NISM-Series-I: Currency Derivatives Certification Examination Sample Questions 1. Which term best describes EUR currency?(a) Managed float (b) Pegged to USD (c) Pegged to gold (d) Free floating 2. Which of the following is true? (a) Base currency is the first currency in a currency pair (b) Base currency is the second currency in a currency pair (c) Quotation currency is the first currency in a currency pair(d) Exchange rates are quoted in per unit of quotation currency 3. Assume you are an exporter and you want to sell USD that you have received as exportremittance. The bank quotes a price of 45.10/ 45.12 for USDINR. At what price can you sell oneunit of USD? (a) 45.12 (b) 45.11 (c) 45.09 (d) 45.10 4. As a trader you believe EURUSD will move from 1.38 to 1.44 in next 2 months. Which of thefollowing would you do to execute this view using currency futures contract of EURINR andUSDINR? (a) Long EURINR (b) Short EURINR (c) Short EURINR, Long USDINR (d) Long EURINR, Short USDINR Which of thefollowing would you do to execute this view using currency futures contract of GBPINR andUSDINR? (a) Long GBPINR (b) Long GBPINR.52 (c) 42. the settlementprice was announced as 63. which of the following could be closest to one year future rate of GBPUSD? (a) 1. As a trader you believe GBPUSD will move from 1.76 8.48 (b) 47.68 in next 2 months.5. At the expiry. If one year interest rate is 2% in US and 10% in India.70. An exporter sells 10 lots of one month EURINR futures at 63.65.6005 (c) 1.63 to 1.24 (d) 45. whichof the following could be closest to the six month future rate of USDINR? (a) 40. If current USDINR spot rate is 44.6995 (b) 1. How much profit/loss (in Rupees) did he make on thetransaction? (a) Profit of 7000 (b) Profit of 700 (c) Loss of 7000 (d) Loss of 700 .7325 (d) 1. Short USDINR (c) Short GBPINR. If current GBPUSD spot rate is 1. Long USDINR(d) Short GBPINR 6. One year interest rate is 4% in US and 1% in UK.6500 7. Higher (c) Bought. When he received thepayment. he buys 30 grams of gold at Rupees22. Short USDINR and long GBPINR for same maturity (c) USD appreciating against GBP. he executes 10USDINR futures contracts to hedge currency risk at a price of 50.000 per gram and . As he is expecting to receive USD 10. Short GBPINR and long USDINR for same maturity (d) USD depreciating against GBP. After six months. An international trading company has export revenue in USD and it uses part of it to makeimport payments in GBP and balance is converted to INR. Lower 11.000 per gram and also sold 6 month USDINR futures at 46. An IT professional buys a house for INR 500. Higher (b) Sold.000 for which payment has to be made afterthree months. Given this situation. What view has he executed? (a) JPY strengthening against USD (b) JPY weakening against USD (c) INR strengthening against USD (d) INR weakening against JPY 12. he converted USD into INR with his bank at a price of 51 for making the payment forthe house and also settles the contract at a price of 49.9. The company is concerned aboutGBPUSD risk for its import payments. Lower (d) Sold. A trader in India expects international gold prices to appreciate from USD 1500 per ounce toUSD 1800 in next six months.000 in three months. sells one lot of JPY/INR. Which of the following best describes company's risk andthe currency futures strategy that it may use to mitigate the risk? (a) USD depreciating against GBP. A trader executes following currency futures trade: buys one lot of USD/INR. To benefit from the view. Short GBPINR and long USDINR for same maturity (b) USD appreciating against GBP. would he havesold/ bought USDINR futures and would the effective price for house be lower than or higherthan USD 10. gold pricesappreciated to USD 1800 per ounce and the trader sold gold at Rupees 24. Short USDINR and long GBPINR for same maturity 10.000? (a) Bought. how many lotsof currency futures would he have used to hedge the currency risk and how much was the realreturn for the investor? (a) 15 lots. In next one year.5 and at the time of converting USD backinto INR. Assuming 1 ounce is equal to 3 grams. 12% (c) 15 lots. In OTC market. 13. 13. A person has invested USD 100.000.50/44.unwinds currency futures contract at 44. 85 paise (b) Buy USDINR in OTC and sell in futures. one month USDINR is quoting at 43.6% (d) 18 lots. How much is the return on investment in USD andin INR respectively? (a) 20%. he received an exchange rate of 46.6% 13. Atthe time of investing abroad the exchange rate was 44. 13% (b) 18 lots.00 and futures for same maturityis quoting at 44.75/44.60. 50 paise 14. what trade position could result in losses? (a) Selling USDINR OTC forward (b) Buying USDINR futures (c) Selling USDINR futures (d) Selling long term USDINR futures and buying short term USDINR futures 15. 24% . his investments in US equities appreciated in value to USD120. If you expect USDINR spot value to remain stable over next one month and also expectforward premium with USD at premium to INR to continue expect the future value of INR at adiscount to USD to continue. 60 paise (c) Buy USDINR in OTC and sell in futures. 16% (b) 20%.The investor decided to sell off his portfolio and repatriate the capital and profits to India. 75 paise (d) Buy USDINR in OTC and sell in futures.000 in US equities with a view of appreciation of US stockmarket. Which of the following describes possible arbitrage trade andpossible arbitrage profit per USD if the arbitrage trade is carried until maturity? (a) Sell USDINR in OTC and buy in futures. USDINR spotrate was 50 and one year premium was 4%.000. On day 1. On the same day. 20% (d) 20%.000.000. A person has invested INR 100. 10. 10.000. What would be the open position (in USD) of the trading member.(c) 20%. On the same day. zero.000 (d) 10.000. 10. client"A" and client "B" respectively at the end of day 1? (a) zero.000 (b) 18. At the time of investing in the corporate bond. The person decides to hedge currency risk usingUSDINR one year futures. 6. client "A" buys 8lots of USDINR one month futures and also sells 2 lots of the same contract while client "B" sells8 lots and buys 2 lots. A trading member (TM) has two clients "A" and "B" and he also does proprietary trading incurrency futures.000.000.000 in an Indian corporate bond for a year giving a return of 16% in one year. 6. client "A" buys12 lots of USDINR one month futures and also sells 2 lots of the same contract while client "B"buys 12 lots and sells 2 lots. zero 18.000 (c) zero.000. On day 1. TM buys 12 lots of USDINR one month futures and also sells 2 lotsof the same contract on the same day in his proprietary book. how many USD can this person remit to hisson? (a) 2320 (b) 2417 (c) 2083 (d) 2231 17. 6.000 (b) 10. 10. 18% 16.000 . At the end of one year. The person plans to use the proceeds from the maturity of corporate bond tofund his son's education on US.000.client "A" and client "B" respectively at the end of day 1? (a) 30. A trading member (TM) has two clients "A" and "B" and he also does proprietary trading incurrency futures. 6. 10. What would be the open position (in USD) of the trading member. 10. TM buys 8 lots of USDINR one month futures and also sells 2 lots of the same contract on the same day in his proprietary book. whichever is higher 22. whichever is higher 21.5% of open interest or JPY 2000 million. whichever is higher (c) 15% of open interest or JPY 75 million. 1999 (b) SC(R)A. whichever is higher (b) 15% of open interest or JPY 1000 million. 6. 1956 (c) SEBI Act .000. whichever is higher (d) 12. Which of the following best describes the total open interest which is used for the purposeof monitoring of open position during the day? (a) Minimum open interest in the previous day (b) Total open interest at the time of monitoring (c) Total open interest at end of previous day(d) Maximum open interest in the previous day 20.000 19. whichever is higher (d) 6% of open interest or EUR 10 million. whichever is higher (c) 6% of open interest or EUR 5 million. zero. Which of the following acts is mainly responsible for governing the securities trading inIndia? (a) FEMA. zero (d) 6. Which of the following best describes the SEBI prescribed open position limit for EURINRcontracts for a client? (a) 5% of open interest or EUR 5 million. 6.(c) 6.000.000. Which of the following best describes the SEBI prescribed open position limit for JPYINRcontracts for a bank trading member? (a) 15% of open interest or JPY 2000 million. whichever is higher (b) 5% of open interest or EUR 10 million. currency futures 27. Which of the following segments of market participants are not allowed to trade in currencyfutures? (a) Trusts (b) NRIs (c) Any corporate not having exposure to foreign currency 24. Which of the following organizations issues guidelines for accounting of currency futurescontracts? (a) ICSI (b) ICWAI (c) IIM (d) ICAI 26.23. Which of the following best describes the guidelines for brokers with respect to executionof client orders? (a) Promptly intimate the execution or non-execution of the order . What is the minimum net worth for a company for it to be eligible for applying to becomean authorized exchange for currency futures? (a) Rs 200 crore (b) Rs 100 crore (c) Rs 50 crore (d) Rs 75 crore 25.currency futures (c) Mark to market . What are the basic accounting heads to be maintained by any market participant formaintaining currency futures accounts? (a) Initial margin .currency futures and Mark to market .currency futures (b) Profit and Loss .currency futures (d) Initial margin . broker and his client clearly specifying rights andobligations of each party 31.5 and pays a premium of INR 0. of broking house in USDINR currency futures contracts (b) Employee to be presentable (c) Employee to also share technical analysis to support currency view 30.(b) Intimate the execution or non-execution within two hour of deal execution (c) Intimate the execution or non-execution by the end of the day (d) Intimate the execution or non-execution within three hour of deal execution 28. An employee of a broking house has started giving advice on taking trading position onUSDINR currency futures on TV. Which of the following best describes the guidelines for brokers with respect to issuing of contract notes for execution of orders? (a) Broker should make guidelines for his sub-brokers to issue contract notes (b) Broker should promptly issue contract notes to his clients and clients of his sub-brokers (c) Broker should ensure that his sub-brokers issue contract notes every week to their clients (d) Broker should have a separate audit team which inspects the process of issuing contractnotes at all his sub-brokers 29. Which of the following best describes the guidelines with respect to nature of agreementthat a sub-broker has to execute with his clients? (a) Tripartite agreement between him. Which of the following best describes the steps that brokinghouse needs to take to ensure that its employee complies with guidelines? (a) Employee to also disclose the proprietary interest. A client buys a USD call option at strike of 45. broker and his client clearly specifying the rights of broker but not his obligations (b) Bipartite agreement between him and his client clearly specifying rights and obligations of each party (c) Bipartite agreement between him and his client clearly specifying the brokerage to becharged (d) Tripartite agreement between him.3. What wouldbe the breakeven point for the transaction? . including long and short position. 8 32. thecurrency option client has 2000 USD long position. Whatwould be the breakeven point for the transaction? (a) 45.(a) 45. Additionally.3.8 (d) 45. one of the clients in currency futures segment has5000 USD short position and the other client has 4000 USD long position. (a) Lot size (b) Requirement of proof of underlying FX transaction (c) Market timings (d) Both (b) and (c) 34. One of the key difference in OTC and Exchange traded USD-INR currency option market is related to ___________.1 (c) 46.8 33. What is the gross open position for thetrading member for the purpose of monitoring open position? (a) 4000 USD (b) 11000 USD (c) 2000 short for currency futures and 2000 long for currency options (d) 20000 USD .1 (d) 45. At the end of a trading day. A trading member has two clients in currency futures segment and one client in currencyoption segment.6 (c) 46. A client sells a USD call option at strike of 45.2 (b) 45.5 (b) 46.8 and receives a premium of INR 0. A trading member has two clients in currency futures segment and one client in currencyoption segment. What is the gross open position for the tradingmember for the purpose of monitoring open position (a) No open position (b) 12000 USD (c) 2000 short for currency futures and 2000 long for currency options (d) 9000 USD 37. An active trader in currency options market wants to execute his view on change in volatilityover a period of time and wants to be insulated from changes in other factors impacting optionpricing. During the day.25 / 0.29 . What option strategy is he likely to use? (a) Short option (b) Long option (c) Covered call (d) Calendar spread 38. each of the client in currency futuressegment have 6000 USD short position and 3000 USD long position.27 (b) 0. each of the clients in currency futures segment sold 6000 USDand bought 3000 USD. For a person who is trading in both currency futures and currency options. at what price could a company buy the call option? (a) 0.27 (bid price / askprice).25 (c) 0. the currencyoption client has 3000 USD long position.23 (d) 0. the open interestwould be monitored for combined gross positions in futures and options. Assume that price of a USD-INR call option is quoted as INR 0. (a) TRUE (b) FALSE 36. Given this quote. At the end of a trading day. Additionally.35. 96 ANSWERS 1. USD-INR spot was at 45. On expiry the RBI reference rate is 44. (d) 8.39.5 and sells a call at a strike of 45. (a) 3. Howmuch net profit/loss did the client make per USD? (a) Loss of INR 0. is it possible for a corporate to write an optionand receive a net premium? (a) Possible (b) Not possible (c) Possible. (c) .55 and premium for January 2011 maturitycall option at strike of 45 is INR 0.71/0. (d) 4. (b) 6.72. Assume that on 1st December 2010.5 is INR 0. A client executes a trade wherein he buys put at astrike of 45.2 (b) Profit of INR 0. if he can give to the bank a copy of underlying trade transaction against whichoption has been written 40.75.15 (c) Profit of INR 0. In OTC currency derivative market in India.54/0. (a) 7. (d) 2.91 (d) Loss of INR 0. (d) 5. premium for January 2011maturity put option at strike of 45. (c) 20. (d) 14. (d) 26. (d) 31. (d) 11. (a) 28. (b) 16. (c) 21. (a) 18. (d) 27. (a) 30. (b) 19. (b) 12. (a) 22. (b) 15. (b) 25. (d) . (d) 10. (b) 29. (c) 13. (b) 24. (b) 23. (d) 17.9. (d) 38.32. (d) 34. (b) 33. (a) 36. (d) 37. (b) 40. (a) 39. (c . (b) 35.