Question 1

When a broker makes an error on payment instructions The Model Code recommends that

Accepted Answer

A)  The broker remains liable for the resulting difference for 3 full business days following the date of the transaction. 
B)  The broker remains liable until the error is discovered. 
C)  The broker is not liable at all. 
D)  The broker's liability should be limited as he is not in a position to directly rectify the situation.

Question 2

Which of the following would not constitute an event of market isruption under the Model Code?

Accepted Answer

A)  The imposition of capital controls. 
B)  A major terrorist attack on a financial centre. 
C)  The failure of SWIFT. 
D)  Concerted cestal bank intervention.

Question 3

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

Accepted Answer

A)  MTn99 
B)  MT300 
C)  MT370 
D)  MT670/671

Question 4

What is the meaning of "under reference" in the terminology of trading?

Accepted Answer

A)  a term the quoting dealer uses to caution the receiver of the quote that the price may have to be re-quoted at the receiver's risk 
B)  the qualification that the rate quoted in the market may no longer be valid and requires confirmation before any trades can be agreed upon 
C)  the statement that the rates quoted by the broker are for indication only 
D)  an acknowledgement by the dealer receiving the quote that the rate may have to be re-quoted at the receiver's risk

Question 5

Mark-to-market' in a repo means:

Accepted Answer

A)  Revaluing collateral versus cash 
B)  Revaluing collateral 
C)  Calculating net present value 
D)  Calculating the net replacement cost

Question 6

Which of the following transactions would have the effect of shortening the average duration of liabilities in the banking book?

Accepted Answer

A)  selling holdings of 30-year German Government bonds 
B)  replacing retail savings accounts with 3-month borrowings under repo 
C)  selling futures contracts on 30-year German Government bonds 
D)  placing a 20-year covered bond in the market

Question 7

Under what conditions can an FX broker act as a position taker?

Accepted Answer

A)  if a principal refuses to honour the deal 
B)  no conditions are required; the broker is entitled to take positions 
C)  only if he can not find another counterparty for a name switching 
D)  brokers act only as intermediaries or arrangers of deals

Question 8

Which of the following is the best description of a "broken trade"?

Accepted Answer

A)  when a trade has been agreed to with dates (maturities) different from the standard dates 
B)  when one of the parties to the deal unilaterally decides to withdraw from the on-going transaction 
C)  when, due to a system break, one or both parties to the deal chooses to withdraw from the ongoing transaction 
D)  when, due to a system break, one or both parties to the deal are unclear as to whether the deal has been done

Question 9

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

Accepted Answer

A)  28th March 
B)  29th March 
C)  30th March 
D)  31st March

Question 10

A 30-day 4% CD with a face value of GBP 20,000,000.00 is trading in the secondary market with 20 days remaining to maturity at 4.05%. What would be your holding period yield if you bought the CD now and held it to maturity?

Accepted Answer

A)  4.05% 
B)  4.0% 
C)  3.891% 
D)  3.838%

Question 11

Which position below is NOT a component of common equity Tier 1 capital?

Accepted Answer

A)  innovative hybrid capital instruments with incentives to redeem 
B)  common shares issued by bank 
C)  retained earnings 
D)  stock surplus (share premium)

Question 12

Which of the following statements is true? The repo legal agreement between the two parties concerned should:

Accepted Answer

A)  detail the rights of counterparties regarding the substitution of collateral 
B)  include named securities permitted to be traded 
C)  be bi-laterally signed by both dealers involved in any transaction 
D)  need not be in place before any deals are executed or finalized

Question 13

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?

Accepted Answer

A)  0.9849 
B)  1.0154 
C)  1.9759 
D)  0.5061

Question 14

How much is a big figure worth per million of base currency it EUR/GBP is 0.6990?

Accepted Answer

A)  GBP 10,000 
B)  EUR 10,000 
C)  GBP 6,990 
D)  EUR 6,990

Question 15

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?

Accepted Answer

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 16

A broker can consider a deal as done if:

Accepted Answer

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 17

You are quoted the following rates: Spot EUR/NOK        7.5250-60 O/N EUR/NOK swap         3.10/3.20 T/N EUR/NOK swap         3.12/3.22 S/N EUR/NOK swap         9.35/9.55 At what rate can you sell EUR against NOK for value tomorrow?

Accepted Answer

A)  7.525322 
B)  7.525312 
C)  7.524688 
D)  7.524678

Question 18

Under Basel rules the risk weight for AM-rated claims on corporates in the standardized approach is:

Accepted Answer

A)  0% 
B)  15% 
C)  20% 
D)  75%

Question 19

7-day USCP is quoted at a rate of discount of 1.75%. What is its true yield?

Accepted Answer

A)  1.73% 
B)  1.75% 
C)  1.77% 
D)  1.80%

Question 20

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?

Accepted Answer

A)  a synthetic forward 
B)  a straddle 
C)  risk reversal 
D)  a strangle

Exam 2: ACI Dealing Certificate-Part B