POST GRADUATE PROGRAM IN FINANCIAL MARKET

(Mock Test)

Subject: Equity Derivatives VIII (NISM)

SET-2
Time :60Minutes Marks:50
Date:

Name:
Sec:
Dept:

• There are 25 questions - you need to select ALL the right option(s).
• Please ENCIRCLE the right option(s).
• Each question carries 2 marks.
• Time – 1 Hour.

1) The intrinsic value of a call option is the amount the option is _______.

(a) Deep out-of-the-money (b) At-the-money (c) Out-of-the-money (d) In-the-money

2) 1 is the beta of _______.

(a) All stocks traded at NSE (b) Nifty 50

(c) All stocks which are part of Nifty 50 (d) None of the above

3) The impact cost on a trade of Rs. 3 million of the CNX Nifty works out to be about 0.05%. This means that if CNX
Nifty is at 4000, a sell order of that value will go through at a price of Rs. _______.

(a) 3998 (b) 3995 (c) 3,999.50 (d) 3,995.50

4) Ms. Shetty has sold 600 calls on WIPRO at a strike price of Rs.1403 for a premium of Rs.30 per call on April 1.
The closing price of equity shares of WIPRO is Rs. 1453 on that day. If the call option is assigned against her on
that day, what is her net obligation on April 01?

(a) Pay-out of Rs. 21,600 (b) Pay-in of Rs.15,000

(c) Pay-out of Rs.12,000 (d) Pay-in of Rs.12,000

5) In the Black-Scholes Option Pricing Model, when S becomes very large a call option is almost certain to be
exercised.

(a) FALSE

(b) TRUE

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6) An index put option at a strike of Rs.4176 is selling at a premium of Rs. 18. At what index level will it break even
for the buyer of the option?

(a) Rs. 4194 (b) Rs. 4196 (c) Rs. 4158 (d) Rs. 4162

7) Which of the following is the duty of the trading member?

(a) Giving tips to clients to buy and sell (b) Funding losses of the clients
(c) Ensuring timely pay-in and pay-out of funds (d) All of the above

8) Futures and forwards are similar in the following respect____.

(a) Settlement of contract takes place in the future (b) They have settlement guarantee
(c) Positions are marked-to-market everyday (d) Contracts are custom designed

9) You’ve bought a stock. To eliminate the risk arising out of the stock price, you should _____.

(a) Buy index futures (b) Buy stock futures (c) Sell stock futures (d) Buy more stocks

10) The units of price quotation and minimum price change are not standardized item in a Futures Contract.

(a) TRUE (b) FALSE

11) The spot price of ABC Ltd. is Rs. 1000 and the cost of financing is 10%. What is the fair price of a one month
futures contract on ABC Ltd.?

(a) 1,082.80 (b) 1008.35 (c) 1,085.15 (d) 1,099.40

12) Cyrus is short 800 WIPRO July Puts at strike Rs. 1620 for a premium of Rs. 43 each on July 22. On July 25, (the
expiration day of the contract), the spot price of WIPRO closes at Rs.1653, while the July futures on WIPRO close at
1655. Does Cyrus have an obligation to the Clearing Corporation on his positions, and how much, if any?

(a) Yes. Rs.19,800 pay-out (b) No pay in or pay-out on expiration of contract

(c) Yes. Rs.18,900 pay-out (d) Yes. Rs.19,800 pay-in

13) June futures contract on ABC Ltd. closed at Rs. 4153 on May 20 and at Rs. 4150 on May 21. Raju has a short
position of 8000 in the June futures contract. On May 21, he sells 5000 units of 28-June expiring Put Options on
ABC Ltd. at strike price of Rs.4145 for a premium of Rs.30 per unit. What is his net obligation to / from the Clearing
Corporation for May 21?

(a) Pay-in of Rs.1,32,000 (b) Pay-in of Rs.1,72,000

(c) Pay-out of Rs.1,74,000 (d) Pay-out of Rs.1,32,000

14) Assume that base value of a market capitalization weighted index were 1000 and base market capitalisation
were Rs.55,000 crore. If current market capitalisation is Rs.110,000 crore, the index is at

(a) 2,110 (b) 2,350 (c) 2,250 (d) 2,000

15) TRAHK (Tracks) is a popular ETF based on the _________ .

(a) Nifty 50 index (b) S&P 500 Index (c) Hang Seng index (d) Dow Jones index

16) If the annual risk free rate is 12%, then the ‘r' used in Black Scholes formula should be ______.

(a) 0.1133 (b) 0.1398 (c) 1.1 (d) None of the above
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17) Hedging with stock futures means ___________.

(a) Long security, short security (b) Long index futures, short index futures
(c) Long security, short stock futures (d) Long security, long index futures

18) Which of the following is the duty of the trading member?

(a) Filling of 'Know Your Client' form(b) Execution of Client Broker Agreement
(c) Bringing risk factors to the knowledge of client(d) All of the above

19) On expiry, the settlement price of a stock futures contract is _______.

(a) Opening price of futures contract(b) Closing stock price

(c) Closing price of futures contract(d) Opening stock value

20) Operational risks include losses due to ____________.

(a) Inadequate disaster planning (b) Too much of management control

(c) Income tax regulations (d) Government policies

21) In an equity scheme, fund can hedge its equity exposure by selling stock index futures.

(a) True (b) False

22) Margins in 'Futures' trading are to be paid by _______.

(a) Only the buyer (b) Only the seller

(c) Both the buyer and the seller (d) The clearing corporation

23) When the near leg of the calendar spread transaction on index futures expires, the farther leg becomes a
regular open position.

(a) True (b) False

24) Selling short a stock means ___________.

(a) Seller does not own the stock he is supposed to deliver

(b) Seller has to deliver the stock within a short time
(c) Seller owns the stock he is supposed to deliver
(d) Seller has more than a year's time to deliver the stock which he sold

25) The buyer of an option cannot lose more than the option premium paid.

(a) True only for European options

(b) True only for American options
(c) True for all options
(d) False for all options