Exchange Traded Interest Rate Futures
20 questions. Each answer is explained.
Question 1 of 10Practice · Series IV — Interest Rate Derivatives
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Learn these topics
More units in NISM Series IV
- Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Market30
- Interest Rate Derivatives10
- Exchange Traded Interest Rate Options22
- Strategies Using Exchange Traded Interest Rate Futures and Options24
- Trading Mechanism in Exchange Traded Interest Rate Derivatives10
- Clearing, Settlement and Risk Management of Interest Rate Derivatives16
- Regulatory Framework for Interest Rate Derivatives8
- Accounting and Taxation of Interest Rate Derivatives4
- Code of Conduct and Investor Protection Measures in Interest Rate Derivatives6
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series IV Interest Rate Derivatives
Exam rules read on NISM's site on 3 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 3 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 20 questions on Exchange Traded Interest Rate Futures, with answers
Q1Under the posted NSE G-Sec futures specification, one contract represents 2,000 units of ₹100 face value. At a quoted bond price of ₹103.25 per ₹100 face, what is the contract value?
Option A. ₹2,06,500 — Correct answer
Option B. ₹2,00,000
Why it is wrong: This is face value, not value at the stated price.
Option C. ₹20,650
Why it is wrong: This uses one-tenth of the required multiplier.
Option D. ₹20,65,000
Why it is wrong: This uses ten times the specified unit multiplier.
Answer: A. Contract value = ₹103.25 × 2,000 = ₹2,06,500. The face amount remains ₹2,00,000 because each of the 2,000 units has ₹100 face value. Contract value is neither initial margin nor the cash premium for an option. It scales the futures exposure. Remember: Keep face value, quoted price, contract value and margin separate.
Hint, shown before you answer in practice mode: Common mistake: Using ₹2 lakh face value as the market value at every price.
IV-041mediumnumerical
Q2A futures contract has a tick size of ₹0.0025 per quoted unit and a multiplier of 2,000. A trader holds 12 contracts. What is the position’s rupee change for a one-tick favourable move?
Option A. ₹5
Why it is wrong: This is the one-contract amount and omits the position size.
Option B. ₹0.03
Why it is wrong: This multiplies tick size by contracts but omits the multiplier.
Option C. ₹60 — Correct answer
Option D. ₹600
Why it is wrong: This overstates the tick size or contract count by ten.
Answer: C. Tick value per contract = 0.0025 × 2,000 = ₹5. For 12 contracts, a single favourable tick changes value by ₹5 × 12 = ₹60 before costs. Small quoted ticks can still create material P/L when many contracts are held. Remember: Rupee tick exposure equals price tick × multiplier × contracts.
Hint, shown before you answer in practice mode: Common mistake: Confusing the displayed price increment with the cash value of the move.
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Q3A futures order price must lie on a ₹0.0025 tick grid. Starting from a valid price of ₹100.0000, which proposed price is also on that grid?
Option A. ₹100.0075 — Correct answer
Option B. ₹100.0010
Why it is wrong: The increment is 0.4 of a tick, not an allowed grid step.
Option C. ₹100.0060
Why it is wrong: The increment is 2.4 ticks.
Option D. ₹100.0030
Why it is wrong: The increment is 1.2 ticks.
Answer: A. A valid order increment is an integer multiple of tick size. The difference 100.0075 − 100.0000 = 0.0075 equals 3 × 0.0025. Tick-size validation is separate from price bands and other risk checks, so a grid-valid price is not by itself a guarantee of order acceptance. Remember: Check price discretisation independently of direction and order size.
Hint, shown before you answer in practice mode: Common mistake: Assuming any number with four decimal places meets the tick rule.
IV-043mediumnumerical
Q4A trader enters a long futures contract rather than buying a call option. Which statement correctly distinguishes the futures position?
Option A. The initial margin works like an option premium that caps all possible losses
Why it is wrong: Futures margin is collateral and does not cap potential losses.
Option B. The trader can avoid losses by simply declining to exercise the futures at expiry
Why it is wrong: A futures contract does not give an option-style right to abandon settlement.
Option C. The futures creates a binding contractual exposure, not a buyer’s exercise choice — Correct answer
Option D. Only the short side has settlement obligations, so the long side can walk away
Why it is wrong: A losing long position also owes settlement amounts.
Answer: C. A long futures position benefits from a rise in the quoted underlying price and loses when it falls. Initial margin supports performance. It does not purchase a right to walk away. This bilateral obligation is the key distinction from the option buyer’s asymmetric contractual right. Remember: Margin does not turn a futures obligation into a limited-loss option.
Hint, shown before you answer in practice mode: Common mistake: Using the phrase “exercise the futures” as though the holder could refuse a loss.
IV-044easyconceptual
Q5A trader is long seven contracts of a particular G-Sec futures expiry. Which trade closes that position without creating a different maturity exposure?
Option A. Sell seven contracts on a different government bond
Why it is wrong: That creates a cross-instrument position rather than closing the original contract.
Option B. Sell seven contracts on the same bond in a later expiry
Why it is wrong: That creates a calendar spread, leaving two distinct maturity positions.
Option C. Sell seven contracts of the same underlying and same expiry — Correct answer
Option D. Buy seven more contracts of the same expiry
Why it is wrong: That increases the long position to fourteen contracts.
Answer: C. Futures are fungible within a specified contract: underlying, expiry and other terms must match. Selling the same number of identical contracts offsets the open long. A superficially similar bond or later expiry can be a hedge or spread, but it is not the same as eliminating the original position. Remember: Offsetting requires contract identity, not just similar interest-rate exposure.
Hint, shown before you answer in practice mode: Common mistake: Mistaking a hedge in another contract for a closed original position.
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Q6An investor holds a cash-settled G-Sec futures position until expiry. What does expiry normally involve under that stated settlement type?
Option A. Conversion into ordinary shares of the bond issuer
Why it is wrong: The stated futures does not contain an equity-conversion provision.
Option B. Automatic repayment of the full futures notional by the exchange
Why it is wrong: Notional measures exposure. It is not a deposit owed back to the holder.
Option C. Automatic receipt of the underlying bond and all its future coupons
Why it is wrong: Cash settlement does not transfer the underlying bond.
Option D. A final cash adjustment based on the prescribed settlement price — Correct answer
Answer: D. Cash-settled futures reference an underlying security for valuation but do not confer ownership of that security. Expiry closes the remaining contractual price difference through final settlement under the exchange methodology. Direct coupon entitlement belongs to bond ownership, not simply to a long cash-settled futures position. Remember: Referencing an asset is different from owning or receiving it.
Hint, shown before you answer in practice mode: Common mistake: Counting future bond coupons as income on a cash-settled futures position.
IV-046mediumconceptual
Q7A trader buys five bond futures at 101.20 and closes all five at 101.65. With a multiplier of 2,000 and no costs, what is the total profit?
Option A. A loss of ₹4,500
Why it is wrong: A higher exit price benefits the long rather than producing a loss.
Option B. ₹4,500 — Correct answer
Option C. ₹900
Why it is wrong: This is the profit on one contract only.
Option D. ₹45,000
Why it is wrong: This overstates the position’s multiplier by ten.
Answer: B. The long earns the exit-minus-entry price difference. The 0.45-point gain is worth ₹900 per contract and ₹4,500 over five contracts. Daily variation payments may divide this profit across days, but their sum equals the entry-to-exit difference before financing effects and costs. Remember: Total futures P/L uses direction, price movement, multiplier and quantity.
Hint, shown before you answer in practice mode: Common mistake: Adding daily variation gains again to an already calculated lifetime gain.
IV-047mediumnumerical
Q8A trader shorts ten futures at 99.80. The multiplier is 2,000 and total round-trip charges are ₹1,000. At what buyback price does the trade break even after those charges?
Option A. 99.30
Why it is wrong: This implies ₹10,000 gross profit, far more than the stated charges.
Option B. 99.80
Why it is wrong: Buying back at entry price leaves the charges as a net loss.
Option C. 99.75 — Correct answer
Option D. 99.85
Why it is wrong: A higher buyback price creates a price loss in addition to charges.
Answer: C. For a short, gross profit = (sale price − buyback price) × multiplier × contracts. The required favourable move is 1,000/(2,000 × 10) = 0.05. Therefore the buyback break-even price is 99.80 − 0.05 = 99.75. Costs are provided as a hypothetical total rather than asserted as current statutory rates. Remember: Round-trip costs move a short trade’s break-even below its sale price.
Hint, shown before you answer in practice mode: Common mistake: Treating the entry price as net break-even when trading charges are non-zero.
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Q9A new buyer and a new seller open one futures contract with each other. How do that trade’s volume and market open interest change?
Option A. Volume increases by one and open interest is unchanged
Why it is wrong: Open interest would be unchanged for an opening side matched against a closing side, not two new positions.
Option B. Volume increases by one and open interest increases by one — Correct answer
Option C. Volume is unchanged and open interest increases by one
Why it is wrong: An executed trade counts in trading volume.
Option D. Volume increases by two and open interest increases by two
Why it is wrong: The buy and sell sides are not two separate matched contracts.
Answer: B. Volume counts contracts traded during the period, while open interest counts outstanding matched contracts. Both sides opening increases open interest by one. There are a long and a short but only one outstanding contract. Two parties closing would reduce open interest, and one opening against one closing would leave it unchanged. Remember: Do not double-count the long and short sides of the same outstanding contract.
Hint, shown before you answer in practice mode: Common mistake: Treating every trade as necessarily increasing open interest.
IV-049mediumconceptual
Q10Define basis as spot price minus futures price. Spot is 100.40 and futures is 100.65. What is the basis?
Option A. +0.25
Why it is wrong: This uses the opposite, futures-minus-spot convention.
Option B. 0.25% automatically
Why it is wrong: The stated basis is an absolute price difference, not necessarily a percentage.
Option C. −0.25 — Correct answer
Option D. 200.05
Why it is wrong: Adding the prices does not measure basis.
Answer: C. Basis terminology is only useful when its sign and units are explicit. Here basis = S − F = −0.25 price point. Some discussions use the opposite convention. The economic relationship is unchanged, but signs in hedge calculations must follow the declared definition consistently. Remember: Write the basis definition before computing or interpreting a basis change.
Hint, shown before you answer in practice mode: Common mistake: Assuming all sources use the same basis sign convention.
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Q11For a cash-settled futures contract, why does the terminal settlement value align with its specified underlying reference rather than an unrelated bond quote?
Option A. All government bonds must have identical prices at every maturity
Why it is wrong: Coupon, maturity and liquidity differences can produce different prices.
Option B. The original entry price is automatically restored at expiry
Why it is wrong: Final settlement reflects the contractual market reference, not the trader’s cost.
Option C. The contract defines the final reference used to extinguish the position — Correct answer
Option D. Convergence guarantees a profit for every long and every short
Why it is wrong: The two sides have offsetting price exposure, so convergence is not a universal profit guarantee.
Answer: C. Convergence means the expiring contract settles against the specified underlying reference. For cash settlement that reference may be an exchange-defined average or other prescribed calculation, not necessarily the last screen quote at one instant. A cross-hedged portfolio can still have residual basis risk relative to that reference. Remember: The final settlement reference is contract-specific.
Hint, shown before you answer in practice mode: Common mistake: Assuming every correlated bond must converge to the same price.
IV-051mediumconceptual
Q12A zero-coupon security costs ₹98. No payment occurs before a three-month forward date. Assume simple financing at 8% per annum, a quarter-year period and no costs. What is its theoretical forward price?
Option A. ₹105.84
Why it is wrong: This finances for a full year rather than a quarter.
Option B. ₹99.96 — Correct answer
Option C. ₹98.00
Why it is wrong: This ignores the funding cost.
Option D. ₹96.04
Why it is wrong: This subtracts rather than adds positive funding cost.
Answer: B. Under these frictionless assumptions, buying and carrying the security costs its spot outlay plus financing through the forward date. F = 98 × (1 + 0.08 × 0.25) = ₹99.96. This calculation uses explicitly simple financing. Replacing it with another compounding convention changes the result. Remember: No-arbitrage carry pricing begins with the actual funded spot outlay.
Hint, shown before you answer in practice mode: Common mistake: Using maturity yield as the financing rate when a separate funding rate is given.
IV-052mediumnumerical
Q13A bond has dirty spot price ₹102. A coupon payable before a six-month forward date has present value ₹2. Use a six-month growth factor of 1.03 and assume no other cash flows or costs. What is the theoretical dirty forward price?
Option A. ₹105.06
Why it is wrong: This carries the whole spot price without allowing for coupon income.
Option B. ₹107.12
Why it is wrong: This adds the coupon present value instead of subtracting it.
Option C. ₹100.00
Why it is wrong: This removes coupon present value but omits financing to the forward date.
Option D. ₹103.00 — Correct answer
Answer: D. A cash-and-carry owner receives the interim coupon, while the forward buyer does not own the bond during that earlier period. The financed value net of that coupon is (dirty spot − PV of income) × growth factor. Here (102 − 2) × 1.03 = ₹103. Using present value keeps cash flows at a consistent valuation date. Remember: Interim income reduces the amount that must be financed to replicate a forward.
Hint, shown before you answer in practice mode: Common mistake: Subtracting an undiscounted interim coupon from a terminal value without a timing convention.
IV-053hardnumerical
Q14A bond’s theoretical dirty forward value is ₹104.20 per ₹100 face. Accrued interest at delivery will be ₹1.60. If the forward is quoted on a clean-price basis, what is its theoretical quote?
Option A. ₹105.80
Why it is wrong: This adds accrued interest even though it is already included in dirty value.
Option B. ₹104.20
Why it is wrong: This leaves the dirty value unchanged rather than converting the quotation.
Option C. ₹100.00
Why it is wrong: Par is not an automatic clean forward price.
Option D. ₹102.60 — Correct answer
Answer: D. Dirty and clean prices must refer to the same date. At delivery, dirty value = clean quote + delivery-date accrued interest. Thus the clean forward quote is 104.20 − 1.60 = ₹102.60. Subtracting today’s accrued interest instead would generally be wrong because the coupon clock changes before delivery. Remember: Use delivery-date accrued interest when converting a forward dirty value to a clean quote.
Hint, shown before you answer in practice mode: Common mistake: Using spot accrued interest for the forward-date conversion.
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Q15A bond’s spot price and expected pre-expiry coupon receipts remain unchanged. In a simple cost-of-carry model, what happens to its theoretical futures price when the funding cost rises?
Option A. It must become exactly equal to the coupon rate
Why it is wrong: A price and an annual coupon rate are different units.
Option B. It rises, other things equal — Correct answer
Option C. It falls solely because every interest rate rose
Why it is wrong: The question holds spot price fixed and changes funding cost, not the bond’s valuation yield.
Option D. It is unchanged because futures never involve funding economics
Why it is wrong: Carry pricing depends on the economics of financing a replicating cash position.
Answer: B. The simplified relation is future value = spot cash outlay + financing cost − income benefit. If spot and coupon receipts are fixed, greater financing cost increases fair futures value. This conditional result must not be confused with the usual fall in bond spot price when its required yield rises. Remember: Separate a bond’s discount yield from the funding input in its carry model.
Hint, shown before you answer in practice mode: Common mistake: Changing every interest-rate-related input when the question changes only one.
IV-055mediumconceptual
Q16Two hedges have similar terminal economic exposure: exchange-traded futures with daily variation settlement and a bilateral FRA settling under its agreed terms. Why might the futures hedge need more interim cash planning?
Option A. Daily settlement guarantees that the futures hedger faces no losing cash flows before expiry
Why it is wrong: Settlement crystallises daily gains and losses. It does not eliminate them.
Option B. Adverse daily price moves can require cash payments before the underlying exposure pays off — Correct answer
Option C. Futures always exchange their full notional amount between the two sides every day
Why it is wrong: Daily variation is a change in value, not repeated payment of full notional.
Option D. An FRA can never create any counterparty exposure for either of the two parties
Why it is wrong: An uncleared bilateral FRA can create counterparty risk.
Answer: B. Daily marked-to-market futures can create short-term cash outflows during an otherwise effective hedge. The underlying bond or future borrowing benefit may not produce matching cash on the same day. FRA and futures comparisons should therefore include liquidity timing and counterparty arrangements, not just the final price exposure. Remember: An economically hedged position can still face a funding squeeze.
Hint, shown before you answer in practice mode: Common mistake: Equating terminal risk offset with identical interim cash flows.
IV-056mediumconceptual
Q17A hypothetical futures position has market exposure ₹2,00,000 and initial margin ₹8,000. A price move creates a ₹4,000 loss. What percentage of the initially posted margin does the loss represent?
Option A. 2%
Why it is wrong: This is the loss as a percentage of the ₹2,00,000 exposure, not of margin.
Option B. 50% — Correct answer
Option C. 4%
Why it is wrong: This does not use either stated denominator correctly.
Option D. 100%
Why it is wrong: The loss is half, not all, of the initial margin.
Answer: B. The loss is 4,000/8,000 = 50% of the initial margin although it is only 2% of the stated exposure. This illustrates collateral leverage. Margin is not a cap on loss: further adverse moves may create additional funding needs or losses beyond the original amount posted. Remember: Always state whether a return or loss percentage is measured on exposure or collateral.
Hint, shown before you answer in practice mode: Common mistake: Assuming a small price movement implies a small loss relative to margin.
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Q18For a 91-day T-bill futures settlement, use the NSE Clearing convention P = 100 − 0.25Y, where Y is the annualised yield expressed in percentage points. If Y is 6.40, what is P?
Option A. 101.60
Why it is wrong: This reverses the subtraction sign.
Option B. 98.40 — Correct answer
Option C. 99.9840
Why it is wrong: This inserts 0.064 where the formula specifies 6.40 percentage points.
Option D. 93.60
Why it is wrong: This incorrectly uses 100 − Y and omits the quarter-year factor.
Answer: B. The supplied convention requires a percentage-point yield input: 100 − 0.25 × 6.40 = 98.40. Do not import the 100-minus-rate convention of another money-market product without checking its scaling. An increase in yield lowers this quote under the stated formula. Remember: Short-rate futures quotations are product-specific.
Hint, shown before you answer in practice mode: Common mistake: Applying a familiar foreign futures quotation to a different Indian contract.
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Q19A portfolio holds long-duration fixed-coupon government bonds. A trader selects an overnight-rate futures contract solely because both products are labelled “interest-rate derivatives.” What is the main problem?
Option A. The hedge must fail only because the futures contract is traded on an exchange
Why it is wrong: An exchange contract can be useful. The concern is mismatch, not the venue alone.
Option B. Short-rate futures are legally the same security as every government bond in the portfolio
Why it is wrong: They reference a particular rate or instrument, not every bond interchangeably.
Option C. Every interest-rate derivative has an identical PVBP per contract, so any one will do
Why it is wrong: Contract notional, reference rate, horizon and price sensitivities differ.
Option D. The contract’s rate horizon and sensitivity may differ greatly from the bond portfolio’s — Correct answer
Answer: D. Government bond prices embed a term structure of discount rates over many future cash-flow dates. An overnight-rate future focuses on a different segment of the curve. A useful hedge needs evidence of sensitivity alignment and correlation, including contract PVBP, rather than selection by product name alone. Remember: Identify the risk factor and maturity bucket before selecting a hedge contract.
Hint, shown before you answer in practice mode: Common mistake: Assuming all interest-rate futures are interchangeable hedging instruments.
IV-059mediumconceptual
Q20A model gives a bond forward price of 103 based on spot value, funding and interim coupons. Which conclusion is justified by that calculation alone?
Option A. A trader who agrees today to buy the bond forward at 103 cannot make a loss on the deal
Why it is wrong: The realised underlying price and funding needs can be adverse.
Option B. The bond’s actual market price on the forward date must be exactly 103, with complete certainty
Why it is wrong: A model fair forward price is not a deterministic forecast.
Option C. The issuer must keep changing the bond’s coupon rate until it equals the forward price of 103
Why it is wrong: Coupon rate and forward price are different quantities and the coupon is contractual.
Option D. It is a no-arbitrage benchmark under the model assumptions, not a guaranteed future spot price — Correct answer
Answer: D. Cost-of-carry links spot and forward prices through a replication strategy under stated funding, income and trading assumptions. It does not remove uncertainty about the future bond market. Actual executable bid–ask spreads, funding constraints and contract settlement rules must also be considered before calling a price difference arbitrage. Remember: Keep pricing identities separate from predictive claims.
Hint, shown before you answer in practice mode: Common mistake: Selling a fair-value calculation as a guaranteed trading outcome.
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Exchange Traded Interest Rate Futures: common questions
How many practice questions are there on Exchange Traded Interest Rate Futures?
20 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 10 practice topics for NISM Series IV, which has 150 questions in total.
Are these real NISM Series IV questions on Exchange Traded Interest Rate Futures?
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.
Does negative marking apply to NISM Series IV?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. 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.
Exchange Traded Interest Rate Options
22 questions on Exchange Traded Interest Rate Options. Its quiz opens on that unit.
Open Exchange Traded Interest Rate Options