NISM SERIES V B - MUTUAL FUND

FOUNDATION EXAM
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

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TEST DETAILS – The NISM Mutual Fund Foundation Module exam is a 50 mark exam with 50% as passing marks.
The question paper will consist of 50 multiple choice questions. There is no negative marking. The time duration is
120 Minutes.

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 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

PRATICE TEST NO. 5

Question 1 Some times the exit loads are higher for shorter holding periods as
compared to long term holding. Such load structures are called _______.

(a) Special Structure Load (SSL)

(b) Short Term Extra Load ( STEL)

(c) Deferred Exit Load (DEL)

(d) Contingent Deferred Sales Load (CDSL).

Question 2 Is it legal in India to sell Mutual Funds through Internet ?

(a) Yes, its legal

(b) No, as Indian population is not that educated as to buy MFs through internet

Correct Answer 1 Contingent Deferred Sales Load (CDSL).

Answer The exit load may be higher for shorter holding periods, and may not be
Explanation charged for longer holding periods. Such structures are called Contingent
Deferred Sales Load (CDSL).

Correct Answer 2 Yes, its legal

Answer AMCs, large distribution houses and some mutual fund information
Explanation companies actively use the internet as a channel to reach out to investors and
handle their mutual fund transactions.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 3 As per SEBI regulations, Monthly Income Plan (MIP) has to declare
monthly dividends - State True or False ?

(a) TRUE

(b) FALSE

Question 4 ________ is a measure of volatility of a security or portfolio in

comparison to the market as a whole.

(a) Beta

(b) Standard Deviation

(c) CAGR

(d) None of the above

Correct Answer 3 FALSE

Answer In a Monthly Income Plan (MIP), dividend declaration is a function of
Explanation distributable surplus. If there is no surplus to distribute, dividend cannot be
declared.

Correct Answer 4 Beta

Answer Beta is a measure of volatility of a security or portfolio in comparison to the
Explanation market as a whole. The higher the value of these measures for a scheme, more
risky the scheme is.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 5 Why does an investor opt for Systematic Withdrawal Plan ?

(a) To minimise the risk of redeeming all the units during a market trough

(b) To meet liquidity needs for regular expenses

(c) If the scheme is profitable, re-purchase ensures that some of the profits are
being regularly encashed by the investor.

(d) All of the above

Question 6 _______ is a measure of the value that the fund manager brought to the
equity scheme performance.

(a) Alpha

(b) Beta

(c) Gamma

(d) Theta

Correct Answer 5 All of the above

Correct Answer 6 Alpha

Answer Alpha is a measure of the value that the fund manager brought to the equity
Explanation scheme performance. Higher the alpha value for an equity scheme, better is
considered to be the risk-adjusted performance of the fund manager.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 7 Which of the below have been appointed KYC Registration Agency
(KRA) by SEBI ?

(a) DotEx International Ltd

(b) Karvy Data Management Services Limited

(c) NSDL Database Management Ltd

(d) All of the above

Question 8 When investments are made in cash in Mutual Funds, the redemption
also takes place in cash - State True or False ?

(a) TRUE

(b) FALSE

Correct Answer 7 All of the above

Answer SEBI has approved the foll KRAs :
Explanation - CDSL Ventures Ltd (www.cvlkra.com)
- NSDL Database Management Ltd (www.ndml.in)
- DotEx International Ltd (www.nsekra.com)
- CAMS Investor Services Pvt. Ltd (www.camskra.com)
- Karvy Data Management Services Limited (www.karvykra.com)

Correct Answer 8 FALSE

Answer Although investment can be made in cash in exceptional situations,
Explanation redemptions as well as dividend payments by the scheme to the investors need
to be made only through banking channels.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 9 Who amongst the below can invest in a Mutual Fund scheme ?

(a) Universities and educational institutions

(b) Trustees of private trusts

(c) Scientific and Industrial Research Organizations

(d) All of the above

Question 10 The AMC is appointed by the _________ .

(a) Sponsor

(b) Trustees

(c) Either 1 or 2

(d) None of the above

Correct Answer 9 All of the above

Correct Answer 10 Either 1 or 2

Answer The AMC is appointed by the sponsor or the Trustees.
Explanation
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 11 The trail commission is calculated as a percentage of the _____________ .

(a) amount mobilized by the distributor

(b) net assets attributable to the Units sold by the distributor

(c) higher of 1 or 2

(d) None of the above

Question 12 The government announces a cost inflation index number twice in every
financial year - State True or False ?

(a) TRUE

(b) FALSE

Correct Answer 11 net assets attributable to the Units sold by the distributor
Answer The trail commission is calculated as a percentage of the current value of the
Explanation amount (net assets) the distributor has mobilized.
Since it is calculated on net assets, distributors benefit from increase in net
assets arising out of valuation gains in the market.

Correct Answer 12 FALSE

Answer The government announces a cost inflation index number once every financial
Explanation year.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 13 Investors need not have a demat account for buying units of ETF - State
True or False ?

(a) TRUE

(b) FALSE

Question 14 AMFI has been authorized by SEBI to collect the KYD application and
documents - State True or False ?

(a) TRUE

(b) FALSE

Correct Answer 13 FALSE

Answer Exchange traded funds (ETFs) are a type of open-end index fund that are
Explanation listed in the stock exchange. Investors need a demat account for buying units
of ETF. There is no physical delivery of ETFs.

Correct Answer 14 FALSE

Answer As part of SEBI’s drive to streamline the distribution process of mutual fund
Explanation products, AMFI has introduced KYD. It consists of document verification and
bio-metric process.
Self-attested copy of the PAN card and specified documents as proof of
address have to be submitted along with an application form at the office of
CAMS- Point of Service (CAMS-PoS).
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 15 Pan Card need not be submitted by individuals for Micro SIPs - State
True or False ?

(a) TRUE

(b) FALSE

Question 16 The new cadre of distributors cannot distribute which of the following
funds ?

(a) Fixed Maturity Plans

(b) Micro Cap Fund

(c) Index Schemes

(d) Diversified Equity Schemes

Correct Answer 15 TRUE

Answer Micro SIPs are SIPs by individuals, minors and sole-proprietary firms, where
Explanation annual investment (12 month rolling or April-March financial year) does not
exceed Rs 50,000. PAN Card is not required in such cases. However, the
investor (including joint holders) will have to submit one other Photo-Identity
document like Voter Identity Card etc.

Correct Answer 16 Micro Cap Fund

Answer The simple mutual fund schemes that the new cadre of distributors can
Explanation distribute are as follows:
- Fixed Maturity Plans
- Index Schemes
- Diversified Equity Schemes shall be Large Cap oriented and well diversified
schemes and shall not include the following;
- Thematic / Sector funds
- Small Cap, Mid Cap or Micro Cap Fund
- Concentrated Funds i.e. number of stocks less than 30 as per offer document
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 17 In the ____________ stage , the children should have started earning and
contributing to the family expenses. The family ought to plan for their
retirement ; what kind of lifestyle to lead, and how those regular
expenses will be met.

(a) Pre-Retirement

(b) Retirement

(c) Married with Young Children

(d) Young Married

Question 18 Diversified debt funds invest in a mix of government and non-

government debt securities - State True or False ?

(a) TRUE

(b) FALSE

Correct Answer 17 Pre-Retirement

Correct Answer 18 TRUE

Answer Diversified debt funds invest in a mix of government and non-government
Explanation debt securities whereas Gilt funds invest in only government treasury bills
and government securities, which do not have a credit risk.
.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 19 Which of the following is a financial goal?

(a) Rs. 5 lakhs required after 1 year to buy a car

(b) Amount required for child’s higher education

(c) Amount to be set aside for retirement

(d) Rs. 10 lakhs required for marriage

Question 20 Non-Resident Indians (NRIs) / Persons of Indian origin (PIO)

applications need to be accompanied by cheque drawn on an _________
account for non-repatriable investment.

(a) Non Resident Ordinary (NRO)

(b) Non Resident External (NRE)

(c) Special Current

(d) None of the above

Rs. 5 lakhs required after 1 year to buy a car

Correct Answer 19 A financial goal always states a specific amount in a specific period for a
Answer specific purpose..
Explanation

Correct Answer 20 Non Resident Ordinary (NRO)

Answer Non-Resident Indians (NRIs) / Persons of Indian origin (PIO) applications
Explanation need to be accompanied by cheque drawn on an NRO account (for non-
repatriable investment) or NRE account (for repatriable investment).
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 21 Lower the age, lower the risk that can be taken - State True or False ?

(a) TRUE

(b) FALSE

Question 22 _________ has generally given the highest returns when invested over
long periods.

(a) Fixed Deposits

(b) Company Deposits

(c) Debentures

(d) Equity

Correct Answer 21 FALSE

Answer Lower the age, higher the risk that can be taken. Higher the age, lower the
Explanation risk taking ability.

Correct Answer 22 Equity

Answer Research studies have proved that the equity returns have outperformed the
Explanation returns of most other forms of investments in the long term.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 23 Foreigners, except NRIs and PIO, cannot invest in Indian shares and
Mutual Funds - State True or False ?

(a) TRUE

(b) FALSE

Question 24 Mutual funds accept post dated cheques only for Systematic Investment
Plan (SIP) investments and in no other option - State True or False ?

(a) TRUE

(b) FALSE

Correct Answer 23 FALSE

Answer Qualified Foreign Investors (QFIs) are foreigners from certain countries that
Explanation are permitted to invest in mutual fund schemes (and equity shares) as per
guidelines of SEBI.
QFI may also be a non-individual, like a company.

Correct Answer 24 TRUE

 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

Question 25 A person has got an unexpected sudden wealth. Does this event require
change in his financial plan ?

(a) Yes

(b) No

Correct Answer 25 Yes

Answer Winning lotteries, unexpected inheritance of wealth, unusually high capital
Explanation gains earned – all these are instances of sudden wealth. However, given the
human nature of frittering away such sudden wealth, the financial planner can
channelize the wealth into investments, for the long term benefit of the
investor’s family.
 NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5

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NISM SERIES V B – MUTUAL FUND FOUNDATION
CERTIFICATION EXAM - PRACTICE TEST 5