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CA Final Futures Contract — practice questions — page 3

Explore 69 free Futures Contract questions in CA Final Strategicfinancialmanagement. Open each question or exercise to read its content, reference answers and available explanation.

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Futures Contract questions and exercises with answers

Showing questions 61–69 of 69.

A foreign currency or stock index typically provides income on which basis for forward pricing?Read the answer and worked solution →In a currency forward, the agreed currency amounts that are specified in the contract are known as:Read the answer and worked solution →Foreign exchange forwards are usually quoted as the difference from spot in:Read the answer and worked solution →Which is a standard use of forward contracts according to finance theory?Read the answer and worked solution →Buying spot and selling forward when the forward exceeds its fair value earns:Read the answer and worked solution →A mutual fund tracking the S&P 500 invests inflows quickly in stock index futures. This practice is known as:Read the answer and worked solution →Exchange limits on position size tighten close to expiry mainly to:Read the answer and worked solution →Between two parties, which risk is higher in a forward than in a futures contract?Read the answer and worked solution →Futures contracts are highly standardized whereas forwards:Read the answer and worked solution →

Worked practice questions

A foreign currency or stock index typically provides income on which basis for forward pricing?

  1. Discrete lump sum
  2. Continuous yield
  3. No income at all
  4. Storage-linked income
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Correct answer: B. Continuous yield

A stock pays discrete income, while an index or foreign currency is modelled with a continuous yield.

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In a currency forward, the agreed currency amounts that are specified in the contract are known as:

  1. Notional amounts
  2. Margin amounts
  3. Premium points
  4. Pip values
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Correct answer: A. Notional amounts

Notional amounts fix the quantities of currency to be exchanged; the margin needed is far smaller, creating leverage.

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Foreign exchange forwards are usually quoted as the difference from spot in:

  1. Equity basis points
  2. Percent of margin
  3. Pips, or forward points
  4. Annual dividends
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Correct answer: C. Pips, or forward points

Where spot is easily accessible, as in FX, forwards are quoted as forward points: pips difference from spot.

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More Strategicfinancialmanagement topics

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