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ACI 3I0-012 ACI Dealing Certificate Exam Practice Test

Demo: 111 questions
Total 740 questions

ACI Dealing Certificate Questions and Answers

Question 1

What is the London Gold Price Fix (London Gold Fixing)?

Options:

A.

the gold price fixed twice a day to balance supply and demand in the London bullion market

B.

the gold price fixed at the end of the day in the London bullion market

C.

the gold price fixed at 11:00 am. local time in the London bullion market from a panel of gold traders

D.

the gold price fixed at 11:00 a.m. to settle gold contracts in the London bullion market

Question 2

Which of the following statements about hedge accounting is not correct?

Options:

A.

A prerequisite for hedge accounting is that a hedging instrument is designated as an offset to changes in the fair value or cash flows of a hedged item.

B.

Hedge accounting enables gains and losses on a hedging instrument to be recognised in the income statement in the same period as offsetting losses and gains on the hedged item.

C.

If one of the criteria for hedge accounting is no longer met, there is an option to discontinue hedge accounting.

D.

Strict criteria must be met at inception and throughout the term of the hedge relationship in order for hedge accounting to be applied.

Question 3

You wish to sell a customer GBP/USD for value tomorrow. How can you hedge yourself?

Options:

A.

Sell and buy GBP/USD T/N

B.

Buy and sell GBP/USD T/N

C.

Sell GBP/USD spot, and sell and buy GBP/USD T/N

D.

Buy GBP/USD spot, and buy and sell GBP/USD T/N

Question 4

Which SWIFT message should be used to advise the netting position of a currency resulting from FX, NDF, options and other trades?

Options:

A.

MTn99

B.

MT300

C.

MT370

D.

MT670/671

Question 5

Four banks provide you with quotes in CHF/SEK. Which is the best price for you to buy SEK?

Options:

A.

6.5825

B.

6.5820

C.

6.5815

D.

6.5830

Question 6

Which of the following statements is an incorrect statement in respect of Model Code recommendations concerning electronic trading?

Options:

A.

It is recommended that ECNs have mechanisms that control price flashing

B.

A manual kill button that disables the system’s ability to trade and cancels all resting orders may not be established without Central Bank approval

C.

The sudden withdrawal of a specific credit limit or limits in a tactical manipulation to mislead the market is unethical

D.

Algorithms require appropriate supervision performed by staff with commensurate levels of experience

Question 7

The delta of an ‘at-the-money’ long call option is:

Options:

A.

Between +0.5 and +1

B.

+0.5

C.

Between 0 and +0.5

D.

Zero

Question 8

In the unforeseen event that a particular maturity date is declared a public holiday, what is standard market practice for spot FX?

Options:

A.

to extend the contract to the next business day

B.

to shorten the contract to the previous business day

C.

The two parties involved agree to a new maturity date.

D.

There is no standard market practice. ACIs Committee for Professionalism decides the issue on a case-by-case basis.

Question 9

When constructing a gap report, how would a EUR 25,000,000.00 long position in 6x12 FRA be categorized?

Options:

A.

as a EUR 25,000,000.00 6-month liability and a EUR 25,000,000.00 12-month asset

B.

as a EUR 25,000,000.00 12-month liability and a EUR 25,000,000.00 6-month asset

C.

as a EUR 12,500,000.00 6-month liability and a EUR 12,500,000.00 12-month asset

D.

as a EUR 12,500,000.00 6-month asset and a EUR 12,500,000.00 12-month liability

Question 10

Which of the following correctly states the Model Code’s recommendations regarding terms and documentation?

Options:

A.

Such documentation should be bi-laterally signed by the dealers of both principals intending to transact business.

B.

When using such agreements... the wording in the agreement must be changed to match the actual transaction details after trading.

C.

Such documentation should be signed, in many cases before any applicable market transactions are entered into.

D.

For instruments where standard terms do not exist, the Model Code recommends that no documentation should be used.

Question 11

As to general risk management principles, the Model Code mentions that the organizationalstructure should ensure independent risk management and controls. Which one of the following is not among those controls?

Options:

A.

open and effective communication channels between all levels of staff and cross-functions should be maintained.

B.

regular internal audits should be carried out together with trading and risk management to ensure early identification of internal control weaknesses

C.

complete segregation of duties between the front, middle and back office activities

D.

a separate system for independent monitoring to ensure compliance with the risk management framework should be in place

Question 12

You are quoted the following rates:

Spot USD/JPY97.10-15

3M USD/JPY swap 9/6

Spot USD/CHF 0.9320-23

3M USD/CHF swap 11/8

Where can you sell CHF against JPY 3-month outright?

Options:

A.

104.14

B.

104.21

C.

104.23

D.

104.30

Question 13

What do you call a combination of a long (short) call option and short (long) put option with same face value, same expiration date, same style, where the strike price is equal to the forward price?

Options:

A.

a synthetic forward

B.

a straddle

C.

risk reversal

D.

a strangle

Question 14

Which one of the following best describes expected shortfall/conditional value-at-risk at the 95% level?

Options:

A.

the expected loss on the portfolio in the worst 95% of cases

B.

the expected loss in those cases where the loss exceeds the VaR at the 95% level

C.

the maximum loss in those cases where the loss exceeds the VaR at the 95% level

D.

the expected loss in those cases where the loss exceeds the VaR at the 5% level

Question 15

Forward points represent:

Options:

A.

The expected appreciation or depreciation of the base currency

B.

The expected appreciation or depreciation of the quoted currency

C.

Largely, the interest rate differential between two currencies

D.

Solely, the interest rate differential between two currencies

Question 16

If you took a short position in USD/JPY, how could the Fed “squeeze” you?

Options:

A.

Raise USD interest rates

B.

Lower USD interest rates

C.

Lower reserve requirements

D.

It could not squeeze you

Question 17

What should be done when a voice broker calls “off” at the very instant the dealer hits the broker’s price as “mine” or “yours”?

Options:

A.

The transaction should be concluded and the broker should inform both counterparties accordingly.

B.

The dealer who hits the broker’s price may decide whether the deal is done or not; the broker should inform both counterparties accordingly.

C.

The deal should not be concluded and the broker should inform both counterparties accordingly.

D.

The broker should immediately inform both counterparties that the deal will have to berenegotiated.

Question 18

You have borrowed at 3-month LIBOR+50. LIBOR for the loan will be re-fixed in exactly one month. The market is quoting:

1x3 USD FRA 0.42-45%

1x4 USD FRA 0.54-58%

1x5 USD FRA 0.57-62%

To hedge the next LIBOR fixing, you should:

Options:

A.

Sell a 1x3 FRA at 0.42%

B.

Buy a 1x3 FRA at 0.45%

C.

Buy a 1x4 FRA at 0.58%

D.

Sell a 1x4 FRA at 0.54%

Question 19

Today is the fixing date for a 6x9 FRA that you sold at 2.55%. BBA LIBOR fixes at 2.7175%.

Which of the following is true?

Options:

A.

You will pay a net settlement amount

B.

You will receive a net settlement amount

C.

There will be an exchange of gross interest payments in 2 business days

D.

There will be an exchange of gross interest payments in 3 months

Question 20

Dealers are authorized to deal:

Options:

A.

anywhere, even away from their own dealing premises

B.

after-hours, but only if listed as such by management

C.

after-hours, but only from their private residence

D.

away from their broker’s dealing premises

Question 21

What is the purpose of a short straddle option strategy?

Options:

A.

To anticipate lower volatility in the price of the underlying commodity

B.

To anticipate moderately high volatility in the price of the underlying commodity

C.

To anticipate increasing volatility in the price of the underlying commodity

D.

To anticipate very high volatility in the price of the underlying commodity

Question 22

A bank quotes 3-month EUR deposits at 0.45% ¡ª 0.55% to its broker. The broker lifts the bank’s offer at 0.55%. Which of the following steps must the broker take?

Options:

A.

The broker must show the borrower’s name to the lender first and disclose the lender’s name only if the borrower is acceptable to the lender.

B.

The broker must show the lender’s name to the borrower first and disclose the borrower’s name only if the lender is acceptable to the borrower.

C.

The broker must show the borrower’s and lender’s names to each other at the same time.

D.

For marketing reasons, the broker can show the lender’s name to the borrower at any time.

Question 23

Convert 8.25% quoted on a semi-annually compounded money market basis for USD to the equivalent annually-compounded bond basis.

Options:

A.

8.30%

B.

8.52%

C.

8.54%

D.

8.69%

Question 24

If USD/JPY is quoted to you as 98.10-15 and USD/CHF as 0.9294-99, what is the rate at which you can buy CHF against JPY?

Options:

A.

105.50

B.

105.61

C.

10555

D.

0.009474

Question 25

The delta of an ‘at-the-money’ long put option is:

Options:

A.

Between -0.5 and -1

B.

-0.5

C.

Between +0.5 and +1

D.

+0.5

Question 26

If you funded your fixed-income investment portfolio with short-term deposits, how would you hedge your interest rate exposure with interest rate swaps?

Options:

A.

Pay fixed and receive floating through swaps for the term of the portfolio

B.

Pay floating and receive fixed through swaps for the term of the portfolio

C.

You cannot: the maturity of the swaps would be longer than that of the deposits

D.

You should not: there would be too much basis risk

Question 27

The rho of an option is:

Options:

A.

The sensitivity of the option value to changes in interest rates

B.

The sensitivity of the option value to changes in volatility

C.

The sensitivity of the option value to changes in the time to expiry

D.

The sensitivity of the option value to changes in the price of the underlying

Question 28

You are short of 6 December EURODOLLAR futures contracts at 99.50. Yesterday, the closing price was 99.35. Today’s closing price is 99.105. What variation margin will be due?

Options:

A.

You will have to pay USD 5,925.00

B.

You will receive USD 5,925.00

C.

You will have to pay USD 3,675.00

D.

You will receive USD 3,675.00

Question 29

Which of the following statements about operational risk awareness is correct?

Options:

A.

It is good practice to collect and disclose incidents and near-misses for the future benefit of the professional community.

B.

It is good practice to collect and analyze incidents and near-misses so as to set up preventive action plans for the future.

C.

A report describing operational risks should be made at the request of the front office.

D.

A report describing operational risks should be made at least once a year and provided to the front office.

Question 30

When is interest conventionally due on a 3-year interbank EUR deposit?

Options:

A.

At maturity

B.

Annually

C.

Semi-annually

D.

Quarterly

Question 31

Which of the following pays a return in the form of a discount to face value?

Options:

A.

Treasury bill

B.

CD

C.

Interbank deposit

D.

Classic repo

Question 32

Under Basel Securitization rules the highest potential risk weight is:

Options:

A.

350%

B.

750%

C.

1250%

D.

1500%

Question 33

Deliberately inputting incorrect big figures into an electronic dealing platform is:

Options:

A.

Technically impossible on electronic platforms

B.

Not an uncommon practice and something which professional dealers should be able to guard against.

C.

Not good practice.

D.

A criminal offence.

Question 34

Under Basel rules, what is the meaning of IRB?

Options:

A.

Internal Risk Based

B.

Internal Ratings Based

C.

Intrinsic Risk Based

D.

Internal Rule Based

Question 35

The mid-rate for USD/CHF is 1.3950 and the mid-rate for AUD/USD is 0.7060. What is the midrate for CHF/AUD?

Options:

A.

0.9849

B.

1.0154

C.

1.9759

D.

0.5061

Question 36

The one-month (31-day) GC repo rate for French government bonds is quoted to you at 3.75-80%. As collateral, you are offered EUR25 million nominal of the 5.5% OAT April 2006, which is worth EUR 28,137,500. If you impose an initial margin of 1%, the Repurchase Price is:

Options:

A.

EUR 27,947,276.43

B.

EUR 27,946,077.08

C.

EUR 27,950,071.43

D.

EUR 27,948,871.97

Question 37

If a dealer has any intention of assigning an interest rate swap to a third party soon after transacting that swap:

Options:

A.

The dealer should not reveal his future dealing intentions to his counterparty.

B.

The dealer should make his intention to assign clear before transacting.

C.

The dealer should agree the method of assignment before transacting.

D.

The counterparty should specify whether or not assignment would be acceptable in negotiations.

Question 38

You bought a USD 4,000000 6x9 FRA at 6.75%. The settlement rate is 3-month (90-day) BBA LIBOR, which is fixed at 5.50%. What is the settlement amount at maturity?

Options:

A.

You receive USD 12,330.46

B.

You pay USD 12,330.46

C.

You pay USD 12,163.81

D.

You receive USD 12,163.81

Question 39

Confirmations must be sent out

Options:

A.

Immediately after the deal is done.

B.

As quickly as possible after the deal is done.

C.

By electronic media only, e.g. fax, telex.

D.

Not later than the value date of the first leg of the transaction.

Question 40

If EUR/USD is quoted to you as 1.3030-40 and GBP/USD as 1.5320-30, at what rate can you sell GBP and buy EUR?

Options:

A.

0.8500

B.

0.8506

C.

0.8512

D.

0.8505

Question 41

Which of the following are transferable instruments?

Options:

A.

Eurocertificate of deposit

B.

US Treasury bill

C.

CP

D.

All of the above

Question 42

Dealers are allowed to trade for their own account only if:

Options:

A.

they have good track records in dealing both for their institution and for themselves

B.

there have been no previous conflicts of interest in the dealing room

C.

there is a clearly defined and written policy about the matter

D.

the dealers see no conflict of interest in such dealing

Question 43

The Interest Rate Parity Theorem states that:

Options:

A.

Interest rates in different currencies will tend to move into line with each other over time

B.

Interest rates in different currencies differ due to differences in expectations about inflation

C.

Selling a low interest rate currency to invest a high interest rate currency will only be profitable if one hedges the currency risk

D.

Selling a low interest rate currency to invest in a high interest rate currency should not be profitable if one hedges the currency risk

Question 44

What rate should be used if the settlement date in a foreign exchange transaction is no longer a “good” date?

Options:

A.

The original rate of the transaction

B.

The original rate of the transaction adjusted by the relevant forward points

C.

The affected parties should agree to adjust the exchange rate according to the prevailing relevant forward mid swap points at the time the bank holiday is announced

D.

The rate is open to negotiation by the two parties

Question 45

It is now permissible in most markets for brokers to be owned by banks and other principals. Where there is shared management, or a share holding or other investment in a broker by a counterparty:

Options:

A.

The broker is not obligated to reveal the connection provided Chinese Walls are in place.

B.

The broker is not obligated to reveal the connection in the professional market.

C.

The broker should advise the other counterparty of the connection.

D.

The matter is covered in the Model Code.

Question 46

What are 1MM dates?

Options:

A.

the tenth of the following months: March, June, September and December

B.

the third Wednesday of January, April, July and October

C.

the Monday before the third Wednesday of March, June, September and December

D.

the third Wednesday of March, June, September and December

Question 47

You deal over the phone with a counterparty. The subsequent confirmation differs from the terms agreed verbally. What is the result?

Options:

A.

The confirmation takes precedence as it is a written contract.

B.

The matter will have to be submitted to arbitration in order to establish the mutual intent of the parties.

C.

It depends on local law.

D.

The verbal agreement is binding.

Question 48

What does the Model Code recommend with regard to any give-up agreement between a prime broker and an executing dealer?

Options:

A.

That the Master FX Give-Up Agreement (FMLG - New York FED FXC) published by the Foreign Exchange Committee can be used for this purpose.

B.

That this agreement need not specify the permitted transaction types, tenors or credit limits.

C.

That this agreement must include instructions that the prime broker must advise the executing dealer promptly of trades for give-up.

D.

That this agreement should not involve any requirement for the executing dealer to inform the prime broker of the material terms of the transaction once a trade has been executed.

Question 49

Are the forward points materially affected by changes in the spot rate?

Options:

A.

never

B.

Only for very large movements and longer terms

C.

always

D.

spot is the principal influence

Question 50

In a dispute between the dealer and a broker, the Model Code recommends that this should be referred in the first instance to:

Options:

A.

Central bank.

B.

Senior management of the bank and the brokerage firm.

C.

Head of compliance.

D.

ACI’s Committee for Professionalism (CFP).

Question 51

You quote the following rates to a customer spot GBP/CHF 2.2005-10

3M GBP/CHF swap 120/115

At what rate do you sell GBP to a customer 3-month outright?

Options:

A.

2.1890

B.

2.2125

C.

2.1895

D.

2.1885

Question 52

Where the Committee for Professionalism of the ACI has been notified of a breach of the letter or spirit of the Model Code, it

Options:

A.

Will examine the complaint.

B.

May consult with the local ACI.

C.

Will bring the matter to the attention of the local regulator.

D.

None of the above.

Question 53

The Model Code strongly recommends that intra-day oral deal checks should:

Options:

A.

Be conducted out at the end of the morning and afternoon trading sessions.

B.

Be only be conducted after the close of business.

C.

Be mutually agreed between the bank and the broker or counterparty.

D.

Be the responsibility of the broker.

Question 54

Making interest rate swap transactions subject to agreement on documentation:

Options:

A.

Is recommended where the complications of the transaction warrant the practice.

B.

Is strictly forbidden.

C.

Is considered bad practice.

D.

Must have senior management approval.

Question 55

The use of off-market rates is discouraged and should be permitted only:

Options:

A.

When the bank’s income is secured on the trade.

B.

If the unsecured credit is taken into account.

C.

It the bank knows the customer very well.

D.

When there are written procedures and policies for such transactions.

Question 56

A broker can consider a deal as done if:

Options:

A.

He is confident that the dealer will not back out of the deal.

B.

Both parties have established credit lines for each other.

C.

One party acknowledges interest.

D.

He receives verbal acknowledgement from the dealer.

Question 57

You have done the following deals in spot USD/JPY:

Sold USD 5.0 million at 130.60

Bought USD 3.5 million at 130.20

Bought USD 2.0 million at 130.50

Sold USD 2.0 million at 130.55

What is your net position and average rate?

Options:

A.

Short USD 1.5 million at 130.46

B.

Long USD 1.5 million at 130.46

C.

Short USD 1.5 million at 131.60

D.

Long USD 1.5 million at 131.60

Question 58

You are quoted the following market rates:

spot GBP/USD. 1.6530

9M (272-day) GBP. 3.60%

9M (272-day) USD. 1.95%

What are the 9-month GBP/USD forward points?

Options:

A.

+206

B.

+197

C.

-195

D.

-204

Question 59

Which of the following is true?

Options:

A.

The CME eurodollar futures contract has a tick value (for one full basis point equivalent) of USD25 and a face value of USD 1,000,000

B.

The Euronext. LIFFE EURIBOR futures contract has a tick value (for one full basis point equivalent) of EUR25 and a face value of EUR 1,000,000

C.

The Euronext.LIFFE CHF futures contract has a tick value (for one full basis point equivalent) of CHF25 and a face value of CHF 1,000,000

D.

All of the above

Question 60

Brokers should confirm all transactions:

Options:

A.

Initially by fax or other acceptable electronic means, then in writing.

B.

Only if the deal is between overseas counterparties and for value today.

C.

Only if the transaction is not for a marketable amount.

D.

To both counterparties immediately by fax or other acceptable electronic means.

Question 61

You are quoted the following market rates:

spot EUR/GBP 0.6670

6M (182-day) EUR 2.35%

6M (182-day) GBP 375%

What is 6-month EUR/GBP?

Options:

A.

0.6675

B.

0.6715

C.

0.6717

D.

0.6718

Question 62

Click on the Exhibit Button to view the Formula Sheet, If the value date of forward USD/JPY transactions is declared a holiday in either New York or Tokyo, the correct value date will be:

Options:

A.

The value date of the centre which is open.

B.

The next business day of the centre which is closed.

C.

The next business day when both NewYork and Tokyo are open.

D.

None of the above.

Question 63

The Committee for Professionalism strongly recommends intra-day oral deal checks to help reduce the number and size of differences, particularly when dealing through voice-brokers, for deals involving foreign counterparties, in faster moving markets such as FX and when dealing in other instruments which have very short settlement periods.

This checking should:

Options:

A.

Be carried out at least three times a day.

B.

Be agreed between the parties.

C.

Be done at the end of each day.

D.

Be decided by the broker.

Question 64

You are quoted the following market rates:

spot EUR/CHF 1.1005

6M (180-day) EUR 3.45%

6M (180-day) CHF 1.25%

What are the 6-month EUR/CHF forward points?

Options:

A.

+121

B.

+120

C.

-116

D.

-119

Question 65

You are quoted spot USD/NOK 5.7220-28 and USD/SEK 6.3850-58, at what price can you buy NOK against SEK?

Options:

A.

0.8963

B.

1.1157

C.

1.1159

D.

1.1160

Question 66

It is June. You are over-borrowed from October to January on your deposit book. How would you hedge using FRAs?

Options:

A.

Sell 3x6

B.

Buy 3x6

C.

Sell 4x7

D.

Buy 4x7

Question 67

Which is the day count/annual basis convention for SGD money market deposits?

Options:

A.

ACT/365

B.

ACT/360

C.

ACT/ACT

D.

30E/360

Question 68

In order to give a price in EUR/USD, the broker must:

Options:

A.

know whether the European Central Bank or the Federal Reserve is in the market before quoting

B.

be sure that the quoting bank’s prices are not shared with other brokers

C.

get the price from a bank or a bid and an offer from different banks in order to make a two-way price, because the broker cannot make prices on his own

D.

make sure that the quoting banks have sufficient credit lines

Question 69

If 6-month USD/CAD forward rates are quoted at 40/45, which of the following statements is correct?

Options:

A.

USD rates are higher than CAD rates in the 6-month

B.

CAD rates are higher than USD rates in the 6-month

C.

There is a positive USD yield curve

D.

There is not enough information to decide

Question 70

Clients of a voice-broker quote EUR/GBP at 0.8345-50, 0.8346-51, 0.8348-53 and 0.8349-53. What will be the broker’s price?

Options:

A.

0.8345-53

B.

0.8345-50

C.

0.8349-50

D.

0.8349-53

Question 71

The Liquidity Coverage Ratio (LCR) in Basel III:

Options:

A.

is a new rule that compares liquid asset levels in banks to their available equity capital

B.

spells out a modernized system for calculating the required minimum reserve that banks must hold at the central bank

C.

compares liquid and reliably liquidating assets to expected cash outflows from specified run-off rates for various liability classes under a short-term stress scenario

D.

tied directly into the internal ratings-based approach for determining the liquidity of credit-counterparties

Question 72

What is the Overnight Index for USD?

Options:

A.

H-15 Index

B.

Prime Rate

C.

Overnight Fed funds

D.

Fed funds effective rate

Question 73

What is the purpose of an initial margin on a futures exchange?

Options:

A.

To cover losses incurred between variation margin payments

B.

To exclude retail investors

C.

To pay reserve requirements

D.

To cover fees due to the clearing house

Question 74

What is meant by “turn of the month”?

Options:

A.

the last calendar day of the month

B.

the last bank business day of the month

C.

value last business day of the month against first business day of the next month

D.

value first business day of the month against last business day of the same month

Question 75

Automated trading systems for interbank spot FX display the best prices entered into the systems by users and:

Options:

A.

Display the names of those users along their prices

B.

Offer pre-trade anonymity to users quoting prices

C.

Offer pre and post-trade anonymity to users quoting prices

D.

Offer users the choice of whether to remain anonymous

Question 76

What is the ISO code for the currency of China?

Options:

A.

CHY

B.

CNR

C.

CHR

D.

CNY

Question 77

EUR/USD is 1.3080-83 and EUR/CHF is 1.2160-63. What price would you quote to a customer who wishes to sell CHF against USD?

Options:

A.

1.0759

B.

0.9299

C.

1.5909

D.

0.9295

Question 78

The weighted average duration of liabilities can be increased by:

Options:

A.

buying additional 30-year German Government bonds

B.

selling futures contracts on 30-year German Government bonds

C.

buying futures contracts on 10-year German Government bonds

D.

exercising an early repayment option on a long-term senior borrowing

Question 79

If the duration gap is zero, how will a small parallel shift in interest rates affect the market value of the bank’s equity?

Options:

A.

If interest rates rise, the market value of equity will increase

B.

If interest rates rise, the market value of equity will decrease C. The bank is immunised from changes in interest rates.

C.

The market value of equity will decrease due to an increase in interest rates

Question 80

Spot EUR/USD is 1.3050-53 and EUR interest rates are lower than USD interest rates. Would you expect the forward points for EUR/USD to be:

Options:

A.

added to spot

B.

subtracted from spot

C.

a negative value

D.

Insufficient information to decide

Question 81

As far as fineness and weight are concerned, what are the London Bullion Market Association (LBMA) requirements for a “good delivery bar”?

Options:

A.

at least 995/1000 pure gold; weight between 350 and 430 fine ounces

B.

minimum 999.9/1000 pure gold; weight between 350 and 430 fine ounces

C.

at least 995/1000 pure gold; weight of 400 fine ounces

D.

minimum 995/1000 pure gold; weight of 400 fine ounces

Question 82

The seller of a EUR/RUB NDF could be:

Options:

A.

a potential buyer of EUR against RUB

B.

speculating on an appreciation of the Russian Rouble

C.

expecting rising EUR/RUB exchange rates

D.

a seller of Russian Rouble

Question 83

What is the correct interpretation of a EUR 2,000,000.00 overnight VaR figure with a 97% confidence level?

Options:

A.

A loss of at least EUR 2,000,000.00 can be expected in 97 out of the next 100 days.

B.

A loss of at most EUR 2,000,000.00 can be expected in 3 out of the next 100 days.

C.

A loss of at least EUR 2,000,000.00 can be expected in 3 out of the next 100 days.

D.

A loss of at most EUR 2,000,000.00 can be expected in 6 out of the next 100 days.

Question 84

When do bank participants have a duty to make absolutely clear whether the prices they are quoting are firm or merely indicative?

Options:

A.

only if they are dealing with brokers

B.

only if dealing on an e-trading platform

C.

only if they are dealing in non-marketable amounts

D.

always

Question 85

You are quoted the following market rates:

spot USD/SEK 6.3850

1M (30-day) USD 0.40%

1M (30-day) SEK 1.15%

What is 1-month USD/SEK?

Options:

A.

6.4250

B.

6.3810

C.

6.7850

D.

6.3890

Question 86

Which statement about modern matched-maturity transfer pricing in banks is correct?

Options:

A.

It is now a widely accepted standard that banks should use a single representative transfer price across the entire maturity spectrum.

B.

Modern matched-maturity pricing systems include an additional liquidity surcharge that is specifically applied to more liquid short maturities.

C.

Matched-maturity transfer prices should represent a weighted average cost of capital that incorporates the cost of equity into the cost of borrowed funds.

D.

Modern matched-maturity systems differentiate transfer prices by the maturity of the commitment and also apply a marginal funding cost perspective.

Question 87

Regarding access to production systems, which of the following is incorrect?

Options:

A.

Profiles for functions are encouraged and should be reviewed semi-annually by a manager.

B.

Developers should have unrestricted access to production systems.

C.

Access to production systems should be rigorously controlled.

D.

Users should not have access to change system functionalities.

Question 88

You bought a CAD 8,000,000.00 6x9 FRA at 1.95%. The settlement rate is 3-month (90-day) BBA LIBOR, which is fixed at 0.9500%.

What is the settlement amount at maturity?

Options:

A.

You pay CAD 20,000.00

B.

You receive CAD 20,000.00

C.

You pay CAD 19,952.61

D.

You receive CAD 19,952.61

Question 89

Today’s spot value date is Friday 27th February. What is normally the 1-month maturity date? Assume no bank holidays.

Options:

A.

28th March

B.

29th March

C.

30th March

D.

31st March

Question 90

Assuming a flat yield curve in both currencies, when quoting a 1- to 2-month forward FX time option price in a currency pair trading at a discount to a customer:

Options:

A.

you would take as bid rate the bid side of the 2-month forward and as offered rate the offered side of the 1-month forward

B.

you would take as bid rate the offered side of the 2-month forward and as offered rate the bid side of the 1-month forward

C.

you would take as bid rate the offered side of the 1-month forward and as offered rate the offered side of the 2-month forward

D.

you would take as bid rate the bid side of the 1-month forward and as offered rate the bid side of the 2-month forward

Question 91

Which of the following rates represents the highest investment yield in the Euromarket?

Options:

A.

Semi-annual bond yield of 3.75%

B.

Annual bond yield of 3.75%

C.

Semi-annual money market yield of 3.75%

D.

Annual money market rate of 3.75%

Question 92

A 3-month (91-day) US Treasury bill is quoted at a rate of discount of 4.25%. What is its true yield?

Options:

A.

4.19%

B.

4.25%

C.

4.30%

D.

4.31%

Question 93

Supervisors would generally consider interest rate risk exposure in the banking book excessive beginning at what level of losses given a +1- 200 bps market rate movement?

Options:

A.

> 2% of 6 months forward earnings

B.

> 20% of regulatory capital

C.

<10% of regulatory capital

D.

< 5% of 12 months forward earnings

Question 94

A 12-month EUR/USD swap is quoted at 41/44. EUR interest rates are expected to fall, with USD interest rates remaining stable.

Assuming no change in the spot rate what effect would you expect on the forward points?

Options:

A.

Unchanged

B.

Move towards 28/31

C.

Move towards 5 7/60

D.

Insufficient information

Question 95

Which of the following scenarios offer an example of wrong way risk?

Options:

A.

A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a US mortgage bank

B.

A bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index crosses the 200 bps level

C.

A bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility moves up to substantially higher levels

D.

A bank enters into a receiver’s swap while interest rates are increasing

Question 96

Which of the following currencies is quoted on an ACT/360 basis in the money market?

Options:

A.

SGD

B.

PLN

C.

GBP

D.

NZD

Question 97

Which of the following currencies is quoted on an ACT/365 basis for the calculation of interest on interbank deposits in London?

Options:

A.

EUR

B.

JPY

C.

HKD

D.

AUD

Question 98

Which one of the following bullion coins has a 999.9/1000 gold purity (.9999 fineness)?

Options:

A.

the Canadian “Maple Leaf”

B.

the South African “Krugerand”

C.

the American “Gold Eagle”

D.

the United Kingdom “Sovereign”

Question 99

If GBP/USD is 1.5350-53 and USD/JPY is 97.50-53, what is GBP/JPY?

Options:

A.

149.66-74

B.

149.69-71

C.

63.52-53

D.

63.51-54

Question 100

A 3-month (90-day) NZD deposit is 2.75% and 6-month (180-day) NZD deposit is 3.00%. What is the 3x6 NZD deposit rate?

Options:

A.

3.2281%

B.

3.2278%

C.

3.00%

D.

2.875%

Question 101

From 2019 on the total capital requirement for banks under Basel III will be defined as:

Options:

A.

8% of RWA plus conservation buffer

B.

10.5% of RWA plus conservation buffer

C.

8% of RWA plus countercyclical buffer

D.

10.5% of RWA plus countercyclical buffer

Question 102

In trade confirmation, which one of the following statements about “matching” is correct?

Options:

A.

matching should be performed by no later than the day after trading day

B.

matching processes are manual and may not be automated

C.

matching should be performed as soon as possible upon receipt of the confirmation

D.

confirmation matching should be a post-settlement workflow activity

Question 103

What is the name of the reference against which most USD and JPY deposits and loans are fixed in London?

Options:

A.

EURIBOR

B.

EONIA

C.

LIBOR

D.

SONIA

Question 104

You are paying 1,00% per annum paid semi-annually and receiving 6-month LIBOR on a USD 10,000,000.00 interest rate swap with exactly two years to maturity. 6-month LIBOR for the next payment date is fixed today at 0.95%. How would you hedge the swap using FRAs?

How to hedge an IRS with a strip of FRAs?

Options:

A.

buy a strip of 0x6, 6x12, 12x18 and 18x24 FRAs

B.

sell a strip of 0x6, 6x12, 12x18 and 18x24 FRAs

C.

buy a strip of 6x12, 12x18 and 18x24 FRAs

D.

sell a strip of 6x12, 12x18 and 18x24 FRAs

Question 105

You have quoted your customer the following CAD deposit rates:

1M 1.00-05%

2M 1.06-11%

3M 1.13-18%

The customer says, “I give you CAD 20,000,000.00 in the two’s”. What have you done?

Options:

A.

Borrowed CAD 20,000,000.00 at 1.06%

B.

Lent CAD 20,000,000.00 at 1.11%

C.

Borrowed CAD 20,000,000.00 at 1.11%

D.

Lent CAD 20,000,000.00 at 1.06%

Question 106

What is the day count/annual basis convention for JPY money market deposits?

Options:

A.

ACT/365

B.

ACT/360

C.

ACT/ACT

D.

30E/360

Question 107

An FRA is:

Options:

A.

A cash instrument

B.

An exchange traded derivative

C.

An interest rate derivative

D.

A balance sheet instrument

Question 108

Which of the following may pay a return as a mix of income and capital/gain loss?

Options:

A.

CD

B.

Interbank deposit

C.

Classic repo

D.

Treasury bill

Question 109

An interest rate guarantee (IRG) is:

Options:

A.

AnFRA

B.

An option on an FRA

C.

A collar

D.

AnIRS

Question 110

What is the Gold Offered Forward Rate (GOFO)?

Options:

A.

the price differential between spot and forward gold prices

B.

the rate at which dealers will lend gold against US dollars

C.

the implied forward price of gold

D.

the price of gold for forward delivery

Question 111

According the Model Code, a principal, whose name has been rejected, feeling that the broker may have actually quoted a price or rate that it could not in fact substantiate, may:

Options:

A.

deduct points from the broker or adjust the brokerage bill accordingly

B.

in some centres, ask either the central bank or some other neutral body to investigate and confidentially verify that there was support for the original price or rate

C.

in some centres, ask the local ACI to investigate and confidentially verify that there was support for the original price or rate

D.

insist that the broker discloses the name of the other counterparty

Demo: 111 questions
Total 740 questions