NISM Series XIX-C: Alternative Investment Fund Managers Free Demo Test 1

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NISM Series XIX-C: Alternative Investment Fund Managers Cert. Mock Test 1

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1. The additional return required by the investor over and above the normal rate of return, when the investment is risky is called ________.

a) Alpha

b) Risk free rate of return

c) Risk premium

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2. ____________________ represent ownership in a company that entitles its holders to participate in its profits and the right to vote on the company’s affairs.

a) Bonds

b) Commercial Papers

c) Equity Shares

d) All the above

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3. If a portfolio is comprised of two stocks, and if the correlation coefficient between two stocks were to decrease over time everything else remaining constant the portfolio’s risk would ___________.

a) Remain constant

b) Decrease

c) Fluctuate positively and negatively

d) Increase

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4. An angel fund is a sub-category of a ________fund.

a) venture capital

b) mutual

c) private equity

d) collective investment

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5. The following category of investors is not suitable to invest in an AIF.

a) Individuals less than 60 years of age

b) Individuals with no risk-taking capacity

c) Members of a HUF

d) Partners of a firm

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6. Which of the following persons is eligible to be the sponsor of an AIF?

a) Individual who is insolvent but is yet to file for bankruptcy

b) Individual of an unsound mind but undergoing treatment

c) Individual who is convicted of a criminal offence but awaiting sentencing

d) ‘Fit and proper’ person as determined by SEBI

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7. ___________ is a function of the investment manager.

a) Settling business disputes of the investee company

b) Entrepreneurship

c) Auditing the books of an AIF

d) Harvesting returns

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8. The following is the most common structure adopted for a domestic AIF in India.

a) Partnership

b) Sole Proprietorship

c) Trust

d) Company

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9. Which of the following is the trust structure that is suitable for an AIF in India?

a) Limited liability trust

b) Public charitable trust

c) Partnership trust

d) Determinate trust

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10. One of the key risks of AIF investment is:

a) the risk of inadequate security creation

b) illiquidity risk

c) the risk of capital inadequacy

d) the risk of inadequate provisioning against NPAs

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11. A fund has a PIC of 0.90. It means ________.

a) that the fund is about to complete its final close

b) that it has only 10% NPA level

c) that the fund has 90% recovery rate on its investments

d) that it has drawn down most of the capital commitments

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12. The FIRR is a measure of return based on the ___________.

a) time value of money

b) percentage of gross margin

c) accounting profit of an investment

d) profit potential of an investment

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13. Which of the following is a use of security market Index?

a) To be used for measuring systematic risk

b) To be used for creating passive portfolios like index funds

c) To serve as a benchmark for portfolio performance

d) All of the above

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14. What impact does a stock split have on a price-weighted series?

a) Index and divisor will both change

b) Index remains the same, divisor will change

c) Divisor remains the same, index will change

d) Index and divisor will both remain the same

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15. An example of a value weighted stock market index is:

a) S & P 500

b) BSE Sensex

c) Nifty 50

d) All the above

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16. The due diligence review is conducted by ________.

a) an agency appointed by the investment manager

b) the trustee of the AIF

c) an investment bank appointed by the manager

d) the auditor of the AIF

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17. The term sheet is entered into by __________.

a) the manager with a potential investee company

b) the sponsor with the investor

c) the fund with the manager

d) the distributor with the investor

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18. The following is a ‘definitive agreement’ for an AIF investment.

a) Articles of Association

b) Subscription agreement

c) Trust deed

d) Private Placement Memorandum

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19. ‘Alignment of interests’ is required between ___________.

a) the AIF and its auditor

b) the AIF and the subsidiary

c) the manager and the AIF investors

d) the LLP and the trust

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20. One of the criteria to evaluate a fund manager is _____________.

a) the timing of the cash flow

b) the economic risk of the investment

c) the general investment climate

d) the prior performance track record of the fund

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21. One of the key disclosures in a Private Placement Memorandum (PPM) is:

a) the management fee structure

b) the details of asset securities

c) the minimum guaranteed return

d) the amount of investment made by the investor

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22. Investment objective of AIF refers to ____________.

a) reporting requirements

b) investee company performance

c) Target TVPI

d) identification of investment opportunities

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23. Which of the following metric measures the estimated value of a start-up immediately before it receives external funding from a Category I AIF or a Category II AIF?

a) Pre-Money Valuation

b) Post-money Valuation

c) Enterprise Value

d) Net Asset Value

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24. Which of the following securities would least likely be valued at Fair Market Value, by a Category III AIF?

a) Listed Equities

b) Exposure in Commodity Derivative Contracts

c) Units of a mutual fund

d) Unlisted Equities

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25. The fund has to maintain records relating to ________.

a) effective rate of return

b) valuation policies and practices

c) all material contracts of investee companies

d) monetary policy prescribed by RBI

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26. Fund activity reporting to SEBI under the AIF Regulations shall be on a ________.

a) annual basis

b) six-monthly basis

c) quarterly basis

d) monthly basis

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27. Which of the following Trust structures are eligible to pass-through income in the nature of ‘Capital Gains’, to its investors?

a) Indeterminate Revocable Trust

b) Determinate Irrevocable Trust

c) Indeterminate Irrevocable Trust

d) Determinate Revocable Trust

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28. The following types of income will most likely be taxed as ‘Income from Other Sources’ for a Category III AIF, EXCEPT:

a) Income from transactions in exchange-traded derivatives

b) Interest Income

c) Dividend Income

d) Deemed Income on Investment in shares below its Fair Market Value, under Section 56(2)(x) of the Income Tax Act

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29. Withholding tax means _____________.

a) additional tax and penalty for withholding information

b) tax that is withheld and carried forward to next year

c) a sum deducted from any income paid/ credited

d) the tax on income not disclosed

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30. The following investors are not an accredited investor, as per the Accreditation Framework:

a) An individual investor having annual income of Rs. 5 crore

b) An corporate having networth of Rs. 250 crore

c) An individual investor having annual income of Rs. 50 lakh

d) An individual investor having networth of Rs 50 crore

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31. Which of the following entity is least likely to be a permissible legal structure, seeking registration as an AIF under the SEBI (Alternative Investment Funds) Regulations?

a) Trust

b) Proprietorship

c) Limited Liability Partnership (LLP)

d) Company

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32. AIFs can invest in Joint Venture or Wholly Owned Subsidiary of itself while making overseas investments. State whether True or False.

a) TRUE

b) FALSE

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33. Which of the following would be inconsistent with an efficient market?

a) Information arrives independently

b) Information arrives randomly

c) Price adjustments are biased

d) Stock prices adjust rapidly to new information

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34. Which of the following would most closely resemble the market portfolio?

a) Stocks, bonds, foreign securities options and Gold

b) Stocks and bonds

c) Stocks, bonds and foreign securities

d) Stocks

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35. An AIF that seeks to invest in listed securities on the stock exchange and stock options belongs to which category?

a) Category II

b) Category III

c) Category I

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36. A fund that provides both equity and quasi-equity debt financing to early stage companies would classify as which one of the following?

a) Unsecured bond fund

b) NBFC fund

c) Venture capital fund

d) Investment Fund

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37. Which of the following positions in F&O are eligible to be considering as offsetting positions, to compute the maximum permissible Leverage for a Category III AIF?

a) A Long Futures Contract and a Call option on the same underlying asset

b) A Call Option and a Put Option on a different underlying asset, but with the same strike price.

c) A Call Option and a Put Option on the same underlying asset, but with different strike price.

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38. Under the SEBI (AIF) Regulations 2012, annual reporting by a Catgory I AIF to investors shall be:

a) within 180 days from the close of the financial year

b) after the final close

c) towards the end of the fund tenure

d) within 90 days after the balance sheet date

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39. For an Indian company engaged in a sector where FDI is not prohibited, the default aggregate FPI limits is the applicable sectoral cap as laid out in Schedule I of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. State whether True or False.

a) TRUE

b) FALSE

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40. The PPM should be submitted by the AIF sponsor through a SEBI-registered Merchant Banker. State whether True or False.

a) TRUE

b) FALSE

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41.

The opportunity to take advantage of the downward pressure on stock prices that result from end-of-the-year tax selling is known as __________.

a) The New Year’s Anomaly.

b) The December Anomaly.

c) The End-of-the-Year Anomaly.

d) The January Anomaly.

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42.

As a portfolio manager you are evaluating to add another security to the portfolio. The correlations of the prospective 4 securities, with the existing portfolio are given below. Which security would you choose if your objective is highest level of risk diversification?

a) 0.0

b) 0.25

c) -0.35

d) -0.85

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43.

Which of the following securities would least likely be valued at Fair Market Value, by a Category III AIF?

a) Listed Equities

b) Unlisted Equities

c) Exposure in Commodity Derivative Contracts

d) Units of a mutual fund

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44.

The fund has to maintain records relating to ________.

a) all all material contracts of investee companiesmaterial contracts of investee companies

b) valuation policies and practices

c) monetary policy prescribed by RBI

d) effective rate of return

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45.

Which of the following factors makes it difficult to create and maintain a bond index?

a) The universe of bonds is broader than stocks.

b) The universe of bonds is constantly changing due to new issues

c) It is difficult to derive up-to-date prices of bonds as compared to stocks

d) All of the above

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46. For an Indian company engaged in a sector where FDI is not prohibited, the default aggregate FPI limits is the applicable sectoral cap as laid out in Schedule I of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. State whether True or False

a) True

b) False

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47. The due diligence review is conducted by ________.

a) the trustee of the AIF

b) the auditor of the AIF

c) an agency appointed by the investment manager

d) an investment bank appointed by the manager

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48.

Which risk measure is used to ascertain the extent to which a distribution is not symmetrical across the mean?

a) Standard Deviation

b) Mean

c) Skewness

d) Kurtosis

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49. Fund due diligence means _________.

a) the due diligence conducted on the AIF

b) the due diligence made by the manager

c) the due diligence conducted on the investee company

d) the due diligence conducted by the auditor

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50.

Which of the following is the function of the secondary markets?

a) Provide liquidity for securities issued

b) Provide a platform for making public issues

c) Provide information about public companies

d) All the above

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NISM Series XIX-C: Alternative Investment Fund Managers Free Demo Test 1

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