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Series 3 – Practice Test 1

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Question 1 of 10

1. Question

Which of these positions describes a long hedge?

Long on the commodity and short the futures contract.
Correct Incorrect Correct answer

Long on the commodity and long the futures contract.
Correct Incorrect Correct answer

Short on the commodity and long the futures contract.
Correct Incorrect Correct answer

Short on the commodity and short the futures contract.
Correct Incorrect Correct answer

Correct

Incorrect
Question 2 of 10

2. Question

Which of the following is true of position traders?

They are a type of day trader.
Correct Incorrect Correct answer

They hold positions for longer terms.
Correct Incorrect Correct answer

They seek to profit from short-term fluctuations.
Correct Incorrect Correct answer

They will only hold long positions.
Correct Incorrect Correct answer

Correct

Incorrect
Question 3 of 10

3. Question

A trader owns 4 wheat contracts and sells them for a profit of $0.15/bu. The total commission is $90 and the contract size is 5,000 bushels. What is the trader’s profit?

$660
Correct Incorrect Correct answer

$1,590
Correct Incorrect Correct answer

$2,910
Correct Incorrect Correct answer

$3,000
Correct Incorrect Correct answer

Correct

Incorrect
Question 4 of 10

4. Question

Markets are inverted when:

the cash price is above the futures price.
Correct Incorrect Correct answer

the cash price is below the futures price.
Correct Incorrect Correct answer

supplies of a commodity are high, driving down short-term prices.
Correct Incorrect Correct answer

none of the above.
Correct Incorrect Correct answer

Correct

Incorrect
Question 5 of 10

5. Question

When setting up a new account, FCM’s must obtain the customer’s previous investment and futures trading experience.

True
Correct Incorrect Correct answer

False
Correct Incorrect Correct answer

Correct

Incorrect
Question 6 of 10

6. Question

How many years do NFA members need to retain financial and compliance records?

2
Correct Incorrect Correct answer

5
Correct Incorrect Correct answer

7
Correct Incorrect Correct answer

10
Correct Incorrect Correct answer

Correct

Incorrect
Question 7 of 10

7. Question

Soybean futures contracts are quoted in which of the following?

Bushels
Correct Incorrect Correct answer

Tons
Correct Incorrect Correct answer

Pounds
Correct Incorrect Correct answer

Metric Tons
Correct Incorrect Correct answer

Correct

Incorrect
Question 8 of 10

8. Question

Which types of contracts are standardized and exchange-traded?

Futures contracts
Correct Incorrect Correct answer

Forward contracts
Correct Incorrect Correct answer

Both futures and forwards
Correct Incorrect Correct answer

None of the above
Correct Incorrect Correct answer

Correct

Incorrect
Question 9 of 10

9. Question

An inverted yield curve is formed when short-term yields fall below long-term yields.

True
Correct Incorrect Correct answer

False
Correct Incorrect Correct answer

Correct

Incorrect
Question 10 of 10

10. Question

A put with a strike price of $4.20 was purchased by your client at 5 cents. The underlying futures price is now $4.10. What is the intrinsic value of the put?

0
Correct Incorrect Correct answer

5 cents
Correct Incorrect Correct answer

10 cents
Correct Incorrect Correct answer

4 dollars and 10 cents
Correct Incorrect Correct answer

Correct

Incorrect

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