Noesis
Level 2 — RecallCommodities, Forex & Crypto

Commodities, Forex & Crypto

⏱ 30 minutes40 marksprintable — key stays hidden on paper

Level: 2 (Recall — definitions, standard textbook problems, short derivations) Time Limit: 30 minutes Total Marks: 40

Instructions: Answer all questions. Show working for numerical questions. Use ...... for any calculations.

Q1. Define the following terms in one line each: (4 marks) (a) Spot price (b) Futures price (c) Base currency (d) Pip

Q2. Name the primary commodity exchange in India and list two categories of commodities traded on it with one example each. (4 marks)

Q3. The spot price of gold is \1{,}800perounce.Therisk−freeinterestrateisper ounce. The risk-free interest rate is5%perannumandstoragecostisper annum and storage cost is1%$ per annum. Using the cost-of-carry model, calculate the fair 1-year futures price (assume simple, non-continuous compounding). (4 marks)

Q4. Classify each of the following currency pairs as major, minor (cross), or exotic: (4 marks) (a) EUR/USD (b) EUR/GBP (c) USD/TRY (d) USD/JPY

Q5. In the quote USD/INR = 83.25, identify the base currency and the quote currency. If the rate moves to 83.29, how many pips has it moved? (Assume 1 pip = 0.01 for INR pairs.) (5 marks)

Q6. Define blockchain and state three key properties that make it secure/reliable. (4 marks)

Q7. Distinguish between Bitcoin and Ethereum on the basis of: (a) primary purpose, (b) native token. Also name one example of an altcoin other than these two. (4 marks)

Q8. (a) What is a stablecoin, and what is it typically pegged to? (b) What does DeFi stand for and give one example of a DeFi activity. (4 marks)

Q9. Explain the difference between a hot wallet and a cold wallet in cryptocurrency storage, and state which is safer for long-term holding. (4 marks)

Q10. State any three reasons why cryptocurrencies are considered highly volatile compared to traditional commodities. (3 marks)

End of Paper

Answer keyMark scheme & solutions

Q1. (4 marks — 1 each) (a) Spot price — the current market price at which a commodity/asset can be bought or sold for immediate delivery. (1) (b) Futures price — the agreed price today for delivery of an asset at a specified future date. (1) (c) Base currency — the first currency in a pair, whose value is quoted in terms of the second. (1) (d) Pip — the smallest standard price increment in a currency quote (0.0001 for most pairs, 0.01 for JPY/INR pairs). (1)

Q2. (4 marks)

  • Exchange: MCX (Multi Commodity Exchange of India) (1)
  • Two categories with examples (1.5 each = 3):
    • Bullion — Gold / Silver
    • Energy — Crude Oil / Natural Gas
    • (or Base metals — Copper/Zinc; Agri — Cotton/Cardamom) — any two valid categories accepted.

Q3. (4 marks) Cost-of-carry model: F=S(1+r+c)F = S(1 + r + c) for simple compounding.

  • Identify S=1800S = 1800, r=0.05r = 0.05, c=0.01c = 0.01. (1)
  • F=1800×(1+0.05+0.01)F = 1800 \times (1 + 0.05 + 0.01) (1)
  • F=1800×1.06F = 1800 \times 1.06 (1)
  • F = \1{,}908$ per ounce (1)

Why: futures fair value = spot plus the net cost of holding (financing + storage) until delivery.

Q4. (4 marks — 1 each) (a) EUR/USD — Major (1) (b) EUR/GBP — Minor / Cross (no USD) (1) (c) USD/TRY — Exotic (emerging-market currency) (1) (d) USD/JPY — Major (1)

Q5. (5 marks)

  • Base currency = USD (1)
  • Quote currency = INR (1)
  • Meaning: 1 USD = 83.25 INR (1)
  • Pip move = 83.29−83.25=0.0483.29 - 83.25 = 0.04 (1)
  • Number of pips =0.04/0.01=4= 0.04 / 0.01 = \mathbf{4} pips (1)

Q6. (4 marks)

  • Blockchain — a distributed, decentralized digital ledger that records transactions in linked, cryptographically-secured blocks across a network. (1)
  • Three properties (1 each): Decentralization (no single authority), Immutability (records cannot be altered), Transparency (public verifiable ledger). (Also acceptable: cryptographic hashing, consensus mechanism.)

Q7. (4 marks)

  • (a) Purpose: Bitcoin = digital currency / store of value ("digital gold"); Ethereum = programmable platform for smart contracts & dApps. (1.5)
  • (b) Native token: Bitcoin → BTC; Ethereum → ETH. (1.5)
  • Altcoin example: Litecoin / Cardano / Solana / Ripple (XRP) — any one. (1)

Q8. (4 marks)

  • (a) Stablecoin — a cryptocurrency designed to maintain a stable value, typically pegged to a fiat currency (e.g., USD) or a commodity. (2)
  • (b) DeFi = Decentralized Finance; example: lending/borrowing, staking, yield farming, or decentralized exchanges (DEX). (2)

Q9. (4 marks)

  • Hot wallet — connected to the internet; convenient for frequent trading but more exposed to hacks. (1.5)
  • Cold wallet — offline storage (hardware/paper); not connected to internet. (1.5)
  • Cold wallet is safer for long-term holding. (1)

Q10. (3 marks — 1 each, any three)

  • Relatively small / immature market size (thin liquidity).
  • Speculative demand and sentiment-driven trading.
  • Lack of / evolving regulation.
  • No intrinsic cash-flow or central-bank backing.
  • Sensitivity to news, hacks, and social media hype.
  • 24/7 trading with high leverage.
[
  {"claim":"Gold futures fair price = 1908", "code":"S=1800; r=Rational(5,100); c=Rational(1,100); F=S*(1+r+c); result = (F==1908)"},
  {"claim":"Pip move for USD/INR 83.25 to 83.29 equals 4 pips", "code":"move=Rational(8329,100)-Rational(8325,100); pips=move/Rational(1,100); result = (pips==4)"},
  {"claim":"Cost of carry factor 1+r+c = 1.06", "code":"factor=1+Rational(5,100)+Rational(1,100); result = (factor==Rational(106,100))"}
]