Nism 9
Nism 9
Nism 9
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TEST DETAILS – The NISM EQUITY DERIVATIVES CERTIFICATION EXAM is a 100 mark exam with 60% as
passing marks. In all 100 questions will be asked with 0.25% negative marking for Wrong Answers. The
time duration is 2 hours.
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NISM SERIES VIII – EQUITY DERIVATIVES CERTIFICATION
EXAM – PRACTICE TEST NO. 9
Question 1 An European option can be exercised only on expiry date - State True or False ?
(a) TRUE
(b) FALSE
Question 2 Clearing member Ram has 6 trading members who are all in Mumbai and Clearing
member Shyam has 6 trading members who are all outside Mumbai. Both of them have
deposited same amount of liquid assets with the clearing corporation. Which amongst the
following statement is True ?
(a) Clearing Member Ram will have a higher exposure limit than Clearing Member Shyam
(b) Clearing Member Shyam will have a higher exposure limit than Clearing Member Ram
(c) Both Ram and Shyam will have the equal exposure limits
Correct Answer 2 Both Ram and Shyam will have the equal exposure limits
Answer As per Dr. L. C. Gupta Committee recommendations: Members’ exposure should be linked to
Explanation the amount of liquid assets maintained by them with the clearing corporation.
There is no mention of any geographical limitations.
NISM SERIES VIII – EQUITY DERIVATIVES CERTIFICATION
EXAM – PRACTICE TEST NO. 9
Question 4 If the far month futures prices are less than near month futures prices, this is known as
________ .
(b) Contango
(c) Basis
(d) Backwardation
If futures price is higher than spot price of an underlying asset, market participants may expect
the spot price to go up in near future. This expectedly rising market is called “Contango
market”.
NISM SERIES VIII – EQUITY DERIVATIVES CERTIFICATION
EXAM – PRACTICE TEST NO. 9
Question 5 A trader sells a future contract and prices rises. The trader will ______ if he squares up
the position.
Question 6 Mr. A is a risk averse investor. He would prefer secure investments like fixed deposits
and other debt instruments and not market oriented investments - State True or False ?
(a) TRUE
(b) FALSE
Question 7 An Equity based Mutual Fund can sell Index Futures to hedge its position - True or False
?
(a) True
(b) False
Answer Derivatives like futures & options are used by mutual funds for hedging their portfolio to
Explanation manage the risk.
For example, if the fund manager foresees a downturn in the stocks held in his portfolio, he can
hedge the same by selling (stock/index futures) in the derivatives segment.
Question 9 Among the following options, in which future contract, the contract cannot be used as a
means to acquire the underlying asset ?
(a) Copper
(b) Gold
Question 10 If the price of the underlying stock of a PUT option is very volatile, _________ .
An increase in the volatility of the underlying increases the expected payout from a buy option,
whether it is a call or a put.
NISM SERIES VIII – EQUITY DERIVATIVES CERTIFICATION
EXAM – PRACTICE TEST NO. 9
Question 11 A trader is long on ABC stock April futures at 3100. He shall make a loss if the futures
price moves to _________ .
(a) 3300
(b) 3200
(c) 3400
(d) 3000
(c) Only members who are registered as clearing members with the derivative exchange
Correct Answer 12 Only members who are registered as clearing members with the derivative exchange
NISM SERIES VIII – EQUITY DERIVATIVES CERTIFICATION
EXAM – PRACTICE TEST NO. 9
(b) make the outcome as per SEBI and Stock market regulations
Question 15 The Risk Return profile for a Future contract is symmetric while that of an Option
contract is asymmetric - State True or False ?
(a) TRUE
(b) FALSE
(a) a bond
For eg - If one buys a call option and the share prices go down the loss will be limited ie.
restricted to the premium paid. But if the share prices move up, the profits can be
huge/unlimited. This is known a asymmetric return.
On the contrary in futures or cash market, the returns are symmetric ie. equal value of profits or
loss is possible.
Question 18 When a call option on an index is exercised, the call option holder receives from the
option writer an amount equal to excess of spot price over the strike price of that call
option - State True or False ?
(a) TRUE
(b) FALSE
Question 19 It is recommended but not compulsory for the trading members to have dealers and sales
personal in the derivatives market who have passed a certification programme approved
by SEBI - State True or False ?
(a) TRUE
(b) FALSE
Question 20 There is only CASH settlement for Nifty futures contract - State True or False ?
(a) TRUE
(b) FALSE
Question 21 Margins in the derivative segment has to be collected from all clients, including Financial
Institutions and FIIs - State True or False ?
(a) TRUE
(b) FALSE
Question 22 Investors who are called Bulls are those investors who believe the market or stock will fall
- State True or False ?
(a) TRUE
(b) FALSE
Question 23 A Mutual Fund floats a new fund offer of a 100% equity scheme. Till the time it invests
this cash in equities, the fund can take equity exposure by buying stock index futures -
State True or False ?
(a) TRUE
(b) FALSE
Question 24 A portfolio with 200 stocks is only half as risky as another portfolio with 100 stocks -
State True or False ?
(a) TRUE
(b) FALSE
Question 25 A writer / seller of a deep out of the money CALL option is ________ .
Question 26 The net worth requirements of Clearing Members and Trading Members is the same for
the derivatives exchange - State True or False ?
(a) TRUE
(b) FALSE
Question 27 You have created a Short Position on futures contract. This can be squared up by
_________ .
Question 28 A separate client account has to be maintained to keep the money and securities deposited
by clients - State True or False ?
(a) TRUE
(b) FALSE
Question 29 One can use Index Futures for hedging to eliminate or reduce the ________ .
Question 30 If a Trading member defaults in the derivative segment, he can still continue the trading
business in the cash segment. - True or False ?
(a) FALSE
(b) TRUE
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