NISM V-A Chapter 10-12 Final Set 1

NISM VA chapter 10-12 final set 1

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

2 months

3 months

6 months

12 months

Question 1 of 60

2. ________ is a proper benchmark for a balanced hybrid scheme.

CRISIL Hybrid 75+25 , Conservative Index

CRISIL Hybrid 25+75 , Aggressive Index

CRISIL Hybrid 50+50 , Moderate Index

Question 2 of 60

3. When the asset allocation is maintained as a constant ratio by regularrebalancing of portfolio, it is known as ________ .

Dynamic asset allocation

Flexible asset allocation

Fixed asset allocation

Variable asset allocation

Question 3 of 60

4. What is the purpose of ‘credit enhancement’ in case of securitisedtransaction?

Payment of higher coupon

Generating capital gain

Higher credit worthiness

Question 4 of 60

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

A and B are false

B and C are false

A and C are false

All A, B and C are false

Question 5 of 60

6. Identify the TRUE statement/s -

Rolling return are the average annualized returns calculated for alternate holdingperiod

Holding period returns (HPR) do not provide an accurate picture of returns of fundif its initial value is too high or low.

Both 1 and 2

None of the above

Question 6 of 60

7. Which of these funds has the highest risk ?

Gilt funds

Index funds

Money market funds

Sector funds

Question 7 of 60

8. Which of these statement(s) is/are FALSE with respect to Benchmarks? A)Portfolio concentration is an important factor while selecting a benchmark foran equity mutual fund B) Choice of investment universe is not an importantfactor while selecting an appropriate benchmark for debt mutual funds

Only A is false

Only B is false

Both A and B are false

Question 8 of 60

9. What is negative Alpha?

It is indicative of outperformance by the fund manager

It is indicative of under-performance by the fund manager

It is indicative of over-hedging by the fund manager

It is indicative of under-hedging by the fund manager

Question 9 of 60

10. _____ is not a fair selling practice by a mutual fund distributor.

Informing the investor of the various investment options

Carefully understanding the clients financial needs

Encouraging the churning of investments

Giving personalised after sales service

Question 10 of 60

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

Only A

Only B

Both A and B

Question 11 of 60

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

Only A is true

Ony B is true

Both A and B are true

Question 12 of 60

13. A creditable benchmark of a mutual fund scheme should be in sync with the__________ . A. Size of scheme B. Investment objective of the scheme C.Investment strategy of the scheme D. Expenses ratio of the scheme E. Assetallocation pattern of the scheme

B, C and E

A, C and D

B, D and E

A and B

Question 13 of 60

14. Return from a fund is 9% and the risk free rate is 5%, the Standard deviation is3 & Beta is 1.6. What will be the NUMERATOR for calculating the Sharpe ratio?

1.6

Question 14 of 60

15. The average net assets of a fund were Rs 800 crore and the investmenttransactions of the fund were Rs 1600 crore. Calculate the Portfolio TurnoverRatio.

10 times

0.5 times

2 times

20 times

Question 15 of 60

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

11.6

4.77

3.08

2.42

Question 16 of 60

17. Which of these is an important criteria for choosing either Growth option orDividend option in the same mutual fund scheme?

Returns on the scheme

Fund Manager

Tax status of the investor

Assets Managed by the scheme

Question 17 of 60

18. What should an investor see to evaluate the Consistency of Mutual Fundscheme performance ?

Point to Point

Standard Deviation

Discrete annual returns

Beta

Question 18 of 60

19. As per the Principles of fair valuation of mutual funds, the valuation of thesecurities shall be ________ .

done aggressively

done conservatively

always rising

reflective of the realizable value of the securities

Question 19 of 60

20. Return from a fund is 11.5% and the risk free rate is 7%, the Standard deviationis 3 & Beta is 1.9. What will be the DENOMINATOR for calculating the Sharperatio?

4.5

1.9

11.5

Question 20 of 60

21. Arrange these funds according to their risk sequence - highest to lowest.

Capital protection oriented, Flexible allocation, Monthly income plan

Flexible allocation, Monthly income plan, Capital protection oriented

Monthly income plan, Capital protection oriented, Fixed allocation

Monthly income plan, Fixed allocation, Capital protection oriented

Question 21 of 60

22. isk profile of an investor is influenced by _______ . A) the need to take risksB) 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 22 of 60

23. Jensen’s Alpha’ is a measure of ________ .

Jensen’s Alpha’ is a measure of risk and outperformance is related to returns

Jensen’s Alpha’ is a measure of simple outperformance, irrespective of the risktaken

ensen’s Alpha’ is a measure of outperformance after adjusting for the risk taken

None of the above

Question 23 of 60

24. S&P BSE Bankex is the appropriate benchmark for a _______ .

Banking sector fund

Auto sector fund

Small Cap Fund

Bluechip Fund

Question 24 of 60

25. Sharpe Ratio is used to measure fund’s risk relative to market index. Statewhether True or False?

TRUE

FALSE

Question 25 of 60

26. The risk levels in different categories of mutual fund schemes can beunderstood with the help of ________ of Mutual Funds.

Standard Deviation / Beta

Tracking Error

Alpha of the scheme

Product labelling

Question 26 of 60

27. The appropriate benchmark for a mutual fund scheme investing across many countries would always be an index based on US equity markets - Statewhether True or False?

TRUE

FALSE

Question 27 of 60

28. With respect to model portfolio for Senior Citizens, it will not have anyexposure to equity - State True or false ?

TRUE

FALSE

Question 28 of 60

29. Which is the most appropriate measure of evaluating how closely an indexfund is tracking its benchmark?

Total Expense Ratio (TER)

Assets Under Management (AUM)

Tracking error

Treynor ratio

Question 29 of 60

30. A company has a Earning Per Share (EPS) of Rs 5 and Price to Earning (PE)ratio of 30. What will be the market price of the shares of this company ?

Rs. 0.60

Rs. 6

Rs. 150

Rs. 75

Question 30 of 60

31. 'Stock Picking' approach is similar to _______ .

Blended style of investment

Growth style of investment

Top down approach of investment

Bottom up approach of investment

Question 31 of 60

32. The first step in developing a model portfolio is _______ .

Deciding the size of portfolio

Selection of the Mutual Fund schemes

Setting of goals

None of the above

Question 32 of 60

33. What does a portfolio which has beta less than 1 mean ?

Highly risky as compared to market

More risky than market

Less risky than market

Same risk as that of market

Question 33 of 60

34. Identify the correct statement with respect to top performing scheme within a category _______ .

A top performing scheme may or may not be the top performer in the next years tocome

A top performing scheme will remain the top performer for a long period of time

A top performing scheme will be the worst performer in the next years to come

A top performing scheme is the best choice for an investor to invest his funds

Question 34 of 60

35. Which is the most important factor for comparing performance of liquid funds?

The Maturity

The Expense Ratio

The taxation aspect

The NAV

Question 35 of 60

36. Invesments owned by the scheme may be quoted in the market at higher tan the cost paid. Such gains in values on securities held are called ____________

Valuation gains

Notional gains

Valuation losses

Notional Losses

Question 36 of 60

37. An investor who has a long term view and is looking for capital appreciation and also has high risk tolerance should opt for invetments in _____________

Gold

Equities

Fixed Deposits

High interest bearing junk bonds

Question 37 of 60

38. The credit rating of a bond migrates from AAA to AA+. Determine what will the impact of this migration on the market price of the bond?

Bond price will rise

Bond price will fall

No change in the bond price

The price can rise or fall depending on the market conditions

Question 38 of 60

39. There is no risk associated with stock lending as the transaction is done through an approved intermediary - State True or False?

TRUE

FALSE

Question 39 of 60

40. These debt mutual funds categories have been arranged from lowest risk to highest risk. Identify the risk which we are discussing : 1. Liquid Funds 2. Money market funds 3. Medium term bond funds

Concentration Risk

Credit Risk

Interest Rate Risk

Default Risk

Question 40 of 60

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

To generate a limited amount of money

An investment plan which is focused on a specific goal

An investment plan with a specific risk profile

A specific option of investment

Question 41 of 60

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

there is a credit event

a change occurs in the fund management team

interest rates move down

interest rates move up

Question 42 of 60

43. These debt mutual funds categories have been arranged from lowest risk to highest risk. Identify the risk which we are discussing : 1. Liquid Funds 2. Money market funds 3. Medium term bond funds

Concentration Risk

Credit Risk

Interest Rate Risk

Default Risk

Question 43 of 60

44. The appropriate benchmark for debt Schemes having duration / maturity of more than 1 year will be _______

1 year T - Bill

10 years dated GoI security

5 years dated GoI security

There is no appropriate benchmark

Question 44 of 60

45. Identify the CORRECT statements. A. Valuation gains are ignored. But valuation losses need to be adjusted against the profits while calculating distributable surplus. B. The Mark-to-market gains from a part of the distributable reserves in case of mutual fund Income Distribution Cum Capital Withdrawal Plan

Only A is correct

Only B is correct

Both A and B is correct

Both A and B are incorrect

Question 45 of 60

46. Identify which of the foll statement/s is/are false in context of bencmarks. A. An Independent agency should calculate the benchmark in a transparent manner. B. The process of choosing a benchmark for an index Fund is very complex

Only A is false

Only B is false

Both A and B are false

None of the above

Question 46 of 60

47. The appropriate benchmark for a short term debt scheme will be _______ .

1 Year T-Bill index

Nifty50

10 year dated GoI security

5 year dated GoI security

Question 47 of 60

48. Identify the false statement/s : A. While evaluating the mutual fund schemes, the expense ratio matters more in debt funds than equity funds B.An Ultrashort term debt fund has to mandatorily invest in high credit quality debt securities

Only A is false

Only B is false

Both A and B are false

None of the above

Question 48 of 60

49. Performance of a portfolio is influenced by __________

Stock Selection

Investment Policy

Asset Allocation Strategy

All of the above

Question 49 of 60

50. The equity share prices of gold mining companies can depend on : 1. The gold reserves of the company 2. The operational efficiency and management of the company 3. International prices of gold

Only 1 and 2

Only 2 and 3

Only 1 and 3

All 1, 2 and 3

Question 50 of 60

51. ______ is used to measure fund’s risk relative to market index.

Tracking error

Beta coefficient

Treynor ratio

Sharpe ratio

Question 51 of 60

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

Only A

Only B

Both A and B

None of the above

Question 52 of 60

53. Identify the TRUE statement with respect to benchmark for Gold ETFs.

CRISIL Gilt fund index is widely used as a benchmark for Gold ETFs

Gold ETFs are benchmarked against gold prices

There can be no benchmark for Gold ETFs

None of the above

Question 53 of 60

54. ________ is the risk of mis-pricing or improper valuation of derivatives.

Counterparty Risk

Model Risk

Basis Risk

Credit Risk

Question 54 of 60

55. When should an investor adopt a strategy of limiting equity exposure to index funds?

In the Accumulation phase

In the Retirement phase

In the Sudden wealth phase

None of the above

Question 55 of 60

56. A person gets sudden wealth by winning a big lottery. Which of the below options is NOT advisable for him?

Investment in STP for investing in equities

Investment in liquid fund for a short period

Investment of the full amount in equities

Revisiting his financial plan

Question 56 of 60

57. When the Capital Base of an investor rises, his or her risk appetite will tend to _________

decreases

increases

remain same

change randomly

Question 57 of 60

58. State True or False - Gilt schemes have more risks than liquid schemes as their NAV fluctuates more due to changes in the yield market.

TRUE

FALSE

Question 58 of 60

59. When compared to Goal based financial planning, Comprehensive financial planning requires more time commitment - State True or False ?

TRUE

FALSE

Question 59 of 60

60. Identify the FALSE statement/s : 1. A mutual fund investing across many countries will keep its benchmark index which is based on US equity markets 2. For Gold ETF, gold prices will be the ideal benchmark

Only 1 is false

Only 2 is false

Both 1 and 2 are false

Question 60 of 60