Certifications Mock Tests Study Material Menu Certifications Mock Tests Study Material NISM Series X-A: Investment Adviser (Level 1) Cert. 'Case Study 6' /10 NISM Series X-A: Investment Adviser (Level 1) Certification – Case Study 6 1 / 10 1. Mr.Vasanth Kumar is a conservative investor who invest regularly in FD and BONDS. He is planning to invest in 8% annual coupon bearing bonds of ABC Ltd. These bonds are issued at Face value and redeemable at a premium of 6%.Term of the bond is 5 years.Calculate YTM at the time of issue. a. 9.67% b. 9% c. 8% d. 8.2% Explanation:=RATE(5,8,-100,106,0) 2 / 10 2. Mr.Vasanth Kumar is a conservative investor who invest regularly in FD and BONDS. He is planning to invest in 8% annual coupon bearing bonds of ABC Ltd. These bonds are issued at Face value and redeemable at a premium of 6%.Term of the bond is 5 years.Bonds are traded at Rs 103 after a year. Calculate YTM after one year a. 9.77% b. 8.77% c. 8.41% d. 8% Explanation:=RATE(4,8,-103,106,0)=8.41% 3 / 10 3. Mr.Vasanth Kumar is a conservative investor who invest regularly in FD and BONDS. He is planning to invest in 8% annual coupon bearing bonds of ABC Ltd. These bonds are issued at Face value and redeemable at a premium of 6%.Term of the bond is 5 years.Calculate modified duration if duration after one year is 3.6 a. 3.69 b. 3.59 c. 3.49 d. 3.320 Explanation:Modified Duration = Duration / (1+Y/K)MD = 3.6/(1+8.41%)MD = 3.6/1.0841 = 3.320 4 / 10 4. Mr.Vasanth Kumar is a conservative investor who invest regularly in FD and BONDS. He is planning to invest in 8% annual coupon bearing bonds of ABC Ltd. These bonds are issued at Face value and redeemable at a premium of 6%.Term of the bond is 5 years.Due to RBI announcement Yields went up by 50 BPS. Calculate the change in price of bond. This happened when the bond was trading at Rs 103. a. 101.28 b. 102.30 c. 103.30 d. 104.30 Explanation:Change in Price of a Bond for a given change in Yiled = Modified Duration * Change in Yiled in %=3.320*0.5%=1.66%Since Yield went up by 50 BPS, Price will drop by 1.66%So From Rs 103 the price will drop to Rs 101.28 5 / 10 5. Mr. X is in the business of mutual fund distribution. He wants to become an insurance adviser. He also wants to become Investment advisor. In this context he has some queries. Please help him to solve the follow queries.He wants to become an insurance adviser. Which of the following is applicable for Mr. X? a. He has to register as investment adviser if he want to sell insurance product b. He Can sell either mutual fund or insurance and not both c. He Can sell both mutual fund and insurance if he registers as investment adviser d. There is no bar on Mr. X selling both products Explanation:Mr. X can sell both mutual funds and insurance products without any restrictions. There is no requirement for him to register as an investment adviser specifically to sell insurance products. He can engage in both businesses simultaneously. 6 / 10 6. Mr. X is in the business of mutual fund distribution. He wants to become an insurance adviser. He also wants to become Investment advisor. In this context he has some queries. Please help him to solve the follow queries.Mr. X wants to pay back to clients, part of the commission he get from Mutual Fund and Insurance companies so that he can bring more customers under his fold. a. He is permitted to rebate only in case of mutual funds b. He is permitted to rebate only in case of insurance c. He is not permitted to rebate in either mutual funds or insurance d. He is free to rebate in both mutual funds and insurance Explanation:Rebating, which involves giving back a portion of the commission to clients, is generally not permitted in the financial services industry, including both mutual funds and insurance. It’s considered unethical and can lead to conflicts of interest, as well as potential regulatory issues. Therefore, Mr. X is not allowed to offer rebates in either mutual funds or insurance. 7 / 10 7. Mr. X is in the business of mutual fund distribution. He wants to become an insurance adviser. He also wants to become Investment advisor. In this context he has some queries. Please help him to solve the follow queries.Mr. X wants to know if any code of conduct is applicable to Insurance and MF Products a. Code of conduct is not compulsory in Mutual Funds b. Code of conduct is not compulsory in Insurance c. Can do either product, because both do not insist on a code of conduct d. Both mutual funds and insurance require compliance with code of conduct Explanation:Both mutual fund distribution and insurance advisory are regulated industries that require adherence to certain standards of conduct. These standards are outlined in the respective codes of conduct or regulations set forth by the regulatory authorities governing each industry. Therefore, Mr. X must comply with the code of conduct applicable to both mutual funds and insurance products in order to conduct business ethically and in accordance with regulations. 8 / 10 8. Mr. X is in the business of mutual fund distribution. He wants to become an insurance adviser. He also wants to become Investment advisor. In this context he has some queries. Please help him to solve the follow queries.Mr. X wants to become an Investment Advisor in Individual capacity. He is confused as to whether he should appoint a Compliance Officer. What would your suggestion be? a. Appointment of compliance officer is compulsory only for non-individuals so Mr.X may proceed further to become an Investment Adviser b. You should advise Mr. X not to worry, because SEBI is unlikely to verify c. You should advise Mr. X that it is SEBI's job to give him a compliance officer d. You should advise Mr. X to appoint a compliance officer Explanation:According to regulations set by SEBI (Securities and Exchange Board of India), the requirement to appoint a compliance officer is applicable primarily to entities that are not individual advisors. Since Mr. X intends to operate as an investment advisor in his individual capacity, he is not obligated to appoint a compliance officer. Therefore, he may proceed further with his plans without the need for appointing a compliance officer. 9 / 10 9. Mr. X is in the business of mutual fund distribution. He wants to become an insurance adviser. He also wants to become Investment advisor. In this context he has some queries. Please help him to solve the follow queries.Mr.X wants to know the Networth requirement to be satisfied to become an Individual Investment Adviser? a. Rs 25 Lakhs b. Rs 1 Lakh c. Rs 5 Lakhs d. Rs 10 Lakhs Explanation:According to SEBI regulations, an individual investment adviser is required to have a minimum net worth of Rs 5 Lakhs to become registered. This net worth requirement ensures that the adviser has sufficient financial stability to operate in the investment advisory business. Therefore, Mr. X needs to satisfy a net worth of Rs 5 Lakhs to become an individual investment adviser. 10 / 10 10. IPO of ABC LTd is Priced at Rs 75. Book value of its shares is Rs 24. Current EPS is Rs 7 and this is likely to increase by 10% every year. He wants to invest in this IPO using a leverage of 2 times at a cost of 2.5%.Calculate Historic Price to Book Value a. 3.125 b. 4.125 c. 5.125 d. 6.125 Explanation:The Historic Price to Book Value (P/B) ratio is calculated by dividing the market price per share by the book value per share.In this case: Market price per share (IPO price) = Rs 75 Book value per share = Rs 24So, Historic P/B ratio = Market price per share / Book value per share = Rs 75 / Rs 24 ≈ 3.125Therefore, the correct answer is a) 3.125. Your score is 0% Restart quiz Exit Your feedback is important to us.😊 Thank you for your feedback. Send feedback
