Q 1. 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
Only A is correct
Only B is correct
Both A and B are correct
CORRECT ANSWER:

Only B is correct

Explanation:
The mutual fund investor has the option to convert the Demat units into
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.

Q 2. What is the maximum percentage of holding can a single

investor have in a mutual fund scheme?
5%
10%
20%
25%
CORRECT ANSWER:

25%

Explanation:
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.

Q 3. In a Contra Fund, the minimum investment in equity & equity

related instruments shall be ________ of total assets.
40 percent
50 percent
55 percent
65 percent
 CORRECT ANSWER:

65 percent

Explanation:
A contra fund is an open-ended equity scheme following contrarian investment
strategy. Minimum investment in equity & equity related instruments shall be
65 percent of total assets.

Q 4. 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?
Notary Public
Manager of a Scheduled Commercial Bank
Mutual Fund distributor
Gazetted Officer
CORRECT ANSWER:

Mutual Fund distributor

Explanation:
In the KYC process, the supporting documents (identity and address proof) 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.

Q 5. _.............. is not a mutual fund distribution channel.

Branches of Public sector banks
Branches of Reserve Bank of India
Branches of Private sector banks
Branches of Foreign banks
CORRECT ANSWER:

Branches of Reserve Bank of India

Explanation:
Reserve Bank of India or its branches are not involved in the sales and
distribution of mutual fund products.
Q 6. 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
Only A is true
Only B is true
Both A and B are true
None of them are true
CORRECT ANSWER:

Both A and B are true

Explanation:
While the SID, SAI and KIM need to be updated periodically, the interim 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.

Q 7. In which document is a commentary on the current state of

economy and markets is also generally provided?
Statement of Additional Information (SAI)
Key Information Memorandum (KIM)
Fund Fact Sheet
Scheme Information Document (SID)
CORRECT ANSWER:

Fund Fact Sheet

Explanation:
Apart from providing information about the schemes in the fund fact sheet,
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.
Q 8. A mutual fund scheme performance must always be measured
relative to the _____ .
Asset class
Index
Investment objective
Benchmark
CORRECT ANSWER:

Benchmark

Explanation:
To know how well a mutual fund scheme is performing, it has to be compared to
a pre-defined comparable benchmark.

For e.g. A midcap fund can be benchmarked / compared to Nifty Midcap 50 index.

Q 9. 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) It’s advisable
to benchmark a sector fund against a diversified fund to get
the correct picture
Only A is true
Only B is true
Both A and B are true
CORRECT ANSWER:

Only A is true

Explanation:
A sector fund would invest in only the concerned sector so the benchmark has
to be a similar index. For e.g. 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.
Q ……………. forms the basis of appointment of a distributor by
10.
an AMC.
SEBI approval
Agreement between the investor and the distributor
Power of attorney from the AMC
An agreement between the AMC and the Distributor
CORRECT ANSWER:

An agreement between the AMC and the Distributor

Explanation:
After obtaining the ARN No., the distributor can get empanelled with any number
of AMCs.

An agreement between the AMC and the Distributor forms the basis of
appointment of a distributor by an AMC.

Q Identify the true statement(s) with respect to stamping of

11.
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
All A, B and C are true
Only A and B are true
Only B and C are true
Only A and C are true
CORRECT ANSWER:

Only B and C are true

Explanation:
Applications for non-financial transactions like change of address and
investor’s acknowledgement are date and time stamped. However, here
stamping of time is not relevant; the date stamping is pertinent (relevant).

Q A synopsis of the scheme related information documents is

12.
found in the _____ .
Statement of Additional Information - SAI
Articles of Association
Trust Deed
Key Information Memorandum – KIM
 CORRECT ANSWER:

Key Information Memorandum - KIM

Explanation:
Scheme Information Document (SID) and Statement of Additional 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.

Q What is the investment range for the mutual fund house to

13.
invest in debt instruments for a Balanced Hybrid Fund?
20 percent and 40 percent
40 percent and 60 percent
10 percent and 30 percent
20 percent and 50 percent
CORRECT ANSWER:

40 percent and 60 percent

Explanation:
Balanced Hybrid Fund: 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 while investment in debt
instruments shall be between 40 percent and 60 percent.

Q What does 'Asset Allocation' mean?

14.
Allocating a portfolio to cash
Allocating various mutual funds to investors
Allocating units to unit holders
Allocating a portfolio to different asset classes
CORRECT ANSWER:

Allocating a portfolio to different asset classes

Explanation:
The basic meaning of asset allocation is to allocate an investor’s money across
asset categories (like Equity, Debt, Gold etc.) in order to achieve the objective.
Q For which of the following fund can NSE’s MIBOR be used as
15.
an benchmark?
ELSS Fund
Liquid Fund
5 year constant maturity G-sec fund
Long duration fund
CORRECT ANSWER:

Liquid Fund

Explanation:
NSE’s MIBOR (Mumbai Inter-Bank Offered Rate) is based on short term money
market. Liquid schemes invest in securities of up to 91 days’ maturity.
Therefore, a short-term money market benchmark such as NSE’s MIBOR is
suitable.

Q What is fixed in a Closed-end fund?

16.
The Net Asset Value
The Rate of Return
The Unit Capital
The Market Price
CORRECT ANSWER:

The Unit Capital

Explanation:
Close-ended Schemes have an NFO Open Date and NFO Close Date. But 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.
(The number of units issued by a scheme multiplied by its face value (Rs. 10) is the capital of
the scheme–its Unit Capital)

Q Which document has the statutory information about the

17.
mutual fund or AMC, that is offering the scheme.
Scheme Information Document (SID)
Statement of Additional Information (SAI)
Red Herring Prospectus
Fund Fact Sheet
CORRECT ANSWER:

Statement of Additional Information (SAI)

 Explanation:
Statement of Additional Information (SAI), has statutory information about 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)

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

18.
against _____ .
short term capital gains only
short term capital gain or long term capital gain
long term capital gains only
Short term capital loss cannot be set off
CORRECT ANSWER:

short term capital gain or long-term capital gain

Explanation:
As per the Income Tax Act -

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

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

19.
______ in all performance related advertisements.
the total number of schemes managed by him has to be
disclosed
performance data need not be given
performance data of top 2 and bottom 2 schemes has to be
disclosed
performance data of top 3 and bottom 3 schemes have to be
disclosed
CORRECT ANSWER:

performance data of top 3 and bottom 3 schemes have to be disclosed

Explanation:
When the performance of a particular mutual fund scheme is advertised,
the advertisement shall also include the performance data of all the other
schemes managed by the fund managers of that particular scheme.
 In case the number of schemes managed by a fund manager is more than six,
then the AMC may disclose the total number of schemes managed by that
fund manager along with the performance data of top 3 and bottom 3
schemes managed by that fund manager in all performance
related advertisements

Q Among these funds, which will have the lowest Interest Rate
20.
Risk?
Money market fund
Diversified Equity Fund
Pharma Sector fund
Dynamic Bond Fund
CORRECT ANSWER:

Money market fund

Explanation:
Interest rate risk is the risk that an investment's value will change as a 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.

Q An existing bond fund will tend to lose value when market

21.
interest rates _______ .
Rise
Fall
remains constant
are equal to yields
CORRECT ANSWER:

Rise

Explanation:
Suppose an investor has invested in a debt security that yields a return of 8
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)
Q What does financial goal setting involve?
22.
Determination of risk profile
Estimating the amount required for a major life event
Determining asset allocation
CORRECT ANSWER:

Estimating the amount required for a major life event

Explanation:
The first step in financial goal setting is to identify events in life which will require
major funding - like child education, marriage, retirement etc.

Asset allocation / Risk profile are looked into later while deciding the investments
etc.

Q In which of the following cases is the transaction charge to be

23.
paid to the mutual fund distributor, deducted from the gross
investment of the investor ?
When the investor purchases mutual fund units worth Rs 5000
through a mutual fund distributor
When the investor purchases mutual fund units worth Rs 10000
through a mutual fund distributor
When the investor purchases mutual fund units worth Rs 5000
through the website of the mutual fund
When the investor purchases mutual fund units worth Rs 10000
through the website of the mutual fund
CORRECT ANSWER:

When the investor purchases mutual fund units worth Rs 10000 through a
mutual fund distributor

Explanation:
To cater to people with small saving potential and to increase reach of mutual
fund products in urban areas and smaller towns, SEBI has allowed a transaction
charge per subscription of Rs. 10,000/- and above to be paid to distributors of
the mutual fund products. However, there shall be no transaction charges on
direct investments.
Q In a Corporate Bond fund, the minimum investment in highest
24.
rated corporate bonds is ______ percent of the total assets.
50
60
70
80
CORRECT ANSWER:

80

Explanation:
Corporate Bond Fund: An open-ended debt scheme predominantly 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).

Q When a dividend is paid, the NAV of the units ______ to that

25.
extent.
rises
falls
There is no change
CORRECT ANSWER:

falls

Explanation:
In a dividend pay-out option, the fund declares a dividend from time to 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.

Q An investor already has a folio in a mutual fund scheme where

26.
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?
He will have to do the investments under a new folio and select
the mode of holding as single
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
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

Explanation:
Once a mutual fund folio is created as a jointly held account there can be no
change in the joint holders or mode of holding - except in the event of a death.

Q Information under Foreign Account Tax Compliance Act

27.
(FATCA) is to be provided ______ .
Only if the investment is made from a foreign bank account
Only if the country of birth/citizenship/nationality/tax residency
is other than India
Only if an NRI is doing the investment
Only if the investor is a resident of USA or Europe
CORRECT ANSWER:

Only if the country of birth/citizenship/nationality/tax residency is other than

India

Explanation:
For mutual fund applicants, including guardians, whose country of
birth/citizenship/nationality/tax residency is other than India, the application
requires additional information under Foreign Account Tax Compliance Act
(FATCA) and Common Reporting Standards (CRS).

Q One of the objectives of …… is to undertake nationwide

28.
investor awareness programme to promote proper
understanding of the concept and working of mutual funds
SEBI
BSE / NSE
AMFI
NISM
CORRECT ANSWER:

AMFI

Explanation:
Association of Mutual Funds in India (AMFI) is the association of all the
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.
Q Decisions in Tactical Asset Allocation are taken on the basis
29.
of _____ .
likely behaviour of the markets
risk profile of the investor
income level of the investor
All of the above
CORRECT ANSWER:

likely behaviour of the markets

Explanation:
In Tactical asset allocation, the allocation between the asset categories 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.

Q Which of these funds has the highest risk?

30.
Index Funds
Diversified Equity fund
Long Duration Funds
Gilt Funds
CORRECT ANSWER:

Diversified Equity fund

Explanation:
In the Risk-Return Hierarchy of mutual funds, Equity funds are always risker then
Debt funds. So in the above question, Index fund and Diversified Equity Fund
(Equity funds) will be more risker than Gilt fund and Long Duration fund (Debt
funds).

Among Index fund and Diversified Equity fund, the latter is usually riskier than
former.

Q Which type of Hybrid Fund has the least exposure to equity?

31.
Aggressive Hybrid Fund
Balanced Hybrid Fund
Conservative Hybrid Fund
Arbitrage Hybrid Fund
 CORRECT ANSWER:

Conservative Hybrid Fund

Explanation:
A Hybrid fund is classified into Aggressive, Balanced and Conservative
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.

Q At what price can investors buy or sell units of an open-ended

32.
fund after the New Fund Offer?
The NAV of the mutual fund units
The New Fund Offer (NFO) price
The face value
The monthly average price
CORRECT ANSWER:

The NAV of the mutual fund units

Explanation:
Investors of an open-ended fund can buy and sell mutual fund units as per its
current Net Asset Value - NAV price.
Q If a third-party payment is to be made for subscribing to a
33.
mutual fund scheme, then which of the following is/are
essentially required?
The minimum investment has to be Rs. 50,000
The third party has to provide PAN details and also comply with
the KYC norms
The third party should also have a folio with the mutual fund
All of the above
CORRECT ANSWER:

The third party has to provide PAN details and also comply with the KYC
norms

Explanation:
Compliance with the KYC norms and providing the PAN details are 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.

Q A mutual fund scheme can invest ………. in the equity

34.
instruments of a company.
5% of the net assets
10% of the net assets
15% of the net assets
25% of the net assets
CORRECT ANSWER:

10% of the net assets

Explanation:
The SEBI Regulations provide for various limits to the kind of investments that
are possible in mutual fund schemes. One of the restrictions 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.
Q When compared to open ended funds, investors in close
35.
ended funds face a higher level of _______ .
Credit risk
Liquidity risk
Market risk
Investment risk
CORRECT ANSWER:

Liquidity risk

Explanation:
Investors may choose the close-ended funds only if they can keep the 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.

Q When is the Statement of Additional Information (SAI) updated

36.
?
Every month
Before 10th of January and 10th of July every six months
Every three months
Before the end of 3 months of every financial year
CORRECT ANSWER:

Before the end of 3 months of every financial year

Explanation:
Updation of SAI - Regular update has to be done by the end of 3 months of
every financial year.

(Material changes have to be updated on an ongoing basis and uploaded on the

websites of the mutual fund and AMFI)
Q Identify the true statement(s) with respect to benchmark for
37.
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
Only A is correct
Only B is correct
Both A and B are correct
Neither A nor B are correct
CORRECT ANSWER:

Only B is correct

Explanation:
Gold price would be the benchmark for gold ETF funds.

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.

Q Which of these statement(s) is/are true? A. In equity

38.
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
Only A is correct
Only B is correct
Both A and B are correct
None of the above
CORRECT ANSWER:

Only A is correct

Explanation:
Historically, equity investing has delivered higher returns than other 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)

Q Can the fundamental attributes of scheme be changed? If yes

39.
- how?
Yes- but with the consent of 100% of the unit holders
Yes - with the permission of SEBI and AMFI
Yes - but this should be communicated to unit holders who
should be provided an option to exit the scheme
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

Explanation:
The trustees shall not permit a change in the fundamental attributes of the
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.

Q Who issues a due diligence certificate stating compliance with

40.
all legal formalities at the time of making a new offer of mutual
fund units?
Board of Trustees
AMC
Compliance Officer
Custodian
CORRECT ANSWER:

AMC

Explanation:
The cover page of Scheme Information Document (SID) has the
following 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).
Q In a mutual fund application form, if 'Direct' is mentioned in
41.
the space provided for ARN and the choice of regular plan is
indicated then the application will be considered as ______ .
Direct plan application
Regular plan application
Incomplete and rejected
Incomplete and sent to the investor for completion
CORRECT ANSWER:

Direct plan application

Explanation:
Investors have the option to invest (purchase or subscribe to mutual fund 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).

Q Which information has to be provided by a normal investor to

42.
be identified as an existing investor in the mutual fund?
PAN
PEKRN
Folio Number
KYC acknowledgement
CORRECT ANSWER:

Folio Number

Explanation:
An existing investor can use the application form to make fresh purchases in
other 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)
Q The AMFI Code of Ethics (ACE) sets out ________ .
43.
The standards of good practices to be followed by the AMCs in
their operations and in their dealings with investors, intermediaries
and the public.
The standards of good practices to be followed by the AMCs in
their operations and in their dealings with mass media
The standards of good practices to be followed by mutual fund
distributors in their dealings with AMFI, AMCs and investors
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.

Explanation:
One of the objectives of the Association of Mutual Funds in India (AMFI) is to
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.

Q How often does a mutual fund disclose the information on

44.
Total Expense Ratio charged to a mutual fund scheme and
where is this published?
Daily - on the mutual fund website
Weekly - on the mutual fund website
Once a month in the fund Factsheet
Once a year when it makes the mandatory disclosures to SEBI
and AMFI
CORRECT ANSWER:

Daily - on the mutual fund website

Explanation:
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 under a separate head – “Total Expense Ratio of
Mutual Fund Schemes” on their website.
Q If there is a breach of the Code of Conduct by an intermediary
45.
and a second violation by the intermediary is proved then the
registration of the intermediary is _______ .
Not renewed
Cancelled
Suspended
Withheld
CORRECT ANSWER:

Cancelled

Explanation:
In the event of breach of the Code of Conduct by an intermediary, the 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.

Q If a Segregated portfolio is created, it shall be effective from

46.
_________ .
the day of credit event
seven days prior to the credit event
one year from the date of the credit event
the day that security was bought in the portfolio
CORRECT ANSWER:

the day of credit event

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.
Segregated portfolio shall be effective from the day of credit event.
Q Where is the information regarding investor service centres,
47.
minimum investment amount and how to make the purchases
of mutual fund mentioned?
Application Form
Nomination Form
Transaction Slip
Key Information Memorandum (KIM)
CORRECT ANSWER:

Key Information Memorandum (KIM)

Explanation:
KIM is a summary of Scheme Information Document (SID) and Statement of
Additional Information (SAI) where in all the details of the scheme are mentioned.

Q Which is the first step that a mutual fund distributor should

48.
take in building a mutual fund portfolio for his investors?
He should list the best performing funds for the investor to
select
He should set the financial goals of the investor
He should invest the amount in a liquid fund and set a
Systematic Transfer Plan in good equity funds
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

Explanation:
The selection of a mutual fund scheme for an investor will depend upon the
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.

Q Which of the statement is true with respect to applicability of
49.
TDS in case of capital gains from mutual fund units?
There is NIL TDS on capital gains in mutual fund for all
investors
TDS is required to be deducted at 10 percent on all declared
dividend
All capital gains from mutual fund investments are subject to
TDS @ 10%
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)

Explanation:
There is no TDS on re-purchase proceeds to resident investors. However, 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)

Q Which investor need not provide a PAN card at the time of

50.
making a mutual fund investment?
Investor who is investing up to Rs. 50,000 in a mutual fund
scheme (excluding SIPs) per year per mutual fund
Investor who is investing up to Rs. 50,000 in a mutual fund
scheme (including SIPs) per year per mutual fund
Investor who is investing up to Rs. 1,00,000 in a mutual fund
scheme (excluding SIPs) per year per mutual fund
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

Explanation:
The following categories of investors are exempt from producing PAN:
- 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 up to Rs. 50,000/- per investor per year per mutual fund.

Q Which transaction of an open ended fund is based on the Net

51.
Asset Value (NAV) pricing?
Purchase of units
Redemption of units
Both purchase and redemption of units
CORRECT ANSWER:

Both purchase and redemption of units

Explanation:
Purchase and redemption of units are always done based on the NAV of the
scheme.

Q In case of a securitized asset, ……… will not be an originator

52.
to a Special Purpose Vehicle (SVP) ?
housing finance company
non-banking finance company
commercial bank
RBI
CORRECT ANSWER:

RBI

Explanation:
A securitization transaction involves sale of receivables by the originator (a
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.
Q What is Indexation ?
53.
Reduction of short and long term capital gains tax by using an
index based calculation
Benchmarking the index fund against a suitable index like
Sensex / Nifty
Adjusting the cost of acquisition upwards to reflect the impact of
inflation
Adjusting the cost of acquisition downward to reflect the impact
of inflation
CORRECT ANSWER:

Adjusting the cost of acquisition upwards to reflect the impact of inflation

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

For e.g. - A stock was purchased at Rs 100 and sold for Rs 150 after 5 years.
The long-term capital gains are 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.

Q As per SEBI rules, commissions cannot be paid to ______ .

54.
Brokers of the stock exchange
Banks
Sponsor distributors
Investors
CORRECT ANSWER:

Investors

Explanation:
As per SEBI rules, a mutual fund distributor has to sign a declaration
mentioning - Undertake not to rebate commission back to investors, or attract
investors through temptation of rebate/gifts, pass back of commission etc

.
Q To become a mutual fund distributor in India, one has to pass
55.
an exam which is conducted by ______ .
Securities and Exchange Board of India - SEBI
National Stock Exchange - NSE NCFM
National Institute of Securities Markets - NISM
Association of Mutual Funds in India’s - AMFI
CORRECT ANSWER:

National Institute of Securities Markets - NISM

Explanation:
Distributors need to pass the NISM certification Examination (NISM-Series- V-A:
Mutual Fund Distributors (MFD) Certification Examination) and register with
AMFI.

Q Which of these documents is not required to be submitted for

56.
investing in mutual funds by a charitable organisation?
List of authorized signatories
Trust deed
Board resolution
Memorandum and Articles of Association
CORRECT ANSWER:

Memorandum and Articles of Association

Explanation:
A Charitable Trust does not have any Memorandum and Articles of Association.
It has a Trust Deed.
Q Mr. Sandesh invests Rs 75 lakh in a Gilt Fund and gives a
57.
local cheque at 3.30 pm. What will be the applicable NAV for
allotment of units?
NAV of the business day on which the funds are available for
utilisation
Same day NAV if received before cut off time.
Closing NAV of the next business day
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

Explanation:
Vide SEBI circular dated September 17, 2020, it was decided that with respect to
purchase of units of MF schemes - both Debt and Equity (except liquid and
overnight schemes), closing NAV of the day shall be applicable, on which the
funds are available for utilisation irrespective of the size and time of receipt of
such application.

Q What is the time duration in which SEBI has to approve the

58.
scheme related documents?
7 working days
3 working days
14 working days
SEBI does not approve the documents. It gives its observations
CORRECT ANSWER:

SEBI does not approve the documents. It gives its observations

Explanation:
SEBI does not approve or disapprove the Scheme Related Documents; it 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.
Q Identify the true statement(s) with respect to Scheme
59.
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
Only A is true
Only B is true
Both A and B are true
Both A and B are false
CORRECT ANSWER:

Both A and B are true

Explanation:
AMFI website (www.amfiindia.com) carries the performance data of all the
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.

Q To measure the fund managers’ performance, the difference

60.
between scheme’s actual return and its optimal return is
calculated and this is known as _____ .
Alpha
Beta
Sharpe
Treynor
CORRECT ANSWER:

Alpha

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.
Q Who has the responsibility of overseeing legal compliance in
61.
a mutual fund?
The Custodian
The Sponsors
The AMC
The Trustees
CORRECT ANSWER:

The Trustees

Explanation:
SEBI expects Trustees to perform a key role in ensuring legal compliances and
protecting the interest of investors.

Q A mutual fund manager is planning to invest in Indian pharma

62.
companies as these companies are setting up new
manufacturing capacities. Identify the investment style of the
fund manager.
Value investment style
Cyclical investment style
Target investment style
Growth investment style
CORRECT ANSWER:

Growth investment style

Explanation:
Growth investment style entails investing in high growth stocks i.e. stocks 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)

Q On which of the following factors does returns from an

63.
international fund depend on?
Asset Class performance
Foreign currency exchange rates
Both 1 and 2
CORRECT ANSWER:

Both 1 and 2
 Explanation:
When an Indian investor invests in equities abroad, he is essentially taking 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.

Q The Securities Transaction Tax levied on re-purchase of units

64.
of debt mutual funds is _____ .
0.001 %
0.025 %
0.25%
STT is not applicable
CORRECT ANSWER:

STT is not applicable

Explanation:
STT is not applicable to transactions in debt securities or debt mutual fund
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.

Q Identify the true statement with respect to Total Expense

65.
Ratio?
The AMC is not allowed to change the Total Expense Ratio of a
scheme during its entire life time
The AMC can change the Total Expense Ratio and it need not
be communicated to the unit holders as its an internal matter
The AMC can change the Total Expense Ratio and it has to be
communicated to all the unit holders
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
 Explanation:
As per SEBI regulations - The AMCs are required to send the update to the
investors through email whenever there is a change in the expense ratio.

Q In case of any conflict between the Principles of Fair Valuation

66.
and AMC's Valuation Guidelines, _________ .
The Valuation Guidelines will prevail
The Principles of Fair Valuation will prevail
Both are same so there will never be an conflict
SEBI will decide which is correct
CORRECT ANSWER:

The Principles of Fair Valuation will prevail

Explanation:
In order to ensure a fair treatment to all investors, SEBI has laid down 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.

Q A ……….. investor will prefer lower risk and will settle for a
67.
lower return.
Aggressive
Adventurous
Moderate
Conservative
CORRECT ANSWER:

Conservative

Explanation:
A conservative investor is someone who wants his money to grow but does not
want to risk his principal investment. Conservative investors choose financial
products that do not fluctuate much in value, such as conservative mutual
funds
Q An investor chooses a mutual fund scheme based on whether
68.
his / her ________ matches with that of the scheme.
Investment period
Investment objective
Investment strategy
CORRECT ANSWER:

Investment objective

Explanation:
Every scheme has a pre-announced investment objective. Investors invest 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.

Q Identify the true statement(s) - A) Individuals can register upto

69.
five bank accounts with a mutual fund B) A Non-Individual can
register up to ten bank accounts with a mutual fund
Only A is correct
Only B is correct
Both A and B are correct
Both A and B are incorrect
CORRECT ANSWER:

Both A and B are correct

Explanation:
Mutual funds provide investors the facility to register multiple bank accounts to
facilitate receiving the redemption, dividends and any other pay outs from the
fund.

An individual investor can register up to five bank accounts and a non-

individual investor, ten.
Q The investors of a mutual fund can terminate the AMC or wind
70.
up a scheme if _____ % or more of the unit holders agree to it.
50%
60%
70%
75%
CORRECT ANSWER:

75%

Explanation:
Mutual fund Investors’ Rights & Obligations -

Rights to terminate appointment of an AMC: 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.

Q Which of the following statement is true with respect to 'Mark

71.
to Market' ?
Securities in the portfolio are valued at current market prices
Securities in the portfolio are valued at 52 week high prices
Securities in the portfolio are valued at 52 week low prices
Securities in the portfolio are valued at purchase price
CORRECT ANSWER:

Securities in the portfolio are valued at current market prices

Explanation:
The process of valuing each security in the investment portfolio of the 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.

Q Identify the true statement(s) - A) Beta is a measure of risk

72.
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'
Only A and B are true
Only A and C are true
Only B and C are true
All A, B and C are true
 CORRECT ANSWER:

All A, B and C are true

Explanation:
Variance as a measure of risk is relevant for both debt and equity schemes.

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'.

Q The units of a Close-ended mutual fund are traded between

73.
the unit holders/investors and ______ on the stock exchange.
The Mutual Fund
Other unit holders/investors
Specially appointed market makers to enhance liquidity
The Sponsors
CORRECT ANSWER:

Other unit holders/investors

Explanation:
Post-NFO, the sale and purchase transactions of a close ended fund happen on
the stock exchange between two different investors, and the mutual fund is not
involved in the transaction.

Q Identify which statement is true?

74.
Investors cannot hold the units of a mutual fund in fraction of 1
unit
Investors can hold the units of a mutual fund in fraction of 1 unit
Investors can hold the units of a mutual fund in market lots of
50 units
Investors can hold the units of a mutual fund in market lots of
100 units
CORRECT ANSWER:

Investors can hold the units of a mutual fund in fraction of 1 unit

 Explanation:
Investors can hold their units even in a fraction of 1 unit.

For example, an 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.

Q AMCs has to put in place a due diligence process to regulate

75.
distributors who ______ .
has received commission received of over Rs. 25 Lakhs from a
single mutual fund
has raised AUM of over Rs. 25 crores from non-institutional
investors
has presence in more than 20 locations
All of the above
CORRECT ANSWER:

has presence in more than 20 locations

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 crores across industry in the non-institutional
category but including high net worth 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

Q From which of these can the mutual fund NOT distribute

76.
dividends?
Income accruals
Dividends which are received from equity investments
Realized gain from sale of investments
Unrealized appreciation in value of investments
CORRECT ANSWER:

Unrealized appreciation in value of investments

Explanation:
SEBI guidelines stipulate that dividends can be paid out of distributable
reserves. In 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.

Q If one wants to know the General Risk Factors, then which

77.
document should he read?
Fund Fact Sheet
Documents filed with SEBI
Key information memorandum (KIM)
Scheme Information Document (SID)
CORRECT ANSWER:

Scheme Information Document (SID)

Explanation:
The risks in the scheme are listed in the segment on Risk Factors in 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.

Q ……….. is considered as an Institutional Investor.

78.
Non-Resident Indians
Trusts
Persons of Indian Origin (PIO)
High Net worth Individuals
CORRECT ANSWER:

Trusts

Explanation:
Charitable Trusts / Private Trusts are considered as institutional investors.

Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO) / HNIs are individual

investors.
Q Which of these is a Passive Fund? A) Gold Sector Fund B)
79.
Gold Mining Companies Fund C) Gold Exchange Traded Fund
D) Gilt Funds
Both A and B
Only D
Only C
All A, B, C and D
CORRECT ANSWER:

Only C

Explanation:
Passive funds invest on the basis of a specified index; whose performance it
seeks to track. For e.g. 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.

Q A person who wants to retain liquidity in his investments will

80.
invest in _____ .
ELSS Schemes
Fixed Deposits
PPFs
Liquid Funds
CORRECT ANSWER:

Liquid Funds

Explanation:
A person who wants liquidity should invest in liquid funds as they can be
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 encashed
before maturity.
Q The empanelment of a mutual fund distributor by an Asset
81.
Management Company can be terminated ______ .
In case all the investors of the distributors shift to direct plans
When the term of empanelment is over
Any time by the AMC
All of the above
CORRECT ANSWER:

Any time by the AMC

Explanation:
The AMC has the power to terminate the empanelment of the mutual fund
distributor at any time.

Q Identify the false statement(s). A) The best strategy in

82.
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
Only statement A is false
Only statement B is false
Both statements A and B are false
CORRECT ANSWER:

Both statements A and B are false

Explanation:
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.

When an investor wants to redeem from a scheme, the distributor must suggest
redemption from the scheme with the minimum exit load.
Q Identify the true statement with respect to 'Unclaimed
83.
Dividend' in mutual fund schemes.
If the plan is a regular plan, then it is the distributors
responsibility that the investor claims the dues
It is the sole responsibility of the investor that he/she claims the
dues
The Asset Management Company (AMC) is expected to make
a continuous effort to remind the investors through letters to claim
their dues.
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.

Explanation:
Right to unclaimed amounts- AMC is expected to make a continuous effort 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.

Q A minor has one more year to become a major. A 3-year SIP is

84.
started in the minors folio. Which of the following statement is
true in this case?
The SIP will be registered for 3 years
The SIP will be registered for only 2 years
The SIP will be registered for only 1 year till the investor attains
majority
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

Explanation:
Standing instructions like Systematic Investment Plans (SIP) are registered 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.
Q What will happen if one of the joint holders of a mutual fund
85.
folio dies?
The folio will be cancelled and the amount refunded
The units will be transferred to nominee/s
The units will be transferred to heir of deceased holder
The units will continue to be held by surviving joint holders
CORRECT ANSWER:

The units will continue to be held by surviving joint holders

Explanation:
Transmission is the process of transferring units to the person entitled to
receive them in the event of the death of the unitholder. If the first holder passes
away, the second holder is substituted as the first holder.

Q Who applies to SEBI for the registration of a Mutual Fund?

86.
The Asset Management Company (AMC)
Board of Trustees
The Sponsors
Chief Fund Manager
CORRECT ANSWER:

The Sponsors

Explanation:
The application to SEBI for registration of a mutual fund is made by the sponsors.

Q When there is a need to withdraw money from a scheme (i.e.,

87.
repurchase / redemption), the distributor must assess the
implications of ……. And …….. on the investor’s portfolio.
entry loads and exit loads
capital gains tax and exit loads
capital gains tax and entry loads
entry loads and dividend tax
CORRECT ANSWER:

capital gains tax and exit loads

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

Q Identify the false statement with respect to mutual fund

88.
scheme related documents.
KIM and SID are two broad types of scheme documents
SID has details of the particular scheme
SAI has statutory information about the mutual fund
KIM is essentially a summary of the SID and SAI
CORRECT ANSWER:

KIM and SID are two broad types of scheme documents

Explanation:
Option 1 is wrong as Scheme Information Document (SID) and Statement of
Additional Information (SAI) are primarily the two important documents.

Key Information Memorandum (KIM) is a summary of SID and SAI.

Q Who handles the appeals which are made against the rulings
89.
of SEBI ?
Company Law Board
AMFI
Securities Appellate Tribunal
High Court
CORRECT ANSWER:

Securities Appellate Tribunal

Explanation:
Persons aggrieved by an order of Adjudicating Officer passed under
the SEBI Act can prefer an appeal to Securities Appellate Tribunal (SAT) under
section 15T of the SEBI Act.
Q Identify the true statement(s) - A) The nominee is the
90.
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
Only A is true
Only B is true
Both A and B are true
Both A and B are false
CORRECT ANSWER:

Only B is true

Explanation:
Nomination is only an authorization for the mutual fund to transfer the units 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.

Q A trader believes that he can always outperform the market.

91.
This is an example of ____ bias.
Recency
Overconfidence / Optimism
Herd Mentality
Anchoring
CORRECT ANSWER:

Overconfidence / Optimism

Explanation:
Overconfidence / Optimism bias refers to a person’s overconfidence in 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.
Q Identify the TRUE statement(s) a) In an Assured Return
92.
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.
'b' and 'c' are true
'a' and 'c' are true
'a' and 'b' are true
All 'a' , 'b' and 'c' are true
CORRECT ANSWER:

'a' and 'b' are true

Explanation:
Mutual funds are not permitted to promise any returns, unless it is an 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.

Q Identify the TRUE statement?

93.
Mutual funds which are bank sponsored are regulated by RBI
and not SEBI
SEBI and AMFI both regulate mutual funds in India
Stock Exchanges regulates mutual funds in India
SEBI regulates mutual funds in India
CORRECT ANSWER:

SEBI regulates mutual funds in India

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

(AMFI is neither a regulatory body nor a Self-Regulatory Organisation)

Q Mr. Suresh invests Rs 2,00,000 in a mutual fund with a face
94.
value of Rs 10 and NAV of Rs. 50. How many units will be
allotted to him?
4000 units
20000 units
Will be lower than 4000 units due to entry load
Will be lower than 20000 units due to entry load
CORRECT ANSWER:

4000 units

Explanation:
Units are allotted as per current NAV.

The NAV is Rs 50 and the amount invested is Rs 200000

Units allotted = 200000 / 50 = 4000

(Currently there is no entry load)

Q Commodities as an asset class does not include ________ .

95.
Art
Fibers
Spices
Energy products
CORRECT ANSWER:

Art

Explanation:
Art is not a commodity. It cannot be standardised. Its valued as per the perception
of buyer etc.

Fibers (e.g. - Cotton yarn), Spices (e.g.- Turmeric) and Energy Products ( e.g. -
Oil) are all commodities.
Q Which of these is NOT a function of Registrars and Transfer
96.
Agents ?
Maintaining investors records
Processing redemption and dividend payouts
Analysing mutual fund performance and making it available to
investors
Updating unit capital of fund
CORRECT ANSWER:

Analysing mutual fund performance and making it available to investors

Explanation:
The Registrars and Transfer Agents (RTAs) maintain investor records.

The functions of the RTA include processing of purchase and redemption

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

Q Which expenses can be charged by the AMC to a mutual fund

97.
scheme?
Expenses which are incurred to manage the fund
Expenses which are incurred to launch the fund
Expenses which are incurred by the AMC
Expenses which are incurred by the investors in buying the
fund
CORRECT ANSWER:

Expenses which are incurred to manage the fund

Explanation:
Expenses for managing the fund are charged to the fund. Any expense other
than investment advisory fee and recurring expenses shall be borne by the
asset management company or trustee or sponsors.
Q Mutual funds must publish their unaudited accounts once
98.
every six months ______ .
on the AMFI website
on the AMC website
on the SEBI website
in at least two English newspaper
CORRECT ANSWER:

on the AMC website

Explanation:
As per SEBI rules - The mutual fund shall before the expiry of one month 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.

Q In case the units are pledged, the unit holder ______ .

99.
can sell the units after the lock in period
cannot sell the units
cannot sell but can switch the units to another scheme
cannot do additional purchase
CORRECT ANSWER:

cannot sell the units

Explanation:
Once units are pledged, the Unit-holder/s cannot sell or switch-out the pledged
units, until the pledgee gives
a written no-objection to release the pledge.
Q Identify the false statement(s) - A) Share certificate is a
100.
physical asset B) Debenture is a physical asset as the paper
on which it is printed has value
Statement A is false
Statement B is false
Both statements A and b are false
CORRECT ANSWER:

Both statements A and b are false

Explanation:
Shares and Debentures are not physical assets. They are financial assets.

Physical assets include Gold, Building, Art etc.