| Q 1. | The Government of India issued, for the first time, licences for setting up national-level, multi-commodity futures exchanges in _____ .
2002-03
2000-01
1999-00
2005-06
 CORRECT ANSWER  WRONG ANSWER
CORRECT ANSWER:2002-03 Explanation:
The Government of India issued licences for setting up national-level, multi-commodity futures
exchanges in 2002-03. Three exchanges came up: Multi Commodity Exchange of India Ltd (MCX),
Mumbai; National Commodity and Derivatives Exchange Ltd (NCDEX), Mumbai; and National Multi
Commodity Exchange (NMCE), Ahmedabad. | | Q 2. | The Over-the-counter (OTC) contracts can be considered as _______ .
Standardised contracts
Private negotiated contracts
Exotic contracts
Illegal contracts
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:Private negotiated contracts Explanation:
The OTC market is a one-to-one/bilateral market where two private parties, a seller and a buyer, come to an agreement for delivery of goods or the underlying asset on a specific date in the future at a price agreed upon.
Unlike an exchange-traded standardized contract, an OTC contract is customized or agreed upon between the parties and holds good till the expiry date of the contract. | | Q 3. | If the price of the far-month futures contract is higher than the near-month futures contract, it is referred to as a ________ .
Backwardation market
Risk Free market
Concurrent market
Normal market
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:Normal market Explanation:
If the price of the far-month futures contract is higher than the near-month futures contract, it is
referred to as a normal market or contango market. | | Q 4. | In April 201X, Mr. Mandar, an active trader of commodity futures, expected gold prices to rise over the next month. He buys one lot of standard June 201X gold contract of 1 kg at the prevailing price of Rs. 30,800 per 10 g. In May 201X, as expected, the gold prices actually go up. For making a profit of Rs. 200 per 10 g or a total of Rs. 20,000 on his contract, the gold price must go up to _____ .
Rs. 31,100 per 10 g
Rs. 30,900 per 10 g
Rs. 31,000 per 10 g
Rs. 31,200 per 10 g
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:Rs. 31,000 per 10 g Explanation:
Mr. Mandar bought gold at Rs 30,800 per 10 g
For making a profit of Rs 200 per 10 g, the price should rise by 200 per 10 g. So the price should rise to 30800 + 200 = 31000. | | Q 5. | A person has done a LONG HEDGE. Later, both the cash and future prices rise. What will be payoff?
He will profit in the cash market and make a loss in the futures market
He will profit in the futures market and make a loss in the cash market
He will profit both in the cash and futures market
He will make a loss both in the cash and futures market
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:He will profit in the futures market and make a loss in the cash market Explanation:
The long hedge is a hedging strategy used by manufacturers and producers to lock in the price of a product or commodity to be purchased some time in the future. Hence, the long hedge is also known as input hedge.
The long hedge involves taking up a long futures position. Should the underlying commodity price rise, the gain in the value of the long futures position will be able to offset the increase in purchasing costs. | | Q 6. | _______ is the measure of the change in option premium corresponding to a one-day change in its time to expiration.
Theta
Vega
Delta
Gamma
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:Theta Explanation:
Theta is the measure of the change in option premium corresponding to a one-day change in its time
to expiration-the change in option price given a one-day decrease in time to expiration.
It is a measure of time decay. | | Q 7. | Mr. Mehta wants to hedge Silver by taking a short position of Rs. 300 lakhs in the future market. The silver futures are trading at a price of Rs. 40000 per kg. The trading lot for silver is 30 kg. Calculate how many lots of silver should he sell for hedging.
15
25
35
45
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:25 Explanation:
One lot of silver is of 30 kg. So cost of 1 lot is 30 x Rs 40000 = 1200000 (Rs 12 lakhs)
Mr. Mehta wants to hedge silver worth Rs 300,000,00 (Rs 300 lakhs)
300,000,00 / 12,000,00 = 25
So he should sell 25 lots.
(Cross verification : 25 lots X 30 kg per lot X Rs. 40000 = 300 lakhs) | | Q 8. | To be suitable for trading on the futures exchanges, a commodity should have or conform to which of the following characteristics?
The commodity should be traded on all exchanges
The commodity should be traded in a closed market
The commodity should be fairly and freely traded
The commodity should be traded in a restricted market
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:The commodity should be fairly and freely traded | | Q 9. | The profits for a seller of a PUT option will be _____ .
Limited
Unlimited
Negligible
None of the above
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:Limited Explanation:
A seller of an option, be it a CALL or a PUT, will have the scope of limited profits and unlimited losses.
Profit is limited as the maximum that a seller of an option can get is the premium received.
(And a buyer of any option, Call or Put, will have limited losses and unlimited profits. The losses are limited to the premium paid) | | Q 10. | A textile exporter in India receives an order of USD 75000 for exporting textiles to USA in 10th September 20XX. He exports the material but by the time the consignment lands in USA on 30th September 20XX , the USDINR rates have changed from 68.50 to 67.80 (Rupee has strengthened against USD). Calculate the exporters profit or loss due to this change.
Profit of Rs. 52500
Loss of Rs. 52500
Profit of Rs. 525000
Loss of Rs. 525000
CORRECT ANSWER WRONG ANSWER CORRECT ANSWER:Loss of Rs. 52500 Explanation:
The exporter exported the goods worth USD 75000 when the USDINR rate was 68.50. Which means he was expecting to receive Rs.5137500 ( 75000 x 68.50 ).
When the rate fell to 67.80, he will now receive Rs. 5085000 ( 75000 x 67.80 )
Therefore there is a loss of Rs. 52500 ( 5137500 - 5085000 ) |
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