An exchange-traded contract that obligates you to purchase a specific amount of an asset
on a future date is most likely a(n):
A. option contract
B. futures contract
C. forward contract
ANSWER: B
The usefulness of a forward contract is limited by some problems. Which of the following is
most likely one of those problems?
A. Once you have entered into a forward contract, it is difficult to exit from the contract.
B. Entering into a forward contract requires the long party to deposit an initial amount with
the short party.
C. If the price of the underlying asset moves adversely from the perspective of the long
party, periodic payments must be made to the short party.
ANSWER: A
You are planning to start trading in commodities. You have heard about the use of futures
contracts on commodities and you are learning more about them. Which of the following are
you least likely to find associated with a futures contract?
A. Existence of counterparty risk.
B. Standardized contractual terms.
C. Payment of an initial margin to enter into a contract.
ANSWER: A
An online brokerage firm has set the minimum margin requirement at 55%. What is the
maximum leverage ratio associated with a position financed by this minimum margin
requirement?
A. 1.55
B. 1.82
C. 2.22
ANSWER: B
You purchased 500 shares of a company at R32 per share. The stock was bought on 75%
margin. One month later, you had to pay interest on the amount borrowed at a rate of 2%
per month. At that time, you received a dividend of R0.50 per share. Immediately after that
you sold the shares at R28 per share. You paid commissions of R10 on the purchase and
R10 on the sale of the stock. What was the rate of return on this investment for the one-
month period?
A. −12.5 percent
B. –15.4 percent
, C. –50.1 percent
ANSWER: B
You believe the price of stock X will go up in the near future. You have decided to buy 200
shares of stock X at the current market price of R47. The initial margin requirement is 40%.
Which of the following is an appropriate statement regarding the margin requirement that
you are subject to on this position?
A. you will need to contribute €3,760 as margin.
B. you will need to contribute €5,640 as margin.
C. you will need to contribute €9,400 as margin.
ANSWER: A
The current price of a stock is R25 per share. You have R10,000 to invest. You borrow an
additional R10,000 from your broker and invest R20,000 in the stock. If the maintenance
margin is 30%, at what price will a margin call first occur?
A. R9.62
B. R17.86
C. R19.71
ANSWER: B
A market has the following limit orders standing on its book for a particular stock. The bid
and ask sizes are number of shares in hundreds.
Which is the least aggressively priced sell order?
A. Limit price €10.02
B. Limit price €9.95
C. Limit price €10.14
ANSWER: C
In an underwritten offering, the risk that the entire issue may not be sold to the public at the
stipulated offering price is borne by the:
on a future date is most likely a(n):
A. option contract
B. futures contract
C. forward contract
ANSWER: B
The usefulness of a forward contract is limited by some problems. Which of the following is
most likely one of those problems?
A. Once you have entered into a forward contract, it is difficult to exit from the contract.
B. Entering into a forward contract requires the long party to deposit an initial amount with
the short party.
C. If the price of the underlying asset moves adversely from the perspective of the long
party, periodic payments must be made to the short party.
ANSWER: A
You are planning to start trading in commodities. You have heard about the use of futures
contracts on commodities and you are learning more about them. Which of the following are
you least likely to find associated with a futures contract?
A. Existence of counterparty risk.
B. Standardized contractual terms.
C. Payment of an initial margin to enter into a contract.
ANSWER: A
An online brokerage firm has set the minimum margin requirement at 55%. What is the
maximum leverage ratio associated with a position financed by this minimum margin
requirement?
A. 1.55
B. 1.82
C. 2.22
ANSWER: B
You purchased 500 shares of a company at R32 per share. The stock was bought on 75%
margin. One month later, you had to pay interest on the amount borrowed at a rate of 2%
per month. At that time, you received a dividend of R0.50 per share. Immediately after that
you sold the shares at R28 per share. You paid commissions of R10 on the purchase and
R10 on the sale of the stock. What was the rate of return on this investment for the one-
month period?
A. −12.5 percent
B. –15.4 percent
, C. –50.1 percent
ANSWER: B
You believe the price of stock X will go up in the near future. You have decided to buy 200
shares of stock X at the current market price of R47. The initial margin requirement is 40%.
Which of the following is an appropriate statement regarding the margin requirement that
you are subject to on this position?
A. you will need to contribute €3,760 as margin.
B. you will need to contribute €5,640 as margin.
C. you will need to contribute €9,400 as margin.
ANSWER: A
The current price of a stock is R25 per share. You have R10,000 to invest. You borrow an
additional R10,000 from your broker and invest R20,000 in the stock. If the maintenance
margin is 30%, at what price will a margin call first occur?
A. R9.62
B. R17.86
C. R19.71
ANSWER: B
A market has the following limit orders standing on its book for a particular stock. The bid
and ask sizes are number of shares in hundreds.
Which is the least aggressively priced sell order?
A. Limit price €10.02
B. Limit price €9.95
C. Limit price €10.14
ANSWER: C
In an underwritten offering, the risk that the entire issue may not be sold to the public at the
stipulated offering price is borne by the:
