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School of Management: Quiz-I Time: 20 Minutes Date: 22/02/2019

The document is a quiz on financial derivatives concepts. It contains 16 multiple choice questions testing understanding of forwards, futures, options, margins, volatility and other derivative pricing topics. The questions cover distinguishing features of different derivative contracts, their uses for hedging and speculation, and factors affecting their pricing.

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Dhruv Upadhyay
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75 views2 pages

School of Management: Quiz-I Time: 20 Minutes Date: 22/02/2019

The document is a quiz on financial derivatives concepts. It contains 16 multiple choice questions testing understanding of forwards, futures, options, margins, volatility and other derivative pricing topics. The questions cover distinguishing features of different derivative contracts, their uses for hedging and speculation, and factors affecting their pricing.

Uploaded by

Dhruv Upadhyay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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School of Management R.No.

________________
Financial Derivatives (MB-525) ____
MBA- IV Semester (2018-19)
Quiz-I Time: 20 Minutes Date: 22/02/2019
Attempt all questions.
1) Which of the following is NOT an example of a forward contract?
a) An agreement to buy a car in the future at a specified price.
b) An agreement to buy an airplane ticket at a future date for a certain price
c) An agreement to buy a refrigerator today at the posted price.
d) An agreement to subscribe to a newspaper at a specified price at a future date.
2) Futures on individual stocks are allowed
a) On all stocks listed on the stock exchange
b) On few selected stocks only
c) On all stocks listed on all stock exchanges in India
d) On all stocks where price is more than Rs 100 per share
3) Taking position in futures opposite to that in cash market for protecting cash market holdings is :
a) Speculating
b) Arbitrage
c) Hedging
d) None of the above.
4) Derivatives are highly leveraged, which implies that
a) You can take a higher position with smaller investments using derivatives
b) You can take a lower position with higher investments using derivatives
c) You can take a higher position if you buy the underlying assets instead of buying derivatives
d) You should buy the underlying assets as you might make more profit on them rather than derivatives
5) At the point of entering into the futures contract
a) Both the buyer and the seller pay initial margin to the exchange
b) The buyer alone pays initial margin to the exchange
c) The seller alone pays initial margin to the exchange
d) No margins are payable to the exchange by the buyer or the seller
6) If you have bought a futures contract and the price drops, you will be making a profit.
a) True
b) False
c) Sometimes true
d) Sometimes false
7) In futures contracts, the contract maturity period is defined
a) By the exchange
b) By the RBI
c) By the parties to the contract
d) By the SEBI
8) A forward contract is an agreement to buy a certain asset at a certain future date for a price to be determined in the
future.
a) True
b) False
c) True only in Europe
d) True only in Africa
9) If the price of the underlying asset rises sharply after the initiation of a futures contract
a) The long position becomes profitable
b) The long position becomes unprofitable
c) The short position becomes profitable
d) None of the above
10) Tick size is
a) The maximum daily movement permitted in the price of the contract
b) The maximum permitted price movement during the entire life of the contract
c) The minimum permitted price movement in a futures contract
d) None of the above

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11) If you have sold June Sensex Futures @ 4800, You will make profit if :-
a) Futures prices go up.
b) Futures prices go down.
c) None of the above

12) In November, a trader feels that the interest rates as reflected in futures prices are going to fall in the next few days.
The trader wants to take a spread position based on his view. What action will he take?
a) Buy near month and sell far month
b) Buy far month and sell near month
c) Buy near month and far month both
d) Sell near month and far month both

13) Generally higher the price volatility, higher would be the initial margin requirement.
a) True
b) False
c) True only in Africa
d) True only in Japan

14) Systematic risk is an investment risk peculiar to a company which can be reduced by diversifying one portfolio.
a) True
b) False
c) True only in Africa
d) True only in Japan

15) In case of BSE Index futures, the monthly series matures on


a) Last Thursday of the month
b) Second Thursday of the month
c) Third last Thursday of the month
d) Second last Thursday of the month

Write your answers here:


1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Q.16 Complete the following table:

Call Option Price Put Option Price


European American European American
Without Dividend
Upper Bound
With Dividend
Without Dividend
Lower Bound
With Dividend
S = Stock Price, X = Strike Price, D = Dividend, r = Risk Free Interest Rate, t = time duration

*****

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