English HKSI LE Paper 9 Pass Paper Question Bank (QB)

2CEXAM Mock Question
Licensing Examination Paper 9
16-Sep-19
19:48:58
1 Derivatives can satisfy which of the following needs? Topic 1
I. Manage investment portfolios
II. Hedge
III. Asset transfer
IV. Increase income
A I, II, III Chapter 3
B II, III, IV Section
C I, III, IV QID 723
D I, II, III, IV Ans D Hot
Exp In summary, the functions of derivatives can be classified as: risk management (i.e. hedging exposures).
Speculation (i.e. taking profit from price movements). Arbitrage (i.e. buying or selling an asset in one
market and immediately transacting an opposite trade of an equal amount of the same asset in a different
market, in order to capture a risk-free profit).
2 Which of the following instrument may have a margin call such that the loss is larger than initial principal? Topic 1
I. Buy call option
II. Sell call option
III. Security margin financing
III. Buy put option
A I, II Chapter 2
B I, III Section
C II, III QID 1081
D II, IV Ans C Hot
Exp Securities margin financing is the process of securities being used as collateral to facilitate the purchase
of additional exchange-traded securities. The writers of call options are required to deliver stock on being
assigned. The difference between the price at which the stock is acquired and the strike price of the
assigned option may be substantial and could represent an outright loss.
3 Which of the following is not derivative? Topic 1
A Futures Chapter
B Options Section
C Bonds QID 857
D Swaps Ans C Hot
Exp Derivatives are financial instruments that derive their value from that of an underlying asset or financial
instrument. A debt is a contractual agreement between the borrower of funds and the lender of funds, and
represents the existence of a loan. Debt securities represent debt that is traded on the debt market.
Website: www.2cexam.com Phone: 21109644 WhatsApp:93472064 WeChat:hk2cexam P.1

Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we provide are
not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and Investment Institute (HKSI) does
not offer any HKSI Past Paper or HKSI Mock Paper for sale.
4 Derivatives can be used as: Topic 1
I. Arbitrage
II. Speculation
III. Risk management
IV. Margin trading
B I, II, IV Section
D II, III, IV Ans A Hot
Exp The functions of derivatives: (1) risk management (i.e. hedging exposures). (2) speculation (i.e. taking
profit from price movements). (3) arbitrage (i.e. buying or selling an asset in one market and immediately
transacting an opposite trade of an equal amount of the same asset in a different market, in order to
capture a risk-free profit).
5 Which of the following is not the main function of derivatives? Topic 1
A Increase flexibility Chapter 3
B Decrease the cost of borrowing Section
C Risk management QID 151
D Obtain constant return Ans D Hot
Exp The derivatives market plays a zero sum game. The buyer and seller take two opposing views on the
future direction of the price of the underlying asset. One side of the transaction will be right, and gain on
the derivatives transaction, and therefore the other side must lose. Thus, return from derivatives is not
constant.
6 If you sell Hang Seng index futures contract, your compterparty may think: Topic 1
I. Hang Seng index is at the bottom
II. Hang Seng index is at the top
III. the fair value of Hang Seng index futures is higher
IV. the fair value of Hang Seng index futures is lower
A I, III Chapter 3
B I, IV Section
C II, III QID 2387
D II, IV Ans A Hot
Exp If you sell Hang Seng index futures, your counterparty buys it and may think that it's at the bottom or
underestimated.
7 The participants of derivatives include: Topic 1
I. Speculators
II. Arbitragers
III. Hedgers
IV. Investors
B I, II, IV Section
D II, III, IV Ans A Hot
Exp Participants in the derivatives market include borrowers and lenders of the underlying assets who use
derivatives transactions for hedging, speculative or arbitrage purposes.

8 The difference between forwards and futures include: Topic 1
I. Futures care less about who is the counterparty.
II. Futures is more standardized.
III. It's easier to offset the positions if you trade futures.
IV. Futures market is more centralized.
B II, III, IV Section
Exp The difference between forwards and futures include:

I. Futures care less about who is the counterparty because there is novation and less credit risks.
II. Futures is more standardized.
III. It's easier to offset the positions if you trade futures because of high liquidity.
IV. Futures market is more centralized.
9 Which of the following is not the main reason to invest in derivatives? Topic 1
A Speculation Chapter 3
B Earning dividends Section
C Arbitrage QID 525
D Hedging Ans B Hot
Exp Derivatives will not distribute dividends.

10 "Swaption" is combined by which of the following derivatives? Topic 1
I. Option
II. Futures
III. Swaps
IV. Commercial Note
A I, II Chapter 1
B I, III Section 1
C I, IV QID 2
D II, IV Ans B Hot
Exp “Swaptions” are effectively a mixture of swaps and options.

11 Financial markets can be classified as exchange-traded market and: Topic 1
A free market. Chapter 1
B OTC market. Section 1
C outside-exchange-traded market. QID 62
D secondary market. Ans B Hot
Exp Financial markets are broadly categorized as being either exchange-traded or OTC.

12 Which of the following statement is correct regarding futures contract? Topic 1
I. It can be cleared by physical delivery or cash delivery.
II. It is exchange-traded.
III. It is a zero-sum game such that profits of one side equal loss of the other side.
IV. It is a standardized contract.
B I, II, IV Section 1
D I, II, III ,IV Ans D Hot
Exp In general, positions in client accounts are margined on a gross basis and initial margins need to be paid
when opening a position.
13 What is derivatives? Topic 1
A Derivatives are the kind of income derived whose income would fluctuate as the value of related assets Chapter 1
change.
B Derivatives are financial tools whose value are derived from relative assets but whose value will not Section 1
change as the value of relative assets change.
C Derivatives are financial tools whose value are derived from relative assets and will change as the value of QID 166
relative assets change.
D Derivatives are the kind of income derived whose income would not fluctuate as the value of related Ans C Hot
assets change.
instrument. Derivatives are classified as either commodity derivatives and financial derivatives.
14 Derivatives can be traded at which of the following places? Topic 1
I. Exchanges
II. Clearing house
III. Over the counter
IV. Hong Kong Monetary Authority
A I, II Chapter 1
B I, III Section 1
C I, IV QID 165
D II, IV Ans B Hot
Exp Derivatives are classified as either exchange-traded or OTC.

15 The common derivatives include: Topic 1
I. Options
II. Futures
III. Swaps
IV. Commercial paper
B II, III, IV Section 1
D I, III, IV Ans A Hot
Exp Commercial papers are kind of short-term debt securities.

16 "It is exchanged-traded and is an agreement to buy or sell an underlying asset at a specified price and Topic 1
date in the future." What is the kind of derivative depicted above?
A Futures Chapter 2
B Options Section 1
C Swaps QID 160
D Forward contracts Ans A Hot
Exp A futures contract are exchange-traded and it is an agreement to buy or sell an underlying asset at a
specified price and date in the future.
17 An investor bought the shares of Vitamilk at $30 and then bought the put option with a strike price of $35. Topic 1
Which of the following is more likely his intent?
A Speculation Chapter 3
B Hedge Section 1
C Stop loss QID 1108
D Arbitrage Ans B Hot
Exp He wants to hedge the risk of a possible drop in the price of the Vitamilk stock through the put option. If
the price of the Vitamilk is really falling, the investor can offset the loss of the stock by exercising the put
option.
18 Mr. Liao bought put option while holding the underlying stock. His purpose was more likely: Topic 1
A speculation. Chapter 3
B hedging. Section 1
C stop loss. QID 1107
D arbitrage. Ans B Hot
Exp Mr. Liao bought put option with holding the underlying stock. He may want to hedge exposures.
19 Which of the following belongs to derivatives? Topic 1
I. Bonds
II. Options
III. Physical silver
IV. Forward currency contract
A I, II, IV Chapter 1
B I, III, IV Section 1
C II, III, IV QID 153
D II, IV Ans D Hot
Exp Derivatives are fundamentally classified into four basic types: futures; forwards; swaps ; options.

20 Derivatives market is a zero-sum game, meaning that: Topic 1
A in the long run, the advantage of buyers and sellers are approximately the same. Chapter 1
B profits of one side equal losses of another side. Section 1
C in the short run, the advantage of buyers and sellers are approximately the same. QID 152
D the direction of derivatives is the same as that of spot market. Ans B Hot
Exp The derivatives market plays a zero sum game. The buyer and seller take two opposing views on the
future direction of the price of the underlying asset. One side of the transaction will be right, and gain on
the derivatives transaction, and therefore the other side must lose.
21 Derivatives include Topic 1
I. Options
II. Equity warrants
III. Futures
IV. Swaps
C I, III, IV QID 84
D I, II, III, IV Ans C Hot
Exp Derivatives include futures, forwards, swaps and options (or a combination of one or more of these
categories). Equity warrants are classified as equity securities.
22 Which of the following statement is most correct regarding derivatives? Topic 1
A A financial instrument with constant value Chapter 1
B A financial instrument that can be transferred into other assets Section 1
C A financial instrument that is transferred from other assets QID 523
D A financial instrument whose value is based on the value of other assets Ans D Hot
instrument.
23 In order to minimize bad effects induced by exchange rate changes when trading foreign currencies, Topic 1
trading companies invest in several derivatives. This is called:
A speculation. Chapter 3
B hedging. Section 1
C spread trading. QID 522
D principal-guaranteed trading. Ans B Hot
Exp Exporters may receive foreign currency payments, while importers may make them, and corporations may
attempt to remove risk from these exposures by buying or selling currency in advance of payment. This
form of active exposure management is referred to as hedging.

24 The most common derivatives include: Topic 1
I. Futures
II. Forward contracts
III. Swaps
IV. Options
C II, III, IV QID 159
Exp Derivatives are fundamentally classified into four basic types: futures; forwards; swaps ; options.
25 Which of the following is not correct regarding the responsibility of The Stock Exchange of Hong Kong Topic 1
Limited(SEHK)?
A Providing a platform to trade Taiwan listed stocks Chapter 1
B Maintaining a market which is efficient, fair, and transparent Section 1
C Ensuring an efficient and fair market QID 1293
D Reducing the risk of investors Ans D Hot
Exp SEHK is responsible to provide protection to the investing public

26 Which of the following is the exchange-traded derivative? Topic 1
A Interest rate swaps Chapter 2
B Forward rate agreement Section 1
C Currency swaps QID 2325
D Interest rate futures Ans D Hot
Exp All futures are traded in the exchange. Agreements and swaps etc are generally referred to over-the-
counter derivatives.
27 A financial tool that can buy or sell underlying asset at a specified price in a specified future time is: Topic 1
A Futures Chapter 2
B Options Section 1
C Bonds QID 859
D Swaps Ans A Hot
Exp A futures contract is an agreement to buy or sell an underlying asset at a specified price and date in the
future.
28 Mr. Yin is a helicopter parent who often pays attention to the trend in AUD in order to prepare for his Topic 1
children's studying abroad. He thinks that AUD will rise in the future, so he buys AUD futures. Mr. Yin is
more likely to be a:
A speculator. Chapter 4
B arbitrager. Section 1
C hedger. QID 729
D trader. Ans C Hot
Exp Mr. Yin buys AUD futures and try to protect (or hedge) against adverse future price movements by “fixing”
a predetermined price of AUD.

29 Miss Yu is a property speculator who has large loans on many of her properties. She worries that loan Topic 1
payment may rise if interest rates increase in the future. So she sells bonds futures. She is more likely a:
C hedger. QID 732
D trader. Ans C Hot
Exp The rise of interest rate leads the drop of bond price. If Miss Yu’s worry comes true, selling bonds futures
will make profit in future. The profit can partly offset the increase of loan payment and thus she is hedging.
30 Hedging can be used in which of the following situations? Topic 1

I. Hedge current positions
II. Hedge transactions in the future
III. Hedge profits of past positions
IV. Hedge losses of past positions
A I, II Chapter 3
B II, III, IV Section 1
C I, III QID 725
D II, IV Ans A Hot
Exp Derivatives used for hedging purposes involve risk minimization, where derivatives eliminate the
uncertainty associated with future price movements of the underlying assets.
31 Which of the following is hedging? Topic 1
I. A retail investor bought the Tracker Fund of Hong Kong before selling Hang Seng index futures.
II. An arbitrager bought China Enterprise Index(HSCEI) futures without simultaneously short selling it.
III. A fund company bought American depository receipts of company A and then sold shares of company
A in the Stock Exchange of Hong Kong Limited(SEHK).
IV. An investor bought shares of company B and then bought put options of company B.
D II, III, IV Ans C Hot
Exp A hedge is a foreign exchange or derivative transaction that is conducted to minimize the risk of the
transaction.
32 Kaohsiung fund holds lots of corporate bonds. Miss Chen, the fund manager, expects the interest rate to Topic 1
rise sharply in the following months. So Miss Chen sells bonds futures for Kaohsiung fund. Kaohsiung
fund is more likely to be a:
C hedger. QID 731
D trader. Ans C Hot
Exp The advantage of futures contract is that the price is set now for delivery of an asset in the future, and
they therefore hedge against unfavourable future price movements. Miss Chen sells bonds futures for
Kaohsiung fund because she wants to hedge the decline in bond price, which is led by the rising interest
rate, so she is more likely to be a hedger.

33 Derivatives can be traded at which of the following places? Topic 1
I. Exchanges
II. Over the counter
III. International settlement platform
IV. World bank
A I, II Chapter 1
B II, IV Section 1
C I, IV QID 858
D II, III Ans A Hot
Exp Derivatives are classified as either exchange-traded or OTC.

34 Which of the following statement is correct regarding futures? Topic 1
A Futures contract represents a standardized agreement to buy or sell a specified quantity of asset on a Chapter 2
specified date at a specified price.
B Futures contract represents a standardized agreement to buy or sell a specified quantity of asset on a Section 1
specified date at a specified price, which are traded over-the-counter rather than exchange-traded.
C Futures are agreements that give the buyer the right, but not the obligation, to buy or sell an asset at a QID 719
specified price(called strike price) on or before(depending on the type of options) a specified date(called
maturity date).
D Futures are agreements between two parties to exchange(or swap) the financial obligations - or income Ans A Hot
stream-C - they derive from a portfolio or assets or liabilities.
Exp A futures contract is an agreement to buy or sell an underlying asset at a specified price and date in the
future. Futures contracts are exchange-traded and therefore have standardized features.
35 Kaohsiung fund holds lots of Hong Kong stocks. Miss Chen, the fund manager, expects the interest rate Topic 1
to rise in the following months which would lead to the decline in stock price. So, Miss Chen sells Hang
Seng index futures contract for Kaohsiung fund. Kaohsiung fund is more likely to be a:
C hedger. QID 730
D trader. Ans C Hot
Exp The advantage of futures contract is that the price is set now for delivery of an asset in the future, and
they therefore hedge against unfavourable future price movements. Miss Chen sells Hang Seng index
futures contract for Kaohsiung fund because she wants to hedge the decline in stock price, so she is
more likely to be a hedger.
36 To hedge current market positions, one must take which of the following positions in the derivatives Topic 1
market?
A a position identical to the current market position Chapter 3
B a position of opposite direction to the current market position Section 1.1
C a position identical to the futures market position QID 3
D a position of opposite direction to the futures market position Ans B Hot
Exp To hedge current market positions, one must take an opposite position in the derivatives market.

37 Mr. Gao is a retired person who holds lots of high-dividend stocks. What should he do if he worries that Topic 1
the price of high-dividend stocks drops?
A Sell futures of high-dividend stocks in the futures market Chapter 3
B Buy futures of high-dividend stocks in the futures market Section 1.1
C Sell calls of high-dividend stocks in the options market QID 726
D Buy calls of high-dividend stocks in the options market Ans A Hot
Exp If Mr. Gao sell futures of high-dividend stocks in the futures market, he need to sell the high-dividend
stocks at the expiry date. The selling price is fixed when Mr. Gao sell the futures, so the price change of
the high-dividend stocks will not affect Mr. Gao anymore.
38 Miss Yu is a young doctor. She just sold a property and will have lots of cash in three months which she Topic 1
plans to use it to invest in stocks. If she worries that in the future the price of stocks rises sharply such
that the number of stocks she can buy decreases upon cash receipt, she should:
A sell futures of stocks in the futures market. Chapter 3
B buy futures of stocks in the futures market. Section 1.2
C sell calls of stocks in the options market. QID 727
D buy calls of stocks in the options market. Ans B Hot
Exp If Miss Yu buy futures of stocks in the futures market, she need to buy the stocks at the expiry date. The
purchasing price is fixed when Miss Yu buy the futures, so the price change of the stocks will not affect
the number of shares that Miss Yu will buy in future.
39 To hedge futures market positions, one must take which of the following positions in the derivatives Topic 1
market?
A a position identical to the current market position Chapter 3
B a position of opposite direction to the current market position Section 1.2
C a position identical to the futures market position QID 4
D a position of opposite direction to the futures market position Ans A Hot
Exp To hedge futures market positions, one must take an identical position to the current market position in
the derivatives market?
40 Which of the following is the difference between futures and forward contracts? Topic 1
I. Futures are standardized contracts.
II. Futures trade at the exchanges.
III. Forward contracts don't have counterparty risk.
IV. The clearing house/exchanges become the settlement counterparty of futures contracts.
D II, III, IV Ans B Hot
Exp A forward contract is not transferable and there is no margin or collateral requirement to assure
performance of the contract. Thus, there is counterparty risk.


English HKSI LE Paper 9 Pass Paper Question Bank (QB)

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

English HKSI LE Paper 9 Pass Paper Question Bank (QB)

Încărcat de

Drepturi de autor:

Formate disponibile

2CEXAM Mock Question

Licensing Examination Paper 9

B II, III, IV Section

C I, III, IV QID 723

D I, II, III, IV Ans D Hot

C II, III QID 1081

D II, IV Ans C Hot

C Bonds QID 857

D Swaps Ans C Hot

Website: www.2cexam.com Phone: 21109644 WhatsApp:93472064 WeChat:hk2cexam P.1

C I, III, IV QID 524

D II, III, IV Ans A Hot

A Increase flexibility Chapter 3

B Decrease the cost of borrowing Section

C Risk management QID 151

D Obtain constant return Ans D Hot

C II, III QID 2387

D II, IV Ans A Hot

C I, III, IV QID 587

D II, III, IV Ans A Hot

Website: www.2cexam.com Phone: 21109644 WhatsApp:93472064 WeChat:hk2cexam P.2

B II, III, IV Section

C I, III, IV QID 2362

D I, II, III, IV Ans D Hot

Exp The difference between forwards and futures include:

B Earning dividends Section

C Arbitrage QID 525

D Hedging Ans B Hot

Exp Derivatives will not distribute dividends.

D II, IV Ans B Hot

Exp “Swaptions” are effectively a mixture of swaps and options.

A free market. Chapter 1

B OTC market. Section 1

C outside-exchange-traded market. QID 62

D secondary market. Ans B Hot

Website: www.2cexam.com Phone: 21109644 WhatsApp:93472064 WeChat:hk2cexam P.3

C I, III, IV QID 534

D I, II, III ,IV Ans D Hot

D II, IV Ans B Hot

Exp Derivatives are classified as either exchange-traded or OTC.

B II, III, IV Section 1

C I, III, IV QID 164

D I, III, IV Ans A Hot

Exp Commercial papers are kind of short-term debt securities.

Website: www.2cexam.com Phone: 21109644 WhatsApp:93472064 WeChat:hk2cexam P.4

C Swaps QID 160

D Forward contracts Ans A Hot

C Stop loss QID 1108

D Arbitrage Ans B Hot

C stop loss. QID 1107

D arbitrage. Ans B Hot

C II, III, IV QID 153

D II, IV Ans D Hot

Website: www.2cexam.com Phone: 21109644 WhatsApp:93472064 WeChat:hk2cexam P.5

B profits of one side equal losses of another side. Section 1

D I, II, III, IV Ans C Hot

A A financial instrument with constant value Chapter 1

B A financial instrument that can be transferred into other assets Section 1

C A financial instrument that is transferred from other assets QID 523

C spread trading. QID 522

D principal-guaranteed trading. Ans B Hot

Website: www.2cexam.com Phone: 21109644 WhatsApp:93472064 WeChat:hk2cexam P.6

C II, III, IV QID 159

D I, II, III, IV Ans D Hot