3)
= 500000 / (1+0.6)^3
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question65 What is the investment in equity and equity related instruments in a Balanced Hybrid
Fund?
(a) Between 20% to 30% of total assets
(b) Between 10% to 20% of total assets
(c) Between 40% to 60% of total assets
(d) Between 60% to 80% of total assets

Correct Answer Between 40% to 60% of total assets

Answer Explanation Balanced Hybrid Fund is an open-ended balanced scheme investing in equity and debt
instruments. The investment in equity and equity related instruments shall be between 40
percent and 60 percent of total assets.

Question66 A person wants to create a synthetic index. Guide him as to in which of these categories
the weightage of equity index would be the lowest?
(a) Super aggressive hybrid fund
(b) Aggressive hybrid fund
(c) Balanced hybrid fund
(d) Conservative hybrid fund

Correct Answer Conservative hybrid fund

Answer Explanation In a CRISIL Conservative Hybrid Fund, the equity component will be only 25% and Debt will be
75%.
In Aggressive Hybrid Fund, the ratio of Equity and Debt is 75% and 25% and in a Balanced
Hybrid Fund, the ratio is 50% and 50%.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question67 The minimum investment limit in equity/equity related instruments of large cap companies
for a Large Cap mutual fund scheme is of total assets.
(a) 70%
(b) 80%
(c) 85%
(d) 90%

Correct Answer 80%

Answer Explanation A Large Cap Fund is an open-ended equity scheme predominantly investing in large cap stocks.
As per SEBI rules on asset allocation, the minimum investment in equity and equity related
instruments of large cap companies shall be 80 percent of total assets

Question68 Identify which of these is a function of Association of Mutual Funds in India (AMFI)?
(a) To calculate the correct NAVs
(b) To make available the AUM, NAV and other important data of the mutual fund industry
(c) To regulate and control insider trading
(d) To manage the Investor Protection Fund

Correct Answer To make available the AUM, NAV and other important data of the mutual fund industry
Answer Explanation AMFI makes available the AUM, NAV and other important data of the mutual fund industry on
its website.
(Calculation of NAV is the duty of the mutual fund / SEBI regulates insider trading / Stock
exchanges manage the Investor protection fund)
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Question69 Identify the true statement with respect to measuring returns for Mutual Funds schemes.
1. Simple Return can be calculated using the formula : Sale Price - Cost Price / Sale Price 2.
Compounded Annual Growth Rate 'CAGR' technique has been prescribed by SEBI when
dividend is paid and compounding is to be considered 3. CAGR is the recognized standard
for calculating returns for investment horizon of greater than or equal to 1 year
(a) 1 and 2
(b) 2 and 3
(c) 3 and 1
(d) 1,2 and 3

Correct Answer 2 and 3

Answer Explanation 1. Simple Return can be calculated with the following formula : Sale Price - Cost Price / Cost
Price
2. Whenever a dividend is paid – and compounding is to be considered - the CAGR technique (or
the reinvestment method, as some call it) prescribed by SEBI is used
3. The return is calculated using CAGR if the holding period is over one year. If returns are less
than one year, than Simple Return is calculated

Question70 If an investor claims his unclaimed redemption amount after 3 years than the payment will
be based on the .
(a) average of the NAVs ie. current NAV and NAV at the time of original redemption
(b) current NAV
(c) NAV at the end of three years
(d) NAV at the time of original redemption

Correct Answer NAV at the end of three years

Answer Explanation Recovery of unclaimed amounts by the investors is as follows:
• If the investor claims the money within 3 years, then payment is based on prevailing NAV i.e.
after adding the income earned on the unclaimed money.
• If the investor claims the money after 3 years, then payment is based on the NAV at the end
of 3 years.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question71 Identify the TRUE statement. 1. Retail investors can buy units of Gold ETF 2. Banks as well
as Mutual Funds, both offer Gold deposit schemes 3. Gold ETF is a closed ended fund and
so the holdings are not for perpetuity
(a) Only statement 1 is true
(b) Only statement 2 is true
(c) Only statement 3 is true
(d) All 1,2 and 3 are true

Correct Answer Only statement 1 is true

Answer Explanation Gold ETF's can be easily bought by retail investors as the minimum traded quantity is 1 unit ie. 1
gram.
The Gold deposit scheme is offered only by banks to mobilise the idle gold in the country and
put it in productive use and to provide the customer an opportunity to earn interest on the idle
gold holdings.
All Exchange Traded Fund are open-ended schemes.

Question72 Identify the FALSE statement(s) –

A - Authorised signatories have to sign the request for transactions of institutional
investors in mutual funds
B - Even if the Memorandum of Association and Articles of Association does not permit
invest in mutual funds, the company can invest in mutual fund on the basis of a Board
Resolution
(a) Statement A is false
(b) Statement B is false
(c) Both statements A and b are false

Correct Answer Statement B is false

Answer Explanation 1. A company cannot invest in mutual funds if its incorporation documents ( (Memorandum of
Association and Articles of Association) do not provide for investments of this type.

2. The mutual fund can allow transactions only if the transaction form/slip carries the signature
of any (one or more, as required) of the authorised signatories.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question73 Rising Sun Mutual Fund holds shares of AAA Ltd. in its portfolio. When the NAV of the
scheme is calculated on 10th April, then each share of AAA Ltd. will be valued at .
(a) Average traded price of AAA Ltd. on 10th April across all stock exchanges
(b) Opening price of AAA Ltd. on 10th April at BSE / NSE
(c) Closing price of AAA Ltd. on 10th April at BSE / NSE
(d) Average traded price of AAA Ltd. on 10th April at BSE / NSE

Correct Answer Closing price of AAA Ltd. on 10th April at BSE / NSE
Answer Explanation As per the SEBI rules of valuation for equity shares : The securities shall be valued at the last
quoted closing price on the stock exchange.
(When the securities are traded on more than one recognised stock exchange, the securities
shall be valued at the last quoted closing price on the stock exchange where the security is
principally traded. It would be left to the asset management company to select the appropriate
stock exchange)

Question74 Identify the TRUE statement(s) : a. A diversified index will have a Beta of 1 b. Unsystematic
risk can be measured by Beta c. A portfolio which has Beta of less than 1 is less risky than
the market
(a) a and b
(b) a and c
(c) b and c
(d) Only b

Correct Answer a and c

Answer Explanation 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.
The risks that impact the entire economy are known as systematic risks. The company specific
risks are also known as unsystematic risks. Systematic risk is measured by its Beta.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question75 risk arises because of difference in price movement of the derivative vis-a-vis that
of the security being hedged.
(a) Model Risk
(b) Basis Risk
(c) Market Liquidity Risk
(d) Credit Risk

Correct Answer Basis Risk

Answer Explanation Basis Risk arises due to a difference in the price movement of the derivative vis-à-vis that of the
security being hedged.

Question76 An investor is interested in buying some units of a Close ended fund after the NFO is over.
How can he buy the same?
(a) He can buy the units on the stock exchange from market makers appointed by the mutual
fund
(b) He can buy the units on the stock exchange from other investors who were allotted the
units and are interested in selling
(c) He can buy the units from the mutual fund itself when they open the sale at periodic
intervals as announced by the fund
(d) He cannot buy units of a close ended fund

Correct Answer He can buy the units on the stock exchange from other investors who were allotted the
units and are interested in selling
Answer Explanation A close-ended scheme offers liquidity through its listing on a stock exchange. Unit holders who
are interested in selling can offer their quotes and new investors can buy them.
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Question77 BSE’s platform for Mutual Fund trading is known is BSE Solar Mutual Funds Platform - True
or False ?
(a) True
(b) False

Correct Answer False

Answer Explanation BSE’s platform is BSE StAR Mutual Funds Platform.
BSE StAR MF stands for BSE Ltd.’s online Stock exchange platform for Allotment and Redemption
of Mutual Fund units.

Question78 Legally SAI is part of the SID - True or False ?

(a) True
(b) False

Correct Answer True

Answer Explanation In practice, Scheme Information Document (SID) and Statement of Additional Information (SAI)
are two separate documents, though the legal technicality is that SAI is part of the SID.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question79 NAV of income funds is to be calculated upto decimals.

(a) 1
(b) 2
(c) 3
(d) 4

Correct Answer 4
Answer Explanation NAV is to be calculated upto 4 decimal places in the case of income funds, liquid funds and
other debt funds.
NAV for equity and balanced funds is to be calculated upto at least 2 decimal places.

Question80 Mutual funds can buy and sell securities only on delivery basis. State whether this
statement is True or False.
(a) True
(b) False

Correct Answer True

Answer Explanation The Mutual Fund will buy and sell securities on delivery basis. Securities purchased will be
transferred in the name of the Mutual Fund because of the respective scheme.

This means mutual funds cannot square-up the same day. They have to compulsorily take
delivery.
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Question81 In case of mutual fund schemes, dividends can be paid only out of .
(a) Unit capital
(b) Distributable surplus generated by the scheme
(c) Premium reserve account
(d) Mark-to-market profits

Correct Answer Distributable surplus generated by the scheme

Answer Explanation SEBI guidelines stipulate that dividends can be paid out of distributable reserves. In
the calculation of distributable reserves:
• All the profits earned (based on accrual of income and expenses as detailed above) are
treated as available for distribution.
• Valuation gains are ignored. But valuation losses need to be adjusted against the profits.
• That portion of sale price on new units, which is attributable to valuation gains, is
not available as a distributable reserve.

Question82 The investor cannot pledge the units of a Mutual Fund as a security to a financer - True or
False ?
(a) True
(b) False

Correct Answer False

Answer Explanation The investor can pledge the units as a security to a financier.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question83 NFO's for ELSS schemes can remain open for days
(a) 10
(b) 15
(c) 20
(d) 30

Correct Answer 30
Answer Explanation In the case of ELSS / RGESS schemes, the offering period shall be not be more than 30 days.
Schemes other than ELSS and RGESS (Rajiv Gandhi Equity Saving Scheme) can remain open for
subscription for a maximum of 15 days.

Question84 As per the SEBI guidelines, how often should the mutual fund scheme’s portfolio be
published?
(a) Monthly
(b) Half-yearly
(c) Annually
(d) Quarterly

Correct Answer Half-yearly

Answer Explanation Schemes portfolio is a list of securities where the corpus of the scheme is currently invested.
The AMCs shall send to its unitholders, a half yearly portfolio via email within 10 days from the
end of each half year. The half yearly portfolio of the schemes is available on the AMFI’s
website and website of AMC on or before the 10th day of succeeding month. The
advertisement for the same is required to be published by the fund in all India edition of at
least two daily newspapers, one each in English and Hindi.
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Question85 Whose job is it to track the various corporate actions like bonus, dividend, or rights issues
in companies where the mutual fund scheme has invested?
(a) Custodian
(b) Registrar and Transfer Agency
(c) Unitholders
(d) Auditors of the Asset Management Company

Correct Answer Custodian

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

The custodian also tracks corporate actions such as dividends, bonus and rights in
companies where the fund has invested.

Question86 Open-ended schemes generally offer exit option to investors through a stock exchange.
(a) True
(b) False

Correct Answer False

Answer Explanation Close-ended schemes generally offer exit option to investors through a stock exchange. The
open-ended schemes can be easily sold at their current NAV back to the mutual fund thro' an
agent or directly.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question87 takes into account all dividends generated from the basket of constituents that
make up the index in addition to the capital gains.
(a) Price return index
(b) Dividend return index
(c) Total return index

Correct Answer Total return index

Answer Explanation Earlier, the Mutual Fund schemes were benchmarked to the Price Return variant of an
Index (PRI). PRI only captures capital gains of the index constituents. With effect from February
1, 2018, the mutual fund schemes are benchmarked to the Total Return variant of an Index
(TRI).

The Total Return variant of an index takes into account all dividends/interest payments that are
generated from the basket of constituents that make up the index in addition to the capital
gains.

Question88 of the Unit-holders can pass a resolution to wind-up a scheme.

(a) 25%
(b) 50%
(c) 60%
(d) 75%

Correct Answer 75%

Answer Explanation 75 percent of unit holders can terminate the appointment of an AMC. Also, 75 percent of
the unitholders (unitholding) can pass a resolution to wind up a scheme.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question89 The main objective of asset allocation is risk management - True or False ?
(a) True
(b) False

Correct Answer True

Answer Explanation The distribution of an investor’s portfolio between different asset classes like Equity, Debt,
Gold etc is called asset allocation.
Asset Allocation is basically using the old proverb - ‘Don’t put all your eggs in one basket’ to
guide investments and managing the risks.

Question90 assumes that all dividend payouts are re-invested in the scheme at the ex-
dividend NAV.
(a) Compounded Returns
(b) Compounded Annual Growth Rate
(c) Annualised Returns
(d) Simple Returns

Correct Answer Compounded Annual Growth Rate

Answer Explanation Whenever a dividend is paid – and compounding is to be considered - the CAGR - Compounded
Annual Growth Rate - technique prescribed by SEBI is used.
This calculation is based on an assumption that the dividend would be re-invested in the same
scheme at the ex-dividend NAV.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question91 Offer documents of mutual fund schemes are approved by SEBI - True or False ?
(a) True
(b) False

Correct Answer False

Answer Explanation Offer Documents in the market are “vetted” by SEBI, though SEBI does not formally “approve”
them.

Question92 Which amongst the following categories of mutual funds have a fixed maturity date?
(a) Exchange Traded Funds
(b) Open-ended funds
(c) Close-ended funds
(d) Interval funds

Correct Answer Close-ended funds

Answer Explanation Close-ended funds have a fixed maturity. Investors can buy units of a close-ended scheme, from
the fund, only during its NFO.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question93 The most appropriate measure of returns for a scheme in existence for several years is
.
(a) CAGR
(b) Annualised Return
(c) Dividend Return
(d) Simple Return

Correct Answer CAGR

Answer Explanation CAGR - Compounded Annual Growth Rate.

Question94 Redemption from which of the following mutual fund schemes would attract Securities
Transaction Tax (STT) for an investor?
(a) Liquid Fund
(b) Overnight Fund
(c) Multi-cap mutual fund
(d) Government Securities Fund

Correct Answer Multi-cap mutual fund

Answer Explanation In the given options, only Multi cap fund is an equity fund and rest all are debt funds.
STT is applicable only on redemption/switch of units of Equity oriented mutual funds whether
sold on stock exchange or otherwise.
STT is not applicable on purchase of units of an equity scheme. It is also not applicable
to transactions in debt securities or debt mutual fund schemes.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question95 How often should the Key Information Memorandum (KIM) be updated?
(a) At least once a month
(b) At least once every six months
(c) At least once a year
(d) It need not be updated after it is issued once

Correct Answer At least once a year

Answer Explanation KIM is to be updated at least once a year or early in case of change in fundamental attributes.

Question96 In case of capital gains from mutual fund investments, Tax Deduction at Source (TDS) is
applicable for:
(a) All investors, who have invested more than Rs. 5 lacs
(b) Minor through guardian
(c) TDS is not applicable in case of mutual funds
(d) Non-Resident Indians (NRIs)

Correct Answer Non-Resident Indians (NRIs)

Answer Explanation There is no TDS on re-purchase proceeds to resident investors. However, for certain cases
of non-resident investments, the same is applicable.

(In case of dividends from mutual fund schemes, even for resident Indians, TDS is applicable.)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question97 Its due to loads and taxes that there is a difference between scheme returns and investor
returns - True or False ?
(a) False
(b) True

Correct Answer True

Answer Explanation Loads like Exit Load and Taxes like STT reduce the scheme returns.

Question98 SEBI regulates Mutual Funds as well as Registrars and Transfer Agents - True or False ?
(a) True
(b) False

Correct Answer True

Answer Explanation SEBI regulates Mutual Funds , Registrars and Transfer Agents, Depositories, Stock Brokers etc.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
LAST DAY REVISION TEST NO. 3

Question99 Which of the following statements is TRUE with respect to the Scheme Information
Document (SID) and Statement of Additional Information (SAI)?
(a) These two documents are prepared in the format prescribed by Association of Mutual
Funds in India as part of AMFIs Code of Conduct
(b) These two documents are prepared in the format prescribed by Association of Mutual
Funds in India as part of AMFIs Best Practices Circular
(c) These two documents are prepared in the format prescribed by Securities and Exchange
Board of India
(d) Each Asset Management Company is free to prepare these documents in the format they
desire

Correct Answer These two documents are prepared in the format prescribed by Securities and Exchange
Board of India
Answer Explanation SAI and SAI documents are prepared in the format prescribed by SEBI and submitted to SEBI.
The contents need to flow in the same sequence as in the prescribed format. The mutual fund
is permitted to add any other disclosure, which it feels, is ‘material’ for the investor.

Question100 In what form do mutual fund distributors earn revenue?

(a) Investment advisory fee from mutual funds
(b) Commission received from Association of Mutual Funds in India
(c) Fees collected from the investors
(d) Commission from mutual funds for distribution of the schemes

Correct Answer Commission from mutual funds for distribution of the schemes
Answer Explanation The mutual fund distributor earns revenue in the form of commission income for distribution of
the mutual fund products/schemes. The commission may be linked to either the transaction or
to the assets under management.

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

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TEST DETAILS – The NISM MUTUAL FUND DISTRIBUTORS CERTIFICATION EXAM is a 100 mark exam
with 50% as
passing marks. In all 100 questions will be asked with NO negative marking. The time duration is 2 hours.

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Question1 Which of these statement(s) is/are true?

A. In equity investments, the probability of losing money over a long term
is lesser than losing money in the short term
B. Fundamental Analysis consists of studying the financial statements of
a company and the candle stick charts

1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 None of the above

Correct Only A is correct

Answer
Answer Historically, equity investing has delivered higher returns than other
Explanation investment
avenues, most of the times, if one considers long investment periods.
Equity share prices generally fluctuate a lot, often without regard to
the business fundamentals. However, over long periods of time, the
share prices follow the fortunes of the firm. If the profits of the company
continue to grow over the years, the share price follows.
(In Fundamental Analysis, one does not study the charts like Candle Stick
chart etc. Study of charts is done in Technical Analysis)

Question2 How often does a mutual fund disclose the information on Total Expense
Ratio charged to a mutual fund scheme and where is this published?
1 Daily - on the mutual fund website
2 Weekly - on the mutual fund website
3 Once a month in the fund Factsheet
4 Once a year when it makes the mandatory disclosures to SEBI and AMFI

Correct Daily - on the mutual fund website

Answer
Answer SEBI has mandated that the Asset Management Companies (AMCs) should
Explanation prominently disclose on a daily basis, the Total expense ratio (scheme-
wise, date- wise) of all schemes under a separate head – “Total Expense
Ratio of Mutual Fund Schemes” on theirwebsite.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
UPDATED QUESTIONS

Question3 Identify the true statement with respect to Total Expense Ratio?
1 The AMC is not allowed to change the Total Expense Ratio of a scheme
during its
entire life time
2 The AMC can change the Total Expense Ratio and it need not be
communicated to
the unit holders as its an internal matter
3 The AMC can change the Total Expense Ratio and it has to be
communicated to all
the unit holders
4 There is no term as - Total Expense Ratio for a mutual fund scheme

Correct The AMC can change the Total Expense Ratio and it has to be
Answer communicated to all the unit holders
Answer As per SEBI regulations - The AMCs are required to send the update to the
Explanation investors
through email whenever there is a change in the expense ratio.
Question4 AMCs has to put in place a due diligence process to regulate distributors
who
.
1 has received commission received of over Rs. 25 Lakhs from a single
mutual fund
2 has raised AUM of over Rs. 25 crores from non-institutional investors
3 has presence in more than 20 locations
4 All of the above

Correct has presence in more than 20 locations

Answer
Answer SEBI has mandated AMCs to put in place a due diligence process to
Explanation regulate
distributors who
qualify any one of the following criteria:
a. Multiple point presence (More than 20 locations)
b. AUM raised over Rs. 100 crore across industry in the non-institutional
category
but including high networth individuals (HNIs)
c. Commission received of over Rs. 1 Crore p.a. across industry
d. Commission received of over Rs. 50 Lakhs from a single mutual fund
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
UPDATED QUESTIONS

Question5 What is the investment range for the mutual fund house to invest in debt
instruments for a Balanced Hybrid Fund?
1 20 percent and 40 percent
2 40 percent and 60 percent
3 10 percent and 30 percent
4 20 percent and 50 percent

Correct 40 percent and 60 percent

Answer
Answer Balanced Hybrid Fund: An open-ended balanced scheme investing in
Explanation equity and
debt instruments. The investment in equity and equity related
instruments shall be between 40 percent and 60 percent of total assets
while investment in debt instruments shall be between 40 percent and 60
percent.
Question6 When is the Statement of Additional Information (SAI) updated ?
1 Every month
2 Before 10th of January and 10th of July every six months
3 Every three months
4 Before the end of 3 months of every financial year

Correct Before the end of 3 months of every financial year

Answer
Answer Updation of SAI - Regular update has to be done by the end of 3 months of
Explanation every
financial year.
(Material changes have to be updated on an ongoing basis and uploaded
on the websites of the mutual fund and AMFI)
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
UPDATED QUESTIONS

Question7 Which is the first step that a mutual fund distributor should take in building
a
mutual fund portfolio for his investors?
1 He should list the best performing funds for the investor to select
2 He should set the financial goals of the investor
3 He should invest the amount in a liquid fund and set a Systematic Transfer
Plan in
good equity funds
4 He should list good equity funds with the lowest expense ratio for the
investor to select

Correct He should set the financial goals of the investor

Answer
Answer The selection of a mutual fund scheme for an investor will depend upon the
Explanation need
that the investor has from the investment. The objective could be a
financial goal like reaching a certain level of wealth in a specified period
of time; or it could be funding a major expense related to an important life
event like education of one’s children or funding one’s retirement. The sight
of the goal must never be missed.
Therefore, the first step is to set the financial goals.

Question8 What is Indexation ?

1 Reduction of short and long term capital gains tax by using an index based
calculation
2 Benchmarking the index fund against a suitable index like Sensex / Nifty
3 Adjusting the cost of acquisition upwards to reflect the impact of inflation
4 Adjusting the cost of acquisition downward to reflect the impact of inflation

Correct Adjusting the cost of acquisition upwards to reflect the impact of inflation
Answer
Answer Indexation means that the cost of acquisition or the cost of purchase is
Explanation adjusted
upwards to reflect the impact of inflation.
For eg. - A stock was purchased at Rs 100 and sold for Rs 150 after 5
years. The long term capital gains is Rs 50 on which tax is to paid. But
when adjusted for indexation (as per data released by Central Board of
Direct taxes every year), the capital gains will be reduced and the tax will
have to be paid on a lower amount.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
UPDATED QUESTIONS

Question9 For which of the following fund can NSE’s MIBOR be used as an
benchmark?
1 ELSS Fund
2 Liquid Fund
3 5 year constant maturity G-sec fund
4 Long duration fund

Correct Liquid Fund

Answer
Answer NSE’s MIBOR (Mumbai Inter-Bank Offered Rate) is based on short term
Explanation money
market. Liquid schemes invest in securities of upto 91 days’ maturity. Therefore, a
short term money market benchmark such as NSE’s MIBOR is suitable.

Question10 Which of these is a Passive Fund? A) Gold Sector Fund B) Gold Mining
Companies Fund C) Gold Exchange Traded Fund D) Gilt Funds
1 Both A and B
2 Only D
3 Only C
4 All A, B, C and D

Correct Only C
Answer
Answer Passive funds invest on the basis of a specified index; whose performance
Explanation it seeks to
track. For eg. NIfty Index fund.
Exchange Traded Funds (traded on exchanges) are also passive funds that
generate returns in line with the index or benchmark.

So, from the above options, only Gold Exchange Traded Fund is a passive
fund.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
UPDATED QUESTIONS

Question11 On which of the following factors does returns from an international fund
depend
on?
1 Asset Class performance
2 Foreign currency exchange rates
3 Both 1 and 2

Correct Both 1 and 2

Answer
Answer When an Indian investor invests in equities abroad, he is essentially taking
Explanation two
exposures:
• An exposure on the international equity market (asset class)
• An exposure to the exchange rate of the rupee. If the investor invests in
the US,
and the US Dollar becomes stronger during the period of his investment,
he benefits; if the US Dollar weakens (i.e. Rupee becomes stronger), he
loses or the portfolio returns will be lower.
Question12 In which of the following cases is the transaction charge to be paid to
the mutual fund distributor, deducted from the gross investment of the
investor ?
1 When the investor purchases mutual fund units worth Rs 5000 through a
mutual
fund distributor
2 When the investor purchases mutual fund units worth Rs 15000 through a
mutual
fund distributor
3 When the investor purchases mutual fund units worth Rs 5000 through the
webiste
of the mutual fund
4 When the investor purchases mutual fund units worth Rs 15000 through
the webiste
of the mutual fund

Correct When the investor purchases mutual fund units worth Rs 15000 through
Answer a mutual fund distributor
Answer SEBI has allowed a transaction charge per subscription of Rs. 10,000/- and
Explanation above to
be paid to distributors of the mutual fund products. However, there shall
be no transaction charges on direct investments. The transaction
charge, if any, is deducted by the AMC from the subscription amount
and paid to the distributor;
and the balance amount is invested.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
UPDATED QUESTIONS

Question13 In case a fund manager is managing more than six funds, then
in all
performance related advertisements.
1 the total number of schemes managed by him hs to be disclosed
2 performance data need not be given
3 performance data of top 2 and bottom 2 schemes has to be disclosed
4 performance data of top 3 and bottom 3 schemes has to be disclosed

Correct performance data of top 3 and bottom 3 schemes has to be disclosed

Answer
Answer When the performance of a particular mutual fund scheme is advertised,
Explanation 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

Question14 At what price can investors buy or sell units of an open-ended fund after
the New Fund Offer?
1 The NAV of the mutual fund units
2 The New Fund Offer (NFO) price
3 The face value
4 The monthly average price

Correct The NAV of the mutual fund units

Answer
Answer Investors of an open ended fund can buy and sell mutual fund units as per
Explanation its
current Net Asset Value - NAV price.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
UPDATED QUESTIONS

Question15 Identify the true statement(s) with respect to Scheme Performance

Disclosures?
A) The data related to fund performance of all mutual funds is available on
the AMFI website
B) SEBI has mandated disclosure of performance data by all the AMCs
1 Only A is true
2 Only B is true
3 Both A and B are true
4 Both A and B are false

Correct Both A and B are true

Answer
Answer AMFI website ([Link]) carries the performance data of all the
Explanation mutual
fund schemes.
SEBI has mandated disclosure of performance data by all the asset
management companies (AMCs). These disclosures can be accessed
through certain scheme documents and website of the fund house.

Question16 When a dividend is paid, the NAV of the units to that extent.
1 rises
2 falls
3 There is no change

Correct falls
Answer
Answer In a dividend pay-out option, the fund declares a dividend from time to
Explanation time. When
a dividend is paid, the NAV of the units falls to that extent.
The reduced NAV, after a dividend pay-out is called ex-Dividend NAV.
NISM SERIES V A – MUTUAL FUND
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Question17 When compared to open ended funds, investors in close ended funds face
a higher
level of .
1 Credit risk
2 Liquidity risk
3 Market risk
4 Investment risk

Correct Liquidity risk

Answer
Answer Investors may choose the close-ended funds only if they can keep the
Explanation money locked-
in such schemes. Although they are listed on stock exchanges, many a
times there is very low liquidity / volumes and also the price could be lower
than NAV.
Anyone, who prefers liquidity option, should consider investing in
open- ended funds.

Question18 Can the fundamental attributes of scheme be changed? If yes - how?

1 Yes- but with the consent of 100% of the unit holders
2 Yes - with the permission of SEBI and AMFI
3 Yes - but this should be communicated to unit holders who should be
provided an
option to exit the scheme
4 No - the fundamental attributes cannot be changed as it is based on these
attributes
that investors have invested their money

Correct Yes - but this should be communicated to unit holders who should be
Answer provided an option to exit the scheme
Answer The trustees shall not permit a change in the fundamental attributes of the
Explanation scheme or any other change that will affect the interests of the unit
holders unless a written communication is sent to each unitholder, a
notice is given in the newspaper with national circulation and the
unitholders are given the option to exit at NAV without paying an exit
load.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
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Question19 is considered as an Institutional Investor.

1 Non-Resident Indians
2 Trusts
3 Persons of Indian Origin (PIO)
4 High Networth Individuals

Correct Trusts
Answer
Answer Charitable Trusts / Private Trusts are considered as institutional investors.
Explanation
Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO) / HNIs are
individual
investors.
Question20 If a Segregated portfolio is created, it shall be effective from .
1 the day of credit event
2 seven days prior to the credit event
3 one year from the date of the credit event
4 the day that security was bought in the portfolio

Correct the day of credit event

Answer
Answer To ensure fair treatment to all investors in case of a credit event and to deal
Explanation with
the liquidity risk, in December 2018, SEBI permitted creation of
segregated portfolio of debt and money market instruments by mutual
funds schemes. “Segregated portfolio” means a portfolio, comprising of
debt or money market instrument affected by a credit event, that has been
segregated in a mutual fund scheme.
Segregated portfolio shall be effective from the day of credit event.
NISM SERIES V A – MUTUAL FUND
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Question21 The empanelment of a mutual fund distributor by an Asset Management

Company
can be terminated .
1 In case all the investors of the distributors shift to direct plans
2 When the term of empanelment is over
3 Any time by the AMC
4 All of the above

Correct Any time by the AMC

Answer
Answer The AMC has the power to terminate the empanelment of the mutual fund
Explanation distributor at any time.

Question22 The AMFI Code of Ethics (ACE) sets out .

1 The standards of good practices to be followed by the AMCs in their
operations and
in their dealings with investors, intermediaries and the public.
2 The standards of good practices to be followed by the AMCs in their
operations and
in their dealings with mass media
3 The standards of good practices to be followed by mutual fund distributors
in their
dealings with AMFI, AMCs and investors
4 The standards of good practices to be followed by fund managers in their
dealings
with AMFI and investors

Correct The standards of good practices to be followed by the AMCs in their

Answer operations and in their dealings with investors, intermediaries and the
public.
Answer One of the objectives of the Association of Mutual Funds in India (AMFI)
Explanati is to promote the investors’ interest by defining and maintaining high
on ethical and professional standards in the mutual fund industry.
The AMFI Code of Ethics (ACE) sets out the standards of good practices
to be followed by the Asset Management Companies (AMCs) in their
operations and in their dealings with investors, intermediaries and the
public.
NISM SERIES V A – MUTUAL FUND
DISTRIBUTORS V IMP REAL FFEL EAXM -
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Question23 Who handles the appeals which are made against the rulings of SEBI ?
1 Company Law Board
2 AMFI
3 Securities Appellate Tribunal
4 High Court

Correct Securities Appellate Tribunal

Answer
Answer Persons aggrieved by an order of Adjudicating Officer passed under the
Explanation SEBI Act can
prefer an appeal to Securities Appellate Tribunal (SAT) under section
15T of the SEBI Act.
Question24 forms the basis of appointment of a distributor by an AMC.
1 SEBI approval
2 Agreement between the investor and the distributor
3 Power of attorney from the AMC
4 An agreement between the AMC and the Distributor

Correct An agreement between the AMC and the Distributor

Answer
NISM SERIES V A – MUTUAL FUND
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Question25 A mutual fund scheme can invest in the equity instruments of a

company.
1 5% of the net assets
2 10% of the net assets
3 15% of the net assets
4 25% of the net assets

Correct 10% of the net assets

Answer
Answer The SEBI Regulations provide for various limits to the kind of investments
Explanation that are
possible in mutual fund schemes. One of the restriction is -
The Mutual Fund under all its schemes shall not own more than 10
percent of a company’s paid up capital bearing voting rights. Provided no
sponsor of a mutual fund, its associate or group company including the
Asset Management Company of the fund, through the schemes of the
mutual fund or otherwise, individually or collectively, directly or
indirectly, have 10 percent or more of the shareholding or voting rights in
the asset management company or the trustee company of any other
mutual fund.

Question26 Identify the false statement(s).

A) The best strategy in selecting a mutual fund scheme is that based on
its past performance
B) When an investor wants to redeem from a scheme, the distributor must
suggest redemption from the scheme with the maximum exit load

1 Only statement A is false

2 Only statement B is false
3 Both statements A and B are false

Correct Both statements A and B are false

Answer
Answer Experience has shown time and again, the top performers during one
Explanation period may
not necessarily remain as a top performer forever or near the other top
performers and vice versa. In such a case, simply buying into a scheme
due to good returns in the recent past may not be a wise approach.
When an investor wants to redeem from a scheme, the distributor must
suggest redemption from the scheme with the minimum exit load.
NISM SERIES V A – MUTUAL FUND
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Question27 Which of the following statement is true with respect to 'Mark to Market' ?
1 Securities in the portfolio are valued at current market prices
2 Securities in the portfolio are valued at 52 week high prices
3 Securities in the portfolio are valued at 52 week low prices
4 Securities in the portfolio are valued at purchase price

Correct Securities in the portfolio are valued at current market prices

Answer
Answer The process of valuing each security in the investment portfolio of the
Explanation scheme at its
current market value is called Mark to Market (MTM). The mark-to-market
valuation is done on a daily basis for calculation of daily NAV of a mutual
fund scheme.
Question28 Identify the TRUE statement(s)
a) In an Assured Return scheme, if the scheme is not able to pay the
assured return amount then the guarantor has to pay the same
b) Investor returns might vary from the scheme returns on account of
choices regarding investment schedule
c) The returns published in a mutual fund advertisement factor the entry
or exit load, as may be applicable.

1 'b' and 'c' are true

2 'a' and 'c' are true
3 'a' and 'b' are true
4 All 'a' , 'b' and 'c' are true

Correct 'a' and 'b' are true

Answer
Answer Mutual funds are not permitted to promise any returns, unless it is an
Explanation assured
returns scheme. Assured returns schemes call for a guarantor who is
named in the SID. The guarantor will need to write out a cheque, if the
scheme is otherwise not able to pay the assured return.
Investor returns might vary from the scheme returns also on account of
choices regarding investment schedule, i.e., additional investment being
made during the period or redeeming a portion of the investment. In such
a case, for the same period investor’s returns may be different from the
published returns of the scheme.
The returns published in a mutual fund advertisement would be without
factoring the entry or exit load, as may be applicable.
NISM SERIES V A – MUTUAL FUND
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Question29 To measure the fund manager’s performance, the difference between

scheme’s
actual return and its optimal return is calculated and this is known as .
1 Alpha
2 Beta
3 Sharpe
4 Treynor

Correct Alpha
Answer
Answer The difference between a scheme’s actual return and its optimal return is its
Explanation Alpha—a measure of the fund manager’s performance. Alpha, therefore,
measures the performance of the investment in comparison to a suitable
market index. Positive alpha is indicative of outperformance by the fund
manager; negative alpha might indicate under-performance.

Question30 Who issues a due diligence certificate stating compliance with all legal
formalities at the time of making a new offer of mutual fund units?
1 Board of Trustees
2 AMC
3 Compliance Officer
4 Custodian

Correct AMC
Answer
Answer The cover page of Scheme Information Document (SID) has the following
Explanation standard
clause - “The particulars of the Scheme have been prepared in accordance
with the Securities and Exchange Board of India (Mutual Funds)
Regulations 1996, as amended till date, and filed with SEBI, along with a
Due Diligence Certificate from the AMC (Asset Management Company).
NISM SERIES V A – MUTUAL FUND
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Question31 A synopsis of the scheme related information documents is found in the .

1 Statement of Additional Information - SAI
2 Articles of Association
3 Trust Deed
4 Key Information Memorandum – KIM

Correct Key Information Memorandum - KIM

Answer
Answer Scheme Information Document (SID) and Statement of Additional
Explanation Information (SAI)
contain the details of the particular scheme and the statutory information
about the mutual fund or AMC, that is offering the scheme.
Key Information Memorandum - KIM is essentially a summary of the SID
and SAI. It contains the key points of these documents that are essential
for the investor to know to make a decision on the suitability of the
investment for their needs. It is more easily and widely distributed in the
market. As per SEBI regulations, every application form is to be
accompanied by the KIM.

Question32 What will happen if one of the joint holders of a mutual fund folio dies?
1 The folio will be cancelled and the amount refunded
2 The units will be transferred to nominee/s
3 The units will be transferred to heir of deceased holder
4 The units will continue to be held by surviving joint holders

Correct The units will continue to be held by surviving joint holders

Answer
Answer Transmission is the process of transferring units to the person entitled to
Explanation receive it
in the event of the death of the unit holder. If a folio is jointly held and has
nominations, the right of the joint holder will be given priority.
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Question33 Identify the true statement(s) –

A) The nominee is the beneficial owner of the mutual fund units
B) Nomination does not create any title or beneficial interest in the units
in favour of the nominee after the death of the unit-holder

1 Only A is true
2 Only B is true
3 Both A and B are true
4 Both A and B are false

Correct Only B is true

Answer
Answer Nomination is only an authorization for the mutual fund to transfer the units
Explanation to the
nominee in the event of demise of the unit-holder. The nominee holds the
units in trust for the legal heirs of the investor. It does not create any title
or beneficial interest in the units in favour of the nominee after the death
of the unit-holder.
An investor in a mutual fund scheme is the beneficial owner of the units
one has bought.
Question34 Which investor need not provide a PAN card at the time of making a mutual
fund investment ?
1 Investor who is investing up to Rs. 50,000 in a mutual fund scheme
(excluding SIPs)
per year per mutual fund
2 Investor who is investing up to Rs. 50,000 in a mutual fund scheme
(including SIPs)
per year per mutual fund
3 Investor who is investing up to Rs. 1,00,000 in a mutual fund scheme
(excluding SIPs)
per year per mutual fund
4 Investor who is investing up to Rs. 1,00,000 in a mutual fund scheme
(including SIPs)
per year per mutual fund

Correct Investor who is investing up to Rs. 50,000 in a mutual fund scheme

Answer (including SIPs) per year per mutual fund
Answer The following categories of investors are exempt from producing PAN:
Explanation - In case of transactions undertaken on behalf of Central/State government
and by
officials appointed by the court.
- Investors residing in the state of Sikkim.
- UN entities/Multilateral agencies exempt from paying taxes/filing tax
returns in
India.
- Investments (including SIPs and lump sum investments) in Mutual Fund
schemes
upto Rs. 50,000/- per investor per year per mutual fund.
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Question35 The Securities Transaction Tax levied on re-purchase of units of debt

mutual funds is
.
1 0.00%
2 0.03%
3 0.25%
4 STT is not applicable

Correct STT is not applicable

Answer
Answer STT is not applicable to transactions in debt securities or debt mutual fund
Explanation schemes.
When an investor sells units of an equity fund in the stock exchange, or
offers them for repurchase to the fund, he will have to incur Securities
Transaction Tax (STT) i.e. STT is applicable only on redemption/switch to
other schemes/sale of units of equity oriented mutual funds whether sold
on stock exchange or otherwise. STT is not applicable on purchase of
units of an equity scheme.

Question36 If a third party payment is to be made for subscribing to a mutual fund

scheme, then which of the following is/are essentially required?
1 The minimum investment has to be Rs. 50,000
2 The third party has to PAN details and also comply with the KYC norms
3 The third party should also have a folio with the mutual fund
4 All of the above

Correct The third party has to PAN details and also comply with the KYC norms
Answer
Answer Compliance with the KYC norms and providing the PAN details are
Explanation mandatory by the
third party making the payment irrespective of the amount involved.
The third party need not have a folio with the mutual fund.
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Question37 Which document has the statutory information about the mutual fund or
AMC, that
is offering the scheme.
1 Scheme Information Document (SID)
2 Statement of Additional Information (SAI)
3 Red Herring Prospectus
4 Fund Fact Sheet

Correct Statement of Additional Information (SAI)

Answer
Answer Statement of Additional Information (SAI), has statutory information about
Explanation the
mutual fund or AMC, that is offering the scheme. Therefore, a single SAI
is relevant for all the schemes offered by a mutual fund.
(Scheme Information Document (SID) has details of the particular scheme)

Question38 A minor has one more year to become a major. A 3 year SIP is started in the
minors folio. Which of the following statement is true in this case?
1 The SIP will be registered for 3 years
2 The SIP will be registered for only 2 years
3 The SIP will be registered for only 1 year till the investor attains majority
4 The SIP will be registered for 3 years from the date of attaining majority

Correct The SIP will be registered for only 1 year till the investor attains majority
Answer
Answer Standing instructions like Systematic Investment Plans (SIP) are registered
Explanation in a
minor folio only till the date of the minor attaining majority, even though the
instructions may be for an extended period.
When the minor is approaching the age of majority, AMCs usually send
letters advising the guardian and the minor to submit the form along with
prescribed documents to change the status of the account/folio to
"major".
All SIP, STP, SWP and any other standing instruction registered in the
minor's account are suspended if the documents are not received by the
date when the
minor attains majority.
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Question39 One of the objectives of is to undertake nationwide investor

awareness
programme to promote proper understanding of the concept and working
of mutual funds
1 SEBI
2 BSE / NSE
3 AMFI
4 NISM

Correct AMFI
Answer
Answer Association of Mutual Funds in India (AMFI) is the association of all the
Explanation registered
Asset Management Companies. One of the objectives of AMFI is to
undertake nationwide investor awareness programme to promote proper
understanding of the concept and working of mutual funds.
Question40 An investor already has a folio in a mutual fund scheme where he is a
joint holder. Now he wants to do additional investments in the same
scheme as a sole holder. How can he make the change?
1 He will have to do the investments under a new folio and select the mode
of holding as single
2 He can do the investments by mentioning the mode of holding in the
application as
single to apply only for the fresh investments being made
3 He can do the investment by changing the mode of holding for the
additional units
after the investment has been made.

Correct He will have to do the investments under a new folio and select the mode
Answer of holding as single
Answer Once a mutual fund folio is created as a jointly held account there can be
Explanation no change
in the joint holders or mode of holding - except in the event of a death.
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Question41 Identify the false statement(s) –

A) Share certificate is a physical asset
B) Debenture is a physical asset as the paper on which it is printed has
value
1 Statement A is false
2 Statement B is false
3 Both statements A and b are false

Correct Both statements A and b are false

Answer
Answer Shares and Debentures are not physical assets. They are financial assets.
Explanation
Physical assets include Gold, Building, Art etc.

Question42 is not a mutual fund distribution channel.

1 Branches of Public sector banks
2 Branches of Reserve Bank of India
3 Branches of Private sector banks
4 Branches of Foreign banks

Correct Branches of Reserve Bank of India

Answer
Answer Reserve Bank of India or its branches are not involved in the sales and
Explanation distribution
of mutual fund products.
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Question43 Who applies to SEBI for the registration of a Mutual Fund?

1 The Asset Management Company (AMC)
2 Board of Trustees
3 The Sponsors
4 Chief Fund Manager

Correct The Sponsors

Answer
Answer The application to SEBI for registration of a mutual fund is made by the
Explanation sponsors.

Question44 A investor will prefer lower risk and will settle for a lower return.
1 Aggressive
2 Adventurous
3 Moderate
4 Conservative

Correct Conservative
Answer
Answer A conservative investor is someone who wants his money to grow but does
Explanation not
want to risk his principle investment. Conservative investors choose
financial products that do not fluctuate much in value, such as
conservative mutual funds
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Question45 Mutual funds must publish their unaudited accounts once every six months
.
1 on the AMFI website
2 on the AMC wesite
3 on the SEBI website
4 in atleast two English newspaper

Correct on the SEBI website

Answer
Answer As per SEBI rules - The mutual fund shall before the expiry of one month
Explanation from the
close of each half year, shall display the unaudited financial results on
AMC website, the advertisement in this reference will be published by the
fund in at least one English daily newspaper and one regional language
newspaper.

Question46 Decisions in Tactical Asset Allocation are taken on the basis of .

1 likely behaviour of the markets
2 risk profile of the investor
3 income level of the investor
4 All of the above

Correct likely behaviour of the markets

Answer
Answer In Tactical asset allocation the allocation between the asset categories
Explanation changes
dynamically. The purpose of such an approach may be to take advantage of
the opportunities presented by various markets at different points of time.
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Question47 What does financial goal setting involve?

1 Determination of risk profile
2 Estimating the amount required for a major life event
3 Determining asset allocation

Correct Estimating the amount required for a major life event

Answer
Answer The first step in financial goal setting is to identify events in life which will
Explanation require
major funding - like child education, marriage, retirement etc.
Asset allocation / Risk profile are looked into later while deciding the
investments etc.

Question48 In a mutual fund application form, if 'Direct' is mentioned in the space

provided for ARN and the choice of regular plan is indicated then the
application will be considered as .
1 Direct plan application
2 Regular plan application
3 Incomplete and rejected
4 Incomplete and sent to the investor for completion

Correct Direct plan application

Answer
Answer Investors have the option to invest (purchase or subscribe to mutual fund
Explanation units)
directly without routing the investment through a distributor (Direct Plan).
In this case, the investor must mention “Direct” in the space provided in the
application form for entering the AMFI Registration Number (ARN).
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Question49 What is the time duration in which SEBI has to approve the scheme related
documents?
1 7 working days
2 3 working days
3 14 working days
4 SEBI does not approve the documents. It gives its observations

Correct SEBI does not approve the documents. It gives its observations
Answer
Answer SEBI does not approve or disapprove the Scheme Related Documents, it
Explanation gives
its observations. The mutual fund needs to incorporate these
observations in these documents. Thus, the Documents in the market are
“vetted” by SEBI, and not approved by SEBI.
Question50 An existing bond fund will tend to lose value when market interest rates .
1 Rise
2 Fall
3 remains constant
4 are equal to yields

Correct Rise
Answer
Answer Suppose an investor has invested in a debt security that yields a return of 8
Explanation percent. Subsequently, yields in the market for similar securities rise to 9
percent. It stands to reason that the security, which was bought at 8
percent yield, is no longer such an attractive investment. It will therefore
lose value.
(Conversely, if the yields in the market go down, the debt security will
gain value. Thus, there is an inverse relationship between yields and
value of such debt securities, which offer a fixed rate of interest)
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Question51 In a Corporate Bond fund, the minimum investment in highest rated

corporate
bonds is percent of the total assets.
1 50
2 60
3 70
4 80

Correct 80
Answer
Answer Corporate Bond Fund: An open-ended debt scheme predominantly
Explanation investing in AA+
and above rated corporate bonds. The minimum investment in corporate
bonds shall be 80 percent of total assets (only in AA+ and above rated
corporate bonds).

Question52 Mr. Suresh invests Rs 2,00,000 in a mutual fund with a facevalue of Rs 10

and NAV of Rs. 50. How many units will be allotted to him?
1 4000 units
2 20000 units
3 Will be lower than 4000 units due to entry load
4 Will be lower than 20000 units due to entry load

Correct 4000 units

Answer
Answer Units are allotted as per current NAV.
Explanation The NAV is Rs 50 and the amount invested is Rs 200000
Units allotted = 200000 / 50 = 4000
(Currently there is no entry load)
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Question53 Identify the true statement(s) –

A) Beta is a measure of risk only for equity schemes
B) Variance is a measure of risk for both debt and equity schemes
C) A fall in prices of the debt securities due to default etc is known as a
'credit event'
1 Only A and B are true
2 Only A and C are true
3 Only B and C are true
4 All A, B and C are true

Correct All A, B and C are true

Answer
Answer Variance as a measure of risk is relevant for both debt and equity schemes.
Explanation Beta as a measure of risk is relevant only for equity schemes.
In the debt markets, the credit risk arises on account of three things, viz.,
default, delay in payments, or rating downgrade. Any of these may result
in fall in prices of the concerned debt securities. Such an event is also
called a 'credit event'.

Question54 Identify the true statement(s) with respect to benchmark for mutual fund
schemes.
A) For International Equity fund, the ideal benchmark will be BSE 500
index as it is a very broad based index covering 500 companies
B) For Gold ETF, gold prices will be the ideal benchmark
1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 Neither A nor B are correct

Correct Only B is correct

Answer
Answer Gold price would be the benchmark for such Gold ETF funds.
Explanation For International Funds - The benchmark would depend on where the
scheme proposes to invest. Thus, a scheme seeking to invest in China
might have a Chinese index as the benchmark and a scheme that would
invest largely in the US market
can have S&P 500 index as the appropriate benchmark.
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Question55 Which information has to be provided by the investor to be indentified as

an
existing investor in the mutual fund?
1 PAN
2 PEKRN
3 Folio Number
4 KYC acknowledgement

Correct PEKRN
Answer
Answer PAN Exempted KYC Reference Number (PEKRN) will be used to identify the
Explanation investor
as existing investor.
Question56 Who has the responsibility of overseeing legal compliance in a mutual
fund?
1 The Custodian
2 The Sponsors
3 The AMC
4 The Trustees

Correct The Trustees

Answer
Answer SEBI expects Trustees to perform a key role in ensuring legal compliances
Explanation and
protecting the interest of investors.
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Question57 Identify the true statement(s) with respect to stamping of application for
Non
Financial transactions of a mutual fund.
A) Time stamping is relevant
B) Date stamping is pertinent
C) Date and Time stamping is done
1 All A, B and C are true
2 Only A and B are true
3 Only B and C are true
4 Only A and C are true

Correct Only B and C are true

Answer
Answer Applications for non-financial transactions like change of address and
Explanation investor’s acknowledgement are date and time stamped. However, here
stamping of time is not relevant; the date stamping is pertinent (relevant).

Question58 Commodities as an asset class does not include _ .

1 Art
2 Fibers
3 Spices
4 Energy products

Correct Art
Answer
Answer Art is not a commodity. It cannot be standardised. Its valued as per the
Explanation perception
of buyer etc.
Fibers (eg. -Cotton yarn), Spices (eg.- Turmeric) and Energy Products ( eg. -
Oil) are all commodities.
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Question59 The units of a Close-ended mutual fund are

traded between the unit
holders/investors and on the stock exchange.
1 The Mutual Fund
2 Other unit holders/investors
3 Specially appointed market makers to enhance liquidity
4 The Sponsors

Correct Other unit holders/investors

Answer
Answer Post-NFO, the sale and purchase transactions of a close ended fund
Explanation happen on the
stock exchange between two different investors, and the mutual fund is
not involved in the transaction.
Question60 Where is the information regarding investor service centers, minimum
investment amount and how to make the purchases of mutual fund
mentioned?
1 Application Form
2 Nomination Form
3 Transaction Slip
4 Key Information Memorandum (KIM)

Correct Key Information Memorandum (KIM)

Answer
Answer KIM is a summary of Scheme Information Document (SID) and Statement of
Explanation Additional Information (SAI) where in all the details of the scheme are
mentioned.
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Question61 What does 'Asset Allocation' mean?

1 Allocating a portfolio to cash
2 Allocating various mutual funds to investors
3 Allocating units to unit holders
4 Allocating a portfolio to different asset classes

Correct Allocating a portfolio to different asset classes

Answer
Answer The basic meaning of asset allocation is to allocate an investor’s money
Explanation across
asset categories (like Equity, Debt, Gold etc.) in order to achieve the
objective.

Question62 A mutual fund manager is planning to invest in Indian pharma companies

as these companies are setting up new manufacturing capacities. Identify
the investment style of the fund manager.
1 Value investment style
2 Cyclical investment style
3 Target investment style
4 Growth investment style

Correct Growth investment style

Answer
Answer Growth investment style entails investing in high growth stocks i.e. stocks
Explanation of
companies that are likely to grow much faster than the market.
(Value investment style is an approach of picking up stocks, which are
priced lower than their intrinsic value)
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Question63 In which document is a commentary on the current state of economy and

markets is
also generally provided?
1 Statement of Additional Information (SAI)
2 Key Information Memorandum (KIM)
3 Fund Fact Sheet
4 Scheme Information Document (SID)

Correct Fund Fact Sheet

Answer
Answer Apart from providing information about the schemes in the fund fact sheet,
Explanation AMCs
may also provide periodic updates on markets and the economy. The
factsheet is also used by the fund manager to communicate their views
on the economy and the markets to the investors.

Question64 Which expenses can be charged by the AMC to a mutual fund scheme?
1 Expenses which are incurred to manage the fund
2 Expenses which are incurred to launch the fund
3 Expenses which are incurred by the AMC
4 Expenses which are incurred by the investors in buying the fund

Correct Expenses which are incurred to manage the fund

Answer
Answer Expenses for managing the fund are charged to the fund. Any expense
Explanation other than
investment advisory fee and recurring expenses shall be borne by the
asset management company or trustee or sponsors.
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Question65 If one wants to know the General Risk Factors, then which document
should he
read?
1 Fund Fact Sheet
2 Documents filed with SEBI
3 Key information memorandum (KIM)
4 Scheme Information Document (SID)

Correct Scheme Information Document (SID)

Answer
Answer The risks in the scheme are listed in the segment on Risk Factors in
Explanation Section I, Sub-
section A of the Scheme Information Document (SID). This section
includes standard or general risk factors that affect all mutual fund
schemes.
Question66 To become a mutual fund distributor in India, one has to pass an exam
which is conducted by .
1 Securities and Exchange Board of India - SEBI
2 National Stock Exchange - NSE NCFM
3 National Institute of Securities Markets - NISM
4 Association of Mutual Funds in India – AMFI

Correct National Institute of Securities Markets - NISM

Answer
Answer Distributors need to pass the NISM certification Examination (NISM-Series-
Explanation V-A:
Mutual Fund Distributors (MFD) Certification Examination) and register with
AMFI.
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Question67 When should the information under Foreign Account Tax Compliance Act
(FATCA)
provided?
1 Only if the investment is made from a foreign bank account
2 Only if the place of birth is other than India
3 Only if an NRI is doing the investment
4 Only if the investor is a resident of USA or Europe

Correct Only if the place of birth is other than India

Answer
Answer For applicants, including guardians, whose country of
Explanation birth/citizenship/nationality/tax residency is other than India, the
application requires additional information under Foreign Account Tax
Compliance Act (FATCA).

Question68 Identify the false statement with respect to mutual fund scheme related
documents.
1 KIM and SID are two broad types of scheme documents
2 SID has details of the particular scheme
3 SAI has statutory information about the mutual fund
4 KIM is essentially a summary of the SID and SAI

Correct KIM and SID are two broad types of scheme documents
Answer
Answer Option 1 is wrong as Scheme Information Document (SID) and Statement of
Explanation Additional Information (SAI) are primarily the two important documents.
Key Information Memorandum (KIM) is a summary of SID and SAI.
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Question69 Short term capital loss can be set off against .

1 short term capital gains only
2 short term capital gain or long term capital gain
3 long term capital gains only
4 Short term capital loss cannot be set off

Correct short term capital gain or long term capital gain

Answer
Answer As per the Income Tax Act -
Explanation - 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).

Question70 Identify the true statement with respect to 'Unclaimed Dividend' in mutual
fund schemes.
1 If the plan is a regular plan, then it is the distributors responsibility that the
investor
claims the dues
2 It is the sole responsibility of the investor that he/she claims the dues
3 The Asset Management Company (AMC) is expected to make a continuous
effort to
remind the investors through letters to claim their dues.
4 All of the above are true

Correct The Asset Management Company (AMC) is expected to make a continuous

Answer effort to remind the investors through letters to claim their dues.
Answer Right to unclaimed amounts- AMC is expected to make a continuous effort
Explanation to
remind the investors through letters to claim their dues. The Annual Report
has to mention the unclaimed amount and the number of such investors for
each scheme.
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Question71 What is fixed in a Closed-end fund?

1 The Net Asset Value
2 The Rate of Return
3 The Unit Capital
4 The Market Price

Correct The Unit Capital

Answer
Answer Close-ended Schemes have an NFO Open Date and NFO Close Date. But,
Explanation they have
no Scheme
Re-opening Date, because the scheme does not sell or re-purchase units.
Whatever
sale-purchase of units takes place is between the investors on the stock
exchange. So the unit capital of a closed-end fund does not change.
Question72 Identify the true statement(s) –
A) An Addendum must accompany the KIM
B) Addendum is considered to be a part of the Scheme Related Documents

1 Only A is true
2 Only B is true
3 Both A and B are true
4 None of them are true

Correct Both A and B are true

Answer
Answer While the SID, SAI and KIM need to be updated periodically, the interim
Explanation changes are
updated through the issuance of an Addendum. The addendum is
considered to be a part of the scheme related documents, and must
accompany the KIM.
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Question73 Which of the statement is true with respect to applicability of TDS in case
of capital
gains from mutual fund units?
1 There is NIL TDS on capital gains in mutual fund for all investors
2 TDS is required to be deducted at 10 percent on all declared dividend
3 All capital gains from mutual fund investments are subject to TDS @ 10%
4 TDS is not applicable on capital gains for resident individuals but is
applicable for
Non Resident Individuals (NRI)

Correct TDS is not applicable on capital gains for resident individuals but is
Answer applicable for Non Resident Individuals (NRI)
Answer There is no TDS on re-purchase proceeds to resident investors. However,
Explanation for certain
cases of non-resident investments, the same is applicable.
(TDS is required to be deducted at 10 percent on the dividend amount if it
exceeds Rs. 5,000)

Question74 Which transaction of an open ended fund is based on the Net Asset Value
(NAV) pricing?
1 Purchase of units
2 Redemption of units
3 Both purchase and redemption of units

Correct Both purchase and redemption of units

Answer
Answer Purchase and redemption of units are always done based on the NAV of the
Explanation scheme.
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Question75 A mutual fund scheme performance must always be measured relative to

the
.
1 Asset class
2 Index
3 Investment objective
4 Benchmark

Correct Benchmark
Answer
Answer To know how well a mutual fund scheme is performing, it has to be
Explanation compared to a
pre-defined comparable benchmark.
For eg. A midcap fund can be benchmarked / compared to Nifty Midcap 50
index.

Question76 In case of any conflict between the Principles of Fair Valuation and
AMC's Valuation Guidelines, .
1 The Valuation Guidelines will prevail
2 The Principles of Fair Valuation will prevail
3 Both are same so there will never be an conflict
4 SEBI will decide which is correct

Correct The Principles of Fair Valuation will prevail

Answer
Answer In order to ensure a fair treatment to all investors, SEBI has laid down
Explanation certain
fair valuation principles of mutual fund schemes.
In case of any conflict between the Principles of Fair Valuation and
Valuation Guidelines, the Principles of Fair Valuation shall prevail.
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Question77 Which type of Hybrid Fund has the least exposure to equity?
1 Aggressive Hybrid Fund
2 Balanced Hybrid Fund
3 Conservative Hybrid Fund
4 Arbitrage Hybrid Fund

Correct Conservative Hybrid Fund

Answer
Answer An Hybrid fund is classified into Aggressive, Balanced and Conservative
Explanation depending
on the equity exposure of the fund.
Conservative Hybrid Fund: An open-ended hybrid scheme investing
predominantly in debt instruments. Investment in debt instruments shall
be between 75 percent and 90 percent of total assets while
investment in equity instruments shall be between 10 percent and 25
percent of total assets.
Balanced Hybrid Fund: An open-ended balanced scheme investing in
equity and debt instruments. The investment in equity related
instruments shall be between 40 percent and 60 percent of total assets
while investment in debt instruments shall be between 40 percent and 60
percent
Aggressive Hybrid Fund: An open-ended hybrid scheme investing
predominantly in equity instruments. Investment in equity instruments
shall be between 65 percent and 80 percent of total assets while
investment in debt instruments shall be between 20 percent and 35
percent of total assets.

Question78 Who is NOT authorised to attest the documents submitted for Know Your
Customer compliance, in case originals are not produced at the time of
KYC?
1 Notary Public
2 Manager of a Scheduled Commercial Bank
3 Mutual Fund distributor
4 Gazetted Officer

Correct Mutual Fund distributor

Answer
Answer In the KYC process, the supporting documents (identity and address proof)
Explanation are
verified with the original documents. Alternatively, the investor can
provide a True Copy attested by a Notary Public, Gazetted Officer or
Manager of a Scheduled Commercial Bank.
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Question79 Which of these funds has the highest risk?

1 Index Funds
2 Diversified Equity fund
3 Long Duration Funds
4 Gilt Funds

Correct Diversified Equity fund

Answer
Answer In the Risk-Return Hierarchy of mutual funds, Equity funds are always
Explanation risker then
Debt funds. So in the above question, Index fund and Diversified Equity
Fund (Equity funds) will be more riskier than Gilt fund and Long Duration
fund (Debt funds).
Among Index fund and Diversified Equity fund, the latter is usaully more
risker than former.

Question80 Identify the true statement(s) - A) Individuals can register upto five bank
accounts with a mutual fund B) A Non-Individual can register upto ten
bank accounts with a mutual fund
1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 Both A and B are incorrect

Correct Both A and B are correct

Answer
Answer Mutual funds provide investors the facility to register multiple bank
Explanation 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.
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Question81 When there is a need to withdraw money from a scheme (i.e. repurchase /
redemption), the distributor must assess the implications of
and on
the investors portfolio.
1 entry loads and exit loads
2 capital gains tax and exit loads
3 capital gains tax and entry loads
4 entry loads and dividend tax

Correct capital gains tax and exit loads

Answer
Answer Both taxes and loads reduce investment returns. Therefore, it is important
Explanation 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.

Question82 As per SEBI rules, commissions cannot be paid to .

1 Brokers of the stock exchange
2 Banks
3 Sponsor distributors
4 Investors

Correct Investors
Answer
Answer As per SEBI rules, a mutual fund distributor has to sign a declaration
Explanation mentioning -
Undertake not to rebate commission back to investors, or attract
investors through temptation of rebate/gifts, pass back of commission
etc.
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Question83 Which of these statement(s) is/are TRUE?

A) If the mutual fund units are held in demat form, they cannot be
converted in to physical form
B) When a mutual fund is redeemed or when there is a dividend pay-out,
the amount will be credited to the bank account linked to the demat
account for those mutual fund investors who opt for demat units

1 Only A is correct
2 Only B is correct
3 Both A and B are correct

Correct Only B is correct

Answer
Answer The mutual fund investor has the option to convert the demat units into
Explanation physical
form. This process is called re-materialisation.
Dividends and redemption proceeds will be credited directly to the bank
account via. electronic modes such as direct credit, NEFT, NACH facility.

Question84 A trader believes that he can always outperform the market. This is an
example of
bias.
1 Recency
2 Overconfidence / Optimism
3 Herd Mentality
4 Anchoring

Correct Overconfidence / Optimism

Answer
Answer Overconfidence / Optimism bias refers to a person’s overconfidence in
Explanation one’s
abilities or judgment. This leads one to believe that one is far better than
others at something, whereas the reality may be quite different. Under the
spell of such a bias, one tends to lower the guards and take on risks
without proper assessment.
NISM SERIES V A – MUTUAL FUND
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Question85 Identify the TRUE statement?

1 Mutual funds which are bank sponsored are regulated by RBI and not SEBI
2 SEBI and AMFI both regulate mutual funds in India
3 Stock Exchanges regulates mutual funds in India
4 SEBI regulates mutual funds in India

Correct SEBI regulates mutual funds in India

Answer
Answer Securities markets in India are regulated by the Securities and Exchange
Explanation Board of
India (SEBI). It regulates, among other entities, mutual
funds, depositories, custodians and registrars and transfer agents
in the country.
(AMFI is neither a regulatory body nor a Self-Regulatory Organisation)

Question86 An investor chooses a mutual fund scheme based on whether his / her

matches with that of the scheme.

1 Investment period
2 Investment objective
3 Investment strategy

Correct Investment objective

Answer
Answer Every scheme has a pre-announced investment objective. Investors invest
Explanation in a
mutual fund scheme whose investment objective reflects their own needs
and preference.
The primary objective of various schemes stems from the basic needs of
an investor, viz., safety, liquidity, and returns.
NISM SERIES V A – MUTUAL FUND
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Question87 Among these funds, which will have the lowest Interest Rate Risk?
1 Money market fund
2 Diversified Equity Fund
3 Pharma Sector fund
4 Dynamic Bond Fund

Correct Money market fund

Answer
Answer Interest rate risk is the risk that an investment's value will change as a
Explanation result of a
change in interest rates. Interest rate risk is always associated with debt
funds and not equity funds.
The interest rate risk varies for bonds with different maturities. Those
with longer maturity would witness higher price fluctuations in
comparison to those with shorter maturities. A money market fund is a
type of a mutual fund that invests in high quality, short term debt
instruments, cash and cash equivalents.

Question88 Mr. Sandesh invests Rs 75 lakh in a Gilt Fund and gives a local cheque at
3.30 pm. What will be the applicable NAV for allotment of units?
1 NAV of the business day on which the funds are available for utilisation
2 Same day NAV if received before cut off time.
3 Closing NAV of the next business day
4 Closing NAV of day immediately preceding the date of application

Correct NAV of the business day on which the funds are available for utilisation
Answer
Answer For all type of debt funds (except liquid funds), if the amount is above Rs. 2
Explanation lakh,
irrespective of the time of receipt of application, NAV of the business day
on which the funds are available for utilisation without availing of any
credit facility before the cut-off time (3 pm) of that day is applicable.
NISM SERIES V A – MUTUAL FUND
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Question89 Identify the true statement(s) with respect to benchmark for Sector Funds.
A) Its ideal to benchmark a sector fund against an index representing the
respective sector
B) Its advisable to benchmark a sector fund against a diversified fund to
get the correct picture

1 Only A is true
2 Only B is true
3 Both A and B are true

Correct Only A is true

Answer
Answer A sector fund would invest in only the concerned sector so the benchmark
Explanation has to be
a similar index. For eg. A Banking Sector fund can be benchmarked
against S&P BSE Bankex and an Infrastructure Fund can be benchmarked
against Nifty Infrastructure Index to get the correct picture.
Question90 From which of these can the mutual fund NOT distribute dividends?
1 Income accruals
2 Dividends which are received from equity investments
3 Realized gain from sale of investments
4 Unrealized appreciation in value of investments

Correct Unrealized appreciation in value of investments

Answer
Answer SEBI guidelines stipulate that dividends can be paid out of distributable
Explanation reserves. In
the calculation of distributable reserves:
• All theprofits earned are treated as available for distribution.
• Valuation gains are ignored. But valuation losses need to be adjusted against
the profits.
• That portion of sale price on new units, which is attributable tovaluation gains, is
not available as a distributable reserve.
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Question91 Which of these documents is not required to be submitted for investing in

mutual
funds by a charitable organisation?
1 List of authorized signatories
2 Trust deed
3 Board resolution
4 Memorandum and Articles of Association

Correct Memorandum and Articles of Association

Answer
Answer A Charitable Trust does not have any Memorandum and Articles of
Explanation Association. It
has a Trust Deed.
Question92 In case the units are pledged, the unit holder .
1 can sell the units after the lockin period
2 cannot sell the units
3 cannot sell but can switch the units to another scheme
4 cannot do additional purchase

Correct cannot sell the units

Answer
Answer Once units are pledged, the Unit-holder/s cannot sell or switch-out the
Explanation pledged
units, until the pledgee gives a written no-objection to release the pledge.
NISM SERIES V A – MUTUAL FUND
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Question93 If these is a breach of the Code of Conduct by an intermediary and

a second
violation by the intermediary is proved then the registration of the
intermediary is
.
1 Not renewed
2 Cancelled
3 Suspended
4 Withheld

Correct Cancelled
Answer
Answer In the event of breach of the Code of Conduct by an intermediary, the
Explanation following
sequence of steps is initiated by AMFI:
• Write to the intermediary and ask for an explanation within 3 weeks.
• In case explanation is not received within 3 weeks, or is not satisfactory, AMFI
will
issue a warning letter indicating that any subsequent violation will result in
cancellation of AMFI registration.
• If there is a proved second violation by the intermediary, the registration will
be cancelled, and intimation sent to all AMCs.

Question94 A person who wants to retain liquidity in his investments will invest in .
1 ELSS Schemes
2 Fixed Deposits
3 PPFs
4 Liquid Funds

Correct Liquid Funds

Answer
Answer A person who wants liquidity should invest in liquid funds as they can be
Explanation redeemed
very fast.
Equity linked saving schemes (ELSS) have a lock in period of three years
Fixed Deposits and Public Provident Fund (PPF) cannot be easily
enchashed before maturity.
NISM SERIES V A – MUTUAL FUND
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Question95 What is the maximum percentage of holding can a single investor have in a
mutual
fund scheme?
1 5%
2 10%
3 20%
4 25%

Correct 25%
Answer
Answer A Scheme/Plan shall have a minimum of 20 investors and no single
Explanation investor shall
account for more than 25 percent of the corpus of the Scheme/Plan.
Question96 In a Contra Fund, the minimum investment in equity & equity related
instruments shall be of total assets.
1 40 percent
2 50 percent
3 55 percent
4 65 percent

Correct 65 percent
Answer
Answer A contra fund is an open-ended equity scheme following contrarian
Explanation investment
strategy. Minimum investment in equity & equity related instruments
shall be
65 percent of total assets.
NISM SERIES V A – MUTUAL FUND
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Question97 The investors of a mutual fund can terminate the AMC or wind up a scheme
if
% or more of the unit holders agree to it.
1 50%
2 60%
3 70%
4 75%

Correct 75%
Answer
Answer Mutual fund Investors’ Rights & Obligations -
Explanation Rights to terminate appointment of an AMC : 75 percent of unit holders
can terminate the appointment of an AMC. Also, 75 percent of the unit
holders (unit holding) can pass a resolution to wind up a scheme.

Question98 Identify which statement is true?

1 Investors cannot hold the units of a mutual fund in fraction of 1 unit
2 Investors can hold the units of a mutual fund in fraction of 1 unit
3 Investors can hold the units of a mutual fund in market lots of 50 units
4 Investors can hold the units of a mutual fund in market lots of 100 units

Correct Investors can hold the units of a mutual fund in fraction of 1 unit
Answer
Answer Investors can hold their units even in a fraction of 1 unit.
Explanation
For example, a investor is holding 650 units in a dividend re-investment
scheme of a mutual fund. On announcement of dividend, when converted
into units, could result in say addition of 20.5 units. Thus his total holding
will become 650 + 20.5 = 670.50 units - which is a fraction.
NISM SERIES V A – MUTUAL FUND
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Question99 In case of a securitized asset, will not be an originator to a Special

Purpose
Vehicle (SVP) ?
1 housing finance company
2 non-banking finance company
3 commercial bank
4 RBI

Correct RBI
Answer
Answer A securitization transaction involves sale of receivables by the originator (a
Explanation commercial bank, non-banking finance company, housing finance
company, or a manufacturing/service company) to a Special Purpose
Vehicle (SPV), typically set up in the form of a trust. Investors are issued
rated Pass Through Certificates (PTCs), the proceeds of which are paid
as consideration to the originator.
In this manner, the originator, by selling his loan receivables to an SPV,
receives consideration from investors much before the maturity of the
underlying loans.

Question100 Zero coupon securities are securities that do not pay a regular interest,
but accumulate the interest, and pay it along with the principal when the
security matures- True or False ?
1 TRUE
2 FALSE

Correct TRUE
Answer

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THESE ARE LATEST UPDATED QUESTIONS.

PLEASE STUDY THEM CAREFULLY

COMPLETE THESE 100 QUESTIONS IN TWO HOURS TO TEST YOUR PREPARATIONS

Question1 Which of these statement(s) is/are true?

A. In equity investments, the probability of losing money over a long term is lesser
than losing money in the short term
B. Fundamental Analysis consists of studying the financial statements of a company
and the candle stick charts
1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 None of the above

Correct Answer Only A is correct

Answer Historically, equity investing has delivered higher returns than other investment
Explanation avenues, most of the times, if one considers long investment periods.

Equity share prices generally fluctuate a lot, often without regard to the
business fundamentals. However, over long periods of time, the share prices follow
the fortunes of the firm. If the profits of the company continue to grow over the
years, the share price follows.
(In Fundamental Analysis, one does not study the charts like Candle Stick chart etc.
Study of charts is done in Technical Analysis)

Question2 How often does a mutual fund disclose the information on Total Expense Ratio
charged to a mutual fund scheme and where is this published?
1 Daily - on the mutual fund website
2 Weekly - on the mutual fund website
3 Once a month in the fund Factsheet
4 Once a year when it makes the mandatory disclosures to SEBI and AMFI

Correct Answer Daily - on the mutual fund website

Answer SEBI has mandated that the Asset Management Companies (AMCs) should
Explanation prominently disclose on a daily basis, the Total expense ratio (scheme-wise, date-
wise) of all schemes under a separate head – “Total Expense Ratio of Mutual Fund
Schemes” on their website.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question3 Identify the true statement with respect to Total Expense Ratio?
1 The AMC is not allowed to change the Total Expense Ratio of a scheme during its
entire life time
2 The AMC can change the Total Expense Ratio and it need not be communicated to
the unit holders as its an internal matter
3 The AMC can change the Total Expense Ratio and it has to be communicated to all
the unit holders
4 There is no term as - Total Expense Ratio for a mutual fund scheme

Correct Answer The AMC can change the Total Expense Ratio and it has to be communicated to all
the unit holders
Answer As per SEBI regulations - The AMCs are required to send the update to the investors
Explanation through email whenever there is a change in the expense ratio.

Question4 AMCs has to put in place a due diligence process to regulate distributors who
.
1 has received commission received of over Rs. 25 Lakhs from a single mutual fund
2 has raised AUM of over Rs. 25 crores from non-institutional investors
3 has presence in more than 20 locations
4 All of the above

Correct Answer has presence in more than 20 locations

Answer SEBI has mandated AMCs to put in place a due diligence process to regulate
Explanation distributors who
qualify any one of the following criteria:
a. Multiple point presence (More than 20 locations)
b. AUM raised over Rs. 100 crore across industry in the non-institutional category
but including high networth individuals (HNIs)
c. Commission received of over Rs. 1 Crore p.a. across industry
d. Commission received of over Rs. 50 Lakhs from a single mutual fund
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Correct Answer 40 percent and 60 percent

Answer Balanced Hybrid Fund: An open-ended balanced scheme investing in equity and
Explanation debt instruments. The investment in equity and equity related instruments shall be
between 40 percent and 60 percent of total assets while investment in debt
instruments shall be between 40 percent and 60 percent.

Question6 When is the Statement of Additional Information (SAI) updated ?

1 Every month
2 Before 10th of January and 10th of July every six months
3 Every three months
4 Before the end of 3 months of every financial year

Correct Answer Before the end of 3 months of every financial year

Answer Updation of SAI - Regular update has to be done by the end of 3 months of every
Explanation financial year.
(Material changes have to be updated on an ongoing basis and uploaded on the
websites of the mutual fund and AMFI)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question7 Which is the first step that a mutual fund distributor should take in building a
mutual fund portfolio for his investors?
1 He should list the best performing funds for the investor to select
2 He should set the financial goals of the investor
3 He should invest the amount in a liquid fund and set a Systematic Transfer Plan in
good equity funds
4 He should list good equity funds with the lowest expense ratio for the investor to
select

Correct Answer He should set the financial goals of the investor

Answer The selection of a mutual fund scheme for an investor will depend upon the need
Explanation that the investor has from the investment. The objective could be a financial goal
like reaching a certain level of wealth in a specified period of time; or it could be
funding a major expense related to an important life event like education of one’s
children or funding one’s retirement. The sight of the goal must never be missed.
Therefore, the first step is to set the financial goals.

Question8 What is Indexation ?

Correct Answer Adjusting the cost of acquisition upwards to reflect the impact of inflation
Answer Indexation means that the cost of acquisition or the cost of purchase is adjusted
Explanation upwards to reflect the impact of inflation.
For eg. - A stock was purchased at Rs 100 and sold for Rs 150 after 5 years. The long
term capital gains is Rs 50 on which tax is to paid. But when adjusted for indexation
(as per data released by Central Board of Direct taxes every year), the capital gains
will be reduced and the tax will have to be paid on a lower amount.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question9 For which of the following fund can NSE’s MIBOR be used as an benchmark?
1 ELSS Fund
2 Liquid Fund
3 5 year constant maturity G-sec fund
4 Long duration fund

Correct Answer Liquid Fund

Answer NSE’s MIBOR (Mumbai Inter-Bank Offered Rate) is based on short term money
Explanation market. Liquid schemes invest in securities of upto 91 days’ maturity. Therefore, a
short term money market benchmark such as NSE’s MIBOR is suitable.

Question10 Which of these is a Passive Fund? A) Gold Sector Fund B) Gold Mining Companies
Fund C) Gold Exchange Traded Fund D) Gilt Funds
1 Both A and B
2 Only D
3 Only C
4 All A, B, C and D

Correct Answer Only C

Answer Passive funds invest on the basis of a specified index; whose performance it seeks to
Explanation track. For eg. NIfty Index fund.

Exchange Traded Funds (traded on exchanges) are also passive funds that generate
returns in line with the index or benchmark.

So, from the above options, only Gold Exchange Traded Fund is a passive fund.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question11 On which of the following factors does returns from an international fund depend
on?
1 Asset Class performance
2 Foreign currency exchange rates
3 Both 1 and 2

Correct Answer Both 1 and 2

Answer When an Indian investor invests in equities abroad, he is essentially taking two
Explanation exposures:
• An exposure on the international equity market (asset class)
• An exposure to the exchange rate of the rupee. If the investor invests in the US,
and the US Dollar becomes stronger during the period of his investment, he
benefits; if the US Dollar weakens (i.e. Rupee becomes stronger), he loses or the
portfolio returns will be lower.

Question12 In which of the following cases is the transaction charge to be paid to the mutual
fund distributor, deducted from the gross investment of the investor ?
1 When the investor purchases mutual fund units worth Rs 5000 through a mutual
fund distributor
2 When the investor purchases mutual fund units worth Rs 15000 through a mutual
fund distributor
3 When the investor purchases mutual fund units worth Rs 5000 through the webiste
of the mutual fund
4 When the investor purchases mutual fund units worth Rs 15000 through the webiste
of the mutual fund

Correct Answer When the investor purchases mutual fund units worth Rs 15000 through a mutual
fund distributor
Answer SEBI has allowed a transaction charge per subscription of Rs. 10,000/- and above to
Explanation be paid to distributors of the mutual fund products. However, there shall be no
transaction charges on direct investments. The transaction charge, if any,
is deducted by the AMC from the subscription amount and paid to the distributor;
and the balance amount is invested.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question13 In case a fund manager is managing more than six funds, then in all
performance related advertisements.
1 the total number of schemes managed by him hs to be disclosed
2 performance data need not be given
3 performance data of top 2 and bottom 2 schemes has to be disclosed
4 performance data of top 3 and bottom 3 schemes has to be disclosed

Correct Answer performance data of top 3 and bottom 3 schemes has to be disclosed
Answer When the performance of a particular mutual fund scheme is advertised,
Explanation 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

Question14 At what price can investors buy or sell units of an open-ended fund after the New
Fund Offer?
1 The NAV of the mutual fund units
2 The New Fund Offer (NFO) price
3 The face value
4 The monthly average price

Correct Answer The NAV of the mutual fund units

Answer Investors of an open ended fund can buy and sell mutual fund units as per its
Explanation current Net Asset Value - NAV price.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question15 Identify the true statement(s) with respect to Scheme Performance Disclosures?
A) The data related to fund performance of all mutual funds is available on the AMFI
website
B) SEBI has mandated disclosure of performance data by all the AMCs
1 Only A is true
2 Only B is true
3 Both A and B are true
4 Both A and B are false

Correct Answer Both A and B are true

Answer AMFI website ([Link]) carries the performance data of all the mutual
Explanation fund schemes.
SEBI has mandated disclosure of performance data by all the asset management
companies (AMCs). These disclosures can be accessed through certain scheme
documents and website of the fund house.

Question16 When a dividend is paid, the NAV of the units to that extent.
1 rises
2 falls
3 There is no change

Correct Answer falls

Answer In a dividend pay-out option, the fund declares a dividend from time to time. When
Explanation a dividend is paid, the NAV of the units falls to that extent.
The reduced NAV, after a dividend pay-out is called ex-Dividend NAV.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
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Question17 When compared to open ended funds, investors in close ended funds face a higher
level of .
1 Credit risk
2 Liquidity risk
3 Market risk
4 Investment risk

Correct Answer Liquidity risk

Answer Investors may choose the close-ended funds only if they can keep the money locked-
Explanation in such schemes. Although they are listed on stock exchanges, many a times there is
very low liquidity / volumes and also the price could be lower than NAV.

Anyone, who prefers liquidity option, should consider investing in open-

ended funds.

Question18 Can the fundamental attributes of scheme be changed? If yes - how?

1 Yes- but with the consent of 100% of the unit holders
2 Yes - with the permission of SEBI and AMFI
3 Yes - but this should be communicated to unit holders who should be provided an
option to exit the scheme
4 No - the fundamental attributes cannot be changed as it is based on these attributes
that investors have invested their money

Correct Answer Yes - but this should be communicated to unit holders who should be provided an
option to exit the scheme
Answer The trustees shall not permit a change in the fundamental attributes of the
Explanation scheme or any other change that will affect the interests of the unit holders unless a
written communication is sent to each unitholder, a notice is given in the newspaper
with national circulation and the unitholders are given the option to exit at NAV
without paying an exit load.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question19 is considered as an Institutional Investor.

1 Non-Resident Indians
2 Trusts
3 Persons of Indian Origin (PIO)
4 High Networth Individuals

Correct Answer Trusts

Answer Charitable Trusts / Private Trusts are considered as institutional investors.
Explanation
Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO) / HNIs are individual
investors.

Question20 If a Segregated portfolio is created, it shall be effective from .

1 the day of credit event
2 seven days prior to the credit event
3 one year from the date of the credit event
4 the day that security was bought in the portfolio

Correct Answer the day of credit event

Answer To ensure fair treatment to all investors in case of a credit event and to deal with
Explanation the liquidity risk, in December 2018, SEBI permitted creation of segregated portfolio
of debt and money market instruments by mutual funds schemes. “Segregated
portfolio” means a portfolio, comprising of debt or money market instrument
affected by a credit event, that has been segregated in a mutual fund scheme.

Segregated portfolio shall be effective from the day of credit event.

NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question21 The empanelment of a mutual fund distributor by an Asset Management Company

can be terminated .
1 In case all the investors of the distributors shift to direct plans
2 When the term of empanelment is over
3 Any time by the AMC
4 All of the above

Correct Answer Any time by the AMC

Answer The AMC has the power to terminate the empanelment of the mutual fund
Explanation distributor at any time.

Question22 The AMFI Code of Ethics (ACE) sets out .

1 The standards of good practices to be followed by the AMCs in their operations and
in their dealings with investors, intermediaries and the public.
2 The standards of good practices to be followed by the AMCs in their operations and
in their dealings with mass media
3 The standards of good practices to be followed by mutual fund distributors in their
dealings with AMFI, AMCs and investors
4 The standards of good practices to be followed by fund managers in their dealings
with AMFI and investors

Correct Answer The standards of good practices to be followed by the AMCs in their operations and
in their dealings with investors, intermediaries and the public.
Answer One of the objectives of the Association of Mutual Funds in India (AMFI) is to
Explanation promote the investors’ interest by defining and maintaining high ethical and
professional standards in the mutual fund industry.
The AMFI Code of Ethics (ACE) sets out the standards of good practices to be
followed by the Asset Management Companies (AMCs) in their operations and in
their dealings with investors, intermediaries and the public.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question23 Who handles the appeals which are made against the rulings of SEBI ?
1 Company Law Board
2 AMFI
3 Securities Appellate Tribunal
4 High Court

Correct Answer Securities Appellate Tribunal

Answer Persons aggrieved by an order of Adjudicating Officer passed under the SEBI Act can
Explanation prefer an appeal to Securities Appellate Tribunal (SAT) under section 15T of
the SEBI Act.

Question24 forms the basis of appointment of a distributor by an AMC.

1 SEBI approval
2 Agreement between the investor and the distributor
3 Power of attorney from the AMC
4 An agreement between the AMC and the Distributor

Correct Answer An agreement between the AMC and the Distributor

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Question25 A mutual fund scheme can invest in the equity instruments of a company.
1 5% of the net assets
2 10% of the net assets
3 15% of the net assets
4 25% of the net assets

Correct Answer 10% of the net assets

Answer The SEBI Regulations provide for various limits to the kind of investments that are
Explanation possible in mutual fund schemes. One of the restriction is -
The Mutual Fund under all its schemes shall not own more than 10 percent of
a company’s paid up capital bearing voting rights. Provided no sponsor of a
mutual fund, its associate or group company including the Asset Management
Company of the fund, through the schemes of the mutual fund or otherwise,
individually or collectively, directly or indirectly, have 10 percent or more of the
shareholding or voting rights in the asset management company or the trustee
company of any other mutual fund.

Question26 Identify the false statement(s).

A) The best strategy in selecting a mutual fund scheme is that based on its past
performance
B) When an investor wants to redeem from a scheme, the distributor must suggest
redemption from the scheme with the maximum exit load
1 Only statement A is false
2 Only statement B is false
3 Both statements A and B are false

Correct Answer Both statements A and B are false

Answer Experience has shown time and again, the top performers during one period may
Explanation not necessarily remain as a top performer forever or near the other top performers
and vice versa. In such a case, simply buying into a scheme due to good returns in
the recent past may not be a wise approach.
When an investor wants to redeem from a scheme, the distributor must suggest
redemption from the scheme with the minimum exit load.
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Correct Answer Securities in the portfolio are valued at current market prices
Answer The process of valuing each security in the investment portfolio of the scheme at its
Explanation current market value is called Mark to Market (MTM). The mark-to-market
valuation is done on a daily basis for calculation of daily NAV of a mutual fund
scheme.
Question28 Identify the TRUE statement(s)
a) In an Assured Return scheme, if the scheme is not able to pay the assured return
amount then the guarantor has to pay the same
b) Investor returns might vary from the scheme returns on account of choices
regarding investment schedule
c) The returns published in a mutual fund advertisement factor the entry or exit
load, as may be applicable.
1 'b' and 'c' are true
2 'a' and 'c' are true
3 'a' and 'b' are true
4 All 'a' , 'b' and 'c' are true

Correct Answer 'a' and 'b' are true

Answer Mutual funds are not permitted to promise any returns, unless it is an assured
Explanation returns scheme. Assured returns schemes call for a guarantor who is named in the
SID. The guarantor will need to write out a cheque, if the scheme is otherwise not
able to pay the assured return.
Investor returns might vary from the scheme returns also on account of choices
regarding investment schedule, i.e., additional investment being made during the
period or redeeming a portion of the investment. In such a case, for the same period
investor’s returns may be different from the published returns of the scheme.

The returns published in a mutual fund advertisement would be without factoring

the entry or exit load, as may be applicable.
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Question29 To measure the fund manager’s performance, the difference between scheme’s
actual return and its optimal return is calculated and this is known as .
1 Alpha
2 Beta
3 Sharpe
4 Treynor

Correct Answer Alpha

Answer The difference between a scheme’s actual return and its optimal return is its
Explanation Alpha—a measure of the fund manager’s performance. Alpha, therefore, measures
the performance of the investment in comparison to a suitable market index.
Positive alpha is indicative of outperformance by the fund manager; negative alpha
might indicate under-performance.

Question30 Who issues a due diligence certificate stating compliance with all legal formalities at
the time of making a new offer of mutual fund units?
1 Board of Trustees
2 AMC
3 Compliance Officer
4 Custodian

Correct Answer AMC

Answer The cover page of Scheme Information Document (SID) has the following standard
Explanation clause - “The particulars of the Scheme have been prepared in accordance with the
Securities and Exchange Board of India (Mutual Funds)
Regulations 1996, as amended till date, and filed with SEBI, along with a Due
Diligence Certificate from the AMC (Asset Management Company).
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Question31 A synopsis of the scheme related information documents is found in the .

1 Statement of Additional Information - SAI
2 Articles of Association
3 Trust Deed
4 Key Information Memorandum – KIM

Correct Answer Key Information Memorandum - KIM

Answer Scheme Information Document (SID) and Statement of Additional Information (SAI)
Explanation contain the details of the particular scheme and the statutory information about
the mutual fund or AMC, that is offering the scheme.
Key Information Memorandum - KIM is essentially a summary of the SID and SAI. It
contains the key points of these documents that are essential for the investor to
know to make a decision on the suitability of the
investment for their needs. It is more easily and widely distributed in the market. As
per SEBI regulations, every application form is to be accompanied by the KIM.

Correct Answer The units will continue to be held by surviving joint holders
Answer Transmission is the process of transferring units to the person entitled to receive it
Explanation in the event of the death of the unit holder. If a folio is jointly held and has
nominations, the right of the joint holder will be given priority.
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Question33 Identify the true statement(s) –

A) The nominee is the beneficial owner of the mutual fund units
B) Nomination does not create any title or beneficial interest in the units in favour
of the nominee after the death of the unit-holder
1 Only A is true
2 Only B is true
3 Both A and B are true
4 Both A and B are false

Correct Answer Only B is true

Answer Nomination is only an authorization for the mutual fund to transfer the units to the
Explanation nominee in the event of demise of the unit-holder. The nominee holds the units in
trust for the legal heirs of the investor. It does not create any title or beneficial
interest in the units in favour of the nominee after the death of the unit-holder.

An investor in a mutual fund scheme is the beneficial owner of the units one has
bought.
Question34 Which investor need not provide a PAN card at the time of making a mutual fund
investment ?
1 Investor who is investing up to Rs. 50,000 in a mutual fund scheme (excluding SIPs)
per year per mutual fund
2 Investor who is investing up to Rs. 50,000 in a mutual fund scheme (including SIPs)
per year per mutual fund
3 Investor who is investing up to Rs. 1,00,000 in a mutual fund scheme (excluding SIPs)
per year per mutual fund
4 Investor who is investing up to Rs. 1,00,000 in a mutual fund scheme (including SIPs)
per year per mutual fund

Correct Answer Investor who is investing up to Rs. 50,000 in a mutual fund scheme (including SIPs)
per year per mutual fund
Answer The following categories of investors are exempt from producing PAN:
Explanation - In case of transactions undertaken on behalf of Central/State government and by
officials appointed by the court.
- Investors residing in the state of Sikkim.
- UN entities/Multilateral agencies exempt from paying taxes/filing tax returns in
India.
- Investments (including SIPs and lump sum investments) in Mutual Fund schemes
upto Rs. 50,000/- per investor per year per mutual fund.
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Question35 The Securities Transaction Tax levied on re-purchase of units of debt mutual funds is
.
1 0.00%
2 0.03%
3 0.25%
4 STT is not applicable

Correct Answer STT is not applicable

Answer STT is not applicable to transactions in debt securities or debt mutual fund schemes.
Explanation
When an investor sells units of an equity fund in the stock exchange, or offers them
for repurchase to the fund, he will have to incur Securities Transaction Tax (STT) i.e.
STT is applicable only on redemption/switch to other schemes/sale of units of
equity oriented mutual funds whether sold on stock exchange or otherwise. STT is
not applicable on purchase of units of an equity scheme.

Question36 If a third party payment is to be made for subscribing to a mutual fund scheme, then
which of the following is/are essentially required?
1 The minimum investment has to be Rs. 50,000
2 The third party has to PAN details and also comply with the KYC norms
3 The third party should also have a folio with the mutual fund
4 All of the above

Correct Answer The third party has to PAN details and also comply with the KYC norms
Answer Compliance with the KYC norms and providing the PAN details are mandatory by the
Explanation third party making the payment irrespective of the amount involved.

The third party need not have a folio with the mutual fund.
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Question37 Which document has the statutory information about the mutual fund or AMC, that
is offering the scheme.
1 Scheme Information Document (SID)
2 Statement of Additional Information (SAI)
3 Red Herring Prospectus
4 Fund Fact Sheet

Correct Answer Statement of Additional Information (SAI)

Answer Statement of Additional Information (SAI), has statutory information about the
Explanation mutual fund or AMC, that is offering the scheme. Therefore, a single SAI is relevant
for all the schemes offered by a mutual fund.
(Scheme Information Document (SID) has details of the particular scheme)

Question38 A minor has one more year to become a major. A 3 year SIP is started in the minors
folio. Which of the following statement is true in this case?
1 The SIP will be registered for 3 years
2 The SIP will be registered for only 2 years
3 The SIP will be registered for only 1 year till the investor attains majority
4 The SIP will be registered for 3 years from the date of attaining majority

Correct Answer The SIP will be registered for only 1 year till the investor attains majority
Answer Standing instructions like Systematic Investment Plans (SIP) are registered in a
Explanation minor folio only till the date of the minor attaining majority, even though the
instructions may be for an extended period.

When the minor is approaching the age of majority, AMCs usually send letters
advising the guardian and the minor to submit the form along with prescribed
documents to change the status of the account/folio to "major".
All SIP, STP, SWP and any other standing instruction registered in the minor's
account are suspended if the documents are not received by the date when the
minor attains majority.
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Question39 One of the objectives of is to undertake nationwide investor awareness

programme to promote proper understanding of the concept and working of mutual
funds
1 SEBI
2 BSE / NSE
3 AMFI
4 NISM

Correct Answer AMFI

Answer Association of Mutual Funds in India (AMFI) is the association of all the registered
Explanation Asset Management Companies. One of the objectives of AMFI is to undertake
nationwide investor awareness programme to promote proper understanding of the
concept and working of mutual funds.

Question40 An investor already has a folio in a mutual fund scheme where he is a joint holder.
Now he wants to do additional investments in the same scheme as a sole holder.
How can he make the change?
1 He will have to do the investments under a new folio and select the mode of holding
as single
2 He can do the investments by mentioning the mode of holding in the application as
single to apply only for the fresh investments being made
3 He can do the investment by changing the mode of holding for the additional units
after the investment has been made.

Correct Answer He will have to do the investments under a new folio and select the mode of holding
as single
Answer Once a mutual fund folio is created as a jointly held account there can be no change
Explanation in the joint holders or mode of holding - except in the event of a death.
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Question41 Identify the false statement(s) –

A) Share certificate is a physical asset
B) Debenture is a physical asset as the paper on which it is printed has value
1 Statement A is false
2 Statement B is false
3 Both statements A and b are false

Correct Answer Both statements A and b are false

Answer Shares and Debentures are not physical assets. They are financial assets.
Explanation
Physical assets include Gold, Building, Art etc.

Question42 is not a mutual fund distribution channel.

1 Branches of Public sector banks
2 Branches of Reserve Bank of India
3 Branches of Private sector banks
4 Branches of Foreign banks

Correct Answer Branches of Reserve Bank of India

Answer Reserve Bank of India or its branches are not involved in the sales and distribution
Explanation of mutual fund products.
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Question43 Who applies to SEBI for the registration of a Mutual Fund?

1 The Asset Management Company (AMC)
2 Board of Trustees
3 The Sponsors
4 Chief Fund Manager

Correct Answer The Sponsors

Answer The application to SEBI for registration of a mutual fund is made by the sponsors.
Explanation

Question44 A investor will prefer lower risk and will settle for a lower return.
1 Aggressive
2 Adventurous
3 Moderate
4 Conservative

Correct Answer Conservative

Answer A conservative investor is someone who wants his money to grow but does not
Explanation want to risk his principle investment. Conservative investors choose financial
products that do not fluctuate much in value, such as conservative mutual funds
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Question45 Mutual funds must publish their unaudited accounts once every six months .
1 on the AMFI website
2 on the AMC website
3 on the SEBI website
4 in atleast two English newspaper

Correct Answer on the SEBI website

Answer As per SEBI rules - The mutual fund shall before the expiry of one month from the
Explanation close of each half year, shall display the unaudited financial results on AMC website,
the advertisement in this reference will be published by the fund in at least one
English daily newspaper and one regional language newspaper.

Question46 Decisions in Tactical Asset Allocation are taken on the basis of .

1 likely behaviour of the markets
2 risk profile of the investor
3 income level of the investor
4 All of the above

Correct Answer likely behaviour of the markets

Answer In Tactical asset allocation the allocation between the asset categories changes
Explanation dynamically. The purpose of such an approach may be to take advantage of the
opportunities presented by various markets at different points of time.
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Question47 What does financial goal setting involve?

1 Determination of risk profile
2 Estimating the amount required for a major life event
3 Determining asset allocation

Correct Answer Estimating the amount required for a major life event
Answer The first step in financial goal setting is to identify events in life which will require
Explanation major funding - like child education, marriage, retirement etc.
Asset allocation / Risk profile are looked into later while deciding the investments
etc.

Question48 In a mutual fund application form, if 'Direct' is mentioned in the space provided for
ARN and the choice of regular plan is indicated then the application will be
considered as .
1 Direct plan application
2 Regular plan application
3 Incomplete and rejected
4 Incomplete and sent to the investor for completion

Correct Answer Direct plan application

Answer Investors have the option to invest (purchase or subscribe to mutual fund units)
Explanation directly without routing the investment through a distributor (Direct Plan). In this
case, the investor must mention “Direct” in the space provided in the application
form for entering the AMFI Registration Number (ARN).
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Correct Answer SEBI does not approve the documents. It gives its observations
Answer SEBI does not approve or disapprove the Scheme Related Documents, it gives
Explanation its observations. The mutual fund needs to incorporate these observations in these
documents. Thus, the Documents in the market are “vetted” by SEBI, and not
approved by SEBI.

Question50 An existing bond fund will tend to lose value when market interest rates .
1 Rise
2 Fall
3 remains constant
4 are equal to yields

Correct Answer Rise

Answer Suppose an investor has invested in a debt security that yields a return of 8
Explanation percent. Subsequently, yields in the market for similar securities rise to 9 percent. It
stands to reason that the security, which was bought at 8 percent yield, is no longer
such an attractive investment. It will therefore lose value.
(Conversely, if the yields in the market go down, the debt security will gain value.
Thus, there is an inverse relationship between yields and value of such debt
securities, which offer a fixed rate of interest)
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Question51 In a Corporate Bond fund, the minimum investment in highest rated corporate
bonds is percent of the total assets.
1 50
2 60
3 70
4 80

Correct Answer 80
Answer Corporate Bond Fund: An open-ended debt scheme predominantly investing in AA+
Explanation and above rated corporate bonds. The minimum investment in corporate bonds
shall be 80 percent of total assets (only in AA+ and above rated corporate bonds).

Question52 Mr. Suresh invests Rs 2,00,000 in a mutual fund with a face value of Rs 10 and NAV
of Rs. 50. How many units will be allotted to him?
1 4000 units
2 20000 units
3 Will be lower than 4000 units due to entry load
4 Will be lower than 20000 units due to entry load

Correct Answer 4000 units

Answer Units are allotted as per current NAV.
Explanation The NAV is Rs 50 and the amount invested is Rs 200000
Units allotted = 200000 / 50 = 4000
(Currently there is no entry load)
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Question53 Identify the true statement(s) –

A) Beta is a measure of risk only for equity schemes
B) Variance is a measure of risk for both debt and equity schemes
C) A fall in prices of the debt securities due to default etc is known as a 'credit event'
1 Only A and B are true
2 Only A and C are true
3 Only B and C are true
4 All A, B and C are true

Correct Answer All A, B and C are true

Answer Variance as a measure of risk is relevant for both debt and equity schemes.
Explanation Beta as a measure of risk is relevant only for equity schemes.
In the debt markets, the credit risk arises on account of three things, viz., default,
delay in payments, or rating downgrade. Any of these may result in fall in prices of
the concerned debt securities. Such an event is also called a 'credit event'.

Question54 Identify the true statement(s) with respect to benchmark for mutual fund schemes.
A) For International Equity fund, the ideal benchmark will be BSE 500 index as it is a
very broad based index covering 500 companies
B) For Gold ETF, gold prices will be the ideal benchmark
1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 Neither A nor B are correct

Correct Answer Only B is correct

Answer Gold price would be the benchmark for such Gold ETF funds.
Explanation
For International Funds - The benchmark would depend on where the scheme
proposes to invest. Thus, a scheme seeking to invest in China might have a Chinese
index as the benchmark and a scheme that would invest largely in the US market
can have S&P 500 index as the appropriate benchmark.
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Question55 Which information has to be provided by a normal investor to be identified as an

existing investor in the mutual fund?
1 PAN
2 PEKRN
3 Folio Number
4 KYC acknowledgement

Correct Answer Folio Number

Answer An existing investor can use the application form to make fresh purchases in other
Explanation schemes of the same mutual fund or even make additional purchases in a scheme.
In this case, the assigned folio number has to be provided and all the personal
information already captured under the folio will apply to the new investment being
made also.

(The investors who are exempt from providing a PAN for their Mutual Fund
investments, should quote their PAN Exempt KYC Reference No. (PEKRN) obtained
from KYC Registration Agency)

Question56 Who has the responsibility of overseeing legal compliance in a mutual fund?
1 The Custodian
2 The Sponsors
3 The AMC
4 The Trustees

Correct Answer The Trustees

Answer SEBI expects Trustees to perform a key role in ensuring legal compliances and
Explanation protecting the interest of investors.
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Question57 Identify the true statement(s) with respect to stamping of application for Non
Financial transactions of a mutual fund.
A) Time stamping is relevant
B) Date stamping is pertinent
C) Date and Time stamping is done
1 All A, B and C are true
2 Only A and B are true
3 Only B and C are true
4 Only A and C are true

Correct Answer Only B and C are true

Answer Applications for non-financial transactions like change of address and
Explanation investor’s acknowledgement are date and time stamped. However, here stamping
of time is not relevant; the date stamping is pertinent (relevant).

Question58 Commodities as an asset class does not include .

1 Art
2 Fibers
3 Spices
4 Energy products

Correct Answer Art

Answer Art is not a commodity. It cannot be standardised. Its valued as per the perception
Explanation of buyer etc.
Fibers (eg. -Cotton yarn), Spices (eg.- Turmeric) and Energy Products ( eg. -Oil) are all
commodities.
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Question59 The units of a Close-ended mutual fund are traded between the unit
holders/investors and on the stock exchange.
1 The Mutual Fund
2 Other unit holders/investors
3 Specially appointed market makers to enhance liquidity
4 The Sponsors

Correct Answer Other unit holders/investors

Answer Post-NFO, the sale and purchase transactions of a close ended fund happen on the
Explanation stock exchange between two different investors, and the mutual fund is not
involved in the transaction.

Question60 Where is the information regarding investor service centers, minimum investment
amount and how to make the purchases of mutual fund mentioned?
1 Application Form
2 Nomination Form
3 Transaction Slip
4 Key Information Memorandum (KIM)

Correct Answer Key Information Memorandum (KIM)

Answer KIM is a summary of Scheme Information Document (SID) and Statement of
Explanation Additional Information (SAI) where in all the details of the scheme are mentioned.
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Question61 What does 'Asset Allocation' mean?

1 Allocating a portfolio to cash
2 Allocating various mutual funds to investors
3 Allocating units to unit holders
4 Allocating a portfolio to different asset classes

Correct Answer Allocating a portfolio to different asset classes

Answer The basic meaning of asset allocation is to allocate an investor’s money across
Explanation asset categories (like Equity, Debt, Gold etc.) in order to achieve the objective.

Question62 A mutual fund manager is planning to invest in Indian pharma companies as these
companies are setting up new manufacturing capacities. Identify the investment
style of the fund manager.
1 Value investment style
2 Cyclical investment style
3 Target investment style
4 Growth investment style

Correct Answer Growth investment style

Answer Growth investment style entails investing in high growth stocks i.e. stocks of
Explanation companies that are likely to grow much faster than the market.

(Value investment style is an approach of picking up stocks, which are priced lower
than their intrinsic value)
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Question63 In which document is a commentary on the current state of economy and markets is
also generally provided?
1 Statement of Additional Information (SAI)
2 Key Information Memorandum (KIM)
3 Fund Fact Sheet
4 Scheme Information Document (SID)

Correct Answer Fund Fact Sheet

Answer Apart from providing information about the schemes in the fund fact sheet, AMCs
Explanation may also provide periodic updates on markets and the economy. The factsheet is
also used by the fund manager to communicate their views on the economy and the
markets to the investors.

Correct Answer Expenses which are incurred to manage the fund

Answer Expenses for managing the fund are charged to the fund. Any expense other than
Explanation investment advisory fee and recurring expenses shall be borne by the asset
management company or trustee or sponsors.
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Question65 If one wants to know the General Risk Factors, then which document should he
read?
1 Fund Fact Sheet
2 Documents filed with SEBI
3 Key information memorandum (KIM)
4 Scheme Information Document (SID)

Correct Answer Scheme Information Document (SID)

Answer The risks in the scheme are listed in the segment on Risk Factors in Section I, Sub-
Explanation section A of the Scheme Information Document (SID). This section includes standard
or general risk factors that affect all mutual fund schemes.

Question66 To become a mutual fund distributor in India, one has to pass an exam which is
conducted by .
1 Securities and Exchange Board of India - SEBI
2 National Stock Exchange - NSE NCFM
3 National Institute of Securities Markets - NISM
4 Association of Mutual Funds in India – AMFI

Correct Answer National Institute of Securities Markets - NISM

Question67 When should the information under Foreign Account Tax Compliance Act (FATCA)
provided?
1 Only if the investment is made from a foreign bank account
2 Only if the place of birth is other than India
3 Only if an NRI is doing the investment
4 Only if the investor is a resident of USA or Europe

Correct Answer Only if the place of birth is other than India

Answer For applicants, including guardians, whose country of
Explanation birth/citizenship/nationality/tax residency is other than India, the application
requires additional information under Foreign Account Tax Compliance Act (FATCA).

Question68 Identify the false statement with respect to mutual fund scheme related documents.
1 KIM and SID are two broad types of scheme documents
2 SID has details of the particular scheme
3 SAI has statutory information about the mutual fund
4 KIM is essentially a summary of the SID and SAI

Correct Answer KIM and SID are two broad types of scheme documents
Answer Option 1 is wrong as Scheme Information Document (SID) and Statement of
Explanation Additional Information (SAI) are primarily the two important documents.
Key Information Memorandum (KIM) is a summary of SID and SAI.
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Question69 Short term capital loss can be set off against .

1 short term capital gains only
2 short term capital gain or long term capital gain
3 long term capital gains only
4 Short term capital loss cannot be set off

Correct Answer short term capital gain or long term capital gain
Answer As per the Income Tax Act -
Explanation - 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).

Question70 Identify the true statement with respect to 'Unclaimed Dividend' in mutual fund
schemes.
1 If the plan is a regular plan, then it is the distributors responsibility that the investor
claims the dues
2 It is the sole responsibility of the investor that he/she claims the dues
3 The Asset Management Company (AMC) is expected to make a continuous effort to
remind the investors through letters to claim their dues.
4 All of the above are true

Correct Answer The Asset Management Company (AMC) is expected to make a continuous effort to
remind the investors through letters to claim their dues.
Answer Right to unclaimed amounts- AMC is expected to make a continuous effort to
Explanation remind the investors through letters to claim their dues. The Annual Report has to
mention the unclaimed amount and the number of such investors for each scheme.
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Question71 What is fixed in a Closed-end fund?

1 The Net Asset Value
2 The Rate of Return
3 The Unit Capital
4 The Market Price

Correct Answer The Unit Capital

Answer Close-ended Schemes have an NFO Open Date and NFO Close Date. But, they have
Explanation no Scheme Re-opening Date, because the scheme does not sell or re-purchase units.
Whatever sale-purchase of units takes place is between the investors on the stock
exchange. So the unit capital of a closed-end fund does not change.

Question72 Identify the true statement(s) –

A) An Addendum must accompany the KIM
B) Addendum is considered to be a part of the Scheme Related Documents
1 Only A is true
2 Only B is true
3 Both A and B are true
4 None of them are true

Correct Answer Both A and B are true

Answer While the SID, SAI and KIM need to be updated periodically, the interim changes are
Explanation updated through the issuance of an Addendum. The addendum is considered to be a
part of the scheme related documents, and must accompany the KIM.
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Question73 Which of the statement is true with respect to applicability of TDS in case of capital
gains from mutual fund units?
1 There is NIL TDS on capital gains in mutual fund for all investors
2 TDS is required to be deducted at 10 percent on all declared dividend
3 All capital gains from mutual fund investments are subject to TDS @ 10%
4 TDS is not applicable on capital gains for resident individuals but is applicable for
Non Resident Individuals (NRI)

Correct Answer TDS is not applicable on capital gains for resident individuals but is applicable for
Non Resident Individuals (NRI)
Answer There is no TDS on re-purchase proceeds to resident investors. However, for certain
Explanation cases of non-resident investments, the same is applicable.
(TDS is required to be deducted at 10 percent on the dividend amount if it exceeds
Rs. 5,000)

Question74 Which transaction of an open ended fund is based on the Net Asset Value (NAV)
pricing?
1 Purchase of units
2 Redemption of units
3 Both purchase and redemption of units

Correct Answer Both purchase and redemption of units

Answer Purchase and redemption of units are always done based on the NAV of the scheme.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question75 A mutual fund scheme performance must always be measured relative to the .
1 Asset class
2 Index
3 Investment objective
4 Benchmark

Correct Answer Benchmark

Answer To know how well a mutual fund scheme is performing, it has to be compared to a
Explanation pre-defined comparable benchmark.
For eg. A midcap fund can be benchmarked / compared to Nifty Midcap 50 index.

Question76 In case of any conflict between the Principles of Fair Valuation and AMC's Valuation
Guidelines, .
1 The Valuation Guidelines will prevail
2 The Principles of Fair Valuation will prevail
3 Both are same so there will never be an conflict
4 SEBI will decide which is correct

Correct Answer The Principles of Fair Valuation will prevail

Answer In order to ensure a fair treatment to all investors, SEBI has laid down certain
Explanation fair valuation principles of mutual fund schemes.
In case of any conflict between the Principles of Fair Valuation and Valuation
Guidelines, the Principles of Fair Valuation shall prevail.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question77 Which type of Hybrid Fund has the least exposure to equity?
1 Aggressive Hybrid Fund
2 Balanced Hybrid Fund
3 Conservative Hybrid Fund
4 Arbitrage Hybrid Fund

Correct Answer Conservative Hybrid Fund

Answer An Hybrid fund is classified into Aggressive, Balanced and Conservative depending
Explanation on the equity exposure of the fund.
Conservative Hybrid Fund: An open-ended hybrid scheme investing predominantly
in debt instruments. Investment in debt instruments shall be between 75 percent
and 90 percent of total assets while investment in equity instruments shall
be between 10 percent and 25 percent of total assets.
Balanced Hybrid Fund: An open-ended balanced scheme investing in equity and
debt instruments. The investment in equity related instruments shall be between 40
percent and 60 percent of total assets while investment in debt instruments shall
be between 40 percent and 60 percent
Aggressive Hybrid Fund: An open-ended hybrid scheme investing predominantly
in equity instruments. Investment in equity instruments shall be between 65
percent and 80 percent of total assets while investment in debt instruments shall be
between 20 percent and 35 percent of total assets.

Question78 Who is NOT authorised to attest the documents submitted for Know Your Customer
compliance, in case originals are not produced at the time of KYC?
1 Notary Public
2 Manager of a Scheduled Commercial Bank
3 Mutual Fund distributor
4 Gazetted Officer

Correct Answer Mutual Fund distributor

Answer In the KYC process, the supporting documents (identity and address proof) are
Explanation verified with the original documents. Alternatively, the investor can provide a True
Copy attested by a Notary Public, Gazetted Officer or Manager of a Scheduled
Commercial Bank.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question79 Which of these funds has the highest risk?

1 Index Funds
2 Diversified Equity fund
3 Long Duration Funds
4 Gilt Funds

Correct Answer Diversified Equity fund

Answer In the Risk-Return Hierarchy of mutual funds, Equity funds are always risker then
Explanation Debt funds. So in the above question, Index fund and Diversified Equity Fund (Equity
funds) will be more riskier than Gilt fund and Long Duration fund (Debt funds).

Among Index fund and Diversified Equity fund, the latter is usually more risker than
former.

Question80 Identify the true statement(s) - A) Individuals can register upto five bank accounts
with a mutual fund B) A Non-Individual can register upto ten bank accounts with a
mutual fund
1 Only A is correct
2 Only B is correct
3 Both A and B are correct
4 Both A and B are incorrect

Correct Answer Both A and B are correct

Answer Mutual funds provide investors the facility to register multiple bank accounts to
Explanation 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.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question81 When there is a need to withdraw money from a scheme (i.e. repurchase /
redemption), the distributor must assess the implications of and on
the investors portfolio.
1 entry loads and exit loads
2 capital gains tax and exit loads
3 capital gains tax and entry loads
4 entry loads and dividend tax

Correct Answer capital gains tax and exit loads

Question82 As per SEBI rules, commissions cannot be paid to .

1 Brokers of the stock exchange
2 Banks
3 Sponsor distributors
4 Investors

Correct Answer Investors

Answer As per SEBI rules, a mutual fund distributor has to sign a declaration mentioning -
Explanation Undertake not to rebate commission back to investors, or attract investors
through temptation of rebate/gifts, pass back of commission etc.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question83 Which of these statement(s) is/are TRUE?

A) If the mutual fund units are held in demat form, they cannot be converted in to
physical form
B) When a mutual fund is redeemed or when there is a dividend pay-out, the
amount will be credited to the bank account linked to the demat account for those
mutual fund investors who opt for demat units
1 Only A is correct
2 Only B is correct
3 Both A and B are correct

Correct Answer Only B is correct

Answer The mutual fund investor has the option to convert the demat units into physical
Explanation form. This process is called re-materialisation.

Dividends and redemption proceeds will be credited directly to the bank account
via. electronic modes such as direct credit, NEFT, NACH facility.

Question84 A trader believes that he can always outperform the market. This is an example of
bias.
1 Recency
2 Overconfidence / Optimism
3 Herd Mentality
4 Anchoring

Correct Answer Overconfidence / Optimism

Answer Overconfidence / Optimism bias refers to a person’s overconfidence in one’s
Explanation abilities or judgment. This leads one to believe that one is far better than others at
something, whereas the reality may be quite different. Under the spell of such a
bias, one tends to lower the guards and take on risks without proper assessment.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question85 Identify the TRUE statement?

Correct Answer SEBI regulates mutual funds in India

(AMFI is neither a regulatory body nor a Self-Regulatory Organisation)

Question86 An investor chooses a mutual fund scheme based on whether his / her
matches with that of the scheme.
1 Investment period
2 Investment objective
3 Investment strategy

Correct Answer Investment objective

Answer Every scheme has a pre-announced investment objective. Investors invest in a
Explanation mutual fund scheme whose investment objective reflects their own needs and
preference.
The primary objective of various schemes stems from the basic needs of an investor,
viz., safety, liquidity, and returns.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question87 Among these funds, which will have the lowest Interest Rate Risk?
1 Money market fund
2 Diversified Equity Fund
3 Pharma Sector fund
4 Dynamic Bond Fund

Correct Answer Money market fund

Answer Interest rate risk is the risk that an investment's value will change as a result of a
Explanation change in interest rates. Interest rate risk is always associated with debt funds and
not equity funds.
The interest rate risk varies for bonds with different maturities. Those with
longer maturity would witness higher price fluctuations in comparison to those with
shorter maturities. A money market fund is a type of a mutual fund that invests in
high quality, short term debt instruments, cash and cash equivalents.

Question88 Mr. Sandesh invests Rs 75 lakh in a Gilt Fund and gives a local cheque at 3.30 pm.
What will be the applicable NAV for allotment of units?
1 NAV of the business day on which the funds are available for utilisation
2 Same day NAV if received before cut off time.
3 Closing NAV of the next business day
4 Closing NAV of day immediately preceding the date of application

Correct Answer NAV of the business day on which the funds are available for utilisation
Answer For all type of debt funds (except liquid funds), if the amount is above Rs. 2 lakh,
Explanation irrespective of the time of receipt of application, NAV of the business day on which
the funds are available for utilisation without availing of any credit facility
before the cut-off time (3 pm) of that day is applicable.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question89 Identify the true statement(s) with respect to benchmark for Sector Funds.
A) Its ideal to benchmark a sector fund against an index representing the respective
sector
B) Its advisable to benchmark a sector fund against a diversified fund to get the
correct picture
1 Only A is true
2 Only B is true
3 Both A and B are true

Correct Answer Only A is true

Answer A sector fund would invest in only the concerned sector so the benchmark has to be
Explanation a similar index. For eg. A Banking Sector fund can be benchmarked against S&P BSE
Bankex and an Infrastructure Fund can be benchmarked against Nifty Infrastructure
Index to get the correct picture.

Question90 From which of these can the mutual fund NOT distribute dividends?
1 Income accruals
2 Dividends which are received from equity investments
3 Realized gain from sale of investments
4 Unrealized appreciation in value of investments

Correct Answer Unrealized appreciation in value of investments

Answer SEBI guidelines stipulate that dividends can be paid out of distributable reserves. In
Explanation the calculation of distributable reserves:
• All the profits earned are treated as available for distribution.
• Valuation gains are ignored. But valuation losses need to be adjusted against
the profits.
• That portion of sale price on new units, which is attributable to valuation gains, is
not available as a distributable reserve.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question91 Which of these documents is not required to be submitted for investing in mutual
funds by a charitable organisation?
1 List of authorized signatories
2 Trust deed
3 Board resolution
4 Memorandum and Articles of Association

Correct Answer Memorandum and Articles of Association

Answer A Charitable Trust does not have any Memorandum and Articles of Association. It
Explanation has a Trust Deed.

Question92 In case the units are pledged, the unit holder .

1 can sell the units after the lockin period
2 cannot sell the units
3 cannot sell but can switch the units to another scheme
4 cannot do additional purchase

Correct Answer cannot sell the units

Answer Once units are pledged, the Unit-holder/s cannot sell or switch-out the pledged
Explanation units, until the pledgee gives a written no-objection to release the pledge.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question93 If these is a breach of the Code of Conduct by an intermediary and a second

violation by the intermediary is proved then the registration of the intermediary is
.
1 Not renewed
2 Cancelled
3 Suspended
4 Withheld

Correct Answer Cancelled

Answer In the event of breach of the Code of Conduct by an intermediary, the following
Explanation sequence of steps is initiated by AMFI:
• Write to the intermediary and ask for an explanation within 3 weeks.
• In case explanation is not received within 3 weeks, or is not satisfactory, AMFI will
issue a warning letter indicating that any subsequent violation will result in
cancellation of AMFI registration.
• If there is a proved second violation by the intermediary, the registration will
be cancelled, and intimation sent to all AMCs.

Question94 A person who wants to retain liquidity in his investments will invest in .
1 ELSS Schemes
2 Fixed Deposits
3 PPFs
4 Liquid Funds

Correct Answer Liquid Funds

Answer A person who wants liquidity should invest in liquid funds as they can be redeemed
Explanation very fast.
Equity linked saving schemes (ELSS) have a lock in period of three years
Fixed Deposits and Public Provident Fund (PPF) cannot be easily enchashed before
maturity.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question95 What is the maximum percentage of holding can a single investor have in a mutual
fund scheme?
1 5%
2 10%
3 20%
4 25%

Correct Answer 25%

Answer A Scheme/Plan shall have a minimum of 20 investors and no single investor shall
Explanation account for more than 25 percent of the corpus of the Scheme/Plan.

Question96 In a Contra Fund, the minimum investment in equity & equity related instruments
shall be of total assets.
1 40 percent
2 50 percent
3 55 percent
4 65 percent

Correct Answer 65 percent

Answer A contra fund is an open-ended equity scheme following contrarian investment
Explanation strategy. Minimum investment in equity & equity related instruments shall be
65 percent of total assets.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question97 The investors of a mutual fund can terminate the AMC or wind up a scheme if
% or more of the unit holders agree to it.
1 50%
2 60%
3 70%
4 75%

Correct Answer 75%

Answer Mutual fund Investors’ Rights & Obligations -
Explanation Rights to terminate appointment of an AMC : 75 percent of unit holders can
terminate the appointment of an AMC. Also, 75 percent of the unit holders (unit
holding) can pass a resolution to wind up a scheme.

Question98 Identify which statement is true?

Correct Answer Investors can hold the units of a mutual fund in fraction of 1 unit
Answer Investors can hold their units even in a fraction of 1 unit.
Explanation
For example, a investor is holding 650 units in a dividend re-investment scheme of a
mutual fund. On announcement of dividend, when converted into units, could result
in say addition of 20.5 units. Thus his total holding will become 650 + 20.5 = 670.50
units - which is a fraction.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Question99 In case of a securitized asset, will not be an originator to a Special Purpose

Vehicle (SVP) ?
1 housing finance company
2 non-banking finance company
3 commercial bank
4 RBI

Correct Answer RBI

Answer A securitization transaction involves sale of receivables by the originator (a
Explanation commercial bank, non-banking finance company, housing finance company, or a
manufacturing/service company) to a Special Purpose Vehicle (SPV), typically set up
in the form of a trust. Investors are issued rated Pass Through Certificates (PTCs),
the proceeds of which are paid as consideration to the originator.

In this manner, the originator, by selling his loan receivables to an SPV, receives
consideration from investors much before the maturity of the underlying loans.

Question100 Zero coupon securities are securities that do not pay a regular interest, but
accumulate the interest, and pay it along with the principal when the security
matures- True or False ?
1 TRUE
2 FALSE

Correct Answer TRUE

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
V IMP REAL FFEL EAXM - UPDATED QUESTIONS

Practice Question Banks also available for :

NISM

NISM Series I: Currency Derivatives Certification Exam

NCFM

NCFM Financial Markets: A Beginners Module

NCFM Capital Market (Dealers) Module
NCFM Derivative Market (Dealers) Module

INSURANCE EXAMS
NISM Mock Test 1
PRACTICE KIT – PAPER 1
No. QUESTION OPTION A OPTION B OPTION C OPTION D Answer

First 5 years of Investment done First 3 years of Investment done First 10 years of investment done by As long as investor held the
1 A mutual fund distributor is paid commission for.. by investor by investor investor investment
D

2 The guideline issued by AMFI for intermediaries are known as... AGNI ACE AMFI none of above A

3 The investment in MF portfolio are valued at Face value of portfolio cost of investment Market value of portfolio Book value of portfolio C

4 Exit loads are generally lower for large investors. TRUE FALSE B

Offices declared as point of

5 Time stamping arrangement is must at.. Offices of distributors AMC offices Bank distributor's branch
acceptance. D

6 SEBI has put a stop on charging ____________ to the scheme. Exit load Entry Load Recurring Expenses CDSC B

Once every six month in one

7 Unaudited accounts of the scheme must be published through monthly fact sheet Only at AMFI website
national & Regional news paper
Only on AMC's website C

Capital gain or loss from mutual fund investment are classified as a short
8 9 months 6 months 12 months 13 months C
term investment are if sold within

An investor invested Rs.100000/in a 370 day FMP and got Rs. 107750/-, 10% Plus surcharge or 20% after
9 7750 750 Insufficient details A
what is capital gain in this case? index benefit

STT is payable when investor STT is payable when investor STT is payable when investor STT is payable when investor sale
10 Which of the following is true purchase equity MF does redemption from equity MF purchase debt MF debt MF B

Liquid funds can not charge management fees of funds parked in a short
11 TRUE FALSE A
term bank deposits.

12 STT is charged on Equity share trading Derivatives trading Equity MF All of the above D

13 Which of the following is not required for KYC norms. Proof of investment Proof of Identity Proof of address All of the above A

The information on minimum investment amount, investor's service

14 Application form Nomination Form KIM None of the above C
centers, and how to make purchase is provided in.

Which of the following document is not require to be submitted by Board resolution and Memorandum
15 Trust deed List of authorized signatories certificate of registration C
charitable trust to invest in MF? and article of association

Investor gets units at a discount to It offers benefits of rupee cost

16 SIP is a good investment strategy because.. NAV averaging
It helps regular income for investor No load investment done B

Relaxation from documentation requirements for micro SIP is available

17 HUF Non Individual NRI PIO C
for..

18 NRI can not make repartition investment in MF using demand draft. TRUE FALSE B

Page 1
NISM Mock Test 1
An investor plans to invest Rs.12000 in a scheme whose NAV is 12 and
19 <1000 1000 1200 cant say B
FV is 10, how many units is he likely to be obtained.

An investor is doing a liquid investment, fund is available and time is Closing NAV of Day immediately Closing NAV of Day immediately
20 Next working day Same day C
12.30. NAV would be applicable for the ________ preceding the date of application preceding next business day

Investor invest 50 lakh in GILT at 3.30 pm with a local cheque. he gets Closing NAV of day fund are
21 Same day Next business day Next preceding day. C
NAV of available

22 Time stamping needs to start with serial no 1 on every business day. TRUE FALSE B

23 Funds pay dividend in Dividend Option Dividend Re-Investment option Both of the above Growth option C

Offering for repurchase, constant amounts worth of units at regular interval

24 SIP STP SWP Value investment C
basis is called

A company's PE ratio may be low because it is unlikely to replicate it's

25 TRUE FALSE A
past performance

26 Fundamental analysts are called "Chartists" TRUE FALSE B

If absolute return was 2.4% over 50 days, annualized return would

27 0.05 0.024 1.2 0.175 D
be____________

In case of liquid fund, investment less than 3 months old. which return
28 Total return CAGR Absolute return Simple annualized B
would be calculated?

In case of equity fund, if fund has higher allocation to cash in bullish Be comparable to that of
29 Be worse than benchmark return Better than benchmark return cant say B
market the performance is likely to.. benchmark index

30 CRISIL's indicator for highest safety in a debenture is AAA High Good P1+ A

31 During the period of turmoil, gold prices Go down Go up Remain steady Mirror equities B

32 Performance of fund must always be measured relative to the. Index Benchmark Asset Class Investment objective B

33 Difference between scheme's actual return and optimal return for it's risk is Sharpe Treynor Alpha Spread C

While evaluating return for an index fund across a peer group, which of
34 BETA Coefficient Past performance Tracking error R-squared C
the following is more important?

35 Balance funds are for Aggressive investors highly aggressive investor Moderate conservative Highly conservative C

36 The lower risk among equity fund is Index Fund Value Fund Dividend yield fund Growth fund C

Probabilities of losing money in equity is negligible if investment horizon is

37 6 months 5 years 1 years 3 years B
for at least

38 Returns in international fund is dependent on Exchange rates Asset class performance Both of the above None of the above C

Page 2
NISM Mock Test 1

39 Mutual funds in India are not permitted to invest in Gold Real estate Art Secularized debt C

40 A value fund is expected to have ________ exposure to front line stocks Entire High Half of it's Low D

41 Index funds are safer because their NAV does not go down TRUE FALSE B

42 Which of the followings are least comparable Liquid and Savings account Liquid and Current account ETF and Index fund GILT and Sector fund D

An investor seeking capital appreciation, having high risk tolerance and

43 Bonds Bank FD Real-Estate PPF C
long term horizon must invest in

Extent of securities against the

44 Credit rating enables an investors to judge the Duration of loan
borrowing
Risk of default by borrower Interest rate risk C

45 Which of the following is not government saving scheme? Infrastructure Bonds RBI Bonds POST KVP A

An investor looking for capital appreciation, having a high risk tolerance

46 Bank FD Equity Bonds Gold B
and long tem horizon must invest in

47 Which of the followings is physical asset? Securised debt Real estate Real estate fund Gold future B

In new pension scheme(NPS) Tier I account new pension scheme is

48 TRUE FALSE A
called pension account

49 Investor in MF can choose asset class but not investment manager TRUE FALSE A

Helping client to select the out Assessing the clients financial Advising client to invest only in
50 Financial Planning Involves performing stock information secured investments
None of the above B

51 Value stocks Have high current dividend Yield high growth in earning Are currently under valued None of the above C

52 A better performance than the return on index is given by Passive fund manager An active fund manager All fund managers Non fund manager B

Emerging or new channel for distributors/marketing of mutual funds in

53 Internet Stock Exchange All of the above None of the above C
India is

Part of commission up front and The entire commission after five

54 Trail commission means paying No commission at all The entire commission upfront
balance in phases years C

55 Agents are compensated by mutual funds Through salaries Through commission Through an annual fees Not in cash but in kind B

56 The fund sponsors should have a sound financial track record of 7 years 5 years 12 months 3 years B

57 Which of the following are self regulatory organization(SRO) BSE SEBI AMFI RBI A

58 Bank owned mutual fund are supervised by SEBI Jointly by SEBI & RBI RBI AMFI A

Page 3
NISM Mock Test 1
Does not have to go through the
59 A passive fund manager Researches stocks extensively Does not buy and sell stocks often
process of stock selection
Does not have to track stocks C

60 Debt securities bought at a discount to their face value are generally Interest bearing Zero coupon bonds Paying interest at a floating rate None of the above B

61 When interest rates rise, bond prices Also rise Are not affected Falls Fluctuate either up or down C

62 The maturity period of RBI relief bonds is 5 years 7 years 6 years 8 years A

The investor redeems his An agent invests his own money, not
63 A trail commission is justified when An investor cancels his investment
investment in a very short time that of client
An Agent retain the Investment D

A debt fund distributes 10% dividend . how much tax does the investor
64 10.00% 20.00% 12.00% None D
have to pay on this dividend

65 What is the current PPF rate 8.00 Percentage 8.50 Percentage 7.75 Percentage 7.50 Percentage A

66 What is the recurring expense on first 100 cr for equity schemes 2.00 Percentage 1.75 Percentage 2.25 Percentage 2.50 Percentage D

67 Risk adjusted return is measured by Sharpe ratio Standard deviation Treynor ratio A&C D

68 Intra day trading can be done on the basis of- Fundamental analysis Technical analysis Economic analysis Political analysis B

69 Mid cap stocks are risky in the time of Boom Recession/Economic turmoil Political instability All of the above B

70 Who Appoints the AMC Custodian R&T Trustee Distributors C

71 Which of the following has lowest risk Liquid fund (mmmf) Gilt funds Diversified debt fund Diversified equity fund A

72 Long term capital gains in a debt fund without indexation for an investor is 10.00% 15.00% 20.00% No tax A

What of the following is not a reason for investor to prefer mutual fund
73 Tax benefits Possibility of capital gain Deposit insurance Investment convenience C
over Bank FD

74 In the NPS each investment manager appoints own distributor TRUE FALSE A

75 Need of Life insurance in life is Must Not required can be done without None of above A

All investor have similar requirements at similar stage in the life/wealth

76 TRUE FALSE B
cycle

77 Name of asset allocation strategy if it is fixed @ 50 % Tactical Allocation Strategic Allocation A&B None of above B

Model portfolio should be determined based on commission income

78 TRUE FALSE B
possibility for distributor

Page 4
NISM Mock Test 1

79 Which of the following is true for model portfolio Stipulated by SEBI Guaranteed by AMC Decided by financial planner Common across industry C

80 As the no of earning member in a family increases risk appetite Increases Decreases Stays constant None of above A

81 Equity investment through sip can be suggested for investor looking for Long term growth Short term target Portfolio churning Tax benefit A

82 How to compare index fund performance expenses Tracking error None of above C

83 What type of bond fund carries least interest rate risk Short term bonds Long term Bonds Mid term Bonds All of above A

84 Arbitrage fund are not equity fund TRUE FALSE B

85 Which of the following is true for FMP NAV do not fluctuate Capital Guaranteed Fixed income None of above D

86 Index funds are_____________fund Passive fund Active fund Both None of above A

The role of insurance is more critical for physical assets than financial
87 TRUE FALSE A
assets

88 When price of gold goes up a buyer of gold future contract see it's value Go up Go down Retain the same value None of above A

89 The investment portfolio is created based on Market views of fund manager Investment objective of fund risk appetite of investor profile of unit holder B

90 Commodities as an asset class does not include Food crops Industrial metals Real Estate Gold C

open for purchase by existing open for purchase only for existing
91 Subsequent to NFO, open ended funds are investor & new investor investor
available on stock market None of above A

If a fund seeks to grow in value overtime it can be said that it's investment
92 capital appreciation safety of capital Capital adequacy Regular income A
objective is

93 Hybrid funds are invested in across equity market capitalization International markets both equity and debt None of above C

94 Mutual fund are constituted in India as Companies Trusts Partnerships NGO B

95 Mutual Fund sponsor can be compared to Depositor of a company Company director Promoter of Company CEO of a company C

Creating maintaining and updating Processing dividends & redemption Settling investment transaction of
96 Which of the following is not a function of R&T agent the investor record
Updating unit capital of fund
payouts to investors the fund
D

Prior approval of SEBI needs to be taken before a person is appointed as

97 TRUE FALSE A
trustee

Person, other than Indian residents, should also comply with RBI
98 TRUE FALSE A
guidelines for investment in Indian mutual funds

Page 5
NISM Mock Test 1
establishing the client planner
99 The first step of financial planning is Evaluating the various alternatives data gathering and goal setting
relationship
Plan Review C

Page 6
NISM Mock Test 2
PRACTICE KIT – PAPER 2
No. QUESTION OPTION A OPTION B OPTION C OPTION D Answer

1 In case of market correction _______ , takes more hit than _______ Fund. Growth , Value Momentum , Value Value , Growth Growth , momentum C

2 Sponsor's net worth should be positive for Last 5 years last 2 years last 3 years last year A

Memorandum and Articles of

3 At time of NFO, which document compulsorily filed with SEBI SID SAI Annual Report
Association A

4 Collection and payment of fund is a responsibility of Custodian R&T Banker AMC B

5 Other than Indian residents, rest have to also comply RBI regulations TRUE FALSE A

Expense and Load structure of

6 Which of the following not included in KIM Details of Key personal of AMC Tax benefit of MF
scheme
Due diligence certificate of AMC D

Give detailed information about

7 Function of OD is scheme to investors
Give current NAV Gives Fund suggestion None of the above A

What should be the Sector Fund Allocation for a single income family having
8 0.00% 70.00% 50.00% 30.00% A
small investable surplus
Expenses on investor General administration expense
9 Which expense can be not charged to scheme? communication
Service tax Fees of custodian
of AMC
D

10 Low PE indicates that stock is cheap and you should buy it TRUE FALSE B

Minimum investment amount and Opening and closing dates of

11 Which of the following need not be included in KIM? Detail of sponsor
cut off time
Risk profile of the scheme
NFO A

12 As per income tax act, Arbitrage Funds are taxed as per debt scheme TRUE FALSE B

13 Which is purely treated as an international asset Equity Gold Real Estate Debt B

14 Transfer of security from one scheme to another scheme is allowed in MF TRUE FALSE A

15 Calculate the sales price of a unit when NAV is 15 and exit load 1% 15 14.85 15.15 15.5 A

16 If you get a cheque of 1 cr in a Gilt Fund at 2.30 pm, NAV date will be NAV at 2.30pm NAV at 3pm Same day NAV NAV of fund realization date D

17 Who allots Amfi Registration Number? AMFI SEBI AMC none of the above A

18 Which distribution channel don't have a huge branch network? Institution Corporate distributor Bank IFA D

19 Dividends in the hands of investors are taxable at the rate of 10.00% 15.00% 33.00% Tax Free D

20 Last step in the process of designing model portfolio Sector selection Asset allocation Scheme selection Client selection C

Page 7
NISM Mock Test 2
Achievement of the goal of
21 Goal based approach of financial planning focuses on Risk profiling
investors
Tax liability of investors Investible surplus of the investor B

22 What is the rate of return of PPF 20 Percentage 8 Percentage 8.50 Percentage 9.25 Percentage B

23 What is the indicator of the risk adjusted performance ratio? Beta Standard Deviation Sharpe's Ratio Variance C

24 Interest Rate sensitivity in Bond fund depends on Credit Profile Avg Maturity YTM Current Yield B

25 SEBI doesn't allow passing of commission to Distributor Investor Bank IFA B

26 If you get a 50L in equity fund at 3:30 pm today,investor will get the NAV of Yesterday Today Tomorrow NAV of fund realization date C

27 Index against which performance of a fund is measured, is called Tracking Error Benchmark Investment objective Ex-mark B

28 FMP are essentially a closed ended Scheme TRUE FALSE A

The information regarding Which category of investors can invest in MF, is

29 Offer document SAI MIN SIN A
given in

30 Who can not be the distributor of the AMC IFA Bank Employees of AMC All of the above C

investing only in Equity Gold and

31 Asset allocation means Putting all eggs in Same basket Investing according to Market Investing in different assets
Silver C

32 MIP is a Debt Scheme TRUE FALSE A

33 Asset allocation should be in line with Financial Goal Age of Client Risk Appetite All of the above D

34 A young investor having objective of capital appreciation should invest in GILT Liquid Equity debt C

35 In NPS class-C predominantly invests in Equity Debt Gold Real Estate B

36 Fund's risk relative to market is measured by tracking error Sharps' Ratio Treynor Beta D

37 Which one is false about debenture Issued by PSU High credit risk It has maturity Duration is greater than 1 yr A

Investor has read the OD and then the invested in the fund and fund goes
38 Gets remedy from SEBI Cant sue the AMC Gets remedy from AMC Gets remedy from NSE B
down, then he

39 STT charge on equity Derivatives Equity MF Equity Schemes All of Above D

40 Which function AMC can't do in house Custodian Accounting Distribution Fund management A

41 Value of Bond goes down when Interest rate goes down Interest rate goes up IRR goes down YTM goes down B

Page 8
NISM Mock Test 2

42 Which one is not exempted in wealth tax Gold sector fund Gold deposit Gold ETF Gold D

43 Institutional distributors needs to be Registered with SEBI Registered with AMFI Listed on stock exchange All of Above B

44 Standard risk are Uncommon to all Common to all Specific to a scheme Systematic B

45 Request for purchase can be made In units and amount In units only In units or amounts In amount only D

In NPS investors get choice of the asset class but don't get choice of
46 TRUE FALSE B
investment manager
Time shown in the computer of
47 In case of online transaction, transaction time is applicable investor
Time as web per web server Mid night Next day morning B

48 If investors invest through demat can AMC asks for KYC requirement TRUE FALSE B

49 According to the asset allocation rule, equity exposure should be equal to Age 100-age Age-100 100.00% B

50 Mutual fund is made up of Pool of trustees fund Pool of institutional investors Pool of investment managers Pool of investment money D

51 Who can not invest in mutual funds? Foreign companies Banks insurance companies NBFC A

52 Which is same as of OD? SID SID+SAI SAI KIM sumarry of SAI + SID. B

53 Mutual fund distributor in India are member of AMFI. TRUE FALSE A

54 Mutual fund in India is regulated by SEBI(Mutual Fund) act 1996. TRUE FALSE A

55 Which of the following is appointed by trustee? Custodian Distributor AMC R&T C

56 KIM has to be updated Twice in a year Quarterly Once in a year Once in two year C

57 Which of the following is more risky? Liquid fund Index fund growth fund gilt fund C

Whenever material changes take

58 Material changes in KIM need to be updated once in a year Half yearly
place
Once in two year C

59 If an investor wants full exposure of gold his investment should be into Gold ETFs Physical gold Shares of gold mining company All of the above D

If an investor invest 1 lakh rupees in a debt fund after 365 days it's value is
60 7.75% 7.47% 10% or 20% with indexation insufficient data A
107756/- what is CAGR?
If an investor invest Rs.100,00,000 in Equity MF Scheme at 3.30 pm through
61 Same day closing value When fund gets credited Previous day closing value Next day closing value B
outstation cheque he will get NAV of
Retaining the investor for long
62 Trail commission to advisor helps in -- term.
Portfolio Churning New client acquisition None of the above A

Page 9
NISM Mock Test 2

63 Exit load __________ Is ame for all schemes Is same for all amc's Varies from investor to investor Varies from scheme to scheme. D

64 Which fund is an actively managed fund? Index fund Diversified equity fund Growth fund B&C D

Risk profile, fund allocation, Risk profile, portfolio construction, Portfolio construction,risk profile, Fund allocation. risk profile,
65 Arrange in correct sequence portfolio construction. fund allocation. fund allocation. portfolio construction
B

Which of the following is against the ethics & Code of conduct guide line of Churning investor's money to get All the associates of a distributor Keeping the interest of all unit
66 All of the above A
AMFI better returns should be amfi approved. holders

67 Minimum contribution of a sponsor in an AMC should be- 50.00% 60.00% 40.00% 25.00% C

68 PAN card is not required in case of- NRI Minor & Senior Citizen Corporate institution & trust. None of the above D

69 FMP can give better interest than a Bank Deposit. TRUE FALSE A

70 The insurance associated with new pension schemes are regulated by- PFRDA + IRDA IRDA PFRDA None of the above. C

71 In India mutual funds are- Govt. institutions Company Trust NBFC C

72 Initial issue expenses in a liquid fund has to be- 0 0.000125 0.25 percentage none of the above A

73 A schemes NAV value increases for the period of 2 yrs . it will show- Absolute return Simple return compounded annualized return all of the above C

In KIM it has been mentioned that the 65% investment will be in equity and
74 Policy of scheme Objective of scheme portfolio of scheme None of the above. A
equity related instrument. this is called-

75 KIM is attached with ? Transaction slip Application Form Both A and B Neither a nor b B

76 Which is technical analysis- Volume & price behavior Mark to market book value analysis all of the above. A

77 Who keeps detail report of transaction- Custodian AMC R&T Distributor C

78 Formula to find out the Standard Deviation in excel is stdev sd stddev stddv A

79 Time stamp machine contains- Time stamping serial no Machine identification location code all of the above D

80 The expected return & yield of the scheme is mentioned in KIM TRUE FALSE B

81 How frequently NAV of an equity scheme are calculated Daily Weekly Quarterly once in financial year. A

beta doesn't make any impact

82 If beta of a scheme is less than one the the fund is- More risky compare to market Less risky compare to market neither risky nor profitable.
on scheme performance
B

83 What is not true objective of life insurance- Risk coverage Investment Both None of the above B

Page 10
NISM Mock Test 2

84 Unit capital is issued at- 10 25 50 100 A

85 Fund management cost is more in- Passive fund Gilt fund Liquid fund Active fund. D

86 Independent trustee are appointed by- Sponsor SEBI AMFI All of the above A

87 Distributors are paid- Commission Fees Salary All of the above A

88 KYC is required for- Guardian in case of minor HUF Sole proprietorship firm All of the above. D

89 KYC is compulsory - For every investment 50000 50000 and above first time investment A

((End Value/Start Value)^(1/

90 Formula for CAGR calculation is Interest * No of years (P1-P0)/PO*100
(Period)) -1
None of above C

91 The NAV of a fund is 15 applicable exit load is 1%, purchase NAV would be- 14.85 15 15.25 15.65 B

92 In case of breach of Code of conduct license is canceled by- AMFI SEBI Sponsor AMC A

Partial withdrawal facility is

93 Which is true in case of PPF? available after one year
Investment & return are tax free. Both None of the above B

94 A fixed term plan series is- As open ended fund A closed ended fund A fixed term bank deposit A fixed term corporate bond B

The P/E ratio is an important measure of a company's anticipated performance.

95 Market price and dividend Market price and earning per share Market capitalization and dividend Market price and face value B
it is calculated using.

Page 11
NISM Mock Test 3

PRACTICE KIT – PAPER 3

No. QUESTION OPTION A OPTION B OPTION C OPTION D Answer

1 Which one of the following is not an eligible investor? Insurance Companies Govt Institutions Foreign Citizens Provident Fund C

For a customer holding units in demat , the AMC also requires to

2 TRUE FALSE B
do his KYC ?

3 Which investment below gives international exposure International Funds Gold Fund None Both D

4 On doing risk profiling which asset allocation does it give ? Strategic Asset Allocation Fixed Asset Allocation Flexible Asset Allocation Tactical Asset Allocation A

In a balance fund with net assets of 750 crores what is the

5 10.13 15.38 17.86 16.125 D
expenses that can be charged ?
I invest Rs 50 lacs at 2.30 pm with a local cheque for funds other Closing NAV of the day preceding
6 Next day NAV Same days closing NAV Previous day NAV B
than liquid scheme, which NAV will you get ? next business day

7 What is the DDT for an individual in liquid fund ? 0.25 0.2 0.13 0.1 A

If client invest in liquid fund at 11.30 am and the fund gets cleared Closing NAV of the day preceding next
8 Next day NAV Same days closing NAV Previous days closing NAV D
on the same day which NAV the client gets ? business day

Premium can be availed under Sec 80

9 What is true about premium paid in a life insurance company ? Customer can decide premium
c
Premium can be shown as exp Premium is volatile B

10 The person with whom the units are pledged is known as Pledger Pledgee B

11 What is the highest expense ratio in a Fund of Fund scheme ? 2.25% 1.75% 0.75% 1.50% C

12 SEBI is sole regulatory authority for MF are answerable TRUE FALSE A

13 How is company fixed deposit compare to bank fixed deposit ? Low Risk Highly Volatile Less Safe Lower Return C

Within how many days the dividend warrants to be dispatched on

14 15 7 10 30 D
declaration?

15 A distributor needs different ARN for each AMC ? TRUE FALSE B

16 A conservative investor need not be advised to invest in ? Gilt Fund Liquid Fund High Yield Bond Fund Short Term Plan C

The New Pension scheme is both regulated IRDA and PFRDA as it

17 TRUE FALSE B
has an insurance component ?

18 Which is the fastest way of remitting funds on real time basis? NEFT D/D SWIFT RTGS D

19 Which of the following is a financial asset ? Govt Security Gold Real Estate None of the above A

20 Which of the following is an SRO ? AMFI SEBI BSE RBI C

Page 12
NISM Mock Test 3

21 NFO other than ELSS can remain open for maximum _________ 7 days 15 days 21 days 30 days B

In NFO the account statement is to be dispatched within â days

22 5 days 15 days 20 days 30 days A
on closure of NFO ?

23 Companies issuing short term debt is called CD Tbills Debentures CP D

Within a category one can decide on investments based on Sharpe

24 TRUE FALSE A
Ratio

25 Which of the following exempt from DDT ? Equity Oriented Fund Liquid Fund Income Fund Gilt fund A

26 The arbitrage funds are taxed like debt funds TRUE FALSE B

27 Which of the below is not in a Transition phase ? Buying of house Providing for daughter marriage Shifting of job for higher income Providing for foreign study for son C

28 The NAV of scheme is impacted by ? No of Investors Unit Capital Market Value of Portfolio Size of Fund C

29 Technical analysis is projecting trend based on human behavior ? TRUE FALSE A

30 Sub distributors work with Online platform Banks IFA Distribution companies D

31 Initial issue expense that can be charged to fund NIL 1.00% 2.00% 1.75% A

According to Performance Advertisements the return shown for

32 Annualised Yield Simple Return Absolute return CAGR D
equity funds over 1 years are
In New Pension Scheme portfolio of Assets class E predominantly
33 Equity debt Govt. Sec. A
investment in

34 Expense ratio is most important in case of Index Fund Offshore Fund Active Fund Fund of Fund A

35 Code of ethics for employees of AMC is described by SEBI AMFI Internal Audit Team Trustee. B

36 Recurring expenses in Equity scheme has a limit up to 1.50% 0.50% 1.25% 2.50% D

In Transition phase of Wealth Cycle investor tends to increase the

37 Equity Liquid Gold None of above. B
proportion of_______ assets in his portfolio.

38 Which of the following is a Financial Asset? Gold Real State Bank deposit None of above. C

39 Index fund can give better returns from its Benchmark. TRUE FALSE B

The young BPO executives should not be advised to invest in long

40 TRUE FALSE B
term schemes because of their lavish life style ?

41 Term âStock pickingâ is used in which of the following? Bottom up approach Top down approach Both None of above. A

What is the applicable rate of STT in case of repurchase of Equity

42 0.13% 0.33% 0.02% 0.25% D
scheme?

Page 13
NISM Mock Test 3
Market value is 152 crore, Dividend accrued but not received= 8
43 crore, liabilities = 2 crore Total no of outstanding units is 75 lakhs. 200 210.67 213.33 None of above. B
What will be the NAV of the scheme?

44 Investor selects an MF based on Investment Philosophy Investment Strategy Investment Policy Investment Objective D

45 ______ has been appointed by Trustee Custodian R&T AMC Distributor C

46 Risk May be defined as Asset Allocation High Transaction Cost Financial Loss Portfolio Rebalancing C

Financial Planner defines that client does not have resources to Increase risk to generate higher
47 Inform the Client Avoid telling as client will be dishearted Avoid telling as he may lose the client
return A
meet goals. He should

48 Which of the following account in NPS is a Saving Account Tier I Tier II Tier III Tier IV B

49 Mutual Fund is exempted from Wealth Tax TRUE FALSE A

Needed for a single rupee

50 KYC is required for investment more than 20000 10000 Not required
investment D

If investor is a minor, KYC should be

KYC for Minor is needed only if KYC for Minor is needed only if KYC is not at all required for
51 If a minor Invests Rs 10,000 in MF, KYC is needed or not investment exceeds Rs 20000 investment exceeds Rs 50000
of his guardian even for a single
minors C
rupee investment

52 Since Preparation of WILL is a long process, it has to be avoided TRUE FALSE B

By allowing fixed number of Units to By selling number of units in a fixed

53 Close ended fund allows investors to sale their units sale interval
by listing MF in stock exchange C

54 ______ Allots the ARN Number AMC SEBI NISM AMFI D

55 Application for MF would be rejected if paid in Cheque DD Cash Bankers cheque C

56 Mutual Fund Investor can't pledge units TRUE FALSE B

57 Change in the value of NAV is Standard Risk Systematic Risk Unsystematic Risk A

NAV on the date when trustee NAV of the date when notice is issued
58 Which one is called cum-dividend NAV? approves dividend to meet trusteed to finalize dividend
NAV after the date of dividend None of the above A

When scheme is first launched and investor invests in MF... it is

59 NFO IPO Purchase Re-Purchase A
called

60 KIM Document is a summary of SID SAI OD SID+SAI D

If investor invests in a Guilt fund at 3:30 p.m., he would get the

61 Current NAV Previous Days NAV NAV of Next Business Day Same day NAV C
units at which NAV ?
If investor invests in a Equity fund at 3:30 p.m., he would get the
62 Same day NAV NAV of Next Business Day Previous Days NAV Current NAV B
units at which NAV ?

63 The guideline issued by AMFI for intermediaries are known as AGNI ACE AMFI None of the above A

Offices declared as point of

64 Time stamping arrangements is must for Offices of Distributors AMC Offices Bank Distributors Branch
acceptance
D

Page 14
NISM Mock Test 3
Unaudited accounts of the scheme must be published in the news
65 Every 3 months Every 6 months Every 12 months None of the above B
paper
An Investor Invests Rs 100000 in a 365 days FMP and got Rs
66 7750 750 Insufficient Data 1000 A
107750, what would be capital gain in this case ?

67 STT is charged on Equity Share Trading Derivative Trading Equity MF All of the Above D

An investor plans to invest Rs 12000 in a scheme whose NAV is

68 <1000 1000 1200 Cant Say B
Rs 12, how many units he will likely to be obtained

69 Company's Earning per share would be indicated by following P/E Ratio Current Ratio EPS Leverage Ration C

70 Beta of Index would be Less than 1 Equals to 1 more than 1 None of the above B

While evaluating return for an index fund across a peer group,

71 Beta Coefficient Past performance Tracking error R-Squared C
which of the following is more important

72 The fund sponsors should have a sound financial track record of 12 months 3 Years 5 Years 7 Years C

73 What is the current PPF Rate ? 7.50% 7.75% 8.00% 8.50% C

Father wants his son to be a doctor and study will start after 5
74 years. The current expense is 2500000. How to calculate the A = P + (1+r) ^ n -1 A = P x (1+r) ^ n A = P / (1+r) ^ (1/n) -1 A = P / (1+r) ^ n B
expense after 5 years

75 Appropriate benchmark for G-sec fund I-sec+ I -bex CRISIL liquid fund index MIBOR CRISIL - MIP bladed index A

76 Which of the following has lowest risk ? Liquid Fund GILT Fund Diversified debt fund Diversified Equity fund A

Compounding method with interest Compounding method with

77 If I require 500000 after 2 years, which method will I follow ? Discounting method with interest rate Discounting method with inflation rate
rate inflation rate C

78 Mutual Fund Sponsors can be compared to Depositor of a company Company director Promoter of a company CEO of a company C

79 Which of the following can be charged to the scheme Salary of Fund Administratives Office rent General Administration Expenses Fees of Custodian D

Low PE compared with peer group or industry standard indicates

80 TRUE FALSE A
that stock is cheap.
What would be the redemption value of a Unit if NAV is 15 and Exit
81 15 14.85 15.5 15.15 B
load is 1%

82 Last step in the process of designing model portfolio Sector Selection Asset Allocation Scheme selection Client Selection C

For a distribution channel, 60% of the employees should have

83 TRUE FALSE B
AMFI Registration Number

84 Equity Fund's Risk relative to market is measured by Tracking error Sharpe's Ratio Treynor Beta D

85 Standard Risk is Common to all Uncommon to all Systematic Specific to all A

86 Request of Purchase can be made Along with requisite form and Cheque Only With Cheque Only Purchase requisite form A

Page 15
NISM Mock Test 3
If an investor invests 1,000,000 at 3:30 p.m through outstation
87 Same day closing NAV When fund gets credited Previous day closing NAV Next Day NAV B
cheque, he will get NAV of

88 Liquidity risk is highest in Mid Cap stocks Front Line Stocks Index Stocks Gilt Security A

Mr A Holds 2000 Units, scheme declared 1:4 bonus. How many

89 400 500 8000 Depends on NAV B
units will Mr A Gets ?

90 Investor can sue the trust for breach of trust TRUE FALSE B

91 Distributors do not get commission on self business TRUE FALSE A

92 Which of the following is an SRO ? AMFI SEBI AMC None of above. D

93 What remains constant in a close ended fund ? Unit Capital NAV Both A

94 SEBI regulates Mutual Funds Depositories RTA All of the Above D

95 Unit holders can hold their units in demat form TRUE FALSE A

96 KIM needs to be updated every 3 months 6 months Once a year No need to update it C

97 Trail commission are linked to valuation of portfolio in the market TRUE FALSE A

98 Risk can be measured by Variance Standard Deviation Beta Any of the above D

According to the Certified Financial Planner - Board of Standards Establish and Define the client Analyse and Evaluate Client's
99 planner relationship
Gather client data Define client goals
Financial Status D
(USA), the third stage in Financial Planning is

Page 16
NISM Mock Test 4
PRACTICE KIT – PAPER 4
No. QUESTION OPTION A OPTION B OPTION C OPTION D Answer

1 Commodity as an asset class does not include Fiber Spices Energy Art D

Financial Planning is just a process and so Financial Planner can use

2 TRUE FALSE B
any profile found in the web

3 5 star fund indicates Lowest Expense ratio Lowest Load Highest Performance Best Portfolio C

Investor should invest in MF with few offices as office expense is

4 TRUE FALSE B
charged to the fund
Number of Units remaining
5 NAV changes with Number of investor
invested
Size of Portfolio Market value of the portfolio D

6 Investor select an MF based on matching Investment Philosophy Investment Policy Investment Objective Investment Strategy C

7 Indian investor in a US $ based fund benefit when $ becomes Weak Strong Euro Becomes Weak Steady B

8 Understanding the psychology helps in risk profiling TRUE FALSE A

9 Securities of a fund are held by Custodian AMC R&T Broker A

10 Risk may be defined as Asset Allocation High Transaction Cost Portfolio re balancing Probability financial Loss D

Financial Planner finds that client does not have resources to meet Avoid telling as client will be Increase risk to generate higher
11 Inform the Client Avoid telling as he may lose the client A
goals. He Should disheartened return and meet the goal

12 Which of the following is with drawable in NPS Tier I Tier II Tier III Tier IV B

13 Mutual fund is exempted from Wealth Tax TRUE FALSE A

14 KYC is required for investment more than 50 K 5K Any Amount 100K C

15 Which of the distribution channel does not have wide branch network Bank Distribution House Broking company IFA D

Process Dividend and

16 Which of the following is not a function of R&T redemption
Maintain the records Settling investors transaction of fund Calculation of NAV D

17 AMFI interacts with _______ on all issues related to MF industry RBI SEBI Govt All of the above B

18 CVL system generates Acknowledge along with PAN MIN KYC Folio B

19 High portfolio turnover ratio implies High Cost Low Expense High return Non Performance A

20 Since preparation of WILL is a long process, it has to be avoided TRUE FALSE B

Single contact point for change of

21 Benefit of Demat a/c is that Direct credit of bonus units
address
Single point for portfolio valuation All of the above D

22 Among equity fund , growth fund has highest risk TRUE FALSE B

Page 17
NISM Mock Test 4

23 What determines the interest rate sensitivity Credibility Quality YTM Avg Maturity D

24 Fundamental Analyst are also called " Chartist" TRUE FALSE B

25 Fundamental Analyst's decision are base on EPS in dollar Trialling EPS Historic EPS Projected EPS D

26 Debenture is physical asset because the paper has some value TRUE FALSE B

27 Investing in Gold ETF helps Guarantees high return Not permitted in India Provide risk cover Reduce storage cost and risk D

Updating the SID with NFO Approval of the features by trustee

28 Which of these activity are carried out before getting SEBI approval dates and AMC board
Dispatch product literature Printing KIM and application form B

Childhood and transition are similar stage of LIFE cycle and WEALTH
29 TRUE FALSE B
cycle stage
Investor with a long term investment horizon for growth are likely to
30 Equity Fund ST Debt Fund Income fund liquid Fund A
invest in

31 Some allocation to GOLD is likely in most model portfolio TRUE FALSE A

32 Approval of SEBI is needed to appoint a person as Trustee TRUE FALSE A

One withdrawal at the end of Interest and Withdrawals are not

33 What is the drawback of PPF Seventh Year taxable
Half yearly Compounded interest Not Guaranteed by Govt A

34 Commission paid at the time of investment are called Upfront Commission Rebate Trail AUM Retention Fee A

35 Investors in NPS can choose asset class but not fund managers TRUE FALSE B

36 Settlement responsibility in BSE / NSE Platform are with AMC Clearing House Concerned Stock Exchange Member A

37 Which of the following information does time stamp include Machine Identifier location code Serial No All of the above D

38 Comprehensive FP should be restricted to five years TRUE FALSE B

39 Closed ended fund has Fixed AUM Fixed Unit Capital Fixed NAV Assured Dividend B

40 To which of the following PAN does not apply PIO NRI Minor & Senior Citizen None of above D

41 Father wants to start his business, this is Asset Allocation Financial Goal Appreciation Financial Planning B

42 In India one can invest in MF only through distributor TRUE FALSE B

43 SIP is called RCA (Rupee Cost Averaging) TRUE FALSE A

44 Liquidity risk arises in Closed ended fund Open ended fund Gold Debt A

45 A mutual fund is A pool of trustee money A pool of investment institutions A pool of investment managers A pool of investment fund D

46 The name and background of key personnel in AMC Are not included in SID Declared on MF website Are included in SAI Are not relevant so not disclosed C

Page 18
NISM Mock Test 4
Annual report should announce the unclaimed amount and no. of
47 TRUE FALSE A
investor

48 STCG in GOLD is applicable if the holding period is less than 12 months 36 months 6 months 9 months B

49 _______ allots the ARN number AMC AMFI SEBI NISM B

50 Application for MF would be rejected if paid in Cheque DD Cash Bankers cheque C

51 Role of Credit rating agencies is highest in Debt Fund Gold Fund Real Estate Fund Equity A

52 Investors in PPF gets deduction up to 100000 10000 70000 75000 C

Agreed between AMC &

53 Cut-off time are Distributor
Different for every RTA Prescribed by SEBI Different from AMC to AMC C

54 Money market in which MF invests are regulated by AMFI SEBI RBI Stock exchange C

For with-holding tax on income earned by NRI depends on nature of

55 TRUE FALSE A
income, nature investment and investor's country of domicile

56 Gilt fund is a good alternative to Capital Appreciation TRUE FALSE B

57 Which of the following is growth asset Savings a/c Current A/c Real Estate Govt Security C

Security transaction through associated

58 Which is prohibited in AMC's Code of ethics Inter Scheme transfer Front Running
broker
Distributor of MF through AMC B

Transfer of Closed ended

59 Loads are applicable to Scheme
Redemption Purchase and redemption Purchase B

60 Bank on receipt of money from abroad issue IEC FIRC MIN + Folio B

61 Mutual Fund investor can't pledge units TRUE FALSE B

62 Standard risk factors are Not market risk Specific to scheme not relevant to investor common to all scheme D

Receive information that can protection of capital even if market Assured return even if there is no
63 Unit holders are entitled to effect their investment goes down
Sue the MF or Trust
guarantee
A

64 Appropriate benchmark to large cap BSE small cap index Sensex BSE 500 BSE Mid cap Index B

65 If market crashes after bull run which fund is more safer Growth Value Sector Theme B

66 Insurance in case of MF is Up to 1 Lac per scheme 1Lac per fund More than 1 lac None of the above D

Net Avg asset of the scheme is 300cr and Investment transaction

67 value for the same is 1000 cr in a year. What is the avg holding 0.3 0.36 Insufficient Data 3.6 D
period (months)?
Mutual Fund transaction on stock exchange are governed by stock
68 TRUE FALSE B
exchange redressal system
NAV of the date when notice is
NAV on the date when trustee
69 Which one is called Cum-Dividend-NAV? approves dividend
issued to meet the trustees to NAV after the date of dividend None of the above A
finalize the dividend

Page 19
NISM Mock Test 4

70 IF Gold price appreciates investors should invest in Gold sector fund Gold ETF Index Fund Gilt edge Security B

71 When scheme is first launched, AUM of the scheme would be nil TRUE FALSE A

An investor looking to select a hybrid fund with tax benefits must

72 Conservative MIP Balance fund Equity oriented Balance fund Debt oriented Aggressive MIP B
choose.

73 Encroachment risk is higher for Land Building Gold Art A

74 Unaudited report has to be published in newspaper every 3 months 6 months 12 months 3 financial year B

75 Tax differal is advantage Growth Dividend payout Dividend reinvest Capital gain A

76 The expense ratio is affected by Fund size Average account size Portfolio composition Stock market conditions A

77 In a mutual fund investors subscription are accounted for as Liabilities Unit capital Deposits None of the above B

A disclosure should be made in the offer document if an AMC has

78 invested more than the following percentage of its net assets in group 0.5 0.25 0.4 0.1 B
companies.

79 Open ended fund can invest in unlisted securities up to- 0.05 0.0475 0.06 0.0525 A

80 Fund of Fund scheme invest in- Mutual Fund scheme International fund Index fund Gilt fund. A

81 A scheme can distribute dividend on its- Realized profit. Profit after tax realized & non realized profit none of the above A

82 A newly married couple should invest into -- Debt fund Balance fund Equity fund Liquid Funds C

If an investor wants to invest in Mutual fund through exchange

83 Existing investor Broker AMC Distributor B
platform he can buy from
Changes from scheme to
84 Standard risk factors are scheme.
Common for all scheme Both None of above B

85 The presence of market makers provide liquidity in case of ETF TRUE FALSE A

Net asset Rs.500cr./ total transaction value is Rs. 1000 cr what is

86 0.5 2 1 data insufficient B
portfolio turnover ratio
Avg net asset of scheme is 3000,total transaction of a scheme 10,000
87 0.3 4 3.33 5 C
what is portfolio turnover ratio

88 What is an ideal sector allocation in a sectoral fund <5 >5 Not more than 2 >10 C

Some funds allow the investor the

Which of the following is true with respect to the automatic It allows the investor to reinvest It ensures that the investor reaps
89 invest the dividend in the other All of the above. D
reinvestment plan? the amount of dividend the benefit of compounding
schemes also

It offers the investors the benefit of

ETF combines the best
flexibility of holding a single share as ETFs recover heavy load from the
90 Which of the following is not true for Exchange Traded Funds (ETF)? features of open end and Its pricing is linked to the index
well as the diversification and cost investors. D
closed end.
efficiency of index

In which of the following the investor generally bears the highest

91 Exchange traded funds Balanced funds Commodity funds Fund of funds. D
expenses?

Page 20
NISM Mock Test 4

92 Which of the following is not the advantage of mutual funds? Reduction of transaction costs Convenience and flexibility Tailor made portfolio Liquidity. C

93 Investor who wants long term exposure to gold should opt for ETF Gold Gold Sector Fund Gold Future Jewellery's A

94 Which is the short term Govt Security Commercial Paper T-Bills Certificate of Deposit Gilt B

95 Which is the most Illiquid Asset? Gold Equity Debt Real state D

Page 21
NISM Mock Test 5

PRACTICE KIT – PAPER 5

No. QUESTION OPTION A OPTION B OPTION C OPTION D Answer

1 Bank lends against Pledged units Dividend Nomination Redemption A

2 SID is approved by Investor Sponsor AMC and Trustee Custodian C

3 Cut-off time for NAV decided by AMC same for all scheme by trustee Prescribed by SEBI D

4 preparation of WILL is pessimistic exercise, so it is better to avoid TRUE FALSE B

Memorandum of the articles of

5 Which document is not required for institutional investor P & L account
association
PAN card Authorized signatory list A

6 Distributors are provided commission for up to 3 yrs 5 yrs 10 yrs investors stay invested D

SEBI is responsible to develop a cadre of well trained agents and

7 TRUE FALSE B
distributors

8 High regular income yield is indicator of scheme weakness TRUE FALSE B

9 Who promotes MF Sponsor custodian AMC trustee A

10 Liquidity risk is highest in Mid cap stocks Front line stocks Index stock Gilt security A

selecting stocks in a portfolio of

11 A unit holder is not responsible for reading OD
the mutual fund scheme
regular monitoring investment awareness of risk factors B

12 Accepted standard for return calculation in financial market is abs return CAGR total return simple annualized return B

13 STT is applicable on Purchase of debt fund Redemption of debt fund Redemption of equity fund All of above C

Mr A holds 1200 units , scheme declares 1:3 bonus. How many units will
14 300 400 3600 depends on NAV B
Mr A gets

15 Corporate deposit interest rate depends on liability of borrower asset of borrower credit rating profit of borrower C

16 Commodity does not include Art Energy product spices Fibres A

Change with the value of the

17 The value of investment in mutual funds.. Increase gradually every day.
investment portfolio
Decrease gradually every day Be volatile in long-term B

18 The first ever mutual fund scheme in India was launched in 1964 1951 1970 1994 A

19 Investors buy units of open-ended funds during the continuous offer at the NFO price Market Price Both none of the above B

Page 22
NISM Mock Test 5
The investment objective of which of these funds would be to seek capital
20 Dividend yield fund Growth Fund Liquid Fund Income Fund B
appreciation?

If we have a view that gold price will appreciate, which mutual fund
21 Gold sector Gilt edged securities Index fund Gold ETF D
scheme should we invest in?
Investors can buy of sell units on
Investor can see where his These schemes can generate stock exchanges at price that
22 One of the advantage if ETF is.. money is invested higher returns than mutual fund. closely track valuation at that
ETF offer tax benefits. C
time.

23 Mutual funds are constituted in India as a.. Companies Trust Partnership firms. NGO B

24 Mutual fund sponsor can be compared to .. A depositor in company A company director Promoter of a company CEO C

25 Which of these entities enables collection and payment of fund. Broker Banker R&T Agents, Custodian C

26 The constituents of mutual fund are appointed with the approval of .. Sponsor Trustees SEBI AMC B

The applicable guidelines for mutual funds are set out in SEBI (Mutual
27 TRUE FALSE A
Fund) regulation, 1996..

28 Bank sponsored mutual funds are also regulated by AMFI Stock Exchanges, RBI SEBI C

AMFI code of ethics prescribes that mutual fund scheme portfolios should
29 Identified class of unit holder All classes of unit holders Retail individual Institutional unit holders B
be managed in interest of

Although AGNI is mandated. there are no penalties for breach of code of

30 TRUE FALSE A
conduct.

To achieve growth by investing in equity and equity related investments,

31 balanced with income generation by investing in debt and money market Equity fund Money market fund Balance fund Debt Fund C
instruments is likely to be the investment objective of ___________ .

Annual report of AMC should necessarily mention the unclaimed amount

32 TRUE FALSE A
and the number of such investors for each scheme.

According to the plan chooses by

33 Unit holders enjoy rights to the asset of the funds... them.
As per decided by trustees equally for all holders In proportion of holding D

For fund of fund NAV is to be updated on-line in the website of AMFI and
34 Before 9 pm same day Before 10 am following day after 10 pm same day Before 9 pm following day B
the mutual fund website..

Periodic disclosure of the fund's Periodic disclosure of AMC'c On-line purchase and sells of Dispatch of dividend within 30
35 Which of the following is not a mandatory services standard as per SEBI. holding accounts units days
C

36 Investors can sue trustees for breach of trust. TRUE FALSE A

To give the FM's commentary on To report the performance of To give investors information
37 Which of the following is the function of an offer document To enable comparison of MFs
market scheme about scheme D

38 NFO other than ELSS can remain open for _________ 15 days 30 days 45 days Forever A

Which of the following contain detail information on the portfolio Statement of additional
39 Key Information of Memorandum Scheme information document Addendum C
characteristics and operational features of a scheme? information.

Page 23
NISM Mock Test 5

40 Which of the following is not fundamental attribute of scheme? Investment objective Name ff Fund Manager Investment Pattern Type of risk profile B

Statement of additional
41 Which of the following is a synopsis of the offer document? Trust deed Memorandum of Association
information
Key information of memorandum D

42 The format of KIM Given by SEBI Given by AMFI Varies to fund to fund By Stock Exchange A

43 Some MF companies allow investors to transact through their website. TRUE FALSE A

44 There is no need for educational qualification to be MF advisor. TRUE FALSE B

Distributors are compensated by mutual fund companies primarily

45 Salaries Annual fees Share in AMC's profit Commission D
through..
Distributors do not get upfront Distributors do not get trail
Distributors get upfront and trail Distributors do not get upfront
46 Which of the following statement is true? commission on self business but commission on self business but
on self business and trail on self business.
D
they get trail commission get upfront commission.

47 AMFI is SRO for mutual fund and regulates all mutual Fund TRUE FALSE B

AMFI code of ethics prescribes that mutual fund schemes portfolios identified special classes of unit
48 all classes of unit holders retail individual class None of above B
should be managed in the interest of holders

49 Transfer of investment from one scheme to another is allowed TRUE FALSE A

He will need to give written he needs to give the NOC from

50 If the investor wishes to change the distributor request to the fund house previous distributor
AMC may allow or disallow All of above A

51 Investor can sue the trust for breach of trust TRUE FALSE B

Since NFO is a marketing decision ,CIO has limited role in deciding it's
52 TRUE FALSE B
structure

53 Info provided in the SAI addendum made in the scheme Updation in OD Updation in KIM None of above A

54 Which of the following form a part of fundamental attributes of a fund Fund manager Investment objective of fund Load None of above B

55 What remains constant in closed ended fund? Unit capital NAV both None of the above A

56 Where do high-yield funds invest? Junk Bonds Gilt fund Equity growth Fund Treasury bills A

57 High yield bond schemes invest in junk bonds? TRUE FALSE A

58 Which ratio measures risk-adjusted return? Sharp Ratio Treynor ratio Both None of the above C

59 Which funds have features of both open ended & close ended? Interval Fund Balance Fund Sector Fund Thematic Fund A

Which approach is used by Fund managers for picking up the Value

60 Bottom up approach Top down Both None of the above A
stocks.

Page 24
NISM Mock Test 5

61 Can liquid funds invest in short term bank fixed deposit? Yes No A

Less then direct Investment in More than direct investment in Equal to direct investment in
62 Expenses in fund of funds? scheme scheme scheme
None B

63 Which fund has highest risk? Liquid Income G-securities Liquid Plus B

64 Childhood & transition phase is common in life cycle & wealth cycle? TRUE FALSE B

65 What is not mandatory in application form? Occupation Status of Individual Mode of holding PAN A

66 Is KIM a synopsis of offer document? TRUE FALSE A

67 Absolute return is best judged if the investment horizon is <1yrs >1 yr Anytime <2Yrs A

68 Dividend distribution tax in liquid fund payable by investor? Nil 12.50% 10.38% 30.00% A

69 What is the rate of TDS in liquid mutual Fund? Nil 12.50% 10.38% 30.00% A

Equity Broker with out NISM certified & AMFI registered

70 Who can distribute mutual fund through stock exchange? certification member
Both None of the above B

71 What is the beta of index fund? 1 More than 1 Less than 1 None of the above A

When a time stamping machine is installed should it be informed to

72 TRUE FALSE A
trustees

The difference between the yield on gilt and the yield on a non
73 TRUE FALSE A
government debt security is called its yield spread.

74 Liquid schemes invest in securities Less then 91 days maturity More then 91 days maturity Less then 1 year maturity More then 1 year maturity A

75 Mutual fund is Trust Company Society None of the above A

76 Who is keeps the custody of security of Mutual Fund ? AMC R&T Custodian Sponsor C

77 AMFI is a SRO ? TRUE FALSE B

Code of Conduct For

78 AGNI is Intermediaries
Rules & Regulations Terms & Conditions Non of the above A

79 NFO opening and closing detail mention in KIM SID OD All of above D

80 KIM is to updated Once in quarter Once in month Once in year weekly C

81 Recurring expenses includes Investment advisory fee Charged by the AMC, R&T fee Marketing and selling fee All of above D

Page 25
NISM Mock Test 5

82 Offer Document of Mutual Fund is approved by SEBI TRUE FALSE B

Stock exchange brokers are permitted to distribute MF after passing the

83 TRUE FALSE A
certifying exam

If the post tax rate of return on an investment is 8% and the inflation rate
84 2.00 Percentage 1.89 Percentage 8.00 Percentage Non of the above B
is 6% the real rate of return is

NAV of the day when funds are

85 A client is investing Rs. 1 Cr. in gilt fund which day NAV he will get? Same day closing NAV Next Day NAV Previous day NAV
realized.
D

86 How many minimum client is required for a scheme to run 20 10 30 50 A

87 There is no TDS on dividend distribution and redemption TRUE FALSE A

88 Which documents are needed for KYC? PAN card Address proof Photo id proof All of above D

89 Which id proof is not valid identity proof for KYC (individual) Credit card Address proof Driving license All of the above A

Transaction slip with purchase

90 For additional purchase Only transaction slip to be filled
cheque
Only cheque None of the above B

Page 26
NISM Mock Test 6
PRACTICE KIT – PAPER 6
No. QUESTION OPTION A OPTION B OPTION C OPTION D Answer

1 Which of the following entities reaches MF product beyond geographical locations The Brokers The Custodian The Distributer R & T Agents. C

2 SEBI is sole regulatory authority for MF are answerable TRUE FALSE A

Where the investor desires to hold MF unit in DMAT form the AMC will still be required to
3 TRUE FALSE B
Perform KYC to such investors

4 Offer document enable investor to compare the of MF scheme with another MF scheme TRUE FALSE B

5 which of the following investors belong to institutional group? HUF NRI Proprietary firm FII D

shall mention the dividend

shall only advertise declared or paid in Rs per unit
compounded annualise yield along with face value of each
6 Performance advertisement Shall identify Nature of scheme
Calculated using the prescribe unit ofthat scheme and the
All of the above D
procedure prevailing NAV at the time
ofDeclaration of Dividend

7 Benefits of STP is Paper work is minimized Idle funds situation reduced Both None C

Company has issued 10 core equity shares. It earns profit of Rs. 105 core on which it has
8 10 10.5 12 11.5 A
Paid tax of Rs. 5 core and distributed dividend of Rs 20 core. What is EPS ?

9 Floating Rate Interest is ? government yield+ spread yield spread base + spread payable only on maturity C

10 Market price of which of the following investment instruments will fluctuates more ? Long Tenor debt Short tenor Debt Floating Rate Securities Debentures A

11 Asset considered for Asset Allocation ideally be Similar only Physical Only Financial Asset Mix of different kind of Asset D

Which of the following is most unlikely to have a model portfolio with 20% alloacation to Young Executive early in his Well Placed Mid Level Senior Executive with Well
12 Investor in Distribution Phase C
sector fund? career. Executive Settled Children

Such distributor and its

Such distributor is approved by Such Distributor is registered
13 A distributor can be empaneled by AMC only if representative has/have
AMFI with Stock Exchange
Approved by SEBI A
cleared certifying Exam

14 AGNI is mandated by ? AMFI AMFI and SEBI RBI SEBI A

15 Junk Bond Scheme is also be known as High Yeild Scheme ? TRUE FALSE A

According to Some studies Asset Allocations and Investment Policy can better explain the
16 TRUE FALSE A
portfolio performance as compared to Stock selection and Investment Timimg?

Protection against Insurance

Higher Money Back after 5 Company rejecting claim on
17 Which Of the following benefits of starting Health Inurance Policy early? years the ground of pre-existing
Both of the above None Of the above B
illness

18 Which of the gollowing is Government Savings Scheme? Infrastrucure Bond RBI releif Bond Post Office recurring Deposit All of the above C

Page 27
NISM Mock Test 6

19 Duration of PPF deposit is 15 years 6 years 7 years 3 years A

Only Individuals other than Individual Including NRI and Individuals Including NRI but not Individuals including PIOs
20 Relaxation from Documetation required for MICRO SIP is available for NRIs and PIOs PIOs PIOs but not NRIs
C

21 Intial Phase of Life Cycle is Accumulation? TRUE FALSE B

22 Life insurance is meant for Tax planing Risk protection Investment Savings B

Beyond means of retail Provided benefits of real estate

23 Real Estate mutual fund is investor's & MF investing
Are popular investment options Are not easy to liquidate B

24 Black swan refer to Probabilities of large losses MF ratings Kind of offer documents Incentive to distributer A

Demonstrate superior
25 A five star rating in MF schemes indicates that Lowest expense ration Lowest load
performance
Best portfolio C

26 Which of the bond fund carries least amount of interest risk Dynamic bond G-sec fund Income fund Money market fund D

27 Asset allocation must primarily based on Investment needs Insurance needs Taxation needs Financial goals D

Move to a larger house in a Husband takes additional

28 Faced with the financial difficulties a family is likely to do all this except following better locality
Economise Expenses Wifes starts working
part time job
A

Annual investment amount Parents reach towards peak Saving for retirement gets Saving for investment is not
29 Pre-retirement stage gets reduced of their earning capacity minimized required B

30 Teir I account of new pension scheme is called pension account ? TRUE FALSE A

Government is trying to convert

Investment in bank FD can be Investment share can be Investment in MF helps the
31 Which is false ? financial Asset to physical
transfered to loan translated into projects real economic
A
asset

32 Minimum Networth requirement of the AMC is Rs 10 crore Rs 5 crore Rs 4 core Rs 2 crore A

If a scheme is launched in the second six months of financial year the the 1st update of the Within 3 months of the end of With 3 months from the Within 3 months from the end of Within 6 months of the end
33 the financial Year begining of Next financial year the next financial year of the financial Year
C
SID is due within

34 Legally SAI is the part of SID TRUE FALSE A

Long term capital losses from Short term capital losses can be Long term capital losses in
Income tax allows setting of certain types of capital gain losses against certain type of Capital losses can be offset equity MF can Be offset offset against dividend income equity MF is not available
35 D
Income which of the following is true in case of such provision. again salary against long term gain from for the year In which the loss has for setting of against
property occurred business or Salary income

36 The __________ is the main driver of returns in a mutual fund scheme . Return Profit of invested company Portfolio None of the above C

37 Fundamental Analysis entails review of the company's Financial Statements Quality of Management Competitive Position All of the above D

___________________ ratio indicates how much investors in the share market are
38 prepared to pay (to become owners of the company ) , in relation to the company's earnings Earnings per Share Price to Earnings ratio Book Value Per Share Price to Book Value B
.

Page 28
NISM Mock Test 6

39 A ____________ fund maintains a portfolio that is in line with the passive fund . Active fund Index Fund Equity fund Debt fund B

Value investment style is an approach of picking up stocks which are valued __________ ,
40 Lower High Medium A&B A
based on fundamental analysis .

41 Which is approcach is also called stock picking . Top – down Approach Bottom – up Approach Either A & B None Of the above B

If the proceeds on redemption are higher than the amount invested then it is called
42 Capital Gain Capital Loss No Profit No Loss None Of the above A
__________ .
Treasury Bills are short term debt instruments issued by the ____________ on behalf of
43 SEBI Reserve Bank of India Central Government State Government B
the Goverment of India .

44 Commercial papers are short term Debt Securities issued by corporates. TRUE FALSE A

45 Credit rating companies are like _______________ . CRISIL ICRA CARE & FITCH All of the Above D

46 Higher the credit risk , lower is likely to be the yield on the debt security . TRUE FALSE B

47 Which of the following are derivative _______________ . Forwards Futures Options and swaps All of The above D

48 Every scheme should have at least __________ investors . 15 20 25 30 B

49 __________ funds take Positions that are countrary to the market . Thematic Funds Mid cap funds Contra funds Dividend yield funds C

Liquid schemes, which invest in securities of up 91 days maturity , have the _________ risk
50 Higher Lowest Zero None of the above B
amongest all kinds of schemes .
Mumbai Inter – Bank Money Inter – Bank offered Multiple Inter – bank
51 What is MIBOR ? Offered Rate Offered Rate
Mutual Inter – Bank offered rate
Offred rate A

52 To convert the demat units into physical from . This process is called re-materialisation . TRUE FALSE A

Real Technique Gross Real Technique Growth

53 RTGS refers to _______________ . Real time Growth Settlement Real Time Gross Settlement
Settlement Settlement B

Application Supported by Application Supported by Application Supported by

54 What is ASBA _____________ . Blocked Account Blocked Acknowledgement Blocked Amount
None of the Above C

55 NSE's Mutua; Fund platform is called NEAT MFSS . TRUE FALSE A

56 When a dividend is paid , the NAV of the units falls to that extent . TRUE FALSE A

57 Risk can be measured by variance Standard Deviation Beta Any of the above D

58 SEBI has Facilitated buying and selling of mutual fund units through the stock exchanges. TRUE FALSE A

Account Registration
59 ARN REFERS TO _____________ . Agent registration Number AMFI Registration Number Application Registration Number
Number B

Page 29
NISM Mock Test 6
In hoardings / posters, the statement , “ Mutual fund investments are subject to market
60 risks, read the offer document carefully before investing ” is to be displayed at least 6 9 5 8 D
_________ inches height .

If a scheme is launched in the first 6 months of the financial year then the first update of the
61 2 6 5 3 D
SID is due with in ________ months of the end of the financial year .

62 No single investor shall account for more than 20% of the corpus of the scheme/plans. TRUE FALSE B

The asset management company shall confirm that a due diligence certificate is signed by
63 Compliance officer Chif executive officer Managing Director Any of the above A
the ____________ .
In case of specifice request recived from investors, mutual funds shall provide the account
64 statement (SIP/STP) to the investor's within __________ working days from the receipt of 5 10 7 15 A
such request without any charges .
The mutual fund would update the current expense ratios on the website within _________
65 5 7 2 10 C
working days mentioning the effective date of the change .

66 Offer documents of mutual fund schemes are approved by SEBI . TRUE FALSE B

_______________ regulates mutual funds, depositories, custodians and registrars &

67 RBI SEBI AMFI All of the above B
transfer agents in the country .
To recommend and To interact with the
To represent to the Government,
68 The objectives of AMFI is/are ____________ . Promote best business securities and Exchange
Reserve bank of india
All of the above D
practices Board of India (SEBI)

“ To generate income by investing predominantly in wide range of debt and money market
69 Diversify equity Scheme Diversify Debt Scheme balanced scheme None B
securities “ is an objective of _________ .

70 Institutional Distributors Build Reach through Employees Agents Sub Brokers Any of the Above D

71 The distributor can charge fees from the Investor TRUE FALSE A

72 The difference between NAV and repurchase price is Entry Load Exit Load Expense Dividend Stripping B

73 NAV of Income Funds is to be calculated upto _______ decimals 4 3 2 1 A

74 Investments in Mutual Fund can be made using Cheque/DD Remittance ASBA Any of the Above D

75 STP is the combination of SIP and SWP TRUE FALSE A

76 In a Top Down approach, sector allocation precedes stock selection TRUE FALSE A

77 Loads and taxes may account for the difference between scheme return and investor return TRUE FALSE A

78 Mutual Fund Ranking and rating amount to same TRUE FALSE B

Which of the following aspects of portfolio would an investor in a debt scheme give more
79 Sector Selection Stock Selection Weighted Average Maturity No of Securities in portfolio C
importance

Page 30
NISM Mock Test 6

80 The comparable for a Liquid Scheme is Equity Scheme Balanced Scheme Gilt Fund Savings Bank Account D

81 Providing Funds for daughter's Marraige is an example of Goal Oriented Financial Plan Comprehensive Financial Plan Financial Goal None of the above C

82 Distribution phase of Wealth Cycle is a parallel of retirement phase of life cycle TRUE FALSE A

83 Incase of NPS investor can choose which of the asset class of the following Equity Corporate Debt government Securities All of the above D

84 New Pension Scheme is regulated by PFRDA IRDA PFRDA+IRDA None of this A

85 What % of the total wealth of Indian People is in physical asset More than 10% More than 25% More than 50% All of the above C

Private Fund Regulatory and Provident Fund Regulatory and Pension Fund Regulatory and
86 PFRDA refers to Development Authority Development Authority Development Authority
All of the above C

87 Investment in a Financial Assets can be productive for the economy TRUE FALSE A

National Conversion
88 NCDEX refers to National Contract Exchange National Currency Exchange National Commodity Exchange
Exchange C

89 In case of the buying of the Gold Future Contract, entire value of the Gold has to be paid TRUE FALSE B

90 ------exempted from the Wealth Tax Gold Deposit Scheme MF Both A and B None of this C

91 Many investors invest money in Bank FD and not in Debt market because Lack of Interest Lack of awareness Lack of Money Lack of confidence B

92 Interest earned in Bank FD is Taxable each year TRUE FALSE A

The primary objective of the Financial Planner is to make available the right amount of
93 TRUE FALSE A
money at the right time.

94 The third stage of the wealth cycle is Accumulation Transition Reaping Intergenerational Transfer D

In many health insurance policies, the customer has to bear the expenses and that can get
95 TRUE FALSE A
reimbursed from the Insurance company

96 Risk appetitte ---------- as no of dependant menber increases Decreases Increases No change Any of the above A

97 Many-------have made available the risk profiling tool on their web sites AMCs Research Houses Both None of this C

98 ------is the decision outcome based on the market behaviour Tactical Asset Allocation Strategic Asset Allocation Flexible Asset Allocation Fixed Asset Allocation A

99 Many Financial advisor work on the Model Portfolio TRUE FALSE A

100 Which are the aspects that affect the Risk profiling of the investors? Family Information Financial Information Personal Information All of the above D

Page 31
NISM Mock Test 7

PRACTICE KIT – PAPER 7

No. QUESTION OPTION A OPTION B OPTION C OPTION D Answer

We have to do the registration of the mutual fund with the SEBI.

1 Trust R&T Sponsor AMC C
Who gets registration done

Publish NAV, AUM of the fund

2 AMFI do the following activity house and maintain and publish Compute NAV Manages money under None of the above A
industry data
Closing NAV of the day Closing NAV of the day
In a liquid fund a application for repurchase comes at 3.30. Whats Closing NAV of the date of Closing NAV of the next business
3 preceeding the next business preceesing the date of B
is the NAV which would be available to it application day
day application

4 In creating of model portfolio which is the first step Deciding the Asset Allocation Identify financial Goal Selection of Sector Selection of the scheme A

Once the asset allocation is decided, sharpe ratio can help us to

5 TRUE FALSE A
select the good debt and equity Schemes

Once the asset allocation is decide, treynor ratio can help us to

6 TRUE FALSE B
select the good debt and equity schemes

With the increase in the regular income from the job risk taking
7 Remains the same Decreases Increases Insufficient data C
ability of the investor _________

Closing NAV of the day

A repurchase comes in a GILT fund at 2.30 pm. Whats would be Closing NAV of Next Business Closing NAV of the Application Closing NAV of the day
8 preceeding the next business B
the NAV available to the redemption Day Day preceeding the Application date
day

Aged couple with no immediate 40 year old man with a family with Yound couple with 2 school
9 75% investment in debt is suggested to Young call centre executive A
family support grown up children going kinds

An investor with interest to earn high return and willing to take high
10 Cautious Investor Conservative Investor Adventurous Investor Aggressive Investor D
risk are refferred to as

A person requires 1,00,000 rs for the specific goal after 3 years. If

we want to known what amount he needs to invest no to get the said
11 100000*(1+0.05)^3 100000*(1+0.05)*3 100000/(1+0.05)^3 100000/(1+0.05)*3 C
amount at rate of 5%. which of the following formula needs to be
used

For an Micro SIP which one of the following is not a valid photo ID
12 PAN proof Debit card with photo ID Credit card with Photo ID Voter ID proof C
proof

The responsiblity to manage funds in the new pension scheme is

13 PFRDA Insurance Companies AMCs PFMs D
with

Where you get the information in regards to the key personals They are not published as it is not They are published on the website Available in SAI ( Statement of
14 C
involved in an AMC very important for the investor of the mutual Fund Additonal Information )

15 Which of the following is not available in SID Type of Fund Risk Factor Due Diligence certificate None of the above D

16 Legally SAI is the part of SID TRUE FALSE A

Time at which the application is b) Scheme in which the money is The day on which the The amount which is getting
17 The date of the applicablity of the NAV is not dependent on C
submiited invested application is submiited invested

Page 32
NISM Mock Test 7
The AMFI allots unique the ARN no which is valid for the period of
18 TRUE FALSE A
three years

The following would not affect the trail commission to the advisor in Portfolio value going up with the Investor making fresh purchase Change in the unit capital of the Investor redeeming the money
19 C
mutual Fund increase in the market during the period the scheme during the period

The STT paid on the equity mutual fund sold on the stock exchange
20 0.00125 Nil 0.0025 0.00017 A
is

The STT paid on th equity mutual fund purchased on the stock

21 0.00125 Nil 0.0025 0.00017 A
exchange is

22 STT paid on the re purchase of units by the AMC 0.00125 Nil 0.0025 0.00017 C

Which of the following when transacted on the stock exchange STT

23 ELSS GOLD ETF Index ETF Diversified Equity Fund B
is not applicable

Its is advisable for an average investor to do Tactical Asset

24 TRUE FALSE B
allocation for planning his retirement

In case of sudden wealth which among the following is least Park the money in the liquid fund Invest all money into equity at one Start STP from liquid fund into
25 Review the financial plan B
advisable for a short time go Equity Funds

Tactical asset allocation is suitable for seasoned investor with large

26 TRUE FALSE A
investible surpluses

Closing NAV of the day

An application for re purchase in equity comes at 3.30. What would Closing NAV of Next Business Closing NAV of the Application Closing NAV of the day
27 preceeding the next business A
be the applicable NAV Day Day preceeding the Application date
day
In case there is a redemption from a NRI who have invested the
28 money on a non repatriable basis. The mutual would pay in dollors TRUE FALSE B
as redemption
The investment grow faster in dividend re investment options as
29 compared to the growth option because more units are added on TRUE FALSE B
dividend reinvest

30 Maximum expense that can we charged in a debt fund is 0.0175 b) 0.75% 0.025 0.0225 D

The NAV capture the full value of The number of units increases
31 In case of the growth option which of the following is not true There is no dividend declared There is a Tax Deffereal C
the porfolio gain over period

We require the board resolution from companies to invest is mutual

32 fund as it may not be specified in the Memorundum and Articale of TRUE FALSE B
Assoiation to invest in such schemes
If the company have 10 cores if Issued shares. The profit it makes
33 is 105 coree. IT pays 5 crore as tax. Also pays 20 crore as dividend 10 8 Not sufficient Data 5 A
what is the EPS
An investor in the debt scheme who completely want to eliminate
34 TRUE FALSE B
investment in equity should invest in MIP
The fund have an average asset of 300 crore. The portfolio turnover
35 is Rs 1000 crore. For how many months the investment are held for 0.36 3.6 3 0.25 B

The floating rate fund hold on to there value even if the interest rate
36 TRUE FALSE A
are fluctuating

Performance of the fund is most sensitive to the expense ratio in

37 Liquid Fund Diversified Equity Fund ETF Sector Fund A
which of the following Fund

Page 33
NISM Mock Test 7
Branches of reserve bank of
38 Who among the following are not distributor for Mutual Funds National Distributors Branches of public Sector Bank Branches of Forein Banks C
India

39 Importance of credit rating agency is most important in Equity Funds Secutised Debt ETF B

AMFI gudieline and Norms for AMFI guideline and norms for AMFI guideline for Asset
40 Full form of AGNI AMFI Guideline for Non Indians A
Intermidiary Investment Management Company

Which of the following scheme is exempted from the divident

41 Debt Oriented Funds Balance Funds Liquid Funds Equity Funds D
distribution Tax

42 Sector selection is the key decision in the Bottom Up Apprach TRUE FALSE B

Fair market value as the the Price decided by the offmarket

43 Illiquid Shares would be valued at Value Decided by the broker None of the above B
guidelines of SEBI Trade

44 Tax consultant should not advice financial planning to his client TRUE FALSE B

45 Mother want to set apart Rs 25 lakhs in 3 years time Financial Goal Asset Allocation Financial Planning Financial Desire A

Dividend payout and Growth

46 Followinf is the Asset Allocation Art and Gold Fund Growth and Value Fund Active fund and Passive Fund B
Option

47 Limit of the commission to be paid to distributor is decided by SEBI TRUE FALSE B

Additional Purhase by the

Investment done by any investor in Additonal Purchase by the existing First time investment in any of
48 Whats is an NFO Investments? existing investot in another A
the new Scheme investor the mutual Fund Scheme
scheme

Returns can be reasonably

49 Whats is true about the FMP NAV dose fluctuate No defaul Involve All of the above C
predicted before the maturity

50 SAI needs to be updated every Yearly Monthly Quarterly Half Yearly A

51 Who is responsible for the information available in OD Trustee AMC Sponsor Custodian B

Which of the following government secuity have leasr maturity

52 CD CP T Bills Gilt Scheme C
period

53 Which of the following credit rating is not required Shor term debt Fund Liquid Schemes GILT Schemes FMPs C

Insurance is more important in case of Physical Asset Vis a Vis

54 TRUE FALSE A
financial Asset

55 Which of the asset have the higest risk to be stolen Real Estate GOLD Mutual Fund Bank Balance B

Most best way to decide the risk appetite of the person is to ask
56 TRUE FALSE B
client that “ how mush risk you are ready to take in the market”

Quality of the operation of the

57 Share price of the Gold Mining Company is dependent on Gold Reserve Gold Price All of the above D
company

58 Expense ration is more important in case of Offshore Fund Equity Fund Debt Fund Sector Fund C

While construction of the portfolio the relative performance is done

59 Peer Group Asset Alllocaton Model Portfolio Tracking error A
with

Page 34
NISM Mock Test 7
The balance funds based on flexible Asset Allication is lower riskier
60 FALSE TRUE A
than high yield debt fund

61 Between whom the Trustdeed is executed between Trustee and Sponsor Sponsor and Custodian Trustee and AMC AMC and Sponsor A

62 Repurchasing the predecided no unit at the regular interval is called STP SWP SIP All of the above B

Unclaimed investment amount and dividend can be demand by the

63 TRUE FALSE A
investor

Cut-Off time decided by SEBI

64 Applicable NAV for the different scheme is as per the following time Office time of AMC Office time of R&T As per the time of stock market D
for various MF scheme

Commitment to abide by Provide all information and

While empannel with the AMC, every distributor have to provide the
65 Correct and complete information instruction given as also statutory document that the AMC may All of the above D
following
codes and guideline ask for from time to time

Transaction done of MF on the NSE NEAT and BSE Start the

66 TRUE FALSE B
exchange gurantee the settlement of Funds

Low P/E ratio indicate that it is unlikely to replicate its past

67 TRUE FALSE A
performance

68 Churning of the portfolio by the Fund Manager is called Portfolio Turnover Ratio Liquidity Ratio Annual Turnover Ration All of the above A

Beyond the means of the retail Extremally Liquid and cost Offer the benefit of both real
69 Invesment in a Real Estate Mutual Fund is Highly illiquid D
investor effedctive estate and Mutual Fund

Premature withdrwal is allowable Any amount of investment in

70 Advantage of investing in PPF is Loan is available any time Tax free return every year D
after one year the scheme
All his member to the limited
71 Self Regulatory Organisation controls All his member completely All mutual fund company All share brokers B
extent
72 In case of Joint holder the pan card requriment for 1st and 2nd Holder All joint holders Only 1st Holder Any One B

73 Maximum number of nominee which can be added 5 1 3 2 C

In case New Pension scheme how many PFM( Pesion Fund

74 5 3 3 6 D
Managers) are managing the money

Diversify Debt,Gilt Fund, Liquid MIP ,Liquid Fund, Diversify

75 Which is the right Sequence Liquid Fund, MIP,Gilt Fund Gilt [Link] Fund,MIP C
Fund. Debt.

In Lower Interest Rate Senario Debt Product of MF will Generate

76 TRUE FALSE A
higher return compared to Fixed Deposit.

77 An employee of the mutual Fund can be an Agent TRUE FALSE B

Payable to Distributor whose

78 Commission on Investment done by Sponsor in a Fund is Not Payable Payable to Sponsor ARN is mentioned in the None of the above A
Application Form

Book Value of a Share is dependent on Accounting Policies of the

79 TRUE FALSE A
company

80 Code of Conduct for AMC Personnel & Trustees are mentioned in Chapter II Chapter IV Schedule II Schedule V ( 5th Schedule) D

Page 35
NISM Mock Test 7
If complaint of an investor is not solved by AMC, investor has to
81 SEBI Trustees Sponsor R&T A
complain to
Anywhere as per Investment
82 Feeder Fund can invest in International Market as Only International Equity Only International Debt All of the above A
Objective of the Fund

83 Tax Deferral is available in Growth Dividend Dividend Reinvest A

84 Benchmark of Sectoral Fund investing in Banking Sector would be BSE Bankex Nifty Junior S&P Nifty S&P 500 A

85 Before going to SEBI for approval of a Fund Launch AMC needs to Take approval from Trustees Print the application Form Finalise the Launch Date All of the above A

86 Which of the Following Fund is most Sensitive to Expense Ratio Liquid Fund Index Fund Equity Fund Off shore Fund A

87 ASBA is an Excellent Facility for Additional Purchase in a Fund TRUE FALSE B

Converting Units of a Mutual Fund from Demat Form to Physical &

88 TRUE FALSE A
Vice Versa is Possible

Finalising the benchmark for the Adjusting the Purchase Price of Considering the growth of
89 Indexation means All of the above B
fund the Fund considering the Inflation partcular asset class

90 Investor in Reaping Phase would primarily invest in Equity Securities yielding Regular Return Both None of the above B

91 Most of the AMC publish Portfolio of their scheme on their Website Daily Monthly Six Monthly Yearly C

Account statement shows

Unit certificate shows only the Unit certificate is issued at the
closing balance and unit
closing balance while account time of NFO and account
92 Difference between Unit Certificate & Account Statement There is no difference certificate shows opening A
statement shows opening balance, statement are send
balance, transactions and
transactions and closing balance consecutively
closing balance

Risk arising from the schemes Risk arising from the non- No previous experience in Movement in NAV because of
93 Which of the following is not the scheme specific risk factor? D
objective diversification managing a fund the market movements.

94 Expense Ratio of an Index Fund is 0.01 0.0125 0.025 0.015 D

A Financial Planner can use any of the Model Portfolio available on

95 TRUE FALSE B
the Web

96 In NPS Tier – I account is compulsory for opening Tier – II account TRUE FALSE A

A Retired couple with Zero income should invest all the money in
97 TRUE FALSE B
Liquid Fund

98 SIP can be done by Standing Instruction ECS PDCs All of the above D

99 Concentration risk is highest in Equity Share Bank deposit Real Estate Commodity C

A high amount of equity investment is suggested to the investor if No such relation with any phase
100 Accumulation phase Transition phase Distribution phase A
he is in which stage ? of life.

Page 36

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