NISM Series-X-A: Investment Adviser (Level 1) 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-A: Investment Adviser (Level 1) flashcards as text
An investment adviser charges a flat annual fee of INR 50,000 regardless of portfolio size. This fee structure is best described as:
Answer: Fixed fee
A flat annual fee that does not vary with portfolio size or performance is classified as a fixed fee model.
Under PMLA (Prevention of Money Laundering Act), investment advisers are classified as:
Answer: Reporting entities
Investment advisers are designated as reporting entities under PMLA and must file suspicious transaction reports (STRs) with FIU-IND.
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?
Answer: 2%
Alpha = Actual Return − [Rf + β(Rm−Rf)] = 10% − [4% + 1.0×(8%−4%)] = 10% − 8% = 2%.
Which of the following is an example of systematic risk?
Answer: A rise in nationwide interest rates
Systematic risk affects the entire market — like interest rate changes — and cannot be eliminated through diversification.
SEBI requires investment advisers to maintain records of client interactions and advice given for a minimum of:
Answer: 5 years
SEBI IA Regulations mandate that investment advisers retain records of client interactions, risk profiling, and advice for at least 5 years.
A client insists on investing entirely in one sector despite the adviser's recommendation for diversification. The adviser should:
Answer: Document the client's decision and provide advice noting concentration risk
Advisers must document client instructions that deviate from recommendations and note the associated risks while respecting client autonomy.
Which concept refers to the tendency of investors to hold on to losing investments too long, hoping for a recovery?
Answer: Disposition effect
The disposition effect is the behavioral tendency to sell winning investments too early and hold losing investments too long.