NISM Series I: Currency Derivatives Mock Test (Set 2)

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1. Margins across the various clients of a member are collected on a gross basis – True or False?

a) True

b) False

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2. When a client defaults in making payments in respect of a daily settlement, the contract is closed out. The amount not paid by the client is adjusted against the margin.

a) Bank fixed deposits of the client

b) PPF balance of the client

c) Initial margin paid by the client

d) Shares deposited by the client with the trading member

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3. A person aims to purchase GBPINR one-month futures at 80.50 when the current price is 80.80 and places a limit order at 80.50. If the market fluctuates within the range of 80.40 and 81 after entering the limit order, the execution price is likely to be 80.50.

a) At or below 80.50

b) Any price above 80.50

c) Any price between 80.40 and 81

d) 80.50

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4. What is the term for an order that, if not executed during the day, the system automatically cancels at the end of the day?

a) Day Order

b) Good Till Cancelled order

c) Stop Loss Order

d) Immediate or Cancel Order (IOC)

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5. If the one-year interest rate is 2% in the US and 10% in India, and the current USDINR spot rate is 64, which of the following could be approximately closest to the six-month futures rate of USDINR?

a) 67.02

b) 65.74

c) 66.51

d) 67.89

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6. Mr. Satish in India anticipates a 10% appreciation in international gold prices from USD 1200 per ounce to USD 1320 in the next six months. To capitalize on this view, he buys 30 grams of gold at Rs. 25000 per gram and simultaneously sells 15 lots of 6-month USDINR futures at 60. After six months, Mr. Satish sells the gold at Rs 28000 per gram and unwinds the currency futures at Rs 63. Assuming 1 ounce is equal to 3 grams, which of the following best describes the return for Mr. Satish and the hedging strategy that he has used?

a) Negative returns, Short USDINR futures

b) Negative returns, Long USDINR futures

c) Positive returns, Long USDINR futures

d) Positive returns, Short USDINR futures

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7. Specify the lot size for EURINR futures contract.

a) 1000 INR

b) 1000 EUR

c) 10000 EUR

d) 100000 INR

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8. The prices of a commodity in the spot market were volatile due to which many traders were going bankrupt. In what way would the introduction of an organised futures market help the spot market of this commodity?

a) When futures are introduced, it will lead to new entrepreneurial activity

b) There will be increased volume in the spot market

c) The risk will be transferred

d) When futures are introduced, it will shift the speculative activities to a controlled environment which will have good risk management systems

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9. What perspective has been conveyed by an individual who sells GBPINR and simultaneously purchases EURINR in equal amounts?

a) INR depreciation against GBP

b) EUR depreciation against GBP

c) EUR appreciation against GBP

d) INR appreciation against GBP

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10. How would a trader likely act on the belief that GBPINR will remain steady around 80.00 levels in the next month, considering a one-month GBPINR premium of 50 paise? Also, what could be the potential profit per GBP if this view materializes?

a) Sell one month GBPINR futures, 50 paisa

b) Buy one month GBPINR futures, 50 paisa

c) Sell 3 month GBPINR futures, 150 paisa

d) Buy 3 month GBPINR futures, 150 paisa

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11. Who serves as the central counterparty to JPYINR futures trades in India?

a) Bank trading and clearing member

b) A jewellery store owner quoting a price to buy old jewellery and also quoting a price to sell new jewellery

c) Clearing corporation

d) Exchange

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12. Mr. Madan, a trading member, purchases 70 lots of GBPINR one-month futures on day 1 at 91.5 and simultaneously sells 80 lots of the same contract on the same day at 91.6 in his proprietary book. The settlement price for the day is 91.20. Calculate the Mark to Market margin on the open positions (in Rs.).

a) 4000

b) 5000

c) -4000

d) -5000

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13. A reputable exim company generates export revenue in USD, utilizing a portion for import payments in EUR, and converting the remainder into INR. The company is apprehensive about USDINR risk. What best characterizes the company’s risk and the potential currency futures strategy it may employ to mitigate the risk?

a) USD depreciating against INR, short USDINR

b) USD depreciating against INR, long USDINR

c) USD appreciating against INR, short USDINR

d) USD appreciating against INR, long USDINR

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14. The maximum net NPA % that an AD Category 1 bank can have to become a trading and clearing member of any recognized currency futures exchange is ____.

a) 3%

b) 1%

c) 2%

d) 5%

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15. In the OTC market, one-month USDINR is quoting at 65.25/65.50, and futures for the same maturity are quoting at 66.00/66.10. Which of the following describes a possible arbitrage trade and the profit per USD if the arbitrage trade is carried until maturity?

a) Buy USDINR in OTC and sell in futures, 75 paise

b) Buy USDINR in OTC and sell in futures, 55 paise

c) Buy USDINR in OTC and sell in futures, 50 paise

d) Buy USDINR in OTC and sell in futures, 40 paise

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16. Who is/are allowed to trade in currency futures ?

a) FIIs

b) Corporate not having exposure to foreign currency

c) NRIs

d) All of the above

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17. A trader in currency markets believes that USDJPY will move from 105 to 108 in the next 1 month. How could this view be executed using currency futures contracts of JPYINR and USDINR?

a) Short JPYINR

b) Long JPYINR and short USDINR

c) Long JPYINR

d) Short JPYINR and Long USDINR

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18. A Currency exchange trading member buys 20 lots of USDINR one month futures on day 1 at 65.80 and also sells 4 lots of the same contract on the same day at 65.90 in the proprietary book. The settlement price for the day was 65.80. What would be the mark to market (MTM) margin on the open positions (in Rs.)?

a) 800

b) -400

c) -600

d) Zero

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19. A significantly better than expected Consumer Price Index from the United Kingdom (UK) will result in what type of movement of GBP against other countries?

a) GBP depreciating against other currencies

b) No significant change

c) GBP appreciating against other currencies

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20. A skilled currency futures trader believes that the INR should depreciate against USD in the next few months. What currency futures trade would be profitable for him if his views come true?

a) Sell USDINR

b) Buy USDINR

c) Sell USDEUR

d) Buy USDEUR

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21. An importer initiates a long position in a USDINR futures contract at a price of 53 by purchasing 20 lots. At the expiry, the settlement price is 54.3. What is the profit or loss incurred by the importer?

a) Profit of 2600

b) Profit of 26000

c) Loss of 26000

d) Loss of 2600

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22. Mr. XYZ anticipates a decline in EURINR prices and sells 10 contracts at Rs. 70.2575 per unit. In the event of an upward movement of 10 ticks, each tick being Re.0025, how much will he gain or lose? (1 lot = EUR 1000)

a) Loss of 250

b) Loss of 300

c) Profit of 300

d) Profit of 250

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23. Assuming the quote for a USD-INR call option is INR 0.45 / 0.47 (bid price / ask price), what is the price at which a company could purchase the call option?

a) 0.48

b) 0.46

c) 0.45

d) 0.47

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24. The process of calculating open positions and determining Mark to Market margins is known as ___________.

a) Pay In

b) Settlement

c) Clearing

d) Pay Out

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25. A person buys a USD call option at strike of 54.5 and pays a premium of INR 0.4. What would be the breakeven point for the transaction?

a) 55.90

b) 54.10

c) 55.30

d) 54.90

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26.

A trader buys April USDINR futures at different times over a two day period as under :
Day 1 – 5 lots at 10.30 am at 54.5 and 10 lots at 2 pm at 54.2
Day 2 – 10 lots at 11 am at 54 and 10 lots at 3 pm at 54.10
On day 3 he sell 20 lots at 54.50. Using FIFO method calculate how much profit he has made on the Squared up position ?

a) 4500

b) 3000

c) 5500

d) 2000

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27. A speculator in currency markets takes a long position in USDINR futures contracts, purchasing 25 lots at a price of 52. On expiry, the settlement price is declared as 52.35. Determine the profit (+) or loss (-) incurred by the speculator.

a) Loss of 875

b) Profit of 875

c) Profit of 8750

d) Loss of 8750

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28. On day 1, a trading member (TM) with two clients, “A” and “B,” engages in proprietary trading in currency futures. The TM buys 12 lots of USDINR one-month futures and sells 2 lots of the same contract in his proprietary book. Client “A” buys 12 lots and sells 2 lots of USDINR one-month futures, while client “B” buys 12 lots and sells 2 lots of USDINR one-month futures on the same day. Determine the open position (in USD) for the trading member, client “A,” and client “B” at the end of day 1.

a) 10,000; 10,000; 10,000

b) Zero, 10,000; 10,000

c) 10,000; zero; zero

d) 30,000; 10,000; 10,000

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29. An export firm expecting to receive USD 50,000 after one month wants to hedge the currency risk. To ensure transparent pricing, what type of contract should the firm use?

a) Short OTC USD

b) Long Exchange Traded USD

c) Long OTC USD.

d) Short Exchange Traded USD

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30. A client sells a USD call option at a strike of 53.8 and receives a premium of INR 0.3. What would be the breakeven point for the transaction?

a) 54.10

b) 53.80

c) 53.50

d) 54.50

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31. The US govt. declares significantly lower Retail Sales Data. This will result in USD ___________ against other currencies.

a) Depreciating

b) Appreciating

c) No Impact

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32. An Immediate Or Cancel (IOC) order ____________.

a) Is valid for one hour after it is entered in the trading system

b) Gets exercised on the last day

c) Gets executed at the best price during the day

d) Is either executed or cancelled as soon as it is entered in the trading system

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33. Mr. Mohit buys 35 lots of USD INR 1 month future when the price was 45.50/45.65 and squares off 20 lots when the price was 46.30/46.50. How much profit or loss does he make on the trades that were squared off?

a) Profit of 12300

b) Loss of 11500

c) Profit of 11750

d) Profit of 13000

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34. An exporter wants to sell USD that he has received as export remittance. The bank quotes a price of 62.20/62.22 for USDINR. At what price can you sell one unit of USD?

a) 62.20

b) 62

c) 62.22

d) 62.21

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35. A trader wants to buy USDINR one month future at 54.50 when the current price is 54.75. When he is entering the limit order, the price is fluctuating between 54.40 to 54.80. At what price is the order likely to get executed?

a) Any price between 54.40 to 54.80

b) 54.75

c) At or below 54.50

d) 54.80

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36. What is the action taken when a client defaults in making the Mark to Market margin payments?

a) SEBI handles the matter as per its guidelines

b) The amount of unpaid mark to market margin is recovered from his Initial Margin

c) The client is allowed to a maximum of 5 more trades so that he can make profits and pay the margins

d) The matter is reported to the clients bankers and amount is recovered from his banks

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37. The contract size for USDINR futures contract is __________.

a) USD 100

b) INR 100

c) USD 1000

d) INR 1000

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38. True or False: The Reserve Bank of India (RBI) has allowed all banks to operate a foreign currency – INR option book to offer currency options to their clients.

a) True

b) False

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39. Mr. Swami initiated a spread trade by purchasing 20 lots of October USDINR at Rs 59.70 and simultaneously selling 20 lots of November USDINR at 59.90. After a month, he reversed the spread by selling 20 lots of October USDINR at 59.30 and buying 20 lots of November USDINR at 59.20. What is the resulting profit or loss from this spread trading?

a) Profit of Rs 60

b) Profit of Rs 6000

c) Loss of Rs 60

d) Loss of Rs 6000

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40. Mr. Kulkarni invested Rs 1,00,000 in the US stock markets when the USDINR rate was 60. After one year, his investment appreciated by 18% in USD terms. Upon selling his investments, he repatriated the money to India at the prevailing rate of 62. What are his real returns in INR?

a) 21.93 %

b) 16.45%

c) 20.78%

d) 15.20%

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41. The initial margin shall be deducted from the liquid net worth of the clearing member _____________.

a) Every 2.5 hours

b) At 10 am in the morning

c) Every one hour

d) On an online, real-time basis

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42. An decrease in expected volatility increases the option premium.

a) True

b) False

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43. A big potato farmer gets into a contract with a leading fastfood restaurant to supply 10 tonnes of potato every month for a certain price. What type of a contract is this ?

a) Forward

b) Future

c) Swap

d) Options

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44. A trader in India anticipates an increase in international gold prices from USD 1500 per ounce to USD 1800 in the next six months. To capitalize on this view, the trader buys 30 grams of gold at Rs. 22,000 per gram. Additionally, the trader sells a 6-month USDINR futures contract at a rate of 46. After six months, gold prices rise to USD 1800 per ounce, and the trader sells gold at Rs. 24,000 per gram. Simultaneously, the trader unwinds the currency futures contract at a rate of 44. Assuming 1 ounce is equal to 3 grams, determine the number of lots of currency futures used to hedge the currency risk and calculate the real return for the investor.

a) 18 lots, 13.6%

b) 15 lots, 13%

c) 15 lots, 13.6%

d) 18 lots, 13%

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45. Mr. Kalpesh invested Rs 50,000 in the UK stock markets when the GBPINR rate was 70. After one year, his investment appreciated by 18% in GBP terms. He sold off his investments and repatriated the money to India at the then existing rate of 74. What are his real returns in INR?

a) Profit of 18.63%

b) Profit of 21.74%

c) Profit of 24.79%

d) Profit of 24.74%

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46. A trading cum clearing member purchases 10 lots of GBPINR one-month futures on day 1 and also sells 4 lots of this contract on that day in his proprietary account. What would be his open position at the end of the day in GBP?

a) 14000

b) 6000

c) 10000

d) 4000

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47. Simultaneous buying and selling of USDINR futures across two different maturities is called ________.

a) Bullish Trading

b) Arbitrage Trading

c) Swap Trading

d) Spread Trading

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48. Which term best describes EUR currency?

a) Pegged to USD

b) Pegged to gold

c) Managed float

d) Free floating

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49. A trader holds a USDINR put option with a strike price of 82. The current spot price of USDINR is 82. What is the moneyness of this option?

a) Out of the Money

b) At the Money

c) None of the Above

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50. Mr Amit is very bullish on USDINR and feels it will reach to 55 from the current levels of 51. He wants his profit to be maximum from this view. Which of the below options strategies should he consider ?

a) Sell USDINR Put Option

b) Buy USDINR Call option

c) Buy USDINR Put option

d) Sell USDINR Call Option

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