NISM V-A Chapter 1-3 Test 1

nism VA chapter 1-3 final set 1

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1. What is asset allocation?

Deciding which and how many mutual fund schemes to invest in

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

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

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

Question 1 of 75

2. Identiry the factor which must be considered to determine the asset allocation for an investor?

Financial goals of the investor and his financial situation

AUM of the scheme

Scheme expenses

Past performance of the scheme

Question 2 of 75

3. What does financial goal setting involve?

Determination of risk profile

Estimating the amount required for a major life event

Determining asset allocation

None of the above

Question 3 of 75

4. Tactical Asset Allocation decisions are based on which of these factor/s?

Likely behaviour of the markets

Age of the investor

Income of the investor

All of the above

Question 4 of 75

5. For investments in Equity Linked Saving Scheme (ELSS), the lock - in for the entire amount would NOT get over on completion of 3 years from the date of the first SIP Instalment - State whether True or False?

TRUE

FALSE

Question 5 of 75

6. What can happen if an investor has an Overconfidence bias?

He will make careful investment choices

He will take higher risks in his investments

His portfolio will have all good blue chip shares

He will keep the risks low in his investment portfolio

Question 6 of 75

7. Which of the following have the highest credit risk?

Money Market Fund

Junk Bond

G - Sec Fund

Income Fund

Question 7 of 75

8. At which price a Close Ended fund can be sold ?

At a price higher than NAV

At a price lower than NAV

At a price same as NAV

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

Question 8 of 75

9. Financial goals have to be defined in terms of _______ .

Time horizon and external funds required

Costs and economic policies

Aspiration and desires

Time horizon and money needed

Question 9 of 75

10. Who manages the contributions from investors and takes investment decisions in a mutual fund company?

The Investors

The Trustees

The Asset Management Company (AMC)

The Sponsors

Question 10 of 75

11. On which of the following factors does returns from an international fund depend on ?

Asset Class performance

Foreign currency exchange rates

Both 1 and 2

Neither A and B

Question 11 of 75

12. Recency bias is applicable only to negative events - State whether True orFalse?

TRUE

FALSE

Question 12 of 75

13. Inflation Risk is also referred as _______ .

Credit Risk

Liquidity Risk

Purchasing Power Risk

Question 13 of 75

14. When the interest rates are rising, the bond funds which have short average maturity are more likely to outperform - State True or False?

TRUE

FALSE

Question 14 of 75

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

Aggressive Hybrid Fund

Balanced Hybrid Fund

Conservative Hybrid Fund

Arbitrage Hybrid Fund

Question 15 of 75

16. Floating interest rate is _________ .

A rate which is payable only on maturity

Base Rate + Spread

Prime rate of lending

the yield on spread

Question 16 of 75

17. In case of a floater Fund, what is the Required Minimum Investment in floatingrate investment of total assets invested ?

65%

45%

55%

75%

Question 17 of 75

18. Multi Asset Allocation funds invest in at least _______ asset calsses with a minimum allocation of at least 10 percent in each class.

Question 18 of 75

19. Identify the TRUE statement with respect to Time Horizon to the financial goal.

Longer the horizon to the goal, the ability to take risk is higher

Longer the horizon to the goal, the ability to take risk is lower

Shorter the horizon to the goal, the ability to take risk is higher

Time horizon has no link to financial goals

Question 19 of 75

20. A Closed-end fund will have a _______ .

Fixed Dividend pay-out ratio

Fixed Unit Capital

Fixed Net Asset Value (NAV

Fixed Asset Under Management (AUM)

Question 20 of 75

21. What is the investment range for the mutual fund house to 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

Question 21 of 75

22. ___________ is certainly not suitable for investors who need the money in the short term.

Index Fund

Overnight Fund

Money - Market Fund

LIquid Fund

Question 22 of 75

23. What is the investment range in debt instruments by a Conservative hybrid fund?

Between 50 percent and 75 percent of total assets

Between 75 percent and 90 percent of total assets

Between 80 percent and 95 percent of total assets

Between 70 percent and 80 percent of total assets

Question 23 of 75

24. _____ investment styles means buying stocks which are priced lower in the markets than the assessment based on fundamental analysis.

Growth

Blend

Value

Cyclical

Question 24 of 75

25. What is the disadvantage of company fixed deposits when compared to bank fixed deposits?

Lower rate of interest

Lower safety

Highly volatile

Difficult to liquidate

Question 25 of 75

26. Mohit needs Rs. 2,00,000 in 5 years from now. The interest rate is 7%. The amount required today to be invested can be calculated by using the formula

200000 / (1+0.07)^5

200000 * (1- 0.07)^5

200000 / (1+0.07)*5

200000 * (1+0.07)*5

Question 26 of 75

27. In case of Excange Traded Funds (ETFs), the minimum investment in securities of a particular index (which is being replicated / tracked) shall be _________ percent of total assets.

100

Question 27 of 75

28. A bond issued by a company has a coupon of 7%. The interest rate in themarket for bonds of similar tenor and credit quality is now 8%. An investorholding the bond will see _____ .

The market price of the bond going up

The market price of the bond going down

The coupon of the bond going up

No change in the market price

Question 28 of 75

29. In India, the Mutual funds are constituted as ______ .

Limited Company

Non - Government Organisation

Self Regulatory Organisations

Trusts

Question 29 of 75

30. Mr. Tarun is in his 30's and has a steady job. He is investing most of his savings in bank deposits. Due to low rate of return on bank deposits, he is putting his financial goals at risk. Which behavioral bias is his portfolio suffering from?

Familiarity bias

Anchoring

Herd mentality

Confidence bias

Question 30 of 75

31. Which certification examination is mandated by SEBI for becoming a mutualfund distributor in the India?

NCFM Series VA Mutual Fund Distributors

NISM Series VA Mutual Fund Distributors

AMFI VA Mutual Fund Distributors

SEBI VA Mutual Fund Distributors

Question 31 of 75

32. Different investors of the similar age group should always have the same asset allocation in their investment portfolios - State whether True or False?

TRUE

FALSE

Question 32 of 75

33. Usually most investors might have invested across various asset categories. However the problem with such asset allocation is that _______________.

such asset allocation is done without defining any objective or without process

such asset allocation earns low returns

such asset allocation leads to payment of additional taxes

such asset allocation increases the portfolio risk

Question 33 of 75

34. In a Corporate Bond fund, the minimum investment in highest rated corporate bonds is ______ percent of the total assets

Question 34 of 75

35. Typically, towards the maturity of the close - end scheme, the market price converges towards the NAV - State whether True of False

TRUE

FALSE

Question 35 of 75

36. Ultra-short-term debt scheme invests in debt and money market instrumentswith Macaulay duration between __________ .

1 to 3 months

3 to 6 months

6 to 12 months

1 year to 3 years

Question 36 of 75

37. What is fixed in a Closed-end fund?

The Net Asset Value

The Rate of Return

The Unit Capital

The Market Price

Question 37 of 75

38. Identify the TRUE statement with respect to a Gilt Fund?

The minimum investment in G-secs (as a percentage of total assets) is 70%

The minimum investment in G-secs (as a percentage of total assets) is 75%

The minimum investment in G-secs (as a percentage of total assets) is 80%

The minimum investment in G-secs (as a percentage of total assets) is 85%

Question 38 of 75

39. Which strategy can be used to ensure that a mutual fund scheme is suitable to the investors need and situation ?

Indexation

Dividend Stripping

Asset Allocation

Tax harvesting

Question 39 of 75

40. After the New Fund Offer, units of the Close Ended Fund can be bought and sold through _____________.

Close Ended fund cannot be bought and sold till the closoure of term

the offices / branches of the respective AMC's

the bank in which the unit holder has an account

Stock Exchanges

Question 40 of 75

41. Usually active funds give higher returns as investors bear a higher fund management expense - State True or False?

TRUE

FALSE

Question 41 of 75

42. There are various risk profiling tools available on the internet. A financialplanner can use any of these as risk profiling is just a process - State True orFalse ?

TRUE

FALSE

Question 42 of 75

43. The actual performance of an index fund can be better or worse than its benchmark due to _________ .

Model Error

Arbitrage error

Tracking error

Systematic risk

Question 43 of 75

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

1 to 3 months

3 to 6 months

6 to 12 months

1 year to 3 years

Question 44 of 75

45. What would be the impact on an International fund investing in US stocks when the US Dollar appreciates against Indian Rupee?

The NAV of the scheme in Indian Rupees will appreciate

The NAV of the scheme in Indian Rupees will depreciate

No impact on the fund as its investing in stocks and not currency

Question 45 of 75

46. Management of investments by mutual funds in governed by Association of Mutual Funds in India (AMFI) - State whether True of False?

True

FALSE

Question 46 of 75

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

Money market securities

Equity stocks

Debt securities

Mutual Fund schemes

Question 47 of 75

48. _______ is an example of physical asset.

Bank Deposit

Shares and Debentures

Land and Building

Futures and Options

Question 48 of 75

49. Commodities as an asset class does not include __________ .

Food Crops

Industrial Metals

Gold

Real Estate

Question 49 of 75

50. Commodities as an asset class does not include ________ .

Art

Fibers

Spices

Energy products

Question 50 of 75

51. Asset allocation must primarily match ________ .

Long term value creation

Investment needs

Financial goals

Tax saving needs

Question 51 of 75

52. Sectoral Funds like Banking Funds etc., have the highest ________ .

Re-Investment Risk

Interest Rate Risk

Liquidity Risk

Concentration Risk

Question 52 of 75

53. Which Behavioral Bias leads an investor to concentrate the investments in what is familiar (eg. Bank Deposits instead of Equity shares), which at times prevents one from exploring better opportunities, as well as from a meaningful diversification ?

Confirmation Bias

Confidence Bias

Familiarity Bias

Anchoring

Question 53 of 75

54. Which debt schemes of mutual funds invest only in debt securities where moneys will be repaid within 91 days?

Money Market Funds

Medium term debt funds

Fixed Maturity Plans

Liquid Funds

Question 54 of 75

55. State True or False - The Thematic funds will always have a wider exposure than Sector funds.

TRUE

FALSE

Question 55 of 75

56. Smita is a young investor and her parents advice her to invest in fixed deposits of banks so that these funds can be used for her retirement. If Smita follows her parents advice, what risk does she face?

She has to select the correct bank which is financially strong

There is a high risk of default in her portfolio

There is a risk of low returns

There is no risk as fixed deposits are quiet safe

Question 56 of 75

57. The sponsor needs to contribute a minimum _____ of the worth of the AMC

25%

40%

50%

66%

Question 57 of 75

58. Which of these is NOT a function of Registrars and Transfer Agents ?

Maintaining investors records

Processing redemption and dividend payouts

Analysing mutual fund performance and making it available to investors

Updating unit capital of fun

Question 58 of 75

59. Identify the FALSE statement/s. 1. Arbitrage funds have lower risk as compared to Equity Funds 2. The main objective of an Arbitrage Fund is to provide capital appreciation 3. Arbitrage funds can invest in both Futures/Options(F&O) and cash markets

Only 1 is false

Only 2 is false

Both 2 and 3 are false

Both 1 and 3 are false

Question 59 of 75

60. Which type of funds investment objective could be - “To achieve growth byinvesting in equity and equity related investments, balanced with income generation by investing in debt and money market instruments”

Arbitrage Fund

Money Market fund

Equity Fund

Balanced Fund

Question 60 of 75

61. With respect to financial goals, longer time horizon _________ the investor's ability to take high risk.

decreases

Increases

Time horizon has no relation to investment risks

no Answer

Question 61 of 75

62. Indentify which of these statements is / are FALSE ? A) Banks and mutual funds both offer the Gold Deposit Scheme B) Gold ETFs are closed ended funds

Only A is false

Only B is false

Both A and B are False

Both A and B are True

Question 62 of 75

63. Association of Mutual Funds in India’s (AMFI) conducts the certificationexamination for Mutual Fund distributors - State whether True or False?

TRUE

FALSE

Question 63 of 75

64. Which of these is a key advantage of Exchange Traded Funds (ETFs) ?

ETFs generally give higher returns than normal funds

ETFs offer tax benefits

Investors can control the money they have invested as to where the ETF caninvest

Investors can buy or sell ETFs on a stock exchange at prices which are close to current valuations

Question 64 of 75

65. Long Duration debt scheme invests in debt instruments with Macaulay duration _____ .

between 1 year and 3 years

below 1 year

greater than 7 years

6 months and 12 months.

Question 65 of 75

66. Mr. Anand has Rs. 5 lakhs to invest but he may need money in the short term.

Liquid Fund

Money - market Fund

Index Fund

Overnight fund

Question 66 of 75

67. After the New Fund Offer, units of the Close Ended fund can be bought and sold through ___________

Close Ended fund cannot be bought and sold till the closure of term

the offices / branches of the respective AMC's

the bank in which the unit holder has an account

Stock Exchange

Question 67 of 75

68. Multi Asset Allocation funds invest in at least _____ asset classes with aminimum allocation of at least 10 percent in each class.

Question 68 of 75

69. An ongoing bond fund will lose value when the interest rates in the market __________.

Rise

Fall

Remains same

Will be equal to yields

Question 69 of 75

70. What is the investment objective of a mutual fund which seeks to grow in value over a period of time?

Capital Adequacy

Capital Appreciation

Safety of Capital

Regular Returns

Question 70 of 75

71. Which intermediary is responsible for implementation of uniform KYC?

Asset Management Company

KYC Registration Agencies

Registrar and Transfer Agents

Depository participants

Question 71 of 75

72. What is the investment range in equity instruments for a Conservative hybrid fund?

Between 20 percent and 30 percent of total assets

Between 30 percent and 40 percent of total assets

Between 10 percent and 25 percent of total assets

Between 5 percent and 20 percent of total assets

Question 72 of 75

73. Which one is the Self Regulatory Organisation (SRO) for the mutual fund industry?

SEBI