Currency Derivatives Free Demo Test 7

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1. Which of the following example is that of Market Making ?

a) A real estate agent quoting a price to sell a bunglow

b) A jewellery store owner quoting a price to buy old jewellery and also quoting a price to sell new jewellery

c) A wholesale fruit vendor quoting price to sell fruits at low prices

d) A steel junk dealer quoting price to buy a very old car

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2. With respect to trading time for the world’s major currencies in the OTC market, which of the following statements is TRUE?

a) Currencies are traded as per the permitted time of the respective countries

b) Currencies are traded across time zones

c) None of the above

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3. When a person buys a put option, it means that he is buying a right to sell the underlying asset – State True or False?

a) True

b) False

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4. Mr. Pritam from India invested USD 20,000 in US equity markets at an exchange rate of 60 for USDINR. After a year, these investments grew to USD 23,000. Mr. Pritam then sold off the entire investments and repatriated his money to India. He found that his effective return (profit) was 20%. Calculate the exchange rate at which Mr. Pritam received when he repatriated the money to India.

a) 62.61

b) 61.77

c) 60.56

d) 59.80

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5. Mr. Singh executes the following currency futures trade – buys USDINR and sells EURINR for an equivalent amount. What view has Mr. Singh expressed?

a) EUR depreciating against USD

b) INR appreciating against USD

c) INR depreciating against USD

d) EUR appreciating against USD

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6. An Indian company has both imports and exports in GBP of equal amounts. However, the export realization comes a week after the payments are made for imports. Which type of currency risk is the company facing?

a) Risk of INR depreciation

b) Risk of forward premia

c) Risk of INR appreciation

d) There is no currency risk

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7. What is the simultaneous buying and selling of EURINR futures contract across two different maturities called?

a) Speculative Trading

b) Hedge Trading

c) Spread Trading

d) Arbitrage Trading

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8. A trader sees that 3 month USDINR forward is quoting at 65.5 while futures are quoting at 65.8. So he sells in futures and buys in the forward market. Determine the type of market participant would this trader be?

a) He is an arbitrageur

b) He is a technical analyst

c) He is hedger

d) He is a speculator

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9. Ms. Mamta buys 10 lots of USDINR 1 month futures when the price was 65.00/65.10 and squares off 5 lots after a week when the price was 65.15/65.35. What were her profits or losses?

a) 500

b) – 500

c) 1250

d) 250

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10. ______ is TRUE for Exchange Traded Derivatives.

a) Decentralized counter party credit risk management

b) It is only available in stocks and currencies

c) Centralized trade settlement

d) Bilateral trade settlement

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Currency Derivatives Free Demo Test 7

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