MUTUAL FUNDS – PRACTICE QUESTIONS:

Q:1. ______ fund managers try to replicate the

performance of a benchmark index, by
Replicating the weights of its constituent stocks.
a. Active
b. Passive
c. Neutral
d. aggressive

Q:2. A portfolio comprises of two stocks A and B.

Stock A gives a return of 8%and stock B gives a
return of 7%. Stock A has a weight of 60% in the
portfolio. What is the portfolio return?
(a) 8.6%
(b) 10.6%
(c) 9.6%
(d) 7.6%
Q:3. A ________, is a time deposit with a bank
with a specified interest rate.
(a) certificate of deposit (CD)
(b) commercial paper (CP)
(c) T-Note
(d) T-Bill
Q:4. ______ are a fixed income security.
(a) Equities
(b) Forex
(c) Derivatives
(d) Bonds
Q:5. In a ZERO COUPON Bond the ____ is paid
at the maturity date.
(a) face value
(b) discounted value
(c) compounded value
(d) present value

Q:6. In investment decisions, _______ refers to

the marketability of the asset.
(a) value
(b) profitability
(c) price
(d) liquidity
Q:7. The ______ refers to the length of time for
which an investor expects to remain
invested in a particular security or portfolio,
before realizing the returns.
(a) investment horizon
(b) credit cycle horizon
(c) duration horizon
(d) constraint horizon

Q:8. A portfolio comprises of two stocks A and B.

Stock A gives a return of 14% and stock B gives
a return of 1%. Stock A has a weight of 60% in
the portfolio. What is the
portfolio return?
(a) 9.8%
(b) 8.8%
(c) 11.8%
(d) 10.8%
Q:9. Average Return of an investor's portfolio is
10%. The risk free return for the market is 8%.
The Standard deviation of the portfolio is 4%.
The Beta of the investor's portfolio is 1.2
Calculate the Treynor Ratio.
(a) 4.67
(b) 8.67
(c) 1.67
(d) 6.67
10. Which of the following is true?
a. All mutual fund units need to be in physical form
b. All mutual fund units need to be in demat form
c. Investor has the option of choosing between physical and
demat form
d. Transaction in stock exchange only happens in physical
units
11. Which of the following is required for online trading in
Units in a stock exchange
a. Online trading account
b. Demat account
c. Both (a) and (b)
d. (a), (b) and internet‐enabled bank account

12. The purchase of a share in one market and the

simultaneous sale in a different market to benefit from price
differentials is known as ____________.
(a) Mortgage
(b) Arbitrage
(c) Hedging
(d) Speculation
13. Which of these investments is seen as riskiest?
a. Investment with low standard deviation
b. Investment with high credit rating
c. Investment with low market volatility
d. Investment with high beta

14. The benefits of diversification in a portfolio is seen in the

form of
a. Eliminating risk
b. Maximising returns
c. Guaranteeing returns
d. Enhancing risk adjusted returns
15. A Close-ended mutual fund has a fixed
a. NAV
b. Fund size
c. Rate of return
d. Number of distributors
16. Debt funds target
a. Low risk and stable income
b. Protection of principal
c. High growth with risk
d. Long term capital appreciation
17. Net Asset Value of a mutual fund scheme is defined
as the scheme’s
a. Assets minus liabilities
b. Assets per unit
c. Assets minus liabilities per unit
d. Assets plus liabilities per unit
 18. The ratio which divides risk premium by standard
deviation is
a. Sharpe ratio
b. Treynor ratio
c. Bogle ratio
d. Jensen ratio
19. Systematic Investment Plan(SIP) is best example of
a. Rupee cost averaging
b. Value averaging
c. Buy & hold.
d. Monthly income scheme
20. The concept of tracking error is applied to measure
performance in case of
a. Tax savings scheme
b. Real estate funds
c. Equity funds
d. Index funds

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