Q1
A derivative is a financial instrument whose value is derived from
Underlying asset
Swaps are mainly used for exchanging - a. Interest payment, currencies b. shares
Interest payment, currencies
Google and Infosys exchanging dollar and rupee interest payments is an example of what type of swap
Currency rate swap
The counterparty risk is highest in: a) Forwards b) Futures
Futures
Derivatives derive value based on
a. past profits b. price movement fluctuations in underlying asset
price movement fluctuations in underlying asset
Interest rate swaps help companies manage - a. Fluctuating interest rates b. Inflation
Fluctuating interest rates
A gold jewelry shop uses gold futures to lock in price for the wedding season. Example of: a. Hedging b. Swaps
Hedging
Profit in a call option happens when:
a. Spot price < strike price
b. Spot price > strike price
Spot price > strike price
A forward contract is: a. traded on stock exchanges b. only for commodities
traded on stock exchanges
A farmer enters a contract to sell wheat at a fixed price after 3 months. This is an example of: a. swap b. Forward
Forward
A trader buys a put option expecting stock prices to fall. This is: a. hedging b. speculation
speculation
Real estate developers commonly hedge cement and steel price fluctuation using : a) Equity options b) Commodity futures
Commodity futures
Futures contracts are traded on - a. OTC exchange b.Banks
OTC exchange
A trader buys a call option expecting stock price to rise. This is: a. Speculation b. Arbitrage
Speculation
OTC derivatives are: a. standardised b. customised
customised
Which derivative allows both parties to exchange a series of cash flows?
Swaps
Options give the holder: a. Right but not the obligation to buy or sell b. maximum profits
Right but not the obligation to buy or sell
A company converts its variable rate loan into a fixed rate loan using a swap. This is what type of swap
Interest rate swap
The premium in an option is: a. Upfront price paid for the option b. penalty amount
upfront price paid for the option.
The maximum loss in buying an option is limited to: a) premium paid b) Zero
premium paid