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The value of a put option is positively related to all of the

following EXCEPT:
A. Exercise price
B. Risk-free rate
C. Time to maturity
D. Spot price
E. I am not attempting this question
ANSWER: B

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When the strike price is lower than the spot price of the
underlying, a call option will be_____.
A. At the money
B. Out of the money
C. In the money
D. American Type
E. I am not attempting this question
ANSWER: C

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Which of the following is NOT a hedge for a long position in an

underlying stock?
A. Sell put option
B. Sell call option
C. Sell futures
D. Buy Put option
E. I am not attempting this question
ANSWER: A

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Which of the following is true?

A. European options can be exercised anytime before the
expiration date
B. European options can be exercised on or before the
expiration date
C. European options must be exercised on the expiration date
D. European options can be exercised only on the expiration
date
E. I am not attempting this question
ANSWER: D
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A forward contract is an agreement to enter into a contract at a

pre-specified future date.
A. TRUE
B. FALSE
C. Partially true
D. Insufficient information
E. I am not attempting this question
ANSWER: B

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An exchange traded futures contract is similar to an OTC (over

the counter) derivative. Some common features are :
A. Both are tailored (e.g. non-standardized instruments)
B. Both require margin collection by a clearing house
C. Both are exposed to credit-risk i.e. risk of non-performance by
counter party
D. None of the above
E. I am not attempting this question
ANSWER: D

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An Over The Counter option

A. is a standardized contract traded on an Exchange
B. is a contract tailored to suit individual requirements
C. is an option on stocks of pharmaceutical companies
D. can be bought from any option writer
E. I am not attempting this question
ANSWER: B

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Daily mark-to-market margin payments arise on adverse

positions resulting from price movements in futures.
A. TRUE
B. FALSE
C. Partially true
D. Insufficient information
E. I am not attempting this question
ANSWER: A

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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
E. I am not attempting this question
ANSWER: A
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Each forward contract

A. can be structured as required by the buyer and seller
B. will have the same specifications
C. specifications are decided by the RBI
D. None of the above .
E. I am not attempting this question
ANSWER: A

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