20 questions weighted across the syllabus. Answer, get the explanation immediately, and see your score at the end.
For review after you've attempted the quiz above — or as a quick reference. Back to the interactive quiz.
1. Saving is best described as the difference between:
Saving = money earned minus money spent. Investment is committing those savings with an expectation of a higher future amount.
2. A retired investor wanting regular payouts from their portfolio is pursuing which objective?
Current income is the objective pursued when an investor wants regular payouts (dividends, interest, rental income) rather than capital appreciation — common among retirees.
3. Which regulator is the primary regulator of India's securities markets?
SEBI is the primary securities markets regulator, and also regulates Portfolio Managers under the SEBI (Portfolio Managers) Regulations, 2020.
4. Unsystematic risk in equity investing can be reduced through:
Unsystematic (company/sector-specific) risk can be reduced through diversification; systematic (market-wide) risk cannot.
5. A bond's price and interest rates generally move:
Bond prices and interest rates move inversely — a fundamental relationship tested throughout the fixed income chapter.
6. Using a derivative to reduce an existing portfolio's risk exposure is called:
Hedging uses derivatives to reduce existing risk; speculation takes on new directional risk hoping to profit from a price move.
7. A portfolio manager cannot accept funds or securities worth less than:
SEBI regulations set a Rs. 50 lakh minimum investment per client for PMS, with specified exceptions for accredited investors and co-investment portfolio managers.
8. In a discretionary PMS, investment decisions are:
A discretionary portfolio manager independently manages client funds according to their needs, without needing approval per transaction.
9. The maximum exit load a portfolio manager can charge in the FIRST year of investment is:
Per the PMS Circular, exit load is capped at 3% in year 1, 2% in year 2, 1% in year 3, and nil thereafter — and no lock-in is permitted instead.
10. The 'High Water Mark' in PMS performance fee calculation refers to:
A performance fee is charged only on gains above the portfolio's prior peak value (its High Water Mark) — not simply on recovering from a loss.
11. Correlation between two asset classes measures:
Correlation measures how two assets' returns move together; combining low-correlation assets can reduce portfolio risk without sacrificing expected return.
12. Portfolio 'rebalancing' is undertaken to:
Rebalancing restores the portfolio's actual asset mix to its target allocation after market movements have caused it to drift.
13. The Sharpe Ratio is calculated as:
Sharpe Ratio = (Return − Risk-free Return) ÷ Standard Deviation — excess return per unit of total risk.
14. Performance attribution analysis seeks to determine:
Performance attribution breaks a portfolio's return into the contribution from asset allocation decisions versus individual security selection.
15. Within a PMS, capital gains on the underlying holdings are taxed:
PMS gains follow ordinary asset-wise capital gains rules (equity, debt, derivatives) — unlike mutual funds, which are taxed at the scheme level.
16. NRIs investing in PMS typically route transactions through:
The Portfolio Investment Scheme (PIS) is the RBI-governed route NRIs typically use to invest in Indian securities, including via PMS.
17. The core regulation governing registration and conduct of Portfolio Managers is:
The SEBI (Portfolio Managers) Regulations, 2020 is the core regulation covering registration, conduct, and operations for Portfolio Managers.
18. Recommending unsuitable products or concealing material risks for higher compensation is an example of:
Concealing risks or recommending unsuitable products for higher compensation is mis-selling, a violation under SEBI's Fraudulent and Unfair Trade Practices Regulations, 2003.
19. What is the correct assessment structure of the NISM-Series-XXI-A exam?
XXI-A has 100 MCQs worth 1 mark each (100 marks total), a 2-hour duration, 60% pass mark, and 10% negative marking per wrong answer.
20. A portfolio manager is prohibited from:
Portfolio managers are explicitly prohibited from deriving any direct or indirect benefit from client funds or securities — a core fiduciary obligation.