FREE NISM Series X-B — Investment Adviser (Level 2) Question and Answers

Question 1

Which investment among them is most susceptible to inflation?

Accepted Answer

Bank deposits

Answer

Bank deposits, especially those with fixed interest rates, are highly susceptible to inflation because inflation erodes the purchasing power of money. If the inflation rate is higher than the interest rate earned on the deposit, the real return becomes negative, meaning the money can buy less in the future. Assets like gold, real estate, and equity shares are often considered hedges against inflation as their values tend to rise with or outperform inflation over the long term.

Question 2

Which of the following determines how many shares in a public offering are distributed among various investor categories?

Accepted Answer

SEBI

Answer

In India, the Securities and Exchange Board of India (SEBI) is the regulatory body that governs the allocation of shares in public offerings (IPOs, FPOs). SEBI mandates specific reservation percentages for different investor categories, such as Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs), and Retail Individual Investors (RIIs). This regulatory framework ensures fair and equitable distribution and protects investor interests.

Question 3

Which of the following MS Excel functions can be used to calculate an EMI for a loan?

Accepted Answer

PMT

Answer

The PMT function in MS Excel is specifically designed to calculate the payment for a loan based on constant payments and a constant interest rate, which is precisely what an Equated Monthly Installment (EMI) represents. It takes arguments like the interest rate, number of periods, and present value (loan amount) to determine the fixed periodic payment. Other functions like PV or NPV serve different financial calculations.

Question 4

A stock's high turnover is a sign of higher _________.

Accepted Answer

Liquidity

Answer

High stock turnover indicates that a large number of shares are being traded frequently, meaning there's a strong market for that stock. This high trading volume directly translates to higher liquidity, as investors can easily buy or sell their shares without significantly impacting the stock's price. While high turnover can sometimes be associated with volatility, its primary and most direct implication is the ease with which the asset can be converted to cash.

Question 5

The riskiest investment is with __________.

Accepted Answer

High beta

Answer

Beta is a measure of a stock's volatility in relation to the overall market. An investment with a high beta (e.g., greater than 1) indicates that it is more volatile and thus riskier than the market as a whole. Such investments tend to experience larger price swings, both up and down, compared to the broader market, making them more susceptible to significant losses.

Investment Advisor Practice Test

Investment Advisor Practice Test

FREE NISM Series X-B — Investment Adviser (Level 2) Question and Answers