NISM Series XV Chapter 11: Fundamental Analysis of Commodities Practice Questions

Question 1

Which of the following is NOT listed as a key driver of supply in commodity markets?

Accepted Answer

Consumer Preferences & Lifestyle. Consumer Preferences & Lifestyle is identified as a demand-side factor, not a supply-side factor

Question 2

The fundamental analysis of commodities is largely dependent on which of the following?

Accepted Answer

Supply and demand dynamics of the commodity.. The text states, 'The fundamental analysis of commodities is largely dependent on the supply and demand dynamics of a particular commodity whereas in equity market, it is largely the study of balance sheet, profit and loss account as well as cash flow statement and performance of the company, industry and economy.'

Question 3

High inventory levels of a commodity typically signal what market condition and price pressure?

Accepted Answer

Oversupply and downward pressure on prices.. The text explains, 'High inventory levels often signal oversupply, leading to downward pressure on prices'

Question 4

The U.S. Dollar Index measures the strength of the U.S. Dollar against a basket of how many major currencies?

Accepted Answer

Six. The dollar index is a measure of strength of U.S. Dollar against six major currencies

Question 5

When the U.S. dollar strengthens against other currencies, what is the typical impact on commodity prices for buyers using non-dollar currencies?

Accepted Answer

Commodities become more expensive, reducing global demand and putting downward pressure on prices.. When the dollar strengthens against other currencies, commodities typically become more expensive for buyers using non-dollar currencies, which often reduces global demand and puts downward pressure on commodity prices

Question 6

A global economic recession would most likely have what effect on the demand for energy, metals, and food commodities?

Accepted Answer

Reduce demand for energy, metals, and food.. The text states that 'recessions reduce the demand' for energy, metals, and food

Question 7

A recession typically has what effect on the demand for commodities like energy, metals, and food?

Accepted Answer

Reduces demand. The text states that 'recessions reduce the demand' for energy, metals, and food

Question 8

As a convention, which currency has established itself as the most preferred internationally convertible currency for quoting and trading commodities?

Accepted Answer

US Dollar. The text states, 'US Dollar, right from the post world war period, has established itself as the most preferred internationally convertible currency... Therefore, commodities’ trade across the world, uses US Dollar, then followed by Euro, as the two most preferred currencies to quote and trade in the commodities.'

Question 9

According to the text, which commodity exchange is the benchmark for trading of agricultural commodities?

Accepted Answer

Chicago Board of Trade (CBOT). The text states, 'Chicago Board of Trade (CBOT) is the benchmark for trading of agricultural commodities.'

Question 10

According to the text, which macroeconomic indicator typically pushes investors toward commodities, especially precious metals like gold, as a hedge?

Accepted Answer

Rising inflation. Rising inflation typically pushes investors toward commodities, especially precious metals like gold, which act as a hedge

Question 11

How does strong economic growth (GDP growth) generally affect the demand for commodities according to the text?

Accepted Answer

It boosts industrial production and consumer spending, increasing demand.. The text states: 'Strong economic growth boosts industrial production and consumer spending, thereby increasing demand for commodities like energy, metals, and agricultural products.'

Question 12

Which of the following is NOT listed as a key driver of supply in commodity markets?

Accepted Answer

Global economic growth.. Global economic growth is listed under Demand Side Factors, while the others are listed under Supply Side Factors

Question 13

Which global exchange is identified as the benchmark for trading agricultural commodities?

Accepted Answer

Chicago Board of Trade (CBOT). The text explicitly states: 'Chicago Board of Trade (CBOT) is the benchmark for trading of agricultural commodities'

Question 14

When the U.S. dollar strengthens against other currencies, what is the typical impact on commodity prices in global markets?

Accepted Answer

It often reduces global demand, putting downward pressure on prices.. The text states, 'When the dollar strengthens against other currencies, commodities typically become more expensive for buyers using non-dollar currencies. This often reduces global demand and puts downward pressure on commodity prices.'

Question 15

According to the text, what is the primary reason the US Dollar has assumed importance as an international reserve currency for commodity trade?

Accepted Answer

Its preference by central banks of many countries.. The text states that the US Dollar 'has assumed the importance as international reserve currency due to the preference by central banks of many countries.'

Question 16

What type of information do crop reports provide that is critical for agricultural commodity fundamental analysis?

Accepted Answer

Acreage, planting progress, yield estimates, and inventory status.. Crop reports provide detailed insights into acreage, planting progress, yield estimates, production levels, and inventory status of key crops

Question 17

The dollar index measures the strength of the U.S. Dollar against six major currencies. Which of the following is NOT one of these six currencies, according to the text?

Accepted Answer

Chinese Yuan. The text lists the six major currencies as 'Euro, Japanese Yen, Pound Sterling, Canadian Dollar, Swedish Krona and Swiss Franc.' Chinese Yuan is not included in this list

Question 18

While international commodity benchmarks like NYMEX for crude oil heavily influence domestic prices in importing countries, which of the following factors could cause domestic prices to diverge from these international benchmarks?

Accepted Answer

Strong local demand, government interventions, or seasonal supply variations.. The text states that 'strong local demand, government interventions, and seasonal supply variations can sometimes cause domestic prices to diverge from international benchmarks.'

Question 19

The fundamental analysis of commodities is largely dependent on which of the following?

Accepted Answer

Supply and demand dynamics of a particular commodity.. The text explicitly states: 'The fundamental analysis of commodities is largely dependent on the supply and demand dynamics of a particular commodity'

Question 20

According to the text, how does rising inflation typically influence investors' behavior regarding commodities, particularly precious metals?

Accepted Answer

It pushes investors toward commodities, especially precious metals, which act as a hedge.. The text states: 'rising inflation typically pushes investors toward commodities, especially precious metals like gold, which act as a hedge.'

Question 21

What is the primary focus of fundamental analysis in commodity markets, as stated in the text?

Accepted Answer

Supply and demand dynamics of a particular commodity.. The fundamental analysis of commodities is largely dependent on the supply and demand dynamics of a particular commodity

Question 22

When the U.S. dollar strengthens against other currencies, what is the typical impact on dollar-denominated commodity prices and global demand?

Accepted Answer

Commodities become more expensive for non-dollar buyers, reducing global demand and putting downward pressure on prices.. The text states: 'When the dollar strengthens against other currencies, commodities typically become more expensive for buyers using non-dollar currencies. This often reduces global demand and puts downward pressure on commodity prices.'

Question 23

A country that is a major exporter of a dollar-denominated commodity would likely benefit from which of the following scenarios when converting revenues back to its home currency?

Accepted Answer

A weakening domestic currency against the U.S. dollar.. Exporters of commodities may benefit when their local currency weakens, as dollar revenues lead to more home currency revenues, when converted back

Question 24

A global shift towards renewable energy, as mentioned in the text, would primarily influence commodity demand through which of the following factors?

Accepted Answer

Consumer Preferences & Lifestyle. The text states, 'Consumer Preferences & Lifestyle – Shift toward renewable energy increases demand for lithium and silver.'

Question 25

The text highlights country-specific factors influencing commodity supply. Which of the following is explicitly mentioned as affecting the supply of copper from Chile?

Accepted Answer

Weather aberrations and labour strikes.. The text states, 'For ex., Copper is largely produced in Chile, a South American Country, which is largely affected by weather aberrations, labour strike and many more, that affects supply of copper to the world market.'

Question 26

Which of the following is mentioned as a global benchmark setting organization for trading in base metals?

Accepted Answer

London Metal Exchange (LME). The London Metal Exchange (LME) is listed as a global benchmark setting organization for base metals

Question 27

According to the text, how does a higher-than-expected production report for an agricultural commodity typically affect its prices?

Accepted Answer

It generally leads to price declines.. The text states, 'A higher-than-expected production report generally leads to price declines, while lower output projections can drive prices upward.'

Question 28

While domestic commodity markets generally correlate with international benchmarks, which of the following factors can cause domestic prices to diverge from international trends?

Accepted Answer

Strong local demand, government interventions, and seasonal supply variations.. The text notes: 'On the other hand, strong local demand, government interventions, and seasonal supply variations can sometimes cause domestic prices to diverge from international benchmarks.'

Question 29

An increase in oil output by OPEC members, as described in the text, typically has what effect on global crude prices?

Accepted Answer

It exerts downward pressure on prices.. The text states, 'For instance, an increase in oil output by OPEC members typically exerts downward pressure on global crude prices.'

Question 30

Which of the following is considered a key driver of supply in commodity markets?

Accepted Answer

Geopolitical Events. Geopolitical Events, such as wars, sanctions, trade restrictions, and OPEC decisions, are listed as key drivers of supply in commodity markets

Ch.11: Fundamental Analysis of Commodities

What You Will Learn in This Chapter

Multiple Choice Questions (30)

Case-Based Questions (1 sets)

Most candidates guess their way through XV.
BullWiser makes you prove it.

Ch.11: Fundamental Analysis of Commodities

What You Will Learn in This Chapter

Multiple Choice Questions (30)

Case-Based Questions (1 sets)

Most candidates guess their way through XV.BullWiser makes you prove it.

Most candidates guess their way through XV.
BullWiser makes you prove it.