Series 34 Exam Questions and
Answers
1. Assets Correct Answer: Property owned by or owed to an individual or business. On a balance sheet,
this includes Correct Answer: cash, accounts receivable, inventory, plant and equipment, loans receivable,
deposits, pre-paid expenses, investments, and goodwill, to name a few. Some people think of an asset as
anything that puts money into one's pocket.
2. Associated Person (AP) Correct Answer: An individual who finds customers, solicits and
submits orders for fulfillment while in the employ of a FCM, IB, CTA, or CPO. APs are required to
register with both the CFTC and the NFA.
3. Barrier Option Correct Answer: An exotic option which comes in two types Correct Answer:
knock-in and knock-out. A knock-in option is activated when the price of the underlying asset hits a
predetermined level known as the "barrier level." A knock-out option becomes null and void when the
price of the underlying asset hits a predetermined level known as the "barrier level." See also Knock-In
Option and Knock-Out Option.
4. Base Currency Correct Answer: In a currency pair, the first currency mentioned. The quote
states how much of the quote currency is required to purchase one unit of the base currency; for example,
if the Australian dollar is quoted as AUD/USD
.8077/80, the bid price is USD .8077 per Australian dollar and the ottered price is USD .8080 per Australian
dollar.
5. Basis Points Correct Answer: one one-hundredth of one percent (0.01%); i.e., the smallest
increment for quoting yields on fixed-income instruments.
6. Bid/Ask Spread Correct Answer: The ditterence between the price at which a forex dealer sells
(ask price) a currency and the price he is willing to pay to buy (bid price) the same currency.
7. Bid Forward Rate Correct Answer: The price the buyer is willing to pay for a forward
contract.
8. Collateral Correct Answer: Assets that can be sold by a lender in the event of a loan default. Also
called security.
9. Commodity Pool Operator (CPO) Correct Answer: An individual or firm that manages
and/or finds customers to contribute to a commodity pool that is invested in futures and/or futures
options. CPOs are usually required to register with the CFTC and NFA.
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,Series 34 Exam Questions and
Answers
10. Commodity Trading Advisor (CTA) Correct Answer: An individual or firm that,
for remuneration or a percent of profits, recommends futures or futures options trades. This may
involve trading a customer's discretionary account. CTAs are usually required to register with the CFTC
and NFA.
11. Compound Option Correct Answer: An option with another option as the
underlying asset.
12. Counterparty Correct Answer: the individual or entity that holds the opposite position in
a bilateral agreement or contract. For purposes of the forex markets, Section 2(c) (2)(B)(ii)(I)-(VI) of the
Commodity Exchange Act defines a counterparty as a financial institution, a broker-dealer, a broker-
dealer's associated person, an FCM, an insurance company, a financial holding company, and/or an
investment bank holding company who enters into an agreement, contract, or transaction in foreign
currency that isn't traded on an exchange or otherwise regulated by the Securities Exchange
Commission (SEC).
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Answers
1. Assets Correct Answer: Property owned by or owed to an individual or business. On a balance sheet,
this includes Correct Answer: cash, accounts receivable, inventory, plant and equipment, loans receivable,
deposits, pre-paid expenses, investments, and goodwill, to name a few. Some people think of an asset as
anything that puts money into one's pocket.
2. Associated Person (AP) Correct Answer: An individual who finds customers, solicits and
submits orders for fulfillment while in the employ of a FCM, IB, CTA, or CPO. APs are required to
register with both the CFTC and the NFA.
3. Barrier Option Correct Answer: An exotic option which comes in two types Correct Answer:
knock-in and knock-out. A knock-in option is activated when the price of the underlying asset hits a
predetermined level known as the "barrier level." A knock-out option becomes null and void when the
price of the underlying asset hits a predetermined level known as the "barrier level." See also Knock-In
Option and Knock-Out Option.
4. Base Currency Correct Answer: In a currency pair, the first currency mentioned. The quote
states how much of the quote currency is required to purchase one unit of the base currency; for example,
if the Australian dollar is quoted as AUD/USD
.8077/80, the bid price is USD .8077 per Australian dollar and the ottered price is USD .8080 per Australian
dollar.
5. Basis Points Correct Answer: one one-hundredth of one percent (0.01%); i.e., the smallest
increment for quoting yields on fixed-income instruments.
6. Bid/Ask Spread Correct Answer: The ditterence between the price at which a forex dealer sells
(ask price) a currency and the price he is willing to pay to buy (bid price) the same currency.
7. Bid Forward Rate Correct Answer: The price the buyer is willing to pay for a forward
contract.
8. Collateral Correct Answer: Assets that can be sold by a lender in the event of a loan default. Also
called security.
9. Commodity Pool Operator (CPO) Correct Answer: An individual or firm that manages
and/or finds customers to contribute to a commodity pool that is invested in futures and/or futures
options. CPOs are usually required to register with the CFTC and NFA.
1/
11
,Series 34 Exam Questions and
Answers
10. Commodity Trading Advisor (CTA) Correct Answer: An individual or firm that,
for remuneration or a percent of profits, recommends futures or futures options trades. This may
involve trading a customer's discretionary account. CTAs are usually required to register with the CFTC
and NFA.
11. Compound Option Correct Answer: An option with another option as the
underlying asset.
12. Counterparty Correct Answer: the individual or entity that holds the opposite position in
a bilateral agreement or contract. For purposes of the forex markets, Section 2(c) (2)(B)(ii)(I)-(VI) of the
Commodity Exchange Act defines a counterparty as a financial institution, a broker-dealer, a broker-
dealer's associated person, an FCM, an insurance company, a financial holding company, and/or an
investment bank holding company who enters into an agreement, contract, or transaction in foreign
currency that isn't traded on an exchange or otherwise regulated by the Securities Exchange
Commission (SEC).
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