Ramesh wants to build a corpus of 12 crores in 30 years to achieve his retirement goal. This is an example of a financial goal
a) True
b) False
As all the attributes are present - the goal itself (to build a retirement corpus), time horizon (30 years), & amount required (12 CR) - have all the characteristics of a financial goal.
Sector funds are high on_______ as the entire exposure is to a single sector
a) Credit risk
b) Liquidity risk
c) Concentration risk
d) Default risk
For e.g. NIPPON PHARMA FUND contains all the Pharma companies, in IT sector funds all the companies would have IT companies. Now there’s a possibility that if there’s any problem in the sector, it’d show on your portfolio. To prevent from the negative impact, you need to diversify in multiple sectors.
During empanelment with the Asset Management Company (AMC), the mutual fund distributor has to sign a declaration. Indicate which of the aspects are covered in the declaration.
a) Commitment to abide by statutory codes, guidelines and circulars
b) Correctness and completeness of the information provided
c) Provide all the information and documents that the AMC may ask for from time to time.
D) All of the above
Let’s understand with an example, a MFD is empanelling himself with Axis Mutual Fund. The declaration (that’ll be signed by MFD) will contained the expectations of complying within the guidelines, provding accurate info while signing the declaration & provide all the required documents that the AMC will ask. 
AMC carries this due diligence with the MFD.
An investor looking for pure exposure to gold should invest in________
A) Gold sectoral fund
b) Gold ETF
C) Gold Mining company's fund
d) Gilt fund
If an investor wants a pure exposure to gold, only 2 options remains Gold ETF & physical gold. You can track the prices of gold ETFs on a real time basis (requires a demat A/c). For pure exposure, you need Gold ETF, when we invest in gold sectoral fund, then the mutual fund invests in gold mining, processing & trading companies.
__________Certification Examination is mandated by SEBI for becoming a mutual fund distributor in the Indian Securities Markets.
a) NISM Series V-A Mutual Fund Distributors
b) SEBI Series V-A Mutual Fund Distributors
c) NCFM Series V-A Mutual Fund Distributors
d) None of the above
Here the answer is the one which we’re preparing for the exam - NISM VA
The net asset value (NAV) of the segregated portfolio be published_______
a) Daily
b) Monthly
c) Weekly
d) Never
The NAV of the segregated portfolio is published on a daily basis. Whenever in a debt oriented mutual fund scheme credit event or default occurs (non payment, interest) in a co.
To abide with SEBI rules, the MF has to create a different portfolio ( aka segregated portfolio). When 2 portfolios are created under the same MF (1st main portfolio & 2nd segregated portfolio & combining these two becomes total portfolio)
We’ve chapter 10 - Risk, Return & Performance of the Mutual Fund where we’ve explained in extreme details.
Cut-off timing is
a) Different from AMC to AMC
b) Agreed upon between the AMC and its distributors
c) Prescribed by SEBI from time to time
d) Prescribed by RBI from time to time
Cut-off timing is for financial & non financial transactions (it is prescribed by SEBI from time to time) with the help of this we can decide the NAV for the financial transaction (purchase of new units, repurchase of units or additional purchase) and non financial (address , email or phone updating).
One of the ways to ensure the suitability of the mutual fund scheme to the investor's situation is to follow a strategy known as
a) Dividend stripping
b) Dividend reinvesting
c) Asset allocation
d) Tax harvesting
Investing goals, objectives and considering investors’ risk appetite to invest in a certain scheme so actually speaking we’re allocation the available assets. We can invest in gold , equity, a hybrid class of investment - aka asset allocation.
Subsequent to the New Fund offer (NFO), open-ended mutual funds are open for the purchase
a) Both existing and new investors
b) By existing investors only
c) By both existing and new investors on the stock exchange platform only
d) By existing Investors on the stock exchange platform only
When the NFO application period ends, units are allocated and after units allocation. A scheme gets opened, for purchases, additional purchases, or for redemption. As far as open schemes are concerned, its units are available for the existing unit holders for the further purchases. And for the new investors - new purchases.
As per SEBI, The Asset Management Companies (AMCs) are required to conduct due diligence in respect of mutual fund distributors (MFDs) who meet any of the following criteria, in order to regulate the distributors:
Here is what is the due diligence we need to know. So as per SEBI circular, due diligence is a process which is carried for large distributors. This is done by AMC with the objective to protect investor’s interest (to check all the criteria and where the distributor is being wrong).
With a reference of a report, once HDFC bank ran a campaign of POWER of 3 where they told to thier relationship managers (RM) to pick any 1 of the 3 MF schemes. RMs were aggressively selling those with a total sale of 90,000 SIPs in a single month. To stop such aggressive practices, SEBI has made due diligence fo distributors, but whom these rules are applicable, let’s see those
a) AUM raised over 7100 crores across the industry in the non-institutional category including high net-worth individuals.
(Here with the above reference HDFC MF is a MF house, HDFC bank is the distributor who has sold schemes to their clients valuing ₹100CR+ and those clients including HUFs, HNIs, or individual investors - so here the due diligence will carry on)
b) The commission received over 81 crore during the year across the industry.
(From the entire MF industry, whichever schemes are sold, the commission from those schemes is above ₹1CR - in this case too the due diligence will be done)
c) The commission received over 150 lakh from a single mutual fund.
(Maybe you’ve sold HDFC MF schemes, and if the commission from those schemes is above ₹50L, due diligence will be done by AMC of distributor)
d) All of the above
Which of the following is not a scheme's fundamental attribute?
a) Investment objective (Any type of investment has some objective from different financial aspects to meet at the end.)
B) Type of the scheme (equity, debt, or hybrid is also being told in the scheme itself)
C) Name of the fund manager (over the period of tenure the fund manager might get changed, if you’re buying based on the name of fund manager, however, this can’t be the fundamental attribute)
d) Investment pattern & risk profile (risk-meter & risk profiling all these are compulsory to show)
Which of the following statement is true in accordance with Asset Allocation?a) Asset allocation involves dividing your investments among different assets, such as stocks, bonds, and cash. (Yes, your corpus gets divided into different asset classes)
b) It aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon. (As per the investor goal & risk he/she can take and deciding the investment horizon is vital)
c) Deciding how to invest money across various asset categories in line with one's financial objectives, current situation and risk profile (this is similar to the one we discussed above)d) All of the above
Which among the following could be used in lieu of income distribution cum capital withdrawal payouts?This is nothing but dividend payout, out of our corpus a small dividend is being credited in our A/c in lieu means instead of which scheme we can consider as dividenda) Systematic Investment Plan (SIP)
b) Systematic withdrawal plan (SWP)
C) Systematic transfer plan (STP)
d) None of the above
For e.g. you’ve done systematic investment of ₹1 CR and ₹50,000 is your monthly requirement. You’ve given instructions that ₹50,000 should get transfered to my A/c. So irrespective of whatever returns the scheme has generated, the ₹50,000 will remain unchanged. In income distribution cum capital withdrawal payouts, only the distributor & reserves gets distributed with you.
Smaller fund size means that the scheme______a) Will not benefit from economies of scale
b) Has a higher possibility of surviving
c) Has a higher possibility of returns
d) Has lower expenses
A scheme will have many related expenses- advisory & analyst fee, brokerage charges (on large orders the brokerage charges can be in differentiated way), fixed AMC fee. So economies of scale can happen when the amount is big but can’t be possible in smaller fund size.
Which of the following transactions are not eligible for charging a transaction fee by the distributor?Which are such transactions that distributor can’t charge (mostly around ₹150)a) A Purchase Transaction by a new investor to the mutual fund.
b) A Purchase transaction by an existing investor in a mutual fund scheme.
c) Systematic Transfer Plan
d) A Systematic Investment Plan
This is mostly happens in the systematic transfer plan , as per SEBI distributor can’t charge a trnactoin fee here.
SEBI advertising code for mutual funds lays down guidelines to be followed.............
A) By fund managers, while monitoring the performance of the schemes they manage
b) By distributors while advertising their services
C) By Investors in interpreting the performance of their investments
d) By AMCs while advertising the performance of their funds
Ad guidelines made by SEBI are specifically for AMC
Which among the following are the benefits of dematerialization?Dematerizlation refers to maintaining securities - bonds, stocks are kept in electronic form at your depositories. These gives you teh unique benefits like :
a) No chance of theft
b) Less paperwork (no need to handle manually)
C) Direct credit of bonus units (if any MF gives bonus, it gets directly credited in your A/c)
D) All of the above
After a dividend is paid, the scheme's Net AssetValue (NAV)______Definitely, after paying out the dividend the AUM will decrease & units won’t get affected. Overall your NAV will fall
a) Fall
b) Rises
c) Remains same
Which amongst the following expenses CANNOT be charged to a mutual fund scheme by an Asset Management Company?
A) Custodian fees
b) Brokerage charges
C) Marketing expenses
D) Depreciation of fixed assets of the Asset Management Company AMC)
The 1st three options are scheme related expenses (so one can charge them with the scheme). However the depreciation of fixed assets can’t be charged against any scheme, these are AMC expenses so will be reduced from their.
As per SEBI Regulations, in case a fund manager of a mutual fund looks after more than six schemes______ In performance advertisements of a specific scheme.
There is a fund manager who’s handling 10 schemes, so as per SEBI only the top 3 & bottom 3 schemes performance can be disclosed
a) The performance of other schemes managed by him must not be disclosed.
b) The total number of schemes managed by him must not be disclosed.
c) Performance data of the top 3 and bottom 3 schemes managed by him may be disclosed
d) No performance data need to submit
Credit Risk Fund has a relatively higher default risk thancorporate Bond Fund.Definitely the name itself suggest the fund nature, the credit rating on my instruments is less and default risk is high.
a) True
b) False
The return from a mutual fund scheme is 8.6% and the beta is 0.8, if the risk-free rate of return is 5.8%, What is the Treynor Ratio?
To find treynor ratio we need fund return minus risk free return divided by beta of that particular mutual fund scheme.
So here’s the calculation
a) 10.75
b) 3.5
c) 7.25
c) 1
Thus, when beta is 0.8 so the return is 3.5 times (higher the better treynor ratio says)
To calculate sharper ratio we need to know the total risk and to find treynor ratio we see beta (systematic risk)
a) 1.767
B) 4.6
C) 0.77 (here it is below than 1 showing high risk with not so much good returns)
d) 1
Which risk arises due to the difference in the price movement of the derivatives vis-Ã -vis that of security being hedged?Whenever price movement of the derivative in relation to security being hedged, we are indirectly speaking about basis risk (when price differences comes in derivative hedged so basis risk arises)
A) Model risk
B) Liquidity risk
c) Basis risk
d) Credit risk
Which of the following may be a proper benchmark for a balanced hybrid scheme?A simple one, the question itself says- it is balanced & hybrid too (50% in debt & 50% in equity)
A) CRISIL Hybrid 75-25 aggressive index.
B) CRISIL Hybrid 50-50 moderate index.
C) CRISIL Hybrid 25-75 conservative index.
D) None of the above
Here we’ve covered 25 questions, if need chapter wise explanation, case studies, mock tests, and 100% assistance until you pass the exam then you can
download Prof. Sheetal Kunder Academy App or
visit here (9503359949 WhatsApp for student advisor)
Launch your Graphy