Question 1

Written confirmation is a function that can be done by:

Accepted Answer

A)  Any dealer as long as he/she is not a party to the 
B)  Staff in the back-office. 
C)  Staff in the dealing room who are not dealing. 
D)  Any staff outside the dealing room.

Question 2

How can material divergences between the value of cash and collateral be managed in a documented sell/buy-back?

Accepted Answer

A)  Margin maintenance 
B)  Re-pricing 
C)  Either of the above, but usually (a) 
D)  Either of the above, but usually (b)

Question 3

What is a long straddle option strategy?

Accepted Answer

A)  A long call option + long put option with the same 
B)  A short call option + short put option with the sa 
C)  A long call option + short put option with the sam 
D)  A short call option + long put option with the sam

Question 4

If you bought USD 2,000,000 against CHF at 1.1020, USD 3,000,000 at 1.1040 and USD 5,000,000 at 1.1032, what is the average rate of your position?

Accepted Answer

A)  1.1030 
B)  1.1035 
C)  1.1028 
D)  1.1032

Question 5

Making interest rate swap transactions subject to agreement on documentation:

Accepted Answer

A)  Is recommended where the complications of the tran 
B)  Is strictly forbidden. 
C)  Is considered bad practice. 
D)  Must have senior management approval.

Question 6

An interest rate swap is:

Accepted Answer

A)  A contract to exchange one stream of income paymen 
B)  A temporary exchange of one deposit for another of 
C)  A forward-forward contract 
D)  All of the above

Question 7

From the following GBP deposit rates: 1M (31-day) GBP deposits3.15% 2M (61-day) GBP deposits3.25% 3M (91-day) GBP deposits3.41% 4M (120-day) GBP deposits3.56% 5M (152-day) GBP deposits3.73% 6M (182-day) GBP deposits3.90% calculate the 3x4 forward-forward rate.

Accepted Answer

A)  3.410% 
B)  3.977% 
C)  3.996% 
D)  3.997%

Question 8

Which of the following is not true?

Accepted Answer

A)  The Model Code is published by ACI's Committee for 
B)  The Model Code sets out the practicalities of deal 
C)  The Model Code is an attempt to deal with the lega 
D)  The Model Code sets out the manner and spirit in w

Question 9

What is the Gold Offered Forward Rate?

Accepted Answer

A)  The price differential between spot and forward go 
B)  The rate at which dealers will lend gold against U 
C)  The implied forward price of gold 
D)  The price of gold for forward delivery

Question 10

In spite of having agreed to a deal, dealers are not bound to the deal if it is subject to documentation. The Model Code:

Accepted Answer

A)  Does not regard this as a good practice. 
B)  Urge dealers to be bear this in mind, as this is c 
C)  Does not comment on this matter. 
D)  Recommends that national ACI Associations deal wit

Question 11

What is the effect of netting?

Accepted Answer

A)  To reduce the number and size of payments and tran 
B)  To reduce exposure to credit risk 
C)  To reduce the size of the balance sheet 
D)  All of the above

Question 12

A dealer does the following deals in EUR/USD: buys EUR 1 m at 1.1020 sells EUR 3 m at 1.1022 buys EUR 2 m at 1.1002 buys EUR 1.5 m at 1.1012 What position does the dealer now have?

Accepted Answer

A)  Long EUR 1.5 m at 1.0984 
B)  Short EUR 1.5 m at 1.1036 
C)  Long EUR 1.5 m at 1.1012 
D)  Short EUR 3.0 m at 1.1025

Question 13

What is settlement risk in FX?

Accepted Answer

A)  The risk of failure of a payments or settlement sy 
B)  The risk that only one side of an exchange of curr 
C)  The risk of payments gridlock in a real-time gross 
D)  The risk that default by a counterparty before the

Question 14

What is the risk of dealing through an agent with an unknown principal?

Accepted Answer

A)  You may not be able to ensure that your firm can a 
B)  You may not be able to net your exposure in an ins 
C)  You may not be able to net your exposure for capit 
D)  All of the above.

Question 15

What is the buyers primary risk in a repo?

Accepted Answer

A)  The credit risk on the collateral 
B)  The credit risk on the repo counterparty 
C)  The legal risk on the contract 
D)  The operational risk on margin maintenance

Question 16

What does the Model Code say about the responsibility of a broker in handling suspicious transactions?

Accepted Answer

A)  Suspicious transactions should be reported by the 
B)  Brokers need to make staff aware of the problem an 
C)  A broker should report any suspicions about a tran 
D)  Brokers should advise clients to reject the name.

Question 17

Which of the following is issued by auction?

Accepted Answer

A)  Treasury bill 
B)  CD 
C)  BA 
D)  USCP

Question 18

A 3-month (91-day) deposit of EUR25 million is made at 3.25%. At maturity, it is rolled over three times at 3.55% for 90 days, 4.15% for 91 days and 4.19% for 89 days. At the end of 12 months, how much is repaid (principal plus interest)?

Accepted Answer

A)  EUR 25,962,011.01 
B)  EUR 25,959,714.91 
C)  EUR 25,948,878.47 
D)  EUR 25,948,648.82

Question 19

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

Accepted Answer

A)  Sell a 1x3 FRA at 1.95% 
B)  Buy a 1x3 FRA at 1.98% 
C)  Buy a 1x4 FRA at 2.10% 
D)  Sell a 1x4 FRA at 2.10%

Question 20

A forward-forward loan creates an exposure to the risk of:

Accepted Answer

A)  Higher interest rates 
B)  Lower interest rates 
C)  Steepening yield curve 
D)  Parallel shift downwards in the yield curve

Exam 1: ACI Dealing Certificate-Part A