Investment Advisor NISM Series-X-A: Investment Adviser (Level 1) 3

Question 1

Which of the following best describes 'dollar-cost averaging' as an investment strategy?

Accepted Answer

Investing fixed amounts at regular intervals regardless of price

Answer

Dollar-cost averaging involves investing a fixed amount periodically, buying more units when prices are low and fewer when prices are high.

Question 2

Under SEBI IA Regulations, investment advisers are prohibited from receiving commissions or referral fees from product manufacturers. This principle is called:

Accepted Answer

Commission ban

Answer

SEBI mandates a commission-free, fee-only model for investment advisers to eliminate distributor-linked conflicts of interest.

Question 3

When assessing a client's risk capacity, which factor is most relevant?

Accepted Answer

Client's income, liabilities, and financial obligations

Answer

Risk capacity is determined by objective financial factors — income, assets, debts, and obligations — not by stated preferences.

Question 4

A bond with a 5% coupon is trading at a premium. Its yield to maturity is therefore:

Accepted Answer

Less than 5%

Answer

When a bond trades at a premium (above par), its YTM is lower than the coupon rate because the investor pays more than face value.

Question 5

Which SEBI regulation governs the registration and conduct of Portfolio Management Services (PMS) in India?

Accepted Answer

SEBI (Portfolio Managers) Regulations, 2020

Answer

PMS providers are governed by SEBI (Portfolio Managers) Regulations, 2020, which is separate from the IA Regulations.

Investment Advisor Practice Test

Investment Advisor Practice Test

Investment Advisor NISM Series-X-A: Investment Adviser (Level 1) 3