NISM SERIES VA

MUTUAL FUND DISTR EXAM

QUESTION SET 2.

NISM VA – MUTUAL FUND DISTRIBUTORS (AMFI) EXAM

QUESTION SET 2

Question 1 The basis of Fundamental Analysis is studying the companies Price

Volume chart and then taking a decision on buying/selling - True
or False ?
(i) TRUE
(ii) FALSE

Question 2 The average net asset of a Mutual Fund scheme is Rs 500 crores
and the investment transactions amounted to Rs 2000 crores in a
year. What is the average holding period of the investments ?
(i) 2 months
(ii) 3 months
(iii) 4 months
(iv) 6 months

Correct Answer 1 FALSE

Answer Fundamental Analysis entails review of the company’s fundamentals

Explanation viz. financial statements, quality of management, competitive position
in its product / service market etc.
Technical analysts study price-volume charts of the company’s share
prices.

Correct Answer 2 3 months

Answer Total Transactions = Rs 2000 cr

Explanation Avg Asset = Rs 500 cr
So 2000 / 500 = 4 times in a year the investments were churned
4 times a year = every 3 months.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 3 Which of the below is not a high risk fund ?

(i) Banking Sector Fund
(ii) Diversified Equity Fund
(iii) Income Fund
(iv) Pharma Sector Fund

Question 4 Every investor should invest in as a part of his core

portfolio.
(i) Arbitrage Funds
(ii) Diversified Equity Funds
(iii) Sector Funds
(iv) Thematic Funds

Correct Answer 3 Income Fund

Correct Answer 4 Diversified Equity Funds

 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 5 The NAV of a Mutual Fund scheme is Rs 180. If the exit load is 2%,
what will be the effective re-purchase price ?
(i) 176
(ii) 176.4
(iii) 177.5
(iv) 177.8

Question 6 AMFI is the sole regulator of Mutual Funds in India - True or False
?
(i) TRUE
(ii) FALSE

Correct Answer 5 176.4

Answer Rs 180 less 2%

Explanation 180 X 2 / 100 = 3.6
180-3.6 = 176.40

Correct Answer 6 FALSE

Answer SEBI is the regulator of MF's in India.

Explanation
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 7 Long Term Capital Gain Tax is Debt Schemes is charged at

.
(i) 20% with indexation
(ii) 10% without indexation
(iii) Lower of 1 and 2
(iv) There is no tax on Debt Schemes

Question 8 A purchase transaction of a Mutual fund scheme is completed

online by an investor at 12.25 pm (web server time). The same is
processed at 3.50 pm. What is the applicable cut-off time for this
transaction?
(i) 12.25 pm
(ii) 3.30 pm
(iii) 3.50 pm
(iv) Cut off time does not apply for online transaction

Correct Answer 7 Lower of 1 and 2

Answer In the case of Long Term Capital Gain, investor pays tax at the lower of
Explanation the following:
- 10% plus surcharge plus education cess, without indexation
- 20% plus surcharge plus education cess, with indexation

Correct Answer 8 12.25 pm

Answer For online transactions, the time as per the web server to which the
Explanation instruction goes, is used in determining the NAV for sale / re-purchase
transactions.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 9 The Trustees have to take the consent of Unit Holders

.
(i) when the trustee’s decide to wind up the scheme
(ii) whenever required by 75% of the unit holders
(iii) whenever required by SEBI in the interest of unit holders
(iv) All of the above

Question 10 The date of applicability of the NAV is not dependent on

.
(i) scheme in which the money is invested
(ii) time at which the application is submitted
(iii) place at which the application is submitted
(iv) All of the above

Correct Answer 9 All of the above

Correct Answer place at which the application is submitted

10
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 11 The scheme in which physical gold is deposited in a bank and

interest is received on such deposit is known as .
(i) Loan against Gold scheme
(ii) Gold Deposit Scheme
(iii) Gold Transfer Scheme
(iv) There is no such scheme

Question 12 No SEBI permission is required in appointing a Bank or a Stock

Broker as a Mutual Fund distributor - True or False ?
(i) TRUE
(ii) FALSE

Correct Answer Gold Deposit Scheme

11
Answer Gold deposit schemes are offered by some banks in India and are like a
Explanation fixed deposit in gold.
An investor depositing gold receives interest at regular intervals and on
maturity the gold of equivalent weight is returned.

Correct Answer TRUE

12
Answer The AMC appoints its distributors as per the guidelines. No SEBI
Explanation permission is required for such appointments.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 13 Mr. Mohan gives an application for investment in an Equity fund

at 3.29 pm on Friday at the AMC's office. Which will be the
applicable NAV ?
(i) Fridays NAV
(ii) Saturdays NAV
(iii) Mondays NAV
(iv) Highest NAV of the above three

Question 14 The Non Systematic Risk can be minimised by diversifying the portfolio
- True or False ?
(i) FALSE
(ii) TRUE

Correct Answer Mondays NAV

13
Answer For applications for an Equity Fund given after 3 pm, the next working
Explanation days NAV is considered.

Correct Answer TRUE

14
Answer Non-systematic risk is unique to a company like risk arising out of
Explanation change in management or cheaper imports etc.
This can be minimised by diversification ie. investing in various
companies of different sectors.
(Systematic risk is integral to investing in the market; it cannot be
avoided like Political risks etc)
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 15 Yield Spread is the additional risk premium that an investor gets
for bearing the credit risk - True Or False ?
(i) TRUE
(ii) FALSE

Question 16 A Mutual Fund scheme issued 36 crore units to its investors in an

NFO at face value Rs 10. What is the unit capital of this scheme ?
(i) Rs 36 cr
(ii) Rs 360 cr
(iii) Rs 3600 cr
(iv) None of the above

Correct Answer TRUE

15
Answer Eg- Additional return offered by a non-government issuer ( like a
Explanation Company), above the yield that the government offers, is called yield
spread. Better the credit quality, lower the yield spread.

Correct Answer Rs 360 cr

16
Answer Each unit is of Rs 10.
Explanation So 36 cr units X Rs 10 = Rs 360 cr
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 17 Retirement Planning involves Tactical Asset Allocation - True or

False ?
(i) TRUE
(ii) FALSE

Question 18 Growth investment style entails investing in high growth stocks

i.e. stocks of companies that are likely to grow at the same pace as
that of the economy - True or False ?
(i) TRUE
(ii) FALSE

Correct Answer FALSE

17
Answer Tactical asset allocation is suitable only for seasoned investors
Explanation operating with large funds as it involves taking a bet on the market
movements.
Strategic Asset Allocation is best suited for Retirement Planning as it
considers the age - risk factor.

Correct Answer FALSE

18
Answer Growth investment style entails investing in high growth stocks i.e.
Explanation stocks of companies that are likely to grow much faster than the
economy.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 19 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 ?
(i) NAV of the same day
(ii) NAV of the next business day
(iii) NAV of the day on which funds will be available
(iv) None of the above

Question 20 The Entry / Exit Loads and Taxes do not have an impact on the
returns to the investors - True or False ?
(i) TRUE
(ii) FALSE

Correct Answer NAV of the next business day

19
Answer For all Equity and Debt funds (except Liquid funds) - For investment of
Explanation Rs 2 lacs and below - NAV of the same day if received before 3 pm (
cut-off time). If received after 3 pm then NAV of the next business day.
For investments of amount over Rs 2 lacs, irrespective of the time of
receipt of application, NAV of the business day on which the funds are
available for utilisation before the cut-off time of that day is applicable.

Correct Answer FALSE

20
Answer Loads and taxes pull the investor’s returns below that earned by the
Explanation Scheme.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 21 The distribution of an investors portfolio between different asset

classes is called asset allocation - True or False ?
(i) TRUE
(ii) FALSE

Question 22 Minors can invest in Mutual Funds - True or False ?

(i) TRUE
(ii) FALSE

Correct Answer TRUE

21

Correct Answer TRUE

22
Answer Minors i.e. persons below the age of 18 are not legally eligible to
Explanation contract, so they need to invest through their Parents/Lawful
guardians.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 23 Investments owned by the scheme may be quoted in the market at

lower price than the cost paid and these losses are called Notional
Losses - True or False ?
(i) TRUE
(ii) FALSE

Question 24 One of the objective of is to interact with the Securities and

Exchange Board of India (SEBI) and to represent to SEBI on all
matters concerning the mutual fund industry.
(i) AMFI
(ii) NSE / BSE
(iii) Investor Forum
(iv) Mutual Fund Distributors Association

Correct Answer FALSE

23
Answer Investments owned by the scheme may be quoted in the market at
Explanation lower than the cost paid and these are called valuation losses.
Similarly, there can be valuation gains when securities are quoted in
the market at a price above the cost at which the scheme acquired
them.

Correct Answer AMFI

24
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 25 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on

the last day of the month for all their equity schemes on their
respective website on or before the third day of the succeeding
month in a user-friendly and downloadable format - True or
False ?
(i) TRUE
(ii) FALSE

Question 26 is the summary of SAI and SID

(i) New Fund Offer Application
(ii) KIM
(iii) Attachments to all Advertisements
(iv) None of the above

Correct Answer FALSE

25
Answer Its on or before the tenth day of the succeeding month.
Explanation

Correct Answer KIM

26
Answer KIM ( Key Information Memorandum) is essentially a summary of the
Explanation SID (Scheme Information Document) and SAI (Statement of Additional
Information).
It is more easily and widely distributed in the market. As per SEBI
regulations, every application form is to be accompanied by the KIM.
New Fund Offer contains the complete SID and SAI.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 27 An investor in an active fund bears a cost for the fund

management, and takes a risk.
(i) Higher , Higher
(ii) Lower , Lower
(iii) Higher, Lower
(iv) Lower, Higher

Question 28 Although invest in equity markets, the expected returns

are in line with liquid funds.
(i) Sectoral Funds
(ii) Arbitrage Funds
(iii) ELSS Funds
(iv) Debt Funds

Correct Answer Higher , Higher

27

Correct Answer Arbitrage Funds

28
Answer Although Arbitrage funds are categorized as equity funds because they
Explanation invest in equity. In reality, the risks are arbitraged (i.e. cancelled out),
normally between the cash market and the F&O market.
The returns are lower – more in line with money market returns/liquid
funds, rather than equity market returns as there is no open position
and the profit is the price difference between two markets.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 29 An investor who wants wider portfolio choices should invest in

Mutual Funds when compared to National Pension System - True
or False ?
(i) TRUE
(ii) FALSE

Question 30 All advertisements and Sales Literature containing an

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

Correct Answer TRUE

29
Answer The NPS offers fewer portfolio choices than mutual funds.
Explanation

Correct Answer All of the above

30
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 31 As per the Income Tax Act - which of the below option is True ?
(i) Capital loss, short term or long term, can be set off against any other
head of income
(ii) Long term capital loss can be set off against long term and short term
capital gain
(iii) Short Term Capital gains is a tax free income
(iv) Short term capital loss is to be set off against short term capital gain or
long term capital gain

Question 32 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 ?
(i) TRUE
(ii) FALSE

Correct Answer Short term capital loss is to be set off against short term capital
31 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

Correct Answer FALSE

32
Answer An important objective of AMFI is to represent to the Government,
Explanation Reserve Bank of India and other bodies on all matters relating to the
Mutual Fund Industry
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 33 If an Institutional Investor is making an application for investing

in a Mutual Fund, which additional document is required ?
(i) Audited Accounts for the last 3 years
(ii) Bank Statements
(iii) Board Resolution
(iv) Approval letter from SEBI

Question 34 An investor gives a cheque of Rs 7 lacs at 4 pm at a Mutual Fund

office for investment in a Equity Fund. The NAV of which day will
be applicable to him ?
(i) Same day NAV
(ii) NAV of the next business day
(iii) NAV of the day on which the funds are available
(iv) None of the above

Correct Answer Board Resolution

33

Correct Answer NAV of the day on which the funds are available
34
Answer For investments of amount over Rs 2 lacs, irrespective of the time of
Explanation 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.
For all Equity and Debt funds (except Liquid funds) - For investment of
Rs 2 lacs and below - NAV of the same day if received before 3 pm (
cut-off time)
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 35 If an investor feels that the trustees have not fulfilled their
obligations, then he can file a suit against the trustees for breach
of trust - True or False ?
(i) TRUE
(ii) FALSE

Question 36 Pension Funds Regulatory and Development Authority (PFRDA) is

the regulator for the National Savings System.
(i) TRUE
(ii) FALSE

Correct Answer TRUE

35

Correct Answer FALSE

36
Answer Pension Funds Regulatory and Development Authority (PFRDA) is the
Explanation regulator for the National Pension System.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 37 An elderly couple who have no immediate family members should

ideally invest in .
(i) ELSS Funds
(ii) Debt Funds
(iii) Sectoral Funds
(iv) Blue Chip Equity Funds

Question 38 To source the data required to track the performance of mutual

funds most offer free tools on their websites for this
purpose.
(i) AMC's
(ii) Distribution Houses
(iii) MF Research companies
(iv) All of the above

Correct Answer Debt Funds

37
Answer Debts funds carry the least amount of risk so they can be
Explanation recommended to the elderly couple.
The other funds are Equity oriented and carry huge market risks.

Correct Answer All of the above

38
Answer An investor who wants to study the performance of a MF by collecting
Explanation daily NAV 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.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.
Question 39 Of the following documents, which is required to be appended to
the application form of a MF scheme ?
(i) Statement of Additional Information - SAI
(ii) Addendum
(iii) Scheme Information Document - SID
(iv) Key Information Memorandum - KIM

Question 40 A regular dividend paying mutual fund scheme can be used for
capital appreciation - True or False ?
(i) FALSE
(ii) TRUE

Correct Answer Key Information Memorandum – KIM

39
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.

Correct Answer FALSE

40
Answer A regular dividend paying mutual fund scheme can be used as a source
Explanation of regular income.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 41 Mutual Funds are constituted as Investment Companies in India -

True or False ?
(i) TRUE
(ii) FALSE

Question 42 Recurring expenses cannot be charged to a Mutual Fund scheme as

it drags down the NAV - True or False ?
(i) TRUE
(ii) FALSE

Correct Answer FALSE

41
Answer Mutual funds are constituted as Trusts.and they are governed by the
Explanation Indian Trusts Act, 1882

Correct Answer FALSE

42
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.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 43 In the Scheme Information Document (SID), the condensed

financial information (for schemes launched in last 3 financial
years) is mentioned - True pr False ?
(i) FALSE
(ii) TRUE

Question 44 Liquid schemes and other debt schemes regularly park funds in
short term deposits of commercial banks but cannot charge
management fees on these - True or False ?
(i) FALSE
(ii) TRUE

Correct Answer FALSE

43
Answer Condensed financial information (for schemes launched in last 3
Explanation financial years) is mentioned in the Statement of Additional
Information (SAI).

Correct Answer TRUE

44
Answer Management fees cannot be charged by liquid schemes and other debt
Explanation schemes on funds parked in short term deposits of commercial banks.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 45 Cash less medical insurance schemes has led to .

(i) More Liquidity with investors
(ii) Less Liquidity with investors

Question 46 Tax Deferral is a key feature of .

(i) Dividend Option
(ii) Growth Option
(iii) Arbitrage Fund
(iv) Liquid Schemes

Correct Answer Less Liquidity with investors

45
Answer Investors keep less liquidity ( ready money ) as the insurance
Explanation companies settle the medical bills directly.

Correct Answer Growth Option

46
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 47 Open-ended schemes have to re-open for sale / re-purchase within

5 business days of the allotment and that date is known as the Re-
Opening date - True or False ?
(i) TRUE
(ii) FALSE

Question 48 The Custodian accepts and gives delivery of securities for the
purchase and sale transactions of the various schemes of the fund
- True or False ?
(i) TRUE
(ii) FALSE

Correct Answer TRUE

47
Answer As per SEBI guidelines, NFOs [other than ELSS and RGESS] can remain
Explanation open for a maximum of 15 days.
Allotment of units or refund of moneys, should be done within 5
business days of closure of the scheme and Open-Ended schemes have
to re-open for sale / re-purchase within 5 business days of the
allotment.

Correct Answer TRUE

48
Answer The custodian is responsible for settling all the transactions on behalf
Explanation of the mutual fund schemes.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 49 In the Mutual Fund industry - every AMC gives an ARN code
number which is renewed every three years - True or False ?
(i) True - this is as per SEBI rules
(ii) False - AMFI issues the ARN code number.

Question 50 All advertisements and Sales Literature containing an

AMC(s)/Mutual Fund ranking must prominently disclose, with
respect to the ranking .
(i) The name of the Ranking Entity and the criteria on which the ranking is
based
(ii) The name of the category (e.g. income/growth)
(iii) The number of AMC(s)/Mutual Funds in the category.
(iv) All of the above

Correct Answer False - AMFI issues the ARN code number.

49

Correct Answer All of the above

50
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 51 Mr. Shah gives a local cheque at 4.30 pm of Rs 10 lacs at a Mutual

Fund office for investing in a Gilt Fund. Of which day will the NAV
be applicable to him ?
(i) NAV of the same day
(ii) NAV of the next business day
(iii) NAV of the day on which the funds will be available
(iv) None of the above

Question 52 Due to the popularity of cash less health insurance policies the
liquidity needs of the investors have reduced - True or False
(i) TRUE
(ii) FALSE

Correct Answer NAV of the day on which the funds will be available
51
Answer For investments of amount over Rs 2 lacs, irrespective of the time of
Explanation 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.
For investment of Rs 2 lacs and below - NAV of the same day if
received before 3 pm ( cut-off time)

Correct Answer TRUE

52
Answer Earlier people use to save to meet medical emergencies. But due to
Explanation cash less medical insurance people keep less liquidity with them as the
insurance companies pay for the medical bills
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 53 Dividend Distribution Tax (DDT) on debt-oriented mutual fund

schemes for Corporate Investors is + Surcharge + Education
Cess
(i) 15%
(ii) 25%
(iii) 30%
(iv) 35%

Question 54 Different investors have different investment needs and

objectives. This is the reason Mutual Fund offer different .
(i) Plans
(ii) Options
(iii) Schemes
(iv) time horizons.

Correct Answer 30%

53
Answer Tax on dividend distributed by debt-oriented mutual fund schemes is
Explanation as follows:
Others: 30% + Surcharge + Education Cess
Individuals and HUF: 25% + Surcharge + Education Cess

Correct Answer Schemes

54
Answer MF's have various schemes like Large Cap Funds, Mid Cap Funds.
Explanation Sectoral Funds etc. to suit varied investment requirements.
(Plans and Options are Dividend / Growth etc. which form a part of the
scheme)
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 55 A person wishes to avail of a loan. For which of the below options
he cannot get a loan ?
(i) To start a textile factory
(ii) To buy a car of value above Rs 20 lacs
(iii) To buy a high priced lottery ticket
(iv) To buy a house in a Union Territory

Question 56 You are expecting interest rates (yields) to rise in the markets.
Where would you invest your money considering this forecast ?
(i) Long Terms Debt Funds
(ii) Short Term Debt Funds
(iii) Equity Funds
(iv) Banking Sector Funds

Correct Answer To buy a high priced lottery ticket

55

Correct Answer Short Term Debt Funds

56
Answer If it is expected that interest rates would go up, it would be safer to go
Explanation with Short 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.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 57 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 ?
(i) TRUE
(ii) FALSE

Question 58 For a Young Unmarried - which of the following phase is

applicable ?
(i) Accumulation
(ii) Distribution
(iii) Transfer
(iv) None of the above

Correct Answer TRUE

57
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

Correct Answer Accumulation

58
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 VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 59 The prescribed ceiling for ill liquid investments is lower for
, which have a greater need for liquidity because
investors can offer their units for re-purchase at any time.
(i) ELSS Schemes
(ii) Close Ended Schemes
(iii) Open Ended Schemes
(iv) Debt Funds

Question 60 Which one of the below mentioned document is not required for
KYC process ?
(i) PAN Card
(ii) Address Proof
(iii) Income Proof
(iv) Identity Proof

Correct Answer Open Ended Schemes

59

Correct Answer Income Proof

60
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 61 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.
(i) 0.89
(ii) 0.72
(iii) 0.49
(iv) 0.35

Question 62 Management fees cannot be charged by liquid schemes on funds

parked in short term deposits of commercial banks - True or False
?
(i) TRUE
(ii) FALSE

Correct Answer 0.35

61
Answer The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation
Explanation ie. ( Return Earned - Risk free Return ) / Standard Deviation
0.536023055
0.354466859
0.35

Correct Answer TRUE

62
Answer SEBI has stipulated annual limits on recurring expenses (including
Explanation management fees) for various Equity and Debt schemes.
However management fees cannot be charged by liquid schemes and
other debt schemes on funds parked in short term deposits of
commercial banks.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 63 In a scenario where interest rates are falling, it would be advisable

to invest in a debt fund rather than bank deposit - True or False ?
(i) TRUE
(ii) FALSE

Question 64 The Pension Account of National Pension System (NPS) is known

as .
(i) Tier I
(ii) Tier II
(iii) Tier III
(iv) Asset Class E

Correct Answer TRUE

63
Answer As interest rates in the market goes down, debt securities gain in value.
Explanation Therefore, long term debt funds would be sensible in declining interest
rate scenarios.
Also if it is expected that interest rates would go up, it would be safer
to go with Short Term Debt Funds. As the rates rise, the short-term
bonds would mature, allowing the fund manager to deploy the
proceeds at higher rates.

Correct Answer Tier I

64
Answer Tier I A/c of the National Pension System (NPS) is the Pension account
Explanation and is non-withdrawable.
Tier II A/c is the Savings account and is withdrawable to meet
financial contingencies. An active Tier I account is a pre-requisite for
opening a Tier II account.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 65 In Liquid funds, simple annualised return method is used to show

the returns because .
(i) Its a simpler way to calculate and investors understand it easily
(ii) The investment made is fixed for 30 - 90 - 180 days
(iii) The return is calculated over smaller time horizons
(iv) The amount invested is usually small

Question 66 You are a mutual fund advisor. To whom would you advise
investment of more than 70 % of their funds in debt funds ?
(i) A 33 year old well employed with one son
(ii) A 45 year old Executive Manager of a company who has 2 children
(iii) Elderly couple with no children
(iv) Young man working with Glaxo

Correct Answer The return is calculated over smaller time horizons

65
Answer In case of Money Market schemes and liquid plans, wherein investors
Explanation have very short investment horizon, the performance can be measured
and advertised by simple annualisation of yields.

Correct Answer Elderly couple with no children

66
Answer More Allocation to debt funds is recommended for senior citizens as
Explanation they carry the least amount of risk
Young people can take risks so they are advised to invest in Equity
funds for a long term.
 NISM SERIES VA
MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 67 The Stock Exchanges which provide facilities for Mutual Fund
trading also do the functions of Mutual Fund RTAs. - True or False
?
(i) TRUE
(ii) FALSE

Question 68 The National Pension System (NPS) offers a wider portfolio choice
than Mutual Funds - True or False ?
(i) TRUE
(ii) FALSE

Correct Answer FALSE

67
Answer Stock Exchanges does are not required to do the role of Registrars and
Explanation Transfer Agents (RTA).

Correct Answer FALSE

68
Answer The NPS offers fewer portfolio choices than mutual funds.
Explanation
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 69 Investments owned by the scheme may be quoted in the market at

higher than the cost paid and these gains are called as .
(i) Valuation Gains
(ii) Booked Gains
(iii) Notional Gains
(iv) Notional Losses

Question 70 Loads and taxes pull the investors returns below that earned by
the Scheme - True or False ?
(i) TRUE
(ii) FALSE

Correct Answer Valuation Gains

69
Answer Investments owned by the scheme may be quoted in the market at
Explanation higher than the cost paid and these 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.

Correct Answer TRUE

70
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 71 What is the full form of ASBA ?

(i) Application Supported by Blocked Amount
(ii) Applicants Supporting Block Amount
(iii) Application Supported by Bankers Acceptance
(iv) Applications Superiority by Blocked Amount

Question 72 An investor gives a cheque of Rs 2 lacs for investing in a ELSS

scheme at 2.30 pm at a Mutual Fund office. The NAV of which day
will be applicable to him ?
(i) NAV of the same day
(ii) NAV of the next business day
(iii) NAV of the day on which funds will be available
(iv) None of the above

Correct Answer Application Supported by Blocked Amount

71

Correct Answer NAV of the day on which funds will be available

72
Answer For all Equity and Debt funds (except Liquid funds) - For investments of
Explanation amount of Rs 2 lacs and above, 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.
For investment of below Rs 2 lacs - NAV of the same day if received
before 3 pm ( cut-off time)
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 73 The dividend received by a Mutual Fund investor will be taxed at a

rate of .
(i) 5%
(ii) 10%
(iii) 20%
(iv) No tax on Mutual Fund Dividends in the hands of the investor

Question 74 A investors wishes to invest in debt mutual funds but wants high
liquidity - should he invest in Fixed Maturity Plans ?
(i) Yes
(ii) No

Correct Answer No tax on Mutual Fund Dividends in the hands of the investor
73
Answer The dividend received by an investor in a MF - be it Equity or Debt, is
Explanation exempt from tax.

Correct Answer No
74
Answer Fixed maturity plans are a kind of debt fund where the investment
Explanation portfolio is 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.
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 75 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
.
(i) At prices usually higher than NAV
(ii) At prices usually lower than NAV
(iii) At prices which can be higher or lower than NAV
(iv) Units of a Close Ended Fund cannot be bought after NFO

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 .
(i) debt fund
(ii) balanced scheme
(iii) ELSS Fund
(iv) Sectoral Equity fund

Correct Answer At prices which can be higher or lower than NAV

75
Answer After the NFO of a close ended fund, sale and purchase transactions
Explanation happen on the 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.

Correct Answer balanced scheme

76
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 77 Young Age, Good Steady Job, an Adventurous streak etc are some
qualities of an investor who takes risks in investments - True or
False ?
(i) FALSE
(ii) TRUE

Question 78 The peak of earning capacity of an investor reached during the

pre-retirement phase - True or False ?
(i) TRUE
(ii) FALSE

Correct Answer TRUE

77

Correct Answer TRUE

78
Answer In the Accumulation stage, the investor gets to build his wealth. It
Explanation covers the earning years of the investor i.e. the phases of the life cycle
from Young Unmarried to Pre-Retirement.
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 79 Investing in can be a risky prospect during periods of

Economic Turmoil.
(i) Gilt Securities
(ii) Debt Funds
(iii) Mid Cap Funds
(iv) Large Cap Funds

Question 80 Asset allocation means .

(i) Distribution of Funds between Fund Managers in a Mutual Fund
(ii) Distribution of funds between various asset classes in a portfolio
(iii) Distribution of funds between various persons after the death of a
person
(iv) Distribution of funds between beneficiaries of an AMC

Correct Answer Mid Cap Funds

79
Answer Mid Cap Stocks are intrinsically not as strong as the frontline (large
Explanation cap) stocks, so they become riskier during periods of economic turmoil.

Correct Answer Distribution of funds between various asset classes in a portfolio

80
Answer The distribution of an investor’s portfolio between different asset
Explanation classes is called asset allocation.
For eg - If an investor wishes to invest Rs 10 lakhs - His funds can be
divided and invested in Equity, Debt and Gold - This is asset allocation.
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 81 Debt-oriented, close-ended / interval, schemes /plans need to

disclose their portfolio in their website every month, by the
working day of the succeeding month.
(i) 3rd
(ii) 10th
(iii) 12th
(iv) 15th

Question 82 Condensed financial information for schemes launched in last 3

financial years is mentioned in the .
(i) Scheme Information Document (SID)
(ii) Statement of Additional Information (SAI)
(iii) Fact Sheet
(iv) Prospectus

Correct Answer 3rd

81

Correct Answer Statement of Additional Information (SAI)

82
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 83 Post the New Fund Offer, investors who wishes to buy units need
to pay .
(i) the NFO price plus inflation rate
(ii) the same price as NFO
(iii) a price linked to the inflation index
(iv) a price that is linked to its NAV.

Question 84 Every trust has beneficiaries - True or False ?

(i) TRUE
(ii) FALSE

Correct Answer a price that is linked to its NAV.

83
Answer When a scheme is first made available for investment, it is called a
Explanation ‘New Fund Offer’ (NFO).
During the NFO, investors have the chance of buying the units at their
face value.
Post-NFO, when they buy into a scheme, they need to pay a price that
is linked to its NAV.

Correct Answer TRUE

84
Answer Every trust has beneficiaries. The beneficiaries, in the case of a mutual
Explanation fund trust, 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.
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 85 Investments in Mutual Funds are subject to market risks and

therefore do not provide any guarantee of Capital Growth /
Protection - True or False ?
(i) TRUE
(ii) FALSE

Question 86 Mutual funds can accept cash to the tune of Rs from small
investors.
(i) No cash can be accepted by a MF
(ii) Rs 50,000
(iii) Rs 20,000
(iv) Rs 5,000

Correct Answer TRUE

85

Correct Answer Rs 50,000

86
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, 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.
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 87 Gold Future Contracts .

(i) are traded on the Commodity Exchanges
(ii) are not standardised products
(iii) can be bought through Mutual Funds
(iv) None of the above

Question 88 If a person wants to appeal against the ruling of SEBI, he can do so

with .
(i) RBI
(ii) Commerce Ministry
(iii) Company Law Board
(iv) Securities Appellate Tribunal

Correct Answer are traded on the Commodity Exchanges

87
Answer Gold futures contracts are traded in commodity exchanges like the
Explanation National Commodities Exchange (NCDEX) and Multi-Commodity
Exchange (MCX).
The value of these contracts goes up or down in line with increases or
decreases in gold prices.

Correct Answer Securities Appellate Tribunal

88
Answer Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the
Explanation Securities Appellate Tribunal (SAT).
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 89 There are no penalties for breach of code of conduct as mandated

by AGNI - True or False ?
(i) TRUE
(ii) FALSE

Question 90 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on

the last day of the month for all their schemes on their respective
website on or before the of the succeeding month
(i) 3rd day
(ii) 7th day
(iii) 10th day
(iv) 15th day

Correct Answer FALSE

89
Answer As per 'AMFI Guidelines & Norms for Intermediaries' (AGNI) - In the
Explanation event of breach of the Code of Conduct by an intermediary the
registration can be cancelled after the set procedure is carried out.

Correct Answer 10th day

90
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 91 Investments in Mutual Funds can be done only through a AMFI

authorised MF distributors - True or False ?
(i) TRUE
(ii) FALSE

Question 92 Dividend Distribution Tax (DDT) on Equity oriented mutual fund

schemes for Corporate Investors is + Surcharge + Education
Cess
(i) 10%
(ii) 25%
(iii) 30%
(iv) NIL TAX

Correct Answer FALSE

91
Answer Investors can directly invest in MF's by visiting the MF office and other
Explanation Point of Sales (POS).

Correct Answer NIL TAX

92
Answer Tax on dividend distributed is not payable on dividend distributed by
Explanation equity-oriented mutual fund schemes.
Its payable only on Debt oriented funds.
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 93 Which of the following should NOT be included in the Key

Information Memorandum ?
(i) The risks associated with the scheme
(ii) The functions of Trustees and AMC
(iii) The opening - closing dates of the NFO
(iv) Minimum investments required and the cutoff time.

Question 94 A Mutual Fund scheme is know to distribute dividends from time

to time. Such MF can be used as a source of .
(i) Good Capital Appreciation
(ii) Regular Income
(iii) Safety of Capital
(iv) Tax Planning

Correct Answer The functions of Trustees and AMC

93

Correct Answer Regular Income

94
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 95 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 ?
(i) TRUE
(ii) FALSE

Question 96 At what rate is the Securities Transaction Tax charged on sale of

units of debt oriented mutual fund in a stock exchange ?
(i) 0.01%
(ii) 0.10%
(iii) 0.13%
(iv) 0%

Correct Answer FALSE

95
Answer A Board Resolution is required as an authorisation for the investing
Explanation institution to invest.

Correct Answer 0%
96
Answer STT is not applicable on transactions in debt or debt-oriented mutual
Explanation fund (including liquid fund) units.
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 97 Summary of SID - Scheme Information Document and SAI -

Statement of Additional Information is known as KIM - Key
Information Memorandum - True or False ?
(i) TRUE
(ii) FALSE

Question 98 What is the effect on bond prices when interest rates rises ?
(i) Bond prices rises
(ii) Bond prices fall
(iii) No effect on bond prices
(iv) Can rise or fall depending on the performance of stock markets

Correct Answer TRUE

97
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. So KIM is more easily and widely distributed in the market.

Correct Answer Bond prices fall

98
Answer Lets take an example : An investor has invested in a bond that yields a
Explanation return of 9%.
Later, yields in the market for similar securities rise to 10%. So the
bond, which was bought at 9% yield, is no longer such an attractive
investment. It will therefore lose value.
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

Question 99 The strategy of Tactical Asset Allocation is considered to be a

risky strategy - True or False ?
(i) TRUE
(ii) FALSE

Question 100 Mutual funds are constituted as and therefore, they are
governed by the .
(i) Companies, Indian Companies Act
(ii) Trusts, Indian Trusts Act
(iii) Investment Agencies, SEBI Act
(iv) NGOs, NGO Act

Correct Answer TRUE

99
Answer Tactical Asset Allocation is the strategy when the investor presumes
Explanation the likely 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.

Correct Answer Trusts, Indian Trusts Act

100
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MUTUAL FUND DISTR EXAM
QUESTION SET 2.

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