NISM Series X-B — Investment Adviser (Level 2) Flashcards
7 cards from real Investment Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 NISM Series X-B — Investment Adviser (Level 2) flashcards as text
Which document must an investment adviser mandatorily provide to a new client BEFORE rendering any investment advice?
Answer: Disclosure document as specified by SEBI
SEBI regulations require investment advisers to furnish a SEBI-prescribed disclosure document to clients before the advisory relationship begins.
The Treynor Ratio differs from the Sharpe Ratio primarily because it uses which denominator?
Answer: Beta of the portfolio
The Treynor Ratio uses beta (systematic risk) in the denominator, while the Sharpe Ratio uses standard deviation (total risk).
Under SEBI guidelines, an investment adviser registered as an individual can have a maximum of how many clients?
Answer: 100
Individual investment advisers registered with SEBI may advise a maximum of 150 clients at any given time per regulatory guidelines.
A client's portfolio earns 12% while the benchmark returns 9%. The portfolio's tracking error is 3%. The Information Ratio is:
Answer: 1.0
Information Ratio = (Portfolio return − Benchmark return) / Tracking error = (12% − 9%) / 3% = 1.0.
Which of the following constitutes a conflict of interest that an investment adviser MUST disclose to clients?
Answer: Receiving distribution commissions from a mutual fund house
Receiving distribution commissions creates a conflict of interest because it may bias advice toward higher-commission products, and must be disclosed.
Dollar-cost averaging is MOST beneficial in which market condition?
Answer: Volatile markets with no clear trend
Dollar-cost averaging reduces average cost per unit most effectively in volatile markets by automatically buying more units when prices are low.
Jensen's Alpha measures:
Answer: Excess return above what CAPM predicts given the portfolio's beta
Jensen's Alpha is the portfolio's actual return minus the CAPM-expected return, indicating the manager's skill in generating abnormal returns.