Exchange Traded Interest Rate Futures
10 questions. Each answer is explained.
Question 1 of 10Practice · Series V-D — Mutual Fund - Specialized Investment Fund Distributors
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Learn these topics
More units in NISM Series V-D
- The Investment Landscape5
- Concept & Role of a Mutual Fund4
- Legal Structure of Mutual Funds in India3
- Legal and Regulatory Framework7
- Scheme Related Information7
- Fund Distribution and Channel Management Practices4
- Net Asset Value, Total Expense Ratio and Pricing of Units5
- Taxation3
- Investor Services10
- Risk, Return and Performance of Funds5
- Mutual Fund Scheme Performance5
- Mutual Fund Scheme Selection10
- Basics of Derivatives10
- Understanding Index5
- Introduction to Forwards and Futures15
- Introduction to Options13
- Strategies Using Equity Futures and Equity Options9
- Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Markets6
- Interest Rate Derivatives2
- Exchange Traded Interest Rate Options6
- Strategies Using Interest Rate Derivatives6
Exam format
| Questions | 150 · 1 mark each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 marks |
| Negative marking | 10% · 0.1 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 10 of 150 marks (6.7%) |
Source: July 2026 Annexure I, Chapter 20: Exchange Traded Interest Rate Futures
NISM Series V-D Mutual Fund - Specialized Investment Fund Distributors
Exam rules read on NISM's site on 30 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 30 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 Exchange Traded Interest Rate Futures, with answers
Q1A hypothetical short-term interest-rate futures contract is quoted as 100 minus its implied annual reference rate expressed in percent. If the futures quote is 93.60, what reference rate is implied by this quotation? Assumptions: The 100-minus-rate quotation is an illustrative contract convention, not a claim about a particular current Indian contract.
Option A. 93.60%
Why it is wrong: This confuses the price-style quote with the rate it represents.
Option B. 0.064%
Why it is wrong: This applies an extra division by 100 after the result is already expressed in percent.
Option C. 106.40%
Why it is wrong: This adds the difference to 100 instead of taking 100 minus the quote.
Option D. 6.40% — Correct answer
Answer: D. The implied rate is 100 − 93.60 = 6.40%. Under this quotation convention, a higher implied rate corresponds to a lower futures quote. Remember: Know whether a contract is quoted as a bond price, a yield, or a transformation of a rate.
Hint, shown before you answer in practice mode: Apply the quotation rule exactly as stated.
V-D-129easynumerical
Q2An illustrative bond futures contract represents ₹2,00,000 face value and is quoted per ₹100 of face value. Its minimum price tick is 0.0025 quote points. What rupee change does one tick represent for one contract? Assumptions: All contract sizes and tick specifications are hypothetical.
Option A. ₹0.50
Why it is wrong: This understates the correct tick value by a factor of ten.
Option B. ₹50
Why it is wrong: This overstates the correct tick value by a factor of ten.
Option C. ₹5 — Correct answer
Option D. ₹500
Why it is wrong: This multiplies the face value by the quote change without dividing by the per-₹100 quotation base.
Answer: C. Tick value = ₹2,00,000 × 0.0025/100 = ₹5. The division by 100 is required because the quote is a price per ₹100 of face value. Remember: Translate quote-point changes into money using the contract’s quotation base.
Hint, shown before you answer in practice mode: Multiply face value by the tick and divide by 100.
V-D-130mediumnumerical
Q3A trader buys two illustrative bond futures contracts, each representing ₹5,00,000 face value. Prices are quoted per ₹100 of face value. The position opens at 100.10 and closes at 100.40. Ignoring all costs, what is the total profit or loss? Assumptions: Contract terms are hypothetical and transaction costs are ignored.
Option A. A loss of ₹3,000
Why it is wrong: A long futures position gains when the quoted price rises.
Option B. A profit of ₹3,00,000
Why it is wrong: This fails to divide by the per-₹100 quotation base.
Option C. A profit of ₹3,000 — Correct answer
Option D. A profit of ₹1,500
Why it is wrong: This calculates the profit on only one of the two contracts.
Answer: C. Profit = (100.40 − 100.10)/100 × ₹5,00,000 × 2 = ₹3,000. A long position benefits from this increase in the futures price. Remember: Keep position direction, contract count and quote units consistent.
Hint, shown before you answer in practice mode: Use the rise in price, face value per contract and number of contracts.
V-D-131mediumnumerical
Q4One short interest-rate futures contract is entered at 99.50. The first day’s settlement price is 99.80 and the second day’s settlement price is 99.20. Each one-point price change is worth ₹2,000 per contract. What is the second day’s mark-to-market cash flow, calculated from the previous day’s settlement? Assumptions: The multiplier is illustrative. The short remains open through both settlements.
Option A. A payment of ₹600
Why it is wrong: This is the first day’s loss, not the second day’s settlement.
Option B. A receipt of ₹600
Why it is wrong: This is the cumulative profit from entry to the second settlement, not the second day’s cash flow.
Option C. A receipt of ₹1,200 — Correct answer
Option D. A payment of ₹1,200
Why it is wrong: This reverses the profit direction of the short position when price falls.
Answer: C. Second-day cash flow = (99.80 − 99.20) × ₹2,000 = ₹1,200 received. The first-day loss was ₹600, so cumulative profit is only ₹600, but that is a different question. Remember: Daily settlement uses the previous settlement price, not the original entry price.
Hint, shown before you answer in practice mode: For the short, subtract today’s settlement from yesterday’s settlement.
V-D-132mediumnumerical
Q5A fund holds bonds and shorts bond futures to reduce interest-rate exposure. During a rally, the bonds gain value but the short futures position incurs daily settlement losses. The fund does not sell the bonds that day. Which planning issue is most directly illustrated? Assumptions: The bonds are not sold and their unrealised gain is not automatically available as cash.
Option A. A hedge is ineffective whenever one leg loses money, even if the other leg gains a similar amount.
Why it is wrong: A hedge deliberately creates offsetting gains and losses. One losing leg does not alone show failure.
Option B. The fund may need cash for futures settlement even when unrealised bond gains offset the hedge loss economically. — Correct answer
Option C. Short futures positions never require settlement payments while the hedged bonds are still held.
Why it is wrong: A short futures position loses when the futures price rises and can require cash payment.
Option D. An offsetting unrealised bond gain automatically pays the futures settlement amount in cash that day.
Why it is wrong: Unrealised gains are not cash unless monetised or otherwise financed.
Answer: B. The bond gain may remain unrealised while futures losses must be settled in cash. The fund therefore needs liquidity planning in addition to an economically appropriate hedge. Remember: A sound hedge can still create interim cash-funding needs.
Hint, shown before you answer in practice mode: Distinguish the total economic result from the timing of cash movements.
V-D-133mediumapplication
Q6A hypothetical bond’s full spot price is ₹100 per ₹100 of face value. It pays no coupon before a six-month futures maturity. Financing costs 6% per year on a simple-interest basis for the full six months. Ignoring margin-timing effects and other costs, what fair futures price follows this carry calculation? Assumptions: The financing rate is simple for six months. Daily-settlement timing and other costs are excluded.
Option A. ₹100.00 per ₹100 face value
Why it is wrong: This ignores the stated financing cost.
Option B. ₹106.00 per ₹100 face value
Why it is wrong: This charges a full year of financing rather than six months.
Option C. ₹103.00 per ₹100 face value — Correct answer
Option D. ₹97.00 per ₹100 face value
Why it is wrong: This subtracts financing cost rather than adding it.
Answer: C. Fair futures price = ₹100 × (1 + 0.06 × 0.5) = ₹103.00. With no interim income, the financing cost is added to the spot price under the supplied assumptions. Remember: Carry pricing connects spot cost, financing and income over the contract period.
Hint, shown before you answer in practice mode: Finance the spot purchase for half a year.
V-D-134mediumnumerical
Q7For an illustrative carry trade, a bond’s full spot price is ₹104 per ₹100 face value. A ₹2 coupon is paid after three months, and the futures horizon is six months. Finance the initial purchase for six months at 8% annual simple interest and reinvest the coupon for its remaining three months at the same annual simple rate. The fair full-price delivery amount equals financed purchase cost minus the coupon’s accumulated value. What is that amount? Assumptions: Both financing and reinvestment use the supplied simple-interest conventions. Full prices are used throughout. Ignore margin-funding effects, taxes, fees and credit risk.
Option A. ₹106.12 per ₹100 face value — Correct answer
Option B. ₹108.16 per ₹100 face value
Why it is wrong: This includes financing but ignores the coupon received before delivery.
Option C. ₹106.16 per ₹100 face value
Why it is wrong: This subtracts only the ₹2 coupon and ignores its ₹0.04 reinvestment income.
Option D. ₹102.00 per ₹100 face value
Why it is wrong: This subtracts the coupon from spot without accounting for either financing or reinvestment.
Answer: A. Financed cost = 104 × (1 + 0.08 × 0.5) = 108.16. The coupon grows to 2 × (1 + 0.08 × 0.25) = 2.04, giving 108.16 − 2.04 = ₹106.12 per ₹100 face value. Remember: Interim bond income offsets carry cost, and its timing affects the amount of that offset.
Hint, shown before you answer in practice mode: Use six months for financing and only three months for reinvesting the coupon.
V-D-135hardnumerical
Q8An illustrative cash-settled bond futures contract uses the underlying bond’s officially specified reference price on expiry for final settlement. Which price is relevant to that final settlement? Assumptions: The cash-settlement method is supplied for this illustrative contract.
Option A. The trader’s preferred valuation, even if different from the contract rule.
Why it is wrong: A trader cannot unilaterally replace the agreed settlement reference.
Option B. Always ₹100, regardless of the contract specification.
Why it is wrong: There is no stated rule forcing the final reference price to equal par.
Option C. The bond’s spot price on the day the trader first entered the futures.
Why it is wrong: The historical entry-day spot price is not the stated expiry settlement reference.
Option D. The expiry-date reference price defined by the contract. — Correct answer
Answer: D. Final settlement follows the contract’s specified expiry reference. The entry-day spot price or a trader’s own estimate does not replace that agreed benchmark. Remember: Read the precise final-settlement reference rather than assuming every contract settles at par.
Hint, shown before you answer in practice mode: The settlement methodology is a contract term.
V-D-136easyconceptual
Q9A borrower needs a rate hedge for an unusual loan amount starting on 15 October. A dealer offers a customised forward-rate agreement, while an exchange offers futures only in standard contract sizes and listed maturities. Which comparison is most accurate? Assumptions: The available contracts and requested loan terms are hypothetical.
Option A. Customisation proves that the forward-rate agreement has no counterparty risk, because it is tailored to the loan.
Why it is wrong: Closer matching of terms does not eliminate the dealer’s credit exposure.
Option B. Standard futures sizes automatically match every possible loan amount and start date exactly, so no sizing adjustment is needed.
Why it is wrong: Fixed standard sizes cannot exactly match every arbitrary exposure.
Option C. A futures hedge cannot be useful unless it matches every detail of the loan exactly, including amount and dates.
Why it is wrong: An imperfectly matched hedge may still reduce risk, although residual risk must be assessed.
Option D. The forward-rate agreement can match the requested dates and amount more closely. The futures hedge may require sizing and maturity adjustments. — Correct answer
Answer: D. A tailored agreement can align closely with a particular exposure. Standard futures can still be useful, but the borrower must assess contract rounding, timing differences and any remaining basis risk. Remember: A closer contractual match and a safer counterparty arrangement are separate considerations.
Hint, shown before you answer in practice mode: Ask which contract allows negotiated terms and which uses standard specifications.
V-D-137easyapplication
Q10One-year and two-year spot rates are 5% and 6% per year, both with annual compounding. Under a no-arbitrage calculation, what one-year forward rate for the second year makes one year at 5%, followed by that forward rate, equivalent to two years at the 6% spot rate? Round to two decimals. Assumptions: Annual compounding and the supplied no-arbitrage relationship apply. Ignore risk and funding differences.
Option A. 6.00%
Why it is wrong: This uses the two-year annual spot rate directly instead of isolating the second year.
Option B. 12.36%
Why it is wrong: This is the total two-year growth at 6%, not the forward rate for one year.
Option C. 1.00%
Why it is wrong: This subtracts the spot rates without matching compounded growth factors.
Option D. 7.01% — Correct answer
Answer: D. The forward rate is (1.06²/1.05 − 1) × 100 = 7.0095%, or 7.01%. The equation equates investments over the same two-year horizon. It is not a guarantee of the actual future short rate. Remember: A forward rate is implied by relative discount factors, not by simple subtraction of spot yields.
Hint, shown before you answer in practice mode: Set (1.05) × (1 + forward rate) equal to 1.06².
V-D-138hardnumerical
Exchange Traded Interest Rate Futures: common questions
How many practice questions are there on Exchange Traded Interest Rate Futures?
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 22 practice topics for NISM Series V-D, which has 150 questions in total.
Are these real NISM Series V-D 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.
How much of the NISM Series V-D exam is Exchange Traded Interest Rate Futures?
NISM's published syllabus outline gives it 10 of the paper's 150 marks, or 6.7% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: July 2026 Annexure I, Chapter 20: Exchange Traded Interest Rate Futures
Does negative marking apply to NISM Series V-D?
Yes. NISM takes off 10% of a question's marks for a wrong answer. On a 1-mark question that is 0.1 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
6 questions on Exchange Traded Interest Rate Options. Its quiz opens on that unit.
Open Exchange Traded Interest Rate OptionsPaper Trading Try it on the practice trading desk