Association of Mutual Funds in India (AMFI) 2008 AMFI Mutual Fund Basic Module Model Mock Test- Question Paper

a) 8%
b) 7%
c) 7.5%
d) 8.5%

51) A unit of open-end fund was purchased when its NAV was Rs. 20. At year-end its NAV was Rs. 22. In the interim period, the fund made a distribution of Rs. four per unit when its NAV was Rs. 21. What was the simple Total Return of the Fund?
a) 25%
b) 30%
c) 20%
d) 31%

52) Which of the subsequent is false?
a) ROI is a measure similar to Total Return with reinvestment of distributions
b) Total Return with reinvestment of distributions assumes reinvestment at NAV on the distribution date
c) As a measure of performance, Total Return with reinvestment of distributions seeks to overcome the shortcomings of simple Total Return
d) Because of its simplicity, simple Total Return is preferred in practice to Total Return with reinvestment of distribution

53) Return can be annualized and compounded only if the Scheme has completed
a) 30 days
b) 12 months
c) 6 months
d) 24 months

54) An equity scheme is 90 days old. To calculate its yield, it can use
a) absolute return
b) simple annualized return
c) compounded annualized return
d) any of these

55) Financial Planning is
a) Investing funds to receive the highest rate of return possible
b) Resorting to tax planning to keep taxes as low as possible
c) Planning for retirement with the maximum income possible.
d) Process of solving financial issues and reaching financial goals.

56) Your client has won Rs. one crore in “Karun Banega Crorepati”. What would your suggestion be?
a) Invest the entire amount without any delay in “old economy” stocks—since they are back in favour
b) Invest the entire amount immediately in an Equity Index Fund—since the index is at a historic low
c) Invest in very safe liquid investment choices and take the time needed to work out a financial plan
d) Invest immediately in IT stocks, since their valuations are now considered to be attractively low

57) Which 1 of the subsequent portfolio is most risky?
a) 75% Equity — 25% debt
b) 40% Equity — 60% debt
c) 60% Equity — 40% debt
d) 80% Equity — 20% debt

58) The strategy advisable for an investor to maximize investment return in the long run is:
a) Buy and hold on to investments for a long time
b) Liquidate poorly performing investments from time to time
c) Liquidate good performing investments from time to time
d) Switch from poor performers to good performers

59) A criticism of rupee-cost averaging is
a) Investment is for the identical amount at regular intervals
b) Over a period of time, avg. per share price will be more than guessing the highs and lows
c) It does not tell you when to buy, sell or switch from 1 scheme to a different
d) Rupee cost averaging has no serious shortcomings

60) If you maintain a flexible ratio of asset allocation, would you
a) Rebalance the Debt/Equity allocation periodically?
b) Rebalance the Debt/Equity allocation very frequently?
c) Generally avoid portfolio rebalancing?
d) Keep fixed percentages of equity and debt investments at all times?

61) SIP is best example of
a) Rupee Cost Averaging
b) Value Averaging
c) Buy & Hold
d) None of the above

62) Direct investment in stock markets can be better choice over investing through mutual funds if:
a) The investor wants better returns than those offered by mutual funds
b) The investor has large capital, knowledge and resources for research
c) The investor has identified a bullish phase in the stock market
d) The investor wants to invest for the long run

63) An investor in need of regular income should not select:
a) A bank deposit
b) A debt fund
c) An equity growth fund
d) PPF

64) Which of the subsequent has the highest level of liquidity?
a) Equity
b) PPF
c) Company fixed deposits
d) Mutual Funds

65) Which of the subsequent should not be viewed primarily as an investment option?
a) Mutual Funds
b) Equity shares
c) Life Insurance
d) None of the above

66) An investor asks you in what order he should list the subsequent schemes, going from the scheme with the lowest risk to the 1 with the 1 with the highest risk — 1. A Balanced Fund, 2. A Stock Index Fund, 3. A Liquid (Money Market) Fund and 4. A Pharmaceuticals Sector Fund.
a) 1, 2, 3, 4
b) 1, 3, 4, 2
c) 3, 1, 2, 4
d) 2, 3, 1, four

67) Ex-Marks (or R-Squared factors) of a fund measures
a) How much of a fund’s NAV movement is due to the market index movement
b) How a fund’s NAV movement relates to the market index movement
c) How much of a fluctuation has occurred in a fund’s NAV over a historical period
d) How many marks a Credit rating Agency accords to a fund

68) Which is better investment choice whilst selecting an equity fund?
a) Ex Marks – 75%, Beta – 0.9, Gross Dividend Yield – 8%
b) Either a or c
c) Ex Marks – 80%, Beta – 0.9, Gross Dividend Yield – 8%
d) Ex Marks – 90%, Beta – 0.8, Gross Dividend Yield – 9%

69) What kind of portfolio asset mix would recommend to your 55 year old client who plans to retire at age 58? select a portfolio that is the nearest match to the investor’s needs.
a) 40% in Equity Schemes and 60% in Balanced Funds.
b) 40% in Equity Schemes and 60% in Debt Funds
c) 20% in Equity Schemes, 20% in Liquid Funds and 60% in Debt Funds
d) 100% in Monthly Income Statements

70) For which of the subsequent funds would you consider “average maturity” as an important factor in selecting the right 1 for the investor?
a) A Debt Fund
b) A Balanced Fund
c) A Money Market or Liquid Fund
d) Both ‘a’ and ‘b’ above

71) Which of the subsequent Portfolios would you recommend to a recently retired Couple?
a) 35% in Conservative Equity Funds, 25% in moderately aggressive equity, 40% in money market funds.
b) 30% in short term municipal funds, 35% long term municipal funds, 25% moderately aggressive equity, 10% in emerging growth equity
c) 50% in aggressive equity fund, 25% in high Yield bond funds and growth and income funds, 25% in conservative money market funds
d) Either two or 3

72) AMFI Code of Conduct for Intermediaries
a) prohibits mutual fund distributors from accepting commissions from an investor who renew his investment in a scheme
b) prohibits them from rebating the commission back to such investors
c) encourages them to refrain from rebating the commissions to such investors, but does not prohibit
d) prohibits them from rebating the commissions back to all investors

73) Mutual funds in India are needed by SEBI to
a) prohibit their employees from personal trading in secondary markets
b) allow all employees to trade freely in secondary markets without restrictions
c) to establish a code of conduct and allow employees to do personal trading that conforms to SEBI guidelines
d) allow employees to carry on personal trading as long as they abide by SEBI guidelines

Earning:   Approval pending.