Sample Questions

NISM-Series-4: Interest Rates Derivatives Mock Tests — 5 random MCQs with answers & explanations

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These 5 questions are randomly selected (standard MCQs only, not case-based).

Q1 An option is _________, if on exercising it, the option buyer gets negative cash flow. (NISM workbook)

A. In the money
B. At the money
C. Out of the money Correct Answer
D. None of the above

Explanation:

An Out of the money (OTM) option is one where exercising it would result in a negative cash flow for the option buyer.

Marks: 1

Q2 True or False: If a seller fails to provide a notice of Intent to Deliver, the resulting shortage is auctioned; this process is called a "buy-in."

A. True Correct Answer
B. False

Explanation:

This is true. If a seller fails to deliver, the exchange holds an auction to buy the securities from the market to fulfill the buyer's contract and protect the market.

Marks: 1

Q3 What is a "Commercial Paper" (CP) primarily used for by a corporation?

A. Long-term factory construction
B. Meeting short-term cash needs or working capital Correct Answer
C. Issuing new shares to the public
D. Paying off permanent debt

Explanation:

Commercial Paper is a short-term, unsecured loan that big companies use to manage their daily expenses for a few months.

Marks: 1

Q4 When derivatives are listed on a balance sheet, what value is used?

A. Current spot value
B. Current book value
C. Current mark-to-market value Correct Answer
D. Zero

Explanation:

Derivatives are recorded at their "fair value," which is the current market price (mark-to-market value) on the date of the report.

Marks: 1

Q5 For standard Government of India (GOI) bond futures (6, 10, or 13 years), what is the total face value represented by a single trading lot?

A. Rs. 1 Lakh
B. Rs. 2 Lakhs Correct Answer
C. Rs. 5 Lakhs
D. Rs. 10 Lakhs

Explanation:

In the Indian market, one "lot" of these bond futures is equal to a face value of Rs. 2 Lakhs. This standard size helps maintain consistency for all traders on the exchange.

Marks: 1

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