Dear aspirants,
We are presenting you the Derivative Contracts MCQ for SEBI Grade A Finance Section of the exam. These Finance MCQ for SEBI Grade A are prepared as per latest syllabus.
Q1. ___________contracts are not standardized?
- Futures
- Forwards
- Options
- Swaps
- Both b. and d.
Answer: (5)
Forward and Swaps contracts are customizable derivative contracts (Over the counter)
Futures and options are standardized derivative contracts (Exchange Traded)
Q2. Which of the following contracts involves future exchange of assets at a specified price?
- Future Contract
- Forward Contract
- Present Contract
- Spot Contract
- Swap Contract
Answer: (2)
A forward contract is a customizable derivative contract between two parties to buy or sell an asset at a specified price on a future date. Forward contracts can be tailored to a specific commodity, amount, and delivery date
Q3. The difference between bid (buying) rates and ask (selling) rates is called the _________?
- Profit
- Arbitrage
- Spread
- Forward transaction
- Speculation
Answer: (3)
The bid price refers to the highest price a buyer will pay for a security. The ask price refers to the lowest price a seller will accept for a security. The difference between these two prices is known as the spread
Q4. Spot price of a stock is 100.
3 Month futures price listed on exchange is INR 105.
Cost of borrowing funds in 12% p.a.
Calculate arbitrage grain?
- 5
- 3
- 2
- 1
- No arbitrage possible
Answer: (3)
Arbitrage is the purchase and sale of an asset in order to profit from a difference in the asset’s price between markets. In other term arbitrage is “Free ka profit”.
Now in above question the investor will buy stock in spot market at INR 100. and subsequently he will sell the share in 3-M futures market at INR 105.
For purchase of share of INR 100 the cost of capital is 12%/12*3monts = 3%.
So, the total cost to purchase the share is INR 100 + INR 3 = 103(after 3 months)
And he sold the share at 105/- in 3M-futures so the arbitrage gain is INR 2.(105-103)
Margin on purchase of future contact ignored.
Q5. An exporter has agreed to receive USD 100 in return for the export sale. However, the exporter will only receive the amount two months down the line.
Spot rate of 1 USD = INR 70/-
Bank offer-
2-month forward “BID” rate = INR 69/-
2-month forward “ASK” rate = INR 71/-
Actual price after 2 Months = INR 68/-
Calculate the amount of INR inflow if exporter booked 2 Months forward rate.
- 7000/-
- 6900/-
- 7100/-
- 6800/-
- 7050/-
Answer: (2)
Given in question that exporter has book 2 months forward rate. Bank will buy USD from exported at BID rate. = INR 69/-
Remember Bank buys cheap and sells expensive. Hence BID rate used
Q6. An investor is long 2 contracts of Nifty futures purchased at Rs. 5000 each. The next morning a scam is disclosed of a large company because of which markets sell off and Nifty futures goes down to Rs. 4500. What is the mark to market for the investor? (1 Nifty contract is 100 shares)
- -50,000
- +50,000
- -1,00,000
- +1,00,000
- None of the above
Answer: (3)
Investor lost INR 500 per contract on Nifty futures due to sharp decline in nifty futures owing to disclosure of scam.
1 Nifty future contract has lot of 100 shares.
So,
Total loss = 500*2*(100) = – 1,00,000/-
These MCQs are prepared by CA Raman Luthra Classes. Subscribe the SEBI Grade A Course by CA Raman Luthra Classes to prepare for SEBI Grade A 2023 exam. Use Coupon Code PTY10 to get instant 10% discount on the course.
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