Evaluating the Financial Position of Clients
5 questions. Each answer is explained.
Question 1 of 5Practice · Series X-A — Investment Adviser (Level 1)
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Learn these topics
More units in NISM Series X-A
- Introduction to Personal Financial Planning4
- Time Value of Money14
- Debt Management and Loans2
- Introduction to the Indian Financial Markets4
- Securities Market Segments21
- Introduction to Investment5
- Investing in Stocks20
- Investing in Fixed Income Securities25
- Understanding Derivatives25
- Mutual Funds25
- Portfolio Manager10
- Overview of Alternative Investment Funds (AIFs)15
- Introduction to Modern Portfolio Theory14
- Portfolio Construction Process11
- Portfolio Performance Measurement and Evaluation25
- Operational Aspects of Investment Management15
- Key Regulations15
- Ethical Issues15
- Grievance Redress Mechanism15
Exam format
| Questions | 135 · 1 or 2 marks each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 marks |
| Negative marking | 25% · 0.25 or 0.5 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series X-A Investment Adviser (Level 1)
Exam rules read on NISM's site on 3 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 5 questions on Evaluating the Financial Position of Clients, with answers
Q1A household receives ₹90,000 a month after tax. Regular monthly living expenses are ₹54,000 and loan instalments are ₹16,000. An insurance premium of ₹72,000 is payable annually. After making an equal monthly provision for that premium, what amount remains available each month for additional saving?
Option A. ₹20,000
Why it is wrong: ₹20,000 ignores the insurance provision altogether.
Option B. ₹18,000
Why it is wrong: ₹18,000 reserves only ₹2,000 from the pre-insurance surplus, not the required ₹6,000.
Option C. ₹8,000
Why it is wrong: ₹8,000 subtracts the ₹6,000 provision twice from the ₹20,000 pre-insurance surplus.
Option D. ₹14,000 — Correct answer
Answer: D. ₹14,000 deducts all stated budget items once. Monthly provision for insurance = ₹72,000 ÷ 12 = ₹6,000. Total budgeted outgo = ₹54,000 living expenses + ₹16,000 loan instalments + ₹6,000 insurance provision = ₹76,000. Income of ₹90,000 less ₹76,000 leaves ₹14,000 for additional saving. The provision is counted once, not in addition to a duplicate annual charge in the same monthly calculation. Remember: Convert predictable non-monthly expenses to the budget’s time unit before calculating spare cash.
Hint, shown before you answer in practice mode: Common mistake: Calling cash left in a non-premium month fully investible while ignoring an annual bill that still has to be funded.
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Q2A client chooses an emergency-fund target of exactly six months of essential outgo of ₹45,000 a month. The amount already earmarked for this purpose is ₹1,80,000. What is the shortfall?
Option A. ₹45,000
Why it is wrong: ₹45,000 covers only one further month. Two months remain unfunded.
Option B. ₹2,70,000
Why it is wrong: ₹2,70,000 is the full target before accounting for the existing fund.
Option C. ₹90,000 — Correct answer
Option D. ₹1,35,000
Why it is wrong: ₹1,35,000 is three months of outgo and exceeds the stated shortfall.
Answer: C. ₹90,000 is the difference between the target and the amount already earmarked. Required coverage in this scenario is six months, with essential monthly outgo of ₹45,000. Target = 6 × ₹45,000 = ₹2,70,000. Already earmarked = ₹1,80,000. Additional funding needed = ₹2,70,000 − ₹1,80,000 = ₹90,000, equal to two more months of the stated outgo. Remember: Keep the target, existing eligible resources and incremental gap as three separate amounts.
Hint, shown before you answer in practice mode: Common mistake: Presenting the example’s six-month choice as a universal compulsory or regulatory threshold.
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Q3CASE: A household has a savings balance of ₹2,40,000, fixed deposits of ₹3,60,000, mutual funds of ₹9,00,000 and a house worth ₹50,00,000. It owes ₹20,00,000 on a housing loan and ₹1,00,000 on a personal loan. What is its net worth?
Option A. ₹65,00,000
Why it is wrong: ₹65 lakh is total assets. It leaves out the loans.
Option B. ₹44,00,000 — Correct answer
Option C. ₹21,00,000
Why it is wrong: ₹21 lakh is the total of the loans, not net worth.
Option D. ₹50,00,000
Why it is wrong: ₹50 lakh is the house alone.
Answer: B. Net worth is assets minus liabilities. Assets = ₹2,40,000 + ₹3,60,000 + ₹9,00,000 + ₹50,00,000 = ₹65,00,000. Loans = ₹21,00,000. Net worth = ₹44,00,000. Remember: Earmarking money for a goal does not create a new asset to add to the balance sheet.
Hint, shown before you answer in practice mode: Common mistake: Double counting the earmarked education money or omitting a self-occupied house solely because it is not readily spendable.
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Q4CASE: A household earns ₹1,20,000 a month after tax. It spends ₹45,000 on essentials, pays loan instalments of ₹25,000 and ₹5,000, and sets aside one-twelfth of a ₹60,000 annual insurance premium each month. What is its monthly surplus before new investments?
Option A. ₹45,000
Why it is wrong: ₹45,000 forgets the monthly insurance provision.
Option B. ₹35,000
Why it is wrong: ₹35,000 counts the insurance provision twice.
Option C. ₹50,000
Why it is wrong: ₹50,000 leaves out the personal-loan instalment and the insurance provision.
Option D. ₹40,000 — Correct answer
Answer: D. ₹1,20,000 − ₹45,000 − ₹25,000 − ₹5,000 − ₹5,000 = ₹40,000. The last ₹5,000 is one-twelfth of the ₹60,000 premium. Remember: Use the same period for all cash flows and distinguish pre-investment surplus from the balance after planned investments.
Hint, shown before you answer in practice mode: Common mistake: Confusing an annual expense not paid this month with an expense that needs no monthly provision.
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Q5CASE: A household's emergency-fund target is six months of essential outgo. Monthly essential outgo is ₹45,000 of living costs, ₹30,000 of loan instalments and a ₹5,000 insurance provision. Only its savings balance of ₹2,40,000 and fixed deposits of ₹3,60,000 count. How does the eligible amount compare with the target?
Option A. It exceeds the target by ₹1,20,000. — Correct answer
Option B. It falls short of the target by ₹2,40,000.
Why it is wrong: This counts only the savings balance against the target.
Option C. It equals the target exactly.
Why it is wrong: ₹6,00,000 is more than the ₹4,80,000 target.
Option D. It exceeds the target by ₹3,30,000.
Why it is wrong: This uses living costs alone, 6 × ₹45,000 = ₹2,70,000.
Answer: A. Target = 6 × ₹80,000 = ₹4,80,000. Eligible = ₹2,40,000 + ₹3,60,000 = ₹6,00,000. The fund exceeds the target by ₹1,20,000. Remember: An asset may count for net worth but not for an emergency-fund test with narrower eligibility.
Hint, shown before you answer in practice mode: Common mistake: Applying a different definition of essential outgo or eligible assets from the one explicitly supplied.
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Evaluating the Financial Position of Clients: common questions
How many practice questions are there on Evaluating the Financial Position of Clients?
5 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 20 practice topics for NISM Series X-A, which has 285 questions in total.
Are these real NISM Series X-A questions on Evaluating the Financial Position of Clients?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series X-A?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1 or 2-mark question that is 0.25 or 0.5 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
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