NCFM COMMODITIES MARKET MODULE MOCK TEST QUESTIONS

COMMODITIES MARKET MODULE

Q1
RBDPLNKAK is the symbol for _____________________. [ 1 Mark ]

(a) RBD Palm Olein Kakinad
(b) Medium staple cotton Bhatinda
(c) Refined Soya Oil Indore
(d) None of the above
(e) I am not attempting this question

Q2
Traditionally ____________ has been the largest producers of gold in the world. [ 1 Mark ]

(a) Europe
(b) South America
(c) South Asia
(d) South Africa
(e) I am not attempting this question

Q3
Commodities, which are to be received by a clearing member, are delivered to him in the depository clearing system in respect of depository deals on the respective __________ day as per instructions of the exchange/ clearing house. [ 1 Mark ]

(a) Expiration
(b) Pay-in
(c) Settlement
(d) Pay-out
(e) I am not attempting this question

Q4
If the value of the claim, difference or dispute is up to ___________, then they are to be referred to a sole arbitrator. [ 1 Mark ]

(a) Rs.50 Lakh
(b) Rs.10 Lakh
(c) Rs.75 Lakh
(d) Rs.25 Lakh
(e) I am not attempting this question

Q5
By using the currency forward market to sell dollars forward, an _________ can lock on to a rate today and reduce his uncertainty. [ 1 Mark ]

(a) Arbitrager
(b) Speculator
(c) Importer
(d) Exporter
(e) I am not attempting this question

Q6
OTC derivatives are considered risky because __________________. [ 1 Mark ]

(a) they are not settled on a clearing house
(b) they do not follow any formal rules or mechanisms
(c) there is no formal margining system
(d) all of the above
(e) I am not attempting this question

Q7
All the exchanges, which deal with forward contracts, are required to obtain certificate of registration from the _______________. [ 1 Mark ]

(a) Commodity Board of Trading
(b) Commodity Exchanges
(c) Forward Markets Commission (FMC)
(d) Government of India
(e) I am not attempting this question

Q8
This option to give delivery is given during a period identified as _______________________. [ 1 Mark ]

(a) Delivery notice period
(b) Settlement period
(c) Delivery period
(d) Option notice period
(e) I am not attempting this question

Q9
The first use of derivatives contract was ________________. [ 1 Mark ]

(a) to manage price uncertainty
(b) for speculation
(c) for arbitrage
(d) None of the above
(e) I am not attempting this question

Q10
To ensure financial integrity and market integrity, the FMC prescribes certain regulatory measures. Which of the following is not a measure prescribed? [ 1 Mark ]

(a) Limit on net open positions
(b) Price determination
(c) Special margin deposits
(d) Circuit-filters or limit on price fluctuations
(e) I am not attempting this question

Q11
A futures contract is nothing but a forward contract that is __________. [ 1 Mark ]

(a) Sold by mutual funds
(b) Sold by banks
(c) Traded across the counter
(d) Exchange traded
(e) I am not attempting this question

Q12
In matters where the exchange is a party to the dispute, the civil courts at __________have exclusive jurisdiction. [ 1 Mark ]

(a) Delhi
(b) Mumbai
(c) Calcutta
(d) Ahmedabad
(e) I am not attempting this question

Q13
Final settlement happens on the ____________. [ 1 Mark ]

(a) last trading day of the month
(b) last trading day of the week
(c) last trading day of the futures contract
(d) none of the above
(e) I am not attempting this question

Q14
The open positions of PCMs are arrived at by ____________the open positions of all the TCMs clearing through him, in contracts in which they have traded. [ 1 Mark ]

(a) Netting
(b) Comparing
(c) Subtracting
(d) Aggregating
(e) I am not attempting this question

Q15
A trader requires to take a long gold futures position worth Rs.5,00,000 as part of his hedging strategy. Two month futures trade at Rs.6500 per 10 gms. Unit of trading is 100 gms and delivery unit is one Kg. How many units must he purchase to give him the hedge? [ 4 Marks ]

(a) 8 units
(b) 11 units
(c) 5 units
(d) 10 units
(e) I am not attempting this question

Q16
A trader has purchased crude oil futures at Rs.750 per barrel. He wishes to limit his loss to 50%. He does so by placing a stop order to sell an offsetting contract if the price falls to or below __________. [ 2 Marks ]

(a) Rs.375
(b) Rs.650
(c) Rs.825
(d) Rs.1125
(e) I am not attempting this question

Q17
Gold trades at Rs.6000 per 10 gms in the spot market. Three-month gold futures trade at Rs.6150. One unit of trading is 100 gms and the delivery unit for the gold futures contract on the NCDEX is 1 kg. A speculator who expects gold prices to fall in the near future sells 10 units of gold futures. Two months later gold futures trade at Rs.5900 per 10 gms. He makes a profit/loss of ______________________. [ 4 Marks ]

(a) (+)25,000
(b) (-)2500
(c) (-)25,000
(d) (+)2500
(e) I am not attempting this question

Q18
A trader sells three-month call options on 10 units of gold with a strike of Rs.7000 per 10 gms at a premium of Rs.70. Unit of trading is 100 gms. On the day of expiration, the spot price of gold is Rs.6980/10 gms. What is his net payoff? [ 4 Marks ]

(a) (-) 1,000
(b) (+) 1,000
(c) (+) 700
(d) (+) 7000
(e) I am not attempting this question

Q19
Which of the following futures don't trade on the NCDEX? [ 1 Mark ]

(a) Six month futures
(b) One month futures
(c) Three month futures
(d) Two month futures
(e) I am not attempting this question

Q20
The exchange levies initial margin on derivatives contracts using the concept of ______________. [ 1 Mark ]

(a) TVM
(b) NPV
(c) IRR
(d) VaR
(e) I am not attempting this question

Q21
The margin is charged so as to cover __________ loss that can be encountered on the position on 99% of the days. [ 1 Mark ]

(a) One day loss
(b) One week loss
(c) One month loss
(d) One trading period loss
(e) I am not attempting this question

Q22
The selling constituent will be responsible for the following: [ 1 Mark ]

(a) Payment of entry tax, octroi, etc., when the commodities are brought into the designated local area for lodging the same with the warehouse.
(b) Obtaining registration under the relevant state sales tax laws, filing of returns, payment of taxes and due compliance of laws.
(c) Complying with any check-post regulations prescribed under the local sales tax, entry tax or other municipal laws and ensuring that the prescribed documents accompany the goods.
(d) All of the above
(e) I am not attempting this question

Q23
Which of the following is not a national level multicommodity exchange? [ 1 Mark ]

(a) Ahmedabad commodity exchange
(b) National Board of Trade
(c) National Commodity & Derivatives Exchange of India Ltd
(d) Multi Commodity Exchange of India
(e) I am not attempting this question

Q24
A cotton trader bought ten one-month, long staple cotton futures contracts at Rs.6020 per Quintal at the beginning of the day. The unit of trading is 11 bales and each contract is for delivery of 55 bales. The settlement price at the end of the day was Rs.6050 per Quintal. The trader's MTM account will show (11 bales = 18.7 Quintal) [ 4 Marks ]

(a) (+)1500
(b) (+)5610
(c) (-)5610
(d) (-)1500
(e) I am not attempting this question

Q25
___________ give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date. [ 1 Mark ]

(a) Futures
(b) Forwards
(c) Call options
(d) Put options
(e) I am not attempting this question

Q26
Which of the following is an investment asset? [ 1 Mark ]

(a) Apartment
(b) Car
(c) Bonds
(d) Computer
(e) I am not attempting this question

Q27
An call option with a strike price of 150 trades in the market at Rs.12. The spot price is Rs.160. The time value of the option is Rs._________. [ 2 Marks ]

(a) 2
(b) 8
(c) 12
(d) 10
(e) I am not attempting this question

Q28
Due to the ________ nature of the underlying assets, physical settlement in commodity derivatives creates the need for warehousing. [ 1 Mark ]

(a) Volatile
(b) Valuable
(c) Bulky
(d) Varying
(e) I am not attempting this question

Q29
Who identifies the buyer to whom the delivery notice is assigned? [ 1 Mark ]

(a) The clearing corporation
(b) The buyer
(c) The exchange
(d) The warehouse
(e) I am not attempting this question

Q30
Physical settlement in a commodity futures market involves the physical delivery of ___________. [ 1 Mark ]

(a) the futures contract
(b) the profits
(c) the underlying commodity
(d) None of the above
(e) I am not attempting this question

Q31
A trader sells 30 units of gold futures at Rs.6500 per 10 grms. What is the value of his open short position? Unit of trading is 100 gms and delivery unit is one Kg. [ 4 Marks ]

(a) Rs.1,95,000
(b) Rs.19,50,000
(c) Rs.195,00,000
(d) Rs.19,500
(e) I am not attempting this question

Q32
On the 15th of June a firm involved in industrial fabrication knows that it will require 30000 kgs of silver on August 15 to meet a certain contract. The spot price of silver is Rs.1680 per kg and the August silver futures price is Rs.1730. A unit of trading is 5 Kgs and the delivery unit is 30 Kgs. The fabricator can hedge his position by _____________________________. [ 4 Marks ]

(a) Buying 1000 units of August silver futures
(b) Buying 6000 units of August silver futures
(c) Selling 6000 units of August silver futures
(d) Selling 1000 units of August silver futures
(e) I am not attempting this question

Q33
Members can opt to meet the security deposit requirement by way of ______________. [ 1 Mark ]

(a) Bank guarantee
(b) Cash
(c) Fixed deposit receipts
(d) All of the above
(e) I am not attempting this question

Q34
An option gives the _________ the right to do something. [ 1 Mark ]

(a) Seller
(b) Exchange
(c) Clearing house
(d) Buyer
(e) I am not attempting this question

Q35
Which of the following cannot form the underlying for a commodity derivative contract? [ 1 Mark ]

(a) Nifty
(b) Cotton
(c) Silver
(d) Wheat
(e) I am not attempting this question

Q36
____________ is the closing price of the underlying commodity on the last trading day of the futures contract. [ 2 Marks ]

(a) Market price
(b) Final settlement price
(c) Auction price
(d) Daily settlement price
(e) I am not attempting this question

Q37
A trading member has proprietary and client positions in April gold futures contract. On his proprietary account, he sold 3000 trading units at Rs.6000 per 10 gms. On account of client A, he bought 2000 trading units at Rs.6012 per 10 gms and sold 1500 units at Rs.6020 per 10 gms, and on account of client B, he sold 2000 trading units at Rs.5990 per 10 gms. What is the outstanding position on which he would be margined? [ 3 Marks ]

(a) 5500
(b) 7500
(c) 6000
(d) 3000
(e) I am not attempting this question

Q38
The __________ market reflects the price of domestically crushed soybean. [ 1 Mark ]

(a) Ahmedabad
(b) Delhi
(c) Mumbai
(d) Indore
(e) I am not attempting this question

Q39
A trading member has proprietary and client positions in a March cotton futures contract. On his proprietary account, he bought 5000 trading units at Rs.6000 per Quintal and sold 2500 at Rs.6015 per Quintal. On account of client A, he sold 2000 trading units at Rs.6012 per Quintal, and on account of client B, he bought 1000 trading units at Rs.5990 per Quintal. What is the outstanding position on which he would be margined? [ 3 Marks ]

(a) 8500
(b) 4500
(c) 9500
(d) 5500
(e) I am not attempting this question

Q40
A company knows that it will require 33,000 bales of cotton in three months. The hedge ratio works out to be 0.85. The unit of trading is 11 bales and the delivery unit for cotton on the NCDEX is 55 bales. The company can obtain a hedge by _______________________. [ 2 Marks ]

(a) Buying 2550 units of three-month cotton futures
(b) Selling 600 units of three-month cotton futures.
(c) Buying 600 units of three-month cotton futures.
(d) Selling 2550 units of three-month cotton futures
(e) I am not attempting this question

Q41
Prices in an organised derivatives market reflect the perception of market participants about the ____________________. [ 1 Mark ]

(a) Present
(b) Variability of spot prices
(c) Future
(d) Past
(e) I am not attempting this question

Q42
There would be liability for payment of sales tax when ______________. [ 1 Mark ]

(a) The contract is settled in the same state as the exchange
(b) The contract is settled in a state other than the state where the exchange is located.
(c) The contract is settled in a state other than the state where the buyer is located.
(d) The futures contract fructifies into a sale and culminates into delivery
(e) I am not attempting this question

Q43
It is the responsibility of the __________constituent to comply with the relevant local state sales tax laws and other local enactments. [ 1 Mark ]

(a) Selling and buying
(b) Clearing house
(c) Buying
(d) Selling
(e) I am not attempting this question

Q44
The amount that must be deposited in the margin account at the time a futures contract is first entered into is known as _____________. [ 1 Mark ]

(a) MTM margin
(b) Initial margin
(c) Security deposit
(d) Collateral
(e) I am not attempting this question

Q45
In order to prevent erroneous order entry by trading members, operating price ranges on the NCDEX are kept at _____from the base price. [ 1 Mark ]

(a) +/- 16%
(b) +/- 10%
(c) +/- 8%
(d) +/-20%
(e) I am not attempting this question

Q46
The seller intending to make delivery takes the commodities to ________. [ 1 Mark ]

(a) The designated warehouse
(b) The clearing house
(c) The buyer
(d) The exchange
(e) I am not attempting this question

Q47
_________is the approved custodian for acceptance of Government of India securities under the security deposit requirement. [ 1 Mark ]

(a) NSE
(b) NSCCL
(c) NSDL
(d) NCDEX
(e) I am not attempting this question

Q48
A gold merchant sold twenty units of one-month gold futures contracts at Rs.6000 per 10 gms at the beginning of the day. The unit of trading is 100 gms and each contract is for delivery of one kg of gold. The settlement price at the end of the day was Rs.5950 per 10 gms. The trader's MTM account would show__________. [ 4 Marks ]

(a) (-)7500
(b) (-)10000
(c) (+)10000
(d) (+)7500
(e) I am not attempting this question

Q49
Soy oil is the derivative of _______________. [ 1 Mark ]

(a) Sunflower seeds
(b) Soybean
(c) CPO
(d) Soy
(e) I am not attempting this question

Q50
Whenever delivery notices are given by the seller, the ___________ identifies the buyer to whom this notice may be assigned. [ 1 Mark ]

(a) The clearing house
(b) The buyer
(c) The exchange
(d) The seller
(e) I am not attempting this question

Q51
Gold trades in the spot market at Rs.6000 per 10 grams. The fixed charge for storing gold is Rs.310 per deposit upto 500 kgs. And the variable storage costs are Rs.55 per week. Assume that the storage costs are paid at the time of deposit and the risk-free rate is 10% per annum. What would the price of one-month gold futures if the delivery unit is one kg? Assume that one month is equal to 4 weeks. [ 4 Marks ]

(a) 6120
(b) 6056
(c) 6068
(d) 6086
(e) I am not attempting this question

Q52
Delivery in respect of all deals for the clearing in commodities happens through the _________________. [ 1 Mark ]

(a) Clearing house
(b) Exchange
(c) Approved banks
(d) Depository clearing system
(e) I am not attempting this question

Q53
A January expiration contract would expire on the ____________of January. [ 1 Mark ]

(a) 28th
(b) Last Thursday
(c) 20th
(d) Last Friday
(e) I am not attempting this question

Q54
Which of the following feature differentiates a commodity futures contract from a financial futures contract? [ 1 Mark ]

(a) Standardised contract size
(b) MTM settlement
(c) Varying quality of underlying asset
(d) Exchange traded product
(e) I am not attempting this question

Q55
A trader has purchased crude oil futures at Rs.750 per barrel. He wishes to limit his loss to 20%. He does so by placing a stop order to sell an offsetting contract if the price falls to or below __________. [ 2 Marks ]

(a) Rs.600
(b) Rs.650
(c) Rs.800
(d) Rs.825
(e) I am not attempting this question

Q56
___________ give the buyer the right but not the obligation to sell a given quantity of the underlying asset, at a given price on or before a given future date. [ 1 Mark ]

(a) Forwards
(b) Futures
(c) Put options
(d) Call options
(e) I am not attempting this question

Q57
One unit of trading for soy bean futures is 10 Quintals, and delivery unit is 100 Quintals. A trader buys 10 units of soy bean at Rs.1500/Quintal on the futures market. A week later soy bean futures trade at Rs.1450/Quintal. How much profit/loss has he made on his position? [ 4 Marks ]

(a) (+)50,000
(b) (+)5000
(c) (-)5000
(d) (-)50,000
(e) I am not attempting this question

Q58
An put option with a strike price of 150 trades in the market at Rs.8. The spot price is Rs.160. The time value of the option is Rs._________. [ 2 Marks ]

(a) 8
(b) 10
(c) 0
(d) 2
(e) I am not attempting this question

Q59
Of the following, NCDEX trades ________ futures. [ 1 Mark ]

(a) Wheat
(b) Pepper
(c) Jaggery
(d) Soybean
(e) I am not attempting this question

Q60
On the 15th of January a refined soy oil producer has negotiated a contract to sell 10,000 Kgs of soy oil. It has been agreed that the price that will apply in the contract is the market price on the 15th April. The spot price for soy oil on January 15 is Rs.400 per 10 Kgs and the April soy oil futures price on the NCDEX is Rs.415 per 10 Kgs. Unit of trading in soy oil futures is 1000 Kgs (=1 MT) and the delivery unit is 10000 Kgs (=10 MT). The producer can hedge his exposure by _____________________. [ 4 Marks ]

(a) Buying 100 units of April futures
(b) Buying 10 units of April futures
(c) Selling 100 units of April futures
(d) Selling 10 units of April futures
(e) I am not attempting this question