NISM Series XV · Unit 3 of 15 · about 2% of the paper
Terminology in equity and debt markets: NISM Series XV notes and practice questions
Key terms the analyst must use correctly.
What to know in Unit 3
- Equity and debt terms.
Key terms, examples and exam traps
Market capitalisation
Market capitalisation is share price multiplied by shares outstanding, and classifies companies as large, mid or small cap.
Example. A company with 50 crore shares at ₹200 has a value of ₹10,000 crore.
Exam trap. This statement is false: Market capitalisation is the company's total assets.
Yield to maturity
Yield to maturity is the annualised return on a bond if held to maturity and coupons are reinvested at the same rate.
Example. A bond priced below face value has a yield above its coupon.
Exam trap. This statement is false: Yield to maturity equals the coupon rate always.
Face value and issue price
Face value is the nominal value of a security, while the issue price is what investors pay at the time of issue, which may differ.
Example. A share with face value ₹10 is issued at ₹250.
Exam trap. This statement is false: Issue price is always equal to face value.
Credit spread
Credit spread is the extra yield on a risky bond over a risk-free government bond of similar maturity, compensating for credit risk.
Example. A corporate bond yields 2% more than a similar G-sec.
Exam trap. This statement is false: Credit spread is the difference between bid and ask.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which term is described here? Credit spread is the extra yield on a risky bond over a risk-free government bond of similar maturity, compensating for credit risk.
- Resistance
- Delisting
- Income statement
- Credit spread
Q2. Which statement best describes “Yield to maturity”?
- An economic moat is a durable competitive advantage, such as brand, network effect, cost advantage or switching cost, protecting long-term profits.
- Technical analysis studies price and volume history to forecast future price moves, assuming patterns repeat.
- Yield to maturity is the annualised return on a bond if held to maturity and coupons are reinvested at the same rate.
- The balance sheet shows a company's assets, liabilities and shareholders' equity at a point in time; assets equal liabilities plus equity.
Q3. Which term is described here? Face value is the nominal value of a security, while the issue price is what investors pay at the time of issue, which may differ.
- Double top
- Public appearance disclosures
- Research entity
- Face value and issue price
Q4. Which term is described here? Market capitalisation is share price multiplied by shares outstanding, and classifies companies as large, mid or small cap.
- Market capitalisation
- Downside risk
- Risk disclosure in reports
- Associate's trading
Q5. A share with face value ₹10 is issued at ₹250. Which idea does this illustrate?
- Face value and issue price
- Yield to maturity
- Credit spread
- Market capitalisation
Q6. Which term is described here? Yield to maturity is the annualised return on a bond if held to maturity and coupons are reinvested at the same rate.
- Face value and issue price
- Credit spread
- Yield to maturity
- Market capitalisation
Frequently asked questions
How much of NISM Series XV comes from Unit 3?
Unit 3 (Terminology in equity and debt markets) usually carries about 2% of the questions. The whole exam has 100 questions and the pass mark is 60%.
What should I study in NISM Series XV Unit 3?
Equity and debt terms.
Are these NISM Series XV practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
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