McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Commerce (M.com) .
| 1. |
The payoffs for financial derivatives are linked to |
| A. | securitiesthat will be issued in the future |
| B. | the volatility of interest rates |
| C. | previously issued securities |
| D. | government regulations specifying allowable rates of return. |
| Answer» C. previously issued securities | |
| 2. |
Financial Derivativesinclude |
| A. | Stocks |
| B. | Bonds |
| C. | Futures |
| D. | None of these |
| Answer» C. Futures | |
| 3. |
By hedging Portfolio a bank manager |
| A. | Reducesinterest rate risk |
| B. | Increases exchange rate risk |
| C. | Increases reinvestment risk |
| D. | Increase the probability of gains |
| Answer» A. Reducesinterest rate risk | |
| 4. |
The markets in which derivatives are trade is known as |
| A. | Asset backed market |
| B. | Cash market |
| C. | Mortgage market |
| D. | Derivative market |
| Answer» D. Derivative market | |
| 5. |
The contract where buyer and seller agrees to exchange asset on future date without the involvement of stock exchange |
| A. | Options |
| B. | Futures |
| C. | Forwards |
| D. | Swaps |
| Answer» C. Forwards | |
| 6. |
The contract which gives the buyer the right but not obligation |
| A. | Options |
| B. | Futures |
| C. | Swaps |
| D. | Forwards |
| Answer» A. Options | |
| 7. |
The buyer in the derivative contract is also known as |
| A. | Deep in the contract |
| B. | Middle in the contract |
| C. | Short in the contract |
| D. | Long in the contract |
| Answer» D. Long in the contract | |
| 8. |
ETD stands for |
| A. | Electronic traded serivatives |
| B. | Equity traded derivatives |
| C. | Exchange traded derivatives |
| D. | Estimated trade delay |
| Answer» C. Exchange traded derivatives | |
| 9. |
Market players who take benefits from difference in market prices are called |
| A. | Speculators |
| B. | Arbitrageurs |
| C. | Hedgers |
| D. | Spreaders |
| Answer» B. Arbitrageurs | |
| 10. |
Short in derivative contract implies |
| A. | Middle man |
| B. | Buyer |
| C. | Seller |
| D. | Stock exchange |
| Answer» C. Seller | |
| 11. |
Which of the following is potentially obligated to sell an asset at a predetermined price |
| A. | Put writer |
| B. | A call writer |
| C. | A put buyer |
| D. | A call buyer |
| Answer» A. Put writer | |
| 12. |
Which of the following contract is non standardised and suffers illiquidity most |
| A. | Swaps |
| B. | Forwards |
| C. | Options |
| D. | Futures |
| Answer» B. Forwards | |
| 13. |
The initial amount paid by option buyer at the time of entering the contract |
| A. | Option margin |
| B. | Option premium |
| C. | Option money |
| D. | Option title |
| Answer» B. Option premium | |
| 14. |
The difference between strike price and current market price of underlying security in option contract is |
| A. | Time value |
| B. | Intrinsic value |
| C. | Exchange value |
| D. | Trade value |
| Answer» B. Intrinsic value | |
| 15. |
The option contract which gives the buyer the right to buy the underlying asset is |
| A. | Put option |
| B. | Call option |
| C. | European option |
| D. | Bermudan option |
| Answer» B. Call option | |
| 16. |
The option contract which gives the seller the obligation to buy is |
| A. | Put option |
| B. | Call option |
| C. | American option |
| D. | European option |
| Answer» A. Put option | |
| 17. |
The option contract that can be exercised at any time before the maturity date is known as |
| A. | European option |
| B. | American option |
| C. | Bermudan option |
| D. | None of the above |
| Answer» B. American option | |
| 18. |
The option contract which can be exercised on a few dates before the maturity date |
| A. | Bermudan option |
| B. | American option |
| C. | European option |
| D. | All the above |
| Answer» A. Bermudan option | |
| 19. |
The amount to be deposited by buyer and seller of future contarct at the time of entering future contract |
| A. | Future margin |
| B. | Future premium |
| C. | Future payoff |
| D. | None of the above |
| Answer» A. Future margin | |
| 20. |
The option contract that can be exercised only at the date of maturity is called |
| A. | European option |
| B. | American option |
| C. | Bermudan option |
| D. | Call option |
| Answer» A. European option | |
| 21. |
Option strategy with combination of selling one put option at low strike price and buying put option at a high strike price |
| A. | Put bear spread |
| B. | Call bear spread |
| C. | Long call butterfly |
| D. | Short call butterfly |
| Answer» A. Put bear spread | |
| 22. |
An option that would lead to negative cash flow if it were exercised immediately is |
| A. | In the money option |
| B. | Out of the money option |
| C. | At the money option |
| D. | With money option |
| Answer» B. Out of the money option | |
| 23. |
Asian option and look back options are types of |
| A. | Vanilla option |
| B. | Exotic option |
| C. | Real option |
| D. | Warrants |
| Answer» B. Exotic option | |
| 24. |
Which of the following is long dated option traded generally traded over the counter |
| A. | Warrants |
| B. | LEAPS |
| C. | Baskets |
| D. | Real option |
| Answer» A. Warrants | |
| 25. |
A contract that confers the right to buy or sell foreign currency at a specified price at some future date |
| A. | Currency forwards |
| B. | Currency futures |
| C. | Currency options |
| D. | Currency Swaps |
| Answer» C. Currency options | |
| 26. |
An option contract with underlying asset commoditiesis |
| A. | Commodity option |
| B. | Currency option |
| C. | Stock index option |
| D. | None of the above |
| Answer» A. Commodity option | |
| 27. |
The risk arising from counterparty’sfailure to meet its fianacial obligation is |
| A. | Market risk |
| B. | Liquidity risk |
| C. | Operation risk |
| D. | Credit risk |
| Answer» D. Credit risk | |
| 28. |
The difference between the future price and cash price is |
| A. | Basis |
| B. | Margin |
| C. | Premium |
| D. | Strike price |
| Answer» A. Basis | |
| 29. |
The additional amount that has to deposited by the trader with broker to bring the balance of margin account to initial margin |
| A. | Initial margin |
| B. | Maintenance margin |
| C. | Variation margin |
| D. | Additional margin |
| Answer» C. Variation margin | |
| 30. |
The system of daily settlement in the future market is |
| A. | Marking to market |
| B. | Market making |
| C. | Market backwardation |
| D. | Market moving |
| Answer» A. Marking to market | |
| 31. |
The test used to check the validity of VaR estimate |
| A. | Black testing |
| B. | Back testing |
| C. | Back end test |
| D. | Back to back test |
| Answer» A. Black testing | |
| 32. |
Which measure is used to indicate the maximum loss that an investor could incur on an exposure at a point in time, determined at a certain confidence level. |
| A. | VaR |
| B. | VaM |
| C. | VaG |
| D. | VaK |
| Answer» A. VaR | |
| 33. |
Which among the following is not a commodity future exchange |
| A. | NCDEX |
| B. | NSDL |
| C. | NMCE |
| D. | MCX |
| Answer» B. NSDL | |
| 34. |
The tendency of spot price and future price to come together is |
| A. | Principle of divergence |
| B. | Principle of convergence |
| C. | Principle of backwardation |
| D. | Principle of contango |
| Answer» B. Principle of convergence | |
| 35. |
The condition where future prices are greater than cashprice resulting in positive basis is |
| A. | Normal backwardation |
| B. | Contango |
| C. | Expectation hypothesis |
| D. | Cost of carry |
| Answer» B. Contango | |
| 36. |
------------ are formed by using the options on the same asset with same strike price but with different expiration dates |
| A. | Box spread |
| B. | Ratio spread |
| C. | Calendar spread |
| D. | Call put spread |
| Answer» C. Calendar spread | |
| 37. |
The difference between option premium and intrinsic value |
| A. | Time value |
| B. | Intrinsic value |
| C. | Money value |
| D. | Premium |
| Answer» A. Time value | |
| 38. |
Option pricing model developed John Cox,Stephen Ross and Mark Rubinstein is |
| A. | Binomial Option pricing Model |
| B. | Black schools model |
| C. | Cost of carry model |
| D. | Backwardation model |
| Answer» A. Binomial Option pricing Model | |
| 39. |
The type of swap agreement which gives seller the chance to terminate swap at any time before maturity. |
| A. | Coupan swap |
| B. | Callable swap |
| C. | Putable swap |
| D. | Rate capped swap |
| Answer» C. Putable swap | |
| 40. |
When Swap is combined with Option it is called |
| A. | Swaption |
| B. | Forwad Swaps |
| C. | Swap options |
| D. | All the above |
| Answer» A. Swaption | |
| 41. |
What is the time value of option at expiration |
| A. | Zero |
| B. | Same as strike price |
| C. | Same as exercise price |
| D. | Same as market price |
| Answer» A. Zero | |
| 42. |
A option that provides a fixed payoff depending on the fulfilment of some condition |
| A. | Asian option |
| B. | Barrier option |
| C. | Binary option |
| D. | Lookback option |
| Answer» C. Binary option | |
| 43. |
Which of the following is a way to settle option contracts |
| A. | By exercising |
| B. | By letting option expire |
| C. | By offsetting |
| D. | All the above |
| Answer» D. All the above | |
| 44. |
The date on which option expires is known as |
| A. | Exercise date |
| B. | Expiration date |
| C. | Contract date |
| D. | Maturity date |
| Answer» B. Expiration date | |
| 45. |
The risk that arises due to adverse movementsin the price of a financial asset or commodity |
| A. | Credit risk |
| B. | Market risk |
| C. | Legal risk |
| D. | Liquidty risk |
| Answer» B. Market risk | |
| 46. |
The persons who enter into derivative contract with the objective of covering risk |
| A. | Hedgers |
| B. | Speculators |
| C. | Spreaders |
| D. | Arbitrageurs |
| Answer» A. Hedgers | |
| 47. |
The persons who enter into derivative contract in anticipation of lower expected return at the reduced risk |
| A. | Hedgers |
| B. | Speculators |
| C. | Spreaders |
| D. | Arbitrageurs |
| Answer» C. Spreaders | |
| 48. |
The approach which assumesthat the expected basis would be equal to zero |
| A. | Normal backwardation approach |
| B. | Contago |
| C. | Expectation hypothesis |
| D. | None of the above |
| Answer» C. Expectation hypothesis | |
| 49. |
The type of hedge used by those who are short on the underlying asset |
| A. | Long hedge |
| B. | Short hedge |
| C. | Perfect hedge |
| D. | Imperfect hedge |
| Answer» A. Long hedge | |
| 50. |
when the gains or losses in the futures do not exactly offset the loss/gainsin the physical market |
| A. | Long hedge |
| B. | Short hedge |
| C. | Perfect hedge |
| D. | Imperfect hedge |
| Answer» D. Imperfect hedge | |
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