amfi work book

7/31/2019 AMFI Work Book

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1) A mutual fund is nota) A company that manages aninvestment portfolio.b) A portfolio of stocks, bonds andother securities.c) A pool of funds used to purchase

securities on behalf of investorsd) A collective investment vehicle.

2) Which of the following is true? Someclose end funds sell at a discount totheir NAV, because

a) Of high expense ratiosb) Investors expect that current NAV

cannot be sustained by future potentialc) The repurchase price fixed by the

fund is lower than the NAVd) Of the inherent risk of closed end

funds.

3) If the entry load is 2% and the NAVis Rs. 10, then the investor will haveto pay for 1000 units

a) Rs. 15000b) Rs. 8000c) Rs. 12000d) Rs. 10200

4) Which of the following Mutual Fundswas not set up within the Phase2:1987-1993?

a) Canbank Mutual Fundb) Kothari Pioneer Mutual Fundc) SBI Mutual Fund

d) LIC Mutual Fund5) Which of the following is not a

benefit from a Mutual Fund?a) Investor has custody of securities

where fund invests.b) Investor is able to diversify riskc) Investor can save costsd) Investor can get professional

management to manage his money.

6) Which of the following has thelowest risk?

a) Liquid Fund (MMMF)

b) Gilt Fundc) Diversified debt fundd) Diversified equity fund

7) The current Mutual FundRegulations from SEBI wasintroduced in

a) 1992b) 1994c) 1996d) 1998

8) The sponsor of a mutual fund maybe compared to:

a) A director in a companyb) The chief executive of a companyc) The promoter of a companyd) An equity shareholder of a company

9) Issuing additional fresh units andredeeming the existing units of amutual fund scheme is the role of:

a) The custodianb) The transfer agentc) The trusteesd) The bankers

10) The appointment of AMC for theMutual Fund can be terminated by

a) Majority of Directors of theTrustee

b) 50% of the Unitholdersc) 45% of the Unitholdersd) 60% of the Unitholders

11) The Asset Management Company

shall make investment decisionssolely in the interest of

a) The sponsorb) The Trusteec) The Unit Holdersd) Its Employees

12) Mutual funds in India are set up as aa) Companyb) Trustc) Partnershipd) Association of Person

13) Minimum number of independent

directors on the board of assetmanagement company is

a) 50%b) 25%c) 75%d) Two-thirds

14) Under the Indian Trusts Act, theinterests of the unit-holders issafeguarded by

a) A board of trusteesb) A trustee companyc) Eitherd) Neither

15) The asset management company isappointed by

a) SEBIb) Unit holdersc) Sponsorsd) Trustee

16) Who needs to sign the trust deedwith the trustee?

a) Asset Management Companyb) Sponsorc) Custodiand) All of the above

17) Which of the following qualifies as aself-regulatory organization?

a) SEBIb) RBIc) National Stock Exchanged) AMFI

18) Whose consent is required toapprove a change in thefundamental attributes of a closedend schemes?

a) 50% of the unit holdersb) 50% of the trusteesc) 75% of the unit-holdersd) None of the above

19) Which schedule of SEBI (MutualFund) regulations 1996 specifies thecontents of the Trust Deed?

a) Eleventh Scheduleb) Eighth Schedulec) First Scheduled) Third Schedule

20) In case of a dispute, against whomcan the Unitholders initiate legalproceedings?

a) Trust

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b) Trusteec) AMCd) None of the above

21) Mutual Funds are regulated bya) RBIb) AMFI

c) SEBId) NSE

22) The body to which investors mayaddress their complaints is

a) SEBIb) RBIc) IRDAd) NSE

23) The first-time investor would bewell-advised to refer to:

a) Detailed Offer Documentb) The Key Information Memorandum

only.c) Either of the aboved) None of the above

24) Which of the following is true of theoffer document?

a) Investor gets all the information toevaluate the performance of theproposed scheme

b) Investor gets useful information toevaluate the performance of theAMCs past schemes

c) Investor does not get anyinformation on services he can

expect from the fund.d) Investor will not be able to assess

the risks of the proposed schemebased on the offer document

25) The Abridged Offer Documentcontains the address of thefollowing:

a) The Trustees of the Mutual Fundb) The Directors of the AMCc) The Registrar and Transfer Agentsd) Options a & be) Options b & c

26) Validate the statement Theinvestor is not obliged to read theoffer document before investing inunits of a scheme.

a) Completely trueb) Rarely truec) Completely falsed) Partly false

27) Offer documents have to beupdated within

a) One year from the date of Issueb) Two years from the date of issuec) Six months from the date of issued) None of these

28) The front page of the offerdocument contains

a) Date of its publicationb) Name and type of the fundc) Major objectives of the fundd) a & b

29) To a prospective investor thereliable source of pertinentinformation about a scheme is

a) Financial Pressb) Offer documentc) AMFI Website

d) Advice from the distributor

30) Which of the following distributionchannels is preferred by privatemutual funds?

a) Individual distributorb) Small distribution companies

c) Established distribution companiesd) The Internet

31) Which of the following salespractices is prescribed byregulation?

a) AMFI Code of Ethicsb) SEBI Advertising Codec) AMFIs code for agentsd) None of the above

32) Risk factors may not be mentionedin

a) Product launch advertisement

b) Tombstone advertisementc) Performance advertisementd) All of the above advertisements

33) An NRI holds units in a mutual fund.What should he do with his holdingif he takes up a foreign citizenship?

a) He redeemsb) He continuesc) He transfers the unit to his mother,

who resides in Indiad) None of the above

34) MF Regulations prescribe

a) The minimum commission of thedistributor

b) The maximum commission of thedistributor

c) The minimum as well as themaximum commission of thedistributor

d) Neither the minimum nor themaximum commission to thedistributor

35) Which of the most appropriateposition under MF Regulations?

a) Buyer bewareb) Buyer is always rightc) Seller is always rightd) Seller is guilty unless proved right

36) According to SEBIs code for mutualfund advertisement, for funds thathave been in existence for morethan a year, annualized returnshave to be furnished for

a) 1 yr, 3 yr, 5 yr. and since launchb) 1 yr, 5 yr and since launchc) 1 yr, 3 yr and since launchd) 1 yr, 3 yr and 5 yr

37) An open-end fund with 10,000 unitsoutstanding had the following itemsin its balance sheet:

Investment at market value Rs. 1,00,000Current Assets Rs. 20,000Current Liabilities Rs. 25,000Calculate the funds NAV per unit.

a) Rs. 9.5b) Rs. 12c) Rs. 10d) Rs. 14.5

([1,00,000 + 20,000 25,0000]/10,000)

38) A closed-end equity fund hasaverage weekly net assets of Rs. 200

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crores. As per SEBI Regulations, theAMC can charge the fund withinvestment and advisory fee upto:

a) Rs. 2.25 croresb) Rs. 2 croresc) RS. 2.5 crores

d) Rs. 3 crores(1.25% of 1st Rs. 100 crores of net assetsand 1% of the balance)

39) An investor purchased units in amutual fund in 1995 for Rs. 75000.He sold the units in 1998 for Rs.125000. The cost inflation index for1995 and 1998 are 281 (C) and351(D) respectively. The capitalgains chargeable to tax are:

a) 64,957b) 31,317c) 50,000

d) 75,000[1,25,000(75000*351/281)]

40) Income earned by a Mutual Fundregistered with SEBI is exempt fromIncome-Tax as per section

a) 10(23D)b) 10(33)c) Total Income is taxable @ 33.2%d) 88

41) Unit capital of a mutual fundscheme is Rs. 20 million; Themarket value of its investments is

Rs. 55 million; The number of unitsis 1 million. The NAV is

a) Rs. 20b) Rs. 75c) Rs. 55d) Not possible to say

42) Which of the following is untrue ofthe Automatic Reinvestment Plan?

a) The plan allows for automaticreinvestment of all income andcapital gains.

b) Automatic reinvestment allows forthe accumulation of additional units

of the fundc) The major benefit of automatic

reinvestment is the compounding ofreturns

d) The benefit of automaticreinvestment is often lost, ifreinvestment is subject to a heavyload

43) Constraints imposed by most fundson check-writing include:

a) Requirement of minimum accountbalance after withdrawal

b) Specification of a minimum amountfor which check can be issuedc) Limit on the number of checks that

are allowed to be issued in a monthd) Both 1 and 2 above

44) Which of the following is true ofSystematic Withdrawal Plan (SWP)?

a) It allows investors to makeSystematic withdrawal from hisfund

b) It is suitable for investors seekingregular income

c) SWP is similar to Monthly Income

Pland) Only 1 & 2

45) Choose the correct Statement Alternative Investment Plans offeredby fund allows investors:

a) Freedom with respect to investingone time or at regular intervals

b) Making transfers to different

schemes with the same fund familyc) Receiving income at specifiedintervals or accumulatingdistributions

d) All the above

46) The current market price of a 9%coupon bond, when other bonds ofsimilar maturities pay 11% will be:

a) Above parb) Below parc) At pard) will be unrelated to other bonds

47) Yield and Price of a bond move:a) In opposite directionsb) Together in the same directionc) In an unrelated fashiond) In line with the inflation index

48) SEBI places a limit on a schemesinvestment in investment graderated debt instruments of a singleissuer, because:

a) Even investment grade securitiescarry risks of default by borrower

b) A scheme must diversify itsholdings and thus reduce portfolio

riskc) Investment Grade ratings cannot besolely relied upon

d) SEBI wants to leave some forinvestment in non-investmentgrade securities by the scheme

49) Technical Analysis tries to predictfuture movement of stock price byanalyzing:

a) The financial workings of aCompany

b) The stock price movements of aCompany

c) Both of the aboved) None of the above

50) An investor purchased an open-endfund when its NAV was Rs. 20. 16months later, its NAV stood at Rs.22. The percentage NAV change inthe fund was:

a) 8%b) 7%c) 7.5%d) 8.5%

({[2220]/20}/16)*12} *100 = 7.5%

51) A unit of open-end fund waspurchased when its NAV was Rs. 20.At year-end its NAV was Rs. 22. Inthe interim period, the fund made adistribution of Rs. 4 per unit whenits NAV was Rs. 21. What was thesimple Total Return of the Fund?

a) 25%b) 30%c) 20%d) 31%

({4+[22-20]}/20)*100 = 30%)

52) Which of the following is false?

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a) ROI is a measure similar to TotalReturn with reinvestment ofdistributions

b) Total Return with reinvestment ofdistributions assumes reinvestmentat NAV on the distribution date

c) As a measure of performance, TotalReturn with reinvestment ofdistributions seeks to overcome theshortcomings of simple Total Return

d) Because of its simplicity, simpleTotal Return is preferred inpractice to Total Return withreinvestment of distribution

53) Return can be annualized andcompounded only if the Scheme hascompleted

a) 30 daysb) 12 monthsc) 6 monthsd) 24 months

54) An equity scheme is 90 days old. Tocompute its yield, it can use

a) absolute returnb) simple annualized returnc) compounded annualized returnd) any of these

55) Financial Planning isa) Investing funds to receive the

highest rate of return possibleb) Resorting to tax planning to keep

taxes as low as possible

c) Planning for retirement with themaximum income possible.

d) Process of solving financialproblems and reaching financialgoals.

56) Your client has won Rs. 1 crore inKarun Banega Crorepati. Whatwould your suggestion be?

a) Invest the entire amount withoutany delay in old economy stockssince they are back in favour

b) Invest the entire amount

immediately in an Equity IndexFundsince the index is at ahistoric low

c) Invest in very safe liquidinvestment options and take thetime needed to work out afinancial plan

d) Invest immediately in IT stocks,since their valuations are nowconsidered to be attractively low

57) Which one of the following portfoliois most risky?

a) 75% Equity 25% debt

b) 40% Equity 60% debtc) 60% Equity 40% debtd) 80% Equity 20% debt

58) The strategy advisable for aninvestor to maximize investmentreturn in the long run is:

a) Buy and hold on to investments fora long time

b) Liquidate poorly performinginvestments from time to time

c) Liquidate good performinginvestments from time to time

d) Switch from poor performers togood performers

59) A criticism of rupee-cost averagingis

a) Investment is for the same amountat regular intervals

b) Over a period of time, average pershare price will be more than

guessing the highs and lowsc) It does not tell you when to buy,sell or switch from one scheme toanother

d) Rupee cost averaging has no seriousshortcomings

60) If you maintain a flexible ratio ofasset allocation, would you

a) Rebalance the Debt/Equityallocation periodically?

b) Rebalance the Debt/Equityallocation very frequently?

c) Generally avoid portfolio

rebalancing?d) Keep fixed percentages of equity

and debt investments at all times?

61) SIP is best example ofa) Rupee Cost Averagingb) Value Averagingc) Buy & Holdd) None of the above

62) Direct investment in stock marketscan be better option over investingthrough mutual funds if:

a) The investor wants better returns

than those offered by mutual fundsb) The investor has large capital,knowledge and resources forresearch

c) The investor has identified a bullishphase in the stock market

d) The investor wants to invest for thelong run

63) An investor in need of regularincome should not select:

a) A bank depositb) A debt fundc) An equity growth fund

d) PPF

64) Which of the following has thehighest level of liquidity?

a) Equityb) PPFc) Company fixed depositsd) Mutual Funds

65) Which of the following should not beviewed primarily as an investmentoption?

a) Mutual Fundsb) Equity shares

c) Life Insuranced) None of the above

66) An investor asks you in what orderhe should list the followingschemes, going from the schemewith the least risk to the one withthe one with the highest risk 1. ABalanced Fund, 2. A Stock IndexFund, 3. A Liquid (Money Market)Fund and 4. A PharmaceuticalsSector Fund.

a) 1, 2, 3, 4b) 1, 3, 4, 2c) 3, 1, 2, 4

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d) 2, 3, 1, 4

67) Ex-Marks (or R-Squared factors) of afund measures

a) How much of a funds NAVmovement is due to the marketindex movement

b) How a funds NAV movementrelates to the market indexmovement

c) How much of a fluctuation hasoccurred in a funds NAV over ahistorical period

d) How many marks a Credit ratingAgency accords to a fund

68) Which is better investment optionwhilst selecting an equity fund?

a) Ex Marks 75%, Beta 0.9, GrossDividend Yield 8%

b) Either a or cc) Ex Marks 80%, Beta 0.9, Gross

Dividend Yield 8%d) Ex Marks 90%, Beta 0.8, Gross

Dividend Yield 9%

69) What type of portfolio asset mixwould recommend to your 55 yearold client who plans to retire at age58? Choose a portfolio that is theclosest match to the investorsneeds.

a) 40% in Equity Schemes and 60% in

Balanced Funds.b) 40% in Equity Schemes and 60% inDebt Funds

c) 20% in Equity Schemes, 20% inLiquid Funds and 60% in DebtFunds

d) 100% in Monthly Income Statements

70) For which of the following fundswould you consider averagematurity as an important factor inselecting the right one for theinvestor?

a) A Debt Fund

b) A Balanced Fundc) A Money Market or Liquid Fundd) Both a and b above

71) Which of the following Portfolioswould you recommend to a recentlyretired Couple?

a) 35% in Conservative Equity Funds,25% in moderately aggressiveequity, 40% in money marketfunds.

b) 30% in short term municipal funds,35% long term municipal funds, 25%

moderately aggressive equity, 10%in emerging growth equity

c) 50% in aggressive equity fund, 25%in high Yield bond funds and growthand income funds, 25% inconservative money market funds

d) Either 2 or 3

72) AMFI Code of Conduct forIntermediaries

a) prohibits mutual fund distributorsfrom accepting commissions froman investor who renew hisinvestment in a scheme

b) prohibits them from rebating thecommission back to such investors

c) encourages them to refrain fromrebating the commissions to suchinvestors, but does not prohibit

d) prohibits them from rebating thecommissions back to all investors

73) Mutual funds in India are required

by SEBI toa) prohibit their employees

from personal trading insecondary markets

b) allow all employees to tradefreely in secondary marketswithout restrictions

c) to establish a code of conduct and allowemployees to do personaltrading that conforms toSEBI guidelines

d) allow employees to carry on

personal trading as long asthey abide by SEBIguidelines

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