Practice Set - 3 | Practice Set | NISM Series XXI-B: Portfolio Managers Certification Examination

Question 1

Which of the following would most likely increase the need for liquidity within a portfolio?

Question 2

A portfolio benchmark changes frequently whenever the portfolio underperforms. This practice mainly reduces:

Question 3

An investor nearing retirement maintains an aggressive equity allocation because of strong recent market returns. This behavior most likely reflects:

Question 4

A portfolio manager selects a benchmark with lower volatility than the actual portfolio strategy. This may artificially:

Question 5

Which situation most strongly supports Tactical Asset Allocation over Strategic Asset Allocation?

Question 6

A portfolio manager delays rebalancing despite large allocation drift because transaction costs are high. This situation highlights the trade-off between:

Question 7

Can portfolio rebalancing potentially reduce long-term returns during prolonged trending markets?

Question 8

A portfolio manager increases equity exposure during a market boom despite the IPS limiting equity allocation. Which principle is most directly violated?

Question 9

An investor’s risk tolerance questionnaire indicates aggressive behavior, but the investor panics during temporary market declines. This primarily suggests:

Question 10

An investor’s IPS states preservation of capital as the primary objective, but the portfolio contains leveraged derivative positions. This indicates:

Question 11

A portfolio heavily invested in international assets experiences losses despite domestic market growth. This primarily demonstrates:

Question 12

A portfolio manager avoids rebalancing to prevent realizing taxable gains, even though asset allocation drift becomes extreme. The greatest resulting concern is:

Question 13

A portfolio manager frequently alters asset allocation based on short-term economic forecasts, but the client requested a stable long-term strategy. This primarily indicates:

Question 14

Can low correlation between asset classes remain stable permanently across all economic cycles?

Question 15

Can diversification across multiple stocks within the same industry significantly reduce industry-specific risk?

Question 16

A benchmark that consistently underrepresents the risk profile of a portfolio may result in:

Question 17

An investor with high risk tolerance but immediate liquidity needs should most likely:

Question 18

Can a highly diversified portfolio still underperform a concentrated portfolio during strong sector rallies?

Question 19

Which investor characteristic is most likely to justify a larger allocation to volatile growth assets?

Question 20

Practice Set - 3