Dhaval Visariya

Commodity Derivatives Mock Test 6 (Questions 1 to 50) Test your knowledge on commodity derivatives, hedging strategies, options pricing, and market regulations with this complete interactive practice set. Q 1. When the currency of a particular country appreciates against the USD, the price of the commodity in that particular country becomes expensive becomes cheaper remains constant equal chances of it becoming expensive or cheaper View Answer & Explanation ✓ CORRECT ANSWER: becomes cheaper Explanation: Comparative movement in the value of a currency of a country in relation to the major global currencies is very important for prices of commodities in that particular country. Most of the commodities globally are denominated in the US dollar (USD). Hence, when the currency of a particular country appreciates against the USD, the price of the commodity in that particular country becomes cheaper and vice versa. Q 2. During the process of physical deliveries in the Comm...

Q1. A gold futures contract is bought for Rs. 50000 per 10 grams with a quality specification of .995 fineness. However, on the delivery date .999 fineness gold is delivered. What would be the price to be paid to the seller? a) Rs. 50845.75 b) Rs. 51,140.30 c) Rs. 50,201 d) Rs. 51,000 Show Answer & Explanation Correct Answer: c) Rs. 50,201 Explanation: If a gold futures contract is bought for Rs 50,000 per 10 grams of gold with a quality specification of .995 fineness and on the delivery date, if .999 fineness gold is delivered, the price is recalculated as follows: Gold price = 50000 x 999/995 = Rs 50,201. The buyer will pay Rs 50,201 as against the original contract price of Rs 50,000 per 10 grams. Q2. During the HARVESTING season, the prices of agricultural commodities generally a) tend to fall b) tend to rise c) remain unchanged d) are unpredictable Show Answer & Explanation Correct Answer: a) tend to fall Explanation: Most commodities follow a certai...

Q1. For a commodity to be suitable for futures trading, it must possess which of the following characteristics? a) It must be possible to specify a standard, as it is necessary for the futures exchange to deal in standardized contracts. b) Prices should be volatile to necessitate hedging through derivatives c) The commodity should be free from substantial control from Government regulations d) All of the above Show Answer & Explanation Correct Answer: d) All of the above Explanation: All the commodities are not suitable for futures trading. For a commodity to be suitable for futures trading, it must possess the following characteristics: (i) The commodity should have a suitable demand and supply conditions i.e., volume and marketable surplus should be large. (ii) Prices should be volatile to necessitate hedging through derivatives. As a result, there would be a demand for hedging facilities. (iii) The commodity should be free from substantial control from Government re...