301. A high turnover rate for a fund indicates
u. high transaction costs
v. greater efficiency
w. high returns to the investor
x. a rising market
👁Answer
Correct Answer: u. high transaction costs
302. Turnover rates would be most relevant to analyse the performance of
w. equity funds
x. growth funds
y. debt funds
z. value funds
👁Answer
Correct Answer: w. equity funds
303. Transaction costs include
y. all expenses related to trading
z. all expenes charged to the fund
a. distribution expenses
b. none of the above
👁Answer
Correct Answer: y. all expenses related to trading
304. Which of the following are not included in Transaction costs?
y. brokerage commissions
z. stamp duty on transfers v a. custodians fees
b. agent commissions
👁Answer
Correct Answer: b. agent commissions
305. Which of the following transaction costs are not quantified in the offer document
w. brokerage commissions
x. dealer spreads
y. custodian's fees
z. registrar's fees
👁Answer
Correct Answer: x. dealer spreads
306. The size of a fund has no bearing on its performance
y. True
z. False
👁Answer
Correct Answer: z. False
307. As per SEBI, mutual funds can borrow for short term to the extent of
w. total net assets
x. 50% of net assets
y. 25% of net assets
z. 20% of net assets
👁Answer
Correct Answer: z. 20% of net assets
308. Which of the following is of no relevance in evaluating a fund's performance
y. The performance of the stock market as a whole
z. The performance of other mutual funds
a. The returns given by other comparable financial products
b. The change in wholesale price index
👁Answer
Correct Answer: b. The change in wholesale price index
309. The choice of an appropriate benchmark for evaluating a fund's performance depends on
s. the fund manager
t. the investment objective of the fund
u. SEBI
v. AMFI
👁Answer
Correct Answer: t. the investment objective of the fund
310. An actively managed equity fund expects to
y. be able to beat the benchmarks
z. earn the same returns as the benchmark
a. have no benchmarksb. underperform when compared with the benchmark
👁Answer
Correct Answer: y. be able to beat the benchmarks
311. For evaluating funds, the preferred benchmark would be the
a. BSE Sensex
b. S&P CNX Nifty
c. BSE 200
d. S&P CNX Sectoral Indices
👁Answer
Correct Answer: d. S&P CNX Sectoral Indices
312. To evaluate a close-ended debt-fund, a suitable benchmark would be
s. BSE Sensex
t. I-Sec's I-BEX
u. interest on bank fixed deposits of similar maturity
v. S&P CNX Defty
👁Answer
Correct Answer: u. interest on bank fixed deposits of similar maturity
313. When comparing performance of two funds, the following need not be similar
w. Risk profiles
x. Investment objectives
y. Fund size
z. Fund managers
👁Answer
Correct Answer: y. Fund size
314. Which of the following is false?
w. ROI is a measure similar to Total Return with Reinvestment of distribution
x. Total Return with Reinvestment of distributions assumes reinvestment at NAV on the distribution date
y. As a measure of performance, Total Return with Reinvestment of distribution seeks to overcome the shortcomings of simple Total Return
z. Because of its simplicity, simple Total Return is preferred in practice to Total Return with Reinvestment of distribution
👁Answer
Correct Answer: z. Because of its simplicity, simple Total Return is preferred in practice to
Total Return with Reinvestment of distribution
315. The basis of genuine investment advice should be
1. the current market situation
2. the agent commissions paid by different funds
3. financial planning to suit the investor's situation
4. planning to complete the agent's annual targets
👁Answer
Correct Answer: 3. financial planning to suit the investor's situation
316. Financial goals do not include w. buying a home
x. winning a sports gold medal
y. planning for retirement
z. saving for child's education
👁Answer
Correct Answer: x. winning a sports gold medal
317. Financial planning allows a person w. to become a billionaire
x. to achieve financial goals through proper management of finances
y. to invest in foreign countries
z. none of the above
👁Answer
Correct Answer: x. to achieve financial goals through proper management of finances
318. Financial plans do not alter in any way the amount of tax an investor pays as the tax is on his income
u. True
v. False
👁Answer
Correct Answer: v. False
319. Which of the following works with an investor on his overall financial situation
s. Tax Advisor
t. Financial Planner
u. Insurance Agent
v. Financial Advisor
👁Answer
Correct Answer: t. Financial Planner
320. A financial planner takes responsibility for the financial well-being of his/her clients
y. True
z. False
👁Answer
Correct Answer: y. True
321. Financial planners and their clients should focus on
w. allocating funds to asset classes (e.g. debt, equity etc.)
x. allocating funds to individual securities
y. tracking stocks which they feel have potential
👁Answer
Correct Answer: w. allocating funds to asset classes (e.g. debt, equity etc.)
322. Within an asset class, which individual security to invest in should be decided by
u. the financial planner
v. the investor himself
w. a professional fund manager
x. an objective advisor
👁Answer
Correct Answer: w. a professional fund manager
323. Financial Planning comprises
s. defining a client's profile and goals
t. recommending appropriate asset allocation
u. monitoring financial planning recommendations
v. all of the above
👁Answer
Correct Answer: v. all of the above
324. Financial planning is relevant only for high networth individuals
u. True
v. False
👁Answer
Correct Answer: v. False
325. Financial planning does work for older clients
y. True
z. False
👁Answer
Correct Answer: y. True
326 Financial planning is primarily tax planning
w. True
x. False
👁Answer
Correct Answer: x. False
327 In financial planning, all responsibility ends with the financial planner and the client has no responsibilities
y. True
z. False
👁Answer
Correct Answer: z. False
328 The constraint on financial planning due to insufficient investable resources can be remedied to some extent by
u. decreasing the standard of living
v. disciplining children
w. disciplined monthly budgeting
x. none of the above
👁Answer
Correct Answer: w. disciplined monthly budgeting
329 In the growth option offered by mutual funds, the number of units held by an investor increases because of
w. growth in net asset value i.e. capital appreciation
x. reinvestment of dividend which is like compounding
y. interest received on the fund's assets
z. none of the above
👁Answer
Correct Answer: x. reinvestment of dividend which is like compounding
330 To maximise returns on investment, once an investor buys into a fund, he/she should hold on to it no matter what happens
o. True
p. False
👁Answer
Correct Answer: p. False
331 If an investor keeps investing a fixed amount at regular intervals, the average cost of his purchases will always be less than if he makes investment at irregular periods
y. True
z. False
👁Answer
Correct Answer: y. True
332. Which of the following lets an investor book profits in a rising market and increase holdings in a falling market
u. Fixed Rates of Asset Allocation
v. Flexible Ratio of Asset Allocation
w. Investment without any asset allocation plan
x. Buy and Hold Strategy👁Answer
Correct Answer: u. Fixed Rates of Asset Allocation
333. A Flexible Ratio of Asset Allocation means
y. continuously changing the ratio of various assets in the portfolio
z. not doing any re-balancing and letting the profits run
a. active switching
b. none of the above
👁Answer
Correct Answer: z. not doing any re-balancing and letting the profits run
334. The strategy advisable for an investor to maximise investment return in the long run is
w. buy and hold on to investments for a long time
x. liquidate poorly performing investments from time to time
y. liquidate good performing investments fro time to time
z. switch from poor performers to good performers
👁Answer
Correct Answer: z. switch from poor performers to good performers
335. A criticism of rupee-cost averaging is
w. Investment is for the same amount at regular intervals
x. Over a period of time, the average purchase price will work out higher than if one tries to guess the market highs and lows
y. It does not tell you when to buy, sell or switch from one scheme to another
z. Rupee cost averaging has no serious shortcomings
👁Answer
Correct Answer: y. It does not tell you when to buy, sell or switch from one scheme to another
336. In India, individual investors do not have direct access to
q. capital market instruments
r. real estate
s.bullion
t. money market instruments
👁Answer
Correct Answer: t. money market instruments
337. Which of the following entities can given loans against securities
w. UTI
x. Banks
y. Mutual funds
z. none of the above
👁Answer
Correct Answer: x. Banks
338. Which of the following investment products do not give guarantee for return or capital
w. Bank deposits
x. Pubic provident fund (PPF)
y. National Savings Certificates (NSC)
z. Units of a mutual fund
👁Answer
Correct Answer: z. Units of a mutual fund
339. The biggest advantage of investment in gold is
w. High returns
x. High appreciation in value
y. Low Purchase price
z. Hedge against inflation
👁Answer
Correct Answer: z. Hedge against inflation
340. The biggest disadvantage of investment in real estate is
y. Less potential for capital appreciation
z. High purchase price
a. Depreciation in value as time passes
b. Value gets eroded due to inflation
👁Answer
Correct Answer: z. High purchase price
341. Which of the following is not an advantage of bank deposits?
u. Liquidity
v. High perceived safety
w. Low entry price
x. High yield after tax
👁Answer
Correct Answer: x. High yield after tax
342. Listing of shares at a stock exchange ensures
w. guaranteed returns
x. long term capital appreciation
y. low risk
z. high liquidity
👁Answer
Correct Answer: z. high liquidity
343. The rate of interest paid by a company on debentures issued by it depends on
u. the stock market situation
v. SEBI guidelines
w. the company's credit rating
x. the amount of money being raised
👁Answer
Correct Answer: w. the company's credit rating
344. Which of the following is not a characteristic of company fixed deposits
u. A higher rate of interest
v. higher risk
w. unfavourable effect of tax
x. very high liquidity
👁Answer
Correct Answer: x. very high liquidity
345. Which of the following is untrue for Public Provident Fund Schemes
s. The interest is tax-free
t. Post-tax returns are attractive
u. Liquidity is rather low
v. none of the above
👁Answer
Correct Answer: v. none of the above
346. Indira Vikas Patra is an investment product popular with
u. rural investors
v. investors in high tax bracket
w. urban investors
x. risk taking investors
👁Answer
Correct Answer: w. urban investors
347. Finance Acts of 2000 and 2001 have reduced tax-free interest on Public Provident Fund to
t. 12%
u. 10.5%
v. 9%
w. 11%
👁Answer
Correct Answer: u. 10.5%
348 Most individuals invest in life insurance policies for
w. risk protection
x. tax benefits
y. easy liquidity
z. high returns
👁Answer
Correct Answer: x. tax benefits
349. Annual contribution to Public Provident Fund should be
w. Rs.10000
x. between 100 and Rs.6000
y. between Rs.600 and Rs.1000
z. none of the above
👁Answer
Correct Answer: x. between 100 and Rs.6000
350. The current yield on Indira Vikas Patra works out to
w. 10.5%
x. 11%
y. 10%
z. 9%
👁Answer
Correct Answer: w. 10.5%
351. The tenure of an Indira Vikas Patra is
y. 7 years
z. 6 years
a. 5 years
b. 3 years
👁Answer
Correct Answer: z. 6 years
352. The maturity period of RBI Relief Bonds is
a. 5 years
b. 6 years
c. 7 years
d. 8 years
👁Answer
Correct Answer: a. 5 years
353. The annual yield on RBI Relief Bonds is
c. 9.5%
d. 9.5% before tax
e. 8.5% before tax
f. 8.5% after tax
👁Answer
Correct Answer: f. 8.5% after tax
354. Individual investors do not normally invest in Government Securities because
c. individual investors re not allowed to invest in Government Securities
d. the amount required for investment is very large
e. safety of principal is not guaranteed
f. none of the above
👁Answer
Correct Answer: d. the amount required for investment is very large
355. The amount an insurance company would pay to the nominee if a policyholder died is known as the
a. premium
b. sum assured
c. face value
d. real value
👁Answer
Correct Answer: b. sum assured
356. Dividends distributed by mutual funds are
a. taxed at source
b. taxed in the hands of the investors
c. are subject to capital gains tax
d. are tax-free in the hands of the investor
👁Answer
Correct Answer: d. are tax-free in the hands of the investor
357. Investing through mutual fund is a better option than investing directly in the stock market because
a.identifying stocks is a difficult process
b.agents get commissions on mutual fund investment
c.returned are guaranteed by mutual funds
d.all of the above
👁Answer
Correct Answer: a.identifying stocks is a difficult process
358. A small investor can build a diversified portfolio by
a. buying one share each of all listed companies
b. investing in a mutual fund
c. borrowing enough money to buy shares of well-managed companies
d. none of the above
👁Answer
Correct Answer: b. investing in a mutual fund
359. Which of the following is not an advantage of mutual fund investment over direct investment
c. Higher liquidity
d. Lower transaction costs
e. Greater convenience
f. guaranteed returns
👁Answer
Correct Answer: f. guaranteed returns
360. There is no contractual guarantee for repayment of principal or interest to an investor in
w. bank deposit
x. debt fund
y. secured debentures
z. all of the above
👁Answer
Correct Answer: x. debt fund
361. Which of the following debt investments is not rated
c. Corporate Bonds
d. Commercial Paper
e. Company Deposit
f. Debt Fund
👁Answer
Correct Answer: f. Debt Fund
362. Gold and real estate are attractive investment options only in high inflation economies
c. True
d. False
👁Answer
Correct Answer: c. True
363. Direct investment in stock market can be a better option than investing through mutual funds if the investor
w. wants better returns than those offered by mutual funds
x. has large capital, knowledge and resources for research
y. has identified a bullish phase in the stock market
👁Answer
Correct Answer: x. has large capital, knowledge and resources for research
z. wants to invest for the long term
364. Deciding on strategies such as long-term compounding, cost averaging, value averaging, active switching, all depend on the
a. stock market situation on date
b. amount of money to be invested
c. investor's risk tolerance
d. phase through which the economy is passing
👁Answer
Correct Answer: c. investor's risk tolerance
365. Financial Planning involves
a. studying financial management
b. managing the risks of investing
c. financing the client's investments
d. none of the above
👁Answer
Correct Answer: b. managing the risks of investing
366. Greater returns come only from assuring higher risks, and a higher risk portfolio guarantees higher returns
w. True
x. False
👁Answer
Correct Answer: x. False
367. The risk tolerance of an investors is independent of
a. his age
b. his income
c. the stock market movements
d. his job security
👁Answer
Correct Answer: c. the stock market movements
368. A sector fund is a
a. low risk fund
b. moderate risk fund
c. high risk fund
d. low-to-moderate risk fund
👁Answer
Correct Answer: c. high risk fund
369. International funds invest in various and so are low risk funds
w. True
x. False
👁Answer
Correct Answer: x. False
370. Investment in gold is a hedge against inflation but investment in a precious metal fund falls in the high risk category
w. True
x. False
👁Answer
Correct Answer: w. True
371. By their very nature, growth funds are considered as high risk funds
a. True
b. False
👁Answer
Correct Answer: b. False
372. Short Term bond funds are
a. low risk funds
b. moderate risk funds
c. high risk
d. of the above depending on the market
👁Answer
Correct Answer: b. moderate risk funds
373. The risk level of commodity funds is
y. high risk category
z. determined by the commodity price movements
a. cannot be specified
b. low risk category
👁Answer
Correct Answer: y. high risk category
374. As compared to a fund with fluctuating total returns, a fund with stable positive earnings
w. gives higher returns
x. is less risky
y. gives lower returns
z. is more risky
👁Answer
Correct Answer: x. is less risky
375. "Risk" is equated with
w. volatility of earnings
x. level of earnings
y. the number of investors in a fund
z. the number of schemes of a fund family
👁Answer
Correct Answer: w. volatility of earnings
376. Volatility of an equity fund portfolio is independent of the
a. kind of stocks in the portfolio
b. degree of diversification of the portfolio
c. fund manager's success at market timing
d.number of investors in the scheme
👁Answer
Correct Answer: d.number of investors in the scheme
d. number of investors in the scheme
377. Equity price risks are
y. company specific
z. market level
a. sector specific
b. all of the above
👁Answer
Correct Answer: b. all of the above
378. Diversification reduces
a. company specific risk
b. market level risk
c. both of the above
d. none of the above
👁Answer
Correct Answer: a. company specific risk
379. Which of the following is most risky?
y. Investing in a money market mutual fund
z. Investing in an index fund
a. Short term investment in an equity fund
b. Long term investment in an equity fund
👁Answer
Correct Answer: a. Short term investment in an equity fund
380. A fund with a high beta coefficient gives
greater returns in a rising market, and is more risky in a falling market
a. True
b. False
👁Answer
Correct Answer: a. True
381. Which of the following is a disadvantage of Standard Deviation as a measure of risk
q. Standard Deviation measures total risk, not just market risk
r. It is based on past returns, which does not necessarily indicate further performance
s. It is an independent number
t. All types of funds can be measured with standard deviation
👁Answer
Correct Answer: r. It is based on past returns, which does not necessarily indicate further
performance
382. The role of an agent is to
a. point out the features and benefits of various investments options
b. help the investor develop the right approach to investing
c. recommend some investment option available
d. offer ad hoc advise whenever the investor has surplus money available
👁Answer
Correct Answer: b. help the investor develop the right approach to investing
383. One of the most effective ways to invest through mutual funds is to
y. develop a model portfolio
z. buy a few units of every mutual fund scheme available
a. invest all the money in one fund scheme
b. invest all the money in different schemes of the same fund family
👁Answer
Correct Answer: y. develop a model portfolio
384. Mutual fund should be advised to expect
c. low post tax returns
d. dramatic results
e. better returns than every other available option
f. only realistic wealth accumulation goals
👁Answer
Correct Answer: f. only realistic wealth accumulation goals
385. Asset Allocation is
a. keeping certificates of the physical securities in proper places
b. allocation the available money to all the securities available
c. allocating the right proportion of funds to equity, debt and money market securities
d. none of the above
👁Answer
Correct Answer: c. allocating the right proportion of funds to equity, debt and money market
securities
386. Once a financial advisor works out ideal Asset Allocation, it can be used for all investors whom he/she advises
a. True
b. False
👁Answer
Correct Answer: b. False
387. Asset distribution among equity, debt and money market securities should correspond to the investors' need for capital growth, income and liquidity
u. True
v. False
👁Answer
Correct Answer: u. True
388. The liquidity needs of an investor are met through
a. Equity Funds
b. Index Funds
c. Money Market Funds
d. Sector Funds
👁Answer
Correct Answer: c. Money Market Funds
389. A retired person generally needs a greater proportion of
a. Debt funds
b. Equity funds
c. Money Market funds
d. All of the above
👁Answer
Correct Answer: a. Debt funds
390. To satisfy a young investor's need for growth, a greater proportion of investment should be advised in
a. Gilt funds
b. Income Funds
c. Equity Growth funds
d. Liquid funds
👁Answer
Correct Answer: c. Equity Growth funds
391. A very high proportion of investment in all types of equity funds is advisable for investors
c. in distribution phase
d. in accumulation phase
e. in transition phase
f. who are wealth preserving affluent individuals
👁Answer
Correct Answer: d. in accumulation phase
392. The transition phase of an investor's wealth cycle is when
y. the financial goals have been already met
z. the investor has retired
a. financial goals are approaching
b. investor suddenly gets a windfall
👁Answer
Correct Answer: a. financial goals are approaching
393. A high proportion of investment in income funds is required by
a. accumulating investors
b. affluent investors
c. investors in the inter-generational transfer phase
d. investors in the distribution phase
👁Answer
Correct Answer: d. investors in the distribution phase
394. Retired investors should
y. not draw down on their capital
z. not invest in securities which bear risk of capital erosion
a. continue holding a major portion of their holding in equity growth funds
b. never invest in equity
👁Answer
Correct Answer: z. not invest in securities which bear risk of capital erosion
395. For older investors who want to transfer their wealth
y. no financial planning is required
z. the right investment strategy depends upon who the beneficiaries are
a. the right investment strategy depends upon the state of the stock market
b. all the funds can be invested in aggressive equity funds
👁Answer
Correct Answer: z. the right investment strategy depends upon who the beneficiaries are
396. Investors who acquire sudden wealth w. can speculate with all the acquired money in the stock markets
x. should not use any of the new wealth to invest in equity
y. should take the effect of taxes into account
z. need not pay any taxes on the newly acquired wealth as it is not a part of their regular income
👁Answer
Correct Answer: y. should take the effect of taxes into account
397. Only if a specialty offshore fund has consistently given very good performance, it can be considered for investment by a retiree
y. True
z. False
👁Answer
Correct Answer: z. False
398. Past performance should not be solely relied on for selecting a fund
x. True
y. False
👁Answer
Correct Answer: x. True
399. Between the past performance of a fund and its suitability for an investor, past performance is more important
a. True
b. False
👁Answer
Correct Answer: b. False
400. Structural characterisations of an equity fund include
a. costs of investing
b. the specific securities in which the fund has invested
c. the number of employees of the AMC
d. all of the above
👁Answer
Correct Answer: b. the specific securities in which the fund has invested
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