Please note question 9,10 and 14 can have variations.

1. A $5,000 face value bond is quoted at a bank discount yield of 2.8% and has 36 days to
maturity?. What is its current

a) $4,978

b) S4.982

c) $4,986

d) $4,991

2. The principle behind hedging with futures contract is that

a) a position should be taken that has the maximum potential for profit

b) a position should be taken that neutralizes the trader's position with the asset

c) the profit from the actual transaction should be high enough to make up for losses in the contract

d) traders should understand that their profits will be always positive, but small

3. One difference between a futures and an options contract is that, futures contracts are

a) sold by futures markets for a price, but options are free to enter

b) written specifically for clients, but options a

c) are not traded, but options contract are traded in the market

d) none of these are true

3. One of the differences between a forward and a futures contract is (VARIATION)

a) forwards are standardized in the size whereas futures can be modified according to the
demands of the parties involved.

b) a futures holder can get out of the contract by buying a reverse contract, while forward
holders can not do that.

c) there are physical exchanges for trading forward contracts whereas futures contracts are
traded over the counter.

D) all of the above are true

Please note question 9,10 and 14 can have variations.

4. A pure discount security is an interest-bearing asset that pays:

a) interest on a semi-annual basis.

c) a single payment at maturity.

b) interest on an annual basis.

d) a variable-rate interest.

5. The daily settlement system at the futures exchange requires that

a. for every contract, the participant has to open an account with the maintenance margin

b. the closing futures price of that asset will be used everyday to find profits/losses for the client

c. the client must be able to keep the balance above the initial margin all the time

d. all of the above are true.

5. The daily settlement system at the futures exchange requires that (VARIATION)

a. for every contract, the participant has to open an account with the maintenance margin

b. the opening futures price of that asset will be used everyday to find profits/losses for the client

c. the client must be able to keep the balance above the margin requirement

d. all of the above are true

6. Pure discount bonds created by separating the interest and principal payments from U.S.
Treasury bonds, are

a) notes.

b) bills.

c) STRIPS.

d) SWAPS.

7. Which one of the following is a method used to quote interest rates on money market
instruments, like T-b

a) floating rate basis

c) bank discount basis

b) call rate method

Please note question 9,10 and 14 can have variations.

d) prime rate method

8. An American style put option writer has

a) an option to sell the stock between now and the maturity

b) the obligation to buy the stock between now and the maturity

c) the obligation to sell the stock between now and the maturity

d) none of the above are true

8. An American style call option buyer has (VARIATION)

a) an option to sell the stock between now and the maturity

b) the obligation to buy the stock between now and the maturity

c) the obligation to sell the stock between now and the maturity

d) none of the above are true

9. Regarding the motives of derivatives market participants,

a) speculators are always looking for maximizing returns

b) hedgers are only interested in managing risk

c) ard contracts are difficult to implement

d) all of these are true.

10. three kinds of efficient market definitions imply that

a)market is strong form efficient, it can not be weak form efficient

b)market is weak form efficient, it is pretty easy to use price and volume information to create a pat
c) markret is semi-strong form efficient, it is also strong form efficient le above are true.

d) all of the above are true

11. A Treasury bull has a face value of $100,000, a price of $99,797.12, and matures in 35 days.
What is the bond equiv

a) 1.98%

b) 2.128
Please note question 9,10 and 14 can have variations.

c) 2.28%

d) 3.67%

12. Which one of the following is defined as a forward rate?

a) rate agreed upon today for a long-term loan

b) interest rate quoted today which will apply to all loans made this week

C) interest rate adjusted for the anticipated rate of inflation

d) expected future interest rate implied by current interest rates

13. The Semi-strong form market efficiency:

a) implies that the expected return on any security is zero.

c) involves past price and volume information only.

b) is compatible with technical analysis.

d) incorporates weak form efficiency.

14. The existence of market anomalies prove that those markets

a) are not strong form efficient

c) are not semi-strong form efficient

b) are not weak form efficient

d) none of these are true.

15. A bond has a face value of $30,000 and matures in 62 days selling for $29,750. What is the bank
discount

a) 4.67%

b) 4.84%

c) 5.48%

d) 5.78%

16. An option contract is purchased/written by the

a) hedgers

b) СВОТ

c) NYSE

d) broker
Please note question 9,10 and 14 can have variations.

17. One of the differences between a forward and a futures contract is

a) forwards are not standardized in the size whereas futures contracts are

b) a futures holder can get out of the contract by buying a reverse contract, while forward holders
can not do that.

c)there are physical exchanges for trading future contracts whereas forward contracts are traded
over

d) all of the above are true.

17. One difference between a futures and an options contract is that, futures contracts are
(VARIATION)

a) sold by futures markets for a price, but options are free to enter

b) written specifically for clients, but options a

c) are not traded, but options contract are traded in the market

d) none of these are true

17. One of the differences between a forward and a futures contract is (VARIATION)

a) forwards are standardized in the size whereas futures can be modified according to the
demands of the parties involved.

b) a futures holder can get out of the contract by buying a reverse contract, while forward
holders can not do that.

c) there are physical exchanges for trading forward contracts whereas futures contracts are
traded over the counter.

D) all of the above are true

18. Most futures contracts are never used for actual delivery. This is mainly because

a) the delivery rules are too stringent to follow

c) contracts don't expire on the day one needs to buy/sell

b) its easier to operate all of these are true

d) all of these are true

Please note question 9,10 and 14 can have variations.

18. Most futures contracts are never used for actual delivery. This is mainly because
(VARIATION)

a) the delivery rules are too stringent to follow

c some contracts do not even have a delivery rule

b) actual deliveries mostly create losses

d) none of these are true

19. The rule regarding margin calls in a futures contract is that if the margin falls below the mainten
bring it back to the maintenance margin

a) bring it back to the maintenance margin

c) bring is back to the initial margin

b) forfeit the contract

d) none of these are true.

20. The efficient market hypothesis asserts that in an efficient market

a) nobody can beat the market in a consistent manner

b) nobody can make a positive profit

c) nobody can make abnormal positive profit

d) all of the above are true.

20. The efficient market hypothesis asserts that in an efficient market (VARIATION)

a) nobody can beat the market in a consistent manner

b) nobody can make a positive profit

c) nobody can make abnormal positive profit

d) market participants always react to current news items