Q1. What is inflation?

• Correct answer: Rise in the general price level of goods and services.​
• Explanation: Inflation erodes purchasing power; lower portfolio real returns delay or shrink corpus growth.​
• Exam cue: Always compare nominal returns to inflation for real return.​

Q2. Which risk cannot be insured?

• Correct answer: Losses from gambling.​
• Explanation: Insurable risks are fortuitous and measurable (e.g., accidents, earthquakes, floods); speculative acts like gambling are not insurable.​
• Exam cue: Speculative risk ≠ insurable risk.​

Q3. If regular expenses exceed regular income, what should one do?

• Correct answer: Either borrow or sell assets.​
• Explanation: First cut discretionary spends, but if essential outflows exceed inflows, bridge via prudent borrowing or asset sales.​
• Exam cue: Align cash flow via budget; consider cost of borrowing vs asset liquidation.​

Q4. Strategy to reduce investment risk by investing across avenues

• Correct answer: Diversification.​
• Explanation: Spread across asset classes and within them to lower concentration risk and stabilize outcomes.​
• Exam cue: “All eggs in one basket” = concentration risk.​

Q5. Liquidity risk can be managed by

• Correct answer: Mapping cash flow needs to investment tenures.​
• Explanation: Time goals decide product choice; short‑term needs use liquid/short duration products, long‑term can use growth assets.​
• Exam cue: Horizon–product fit reduces forced exits.​

Q6. Ability to convert investments into cash with ease is called

• Correct answer: Liquidity.​
• Explanation: Listed equities/ETFs/MFs are relatively liquid; real estate is typically illiquid.​
• Exam cue: Liquidity = speed + fair price realization.​

Q7. At which life stage do longer life span and inflation pose high financial risk?

• Correct answer: Retirement.​
• Explanation: Active income stops while expenses continue; plan a corpus that beats inflation for decades.​
• Exam cue: Sequence‑of‑returns risk + longevity risk matter post‑retirement.​

Q8. You often miss flights but do not buy insurance—this is

• Correct answer: Risk retention.​
• Explanation: By not transferring (insuring) the risk, the financial impact remains with the traveler.​
• Exam cue: Transfer via insurance vs retention by choice.​

Q9. Know the time horizon; how to estimate annual rate to double money?

• Correct answer: Rule of 72 (72 ÷ years).​
• Explanation: A thumb rule for compounding; for precise planning, use exact CAGR math.​
• Exam cue: Handy for quick feasibility checks.​

Q10. Market with strong demand and rising stock prices

• Correct answer: Bull market.​
• Explanation: Rising sales/profits fuel optimism and higher equity prices.​
• Exam cue: Bull = rising, Bear = falling.​

Q11. Role of Depository Participant (DP) in securities market

• Correct answer: Safeguards and maintains securities in electronic form.​
• Explanation: DPs interface between investors and depositories (NSDL/CDSL) for demat and transfers.​
• Exam cue: DP = agent of depository for investor services.​

Q12. During due diligence, an investor should consider

• Correct answer: Examining cash flow statement, income statement, and balance sheet.​
• Explanation: Also evaluate business model, competition, management quality, and macro sensitivity.​
• Exam cue: Avoid ignoring business model or peer comparisons.​

Q13. What is SEBI SCORES?

• Correct answer: An online platform for investors to file complaints against SEBI‑registered intermediaries and track resolution status.​
• Explanation: Ensures time‑bound handling, status visibility, and escalation if needed.​
• Exam cue: Use official grievance mechanisms for redressal.​

Q14. When a market index value goes up, what does it imply?

• Correct answer: Investors are feeling positive about the market.​
• Explanation: Index gains reflect weighted advances in constituent stocks, signaling improving sentiment.​
• Exam cue: Index is an aggregate signal, not a guarantee for each stock.​

Q15. Hybrid funds typically invest in

• Correct answer: A combination of equity and debt securities.​
• Explanation: Asset mix manages risk/return; sub‑types vary by equity allocation.​
• Exam cue: Check scheme category and Riskometer for fit.​

Q16. Where can investors buy and sell REIT units?

• Correct answer: On the stock exchange.​
• Explanation: Listed REITs trade like shares/ETFs during market hours, enabling liquidity.​
• Exam cue: REIT income = rentals + potential appreciation.​

Q17. Confirmation of trades done during the day for/on behalf of a client is called

• Correct answer: Contract note.​
• Explanation: Shows order details, price, time, charges; statutory proof for trades.​
• Exam cue: Verify promptly for accuracy.​

Q18. Are derivatives low‑risk or high‑risk products?

• Correct answer: High risk.​
• Explanation: Leverage, margining, and path‑dependence can amplify losses; requires strong risk controls.​
• Exam cue: Options/futures demand clear strategies and limits.​

Q19. Before investing, an investor should be aware of

• Correct answer: The risks involved.​
• Explanation: Understand downside, volatility, liquidity, and suitability before expected returns or branding.​
• Exam cue: Suitability first; returns later.​

Q20. What is not traded on stock exchanges?

• Correct answer: Fixed deposits.​
• Explanation: ETF units, listed company shares, and many debentures are exchange‑traded; bank FDs are not.​
• Exam cue: Distinguish primary bank products vs marketable securities.​

Q21. Main advantage of ETFs over regular mutual funds

• Correct answer: Higher daily liquidity and lower fees.​
• Explanation: ETFs trade intra‑day and usually carry lower expense ratios than many active funds.​
• Exam cue: Track index; mind tracking error and bid‑ask spreads.​

Q22. IPO tip claims shares will double on listing—what should you do?

• Correct answer: Do your own homework; check fundamentals before investing.​
• Explanation: Avoid tip‑driven decisions; assess business quality, valuations, risk.​
• Exam cue: Hype ≠ investment thesis.​

Q23. A pool of investments is called

• Correct answer: Mutual fund.​
• Explanation: AMCs pool investor money into schemes for professional management per stated objectives.​
• Exam cue: Read scheme documents for mandate and risks.​

Q24. What returns do equity mutual funds offer?

• Correct answer: Dividends and capital appreciation.​
• Explanation: NAV gains and distributed dividends form total return; taxation differs by component.​
• Exam cue: Focus on long‑term, post‑tax, real returns.​

Q25. From where can you buy securities of listed companies?

• Correct answer: Stock brokers (members of stock exchanges).​
• Explanation: Registered trading members route orders to exchanges and handle settlement.​
• Exam cue: Always transact via registered intermediaries.​

Q26. What does a mutual fund’s NAV represent?

• Correct answer: Realizable value of the assets of the fund (per unit, net of liabilities/expenses).​
• Explanation: NAV ≈ per‑unit market value after expenses; it updates per valuation norms.​
• Exam cue: NAV is not “cheap/expensive” by itself—look at portfolio, not price alone.​

Q27. Settlement of funds and securities as per running account authorization should occur

• Correct answer: At least once in 30 days or 90 days as opted by the investor.​
• Explanation: Periodic settlement ensures idle balances are returned and accounts reconciled.​
• Exam cue: Choose frequency and monitor statements.​

Q28. Typical outcome for remaining investors when a Ponzi scheme collapses

• Correct answer: The promoter disappears with all the money.​
• Explanation: Schemes pay old investors from new inflows until inflows stop and collapse occurs.​
• Exam cue: “High return, no risk, hurry” = red flags.​

Q29. Which is an objective of SEBI?

• Correct answer: Regulating the securities market.​
• Explanation: SEBI regulates markets and protects investors; use its mechanisms for redressal and transparency.​
• Exam cue: Know regulator roles and escalation paths.​

Q30. You receive an email claiming a ₹1 crore lottery asking for personal and bank credentials—this is

• Correct answer: Phishing.​
• Explanation: Never share credentials; report and delete suspicious communications.​
• Exam cue: Use official portals; enable 2FA and strong hygiene.​

Q31. Passive mutual funds are designed to

• Correct answer: Provide returns similar to the market index.​
• Explanation: They replicate index constituents/weights; slight variance is tracking error.​
• Exam cue: Costs and tracking error shape net results.​

Q32. Investing all savings only in stocks is the only way to get rich—correct?

• Correct answer: No; diversify and explore other avenues too.​
• Explanation: Asset allocation across equity, debt, gold, etc., balances risk and goals.​
• Exam cue: Allocation > selection for long‑term outcomes.​

Q33. Inherited 10,000 large‑cap shares; registrar not transferring despite attempts—what recourse?

• Correct answer: File a complaint on SEBI’s SCORES platform.​
• Explanation: Official redressal provides tracking and timelines; RTA must respond.​
• Exam cue: Maintain documentation for transmission requests.​

Q34. Missed encashing dividends from FY15–16; can the company pay now?

• Correct answer: No; after 7 years, unclaimed amounts move to IEPF—recover via IEPF claim.​
• Explanation: Unclaimed dividends and shares are transferred to IEPF; investors must claim from IEPF.​
• Exam cue: Track dividends/corporate actions; update bank/KYC promptly.​

Q35. Markets are rapidly falling—should long‑term investments be sold?

• Correct answer: No; avoid panic selling if fundamentals are intact.​
• Explanation: Volatile phases like pandemics can reverse; focus on quality and horizon, not fear.​
• Exam cue: Time in market and discipline drive compounding.​

Q36. Newly‑listed company shows quick gains; news and social posts look positive—hold purely on news?

• Correct answer: No; do your own research beyond media/social narratives.​
• Explanation: Momentum can reverse; assess fundamentals, valuations, and risks before decisions.​
• Exam cue: Validate tips; use documented thesis and exit rules.