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
Under SEBI Investment Adviser Regulations, an investment adviser providing advice on securities must ensure the advice is based on which primary criterion?
Answer: The client's risk profile and investment objective
SEBI regulations mandate that investment advice must be grounded in the client's individual risk profile and stated investment objectives.
Which metric best captures the excess return of a portfolio per unit of total risk taken?
Answer: Sharpe Ratio
The Sharpe Ratio divides excess return (over the risk-free rate) by standard deviation, which represents total risk.
An investment adviser recommends a client shift from equity to debt funds as the client nears retirement. This strategy is best described as:
Answer: Life-cycle or glide-path asset allocation
Life-cycle (glide-path) allocation systematically reduces equity exposure and increases debt as the investor approaches a target date such as retirement.
Under the SEBI IA Regulations, how often must an investment adviser conduct a formal review of a client's financial plan?
Answer: At least once a year
SEBI requires investment advisers to review each client's financial plan at least annually to ensure it remains suitable.
A portfolio has a beta of 1.4. If the market rises by 10%, the expected portfolio return (ignoring alpha) is:
Answer: 14%
Expected return = Beta × Market return = 1.4 × 10% = 14%, assuming no alpha contribution.
Which type of risk CANNOT be eliminated through diversification within a domestic equity portfolio?
Answer: Systematic (market) risk
Systematic risk is inherent to the entire market and persists even in a well-diversified portfolio.
A client has a moderate risk profile and a 10-year horizon. Which asset allocation is MOST appropriate?
Answer: 60% equity, 40% debt
A 60/40 equity-debt split balances growth potential with stability, suitable for a moderate-risk investor with a medium-to-long horizon.