AMFI Question Bank

1. NAV of a fund has gone from Rs.24 to 26 in 16 months. What is the annualized return
a. 8.35% b. 6.25% c. 10% d. Insufficient information to calculate the
returns

2. An investment has doubled in 6 years. The annualized compounded returns is:

a. 16.67% b. 12.25% c. 100% d. Insufficient information to calculate the returns

3. A moderate risk investor who has been advised 35% equity allocation, would be best advised to invest in
a. Value fund b. Diversified equity fund c. Sector fund d. Aggressive growth fund

4. An MBA, 25 years has joined Hindustan Lever as a management trainee. What allocation would be your
recommend to him?
a. 50% in equities and balance in debt/money market
b. 80% in debt and 20% in money market
c. 90% in money market and 10% in equity
d. 100% in equities

5. A person has invested as follows:

Rs.50,000 in a SEBI approved equity scheme
Rs.50,000 in a Infrastructure Bond
Rs.20,000 in ELSS
How much tax-rebate under sec 88 will he get?
a. Rs.4000 b. Rs.14000 c. Rs.12000 d. Rs.10000

6. A stock with a high PE is likely to be a part of

a. Growth stocks portfolio b. Value portfolio
c. Sectoral fund portfolio d. Small cap portfolio

7. Which of these cannot be prevented by unit holders even if 75% of unit holders are behind it:
a. Change the AMC
b. Prevent the takeover of the funds AMC by another sponsor
c. Prevent the merger of two schemes
d. Selling off a scheme of one fund to another fund

8. Which of the following is correct about disclosure of illiquid securities?

a. If the fund proposes to invest more than 25% of net assets in associate companies, it should disclose in offer
document
b. If the fund propose to invest more than 10% of net assets in illiquid securities, it should disclose the impact
on redemption/liquidity in offer document
c. If the fund proposes to invest in illiquid securities it should disclose in the offer document
d. If the fund purpose to invest more than 20% of net assets in illiquid securities, it should disclose the possible
impact on NAV in offer document

9. An equity fund has an average weekly net assets of Rs.250 crores throughout the year. The maximum investment
management and advisory fee it can charge is:
a. Rs.2.50 crores b. Rs.5 crores c. Rs.2.75 crores d. Rs.6.25 crores

10. The duration of a bond is 4. If the annual yield changes from .4% to .8% without any change in the benchmark
yield, the impact on bond will be
a. 1.6% b. 1.6% c. No impact

11. Which of the following are important in fund comparison

a. Investment objective of the schemes b. Size of the scheme
c. Both of the above d. None of the above

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 1
 12. The brokerage paid to investors is
a. Regulated by SEBI b. Decided by AMFI c. Decided by individual AMCs

13. Which of the following is correct about appointing agents

a. They have to graduates b. They have to be cleared by SEBI
c. They have to be AMFI certified d. Their appointment is in line with individual AMCs policies
(caution: both c and d could be correct)

14. A stock exchange is involved in the supervision of

a. All mutual fund schemes b. Only open end schemes
c. Only closed end schemes d. Only the closed end schemes which are listed in the particular stock
exchange

15. Investors can demand a minimum assured returns

a. If other schemes of the same fund are doing very well
b. If other schemes of other funds are doing very well
c. If there was an assurance on the returns in the offer document
d. If the scheme has delivered very high returns in the past

16. Which of the following is not true about trustees?

a. They can ask for investment portfolio at any time
b. They have to approve the appointment of brokers/distributors
c. They have to exercise due diligence in ensuring that the AMC has the proper systems in place

17. Which of the following is true as per SEBI rules?

a. One fund manager can manage only one fund
b. One fund manager cannot run both equity and debt fund
c. The name of the fund manager of each scheme has to be given in the offer document of the scheme
d. Each fund has to be run by a team of fund managers

18. A person who is 55 years and about to retire in 3 years, is in

a. Growth phase b. Income phase c. Accumulation phase d. Distribution phase

19. An investment analyst looks at the operations and financial of the company. Such an analysis is called
a. Technical analysis b. Fundamental analysis c. Chartist approach

20. Which is the best MMMF in the following

a. Returns 10% Rating BB Load .05%
b. Returns 9% Rating A Load .04%
c. Returns 8% Rating AA Load .04%
d. Returns 10% Rating AAA Load .05%

21. Which of the following does not form part of a direct marketing strategy?
a. Seminars b. Newspaper advertisements
c. Distribution of pamphlets d. Using distribution company of sponsors

22. Application printing charges for existing open end schemes

a. Can be amortised over 5 years b. Can be amortised over 260 weeks
c. Can be amortised over 10 years d. Cannot be amortised

23. In the event that an assured return fund does not meet its obligation, a unit holder can sue
a. The AMC b. The sponsors
c. The person named as guarantor in the offer document d. The trustees

24. Which of the following is not the object of AMFI?

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 2
 a. To promote interest of mutual funds b. To create ethical practices amongst mutual funds
c. To regulate norms governing mutual funds d. To increase awareness of mutual fund
25. A charitable trust wishes to invest in units of super equity fund 2001 and approaches you as distributor. What do
you do?
a. Accept the application form without the cheque and sent it to the AMC for approval
b. Refuse to accept the application
c. Accept the application form and the cheque
d. Check the offer document to see whether charitable trusts are allowed to apply for units

26. Which of the following is not a criteria for a sponsor:

a. Net worth to be more than capital investment
b. Sponsor should contribute 40% of net assets
c. Sponsor should ensure that 20% of funds assets to be invested in sponsors company

27. In case of corporate deposits the most important thing an investor must look for is:
a. Yield b. Rate of return
c. Credit rating of the company and deposit d. Profitability of the company

28. Which of the following can an existing MF investor sur?

a. The AMC b. Directors of the AMC c. The Mutual Fund/Trust d. The Trustees

29. In a comparison of direct equity and mutual fund investment, which of the following is true?
a. A large capital is required while investing in MFs as compared to direct investing
b. Diversification is possible in direct equity as compared to MFs.
c. Transaction costs with a fund wipe out the profits as compared to direct equity
d. The investment objective is more likely to be achieved through MF investing as against direct equity
investment

30. The health of a fund can be known from

a. Offer document b. Annual/half-yearly report c. NAV d. Newspapers

31. Which of the following in not a Specialty Fund?

a. Small Cap fund b. Balanced Fund c. Pharma Fund

32. In India, a Mutual Fund is constituted as

a. Trust b. Investment company c. Company d. None of the above

33. An investment shall be regarded as non-performing, if it has provided no returns through dividend/interest for
more than
a. 3 months b. 6 months c. 12 months d. 36 months

34. If a security is thinly traded it implies that the security has not traded on any stock exchange for the last _____
days
a. 40 b. 15 c. 30 d. 60

35. Diversified Debt Funds are most affected by

a. Reinvestment Risk b. Liquidity Risk c. Interest Rate Risk d. Default Risk

36. For a merger of two AMCs to go through, which of the following is not required?
a. Approval by SEBI b. Approval by Trustees c. Approval by company law board
ff
37. Which of the following is not a characteristic of LIC?
a. Its objective is to provide life insurance with return comparable to Govt debt instruments
b. It assures a fixed amount in the event of death of the policy holder
c. Premium paid towards policies provide tax exemption under section 88 and proceeds at the time of death or
maturity are exempt from taxsw

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 3
 d. A with profits policy not only pays the sum assured in the event od death during the policy term, but also
pays a bonus as declared by LIC from year to year
38. The Mutual Fund may be managed by
a. Board of Trustees b. Trust company c. Either of the above d. None of the above

39. The maximum load that can be charged by the AMC for paying initial issue expenses
a. 7% b. 6% c. 5% d. 8%

40. Safekeeping of Physical Securities is the role of

a. The Custodian b. The Transfer Agent c. Trustee d. Sponsor

41. Which of the following is untrue of the automatic reinvestment plan?

a. The plan allows for automatic reinvestments of all income and capital gains
b. Automatic reinvestment allows for the accumulation of additional units of the fund
c. The benefit of automatic reinvestment is often lost, if reinvestment is subject to heavy load
d. The major benefit of automatic reinvestment is the compounding of returns

42. SEBI regulations for mutual funds came into force in

a. 1993 b. 1987 c. 1996 d. 1998

43. Which class of investors is not allowed to invest in Indian Mutual Fund?
a. Foreign National b. FII c. NRI d. Indian Resident

44. Value of stocks refers to

a. Shares of companies whose earnings are correlated with the state of the economy
b. Shares of companies whose earnings are expected to increase at normal levels
c. Shares of companies trading in precious commodities
d. Shares of companies in nature industries expected to yield low groth earnings

45. Investors can address their complaint except to

a. Consumer court b. SEBI c. AMFI d. Sponsor

46. Commissions payable by a fund to its agents

a. Depend upon the funds discretion to decide b. Regulated by SEBI
c. Regulated by AMFI d. Regulated by AMC

47. The dividend yield of a company growing faster than the market usually will be:
a. Higher than the market average b. Lower than the market average c. Same as the market
average

48. Which of the following statements is false:

a. Gilt funds have the least credit risk among various types of funds
b. Gilt funds NAV will not fluctuate irrespective of interest rate movements
c. Gilt funds would not face the risk of default unless the government defaults on its payments
d. Gilt funds are ideal for investors who look for highest safety of principal amount

49. Value investment means

a. Investing based on attractiveness of sector
b. Investing based on p/e of company as compared to an industry
c. Investing with the intention of unlocking an intrinsic value
d. Investing in companies that have good dividend yield

50. An investor purchased an open-end fund when its NAV was Rs.20. 16 months later, its NAV stood at Rs.22. The
percentage NAV change in the fund was:
a. 8% b. 7% c. 7.5% d. 8.5%

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 4
 {formula for percentage NAV change: [{(absolute change in NAV/NAV at the beginning)/months
covered)*12}]*100

51. A unit of an open-end fund was purchased when its NAV was Rs.25. At year-end its NAV was Rs.27. In the
interim period, the fund made a distribution of Rs. 5 per unit when its NAV was Rs.26. What was the simple total
return of the fund?
a. 27% b. 28% c. 27.5% d. 28.5%

52. Mutual Fund can borrow

a. In order to meet redemption units/dividends or interest payouts
b. For a maximum duration of 6 months
c. Upto a maximum of 20% of the net assets
d. All of the above

53. A security is considered to be untraded if

a. It is not traded for 30 days b. It is not traded for 60 days
c. It is not traded for 90 days d. It is not traded for 180 days

54. Which of the following is not true for valuation of traded instruments
a. Capitalization of earnings b. Mark to market
c. Last quoted closing price on the stock exchange when it is principally traded

55. Initial issue expenses for an open end fund can be amortised over a period of
a. 10 years based WNA b. 4 years c. 5 years d. 6 years

56. A prospective investor to seek legal resources can use

a. AMC b. Sponsors c. Trustees d. None of the above

57. An investment of Rs.100,000 on January 1, 1998 is redeemed to December 1,1999. what will the capital gains tax
be without considering indexation, or any other tax benefit?
a. 10,000 b. 0 c. Marginal rate d. 15,000
(hint: the flat tax rate of 10% came into force after the March 2000 budget)

58. Which of these would you recommend to a low risk investor?

a. Bond fund b. Balanced fund c. Sector fund d. Small cap fund

59. Which of the following is not an advantage of investing in mutual funds vis-a-vis directly investing in stocks
a. Portfolio diversification b. Professional management c. Risk management
d. Reduction in transaction cost e. Liquidity f. None of the above

60. Which of these securities will you not find in a MMMF

a. Call money b. Certificate of deposits c. 3 year government securities d. Commercial paper

61. Mutual funds in India started with the launch of schemes by

a. SBI b. UTI c. RBI d. Canbank

62. Closed end funds sell at discount to their NAV because

a. Repurchase price fixed by the fund is lower than the NAV
b. Investors expect that current NAV cannot be sustained by future potential
c. Closed end funds have a higher expense ratio
d. Interest risks of closed end funds

63. Which of the following services is not permitted by mutual funds

a. Cheque writing b. Nomination c. Loan against units d. Transfer of units

64. Which of the following is not an ethical practice by an agent

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 5
 a. Assuring or raising investor expectation on the returns that the investment would generate
b. Explaining the risk/return profile of a scheme

65. Commissions are paid to agents for the following except

a. Enhance the returns of the investor b. Pre and post sale service
c. To meet their selling expense d. For introducing the investor to the fund

66. If your brother who is in the US and now a citizen wants to invest in US 64. What will you do?
a. Send him the form of US 64 to invest
b. Recommend another scheme to him
c. Ask him to send you the money immediately
d. Read the offer document of the scheme to ascertain whether he can invest, and then send him the
forms

67. Which of the following can be used to measure the performance of a scheme relative to its benchmark
a. Beta b. Ex-marks(r-squared) c. Standard deviation d. All of the above

68. When is the offer document of an open end scheme updated

a. Once a year b. Once in 6 months c. Once every 3 months d. When a material change occurs

69. Between the following four debt schemes, which one would you recommend to your clients
a. Upfront load 0.4%; recurring expense of 0.7% p.a
b. Upfront load 0.3%; recurring expense of 0.8% p.a
c. Upfront load 0.6%; recurring expense of 0.4% p.a
d. Upfront load nil; recurring expense of 1% p.a

70. What will you not find on the cover of the offer document
a. Starting, closing and earliest closing date b. Type of scheme
c. Investment policy of the scheme d. SEBI disclaimer

71. Which of these can UTI do

a. Launch insurance linked schemes b. Grant loans against security
c. Enter into bills discounting activities d. Acquire immovable property
e. Providing leasing/hire purchase finance f. Deal in foreign exchange
g. All of the above

72. For an assured return scheme, which of the following are not required disclosures in the offer document
a. Basic of guarantee
b. Name of the guarantee
c. Justification of net worth of guarantor with respect to meeting short falls
d. Explanation of how the guaranteed return will be achieved

73. Which of the following is not false of a fund sponsor

a. He cannot invest in the scheme b. He can invest in the scheme
c. The scheme should invest in the sponsors companies

74. Which of the following documents can an investor inspect

a. Custodial and registrar agreement b. Trust deed
c. Investment management agreement d. All of the above

75. An application can be found along with

a. Newspaper advertisement b. Offer document
c. Key information memorandum d. Brochure

76. Which of the following is not true of the offer document?

a. Investor gets useful information to evaluate the performance of AMCs past schemes

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 6
 b. Investor gets information on services he can expect from the fund
c. Investor can assess the risk of the proposed scheme
d. Investor can evaluate the performance of competitive schemes

77. SWP can be useful to an investor looking for

a. Rupee coast averaging b. Power of compounding c. Regular income

78. Which of the following is untrue of automatic reinvestment plan/growth plan

a. The plan allows for automatic reinvestment of all income and capital gains
b. Automatic reinvestment allows for the accumulation of additional units of the fund
c. The major benefit is the compounding of returns
d. The benefit of automatic reinvestment is often lost, if reinvestment is subject to a heavy load

79. Systematic transfer plan is

a. Exchange of units from one scheme to another at regular intervals
b. Regular withdrawal of units
c. Automatic reinvestment

80. SIP is not

a. Rupee cost averaging b. Systematic investment at regular intervals c. Transfer of units

81. Untraded instruments are to be valued at

a. Capitalization of earnings
b. While using capitalization of earnings discount has to be applied for credit worthiness of the company
c. Both of the above
d. None of the above

82. A Unit Holder

a. Assigns the management of funds to the fund manager
b. Manages the fund by himself
c. Can insist for a tailor made portfolio

83. Report on portfolio of investments is submitted to SEBI by

a. AMC directors b. Sponsors c. Trustees d. Fund Manager

84. In respect of the due diligence certificate, which of the following is not true?
a. It is signed by the compliance officer
b. It is issued at the time of launching a scheme
c. It is filed along with the annual report

85. Which of the following is true under the AMFI code of ethics
a. Protecting the interests of investors b. Protecting the interest of trustees
c. Protecting the sponsor d. None of the above

86. Which of the following is true

a. UTI does not allow its agents to sell other mutual fund schemes
b. An agent can sell any other mutual scheme
c. An AMC allows their agents to sell their own funds

87. Which of the following cannot market mutual fund schemes

a. NBFC b. Banks c. Distribution companies d. Agents e. None of the above

88. Mutual fund is not a

a. Trust b. Investment company

89. Commissions are paid to agents for not

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 a. Bringing investors to fund b. For assuring the investor returns

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 90. A young couple with dual income is looking for a asset allocation plan. What would you suggest
a. 10% in equities 90% in debt and money market instruments
b. 25% in debt 25% in balanced 50% in equities
c. 40% in debt 60% in equities and balanced funds

91. Which of the following statements are correct:

a. MFs are allowed to borrow as per SEBI requlations
b. MFs are allowed to borrow to meet temporary liquidity requirements
c. In case of borrowing by mf, the duration should be more than 6 months
d. In case of borrowing by mf, the mf shall not borrow more than 20% of the net asset value of the scheme
e. All of the above
f. Only a, b & d are correct

92. A mutual fund is not

a. A portfolio of stocks, bonds, and securities
b. A pool of funds used to purchase securities on behalf of investors
c. A collective investment vehicle
d. A company that manages an investment portfolio

93. Which is not true about an SRO

a. Works as a decentralizing organization
b. Reports to an apex regulatory body
c. Passes its own laws

94. An investor who has invested Rs.300 after 7 yrs the value Rs.600. what is his annualized compounded rate of
return
a. 9 b. 11 c. 10.41

95. Money market funds invest in

a. Company fixed deposits b. Government securities with less than 1 yr maturity

96. An investor had a property of Rs.1,25,000 in 1995 and sold it in Rs.1,87,000 in 1998. The inflation rates where
281 & 361 in 1995 & 1998. What is the amount on which he will be taxed
a. 62500 b. 90000 c. 26912

97. A Mutual Fund has an NAV of Rs.12. What is the maximum sale price ?
a. 12 b. 11.50 c. 12.84

98. A NRI holds units in Mutual Fund. What should he do with his holdings if he takes up foreign citizenship
a. He redeems b. He continues
c. He transfers the units to his mother, who resides in India d. None of the above

99. The strategy advisable for an investor to maximize investment return in the long run
a. Buy & hold on to investment for a long time
b. Liquidate poorly performing investment from time to time
c. Liquidate good performing investments
d. Switch from poor performers to good performers

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 100. Which of the following portfolio would you recommend to a young couple with 2 income & 2 children
a. 50% in aggressive equity fund, 25% in high yield bond fund and growth & income funds, 25% in
conservative money market fund
b. 50% moderately aggressive equity fund, 20% aggressive equity fund, 15% high yield bond funds, 15%
municipal bond fund
c. 10% in money market fund, 30% in aggressive equity fund, 25% in high yield bond fund & long term growth
fund & 35% in municipal bond funds
d. Either a or b
e. None of the above

101. AMC should have a net worth of not less than

a. 10 crores b. 10 crores at all times c. 5 crores at all times

102. A mutual fund has a distributable income of Rs.300000 for the year 1999-2000. What will be the tax payable by
the fund?
a. 30000 b. 20000 c. 10000 d. NIL as MFs are exempt from paying tax

103. A person purchased a property for Rs.250000 in 1995 and sold it for 345000 in 1998. Not considering the benefit
of indexation what would be the capital gains tax payable by the person?
a. 9500 b. 19000 c. Depends on the tax slab of the person concerned d. No capital gains tax

104. What are the advantages of investing in MFs over directly investing in shares?
a. Benefit of diversification b. Benefit of professional management
c. Both of the above d. None of the above

105. A money market MF will not invest in

a. Call money market b. Certificate of deposit c. 3 year government security

106. An investor in a load fund cannot expect the following benefit from the fund
a. Load funds will perform better than no load funds
b. Load funds will perform in the long term
c. The amount of load recovered will be reinvested which will increase the NAV
d. All of the above

107. Sale and repurchase of units is the job of the

a. Custodian b. Registrar and transfer agents c. Agents d. Brokers

108. Which of the following is not the object of AMFI?

a. To promote interest of mutual funds
b. To create ethical practices amongst mutual funds
c. To regulate norms governing mutual funds

109. Units of closed end funds sell at a discount to their NAV because
a. Stock exchange regulations
b. Load on closed end funds is compulsory as per SEBI
c. Investors expect their future potential to be unviable to sustain their current NAVs
d. Assets are undervalued

110. As an advisor to a holder of units, which of the following would you suggest irrespective of the fluctuations in
NAV?
a. Automatic reinvestment plans b. Systematic withdrawal plans
b. Both of the above d. None of the above

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 111. An investor in a MMMF approaches you as an intermediary for investments in equity. Which of the following
would you suggest?
a. He should switch over when equity prices fall
b. He should switch over when equity prices increase
c. He should never go in for equities due to volatility

112. Which of the following is not a characteristic of an index fund?

a. Basket of securities in the same proportion as the index
b. It is parallel to the benchmark index
c. Portfolio changes in accordance to changes in the benchmark index
d. Portfolio undergoes at a very slow pace

113. Which of the following statement is true about the key information memorandum?
a. It is supplied with the offer document as an annexure
b. It contains all the information contained in the offer document as also history of the mutual fund
c. It is an abridged portion of the offer document and contains key points of the fund
d. None of the above

114. Who can appoint the AMC?

a. Sponsors b. Trustees c. Either of the above d. None of the above

115. What is the maximum limit for investing in unlisted securities for an open end scheme (as % of net assets)
a. 10% b. 5% c. 15% d. None of the above

116. Which of the following would be termed as direct marketing measures?

a. Selling units through well established distribution channels
b. Selling through agents
c. Sending staff to corporate houses for marketing
d. None of the above

117. If inflation rises, which of the following funds would be affected the most?
a. Power sector fund b. Bond fund c. Software fund d. Service sector fund

118. Which of the following is a self regulatory body?

a. SEBI b. BSE c. AMFI d. None of these

119. An investor has been insisting in investing in PPF. Which of the following arguments can you legally give in
favour of mutual funds?
a. MFs give assured returns which are always more than PPF interest rates
b. Investing in MFs is less riskier than investing in PPF
c. Mutual funds have the potential to give higher returns and carry lesser risk than investing directly in the stock
markets
d. All mutual funds in India are government owned and hence do not carry any risk

120. Which of the following portfolios has the lowest risk profile?
a. 50% aggressive growth fund; 50% index fund
b. 50% software fund; 50% index fund
c. 50% index fund; 50% debt fund
d. 50% money market fund; 50% debt fund

121. If an NRI investor wanted the facility of investment with repatriation benefits, what kind of an account would you
advise him to open:
a. NRO b. NRNR c. NRE d. None of the above

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 122. The 1999 union budget helped the mutual fund industry by
a. Regulating the practices of the MF industry
b. Exempting MF dividends from income tax in the hands of investors
c. Approving the code of ethics suggested by AMFI
d. None of the above

123. The mobilization of funds by the MF industry (as % of GDS) is in the range of
a. 5% - 6% b. 2% - 4% c. 7% - 10% d. 25% - 40%

124. A load means

a. A sum recovered from investors b. An expense charged to the scheme/fund
c. A sales charge d. None of the above

125. An investor should not invest in a mutual fund if

a. His capital base is large and is able to monitor the stock market
b. He is able to carry out detailed investment research
c. Both of the above
d. None of the above

126. The only advantage of portfolio diversification to a mutual fund investor is

a. The risk involved is diversified
b. The investor can hold the diversified portfolio with a small investment
c. Expertise in stock market is not required
d. None of the above

127. The term Professional Management indicates

a. Investment management skills b. Research of available investment options
c. Both of the above d. None of the above

128. Benefits of economies of scale is reaped by mutual funds because of

a. Portfolio diversification b. Reduction of risk
c. Large volumes of trades d. None of the above

129. Which of the following is not a disadvantage of investing through a mutual fund?
a. No control over costs b. Liquidity and convenience
c. No tailor made portfolio d. Managing a portfolio of funds

130. The mutual fund industry in India began in

a. 1988 b. 1963 c. 1992 d. None of the above

131. Which of the following is untrue

a. UTI was setup in 1963 b. UTI was formed by RBI
c. UTI was established by an act of parliament d. UTI was not given a monopoly

132. Which of the following schemes has the largest investor base?
a. ULIP b. UTI Mastershare c. US 64 d. SBI magnum multiplier

133. Which was the first diversified equity fund in India?

a. Mastergain 92 b. MEP 91 c. Mastershare d. None of the above

134. Which was the first Indian offshore fund?

a. Indian growth fund b. India fund
c. India infrastructure fund d. None of the above

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 135. The first non-UTI Mutual Fund was
a. SBI MF b. LIC MF c. Canbank MF d. Indian Bank MF

136. Private sector funds were guranted permission to enter the mutual fund industry in
a. 1992 b. 1993 c. 1988 d. 1995

137. The organization responsible for a comprehensive set of regulations for all Mutual funds in India is
a. RBI b. SEBI c. AMFI

138. Which of the following is not a fundamental attribute of a scheme?

a. The scheme is income bearing
b. The procedure for buying/selling un its
c. The names and addresses of the registrars and custodians
d. None of the above

139. An investor approaches you to build his portfolio. What is the sequence of the steps that youll take?
a. Selection of sector, selection of fund manager and schemes, classification of assets
b. Selection of fund manager and schemes, selection of sector, classification of assets
c. Classification of assets, selection of sector, selection of fund manager and schemes
d. Selection of sector, classification of assets, selection of fund manager and schemes

140. A Charitable trust wishes to invest in units of super equity fund 2001 and approaches you a distributor. What do
you do?
a. Accept the application form without the cheque and send it to the AMC for approval
b. Refuse to accept the application
c. Accept the application form and the cheque
d. Check the offer document to see whether charitable trusts are allowed to apply for units

141. Ex-marks with 100% could be for the following fund:

a. Growth fund b. Index fund c. Balanced fund d. Equity diversified fund

142. A high Portfolio turnover means:

a. The fund is very active in the market
b. Transaction costs are high
c. A high risk is involved as per the investment objectives
d. All of the above

143. In case of corporate deposits the most important thing an investor must look for is:
a. Yield b. Rate of return c. Credit rating d. None of the above

144. Bank deposits are superior to mutual funds in which of the following respects:
a. Bank deposits offer a higher yield
b. They are guaranteed by bankers for capital protection
c. Transaction cost are low
d. They are more liquid than mutual funds

145. Indira Vikas Patra caught the attention of the masses because of
a. Popularity in rural areas b. Easy transferability and identity of owner is hidden
c. Offers high yield d. Less risky

146. The steps involved in selection of an equity fund are:

a. Evaluate past returns, review salient features of the schemes, classify the equity schemes
b. Review salient features of the schemes, evaluate past returns, classify the equity schemes
c. Classify the equity schemes, evaluate past returns, review salient features of the schemes
d. Classify the equity schemes, review salient features of the schemes, evaluate past returns

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 13
 147. From the perspective of a value fund manager, which of the following will not unlock the value of share:
a. Privatization of PSU b. Buy back of shares
c. Bull run in the market d. Corporate restructuring

148. Which of the following funds would you select for a risk averse investor wanting high yield:
a. Div yield: 15%; Beta: 1.5; Ex-marks: 90
b. Div yield: 10%; Beta: 1; Ex-marks: 70
c. Div yield: 11%; Beta: 0.9; Ex-marks: 80
d. Div yield: 12%; Beta: 1.2; Ex-marks: 80

149. If yield falls, a debt fund manager will do all of the following except:
a. Sell short maturity bonds and buy long maturity bonds
b. See that the funds average duration becomes longer than the market average duration
c. Sell long duration bonds and buy short duration bonds
d. Sell low coupon bonds and buy high coupon bonds

150. Which of the following is true?

a. An MF investor cannot directly control the cost of investing
b. An MF investor pays less for expenses than when he invests directly in stocks

151. The NAV of a scheme is Rs.11. What is the maximum sale price that the MF can announce?
a. Rs.11 b. Rs.11.55 c. Rs.11.77 d. None of the above

152. Which of the following is true?

a. A load fund is better than a no load fund b. With load funds, the NAV increases faster than no load funds
c. No load funds guarantee higher returns than load funds d. None of the above

153. Non traded securities are to be excluded while calculating the NAV. True or False?
a. True b. False

154. While comparing Mutual funds with other options, which of the following should not be taken into
considerations?
a. Transaction costs b. Cumulative aggregate returns
c. Compounded annual return d. Liquidity

155. Contingent deferred sales charge is:

a. A variable charge to cover the marketing and sales charges
b. A variable charge to make up for the loss of unit value
c. A fixed amount charged every time an investor exits
d. A fixed or variable load depending upon how many years the investor has stayed with the fund

156. Which of the following factors would prompt an investor to prefer a bank deposit over a debt mutual fund
scheme?
a. Bank deposits always offer higher yields
b. They are guaranteed by bankers for capital protection
c. Credit rating is higher
d. They are more liquid than mutual funds

157. As per SEBI guidelines, which of the following activities is an AMC allowed to undertake?
a. To be a trustee of some other mutual fund
b. To provide advisory functions to pension and provident funds
c. To look after the schemes of other mutual funds

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 14
 158. Which of the following is untrue of systematic investment plan?
a. It allows investor to invest a fixed amount on a monthly basis
b. It allows investor to change the amount
c. It inculcates a discipline of regular investment in the investor
d. It facilitates rupee cost averaging

159. Offer document as per trust deed is issued by:

a. AMC b. Sponsors c. AMC in the name of the trustees d. Trustees

160. In case of assured schemes, which information is not required to be given in offer document
a. Means of meeting the guarantee
b. All past assured return schemes with details of the shortfalls
c. Comparison with other funds / MF
d. Disclosure about the investment objective

161. Which of the following funds would not be very volatile?

a. A fund with investments across only two sectors
b. A fund with investments in high quality assets
c. A fund with investments in a handful of stocks
d. A small cap fund

162. Bank sponsored MF are regulated by

a. RBI b. SEBI c. RBI & SEBI d. None

163. Which of the following is true about US 64?

a. Sales and repurchase done at NAV based prices
b. Its a closed end scheme - hence no redemption offered by UTI
c. Units under US 64 are not tradeable
d. Sales and repurchase are done at rates decided by UTI from time to time

164. Which of the following is true about switching from a MMMF to an equity fund?
a. It is not allowed b. It takes too long to execute
c. One should remain invested in one fund always d. It is a means to deal with the stock market swings

165. A debenture with a face value of Rs.1000 and a 2 year term to maturity has yield to maturity (YTM) of 10%. The
coupon rate is 12% per annum, payable half-annually. What is its price?
a. Rs.1000.00 b. Rs.995.35 c. Rs.990.10 d. Rs.1049.84

166. The maximum limit of inter-scheme investments by a funs is

a. 5% of the NAV of the transferring scheme b. 15% of the NAV of the receiving scheme
c. 5% of the NAV of all schemes of the fund d. 15% of the NAV of all schemes of the fund

167. Which of the following is true about investments made under section 54 ea of the income tax act:
a. The investment cannot be withdrawn for 5 years
b. The investment cannot be withdrawn for 4 years
c. The investment cannot be pledged
d. The investment can be transferred

168. Which of the following is an FII not allowed?

a. Investing directly in a mutual fund b. Opening a non-resident (external) account
c. Open a non-resident (rupee) account d. Can invest through a broker

169. The performance of which of the following is not comparable?

a. Two debt funds b. Two diversified equity funds
c. A liquid fund and a MMMF d. An IT fund and a diversified equity fund

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 15
 170. A scheme has realised gains of Rs. 5 crore, unrealised losses of Rs.1 crore, unrealised gains of Rs.2 crore and
excess of income over expenses of Rs.3 crore. What would be the distributable surplus?
a. Rs 5 crore b. Rs 7 crore c. Rs 9 crore d. Rs 10 crore

171. Abridged offer document distributed with application is called

a. Prospectus b. Key information memorandum
c. Statement in lieu of prospects d. Scheme features document

172. The difference between repurchase and sale price of the unit should not exceed
a. 7% b. 5% c. 6% d. 2%

173. Initial issue expenses in respect of any scheme shall not exceed
a. 5% b. 4% c. 6% d. 2%

174. For valuing equity holdings in a scheme, quotes from the following exchange should be taken:
a. NSE b. BSE c. Regional Stock Exchange d. Principal Stock Exchange

175. What is the rate of tax on large term capital gains in case of MF units?
a. 20% after indexation b. 10% without indexation
c. Either a or b d. Higher of a or b

176. In the offer document of a scheme the name of which official in the AMC is mandatory required to be given
a. Investor relations officer b. Operations head c. Name of the dealer d. Fund manager

177. The following characteristics is not present in an open end fund

a. Facility to buy or sell back units to the fund
b. A fixed unit corpus for the life of the scheme
c. Regular declarations of NAV
d. Regular disclosure of portfolio

178. The following is not a characteristic of a closed end fund

a. It has fixed corpus b. It has a fixed duration
c. It declares NAV & portfolio regularly d. Its units can be purchased or resold on any working day

179. A fund charges 2% entry load its NAV is Rs.15. An investor invests Rs.15,000. How many units will he/she get?
a. 1,000 b. 980.39 c. 980 d. 1020.40

180. A fund charges 1.5% exit load. An investor holds 1000 units. The investor wants to redeem today and the NAV is
Rs.20. What amount will he/she get?
a. 20,000 b. 20,300 c. 17,000 d. 19,700

181. Money market funds would not invest in

a. Treasury bills b. Cert. of Deposit c. Commercial papers d. Long term corporate debt

182. Which of the following statements is false

a. Gilt funds have the least credit risk among various types of funds
b. Guilt funds NAV will not fluctuate irrespective of interest rate movements
c. Gilt funds would not face the risk of default unless the government defaults on its payments
d. Gilt funds are ideal for investors who look for highest safety of principal amount

183. Arrange the fund types starting from lowest risk to highest risk: Sector funds, Balanced funds, Diversity equity
funds, Money market funds
a. MBDS b. MDBS c. DBSM d. DMBS

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 16
 184. Index funds aim to
a. Beat all market indices
b. Track a specified index subject to a small tracking error
c. Beat a specific market index
d. Invest in well researched stock to beat popular indices

185. The following is not a duty of the board of trustees of a mutual fund
a. Ensure that investors interests are safeguarded
b. The management of the fund is in accordance with SEBI regulations
c. Ensure the AMC has proper systems, procedures and key personnel in place
d. Raise the maximum possible amount of assets in each scheme floated by the fund

186. The following is not a duty of the board of trustees of a mutual fund
a. Enter into IMA with AMC in accordance with SEBI regulations
b. Guarantee returns on the investors money
c. Furnish a report to SEBI on the funds activities on half yearly basis
d. Ensure due diligence on part of the AMC for empanelment of brokers

187. What percentage of unit holders of the scheme present at a meeting called for the purpose can terminate the
appointment of an AMC
a. 51% b. 100% c. 75% d. none of the above

188. Which organization should an investor approach in case of grievance against a mutual fund
a. Consumer protection court b. Company law board c. AMFI d. SEBI

189. The first time investor would be advised to refer to

a. Detailed offer document b. The key information memorandum
c. SEBI regulations d. None of these

190. Which of the following is not true of the offer document

a. Investor gets all the information for evaluating the proposed schemes performances
b. Investor gets useful information for evaluating the performance of the AMCs past schemes
c. Investor does not get any information on services he can expect from the fund
d. Investor will not be able to assess the risks of the scheme based on the offer document

191. Which of the following statement is not true

a. As per SEBI regulations, all initial issue expense incl. Brokerage are limited to 6% of resources raised
b. Open-end funds are authorised to charge the investors entry & exit loads to cover fund distribution expenses
c. There is a cap on the total expenses chargeable to a scheme each year
d. Excess expenses over prescribed cap can be carried forward and charged next year

192. The following is not desirable from an agent selling mutual funds
a. He should be fully aware of the important characteristics of the scheme he sells
b. He should know the clients need and help choose the right investment
c. He should pass the highest possible incentive to the client
d. He must encourage regular investment & give personalized after sales service

193. An open-end fund with 10,000 units outstanding had the following items on its balance sheet. Investments at
market value Rs.100,000, other assets Rs.20,000, current liabilities Rs.25,000. calculate the funds NAV per unit
a. Rs.9.5 b. Rs.12 c. Rs.10 d. Rs.14.5

194. The expenses charged to a fund on a share are calculated on

a. Ave. Weekly net assets b. Ave. Quarterly net assets
c. Ave. Monthly net assets d. Year end net assets

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 17
 195. Dividend received by the fund on a share is to be recognised on
a. Dividend declaration date
b. Dividend receipt rate
c. Last date of the quarter end after dividend declaration
d. Date on which the share is quoted ex-dividend

196. A fund acquires 100 shares in a company for Rs.5000, it buys another 150 shares in the same company for
Rs.7000. Later it sells 50 shares for Rs.3500. What is the gain/loss on the sale?
a. Rs.1100 b. Rs.1000 c. Rs.1167 d. Rs.1500

197. An investment shall be regarded as non-performing, if it has provided no returns through dividend/interest for
more than
a. 6 months b. 12 months c. 24 months d. 3 months

198. At what rate does a mutual fund have to pay tax

a. 38.5% b. 22% c. 22% on Debt Funds, nil on Equity Funds d. A Mutual Fund does not have to pay tax

199. The following funds are exempt from dividend distribution tax upto 31/3/2002
a. All open-end funds b. Open-end debt schemes
c. All open and close-ended equity schemes d. Open-end funds with over 51% investment in equities

200. Mutual fund units become long term capital assets it held for
a. 12 months b. over 12 months c. 36 months d. over 36 months

201. The rate of wealth tax on mutual fund units is

a. 10% b. 20% c. 30% d. MF units are exempt from wealth tax

202. A bond with a coupon rate of 9% when interest rates for similar maturities are 11% will sell
a. Above par b. At par
c. Below par d. At a price which is not related to interest rates for similar maturities

203. A Certificate of Deposit is issued by

a. Government b. Corporates c. Banks d. Trust

204. Commercial paper is issued by

a. Mutual funds b. Banks c. PSUs d. Corporates

205. Debentures differ from fixed deposits in respect of

a. Interest rates b. Security c. Liquidity d. End use of funds

206. A longer maturity has the following impact on its price risk in case of interest rate fluctuation
a. Risk increases with longer maturity b. Price risk depends solely on credit rating of issuer
c. Risk decreases with longer maturity d. None of the above

207. Treasury bills are issued by

a. A companys treasury department b. RBI on behalf of the government
c. Nationalized banks d. PSUs

208. The following investments are not affected by price risk in case of interest rate movement
a. Company debentures b. Institutional bonds c. Mutual funds d. Floating rate bonds

209. Can one scheme of a mutual fund invest in another scheme of the same AMC
a. No b. Yes. Upto 10% of the net assets of the fund
b. With prior permissions of SEBI d. Yes. Up to 5% without charging any fee

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 18
 210. Can a mutual fund transfer investments from one scheme to another
a. Yes. Only with prior approval of SEBI b. Yes. Only up to 10% of total investments
c. No d. Yes. Provided transfer is at current market rate

211. Which of the following is not a type of load?

a. A charge at the time of investors into fund, by deducting a specific amount from his initial contributions
b. A charge at the time of investor exit from the scheme by deducting a specified amount from redemption
proceeds
c. A charge of investment management fees to the fund every year
d. A charge of fixed amount if the investor exits before completing a predetermined period of holding his
investment

212. Gilt funds would not invest in

a. Treasury bills b. Govt securities c. Convertible debentures d. Call money

213. A sponsor of a mutual fund may be compared to

a. A director in a company b. A chief executive of a company
c. A promoter of a company d. An equity shareholder in a company

214. The board of trustees is expected to protect the interest of

a. The Sponsors b. The Asset Management company c. SEBI d. The Unit
holders

215. In case of an assured return who is responsible for meeting the shortfall in case the assured return is not achieved
a. The AMC b. The Fund Manager c. The Trustees d. The Sponsor

216. In index funds the expenses are low because

a. The fund manager does not want a large tracking error
b. The equity research expenses are not incurred
c. SEBI regulations stipulate lower expenses for index funds
d. To compare against the actively managed funds

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 19
 Chapter 15
1. The areas monitored by SEBI in the activities of Mutual Funds ubclude:

a) Fund structure and governance

b) Exercising of voting rights by funds
c) Fund operations
d) All the above

2. Ethical norms require that the Trusses exercise their voting rights at the share holders meetings of companies.
a) In the interest of the promoters
b) In the interest of the companies employees
c) In the interest of the fund managers
d) In the interest of the investors

3. Front running is a practice which means

a) A Bull/Run in the market
b) The fund manager buys and sells securities ahead of doing the same transactions for the fund
c) Both the above
d) None of the above

4. Insider Trading by a Fund Manager means

a) Colluding with other insiders to gain access to private information
b) Using that information to trade on their personal account.
c) Both the above
d) None of the above

5. Responsible investing in the U S include the following tools:

a) Screening of investment
b) Share holders activism
c) Community investing
d) All the above

6. SEBI Regulations require the Directors of a Trustee company to file the details of transaction in securities with
the Mutual Fund, where they exceed the value of
a) Rs. 1 Lac
b) Rs 2 Lacs
c) Rs. 5 Lacs
d) Rs. 10 Lacs

7. Conflict of interest in a mutual fund business means

a) No identity of interest between the sponsor and the Trustee

b) The interest of the Trustees and AMC are in conflict
c) The interest of the investor runs counter to the interest of the intermediary
d) Both a & b above

8. AGNI refers to
a) Code of Conduct laid down by SEBI for Mutual Funds
b) Code of Conduct laid down by AMFI per distributors
c) Action for good governance in nationalised institutions.
d) None of the above

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 20
 9. Objectives of Business Ethics are:

a) Simply being honest, open and transparent with potential clients

b) To protect the consumers of goods and services for being cheated or exploited
c) Both the above
d) None the above

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 21
 Key to AMFI Question Bank

Q. No Ans Q. No Ans Q. No Ans Q. No Ans Q. No Ans Q. No Ans

1 b 43 a 85 d 127 c 169 d 211 c
2 b 44 d 86 a 128 c 170 b 212 c
3 b 45 a 87 e 129 b 171 b 213 c
4 d 46 a 88 b 130 b 172 a 214 d
5 c 47 b 89 b 131 d 173 c 215 d
6 a 48 b 90 c 132 c 174 d 216 b
7 b 49 c 91 f 133 c 175 c
8 c 50 c 92 d 134 b 176 a
9 c 51 b 93 a 135 a 177 b
10 c 52 d 94 c 136 b 178 d
11 c 53 a 95 b 137 b 179 b
12 c 54 a 96 c 138 d 180 d
13 c 55 c 97 c 139 c 181 d
14 d 56 d 98 a 140 d 182 b
15 c 57 a 99 d 141 b 183 a
16 b 58 a 100 c 142 d 184 b
17 c 59 f 101 b 143 c 185 d
18 d 60 c 102 d 144 b 186 b
19 b 61 b 103 a 145 b 187 c
20 d 62 b 104 c 146 c 188 d
21 d 63 c 105 c 147 c 189 a
22 d 64 a 106 d 148 c 190 c
23 c 65 a 107 b 149 c 191 d
24 c 66 d 108 c 150 a 192 c
25 d 67 d 109 c 151 c 193 a
26 c 68 d 110 b 152 d 194 a
27 c 69 c 111 a 153 b 195 d
28 d 70 c 112 d 154 a 196 a
29 d 71 g 113 c 155 d 197 d
30 b 72 d 114 c 156 b 198 d
31 b 73 b 115 b 157 b 199 d
32 a 74 d 116 c 158 b 200 b
33 a 75 c 117 b 159 a 201 d
34 c 76 d 118 b 160 c 202 c
35 c 77 c 119 c 161 b 203 c
36 c 78 d 120 d 162 c 204 d
37 a 79 a 121 c 163 a 205 b
38 c 80 c 122 b 164 d 206 a
39 b 81 a 123 a 165 d 207 b
40 a 82 a 124 c 166 c 208 d
41 c 83 c 125 c 167 c 209 d
42 c 84 a 126 b 168 b 210 d

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 22
 Key to AMFI Question Bank ( Chapter 15)

Q. Ans.
No.
1 d
2 c
3 b
4 c
5 d
6 a
7 c
8 b
9 c

Copyright March 2006 by IL&FS ACADEMY FOR INSURANCE & FINANCE LIMITED 23