NISM Series XXI-B Portfolio Managers Cert. Mock Test -1

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1 / 50

A portfolio manager aims to keep at least 10% of investible funds as cash. Despite competitive pressures, the target portfolio return is set at 18%. The manager expects a 19% return on the portfolio and a maximum 3% return on cash. With Rs. 100 crores of investible funds, what is the impact of the liquidity policy on the overall portfolio return from the target, in rupee terms?

a) Rs. 1.6 crores

b) Rs.0.06 crores

c) Rs. 0.6 crores

d) Rs.0.16 crores

2 / 50

___________ is typically divided into short periods, and at the end of each period, the option seller offers protection against downside risk.

a) Credit portfolio

b) Protective Put

c) Currency Swap

d) Cross Currency Swap

3 / 50

The average annual _________ is calculated as the simple average of individual total yearly returns.

a) Arithmetic return

b) Mean average

c) Total return

d) Geometric average

4 / 50

___________ indicates how responsive the fund’s return is to changes in the market index.

a) Alpha

b) Beta

c) Benchmark

d) Index

5 / 50

If the rupee has strengthened against the USD, when the interest is received in dollars and converted into rupees, the investor will receive _______.

a) Less in rupee than expected

b) No change

c) Higher than expected

d) All the above

6 / 50

_______ risk emerges because the income flows received from an investment at the coupon rate may not be able to earn the same interest.

a) Re-Investment Risk

b) Credit risk

c) Default risk

d) None of the above

7 / 50

A _______ must be appointed to ensure compliance with the provisions of the PMLA.

a) Principal Officer

b) Client

c) CEO

d) Director

8 / 50

_________ is closely tied to the term to maturity; longer maturity bonds undergo more significant price changes for a given shift in yields.

a) Bond price

b) Reinvestment risk

c) Bond price volatility

d) Interest Rate Risk

9 / 50

__________ is determined by dividing the Profit after Tax (PAT) by the number of outstanding common shares of the company.

a) EPS

b) EVA

c) PEG

d) MVA

10 / 50

CRISIL C signifies __________.

a) High Safety

b) Very High Risk

c) High Risk

d) Moderate

11 / 50

The ______ states that two goods that are identical, cannot trade at different prices in two different markets.

a) Law of identical good

b) Law of one good

c) Law of one price

d) Law of identical price

12 / 50

How long a person who works for a company has to wait before they can do a contra trade is ______________.

a) Nine months

b) Six Months

c) Three months

d) One month

13 / 50

What is the current price of a bond with a face value of Rs. 1000, an annual interest rate of 12% paid semi-annually, and 5 years left until maturity? The bond is repaid at its face value and has a Yield to Maturity (YTM) of 11%. (Round the answer to the nearest Rupee, and use a 30/360 day count convention).

a) Rs. 1038

b) Rs. 1100

c) Rs. 1077

d) Rs. 1000

14 / 50

As per Regulation 22 (11) of the PMS Regulations, portfolio managers must charge __________ to clients, either directly or indirectly.

a) Auditing charges

b) Franking charges and notarizations

c) Taxation charges

d) No upfront fees

15 / 50

Mr. Suresh is considering investing in long-term corporate bonds for higher returns, but his portfolio manager strongly believes that inflation and interest rates will increase in the next 2-3 years. What valid arguments could convince Mr. Suresh not to invest in long-term corporate bonds?

a) The bond prices and market interest rates are inversely related

b) Due to rising inflation, the profitability of corporates may be negatively affected leading to corporate default

c) Both of the above

d) None of the above

16 / 50

Which of these risks are NOT connected to the factors that must be disclosed in the document provided to the client?

a) The business risks of the group companies of the PMS

b) The risks arising due to the investment approach of PMS

c) Market Risks

d) The risks arising due to Non-Diversification

17 / 50

After earning a pre-tax rate of return of 5% on stock XYZ, and considering a 15% capital gains tax, the post-tax rate of return is ______.

a) 2.25%

b) 3.25%

c) 4.25%

d) 3.75%

18 / 50

Find the statement that is TRUE –

a) Sortino ratio and Sharpe ratio both measures the same excess returns

b) Sortino ratio is excess returns per unit downside risk

c) Sharpe ratio when multiplied by the downside Risk is called Sortiona ratio

d) Sortino ratio is the excess returns per unit of total risk

19 / 50

Arbitrage opportunities can occur between _____________.

a) Two futures prices

b) Futures and options prices

c) Spot and futures prices

d) All of the above

20 / 50

______ refers to an employee of the portfolio manager responsible for overseeing the overall operations of the portfolio manager.

a) Compliance officer

b) Nominee director

c) Trustee

d) Principal officer

21 / 50

There seems to be a need for a theory of active portfolio management because ________________.

a) Some portfolio managers have produced sequences of abnormal returns that are difficult to label as lucky outcomes.

b) Some anomalies in realized returns have been persistent enough to suggest that portfolio managers who identified these anomalies in a timely fashion could have outperformed a passive strategy over prolonged periods.

c) The "noise" in the realized returns is enough to prevent the rejection of the hypothesis that some money managers have outperformed a passive strategy by a statistically small, yet economic, margin.

d) A, B, and C.

22 / 50

Which of the following statements are incorrect when it comes to calculating the Sharpe ratio?

a) Considers diversification potential of portfolio

b) Measures reward to variability

c) Ideal for mutually exclusive portfolios

d) None of the above

23 / 50

______ is recommended for investors who have well-diversified portfolios.

a) Jensons alpha

b) Treynor ratio

c) Sharpe ratio

d) Both 2 and 3

24 / 50

A limited liability partnership must invest a minimum amount of ______ in PMS.

a) Rs.30 lakh

b) Rs.50 lakhs

c) Rs.25 lakhs

d) Rs.45 lakhs

25 / 50

The price of ABC Ltd. equity shares has reached its resistance line. According to technical analysis, this is a good time to _____________.

a) Buy the shares of ABC Ltd.

b) Hold the shares of ABC Ltd.

c) Sell the shares of ABC Ltd.

26 / 50

______ combine features of both open-ended and close-ended schemes.

a) Semi – closed funds

b) Hedge funds

c) Semi – open funds

d) Interval funds

27 / 50

The information ratio of a portfolio is determined by ______.

a) (Rp – Rb)/Stdev (Rp – Rb)

b) (Rp – Rb)/ Cor (Rp – Rb)

c) (Rp – Rb)/ Var (Rp – Rb)

d) (Rp – Rb)/ Cov (Rp – Rb)

28 / 50

The liquidity of an investment refers to the ______ of the instrument.

a) Intrinsic value

b) Marketability

c) Profitability

d) Time decay

29 / 50

_______ is a mandatory expense for investors when participating in PMS (Portfolio Management Services).

a) Auditors fees

b) Notary charges

c) Brokerage charges

d) Registrars fees

30 / 50

Which of these factors is NOT taken into account by SEBI when determining a person’s eligibility according to the Fit and Proper Person Declaration.

a) Financial solvency

b) Integrity in character

c) Office of profit held

d) Conviction orders

31 / 50

The rising ______ indicates new or additional funds entering the market.

a) Asset volatility

b) Initial margin

c) Open interest

d) Asset volatility

32 / 50

For PMS (Portfolio Management Services), the minimum required investment amount is ______.

a) Rs. 50 lakhs

b) Rs. 25 lakhs

c) Rs. 45 lakhs

d) Rs. 25 lakhs

33 / 50

Tracking error is the ______ of the difference between the portfolio and its target benchmark portfolio total return.

a) Standard deviation

b) Semi variance

c) Covariance

d) Correlation

34 / 50

The portfolio manager is required to appoint a compliance officer who shall be responsible for monitoring _______.

a) Fund management

b) Market exposure

c) Redressal of investors' grievances

d) Performance of the fund

35 / 50

______ becomes the counterparty to both the buyer and seller of a futures contract through a clearing house.

a) RBI

b) Depository

c) SEBI

d) Stock exchange

36 / 50

_______ industries may raise prices and encounter higher profit margins during inflation.

a) Technology

b) Oil

c) Manufacturing

d) Only 1 and 3

37 / 50

What is the characteristic feature that distinguishes a body corporate?

a) A body corporate should be an independent legal entity separate from its owners

b) A body corporate should have minimum 10 shareholders

c) A body corporate should be listed on a recognised stock exchange

d) A body corporate should have issued equity shares

38 / 50

The agreement between the portfolio manager and the client should encompass the following:

a) Period of the contract and provision of early termination, if any

b) Investment approach, areas of investment and restrictions, if any, imposed by the client with regard to the investment in a particular company or industry

c) The investment objectives and the services to be provided

d) All the above

39 / 50

SEBI portfolio managers regulations require managers to disclose the details of ______.

a) Beneficial interest received

b) Details of commission paid to distributor

c) Expenses incurred in managing the portfolio

d) All the above

40 / 50

In a cost leadership strategy, the firm aims to be the _______ and, consequently, the cost leader in its industry.

a) Low-cost producer

b) Low cost retailer

c) Low cost seller

d) Low cost consumer

41 / 50

Securities traded on a stock exchange or other regulated markets are to be valued at the closing price quoted on the relevant exchange or market, as on the relevant Valuation Day. State whether true or false.

a) True

b) False

42 / 50

____ Funds are recommended to comply with the Global Investment Performance Standards, to ensure full disclosures and fair performance presentation which helps to advance fair competitive practices within the industry and meet the demands of prospective clients and investors.

a) Global Investment

b) Alternative Investment

c) Investment Management Firms

d) Gross Asset Value

43 / 50

In the Category III AIF Distributors’ model code of conduct, it’s important to consider _________, assess the risks, and ensure suitability to their financial needs when promoting and advising on Category III AIFs.

a) Directors premiums

b) Investee premiums

c) Distributors risk

d) Investor's interest

44 / 50

The ________ will be determined by adding up the market value of both the long and short positions of all securities/contracts held by the fund.

a) Beneficial Interest

b) Debt security

c) Total exposure

d) Unlisted securities

45 / 50

____ commitment shall be in the form of investment in the scheme of the fund and shall not be through the waiver of management fees.

a) Capital commitment

b) Sponsor commitment

c) Commercial commitment

d) Drawdown

46 / 50

Performance Risk encompasses the ________ risk factors.

a) Potential Loss of Investment

b) Incentive Fee

c) Dependence on Investment Manager

d) All the above

47 / 50

A Category III AIF is allowed to invest up to _____ of its investable funds in a single investee company.

a) 20 percent

b) 25 percent

c) 5 percent

d) 10 percent

48 / 50

The Investment Manager has ________ years of experience in handling equities, fixed-income securities, and derivatives. Therefore, they can make investment decisions on behalf of their investors.

a) Minimum 2 years

b) Maximum 2 years

c) Minimum 5 years

d) Maximum 5 years

49 / 50

___________ made by AIFs in India, are considered foreign investments if neither the Sponsor nor the Manager nor the Investment Manager is Indian owned and controlled.

a) Investments

b) Private Equity Fund

c) Angel Fund

d) Hedge Fund

50 / 50

The United Nations-supported __________ is a worldwide network of investors working to incorporate ESG (Environmental, Social, and Governance) practices into their investment approaches.

a) Principles for Responsible Investment

b) Principles of Drawdown P eriod

c) Principles for Required Investments

d) Principles of Commitment Period

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NISM Series XXI-B Portfolio Managers Cert. Mock Test -1

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