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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Comparison of Products Across Categories

Caselet: Mr. Iyer, aged 40, has a 15-year horizon for a child's education goal and a high risk tolerance. He asks you to compare an equity mutual fund SIP with a Public Provident Fund (PPF) account. Which statement correctly describes the comparison?

PPF has a 15-year maturity with partial withdrawals permitted from the seventh financial year and a government-notified rate, while equity mutual funds give market-linked, non-guaranteed returns with no lock-in for ordinary open-ended schemes. This contrast suits Mr. Iyer's long horizon and high risk tolerance.

  1. APPF has a 15-year lock-in with partial withdrawals from the seventh financial year, while an equity fund offers market-linked returns with no guaranteed returnCorrect
  2. BPPF returns are market-linked and fluctuate daily, while equity fund returns are fixed by the government
  3. CEquity fund SIPs have a mandatory 15-year lock-in, while PPF can be fully redeemed any time
  4. DBoth products offer assured returns declared quarterly by the Government

Explanation

PPF has a 15-year tenure, with partial withdrawals allowed from the seventh financial year, and its rate is notified by the government. Equity funds carry market risk with no assured return, and ordinary open-ended equity funds have no lock-in (only ELSS has three years). The other options reverse these features.

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