Last updated: 10 October 2026 · By Yashna Bhuwania (ARN-325085)
Quick answer: Below are 50 original NISM Series 5A practice questions with answers and one-line explanations, grouped by the 12 syllabus units. They follow the real exam's format: one-mark multiple choice with four options. These are not actual NISM exam questions. For a timed 100-question test, use our free mock test.
How should you use these questions?
Attempt each unit's questions before reading the answers, then re-read the workbook sections you got wrong. When you score well here, take the full timed mock test and follow the study plan in our NISM Series 5A prep guide.
How are the 50 questions split across the syllabus?
The split follows NISM's published unit weights for the exam.
| Unit | Topic | Exam weight | Questions here |
|---|---|---|---|
| 1 | Investment Landscape | 8% | 4 |
| 2 | Concept and Role of a Mutual Fund | 6% | 3 |
| 3 | Legal Structure | 4% | 2 |
| 4 | Legal and Regulatory Framework | 10% | 5 |
| 5 | Scheme Related Information | 10% | 5 |
| 6 | Fund Distribution and Channel Management | 6% | 3 |
| 7 | NAV, TER and Pricing of Units | 8% | 4 |
| 8 | Taxation | 4% | 2 |
| 9 | Investor Services | 15% | 8 |
| 10 | Risk, Return and Performance of Funds | 7% | 4 |
| 11 | Mutual Fund Scheme Performance | 7% | 3 |
| 12 | Mutual Fund Scheme Selection | 15% | 7 |
What do Unit 1 (Investment Landscape) questions look like?
Q1. A deposit pays 8% a year and inflation is 5%. Using the exact formula, what is the real rate of return?
- A) 3.00%
- B) 2.86%
- C) 13.00%
- D) 1.60%
Answer: B. Why: (1.08 ÷ 1.05) − 1 = 2.86%. 3% is only the shortcut approximation.
Q2. Which asset makes the investor a part-owner of a business?
- A) Fixed deposit
- B) Government bond
- C) Gold
- D) Equity share
Answer: D. Why: Equity is ownership. Deposits and bonds are loans; gold is a commodity.
Q3. Using the Rule of 72, roughly how many years does money take to double at 9% a year?
- A) 6
- B) 8
- C) 9
- D) 12
Answer: B. Why: 72 ÷ 9 = 8 years.
Q4. Someone keeps all their 20-year retirement savings in a savings bank account. What is the main risk?
- A) Inflation risk
- B) Credit risk
- C) Market risk
- D) Liquidity risk
Answer: A. Why: A low interest rate may not beat inflation, so purchasing power falls over time.
What do Unit 2 (Concept and Role of a Mutual Fund) questions look like?
Q5. In an open-ended scheme, investors can buy and redeem units:
- A) Only during the NFO
- B) Only on a stock exchange
- C) With the fund on an ongoing basis, at NAV-based prices
- D) Only on maturity
Answer: C. Why: Open-ended schemes have no maturity and transact with the fund continuously.
Q6. An interval scheme allows purchases and redemptions:
- A) Only during specified transaction periods
- B) On every business day
- C) Never, until the scheme matures
- D) Only through a stock exchange
Answer: A. Why: It is closed most of the time and opens at pre-set intervals.
Q7. Which of these is NOT a feature of mutual fund investing?
- A) Diversification
- B) Professional management
- C) Guaranteed returns
- D) Liquidity in open-ended schemes
Answer: C. Why: Mutual funds are market-linked; returns are not guaranteed.
What do Unit 3 (Legal Structure) questions look like?
Q8. Who holds a mutual fund's property in trust for unitholders and supervises the AMC?
- A) Sponsor
- B) Custodian
- C) Trustees
- D) Registrar and Transfer Agent
Answer: C. Why: Trustees protect unitholders' interests. The custodian only holds the securities.
Q9. A mutual fund in India is set up as:
- A) A trust
- B) A public limited company
- C) A partnership firm
- D) A co-operative society
Answer: A. Why: The fund is a trust registered with SEBI; the AMC is a separate company that manages the money.
What do Unit 4 (Legal and Regulatory Framework) questions look like?
Q10. Which body regulates mutual funds in India?
- A) RBI
- B) AMFI
- C) IRDAI
- D) SEBI
Answer: D. Why: SEBI regulates mutual funds. AMFI is the industry association, not a regulator.
Q11. An investor's complaint is not resolved by the AMC. Where can they escalate it online?
- A) SEBI SCORES
- B) RBI Banking Ombudsman
- C) IRDAI Bima Bharosa
- D) The stock exchange's arbitration cell
Answer: A. Why: SCORES is SEBI's complaint redress system for securities-market complaints, including mutual funds.
Q12. An AMC changes a fundamental attribute of a scheme. What must existing unitholders get?
- A) Nothing, if the trustees approve
- B) Bonus units
- C) An option to exit at NAV without exit load
- D) A higher IDCW payout
Answer: C. Why: Unitholders who disagree must be allowed to leave without paying an exit load.
Q13. Who must approve an AMC before it can manage a mutual fund's schemes?
- A) AMFI
- B) The stock exchange
- C) RBI
- D) SEBI
Answer: D. Why: The AMC must be approved by SEBI.
Q14. An MFD wants to use the term "financial advice" in promotional material. This is allowed only if the MFD:
- A) Has 10 years of experience
- B) Is registered with SEBI as an Investment Adviser, with a separately identifiable division
- C) Has AUM above ₹25 Cr
- D) Gets AMC approval
Answer: B. Why: AMFI's guidance reserves "financial advice" for SEBI-registered Investment Advisers.
What do Unit 5 (Scheme Related Information) questions look like?
Q15. Which document carries scheme-specific details such as the investment objective, asset allocation and loads?
- A) Statement of Additional Information (SAI)
- B) Scheme Information Document (SID)
- C) Consolidated Account Statement (CAS)
- D) Annual report of the AMC
Answer: B. Why: The SID is scheme-specific. The SAI covers fund-house information common to all schemes; the KIM is the abridged version given with forms.
Q16. Under SEBI's categorisation, a "large cap" company is:
- A) 1st to 100th company by full market capitalisation
- B) 1st to 250th company by full market capitalisation
- C) Any company with market cap above ₹20,000 Cr
- D) Any Nifty 50 company
Answer: A. Why: Large cap is the top 100. Mid cap is 101st to 250th. Small cap is 251st onwards.
Q17. A multi cap fund must invest at least how much each in large, mid and small cap stocks?
- A) 10%
- B) 20%
- C) 25%
- D) 33%
Answer: C. Why: SEBI requires at least 25% in each, within 75% minimum equity.
Q18. What is the maximum number of stocks a focused fund can hold?
- A) 20
- B) 25
- C) 50
- D) 30
Answer: D. Why: Focused funds hold at most 30 stocks, with at least 80% in equity.
Q19. SEBI's February 2026 categorisation circular discontinued which category?
- A) Solution-oriented schemes
- B) Index funds
- C) Sectoral funds
- D) Arbitrage funds
Answer: A. Why: Solution-oriented schemes were discontinued and Life Cycle Funds were introduced as a new category.
What do Unit 6 (Fund Distribution and Channel Management) questions look like?
Q20. How are MFDs paid by AMCs today?
- A) Upfront commission on each purchase
- B) Trail commission only
- C) Upfront plus trail
- D) A fee collected from the investor's bank account by the AMC
Answer: B. Why: SEBI banned upfront commission in October 2018. Only trail is paid.
Q21. Which tagline must an MFD show with their name on printed communication?
- A) "SEBI-registered Investment Adviser"
- B) "Certified Financial Planner"
- C) "AMFI-registered Mutual Fund Distributor"
- D) "Authorised AMC Agent"
Answer: C. Why: AMFI requires this tagline along with or below the MFD's name.
Q22. Which practice is an MFD barred from?
- A) Risk-profiling clients
- B) Displaying their ARN
- C) Using AMC-provided marketing material
- D) Attracting investors with rebates or gift vouchers
Answer: D. Why: AMFI bars inducements such as rebates, gifts and gift vouchers.
What do Unit 7 (NAV, TER and Pricing) questions look like?
Q23. A scheme has investments of ₹95 Cr, cash of ₹3 Cr, accrued income of ₹0.5 Cr, liabilities of ₹1 Cr and accrued expenses of ₹0.5 Cr. There are 5 Cr units. What is the NAV?
- A) ₹19.00
- B) ₹19.40
- C) ₹19.70
- D) ₹20.00
Answer: B. Why: (95 + 3 + 0.5 − 1 − 0.5) ÷ 5 = 97 ÷ 5 = ₹19.40.
Q24. An investor redeems 400 units at an NAV of ₹50 with a 1% exit load. How much do they receive? Ignore taxes.
- A) ₹20,000
- B) ₹19,800
- C) ₹19,500
- D) ₹20,200
Answer: B. Why: Redemption price = ₹50 × 0.99 = ₹49.50; × 400 = ₹19,800.
Q25. Why is the direct plan's NAV usually higher than the regular plan's NAV of the same scheme?
- A) The direct plan holds different stocks
- B) The regular plan pays entry load
- C) The direct plan gets bonus units
- D) The direct plan has a lower expense ratio, because it pays no distributor commission
Answer: D. Why: Same portfolio, lower costs; the difference compounds into a higher NAV over time.
Q26. What is the status of entry load on mutual fund purchases?
- A) Abolished by SEBI
- B) Up to 2.25%
- C) Charged only on SIPs
- D) Charged only by regular plans
Answer: A. Why: SEBI abolished entry loads. Only exit loads, where applicable, are charged.
What do Unit 8 (Taxation) questions look like?
Q27. How is IDCW (dividend) received from a mutual fund taxed?
- A) It is tax-free for the investor
- B) As the investor's income, at their applicable slab rate
- C) As long-term capital gains
- D) Only through tax paid by the fund before distribution
Answer: B. Why: Since dividend distribution tax was abolished in 2020, IDCW is taxed in the investor's hands.
Q28. An investor switches from Scheme X to Scheme Y of the same fund house. For tax purposes this is:
- A) Not a transaction at all
- B) Taxable only if the amount exceeds ₹1 lakh
- C) A redemption from X and a purchase in Y, so capital gains may arise
- D) Exempt, because the fund house is the same
Answer: C. Why: A switch is a sale of the old units, so gains on X are taxable.
What do Unit 9 (Investor Services) questions look like?
Q29. What is the cut-off time for purchases in a liquid fund?
- A) 12:00 pm
- B) 1:30 pm
- C) 3:00 pm
- D) 5:00 pm
Answer: B. Why: Liquid and overnight purchases close at 1:30 pm. Most other schemes close at 3:00 pm.
Q30. An investor submits an equity fund purchase at 2:00 pm, but the money reaches the AMC's bank account at 4:30 pm the same day. Which NAV applies?
- A) The same day's NAV
- B) The previous day's NAV
- C) The next business day's NAV
- D) The NAV on the date the cheque was written
Answer: C. Why: For purchases, NAV depends on when funds are realised, and the funds arrived after the 3:00 pm cut-off.
Q31. Redemption proceeds from a domestic equity scheme must reach the investor within:
- A) 1 working day
- B) 3 working days
- C) 7 working days
- D) 10 working days
Answer: B. Why: SEBI's limit is three working days; schemes with at least 80% overseas investment get five.
Q32. An investor wants to move ₹10,000 every month from a liquid fund into an equity fund. Which facility fits?
- A) SIP
- B) SWP
- C) Dividend reinvestment
- D) STP
Answer: D. Why: A Systematic Transfer Plan moves money from one scheme to another at regular intervals.
Q33. A retiree uses an SWP to withdraw ₹10,000 a month. The NAV this month is ₹40. How many units are redeemed?
- A) 250
- B) 400
- C) 40
- D) 2,500
Answer: A. Why: ₹10,000 ÷ ₹40 = 250 units.
Q34. A ₹5,000 SIP instalment is invested at an NAV of ₹25. How many units are allotted? Ignore stamp duty.
- A) 125
- B) 500
- C) 250
- D) 200
Answer: D. Why: ₹5,000 ÷ ₹25 = 200 units.
Q35. Who maintains India's Central KYC Records Registry (CKYC)?
- A) SEBI
- B) AMFI
- C) CERSAI
- D) NSDL
Answer: C. Why: CERSAI runs the CKYC registry. KYC Registration Agencies (KRAs) are SEBI-registered.
Q36. An investor transacted in their folio in July. By when should they get their Consolidated Account Statement (CAS)?
- A) 15 August
- B) 31 July
- C) 30 September
- D) 31 March
Answer: A. Why: A monthly CAS is issued by the 15th of the next month for any month with transactions.
What do Unit 10 (Risk, Return and Performance) questions look like?
Q37. Standard deviation of a fund's returns measures:
- A) Return over the risk-free rate
- B) Interest rate sensitivity
- C) Sensitivity to market movements only
- D) Total volatility of returns around their average
Answer: D. Why: Standard deviation is total risk; beta is market risk.
Q38. A fund has a beta of 1.2. If the market rises 10%, the fund is expected to rise about:
- A) 8%
- B) 10%
- C) 12%
- D) 20%
Answer: C. Why: 1.2 × 10% = 12%.
Q39. A fund returned 14%, the risk-free rate is 6%, and the fund's standard deviation is 16%. What is its Sharpe ratio?
- A) 0.50
- B) 0.88
- C) 1.25
- D) 2.00
Answer: A. Why: (14 − 6) ÷ 16 = 0.50.
Q40. Which measure best shows how much a debt fund's NAV changes when interest rates move?
- A) Beta
- B) Sharpe ratio
- C) Modified duration
- D) Portfolio turnover
Answer: C. Why: Modified duration estimates the % price change for a 1% change in yields.
What do Unit 11 (Scheme Performance) questions look like?
Q41. ₹1 lakh grows to ₹2 lakh in 6 years. What is the CAGR?
- A) 16.67%
- B) 20.00%
- C) 10.00%
- D) 12.25%
Answer: D. Why: 2^(1/6) − 1 = 12.25%. 16.67% is the simple average, which ignores compounding.
Q42. Equity scheme performance must be compared with which version of the benchmark index?
- A) Price Return Index
- B) Total Return Index (TRI)
- C) The index's highest value in the year
- D) Any index the fund manager chooses
Answer: B. Why: TRI includes dividends, so the comparison is fair to the fund, which also earns them.
Q43. Which measure best judges how well an index fund does its job?
- A) Tracking error
- B) Alpha
- C) Sharpe ratio
- D) AUM
Answer: A. Why: An index fund aims to copy its index, so lower tracking error is better.
What do Unit 12 (Scheme Selection) questions look like?
Q44. A client wants to park an emergency fund that may be needed any day. Which category fits best?
- A) Small cap fund
- B) Long duration fund
- C) Liquid fund
- D) Sectoral fund
Answer: C. Why: Liquid funds invest in instruments of up to 91 days and have low volatility.
Q45. Which statement about a gilt fund is correct?
- A) It has no credit risk and no interest rate risk
- B) Its returns are guaranteed by the government
- C) It has high credit risk but no interest rate risk
- D) It has negligible credit risk but carries interest rate risk
Answer: D. Why: Government securities rarely default, but their prices fall when rates rise.
Q46. Interest rates are expected to rise. A conservative client wants the least NAV volatility from a debt fund. What should you suggest?
- A) Long duration fund
- B) 10-year constant maturity gilt fund
- C) Money market fund
- D) Dynamic bond fund with long duration positions
Answer: C. Why: Shorter maturity means lower sensitivity to rising rates.
Q47. A 25-year-old with a 15-year goal and a high risk appetite asks where to invest. Which is most suitable?
- A) Overnight fund
- B) Flexi cap fund
- C) Liquid fund
- D) Arbitrage fund
Answer: B. Why: A long horizon and high risk tolerance suit diversified equity.
Q48. A multi asset allocation fund must invest in:
- A) At least 3 asset classes, at least 10% in each
- B) Equity and debt only
- C) Gold only
- D) At least 2 asset classes, at least 25% in each
Answer: A. Why: SEBI's category rule is 3 or more asset classes, with a minimum of 10% in each.
Q49. Two flexi cap funds are being compared. Which is the best basis for choosing?
- A) Last 1-year return only
- B) The fund with the lower NAV
- C) Consistent long-term risk-adjusted returns against the benchmark, plus costs
- D) The fund with the most advertisements
Answer: C. Why: One year's return can be luck, and a lower NAV does not make a fund cheaper.
Q50. How many risk levels does the mutual fund risk-o-meter have?
- A) 4
- B) 5
- C) 6
- D) 7
Answer: C. Why: Low, Low to Moderate, Moderate, Moderately High, High and Very High.
Which concepts do candidates miss most often?
- Real return: use (1 + nominal) ÷ (1 + inflation) − 1 when the question asks for the exact figure.
- Applicable NAV: for purchases, it depends on when the money reaches the AMC, not when the form is signed.
- Cut-off times: liquid and overnight purchases close at 1:30 pm; others at 3:00 pm.
- SIP vs STP vs SWP: in, across and out.
- Standard deviation vs beta: total risk vs market risk. Sharpe uses standard deviation.
- CAGR vs simple average: CAGR compounds; the simple average overstates growth.
- Gilt funds: no real credit risk, but full interest rate risk.
- Who does what: trustees supervise, the AMC manages, the custodian holds securities, the RTA keeps records.
- Direct vs regular: same portfolio; direct has a lower expense ratio and a higher NAV.
Once you pass, the next step is the ARN: see how to become a mutual fund distributor. To start distributing without empanelling with 40+ AMCs separately, see how Dhan Saarthi works.
Sources
- NISM: Mutual Fund Distributors certification (Series 5A)
- NISM: Series 5A unit weights (Annexure I)
- SEBI: Categorization and Rationalization of Mutual Fund Schemes, 26 Feb 2026
- SEBI: FAQs for Mutual Fund Investors (Sep 2024)
- AMFI: Cut-off timings and applicable NAV
- AMFI: FAQs on do's and don'ts for MFDs
- SEBI SCORES
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Distribution services are offered through Khazana Fintech Pvt. Ltd. (AMFI ARN – 325085). Rules checked against SEBI, AMFI and NISM sources as of October 2026.
