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
A client realizes a short-term capital gain of ₹1,00,000 from equity mutual funds held for 8 months. What is the applicable tax rate in India?
Answer: 15% flat
Short-term capital gains on equity mutual funds (held less than 12 months) are taxed at a flat 15% under Section 111A of the Income Tax Act.
Which of the following is a key difference between a Portfolio Management Service (PMS) and an investment adviser?
Answer: PMS managers directly manage client assets; investment advisers only provide advice
PMS providers take discretionary control of client assets, while investment advisers only give advice; execution remains the client's decision.
Rebalancing a portfolio back to its target asset allocation primarily serves which purpose?
Answer: Maintaining the client's intended risk exposure over time
Rebalancing restores the original risk-return profile by trimming outperforming assets and adding to underperforming ones, keeping risk aligned with the client's tolerance.
Which of the following behavioral biases causes investors to hold losing investments too long hoping to break even?
Answer: Loss aversion / Disposition effect
The disposition effect (driven by loss aversion) leads investors to hold losing positions to avoid realizing a loss while prematurely selling winners.
An adviser recommends a client invest a lump sum in a liquid fund temporarily before deploying into equity via STP. The primary benefit of this strategy is:
Answer: Rupee-cost averaging combined with capital preservation during deployment
Using an STP from a liquid fund into equity provides rupee-cost averaging over the deployment period while preserving capital in a low-risk instrument in the interim.
Which of the following is NOT a component of a comprehensive financial plan prepared by an investment adviser?
Answer: Filing of income tax returns on behalf of the client
Filing tax returns is the domain of a tax consultant or CA; investment advisers provide planning advice but do not execute tax compliance on behalf of clients.
Under the net present value (NPV) rule, an investment project should be accepted when:
Answer: NPV is positive
A positive NPV indicates the project generates returns exceeding the required rate of return, creating value for the investor.