Question 1

3-month EUR/USD FX swaps are quoted to you at 8/12. If the "points are in your favor", what have you done?

Accepted Answer

A)  Bought and sold 3-month EUR/USD through the swap 
B)  Sold and bought 3-month EUR/USD through the swap 
C)  Made the quote 
D)  Cannot say

Question 2

A CD with a face value of EUR 10,000,000.00 and a coupon of 3% was issued at par for 182 days and is now trading at 3.10% with 120 days remaining to maturity. What has been the capital gain or loss since issue?

Accepted Answer

A)  -EUR 52,161.00 
B)  -t-EUR 47,839.00 
C)  -EUR 3,827.67 
D)  Nil

Question 3

In the deposit broker market, which one of the following is not a valid reason for the proposed borrower to decline the lenders name?

Accepted Answer

A)  In the case of short date deposits, if the borrower is not prepared to repay the deposit prior to notice of receipt of the funds from the correspondent bank. 
B)  The borrower has no lending line for the placer of the funds and does not wish to be embarrassed by being unable to reciprocate. 
C)  If he secures a better rate elsewhere. 
D)  The borrower would be in breach of internal or regulatory depositor concentration limitations.

Question 4

If the yield curve is upward sloping, a bank would not profit from:

Accepted Answer

A)  borrowing short and lending long 
B)  borrowing long and lending short 
C)  paying a higher rate on deposits than the market 
D)  increasing the banks leverage

Question 5

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

Accepted Answer

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 6

A customer would hedge a currency exposure with a forward FX time option if:

Accepted Answer

A)  he is unsure about the presence of a currency risk 
B)  the amount of the currency risk is not precisely known in advance 
C)  his currency risk might change over time 
D)  the precise maturity of the currency risk is not known

Question 7

If the value date of a forward USD/JPY transaction is declared a holiday in either New York or Tokyo, the correct value date will be:

Accepted Answer

A)  the value date of the financial centre that is open 
B)  the next business day of the financial centre which is closed 
C)  the next business day when both New York and Tokyo are open 
D)  the previous business day when both New York and Tokyo are open

Question 8

You have taken 3-month deposits of EUR 10,000,000.00 at 0.60%, EUR 5,000,000.00 at 0.40% and EUR 5,000,000.00 at 0.50%. What is the average rate of your long position?

Accepted Answer

A)  0.525% 
B)  0.45% 
C)  0.75% 
D)  0.375%

Question 9

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

Accepted Answer

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 10

What is the expression used to describe a genuine error (wrong amount, wrong side, wrong rate) made by a dealer in the execution of an order on an electronic platform?

Accepted Answer

A)  mis-stroke 
B)  slip-bid 
C)  mis-hit 
D)  broken trade

Question 11

If you lend for 3 months and borrow for 6 months, you may be said to:

Accepted Answer

A)  Be over-lent 
B)  Have a negative gap 
C)  Be exposed to higher interest rates 
D)  Be over-borrowed

Question 12

When performing a gap analysis, into which of the following time buckets should a 5-year floating-rate note with a 6-month LIBOR coupon be slotted?

Accepted Answer

A)  the 6-month bucket 
B)  the 2.5-year bucket 
C)  the 5-year bucket 
D)  It should be weighted and apportioned in each of the time buckets in accord with the periodic coupon payments.

Question 13

Which of the following statements about Eurodollar deposits is correct?

Accepted Answer

A)  Eurodollar deposits can only be dealt by banks in the USA 
B)  US withholding tax applies to Eurodollar deposits 
C)  Eurodollar deposits are free of US reserve requirements 
D)  Eurodollar deposits are subject to US exchange controls

Question 14

Which of the following is true?

Accepted Answer

A)  The 3-month Sterling (SHORT STERLING) futures contract has a basis point value of GBP 25.00 and a face value of GBP 1,000,000 .00 
B)  The EUROYEN TIBOR futures contract has a basis point value of JPY 25,000 and a face value of JPY 1,000,000,000 
C)  The CME EURODOLLAR futures contract has a minimum price interval of one-quarter basis point value (0.0025) for the nearest contract 
D)  The 3-month EURIBOR futures contract has a minimum price interval of half a basis point value (0.0050) for the nearest contract

Question 15

An option premium is a positive function of:

Accepted Answer

A)  Time to expiry 
B)  The volatility of the price of the underlying commodity 
C)  The moneyness of the option 
D)  All of the above

Question 16

The market is quoting: 1-month (30-day) GBP     0.47% 7-month (213-day) GBP     0.74% What is the 1x7 rate in GBP?

Accepted Answer

A)  0.7956% 
B)  0.7946% 
C)  0.7840% 
D)  0.7732%

Question 17

The primary issue for insuring prudent liquidity management in accord with the guidance provided by the Basel Committee (Basel II I Basel III) is:

Accepted Answer

A)  Tier 3 capital requirements held against liquidity risk. 
B)  The nature and amount of high quality liquid assets a bank holds. 
C)  Central bank internal management processes regarding open market operations. 
D)  The transparent disclosure of illiquid on-balance sheet liabilities.

Question 18

What is the Overnight Index for EUR?

Accepted Answer

A)  EURIBOR 
B)  EONIA 
C)  EUREPO 
D)  EURONIA

Question 19

You are the fixed-rate payer in a plain vanilla interest rate swap. If your counterparty defaults, your exposure at default is:

Accepted Answer

A)  greater, the higher the market swap rate and the shorter the term 
B)  lower, the lower the market swap rate and the shorter the term 
C)  lower, the lower the market swap rate and the longer the term 
D)  greater, the higher the market swap rate and the longer the term

Question 20

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

Accepted Answer

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

Exam 2: ACI Dealing Certificate-Part B