NISM SERIES V A – MUTUAL FUND DISTRIBUTORS

CERTIFICATION EXAM – PRACTICE TEST 6

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 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

PRACTICE TEST 6

Question 1 According to the Certified Financial Planner “ Board of Standards

(USA), the last stage in financial planning is _____________.
(a) Develop and Present Financial Planning Recommendations and / or Options
(b) Monitor the Financial Planning Recommendations
(c) Implement the Financial Planning Recommendations
(d) Establish and Define the Client-Planner Relationship

Question 2 Which of the below statement is FALSE with respect to objectives of

AMFI ?
(a) To represent to the Government, Reserve Bank of India and other bodies on
all matters relating to the Mutual Fund Industry.
(b) To regulate the Mutual Fund Industry
(c) To disseminate information on Mutual Fund Industry and to undertake
studies and research directly and/or in association with other bodies.
(d) To develop a cadre of well-trained Agent distributors

Correct Answer 1 Monitor the Financial Planning Recommendations

Answer The steps in creating a comprehensive financial plan, as proposed by the

Explanation Certified Financial Planner – Board of Standards (USA) are as follows:
• Establish and Define the Client-Planner Relationship
• Gather Client Data, Define Client Goals
• Analyse and Evaluate Client’s Financial Status
• Develop and Present Financial Planning Recommendations and / or Options
• Implement the Financial Planning Recommendations
• Monitor the Financial Planning Recommendations

Correct Answer 2 To regulate the Mutual Fund Industry

Answer SEBI is the regulator of Mutual Funds in India.

Explanation
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 3 A Mutual Fund has several schemes running. To avoid more backoffice
work etc. it can put funds of all the schemes in a single bank account -
True or False ?
(a) TRUE
(b) FALSE

Question 4 The benchmark for a Gilt fund investing in Government Securities with
maturities ranging from 1 to 3 years is ___________.
(a) Si-Bex
(b) Mi-Bex
(c) Li-Bex
(d) None of the above

Correct Answer 3 FALSE

Answer The funds of each scheme has to be maintained in a different Bank Account.
Explanation

Correct Answer 4 Si-Bex

Answer ICICI Securities and Finance Company Limited (Isec) has been maintaining
Explanation ICICI Securities Sovereign Bond Index (i-BEX) since 1994 representing gilts
market.
In order to meet specific needs of market participants, it has also been
maintaining short-maturity index (Si-BEX) comprising securities maturing in
one to three years, medium maturity index (Mi-BEX) comprising
securities maturing in three to seven years, and long-maturity index (Li-
BEX) comprising securities maturing later than seven years since March
1996.
These three new indices alongwith a composite index, which is an average of
Si-BEX, Mi-BEX and Li-BEX were chosen by AMFI as benchmark gilt
indices for mutual fund schemes.
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 5 Floating rate debt market securities generally hold their value despite
changes in the yields in the debt market - True or False ?
(a) TRUE
(b) FALSE

Question 6 Dividend warrants have to be dispatched to investors within __ days of

declaration of the dividend.
(a) 10
(b) 15
(c) 30
(d) 45

Correct Answer 5 TRUE

Correct Answer 6 30
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 7 The Market Value of a scheme is Rs 240 crores. Dividend accrued but
not received is Rs 30 crore. The Expenses payable are Rs 10 crore. The
total number of outstanding units is 120 lakhs. What is the NAV of the
scheme ?
(a) 175.8
(b) 216.66
(c) 224.7
(d) 311.74

Question 8 Which of the following is not a benefit of investing in a Mutual Fund ?

(a) Diversification of Risk
(b) Professional Management of Funds
(c) Time and cost savings
(d) Custody of his share of the portfolio in his demat account

Correct Answer 7 216.66

Answer Total Market Value = Rs 240 crore

Explanation Add Dividend Accrued of Rs 30 crore
Less Expenses Payable of Rs 10 crore
Divided by Units 120 lakhs
= 216.66 NAV

Correct Answer 8 Custody of his share of the portfolio in his demat account

Answer Mutual Fund investors do not get shares in their demat account.
Explanation
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 9 AMFI is a Self Regulatory Organization (SRO) - True or False ?

(a) FALSE
(b) TRUE

Question 10 Mr. Mohit invested Rs 5000 in a Mutual Fund on 1 Jan 2011 and when
he redeemed on 31 Dec 2012 he got Rs 12000. Calculate the CAGR.
(a) 54.90%
(b) 69.75%
(c) 70.80%
(d) 125%

Correct Answer 9 FALSE

Answer Mutual Funds in India have not constituted any SRO for themselves.
Explanation Therefore, they are directly regulated by SEBI.
AMCs in India are members of AMFI, an industry body that has been created
to promote the interests of the mutual funds industry. AMFI is not an SRO.

Correct Answer 10 54.90%

Answer Formula for calculating Compounded Annual Growth Rate :

Explanation CAGR = { Ending Value / Beginning Value } ^ ( 1 / No. of years) - 1.
= { 12000 / 5000 } ^ 1 / 2 - 1
= {2.4} ^ 0.5 - 1
On the scientific calculator of your computer type 14000 then press x^y the
.5
= 1.549 - 1
= .549 x 100 = 54.90%
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 11 FMP dividends are Tax Free - True or False ?

(a) TRUE
(b) FALSE

Question 12 In the National Pension System -NPS, the investor is allotted a

_________.
(a) Special NPS number
(b) PRAN
(c) QNPSN
(d) MANN

Correct Answer 11 TRUE

Correct Answer 12 PRAN

Answer PRAN - Personal Retirement Account Number.

Explanation
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 13 Investors of debt oriented mutual funds do not have to pay STT - True
or False ?
(a) TRUE
(b) FALSE

Question 14 ' Not more than 25% of the Net Assets will be invested in the Derivatives
Market' - This statement best describes ___________.
(a) Investment Interest
(b) Investment Objective
(c) Investment Policy
(d) Investment Strategy

Correct Answer 13 TRUE

Correct Answer 14 Investment Policy

Answer Investment objective defines the broad investment charter.

Explanation Investment policy describes in greater detail, the kind of portfolio that will be
maintained.
Investment strategies are decided on a day-to-day basis by the senior
management of the AMC.
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 15 A Mutual Fund scheme has equity shares of ICICI Bank in its portfolio.
For calculation of NAV, which of the following prices will be considered
?
(a) The closing price of ICICI Bank on Regional Stock Exchanges on the day of
calculation of NAV
(b) The closing price of ICICI Bank on BSE / NSE on the day of calculation of
NAV
(c) The Average trading price on Regional Stock Exchanges on the day of
calculation of NAV
(d) The Average trading price on BSE/NSE on the day of calculation of NAV

Question 16 Minimum duration of an interval period in an interval scheme/plan is

_______.
(a) 15 Days
(b) 30 Days
(c) 45 Days
(d) 60 Days

Correct Answer 15 The closing price of ICICI Bank on BSE / NSE on the day of calculation of
NAV

Correct Answer 16 15 Days

 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 17 The unit capital in an open ended fund keeps changing on a regular
basis - True or False ?
(a) TRUE
(b) FALSE

Question 18 People who are better able to take the downside that comes with risk are
those who have a ____________.
(a) Daring and adventurous psyche
(b) Multi-skilled and qualified professionals
(c) Regular source of income
(d) All of the above

Correct Answer 17 TRUE

Answer Additional Investments and Withdrawals happen on a daily basis in an open

Explanation ended mutual fund. So the unit capital keeps changing.

Correct Answer 18 All of the above

 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 19 The unit holder who has given his money to the Mutual Fund can decide
what securities or investments the scheme would buy - True or False ?
(a) TRUE
(b) FALSE

Question 20 The advantages of mutual funds are :

(a) Liquidity
(b) Economics of scale
(c) Both 1 and 2
(d) None of the above

Correct Answer 19 FALSE

Answer The unit holder can never decide which investments the fund should buy.
Explanation The Fund Manager / Concerned Authority decided on the investments.

Correct Answer 20 Both 1 and 2

 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 21 What is the sale price of the additional units bought by an investor of an
open ended scheme?
(a) More than NAV
(b) Less than NAV
(c) Equal to NAV
(d) 2.5 % more than NAV

Question 22 Arbitrage funds are meant to give better equity risk exposure - True or
False ?
(a) TRUE
(b) FALSE

Correct Answer 21 Equal to NAV

Correct Answer 22 FALSE

Answer Arbitrage Funds are not meant for equity risk exposure, but to lock into a
Explanation better risk-return relationship than liquid funds – and take the tax benefits
that equity schemes offer.
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 23 Which of the following aspects of portfolio would an investor in a debt

scheme give most importance?
(a) Number of securities in portfolio
(b) Weighted Average Maturity
(c) Stock selection
(d) Sector selection

Question 24 The NSEs platform for Mutual Fund trading is called NEAT MFSS -
True or False ?
(a) TRUE
(b) FALSE

Correct Answer 23 Weighted Average Maturity

Answer Longer the maturity of a debt security, higher would be its interest rate
Explanation sensitivity.
Therefore, weighted average maturity of debt securities in a scheme’s
portfolio is indicative of the interest rate sensitivity of a scheme.
(Also in the above question all the other three options are related to Equity
Fund)

Correct Answer 24 TRUE

Answer MFSS : Mutual Fund Service System.

Explanation
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 25 ______________ is the regulator for the National Pension System.

(a) AMFI
(b) COMMERCE MINISTRY
(c) SEBI
(d) PFRDA

Question 26 The Mutual Fund distributor can charge a fee from the investor - True
or False ?
(a) TRUE
(b) FALSE

Correct Answer 25 PFRDA

Answer Pension Funds Regulatory and Development Authority (PFRDA) is the

Explanation regulator for the National Pension System.

Correct Answer 26 TRUE

Answer As per new rules : Upfront commission to distributors will be paid by the
Explanation investor directly to the distributor, based on his assessment of various factors
including the service rendered by the distributor.
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 27 The STT charged on Purchase of Equity Share in a Stock Exchange is

____.
(a) 0.01%
(b) 0.10%
(c) 1%
(d) 2.50%

Question 28 Mutual funds are constituted as Trusts - True or False ?

(a) FALSE
(b) TRUE

Correct Answer 27 0.10%

Answer STT ie. Securities Transaction Tax on purchase or sale of equity shares in
Explanation stock exchange is 0.1%
STT on sale of futures & options in stock exchange is 0.01%

Correct Answer 28 TRUE

 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 29 Fundamental analysis can be effectively used for Intra Day Trading -
True or False ?
(a) TRUE
(b) FALSE

Question 30 Its compulsory to list units of _____________ on the stock exchange.

(a) ELSS Fund
(b) Close Ended Fund
(c) Gilt Fund
(d) Arbitrage Fund

Correct Answer 29 FALSE

Answer It is generally agreed that longer term investment decisions are best taken
Explanation through a fundamental analysis approach.
Technical analysis is generally used for shorter term speculative decisions,
including intra-day trading.

Correct Answer 30 Close Ended Fund

 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 31 KIM has to be updated every ______.

(a) three months
(b) six months
(c) one year
(d) five year

Question 32 Generally long term investment decisions taken through fundamental

analysis and for shorter term speculative decisions, including intra-day
trading one uses Technical Analysis - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 31 one year

Answer KIM is to be updated at least once a year.

Explanation

Correct Answer 32 TRUE

Answer It is generally agreed that longer term investment decisions are best taken
Explanation through a fundamental analysis approach.
Technical analysis is generally used for shorter term speculative decisions,
including intra-day trading.
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 33 Fund accounting activity of a scheme has be 100% outsourced - True or

False ?
(a) TRUE
(b) FALSE

Question 34 Offer documents of mutual fund schemes are approved by SEBI - True
or False ?
(a) TRUE
(b) FALSE

Correct Answer 33 FALSE

Correct Answer 34 FALSE

Answer Offer Documents in the market are “vetted” by SEBI, though SEBI does not
Explanation formally “approve” them.
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 35 _____________ assumes that all dividend payouts are re-invested in the
scheme at the ex-dividend NAV.
(a) Compounded Returns
(b) Compounded Annual Growth Rate
(c) Annualised Returns
(d) Simple Returns

Question 36 Nomination and Pledge options are not available for mutual fund
investors - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 35 Compounded Annual Growth Rate

Answer Whenever a dividend is paid – and compounding is to be considered - the

Explanation CAGR - Compounded Annual Growth Rate - technique prescribed by SEBI
is used.
This calculation is based on an assumption that the dividend would be re-
invested in the same scheme at the ex-dividend NAV.

Correct Answer 36 FALSE

Answer Nomination and Pledge options are available for mutual fund investors.
Explanation
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 37 Day to day management of the MF schemes is handled by the Trustees -

True or False ?
(a) FALSE
(b) TRUE

Question 38 Redemption / re-purchase cheques would need to be dispatched to

investors within ______ working days from the date of receipt of request.
(a) 2
(b) 3
(c) 5
(d) 10

Correct Answer 37 FALSE

Answer Day to day management of the schemes is handled by an AMC.

Explanation The AMC is appointed by the sponsor or the Trustees.

Correct Answer 38 10
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

Question 39 ELSS schemes should contain the least amount of Ill Liquid Investments
- True or False ?
(a) TRUE
(b) FALSE

Question 40 Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the
Ministry of Finance - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 39 FALSE

Answer Open-ended scheme, which have a greater need for liquidity because
Explanation investors can offer their units for re-purchase at any time - should have the
least amount of ill liquid investments in their portfolio.
ELSS Schemes have a lockin period of three years - so the fund manager can
buy more illiquid investments if he feels there is great potential in them in the
long run.

Correct Answer 40 FALSE

Answer Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the
Explanation Securities Appellate Tribunal (SAT).
 NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION EXAM – PRACTICE TEST 6