Sample Questions

NISM-Series-12: Securities Markets Foundation 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 are "Systematic Transactions" offered by mutual funds?

  • A. Transactions that require manual approval from the investor for each instance.
  • B. Transactions conducted directly on the stock exchange.
  • C. Transactions that are executed automatically by the mutual fund at fixed intervals based on pre-specified instructions. Correct Answer
  • D. One-time lump sum investments.
Explanation:
Systematic transactions, such as SIPs, SWPs, and STPs, automate recurring investment, withdrawal, or transfer activities based on parameters set by the investor.

Marks: 1

Q2 What is the benefit of "Co-location" for high-frequency traders?

  • A. Access to insider information.
  • B. Reduced brokerage charges.
  • C. Increased market liquidity.
  • D. Reduced latency. Correct Answer
Explanation:
By placing their servers very close to the exchange's servers, co-location allows high-frequency traders to minimise the time delay (latency) in sending and receiving trading signals.

Marks: 1

Q3 How does SEBI monitor the activities of market constituents like stock exchanges and brokers?

  • A. By setting interest rates for debt securities.
  • B. Through routine inspections and surveillance mechanisms to identify unfair practices. Correct Answer
  • C. By directly executing trades on their behalf.
  • D. By managing their financial reserves.
Explanation:
SEBI conducts inspections and uses surveillance systems to monitor compliance and identify unfair trade practices such as manipulation and insider trading.

Marks: 1

Q4 What must be done by all holders in a joint mutual fund folio?

  • A. Only the first holder needs to complete KYC.
  • B. Only the first holder needs to provide PAN.
  • C. All holders must undergo KYC formalities and provide PAN. Correct Answer
  • D. Only one holder is required to sign for all transactions.
Explanation:
For joint folios, all holders listed on the account are required to complete KYC procedures and provide their Permanent Account Number (PAN).

Marks: 1

Q5 How does investing in mutual funds help investors achieve diversification?

  • A. By focusing investment in a single sector for maximum growth.
  • B. By allowing investment in a diversified portfolio with small amounts. Correct Answer
  • C. By guaranteeing returns that exceed market benchmarks.
  • D. By eliminating all investment risks.
Explanation:
Mutual funds pool money from many investors, enabling them to invest in a diversified portfolio across various securities and sectors, which is difficult with small individual amounts.

Marks: 1

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