Investment Advisor NISM Series-X-A: Investment Adviser (Level 1) 4

Question 1

An investment adviser charges a flat annual fee of INR 50,000 regardless of portfolio size. This fee structure is best described as:

Accepted Answer

Fixed fee

Answer

A flat annual fee that does not vary with portfolio size or performance is classified as a fixed fee model.

Question 2

Under PMLA (Prevention of Money Laundering Act), investment advisers are classified as:

Accepted Answer

Reporting entities

Answer

Investment advisers are designated as reporting entities under PMLA and must file suspicious transaction reports (STRs) with FIU-IND.

Question 3

A portfolio returned 10% while the market returned 8%. If the portfolio's beta is 1.0 and the risk-free rate is 4%, what is the portfolio's Jensen's alpha?

Accepted Answer

2%

Answer

Alpha = Actual Return − [Rf + β(Rm−Rf)] = 10% − [4% + 1.0×(8%−4%)] = 10% − 8% = 2%.

Question 4

Which of the following is an example of systematic risk?

Accepted Answer

A rise in nationwide interest rates

Answer

Systematic risk affects the entire market — like interest rate changes — and cannot be eliminated through diversification.

Question 5

SEBI requires investment advisers to maintain records of client interactions and advice given for a minimum of:

Accepted Answer

5 years

Answer

SEBI IA Regulations mandate that investment advisers retain records of client interactions, risk profiling, and advice for at least 5 years.

Investment Advisor Practice Test

Investment Advisor Practice Test

Investment Advisor NISM Series-X-A: Investment Adviser (Level 1) 4