NCFM Model Test Paper

Mutual Funds (Advanced) Module

Maximum Marks: 100 Test Duration: 120 minutes Pass Marks: 60 Time Left: 119:44 minutes

Correct answers are shown in green. Attempted answers, if wrong, are in red.

"If the latest Balance Sheet of a company is not available within ______ months from the close of the year, unless the accounting year is changed, the shares of such companies have to be valued at zero." [ 1 Mark ] (a) three (b) six (c) nine (d) four Q1 (e) I am not attempting the question LBMA stands for ________. [ 2 Marks ] (a) London Bullion Members Association (b) London Bond Market Association (c) London Bond Members Association (d) London Bullion Market Association Q2 (e) I am not attempting the question "If all markets, across countries move in tandem, it benefits asset allocation." [ 2 Marks ] (a) TRUE (b) FALSE Q3 (c) I am not attempting the question "On account of the _______ valuation, a scheme will keep showing capital gains (if the market goes up)." [ 1 Mark ] (a) weekly (b) NAV Q4 (c) MTM

(d) NPV (e) I am not attempting the question An active fund manager will try and give a return to the investor as close as possbile to the Nifty index returns. [ 1 Mark ] (a) TRUE (b) FALSE Q5 (c) I am not attempting the question "Unlike mutual funds, which accept money from investors upfront, venture capital funds and private equity funds only accept _______. " [ 2 Marks ] (a) pledges (b) shares (c) loans (d) firm commitment Q6 (e) I am not attempting the question TDS stands for _______. [ 2 Marks ] (a) Tax Deducted at Service (b) Tax Deducted at Source (c) Tax Deposited at Source (d) Tax Deposited at Service Q7 (e) I am not attempting the question All _____ reduce the investor?s returns. [ 2 Marks ] (a) passively managed funds (b) actively managed funds (c) dividends (d) transaction costs Q8 (e) I am not attempting the question "Suppose 100 ETF Units = 1 Nifty. In that case, if the Nifty is at 4,800, then the Q9 intrinsic value of each ETF Unit is Rs. _____. " [ 1 Mark ]

(a) 28 (b) 38 (c) 58 (d) 48 (e) I am not attempting the question Mutual Funds need to calculate NAV for each calendar ____ for their liquid fund schemes and plans. [ 1 Mark ] (a) day (b) week (c) month (d) year Q10 (e) I am not attempting the question Application from investors are to be received by mutual funds only at the _______. [ 1 Mark ] (a) head office or branch offices of the mutual fund (b) designated RTAs (c) official points of acceptance (d) designated banks Q11 (e) I am not attempting the question RTA carries out the redemption processing at its end and provides final redemption information to the Exchange on ____. [ 3 Marks ] (a) T+2 (b) T+1 (c) T+3 (d) T+4 Q12 (e) I am not attempting the question "On receipt of RBI consent, and subject to SEBI-registration, a FII can open a Q13 foreign currency denominated as well as rupee denominated bank account in India.

" [ 3 Marks ] (a) TRUE (b) FALSE (c) I am not attempting the question "Based on yield on government securities, risk-free benchmark yields are calculated. Government securities are grouped into _______ of 0.25-0.5 year, 0.5-1 year, 1-2 years, 2-3 years, 3-4 years, 4-5 years, 5-6 years, and 6 years and above for this purpose. " [ 2 Marks ] (a) """maturity buckets""" (b) """time to maturity buckets""" (c) """time period buckets""" (d) """duration buckets""" Q14 (e) I am not attempting the question STT stands for ______. [ 1 Mark ] (a) Securities Trading Tax (b) Securities Transfer Tax (c) Securities Transaction Tax (d) Securities Takeover Tax Q15 (e) I am not attempting the question ______ have to compensate any loss occasioned to any investor or to the scheme and/or plan on account of non-compliance by the fund. [ 1 Mark ] (a) RTAs (b) Stock Exchanges (c) Custodians (d) AMCs Q16 (e) I am not attempting the question The investment management activity of a mutual fund is managed by the ____. [ 1 Mark ] Q17

(a) Sponsors (b) AMC (c) Custodians (d) RTA (e) I am not attempting the question "CAGR calculation is more commonly used in statutory communication, such as Scheme Information Document, Performance advertisements etc. In other situations, market intermediaries use the _______." [ 1 Mark ] (a) XIR (b) XRR (c) IRR (d) XIRR Q18 (e) I am not attempting the question KIM stands for _____. [ 2 Marks ] (a) Key Information Master (b) Key Information Memo (c) Key Information Memorandum (d) Key Introduction Memorandum Q19 (e) I am not attempting the question "_____ investors trade in securities with a view to benefit from changes in their value, rather than to create value through projects. " [ 1 Mark ] (a) Foreign Direct (b) Foreign Portfolio Q20 (c) I am not attempting the question ______ is required for investing in mutual funds. [ 1 Mark ] (a) KYC (b) Passport Q21 (c) Voters ID

(d) Demat account (e) I am not attempting the question The maximum amount that a single investor can invest in a PMS scheme offered by a mutual fund is set at Rs. 500 crores. [ 2 Marks ] (a) TRUE (b) FALSE Q22 (c) I am not attempting the question Mutual funds are allowed to lend money to investment grade rated corporates and banks. [ 1 Mark ] (a) TRUE (b) FALSE Q23 (c) I am not attempting the question "In an open-end scheme, the unit-holder offers his units for re-purchase. This is effected at the ______ (if applicable)" [ 1 Mark ] (a) NAV less Entry Load (b) NAV (c) NAV less Exit Load (d) Exit Load Q24 (e) I am not attempting the question "The compounded return of a scheme is 12.55%. The annualised standard deviation is calculated to be 6.98%. Let us say that a risk-free return of 8% would have been possible, if the same money was invested in government bonds. Calculate Sharpe's ratio." [ 3 Marks ] (a) 0.57 (b) 0.55 (c) 0.65 (d) 0.59 Q25 (e) I am not attempting the question Q26 "When on a particular valuation day, a security has not been traded on the selected

stock exchange, the value at which it is traded is taken as 0." [ 1 Mark ] (a) FALSE (b) TRUE (c) I am not attempting the question Short term deposits by mutual funds can only be placed with ______. [ 1 Mark ] (a) only public sector banks (b) scheduled banks (c) only public sector banks or co-operative banks (d) only co-operative banks Q27 (e) I am not attempting the question "ETFs are _____-ended funds that can be bought at prices, which vary during the day, and operate with low tracking error." [ 3 Marks ] (a) close (b) open Q28 (c) I am not attempting the question ______ is a measure of risk. [ 1 Mark ] (a) Alpha (b) Vega (c) Standard deviation (d) Gamma Q29 (e) I am not attempting the question The ________ sets out concisely the information about the scheme that a prospective investor ought to know before investing. [ 2 Marks ] (a) Scheme Source Document (b) Scheme Information Book (c) Scheme Document Q30 (d) Scheme Information Document

(e) I am not attempting the question "An open-ended scheme sells its units to investors through a ?sale? transaction; they take back the units through a ?re-purchase? transaction. These transactions are routed through the bank account of the scheme. Therefore, the balance sheet of the scheme is unaffected." [ 2 Marks ] (a) FALSE (b) TRUE Q31 (c) I am not attempting the question KYC requirements are waived for FIIs. [ 1 Mark ] (a) TRUE (b) FALSE Q32 (c) I am not attempting the question Every application for redemption has to be stamped on the face and on the investor?s acknowledgment copy (or twice on the application if no acknowledgment is issued) indicating the date and time of receipt and running serial number. [ 2 Marks ] (a) TRUE (b) FALSE Q33 (c) I am not attempting the question Loss under the head Profits & Gains of Business or Profession cannot be set off against income from salaries. [ 2 Marks ] (a) FALSE (b) TRUE Q34 (c) I am not attempting the question SID is legally a part of the SIA. [ 2 Marks ] (a) FALSE (b) TRUE Q35 (c) I am not attempting the question

"Mutual fund units can be bought through the NSE, but can be redeemed only through the AMC." [ 1 Mark ] (a) TRUE (b) FALSE Q36 (c) I am not attempting the question Expenses (and losses) bring down the NAV. [ 1 Mark ] (a) FALSE (b) TRUE Q37 (c) I am not attempting the question Past performance of the mutual fund more or less guarantees future performance of the fund. [ 2 Marks ] (a) FALSE (b) TRUE Q38 (c) I am not attempting the question Allocating assets across different countries reduces the dependence on any single country?s economic performance. [ 2 Marks ] (a) TRUE (b) FALSE Q39 (c) I am not attempting the question "_______ is the Corporate YTM for each credit rating, minus the risk-free yield. " [ 3 Marks ] (a) Yield spread (b) Credit spread (c) Yield to maturity spread (d) Maturity spread Q40 Q41 (e) I am not attempting the question Close ended schemes need not declare their NAVs daily. [ 1 Mark ]

(a) TRUE (b) FALSE (c) I am not attempting the question "Besides SEBI, a part of the PMS activities of a mutual fund is regulated by the RBI." [ 1 Mark ] (a) FALSE (b) TRUE Q42 (c) I am not attempting the question _________ represent the amount that is available for schemes to declare a dividend. [ 3 Marks ] (a) Dividend reserves (b) Fund reserves (c) Realisation reserves (d) Distributable reserves Q43 (e) I am not attempting the question A passively managed fund charges a higher fee than the actively managed fund since it has higher expenses of research and analysis. [ 1 Mark ] (a) FALSE (b) TRUE Q44 (c) I am not attempting the question Investments in mutual funds cannot lead to a loss of principal. [ 2 Marks ] (a) TRUE (b) FALSE Q45 (c) I am not attempting the question "Where re-purchase application is received after _____ pm, it is effected at the closing NAV of the next business day." [ 2 Marks ] Q46 (a) 1

(b) 3 (c) 4 (d) 3:30 (e) I am not attempting the question Short term capital gains tax are not applicable for equity oriented mutual fund schemes. [ 2 Marks ] (a) FALSE (b) TRUE Q47 (c) I am not attempting the question Mutual funds are not permitted to buy securities with embedded options. [ 2 Marks ] (a) FALSE (b) TRUE Q48 (c) I am not attempting the question ________ funds trade stocks infrequently. [ 3 Marks ] (a) passively managed (b) actively managed Q49 (c) I am not attempting the question "There is no time lag between the day a company declares a dividend on its equity shares, and the time when it is actually received in the scheme. " [ 1 Mark ] (a) FALSE (b) TRUE Q50 (c) I am not attempting the question "Where it is decided not to subscribe for the rights but to renounce them and renunciations are being traded, the rights can be valued at the ________ value." [ 1 Mark ] (a) market Q51 (b) renunciation

(c) book (d) amortisation (e) I am not attempting the question "An Indian investor investing in a US equity stock mutual fund, would be worried about what happens to the _____ exchange rate." [ 1 Mark ] (a) US Dollar : Euro (b) Euro : Indian Rupee (c) US Dollar : Indian Rupee (d) British Pound : Indian Rupee Q52 (e) I am not attempting the question "Non-resident investors might have to bear _______ tax, which will reduce the amount they receive from the scheme as dividend or re-purchase amounts. " [ 2 Marks ] (a) consumption (b) indirect (c) withholding (d) gross Q53 (e) I am not attempting the question QFI stands for ______. [ 1 Mark ] (a) Qualified Financial Investor (b) Qualified Fund Investor (c) Qualified Foreign Investor (d) Qualified Foreign Individual Q54 (e) I am not attempting the question Fund of funds schemes are allowed to invest in schemes of other mutual funds subject to a cap of 10% of the fund's net assets in a single scheme. [ 1 Mark ] (a) FALSE Q55 (b) TRUE

(c) I am not attempting the question Investment requirement to buy Nifty futures would usually be _____ than buying a Nifty index fund. [ 2 Marks ] (a) lower (b) higher Q56 (c) I am not attempting the question PIO stands for ______. [ 1 Mark ] (a) Persons of Indian Origin (b) Persons of International Origin (c) Persons of Indian Organisations (d) Persons of International Organisations Q57 (e) I am not attempting the question "QFI is defined to mean a person (not resident in India), who is resident in a country that is compliant with _________ standards" [ 3 Marks ] (a) Financial Task Force (b) Financial Action Audit Force (c) Financial Action Enforcement Force (d) Financial Action Task Force Q58 (e) I am not attempting the question "Since investors can diversify away their _______ risks, they have to be compensated only for _______ risk. " [ 3 Marks ] (a) "systematic, non-systematic" (b) "non-systematic, systematic" Q59 (c) I am not attempting the question Systematic risk can be minimized by holding a diversified portfolio of investments. [ 2 Marks ] Q60 (a) FALSE

(b) TRUE (c) I am not attempting the question