NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)

CERTIFICATION EXAM – PRACTICE TEST NO. 3

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 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

PRACTICE TEST NO. 3

Question 1 An individual who prefers to hold income-oriented assets is a

(a) Aggressive investor
(b) Moderate Investor
(c) Conservative investor
(d) Passive Investor

Question 2 What is the age limit to invest in the Senior Citizens Saving Scheme in
case of an individual retiring on superannuation or otherwise, or under
VRS or special VRS?
(a) 60
(b) 75
(c) 80
(d) 55

Correct Answer 1 Conservative investor

Answer A conservative investor likes income and therefore, holds more of income-
Explanation oriented asset classes.

Correct Answer 2 55
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 3 Income which accrues or arises inside India from a business controlled
from India is taxable in case of : -
(a) Residents
(b) Resident but Not Ordinarily Resident
(c) Both Ordinarily resident and not ordinarily resident
(d) All the Assessees

Question 4 Gross Annual Value of the property is Rs.1,20,000 and the Municipal
Taxes Accrued are Rs.10,000. What is the Net Annual Value of the
property?
(a) 1,30,000
(b) 1,20,000
(c) 1,10,000
(d) 70,000

Correct Answer 3 All the Assessees

Answer Income which accrues or arises in India is taxable for all assessees
Explanation

Correct Answer 4 1,20,000

Answer Gross Annual Value 1,20,000

Explanation Less: Municipal Taxes(Paid) Nil
Net Annual Value 1,20,000
Municipal taxes are deducted only if they are actually paid during the year.
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 5 Insurance company is able to offer protection because of –

(a) Few Individuals with similar exposure
(b) An individual with a distinct exposure
(c) Group of individuals with similar exposure
(d) Group of individuals with different exposure

Question 6 What is the maximum tenure in a scheme of reverse mortgage?

(a) 20 years
(b) 15 years
(c) 10 years
(d) 5 years

Correct Answer 5 Group of individuals with similar exposure

Correct Answer 6 20 years

 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 7 Asset allocation that builds purely on the needs and preferences of the
individual over the long-term is called __________.
(a) Dynamic Asset Allocation
(b) Strategic Asset Allocation
(c) Tactical Asset Allocation
(d) Periodic Asset Allocation

Question 8 Subject to certain conditions, persons working in the ________ can make
an oral Will.
(a) Refinery Sector
(b) Armed Forces
(c) Airline Industry
(d) Shipping Services

Correct Answer 7 Strategic Asset Allocation

Answer Asset allocation that builds purely on the needs and preferences of the
Explanation individual over the long-term is called strategic asset allocation (SAA).

Correct Answer 8 Armed Forces

 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 9 The maximum monthly payments under RML (Reverse Mortgage Loan)
have been capped at Rs.________..
(a) 10000
(b) 50000
(c) 25000
(d) 35000

Question 10 In which of the annuities, the rate of payout is based on the return from
underlying assets?
(a) Immediate Annuity
(b) Variable Annuity
(c) Fixed Annuity
(d) Implied Annuity

Correct Answer 9 50000

Correct Answer 10 Variable Annuity

Answer Variable returns are based on an underlying asset or index whereas it is not the
Explanation case with fixed annuity.
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 11 When a put option is bought

(a) One receives premium and has a right to buy
(b) One pays premium and has an obligation to buy
(c) One pays premium and has a right to sell
(d) One receives premium and has an obligation to sell

Question 12 SEBI has developed a centralized web based system for lodging and
tracking investor complaints which is known as ______.
(a) SCORES
(b) CDSL
(c) IDEAS
(d) NOW

Correct Answer 11 One pays premium and has a right to sell

Correct Answer 12 SCORES

Answer SCORES - SEBI Complaint Redress System

Explanation
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 13 If a persons total income does not exceed the basic exemption limit, is he
liable to file return of income under section 139(1)?
(a) Yes
(b) No

Question 14 An ULIP is a -
(a) Life Insurance with annuities
(b) Form of mutual fund investment
(c) Product which combines insurance with investment
(d) Period Certain Life Insurance

Correct Answer 13 No

Answer Under section 139(1), every person has to furnish a return of his income on or
Explanation before the due date, if his total income exceeds the basic exemption limit.

Correct Answer 14 Product which combines insurance with investment

Answer A ULIP is basically a combination of insurance as well as investment. A part

Explanation of the premium paid is utilized to provide insurance cover to the policy holder
while the remaining portion is invested in various equity and debt schemes.
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 15 Mr.Roy sold a residential house property for a consideration of 37 lakhs

on 25th April 2013. The indexed cost of acquisition of the property is 18
lakhs. Mr. Roy purchases another residential property for Rs. 30 lakhs.
What is amount of exemption under section 54?
(a) 18 lakhs
(b) 30 lakhs
(c) 19 lakhs
(d) 37 lakhs

Question 16 You had advised your client to reduce his equity exposure but the Nifty
doubled after that and the client is not happy. What might be the most
appropriate action to be taken immediately ?
(a) Further reduce his equity exposure as the markets are over heated
(b) Change the asset allocation and increase the equity exposure as the market is
in a bull run.
(c) Help the client understand the logic of asset allocation
(d) Apologise for wrongly predicting the stock markets

Correct Answer 15 19 lakhs

Answer Capital Gains = Sales Consideration – Indexed cost of acquisition

Explanation = 37 lakhs – 18 lakhs
= 19 lakhs

Since the amount is re-invested in a residential property, Exemption under

section 54 cannot exceed the gain amount of 19 lakhs.

Correct Answer 16 Help the client understand the logic of asset allocation

Answer Proper asset allocation always proves beneficial in the long run.
Explanation
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 17 The amount of money required in Goal Value setting is a function of-
(a) Current value of the goal or expense
(b) Time period after which the goal will be achieved
(c) Rate of inflation at which the cost of the expense is expected to go up
(d) All of the Above

Question 18 In which of the following properties, Mr. X(62 years old) can claim a
reverse mortgage loan-
(a) Property situated in Singapore held by Mr.X
(b) Property held in India by Mr.X
(c) Property held in India by Mr. Xs son
(d) Property held in India by Mr.Xs wife

Correct Answer 17 All of the Above

Correct Answer 18 Property held in India by Mr.X

Answer Reverse Mortgage loan can be taken on a self acquired and self occupied
Explanation house situated in India.
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 19 The inflows from a Reverse Mortgage contract are taxable .

(a) TRUE
(b) FALSE

Question 20 What is the last date for filing of return for a partnership firm covered by
Audit?
(a) 30th July
(b) 31st July
(c) 30th September
(d) 31st August

Correct Answer 19 FALSE

Answer As per section 10(43) inflows from a reverse mortgage contract are exempt.
Explanation

Correct Answer 20 30th September

Answer A partnership firm covered by audit will have its last date for filing of return
Explanation on 30th September.
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 21 As per section ____ of the ITA, every person shall furnish on or before
the due date, a return of income in prescribed form and manner.
(a) 139(1)
(b) 139 (2)
(c) 139 (3)
(d) 139 (4)

Question 22 ______ is a closed end fund that invests in debt and money market
instruments of the same maturity as the stated maturity of the plan.
(a) Fixed Term Plan
(b) Fixed Maturity Plan
(c) Fixed Investment Plan
(d) Fixed Expiry Plan

Correct Answer 21 139(1)

Answer As per section 139(1) of the ITA, every person shall furnish on or before the
Explanation due date, a return of income in prescribed form and manner.

Correct Answer 22 Fixed Maturity Plan

Answer Fixed Maturity Plan is a closed end fund that invests in debt and money
Explanation market instruments of the same maturity as the stated maturity of the plan.
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 23 Unrealised rent has to be deducted while determining the Net Annual
Value of a property ?
(a) FALSE
(b) TRUE

Question 24 A NRI can invest in the Senior Citizen’s Saving Scheme(SCSS) - True or
False ?
(a) FALSE
(b) TRUE

Correct Answer 23 TRUE

Correct Answer 24 FALSE

Answer NRIs, PIOs and HUF are not eligible to invest in this Senior Citizens’ Saving
Explanation Scheme (SCSS).
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 25 Mr. Jai goes out of India for the first time on 31st May , 2012 to meet his
son and comes back on 1st April, 2013. What is the residential of Mr. Jai
for the financial year 2012-13?
(a) Non Resident
(b) Resident
(c) Resident and ordinarily resident
(d) Resident and not ordinarily resident

Question 26 A government security issued at a fixed rate is subject to –

(a) Interest Rate Risk
(b) Counterparty Risk
(c) Credit Risk
(d) Default Risk

Correct Answer 25 Resident and ordinarily resident

Answer BASIC CONDITIONS TO TEST AS TO WHEN AN INDIVIDUAL IS
Explanation RESIDENT IN INDIA - Under section 6(1) an individual is said to be resident
in Ordinarily resident India in any previous year, if he satisfies at least one of
the following basic conditions -
Basic condition (a) He is in India in the previous year for a period of 182 days
or more
Basic condition (b) He is in India for a period of 60 days or more during the
previous year and 365 days or more during 4 years immediately preceding the
previous year.
ADDITIONAL CONDITIONS TO TEST AS TO WHEN A RESIDENT
INDIVIDUAL IS ORDINARILY RESIDENT IN INDIA –
Under section 6(6),
a resident individual is treated as “resident and ordinarily resident” in India if
he
satisfies the following two additional conditions —
Additional condition
(i) He has been resident in India in at least 2 out of 10 previous
years [according to basic condition noted above] immediately preceding the
relevant previous year.
(ii) He has been in India for a period of 730 days or more during 7 years
immediately preceeding the relevant previous year.
In brief it can be said that an individual becomes resident and ordinarily
resident
in India if he satisfies at least one of the basic conditions [i.e., (a) or (b)] and
the
two additional conditions [i.e., (i) and (ii)].

Correct Answer 26 Interest Rate Risk

Answer Interest rate risk refers to the risk that bond prices will fall in response to
Explanation rising interest rates, and rise in response to declining interest rates.
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 27 A new bond maturing in 10 years is issued at Rs 100, coupon of 9%

payable annually. If the interest rates fall to 8% after a year, the investors
will face a ___________.
(a) Credit Risk
(b) Default Risk
(c) Reinvestment Risk
(d) Repricing Risk

Question 28 Which of the following instruments under Section 80C enjoys an EEE
status?
(a) ELSS
(b) Debt Mutual Funds
(c) PPF
(d) SCSS

Correct Answer 27 Reinvestment Risk

Correct Answer 28 PPF

Answer EEE status means Exempt-Exempt-Exempt status where withdrawals are not
Explanation taxed and interest received is also not taxed.
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

Question 29 The long term goal of an investor is to build a corpus that is adequate to
serve his income needs after retirement. The portfolio when constructed,
should have a higher allocation to
(a) Debt
(b) Cash equivalents
(c) Equity
(d) Govt Bonds

Question 30 Which of the following is not allowed as deduction under section 80C?
(a) Subscription to the NSC
(b) Subscription to units of mutual fund Equity Linked Savings Scheme.
(c) Life Insurance Policy
(d) Mediclaim

Correct Answer 29 Equity

Answer At the accumulation stage for retirement, equity allocation should be higher
Explanation because the individual has a higher risk taking ability.

Correct Answer 30 Mediclaim

Answer Mediclaim is allowed as deduction under section 80D.

Explanation
 NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3

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NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION EXAM – PRACTICE TEST NO. 3