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Key Facts: Investment Advisor Exam

25

Official Exam Questions

Israel Securities Authority

2.5 Hours

Exam Duration

Israel Securities Authority

60%

Passing Score (15/25)

Israel Securities Authority

556 ILS

Statutory Exam Fee (2026)

ISA 2026 fee schedule

6 Months

Internship for an Advisor Licence

ISA licensing rules under the 1997 regulations

100

Practice Questions

OpenExamPrep Bank

The Israel Securities Authority administers the statutory Professional A (מקצועית א׳) licensing examination twice a year for investment advisors and marketers: 25 Hebrew multiple-choice questions with five options each, 2.5 hours, a pass mark of 60, and a 556 ILS statutory fee in 2026. This question bank provides 100 independent English-language practice items covering the published syllabus.

Sample Investment Advisor Practice Questions

Try these sample questions to review concepts for the Investment Advisor exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1What is the defining structural characteristic of a Short-Term Loan (Makam — מלווה קצר מועד) issued by the Bank of Israel?
A.It is a zero-coupon discount instrument with a maturity of up to one year, issued at a discount to its par value and redeemed at par without ongoing coupon payments.
B.It is a variable-rate sovereign bond with semi-annual coupons pegged to the 12-month Consumer Price Index (CPI).
C.It is a perpetual debt security issued by commercial banks to meet Basel III Tier 2 regulatory capital adequacy requirements.
D.It is an inflation-linked treasury bill that pays an annual fixed coupon plus the accumulated change in the Israeli CPI.
Explanation: Makam (מק"מ - מלווה קצר מועד) is a short-term monetary policy instrument issued by the Bank of Israel with maturities of up to one year (typically 3, 6, 9, or 12 months). It pays no periodic coupons and is issued at a discount to its par value, so the entire return comes from the price appreciation between purchase and par redemption.
2What is the primary structural difference between an Israeli government Shahar (שחר) bond and a Galil (גליל) bond?
A.Shahar is a fixed-coupon unlinked (nominal) bond, whereas Galil is an inflation-indexed bond whose principal and coupons are linked to the Israeli Consumer Price Index (CPI).
B.Shahar is issued exclusively in foreign currency (USD/EUR), while Galil is denominated in New Israeli Shekels (ILS).
C.Shahar pays a floating coupon tied to the Bank of Israel base rate, whereas Galil pays a fixed coupon without indexation.
D.Shahar is a convertible bond that can be exchanged for shares of state-owned enterprises, while Galil is standard sovereign debt.
Explanation: In the Israeli government bond market, Shahar (שחר) bonds pay a fixed nominal annual coupon without any indexation to inflation, exposing the investor to purchasing power risk. In contrast, Galil (גליל) bonds are indexed to the Consumer Price Index (מדד המחירים לצרכן), meaning both their periodic coupon payments and final principal redemption adjust in proportion to the known CPI change since issuance.
3An unlinked corporate bond with a par value of 100 ILS pays an annual coupon of 6% (6 ILS) and currently trades on the Tel Aviv Stock Exchange at a clean price of 105 ILS. What can be concluded regarding its current yield and its yield to maturity (YTM)?
A.The current yield is 5.71%, and the bond's yield to maturity (YTM) must be strictly lower than 5.71%.
B.The current yield is 6.00%, and the bond's yield to maturity must be equal to 6.00%.
C.The current yield is 5.71%, and the bond's yield to maturity must be strictly greater than 6.00%.
D.The current yield is 6.30%, and the bond's yield to maturity must be lower than 5.00%.
Explanation: Current yield is calculated as Annual Coupon / Clean Price = 6 / 105 = 5.714%. Because the bond trades at a premium to par (105 ILS > 100 ILS), an investor holding to maturity will experience capital depreciation from 105 ILS down to 100 ILS par redemption. Consequently, the yield to maturity (YTM) accounts for this loss and must be lower than the current yield (YTM < Current Yield < Coupon Rate).
4What is the theoretical definition and practical interpretation of Macaulay duration (מח"מ - משך חיים ממוצע) for a fixed-income bond?
A.The weighted average time until all bond cash flows are received, where each cash flow's time weight is proportional to its present value as a share of the total bond price.
B.The exact calendar period remaining until the final principal redemption date regardless of coupon frequency.
C.The percentage decrease in the issuing corporation's equity market capitalization following a 100-basis-point increase in sovereign benchmark yields.
D.The ratio of annual coupon payments to the bond's dirty market price expressed as an annualized cash dividend equivalent.
Explanation: Macaulay duration measures the weighted average time (in years) an investor must wait to receive the present value of all cash flows (coupons and principal) from a bond. It serves as the foundation for measuring price sensitivity to interest rate shifts, where weights equal the present value of each cash flow discounted at the bond's yield to maturity divided by the bond's current market price.
5A fixed-coupon corporate bond has a Macaulay duration of 5.25 years and a yield to maturity (annual compounding) of 5.0%. What is the bond's modified duration (משך חיים ממוצע מתואם), and what does it measure?
A.5.00 years; it indicates that a 1.0% (100 basis point) increase in yield will cause an approximate 5.0% decline in the bond's price.
B.5.51 years; it indicates that a 1.0% increase in yield will cause an approximate 5.51% increase in the bond's price.
C.5.25 years; it indicates that the bond's duration is invariant to prevailing market interest rate levels.
D.2.50 years; it reflects the half-life of principal amortization across semi-annual coupon dates.
Explanation: Modified duration is calculated as Macaulay Duration / (1 + y), where y is the yield to maturity per compounding period. Here, Modified Duration = 5.25 / (1 + 0.05) = 5.00 years. Modified duration directly measures the percentage price change of a bond for a 100-basis-point (1 percentage point) shift in yield: Delta P / P approx -Modified Duration * Delta y = -5.00 * (+0.01) = -5.0%.
6An institutional investor holds a portfolio of Israeli corporate bonds with a modified duration of 6.0 years and a convexity of 50. If market yields increase by 150 basis points (+1.50%), what is the estimated percentage change in the portfolio's price using the duration-with-convexity approximation?
A.-8.4375%
B.-9.0000%
C.-9.5625%
D.-7.8750%
Explanation: The Taylor-series approximation for bond percentage price change incorporating duration and convexity is: Delta P / P approx -Modified Duration * Delta y + 0.5 * Convexity * (Delta y)^2. Substituting the parameters: Duration effect = -6.0 * (+0.015) = -0.0900 (-9.00%). Convexity effect = 0.5 * 50 * (0.015)^2 = 25 * 0.000225 = +0.005625 (+0.5625%). Combining both effects: -9.00% + 0.5625% = -8.4375%.
7Holding maturity, yield, and par value constant, how does a bond's annual coupon rate affect its Macaulay duration?
A.A higher coupon rate leads to a lower Macaulay duration, because a greater proportion of the bond's total cash flow is received earlier in its life.
B.A higher coupon rate leads to a higher Macaulay duration, because total nominal cash returned to the investor increases.
C.The coupon rate has no mathematical impact on duration, which depends solely on the final redemption date.
D.A higher coupon rate reduces duration for zero-coupon bonds but increases duration for amortizing debt instruments.
Explanation: Macaulay duration represents the weighted average timing of cash flows. When the coupon rate is higher, the intermediate coupon payments carry greater present value weights relative to the final principal repayment at maturity, pulling the center of gravity of cash flows closer to the present and thus reducing Macaulay duration.
8What is the Macaulay duration of a 7-year zero-coupon government debt instrument?
A.Exactly 7.0 years.
B.6.15 years (discounted by the prevailing market yield).
C.0.0 years (because there are no periodic coupon payments).
D.3.5 years (the midpoint of the issuance lifespan).
Explanation: Because a zero-coupon bond makes only one cash flow—the final par payment at maturity—100% of the present value weight is allocated to that final date. Consequently, the Macaulay duration of any zero-coupon bond is always exactly equal to its remaining time to maturity (7.0 years in this case).
9On the Tel Aviv Stock Exchange (TASE), bond quotes are displayed on a 'clean price' (שער נקי) basis. How is the 'dirty price' (שער מלוכלך / מחיר כולל ריבית) settled by the buyer calculated?
A.Dirty Price = Clean Price + Accrued Interest (ריבית צבורה) accumulated since the previous coupon payment date.
B.Dirty Price = Clean Price - Underwriting commissions and exchange trading levies.
C.Dirty Price = Clean Price multiplied by the ratio of the Consumer Price Index to the base index.
D.Dirty Price = Clean Price divided by the bond's modified duration.
Explanation: Bond market prices on TASE trade on a clean price basis (net of accrued interest). The actual settlement amount paid by the buyer to the seller—the dirty price (or full price)—equals the clean price plus accrued interest (ריבית צבורה) earned from the last coupon payment date up to the settlement date, compensating the seller for holding the bond during that coupon accrual period.
10A Bank of Israel Makam with exactly 182 days remaining to maturity trades at an annual simple discount yield of 4.50% based on an actual/365 day-count convention. If the par redemption value is 100 ILS, what is its current trading price per unit?
A.97.80 ILS
B.95.50 ILS
C.98.50 ILS
D.96.25 ILS
Explanation: For short-term money market discount instruments like Makam, the price is given by: Price = Par / [1 + y * (Days / 365)]. Substituting the values: Price = 100 / [1 + 0.0450 * (182 / 365)] = 100 / [1 + 0.0450 * 0.49863] = 100 / [1 + 0.022438] = 100 / 1.022438 = 97.805 ILS (approximately 97.80 ILS).

About the Investment Advisor Exam

The Final Examination in Professional A (בחינת גמר מקצועית א׳ — ניתוח ניירות ערך ומכשירים פיננסיים) is the culminating statutory qualification examination administered by the Israel Securities Authority (רשות ניירות ערך - ISA) for individuals seeking licensing as an Investment Advisor (יועץ השקעות) or Investment Marketer (משווק השקעות) under the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 5755-1995. The examination assesses advanced competence in financial instruments and market mechanics: valuation of domestic and international equities, fixed-income debt analysis (including Treasury Makam, fixed-rate Shahar, and CPI-linked Galil government bonds), option pricing and Black-Scholes Greeks, portfolio hedging strategies, mutual funds and ETFs (קרנות סל), Tel Aviv Stock Exchange (TASE) trading rules, investor suitability standards (טופס הכרת הלקוח), and Israeli capital gains taxation. The official licensing examination is conducted in Hebrew; this practice bank is an independent English-language study adaptation developed by OpenExamPrep and is not an official translation or format simulation.

Exam sponsor: Israel Securities Authority (רשות ניירות ערך). The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

25 multiple-choice questions, each with five answer options (א-ה), sat in Hebrew under proctored conditions on a machine-read answer sheet; an official formula sheet is distributed with the exam booklet, and the paper mixes quantitative calculation with market and regulatory scenario analysis

Time Limit

2.5 hours (150 minutes)

Passing Score

60% (15 out of 25 questions correct)

Exam / Certification Fees

556 ILS (statutory examination fee under the 1997 licensing regulations, as updated for 2026)

Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

25%

Fixed Income Securities: Bonds, Yields & Duration

Makam Treasury bills, Shahar fixed-rate bonds, Galil CPI-linked bonds, corporate debt, yield curves, Macaulay and modified duration, convexity, credit rating spreads, and interest rate immunization.

20%

Equities, Corporate Valuation & Statement Analysis

Financial statement analysis, DCF valuation, Gordon dividend discount model, comparative multiples (P/E, EV/EBITDA, P/B), cost of capital (WACC and CAPM), capital structure theory, and corporate actions.

20%

Derivative Instruments: Options, Futures & Hedging

Call and put option payoff structures, Black-Scholes valuation formula, put-call parity arbitrage, Delta and Gamma Greeks, TA-35 index futures, currency hedging, and option spreads.

20%

Collective Investment Vehicles & Structured Products

Open-end mutual funds (קרנות נאמנות), exchange-traded funds (קרנות סל), tracking funds, tracking error, management fee structures, reverse convertibles, and structured deposits.

15%

Securities Regulation, TASE Trading & Taxation

The 1995 Advisory Law, fiduciary obligations, client suitability profiling (KYC), TACT continuous trading mechanisms, market abuse prohibitions, and Israeli capital gains tax rules.

Preparing for the Investment Advisor Exam

What You Need to Know

  • Passing score: 60% (15 out of 25 questions correct)
  • Assessment: 25 multiple-choice questions, each with five answer options (א-ה), sat in Hebrew under proctored conditions on a machine-read answer sheet; an official formula sheet is distributed with the exam booklet, and the paper mixes quantitative calculation with market and regulatory scenario analysis
  • Time limit: 2.5 hours (150 minutes)
  • Exam / certification fees: 556 ILS (statutory examination fee under the 1997 licensing regulations, as updated for 2026) Official sources

Using Our Practice Resources

  • Work through all 100 available questions
  • Review every answer and explanation
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Investment Advisor: Suggested Study Strategy

1Master Macaulay duration and modified duration calculations, including percentage price change approximations using duration and convexity.
2Understand the mechanics of Israeli government debt instruments, particularly the difference between unlinked Makam/Shahar and CPI-linked Galil bonds.
3Practice multi-step option pricing and arbitrage scenarios using the put-call parity formula (C - P = S - K*e^(-rT)).
4Memorize the key statutory provisions of the 1995 Advisory Law, including client suitability documentation (טופס הכרת הלקוח) and conflict-of-interest disclosure rules.
5Be fluent in Israeli tax treatments: 25% on real capital gains (inflation-adjusted) for shares and indexed bonds versus 15% on nominal capital gains for non-indexed bonds.

Frequently Asked Questions

How many questions are on the Israel Securities Authority Professional A exam?

The official ISA Professional A (מקצועית א׳) examination consists of 25 multiple-choice questions, each offering five answer options. Candidates have 2.5 hours (150 minutes) to complete the paper. The ISA raised the question count from 20 to 25 from the winter 2021 sitting without extending the time allowed.

What is the passing score for the ISA Professional A examination?

The passing score is 60. With 25 equally weighted questions worth four points each, that corresponds to at least 15 correct answers. Candidates who score 60 or above are recorded simply as having passed; only failing candidates are shown a numerical grade.

What is the fee for the examination in 2026?

Under the statutory fee schedule in the 1997 licensing regulations, as updated with effect from 1 January 2026, the examination fee is 556 ILS per sitting. The same amount applies to a re-sit and to an appeal against a grade.

What is the difference between an Investment Advisor and an Investment Marketer under Israeli law?

Under the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 5755-1995, an Investment Advisor (יועץ השקעות) owes a strict fiduciary duty of loyalty solely to the client and may not have institutional affiliations. An Investment Marketer (משווק השקעות) has contractual affiliations with specific financial product providers and must disclose those affiliations to the client prior to providing advice.

What prerequisites are required before sitting for Professional A?

Candidates must pass, or hold exemptions from, four foundation examinations: Economics, Accounting, Statistics & Finance, and Securities Law & Professional Ethics. A recognised academic degree in accounting, economics, business administration, insurance, or banking can exempt a candidate from the first three, but no exemption is available for Securities Law & Professional Ethics. The statutory internship is a requirement for the licence itself and can be completed before, during, or after the professional papers.

Is this practice bank in the same language as the official examination?

No. The official licensing examination is conducted in Hebrew by the Israel Securities Authority. This question bank is an independent English-language study adaptation developed by OpenExamPrep to help learners master the tested financial, quantitative, and regulatory principles.