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Question and Answer Bank in Financial Markets - Part 5

(200 questions and answers)

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  1. The computation of open position for client trades would be carried out on a ______________. {Derivatives}
    1. Gross basis i.e. long minus short
    2. Net basis i.e. long and short separately


  2. A clearing member of F&O segment is required to have a networth of ____________ and keep collateral security deposit of ______________.{Derivatives}
    1. Rs. 3 Crore, 50 Lakhs
    2. Rs. 5 Crore, 50 Lakhs
    3. Rs. 3 Crore, 80 Lakhs
    4. Rs. 5 Crore, 10 lakhs


  3. The clearing member has to maintain a minimum liquid networth of ___________. {Derivatives}
    1. Rs. 35 Lakhs
    2. Rs. 50 Lakhs
    3. Rs. 80 Lakhs
    4. Rs. 20 Lakhs


  4. Initial margin paid/payable should be debited to _____________. {Derivatives}
    1. "Initial margin - Equity index futures account"
    2. "Initial margin - Equity index futures broker's account"
    3. "Initial margin - Equity index futures client's account"
    4. None of the above


  5. Weekly options traded on NSE follow an _______________. {Derivatives}
    1. European style settlement
    2. American style settlement
    3. Asian style settlement
    4. Weekly options are not traded at NSE


  6. A stock is currently selling at Rs. 75. The put option to sell the stock at Rs. 80 costs Rs. 6. What is the time value of the option? {Derivatives}
    1. Rs. 1
    2. Rs. 5
    3. Rs. 2
    4. Rs. 4


  7. Equity Index Options are a form of ______________. {Derivatives}
    1. Options on futures
    2. Basket options
    3. Swaptions
    4. Warrants


  8. Swaptions is an option to buy or sell a ______________ at the expiry of the option. {Derivatives}
    1. Swap
    2. Futures
    3. Basket option
    4. Warrant


  9. ___________________ is one of the uses of derivatives. {Derivatives}
    1. Forecasting
    2. Risk taking
    3. Arbitrage
    4. All of the above


  10. To be eligible for options trading, the _______________ of a stock is taken into account. {Derivatives}
    1. Price Limit
    2. Trading Member Position Limit
    3. Client Wise Position Limit
    4. Market Wise Position Limit


  11. The theoretical futures price is considered for ______________ in case a futures contract is not traded during the day.{Derivatives}
    1. Opening price
    2. Last traded price
    3. premium settlement
    4. Daily mark to market settlement


  12. You are the owner of a 4 million portfolio with a beta 1.0. You would like to insure your portfolio against a fall in the index of magnitude higher than 15%. Spot Nifty stands at 4200. Put options on the Nifty are available at three strike prices. Which strike price will give you the insurance you want? {Derivatives}
    1. 4,870
    2. 4,840
    3. 3,570
    4. None of the above


  13. 2.5% is the ______________ brokerage chargeable by a trading member in relation to trades effected in the contracts admitted to dealing on the F&O segment of NSEIL, exclusive of statutory levies. {Derivatives}
    1. Maximum
    2. Minimum
    3. There is no limit on the brokerage
    4. Fixed


  14. Mr. X has sold 800 calls on Dr. REDDY'S LAB at a strike price of Rs. 882 for a premium of Rs. 25 per call on April 1. The closing price of equity shares of Dr. REDDY'S LAB is Rs. 884 on that day. If the call option is assigned against her on that day, what is his net obligation on April 01? {Derivatives}
    1. Pay-out of Rs. 18,300
    2. Pay-in of Rs. 18,300
    3. Pay-in of Rs. 13,800
    4. Pay-out of Rs. 18,400


  15. T+1 is the basis on which ______________ of futures takes place. {Derivatives}
    1. Hedging
    2. Arbitrage
    3. Pricing
    4. Daily mark to market settlement


  16. The stock symbol, volume and price at which each successive trade occurs is dispalyed in the ______________? {Derivatives}
    1. NEAT Trading System Ticker Screen
    2. MBP Screen
    3. Outstanding Orders Screen
    4. None of the above


  17. "An unique user ID is assigned to each _____________ in F&O segment of NSEIL. {Derivatives}
    1. User of the trading member
    2. Director of the trading member
    3. Branch
    4. Exchange


  18. An IOC order stands for _______________. {Derivatives}
    1. Interest Order Cancellation
    2. Immediate or Cancel order
    3. Increase Order Cancellation
    4. Immediate or Correct order


  19. ________________ facility is available on the F&O segment of NSEIL. {Derivatives}
    1. Stock trading facility
    2. Commodity trading
    3. Carry forward
    4. Basket trading facility


  20. _______________ is an order which will be cancelled if it is not matched immediately and in its entirely, in F&O segment of NSEIL. {Derivatives}
    1. MBP order
    2. Immediate or Cancel order
    3. Limit order
    4. Stop loss order


  21. Institutional investors world wide are major users of ______________. {Derivatives}
    1. Stock futures
    2. Stock options
    3. Index linked derivatives
    4. Equity linked derivatives


  22. An "authorised person" in the Futures & Options segment is __________________. {Derivatives}
    1. The client of the broker
    2. A clearing member
    3. An approved user of a participant
    4. All of the above


  23. All trading member's positions are monitored on a real time basis by the ______________. {Derivatives}
    1. Clearing members only
    2. Trading members only
    3. NSCCL
    4. NSE


  24. The option price is the ______________. {Derivatives}
    1. Price paid by the buyer of the option to the seller of the option
    2. Paid by the seller of the option to the buyer of the option
    3. Sum of intrinsic value plus daily margin of an option
    4. All of the above


  25. _______________ contracts are not settled on exercise date? {Derivatives}
    1. In the money option contracts
    2. Deep in the money option contracts
    3. Both in the money and deep in the money option contracts
    4. Out of the money option contracts


  26. Which of the following are derivatives? {Derivatives}
    1. Stocks
    2. Bonds
    3. Forward Rate Agreements
    4. All of the above


  27. To safeguard against potential losses on out-standing positions _____________ is collected. {Derivatives}
    1. Premium margin
    2. Assignment margin
    3. Initial margin
    4. None of the above


  28. The seller of a derivative instrument pays ______________. {Derivatives}
    1. Wealth
    2. Sales tax
    3. Securities transaction tax
    4. Excise duty


  29. The intrinsic value of a call option is the amount the option is ____________. {Derivatives}
    1. Deep out of the money
    2. At the money
    3. Out of the money
    4. None of the above


  30. 1 is the beta of _____________. {Derivatives}
    1. All stocks traded at NSE
    2. Nifty 50
    3. All stocks which are part of Nifty 50
    4. None of the above


  31. A stock broker must have a certificate of registration granted by SEBI before he is allowed to ______________. {Derivatives}
    1. Set up his broking firm
    2. Hire employees for his broking firm
    3. Appoint any director in the broking firm
    4. Buy, sell or deal in securities


  32. The market impact cost on a trade of Rs. 3 million of the S&P CNX Nifty works out to be about 0.05%. This means that if S&P CNX Nifty is at 4000, a sell order of that value will go through at a price of Rs. _______________. {Derivatives}
    1. 3,998
    2. 3,995
    3. 3,999.50
    4. 3,995.50


  33. _______________ can be bought and sold on an exchange like shares. {Derivatives}
    1. ETFs
    2. Index funds
    3. Fixed deposits
    4. None of the above


  34. Mr. X has sold 600 calls on WIPRO at a strike price of Rs. 1,403 for a premium of Rs. 30 per call on April 1. The closing price of equity shares of WIPRO is Rs. 1,453 on that day. If the call option is assigned against her on that day, what is her net obligation on April 01? {Derivatives}
    1. Pay-out of Rs. 21,600
    2. Pay-in of Rs. 15,000
    3. Pay-out of Rs. 13,400
    4. Pay-in of Rs. 12,000


  35. _________________ seeks to measure the amount of value that a portfolio may stand to lose within a certain time horizon due to potential changes in the underlying asset spot price. {Derivatives}
    1. Black & Scholes model
    2. VaR methodology
    3. Binomial model
    4. Volatility model


  36. Mr. A sells a futures contract of XYZ Ltd., (Lot Size: 1000) expiring on 29th September for Rs. 300. The spot price of the shares is Rs. 290. He will have to pay a ___________. {Derivatives}
    1. Wealth tax
    2. Sales tax
    3. Excise tax
    4. Security transaction tax


  37. An index put option at a strike price of Rs. 4,176 is selling at a premium of Rs. 18. At what index level will it break even for the buyer of the option? {Derivatives}
    1. Rs. 4,194
    2. Rs. 4,196
    3. Rs. 4,158
    4. Rs. 4,162


  38. Which of the following is the duty of the trading member? {Derivatives}
    1. Giving tips to clients to buy and sell
    2. Funding losses of the clients
    3. Ensuring timely pay-in and pay-out of funds
    4. All of the above


  39. Which of the following should be disclosed separately for long and short positions, in respect of each series of equity index futures as part of the balance sheet date? {Derivatives}
    1. Number of equity index futures contracts having open positon
    2. Names of the clients of each trade in the units of equity index futures
    3. Names of the dealers of each trade in the units of equity index futures
    4. All of the above


  40. Futures and Forwards are similar in the following respect ______________. {Derivatives}
    1. Settlement of contract takes place in the future
    2. They have settlement guarantee
    3. Positions are marked-to-market everyday
    4. Contracts are custom designed


  41. You have bought a stock on the exchange. To eliminate the risk arising out of the stock price, you should ______________. {Derivatives}
    1. Buy index futures
    2. Buy stock futures
    3. Sell stock futures
    4. Buy more stocks


  42. MTM settlement stands for _______________. {Derivatives}
    1. Member to member settlement
    2. Market to market settlement
    3. Money to money settlement
    4. Monday to Monday settlement


  43. The spot price of ABC Ltd., is Rs. 1,000 and the cost of financing is 10%. What is the fair price of a one-month futures contract on ABC Ltd.? {Derivatives}
    1. 1,082.80
    2. 1,008.35
    3. 1,085.15
    4. 1,099.40


  44. Cyrus is short 800 WIPRO July Puts at a strike of Rs. 1,620 for a premium of Rs. 43 each on July 22. On July 25, (the expiration day of the contract), the spot price of WIPRO closes at Rs. 1,653, while the July futures on WIPRO close at 1,655. Does Cyrus have an obligation to the Clearing Corporation on his positions, and how much, if any? {Derivatives}
    1. Yes Rs. 19,800 pay-out
    2. No pay in or pay out on expiration of contract
    3. Yes Rs. 18,900 pay out
    4. Yes Rs. 19,800 pay in


  45. Which of the following is required for personnel working in the industry in order to dispense quality intermediation? {Derivatives}
    1. To follow certain code of conduct
    2. To give frequent buy and sell recommendations to clients
    3. To have good contacts with institutional clients
    4. All of the above


  46. June futures contracts on ABC Ltd., closed at Rs. 4,153 on May 20 and at Rs. 4,150 on May 21. Mr. X has a short position of 8000 in the July futures contract. On May 21, he sells 5000 units of 28-June expiring put options on ABC Ltd., at a strike price of Rs. 4,145 for a premium of Rs. 30 per unit. What is his net obligations to/from the clearing corporation for May 21? {Derivatives}
    1. Pay in of Rs. 1,32,000
    2. Pay in of Rs. 1,72,000
    3. Pay out of Rs. 1,74,000
    4. Pay out of Rs. 1,32,000


  47. Assume that the base value of a market capitalization weighted index were 1000 and the base market capitalization were Rs. 55,000 crore. If the current market capitalization is Rs. 1,10,000 crore, the index is at Rs. ___________. {Derivatives}
    1. 2,110
    2. 2,350
    3. 2,250
    4. 2,000


  48. TRAHK (Tracks) is a popular ETF based on the _______________. {Derivatives}
    1. Nifty 50 index
    2. S&P 500 index
    3. Hang Seng index
    4. Dow Jones index


  49. If the annual risk free rate is 12%, then the "r' used in the Black Scholes formula should be ____________. {Derivatives}
    1. 0.1133
    2. 0.1398
    3. 1.1
    4. None of the above


  50. At the balance sheet date, the balance in the "initial margin equity index options account" should be shown separately under the head ______________________. {Derivatives}
    1. Prepaid expenses
    2. Current assets
    3. Outstanding balances
    4. Current liabilities


  51. Heding with stock futures means ______________. {Derivatives}
    1. Long security, short security
    2. Long index futures, short index futures
    3. Long security, short stock futures
    4. Long security, long index futures


  52. Which of the following is the duty of the trading member? {Derivatives}
    1. Filling of "Know Your Client" form
    2. Execution of Client Broker Agreement
    3. Bringing risk factors to the knowledge of client
    4. All of the above


  53. On expiry, the settlement price of a stock futures contract is _____________. {Derivatives}
    1. Opening price of futures contract
    2. Closing stock price
    3. Closing price of futures contract
    4. Opening stock value


  54. The NEAT F&O trading system __________________. {Derivatives}
    1. Allows spread trades
    2. Does not allow combination trades
    3. Allows only a single order placement at a time
    4. None of the above


  55. Mr. X is bearish about ABC Ltd., and sells ten one-month ABC Ltd., futures contracts at Rs. 3,96,000. On the last Thursday of the month, ABC Ltd., closes at Rs. 410. He makes a ___________________ (assume one lot = 100). {Derivatives}
    1. Profit of Rs. 7,000
    2. Loss of Rs. 7,000
    3. Profit of Rs. 14,000
    4. Loss of Rs. 14,000


  56. The __________________ applies to SEBI for the trading member registration. {Derivatives}
    1. Stock exchange, of which he or she is admitted as a member
    2. Stock broker
    3. Association of trading members
    4. Association of national trading members


  57. The on-line certification of NSE is known as the _________________. {Derivatives}
    1. National Certification in Financial Management (NCFM)
    2. National Certification in Financial Markets (NCFM)
    3. NSE's Certification in Financial Markets (NCFM)
    4. NSE's Certification in Financial Management (NCFM)


  58. In Indian context, trading of derivatives is governed by the regulatory framework under the ____________. {Derivatives}
    1. SC(R) R
    2. SEBI Act
    3. SC(R) A
    4. None of the above


  59. The theoretical futures price is __________________. {Derivatives}
    1. The price of a contract in the future
    2. Spot price plus cost of carry
    3. The price at which a futures contract trades in the market
    4. The price set by the exchange


  60. Stock options on ICICI Bank Ltd., can be exercised ___________________. {Derivatives}
    1. Any time on or before maturity
    2. Upon maturity
    3. Any time upto maturity
    4. On a date pre-specified by the trading member


  61. ____________________ is allowed to only clear trades of others but not trade themselves. {Derivatives}
    1. Trading member - clearing member
    2. Trading members are not allowed to clear their own trades
    3. Professional clearing members
    4. Self clearing members


  62. The intial margin amount is based on _______________. {Derivatives}
    1. Black and Scholes calculations
    2. Binomial calculations
    3. VaR calculations
    4. Theoritical pricing calculations


  63. A market index is very important for its use ________________. {Derivatives}
    1. as a barometer for market behaviour
    2. as an indicator of future stock prices
    3. as an indicator of management's quality of companies
    4. All of the above


  64. Swaps are a form of __________________. {Derivatives}
    1. Derivatives
    2. Stocks
    3. Bonds
    4. None of the above


  65. _______________ is what the person making the quote is willing to pay for buying one unit of the base currency from the other party.{Forex}
    1. Bid
    2. Ask
    3. Spread


  66. A Spot Trade implies{Forex}
    1. Immediate settlement
    2. Settlement on the spot
    3. Settlement on T+2
    4. Settlement on T+3


  67. In calculating the Spot Date from Dealing Date we need to consider two days, whether business days or not.{Forex}
    1. True
    2. False


  68. Four banks in the international market quote you Spot GBP/USD. Which is the best quote for you as a seller of GBP.{Forex}
    1. 0.9249
    2. 0.9250
    3. 0.9247
    4. 0.9245


  69. Between JPY and EUR: {Forex}
    1. JPY is the variable currency
    2. JPY is the base currency
    3. EUR is the base currency
    4. Both a and c are true


  70. A settlement date of a T+1 in Forex markets is {Forex}
    1. Cash trade
    2. Tom trade
    3. Spot trade


  71. When a customer phones a bank with a commercial requirement: {Forex}
    1. The bank will see whetehr or not it can handle the need before responding
    2. The bank will fill the customer need and find ways to handle the market separately
    3. If the market situation is unprofitable the bank will refuse to complete the transaction for the customer
    4. The bank will make a loss if it has to; but will fill the need


  72. Which of the following is true: {Forex}
    1. If a transaction is not to be settled on T+0 it is a forward
    2. If a transaction is to be settled on T+1 it is a forward
    3. If a transaction is to be settled beyond T+2 it is a forward
    4. If a transaction is to be settled on T+2 it is a forward


  73. Importing countries or importing companies of a country want their currencies to be: {Forex}
    1. Weak
    2. Strong
    3. Equal


  74. Spot USD/JPY is 77.15 -10 and GBP/USD is 1.6310-25. What rate would you quote to a customer who wishes to sell JPY against GBP.{Forex}
    1. 125.7501
    2. 125.8316
    3. 125.8657
    4. 125.9473


  75. _____________ is a no risk trade by borrowing low carry asset (currency) and investing in a relatively higher carry asset (currency).{Forex}
    1. No risk trade
    2. Carry trade
    3. Drop trade


  76. The importance of currencies in the international market is determined by: {Forex}
    1. Usage of the currency for trade
    2. Usage of the currency for financial flows
    3. Political power of the related country
    4. Both a and b


  77. Exporting countries or exporting companies of a country want their currencies to be{Forex}
    1. Weak
    2. Strong
    3. Equal


  78. If our bank does not have operations in a particular currency center we will: {Forex}
    1. Inform the customer that settlement cannot be done
    2. Appoint a correspondent bank
    3. Open a branch since there is a customer need
    4. Inform management


  79. Which statement describes the Vostro: {Forex}
    1. Our account with them
    2. Their account with that other bank
    3. Their account with us
    4. Their account in our currency center


  80. SWIFT is a {Forex}
    1. Method for payment
    2. Method for messaging
    3. Both a and b
    4. Neither a nor b


  81. Forward contracts are of use only to importers who have bills to pay:{Forex}
    1. True
    2. False


  82. In the context of forex trade, the value date is best described as _____________ {Forex}
    1. The date a trade is undertaken
    2. The date the fixing rate is agreed upon
    3. The date the settlement occurs
    4. The date cofirmations are exchanged between counterparties


  83. Which of the following consummates what is intended between parties? {Forex}
    1. Trading
    2. Clearing
    3. Settlement


  84. FX trade has established legality after ____________ {Forex}
    1. Trade capture
    2. Trade validation
    3. Trade confirmation
    4. Trade settlement


  85. Reconciliations exist to check the accuracy of the firms books and records.{Forex}
    1. Internally between systems and departments
    2. Externally where securities and cash are held
    3. Both a and b


  86. We are in January and a dealer has borrowed USD 5 million till December and lent USD 5 million till March, where the interest liability is floating. To cover the position the dealer would do which of the following? {Derivatives}
    1. Buy 3 vs 12 FRA
    2. Sell 3 vs 12 FRA
    3. Buy 3 vs 9 FRA
    4. Sell 3 vs 9 FRA


  87. You quote the following rates to a customer spot GBP-CHF 2.2005-10; 3M GBP-CHF swap 120-115. At what rate do you sell GBP to a customer 3-month outright? {Forex}
    1. 2.189
    2. 2.2125
    3. 2.1895
    4. 2.1885


  88. You are quoted the following market rates ......... Spot EUR/GBP 0.6670; 6M (182 day) EUR 2.35%; 6M (182 day) GBP 3.75%. What is the 6-month EUR-GBP? {Forex}
    1. 0.6675
    2. 0.6715
    3. 0.6717
    4. 0.6718


  89. What is the value date of a 6-month outright forward FX transaction dealt today - if today's spot date is Monday 30th June? Assume there are no bank holidays.{Forex}
    1. 27th December
    2. 30th December
    3. 31st December
    4. 1st January


  90. Consider GE which supplies power equipment to India and bills in its home currency. Which of the folowing is a valid advice for GE ___________________.{Forex}
    1. If GE's home currency is depreciating, enter into a forward contract.
    2. If the currency of the importer is appreciating, enter into a forward contract.
    3. If the currency of the importer is depreciating, enter into a forward contract.
    4. Do nothing


  91. A 6-month SEK-NOK swap is quoted at 140-150. Spot is 0.9445. Which of the following statements is correct?{Forex}
    1. SEK interest rates are higher than NOK interest rates
    2. NOK interest rates are higher than SEK interest rates
    3. NOK interest rates are higher than USD interest rates
    4. SEK interest rates and NOK interest rates are converging


  92. A payoff pattern for a forward is different from that of the underlying asset.{Forex}
    1. True
    2. False


  93. Which of the following is not a basic requirement for a forex trade:{Forex}
    1. Presence of two currencies
    2. The rate of exchange between the currencies must be fixed
    3. It can be conducted only at a designated foreign exchange center
    4. All of the above


  94. The main basis of foreign exchange trade is{Forex}
    1. International trade
    2. Exports and imports
    3. Free float system
    4. Gold standard
    5. Capital flows


  95. Balance of payments is ____________{Forex}
    1. It is a statement which shows the exports and imports between two countries
    2. It is a statement which shows the transactions between any two countries
    3. A systematic record of all transactions between residents and non-residents during a year
    4. A systematic record of all economic transactions between the residents of a reporting country and the residents of foreign countries during a given period of time


  96. What are the two accounts in a Balance of Payments?{Forex}
    1. Cash account and Current account
    2. Current account and Capital account
    3. Current account and Non-current account
    4. Goods account and Capital account


  97. Balance of Trade and Balance of Payments are one and the same{Forex}
    1. True
    2. False


  98. Invisibles in Balance of Payments refer to ______________{Forex}
    1. Services
    2. Items which are not recorded by customs
    3. Payments which are received outside India
    4. Banking and Travel services


  99. What type of accounting system is followed to record balance of payment transactions?{Forex}
    1. Single entry book keeping
    2. Double entry book keeping
    3. Receipts and Payments account
    4. Income and expenditure account


  100. Unilateral transfers is a part of __________{Forex}
    1. Capital account
    2. Foreign exchange account
    3. Current account
    4. None of the above


  101. Devaluation of a currency will help ___________{Forex}
    1. Exports
    2. Imports
    3. Unilateral transfers
    4. All of the above


  102. Depreciation and Devaluation of currency refers to the same thing{Forex}
    1. True
    2. False


  103. Under Gold Standard, the currencies are pegged to ____________{Forex}
    1. Great Britain Pound
    2. Dollar
    3. Both Gold and Dollar
    4. Gold


  104. If mint-par rate of USD is $100 and mint-par rate of INR is Rs. 5,000, what is the exchange rate between USD and IRN?{Forex}
    1. Rs. 50
    2. Rs. 500
    3. Rs. 100
    4. Cannot say


  105. Left to itself, the Balance of Payments will correct itself{Forex}
    1. True
    2. False


  106. Forex price is ________________{Forex}
    1. The price of base currency in quoting currency
    2. The price of quoting currency in base currency
    3. The price of quoting currency against USD
    4. All of the above


  107. All ISO SWIFT codes start with the country code{Forex}
    1. True
    2. False


  108. Which currency has the highest heirarchy when it comes to quoting the currency in interbank market?{Forex}
    1. USD
    2. GBP
    3. EUR
    4. Local currency


  109. What are the two market segements in forex?{Forex}
    1. Interdealer market and Commercial market
    2. Interbank market and Interdealer market
    3. Commercial market and Local market
    4. Wholesale market and Interbank market


  110. Which of the following is a cross rate?{Forex}
    1. USD/INR
    2. GBP/USD
    3. EUR/USD
    4. EUR/GBP


  111. Price quotation is also called as ___________{Forex}
    1. Direct quotation
    2. Indirect quotation
    3. Product quotation
    4. Base quotation


  112. Interdealer market deals in _____________{Forex}
    1. One-way quotes
    2. Direct quotes
    3. Two-way quotes
    4. Indirect quotes


  113. For the quote GBP/USD = 1.9997/2.0002, which of the following is the correct abbreviated quote?{Forex}
    1. 1.9997 / 202
    2. 1.9997 / 99
    3. 1.9997 / 002
    4. 1.9997 / 02


  114. In FX, Trade date and Value date are one and the same.{Forex}
    1. True
    2. False


  115. Settlement risk arises on ___________{Forex}
    1. Settlement date
    2. Trade date
    3. At any point between trade date and settlement date
    4. Settlement risk do not exist in FX trade


  116. Identify the correct grouping of value dates{Forex}
    1. Trade date and Settlement date
    2. Spot date, Trade date and Settlement date
    3. Spot date, Short dates and Forward
    4. Tom date and Spot date


  117. In case of cross rate, Newyork should also be open for settlement.{Forex}
    1. True
    2. False


  118. For broken dates in Forward value dates, the method used to calculate the rate is ____________{Forex}
    1. Non-linear interpolation
    2. Polynomial interpolation
    3. The nearest short standard tenor rate is used
    4. Linear interpolation


  119. Which of the following is not a cash FX deal?{Forex}
    1. Outright
    2. Forex swap
    3. Cross currency swap
    4. All of the above


  120. Forex swap and Currency swap are one and the same{Forex}
    1. True
    2. False


  121. The FX rate on the far leg of an FX swap is _____________{Forex}
    1. The prevailing spot price on the far leg
    2. Derived from the spot price of the near leg plus the accrued interest
    3. The forward FX rate of the far leg date prevailing on the trade date
    4. The parties agree to the rate on the fixing date just before the far leg


  122. Which of the following is a cash management tool?{Forex}
    1. Forex swap
    2. Cross currency swap
    3. Total return swap
    4. All of the above


  123. When two instruments pay same notional rate but with different payment (or compounding frequency), which of the following is used to compare their true rate? (Select the most appropriate) {Interest Rates}
    1. Effective Annual Rate (EAR)
    2. Continuously compounded rate (CCR)
    3. Either (a) or (b)
    4. EAR in practice for ease of understanding but CCR is logically consistent and computationally efficient


  124. What is the difference between Effective Annual Rate (EAR) and Annual Percentage Rate (APR)? {Interest Rates}
    1. Both EAR and APR are annualised rates; the former is market practice for enabling comparing nominal rates with different payment frequency while the later is a legal requirement in consumer credit.
    2. EAR incorporates interest rate and compounding rate but ignores non-interest charges (e.g. fees)
    3. APR incorporates interest rate and non-interest charges (e.g. fees) but ignores compounding
    4. All of them


  125. In which of the following cases, the compounded interest amount will be LESS than simple interest amount? {Interest Rates}
    1. When the payment period consists of two or more compounding periods
    2. When the payment period is equal to the compounding period
    3. When the payment period is less than the compounding period
    4. Compound interest cannot be less than simple interest in all cases


  126. Which of the following is a discount instrument in the money market? {Interest Rates}
    1. Treasury bill
    2. Commercial paper
    3. Both (a) and (b)
    4. Repo


  127. For the same nominal rate, which of the following results in higher yield measures?{Interest Rates}
    1. Discount yield
    2. Investment yield
    3. Both have the same return
    4. Differs from case to case


  128. Which of the following statements is correct about different yield measures?{Interest Rates}
    1. Money market yield pays interest once and in arrears on day count convention basis of Actual/360
    2. Discount yield pays interest once and in advance on day count basis of Actual/360
    3. Bond equivalent yield pays interest semiannual in arrears on day count basis of Actual/Actual
    4. All of them


  129. For interest accrual for a period, which of the following is the market convention? {Interest Rates}
    1. Include the start date but exclude the end date
    2. Exclude the start date but include the end date
    3. Exclude both start date and end date
    4. Include both start date and end date


  130. Which of the following conventions of "Actual/Actual" count basis counts the largest number of days for accrual (i.e. numerator of fraction)? {Interest Rates}
    1. ISDA
    2. ICMA
    3. AFB
    4. All of them count the same


  131. Which of the following is correct about day count fraction for the period of Feb 15 - 26, 2016? {Interest Rates}
    1. 11/366 for Act/Act-ISDA and 11/365 for Act/Act-AFB
    2. 11/365 for Act/Act-ISDA and 11/366 for Act/Act-AFB
    3. 11/366 for both Act/Act-ISDA and Act/Act-AFB
    4. 11/365 for both Act/Act-ISDA and Act/Act-AFB


  132. Which of the following is the market convention for soveign bonds of US ("treasuries") & UK ("gilts")? {Interest Rates}
    1. Act/360 for treasuries and Act/365 Fixed for gilts
    2. Act/Act-ICMA for both treasuries and gilts
    3. Act/Act-ICMA for both treasuries and gilts
    4. Act/Act-ICMA for treasuries and Act/Act-AFB for gilts


  133. Which of the following is the market convention for money market trades? {Interest Rates}
    1. Act/360 for USD and EUR
    2. Act/365 Fixed for GBP and JPY
    3. Both (a) and (b)
    4. None of the above


  134. Which of the following day count basic conventions change the last of Feb (as day of start or end date) to 30? {Interest Rates}
    1. Eurobond basis
    2. Bond basis
    3. 30E/360 ISDA
    4. None of them


  135. Business day convention of "Unadjusted" is acceptable for which of the following dates? {Interest Rates}
    1. Period end date and reset date
    2. Payment date
    3. Fixing date
    4. None of them


  136. Business day convention of "Preceding" is acceptable for which of the following dates? {Interest Rates}
    1. Period end date and reset date
    2. Payment date
    3. Fixing date
    4. All of them


  137. Which of the following business day convention incorporates the end-of-month (EOM) restriction? {Interest Rates}
    1. Modified Following
    2. FRN
    3. Both (a) and (b)
    4. None of them


  138. Which of the following business day convention incorporates the end-of-month (EOM) restrictions? {Interest Rates}
    1. Preceding day
    2. Following day
    3. Both (a) and (b)
    4. None of them


  139. Which of the following describes the "credit curve"? {Interest Rates}
    1. Plot of interest rate for different credit ratings for the same term/tenor
    2. Plot of interest rate for the same credit ratings for different terms/tenors
    3. Plot of credit spread for different credit ratings for the same term/tenor
    4. None of them


  140. The initial investment of P has become F after T years. What is the interpretation of the term (F/P)? {Interest Rates}
    1. Growth factor for T
    2. Growth rate for T
    3. Annual growth rate
    4. Annual growth factor


  141. The initial investment of P has become F after T years. What is the interpretation of the term (F/P) - 1? {Interest Rates}
    1. Growth factor for T
    2. Growth rate for T
    3. Annual growth rate
    4. Annual growth factor


  142. The initial investment of P has become F after T years. What is the interpretation of the term (F/P)(1/T)-1 {Interest Rates}
    1. Growth factor for T
    2. Growth rate for T
    3. Annual growth rate (compounded)
    4. Annual growth factor (compounded)


  143. The initial investment of P has become F after T years. What is the interpretation of the term [((F/P)-1)/T]? {Interest Rates}
    1. Growth factor for T
    2. Growth rate for T
    3. Annual growth rate (simple interest)
    4. Annual growth factor (simple interest)


  144. Which of the following is the return measure for current investment? {Interest Rates}
    1. Par rate
    2. Zero rate
    3. Forward rate
    4. Both (b) and (c)


  145. Which of the following statements is correct? (R = par rate; Z = zero rate; F = forward rate) {Interest Rates}
    1. Z is the geometric average of F; and R is a geometric average of Z
    2. Z is an arithmetic average of F; and R is an arithmetic average of Z
    3. F is a geometric average of Z; and Z is a geometric average of R
    4. F is an arithmetic average of Z; and Z is an arithmetic average of R


  146. Under what circumstances do the Following Day and Modified Following Day business day convention can be reasonably expected to result in the same adjusted day? (Select the most correct answer) {Interest Rates}
    1. When the day of date is 1st day of the month
    2. When the day of date is between 1st to 20th day of the month
    3. When the day of the date is the last day of month
    4. None of them


  147. Which of the following statements is correct about Modified Following (MF) and FRN (Eurodollar) business day conventions? {Interest Rates}
    1. MF can be applied to a single date but FRN applies where there is more than one date
    2. MF and FRN result in the same adjusted day when the first date in the series is last calendar day of month
    3. MF and FRN result in the same adjusted day when the first date is the series is last business day of month
    4. All of them


  148. Which of the following is the feature of fixed income securities? {Fixed Income Securities}
    1. Fixed return
    2. Fixed risk
    3. Fixed cash flow and maturity
    4. All of them


  149. In the secondary market trades of coupon bonds, accrued interest is computed for which period? {Fixed Income Securities}
    1. From previous coupon date to next coupon date
    2. From next coupon date to maturity date of bond
    3. From previous coupon date to settlement date of trade
    4. From next coupon date to settlement date of trade


  150. The concept of accrued interest applies to: {Fixed Income Securities}
    1. Coupon bond
    2. Annuity
    3. Zero coupon bond
    4. All of them


  151. Repo seller is ___________ {Fixed Income Securities}
    1. Money lender
    2. Security borrower
    3. Both (a) and (b)
    4. None of them


  152. Which of the following is the price for the first (or "near") leg for repo if the collateral is coupon bond? {Fixed Income Securities}
    1. Clean price
    2. Dirty price
    3. Dirty price less haircut
    4. Clean price less haircut


  153. Which of the following is the price for the first (or "near") leg for repo if the collateral is equity? {Fixed Income Securities}
    1. Market price
    2. Market price plus Accrued dividend
    3. Market price minus Haircut
    4. None of the above


  154. Which of the following is the most important security from financial engineering perspective? {Fixed Income Securities}
    1. Coupon bond
    2. Annuity
    3. Zero coupon bond
    4. None of the above


  155. Who has the economic ownership of collateral in repo? {Fixed Income Securities}
    1. Repo buyer
    2. Repo seller
    3. Both (a) and (b)
    4. None of them


  156. In the reconstitution of STRIPS, which of the following is permitted? {Fixed Income Securities}
    1. Between C-STRIP and P-STRIP from the same security
    2. Between C-STRIP and P-STRIP from different securities
    3. Between P-STRIPs from different securities
    4. None of them


  157. Who pays "cash rebate" in security borrowing / lending rate? {Fixed Income Securities}
    1. Security lender
    2. Security lender if the cash interest rate is lower than security interest rate
    3. Security lender if the cash interest rate is higher than security interest rate
    4. None of the above


  158. Which of the following is true about security borrowing / lending against another security collateral? {Fixed Income Securities}
    1. Security borrowed / lent is General Collateral (GC) and the other is Special (SP)
    2. Security borrowed / lent is Special and the other is General Collateral
    3. Either security can be General Collateral or Special
    4. None of them


  159. Which of the following instruments is transferable through endorsement? {Fixed Income Securities}
    1. Interbank deposit
    2. Repo
    3. Security borrow/lend
    4. None of the above


  160. The concept of accrued interest applies to ______________ {Fixed Income Securities}
    1. Zero coupon bond
    2. Annuity
    3. Equity
    4. None of them


  161. Repo buyer is ____________ {Fixed Income Securities}
    1. Cash lender
    2. Security borrower
    3. Both (a) and (b)
    4. None of them


  162. In security borrow/lend trades, the "borrower" is with reference to __________ {Fixed Income Securities}
    1. General Collateral Security
    2. Special Security
    3. Can be either (a) and (b)


  163. Which of the following is the feature of generic derivative product called "swap" in general? {Derivatives}
    1. Buy/sell of returns from underlying
    2. Periodic and multiple settlements
    3. Cash settlement method
    4. All of them


  164. Termination date is the last of _________ {Derivatives}
    1. Period end date
    2. Payment date
    3. Both (a) and (b)
    4. Fixing date


  165. Which of the following statements is correct? {Derivatives}
    1. Reset dates can be fewer than Payment dates
    2. Fixing dates can be fewer than Payment dates
    3. Both (a) and (b)
    4. None of them


  166. Which of the following is possible about the relation between Reset Date (RD) and and Fixing Date (FD)? {Derivatives}
    1. RD is later than FD
    2. RD & FD can be the same
    3. Both (a) and (b)
    4. None


  167. The process of averaging is applicable to which of the following? {Derivatives}
    1. Fixed rate
    2. Floating rate
    3. Both (a) and (b)
    4. None of them


  168. The process of compounding is applicable for which of the follwoing? {Derivatives}
    1. Floating rate
    2. Reset dates fewer than Payment dates
    3. Both (a) and (b)
    4. None of them


  169. Which of the following statements is correct about the different types of compounding? {Derivatives}
    1. Straight compounding compounds both the rate and spread
    2. Flat compounding compounds the rate and spread for 1st period; and only the rate for subsequent periods
    3. Spread exclusive compounding compounds only the rate but not the spread
    4. All of them


  170. Which of the following is correct about "FRA Yield Discounting"? {Derivatives}
    1. Discount rate is the fixed rate
    2. Discount rate is the floating rate
    3. Discount rate is the fixed rate for fixed amount and floating rate for floating amount
    4. None of the above


  171. Which of the following swaps have a single fixed interest amount? {Derivatives}
    1. Zero coupon swaps
    2. Pre-paid swaps
    3. Both (a) and (b)
    4. Basis swaps


  172. Which of the following swaps have no fixed interest amount? {Derivatives}
    1. Zero coupon swap
    2. Pre-paid swap
    3. Both (a) and (b)
    4. Basis swap


  173. Which of the following is the problem with naked long optins? {Derivatives}
    1. Time decay of initial premium
    2. Premium high relative to protection / profit (or probability of profit / protection is low)
    3. Both (a) and (b)
    4. None of them


  174. Which of the following is the feature of option "spread"? {Derivatives}
    1. Options of same type and same market side, but must differ in strike price or expiry or both
    2. Options of same type, same market side, same strike price, but different expiry
    3. Options of different type, same markt side, different strike price, but same expiry
    4. None of them


  175. Which of the following is the feature of option "collar"? {Derivatives}
    1. Options of same type and same market side, but must differ in strike price or expiry or both
    2. Options of same type, same market side, same strike price, but different expiry
    3. Options of different type, same market side, different strike price, but same expiry
    4. None of them


  176. Which of the following is the feature of option "straddle / strangle"? {Derivatives}
    1. Options of same type and same market side, but must differ in strike price or expiry or both
    2. Options of same type, same market side, same strike price, but diferent expiry
    3. Options of different type, same market side, same or different strike price, but same expiry
    4. None of the above


  177. Option cap consists of __________ {Derivatives}
    1. Call options
    2. Put options
    3. Both (a) and (b)
    4. None of them


  178. Option floor consists of ____________ {Derivatives}
    1. Call options
    2. Put options
    3. Both (a) and (b)
    4. None of them


  179. Which of the following is used predominantly for hedging market risk? {Derivatives}
    1. Spread
    2. Straddle / strangle
    3. Both (a) and (b)
    4. None of them


  180. Which of the following can be used for trading volatility? {Derivatives}
    1. Spread
    2. Straddle / strangle
    3. Collar
    4. Cap


  181. Which of the following is used predominantly for hedging market risk? {Derivatives}
    1. Collar
    2. Cap / Floor
    3. Both (a) and (b)
    4. None of them


  182. Which of the following is a better directional trade than naked long option? {Derivatives}
    1. Spread
    2. Collar
    3. Straddle
    4. None of them


  183. Which of the following is a better directional trade than naked short option? {Derivatives}
    1. Spread
    2. Collar
    3. Straddle
    4. None of them


  184. Which of the following relationships is correct? {Derivatives}
    1. Long Cap + Short Floor = Short vanilla swap (receive fixed, pay float)
    2. Short Cap + Long Floor = Long vanilla swap (pay fixed, receive float)
    3. Both (a) and (b)
    4. None of them


  185. Which of the following is true about the strike prices of options in the "collar" structure? {Derivatives}
    1. Call strike price is always at-the-money and put strike price is always out-of-the-money
    2. Put strike price is always at-the-money and call strike price is always out-of-the-money
    3. Strike price of both call and put is always at-the-money
    4. None of them


  186. Which of the following is true about the ratio collar of "participation" type? {Derivatives}
    1. The third option added to the collar is Short Call
    2. The third option added to the collar is Short Put
    3. The third option added to the collar is Long option
    4. None of the above


  187. Which of the following is true about the ratio collar of "accumulator" type? {Derivatives}
    1. The third option added to the collar is Short call
    2. The third option added to the collar is Short put
    3. The third option added to the collar is Long option
    4. None of the above


  188. Which of the following is true about the ratio collar of "decumulator" type? {Derivatives}
    1. The third option added to the collar is Short Call
    2. The third option added to the collar is Short Put
    3. The third option added to the collar is Long option
    4. None of them


  189. Which of the following have the payoff of "limited profit, limited loss"? {Derivatives}
    1. Spread
    2. Binary / digital option
    3. Both (a) and (b)
    4. None of them


  190. The volatility quoted for risk reversal in forex options is the ___________ {Derivatives}
    1. Volatility for Long Call minus volatility for Short Put (both options have same absolute delta)
    2. Average volatility of Long Call and Short Put (both options have same absolute delta)
    3. Volatility for at-the-money forward Long Call
    4. None of the above


  191. Which of the following is equivalent to Short vanilla put? (AONP = asset-or-nothing call; CONP = cash-or-nothing put) {Derivatives}
    1. (Long AONP + Short CONP)
    2. (Short AONP + Long CONP)
    3. (Long AONP + Long CONP)


  192. Which of the following is the relative levels of S, K and H for standard up-and-out barrier call? {Derivatives}
    1. (K ≤ H > S)
    2. (K ≥ H < S)
    3. (K ≥ H > S)
    4. None of them


  193. Which of the following is the relative levels of S, K and H for reverse down-and-in barrier put? {Derivatives}
    1. (K ≤ H > S)
    2. (K ≥ H < S)
    3. (K ≥ H > S)
    4. None of them


  194. Which of the following is the relative levels of S, K and H for reverse down-and-out barrier put? {Derivatives}
    1. (K ≤ H > S)
    2. (K ≥ H < S)
    3. (K ≥ H > S)
    4. None of them


  195. Which of the following barrier options cannot trade without cash rebate? {Derivatives}
    1. Reverse up-and-out call
    2. Reverse down-and-out put
    3. Both (a) and (b)
    4. None of them


  196. For double knock-out (DKO) barrier option, the option comes to life when {Derivatives}
    1. Lower barrier is hit
    2. Higher barrier is hit
    3. Either barrier is hit
    4. None of them


  197. For knock-in-knock-out (KIKO) double barrier option, which event has priority? {Derivatives}
    1. Knock out
    2. Knock in
    3. Both have same priority
    4. None of them


  198. The overnight indexed interest rates are announced at _______ {Derivatives}
    1. End-of-day
    2. Beginning of next day
    3. Either (a) or (b)
    4. Beginning of same day


  199. Which of the following exchange of interest rate is possible in currency swap? {Derivatives}
    1. Float-for-float
    2. Fixed-for-fixed
    3. Fixed-for-floater
    4. Any of them


  200. Which of the following statements is true about principal exchange in interest rate swap (IRS) and currency swap (CS)? {Derivatives}
    1. Principal is never exchanged in IRS and CS
    2. Principal is always exchanged in IRS and CS
    3. Principal is never exchanged in IRS but always exchanged in CS
    4. Principal is never exchanged in IRS but may or may not be exchanged in CS




Updation History
First updated on 19.10.2018
Second updated on 14.06.2018
Third updated on 26.11.2019