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Test 3


1 AMC should have a net worth of not less than
  10 crores 10 crores at all times 5 crores at all times
2. A mutual fund has a distributable income of Rs.300000for the year 1999-2000. What will be the tax payable by the fund?
  NIL as MFs are exempt from paying tax
3. A person purchased a property for Rs.250000 in 1995 in 1995 and solid it for 345000in 1998. Not considering the benefit of indexation what would be the capital gains tax payable by the person?
  Depends on the tax slab of the person concerned
4. What are the advantages of investing in MFs over directly investing in shares?
  Benefit of diversification
Benefit of professional management
Both of the above
None of the above
5. A money market MF will not invest in
  Call money market Certificate of deposit 3 year government security
6. An investor in a load fund cannot expect the following benefit from the fund
  Load funds will perform better than no load funds
Load funds will perform in the long term
The amount of load recovered will be reinvested which will increase the NAV All of the above
7. Sale and repurchase of units is the job of the
Registrar and transfer agents
8. Which of the following is not the object of AMFI?
  To promote interest of mutual funds
To create ethical practices amongst mutual funds
To regulate norms govering mutual funds
9. Units of closed end funds sell at a discount to their NAV because

Stock exchange regulations
Load on closed end funds is compulsory as per SEBI
Investors expect their future potential to be unviable to sustain their current NAV
Assets are undervalued

10. As an advisor to a holder of units, which of the following would you suggest irrespective of the fluctuations in NAV?
  Automatic reinvestment plans Systematic withdrawal plans
Both of the above None of the above
11. An investor in a MMMF approaches you as an intermediary for investments in equity. Which of the following would you suggest?
  He should switch over when equity prices fall He should switch over when equity prices increase He should never go in for equities due to volatility
12. Which of the following is not a characteristic of an index fund?
  Basket of securities in the same proportion as the index
  It is parallel to the benchmark index
  Portfolio changes in accordance to changes in the benchmark index
  Portfolio under goes at a very slow pace

1Which of the following statement is true about the key information memorandum?

  It is supplied with the offer document as an annexure
It contains all the information contained in the offer document as also history of the mutual fund
It is an abridged portion of the offer document and contains key points of the fund
None of the above
14. Who can appoint the AMC?
  Sponsor Trustees Either of the above None of the above
15. What is the maximum limit for investing in unlisted securities for an open end scheme(as % of net assets)
None of the above
16 Which of the following would be termed as direct marketing measures?
  Selling units through well established distribution channels
Selling through agents
Sending staff to corporate houses for marketing
None of the above
17 If inflation rises, which of the following funds would be affected the most
  Power sector fund
Bond fund
Sopftware fund
Service sector fund
18. Which of the following is a regulatory body?
  SEBI BSE AMFI None of the above
19. An investor has been insisting in investing in PPF. which of the following arguments can you legally given in favour of mutual funds?
  MFs give assured returns which are always more than PPF interest rates
Investing MFs is less riskier than investing in PPF
Mutual funds have the potential to give higher returns and carry lesser risk than investing directly in the stock markets
All mutual funds in India are government owned and hence do not carry any risk
20. Which of the following portfolios has the lowest risk profile?
  50% aggressive growth fund; 50% index fund
50% software fund; 50% index fund
50% index fund; 50%debt fund
50% money market fund; 50% debt fund
21. If an NRI investor wanted the facility of investment with repartiation benefits, what kind of an account would you advice him to open:
None of the above
22. The 1999 union budget helped the mutualfund industry by
  Regulating the practices of the MF industry
Excempting MF dividents from income tax in the hands of investors
Approving the code of ethics suggested by AMFI
None of the above
23. The mobilization of unds by the MF industry (as % of GDS) is in the range of


24 A load means
  A sum recovered from investors
An expense charged to the scheme/fund
A sales charge
None of the above
25. An investor should not invest in a mutual duns if
  His capital base is large and is able to monitor the stock market
He is able to carry out detailed investment research
Both of the above
None of the above
26 The only advantage of portfolio diversification to a mutual fund investor is
  The risk involved is diversified
The investor can hold the diversified portfolio with a small investment
Expertise in stock market is not required
None of the above
27. The term 'Professional Managment' indicates
  Investment managment skills
Reaserch of avsailable investment options
Both of the above
None of the Bove
28. Benefits of economies of scale is repeated by mutual funds because of
  Portfolio diversification
Reduction of risk
Large volumes of trades
None of the above
29. Which of the following is not a disadvantage of investing through a mutual fund?
  No control over costs
Liquidity and convenience
No tailor made portfolio
Managing a portfolio of funds
30. The mutual fund industry in India began in
None of the above
31. Which of the following is untrue
  UTI was setup in 1963
UTI was formed by RBI
UTI was established by an act of parliament
UTI was given a monopoly
32. Which of the following schemes has the largest investor base?
UTI Mastershare
US 64
SBI magnum multiplier
33. Which was the first diversified equity fund in India?
  Mastergain 92 MEP 91 Mastershare None of the above
34. Which was the first Indian Offshore fund?
  Indian growth fund
India fund
India infrastructure fund
None of the above
35. The first non-UTI Mutual FUnd was
Canbank MF
Indian Bank MF
36. Private sector funds were granted permission to enter the Mutual fund industry in
37. The organisation responsible for a comprehensive set of regulations for all Mutual Funds in India is
38. Which of the following is not a fundamental attribute of a scheme?
  The schme is income bearing
The procedure for buying/selling un its
The names and addresses of the registras and custodians
None of the above
39. An investor approaches you to build hid portfolio. What is the sequence of the steps that you'll take?
  Selection of sector, selection of fund manager and schemes, classification of assets
Selection of fund manager and schemes, selection of sector, classification of assets
Classification of assets, selection of sector, selection of fund manager and schemes
Selection of sector, classification of assets, selection of fund manager and schemes
40. A Charitable trust wishes to invest in units of super equity fund 2001 and approaches you a distributor. What do you do?
  Accept the application form without the cheque and send it to the AMC for approval
Refuse to accept the application
Accept the application form and the cheque
Check the offer document to see whether charitable trusts are allowed to apply for units

Ex-marks with 100% could be for the following fund:

  Growth fund
Index fund
Balanced fund
Equity diversified fund
42. A high portfolio turnover means:
  The fund is very active in the market
Transaction costs are high
A high risk is involved as per the investment objectives
All of the above
43. In case of corporate deposits the most important thing an investor must look for is:
Rate of return
Credit Rating
None of the above
44. Bank deposits are superior to mutual funds in which of the following respects:
  Bank deposits offer a higher yield
They are guranteed by bankers for capital protection
Transaction cost are low
They are more liquid than mutual funds
45 Indira Vikas Patra caught the attention of the masses because of
  Popularity rural areas Easy transferability and identity of owner is hidden
Offeres high yield Less risky
46. The steps involved in selection of an equity fund are:
  Evaluate past returns, review salient features of the schemes, classify the equity schemes
Review salient features of the schemes, evaluate past returns, classify the equity schemes
Classify the equity schemes, evaluate past returns, review salient features of the schemes
Classify the equity schemes, review salient features of the schemes, evaluate past returns
47. From the prespective of a value fund manager, which of the following will not unlock the value of share:
  Privatization of PSU
Buy back of shares
Bull run in the market
Corporate restructuring
48. Which of the following funds would you select for a risk averse investor wanting high yield
  Div yield:15%; Beta:1.5; Ex-marks:90
Div yield:10%; Beta:1; Ex-marks:70
Div yield:11%; Beta:0.9; Ex-marks:80
Div yield:12%; Beta:1.2; Ex-marks:80
49. If yield falls, a debt fund manager will do all of the following except:
  Sell short maturity bonds and buy long maturity bonds
See that the fund's average duration becomes longer than the market average duration
Sell long duration bonds and buy short duration bonds
Sell low coupon bonds and buy high coupon bonds
50. Which of the following is true?
  An MF investor cannot directly control the cost of investing
An MF investor pay less for expenses than when he invests directly


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