Securities: Types, Features and Concepts of Asset Allocation and Investing
30 questions. Each answer is explained.
Question 1 of 10Practice · Series XII — Securities Markets Foundation
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Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series XII Securities Markets Foundation
Exam rules read on NISM's site on 17 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 17 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 30 questions on Securities: Types, Features and Concepts of Asset Allocation and Investing, with answers
Q1Which statement about dividends on ordinary equity shares is correct?
Option A. They must equal the coupon on company bonds
Why it is wrong: Equity dividends and bond coupons are separate payments.
Option B. They are not an assured contractual interest payment — Correct answer
Option C. They remain fixed throughout the company’s life
Why it is wrong: Ordinary equity dividends can vary or be absent.
Option D. They must increase whenever the share price rises
Why it is wrong: A higher market price does not require a higher dividend.
Answer: B. Ordinary equity dividends are not assured contractual interest payments. Their payment depends on the company’s decisions and applicable conditions. Remember: Ordinary share ownership does not assure a dividend.
Hint, shown before you answer in practice mode: Common mistake: Expecting equity dividends to behave like fixed bond interest. Compare the payment rights of an owner with those of a lender.
XII-016easyconceptual
Q2For a plain fixed-rate bond, what does its coupon rate determine?
Option A. The issuer’s future percentage growth in profit
Why it is wrong: A bond coupon does not determine company profit growth.
Option B. Interest calculated on the bond’s face value — Correct answer
Option C. The investor’s total return at every purchase price
Why it is wrong: Total return also depends on price and other cash flows.
Option D. The bond’s daily percentage change in market price
Why it is wrong: Market-price changes are not set by the coupon rate.
Answer: B. A plain fixed-rate bond’s coupon rate determines its interest payment on face value. Its market yield can be different. Remember: Coupon interest is based on face value, not the trading price.
Hint, shown before you answer in practice mode: Common mistake: Multiplying the coupon rate by the bond’s current market price. Recall the value on which the contractual interest is based.
XII-017easyconceptual
Q3Which cash-flow feature normally distinguishes a zero-coupon bond from a coupon-paying bond?
Option A. No possibility of a change in market price
Why it is wrong: Its price can change with interest rates and credit conditions.
Option B. No repayment value at the maturity date
Why it is wrong: A zero-coupon bond normally has a specified redemption value.
Option C. No periodic interest payments before maturity — Correct answer
Option D. No connection between purchase price and investment return
Why it is wrong: The difference between purchase and redemption values affects return.
Answer: C. A zero-coupon bond does not make periodic interest payments. Its return can arise from buying below its redemption value. Remember: Zero coupon means no periodic coupon, not necessarily zero return.
Hint, shown before you answer in practice mode: Common mistake: Thinking that a bond without interest payments cannot earn a return. Think about the timing of payments rather than the existence of return.
XII-018easyconceptual
Q4Compared with ordinary equity shares, what priority do preference shares generally carry?
Option A. Priority in dividends and return of capital — Correct answer
Option B. Priority in fixing all stock-exchange prices
Why it is wrong: Shareholders do not set all exchange prices.
Option C. Priority over every secured debt claim
Why it is wrong: Preference shares do not generally outrank secured creditors.
Option D. Priority in receiving unlimited company profits
Why it is wrong: Preference rights do not automatically create unlimited profit participation.
Answer: A. Preference shares generally have priority over ordinary equity in dividends and repayment of capital. The particular issue terms still matter. Remember: Preference priority is mainly relative to ordinary equity.
Hint, shown before you answer in practice mode: Common mistake: Assuming preference shares rank above all company debt. Compare preference shareholders with ordinary shareholders, not creditors.
XII-019easyconceptual
Q5What feature makes a convertible debenture different from a non-convertible debenture?
Option A. It must keep the same market price forever
Why it is wrong: Convertibility does not fix the debenture’s market price.
Option B. It can become equity under specified terms — Correct answer
Option C. It cannot contain an interest payment obligation
Why it is wrong: A convertible debenture may pay interest before conversion.
Option D. It has no issuer repayment or interest risk
Why it is wrong: Convertible debt can still carry credit risk.
Answer: B. A convertible debenture can change from debt into equity according to its terms. A non-convertible debenture lacks that conversion feature. Remember: Conversion can change a lender’s claim into ownership.
Hint, shown before you answer in practice mode: Common mistake: Assuming that convertibility removes debt-related risks. Focus on how the nature of the investor’s claim may change.
XII-020easyconceptual
Q6Which asset is a commodity rather than a financial claim on an issuer?
Option A. A mutual fund unit
Why it is wrong: A mutual fund unit represents an interest in a pooled portfolio.
Option B. An ordinary equity share
Why it is wrong: An equity share is an ownership claim in a company.
Option C. A corporate debenture
Why it is wrong: A corporate debenture is a debt claim on its issuer.
Option D. Copper — Correct answer
Answer: D. Copper is a commodity because it is a physical material. The other instruments represent financial claims. Remember: Commodities include physical raw materials rather than issuer claims.
Hint, shown before you answer in practice mode: Common mistake: Treating every investible asset as a company-issued security. Look for a physical raw material.
XII-021easyconceptual
Q7What is the main purpose of spreading investments across different assets?
Option A. Reduce dependence on any single investment — Correct answer
Option B. Guarantee that every asset rises together
Why it is wrong: Different assets can move differently and may fall.
Option C. Ensure that the portfolio never loses value
Why it is wrong: Diversification does not eliminate all investment risk.
Option D. Remove the need to understand the investments
Why it is wrong: Investors still need to understand the assets they hold.
Answer: A. Diversification reduces dependence on any single investment. It does not guarantee a profit or remove all risk. Remember: Diversification limits concentration rather than eliminating every risk.
Hint, shown before you answer in practice mode: Common mistake: Confusing risk reduction with a guarantee against losses. Think about the effect of one investment performing poorly.
XII-022easyconceptual
Q8Which risk arises when an investor cannot sell promptly at a reasonable price?
Option A. Reinvestment risk
Why it is wrong: Reinvestment risk concerns the return available on future reinvestments.
Option B. Liquidity risk — Correct answer
Option C. Inflation risk
Why it is wrong: Inflation risk concerns the purchasing power of money.
Option D. Currency risk
Why it is wrong: Currency risk concerns changes in exchange rates.
Answer: B. Liquidity risk is the risk of being unable to sell promptly at a reasonable price. Remember: Liquidity concerns the practical ability to turn an asset into cash.
Hint, shown before you answer in practice mode: Common mistake: Assuming a quoted price means a large holding can be sold at that price. Focus on the ease and cost of exiting an investment.
XII-023easyconceptual
Q9How does estimated intrinsic value differ from a share’s market price?
Option A. It guarantees the price available on a future sale
Why it is wrong: An estimate does not guarantee any future transaction price.
Option B. It must always equal the latest exchange price
Why it is wrong: An estimate of worth may differ from the current market price.
Option C. It estimates worth rather than recording the traded price — Correct answer
Option D. It is the face value printed in company records
Why it is wrong: Face value is an accounting denomination, not estimated investment worth.
Answer: C. Intrinsic value is an estimate of a share’s economic worth. Market price is the price at which it trades. Remember: Estimated value and observed price are different concepts.
Hint, shown before you answer in practice mode: Common mistake: Treating a valuation estimate as an assured future price. Separate an analyst’s estimate from an observed transaction.
XII-024easyconceptual
Q10A product combines a debt instrument with a derivative-linked payoff. Which description best fits its design?
Option A. Physical commodity holding
Why it is wrong: A physical commodity holding is not this combined financial arrangement.
Option B. Structured product — Correct answer
Option C. Plain fixed-rate debenture
Why it is wrong: A plain fixed-rate debenture lacks the stated derivative-linked feature.
Option D. Plain ordinary equity share
Why it is wrong: An ordinary share does not by itself combine those payoff components.
Answer: B. A structured product combines financial components to create a specified payoff. Its risks depend on the actual structure and terms. Remember: Understand the components behind a structured product’s payoff.
Hint, shown before you answer in practice mode: Common mistake: Assuming that the debt component makes every structured payoff safe. Look for a product built by combining different financial components.
XII-025mediumapplication
Q11A hypothetical bond has ₹2,000 face value and an 8% annual coupon. What annual coupon amount does it pay?
Option A. ₹160 — Correct answer
Option B. ₹16
Why it is wrong: This divides the correct coupon amount by ten.
Option C. ₹200
Why it is wrong: This incorrectly uses a 10% coupon rate.
Option D. ₹2,160
Why it is wrong: This adds principal even though only the annual coupon is asked.
Answer: A. The annual coupon is ₹160 because the 8% rate applies to ₹2,000 face value. Coupon = ₹2,000 × 8 ÷ 100 = ₹160. Remember: Annual coupon equals face value multiplied by the annual coupon rate.
Hint, shown before you answer in practice mode: Common mistake: Including repayment of principal when only interest is requested. Use the bond’s face value as the interest base.
XII-026mediumnumerical
Q12A bond pays ₹90 annually and trades at ₹900. What is its current yield?
Option A. 90%
Why it is wrong: This places the decimal point incorrectly in the yield calculation.
Option B. 9%
Why it is wrong: This would use ₹1,000 rather than the stated ₹900 market price.
Option C. 11.11%
Why it is wrong: This does not equal annual coupon divided by the stated price.
Option D. 10% — Correct answer
Answer: D. The current yield is 10% because ₹90 is earned annually on a ₹900 market price. Current yield = ₹90 ÷ ₹900 × 100 = 10%. Remember: Current yield compares annual coupon income with market price.
Hint, shown before you answer in practice mode: Common mistake: Using face value instead of market price to calculate current yield. Relate the annual income to the amount paid for the bond.
XII-027mediumnumerical
Q13Market yields rise while a plain fixed-rate bond’s promised cash flows stay unchanged. What normally happens to its price?
Option A. It necessarily returns to face value
Why it is wrong: Higher market yields do not necessarily make the bond trade at face value.
Option B. It remains unchanged
Why it is wrong: A fixed coupon does not mean a fixed market price.
Option C. It rises
Why it is wrong: A higher required yield reduces the value of unchanged fixed cash flows.
Option D. It falls — Correct answer
Answer: D. The bond’s price normally falls because investors require a higher yield on the same cash flows. Remember: Fixed-rate bond prices and market yields normally move in opposite directions.
Hint, shown before you answer in practice mode: Common mistake: Assuming that a higher market interest rate increases every bond’s price. Think about whether the old fixed payments become more or less attractive.
XII-028mediumapplication
Q14Why might a financially troubled company’s debt be described as distressed securities?
Option A. Repayment is uncertain because the issuer is in serious trouble — Correct answer
Option B. Its trading price moves whenever market interest rates change
Why it is wrong: Ordinary interest-rate sensitivity does not establish serious issuer financial difficulty.
Option C. Its repayment terms were negotiated privately
Why it is wrong: A private agreement alone does not make the issuer financially distressed.
Option D. Its scheduled maturity is very near
Why it is wrong: A short remaining maturity alone does not make debt distressed.
Answer: A. Distressed securities are associated with issuers in serious financial difficulty. Their low prices can reflect substantial uncertainty about recovery. Remember: A low distressed-debt price can reflect high repayment risk.
Hint, shown before you answer in practice mode: Common mistake: Treating a deep discount as proof of a bargain. Consider what financial distress means for promised payments.
XII-029mediumconceptual
Q15A young company has highly uncertain cash flows and wants to avoid fixed interest obligations. Which financing choice best matches that aim?
Option A. A non-convertible interest-bearing debenture
Why it is wrong: An interest-bearing debenture does not avoid fixed payment obligations.
Option B. An interest-bearing loan with monthly repayments
Why it is wrong: Monthly loan repayments add scheduled cash-flow commitments.
Option C. A fixed-coupon corporate bond
Why it is wrong: A fixed-coupon bond creates contractual interest obligations.
Option D. Fresh ordinary equity — Correct answer
Answer: D. Fresh ordinary equity avoids the fixed interest obligations associated with borrowing. It gives new investors ownership and can dilute existing ownership. Remember: Equity financing trades ownership participation for less fixed-payment pressure.
Hint, shown before you answer in practice mode: Common mistake: Considering only financing cost while ignoring payment obligations. Compare contractual repayment commitments with ownership financing.
XII-030mediumapplication
Q16A portfolio has ₹1.2 lakh in equity and ₹80,000 in debt. What percentage is allocated to equity?
Option A. 150%
Why it is wrong: This divides equity by debt instead of by the whole portfolio.
Option B. 60% — Correct answer
Option C. 40%
Why it is wrong: This is the debt weight rather than the equity weight.
Option D. 66.67%
Why it is wrong: This does not use the stated total portfolio value of ₹2 lakh.
Answer: B. The equity allocation is 60% of the portfolio. Total = ₹1,20,000 + ₹80,000 = ₹2,00,000. Equity weight = ₹1,20,000 ÷ ₹2,00,000 × 100 = 60%. Remember: An asset weight uses total portfolio value as its denominator.
Hint, shown before you answer in practice mode: Common mistake: Dividing one asset class by another instead of by the total. Calculate the total portfolio value before finding its equity share.
XII-031mediumnumerical
Q17A learner needs money for a fixed expense next month. Which investment feature is most important when evaluating suitability?
Option A. Access to funds with limited short-term value uncertainty — Correct answer
Option B. The largest possible exposure to daily price swings
Why it is wrong: Large daily swings increase uncertainty about the available amount.
Option C. The highest possible return over several decades
Why it is wrong: A multi-decade return objective does not match next month’s payment.
Option D. An inability to exit for many years
Why it is wrong: A long exit restriction conflicts with the near-term need.
Answer: A. Access to funds with limited short-term value uncertainty best matches the near-term payment need. Suitability depends on the goal and investment horizon. Remember: Investment horizon is an important part of product suitability.
Hint, shown before you answer in practice mode: Common mistake: Choosing only by possible return and ignoring the date of the goal. Match the investment’s features to when the money is needed.
XII-032mediumapplication
Q18A share pays an annual dividend of ₹6 and trades at ₹150. What is its dividend yield?
Option A. 6%
Why it is wrong: This treats the dividend amount as a percentage without using the share price.
Option B. 2.5%
Why it is wrong: This does not equal the stated dividend divided by price.
Option C. 25%
Why it is wrong: This misuses the reciprocal relationship between price and dividend.
Option D. 4% — Correct answer
Answer: D. The dividend yield is 4% because the annual dividend is ₹6 on a ₹150 price. Dividend yield = ₹6 ÷ ₹150 × 100 = 4%. Remember: Dividend yield is annual dividend per share divided by market price.
Hint, shown before you answer in practice mode: Common mistake: Using the dividend amount alone as the yield. Compare annual dividend income with the share’s current price.
XII-033mediumnumerical
Q19A company has ₹48 crore annual profit available to equity and 12 crore ordinary shares throughout the year. What are earnings per share?
Option A. ₹36
Why it is wrong: This subtracts shares from profit instead of calculating a per-share amount.
Option B. ₹0.25
Why it is wrong: This divides the number of shares by profit rather than profit by shares.
Option C. ₹576
Why it is wrong: This multiplies profit by the share count.
Option D. ₹4 — Correct answer
Answer: D. Earnings per share are ₹4 because ₹48 crore is attributable to 12 crore shares. Earnings per share = ₹48 crore ÷ 12 crore = ₹4. Remember: Earnings per share express available equity profit on a per-share basis.
Hint, shown before you answer in practice mode: Common mistake: Reversing the profit and share-count values in the division. Spread the profit available to ordinary shareholders across their shares.
XII-034mediumnumerical
Q20A share trades at ₹240 and has earnings per share of ₹16. What is its price-to-earnings ratio?
Option A. 224 times
Why it is wrong: This subtracts earnings from price instead of dividing.
Option B. 6.67 times
Why it is wrong: This is not price divided by earnings per share.
Option C. 15 times — Correct answer
Option D. 16 times
Why it is wrong: This repeats earnings per share instead of calculating the multiple.
Answer: C. The price-to-earnings ratio is 15 times. Price-to-earnings ratio = ₹240 ÷ ₹16 = 15. Remember: The price-to-earnings ratio compares price with earnings per share.
Hint, shown before you answer in practice mode: Common mistake: Subtracting earnings from price instead of calculating a multiple. Compare the share price with one share’s earnings.
XII-035mediumnumerical
Q21A share trades at ₹180 and has book value of ₹60 per share. What is its price-to-book ratio?
Option A. 0.33 times
Why it is wrong: This reverses book value and market price.
Option B. 120 times
Why it is wrong: This subtracts book value from price.
Option C. 240 times
Why it is wrong: This adds book value to price instead of dividing.
Option D. 3 times — Correct answer
Answer: D. The price-to-book ratio is 3 times because the price is three times book value per share. Price-to-book ratio = ₹180 ÷ ₹60 = 3. Remember: Price-to-book ratio compares market price with book value per share.
Hint, shown before you answer in practice mode: Common mistake: Reversing the ratio or mixing company-wide and per-share figures. Use both figures on the same per-share basis.
XII-036mediumnumerical
Q22What does a share warrant generally give its holder under its specified terms?
Option A. An obligation to buy shares regardless of the stated terms
Why it is wrong: A warrant ordinarily provides an exercisable right rather than this unconditional obligation.
Option B. A right to receive fixed interest on a debt principal
Why it is wrong: That describes a debt cash-flow right rather than a share warrant.
Option C. A right to subscribe for shares at a stated price — Correct answer
Option D. An immediate ownership stake before exercising the warrant
Why it is wrong: The warrant right is not the same as shares already acquired on exercise.
Answer: C. A warrant generally gives the holder a right to subscribe for shares at a stated price under its terms. The right is different from already owning those shares. Remember: A warrant is a share-subscription right rather than ordinary share ownership.
Hint, shown before you answer in practice mode: Common mistake: Assuming a warrant holder automatically has all shareholder rights before exercise. Distinguish a future subscription right from present share ownership.
XII-037mediumconceptual
Q23What does a depository receipt represent in a cross-border securities arrangement?
Option A. An exchange certificate fixing future currency conversion rates
Why it is wrong: It is not a currency-rate guarantee.
Option B. An interest in underlying shares held through a depository arrangement — Correct answer
Option C. A bank receipt guaranteeing the issuer’s operating profits
Why it is wrong: A depository receipt does not guarantee company profits.
Option D. A document proving that the investor owns the issuing bank
Why it is wrong: It represents the underlying company shares, not ownership of the issuing depository bank.
Answer: B. A depository receipt represents an interest in underlying shares held through a depository arrangement. It can make those shares accessible in another market. Remember: Identify the underlying shares behind a depository receipt.
Hint, shown before you answer in practice mode: Common mistake: Mistaking the depository bank for the company in which the investor has exposure. Look through the receipt to the security supporting it.
XII-038mediumconceptual
Q24One analyst studies financial statements. Another studies historical price and volume patterns. Which classification correctly distinguishes their approaches?
Option A. Technical analysis first and fundamental analysis second
Why it is wrong: This reverses the normal distinction between business data and price patterns.
Option B. Market making first and securities custody second
Why it is wrong: Market making and custody are different market functions.
Option C. Passive indexing first and credit rating second
Why it is wrong: Neither description identifies the stated analytical approaches.
Option D. Fundamental analysis first and technical analysis second — Correct answer
Answer: D. Financial-statement analysis is a fundamental approach, while price-and-volume analysis is a technical approach. Neither approach guarantees an investment outcome. Remember: Fundamental and technical analysis use different kinds of evidence.
Hint, shown before you answer in practice mode: Common mistake: Classifying any use of numbers as technical analysis. Compare analysis of a business with analysis of its market trading patterns.
XII-039mediumapplication
Q25A hypothetical ₹10,000 investment earns 10% annually, compounded yearly for two years. Ignoring charges and taxes, what is its final value?
Option A. ₹21,000
Why it is wrong: This adds an extra amount of principal incorrectly.
Option B. ₹11,000
Why it is wrong: This calculates only one year of growth.
Option C. ₹12,100 — Correct answer
Option D. ₹12,000
Why it is wrong: This uses simple interest and omits interest on the first year’s interest.
Answer: C. The final value is ₹12,100 because the second year also earns a return on the first year’s interest. Year 1 = ₹10,000 × 1.10 = ₹11,000. Year 2 = ₹11,000 × 1.10 = ₹12,100. Remember: Compounding earns a return on both principal and accumulated returns.
Hint, shown before you answer in practice mode: Common mistake: Applying the second year’s rate only to the original principal. Update the balance after the first year before calculating the second year.
XII-040hardnumerical
Q26A hypothetical payment of ₹12,100 is due in two years. At a 10% annual discount rate, what is its present value?
Option A. ₹10,000 — Correct answer
Option B. ₹9,801
Why it is wrong: This multiplies twice by 90% instead of discounting by 1.10 twice.
Option C. ₹11,000
Why it is wrong: This discounts the payment for only one year.
Option D. ₹14,641
Why it is wrong: This compounds forward instead of discounting to the present.
Answer: A. The present value is ₹10,000 because that amount grows to ₹12,100 in two years at 10% annually. Present value = ₹12,100 ÷ 1.10 ÷ 1.10 = ₹10,000. Remember: Discount future cash flows over the full time period.
Hint, shown before you answer in practice mode: Common mistake: Subtracting a percentage instead of dividing by the compound-growth factor. Reverse two years of compound growth.
XII-041hardnumerical
Q27A portfolio now holds ₹70,000 equity and ₹30,000 debt. Ignoring costs, how much equity must move to debt to restore a 60:40 allocation?
Option A. ₹40,000
Why it is wrong: This leaves only ₹30,000 in equity rather than the ₹60,000 target.
Option B. ₹4,000
Why it is wrong: This does not reduce equity to 60% of the ₹1,00,000 portfolio.
Option C. ₹10,000 — Correct answer
Option D. ₹20,000
Why it is wrong: This produces a 50:50 allocation instead of 60:40.
Answer: C. ₹10,000 must move from equity to debt to reach the target allocation. Total = ₹1,00,000. Target equity = 60% × ₹1,00,000 = ₹60,000. Transfer = ₹70,000 − ₹60,000 = ₹10,000. Remember: Rebalancing restores target weights using current portfolio values.
Hint, shown before you answer in practice mode: Common mistake: Applying the target percentage only to the existing equity portion. Find the target equity value using the unchanged portfolio total.
XII-042hardnumerical
Q28A share bought at ₹200 is sold at ₹216 after paying a ₹4 dividend. Ignoring costs and taxes, what is the holding-period return?
Option A. 8%
Why it is wrong: This includes only the price gain and omits the dividend.
Option B. 9.26%
Why it is wrong: This uses the selling price rather than the original investment as the denominator.
Option C. 10% — Correct answer
Option D. 2%
Why it is wrong: This includes only the dividend and omits the price gain.
Answer: C. The holding-period return is 10% because the investor gains ₹20 on the original ₹200. Price gain = ₹216 − ₹200 = ₹16. Total gain = ₹16 + ₹4 = ₹20. Return = ₹20 ÷ ₹200 × 100 = 10%. Remember: Total holding-period return includes price changes and investment income.
Hint, shown before you answer in practice mode: Common mistake: Ignoring dividends when calculating equity returns. Combine the price change and cash income before finding the percentage return.
XII-043hardnumerical
Q29A bond is bought below its face value and later repaid at face value. Coupons are paid as promised. Why can current yield differ from yield to maturity?
Option A. Yield to maturity also considers the redemption gain and cash-flow timing — Correct answer
Option B. Buying below face value makes coupon income irrelevant
Why it is wrong: Coupon payments remain part of the investor’s return.
Option C. Yield to maturity ignores all coupons received before redemption
Why it is wrong: Yield to maturity includes the promised coupon cash flows.
Option D. Current yield already includes every future redemption cash flow
Why it is wrong: Current yield uses annual coupon and current price only.
Answer: A. Yield to maturity considers coupon payments, redemption value and their timing. Current yield does not capture the full return from buying below redemption value. Remember: Current yield is not a substitute for yield to maturity.
Hint, shown before you answer in practice mode: Common mistake: Treating a bond’s annual income yield as its complete return measure. Compare an annual-income ratio with a full cash-flow return measure.
XII-044hardapplication
Q30An analyst discounts forecast cash flows and separately compares valuation multiples with similar firms. Which pairing describes these two valuation methods?
Option A. Discounted cash flow and relative valuation — Correct answer
Option B. Book-value valuation and technical analysis
Why it is wrong: Discounted future cash flows are not accounting book value, and peer multiples are not chart analysis.
Option C. Relative valuation and discounted cash flow
Why it is wrong: This reverses the two methods described.
Option D. Dividend-yield comparison and asset liquidation value
Why it is wrong: These are different approaches from the cash-flow discounting and peer-multiple comparison described.
Answer: A. Discounting forecast cash flows is discounted cash flow valuation, while comparing peer multiples is relative valuation. Both depend on the assumptions and inputs used. Remember: Cash-flow valuation and peer-based valuation estimate value in different ways.
Hint, shown before you answer in practice mode: Common mistake: Treating a peer multiple as if it directly discounts the company’s own cash flows. Identify whether value comes from future cash flows or comparison with peers.
XII-045hardapplication
Securities: Types, Features and Concepts of Asset Allocation and Investing: common questions
How many practice questions are there on Securities: Types, Features and Concepts of Asset Allocation and Investing?
30 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 6 practice topics for NISM Series XII, which has 150 questions in total.
Are these real NISM Series XII questions on Securities: Types, Features and Concepts of Asset Allocation and Investing?
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 XII?
No. NISM applies no negative marking to Series XII. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. 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.
Primary Markets
30 questions on Primary Markets. Its quiz opens on that unit.
Open Primary MarketsPaper Trading Try it on the practice trading desk