Sample Questions

NISM-Series-19D: Category I and II Alternative Investment Fund Managers 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 To find the "fair value" of an investor's piece of a fund, you look at their share of the fund's value after subtracting:

A. The investor's original capital contribution
B. The fund's unrealised gains on investee companies
C. Capital commitments not yet drawn down
D. Taxes and mandatory government payments Correct Answer

Explanation:

Your real value is what is left after all debts and government taxes are cleared. This is your "proportionate distributable" share.

Marks: 1

Q2 Which document must be given to prospective investors to explain the fund's strategy, fees, risks, and terms?

A. Trust Deed
B. Private Placement Memorandum (PPM) Correct Answer
C. Term Sheet
D. Shareholder Agreement

Explanation:

The PPM is the official disclosure document that details all material information an investor needs before committing capital.

Marks: 1

Q3 Which of the following best captures the fundamental distinction between 'Investment' and 'Speculation'?

A. Investments are short-term trades based on technical charts, while speculation is long-term holding
B. Investment decisions are based on fundamental value, expected cash flows, and long-term risk-return analysis, whereas speculation relies on short-term price movements and market sentiment Correct Answer
C. Investments carry no financial risk, whereas speculation carries moderate risk
D. Investment is restricted to listed equities, whereas speculation is allowed only in Category I AIFs

Explanation:

Investment is characterised by thorough analysis of safety of principal, fundamental cash flow generation, and reasonable long-term returns. Speculation, conversely, focuses on short-term price fluctuations and market psychology without underlying asset valuation.

Marks: 1

Q4 What is the main characteristic of "Mezzanine Financing"?

A. Pure equity financing with voting rights
B. Unsecured short-term working capital loan from a bank
C. A hybrid of debt and equity financing with flexible conversion rights Correct Answer
D. Secured senior debt with a fixed repayment schedule

Explanation:

Mezzanine capital sits between senior debt and equity, offering debt-like income with equity upside through warrants or conversion.

Marks: 1

Q5 Which financial statement shows a company's total assets, liabilities, and owners' equity at a specific point in time?

A. Audit Report
B. Balance Sheet Correct Answer
C. Cash Flow Statement
D. Income Statement

Explanation:

The Balance Sheet gives a financial "snapshot" of what a business owns and owes on a specific date.

Marks: 1

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Sample Questions

Q1 To find the "fair value" of an investor's piece of a fund, you look at their share of the fund's value after subtracting:

Q2 Which document must be given to prospective investors to explain the fund's strategy, fees, risks, and terms?

Q3 Which of the following best captures the fundamental distinction between 'Investment' and 'Speculation'?

Q4 What is the main characteristic of "Mezzanine Financing"?

Q5 Which financial statement shows a company's total assets, liabilities, and owners' equity at a specific point in time?

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