NISM Series X-A (Investment Adviser Level 1): Mock Test 1

Mock Test: Focus on multiple-choice questions (MCQs) covering concepts, regulations, and case studies. Use mock tests for time management and reinforcing weaker areas, reviewing common question patterns.

NISM Series X-A: Mock Test 1

NISM Series X-A (Investment Advisor Level-1): Mock Test 1

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1. Which of the following is considered a "real asset"?

A. Corporate Bonds

B. Mutual Fund Units

C. Real Estate Property

D. Stock Certificates

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2. What is the primary objective of diversification in a portfolio?

A. Maximizing returns

B. Increasing liquidity

C. None of the above

D. Reducing overall risk

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3. Which of the following is NOT a feature of Exchange-Traded Funds (ETFs)?

A. ETFs generally have lower expense ratios than mutual funds

B. ETFs guarantee a fixed return on investment

C. ETFs have intraday liquidity

D. ETFs trade like stocks on an exchange

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4. Which of the following can help reduce credit risk in a bond portfolio?

A. Diversifying across multiple issuers

B. Investing only in equity

C. Investing only in long-term bonds

D. Holding all investments in one company

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5. What does SEBI stand for?

A. Securities and Exchange Board of India

B. Securities and Economic Bureau of India

C. Securities and Equity Board of India

D. Securities and Exchange Bureau of India

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6. What does risk profiling help determine in investment advisory?

A. The regulatory requirements applicable to a client

B. The client’s ability and willingness to take risks

C. The type of assets a client should invest in

D. The amount of tax a client will pay

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7. Which financial statement summarizes a company’s revenues and expenses over a period of time?

A. Cash Flow Statement

B. Profit and Loss Statement

C. Asset Allocation Statement

D. Balance Sheet

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8. What is the lock-in period for an Equity-Linked Savings Scheme (ELSS)?

A. 1 year

B. 5 years

C. 3 years

D. 7 years

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9. . What is the primary goal of retirement planning?

A. Building an emergency fund

B. Ensuring sufficient savings for post-retirement years

C. Investing in equities

D. Purchasing real estate

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10. Which of the following entities regulates the mutual fund industry in India?

A. IRDA

B. RBI

C. AMFI

D. SEBI

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11. Which of the following is an example of an illiquid asset?

A. Liquid Mutual Funds

B. Real Estate

C. Gold

D. Government Bonds

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12. The process of balancing the risk-reward profile of a portfolio by periodically adjusting the weight of asset classes is known as:

A. Averaging

B. Rebalancing

C. Compounding

D. Hedging

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13. Which ratio is used to assess the risk-adjusted return of a mutual fund?

A. Price-to-Earnings Ratio

B. Sharpe Ratio

C. Current Ratio

D. Dividend Yield

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14. Which of the following is NOT a tax-free income in India?

A. Interest on Public Provident Fund (PPF)

B. Income from fixed deposits

C. Dividend Income from Equity Mutual Funds

D. Agricultural Income

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15. Which of the following instruments is issued by the Government of India and has a maturity of more than one year?

A. Commercial Paper

B. G-Sec (Government Security)

C. Treasury Bill

D. Certificate of Deposit

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16. What is a key feature of "tax-free bonds"?

A. They offer high liquidity

B. They can be traded on stock exchanges daily

C. The interest income from the bonds is exempt from tax

D. They are issued only by private companies

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17. What does "liquidity risk" refer to?

A. The risk of fluctuating interest rates

B. The risk of capital loss due to inflation

C. The risk that an asset cannot be sold quickly without incurring a loss

D. The risk that an investment will not generate returns

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18. What is the primary objective of a "balanced mutual fund"?

A. To invest only in equities

B. To maintain a balance between equity and debt investments

C. To invest only in debt instruments

D. To invest in real estate

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19. Which of the following is not considered a fixed-income security?

A. Corporate Bonds

B. Government Securities

C. Equity Shares

D. Debentures

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20. Under which section of the Income Tax Act is interest earned on savings bank accounts exempt up to ₹10,000?

A. Section 87A

B. Section 24

C. Section 80TTA

D. Section 80C

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21. Under SEBI guidelines, an Investment Adviser must act in which capacity?

A. Agent

B. Trader

C. Broker

D. Fiduciary

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22. The "expense ratio" in a mutual fund refers to:

A. The annual fee charged by the fund for managing the portfolio

B. The annual returns generated by the fund

C. The total sales charges applicable on the purchase of units

D. The percentage of total assets invested in equities

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23. Which type of mutual fund primarily invests in debt instruments?

A. Balanced Fund

B. Sector Fund

C. Equity Fund

D. Debt Fund

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24. What does the term "systematic investment plan" (SIP) refer to?

A. A method of withdrawing funds periodically from a mutual fund

B. An insurance policy with fixed returns

C. Periodic investment of a fixed amount in mutual funds

D. A fixed-term deposit in banks

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25. Which of the following statements is true about diversification?

A. Diversification reduces regulatory risk

B. Diversification helps reduce unsystematic risk

C. Diversification guarantees higher returns

D. Diversification eliminates all types of risk

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26. An individual seeking regular income with low risk should consider investing in:

A. Equity Shares

B. Debt Mutual Funds

C. Fixed Deposits

D. Corporate Bonds

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27. Which of the following is a key role of an Investment Adviser?

A. Acting as a mutual fund distributor

B. Offering personalized financial advice based on client’s risk profile

C. Market trading on behalf of the client

D. Providing legal advice on all matters

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28. Which of the following is considered a "direct tax"?

A. Income Tax

B. Goods and Services Tax (GST)

C. Customs Duty

D. Excise Duty

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29. Which of the following is true regarding "inflation risk"?

A. It refers to the default risk in corporate bonds

B. It refers to the risk that inflation will reduce purchasing power

C. It refers to the risk of capital loss in equities

D. It refers to the volatility in bond prices

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30. A client’s total asset allocation should consider which of the following factors?

A. Investment time horizon

B. Risk tolerance

C. All of the above

D. Financial goals

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31. A client’s risk tolerance is assessed using which of the following methods?

A. Financial goals assessment

B. Tax bracket analysis

C. Historical market data

D. A detailed risk profiling questionnaire

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32. What does a client’s "risk capacity" indicate?

A. The client’s financial ability to absorb losses

B. The client’s preference for investing in equity

C. The tax implications of investments

D. The client's emotional ability to take risks

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33. What is the minimum validity period of a financial plan recommended by SEBI?

A. 3 years

B. 5 years

C. 6 months

D. 1 year

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34. Which of the following is NOT a benefit of investing in mutual funds?

A. Diversification

B. Guaranteed returns

C. Liquidity

D. Professional management

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35. Which financial ratio is used to measure the ability of a company to meet its short-term obligations?

A. Return on Equity (ROE)

B. Debt-to-Equity Ratio

C. Price-to-Earnings Ratio (P/E)

D. Current Ratio

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36. Which of the following is an example of an equity-related product?

A. Public Provident Fund (PPF)

B. Fixed Deposits

C. Index Funds

D. Government Bonds

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37. Which of the following is true regarding systematic risk?

A. It is specific to individual assets

B. It affects the entire market

C. It has no impact on equity markets

D. It can be eliminated through diversification

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38. Which of the following is not a category of debt mutual funds?

A. Dynamic Bond Fund

B. Gilt Fund

C. Credit Risk Fund

D. Sector Fund

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39. A bond issued at a discount and redeemed at face value is called:

A. Zero-Coupon Bond

B. Perpetual Bond

C. Convertible Bond

D. Callable Bond

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40. Which of the following is an example of an actively managed fund?

A. Large Cap Mutual Fund

B. Index Fund

C. Exchange-Traded Fund (ETF)

D. Liquid Fund

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41. Which of the following investment products offers tax benefits under Section 80C of the Income Tax Act?

A. Equity-Linked Savings Scheme (ELSS)

B. Corporate Bonds

C. Treasury Bills

D. Fixed Deposit

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42. Which of the following is considered a high-risk, high-return investment?

A. Bonds

B. Debt Mutual Funds

C. Fixed Deposits

D. Equity Shares

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43. Which type of mutual fund is best suited for short-term investment goals?

A. Liquid Funds

B. Equity Funds

C. Hybrid Funds

D. Debt Funds

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44. Which of the following is an example of a derivative product?

A. Savings Account

B. Mutual Fund

C. Futures Contract

D. Fixed Deposit

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45. Which of the following is true about "interest rate risk"?

A. It is a type of unsystematic risk

B. It has no effect on debt mutual funds

C. It primarily affects equity investments

D. It refers to the risk that bond prices will fall when interest rates rise

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46. The concept of 'asset allocation' refers to:

A. Investing in a single asset class

B. Minimizing investment in risky assets

C. Dividing investments among different asset classes

D. Investing only in government securities

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47. In which of the following scenarios would a "term insurance policy" be most appropriate?

A. To invest in stocks

B. To provide financial security to dependents in case of the policyholder's death

C. To create a fixed income stream for retirement

D. To save for retirement

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48. The maximum tax deduction available under Section 80C is:

A. ₹2,50,000

B. ₹2,00,000

C. ₹1,50,000

D. ₹1,00,000

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49. What does the term "alpha" refer to in portfolio performance evaluation?

A. The excess return of a portfolio over its benchmark

B. A measure of portfolio volatility

C. The difference between expected and actual returns

D. The return on the portfolio compared to the market

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50. Which of the following is a goal of "estate planning"?

A. Buying real estate for investment purposes

B. Management of personal debt

C. Transfer of wealth to heirs in a tax-efficient manner

D. Tax saving on salary income

Your score is

The average score is 53%

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