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CA Final Ind AS 109 Financial Instruments — practice questions — page 3

Explore 83 free Ind AS 109 Financial Instruments questions in CA Final Financialreporting. Open each question or exercise to read its content, reference answers and available explanation.

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Ind AS 109 Financial Instruments questions and exercises with answers

Showing questions 61–83 of 83.

What separates a forward from a futures contract?Read the answer and worked solution →A standardised exchange-traded contract fixing a future price today is a?Read the answer and worked solution →Why does a futures exchange require both parties to post margin?Read the answer and worked solution →In a forward contract, which party assumes the long position?Read the answer and worked solution →An option giving its owner the right to buy at a certain price is a?Read the answer and worked solution →When can the owner of a European option require the sale to take place?Read the answer and worked solution →Until when can the owner of an American option demand the sale?Read the answer and worked solution →In a swap, what usually happens to the notional principal?Read the answer and worked solution →Which generic swap type ranks first by quantitative importance?Read the answer and worked solution →In which year was the Black-Scholes option valuation model first published?Read the answer and worked solution →A firm buys a forward rate agreement to guard against which risk?Read the answer and worked solution →Which feature describes over-the-counter derivatives?Read the answer and worked solution →How can a futures holder exit before the settlement date?Read the answer and worked solution →Using a derivative like insurance against an undesired event is called?Read the answer and worked solution →A farmer sells wheat futures. Which risk does the farmer reduce?Read the answer and worked solution →Under the FASB CECL model, losses are recognised over what period from acquisition?Read the answer and worked solution →Which portion of IFRS 9 did the IASB issue first, in 2009?Read the answer and worked solution →As an option nears expiry, what happens to its time value?Read the answer and worked solution →Which exchange is noted for rice futures traded since the eighteenth century?Read the answer and worked solution →What must an entity do to qualify for hedge accounting?Read the answer and worked solution →How did IFRS 9 change hedge accounting for non-financial entities?Read the answer and worked solution →IFRS 9 hedge documentation must describe what?Read the answer and worked solution →The 2009 IFRS 9 model for debt assets allowed which two approaches?Read the answer and worked solution →

Worked practice questions

What separates a forward from a futures contract?

  1. It trades on a clearing exchange
  2. It has standard quantity and quality
  3. It needs daily exchange margin
  4. It is a private non-standard deal
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Correct answer: D. It is a private non-standard deal

Forwards are tailored between two parties, while futures are standardised and exchange-traded.

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A standardised exchange-traded contract fixing a future price today is a?

  1. Futures contract
  2. European call option
  3. Forward contract
  4. Interest rate swap
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Correct answer: A. Futures contract

Futures are standardised contracts negotiated on a futures exchange for delivery at a later date.

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Why does a futures exchange require both parties to post margin?

  1. To fix the final delivery price
  2. To limit default by either side
  3. To pay the option premium due
  4. To stop daily price changes
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Correct answer: B. To limit default by either side

Margin backs each side's obligation so the exchange can limit default risk during the contract.

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