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http://testcentre.cielindia http://testcentre.cielindia.com/Login.aspx .com/Login.aspx Trail commission is paid on the basis of:

Minimum value of the invested amount Face value of the invested amount Original invested amount Market value of the invested amount Answer Feedback: Trail is paid on the market value of the invested amount The primary objective of creating a mutual fund trading platform on a stock exchange is to

Increase the number of products Increase the reach of mutual fund products Increase the cost of distribution Increase the number of investors Answer Feedback: Trading of units in stock exchanges is intended to increase the reach of the funds, not the investors, products or costs A fund of fund derives its NAV from other funds. Therefore it can publish its NAV by __________ 

9 am of the next day. 8 pm of the same day. 9 pm of the same day. 8 am of the next day. Answer Feedback: Fund of funds can publish the NAV by 9 am of the next day The primary data used in fundamental analysis of equity is

Financial information Shareholding pattern

Trading volume Stock prices Answer Feedback: Financial information is used in fundamental analysis An investor who saves for a large expense in a short period of time is likely to choose:

A money back policy An endowment policy A term policy A ULIP Answer Feedback: A money back policy is shorter in tenor compared to the other policies When investors buy units in an NFO, the amount mobilized by the fund is called:

Initial AUM Unit capital Average AUM Managed capital Answer Feedback: NFO is usually priced at face value. The amount mobilised therefore is the unit capital Which of the following is NOT required to be disclosed to the investors in a mutual fund?

Annual report of the AMC Annual report of the scheme Portfolio of the scheme  NAV of the schemes Answer Feedback: The annual report of the AMC need not be disclosed to unit holders If you receive an application for investing in a mutual fund, which one of the following investors would you reject?

HUFs PIOs OCBs  NRIs Answer Feedback: OCBs are not eligible to invest in mutual funds The amount of money remaining with a fund as unclaimed redemption is:

Transferred to a trust immediately. Managed by the fund until it is claimed. Transferred to SEBI. Managed by the fund for a specified period. Answer Feedback: Unclaimed redemptions have to be managed by the fund for a period of three years A financial goal, to be actionable has to be defined in terms of:

Amount and time Amount and need  Need and time  Needs and desires Answer Feedback: A financial goal has to be defined in terms of time and money, to be acted upon Which of the following constituents is responsible for executing the trades of the fund manager on the stock  exchange?

Custodian Brokers R&T agents

Banker  Answer Feedback: Brokers execute the trades for the fund manager. The custodian settles them. Which of the following investment exhibits higher volatility in its value?

Deposits PPF Bonds Equity shares Answer Feedback: Compared to bonds, deposits and PPF, the value of equity is more volatile Profiling is done to ensure that investment options are chosen according to the ability of the investor to:

Save Expect returns Bear risks Accumulate Answer Feedback: Profiling is done to assess the ability of the investor to bear risks Asset class G in the NPS is suitable for investors who like to invest in:

Debentures of companies Bank deposits Government securities Equity Shares Answer Feedback: Class G represents investment in government securities KYC norms have to be complied for which of the following mutual fund transactions?

All purchase transactions of Rs.50,000 or more in value

All transactions of Rs.50,000 or more in value All transactions All purchase transactions Answer Feedback: From Jan 1, 2011, KYC applies for all mutual fund transactions Risk factors needs not be carried in which of the following advertisements?

Awards advertisement Advertisement of existing products Tombstone advertisements  NFO advertisement Answer Feedback: Tombstone advertisements make statutory announcements. They carry no product information or risk factors An investor earns long term capital losses from his debt fund investments. He also makes a long term gain from his MIP investments. Which of the following is true?

The loss can be set off only against short term gains The loss can be set off  The loss cannot be set-off  Only short term gains are available for set-off  Answer Feedback: Long term capital losses can be set off only against long term capital gains 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?

Outperform Match the market Underperform

Correlated to the market Answer Feedback: If fund manager is in cash and the market corrects, the portfolio will not lose as much as a the benchmark. Which of the following is an appropriate benchmark for a large cap equity fund?

BSE 500 index BSE 200 Index S&P CNX Nifty index S&P CNX IT index Answer Feedback: Nifty is an index of 50 large cap equity shares and is the appropriate benchmark  If you had to choose the lowest risk option for your investor, which one of the following would you choose?

Equity funds Balanced funds based on fixed allocation Balanced funds based on flexible allocation Sector funds Answer Feedback: A balanced fund with fixed allocation maintains the ratio between debt and equity and is therefore less risky Investments in equity funds can be expected to be:

Risky in the long term Risky in the short term Riskless in the long term Riskless in the short term Answer Feedback: Investments in equity are risky, especially in the short term If an investor in a closed end fund seeks liquidity, he can:

Redeem units at ISCs Redeem units with the fund not redeem units before maturity Sell the units on a stock exchange Answer Feedback: Closed end funds can be sold before maturity only by selling at the stock exchange Which of the following NAVs of an equity fund is as per minimum regulatory requirement?

Rs.12.4525 Rs.12 Rs.12.452 Rs. 12.45 Answer Feedback: Equity fund NAVs have to be published to at least 2 decimal points. That is the minimum requirement Investments in mutual funds enable investors to reduce the risk in their portfolios through:

Sector selection Diversification Stock selection Market timing Answer Feedback: Risk in a portfolio is reduced through diversification Which of the following cannot be a appointed as a distributor of a mutual fund?

Individuals Banks Sponsor 

AMC employees Answer Feedback: AMC employees cannot be distributors The AMC's expenses to pay salaries to employees is borne by:

Trustees, not sponsors AMC, not unit holders Distributors, not unit holders Unit holders, not the AMC Answer Feedback: AMC expenses are borne out of the fee it earns and not charged to the fund When the interest rates are going down, the prices of debt securities are likely to:

Remain unchanged Cannot say Go down Go up Answer Feedback: Interest rate and prices of debt securities are inversely related The fund manager in a fund of fund scheme selects:

Stocks Bonds Funds Sectors Answer Feedback: A fund of fund invests in other funds In order to be appointed as a constituent of a mutual fund, it is compulsory to be:

Approved by RBI

Certified by Amfi Registered with SEBI Listed by Ministry of Company Affairs Answer Feedback: All mutual fund constituents have to be registered with SEBI A company investing in a mutual fund is required to submit along with the application:

A copy of the board resolution A copy of the profit and loss account A copy of the tax returns A copy of the balance sheet Answer Feedback: Companies have to submit the board resolutions approving the purchase The limitation of investing in real estate, to a small investor is that

Meets only income needs The holding period is short Requires higher investment outlay The liquidity is high Answer Feedback: Real estate investment requires higher investment outlay The assets of a fund are Rs. 200 cr. The current liabilities are Rs. 20 cr. The unit capital is Rs. 50 cr. and the face value per unit is Rs. 10. what is the NAV of the fund?

Rs.40 Rs.44 Rs.32 Rs.36 Answer Feedback: NAV = (Assets less liabilities)/units. Units = Unit capital/Face value. NAV = ((20020)/5) = 36

CAGR is used to measure the returns from mutual funds for periods of ____________.

less than one year  equal to one year  more than five years more than one year  Answer Feedback: For periods more than one year, it is mandatory to use CAGR to measure returns The investment objective of an investor is to earn steady income. Which of the following funds is most likely to meet that objective?

Diversified equity fund Dynamic Bond Fund Equity index fund Sector equity fund Answer Feedback: A fund that seeks to earn a steady income cannot be an equity fund, only a debt or bond fund When an investor plans to will his wealth to his heirs, financial planning is:

 Not required Required for the investor  Required only for tax purposes Required for the beneficiaries Answer Feedback: When wealth is planned to be passed on, financial planning is required for the  beneficiaries The focus on building a retirement corpus should be high ___________.

after retirement at retirement

closer to retirement much before retirement Answer Feedback: Retirement corpus needs to be built during the working years, much before retirement Which of the following is NOT found in an offer document?

Key personnel of the fund Existing schemes of the fund Features of competing funds Fees and expenses of the scheme Answer Feedback: Offer documents only provide information about the fund making the offer not information about competing funds An important benefit of SIPs is:

Lower fund expenses Rupee cost averaging Lower lock-in period High rates of return Answer Feedback: SIP is a mode of transaction in a fund that reduces average cost. The expense, return or  lock-in do not change. The price of gold in the spot markets 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?

Go up Do not change increased volatility Go down Answer Feedback: If it is expected that price will go up, prices in the futures market will go up

PAN is required for:

Re-purchase transactions  NFO transactions Purchase transactions above Rs50,000 All mutual fund transactions Answer Feedback: PAN is mandatory for all mutual fund transactions An individual investor chooses a dividend reinvestment option in a debt fund. What is the DDT applicable to the dividends that are reinvested?

DDT does not apply DDT applies only for dividend payout option DDT applies at 20% DDT applies at 12.5% Answer Feedback: DDT applies for individuals at 12.5% for both dividend and reinvestment options in a debt fund The AMFI code of conduct is:

 Not approved by SEBI Applicable only on voluntary basis Implemented only by AMFI Part of the SEBI Mutual fund regulation Answer Feedback: AMFI code of conduct has been included as part of regulation by SEBI Which of the following is a eligible for specific tax concessions?

Corporate bonds Company deposits

Post office deposits PPF Answer Feedback: There are no tax concessions on bonds and deposits. PPF interest is exempt from tax A mutual fund has been set up by a bank. Who is the regulator of the sponsor of such a fund?

Ministry of Finance RBI AMFI SEBI Answer Feedback: The fund in this case is regulated by SEBI, but its sponsor, the bank is regulated by RBI. Return from equity depends on:

All of the given options Company factors Economy factors Industry factors Answer Feedback: Return from equity depends on economy, industry and company factors A mutual fund scheme was launched on October 15. 2010. When is the SID due for the first regular  update?

January-12 January-11 March-11 March-12 Answer Feedback: SID has to be updated every March. But, for schemes launched in the second half of a financial year, time until the next, not following, March is allowed.

f unit holders seek a change in AMC, they should get the support of investors holding __________ 

50% of the unit capital. 25% of the unit capital. 75% of the unit capital. 40% of the unit capital. Answer Feedback: Unit holders controlling at least 75% of the unit capital should vote for a change in AMC Which of the following risks is not borne by FMP, who holds to maturity?

Credit risk  Default risk  Market risk  Liquidity risk  Answer Feedback: FMP that is held to maturity does not bear market risks If an investor uses the ASBA facility in NFO transactions, he makes the payment for units:

Without making an application In installments Upfront in advance Only on allotment of units Answer Feedback: ASBA enables payment for units only after allotment If an investor uses the ASBA facility in NFO transactions, he makes the payment for units:

Without making an application In installments

Upfront in advance Only on allotment of units Answer Feedback: ASBA enables payment for units only after allotment An investor transaction is completed using the online facility of a mutual fund at 11:30 AM. It is processed at 4:00 PM. What is the applicable cut-off time for the transaction?

Cut-off time does not apply to such transactions 11:30 AM 3:00 PM 4:00 PM Answer Feedback: For online transactions, the time recorded on the system is used to apply the NAV. It is 11:30 am in this case. Money is paid by the insurer on the death of an insured person, to the ____________.

 proposer of the policy wife of the policy holder  nominees of the deceased children of the deceased Answer Feedback: The proceeds of a policy are paid to the nominees if the insured person dies An investor likes to assume high risks for higher returns. Which of the following funds would he prefer?

Diversified equity fund Income fund Large cap fund Small cap growth fund Answer Feedback: A small cap growth fund has a higher risk-return ratio compared to a diversified, large cap or income fund

If flexible asset allocation is chosen, the ratio between the asset classes is likely to:

Change with market changes Change every year  Remain fixed Remain equal Answer Feedback: Flexible allocation means the ratio between the assets changes with changes in market value The track record of a fund can be used in evaluating funds that are:

Small In existence for a long period Large In existence for a short period Answer Feedback: Track record can be used to choose funds that have been in existence for a long period of time Which of the following funds will not be chosen by an investor who seeks liquidity?

Equity-linked saving schemes Liquid funds Open ended income funds Diversified equity funds Answer Feedback: Equity linked saving schemes have a 3-year lock-in and therefore should not be chosen  by an investor who seeks liquidity Which of the following funds is likely to have a high level of volatility in the NAV?

Liquid fund Long term gilt fund

91-day FMP Short term debt fund Answer Feedback: The volatility of a debt fund increases with its maturity, a long term gild fund is likely to have a high NAV volatility AMFI has the powers with respect to registered ARN-holding distributors to:

Issue notices All of the given options Impose penalties Cancel registration Answer Feedback: AMFI can issue notices, impose penalties and cancel registration of ARN holders. When a fund launches a new scheme, it first takes the approval of 

SAT Sponsors AMFI Trustees Answer Feedback: All mutual fund schemes are approved by Trustees. AMFI, SAT or Sponsors do not have anything to do with scheme launches The NAV for an equity fund purchase transaction will be applied based on:

Date of realization of cheque Date on the time stamp Date of the cheque Date of the application Answer Feedback: NAV applies for a equity fund transaction based on the time stamp.

A company that intends to invest in a mutual fund scheme needs to take approval from:

Company Law Board Registrar of Companies SEBI Board of Directors Answer Feedback: The Board of Directors have to approve the investments of a company in a mutual fund Which one of the following is NOT appointed by the AMC?

The R&T agent The custodian The banker  The distributor  Answer Feedback: The custodian is not appointed by the AMC, but by the sponsor  An investor in mutual funds faces the disadvantage of:

Lock-in period High cost of operations Low flexibility in investing Overload of choices Answer Feedback: The cost of operations in a fund is low, flexibility is high and not all funds have lock-in. The primary objective of financial planning is to provide for:

Tax saving Creating wealth Financial goals

Retirement Answer Feedback: Financial planning focuses on providing for defined financial goals Which of the following entities cannot be sued by the investor?

AMC Trust Custodian Sponsor  Answer Feedback: Investors cannot sue the trust, for it represents the investors themselves The risk in an equity fund can arise from the portfolio that holds:

Stocks from several sectors  Non-index stocks Higher proportion in a few sectors Less than 10% in a single stock  Answer Feedback: A portfolio with high proportion in few sectors is concentrated and risky. If an investor conducts a mutual fund transaction on a stock exchange platform, which of the following is  NOT true?

The transaction may have to be sent to the R&T agent The transaction will be put through by a broker  The transaction has be conducted online The transaction can be settled using a demat account Answer Feedback: An exchange transaction is put through a broker, settled using demat or sent to R&T agent, but need not always be online What is the maximum number of AMCs with whom a mutual fund distributor can be empanelled?

10 5 There is no maximum limit 20 Answer Feedback: There is no limit to the numbers of funds for which a distributor can work  If an investor redeems units from a fund, he is likely to receive an updated statement of account within:

7 days 15 days 30 days 10 days Answer Feedback: Statement of account for normal transactions has to be issued within 10 working days Money market securities have a maturity period of:

Less than or equal to 364 days Less than 91 days Less than 182 days Equal to 364 days Answer Feedback: All money market securities have maturity less than or equal to 364 days. An investor who is conservative in his risk taking ability should avoid which of the following funds?

Liquid funds Diversified equity funds Sector equity funds Monthly income plans

Answer Feedback: A conservative investor should avoid sector funds which can be risky, depending on how the sector performs A purchase request for an equity fund was accepted at an AMC office on Wednesday, March 11 at 2:30  pm. What is the applicable NAV for the transaction?

 NAV of March 11  NAV of March 9  NAV of March 12  NAV of March 10 Answer Feedback: Since the purchase request was on a working day before cut off time, same day NAV (NAV of March 11) applies. Securities transaction tax (STT) is payable by mutual fund investors on:

Repurchase of all units Sale of equity-oriented units Re-purchase of equity-oriented units Sale and repurchase of all units Answer Feedback: STT is payable only on redemption or repurchase of equity oriented funds A greater allocation to equity can be recommended to an investor in the:

Reaping phase Accumulation phase Distribution phase Transition phase Answer Feedback: If the investor is in accumulation phase he can allocate a higher amount to equity The component that is common between offer documents of two schemes of the same mutual fund is:

KIM SAI MIN SID Answer Feedback: SAI contains common information about the background of the fund house. If a scheme has a lock-in period, such information can be found in:

KYC SID SAI MIN Answer Feedback: Scheme specific information is found in the SID The risk appetite of an investor can be expected to:

Change every year  Remain unchanged Change with age Change with new events Answer Feedback: Risk appetite changes primarily with age of the investor  If the PE ratio is very high, it is likely that growth stocks would be

Fairly valued Undervalued Overvalued Illiquid

Answer Feedback: If the PE ratio is high, it means growth stocks are overvalued A transaction slip can be used in a mutual fund transaction if:

It is a transaction in an existing folio It is a non-financial transaction The value of the transaction is less than Rs.50000 It is a first time transaction Answer Feedback: To transact in an existing folio, transaction slip can be used An investor sells his units in an equity-oriented fund after 6 months, for a profit. What is the taxability of  this gain?

Taxable at 10% Taxable at 15% Taxable at 20% Taxable at marginal rates Answer Feedback: Gains from sale within one year is treated as short term capital gain, taxable at 15% for  an equity-oriented fund An investor buying mutual fund units for the first time uses the:

Transaction slip Statement of account Application form Switch form Answer Feedback: Application forms are used for fresh purchase transactions Which of the following is a physical asset?

Title to property

Bank deposits Corporate bonds Equity shares Answer Feedback: Deposits, bonds and shares are financial assets. Property is a physical asset The NAV of a fund is Rs. 40. The exit load is 1%. What is the re-purchase price per unit?

Rs.40.40 Rs.39.60 Rs.40 Rs. 39.40 Answer Feedback: Repurchase price = NAV - (NAV x Load). =( 40 - (40 x 1%) = 40 - 0.40 = 39.60. An investor who is unwilling to invest in equity due to the perceived high risk may benefit from:

A complete allocation to an all-debt portfolio A small proportion in a diversified equity fund A large proportion in a sector fund A small proportion to a quick-gain trading portfolio Answer Feedback: Sector funds are equity trading are risky options. A small portion in diversified equity is desirable for such investors The return to the investor in a short term debt fund can be impacted by __________.

cash risk  liquidity risk  expense ratios market risk  Answer Feedback: A short term debt fund is impacted the most by expenses, since the market and liquidity risks are low in such products

An application for a gilt fund is received with a cheque for Rs. 2 crore at 11:00 AM. What is the applicable  NAV?

 Next day Previous day Day of cheque realisation Same day Answer Feedback: For a debt fund, if the value of transaction is over Rs.1 cr, NAV applies on the date of  realisation of the cheque. In the asset allocation decision, which step is the last one?

Scheme selection Financial goal determination Return objective Asset allocation Answer Feedback: The determination of goal, objective and asset allocation is done first, and selection of  scheme is done last The interest on bank deposits is:

Taxable up to a certain limit Exempt from tax up to a limit Fully taxable Fully exempt from tax Answer Feedback: Interest from bank deposits is fully taxable If a distributor invests his own funds in a mutual fund, which of the following is true?

He can invest but only in a joint name

He cannot earn commission on his investments He cannot invest his own funds He cannot invest as a individual Answer Feedback: A distributor cannot earn commissions on his own investments in a fund The price of a closed end fund that is listed on a stock exchange tends to be:

Equal to the NAV Unrelated to the NAV Higher than the NAV Different from the NAV Answer Feedback: The price of a listed closed end fund depends on liquidity in the market and can be different from the NAV According to the investment management agreement, what is the power the trustee holds with respect to an AMC?

Trustee can recapitalize the AMC Trustee can deny fees to the AMC Trustee can change the staff of the AMC Trustee can change the AMC for non-performance Answer Feedback: A trustee can change the AMC An investor in NPS chooses the life cycle option. This means his asset allocation will be based on:

Age Risk profile Holding period Amount invested Answer Feedback: In a life cycle option, the asset allocation changes with the age of the investor 

An asset allocation that is not frequently revised is called:

Flexible allocation Floating allocation Tactical allocation Fixed allocation Answer Feedback: Flexible allocation allows the proportion invested in assets to change with market value without revision. A loan can be taken to buy an asset provided:

Rate of loan is less than rate of return on the asset Rate of loan is greater than rate of return on the asset Rate of loan is equal to rate of return on the asset Rate of loan is unrelated to rate of return on the asset Answer Feedback: If the rate of return on an asset is higher than the rate of loan, it may be worthwhile taking a loan to buy an asset A loan can be taken to buy an asset provided:

Rate of loan is less than rate of return on the asset Rate of loan is greater than rate of return on the asset Rate of loan is equal to rate of return on the asset Rate of loan is unrelated to rate of return on the asset Answer Feedback: If the rate of return on an asset is higher than the rate of loan, it may be worthwhile taking a loan to buy an asset Which of the following entities actually represents the mutual fund?

The custodian

The trust The sponsor  The AMC Answer Feedback: The mutual fund is structured as Which one of the following can change, without changing the fundamental attribute of a fund?

Fund manager  Lock-in period Asset allocation Investment Objective Answer Feedback: The fund manager of a fund can change If there is a loss from sale of mutual funds, this cannot be set off against ___________.

income from dividends and interest income from residential property any other head of income income from salary Answer Feedback: Loss from sale of mutual funds cannot be set off against any other head of income The correct indicator of return to the investor would be:

Return after expenses and load Return after expenses, load and tax Return after expenses Portfolio return Answer Feedback: Return to the investor is net, after expense, load and taxes Alpha refers to:

Sharpe ratio Excess return Tracking error  Beta Answer Feedback: Alpha refers to return over and above the benchmark