AS 05 (iv) - Finance and Investment Mock Test 15
This section covers key concepts related to bonds, mutual funds, post office savings schemes, retirement planning, options trading, KYC requirements, asset allocation, and capital market participants. It explains the significance of reinvested interest in long-term bond returns, borrowing limits for mutual funds, features of the Post Office Recurring Deposit (RD) account, eligibility for the Senior Citizen Savings Scheme (SCSS), Fixed Term Plans (FTPs), daily NAV disclosure requirements, the concept of squaring off an options position, Aadhaar as the primary KYC document for APY enrollment, objectives of asset allocation, and the role of speculators in capital markets.
1. For long-term bonds, the interest-on-interest component of the total realized yield may account for:
A. Less than 10% of the total return
B. About 25% of the total return
C. More than three-fourths of the bond's total return
D. Exactly 50% of the total return
E. None of the total return
2. What is the maximum amount a Mutual Fund can borrow, and for what purpose?
A. Up to 50% of net assets for any purpose
B. Up to 10% of net assets for portfolio management
C. Up to 20% of net assets for a maximum period of 6 months; only to meet temporary liquidity requirements such as dividend payments or redemption obligations, and not as a permanent source of funds
D. Up to 30% of net assets for investment purposes
E. Up to 5% of net assets for emergency expenses
3. What is the maturity period of a Post Office Recurring Deposit (RD) account?
A. 3 years
B. 5 years, which can be continued for another 5 years on a year-to-year basis
C. 10 years
D. 7 years
E. 2 years
4. Who is eligible to open a Senior Citizen Savings Scheme (SCSS) account?
A. Any individual above 21 years of age
B. Any individual above 18 years of age
C. An individual aged 60 years or above, or an individual aged 55 years or above who has retired on superannuation or under a Voluntary Retirement Scheme (VRS), subject to applicable conditions
D. Only retired Central Government employees
E. Any senior citizen above 50 years of age
5. What is a 'Fixed Term Plan (FTP)' series in Mutual Funds?
A. A long-term open-ended equity fund
B. A close-ended scheme where the AMC issues a fixed number of units only once for each series during the initial offer period; generally for shorter tenures and often used as an alternative to bank deposits
C. A fund that invests only in fixed-interest bonds
D. A scheme with guaranteed fixed returns
E. A type of Unit Linked Insurance Plan (ULIP)
6. How frequently must all Mutual Funds disclose their NAV?
A. Monthly
B. Weekly
C. Daily, by publishing the NAV on the AMFI website by 8:00 p.m.; open-ended schemes must compute and disclose NAV every business day
D. Quarterly
E. Only when there is a change of more than 1%
7. What does it mean to 'Square Off' an options position?
A. Exercising the option and taking delivery of the underlying asset
B. Closing an existing position by taking an exactly opposite position with the same strike price and expiry date
C. Converting an options position into a futures position
D. Depositing additional margin with the broker
E. Buying additional options contracts of the same type
8. What document serves as the primary KYC document for APY enrollment?
A. Voter ID
B. Driving Licence
C. Aadhaar Card
D. Passport
E. PAN Card
9. The main objective of asset allocation is to:
A. Maximize absolute returns regardless of risk
B. Maximize return for a chosen level of risk, or minimize risk for a desired level of expected return
C. Invest only in government-backed securities
D. Avoid all forms of market risk
E. Generate fixed income only through fixed deposits
10. Speculators in the Capital Market are:
A. Investors who only buy government bonds
B. Market participants who seek to profit from anticipated short-term price movements in stocks, commodities, or financial instruments through buying and selling
C. Long-term investors who hold stocks for several decades
D. Market makers who provide liquidity to exchanges
E. Regulators responsible for supervising financial markets
