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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Risk Profiling for Investors

Caselet: Anita, 45, has a risk-profile questionnaire with the following weighted results: risk capacity score 70 (weight 60%) and risk tolerance score 50 (weight 40%). The adviser's firm computes an overall risk score as the weighted average of the two. Bands: below 50 = conservative, 50 to 59 = moderately conservative, 60 to 69 = moderate, 70 and above = aggressive. What is the overall score and resulting category, and what caution applies if the firm's policy instead requires the lower score to govern?

The weighted score is 0.6 x 70 plus 0.4 x 50, which equals 62, placing Anita in the moderate band. If policy lets the lower score govern, the score is 50, which falls in the moderately conservative band.

  1. A62; moderate; under the lower-score policy she would be moderately conservative (50)Correct
  2. B60; moderate; under the lower-score policy she would be conservative
  3. C62; moderate; under the lower-score policy she would remain moderate
  4. D64; moderate; under the lower-score policy she would be aggressive

Explanation

Weighted score = 0.6 x 70 + 0.4 x 50 = 42 + 20 = 62, which falls in the 60-69 moderate band. Under a lower-score policy the governing score is 50, the tolerance score, which lies in the 50-59 moderately conservative band. Options with 60 or 64 use wrong arithmetic, and the other options misstate the band for 50.

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