Characteristics of Debt Securities
10 questions. Each answer is explained.
Question 1 of 10Practice · Series II-A — Registrars to an Issue and Share Transfer Agents - Corporate
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Learn these topics
More units in NISM Series II-A
- Introduction to Securities10
- Characteristics of Equity Shares10
- Characteristics of Other Securities10
- Basics of Mutual Funds10
- SEBI – Role and Regulations10
- Public Offer of Securities10
- Modes of allotment of shares other than Public Offers10
- Processes related to Public Offering of Shares10
- Roles and Responsibilities in a Public Issue10
- Depository Services10
- Processes Related to Depositories10
- Investor Interface with the R&T Agent10
- Secondary Market Transactions10
- Client Servicing10
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 50% · 50 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 6 of 100 marks (6%) |
Source: March 2025 Annexure I, Unit 3: Characteristics of Debt Securities
NISM Series II-A Registrars to an Issue and Share Transfer Agents - Corporate
Exam rules read on NISM's site on 31 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 31 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 10 questions on Characteristics of Debt Securities, with answers
Q1Which feature normally distinguishes a zero-coupon bond from a bond paying regular coupons?
Option A. No exposure to issuer default
Why it is wrong: The issuer can still default on redemption.
Option B. No change in market value
Why it is wrong: A zero-coupon bond’s market value can change.
Option C. No periodic coupon payments — Correct answer
Option D. No repayment at maturity
Why it is wrong: The absence of coupons does not remove the promised redemption payment.
Answer: C. A zero-coupon bond has no periodic coupon payments and normally provides its return through the difference between purchase price and redemption value. Remember: Zero coupon means no periodic coupon, not zero risk.
Hint, shown before you answer in practice mode: Focus on the timing of interest cash flows, not the absence of risk. Common mistake: Assuming a bond without coupons cannot provide a return.
II-A-021easyconceptual
Q2What does a credit rating mainly assess for a debt security?
Option A. The security’s future exchange price
Why it is wrong: A rating is not a forecast of the exact market price.
Option B. The investor’s personal tax rate
Why it is wrong: A rating does not set the investor’s personal tax treatment.
Option C. The next dividend on ordinary shares
Why it is wrong: A debt rating does not determine ordinary share dividends.
Option D. The issuer’s credit risk — Correct answer
Answer: D. A credit rating mainly assesses credit risk, including the issuer’s ability and willingness to meet debt obligations. Remember: A credit rating is an opinion about credit risk, not a repayment guarantee.
Hint, shown before you answer in practice mode: Think about the likelihood of meeting promised debt payments. Common mistake: Treating a high rating as insurance against loss.
II-A-022easyconceptual
Q3How does an amortising bond normally repay its principal during its life?
Option A. Only through the final coupon
Why it is wrong: A coupon is interest and is not, by itself, the principal repayment schedule.
Option B. Through scheduled instalments — Correct answer
Option C. Only through new equity shares
Why it is wrong: Repayment in equity describes a conversion feature, not ordinary amortisation.
Option D. Through daily market-price increases
Why it is wrong: Price appreciation does not repay the issuer’s principal obligation.
Answer: B. An amortising bond repays principal through scheduled instalments rather than leaving all principal outstanding until maturity. Remember: Amortisation gradually reduces outstanding principal.
Hint, shown before you answer in practice mode: Look for a repayment pattern that gradually reduces the outstanding borrowing. Common mistake: Confusing principal instalments with coupon interest.
II-A-023easyconceptual
Q4A bond has ₹2,000 face value and an 8% annual coupon paid half-yearly. What is each coupon payment?
Option A. ₹800
Why it is wrong: ₹800 misreads the coupon percentage by a factor of ten.
Option B. ₹40
Why it is wrong: ₹40 divides the annual coupon into four periods rather than two.
Option C. ₹160
Why it is wrong: ₹160 is the entire annual coupon, not one half-yearly payment.
Option D. ₹80 — Correct answer
Answer: D. Each half-yearly coupon is ₹80. Annual coupon = ₹2,000 × 8% = ₹160. Each payment = ₹160 ÷ 2 = ₹80. Remember: Coupon frequency changes payment size, not the stated annual coupon amount.
Hint, shown before you answer in practice mode: The quoted annual rate must be allocated across the payment periods. Common mistake: Applying the annual rate to every half-year.
II-A-024mediumnumerical
Q5A bond pays ₹90 annual interest and trades at ₹900. What is its current yield?
Option A. 1%
Why it is wrong: 1% is a decimal-place error in the percentage conversion.
Option B. 9%
Why it is wrong: 9% uses ₹1,000 as the denominator even though the stated market price is ₹900.
Option C. 11.11%
Why it is wrong: 11.11% results from using ₹100 instead of the stated ₹90 coupon.
Option D. 10% — Correct answer
Answer: D. The current yield is 10%. Current yield = ₹90 ÷ ₹900 × 100 = 10%. Remember: Current yield uses market price rather than face value.
Hint, shown before you answer in practice mode: Compare the annual cash interest with the amount paid at the current market price. Common mistake: Confusing the coupon rate with current yield.
II-A-025mediumnumerical
Q6A floating-rate bond pays the benchmark plus 1.5 percentage points. At reset, the benchmark becomes 6.2%. What coupon rate applies?
Option A. 7.7% — Correct answer
Option B. 6.2%
Why it is wrong: 6.2% leaves out the contractual spread.
Option C. 4.7%
Why it is wrong: 4.7% subtracts the spread instead of adding it.
Option D. 9.3%
Why it is wrong: 9.3% multiplies the two stated numbers instead of adding the spread.
Answer: A. The new coupon rate is 7.7%. Calculation: 6.2% + 1.5 percentage points = 7.7%. Remember: A floating coupon changes according to its benchmark and contractual spread.
Hint, shown before you answer in practice mode: The stated spread is added in percentage points at the reset. Common mistake: Treating percentage points as a multiplication factor.
II-A-026mediumnumerical
Q7A fixed-coupon bond’s credit quality and cash flows are unchanged. Comparable market yields rise. What usually happens to its market price?
Option A. Its price becomes its annual coupon
Why it is wrong: The annual coupon is one cash flow, not the whole bond’s value.
Option B. Its market price rises
Why it is wrong: A higher price would reduce the yield rather than help it match the higher market yield.
Option C. Its price stays at face value
Why it is wrong: Fixed face value does not force a fixed market price.
Option D. Its market price falls — Correct answer
Answer: D. The price usually falls because unchanged future cash flows are discounted at a higher required yield. Remember: Bond prices and required yields usually move in opposite directions.
Hint, shown before you answer in practice mode: An existing coupon must compete with the return now available on comparable bonds. Common mistake: Assuming a fixed coupon creates a fixed market price.
II-A-027mediumapplication
Q8A zero-coupon bond is purchased for ₹8,000 and redeemed for ₹10,000. What is the total rupee gain before tax?
Option A. ₹2,000 — Correct answer
Option B. ₹10,000
Why it is wrong: ₹10,000 is the redemption amount and includes the invested principal.
Option C. ₹18,000
Why it is wrong: ₹18,000 adds the two cash amounts instead of finding the gain.
Option D. ₹8,000
Why it is wrong: ₹8,000 is the original investment, not the gain.
Answer: A. The total gain is ₹2,000. Calculation: ₹10,000 redemption value − ₹8,000 purchase price = ₹2,000, before tax or costs. Remember: Redemption proceeds include both recovery of investment and any gain.
Hint, shown before you answer in practice mode: Compare the amount received on redemption with the amount invested. Common mistake: Calling the entire redemption amount profit.
II-A-028mediumnumerical
Q9A bond costs ₹950 and pays ₹80 interest plus ₹1,000 principal exactly one year later. What is its one-year yield to maturity?
Option A. 8.00%
Why it is wrong: 8.00% is the coupon rate on face value, not the return on ₹950.
Option B. 8.42%
Why it is wrong: 8.42% is the current yield and leaves out the ₹50 redemption gain.
Option C. 13.68% — Correct answer
Option D. 5.26%
Why it is wrong: 5.26% counts only the redemption gain and omits the coupon.
Answer: C. The one-year yield to maturity is about 13.68%. Total receipt = ₹80 + ₹1,000 = ₹1,080. Gain = ₹1,080 − ₹950 = ₹130. Yield = ₹130 ÷ ₹950 × 100 = 13.68%. Remember: For a one-year bond, yield to maturity includes every final cash flow.
Hint, shown before you answer in practice mode: Include both the coupon and the difference between purchase price and redemption value. Common mistake: Using current yield when the question asks for yield to maturity.
II-A-029hardnumerical
Q10A bond starts with ₹50,000 principal and pays 10% yearly on outstanding principal. ₹10,000 is repaid at each year-end. What is year-two interest?
Option A. ₹3,000
Why it is wrong: ₹3,000 deducts the second repayment before calculating interest for that year.
Option B. ₹4,000 — Correct answer
Option C. ₹5,000
Why it is wrong: ₹5,000 ignores the principal repaid at the end of year one.
Option D. ₹1,000
Why it is wrong: ₹1,000 applies the coupon only to the instalment repaid.
Answer: B. Year-two interest is ₹4,000. After year one, principal = ₹50,000 − ₹10,000 = ₹40,000. Year-two interest = ₹40,000 × 10% = ₹4,000. Remember: Amortising-bond interest depends on the outstanding principal for the period.
Hint, shown before you answer in practice mode: Identify the principal outstanding during the second year, before that year’s repayment. Common mistake: Using the original principal after repayments have begun.
II-A-030hardnumerical
Characteristics of Debt Securities: common questions
How many practice questions are there on Characteristics of Debt Securities?
10 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 15 practice topics for NISM Series II-A, which has 150 questions in total.
Are these real NISM Series II-A questions on Characteristics of Debt Securities?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
How much of the NISM Series II-A exam is Characteristics of Debt Securities?
NISM's published syllabus outline gives it 6 of the paper's 100 marks, or 6% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: March 2025 Annexure I, Unit 3: Characteristics of Debt Securities
Does negative marking apply to NISM Series II-A?
No. NISM applies no negative marking to Series II-A. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Characteristics of Other Securities
10 questions on Characteristics of Other Securities. Its quiz opens on that unit.
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