Investment Landscape and Required Return
4 questions. Each answer is explained.
Question 1 of 4Practice · Series XXI-B — Portfolio Managers
0 right · 0 wrong · 4 to go
A–D or 1–4 to answer · Enter or → for the next question · ← to go back
Learn these topics
More units in NISM Series XXI-B
- Introduction to Securities Markets and Participants3
- Investing in Stocks and Equity Research7
- Investing in Fixed Income Securities and Bond Valuation6
- Derivatives in Portfolio Management6
- Mutual Fund6
- Role of Portfolio Managers in India8
- Operational Aspects of Portfolio Managers (Onboarding and Fees)8
- Portfolio Management Process and Asset Allocation8
- Taxation6
- Regulatory, Governance and Ethical Aspects of Portfolio Managers8
- Introduction to Indices6
- Concept of Informational Efficiency6
- Behavioral Finance6
- Introduction to Modern Portfolio Theory6
- Introduction to Capital Market Theory6
- Risk8
- Equity Portfolio Management Strategies14
- Fixed Income Portfolio Management Strategies14
- Performance measurement and evaluation of Portfolio Managers8
- Portfolio Rebalancing6
Exam format
| Questions | 120 · 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 XXI-B Portfolio Managers
Exam rules read on NISM's site on 30 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 30 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 4 questions on Investment Landscape and Required Return, with answers
Q1Which approach best distinguishes an investment decision from a short-term speculative bet?
Option A. Borrowing heavily to recover a recent loss
Why it is wrong: Loss recovery through leverage is not a valuation-based investment process.
Option B. Assessing value and expected future cash flows — Correct answer
Option C. Following a rumour about tomorrow’s price
Why it is wrong: A rumour-based short-term bet does not assess the asset’s underlying value.
Option D. Buying only because its price rose yesterday
Why it is wrong: A recent price rise alone does not establish investment value.
Answer: B. Assessing value and future cash flows provides an investment basis rather than relying only on a hoped-for price move. Both investment and speculation can still involve losses. Remember: A reasoned investment decision links price, value, risk and expected cash flows.
Hint, shown before you answer in practice mode: Think about the evidence used before committing money. Common mistake: Assuming that calling a trade an investment removes its risk.
XXI-B-001easyconceptual
Q2What economic claim does an ordinary equity share give its holder?
Option A. A residual ownership claim on the company — Correct answer
Option B. A guaranteed repayment claim at face value
Why it is wrong: An ordinary share does not promise repayment at face value.
Option C. A priority payment claim ahead of creditors
Why it is wrong: Creditors generally rank before ordinary shareholders on liquidation.
Option D. A fixed interest claim on the company
Why it is wrong: Fixed interest is a debt feature, not an ordinary equity entitlement.
Answer: A. An ordinary share gives a residual ownership claim after the company’s obligations to other claimants. Its dividends and market value are not guaranteed. Remember: Equity represents ownership rather than a fixed repayment promise.
Hint, shown before you answer in practice mode: Think about where owners stand after other claims are met. Common mistake: Treating an ordinary share like an interest-paying loan.
XXI-B-002easyconceptual
Q3An investment earns 10% while prices rise 5% over the year. What is its exact real return, approximately?
Option A. 5.00%
Why it is wrong: Subtracting inflation gives an approximation rather than the exact real return.
Option B. 4.76% — Correct answer
Option C. 15.00%
Why it is wrong: Adding inflation does not measure the gain in purchasing power.
Option D. 9.52%
Why it is wrong: Dividing the nominal return by the inflation factor omits the correct growth-factor comparison.
Answer: B. The real return is approximately 4.76% because purchasing power grows more slowly than the money value. Real return = (1 + nominal return) ÷ (1 + inflation) − 1. Working: 1.10 ÷ 1.05 − 1 = 0.047619, or 4.76%. Remember: Use growth factors when calculating an exact inflation-adjusted return.
Hint, shown before you answer in practice mode: Compare the growth in money with the growth in prices. Common mistake: Using subtraction when the question asks for the exact real return.
XXI-B-003mediumnumerical
Q4A security requires a 12% return when the comparable risk-free rate is 7%. What is its risk premium?
Option A. 5 percentage points — Correct answer
Option B. 12 percentage points
Why it is wrong: Twelve percentage points includes both the risk-free return and the risk premium.
Option C. 19 percentage points
Why it is wrong: Adding the two rates does not isolate the premium.
Option D. 7 percentage points
Why it is wrong: Seven percentage points is the risk-free return, not the additional return.
Answer: A. The risk premium is 5 percentage points because it is the return required above the risk-free rate. Working: 12% − 7% = 5 percentage points. Remember: A risk premium is additional expected compensation, not a guaranteed extra return.
Hint, shown before you answer in practice mode: Separate compensation for taking risk from the baseline return. Common mistake: Confusing total required return with compensation for risk.
XXI-B-004mediumnumerical
Investment Landscape and Required Return: common questions
How many practice questions are there on Investment Landscape and Required Return?
4 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 21 practice topics for NISM Series XXI-B, which has 150 questions in total.
Are these real NISM Series XXI-B questions on Investment Landscape and Required Return?
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 XXI-B?
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.
Introduction to Securities Markets and Participants
3 questions on Introduction to Securities Markets and Participants. Its quiz opens on that unit.
Open Introduction to Securities Markets and ParticipantsPaper Trading Try it on the practice trading desk