NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Portfolio Construction Process
Ms. Meera Iyer holds a portfolio with a strategic allocation of 60% equity and 40% debt. After a strong equity rally, the portfolio value is Rs 10,00,000, of which Rs 7,00,000 is in equity. To restore the target allocation, how much equity should be sold and moved to debt?
Rs 1,00,000 of equity should be sold. The target equity is 60% of Rs 10,00,000, which is Rs 6,00,000, while the current holding is Rs 7,00,000. The excess of Rs 1,00,000 is moved into debt to restore the 60:40 allocation.
- ARs 1,00,000Correct
- BRs 60,000
- CRs 70,000
- DRs 1,40,000
Explanation
Target equity is 60% of Rs 10,00,000 = Rs 6,00,000. Current equity is Rs 7,00,000, so Rs 1,00,000 must be sold and shifted to debt. Rs 60,000 wrongly takes 6% of the total, and Rs 70,000 wrongly takes 10% of the equity holding.
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