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Series 3 GL Exam 1 questions and answers already passed 2024
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Series 3 GL Exam 1 questions and answers already passed 2024
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Series 3 GL Exam 1Original margin is all of the following, EXCEPT:
AThe amount of funds required by the broker when the futures contract is
initiated
BEstablished by the commodity exchange on which the commodity is traded
CTo insure performance under the terms of a futures contract
DEstablished by the federal government - correct answer ✔D
Original or initial margin is the amount of money prescribed by the exchange
on which the commodity is traded. It is the amount that a customer is required
to deposit when he takes a position in futures. The purpose of the margin
deposit is to insure that the customer will perform under the terms of the
contract, and to protect the broker against loss due to adverse price
movements. There is no federal regulation of margin deposits in commodity
futures, and the CFTC is not involved in establishing margin requirements.
A pool that invests only in foreign futures and options is exempt from
registration.
ATrue
BFalse - correct answer ✔B
Commodity pools sold within the United States must be registered irrespective
of the domestic or international character of the futures or commodities
contained therein.
An AP has opened a discretionary account with a client. Which of the
following is NOT a requirement?
AThe account must be under the supervision of a partner or officer of the
member firm.
BThe customer must receive a confirmation after any purchase or sale.
,CThe customer must be notified each time the account executive plans to
take a new position.
DThe customer must give the account executive written authority to exercise
discretion in the account. - correct answer ✔C
If an AP has received the necessary papers to open a discretionary account,
he need not notify the customer each time he takes a new position.
The Board of Directors of an industrial corporation decides at their board
meeting in October to sell $25 million in commercial paper in May. The
commercial paper prime rate is 7%. The 90-day Treasury Bill rate is 6% and
the Treasury Bill June futures rate is 8%. The board decides to hedge and will:
ABuy June T-bill futures
BSell June T-bill futures
CBuy six-month T-bills
DSell six-month T-bills - correct answer ✔B
The corporation is concerned that interest rates will rise. If interest rates rise,
the price of outstanding fixed-income securities will fall. The corporation will
therefore sell futures. If interest rates do rise, they will be able to buy the
futures at a lower price. The profit on futures will substantially offset the
increase in interest rates.
If the market touches the price of a limit order after that order is entered, the
customer is entitled to a fill and can hold the broker responsible if the order is
not filled.
ATrue
BFalse - correct answer ✔B
Limit orders can only be filled at the specified limit price, or better. If the
market moves away from the specified limit price, the customer order will not
be executed. If the customer wished to obtain an execution once a specific
market point is reached, they may place a "market if touched order." They
would not be guaranteed to receive a specific price for execution.
,A customer buys a T-bond contract at 88-16. He liquidates the contract at 90-
10. Round-turn commissions are $30. His net profit is:
A$1,376.25
B$1,406.25
C$1,782.50
D$1,812.50 - correct answer ✔C
T-bond futures are quoted in 1/32nds of a point. The investor buys the
contract at 88-16 or 88 16/32 and sells at 90-10 or 90 10/32, for a gain of 1
26/32. (90 10/32 - 88 16/32), or $1,812.50. After commissions of $30, his net
profit is $1,782.50.
A customer purchases 4 silver futures contracts at 16.65. The contract size is
5,000 troy oz. and the initial margin requirement is $5,000 per contract. If the
contract closes at 16.70, what is the customer's total equity?
A$250
B$1,000
C$5,250
D$21,000 - correct answer ✔D
The client deposited $20,000 ($5,000 x 4 contracts) in initial margin. Since the
customer bought the futures contracts and the contracts increased, the equity
in the account will increase.
The total equity is $21,000 ($20,000 + $1,000).
Inflation rates are as follows: Germany 10%, Switzerland 4%, and United
States 5%. Which of the following is an appropriate trading strategy if this
trend is expected to continue?
ASell Swiss franc calls
BSell Swiss franc futures
, CBuy Euro calls
DSell Euro futures - correct answer ✔D
If a country has persistently high inflation, its currency will probably decline in
value. Since the rate of inflation in Germany is higher than in the U.S. or
Switzerland, the Euro is likely to fall in value. Selling Euro futures will be the
most profitable position.
The NFA designates exchanges as contract markets.
ATrue
BFalse - correct answer ✔B
This is false. The CFTC designates exchanges as contract markets.
An individual who buys a futures contract against a cash forward sale is a:
ASpreader
BScalper
CHedger
DSpeculator - correct answer ✔C
An individual who buys a futures contract against a cash forward sale is
known as a hedger. The term "cash forward" sale refers to a cash market
transaction in which the buyer and the seller negotiate for the sale of a
specified amount of a commodity to be delivered on a specified date in the
future. The price might be agreed upon at the time of the sale, or the buyer
and seller might agree that the price is to be determined at the time of
delivery. If the seller of the commodity does not own it at the time of the sale,
and the price is determined as of the time the transaction is negotiated, he will
be concerned about a price rise. He would therefore hedge by buying futures.
Which of the following is an advantage of futures trading?
AIt's the only market for the cash commodity.
BBuyers and sellers are able to deal with one another directly.
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