Q1 .

As per SEBI regulations , a mutual funds scheme should have at least _________
Investor
● 10
● 15
● 20
● 25
CORRECT ANSWER
20
Explanation
As per SEBI, a Mutual Fund Scheme/Plan shall have minimum of 20 investor shall account for
more than 25 percent of the corpus of the Scheme/Plan (s).

Q2. Mutual fund units issued against purchase transactions would be subject to levy of stamp
duty at ______ of the amount invested
● 0.5%
● 0.05%
● 0.005%
● 0.01%
CORRECT ANSWER
0.005%
Explanation
With effect from July 1, 2020, mutual fund units issued against purchased transactions
(whether through lump-sum investment or SIP or STP or switch-ins or divided reinvestment)
would be subject to levy of stamp duty @0.005% of the amount invested.
Q3. To whom does the profits or losses made by mutual fund belongs?
● The investors
● The Asset Management Company
● Fund Managers
● Trustees
CORRECT ANSWER
The Investors
Explanation
The money received from investors is invested by the mutual fund scheme in a portfolio of
securities as per the stated investment objective .Profits or losses, as the case might be ,belong
to investors or unitholders.

No other entity involved in the mutual fund in any capacity participates in the schemes profts
and losses . They are all paid a free or commission for the contributions they make to launching
and operating the schemes.

Q4 What action has to be taken before deleting a default bank account from the registered
bank account in a mutual fund folio?
● A new folio will have to be opened with the same joint holding as the new default
account
● Another account has to be designated as the default bank account
● All the nominess of the mutual fund scheme have to sign on the change from
irrespective of the mode of holding .
CORRECT ANSWER
Another account has to be designated as the default bank account
Explanation
If the default bank account is being deleted from the list of registered accounts , than before
that ,another account has to be designated as the default bank account .
Q5 . The Asset Management Companies have to disclose the Total Expnese Ratios (TER) of the
various schemes on their websites on a _____ basis.
● Daily
● Weekly
● Montly
● Annual
CORRECT ANSWER
Daily
Explanation:
One of the important factors that impacts the scheme’s NAV is the Total Expense Ratio (TER),
charged to the scheme. Through, the same is very tightly regulated through SEBI regulations,
the investor should know about the scheme expense ratio
SEBI has mandated that the Asset Management Companies (AMCs) should prominently
disclosed on a daily basis , the Total expense ratio (scheme- wise , date- wise ) of all schemes on
their website .The same must also be published on AMFI website.
Q6. Financial goals have to be defined in terms of ________
● Time horizon and external funds required
● Cost and economics policies
● Aspiration and desires
● Time horizon and money needed
CORRECT ANSWER
Time horizon and money needed
Explanation:

The first step in goal setting is to identify events in life which will require funding like- marriage,
education, buying a vehicle etc.
The next step is to assign priorities-which of these events are more important than the others
After that one needs to assing a timline as well as amount of funding required at the time of
such events
Q7. If the sale and purchase transactions for year amounted to Rs .10,000 crore, and the
average size of net assets is Rs 5.000 core , this means that investment are held in the portfolio
on an average for ______ .
● 2 months
● 3 months
● 6 months
● 12 months
CORRECT ANSWER
6 months
Explanation:
Portfolio Turnover Ratio is calculated as Value of Purchase and Sale of Securities during a period
divided by the average size of net asset of the scheme during the period.
=Rs. 10,000 crore + Rs 5,000 crore = 2 or 200 percent
This means that investment are held in the portfolio, on an average for 12 montss + 2 i.e, 6
months.
Q8 . Investors tend to extrapolate the current event into the future and expect a repeat. This is
an example of _____ bias
● Overconfidence
● Recency
● Heard Mentality
● Familiarity
CORRECT ANSWER
Recency
Explanation:
Recency bias : The impact of recent events on decision making can be very strong . This applies
equality to positive and negative experiences . Investors tend to extrapolate the event into the
future and expect a repeat.
A bear market or a financial crisis lead people to prefer safe assets . Similarly,a bull market
makes people allocate more than what is advised for risky assets .The recent experience
overrides analysis in decision making.
Q9 . ______ is a proper benchmark for a balanced hybrid scheme.
● CRISIL Hybrid 75 + 25 , Conservative Index
● CRISIL Hybrid 25 + 75 , Aggressive Index
● CRISIL Hybrid 50 + 50 , Moderate Index
Correct answer
CRISIL Hybrid 50 + 50 , Moderate Index
Explanation:
CRISIL blended indices for hybrid funds:
Aggressive Hybrid Fund – CRISIL Hybrid 25+75 , Aggressive Index
Balanced Hybrid Fund – CRISIL Hybrid 50 + 50 , Moderate Index
Conservative Hybrid Fund – CRISIL Hybrid 75+25, Conservative Index.

Q 10 . Long Duration debt scheme invests in debt instruments with Macaulay duration _____.
● between 1 year and 3 years
● below 1 year
● greater than 7 years
● 6 months and 12 months
CORRECT ANSWER
greater than 7 years
Explanation:
Macaulay Duration is the weighted average of the time to receive the cash flows from a bond.
Long Duration Fund : An open – ended debt scheme investing in debt and money market
instruments with Macaulay duration greater than 7 years.

Q 11. When the asset allocation is maintained as a constant ratio by regular rebalancing of
portfolio , it is know as _____ .
● Dynamic asset allocation
● Flexible asset allocation
● Fixed asset allocation
● Variable asset allocation
CORRECT ANSWER
Fixed asset allocation
Explanation :
For eg – If a fund has a fixed asset allocation of 50:50 for Debt and Equity and if equity valuation
rises by 10 % then as per the fixed asset allocation strategy, 10 % of equity portfolio will be sold
and debt will be bought so that the debt equity valuation will be 50 :50

Q 12. For which of these documents is Time Stamping mandatory?

● Payment instrument only
● Application form only
● Transaction slip for buying additional units
 ● Both for Application form/transaction slip and payment instrument

CORRECT ANSWER
Both for Application form/transaction slip and payment instrument
Explanation:
Time stamping is mandatory for all financial transactions in mutual funds like purchase,
redemption etc. The application form, the payment instrument etc. have to be time and date
stamped.

Q 13 . Segregated portfolio means _______

● A portfolio which is kept aside for a ‘rainy’ day or contingency fund
● A portfolio which is created out of debt or money market securities affected by a credit
event
● A portfolio which is left after removing poor credit quality papers
● All of the above
CORRECT ANSWER
A portfolio which is created out of debt or money market securities affected by a credit event
Explanation:
To ensure fair treatment to all investors in case of a credit event and to deal with the liquidity
risk , in December 2018, SEBI permitted creation of segregated portfolio of debt and money
market intruments by mutual funds schemes.
“Segregated portfolio” means a portfolio , comprising of debt or money market instrument
affected by a credit event ,that has been segregated in a mutual funds .
Q 14 . What is the purpose of ‘credit enhancement’ in case of securitised transaction?
● Payment of higher coupon
● Generating capital gain
● Higher credit worthless
CORRECT ANSWER
Higher credit worthlness
Explanation:
In securitisation transactions, It is possible to work towards a target credit rating , which could
be much higher than the originator’s own credit rating .This is possible through a mechanism
called “Credit enhancement “.
The process of “Credit enhancement” is fulfilled by filtering the underlying asset classes and
applying selection criteria , which further diminishes the risk inherent for a particular asset
class.

Q 15 . Banks and NBFC’s can lend money against ________ of mutual fund units
● Nomination
● Redemption
● Pledge
● All of the above
CORRECT ANSWER
Pledge
Explanation:
Banks ,NBFC’s and other financiers often lend money against pledge of Units by the Unitholder.
This is effected through a Pledge Form executed by the unit-holder (pledger).The form has a
provision for specifying the party in whose favour the units are pledged (pledgee)

Q 16 . Whom should the investor approach if his complaint is not resolved by the Asset
Management Company (AMC)?
● Securities and Exchange Board of India (SEBI)
● Custodian
● Company Law Board
● Ombudsman
CORRECT ANSWER
Securities and Exchange Board of India (SEBI)
Explanation :
In the event of any issue with the AMC of mutual funds scheme , the investor can first approach
the AMC investor Service Centre . If the issues is not redressed , even after taking it up at
senior levels in the AMC, then the investor can write to SEBI (through SCORES) with the
complaint details.
SEBI complaint Redress System (SCORES) is a web based centralized grievance redress system of
SEBI SCORES enables investors to lodge, follow up on the complaints and tracks the status or
redressal of such complaints online.

Q 17. Infaltion Risk is also refered as _____

● Credit Risk
● Liquidity Risk
● Purchasing Power Risk
CORRECT ANSWER
Purchasing Power Risk
Explanation:
Inflation, or price inflation is the genral rise in the prices of various commondities , product, and
services that we consume .Inflation erodes the purchasing power of the money.
Inflation risk is also referred to as purchasing power risk, is the risk that inflation wil undermine
the real value of cash flow made from an investment.
Q 18 . Which of these statement(s) is /are False?
● If an investor holds his investment in a debt fund for more than three years , thre capital
gain will be considered as a long term capital gain
● As the purchase and re-purchase is done with the mutual fund , the investor does not
have to pay any capital gain tax
● Both ‘a’ and ‘b’ are false

CORRECT ANSWER
As the purchase and re-purchase is done with the mutual fund , the investor does not have to
pay any capital gain tax
Explanation :
Infalation, or price inflation is the general rise in the prices of various commonodities ,product
and services that we consume .
Inflation erodes the purchasing power of the money.

Infaltion risk is also reffered to as purchasing power risk , is the risk that inflation will
undermine the real value of cash flows made from and investment.

Q18. Which of these statement(s) is/ are FALSE?

● If an investor holds his investment in a debt in a debt fund for more three
years ,the capital gain will be considered as a long term capital gain
● As the purchase and re-purchase is done with the mutual fund, the
investor does not have to pay any capital gain tax
● Both ‘a’ and ‘b’ are false
CORRECT ANSWER
As the purchase and re- purchase is done with the mutual fund, the investor
does not have to pay any capital gain tax
Explanation:
The difference between the purchase price of the units and the selling price of
the units would be treated as capital gain and such capital gain are subject to tax

(Long –term is define as holding period of more than three years in case of non-
equityoriented funds like debt funds, whereas the same is more than 1 year in
case of equity –oriented funds)

Q19. Long term capital gains is Not taxed in which of these funds?
A. Balanced Advantage Funds
B. Balanced Funds
C. Diversified Equity Funds
● Both A and B
● Only C
● Only A
● Capital gains from all types of mutual funds are taxed subject to certain conditions
CORRECT ANSWER
Capital gains from all types of mutual funds are taxed subject to certain conditions
Explanation:
Capital gains form Equity, Debt and Hybrid funds are taxed to certain conditions like the holding
period etc.

Q 20. In whose beneficial interest is a mutual fund managed?

● Trustees
● Unit holders
● Sponsors
● AMC
CORRECT ANSWER
Unit holders
Exxplanation:
An investor (unit holder) in a mutual fund scheme is the benefical owner of thr units one
has bought. The mutual fund is managed for benefical interest of the unitholers.

Q 21 . The loss booked from a debt investment of 15 months can be set off against ______
● Long term capital loss
● Short term capital loss
● Short term capital gain or long term capital gain
● It cannot be set-off
CORRECT ANSWER
Short term capital gain or long term gain
Explanation
A capital gain or loss from an investment of less than 3 years in a debt instruments is
considered as Short term .
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.
Q 22 . Which if these statement are false?
A. While evaluating scheme , the Exqpense Ratio will matter much more in Debt Funds
than Equity mutual funds.
B. A mutual fund with a long track record is always better for investment as it would
give higher returns in the future
C. Ultra short term debt fund always invest in high credit quality debt securities
● A and B are false
● B and C are false
● A and C are false
● All A ,B and C are false
CORRECT ANSWER
B and C are false
Explanation:
1. Any cost is a drag on investor’s returns.Investors neeed to be particularly
careful about the cost structure of debt scheme’s because in the normal
course, debt returns can be much lower than equity schemes. So expense
ratio is more critical for debt funds.
2. The mutual fund advertisements use the disclaimer. “ Past performance may
or may not be sustained in future .”There is a reason for that . As expected
has shown time and again ,the top performers during one period may not
neccesarily remain as a top performer forever or near the other top
performaers or near top performers and vice versa . In such case , Simply
buying into a scheme due to good returns in the recent past may not be wise
approach .
3. When the limits are not tightly defined , the fund manager may assume an
active role in managing the risk ,e.g. an ultra –short term debt fund may take
credit risk since the SENI regulation only define the permitted maturity
profile ,which indicates how much interest risk the scheme can take.

Q 23 . Ultra –short –term debt scheme invests in debt and money market
instruments with Macaulay duration between ______
● 1 to 3 months
● 3 to 6 months
● 6 to 12 months
● 1 year to 3 years
CORRECT ANSWER
3 to 6 months
Explanation:
Macaulay Duration is the weighted average of the time to receive the cash flows
form a bond.
An open ended ultra-short-term debt scheme invests in debt and ,oney market
intruments with Macaulay duration between 3 month to 6 months

Q 24. Which of these is physical asset ?

● Gold futures
● Real estate fund
● Real estate
● Mortgaged backed schemes
CORRECT ANSWER
Real estate
Explanation:
Real estate means physical property in the form of land and buildings.
Real estate funds , God future and Mortaged backed securities are all financial
assests.

Q 25 . A mutual fund scheme’s NAV is said to be cum-dividend from the ______

● Date the dividend is announced till it is paid out
● Date the dividend is paid
● Date unit holders approve the dividend
● Date of notice of meeting

CORRECT ANSWER
Date the dividend is announced till it is paid out
Explanation:
When a dividend is announced , and until it is paid out ,it is referred to as cum –
Dividend NAV.

Q 26 . The expense which can be charged by an Asset Management Company to a

Mutual Fund scheme are limited by _______
● Fund Managers
● Sponsors
● Investors
● SEBI

CORRECT ANSWER
SEBI
Explanation :
The expenses which can be charged and the expense ratio etc . are mentioned in the
SEBI Mutual Funds Regulation , 1996 which the AMC have to adhere to .

Q 27 . What is the portfolio of a “Fund of Funds” made up of ?

● Money market securities
● Equity stocks
● Debt securities
● Mutual Funds schemes
CORRECT ANSWER
Mutual Fund schemes
Explanation:
Funds of funds is a mutual fund which utilise its proof of resources to invest in
various other kinds of mutual funds available in the market.
It does not directly invest in equity or debt securities.

Q 28 . Identify the TRUE statement .

 ● While calculating scheme returns for an investors , if there is an entry load ,
then the intial value of the Net Asset Value (NAV) Is taken as NAV minus
Entry Load.
● While calculating scheme returns for an investors , if there is an exit load ,
then the later value of the Net Asset Value

CORRECT ANSWER
While calculating scheme returns for an investors , if there is an entry load , then the
intial value of the Net Asset Value (NAV) Is taken as NAV minus Entry Load.

Explanation:
If there is an entry load on a scheme then while calculating the scheme returns, the
intial value of the Net Asset Value (NAV) is taken as NAV plus the Entry load as the
cost of purchase increases due to the entry load . So entry load has to be added to
the NAV and not subtracted.
For redemption , Instead of the later value of NAV ( which is used to calculating
scheme returns) , the amount actually received/receivable by the investors (i.e NAV
minus Exit Load , If any ) would need to be used.

Q 29 . Identify the TRUE statements

A. A mutual fund scheme with a beta of less than 1 is less risky than market
B. The diversified stock index has a Beta of 1
C. Unsystematic risk is measured by Its Beta
● Only A is True
● B and C are True
● A and B are True
● All A , B and C are True
CORRECT ANSWER
A and B are True
Explanation:
Beta measures the fluctuation in periodic returns in a scheme , as compared to
fluctuation in periodic returns of a diversified stock index ( representing the
market ) over the same period.
The diversified stock index by definition ,has a Beta of 1 , Schemes, whose beta is
more than 1 are seen as more risky than the market. Beta less than 1 is indicative
of a scheme that is less risky than the market.
Systematic risk is measured by its Beta

Q 30 . The New Fund Offer dates are published in the _______

● Both Key Information Memorandum and Scheme Information Document
● Statement of Additional Information (SAI)
● Key Information Memorandum (KIM)
● Scheme Information Document (SID)
Correct answer:
Both Key Information Memorandum and Scheme Information Document
Explanation:
SID has information on relevant NFO dates (opening,closing , re-opening).
KIM is essentially a summary of the SID and SAI, it contains the key points of the
offer document including the date of issue Opening, issue Closing & Re-opening
for Sale and Re- purchase
Q 31. Which of the below statements is a important advantage of a Exchange
Trade Fund (ETF)?
● A person can closely track the current valuation of an ETF and buy/sell
the units on stock exchange at those prices
● ETFs generally give higher returns than the other Mutual Funds
● An investor in an ETF can have a control on where his money can be
invested
● All of the above

CORRECT ANSWER
:
Explanation :
ETF’s are passive funds whose portfolio replicates an index or benchmark such as
an equity market index or a commodity index.
The units of the EFT are traded at a real time prices that are linked to the
changes in the underlying index. The market price also tracks the NAV very
closely.

Q 32 . The New Fund Offer dates are published in the ____

Both Key Information Memorandum and Scheme Information Document
Statement of Additional Information (SAi)
Key Information Memorandum (KIM) Scheme Information Document (SID)

CORRECT ANSWER

Explanation:
SID has information on relevant NFO dates (opening,closing,re-opening),

KIM is essentially a summary of the SID and SAi.It contains the key points of the
offer document including the dates of Issue Opening,Issue Closing & Re-opening
for Sale and Re-purchase

Which of the below statements is a important advantage of a Exchange Traded

Fund (ETF) ?
A person can closely track the current valuation of an ETF and buy/sellthe units
on a stock exchange at those prices ETFs generally give higher returns than other
Mutual Funds
An investor in an ETF can have a control on where his money can be invested All
of the above

.CORRECT ANSWER
Explanation:
ETFs are passive funds whose portfolio replicates an index or benchmark such as
an equity market index or a commodity index.
The units of the ETF are traded at real time prices that are linked to the changes
in the underlying index. The market price also tracks the NAV very closely.

As per AMFl's code of ethics,an Asset Management Company has to disclose

which of the following scheme related information to the unit holders?

A. Investment Pattern
B.Annual portfolio turnover
C. Annual securities transactions

CORRECTANSWER:

A and B

Explanation:
Asset Management Company (AMC) shall disclose to unit holders investment
pattern, portfolio details, ratios of expenses to net assets and total income
and portfolio turnover wherever applicable in respect of schemes on annual
basis.
Q 33. In which of these options can an investor expect a cash flow in his
bank account?
● Bonus
● Dividend Payout
● Dividend Reinvestment
● Growth

CORRECTANSWER:
Dividend Payout

Explanation:

Only if the investor chooses Dividend Pay-out option in his mutual fund
investments, the money will flow into his bank account whenever the mutual
fund pays the dividend.

In a growth option, dividend is not declared. Therefore, nothing is received in

the bank account

In a dividend re-investment option, the investor does not receive the

dividend in his bank account; the amount is reinvested in the same scheme
and additional units are allotted to the investor.

In a bonus issue, the investor does not pay anything. The fund allots new
units for free.

Q 34. Which statement is FALSE with reference to risk appetite?

● Risk appetite can be assessed by risk profiling
● Preferred risk appetite is different from ideal risk appetite
● Risk appetite indicates levelof risk that investor is comfortable with
People of same age will have same risk appetite

CORRECTANSWER:
People of same age will have same risk appetite

Explanation:
One of the common factors that many people use to evaluate the investor's
risk profile is the investor's age. It is popularly believed that younger
investors have the potential for taking higher risks compared to old people.

However, this may not be correct as different investors have different

financial goals at different age levels. In tact,investors in the same age group
may also have different goals. Their financial situations may also differ.In
such cases, it may not be prudent to categorize investors on the basis of age
alone.

Q 35. If an investor want to get updated monthly performance and portfolio

data on mutual funds , which of the following documents should be read?
● Scheme Information Document (SID)
● Fund Fact Sheet
● Key Information Memorandum (KIM)
● Statement of Additional Information (SAI)
CORRECT ANSWER
Fund Fact Sheet
Explanation:
The fund fact sheet plays a vital role in giving updated information on the
mutual fund schemes and usually is published on a montly basis by all the
fund houses.

Factsheet is not a statutory requirement.

Q 36. For how long is the trail commission paid to mutual fund distributor?
● For the first one year only
● For the first three years only
● For the first ten years only
● Till the money is held in fund
CORRECT ANSWER
:
Till the money is held in fund
Explanation:
A mutual fund distributor is paid trail commission for as long as the
investor’s money is held in fund.

Q 37 . identify the TRUE statement/s

● Rolling return are the average annualized returns calculated for
alternate holding period
● Holding period returns (HPR) do not provide an accurate pictiure of
returns of fund if its intial value is too high or low
● Both 1 and 2
● None of the above

CORRECT ANSWER
:
Explanation:
Holding period returns is calculated for a fixed period such as one month,
three months, one year , three years or since inception. Holding period
returns may not present an accurate picture of the returns from a fund if the
initial value or the end value used for calculator was too high or low.
To eliminate this impact rolling returns are calculated. Rolling returns is the
average annualized return calculated for multiple consecutive holding period
in an evaluation period.

Q 38. What is asset allocation?

● Deciding which and how many mutualfund schemes to invest in
● Finalizing which mutual fund schemes would deliver the highest
returns in future
● Deciding how to invest money across various asset categories in line
with one's risk profile,financialobjectives and current situation
● Deciding which asset category would outperform the others and
investing in it

CORRECT ANSWER
Explanation:
 Asset Allocation is a process of allocating money across various asset
categories in line with a stated objective.

The basic meaning of asset allocation is to allocate an investor's money

across asset categories in order to achieve same objective.

Q 39 .Which of these funds has the highest risk ?

● Gilt funds Index funds
● Money market funds Sector funds
CORRECTANSWER:
Sector funds

Explanation:
The sector funds invest in stocks belonging to just one sector of the
economy,in order to take advantages within the said sector. The examples of
such funds are:Pharma fund or Banking fund.

Sector funds are very risky because of the concentration in one sector. If the
sector underperforms then the scheme's returns is likely to be poor.

Q 40. Which of these statement(s) is/are FALSE with respect to Benchmarks?

A) Portfolio concentration is an important factor while selecting a
benchmark for an equity mutual fund
B) Choice of investment universe is not an important factor while selecting
an appropriate benchmark for debt mutual funds
Only A is false Only B is false
Both A and B are false
CORRECT ANSWER
Explanation:
Choice of investment universe is important and drives the choice of
benchmark in debt schemes.

For eg Liquid schemes invest in securities of upto 91 days' maturity.

Therefore, a short term money market benchmark such as NSE's MIBOR or
CRISIL Liquid Fund Index is suitable. Non-liquid schemes can use other type
indices depending on the nature of their portfolio.

Q 41. The opening of time stamping machine needs to be documented and

reported to _______
● Sponsors
● Trustees
● SEBI
● Asset Management Company
CORRECT ANSWER
Trustees
Explanantion:
The points of acceptance for mutual fund transaction have time stamping
machine with tamper-proof seal.
Opening the machine for repairs or maintaince is permitted only by vendors
or nominated persons of the mutual fund. Such opening of the machine has
to be property documents and reported to Trustees.

Q 42. What is negative Alpha?

It is indicative of outperformance by the fund manager
It is indicative of under-performance by the fund manager It is indicative of
over-hedging by the fund manager
It is indicative of under-hedging by the fund manager
 CORRECT ANSWER:
It is indicative of under-performance by the fund manager

Explanation:
The difference betweena scheme's actual return and its optimal return isits
Alpha-a measure of the fund manager's performance.

. Alpha, therefore, measures the performance of the investment in

comparison to a suitable market index. Positive alpha is indicative of
outperformance by the fund manager;negative alpha might indicate under-
performance.

Q43. Securities and Exchange Board of India (SEBI) functions does not include
which of the following?
● Regulation of Stock Exchanges Enforcing compliance of its regulations
● Making regulations for the MutualFund industry
● Approving the fund managers which have been appointed by the
AMC

CORRECTANSWER:

Approving the fund managers which have been appointed by the AMC

Explanation:
An approval of SEBI is not required by the AMC while appointing the fund
managers.

Q 44. _______is not a fair selling practice by a mutual fund distributor.

● Informing the investor of the various investment options
● Carefully understanding the clients financial needs
● Encouraging the churning of investments
● Giving personalised after sales service

CORRECTANSWER:
 Encouraging the churning of investments

Explanation:
Churning means frequent buying and selling.

Encouraging over transacting and churning of Mutual Fund investments to

earn higher commissions by MF agents is a bad practice.

Q 45. Identify the TRUE statement.

A) While calculating scheme returns for an investor, if there is an entry load,
then the initial value of the Net Asset Value (NAV) is taken as NAV plus Entry
Load
B) While calculating scheme returns for an investor, if there is an exit load,
then the later value of the Net Asset
Value (NAV) is taken as NAV plus Exit Load.

● Only A Only B
● Both A and B

CORRECTANSWER:

Only A

Explanation:

If there is an exit load on a scheme then while calculating the scheme

returns, the later value of the Net Asset Value (NAV) is taken
as NAV minus the exit load as the sale value decreases due to the exit load.
So exit load has to be subtracted from the NAV and not added.

Q 46 . Once a New Fund Offer closes , an open ended mutual fund is open for
Purchase _______
● By an existing investors only
 ● By existing investors on the stock exchange platform only
● By both existing and new investors

CORRECT ANSWER :
By both existing and new investors
Explanation:
An Open Ended mutual fund can be purchased by both new and existing
investors through the traditional way or through stock exchages.

Q 47. An investor in India is investing in US Dollar based funds. He/ She will
benefit when _____
● The US Dollar becomes weaker
● The US Dollar becomes stronger
● The US Dollar reamins steady

CORRECT ANSWER
The US Dollar becomes stronger

Explanation:
If the investor invests in the US, and the US Dollar becomes stronger during
the period of his investment, he/she will benefit.

For eg. •An investor buys USO 1000 worth of units in a US mutual fund
when the exchange rate was Rs 75 for 1 USO. So his investment is Rs 75000

If USO becomes stronger against India Rupee and rises to Rs. 77 and he
sells USO 1000 worth of units, his realisation in Indian rupees is 1000 x 77 =
Rs 77000. So he earns Rs 2000
(This is assuming all other factors like the NAV of the mutual fund
remaining the same)

Q 48. How is the redemption transaction of a mutual fund priced?

● NAV plus exit load
● NAV minus exit load
● NAV plus entry load NAV minus entry load

CORRECTANSWER:
NAV minus exit load

Explanation:
Schemes are permitted to keep the re-purchase Price lower than the NAV.
The difference between the NAV and re-purchase Price is called the "exit
load".

If the NAV of a scheme is Rs. 11.00 per unit,and it were to charge exit load
of 1 percent,the re-purchase Price would be Rs. 11- 1 percent on Rs. 11i.e.
Rs. 10.89.

Q 49. Identify the TRUE statement with respect to 'Tracking Error'.

A. Tracking error is calculated as the standard deviation of the excess
returns generated by the fund.
B. While comparing different index funds, one should invest in a fund with
high tracking error

● Only A is true
● Only B is true
 ● Both A and B are true

CORRECTANSWER:
Only A is true

Explanation:
Tracking error is a measure of the consistency of the out-performance of
the fund manager relative to the benchmark.The tracking error has to be
low for a consistently out-performing fund.

While investing in an Index Fund,one should invest in a fund with the

lowest tracking error.

Q 50. Investments are carried at _____ in a mutual fund portfolio.

● Market Value
● Face Value
● Book Value
● Cost Value

CORRECT ANSWER
Explanation:
Investments are taken at their market value. This is done, to ensure that
sale and re-purchase transact ions are effected at the true worth of the
unit, including the gains on the investment portfolio.

The process of valuing each security in the investment portfolio of the

scheme at its current market value is called 'mark to market• i.e. marking
the securities to their market value.