USA · National Futures Association (administered by FINRA) · licensing
Two parts, 120 scored MCQs, 2 h 30 min, USD 140; 70% needed on each part.
Remote testing is allowed in some cases. The split of questions between the two parts is not verified.
Official source: https://www.finra.org/registration-exams-ce/qualification-exams/series3
Original questions written to this exam's published syllabus and pattern. Not past papers.
1. The local cash price of soybean is 2150 currency units per 100 kg and the nearby futures price is 2300 currency units per 100 kg. What is the basis?
D. -150 currency units per 100 kg
Basis = cash - futures = 2150-2300 = -150 currency units. Reporting futures minus cash (+150) reverses the convention and the sign; a negative basis means cash is 'under' futures. -6.5 expresses the basis as a percentage of the futures price; 4,450 currency units adds the two prices.
Agricultural Marketing & Price Analysis · Buffer stocks and price stabilisation
2. A grain futures contract covers 5,000 bushels and is quoted in cents per bushel with a minimum tick of 1/4 cent. What is the value of one tick per contract?
A. US$ 12.50
Tick value = tick size × lot size = 0.0025 dollars × 5,000 bushels = US$ 12.50. The common slip is to treat 1/4 cent as 0.25 dollars, giving US$ 1,250, or to misplace the decimal once, giving US$ 125 or US$ 1.25.
Commodity Markets, Futures & Options · Contract specifications
3. At sowing, a farmer sells wheat futures at Rs 5000 per quintal. At harvest the futures price is Rs 4500 and the local cash price is Rs 4250. He sells the crop locally and buys back the futures. His net price per quintal is:
D. Rs 4750
Futures gain = 5000 - 4500 = 500. Net price = cash 4250 + 500 = Rs 4750. Equivalently, futures price at placement + basis at lifting = 5000 + (-250) = 4750. Subtracting the futures gain (Rs 3750) is the sign error.
Agri Risk Management & Insurance · Hedging with futures and options
4. Using the same contract (5,000 bushels, bought at $4.50, initial margin $2,000, maintenance $1,500), below what price will the trader first receive a margin call?
D. $4.40
A call comes when losses exceed initial − maintenance = $500. Price fall = 500/5,000 = $0.10, so the trigger price is 4.50 − 0.10 = $4.40. $4.10 uses the full $2,000 margin, i.e. 2,000/5,000 = 0.40; $4.20 uses 1,500/5,000 = 0.30. $4.60 adds the $0.10 move instead of subtracting it, which would be the trigger for a short position.
Commodity Markets, Futures & Options · Clearing house, margins and mark-to-market
5. Compared with a forward contract, an exchange-traded futures contract:
B. Is standardised and cleared through a clearing house with daily margining, limiting counterparty risk
Futures are standardised in quantity, quality and delivery, with the clearing house as counterparty and daily mark-to-market. Most futures positions are closed out before delivery. Forwards are private and customised.
Agri Risk Management & Insurance · Hedging with futures and options
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