Question 1

The interest earned on a USD 5,000,000.oo money market deposit for 184 days is USD 12,500.00. What was the interest rate?

Accepted Answer

A)  0.470% 
B)  0.196% 
C)  0.500% 
D)  0.169%

Question 2

How would you delta hedge an 'at-the-money' long call option?

Accepted Answer

A)  Go short of the underlying commodity equal to 50% of the size of the option contract 
B)  Go long of the underlying commodity equal to 50% of the size of the option contract 
C)  Go long of the underlying commodity equal to the full size of the option contract 
D)  Go short of the underlying commodity equal to the full size of the option contract

Question 3

What does the Model Code say about omitting the "big figure" in voice communication?

Accepted Answer

A)  The "big figure" should not be included in outright quotations. 
B)  In order to avoid misunderstandings, the "big figure" should not be mentioned when repeating the details (facts/rates) of the deal. 
C)  For the sake of brevity and efficiency, "big figures" should never be quoted at all in spot FX trading. 
D)  The Model Code recommends that the "big figure" be included in all outright and spot FX quotations.

Question 4

Lending for 3 months and borrowing for 6 months creates a 3x6 forward-forward deposit. The cost of that deposit is called:

Accepted Answer

A)  Implicit nominal rate 
B)  Implied forward rate 
C)  Funding rate 
D)  Effective future rate

Question 5

You have just sold USD 5,000,000.00 spot against JPY. What type of risk does not apply?

Accepted Answer

A)  Market risk 
B)  Settlement risk 
C)  Basis risk 
D)  Credit risk

Question 6

In all dealing conversations, the Model Code strongly recommends:

Accepted Answer

A)  Dealers stick to market terminology in order to avoid the impression that they are offering an advisory or fiduciary role. 
B)  Dealers clarity what is being proposed rather than using any terminology that could be misinterpreted. 
C)  Dealers restrict themselves to terminology listed and explained in Chapter 11 of the Model Code. 
D)  Dealers define complex terminology in the confirmation of a deal.

Question 7

USD/CHF is quoted to you at 0.9290-93 and GBP/USD at 1.5320-30. At what rate could you buy GBP and sell CHF?

Accepted Answer

A)  1.4242 
B)  1.4232 
C)  1.4246 
D)  1.4237

Question 8

A futures clearing house is:

Accepted Answer

A)  The buyer to each seller and the seller to each buyer 
B)  A clearing agent only 
C)  The self-regulatory organization for the futures exchange 
D)  The owner of the futures exchange

Question 9

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

Accepted Answer

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 10

Today is Monday, 8th December. You sell a 9x12 USD FRA for value Thursday, 10th September next year. On what date is the settlement amount due to be paid or received (assuming that there are no holidays)?

Accepted Answer

A)  8th September next year 
B)  10th September next year 
C)  8thDecembernextyear 
D)  December next year

Question 11

A 6-month (182-day) investment of CAD 15,500,000.00 yields a return of CAD 100,000.00. What is the rate of return?

Accepted Answer

A)  1.32% 
B)  1.29% 
C)  1.28% 
D)  0.65%

Question 12

The Model Code recommends that standard terms and conditions be used in legal documents. Which one of the following statements is correct?

Accepted Answer

A)  When trading in financial products described by the Model Code, dealers and voice brokers need not clarify whether they propose to use standard terms. 
B)  Standard terms and conditions should be signed bilaterally by senior management of both principals before any applicable market transactions are entered into. 
C)  When using legal agreements any proposed modifications or choices offered in the agreement must be clearly stated as soon as the trade is agreed. 
D)  For many instruments, standard master agreements issued by recognized authorities need not be signed by senior management of the principals intending to transact business.

Question 13

Which of the following is true?

Accepted Answer

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 14

Bank B's price is shown by a broker to Bank A and is dealt by Bank A. If Bank A wants to increase the amount of the transaction, what is good market practice according to the Model Code:

Accepted Answer

A)  Bank A can call Bank B directly. 
B)  Bank A should wait 10 minutes before calling Bank B. 
C)  Bank A cannot increase the amount. 
D)  Bank A should go back to the broker.

Question 15

A euro zone-based bank that is asset-sensitive to market interest rate changes might reduce interest rate risk by:

Accepted Answer

A)  entering into a pay fixed I receive variable standard interest rate swap 
B)  entering into a receive fixed I pay variable standard interest rate swap 
C)  entering into a pay fixed / receive variable amortizing interest rate swap 
D)  entering into a GBP/USD FX swap

Question 16

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

Accepted Answer

A)  4.19% 
B)  4.25% 
C)  4.30% 
D)  4.31%

Question 17

A bank quotes a spot rate that is verifiably incorrect and deviates substantially from the prevailing market rate.

Accepted Answer

A)  you should hit the price and hold the bank to the quoted incorrect rate, as the quoted party is entitled to hold the quoting party to an erroneous rate 
B)  you should ask the dealer to check his price, as it is highly unethical for one party to hold another to an erroneously agreed rate 
C)  you should point out the mistake and split the difference 
D)  you should keep on dealing with this bank until the mistake is rectified

Question 18

What is the ISO code for the Indian rupee?

Accepted Answer

A)  IDR 
B)  RUP 
C)  INR 
D)  IND

Question 19

Claims should be communicated in writing via e-mail or preferably by authenticated SWIFT. What information should be provided in the claim?

Accepted Answer

A)  the details of the transaction involved, the number of days the payment was delayed and the resulting cost 
B)  the details of the transaction involved, the number of days the payment was delayed and the cost, together with Central Bank rate to be applied 
C)  the details of the transaction involved, the number of days the payment was delayed and the cost, together with reference rates to be applied 
D)  the details of the transaction involved, the number of days the payment was delayed and the cost, together with the calculation methodology being claimed

Question 20

Which of following is not true?

Accepted Answer

A)  Inter-bank market participants have a duty to make absolutely clear whether the prices they are quoting are firm or merely indicative. 
B)  It is the duty of the dealer to periodically confirm with the broker the validity of his price. 
C)  It is the responsibility of the dealer to ensure that prices given to a broker are taken off if they have not been hit or were subject to a time limit. 
D)  No deal is done if one counterparty is unable to conclude a deal due to credit line problems and a name switch is not found within a reasonable period of time.

Exam 2: ACI Dealing Certificate-Part B