Equity derivatives Free mock test -2

Question 1: 

A derivative is a financial contract that derives its value from an underlying asset.

a). True

b).  False

Question 2: 

Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price.

a).  True

b).  False

Question 3: 

An index option is a

a).  Cash market product

b).  Money market instrument

Question 4: 

Financial derivatives provide the facility for

a).  Trading

b).  Hedging

c).  Arbitraging

d).  All of the above

Question 5: 

Operational risks include losses due to

a).  Inadequate disaster planning

b).  Government policies

c).  Income tax regulations

Question 6: 

Impact cost is low when the liquidity in the system is poor.

a).  True

b).  False

Question 7: 

A calendar spread contract in index futures attracts

a).  Higher margin than sum of two independent legs of futures contract

b). Lower margin than sum of two independent legs of futures contract

Question 8: 

In an equity scheme, fund can hedge its equity exposure by selling stock index futures.

a).  True

b).  False

Question 9: 

Margins in 'Futures' trading are to be paid by

a).  buyer

b).  seller

c).  both the above

Question 10: 

When the near leg of the calendar spread transaction on index futures expires, the farther leg becomes a regular open position.

a).  True

b).  False

Solutions: 

1). a             2). a               3). b              4). d 

5). a             6). b              7). b              8). a

9).  c           10). a