NISM MF Mock Test 8 (Series 5A) – 50 Exam Level Questions

1. An investor holding long-duration debt funds notices a decline in NAV despite no defaults in portfolio securities during a rising interest rate environment. What is the most appropriate explanation for this decline?

2. An investor compares two investments: one yields 8% and another 11%, while inflation is 9%. Which interpretation is correct regarding real returns?

3. An investor diversifies across equity, debt, and gold to reduce risk. However, during a global crisis, all asset classes fall simultaneously. What does this indicate about diversification?

4. An investor exits equity markets during a downturn due to fear and shifts entirely to fixed deposits, missing subsequent recovery. Which behavioral bias is reflected?

5. An investor with limited funds wants exposure to a diversified portfolio managed by professionals without actively tracking markets. Which feature of mutual funds directly addresses this need?

6. An investor claims mutual funds eliminate all risks due to diversification. Which of the following is the most accurate evaluation?

7. An investor prefers mutual funds over direct equity due to lack of expertise and time to monitor markets. Which benefit is he primarily utilizing?

8. In a mutual fund structure, which entity ensures that the AMC functions in accordance with SEBI regulations and safeguards investor interests?

9. Before launching a new scheme involving complex instruments, which entity must ensure that all regulatory requirements are met and investor interests are protected?

10. An entity establishes a mutual fund and is responsible for its initial setup similar to a promoter. Which entity is this?

11. A mutual fund advertisement highlights high past returns prominently but mentions risk factors in very small font. Which regulatory principle is violated?

12. An AMC delays redemption proceeds beyond the prescribed time limit. What is the regulatory consequence?

13. An investor receives complete scheme information including risks, objectives, and disclosures. Which regulatory principle ensures this transparency?

14. An investor reads a simplified document summarizing scheme objectives, risks, and plans before investing. Which document is this?

15. An AMC wants to change fundamental attributes of a scheme. What is required?

16. An investor redeems units within exit load period. What is the financial implication?

17. A distributor recommends a high-risk fund to a conservative investor to earn higher commission. Which principle is violated?

18. An investor verifies the ARN of a distributor before investing. What does this confirm?

19. An investor invests ₹60,000 at NAV ₹30. How many units will be allotted?

20. A scheme has assets ₹270 crore, liabilities ₹30 crore, and 12 crore units. What is NAV?

21. True or False: Expense ratio reduces investor returns over time by lowering NAV on a continuous basis.

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

23. Dividend received from mutual funds is treated how for taxation purposes?

24. An investor notices unauthorized redemption in his mutual fund account and realizes that his bank and contact details were outdated. Which investor service could have helped prevent or reduce such risk if updated timely?

25. An investor uses Systematic Transfer Plan (STP) to gradually move funds from a debt fund to an equity fund over 12 months. What is the primary benefit of this strategy?

26. True or False: Completing KYC once allows an investor to invest across all mutual fund houses without repeating the process.

27. An investor compares two funds with similar average returns over 5 years. However, Fund A has significantly higher standard deviation than Fund B. What should the investor infer?

28. A mutual fund has a beta of 1.4. During a market rally of 10%, what approximate movement can be expected in the fund?

29. An investor evaluates a fund that has consistently generated returns above its benchmark index over several years. Which metric best captures this performance?

30. A fund shows a higher Sharpe ratio compared to peers, even though its absolute returns are slightly lower. What does this indicate?

31. An investor notices that a fund outperformed its benchmark during bull markets but significantly underperformed during market downturns. What does this suggest about the fund’s strategy?

32. A fund shows consistent returns close to its benchmark with minimal deviation. Which type of fund is most likely this?

33. An investor observes that a fund has high returns but also high volatility compared to peers. Which measure should he consider to better evaluate performance?

34. An investor selects a fund solely based on past 1-year performance without analyzing consistency, portfolio quality, or risk metrics. What is the major flaw in this approach?

35. An investor prefers a fund with lower portfolio turnover ratio compared to peers. What is the likely advantage of this choice?

36. An investor with a long-term horizon and high risk appetite is selecting between a large-cap fund and a small-cap fund. Which is more suitable and why?

37. An investor invests only in fixed deposits to avoid risk but finds that inflation-adjusted returns are low. What risk is he primarily exposed to?

38. An investor prefers mutual funds because they provide diversification even with small investments. Which concept enables this benefit?

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

40. An investor observes NAV increased from ₹50 to ₹60 over one year. What is the approximate return?

41. An investor holds debt mutual fund units for 2 years and sells them at a profit. How will the gain be classified?

42. An investor registers a nominee in his mutual fund folio. What is the primary purpose of this action?

43. An investor wants to understand the risk that cannot be diversified away. Which type of risk should he focus on?

44. An investor compares a fund’s returns with its benchmark index to evaluate performance. What is this process called?

45. An investor redeems units before the exit load period ends and notices deduction in proceeds. What is the purpose of exit load?

46. An investor checks ARN before investing through a distributor. What does ARN represent?

47. If the expense ratio of a fund increases while returns remain unchanged, what happens to investor returns?

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

49. A fund has a positive alpha over long periods. What does this indicate?

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