NISM Certifications Specialized and Institutional Certifications Syllabus

What is a bond's coupon rate?

The fixed annual interest rate stated on a bond, expressed as a percentage of its face (par) value, determining the periodic interest payments to the bondholder.

What is the relationship between a bond's price and prevailing market interest rates?

Inverse relationship: when market interest rates rise, bond prices fall, and when rates fall, bond prices rise.

What is the difference between a bond's Yield to Maturity (YTM) and its current yield?

YTM is the total return if held to maturity, accounting for coupon, price, and time value; current yield is simply annual coupon divided by current market price, ignoring capital gain/loss and reinvestment.

When does a bond trade at a premium versus a discount?

At a premium when its coupon rate exceeds the market yield (price above par); at a discount when its coupon rate is below the market yield (price below par).

What is the formula for the current yield of a bond?

Current Yield = (Annual Coupon Payment / Current Market Price) x 100.

What is Macaulay Duration?

The weighted average time (in years) to receive a bond's cash flows, where weights are the present values of each cash flow as a proportion of the bond's price; a measure of interest rate sensitivity.

What is Modified Duration and what does it measure?

Modified Duration = Macaulay Duration / (1 + YTM/n). It measures the approximate percentage change in a bond's price for a 1% change in yield.

How do you approximate the percentage change in a bond's price using Modified Duration?

% Price Change = - Modified Duration x Change in Yield. For example, a duration of 5 with a 1% rate rise implies roughly a 5% price fall.

What is convexity and why does it matter for bonds?

Convexity measures the curvature of the price-yield relationship; it corrects the duration estimate. Higher convexity means bond prices rise more when yields fall and fall less when yields rise (a desirable property).

How does maturity and coupon affect a bond's interest rate (duration) risk?

Longer maturity increases duration/interest-rate risk; higher coupon decreases duration. Thus a long-maturity, low-coupon (or zero-coupon) bond has the highest interest rate risk.

What is the duration of a zero-coupon bond?

Equal to its time to maturity, because its only cash flow is the single payment at maturity.

What distinguishes money market instruments from capital market instruments?

Money market instruments have an original maturity of up to 1 year (short-term, high liquidity, low risk); capital market instruments have maturities exceeding 1 year.

What is a Treasury Bill (T-Bill) and what tenures are issued in India?

A short-term government security issued at a discount and redeemed at face value (no coupon), issued by RBI on behalf of the government in 91-day, 182-day, and 364-day tenures.

What is Commercial Paper (CP) and who issues it?

An unsecured short-term money market instrument (promissory note) issued at a discount by corporates, primary dealers, and large financial institutions to meet short-term funding needs, with maturity of 7 days to 1 year.

What is a Certificate of Deposit (CD)?

A negotiable, unsecured money market instrument issued by banks and select financial institutions against funds deposited, issued at a discount with maturity from 7 days to 1 year (up to 3 years for FIs).

What are Government Securities (G-Secs) and what is the difference between dated securities and T-Bills?

G-Secs are debt instruments issued by the central/state government. Dated securities have maturities over 1 year and carry coupons; T-Bills are short-term (under 1 year) zero-coupon instruments issued at a discount.

What is the role of merchant bankers in a public issue of securities?

Merchant bankers manage the issue: due diligence, drafting the prospectus/offer document, pricing, marketing/roadshows, coordinating with SEBI and intermediaries, and ensuring regulatory compliance as lead managers.

Under SEBI regulations, what are the categories of merchant banker registration historically, and the current requirement?

Originally Categories I-IV; currently only Category I merchant bankers (lead managers) are registered, requiring a minimum net worth of Rs. 5 crore.

What is an 'underwriting' commitment by a merchant banker?

An agreement to subscribe to (buy) the unsubscribed portion of a securities issue, guaranteeing the issuer raises the targeted capital and bearing the risk of under-subscription.

What is corporate restructuring and what are its main forms?

Reorganizing a company's structure or operations to improve efficiency/value. Main forms: mergers, acquisitions, amalgamations, demergers/spin-offs, slump sale, buybacks, and financial restructuring.

What is the difference between a merger and an acquisition?

In a merger two companies combine to form a single entity (or one absorbs the other); in an acquisition one company purchases controlling interest in another, which may continue to exist as a subsidiary.

What is a demerger (spin-off)?

A form of corporate restructuring where a company separates one or more business units into independent companies, with shareholders typically receiving shares in the resulting entity, to unlock value or focus operations.

What is the difference between a horizontal and a vertical merger?

A horizontal merger is between firms in the same industry/competitors (to gain market share/economies of scale); a vertical merger is between firms at different stages of the same supply chain (e.g., supplier and manufacturer).

In capital raising, what is the difference between an IPO and an FPO?

An IPO (Initial Public Offering) is a company's first sale of shares to the public; an FPO (Follow-on Public Offering) is a subsequent issuance of shares by an already-listed company.

What is a REIT (Real Estate Investment Trust)?

A trust that owns, operates, or finances income-generating real estate, pools investor money to invest in property, and is required to distribute most of its income to unit holders; units are listed and traded on exchanges.

What are the key distribution and asset requirements for a REIT under SEBI regulations?

A REIT must distribute at least 90% of net distributable cash flows to unit holders (at least twice a year) and invest at least 80% of assets in completed, rent-generating properties (max 20% in under-construction/other assets).

What is an InvIT (Infrastructure Investment Trust) and how does it differ from a REIT?

An InvIT is a trust that pools investor money to invest in income-generating infrastructure assets (roads, power, telecom, etc.), whereas a REIT invests in real estate; both must distribute at least 90% of net distributable cash flows.

What is the minimum asset value required for a publicly offered REIT/InvIT under SEBI rules?

The value of assets must be at least Rs. 500 crore and the minimum offer/issue size at least Rs. 250 crore for a public REIT or InvIT.

What is the Social Stock Exchange (SSE) in India?

A separate segment of existing stock exchanges (NSE/BSE) that enables Social Enterprises (NPOs and for-profit social enterprises) to raise funds from the public for social impact, providing transparency and a regulated fundraising platform.

What do the three letters in ESG investing stand for, and what does it represent?

Environmental, Social, and Governance - a framework for evaluating a company's sustainability and ethical impact (e.g., carbon footprint, labor practices, board structure) alongside financial factors in investment decisions.