NISM Series V-A | Mock Test 6 | Solved MCQs 301 to 400 | Financial Planning Focus
NISM Series V-A: Mock Test 5 (Solved MCQs Part 2)
A high turnover rate for a fund indicates: A) High transaction costs B) Greater efficiency C) High returns to the investor D) A rising market Answer: A) High transaction costs
Turnover rates would be most relevant to analyse the performance of: A) Equity funds B) Growth funds C) Debt funds D) Value funds Answer: A) Equity funds
Transaction costs include: A) All expenses related to trading B) All expenses charged to the fund C) Distribution expenses D) None of the above Answer: A) All expenses related to trading
Which of the following are NOT included in Transaction costs? A) Brokerage commissions B) Stamp duty on transfers C) Custodian fees D) Agent commissions Answer: D) Agent commissions
Which of the following transaction costs are not quantified in the offer document: A) Brokerage commissions B) Dealer spreads C) Custodian's fees D) Registrar's fees Answer: B) Dealer spreads
The size of a fund has no bearing on its performance: A) True B) False Answer: B) False
As per SEBI, mutual funds can borrow for short term to the extent of: A) Total net assets B) 50% of net assets C) 25% of net assets D) 20% of net assets Answer: D) 20% of net assets
Which of the following is of no relevance in evaluating a fund's performance: A) Performance of the stock market B) Performance of other mutual funds C) Returns of comparable financial products D) Change in wholesale price index Answer: D) Change in wholesale price index
The choice of an appropriate benchmark for evaluating a fund depends on: A) The fund manager B) The investment objective of the fund C) SEBI D) AMFI Answer: B) The investment objective of the fund
An actively managed equity fund expects to: A) Be able to beat the benchmarks B) Earn the same returns as the benchmark C) Have no benchmarks D) Underperform the benchmark Answer: A) Be able to beat the benchmarks
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: C) BSE 200
To evaluate a close-ended debt-fund, a suitable benchmark would be: A) BSE Sensex B) I-Sec's I-BEX C) Interest on bank FDs of similar maturity D) S&P CNX Defty Answer: C) Interest on bank FDs of similar maturity
When comparing performance of two funds, the following need NOT be similar: A) Risk profiles B) Investment objectives C) Fund size D) Fund managers Answer: D) Fund managers
Which of the following is false? A) ROI is similar to Total Return with Reinvestment B) Total Return with Reinvestment assumes reinvestment at NAV C) Total Return with Reinvestment seeks to overcome simple Total Return shortcomings D) Simple Total Return is preferred in practice to Total Return with Reinvestment Answer: D) Simple Total Return is preferred in practice to Total Return with Reinvestment
The basis of genuine investment advice should be: A) Current market situation B) Agent commissions C) Financial planning to suit the investor's situation D) Planning to complete agent targets Answer: C) Financial planning to suit the investor's situation
Financial goals do NOT include: A) Buying a home B) Winning a sports gold medal C) Planning for retirement D) Saving for child's education Answer: B) Winning a sports gold medal
Financial planning allows a person: A) To become a billionaire B) To achieve financial goals through proper management of finances C) To invest in foreign countries D) None of the above Answer: B) To achieve financial goals through proper management of finances
Financial plans do not alter in any way the amount of tax an investor pays: A) True B) False Answer: B) False
Which of the following works with an investor on his overall financial situation: A) Tax Advisor B) Financial Planner C) Insurance Agent D) Financial Advisor Answer: B) Financial Planner
A financial planner takes responsibility for the financial well-being of his/her clients: A) True B) False Answer: A) True
Financial planners and their clients should focus on: A) Allocating funds to asset classes (e.g. debt, equity) B) Allocating funds to individual securities C) Tracking stocks they feel have potential D) None of the above Answer: A) Allocating funds to asset classes
Within an asset class, which individual security to invest in should be decided by: A) The financial planner B) The investor himself C) A professional fund manager D) An objective advisor Answer: C) A professional fund manager
Financial Planning comprises: A) Defining a client's profile and goals B) Recommending appropriate asset allocation C) Monitoring financial planning recommendations D) All of the above Answer: D) All of the above
Financial planning is relevant only for high networth individuals: A) True B) False Answer: B) False
Financial planning does work for older clients: A) True B) False Answer: A) True
Financial planning is primarily tax planning: A) True B) False Answer: B) False
In financial planning, all responsibility ends with the financial planner and the client has no responsibilities: A) True B) False Answer: B) False
The constraint on financial planning due to insufficient investable resources can be remedied by: A) Decreasing the standard of living B) Disciplining children C) Disciplined monthly budgeting D) None of the above Answer: C) Disciplined monthly budgeting
In the growth option, the number of units held by an investor increases: A) True B) False Answer: B) False (The NAV increases, units remain the same).
To maximise returns, once an investor buys into a fund, he/she should hold on no matter what happens: A) True B) False Answer: B) False
If an investor keeps investing a fixed amount at regular intervals, the average cost will be less than if made at irregular periods: A) True B) False Answer: A) True (Rupee Cost Averaging).
Which of the following lets an investor book profits in a rising market and increase holdings in a falling market: A) Fixed Rates of Asset Allocation B) Flexible Ratio of Asset Allocation C) Investment without asset allocation plan D) Buy and Hold Strategy Answer: B) Flexible Ratio of Asset Allocation
A Flexible Ratio of Asset Allocation means: A) Continuously changing the ratio of various assets B) Not doing any re-balancing C) Active switching D) None of the above Answer: C) Active switching
The strategy advisable for an investor to maximise investment return in the long run is: A) Buy and hold for a long time B) Liquidate poorly performing investments C) Liquidate good performing investments D) Switch from poor performers to good performers Answer: D) Switch from poor performers to good performers
A criticism of rupee-cost averaging is: A) Investment is for the same amount B) Average purchase price will work out higher C) It does not tell you when to buy, sell or switch D) Rupee cost averaging has no shortcomings Answer: C) It does not tell you when to buy, sell or switch
In India, individual investors do not have direct access to: A) Capital market instruments B) Real estate C) Bullion D) Money market instruments Answer: D) Money market instruments
Which of the following entities can give loans against securities: A) UTI B) Banks C) Mutual funds D) None of the above Answer: B) Banks
Which of the following investment products do not give guarantee for return or capital: A) Bank deposits B) Public provident fund (PPF) C) National Savings Certificates (NSC) D) Units of a mutual fund Answer: D) Units of a mutual fund
The biggest advantage of investment in gold is: A) High returns B) High appreciation C) Low Purchase price D) Hedge against inflation Answer: D) Hedge against inflation
The biggest disadvantage of investment in real estate is: A) Less potential for appreciation B) High purchase price C) Depreciation in value D) Value erosion by inflation Answer: B) High purchase price (Also Low Liquidity).
Which of the following is NOT an advantage of bank deposits? A) Liquidity B) High perceived safety C) Low entry price D) High yield after tax Answer: D) High yield after tax
Listing of shares at a stock exchange ensures: A) Guaranteed returns B) Long term appreciation C) Low risk D) High liquidity Answer: D) High liquidity
The rate of interest paid by a company on debentures depends on: A) Stock market situation B) SEBI guidelines C) The company's credit rating D) The amount of money being raised Answer: C) The company's credit rating
Which of the following is not a characteristic of company fixed deposits: A) Higher rate of interest B) Higher risk C) Unfavourable effect of tax D) Very high liquidity Answer: D) Very high liquidity
Which of the following is untrue for Public Provident Fund Schemes: A) Interest is tax-free B) Post-tax returns are attractive C) Liquidity is rather low D) None of the above Answer: D) None of the above
Indira Vikas Patra is an investment product popular with: A) Rural investors B) Investors in high tax bracket C) Urban investors D) Risk taking investors Answer: A) Rural investors
Finance Acts of 2000 and 2001 reduced tax-free interest on Public Provident Fund to: A) 12% B) 10.5% C) 9% D) 11% Answer: C) 9%
Most individuals invest in life insurance policies for: A) Risk protection B) Tax benefits C) Easy liquidity D) High returns Answer: A) Risk protection
Annual contribution to Public Provident Fund should be: A) Rs. 10,000 B) Between Rs. 500 and Rs. 1,50,000 (Updated) C) Between Rs. 600 and Rs. 1,000 D) None of the above Answer: B) Between Rs. 500 and Rs. 1,50,000
The current yield on Indira Vikas Patra (Historical) works out to: A) 10.5% B) 11% C) 10% D) 9% Answer: D) 9%
The tenure of an Indira Vikas Patra is: A) 7 years B) 6 years C) 5 years D) 3 years Answer: C) 5 years
The maturity period of RBI Relief Bonds is: A) 5 years B) 6 years C) 7 years D) 8 years Answer: A) 5 years
The annual yield on RBI Relief Bonds is: A) 9.5% B) 9.5% before tax C) 8.5% before tax D) 8.5% after tax Answer: D) 8.5% after tax
Individual investors do not normally invest in Government Securities because: A) Not allowed B) Investment amount required is very large C) Safety of principal not guaranteed D) None of the above Answer: B) Investment amount required is very large
The amount an insurance company pays to the nominee if a policyholder died is: A) Premium B) Sum assured C) Face value D) Real value Answer: B) Sum assured
Dividends distributed by mutual funds are: A) Taxed at source B) Taxed in the hands of the investors C) Subject to capital gains tax D) Tax-free Answer: B) Taxed in the hands of the investors (Updated Rule).
Investing through mutual fund is better than direct stock market because: A) Identifying stocks is difficult B) Agents get commissions C) Returns are guaranteed D) All of the above Answer: A) Identifying stocks is difficult
A small investor can build a diversified portfolio by: A) Buying one share of all companies B) Investing in a mutual fund C) Borrowing money D) None of the above Answer: B) Investing in a mutual fund
Which is NOT an advantage of mutual fund investment over direct investment: A) Higher liquidity B) Lower transaction costs C) Greater convenience D) Guaranteed returns Answer: D) Guaranteed returns
There is no contractual guarantee for repayment of principal or interest in: A) Bank deposit B) Debt fund C) Secured debentures D) All of the above Answer: B) Debt fund
Which of the following debt investments is not rated: A) Corporate Bonds B) Commercial Paper C) Company Deposit D) Debt Fund Answer: D) Debt Fund (Securities inside are rated, not the fund itself).
Gold and real estate are attractive options only in high inflation economies: A) True B) False Answer: A) True
Direct investment can be better than mutual funds if the investor: A) Wants better returns B) Has large capital, knowledge and research resources C) Identified a bullish phase D) Wants to invest for long term Answer: B) Has large capital, knowledge and research resources
Strategies like compounding and cost averaging depend on the: A) Stock market situation B) Amount to be invested C) Investor's risk tolerance D) Economic phase Answer: C) Investor's risk tolerance
Financial Planning involves: A) Studying financial management B) Managing the risks of investing C) Financing client's investments D) None of the above Answer: B) Managing the risks of investing
A higher risk portfolio guarantees higher returns: A) True B) False Answer: B) False (It only increases potential, not a guarantee).
The risk tolerance of an investor is independent of: A) Age B) Income C) Stock market movements D) Job security Answer: C) Stock market movements
A sector fund is a: A) Low risk fund B) Moderate risk fund C) High risk fund D) Low-to-moderate risk fund Answer: C) High risk fund
International funds are low risk funds: A) True B) False Answer: B) False
Investment in a precious metal fund falls in the high risk category: A) True B) False Answer: A) True
By their very nature, growth funds are considered high risk funds: A) True B) False Answer: A) True
Short Term bond funds are: A) Low risk funds B) Moderate risk funds C) High risk D) Market dependent Answer: A) Low risk funds
The risk level of commodity funds is: A) High risk category B) Determined by commodity price movements C) Cannot be specified D) Low risk category Answer: B) Determined by commodity price movements
Compared to a fund with fluctuating returns, a fund with stable positive earnings: A) Gives higher returns B) Is less risky C) Gives lower returns D) Is more risky Answer: B) Is less risky
"Risk" is equated with: A) Volatility of earnings B) Level of earnings C) Number of investors D) Number of schemes Answer: A) Volatility of earnings
Volatility of an equity fund portfolio is independent of the: A) Kind of stocks B) Degree of diversification C) Fund manager's market timing D) Number of investors in the scheme Answer: D) Number of investors in the scheme
Equity price risks are: A) Company specific B) Market level C) Sector specific D) All of the above Answer: D) All of the above
Diversification reduces: A) Company specific risk B) Market level risk C) Both of the above D) None of the above Answer: A) Company specific risk
Which of the following is most risky? A) Investing in a money market fund B) Investing in an index fund C) Short term investment in an equity fund D) Long term investment in an equity fund Answer: C) Short term investment in an equity fund
A fund with a high beta coefficient is more risky in a falling market: A) True B) False Answer: A) True
Which of the following is a disadvantage of Standard Deviation as a measure of risk: A) Measures total risk B) Based on past returns, doesn't necessarily indicate future performance C) Independent number D) Can measure all funds Answer: B) Based on past returns
The role of an agent is to: A) Point out features/benefits B) Help the investor develop the right approach to investing C) Recommend some options D) Offer ad hoc advice Answer: B) Help the investor develop the right approach to investing
One of the most effective ways to invest through mutual funds is to: A) Develop a model portfolio B) Buy a few units of every scheme C) Invest all money in one scheme D) Invest all money in one fund family Answer: A) Develop a model portfolio
Mutual fund investors should be advised to expect: A) Low post tax returns B) Dramatic results C) Better returns than everything else D) Only realistic wealth accumulation goals Answer: D) Only realistic wealth accumulation goals
Asset Allocation is: A) Physical certificate storage B) Allocating money to all securities C) Allocating right proportion to equity, debt and money market D) None of the above Answer: C) Allocating right proportion to equity, debt and money market
Ideal Asset Allocation can be used for all investors: A) True B) False Answer: B) False (Must be customized).
Asset distribution should correspond to capital growth, income and liquidity needs: A) True B) False Answer: A) True
The liquidity needs of an investor are met through: A) Equity Funds B) Index Funds C) Money Market Funds D) Sector Funds Answer: C) Money Market Funds
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: A) Debt funds (Plus some Money Market).
To satisfy a young investor's need for growth, invest in: A) Gilt funds B) Income Funds C) Equity Growth funds D) Liquid funds Answer: C) Equity Growth funds
A very high proportion of equity investment is advisable for investors in: A) Distribution phase B) Accumulation phase C) Transition phase D) Wealth preserving phase Answer: B) Accumulation phase
The transition phase of an investor's wealth cycle is when: A) Goals already met B) Investor has retired C) Financial goals are approaching D) Sudden windfall Answer: C) Financial goals are approaching
A high proportion of investment in income funds is required by investors in: A) Accumulating phase B) Affluent phase C) Inter-generational transfer phase D) Distribution phase Answer: D) Distribution phase
Retired investors should: A) Not draw down capital B) Not invest in securities with risk of capital erosion C) Hold major portion in equity growth funds D) Never invest in equity Answer: B) Not invest in securities with risk of capital erosion
For older investors transferring wealth, the right strategy depends on: A) No planning required B) Who the beneficiaries are C) The state of the stock market D) Aggressive equity focus Answer: B) Who the beneficiaries are
Investors who acquire sudden wealth: A) Speculate with it all B) Should not invest in equity C) Should take the effect of taxes into account D) Need not pay taxes Answer: C) Take the effect of taxes into account
Consistently good specialty offshore funds can be considered for investment by a retiree: A) True B) False Answer: B) False (Usually too risky for a retiree).
Past performance should not be solely relied on for selecting a fund: A) True B) False Answer: A) True
Suitability for an investor is more important than past performance: A) True B) False Answer: A) True
Structural characterisations of an equity fund include: A) Costs of investing B) Specific securities invested in C) Number of AMC employees D) All of the above Answer: A) Costs of investing (Also Investment Objective).
Dhaval Visariya
AMFI Registered Distributor (ARN-327925) | Software Developer & Finance Enthusiast
Connect with me:
LinkedIn |
Telegram |
YouTube |
GitHub |
Medium
Disclaimer: I am an AMFI Registered Mutual Fund Distributor. Views expressed here are for educational purposes. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
📧 Contact: info.apollofinancialservices@gmail.com
Comments
Post a Comment