NISM Series IV | Interest Rate Derivatives | Mock Test 4.3 | 100 Solved MCQs
NISM Series IV: Interest Rate Derivatives
Mock Test 4.3: 30 Solved MCQs (Full List)
📝 MODULE 4.3 OVERVIEW:
This set focuses on Term Structure of Interest Rates, Option Greeks, Regulatory Complaints (SCORES), and Portfolio Valuation. Click each question to reveal the answer and the logic behind it.
Q 1. What does a 'Normal' shape of term structure indicate?
A) It indicates that the rate is same for all terms
B) It indicates that the rate rises with the term
C) It indicates that the rate falls with the term
D) It indicates that the rate first rises and then falls
View Answer & Explanation
Answer: B) It indicates that the rate rises with the term
Explanation: A "Normal" yield curve is upward sloping. Investors typically demand higher yields for longer-term bonds to compensate for the increased risk and time value of money.
Q 2. One way to calculate the Real Rate is by ________.
A) Nominal rate plus effective rate
B) Nominal interest rate less inflation
C) Nominal rate plus inflation
D) Inflation less nominal rate
View Answer
Answer: B) Nominal interest rate less inflation
Q 3. What is the minimum percentage of the Minimum Required Corpus (MRC) that the stock exchange must contribute to the Core SGF?
A) 15
B) 20
C) 25
D) 30
View Answer
Answer: C) 25
Explanation: Per SEBI guidelines, CC contributes 50%, the Stock Exchange contributes 25%, and Clearing Members contribute up to 25%.
Q 4. The impact of time decay on an option's price is measured by ________.
A) Theta
B) Gamma
C) Rho
D) Delta
View Answer
Answer: A) Theta
Q 5. The extent to which an option is In-the-money is known as its ________.
A) Intrinsic Value
B) Time Value
C) Premium Value
D) Notional Value
View Answer
Answer: A) Intrinsic Value
Q 6. If someone plans to borrow money later and expects interest rates to go up, what hedging strategy can he/she employ?
A) Buy GOI Bond Call option
B) Sell GOI Bond futures
C) Both of the above
D) None of the above
View Answer
Answer: B) Sell GOI Bond futures
Explanation: Borrowers fear rising rates. Since bond prices fall when rates rise, selling futures allows the borrower to profit from the price drop, offsetting the higher cost of borrowing.
Q 7. The contract value is ________ when an investor purchases 10 lots of single bond futures at Rs. 99.
A) Rs. 20,00,000
B) Rs. 20,20,000
C) Rs. 19,80,000
D) Rs. 19,90,000
View Math
Answer: C) Rs. 19,80,000
Math: Lot size 2000 x 10 lots x Rs. 99 = Rs. 19,80,000.
Q 8. For long-term interest rate speculation or hedging with a long-term outlook, which instrument should be used?
A) Treasury Bills futures
B) 10 year Government Bond futures
C) Both of these
D) None of these
View Answer
Answer: B) 10 year Government Bond futures
Q 9. The timeframe for all entities to resolve investor complaints received via SCORES is ____ calendar days.
A) 10
B) 15
C) 21
D) 30
View Answer
Answer: C) 21
Q 10. What additional detail is required to convert an interest rate into a specific interest amount?
A) Day Count basis
B) Identities of debtor and lender
C) Compounding frequency
D) Both A and C
View Answer
Answer: A) Day Count basis
Q 11. Presumptive taxation under 44AD: digital/cheque ____ % and cash ____ %.
A) 6 , 8
B) 5 , 10
C) 8 , 6
D) 7 , 12
View Answer
Answer: A) 6 , 8
Q 12. How can a person holding a fixed income security hedge his position?
A) By Buying GOI bond call option
B) By Selling GOI bond futures
C) Both of the above
D) None of the above
View Answer
Answer: B) By Selling GOI bond futures
Q 13. Which of the following is interest rate derivative?
A) Swaps
B) Futures
C) Forward rate agreement
D) All of the above
View Answer
Answer: D) All of the above
Q 14. Fund created for legitimate investment claims of defaulting member's clients?
A) Investor grievance fund
B) Investor protection fund
C) Core SGF
D) Member default fund
View Answer
Answer: B) Investor protection fund
Q 15. Which of the following has higher credit risk?
A) Bond rated BBB
B) Bond rated AAA
C) Bond rated A
D) All are same
View Answer
Answer: A) Bond rated BBB
Q 16. If long-term rate is 10% and short-term rate is 8%, the shape is:
A) Flat
B) Normal/positive
C) Humped
D) Inverted/negative
View Answer
Answer: B) Normal/positive
Q 17. Regulation of interest rate derivatives is similar to that of ________.
A) Cash Market
B) Equity Derivatives
C) Currency Derivatives
D) Commodity Derivatives
View Answer
Answer: C) Currency Derivatives
Q 18. Maximum exposure levels allowed for whole market/member/investor:
A) Position limits
B) Open interest
C) VaR
D) Price bands
View Answer
Answer: A) Position limits
Q 19. Last trading day for T-Bill futures is Last Thursday of the month. True or False?
A) True
B) False
View Answer
Answer: False
Explanation: T-Bill futures expire on the Last Wednesday. G-Sec futures expire on the Last Thursday.
Q 20. The size of settlement risk is equal to the ________.
A) trade value
B) replacement cost
C) replacement gain
D) credit risk
View Answer
Answer: A) trade value
Q 21. Treasury Bills auction is conducted on ________.
A) Monday
B) Wednesday
C) Friday
D) Saturday
View Answer
Answer: B) Wednesday
Q 22. Fair value is taken to P&L including Hedging Transactions. True or False?
A) True
B) False
View Answer
Answer: False
Q 23. Change in bond price is ________, effect of reinvestment is ________.
A) slow , instant
B) instant , slow over a period of time
View Answer
Answer: instant , slow over a period of time
Q 24. Difference between Long and Short rates rises/widens. Term structure is:
A) Steepening
B) Flattening
C) Parallel
D) Humped
View Answer
Answer: A) Steepening
Q 25. Which interest rate affects Treasury Bills price?
A) Short Term rate
B) Long Term rate
C) Both 1 and 2
View Answer
Answer: A) Short Term rate
Q 26. Fixed-income securities market consists of:
A) Bond Markets
B) Money Markets
C) Both 1 and 2
View Answer
Answer: C) Both 1 and 2
Q 27. 30/360 count: interest days for Feb 28 to March 1?
A) 1
B) 2
C) 3
D) 4
View Answer
Answer: A) 1
Logic: In 30/360, Feb 28 is the 30th day of the month. To the next day (March 1) is a 1-day interval.
Q 28. The contract-level minimum margin is ________.
A) same for all the days of a contract
B) different for all days of a contract
C) one amount for first day, different for others
View Answer
Answer: A) same for all the days of a contract
Q 29. Calendar spread consists of:
A) Same underlying, same quantity, same expiry
B) Different underlying, different expiry
C) Same underlying, same quantity, different expiry month
View Answer
Answer: D) None of the above
Correct logic: One long and one short position in same underlying but different maturities.
Q 30. Which of the following is true about the Conversion Factor?
A) Makes adjustment always perfect
B) Makes adjustment always imperfect
C) Good and practical approximation for adjustment
View Answer
Answer: C) It is a good and practical approximation for adjustment
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