These twelve are in the style of NISM Series V-C and weighted towards the numerical questions that carry 2 marks. Attempt each before reading the answer.
1. Unlisted shares with no balance sheet
How are the shares of an unlisted company valued if no audited balance sheet is available within nine months of the year end?
Answer: at zero. Unlisted equity is valued in good faith from the latest audited balance sheet; without one inside nine months (unless the accounting year has changed), the holding is marked down to nothing.
2. A bond with a put option
A six-year bond has a put option after two years. How is it valued for NAV?
Answer: at the higher of the value to maturity and the value to the put. Option-embedded securities are valued on yield-to-put or yield-to-call as well as yield-to-maturity, and a put favours the holder — hence the higher.
3. What PMS offers
A Portfolio Management Service offers a ______ portfolio to ______ investor.
Answer: customised, each. Three account types — discretionary, non-discretionary and advisory — and a minimum ticket of Rs 50 lakh.
4. FMPs
Which is true of a Fixed Maturity Plan?
Answer: it is a close-ended debt fund whose portfolio maturity is aligned with the scheme's tenure. Not an ETF, not open-ended, not an interval fund.
5. The no-transaction period
The "no transaction period" after an NFO closes is usually ______ days.
Answer: five. Bankers certify collections, the RTA reconciles, units are allotted — and the scheme is closed to transactions while that happens.
6. Simple return
Bought at NAV 24 on 6 April, sold at 21.80 on 25 July; risk-free rate 6.5%. What is the simple return?
Answer: −9.16%. (21.80 − 24) ÷ 24 = −0.0916. The risk-free rate is a distractor — it belongs in a Sharpe ratio, not a simple return.
7. Rupee return on an international fund
USD 15 million invested at Rs 46.67; the portfolio grows to USD 18 million with the rupee at Rs 45. Rupee return?
Answer: 15.71%. Cost 15 × 46.67 = Rs 700 million; value 18 × 45 = Rs 810 million; 110 ÷ 700 = 15.71%. The dollar return was 20%; the stronger rupee ate the difference.
8. IDCW taxation
How is income distributed by an equity mutual fund taxed in the investor's hands?
Answer: at the investor's applicable slab rate. Dividend distribution tax was abolished in 2020; IDCW is added to income.
9. Sharpe ratio
Scheme return 14%, risk-free 6%, standard deviation 20%. Sharpe ratio?
Answer: 0.40. (14 − 6) ÷ 20. Excess return per unit of total risk.
10. Treynor and when it matters
Same scheme, beta 1.2. Treynor ratio — and for which investor is it the right measure?
Answer: 6.67, for an investor whose portfolio is already diversified. (14 − 6) ÷ 1.2. Treynor divides by market risk only, which is all that matters at the margin of a diversified portfolio; Sharpe suits the investor for whom the scheme is the whole portfolio.
11. International investment by Indian funds
In which of these may an Indian mutual fund invest abroad — ADRs/GDRs, or foreign debt in countries without fully convertible currencies?
Answer: ADRs and GDRs only. Foreign debt is permitted only in countries with fully convertible currencies.
12. Who writes the intermediaries' code
Which body has framed the guidelines and code of conduct for mutual fund intermediaries?
Answer: AMFI, through AGNI — the AMFI Guidelines and Norms for Intermediaries — which SEBI has made a condition of distribution.
Scoring yourself
Count the numerical ones — 6, 7, 9 and 10 — separately. Those are the 2-mark questions in disguise, and in the real paper they are half the marks. A candidate who gets all eight theory questions and none of the four calculations has not passed; one who gets the four calculations and half the theory has.
Practise the full bank free — 340 V-C questions by unit, each with the working and a memory hook — then sit a 75-question timed mock.