Sample Questions

NISM-Series-21A: Portfolio Management Services (PMS) Distributors Mock Tests — 5 random MCQs with answers & explanations

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These 5 questions are randomly selected (standard MCQs only, not case-based).

Q1 What is the primary purpose of the 'Securities Market' in an economy?

A. To provide a place for people to gamble.
B. To move money from those who have extra savings to those who need capital for business. Correct Answer
C. To allow the government to control all private companies.
D. To eliminate the need for banks.

Explanation:

The market is like a bridge. It connects people with spare cash (households) to companies that need money to build factories and create jobs.

Marks: 1

Q2 What is the core concept behind the investment principle that says "Risk leads to return"?

A. Investors should only focus on the highest returns.
B. Potential for higher profit is linked to taking on more risk. Correct Answer
C. Investors should avoid all risky investments.
D. The return earned determines the level of risk.

Explanation:

This principle means that if you want the chance to earn a higher reward, you generally must be willing to accept a higher chance of loss (risk). Low-risk investments usually offer lower returns.

Marks: 1

Q3 If a bond is rated 'D', what does it mean?

A. The bond is Excellent (D for Delightful).
B. The bond is in 'Default' (the issuer failed to pay). Correct Answer
C. The bond is only for Daily trading.
D. The bond is issued by a Developer.

Explanation:

D stands for default. It’s a warning that the company has stopped making its promised payments.

Marks: 1

Q4 Can a Registered Investment Adviser (RIA) take both a commission and an advisory fee from the same client?

A. Yes, they can charge as much as they want.
B. No, they are strictly prohibited from taking both from the same person. Correct Answer
C. Only if the client is very wealthy.
D. Only if the stock market is going up.

Explanation:

To avoid "conflict of interest," regulations state that an adviser cannot earn an advisory fee and a sales commission from the same investor,.

Marks: 1

Q5 Which investment goal focuses on keeping the original amount of money safe above all else?

A. Aggressive Growth
B. Income Generation
C. Tax Planning
D. Capital Preservation Correct Answer

Explanation:

Capital Preservation is for people who cannot afford to lose their initial investment. They take minimal or no risk to ensure their starting money stays intact,.

Marks: 1

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