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 Which scenario best illustrates an example of liquidity risk in an investment?

  • A. The government raising taxes on profits
  • B. A company failing to keep up with online trends
  • C. Difficulty in selling penny stocks because there are no buyers Correct Answer
  • D. A sudden drop in the local currency value
Explanation:
Liquidity risk is the danger of being unable to sell an investment quickly at a fair price. If there are no buyers for a stock, you are "stuck" with the asset, which is a liquidity issue.

Marks: 1

Q2 What is 'Compound Interest'?

  • A. A tax on savings.
  • B. A penalty for late payments.
  • C. Interest calculated only on the original amount.
  • D. Interest calculated on both the original amount and the interest already earned. Correct Answer
Explanation:
Compounding is "interest on interest." It is the secret to getting rich over long periods because your money grows faster and faster.

Marks: 1

Q3 What is a defining feature of a "squared-off" trade that happens within a single business day?

  • A. It requires the physical transfer (delivery) of shares.
  • B. It is not recorded in the day's trading volume.
  • C. It does not require the delivery of shares. Correct Answer
  • D. It is cancelled by the stock exchange authorities.
Explanation:
"Squaring off" means you bought and sold the exact same amount of a stock on the same day. Since your position is back to zero, no shares actually need to be moved in or out of your account.

Marks: 1

Q4 What is 'Net Return' for an investor?

  • A. Return after all management fees, expenses, and commissions have been subtracted. Correct Answer
  • B. Return after the government takes its share.
  • C. Return before any fees are paid.
  • D. The return of the benchmark index.
Explanation:
Net return is what you actually get to keep. Always look at net returns because high fees can eat up all your profits.

Marks: 1

Q5 What is the GST rate usually charged on PMS management fees?

  • A. 28%
  • B. 18% Correct Answer
  • C. 12%
  • D. 5%
Explanation:
Financial services in India generally attract 18% GST. This is an extra cost that the investor has to bear.

Marks: 1

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