| 1. | The markets in which the derivatives are traded, are classified as |
| a. | assets backed market |
| b. | cash flow backed markets |
| c. | mortgage backed markets |
| d. | derivative securities markets |
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Answer: (d).derivative securities markets
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| 2. | Consider the buying of put option, the probability that a buyer would have negative payoff increases with the |
| a. | increase in stock price |
| b. | decrease in stock price |
| c. | increase in maturity duration |
| d. | decrease in maturity duration |
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Answer: (a).increase in stock price
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| 3. | The price of an option is subtracted form time value of option to calculate |
| a. | book value index |
| b. | market index |
| c. | intrinsic value |
| d. | extrinsic value |
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Answer: (c).intrinsic value
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| 4. | If the intrinsic value of an option is $450 and the price of an option is $560 then the time value of an option is |
| a. | 110 |
| b. | 1010 |
| c. | 450 |
| d. | 560 |
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Answer: (a).110
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| 5. | The type of swaps in which the fixed payments of interest are exchanged by two counterparties for floating payments of interest are called |
| a. | float-fixed swaps |
| b. | interest rate swaps |
| c. | indexed swaps |
| d. | counter party swaps |
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Answer: (b).interest rate swaps
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