Alternative Investment Fund Managers

Syllabus and chapter weightage

Weightages are taken from the official syllabus table published in the NISM workbook, so you can see exactly where the marks are.

Every chapter can be read free, no account needed — tap a chapter to open its plain-English Foundation lesson.

Sample questions

5 questions from the chapter tests, one per chapter. Pick your answer before you open the explanation.

1. Question 1 · Chapter 1: Investments Landscape

   The additional return required by an investor over and above the normal rate of return, when the investment is risky, is called:

   1. A.Alpha
   2. B.Risk free rate of return
   3. C.Risk premium
   4. D.Real rate of return
   Show the answer

   Answer: C. Risk premium

   This is the workbook's own sample question. In such cases, investors would require compensation for the uncertainty associated with future cashflows. This additional compensation over the nominal risk-free rate is called risk premium. If the investors perceive higher risk (more uncertainty with respect to the future payment), they would demand higher risk premium. The risk free rate of return is the base to which the premium is added, and the build-up is Real risk free rate plus inflation adjustment + Risk premium adjustment = Required rate of return.

2. Question 2 · Chapter 2: Types of Investments

   Which of the following represent ownership in a company, entitling holders to participate in its profits and to vote on the company's affairs?

   1. A.Bonds
   2. B.Commercial Papers
   3. C.Equity Shares
   4. D.Treasury Bills
   Show the answer

   Answer: C. Equity Shares

   This is the workbook's own sample question. Equity Shares represent ownership in a company that entitles its holders a share in profits and the right to vote on the company's affairs. Equity shareholders are residual owners of firm's profit after other contractual claims on the firm are satisfied and they have the ultimate control over how the firm is operated. Bonds, commercial papers and treasury bills are all debt — contracts containing a promise to pay a stream of cashflows during the term of the contract — conferring neither ownership nor voting rights.

3. Question 3 · Chapter 3: Concept of Informational Efficiency

   Which of the following would be INCONSISTENT with an efficient market?

   1. A.Information arrives randomly
   2. B.Information arrives independently
   3. C.Stock prices adjust rapidly to new information
   4. D.Price adjustments are biased
   Show the answer

   Answer: D. Price adjustments are biased

   This is the workbook's own sample question. Efficiency requires that the market price is an unbiased estimate of the true value of the security... deviations of the price from the value is random in nature... Randomness means that there is an equal chance that security is under or over or fairly valued at any point in time. A biased adjustment leans systematically in one direction and can therefore be exploited, which is exactly what efficiency denies: no investor should be able to consistently find under-valued or over-valued securities using any investment strategy. Random and independent arrival of information, and rapid price adjustment, are all conditions consistent with efficiency.

4. Question 4 · Chapter 4: Introduction to Modern Portfolio Theory

   If a portfolio comprises two stocks and the correlation coefficient between them decreases over time, everything else remaining constant, the portfolio's risk would:

   1. A.Decrease
   2. B.Remain constant
   3. C.Increase
   4. D.Fluctuate positively and negatively
   Show the answer

   Answer: A. Decrease

   This is the workbook's own sample question. If the two securities are not perfectly correlated, the portfolio's risk is less than the weighted average risk of the securities... As long as the correlation is less than perfect 1, benefits of diversification occurs. Lower the correlation, higher the benefits of diversification. Mechanically, correlation enters portfolio variance through Cov(ij) = r(ij) × σi × σj — lowering r shrinks the covariance term while the weights and individual standard deviations are unchanged, so portfolio variance falls.

5. Question 5 · Chapter 5: Introduction to Capital Market Theory

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

   1. A.Stocks
   2. B.Stocks and bonds
   3. C.Stocks, bonds and foreign securities
   4. D.Stocks, bonds, foreign securities, options and gold
   Show the answer

   Answer: D. Stocks, bonds, foreign securities, options and gold

   This is the workbook's own sample question. Market portfolio consists of all the risky assets. The theoretical market portfolio should include domestic and foreign stocks and bonds, real estate, coins, stamps, art, antiques, and any other marketable risky asset from around the world. The question asks which option comes closest, so the widest list wins. In practice, It is not possible to construct such a portfolio in practice. Hence proxies are to be used. Broad based equity market indices are often used, though An incorrect market proxy will affect both the beta risk measures and the position and slope of the SML.

Frequently asked questions

What is the passing mark for NISM Series XIX-C?

You need 60% to pass NISM-Series-XIX-C: Alternative Investment Fund Managers. On a 150-mark paper that is 90 marks.

Is there negative marking in NISM Series XIX-C?

There is negative marking of 25% of the marks for that question, so a wrong answer costs you 0.25 marks on a 1-mark question. Guess only when you can eliminate at least two options.

How long is the NISM Series XIX-C exam?

The exam runs for 180 minutes and carries 150 marks in total.

How long is the NISM Series XIX-C certificate valid?

NISM certifications are generally valid for 3 years from the date of passing, after which they must be renewed. Confirm the current position on nism.ac.in before your certificate lapses.