FD MCQ 2
FD MCQ 2
FD MCQ 2
1. …………. risk is a loss may occur from the failure of another party to perform according to
the terms of a contract?
a) Credit
b) Currency
c) Market
d) Liquidity
2. Financial derivatives includes?
a) Stock
b) Bonds
c) Future
d) None of these
3. By hedging a portfolio ; a bank manager
a) Reduces interest rate risk
b) Increases re investment risk
c) Increases exchange rate risk
d) None of these
4. A long contract requires that the investor
a) Sell securities in the future
b) Buy securities in the future
c) Hedge in the future
d) Close out his position in the future
5. The disadvantage of swaps is that they
a) Lack of liquidity
b) Suffer from default risk
c) Both A & B
d) B only
6. Hedging by buying an option
a) Limits gain
b) Limits losses
c) Limits gain & losses
d) Has no limit on losses
7. All other things held constant premium on options will increase when the
a) Exercise price increases
b) Volatility of the underlying assets fails
c) Term to maturity increases
d) Both B & C
Answer key : 1.(a). 2.(c). 3 .(a). 4.(b). 5.(c). 6.(b). 7.(c). 8.(a). 9.(c). 10.(c). 11.(a). 12.(c)
13. (c) 14. (c) 15. (a)