Mutual Fund Distributor Mock Test 9 (NISM 5A – 50 Questions)

1. An investor observes that during a rising interest rate cycle, his long-duration debt fund shows significant decline in NAV even though all underlying securities are AAA-rated. What is the most appropriate explanation?

2. An investor earns 9% return on investment while inflation is 8%. What is the approximate real return?

3. An investor diversifies across multiple asset classes but still experiences portfolio decline during global recession. What does this indicate?

4. An investor exits equity markets after a crash due to fear and later misses recovery. Which behavioral bias is most evident?

5. A small investor wants access to diversified investments managed by experts without actively monitoring markets. Which mutual fund feature enables this?

6. An investor states mutual funds eliminate all investment risks. Evaluate this statement.

7. An investor prefers mutual funds over direct equity due to lack of expertise and time. Which advantage is most relevant?

8. Which entity in mutual fund structure is responsible for safeguarding investor interests and ensuring AMC compliance?

9. Before launching a scheme, who ensures regulatory compliance and investor protection?

10. An entity that sets up mutual fund similar to promoter is called:

11. An advertisement highlights returns but hides risks in fine print. What is violated?

12. An AMC delays redemption payout. What must it do?

13. An investor receives full scheme details including risks. Which principle applies?

14. A simplified document summarizing scheme details is:

15. Fundamental change requires:

16. Exit load leads to:

17. Mis-selling occurs when:

18. What does ARN ensure?

19. If ₹80,000 invested at NAV of ₹40. How many units will be issued?

20. Assets ₹150cr, liabilities ₹30cr, units 6cr → NAV?

21. True or False: Expense ratio reduces investor returns over time.

22. Equity MF sold after 2 years, gain ₹2 lakh. Tax?

23. Dividend income is:

24. An investor notices that redemption proceeds from his mutual fund are delayed due to incorrect bank details registered in his folio. Which investor service could have prevented this issue if updated proactively?

25. An investor opts for Systematic Withdrawal Plan (SWP) from his mutual fund investment to generate regular monthly income. What is the mechanism behind this facility?

26. True or False: Once KYC is completed, an investor can invest across all AMCs without repeating the KYC process.

27. An investor compares two funds with identical average returns over 5 years. However, Fund X has a significantly higher standard deviation than Fund Y. What should be the correct interpretation?

28. A mutual fund has a beta of 1.2. If the market rises by 10%, what is the expected movement of the fund (approx)?

29. A fund consistently delivers returns above its benchmark index across multiple market cycles. Which performance measure reflects this ability?

30. A fund shows lower returns than peers but has significantly lower volatility and a higher Sharpe ratio. What should an investor infer?

31. A fund performs exceptionally well during bull markets but performs poorly during downturns compared to benchmark. What characteristic does this indicate?

32. An investor observes minimal deviation between fund performance and benchmark returns over time. Which type of fund is this likely to be?

33. An investor wants to compare two funds with different volatility levels. Which metric is most appropriate to evaluate performance fairly?

34. An investor selects a mutual fund purely based on last 1-year return without considering consistency, risk, or portfolio composition. What is the key drawback of this approach?

35. An investor prefers funds with low portfolio turnover ratio. What benefit does this indicate?

36. A long-term investor with high risk appetite is selecting between large-cap and small-cap funds. Which is more appropriate and why?

37. An investor invests only in fixed deposits and realizes that his wealth is not growing in real terms due to rising inflation. Which risk is he facing?

38. A mutual fund allows small investors to participate in diversified portfolios by pooling money together. Which concept enables this?

39. A distributor clearly explains product risks, commissions, and suitability before recommending a scheme. Which principle is followed?

40. An investor sees NAV rise from ₹40 to ₹48 in one year. What is approximate return?

41. An investor sells debt mutual fund units after 2 years. How will gains be classified?

42. An investor registers a nominee in his mutual fund account. What is the primary advantage?

43. An investor wants to understand risk that cannot be diversified away. Which risk is this?

44. An investor compares fund performance against benchmark index. What is this process called?

45. Exit load is charged to:

46. ARN stands for:

47. If expense ratio increases while returns remain constant, investor return will:

48. True or False: Investments with higher expected returns generally involve higher risk.

49. A fund has positive alpha consistently. What does it indicate?

50. An investor compares two funds—one with consistent moderate returns and another with high but volatile returns. Being risk-averse, which is the better choice?