Unit study guide · NISM Series V-D
Investor Services
10 questions in this unit
What this unit covers
- For direct and regular plans of the same scheme, which difference is particularly relevant to investors?
- Samar invests ₹6,000 on each of three dates at applicable NAVs of ₹20, ₹15 and ₹30. Ignore charges and taxes. What is the average acquisition cost per unit across all three purchases? Assumptions: Each stated NAV applies to that purchase. No deductions are made.
- An investor’s systematic withdrawal pays ₹5,000 at an applicable NAV of ₹25 per unit, with no exit load, tax or other deduction. How many units are redeemed? Assumptions: The cash withdrawal has no exit load, tax or other deduction.
- A valid systematic transfer plan moves money periodically from a source mutual-fund scheme to a destination scheme. Which description best explains each transfer?
- An investor holds 1,000 units. Immediately before an IDCW payout, NAV is ₹30. The scheme pays ₹2 per unit and there is no other asset-price movement, cost or tax. What is the investor’s combined unit value and cash immediately after the payout? Assumptions: No movement or deduction other than the stated distribution occurs.
- What is the central purpose of the know-your-client process when opening or maintaining a mutual-fund investment relationship?
- An investor-service team receives an email asking to change a folio’s redemption bank account. Under the firm’s stated control, the request must be verified using the registered contact and prescribed supporting evidence. The email asks staff to skip those checks because the request is urgent. What should staff do? Assumptions: This question applies an expressly supplied internal control and does not assert a statutory documentation list.
- For this fictional transaction exercise, a fund’s stated rule assigns the day’s NAV only when both a valid application and usable funds arrive by 3:00 p.m.. Otherwise the next business day’s NAV applies once both conditions are met. A valid application arrives Monday at 2:45 p.m. and usable funds at 3:15 p.m. Monday’s NAV is ₹20 and Tuesday’s is ₹22. Both are business days. Which NAV applies? Assumptions: The 3:00 p.m. rule is supplied solely for this exercise. Actual applicable-NAV rules must be checked for the scheme and transaction type.
- A folio was opened for a minor under a guardian, and the investor has now reached majority. What is the most appropriate service approach before relying on the old operating arrangement?
- An investor holds 1,000 units at a pre-distribution NAV of ₹25. The scheme distributes ₹2 per unit and immediately reinvests the full distribution at the ex-distribution NAV. No market movement, tax or charge occurs. What is the total unit holding after reinvestment, rounded to two decimals? Assumptions: The full distribution is reinvested at the ex-distribution NAV with no tax, charge or market movement.
Key ideas
From the practice bank · 1
For direct and regular plans of the same scheme, which difference is particularly relevant to investors?
A direct plan excludes distributor expenses, so its expense ratio differs from that of the regular plan. Investors should also consider their need for support and their ability to select and monitor investments. Remember: Compare plan costs and service needs without treating NAV as a bargain indicator.
Hint Focus on distribution expenses rather than the nominal price of a unit.
V-D-039From the practice bank · 2
Samar invests ₹6,000 on each of three dates at applicable NAVs of ₹20, ₹15 and ₹30. Ignore charges and taxes. What is the average acquisition cost per unit across all three purchases? Assumptions: Each stated NAV applies to that purchase. No deductions are made.
The purchases create 300, 400 and 200 units, for a total of 900. Average cost is ₹18,000/900 = ₹20 per unit. Periodic investing does not guarantee a profit. Remember: The average cost of equal-amount investments is quantity-weighted through the units acquired.
Hint Find units bought on each date, add them, and divide total investment by total units.
V-D-040From the practice bank · 3
An investor’s systematic withdrawal pays ₹5,000 at an applicable NAV of ₹25 per unit, with no exit load, tax or other deduction. How many units are redeemed? Assumptions: The cash withdrawal has no exit load, tax or other deduction.
Units redeemed = ₹5,000/₹25 = 200. The investor’s remaining unit balance falls by that amount. Remember: An SWP is a withdrawal mechanism and can reduce invested capital.
Hint Divide the required cash amount by the applicable value of one unit.
V-D-041From the practice bank · 4
A valid systematic transfer plan moves money periodically from a source mutual-fund scheme to a destination scheme. Which description best explains each transfer?
An STP involves an outflow through redemption in the source and investment in the destination. Applicable loads, tax consequences and transaction rules should be considered for the actual transfer. Remember: Automation does not remove the economic nature of the underlying transactions.
Hint Treat the two schemes as separate investments with separate unit balances.
V-D-042From the practice bank · 5
An investor holds 1,000 units. Immediately before an IDCW payout, NAV is ₹30. The scheme pays ₹2 per unit and there is no other asset-price movement, cost or tax. What is the investor’s combined unit value and cash immediately after the payout? Assumptions: No movement or deduction other than the stated distribution occurs.
NAV falls to ₹28 under the stated assumptions. The 1,000 units are then worth ₹28,000, and adding ₹2,000 cash leaves total wealth of ₹30,000. Remember: A distribution is not additional wealth created merely by paying it out.
Hint The distribution moves value out of the scheme into the investor’s cash balance.
V-D-043From the practice bank · 6
What is the central purpose of the know-your-client process when opening or maintaining a mutual-fund investment relationship?
KYC supports identification and verification using the information and documents required for the investor category. It is distinct from selecting the appropriate investment or promising returns. Remember: Identity checks and investment suitability are complementary controls.
Hint Identify the client before processing a relationship or transaction.
V-D-044From the practice bank · 7
An investor-service team receives an email asking to change a folio’s redemption bank account. Under the firm’s stated control, the request must be verified using the registered contact and prescribed supporting evidence. The email asks staff to skip those checks because the request is urgent. What should staff do? Assumptions: This question applies an expressly supplied internal control and does not assert a statutory documentation list.
Staff should follow the stated bank-change process and verify the authority for the request. The controls help reduce the risk of directing redemption money to an unauthorised account. Remember: Sensitive changes require verified authority, even under time pressure.
Hint The verification channel should not depend only on unverified information in the request.
V-D-045From the practice bank · 8
For this fictional transaction exercise, a fund’s stated rule assigns the day’s NAV only when both a valid application and usable funds arrive by 3:00 p.m.. Otherwise the next business day’s NAV applies once both conditions are met. A valid application arrives Monday at 2:45 p.m. and usable funds at 3:15 p.m. Monday’s NAV is ₹20 and Tuesday’s is ₹22. Both are business days. Which NAV applies? Assumptions: The 3:00 p.m. rule is supplied solely for this exercise. Actual applicable-NAV rules must be checked for the scheme and transaction type.
The application meets the Monday cut-off, but usable funds do not. Under the rule supplied for the exercise, Tuesday’s ₹22 NAV applies. Remember: A transaction can depend on more than the timestamp of the application.
Hint Test the application condition and the usable-funds condition separately.
V-D-046From the practice bank · 9
A folio was opened for a minor under a guardian, and the investor has now reached majority. What is the most appropriate service approach before relying on the old operating arrangement?
The service team should follow the process applicable when a minor becomes an adult. Updating the records and authority avoids treating the former guardian arrangement as automatically sufficient. Remember: Maintain accurate investor status and operating instructions without losing transaction history.
Hint A change in legal status can require changes to who operates the folio and how.
V-D-047From the practice bank · 10
An investor holds 1,000 units at a pre-distribution NAV of ₹25. The scheme distributes ₹2 per unit and immediately reinvests the full distribution at the ex-distribution NAV. No market movement, tax or charge occurs. What is the total unit holding after reinvestment, rounded to two decimals? Assumptions: The full distribution is reinvested at the ex-distribution NAV with no tax, charge or market movement.
The ex-distribution NAV is ₹25 − ₹2 = ₹23. Reinvesting ₹2,000 buys 86.9565 units, bringing the total to 1,086.96 units. Total value remains ₹25,000 before rounding. Remember: Reinvestment changes the number of units, while the payout itself does not create wealth.
Hint First reduce NAV by the distribution, then divide the distribution cash by that new NAV.
V-D-048