Currency Derivatives Free Demo Test 5

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Currency Derivatives Free Demo Test 5

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1. A trader enters a long position in a USDINR futures contract at a price of 65, buying 40 lots. Upon the contract’s expiry, the settlement price is 65.40. What is the resulting profit or loss?

a) Profit of Rs 16000

b) Loss of Rs 16000

c) Profit of Rs 1600

d) Loss of Rs 1600

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2. Mr. Amit sells a USD put option with a strike of 66 and receives a premium of INR 0.4. What is the break-even point for these two transactions?

a) 65.40

b) 66

c) 66.40

d) 65.60

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3. The current EURINR spot is 80. The current future price of EUR is at a premium to INR. A trader believes that on expiry of one month EURINR futures, the spot may remain at 80. What currency futures trade strategy would be profitable to the trader if his views come correct?

a) Sell EURINR for one month and buy for 2 month

b) Buy EURINR

c) Sell EURINR

d) Buy EURINR for one month and sell for 2 month

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4. What is the process of actual pay-in/pay-out of mark-to-market margin or profit/loss on cancellation or on maturity of futures contract called?

a) MTM

b) Clearing

c) Pay in / Pay out

d) Settlement

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5. The ______ has issued guidance notes on the accounting of index futures contracts from the viewpoint of parties who enter into such futures contracts as buyers or sellers.

a) ICAI

b) CRISIL

c) RBI

d) SEBI

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6. An Indian investor invested Rs 390,000 in US securities when the exchange rate was 65. Two years later, he observed a 25% gain in USD terms and liquidated his investments. Upon repatriating the money to India at the prevailing rate of Rs 62, what would be his real returns (returns in INR terms)?

a) 21.30%

b) 20.87%

c) 19.23%

d) 18.56%

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7. Total open interest, used for monitoring open positions during the day, is best described as _______.

a) Maximum open interest in the previous day

b) Total open interest at the end of previous day

c) Total open interest at the time of monitoring

d) Total open interest at 12.00

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8. A vegetable oil factory owner has entered into a fixed-price contract with McDonald’s for the sale of a certain quantity of vegetable oil for a year. This type of contract is known as a _______.

a) Swap

b) Future

c) Forward

d) Arbitrage

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9. Mr. Amit, an employee of a currency broking house, is well-versed in currency movements. He holds the view that INR should appreciate against EUR in the next 6 months. Consequently, he advised some of his clients to take a short position by selling EUR against INR and provided a guarantee against any losses. However, the manager takes action against Mr. Amit for violating certain trading guidelines. To avoid punishment, Mr. Amit should have _______.

a) Amit should have advised the clients correctly to take short position for 12 months and not 6 months as 6 month is a short period

b) Amit should not have guaranteed against losses

c) Amit should have also clearly mentioned the risk to his view

d) Amit should have advised the clients correctly to take short position for 1 months and not 6 months as 6 month is a long period

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10. Mr. Vaibhav believes that USDINR will appreciate, and accordingly, he enters into a derivative contract to execute his view. His view proves correct, but he observes that his profits are not increasing along with the USDINR appreciation. He would have entered into a ________ derivative contract.

a) Short Put option

b) Short Call option

c) Long Put Option

d) Long Call option

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11. What is true regarding the Governing Council of the currency futures segment of an exchange?

a) Governing council of currency futures and equity derivative /cash segment can have maximum 10% common members

b) Governing council of currency futures and equity derivative /cash segment can have maximum 50% common members

c) Governing council of currency futures and equity derivative /cash segment can have maximum 40% common members

d) Governing council of currency futures and equity derivative /cash segment can have maximum 25% common members

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12. A ‘DERIVATIVE PRODUCT’ can be best described as a ______ .

a) Complex product which is traded only amongst banks and large institutions

b) Product which can be from Equity / Currency or Commodity markets and are traded on a recognised stock exchange.

c) Product whose value is derived from value of one or more underlying variables

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13. If a person has a bearish view on USDINR, which would be the appropriate strategy for the objective of maximizing the profit?

a) Sell USD Call option

b) Buy USD Call option

c) Sell USD Put option

d) Buy USD Put option

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14. Identify the appropriate strategy for a BULLISH view on USDINR and trade objective of zero cash outgo.

a) Buy USDINR Put option

b) Buy USDINR Call option

c) Sell USDINR Put option

d) Sell USDINR Call option

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15. As a trader, you believe USDJPY will move from 90 to 95 in the next one month. As you are based in India where there is no trading in USDJPY, you would execute this view using currency future contracts of JPYINR and USDINR.

a) Short USDINR and Long JPYINR

b) Short JPYINR

c) Long JPYINR

d) Short JPYINR and Long USDINR

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16. If more than one contract in a series are outstanding at the time of expiry/squaring off, the contract price of the contract so squared off should be determined using the _______ method for calculating profit/loss on squaring-up.

a) Low price first

b) High price first

c) FIFO

d) LIFO

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17. Which of the following statements is TRUE regarding Exchange Traded derivatives?

a) Exchange traded derivatives are not regulated

b) Only the contracting parties are safe guarded by the risk management policies and not all the market participants.

c) The margining system is different for different set of counter parties

d) All market participants are safe guarded by the risk management policies

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18. When you purchase an option, does it imply that you have the right to sell the underlying asset?

a) Yes

b) No

c) Depends on whether its a Call or Put option

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19. The minimum net worth required for a company to apply to become an authorized exchange of currency futures is Rs ______ crores.

a) 50

b) 75

c) 100

d) 200

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20. A sub-broker has to execute a bipartite agreement between him and his client clearly specifying rights and obligations of each party – State True or False ?

a) True

b) False

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Currency Derivatives Free Demo Test 5

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