Practice 30 important MCQs for NISM Series V-A Unit 1 Investment Landscape with answers and explanations for exam preparation.

NISM Series V-A Unit 1 MCQs – Investment Landscape

Q1. What is the primary purpose of investment?

A. Safety
B. Liquidity
C. Profit generation
D. Tax saving

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Correct Answer: C
Explanation: Investment aims to generate returns or profit.

Q2. Financial goals are best defined as:

A. Current expenses
B. Future monetary needs
C. Daily income
D. Fixed deposits

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Correct Answer: B
Explanation: Financial goals represent future financial requirements.

Q3. Which of the following is a short-term goal?

A. Retirement
B. Child education
C. Buying a house in 1 year
D. Wealth creation

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Correct Answer: C
Explanation: Short-term goals are typically within 1–3 years.

Q4. Savings primarily focus on:

A. High returns
B. Safety
C. Risk
D. Speculation

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Correct Answer: B
Explanation: Savings emphasize capital protection.

Q5. Which factor measures ease of converting investment to cash?

A. Return
B. Safety
C. Liquidity
D. Tax

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Correct Answer: C
Explanation: Liquidity indicates how quickly an asset can be converted into cash.

Q6. Equity investments represent:

A. Loan
B. Ownership
C. Deposit
D. Insurance

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Correct Answer: B
Explanation: Equity gives ownership in a company.

Q7. Which asset class provides regular income?

A. Gold
B. Equity
C. Fixed income
D. Real estate

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Correct Answer: C
Explanation: Fixed income instruments provide regular interest.

Q8. Inflation risk leads to:

A. Higher returns
B. Loss of purchasing power
C. Increase in liquidity
D. Lower risk

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Correct Answer: B
Explanation: Inflation reduces purchasing power over time.

Q9. Which risk arises from inability to sell an asset quickly?

A. Credit risk
B. Market risk
C. Liquidity risk
D. Inflation risk

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Correct Answer: C
Explanation: Liquidity risk occurs when assets cannot be easily sold.

Q10. Credit risk refers to:

A. Price fluctuation
B. Default by borrower
C. Inflation
D. Liquidity

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Correct Answer: B
Explanation: Credit risk is the risk of non-payment.

Q11. Market risk affects:

A. Single company
B. Entire market
C. Only bonds
D. Only real estate

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Correct Answer: B
Explanation: Market risk impacts all securities.

Q12. Interest rate risk mainly affects:

A. Equity
B. Bonds
C. Gold
D. Real estate

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Correct Answer: B
Explanation: Bond prices are sensitive to interest rates.

Q13. Diversification helps in:

A. Increasing risk
B. Reducing risk
C. Increasing tax
D. Eliminating returns

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Correct Answer: B
Explanation: Diversification spreads risk.

Q14. Asset allocation means:

A. Saving money
B. Spending money
C. Distributing investments
D. Borrowing money

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Correct Answer: C
Explanation: Asset allocation distributes funds across asset classes.

Q15. Strategic asset allocation is based on:

A. Market timing
B. Investor goals
C. Luck
D. Random choice

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Correct Answer: B
Explanation: Strategic allocation aligns with goals.

Q16. Behavioural bias refers to:

A. Logical thinking
B. Emotional decision-making
C. Tax planning
D. Diversification

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Correct Answer: B
Explanation: Bias arises from emotions affecting decisions.

Q17. Herd mentality means:

A. Independent thinking
B. Following others
C. Risk avoidance
D. Long-term investing

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Correct Answer: B
Explanation: Investors follow the crowd.

Q18. Loss aversion means:

A. Seeking profits
B. Avoiding losses
C. Ignoring risks
D. Taking high risk

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Correct Answer: B
Explanation: Investors fear losses more than gains.

Q19. Risk profiling determines:

A. Income
B. Expenses
C. Risk appetite
D. Tax

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Correct Answer: C
Explanation: It evaluates ability and willingness to take risk.

Q20. Which asset is least liquid?

A. Equity
B. Fixed deposit
C. Real estate
D. Mutual fund

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Correct Answer: C
Explanation: Real estate is highly illiquid.

Q21. Commodities include:

A. Stocks
B. Bonds
C. Gold
D. Mutual funds

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Correct Answer: C
Explanation: Gold is a commodity.

Q22. Fixed income instruments include:

A. Shares
B. Bonds
C. Gold
D. Property

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Correct Answer: B
Explanation: Bonds are fixed income instruments.

Q23. Equity returns are generally:

A. Fixed
B. Guaranteed
C. Variable
D. Zero

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Correct Answer: C
Explanation: Equity returns fluctuate.

Q24. Inflation-adjusted return is called:

A. Nominal return
B. Real return
C. Gross return
D. Net return

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Correct Answer: B
Explanation: Real return considers inflation.

Q25. Which is a long-term goal?

A. Monthly expenses
B. Buying groceries
C. Retirement
D. Utility bills

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Correct Answer: C
Explanation: Retirement is long-term.

Q26. Which bias involves overestimating abilities?

A. Herd bias
B. Recency bias
C. Overconfidence
D. Loss aversion

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Correct Answer: C
Explanation: Overconfidence leads to excessive risk-taking.

Q27. Tactical asset allocation involves:

A. Fixed allocation
B. Dynamic changes
C. No allocation
D. Random allocation

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Correct Answer: B
Explanation: Tactical allocation adjusts based on market conditions.

Q28. Which factor is most important for evaluating investments?

A. Only returns
B. Only tax
C. Combination of factors
D. Only safety

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Correct Answer: C
Explanation: Multiple factors must be considered.

Q29. Liquidity and returns have:

A. No relation
B. Positive relation
C. Trade-off
D. Equal relation

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Correct Answer: C
Explanation: Higher liquidity often means lower returns.

Q30. Asset allocation helps in:

A. Increasing risk
B. Reducing diversification
C. Managing portfolio risk
D. Eliminating returns

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Correct Answer: C
Explanation: Asset allocation balances risk and return.

Prepare More

• Unit 1 Notes
• Unit 2 Notes
• NISM V-A Main Page