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Investment advisor Certification Exam Question Paper

Investment advisor Certification Exam Question Paper

NISM Series XB: Investment Adviser (Level 2) Certification Examination 

Chapter 1:

1. The proportion of a public issue of shares allocated to various categories of investors is

decided by

a. SEBI

b. Issuer

c. Stock exchange

d. Registrar and Transfer agent

2. In a leveraged investment in an IPO, the profits to the investor depends upon

a. Issue price & listing price

b. Cost of borrowing and period of borrowing

c. Shares allotted and listing premium

d. Interest paid and issue price

3. A high turnover in a stock is an indicator of which of the following

a. Higher price

b. Higher liquidity

c. Lower volatility

d. Lower returns

4. Read the following caselet and answer the questions that follow:

Mr. A is a conservative investor who is looking to invest in equity markets. He is evaluating

shares of VKP Ltd. with a PE ratio of 22, PEG ratio of 0.98, dividend yield of 3.5.

a. Which of the following may make VKP Ltd unsuitable for Mr. A as a conservative

investor?

i. PEG ratio lower than 1

ii. A dividend yield lower than the risk free rate of interest

iii. PE ratio higher than peer average

iv. Dividend yield higher than dividend yield of index

b. The PEG ratio of the company classifies it as

i. Overvalued

ii. Undervalued

iii. Low growth stock

iv. High growth stock

Investment advisor Certification Exam Question Paper


c. Mr. A is attracted by the high dividend yield of the stock. Which of the following is a

likely feature of the investment going forward?

i. High growth in EPS

ii. Low dividend payout

iii. High capital appreciation

iv. Low earnings growth

5. A decrease in interest rates is likely to see a greater impact on the price of which bond?

a. AAA rated 5 year bond

b. 15 year Government security

c. 30 year bond with 2 years to maturity

d. Commercial paper of company

Chapter: 2

1. A nomination made in a mutual fund folio

a. Can be changed by the PoA

b. Cannot be cancelled

c. Can be cancelled by the first holder in a jointly held account

d. Can be changed by all the holders signing for the change

2. In a jointly held folio, the PAN and KYC process has to be complied with by

a. All the joint holders

b. The first holder only

c. Any one of the joint holders

d. The joint holders depending upon mode of operation

3. An NRI returning to India and becoming a Resident Indian has to do which of the following

with respect to holdings in demat account?

a. Operate the existing demat account

b. Open a new demat account and transfer holdings

c. Change the existing account status to resident

d. Open a new account for future investment and maintain current account for existing

investments.

4. Mr. D holds investments in UPP equity scheme. He makes an investment in an MIP of the

same mutual fund. Will it be held under the same folio?

a. No, since the scheme is different

b. Can be held in either the same folio or different folio

c. Can be held only under the same folio

d. Will depend upon the mutual fund policy

5. A request for dematerialization of securities may be rejected if

a. Securities are not dematerialised at the time of listing

b. Securities are not dematerialized within the period specified by SEBI

c. Dematerialization request is not accompanied by R&T verification of signature.

d. Delay of more than 15 days in the receipt of physical securities from the day of

electronic request.

6. Ms. L takes a loan against her mutual fund holdings. Only a portion of her units are

required as security. How will she give effect to this?

a. Transfer the required portion to a new folio and mark a lien on it

b. Mark lien on the entire holdings, irrespective of the requirement

c. Mark lien only on the portion required in the existing folio

d. Transfer the required portion to a new folio and make the lender the joint holder


Chapter:6

1. Which of the following need to compulsorily register as investment adviser with SEBI?

a. Mutual fund distributor

b. Insurance adviser

c. Lawyer

d. None of the above

2. Which of the following can deal with multiple insurance companies?

a. Insurance broker

b. Insurance agent and broker

c. Corporate insurance agent

d. Bank assurance channel

3. Read the following caselet and answer the questions that follow

Mr. X is in the business of mutual fund distribution. He wants to become an insurance

adviser.

a. Which of the following is applicable for Mr. X?

i. Has to register as investment adviser if he sells either product

ii. Can sell either mutual fund or insurance – not both

iii. Can sell both mutual fund and insurance if he registers as investment adviser

iv. There is no bar on Mr. X selling both products

b. Mr. X wants to pay back to clients, part of the moneys he collects from them?

i. He is permitted to rebate only in case of mutual funds

ii. He is permitted to rebate only in case of insurance

iii. He is not permitted to rebate in either mutual funds or insurance

iv. He is free to rebate in both mutual funds and insurance

c. Mr. X wants to focus on a business where there is no requirement of complying with a

code of conduct. He should

i. Do mutual funds, since code of conduct is not compulsory

ii. Do insurance, since code of conduct is not compulsory

iii. Can do either product, because both do not insist on a code of conduct

iv. Re-consider, because both mutual funds and insurance require compliance with

code of conduct

d. Mr. X tells a consultant that he will not register as investment adviser, because he

does not want to appoint a compliance officer. What should the consultant tell Mr. X?

i. Consultant should explain to Mr. X, the benefits of appointing a compliance officer

ii. Consultant should explain to Mr. X that appointment of compliance officer is

compulsory only for non-individuals

iii. Consultant should advise Mr. X not to worry, because SEBI is unlikely to verify

iv. Consultant should advise Mr. X that it is SEBI’s job to give him a compliance officer

Chapter: 7

Case 7.1

Mr. Z, aged 52 years, is working in a leading company. His net savings are Rs 50,000 p.m. Based

on salary growth and other factors, he expects this to rise by 20% p.a. till his retirement at age

60. This does not include monthly contributions of Rs 9,000 (Rs 4000 own contribution; Rs 5000

employer contribution) to various funds towards retirement corpus. These are expected to

grow by 20% p.a. till retirement. The retirement corpus by the end of the year will be Rs 12

lakhs, entirely in debt, which will yield 8% p.a. on average. Besides his own residential house

and the retirement corpus, his savings and investments will amount to Rs 50 lakhs by the end of

the year, 30% of which will be in equity. He has a practice of investing, at the end of each year,

his disposable savings into debt and equity in the ratio of 80:20. In the long run, he expects

equity to yield 15% and debt to yield 8.5%. At the end of age 55, he expects an outflow of funds

amounting to Rs 5 lakhs, which he hopes to meet out of annual savings.

He expects inflation of 10% and post-retirement investment return on his portfolio at 11%. His

current expenses are Rs 40,000 per month.

Assume zero date as the end of age 52. Calculations are to be done on annual basis. Ignore

taxation and interest income on savings and contributions during the year.

1) On retirement, how much will Mr. Z have in his retirement corpus?

a. Rs. 46,65,905

b. Rs. 50,65,910

c. Rs. 44,81,442

d. Rs. 48,65,917

2) At the end of Age 55, what percentage of Mr. Z's portfolio will be in debt (excluding

retirement corpus)?

a. 69.49%

b. 68.29%

c. 66.99%

d. 71.79%

3) If he re-invests the entire retirement corpus in debt, what percentage of Mr. Z's portfolio

will be in debt when he retires?

a. 72.76%

b. 70.51%

c. 74.21%

d. 76.29%

4) What is the corpus requirement to ensure that he is able to sustain the same standard of

living for 15 years after retirement?

a. Rs. 14,496,632

b. Rs. 13,861,919

c. Rs. 15,239,389

d. Rs. 15,254,894

Calculations are shown in the following table:


Case 7.2

Mr. Y, aged 40, has the following goals ahead of him. (1) Son's post-graduate education: Due in

Year 5. Current cost Rs 15,00,000 p.a. to be incurred at the end of each year for 2 years. Likely

Inflation 15% p.a. (2) Daughter's marriage: Scheduled in end of Year 7. Current cost Rs

1,00,00,000. Inflation is assumed to be at 10% p.a. Mr. Y has provided a corpus of Rs

2,00,00,000 towards these two needs. The corpus is invested in a mix of debt and equity

yielding 8% p.a. Ignore taxation.

1) How much money will need to be set apart from the corpus at the end of Year 5, to finance

the son's post-graduate education? Assume the amount set apart will earn 6% interest.

a. Rs. 59,34,184

b. Rs. 62,90,235

c. Rs. 64,12,209

d. Rs. 60,35,259

2) What is the likely outflow on account of daughter's marriage in the year it is planned?

a. Rs. 1,94,87,171

b. Rs. 1,77,15,610

c. Rs. 2,14,35,888

d. Rs. 2,05,10,865

3) How much will be left in the corpus after both goals are fulfilled (assume that he does not

set apart money in the 6% corpus mentioned in Q1)?

a. Rs. 81,24,932

b. Rs. 69,65,820

c. Rs. 75,23,085

d. Rs. 66,42,292

4) How would you describe the investment policy Mr. Y is using for the corpus?

a. A little conservative

b. A little aggressive

c. Very aggressive

d. Very conservative

Calculations as shown in the following table:


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