Answers

The Singapore government deems it necessary to treat it’s citizens like children and force them to take a humiliating online quiz before allowing them to use their own money for trading. To add insult to injury the quiz is hosted on a terrible website with horrendously buggy flash presentations which one is forced to click through. Please post any additional answers in the comments if and when you do take the quiz.

 

Derivatives can be used to provide leverage and mitigate risk.
True

Mr Lim is a firm believer of the concept of “high risk, high return”. He is confident that by “taking higher risk, higher return will surely happen.” This statement is:
False

ABC share price is now $16. The call option trades has a strike price of $14. This option would be
In-the-money

When I long a put option, the maximum loss I can lose is the amount I invested.
True

An in-the-money call option has positive intrinsic value
True

Which is true about structured warrants?
Structured Warrants have no margins requirement

If I think that the underlying asset price will increase, I should long a call option
True

Trading price of an Exchange Traded Fund (ETF) may deviate from its NAV due to
Demand and supply conditions in the market

The following are descriptions of some of the key risk factors of Exchange Traded Funds (ETFs). Which one describes tracking error?
Inability of fund manager to exactly replicate the performance of the underlying asset

Synthetic replication methods allow the issuer of an Exchange Traded Fund (ETF) to minimise tracking error with a cost.
True

Unlike unlisted unit trusts, Exchange Traded Funds (ETFs) are traded at known prices throughout the trading day.
True

Which of the following are replication methods used by Exchange Traded Funds (ETFs)?
All of the above (synthetic replication and direct replication)

Which of the following risk factors can be found in Exchange Traded Notes (ETNs) and not in cash-based Exchange Traded Funds (ETFs)?
Issuer credit risk

Exchange Traded Note’s (ETN) returns are based on the periodic coupon payments like bonds.
False

Futures contracts are marked to market on a daily basis. When the initial margin is eroded by losses, the broker may issue a margin call to restore the account to the initial margin. This additional amount is known as:
Variation margin

Janet buys a futures contract with underlying asset worth $50,000. The initial margin was $5,000 and maintenance margin was $3,000. Under which scenario will there be a margin call?
None of the above

The gains/losses of a futures contract is mark-to-market daily.
True

Which of the following group of products cannot be underlying assets of futures contract?
None of the above

A broker has no right to liquidate its client’s holding in the futures contracts if the client does not meet the margin calls.
False

Discount Certificates are typically tied to a single listed stock. If the closing price of the underlying on expiry of the certificate is lower than the Cap Strike, then
the underlying shares will be delivered