Question 1

The quote for which of the following methods of physical delivery of a futures contract would be the cheapest?

AFree on board

BFree alongside ship

CIn store

DCost, insurance and freight

Answer : C

Question 2

If the spot price for a commodity is lower than the forward price, the market is said to be in:

Acontango

Bbackwardation

Ca short squeeze

Ddisequilibrium

Answer : A

Question 3

Backwardation can be explained by:

Aexpectations of oversupply in the future

Bconvenience yields being greater than the total carrying cost

Cshort term shortages in the spot markets

Dall of the above

Answer : D

Question 4

A 'short squeeze' refers to a situation where

Aa sharp increase in spot prices due to a shortage in the spot market as shorts try to cover their positions

Ba sharp drop in spot prices as shorts try to drive down prices

Csharp swings in forward basis caused due to normal market movements

Dan increase in forward prices due to factors underlying a contango market overwhelming the factors that take the market into backwardation

Answer : A

Question 5

A refiner may use which of the following instruments to simultaneously protect against a fall in the prices of its products and a rise in the prices of its inputs:

Acrude oil swaps

Boptions on the crack spread

Ccrude oil futures

Dcalendar spread options

Answer : B

Free Exam I: Finance Theory, Financial Instruments, Financial Markets – 2015 Edition Questions for PRMIA Exam I: Finance Theory, Financial Instruments, Financial Markets – 2015 Edition Exam as PDF & Practice Test Software

Question 1

Question 2

Question 3

Question 4

Question 5