FIMMDA-NSE DEBT MARKET (BASIC) MODULE TEST PAPERS

FIMMDA-NSE DEBT MARKET (BASIC) MODULE

Q1
Which of the following statements is TRUE about daily volumes in the call money market? [ 1 Mark ]

(a) These volumes are usually lower than the volumes in the repo markets.
(b) These volumes are comparable with volumes in the ICD and CP markets.
(c) They register the largest transaction value after government securities.
(d) Call money markets record the highest daily transaction value amongst all segments of debt markets.
(e) I am not attempting this question

Q2
How are the market borrowings of state governments managed? [ 1 Mark ]

(a) Bonds are privately placed with PDs.
(b) Bonds are issued by the state governments.
(c) Bonds are issued by the RBI as well as the respective state governments.
(d) Bonds are issued by the RBI.
(e) I am not attempting this question

Q3
Which of the following is NOT a credit enhancement mechanism for asset backed securities? [ 1 Mark ]

(a) Creation of an escrow account for repayment by principal borrowers with rights to the investor.
(b) Cherry-picking of the asset portfolio of the originator.
(c) Guarantees from loan originators in the event of default.
(d) Enabling the servicing of payments through the originator.
(e) I am not attempting this question

Q4
If a trade is cancelled, the counter party limit in the WDM segment of NSE is _____. [ 1 Mark ]

(a) not changed during the trading day
(b) automatically restored when trades are cancelled
(c) restored only after the counterparties notify the exchange of the same
(d) restored only when transactions are settled
(e) I am not attempting this question

Q5
Which segment of the debt markets has highest market capitalisation? [ 1 Mark ]

(a) Call money markets
(b) Government bonds
(c) PSU bonds
(d) Corporate bonds
(e) I am not attempting this question

Q6
To arrive at the average MIBOR/MIBID rates, NSE uses _______. [ 1 Mark ]

(a) weighted trimmed mean adjusted for standard deviation
(b) simple mean trimmed arrived at by bootstrapping
(c) simple trimmed mean
(d) adaptive trimmed mean
(e) I am not attempting this question

Q7
If the yield changes by 15 basis points, the value of the portfolio (given in the following table) can be expected to change by _________.

Coupon(%pa)
Maturity Date
Price(Rs) as on June 8,2001
No. of Bonds

11.83
November 12, 2014
113.65
116600

10.47
February 12, 2015
105.35
114100

11.43
April 7, 2015
111.45
113600

10.71
April 18, 2016
106.75
112400

10.45
April 27, 2018
104.78
111100



[ 4 Marks ]

(a) Rs. 678816.90
(b) Rs. 680916.90
(c) Rs. 677616.90
(d) Rs. 678866.90
(e) I am not attempting this question

Q8
The repo auction conducted by the RBI on a daily basis is known as _______. [ 1 Mark ]

(a) money market intervention
(b) open market operations
(c) liquidity adjustment facility
(d) tri-partite repos
(e) I am not attempting this question

Q9
The company sends the debenture certificate/ credits the depository account in case of all allottees in a corporate debenture issue within _______. [ 1 Mark ]

(a) 30 days from the date of closure of the issue
(b) 3 months from the closure of the issue
(c) 30 days from the deemed date of allotment
(d) 3 months from the deemed date of allotment
(e) I am not attempting this question

Q10
Which of the following factors does NOT directly affect call rates? [ 1 Mark ]

(a) Capital inflows and exchange rate situation
(b) Outcome of treasury bill auctions
(c) Rates of growth in bank deposits
(d) Seasonal fluctuations in credit off take
(e) I am not attempting this question

Q11
Which of the following is FALSE? [ 1 Mark ]

(a) FIIs cannot invest more than 30% of their funds in Dated Government Securities and Treasury Bills.
(b) RBI cannot buy or sell securities in the secondary markets.
(c) PDs cannot issue CPs.
(d) Provident funds cannot invest in call money markets.
(e) I am not attempting this question

Q12
If the YTMs of 2 bonds with tenors of 4.850 years and 7.842 years are 8.9202% and 9.1699% respectively, what is the YTM (%) of a bond with a tenor of 5.748 years? (Hint: Use linear interpolation). [ 2 Marks ]

(a) 9.0251
(b) 8.9951
(c) 8.9551
(d) 9.1451
(e) I am not attempting this question

Q13
If interest rates fall, which of the following will hold good? [ 1 Mark ]

(a) The total return to the investor will change depending on the investor's investment horizon.
(b) The total return to the investor will increase because there would be capital gains on the bond.
(c) The total return to the investor will decrease because reinvestment income will become lower.
(d) The total return to the investor will remain unchanged as long as coupons are not defaulting and are the largest component of total return.
(e) I am not attempting this question

Q14
What is the maximum brokerage that can be charged by an NSE trading member for a deal in government securities for Rs. 20 million? [ 2 Marks ]

(a) Rs. 30,000
(b) Rs. 22,000
(c) Rs. 20,000
(d) Rs. 25,000
(e) I am not attempting this question

Q15
In the case of securities held in SGL form, which of the following statements is FALSE? [ 2 Marks ]

(a) The transferor is deemed to be the holder of the security, until the transferee is registered by the PDO.
(b) Transfer is effected using RBI prescribed instruments of transfer.
(c) The transfer can be for whole or part of the stock of securities.
(d) Transfers are effected by execution of the SGL form III by the seller of the securities.
(e) I am not attempting this question

Q16
Which of the following statements is FALSE? [ 1 Mark ]

(a) Non-competitive bids are always deducted from the notified amount of Treasury Bills auction.
(b) Non-competitive bids are allotted at the weighted average price of winning bids.
(c) Provident funds can submit non-competitive bids at treasury auctions.
(d) FIIs can submit non-competitive bids in treasury auctions.
(e) I am not attempting this question

Q17
If the NSE-ZCYC interest rate for 10.5095 years is 9.6150%, what is the discounted value of Rs.100 receivable at the end of that period? [ 2 Marks ]

(a) Rs. 36.42413
(b) Rs. 36.33913
(c) Rs. 36.40411
(d) Rs. 36.32913
(e) I am not attempting this question

Q18
The Clearing Corporation of India Ltd. will settle transactions in ____. [ 1 Mark ]

(a) long term government debt
(b) money and Forex markets
(c) money, government securities and Forex markets
(d) money market instruments and government securities
(e) I am not attempting this question

Q19
How is a bond marked to market using a simple yield curve? [ 2 Marks ]

(a) The YTM that corresponds with the duration of the bond is used to value the cash flows of the bond.
(b) The YTM that corresponds with the average tenor of the cash flows of the bond are used to value the bond.
(c) The YTM that corresponds with the tenor of the bond is used to value the cash flows of the bond.
(d) The rates that correspond to each cash flow of the bond are read from the yield curve, and used to value the bond.
(e) I am not attempting this question

Q20
Duration of the bond index is computed as _______. [ 1 Mark ]

(a) duration of all bonds included in the index, weighted by the number of each bond held
(b) simple average of the duration of all bonds included in the index
(c) market capitalisation weighted duration of all bonds in the index
(d) price-weighted duration of all bonds included in the index
(e) I am not attempting this question

Q21
Which of the following statements is TRUE about the NSE MIBOR polling process? [ 2 Marks ]

(a) NSE disseminates information about the rates and participants, but not the amount associated with each quote.
(b) NSE does not reveal the identity of the participants, but discloses the rates of each participant.
(c) NSE keeps both participant identity and polled rate confidential.
(d) NSE disseminates information on rates quoted by each participant and the amounts associated with those rates.
(e) I am not attempting this question

Q22
A 13.82% GOI security maturing on 30-May-2002 is trading at a YTM of 6.9545% on 10-Jul-2001. The price of the security is ______. [ 2 Marks ]

(a) Rs 105.82
(b) Rs 105.80
(c) Rs 105.78
(d) Rs 105.83
(e) I am not attempting this question

Q23
A CP maturing on September 26, 2001 was issued on June 28, 2001 at a price of Rs.97.05. What is the cut-off yield (%)? [ 2 Marks ]

(a) 12.1276
(b) 12.8276
(c) 12.5276
(d) 12.3276
(e) I am not attempting this question

Q24
A 10.25% GOI security, maturing on 29-May-2021 is trading on 2-Jul-2001 at a YTM of 9.8944%. How much interest has accrued on the security? [ 2 Marks ]

(a) Rs. 0.9396
(b) Rs. 0.9344
(c) Rs. 0.9448
(d) Rs. 0.9293
(e) I am not attempting this question

Q25
When can a company withdraw funds from the debenture redemption reserve account? [ 2 Marks ]

(a) The redemption reserve is equal to the redemption amount.
(b) At least 50% of the debentures outstanding have been redeemed.
(c) Companies cannot withdraw funds from the debenture redemption reserve account.
(d) At least 10% of the debentures outstanding have been redeemed.
(e) I am not attempting this question

Q26
Which of the following statements is FALSE? [ 1 Mark ]

(a) The lower the YTM of a bond, the lower its duration.
(b) The higher the YTM of a bond, the lower its duration.
(c) The higher the tenor of a bond, the higher its duration.
(d) The lower the coupon of a bond, the higher its duration.
(e) I am not attempting this question

Q27
Which of the following about the relationship between price and yield is FALSE? [ 2 Marks ]

(a) The relationship between prices and yields is non-linear.
(b) Rise in bond prices for a fall in yields is mostly steeper than fall in bond prices for a rise in yields.
(c) Prices and yields of a bond are inversely related.
(d) The fall in bond yields for a rise in price is lower than the rise in bond yields for a fall in price.
(e) I am not attempting this question

Q28
PV01 of a bond represents ____________. [ 1 Mark ]

(a) the percentage change in value of the bond, for a 1bp change in yield
(b) the change in rupee value of the bond for a 1bp change in yield
(c) the change in duration of the bond for a 1 basis point change in yield
(d) the change in modified duration of the bond for a 1 basis point change in yield
(e) I am not attempting this question

Q29
In order for a mutual fund scheme to be listed for trading on the WDM segment of NSE, ________. [ 1 Mark ]

(a) the scheme should invest atleast 50% of NAV in debt instruments
(b) the scheme has to publish daily NAVs
(c) the investment objective of the scheme should be to invest pre-dominantly in debt securities.
(d) the scheme has to be held by atleast 50 investors
(e) I am not attempting this question

Q30
The following are the parameters of the NSE-ZCYC.
beta0 = 11.1462
beta1 = (-)2.0187
beta2 = (-)8.9666
tau = 1.3540
What is the interest rate (%) corresponding to a tenor of 0.4986 years, using the above ZCYC?
[ 3 Marks ]

(a) 8.1649
(b) 8.1839
(c) 8.1610
(d) 8.1189
(e) I am not attempting this question

Q31
Which of the following statements about the ZCYC is TRUE? [ 1 Mark ]

(a) The ZCYC estimates the yield associated with bonds whose duration is equal to the tenor of a corresponding zero coupon bond.
(b) The ZCYC cannot be estimated in market where only coupon paying bonds are traded.
(c) The ZCYC is the estimated theoretical spot rate curve underlying coupon-paying bonds.
(d) The ZCYC is the YTM of all traded zero coupon bonds in the market.
(e) I am not attempting this question

Q32
Which of the following about mandates to debt market brokers is FALSE? [ 1 Mark ]

(a) Mandates are usually valid for 15 minutes, unless otherwise specified.
(b) If the counter-party is firm to the deal at the mandate price, the broker shall reveal the name of the party offering the mandate.
(c) Mandates cannot be renewed at the same terms after expiry of the validity period.
(d) Brokers have to check for the currency of the mandate from time to time after the initial validity period expires.
(e) I am not attempting this question

Q33
The following bids are received in a treasury bond auction. The notified amount is Rs. 20,000 million. No amount devolves on the RBI/PDs.

No. of Bonds
Price (Rs.)

39 million
110.2025

40 million
110.2000

41 million
110.1975

42 million
110.1950

43 million
110.1925

44 million
110.1900

45 million
110.1875

46 million
110.1850



What is the cut-off price in the auction? [ 3 Marks ]

(a) Rs. 110.1900
(b) Rs. 110.1950
(c) Rs. 110.1925
(d) Rs. 110.1875
(e) I am not attempting this question

Q34
Which of the following statements is TRUE? [ 1 Mark ]

(a) A Daily market- to- market based margin has to be paid on FRA's
(b) FRA's are OTC contracts
(c) FRA's cannot be cash-settled
(d) Swaps are traded on an exchange
(e) I am not attempting this question

Q35
Primary dealers are NOT directly involved in _______. [ 1 Mark ]

(a) creating an effective conduit for open market operations
(b) enabling wider holding of government securities
(c) extending market support to retail investors in debt market
(d) underwriting and market making in government securities
(e) I am not attempting this question

Q36
On value date 27/07/2001, the term to maturity of a GOI bond maturing on 28/07/2006 is _____ year. [ 2 Marks ]

(a) 5.075
(b) 5.003
(c) 5.002
(d) 5.005
(e) I am not attempting this question

Q37
Which of the following is a NOT a use of interest rate derivatives? [ 2 Marks ]

(a) They can be used to avail of arbitrage opportunities that may exist in the market.
(b) They can be used to speculate on future interest rates.
(c) They can be used to separate funding/ liquidity decisions from interest rate sensitivity decisions.
(d) They can be used to hedge credit risk.
(e) I am not attempting this question

Q38
An investing institution has paid some amount as application money in a privately placed corporate debenture issue. They will receive interest on the application money at ________. [ 2 Marks ]

(a) money market rates until the deemed date of allotment
(b) 15%
(c) the coupon rate applicable to the debenture for the period until the deemed date of allotment
(d) the MIBOR rate for the period until the deemed date of allotment
(e) I am not attempting this question

Q39
A 11.43% GOI security, maturing on 7-Apr-2015, trades on 28-Feb-2001. The next coupon payment is due on _______. [ 2 Marks ]

(a) 04-Apr-2001
(b) 06-Apr-2001
(c) 05-Apr-2001
(d) 07-Apr-2001
(e) I am not attempting this question

Q40
SEBI does NOT regulate _______. [ 1 Mark ]

(a) debentures issues by PSUs
(b) corporate debentures with less than 18 months to maturity
(c) Commercial Paper and Certificate of Deposit
(d) public issue of floating rate debentures
(e) I am not attempting this question

Q41
Which of the following statements is TRUE? [ 1 Mark ]

(a) State Government funding for fiscal deficit can only be done through market borrowings.
(b) State Government funding for fiscal deficit can only be done through loans from Central Government
(c) State Government funding for fiscal deficit through loans from the Central Government has fallen over the years
(d) None of the above
(e) I am not attempting this question

Q42
What is the PV01 of the following holding?
Coupon rate: 10.47%
Maturity date: 12-Feb-2015
YTM: 9.6524%
Settlement date: 7-Jul-2001
Size of holding: 2250 G-secs
[ 2 Marks ]

(a) Rs. 169.1489
(b) Rs. 169.1316
(c) Rs. 169.0767
(d) Rs. 169.1554
(e) I am not attempting this question

Q43
SBI enters into the following repo transaction:
Security: 11.99% GOI security maturing on 7-Apr-2009
Days in the repo period: 4
Settlement date: 13-Oct-2001
Face value of the transaction: Rs. 3,550,000
Market Price of the security: Rs. 116.25
Repo rate: 7.75%
How much does SBI pay on the second leg of the transaction?
[ 3 Marks ]

(a) Rs. 4,123,055
(b) Rs. 4,161,755
(c) Rs. 4,173,755
(d) Rs. 4,137,480
(e) I am not attempting this question

Q44
Which of the following statements about CP issuance is FALSE? [ 1 Mark ]

(a) CPs cannot be rolled over.
(b) The issuing and paying agent will have to be a scheduled bank.
(c) CP issues cannot be underwritten.
(d) CPs cannot be issued by primary dealers.
(e) I am not attempting this question

Q45
Settlement date for a repo transaction on the WDM segment of NSE is after specified number of _________. [ 2 Marks ]

(a) calendar days for the ready and forward legs of the transaction
(b) calendar days for the ready leg and working days for the forward leg of the transaction
(c) Working days for the ready leg and calendar days for the forward leg of the transaction
(d) Working days for the ready and forward legs of the transaction
(e) I am not attempting this question

Q46
Which of the following statements is TRUE for a normal overnight-indexed interest rate swap? [ 1 Mark ]

(a) The fixed leg gets compounded daily.
(b) The floating leg gets compounded daily at the overnight rate.
(c) Floating rate can be set weekly.
(d) The exchange of interest payments has to take place daily.
(e) I am not attempting this question

Q47
Consider a 6 month OIS:
Notional Principal = Rs. 200
Fixed Rate = 7.5%
Floating Rate = NSE Overnight MIBOR
Under the structure of the swap, the Fixed Rate is a nominal rate
MIBOR is compounded daily (on holidays, the previous MIBOR is taken)
Consider 182 days in the period of the swap, 365 days in a year
MIBOR remains constant for the entire period at 6.90%
What is the amount to be exchanged at the end?
[ 3 Marks ]

(a) Rs. 0.479
(b) Rs. 0.858
(c) Rs. 0.191
(d) Rs. 0.600
(e) I am not attempting this question

Q48
Which of the following is FALSE? [ 2 Marks ]

(a) The company has to file the details of the charge with the Registrar of Companies.
(b) A charge can be enforced only if it is registered with the Registrar of the Companies.
(c) If no charge is created, such borrowings will be treated as "deposits" under Companies (Acceptance of Deposits) Rules, 1975.
(d) No charge is required to be created for debentures with maturity less than 18 months.
(e) I am not attempting this question

Q49
The average trade size at NSE-WDM segment is approximately Rs. ___ crore. [ 2 Marks ]

(a) 12
(b) 10
(c) 6
(d) 2
(e) I am not attempting this question

Q50
How are the securities, used as collateral in a repo transaction, valued? [ 1 Mark ]

(a) The value of the collateral is the clean price of the security, adjusted for a 'haircut.'
(b) The value of the collateral is calculated by discounting the cash flows at the YTM of a comparable bond.
(c) The value of the collateral is equal to the market value of the securities.
(d) The value of the collateral is the dirty price of the security, less margin.
(e) I am not attempting this question

Q51
You have sold the following GOI bond:
Coupon Rate: 11.68%
Maturity Date: April 10, 2006
Settlement Date: October 9, 2001
Price: Rs. 115.7625
Transaction amount: Rs. 97,700,000
How much do you receive on settlement?
[ 3 Marks ]

(a) Rs. 118,798,944
(b) Rs. 118,783,944
(c) Rs. 118,748,944
(d) Rs. 118,773,944
(e) I am not attempting this question

Q52
A treasury bill maturing on 30-Jul-2001 has a market price of Rs. 99.4881 on 3-Jul-2001. What is the discount rate (%) inherent in this price? [ 2 Marks ]

(a) 7.2057
(b) 6.9557
(c) 7.0557
(d) 6.7057
(e) I am not attempting this question

Q53
A dealer purchased on April 12, 2000 a 11.50% GOI bond maturing on 24-Nov-2011 for Rs. 115.03. He held it for 1 year, and sold it on 11-April-2001 for Rs. 110.78. He reinvested the coupons received during the holding period (first coupon @8.1355% and the second coupon @6.6475%). What is the realised yield (%) from the investment? [ 3 Marks ]

(a) 7.1360
(b) 6.7871
(c) 6.4860
(d) 7.0860
(e) I am not attempting this question

Q54
What is the duration (years) of the following GOI bond:
Coupon rate: 12.50%
Maturity date: 23-Mar-2004
YTM: 7.8384%
Settlement date: 10-Jul-2001
[ 2 Marks ]

(a) 2.321
(b) 2.295
(c) 2.329
(d) 2.324
(e) I am not attempting this question

Q55
The following bids are received in a treasury bond auction. The notified amount is Rs. 20,000 million. No amount devolves on the RBI/PDs.

No. of Bonds
Price (Rs.)

39 million
110.2025

40 million
110.2000

41 million
110.1975

42 million
110.1950

43 million
110.1925

44 million
110.1900

45 million
110.1875

46 million
110.1850



At what price will non-competitive bidders receive allotments? [ 3 Marks ]

(a) Rs. 110.1980
(b) Rs. 110.1938
(c) Rs. 110.1925
(d) Rs. 110.1975
(e) I am not attempting this question

Q56
Who are currently the largest holders of T-bills? [ 1 Mark ]

(a) Banks
(b) Provident Funds
(c) Mutual Funds
(d) Primary Dealers
(e) I am not attempting this question

Q57
In relation to documentation of a deal in the debt markets, which of the following statements is FALSE? [ 2 Marks ]

(a) Documentation is evidence of the deal, and should not override the terms agreed upon orally.
(b) A dealer cannot, under any circumstance, specify that a deal is subject to documentation.
(c) A market transaction is usually confirmed orally, and the practice is not to finalise a deal subject to documentation.
(d) Making a transaction subject to documentation is not considered good market practice.
(e) I am not attempting this question

Q58
_______ of outright transactions in G-secs is reported on the WDM segment of NSE. [ 1 Mark ]

(a) Almost 90%
(b) Over 80%
(c) About 65%
(d) Less than 50%
(e) I am not attempting this question

Q59
Which one of the following conditions an offsetting swap, for a normal fixed-floating interest rate swap, does not have to satisfy? [ 1 Mark ]

(a) Floating leg benchmark should be the same.
(b) Notional Principal should be the same.
(c) Fixed Rate has to be the same.
(d) Interest exchange dates have to be the same.
(e) I am not attempting this question

Q60
A trading member on the WDM segment of NSE sets up a counter party limit of Rs. 350 lakh against counter-party and utilises Rs. 300 lakh on a given day which is still outstanding in current asset limit. The next day, he modifies the CP limit to Rs. 250 lakh. Which of the following will hold good? [ 2 Marks ]

(a) The counterparty has to be notified about the reduction in the CP limit.
(b) The CP limits cannot be modified to a level lower than amounts in current asset limit.
(c) The earlier transaction will remain in the system as utilised CP limit until those trades are settled; the new CP limit will apply for fresh trades.
(d) The new CP limit will result in the counterparty cancelling or reversing that amount of transaction that exceeds the new CP limit.
(e) I am not attempting this question