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2026 Statistics
Key Facts: IFoA SP6 Exam
3h15m
Exam Duration
IFoA SP6 syllabus
50%
Pricing and Valuation Weight
IFoA SP6 syllabus
4
Syllabus Groups
IFoA SP6 syllabus
~200 hrs
Indicative Study Hours
IFoA guidance
ST6
Predecessor Subject
IFoA curriculum
Written
Exam Format
IFoA SP6 syllabus
SP6 is a 3 hour 15 minute online written paper of short and long-answer questions, not a multiple-choice exam, so this free bank provides 100 MCQs as technical-knowledge prep. The current IFoA 2026 syllabus weights the four groups as Derivative markets 5%, Derivative types and uses 20%, Derivative pricing and valuation methods including interest rate models 50%, and Management of derivatives 25%. SP6 replaced the former ST6 subject and assumes the CM2 material as background. The IFoA sets the pass mark each session rather than publishing a fixed percentage, and around 200 study hours are typical.
Sample IFoA SP6 Practice Questions
Try these sample questions to test your IFoA SP6 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.
1A forward contract on a non-dividend-paying stock has 9 months to maturity. The stock trades at 50 and the continuously compounded risk-free rate is 4% per annum. What is the theoretical forward price?
A.48.52
B.50.00
C.51.52
D.52.00
Explanation: The forward price of a non-income asset is F = S0 e^(rT) = 50 e^(0.04 x 0.75) = 50 e^(0.03) = 51.52. The forward price exceeds spot because the holder of the long forward defers payment and forgoes the risk-free return on the cash.
2Which feature most clearly distinguishes an exchange-traded futures contract from an over-the-counter forward contract?
A.Futures are standardised and subject to daily margining through a clearing house, whereas forwards are bespoke with counterparty credit exposure
B.Forwards eliminate counterparty risk because they are guaranteed by an exchange
C.Futures cannot be used to hedge while forwards can
D.Futures are settled only at maturity whereas forwards are marked to market daily
Explanation: Futures are standardised in size, maturity and quality, trade on an exchange, and are guaranteed by a clearing house that requires initial and variation margin (daily marking to market). Forwards are customised OTC agreements that carry bilateral counterparty credit risk.
3In a plain vanilla interest rate swap, party A pays a fixed rate and receives a floating rate (e.g. SOFR) on the same notional. What is party A's primary economic exposure?
A.A benefits if floating rates rise above the fixed rate
B.A benefits if floating rates fall below the fixed rate
C.A has no rate exposure because the notional is never exchanged
D.A is exposed only to changes in the notional principal
Explanation: The fixed-rate payer (floating receiver) gains when floating rates rise, because it continues paying the locked-in fixed coupon while receiving the higher floating leg. This is economically similar to being short fixed-rate bonds and long a floating-rate note.
4An investor holds a European call option with strike 100. At expiry the underlying is worth 92. What is the payoff and what has happened to the premium paid?
A.Payoff 8; premium recovered
B.Payoff -8; investor must pay the difference
C.Payoff 0; the premium paid is a sunk loss
D.Payoff 100; the option is exercised at strike
Explanation: A call payoff is max(ST - K, 0) = max(92 - 100, 0) = 0. The holder simply lets the out-of-the-money option lapse. The premium originally paid is lost but is not an additional cost; option buyers cannot lose more than the premium.
5Put-call parity for European options on a non-dividend-paying stock states that:
A.c + Ke^(-rT) = p + S0
B.c - p = Ke^(-rT) - S0
C.p - c = S0 - Ke^(-rT)
D.c + p = S0 + Ke^(-rT)
Explanation: Put-call parity is c + Ke^(-rT) = p + S0. A portfolio of a long call plus cash equal to the present value of the strike replicates a long put plus the stock. Any deviation creates an arbitrage opportunity.
6A trader sets up a bull call spread: long a call struck at 100 and short a call struck at 110, both same maturity. What is the maximum profit, ignoring the time value of the net premium?
A.10 minus the net premium paid
B.The net premium received
C.110
D.Unlimited
Explanation: A bull call spread caps the upside. Maximum payoff is the difference in strikes, 110 - 100 = 10, achieved when the underlying is at or above the higher strike. Subtracting the net premium paid gives the maximum profit. Selling the higher-strike call reduces cost but caps gains.
7What is the main purpose of an initial margin requirement imposed by a futures clearing house?
A.To provide a buffer against a participant's potential one-day adverse price move and reduce default risk to the clearing house
B.To guarantee the trader a minimum profit
C.To replace the need for daily settlement
D.To pay the broker's commission upfront
Explanation: Initial margin is collateral posted to cover potential losses over the period it would take to close out a defaulting member, protecting the clearing house and other participants. Variation margin then tops this up daily as positions are marked to market.
8An asset pays a known continuous dividend yield q. The forward price for maturity T is given by:
A.F = S0 e^((r-q)T)
B.F = S0 e^(qT)
C.F = S0 e^(-rT)
D.F = S0 e^((r+q)T)
Explanation: With a continuous dividend yield q, the cost-of-carry net of income is r - q, so F = S0 e^((r-q)T). The dividend yield reduces the forward price because the holder of the asset receives income the forward holder does not.
9A currency forward on GBP/USD is priced using covered interest rate parity. If UK interest rates are higher than US interest rates, the forward USD-per-GBP rate will be:
A.Lower than the spot rate (GBP at a forward discount)
B.Equal to the spot rate
C.Indeterminate without volatility data
D.Higher than the spot rate (GBP at a forward premium)
Explanation: Under covered interest parity, the currency with the higher interest rate trades at a forward discount. If UK rates exceed US rates, GBP sells forward at a discount, so the forward USD-per-GBP rate is below spot. This prevents riskless arbitrage between money markets and the FX forward.
10The value of a long forward contract at time t, with delivery price K agreed at inception and current forward price Ft, is:
A.(Ft - K) e^(-r(T-t))
B.(K - Ft) e^(-r(T-t))
C.Ft - K with no discounting
D.S0 - K
Explanation: The mark-to-market value of a long forward is the present value of the gain locked in: (Ft - K) e^(-r(T-t)). At inception Ft = K so the value is zero; as the current forward price moves above K the long position gains value.
About the IFoA SP6 Practice Questions
Verified exam format metadata for IFoA SP6 Financial Derivatives Specialist Principles is pending. The practice questions above remain available while official exam length, timing, passing score, fee, and administrator details are reviewed.