Round 3: Financial Markets and Products

What is the ISO 4217 currency code for the South African Rand?

• RND

• ZAR

• SAR

• RSR

CSE Clear (Pvt) LTD, is a new entity created by the Securities and Exchange Commission of Sri Lanka. What is this entity?

• A central counterparty for clearing local USD/LKR trades

• A clearing agency for International Sovereign Bonds

• A clearing agency for secondary market trading of corporate debt

• A central counterparty for clearing stocks

Which of the following statements is Untrue regarding 'Index Funds'?

• This is a low-cost method to track a specific group of investments, which are simpler to buy than each of the individual stocks or bonds within the index

• These funds invest in the same assets using the same weights as the target index, typically stocks or bonds

• Index fund returns are risk free

• All of the above

Which of the following statements is True regarding a 'Foreign Exchange Fix'?

I. A fix is a benchmark rate based on trades taking place during a given time window

II. A fix is an indicative rate based on quotes made during a given time window

III. Investors who are unwilling to deal on their own choose the fix

IV. Trading at the Fix guarantees an investor will always get the best price

• All of the above

• II Only

• I and III

• I and IV

Which of the following statements are True. A buyer of a put option is expecting:

I. A rise in the price of the underlying asset

II. A decline in price of the underlying asset

III. To limit his/her loss to the option premium paid

IV. Unlimited losses if the price of the underlying asset declines

• II

• II and IV

• II and III

• I, III and IV

The term 'In the Money' in options trading refers to:

• The price of the underlying asset which is below the strike price

• Exchange traded options only

• Put options only

• Options that have intrinsic value and would be profitable if exercised immediately

In financial markets, the term 'Bear Market' generally means a prolonged decline in prices by what percentage?

• More than 30%

• More than 20%

• More than 10%

• More than 5%

Which of the following statements is True regarding 'Forward Rate Agreements'?

• A forward rate agreement (FRA) is a cash-settled over-the-counter (OTC) contract between two parties

• It is an agreement where one party agrees to borrow and the other to lend a notional sum at a floating interest rate for a specified period starting at a future date

• FRAs are exchange traded instruments

• The buyer of the FRA, who locks in a borrowing rate, will be protected against a drop in interest rates

A futures contract is a legal agreement to buy or sell a particular commodity, or security at a predetermined price at a specified time in the future. Is this statement True?

• Yes

• No

Arbitrage is a strategy that takes advantage of an imbalance in prices. True or False?

• True

• False