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Question 1 of 30
1. Question
Security futures, which have been authorized by Congress, can be bought and sold for which of the following?
I. Price risk management
II. Speculative purposes
III. Trading vehicles
IV. Asset managementCorrect
Security futures, which have been authorized by Congress, can be bought and sold for either price risk management or for speculative purposes
Incorrect
Security futures, which have been authorized by Congress, can be bought and sold for either price risk management or for speculative purposes
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Question 2 of 30
2. Question
Which of the following is a legally binding agreement between two parties to purchase or sell in the future a specific quantity of shares of a single equity security or narrow-based securities index, at a certain price?
Correct
A security futures contract is a legally binding agreement between two parties to purchase or sell in the future a specific quantity of shares of a single equity security or narrow-based securities index, at a certain price
Incorrect
A security futures contract is a legally binding agreement between two parties to purchase or sell in the future a specific quantity of shares of a single equity security or narrow-based securities index, at a certain price
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Question 3 of 30
3. Question
A futures contract specifies must state which of the following?
I. The item being bought and sold
II. The standardized contract size
III. The contract month
IV. The manner of settlementCorrect
A futures contract specifies:
• The item being bought and sold.
• The standardized contract size
• The contract month
• The manner of settlementIncorrect
A futures contract specifies:
• The item being bought and sold.
• The standardized contract size
• The contract month
• The manner of settlement -
Question 4 of 30
4. Question
Security futures prices are determined why which of the following?
I. Through continuous competitive bidding among buyers and sellers
II. Bidding by open outcry on a trading floor
III. Bidding through electronic order matching
IV. Through transactions of specified demands through buyers and sellersCorrect
Security futures prices are determined the same way stock prices are determined— through continuous competitive bidding among buyers and sellers. This may be conducted either by open outcry on a trading floor or through electronic order matching
Incorrect
Security futures prices are determined the same way stock prices are determined— through continuous competitive bidding among buyers and sellers. This may be conducted either by open outcry on a trading floor or through electronic order matching
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Question 5 of 30
5. Question
Buyers’ and sellers’ gains or losses are credited or debited to their accounts on which of the following basis?
Correct
Buyers’ and sellers’ gains or losses are credited or debited to their accounts on a daily basis, following the close of that day’s trading activity.
Incorrect
Buyers’ and sellers’ gains or losses are credited or debited to their accounts on a daily basis, following the close of that day’s trading activity.
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Question 6 of 30
6. Question
Which of the following statements with regards to leverage is not true?
Correct
Leverage is a feature whose risks are the mirror image of its potential benefits. Leverage is frequently, and accurately, described as a “two-edged sword.”
Leverage exists because the margin deposit needed to buy or sell a futures contract is only a portion of the current market value of the contract.
Leverage is also possible in securities trading, but to a more limited extent.
Incorrect
Leverage is a feature whose risks are the mirror image of its potential benefits. Leverage is frequently, and accurately, described as a “two-edged sword.”
Leverage exists because the margin deposit needed to buy or sell a futures contract is only a portion of the current market value of the contract.
Leverage is also possible in securities trading, but to a more limited extent.
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Question 7 of 30
7. Question
Subject to the limitations in Section 2 of Articles of Incorporation, the fundamental purposes of NFA are to promote the improvement of business conditions and the common business interests of persons engaged in commodity futures and swaps or related activity by which of the following?
I. Providing such regulatory services to such markets as the Board may from time to time approve
II. The adoption, administration and enforcement of common business interests
III. Relieving the Commission from the substantial burden of direct regulation in such matters
IV. Undertaking the regulation of persons that are members of NFA (hereinafter “Members”) as set forth in this ArticleCorrect
Subject to the limitations in Section 2 of this Article, the fundamental purposes of NFA are to promote the improvement of business conditions and the common business interests of persons engaged in commodity futures and swaps or related activity by
(i) undertaking the regulation of persons that are members of NFA (hereinafter “Members”) as set forth in this Article;
(ii) relieving the Commission from the substantial burden of direct regulation in such matters; and
(iii) providing such regulatory services to such markets as the Board may from time to time approve.
Incorrect
Subject to the limitations in Section 2 of this Article, the fundamental purposes of NFA are to promote the improvement of business conditions and the common business interests of persons engaged in commodity futures and swaps or related activity by
(i) undertaking the regulation of persons that are members of NFA (hereinafter “Members”) as set forth in this Article;
(ii) relieving the Commission from the substantial burden of direct regulation in such matters; and
(iii) providing such regulatory services to such markets as the Board may from time to time approve.
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Question 8 of 30
8. Question
The prohibition of Members from carrying accounts, accepting orders, or handling transactions, in commodity futures contracts, for or on behalf of any non-Member, or suspended Member, that is required to be registered with which of the following?
I. Commission as a Futures Commission Merchant
II. Commodity Pool Operator
III. Commodity Trading Advisor
IV. Introducing Broker or Leverage Transaction MerchantCorrect
The prohibition of Members from carrying accounts, accepting orders, or handling transactions, in commodity futures contracts, for or on behalf of any non-Member, or suspended Member, that is required to be registered with the Commission as a Futures Commission Merchant, Commodity Pool Operator, Commodity Trading Advisor, Introducing Broker or Leverage Transaction Merchant and that is acting in respect to the account, order, or transaction for a customer, a commodity pool or participant therein, a client of a commodity trading advisor, or any other person.
Incorrect
The prohibition of Members from carrying accounts, accepting orders, or handling transactions, in commodity futures contracts, for or on behalf of any non-Member, or suspended Member, that is required to be registered with the Commission as a Futures Commission Merchant, Commodity Pool Operator, Commodity Trading Advisor, Introducing Broker or Leverage Transaction Merchant and that is acting in respect to the account, order, or transaction for a customer, a commodity pool or participant therein, a client of a commodity trading advisor, or any other person.
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Question 9 of 30
9. Question
The prohibition of Members from accepting orders in commodity futures contracts to cover leverage transactions, for or on behalf of any non-Member, or suspended Member that is required to be registered with the Commission as a Leverage Transaction Merchant, unless?
I. such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board
II. such suspended Member is exempted from this prohibition by the Board or a committee thereof
III. such non-Member is a member of another futures association registered under Section 17 of the Act or is not exempted from this prohibition by the Board
IV. such suspended Member is not exempted from this prohibition by the Board or a committee thereofCorrect
The prohibition of Members from accepting orders in commodity futures contracts to cover leverage transactions, for or on behalf of any non-Member, or suspended Member that is required to be registered with the Commission as a Leverage Transaction Merchant, unless
(i) such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board or
(ii) such suspended Member is exempted from this prohibition by the Board or a committee thereof.
Incorrect
The prohibition of Members from accepting orders in commodity futures contracts to cover leverage transactions, for or on behalf of any non-Member, or suspended Member that is required to be registered with the Commission as a Leverage Transaction Merchant, unless
(i) such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board or
(ii) such suspended Member is exempted from this prohibition by the Board or a committee thereof.
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Question 10 of 30
10. Question
NFA shall not adopt, administer or enforce upon any Member or Associate a rule, standard, requirement or procedure which purports to govern or otherwise regulate which of the following?
I. The content, interpretation, administration or enforcement of any rule, standard, requirement or procedure of a Contract Market or Clearing Organization.
II. Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.
III. Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.
IV. The terms or conditions of any futures contract.Correct
NFA shall not adopt, administer or enforce upon any Member or Associate a rule, standard, requirement or procedure which purports to govern or otherwise regulate any of the following:
(i) The minimum level of margin required for any futures or swaps contract or type of futures or swaps transaction, the method for calculation thereof, or compliance therewith, unless such rule, standard, requirement or procedure conforms and is not inconsistent with applicable Contract Market requirements.
(ii) Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.
(iii) The rights, privileges, duties or responsibilities of membership in any Contract Market or Clearing Organization.
(iv) The content, interpretation, administration or enforcement of any rule, standard, requirement or procedure of a Contract Market or Clearing Organization.
(v) The conduct of business or other activities on the trading floor of a Contract Market.
(vi) The terms or conditions of any futures contract.
(vii) The terms or conditions of any swaps contract; provided that such terms or conditions conform to and are not inconsistent with applicable Contract Market requirements.
Incorrect
NFA shall not adopt, administer or enforce upon any Member or Associate a rule, standard, requirement or procedure which purports to govern or otherwise regulate any of the following:
(i) The minimum level of margin required for any futures or swaps contract or type of futures or swaps transaction, the method for calculation thereof, or compliance therewith, unless such rule, standard, requirement or procedure conforms and is not inconsistent with applicable Contract Market requirements.
(ii) Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.
(iii) The rights, privileges, duties or responsibilities of membership in any Contract Market or Clearing Organization.
(iv) The content, interpretation, administration or enforcement of any rule, standard, requirement or procedure of a Contract Market or Clearing Organization.
(v) The conduct of business or other activities on the trading floor of a Contract Market.
(vi) The terms or conditions of any futures contract.
(vii) The terms or conditions of any swaps contract; provided that such terms or conditions conform to and are not inconsistent with applicable Contract Market requirements.
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Question 11 of 30
11. Question
A firm may not act as a counterparty, or offer to act as a counterparty, to any forex transaction unless the firm is one of the regulated entities listed in the CEA. These entities (authorized counterparties) include which of the following?
I. RFEDs
II. U.S.-based market institutions
III. financial holding companies
IV. U.S.-based financial institutionsCorrect
A firm may not act as a counterparty, or offer to act as a counterparty, to any forex transaction unless the firm is one of the regulated entities listed in the CEA. These entities (authorized counterparties) are:
-U.S.-based financial institutions (e.g., banks and savings associations);
-financial holding companies;
-registered FCMs that are primarily or substantially engaged in on-exchange futures activities; and
-RFEDs.Incorrect
A firm may not act as a counterparty, or offer to act as a counterparty, to any forex transaction unless the firm is one of the regulated entities listed in the CEA. These entities (authorized counterparties) are:
-U.S.-based financial institutions (e.g., banks and savings associations);
-financial holding companies;
-registered FCMs that are primarily or substantially engaged in on-exchange futures activities; and
-RFEDs. -
Question 12 of 30
12. Question
Individuals employed by the following must register as associated persons (AP) and be approved as forex APs by NFA except?
Correct
Individuals employed by an FCM, RFED, introducing broker (IB), commodity pool operator (CPO) or commodity trading advisor (CTA) who solicit or accept retail forex customer orders or supervise any person who solicits or accepts retail forex customer orders must register as associated persons (AP) and be approved as forex APs by NFA. No Member may be approved as a forex firm unless at least one of its principals is registered as an AP and approved as a forex AP.
Incorrect
Individuals employed by an FCM, RFED, introducing broker (IB), commodity pool operator (CPO) or commodity trading advisor (CTA) who solicit or accept retail forex customer orders or supervise any person who solicits or accepts retail forex customer orders must register as associated persons (AP) and be approved as forex APs by NFA. No Member may be approved as a forex firm unless at least one of its principals is registered as an AP and approved as a forex AP.
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Question 13 of 30
13. Question
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates and financial holding companies, entities or individuals that introduce forex customers to registered FCMs or RFEDs must do which the following except?
I. be registered as IBs
II. be members of NFA
III. be registered as Future Commission Merchant
IV. be members of Clearing House Interbank Payment AssociationCorrect
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates and financial holding companies, entities or individuals that introduce forex customers to registered FCMs or RFEDs must register as IBs and be NFA Members.
Incorrect
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates and financial holding companies, entities or individuals that introduce forex customers to registered FCMs or RFEDs must register as IBs and be NFA Members.
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Question 14 of 30
14. Question
A person or entity exercising trading authority over a customer’s forex account must register as a CTA except for the following except?
Correct
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates, and financial holding companies, a person or entity exercising trading authority over a customer’s forex account must register as a CTA. A person exercising trading authority over a customer’s account may not receive or hold the customer’s funds. Those funds must be held by the FCM or RFED counterparty.
Incorrect
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates, and financial holding companies, a person or entity exercising trading authority over a customer’s forex account must register as a CTA. A person exercising trading authority over a customer’s account may not receive or hold the customer’s funds. Those funds must be held by the FCM or RFED counterparty.
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Question 15 of 30
15. Question
Bylaw 1507(b) excludes which of the following from the forex definition if the transaction is not a futures or options contract?
I. securities (other than security futures products)
II. any contract of sale that creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business
III. any contracts offered to or entered into with persons that are not eligible contract participants
IV. any contract of sale that results in actual delivery within two daysCorrect
Bylaw 1507(b) also excludes the following from the forex definition if the transaction is not a futures or options contract:
securities (other than security futures products);
any contract of sale that results in actual delivery within two days; and
any contract of sale that creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business.Incorrect
Bylaw 1507(b) also excludes the following from the forex definition if the transaction is not a futures or options contract:
securities (other than security futures products);
any contract of sale that results in actual delivery within two days; and
any contract of sale that creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business. -
Question 16 of 30
16. Question
In developing its forex requirements, NFA’s primary concern is to do which of the following?
Correct
In developing its forex requirements, NFA’s primary concern was to ensure that they provide adequate protection for retail customers without imposing undue burdens on NFA Members.
Incorrect
In developing its forex requirements, NFA’s primary concern was to ensure that they provide adequate protection for retail customers without imposing undue burdens on NFA Members.
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Question 17 of 30
17. Question
In developing its forex requirements, NFA believes that its requirements should include which of the following?
I. promote competition
II. customer protection
III. promote innovation
IV. customer inquiriesCorrect
In developing its forex requirements, NFA’s primary concern was to ensure that they provide adequate protection for retail customers without imposing undue burdens on NFA Members. NFA also believes that its requirements should, where consistent with customer protection, promote innovation and competition.
Incorrect
In developing its forex requirements, NFA’s primary concern was to ensure that they provide adequate protection for retail customers without imposing undue burdens on NFA Members. NFA also believes that its requirements should, where consistent with customer protection, promote innovation and competition.
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Question 18 of 30
18. Question
NFA Compliance Rule 2-36 subsection (d) sets out which of the following?
Correct
NFA Compliance Rule 2-36 sets out the general standards that apply to Forex Dealer Members and their Associates in connection with forex transactions.
subsection (d) prohibits Members from accepting forex orders or accounts from, handling a forex transaction for or on behalf of, receiving compensation for forex transactions from, or paying compensation for forex transactions to any non-Member of NFA that is required to be registered with the Commission as a FCM, RFED, IB, CPO, or CTA in connection with its forex activitiesIncorrect
NFA Compliance Rule 2-36 sets out the general standards that apply to Forex Dealer Members and their Associates in connection with forex transactions.
subsection (d) prohibits Members from accepting forex orders or accounts from, handling a forex transaction for or on behalf of, receiving compensation for forex transactions from, or paying compensation for forex transactions to any non-Member of NFA that is required to be registered with the Commission as a FCM, RFED, IB, CPO, or CTA in connection with its forex activities -
Question 19 of 30
19. Question
NFA Compliance Rule 2-36 Subsection (b) states which of the following?
Correct
NFA Compliance Rule 2-36 Subsection (b) prohibits Forex Dealer Members and their Associates from engaging in fraudulent activities
Incorrect
NFA Compliance Rule 2-36 Subsection (b) prohibits Forex Dealer Members and their Associates from engaging in fraudulent activities
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Question 20 of 30
20. Question
The Interpretive Notice has the following sections except?
Correct
The Interpretive Notice has three sections. The first section explains who qualifies as a Forex Dealer Member under NFA Bylaw 306, the second section provides additional guidance about the requirements in Compliance Rule 2-36, and the third section covers other miscellaneous requirements.
Incorrect
The Interpretive Notice has three sections. The first section explains who qualifies as a Forex Dealer Member under NFA Bylaw 306, the second section provides additional guidance about the requirements in Compliance Rule 2-36, and the third section covers other miscellaneous requirements.
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Question 21 of 30
21. Question
Which of the following would be considered an accurate definition of a security deposit?
Correct
Security deposit – The amount of money needed to open or maintain a position. Also known as ‘margin.’
Incorrect
Security deposit – The amount of money needed to open or maintain a position. Also known as ‘margin.’
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Question 22 of 30
22. Question
Which of the following is an option contract that can be exercised only on or near its expiration date.
Correct
European-style option – An option contract that can be exercised only on or near its expiration date.
Incorrect
European-style option – An option contract that can be exercised only on or near its expiration date.
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Question 23 of 30
23. Question
Which of the following is a transaction that has not been closed out by a corresponding opposite transaction.
Correct
Open position – Any transaction that has not been closed out by a corresponding opposite transaction.
Incorrect
Open position – Any transaction that has not been closed out by a corresponding opposite transaction.
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Question 24 of 30
24. Question
Which of the following is/are considered as major currency pairs?
I. EUR/TRY
II. USD/JPY
III. EUR/USD
IV. USD/CADCorrect
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
NZD/USD
Incorrect
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
NZD/USD
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Question 25 of 30
25. Question
Which of the following is/are minor currency pairs?
I. EUR/GBP
II. NZD/SGD
III. EUR/AUD
IV. NZD/JPYCorrect
EUR/GBP — Euro/British pound
EUR/AUD — Euro/Australian dollar
GBP/JPY — British pound/Japanese yen
CHF/JPY — Swiss franc/Japanese yen
NZD/JPY — New Zealand dollar/Japanese yen
GBP/CAD — British pound/Canadian dollarIncorrect
EUR/GBP — Euro/British pound
EUR/AUD — Euro/Australian dollar
GBP/JPY — British pound/Japanese yen
CHF/JPY — Swiss franc/Japanese yen
NZD/JPY — New Zealand dollar/Japanese yen
GBP/CAD — British pound/Canadian dollar -
Question 26 of 30
26. Question
Which of the following are exotic currency pairs?
I. EUR/AUD
II. EUR/TRY
III. NZD/SGD
IV. USD/HKDCorrect
Exotic Currency Pair:
EUR/TRYUSD/HKD
JPY/NOK
NZD/SGD
GBP/ZAR
AUD/MXN
Incorrect
Exotic Currency Pair:
EUR/TRYUSD/HKD
JPY/NOK
NZD/SGD
GBP/ZAR
AUD/MXN
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Question 27 of 30
27. Question
The following is based on the difference between the interest rates of the two currencies and the time until the maturity of the deal except?
I. The forward rate
II. The spot rate
III. The base rate
IV. The currency rateCorrect
The forward rate is based on the difference between the interest rates of the two currencies (currency deals always involve two currencies) and the time until the maturity of the deal.
Incorrect
The forward rate is based on the difference between the interest rates of the two currencies (currency deals always involve two currencies) and the time until the maturity of the deal.
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Question 28 of 30
28. Question
The following is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate except?
I. Spot rate parity
II. Forward rate parity
III. Interest rate parity
IV. Rollover ratesCorrect
Interest rate parity (IRP) is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.
Incorrect
Interest rate parity (IRP) is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.
-
Question 29 of 30
29. Question
The following represents a country’s net income over a period of time except?
I. The current account
II. The base account
III. The capital account
IV. The fixed accountCorrect
The current and capital accounts represent two halves of a nation’s balance of payments. The current account represents a country’s net income over a period of time, while the capital account records the net change of assets and liabilities during a particular year.
Incorrect
The current and capital accounts represent two halves of a nation’s balance of payments. The current account represents a country’s net income over a period of time, while the capital account records the net change of assets and liabilities during a particular year.
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Question 30 of 30
30. Question
The International Monetary Fund (IMF) is an organization that does which of the following?
I. Promote high employment
II. Facilitate international trade
III. Secure financial stability
IV. Foster global monetary cooperationCorrect
The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
Incorrect
The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.