NISM Series XVII: Retirement Adviser Mock Test – Free Demo

Explanation:

Investment in real estate can be accomplished through private equity funds, which pool capital to invest directly in properties, and also through investment trusts, known as REITs, which are publicly traded companies that own, operate, or finance income-producing real estate.

Explanation:

Income received from mutual funds can fluctuate over time and is not guaranteed. It depends on various factors such as the performance of the underlying investments, market conditions, and fund management decisions. Therefore, it cannot be relied upon as a stable and predictable source of income for meeting mandatory and essential expenses.

Explanation:

Biases in investing, such as emotional decision-making or cognitive errors, can significantly impact investment outcomes, especially when planning for retirement. By implementing an automated and process-oriented system for investing, individuals can mitigate the influence of biases. Automation removes the emotional element from decision-making and ensures consistency in executing the investment strategy over the long term. It helps individuals adhere to their investment plan and avoid impulsive or irrational decisions driven by biases, ultimately contributing to a more disciplined and successful retirement savings strategy.

Explanation:

When there are debt obligations in retirement, allocating a higher portion of the retirement portfolio to low-yield but fixed-return products like annuities can help ensure a steady and reliable stream of income to meet those obligations. Annuities provide a guaranteed income stream, which can be particularly beneficial for covering fixed debt payments without relying on potentially volatile investment returns. Therefore, prioritizing investments in such low-risk, fixed-return products can help manage debt obligations effectively in retirement.

Explanation:

The major source of return from an equity instrument is capital appreciation, which refers to the increase in the value of the investment over time. This increase occurs when the market price of the equity instrument rises above its purchase price, allowing investors to sell the asset at a profit. While dividends may also contribute to returns, especially in the case of dividend-paying stocks, capital appreciation typically represents the primary source of returns from equity investments, making it the correct answer.

Explanation:

Investments made in fixed deposits through NRE (Non-Resident External) accounts are not taxable in India. NRE accounts are specifically designed for non-resident Indians (NRIs) to park their foreign earnings in India, and the interest earned on fixed deposits in NRE accounts is tax-free in India.

Explanation:

Under the Pension Fund Regulatory and Development Authority (PFRDA) regulations of 2015, the sponsor is required to contribute at least 20% of the tangible net worth of the pension fund. This ensures that the sponsor has a significant financial stake in the fund, aligning their interests with the fund’s performance and the security of its assets.

Explanation:

A reverse mortgage scheme allows homeowners, typically seniors, to monetize their primary residence into a stream of income until the end of their life. In a reverse mortgage, the homeowner receives periodic payments from the lender, which are based on the equity in their home. The homeowner retains ownership of the home but can access its value without selling it outright. Therefore, a reverse mortgage scheme enables homeowners to generate income from their primary residence while still living in it.

Explanation:

Non-financial transactions in the National Pension Scheme (NPS) incur a charge of Rs. 4 per transaction. These charges are collected by cancelling the units from the subscriber’s NPS account. This means that when a non-financial transaction is performed, such as changing investment options or updating personal information, Rs. 4 worth of units are deducted from the subscriber’s NPS account as a fee for the transaction.

Explanation:

When opening Tier I or Tier II accounts in the National Pension Scheme (NPS), the following details of the bank account need to be provided:

a) Bank’s name

b) Branch details and address

c) Account type & Account number

These details are essential for linking the NPS account with the subscriber’s bank account for contributions, withdrawals, and other transactions. Therefore, all of the options provided are required while opening Tier I or Tier II accounts in NPS.

Explanation:

A specific Power of Attorney (POA) grants the donee authority to act on specific matters or transactions specified in the document. It does not confer authority to act on all matters for the donor. Specific POAs are tailored to address particular needs or situations, limiting the scope of authority granted to the donee. Therefore, the statement that a specific POA enables the donee to act on all matters for the donor is false.

Explanation:

The Central Grievance Management System under the National Pension System (NPS) is provided by the Central Record-keeping Agency (CRA). CRA is responsible for record-keeping, administration, and customer service functions related to NPS accounts. Therefore, it is the entity responsible for managing grievances related to the NPS.

Explanation:

In retirement planning, it’s essential to consider inflation throughout the entire retirement period to ensure that the impact of inflation is adequately covered when creating the corpus. Inflation erodes the purchasing power of money over time, meaning that expenses will likely increase during retirement. By accounting for inflation over the entire retirement period, individuals can better estimate their future expenses and ensure that their retirement corpus is sufficient to meet those expenses despite inflationary pressures.

Explanation:

When signing up for a systematic investment or withdrawal plan, individuals need to decide on the fixed amount to be invested or withdrawn regularly, choose the frequency of these transactions, and determine the total number of transactions. These decisions ensure a structured approach to investing or withdrawing funds according to their financial goals and preferences.

Explanation:

Investing in equity typically requires a long-term investment horizon. Equity investments tend to be more volatile in the short term but have historically provided higher returns over longer periods. Therefore, having a long-term perspective allows investors to ride out market fluctuations and benefit from the growth potential of equity investments over time. Additionally, long-term investing aligns with the goal of accumulating wealth gradually and achieving financial objectives over the years.

Explanation:

The Atal Pension Yojana (APY) was launched in 2015 by the Government of India. It aims to provide a guaranteed pension cover to people working in the unorganized sector, particularly those who are not covered by any formal pension scheme. APY encourages individuals to save for their retirement by contributing regularly to their pension accounts, ensuring financial security during their old age.

Explanation:

The Investment Management Agreement (IMA) is a contract between the National Pension System (NPS) Trust and the Pension Fund manager. The NPS Trust oversees the administration and operation of the NPS, while the Pension Fund manager is responsible for managing the investments of the pension funds within the framework set by the NPS Trust. Therefore, the IMA outlines the terms and conditions of the relationship between the NPS Trust and the Pension Fund manager regarding the management of pension fund investments.

Explanation:

The rate of inflation and the expected rate of return on investments typically act in opposite directions on the amount of retirement corpus.

• Inflation erodes the purchasing power of money over time, meaning that the same amount of money will buy fewer goods and services in the future.

• On the other hand, the expected rate of return on investments represents the growth potential of the retirement corpus over time.

Therefore, while inflation reduces the real value of the retirement corpus, the expected rate of return on investments aims to counteract the effects of inflation by growing the corpus over time. Thus, they generally act in opposite directions on the retirement corpus.

Explanation:

The Senior Citizen Savings Scheme (SCSS) provides tax benefits under Section 80C of the Income Tax Act at the time of investment. This means that the amount invested in the SCSS is eligible for deduction from the total taxable income of the investor, up to the specified limit under Section 80C. Therefore, individuals investing in the SCSS can avail tax benefits under this section of the Income Tax Act.

Explanation:

Under the Sovereign Gold Bond Scheme, 2015, the maximum gold investment for individual investors for each fiscal year is limited to 4 kg. This limit ensures that the scheme remains accessible to a wide range of investors while also preventing excessive concentration of gold holdings by any single individual. Therefore, the maximum gold investment allowed for individual investors is 4 kg per fiscal year under this scheme.