Set 2 – Unit 1: Investment Landscape (15 Questions)

Q1. Which of the following is most suitable for wealth preservation

rather than wealth creation?
(a) Equity mutual funds
(b) Government bonds
(c) Mid-cap equities
(d) Real estate
Answer: (b) Government bonds
Explanation: Government bonds are low-risk and focus on capital safety and
steady income. Equities and real estate aim for long-term wealth creation, but
with higher risk.

Q2. An investor saving for their child’s college fees in 3 years is said to
have which type of goal?
(a) Short-term goal
(b) Medium-term goal
(c) Long-term goal
(d) Lifestyle goal
Answer: (b) Medium-term goal
Explanation: Goals of 3–5 years are typically medium-term. Short-term goals
are under 3 years, long-term exceed 5 years.

Q3. Which asset class provides the highest potential return but also the
highest risk?
(a) Equity
(b) Debt
(c) Gold
(d) Fixed deposits
Answer: (a) Equity
Explanation: Equities can deliver high growth but are volatile. Debt and fixed
deposits are safer but yield lower.

Q4. Inflation risk impacts which investors the most?

(a) Equity investors
(b) Debt investors with fixed interest
(c) Real estate investors
(d) Gold investors
Answer: (b) Debt investors with fixed interest
Explanation: Fixed interest income loses purchasing power when inflation rises.
Equity and real estate often outpace inflation.

Q5. Diversification is aimed at reducing which type of risk?

(a) Systematic risk
(b) Unsystematic risk
(c) Inflation risk
(d) Liquidity risk
Answer: (b) Unsystematic risk
Explanation: Unsystematic (company/sector-specific) risk can be reduced by
diversification. Systematic risk cannot be eliminated.

Q6. Which of the following is a tangible asset?

(a) Company shares
(b) Mutual fund units
(c) Real estate
(d) Derivatives
Answer: (c) Real estate
Explanation: Tangible assets have physical form. Financial securities are
intangible.

Q7. For a risk-averse investor, the most suitable initial investment

would be:
(a) Equity mutual funds
(b) Government-backed debt funds
(c) Mid-cap equity shares
(d) Sectoral equity funds
Answer: (b) Government-backed debt funds
Explanation: Low risk, steady returns, and high safety align with risk-averse
profiles.

Q8. Which is an example of a lifestyle financial goal?

(a) Retirement planning
(b) Buying a luxury car
(c) Children’s education
(d) Medical emergency corpus
Answer: (b) Buying a luxury car
Explanation: Lifestyle goals improve comfort but are not essential, unlike
retirement or education.

Q9. Real rate of return turns negative when:

(a) Inflation exceeds nominal return
(b) Taxes are higher than expenses
(c) Equity returns outperform inflation
(d) Market risk disappears
Answer: (a) Inflation exceeds nominal return
Explanation: Real return = Nominal return – Inflation. If inflation is higher, real
return is negative.

Q10. Which asset is best suited for hedging against inflation?

(a) Fixed deposits
(b) Equity
(c) Gold
(d) Bonds
Answer: (c) Gold
Explanation: Gold tends to preserve purchasing power and acts as an inflation
hedge.

Q11. Which investor profile is most likely to choose equity mutual

funds?
(a) Retired investor needing steady income
(b) Young professional with 20-year horizon
(c) Risk-averse senior citizen
(d) Investor saving for vacation next year
Answer: (b) Young professional with 20-year horizon
Explanation: Equity suits long-term horizons and higher risk tolerance.

Q12. What does liquidity mean in investment terms?

(a) Safety of investment
(b) Ease of converting to cash without loss of value
(c) Guaranteed returns
(d) Tax efficiency
Answer: (b) Ease of converting to cash
Explanation: Liquid assets can be sold quickly without significant loss, e.g.,
money market funds.

Q13. Which investment is considered both an ownership and

consumption asset?
(a) Equity shares
(b) Real estate property
(c) Bonds
(d) Commodities
Answer: (b) Real estate property
Explanation: Property is ownership asset (value appreciation) and consumption
asset (can be used for living).

Q14. Which asset class usually shows the least correlation with
equities?
(a) Debt securities
(b) Real estate
(c) Gold
(d) Mid-cap equities
Answer: (c) Gold
Explanation: Gold often moves opposite to equities, providing diversification
benefits.
Q15. An investor prioritising safety of capital above all else belongs to
which category?
(a) Aggressive
(b) Balanced
(c) Conservative
(d) Speculative
Answer: (c) Conservative
Explanation: Conservative investors focus on protecting principal, even at the
cost of lower returns.

✅ That’s Unit 1 of Set 2 (15 Qs) completed.

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Set 2 – Unit 2: Concept & Role of a Mutual Fund (20 Qs)

Q16. The primary role of a mutual fund is to:
(a) Guarantee returns
(b) Pool money from investors and invest on their behalf
(c) Eliminate all investment risk
(d) Lend directly to corporates
Answer: (b) Pool money from investors and invest on their behalf
Explanation: A mutual fund pools savings of many investors and invests them
in securities. It doesn’t guarantee returns or eliminate risk.
Q17. Which of the following is NOT a feature of mutual funds?
(a) Professional management
(b) Diversification
(c) Guaranteed capital protection
(d) Liquidity
Answer: (c) Guaranteed capital protection
Explanation: Mutual funds provide liquidity and diversification, but returns and
capital are market-linked.
Q18. AMC stands for:
(a) Asset Management Company
(b) Account Monitoring Corporation
(c) Asset Mutual Corporation
(d) Association of Mutual Companies
Answer: (a) Asset Management Company
Explanation: An AMC manages mutual fund schemes, investment decisions,
and operations.
Q19. Sponsor of a mutual fund is comparable to:
(a) Promoter of a company
(b) Investor in the scheme
(c) SEBI regulator
(d) Distributor
Answer: (a) Promoter of a company
Explanation: The sponsor sets up the mutual fund trust, similar to a promoter
incorporating a company.
Q20. Trustees of a mutual fund act as:
(a) Regulators
(b) Protectors of investor interests
(c) Fund managers
(d) Brokers
Answer: (b) Protectors of investor interests
Explanation: Trustees oversee AMC activities and safeguard investor interest.
Q21. NAV of a mutual fund represents:
(a) Total AUM divided by number of units outstanding
(b) Total profits earned by the AMC
(c) Market value of trustee corpus
(d) Daily investor subscriptions
Answer: (a) Total AUM ÷ outstanding units
Q22. Mutual fund investors are known as:
(a) Shareholders
(b) Unit-holders
(c) Bondholders
(d) Partners
Answer: (b) Unit-holders
Explanation: Mutual funds issue “units” to investors, unlike companies which
issue shares.
Q23. SEBI regulates mutual funds through:
(a) Mutual Fund Regulations, 1996
(b) RBI guidelines
(c) Company Law Board
(d) Insurance Act
Answer: (a) Mutual Fund Regulations, 1996
Q24. AUM stands for:
(a) Assets Under Management
(b) Annual Unit Management
(c) Asset Utility Measure
(d) Allocation Utility Method
Answer: (a) Assets Under Management
Explanation: It is the total market value of investments managed by the AMC.
Q25. Which is a benefit of mutual fund investing?
(a) Diversification even with small amounts
(b) No market risk
(c) Guaranteed profit
(d) No expenses
Answer: (a) Diversification with small amounts
Q26. Role of custodians in mutual funds is to:
(a) Regulate AMC
(b) Hold securities safely on behalf of schemes
(c) Issue scheme advertisements
(d) Collect distributor fees
Answer: (b) Hold securities safely
Q27. Offer document of a scheme is called:
(a) SID (Scheme Information Document)
(b) AMC Report
(c) SEBI Gazette
(d) Trustee note
Answer: (a) SID
Q28. The KIM (Key Information Memorandum) is:
(a) A summary of the SID
(b) Trustee declaration
(c) AMC profit statement
(d) NAV calculation report
Answer: (a) Summary of the SID
Q29. Open-ended mutual funds allow investors to:
(a) Buy and sell units anytime
(b) Trade only during NFO
(c) Redeem only after maturity
(d) Subscribe via stock exchange only
Answer: (a) Buy and sell anytime
Q30. Close-ended funds allow redemption:
(a) Only on maturity date
(b) Anytime with exit load
(c) Weekly
(d) Only via SIP
Answer: (a) On maturity
Q31. Which is a self-regulatory body for distributors?
(a) AMFI
(b) SEBI
(c) RBI
(d) IRDAI
Answer: (a) AMFI
Q32. Riskometer in scheme documents shows:
(a) Level of risk of that scheme
(b) AMC profit trend
(c) Investor tax liability
(d) NAV volatility only
Answer: (a) Scheme risk level
Q33. Mutual fund investments are suitable for:
(a) Retail, HNI, and institutional investors
(b) Only large corporates
(c) Only government entities
(d) Only NRIs
Answer: (a) All categories
Q34. Daily NAV of open-ended schemes is published by:
(a) AMC and AMFI
(b) RBI
(c) SEBI
(d) Depositories
Answer: (a) AMC and AMFI
Q35. Entry load on mutual funds has been:
(a) Abolished by SEBI
(b) Raised to 5%
(c) Doubled in 2018
(d) Fixed by AMFI
Answer: (a) Abolished by SEBI

✨ That’s Unit 2 (20 Qs).

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Set 2 – Unit 3: Legal Structure of Mutual Funds in India (15 Qs)

Q36. The mutual fund structure in India is set up as a:
(a) Company
(b) Trust under the Indian Trusts Act
(c) Partnership firm
(d) Co-operative society
Answer: (b) Trust under the Indian Trusts Act
Explanation: All mutual funds in India are structured as trusts, registered with
SEBI.

Q37. The sponsor of a mutual fund must hold a minimum stake of:
(a) 10% in the AMC
(b) 40% in the AMC
(c) 25% in the trustee company
(d) 51% in the AMC
Answer: (b) 40% in the AMC
Explanation: As per SEBI, sponsors must hold at least 40% of the AMC’s net
worth.

Q38. Trustees are responsible for:

(a) Day-to-day investment management
(b) Supervising AMC and protecting investors’ interest
(c) Collecting brokerage fees
(d) Registering schemes with SEBI
Answer: (b) Supervising AMC and protecting investors’ interest

Q39. Who appoints the custodian of a mutual fund?

(a) Sponsor
(b) AMC
(c) Trustees
(d) SEBI
Answer: (c) Trustees
Explanation: Trustees appoint custodians to safeguard securities.

Q40. Custodians must be registered with:

(a) RBI
(b) AMFI
(c) SEBI
(d) Ministry of Finance
Answer: (c) SEBI

Q41. The sponsor of a mutual fund must be:

(a) A company in financial services with track record
(b) Any individual with capital
(c) Government agency only
(d) A bank only
Answer: (a) A company in financial services with track record

Q42. The AMC board must have at least:

(a) Half independent directors
(b) Two-thirds independent directors
(c) One-third independent directors
(d) No requirement
Answer: (c) One-third independent directors

Q43. The role of SEBI in mutual funds is to:

(a) Guarantee investor returns
(b) Regulate, approve schemes, and monitor AMCs
(c) Collect fees from distributors
(d) Act as a custodian
Answer: (b) Regulate, approve schemes, and monitor AMCs

Q44. NAV must be disclosed by open-ended schemes:

(a) Daily
(b) Weekly
(c) Monthly
(d) Quarterly
Answer: (a) Daily

Q45. Close-ended funds must be listed on:

(a) SEBI website
(b) Stock exchange
(c) AMC website only
(d) RBI bulletin
Answer: (b) Stock exchange

Q46. Mutual fund auditors are appointed by:

(a) Trustees
(b) AMC
(c) Custodian
(d) SEBI
Answer: (a) Trustees

Q47. Investors’ grievance redressal in mutual funds is primarily

monitored by:
(a) Trustees
(b) AMFI
(c) SEBI
(d) Distributors
Answer: (c) SEBI

Q48. Which entity holds investors’ money and securities?

(a) Custodian
(b) AMC
(c) Sponsor
(d) Distributor
Answer: (a) Custodian

Q49. Which one of the following is NOT part of mutual fund structure?
(a) Sponsor
(b) Trustee
(c) Custodian
(d) Depository Participant
Answer: (d) Depository Participant

Q50. AMC’s net worth requirement under SEBI is:

(a) ₹10 crore
(b) ₹50 crore
(c) ₹100 crore
(d) ₹25 crore
Answer: (a) ₹50 crore

Set 2 – Unit 4: Legal & Regulatory Framework (20 Qs)

Q51. SEBI was established in:
(a) 1988
(b) 1992
(c) 1995
(d) 2001
Answer: (b) 1992

Q52. Primary law governing mutual funds in India is:

(a) SEBI Act, 1992
(b) Companies Act, 2013
(c) Indian Trusts Act, 1882
(d) Income Tax Act, 1961
Answer: (a) SEBI Act, 1992

Q53. Which regulation covers mutual funds?

(a) SEBI (Mutual Fund) Regulations, 1996
(b) RBI (Banking) Regulations, 1955
(c) Insurance Act, 1938
(d) Companies Act, 2013
Answer: (a) SEBI (Mutual Fund) Regulations, 1996

Q54. AMFI stands for:

(a) Association of Mutual Funds in India
(b) Asset Managers’ Forum of India
(c) Association for Money Fund Industry
(d) Asset Management Federation of India
Answer: (a) Association of Mutual Funds in India

Q55. AMFI’s main role is to:

(a) Regulate AMCs
(b) Act as self-regulatory organisation
(c) Guarantee returns
(d) Decide NAVs
Answer: (b) Act as SRO (self-regulatory organisation)

Q56. AMFI issues which certification mandatory for distributors?

(a) ARN (AMFI Registration Number)
(b) PAN
(c) CAS
(d) KYC
Answer: (a) ARN

Q57. To protect investors, SEBI mandates disclosure of:

(a) Riskometer and scheme objectives
(b) AMC annual profits
(c) Trustee personal details
(d) Distributors’ salaries
Answer: (a) Riskometer and scheme objectives

Q58. SEBI requires offer documents to be:

(a) Filed with SEBI before launch
(b) Kept private with trustees
(c) Sent only to large investors
(d) Optional for debt schemes
Answer: (a) Filed with SEBI

Q59. KYC norms are regulated by:

(a) SEBI
(b) RBI
(c) AMFI
(d) MCA
Answer: (a) SEBI

Q60. Investor protection fund is maintained by:

(a) SEBI
(b) AMFI
(c) RBI
(d) Trustee board
Answer: (a) SEBI

Q61. SEBI requires half-yearly disclosure of:

(a) Scheme portfolio
(b) AMC salaries
(c) Sponsor dividends
(d) Trustee meetings
Answer: (a) Scheme portfolio

Q62. SEBI mandates that half of AMC board must include:

(a) Sponsor representatives
(b) Independent directors and trustees
(c) Investors
(d) Distributors
Answer: (b) Independent directors and trustees

Q63. Redressal of investor grievances is handled through:

(a) SEBI SCORES system
(b) AMC grievance cell only
(c) RBI Ombudsman
(d) AMFI website alone
Answer: (a) SCORES

Q64. Advertisement code for mutual funds is issued by:

(a) SEBI
(b) AMFI
(c) RBI
(d) Ministry of Finance
Answer: (b) AMFI

Q65. Which authority approves merger of two mutual fund schemes?

(a) Trustees + SEBI
(b) AMC board
(c) Custodian
(d) RBI
Answer: (a) Trustees + SEBI

Q66. SEBI mandates disclosure of scheme performance against:

(a) Benchmark index
(b) Trustee profit
(c) AMC NAV target
(d) RBI repo rate
Answer: (a) Benchmark index

Q67. Investor complaints must be resolved by AMC within:

(a) 15 working days
(b) 30 working days
(c) 7 working days
(d) 90 working days
Answer: (a) 30 working days

Q68. AMFI code of conduct applies to:

(a) Mutual fund distributors and intermediaries
(b) SEBI officials
(c) RBI inspectors
(d) Stock brokers only
Answer: (a) Distributors and intermediaries

Q69. FATCA compliance ensures reporting of:

(a) US investors’ accounts
(b) RBI data
(c) Indian tax evasion cases only
(d) SEBI corpus
Answer: (a) US investors’ accounts

Q70. PMLA (Prevention of Money Laundering Act) applies to:

(a) All mutual fund transactions
(b) Only corporate investors
(c) Only NRIs
(d) Trustees alone
Answer: (a) All transactions

Set 2 – Unit 5: Scheme Related Information (15 Qs)

Q71. SID contains:
(a) Detailed scheme objectives and risks
(b) AMC employee list
(c) SEBI fee structure
(d) Distributor commissions only
Answer: (a) Scheme objectives and risks

Q72. KIM is:

(a) Condensed summary of SID for investors
(b) AMC annual profit report
(c) Custodian balance sheet
(d) SEBI guidelines
Answer: (a) Condensed summary

Q73. Statement of Additional Information (SAI) contains:

(a) AMC constitution, sponsor details, financials
(b) NAV trends
(c) Only taxation rules
(d) Only distributor codes
Answer: (a) AMC constitution & sponsor details

Q74. Offer documents must carry riskometer since:

(a) 2015
(b) 2017
(c) 2019
(d) 2021
Answer: (b) 2017

Q75. NFO stands for:

(a) New Fund Offer
(b) Net Fund Ownership
(c) National Fund Option
(d) New Fiscal Obligation
Answer: (a) New Fund Offer

Q76. In NFO, close-ended funds are sold at:

(a) Face value (₹10)
(b) Premium decided by AMC
(c) NAV-based pricing
(d) Benchmark-linked price
Answer: (a) Face value (₹10)

Q77. Minimum subscription amount in open-ended NFO is fixed by:

(a) AMC
(b) SEBI regulations
(c) Trustees
(d) AMFI code
Answer: (a) AMC

Q78. NAV must be published on:

(a) AMC website + AMFI
(b) SEBI bulletin
(c) RBI circular
(d) Custodian reports
Answer: (a) AMC & AMFI

Q79. SID must clearly mention:

(a) Investment objective, strategy, risk factors, benchmark
(b) AMC employee salaries
(c) Trustee dividend payouts
(d) Stock exchange profits
Answer: (a) Objective, strategy, risk, benchmark

Q80. Minimum disclosure of scheme portfolio by AMC is:

(a) Monthly
(b) Half-yearly
(c) Quarterly
(d) Annually
Answer: (c) Quarterly

Q81. Dividend distribution procedure must be mentioned in:

(a) SID/KIM
(b) RBI bulletin
(c) Custodian report
(d) AMFI handbook
Answer: (a) SID/KIM

Q82. Benchmark index is mandatory for:

(a) Every mutual fund scheme
(b) Only equity schemes
(c) Only debt schemes
(d) Only hybrid schemes
Answer: (a) Every scheme

Q83. Scheme’s risk factors must be disclosed:

(a) In SID and advertisements
(b) Only in trustee report
(c) Only to large investors
(d) Only during SEBI audit
Answer: (a) SID + advertisements

Q84. “Load” in mutual funds means:

(a) Entry/exit charge on investors
(b) AMC trustee fees
(c) Distributor commissions
(d) Custodian charges
Answer: (a) Entry/exit charges

Q85. Half-yearly scheme portfolio must be mailed to:

(a) All unit-holders on request
(b) SEBI only
(c) AMC employees
(d) RBI
Answer: (a) Unit-holders on request

Set 2 – Unit 6: Fund Distribution and Channel Management (20 Qs)

Q86. The primary role of a mutual fund distributor is to:
(a) Provide investment advice and distribute schemes
(b) Manage investor portfolios directly
(c) Guarantee investor returns
(d) Approve scheme launches
Answer: (a) Provide investment advice and distribute schemes
Explanation: Distributors act as intermediaries between AMC and investors,
helping with sales and advice.

Q87. ARN stands for:

(a) AMFI Registration Number
(b) AMC Regulatory Norms
(c) Annual Revenue Note
(d) Advisory Reference Number
Answer: (a) AMFI Registration Number

Q88. Which body issues ARN to distributors?

(a) AMFI
(b) SEBI
(c) RBI
(d) AMC
Answer: (a) AMFI

Q89. Which certification is mandatory for distributors?

(a) NISM Series V-A
(b) CA certification
(c) MBA in finance
(d) NSE dealer module
Answer: (a) NISM Series V-A

Q90. Distributors earn their income through:

(a) Commissions from AMC
(b) Trustee fees
(c) Investor payments directly
(d) SEBI subsidy
Answer: (a) AMC commissions

Q91. Trail commission is paid on:

(a) Assets retained by investors over time
(b) Only new subscriptions
(c) Only exit load
(d) Custodian income
Answer: (a) Assets retained over time

Q92. Which of the following must distributors follow?

(a) SEBI & AMFI Code of Conduct
(b) Custodian rules only
(c) Investor grievance rules only
(d) RBI guidelines
Answer: (a) SEBI & AMFI Code of Conduct

Q93. Direct plans of mutual funds were introduced to:

(a) Allow investors to invest without distributor commission
(b) Ban distributors
(c) Eliminate AMCs
(d) Increase NAVs artificially
Answer: (a) Invest without distributor commission

Q94. EUIN stands for:

(a) Employee Unique Identification Number
(b) External Unit Investor Number
(c) Equity Unit Identification Number
(d) Essential Utility Identification Note
Answer: (a) Employee Unique Identification Number

Q95. EUIN helps track:

(a) Individual distributor’s employee involved in sale
(b) Investor PAN
(c) AMC profits
(d) NAV changes
Answer: (a) Distributor’s employee in sale

Q96. Online mutual fund platforms allow:

(a) Direct digital purchase and redemption
(b) Only NFO investment
(c) Only dividend option selection
(d) Only SIP registration
Answer: (a) Direct purchase and redemption

Q97. Banks acting as mutual fund distributors are called:

(a) Corporate agents
(b) Institutional distributors
(c) NBFCs
(d) Custodians
Answer: (b) Institutional distributors

Q98. Which investor class benefits most from direct plans?

(a) Informed investors comfortable investing online
(b) First-time investors needing handholding
(c) Investors preferring distributors
(d) Only NRIs
Answer: (a) Informed investors

Q99. Mis-selling by distributors can lead to:

(a) SEBI penalties and cancellation of ARN
(b) Higher NAV for investor
(c) Trustee bonus
(d) Exemption from trail commission
Answer: (a) SEBI penalties and ARN cancellation

Q100. Which disclosure is mandatory by distributors?

(a) Commission earned from scheme
(b) Trustee remuneration
(c) Custodian charges
(d) SEBI’s annual report
Answer: (a) Commission earned

Q101. AMFI provides investors with:

(a) List of ARN holders
(b) AMC profit reports
(c) Stock market data
(d) RBI repo updates
Answer: (a) List of ARN holders

Q102. Investors choosing direct plans save by avoiding:

(a) Distributor commission costs
(b) Exit load charges
(c) NAV fluctuation
(d) Custodian fees
Answer: (a) Distributor commission costs

Q103. Which channel has seen rapid growth in mutual fund sales?
(a) Online and digital platforms
(b) Rural cooperative societies
(c) Postal deposits
(d) Government subsidies
Answer: (a) Online/digital

Q104. Who is responsible if an employee mis-sells a scheme?

(a) Distributor and employee both
(b) Investor
(c) SEBI
(d) AMC
Answer: (a) Distributor and employee both

Q105. Which of the following best defines “execution-only” transaction?

(a) Distributor executes order without advice
(b) Distributor provides full advisory service
(c) Investor is guaranteed returns
(d) AMC subsidises investment
Answer: (a) Order execution without advice

Set 2 – Unit 7: Accounting, Valuation, and Taxation (20 Qs)

Q106. The NAV of a scheme is calculated as:
(a) (Market value of securities – liabilities) ÷ units outstanding
(b) AMC profit ÷ number of investors
(c) Custodian corpus ÷ SEBI fee
(d) Units outstanding ÷ market index
Answer: (a) Market value minus liabilities ÷ units

Q107. NAV must be calculated:

(a) Daily for open-ended funds
(b) Weekly for close-ended only
(c) Monthly for all schemes
(d) Quarterly for debt funds
Answer: (a) Daily for open-ended funds

Q108. Mark-to-market means:

(a) Valuing assets at current market price
(b) Valuing at purchase price
(c) Valuing at SEBI fixed rate
(d) Valuing at face value
Answer: (a) Current market price

Q109. Fund accounts must be audited:

(a) Annually by independent auditors
(b) Monthly by trustees
(c) Weekly by SEBI
(d) Quarterly by custodians
Answer: (a) Annually

Q110. Expense ratio represents:

(a) Annual expenses ÷ average AUM
(b) AMC profit margin
(c) Distributor commission alone
(d) NAV volatility
Answer: (a) Annual expenses ÷ average AUM

Q111. Tax on dividends from mutual funds is payable by:

(a) Investor at slab rate
(b) AMC at flat 10%
(c) Trustee
(d) Distributor
Answer: (a) Investor at slab rate

Q112. Capital gains holding period for equity funds qualifying as long-
term is:
(a) More than 12 months
(b) More than 24 months
(c) More than 36 months
(d) More than 6 months
Answer: (a) >12 months

Q113. Long-term capital gains (LTCG) on equity mutual funds are taxed
at:
(a) 10% above ₹1 lakh
(b) 15% flat
(c) Nil
(d) 20% indexed
Answer: (a) 10% above ₹1 lakh

Q114. Short-term capital gains on equity mutual funds are taxed at:
(a) 15% flat
(b) 10% flat
(c) Nil
(d) 20% indexed
Answer: (a) 15% flat

Q115. Indexation benefit is available on:

(a) Debt funds for long-term gains
(b) Equity SIPs
(c) Hybrid aggressive funds
(d) Liquid funds for short-term gains
Answer: (a) Debt funds (long-term)

Q116. STT (Securities Transaction Tax) is applicable on:

(a) Equity mutual fund redemption
(b) Debt funds
(c) Fixed deposits
(d) Gold ETFs
Answer: (a) Equity redemption

Q117. Dividend reinvestment option means:

(a) Declared dividend used to buy more units
(b) Cash credited to investor bank
(c) Used to pay AMC expenses
(d) Paid to trustees
Answer: (a) Reinvested into more units

Q118. TER (Total Expense Ratio) includes:

(a) All recurring scheme expenses
(b) Only distributor commissions
(c) Only SEBI fee
(d) Only custodian charges
Answer: (a) All recurring expenses

Q119. NAV rises when:

(a) Market value of portfolio increases
(b) AMC reduces expenses
(c) Custodian reduces charges
(d) Investors exit
Answer: (a) Market value increases

Q120. Unit capital of mutual fund means:

(a) Total number of units issued × NAV
(b) AMC’s net worth
(c) Trustee’s initial corpus
(d) Distributors’ commission
Answer: (a) Units × NAV

Q121. Exit load is charged to:

(a) Discourage premature redemption
(b) Increase NAV
(c) Pay AMC profit
(d) SEBI fees
Answer: (a) Discourage premature redemption

Q122. For taxation, hybrid equity-oriented funds are classified as:

(a) Equity if >65% in equity
(b) Debt if <50% in equity
(c) Always debt
(d) Always equity
Answer: (a) Equity if >65% in equity

Q123. Fund valuation norms are issued by:

(a) SEBI and AMFI
(b) RBI
(c) Ministry of Finance
(d) Custodian association
Answer: (a) SEBI and AMFI

Q124. Mutual fund accounts are maintained on:

(a) Accrual basis
(b) Cash basis
(c) Hybrid basis
(d) Trustee choice
Answer: (a) Accrual basis

Q125. Consolidated Account Statement (CAS) provides:

(a) Investor’s mutual fund and demat holdings
(b) AMC profit reports
(c) Custodian asset balance
(d) Trustee dividend payout
Answer: (a) Investor holdings

Set 2 – Unit 8: Investor Services (20 Qs)

Q126. KYC is mandatory for:
(a) All mutual fund investors
(b) Only corporate investors
(c) Only large-ticket investors
(d) Only NRIs
Answer: (a) All investors

Q127. CKYC stands for:

(a) Central KYC Registry
(b) Complete KYC Certificate
(c) Custodian KYC Card
(d) Central Knowledge of Customers
Answer: (a) Central KYC Registry

Q128. PAN is mandatory for mutual fund investors except:

(a) Micro-SIP investors up to ₹50,000 annually
(b) All retail investors
(c) Corporate investors
(d) NRIs
Answer: (a) Micro-SIP up to ₹50,000

Q129. Investor folio number is:

(a) Unique account number assigned by AMC
(b) PAN number
(c) Bank account number
(d) Trustee registration
Answer: (a) Unique number per investor

Q130. SIP stands for:

(a) Systematic Investment Plan
(b) Secure Income Portfolio
(c) Strategic Index Program
(d) Standard Investment Policy
Answer: (a) Systematic Investment Plan

Q131. STP (Systematic Transfer Plan) helps investors:

(a) Transfer money periodically between schemes
(b) Transfer AMC profits
(c) Transfer KYC data
(d) Transfer ARN numbers
Answer: (a) Transfer between schemes

Q132. SWP (Systematic Withdrawal Plan) is used to:

(a) Withdraw fixed amounts regularly from investment
(b) Withdraw entire corpus at maturity
(c) Avoid taxation
(d) Pay distributor commissions
Answer: (a) Withdraw fixed amounts

Q133. Which option allows dividends to be credited in bank account?

(a) Dividend payout
(b) Dividend reinvestment
(c) Growth option
(d) SIP option
Answer: (a) Dividend payout

Q134. Growth option in mutual funds means:

(a) No dividend is paid; returns accumulate in NAV
(b) Only dividends paid
(c) Only capital preserved
(d) NAV fixed at face value
Answer: (a) Returns accumulate in NAV

Q135. Nomination facility in mutual funds allows:

(a) Transfer of units to nominee on investor’s death
(b) Assigning trusteeship
(c) Tax-free gains
(d) Higher NAV allocation
Answer: (a) Transfer to nominee

Q136. Minor investors can invest if:

(a) Application made by guardian
(b) They hold PAN independently
(c) They are above 12 years
(d) No restrictions
Answer: (a) Application via guardian

Q137. Redemption proceeds of mutual fund units are paid by:

(a) Direct credit to bank account registered in folio
(b) Cash from distributor
(c) Trustee cheque only
(d) Custodian in physical cash
Answer: (a) Direct bank credit

Q138. Turnaround time for redemption in liquid funds is:

(a) 1 working day (T+1)
(b) 2 working days
(c) 7 working days
(d) Same day
Answer: (a) T+1 day

Q139. Turnaround time for redemption in equity funds is:

(a) T+3 working days
(b) T+1
(c) T+7
(d) Same day
Answer: (a) T+3

Q140. CAS is sent to investors:

(a) Monthly if transaction, else half-yearly
(b) Weekly always
(c) Quarterly only
(d) Only annually
Answer: (a) Monthly if transaction, else half-yearly

Q141. If investor does not provide bank details, AMC will:

(a) Reject the application
(b) Issue cash
(c) Issue cheque
(d) Route through distributor
Answer: (a) Reject application

Q142. Nomination can be made for up to:

(a) 3 nominees
(b) 2 nominees
(c) Unlimited nominees
(d) 1 nominee only
Answer: (a) 3 nominees

Q143. Transmission of units happens when:

(a) Investor dies and units pass to nominee/legal heir
(b) Investor switches scheme
(c) Investor redeems units
(d) AMC merges schemes
Answer: (a) On death → nominee/heir

Q144. Investors can switch units between schemes by:

(a) Redemption + fresh purchase
(b) Selling to trustee directly
(c) Only at NFO stage
(d) Not allowed
Answer: (a) Redemption + purchase

Q145. Redemption in close-ended schemes is possible:

(a) Only at maturity or via stock exchange
(b) Anytime with exit load
(c) Daily like open-ended
(d) Not at all
Answer: (a) At maturity/stock exchange

Set 2 – Unit 9: Return, Risk, and Performance of Funds (20 Qs)

Q146. Mutual fund return is calculated based on:
(a) Change in NAV plus dividends distributed
(b) Only dividends
(c) Only NAV change
(d) Trustee report
Answer: (a) NAV change + dividends

Q147. Standard deviation in mutual funds measures:

(a) Volatility of returns
(b) Average returns
(c) Benchmark comparison
(d) Expense ratio
Answer: (a) Volatility

Q148. Sharpe ratio evaluates:

(a) Excess return per unit of total risk
(b) NAV over 3 years
(c) AMC profit margin
(d) Benchmark return only
Answer: (a) Excess return ÷ risk

Q149. Beta of a fund measures:

(a) Sensitivity to market movements
(b) AMC profit growth
(c) Risk-free return
(d) Fund’s diversification level
Answer: (a) Market sensitivity

Q150. Alpha measures:

(a) Risk-adjusted performance compared to benchmark
(b) AMC profit margin
(c) Portfolio diversification
(d) NAV volatility
Answer: (a) Excess return vs benchmark

Q151. R-squared indicates:

(a) Correlation between fund returns and benchmark
(b) AMC income
(c) Expense ratio
(d) Riskometer level
Answer: (a) Correlation

Q152. Tracking error is relevant for:

(a) Index funds and ETFs
(b) Debt funds
(c) Hybrid funds
(d) Arbitrage funds
Answer: (a) Index funds

Q153. Riskometer has how many levels of risk?

(a) 6
(b) 5
(c) 7
(d) 4
Answer: (a) 6

Q154. Diversification helps in:

(a) Reducing unsystematic risk
(b) Eliminating systematic risk
(c) Increasing returns guaranteed
(d) Lowering expense ratio
Answer: (a) Reduce unsystematic risk

Q155. Systematic risk in mutual funds refers to:

(a) Market-wide risk that cannot be diversified away
(b) Risk of mis-selling
(c) Trustee fraud
(d) Expense leakage
Answer: (a) Market-wide risk

Q156. Unsystematic risk refers to:

(a) Stock/sector-specific risk
(b) Entire market downturn
(c) Inflation risk
(d) Liquidity crisis
Answer: (a) Stock/sector specific

Q157. Fund performance should be compared against:

(a) Benchmark index and peers
(b) AMC profits
(c) Distributor commission
(d) RBI repo rate
Answer: (a) Benchmark + peers

Q158. Which risk affects debt mutual funds most?

(a) Interest rate risk
(b) Equity market risk
(c) Currency risk
(d) Political risk
Answer: (a) Interest rate risk

Q159. Modified duration measures:

(a) Sensitivity of bond prices to interest rate changes
(b) Equity NAV volatility
(c) AMC’s accounting period
(d) Dividend frequency
Answer: (a) Bond price sensitivity

Q160. Credit risk in debt funds arises from:

(a) Issuer default possibility
(b) Market NAV fall
(c) Higher benchmark
(d) AMC fee hike
Answer: (a) Issuer default

Q161. Which fund has lowest risk?

(a) Overnight fund
(b) Small-cap equity fund
(c) Sectoral fund
(d) Thematic fund
Answer: (a) Overnight fund

Q162. CAGR stands for:

(a) Compounded Annual Growth Rate
(b) Current Average Growth Return
(c) Capital Allocation Growth Ratio
(d) Cumulative AMC Growth Return
Answer: (a) Compounded Annual Growth Rate

Q163. Point-to-point return means:

(a) NAV change between two dates
(b) Average daily NAV
(c) Dividend reinvestment return
(d) Annualised rolling return
Answer: (a) NAV change between dates

Q164. Rolling return is useful because:

(a) Shows consistency of performance over multiple periods
(b) Calculates AMC profits
(c) Tracks only annual return
(d) Removes volatility
Answer: (a) Consistency

Q165. Which ratio is best for comparing two actively managed funds?
(a) Sharpe ratio
(b) Expense ratio
(c) Modified duration
(d) R-squared
Answer: (a) Sharpe ratio

Set 2 – Unit 10: Mutual Fund Scheme Evaluation (20 Qs)

Q166. When evaluating mutual funds, investors should look at:
(a) Returns, risk, expenses, consistency
(b) AMC profit
(c) Distributor popularity
(d) NAV alone
Answer: (a) Returns + risk + expenses

Q167. Expense ratio directly impacts:

(a) Investor returns
(b) Trustee profits
(c) Benchmark value
(d) Fund duration
Answer: (a) Investor returns

Q168. Which is better for long-term investment evaluation?

(a) Rolling returns
(b) Point-to-point single return
(c) AMC dividend
(d) Exit load
Answer: (a) Rolling returns

Q169. Peer comparison in mutual funds means:

(a) Comparing scheme performance with similar category funds
(b) Comparing NAV to stock index
(c) Comparing with custodian
(d) Comparing AMC salaries
Answer: (a) Category comparison

Q170. Benchmark selection should be based on:

(a) Scheme’s stated investment objective
(b) AMC’s discretion
(c) RBI repo rate
(d) Investor suggestion
Answer: (a) Investment objective

Q171. For equity diversified fund, suitable benchmark is:

(a) Nifty 50 / Sensex
(b) Government bond index
(c) Gold prices
(d) Liquid fund average
Answer: (a) Nifty 50 / Sensex

Q172. Debt mutual fund benchmarks are usually:

(a) Government security/bond indices
(b) Equity indices
(c) Commodity indices
(d) Gold ETFs
Answer: (a) Bond indices

Q173. Consistency of performance is shown by:

(a) Quartile rankings over periods
(b) NAV on one date
(c) AMC income
(d) Exit load
Answer: (a) Quartile rankings

Q174. Which is NOT part of fund evaluation?

(a) Sponsor’s family background
(b) Fund manager’s track record
(c) Portfolio quality
(d) Expense ratio
Answer: (a) Sponsor’s family background

Q175. Higher portfolio turnover generally indicates:

(a) Higher transaction costs and expenses
(b) Lower expenses
(c) Lower risk
(d) Stable NAV
Answer: (a) Higher costs

Q176. Risk-adjusted return measures are important because:

(a) They adjust returns for volatility
(b) They remove expenses
(c) They guarantee profits
(d) They ignore benchmarks
Answer: (a) Adjust for volatility

Q177. Information ratio is:

(a) Excess return per unit of tracking error
(b) AMC profit ratio
(c) Peer comparison average
(d) Expense ratio alternative
Answer: (a) Excess ÷ tracking error

Q178. Star ratings of funds by agencies depend on:

(a) Past performance & risk metrics
(b) AMC size
(c) Distributor network
(d) Sponsor name
Answer: (a) Past performance + risk

Q179. Limit of relying on past performance is:

(a) It may not repeat in future
(b) It is SEBI prohibited
(c) It guarantees returns
(d) It ignores NAV
Answer: (a) May not repeat

Q180. SIP returns differ from lump sum because:

(a) Cost averaging occurs in SIP
(b) NAV is fixed in SIP
(c) SEBI mandates bonus in SIP
(d) Lump sum guarantees returns
Answer: (a) Cost averaging

Q181. Portfolio concentration risk is high in:

(a) Sectoral funds
(b) Index funds
(c) Diversified equity
(d) Balanced advantage funds
Answer: (a) Sectoral

Q182. Exit load is relevant while:

(a) Evaluating liquidity and effective returns
(b) Measuring fund size
(c) Benchmark selection
(d) Tax computation
Answer: (a) Liquidity + effective returns

Q183. Higher AUM of fund generally suggests:

(a) More investor confidence, but not always better returns
(b) Guaranteed performance
(c) Lower NAV
(d) Higher expenses always
Answer: (a) More confidence

Q184. Fund fact sheets published by AMCs give:

(a) Portfolio, returns, ratios, load, benchmark
(b) AMC board salaries
(c) SEBI policy details
(d) Custodian balances
Answer: (a) Key scheme details

Q185. Investor should avoid evaluating funds solely on:

(a) Past NAV growth
(b) Expense ratio + risk
(c) Peer performance
(d) Benchmark alignment
Answer: (a) Past NAV growth only

Set 2 – Unit 11: Helping Investors with Financial Planning (20 Qs)
Q186. Financial planning begins with:
(a) Identifying investor goals
(b) Selecting schemes
(c) Tax filing
(d) Market timing
Answer: (a) Identifying goals

Q187. Emergency fund should cover:

(a) 6–12 months of expenses
(b) 1 month expenses
(c) 2 years expenses
(d) Only medical bills
Answer: (a) 6–12 months

Q188. Equity funds are most suitable for:

(a) Long-term wealth creation goals
(b) Parking short-term surplus
(c) Emergency reserves
(d) Guaranteed returns
Answer: (a) Long-term wealth

Q189. Debt funds are suitable for:

(a) Short to medium-term goals
(b) Long-term equity growth
(c) Venture capital
(d) Guaranteed retirement income
Answer: (a) Short to medium goals

Q190. Retirement planning requires:

(a) Long-term disciplined investing in equity funds + debt allocation
(b) Pure liquid funds
(c) Pure arbitrage
(d) Only gold ETFs
Answer: (a) Long-term equity + debt

Q191. SIP is preferred because:

(a) Brings discipline, averages cost, suits long-term goals
(b) Guarantees return
(c) Avoids NAV volatility
(d) Removes taxation
Answer: (a) Discipline + averaging

Q192. Asset allocation refers to:

(a) Distribution of investment across asset classes
(b) Selecting NAV dates
(c) Setting trustee fees
(d) Deciding dividend payout
Answer: (a) Asset class mix

Q193. Risk profiling helps in:

(a) Matching investor tolerance with suitable schemes
(b) Avoiding taxes
(c) Increasing NAV
(d) Reducing expense ratio
Answer: (a) Matching tolerance + scheme

Q194. Child education goal planning requires:

(a) Long-term equity allocation + SIP
(b) Only debt allocation
(c) Only liquid funds
(d) Trustee scheme selection
Answer: (a) Equity SIP

Q195. Gold ETFs are useful for:

(a) Diversification + hedge against inflation
(b) Guaranteed profit
(c) Only short-term returns
(d) Custodian fee saving
Answer: (a) Diversification + hedge

Q196. Time horizon of investment is important because:

(a) Determines suitable scheme category
(b) Fixes AMC expenses
(c) Sets NAV volatility
(d) Trustees decide tenure
Answer: (a) Determines scheme type

Q197. ULIPs are regulated by:

(a) IRDAI
(b) SEBI
(c) RBI
(d) AMFI
Answer: (a) IRDAI

Q198. Investor’s retirement corpus should consider:

(a) Inflation, life expectancy, lifestyle
(b) AMC profits
(c) Trustee dividend
(d) Benchmark NAV
Answer: (a) Inflation + longevity

Q199. SIP step-up facility allows:

(a) Increasing SIP contribution over time
(b) Guaranteeing returns
(c) AMC dividend rise
(d) Exit load waiver
Answer: (a) Increasing SIP amount

Q200. Role of distributor in financial planning is to:

(a) Guide investor through goal-based allocation, suitable schemes, periodic
review
(b) Guarantee NAV growth
(c) Eliminate all risk
(d) Pay SEBI fees
Answer: (a) Goal-based guidance

Set 2 – Unit 12: Ethics and Advisors’ Role (15 Qs)

Q201. Code of Conduct for distributors is issued by:
(a) AMFI
(b) SEBI
(c) RBI
(d) Custodian
Answer: (a) AMFI

Q202. Mis-selling means:

(a) Selling products unsuitable for investor’s profile
(b) Distributing via online mode
(c) Offering direct plans
(d) Selling through SIPs
Answer: (a) Unsuitable selling

Q203. Churning refers to:

(a) Excessive switching/redemption to earn commission
(b) SIP averaging
(c) AMC dividend payout
(d) Trustee role
Answer: (a) Excessive switching

Q204. Suitability principle means:

(a) Recommending only schemes matching investor profile
(b) Selling highest commission product
(c) Recommending based on AMC profit
(d) Trustee dividend alignment
Answer: (a) Suitability to profile

Q205. Fiduciary duty of distributor means:

(a) Acting in best interest of investor
(b) Acting in AMC’s interest
(c) Acting in SEBI’s interest
(d) Acting in distributor’s interest only
Answer: (a) Investor’s best interest

Q206. Which of the following is UNETHICAL?

(a) Hiding risks while selling a scheme
(b) Explaining risk factors
(c) Suggesting SIP for long-term goals
(d) Transparent disclosure of commission
Answer: (a) Hiding risks

Q207. Conflict of interest arises when:

(a) Distributor prefers high commission product over suitable one
(b) AMC discloses expense ratio
(c) Investor redeems units
(d) Custodian holds assets
Answer: (a) High commission bias

Q208. Transparency in dealing requires:

(a) Disclosing commission and load to investors
(b) Hiding AMC policies
(c) Avoiding peer comparison
(d) SEBI approval before disclosure
Answer: (a) Full disclosure

Q209. Ethical sales process involves:

(a) Explaining risks, suitability, alternatives, costs
(b) Guaranteeing profit
(c) Ignoring KYC norms
(d) Selling without advice
Answer: (a) Full ethical disclosure

Q210. Which body monitors distributor mis-selling complaints?

(a) SEBI + AMFI
(b) RBI
(c) IRDAI
(d) Custodian
Answer: (a) SEBI + AMFI

Q211. Investor interest should be placed:

(a) Above distributor’s interest
(b) Equal to AMC’s interest
(c) Below AMC’s profit
(d) Along with custodian’s profit
Answer: (a) Above distributor’s interest

Q212. Which practice is encouraged ethically?

(a) Recommending SIPs for long-term goals
(b) Guaranteeing returns
(c) Pushing unsuitable schemes
(d) Hiding trail commissions
Answer: (a) SIP recommendation

Q213. Distributor must avoid:

(a) Misrepresentation, false promises, hiding costs
(b) Suitability checks
(c) Explaining risk factors
(d) Educating investor
Answer: (a) Misrepresentation

Q214. A professional advisor must maintain:

(a) Confidentiality of client’s financial information
(b) Public disclosure of client income
(c) Sharing data with other distributors
(d) Hiding costs
Answer: (a) Confidentiality

Q215. Importance of ethics in distribution is:

(a) Builds investor trust, ensures sustainable business
(b) Helps avoid taxation
(c) Guarantees NAV increase
(d) Protects AMC profits only
Answer: (a) Investor trust + sustainable growth