Free Financial Markets Foundation Qualification Exam FMFQ Exam Practice Test

You hold a call option on a stock with a strike of EUR 35. The current premium for this option is EUR 3.80 and the underlying stock is trading at EUR 32. How much of this option price represents time value?

• None as the option is in-the-money
• EUR 3.80
• EUR 3.00
• EUR 0.80

A company issues a share that has a par value of 100.00 and pays a fixed dividend of 2.0% annually? What type of share is this?

• Ordinary share
• Cumulative share
• Deferred share
• Preference share

Which of the following statements is true of dividend payments in the equity market?

• All equities pay dividends
• Dividend rates are pre-determined at the launch of the equity
• Management determines the level of dividend payment in each period
• If a company does not pay a dividend one year then this skipped dividend becomes a liability on the company's balance sheet

One of the most contentious parts of the US Dodd-Franks Act is the restrictions placed on banks carrying trading positions. What is the name of the rule that deals with this?

• Bernanke Rule
• Greenspan Rule
• Yellan Rule
• VolckerRule

What is the credit spread on a corporate bond?

• The increased size of the bid/ask spread in a trade price
• The difference in price between a corporate bond and a benchmark treasury
• The additional yield required by investors to offset the credit risk of the security
• The difference between the coupon rate of a corporate bond and the dividend of the issuing company

Which of the following factors in option pricing is the most subjective?

• Intrinsic value
• Interest rates
• Time to maturity
• Volatility

Which of the following would be considered a consumption asset?

• Land
• Buildings
• Heavy equipment
• Food and drink

You purchase a USD Treasury Bill. Which of the following sentences best describes the trade you have done?

• You have purchased a credit risk free security for which you have paid face value and will receive at maturity face value plus accrued interest
• You have purchased a credit risk free security for which you have paid less than face value and will receive at maturity face value
• You have purchased an interest rate risk free security for which you have paid face value and will receive at maturity face value plus accrued interest
• You have purchased an interest rate risk free security for which you have paid less than face value and will receive at maturity face value

Which of the following is NOT a vlue-weighted index?

• S&P 500
• FTSE10C0
• CAC40
• DJIA

The dirty price of a bond is which of the following:

• The same as the clean price
• Clean price + interest of the period from the last coupon payment date
• Clean price + interest of the period from settlement until the next coupon payment date
• Clean price + trading commissions