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School
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School Examination
You have gone through our School and now, test your knowledge in our Examination! It should be a piece of cake if you have been diligent in School.

To pass, you need to have a minimum score of 60 points.

Q1: Before you make your first mutual fund investment, it is important to know your level of risk tolerance
 So that you can accurately predict the returns your mutual fund will yield in 2 years
 So that you can predict when is the right time to sell your mutual funds
 So that you can decide what type of mutual fund best matches your investment objectives.
 So that you can control the value of your mutual funds

Q2: Which of the following best describes 'Time Horizon'?
 How long you can afford to hold on to your investments before selling them off
 The time when the sun sets over the horizon
 The growth cycle of a mutual fund investment
 The best time to switch from one mutual fund to the other

Q3: How would you budget for investment?
 70% of each month's salary goes into investments
 I invest the amount left over after taking care of all major commitments
 Why budget?
 I usually spend all my salary on other things and have to borrow to invest

Q4: If you save Rs. 5000 every month in an investment that gives you 15% annual return, in 30 years' time, how much would your savings be worth according to the principle of compounding?
 Rs. 60,000
 I don't save
 Rs. 3,46,16,400
 Rs. 18,00,000

Q5: What are bonds?
 Bonds are basically loans, where you are the lender.
 Bonds are portfolios of mutual funds, bonds, and other investment instruments.
 Bonds are derivative instruments.
 Bonds are 'shares' of a company.

Q6: Which of the following is true?
 Stocks are 'shares' of a company whereas dividends are non-obligatory yearly cash payments to share-owners that represent a portion of profits
 Stocks are what you lend out whereas dividends are what you receive in payment for your loans
 Stocks are mutual funds whereas dividends are the monthly cash-payments to owners of mutual funds
 Stocks are always traded at a fixed price whereas the prices for dividends are never fixed

Q7: Which of the following best describes the investment strategy of a 'contrarian investor'?
 A contrarian investor buys more units of a fund using contra
 A contrarian investor buys when the market is up and sells when the market is down
 A contrarian investor buys when the market is down and sells when the market is up
 A contrarian investor only invests in country funds

Q8: In general, rising interest rates cause bond prices to
 Rise
 Fall
 Remain the same
 Interest rates do not affect bond prices in any way

Q9: which of the following is false?
 Mutual funds are portfolios of stocks, bonds, and other investment instruments.
 Mutual funds can be sold any day at the market price
 Mutual funds spread the risks involved in investing because they buy into a good variety of stocks and bonds
 Mutual funds are a type of insurance policy

Q10: How is the price of a stock determined before it is listed?
 By the location of the company
 By the company's actual and potential earnings
 By the staff strength of the company
 By the number of years that it has been in existence

Q11: Where do Global Funds typically invest in?
 Mostly in emerging markets
 In all parts of the world including the Indian market
 In all parts of the world excluding the Indian market
 In all types of foreign investments, including stocks, bonds and real estate

Q12: What is one thing you can be certain of when you switch mutual funds frequently?
 You maximise your returns
 Your risks are spread out
 You will be able to catch the market timing
 You incur additional costs

Q13: What factors should you consider when you invest in a mutual fund?
 The fund's past performance.
 The entry, exit loads and Annual expense ratios
 The fund objective, the ability & experience of the fund manager in managing such funds.
 All of the above.

Q14: Which one of the following describes Rupee Cost Averaging'?
 The average cost of all the mutual funds in a portfolio
 A constant investment into a mutual fund at predetermined times such that the investor purchases more units when the price is low and less when it is high.
 The average returns of the mutual funds achieved over a period of time expressed as the annual compounded interest rate
 None of the above

Q15: What is asset allocation in building a portfolio?
 It is the total value of all the assets minus all the expenses in your portfolio
 It is to fully expose your portfolio to only equities
 It is to balance your portfolio between various types of mutual funds
 It is to weight your portfolio towards one type of mutual fund

Q16: If a mutual fund is invested in only one sector
 It is broadly diversified
 It has a high P/E ratio
 It is classified as low risk
 It is narrowly focused

Q17: If past performance is not an indicator of future results, should it be totally disregarded?
 Yes, since it does not help at all
 No, it can still be used to predict short-term results
 No, but it should be considered together with other non-quantitative factors
 No, because past performance is actually an indicator of future results

Q18: If Rahul is a conservative investor and is not a big fan of risk-taking, if given a choice between a sector fund and a balanced fund, which would you recommend him to invest in?
 The sector fund.
 The balanced fund.
 Both funds are suitable
 Both funds are only suitable for aggressive investors.

Q19: An investor seeking a fund that generally buys cheap stocks of well-run unnoticed companies would be best served by a fund manager with what kind of investing style?
 Value
 Money Market
 Growth
 Index

Q20: Mutual funds measure their performance against
 Rate of depreciation
 Interest rates
 A benchmark index
 Inflation rates

Q21: As your investment horizon approaches, You will,
 Switch your high risk mutual funds to low risk mutual funds.
 Accumulate more high risk mutual funds.
 Sell off all your mutual funds and just keep cash.
 Do nothing.

Q22: What do money market mutual funds invest in?
 These invest in stocks of companies
 These invest in bonds and other fixed income instruments
 These invest in a combination of stocks and bonds.
 These invest in short-term debt instruments comprising I Owe Yous of various kinds

Q23: If you have a short investment horizon of between 2 to 5 years,
 You should hold a greater proportion of less risky mutual funds
 You should hold a mixture of higher risk mutual funds, and lower risk mutual funds
 You can afford to have a greater proportion of higher risk mutual funds
 You should hold only narrowly focused mutual funds

Q24: what is an underlying fund?
 The main fund in which a feeder fund invests in.
 A fund which invests in the emerging markets
 A fund which invests only in derivatives
 A fund which has a contrarian investment approach

Q25: What is the difference between the bottom-up and top-down investment strategies in asset management?
 A bottom-up strategy focuses on growth while the top-down strategy focuses on value.
 A bottom-up strategy underweights the major world indices while the top-down strategy overweights the major world indices
 A bottom-up strategy focuses on diversification while a top-down strategy focuses on specialization.
 A bottom-up strategy focuses on a company's fundamentals while a top-down strategy focuses on the sector or industry and then searches for the companies within those sectors/industries to invest in.