Sample Questions

NISM-Series-5B: Mutual Fund Foundation Mock Tests — 5 random MCQs with answers & explanations

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These 5 questions are randomly selected (standard MCQs only, not case-based).

Q1 Who has the custody of the assets of the mutual fund scheme?

  • A. The Asset Management Company (AMC).
  • B. The Registrar & Transfer Agent (RTA).
  • C. The Custodian. Correct Answer
  • D. The Sponsors.
Explanation:
A Custodian is appointed by the Trustees to hold the assets (securities, gold, etc.) of the mutual fund scheme.

Marks: 1

Q2 What must employees of institutions distributing mutual funds obtain from AMFI?

  • A. An AMFI Registration Number (ARN).
  • B. An Employee Unique Identification Number (EUIN). Correct Answer
  • C. A Common Account Number (CAN).
  • D. Both ARN and EUIN.
Explanation:
Employees working under an institutional distributor's ARN need to obtain an Employee Unique Identification Number (EUIN) from AMFI.

Marks: 1

Q3 What are the two main types of risks that investments face?

  • A. Short-term and long-term risks.
  • B. Market/systematic risk and company specific/unsystematic risk. Correct Answer
  • C. Credit risk and liquidity risk.
  • D. Interest rate risk and foreign currency risk.
Explanation:
Risks are broadly categorized into systematic (market-wide, non-diversifiable) and unsystematic (company-specific, diversifiable).

Marks: 1

Q4 What are two ways to mitigate the risks associated with equity investing?

  • A. Investing only in large-cap companies and avoiding small-cap.
  • B. Investing in guaranteed return products and diversifying across asset classes.
  • C. Investing in a diversified portfolio and staying invested for the long term. Correct Answer
  • D. Predicting market movements and timing entry/exit points.
Explanation:
Diversification spreads risk across companies, and staying invested long-term helps navigate market volatility.

Marks: 1

Q5 Under the tax regime introduced in 2020, how is dividend income from mutual funds treated?

  • A. It remains tax-free in the hands of the investor.
  • B. It is subject to Dividend Distribution Tax by the fund.
  • C. It is added to the taxable income of the assessee for the year and taxed at applicable rates. Correct Answer
  • D. It is taxed at a flat rate of 10%.
Explanation:
The 2020 budget abolished Dividend Distribution Tax and made dividends taxable income in the hands of the recipient investor.

Marks: 1

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