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

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Q 1. A strategy which brings in the element of market timing and view based allocation to portfolio management is known
as?
Dynamic Asset Allocation
Strategic Asset Allocation
Tactical Asset Allocation
Periodic Asset Allocation
WRONG ANSWER

CORRECT ANSWER:
Tactical Asset Allocation

Explanation:
Tactical asset allocation regularly adjusts asset allocation as per the changing market conditions subject to forecasts,
whims or guesses. The premise is that by doing this, one can optimize market exposure to best maximize risk-
adjusted returns

This strategy allows portfolio managers to create extra value by taking advantage of certain situations in the
marketplace.

Q 2. Suresh buys a call option on a company with a strike price of Rs 250 per share for a premium of Rs 15 per share. If the
spot price today is Rs 275 per share, the option is said to be _________ .
In The Money
At The Money
Out of Money
CORRECT ANSWER

Explanation:
A call option is In The Money if the market price (spot price) is above the strike price.

Q 3. How do Close-end mutual funds provide liquidity to investors ?

By giving a redemption facility to investors at regular intervals
By facilitating transactions on the stock exchange
By giving a continuous redemption facility to investor
By giving a limited repurchase window to investors
CORRECT ANSWER

Explanation:
A closed-end scheme offers units to investors only during the new fund offer (NFO). The scheme is closed for
transactions with investors after this. The units allotted are redeemed by the fund at the prevalent NAV when the term
is over and the fund ceases to exist after this.

In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a
stock exchange where they are mandatorily listed.
Q 4. ______ is not one of the accepted model of execution of PMS services.
Custodial execution
Individual execution
Pooled Execution
None of the above
WRONG ANSWER

CORRECT ANSWER:
Custodial execution

Explanation:
The portfolio manager has to manage and administer the funds of the investors within the regulatory framework.
There are two popular models of execution.

First one is pool execution i.e. trading for all clients together and then allocating individual securities to each client’s
demat account and the other one is trading in individual client name. In this case, allocation happens automatically
since trade is in individual name.

Q 5. ______ can invest in an Alternative Investment Fund.

Indian Resident Investor
Non Resident Investor
Foreign Investor
All of the above
CORRECT ANSWER

Explanation:
Alternative Investment Fund can raise funds from any investor whether Indian, foreign or non-resident Indians by way
of issue of units

Q 6. A 'Straight Arrow' investor is a/an __________ investor.

Confident and careful
Well balanced
Anxious and careful
Anxious and impetuous
CORRECT ANSWER

Explanation:
As per Bailard, Biehl & Kaiser (BB&K) model, the five types of investors are - the adventurer, the celebrity, the
Individualist, the guardian and the straight-arrow investor.

There are always people who are so well balanced that they cannot be placed in any specific quadrant, so they fall
near the centre; this investor is called a Straight-Arrow investors. On average, this group of investors is a relatively
balanced composite of each of the other four investor types, and by implication a group willing to be exposed to
medium risk.
Q 7. The Stock Exchanges have daily price band for individual stocks at 2%, 5%, 10% or 20% depending on _______ .
Public and Private shareholding
Price Levels
Volatility
All of the above
CORRECT ANSWER

Explanation:
Stock exchanges impose price bands on individual securities to limit volatility in prices.

Daily price bands applicable on securities are as follows:

- Daily price bands on 2%, 5% or 10% either way on securities as specified by the exchange.

- No price bands are applicable on scrips on which derivatives products are available

- Price bands of 20% either way on all remaining scrips.

Q 8. Mr. Mohan has deposited Rs. 5 lakhs with a fund manager. Out of this amount, the fund manager has invested Rs 2.5
lakhs and earned Rs. 60000. What is the effective return for Mr. Mohan?
12%
24%
9%
- 18%
WRONG ANSWER

CORRECT ANSWER:
12%

Explanation:
Mr. Mohan has deposited Rs. 5 lakhs and the effective return has to be calculated on the total amount deposited.

Return on Investment = Net Return on investment / Cost of investment X 100%

= 60000 / 500000 X 100%

= 12%
Q 9. Generally, investor participation is widest in a _________ .
Preferential issue
Public issue
Rights issue
Private placement
CORRECT ANSWER

Explanation:
A Public issue (Initial Public Offer (IPO)) usually receives the maximum investor participation. When a company makes
an IPO, the shares of the company become widely held.

Rights issues gives additional shares only to the existing investors.

Private placement involves issuance of securities to a relatively small number of select investors

Preferential issue means an issue of specified securities by a listed issuer to any select person or group of persons.

Q If an investor wants to know the costs and fees associated with a Portfolio Management Scheme (PMS), he will have to
10.
read the ________ .
Disclosure document
Scheme offer document
Scheme Information Document
Fact Sheet
CORRECT ANSWER

Explanation:
The Portfolio Manager, before taking up an assignment of management of portfolio on behalf of a client is required to
enter into an agreement in writing with the client specifying the details stated in the SEBI (Portfolio Managers
Regulations), 2020. The Portfolio Manager is also required to provide the client with a Disclosure Document
containing specified particulars.

The portfolio manager shall disclose the range of fees charged under various heads in the disclosure document.

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