NISM V-A Risk, Return and Fund Performance — Practice Questions
Questions on measuring what a fund actually delivered: absolute, annualised and CAGR returns, standard deviation, beta and Sharpe ratio, tracking error, and the risks specific to equity and debt portfolios.
55 questions on Risk, Return & Performance in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Absolute, annualised and CAGR returns
- Standard deviation, beta, Sharpe
- Tracking error
- Credit, interest-rate and liquidity risk
Free sample questions
1. The return from a mutual fund scheme is 8.3% and the Standard Deviation is 0.6. The risk-free rate of return is 5%. Calculate the Sharpe ratio.
- A. 3.5
- B. 5.5 ✅
- C. 4
- D. 2.87
Answer: B — 5.5
Why: The formula for Sharpe Ratio is : ( Rs-Rf ) / Standard Deviation ie. ( Return Earned - Risk free Return ) / Standard Deviation = (8.3 - 5) / 0.6 = 3.3 / 0.6 = 5.5
💡 Sharpe = (Rp - Rf)/SD = (8.3-5)/0.6 = 5.5.
2. Identify the TRUE statement. A) While calculating scheme returns for an investor, if there is an entry load, then the initial value of the Net Asset Value (NAV) is taken as NAV minus Entry Load B) While calculating scheme returns for an investor, if there is an exit load, then the later value of the Net Asset Value (NAV) is taken as NAV minus Exit Load
- A. Only A is true
- B. Only B is true ✅
- C. Both A and B are true
Answer: B — Only B is true
Why: If there is an Entry load on a mutual fund scheme then while calculating the scheme returns, the initial value of the net asset value (NAV) is taken as NAV PLUS entry load as the purchase value increases due to entry load. If there is an exit load on a scheme then while calculating the scheme returns, the later value of the Net Asset Value (NAV) is taken as NAV minus the exit load as the sale value decreases due to the exit load. (Note - Entry load has now been banned by SEBI)
💡 Returns: entry load -> initial NAV PLUS load; exit load -> final NAV MINUS load. Only B true.
3. Identify the true statement with respect to measuring returns for Mutual Funds schemes. 1. Simple Return can be calculated using the formula : (Sale Price - Cost Price) / Sale Price 2. Compounded Annual Growth Rate 'CAGR' technique has been prescribed by SEBI when dividend is paid and compounding is to be considered 3. CAGR is the recognized standard for calculating returns for investment horizon of greater than or equal to 1 year
- A. 1 and 2
- B. 2 and 3 ✅
- C. 3 and 1
- D. 1,2 and 3
Answer: B — 2 and 3
Why: 1. Simple Return can be calculated with the following formula : (Sale Price - Cost Price) / Cost Price 2. Whenever a dividend is paid – and compounding is to be considered - the CAGR technique (or the reinvestment method, as some call it) prescribed by SEBI is used 3. The return is calculated using CAGR if the holding period is over one year. If returns are less than one year, than Simple Return is calculated
💡 Simple Return = (Sale-Cost)/COST. CAGR (SEBI) for >=1yr & when dividend reinvested (2 & 3).
Practise all 55 Risk, Return & Performance questions
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