NISM Series 1 Mock Test 1: Free Currency Derivatives Paper

How this mock is marked

• 50 questions, one mark each.
• 60 minutes on the clock. That is the real exam's pace: 120 minutes for 100 questions.
• A wrong answer loses a quarter of a mark. A blank loses nothing.
• You pass with 60% or more.
• Submit to see your score and the chapters to work on. Then check each right answer and why it is right.

What this paper covers

50 questions from 10 chapters. Each chapter gets a share that follows our question bank.

• Introduction to Currency Markets: 6 questions.
• Foreign Exchange Derivatives: 4 questions.
• Exchange Traded Currency Futures: 5 questions.
• Exchange Traded Currency Options: 7 questions.
• Strategies Using Exchange Traded Currency Derivatives: 6 questions.
• Trading Mechanism in Exchange Traded Currency Derivatives: 4 questions.
• Clearing, Settlement and Risk Management in Exchange Traded Currency Derivatives: 6 questions.
• Regulatory Framework for Exchange Traded Currency Derivatives: 4 questions.
• Accounting and Taxation: 4 questions.
• Codes of Conduct and Investor Protection Measures: 4 questions.

By level: Beginner 15 · Intermediate 27 · Advanced 8.

Chapter split of Mock 1

How Mock 1 shares its questions between chapters and levels. This split belongs to this paper. The other mocks of this exam have their own.

• Introduction to Currency Markets: Beginner 3 · Intermediate 3 · Advanced 0.
• Foreign Exchange Derivatives: Beginner 2 · Intermediate 2 · Advanced 0.
• Exchange Traded Currency Futures: Beginner 1 · Intermediate 2 · Advanced 2.
• Exchange Traded Currency Options: Beginner 2 · Intermediate 4 · Advanced 1.
• Strategies Using Exchange Traded Currency Derivatives: Beginner 0 · Intermediate 3 · Advanced 3.
• Trading Mechanism in Exchange Traded Currency Derivatives: Beginner 1 · Intermediate 3 · Advanced 0.
• Clearing, Settlement and Risk Management in Exchange Traded Currency Derivatives: Beginner 2 · Intermediate 3 · Advanced 1.
• Regulatory Framework for Exchange Traded Currency Derivatives: Beginner 1 · Intermediate 2 · Advanced 1.
• Accounting and Taxation: Beginner 1 · Intermediate 3 · Advanced 0.
• Codes of Conduct and Investor Protection Measures: Beginner 2 · Intermediate 2 · Advanced 0.

3 sample questions, with answers

These 3 questions are not in Mock 1, so reading them spoils nothing here. They come from Mock 3 of this exam. Each one shows the hint, the answer and why every wrong option is wrong.

1. Q1A dealer quotes EUR-USD at 1.1050–1.1070 and USD-INR at 88.10–88.14, with bid first and ask second. At these quotes, what INR amount buys EUR 1 through USD, rounded to four decimals? Ignore charges.

   • A

     Option A. ₹97.5710 — Correct answer

   • B

     Option B. ₹97.3505

     Why it is wrong: This multiplies both bids, 1.1050 × 88.10. Those are not the prices for buying EUR and USD from the dealer.

   • C

     Option C. ₹97.3947

     Why it is wrong: This uses the EUR-USD bid with the USD-INR ask. The customer needs to buy, not sell, EUR.

   • D

     Option D. ₹97.5267

     Why it is wrong: This uses the EUR-USD ask with the USD-INR bid. The customer must buy the required USD at the ask.

   Answer: A. The buyer pays the ask on both purchases. 1.1070 × 88.14 = 97.57098, which rounds to 97.5710. Buying EUR 1 costs USD 1.1070 at the EUR-USD ask. Buying that USD amount with INR costs ₹88.14 per USD at the USD-INR ask. Required INR = 1.1070 USD/EUR × 88.14 INR/USD = 97.57098 INR/EUR. USD cancels from the units. Rounded to four decimals, the cost is ₹97.5710 for EUR 1. A bid-ask spread cannot be avoided by selecting the cheaper side of a quote. Remember: Trace what you buy at each leg. Here both legs require the dealer’s ask.

   Hint, shown before you answer in practice mode: Common mistake: Multiplying a bid and an ask without checking the direction of the two currency exchanges.

   I-077mediumnumerical

   Study this unit

2. Q2An importer must pay USD 40,000 and buys matching USD-INR calls at strike 84.00 for ₹0.25 per USD. At expiry, both the spot purchase rate and the option settlement rate are 85.30. Ignoring fees and financing, what is the total rupee cost after the option settlement and premium?

   • A

     Option A. ₹34,12,000

     Why it is wrong: This is the unhedged spot payment. It excludes both the option receipt and premium.

   • B

     Option B. ₹33,70,000 — Correct answer

   • C

     Option C. ₹33,60,000

     Why it is wrong: This is the strike-based payment before adding the ₹10,000 premium.

   • D

     Option D. ₹34,22,000

     Why it is wrong: This adds the premium to the spot purchase but omits the ₹52,000 call settlement received.

   Answer: B. This answer includes all three cash flows with the option receipt reducing the payment and premium increasing it. Buying USD 40,000 at spot costs 40,000 × ₹85.30 = ₹34,12,000. The calls pay (85.30 − 84.00) × 40,000 = ₹52,000. Premium paid is ₹0.25 × 40,000 = ₹10,000. Net rupee cost = ₹34,12,000 − ₹52,000 + ₹10,000 = ₹33,70,000. Dividing by USD 40,000 gives an effective cost of ₹84.25 per USD. It is strike plus premium here because the calls finish in the money and the settlement and purchase rates match. Remember: For an importer’s purchased-call hedge, calculate spot cost minus call receipt plus premium.

   Hint, shown before you answer in practice mode: Common mistake: Quoting the strike as the all-in cost or treating the call receipt as another payment.

   I-061hardnumerical

   Study this unit

3. Q3A trader buys 12 USD-INR futures contracts at 88.20, each for USD 1,000. Total charges for entry and exit together are ₹240. At what closing price is the cumulative net result zero? Ignore all other costs and interest.

   • A

     Option A. 88.22 — Correct answer

   • B

     Option B. 88.20

     Why it is wrong: This breaks even before costs but leaves a ₹240 net loss after charges.

   • C

     Option C. 88.21

     Why it is wrong: A rise of 0.01 earns only ₹120, covering half of the total charges.

   • D

     Option D. 88.24

     Why it is wrong: This earns ₹480 and double-counts the stated ₹240 total round-trip charge.

   Answer: A. The gross profit required is ₹240 on USD 12,000. The required price rise is 240 ÷ 12,000 = 0.02. Total USD quantity = 12 × 1,000 = USD 12,000. Net cumulative result = (closing price − 88.20) × 12,000 − 240. Set the result equal to zero. Required price change = 240 ÷ 12,000 = ₹0.02 per USD. Break-even closing price = 88.20 + 0.02 = 88.22. The total ₹240 already includes both entry and exit and must be deducted only once. Remember: Divide total round-trip cost by total underlying quantity to find the extra break-even price move.

   Hint, shown before you answer in practice mode: Common mistake: Doubling a fee that was already stated for both legs or applying the total fee to only one contract.

   I-090mediumnumerical

   Study this unit

Then take Mock 2

Read the chapters your result names first. A new paper then shows whether those gaps have closed.