NISM V-A Chapter 1-3 Test 2

nism VA chapter 1-3 final set 2

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1. Risk Profilers are used to ascertain the risk appetite of an investor. State whether True or False?

TRUE

FALSE

Question 1 of 75

2. By Investing in mutual funds an investor uses the services of ____________

a professional actuary

a professional insurnace agent

a professional investment manager

a professional tax planner

Question 2 of 75

3. Which of these funds will generally have a higher fund management cost?

Debt Fund

Passive Equity Fund

Active Equity Fund

Equity Index Fund

Question 3 of 75

4. An International Fund is investing in US stocks . What would be the impact on it if US Dollar depreciates against the Indian Rupee?

The NAV of the scheme in Indian Rupees will depreciate

The NAV of the scheme in Indian Rupees will appreciate

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

Question 4 of 75

5. To terminate the appointment of an Asset Management Company, 90% of theunitholders should approve this termination - State True or False?

TRUE

FALSE

Question 5 of 75

6. Which of these funds has the highest risk?

Index Funds

Diversified Equity Fund

Long Duration Funds

Gilt Funds

Question 6 of 75

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

Overconfidence

Recency

Herd Mentality

Familiarity

Question 7 of 75

8. The interest rate sensitivity of a bond is determined by its maturity - State whether True or False?

True

FALSE

Question 8 of 75

9. If an investor in a Multicap Fund wants to know the industry wise allocation of the funds then which document should he refer to?

Fund Factsheet

SID and SAI

Investment management agreement

Annual accounts of the AMC

Question 9 of 75

10. If a person has to trade in units of a closed-ended mutual fund on the stockexchange platform then the units have to be held in _______ .

Dematerialized form

Physical form

Any of the above

None of the above

Question 10 of 75

11. The auditor appointed to audit the scheme accounts is the same as the auditor of the AMC accounts - State True or False?

TRUE

FALSE

Question 11 of 75

12. Focused funds carry _______ risk than a diversified fund, due to higherconcentration among smaller number of stocks.

Higher

Lower

Equal

Zero Risk

Question 12 of 75

13. Which of the following function can an Asset Management Company (AMC) do in - house?

Custodial Services

Broking

Registrar and Transfer Agent

Clearing and Settlement

Question 13 of 75

14. The minimum investment limit in equity/equity related instruments of large cap companies for a Large Cap mutual fund scheme is ______ of total assets.

70%

80%

85%

90%

Question 14 of 75

15. An investor is interested in buying some units of a Close ended fund after the NFO is over. How can he buy the same?

He can buy the units on the stock exchange from market makers appointed by the mutual fund.

He can buy the units on the stock exchange from other investors who were allotted the units and are interested in selling.

He can buy the units from the mutual fund itself when they open the sale at periodic intervals as announced by the fund.

He cannot buy units of a close ended fund.

Question 15 of 75

16. Identify which of these is NOT a function of Association of Mutual Funds in India (AMFI)?

To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the mutual fund Industry

To disseminate information on the mutual fund industry and to undertake studies and research directly and/or in association with other bodies.

To conduct a certification examination for Mutual Fund distributors

To undertake a nationwide investor awareness programme to promote proper understanding of the concept and working mutual funds

Question 16 of 75

17. A ________ investor will prefer lower risk and will settle for a lower return.

Aggressive

Adventurous

Moderate

Conservative

Question 17 of 75

18. Investors tend to extrapolate the current event into the future and expect arepeat. This is an example of ________ bias.

Overconfidence

Recency

Herd Mentality

Familiarity

Question 18 of 75

19. The minimum investment in G-Secs (as a percentage of total assets) in case of a Gilt Fund is ______ .

90%

95%

80%

75%

Question 19 of 75

20. For a value fund, the minimum investment in equity and equity related instruments of the total assets is ____ .

55%

60%

65%

70%

Question 20 of 75

21. _______ gives the investor exposure to international assets

Index funds

ELSS Fund

International Funds

Arbitrage Funds

Question 21 of 75

22. Identify which of these is a function of Association of Mutual Funds in India's (AMFI)?

To calculate the correct NAVs

To make available the AUM, NAV and other important data of the mutual fund industry

To regulate and control insider trading

To manage the Investor Protection Fund

Question 22 of 75

23. Identify the INCORRECT statement/s with respect to investments in real estate

The minimum amount required (Ticket size) for investing in real estate is high compared to other financial assets

The transaction costs are low for investments in real estate as compared to other financial assets

The real estate market is quiet illiquid and the pricing is not transparent

All of the above are incorrect

Question 23 of 75

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

Question 24 of 75

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

by existing investors only

by existing investors on the stock exchange platform only

by both existing and new investors on the stock exchange platform only

by both existing and new investors

Question 25 of 75

26. Apart from other things, ________ should also be factored in while calculatingthe future value.

Economic Growth

Risks which are unexpected

Return and Gains

Inflation Rate

Question 26 of 75

27. Mutual Funds have to follow the regulations of Reserve Bank of India (RBI) for investments in

Securities market

Gold

Money market

Commodity Market

Question 27 of 75

28. A person wishes to avail of a loan. For which of the below options he cannot get a loan?

To start a Pharma factory

To buy a car of value above Rs. 20 Lacs

To buy a high priced lottery ticket

To buy a house in a Union Territory

Question 28 of 75

29. ______ forms the basis of appointment of a distributor by 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

Question 29 of 75

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

The Asset Management Company (AMC)

Board Trustees

The Sponsors

Chief Fund Manager

Question 30 of 75

31. Which of the below statements is a important advantage of a Exchange TradedFund (ETF) ?

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

ETFs generally give higher returns than other Mutual Funds

An investor in an ETF can have a control on where his money can be invested

All of the above

Question 31 of 75

32. In the usual course of events, a fund manager will have to provide the maximum liquid assets for ___________

Gold ETFs

Equity ETFs

Close -end fund

Open-end fund

Question 32 of 75

33. In the Mutual Fund industry - every AMC gives an ARN code number to the mutual fund distributor which is to be renewed every three years - True or False?

True - this is as per SEBI rules

False - AMFI issues the ARN code number

True - AMFI authorised all AMCs to give ARN code to their distributors

False -SEBI issues the ARN code number.

Question 33 of 75

34. Recency bias applies to _______ events.

Only positive

Only negative

Both positive and negative

Question 34 of 75

35. Liquid Fund is an open-ended liquid scheme whose investment is into debt and money market securities with a maturity of up to ____ days only

Question 35 of 75

36. What is the investment in equity and equity related instruments in a Balanced Hybrid Fund?

Between 20% to 30% of total assets

Between 10% to 20% of total assets

Between 40% to 60% of total assets

Between 60% to 80% of total assets

Question 36 of 75

37. The ARN is allotted to the mutual fund distributors by ______ .

SEBI

NISM

AMC

AMFI

Question 37 of 75

38. Among equity funds, Focused funds carry _______ risks as compared to diversified funds due to ______ .

Lower and highly concentrated portfolio

Higher and highly concentrated portfolio

Lower and lower expenses of the fund

Higher and investments in debt securities

Question 38 of 75

39. The functions of a Registrar and Transfer Agent can be performed in-house by an Asset Management Company - State whether True or False?

TRUE

FALSE

Question 39 of 75

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

The US Dollar becomes weaker

The US Dollar becomes stronger

The US Dollar reamins steady

Question 40 of 75

41. ______________ gives the investor exposure to international assets.

Index Funds

ELSS Fund

International Funds

Arbitrage Funds

Question 41 of 75

42. The distributors are mainly compensated through ______ by the mutual funds.

Commissions

Salaries

Portfolio Profits

Annual Fees

Question 42 of 75

43. Which statement is FALSE with reference to risk appetite?

Risk appetite can be assessed by risk profiling

Preferred risk appetite is different from ideal risk appetite

Risk appetite indicates level of risk that investor is comfortable with

People of same age will have same risk appetite

Question 43 of 75

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

Mostly large cap stocks only of various companies

Mostly mid cap stocks only of various companies

Mostly small cap stocks only of various companies

A mix of large, mid and small cap stocks

Question 44 of 75

45. When compared to open ended funds, investors in close ended funds face a high level of __________

credit risk

Liquidity Risk

Market Risk

Investment Risk

Question 45 of 75

46. Suresh see's that his friends are investing in a finance scheme which is promising very high returns (a ponzi scheme). He also blindly invests in the same scheme. Which bias is Suresh exhibiting?

Herd mentality

Loss Aversion

Confidence bias

Anchoring

Question 46 of 75

47. What is required for the termination of the services of an Asset Management Company (AMC)?

75 % of the mutual funds distributors should approve the termination of the Asset Management Company

75 % of the unitholders should approve the termination of the Asset Management Company

The custodian should approve the termination of the Asset Management Company

AMFI should approve the termination of the Asset Management Company

Question 47 of 75

48. For a Sector Fund, the minimum investment in equity and equity related instruments of a particular sector/ theme shall be 90 percent of total assets. State whether True or False?

TRUE

FALSE

Question 48 of 75

49. Thematic funds are risky because of _________ in one theme.

under exposure

high beta

diversification

concentration

Question 49 of 75

50. Which amongst the following bias can lead to concentrated portfolio?

Familiarity Bias

Herd Mentality

Overconfidence Bias

Recency Bias

Question 50 of 75

51. _________ is responsible for ensuring the valuation of the securities in a mutual fund scheme’s portfolio are true and fair.

Association of Mutual Funds in India (AMFI)

Registrar and Transfer Agent

The auditor of the fund

Asset Management Company (AMC)

Question 51 of 75

52. Which one of these is an advantage of investing in Mutual Funds?

Economies of scale

Portfolio customization

Choice overload

All of the above

Question 52 of 75

53. In which type of fund is the risk of investor not selecting the correct sector maximum?

Thematic Funds

Sector Funds

Arbitrage Funds

Index Funds

Question 53 of 75

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

65%

45%

55%

75%

Question 54 of 75

55. Management of investments by mutual funds is governed by ______ .

Association of Mutual Funds in India (AMFI)

Reserve Bank of India (RBI)

Securities and Exchange Board of India (SEBI)

Both RBI and SEBI

Question 55 of 75

56. Can Indian mutual funds invest in Real Estate?

Yes

Question 56 of 75

57. __________ invest in those securities which have maturity matching the maturity of the scheme.

Fixed Maturity Plans

Exchange Traded Funds

ELSS Funds

High Yield Funds

Question 57 of 75

58. A mutual fund scheme mentions that it will use derivatives only to the extentof 30 % of its net assets. This is the scheme’s Investment Objective. Statewhether True or False?

TRUE

FALSE

Question 58 of 75

59. Which of these is a physical asset?

Bank Deposits

Units by Real Estate investment Trusts

Real Estate

Shares in physical form

Question 59 of 75

60. Interval funds offer better liquidity to investors as compared to Close-Ended mutual fund. State whether True or False?

TRUE

FALSE

Question 60 of 75

61. The portfolio of a fund of funds consists of ______ .

Equity securities only

Debt securities only

Units of other mutual fund schemes

Money market securities only

Question 61 of 75

62. In the case of a Sectoral Fund, the minimum investment in equity and equity related instruments of a particular sector of total assets should be _____ .

65%

70%

80%

95%

Question 62 of 75

63. In case of a Aggressive hybrid fund, the investment range in equityinstruments is between ______ of the total assets.

65 to 80 percent

75 to 90 percent

60 to 70 percent

80 to 95 percent

Question 63 of 75

64. Investors in India are usually highly organised in managing their financial transactions and taking decisions related to Financial Planning - State True or False?

TRUE

FALSE

Question 64 of 75

65. A trader believes that he can always outperform the market. This is an example of __________ bias.

Recency

Overconfidence / Optimism

Herd Mentality

Anchoring

Question 65 of 75

66. An Indian investor in a US Dollar based fund will benefit if US Dollar weakens against the Indian Rupee. (Assuming other things remain the same) - State True or False?

True

FALSE

Question 66 of 75

67. In an Arbitrage fund, the minimum investment in equity and equity related instruments shall be __________ of total assets.

50 percent

55 percent

60 percent

65 percent

Question 67 of 75

68. What is the tax applicable on the AMC for the income earned by the mutual fund schemes?

Income earned by a mutual fund is exempt from taxes

10 percent plus surcharge and cess

It is a function of the marginal rate of tax applicable to the respective investor in the muual fund scheme

It is a function of the type of income since dividends, short term capital gains attract different tax rates

Question 68 of 75

69. Mrs. Neeta needs Rs.5,00,000 in 3 years from now. The interest rate is 6%. By which formula can we calculate the amount which is required to be invested today to achieve the goal?

500000 * (1+0.06)*3

500000 / (1+0.06)^3

500000 / (1+0.06)*3

500000 * (1- 0.06)^3

Question 69 of 75

70. Decisions in Tactical Asset Allocation are taken on the basis of _________

likely behaviour of the markets

risk Profile of the investor

income level of the investor

All of the above

Question 70 of 75

71. Diversified equity funds are less risky compared to Thematic funds in terms of _______ risk.

Duration

Size

Concentration

Style

Question 71 of 75

72. Risk profile of an investor is influenced by __________. A) the need to take risks B) the willingness to take risks C) the ability to take risks

Only C

A and B

A and C

All A, B and C

Question 72 of 75

73. The trustees of a mutual fund is appointed by the ______ .