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

When an investment adviser compares a bank fixed deposit with a debt mutual fund for a client who wants predictable, contractually fixed returns, which feature of the fixed deposit is the main advantage?

The main advantage is that a bank fixed deposit offers a rate fixed at the time of deposit, so the return is predictable and does not change with market yields, unlike a debt mutual fund whose NAV fluctuates with interest rates and credit quality.

  1. AThe interest rate is fixed at the time of deposit and does not move with market yieldsCorrect
  2. BThe principal is guaranteed by SEBI
  3. CReturns are always higher than those of debt mutual funds
  4. DInterest is completely exempt from income tax

Explanation

A fixed deposit locks in a contracted rate for the tenure, so the return is known in advance. A debt fund's NAV moves with interest rates and credit events. SEBI does not guarantee any principal, FD returns are not always higher, and FD interest is taxable.

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