n NISM Certifications
V-A NISM Series V-A
Medium

Identify the TRUE statements: (A) A mutual fund scheme with a beta of less than 1 is less risky than the market (B) The diversified stock index has a Beta of 1 (C) Unsystematic risk is measured by its Beta

Practice question from Nism VA Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Only A is true

  2. B

    B and C are True

  3. A and B are True

    Correct answer

  4. D

    All A, B and C are True

Why this is the answer

A Beta of less than 1 indicates that the scheme is less risky compared to the market. A diversified stock index by definition has a Beta of 1 (representing the market). Beta measures systematic risk, not unsystematic risk, which is unrelated to market movements.

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