Valuation
8 questions. Each answer is explained.
Question 1 of 8Practice · Series XIX-A — Alternative Investment Funds (Category I and II) Distributors
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Learn these topics
More units in NISM Series XIX-A
- Overview of Alternative Investments7
- Alternative Investment Funds in India7
- Concepts in Alternative Investment Funds Industry7
- Regulatory Framework – Indian Context15
- Alternative Investment Fund Structuring15
- Risk and Return – Investor and Fund Perspective15
- Investment Process and Governance of Funds15
- Fund Due Diligence – Investor Perspective23
- Legal Documents and Negotiations – Investor Perspective15
- Fund Monitoring, Reporting and Exit7
- Taxation – India specific8
- Good Practices8
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 10% · 0.1 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 5 of 100 marks (5%) |
Source: 19 March 2025 Annexure I, Unit 11: Valuation
NISM Series XIX-A Alternative Investment Funds (Category I and II) Distributors
Exam rules read on NISM's site on 29 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 29 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 8 questions on Valuation, with answers
Q1What is the central idea of discounted cash flow valuation?
Option A. Using the original purchase cost as the only possible current value
Why it is wrong: Historical cost alone is not a discounted cash flow valuation.
Option B. Estimating present value from expected future cash flows — Correct answer
Option C. Adding future cash receipts without allowing for time or risk
Why it is wrong: Simply adding future receipts ignores the discounting central to the method.
Option D. Selecting whichever quoted multiple produces the highest value
Why it is wrong: Choosing a high market multiple is not the cash-flow discounting method.
Answer: B. Discounted cash flow valuation estimates present value from expected future cash flows using an appropriate discount rate. Its result depends on the cash-flow and discount-rate assumptions. Remember: A cash-flow valuation is an estimate built on assumptions, not a guaranteed sale price.
Hint, shown before you answer in practice mode: Consider how money received in the future is valued today. Common mistake: Treating forecast cash as if it were already available today.
XIX-A-127easyconceptual
Q2For an otherwise unchanged fixed-rate bond, what generally happens to its price when the required market yield rises?
Option A. Its price becomes equal to the next coupon
Why it is wrong: The bond is valued using its relevant cash flows, not only the next coupon.
Option B. Its price falls — Correct answer
Option C. Its price rises
Why it is wrong: A higher required yield reduces the present value of the unchanged future payments.
Option D. Its price stays fixed at face value
Why it is wrong: A fixed face value does not mean that the bond’s market price is fixed.
Answer: B. The price generally falls because a higher required yield reduces the present value of the unchanged cash flows. This relationship assumes the other relevant terms and risks remain unchanged. Remember: Fixed cash flows do not imply a fixed market value.
Hint, shown before you answer in practice mode: Apply the new required return to the bond’s unchanged payments. Common mistake: Assuming that a fixed coupon makes a bond’s market price constant.
XIX-A-128easyconceptual
Q3Enterprise value is ₹120 crore, debt ₹30 crore and surplus cash ₹10 crore. With no other adjustments, what is equity value?
Option A. ₹160 crore
Why it is wrong: ₹160 crore adds both debt and cash, incorrectly treating debt as additional shareholder value.
Option B. ₹140 crore
Why it is wrong: ₹140 crore adds debt and subtracts cash, reversing the correct bridge.
Option C. ₹80 crore
Why it is wrong: ₹80 crore subtracts surplus cash instead of adding it when bridging from enterprise to equity value.
Option D. ₹100 crore — Correct answer
Answer: D. Equity value is ₹100 crore after deducting debt and adding surplus cash. Equity value = ₹120 crore − ₹30 crore + ₹10 crore = ₹100 crore. Remember: Enterprise value and equity value are connected by the debt-and-cash bridge.
Hint, shown before you answer in practice mode: Separate the value available to debt holders from the value attributable to shareholders. Common mistake: Treating enterprise value as the shareholders’ value without adjustment.
XIX-A-129mediumnumerical
Q4A fund has assets of ₹250 crore, liabilities of ₹10 crore and 20 crore identical units. What is net asset value per unit?
Option A. ₹12 — Correct answer
Option B. ₹12.50
Why it is wrong: ₹12.50 divides gross assets by units without deducting liabilities.
Option C. ₹13
Why it is wrong: ₹13 adds liabilities to assets rather than deducting them.
Option D. ₹0.50
Why it is wrong: ₹0.50 divides liabilities alone by the number of units.
Answer: A. Net asset value per unit is ₹12. Net assets = ₹250 crore − ₹10 crore = ₹240 crore. Value per unit = ₹240 crore ÷ 20 crore units = ₹12. Remember: Fund liabilities must be deducted before calculating per-unit net value.
Hint, shown before you answer in practice mode: Calculate what belongs to unit holders before dividing by the unit count. Common mistake: Using gross assets instead of net assets in a unit-value calculation.
XIX-A-130mediumnumerical
Q5A business has earnings before interest, tax, depreciation and amortisation of ₹12 crore. An enterprise-value multiple of eight applies. What is enterprise value?
Option A. ₹20 crore
Why it is wrong: ₹20 crore adds the multiple to earnings even though the multiple is not a rupee amount.
Option B. ₹1.5 crore
Why it is wrong: ₹1.5 crore divides earnings by the multiple rather than multiplying them.
Option C. ₹104 crore
Why it is wrong: ₹104 crore adds the multiple again after using it to calculate value.
Option D. ₹96 crore — Correct answer
Answer: D. Enterprise value is ₹96 crore using the specified earnings multiple. Enterprise value = ₹12 crore × 8 = ₹96 crore. Equity value would require any relevant debt, cash and other adjustments. Remember: Apply a valuation multiple to its matching earnings or financial measure.
Hint, shown before you answer in practice mode: Match the stated valuation multiple with its matching earnings measure. Common mistake: Calling enterprise value the final shareholder value without checking the bridge.
XIX-A-131mediumnumerical
Q6A zero-coupon instrument pays ₹121 exactly two years from today. At a 10% annual compounded discount rate, what is its present value?
Option A. ₹100 — Correct answer
Option B. ₹101
Why it is wrong: ₹101 subtracts a simple ₹20 from the final value rather than applying compound discounting.
Option C. ₹110
Why it is wrong: ₹110 discounts the payment for only one year rather than two.
Option D. ₹121
Why it is wrong: ₹121 ignores the time value of money and does not discount the payment.
Answer: A. The present value is ₹100 because ₹100 compounded at 10% for two years becomes ₹121. Present value = ₹121 ÷ 1.10² = ₹121 ÷ 1.21 = ₹100. Remember: Discount each payment over its full remaining term.
Hint, shown before you answer in practice mode: Work backwards through two years of compounding. Common mistake: Discounting a two-year cash flow for only one year.
XIX-A-132mediumnumerical
Q7An investment pays ₹11 lakh after one year and a final ₹121 lakh after two years. What is present value at 10% annually?
Option A. ₹110 lakh — Correct answer
Option B. ₹132 lakh
Why it is wrong: ₹132 lakh adds the cash flows without discounting either payment.
Option C. ₹109.09 lakh
Why it is wrong: ₹109.09 lakh discounts both receipts for two years, delaying the first payment incorrectly.
Option D. ₹120 lakh
Why it is wrong: ₹120 lakh discounts both receipts for only one year instead of using their separate dates.
Answer: A. The present value is ₹110 lakh after discounting each payment separately. Year-one present value = ₹11 lakh ÷ 1.10 = ₹10 lakh. Year-two present value = ₹121 lakh ÷ 1.10² = ₹100 lakh. Total = ₹10 lakh + ₹100 lakh = ₹110 lakh. Remember: Cash-flow timing must be preserved in a valuation.
Hint, shown before you answer in practice mode: Value each cash flow at its own date before adding the present values. Common mistake: Applying one discount period to payments that occur on different dates.
XIX-A-133hardnumerical
Q8An early-stage company is making accounting losses but has uncertain future growth opportunities. An analyst proposes using a conventional positive price-to-earnings multiple on its negative earnings. What is the more appropriate approach?
Option A. Treat the company’s growth forecast as a guaranteed present asset value
Why it is wrong: A growth forecast is uncertain and should not be treated as a guaranteed value.
Option B. Use suitable alternative methods with explicit assumptions and scenarios — Correct answer
Option C. Use the absolute value of the loss as though it were earned profit
Why it is wrong: Turning a loss into a positive earnings figure misrepresents the valuation input.
Option D. Automatically declare the company worthless because current earnings are negative
Why it is wrong: Current losses alone do not prove that all assets or future economic opportunities have zero value.
Answer: B. Suitable alternative methods with explicit assumptions and scenarios are more appropriate than mechanically applying a positive earnings multiple to losses. Current losses alone do not prove that the business has no economic value. Remember: Choose valuation methods that fit the company’s stage and financial characteristics.
Hint, shown before you answer in practice mode: Check whether the chosen multiple is meaningful for the company’s current financial profile. Common mistake: Forcing a familiar multiple onto an unsuitable earnings base.
XIX-A-134hardapplication
Valuation: common questions
How many practice questions are there on Valuation?
8 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 13 practice topics for NISM Series XIX-A, which has 150 questions in total.
Are these real NISM Series XIX-A questions on Valuation?
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.
How much of the NISM Series XIX-A exam is Valuation?
NISM's published syllabus outline gives it 5 of the paper's 100 marks, or 5% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: 19 March 2025 Annexure I, Unit 11: Valuation
Does negative marking apply to NISM Series XIX-A?
Yes. NISM takes off 10% of a question's marks for a wrong answer. On a 1-mark question that is 0.1 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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