FREE NISM Series-X-A: Investment Adviser (Level 1) Question and Answers
Which one of the following is not a component of personal financial planning?
Explanation:
Portfolio churning describes the adjustments investors make to their holdings while taking the state of the market into consideration. It involves making decisions to keep keeping an investment in order to provide a higher yield as well as buying and selling the holdings. The market's overall or near- and long-term perception of the underlying business is the major factor influencing churn.
Which of the following categories of risk applies to an investment in a government security issued with a set interest rate?
Explanation:
Interest rate risk is the likelihood that unanticipated changes in interest rates may cause an asset's value to drop. Instead of equity investments, fixed-income assets (such as bonds) are more commonly linked to interest rate risk. One of the main factors influencing the price of a bond is the interest rate.
Let's assume Jay has purchased a pure risk cover product, which means he has purchased ___________.
Explanation:
Term insurance is a form of life insurance policy that offers protection for a certain "term" of years, or a set amount of time. A death benefit will be paid if the insured passes away within the time frame specified in the policy and the policy is active, or in effect.
A defined contribution plan is _________.
Explanation:
A defined contribution plan is a standard corporate retirement program where employees make financial contributions and employers often match those contributions. The 401(k) and 403(b) plans are two common varieties of these programs. The most popular kind of employer-sponsored benefit plan in the US is a defined contribution plan. To benefit from the plan, you might need to enroll yourself.
Insurance typically represents _________.
Explanation:
The potential loss from an unfavorable outcome faced by an individual or entity is transferred to a third party as part of a standard risk management method. The person or entity will often make periodic payments to the third party as reimbursement for taking on the risk.
Which of the following is impacted by financial market activity?
Explanation:
The efficiency of the economy, how businesses behave, and individual wealth are all directly impacted by financial market activity. The bond market, stock market, and foreign currency market are the three financial marketplaces that require special consideration.
An investor invests in the underlying asset of __________ in order to receive a variable annuity.
1. Debt Instruments
2. Equity
3. Gold
Explanation:
Two wonderful asset classes that can do wonders for your portfolio are equity and gold. Gold functions as insurance against economic volatility and turbulence in the equity markets, whereas equities on the one hand provides long-term wealth creation and also hedges inflation - therefore having a tendency to become bold.