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Question 1 of 30
1. Question
Which of the following best describes what an American-style option is?
Correct
American-style option – An option contract that may be exercised at any time before it expires.
Incorrect
American-style option – An option contract that may be exercised at any time before it expires.
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Question 2 of 30
2. Question
Which of the following best describes what an European-style option is?
Correct
Incorrect
European-style option – An option contract that can be exercised only on or near its expiration date.
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Question 3 of 30
3. Question
For foreign exchange trading, currencies are quoted in terms of which of the following?
Correct
Base Currency – For foreign exchange trading, currencies are quoted in terms of a currency pair.
Incorrect
Base Currency – For foreign exchange trading, currencies are quoted in terms of a currency pair.
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Question 4 of 30
4. Question
For USD/JPY & EUR/CNY, which of the following are the base currency?
Correct
Base Currency – For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency.
Incorrect
Base Currency – For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency.
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Question 5 of 30
5. Question
Which of the following best describes quote currency?
Correct
Quote currency – The second currency in a currency pair is referred to as the quote currency.
Incorrect
Quote currency – The second currency in a currency pair is referred to as the quote currency.
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Question 6 of 30
6. Question
Which of the following is an accurate definition for Bid/Ask Spread?
Correct
Bid/Ask Spread – The point difference between the bid and ask (offer) price.
Incorrect
Bid/Ask Spread – The point difference between the bid and ask (offer) price.
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Question 7 of 30
7. Question
Which of the following is the process of extending the settlement date on an open position by rolling it over to the next settlement date?
Correct
Rollover – The process of extending the settlement date on an open position by rolling it over to the next settlement date.
Incorrect
Rollover – The process of extending the settlement date on an open position by rolling it over to the next settlement date.
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Question 8 of 30
8. Question
A forex dealer member (FDM) is an entity that acts, or offers to act, as a counterparty to an off-exchange foreign currency transaction with a person who is not an eligible contract participant and the transaction is either which of the following?
I. Offered or entered into, on a leveraged or margined basis, or financed by the offeror, counterparty or person acting in concert with the offeror or counterparty on a similar basis.
II. A futures contract, an option on a futures contract or an option contract (including options traded on a securities exchange)
III. A futures contract, an option on a futures contract or an option contract (except options traded on a securities exchange)
IV. Offered or entered into, on a leveraged or margined basis, but financed by the offeror with counterparty or person acting in concert with the offeror on the same basisCorrect
A forex dealer member (FDM) is an entity that acts, or offers to act, as a counterparty to an off-exchange foreign currency transaction with a person who is not an eligible contract participant and the transaction is either:
a futures contract, an option on a futures contract or an option contract (except options traded on a securities exchange); or
offered or entered into, on a leveraged or margined basis, or financed by the offeror, counterparty or person acting in concert with the offeror or counterparty on a similar basis.
Incorrect
A forex dealer member (FDM) is an entity that acts, or offers to act, as a counterparty to an off-exchange foreign currency transaction with a person who is not an eligible contract participant and the transaction is either:
a futures contract, an option on a futures contract or an option contract (except options traded on a securities exchange); or
offered or entered into, on a leveraged or margined basis, or financed by the offeror, counterparty or person acting in concert with the offeror or counterparty on a similar basis.
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Question 9 of 30
9. Question
A futures commission merchant (FCM) is an entity that solicits or accepts orders to buy or sell which of the following?
I. futures contracts
II. options on futures
III. retail off-exchange forex contracts or swaps
IV. future commoditiesCorrect
A futures commission merchant (FCM) is an entity that solicits or accepts orders to buy or sell futures contracts, options on futures, retail off-exchange forex contracts or swaps, and accepts money or other assets from customers to support such orders.
Incorrect
A futures commission merchant (FCM) is an entity that solicits or accepts orders to buy or sell futures contracts, options on futures, retail off-exchange forex contracts or swaps, and accepts money or other assets from customers to support such orders.
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Question 10 of 30
10. Question
Which of the following best describes Tom Next?
Correct
Tomorrow next (tom next), is a short-term foreign exchange transaction where a currency is simultaneously bought and sold over two separate business days, those being tomorrow (one business day) and the following day (two business days from today), otherwise known as the spot date.
Incorrect
Tomorrow next (tom next), is a short-term foreign exchange transaction where a currency is simultaneously bought and sold over two separate business days, those being tomorrow (one business day) and the following day (two business days from today), otherwise known as the spot date.
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Question 11 of 30
11. Question
Which of the following describes what a Pip is?
Correct
Pip – The smallest unit of trading in a foreign currency price
Incorrect
Pip – The smallest unit of trading in a foreign currency price
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Question 12 of 30
12. Question
Which of the following is the process of extending the settlement date on an open position by rolling it over to the next settlement date?
Correct
The process of extending the settlement date on an open position by rolling it over to the next settlement date.
Incorrect
The process of extending the settlement date on an open position by rolling it over to the next settlement date.
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Question 13 of 30
13. Question
Which of the following best described a forward transaction?
Correct
A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date.
Incorrect
A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date.
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Question 14 of 30
14. Question
Which of the following is/are included in the Counterparty, dealer?
I. Futures Commission Merchant
II. Retail Foreign Exchange Dealer
III. Regulated entities listed in the Commodity Exchange Act
IV. Commodities Exchange DealersCorrect
Counterparty, dealer: Futures Commission Merchant, Retail Foreign Exchange Dealer, other regulated entities listed in the Commodity Exchange Act
Incorrect
Counterparty, dealer: Futures Commission Merchant, Retail Foreign Exchange Dealer, other regulated entities listed in the Commodity Exchange Act
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Question 15 of 30
15. Question
Which of the following best describes what an Interbank market is?
Correct
Interbank market – A loose network of currency transactions negotiated between financial institutions and other large companies
Incorrect
Interbank market – A loose network of currency transactions negotiated between financial institutions and other large companies
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Question 16 of 30
16. Question
The Commodity Exchange Act (CEA) requires certain firms and individuals that conduct business in the derivatives industry to register with which of the following?
Correct
The Commodity Exchange Act (CEA) requires certain firms and individuals that conduct business in the derivatives industry to register with the CFTC.
Incorrect
The Commodity Exchange Act (CEA) requires certain firms and individuals that conduct business in the derivatives industry to register with the CFTC.
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Question 17 of 30
17. Question
Which of the following firms has to register with the Commodity Futures Trading Commission?
I. Commodity Trading Advisor (CTA)
II. Commodity Pool Operator (CPO)
III. Introducing Broker (IB)
IV. Futures Commission Merchant (FCM)Correct
Firms required to register with the Commodity Futures Trading Commission includes:
– Commodity Trading Advisor (CTA)
– Commodity Pool Operator (CPO)
– Introducing Broker (IB)
– Futures Commission Merchant (FCM)Incorrect
Firms required to register with the Commodity Futures Trading Commission includes:
– Commodity Trading Advisor (CTA)
– Commodity Pool Operator (CPO)
– Introducing Broker (IB)
– Futures Commission Merchant (FCM) -
Question 18 of 30
18. Question
Which of the following gives the Commodity Futures Trading Commission (CFTC) jurisdiction over off-exchange foreign currency futures and options transactions as well as certain leveraged foreign currency transactions offered to or entered into with retail customers?
Correct
The Commodity Exchange Act (CEA or Act) gives the Commodity Futures Trading Commission (CFTC) jurisdiction over off-exchange (also called over-the-counter or OTC) foreign currency futures and options transactions as well as certain leveraged foreign currency transactions offered to or entered into with retail customers.
Incorrect
The Commodity Exchange Act (CEA or Act) gives the Commodity Futures Trading Commission (CFTC) jurisdiction over off-exchange (also called over-the-counter or OTC) foreign currency futures and options transactions as well as certain leveraged foreign currency transactions offered to or entered into with retail customers.
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Question 19 of 30
19. 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. registered FCMs that are primarily or substantially engaged in on-exchange futures activities
II. RFEDs
III. UK-based financial institution
IV. financial holding companiesCorrect
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 20 of 30
20. Question
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 do which of the following?
I. Register as associated persons (AP)
II. Be listed by the FCMs
III. Be approved as forex APs by NFA
IV. Be approved by the CTCACorrect
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.
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.
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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
The following are exotic currency pairs except?
Correct
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
Which of the following is based on the difference between the interest rates of the two currencies and the time until the maturity of the deal?
Correct
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
Which of 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?
Correct
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.
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Question 29 of 30
29. Question
Which of the following represents a country’s net income over a period of time?
Correct
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.