NISM V-C Valuation and Accounting — Practice Questions
Questions on how a scheme's portfolio is valued — traded and non-traded equities, debt and money market instruments, derivatives and real estate — and the accounting behind NAV, unit transactions and corporate actions.
36 questions on Valuation & Accounting in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Valuation of equity and debt
- Non-traded and thinly traded securities
- NAV accounting
- Corporate actions and unit transactions
Free sample questions
1. A bond has maturity of eight years and a Call Option after four years. In which way will this security be valued for the purpose of calculation of NAV of mutual fund scheme that holds it in the portfolio?
- A. The security will be valued at the higher of the value as obtained by valuing the security to final maturity and valuing the security to the call option
- B. The security will be valued at the lower of the value as obtained by valuing the security to final maturity and valuing the security to the call option ✅
- C. The security will be valued at the average of the value as obtained by valuing the security to final maturity and valuing the security to the call option
- D. None of the above
Answer: B — The security will be valued at the lower of the value as obtained by valuing the security to final maturity and valuing the security to the call option
Why: Some bonds have call and/or put options. These are also known as option embedded securities. In such cases, the valuation method must factor these options instead of only looking at the maturity. In other words, one may need to look at Yield-To-Call or Yield-To-Put apart from Yield-To-Maturity for the respective security. The securities with call option shall be valued at the lower of the value as obtained by valuing the security to final maturity and valuing the security to call option. In case there are multiple call options, the lowest value obtained by valuing the various call dates and valuing the maturity date is to be taken as the value of the instrument.
💡 CALL-option bond -> value at the LOWER of (value-to-maturity) and (value-to-call).
2. Money market and debt securities, including floating rate securities are valued in mutual fund schemes on amortisation basis if the residual maturity is upto _______ days.
- A. 30 ✅
- B. 45
- C. 60
- D. 90
Answer: A — 30
Why: Traded debt and money market securities are valued on a mark-to-market basis. However, SEBI permits amortisation-based valuation for money market and debt securities, including floating rate securities, with residual maturity of up to 30 days, subject to certain conditions. For floating rate securities with a floor and cap, the floor rate is taken as the coupon.
💡 Amortisation-basis valuation allowed for money market/debt securities with residual maturity <= 30 days.
3. In a Balance Sheet of a Mutual Fund scheme, which of the following is NOT shown as an asset of the scheme ?
- A. Cash & Bank balances
- B. Equity Investments
- C. Expenses not written off
- D. Unit Capital ✅
Answer: D — Unit Capital
Why: Unit Capital , Reserves etc. come under the liability section.
💡 Unit Capital & Reserves are LIABILITIES, not assets, on a MF scheme balance sheet.
Practise all 36 Valuation & Accounting questions
Plus the full 340-question NISM V-C bank and real-feel mock exams.