n NISM Certifications
X NISM Series X
Medium

The Modern Portfolio Theory uses Expected Returns, Standard deviation of asset classes and __________ to create an optimal portfolio.

Practice question from NISM Series XB- Investment Adviser (Level 1) Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Expected market performance

  2. B

    Portfolio variance

  3. Correlation Coefficient of the asset classes

    Correct answer

  4. D

    All of the above

Why this is the answer

Modern Portfolio Theory uses expected returns, standard deviation (risk), and the correlation coefficient between asset classes to construct an optimal portfolio, as diversification benefits arise from combining assets that do not move perfectly in tandem.

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