1.

As per the SEBI PMS Regulations 2020 the agreement between the portfolio manager and the investor
should include the investment approach. An investment approach is a broad outlay of the type of securities
and permissible instruments to be invested in by the portfolio manager for the investor, taking into account
factors specific to investor and securities. It should also include the type of instruments and proportion of
exposure.
2. Cyclical industries rise and fall and very closely follow the general economic activity in comparison to other
industries.
3. The SEBI (Mutual Funds) Regulations came in the year: 1996
4. Non-discretionary portfolio manager manages the funds in accordance with the directions of the client.
5. Paid-up capital & Free Reserves for Year prior to the preceding year of current year, Preceding year, Current
Year – Preceding two years and current year - Application for a portfolio manager
6. The portfolio manager shall not deploy the clients' funds in bill discounting, badla financing or for the
purpose of lending or place ment with corporate or non-corporate bodies
7. The code of conduct shall specify the period, which in any event shall not be less than six months, within
which a designated person who is a connected person of the listed company and is permitted to trade in the
securities of such listed company, shall not execute a contra trade.
8. Record of transactions to be maintained under the Prevention of Money Laundering Act includes Cash
transactions of the value of more than 10 Lakhs
9. If the portfolio manager has group companies, a disclosure of conflict of interest related to services offered
by group companies of the portfolio manager if any.
10. Attention can also be paid to the major provisions in the contract with the portfolio managers
11. Sortino Ratio adjusts portfolio’s excess return to the downside risk –High is good.
12. Call option is OTM when its strike price is higher than its spot price.
13. In addition to the Principal Officer and Compliance Officer, the applicant has in its employment at least one
person who has a graduation from a university or an institution recognized by the Central Government or
any State Government or a foreign university; and an experience of at least two years in related activities in
the securities market including in a portfolio manager, stock broker, investment advisoror as a fund
manager.
14. Perpetual bonds which have no maturity date.
15. Form A of Schedule I – Registering a portfolio management service.
16. Section 9 was inserted in the Income Tax Act, 1961 to provide a ‘safe harbour’ to overseas funds availing
fund management services from India based managers
17. Under relative valuation techniques, value of a stock is estimated based upon its current price relative to
variables considered to be significant in valuation, such as. Earnings, cash flow, book value, All the above
18. In india Central Govt issues both Dated securities & Treasury bills.
19. Operating expenses excluding ××brokerage××, includes courier charges✔,
20. The difference between the value of assets and the liability is net worth. i.e.All assets – All liabilities.
21. Portfolio Managers can be evaluated on the basis of their investment philosophy, investment approach,
investment process, strategies, styles and past performance compared against a benchmark or managers’
universe.
22. The portfolio manager shall keep the funds of all clients in a separate account to be maintained by it in a
Scheduled Commercial Bank.
23. Michael Porter suggests two major strategies: Cost Leadership and Differentiation.
24. Convertible bond is not like a traditional bond.
25. Companies not earning profits yet, or companies in high volume low margin businesses instead of earning
based ratios investors can look at the P/S ratio to determine whether the stock is undervalued or
overvalued. -price-to-sales ratio
26. Portfolio manager shall not execute any trade against the interest of the clients in its proprietary account-
Clause 12 (b)
 27. E(Requity)=Rrisk-free+β×Market Risk Premium.

The Capital Asset Pricing Model (CAPM) is used to estimate the expected return of an equity
investment based on its beta, the risk-free rate, and the market risk premium. The formula for CAPM
is as follows:

E(Requity)=Rrisk-free+β×Market Risk PremiumE(Requity)

Company’s market Beta = 1.25

Risk Free rate = 6%
Market risk premium = 9%
6+1.25*9, =6+11.25, = 17.25%

28. Government Securities – Issuer is Central Government/State Govt.

29. Public Sector Bonds – Public sector agency, Government agencies
30. Conditions specified shall not apply in case of an investment fund set up by the Government or the Central
Bank of a foreign State or a sovereign fund or Category I FPI registered under SEBI (FPI) Regulations, 2019.
31. January 1993, marked the beginning of Portfolio Management Service when SEBI issued securities and
Exchange Board of India (Portfolio Managers) Regulations, 1993.
32. The following entities can invest in PMS with a minimum investment of Rs. 50 lacs: Individuals, Non-resident
Indians (as per the RBI guidelines), Hindu Undivided Family, Proprietorship firms, Association of person,
Partnership Firms, Limited liability Partnership, Trust, Body Corporate
33. Portfolio performance measure of “Information Ratio” calculates average differential return per unit of
variability of differential return. The numerator is often referred to as the active return on the portfolio
whereas denominator is referred to as the active risk. The point to be noted is that active risk is nothing but
tracking error of the portfolio.
34. Sharpe's performance measure divides the portfolio's risk premium by the Standard deviation of the rate of
return.
35. The measure of performance which divides the portfolio's risk premium by the portfolio's beta is the
Treynor measure
36. Sortino Ratio = (Rp – Rf)/ Semi Standard deviation of the portfolio, Rp = Return of the portfolio, Rf = Risk-free
rate
37. Information Ratio (Appraisal ratio) = IR = (Rp – Rb)/Stdev (Rp – Rb) , IR = the information ratio,Rp = Return on
the portfolio, Rb = Return on the benchmark Stdev (Rp – Rb)= Standard deviation of the difference between
the return of the portfolio and return of the benchmark.
38. Information Ratio = Alpha / Tracking Error
39. Jensen Alpha = R(p) - (R(f) + B x (R(m) - R(f)))
R(p) –Portfolio Return, R(f) – Risk Free return, R(m) – Market return, B = Beta

R(p) –Portfolio Return = 14%, R(f) – Risk Free return 6%, R(m) – Market return 12%, B = Beta 1.05

14-6+
1.05(12-6)
6.3

Jensen Alpha 1.7

40. Anchor investor means a qualified institutional buyer who makes an application for a value of ten crore
rupees -10 Crores
41. Accumulation Phase: High-return, high-risk capital gain-oriented investments.
42. Consolidation Phase: Capital preservation
43. Indenture is the legal agreement between two parties, in case of bond indenture the two parties are the
bond issuer (borrower) and the investors (lender).
44. The portfolio manager shall furnish periodically a report to the client, as agreed in the contract, but not
exceeding a period of three months .
45. Fundamental analysis is the process of determining intrinsic value for the stock.
46. Cash management team works as an interface between the banks and the fund management team.
47. Client has power to appoint auditor to conduct annual audits of their transaction with a PMS firm.
48. Systematic risk is measured by Beta
49. Time Weighted Rate of Return - TWRR is the same as geometric return.
50. Thus, if a portfolio manager believes that the stock market is overvalued and is up for a correction, while
debt market is undervalued, then it may reduce the proportion of the portfolio that is allocated to equities
and increase the proportion allocated to debt.
51. Since investor’s requirement’s change over a period time, IPS (Investment Policy Statement (IPS)) also needs
to be updated and revised periodically. Investment Policy Statement is the first step in investment process.
52. The Companies Act has provided an extensive definition of the term body corporate. The term "body
corporate" is defined in Section 2(11) of the Companies Act, 2013.
53. The portfolio manager shall take adequate steps for redressal of grievances of the investors within one
month of the date of the receipt of the complaint and keep SEBI informed about the number, nature and
other particulars of the complaints received.
54. High Water Mark is the highest value that the portfolio/account has reached. The portfolio manager charges
performance based fee only on increase in portfolio value in excess of the previously achieved high water
mark.
55. Systematic risk is defined as risk due to common risk factors, like interest rates, exchange rates, commodities
prices.
56. Up to Assessment Year 2020-21, domestic companies and mutual funds were liable to pay Dividend
Distribution Tax (DDT) on the dividend.
57. 5 KYC registration agencies – CAMS, Karvy, NSDL, Dotex, CSDL
58. Day count convention – method used for arriving at the holding period (number of days) of a bond to
calculate the accrued interest
59. 1.05 – Lowest expense ratio of equity, 0.8 for debt
60. Mutual fund is a trust.
61. Buy-side Analysts work for money managers like mutual funds, hedge funds, pension funds, or portfolio
managers that purchase and sell securities for their own investment accounts or on behalf of their clients
62. Customized Benchmark – If no suitable bench mark available.
63. Duration of bond -the time taken for a bond to repay its own purchase price.
64. Liability in case of Default: Chapter V of the SEBI
65. Maturity: This is generally the longest phase in the life cycle of the industry. During this stage, growth rate in
the industry normally matches with the economy’s growth rate.
66. The debt instruments must be credit rated
67. A new category of ‘deemed resident’ has been introduced in clause (1A) of Section 6 with effect from
Assessment Year 2021-22. As per Section 6(1A), an Indian citizen is deemed as resident in India irrespective
of his stay in India if his total income, excluding income from foreign sources, [hereinafter referred to as
‘Indian Income’] exceeds Rs. 15 lakhs during theprevious year and he is not liable to tax in any other country
or territory by reason of his domicile or residence or any other criteria of similar nature.
68. BBB - Instruments with this rating are considered to have moderate degree of safety
69. Costs of construction and maintenance of customized benchmarks would be much higher than the fee paid
for using market-based indices.
70. Open interest is the total number of outstanding derivative contracts that have not been settled.
71. Day count convention in India- 30/360 days
 72. Correlation coefficient vary in the range −1 to +1.
73. Cost Inflation Index (CII) of the year in which capital asset is transferred and divided by CII of the year in
which asset is first held by the assessee or CII of 2001- 02,whichever is later.
74. Compensation for liquidity is not embedded in the risk free rate.
75. Pension Funds: A fund established to facilitate and organize the investment of the retirement funds
contributed by the employees and employers
76. Putability (put option) feature of a bond: Gives the holder the right, under certain circumstances to sell the
bond back to the issuer
77. For a single fund, asset allocation explain 90 percent of the fund’s variation in returns over time.
78. The portfolio manager shall not execute off market transfers in client’s account except: (a) for settlement of
the clients’ own trades; (b) for providing margin/ collateral for clients’ own positions;(c) for dealing in
unlisted securities in accordance with the regulations
79. Appraisal ratio – denominator is active risk – tracking error.

80. Coupon yield = Coupon Payment / Face Value

Coupon: Rs. 8.24

Face Value: Rs. 100
Market Value: Rs. 103.00
Coupon yield = 8.24/100 = 8.24%

Current Yield
Current yield = (Annual coupon rate / current market price of the bond) *100%
=8.24/103*100
=8%

81. Asset allocation is the process of dividing funds into various asset classes.
82. Higher the risk, higher the return.
83. Preferential Issue: Preferential issue is when a listed issuer issues shares or convertible securities, to a select
group of persons.
84. The first step = identifies investors risk appetite and defines investment objectives, goals and investment
constraints.
85. The second step = study of current financial conditions and forecast future trends.
86. The third Step: = construction of portfolio, requires continuous monitoring and rebalancing
87. The fourth Step = performance measurement & evaluation
88. Sub-period return for the period between the valuation dates - (Ending Market Value - Beginning Market
Value - Contribution + Withdrawal) ÷ (Beginning Market Value + Contribution - Withdrawal)
89. An account is funded on 1-Jan-2019 by an amount 50,00,000. On 1-Mar-2019, client
contributed additional 20,00,000. The market value of the account as on 28-Feb-2019
 is 49,00,000. On 1-Oct-2019, the client withdrew an amount of 10,00,000 from the
account. The market value of the account on 30-Sep-2019 was 75,00,000. The market
value of the account on 31-Dec-2019 was 70,00,000.

01/01/2019 50,00,000
28/02/2019 49,00,000
01/03/2019 20,00,000
30/09/2019 7500000
01/12/2018 7000000

NISM XXI A Important Questions

1. Which of the following is correct for “Capital Appreciation”?

a. To minimize / avoid chances of capital erosion
b. Retired individual
c. To grow portfolio over time
d. To generate income at regular interval

2. If an investor gives up Rs. 100 today for more than Rs. 100. Say Rs. 104 one year from today. If
the price level in the economy increases by 6%. Calculate nominal risk-free rate (NRR)

(1.04) *(1.06) -1

ANS: 10.24

3. Which of the following is correct for “CRISIL BBB (Moderate Safety)”?

a. Instruments with this rating are considered to have the moderate degree of safety regarding
timely servicing of financial obligation. Such instruments carry moderate credit risk.
b. Instruments with this rating are considered to have the moderate risk of default regarding timely
servicing of financial obligation.
c. Instruments with this rating are in default or are expected to be in default soon.
d. Instruments with this rating are considered to have the high degree of safety regarding timely
servicing of financial obligations. Such instruments carry very low credit risk. 

4. Which of the following are examples of managed portfolio solutions available to the investors in
India?
a. Mutual Funds
b. Alternative Investment Funds
c. Collective Investment Schemes
d. Portfolio Managers
e. All the above

5. Unlisted investments are traded on a stock exchange. True or False

ANS: False

6. Which of the following is/are considered a hard commodity?

a. Corn
b. Soyabean Oil
c. Sugar
d. Oil

7. Which of the below terms is another name for "distressed securities"?

a. grown angels
b. high yielder
c. Fallen angels
d. benefit star

8. If there is uncertainty with respect to the future payment, the investor would require a higher
return than the nominal required rate of return. The additional component is called Alpha. True
or False

ANS: False
Risk premium - Correct

9. Which of the below is/are incorrect for “Clearing Settlement”?

a. Clearing and settlement are pre-trading activities that constitute the core part of equity trade life
cycle.
b. Clearing activity is all about ascertaining the net obligations of buyers and sellers for a specific
time period.
c. Settlement is the next step of settling obligations by buyers and sellers by paying money (if
transaction is a buy transaction) or delivering securities (if it is a sell transaction).
d. All the above
e. None of the above

10. _______ are intermediaries in the primary market who undertake to subscribe any portion of a
public offer of securities which may not be bought by investors.

Underwriters are intermediaries in the primary market who undertake to subscribe any portion of a
public offer of securities which may not be bought by investors.

ANS: Underwriters

11. Which of the below is/ are correct for “Retail Participants”?
a. Individual investors who buy and sell securities for their personal accounts
b. No buying and selling for another company or organization
c. An individual investor who applies for or bids on specified securities for a value of not more than
Rs. 2 lakhs.
d. All the above
e. None of the above

12. Which of the below is incorrect?

a. Insurance companies' core business is to insure assets.
b. A mutual fund is a professionally managed collective investment scheme that pools money from
many investors to purchase securities on their behalf.
c. A Foreign Portfolio investor (FPI) is an entity established or incorporated outside India that
proposes to make investments in India.
d. National Pension System (NPS) is a pension cum investment scheme launched by SEBI to provide
old age security to Citizens of India.

ANS: National Pension System (NPS) is a pension cum investment scheme launched by SEBI to
provide old age security to Citizens of India. NPS is regulated by Pension Fund Regulatory and
Development Authority (PFRDA) and not SEBI

13. Depositories are institutions that hold securities (shares, debentures, bonds, government
securities, mutual fund units) of investors in physical form.

True or False.

ANS: False

14. Preferential issue is when a listed issuer issues shares or convertible securities, to a _________.

When a listed company issues shares to a select group of persons, which is neither a
rights nor a public issue, then it is known a select group of persons

15. _______ is a privately pooled investment vehicle which collects funds from sophisticated
investors, for investing it in accordance with a defined investment policy for the benefit of its
investors.

ANS: Alternative Investment Fund

16. A positive relationship exists between risk and return. The greater the risk, the higher the
potential for profit (or loss).

ANS: True

17. Businesses that do better in a recession are called ‘__________’ businesses.

ANS: recession-proof

18. When a Company Issues Equity Securities, they are 

a. not contractually obligated to repay the amount it receives from shareholders.
b. not contractually obligated to make periodic payments to shareholders for the use of their funds.
c. Both a and b
d. None of the above

ANS:  Both a and b

19. What is the formula for Price to Book Value Ratio?

ANS: Stock price per share / Shareholder’s equity per share

20. MVA is positive, when the firm has added value. True or False.
ANS: True

21. Which of the below is/are correct for “Technical Analysis” of the company?
a. Performance of a stock
b. Company fundamentals
c. Economic factors and market sentiments
d. All the above
e. None of the above

ANS: All the above

Technical analysis is based on the assumption that all information that can affect the performance
of stock, company fundamentals, economic factors and market sentiments, is reflected already
in its stock price

22. What is the EV of a business?

ANS. Market capitalization + Total Debt - All cash and cash equivalents

23. Which of the below “Identifies comparable firms and then obtains the market values of the
equity of these firms”?
a. Asset based valuation
b. P/E Ratio
c. Relative valuation
d. P/S Ratio

ANS: Relative valuation

24. The free cash flows for the firm (FCFF) are then discounted at the appropriate cost of capital
(KO) discount rate to arrive at the __________.

ANS. firm value

25. Which of the below is/are correct for putable bond?

a. Gives the issuer the right to redeem all or part of the outstanding bonds before specified the
specified maturity date
b. present investors with a higher level of reinvestment risk
c. The issuer will call the bond before its maturity only in cases where interest rates for similar
bonds fall in the market.
d. All the above
e. None of the above

ANS: None of the above

26. Which of the below is “combination of plain vanilla bond plus an embedded equity call option?
a. Callable bond
b. Putable option
c. Convertible option
d. Convertible bond

ANS: Convertible bond

27. Which of the below is said to be “Indenture”?
a. Legal agreement between the firm issuing the bond and the bondholders.
b. Contract between the bondholders and investor companies.
c. Legal formality between company issuing bond and the bondholder.
d. None of the above

ANS: Legal agreement between the firm issuing the bond and the bondholders.

28. If the coupon value is Rs. 9.20, face value of bond is Rs. 100, and the market value is Rs. 103.
What will be the bond yield?

ANS: 9.20

29. What is the current yield of the 10-year 7.50% coupon bond selling for Rs. 105.00 per Rs. 100
par value?

ANS: 7.14

30. Money market the day count convention followed is actual/360.

ANS: False Money market the day count convention followed is actual/365.

31. The volatility of the bond price is _______ related to the coupon.

ANS. inversely

32. ___________ arises when the investor may not be able to reinvest these proceeds at the yield
prevalent at the time of making investment.

ANS: Reinvestment risk

33. The basic idea behind entering into a forward contract is to ________ and thus _______. 

ANS: fix the price and avoid price risk

34. Counterparty fails to fulfil its contractual obligations due to a lack of _____ and settlement
complications. 

ANS: transparency

35. In which of the below contract “one party pays a fixed rate to the other and receives a floating
rate in return.”

ANS: Swaps

36. FX futures are another name for currency forwards.

ANS: False
37. __________ is defined as the funds or securities which must be deposited by Clearing Members
as collateral before executing a trade. 

ANS. Margin

38. Which of the below statement is incorrect for “Open interest”?

a. Open interest is the total number of outstanding derivative contracts that have not been settled.
b. Open interest is a measure of market activity.
c. Open interest is a measure of the flow of money into a futures or options market.
d. Open interest identifies such price differential in two markets and indulge in trades that reduce
such differences in price.

ANS: Open interest identifies such price differential in two markets and indulge in trades that
reduce such differences in price.

39. Option buyer and holder will exercise their option only when the situation is favorable to them,
but when they decide to exercise, __________. 
a. the option writer may or may not honor the contract.
b. the option writer is legally bound to honor the contract.
c. the option writer can dishonor the contract. 
d. the option writer is not legally bound to honor the contract.

ANS: the option writer is legally bound to honor the contract.

40. Mutual fund investments are:

a. in line with the investment objective
b. backed by adequate research
c. follow prudent investment processes
d. All the above
e. None of the above

ANS: All the above

41. Which of the below is correct for fund of accounting team?

a. Calculates NAV on a daily basis. 
b. Maintains investor records as well as allots or redeems units.
c. Processes purchase / redemption / switch requests, dividends, etc.
d. Generates the account statement for the investors.

ANS: Calculates NAV on a daily basis.

42. “Investors can buy units of a closed-ended scheme from the fund only during its NFO.” Is true
for which of the below funds?
a. Open ended schemes
b. Closed ended schemes
c. Interval schemes
d. None of the above

ANS: Closed ended schemes

43. Which of the below statement is incorrect?

a. Redemption refers to withdrawing.
b. NFO is open for period of 15 days
c. Publishing the monthly fact sheet is not a regulatory requirement.
d. Investors' money is held on the AMC’s balance sheet.

ANS:  Investors' money is held on the AMC’s balance sheet.

44. The performance of the scheme is the responsibility of _________.

ANS: Fund manager

45. Which of the below is/are correct for Mutual funds?

a. It is a trust created by one or more Sponsors
b. The beneficiaries are the investors who invest in various schemes
c. Day to day management of the schemes is handled by an AMC
d. All the above
e. None of the above

ANS: All the above

46. Which of the below is correct for TER?

a. TER to be charged over and above the weighted average of the TER of the underlying scheme
shall not exceed twice the weighted average of the TER levied by the underlying scheme(s).
b. TER to be charged below the weighted average of the TER of the underlying scheme shall not
exceed twice the weighted average of the TER levied by the underlying scheme(s).
c. TER to be charged over and above the weighted average of the TER of the underlying scheme
must exceed twice the weighted average of the TER levied by the underlying scheme(s).
d. TER to be below the weighted average of the TER of the underlying scheme shall not exceed
thrice the weighted average of the TER levied by the underlying scheme(s).

ANS: TER to be charged over and above the weighted average of the TER of the underlying scheme
shall not exceed twice the weighted average of the TER levied by the underlying scheme(s).

47. Which of the below is incorrect for Key performance measures?

a. SEBI has established Advertisement Guidelines for Mutual Funds. 
b. If a performance figure is available for at least 7 days, 15 days and 30 days simple annualization
of yields can be used to advertise.
c. For measuring the risk, variance, standard deviation, beta, and tracking errors are calculated.
d. When mutual funds are for more than three years the point-to-point returns on a standard
investment of Rs. 50,000 shall also be shown

ANS: When mutual funds are for more than three years the point-to-point returns on a standard
investment of Rs. 50,000 shall also be shown

48. The analysts analyse:

a. individual securities
b. Sectors
c. the state of the markets, or the economy.
d. All the above
e. None of the above

ANS: All the above

49. For options contract which of the below is correct?
a. Buyer / Holder takes long position
b. Holder/ Writer takes short position
c. Seller / Holder takes short position
d. Writer / Buyer takes long position

ANS: Buyer / Holder takes long position

50. Which of the below is incorrect for covenants clauses?

a. Specifies bondholder’s rights and restrictions on bond issuers
b. Positive covenants say the actions issuers are required to do.
c. Negative covenants specify what issuers are prohibited from doing.
d. All the above
e. None of the above

ANS: None of the above

51. Body corporate does not include:

a. a co-operative society registered under any law relating to co-operative societies

b. any other body corporate (not being a company as defined in this Act), which the Central
Government may, by notification, specify in this behalf

c. a and b

d. Neither a nor b

ANS: Neither a nor b

52. Which of the below statement is incorrect?

a. The money or securities accepted by the portfolio manager shall not be invested or managed by the
portfolio manager except in terms of the agreement between the portfolio manager and the client.

b. Segregate each client’s holding in securities in separate accounts.

c. Keeps the funds of all clients in a separate account to be maintained by it in a Scheduled

Commercial Bank.

d. None of the above

ANS: None of the above

53. As the PMS Circular dated February 13, 2020 in case client portfolio is redeemed in part or full,
which of the below is correct for the exit charges?

a. first year of investment- maximum of 3% of the amount redeemed

b. second year of investment-maximum of 2% of the amount redeemed

c. third year of investment-maximum of 1% of the amount redeemed

d. After a period of five years from the date of investment, no exit load

ANS: first year of investment- maximum of 3% of the amount redeemed

54. Portfolio managers can impose a lock- in on the investment of their clients.

ANS: False

55. The compliance officer shall immediately and independently report to _______ any non-
compliance observed.

ANS. SEBI

56. The portfolio manager is required to report any suspicious transaction within ___ working days
to FIU. 

ANS: 7

57. Which of the below is correct for “Custodian fee / Depository fee”?

a. The fee so charged may be a fixed fee or a return-based fee or a combination of both. These are
typically on actuals and reimbursed to Portfolio Manager. 

b. Charges payable to registrars and transfer agents in connection with effecting transfer of securities
and bonds.

c. The charges relating to opening and operation of dematerialized accounts, custody and transfer
charges for shares, bonds and units, dematerialization and other charges in connection with the
operation and management of the depository accounts. 

d. Brokerage and related transaction costs, are part of the acquisition cost / sale realization including
STT, stamp duty etc. Brokerage at actuals shall be charged to clients as expense. 

ANS: The charges relating to opening and operation of dematerialized accounts, custody and transfer
charges for shares, bonds and units, dematerialization and other charges in connection with the
operation and management of the depository accounts. 
58. Investors can invest in PMS products minimum worth Rs. 50 lacs:

ANS: Combination of cash or securities

59. Which of the below is correct for PMS process?

a. Development of policy statement - Construction of portfolio - Performance measurement &

evaluation - Study of current financial conditions and forecast future trends

b. Study of current financial conditions and forecast future trends - Development of policy statement
- Construction of portfolio - Performance measurement & evaluation

c. Development of policy statement - Study of current financial conditions and forecast future trends
- Construction of portfolio - Performance measurement & evaluation

d. Performance measurement & evaluation - Development of policy statement - Study of current

financial conditions and forecast future trends - Construction of portfolio

ANS: Development of policy statement - Study of current financial conditions and forecast future
trends - Construction of portfolio - Performance measurement & evaluation

60. IPS is an important planning tool which help investors:

a. In understand their requirements

b. in creating portfolios for the investors

c. In maintaining optimum portfolios for the investors

d. All the above

ANS: All the above

61. _________ have a high emotional priority which the investor wishes to achieve within just a few
years at most.

ANS: Near-Term High Priority Goals 

62. __________ people who are willing to put it all in one major bet and "go for it" because they
have confidence. As far as they are concerned, it is a carefully considered decision.

ANS: Adventurer
63. _______ are the people who has certain degree of confidence about them, but they are also
careful, methodical, and analytical. Individualists like to do their own research and tend to avoid
extreme volatility.

ANS: Individualist

64. Which of the below is correct for “Consolidated phase”?

a. During this phase, net worth is typically small relative to liabilities. Investments are fewer and
typically non-diversified. Goals may include children's education, a house, and if possible,
investments for future financial independence.

b. The period when income exceeds expenses. At this time, while the time horizon to retirement is
still relatively long (15 or 20 years), investors may start looking for capital preservation.

c. This is the period when living expenses are covered not from earned income but from accumulated
assets such as investments and retirement corpus. Because of the heavy reliance on investments in
this phase and the unlikelihood of going back to work, the focus is on stability in investment
portfolio.

d. This is the phase when a person realizes that she has more assets than he/she will need for
spending. In such cases the attitude about the purpose of investments does change.

ANS: The period when income exceeds expenses. At this time, while the time horizon to retirement
is still relatively long (15 or 20 years), investors may start looking for capital preservation.

65. If the investment is made in long term bonds, a bond index with similar maturity and ______ will
be an appropriate benchmark.

ANS: credit profile

66. SAA decisions involve __________ whereas TAA is for ______. 

ANS: time in the market and timing the markets. SAA decisions involve “time in the market”
whereas

67. Alpha return is a reward for bearing _____.

ANS: Non market risk

68. Portfolio standard deviation is the weighted average standard deviation of individual investments
in a portfolio. True or False.

ANS: False
69. ________ is the standard deviation of the difference between the portfolio and its target
benchmark portfolio total return.

ANS: Tracking error

70. Which of the below is correct for “Sortino ratio”?

a. Return in excess of the risk-free return and divide the excess return by the portfolio’s standard
deviation

b. Excess return for systematic risk

c. Adjust the potfolio’s excess return to the downside risk

d. None of the above

ANS: Adjust the potfolio’s excess return to the downside risk

71. GIPS stand for:

ANS: Global Investment Performance Standards

72. What is the formula for Holding period return?

ANS: Total return / point to point return

73. __________ is the annual rate of return at which the cumulative contributions grow over the
measurement period. 

ANS: MWRR

74. Foreign company can be resident if PEOM in India. True or False.

ANS: False

75. If the income accrues or arises outside India if it is derived from business controlled in India or a
profession set up in India. Then which of the below is correct?

a. Resident and ordinarily resident is not taxable

b. Resident but not ordinarily resident is not taxable

c. Non-resident is not taxable

d. Non-resident is taxable

ANS: Non-resident is not taxable

76. For capital gains – Short term is:

ANS: Short Term - Any asset held for less than 36 months

77. Interest on securities can arise from:

a. Bonds

b. Debentures or debenture stock

c. Government Securities

d. All the above

ANS: All the above

78. ______ provides a special taxation regime in respect of certain offshore funds in context of their
fund managers being located in India.

ANS: Section 9A

79. Specified transaction means:

a. any withdrawal or deposit in cash, exceeding such amount

b. any transaction in foreign exchange, exceeding such amount 

c. any transaction in any high value imports or remittances; 

d. All the above

ANS: All the above

80. Principal officer means:

a. an employee of the portfolio manager who has been designated as such by the portfolio manager

b. responsible for the decisions made by the portfolio manager for the management or administration
of portfolio of securities or the funds of the client, as the case may be
c. responsible for all other operations of the portfolio manager

d. All the above

ANS: All the above

81. On termination of the contract, the portfolio manager shall give a detailed statement of accounts
to the client and settle the account with the client as agreed in the contract. The client shall have the
right to obtain details of his portfolio from the portfolio managers.

ANS: True

82. A portfolio manager shall disclose to AMFI as and when required the following information
namely:

a. particulars regarding the management of a portfolio

b. the names of the clients whose portfolio he has managed

c. particulars relating to the net worth requirement

d. All the above

e. None of the above

ANS: None of the above

83. The return received on this portfolio investment can be termed as ________.

ANS: Holding Period Return

84. To 88. 

You are provided with the expected return and standard deviation on the following four assets:
Based on this data, please answer the following questions:

84. If you are a portfolio manager and could invest in only one of the three assets i.e. A, B or C,
which one would you pick?

ANS: Any of them depending upon the risk profile of the investor and investment objectives

85   Which of the three assets i.e. B, C & D has the highest Sharpe Ratio?

ANS: B

86 - If you could combine any of the other three assets with Asset A, which one would you choose?

ANS: A with B

87. Within the framework of portfolio theory, would you automatically rule out asset D by
dominance, if you could combine it with asset B&C?

ANS: No, information on correlation would be needed before any decision can be made

88. In what proportion would you combine asset B & C, if you can invest in both of them along with
asset A.

ANS: Depending upon the investment objective

89. to 91.

An investor has given Rs. 20 Lakhs to a portfolio manager which is to be invested equally in the
equity shares and bonds of a company called Sunshine Metals Ltd.

Sunshine Metals Ltd. has 1 crore outstanding equity shares and these shares are trading at Rs. 120 in
the stock markets. The company reported a PAT of Rs. 8 crores. The average PE Ratio of firms
comparable to Sunshine Metals is 22.

Sunshine Metals has also issued bonds of face value Rs 100. The annual coupon payable is 15%. The
balance term to maturity is 5 years and it is currently trading at Rs 96. The required rate of return of
the investor is 15% (Present value Interest Factor for Annuity at 15% for 5 years = 3.3522; Present
Value Interest Factor at 15% for 5 years = 0.4972)

The equity investment reaches its intrinsic value at the end of 2 years. The price of the bond at the
end of 2 years is Rs 98 

Coupon amount received during the investment period is to be used and not reinvested.

89. At the end of two years, how has the risk profile changed for the investor?

ANS: The risk for the investor has increased as the weight of equity in the portfolio has increased

90. Calculate the Intrinsic Value of the equity share. 

ANS: 176

91. Calculate the fair value of the bond.

ANS: 100

92. to 96. 

You are an PMS distributor. You are comparing the performance of various funds. The following
table gives you the performance of two funds. Comment on their performance by ranking them on
various risk and return measures and ratios. The yield on government bond is 5 percent.
92. Calculate the Sharpe Ratio of Fund A

ANS: 0.4844

93. Rank the funds on the basis of Sharpe Ratio:

ANS: Rank 1 – Fund A & Rank 2 – Fund B

94. Calculate the Treynor Ratio of Fund A

ANS: 0.0473

95. Calculate Sortino ratio for Fund A.

ANS: 0.6600

96. Calculate the Alpha for Fund A.

ANS: 0.01529208

97. to 100.

Ms Reena was bullish on the equity markets. She gave Rs 200 lakhs to her portfolio manager to be
invested equally in equity shares of 4 companies (Rs. 50 lakhs each). The names of the companies
were WW, XX, YY and ZZ and the prices at the time of investment were Rs. 100, Rs. 50, Rs. 20 and
Rs. 200 respectively.

During the course of the year, dividend was paid by the companies as under: 

WW – Rs 2
XX – Rs 1 YY – Rs 0.40

ZZ – Rs 4

After a year, Ms Reena instructed the portfolio manager to sell off the shares and the shares were
sold at the following prices:

WW – Rs 110 XX – Rs 70

YY – Rs 40 ZZ – Rs 160

Ms. Reena expected 50% return on her total investments.

Answer the following questions on the assumption that there is no income tax on dividends and
Capital Gains are taxed at 10%

97. From the four companies in which investment was done, which company has given the desired
return?

ANS: YY

98. Calculate the tax adjusted return on company ZZ’s stock?

ANS: -18%

99. Calculate the capital gain earned by the investor on the entire portfolio. 

ANS: Rs. 65,00,000

100. Identify the TRUE statement with respect to tax treatment on Capital Gains.

a. Tax on capital gains will be deducted by the portfolio manager at the source

b. Tax on capital gains will be deducted by the company whose shares are bought and sold, at the
source

c. Tax on capital gains will be paid by the investor (Ms. Reena)

d. Tax on capital gains will be paid by the portfolio manager and later collected from the investor
(Ms. Reena)

ANS: Tax on capital gains will be paid by the investor (Ms. Reena) 
 Question 101 to 150

101. The SEBI Fraudulent and Unfair Trade Practices Regulations prohibit a person to, directly
or indirectly _____ securities in a fraudulent manner.

A. Buy

B. Sell

C. Deal

D. All of the above

ANS: All of the above

102. Which of the following schemes have the features like 1) Continuous sale and purchase of units
at NAV or NAV related prices, 2) Investor can enter and exit the scheme any time during the life of a
fund, 3) The scheme does not have specific time frame.

A. Interval scheme

B. Open ended scheme

C. Close ended scheme

D. All of the above

ANS: Open ended scheme

103. The counterparty risk in a futures contract is mitigated primarily through ______.

ANS: The functions of the clearing corporation

104. ________ is the central, national agency responsible for receiving, processing, analysing
and disseminating information relating to suspect financial transactions to enforcement agencies.

ANS: FIU-IND

105. The feature that allows the issuing firms to retire the bonds before the maturity by paying
a prescribed price is called ________.

ANS: Callability (call option)

106. An _________ is a broad outlay of the type of securities and permissible instruments to
be invested in by the portfolio manager for the customer, considering factors specific to clients and
securities.

ANS: Investment approach

107. _________ industries rise and fall and very closely follow the general economic activity
in comparison to other industries.

ANS: Cyclical

108. The agreement between the portfolio manager and the client should include which of
the following?

A. investment approach, areas of investment and restrictions, if any, imposed by the client with
regard to the investment in a particular company or industry

B. period of the contract and provision of early termination, if any

C. the investment objectives and the services to be provided

D. All of the above

ANS: All of the above

109. The SEBI (Mutual Funds) Regulations came in the year ______.

ANS: 1996

110. _________ portfolio manager manages the funds in accordance with the directions of the client.

ANS: Non-discretionary

111. While making an application for a portfolio manager, financial information has to be

submitted for which of the three years?

A. Current and the next two years

B. Preceding two years and the current year

C. Preceding 3 years

D. Succeeding three years

ANS: Preceding two years and the current year

112. A reputed portfolio manager has deployed funds of a client with a corporate. The corporate has
promised that convertible bonds will be issued against these funds. Is this transaction in order?

A. This is NOT in order as no physical delivery of the security has been made and this is not
permitted

B. This is NOT in order as this amounts to lending of the client's funds and this is not permitted

C. This is in order as this style of investment is routine and approved

D. This is in order as eventually bonds will be issued to the PMS

ANS: This is NOT in order as this amounts to lending of the client's funds and this is not permitted

113. The time period restriction for a contra trade by a Designated Person of a company is ______.

ANS: Six Months

114. _________ is the threshold limit for the suspicious transactions for which record needs to
be kept as per the Money Laundering Act. Rs. 5 Lakhs

ANS: Rs. 10 Lakhs

115. Define the relationship between the prices of a bond and its yield.

ANS: Its always inverse

116. A PMS has changed its main office address. This should be informed to ______.

ANS: Only B and C

117. A reputed PMS firm has 5 group companies. Identify which among the following is the
best practice about disclosing these to the client.

A. The PMS firm has to disclose about the group companies only if there is a conflict of interest

B. The PMS firm need not disclose about the group companies

C. The PMS firm has to disclose about the group companies

D. The PMS firm need not disclose about the group companies as they are not above 10 in number

ANS: The PMS firm has to disclose about the group companies only if there is a conflict of interest
118. Which of the following institutions can issue bonds in India?

A. Financial Institutions

B. Banks

C. Corporates

D. All of the above

ANS: All of the above

119. The price of ABC Ltd. equity shares has reached its resistance line. As per technical
analysis, this is a good time to ____.

ANS: Sell the shares of ABC Ltd.

120. Identify the TRUE statement with respect to an investor seeking to engage a portfolio manager.

A. There is no need for an investor to understand anything about investing styles

B. An investor should pay attention to the major provisions of the investment contract

C. An investor has to depend on the distributor’s advice on the choice of a portfolio manager

D. An investor only has to place trust in the portfolio managers approach to investing

ANS: An investor should pay attention to the major provisions of the investment contract

121. Identify the TRUE statement -

A. Sharpe ratio when multiplied by the downside Risk is called Sortiona ratio

B. Sortino ratio is excess returns per unit downside risk

C. Sortino ratio is the excess returns per unit of total risk

D. Sortino ratio and Sharpe ratio both measures the same excess returns

ANS: Sortino ratio is excess returns per unit downside risk

122. Which type of compensation is not embedded in the nominal risk-free rate?

ANS: Compensation for liquidity

123. The fund which is established to facilitate and organize the investment of the retirement
funds contributed by the employees and employers is known as _____.

ANS: Pension Fund

124. Identify the TRUE statement with respect to P/E Ratio (Price Earnings Ratio).

A. P/E Ratio is the market determined earnings of a company

B. P/E Ratio is the market determined price of a company's equity

C. P/E Ratio is the market perceived earnings growth rate of a company

D. P/E Ratio is the market's willing investment for every 1 rupee of earnings of the company

ANS: P/E Ratio is the market's willing investment for every 1 rupee of earnings of the company

125. ___________ as a factor is recognized by RBI Act 1934 to derive the value of a derivative.

ANS: Interest Rate

126. Which of these is NOT contained in the Investment policy statement?

A. Financial Regulations

B. Investment roadmap

C. Investors risk appetite

D. Investment constraints

ANS: Financial Regulations

127. A net amount of Rs 10,000 has to be paid to an investor as interest. The TDS (Tax Deducted at
Source) is 10%. Calculate how much should be set aside for the payment of interest?

ANS: Rs. 11,111.11

128. Identify the CORRECT statement with respect to Foreign Currency Convertible bonds (FCCB).

A. FCCBs are equity shares convertible into bonds

B. In FCCBs, the payment of interest and principal is in domestic currency

C. FCCBs are foreign currency denominated equity certificates issued by firms

D. FCCBs are foreign currency denominated debt certificates issued by firms

ANS: FCCBs are foreign currency denominated debt certificates issued by firms

129. As per which regulations is the KYC compliance been made mandatory?

ANS: Prevention of Money Laundering Act 2002

130. Ms. Preeti invested in the US and she earned 18% on that US investment. If the US
Dollar depreciates during this investment period then the return in INR terms will be _______.

ANS: Less than 18%

131. Identify the statement which is NOT true regarding the organization of Portfolio Manager?

A. The legal existence of a Portfolio Manager should be separate from its promoters

B. A Micro credit institution under co-operative societies act cannot be a Portfolio Manager

C. A one-person company can also be a Portfolio Manager

D. A Portfolio Manager is to be promoted by a Scheduled commercial bank

ANS: A Portfolio Manager is to be promoted by a Scheduled commercial bank

132. What type of disciplinary action can be taken as per the SEBI (Prohibition of Insider
Trading) Regulations?

A. Wage freeze

B. Recovery

C. Suspension

D. All of the above

ANS: All the above

133. The currency pair of _______ does not have futures or options trading on Indian
stock exchanges.

A. JPY-INR
B. USD-INR

C. Chinese Yuan – INR

D. EUR-INR

ANS: Chinese Yuan – INR

134. Mr. Mehta's initial contribution is Rs. 2 crores which then rises to Rs. 2 crores 30 lakhs in
the first year. Therefore, a performance fee will be payable on Rs. 30 lakhs. Is this statement True or
False?

ANS: True

135. Identify the INCORRECT statement with respect to Unsystematic risk.

A. Unsystematic risk is diversifiable risk

B. Unsystematic risk is sector specific risk

C. Unsystematic risk is unavoidable risk

D. Unsystematic risk is expected to be nil in a portfolio investment

ANS: Unsystematic risk is unavoidable risk

136. Identify which of these statement(s) is/are true with respect to Unlisted equity investments.

A. Unlisted equity is relatively illiquid

B. Pricing of Unlisted equity is sporadic

C. Pricing of Unlisted equity includes a discount for illiquidity

D. All of the above

ANS: All of the above

137. The nominal rate of return protects the investors from inflation risk. Comment on this statement.

A. Yes, it definitely protects

B. No, it definitely does not protect

C. Yes, it probably protects

D. Can' say
ANS: No, it definitely does not protect

138. Identify the distinguishing feature of a body corporate?

A. A body corporate should have minimum 10 shareholders

B. A body corporate should have issued equity shares

C. A body corporate should be an independent legal entity separate from its owners

D. A body corporate should be listed on a recognised stock exchange

ANS: A body corporate should be an independent legal entity separate from its owners

139. Identify which of these is an essential element of Technical Analysis?

A. Prices follow a pattern

B. Time span is an indication of Trend sustenance

C. A good volume indicates strength in Trend

D. All of the above

ANS: All of the above

140. Identify the true statement with respect to registration of a Portfolio Management Service.

A. The Principal officer is required to have a valid degree from any discipline

B. If the applicant is from United States of America, then the net worth requirement is relaxed

C. The principal officer should have experience of at least five years in related activities in the
securities market

D. PMS registration and approval can now be done online

ANS: The principal officer should have experience of at least five years in related activities in the
securities market

141. Identify which of these is not a cost of investing in a PMS?

A. Franking charges

B. Brokerage charges

C. Listing Fee
D. Registrar Fee

ANS: Listing Fee

142. The application for registering as a Portfolio Management Service has to be made in _______ of
SEBI Portfolio Managers regulations.

ANS: Form A of Schedule I

143. It is correct that the 'long term correlation pattern between two asset classes does not
change over times'?

A. Yes, the statement is correct as their cashflow patterns do not change

B. No, the statement is incorrect as the macroeconomic factors and investor preference change

ANS: Only B is correct

144. Identify the CORRECT statement with respect to the charge of performance fee by the portfolio
manager.

A. The performance fee is charged when the portfolio value exceeds the previous highwater mark

B. The performance fee is charged only when the rate of return on a portfolio exceeds a 'hurdle rate'

C. Both of the above

D. None of the above

ANS: Both of the above

145. Identify the TRUE statement with respect to Bonds.

A. The Face value of a bond and its Market value are always same

B. There cannot be embedded options in bonds

C. Some type of bonds need not be repaid

D. All bonds create an ownership right in a company

ANS: Some type of bonds need not be repaid

146. The prime motto of portfolio attribution analysis is _______.

A. To find out the differential return generated due to the skill of the portfolio manager

B. To find out to what extent individual firms contribute to portfolio returns

C. To find out to what extent sectoral returns contribute to portfolio returns

ANS: To find out the differential return generated due to the skill of the portfolio manager

147. Before SEBI issues the certificate of registration to a PMS, it has to ensure that the applicant has
appointed:

A. Compliance Officer

B. Principal Officer

C. Atleast one person who is graduate from a university etc. recognized by Central or
State Government and has atleast 2 years’ experience in securities market related activities

A. Only A and B are correct

B. Only B and C are correct

C. Only A and C are correct

D. All A, B and C are correct

ANS: All A, B and C are correct

148. When is a Call Option said to be Out of the Money (OTM)?

A. When the Market price is lower than strike price

B. When the Market price is equal to OTC price

C. When the Market price is equal to strike price

D. When the Market price is higher than strike price

ANS: When the Market price is lower than strike price

149. An investor wants to invest for some near-term goals and he does not have much tolerance for
variation. In this case the investment universe should be restricted to ___________.

ANS: Government Bills

150. As per SEBI regulations, __________ is the minimum limit value of funds or securities that can
be accepted from a client by a PMS.
 ANS: Rs. 50 Lakhs

 Question 151 to 200

151. Which of the following is a step in the portfolio management process?

A. Study current financial and economic conditions

B. Develop a policy statement

C. Construct the portfolio

D. All of the above

ANS: All of the above

152. Which of the following is the requirement for granting the certificate of registration
under Portfolio Managers Regulations 2020?

A. The applicant has the necessary infrastructure like adequate office space, equipment and the
manpower to effectively discharge the activities of a portfolio manager

B. The applicant is a body corporate

C. The applicant has appointed a compliance officer

D. All of the above

ANS: All of the above

153. Which of the following persons/entities can invest in PMS?

A. Hindu Undivided Family

B. Individuals

C. Non-resident Indians (as per the RBI guidelines)

D. All of the above

ANS: All of the above

154. Typical putability (put option) feature of a bond _______.

A. Gives the holder the right, under certain circumstances to sell the bond back to the issuer

B. Gives the bond holders the option to convert the bond into another security, typically the common
stock of the firm issuing the convertible bonds
C. Allows the issuing firms to retire the bonds before the maturity by paying a prescribed price

D. Allows the investor to redeem the bond

ANS: Gives the holder the right, under certain circumstances to sell the bond back to the issuer

155. Government securities carry practically no risk of _______ and, hence are called risk-free
or gilt-edged instruments.

ANS: Default

156. _______ ratio compares the price of the stock to the earning it generates.

ANS: P/E ratio

157. _________ was inserted in the Income Tax Act, 1961 to provide a 'safe harbour' to overseas
funds availing fund management services from India based managers

ANS: Section 9A

158. Under relative valuation techniques, value of a stock is estimated based upon its current price
relative to variables considered to be significant in valuation, such as _______.

A. Cash Flow

B. Book Value

C. Earnings

D. All of the above

ANS: All of the above

159. In India, the Central Government issues _________.

A. Dated Securities

B. Treasury bills

C. Both of the above

D. Certificate of deposit

ANS: Both of the above

160. _______ represent ownership in a company that entitles its holders to participate in its profits
and the right to vote on the company's affairs.

ANS: Equity Shares

161. Which of these expenses can be included under Operating Expenses?

A. Courier Charges

B. Audit fees

C. Fee for Portfolio manager's services

D. Brokerage charges

ANS: Courier Charges

162. Which of these documents is mandatory for investment in PMS as per SEBI (Portfolio
Managers) Regulations?

A. Aadhar Card

B. PAN Card

C. Savings Bank Passbook

D. Passport

ANS: PAN Card

163. Which of these risks are NOT related to the risk factors that are to be revealed as part of the
disclosure document given to the client?

A. The risks arising due to the investment approach of PMS

B. The business risks of the group companies of the PMS

C. The risks arising due to Non-Diversification

D. Market Risks

ANS: The business risks of the group companies of the PMS

164. Mr. Karan is an investor and he has a good amount of surplus in his saving bank account. What
can you make out from this statement?
A. It is the income of Mr. Karan

B. It is the future expenses of Mr. Karan

C. It may be the savings of Mr. Karan

D. It is an investment of Mr. Karan

ANS: It may be the savings of Mr. Karan

165. How is the Net Worth of an individual investor calculated?

A. Financial assets - Financial liabilities

B. Tangible assets - Tangible liabilities

C. All Assets - All Liabilities

D. All Assets - Current Liabilities

ANS: All Assets - All Liabilities

166. What is the fixed amount that is paid at regular intervals till the maturity of a bond known as?

ANS: Coupon

167. Who appoints the Compliance Officer in a PMS firm?

ANS: The Portfolio Manager

168._________ is one of the statutory costs to the investor while engaging PMS.

ANS: Notary charges

169. While doing the due diligence for selecting a portfolio manager, an investor should be careful
and not fall in which of these traps?

A. If a portfolio manager is continuously beating the benchmark then this is a adequate indicator of

the investment strategy

B. The best indicator of a portfolio managers future performance is the past performance

C. Both of the above

D. None of the above

ANS: Both of the above

170. Which among these is NOT a valid classification of a portfolio management service provider?

A. Commodity PMS

B. Forex PMS

C. Equity PMS

D. Fixed income PMS

ANS: Forex PMS

171.Ms. Seema is an eligible fund manager and she has a disagreement with an overseas fund
regarding parking of investible funds. According to the overseas fund, they are not allowed to park
their funds in scheduled Indian commercial banks. Can you guide them.

A. The overseas fund is allowed to park their funds in Indian scheduled commercial banks with a
permission from SEBI on a case to case basis

B. The overseas fund is NOT allowed to park their funds in Indian scheduled commercial banks as
per Chapter II A guidelines of SEBI

C. The overseas fund is allowed to park their funds in Indian scheduled commercial banks, however
they would be deemed to have a business connection with India, under section 9A of Income Tax
Act, 1961

D. The overseas fund is allowed to park their funds in Indian scheduled commercial banks if they do
not want to invest in Indian markets

ANS: The overseas fund is allowed to park their funds in Indian scheduled commercial banks if they
do not want to invest in Indian markets

172. As per Chapter V of SEBI (Intermediaries) Regulations, 2008, the period for which a portfolio
manager would be prohibited from taking any new assignment (in case of default) is

ANS: Unspecified

173. On what does the Risk and Return of a portfolio depend upon?

A. It depends upon the covariance of return of each pair of securities in the portfolio

B. It depends upon the proportion of investment in each constituent security

A. Only A
B. Only B

C. Both A and B

D. Neither A nor B

ANS: Both A and B

174. What type of action can be taken by SEBI in case of default by a portfolio manager?

A. It can prohibit the portfolio manager from launching a new scheme

B. It can issue a warning to the portfolio manager

C. It can suspend the certificate of registration of the portfolio manager

A. Both A and B

B. Both B and C

C. Both A and C

D. All A, B and C

ANS: All A, B and C

175. A client has suffered a loss which is greater than the value of assets with a PMS. How is the
client protected in such a case?

A. In case of a non-discretionary portfolio manager the client will be completely protected

B. If the agreement contains a limited liability clause then the client is protected in case of
discretionary portfolio manager

C. Both of the above are true

D. None of the above is true

ANS: If the agreement contains a limited liability clause then the client is protected in case of
discretionary portfolio manager

176. When will the Portfolio Manager appoint a Custodian?

A. When it is offering fund management services to a Foreign Portfolio Investor

B. When it is offering advisory services to a domestic investor

C. When it is offering advisory services to a Foreign Portfolio Investor

ANS: When it is offering fund management services to a Foreign Portfolio Investor

177. The Asset Allocation decision explains ________.

A. A significant percentage of variability of broadly diversified portfolios

B. A larger percentage of variation in Single fund Returns

C. Both of the above

D. None of the above

ANS: Both of the above

178. Which type of equity can be offered to investors in the Accumulation Phase?

A. Zero Beta Equity

B. Low Beta Equity

C. High Beta Equity

D. Equity with Beta = 1

ANS: High Beta Equity

179. What type of strategy is a company following if it is positioning itself as a unique one in the
industry?

ANS: Differentiation

180. _________ is not like a traditional bond.

A. Zero coupon bond

B. Convertible bond

C. Corporate bond

D. Government bond

ANS: Convertible bond

181.Which valuation metric is appropriate to value a firm belonging to a industry which thrives on
high volume and low margin model?
ANS: Price/Sales Ratio

182. In a discretionary PMS, a client cannot impose which of the following condition/restriction?

A. The type of securities in which investment can be made

B. Market timing for buying/selling the securities

C. The investment approaches

D. The industry sector in which investments cannot be made

ANS: Market timing for buying/selling the securities

183. Identify the true statement(s) -

A. Performance Attribution Analysis is the correct way to decide the amount of performance fee that
can be charged by a portfolio manager

B. Performance Attribution Analysis identifies whether a portfolio has outperformed the benchmark
or it has not outperformed the benchmark in terms of risk-return metrics

C. Both of the above

D. None of the above

ANS: Performance Attribution Analysis identifies whether a portfolio has outperformed the
benchmark or it has not outperformed the benchmark in terms of risk-return metrics

184. An investor has deposited Rs 50 lakhs with a fund manager. Out of this, only Rs. 35 lakhs were
invested and this earned Rs. 3,40,000. How much return did the investor effectively earn?

ANS: 6.8%

185. Identify the INCORRECT statement with respect to Currency Risk.

A. Currency risk can increase the realized return on a foreign investment

B. Currency risk can decrease the realized returns on a foreign investment

C. Currency risk is covered by the returns generated on foreign investments

D. Currency risk arises due to unpredictability in exchange rate

ANS: Currency risk is covered by the returns generated on foreign investments

186.________is not considered a part of Rebalancing cost.

ANS: PMS fees payable

187. Which of these incomes will NOT be earned by a PMS client?

A. Interest income

B. Capital gains from sale of business

C. Dividend income

D. Capital gains from sale of securities

ANS: Capital gains from sale of business

188. An investor has a limited and low means of income. Which of these goals should he give a low
priority?

A. Buying a house for his own residence

B. Buying a health insurance

C. Buying a Multi Utility Vehicle

D. Providing for children higher education

ANS: Buying a Multi Utility Vehicle

189. Clause 12(B) of Schedule III of SEBI (Portfolio Managers) Regulations relate to _______.

ANS: It relates to Proprietary trading

190. There are several benefits of economies of scale for a mutual fund. Which of these is NOT a
benefit of economies of scale for a mutual fund?

A. Providing all required information

B. Negotiating better terms with brokers

C. Costs on investment research

D. Engaging professional managers

ANS: Providing all required information

191. A company's market beta is 1.25 and the risk-free rate is 6 percent. What is the estimated equity
return as per CAPM if the market risk premium in the country is 9 percent?

ANS: 17.25%

192. What are the bonds known as which are issued by Government Agencies?

A. Government Bonds

B. Public Sector Bonds

C. Agency Bonds

D. Public Securities

ANS: Public Sector Bonds

193. For which category/categories of FPIs is Section 9A of the Income Tax Act 1961 NOT
applicable?

ANS: Category I FPIs only

194. What does 'Up front' mean under the PMS regulations?

ANS: A Portfolio Manager will not charge any fees at beginning before providing any service to
client

195. ________ is the top most attribute while choosing a comparable benchmark index.

ANS: Investment approach

196. _________ can be a day count convention in the Fixed Income markets of the world.

A. Actual/Actual

B. Actual/365

C. Actual/360

D. All of the above

ANSWER: All of the above

197. Before SEBI issues the certificate of registration to a PMS, it has to ensure that the applicant has
appointed:

A. Compliance Officer

B. Principal Officer

C. At least five person who are graduate from a university recognized by Central or
State government and has at least 2 years’ experience in securities market related activities

A. All A, B and C

B. Only A and B

C. Only B and C

D. Only A and C

ANSWER: Only A and B

198. Mr. Soham is a fund manager and he has invested the funds in two stocks A and B in the ratio 6:
4 respectively. The beta of stock A is 1.2 and the beta of stock B is 0.6. Calculate the Portfolio Beta.

ANS: 0.96

199. Is it correct for the PMS to execute Off-Market transactions in the clients account?

A. Yes, when it is required for providing margin for client's own positions

B. Yes, when it is for dealing in unlisted securities

C. Yes, when it is for settlement of client's own trades

D. All of the above

ANS: All of the above

200.________ of a Futures Contract is not decided on the date of entry into the contract.

ANS: The discounting rate

NISM XXI A Important Questions

Question Set 05 of 07

 Question 201 to 250

201. For a person to be qualified as an NRI, he must have stayed outside India for more than days in
a previous financial year.

ANS: 182

202. Which of the following is considered to be an investment objective?

A. Current income

B. Capital preservation

C. Capital appreciation

D. All of the above

ANS: All of the above

203. The first step in the investment process is the development of __________.

ANS: Investment Policy statement

204. _______ marked the beginning of PMS when SEBI issued SEBI (Portfolio Managers)
Regulations.

ANS: January 1993

205. Except for the one that provides only the _______ every portfolio manager shall appoint a
custodian in respect of securities managed or administered by it.

ANS: advisory services

206. Which of following entity is NOT eligible to invest into PMS?

A. Association of person

B. Partnership Firms

C. Proprietorship firms
D. None of the above

ANS: None of the above

207. If there is an uncertainty with respect to the future payment, the investor would require return
more than the nominal required rate of return. The additional component is called ________.

ANS: Risk premium

208. Portfolio performance measure of "Information Ratio" ________.

ANS: calculates average differential return per unit of variability of differential return

209. Arbitrage opportunities can exist between ______.

A. Two futures prices

B. Spot and futures prices

C. Futures and options prices

D. All of the above

ANS: All of the above

210. The measure of performance which divides the portfolio's risk premium by the portfolio's beta
is the ________.

ANS: Treynor measure

211. What is/are the regulatory constraints for investors resident in India?

A. Access to information which is unavailable to the general public

B. Investment in overseas markets

C. Both of the above

D. None of the above

ANS: Both of the above

212. As per SEBI Regulations, what is the application amount of a QIB which will give them the
status of Anchor Investor?

ANS: Rs. 10 crores

213. Calculate the duration of a zero-coupon bond which has a balance term to maturity of four
years.

ANS: Four Years

214. What type of investment objective should be pursued by an investor during the Consolidation
phase?

ANS: Capital Preservation

215. ___________ costs influence the Portfolio Rebalancing decisions.

ANS: Transaction costs and Taxes

216. With respect to a Bond, what is an Indenture?

A. an Indenture is a special kind of high value bond

B. An Indenture is a clause of indemnity in a bond

C. An Indenture is a legal agreement describing the features of a bond

D. An Indenture is the power of SEBI to write off the liability on a bond

ANS: An Indenture is a legal agreement describing the features of a bond

217. The threshold frequency of performance reporting required by the portfolio managers as per
SEBI (Portfolio managers) regulations is

ANS: 3 months

218. Identify the INCORRECT statement with respect to fees paid by the client to the portfolio
manager.

A. The client does not have to pay fees for services which are outsourced by the portfolio manager

B. Each service type wise fee payable is agreed upon

C. Fee payable by the client is agreed upon in the initial agreement

D. Performance fee charged by Portfolio manager is completely negotiable

ANS: The client does not have to pay fees for services which are outsourced by the
portfolio manager

219. A PMS firm need not keep which of these records?

A. Balance sheet of the firm

B. Profit and Loss Account of the firm

C. Financial statements of companies in which the PMS has invested

D. Auditor's report of the firm

ANS: Financial statements of companies in which the PMS has invested

220. An Appraisal Ratio makes use of Tracking error - State whether True or False?

A. True as a denominator

B. True - as a numerator

C. False - Appraisal Ratio does not use Tracking error

ANS: True - as a denominator

221. A net amount of Rs 25,000 has to be paid as interest to an investor. The TDS (Tax Deducted at
Source) is 10%. Calculate how much should be set aside for the payment of interest?

ANS: Rs. 27777.77

222. __________ cannot be an objective for investment.

ANS: Capital Rationing

223. Fundamental Analysis is the process of determining _________ for the stock.

ANS: Intrinsic value

224. What is the Cash Management team of a mutual fund responsible for?
ANS: It’s the interface between banks and fund management team

225. When an individual faces shortfall of money, his/her immediate effective response is to
________.

ANS: Borrow

226. The _________ has the power to appoint an auditor to conduct annual audits of records of
their transactions with a PMS firm.

ANS: Client

227.Mr. Avinash is a portfolio manager and is planning to sell securities but he is not sure about
the ownership or existence of the securities. Should he go ahead with the deal?

A. Yes, he can go ahead with the deal because it is for the company to prove the
security's authenticity

B. Yes, he can go ahead with the deal because his intentions are good

C. Yes, he can go ahead with the deal because by the time of the completion of the transaction
he will have clarity

D. No, he cannot go ahead with the deal because it will be deemed a fraudulent transaction as
per SEBI's Prevention of fraudulent practices

ANS: No, he cannot go ahead with the deal because it will be deemed a fraudulent transaction as per
SEBI's Prevention of fraudulent practices

228. Market experts are predicting a high volatility period for the next 2-3 years to come. Investors
in which of following phases should be alert and consider rebalancing?

A. Accumulating and Consolidation phases

B. Consolidation and Spending phases

C. Gifting and Consolidation phases

D. Gifting and Accumulating phases

ANS: Consolidation and Spending phases

229. Mr. Mistry has been granted a certificate as a registered Portfolio Manager by SEBI. What can
lead to cancellation / suspension of his registration with SEBI in the next 12 months?
A. The principal officer of Mr. Mistry has acquired a CFA charter only recently

B. Mr. Mistry has a net worth of Rs. 5 crores

C. The Compliance Officer of Mr. Mistry has been recently charged for an economic offence

ANS: The Compliance Officer of Mr. Mistry has been recently charged for an economic offence

230. Beta is used to measure ______.

ANS: Systematic risk

231. __________ are the beneficiaries of a Mutual Fund trust.

ANS: Unit holders

232. Ms. Shobha has invested Rs 10 lakhs in USA when the USD/INR rate was Rs. 74.25 per USD.
After about six months, the USD/INR rate has changed to Rs. 71.25 per USD. In this scenario, the
new INR value of the investment –

A. Will depend on the change in the value of investment in USA and its value in US Dollars

B. Will surely decrease as INR has appreciated

A. Only A

B. Only B

C. Both A and B

D. Neither A nor B

ANS: Only A

233. Identify the TRUE statement with respect to 'Returns'.

A. The Money Weighted rate of return is equivalent to Annualized Holding period return

B. The Time Weighted rate of return is equivalent to Geometric Mean

C. Both of the above

D. None of the above

ANS: The Time Weighted rate of return is equivalent to Geometric Mean

234. Identify which provision of portfolio managers regulations is not applicable for eligible fund
managers?

A. Submissions of required declarations to provide services to eligible investment funds

B. Compliance under section 9A of the income Tax Act

C. Disclosure requirements towards eligible investment funds

D. Audit of overseas fund

ANS: Audit of overseas fund

235. Identify the true statement(s) -

A. While evaluating a scheme, the expenses ratio is more significant for debt mutual fund schemes
than equity mutual fund schemes.

B. While investing in a short-term debt mutual fund, one must verify the credit quality of the
portfolio

A. Only A

B. Only B

C. Both A and B

D. Neither A nor B

ANS: Both A and B

236. A Portfolio Manager believes that the equity market is overpriced and can correct shortly. What
action should he take?

A. He should adopt a wait and watch strategy

B. Rebalancing should be done depending on the investor psychology

C. Assign more weight to equity till the time market corrects

D. Reduce weight in equity before the market corrects

ANS: Reduce weight in equity before the market corrects

237. Ms. Kavita is a PMS Distributor. Her client wants some explanations on the way the
performance projections are made. What should she do?

A. Ms. Kavita should inform the clients that in real life, the projections never come true and hence
they can be ignored
B. Ms. Kavita should express her inability to explain as it is a complex subject

C. Ms. Kavita should refer the client to the Portfolio Manager

D. Ms. Kavita is expected to explain and should take all efforts to explain it

ANS: Ms. Kavita is expected to explain and should take all efforts to explain it

238. Identify the TRUE statement with respect to Investment Policy statement.

A. Investment policy statement is a document which needs periodic updates as per the investors
requirements

B. Investment policy statement is an offer document prepared by the portfolio manager to attract and
guide the investors

C. Investment policy statement is a blank form provided by SEBI which needs to be filled up by the
investors

D. All of the above

ANS: Investment policy statement is a document which needs periodic updates as per the investors
requirements

239. Which section of Companies Act 2013 defines a body corporate?

ANS: Section 2 (11)

240. Mr. Amit has a grievance with the portfolio manager and he submits the same on 1st September.
The portfolio manager has to redress this grievance before _________.

ANS: 1st October of the same year

241. Which of these contracts have an inherent risk of default as the parties to the transaction may
fail to pay the agreed amount or deliver the commodity on maturity of the contract?

A. A Futures Contract

B. A Forward Contract

C. An Options Contract

D. All of the above

ANS: A Forward Contract

242. With respect to equity markets, what does Impact Cost mean?

A. Percentage price movement caused by a particular order size

B. Liquidity risk measure

C. Risk in illiquid stocks

D. All of the above

ANS: All of the above

243. The investment objective of Mr. Sundar is to have a regular income. He approaches a PMS firm
for this purpose. Among the given four choices, which will be the preferred choice of the portfolio
manager?

A. New IPO's

B. Dividend paying equity shares

C. Zero coupon bonds

D. Small and Mid-cap equity shares

ANS: Dividend paying equity shares

244. An unlisted company is inviting subscription of securities from a select group of persons. This
issue is neither a public issue nor a rights issue. Such an issue is called as a _______.

ANS: Private Placement

245. Which of these is NOT considered by SEBI to decide the eligibility of a person as per the
Declaration of Fit and Proper person?

A. Integrity in character

B. Financial solvency

C. Conviction orders

D. Office of profit held

ANS: Office of profit held

246. As per SEBI's Regulations on Fee and Charges, what is the 'High-Watermark' for a PMS
scheme?
A. High Watermark is the highest value of portfolio account has reached

B. High Watermark is the threshold of portfolio value beyond which the performance-based fees can

be charged by the portfolio manager

A. Only A

B. Only B

C. Both A and B

D. Neither A nor B

ANS: Both A and B

247. Identify the additional documents which have to be collected for KYC of Non-Resident
investors.

A. Certified true copy of birth certificate

B. Certified true copy of the Overseas address

C. Certified true copy of passport

A. Only A and B

B. Only B and C

C. Only A and C

D. All A, B and C

ANS: Only B and C

248. Investment in antiques is an example of __________.

A. Intangible Investment

B. Alternate Investment

C. Securities form of Investment

D. Real Investment

ANS: Alternate Investment

249. Identify the FALSE statement. Dealing in securities shall be deemed to be a manipulative or
fraudulent if it involves
 A. Entering into a trade in securities without the intention of performing it

B. Selling or pledging of securities in physical or dematerialized form

C. Inducing a person for dealing in securities for artificially inflating or depressing the prices in
securities

D. Inducing any person to subscribe to an issue of shares

ANS: Selling or pledging of securities in physical or dematerialized form

250. Risks due to sector specific/company specific factors is referred as _________.

A. Systematic risks

B. Unsystematic risks

C. Speculative risks

D. Total risks

ANS: Unsystematic risks

NISM XXI A Important Questions

Question Set 06 of 07

 Question 251 to 300

251. Record of transactions to be maintained under the Prevention of Money Laundering Act
includes Cash transactions of the value of more than ________.

ANS: Rs.10 lakh

252. Offer for sale (OFS) is method of share sale for ________.

ANS: listed companies

253. Asset allocation is ________.

ANS: The process of dividing funds into asset classes

254. A foreign portfolio investor can invest in the following securities?

A. Rupee denominated credit enhanced bonds

B. Derivatives traded on a recognised stock exchange

C. Domestic Mutual Fund Schemes

D. All of the above

ANS: All of the above

255. Which of the following is the function of the secondary markets?

A. Provide information about public companies

B. Provide a platform for making public issues

C. Provide liquidity for securities issued

D. All of the above

ANS: All of the above

256. Up to Assessment Year _____. domestic companies and mutual funds were liable to pay
Dividend Distribution Tax (DDT) on the dividend.

ANS: 2020-21

257. Which of the following is an example of trading rules and indicators?

A. Moving averages

B. Bollinger-Band Analysis

C. Trend-line analysis

D. All of the above

ANS: All of the above

258. A ___________ is a trust that pools the savings of a number of investors who share a common
financial goal.

ANS: Mutual Fund

259. A trade that is squared-off during the day ________.

A. Is not guaranteed by the exchange

B. Is cancelled by the exchange

C. Is not considered in calculating trading volumes

D. Does not require delivery of shares

ANS: Does not require delivery of shares

260. The risk of default on obligations arising out of trading is controlled by the exchange by
________.

ANS: Imposing margins

261. Generally, the relationship between Risk and Return is __________.

ANS: Higher the risk higher the return

262. The sale of which of these securities will result in short term capital gain if they are held for
more than 12 months but less than 24 months.

A. Unlisted Shares

B. Listed Shares

C. Listed Bonds

D. Units of UTI

ANS: Unlisted Shares

263. __________ is/are significant metrics of measuring portfolio manager's performance.

A. Investment returns

B. Investment risk profile

C. Investment style

D. All of the above

ANS: All of the above

264. Which of this information about client grievances needs to be posted to the regulator?

A. Nature of complaints

B. Number of complaints

C. Any other particulars if required

A. Only A and B

B. Only B and C

C. Only A and C

D. All A, B and C

ANS: All A, B, and C

265. When does the need for re-balancing of a portfolio arise?

A. Due to change in asset weights

B. Due to change in asset prices

C. Due to change in Risk-Return characteristics

D. All of the above

ANS: All of the above

266. Identify the entity which is currently NOT a KYC Registration Agency?

A. CDSL Ventures Limited

B. NSDL Database Management Limited

C. CAMS Investor Services Pvt. Ltd

D. HDFC Ventures Itd

ANS: HDFC Ventures ltd

267. Mr. Gupta is a promoter of a yet to be registered company. He wants PMS services for his
company and wants to invest Rs. 3 crores. What should the PMS firm do?

A. The PMS firm should inform the promoter that he is ineligible for PMS services
B. The PMS firm should consider the promoter as an individual and take him as an individual client

C. The PMS firm should ask the promoter to revisit after the registration of the company is done

D. The PMS firm should inquire and know in what capacity does the promoter wants to invest the
fund

ANS: The PMS firm should ask the promoter to revisit after the registration of the company is done

268. Identify the INCORRECT statement with respect to premature withdrawal of funds by a client.

A. A lock-in period can be imposed on the client

B. The PMS agreement should include terms for early withdrawal of funds by the client

C. The PMS agreement should include the details of withdrawal fees

D. All of the above are incorrect

ANS: A lock-in period can be imposed on the client

269. What are the characteristics of a Straight Arrow investor?

A. Confident and careful investor

B. Anxious and impetuous investor

C. Well balanced investor

D. Anxious and careful investor

ANS: Well-balanced investor

270. What is the YTM of a 10% Coupon Bond of face value of Rs 1000 and which is currently being
sold at Rs. 1000 and which has a balance maturity period of 3 years?

ANS: 10%

271. 'Day Count Convention' is a method ________.

ANS: to arrive at holding period to calculate accrued interest

272. The lowest Expense Ratio threshold for open ended equity-oriented schemes is ______.

ANS: 1.05%
273. Which feature can be typically related to Accumulation Phase of an investor?

A. Less period of time left to retire

B. As compared to net worth, the liabilities are higher

C. There is supplemental income from accumulated assets

D. The investor has sufficient assets

ANS: As compared to net worth, the liabilities are higher

274. What type of an organisation is a Mutual Fund?

A. Mutual Fund is an Advisory

B. Mutual Fund is Trust

C. Mutual Fund is Special Purpose Vehicle (SPV)

D. Mutual Fund is Depository and Custodian

ANS: Mutual Fund is Trust

275. What do the Buy-Side Analyst do?

ANS: Buy-Side Analyst buy securities for their own investment accounts

276. From 2015, all Indians and NRIs have to submit an additional declaration to register for PMS
services. What is the name of this declaration?

ANS: FATCA

277. Mr. lyer is a portfolio manager and he is unable to find a comparable benchmark index for
portfolio analysis. In such a case, he should follow which of these approaches?

A. customised benchmark should be created

B. Benchmark index, closest in asset allocation should be considered

C. Peer group comparison can be done

D. Sectoral index of the dominant sector in the portfolio should be considered

ANS: A customised benchmark should be created

278. As per GIPS Advertisement guidelines, the leverage and use of derivatives have to be
mandatorily disclosed in an advertisement by a Portfolio Manager. Is this statement true and why?

A. Yes, it is true if there is material impact on returns due to their usage

B. Yes, it is true if they are only used for efficient portfolio management

C. No, it’s not true as GIPS does not mention about derivatives and leverage

ANS: Yes, it is true if there is material impact on returns due to their usage

279. Which of these is NOT included in the performance reports given to the investors?

A. Cash balance

B. Number of securities held in the portfolio

C. The Dividend Pay-out ratio of the companies held in the portfolio

D. Composition of portfolio

ANS: The Dividend Pay-out ratio of the companies held in the portfolio

280. Identify the true statement(s) with respect to a benchmark for a composite.

A. The benchmark can be a readily recognised benchmark

B. The benchmark can be a customised benchmark

C. The benchmark can be a combination of benchmarks

D. All of the above

ANS: All of the above

281. Identify the TRUE statement with respect to market price of a bond and YTM.

A. If the market price of a bond is lower than the face value, it's YTM is equal than the coupon rate

B. If the market price of a bond is higher than the face value, it's YTM is greater than the coupon rate

C. If the market price of a bond is lower than the face value, it's YTM is greater than the coupon rate

D. If the market price of a bond is lower than the face value, it's YTM is lesser than the coupon rate

ANS: If the market price of a bond is lower than the face value, it's YTM is greater than the coupon
rate
282. The risk of fluctuations in currency exchange rates is a _______.

ANS: Systematic risk

283. When we mention the term ‘Risk’ in investments, what actually are we referring to?

ANS: Certainty of Amount

284. What is ‘Duration of a Bond"?

ANS: It is the payback period to repay the purchasing price of the bond

285. Identify the primary mode by which Corporate Bonds are raised in India?

A. Private Placement

B. Auction

C. OTC - Over the Counter

D. Public Issue

ANS: Private Placement

286. Under which Chapter of SEBI (Intermediaries) Regulations 2008, can action be taken against
defaulting portfolio managers?

ANS: Chapter V

287. A mutual fund has to provide various disclosures which give details of its portfolios. Which of
these disclosure does not provide any information where the mutual fund scheme has invested?

A. Fund Fact Sheet

B. Scheme wise dashboard

C. Portfolio disclosure

D. NAV disclosure

ANS: NAV disclosure

288. What is the likely impact on the stock prices of fertilizer manufacturing companies if it is
expected that there will be poor monsoon in the current year?

A. The stock prices of fertilizer manufacturing companies may increase

B. The stock prices of fertilizer manufacturing companies may decrease

C. The stock prices of fertilizer manufacturing companies may be unaffected

ANS: The stock prices of fertilizer manufacturing companies may decrease

289. A foreign company has paid dividend in India to a Non-resident in India. Inform if this dividend
taxable in India?

A. It’s not taxable as it is a foreign company

B. It’s not taxable as the individual is a non-resident

C. Its taxable as it is paid by a foreign company

D. Its taxable as it is paid in India

ANS: Its taxable as it is paid in India

290. In which asset class can one find categories like Small Cap, Large Cap and Mid Cap?

A. Hybrids

B. Equities

C. Bills

D. Bonds

ANS: Equities

291.Calculate the coupon yield of bond which pays a coupon of Rs 14. The face value is Rs. 100 and
the market price is Rs. 108.

ANS: 14%

292. Mr. Abdul is a citizen of Bangladesh. He wants to invest Rs. 1 crore in an Indian PMS. Is he
eligible to invest?

A. Mr. Abdul can invest only if his wife is an Indian citizen

B. Mr. Abdul can invest only if his grandparents were citizens of India
C. Both of the above

D. None of the above

ANS: None of the above

293. Identify which of these is NOT one of the four steps in the portfolio management process?

A. Look at the current and future financial condition

B. Develop a policy statement

C. Target a customer to sell the PMS

D. Construction of a portfolio of securities

ANS: Target a customer to sell the PMS

294. Identify the TRUE statement - -

A. A saver can never be an investor

B. Every investor is a saver

C. Every saver is an investor

D. Savers and investors are always two different sets of people

ANS: Every investor is a saver

295. What should a portfolio manager disclose when he is offering investment advice in public
domain?

A. He should disclose the wealth and investment details of his family members

B. He should disclose his investment position in the security in advice

C. He should disclose his entire portfolio of investment

D. He should disclose his fixed deposits in various banks

ANS: He should disclose his investment position in the security in advice

296. The full form of GIPS is _____.

ANS: Global Investment Performance Standards

297. Which of the following Portfolio Management Service (PMS) is NOT classified based
on provider of the services?

A. AMC PMS

B. Brokerage House PMS

C. Boutique PMS

D. SME PMS

ANS: SME PMS

298. Which of these is a characteristic of the ‘Maturity Phase’ of an industry life cycle?

A. In the Maturity Phase, the growth of the industry matches the economy’s growth

B. In the Maturity Phase, the profit margins are the highest

C. Maturity Phase is the shortest phase in the life cycle of industry

D. In the Maturity Phase there is no strong competition pressure

ANS: In the Maturity Phase, the growth of the industry matches the economy’s growth

299. According to the definition of Mutual fund as per SEBI (Mutual Fund) Regulations -1996,
which of these is NOT a feature of a Mutual Fund?

A. Mutual fund invests in real estate

B. Mutual fund sells unit

C. Mutual fund raise money through various schemes

D. Mutual fund is a trust

ANS: Mutual fund invests in real estate

300. Identify the FALSE statement with respect to asset allocation decision.

A. The asset allocation decision involves arriving at the proportions of investments into various types
of investments

B. The asset allocation decision influences the long run performance of the portfolio investments

C. The asset allocation decision is isolated from the basic portfolio management process
 D. The asset allocation decision considers the risk return characteristics of various investment
avenues

ANS: The asset allocation decision is isolated from the basic portfolio management process

 Question 301 to 350

301. __________ phase is the stage when investors in their early-to-middle earning years attempt to
accumulate assets to satisfy near-term needs, e.g., children's education or down payment on a home.

ANS: Accumulation

302. The objective of the SEBI (Prohibition of Insider Trading) Regulations is to prohibit insider
from ________ on matters relating to insider trading.

A. Counselling

B. Dealing

C. Communicating

D. All of the above

ANS: All of the above

303. Sharpe's performance measure divides the portfolio's risk premium by the _______.

ANS: Standard deviation of the rate of return

304.The settlement price for determining daily mark-to-market margins for a futures contract is
_________.

ANS: the weighted average price of last 30 minutes of trading

305. The minimum investment required for PMS investment is ______.

ANS: Rs. 50 Lacs

306. Which of the following is essential for the public issue of a debt security?

A. The debt instruments must be credit rated

B. The debt instruments should have a minimum coupon specified

C. The debt issue size should be greater than Rs. 5000 Crs

D. The debt issuer must stand as guarantor for the payment of principal and interest

ANS: The debt instruments must be credit rated

307. Commission received from business forms part of income from ________.

ANS: Business and profession

308.The types of securities purchased by the fund, depends on ________.

ANS: the investment objectives of the fund

309. Future value of the investment is influenced by ________.

A. Time period

B. Rate of return

C. Both of the above

D. None of the above

ANS: Both of the above

310. Mr. Suresh is a PMS distributor and he is marketing Portfolio Management Services to a
potential investor. From the options given below, choose which action should Mr. Suresh take?

A. Convince the investor that his firm has the best investment solutions

B. Keeping in mind the investors interest, a risk profiling should be done

C. Offer the investor some rebates on the investment alternatives his firm has to offer

D. All of the above

ANS: Keeping in mind the investors interest, a risk profiling should be done

311. An auditor was auditing the books of a PMS firm. While auditing it did not find any records
which supported the recommendations made by the PMS firm. Is this acceptable or not?
A. It is NOT acceptable as the central vigilance needs to cross verify the recommendations for any
cause of money laundering

B. It is NOT acceptable as it is required as per the SEBI (Portfolio Managers) Regulations 2020

C. YES, it is acceptable as it is not required to be kept by a Discretionary Portfolio Manager

D. YES, it is acceptable as it is related to a recommendation and not actual execution of the

transaction

ANS: It is NOT acceptable as it is required as per the SEBI (Portfolio Managers) Regulations 2020

312. Debts funds have

A. Default risk

B. Interest rate risk

C. Both of the above

D. None of the above

ANS: Both of the above

313. Which of this aspect is NOT included in the agreement between the portfolio manager and the
client?

A. The period of the PMS contract

B. The provisions related to early termination of the PMS contract

C. The procedure of settling the clients account

D. The various portfolio schemes which are managed by the portfolio manager

ANS: The various portfolio schemes which are managed by the portfolio manager

314. A new category of 'resident' has been introduced in clause (1A) of Section 6 of Income Tax Act
with effect from Assessment Year 2021-22. What is it?

ANS: Deemed resident

315. ______ need not be furnished to the client by a portfolio manager.

A. The salary payable to the principal officer

B. Risks foreseen related to client’s investment

C. Details of commission paid to the distributor

D. Beneficial interest, dividend etc. received on the client’s fund

ANS: The salary payable to the principal officer

316. A Government Bond will generally NOT have which type of risk?

A. Purchasing Power Risk

B. Interest Rate Risk

C. Market Risk

D. Default Risk

ANS: Default Risk

317. Identify which of these is not an example of a unique preferences of the investor?

A. Selection of securities as per religious principles

B. Desired Risk to Return Ratio

C. Emotional attachment to an industry

D. Ethical choices

ANS: Desired Risk to Return Ratio

318. Mr. Suresh wants to invest in long term corporate bonds as they are giving higher returns.
However, his portfolio manager is of a strong belief that inflation and interest rates will be on a rise
for the next 2-3 years. Which of these is/are valid arguments to convince Mr. Suresh not to invest in
long term corporate bonds?

A. Due to rising inflation, the profitability of corporates may be negatively affected leading to
corporate default

B. The bond prices and market interest rates are inversely related

C. Both of the above

D. None of the above

ANS: Both of the above

319. ________ a is not related to Commodity Derivates Exchanges in India.

A. MCX

B. ICEX

C. CCIL

D. NCDEX

ANS: CCIL

320. _________ is the entity which holds the funds and securities of large clients such as banks.

A. Portfolio Manager

B. Custodian

C. Depository

D. Fund Manager

ANS: Custodian

321. The contributions made by unitholders into a scheme of a mutual fund are _______.

A. Invested in the name of the investor according to his/her preference

B. Pooled along with others contributions to the scheme and are invested in financial securities as per
the investment objective

C. Deposited with a bank who will be the Trustee and these are used for fund management activities

D. Pooled and given as loans to various companies as equity contributions and debt contributions

ANS: Pooled along with others contributions to the scheme and are invested in financial securities as
per the investment objective

322. Debt instruments with 'C’ credit rating is considered to have _______.

A. very high risk of default regarding timely servicing of financial obligations

B. have moderate risk of default regarding timely servicing of financial obligations

C. adequate degree of safety regarding timely servicing of financial obligations

D. highest degree of safety regarding timely servicing of financial obligations

ANS: very high risk of default regarding timely servicing of financial obligations
323. A debt security has been assigned a credit rating of BBB. This means that this security is
______.

ANS: Moderately safe

324. Identify the TRUE statement with respect to the 'Psychographic Analysis’ of investors?

A. As per Bailard, Biehl and Kaiser (BB&K) model, an investor broadly belongs to one of the five
types of investor categories

B. Due to extraneous factors, an investor can sometime display behaviours other than his normal
type

A. Only Ais true

B. Only B is true

C. Both A and B are true

D. Neither A nor B is true

ANS: Both A and B are true

325. By which way will the residential status of an individual be determined as per the Income
Tax Act from the assessment year 2021-22?

A. Based on the period of stay in India

B. Based on citizenship

C. Based on the total income from Indian sources

D. All of the above

ANS: All of the above

326. Identify which of these is a big challenge in the creation of a customized benchmark?

A. The cost of maintenance of the benchmark is high

B. It is difficult to track the performance of the benchmark

C. It is difficult to find comparable securities

D. It is difficult to decide the weights of the securities

ANS: The cost of maintenance of the benchmark is high

327. Why does SEBI seek some business information as part of the application for registration for
Portfolio Managers?

A. It is to understand if the portfolio manager has the infrastructure in place to deliver good quality
of PMS

B. It is to understand the integrity of third-party service providers like stock brokers which are
contracted by the portfolio managers

A. Only A

B. Only B

C. Both A and B

D. Neither A nor B

ANS: Both A and B

328. Mr. Goel own a house worth Rs 1 crore and has financial assets worth Rs. 40 Lakhs. He also
has an outstanding home loan of Rs 20 Lakhs and an outstanding car loan of Rs 3

Lakhs. Calculate the estimated Net Worth of Mr. Goel.

ANS: Rs. 1.17 crore

329. Identify the true statement with respect to ‘Open Interest’.

A. Open Interest is the number of derivative contracts that are not settled by the end of a particular
day

B. Open Interest is the interest quoted shown by traders on a public screen

C. Open Interest is the number of successful trades during a particular day

D. Open Interest is the number of derivative contracts which are booked by traders

ANS: Open Interest is the number of derivative contracts that are not settled by the end of a
particular day

330. While calculating the price volatility in a bond, which of the following information is NOT
required?

A. Maturity period of a bond

B. Coupon rate of the bond

C. Required rate of return by the investor

D. Face value of the bond

ANS: Required rate of return by the investor

331. Which of these forms a part of the GIPS advertising guidelines?

A. Five years of Annual composite performance returns

B. Currency used to express performance

C. Appropriate composite benchmark

D. All of these

ANS: All of these

332. Who is a ‘Discretionary portfolio manager’?

A. A Discretionary portfolio manager is one who exercises any degree of discretion relating to
investment of funds of the client

B. A Discretionary portfolio manager is one who acts according to the directions of the client

C. A Discretionary portfolio manager is one who is entitled to make discretionary expenditure

D. A Discretionary portfolio manager is one who is free to take any decision regarding the wealth of
the investor

ANS: A Discretionary portfolio manager is one who exercises any degree of discretion relating to
investment of funds of the client

333. Which of these financial indicators indicate that an investor has the ability to invest
periodically?

A. The financial assets of the investor are greater than regular income

B. The financial assets of the investor are greater than financial liabilities

C. The regular income of the investor is greater than expenses

D. The regular income of the investor is greater than financial liabilities

ANS: The regular income of the investor is greater than expenses

334. A PMS client is unable to meet the specified requirements with respect to a transaction in
accordance with the Prevention of Money Laundering Act (PMLA). In such a case what can the
Reporting Entity do?
A. The Reporting Entity can stop the transaction

B. The Reporting Entity can only report to SEBI

C. The Reporting Entity can only record the transaction and report

D. The Reporting Entity can attach the property of the client

ANS: The Reporting Entity can stop the transaction

335. Which of these value(s) will be required for calculating Portfolio Beta?

A. Values of chosen index on matching dates

B. Prices of all individual stocks in the portfolio

C. Proportions of investment in individual stocks

D. All of the above

ANS: All of the above

336. A Portfolio Manager might not provide to SEBI, _________.

ANS: the net worth of client's whose portfolio's they manage

337. A company has gone public buy there is a shortfall of 20,000 shares to complete the minimum
subscription rule. A client of a PMS distributor wants to invest in these shares but does not have
funds to buy the complete 20,000 shares. Identify what should the PMS distributor do?

A. The PMS distributor should arrange for a bank loan to finance the shortfall

B. The PMS distributor should lend his own money to cover the shortfall

C. The PMS distributor should pay on the client's behalf to cover the shortfall

D. None of the above

ANS: None of the above

338. Ms. Harshita has taken a short position in a ‘Put Option’. This means that she believes that
________.

A. The price of underlying will go below strike price

B. The price of underlying will not go below strike price

C. The price of underlying will not go above strike price

D. The price of underlying will not go below current market price

ANS: The price of underlying will not go below strike price

339. Investors in the ________ phase should not approach a PMS firm which is famous for
generating high growth for the wealth of investors?

ANS: Spending

340. An appropriate day count convention used in the Bond markets is _______.

ANS: 30/360

341. Value of correlation ranges from _______.

ANS: -1 to +1

342. On what parameter is the classification of Active and Passive funds based on?

A. On the structure of fund

B. On the background of the fund manager

C. On the investment universe

D. On the fund management style

ANS: On the fund management style

343. The bank account containing the funds of the clients in PMS firm is maintained by ________.

ANS: The PMS Firm

344. Due to changes in immigration laws in the USA, there was a fall in the IT sectors stocks. What
type of risk is this?

ANS: Business Sector Risk

345. A Micro Finance Self Help Group wanted to invest Rs. 1.5 crore in a PMS. Should the PMS
accept or reject the offer?

A. The offer has to be rejected as a Self-Help group is not eligible to invest in a PMS

B. Accept the offer by creating a trust and include the PMS as the main trustee

ANS: The offer has to be rejected as a Self-Help group is not eligible to invest ina PMS

346. Identify the true statement with respect to withdrawal of funds by the client from a PMS.

A. A client will not be able to prematurely withdraw funds from a PMS

B. A client has the power to withdraw the funds anytime from a PMS

C. The terms of withdrawal have to be included in the PMS agreement itself by the client

ANS: The terms of withdrawal have to be included in the PMS agreement itself by the client

347. As per the SEBI list of Don'ts for a Portfolio Management Service, a Speculative Transaction is
___________.

A. a transaction which is entered even though there is no physical delivery of the security

B. a transaction which is in a contrarian position of the market

C. an investment which is based on an option depending on future price movements

D. a transaction done even though there are no sufficient funds to settle this transaction

ANS: a transaction which is entered even though there is no physical delivery of the security

348. How is the Cost of Acquisition adjusted by indexation in the computation of Long-term capital
gains?

A. Cost of Inflation Index of the year of transfer / Cost of Inflation Index in the year 2001-2002

B. Cost of Inflation Index of the year of transfer of asset / Cost of Inflation Index of the year of
acquisition or 2001-2002 whichever is earlier

C. Cost of Inflation Index of the year of transfer of asset / Cost of Inflation Index of the year of
acquisition or 2001-2002 whichever is later

D. Cost of Inflation Index of the year of acquisition / Cost of Inflation Index of the year of transfer

ANS: Cost of Inflation Index of the year of transfer of asset / Cost of Inflation Index of the year of
acquisition or 2001-2002 whichever is later
349. A PMS firm has suddenly found that there is a shortage of working capital funds. From the
options given below, which will be most acceptable?

A. The PMS firm should borrow for short term from a commercial bank by pledging the securities of
the client

B. The PMS firm should use the common pool of client’s funds in a scheduled commercial bank

C. The PMS firm should charge the client under PMS fees and reduce the distributions to be made to
the client

D. The PMS firm should borrow from a commercial bank for short term

ANS: The PMS firm should borrow from a commercial bank for short term

350. What should be included in the contract with the client on portfolio management?

A. The contract should include the provisions of early termination

B. The contract should include the industries restricted for investment

C. The contract should include the form of repayment on maturity

D. All of the above

ANS: All of the above