NISM Series X-A Ch.11: Mutual Fund — 250 Practice Questions

Q: To be classified as a Large Cap fund, what is the minimum percentage of its total assets that must be invested in large-cap companies?

80%. The text states: 'To be classified as a large cap fund, at least 80% of the total assets should be invested in such large cap companies.'

Q: If an investor has 1,000 units in a mutual fund scheme and the Net Asset Value (NAV) is Rs. 12, what is the current value of the investment?

Rs. 12,000. The value of an investment is calculated by multiplying the number of units held by the current Net Asset Value (NAV). In this case, 1,000 units * Rs. 12/unit = Rs. 12,000

Q: What is the primary impact on Net Asset Value (NAV) when an investor redeems or makes an additional investment in a mutual fund scheme, assuming transactions are conducted at NAV?

The NAV will not directly affect the NAV.. The text states: 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.'

Q: Which body is the primary regulator of mutual funds in India, responsible for governing their setup, structure, scheme launches, portfolio management, and investor protection?

Securities and Exchange Board of India (SEBI). The text states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India. SEBI’s Regulations called the SEBI (Mutual Funds) Regulations, 1996, along with amendments made from time to time, govern the setting up a mutual fund and its structure, launching a scheme, creating and managing the portfolio, investor protection, investor services and roles and responsibilities of the constituents.'

Q: What is the minimum gap required between two specified transaction periods for an Interval Fund to allow investors to purchase and redeem units?

A minimum gap of 15 days.. The text states for Interval funds: 'The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods.'

Q: According to the text, if an investor buys units and they are hypothetically allotted at face value (Rs. 10) when the NAV is Rs. 11.11, what is the immediate impact on the scheme's NAV?

The NAV will decrease.. The text states: 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q: An investor buys 1,000 units when the NAV is Rs. 11.11, but is hypothetically allotted units at a face value of Rs. 10. If the initial net assets were Rs. 100,000 with 9,000 outstanding units, what would be the NAV of the scheme immediately after this transaction, based on the example provided in the text?

Rs. 11.00. Based on the example in the text: 'The investor will bring in Rs.10,000 (1000* Rs.10). The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11.' Calculation: (100,000 + 10,000) / (9,000 + 1,000) = 110,000 / 10,000 = Rs. 11.00

Multiple Choice Questions (225)

Q1 MCQ · 1 mark MediumEquity Fund Categories

To be classified as a Large Cap fund, what is the minimum percentage of its total assets that must be invested in large-cap companies?

A65%

B75%

✓80%

D90%

💡 The text states: 'To be classified as a large cap fund, at least 80% of the total assets should be invested in such large cap companies.'

Q2 MCQ · 1 mark MediumNAV Calculation & Impact

An investor buys 1,000 units in a mutual fund scheme when the NAV is Rs. 11.11. If, hypothetically, these units are allotted at a face value of Rs. 10 instead of the NAV, what would be the immediate impact on the scheme's Net Asset Value (NAV)?

AThe NAV would increase, benefiting existing investors.

✓The NAV would decrease, impacting all investors in the scheme.

CThe NAV would remain unchanged, as redemptions and purchases do not directly affect it.

DThe NAV would fluctuate unpredictably due to market volatility.

💡 The text provides this specific example: 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.' Specifically, the example shows the NAV falling from Rs. 11.11 to Rs. 11 after the hypothetical transaction.

Q3 MCQ · 1 mark EasyNAV Calculation Basics

If an investor has 1,000 units in a mutual fund scheme and the Net Asset Value (NAV) is Rs. 12, what is the current value of the investment?

ARs. 10,000

BRs. 11,110

✓Rs. 12,000

DRs. 12,220

💡 The value of an investment is calculated by multiplying the number of units held by the current Net Asset Value (NAV). In this case, 1,000 units * Rs. 12/unit = Rs. 12,000.

Q4 MCQ · 1 mark EasyMutual Fund Basics

What is the primary impact on Net Asset Value (NAV) when an investor redeems or makes an additional investment in a mutual fund scheme, assuming transactions are conducted at NAV?

AThe NAV will directly increase.

BThe NAV will directly decrease.

✓The NAV will not directly affect the NAV.

DThe NAV will fluctuate unpredictably.

💡 The text states: 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.'

Q5 MCQ · 1 mark MediumInterval Funds

Which of the following is a characteristic of Interval Funds?

AThey are completely open-ended, allowing continuous transactions without any specified periods.

✓They are a variant of closed-end funds that become open-ended during specified periods for a minimum of two days.

CThey are not required to be listed on a stock exchange.

DThere must be a maximum gap of 15 days between two transaction periods.

💡 The text states, 'Interval funds are a variant of closed end funds which become open-ended during specified periods. During these periods investors can purchase and redeem units like in an open-ended fund. The specified transaction periods are for a minimum period of two days...' They are also required to be listed on a stock exchange, and there must be a minimum gap of 15 days.

Q6 MCQ · 1 mark EasyRegulatory Framework

Which body is the primary regulator of mutual funds in India, responsible for governing their setup, structure, scheme launches, portfolio management, and investor protection?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India. SEBI’s Regulations called the SEBI (Mutual Funds) Regulations, 1996, along with amendments made from time to time, govern the setting up a mutual fund and its structure, launching a scheme, creating and managing the portfolio, investor protection, investor services and roles and responsibilities of the constituents.'

Q7 MCQ · 1 mark HardEquity Fund Categories & Investment Styles

Which statement is accurate regarding specific categories or investment styles of open-ended equity funds as defined by SEBI?

AAn AMC can offer both a Value Fund and a Contra Fund simultaneously.

BFlexicap funds have a minimum investment limit of 25% across large, mid, and small caps.

CSector funds should invest at least 65% of their total assets in the equity and equity-related instruments of the identified sector.

✓Dividend yield funds typically invest in companies with high stable earnings but limited growth potential, paying a large portion of profits as dividends.

💡 Let's analyze each option based on the text: - A) Incorrect. The text states: 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.' - B) Incorrect. The text states for Flexicap funds: 'there is no minimum investment limits across market caps'. The 25% minimum across categories is for Multi-cap funds. - C) Incorrect. The text states for Sector funds: 'An open-ended sector fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector.' - D) Correct. The text states: 'Dividend yield funds invest in stocks that have a high dividend yield. These stocks pay a large portion of their profits as dividend... The companies typically have high level of stable earnings but do not have much potential for growth or expansion. They therefore pay high dividends while the stock prices remain stable.'

Q8 MCQ · 1 mark MediumScheme Types - Interval Funds

What is the minimum gap required between two specified transaction periods for an Interval Fund to allow investors to purchase and redeem units?

AA minimum period of two days.

BA minimum gap of 7 days.

✓A minimum gap of 15 days.

DA minimum period of one month.

💡 The text states for Interval funds: 'The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods.'

Q9 MCQ · 1 mark EasyNAV Impact

According to the text, if an investor buys units and they are hypothetically allotted at face value (Rs. 10) when the NAV is Rs. 11.11, what is the immediate impact on the scheme's NAV?

AThe NAV will increase.

✓The NAV will decrease.

CThe NAV will remain unchanged.

DThe NAV will become equal to the face value.

💡 The text states: 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q10 MCQ · 1 mark HardNAV Calculation

An investor buys 1,000 units when the NAV is Rs. 11.11, but is hypothetically allotted units at a face value of Rs. 10. If the initial net assets were Rs. 100,000 with 9,000 outstanding units, what would be the NAV of the scheme immediately after this transaction, based on the example provided in the text?

ARs. 11.11

✓Rs. 11.00

CRs. 10.00

DRs. 11.10

💡 Based on the example in the text: 'The investor will bring in Rs.10,000 (1000* Rs.10). The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11.' Calculation: (100,000 + 10,000) / (9,000 + 1,000) = 110,000 / 10,000 = Rs. 11.00.

Q11 MCQ · 1 mark EasyRegulatory Framework

Which body is identified in the text as the primary regulator for mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text clearly states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q12 MCQ · 1 mark MediumMark to Market

In the context of mutual funds, what does the process of 'marking to market' primarily involve?

ACalculating the expense ratio of the fund.

✓Valuing the fund's portfolio on a daily basis at current market prices.

CDetermining the brokerage fees for securities transactions.

DDistributing dividends to investors based on market performance.

💡 The text defines it as: 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q13 MCQ · 1 mark HardEquity Fund Investment Style

What is a key regulatory distinction between a Value Fund and a Contra Fund, as per the text?

AValue funds invest in undervalued stocks, while Contra funds invest in high dividend yield stocks.

BValue funds have a shorter investment horizon, whereas Contra funds require a longer horizon.

CAn AMC can offer both a Value Fund and a Contra Fund, provided they have different fund managers.

✓A mutual fund house can offer either a Contra Fund or a Value Fund, but not both.

💡 The text states under Contra Funds: 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Q14 MCQ · 1 mark MediumFeatures of Mutual Fund Schemes

Which of the following is a characteristic of Interval Funds, according to the provided text?

AThey are open-ended schemes that allow continuous transactions throughout the year.

✓They are a variant of closed-end funds, becoming open-ended during specified transaction periods.

CThey are not required to be listed on a stock exchange, unlike closed-ended funds.

DThe specified transaction periods must have a maximum gap of 15 days between them.

💡 The text states, 'Interval funds are a variant of closed end funds which become open-ended during specified periods.' It also mentions 'Like closed-ended funds, these funds have to be listed on a stock exchange' (making C incorrect) and 'there must be a minimum gap of 15 days between two transaction periods' (making D incorrect, as it's a minimum, not a maximum, and not about the transaction period itself). Option A describes open-ended funds, not interval funds.

Q15 MCQ · 1 mark MediumEquity Fund Categorization

According to SEBI classification, what is the minimum investment requirement for a 'Large and Mid-cap fund' in large-cap companies and mid-cap companies, respectively?

AMinimum 80% of total assets in large-cap companies.

BMinimum 65% of total assets in mid-cap companies.

✓Minimum 35% of total assets in large-cap companies and a minimum 35% in mid-cap companies.

DMinimum 25% of total assets in large-cap companies and a minimum 25% in mid-cap companies.

💡 The text states, "To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies."

Q16 MCQ · 1 mark EasyNAV Calculation

An investor buys 1,000 units when the NAV is Rs. 11.11, but the units are allotted at the face value of Rs. 10. Assuming the net assets before this transaction were Rs. 100,000 with 9,000 units outstanding, what will be the impact on the scheme's NAV after this transaction?

AThe NAV will increase.

BThe NAV will remain unchanged.

✓The NAV will decrease.

DThe NAV will become equal to the face value.

💡 Before transaction: Net Assets = Rs. 100,000, Units = 9,000. Investor brings in Rs. 10,000 (1,000 units * Rs. 10 face value). New Net Assets = Rs. 100,000 + Rs. 10,000 = Rs. 110,000. New Units = 9,000 + 1,000 = 10,000. New NAV = Rs. 110,000 / 10,000 = Rs. 11.00. The NAV decreases from Rs. 11.11 to Rs. 11.00 because units were allotted at a price different from the NAV, specifically at a lower price than the prevailing NAV.

Q17 MCQ · 1 mark MediumInterval Schemes

Which of the following statements accurately describes a feature of Interval Funds?

AThey allow continuous investment and redemption like open-ended schemes.

BThey are primarily unlisted and trade over-the-counter.

✓They become open-ended during specified transaction periods, which must be a minimum of two days long.

DTheir unit capital is fixed and does not change over the life of the scheme.

💡 Section 11.3.2 clarifies that Interval funds 'become open-ended during specified periods. During these periods investors can purchase and redeem units... The specified transaction periods are for a minimum period of two days.'

Q18 MCQ · 1 mark HardInterval Funds

Which statement accurately describes Interval Funds based on the provided text?

AThey are open-ended schemes that allow continuous transactions with no fixed tenor.

✓They are a variant of closed-end funds that become open-ended during specified periods, with mandatory stock exchange listing.

CThey are similar to ETFs, allowing trading throughout the day on a stock exchange but without specified transaction periods.

DThey are closed-end schemes that are never listed on a stock exchange and only redeem units at the end of their tenor.

💡 The text states: 'Interval funds are a variant of closed end funds which become open-ended during specified periods.' and 'Like closed-ended funds, these funds have to be listed on a stock exchange.'

Q19 MCQ · 1 mark MediumRegulatory Framework

Besides SEBI, which other regulatory body is involved in specific areas concerning mutual funds, particularly involving foreign exchange transactions and the role of the banking system?

AAMFI

BMinistry of Finance

✓Reserve Bank of India (RBI)

DNational Stock Exchange (NSE)

💡 The text states: 'Apart from SEBI, other regulators such as the RBI are also involved for specific areas which involve foreign exchange transactions such as investments in international markets and investments by foreign nationals and the role of the banking system in the mutual funds industry in India.'

Q20 MCQ · 1 mark HardEquity Fund Investment Style

Which statement accurately describes the characteristics and rules for 'Value Funds' and 'Contra Funds'?

AValue Funds prioritize high dividend yield stocks, while Contra Funds focus on growth stocks.

BContra Funds adopt a contrarian investment strategy, and an AMC can offer both a Value Fund and a Contra Fund simultaneously.

✓Value Funds seek companies trading below their inherent value with a longer investment horizon, and an AMC can offer either a Value Fund or a Contra Fund, but not both.

DBoth Value Funds and Contra Funds are required to invest a minimum of 75% of their total assets in equity and equity-related instruments.

💡 The text states: "Value Funds seek to identify companies that are trading at prices below their inherent value with the expectation of benefiting from an increase in price as the market recognizes the true value. Such funds have lower risk. They require a longer investment horizon for the strategy to play out." And regarding both: "Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both." Option A is incorrect as dividend yield funds focus on high dividend stocks. Option B is incorrect because an AMC cannot offer both. Option D is incorrect as Value funds require at least 65% in equity, not 75%.

Q21 MCQ · 1 mark MediumScheme Types

Which of the following statements accurately describes a characteristic of an Exchange Traded Fund (ETF) according to the provided text?

AETFs allow investors to invest in additional units and redeem investment continuously at current NAV.

BETFs offer units to investors only during the new fund offer (NFO) and are closed for transactions thereafter.

✓ETFs are listed on a stock exchange and can be traded all day long, with multiple prices available throughout the day.

DETFs become open-ended during specified periods, allowing purchases and redemptions.

💡 The text states: 'Exchange Traded Funds (ETFs) are mutual funds that have the features of a mutual fund but can be traded. Like a stock they are listed on the stock exchange so they can be traded all day long...Instead of a single NAV for a day that the investor gets in a normal open-ended fund there are multiple prices they can get in an ETF.' Option A describes open-ended schemes. Option B describes closed-end schemes. Option D describes interval funds.

Q22 MCQ · 1 mark MediumNAV Calculation Impact

According to the provided text, what is the direct impact of a redemption or an additional investment on a scheme's Net Asset Value (NAV)?

AIt always causes the NAV to increase.

BIt always causes the NAV to decrease.

✓It does not directly affect the NAV, as transactions are conducted at the NAV.

DIt causes the NAV to change only if the units are allotted at face value.

💡 The text explicitly states, 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.' While the text later provides a hypothetical example of an indirect impact if units are allotted at a price *different* from NAV, the direct effect of transactions *at NAV* is none.

Q23 MCQ · 1 mark MediumValuation Principles

What is the process of 'marking to market' in the context of mutual funds?

AValuing the portfolio based on its historical purchase price.

✓Valuing the portfolio on a daily basis at the current market price of securities held.

CAdjusting the NAV to reflect expected future market trends.

DCalculating the fund's net assets only once a week to reduce operational costs.

💡 The text defines it as, 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q24 MCQ · 1 mark MediumNAV Impact of Transactions

Under which of the following scenarios would a mutual fund scheme's Net Asset Value (NAV) be directly impacted (i.e., change) by an investor transaction?

AAn investor redeems units at the prevailing NAV.

BAn investor buys additional units at the prevailing NAV.

✓Units are allotted to an investor at a price different from the prevailing NAV.

DThe value of the scheme's portfolio increases due to market movements.

💡 A redemption or additional investment will not directly affect the NAV if the transactions are conducted at the prevailing NAV, as the change in net assets is offset by a proportional change in units. However, if units are allotted at a price different from the NAV, it will impact the NAV of the scheme and all investors. Changes in portfolio value due to market movements (Mark to Market) directly affect NAV but are not investor transactions.

Q25 MCQ · 1 mark MediumEquity Funds - Market Capitalisation

According to SEBI classification, what are the minimum investment requirements for a 'Large and Mid-cap fund'?

AAt least 80% of total assets in large cap companies.

BAt least 65% of total assets in mid-cap companies.

✓A minimum of 35% in large cap companies AND a minimum of 35% in mid-cap companies.

DAt least 75% of total assets in equity, with a minimum of 25% each in large, mid, and small caps.

💡 The text states: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q26 MCQ · 1 mark EasyNAV Calculation

If an investor holds 1,000 units in a mutual fund scheme and the Net Asset Value (NAV) per unit is Rs. 12, what is the current value of the investor's investment?

ARs. 10,000

BRs. 11,110

✓Rs. 12,000

DRs. 1,000

💡 The value of an investor's investment is calculated by multiplying the number of units held by the current NAV per unit. In this case, 1,000 units * Rs. 12/unit = Rs. 12,000. This is directly stated in the text: 'When the NAV goes up to Rs.12, the value of the investment also goes up to Rs.12,000'.

Q27 MCQ · 1 mark MediumFeatures of Mutual Fund Schemes

Which of the following statements accurately differentiates between open-ended funds and Exchange Traded Funds (ETFs) based on the provided text?

AOpen-ended schemes have fixed unit capital, while ETFs allow continuous changes in unit capital.

✓In an open-ended fund, transactions occur between investors and the mutual fund, whereas in an ETF, investors trade with each other on a stock exchange.

COpen-ended schemes are for a fixed period, while ETFs are for perpetuity.

DETFs offer a single NAV for a day, similar to open-ended funds, but are listed on an exchange.

💡 The text states: 'In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.' Option D is incorrect as ETFs have 'multiple prices they can get in an ETF' unlike the 'single NAV for a day that the investor gets in a normal open-ended fund'.

Q28 MCQ · 1 mark EasyRegulatory Framework

Which body is the primary regulator of mutual funds in India, as per the SEBI (Mutual Funds) Regulations, 1996?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India. SEBI’s Regulations called the SEBI (Mutual Funds) Regulations, 1996... govern the setting up a mutual fund and its structure...'

Q29 MCQ · 1 mark HardNAV Calculation & Impact of Transactions

An investor buys 1,000 units in a mutual fund scheme when the Net Asset Value (NAV) is Rs. 11.11. If, hypothetically, these units are allotted at a face value of Rs. 10, how would this transaction impact the scheme's NAV and why?

AThe NAV would remain unchanged because redemptions or additional investments do not directly affect the NAV.

BThe NAV would increase because the net assets go up by Rs. 11,110 for 1,000 units.

✓The NAV would decrease because the units were allotted at a price different from the NAV, impacting all investors.

DThe NAV would increase because the scheme received more cash (Rs. 11,110) than the face value of units allotted (Rs. 10,000).

💡 The text provides a specific example: '...if hypothetically the investor buying 1,000 units when the NAV is Rs.11.11, is allotted units at the face value of Rs.10. The investor will bring in Rs.10,000 (100* Rs.10). The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11. The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q30 MCQ · 1 mark MediumNAV Impact

Under what specific circumstance will a purchase of units by an investor at a price different from the prevailing NAV directly impact the NAV of a mutual fund scheme?

AWhen the investor redeems units at the prevailing NAV.

✓When the investor buys units at the face value, which is different from the prevailing NAV.

CWhen the NAV is calculated on a daily basis for liquid schemes.

DWhen the fund's portfolio undergoes mark to market valuation.

💡 The text explains a hypothetical scenario: 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.' This refers to a situation where units are allotted at face value (e.g., Rs.10) when the NAV is different (e.g., Rs.11.11).

Q31 MCQ · 1 mark EasyRegulatory Framework

Which industry body oversees the functioning of the mutual fund industry in India, recommends best practices, and represents the industry's requirements to the regulator, government, and other stakeholders?

AReserve Bank of India (RBI)

BSecurities and Exchange Board of India (SEBI)

✓Association of Mutual Funds in India (AMFI)

DNational Institute of Securities Markets (NISM)

💡 The text states: 'The Association of Mutual Funds in India (AMFI) is the industry body that oversees the functioning of the industry and recommends best practices to be followed by the industry members. It also represents the industry’s requirements to the regulator, government and other stakeholders.'

Q32 MCQ · 1 mark MediumInterval Funds

Interval funds are a variant of closed-end funds. Which of the following statements accurately describes their unique feature?

AThey are open for continuous transactions throughout their fixed tenor.

✓They allow purchase and redemption of units during specified periods, with a minimum gap of 15 days between two transaction periods.

CTheir unit capital is not fixed but changes continuously with investments and redemptions.

DThey are not required to be listed on a stock exchange.

💡 The text states: 'Interval funds are a variant of closed end funds which become open-ended during specified periods. During these periods investors can purchase and redeem units like in an open-ended fund. The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods.' It also states they 'have to be listed on a stock exchange'.

Q33 MCQ · 1 mark HardScheme Types - ETFs vs Open-ended

What is a key difference in how transactions occur between investors and the fund in an Exchange Traded Fund (ETF) compared to an open-ended fund?

✓In an ETF, investors trade with each other, while in an open-ended fund, investors transact with the mutual fund.

BETFs offer a single NAV for the day, whereas open-ended funds have multiple prices throughout the day.

COpen-ended funds are mandatorily listed on a stock exchange, unlike ETFs.

DETFs allow continuous investment and redemption, while open-ended funds are closed for transactions after NFO.

💡 The text highlights this difference: 'In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.'

Q34 MCQ · 1 mark EasyMutual Fund Valuation

What is the process of valuing a mutual fund's portfolio on a daily basis at its current market value called?

ANet Asset Valuation

✓Mark to Market

CFund Rebalancing

DPortfolio Liquidation

💡 The text states: 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q35 MCQ · 1 mark EasyRegulatory Bodies

Which entity is the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q36 MCQ · 1 mark MediumNAV Calculation

According to the provided text, what is the impact on a mutual fund scheme's Net Asset Value (NAV) if new units are hypothetically allotted to an investor at a price different from the prevailing NAV?

AThe NAV of the scheme will increase, benefiting all existing investors.

✓The NAV of the scheme will decrease, impacting all existing investors.

CThe NAV of the scheme will remain unchanged as new investments do not affect NAV.

DThe NAV will only be affected if the new units are allotted at a price higher than the prevailing NAV.

💡 The text provides a hypothetical example where units are allotted at Rs. 10 when the NAV is Rs. 11.11. This results in the NAV falling to Rs. 11, stating that 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q37 MCQ · 1 mark MediumMark to Market

The process of 'marking to market' the portfolio of a mutual fund primarily ensures that:

AThe fund manager can frequently adjust the portfolio for optimal returns.

✓The portfolio reflects the current market price of the securities held.

CInvestors can trade their units throughout the day at real-time prices.

DThe fund's net assets remain stable regardless of market fluctuations.

💡 The text states: 'The portfolio has to reflect the current market price of the securities held. This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q38 MCQ · 1 mark HardInvestment Style Funds (Contra vs. Value)

A mutual fund house is considering launching two new equity schemes based on investment style. Based on SEBI guidelines mentioned in the text, which of the following combinations of funds *cannot* be offered by the same Asset Management Company (AMC)?

AA Value Fund and a Dividend Yield Fund.

BA Contra Fund and a Large Cap Fund.

✓A Value Fund and a Contra Fund.

DA Flexicap Fund and a Small Cap Fund.

💡 The text explicitly states under 'Based on Investment Style' for Contra Funds: 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.' All other combinations are not restricted by this specific rule.

Q39 MCQ · 1 mark MediumNAV Calculation

An existing mutual fund scheme has net assets of Rs. 100,000 and 9,000 units outstanding. If a new investor hypothetically buys 1,000 units and is allotted them at a face value of Rs. 10 (instead of the initial NAV of Rs. 11.11), how will the NAV of the scheme change immediately after this transaction, as per the example in the text?

AThe NAV will remain unchanged at Rs. 11.11.

BThe NAV will increase to Rs. 12.

✓The NAV will decrease to Rs. 11.

DThe NAV will increase to Rs. 11.20.

💡 Based on the example in the text: Initial Net Assets = Rs. 100,000 New investor brings in Rs. 10,000 (1,000 units * Rs. 10) New Net Assets = Rs. 100,000 + Rs. 10,000 = Rs. 110,000 Initial Units Outstanding = 9,000 New units allotted = 1,000 New Units Outstanding = 9,000 + 1,000 = 10,000 units New NAV = New Net Assets / New Units Outstanding = Rs. 110,000 / 10,000 units = Rs. 11.00 The text explicitly confirms this: 'The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11.'

Q40 MCQ · 1 mark EasyNAV Calculation Frequency

For mutual fund schemes other than liquid schemes, how often is the Net Asset Value (NAV) typically calculated?

AWeekly

BMonthly

✓Every business day

DQuarterly

💡 The text specifies, 'The NAV of a scheme (other than liquid schemes where NAV is calculated on a daily basis) is calculated every business day so that investors can value their portfolio holdings and conduct transactions on this basis.'

Q41 MCQ · 1 mark EasyMark to Market

What is the primary purpose of 'marking to market' a mutual fund portfolio?

ATo determine the daily trading price of units on the stock exchange.

✓To reflect the current market price of the securities held, forming the base of the NAV.

CTo calculate the dividend payout ratio for the scheme.

DTo assess the fund manager's performance against a benchmark index.

💡 The text states, "This process of valuing the portfolio on a daily basis at current value is called marking to market. The current value of the portfolio forms the base of the net assets of the scheme and therefore the NAV. It means that if the portfolio was to be liquidated, then this would be the value that would be realised and distributed to the investors."

Q42 MCQ · 1 mark MediumNAV Impact

Under which of the following hypothetical scenarios would a mutual fund scheme's Net Asset Value (NAV) be directly impacted by an investor's transaction?

AAn investor buys 1,000 units when the NAV is Rs.11.11, and the units are allotted at the prevailing NAV.

BAn investor redeems 500 units when the NAV is Rs.10, and the redemption is processed at the prevailing NAV.

✓An investor buying 1,000 units when the NAV is Rs.11.11, is allotted units at the face value of Rs.10.

DThe value of the scheme's underlying portfolio falls due to market movements.

💡 The text states: 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.' However, it provides a hypothetical example where 'the investor buying 1,000 units when the NAV is Rs.11.11, is allotted units at the face value of Rs.10. The NAV post this transaction will be Rs.11. The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q43 MCQ · 1 mark MediumMutual Fund Products

According to SEBI's categorization rules, which of the following is an exception to the 'only one scheme per category' rule for a mutual fund?

ALarge Cap Funds

BMid Cap Funds

✓Index Funds tracking different indices

DSector Funds (unless investing in different sectors)

💡 The text states: 'Only one scheme per category is permitted for each mutual fund. The exceptions are Index funds and Exchange Traded Funds (ETF) tracking different indices, Fund of Funds with different underlying schemes and sectoral/thematic funds investing in different sectors or themes.'

Q44 MCQ · 1 mark MediumEquity Fund Categorization

An open-ended thematic fund, focusing on a specific theme like infrastructure, is required to invest a minimum percentage of its total assets in the equity and equity-related instruments of the identified theme. What is this minimum percentage?

A65%

B75%

✓80%

D100%

💡 The text states, 'An open-end thematic fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector.' This rule applies to thematic funds as well, as indicated by its placement under the 'Themes' section.

Q45 MCQ · 1 mark EasyMark to Market

The process of valuing a mutual fund's portfolio on a daily basis at current market value is known as:

ANet Asset Valuation

✓Mark to Market

CPortfolio Rebalancing

DAsset Allocation

💡 The text states, 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q46 MCQ · 1 mark HardEquity Fund Categorization

An open-ended equity scheme invests in mid-cap companies, which are ranked 101st to 250th in terms of full market capitalization as per AMFI's list. To be classified as a mid-cap fund, what is the minimum percentage of its total assets that must be invested in such companies?

A80%

✓65%

C35%

D75%

💡 Under the 'Mid-cap funds' description, the text states: 'Mid-cap companies are those ranked 101st to 250th in terms of full market capitalization in the list of stocks prepared by AMFI. To be classified as a mid-cap fund, at least 65% of the total assets should be invested in such companies.'

Q47 MCQ · 1 mark MediumNAV Impact of Transactions

According to the text, under which scenario will a redemption or additional investment *directly* affect the Net Asset Value (NAV) of a mutual fund scheme?

AWhen the transaction is conducted at the prevailing NAV.

✓When the units are allotted at face value, which is different from the prevailing NAV.

CWhen an investor buys 1,000 units at Rs. 11.11 and the NAV remains Rs. 11.11.

DWhen the value of the portfolio falls, leading to a decrease in net assets.

💡 The text states, 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.' However, it then provides a hypothetical example where 'the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme,' causing the NAV to come down.

Q48 MCQ · 1 mark HardEquity Funds - Investment Style (Value vs. Contra)

An Asset Management Company (AMC) is planning to launch two new equity schemes. Scheme X aims to identify companies trading below their inherent value for potential price appreciation, while Scheme Y intends to invest in fundamentally strong but currently underperforming stocks due to transitory factors. Which statement is true regarding the launch of these two schemes by the same AMC?

AThe AMC can launch both Scheme X (Value Fund) and Scheme Y (Contra Fund) as they target different investment strategies.

BThe AMC can launch Scheme X (Value Fund) but cannot launch Scheme Y (Contra Fund) if Scheme X is already offered.

✓The AMC must choose to offer either Scheme X (Value Fund) or Scheme Y (Contra Fund, but cannot offer both simultaneously.

DBoth schemes are essentially the same and would be classified under a single category, thus only one can be launched.

💡 The text states under 'Contra Funds': 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Q49 MCQ · 1 mark MediumEquity Fund Categorization

Which of the following statements accurately describes the difference between Multi cap funds and Flexicap funds as per SEBI classifications?

AMulti cap funds have no minimum investment limits across market caps, while Flexicap funds require a minimum of 25% in large, mid, and small caps.

✓Multi cap funds require at least 75% of assets in equity with a minimum of 25% in large, mid, and small caps, whereas Flexicap funds have no minimum limits across market caps.

CBoth Multi cap and Flexicap funds must invest at least 65% of their total assets in small cap companies.

DFlexicap funds are restricted to investing only in large-cap companies, while Multi cap funds can invest across all market caps.

💡 The text states for Multi cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' For Flexicap funds: 'In Flexicap funds there is no minimum investment limits across market caps and the funds are free to invest according to their requirements.'

Q50 MCQ · 1 mark MediumSector Funds

To be classified as an open-ended sector fund, what minimum percentage of its total assets must be invested in the equity and equity-related instruments of the identified sector?

✓80%

B65%

C75%

D35%

💡 An open-ended sector fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector.

Q51 MCQ · 1 mark MediumExchange Traded Funds (ETFs)

What is a key characteristic that distinguishes Exchange Traded Funds (ETFs) from a normal open-ended mutual fund in terms of pricing and trading?

AETFs offer a single Net Asset Value (NAV) for a day, similar to open-ended funds, but are traded on a stock exchange.

✓ETFs are traded all day long on a stock exchange, allowing for multiple prices throughout the day, where investors trade with each other.

CETFs can only be purchased during a New Fund Offer (NFO) period and redeemed at maturity, similar to closed-end funds.

DETFs are primarily regulated by the Reserve Bank of India (RBI) due to their trading nature, unlike other mutual funds.

💡 The text states: 'Like a stock they are listed on the stock exchange so they can be traded all day long.' and 'Instead of a single NAV for a day that the investor gets in a normal open-ended fund there are multiple prices they can get in an ETF. In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.'

Q52 MCQ · 1 mark MediumScheme Types - Open-ended vs Closed-ended

Which of the following statements accurately describes a key difference in unit capital between open-ended and closed-ended mutual fund schemes?

AAn open-ended scheme has a fixed unit capital, while a closed-ended scheme has a variable unit capital.

✓The unit capital of an open-ended scheme changes with every investment or redemption, whereas a closed-ended scheme's unit capital does not change over its life.

CBoth open-ended and closed-ended schemes have fixed unit capital, but only open-ended schemes allow continuous transactions.

DBoth open-ended and closed-ended schemes have variable unit capital, but closed-ended schemes are mandatorily listed on a stock exchange.

💡 For open-ended schemes, the text says: 'The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors.' For closed-ended schemes: 'The unit capital of a closed end fund does not change over the life of the scheme since transactions between investors on the stock exchange does not affect the fund.'

Q53 MCQ · 1 mark MediumNAV Impact of Transactions

An additional investment or redemption in a mutual fund scheme will NOT directly affect the NAV under which condition?

✓When the transactions are conducted at the current NAV

BWhen units are allotted at face value

CWhen the value of the portfolio falls significantly

DWhen there is a substantial decrease in outstanding units

💡 A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.

Q54 MCQ · 1 mark EasyRegulatory Framework

Which entity is identified as the primary regulator of mutual funds in India by the provided text?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q55 MCQ · 1 mark HardInvestment Style Funds

Which of the following statements about equity funds based on investment style is accurate, according to the NISM Series X-A chapter text?

AValue Funds typically seek to identify companies with high dividend yields for stable income.

BContra Funds are characterized by investing in companies ranked 101st to 250th in market capitalization.

CAn Asset Management Company (AMC) is permitted to offer both a Contra Fund and a Value Fund simultaneously.

✓Contra Funds adopt a contrarian investment strategy, seeking undervalued or under-performing stocks due to transitory factors.

💡 The text states: "Contra Funds adopt a contrarian investment strategy. They seek to identify under-valued stocks and stocks that are under-performing due to transitory factors." Option A describes Dividend Yield funds. Option B describes Mid-cap funds. Option C is incorrect because the text clearly states: "An AMC can have either of Value or Contra Fund, not both."

Q56 MCQ · 1 mark MediumEquity Fund Categories

As per SEBI classification for open-end equity schemes based on market capitalization, which of the following statements is correct regarding investment mandates?

AA Small-cap fund must invest at least 80% of its total assets in companies ranked 1 to 100th in terms of full market capitalization.

BA Mid-cap fund must invest a minimum of 35% of its total assets in large cap companies and a minimum of 35% in mid-cap companies.

CA Large and Mid-cap fund must invest at least 65% of its total assets in companies ranked 101st to 250th in terms of full market capitalization.

✓A Large-cap fund must invest at least 80% of its total assets in companies ranked 1 to 100th in terms of full market capitalization.

💡 According to the text: 'Large-cap companies are those ranked 1 to 100th... To be classified as a large cap fund, at least 80% of the total assets should be invested in such large cap companies.' - Option A is incorrect: Small-cap funds invest at least 65% in companies ranked 251 onwards. - Option B is incorrect: This describes a Large and Mid-cap fund. A Mid-cap fund invests at least 65% in companies ranked 101st to 250th. - Option C is incorrect: This describes a Mid-cap fund's investment mandate (referring to the ranking). A Large and Mid-cap fund invests a minimum of 35% in large cap companies and a minimum of 35% in mid-cap companies.

Q57 MCQ · 1 mark MediumScheme Types

How does the trading mechanism of an Exchange Traded Fund (ETF) fundamentally differ from an open-ended fund for an investor, as described in the text?

AETFs offer only a single NAV for the day, while open-ended funds offer multiple prices.

BIn an ETF, investors trade directly with the mutual fund, whereas in an open-ended fund, they trade with other investors.

✓ETFs are traded like stocks on an exchange throughout the day with multiple prices, while in open-ended funds, the investor transacts with the mutual fund at a single daily NAV.

DETFs can only track commodity prices, while open-ended funds track indices.

💡 The text states, 'Instead of a single NAV for a day that the investor gets in a normal open-ended fund there are multiple prices they can get in an ETF. In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.'

Q58 MCQ · 1 mark MediumClosed-end Schemes

If an investor in a closed-end mutual fund scheme wishes to exit their investment before the scheme's fixed tenor is over, how can they typically do so?

ABy redeeming units directly with the mutual fund at the current NAV.

✓By selling the units to other investors on a stock exchange.

CBy requesting a switch to an open-ended scheme managed by the same fund.

DBy waiting for a specified transaction period, similar to an interval fund.

💡 Section 11.3.1 states that for closed-end schemes, 'In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed.'

Q59 MCQ · 1 mark HardEquity Fund Categorization (Market Cap)

According to SEBI's classification for open-end equity schemes based on market capitalization, which of the following statements is INCORRECT?

ALarge cap funds must invest at least 80% of total assets in companies ranked 1st to 100th in market capitalization.

BMid-cap funds must invest at least 65% of total assets in companies ranked 101st to 250th in market capitalization.

CSmall-cap funds must invest at least 65% of total assets in companies ranked from 251st onwards in market capitalization.

✓Multi cap funds are required to invest a minimum of 25% in large caps, 25% in mid-caps, and 25% in small caps, with at least 65% of total assets in equity.

💡 The text states for Multi cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' The option incorrectly states 'at least 65% of total assets in equity' as the overall minimum, which was an earlier rule, not the current one mentioned in the text.

Q60 MCQ · 1 mark EasyRegulatory Framework

Which of the following bodies is the primary regulator for mutual funds in India, as per the SEBI (Mutual Funds) Regulations, 1996?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance (MoF)

Q61 MCQ · 1 mark MediumClosed-end Schemes

A key difference between a closed-end scheme and an open-ended scheme is that closed-end schemes:

AAre for perpetuity unless investors decide to wind up the scheme.

BAllow continuous investment and redemption at current NAV.

CHave unit capital that changes with every investment or redemption.

✓Offer units only during the New Fund Offer (NFO) and are mandatorily listed on a stock exchange for interim exit.

💡 The text states for closed-end schemes: 'It offers units to investors only during the new fund offer (NFO). ... In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed.' Options A, B, and C describe open-ended schemes.

Q62 MCQ · 1 mark EasyRegulatory Framework

Which body is identified as the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text clearly states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q63 MCQ · 1 mark HardNAV Impact Calculation

A mutual fund scheme has net assets of Rs. 100,000 and 9,000 outstanding units, making the current NAV Rs. 11.11. If a hypothetical investor buys 1,000 units but is allotted these units at a face value of Rs. 10 instead of the NAV, what will be the new NAV of the scheme after this transaction?

ARs. 11.11

✓Rs. 11.00

CRs. 10.90

DRs. 10.81

💡 Initial Net Assets = Rs. 100,000 Initial Outstanding Units = 9,000 Initial NAV = Rs. 100,000 / 9,000 = Rs. 11.11 (approximately) Investor buys 1,000 units at face value of Rs. 10. Amount brought in by investor = 1,000 units * Rs. 10/unit = Rs. 10,000 New Net Assets = Initial Net Assets + Amount brought in by investor New Net Assets = Rs. 100,000 + Rs. 10,000 = Rs. 110,000 New Outstanding Units = Initial Outstanding Units + Units allotted New Outstanding Units = 9,000 + 1,000 = 10,000 New NAV = New Net Assets / New Outstanding Units New NAV = Rs. 110,000 / 10,000 = Rs. 11.00 The text explicitly provides this example: 'The investor will bring in Rs.10,000 (100* Rs.10). The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11.'

Q64 MCQ · 1 mark MediumScheme Types - ETFs

Which of the following describes a key characteristic of Exchange Traded Funds (ETFs) in comparison to a normal open-ended fund?

AETFs typically have a single NAV for a day, similar to open-ended funds.

BIn an ETF, the investor is on one side of the transaction and the mutual fund is on the other side.

✓ETFs are listed on the stock exchange and can be traded all day long like a stock.

DETFs do not derive their value from the holdings in their portfolio.

💡 The text states: 'Like a stock they are listed on the stock exchange so they can be traded all day long.' It also clarifies: 'Instead of a single NAV for a day that the investor gets in a normal open-ended fund there are multiple prices they can get in an ETF.' And: 'In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.'

Q65 MCQ · 1 mark MediumEquity Fund Classification

As per SEBI's classification for open-ended equity schemes based on market capitalization, what are the minimum investment requirements for a Large and Mid-cap fund?

AAt least 80% in large cap companies.

BAt least 65% in mid-cap companies.

✓A minimum of 35% of total assets in large cap companies and a minimum of 35% in mid-cap companies.

DAt least 25% in large caps, 25% in mid-caps, and 25% in small caps.

💡 The text states: "To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies." Option D describes Multi Cap funds.

Q66 MCQ · 1 mark EasyMark to Market

What is the process of valuing a mutual fund's portfolio on a daily basis at current market value called?

ANet Asset Valuation

BCut-off timing

✓Mark to Market

DFund Rebalancing

💡 The text states: 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q67 MCQ · 1 mark MediumImpact on NAV

Which of the following transactions will NOT directly affect the Net Asset Value (NAV) of a mutual fund scheme, assuming the transaction is conducted at the prevailing NAV?

AA decrease in the value of the portfolio holdings.

BAn increase in the value of the portfolio holdings.

✓An investor making an additional investment in the scheme.

DThe allotment of units at a price different from the NAV.

💡 The text states, 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.' Changes in portfolio value (options A and B) directly impact net assets and thus NAV. Allotting units at a price different from NAV (option D) is explicitly stated to have an impact on NAV.

Q68 MCQ · 1 mark MediumEquity Funds - Market Capitalization

According to SEBI classification for open-end equity schemes based on market capitalization, what is the minimum percentage of total assets that a Large-cap fund must invest in large-cap companies?

A65%

B75%

✓80%

D35%

💡 The text states: 'To be classified as a large cap fund, at least 80% of the total assets should be invested in such large cap companies.'

Q69 MCQ · 1 mark EasyMutual Fund Basics

What is the primary purpose of 'Mark to Market' in mutual funds?

ATo determine the cut-off timing for transactions.

✓To reflect the current market price of the securities held in the portfolio.

CTo calculate the dividend payout for investors.

DTo identify undervalued stocks for contrarian investment.

💡 The text states, "This process of valuing the portfolio on a daily basis at current value is called marking to market. The price is taken from the market where the security is traded." Its purpose is to reflect the value that would be realised if the portfolio were liquidated.

Q70 MCQ · 1 mark MediumEquity Funds - Market Capitalisation

According to SEBI's classification of open-end equity schemes, what is the minimum investment requirement for a fund to be classified as a 'Large and Mid-cap fund'?

AAt least 80% of total assets in large-cap companies.

BAt least 65% of total assets in mid-cap companies.

✓A minimum of 35% of total assets in large-cap companies AND a minimum of 35% in mid-cap companies.

DAt least 75% of assets in equity-related instruments with a minimum of 25% in large caps, 25% in mid-caps, and 25% in small caps.

💡 The text states, 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q71 MCQ · 1 mark MediumEquity Fund Categorization

According to SEBI classification, what is the minimum investment requirement for a fund to be classified as a Mid-cap fund?

AAt least 80% of the total assets should be invested in mid-cap companies.

✓At least 65% of the total assets should be invested in mid-cap companies.

CA minimum of 35% in large cap companies and 35% in mid-cap companies.

DAt least 65% of the total assets should be invested in small-cap companies.

💡 The text states: 'To be classified as a mid-cap fund, at least 65% of the total assets should be invested in such companies.'

Q72 MCQ · 1 mark EasyNAV and Investment Value

How is the value of a mutual fund investor’s investment typically calculated?

ABy multiplying the number of units held by the face value of the units.

✓By multiplying the number of units held by the Net Asset Value (NAV).

CBy adding the initial investment to the total dividends received.

DBy subtracting the redemption charges from the initial investment.

💡 The text states: 'The value of a mutual fund investor’s investment is calculated using the NAV. If an investor has invested 1,000 units in the scheme at Rs.10, the value of the investment is Rs.10,000. When the NAV goes up to Rs.12, the value of the investment also goes up to Rs.12,000...' This clearly indicates value is units multiplied by NAV.

Q73 MCQ · 1 mark MediumNAV Impact

A mutual fund investor buys 1,000 units when the NAV is Rs. 11.11, but hypothetically, these units are allotted at a face value of Rs. 10. How will this transaction impact the scheme's Net Asset Value (NAV)?

AThe NAV will increase because new funds are brought into the scheme.

BThe NAV will remain unchanged because transactions are conducted at the NAV.

✓The NAV will decrease because units were allotted at a price different from the NAV.

DThe NAV will only be affected if the total units outstanding decrease.

💡 The text states: 'consider the impact if hypothetically the investor buying 1,000 units when the NAV is Rs.11.11, is allotted units at the face value of Rs.10. The investor will bring in Rs.10,000 (100* Rs.10). The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11. The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q74 MCQ · 1 mark EasyRegulatory Framework

Which entity is the primary regulator of mutual funds in India, governing their setting up, structure, scheme launch, portfolio management, investor protection, and services?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India. SEBI’s Regulations called the SEBI (Mutual Funds) Regulations, 1996... govern the setting up a mutual fund and its structure, launching a scheme, creating and managing the portfolio, investor protection, investor services and roles and responsibilities of the constituents.'

Q75 MCQ · 1 mark EasyRegulatory Framework

Which body is identified as the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q76 MCQ · 1 mark EasyExchange Traded Funds (ETFs)

Which of the following is a distinguishing feature of Exchange Traded Funds (ETFs) compared to a normal open-ended mutual fund?

✓ETFs can be traded all day long on a stock exchange.

BETFs typically have a single NAV for a day.

CTransactions in ETFs primarily involve the investor on one side and the mutual fund on the other side.

DThe unit capital of an ETF changes with every investment or redemption made by investors.

💡 Like a stock they are listed on the stock exchange so they can be traded all day long. In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side. Instead of a single NAV for a day that the investor gets in a normal open-ended fund there are multiple prices they can get in an ETF.

Q77 MCQ · 1 mark MediumEquity Fund Categories

To be classified as a Large and Mid-cap fund, what is the minimum asset allocation requirement for both large-cap and mid-cap companies, as per SEBI's classification?

AAt least 80% in large-cap companies.

BAt least 65% in mid-cap companies.

✓A minimum of 35% in large-cap companies AND a minimum of 35% in mid-cap companies.

DAt least 65% of the total assets invested across large, mid, and small-cap companies without specific individual limits.

💡 The text states: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q78 MCQ · 1 mark MediumInterval Funds

Which of the following statements is TRUE regarding Interval Funds?

AThey are open-ended schemes that allow continuous transactions throughout their lifespan.

BThey offer units only during the New Fund Offer (NFO) and are not listed on a stock exchange.

✓They are a variant of closed-end funds that become open-ended during specified periods.

DThe minimum gap between two specified transaction periods for an Interval Fund is 7 days.

💡 The text states: 'Interval funds are a variant of closed end funds which become open-ended during specified periods.' Option A describes open-ended funds. Option B describes closed-end funds, but Interval Funds *are* listed. Option D is incorrect; the text specifies 'a minimum gap of 15 days between two transaction periods.'

Q79 MCQ · 1 mark EasyRegulatory Framework

Which entity is the primary regulator of mutual funds in India, as per the provided text?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q80 MCQ · 1 mark MediumScheme Types

What is a key differentiating feature between an open-ended scheme and a closed-end scheme regarding their unit capital?

AIn open-ended schemes, the unit capital is fixed, while in closed-end schemes, it changes with investments and redemptions.

✓Open-ended schemes allow for continuous changes in unit capital, whereas the unit capital of a closed-end scheme does not change over its life.

CBoth open-ended and closed-end schemes have fixed unit capital once the NFO is closed.

DClosed-end schemes allow investors to invest in additional units continuously, thereby changing their unit capital.

💡 The text states, 'The unit capital of the scheme [open-ended] is not fixed but changes with every investment or redemption made by investors.' and 'The unit capital of a closed end fund does not change over the life of the scheme since transactions between investors on the stock exchange does not affect the fund.'

Q81 MCQ · 1 mark EasyMark to Market

The process of valuing a mutual fund's portfolio on a daily basis at its current market value is known as:

ANet Asset Valuation

BCut-off Timing

✓Mark to Market

DAsset Under Management

💡 The text states, 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q82 MCQ · 1 mark MediumNAV Calculation Impact

AThe NAV would increase because the net assets go up by the investment amount.

✓The NAV would decrease because the units were allotted at a price different from the current NAV.

CThe NAV would remain unchanged as the addition to net assets is offset by an increase in units.

DThe NAV would fluctuate unpredictably due to the discrepancy between allotment price and NAV.

💡 The text states: 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.' This scenario is explicitly described in the example given in the text.

Q83 MCQ · 1 mark MediumOpen-ended vs. Closed-ended Schemes

Which of the following is a distinguishing feature of a closed-end mutual fund scheme compared to an open-ended scheme?

AInvestors can continuously invest in additional units and redeem investments at current NAV.

BThe scheme is for perpetuity unless investors decide to wind it up.

✓Units are offered to investors only during the New Fund Offer (NFO).

DThe unit capital of the scheme changes with every investment or redemption.

💡 Closed-end schemes offer units to investors only during the New Fund Offer (NFO) and are closed for transactions with investors after this. Options A, B, and D describe features of open-ended schemes.

Q84 MCQ · 1 mark EasyMark to Market

What is the primary purpose of 'marking to market' the portfolio of a mutual fund?

ATo reduce the operational costs associated with fund management.

✓To reflect the current market price of the securities held in the portfolio.

CTo determine the dividend payout ratio for the scheme.

DTo ensure preferential treatment for certain investors over others.

💡 The text states, 'This process of valuing the portfolio on a daily basis at current value is called marking to market. The price is taken from the market where the security is traded.' This ensures the portfolio reflects the current value that would be realised if liquidated.

Q85 MCQ · 1 mark EasyNAV Calculation

If an investor has 1,000 units in a mutual fund scheme and the Net Asset Value (NAV) is Rs. 12, what is the current value of the investor's investment?

ARs. 10,000

BRs. 11,110

✓Rs. 12,000

DRs. 1,000

💡 The value of an investment is calculated by multiplying the number of units held by the current Net Asset Value (NAV). In this case, 1,000 units * Rs. 12/unit = Rs. 12,000.

Q86 MCQ · 1 mark EasyRegulatory Framework

Which of the following bodies is the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance (MoF)

💡 The text states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q87 MCQ · 1 mark EasyEquity Funds - Passive & Active

Which type of equity fund invests in companies represented in an index in the same proportion as their representation in the index, without selection of securities or investment decisions by the fund manager?

AActive Fund

BDiversified Equity Fund

✓Passive Fund

DValue Fund

💡 The text defines Passive funds as: 'Passive funds invest the money in the companies represented in an index such as Nifty or Sensex in the same proportion as the company’s representation in the index. There is no selection of securities or investment decisions taken by the fund manager as to when to invest or how much to invest in each security.'

Q88 MCQ · 1 mark MediumRegulatory Framework

While SEBI is the primary regulator for mutual funds in India, the Reserve Bank of India (RBI) is also involved in specific areas such as:

ARecommending best practices to industry members.

BOverseeing the functioning of the industry body AMFI.

✓Regulating foreign exchange transactions related to international investments by mutual funds.

DDefining the process of categorizing open-end mutual fund products.

💡 The text mentions, "Apart from SEBI, other regulators such as the RBI are also involved for specific areas which involve foreign exchange transactions such as investments in international markets and investments by foreign nationals and the role of the banking system in the mutual funds industry in India."

Q89 MCQ · 1 mark MediumEquity Fund Categorization

To be classified as a mid-cap fund, what is the minimum percentage of total assets that must be invested in mid-cap companies, as per SEBI's classification?

AAt least 80%

✓At least 65%

CAt least 35%

DAt least 25%

💡 The text states, 'To be classified as a mid-cap fund, at least 65% of the total assets should be invested in such companies.'

Q90 MCQ · 1 mark EasyOpen-ended Schemes

Which of the following is a characteristic of an open-ended mutual fund scheme?

AIt offers units to investors only during the New Fund Offer (NFO).

BIts unit capital is fixed throughout the life of the scheme.

✓It allows investors to invest in additional units and redeem investment continuously at current NAV.

DIt is mandatorily listed on a stock exchange for interim exit.

💡 The text states: 'An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV.'

Q91 MCQ · 1 mark MediumTypes of Mutual Fund Schemes

Which of the following characteristics is unique to a closed-end mutual fund scheme compared to an open-ended scheme?

AAllows investors to continuously invest in additional units and redeem investments at current NAV.

BIts unit capital is not fixed but changes with every investment or redemption made by investors.

✓Units are offered to investors only during the new fund offer (NFO), and they are mandatorily listed on a stock exchange for interim exit.

DIt becomes open-ended during specified periods, allowing purchases and redemptions like an open-ended fund.

💡 The text states that a closed-end scheme "offers units to investors only during the new fund offer (NFO). The scheme is closed for transactions with investors after this. In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed." Options A and B describe open-ended schemes, while option D describes interval funds.

Q92 MCQ · 1 mark MediumEquity Fund Classification

What is a defining characteristic of Flexicap funds according to SEBI's classification?

AThey must invest at least 75% of assets in equity, with a minimum of 25% in large, mid, and small caps each.

✓They have no minimum investment limits across market caps, provided at least 65% of the corpus is invested in equities.

CThey primarily focus on companies ranked 1 to 100th in terms of market capitalization.

DThey are mandated to invest at least 80% of total assets in a specific identified sector.

💡 The text states for Flexicap funds: 'In Flexicap funds there is no minimum investment limits across market caps and the funds are free to invest according to their requirements. Overall at least 65% of the corpus has to be invested in equities.' Option A describes Multi cap funds.

Q93 MCQ · 1 mark HardEquity Fund Investment Styles

A mutual fund house offers a scheme that seeks to identify companies trading at prices below their inherent value with the expectation of benefiting from an increase in price. Which of the following options is NOT permissible for this fund house to offer alongside this scheme, based on SEBI regulations mentioned in the text?

AA dividend yield fund

BA multi cap fund

✓A contra fund

DA passive fund

💡 The scheme described is a 'Value Fund'. The text states, 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.' Therefore, a fund house offering a Value Fund cannot also offer a Contra Fund. All other options are distinct categories and are not restricted in this manner.

Q94 MCQ · 1 mark HardNAV Impact

A mutual fund scheme has Net Assets of Rs. 100,000 and 9,000 units outstanding. If an investor hypothetically buys 1,000 units, but these units are allotted at a face value of Rs. 10 instead of the current NAV of Rs. 11.11, what will be the approximate NAV of the scheme post-transaction?

ARs. 11.11

BRs. 10.00

✓Rs. 11.00

DRs. 12.11

💡 Based on the example in the text: 'consider the impact if hypothetically the investor buying 1,000 units when the NAV is Rs.11.11, is allotted units at the face value of Rs.10. The investor will bring in Rs.10,000 (100* Rs.10). The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11.' Working: Initial Net Assets = Rs. 100,000 Initial Units Outstanding = 9,000 Initial NAV = Rs. 100,000 / 9,000 = Rs. 11.11 (approx) Investor buys 1,000 units at face value of Rs. 10. Amount brought in by investor = 1,000 units * Rs. 10/unit = Rs. 10,000 New Net Assets = Initial Net Assets + Amount brought in = Rs. 100,000 + Rs. 10,000 = Rs. 110,000 New Units Outstanding = Initial Units Outstanding + New Units = 9,000 + 1,000 = 10,000 units New NAV = New Net Assets / New Units Outstanding = Rs. 110,000 / 10,000 units = Rs. 11.00

Q95 MCQ · 1 mark EasyRegulatory Framework

Which entity is the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text clearly states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q96 MCQ · 1 mark EasyRegulatory Framework

Which entity is identified as the primary regulator of mutual funds in India according to the provided text?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states, "The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India."

Q97 MCQ · 1 mark MediumScheme Types

Which of the following is a distinguishing feature of Exchange Traded Funds (ETFs) compared to normal open-ended mutual funds?

AETFs have a single Net Asset Value (NAV) for the day, similar to open-ended funds.

BIn an ETF, investors trade units directly with the mutual fund.

✓ETFs are listed on a stock exchange and can be traded all day long, offering multiple prices throughout the day.

DETFs typically do not track any underlying index or commodity price, focusing on active management.

💡 The text states: 'Like a stock they are listed on the stock exchange so they can be traded all day long. ... Instead of a single NAV for a day that the investor gets in a normal open-ended fund there are multiple prices they can get in an ETF.' Options A and B describe open-ended funds, and option D is incorrect as ETFs usually track indices or commodities.

Q98 MCQ · 1 mark HardInvestment Style Funds

Which of the following statements is true regarding Value Funds and Contra Funds based on the provided text?

✓Both Value Funds and Contra Funds aim to identify companies trading at prices below their inherent value.

BAn Asset Management Company (AMC) can offer both a Value Fund and a Contra Fund simultaneously.

CValue Funds typically have higher risk and require a shorter investment horizon compared to Contra Funds.

DContra Funds primarily invest in stocks with a high dividend yield for income generation.

💡 Value Funds 'seek to identify companies that are trading at prices below their inherent value'. Contra Funds 'seek to identify under-valued stocks and stocks that are under-performing due to transitory factors. The fund invests in such stocks at valuations that are seen as cheap relative to their long-term fundamental values.' This confirms option A. Option B is false as the text says: 'An AMC can have either of Value or Contra Fund, not both.'

Q99 MCQ · 1 mark MediumMark to Market

What is the primary purpose of 'marking to market' in the context of mutual funds?

ATo determine the dividend payout ratio for investors.

✓To reflect the current market price of the securities held in the portfolio, forming the base of the net assets.

CTo calculate the expense ratio of the scheme on a daily basis.

DTo ensure that all transactions are processed at the face value of the units.

💡 The text states: 'The current value of the portfolio forms the base of the net assets of the scheme and therefore the NAV... This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q100 MCQ · 1 mark HardEquity Funds - Investment Style

Which of the following statements is TRUE regarding Value Funds and Contra Funds based on SEBI's classification of open-ended equity funds?

AContra Funds typically have lower risk compared to Value Funds.

BValue Funds primarily focus on stocks with high dividend yields.

CAn Asset Management Company (AMC) can offer both a Value Fund and a Contra Fund simultaneously.

✓Contra Funds invest in undervalued stocks and those underperforming due to transitory factors, adopting a contrarian investment strategy.

💡 Option D accurately describes Contra Funds as per the text: 'Contra Funds adopt a contrarian investment strategy. They seek to identify under-valued stocks and stocks that are under-performing due to transitory factors. The fund invests in such stocks at valuations that are seen as cheap relative to their long-term fundamental values.' Option C is false because the text states: 'An AMC can have either of Value or Contra Fund, not both.' Options A and B are incorrect based on the descriptions provided.

Q101 MCQ · 1 mark MediumMark to Market

The process of 'marking to market' for a mutual fund portfolio primarily ensures that:

Athe fund manager can frequently change the investment strategy.

✓the portfolio reflects the current market price of the securities held.

Cinvestors receive preferential treatment in unit allocation.

Dthe fund's unit capital remains stable over time.

💡 Section 11.2.6 explains that 'the portfolio has to reflect the current market price of the securities held. This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q102 MCQ · 1 mark MediumEquity Fund Categorization (Thematic/Sectoral)

According to SEBI's categorization, what is the minimum percentage of total assets an open-ended thematic fund should invest in the equity and equity-related instruments of the identified theme?

A65%

B75%

✓80%

D90%

💡 The text states: 'An open-end thematic fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector.' (The term 'sector' is used here in the context of thematic funds, referring to the identified theme).

Q103 MCQ · 1 mark MediumEquity Fund Classification

To be classified as a Large and Mid-cap fund, what are the minimum investment requirements in large cap and mid-cap companies, respectively?

AAt least 80% of total assets in large cap companies.

BAt least 65% of total assets in mid-cap companies.

✓A minimum of 35% of total assets in large cap companies and a minimum of 35% in mid-cap companies.

DAt least 65% of total assets should be invested in equity-related instruments of such companies without specific market cap distribution.

💡 The text specifies: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q104 MCQ · 1 mark EasyRegulatory Framework

Which entity is the primary regulator of mutual funds in India, governing aspects like setting up a fund, launching schemes, and investor protection?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text states, "The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India. SEBI’s Regulations called the SEBI (Mutual Funds) Regulations, 1996, along with amendments made from time to time, govern the setting up a mutual fund and its structure, launching a scheme, creating and managing the portfolio, investor protection, investor services and roles and responsibilities of the constituents."

Q105 MCQ · 1 mark EasyRegulatory Framework

Who is identified as the primary regulator of mutual funds in India, according to the provided text?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance (MoF)

💡 The text explicitly states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q106 MCQ · 1 mark EasyRegulatory Framework

Which body is the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

✓Securities and Exchange Board of India (SEBI)

CAssociation of Mutual Funds in India (AMFI)

DMinistry of Finance

💡 The text states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q107 MCQ · 1 mark MediumOpen-ended vs. Closed-ended Schemes

Which of the following is a distinguishing feature of an open-ended mutual fund scheme compared to a closed-ended scheme?

AUnits are offered only during the New Fund Offer (NFO).

BThe scheme is for a fixed period or tenor.

✓Investors can continuously invest in additional units and redeem investments at current NAV.

DUnits are mandatorily listed on a stock exchange for investors to exit in the interim.

💡 The text states, 'An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV.' Options A, B, and D describe features of closed-ended schemes.

Q108 MCQ · 1 mark MediumExchange Traded Funds (ETFs)

A key difference between an Exchange Traded Fund (ETF) and a normal open-ended mutual fund is that in an ETF:

AThe value is derived from a single Net Asset Value (NAV) for the day.

BInvestors trade units directly with the mutual fund.

✓There are multiple prices throughout the day as investors trade with each other on a stock exchange.

DThe fund's unit capital is fixed and does not change with investment or redemption.

Q109 MCQ · 1 mark EasyRegulatory Framework

Which entity is identified as the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q110 MCQ · 1 mark HardEquity Fund Classification

As per SEBI classification, which type of equity fund requires at least 75% of its assets to be invested in equity-related instruments, with a minimum of 25% each in large caps, 25% in mid-caps, and 25% in small caps?

✓Multi cap funds

BFlexicap funds

CLarge and Mid-cap funds

DSmall-cap funds

💡 For Multi cap funds, 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' Flexicap funds have no minimum investment limits across market caps, Large and Mid-cap funds require a minimum of 35% in large cap and 35% in mid-cap.

Q111 MCQ · 1 mark HardEquity Fund Categorization (Investment Style)

Regarding equity funds based on investment style, which statement is ACCURATE?

AValue Funds typically seek short-term gains by identifying overvalued stocks.

BContra Funds invest in stocks that are performing strongly and are expected to continue their upward trend.

CAn Asset Management Company (AMC) can offer both a Value Fund and a Contra Fund simultaneously.

✓Dividend Yield Funds focus on companies with stable earnings that pay a large portion of their profits as dividends.

💡 Dividend Yield Funds 'invest in stocks that have a high dividend yield. These stocks pay a large portion of their profits as dividend and these appeals to investors looking for income from their equity investments. The companies typically have high level of stable earnings but do not have much potential for growth or expansion.' Options A, B, and C are incorrect based on the text.

Q112 MCQ · 1 mark EasyRegulatory Framework

Which entity is the primary regulator of mutual funds in India, governing their setting up, structure, scheme launch, portfolio management, and investor protection?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text clearly states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q113 MCQ · 1 mark EasyNAV Calculation

What is the primary method used to calculate the value of a mutual fund investor's investment?

AFace value of units

BOriginal purchase price

✓Net Asset Value (NAV)

DMarket capitalization of the fund

💡 The text states: 'The value of a mutual fund investor’s investment is calculated using the NAV.'

Q114 MCQ · 1 mark MediumTypes of Mutual Fund Schemes

Which of the following statements accurately describes a key characteristic of Interval Funds?

AThey allow continuous investment and redemption at current NAV, similar to open-ended schemes.

BThey are fixed-period schemes that offer units only during the New Fund Offer (NFO) and are not listed on a stock exchange.

✓They are a variant of closed-end funds that become open-ended during specified transaction periods, with a minimum gap of 15 days between such periods.

DThey are traded on a stock exchange throughout the day, with investors trading units among themselves, similar to stocks.

💡 The text states, "Interval funds are a variant of closed end funds which become open-ended during specified periods. During these periods investors can purchase and redeem units like in an open-ended fund. The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods. Like closed-ended funds, these funds have to be listed on a stock exchange." Option A describes open-ended funds. Option B describes closed-ended funds, but closed-ended funds are mandatorily listed. Option D describes Exchange Traded Funds (ETFs).

Q115 MCQ · 1 mark MediumScheme Types

A key difference between an open-ended scheme and a closed-end scheme, as described in the text, relates to their unit capital. How does the unit capital typically behave for these two scheme types?

AOpen-ended scheme's unit capital is fixed, while closed-end scheme's unit capital changes with investment/redemption.

BBoth open-ended and closed-end schemes have fixed unit capital throughout their life.

✓Open-ended scheme's unit capital changes with every investment or redemption, while closed-end scheme's unit capital does not change over its life.

DBoth open-ended and closed-end schemes allow continuous investment and redemption, causing their unit capital to change.

💡 The text states for open-ended schemes: "The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors." For closed-end schemes: "The unit capital of a closed end fund does not change over the life of the scheme since transactions between investors on the stock exchange does not affect the fund."

Q116 MCQ · 1 mark EasyMark to Market

The process of valuing a mutual fund's portfolio on a daily basis at current market price is called:

✓Marking to Market

BPortfolio Rebalancing

CAsset Allocation

DNet Asset Valuation

💡 This process of valuing the portfolio on a daily basis at current value is called marking to market.

Q117 MCQ · 1 mark EasyNAV Calculation

If an investor has 1,000 units in a mutual fund scheme and the Net Asset Value (NAV) is Rs. 12, what is the current value of the investor's investment?

ARs. 10,000

BRs. 11,110

✓Rs. 12,000

DRs. 1,000

💡 The value of an investment is calculated by multiplying the number of units by the current NAV. Here, 1,000 units * Rs. 12 = Rs. 12,000.

Q118 MCQ · 1 mark MediumTypes of Mutual Fund Schemes

Which of the following statements accurately describes a key characteristic distinguishing a closed-end mutual fund scheme from an open-ended scheme?

AClosed-end schemes allow investors to invest and redeem continuously at current NAV, while open-ended schemes offer units only during NFO.

BOpen-ended schemes are for a fixed period or tenor, whereas closed-end schemes are for perpetuity.

✓The unit capital of a closed-end scheme does not change over its life, while it changes with every investment or redemption in an open-ended scheme.

DClosed-end schemes are not mandatorily listed on a stock exchange, unlike open-ended schemes.

💡 The text states: 'The unit capital of a closed end fund does not change over the life of the scheme since transactions between investors on the stock exchange does not affect the fund.' For open-ended schemes, it states: 'The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors.' Options A and B incorrectly swap the characteristics of open-ended and closed-ended schemes. Option D is incorrect as closed-end funds are 'mandatorily listed' on a stock exchange.

Q119 MCQ · 1 mark MediumNAV Impact

Under normal circumstances, how does an additional investment or redemption transaction, conducted at the Net Asset Value (NAV), directly affect the NAV of a mutual fund scheme?

AAn additional investment directly increases the NAV, while a redemption directly decreases it.

BAn additional investment directly decreases the NAV, while a redemption directly increases it.

✓Neither an additional investment nor a redemption directly affects the NAV.

DThe impact on NAV depends on whether the transaction volume is above a certain threshold.

💡 The text states: 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.'

Q120 MCQ · 1 mark EasyCut-off Timings

What is the primary reason for standardizing cut-off timings across all mutual funds?

ATo allow fund managers more time for portfolio adjustments.

✓To ensure equity and fairness in unit allocation and prevent preferential treatment.

CTo facilitate faster processing of all transactions.

DTo reduce the operational costs for mutual fund houses.

💡 The text states: 'This is a standard that is followed across all mutual funds so that there is equity and fairness in allocation and that no investors gets a preferential treatment over others.'

Q121 MCQ · 1 mark MediumScheme Types (Open-ended, ETF)

Which of the following statements accurately describes a key difference between an Open-ended scheme and an Exchange Traded Fund (ETF)?

AOpen-ended schemes are for a fixed period, while ETFs are for perpetuity.

BInvestors in open-ended schemes trade units with other investors on a stock exchange, whereas in ETFs, investors transact directly with the mutual fund.

✓Open-ended schemes have a single NAV for a day, while ETFs can have multiple prices throughout the day.

DThe unit capital of an open-ended scheme is fixed, while that of an ETF changes with every investment or redemption.

💡 The text states for open-ended funds, 'Instead of a single NAV for a day that the investor gets in a normal open-ended fund there are multiple prices they can get in an ETF.' It also mentions that in an ETF, investors trade with each other, while in an open-ended fund, it is the investor on one side and the mutual fund on the other. Options A and D are incorrect as open-ended schemes are for perpetuity and have variable unit capital.

Q122 MCQ · 1 mark HardEquity Fund Categorization

Based on SEBI's classification mentioned in the text, what is a key difference in asset allocation requirements between a Multi-cap fund and a Flexicap fund?

AMulti-cap funds must invest at least 65% in equities, while Flexicap funds have no overall equity investment requirement.

✓Multi-cap funds require a minimum of 25% investment in large caps, mid-caps, and small caps each, within an overall 75% equity allocation, whereas Flexicap funds have no minimum investment limits across market caps but must invest at least 65% in equities overall.

CFlexicap funds are mandated to invest at least 35% in large-cap and 35% in mid-cap companies, unlike Multi-cap funds.

DMulti-cap funds invest only in large and mid-cap companies, while Flexicap funds invest across all market capitalizations without any specific percentages.

💡 For Multi-cap funds, the text states: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' For Flexicap funds, it states: 'In Flexicap funds there is no minimum investment limits across market caps and the funds are free to invest according to their requirements. Overall at least 65% of the corpus has to be invested in equities.'

Q123 MCQ · 1 mark MediumEquity Funds - Sector and Theme

What is the minimum investment requirement for an open-ended sector fund in the equity and equity-related instruments of its identified sector?

AAt least 65% of the total assets.

BAt least 75% of the total assets.

✓At least 80% of the total assets.

DAt least 35% of the total assets.

💡 The text states, 'An open-ended sector fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector.' The same rule applies to thematic funds.

Q124 MCQ · 1 mark MediumScheme Types

How do investors typically exit their investment in a closed-end scheme *before* its tenor ends, as compared to an Exchange Traded Fund (ETF)?

ABoth closed-end schemes and ETFs allow continuous redemption with the fund.

✓Investors sell closed-end scheme units to other investors on a stock exchange, while ETFs are also traded on a stock exchange.

CClosed-end schemes allow early redemption with the fund, while ETFs are traded with the fund.

DClosed-end schemes are traded on a stock exchange, while ETFs are redeemed directly with the AMC.

💡 For closed-end schemes: 'In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed.' For ETFs: 'Like a stock they are listed on the stock exchange so they can be traded all day long. In an ETF it is actually investors trading with each other'.

Q125 MCQ · 1 mark MediumEquity Fund Categories - Multi Cap vs Flexicap

According to SEBI's classification, what is the primary difference in investment allocation requirements between a Multi Cap fund and a Flexicap fund?

AMulti Cap funds have no minimum investment limits across market caps, while Flexicap funds require at least 65% in equities.

✓Multi Cap funds require a minimum of 25% each in large, mid, and small caps, while Flexicap funds have no such minimum limits across market caps.

CFlexicap funds must invest at least 80% in large-cap companies, while Multi Cap funds have no specific large-cap requirement.

DBoth Multi Cap and Flexicap funds must invest at least 65% of total assets in mid-cap companies.

💡 The text states for Multi Cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' For Flexicap funds: 'In Flexicap funds there is no minimum investment limits across market caps and the funds are free to invest according to their requirements.'

Q126 MCQ · 1 mark EasyNAV Calculation

How frequently is the Net Asset Value (NAV) of a mutual fund scheme (other than liquid schemes) calculated?

✓Every business day

BOnce a week

COnce a month

DAnnually

💡 The NAV of a scheme (other than liquid schemes where NAV is calculated on a daily basis) is calculated every business day so that investors can value their portfolio holdings and conduct transactions on this basis.

Q127 MCQ · 1 mark HardInterval Funds

Which statement accurately describes a characteristic of Interval Funds?

AThey are continuously open for purchase and redemption of units throughout the year.

BThey are not required to be listed on a stock exchange.

✓They become open-ended during specified transaction periods, which must have a minimum gap of 15 days between them.

DTheir unit capital changes continuously with every investment or redemption.

Q128 MCQ · 1 mark HardScheme Characteristics and Regulatory Guidelines

Which of the following statements accurately describes the characteristics and regulatory guidelines for specific types of mutual funds?

AAn AMC can offer both a Value Fund and a Contra Fund simultaneously as they represent distinct investment strategies.

BFlexicap funds are required to invest a minimum of 25% each in large-cap, mid-cap, and small-cap companies, with an overall 65% in equities.

✓Interval funds, a variant of closed-end funds, must be listed on a stock exchange and allow transactions during specified periods with a minimum gap of 15 days between two such periods.

DPassive funds are characterized by fund managers actively selecting stocks to generate higher returns than the benchmark index, albeit with higher risk.

💡 Option A is incorrect because the text states, 'An AMC can have either of Value or Contra Fund, not both.' Option B is incorrect because Flexicap funds have 'no minimum investment limits across market caps' (the 25% rule applies to Multi cap funds). Option D is incorrect because passive funds do not involve fund managers actively selecting stocks; that is characteristic of active funds. Option C is correct as the text mentions 'Interval funds are a variant of closed end funds which become open-ended during specified periods... Like closed-ended funds, these funds have to be listed on a stock exchange... there must be a minimum gap of 15 days between two transaction periods.'

Q129 MCQ · 1 mark HardScheme Types

Regarding Interval Funds, which statement is accurate according to the provided text?

AThey are a type of open-ended fund that allows continuous transactions throughout the year.

BThey are not required to be listed on a stock exchange, unlike closed-ended funds.

✓The specified transaction periods must be for a minimum of two days, with a minimum gap of 15 days between two such periods.

DTheir unit capital changes continuously with investments and redemptions, similar to open-ended funds.

💡 The text states: 'The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods.' Interval funds are a variant of closed-end funds (not open-ended) and are required to be listed.

Q130 MCQ · 1 mark HardEquity Fund Categories

As per SEBI's classification mentioned in the text, what is the key difference in asset allocation requirements between a Multi-cap fund and a Flexicap fund?

AMulti-cap funds must invest a minimum of 65% in equities, while Flexicap funds have no such overall equity investment limit.

✓Multi-cap funds require a minimum of 25% investment in large-caps, mid-caps, and small-caps each, whereas Flexicap funds have no minimum investment limits across market caps.

CFlexicap funds must invest at least 75% of assets in equity, while Multi-cap funds only require 65%.

DMulti-cap funds can invest across large, mid, and small-cap companies without any specific percentages, while Flexicap funds have fixed percentages for each market cap.

Q131 MCQ · 1 mark MediumClosed-end Schemes

Which of the following statements is true regarding a closed-end mutual fund scheme?

✓Its unit capital does not change over the life of the scheme.

BInvestors can continuously invest in additional units.

CIt allows investors to redeem investments continuously at current NAV.

DThe scheme is for perpetuity.

💡 The unit capital of a closed end fund does not change over the life of the scheme since transactions between investors on the stock exchange does not affect the fund.

Q132 MCQ · 1 mark EasyRegulatory Framework

What is the primary regulatory body for mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states, "The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India."

Q133 MCQ · 1 mark EasyRegulatory Framework

Which entity is the primary regulator of mutual funds in India, governing their setting up, structure, scheme launch, portfolio management, and investor protection?

✓Securities and Exchange Board of India (SEBI)

BReserve Bank of India (RBI)

CAssociation of Mutual Funds in India (AMFI)

DMinistry of Finance

💡 The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India. SEBI’s Regulations called the SEBI (Mutual Funds) Regulations, 1996, along with amendments made from time to time, govern the setting up a mutual fund and its structure, launching a scheme, creating and managing the portfolio, investor protection, investor services and roles and responsibilities of the constituents.

Q134 MCQ · 1 mark EasyExchange Traded Funds (ETFs)

Which of the following is a distinguishing feature of Exchange Traded Funds (ETFs) compared to a normal open-ended fund, as mentioned in the text?

AETFs are not listed on a stock exchange, unlike open-ended funds.

BETFs typically have a single NAV for the day, whereas open-ended funds have multiple prices throughout the day.

✓In an ETF, investors primarily trade with each other, while in an open-ended fund, the investor trades with the mutual fund.

DETFs do not track any indices or commodities, focusing solely on active management.

Q135 MCQ · 1 mark MediumScheme Types

Which of the following statements accurately describes a key difference between open-ended and closed-end mutual fund schemes?

AOpen-ended schemes are for a fixed period, while closed-end schemes are for perpetuity.

BUnits of open-ended schemes are mandatorily listed on a stock exchange, unlike closed-end schemes.

✓In open-ended schemes, unit capital changes with investment/redemption, whereas in closed-end schemes, it does not change over the life of the scheme.

DClosed-end schemes allow investors to invest in additional units and redeem continuously at current NAV.

💡 The text states that in an open-ended scheme, 'The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors.' For a closed-end scheme, it says, 'The unit capital of a closed end fund does not change over the life of the scheme.'

Q136 MCQ · 1 mark MediumEquity Fund Categories - Sector Funds

What is a characteristic feature of an open-ended Sector fund as per the provided text?

AIt invests in companies across various sectors to achieve broad diversification.

✓It must invest at least 80% of its total assets in equity and equity-related instruments of the identified sector.

CIt focuses on identifying undervalued stocks trading below their inherent value.

DIts risk profile is generally lower due to concentration in stable, high-dividend paying companies.

💡 The text specifies for sector funds: 'An open-ended sector fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector.' Other options describe different fund types or are incorrect for sector funds.

Q137 MCQ · 1 mark MediumScheme Features

Which type of mutual fund scheme allows investors to invest in additional units and redeem investments continuously at the current NAV, and its unit capital is not fixed but changes with every transaction?

AClosed-end scheme

BInterval scheme

CExchange Traded Fund (ETF)

✓Open-ended scheme

💡 An open-ended scheme 'allows investors to invest in additional units and redeem investment continuously at current NAV. The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors.'

Q138 MCQ · 1 mark MediumInterval Funds

Which statement accurately describes a key feature of Interval funds?

AThey are open-ended schemes that allow continuous transactions throughout the year.

BThey are structured for perpetuity and are not required to be listed on a stock exchange.

✓They are a variant of closed-end funds that become open-ended during specified periods.

DThey exclusively track market indices and trade like stocks on an exchange.

💡 The text defines Interval funds as 'a variant of closed end funds which become open-ended during specified periods.' Options A and B describe open-ended characteristics or are incorrect regarding listing. Option D describes Exchange Traded Funds (ETFs).

Q139 MCQ · 1 mark MediumEquity Funds - Market Capitalisation

As per SEBI classification, what is the minimum investment requirement for a Multi Cap fund in equity and equity-related instruments across large, mid, and small caps?

AAt least 65% of total assets in equity, with no specific minimums for market caps.

✓At least 75% of total assets in equity, with a minimum of 25% each in large-cap, mid-cap, and small-cap companies.

CAt least 80% of total assets in large-cap companies.

DAt least 35% in large-cap and 35% in mid-cap companies.

💡 The text states the current rule for Multi Cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.'

Q140 MCQ · 1 mark HardEquity Funds - Investment Style

If a mutual fund house offers a 'Value Fund', which other type of fund from the options below is it explicitly prohibited from offering concurrently, as per SEBI regulations mentioned in the text?

AFlexicap Fund

✓Contra Fund

CDiversified Equity Fund

DLarge and Mid-cap Fund

💡 The text explicitly states: 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Q141 MCQ · 1 mark HardNAV Impact

An investor buys 1,000 units in a mutual fund scheme. If these units are allotted at a face value of Rs. 10 when the prevailing Net Asset Value (NAV) is Rs. 11.11, how would this transaction impact the scheme's NAV?

AThe NAV of the scheme would increase because new assets are brought in.

BThe NAV of the scheme would remain unchanged as transactions are conducted at NAV.

✓The NAV of the scheme would decrease because units were allotted at a price lower than the NAV.

DThe NAV of the scheme would increase, but only for the new investor, not existing ones.

💡 The text explicitly states: "In the above example, consider the impact if hypothetically the investor buying 1,000 units when the NAV is Rs.11.11, is allotted units at the face value of Rs.10. The investor will bring in Rs.10,000 (100* Rs.10). The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11. The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme."

Q142 MCQ · 1 mark HardEquity Funds - Multi cap

As per SEBI's classification for Multi cap funds, what is the minimum investment requirement in equity and equity-related instruments across different market capitalizations?

AAt least 65% of total assets in equity, with no specific minimums for large, mid, or small caps.

✓At least 75% of total assets in equity, with a minimum of 25% each in large-cap, mid-cap, and small-cap companies.

CAt least 80% of total assets in equity, with a minimum of 35% each in large-cap and mid-cap companies.

DAt least 65% of total assets in equity, with a minimum of 25% each in large-cap and mid-cap companies, and the rest in small-cap.

💡 The text states for Multi cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.'

Q143 MCQ · 1 mark HardEquity Fund Categories

As per SEBI's classification, what is the key distinction between a Multi Cap fund and a Flexicap fund based on their investment allocation rules for market capitalization?

AMulti Cap funds must invest at least 65% in equities, while Flexicap funds have no such overall equity investment requirement.

✓Multi Cap funds have specific minimum investment percentages across large, mid, and small caps, while Flexicap funds have no such minimum limits across market caps.

CFlexicap funds must invest a minimum of 25% in large, mid, and small caps each, whereas Multi Cap funds have no such specific allocation.

DMulti Cap funds can only invest in large and mid-cap companies, while Flexicap funds can invest in all three market caps.

💡 The text specifies for Multi Cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' For Flexicap funds, it states: 'In Flexicap funds there is no minimum investment limits across market caps and the funds are free to invest according to their requirements.'

Q144 MCQ · 1 mark MediumNAV Calculation & Impact

An investor hypothetically buys 1,000 units in a mutual fund scheme when the Net Asset Value (NAV) is Rs. 11.11. If these units are allotted at a face value of Rs. 10 instead of the prevalent NAV, what would be the immediate impact on the scheme's NAV?

AThe NAV will increase because the net assets go up by the investment amount.

BThe NAV will remain unchanged as the increase in net assets is offset by an increase in units.

✓The NAV will decrease because the units were allotted at a price different from the NAV, impacting all investors.

DThe NAV will increase because the fund receives funds at a lower price, creating value for existing investors.

💡 The text provides an example: 'consider the impact if hypothetically the investor buying 1,000 units when the NAV is Rs.11.11, is allotted units at the face value of Rs.10... The NAV post this transaction will be Rs.11. The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q145 MCQ · 1 mark MediumEquity Fund Categories

To be classified as a 'Large Cap fund' by SEBI, what is the minimum percentage of total assets that must be invested in large cap companies?

AAt least 65%

BAt least 75%

✓At least 80%

DAt least 35%

💡 The text clearly states: 'To be classified as a large cap fund, at least 80% of the total assets should be invested in such large cap companies.'

Q146 MCQ · 1 mark EasyNAV Calculation

How is the value of a mutual fund investor's investment primarily calculated?

AUsing the face value of the units.

✓Using the Net Asset Value (NAV).

CUsing the initial investment amount.

DUsing the market capitalization of the underlying assets.

💡 The provided text explicitly states, 'The value of a mutual fund investor’s investment is calculated using the NAV.'

Q147 MCQ · 1 mark EasyRegulatory Framework

Which body is the primary regulator of mutual funds in India, governing their setting up, structure, and investor protection?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text clearly states, "The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India. SEBI’s Regulations called the SEBI (Mutual Funds) Regulations, 1996, along with amendments made from time to time, govern the setting up a mutual fund and its structure, launching a scheme, creating and managing the portfolio, investor protection, investor services and roles and responsibilities of the constituents."

Q148 MCQ · 1 mark HardEquity Funds - Investment Style

A mutual fund house offers a scheme that seeks to identify companies trading at prices below their inherent value with the expectation of benefiting from an increase in price. Which of the following statements is true regarding this fund house's offerings?

AThe fund house can also offer a Contra Fund simultaneously.

BThe fund house must invest at least 80% of its total assets in equity and equity-related instruments.

✓The fund is likely a Value Fund, which generally has lower risk and requires a longer investment horizon.

DThe fund's primary objective is to invest in high dividend yield stocks.

💡 The description matches a Value Fund: 'Value Funds seek to identify companies that are trading at prices below their inherent value with the expectation of benefiting from an increase in price as the market recognizes the true value. Such funds have lower risk. They require a longer investment horizon for the strategy to play out.' Option A is incorrect because 'An AMC can have either of Value or Contra Fund, not both.'

Q149 MCQ · 1 mark MediumNAV Impact

An investor buys 1,000 units when the NAV is Rs.11.11, but hypothetically, the units are allotted at a face value of Rs.10. If the net assets before this transaction were Rs.100,000 and outstanding units were 9,000, what will be the NAV of the scheme post this transaction?

ARs. 11.11

BRs. 10.00

✓Rs. 11.00

DRs. 9.09

💡 Initial Net Assets = Rs. 100,000. Initial Outstanding Units = 9,000. Investor brings in Rs. 10,000 (1,000 units * Rs. 10 face value). New Net Assets = Rs. 100,000 + Rs. 10,000 = Rs. 110,000. New Outstanding Units = 9,000 + 1,000 = 10,000. New NAV = New Net Assets / New Outstanding Units = Rs. 110,000 / 10,000 = Rs. 11.00. This transaction causes the NAV to fall because units were allotted at a price different from the prevailing NAV.

Q150 MCQ · 1 mark HardEquity Fund Categories - Investment Style

A mutual fund house is considering launching two new equity schemes. Based on SEBI's classification and restrictions mentioned, which combination of investment styles is NOT permitted for a single Asset Management Company (AMC)?

AA Large Cap Fund and a Small Cap Fund.

BA Passive Fund and an Active Fund.

✓A Value Fund and a Contra Fund.

DA Sector Fund and a Thematic Fund.

💡 The text explicitly states under 'Contra Funds': 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.' The other combinations are generally permitted as they represent distinct categories or sub-categories.

Q151 MCQ · 1 mark MediumOpen-ended vs. Closed-ended Schemes

Which of the following is a distinguishing feature of an open-ended mutual fund scheme compared to a closed-ended scheme?

AUnits are offered only during a New Fund Offer (NFO).

BThe scheme has a fixed period or tenor.

✓Investors can continuously invest in additional units and redeem investment at current NAV.

DUnits are mandatorily listed on a stock exchange for interim exit.

💡 An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV. Options A, B, and D are characteristics of closed-ended schemes.

Q152 MCQ · 1 mark EasyRegulatory Framework

What is the primary regulatory body for mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q153 MCQ · 1 mark HardEquity Funds - Market Capitalisation

Which of the following statements accurately describes the current SEBI classification requirements for Multi Cap and Flexicap funds?

AMulti Cap funds must invest at least 65% of total assets in equity, with no specific minimum allocation to large, mid, or small caps, similar to Flexicap funds.

BFlexicap funds have a minimum overall equity investment of 75% and must allocate at least 25% each to large, mid, and small caps, while Multi Cap funds have no such sub-segment limits.

✓Multi Cap funds must invest at least 75% of assets in equity, with a minimum of 25% each in large, mid, and small caps; Flexicap funds require at least 65% in equities overall but have no minimum investment limits across market caps.

DBoth Multi Cap and Flexicap funds are required to invest a minimum of 65% of their total assets in equity-related instruments, with an equal allocation of 25% to large, mid, and small caps.

💡 For Multi Cap funds, the text states: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' For Flexicap funds, it states: 'In Flexicap funds there is no minimum investment limits across market caps and the funds are free to invest according to their requirements. Overall at least 65% of the corpus has to be invested in equities.'

Q154 MCQ · 1 mark HardEquity Funds - Large & Mid-cap

To be classified as a Large and Mid-cap fund, what is the minimum investment requirement in large-cap and mid-cap companies, respectively, as per SEBI classification?

AA minimum of 65% in large-cap companies and a minimum of 35% in mid-cap companies.

✓A minimum of 35% in large-cap companies and a minimum of 35% in mid-cap companies.

CA minimum of 80% in large-cap companies and the rest in mid-cap companies.

DA minimum of 25% in large-cap companies and a minimum of 25% in mid-cap companies, with the remainder in small-cap.

💡 The text states for Large and Mid-cap funds: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q155 MCQ · 1 mark MediumScheme Types - Closed-end

A distinctive feature of a closed-end mutual fund scheme is that:

AIt allows investors to redeem investment continuously at current NAV.

BIts unit capital changes with every investment or redemption made by investors.

✓It offers units to investors only during the New Fund Offer (NFO) period.

DIt is structured for perpetuity unless investors decide to wind up the scheme.

💡 The text states: 'A closed-end scheme is for a fixed period or tenor. It offers units to investors only during the new fund offer (NFO).'

Q156 MCQ · 1 mark HardEquity Fund Categorization (Market Cap)

A mutual fund scheme is classified as a 'Large and Mid-cap fund'. According to SEBI's classification, what is the minimum investment requirement for such a fund?

AAt least 80% of total assets in large-cap companies.

BAt least 65% of total assets in mid-cap companies.

✓A minimum of 35% of total assets in large-cap companies AND a minimum of 35% in mid-cap companies.

DAt least 75% of assets in equity, with a minimum of 25% in large caps, 25% in mid-caps, and 25% in small caps.

💡 The text states: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.' Option D describes Multi-cap funds (under the updated rule mentioned).

Q157 MCQ · 1 mark EasyMark to Market

What is the primary purpose of 'marking to market' in mutual funds?

ATo determine the cut-off timings for transactions.

✓To reflect the current market price of the securities held in the portfolio.

CTo calculate the fund manager's performance bonus.

DTo identify stale prices for illiquid securities.

💡 The text states: 'This process of valuing the portfolio on a daily basis at current value is called marking to market.' It also mentions that the portfolio 'has to reflect the current market price of the securities held.'

Q158 MCQ · 1 mark HardInvestment Style Funds

Regarding investment style-based equity funds, which of the following combinations can a single Asset Management Company (AMC) offer?

ABoth a Value Fund and a Contra Fund.

BOnly a Value Fund, but not a Contra Fund.

COnly a Contra Fund, but not a Value Fund.

✓Either a Value Fund or a Contra Fund, but not both.

💡 Section 11.5.1 (f) explicitly states: 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Q159 MCQ · 1 mark MediumNAV Impact

According to the text, under what specific circumstance would an additional investment by an investor directly lead to a fall in the scheme's Net Asset Value (NAV)?

AWhen the investor buys units at the current NAV.

BWhen the investor redeems units at the current NAV.

✓When the units are allotted to the investor at a price different from the current NAV.

DWhen the value of the portfolio falls after the investment.

💡 The text states: 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.' However, it then gives a hypothetical example: 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q160 MCQ · 1 mark EasyRegulatory Framework

Which entity serves as the primary regulator for mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 As per Section 11.4, The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.

Q161 MCQ · 1 mark EasyEquity Funds - Sectors and Industries

What is the minimum percentage of total assets an open-ended sector fund should invest in the equity and equity-related instruments of its identified sector?

A35%

B65%

C75%

✓80%

💡 The text states: 'An open-ended sector fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector.' The same applies to thematic funds.

Q162 MCQ · 1 mark HardInvestment Style

A mutual fund house plans to launch a 'Contra Fund' which adopts a contrarian investment strategy. Based on SEBI's regulations mentioned, what restriction applies to this fund house?

AThe fund must invest at least 80% of its total assets in a single identified sector.

✓The fund house can offer either a Contra Fund or a Value Fund, but not both.

CThe fund must maintain a minimum of 35% investment in large cap companies.

DThe fund is considered a passive fund and cannot make active investment decisions.

💡 The text explicitly states under 'Contra Funds': 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Q163 MCQ · 1 mark EasyMark to Market

What is the primary purpose of 'marking to market' in mutual funds, as described in the text?

ATo determine the cut-off timings for transactions.

✓To reflect the current market price of the securities held in the portfolio.

CTo calculate the dividend yield of the fund.

DTo identify under-valued stocks for value investing.

💡 The text states: 'This process of valuing the portfolio on a daily basis at current value is called marking to market. The price is taken from the market where the security is traded.' It also says, 'The portfolio has to reflect the current market price of the securities held.'

Q164 MCQ · 1 mark MediumScheme Types

An investor wishes to trade mutual fund units throughout the day on a stock exchange, similar to stocks. Which type of mutual fund would best suit this requirement?

AOpen-ended scheme

BClosed-ended scheme

CInterval fund during its specified transaction period

✓Exchange Traded Fund (ETF)

💡 The text describes Exchange Traded Funds (ETFs) as having features of a mutual fund but can be traded like a stock on the stock exchange "all day long." It also notes that in an ETF, "it is actually investors trading with each other."

Q165 MCQ · 1 mark HardInvestment Style Funds

An equity fund that seeks to identify companies trading at prices below their inherent value, has lower risk, and typically requires a longer investment horizon for the strategy to play out, is classified as a:

✓Value Fund

BContra Fund

CDividend Yield Fund

DGrowth Fund

💡 Value Funds seek to identify companies that are trading at prices below their inherent value with the expectation of benefiting from an increase in price as the market recognizes the true value. Such funds have lower risk. They require a longer investment horizon for the strategy to play out.

Q166 MCQ · 1 mark MediumEquity Fund Classification (Market Cap)

According to SEBI classification, what is the minimum percentage of total assets that a 'Large and Mid-cap fund' must invest in large cap companies?

A80%

B65%

✓35%

D25%

💡 The text states: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q167 MCQ · 1 mark MediumCut-off Timings

The NAV applicable for a purchase or redemption request in a mutual fund is determined by the time the request is received by the mutual fund, provided that:

AThe investor has a long-term investment horizon.

BThe fund manager approves the transaction.

✓Clear funds hit the account of the fund by the cut-off time.

DThe transaction is for a closed-ended scheme.

💡 The text states, "The NAV that will be applicable would thus be determined by the time when the request is received by the mutual fund, provided clear funds hit the account of the fund by cut-off time."

Q168 MCQ · 1 mark HardEquity Fund Categorization (Market Capitalisation)

According to SEBI classification for open-end equity schemes based on market capitalization, which of the following accurately describes the investment mandate for a Multi Cap fund?

AAt least 80% of total assets must be invested in large cap companies.

BAt least 65% of total assets must be invested in mid cap companies.

✓At least 75% of assets must be invested in equity-related instruments, with a minimum of 25% each in large caps, mid-caps, and small caps.

DA minimum of 35% of total assets must be invested in large cap companies and a minimum of 35% in mid-cap companies.

💡 The text specifies for Multi cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' Option A describes Large Cap funds. Option B describes Mid-cap or Small-cap funds. Option D describes Large and Mid-cap funds.

Q169 MCQ · 1 mark HardEquity Fund Categorization & Investment Style

A fund house offers an equity scheme that aims to identify companies trading below their inherent value with an expectation of price increase over a longer investment horizon. The fund also states it has lower risk compared to active funds focused on timing strategies. Based on SEBI's classification, which specific type of fund is this, and what other type of fund is the AMC prohibited from offering simultaneously?

APassive Fund; Multi cap fund.

✓Value Fund; Contra Fund.

CContra Fund; Value Fund.

DDiversified Equity Fund; Sector Fund.

💡 The description matches a 'Value Fund': "Value Funds seek to identify companies that are trading at prices below their inherent value with the expectation of benefiting from an increase in price as the market recognizes the true value. Such funds have lower risk. They require a longer investment horizon..." The text further states, "Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both."

Q170 MCQ · 1 mark MediumExchange Traded Funds (ETFs)

A key characteristic distinguishing Exchange Traded Funds (ETFs) from open-ended mutual funds is that ETFs:

AAllow investors to invest and redeem continuously at current NAV.

BAre valued only once a day at a single NAV.

✓Involve investors trading with each other on a stock exchange throughout the day.

DTypically have a fixed period or tenor, after which units are redeemed by the fund.

💡 The text states for ETFs: 'Like a stock they are listed on the stock exchange so they can be traded all day long... In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.' Options A and B describe open-ended funds, and D describes closed-end funds.

Q171 MCQ · 1 mark EasyValuation

What is the process of valuing a mutual fund's portfolio on a daily basis at its current market value called?

ANet Asset Valuation

BCut-off Timing

✓Mark to Market

DAsset Under Management

💡 The text defines 'marking to market' as the process of valuing the portfolio on a daily basis at current value, reflecting the current market price of the securities held.

Q172 MCQ · 1 mark EasyMark to Market

The process of valuing a mutual fund's portfolio on a daily basis at current market value is known as:

ANet Asset Valuation

BCut-off Timing

✓Mark to Market

DFund Accounting

💡 The text defines it: 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q173 MCQ · 1 mark HardScheme Differences

Identify the INCORRECT statement regarding the features of mutual fund schemes.

AClosed-end schemes are mandatorily listed on a stock exchange to provide an exit route for investors.

BInterval funds are a variant of closed-end funds that become open-ended during specified periods, with a minimum gap of 15 days between two transaction periods.

✓Exchange Traded Funds (ETFs) typically have a single NAV for a day, similar to a normal open-ended fund.

DThe unit capital of a closed-end fund does not change over the life of the scheme, as transactions between investors on the stock exchange do not affect the fund.

💡 Statement C is incorrect. The text explicitly states, 'Instead of a single NAV for a day that the investor gets in a normal open-ended fund there are multiple prices they can get in an ETF.'

Q174 MCQ · 1 mark MediumExchange Traded Funds (ETFs)

In the context of investor transactions, what is a fundamental difference between an Exchange Traded Fund (ETF) and an open-ended fund?

AIn an ETF, transactions occur only during the New Fund Offer (NFO) period, unlike open-ended funds.

✓In an ETF, investors trade with each other on a stock exchange, while in an open-ended fund, the investor transacts with the mutual fund.

CETFs offer a single NAV for the day, whereas open-ended funds have multiple prices throughout the day.

DOpen-ended funds are mandatorily listed on a stock exchange, while ETFs are not.

💡 Section 11.3.3 explains, 'In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.'

Q175 MCQ · 1 mark HardInvestment Style

A mutual fund house, according to SEBI's classification on investment styles, is permitted to offer which of the following combinations of funds?

ABoth a Contra Fund and a Value Fund.

BA Contra Fund but not a Value Fund.

CA Value Fund but not a Contra Fund.

✓Either a Value Fund or a Contra Fund, but not both.

💡 The text clearly states under the 'Investment Style' section: 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Q176 MCQ · 1 mark MediumScheme Types

Which of the following statements accurately describes a characteristic of Interval Funds, according to the provided text?

AThey are purely open-ended schemes with no fixed tenor.

BThey are not required to be listed on a stock exchange.

✓Their specified transaction periods must be for a minimum of two days, with a minimum gap of 15 days between periods.

DInvestors can only invest during the New Fund Offer (NFO) period, similar to closed-end schemes.

💡 The text mentions, 'The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods.'

Q177 MCQ · 1 mark EasyOpen-ended Schemes

A key characteristic of an open-ended mutual fund scheme is that its unit capital:

Aremains fixed throughout the life of the scheme.

✓changes continuously with investments and redemptions.

Cis determined only during the New Fund Offer (NFO) period.

Dis fixed for a specified period, after which it changes.

💡 Section 11.3.1 states that 'The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors' in an open-ended scheme.

Q178 MCQ · 1 mark EasyNAV Calculation

If an investor has 1,000 units in a mutual fund scheme and the NAV is Rs. 12, what is the current value of their investment?

ARs. 10,000

BRs. 11,110

✓Rs. 12,000

DRs. 13,000

💡 The value of an investor's investment is calculated by multiplying the number of units held by the current Net Asset Value (NAV). In this case, 1,000 units * Rs. 12 = Rs. 12,000.

Q179 MCQ · 1 mark MediumFeatures of Mutual Fund Schemes

How does the unit capital of an open-ended scheme typically differ from that of a closed-end scheme?

AAn open-ended scheme has a fixed unit capital, while a closed-end scheme's unit capital changes with investment and redemption.

BBoth open-ended and closed-end schemes maintain a fixed unit capital throughout their life.

✓An open-ended scheme's unit capital changes continuously with investment or redemption, whereas a closed-end scheme's unit capital does not change over its life.

DThe unit capital of both schemes is determined solely by the Net Asset Value (NAV) and not by transactions.

💡 For open-ended schemes, the text states: 'The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors.' For closed-end schemes, it states: 'The unit capital of a closed end fund does not change over the life of the scheme since transactions between investors on the stock exchange does not affect the fund.'

Q180 MCQ · 1 mark EasyScheme Types

Which type of mutual fund scheme allows investors to continuously invest in additional units and redeem investments at the current NAV, and is generally for perpetuity?

AClosed-end scheme

BInterval scheme

✓Open-ended scheme

DExchange Traded Fund

💡 The text describes open-ended schemes: 'An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV. The scheme is for perpetuity unless the investors decide to wind up the scheme.'

Q181 MCQ · 1 mark MediumInterval Funds

According to the provided text, what is the minimum gap required between two transaction periods for an Interval Fund?

✓15 days

B2 days

C7 days

D30 days

💡 The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods.

Q182 MCQ · 1 mark MediumRegulatory Framework

Which body is described as the industry body that oversees the functioning of the mutual fund industry, recommends best practices, and represents industry requirements to regulators and stakeholders?

ASecurities and Exchange Board of India (SEBI)

BReserve Bank of India (RBI)

✓Association of Mutual Funds in India (AMFI)

DMinistry of Finance

💡 The text states, 'The Association of Mutual Funds in India (AMFI) is the industry body that oversees the functioning of the industry and recommends best practices to be followed by the industry members. It also represents the industry’s requirements to the regulator, government and other stakeholders.'

Q183 MCQ · 1 mark MediumRegulatory Framework

What is the primary role of the Association of Mutual Funds in India (AMFI), as described in the provided text?

ATo act as the primary regulator for all mutual funds in India.

BTo manage and create mutual fund portfolios for investors.

✓To oversee the functioning of the industry and recommend best practices to its members.

DTo define the process of categorizing open-end mutual fund products.

💡 The text states: 'The Association of Mutual Funds in India (AMFI) is the industry body that oversees the functioning of the industry and recommends best practices to be followed by the industry members.' Options A, B, and D are roles of SEBI or AMCs, not AMFI's primary role as described.

Q184 MCQ · 1 mark HardInvestment Style

Regarding 'Value Funds' and 'Contra Funds', which statement is true as per the NISM curriculum?

AContra Funds generally have lower risk compared to Value Funds.

✓Both Value Funds and Contra Funds aim to identify companies trading at prices below their inherent value.

CAn Asset Management Company (AMC) can offer both a Value Fund and a Contra Fund simultaneously.

DValue Funds typically require a shorter investment horizon for their strategy to play out.

💡 The text states that Value Funds 'seek to identify companies that are trading at prices below their inherent value'. For Contra Funds, it mentions they 'seek to identify under-valued stocks... The fund invests in such stocks at valuations that are seen as cheap relative to their long-term fundamental values.' The text also clarifies that 'An AMC can have either of Value or Contra Fund, not both.' and Value Funds 'require a longer investment horizon'.

Q185 MCQ · 1 mark EasyEquity Funds - Market Capitalisation

As per SEBI's classification for open-end equity schemes, what is the minimum percentage of total assets that a 'Large Cap fund' must invest in large-cap companies?

A65%

B75%

✓80%

D50%

💡 The text states: 'To be classified as a large cap fund, at least 80% of the total assets should be invested in such large cap companies.'

Q186 MCQ · 1 mark EasyRegulatory Framework

Which entity is the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text states: 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q187 MCQ · 1 mark MediumScheme Types

Which of the following statements accurately describes a key difference between open-ended and closed-ended mutual fund schemes?

AOpen-ended schemes are for a fixed period, while closed-ended schemes are for perpetuity.

BOpen-ended schemes offer units only during the New Fund Offer (NFO), while closed-ended schemes allow continuous investment.

✓Open-ended schemes have a unit capital that changes with investment/redemption, whereas closed-ended schemes have a fixed unit capital.

DClosed-ended schemes are not mandatorily listed on a stock exchange, unlike open-ended schemes.

💡 The text states that in an open-ended scheme, "The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors." Conversely, for a closed-ended scheme, "The unit capital of a closed end fund does not change over the life of the scheme since transactions between investors on the stock exchange does not affect the fund."

Q188 MCQ · 1 mark EasyMark to Market

The process of valuing a mutual fund's portfolio on a daily basis at its current market value is referred to as:

AAsset Under Management (AUM) calculation

BNet Asset Value (NAV) determination

✓Marking to Market

DFund Accounting

💡 The text explicitly states, 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q189 MCQ · 1 mark MediumExchange Traded Funds (ETFs)

Which statement accurately describes a key characteristic of Exchange Traded Funds (ETFs) as per the provided text?

AETFs typically have a single Net Asset Value (NAV) for the entire trading day.

BIn an ETF, transactions primarily involve the investor on one side and the mutual fund on the other.

CETFs are not listed on a stock exchange, similar to traditional open-ended funds.

✓ETFs can be traded all day long like a stock and have their value derived from the holdings in their portfolio.

💡 The text states, 'Like a stock they are listed on the stock exchange so they can be traded all day long. Beneath this feature is the fact that the ETF is a mutual fund that has its value derived from the value of the holdings in its portfolio.'

Q190 MCQ · 1 mark HardEquity Fund Categorization

As per the updated SEBI classification mentioned in the text for Multi Cap funds, what is the minimum asset allocation requirement?

AAt least 65% of total assets in equity and equity-related instruments, with no specific market cap allocation.

BAt least 80% of total assets in equity and equity-related instruments, with at least 25% each in large, mid, and small caps.

✓At least 75% of total assets in equity and equity-related instruments, with a minimum of 25% in large caps, 25% in mid-caps, and 25% in small caps.

DAt least 35% in large cap companies and a minimum of 35% in mid-cap companies.

💡 The text states under Multi cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.'

Q191 MCQ · 1 mark EasyNAV Calculation

If an investor has 1,000 units in a mutual fund scheme and the NAV goes up to Rs. 12, what is the current value of their investment?

ARs. 10,000

BRs. 11,110

✓Rs. 12,000

DRs. 1,200

💡 The value of an investment is calculated by multiplying the number of units held by the current Net Asset Value (NAV). In this case, 1,000 units * Rs. 12 NAV = Rs. 12,000.

Q192 MCQ · 1 mark EasyScheme Types

An open-ended mutual fund scheme is primarily characterized by which of the following features?

AUnits are offered only during a New Fund Offer (NFO) and redeemed at the end of a fixed tenor.

✓Investors can continuously invest in additional units and redeem existing investments at the current NAV.

CThe unit capital of the scheme remains fixed throughout its life as transactions occur only on a stock exchange.

DIt operates as a closed-end fund but becomes open-ended during specified transaction periods with a minimum gap of 15 days.

💡 The text states, 'An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV.'

Q193 MCQ · 1 mark HardEquity Fund Categorization (Market Cap)

To be classified as a Large and Mid-cap fund, what is the minimum investment allocation requirement in large-cap and mid-cap companies?

AAt least 80% of total assets in large-cap companies.

BAt least 65% of total assets in mid-cap companies.

✓A minimum of 35% of total assets in large-cap companies AND a minimum of 35% in mid-cap companies.

DAt least 65% of total assets in a combination of large and mid-cap companies without specific individual minimums.

💡 Section 11.5.1 (c) specifies: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q194 MCQ · 1 mark HardInvestment Styles

Which of the following statements is true regarding a mutual fund house offering Value Funds and Contra Funds?

AAn AMC can offer both a Value Fund and a Contra Fund simultaneously.

✓An AMC can offer a Value Fund or a Contra Fund, but not both.

CAn AMC must offer both a Value Fund and a Contra Fund to provide diversification.

DValue Funds and Contra Funds are essentially the same and are categorized interchangeably.

💡 The text explicitly states under 'Contra Funds': 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Q195 MCQ · 1 mark MediumEquity Fund Categorization

According to SEBI classification, what is a key difference in investment allocation between a Multi Cap fund and a Flexicap fund?

AMulti Cap funds have no minimum investment limits across market caps, while Flexicap funds require at least 65% in equities.

✓Multi Cap funds must invest a minimum of 25% each in large, mid, and small caps, while Flexicap funds have no such minimum limits across market caps.

CFlexicap funds only invest in large and mid-cap companies, whereas Multi Cap funds invest across all market caps.

DBoth Multi Cap and Flexicap funds have the same minimum allocation of 65% in equity-related instruments without specific market cap distribution.

💡 Section 11.5.1 (c) states that Multi Cap funds require 'a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps,' whereas for Flexicap funds, 'there is no minimum investment limits across market caps and the funds are free to invest according to their requirements.'

Q196 MCQ · 1 mark MediumNAV Calculation

An investor buys 1,000 units in a mutual fund scheme when the NAV is Rs. 11.11, but hypothetically, the units are allotted at a face value of Rs. 10. If the initial net assets were Rs. 100,000 with 9,000 outstanding units, what will be the NAV after this transaction?

ARs. 11.11

BRs. 10.00

✓Rs. 11.00

DRs. 10.90

💡 As per the example in the text: Initial Net Assets = Rs. 100,000 Initial Outstanding Units = 9,000 Amount brought in by investor (1,000 units * Rs. 10) = Rs. 10,000 New Net Assets = Rs. 100,000 + Rs. 10,000 = Rs. 110,000 New Outstanding Units = 9,000 + 1,000 = 10,000 units NAV post transaction = New Net Assets / New Outstanding Units = Rs. 110,000 / 10,000 units = Rs. 11.00.

Q197 MCQ · 1 mark MediumScheme Types

What is a defining characteristic of an Interval fund, according to the text?

AIt allows continuous investment and redemption, and its unit capital changes with transactions.

✓It is a variant of closed-end funds that becomes open-ended during specified periods, with a minimum gap of 15 days between transaction periods.

CIt is listed on a stock exchange and can be traded throughout the day at multiple prices.

DIt offers units only during the New Fund Offer (NFO) and redeems them at maturity without interim transactions.

💡 The text describes Interval funds as: 'Interval funds are a variant of closed end funds which become open-ended during specified periods. During these periods investors can purchase and redeem units like in an open-ended fund. The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods.'

Q198 MCQ · 1 mark MediumCut-off Timings

What is the primary reason for having standard cut-off timings for mutual fund transactions, according to the text?

ATo allow mutual funds to calculate NAV accurately at the end of the day.

✓To ensure equity and fairness in unit allocation and prevent preferential treatment.

CTo facilitate quicker processing of all purchase and redemption requests.

DTo determine the daily trading hours for mutual fund units on stock exchanges.

💡 The text states: 'This is a standard that is followed across all mutual funds so that there is equity and fairness in allocation and that no investors gets a preferential treatment over others.'

Q199 MCQ · 1 mark EasyEquity Fund Categorization

According to SEBI's classification based on market capitalization, what is the minimum investment requirement in large cap companies for a fund to be classified as a 'Large cap fund'?

AAt least 65% of the total assets

BAt least 35% of the total assets

✓At least 80% of the total assets

DAt least 25% of the total assets

💡 The text states: "To be classified as a large cap fund, at least 80% of the total assets should be invested in such large cap companies."

Q200 MCQ · 1 mark HardEquity Fund Categorization

According to the current classification provided, what are the minimum investment requirements for a Multi-cap fund?

AAt least 65% of total assets in equity and related instruments, with no specific allocation across market caps.

✓At least 75% of total assets in equity and related instruments, with a minimum of 25% each in large-cap, mid-cap, and small-cap companies.

CAt least 80% of total assets in large-cap companies.

DAt least 35% in large-cap companies and at least 35% in mid-cap companies, with the remainder in small-cap.

💡 The text specifies for Multi-cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.'

Q201 MCQ · 1 mark EasyMark to Market

What is the process called when a mutual fund portfolio is valued on a daily basis at its current market price?

APortfolio Rebalancing

BAsset Allocation

✓Marking to Market

DNet Asset Valuation

💡 The text defines this process: 'This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q202 MCQ · 1 mark EasyRegulatory Framework

Which entity is identified as the primary regulator of mutual funds in India?

AReserve Bank of India (RBI)

BAssociation of Mutual Funds in India (AMFI)

✓Securities and Exchange Board of India (SEBI)

DMinistry of Finance

💡 The text explicitly states, 'The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India.'

Q203 MCQ · 1 mark EasyNAV Calculation

If an investor holds 1,000 units in a mutual fund scheme and the Net Asset Value (NAV) is Rs. 12, what is the current value of their investment?

ARs. 10,000

BRs. 11,110

✓Rs. 12,000

DRs. 1,000

💡 The value of an investment is calculated by multiplying the number of units held by the current NAV. In this case, 1,000 units * Rs. 12/unit = Rs. 12,000.

Q204 MCQ · 1 mark EasyMutual Fund Scheme Types

Which type of mutual fund scheme is characterized by continuous investment and redemption at current NAV, and has a unit capital that changes with every investment or redemption made by investors?

AClosed-end scheme

BInterval scheme

✓Open-ended scheme

DExchange Traded Fund (ETF)

💡 An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV. The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors.

Q205 MCQ · 1 mark MediumScheme Types

Which of the following is a key characteristic of a closed-end mutual fund scheme?

AIt allows investors to invest in additional units and redeem continuously at current NAV.

BIts unit capital is not fixed but changes with every investment or redemption.

✓It offers units to investors only during the new fund offer (NFO) and is mandatorily listed on a stock exchange.

DIt is for perpetuity unless the investors decide to wind up the scheme.

💡 The text states, 'A closed-end scheme is for a fixed period or tenor. It offers units to investors only during the new fund offer (NFO). ... In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed.' Options A, B, and D describe open-ended schemes.

Q206 MCQ · 1 mark HardEquity Fund Investment Style

Regarding the offering of Value Funds and Contra Funds by mutual fund houses, what specific regulatory guideline is mentioned in the text?

AMutual fund houses are encouraged to offer both Value and Contra Funds to diversify investor options.

✓An Asset Management Company (AMC) can offer either a Value Fund or a Contra Fund, but not both.

CThere are no restrictions on an AMC offering both Value and Contra Funds simultaneously.

DContra Funds are a sub-category of Value Funds, so AMCs can offer both under a single scheme.

💡 The text explicitly states, 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Q207 MCQ · 1 mark EasyNAV Calculation

According to the text, what is the direct effect on a scheme's Net Asset Value (NAV) when an investor makes an additional investment or redemption, assuming transactions are conducted at the prevailing NAV?

AThe NAV will increase with an additional investment and decrease with a redemption.

BThe NAV will decrease with an additional investment and increase with a redemption.

✓The NAV will not be directly affected by additional investments or redemptions.

DThe NAV will fluctuate unpredictably based on the volume of transactions.

💡 The text states, 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.'

Q208 MCQ · 1 mark MediumNet Asset Value (NAV)

If an investor buys 1,000 units when the NAV is Rs.11.11, but is hypothetically allotted units at the face value of Rs.10, what will be the immediate impact on the scheme's Net Asset Value (NAV)?

AThe NAV will increase because the net assets go up by more than the increase in units.

✓The NAV will decrease because the units were allotted at a price different from the prevailing NAV.

CThe NAV will remain unchanged as the addition to net assets is perfectly offset by an increase in units.

DThe NAV will adjust to Rs.10, reflecting the face value at which units were allotted.

💡 The text provides an example where an investor buying 1,000 units at NAV Rs.11.11 is allotted units at face value Rs.10. It states, "The investor will bring in Rs.10,000 (100* Rs.10)... The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11. The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme."

Q209 MCQ · 1 mark MediumScheme Features

What is a key differentiating feature of a closed-end mutual fund scheme compared to an open-ended scheme?

AClosed-end schemes allow continuous investment and redemption at current NAV.

BThe unit capital of a closed-end scheme changes with every investment or redemption.

✓Closed-end schemes are listed on a stock exchange for investors to exit their investment in the interim.

DClosed-end schemes are for perpetuity unless investors decide to wind up the scheme.

💡 The text states for closed-end schemes: 'In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed.' Options A, B, and D describe characteristics of open-ended schemes.

Q210 MCQ · 1 mark MediumScheme Types

Which of the following statements accurately describes a key characteristic of a closed-end mutual fund scheme?

AInvestors can continuously invest in additional units and redeem investments at current NAV.

BThe scheme is for perpetuity unless investors decide to wind it up.

CThe unit capital of the scheme changes with every investment or redemption made by investors.

✓Units are offered only during the New Fund Offer (NFO), and for interim exit, units are sold on a stock exchange.

💡 The text states, 'A closed-end scheme is for a fixed period or tenor. It offers units to investors only during the new fund offer (NFO). The scheme is closed for transactions with investors after this. ... In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed.' Options A, B, and C describe characteristics of an open-ended scheme.

Q211 MCQ · 1 mark MediumEquity Funds - Market Capitalization

According to SEBI's classification for open-end equity schemes based on market capitalization, what is the minimum investment requirement for a Large and Mid-cap fund?

AAt least 80% of total assets in large-cap companies.

BAt least 65% of total assets in mid-cap companies.

✓A minimum of 35% of total assets in large-cap companies and a minimum of 35% in mid-cap companies.

DAt least 75% of total assets in equity, with a minimum of 25% in large caps, 25% in mid-caps, and 25% in small caps.

💡 The text states: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q212 MCQ · 1 mark EasyMark to Market

What is the primary purpose of 'Mark to Market' in mutual funds, as described in the text?

ATo determine the cut-off timings for transactions.

✓To reflect the current market price of the securities held in the portfolio.

CTo calculate the dividend yield of the fund.

DTo identify undervalued stocks for investment.

💡 The text states, 'The current value of the portfolio forms the base of the net assets of the scheme and therefore the NAV. It means that if the portfolio was to be liquidated, then this would be the value that would be realised and distributed to the investors. Therefore, the portfolio has to reflect the current market price of the securities held. This process of valuing the portfolio on a daily basis at current value is called marking to market.'

Q213 MCQ · 1 mark EasyScheme Types

A distinguishing feature of an open-ended mutual fund scheme, as per the text, is that it allows investors to:

AInvest only during the New Fund Offer (NFO) period.

BRedeem investments only at the end of a fixed tenor.

✓Continuously invest in additional units and redeem investments at the current NAV.

DTrade units only on a stock exchange.

💡 The text states, 'An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV.'

Q214 MCQ · 1 mark EasyOpen-ended Schemes

A distinguishing feature of an open-ended mutual fund scheme, as described in the text, is that it allows investors to:

AInvest only during a New Fund Offer (NFO) period.

BRedeem investments only at the end of a fixed tenor.

✓Continuously invest in additional units and redeem investments at current NAV.

DTrade units with other investors exclusively on a stock exchange.

💡 The text states: 'An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV.'

Q215 MCQ · 1 mark MediumMutual Fund Schemes Classification

According to SEBI classification, what is the key difference in investment allocation between a Multi-cap fund and a Flexicap fund?

AMulti-cap funds invest only in large-cap companies, while Flexicap funds invest across all market caps.

✓Multi-cap funds have specific minimum investment limits across large, mid, and small caps, whereas Flexicap funds have no such minimum limits across market caps.

CFlexicap funds must invest at least 75% in equity, while Multi-cap funds have no such overall equity requirement.

DMulti-cap funds are actively managed, while Flexicap funds are passively managed.

💡 The text specifies for Multi-cap funds: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' For Flexicap funds, it states: 'In Flexicap funds there is no minimum investment limits across market caps and the funds are free to invest according to their requirements.'

Q216 MCQ · 1 mark HardEquity Fund Categorization

According to SEBI classification for open-end equity schemes based on market capitalization, which of the following statements is INCORRECT?

ALarge cap funds must invest at least 80% of total assets in companies ranked 1st to 100th by market capitalization.

BMid-cap funds must invest at least 65% of total assets in companies ranked 101st to 250th by market capitalization.

CLarge and Mid-cap funds require a minimum of 35% investment in large cap companies and a minimum of 35% in mid-cap companies.

✓Multi cap funds must invest at least 65% of total assets in equity-related instruments, with no specific minimum allocation to large, mid, or small caps.

💡 The text states the *current* rule for Multi cap funds: "At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps." The statement in option D describes the *earlier* rule for multi cap funds, or features similar to Flexicap funds (no minimum limits across market caps for the latter).

Q217 MCQ · 1 mark EasyExchange Traded Funds (ETFs)

How do transactions in Exchange Traded Funds (ETFs) typically differ from those in open-ended mutual funds?

AETFs involve the investor trading with the mutual fund, similar to open-ended funds.

✓ETFs are traded like stocks on an exchange throughout the day, with investors trading with each other.

CETFs have a single Net Asset Value (NAV) for a day, similar to open-ended funds.

DETFs cannot track an index or commodity price.

💡 The text states: 'Like a stock they are listed on the stock exchange so they can be traded all day long.' and 'In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.'

Q218 MCQ · 1 mark MediumEquity Fund Categorization

According to SEBI classification based on market capitalization, what is the minimum percentage of total assets that a 'Large and Mid-cap fund' must invest in large cap companies?

A80%

B65%

✓35%

D25%

💡 The text specifies, 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Q219 MCQ · 1 mark MediumNAV Impact

According to the text, what is the direct impact on a scheme's Net Asset Value (NAV) if an investor buys 1,000 units when the NAV is Rs. 11.11 but is hypothetically allotted units at the face value of Rs. 10?

AThe NAV will increase because new funds are brought in.

BThe NAV will remain unchanged as transactions are conducted at NAV.

✓The NAV will decrease because units were allotted at a price different from the NAV.

DThe NAV will fluctuate based on the market performance of the portfolio.

💡 The text provides an example: 'The investor will bring in Rs.10,000 (100* Rs.10). The net assets will go up by this Rs.10,000 to Rs.110,000. The number of units outstanding will go up by 1,000 to 10,000 units. The NAV post this transaction will be Rs.11. The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.'

Q220 MCQ · 1 mark EasyNAV Calculation

A redemption or additional investment in a mutual fund scheme will generally not directly affect the NAV under normal circumstances because:

AThe NAV is only calculated annually.

✓These transactions are conducted at the prevailing NAV.

CThe fund manager adjusts the portfolio immediately to stabilize the NAV.

DOnly market movements impact the NAV.

💡 The text explicitly states, "A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV."

Q221 MCQ · 1 mark MediumCut-off Timings

What determines the applicable NAV for a purchase, redemption, or switch request received by a mutual fund?

AThe NAV at the close of the previous business day.

BThe NAV determined by the fund house's internal policy, irrespective of the request time.

✓The NAV determined by the time the request is received, provided clear funds hit the account by cut-off time.

DThe highest NAV recorded during the entire day of the transaction.

💡 The text states: 'The NAV that will be applicable would thus be determined by the time when the request is received by the mutual fund, provided clear funds hit the account of the fund by cut-off time.'

Q222 MCQ · 1 mark MediumNAV Impact

A mutual fund scheme's NAV is Rs. 11.11. An investor hypothetically buys 1,000 units, which are allotted at a face value of Rs. 10. What will be the immediate impact on the scheme's NAV for all investors?

AThe NAV will increase because new funds are brought into the scheme.

✓The NAV will decrease because units were allotted at a price lower than the current NAV.

CThe NAV will remain unchanged as transactions are conducted at the NAV.

DThe NAV will increase only if the new investment amount exceeds the previous net assets.

💡 The text states: 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.' Allotting units at a price lower than the prevailing NAV dilutes the value for existing unit holders.

Q223 MCQ · 1 mark MediumScheme Types

Which of the following is a characteristic of Interval funds?

AThey are open-ended schemes that allow continuous transactions throughout their life.

✓They are a variant of closed-end funds that become open-ended during specified periods.

CThey are not required to be listed on a stock exchange.

DThe minimum gap between two transaction periods for an Interval fund is 7 days.

💡 The text describes Interval funds as 'a variant of closed end funds which become open-ended during specified periods.' It also mentions they 'have to be listed on a stock exchange' and require 'a minimum gap of 15 days between two transaction periods.'

Q224 MCQ · 1 mark MediumScheme Types - Closed-ended

Which of the following is a distinguishing feature of a closed-end mutual fund scheme?

AInvestors can continuously purchase and redeem units at the current NAV.

BThe unit capital of the scheme changes with every investment or redemption.

✓Units are offered to investors only during the New Fund Offer (NFO) period.

DThe scheme is for perpetuity unless investors decide to wind it up.

💡 The text states that a closed-end scheme 'offers units to investors only during the new fund offer (NFO). The scheme is closed for transactions with investors after this.' Options A, B, and D describe open-ended schemes.

Q225 MCQ · 1 mark EasyMark to Market

What is the primary purpose of 'marking to market' in the context of mutual funds?

ATo determine the daily cut-off timings for transactions.

✓To reflect the current market price of the securities held in the portfolio.

CTo calculate the dividend yield for income-seeking investors.

DTo identify under-performing stocks for a contra investment strategy.

💡 The text states, "The current value of the portfolio forms the base of the net assets of the scheme and therefore the NAV. It means that if the portfolio was to be liquidated, then this would be the value that would be realised and distributed to the investors. Therefore, the portfolio has to reflect the current market price of the securities held. This process of valuing the portfolio on a daily basis at current value is called marking to market."

Case-Based Questions (5 sets)

Case 1 Case-Based · 1 mark each Mutual Fund Scheme Types and Categorization

Rohan, 30, and Priya, 28, are a young couple based in Mumbai, looking to start their investment journey. They have accumulated savings of ₹1,00,000 and can invest ₹20,000 monthly. Their primary goal is to build long-term wealth, but they also anticipate needing a significant portion of their investment for a house down payment in about 7 years. They are new to mutual funds and want to understand the different types of schemes available, how they operate, and the regulatory guidelines governing them. Rohan is particularly interested in schemes that allow him to invest and redeem units continuously, offering flexibility for his future financial needs. Priya, on the other hand, is keen on understanding how fund managers select stocks and the various categories of equity funds based on market capitalization and investment style. They recently heard about a 'new fund offer' (NFO) for a scheme that promises a fixed tenure and mandatory listing on a stock exchange, which has added to their confusion about how different funds operate.

Medium Sub-question 1

Priya is confused between Multi-cap funds and Flexi-cap funds, as both invest across large, mid, and small-cap companies. What is the key regulatory difference in their minimum allocation requirements across market capitalizations according to SEBI?

AMulti-cap funds have no minimum allocation limits across market caps, while Flexi-cap funds must invest a minimum of 25% in each market cap segment.

✓Multi-cap funds must invest a minimum of 25% in large-cap, 25% in mid-cap, and 25% in small-cap companies, whereas Flexi-cap funds have no minimum investment limits across market caps (though at least 65% in equities overall).

CBoth Multi-cap and Flexi-cap funds must invest at least 65% in equity and have no specific minimum allocation across market caps.

DFlexi-cap funds are only allowed to invest in large and mid-cap companies, while Multi-cap funds can invest in all three.

💡 As per SEBI regulations, a Multi-cap fund must invest at least 75% of its assets in equity and equity-related instruments, with a minimum of 25% in large caps, 25% in mid-caps, and 25% in small caps. In contrast, Flexi-cap funds have no minimum investment limits across market caps, allowing fund managers complete flexibility, although they must invest at least 65% of their corpus in equities overall.

Medium Sub-question 2

Rohan and Priya are considering investing in a New Fund Offer (NFO) for a scheme that is for a fixed period and will be mandatorily listed on a stock exchange after the NFO closes. If they need to exit their investment before the scheme's maturity, how can they typically do so?

ABy redeeming units directly with the mutual fund at the prevailing NAV.

✓By selling their units to other investors on a stock exchange.

CThey cannot exit before maturity as it's a fixed-period scheme.

DBy converting their units into an open-ended scheme.

💡 A closed-end scheme is for a fixed period and offers units only during the NFO. If investors want to exit their investment in the interim, they can do so by selling their units to other investors on a stock exchange where these funds are mandatorily listed.

Hard Sub-question 3

Priya is considering two types of funds: a 'Technology Sector Fund' and a 'Sustainable Infrastructure Thematic Fund'. She wants to understand their regulatory minimum equity allocation and which one typically offers better diversification. Which of the following statements is correct?

AThe Technology Sector Fund requires 65% equity allocation, while the Thematic Fund requires 80%. The Thematic Fund is less diversified.

✓Both funds require at least 80% of total assets in their identified sector/theme. The Thematic Fund is generally more diversified than the Sector Fund.

CThe Technology Sector Fund requires 80% equity allocation, while the Thematic Fund has no specific minimum. Both offer similar diversification.

DBoth funds require at least 65% of total assets in their identified sector/theme. The Sector Fund is generally more diversified.

💡 Both open-ended sector funds and open-ended thematic funds must invest at least 80% of their total assets in the equity and equity-related instruments of the identified sector or theme, respectively. Thematic funds, by definition, invest in multiple sectors and stocks that form part of a broader theme (e.g., infrastructure includes construction, cement, banking), making them more diversified than sector funds, which concentrate solely on a single sector (e.g., technology).

Easy Sub-question 4

Priya is interested in an equity fund that focuses primarily on large, liquid blue-chip companies with stable performance. According to SEBI classification, which category of fund should she consider if she wants at least 80% of the total assets to be invested in companies ranked 1 to 100 in terms of full market capitalization?

AMid-cap fund

BSmall-cap fund

✓Large-cap fund

DLarge and Mid-cap fund

💡 As per SEBI classification, a Large-cap fund invests in stocks of large, liquid blue-chip companies (ranked 1 to 100 by market capitalization) and must invest at least 80% of its total assets in such companies.

Easy Sub-question 5

Rohan prioritizes flexibility to invest additional amounts or redeem his investment continuously at the current Net Asset Value (NAV). Which type of mutual fund scheme is best suited for his requirement?

✓Open-ended scheme

BClosed-ended scheme

CInterval scheme

DExchange Traded Fund (ETF)

💡 An open-ended scheme allows investors to invest in additional units and redeem investments continuously at the current NAV. This matches Rohan's requirement for flexibility.

Case 2 Case-Based · 1 mark each Mutual Fund Types and Regulations

Mr. and Mrs. Sharma, both 38 years old, are reviewing their investment portfolio to align with their financial goals. They aim to save for their child's higher education in 15 years and their own retirement. Mr. Sharma is keen on long-term growth through equity-oriented mutual funds, while Mrs. Sharma values liquidity and the ability to trade investments during market hours. They currently hold 3,000 units of an open-ended diversified equity fund, "Alpha Growth Fund," which they acquired at an average NAV of Rs. 28 per unit. The fund's current NAV is Rs. 35. Mrs. Sharma is contemplating an additional investment of Rs. 75,000 and is particularly interested in a fund that tracks a specific index and can be bought or sold throughout the day. She has also heard about "Dynamic Opportunities Fund," which invests across large, mid, and small-cap companies with no minimum limits, and "Sustainable Future Fund," an ESG-focused thematic fund.

Medium Sub-question 1

If Mr. Sharma decides to redeem 1,000 units from the "Alpha Growth Fund" at its current NAV of Rs. 35, what will be the direct impact of this transaction on the NAV of the remaining units in the fund?

AThe NAV will increase as the fund's assets decrease.

BThe NAV will decrease as the number of outstanding units decreases.

✓The NAV will remain unchanged as the transaction is conducted at the current NAV.

DThe NAV will fluctuate based on the market conditions at the time of redemption.

💡 A redemption or additional investment will not directly affect the NAV of a mutual fund scheme since these transactions are conducted at the current NAV. The decrease in net assets due to redemption is proportionally offset by a decrease in the number of outstanding units, thus keeping the NAV constant.

Easy Sub-question 2

Mrs. Sharma is interested in a fund that tracks a specific index and can be bought or sold throughout the day on a stock exchange. Which type of mutual fund product best fits this description according to the chapter text?

AOpen-ended scheme

BClosed-end scheme

✓Exchange Traded Fund (ETF)

DInterval fund

💡 Exchange Traded Funds (ETFs) are mutual funds that are listed on the stock exchange and can be traded all day long, similar to stocks. They usually track an index.

Easy Sub-question 3

What is the current total value of Mr. and Mrs. Sharma's investment in the "Alpha Growth Fund"?

ARs. 84,000

✓Rs. 105,000

CRs. 90,000

DRs. 98,000

💡 The current value of the investment is calculated by multiplying the number of units by the current Net Asset Value (NAV). Number of units = 3,000 Current NAV = Rs. 35 Current total value = 3,000 units * Rs. 35/unit = Rs. 105,000.

Hard Sub-question 4

The "Dynamic Opportunities Fund" invests across large, mid, and small-cap companies with no minimum investment limits across market caps, provided at least 65% of the corpus is invested in equities. Which specific SEBI category does this fund belong to, and which regulatory body is primarily responsible for governing the setting up and structure of such a mutual fund in India?

AMulti Cap Fund; Reserve Bank of India (RBI)

✓Flexicap Fund; Securities and Exchange Board of India (SEBI)

CLarge and Mid Cap Fund; Association of Mutual Funds in India (AMFI)

DDiversified Equity Fund; Securities and Exchange Board of India (SEBI)

💡 A fund that invests across large, mid, and small-cap companies with no minimum investment limits across market caps, but with an overall minimum of 65% of the corpus in equities, is classified as a Flexicap fund. The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India, governing their setting up, structure, and operations.

Medium Sub-question 5

The "Sustainable Future Fund" is described as an ESG-focused thematic fund. According to SEBI's categorization, what is a key characteristic of a thematic fund, and what is the minimum investment requirement in its identified theme?

AIt invests in a particular sector; minimum 65% of total assets.

✓It invests in multiple sectors forming part of a theme; minimum 80% of total assets.

CIt invests based on market capitalization; minimum 75% of total assets.

DIt adopts a contrarian investment strategy; minimum 65% of total assets.

💡 Theme-based funds invest in multiple sectors and stocks that form part of a theme. An open-end thematic fund should invest at least 80% of its total assets in the equity and equity-related instruments of the identified theme.

Case 3 Case-Based · 1 mark each Mutual Fund Operations and Classification

Mr. and Mrs. Sharma, a couple in their late 30s, are actively managing their investment portfolio. Mr. Sharma (40) and Mrs. Sharma (38) recently made several mutual fund investments. They invested ₹50,000 in the New Fund Offer (NFO) of 'Alpha Growth Fund', a diversified equity scheme, which allotted units at its face value of ₹10 per unit. At the time of allotment, the scheme's Net Asset Value (NAV) was ₹12 per unit based on its underlying portfolio. They also hold 2,000 units in 'Dynamic Equity Fund', an open-ended large-cap scheme. On a specific business day, they decided to redeem 500 units from 'Dynamic Equity Fund'. The request was submitted at 1:30 PM, and clear funds hit the fund's account by 2:30 PM. The published NAV for that day was ₹28. Furthermore, they are considering an additional investment of ₹25,000 in 'Infra Builders Fund', a sector-specific equity scheme. Their financial advisor explained that this fund invests at least 80% of its total assets in the infrastructure sector. The advisor also mentioned that their AMC, 'Wealth Creators AMC', recently launched two new equity schemes: 'Value Seekers Fund' and 'Contrarian Bet Fund', both aiming to identify undervalued companies.

Hard Sub-question 1

If 'Alpha Growth Fund' had existing net assets of ₹1,000,000 and 83,333 units outstanding *before* the Sharma's NFO investment, what was the *new* NAV of 'Alpha Growth Fund' immediately after Mr. and Mrs. Sharma's ₹50,000 investment where units were allotted at face value of ₹10 per unit?

✓₹11.89

B₹12.00

C₹11.11

D₹12.11

💡 1. Initial Net Assets = ₹1,000,000 2. Initial Units Outstanding = 83,333 3. Initial NAV (for reference) = ₹1,000,000 / 83,333 = ₹12.00 (approximately) 4. Sharma's Investment = ₹50,000 5. Units Allotted to Sharmas = Investment Amount / Face Value = ₹50,000 / ₹10 = 5,000 units 6. New Total Net Assets = Initial Net Assets + Sharma's Investment = ₹1,000,000 + ₹50,000 = ₹1,050,000 7. New Total Units Outstanding = Initial Units Outstanding + Units Allotted to Sharmas = 83,333 + 5,000 = 88,333 units 8. New NAV = New Total Net Assets / New Total Units Outstanding = ₹1,050,000 / 88,333 ≈ ₹11.8864 Rounding to two decimal places, the new NAV is ₹11.89.

Easy Sub-question 2

What was the immediate impact on the Net Asset Value (NAV) of 'Alpha Growth Fund' after Mr. and Mrs. Sharma's units were allotted at face value, given the scheme's NAV was ₹12 per unit at the time of allotment?

AThe NAV increased because new money came into the fund.

✓The NAV decreased because units were allotted at a price lower than the existing NAV.

CThe NAV remained unchanged because new units were issued.

DThe NAV increased to reflect the higher market value of the underlying portfolio.

💡 When units are allotted at a price different from the prevailing NAV, it impacts the NAV. In this case, units were allotted at the face value of ₹10, which was lower than the scheme's NAV of ₹12. Allotting units at a price lower than the NAV will dilute the NAV for all investors in the scheme.

Medium Sub-question 3

Wealth Creators AMC launched 'Value Seekers Fund' and 'Contrarian Bet Fund'. Both aim to identify undervalued companies. According to SEBI regulations for open-ended equity schemes, what is the rule regarding an Asset Management Company (AMC) offering both a Value Fund and a Contra Fund?

AAn AMC can offer both a Value Fund and a Contra Fund, provided they have different fund managers.

BAn AMC can offer both a Value Fund and a Contra Fund, but they must be in different categories (e.g., Value fund is large-cap, Contra fund is mid-cap).

✓An AMC can offer either a Value Fund or a Contra Fund, but not both.

DAn AMC can offer both, as their investment strategies, though similar, are distinct.

💡 As per the chapter text, 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.' This is a specific regulatory guideline to prevent too much overlap in fund offerings that follow similar investment philosophies.

Easy Sub-question 4

Based on its investment mandate, what type of fund is 'Infra Builders Fund'?

AA thematic fund

BA diversified equity fund

✓A sector fund

DA large-cap fund

💡 The case context states that 'Infra Builders Fund' is a 'sector-specific equity scheme' and 'invests at least 80% of its total assets in the infrastructure sector'. This clearly defines it as a sector fund, which concentrates investments in a particular industry or sector.

Medium Sub-question 5

Assuming the cut-off time for equity fund transactions is 3:00 PM on a business day, which NAV would be applicable for the redemption of 500 units from 'Dynamic Equity Fund' by the Sharmas?

AThe NAV of the previous business day.

BThe NAV of the next business day.

✓The published NAV of ₹28 for the day the request was made.

DAn estimated NAV calculated at the time of the request (1:30 PM).

💡 The applicable NAV is determined by the time the request is received by the mutual fund, provided clear funds hit the account by the cut-off time. Since the redemption request was submitted at 1:30 PM and clear funds hit by 2:30 PM, both before the 3:00 PM cut-off, the published NAV for that day (₹28) will be applicable.

Case 4 Case-Based · 1 mark each Mutual Fund Basics and Product Classification

Mr. and Mrs. Sharma, both 45 years old, are reviewing their investment portfolio. They have accumulated savings of ₹50 lakhs and are looking to invest a significant portion of it in mutual funds for their long-term goals, including their child's higher education and retirement. Currently, they hold 5,000 units in an existing open-ended diversified equity fund, 'Growth Seeker Fund', which they bought at an NAV of ₹20 per unit. The current Net Asset Value (NAV) of 'Growth Seeker Fund' is ₹25. They are exploring various mutual fund options with their investment adviser. Mrs. Sharma is interested in funds that invest in companies with stable performance and high dividend payouts, while Mr. Sharma is keen on exploring opportunities in specific high-growth sectors like technology. They are also considering a new investment of ₹10 lakhs into a fund that tracks a major equity index. Their adviser explained the differences between open-ended, closed-ended, and Exchange Traded Funds (ETFs), and the importance of cut-off timings for transactions.

Medium Sub-question 1

Mr. Sharma is considering a new investment. If he opts for an open-ended 'Large and Mid-cap fund', what is the minimum percentage of its total assets that must be invested in mid-cap companies according to SEBI regulations?

A25%

✓35%

C50%

D65%

💡 The chapter text specifies: 'To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.'

Easy Sub-question 2

What is the current value of Mr. and Mrs. Sharma's existing investment in 'Growth Seeker Fund'?

A₹100,000

✓₹125,000

C₹150,000

D₹200,000

💡 The current value of their investment is calculated by multiplying the number of units held by the current NAV. Units held = 5,000 Current NAV = ₹25 Current investment value = 5,000 units * ₹25/unit = ₹125,000.

Hard Sub-question 3

If Mr. Sharma invests ₹10 lakhs in an open-ended fund and, hypothetically, units are allotted at a face value lower than the prevailing NAV, how would this impact the NAV for existing investors? Additionally, what is a key regulatory difference between a 'Value Fund' and a 'Contra Fund' that an AMC can offer?

AThe NAV would increase; An AMC can offer both Value and Contra funds simultaneously.

✓The NAV would decrease; An AMC can offer either a Value or a Contra fund, but not both.

CThe NAV would remain unchanged; An AMC can offer both Value and Contra funds if they track different indices.

DThe NAV would decrease; An AMC can offer both Value and Contra funds if they have different fund managers.

💡 The chapter text explains: 'The NAV of the scheme has come down because the units were allotted at a price different from the NAV and will have an impact on all the investors in the scheme.' When new units are allotted at face value (e.g., ₹10) which is lower than the prevailing NAV (e.g., ₹11.11), the net assets increase by the investment amount, but the increase in units at a lower price per unit effectively dilutes the NAV for existing investors, causing it to decrease. Regarding Value vs. Contra Funds, the text states: 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Medium Sub-question 4

If Mr. Sharma considers investing in a closed-ended fund, how would he typically exit his investment before the scheme's maturity period?

ABy redeeming units directly with the Asset Management Company (AMC) at the prevailing NAV.

✓By selling the units to other investors on a stock exchange where they are mandatorily listed.

CBy switching his units to an open-ended scheme offered by the same AMC.

DBy waiting for a specified interval period during which the fund becomes open-ended.

💡 The chapter text states: 'A closed-end scheme is for a fixed period or tenor. ... In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed.' Options A and C are characteristic of open-ended funds or not generally applicable. Option D describes an Interval fund, which is a variant of a closed-end fund but not a typical closed-end fund's exit mechanism.

Easy Sub-question 5

Based on Mrs. Sharma's preference for companies with stable performance and high dividend payouts, which type of equity fund would be most suitable for her?

ASmall-cap Fund

✓Dividend Yield Fund

CContra Fund

DSector Fund

💡 The chapter text states that 'Dividend yield funds invest in stocks that have a high dividend yield. These stocks pay a large portion of their profits as dividend and these appeals to investors looking for income from their equity investments. The companies typically have high level of stable earnings but do not have much potential for growth or expansion. They therefore pay high dividends while the stock prices remain stable.' This perfectly matches Mrs. Sharma's preference.

Case 5 Case-Based · 1 mark each Mutual Fund Basics and Product Categories

Mr. and Mrs. Khanna, both aged 42, are reviewing their investment portfolio. They have an existing investment of Rs. 3,00,000 in 'Growth Multi-Cap Fund', an open-ended scheme, which they initially invested in at an NAV of Rs. 30. Recently, the NAV of this fund went up to Rs. 33. They are considering an additional investment of Rs. 60,000 into the same fund. Mrs. Khanna is also interested in a 'Tech Sector Fund' NFO that just launched, while Mr. Khanna is exploring 'XYZ Gold ETF' he heard about. They want to understand how different fund structures and investment styles might impact their portfolio and the regulatory aspects involved in mutual funds.

Easy Sub-question 1

What is the current value of Mr. and Mrs. Khanna's existing investment in 'Growth Multi-Cap Fund', given the NAV has risen to Rs. 33?

ARs. 3,00,000

✓Rs. 3,30,000

CRs. 3,60,000

DRs. 3,90,000

💡 Initial units held = Total Investment / Initial NAV = Rs. 3,00,000 / Rs. 30 = 10,000 units. Current value of investment = Number of units held * Current NAV = 10,000 units * Rs. 33 = Rs. 3,30,000.

Easy Sub-question 2

When Mr. and Mrs. Khanna make their additional investment of Rs. 60,000 into the 'Growth Multi-Cap Fund' (an open-ended scheme), how will this transaction typically affect the scheme's Net Asset Value (NAV) immediately after their investment?

AThe NAV will increase proportionally to the additional investment.

BThe NAV will decrease slightly due to dilution.

✓The NAV will remain unchanged as transactions are conducted at the NAV.

DThe NAV will only change if the investment is made at face value.

💡 As per the chapter text, 'A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.' The addition to net assets brought in by the investor is offset by an increase in units, thus keeping the NAV constant.

Medium Sub-question 3

Mrs. Khanna is interested in the 'Tech Sector Fund' NFO. Based on the chapter text, what is a primary characteristic of a sector fund in terms of diversification and risk compared to a diversified equity fund?

ASector funds offer higher diversification and lower risk due to focused investment.

✓Sector funds have lower diversification and higher risk due to concentration in a specific sector.

CSector funds have similar diversification and risk as multi-cap funds.

DSector funds are always closed-ended, limiting liquidity but reducing risk.

💡 The chapter text states: 'Sector funds invest in companies that belong to a particular sector... The risk is higher because of lesser diversification since such funds are concentrated in a particular sector.' This makes them distinct from diversified equity funds.

Hard Sub-question 4

If the 'Growth Multi-Cap Fund' is an open-ended multi-cap fund as per SEBI regulations, what minimum percentage of its total assets must be invested in large-cap, mid-cap, and small-cap companies respectively? Additionally, if the AMC launching the 'Tech Sector Fund' NFO already manages a 'Contra Fund', what other specific investment style fund is it prohibited from offering?

✓Large-cap: 25%, Mid-cap: 25%, Small-cap: 25%; It cannot offer a Value Fund.

BLarge-cap: 35%, Mid-cap: 35%, Small-cap: No minimum; It cannot offer a Flexicap Fund.

CLarge-cap: 80%, Mid-cap: No minimum, Small-cap: No minimum; It cannot offer a Dividend Yield Fund.

DLarge-cap: 20%, Mid-cap: 20%, Small-cap: 20%; It cannot offer a Sector Fund.

💡 For multi-cap funds, the text states: 'At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps.' Regarding investment styles, it mentions: 'Mutual fund houses can either offer a contra fund or a value fund. An AMC can have either of Value or Contra Fund, not both.'

Medium Sub-question 5

Mr. Khanna is exploring the 'XYZ Gold ETF'. Which statement accurately describes a key operational difference between an ETF and a traditional open-ended mutual fund based on how investors transact?

AETFs are traded only at the end of the day based on a single NAV, similar to open-ended funds.

✓ETFs are traded on a stock exchange throughout the day, allowing investors to trade with each other, unlike open-ended funds which transact with the fund house at a single daily NAV.

COpen-ended funds allow trading throughout the day, while ETFs only allow redemptions at fixed intervals.

DBoth ETFs and open-ended funds are mandatorily listed on a stock exchange for continuous trading.

💡 The text states: 'ETFs are mutual funds that have the features of a mutual fund but can be traded. Like a stock they are listed on the stock exchange so they can be traded all day long.' It further clarifies: 'In an ETF it is actually investors trading with each other while in case of an open-ended fund it is the investor on one side of the transaction and the mutual fund on the other side.'

About this content: These practice questions are based on the NISM-Series-X-A: Investment Adviser (Level 1) Certification Examination Workbook published by the National Institute of Securities Markets (NISM), Mumbai. NISM is a SEBI-established institution. Questions cover Mutual Fund with verified answers and explanations. BullWiser is an independent exam preparation platform — not affiliated with NISM or SEBI. Last updated: July 08, 2026.

Ready to Test Yourself Under Exam Conditions?

Full 180-minute mock exam with all 20 chapters, mixed-weight case-based questions, negative marking, and NISM-accurate 60% pass threshold.

Start Full Mock Exam ▶

← Ch.10: Understanding Derivatives Ch.12: Portfolio Manager →

Ch.11: Mutual Fund

What You Will Learn in This Chapter

Multiple Choice Questions (225)

Case-Based Questions (5 sets)

Ready to Test Yourself Under Exam Conditions?