# Westpac CFD quiz



## noident (13 April 2008)

Hi,
Westpac resells MF Global's CFD. I would like an account but to open one you have to complete a quiz. No matter how hard I tried I couldn't do it.
I am fairly confident that I'm getting almost everything right but still can't quite get it.
Has anyone gotten through that quiz? Can anyone think of which of my answers are wrong?

Question 1

A CFD is?
 a. A type of exchange traded option that Covers For Decline.
 b. A futures swap that Commutes Future Deliverables
 c. A financial product called Contract For Difference
 d. An FX transaction Conducted in Foreign Denominations
My Answer - C

Question 2

Short selling CFDs is a strategy that involves selling first and buying back later to profit from rising prices?
 a. True
 b. False
My Answer - B

Question 3

Additional margin is required:
 a. If you hold a short position and the underlying instrument or security price rises
 b. If your initial margin is eroded due to market volatility
 c. If the free equity in your CFD account drops below $1000
 d. All of the above
My Answer - D

Question 4

If you receive a margin call (either by phone, SMS or email) you must:
 a. BPay the additional margin within 72 hours
 b. BPay the additional margin on the same day you receive the call
 c. Clear the margin call by selling some of your equity holdings
 d. Open another position requiring less margin
My Answer - not sure here, tried A,B and C

Question 5

If you fail to pay your additional margin when required, can your position be compulsorily closed out without your consent?
 a. Yes
 b. No
My Answer - A

Question 6

An open CFD position is a risk until:
 a. Expiry
 b. The price of the underlying security rises
 c. It is closed
 d. All of the above
My Answer - C

Question 7

Using a Stop Loss order when trading CFDs guarantees your order will be closed out at the price you specified?
 a. True
 b. False
My Answer - I'd say B (because as far as I understand the price can gap without triggering the stop loss) but I tried both here.

Question 8

You hold an open short CFD position on 15,000 XYZ, at the time of the ex-dividend date, generally you will:
 a. Receive the value of the dividend
 b. Do nothing, when holding CFDs, dividends are ignored
 c. Be required to pay the value of the dividend
 d. Be required to pay the value of the dividend plus the value of imputation (franking) credits
My Answer - D

Question 9

In the event of a corporate action your position may be adjusted or closed out by MFGA without reference to you?
 a. True
 b. False
My Answer - A

Question 10

Which of the following statements is true?
 a. CFDs can be highly leveraged and carry a high level of risk
 b. CFDs are a low risk investment products, and do not involve any leverage
 c. The use of leverage can minimise losses
 d. You can limit your risk on CFDs by placing the order over the phone
My Answer - A

Question 11

Which of the following is a potential benefit of CFD Trading:
 a. Liquidity in the CFD market is guaranteed
 b. You do not need to sell or purchase the underlying shares
 c. You are entitled to imputation (franking) credits attached to dividends
 d. All of the above
My Answer - B (although I should say non of the above I such an option existed).

I still can't get the quiz right no matter how much I tried.


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## Timmy (14 April 2008)

1. c
2. b
3. Must be c (Not a or b because you may already have enough margin in your account to cover the rise in price/volatility)
4. b  
5. a
6. c
7. b
8. d
9. a
10. a
11. b

Surprised you have had no responses.

Can I ask, just out of curiosity, why are you going through Westpac, why not MF direct?

I hope others read this and correct me if I am wrong on any of the above.

Good luck.


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## noident (14 April 2008)

Thanks for your answers Timmy.
Still no luck with the quiz, I suspect something is wrong with it.

I want to go through Westpac rather than direct through MF Global for the following reasons:
1. I have a broking account with Westpac and would like to use the same cash account to pay for my shares and CFD. Otherwise I'd have to have some of my money with Westpac and some with MF Global and transfer it around depending on whether I want to buy shares or CFDs.
2. Taking money out of the MF account would not be easy - there is no set mechanism, they say that if you want to withdraw some money - send us an email. I suspect it could prove to be a pain.
3. If I hold some cash for possible margin calls I'd rather hold it in a Westpac account than in a MF Global account - the recent broker collapses got me worried a bit.

Having said all that - if I don't get through this stupid quiz I won't be able to open a Westpac CFD account


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## ice (14 April 2008)

With all due respect if you can't answer the quiz correctly, should you be trading cfd's? 


ice


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## Uncle Festivus (14 April 2008)

noident said:


> Question 2
> 
> Short selling CFDs is a strategy that involves selling first and buying back later to profit from rising prices?
> a. True
> ...




Just out of curiosity, what happens if you answer A? the question seems odd???


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## noident (14 April 2008)

ice:
I believe I've done my homework and read up and understood all the relevant docs such as PDS and client agreement, etc.
I do believe that I am answering the quiz correctly and that's why I asked for help.
It's not like I am a lazy student asking you to do my homework for me - can't you see the difference? I have provided the answers I think are correct. I believe that that is sufficient to show that I have made a reasonable effort to solve the problem on my own and just got stuck and need a little bit of help.
The short answer to you question is: yes, I do.


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## noident (14 April 2008)

Uncle Festivus said:


> Just out of curiosity, what happens if you answer A? the question seems odd???




I have noticed that too, thought maybe they got confused there and tried the other answer. That didn't work either.


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## Uncle Festivus (14 April 2008)

8 = C, no imp credits


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## noident (14 April 2008)

Uncle Festivus said:


> 8 = C, no imp credits




Tried that too, although their PDS states the following, that's why I chose D over C:

If a dividend or distribution is paid in respect of an
underlying instrument or security while you hold a short
position in a CFD in respect of the underlying instrument
or security you must pay cash equal to the value of the
dividend or distribution paid on such underlying instrument
or security (if any) *(plus, in some circumstances, the value
of any franking credits applicable to that dividend or
distribution)* to MFGA based on the number of instruments
or securities to which the CFD relates on the Business Day
immediately preceding the ex-dividend or distribution date,
as applicable.


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## ice (14 April 2008)

Noident,

My apologies. 
I'm starting to see your dilemma.
Best to ring them and ask them what they're playing at.

ice


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## noident (14 April 2008)

ice said:


> Noident,
> 
> My apologies.
> I'm starting to see your dilemma.
> ...




It's cool 
I don't think ringing them is going to solve anything - they will most certainly say that no matter who thinks what that's their policy and no correct quiz answers = no account.
At this stage thinking of writing a script to iterate over all possible answers and submit them all automatically (approx 128,000 altogether). If it submits one form in 5 seconds all iterations can be completed in just over 1 week.
This is beginning to look stupid


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## noident (14 April 2008)

Solved!
Correct answers:
1.C 2.B 3.D 4.B 5.A 6.C 7.B 8.C 9.A 10.A 11.B

The problem was question 8 - Westpac's answer is C (no franking credits paid on a short position).
MF Global's PDS says that franking credits may need to be paid.
My problem was that I actually did read the documents and Westpac didn't.
Anyway, I'm on my way to opening the account - thank you everyone who replied and Uncle Festivus for providing the right answer.


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## Timmy (14 April 2008)

Congrats noident !!!  Now go nail that market!


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## CFD (14 April 2008)

Are their fees/costs and platform the same as MF Global's?


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## noident (14 April 2008)

CFD said:


> Are their fees/costs and platform the same as MF Global's?




The brokerage fees are the same.
The interests are also the same - Official Cash Rate +- 3%
The trading platform would be different. MF Global uses eMPower (webiress based) and Westpac uses Trader Pro (haven't had a look at it yet as they don't provide evaluation versions, so don't know what it looks like).


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