Mutual Funds
25 questions. Each answer is explained.
Question 1 of 10Practice · 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
- Evaluating the Financial Position of Clients5
- 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
- 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 25 questions on Mutual Funds, with answers
Q1A scheme has assets of ₹52 crore, liabilities of ₹2 crore and 2 crore units outstanding. What is its NAV per unit?
Option A. ₹26
Why it is wrong: ₹26 divides gross assets by units without deducting liabilities.
Option B. ₹25 — Correct answer
Option C. ₹24
Why it is wrong: ₹24 effectively deducts the ₹2 crore liability twice before dividing.
Option D. ₹50
Why it is wrong: ₹50 confuses the numerical net-assets amount in crore with a per-unit value.
Answer: B. ₹25 correctly divides net assets by outstanding units. Net assets = ₹52 crore − ₹2 crore = ₹50 crore. The liability is deducted once from the gross asset figure. NAV per unit = ₹50 crore ÷ 2 crore units = ₹25 per unit. The crore factors cancel because both numerator and denominator use that scale. This is an accounting value per unit at the stated valuation point. The calculation does not establish a future return or whether the scheme is suitable for a particular investor. Remember: Subtract scheme liabilities before dividing by the unit count.
Hint, shown before you answer in practice mode: Common mistake: Mixing rupees, crore rupees and crore units, or using gross rather than net assets.
X-A-126easynumerical
Q2A scheme has net assets of ₹50 crore and 2 crore units outstanding, giving NAV ₹25. It receives a ₹50,000 subscription and issues units at exactly ₹25, with no charges, valuation movement or other cash flow. What is NAV immediately after issuing the new units?
Option A. ₹25.0025
Why it is wrong: ₹25.0025 adds the subscription cash but incorrectly leaves the old unit count unchanged.
Option B. ₹24.9975
Why it is wrong: ₹24.9975 approximately adds the new units while ignoring the matching subscription cash.
Option C. ₹50
Why it is wrong: ₹50 is neither the old nor the correctly recalculated per-unit net asset value.
Option D. ₹25 — Correct answer
Answer: D. ₹25 reflects the matching increases in assets and units. Units issued = ₹50,000 ÷ ₹25 = 2,000 units. Net assets increase from ₹50,00,00,000 to ₹50,00,50,000. Outstanding units increase from 2,00,00,000 to 2,00,02,000. Dividing ₹50,00,50,000 by 2,00,02,000 still gives ₹25. The fresh money increases the size of the fund, not the value of each existing unit. Ignoring the new units would falsely treat someone else’s subscription as an investment gain for existing investors. Remember: Fair-value unit issuance changes fund size without creating a windfall for existing holders.
Hint, shown before you answer in practice mode: Common mistake: Counting subscription inflows as portfolio investment returns.
X-A-127mediumnumerical
Q3An investor redeems 1,500 units at the applicable NAV of ₹40. For this hypothetical redemption, the exit load is exactly 1% of the gross redemption value. There are no other deductions. How much cash is payable?
Option A. ₹59,400 — Correct answer
Option B. ₹60,000
Why it is wrong: ₹60,000 ignores the exit load entirely.
Option C. ₹59,985
Why it is wrong: ₹59,985 deducts ₹15, confusing 1% of the unit count with a rupee charge.
Option D. ₹60,600
Why it is wrong: ₹60,600 adds the fee to the investor’s proceeds instead of deducting it.
Answer: A. ₹59,400 deducts the stated ₹600 load from gross proceeds. Gross redemption value = 1,500 units × ₹40 = ₹60,000. Exit load = 1% × ₹60,000 = ₹600. Net payment = ₹60,000 − ₹600 = ₹59,400. The 1% is a scenario term, not a statement about the current load of any real fund. The question already supplies the applicable NAV and does not require deciding a transaction cut-off or tax treatment. Remember: Identify the specified load base, compute gross value and then apply the deduction.
Hint, shown before you answer in practice mode: Common mistake: Treating an assumed load as a universal rule for mutual funds.
X-A-128mediumnumerical
Q4A scheme has assets of ₹1,00,00,000 and 5,00,000 units. An expense of ₹20,000 has just been recognised as payable but is not yet paid. It is the only liability and is not already deducted from the stated assets. What is NAV after recognising this expense?
Option A. ₹20.04
Why it is wrong: ₹20.04 adds the expense to assets rather than recognising its cost.
Option B. ₹20.00
Why it is wrong: ₹20.00 ignores the liability because it has not yet been paid.
Option C. ₹19.96 — Correct answer
Option D. ₹19.92
Why it is wrong: ₹19.92 deducts the same ₹20,000 twice.
Answer: C. ₹19.96 deducts the ₹20,000 expense once through the liability. Net assets = ₹1,00,00,000 − ₹20,000 = ₹99,80,000. The asset figure is gross of this newly recognised liability. NAV = ₹99,80,000 ÷ 5,00,000 units = ₹19.96. The decrease from ₹20 is ₹20,000 ÷ 5,00,000 = ₹0.04 per unit. When the payable is later settled, cash and the liability both fall by ₹20,000. That settlement alone would not create a second expense or a second NAV reduction. Remember: Recognise an expense once. Later payment of the payable is not another identical expense.
Hint, shown before you answer in practice mode: Common mistake: Waiting for cash payment before considering an accrued liability, or double-counting it.
X-A-129mediumnumerical
Q5An investor puts ₹10,000 into Fund A at NAV ₹10 and a separate ₹10,000 into Fund B at NAV ₹50. During the same period both NAVs rise exactly 10%, with no distributions, charges or further transactions. Which ending-value comparison is correct?
Option A. A is worth ₹55,000 and B ₹11,000.
Why it is wrong: ₹55,000 incorrectly values A’s 1,000 units at B’s ending NAV of ₹55.
Option B. Both investments are worth ₹11,000. — Correct answer
Option C. A is worth ₹11,000 and B ₹10,200.
Why it is wrong: ₹10,200 does not apply a 10% gain to B’s ₹10,000 holding.
Option D. Both investments are worth ₹10,000.
Why it is wrong: ₹10,000 ignores the stated positive change in both NAVs.
Answer: B. Both ₹11,000 follows from the same starting investment and 10% increase. Fund A: ₹10,000 ÷ ₹10 = 1,000 units. Its NAV rises to ₹11, so value becomes 1,000 × ₹11 = ₹11,000. Fund B: ₹10,000 ÷ ₹50 = 200 units. Its NAV rises to ₹55, so value becomes 200 × ₹55 = ₹11,000. Both investments gain ₹1,000 because both started with the same capital and experienced the same stipulated percentage return. These assumptions do not assert that two real schemes will have equal returns. Remember: Compare percentage performance, portfolio characteristics and costs—not the nominal NAV alone.
Hint, shown before you answer in practice mode: Common mistake: Assuming that more units necessarily mean more profit.
X-A-130easyconceptual
Q6A debt fund values its fixed-rate bonds at current market prices. Market yields rise, and those bond prices fall. The issuers continue to pay every contractual coupon on time. With other assets, liabilities and units unchanged, which conclusion follows?
Option A. NAV must remain unchanged until a coupon is missed.
Why it is wrong: A missed coupon is not required for a mark-to-market loss.
Option B. NAV must rise because newly issued bonds offer higher yields.
Why it is wrong: Higher yields on new investments do not make the existing fixed-rate holdings rise in value in the stated situation.
Option C. NAV is determined only by the bonds’ face values.
Why it is wrong: The premise expressly uses current market prices, not face values alone.
Option D. NAV can decline even without a payment default. — Correct answer
Answer: D. A NAV decline is consistent with the price falls despite punctual coupons. The question specifies current market-price valuation. Lower bond market prices reduce the value of the fund’s assets even when each issuer performs its payment promises. With liabilities and unit count unchanged, lower net assets mean a lower NAV per unit. Future opportunities to reinvest at higher yields do not cancel the stated current valuation decline. The result is not proof of default and does not mean all debt funds respond equally. Holdings, duration, cash flows and valuation assumptions determine the size of the effect. Remember: “Fixed income” describes contractual cash flows, not a promise that a fund’s NAV never falls.
Hint, shown before you answer in practice mode: Common mistake: Equating no default with no change in market value.
X-A-131mediumconceptual
Q7A hypothetical scheme permits subscriptions and redemptions with the fund only during specified recurring transaction windows, rather than continuously. Which scheme-structure label most directly describes that pattern?
Option A. Interval scheme — Correct answer
Option B. Continuously open-ended scheme
Why it is wrong: Continuously open-ended access conflicts with the restrictions in the stem.
Option C. Exchange-traded fund solely because windows exist
Why it is wrong: Transaction windows alone do not establish exchange listing or ETF trading.
Option D. A scheme offering no redemption opportunity before final maturity
Why it is wrong: The stem explicitly allows recurring redemptions, not just a single final opportunity.
Answer: A. An interval scheme is the label matching specified recurring transaction windows. The scheme is not continuously open for the stated transactions, so describing its access as continuously open-ended would contradict the premise. The repeated windows identify the interval pattern. A single final redemption date would be different from recurring transaction opportunities. The question describes access to the fund, not secondary-market trading. Actual dates, conditions and liquidity must be read from the relevant scheme terms. None are invented here. Remember: Distinguish transactions with a fund from exchange trading in its units.
Hint, shown before you answer in practice mode: Common mistake: Assuming that a professionally managed fund always provides continuous redemption access.
X-A-132easyconceptual
Q8An ETF’s published NAV is ₹100 per unit. At the moment of purchase, an exchange sell quote of ₹101.20 is available for the investor’s entire order of 200 units, and all 200 execute at that quote. Ignoring costs, how much does the investor pay?
Option A. ₹20,000
Why it is wrong: ₹20,000 uses NAV instead of the stated execution price.
Option B. ₹20,120
Why it is wrong: ₹20,120 counts only half of the total ₹240 premium for 200 units.
Option C. ₹20,240 — Correct answer
Option D. ₹19,760
Why it is wrong: ₹19,760 subtracts the premium even though the execution price is above NAV.
Answer: C. ₹20,240 correctly multiplies executed price by executed quantity. The question specifies both available quantity and the actual execution: 200 units at ₹101.20 each. Cash paid = 200 × ₹101.20 = ₹20,240. This is ₹240 more than 200 units valued at the published ₹100 NAV. The quote is 1.2% above that NAV because (₹101.20 − ₹100) ÷ ₹100 = 1.2%. The example does not assert a universal ETF premium or that the same quote is always available. Remember: Keep an ETF’s NAV and the actual exchange execution price distinct.
Hint, shown before you answer in practice mode: Common mistake: Assuming every exchange trade must occur exactly at the published NAV.
X-A-133mediumnumerical
Q9Two hypothetical fund accounts each start at ₹1,00,000 and each earns a gross gain of ₹10,000 over the period. At period-end, Account A is charged ₹1,000 and Account B ₹2,000. No other flows or charges occur. How much higher is A’s ending value?
Option A. ₹1,000 — Correct answer
Option B. ₹10,000
Why it is wrong: ₹10,000 is the common gross gain, not the advantage of A over B.
Option C. ₹2,000
Why it is wrong: ₹2,000 is B’s entire charge, without recognising that A also incurs ₹1,000.
Option D. ₹11,000
Why it is wrong: ₹11,000 combines unrelated amounts and does not reconcile the two ending balances.
Answer: A. ₹1,000 is the difference between the two charges and between ending values. A ends at ₹1,00,000 + ₹10,000 − ₹1,000 = ₹1,09,000. B ends at ₹1,00,000 + ₹10,000 − ₹2,000 = ₹1,08,000. The difference is ₹1,000. This deliberately uses fixed end-of-period rupee charges. It is not a prescribed total-expense-ratio calculation or an assumption that two different real funds will earn identical gross returns. Remember: When gross performance is held equal, the expense difference changes what the investor retains.
Hint, shown before you answer in practice mode: Common mistake: Confusing a controlled cost comparison with a forecast of real fund performance.
X-A-134easynumerical
Q10For this comparison, a scheme’s direct and regular plans are stated to use the same portfolio and objective. The regular plan includes a distribution expense that the direct plan does not. All other expenses are equal. Which conclusion is justified by those facts?
Option A. The shared portfolio requires identical net returns even when plan expenses differ.
Why it is wrong: The shared portfolio can produce the same gross result while different expenses produce different net results.
Option B. The direct plan’s lower expenses protect it from any exposure to losses in the shared portfolio.
Why it is wrong: An expense saving is not protection from a decline in the holdings.
Option C. The regular plan has a lower total expense because it also includes a distribution expense.
Why it is wrong: An additional positive expense raises rather than lowers the stated total cost.
Option D. The direct plan has lower stated expenses, but still shares the portfolio’s investment risks. — Correct answer
Answer: D. The conclusion keeps the stated expense difference separate from the shared investment risks. With all other expenses equal, adding distribution expense makes the regular plan’s stated total expense higher in this comparison. Lower expenses leave more value after costs for an otherwise identical gross outcome. They do not remove exposure to a fall in the common portfolio. The facts do not specify actual expense rates, adviser fees outside the plans, future returns or which service arrangement best fits an investor. This is a controlled comparison, not a universal personal recommendation. Remember: Distinguish a plan’s expense structure from the risk and objective of its portfolio.
Hint, shown before you answer in practice mode: Common mistake: Assuming a lower-cost plan is a risk-free or universally suitable investment.
X-A-135mediumconceptual
Q11A fund of funds invests 60% of its net assets in Fund A and 40% in Fund B, with no cash or borrowing. Fund A holds 80% equity and Fund B holds 20% equity. Treat all percentages as simultaneous net-asset weights and ignore other exposures. What is the fund of funds’ look-through equity weight?
Option A. 50%
Why it is wrong: 50% simply averages 80% and 20%, ignoring the unequal 60:40 investment weights.
Option B. 56% — Correct answer
Option C. 60%
Why it is wrong: 60% is the allocation to Fund A, not the combined underlying equity weight.
Option D. 100%
Why it is wrong: 100% incorrectly treats all holdings of fund units as equity exposure.
Answer: B. 56% correctly combines the two weighted equity exposures. The contribution from Fund A is 60% × 80% = 48% of the fund of funds’ net assets. The contribution from Fund B is 40% × 20% = 8%. Total equity exposure is 48% + 8% = 56%. The remaining 44% is non-equity exposure under the stated simplified allocations. This is portfolio arithmetic, not a claim that a specific legal or tax category follows from the result. Remember: Multiply each fund allocation by its underlying exposure before adding the contributions.
Hint, shown before you answer in practice mode: Common mistake: Using an unweighted average when the top-level portfolio weights differ.
X-A-136mediumnumerical
Q12An investor makes three SIP contributions of ₹12,000 each at NAVs ₹40, ₹30 and ₹24 respectively. There are no charges or distributions. What is the average acquisition cost per unit across the three purchases?
Option A. ₹31.33
Why it is wrong: ₹31.33 is the rounded simple average of the three NAVs, not the cost weighted by units purchased.
Option B. ₹24
Why it is wrong: ₹24 is only the last purchase NAV.
Option C. ₹30 — Correct answer
Option D. ₹36
Why it is wrong: ₹36 confuses the ₹36,000 investment with a per-unit amount without the correct divisor.
Answer: C. ₹30 divides the complete investment by the complete unit count. Units purchased are ₹12,000 ÷ ₹40 = 300. ₹12,000 ÷ ₹30 = 400. And ₹12,000 ÷ ₹24 = 500. Total units = 300 + 400 + 500 = 1,200. Total investment = ₹36,000. Average acquisition cost = ₹36,000 ÷ 1,200 = ₹30. Lower NAVs bought more units in this example. That arithmetic does not guarantee a profit: the eventual value still depends on the NAV when holdings are valued or redeemed. Remember: For equal-cash systematic purchases, calculate units first and average cost second.
Hint, shown before you answer in practice mode: Common mistake: Claiming that averaging acquisition cost eliminates market risk.
X-A-137mediumnumerical
Q13An investor holds 1,000 units at NAV ₹20. A systematic withdrawal pays ₹4,000 by redeeming units at that NAV, with no charges or other changes. How many units remain immediately afterwards?
Option A. 800 — Correct answer
Option B. 1,000
Why it is wrong: 1,000 incorrectly leaves the unit count unchanged despite the redemption.
Option C. 200
Why it is wrong: 200 is the number redeemed, not the number remaining.
Option D. 960
Why it is wrong: 960 subtracts 40 units, which would provide only ₹800 at NAV ₹20.
Answer: A. 800 deducts the 200 redeemed units from the original 1,000. Units redeemed = ₹4,000 ÷ ₹20 = 200. The holding falls from 1,000 units to 800 units. The remaining units are worth 800 × ₹20 = ₹16,000. Adding the ₹4,000 cash withdrawal gives ₹20,000, equal to the pre-withdrawal holding value under the unchanged-NAV assumptions. The transaction alone creates no profit. Repeated withdrawals can consume capital. Their sustainability depends on withdrawals, returns and the investment horizon. Remember: An SWP payment funded by selling units can include return of the investor’s capital.
Hint, shown before you answer in practice mode: Common mistake: Treating every regular cash withdrawal as interest or a dividend.
X-A-138mediumnumerical
Q14Under a hypothetical systematic transfer, 100 units of Source Fund are redeemed at NAV ₹30 and all resulting cash buys Destination Fund units at NAV ₹50. Ignore taxes, loads and timing differences. How many Destination Fund units are purchased?
Option A. 100
Why it is wrong: 100 incorrectly assumes that units transfer one-for-one despite different NAVs.
Option B. 166.67
Why it is wrong: 166.67 approximately reverses the source and destination price ratio.
Option C. 50
Why it is wrong: 50 repeats the destination NAV, which is a rupee-per-unit figure rather than a unit count.
Option D. 60 — Correct answer
Answer: D. 60 converts the source units to cash and then cash into destination units. Source redemption produces 100 units × ₹30 = ₹3,000. No deduction is assumed in this exercise. Destination units acquired = ₹3,000 ÷ ₹50 = 60 units. The value transferred is ₹3,000 even though the unit count falls from 100 to 60. Different unit counts do not themselves create a gain or loss. In actual transactions, applicable charges, taxes and NAV rules need separate verification. The question expressly excludes those issues. Remember: Follow a switch or transfer through its cash amount before calculating destination units.
Hint, shown before you answer in practice mode: Common mistake: Comparing unit counts across funds as though each unit has the same value.
X-A-139mediumnumerical
Q15An investor owns 1,000 units at NAV ₹20 immediately before a cash distribution of ₹2 per unit. The distribution is paid from scheme assets. Units remain unchanged and no other assets, liabilities or prices change. What is the combined value of the remaining holding and distribution cash immediately afterwards?
Option A. ₹22,000
Why it is wrong: ₹22,000 adds the distribution without reducing the asset value from which it was paid.
Option B. ₹20,000 — Correct answer
Option C. ₹18,000
Why it is wrong: ₹18,000 measures only the remaining units and omits the cash.
Option D. ₹2,000
Why it is wrong: ₹2,000 measures only the distribution and omits the continuing holding.
Answer: B. ₹20,000 accounts for both the reduced holding and the received cash. The investor receives 1,000 × ₹2 = ₹2,000 cash. The corresponding NAV decrease is ₹2, taking NAV from ₹20 to ₹18. The remaining units are worth 1,000 × ₹18 = ₹18,000. Holding plus cash totals ₹18,000 + ₹2,000 = ₹20,000. That matches the original 1,000 × ₹20 holding value. Earlier investment gains or future performance are separate from this mechanical distribution effect. The payment alone is not an extra return. Remember: Assess total value after a distribution, including both the fund holding and cash received.
Hint, shown before you answer in practice mode: Common mistake: Treating a distribution as free additional wealth without the associated NAV adjustment.
X-A-140mediumnumerical
Q16An investor owns 1,000 eligible units and receives a distribution of ₹2 per unit. The entire distribution is reinvested at the stated post-distribution NAV of ₹18, with fractional units permitted and no charges. How many additional units are acquired, rounded to four decimal places?
Option A. 100.0000
Why it is wrong: 100.0000 uses ₹20 rather than the stated ₹18 reinvestment NAV.
Option B. 1,111.1111
Why it is wrong: 1,111.1111 is the rounded total holding, including the original 1,000 units.
Option C. 111.1111 — Correct answer
Option D. 112.0000
Why it is wrong: 112.0000 rounds up to a whole unit and would require more than ₹2,000 at ₹18.
Answer: C. 111.1111 is the correctly rounded additional allotment. Distribution cash available = 1,000 × ₹2 = ₹2,000. Additional units = ₹2,000 ÷ ₹18 = 111.111111… units, rounded to 111.1111. Total units after reinvestment would be 1,111.111111…, but the question asks only for the increase. Fractional units are expressly allowed. The calculation therefore does not require rounding up to a whole unit or inventing extra cash. Keep full precision until the requested final rounding. Remember: Use the post-distribution reinvestment NAV and distinguish new units from total units.
Hint, shown before you answer in practice mode: Common mistake: Dividing by the pre-distribution NAV or rounding intermediate units prematurely.
X-A-141mediumnumerical
Q17A fund unit is purchased for ₹20. By the end of the holding period its NAV is ₹21 and a cash distribution of ₹2 per original unit has been received and not reinvested. There are no other cash flows or costs. Ignoring interest on the distribution, what is the holding-period total return?
Option A. 5%
Why it is wrong: 5% includes only the ₹1 NAV increase and leaves out cash received.
Option B. 10%
Why it is wrong: 10% includes only the distribution relative to cost.
Option C. 25%
Why it is wrong: 25% overstates the stated ₹3 gain on the ₹20 starting investment.
Option D. 15% — Correct answer
Answer: D. 15% includes the NAV movement and cash distribution once each. NAV gain = ₹21 − ₹20 = ₹1 per unit. Add the ₹2 distribution to obtain total economic gain of ₹3. Holding-period total return = ₹3 ÷ ₹20 × 100 = 15%. The NAV-gain component is 5%, and the distribution component relative to original cost is 10%. No length of the holding period is specified. Therefore 15% is not presented as an annualised return. It is also not a forecast of another period’s distribution or performance. Remember: Compare complete cash flows and ending value with the original cost.
Hint, shown before you answer in practice mode: Common mistake: Mistaking a distribution yield or NAV-only change for total investment return.
X-A-142mediumnumerical
Q18Over a year, an index fund returns 11.0% and its benchmark returns 12.5%. What is the fund's tracking difference?
Option A. +1.5 percentage points
Why it is wrong: +1.5 reverses the specified subtraction and obscures that the fund underperformed.
Option B. −1.5 percentage points — Correct answer
Option C. −12.0 percentage points
Why it is wrong: −12.0 comes from dividing the gap by 12.5%. It is a relative percentage, not the requested percentage-point difference.
Option D. +23.5 percentage points
Why it is wrong: +23.5 adds rather than compares the two returns.
Answer: B. −1.5 percentage points is the stated fund-minus-benchmark gap. Tracking difference = 11.0% − 12.5% = −1.5 percentage points. The order of subtraction is expressly stated. Dividing the gap by benchmark return would answer a relative-ratio question instead. Adding the two returns would not measure a gap at all. One annual observation does not establish tracking error, which concerns variation in the return differences over a series. The calculation also does not identify how much of the gap arose from expenses versus other factors. Remember: Keep the sign, the percentage-point unit and the definition of the tracking measure explicit.
Hint, shown before you answer in practice mode: Common mistake: Calling a single-period return shortfall tracking error or reversing the sign.
X-A-143mediumnumerical
Q19A fund’s mandate is to replicate a stated market index, subject to expenses and implementation differences. Which management action most closely fits that passive mandate?
Option A. Maintain exposures intended to track the benchmark as its composition changes. — Correct answer
Option B. Replace benchmark holdings primarily with stocks the manager expects to outperform.
Why it is wrong: Discretionary selection to outperform is an active aim rather than the stated replication aim.
Option C. Hold only cash whenever the manager believes the index will fall.
Why it is wrong: All-cash market timing deliberately removes the required index exposure.
Option D. Use the largest possible borrowing position to multiply the index exposure.
Why it is wrong: Maximising borrowing is not equivalent to replicating an unleveraged benchmark.
Answer: A. Benchmark-aligned maintenance follows the stated tracking objective. Keeping exposures aligned with the stated benchmark supports the replication objective. Adjustments can be necessary even though the approach is described as passive. Stock selection based primarily on expected outperformance or discretionary movement entirely into cash introduces active decisions that can materially depart from the given mandate. The question specifies ordinary replication, not a leveraged-index objective. Tracking also does not promise exact equality after every expense or removal of the index’s market risk. Remember: Passive means benchmark-directed management, not no operational decisions and not no investment risk.
Hint, shown before you answer in practice mode: Common mistake: Assuming that an index mandate authorises any strategy labelled market-related.
X-A-144mediumconceptual
Q20An investor holds 1,000 units. A hypothetical instruction says: when the holding value first reaches at least ₹1,10,000, redeem 10% of the units then held. The trigger is evaluated and executed at NAV ₹112, with no charges or execution delay. What cash is generated?
Option A. ₹10,000
Why it is wrong: ₹10,000 is not 10% of the actual units multiplied by the given NAV.
Option B. ₹1,12,000
Why it is wrong: ₹1,12,000 redeems the entire holding instead of the instructed 10%.
Option C. ₹11,200 — Correct answer
Option D. ₹11,000
Why it is wrong: ₹11,000 takes 10% of the threshold amount, not 10% of the actual holding at execution.
Answer: C. ₹11,200 follows the triggered quantity rule at the stated execution NAV. At NAV ₹112 the holding is worth 1,000 × ₹112 = ₹1,12,000, which meets the at-least-₹1,10,000 condition. The instruction redeems 10% of 1,000 units, or 100 units. At the stated execution NAV, cash generated is 100 × ₹112 = ₹11,200. The question removes execution delay and costs to isolate the rule. An actual trigger should not be assumed to guarantee the threshold price or eliminate losses without inspecting its terms. Remember: Read a trigger’s activation condition separately from the amount or units it instructs you to transact.
Hint, shown before you answer in practice mode: Common mistake: Using a threshold value as the execution amount when the instruction uses a different base.
X-A-145mediumnumerical
Q21CASE: A fund's NAV is ₹24. It pays a cash distribution of ₹2 a unit from its assets, and nothing else changes. What is the NAV just after?
Option A. ₹20
Why it is wrong: ₹20 takes off twice the distribution.
Option B. ₹22 — Correct answer
Option C. ₹24
Why it is wrong: ₹24 ignores the cash paid out.
Option D. ₹26
Why it is wrong: ₹26 adds the distribution instead of taking it off.
Answer: B. The payout leaves the fund, so NAV falls by ₹2. ₹24 − ₹2 = ₹22. Remember: Use the NAV immediately before a distribution, not the investor’s historical purchase price.
Hint, shown before you answer in practice mode: Common mistake: Adding a distribution to both NAV and the investor’s separate cash balance.
X-A-146easyapplication
Q22CASE: An investor holds 5,000 units at NAV ₹24. The fund pays ₹2 a unit in cash, so NAV falls to ₹22. What are the investor's units plus cash worth just after?
Option A. ₹1,10,000
Why it is wrong: ₹1,10,000 counts the units but not the ₹10,000 cash.
Option B. ₹1,30,000
Why it is wrong: ₹1,30,000 adds the cash to the old NAV.
Option C. ₹1,00,000
Why it is wrong: ₹1,00,000 does not follow from these values.
Option D. ₹1,20,000 — Correct answer
Answer: D. Units = 5,000 × ₹22 = ₹1,10,000. Cash = 5,000 × ₹2 = ₹10,000. Total = ₹1,20,000, the same as before the payout. Remember: Track every location of value while keeping the observation date consistent.
Hint, shown before you answer in practice mode: Common mistake: Combining a current cash payout with an unadjusted earlier NAV.
X-A-147mediumapplication
Q23CASE: An investor holding 5,000 units receives ₹2 a unit and reinvests it all at the new NAV of ₹22. How many extra units does the investor get, to four decimals?
Option A. 454.5455 — Correct answer
Option B. 416.6667
Why it is wrong: 416.6667 divides by the old NAV of ₹24.
Option C. 5,454.5455
Why it is wrong: 5,454.5455 is the total holding, not the extra units.
Option D. 500.0000
Why it is wrong: 500.0000 divides by ₹20, which is not the reinvestment NAV.
Answer: A. Cash = 5,000 × ₹2 = ₹10,000. Extra units = ₹10,000 ÷ ₹22 = 454.5455. Remember: The relevant NAV is the one attached to the reinvestment transaction, not the original investment.
Hint, shown before you answer in practice mode: Common mistake: Mixing historical acquisition price with a later unit allotment.
X-A-148mediumapplication
Q24CASE: An investor kept a ₹10,000 distribution in cash and still holds 5,000 units. All units are redeemed at NAV ₹25 with a 1% exit load. What is the investor's total cash afterwards?
Option A. ₹1,35,000
Why it is wrong: ₹1,35,000 forgets the exit load.
Option B. ₹1,23,750
Why it is wrong: ₹1,23,750 leaves out the ₹10,000 kept earlier.
Option C. ₹1,33,750 — Correct answer
Option D. ₹1,33,650
Why it is wrong: ₹1,33,650 also charges the load on the ₹10,000 cash.
Answer: C. Redemption = 5,000 × ₹25 × 0.99 = ₹1,23,750. Add the ₹10,000 kept earlier, giving ₹1,33,750. Remember: Apply charges only to their stated base and distinguish ending wealth from net profit.
Hint, shown before you answer in practice mode: Common mistake: Charging a final redemption load on cash that was never reinvested.
X-A-149mediumapplication
Q25CASE: An investor paid ₹1,00,000 for 5,000 units. After reinvesting a distribution, the investor holds 5,454.5455 units. All are redeemed at NAV ₹25 with a 1% exit load. What is the holding-period return?
Option A. 25.00%
Why it is wrong: 25% compares NAV ₹25 with ₹20 only. It ignores the extra units and the load.
Option B. 35.00% — Correct answer
Option C. 36.36%
Why it is wrong: 36.36% forgets the exit load.
Option D. 45.00%
Why it is wrong: 45% counts the distribution again, though it already bought the extra units.
Answer: B. Proceeds = 5,454.5455 × ₹25 × 0.99 = ₹1,35,000. Return = ₹35,000 ÷ ₹1,00,000 = 35%. Remember: After reinvestment, distribution value is represented by extra units, not both extra units and retained cash.
Hint, shown before you answer in practice mode: Common mistake: Double-counting a reinvested distribution or labelling a holding-period return annualised.
X-A-150hardapplication
Mutual Funds: common questions
How many practice questions are there on Mutual Funds?
25 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 Mutual Funds?
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.
Portfolio Manager
10 questions on Portfolio Manager. Its quiz opens on that unit.
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