AMFI Practice TestSeries B

1. Which of the following is generally true for a growth stock?a. Steady capital appreciation and steady dividends yieldsb. High capital appreciation and high dividend yieldsc. High capital appreciation but low dividend yieldsd. Steady capital appreciation but high dividend yields

2. A fund's declared NAV does not include loadsa. Trueb. False

3. All expenses and income accrued upto the valuation date shall be considered for valuation. Some minor expenses need not be so accrued, provided their affect on the NAV is not more than:

a. 2%b. 1.5%c. 0.5%d. 1%

4. When a scheme with assured returns is being launched, which of the following need not be published in the offer document?

a. Means of fulfilling the guaranteeb. Information for all schemes launched by the fund in the pastc. Comparison with other mutual fundsd. Investment objective

5. NAV of a fund is 14, Entry Load is 2.25%. Calculate the price at which the investor will be able to 500 purchase units.

6. The NAV of each scheme should be updated on AMFI's websitea. Every quarterb. Every monthc. Every hourd. Every day

7. NAV of a scheme is 20. Exit Load is 1.5%. What will be the price at which the investor will be able to sell units?

8. Which of the following would you suggest if your client suddenly wins Rs. 1 cr in a game showa. Invest the whole amount in equity directlyb. Invest half in equity mutual funds and the other half in debt mutual fundsc. Invest in a money market mutual fund till the time he decides on the use of the moneyd. Spend, gift and invest as per his wish

9. Which of the following are not true for ELSS?a. Investor can claim an income tax benefitb. There is a lock-in period before investment can be withdrawnc. There are no specific restrictions on investment objectives for the fund managersd. These funds cannot invest in shares of listed companies

10. The prospectus of the OD containing the details of a new scheme is first registered witha. AMFIa. SEBIb. BSEc. Ministry of Finance

11. A no-load fund is one in which?

a. Entry load is not chargedb. Exit load in not chargedc. Entry load as well as exit load is not chargedd. The initial issue expenses are not charged to the investor

12. If the NAV of an open-ended fund increased from Rs. 16 to Rs. 20 in 6 months, the absolute return is

a. 6.00%b. 34.60%c. 25.00%d. 37.50%

13. A Mutual fund can benefit from economies of scale because of:a. Indirect investmentb. Large volumes of tradec. Portfolio diversificationd. Fund manager

14. The structure, which is required to be followed by mutual funds in India, is laid down by:a. Finance ministryb. SEBIc. Fund Sponsord. AMFI

15. The Board of trustees of a mutual funda. Act as a protector of investor’s interestb. Directly manage the portfolio of securitiesc. Do not have the right to dismiss the AMCd. Cannot supervise and direct the working of the AMC

16. The fund sponsor has to contribute:a. Nothing to the AMCb. The total Net Worth of the AMCc. At least 40% of the AMC’s net worthd. Exactly 50% of the net worth of AMC

17. Special Privileges of erstwhile UTI includea. Assured return schemesb. Guaranteesc. Ability to take/make loansd. All of the above

18. The most important factor to look for when investing in a corporate fixed deposit is thea. Yieldb. Rate of interestc. Credit rating of the depositd. None of the above

19. Risk arising from a scheme’s investment objective/strategy and proposed asset allocation isa. Not a risk at allb. Common to all schemesc. Specific to that schemed. Not applicable to debt funds

20. The role of AMFI in the MF industry is not to:a. Promote the interest of the unit holders

b. Set a code of ethicsc. Regulate mutual fundsd. Increase public awareness of MFs in the country

21. Loads are recovered a. From agents and distributorsb. As a fixed amount each yearc. At the time of investor’s entry or exitd. None of the above

22. Which of the following is true about the fundamental attributes of a schemea. Investment objectives of a scheme are not a fundamental attributeb. These can be changed after informing investors and taking approval from SEBI and Trusteesc. OD need not be updated after change in fundamental attributes of a schemed. All are false

23. Investments made by mutual fund on behalf of investors are accounted asa. Assetsb. Liabilitiesc. Capitald. None of the above

24. The NAV of an Open-ended scheme is 15. What can be the maximum entry load charged to the investor?

a. 2.25% of 10b. 2.25% of 15c. 7% of 15d. 7% of 10

25. A high portfolio turnover for a fund indicatesa. That the fund is activeb. Higher transaction costc. Both of the aboved. None of the above

26. Which of the following is not an equity instrument?a. Preference sharesb. Equity warrantsc. Ordinary debenturesd. Convertible debentures

27. Retired investors shoulda. Not draw down on their capitalb. Not invest in securities which bear risk of capital erosionc. Continue holding some proportion of their holdings in equity growth fundsd. Never invest in equity

28. The code of conduct may be put in place by:a. AMFIb. Board of Trusteesc. Directors of AMCd. All of the above

29. The expense ratio is not affected by:a. Fund sizeb. Average account sizec. Portfolio compositiond. Stock market conditions

30. Which of the following transaction cost are not quantified in the offer document?a. Brokerage commissionb. Dealer spreadc. Custodian feed. Registrar fee

31. A small investor can build a diversified portfolio bya. Buying one share each of all listed companiesb. Investing in a mutual fundc. Borrowing enough money to buy shares of well-managed companiesd. None of the above

32. The liquidity needs of an investor are met througha. Equity fundsb. Index fundsc. Money market fundsd. Sector funds

33. Which of the following is not false about a mutual funda. Open ended funds can be sold in secondary marketsb. Close ended funds do not have a fixed tenurec. Open ended funds do not calculate their NAV on every business dayd. The NAV of a close ended fund has to be calculated at least once in a week

34. An investor should be advised to avoid investing in a debt fund with a a. Lower rated portfolio and higher expense ratiob. Higher rated portfolio and lower expense ratioc. Lower rated portfolio and lower expense ratiod. Higher rated portfolio and higher expense ratio

35. A self-regulatory organization cana. Regulate all entities in the marketb. Regulate only its own members in a limited wayc. Regulate its own members with total jurisdictiond. Regulate no one

36. Systematic Withdrawal Plan allows investors to get back the principal amounts invested in addition to the income on investment

a. Trueb. False

37. UTI was set up bya. SEBIb. AMFIc. A special Actd. RBI

38. Constraints imposed by most funds on check writing area. Account balance should not fall below the minimum capital requiredb. Checks issued must be for at least the minimum amount specifiedc. Number of checks per month must not exceed a specified numberd. Both a & b above

39. An owner of preference shares is given which of the following rightsa. Voting rightsb. Fixed dividend income from post-tax profitsc. Voting rights and unlimited dividend incomed. No guaranteed rights

40. Market capitalisation of a company is calculated by multiplying the number of outstanding shares by

a. Rs.10b. Face value of each sharec. Current market value of each shared. Dividend yield

41. Shares of companies with large capital market capitalisationa. Have greater growth potentialb. Are more liquidc. Are not availabled. None of the above

42. In case of a fund scheme merger or take-overa. High court approval may not be necessaryb. SEBI approval is a mustc. All unit holders must be informedd. All of the above

43. What is the statistics used in validitating Beta?a. Standard deviationb. Betac. Ex-marksd. Sharpe ratio

44. As a financial planner, which of the following would you suggest for a person who can take a moderate risk

a. Aggressive growth fundb. Aggressive equity fundc. Diversified equity fundd. Sectoral fund

45. A growth fund manager would apply the following strategies:a. Invest in those companies that would give more returns than the average returns in the

industry.b. Invest in companies having a large equity base.c. Invest in companies coming out with new “Initial public offers’d. All of the above

46. An active style of portfolio management includes the following:a. Application of ‘Systematic transfer plan’ in various schemes of a fund.b. Undertake macroeconomic analysis to determine profitable investment trends.c. Invest in companies with high market capitalizationd. All of the above.

47. What would be the maximum initial issue expenses charged from the investors, if the amount mobilized from a mutual fund NFO is Rs. 50 crore.

a. Rs. 5 croreb. Rs. 2 crorec. Rs. 3 crored. Rs. 1 crore

48. When interest rates for similar maturities bonds are 11.5%, bond with a 8% coupon rate will become:

a. More attractiveb. Less attractivec. At pard. The price is unrelated to the interest rates for similar securities.

49. What would be a suitable benchmark to evaluate a closed-end debt fund?a. BSE Sensexb. I-sec’s Si-bexc. Crisil Composite Bond Fund Indexd. S & P CNX Nifty

50. Financial planning involves the achievement of following objectives:a. Buying a homeb. Purchase of a new carc. Planning for retirementd. All of the above

51. What is Bogle’s suggestion regarding the ‘rule of thumb’ for asset allocation?a. 50% equity and 50% debtb. 60% equity and 40% debtc. An investor’s allocation to debt should be equal to his age.d. Investor should not do any re-balancing of his/her portfolio.

52. What should be the recommended portfolio for an investor who is risk averse in his transition phase?

a. Higher allocation to equity fundsb. Higher allocation to debt instrumentsc. Investments only in equityd. He should not invest anywhere

53. Which of the following is true?a. SEBI does not allow the investor to pledge his mutual fund units in favor of a financial

institutionb. An investor cannot redeem his mutual fund holding in part.c. The frequency of investment offered for SIP varies from one fund to another.d. All of the above

54. What is the proof that the investor has invested in mutual fund units?a. The investors receive units commensurate with the investment made.b. Investors get an account statement, showing their holdings and their price.c. The receipt of money acts as the proofd. None of the above

55. What is the maximum time given to the Asset management company to give their reply after the observations made by SEBI to a new fund scheme filed with it?

a. 2 monthsb. 3 monthsc. 4 monthsd. 6 months

56. How would you convince a first-time investor who is risk-averse to invest in mutual funds in comparison to a bank deposit?

a. Mutual funds is the right choice to grow your wealth at a fast paceb. Mutual fund has the likelihood of giving more growth than the bank deposit as the investment

is in a diversified portfolio of securities.c. Investment in Mutual fund doubles your money in 3 years.d. All of the above

57. Bogle’s suggestion for debt is based on:a. Ageb. Wealth

c. Family sized. None

58. Govt. securities are valued for computing NAV by:a. AMFIb. RBIc. SEBId. MOF

59. Who cannot distribute mutual funds in India?a. Regional officeb. SEBIc. Post Officed. Foreign Banke. PSU Bank

60. Who cannot distribute mutual funds in India?a. Directors of AMCb. Trusteec. Employee of AMCd. Sponsor

61. Who cannot distribute mutual funds in India?a. RBIb. PSU Bankc. Foreign Bankd. All of the above

62. An important part of transaction cost is:a. Stamp dutyb. Custodian feec. Registrar feed. Commission

63. Best option for power of compounding is:a. 12% yearlyb. 6% half-yearlyc. 3% quarterlyd. 1% monthly

64. For tax implication computation, a client shoulda. Read the ODb. Consult tax consultantc. AMC will take cared. Clarify with IT Dept

65. Who registers the mutual fund with the SEBI?a. AMCb. Trusteec. Sponsord. Investment manager

66. A client’s financial plan should not be reviewed whena. The client has just retiredb. The client has just been divorced at age 40c. The client feels he has attained his financial goalsd. The client’s mutual fund portfolio shows appreciation

67. NAV means:a. (Market Value of Assets – Liabilities) / number of units outstandingb. (Book Value of Assets – Liabilities) / number of units outstandingc. Unit capital / number of units outstandingd. Net assets / initial number of units

68. If an investor needs income, he should select funds with:a. Low expense ratiob. High expense ratioc. Low current yieldd. High current yield

69. When interest rate rises, bond pricea. Is not affectedb. Fluctuates up or downc. Also risesd. Falls

70. The AMFI is governed by:a. RBIb. Ministry of Financec. A board of directors elected from among members of AMFId. SEBI

71. A fund that charges a load is better than a no-load funda. True b. False

72. Documents available to investors for inspection do not includea. Memorandum and Articles of Association of AMCb. Consent of auditors and legal advisorsc. Investment management reportsd. Reports based on which actual investments are made

73. A passive fund has the following featurea. A passive fund tracks the indexb. A passive fund matches the performance if the indexc. A passive fund selects the stocks that are present in the indexd. All of the above

74. Where do Gilt Funds Invest?a. Sharesb. Debenturesc. Dated Securitiesd. None of the above

75. Which of the following Mutual Fund was setup after 1963 but before 1987?a. SBI Mutual Fundb. Can Bank Mutual Fundc. LIC Mutual Fundd. None of the above

ANSWERS

1 a 31 b 61 a2 a 32 c 62 d3 d 33 d 63 d4 d 34 b 64 b

5 514.32 35 b 65 c6 d 36 a 66 d7 19.70 37 c 67 a8 c 38 d 68 d9 d 39 b 69 d10 a 40 c 70 c11 d 41 b 71 b12 c 42 d 72 d13 b 43 d 73 d14 b 44 c 74 c15 a 45 a 75 d16 c 46 b17 d 47 c18 c 48 b19 c 49 b20 c 50 d21 c 51 c22 a 52 b23 a 53 c24 c 54 b25 b 55 d26 c 56 b27 c 57 a28 d 58 b29 d 59 b30 a 60 b