M6A Set 1

1. In segregating responsibilities, this office reconciles payments with confirmations.

(A) middle office
(B) back office
(C) central control
(D) None of the above

2. These traders normally initiate positions for bigger movements .

(A) Contractors
(B) Position traders
(C) Hedgers
(D) Scalpers

3. What should a representative hold to be better equipped in giving financial advise?

(A) Technical knowledge
(B) Understanding of the market conditions
(C) Both A and B
(D) None of the above

4. What is a Fiscal policy?

(A) It is the use of government expenditure and taxation to try to influence the level of economic
activity.
(B) It is a demand - management policy.
(C) It maintains output near full employment levels and price stability.
(D) All of the above.

5. What are Trendlines?

(A) it indicates the general direction of market.
(B) commonly used for identifying support and resistance points.
(C) A and B
(D) None of the above.
6. _ are formed by parallel or almost parallel lines connecting the high and low points.
(A) Signals
(B) Resistance points
(C) Channels
(D) Downtrend line

7. Which of the following is a derivative that gives the investor an option to buy or sell a stated
number of shares of an underlying instrument at a specified price within a specified time period?
(A) Futures
(B) Forwards
(C) Warrants
(D) Swaps

8. Which of the following defines the expected movement in value of the cash instrument to be
hedged given a particular movement in the value of the futures contract?
(A) Target rate
(B) Hedge vehicle
(C) Hedge ratio
(D) None of the above
9. This the risk associated with hedging with a futures contract that is very close but having exactly
the same characteristics with the underlying.
(A) mismatch risk
(B) basis risk
(C) future risk
(D) forward risk

10. This is a large gap formed after an extended move, it marks the end of a trend.
(A) Exhaustion gap
(B) common gap
(C) breakaway gap
(D) island reversal gap

11. Which of the following is used as a means of implementing investment views and allowing
investors to access broader investment opportunities?
(A) Derivatives
(B) Hedging
(C) Spot contracts
(D) Stock exchange

12. Which of the following reflects the costs of resources to manufacture goods and measures price
changes?
(A) Consumer price index
(B) Producer price index
(C) Implicit price deflator
(D) Gross domestic product

13. These are the the four main types of participants in Futures markets.
(A) Speculators, hedgers, Arbitrageurs and Portfolio managers
(B) Investors, Traders, Arbitrageurs and Portfolio managers
(C) Importers, Receivers, Contactors and Analysts
(D) None of the above

14. Which of the following is a long dated call option whose maturity is typically 3 to 5 years?
(A) Company warrant
(B) Host instrument
(C) American option
(D) European option

15. What are the three hypotheses that explain the shape of a yield curve?
(A) Liquidity, Expectation and Segmentation
(B) Liquidity, Equity and Segmentation
(C) Liquidity, Expectation and Segregation
(D) Liquidity, Equity and Segregation

16. Which of the following is the exposure to a change in value of some market variables, such as
interest rates, foreign exchange rates, equity or commodity prices?
(A) credit risk
(B) market risk
(C) contract risk
(D) value - at - risk
17. The basis between cash and futures will widen whenever market sentiments swings to one
extreme to another. Which of the following factors affects this?
(A) Expectations of market participants
(B) Differences in coupons between fixed income instruments
(C) Market rates versus administered rates.
(D) None of the above.

18. On what day are contracts usually traded and settled?

(A) Monday
(B) Tuesday
(C) Wednesday
(D) Friday

19. How is the target rate for hedge computed?

(A) Futures rate + target rate basis
(B) Initial futures price + ending basis
(C) Ending security price + futures gain
(D) None of the above.

20. What happens when rates change across the board, like when there is a change in interest rates?
(A) Shifting of yield curves
(B) Steepening of yield curves
(C) Inverting of yield curves
(D) None of the above.

21. Which of the following is/are example(s) of hedging?

(A) an investor bought a 5 year bond issued by ABC corp. He chose to hedge the bond holding
against a higher rate by selling the 5 year government bond futures.
(B) A bank, which has a loan outstanding, may decide to buy interest rates futures to hedge against
the rising cost of funds.
(C) A company that issues floating rate notes may buy futures to hedge against a higher fixing for its
FRN's.
(D) None of the above.

22. This type of gap occurs during a straight - line advance or decline.
(A) island reversal gap
(B) common gap
(C) breakaway gap
(D) runaway gap

23. It is a transaction in which two parties agree to make each other periodic payments calculated on
the basis of specified interest rates and a hypothetical principal amount..
(A) fixed rate swap
(B) floating rate swap
(C) interest rate swap
(D) implied fixed rate swap

24. What best describes portfolio management?

(A) it is about investment mix and policy
(B) matching investments to objectives
(C) asset allocation for individuals and institution
(D) All of the above
25. What is the total turnover of futures and options contracts in Singapore for 2010?
(A) 60 million
(B) more than 60 million
(C) less than 60 million
(D) None of the above.

26. Which of the following is an agreement to buy or sell an asset at a fixed date in the future, for a
fixed price?
(A) Swaps
(B) Futures
(C) Forwards
(D) Warrants

27. Which of the following is also known as 'blackbox trading'?

(A) Systematic trading
(B) Insider trading
(C) Algorithmic trading
(D) None of the above

28. What is the conversion factor of a US Treasury bond if the securities coupon is 6 Percent?
(A) 1
(B) 2
(C) 3
(D) 6

29. What are derivatives?

(A) A residual claim on both the income and assets of the company.
(B) Periodic payments of interests.
(C) A financial security whose value is linked to the value of one or more underlying assets.
(D) None of the above.

30. What factor/s must be evaluated before hedging is done?

(A) probability of change in prices/rates.
(B) probable size of the price rate change.
(C) cost of hedging compared with risk value
(D) All of the above

31. Who are institutional clients that dominate the major markets with good liquidity?
(A) Hedge funds or asset managers
(B) Long term investors with good track record
(C) Both A and B
(D) None of the above.

32. Which of the following is a way to control money supply?

(A) set the level of key interest rates
(B) vary the level of reserves through open market operations
(C) A and B
(D) None of the above
33. It is important to differentiate the _ as the investment horizon of the clients would vary.
(A) long and short term factors
(B) risk and profit
(C) contracts and futures
(D) fundamental and technical analysis
34. Name the three types of risks involved in trading.
(A) market, credit and settlement risks
(B) market, contract and settlement risks
(C) contract, credit and settlement risks
(D) None of the above.

35. They usually trade for small gains.

(A) Arbitrageurs
(B) Scalpers
(C) Speculators
(D) Portfolio managers

36. Which of the following is financial instruments that combine an underlying asset with an option,
where the payoff profile of the return component has an 'all or nothing' outcome and the value of the
option can become worthless should the price of the underlying instrument or some other
predetermined reference reach a certain price level?
(A) Contracts for Differences
(B) Knock - out products
(C) Extended Settlement contracts
(D) None of the above

37. Organized trading in forward contracts was found to occur in as early as the _ _ century.
(A) 16th
(B) 17th
(C) 18th
(D) 20th

38. Which of the following does algorithm trading approach incorporate as a forecasting tool?
(A) Parameters
(B) Studies
(C) Both A and B
(D) None of the above.

39. Which of the following is/are typical use/uses of derivatives?

(A) Hedging and speculating
(B) Arbitraging
(C) Changing the nature of an asset or liability to meet specific needs and creating synthetic
positions .
(D) All of the above

40. Which of the following forms the foundation of knowledge in analyzing the market?
(A) Forecasting
(B) Fundamental analysis
(C) Spot analysis
(D) Third party information

41. It's objective is to reduce risk. Similar to buying an insurance policy for protection against adverse
price moves.
(A) Hedging
(B) Speculating
(C) Contract buying
(D) None of the above
42. Fundamental analysis tries to forecast future price movements by studying the price patterns,
volume and open interest.
(A) TRUE
(B) FALSE

43. Which of the following statements is NOT true?

(A) Volume measures the number of contracts traded and is a good indication of the intensity of a
move reflecting the demand and supply.
(B) When prices are rising and volume increasing , we expect the trend to continue.
(C) If prices are rising and volume is decreasing, the present trend may not sustain.
(D) Open interest measures the outstanding covered contracts.

44. _ _ are derived by continuously computing the average of the most recent n days closing prices.
(A) Moving average
(B) Quotes
(C) Commodities plots
(D) Plots

45. On what risk category generated the lowest notional amounts outstanding of global OTC
derivatives EOY(end of year)of 2010?
(A) Commodity contracts
(B) Foreign exhange contracts
(C) Credit default swaps
(D) Interest rate contracts

46. What are the contract months available for trading?

(A) the 4 nearest serial months
(B) the quarterly months of March, June, September and December
(C) Both A and B
(D) None of the above.

47. Technical and statistical analysis not only help identify the entry and exit points but also .
(A) helps to identify the trend if there is one.
(B) helps minimize loss.
(C) ensures that there will be profit.
(D) None of the above.

48. The type of hedge that can be used when the maturity date of the underlying instrument does not
coincide with the expiry dates.
(A) interpolative and extrapolative
(B) long term and short term
(C) complete and delta - neutral
(D) None of the above

49. What are the types of movements under the tenets of the Dow theory?
(A) primary trends, secondary reactions and minor movements.
(B) normal, advance and insignificant movements
(C) reactive, advance and minor movements
(D) None of the above.
50. One of the factors affecting basis which states that this depends on the difference between cost
of funds and the yield on the underlying assets.
(A) time to maturity
(B) cost/return carry
(C) yield curve changes
(D) None of the above

51. Knowing the _ for specific markets would help to identify the better investments and appropriate
instruments.
(A) primary drivers
(B) speculators
(C) traders
(D) stock holders

52. What does a trader practice when he sees a directional view of the market? For example: He
sells futures when he sees interest rates going up.
(A) Outright trade
(B) Spread trade
(C) speculate
(D) None of the above

53. In segregating responsibilities, this office controls and monitors risk limits.
(A) middle office
(B) back office
(C) central control
(D) None of the above

54. Name the 2 classification of Capital Market Securities.

(A) low risk and high risk instruments.
(B) forward and swap options
(C) debt and equity
(D) None of the above.

55. What will be the basis for adjustment when bonds to be delivers are ensured that the value of the
physical bond commensurate with the value of futures contract at expiration?
(A) Price index
(B) Conversion factor
(C) Settlement price
(D) Invoice price

56. Which of the following is a strategy that option arbitrageurs pursue? It represents the purchase of
a call, the sale of a put which shares a common strike and expiration date with the call, and the sale
of the underlying instrument.
(A) Reversal
(B) Conversion
(C) Boxes
(D) None of the above

57. This minor trend change indicator normally occurs when prices move within the range of the
previous day.
(A) inside range day
(B) outside range day
(C) Key reversal day
(D) None of the above.
58. How many studies should be kept when doing the market analysis?
(A) 2 to 5
(B) 3 to 5
(C) 4 to 5
(D) 5

59. Adjusted futures price is computed as follows:

(A) futures price x conversion factor
(B) cash price / basis
(C) cash price less basis
(D) None of the above

60. Which of the following is the technique of holding a view opposite to what is prevalent and
generally believed by the majority players?
(A) Contrarian theory
(B) Confucius theory
(C) Random walk theory
(D) Arbitrage Pricing Theory

61. On market analysis, what is considered a profitable strategy?

(A) Buying euros in the futures market in a contract around 6 months before settlement date.
(B) Buying euros futures contract with around 1 month before the settlement date.
(C) Selling a Euro call.
(D) All of the above.

62. What generally happens when the stock market declines?

(A) The US dollar automatically rallies due to money flowing to a safe haven.
(B) Commodities prices decline.
(C) Both A and B
(D) None of the above.
Which of the following are market conditions?
(A) Overbought or oversold
(B) Trending or range trading
(C) Both A and B
(D) None of the above.

63. Which of the following gives the holder the right to buy the underlying from the writer at the
strike price on or before a specified date?
(A) Call option
(B) Put option
(C) Normal option
(D) None of the above

64. Aside from giving financial advisory services, as representatives, what is equally important?
(A) understand the needs of clients
(B) understand their investment decision making process.
(C) Both A and B
(D) None of the above

65. Name the two types of momentum.

(A) relative and indexed
(B) price and breadth
(C) gradient and generic
(D) None of the above.
66. Which of the following is a type of derivative that is similar to a forward contract?
(A) Structured products
(B) Swaps
(C) Futures
(D) Warrants

67. Which of the following is considered as an inflation indicator?

(A) Consumer price index
(B) Producer price index
(C) implicit price deflator
(D) All of the above.

68. This theory is developed from observations that all natural phenomena repeat themselves in
regular rhythms.
(A) Elliot wave theory
(B) Dow theory
(C) Post analysis theory
(D) None of the above

69. What are the types of Yield curve?

(A) Normal, Upward and Inverted Yield curve
(B) Normal, Downward and Inverted Yield Curve
(C) Upward, Downward and Inverted Yield curve.
(D) Positive, Negative and Flat Yield curve

70. Which of the following is the normal shape of a yield curve, also known as the normal curve?
(A) Inverted Yield Curve
(B) Negative Yield curve
(C) Positive Yield curve
(D) None of the above

71. What do the following factors affect? Price levels, inflation rate, balance of payments, interest
rates, economic performance
(A) Foreign exchange
(B) Stock exchange
(C) Trade value
(D) None of the above

72. Which of the following is/are the factor/s that outweigh other market drivers?
(A) Market positioning
(B) Technical factors like the breach of crucial chart points
(C) Risk management considerations like loss - cutting or profit - taking.
(D) All of the above.

73. According to this theory, movement in financial markets depends on attitudes of investors on
the business cycle.
(A) Dow theory
(B) Cycle theory
(C) Elliot wave theory
(D) None of the above.
74. What happens when Fiscal policy is paralyzed due to political stalemate or budget constraints?
(A) Revert to the economic policy established by the government.
(B) Monetary policy will be relied on.
(C) Opt to the financial policy.
(D) None of the above.

75. What is the rate charged for interbank borrowing, usually for overnight purposes?
(A) Prime rate
(B) Discount rate
(C) Commercial paper rate
(D) Fed funds rate

76. Under futures contracts, what specification determines the minimum change in the value of
the contract in monetary terms?
(A) Minimum price fluctuation
(B) Daily price limit
(C) Contract size
(D) Contract months

77. Which of the following is the graphical plots of interest rates on the vertical axis against term
to maturity on the horizontal axis?
(A) Candle curve
(B) Yield curve
(C) Analysis curve
(D) Fundamental curve

78. The year wherein 82 merchants from Chicago area founded the Chicago Board of Trade.
(A) 1848
(B) 1948
(C) 1868
(D) 1919

79. Which of the following is a combination of 2 spreads, namely a bull spread and a bear spread,
with no common middle contract?
(A) Condor spread
(B) Bull - bear spread
(C) Butterfly spread
(D) TED spread

80. Base on the purchasing power theory, what is the exchange rate for USD against SGD if
USD 1 = SGD 1.3 and a year later USD 1.2 = SGD 1.8?
(A) USD 1 = SGD 1.5
(B) USD 1.2 = SGD 1.8
(C) USD 1 = SGD 1.3
(D) USD 1 = SGD 1

81. What comprises GNP?

(A) consumption + investment
(B) government expenditure + net exports
(C) all of the above
(D) None of the above
82. Which is the following is a broader measure of current inflationary pressures?
(A) Consumer price index
(B) Implicit price deflator
(C) Gross domestic product
(D) Producer price index

83. This chart originated from Japanese rice traders.

(A) candle charts
(B) ichiban chart
(C) Bar charts
(D) None of the above

84. _ _ measures the market value of total output of goods and services and is published in real
and current dollar terms.
(A) GNP
(B) GBC
(C) IP
(D) OOC

85. What is the trading unit used for the gold contract?
(A) troy ounces
(B) grams
(C) pounds
(D) None of the above

86. Which of the following describes exchange rates between currencies being in equilibrium
when their purchasing power is the same in each of the two countries?
(A) Appreciation of currency theory
(B) Purchasing power of currency
(C) Purchasing power parity
(D) None of the above

87. This type of gap occurs within trading range or congestion areas and has no forecasting value.
(A) common gap
(B) breakaway gap
(C) island reversal gap
(D) runaway gap

88. Which of the following is the rate charged by a bank to its best customers?
(A) Fed funds rate
(B) Prime rate
(C) Discount rate
(D) Fed funds rate

89. They are professional traders who trade for minimal fluctuations.
(A) Contractors
(B) Position traders
(C) Hedgers
(D) Scalpers
90. Which of the following is a measure of the average change in prices of goods and represent
inflation at the consumer level?
(A) Consumer price index
(B) Implicit price deflator
(C) Gross domestic product
(D) None of the above

91. What is the rate charged for corporate borrowing that is unsecured?
(A) Fed funds rate
(B) Prime rate
(C) Commercial paper rate
(D) Discount rate

92. Name the three types of moving average.

(A) simple, weighted and exponential.
(B) complex, weighted and exponential.
(C) long term, short term and equilibrium.
(D) None of the above.

93. Which of the following is an obligation between two parties to exchange an entitlement for
another to maximize revenue or minimize financing costs?
(A) Warrants
(B) Structured products
(C) Swaps
(D) Options

94. This index is generated by determining the total market capitalization of all stocks .
(A) SGX All Share Index
(B) STI Index
(C) Nikkei 225 Index
(D) None of the above

95. What is the advantage of relative strength index over rate of change?
(A) RSI indicates what is overbought.
(B) It takes out erratic movements by averaging the price change.
(C) ROC indicates what is bought.
(D) None of the above.

96. When is the arbitrage between futures and floating rate notes considers risk free?
(A) When value dates for the two correspond.
(B) When the value dates for the two is different
(C) When it is quoted over the counter
(D) None of the above

97. A certain chart point can be breached by the interaction of these forces.
(A) loss cutting, profit taking and new entry.
(B) price move, fall back and channel break.
(C) acceleration, deceleration and penetration of channels
(D) None of the above.
98. On what risk category generated the highest notional amounts outstanding of global OTC
derivatives EOY(end of year) of 2010?
(A) Foreign exchange contracts
(B) Equity - linked contracts
(C) Interest rate contracts
(D) Credit default swaps

99. In a market downtrend, what should a representative providing financial advisory do?
(A) take a contrarian view
(B) advise the investor to buy at a certain level.
(C) Both A and B
(D) None of the above.

100. Which of the following is commonly referred to as the dominant bias of the market and the
combination of factors that drives it?
(A) Market sentiment
(B) Market analysis
(C) Consolidation factor
(D) High valuation

101. The triangle, wedges, flags and pennants are patterns of this major chart patterns.
(A) continuation patterns
(B) reversal patterns
(C) zigzag pattern
(D) None of the above.

102. The Enron incident of 2002 triggered the Asian economic crisis.
(A) TRUE
(B) FALSE

103. Aside from the lack of transparency, what have caused massive investment losses during the
global financial crisis.
(A) insider information
(B) speculative trading
(C) proliferation of OTC products.
(D) None of the above.

104. How is the target rate for hedge computed?

(A) Futures rate + target rate basis
(B) Initial futures price + ending basis
(C) Ending security price + futures gain
(D) None of the above.

105. The two types of risks in any equity portfolio.

(A) market and specific
(B) systematic and non - market
(C) all of the above
(D) None of the above.

106. What are Capital Market Securities?

(A) it's financial security whose value is linked to the valuer of one or more underlying assets.
(B) debt securities with maturities of more than 1 year and equity securities.
(C) structured products used for implementing investments.
(D) investment options that are used to refinance mortgages.
107. Which of the following is an OTC derivatives product that is based on an agreement between
two parties to settle the difference in the price of a reference instrument between the opening price
and closing price of the transaction?
(A) Knock - out products
(B) Extended Settlement contracts
(C) Contracts for Differences
(D) None of the above

108. Which of the following aims to profit from change in price differential between two contracts?
(A) Spread trade
(B) Outright trade
(C) Speculatative trade
(D) None of the above

109. Which of the following is the most widely used chart and requires data on opening, high, low
and closing prices?
(A) Bar charts
(B) Histogram
(C) Pie charts
(D) Line charts

110. This was originally developed to determine the trend direction of the stock market.
(A) Dow Theory
(B) candle charts
(C) technical analysis
(D) None of the above

111. Some corporate institutions have been known to raise capital by selling _ .
(A) deep in - the - money options
(B) out - of - money options
(C) call currency
(D) put currency

112. Which of the following is considered a fundamental reason for market behavior
(A) Bearish chart formation
(B) Redemption of investors money from funds
(C) Reduction of risk from large losses suffered by speculative funds.
(D) All of the above.

113. This minor trend change indicator normally occurs after an extended move.
(A) Key reversal day
(B) inside range day
(C) outside range day
(D) None of the above.

114. Which of the following are market instruments that are low risks, highly liquid, short term debt
instruments issued by governments, financial institutions and corporations?
(A) Derivatives
(B) Financial Assets
(C) Money Market Securities
(D) None of the above
115. What is the advantage of Mutual Offset Trading system over independently settled contracts?
(A) Better management of positions as the outstanding contracts can be consolidated across
participating exchanges.
(B) Lower costs as only one set of margin applies.
(C) Improved market liquidity for instruments traded in this system.
(D) All of the above.

116. What is the only limitation of the Dow Theory?

(A) the buy/sell signals are slow by the time confirmation appears.
(B) traders consider the weight of other evidence.
(C) maturity of cycles
(D) price volume divergence.

117. This refers to verbal intervention by officials whose statements are aimed at weakening or
strengthening the currencies.
(A) Open mouth policies
(B) Rumors
(C) Central bank intervention
(D) Speculation

118. On pricing of futures contracts, these are usually quoted as a percentage of the par value of the
underlying instrument.
(A) bond futures contracts
(B) short term deposit
(C) fixed income instruments
(D) None of the above

119. They take advantage of mispricings between two related markets. As the two related markets
have a constant relationship, they will exploit the difference between the implied value and the market
value.
(A) Arbitrageurs
(B) Scalpers
(C) Speculators
(D) Hedgers

120. Which of the following is a contract between two parties, to buy or sell a specific quantity of a
specific underlying security at a specific price for settlement a specific future date? It is also
commonly known as as a single stock futures contact.
(A) Extended Settlement contracts
(B) Contracts for Differences
(C) Knock - out products
(D) None of the above

121. Which of the following is Asia's first clearing platform for OTC derivatives traded in Singapore,
which include freight, energy, commodity and financial derivatives?
(A) SGX - AsiaClear
(B) SGX - DT
(C) Singapore Exchange
(D) None of the above
122. This deposit is placed with the futures broker with whom the participant transacts.
(A) cover price
(B) margin
(C) reflected price
(D) None of the above

123. Their main focus is to identify investment that will optimize returns for investors who place
money with them.
(A) Portfolio managers
(B) Arbitrageurs
(C) Scalpers
(D) Speculators

124. A futures exchange is a place where:

(A) physical facilities are provided for buyers and sellers
(B) information about markets prices are collected and disseminated.
(C) a framework is provided for arbitrating disputes and settling differences.
(D) All of the above.

125. Which of the following gives the holder the right to receive the strike price upon delivery of the
underlying to the writer?
(A) Call option
(B) Put option
(C) Normal option
(D) None of the above