Finance Questions

Question 1 of 25

… markets are public financial markets in which the price you pay for a product is the current price for immediate delivery.

Forward

Spot

Futures

CFD

Question 2 of 25

… contract is an agreement to buy a product at a future date at an already specified price.

Spot

CFD

Futures

Gentlemen's

Question 3 of 25

Which of the following assets can be traded as futures?

Interest rates

Stock indices

Commodities

All answers provided are correct

Question 4 of 25

The spot price for metal is $1,400 a tonne, but there is a futures contract for $1,500 a tonne in a year from now. In what circumstance will the futures contract not be beneficial?

If in one year the price of metal will be $1,500 a tonne

If in one year the price of metal will be $1,700 a tonne

No answers provided are correct

If in one year the price of metal will be $1,600 a tonne

Question 5 of 25

What are the two types of options?

Call and Put

Be and Not to be

Short-term and Long-term

Buy and Sell

Question 6 of 25

In an option you’re entering into a contract with a vendor to purchase or sell a specified quantity of a security at an agreed price at a certain point in the future.

False

True

Question 7 of 25

What is a specified price of a security in an options contract called?

Option price

Strike price

Spot price

Security price

Question 8 of 25

In what case is the vendor obliged to sell or buy the underlying security at the strike price at the expiration of the contract?

Futures

Options

Forwards

Never

Question 9 of 25

Sigma corps is currently trading at $20 and you agree at the same strike price. You decide to buy 100 shares and you have to pay $1 per share to the vendor. If the stock rises to $25, how much will you lose/make?

Will make $500

Will make $400

Will lose $500

Will lose $400

Question 10 of 25

Sigma corps is currently trading at $20 and you agree at the same strike price. You decide to buy 100 shares and you have to pay $1 per share to the vendor. If the stock falls to $15, how much will you lose/make?

Will make $500

Will make $400

Will lose $600

Will lose $500

Question 11 of 25

Sigma corps is currently trading at $20 and you agree at the same strike price. You decide to buy 100 shares and you have to pay $1 per share to the vendor. If the stock rises to $20.50, how much will you lose/make?

Will lose $100

Will make $100

Will make $50

Will lose $50

Question 12 of 25

What does CDS stand for?

Canadian Depository for Securities

Consumer Debt Solutions

Central Depository System

Credit Default Swaps

Question 13 of 25

The seller of the CDS receives regular payments from the buyer to cover the possibility that the bond issuer will fail to meet repayments and thereby default.

True

False

Question 14 of 25

Who wins if the bond reaches maturity?

The investor

The CDS issuer

The company that has issued the bond

Everyone loses

Question 15 of 25

Who wins if the bond goes into default?

The investor

The CDS issuer

Everyone loses

The company that has issued the bond

Question 16 of 25

What does CLO stand for in asset-backed securities?

Cash Loan Organisation

Collateralised Loan Obligation

Cat Lovers Organisation

Chief Legal Officer

Question 17 of 25

What is the minimum investment amount for mortgage-backed securities?

$10,000

No minimum

$1,000

$5,000

Question 18 of 25

Who wins in the mortgage-backed security if there is no crash in the property market?

Those who securitise the loans

Investors

All answers provided are correct

Mortgage originators

Question 19 of 25

A forward contract is a private agreement between two parties obliging either the buyer or seller to purchase or offer an asset at a set price at a specified time.

False

True

Question 20 of 25

How do forward contracts differ from futures market?

Forwards are custom built and will usually vary from contract to contract

Futures are largely standardised and transparent

All answers provided are correct

Forwards can’t be traded on exchanges

Question 21 of 25

What does IRS stand for?

Interest Rate Swap

Increasing Returns to Scale

Internal Revenue Service

International Riot Society

Question 22 of 25

Are interest rate swaps traded on exchanges?

Yes

Question 23 of 25

Who wins in interest rate swaps?

The side that will gain a better cash flow from a swapped rate

No one wins

Often mutual benefits, as one side must pay an agreed premium (to gain a better cash flow)

The side that will gain a worse cash flow from a swapped rate

Question 24 of 25

What is thought to be the biggest risk for retail investors?

Inflation risk

Getting it wrong

Liquidity risk

Credit risk

Question 25 of 25

Which of the following statements is false?

Institutional investors are required to set up margin accounts to trade many derivatives

Introduction of clearing houses have made the trading environment insecure

All statements are true

Investing in derivatives is now more transparent than it has ever been

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Trading Glossary

1992

That's the number of terms in our glossary.

Do you know your CFDs from your IPOs or ETFs? Remove the mystery with our definitions glossary.

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Term of the day

Ask Price

The ask price is like the reserve price at an auction: it's basically a price that someone has agreed to sell a security for. It differs from the bid price, which is basically the price a buyer is happy to pay for a security. Thus,...

The most common word

Illiquidity

In the investment world, illiquidity refers to assets which can't be exchanged for cash easily. This might be because there aren't enough investors willing to buy them. In business, the term can describe a company that doesn't have...

Finance Questions

… markets are public financial markets in which the price you pay for a product is the current price for immediate delivery.

… contract is an agreement to buy a product at a future date at an already specified price.

Which of the following assets can be traded as futures?

The spot price for metal is $1,400 a tonne, but there is a futures contract for $1,500 a tonne in a year from now. In what circumstance will the futures contract not be beneficial?

What are the two types of options?

In an option you’re entering into a contract with a vendor to purchase or sell a specified quantity of a security at an agreed price at a certain point in the future.

What is a specified price of a security in an options contract called?

In what case is the vendor obliged to sell or buy the underlying security at the strike price at the expiration of the contract?

Sigma corps is currently trading at $20 and you agree at the same strike price. You decide to buy 100 shares and you have to pay $1 per share to the vendor. If the stock rises to $25, how much will you lose/make?

Sigma corps is currently trading at $20 and you agree at the same strike price. You decide to buy 100 shares and you have to pay $1 per share to the vendor. If the stock falls to $15, how much will you lose/make?

Sigma corps is currently trading at $20 and you agree at the same strike price. You decide to buy 100 shares and you have to pay $1 per share to the vendor. If the stock rises to $20.50, how much will you lose/make?

What does CDS stand for?

The seller of the CDS receives regular payments from the buyer to cover the possibility that the bond issuer will fail to meet repayments and thereby default.

Who wins if the bond reaches maturity?

Who wins if the bond goes into default?

What does CLO stand for in asset-backed securities?

What is the minimum investment amount for mortgage-backed securities?

Who wins in the mortgage-backed security if there is no crash in the property market?

A forward contract is a private agreement between two parties obliging either the buyer or seller to purchase or offer an asset at a set price at a specified time.

How do forward contracts differ from futures market?

What does IRS stand for?

Are interest rate swaps traded on exchanges?

Who wins in interest rate swaps?

What is thought to be the biggest risk for retail investors?

Which of the following statements is false?

Looking for more?

Trading Glossary

Ask Price

Illiquidity

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