NISM V-B Performance of Mutual Funds — Practice Questions
Questions on how fund performance is measured and compared — NAV, absolute and annualised returns, CAGR, benchmarks, and what a distributor may and may not say about past performance.
41 questions on Performance of Mutual Funds in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- NAV and returns
- CAGR and annualisation
- Benchmarks
- Rules on quoting performance
Free sample questions
1. The risk of investing in stock markets can be quantified using ______ .
- A. Standard Deviation
- B. Beta
- C. Both 1 and 2 ✅
- D. None of the above
Answer: C — Both 1 and 2
Why: Risk of investing in stock markets is quantified statistically: Standard Deviation measures the total volatility of returns (used in the Sharpe Ratio), while Beta measures the sensitivity of a scheme or stock to market movements (used in the Treynor Ratio). Both are measures of risk, so the answer is both.
💡 Stock-market risk quantified by BOTH Standard Deviation AND Beta.
2. ___________ is the average deviation of observed returns from the average return over a time period.
- A. Delta
- B. Standard Deviation ✅
- C. Beta
- D. CAGR
Answer: B — Standard Deviation
Why: Standard Deviation is the average deviation of observed returns from the average return over a time period. It is a measure of dispersion, since it measures the extent to which observed values are scattered away from the average.
💡 Standard Deviation = spread of returns around their average = TOTAL risk.
3. The scheme with the _______ standard deviation or beta is considered more risky.
- A. higher ✅
- B. lower
- C. NIL
- D. None of the above
Answer: A — higher
Why: The higher the value of standard deviation or beta for a scheme, more risky the scheme is.
💡 HIGHER standard deviation or beta -> MORE risky scheme.
Practise all 41 Performance of Mutual Funds questions
Plus the full 369-question NISM V-B bank and real-feel mock exams.