Question Set 3B

Welcome to the Mutual Fund Distributor Demo Examination :
Get ready to test your knowledge of the NISM-Series-V-A: Mutual Fund Distributors Certification Examination.

1. What is the role of the asset management company in a mutual fund scheme?

To guarantee returns to investors.

To professionally manage the investments on behalf of investors.

To provide insurance for losses.

To invest only in government bonds.

2. What is disclosed in the Scheme Information Document (SID)?.

The expected returns only.

The asset allocation and investment style of the mutual fund scheme.

The historical performance of the fund manager.

3. What is the primary objective of a mutual fund with a focus on income generation?.

To provide high returns with high risk.

To generate a steady stream of income through fixed income securities.

To invest only in equities.

To invest in real estate properties.

4. What investment style might a mutual fund manager use for a long-term growth strategy?

Value style.

Conservative style.

Money market style.

Short-term trading style.

5. What determines the returns of a mutual fund scheme?

The size of the mutual fund.

The returns generated from the underlying investments in the scheme.

The number of investors in the scheme.

The fees charged by the mutual fund company.

6. What is issued to an investor when they invest in a mutual fund scheme?

Bonds

Certificates

Units

Stocks

7. What is the typical face value of a mutual fund unit?

Rs. 100

Rs. 50

Rs. 20

Rs. 10

8. What does the unit capital of a scheme represent?

The number of units issued multiplied by their NAV

The number of units issued multiplied by their face value

The total dividends paid by the scheme

The total amount of interest earned

9. What are recurring expenses in mutual funds?

One-time fees charged to investors

Expenses incurred to manage the scheme

Penalties for early withdrawal

Taxes paid on the income generated

10. How do recurring expenses affect the NAV of a mutual fund scheme?

They increase the NAV

They do not affect the NAV

They lower the NAV

They are added to the NAV

11. What has SEBI done to regulate recurring expenses in mutual funds?

Allowed unlimited expenses

Imposed limits on expenses

Banned all expenses

Made expenses optional for investors

12. What does NAV stand for in mutual funds?

Net Asset Value

Nominal Asset Value

Notional Account Value

Net Annual Value

13. What does a rise in the NAV of a mutual fund indicate?

Losses in the investment portfolio

Profits in the investment portfolio

No change in the portfolio

Increase in management fees

14. What does the AUM of a mutual fund scheme represent?

The total number of units sold

The total amount of recurring expenses

The size of the mutual fund scheme based on investments

The total dividends distributed by the scheme

15. What happens to AUM when a mutual fund scheme performs well?

It decreases

It remains constant

It increases

It fluctuates

16. What is the process of valuing securities in a mutual fund portfolio at their current market value called?

Dividend distribution

Face value calculation

Mark to Market (MTM)

Asset realization

17. What is the advantage of professional management in mutual funds?

Guaranteed returns

Simplification of the investment process

No management fees

Direct stock trading

18. How is diversification achieved in mutual funds?

By investing only in bonds

By holding various types of securities in the investment portfolio

By focusing on one sector

By investing in only large-cap stocks

19. What is the primary benefit of diversification in mutual funds?

It guarantees returns

It reduces risk

It increases management fees

It eliminates taxes

20. What advantage does economies of scale provide to mutual fund investors?

Reduced transaction costs and better terms with brokers

Higher risk exposure

Higher recurring expenses

Less regulatory oversight

21. What are IDCW options in mutual funds previously known as?

Systematic Investment Plan (SIP)

Dividend options

Capital Withdrawal Plans

Growth options

22. What is the purpose of the mark-to-market valuation in mutual funds?

To fix a constant NAV for the scheme

To calculate the daily NAV of the mutual fund scheme

To eliminate market fluctuations

To guarantee investor returns

23. How do mutual funds enhance liquidity for investors?

By allowing instant withdrawals anytime

By enabling investors to sell units back to the mutual fund or via stock exchanges

By keeping funds locked for long periods

By providing fixed interest payouts

24. What happens if there is a material development related to a mutual fund’s investments?

The information is withheld for investor protection

The information is made available to investors

The fund is liquidated immediately

SEBI takes control of the fund

25. What is one of the tax-related benefits of investing in mutual funds?

Tax on income is paid immediately

Mutual funds pay taxes on behalf of investors

Investors can defer tax liability

No taxes are paid on mutual fund investments

26. What benefit do Equity Linked Savings Schemes (ELSS) provide under Section 80C?

They guarantee returns

They reduce the tax liability by allowing deductions

They offer fixed interest rates

They are free of any risk

27. What option does a Systematic Investment Plan (SIP) offer to investors?

The ability to withdraw all money at once

Regular investment of fixed amounts over time

Direct stock trading access

One-time bulk investment

28. How do mutual funds provide transparency to investors?

By withholding information until the scheme matures

By providing regular updates through scheme-related documents, NAV, and portfolio disclosures

By charging extra fees for information access

By offering only annual statements

29. What is one way mutual funds offer convenience to investors?

By eliminating all documentation

By allowing systematic transactions like SIP, SWP, and STP

By charging high entry and exit loads

By providing no flexibility in investment structure

30. What protection does SEBI provide to mutual fund investors?

A guarantee against losses

Strict checks and balances on mutual funds and their activities

Exemption from taxes

Free investment advice

31. What is the advantage of tax deferral in mutual funds?

The investor never has to pay taxes

The investor can accumulate wealth faster

The investor gets a higher NAV

The mutual fund pays taxes on behalf of the investor

32. What is the purpose of the Scheme Information Document (SID)?

To provide daily market updates

To disclose detailed information about the mutual fund scheme

To give investment advice

33. What is the role of a Systematic Transfer Plan (STP)?

To transfer funds between different types of mutual fund schemes

To withdraw funds regularly

To lock funds for a fixed duration

To invest in only one mutual fund scheme

34. What does “liquidity” in mutual funds refer to?

The ability to recover the market value of investments

The guarantee of fixed returns

The lock-in period of a scheme

The tax benefits available

35. How do mutual funds benefit small investors?

By offering free brokerage accounts

By enabling them to diversify investments at a low cost

By giving high interest on fixed deposits

By providing risk-free returns

36. What is a limitation of mutual funds in terms of portfolio customization?

Investors have full control over portfolio decisions.

Investors have no control over what securities are bought or sold.

Investors can customize their portfolio with mutual funds.

Mutual funds guarantee portfolio customization for large investors.

37. What service allows large investors to have better control over their portfolio?

Systematic Investment Plan (SIP).

Portfolio Management Services (PMS).

Index Fund Management.

Mutual Fund Distributor Services.

38. Why can choice overload be a limitation in mutual funds?

There are no tools to evaluate fund options.

SEBI does not regulate mutual fund schemes.

There are too many schemes and options available to choose from.

Investors have no advisors to help them.

39. How has SEBI addressed the issue of choice overload in mutual funds?

By limiting the number of mutual funds available.

By introducing categorization of mutual funds.

By eliminating multiple options within schemes.

By increasing the complexity of mutual funds.

40. How are costs shared in a mutual fund scheme?

Costs are paid only by the fund manager.

Costs are divided equally among investors.

Costs are shared proportionally based on the investor’s holding.

Costs are controlled by individual investors.

41. What does SEBI do to control the costs in mutual funds?

SEBI guarantees no costs for investors.

SEBI imposes limits on expenses that can be charged to a scheme.

SEBI requires all funds to have the same cost structure.

SEBI does not regulate mutual fund expenses.

42. What is one of the key limitations of mutual funds in terms of returns?

Mutual funds guarantee returns.

Mutual funds offer fixed returns.

Mutual funds have no guaranteed returns.

Mutual funds are risk-free investments.

43. What factors influence the performance of mutual funds?

Government regulations only.

The performance of individual securities and market movements.

Only the skills of the investment manager.

Interest rates set by SEBI.

44. How are mutual funds classified based on their structure?

Fixed and flexible funds.

Open-ended and close-ended funds.

Growth and income funds.

High-risk and low-risk funds.

45. What characteristic defines an open-ended mutual fund?

It has a fixed maturity date.

Investors can enter and exit the fund at any time.

It can only be traded during specific intervals.

It closes after a certain period.

46. How do close-ended funds differ from open-ended funds?

Close-ended funds have a fixed maturity date.

Close-ended funds can be bought anytime.

Close-ended funds have unlimited units.

Close-ended funds allow daily transactions.

47. What type of fund tracks an index and mirrors its performance?

Actively managed fund.

Passive fund.

Growth fund.

Income fund.

48. What usually happens to the transaction price of close-ended funds on stock exchanges?

It always matches the NAV.

It is typically higher than the NAV.

It is usually lower than the NAV.

It never changes from the initial price.

49. How do investors in close-ended funds typically trade units after the NFO?

By directly selling to the mutual fund.

By trading on stock exchanges.

By transferring to the fund manager.

By redeeming through SIP.

50. What do interval funds combine?

Features of growth and income funds.

Features of open-ended and close-ended schemes.

Features of fixed and flexible schemes.

Features of high-risk and low-risk schemes.

51. What are transaction periods in interval funds?

Periods when investors can buy or sell units.

The time when the fund matures.

The periods when the NAV is fixed.

The time when fund managers change investments.

52. Why do actively managed funds have higher expenses?

Because they involve more frequent trading.

Because they guarantee high returns.

Because the fund manager customizes the portfolio.

Because they charge high entry fees.

53. What risk is associated with investing in ETFs?

ETFs never fluctuate in price.

ETFs are risk-free investments.

ETF prices can fluctuate during the day.

ETF prices are fixed at the end of the day.

54. What is required to invest in ETFs?

A demat account and stock exchange access.

A fixed deposit with a bank.

Direct investment through the fund manager.

A government bond purchase.

55. What differentiates an ETF from a traditional mutual fund?

ETFs offer guaranteed returns.

ETFs can be traded like stocks throughout the day.

ETFs have fixed prices.

ETFs require no demat account.

56. How do SEBI regulations benefit mutual fund investors?

By ensuring mutual funds always provide returns.

By imposing limits on costs and categorizing schemes.

By removing taxes on mutual fund investments.

By controlling the stock market.

57. How is liquidity in close-ended and interval funds provided?

By the fund manager only.

Through listing on stock exchanges.

By daily redemptions from the fund.

Through government bonds.

58. What is the role of the fund manager in a passive fund?

To actively select investments.

To mirror the index without making investment decisions.

To customize portfolios for each investor.

To guarantee the fund’s performance.

59. What investment strategy do Gold and Silver ETFs follow?

Investing in government bonds.

Tracking the prices of gold or silver.

Investing in real estate.

Investing in the stock market only.

60. What is a key benefit of Exchange Traded Funds (ETFs)?

They guarantee a fixed return.

They offer multiple transaction prices throughout the day.

They limit investor choices.

They can only be traded once per day.

61. Why do some mutual fund units trade at a discount to NAV?

Due to high investor demand.

Because of the demand-supply imbalance for units on stock exchanges.

Because SEBI regulates trading prices.

Due to daily NAV updates.

62. What is a common feature of close-ended schemes?

They have no maturity date.

They trade only on stock exchanges after NFO.

They allow daily buying and selling of units.

They are open for perpetual investment.

63. What is a key characteristic of open-ended funds?

Fixed number of units.

Units can be redeemed anytime.

Units must be traded on stock exchanges.

They have a specific maturity date.

64. What determines the price of units in a close-ended fund after NFO?

The fund manager’s decision.

Market demand and supply on stock exchanges.

Fixed price set by SEBI.

The fund’s NAV alone.

65. What is the minimum duration of a transaction period in an interval fund?

2 days.

5 days.

10 days.

15 days.

66. What does the investment universe in mutual funds refer to?.

The size of the mutual fund.

The variety of stocks in a fund.

Where the scheme may invest money.

The amount of money invested in a fund.

67. Which of the following is NOT a type of investment universe mentioned?

Equity funds.

Money market funds.

Gold funds.

Real estate funds.

68. What is a further classification within equity funds?

Hybrid funds.

Large-cap and mid-cap funds.

Money market funds.

International funds.

69. How many broad categories of mutual fund schemes are there according to SEBI?

70. Which of the following is NOT a broad category of mutual fund schemes under SEBI regulation?

Equity schemes.

Debt schemes.

Hybrid schemes.

Real estate schemes.

71. What is the minimum investment in equity and equity-related instruments for a Multi-Cap Fund?

50% of total assets.

65% of total assets.

75% of total assets.

85% of total assets.

72. What percentage of a Multi-Cap Fund’s assets must be invested in large-cap companies?

15%.

25%.

35%.

45%.

73. How are large-cap companies defined according to SEBI?

Companies ranked 1st to 100th in terms of full market capitalization.

Companies ranked 101st to 250th in terms of full market capitalization.

Companies ranked 251st onwards in terms of full market capitalization.

Companies ranked 1st to 50th in terms of full market capitalization.

74. What is the minimum investment in large-cap companies for a Large Cap Fund?

50% of total assets.

60% of total assets.

80% of total assets.

90% of total assets.

75. What is the minimum investment in mid-cap companies for a Mid Cap Fund?

25%.

35%.

45%.

65%.

76. Which type of equity scheme invests in both large-cap and mid-cap companies?

Multi Cap Fund.

Large and Mid-Cap Fund.

Mid Cap Fund.

Small Cap Fund.

77. What is the minimum investment in small-cap companies for a Small Cap Fund?

55% of total assets.

65% of total assets.

75% of total assets.

85% of total assets.

78. Which type of fund predominantly invests in dividend-yielding stocks?

Value Fund.

Contra Fund.

Dividend Yield Fund.

Flexi-cap Fund.

79. A Value Fund follows which type of investment strategy?

Growth strategy.

Value investment strategy.

Short-term strategy.

High-risk strategy.

80. What is the maximum number of stocks a Focused Fund can invest in?

15 stocks.

25 stocks.

30 stocks.

50 stocks.

81. What is a Sectoral/Thematic Fund focused on?

A specific market capitalization.

A specific sector or investment theme.

Only large-cap stocks.

Fixed-income instruments.

82. What is a key feature of an Equity Linked Savings Scheme (ELSS)?

It has a statutory lock-in period of 3 years.

It invests only in large-cap stocks.

It guarantees fixed returns.

It is not regulated by SEBI.

83. What type of fund invests dynamically across large-cap, mid-cap, and small-cap stocks?

Sectoral Fund.

Multi Cap Fund.

Flexi-cap Fund.

Thematic Fund.

84. What is an Overnight Fund?

A fund that invests in securities with a maturity of 1 year.

A fund that invests in securities with a maturity of 1 day.

A fund that invests in mid-cap stocks.

A fund that invests in real estate.

85. What is the maturity period of securities in a Liquid Fund?

Up to 31 days.

Up to 91 days.

Up to 6 months.

Up to 1 year.

86. An Ultra-Short Duration Fund invests in debt instruments with what Macaulay duration?

1 to 2 months.

3 to 6 months.

6 to 12 months.

1 to 2 years.

87. What is the Macaulay duration for a Short Duration Fund?

1 to 3 years.

3 to 4 years.

4 to 6 years.

6 to 12 months.

88. What is the main characteristic of a Credit Risk Fund?

It invests only in government bonds.

It invests in AA and below-rated corporate bonds.

It invests only in large-cap stocks.

It invests in high-risk international funds.

89. What percentage of total assets must be invested in floating rate instruments for a Floater Fund?

50%.

65%.

75%.

85%.

90. What is a Gilt Fund’s primary investment?

Corporate bonds.

Government securities.

International stocks.

Real estate.

91. What is the constant maturity for securities in a Gilt Fund with 10-year constant duration?

5 years.

7 years.

10 years.

15 years.

92. Which type of fund invests in both fixed and floating rate instruments?

Credit Risk Fund.

Floater Fund.

Gilt Fund.

Sectoral Fund.

93. How does SEBI categorize a Dynamic Bond fund?

A fund investing only in short-term debt.

A fund investing across various durations.

A fund investing exclusively in corporate bonds.

A fund that provides a fixed interest rate.

94. What defines a Corporate Bond Fund?

It invests in AA+ and above-rated corporate bonds.

It invests in government securities.

It invests in international markets.

It only invests in small-cap companies.

95. What is the minimum Macaulay duration for a Medium to Long Duration Fund?

1 year.

3 years.

4 years.

7 years.

96. Which of the following is a type of hybrid scheme?

Large Cap Fund

Mid Cap Fund

Conservative Hybrid Fund

Dividend Yield Fund

97. What is the minimum equity investment in an Aggressive Hybrid Fund?

50%

25%

65%

80%

98. Which of the following funds invests dynamically between equity and debt?

Multi Cap Fund

Arbitrage Fund

Dynamic Asset Allocation Fund

Large Cap Fund

99. How many asset classes does a Multi Asset Allocation fund invest in?

100. In a Balanced Hybrid Fund, the investment in equity and equity-related instruments must be between:

25% and 50%

40% and 60%

50% and 75%

75% and 90%

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