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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS

CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

LAST DAY REVISION EXAM1

Question 1 The basis of Fundamental Analysis is studying the companies Price


Volume chart and then taking a decision on buying/selling - True or False
?
(a) TRUE
(b) FALSE

Question 2 The average net asset of a Mutual Fund scheme is Rs 500 crores and the
investment transactions amounted to Rs 2000 crores in a year. What is
the average holding period of the investments ?
(a) 2 months
(b) 3 months
(c) 4 months
(d) 6 months

Correct Answer 1 FALSE

Answer Fundamental Analysis entails review of the company’s fundamentals viz.


Explanation financial statements, quality of management, competitive position in its
product / service market etc.
Technical analysts study price-volume charts of the company’s share prices.

Correct Answer 2 3 months

Answer Total Transactions = Rs 2000 cr


Explanation Avg Asset = Rs 500 cr
So 2000 / 500 = 4 times in a year the investments were churned
4 times a year = every 3 months.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 3 Which of the below is not a high risk fund ?


(a) Banking Sector Fund
(b) Diversified Equity Fund
(c) Income Fund
(d) Pharma Sector Fund

Question 4 Every investor should invest in as a part of his core


portfolio.
portfolio
(a) Arbitrage Funds
(b) Diversified Equity Funds
(c) Sector Funds
(d) Thematic Funds

Correct Answer 3 Income Fund

Correct Answer 4 Diversified Equity Funds


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 5 The NAV of a Mutual Fund scheme is Rs 180. If the exit load is 2%, what
will be the effective re-purchase price ?
(a) 176
(b) 176 4
176.4
(c) 177.5
(d) 177.8

Question 6 AMFI is the sole regulator of Mutual Funds in India - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 5 176.4

Answer Rs 180 less 2%


Explanation 180 X 2 / 100 = 3.6
180-3.6 = 176.40

Correct Answer 6 FALSE

Answer SEBI is the regulator of MF's in India.


Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 7 Long Term Capital Gain Tax in Debt Schemes is charged at .


(a) 20% with indexation
(b) 10% without indexation
(c) Lower of 1 and 2
(d) There is no tax on Debt Schemes

Question 8 A purchase transaction of a Mutual fund scheme is completed online by


an investor at 12.25
12 25 pm (web server time).
time) The same is processed at 3.50
3 50
pm. What is the applicable cut-off time for this transaction?
(a) 12.25 pm
(b) 3.30 pm
(c) 3.50 pm
(d) Cut off time does not apply for online transaction

Correct Answer 7 20% with indexation


Answer Gains on debt mutual funds held for less than 36 months are treated as short
Explanation term capital gains and taxed as per the income tax slab of the investor.

Gains on debt mutual funds held for 36 months or more are treated as long-
term capital gains and taxed at the rate of 20% after indexation.

Correct Answer 8 12.25 pm

Answer For online transactions, the time as per the web server to which the instruction
Explanation goes, is used in determining the NAV for sale / re-purchase transactions.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 9 The Trustees have to take the consent of Unit Holders .


(a) when the trustee’s decide to wind up the scheme
(b) whenever required by 75% of the unit holders
(c) whenever required by SEBI in the interest of unit holders
(d) All of the above

Question 10 The date of applicability of the NAV is not dependent on .


(a) scheme in which the money is invested
(b) time at which the application is submitted
(c) place at which the application is submitted
(d) All of the above

Correct Answer 9 All of the above

Correct Answer 10 place at which the application is submitted


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 11 The scheme in which physical gold is deposited in a bank and interest is
received on such deposit is known as .
(a) Loan against Gold scheme
(b) Gold Deposit Scheme
(c) Gold Transfer Scheme
(d) There is no such scheme

Question 12 No SEBI permission is required in appointing a Bank or a Stock Broker


as a Mutual Fund distributor - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 11 Gold Deposit Scheme

Answer Gold deposit schemes are offered by some banks in India and are like a fixed
Explanation deposit in gold.
An investor depositing gold receives interest at regular intervals and on
maturity the gold of equivalent weight is returned.

Correct Answer 12 TRUE

Answer The AMC appoints its distributors as per the guidelines. No SEBI permission
Explanation is required for such appointments.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 13 Mr. Mohan gives an application for investment in an Equity fund at 3.29
pm on Friday at the AMC's office. Which will be the applicable NAV ?
(a) Fridays NAV
(b) Saturdays NAV
(c) Mondays NAV
(d) Highest NAV of the above three

Question 14 The Non Systematic Risk can be minimised by diversifying the portfolio -
True or False ?
(a) FALSE
(b) TRUE

Correct Answer 13 Monda s NAV


Mondays

Answer For applications for an Equity Fund given after 3 pm, the next working days
Explanation NAV is considered.

Correct Answer 14 TRUE

Answer Non-systematic risk is unique to a company like risk arising out of change in
Explanation management or cheaper imports etc.
This can be minimised by diversification ie. investing in various companies of
different sectors.
(Systematic risk is integral to investing in the market; it cannot be avoided like
Political risks etc)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 15 Yield Spread is the additional risk premium that an investor gets for
bearing the credit risk - True Or False ?
(a) TRUE
(b) FALSE

Question 16 A Mutual Fund scheme issued 36 crore units to its investors in an NFO at
face value Rs 10. What is the unit capital of this scheme ?
(a) Rs 36 cr
(b) Rs 360 cr
(c) Rs 3600 cr
(d) None of the above

Correct Answer 15 TRUE

Answer Eg- Additional return offered by a non-government issuer ( like a Company),


Explanation above the yield that the government offers, is called yield spread. Better the
credit quality, lower the yield spread.

Correct Answer 16 Rs 360 cr

Answer Each unit is of Rs 10.


Explanation So 36 cr units X Rs 10 = Rs 360 cr
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 17 Retirement Planning involves Tactical Asset Allocation - True or False ?


((a)) TRUE
(b) FALSE

Question 18 Growth investment style entails investing in high growth stocks i.e. stocks
of companies
p that are likely
y to ggrow at the same p
pace as that of the
economy - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 17 FALSE

Answer Tactical asset allocation is suitable only for seasoned investors operating with
Explanation large funds as it involves taking a bet on the market movements.
St t i Asset
Strategic A t Allocation
All ti is i best
b t suited
it d for
f Retirement
R ti t Planning
Pl i as it
considers the age - risk factor.

Correct Answer 18 FALSE

Answer Growth investment style entails investing in high growth stocks i.e. stocks of
Explanation companies that are likely to grow much faster than the economy.
economy
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 19 An investor gives a cheque of Rs 1 lacs for investing in a Debt scheme at


3.30 pm at a Mutual Fund office. The NAV of which day will be
applicable to him ?
(a) NAV of the same day
(b) NAV of the next business day
(c) NAV of the day on which funds will be available
(d) None of the above

Question 20 The Entry / Exit Loads and Taxes do not have an impact on the returns to
the investors - True or False ?
( )
(a) TRUE
(b) FALSE

Correct Answer 19 NAV of the next business day

Answer For all Equity and Debt funds (except Liquid funds) - For investment of Rs 2
Explanation l andd below
lacs b l - NAV off theth same day
d if received
i d before
b f 3 pm ( cut-off
t ff time).
ti )
If received after 3 pm then NAV of the next business day.
For investments of amount over Rs 2 lacs, irrespective of the time of receipt of
application, NAV of the business day on which the funds are available for
utilisation before the cut-off time of that day is applicable.

Correct Answer 20 FALSE

Answer Loads and taxes pull the investor’s returns below that earned by the Scheme.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 21 The distribution of an investors portfolio between different asset classes is


called asset allocation - True or False ?
(a) TRUE
(b) FALSE

Question 22 Minors can invest in Mutual Funds - True or False ?


(a) TRUE
(b) FALSE

Correct Answer 21 TRUE

Correct Answer 22 TRUE

Answer Minors i.e. persons below the age of 18 are not legally eligible to contract, so
Explanation they need to invest through their Parents/Lawful guardians.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 23 Investments owned by the scheme may be quoted in the market at lower
price than the cost paid and these losses are called Notional Losses - True
or False ?
((a)) TRUE
(b) FALSE

Question 24 One of the objective of is to interact with the Securities and


Exchange Board of India (SEBI) and to represent to SEBI on all matters
concerning the mutual fund industry.
(a) AMFI
(b) NSE / BSE
(c) Investor Forum
(d) Mutual Fund Distributors Association

Correct Answer 23 FALSE

Answer Investments owned by the scheme may be quoted in the market at lower than
Explanation the cost paid and these are called valuation losses.
Similarly, there can be valuation gains when securities are quoted in the
market at a price above the cost at which the scheme acquired them.

Correct Answer 24 AMFI


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 25 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the
last day of the month for all their equity schemes on their respective
website on or before the third day of the succeeding month in a user-
friendly
y and downloadable format - True or False ?
(a) TRUE
(b) FALSE

Question 26 is the summary of SAI and SID


(a) New Fund Offer Application
(b) KIM
(c) Attachments to all Advertisements
(d) None of the above

Correct Answer 25 FALSE

Answer Its on or before the tenth day of the succeeding month.


Explanation

Correct Answer 26 KIM

Answer KIM ( Key Information Memorandum) is essentially a summary of the SID


Explanation (Scheme Information Document) and SAI (Statement of Additional
Information).
It is more easily and widely distributed in the market. As per SEBI
regulations, every application form is to be accompanied by the KIM.
New Fund Offer contains the complete SID and SAI.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 27 An investor in an active fund bears a cost for the fund


management, and takes a risk.
(a) Higher , Higher
(b) Lower , Lower
(c) Higher, Lower
(d) Lower, Higher

Question 28 Although invest in equity markets,


markets the expected returns are in
line with liquid funds.
(a) Sectoral Funds
(b) Arbitrage Funds
(c) ELSS Funds
(d) Debt Funds

Correct Answer 27 Higher , Higher

C
Correct
tAAnswer 28 A bit
Arbitrage F d
Funds

Answer Although Arbitrage funds are categorized as equity funds because they invest
Explanation in equity. In reality, the risks are arbitraged (i.e. cancelled out), normally
between the cash market and the F&O market.
The returns are lower – more in line with money market returns/liquid funds,
rather than equity market returns as there is no open position and the profit is
the price difference between two markets.
markets
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 29 An investor who wants wider portfolio choices should invest in Mutual
Funds when compared to National Pension System - True or False ?
(a) TRUE
(b) FALSE

Question 30 All advertisements and Sales Literature containing an AMC(s)/Mutual


Fund ranking must prominently disclose .
(a) The publisher of the ranking data.
data
(b) Criteria on which the ranking is based.
(c) The name of the Ranking Entity.
(d) All of the above

Correct Answer 29 TRUE

Answer The NPS offers fewer portfolio choices than mutual funds.
Explanation

Correct Answer 30 All of the above


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 31 As per the Income Tax Act - which of the below option is True ?
(a) Capital loss, short term or long term, can be set off against any other head of
income
(b) Long term capital loss can be set off against long term and short term capital
gain
(c) Short Term Capital gains is a tax free income
(d) Short term capital loss is to be set off against short term capital gain or long
term capital gain

Question 32 An important objective of SEBI is to represent to the Government,


Reserve Bank of India and other bodies on all matters relating to the
Mutual Fund Industry - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 31 Short term capital loss is to be set off against short term capital gain or long
term capital gain

Answer A few key provisions of the Income Tax Act are :


Explanation •Capital loss, short term or long term, cannot be set off against any other head
of income (e.g. salaries)
•Short term capital loss is to be set off against short term capital gain or long
term capital gain
•Long term capital loss can only be set off against long term capital gain

Correct Answer 32 FALSE

Answer An important objective of AMFI is to represent to the Government, Reserve


Explanation Bank of India and other bodies on all matters relating to the Mutual Fund
Industry
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 33 If an Institutional Investor is making an application for investing in a


Mutual Fund, which additional document is required ?
(a) Audited Accounts for the last 3 years
(b) Bank Statements
(c) Board Resolution
(d) Approval letter from SEBI

Question 34 An investor gives a cheque of Rs 7 lacs at 4 pm at a Mutual Fund office


for investment in a Equity Fund. The NAV of which day will be
applicable to him ?
(a) Same day NAV
(b) NAV of the next business day
(c) NAV of the day on which the funds are available
(d) None of the above

Correct Answer 33 Board Resolution

Correct Answer 34 NAV of the day on which the funds are available

Answer For investments of amount over Rs 2 lacs, irrespective of the time of receipt of
Explanation application, NAV of the business day on which the funds are available for
utilisation before the cut-off time of that day is applicable.
For all Equity and Debt funds (except Liquid funds) - For investment of Rs 2
lacs and below - NAV of the same day if received before 3 pm ( cut-off time)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 35 If an investor feels that the trustees have not fulfilled their obligations,
then he can file a suit against the trustees for breach of trust - True or
False ?
(a) TRUE
(b) FALSE

Question 36 Pension Funds Regulatory and Development Authority (PFRDA) is the


regulator for the National Savings System.
(a) TRUE
(b) FALSE

Correct Answer 35 TRUE

Correct Answer 36 FALSE

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


Explanation regulator for the National Pension System.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 37 An elderly couple who have no immediate family members should ideally
invest in .
(a) ELSS Funds
(b) Debt Funds
(c) Sectoral Funds
(d) Blue Chip Equity Funds

Question 38 To source the data required to track the performance of mutual funds
most offer free tools on their websites for this purpose.
(a) AMC's
(b) Distribution Houses
(c) MF Research companies
(d) All of the above

Correct Answer 37 Debt Funds

Answer Debts funds carry the least amount of risk so they can be recommended to the
Explanation elderly couple.
The other funds are Equity oriented and carry huge market risks.

Correct Answer 38 All of the above

Answer An investor who wants to study the performance of a MF by collecting daily


Explanation NAV etc. from the newspapers can find it frustratingly time consuming.
However ready-made solutions are available in the market. Many AMCs,
distribution houses and mutual fund research houses offer free tools in their
website.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 39 Of the following documents, which is required to be appended to the


application form of a MF scheme ?
(a) Statement of Additional Information - SAI
(b) Addendum
(c) Scheme Information Document - SID
(d) Key Information Memorandum - KIM

Question 40 A regular dividend paying mutual fund scheme can be used for capital
appreciation - True or False ?
(a) FALSE
(b) TRUE

Correct Answer 39 Key Information Memorandum – KIM

Answer KIM is essentially a summary of the SID and SAI.


Explanation
p As p
per SEBI regulations,
g , every
y application
pp form is to be accompanied
p by
y the
KIM.

Correct Answer 40 FALSE

Answer A regular dividend paying mutual fund scheme can be used as a source of
Explanation regular income.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 41 Mutual Funds are constituted as Investment Companies in India - True


or False ?
(a) TRUE
(b) FALSE

Question 42 Recurring expenses cannot be charged to a Mutual Fund scheme as it drags


down the NAV - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 41 FALSE

Answer Mutual funds are constituted as Trusts.and they are governed by the Indian
Explanation Trusts Act, 1882

Correct Answer 42 FALSE

Answer Recurring Expenses can be charged to the scheme.


Explanation Since the recurring expenses drag down the NAV, SEBI has laid down the
expenses and their limits which can be charged to the scheme.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 43 In the Scheme Information Document (SID), the condensed financial


information (for schemes launched in last 3 financial years) is mentioned -
True pr False ?
(a) FALSE
(b) TRUE

Question 44 Liquid schemes and other debt schemes regularly park funds in short
term deposits of commercial banks but cannot charge management fees
on these - True or False ?
(a) FALSE
(b) TRUE

Correct Answer 43 FALSE

Answer Condensed financial information (for schemes launched in last 3 financial


Explanation
p years)) is mentioned in the Statement of Additional Information ((SAI).
y )

Correct Answer 44 TRUE

Answer Management fees cannot be charged by liquid schemes and other debt
Explanation schemes on funds parked in short term deposits of commercial banks.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 45 Cash less medical insurance schemes has led to .


(a) More Liquidity with investors
(b) Less Liquidity with investors

Question 46 Tax Deferral is a key feature of .


(a) Dividend Option
(b) Growth Option
(c) Arbitrage Fund
(d) Liquid Schemes

Correct Answer 45 Less Liquidity with investors

Answer Investors keep less liquidity ( ready money ) as the insurance companies settle
Explanation the medical bills directly.

Correct Answer 46 Growth Option


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 47 Open-ended schemes have to re-open for sale / re-purchase within 5


business days of the allotment and that date is known as the Re-Opening
date - True or False ?
(a) TRUE
(b) FALSE

Question 48 The Custodian accepts and gives delivery of securities for the purchase
and sale transactions of the various schemes of the fund - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 47 TRUE

Answer As per SEBI guidelines, NFOs [other than ELSS and RGESS] can remain
Explanation open for a maximum of 15 days.
Allotment of units or refund of moneys, should be done within 5 business days
of closure of the scheme and Open-Ended
p schemes have to re-open
p for sale /
re-purchase within 5 business days of the allotment.

Correct Answer 48 TRUE

Answer The custodian is responsible for settling all the transactions on behalf of the
Explanation mutual fund schemes.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 49 In the Mutual Fund industry - every AMC gives an ARN code number
which is renewed every three years - True or False ?
(a) True - this is as per SEBI rules
(b) False - AMFI issues the ARN code number.
number

Question 50 All advertisements and Sales Literature containing an AMC(s)/Mutual


Fund ranking must prominently disclose, with respect to the ranking
.
(a) The name of the Ranking Entity and the criteria on which the ranking is based
(b) The name of the category (e.g. income/growth)
(c) The number of AMC(s)/Mutual Funds in the category.
(d) All of the above

Correct Answer 49 False - AMFI issues the ARN code number.

Correct Answer 50 All of the above


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 51 Mr. Shah gives a local cheque at 4.30 pm of Rs 10 lacs at a Mutual Fund
office for investing in a Gilt Fund. Of which day will the NAV be
applicable to him ?
(a) NAV of the same day
(b) NAV of the next business day
(c) NAV of the day on which the funds will be available
(d) None of the above

Question 52 Due to the popularity of cash less health insurance policies the liquidity
needs of the investors have reduced - True or False
(a) TRUE
(b) FALSE

Correct Answer 51 NAV of the day on which the funds will be available

Answer For investments of amount over Rs 2 lacs, irrespective of the time of receipt of
Explanation application, NAV of the business day on which the funds are available for
utilisation before the cut-off time of that day is applicable.
For investment of Rs 2 lacs and below - NAV of the same day if received
before 3 pm ( cut-off time)

Correct Answer 52 TRUE

Answer Earlier people use to save to meet medical emergencies. But due to cash less
Explanation medical insurance people keep less liquidity with them as the insurance
companies pay for the medical bills
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 53 Dividend Distribution Tax (DDT) on debt-oriented mutual fund schemes


for Corporate Investors is + Surcharge + Education Cess
(a) 15%
(b) 25%
(c) 30%
(d) 35%

Question 54 Different investors have different investment needs and objectives. This is
the reason Mutual Fund offer different .
(a) Plans
(b) Options
(c) Schemes
(d) time horizons.

Correct Answer 53 30%

Answer Tax on dividend distributed by debt-oriented mutual fund schemes is as


Explanation follows:
Others: 30% + Surcharge + Education Cess
Individuals and HUF: 25% + Surcharge + Education Cess

Correct Answer 54 Schemes

Answer MF's have various schemes like Large Cap Funds, Mid Cap Funds. Sectoral
Explanation Funds etc. to suit varied investment requirements.
(Plans and Options are Dividend / Growth etc. which form a part of the
scheme)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 55 A person wishes to avail of a loan. For which of the below options he
cannot get a loan ?
(a) To start a textile factory
(b) To buy a car of value above Rs 20 lacs
(c) To buy a high priced lottery ticket
(d) To buy a house in a Union Territory

Question 56 You are expecting interest rates (yields) to rise in the markets.
markets Where
would you invest your money considering this forecast ?
(a) Long Terms Debt Funds
(b) Short Term Debt Funds
(c) Equity Funds
(d) Banking Sector Funds

Correct Answer 55 To buy a high priced lottery ticket

C
Correct
tAAnswer 56 Sh t Term
Short T D bt Funds
Debt F d

Answer If it is expected that interest rates would go up, it would be safer to go with
Explanation Short Term Debt Funds. As the rates rise, the short-term bonds would mature,
allowing the fund manager to deploy the proceeds at higher rates.
On the contrary, as interest rates in the market goes down, debt securities gain
in value. Therefore, long term debt funds would be sensible in declining
interest rate scenarios.
scenarios
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 57 As per the provisions of the Income Tax Act - Short term capital loss is to
be set off against short term capital gain or long term capital gain - True
or False ?
(a) TRUE
(b) FALSE

Question 58 For a Young Unmarried - which of the following phase is applicable ?


(a) Accumulation
(b) Distribution
(c) Transfer
(d) None of the above

Correct Answer 57 TRUE

Answer Some key provisions of IT Act related to Capital Gains are:


Explanation •Capital loss, short term or long term, cannot be set off against any other head
of income (e.g. salaries)
•Short term capital loss is to be set off against short term capital gain or long
term capital gain
•Long term capital loss can only be set off against long term capital gain

Correct Answer 58 Accumulation

Answer Accumulation is the stage when the investor gets to build his wealth.
Explanation It covers the earning years of the investor i.e. the phases of the life cycle from
Young Unmarried to Pre-Retirement.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 59 The prescribed ceiling for ill liquid investments is lower for ,
which have a greater need for liquidity because investors can offer their
units for re-purchase at any time.
(a) ELSS Schemes
(b) Close Ended Schemes
(c) Open Ended Schemes
(d) Debt Funds

Question 60 Which one of the below mentioned document is not required for KYC
process ?
(a) PAN Card
(b) Address Proof
(c) Income Proof
(d) Identity Proof

Correct Answer 59 Open Ended Schemes

Correct Answer 60 Income Proof


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 61 A Mutual Fund scheme gave an annualised return of 9.86% and the
annualised Standard Deviation of the fund is 3.47. The current risk free
return is 8%. Calculate the Sharpe Ratio.
(a) 0.89
(b) 0.72
(c) 0.49
(d) 0.53

Question 62 Management fees cannot be charged by liquid schemes on funds parked


in short term deposits of commercial banks - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 61 0.53

Answer The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation


Explanation ie. ( Return Earned - Risk free Return ) / Standard Deviation
(9.86 – 8) / 3.47
1.86/3.47
0.53

Correct Answer 62 TRUE

Answer SEBI has stipulated annual limits on recurring expenses (including


Explanation management fees) for various Equity and Debt schemes.
However management fees cannot be charged by liquid schemes and other
debt schemes on funds parked in short term deposits of commercial banks.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 63 In a scenario where interest rates are falling, it would be advisable to


invest in a debt fund rather than bank deposit - True or False ?
(a) TRUE
(b) FALSE

Question 64 The Pension Account of National Pension System (NPS) is known as


.
(a) Tier I
(b) Tier II
(c) Tier III
(d) Asset Class E

Correct Answer 63 TRUE

Answer As interest rates in the market goes down, debt securities gain in value.
Explanation Therefore, long term debt funds would be sensible in declining interest rate
scenarios.
i
Also if it is expected that interest rates would go up, it would be safer to go
with Short Term Debt Funds. As the rates rise, the short-term bonds would
mature, allowing the fund manager to deploy the proceeds at higher rates.

Correct Answer 64 Tier I

Answer Tier I A/c of the National Pension System (NPS) is the Pension account and
Explanation is non-withdrawable.
Tier II A/c is the Savings account and is withdrawable to meet financial
contingencies. An active Tier I account is a pre-requisite for opening a Tier II
account.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 65 In Liquid funds, simple annualised return method is used to show the
returns because .
(a) Its a simpler way to calculate and investors understand it easily
(b) The investment made is fixed for 30 - 90 - 180 days
(c) The return is calculated over smaller time horizons
(d) The amount invested is usually small

Question 66 You are a mutual fund advisor.


advisor To whom would you advise investment of
more than 70 % of their funds in debt funds ?
(a) A 33 year old well employed with one son
(b) A 45 year old Executive Manager of a company who has 2 children
(c) Elderly couple with no children
(d) Young man working with Glaxo

Correct Answer 65 The return is calculated over smaller time horizons

Answer In case of Money Market schemes and liquid plans, wherein investors have
Explanation very short investment horizon, the performance can be measured and
advertised by simple annualisation of yields.

Correct Answer 66 Elderly couple with no children

Answer More Allocation to debt funds is recommended for senior citizens as they
Explanation carry the least amount of risk
Young people can take risks so they are advised to invest in Equity funds for a
long term.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 67 The Stock Exchanges which provide facilities for Mutual Fund trading
also do the functions of Mutual Fund RTAs. - True or False ?
(a) TRUE
(b) FALSE

Question 68 The National Pension System (NPS) offers a wider portfolio choice than
Mutual Funds - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 67 FALSE

Answer
A Stockk Exchanges
St E h d
does are nott required
i d to
t do
d the
th role
l off Registrars
R it andd
Explanation Transfer Agents (RTA).

Correct Answer 68 FALSE

Answer The NPS offers fewer portfolio choices than mutual funds.
Explanation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 69 Investments owned by the scheme may be quoted in the market at higher
than the cost paid and these gains are called as .
(a) Valuation Gains
(b) Booked Gains
(c) Notional Gains
(d) Notional Losses

Question 70 Loads and taxes pull the investors returns below that earned by the
Scheme - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 69 Valuation Gains

Answer Investments owned by the scheme may be quoted in the market at higher than
Explanation
p the cost p
paid and these are called valuation g
gains.
Similarly, there can be valuation losses when securities are quoted in the
market at a price below the cost at which the scheme acquired them.

Correct Answer 70 TRUE


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 71 What is the full form of ASBA ?


(a) Application Supported by Blocked Amount
(b) Applicants Supporting Block Amount
(c) Application Supported by Bankers Acceptance
(d) Applications Superiority by Blocked Amount

Question 72 An investor gives a cheque of Rs 2 lacs for investing in a ELSS scheme at


2.30
2 30 pm at a Mutual Fund office.
office The NAV of which day will be
applicable to him ?
(a) NAV of the same day
(b) NAV of the next business day
(c) NAV of the day on which funds will be available
(d) None of the above

Correct Answer 71 Application Supported by Blocked Amount

Correct Answer 72 y on which funds will be available


NAV of the day

Answer For all Equity and Debt funds (except Liquid funds) - For investments of
Explanation amount of Rs 2 lacs and above, irrespective of the time of receipt of
application, NAV of the business day on which the funds are available for
utilisation before the cut-off time of that day is applicable.
For investment of below Rs 2 lacs - NAV of the same day if received before 3
pm ( cut-off time)
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 73 The dividend received by a Mutual Fund investor will be taxed at a rate
of .
(a) 5%
(b) 10%
(c) 20%
(d) No tax on Mutual Fund Dividends in the hands of the investor

Question 74 A investors wishes to invest in debt mutual funds but wants high liquidity
- should he invest in Fixed Maturity Plans ?
(a) Yes
(b) No

Correct Answer 73 No tax on Mutual Fund Dividends in the hands of the investor

Answer The dividend received by an investor in a MF - be it Equity or Debt, is


Explanation exempt from tax.

Correct Answer 74 No

Answer Fixed maturity plans are a kind of debt fund where the investment portfolio is
Explanation closely aligned to the maturity of the scheme.
AMCs tend to structure the scheme around pre-identified investments. So it
will not be easy to liquidate the FMPs.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 75 Once the New Fund Offer (NFO) of a Close Ended Fund has closed, a
person can buy the listed units of such close ended fund .
(a) At prices usually higher than NAV
(b) At prices usually lower than NAV
(c) At prices which can be higher or lower than NAV
(d) Units of a Close Ended Fund cannot be bought after NFO

Question 76 To achieve growth by investing in equity and equity related investments,


investments
along with income generation by investing in debt and money market
instruments would be the investment objective of a
.
(a) debt fund
(b) balanced scheme
(c) ELSS Fund
(d) S
Sectoral
l Equity
E i fund
f d

Correct Answer 75 At prices which can be higher or lower than NAV

Answer After the NFO of a close ended fund, sale and purchase transactions happen
Explanation on tthee stock
o stoc exchange
e c a ge betwee
between two ddifferent
e e t investors,
vesto s, and
a d that
t at tthee fund
u d iss not
ot
involved in the transaction.
The transaction price is likely to be different from the NAV. Depending on the
demand-supply situation for the units of the scheme on the stock exchange, the
transaction price could be higher or lower than the prevailing NAV.

Correct Answer 76 balanced scheme


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 77 Young Age, Good Steady Job, an Adventurous streak etc are some
qualities of an investor who takes risks in investments - True or False ?
(a) FALSE
(b) TRUE

Question 78 The peak of earning capacity of an investor reached during the pre-
retirement phase - True or False ?
(a) TRUE
(b) FALSE

Correct Answer 77 TRUE

Correct Answer 78 TRUE

Answer In the Accumulation stage, the investor gets to build his wealth. It covers the
Explanation earning years of the investor i.e. the phases of the life cycle from Young
Unmarried to Pre
Pre-Retirement
Retirement.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 79 Investing in can be a risky prospect during periods of


Economic Turmoil.
(a) Gilt Securities
(b) Debt Funds
(c) Mid Cap Funds
(d) Large Cap Funds

Question 80 Asset allocation means .


(a) Distribution of Funds between Fund Managers in a Mutual Fund
(b) Distribution of funds between various asset classes in a portfolio
(c) Distribution of funds between various persons after the death of a person
(d) Distribution of funds between beneficiaries of an AMC

Correct Answer 79 Mid Cap Funds

Answer Mid Cap Stocks are intrinsically not as strong as the frontline (large cap)
Explanation stocks, so they become riskier during periods of economic turmoil.

Correct Answer 80 Distribution of funds between various asset classes in a portfolio

Answer The distribution of an investor’s portfolio between different asset classes is


Explanation called asset allocation.
For eg - If an investor wishes to invest Rs 10 lakhs - His funds can be divided
and invested in Equity,
Equity Debt and Gold - This is asset allocation.
allocation
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 81 Debt-oriented, close-ended / interval, schemes /plans need to disclose their


portfolio in their website every month, by the working day of the
succeeding month.
(a) 3rd
(b) 10th
(c) 12th
(d) 15th

Question 82 Condensed financial information for schemes launched in last 3 financial


years is mentioned in the .
(a) Scheme Information Document (SID)
(b) Statement of Additional Information (SAI)
(c) Fact Sheet
(d) Prospectus

Correct Answer 81 3rd

Correct Answer 82 Statement of Additional Information (SAI)


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 83 Post the New Fund Offer, investors who wishes to buy units need to pay
.
(a) the NFO price plus inflation rate
(b) the same price as NFO
(c) a price linked to the inflation index
(d) a price that is linked to its NAV.

Question 84 Every trust has beneficiaries - True or False ?


(a) TRUE
(b) FALSE

Correct Answer 83 a price that is linked to its NAV.

Answer When a scheme is first made available for investment, it is called a ‘New Fund
Explanation Offer’ (NFO).
During the NFO, investors have the chance of buying the units at their face
value.
Post-NFO, when they buy into a scheme, they need to pay a price that is
linked to its NAV.

Correct Answer 84 TRUE

Answer Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund
Explanation trust, are the investors who invest in various schemes of the mutual fund.
The Trust acts through its trustees. Therefore, the role of protecting the
interests of the beneficiaries (investors) is that of the Trustees.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 85 Investments in Mutual Funds are subject to market risks and therefore
do not provide any guarantee of Capital Growth / Protection - True or
False ?
(a) TRUE
(b) FALSE

Question 86 Mutual funds can accept cash to the tune of Rs from small
investors.
(a) No cashh can be
b accepted
d by
b a MF
(b) Rs 50,000
(c) Rs 20,000
(d) Rs 5,000

Correct Answer 85 TRUE

Correct Answer 86 Rs 50,000


50 000

Answer Mutual funds usually do not accept cash.


Explanation However for small investors, who may not be tax payers and may not have
PAN/bank accounts, are allowed cash transactions for purchase of units in
mutual funds to the extent of Rs. 50,000/- per investor, per mutual fund, per
financial year.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 87 Gold Future Contracts .


(a) are traded on the Commodity Exchanges
(b) are not standardised products
(c) can be bought through Mutual Funds
(d) None of the above

Question 88 If a person wants to appeal against the ruling of SEBI, he can do so with
.
(a) RBI
(b) Commerce Ministry
(c) Company Law Board
(d) Securities Appellate Tribunal

Correct Answer 87 are traded on the Commodity Exchanges

Answer Gold futures contracts are traded in commodity exchanges like the National
Explanation Commodities Exchange (NCDEX) and Multi-Commodity Exchange (MCX).
The value of these contracts goes up or down in line with increases or
decreases in gold prices.

Correct Answer 88 Securities Appellate Tribunal

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 V.IMP LAST DAY REVISION EXAM 1

Question 89 There are no penalties for breach of code of conduct as mandated by


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

Question 90 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the
last day of the month for all their schemes on their respective website on
or before the of the succeeding month
(a) 3rd day
(b) 7th day
(c) 10th day
(d) 15th day

Correct Answer 89 FALSE

Answer As per 'AMFI Guidelines & Norms for Intermediaries' (AGNI) - In the event
Explanation of breach of the Code of Conduct by an intermediary the registration can be
cancelled after the set procedure is carried out.

Correct Answer 90 10th day


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 91 Investments in Mutual Funds can be done only through a AMFI


authorised MF distributors - True or False ?
(a) TRUE
(b) FALSE

Question 92 Dividend Distribution Tax (DDT) on Equity oriented mutual fund


schemes for Corporate Investors is + Surcharge + Education Cess
(a) 10%
(b) 25%
(c) 30%
(d) NIL TAX

Correct Answer 91 FALSE

Answer Investors can directly invest in MF's by visiting the MF office and other Point
Explanation
p of Sales ((POS).
)

Correct Answer 92 10%

Answer Tax on dividend distributed is for Individual / Domestic Companies and NRIS
Explanation for Equity oriented scheme is : 10% + 12% Surcharge + 4% cess = 11.648%
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 93 Which of the following should NOT be included in the Key Information
Memorandum ?
(a) The risks associated with the scheme
(b) The functions of Trustees and AMC
(c) The opening - closing dates of the NFO
(d) Minimum investments required and the cutoff time.

Question 94 A Mutual Fund scheme is know to distribute dividends from time to time.
time
Such MF can be used as a source of .
(a) Good Capital Appreciation
(b) Regular Income
(c) Safety of Capital
(d) Tax Planning

Correct Answer 93 The functions of Trustees and AMC

Correct Answer 94 Regular Income


NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 95 A Board Resolution is not required for an institutional investor to invest


in Mutual Funds if the Memorandum and Articles of Association permit
it to do so - True or False ?
(a) TRUE
(b) FALSE

Question 96 At what rate is the Securities Transaction Tax charged on sale of units of
debt oriented mutual fund in a stock exchange ?
(a) 0.01%
(b) 0.10%
(c) 0.13%
(d) 0%

Correct Answer 95 FALSE

Answer A Board Resolution is required as an authorisation for the investing institution


Explanation to invest.

Correct Answer 96 0%

Answer STT is not applicable on transactions in debt or debt-oriented mutual fund


Explanation
p ((includingg liquid
q fund)) units.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 97 Summary of SID - Scheme Information Document and SAI - Statement of


Additional Information is known as KIM - Key Information
Memorandum - True or False ?
(a) TRUE
(b) FALSE

Question 98 What is the effect on bond prices when interest rates rises ?
(a) Bond prices rises
(b) Bond prices fall
(c) No effect on bond prices
(d) Can rise or fall depending on the performance of stock markets

Correct Answer 97 TRUE

Answer KIM is essentially a summary of the SID and SAI.


Explanation As per SEBI regulations, every application form is to be accompanied by the
KIM. So KIM is more easily and widely distributed in the market.

Correct Answer 98 Bond prices fall

Answer Lets take an example : An investor has invested in a bond that yields a return
Explanation of 9%.
Later, yields in the market for similar securities rise to 10%. So the bond,
which was bought at 9% yield, is no longer such an attractive investment. It
will therefore lose value.
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

Question 99 The strategy of Tactical Asset Allocation is considered to be a risky


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

Question 100 Mutual funds are constituted as and therefore, they are governed
by the .
(a) Companies Indian Companies Act
Companies,
(b) Trusts, Indian Trusts Act
(c) Investment Agencies, SEBI Act
(d) NGOs, NGO Act

Correct Answer 99 TRUE

Answer Tactical Asset Allocation is the strategy when the investor presumes the
Explanation
p likely
y behaviour of the market.
An investor who decides to go overweight on equities i.e. take higher
exposure to equities, because of expectations of buoyancy in industry and
share markets. Such strategies are very risky and can backfire.

Correct Answer Trusts, Indian Trusts Act


100
NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1

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NISM SERIES V A – MUTUAL FUND DISTRIBUTORS
CERTIFICATION V.IMP LAST DAY REVISION EXAM 1