PracticeVideosBlogFlashcardsEspañol
All Practice Exams

100+ Free IAI SP5 Practice Questions

IAI SP5 Investment and Finance Specialist Principles practice questions are available now; exam metadata is being verified.

✓ No registration✓ No credit card✓ No hidden fees✓ Start practicing immediately
100+ Questions
100% Free
1 / 100
Question 1
Score: 0/0

A scheme's actuary recommends diversifying overseas. The MAIN additional risk introduced relative to a purely domestic portfolio is:

A
B
C
D
to track
Same family resources

Explore More Institute of Actuaries of India Exams

Continue into nearby exams from the same family. Each card keeps practice questions, study guides, flashcards, videos, and articles in one place.

ACET — Actuarial Common Entrance Test (Institute of Actuaries of India)

Practice Questions

IAI Subject CB1 — Business Finance (Institute of Actuaries of India)

Practice Questions

IAI Subject CB2 — Business Economics (Institute of Actuaries of India)

Practice Questions

IAI Subject CM1 — Actuarial Mathematics (Institute of Actuaries of India)

Practice Questions

IAI Subject CM2 — Financial Engineering and Loss Reserving (Institute of Actuaries of India)

Practice Questions

IAI Subject CP1 — Actuarial Practice (Institute of Actuaries of India)

Practice Questions
2026 Statistics

Key Facts: IAI SP5 Exam

8

Syllabus Topics

IAI SP5 syllabus

3h 20m

Exam Duration

IAI SP5 syllabus

15%

Top Topic Weight

IAI SP5 syllabus

50%

Application Marks

IAI SP5 syllabus

Written

Exam Format

IAI SP5 syllabus

100

Practice Questions

OpenExamPrep

IAI SP5 is a Specialist Principles fellowship subject on investment and finance, run by the Institute of Actuaries of India. The 2026 syllabus spans eight topics: the framework for investment management (10%), specialist investment products (15%), valuing investments (10%), monitoring and managing risks (10%), investor characteristics (10%), appropriate investment strategies (15%), portfolio management and risk control (15%), and analysing portfolio performance (15%). It is a written, application-focused paper of 3 hours 20 minutes with a scientific calculator allowed, weighted roughly 25% knowledge, 50% application and 25% higher-order skills. The real exam uses long-form written answers; this free bank offers 100 MCQs as structured knowledge prep over the same body of material.

Sample IAI SP5 Practice Questions

Try these sample questions to test your IAI SP5 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under the efficient market hypothesis, the semi-strong form states that security prices reflect which information set?
A.Only past price and volume data
B.All information, public and private (insider)
C.All publicly available information including past prices
D.Only the most recent annual report
Explanation: Semi-strong efficiency holds that prices reflect all publicly available information, so fundamental analysis of public data cannot consistently produce excess risk-adjusted returns. It encompasses the weak form (past prices) and is encompassed by the strong form.
2An investor wants exposure to a diversified pool of commercial property without the illiquidity of direct holdings. Which vehicle is MOST appropriate?
A.A single freehold office building
B.A zero-coupon government bond
C.A currency forward contract
D.A Real Estate Investment Trust (REIT)
Explanation: A REIT is a listed, pooled vehicle holding income-producing real estate; its shares trade on an exchange, giving property exposure with far greater liquidity and diversification than direct ownership. It also typically distributes most rental income as dividends.
3A pension scheme adopts a liability-driven investment (LDI) strategy. The PRIMARY objective of LDI is to:
A.Maximise the absolute return on assets regardless of liabilities
B.Match the sensitivity of assets to changes that affect the liabilities
C.Hold only equities for long-term growth
D.Minimise the management expense ratio of the fund
Explanation: LDI structures the asset portfolio so its value moves in line with the liabilities as interest rates and inflation change, reducing the volatility of the funding position. Bonds and interest-rate/inflation swaps are commonly used to match liability duration and inflation linkage.
4A bond has a Macaulay duration of 8 years and a yield to maturity of 5%. Its modified duration is approximately:
A.7.62 years
B.8.40 years
C.8.00 years
D.0.40 years
Explanation: Modified duration = Macaulay duration / (1 + y) = 8 / 1.05 = 7.62 years. Modified duration estimates the percentage price change for a 1% change in yield, so a 1% rise in yield implies roughly a 7.62% price fall.
5A portfolio returned 12% over a year. The risk-free rate was 4% and the portfolio's standard deviation of returns was 16%. The Sharpe ratio is:
A.0.75
B.0.25
C.0.50
D.1.00
Explanation: Sharpe ratio = (portfolio return - risk-free rate) / standard deviation = (12% - 4%) / 16% = 8 / 16 = 0.50. It measures excess return per unit of total risk and is used to compare risk-adjusted performance across portfolios.
6Which body is responsible for setting the syllabus and conducting the SP5 Investment and Finance examination in India?
A.Securities and Exchange Board of India (SEBI)
B.Reserve Bank of India (RBI)
C.Insurance Regulatory and Development Authority of India (IRDAI)
D.Institute of Actuaries of India (IAI)
Explanation: The Institute of Actuaries of India (IAI) is the statutory professional body that sets the actuarial syllabus and conducts examinations such as SP5 in India. Its syllabus mirrors the IFoA SP5 curriculum, adapted to the Indian jurisdiction.
7The price of a forward contract on a non-dividend-paying asset is best given by:
A.The current spot price discounted at the risk-free rate
B.The expected future spot price under real-world probabilities
C.The current spot price compounded at the risk-free rate to maturity
D.The spot price plus the expected dividend yield
Explanation: By no-arbitrage, the forward price F = S0 × e^(rT) for a non-dividend asset, where the spot is carried forward at the risk-free rate over time T. Holding the asset incurs the cost of carry (financing), which the forward price must compensate.
8An equity is expected to pay a dividend of 4 next year, growing at 3% per annum in perpetuity. If the required return is 9%, the Gordon growth model value of the share is:
A.44.44
B.133.33
C.66.67
D.40.00
Explanation: The Gordon (constant) growth model gives P = D1 / (r - g) = 4 / (0.09 - 0.03) = 4 / 0.06 = 66.67. The model assumes a constant dividend growth rate below the required return in perpetuity.
9Behavioural finance identifies 'anchoring'. This bias describes investors who:
A.Rely too heavily on an initial reference figure when making estimates
B.Sell winners too early and hold losers too long
C.Follow the crowd into popular investments
D.Treat money differently depending on its source or label
Explanation: Anchoring is the tendency to fix on an initial value (such as a purchase price or first forecast) and adjust insufficiently from it when forming new estimates. It can distort valuations and revisions of expectations.
10Which performance measure is calculated as portfolio excess return over the benchmark divided by the tracking error (standard deviation of the excess return)?
A.Information ratio
B.Sharpe ratio
C.Treynor ratio
D.Jensen's alpha
Explanation: The information ratio = active return (portfolio minus benchmark) divided by tracking error. It measures the consistency with which a manager generates excess return relative to a benchmark per unit of active risk.

About the IAI SP5 Practice Questions

Verified exam format metadata for IAI SP5 Investment and Finance Specialist Principles is pending. The practice questions above remain available while official exam length, timing, passing score, fee, and administrator details are reviewed.