Equity and Derivative – Beginners Module – Chapter 2 – Quiz 2


Equity and Derivative - Beginners Module - Chapter 2 - Quiz 2
15 Questions 01:59
Question 1:
What is the payoff in an options contract?


Equity and Derivative - Beginners Module - Chapter 2 - Quiz 2

Question 1: What is the payoff in an options contract?

     Option 1: The difference between the strike price and the market price
     Option 2: The profit or loss resulting from exercising the option
     Option 3: The interest earned on the option
     Option 4: The premium paid for the option


Answer: Option 2: The profit or loss resulting from exercising the option
Reference

Question 2: What is an expiration date in an options contract?

     Option 1: The date on which the option contract becomes void
     Option 2: The date on which the underlying asset's price is determined
     Option 3: The date when the option premium is paid
     Option 4: The date when the option can first be exercised


Answer: Option 1: The date on which the option contract becomes void
Reference

Question 3: What is a European option?

     Option 1: An option that can be exercised at any time before expiration
     Option 2: An option that can only be exercised on the expiration date
     Option 3: An option traded in European markets
     Option 4: An option issued by European companies


Answer: Option 2: An option that can only be exercised on the expiration date
Reference

Question 4: What is an 'out of the money' option?

     Option 1: An option that has intrinsic value
     Option 2: An option with no intrinsic value
     Option 3: An option that cannot be exercised
     Option 4: An option that is not yet expired


Answer: Option 2: An option with no intrinsic value
Reference

Question 5: What is the underlying asset in a derivative contract?

     Option 1: The asset on which the derivative's value is based
     Option 2: The derivative itself
     Option 3: A secondary financial instrument
     Option 4: A government bond


Answer: Option 1: The asset on which the derivative's value is based
Reference

Question 6: What is a futures contract?

     Option 1: A contract to buy or sell an asset at a future date at a predetermined price
     Option 2: An insurance policy for investments
     Option 3: A type of bond
     Option 4: A savings plan with a bank


Answer: Option 1: A contract to buy or sell an asset at a future date at a predetermined price
Reference

Question 7: What happens to an option's time value as it approaches expiration?

     Option 1: It increases
     Option 2: It remains constant
     Option 3: It decreases
     Option 4: It becomes zero


Answer: Option 3: It decreases
Reference

Question 8: In what type of market are futures contracts traded?

     Option 1: Stock exchanges
     Option 2: Over the Counter (OTC) market
     Option 3: Retail market
     Option 4: Auction market


Answer: Option 1: Stock exchanges
Reference

Question 9: What is the time value of an option?

     Option 1: The remaining time until the option's expiration
     Option 2: The intrinsic value of the option
     Option 3: The premium paid for the option
     Option 4: The difference between the option premium and intrinsic value


Answer: Option 4: The difference between the option premium and intrinsic value
Reference

Question 10: What is the primary use of derivatives?

     Option 1: To invest in real estate
     Option 2: To hedge risk or speculate on the price movement of the underlying asset
     Option 3: To open a savings account
     Option 4: To create a pension fund


Answer: Option 2: To hedge risk or speculate on the price movement of the underlying asset
Reference

Question 11: What is an 'in the money' option?

     Option 1: An option that has intrinsic value
     Option 2: An option with no intrinsic value
     Option 3: An option that cannot be exercised
     Option 4: An option that is not yet expired


Answer: Option 1: An option that has intrinsic value
Reference

Question 12: What is the strike price in an options contract?

     Option 1: The market price of the underlying asset
     Option 2: The price at which the option can be exercised
     Option 3: The premium paid for the option
     Option 4: The interest rate on a loan


Answer: Option 2: The price at which the option can be exercised
Reference

Question 13: What is the intrinsic value of an option?

     Option 1: The difference between the exercise price and the current market price of the underlying asset
     Option 2: The total cost of the options contract
     Option 3: The premium paid for the option
     Option 4: The interest rate on a loan


Answer: Option 1: The difference between the exercise price and the current market price of the underlying asset
Reference

Question 14: What is a derivative?

     Option 1: A financial instrument whose value depends on the value of another asset
     Option 2: A type of stock
     Option 3: A bond issued by a corporation
     Option 4: A savings account with a bank


Answer: Option 1: A financial instrument whose value depends on the value of another asset
Reference

Question 15: What is an option premium?

     Option 1: The fee paid by the option buyer to the option seller
     Option 2: The market price of the underlying asset
     Option 3: The interest rate on a loan
     Option 4: The commission paid to a broker


Answer: Option 1: The fee paid by the option buyer to the option seller
Reference

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