FIN204 Introduction to Mutual Funds

MCQ: Unit 1-Unit 3

Unit 1

Which of the following is true about mutual fund?

Mutual Funds are a vehicle for retail and institutional investors to benefit from the capital
markets.

They offer different kinds of schemes to cater to various types of investors, companies and
institutions

Mutual fund schemes are offered to investors for the first time through a New Fund Offering
(NFO).

All of the above

Which is the right option of structure based mutual fund?

Growth Funds
Money Market Funds
Income Funds
Interval Funds

Which one of the following is the investment objectives based mutual fund?

Growth Funds
Interval Funds
Income Funds
Both A and C

Which one of the following is not the advantage of mutual fund?

Convenience and Flexibility

Wide Choice to suit risk-return profile
Managing a portfolio of funds
All of the above
C

Which one of the following is not the obligation of Trustees?

Enter into an investment management agreement with the AMC.

Furnish to SEBI on a half-yearly basis, a report on the fund's activities
The right to request any necessary information from the AMC.
All of the above

Which term describes the price at which an investor can purchase the units of a mutual fund?
Net purchase price
Unit sale price
Investor expense ratio
None of the above
B

SEBI ________ offer documents of mutual fund schemes.

Vets
Approves
Disapproves
Registers
A

In declining interest rate scenario, which of the following is better?

Floaters
Gold schemes
Conventional debt investments like bank deposits
Conventional debt schemes
D

Mutual funds in India are permitted to invest in

Securities other than real estate

Securities
Securities, gold and real estate
Securities and Gold
C
Which index comprises 30 of the largest and most liquid companies in India?

S&P 500
Russell 3000
CNX Nifty
S&P BSE Sensex
D

Investor’s return is different from scheme return to the extent of

MTM
AMC fees
Scheme running expenses
Load
D

Mutual Fund schemes are first offered to investors through

Stock Exchange
IPO
NFO
AMFI
C
_________ is lowest in risk
Fixed maturity plans
Gilt funds
Diversified equity funds
Liquid funds
D

Risk can be measured by ______.

Standard Deviation
Beta
Variance
Any of the above
D

What is an open-ended fund?

It is a fund that offers sale of units or redemption of units at periodic intervals.

The fund’s returns closely track the returns of a benchmark index.
It is a fund that buys and sells units on a continuous basis.
The units of the fund are not available for sale after the NFO period ends.
C

Which type of Fund is required to be listed on Stock Exchange?

Debt fund
Liquid fund
Close ended fund
Sector fund
C
Funds which combined the features of an Open-Ended and Close-Ended funds are known as
which of the following?

Interval funds
Balance funds
Specialty funds
All of the above

Which of the following organizations is the Mutual Fund market regulator in India?
RBI
IDBI
CIBIL
SEBI
D
What do you mean by NAV?
National assets value
Net asset value
Net assigned value
Net assessment value
B

SIP is best example of

Rupee Cost Averaging

Value Averaging
Buy and Hold
None of the above
A

A high turnover rate for a fund indicates

High transaction costs

Greater efficiency
High returns to the investor
A rising market

A
Q. 18 The systematic approaches offered by mutual funds to promote an investment discipline for long
term wealth creation are

A. SIP, STP
B. SIP, STP, SWP
C. SIP, SWP
D. None of the above
B
Investments in mutual fund can be made using

Cheque / DD
Remittance
ASBA
Any of the above
D

A greater portion of returns from conventional debt investments is generally through

Capital gain
Interest income
Dividend income
Inflation
B

The liquidity needs of an investor are met through

Equity Funds
Index Funds
Money Market Funds
Sector Funds
C

Which of the following is not a benefit from a Mutual Fund?

Investor is able to diversify risk

Investor has custody of securities where fund invests
Investor can save costs
Professional Management of money
B

Offer document of mutual fund scheme is prepared by

AMC
Trustees
RTA
SEBI
A

The custodian has the custody of the investments in a scheme and a custodian is largely independent of

A. Sponsors
B. AMCs
 C. Trustees
D. Both (A) and (B)
D

Which of the following document must be read carefully in order to get details on risk factors before
investing in Mutual Fund Units?
KIM
SAI
SID
None of the above

Day to day operations of a mutual fund is handled by

Asset Management Company

Sponsor
Trustee
None of the above
A

Which of the following is not a benefit of investing in mutual funds?

Professional management

Transaction costs
Switching services
Diversification
B
Issuing additional fresh units and redeeming the existing units of a mutual fund scheme is the role of:

The custodian
The transfer agent
The trustees
The bankers
B
Q. 29 Under the Indian Trusts Act, the interests of the unit-holders is safeguarded by
A board of trustees
A trustee company
Either
Neither
C

A Mutual Fund is not

 A company that manages an investment portfolio.
A portfolio of stocks, bonds and other securities.
A pool of funds used to purchase securities on behalf of investors
A collective investment vehicle.
A

To a prospective investor the reliable source of pertinent information about a scheme is

Financial Press
Offer document
AMFI Website
Advice from the distributor
B

Which of the most appropriate position under MF Regulations?

 Buyer beware
 Buyer is always right
 Seller is always right
 Seller is guilty unless proved right
A

The asset management company is appointed by

SEBI
Unit holders
Sponsors
Trustee
D
Q. 34 In case of a dispute, against whom can the Unitholders initiate legal proceedings?
Trust
Trustee
AMC
None of the above
B

Mutual funds in India are set up as a

Company
Trust
Partnership
Association of Person
B
Q. 36 Which of the following should not be viewed primarily as an investment option?
Mutual Funds
Equity shares
Life Insurance
PPF
C
Q. 37 The appointment of AMC for the Mutual Fund can be terminated by
 Majority of Directors of the Trustee
 50% of the Unitholders
 45% of the Unitholders
 60% of the Unitholders
A

A type of mutual fund that maintains relatively stable proportions of its funds invested in equities
and in fixed-income securities is called a _______________.
Specialized sector fund
Index fund
Asset allocation fund
Balanced fund
D
Q. 39 Which of the following is an advantage to investors of exchange traded funds (ETFs) that
is not available to investors in open-end mutual funds?
a. ETFs allow investors to invest in broad U.S. market indexes as well as
international indexes.
b. Investors can avoid incurring an expense in the form of a bid-ask spread
by purchasing an ETF rather than investing in an open-end mutual fund.
c. ETFs offer a potential tax advantage to investors who incur capital gains
taxes only when they sell ETF shares.
d. ETF prices can not deviate from net asset value.

C
Q. 40 Cost incurred by a mutual fund in managing the fund, including administrative expenses
and advisory fees, are referred to as the fund's ______________.
a. charges
b. Front-end load
c. Management fee
d. Operating expenses

D
Q. 41 Investors in a common stock mutual fund incur an income tax liability when
_______________.
a. They sell their mutual fund shares at a gain
b. The mutual fund sells stock in its portfolio at a gain
c. The mutual fund receives dividends on the stock owned by the mutual fund
d. All of the above

D
Which of the following is incorrect w.r.t. different agencies involved in setting up of Mutual
Fund?
A mutual fund is set up in the form of a trust which is established by a sponsor who is like a
promoter of a company
The trustees of the mutual fund hold its property for the benefit of the unit-holders
The AMC, approved by SEBI, manages the funds by making investments in various types of
securities
Registrar & Transfer Agent holds the securities of various schemes of the fund in its custody

D
Which of the following is not a feature of open-ended mutual fund schemes?
They allow investors to enter and exit as per their convenience
The units are bought and sold at the net asset value (NAV) declared by the fund
The number of outstanding units remains constant in open ended mutual fund schemes
All are correct features

C
Q. 44 A group of mutual funds with a common management are known as:
A. funds syndicates
B. fund conglomerates
C. fund families
D. fund complexes

C
Q. 45 Which of the following is a reason for selecting a mutual fund?
A. Its historic return
B. High tax efficiency
C. Charging 12b-1 fees instead of load fees
D. Often realizing portfolio gains

UNIT-3

Which of the following is an advantage of Investing in Gold ETFs instead of Physical Gold?

Capital Gains tax is waived if held for more than 3 years

Capital Gains tax is waived if held for more than 1 year

Risk of impurity

Risk of storage and theft

Which of the following statement is true?

Equity has outperformed Gold in the long run

Gold is the most liquid investment

Gold prices always go up

All of the above

A

Which of the following is correct?

There is no effect of Rupee value on Gold investment

Appreciation of rupee might disappoint Gold investors

Depreciation of rupee might disappoint Gold investors

Any movement in rupee might disappoint Gold investors

Why does Gold need to be a part of one’s portfolio when investing for long-term?

Gold acts as a status symbol

Gold returns are highly correlated with Equity

Gold is a precious element

Gold returns are negatively correlated with Equity

Exchange traded funds are an alternative to what?

Actively managed equity funds.

Call options.
Actively managed bond funds.
Index trackers.

Q. 6 If your investment goal is simply to match the market, should buy a(n)

A. Money market fund.

B. Index fund.
C. Growth fund.
D. None of the above
B
You are evaluating a fund. What activity would you typically not undertake in this effort?

Calculate or find the fund's rate of return.

Calculate the fund's NAV.
Review the fund's turnover ratio and administrative expenses-to-assets ratio.
None of the above

Q. 8 Which item below would not be a characteristic of an exchange-traded fund (ETF)?

A. They have a tax disadvantage in that all gains are taxable, even if shares are not sold.
B. They are easily bought and sold.
C. They have very low expense ratios.
D. None of the above

With an open-end fund, you

A. Buy and sell shares from and to the fund.

B. Trade shares in the open market.
C. Can buy shares from the fund but you must sell them in the open market.
D. B and C

Q. 10 A closed-end fund's shares

A. Do not trade in the open market.

B. Are required to trade at the shares' NAV.
C. May trade at a premium or discount.
D. A and B
C

Which service below would a mutual fund typically not offer?

Automatic reinvestment
Internet transactions
Security loss insurance
None of the above
C
A type of mutual fund that maintains relatively stable proportions of its funds invested in equities
and in fixed-income securities is called a _______________.

A. Specialized sector fund

B. Index fund
C. Asset allocation fund

D. Balanced fund

Which of the following is true about advantages of Gold ETF?

No surety of quality
Lesser realisation on remoulding of ornaments
Changes in fashion and trends
No fear of theft

The Gold which the authorized participant deposits for buying the bundled ETF units with the
Custodian is called?

Allocated Account
Portfolio Deposit
Cash Component
Either A or C

An account in which custodian has to keep record of all the Gold that has been
deposited/withdrawn under the Gold ETF is known as

Allocated Account
Portfolio Deposit
Cash Component
None of the above

The money which the authorized participant deposits for buying the bundled ETF units is known
as

Allocated Account
Portfolio Deposit
Cash Component
None of these

Mutual funds that invest on the basis of a specified index, whose performance it seeks to track
are called

Passive funds
Actively managed funds
Index Fund
None of the above

In which fund, restriction of maximum 10% investment in a single company share is not
applicable ?

Contra Fund
Mid Cap Fund
Fund of Fund
Sectoral Fund

D
Which fund do not directly invest in stocks and shares but invest in units of other mutual funds
Fund of Funds
Multi Cap Fund
Quant Fund
Contra Fund

Gold ETFs are

Open ended fund

Close ended fund
Interval fund
None of these

Which of these is not an ETF ?

Index ETF
Gold ETF
Liquid fund ETF
Mutual fund ETF
D

Which of these is not true about an ETF

Low expense ratio

Liquidity
No minimum initial investment
Actively managed fund

ETF fees/cost/expense ratio is low since it is

Passively managed

High liquidity

Tax advantage

No minimum initial investment

Which of the following is not the disadvantage of holding physical gold ?

Fear of theft

Locker cost

No surety of quality

Price appreciation

Who holds physical gold on behalf of AMC for Gold ETFs ?

Custodian

Trustees

Banker

Registrar & Transfer Agent