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TEST DETAILS – The NISM Series XB – Investment Adviser Certification (Level 2) exam is a 100 mark exam with
60% as passing marks. The question paper will consist of 36 multiple choice questions of 1 mark each and 8 Case
Studies having 4 multiple choice questions of 2 marks each ( A total of 36 + 32 = 68 questions). There is 0.25%
negative marking. The time duration is 120 Minutes.
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NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
Question 2 Which amongst the following would you suggest to an investor who is
looking for capital appreciation ?
(a) PPF
Answer Its the obligation of the insured person to disclose all relevant information
Explanation truthfully. For eg. Family history of medical conditions, habits regarding
smoking and drinking, nature of the profession etc. have implications on risk
perception.
Question 3 The financial goals of a person are personal to him and therefore the
Financial Planner have no role in influencing them - State True or False ?
(a) TRUE
(b) FALSE
Question 4 Mr. Swami has invested in an ELSS scheme of a mutual fund a year back.
Now he wishes to invest in an MIP of the same mutual fund. Can it be
held under the same folio?
Answer The Financial Planner may have to provide inputs on the financial goals,
Explanation especially if the client is financially constrained. Also the Financial Plannert
has to help the client prioritize, so that less critical goals are deferred or even
dropped.
So in such cases and other similar cases, the Financial Planner influences the
financial goals of an individual.
Correct Answer 4 Can be held in either the same folio or different folio
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
Answer Asset protection needs is the need to protect assets created. Insurance against
Explanation theft or destruction of goods is an example of insurance product that covers
the risk.
Answer The Indian foreign exchange market has an OTC derivatives market as well as
Explanation an exchange traded derivatives market.
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
Question 7 In which analysis are the Economic, Industry and Company (EIC) factors
considered ?
(a) IV
(b) V
(c) II
Answer Techinal Analysis is more to do with analysing the historic prices and volumes
Explanation in a security.
If the analysis begin from studying the Economy, then Industry and then
Company - Its called Top Down approach.
If the analysis begin from studying the company first and then the industry
and Economy, its called Bottom Up approach.
Correct Answer 8 II
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
Question 9 Which of the following process is most time consuming with respect to
investments in equities ?
(a) market
(b) limit
Answer Direct investing in equity requires access to information, skills to analyse and
Explanation time to monitor and rebalance the portfolio by continuous evaluation.
A ‘limit order’ is where the investor specifies the maximum price at which
they are willing to buy or the minimum price at which they are willing to sell.
(c) Depositories
Question 12
In the Indian currency future markets, which amongst the following is the
correct contract size ?
Answer SEBI has introduced the system of KYC Registration Agency (KRA) to
Explanation enable this.
Intermediaries covered under the uniform KYC norms include mutual funds,
DPs, stock brokers, portfolio managers, venture capital funds and collective
investment schemes.
Correct Answer 12 1000 units of a foreign currency except JPY which is 100000
Answer The contract size in the case of USDINR it is USD 1000; EURINR it is EUR
Explanation 1000; GBPINR it is GBP 1000 and in case of JPYINR it is JPY 100,000.
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
(b) Anchoring
(c) Recency
(d) Familiarity
Question 14 The shares which are listed on a Stock Exchange after an IPO are listed
at ________.
(c) a premium
(d) a discount
Answer In Anchoring bias, Investors stick to some information that may no longer be
Explanation relevant. New information is labelled as incorrect or irrelevant and ignored in
the decision making process.
For example - Investors may be holding some loss making stocks, but they
still do not sell them expecting the stock to perform well, even though there
are negative news inflow of the company.
Correct Answer 14 the issue price or at a premium or Discount to the issue price
Answer The listing price of the shares is decided by the market forces, and can list at
Explanation any price.
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
(a) TRUE
(b) FALSE
When applying for life insurance coverage, it is typically required that the
beneficiary have an insurable interest in the person who is being insured.
(c) Debentures
(d) Bonds
Question 18 Does one need to open a new Demat a/c when a minor turns into a major
?
(a) Yes
(b) No
Answer Open-ended debt schemes have no maturity even though the scheme invests in
Explanation securities with fixed tenors.
The fund manager manages cash flows to earn market returns and provide
liquidity to investors even though the underlying securities are illiquid.
Answer Since demat accounts of minors can be held only on single-name basis,
Explanation the account opening process has to be redone for a minor-turned-major.
Securities held in the old demat account with minor status are transferred to
the new demat account.
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
Question 19 The costs mentioned in today's terms can be translated into the rupee
requirement in future using the formula__________ and the same
formulae can be used for finding out the future value of an amount
invested today.
(a) P X (1 + i) ^n
(b) P X (1 - i) ^n
(c) P / (1 + i) ^n
(d) P + (1 + i)^ n
(a) TRUE
(b) FALSE
Correct Answer 19 P X (1 + i) ^n
Question 21
While constructing a CORE Portfolio, which of these options is not
considered ?
Answer The core portfolio is constructed to meet the long-term goals and strategic
Explanation needs of an investor. It usually consists of Large Cap and Blue Chip stocks.
Changes in the core portfolio are rarely made, only when there is a change in
investor needs, objectives or life stage.
Answer Leverage Ratio measure of the role of debt in the asset build-up of the
Explanation investor. Higher the leverage, more risky it is for the individual’s financial
situation.
Question 24 __________ is the decision that comes out of calls on the likely behaviour
of the market.
Small investors keep watching other participants for confirmation and then
end up entering when the markets are over heated and poised for correction.
Answer Tactical Asset Allocation is the decision that comes out of calls on the likely
Explanation behaviour of the market.
Strategic Asset Allocation is the ideal that comes out of the risk profile of the
individual.
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
Question 25 If the real rate of interest is 5% and rate of inflation is 3%, what is the
nominal rate of return?
(a) 8%
(b) 8.15%
(c) 2%
(d) 2.74%
Question 26 Stocks which have a beta greater than one are likely to be ______ riskier
than the market.
(a) more
(b) less
(c) equally
(d) no effect
Answer Beta measures the systematic risk in a stock by measuring the volatility in the
Explanation price of a stock relative to the overall market.
The market index is assumed to have a beta of 1. Stocks with a beta greater
than one are likely to be riskier than the market. Stocks with beta less than one
are less risky than the market.
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
Answer Age - Lower the age, higher the risk that can be taken (negative relationship)
Explanation
No. of Dependents - Risk appetite decreases as the number of dependent
members increases (negative relationship)
Question 29 In the SEBI (Alternate Investment Funds) Regulations, 2012, the funds
that employs diverse or complex trading strategies are classified as
________.
Question 30 The Gross Domestic Product - GDP calculations are done on the value of
goods and services at their _________ prices.
(a) Cost
(b) Market
(c) Notional
Category II Alternative Investment Fund does not fall in Category I and III
etc.
Correct Answer 30
Market
Answer GDP computation values goods and services at their market prices and not
Explanation cost.
NISM SERIES X B : INVESTMENT ADVISER (LEVEL 2)
CERTIFICATION EXAM – PRACTICE TEST NO. 4
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