NISM Series IV | Interest Rate Derivatives | Mock Test 4.4 | 100 Solved MCQs

NISM Series IV: Interest Rate Derivatives

Mock Test 4.4: 30 Solved MCQs (Full Set)

📌 MODULE 4.4 STUDY FOCUS:

This section covers Complex Option Payoffs, Notice of Intent to Deliver, Inverted Yield Curves, and Market Lot Multiples. Click each question to reveal the logic.

Q 1. What is the net financial outcome for a trader who bought a 300.25 call (₹0.20 premium) and a 299.75 put (₹0.15 premium) when the underlying price closes at ₹299.40?

A) Rs - 0.40
B) Rs 0.40
C) Rs - 0.35
D) 0

View Answer & Explanation

Answer: 0

Logic: Call is OTM (Payoff = 0). Put is ITM: Payoff = 299.75 - 299.40 = 0.35. Total Premium Paid = 0.20 + 0.15 = 0.35. Net Outcome = 0.35 - 0.35 = 0.

Q 2. Name the document that provides crucial information about the risks of trading in equities and derivatives on a stock exchange?

A) Risk Disclosure Document (RDD)
B) Rights and obligations document
C) Know Your Client (KYC) Form
D) Policies and procedures

View Answer

Answer: Risk Disclosure Document (RDD)

Q 3. Evaluate net payoff for: long call 125.50 (@0.60), long call 126.50 (@0.20), and two short calls 126.00 (@0.30 each) if underlying bond settles at ₹127?

A) Rs - 0.20
B) 0
C) Rs 0.25
D) Rs - 0.40

View Math

Answer: Rs - 0.20

Calculation: Total Payoff = (127-125.5) + (127-126.5) - 2*(127-126) = 1.5 + 0.5 - 2 = 0.
Net Premium = (0.6+0.2) - (0.3*2) = 0.20 Paid.
Final Outcome = 0 - 0.20 = -0.20.

Q 4. Mr. X sold a 40.50 strike put for Rs. 0.35. If bond price is 40.50 at expiry, net payoff?

A) Rs 0.35
B) Rs 0.70
C) Rs - 0.50

View Answer

Answer: Rs 0.35

Explanation: At-the-money options expire worthless. The seller keeps the entire premium.

Q 5. Derivative losses on a recognized exchange can be offset against all except?

A) Business Income
B) Salary Income
C) Other sources

View Answer

Answer: Salary Income

Q 6. Last trading day for cash-settled bond futures?

A) First day of month
B) Last Wednesday
C) Last Thursday of expiry month

View Answer

Answer: Last Thursday of expiry month

Q 7. Where can interest rate derivatives contracts be traded?

A) Exchanges
B) OTC Market
C) ETPs
D) All of the above

View Answer

Answer: All of the above

Q 8. Contract value change for every 100 ticks movement?

A) 100
B) 200
C) 500

View Answer

Answer: 500

Calculation: 100 ticks * 0.0025 tick size * 2000 lot size = 500.

Q 9. Why does Basis Risk arise?

A) Standardized expiry date
B) Standardized contract amount
C) Both of the above

View Answer

Answer: Both of the above

Q 10. Option time value is ________ proportional to its time until expiration.

A) Inversely
B) Directly
C) Only for Puts

View Answer

Answer: Directly

Q 11. Long position at Rs. 58, underlying settles at Rs. 56 at expiry. Result?

A) Profit Rs 2
B) Loss of Rs 2
C) No P&L

View Answer

Answer: There is a loss of Rs 2

Q 12. Last trading day for the treasury bill futures contract?

A) Last Friday
B) Last Wednesday of expiry month

View Answer

Answer: Last Wednesday of expiry month

Q 13. Position limits guideline for ETIRD is provided by ________.

A) RBI
B) SEBI

View Answer

Answer: SEBI

Q 14. Settlement method for 91-day bill futures?

A) Physical
B) Cash

View Answer

Answer: Cash

Q 15. Last trading day for cash settled 10-year bond futures?

A) Last Thursday of Contract Month
B) Two business days before last day

View Answer

Answer: Last Thursday of Contract Month

Q 16. Credit spread is the price of ________.

A) Price risk
B) Credit risk

View Answer

Answer: Credit risk

Q 17. Investors can have grievances against ________.

A) Intermediaries
B) Brokers
C) Company
D) All of the above

View Answer

Answer: All of the above

Q 18. Underlying is a theoretical bond, not physical:

A) Single bond Futures
B) Notional Bond Futures

View Answer

Answer: Notional Bond Futures

Q 19. Who must notify the CC of the notice of intent to deliver?

A) Futures seller
B) Futures buyer

View Answer

Answer: Futures seller

Q 20. Choice for hedging long term interest rates?

A) T-Bill futures
B) Govt. Bond futures with long expiry date

View Answer

Answer: Govt. Bond futures with long expiry date

Q 21. Implication of 'Inverted' shape of term structure?

A) Rate same for all
B) Rate rises first and then falls with the term

View Answer

Answer: Rate rises first and then falls with the term

Q 22. Contract Amount for Govt Bond futures is Rs 100000. True or False?

A) True
B) False

View Answer

Answer: False

Explanation: The Market Lot is Rs 200,000 of face value.

Q 23. Market categorization by time:

A) Money market < 1yr, Bond market >= 1yr
B) Bond market < 1yr, Money market >= 1yr

View Answer

Answer: money market , bond market

Q 24. Seller delivery rules for entire obligation:

A) Diff bonds but in multiples of contract amount
B) Any bond preference

View Answer

Answer: different deliverable bonds but in multiples of contract amount

Q 25. Yield curve spread risk arises when shift is ________.

A) Steepening
B) Flattening
C) Both 1 and 2

View Answer

Answer: both 1 and 2

Q 26. Contract Amount for T-Bills and Govt Bond futures is:

A) Rs 2,00,000 for both
B) Rs 1,00,000 for both

View Answer

Answer: Rs 2,00,000 of facevalue for both.

Q 27. Conversion factor for same deliverable bond across months?

A) Same
B) Different for different Delivery Months

View Answer

Answer: different for different Delivery Months

Q 28. Notice of Intent to Deliver is given by ________.

A) Buyer
B) Seller

View Answer

Answer: the seller

Q 29. Coupon isn't a true return measure because it ignores ________.

A) Premium/Discount in price
B) Capital gain/loss at redemption
C) Both 1 and 2

View Answer

Answer: both 1 and 2

Q 30. Which face value can be bought/sold for Govt. Bond Futures?

A) Rs 3 Lakh
B) Rs 6 Lakh
C) Rs 9 Lakh

View Answer

Answer: Rs 6 Lakh

Logic: Only multiples of Rs 2 Lakh are permissible (2, 4, 6, 8, etc.).

🚀 Final Push for NISM Certification!

You have successfully practiced the full 30-question bank for NISM 4.4. For pro study guides and formula sheets, visit Apollo Financial Services.

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Dhaval Visariya

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