Equity and Derivative - Beginners Module - Chapter 2 - Quiz 3
15 Questions 01:58
Question 1:
What is the purpose of a margin call in futures trading?
What is the purpose of a margin call in futures trading?
Equity and Derivative - Beginners Module - Chapter 2 - Quiz 3
Question 1: What is the purpose of a margin call in futures trading?
Option 1: To settle the contract at expiration
Option 2: To pay the broker's fee
Option 3: To demand additional funds when the account balance falls below the maintenance margin
Option 4: To close out a futures position
Answer: Option 3: To demand additional funds when the account balance falls below the maintenance margin
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Question 2: What is a credit default swap (CDS)?
Option 1: A contract that provides protection against the default of a borrower
Option 2: A swap based on commodity prices
Option 3: A forward contract on currency exchange rates
Option 4: A futures contract on interest rates
Answer: Option 1: A contract that provides protection against the default of a borrower
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Question 3: What are commodity swaps used for?
Option 1: To speculate on the price of commodities
Option 2: To hedge against fluctuations in commodity prices
Option 3: To acquire physical commodities
Option 4: To trade futures contracts
Answer: Option 2: To hedge against fluctuations in commodity prices
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Question 4: What is an option's intrinsic value?
Option 1: The difference between the underlying asset's market price and the option's strike price
Option 2: The premium paid for the option
Option 3: The time value of the option
Option 4: The total market value of the option
Answer: Option 1: The difference between the underlying asset's market price and the option's strike price
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Question 5: What happens to the intrinsic value of a call option if the price of the underlying asset increases?
Option 1: The intrinsic value decreases
Option 2: The intrinsic value remains the same
Option 3: The intrinsic value increases
Option 4: The intrinsic value becomes zero
Answer: Option 3: The intrinsic value increases
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Question 6: What is mark-to-market in the context of futures contracts?
Option 1: A method of adjusting the contract value to reflect current market prices
Option 2: The initial margin required for trading
Option 3: The process of closing out a futures position
Option 4: The final settlement price of a futures contract
Answer: Option 1: A method of adjusting the contract value to reflect current market prices
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Question 7: What is the initial margin in futures trading?
Option 1: The initial deposit required to enter into a futures contract
Option 2: The fee paid to the broker
Option 3: The total value of the futures contract
Option 4: The difference between the market price and the strike price
Answer: Option 1: The initial deposit required to enter into a futures contract
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Question 8: What is an equity swap?
Option 1: A swap where cash flows are exchanged based on the returns of an equity index
Option 2: A contract to exchange commodities
Option 3: A forward contract for equity shares
Option 4: A futures contract on an equity index
Answer: Option 1: A swap where cash flows are exchanged based on the returns of an equity index
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Question 9: What is the role of the clearinghouse in futures trading?
Option 1: To match buyers and sellers
Option 2: To provide a platform for trading stocks
Option 3: To ensure the performance of the futures contracts
Option 4: To issue bonds
Answer: Option 3: To ensure the performance of the futures contracts
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Question 10: What differentiates a futures contract from a forward contract?
Option 1: Futures contracts are standardized and traded on exchanges
Option 2: Forward contracts are traded on exchanges
Option 3: Forward contracts are standardized
Option 4: Futures contracts are private agreements between parties
Answer: Option 1: Futures contracts are standardized and traded on exchanges
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Question 11: Which of the following is true about forward contracts?
Option 1: They are traded on exchanges
Option 2: They are standardized contracts
Option 3: They are subject to default risk
Option 4: They are backed by clearinghouses
Answer: Option 3: They are subject to default risk
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Question 12: What is the primary purpose of interest rate swaps?
Option 1: To hedge against interest rate risk
Option 2: To invest in foreign currencies
Option 3: To acquire equity in a company
Option 4: To purchase commodities
Answer: Option 1: To hedge against interest rate risk
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Question 13: What is a swap?
Option 1: An exchange of one security for another
Option 2: A contract to exchange cash flows between two parties
Option 3: A loan agreement
Option 4: A type of insurance policy
Answer: Option 2: A contract to exchange cash flows between two parties
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Question 14: What is the difference between a long position and a short position in futures trading?
Option 1: A long position is a bet on price increase, while a short position is a bet on price decrease
Option 2: A long position is held by the seller, and a short position is held by the buyer
Option 3: A long position requires higher margins than a short position
Option 4: A short position is closed out sooner than a long position
Answer: Option 1: A long position is a bet on price increase, while a short position is a bet on price decrease
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Question 15: What is a forward contract?
Option 1: A standardized contract traded on an exchange
Option 2: A customized contract between two parties to buy or sell an asset at a specified future date at a price agreed upon today
Option 3: A bond issued by a government
Option 4: An insurance policy for an asset
Answer: Option 2: A customized contract between two parties to buy or sell an asset at a specified future date at a price agreed upon today
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