Mutual Fund Distributor Exam Mock Test 7 (NISM 5A)

1. An investor evaluates two investments—one offering 8% return and another offering 10% return—but inflation during the period is 9%. Which conclusion is most appropriate?

2. True or False: Diversification across asset classes such as equity, debt, and gold helps in reducing overall portfolio volatility but does not guarantee elimination of losses.

3. A retail investor exits equity markets after a sharp fall and shifts entirely to fixed deposits, only to see markets recover strongly later. Which behavioral bias best explains this action?

4. An investor with limited capital wants access to professionally managed diversified portfolio across multiple securities. Which feature of mutual funds directly enables this?

5. An investor argues that mutual funds eliminate all risks due to diversification. Evaluate this statement.

6. An investor compares direct equity investing with mutual funds and prefers mutual funds due to lower effort in research and monitoring. Which benefit is being highlighted?

7. In the mutual fund structure, the entity responsible for holding assets in trust and ensuring that investor interests are protected is:

8. An AMC proposes to launch a new scheme with features significantly different from existing ones. Which entity must ensure that the scheme complies with regulations before launch?

9. True or False: Sponsor of a mutual fund is similar to a promoter and is responsible for setting up the mutual fund.

10. A mutual fund advertisement highlights past returns prominently but provides risk disclosure in very small font. What is the likely regulatory issue?

11. An investor receives redemption proceeds after delay beyond regulatory timeline. What must AMC do?

12. True or False: SEBI regulates mutual funds to protect investor interest and ensure fair market practices.

13. An investor reads a concise document containing scheme objectives, risk factors, and plans in simplified language before investing. Which document is this?

14. An AMC wants to change the fundamental attributes of a scheme. What is mandatory?

15. An investor redeems units within exit load period. What is the effect?

16. A distributor recommends products based on commission rather than suitability. Which principle is violated?

17. An investor verifies ARN number of distributor before investing. Why is this important?

18. An investor invests ₹50,000 in a scheme with NAV ₹25. How many units will be allotted?

19. A scheme has assets worth ₹300 crore, liabilities ₹30 crore, and 10 crore units outstanding. What is NAV?

20. True or False: Higher expense ratio directly reduces investor returns over time due to compounding effect.

21. An investor sells equity mutual fund units after 18 months with gains exceeding ₹1 lakh. What tax implication applies?

22. An investor receives dividend from mutual fund. How is it taxed?

23. An investor updates nomination details to ensure smooth transfer of units. What is benefit?

24. Explanation: Nomination ensures smooth transfer.

25. An investor uses STP to gradually move funds from debt to equity. What is main advantage?

26. True or False: KYC compliance is mandatory before investing in mutual funds.

27. A fund shows higher standard deviation compared to peers but similar average returns. What does this indicate?

28. A fund has beta of 1.5. What does this imply?

29. A fund consistently outperforms its benchmark over long term. Which metric captures this?

30. A fund has higher Sharpe ratio than peers. What does this indicate?

31. A 35-year-old investor chooses a fund based only on recent high returns without checking portfolio quality, volatility, or consistency. After market correction, fund underperforms significantly. What was the key mistake?

32. An investor selects a fund with low turnover ratio. What is benefit?

33. An investor wants high liquidity and low risk for short-term parking of funds. Which option is most suitable?

34. True or False: Fund selection should align with investor’s financial goals, time horizon, and risk appetite.

35. An investor allocates funds across equity, debt, and gold to reduce overall portfolio risk. Which principle is applied?

36. An investor prefers mutual funds over direct equity due to ease of management and diversification. Which advantage is highlighted?

37. A distributor explains all risks, charges, and suitability before recommending a scheme. Which principle is followed?

38. An investor notices NAV increased from ₹20 to ₹24 over a year. What is approximate return?

39. Debt mutual fund investments are considered long-term if held for more than:

40. An investor registers nominee in mutual fund folio. What advantage does this provide?

41. Which type of risk affects entire market and cannot be diversified away?

42. Benchmark is used to:

43. An investor evaluates funds using Sharpe ratio, consistency, and portfolio diversification. What approach is this?

44. An investor pays exit load when redeeming units early. What is the purpose?

45. ARN issued to distributors ensures:

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

47. Switching allows investor to:

48. True or False: Higher return investments generally involve higher risk.

49. Positive alpha indicates:

50. An investor compares two funds—one offering consistent moderate returns and another offering high but volatile returns. Being risk-averse, which should be preferred?