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Advanced Wealth Management Course (IIBF) - Paper 3

Part II: Ch 16: Fixed Income Derivatives

Q1.

The most popular and liquid benchmark, especially in the interbank market is:

Overnight Index Swaps (OIS)

MITOR Swaps

MIFOR

NSE-MIBOR

Q2.

(I) Interest Rate Swaps are Exchange traded derivative contracts. (II) The primary advantage offered by Interest Rate Swaps is the facility to hedge interest rate risk.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q3.

(I) Swaps having explicit/implicit option features such as caps/floors/collars are not permitted. (II) There are no restrictions on the minimum or maximum size of “notional principal” amounts of FRAs/IRS.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q4.

Each contract of Interest Rate Futures is of ___________ value.

Rs. 1 lakh

Rs. 2 lakhs

Rs. 3 lakhs

Rs. 5 lakhs

Q5.

The maximum maturity of Interest Rate Futures is __________ months.

3 months

6 months

12 months

36 months

Q6.

The contract of Interest Rate Futures is based on 10-year government bonds bearing a notional coupon of 7.5% per annum, compounded every 12 months.

True

False

Q7.

(I) An interest rate put option is an option that grants the holder the right to make a fixed or known interest payment and receive a variable or unknown interest payment. (II) Interest Rate Futures are standardized forward contracts that are traded on exchanges.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q8.

An option granting the right to buy is referred to as a “Put” whereas an option granting a right to sell is referred to as a “Call”.

True

False

Q9.

The advantage/s of Interest rate Swaps is/are:

It enables participants to hedge against the risk of adverse movements in interest rates.

It allows participants to take biggest risks by taking positions based on their views of the future

Both (a) & (b)

None of the above

Q10.

Participants in FRAs are:

Scheduled commercial banks (excluding Regional Rural Banks)

Primary Dealers

All-India Financial Institutions

Both (b) & (c)

All of the above

Q11.

(I) There are restrictions on the minimum or maximum tenor of the FRAs/IRS. (II) Price risks refer to bid-offer spreads and ease of unwinding or reversing swaps.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q12.

The option Seller pays a premium up-front for obtaining the right to buy or sell the asset during a specific period of time.

True

False

Q13.

(I) The MITOR benchmark that has developed into a proxy for AAA Corporation funding cost in India. (II) The Floating benchmark is known as MIBOR, which is computed daily by the National Stock Exchange (NSE) against which the swap is settled.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q14.

Deliverable securities under the Interest Rate Futures should mature between 7 – ½ years and 15 years.

True

False

Q15.

(I) Counter party risk refers to risks of default or delay in payment settlement. (II) Basis risk is the risk of mismatch.

Both the statements are correct

Only statement (I) is correct