Ch.1 · Investment Landscape

Comparing Financial Products

25 practice questions on this topic

Which regulatory body governs the equity and debt capital markets in India?

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EXPLANATION

SEBI is the statutory regulator for securities markets in India, covering equity, debt, mutual funds, and intermediaries. RBI regulates money markets, banking, and government securities markets.

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An investor needs ₹50 lakh for a goal 20 years away. Which of the following asset allocation strategies is most appropriate for this goal?

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EXPLANATION

For long-term goals (15–20+ years), equity-oriented investments are most appropriate. Equities have historically delivered inflation-beating returns over long periods. Short-term volatility is manageable given the long runway, making pure debt or liquid funds unsuitable for wealth creation.

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What is 'real rate of return' in the context of investments?

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EXPLANATION

Real rate of return = Nominal return − Inflation rate (approximately). If an FD earns 7% but inflation is 6%, the real return is ~1%. Real returns matter because they measure actual purchasing power gained, not just nominal growth.

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What is the 'time value of money' principle?

A.A rupee available today is worth more than a rupee available in the future due to its earning potential

B.Money loses value over time due to inflation, so investing is risky

C.The longer you hold an investment, the lower its value becomes

D.Money held in a bank account multiplies faster than money invested in equity

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Which of the following correctly describes a 'call money' market?

A.A market where corporates lend to each other overnight

B.An overnight interbank lending market where banks borrow and lend funds to manage daily liquidity

C.A market where investors place calls on equity options

D.A platform for small businesses to raise short-term working capital

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A Sovereign Gold Bond (SGB) is issued by:

A.The World Gold Council on behalf of Indian bullion dealers

B.The Reserve Bank of India on behalf of the Government of India

C.SEBI as part of its commodity market regulation

D.Nationalised banks as an alternative to physical gold

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Which of the following best describes 'liquidity' as a feature of a financial instrument?

A.The ability of an instrument to generate high returns over the long term

B.The stability of principal value regardless of market conditions

C.The ease and speed with which an instrument can be converted to cash without significant loss of value

D.The tax efficiency of the instrument under the Income Tax Act

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Which of the following statements about the National Pension System (NPS) is CORRECT?

A.NPS is a market-linked, defined contribution pension scheme regulated by PFRDA

B.NPS guarantees a fixed monthly pension regardless of market performance

C.NPS is only available to central government employees

D.NPS maturity proceeds are fully taxable at the investor's slab rate

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What is the additional tax deduction available under Section 80CCD(1B) for NPS contributions, over and above the Section 80C limit?

A.₹25,000

B.₹50,000

C.₹75,000

D.₹1,00,000

Q10

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Why is mutual fund investment considered superior to direct equity investment for a retail investor with limited expertise?

A.Mutual funds guarantee returns that direct equity cannot

B.Mutual funds invest only in government securities, making them risk-free

C.Mutual fund investors do not pay any taxes on gains

D.Mutual funds offer professional management, diversification, regulatory oversight, and accessibility at low ticket sizes

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