Class Test- 4

Year 1; Semester 1: Mutual Fund Agent

Total Marks: 110
Total Time: 1 Hour & 30 Minutes
Chapter No. 8,9,10,11 & 12 of NISM V-A Module

Instruction: Please encircle the correct Answer.

1. Fundamental analysis is a evaluation of the strength of the company’s price-volume charts.
A. True B. False

2. In a top-down approach, sector allocation precedes stock selection

A. True B. False

3. Which of the following is a truly international asset class

A. Real Estate B. Equity C. Debt D. Gold

4. Loads and taxes may account for the difference between scheme returns and investor returns.
A. True B. False

5. The most appropriate measure of returns for a scheme in existence for several years is:
A. Simple Return B. Dividend Return C. Annualised Return D. CAGR

6. Risk can be measured by

A. Variance B. Standard Deviation C. Beta D. Any of the above

7. Alpha refers to:

A. Excess return B. Beta C. Sharpe ratio D. Tracking error

8. Which of the following is an appropriate benchmark for a large cap equity fund?
A. S&P CNX Nifty index B. BSE 500 index C. BSE 200 index D. S&P CNX IT index

9. If the PE ratio is very high, it is likely that growth stocks would be:
A. Fairly valued B. Illiquid C. Overvalued D. Undervalued

10. CAGR is used to measure the returns from mutual funds for periods of:
A. equal to one year B. more than five years C. more than one year D. less than one year

11. Investments in equity funds can be expected to be:

A. Risky in the long term B. Risky in the short term C. Riskless in the long term D.Riskless in the short term

12. The primary data used in fundamental analysis of equity is:

A. Financial information B. Trading volume C. Shareholding pattern D. Stock prices

13. The correct indicator of return to the investor would be:

A. Return after expenses B. Return after expenses, load and tax
C. Return after expenses and load D. Portfolio Return.

14. Which of the following risks is not borne by FMP, who holds to maturity?
A. Credit risk B. Liquidity risk C. Default risk D. Market risk

Prepared By: Rahul Ranjan, Certified Financial Planner 1

9891303734, 9350024013; [email protected], [email protected]
15. A fund manager has sold his holdings while the markets are still going up and is holding cash as a
defensive measure. How is the portfolio likely to perform if the markets correct?
A. Underperform B. Match the market C. Outperform D. Correlated to the market

16. The track record of a fund can be used in evaluating funds that are:
A. Large B. Small C. In existence for a long period D. In existence for a short period

17. The risk in an equity fund can arise from the portfolio that holds:
A. Non-index stocks B. Higher proportion in a few sectors
C. Stocks from several sectors D. Less than 10% in a single stock

18. Which of the following investment exhibits higher volatility in its value?
A. Equity shares B. PPF C. Bonds D. Deposits

19. When the interest rates are going down, the prices of debt securities are likely to:
A. Go down B. Cannot say C. Go up D. Remain unchanged

20. Money market securities have a maturity period of:

A. Less than 91 days B. Less than 182 days
C. Less than or equal to 364 days D. equal to 364 days

21. Dividend yield for a stock is

A. Dividend per share B. Dividend per face value
C. Dividend per share to current market price D. None of the above

22. Of the following, which type of the fund would have a higher P/E multiple in comparison to average
market multiple
A. A value fund B. A growth fund
C. An index fund D. Could be any of the above three, one cannot generalize

23. What are value stocks?

A. They try to give higher returns than the market.
B. They are currently undervalued, but their true potential will be unearthed soon
C. Their earning are correlated with the state of the economy
D. They invest in high risk – high return stocks

24. Which of these analysts involves the study of historical data on the company’s share
price movement?
A. Fundamental analyst B. Technical analyst C. Quantitative analyst D. Security analyst

25. Who is the issuer of certificate of deposit?

A. Co-operative banks B. Scheduled banks C. Reserve bank of India D. Ministry of Finance

26. which of the following tells about how much profit the company earned for each equity share that
they own?
A. Earnings per Share(EPS) B. Price to Earning Ratio(P/E Ratio)
C. Book Value per share D. Price to Book Value

27. Which ratio indicates how much investor in the share market are prepared to pay (to become owners
of the company), in relation to the company’s earnings?
A. Earnings per Share(EPS) B. Price to Earning Ratio(P/E Ratio)
C. Book Value per share D. Price to Book Value

28. Which of the following is an indicator of how much each share is worth, as per the company’s own
books of accounts?
A. Earnings per Share(EPS) B. Price to Earning Ratio(P/E Ratio)
C. Book Value per share D. Price to Book Value

Prepared By: Rahul Ranjan, Certified Financial Planner 2

9891303734, 9350024013; [email protected], [email protected]
29. Which of the following is an indicator of how much the share market is prepared to pay for each
share of the company, as compared to its book value.
A. Earnings per Share(EPS) B. Price to Earning Ratio(P/E Ratio)
C. Book Value per share D. Price to Book Value

30. It is generally agreed that longer term investment decisions are best taken through a fundamental
analysis approach, while technical analysis comes in handy for shorter term speculative decisions,
including intra-day trading.
A. True B. False

31. Which of the following Portfolio Building approach focuses mainly on sector allocation decisions.
A. Top Down B. Bottom Up C. Growth Style D. Value Style

32. Which of the following Portfolio Building approach focuses mainly on stock picking decisions.
A. Top Down B. Bottom Up C. Growth Style D. Value Style

33. The returns in a debt portfolio are largely driven by

A. Interest rates B. Yield Spreads. C. tenor D. Both A & B

34. It is a used to assess how much a debt security is likely to fluctuate in response to changes in the
interest rates.
A. Interest Rates B. Modified Duration C. Yield Spreads D. ROI

35. Which of the following is truly an International Asset?

A. Debt B. Commodity C. Gold D. Real Estate

36. Which of the following is Measures of Return

A. Simple Return B. Annualised Return C. Compounded Return D. All of the above.

37. Recognising the risks involved in such leveraging, SEBI regulations stipulate that:
A. A mutual fund scheme cannot borrow more than 20% of its net assets
B. The borrowing cannot be for more than 6 months.
C. The borrowing is permitted only to meet the cash flow needs of investor servicing viz. dividend payments or
. re-purchase payments.
D. All of the above

38. Mutual Funds are barred from writing options (they can buy options) or purchasing instruments with
embedded written options.
A. True B. False

39. Which of the following suffers from concentration risk?

A. Sector Funds B. Diversified Equity Funds’ C. Mid Cap Funds D. Contra Funds

40. A diversified stock index, by definition, has a beta of

A. -1 B. 0 C. 1 D. None of the above

41. if risk free return is 5%, and a scheme with standard deviation of 0.5 earned a return of 7%, its
Sharpe Ratio would be
A. 4% B. 5% C. 7% D. 0.5%

42. if risk free return is 5%, and a scheme with Beta of 1.2 earned a return of 8%, its Treynor Ratio
would be
A. 2.5% B. 5% C. 8% D. 1.2%

43. Which of the following is a measure of the funds manager’s performance

A. Alpha B. Beta C. Delta D. Gamma

Prepared By: Rahul Ranjan, Certified Financial Planner 3

9891303734, 9350024013; [email protected], [email protected]
44. A value-based fund is likely to choose which type of stocks?
A. Higher priced stocks B. High growth stocks C. High dividend value stocks D. High PE stocks

45. Equity markets are more predictable in the long term than the short.
A. True B. False
46. Arbitrage funds are meant to give better equity risk exposure
A. True B. False

47. The comparable for a liquid scheme is

A. Equity scheme B. Balanced Scheme C. Gilt Fund D. Savings Bank account

48. Which of the following aspects of portfolio would an investor in a debt scheme give most importance
A. Sector selection B. Stock selection C. Weighted Average Maturity D. Number of securities in portfolio

49. Mutual fund ranking and rating amount to the same.

A. True B. False
50. An investor likes to assume high risks for higher returns. Which of the following funds would he
prefer?
A. Large cap fund B. Diversified equity fund C. Small cap growth fund D. Income fund

51. Which of the following funds is likely to have a high level of volatility in the NAV?
A. Long term gilt fund B. Short term debt fund C. Liquid fund D. 91-day FMP

52. The return to the investor in a short term debt fund can be impacted by ___________.
A. cash risk B. liquidity rist. C. Expense ratios D. Market risk

53. If you had to choose the lowest risk option for your investor, which one of the following would you
choose?
A. Balanced funds based on flexible allocation B. Equity funds
C. Balanced funds based on fixed allocation D. Sector funds

54. An investor who is conservative in his risk taking ability should avoid which of the following funds?
A. Liquid funds B. Diversified equity funds C. Sector equity funds D. Monthly income plans.

55. The investment objective of an investor is to earn steady income. Which of the following funds is
most likely to meet that objective?
A. Diversified equity fund B. Equity index fund C. Sector equity fund D. Dynamic bond fund.

56. While choosing a Debt fund, what is an important criteria?

A. Fund age & size B. Portfolio characteristics C. Tax implications D. All of the above

57. Which choosing a Money market fund, what does the investor look at?
A. Cost B. Quality C. Yield D. All of the above

58. While choosing an equity fund, which is an important criteria?

A. Fund age B. Fund manager’s experience C. Cost of investing D. All of the above

59. What is the first step of scheme selection

A. Deciding on the scheme category B. Selecting a scheme within the category
C. Selecting the right option within the scheme D. None of the above

Prepared By: Rahul Ranjan, Certified Financial Planner 4

9891303734, 9350024013; [email protected], [email protected]
60. What is the second step of scheme selection
A. Deciding on the scheme category B. Selecting a scheme within the category
C. Selecting the right option within the scheme D. None of the above

61. What is the third step of scheme selection

A. Deciding on the scheme category B. Selecting a scheme within the category
C. Selecting the right option within the scheme D. None of the above

62. More than 50% of the wealth of Indians is held in physical assets
A. True B. False

63. Gold Futures are superior to ETF Gold as a vehicle for life-long investment in gold.
A. True B. False

64. As regards wealth tax, ETF Gold is superior to physical gold.

A. True B. False

65. The New Pension Scheme is regulated by

A. SEBI B. IRDA C. PFRDA D. AMFI

66. An investor under the new pension scheme can choose which of the following asset classes
A. Equities B. Corporate debt C. Government Securities D. Any of the above

67. Asset class G in the NPS is suitable for investors who like to invest in:
A. Bank Deposits B. Government Securities C. Debentures of Companies D. Equity Shares

68. The price of gold in the spot market is Rs.20,000 per 10 gms. It is expected to go up to Rs.21,000.
What is likely to happen to the price of gold futures?
A. Increased volatility B. Go down C. Go up D. Do not change.

69. Money is paid by the insurer on the death of an insured person, to the
A. nominees of the deceased B. proposer of the policy
C. wife of the policy holder D. children of the deceased

70. The limitation of investing in real estate, to a small investor is that:

A. The liquidity is high B. Meets only income needs
B. Requires higher investment outlay D. The holding period is short

71. An investor who saves for a large expense in a short period of time is likely to choose:
A. A money back policy B. An endowment policy C. A ULIP D. A term Policy

72. Which of the following is a physical asset?

A. Corporate bonds B. Title to property C. Equity Shares D. Bank Deposits

73. An investor in NPS chooses the life cycle option. This means his asset allocation will be based on:
A. Age B. Holding period C. Risk profile D. Amount invested

74. Physical assets have value and can be touched, felt and used.
A. True B. False

75. This practice of taking larger positions based on margin payments is called leveraging.
A. True B. False

76. Wealth Tax is applicable on gold holding (beyond the jewellery meant for personal use). However,
mutual fund schemes (gold linked or otherwise) and gold deposit schemes are exempted from Wealth
Tax.
A. True B. False

Prepared By: Rahul Ranjan, Certified Financial Planner 5

9891303734, 9350024013; [email protected], [email protected]
77. In the event that a bank fails, the deposit insurance scheme of the government comes to the rescue
of small depositors. Upto Rs 1 lakh per depositor in a bank (across branches) will be paid by the insurer.
This limit is inclusive of principal and interest. Mutual fund schemes do not offer any such insurance.
A. True B. False

78. Interest earned in a bank deposit is taxable each year. However, if a unit holder allows the
investment to grow in a mutual fund scheme (which in turn is exempt from tax), then no income tax is
payable on year to year accretions. In the absence of the drag of annual taxation, the money can grow
much faster in a mutual fund scheme.
A. True B. False

79. An investor who is unwilling to invest in equity due to the perceived high risk may benefit from:
A. A complete allocation to an all-debt portfolio. B. A small proportion to a quick-gain trading portfolio.
C. A large proportion in a sector fund D. A small proportion in a diversified equity fund.

80. Which of the following funds will not be chosen by an investor who seeks liquidity?
A. Diversified equity funds B. Open ended income funds C. Liquid funds D. Equity-Linked saving schemes

81. The price of a closed end fund that is listed on a stock exchange tends to be:
A. Different from the NAV B. Unrelated to the NAV C. Higher than the NAV D. Equal to the NAV

82. Today’s costs can be translated into future requirement of funds using the formula:
A. A = P X (1 + i)n B. A = P / (1 + i) n C. P = A n X (1 + i) D. P = A n X (1 + i)

83. Providing funds for a daughter’s marriage is an example of

A. Goal-oriented Financial Plan B. Comprehensive Financial Plan
C. Financial goal D. None of the above

84. According to the Certified Financial Planner – Board of Standards (USA), the first stage in financial
planning is
A. Analyse and Evaluate Client’s Financial Status
B. Establish and Define the Client-Planner Relationship
C. Gather Client Data, Define Client Goals
D. Develop and Present Financial Planning Recommendations and / or Options

85. Investor can get into long term investment commitments in

A. Distribution Phase B. Transition Phase C. Inter-generational Phase D. Accumulation Phase

86. Distribution phase of Wealth Cycle is a parallel of Retirement phase of Life Cycle
A. True B. False

87. A financial goal, to be actionable has to be defined in terms of:

A. Amount and need B. Amount and time C. Needs and desires D. Need and time

88. The primary objective of financial planning is to provide for:

A. Financial goals B. Tax Saving C. Creating Wealth D. Retirement

89. A loan can be taken to buy an asset provided:

A. Rate of loan is less than rate of return on the asset
B. Rate of loan is unrelated to rate of return on the asset
C. Rate of loan is greater than rate of return on the asset
D. Rate of loan is equal to rate of return on the asset

90. When an investor plans to will his wealth to his heirs, financial planning is:
A. Required for the beneficiaries B. Required only for tax purposes
C. Required for the investor D. Not required

Prepared By: Rahul Ranjan, Certified Financial Planner 6

9891303734, 9350024013; [email protected], [email protected]
91. The focus on building a retirement corpus should be high ___________.
A. after retirement B. closer to retirement C. at retirement D. much before retirement

92. A greater allocation to equity can be recommended to an investor in the:

A. Transition phase B. Accumulation phase C. Reaping phase D. Distribution phase

93. Financial planning is:

A. investing funds to receive the highest rate of return possible
B. resorting to tax planning to keep taxes as low as possible
C. planning for retirement with the maximum income possible
D. process of solving financial problems and reaching goals

94. A couple in mid 40s who have children approaching the age of higher education or marriage are in
A. accumulation stage B. transition stage C. reaping stage D. distribution phase

95. A client whose goal of buying a house or funding a child’s education is close at hand is in the:
A. accumulation stage B. transition stage C. reaping stage D. d. distribution stage

96. The basis of genuine investment advice should be

A. The current market situation B. The agent commissions paid by different funds
C. Financial planning to suit the investor's situation D. Planning to complete the agent's annual targets

97. Financial planners and their clients should focus on

A. Allocating funds to asset classes B. Allocating funds to individual securities
C. Tracking stocks, which they feel have potential D. None of the above

98. Where would you place a 53 years old executive planning to retire at age 60?
A. Sudden wealth stage B. Reaping stage C. Accumulation stage D. Transition stage

99. During the reaping phase the investor looks to:

A. building wealth B. cashing out C. transferring wealth D. all of the above

100. Risk appetite of investors is assessed through

A. Risk Appetizers B. Asset Allocators C. Risk Profilers D. Financial Plan

101. The objective of asset allocation is risk management

A. True B. False

102. The asset allocation that is worked out for an investor based on risk profiling is called
A. Tactical Asset Allocation B. Fixed Asset Allocation
C. Flexible Asset Allocation D. Strategic Asset Allocation

103. Model portfolios are a waste of time for financial planners

A. True B. False

104. How much equity would you suggest for a young well settled unmarried individual
A. 100% B. 80% C. 60% D. 40%

105. An asset allocation that is not frequently revised is called:

A. Fixed allocation B. Tactical Allocation C. Flexible allocation D. Floating allocation

106. Return from equity depends on:

A. Company factors B. Economy factors C. Industry factors D. All of the given options

Prepared By: Rahul Ranjan, Certified Financial Planner 7

9891303734, 9350024013; [email protected], [email protected]
107. The risk appetite of an investor can be expected to:
A. Change with age. B. Remain unchanged C. Change every year D. Change with new events

108. In the asset allocation decision, which step is the last one?
A. financial goal determination B. Scheme Selection C. Asset Allocation D. Return Objective.

109. If flexible asset allocation is chosen, the ratio between the asset classes is likely to:
A. Remain equal B. Change with market changes C. Change every year D. Remain fixed.

110. Profiling is done to ensure that investment options are chosen according to the ability of the
investor to:
A. Save B. Accumulate C. Bear Risk D. Expect returns

Prepared By: Rahul Ranjan, Certified Financial Planner 8

9891303734, 9350024013; [email protected], [email protected]