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Series 3 Test Questions andanswers already solved 2024
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Series 3 Test Questions andanswers already solved 2024
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Series 3 Test QuestionsAccording to NFA Rule 2-30 (know your customer), what information do you
need to know about them? - correct answer ✔According to Rule 2-30, the
representative should know at least the customer's name, address,
occupation, annual income, net worth, approximate age, and previous
investment/futures trading experience. Educational background is not required
Offset of a short futures position occurs with - correct answer ✔Buying the
futures intramarket
Stop orders can be used to initiate/close positions - correct answer ✔True. A
sell stop order (placed below the current market) can be used to limit losses,
protect profits on long positions, or establish a short position. A buy stop order
(placed above the current market) can be used to limit losses, protect profits
on a short position, or establish a long position
When yields on short-term maturities are lower than yields on long-term
maturities, the yield curve is said to be inverted - correct answer ✔False. that
is a normal yield curve
A trader anticipates a sharp rise in interest rates. Which of the following trades
in T-bond futures options would likely produce the greatest gain? - correct
answer ✔Long Put. The trader anticipates a rise in rates, which means a
decrease in prices. The best downside play in options is to buy a put. Writing
a call will be profitable, but gain is limited to the premium received.
A savings and loan intends to issue $4 million in CDs in 3 months. The issue
is based on the purchase of an equivalent amount of mortgages from its
customers. To hedge the purchase of the mortgages, the savings and loan
could - correct answer ✔The savings and loan is going to buy mortgages, so
,it should buy futures today. The S&L's risk is that mortgage rates will go down
(price up). In this case, buy 4 $1 million T-bill futures.
Delta is defined as the change in the premium of an option - correct answer
✔Delta measures the responsiveness of a change in an option premium with
a given change in the price of the underlying futures contract.
Copies of written customer complaints must be forwarded to the CFTC before
their final disposition. - correct answer ✔Copies must be forwarded to the
NFA, not the CFTC.
A T-bond Jul 96 call for 1.8 has how much time value when the underlying
futures contract is quoted at 96.8? - correct answer ✔96.8-96 = .8, .8/32
= .250, .250 * $1,000 = $250 = Intrinsic value
Premium = 1.8 -> 8/64 = .125 + 1 = 1.125 * 1,000 = $1,125 (Cost of Premium)
$1,125 - $250 = $875
Under what circumstances can a registered commodities representative
handle a discretionary account? - correct answer ✔The requirements for a
discretionary account are 2 years of continuous registration as an RCR, a
written agreement from the customer on file, and a record system identifying
each trade as discretionary. This does not apply to accounts for family
members of the RCR
If a CTA discovers that there are errors in its disclosure document, the errors
must be corrected within 21 calendar days of discovery. - correct answer
✔True. Normally, once an error is discovered, the document cannot be used
until corrected
A conservative growth fund manager has a common stock portfolio worth $2.4
million with a beta coefficient of 1.25. The S&P 500 (1 pt = $500) Mar 300
, futures option is available for a hedge. Which do you, as an RCR,
recommend? - correct answer ✔Market value to hedge = portfolio value $2.4
million beta coefficient 1.25 = $3 million
S: $500 300 strike = $150,000. $3 million/ $150,000 = 20 puts.
Thus, 20 contracts will be necessary. To hedge against a declining market, it
is better to pay premium as insurance; thus, buy 20 S&P 500 puts.
Which statement regarding branch offices of FCMs is CORRECT? - correct
answer ✔NFA members must supervise their branches continuously. The
NFA must be made aware of the exact location of each member branch office.
Branch managers must demonstrate competency either by successful
completion of the futures branch manager exam (Series 30) or by being
sponsored by an NASD-registered broker/dealer and meeting securities
industry requirements as a branch manager or registered principal. The NFA
frequently audits branch offices of member FCMs.
Your customer is considering the purchase of the Apr crude oil 19 put, which
has a premium of
.97 cents. The Apr futures contract is trading at $18.19. The time value of the
option is - correct answer ✔Puts are in the money (have intrinsic value)
when the market price of the underlying future contract is below the strike
price. In this case, the intrinsic value is .81 cents. Therefore, the time value of
the option premium is .16 cents.
An intermaturity spread in which the spreader expects long-term interest rates
to fall relative to short-term rates would consist of - correct answer ✔If the
investor expects long-term rates to fall, he expects long-term prices to rise
and would be long T-bond futures and short T-bills.
Soybean futures are trading as follows:
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