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Mutual Fund Distributors Free Demo Test 8

/10

Mutual Fund Distributors Free Demo Test 8

1 / 10

1.

An ongoing bond fund will lose value when the interest rates in the market ______ .

a) remains same

b) will be equal to yields

c) Fall

d) Rise

Explanation:

Suppose an investor has invested in a debt security that yields a return of 7 percent. Subsequently, yields in the market for similar securities rise to 8 percent. It stands to reason that the security, which was bought at 7 percent yield, is no longer such an attractive investment. It will therefore lose value.

2 / 10

2.

The difference between the yield on Gilt and the yield on a non-Government Debt security is called its ______ .

a) Credit Spread

b) YTM

c) Risk Spread

d) Yield to Call

Explanation:

The yield on Gilt (Govt. securities) is generally the lowest in the market for a given tenor. Since non-Government issuers can default, they tend to offer higher yields for the same tenor.

The difference between the yield on Gilt and the yield on a non-Government Debt security is called its credit spread.

3 / 10

3.

When a mutual fund scheme generates profits or incurs losses, these profits and losses belong to _______ .

a) The AMC

b) The Fund Manager

c) The Trustees

d) The Investor

Explanation:

The investor enjoys the profits as well as bears the losses of his investments in Mutual Funds.

4 / 10

4. A fundamental analyst will study the Candle-Stick charts and also the financial statement of a company. State whether True or False?

a) False

b) True

Explanation:

Fundamental analysis is a study of the business and financial statements of a firm. It does not study the charts like the Candle-Stick charts.

Charts are studied by the Technical analysts.

5 / 10

5. The return from a mutual fund scheme is 8.3% and the Standard Deviation is 0.6. The risk-free rate of return is 5%. Calculate the Sharpe ratio.

a) 3.5

b) 5.5

c) 2.87

d) 4

Explanation:

The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation

ie. ( Return Earned – Risk free Return ) / Standard Deviation

= (8.3 – 5) / 0.6

= 3.3 / 0.6

= 5.5

6 / 10

6.

Ms. Apeksha puts Rs 2 crore into a Gilt scheme at 2 pm using a local cheque. What is the relevant NAV (Net Asset Value) for getting units assigned?

a) Closing NAV of date of application

b) Closing NAV of day immediately preceding the date of application

c) Closing NAV of next business day

d) NAV of the business day on which the funds are available for utilization

Explanation:

Irrespective of the time of receipt of application, for all equity oriented funds and debt funds (except liquid funds) in respect of transaction of any amount, the applicable NAV will be NAV of the business day on which the funds are available for utilisation.

7 / 10

7.

The trustees of a mutual fund are chosen by the ______.

a) Sponsors

b) Custodian

c) Asset Management Company (AMC)

d) SEBI

Explanation:

The application to SEBI for registration of a mutual fund is made by the Sponsor(s).

The Sponsors then appoints the Trustees.

The operations of the mutual fund trust are governed by a Trust Deed, which is executed between the sponsors and the trustees.

8 / 10

8.

How can a mutual fund distributor’s approval be ended?

a) When all the clients of the distributor shift to Direct Plans

b) Asset Management Company can terminate the empanelment at any time

c) The empanelment gets automatically terminated on the completion of the term of empanelment

d) All of the above

Explanation:

While empaneling with an AMC, the mutual fund distributor applicant signs a declaration which gives power to the AMC to terminate the empanelment at any time.

9 / 10

9.

Which of the following is NOT RIGHT regarding Mutual Funds advertisements by AMCs?

a) The advertisements can show past performance of the scheme

b) The advertisements can use celebrities for endorsements

c) The advertisements can show the return numbers

d) All of the above are incorrect

Explanation:

As per the SEBI Advertisement Code for Mutual Funds – No celebrities shall form part of the advertisement.

(AMFI can use celebrities but individual mutual funds cannot use celebrities)

10 / 10

10.

If a mutual fund makes a deal to buy or sell securities with any of its associates, the members of the Asset Management Company of the mutual fund must _________.

a) Make certain that the transactions happens at a price that is better than the closing market price

b) Inform the mutual fund unitholders of the intent to undertake the transaction before it is done

c) Take the approval of the trustees before undertaking the transactions

d) Justify the fairness of the transaction to the Board of Trustees

Explanation:

As per the AMFI Code of Ethics for Mutual Funds :

Members shall in respect of transactions of purchase and sale of securities entered into with any of their associates or any significant unitholder :

1. Submit to the Board of Trustees details of such transactions, justifying its fairness to the scheme

2. Disclose to the unitholders details of the transaction in brief through annual and half yearly reports.

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