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Vendor: ACI

Exam Code: 3I0-012

Exam Name: ACI Dealing Certificate

Q&As: 740
QUESTION 1
What is the amount of the principal plus interest due at maturity on a 1-month (32-day) deposit of USD
50,000,000.00 placed at 0.37%?

A. EUR 50,015,416.67
B. EUR 50,016,219.18
C. EUR 50,016,444.44
D. EUR 50,016,958.33

Correct Answer: C

QUESTION 2
Which of the following currencies is quoted on an ACT/360 basis in the money market?

A. SGD
B. PLN
C. GBP
D. NZD

Correct Answer: D

QUESTION 3
Today's spot value date is the 30th of June. What is the maturity date of a 2-month EUR deposit deal
today? Assume no bank holidays.

A. 27th August
B. 30th August
C. 31st August
D. 1 September

Correct Answer: C

QUESTION 4
How many GBP would you have to invest at 0.55% to be repaid GBP 2,000,000.00 (principal plus interest)
in 90 days?

A. GBP 1,997,253.78
B. GBP 1,997,291.34
C. GBP 1,997,287.67
D. GBP 1,997,250.00

Correct Answer: B

QUESTION 5
From the following GBP deposit rates:

1M (30-day) GBP deposits 0.45%

2M (60-day) GBP deposits 0.50%
3M (91-day) GBP deposits 0.55%
4M (123-day) GBP deposits 0.65%
5M (153-day) GBP deposits 0.70%
6M (184-day) GBP deposits 0.75%

Calculate the 3x4 forward-forward rate.

A. 0.60%
B. 0.949%
C. 1.074%
D. 0.933%

Correct Answer: D

QUESTION 6
What is EONIA?

A. Volume-weighted average overnight EUR deposit rate

B. Volume-weighted average overnight EUR LIBOR
C. Arithmetic average overnight EUR deposit rate
D. ECB overnight lending rate

Correct Answer: A

QUESTION 7
Which of the following is not a negotiable instrument?

A. CD
B. FRA
C. BA
D. ECP

Correct Answer: B

QUESTION 8
Which of the following is a Eurocurrency deposit?

A. A 3-month deposit of USD 10,000,000.00 offered by a US bank in New York

B. A 3-month deposit of USD 10,000,000.00 offered by the US branch of a UK bank in New York
C. A 3-month deposit of USD 10,000,000.00 offered by a US bank in London
D. A 3-month deposit of GBP 10,000,000.00 offered by the UK branch of a US bank in London

Correct Answer: C

QUESTION 9
What is the maximum maturity of an unsecured USCP?

A. One year
B. 270 days
C. 183 days
D. 5 years

Correct Answer: B

QUESTION 10
Which party usually takes an initial margin in a classic repo?

A. The buyer
B. The seller
C. Neither
D. Both

Correct Answer: A

QUESTION 11
What are the primary reasons for taking an initial margin in a classic repo?
A. Counterparty risk and operational risk
B. Counterparty risk and legal risk
C. Collateral illiquidity and counterparty risk
D. Collateral illiquidity and legal risk

Correct Answer: C

QUESTION 12
What happens when a coupon is paid on bond collateral during the term of a classic repo?

A. Nothing
B. A margin call is triggered on the seller
C. A manufactured payment is made to the seller
D. Equivalent value plus reinvestment income is deducted from the repurchase price

Correct Answer: C

QUESTION 13
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?

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

Correct Answer: C

QUESTION 14
You have taken 3-month (92 days) deposits of CAD 12,000,000.00 at 1.10% and CAD 6,000,000.00 at
1.04%. Minutes later, you quote 3-month CAD 1.09-14% to another bank. The other dealer takes the CAD
18,000,000.00 at your quoted price. What is your profit or loss on this deal?

A. CAD 2,722.19
B. CAD 460.00
C. CAD 3,220.00
D. CAD 2,760.00

Correct Answer: D

QUESTION 15
A 7% CD was issued at par, which you now purchase at 6.75%. You would expect to pay:

A. The face value of the CD

B. More than the face value
C. Less than the face value
D. Too little information to decide

Correct Answer: B

QUESTION 16
The tom/next GC repo rate for German government bonds is quoted to you at 1.75-80%. As collateral, you
sell EUR 10,000,000.00 nominal of the 5.25% Bund July 2012, which is worth EUR 11,260,000.00, with no
initial margin. The Repurchase Price is:

A. EUR 10,000,500.00
B. EUR 10,000,486.11
C. EUR 11,260,563.00
D. EUR 11,260,547.36

Correct Answer: C

QUESTION 17
The tom/next GC repo rate for German government bonds is quoted to you at 1.75-80%. As collateral, you
sell EUR 10,000,000.00 million nominal of the 5.25% Bund July 2012, which is worth EUR 11,260,000.00.
If you have to give an initial margin of 2%, the Repurchase Price is:

A. EUR 11,035,336.41
B. EUR 11,035,351.74
C. EUR 11,039,752.32
D. EUR 11,039,767.65

Correct Answer: D

QUESTION 18
A bond is trading 50 basis points special for 1 week, while the 1-week GC repo rate is 3.25%. If you held
GBP 10,500,000.00 of this bond, what would be the cost of borrowing against it in the repo market?

A. GBP 7,551.37
B. GBP 6,544.52
C. GBP 5,537.67
D. GBP 1,006.85

Correct Answer: C

QUESTION 19
If EUR/USD is quoted to you as 1.3050-53, does this price represent?

A. The number of EUR per USD

B. The number of USD per EUR
C. Depends on whether the price is being quoted in Europe or the US
D. Depends on whether the price is being quoted interbank or to a customer

Correct Answer: B

QUESTION 20
The seller of a EUR/RUB NDF could be:

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

Correct Answer: B

QUESTION 21
Voice-brokers in spot FX act as:

A. Proprietary traders
B. Market-makers
C. Matched principals
D. Agents
Correct Answer: D

QUESTION 22
Are the forward points significantly affected by changes in the spot rate?

A. Never
B. For very large movements and longer terms
C. Always
D. Spot is the principal influence

Correct Answer: B

QUESTION 23
In GBP/CHF, you are quoted the following prices by four different banks. You are a buyer of CHF.
Which is the best quote for you?

A. 1.4340
B. 1.4343
C. 1.4337
D. 1.4335

Correct Answer: B

QUESTION 24
Which of the following CHF/JPY quotes that you have received is the best rate for you to buy CHF?

A. 105.80
B. 105.75
C. 105.70
D. 105.85

Correct Answer: C

QUESTION 25
You have quoted spot USD/CHF at 0.9423-26. Your customer says "I take 5". What does he mean?

A. He buys CHF 5,000,000.00 at 0.9423

B. He buys CHF 5,000,000.00 at 0.9426
C. He buys USD 5,000,000.00 at 0.9423
D. He buys USD 5,000,000.00 at 0.9426

Correct Answer: D

QUESTION 26
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?

A. Unchanged
B. Move towards 28/31
C. Move towards 5 7/60
D. Insufficient information

Correct Answer: C

QUESTION 27
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:

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

Correct Answer: A

QUESTION 28
Clients of a voice-broker quote EUR/USD at 1.3556-61, 1.3559-62, 1.3557-63 and 1.3555-59.

What will be the broker's price?

A. 1.3559 choice
B. 1.3555-63
C. 1.3559-62
D. 1.3556-59

Correct Answer: A

QUESTION 29
A "time option" is an outright forward FX transaction where the customer:

A. has the option to fulfill the outright forward or not at maturity

B. may freely choose the maturity, given a 24-hour notice to the bank
C. can choose any maturity within a previously fixed period
D. may decide to deal at the regular maturity or on either the business day before or after

Correct Answer: C

QUESTION 30
As far as fineness and weight are concerned, what are the London Bullion Market Association (LBMA)
requirements for a "good delivery bar"?

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

Correct Answer: A

QUESTION 31
If spot AUD/USD is quoted to you as 1.0420-25 and 1-month forward AUD/USD is quoted to you as 28/23,
at what rate can you buy USD 1-month outright?

A. 1.0448
B. 1.0402
C. 1.0397
D. 1.0392

Correct Answer: D

QUESTION 32
The mid-rate for USD/CHF is 0.9300 and the mid-rate for NZD/USD is 0.8560. What is the mid rate for
NZD/CHF?

A. 0.7961
B. 1.0864
C. 1.7860
D. 1.2561

Correct Answer: A

QUESTION 33
You quote a customer a spot cable 1.6050-55 in USD 3,000,000.00. If they sell USD to you, how much
GBP will you be short of?

A. 4,816,500.00
B. 1,869,158.88
C. 1,868,57677
D. 4,815,000.00

Correct Answer: C

QUESTION 34
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?

A. 6.4250
B. 6.3810
C. 6.7850
D. 6.3890

Correct Answer: D

QUESTION 35
You are quoted the following market rates:
Spot GBP/USD 1.5525
9M (272-day) GBP 0.81%
9M (272-day) USD 0.55%

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

A. -30
B. +29
C. -29
D. +30

Correct Answer: C

QUESTION 36
You quote a customer spot AUD/USD at 1.0350-55. The T/N swap is quoted to you at 3/2. The customer
asks to buy USD for value tomorrow. What rate should you quote him to break-even against the other
rates?

A. 1.0352
B. 1.0353
C. 1.0347
D. 1.0348

Correct Answer: A

QUESTION 37
Which of the following is true about interest rate swaps (IRS):

A. Both parties know what their future payments will be at the outset of the swap
B. There is payment of principal at maturity
C. Payments are always made gross
D. The fixed rate payer knows what his future payments will be at the outset of the swap

Correct Answer: D

QUESTION 38
Which of the following is true?

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

Correct Answer: C

QUESTION 39
EURODOLLAR futures are:

A. Traded on the Chicago Mercantile Exchange (CME Group) and have a face value of USD 500,000.00
B. Traded on the Intercontinental Exchange (ICE) and have a face value of USD 1,000,000.00
C. Traded on the Intercontinental Exchange (ICE) and have a face value of USD 500,000.00
D. Traded on the Chicago Mercantile Exchange (CME Group) and have a face value of USD
1,000,000.00

Correct Answer: D

QUESTION 40
You have a short position of 50 EURODOLLAR futures contracts. You can hedge your position by:

A. Selling a FRA for a similar notional amount

B. Buying a FRA for a similar notional amount
C. Selling a call option on the contract
D. Selling a put option on the contract

Correct Answer: A

QUESTION 41
If a dealer has a 6-month USD asset and a 3-month USD liability, how could he hedge his balance sheet
exposure in the FRA market?

A. Buy 3x6
B. Sell 3x6
C. Buy 0x6
D. Sell 6x9
Correct Answer: A

QUESTION 42
What is the Overnight Index for EUR?

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

Correct Answer: B

QUESTION 43
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?

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

Correct Answer: C

QUESTION 44
Which of the following is true?

A. The 3-month EURODOLLAR futures contract has a basis point value of USD 50.00 and a face value of
USD 1,000,000.00
B. The 3-month EURIBOR futures contract has a a basis point value of EUR 12.50 and a face value of
EUR 500,000.00
C. The 3-month Sterling (SHORT STERLING) futures contract has a a basis point value of GBP 12.50
and a face value of GBP 500,000.00
D. The 3-month Euro Swiss Franc (EUROSWISS) futures contract has a a basis point value of CHF 50.00
and a face value of CHF 2,000,000.00

Correct Answer: C

QUESTION 45
Basis risk on a futures contract is:

A. The risk of an adverse change in the futures price

B. The risk of an adverse change in the spread between futures and cash prices
C. The progressive illiquidity of a futures contract as it approaches expiry
D. The risk of a divergence between the futures price and the final fixing of the underlying interest rate

Correct Answer: B

QUESTION 46
Lending for 3 months and borrowing for 6 months creates a 3x6 forward-forward deposit. The cost of that
deposit is called:

A. Implicit nominal rate

B. Implied forward rate
C. Funding rate
D. Effective future rate
Correct Answer: B

QUESTION 47
A corporate wishing to hedge the interest rate risk on its floating-rate borrowing would:

A. Sell interest rate caps

B. Sell futures
C. Sell FRAs
D. Buy futures

Correct Answer: B

QUESTION 48
The market is quoting:

6-month (182-day) CAD 1.25%

12-month (366-day) CAD 1.55%

What is the 6x12 rate in CAD?

A. 0.300%
B. 0.946%
C. 1.935%
D. 1.835%

Correct Answer: D

QUESTION 49
The seller of a put option has:

A. Substantial opportunity for gain and limited risk of loss

B. Substantial risk of loss and substantial opportunity for gain
C. Limited risk of loss and limited opportunity for gain
D. Substantial risk of loss and limited opportunity for gain

Correct Answer: D

QUESTION 50
The exercise price in an option contract is:

A. The price of the underlying instrument at the time of the transaction

B. The price at which the transaction on the underlying instrument will be carried out if and when the
option is exercised
C. The price the buyer of the option pays to the seller when entering into the options contract
D. The price at which the two counterparties can close-out their position

Correct Answer: B

QUESTION 51
An `at-the-money' option has:

A. Intrinsic value but no time value

B. Time value but no intrinsic value
C. Both time value and intrinsic value
D. Neither time value nor intrinsic value

Correct Answer: B
QUESTION 52
The vega of an option is:

A. The sensitivity of the option value to changes in interest rates

B. The sensitivity of the option value to changes in implied 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

Correct Answer: B

QUESTION 53
An option is:

A. The right to buy or sell a commodity at a fixed price

B. The right to buy a commodity at a fixed price
C. The right but not the obligation to buy or sell a commodity at a fixed price
D. The right but not the obligation to buy a commodity at a fixed price

Correct Answer: C

QUESTION 54
A put option is `out-of-the-money' if:

A. Its strike price is higher than the current market price of the underlying commodity
B. If the current market price of the underlying commodity is higher than the strike price of the option
C. Its strike price is equal to the current market price of the underlying commodity
D. If the current market price of the underlying commodity is lower than the strike price of the option

Correct Answer: B

QUESTION 55
Which of the following transactions would have the effect of lengthening the average duration of assets in
the banking book?

A. buying futures contracts on 30-year German Government bonds

B. selling futures contracts on 30-year German Government bonds
C. buying put options on 30-year German Government bonds
D. buying a 3x6 forward rate agreement

Correct Answer: A

QUESTION 56
What is a `duration gap'?

A. the average maturity of liabilities on a balance sheet

B. the difference between the duration of assets and liabilities
C. the difference between the duration of the longest-held and shortest-held liabilities on the balance
sheet
D. the average maturity of the portfolio on the asset side of a balance sheet

Correct Answer: B

QUESTION 57
Which statement about modern matched-maturity transfer pricing in banks is correct?

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.

Correct Answer: D

QUESTION 58
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?

A. > 2% of 6 months forward earnings

B. > 20% of regulatory capital
C. <10% of regulatory capital
D. < 5% of 12 months forward earnings

Correct Answer: B

QUESTION 59
Which one of the following statements is incorrect? Hedge accounting of an existing position no longer
applies when:

A. the trader acquires additional exposure in the hedged item.

B. the hedging instrument is sold, terminated or exercised.
C. the hedged item is sold or settled.
D. a hedge fails the effectiveness test.

Correct Answer: A

QUESTION 60
Which of the following is a function of asset and liability management (ALM)?

A. coordinated limit management of a financial institution's credit portfolio

B. running a matched trading book
C. monitoring credit quality of assets and establishing a early warning system
D. managing the financial risk of the bank by protecting it from the adverse effects of changing interest
rates

Correct Answer: B

QUESTION 61
Which of the following statements is correct?

A. Unilateral collateral obligations to sovereign counterparties provide liquidity to banks.

B. Under Basel III commercial banks are most likely to incur lower costs to service their sovereign clients.
C. While banks usually do not call for collateral from sovereign counterparties, they must provide collateral
for the offsetting hedge transactions which are undertaken with commercial counterparties.
D. Uncollateralised exposures to sovereign counterparties will not require additional regulatory capital to
be set aside against potential credit losses

Correct Answer: C

QUESTION 62
Which one of the following statements about interest rate movements is true?

A. An upward parallel shift of interest rates will cause a loss of income if the rate-sensitivity of a bank's
 liabilities is higher than the rate-sensitivity of its assets.
B. A bank will lose income if it has more rate-sensitive liabilities than rate-sensitive assets.
C. Falling interest rates will always result in mark-to-market profits on short positions in fixed rate
securities.
D. Rising interest rates can result in mark-to-market losses on fixed-rate assets.

Correct Answer: D

QUESTION 63
Under Basel rules, what is the meaning of EEPE?

A. Effective Expected Potential Exposure

B. Effective Expected Positive Exposure
C. Effective Expected Price Earning
D. Effective Expected Payment Exposure

Correct Answer: B

QUESTION 64
The major risk to the effectiveness of netting is:

A. Credit risk
B. Settlement risk
C. Liquidity risk
D. Legal risk

Correct Answer: D

QUESTION 65
Which of the following methods is a means of credit risk mitigation?

A. entering into a plain vanilla IRS

B. entering into collateral agreements
C. hedging a portfolio's USD exposure
D. investing only in sizeable and liquid markets

Correct Answer: B

QUESTION 66
Which of the following scenarios offer an example of wrong way risk?

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

Correct Answer: A

QUESTION 67
Which of the following is typical of liquid assets held by banks under prudential requirements?

A. prices increase during a systemic crisis

B. return on investment is relatively high
C. absence of active market makers
D. wide bid/offer spreads

Correct Answer: A

QUESTION 68
What is the correct interpretation of a EUR 2,000,000.00 overnight VaR figure with a 97% confidence
level?

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.

Correct Answer: C

QUESTION 69
Hybex Electrics is a highly rated company with a considerable amount of fixed rate liabilities and would like
to increase the percentage of floating rate debt. Which of the following is the best course of action?

A. Hybex should become a payer of a fixed rate on a swap against receipt of LIBOR.
B. Hybex should become a receiver of a floating rate on a swap against payment of a fixed rate
C. Hybex should become a receiver of a fixed rate on a swap against payment of LIBOR D.
D. Hybex should become a receiver of a floating rate on a swap against payment of LIBOR

Correct Answer: C

QUESTION 70
Which one of the following statements correctly describes the increased capital ratios that will come into
effect under Basel III?

A. minimum tier 1 capital of 4.5% and minimum total capital plus a conservation buffer of 10.5%
B. minimum tier 1 capital of 6% and minimum total capital including conservation buffer of 8%
C. minimum tier 1 capital of 4% and minimum total capital including conservation buffer of 10.5%
D. minimum tier 1 capital of 6% and minimum total capital including conservation buffer of 10.5%

Correct Answer: D

QUESTION 71
Responsibility for the activities of all personnel engaged in dealing (both dealers and support staff) for both
principals and brokers lies with:

A. the market supervisor

B. the national ACI association
C. the management of such organizations
D. the central bank

Correct Answer: C

QUESTION 72
Which Greek letter is used to describe the ratio of change in the option price compared with change in the
price of the underlying instrument, when all other conditions are fixed?

A. beta
B. gamma
C. delta
D. theta

Correct Answer: C
QUESTION 73
When banks transact FX swaps, the spot price should be determined:

A. anytime after the swap is transacted

B. before the swap is transacted
C. immediately after the swap is transacted
D. no less than 24 hours after the completion of the swap

Correct Answer: C

QUESTION 74
Which of the following statements is true?

A. Prices quoted by brokers should be taken to be firm in marketable amounts unless otherwise qualified
B. Prices quoted by brokers should be taken to be indicative in marketable amounts unless otherwise
qualified
C. Prices quoted by brokers should be taken to be firm in amounts of 1,000,000.00 of the quoted currency
unless otherwise qualified
D. Prices quoted by brokers should be taken to be indicative in amounts of 1,000,000.00 of the base
currency unless otherwise qualified

Correct Answer: A

QUESTION 75
A broker offers a dealer a financial incentive in the form of a price reduction to the previously agreed
brokerage arrangements between the firms.

A. This is considered as a normal discount for bulk business.

B. The offer should be agreed only by directors or senior management on each side and should be
recorded in writing.
C. The offer should be expressly approved by both the individuals concerned and clearly recorded in
writing.
D. The Model Code strongly discourages such practices.

Correct Answer: B

QUESTION 76
What ought to be done in the event a trade erroneously occurs at an off-market rate?

A. By agreement between the two counterparties, the trade must be cancelled as soon as practically
possible since a rate amendment is prohibited.
B. By agreement between the two counterparts, the trade should, as soon as practically possible, either
be cancelled or have its rate amended to an appropriate market rate.
C. The off-market rate should be adjusted as soon as possible to the appropriate current market rate and
a new authenticated SWIFT confirmation sent immediately to the counterparty.
D. Nothing need be done, since once a trade is agreed to by the front office it is a binding agreement for
both counterparties.

Correct Answer: B

QUESTION 77
How long does the Model Code recommend that tapes and other records of dealers/brokers be kept?

A. at least two months

B. one year
C. up to one month
D. at least three months
Correct Answer: A

QUESTION 78
What is the meaning of "under reference" in the terminology of trading?

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

Correct Answer: B

QUESTION 79
You request use of funds from your agent bank for 1 day on an amount of EUR 100,000,000.00, EONIA
was 0.812% and the ECB deposit facility rate is 0.50%. What use of funds settlement amount should you
expect?

A. EUR 1,388,89
B. EUR 1,561.11
C. EUR 2,255.56
D. EUR 2,951.39

Correct Answer: B

QUESTION 80
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:

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

Correct Answer: C

QUESTION 81
How frequently should business contingency procedures be tested and updated?

A. quarterly tests I updates as needed

B. at least every second year
C. half-yearly tests / yearly updates
D. at least yearly

Correct Answer: D

QUESTION 82
Which of the following does the Model Code mention with regards to recording telephone conversations?

A. There is no need to inform new counterparties and clients that conversations will be recorded.
B. It is normal practice that tapes and other records should be kept for at least twelve months.
C. The periods for which tapes and other records should be retained should reflect the way in which the
terms and conditions of transactions have been agreed, and the duration of transactions.
D. Dealers and other staff are reminded that telephones and electronic text messaging systems in the firm
are intended for business and private use and that conversations and exchanges of text messages
 should be conducted in a casual manner.

Correct Answer: C

QUESTION 83
Regarding access to production systems, which of the following is incorrect?

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.

Correct Answer: B

QUESTION 84
Which one of the following statements is true?

A. Brokers should only show the names of banks to counterparties who have prime credit ratings.
B. Brokers should only show the names of banks to counterparties who provide good liquidity to the
brokered market.
C. Brokers should only show the names of banks to counterparties whom they know well.
D. Brokers should only show the names of bank counterparties if both sides display a serious intention to
transact

Correct Answer: D

QUESTION 85
When do bank participants have a duty to make absolutely clear whether the prices they are quoting are
firm or merely indicative?

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

Correct Answer: D

QUESTION 86
The use of standard settlement instructions (SSI's) is strongly encouraged because:

A. it reduces operational risk

B. it splits differences arising from failed settlement between the two counterparties
C. it removes the need for sending out SWIFT confirmations
D. the use of SSI's secures the trading on more secure platforms

Correct Answer: A

QUESTION 87
Which of the following statements is true concerning dealing and rollovers at non-current rates?

A. When setting the rates for an FX swap to extend the maturity, the spot rate should be fixed immediately
within the current spread
B. Where the use of non-current rates may be necessary, they should only be entered into with the prior
explicit permission of the quoting party's senior management
C. Dealing and rollovers at non-current rates are relatively common market practice and therefore should
not be treated differently from any other transaction
D. Dealing and rollovers at non-current rates are forbidden as they can help perpetrate fraud and tax
evasion
Correct Answer: A

QUESTION 88
A bank that has quoted a firm price is obliged to deal:

A. At that price
B. At that price in a marketable amount
C. At that price in a marketable amount, provided the counterparty's name is acceptable
D. At that price in a marketable amount, provided the counterparty's name is acceptable and the market
price has not moved excessively

Correct Answer: C

QUESTION 89
Confirmations of non-prime brokerage deals using CLS should be exchanged:

A. within 2 hours after deal agreed with counterparty

B. before the value date of the trade
C. by the end of the trade date
D. within 24 hours

Correct Answer: A

QUESTION 90
Your agent bank accepts your back-valuation request for 1 day on an amount of EUR 50,000,000.00.
EONIA is 0.375% and the ECB marginal lending facility rate is 1.50%. Applying conventional
administration fees, how much will this be charged?

A. EUR 620.83
B. EUR 868.06
C. EUR 968.06
D. EUR 2,183.33

Correct Answer: C

QUESTION 91
A 3-month (91-day) deposit of AUD 25,000,000.00 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)?

A. AUD 25,962,011.00
B. AUD 25,959,714.91
C. AUD 25,948,878.47
D. AUD 25,948,648.82

Correct Answer: A

QUESTION 92
Which of the following rates represents the highest investment yield in the Euromarket?

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%

Correct Answer: C
QUESTION 93
A 3-month (91-day) US Treasury bill is quoted at a rate of discount of 4.25%. What is its true yield?

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

Correct Answer: C

QUESTION 94
Today's spot value date is Friday 27th February. What is normally the 1-month maturity date? Assume no
bank holidays.

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

Correct Answer: D

QUESTION 95
The Market Segmentation hypothesis suggests that the yield curve bends at some point along its length
because:

A. Investors have less appetite for longer-term investments

B. Borrowers prefer to borrow long-term but lenders prefer to lend short-term
C. Different types of institution tend to specialize in different maturity ranges
D. The risk premium becomes significant only at longer maturities

Correct Answer: C

QUESTION 96
Which of the following is always a secured instrument?

A. ECP
B. Repo
C. Interbank deposit
D. CD

Correct Answer: B

QUESTION 97
What type of institution is the typical drawer of banker's acceptances?

A. Credit institution
B. Investment bank
C. Corporate
D. Central Bank

Correct Answer: A

QUESTION 98
Which type of repo is the most risky for the buyer?

A. Delivery repo
B. HIC repo
C. TO-party repo
D. There is no real difference

Correct Answer: C

QUESTION 99
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?

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

Correct Answer: A

QUESTION 100
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?

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

Correct Answer: B

QUESTION 101
The spot/week repo rate for the 4.25% OAT 2015 is quoted to you at 2.35-38%. You buy bonds with a
market value of EUR 3,295,500.00 through a sell/buy-back. The Repurchase Price is:

A. EUR 3,297,004.19
B. EUR 3,297,005.86
C. EUR 3,297,025.09
D. EUR 3,296,985.23

Correct Answer: B

QUESTION 102
The two-week repo rate for the 5.25% Bund 2014 is quoted to you at 3.33-38%. You agree to reverse in
bonds worth EUR 266,125,000.00 with no initial margin.

You would earn repo interest of:

A. EUR 349,806
B. EUR 344,632
C. EUR 319,315
D. EUR 324,110

Correct Answer: B

QUESTION 103
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?
A. 0.8345-53
B. 0.8345-50
C. 0.8349-50
D. 0.8349-53

Correct Answer: C

QUESTION 104
How would you compute the bid side of the forward/forward FX swap points?

A. bid side of the near leg swap points minus offered side of the far leg swap points
B. bid side of the far leg swap points minus offered side of the near leg swap points
C. offered side of the far leg swap points minus bid side of the near leg swap points
D. offered side of the near leg swap points minus bid side of the far leg swap points

Correct Answer: B

QUESTION 105
What is the ISO code for the Argentine peso?

A. ARP
B. ARS
C. ARA
D. AED

Correct Answer: B

QUESTION 106
Automated trading systems for interbank spot FX display the best prices entered into the systems by users
and:

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

Correct Answer: B

QUESTION 107
What is the ISO code for silver?

A. XAU
B. XAG
C. XPT
D. XPD

Correct Answer: B

QUESTION 108
What is the ISO code for palladium?

A. XAU
B. XAG
C. XPT
D. XPD

Correct Answer: D
QUESTION 109
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:

A. added to spot
B. subtracted from spot
C. a negative value
D. Insufficient information to decide

Correct Answer: A

QUESTION 110
The forward points are calculated using:

A. The level of interest rates in the base currency

B. The level of interest rates in the quoted currency
C. The interest rates in the two currencies
D. Your expectations of the future spot rate

Correct Answer: C

QUESTION 111
If you are trading spot on an ATS (Automated Trading System) and see a price for EUR/USD of 1.3050-53.
If you hit the button marked "YOURS", what have you done?

A. Bought EUR at 1.3053

B. Bought USD at 1.3053
C. Sold EUR at 1.3050
D. Sold USDatl.3050

Correct Answer: C

QUESTION 112
3-month EUR/USD FX swaps are quoted to you at 8/12. If the "points are in your favor", what have you
done?

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

Correct Answer: A

QUESTION 113
If spot GBP/CHF is quoted 1.4275-80 and the 3-month forward outright is 1.4254-61, what are the forward
points?

A. 19/21
B. 2.1/1.9
C. 21/19
D. 0.21/0.19

Correct Answer: C

QUESTION 114
Your are quoted the following rates:
Spot CHF/JPY105.12-22
3M CHF/JPY 3.5/4.5

At what rate can you buy 3-month outright JPY against CHF?

A. 105.085
B. 105.265
C. 108.62
D. 105.155

Correct Answer: D

QUESTION 115
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?

A. 1.0759
B. 0.9299
C. 1.5909
D. 0.9295

Correct Answer: B

QUESTION 116
If spot NZD/CHF is quoted to you as 0.7406-09. How many NZD would you receive in exchange for CHF
5,000,000.00 if you dealt on the price?

A. 3,704,500.00
B. 6,748,549.06
C. 3,703,000.00
D. 6,751,282.74

Correct Answer: B

QUESTION 117
You quote the following rates to a customer:
Spot GBP/CHF 1.4535-45
6MGBP/CHF swap 46/41

At what rate do you sell GBP to a customer 6-month outright?

A. 1.4494
B. 1.4499
C. 1.4504
D. 1.4586

Correct Answer: C

QUESTION 118
You are paying 5% 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 4.95%. You expect 6-month LIBOR in 6 months to fix at 5.25%, in 12 months at 5.35% and in 18
months at 5.40%. What do you expect the net settlement amounts to be over the next 2 years? Assume
30-day months.

A. Pay 250.00, receive 1,250.00, receive 1,750.00, receive 2,000.00

B. Receive 250.00, pay 1,250.00, pay 1,750.00, pay 2,000.00
C. Pay 2,500.00, receive 12,500.00, receive 17,500.00, receive 20,000.00
D. Receive 2,500.00, pay 12,500.00, pay 17,500.00, pay 20,000.00

Correct Answer: C

QUESTION 119
You sold a JPY 500,000,000 1x12 FRA at 0.35%. The settlement rate is 11-month (334-day) JPY LIBOR,
which is fixed at 0.4450%.

What is the settlement amount at maturity?

A. You pay JPY 440,694

B. You receive JPY 440,694
C. You pay JPY 438,882
D. You receive JPY 438,882

Correct Answer: C

QUESTION 120
A Eurodollar futures price of 99.685 implies:

A. A forward-forward rate of 0.685%

B. A forward-forward rate of 0.315%
C. Current 3-month LIBOR of 0.6850%
D. Current 3-month LIBOR of 0.3150%

Correct Answer: B

QUESTION 121
In the international market, a FRA in USD is usually settled with reference to:

A. BBA LIBOR
B. Fed funds
C. ISDALIBOR
D. EURIBOR

Correct Answer: A

QUESTION 122
A bank borrowing USD for 12 months and lending them for 6 months creates:

A. Forward-forward loan
B. Forward-forward deposit
C. Negative gap
D. An over-lent position

Correct Answer: B

QUESTION 123
A futures clearing house is:

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

Correct Answer: A

QUESTION 124
An Overnight Indexed Swap (OIS) is:

A. A fixed-floating money market swap in which the floating rate is an overnight index fixed periodically
over the term of the swap
B. A fixed-floating money market swap in which the floating rate is the mean of the overnight index over
the term of the swap
C. A fixed-floating money market swap in which the floating rate is an overnight index compounded daily
D. A floating-for-floating rate swap in different currencies in which both floating rates are overnight indexes
compounded daily

Correct Answer: C

QUESTION 125
It is June. You are over-borrowed from October to January on your deposit book. How would you hedge
using FRAs?

A. Sell 3x6
B. Buy 3x6
C. Sell 4x7
D. Buy 4x7

Correct Answer: C

QUESTION 126
Today, you sold 10 December EURODOLLAR futures contracts at 99.50. The closing price is fixed by the
exchange at 99.375. What variation margin will be due?

A. You will have to pay USD 312.50

B. You will receive USD 312.50
C. You will have to pay USD 3,125.00
D. You will receive USD 3,125.00

Correct Answer: D

QUESTION 127
What is a short straddle option strategy?

A. A long call option + long put option with the same strike prices
B. A short call option + short put option with the same strike prices
C. A long call option + short put option with the same strike prices
D. A short call option + long put option with the same strike prices

Correct Answer: B

QUESTION 128
What is the probability of an `at-the-money' option being exercised?

A. Less than 50% probability

B. 50% probability
C. More than 50% probability
D. Zero probability

Correct Answer: B

QUESTION 129
What is a short strangle option strategy?

A. A short call option + long put option with a higher strike price than the call option
B. A long call option + long put option with a lower strike price than the call option
C. A short call option + short put option with a lower strike price than the call option
D. A long call option + long put option with higher strike price than the call option

Correct Answer: C

QUESTION 130
A euro zone-based bank that is asset-sensitive to market interest rate changes might reduce interest rate
risk by:

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

Correct Answer: B

QUESTION 131
Which of the following statements about leverage ratios under Basel III is correct?

A. The leverage ratio is the ratio of the bank's Tier 1 Capital to total assets of the bank, excluding its off-
balance sheet exposures and derivatives.
B. The purpose of introducing a leverage ratio is to avoid the build-up of excess leverage that could
potentially lead to a "credit crunch" in stressed conditions.
C. The leverage ratio under Basel III must be higher than 4%.
D. The leverage ratio is the ratio of the bank's Tier 1 and Tier 2 Capital to total assets of the bank,
including its off-balance sheet exposures and derivatives.

Correct Answer: B

QUESTION 132
Complete the following sentence. If a bank has an asset repricing in 6 months funded by a liability repriced
in 3 months:

A. the bank would benefit from higher interest rates

B. the bank could hedge this interest rate risk with a 3x6 derivative
C. the bank will make mark-to-market losses if rates decrease
D. the bank could hedge this interest rate risk by selling a 6x9 derivative

Correct Answer: A

QUESTION 133
The Liquidity Coverage Ratio (LCR) in Basel III:

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

Correct Answer: B

QUESTION 134
What is interest rate immunization in the context of bank gap management?

A. the strategy of holding more interest rate sensitive assets than interest rate sensitive liabilities
B. the strategy of holding fewer interest rate sensitive assets than interest rate sensitive liabilities
C. reducing the size of the balance sheet
D. structuring a bank's portfolio so that its net interest revenue and/or the market value of its portfolio will
not be adversely affected by changes in interest rates

Correct Answer: C

QUESTION 135
The weighted average duration of liabilities can be increased by:

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

Correct Answer: D

QUESTION 136
Prudential regulation of banking book liquidity risk is dealt with by the Basel Committee (Basel II / Basel III)
in the context of:

A. capital adequacy regulations in Pillar 1

B. market risk and Tier 3 capital elements
C. internal management procedures subject to supervisory review in Pillar 2
D. market discipline, disclosure and transparency in Pillar 3

Correct Answer: B

QUESTION 137
VaR increases with:

A. lower correlation of underlying risk factors

B. a shorter time horizon
C. a lower confidence level
D. a higher confidence level

Correct Answer: C

QUESTION 138
Under Basel Rules, the Basic Indicator Approach is a regulatory framework for:

A. liquidity risk
B. business risk
C. operational risk
D. funding risk

Correct Answer: B

QUESTION 139
Under Basel rules, expected credit loss is a function of which of the following sets of parameters:

A. 1 minus recovery rate, probability of default and exposure at default

B. exposure at origination, exposure at default and loss given default
C. loss given default, 1 minus recovery rate and exposure at default
D. exposure at origination, recovery rates and probability of default

Correct Answer: B
QUESTION 140
Under Basel rules the risk weight for claims on unrated sovereigns and their cennl banks in the
standardized approach is:

A. 75%
B. 100%
C. 150%
D. 350%

Correct Answer: D

QUESTION 141
Under Basel rules the meaning of CCF is:

A. Currency Conversion Factor

B. Credit Conversion Factor
C. Credit Contribution Factor
D. Credit Collateralization Factor

Correct Answer: B

QUESTION 142
What is meant by "turn of the month"?

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

Correct Answer: C

QUESTION 143
In order to give a price in EUR/USD, the broker must:

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

Correct Answer: C

QUESTION 144
In interbank trading, if a dealer is calling "off" at the same time as the broker is hitting a price:

A. no transaction should be concluded and the broker should inform both counterparties accordingly
B. a transaction should be concluded and the broker should inform both counterparties accordingly
C. the dealer has the choice of either concluding the transaction or not
D. the broker decides whether the transaction should be concluded or not

Correct Answer: B

QUESTION 145
A dealer has been invited by a broker to go to an exclusive club for the third time in a week. He should:

A. agree, since entertainment is a normal part of business

B. refer this to senior management
C. agree but insist on paying half the cost
D. agree, if the broker pays for the event but does not attend it

Correct Answer: B

QUESTION 146
What does the Model Code recommend regarding "entertainment and gifts"?

A. Management should monitor the form, frequency and cost of entertainment and gifts dealers receive,
have a clearly articulated policy towards the giving/receipt of gifts and ensure the policy is enforced.
B. As gifts and entertainment may be offered in the normal course of business, employees can offer
inducements to conduct business and solicit them from the personnel of other institutions.
C. Although management should not monitor the form, frequency or cost of entertainment/gifts dealers
receive, they may have a policy towards the giving/receipt of gifts and ensure the policy is enforced.
D. Gifts or entertainment should never be offered in the normal course of business, and employees must
never offer any inducements to conduct business, nor solicit them from other institutions.

Correct Answer: C

QUESTION 147
Which one of the following is a major objective of ACI-The Financial Markets Association?

A. to promote globalization and deregulation of the financial markets

B. to maintain the professional level of competence and to disseminate a high level of ethical and
professional behavior
C. to act as the official international market regulator in the absence of government regulation
D. to become the sole global corporation of wholesale financial market professionals

Correct Answer: B

QUESTION 148
Which of the following is required for institutions acting as prime brokers?

A. They must remain neutral and stay out of disputes between their customers.
B. They must rely on the execution venue to resolve disputes.
C. They must delegate the resolution of broken trades downstream to their clients.
D. They must take responsibility for the swift resolution of any disputes.

Correct Answer: D

QUESTION 149
When a deal is done via a broker:

A. it need not be confirmed between the counterparties as the broker confirms it immediately with both
counterparties
B. it should also be confirmed directly between the two counterparties
C. it is important to note that broker confirmations are bilateral confirmations between the principals of the
trade
D. the dealer should obtain acknowledgement that the deal has been agreed to but may assume
agreement to the trade in the absence of such acknowledgement

Correct Answer: B

QUESTION 150
Bank XYZ calls you for a quote in EUR/USD for EUR 50,000,000.00. If you decide to quote, which of the
following is true?
A. You must be prepared to deal EUR 50,000,000.00.
B. You may quote without stating the amount you are prepared to deal.
C. You are only committed to deal in a marketable amount.
D. You must be prepared to deal for more than EUR 50,000,000.00 in case Bank XYZ wishes to.

Correct Answer: A

QUESTION 151
What happens if an instruction remains unmatched and/or unsettled through CLS Bank?

A. If there is more than one FX trade with a single counterparty to settle in the identical currencies, then
both sides should bilaterally agree to settle the trades outside of CLS Bank on a net basis.
B. If there is only one FX trade with a single counterparty to settle in the identical currencies, then either
side can unilaterally decide to settle the trade outside of CLS Bank on a net basis.
C. If there is more than one FX trade with a single counterparty to settle in the identical currencies, then
both sides should bilaterally agree to settle the trade outside CLS Bank on a gross basis.
D. If there is more than one FX trade with a single counterparty to settle in the identical currencies, then
either side can unilaterally instruct the CLS Bank to settle the trades.

Correct Answer: C

QUESTION 152
What recommendation does the Model Code make to banks accepting a stop-loss order?

A. The Model Code emphasizes the importance of clear, concise documentation and on-going lines of
communication.
B. Bank management must guarantee a fixed price execution to the counterparty.
C. The Model Code recommends that only experienced dealers should be allowed to take such orders.
D. Bank staff must secure the approval of the counterparty's management to accept such orders.

Correct Answer: A

QUESTION 153
Where sale and repurchase agreements or stock borrowing or lending transactions are entered into:

A. screen services, brokers and other third party providers can all be useful sources of data
B. For periods less than one month, the maturity date will be the first date that is a business day that is
within one, seven, fourteen days from the value date, but when near the month end must never be a
date in the next calendar month
C. Inter-dealer brokers or the automated trading system need not be notified when participants attempt to
utilize odd settlement dates
D. It is not recommended that legal opinion should be obtained on the enforceability of the contract

Correct Answer: A

QUESTION 154
Whose compliance rules, regulations and best practices should be followed in FX electronic trading?

A. solely those of the electronic trading platforms vendors

B. exclusively ACI's Model Code Best Practices
C. ACI's Model Code Best Practices and ICMA's Market Practice & Regulatory Policy
D. the electronic trading platforms vendors' and the ACIs Model Code Best Practices guidelines

Correct Answer: B

QUESTION 155
You quote a price to a broker. It is hit by another bank, but you are not informed until some time afterward
that the deal has been done. Who is to blame?
A. You are, as it is your responsibility to check periodically that the price has not been dealt upon.
B. The broker is, as he must immediately tell you that your price has been dealt upon.
C. The other bank is, since it did not immediately seek confirmation.
D. All the parties, particularly you and the other bank.

Correct Answer: B

QUESTION 156
For which of the following might an MT370 be used?

A. To confirm an FX transaction
B. To advise the netting position of a currency in NDFS
C. To advise changes in SSIs
D. To confirm a MM transaction

Correct Answer: B

QUESTION 157
What steps will the CFP of the ACI probably not undertake after having been formally notified by one of the
parties of a breach of the letter or spirit of the Model Code?

A. consult the local ACI national association

B. bring the matter to the appropriate court of justice
C. examine the complaint
D. bring the matter to the attention of the appropriate regulatory body

Correct Answer: B

QUESTION 158
Experience has shown that recourse to taped telephone conversations proves invaluable to the speedy
resolution of disputes. Therefore, the Model Code recommends:

A. that all telephone conversations (internal and external) be taped without informing counterparties
B. that only conversations undertaken by dealers and brokers should be recorded
C. that all conversations undertaken by dealers and brokers should be recorded, together with back office
telephone lines used by those responsible for confirming deals or passing payments to other
institutions
D. that only telephone conversations between dealers and brokers be recorded

Correct Answer: D

QUESTION 159
Which of the following correctly states the Model Code's recommendations regarding electronic trading
and broking?

A. Liquidity providers should be cognizant of reputational risks when supplying liquidity for onward third
party consumption.
B. Market participants must not seek information as to the legal status of a potential counterparty before
allocating credit or trading status.
C. Transactions should be handled in accordance with the regulator's dealing rule book.
D. Access to systems internally and at the client interface must be strictly controlled by the dealers.

Correct Answer: A

QUESTION 160
A US security yields 7% on an annually-compounded bond basis. What is the equivalent annually-
compounded money market yield?
A. 7.09%
B. 7.03%
C. 6.90%
D. 6.95%

Correct Answer: C

QUESTION 161
Today's spot value date is the 29th of February. What is the maturity date of a 4-month USD deposit deal
today? Assume no bank holidays.

A. Thursday 27th June

B. Friday 28th June
C. Saturday 29th June
D. Monday 1st July

Correct Answer: B

QUESTION 162
From the following AUD rates:

3M AUD (91-day) deposits 2.35%

3x6 AUD (90-day) FRA 2.55%

Calculate the 6-month implied cash rate.

A. 2.37%
B. 2.46%
C. 2.55%
D. 4.90%

Correct Answer: B

QUESTION 163
Which is the day count/annual basis convention for SGD money market deposits?

A. ACT/365
B. ACT/360
C. ACT/ACT
D. 30E/360

Correct Answer: A

QUESTION 164
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?

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

Correct Answer: C

QUESTION 165
Which of the following are specifically quoted in terms of a yield-to-maturity?
A. US Treasury bill
B. CD
C. Interbank deposit
D. USCP

Correct Answer: B

QUESTION 166
Who takes the counterparty risk on the seller in a to-party repo?

A. The buyer
B. The to-party agent
C. A third-party guarantor
D. A central clearing counterparty

Correct Answer: A

QUESTION 167
Repo is said to have "double indemnity" due to the creditworthiness of the counterparty and:

A. A written legal agreement between the parties

B. The oversight of the transaction by the custodian of the collateral
C. The creditworthiness of the collateral
D. The right of close-out and set-off in an event of default

Correct Answer: C

QUESTION 168
In which type of repo is "double dipping" a risk?

A. Delivery repo
B. HIC repo
C. To-party repo
D. "Double dipping" is never a risk in any type of repo

Correct Answer: B

QUESTION 169
You buy a 30-day 4% CD with a face value of GBP 20,000,000.00 at par when it is issued. You sell it in the
secondary market after 10 days at 4.05%.

What is your holding period yield?

A. 4.05%
B. 3.891%
C. 3.838%
D. 1.946%

Correct Answer: B

QUESTION 170
What are the secondary market proceeds of a CD with a face value of EUR 5,000,000.00 and a coupon of
3% that was issued at par for 182 days and is now trading at 3% but with only 7 days remaining to
maturity?

A. EUR 4,997,085.03
B. EUR 5,000,000.00
C. EUR 5,071,086.45
D. EUR 5,072,874.16

Correct Answer: D

QUESTION 171
The spot/next repo rate for the 5% Bund 2018 is quoted to you at 1.75-80%. You sell bonds with a market
value of EUR 5,798,692.00 through a sell/buy-back. The Repurchase Price is:

A. EUR 5,798,982
B. EUR 5,799,497
C. EUR 5,746,376
D. EUR 5,000,694

Correct Answer: A

QUESTION 172
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 EUR 25,000,000.00 nominal of the 5.5% OAT April 2012, which is worth EUR
28,137,500.00.

The Repurchase Price is:

A. EUR 28,228,360.69
B. EUR 28,229,572.15
C. EUR 25,080,729.18
D. EUR 25,081,805.55

Correct Answer: A

QUESTION 173
If 6-month USD/CAD forward rates are quoted at 40/45, which of the following statements is correct?

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

Correct Answer: B

QUESTION 174
What is the ISO code for the currency of China?

A. CHY
B. CNR
C. CHR
D. CNY

Correct Answer: D

QUESTION 175
The "spot basis" of a 2 against 4 months EUR/USD forward/forward swap is:

A. usually the current spot EUR/USD mid-market rate

B. commonly the prevailing 4-month forward EUR/USD mid-rate
C. always the forward EUR/USD bid rate of the first swap leg
D. generally the prevailing 2-month forward EUR/USD mid-rate
Correct Answer: D

QUESTION 176
If you sell USD 3-month forward to a client against EUR, what should you do to hedge your position?

A. Buy a 3-month EUR/USD outright forward

B. Buy USD spot, and sell and buy a 3-month EUR/USD FX swap
C. Sell EUR/USD in the spot market, lend EUR for 3 months and borrow USD for 3 months
D. Sell EUR/USD in the spot market, borrow EUR for 3 months and lend USD for 3 months

Correct Answer: D

QUESTION 177
What is an FX swap from spot?

A. An exchange of two streams of interest payments in different currencies and an exchange of the
principal amounts of those currencies at maturity
B. A spot sale (purchase) and a forward purchase (sale) of two currencies agreed simultaneously
between two parties
C. An exchange of currencies on a date beyond spot and at a price fixed today
D. An agreement to buy (sell) an amount of base currency value spot and simultaneously resell (buy
back) the same amount to the same counterpart value today

Correct Answer: B

QUESTION 178
Which of the following currency risks could only be hedged by a non deliverable forward (NDF)?

A. an exposure in Latvian Lats (LVL)

B. an exposure in Russian Rouble (RUB)
C. an exposure in Romanian Leu (RON)
D. an exposure in Bulgarian Lev (BGN)

Correct Answer: B

QUESTION 179
A 6-month SEK/NOK Swap is quoted 40/50. Spot is 1.1145. Which of the following statements is correct?

A. SEK interest rates are higher than NOK interest rates

B. NOK interest rates are higher than SEK interest rates
C. NOK interest rates are higher than USD interest rates
D. SEK interest rates and NOK interest rates are converging

Correct Answer: B

QUESTION 180
For which country's currency is ZAR the ISO code?

A. Saudi Arabia
B. South Africa
C. Zimbabwe
D. Zambia

Correct Answer: B

QUESTION 181
You are quoted the following rates:
Spot GBP/USD 1.5295-00
Spot USD/CHF 0.9320-23
6M GBP/USD swap 16/12
6M USD/CHF swap 22/18

Where can you buy GBP against CHF 6-month outright?

A. 1.4206
B. 1.4215
C. 1.4217
D. 1.4225

Correct Answer: D

QUESTION 182
You are quoted spot USD/NOK 5.7220-28 and USD/SEK 6.3850-58, at what price can you buy NOK
against SEK?

A. 0.8963
B. 1.1157
C. 1.1159
D. 1.1160

Correct Answer: D

QUESTION 183
You are quoted the following market rates:

Spot EUR/USD 1.3150

3M (92-day) EUR 0.20%
3M (92-day) USD 0.44%

What is 3-month EUR/USD?

A. 1.3159
B. 1.3158
C. 1.3142
D. 1.3230

Correct Answer: B

QUESTION 184
You are quoted the following market rates:

Spot AUD/CAD 1.0600

12M (360-day) AUD 3.40%
12M (360-day) CAD 1.55%

What are the 12-month AUD/CAD forward points?

A. +190
B. -193
C. -192
D. -190

Correct Answer: D

QUESTION 185
You are quoted the following rates:
Spot GBP/CHF 1.4535-45
3M GBP/CHF swap 22/19

At what rate can you sell GBP against CHF outright 3-month?

A. 1.4523
B. 1.4526
C. 1.4513
D. 1.4516

Correct Answer: C

QUESTION 186
An interest rate swap (IRS) is:

A. A contract to exchange one stream of interest payments for another

B. A temporary exchange of one deposit for another of a longer maturity in the same currency
C. A forward-forward contract
D. A contract to exchange an interest rate stream in one currency for another one in a different currency

Correct Answer: A

QUESTION 187
An important reason for trading a futures contract rather than an FRA is:

A. The expense of settling an FRA

B. The reduced counterparty risk on a futures exchange
C. The reduced basis risk on futures
D. The superior interest rate risk on FRAs

Correct Answer: B

QUESTION 188
Selling a FRA has the same interest rate exposure as:

A. Opening a positive gap

B. Going over-borrowed
C. Making a forward-forward loan
D. Taking a forward-forward deposit

Correct Answer: C

QUESTION 189
What is the purpose of an initial margin on a futures exchange?

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

Correct Answer: A

QUESTION 190
What is the Overnight Index for USD?

A. H-15 Index
B. Prime Rate
C. Overnight Fed funds
D. Fed funds effective rate

Correct Answer: D

QUESTION 191
Which of the following statements is correct?

A. An adjusted settlement amount is paid at the end of the FRA contract period that includes reinvestment
interest for late payment
B. An unadjusted settlement amount is paid at the end of the FRA contract period
C. An adjusted settlement amount is paid at the start of the FRA contract period that is discounted for
early payment
D. An unadjusted settlement amount is paid at the start of the FRA contract period

Correct Answer: C

QUESTION 192
A forward-forward lender has an exposure to the risk of:

A. Higher interest rates

B. Lower interest rates
C. Flattening yield curve
D. Parallel shift downwards in the yield curve

Correct Answer: A

QUESTION 193
What is the Overnight Index for GBP?

A. SONIA
B. STINA
C. STONIA
D. EONIA

Correct Answer: A

QUESTION 194
An option premium is normally a positive function of:

A. the traded volume

B. the historical volatility of the price of the underlying commodity
C. the style (European or American) of the option
D. the implied volatility of the price of the underlying

Correct Answer: D

QUESTION 195
The gamma of an option is:

A. The sensitivity of the option value to changes in volatility

B. The sensitivity of the option value to changes in the time to expiry
C. The sensitivity of the delta to changes in the value of the underlying
D. The sensitivity of the option value to changes in the price of the underlying

Correct Answer: C
QUESTION 196
The seller of a call option has:

A. Substantial opportunity for gain and limited risk of loss

B. Substantial risk of loss and substantial opportunity for gain
C. Limited risk of loss and limited opportunity for gain
D. Substantial risk of loss and limited opportunity for gain

Correct Answer: D

QUESTION 197
How would you delta hedge an `at-the-money' long call option?

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

Correct Answer: A

QUESTION 198
An option contract that gives the buyer the right to exercise the option at several distinct points during its
life is called:

A. European-style option
B. American-style option
C. Bermudan option
D. Asian option

Correct Answer: C

QUESTION 199
When considering interest rate risk in the banking book, retail demand deposits without fixed contractual
maturity:

A. should be assumed to have zero duration

B. should be treated like other instantly variable rate liabilities, such as overnight money market
borrowing.
C. should be assumed to have a low correlation with money market reference rates
D. represent a minor contributor to interest rate risk and can safely be disregarded

Correct Answer: C

QUESTION 200
If the duration gap is zero, how will a small parallel shift in interest rates affect the market value of the
bank's equity?

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

Correct Answer: C

QUESTION 201
Which of the following statements is correct regarding duration?

A. It is a measure of the average price of a financial instrument.

B. It doesn't take into account the timing and market value of cash flows.
C. It increases if the average coupon increases.
D. It decreases as maturity decreases

Correct Answer: D

QUESTION 202
Using reprising gap analysis, a bank's balance sheet is considered liability-sensitive to market interest rate
changes, if:

A. more liabilities than assets will be reprised in the near term

B. more assets than liabilities will be reprised in the near term
C. more assets than liabilities have variable rates or short residual maturities
D. non-interest bearing liabilities are greater than non-interest bearing assets

Correct Answer: A

QUESTION 203
Which of the following statements about the Liquidity Coverage Ratio is correct?

A. The LCR is a measure to ensure that the reserve of high quality liquid assets is sufficient to cover short
term demand for liquidity in a stress situation.
B. the ratio (cash outflow in a 30-day stress period divided by high quality liquid assets) has to be greater
than 100%.
C. Covered bonds are class 1 assets.
D. Obligations issued by central banks or government agencies are class 2 assets.

Correct Answer: A

QUESTION 204
Which one of the following statements about mark-to-model valuation is correct?

A. Mark-to-model valuation is used for exchange-traded positions to ensure correct pricing.

B. Asset managers are not allowed to use mark-to-model valuation.
C. Mark-to-model valuation is used for complex financial instruments; it is always accurate and in line with
potential tradable prices.
D. Mark-to-model valuation refers to prices determined by financial models, rather than actual market
prices.

Correct Answer: D

QUESTION 205
A closed position in a particular foreign currency exists:

A. when the net spot position plus the forward position plus the delta equivalent of the foreign currency
options book add up to zero
B. when the forward purchases of a foreign currency are equivalent to the equity position in that same
currency
C. when the reverse repurchases of foreign currency are equal to the forward purchases of the functional
currency
D. when the maturity structure of the assets in one currency is closely matched to the maturity structure of
liabilities in another

Correct Answer: A

QUESTION 206
Which of the following are all goals of the originator of securitized assets?
A. to increase funding diversification , to reduce funding costs, to achieve regulatory and accounting
benefits, to increase the size of the balance sheet
B. to increase funding diversification , to reduce funding costs, to achieve regulatory and accounting
benefits
C. to increase funding diversification , to reduce operational risk, to achieve regulatory and accounting
benefits, to decrease the size of the balance sheet
D. to increase funding diversification , to reduce operational risk, to achieve regulatory and accounting
benefits, to increase the size of the balance sheet

Correct Answer: B

QUESTION 207
Which of the following risks are considered market risks?

A. interest rate, currency, equity and commodity risk

B. interest rate, currency, equity and default risk
C. interest rate, equity, liquidity and default risk
D. legal, reputation and regulatory risk

Correct Answer: A

QUESTION 208
Under Basel III rules the meaning of RSF is:

A. Reviewed Supervisory Factor

B. Required Stable Funding
C. Riskless Stable Funding
D. Riskless Supervised Funding

Correct Answer: B

QUESTION 209
Under Basel rules the risk weight for MA-rated claims on corporate in the standardized approach

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

Correct Answer: C

QUESTION 210
What is the meaning of CCP within the Basel framework?

A. Collateralized Clearing Process

B. Central Clearing Counterparty
C. Collateralized Counterparty Protection
D. Collateralized Credit Protection

Correct Answer: B

QUESTION 211
At the end of the day, you are short CHF 3,500,000.00 against SEK at 6.9275. You are asked to revalue
your position at 6.9190. What is the resulting profit or loss?

A. Profit of CHF 29,750.00

B. Profit of SEK 29,750.00
C. Loss of SEK 29,750.00
D. Loss of CHF 29,750.00

Correct Answer: B

QUESTION 212
From 2019 on the total capital requirement for banks under Basel III will be defined as:

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

Correct Answer: D

QUESTION 213
You are the buyer of a receiver's swap. All other things being equal your counterparty risk is increasing if

A. the swap curve is shifting downwards

B. the swap curve is shifting upwards
C. swaption volatilities are decreasing
D. time to expiry is becoming shorter

Correct Answer: A

QUESTION 214
What does the Model Code recommend in respect of prices and orders made on electronic trading
platforms?

A. They must be posted with a clear intent to be tradable.

B. They must be identified as indicative rates only.
C. They must be posted subject to later credit line approval.
D. They need not be posted in an appropriate trading style.

Correct Answer: A

QUESTION 215
Which of the following statements best describes the conditions under which a prime broker may accept a
trade given up?

A. the trade is within the specified tenor limits

B. the trade is within the tenor limits and is of an applicable trade type
C. the trade is within the tenor limits and credit limits
D. the trade is within the tenor limits, credit limits and is of an applicable trade type

Correct Answer: D

QUESTION 216
Claims should be communicated in writing via e-mail or preferably by authenticated SWIFT. What
information should be provided in the claim?

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

Correct Answer: D

QUESTION 217
You and a dealer at another bank have a verbal bilateral reciprocal arrangement to quote each other two-
way prices. During periods of high volatility, the other dealer refuses to quote to you. What does the Model
Code say about this situation?

A. The other dealer is bound to reciprocate.

B. This is not in any way an enforceable or binding commitment.
C. The Model Code does not comment on dealing reciprocity.
D. It is common market practice to suspend reciprocity in periods of high volatility.

Correct Answer: B

QUESTION 218
What does the Model Code say about omitting the "big figure" in voice communication?

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.

Correct Answer: D

QUESTION 219
Which of the following risks is best mitigated by CLS?

A. currency risk
B. operational risk
C. liquidity risk
D. settlement risk

Correct Answer: D

QUESTION 220
When differences in payment arise because of errors in the payment of funds:

A. claims should be made for the costs incurred by the injured party and include all administration costs
B. no party involved can be enforced to contribute to achieve an equitable resolution to the problem
C. no market participant should be unjustly enriched or injured by the action/error of another market
participant
D. claims are calculated on the full principal amount of the failed payment with the interest rate imposed
by the injured party

Correct Answer: C

QUESTION 221
The Model Code stipulates that you have a right to qualify your quotes in terms of amounts:

A. if you do so when you make the price

B. provided the amounts are marketable
C. once you have discovered the name of the counterparty for credit reasons
D. at anytime

Correct Answer: A
QUESTION 222
As regards controls, which of the following best practices for counterparty identification is incorrect?

A. Amendments to customer standing data should be subject to 4 eyes control and only changed if the
appropriately authorized documentation is provided.
B. The set up of settlement instructions and the confirmation method should be fixed when setting the first
transaction.
C. No trading should be done without first identifying and setting up the counterparty.
D. Counterparty identification and setup of settlement instructions should be completed in less than 2
working days.

Correct Answer: B

QUESTION 223
What does the Model Code say concerning repos and stock-lending?

A. Legal documentation must be put in place as soon as possible after transaction.

B. All market participants should use the Modified Previous Business Day Convention.
C. The exact maturity (end) dates for transactions must be agreed as soon as possible after a transaction.
D. All market participants should use the Modified Following Business Day Convention.

Correct Answer: D

QUESTION 224
What should be done when a voice broker hits a dealer's price as "done" at the very instant the dealer
calls "off"?

A. The deal should not be concluded and the broker should inform both counterparties accordingly.
B. The transaction should be concluded and the broker should inform both counterparties accordingly.
C. The broker should immediately inform both counterparties that the deal will have to be renegotiated.
D. The broker should decide whether the transaction is concluded or not and inform both counterparties
accordingly.

Correct Answer: B

QUESTION 225
Which of the following does the Model Code not recommend to prevent technical errors by etrading
devices?

A. A manual "kill button" to disable the system's ability to trade and cancel all resting orders.
B. An `inbound message rate" feature that monitors the number of confirmation messages that are sent
from trading venues within a specific time period.
C. A "repeated automated execution throttle" monitoring the frequency of strategies that are filled and then
re-entered into the market without human intervention through automated trading systems.
D. A "fat-finger quantity" feature limiting the size of orders that can be sent from the trading systems and
preventing order quantities above the fat-finger limit from leaving the system.

Correct Answer: B

QUESTION 226
In trade confirmation, which one of the following statements about "matching" is correct?

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
Correct Answer: C

QUESTION 227
If several banks hit a broker simultaneously for an amount greater than the amount for which the price was
shown:

A. no transaction is done
B. the broker has to honor each and every amount hit
C. the broker has to split the amount among the banks on a pro rata basis
D. the broker may freely choose the bank(s) he will deal with

Correct Answer: C

QUESTION 228
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:

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

Correct Answer: B

QUESTION 229
What kind of information should dealers and brokers take care when relaying?

A. Information that could be damaging to a third party

B. Unsubstantiated rumours
C. Unsubstantiated information that they suspect may be inaccurate and damaging to a third party
D. Price-sensitive information

Correct Answer: C

QUESTION 230
Which of the following is true regarding the consummation of a deal?

A. verbal agreements are considered binding

B. written confirmations always override terms verbally agreed to
C. deals agreed to verbally can be done subject to documentation
D. verbal agreements are never to be considered legally binding

Correct Answer: C

QUESTION 231
Which of the following dealing strategies involves the placing of orders with very short quote lives into a
market?

A. frequency trading
B. high-incidence trading
C. flash trading
D. liquidity aggregators

Correct Answer: C

QUESTION 232
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?

A. 3.2281%
B. 3.2278%
C. 3.00%
D. 2.875%

Correct Answer: B

QUESTION 233
What is the name of the reference against which most USD and JPY deposits and loans are fixed in
London?

A. EURIBOR
B. EONIA
C. LIBOR
D. SONIA

Correct Answer: C

QUESTION 234
You borrow GBP 2,500,000.00 at 0.625% for 165 days. How much do you repay including interest?

A. GBP 2,507,161.46
B. GBP 2,507,063.36
C. GBP 2,507,006.85
D. GBP 2,507,106.16

Correct Answer: B

QUESTION 235
The columns below list short-term cash rates on 3rd April and 3rd F1ay 3rd April 3rd May

Describe the shape of the short-term segment of the yield curve on 3' April using market terminology. In
addition, describe the change in the shape of the curve between 3rd April and 3rd May.

A. Positive, steepening
B. Positive, flattening
C. Inverted, steepening
D. Inverted, flattening

Correct Answer: C

QUESTION 236
7-day USCP is quoted at a rate of discount of 1.75%. What is its true yield?

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

Correct Answer: B

QUESTION 237
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?

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%

Correct Answer: A

QUESTION 238
Which of the following may pay a return as a mix of income and capital/gain loss?

A. CD
B. Interbank deposit
C. Classic repo
D. Treasury bill

Correct Answer: A

QUESTION 239
Which of the following is not transferable?

A. Euro certificate of deposit

B. US Treasury bill
C. CP
D. Call deposit

Correct Answer: D

QUESTION 240
What happens when the issuer of a bond being used as collateral in a classic repo fails to pay a coupon
on the bond during the term of the repo?

A. The transaction is terminated and the collateral is returned to the seller

B. The transaction is rolled over until the coupon is paid or the issuer becomes insolvent, at which point
the seller becomes an unsecured creditor of the issuer
C. The buyer is obliged to make a manufactured payment to the seller and becomes an unsecured
creditor of the issuer
D. The buyer is not obliged to make a manufactured payment to the seller but the buyer is likely to ask for
margin

Correct Answer: D

QUESTION 241
What is the Repurchase Price of a classic repo?

A. The market value of bond collateral at the end of the repo at the clean price of the bond
B. The market value of bond collateral at the end of the repo at the dirty price of the bond
C. The amount of cash actually paid for collateral at the start of the repo
D. The amount of cash actually paid for collateral at the start of the repo plus repo interest

Correct Answer: D

QUESTION 242
A CD with a face value of USD 50,000,000.00 and a coupon of 4.50% was issued at par for 90 days and is
now trading at 4.50% with 30 days remaining to maturity. What has been the capital gain or loss since
issue?

A. +USD 373,599.00
B. +USD 186,099.00
C. -USD 1,400.99
D. Nil

Correct Answer: C

QUESTION 243
You buy a 181-day 2.75% CD with a face value of USD 1,500,000.00 at par when it is issued. You sell it in
the secondary market after 150 days at 2.60%. What is your holding period yield?

A. 2.60%
B. 2.75%
C. 2.775%
D. 2.813%

Correct Answer: C

QUESTION 244
The Interest Rate Parity Theorem should work because, when one sells a low interest rate currency to
invest in a high interest rate currency and hedges the currency risk:

A. The cost of hedging is given by the forward points, which are equal to the interest rate differential
between the two currencies
B. The high interest rate currency will depreciate
C. The profit from the appreciation of the high interest rate currency has been hedged away
D. Interest rates are mean reverting, which means the low interest rate will tend to rise and the high
interest rate will tend to fall

Correct Answer: A

QUESTION 245
Which one of the following bullion coins has a 999.9/1000 gold purity (.9999 fineness)?

A. the Canadian "Maple Leaf"

B. the South African "Krugerand"
C. the American "Gold Eagle"
D. the United Kingdom "Sovereign"

Correct Answer: A

QUESTION 246
What is the Gold Offered Forward Rate (GOFO)?

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

Correct Answer: B

QUESTION 247
For which country's currency is SEK the ISO code?

A. South Korea
B. Sri Lanka
C. Slovakia
D. Sweden

Correct Answer: D

QUESTION 248
3-month USD/CHF is quoted at 12/10. Interest rates in Switzerland are reduced but USD rates (which are
higher) are unchanged. What would you expect the 3-month forward USD/CHF rate to be?

A. unchanged
B. 15/13
C. 10/8
D. 6/4

Correct Answer: B

QUESTION 249
What is the ISO code for the Indian rupee?

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

Correct Answer: C

QUESTION 250
Cable is quoted at 1.5575-80 and you say "5 yours!" to the broker. What have you done?

A. Sold USD 5,000,000.00 at 1.5575

B. Sold GBP 5,000,000.00 at 1.5575
C. Bought GBP 5,000,000.00 at 1.5580
D. Bought USD 5,000,000.00 at 1.5580

Correct Answer: B

QUESTION 251
What is the result of combining a 1-month buy and sell FX swap with a 2-month sell and buy FX swap?

A. a 1x2 FRA short position

B. a 1- against 2-month buy and sell forward/forward FX swap
C. a 1- against 2-month sell and buy forward/forward FX swap
D. a 1- against 2-month forward/forward long position

Correct Answer: C

QUESTION 252
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?

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

Correct Answer: C

QUESTION 253
Your GBP/CHF rate is 1.3710-15. How many GBP would your customer have to give you to buy CHF
10,000,000.00?

A. 7,291,286.91
B. 7,293,946.02
C. 13,710,000.00
D. 13,715,000.00

Correct Answer: B

QUESTION 254
Using the following rates:
Spot GBP/CHF1.4235-55
Spot CHF/SEK6.8815-45
3M GBP/SEK swap 140/150

What is the price for 3-month outright GBP/SEK?

A. 9.8141-9.8246
B. 9.8108-9.8279
C. 9.8098-9.8289
D. 9.8151-9.8236

Correct Answer: A

QUESTION 255
If GBP/USD is quoted to you at 1.6120-30, how much GBP would you receive if you sold USD
2,000,000.00?

A. 1,239,925.60
B. 1,237,873.80
C. 1,240,694.79
D. 1,242,720.50

Correct Answer: A

QUESTION 256
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)?

A. 8th September next year

B. 10th September next year
C. 8thDecembernextyear
D. December next year

Correct Answer: B

QUESTION 257
An FRA is:

A. A cash instrument
B. An exchange traded derivative
C. An interest rate derivative
D. A balance sheet instrument

Correct Answer: C

QUESTION 258
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?

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

Correct Answer: D

QUESTION 259
How would you delta hedge a deeply "in-the-money" short put option?

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 more than 50% of the full size of the option contract
D. Go short of the underlying commodity equal to more than 5O% of the full size of the option contract

Correct Answer: D

QUESTION 260
An interest rate guarantee (IRG) is:

A. AnFRA
B. An option on an FRA
C. A collar
D. AnIRS

Correct Answer: B

QUESTION 261
Which of the following statements is correct?
A. With liquidity transfer pricing (LTP) banks attribute the costs, benefits and risks of liquidity to respective
business units within a bank
B. With liquidity transfer pricing (LTP) banks are monitoring and diversifying their funding base
C. With liquidity transfer pricing (LTP) banks are agreeing with external liquidity providers on the fair
market price of funds
D. Liquidity transfer pricing charges providers of funds for the cost of liquidity and users of funds for the
benefit of liquidity

Correct Answer: A

QUESTION 262
The Liquidity Coverage Ratio imposed by Basel III requires a bank:

A. to keep enough highly liquid assets to cover its net liabilities for the next 10 days to guard against
severe liquidity stress
B. to keep enough highly liquid assets to cover its net liabilities for the next 30 days to guard against
severe liquidity stress
C. to keep enough highly liquid assets to cover its net liabilities for the next 60 days to guard against
severe liquidity stress
D. to retain enough liquidity to cover its assets against severe default risk

Correct Answer: B

QUESTION 263
Does the slope of the interest yield curve typically have a substantial impact on a bank's net interest
margin?

A. No, it doesn't, since the slope of the yield cure is unrelated to the spread between short-term and long-
term interest rates.
B. No, it doesn't. There isn't any link at all between the slope of the interest yield curve and a bank's net
interest margin.
C. Yes it does. In banking, long-term rates usually apply to bank deposits and money market borrowings
whereas short-term interest rates are attached to loans and securities.
D. Yes it does. Long-term rates usually apply to a bank's assets (loans, securities, etc.) and the short term
interest rates are generally attached to liabilities (deposits, money market borrowings, etc.).

Correct Answer: D

QUESTION 264
A purchased 3X6 FRA should be reported in a gap report as

A. a given deposit with a term of six months

B. a taken deposit with a term of three months
C. a given deposit with a term of three months and a taken deposit with a term of six months
D. a taken deposit with a term of three months and a given deposit with a term of six months

Correct Answer: C

QUESTION 265
What would be the strategy for a bank if it is unable to speculate on interest rates and/or unable to absorb
market risk?

A. to run a zero gap

B. to hold more interest rate sensitive assets than interest rate sensitive liabilities
C. to reduce the size of the balance sheet
D. to hold fewer interest rate sensitive assets than interest rate sensitive liabilities

Correct Answer: A
QUESTION 266
Net funding requirements in liquidity management are determined by means of:

A. adding up expected vault cash outflows, ATMs and other cash points operated by the institution across
all branches
B. establishing a forward cash flow plan that takes account of all contractual and behavioral cash flows
related to assets and liabilities
C. the net cash flow from investment activities in the IFRS consolidated Statement of Cash Flows for prior
periods
D. subtracting short-term liabilities from short-term assets

Correct Answer: B

QUESTION 267
Which one of the following statements is incorrect under Basel III?

A. Instruments qualifying for recognition as Tier 1 or Tier 2 capital will be substantially restricted.
B. Basel III does not include Tier 3 capital
C. There is a distinction between upper Tier 2 and lower Tier 2 capital
D. New non-common equity Tier 1 and Tier 2 instruments are more loss-absorbing than previously

Correct Answer: C

QUESTION 268
Which one of the following statements regarding the variance-covariance method for calculating value- at-
risk is true?

A. The volatilities of the underlying assets are normally distributed and the prices remain constant.
B. The risk factors are normally distributed and volatilities of risk factors and correlations between risk
factors are constant.
C. The prices of underlying assets are normally distributed, the volatilities of risk factors follow a GARCH
process and correlations between risk factors are constant.
D. The returns of underlying assets are normally distributed and volatilities of risk factors and correlations
between risk factors are constant.

Correct Answer: D

QUESTION 269
Which one of the following formulae is correct?

A. Long a straight bond + pay fixed on a swap = long a synthetic Floating Rate Note
B. Long a straight bond + pay floating on a swap = long a synthetic Floating Rate Note
C. Short a straight bond + receive fixed on a swap = long a synthetic Floating Rate Note
D. Short a straight bond + pay fixed on a swap = long a synthetic Floating Rate Note

Correct Answer: A

QUESTION 270
Under new Basel rules, what is the meaning of CVA?

A. Credit Value Adaption

B. Call Value Adaption
C. Credit Value Adjustment
D. Counterpart Value Adjustment

Correct Answer: C
QUESTION 271
Which of the following does not represent an operational risk as defined by Basel rules?

A. theft of information
B. damage to an organization through loss of its reputation or standing
C. market manipulation
D. loss incurred from the use of incorrect documentation

Correct Answer: B

QUESTION 272
You are a sales person in a bank and are about to sell a structured note to a non-professional customer.
Before finalizing the transaction you remember to double-check the customer's charter. You learn that the
customer is not allowed to invest in structured products. The risk you have avoided is most likely to be
classified as:

A. credit risk
B. liquidity risk
C. legal risk
D. refinancing risk

Correct Answer: C

QUESTION 273
By what means should a financial institution preferably submit SSI changes and notifications to its clients?

A. e-mail
B. fax or letter
C. MTn99 SWIFT message
D. MT670/671 SWIFT message

Correct Answer: D

QUESTION 274
The Model Code's correct recommendation regarding electronic trading states:

A. Time stamps on e-trading platforms need to be internally and globally synchronised to ensure
appropriate tracking of trades
B. All records should be archived and appropriate audit trails must be maintained as required by the local
Central Bank
C. Regular tests for loss of access to external liquidity platforms but not loss of service to clients should be
undertaken
D. Testing of the system's capability to cope with extreme volumes should be carried out annually

Correct Answer: A

QUESTION 275
When can a broker consider a deal to be done?

A. if he is confident that the dealer will not back out of the deal
B. if both parties to the deal have established credit lines for each other
C. if one party to the deal acknowledges interest
D. if he receives acknowledgement from both the dealers involved

Correct Answer: D

QUESTION 276
A dealer in the spot foreign exchange market has to assume that a price given to a voice broker is only
valid:

A. for a short length of time, usually 30 seconds

B. until the price has been taken "off" by the dealer
C. for a short length of time, typically a matter of seconds
D. for a minute or two

Correct Answer: C

QUESTION 277
As to the Charter of ACI - The Financial Markets Association, what do members not pledge?

A. to maintain the professional level of competence and the ethical standards of loyalty
B. to develop sound reciprocal dealing relationships between institutions and to render unconditional
mutual assistance
C. to demonstrate the best ethical behavior in strict accordance with the content and spirit of The Model
Code
D. to maintain the highest possible standards in their profession by constantly setting an example of
propriety in business

Correct Answer: B

QUESTION 278
Which of the following statements reflects the position of the Model Code on gambling or betting amongst
market participants?

A. Gambling and betting amongst market participants should be strongly discouraged.

B. Gambling and betting amongst market participants may be permitted if management monitors it.
C. Gambling and betting amongst market participants should be prohibited.
D. Gambling and betting amongst market participants is only tolerated if it is previously reported to the
CFP of the ACI.

Correct Answer: A

QUESTION 279
The popularity of FX-trading via Internet platforms has serious implications for the applicability of traditional
rules such as "Know Your Customer". Which of the following are correct?

A. "Know Your Customer" rules cannot be applied online and banks will have to rely instead on new
safeguards such as third-party authentication.
B. "Know Your Customer" rules apply only to retail customers and are therefore irrelevant to currency
trading.
C. In practice, banks can avoid "Know Your Customer" rules by limiting online deal size to EUR
100,000.00 or equivalent.
D. No trading should be carried out without first identifying and setting up the counterparty; this includes
"Know Your Customer" procedures.

Correct Answer: D

QUESTION 280
Where voicemail equipment is used for the reporting and recording of off-premises transactions, voice mail
should be:

A. installed on secret number known only to the chief dealer

B. installed and located in the office of the head of compliance
C. installed and located in such a way that reported transactions cannot be subsequently erased without
senior management approval.
D. securely saved by recordings that have to be stored for at least a twelve-month period
Correct Answer: C

QUESTION 281
In a plain vanilla interest rate swap, the "fixed-rate payer":

A. has established the price sensitivities of a longer-term fixed-rate liability and a floating-rate asset
B. has established the price sensitivities of a longer-term fixed-rate asset and a floating-rate liability
C. receives fixed in the swap
D. pays floating in the swap

Correct Answer: A

QUESTION 282
All prices quoted by brokers should be taken to be:

A. under reference
B. firm, but not necessarily in marketable amounts
C. firm, unless otherwise qualified
D. merely indicative

Correct Answer: C

QUESTION 283
What should a broker do if his quoted price is hit simultaneously by several dealers for a total amount
greater than that for which the price concerned was valid?

A. allot the amount for which the price is valid pro rata amongst some principals in accordance with the
amount proposed by each and inform the other dealers that "nothing was done"
B. decide which principals he will allot the amount for which the price is valid and inform the other dealers
that "nothing was done"
C. evenly allocate the amount for which the price is valid amongst all the principals and inform all the
relevant dealers
D. apportion the amount for which the price is valid pro rata amongst all the principals concerned in
accordance with the amount proposed by each and inform all the relevant dealers

Correct Answer: D

QUESTION 284
Under the Model Code, if a broker shouts "done" or "mine" at the very moment a dealer shouts "off":

A. No deal is done and the broker should inform both counterparties accordingly.
B. The deal is done and the broker should inform both counterparties accordingly.
C. The matter should be resolved in consultation with senior management of the 3 institutions.
D. The ACI's Committee for Professionalism will investigate and advise accordingly.

Correct Answer: B

QUESTION 285
In order to be introduced in a controlled manner, which areas should be involved before a new product or
business strategy is launched?

A. Product Control, Legal and Compliance, Front Office, Treasury and Operations
B. Senior management only
C. Front Office and Treasury Middle Office
D. All relevant areas

Correct Answer: D
QUESTION 286
Which of the following currencies is quoted on an ACT/365 basis for the calculation of interest on interbank
deposits in London?

A. EUR
B. JPY
C. HKD
D. AUD

Correct Answer: C

QUESTION 287
A negative yield curve is one in which:

A. Longer rates are lower than short rates

B. Forward exchange rates are at a discount
C. Short term rates are lower than long
D. Forward exchange rates are a premium

Correct Answer: A

QUESTION 288
What is the day count/annual basis convention for JPY money market deposits?

A. ACT/365
B. ACT/360
C. ACT/ACT
D. 30E/360

Correct Answer: B

QUESTION 289
What rates should a panel bank contribute to the EURIBOR fixings?

A. The offer side of the quotes it is making to other banks

B. The offer side of the quotes which it is receiving from other banks
C. The offer side of the interbank quotes it observes being made by prime banks
D. The offer side of the quotes it has actually borrowed at

Correct Answer: C

QUESTION 290
EURIBOR is the:

A. Daily fixing of EUR interbank deposit rates in the European market

B. Daily fixing of EUR interbank deposit rates in the London market
C. Another name for EUR LIBOR
D. The ECB's official repo rate

Correct Answer: A

QUESTION 291
A USD deposit traded in London between two German banks is cleared:

A. Wherever the parties agree

B. In London
C. In NewYork
D. In Frankfurt

Correct Answer: C

QUESTION 292
If the issuer of the collateral used in a repo defaults during the term of the transaction, who suffers the
loss?

A. Buyer
B. Seller
C. Issuer
D. It depends on the agreement between the buyer and seller

Correct Answer: B

QUESTION 293
What is the Purchase Price of a repo?

A. The market value of bond collateral at the start of the repo at the clean price of the bond
B. The market value of bond collateral at the start of the repo at the dirty price of the bond
C. The amount of cash actually paid for collateral at the start of the repo
D. The amount of cash actually paid for collateral at the start of the repo plus repo interest

Correct Answer: C

QUESTION 294
A CD with a face value of USD 250,000,000.00 was issued at par with a coupon of 5% for 91 days.

You buy it in the secondary market when it has 30 days remaining to maturity and is trading at 5.25%. How
much do you pay?

A. USD 252,056,972.97
B. USD 252,028,916.32
C. USD 250,000,000.00
D. USD 248,911,014.31

Correct Answer: A

QUESTION 295
You quote spot EUR/USD at 1.3023-26 in 5 to another bank. He says, "Take 5, could do 8".

How much are you obliged to do?

A. Nothing, as he changed the terms of the deal

B. EUR 5,000,000.00
C. More than EUR 5,000,000.00, but a maximum of EUR 8,000,000.00
D. EUR 8,000,000.00

Correct Answer: B

QUESTION 296
What is the value date of a 1-month outright forward FX transaction dealt today, if today's spot date is
Monday, 30th January? Assume there are no bank holidays and that the year is not a leap year.

A. 2nd March
B. 1st March
C. 2gth February
D. 28th February

Correct Answer: D

QUESTION 297
When would an exporter commonly use an NDF?

A. when receiving THB in 1 month

B. when receiving HKD in 2 months
C. when receiving PHP in 2 bank business days
D. when receiving KRW in 3 months

Correct Answer: D

QUESTION 298
What is the value date of a 6-month outright forward FX transaction dealt today, if today's spot date is
Monday, 30th June? Assume there are no bank holidays.

A. 27th December
B. 30th December
C. 31st December
D. 1st January

Correct Answer: C

QUESTION 299
How many Yen would you pay to buy 1 ounce of gold if you were quoted the following?

XAU/USD 1575.25-75
USD/JPY 96.55-60

A. JPY 152,090
B. JPY 152,139
C. JPY 152,169
D. JPY 152,217

Correct Answer: D

QUESTION 300
If GBP/USD is 1.5350-53 and USD/JPY is 97.50-53, what is GBP/JPY?

A. 149.66-74
B. 149.69-71
C. 63.52-53
D. 63.51-54

Correct Answer: A

QUESTION 301
The 180-day CAD/CHF rate is bid 62 and the 90-day CAD/CHF rate is bid 29. What is the bid rate for 120
days, assuming straight-line interpolation?

A. 33
B. 42
C. 27
D. 40

Correct Answer: D
QUESTION 302
You are quoted the following rates:

Spot cable1.5340-43
0/N cable swap0.14/0.11
T/N cable swap0.16/0.13
S/N cable swap0.43/0.37

At what rate can you buy cable for value tomorrow?

A. 1.534284
B. 1.534316
C. 1.534287
D. 1.534313

Correct Answer: B

QUESTION 303
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?

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

Correct Answer: A

QUESTION 304
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?

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

Correct Answer: A

QUESTION 305
If you lend for 3 months and borrow for 6 months, you may be said to:

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

Correct Answer: D

QUESTION 306
What is the purpose of a short straddle option strategy?

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

Correct Answer: A

QUESTION 307
The delta of an `at-the-money' long put option is:

A. Between -0.5 and -1

B. -0.5
C. Between +0.5 and +1
D. +0.5

Correct Answer: B

QUESTION 308
Which of the following both provide credit enhancement to a true-sale securitization?

A. reserve account and third-party insurance

B. subordinated tranches and creditworthiness of the originator
C. creditworthiness of the originator and third-party insurance
D. reserve account and interest rate hedging

Correct Answer: A

QUESTION 309
Which of the following situations would be most likely to result in a negative mark-to-market for a bank
borrowing short term and lending long term?

A. credit spread tightening of the long term position

B. if the yield curve is inverted
C. if the yield curve becomes steeper
D. if there is a downward parallel shift in the yield curve

Correct Answer: C

QUESTION 310
The primary issue for insuring prudent liquidity management in accord with the guidance provided by the
Basel Committee (Basel II I Basel III) is:

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.

Correct Answer: B

QUESTION 311
Which of the following statements about Credit Default Swaps (CDS) is correct?

A. CDS are used to recover funds from defaulted swap counterparties.

B. CDS provide protection against specified credit events to the party receiving the CDS premium
payments.
C. CDS provide protection against the default of the trade counterparty that buys the CDS.
D. CDS provide compensation to the protection buyer, should a specified credit event occur to a third
party entity.
Correct Answer: D

QUESTION 312
Which of the following is not the responsibility of the asset and liability committee (ALCO)?

A. ensure that compliance is carried out efficiently

B. set limits on borrowing in the short-term markets to fund long-term lending
C. develop, evaluate, monitor and approve strategies related to risk due to imbalances in the asset and
liability structure of the balance sheet
D. report to the board of directors

Correct Answer: C

QUESTION 313
Which of the following is part of the typical scope of Asset Liability Management (ALM)?

A. Selling distressed assets and investing in bank liabilities trading at distressed levels.
B. Making sure that fixed assets are depreciated according to the applicable tax code.
C. Planning the maturity structure and net funding requirements arising from banking book and trading
book transactions.
D. Planning the liability structure and net funding requirements arising from trading book assets carried at
amortized cost.

Correct Answer: C

QUESTION 314
All other things being equal, if a bank borrows short and lends long what is the effect on the liquidity risk of
the bank?

A. positive
B. changes only when interest rates levels are high
C. negative
D. changes only when interest rates levels are low

Correct Answer: C

QUESTION 315
A transaction that entails market price risks may be entered into in the absence of a market price risk
limit...

A. ...only at the discretion of the head of treasury.

B. ...only at the discretion of the head of trading.
C. ...as long a counterparty and issuer limit is in place.
D. ... is not permitted.

Correct Answer: D

QUESTION 316
The risk associated with a stock or a bond that is not correlated with events in the market is known as:

A. interest rate risk

B. model risk
C. currency risk
D. specific risk

Correct Answer: D
QUESTION 317
What is the correct interpretation of a EUR 5,000,000.00 one-week VaR figure with a 99% confidence
level?

A. A loss of at least EUR 5,000,000.00 can be expected in 99 out of the next 100 weeks.
B. A loss of at most EUR 5,000,000.00 can be expected in 1 out of the next 100 weeks.
C. A loss of at most EUR 5,000,000.00 can be expected in 1 out of the next 100 days.
D. A loss of at least EUR 5,000,000.00 can be expected in 1 out of the next 100 weeks.

Correct Answer: D

QUESTION 318
Which one of the formulae below is correct?

A. Long a FRN + pay fixed on a swap = long a synthetic straight bond

B. Long a FRN + receive floating on a swap = long a synthetic straight bond
C. Long a FRN + pay floating on a swap = short a synthetic straight bond
D. Long a FRN + pay floating on a swap = long a synthetic straight bond.

Correct Answer: D

QUESTION 319
Which of the following statements about requirements for limit setting is correct?

A. In the case of trading transactions, counterparty limits are to be set by the front office and issuer limits
are to be set by the back office
B. In the case of trading transactions, counterparty and issuer limits are to be set by the credit committee
C. In the case of trading transactions, counterparty limits are to be set by a front office vote and market
risk limits are to be set by the back office
D. In the case of trading transactions, counterparty limits and issuer limits are to be set by the front office

Correct Answer: B

QUESTION 320
You are the buyer of protection in a credit default swap. All other things being equal your counterparty
credit risk is increasing if:

A. the credit spread is decreasing

B. the credit spread is decreasing and recovery rate is increasing
C. the credit spread is increasing
D. the recovery rate is increasing

Correct Answer: C

QUESTION 321
Which of the following statements is correct?

A. The best strategy to treat and mitigate risk is avoiding the risk by avoiding the business
B. The best strategy to treat and mitigate risk is transferring the risk to another party, e. g. by transfer to
an insurance company
C. The best strategy to treat and mitigate risk is to establish the appropriate processes for identifying,
assessing, managing, monitoring and reporting risks
D. The best strategy to treat and mitigate risk is to reduce the negative effect of the risk, e. g. by hedging

Correct Answer: C

QUESTION 322
In the event that standard settlement instructions are provided by a third party, full authentication and
authorization of those SSIs should be independently performed by?

A. Sales I trading staff

B. Operations staff
C. Nostro staff
D. Front office staff

Correct Answer: B

QUESTION 323
Which of the following statements about operational risk awareness is correct?

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.

Correct Answer: B

QUESTION 324
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?

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

Correct Answer: C

QUESTION 325
The Model Code recommends that standard terms and conditions be used in legal documents. Which one
of the following statements is correct?

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.

Correct Answer: B

QUESTION 326
For which one of the following disputes is the Chairman and members of the ACI's CFP ready to assist
through the ACI's Expert Determination?

A. all legal disputes

B. disputes related to market practice or conduct as set out in the Model Code or in any other Code of
Conduct
C. disputes between two market participants, at least one of them being a member of ACI
D. disputes related to over-the-counter financial instruments as detailed in appendix four of the Model
Code
Correct Answer: D

QUESTION 327
Which one of the following statements about claims is true?

A. Claims are not expected to be submitted after 15 days from the actual settlement date.
B. Claims of less than USD 5,000.00 are not expected to be submitted.
C. Claims are calculated on the full principal amount of the failed transaction. Interest rates are imposed
by the agent banks, unless a higher negotiated rate is to be applied.
D. Acknowledgement of receipt of a claim should be confirmed within 48 hours by email or SWIFT.

Correct Answer: C

QUESTION 328
What should be done if a broker fails to conclude a transaction at the quoted price and the dealer has to
accept a lesser quote to neutralize his risk?

A. `stuff' the broker and insist on a replacement name at the original price
B. accept a bank transfer compensation payment in favour of the bank or adjustment to brokerage bills
C. refuse any sort of compensation from the broker for the amount concerned
D. acknowledge the excuses of the broker and accept his offer of entertainment in compensation for the
failed transaction

Correct Answer: B

QUESTION 329
Which of the following is the best description of a "broken trade"?

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

Correct Answer: D

QUESTION 330
What is the policy of the Model Code on drugs, alcohol and other substance abuse in the dealing room?

A. Management is to proximately inform the local regulator of any suspected drug abuse in either the front
office or operations department.
B. The chief dealer must inform the ACI's Committee for Professionalism as soon as he suspects any
drug or alcohol abuse in his dealing room.
C. Policies should be developed and clearly announced, including penalties for individuals who are found
to be substance abusers.
D. Management should take all reasonable steps to stop the abuse of drugs, including alcohol and other
substances.

Correct Answer: C

QUESTION 331
Which of the following statements is true? The repo legal agreement between the two parties concerned
should:

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

Correct Answer: A

QUESTION 332
Principals who enter into an interest rate swap with the intention of shortly afterwards assigning or
transferring the swap to a third party:

A. should never reveal their future dealing intentions to their counterparties

B. should make clear their intention to do so when initially negotiating the deal
C. should agree upon the method of assignment before transacting
D. should only reveal any such intentions after the confirmations have been exchanged

Correct Answer: B

QUESTION 333
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?

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.

Correct Answer: A

QUESTION 334
Where dealing for personal account is allowed, what safeguards to prevent abuse or insider dealing are
stated by the Model Code?

A. The need to maintain confidentiality with respect to non-public price sensitive information
B. The maximum amounts or sizes of trades dealers are allowed to trade for their own account
C. The instruments/products dealers can trade for their own account
D. The pledge that no action is taken by employees that might adversely affect the interests of clients or
counterparties

Correct Answer: B

QUESTION 335
Principals are allowed to:

A. visit a broker's dealing room to arrange or confirm deals

B. visit a broker's dealing room with the permission of the management of both parties
C. deal from within a broker's dealing room with the permission of the broker's management
D. place an order with a broker from within the same broker's office

Correct Answer: B

QUESTION 336
What needs to be done in the event that a trade is amended by one or both parties?

A. A new confirmation should be generated by both parties but there is no need to restart the confirmation
cycle.
B. The amending party should verbally inform the other party.
C. A new confirmation should be generated and the confirmation cycle should restart and continue until
 the trade is completely matched by both parties.
D. A new confirmation need not be generated but the confirmation cycle must restart and continue until
the trade is completely matched by both parties.

Correct Answer: C

QUESTION 337
Management has a specific responsibility to issue guidelines to staff on transacting after-hours and off-
premises. Which of the following does the Model Code suggest?

A. Dealing should only be allowed during normal trading hours.

B. It is not recommended that an unofficial close of business be specified for each trading day.
C. There should be clear written guidelines regarding the limit and type of deals that are permitted after
normal hours or off-premises.
D. All after-hours and off-premises transactions must be dealt exclusively with the dealer's personal
mobile phones

Correct Answer: C

QUESTION 338
You have bought a 93-day US Treasury bill at 5.63%. What is the true yield?

A. 5.71%
B. 5.69%
C. 5.72%
D. 5.62%

Correct Answer: A

QUESTION 339
When is interest conventionally due on a 3-year interbank EUR deposit?

A. At maturity
B. Annually
C. Semi-annually
D. Quarterly

Correct Answer: B

QUESTION 340
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?

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

Correct Answer: D

QUESTION 341
The maturity of a straight 3-months deposit falls on Saturday, which happens to be the last day of the
month. What is the actual deposit maturity date?

A. The following Monday

B. Saturday
C. Sunday
D. The previous Friday
Correct Answer: D

QUESTION 342
What is the maximum maturity of a US Treasury bill?

A. One year
B. 270 days
C. 183 days
D. 5years

Correct Answer: A

QUESTION 343
What is the major difference between a CD and a deposit?

A. The CD yields a higher rate of return

B. The CD has less credit risk
C. The CD is a transferable instrument
D. The CD has a shorter range of maturities

Correct Answer: C

QUESTION 344
What happens when a coupon is paid on bond collateral during the term of a sell/buy-back?

A. Nothing
B. A margin call is triggered on the seller
C. A manufactured payment is made to the seller
D. The equivalent value plus reinvestment income is deducted from the repurchase price

Correct Answer: D

QUESTION 345
A customer gives you GBP 25,000,000.00 at 0.625% same day for 7 days.

Through a broker, you place the funds with a bank for the same period at 0.6875%.
Brokerage is charged at 2 basis points per annum.

What is the net profit or loss on the deal?

A. ProfitofGBP 299.66
B. Profit of GBP 203.77
C. LossofGBP299.66
D. Loss ofGBP 203.77

Correct Answer: B

QUESTION 346
How is an outright forward FX transaction quoted?

A. pared points
B. Depends on the term
C. Depends on whether it is interbank or to a customer
D. Depends on the currency pair

Correct Answer: C
QUESTION 347
How much is one big figure worth per million of base currency if EUR/GBP is 0.8990?

A. GBP 10,000.00
B. EUR 10,000.00
C. GBP 8,990.00
D. EUR 8,990.00

Correct Answer: A

QUESTION 348
A customer would hedge a currency exposure with a forward FX time option if:

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

Correct Answer: D

QUESTION 349
If you sell forward USD to a client against EUR, what is the first thing you should do to cover your
exposure to exchange rate movements?

A. Sell and buy USD in the FX swap market

B. Sell USD in the spot market
C. Buy USD in the spot market
D. Buy and sell USD in the FX swap market

Correct Answer: C

QUESTION 350
You are quoted the following market rates:

Spot EUR/USD 1.3097-00

0/N EUR/USD swap 0.08/0.11
TIN EUR/USD swap 0.29/0.34
S/N EUR/USD swap 0.10/0.13

Where can you buy EUR against USD for value tomorrow?

A. 1.299971
B. 1.309966
C. 1.309971
D. 1.310029

Correct Answer: C

QUESTION 351
You are quoted the following rates:

Spot EUR/NOK7.5250-60
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?

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

Correct Answer: D

QUESTION 352
The market is quoting:
3-month (90-day) NZD 2.55%
6-month (182-day) NZD 2.75%

What is the 3x6 rate in NZD?

A. 2.338%
B. 2.650%
C. 2.927%
D. 2.992%

Correct Answer: C

QUESTION 353
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?

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

Correct Answer: C

QUESTION 354
If you funded your fixed-income investment portfolio with short-term deposits, how would you hedge your
interest rate exposure with interest rate swaps?

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

Correct Answer: A

QUESTION 355
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:

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%

Correct Answer: C
QUESTION 356
The buyer of a cap:

A. Receives compensation if a reference interest rate falls below an agreed level

B. Pays compensation if a reference interest rate falls below an agreed level
C. Receives compensation if a reference interest rate rises above an agreed level
D. Pays compensation if a reference interest rate rises above an agreed level

Correct Answer: C

QUESTION 357
The buyer of a currency put option has:

A. Substantial opportunity for gain and limited risk of loss

B. Substantial risk of loss and substantial opportunity for gain
C. Limited risk of loss and limited opportunity for gain
D. Substantial risk of loss and limited opportunity for gain

Correct Answer: A

QUESTION 358
The rho of an option is:

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

Correct Answer: A

QUESTION 359
Which of the following statements regarding economic capital is correct?

A. Economic capital is calculated externally and is the amount of capital the firm should have to support
its target credit rating
B. Economic capital is calculated on an expected shortfall basis with a specific time horizon and
confidence level.
C. Economic capital is used for measuring and reporting risks across a financial organisation.
D. Economic capital is always lower than regulatory capital because of the more adequate modelling of
correlation effects compared to the regulatory approach.

Correct Answer: C

QUESTION 360
Who typically communicates the bank's asset and liability management policy internally?

A. the management board

B. the chief risk officer
C. the bank's ALCO
D. the Risk and Capital Committee

Correct Answer: C

QUESTION 361
You have prepared the following economic capital table for the next ALCO meeting:
For which of the following risks should you consider actions?

A. credit risk
B. interest rate risk
C. liquidity risk
D. currency risk

Correct Answer: C

QUESTION 362
All other things being equal the interest rate risk of a fixed coupon bond is:

A. greater, the higher the coupon and the longer the term
B. greater, the lower the coupon and the longer the term
C. lower, the lower the coupon and the shorter the term
D. lower, the higher the coupon and the longer the term

Correct Answer: B

QUESTION 363
What is settlement risk in FX?

A. The risk of failure of a payments or settlement system

B. The risk that only one side of an exchange of currencies will be made
C. The risk of payments `gridlock' in a real-time gross settlement system
D. The risk that default by a counterparty before the value date means you have to replace the defaulted
deal at a worse rate

Correct Answer: B

QUESTION 364
Taking collateral to hedge the credit risk on a counterparty means that you have:

A. Eliminated credit risk

B. Eliminated market risk
C. Taken a guarantee from the issuer of the collateral
D. Taken on market, legal and operational risks

Correct Answer: D

QUESTION 365
You want to hedge your deposit against falling interest rates. Which of the alternatives below are
appropriate for this purpose?

A. Selling a Money Market Future and/or selling a Forward Rate Agreement

B. Buying a Money Market Future and/or buying a Forward Rate Agreement
C. Selling a Money Market Future and/or buying a Forward Rate Agreement
D. Buying a Money Market Future and/or selling a Forward Rate Agreement
Correct Answer: D

QUESTION 366
You are the fixed-rate payer in a plain vanilla interest rate swap. If your counterparty defaults, your
exposure at default is:

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

Correct Answer: D

QUESTION 367
Extended trading hours and off-premises dealing can involve additional hazards, the avoidance of which
requires clear controls. The Model Code prescribes best market practice. Which of thefollowing is true?

A. Off-premises dealing should be strictly prohibited.

B. After-hours trading should be prohibited.
C. Deals transacted after normal business hours or off-premises should only be undertaken on mobile
phones approved by management.
D. Deals transacted after normal business hours or off-premises either by mobile phones or any other
equipment should only be undertaken with the approval of management.

Correct Answer: D

QUESTION 368
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"?

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.

Correct Answer: C

QUESTION 369
Where there are shared management responsibilities or where an investment or shareholding exists in a
broker by a counterparty:

A. the broker is not obligated to reveal any material connections provided Chinese Walls are in place.
B. the broker is not required to reveal any connections at all.
C. the broker is legally obliged to advise his clients of any material connections that exist.
D. is a matter which is not covered by the Model Code.

Correct Answer: C

QUESTION 370
Dealers are authorized to deal:

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

Correct Answer: B
QUESTION 371
Which of the following statements about "standard settlement instructions" (SSI) is correct?

A. The Head of Operations has the sole responsibility of ensuring the correctness and validity of the SSI
set up.
B. SSIs should be stored and maintained in the bank's general static data system.
C. Each institution should have a separate SSI team to prevent I minimise the potential risk of fraud.
D. SSI staff should be fully integrated within Operations to insure consistent and reliable settlement
guidelines.

Correct Answer: C

QUESTION 372
Which of the following is a Model Code good practice regarding the passing of names?

A. Bank dealers should, wherever possible, give brokers prior indication of counterparties with whom they
would be unwilling to do business.
B. Brokers may divulge the names of principals prematurely to induce a counterparty to transact.
C. Dealers should never give brokers guidance on the extent of their price differentiation across broad
categories of counterparties.
D. When a principal's name proves unacceptable to another principal, the broker is bound to divulge who
refused it.

Correct Answer: A

QUESTION 373
Three of the following non-EU countries have unilaterally adopted the Euro. Which one has not?

A. Kosovo
B. Andorra
C. Albania
D. Montenegro

Correct Answer: C

QUESTION 374
Which of the following is not an officially published settlement or reference rate?

A. LIBID
B. LIBOR
C. EURIBOR
D. EURO LIBOR

Correct Answer: A

QUESTION 375
When a broker needs to switch a name this should be done:

A. only after consultation with the local regulator

B. only if the switching transaction is done at the current market rate
C. only provided that such transactions are identified as switching transactions
D. only after approval by the broker's senior management

Correct Answer: C

QUESTION 376
Once a prime-broker has matched and accepted a trade, separate confirmations must be exchanged
between:

A. the prime-broker and the executing dealer only

B. the prime-broker and the executing dealer, and between the executing dealer and the client
C. the prime-broker and the executing dealer, and between the prime-broker and the client
D. the prime-broker and the client, and between the executing dealer and the client

Correct Answer: C

QUESTION 377
A fixed rate forward/forward non-deliverable deposit/loan transaction, settled in cash with an agreed upon
process for calculating the market reference at the commencement of the forward/forward period, is called:

A. an interest rate swap

B. a forward rate agreement
C. a short term interest rate future
D. an interest rate collar

Correct Answer: B

QUESTION 378
Convert 8.25% quoted on a semi-annually compounded money market basis for USD to the equivalent
annually-compounded bond basis.

A. 8.30%
B. 8.52%
C. 8.54%
D. 8.69%

Correct Answer: C

QUESTION 379
Today's date is Thursday 12th December. What is the spot value date? Assume no bank holidays.

A. 14th December
B. 15th December
C. 16th December
D. 17th December

Correct Answer: C

QUESTION 380
Which of the following pays a return in the form of a discount to face value?

A. Treasury bill
B. CD
C. Interbank deposit
D. Classic repo

Correct Answer: A

QUESTION 381
Which of the following will tend to have the lowest yield?

A. Interbank deposit
B. Certificate of deposit
C. Treasury bill
D. BA

Correct Answer: C

QUESTION 382
Which of the following market participants would least likely be a user of repo?

A. Investment funds
B. Credit institutions and central banks
C. Corporates
D. Retail and private customers

Correct Answer: D

QUESTION 383
When quoting the exchange rate between the USD and AUDI which is conventionally the base currency?

A. USD
B. AUD
C. Depends on whether the price is being quoted in Australia or the US
D. Depends on whether the price is being quoted interbank or to a customer

Correct Answer: B

QUESTION 384
The buyer of a USD/ARS NDF could be:

A. a buyer of Argentine Pesos

B. expecting a falling USD/ARS rate
C. hedging against a weakening of the Argentine Peso
D. speculating on an appreciation of the Argentine Peso

Correct Answer: C

QUESTION 385
A forward/forward FX swap:

A. is a contract by which the maturity of a regular FX swap can be extended at an historic (noncurrent)
rate
B. is a swap transaction where the near leg is traded either value today or value tomorrow and the far leg
is traded spot
C. is a swap that does not start spot and where both the near and the far leg are traded forward
D. is a transaction by which a maturing outright forward FX is prolonged at an historic (non-current) rate

Correct Answer: C

QUESTION 386
If you have created a `synthetic asset' by buying and selling a USD/CHF swap, what have you done?

A. Created an exposure to the CHF

B. Created an exposure to the USD
C. Switched a CI-IF asset temporarily into USD without taking currency risk
D. Switched a USD asset temporarily into CHF without taking currency risk

Correct Answer: C

QUESTION 387
If I say that I have "bought and sold" EUR/USD in an FX swap, what have I done?
A. Bought EUR and sold USD spot, and sold EUR and bought USD forward
B. Bought USD and sold EUR spot, and sold USD and bought EUR forward
C. Synthetically taken a USD loan in exchange for making a EUR loan with the same counterparty
D. Sold EUR/USD spot and bought back EUR/USD forward

Correct Answer: A

QUESTION 388
If EUR/USD is 1.3025-28 and the 6-month swap is 15.50/17, what is the 6-month outright price?

A. 1.3042-1.30435
B. 1.30405-1.3045
C. 1.30095-1.3011
D. 1.4575- 1.4728

Correct Answer: B

QUESTION 389
If spot USD/HKD is 7.7600 and USD/SGD is 1.2350, what is SGD/HKD?

A. 9.5836
B. 6.2834
C. 0.1591
D. 0.1043

Correct Answer: B

QUESTION 390
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?

A. 105.50
B. 105.61
C. 10555
D. 0.009474

Correct Answer: B

QUESTION 391
The market is quoting:

1-month (31-day) NOK 1.75¡ãk

3-month (91-day) NOK 2.05%

What is the 1x3 rate in NOK?

A. 4.261%
B. 2.202%
C. 1.900%
D. 1.592%

Correct Answer: B

QUESTION 392
The major difference between FRAs and futures is that FRAs are:

A. Exchange-traded
B. Margined
C. Standardized
D. Dealtoverthe counter

Correct Answer: D

QUESTION 393
A short USD put/JPY call option:

A. Gives you the right but not the obligation to sell USD and buy JPY
B. Gives you the right but not the obligation to buy USD and sell JPY
C. Gives your counterparty the right but not the obligation to sell USD and buy JPY
D. Gives your counterparty the right but not the obligation to buy USD and sell JPY

Correct Answer: C

QUESTION 394
What is a long strangle option strategy?

A. A short call option + short put option with a higher strike price than the call option
B. A long call option + long put option with a lower strike price than the call option
C. A short call option + short put option with a lower strike price than the call option
D. A long call option + short put option with higher strike price than the call option

Correct Answer: B

QUESTION 395
If the yield curve is upward sloping, a bank would not profit from:

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

Correct Answer: B

QUESTION 396
Issues relating to the bank's liquidity management are commonly discussed in:

A. the Asset Liability Management Committee (ALCO)

B. the Financial Resources and Compensation Committee
C. the Credit Committee
D. the Federal Open Market Committee

Correct Answer: A

QUESTION 397
Which of the following transactions would have the effect of shortening the average duration of liabilities in
the banking book?

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

Correct Answer: B
QUESTION 398
What is Funds Transfer Pricing in the ALM process?

A. A maturity analysis of a bank's interest-bearing assets and interest-bearing liabilities.

B. A method used to measure how much each source of funding is contributing to overall profitability.
C. A calculation of the spread between the duration of the interest-bearing assets and the interestbearing
liabilities.
D. The evaluation and management of the gap between a bank's volume of loans and deposits.

Correct Answer: B

QUESTION 399
Which of the following statements about requirements for dealing with limit violations is correct?

A. Financial institutions have to establish procedures for handling limit breaches that are in accordance
with their decision-making hierarchy.
B. If a partial limit violation does not exceed the overall limit, no reaction is required.
C. The definition of escalation levels is not required in order to react appropriately to different sorts and
intensities of limit breaches.
D. It is adequate and proper to define reactions only to standard cases of limit violations.

Correct Answer: A

QUESTION 400
Under Basel Securitization rules the highest potential risk weight is:

A. 350%
B. 750%
C. 1250%
D. 1500%

Correct Answer: C

QUESTION 401
You are entering into a swap as a fixed rate receiver with Party A and into an offsetting position with party
B. All other things being equal, which of the scenarios below will lead to the greatest increase in the sum of
the Credit Value Adjustments for A and B?

A. upward shift of the swap curve and rating downgrade of party A

B. downward shift of the swap curve and rating downgrade of party A
C. downward shift of the swap curve and rating downgrade of party B
D. downward shift of the swap curve only

Correct Answer: B

QUESTION 402
Under Basel rules, what is the meaning of RWA?

A. Risk Weighted Assets

B. Risk Weighted Average
C. Recovery Weighted Assets
D. Risk Weighted Adjustments

Correct Answer: A

QUESTION 403
What does the term "mine" mean when given in response to an FX spot quotation?
A. I buy the base currency at the bid rate.
B. I buy the base currency at the offer rate.
C. I buy the counter-currency at the offer rate.
D. I sell you the base currency at the bid rate,

Correct Answer: B

QUESTION 404
Assume the following scenario:

Bank A bids for EUR 5,000,000.00 at 1.3592.

Bank B offers EUR 10,000,000.00 at 1.3597.
Broker XYZ quotes to the market EUR/USD 1.3592/97.
Bank C takes the offer at 1.3597.

What information is the broker obliged to reveal?

A. the name of Bank A and Bank B

B. the names of Bank B and Bank C
C. the amount that was bid but not the name of Bank A
D. the amount taken by Bank C as well as the amount that was bid

Correct Answer: B

QUESTION 405
Which of the following correctly states the Model Code's recommendations regarding terms and
documentation?

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.

Correct Answer: C

QUESTION 406
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?

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

Correct Answer: B

QUESTION 407
What is the documentation in which the parties agree to the terms that will govern future transactions?

A. standard settlement instructions

B. netting agreement
C. terms of engagement
D. master agreement

Correct Answer: D

QUESTION 408
What are de minimis claims?

A. claims of less than USD 100.00

B. claims of less than USD 1,000.00
C. claims of less than EUR 100.00
D. claims of less than EUR 1,000.00

Correct Answer: B

QUESTION 409
What is the name of a swap in which the counterparties sell currencies to each other with a concomitant
agreement to reverse the exchange of currencies at a fixed date in the future at the same price, and where
the interest rates for the two currencies are reflected in the two exchanges but paid separately?

A. aFXswap
B. an in/out swap
C. a currency swap
D. a quanto swap

Correct Answer: C

QUESTION 410
Under what circumstances are banks allowed to "park" deals or positions with a counterparty?

A. Not under any circumstances, since the "parking" of deals or positions should be prohibited
B. in conditions of exceptional volatility
C. only if the two counterparties to the deal agree
D. only if "parking" of deals or positions has been approved by senior management

Correct Answer: A

QUESTION 411
Any breaches in confidentiality should be:

A. documented and reported to the local regulator

B. communicated to local staff by a confidential internal circular
C. investigated immediately according to a properly documented procedure
D. reported to the ACI's Committee for Professionalism to investigate and advise accordingly

Correct Answer: C

QUESTION 412
An FX forward outright has been dealt for a value date which is subsequently declared to be a bank
holiday. According to the Model Code, the exchange rate for the deal:

A. should be adjusted to take account of the change in value date

B. cannot be adjusted if one of the counterparties wishes to adjust the rate but the other wishes to keep
the original rate
C. must be adjusted if one of the counterparties wishes to adjust the rate but the other wishes to keep the
original rate
D. should be adjusted if the adjustment is for two days or longer but not if it is for only one day
Correct Answer: A

QUESTION 413
Under what conditions can an FX broker act as a position taker?

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

Correct Answer: D

QUESTION 414
A prime broker may not reject a trade given up if:

A. the trade is not within the specified tenor limits

B. the trade is not within the specified credit limits
C. the trade details provided by the executing dealer and the client match
D. the trade is a permitted transaction type as specified in the give-up agreement with the executing
dealer

Correct Answer: D

QUESTION 415
Is gambling or betting between market participants allowed?

A. Yes, it is allowed for sporting events.

B. Yes, it is allowed if no money is involved.
C. Although not prohibited, it is strongly discouraged.
D. It is allowed for purposes of charity.

Correct Answer: C

QUESTION 416
What is a "normal" shaped curve?

A. Gradual positive slope

B. Steep positive slope
C. Flat
D. Inverted

Correct Answer: A

QUESTION 417
If you take an 18-month USD deposit, when is interest payable?

A. Quarterly
B. At maturity
C. Semi-annually
D. After one year and at maturity

Correct Answer: D

QUESTION 418
Which of the following will tend to have the higher yield?

A. Treasury bill
B. Repo against Treasury bill collateral
C. They have the same yield
D. Cannot say

Correct Answer: B

QUESTION 419
Mark-to-market' in a repo means:

A. Revaluing collateral versus cash

B. Revaluing collateral
C. Calculating net present value
D. Calculating the net replacement cost

Correct Answer: A

QUESTION 420
How can material divergences between the value of cash and collateral be managed in a documented sell/
buy-back?

A. Margin maintenance
B. Re-pricing
C. Margin maintenance or re-pricing, but usually margin maintenance
D. Margin maintenance or re-pricing, but usually re-pricing

Correct Answer: D

QUESTION 421
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 EUR 25,000,000.00 nominal of the 5.5% OAT April 2015, which is worth EUR
28,137,500.00. If you impose an initial margin of 1%, the Repurchase Price is:

A. EUR 27,947,276.43
B. EUR 27,946,077.08
C. EUR 27,950,071.43
D. EUR 27,948,871.97

Correct Answer: D

QUESTION 422
Four banks provide you with quotes in CHF/SEK. Which is the best price for you to buy SEK?

A. 6.5825
B. 6.5820
C. 6.5815
D. 6.5830

Correct Answer: D

QUESTION 423
After having quoted a rate of 1.5005-10, the quoting bank says, "Your risk". This means:

A. The quoted rate is subject to change at the risk of the price-taker

B. The quoting bank is reminding you of the market risk of your potential trade
C. This is a requirement of any market maker
D. The market maker needs to check your credit limit
Correct Answer: A

QUESTION 424
What is the London Gold Price Fix (London Gold Fixing)?

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

Correct Answer: A

QUESTION 425
The outright forward FX rate is not a function of which of the following?

A. The interest rates of the two currencies

B. The spot exchange rate
C. Thedaycount
D. Market expectation

Correct Answer: D

QUESTION 426
The Interest Rate Parity Theorem states that:

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

Correct Answer: D

QUESTION 427
Forward points represent:

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

Correct Answer: C

QUESTION 428
You have quoted a Swiss customer spot USD/CHF as 0.9273-78, but he asks you to quote it as CHF/
USD. What do you quote?

A. 0.9278-73
B. 1.0784-78
C. 1.0778-84
D. 1,0773-78

Correct Answer: C

QUESTION 429
How is a USD Overnight Indexed Swap (OIS) settled?
A. Periodic exchange of fixed and floating payments up to and including maturity
B. At maturity by net payment
C. After maturity by exchange of fixed and floating payments
D. Two days after maturity by net payment

Correct Answer: D

QUESTION 430
An `at-the-money' call option:

A. Costs more than an `in-the-money' call option

B. Costs less than an `out-of-the-money' call option
C. Costs more than an `out-of-the-money' call option
D. Costs the same as an `in-the-money' put option

Correct Answer: C

QUESTION 431
The seller of a floor:

A. Receives compensation if a reference interest rate falls below an agreed level

B. Pays compensation if a reference interest rate falls below an agreed level
C. Receives compensation if a reference interest rate rises above an agreed level
D. Pays compensation if a reference interest rate rises above an agreed level

Correct Answer: B

QUESTION 432
Which of the following statements about the Net Stable Funding Ratio is correct?

A. Assets are classified with an available stable funding factor (ASF).

B. Liabilities are classified with a required stable funding factor (RSF).
C. The ratio of available funding to required funding has to be higher than 50%n
D. Equity has an available stable funding factor of 100%.

Correct Answer: D

QUESTION 433
A bank expects interest rates to fall with a parallel downward shift in the yield curve. What action should
the bank take, if it wants to benefit from this view?

A. increase the maturity of its liabilities

B. reduce the maturity of its asset portfolio
C. runazerogap
D. lengthen the maturity of its asset portfolio

Correct Answer: D

QUESTION 434
Which of the following statements is correct?

A. Hedging a long bond position with payer's swap involves basis risk
B. Hedging the credit risk of an asset swap package with a credit default swap has no basis risk
C. Basis risk is a result only of maturity mismatches
D. Basis risk is a result only of duration mismatches.

Correct Answer: A
QUESTION 435
What type of risk would describe the failure of a back office to make adequate margin calls on repo
positions?

A. Credit risk
B. Market risk
C. Operational risk
D. Settlement risk

Correct Answer: C

QUESTION 436
Which one of the following statements concerning covenants is incorrect?

A. Covenants are clauses in bank credit agreements and bond indentures designed to assure debt
holders that the creditworthiness of the borrower(s)/issuer(s) will remain satisfactory
B. Covenants must be tailored to reflect the specific needs of the borrower/issuer and the specific risks
perceived by the debt holders.
C. Covenants require the holder of the debt to refrain from doing certain specific things.
D. Three different types of covenants in credit agreements and bond indentures are affirmative, negative
and financial.

Correct Answer: C

QUESTION 437
Under Basel rules, what is the meaning of LGD?

A. Loss Given Default

B. Liquidity Given Distress
C. Limit Given Default
D. Loss Given Distress

Correct Answer: A

QUESTION 438
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?

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

Correct Answer: A

QUESTION 439
Which one of the following is a major objective of ACI-The Financial Markets Association?

A. to promote globalization and deregulation of the financial markets

B. to maintain the professional level of competence and to disseminate a high level of ethical and
professional behavior
C. to act as the official international market regulator in the absence of government regulation
D. to become the sole global corporation of wholesale financial market professionals

Correct Answer: B

QUESTION 440
When may a broker assume a deal is closed?

A. When one of the principals confirms the deal

B. When the principals give a written undertaking for all deals done at the end of the day
C. When acknowledgement is received from the principals that the deal is done
D. When both back offices acknowledge the deal

Correct Answer: C

QUESTION 441
What is the recommended follow-up procedure in case of a settlement discrepancy?

A. All investigation cases should be handled within the same day B. All investigation cases should be
handled within 2 days
B. Investigation cases received before noon should be handled within the same day and those received
after midday should be handled before noon the next day
C. Investigation cases received before noon should be handled within the same day and those received
after midday within 24 hours

Correct Answer: C

QUESTION 442
In dealing terminology, what does "my risk" refer to?

A. the market amount for which the quote is valid

B. the acknowledgement by the broker that he may be stuffed
C. the acknowledgement by the dealer receiving the quote that the rate may have to be re-quoted
D. the quoting dealer cautions the receiver of the quote that the price may have to be re-quoted at the
receiver's risk

Correct Answer: A

QUESTION 443
Which one of the following statements about "CLS rescinds" is correct?

A. CLS settlement members may rescind instructions unilaterally provided that the rescind messages
reach the CLS Bank before the 00:00 CET deadline.
B. CLS settlement members may rescind instructions unilaterally provided that the rescind messages
reach the CLS Bank before the 06:30 CET deadline.
C. CLS settlement members may rescind instructions bilaterally only if the rescind messages reach the
CLS Bank before the 00:00 CET deadline.
D. CLS settlement members may rescind instructions bilaterally only if the rescind messages reach the
CLS Bank after the 06:30 CET deadline.

Correct Answer: A

QUESTION 444
The process of confirming trades is a function that can be performed by:

A. any dealer as long as he/she is not a party to the trade

B. staff in the back-office/operations who are independent of the trade
C. staff in the dealing room who are not dealing
D. any staff outside the dealing room

Correct Answer: B

QUESTION 445
Your broker quotes you EUR/USD at 1.3425-28. You respond by saying "yours". Which one of the
following statements is true?

A. You are committed to sell a marketable EUR amount unless the quote was for a specific amount.
B. You are committed to sell to the counterparty his full EUR amount subject to credit limits on the
counterparty.
C. You are committed to sell EUR up to the amount permitted by your credit limits on the counterparty.
D. You are committed to sell a marketable USD amount unless the quote was for a specific amount.

Correct Answer: A

QUESTION 446
Which SWIFT message should be used to advise the netting position of a currency resulting from FX,
NDF, options and other trades?

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

Correct Answer: C

QUESTION 447
What does the Model Code advise regarding the taping of telephone conversations?

A. The tapes and other records should be kept until the transaction has been settled B. Firms should
ensure that they comply with local privacy laws
B. Management should ensure that the installation and control of recording equipment complies with local
legislation, including laws on data protection, privacy and human rights as well as the manufacturers
minimum requirements
C. All front office personnel should have access to these tapes and records

Correct Answer: B

QUESTION 448
From the following CAD rates:

1M (31-day) CAD deposit 0.95%

1x2 CAD (30-day) FRA 1.21%
2x3 CAD (31-day) FRA 2.01%

Calculate the 3-month implied cash rate.

A. 1.42%
B. 1.39%
C. 2.01%
D. 4.21%

Correct Answer: B

QUESTION 449
Using the following rates:

3M (90-day) EUR deposit 0.25%

6M (180-day) EUR deposit 0.50%

What is the rate for a EUR deposit, which runs from 3 to 6 months?

A. 0.25%
B. 0.375%
C. 0.75%
D. 0.50%

Correct Answer: C

QUESTION 450
The two-week repo rate for the 5.25% Bund 2011 is quoted to you at 3.33-38%. You agree to reverse in
bonds worth EUR 266,125,000.00, but insist on an initial margin of 2%. You would earn repo interest
of:

A. EUR 337,874A0
B. EUR 342,947.58
C. EUR 337,739.24
D. EUR 342,810.40

Correct Answer: A

QUESTION 451
What is an outright forward FX transaction?

A. A spot sale (purchase) and a forward purchase (sale)

B. A spot sale (purchase) and a forward sale (purchase)
C. An exchange of currencies on a date beyond spot and at a price fixed today
D. An exchange of currencies on a date beyond spot

Correct Answer: C

QUESTION 452
If a 12-month AUD/NZD swap is quoted 53/47, which of the following statements would you consider to be
correct?

A. 12-month AUD rates are higher than 12-month NZD rates

B. 12-month AUD rates are lower than 12-month NZD rates
C. Spot AUD/NZD will be higher by approximately 50 points in 12 months
D. The AUD yield curve is positive, whilst the NZD curve is negative

Correct Answer: A

QUESTION 453
You wish to sell a customer GBP/USD for value tomorrow. How can you hedge yourself?

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

Correct Answer: D

QUESTION 454
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?

A. 104.14
B. 104.21
C. 104.23
D. 104.30

Correct Answer: A

QUESTION 455
If a dealer needs to hedge an over-lent 3x6 position against 1MM dates for which the FRA is quoted 1.30-
1.34% and futures at 98.64, which would be cheapest for him (ignoring margin costs on futures positions)
to cover his gap?

A. FRA
B. Futures
C. No difference
D. Too little information to decide

Correct Answer: A

QUESTION 456
The delta of an `at-the-money' long call option is:

A. Between +0.5 and +1

B. +0.5
C. Between 0 and +0.5
D. Zero

Correct Answer: B

QUESTION 457
A long collar is:

A. A purchase of a cap and a sale of a floor

B. A purchase of a floor and a sale of a cap
C. A purchase of a cap and a purchase of a floor
D. A sale of a cap and a sale of a floor

Correct Answer: A

QUESTION 458
What is the purpose of the Liquidity Coverage Ratio?

A. to mitigate market replacement risk across markets

B. to eliminate funding mismatches by establishing a minimum acceptable amount of stable funding
C. to ensure that banks have enough high-quality liquid assets to survive a 30-day period of acute market
stress
D. to minimize duration risk on a bank's assets over a one-year horizon

Correct Answer: C

QUESTION 459
Which of the following is a measure of a bank's gross exposure to foreign exchange rate risk?

A. The maturity mismatch among assets and liabilities denominated in the home and reporting currencies.
B. The gap between variable and fixed rate assets and liabilities across all currencies.
C. The sum of all assets in one currency minus the sum of all liabilities in that same currency.
D. The sum of all off-balance sheet assets in one foreign currency minus the on-balance sheet equity in
 another currency.

Correct Answer: C

QUESTION 460
When constructing a gap report, how would a EUR 25,000,000.00 long position in 6x12 FRA be
categorized?

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

Correct Answer: B

QUESTION 461
What would happen to a bank's net interest income if it ran a zero gap in an environment of decreasing
interest rates?

A. Net interest income would increase slightly.

B. Net interest income would increase considerably.
C. Net interest income would decrease.
D. Net interest income would hardly change at all.

Correct Answer: D

QUESTION 462
What is a hedge?

A. A means by which to reduce a risk

B. An equal and opposite risk
C. A riskless transaction
D. A means of cancelling a deal

Correct Answer: A

QUESTION 463
When is your settlement risk greatest on a spot FX deal?

A. Today
B. Tomorrow
C. After you make an irrevocable payment
D. On the spot value date

Correct Answer: C

QUESTION 464
Which of the following is a characteristic of all liquid assets under Basel III?

A. uncertainty of valuation
B. high correlation with risky assets
C. listed on a developed and recognized exchange
D. readily marketable

Correct Answer: D

QUESTION 465
Today, you sell GBP 5,000,000.00 to a customer against JPY for spot value. Tomorrow, the customer
defaults. What is your exposure called?

A. Replacement risk
B. Settlement risk
C. Legal risk
D. Basis risk

Correct Answer: A

QUESTION 466
Which one of the following best describes expected shortfall/conditional value-at-risk at the 95% level?

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

Correct Answer: B

QUESTION 467
For a bank to count funds as regulatory capital:

A. There has to be an ultra long term maturity date

B. The risk taken by the bank must be taken or shared by provider of the capital
C. The funds must be in the form of pure equity
D. The funds must be re-invested only in cash

Correct Answer: B

QUESTION 468
In FX trading a "third party beneficiary" is best described as:

A. the issuer of a payment for the relevant trade distinct from the counterparty
B. the issuer of a payment for the relevant trade identical to the counterparty
C. the recipient of a payment for the relevant trade distinct from the counterparty
D. the recipient of a payment for the relevant trade identical to the counterparty

Correct Answer: C

QUESTION 469
If manual trade capture methods are used, when should deals be recorded in systems used for this
purpose?

A. The same day they are dealt

B. Promptly
C. Within 24 hours of execution
D. Within an hour of execution

Correct Answer: B

QUESTION 470
Between which departments are clear and structured escalation procedures required for the management
of incorrect funding balances?

A. Nostro reconciliations, the Cash Management Department and Operations

B. Front Office, the Cash Management Department and Operations
C. Front Office, Nostro reconciliations and Operations
D. Front Office, Nostro reconciliations and the Cash Management Department

Correct Answer: B

QUESTION 471
A bank quotes a spot rate that is verifiably incorrect and deviates substantially from the prevailing market
rate.

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

Correct Answer: B

QUESTION 472
In foreign exchange markets, the first currency in a currency pair is:

A. The quoted currency

B. The base currency
C. The counter currency
D. The terms currency

Correct Answer: B

QUESTION 473
Which of the following statements is an incorrect statement in respect of Model Code recommendations
concerning electronic trading?

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

Correct Answer: B

QUESTION 474
What are financial market professionals not explicitly required by the Model Code to clarify and agree to in
writing?

A. that the customer understands he will be charged for advisory services that are provided
B. that the customer understands the terms, conditions and risks of the transaction
C. that the customer understands that any information or explanation should not be interpreted as
investment advice or recommendations
D. that the customer understands he is entering into the transaction at his own risk and for his own
account.

Correct Answer: A

QUESTION 475
When should confirmations be sent out?

A. one day after the deal is done

B. within two hours of the trade being booked and as soon as technologically possible
C. immediately after having received the confirmation of the counterparty
D. no later than the value date of the first leg of the transaction

Correct Answer: B

QUESTION 476
In the unforeseen event that a particular maturity date is declared a public holiday, what is standard market
practice for spot FX?

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.

Correct Answer: A

QUESTION 477
What should a dealer say to express his commitment to putting an additional bid or offer at a current bid or
offer price already quoted by his broker?

A. same way"
B. me too"
C. "par", or "parity"
D. "join at", or "support at"

Correct Answer: D

QUESTION 478
If making a claim in respect of "use of funds", payments should be settled within how many days?

A. 15
B. 20
C. 35
D. 40

Correct Answer: C

QUESTION 479
Which of following terms is not used as an expression for dates other than regular dates/periods?

A. cock dates
B. broken dates
C. odd dates
D. weird dates

Correct Answer: D

QUESTION 480
Which of the following statements with respect to trading and broking ethics through the use of technology
is the correct quote from the Model Code?

A. Deliberate attempts at gaming and abuse using the flashing of orders without the intent to deal should
be classified as proprietary trades.
B. Management should ensure that the complete e-trading process, from pricing to risk impact through to
settlement, conforms to recognized standards and market conventions.
C. All bid-offers presented to electronic platforms should remain in the Matching System for no more than
the minimum period of time defined within their respective Minimum Quote Life (MQL) rules.
D. Trades which occur at off-market rates, by agreement between the two counterparts and as soon as
practically possible, should stand and any profit be equitably divided between them.

Correct Answer: B

QUESTION 481
The Model Code is clear on "position parking". What does it say?

A. The parking of deals or positions with any counterparty is discouraged B. The parking of deals or
positions with any counterparty should be forbidden
B. The parking of deals or positions should be subject to a clear policy laid down in writing by senior
management
C. In jurisdictions where position parking is allowed, prior approval should be sought from the regulator

Correct Answer: B

QUESTION 482
Which of the following statements about Eurodollar deposits is correct?

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

Correct Answer: C

QUESTION 483
A CD can usually only be issued by what type of institution?

A. Credit institution
B. Investment bank
C. Discount house
D. Corporate

Correct Answer: A

QUESTION 484
If the value of the collateral in a repo has fallen during the term of the transaction, who suffers the loss?

A. Seller
B. Buyer
C. Issuer
D. It depends on the agreement between the buyer and seller

Correct Answer: A

QUESTION 485
Which of the following functions does a to-party repo agent not perform?

A. It checks the eligibility and sufficiency of collateral

B. It can impose an initial margin on behalf of the buyer and manages margin calls
C. It manages substitution of collateral on behalf of the seller
D. It participates in the risk of transactions if one of the parties defaults

Correct Answer: D

QUESTION 486
What is the ISO code for platinum?
A. XAU
B. XAG
C. XPT
D. XPD

Correct Answer: C

QUESTION 487
If 6-month EUR/AUD is quoted at 129/132, which of the following statements is correct?

A. EUR rates are higher than AUD rates in the 6-month

B. AUD rates are higher than EUR rates in the 6-month
C. There is a positive EUR yield curve
D. There is not enough information to decide

Correct Answer: B

QUESTION 488
What criteria define a market-maker?

A. He will only quote to brokers

B. He will quote choice prices on request
C. He will only quote two-way prices to brokers
D. He will quote two-way prices for marketable amounts on request

Correct Answer: D

QUESTION 489
You are quoted the following market rates:

Spot EUR/USD 1.3010

6M (181-day) EUR 0.30%
6M (181-day) USD 0.50%

What is 6-month EUR/USD?

A. 1.2993
B. 1.3023
C. 1.3141
D. 1.4323

Correct Answer: B

QUESTION 490
You quote your customer EUR/USD 1.3070-73, However they need the rate quoted in EUR per USD.
What do you quote?

A. 1.3073-70
B. 0.7651-49
C. 0.7646-49
D. 0.7649-51

Correct Answer: D

QUESTION 491
A customer sells a 3-month Euro Swiss Franc (EUROSWISS) futures contract. Which of the following risks
could he be trying to hedge?
A. An increase in forward USD/CHF
B. Falling CI-IF interest rates
C. A decrease in forward USD/CHF
D. Rising CHF interest rates

Correct Answer: D

QUESTION 492
A bank wants to use STIR futures for establishing a macro hedge for the asset portfolio. Which of the
following statements is correct?

A. It is reasonable for the bank to purchase futures contracts if they expect interest rates to rise.
B. It is reasonable for the bank to take a long position in anticipation of rising rates.
C. Losses (or gains) in the value of the cash position can be largely offset by gains (or losses) in the value
of the futures position
D. It is reasonable for the bank to sell futures contracts if it expects interest rates to fall

Correct Answer: C

QUESTION 493
Which of the following statements about hedge accounting is not correct?

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.

Correct Answer: C

QUESTION 494
Which of the following statements does not explain why banks accept some amount of interest rate risk?

A. In their function as intermediaries, banks must necessarily accept some degree of interest rate risk.
B. Banks incur interest rate risk to increase income
C. Banks prefer c red it risk to market risk.
D. If banks failed to take on interest rate risk they would not be able to meet the needs of their deposit and
loan customers.

Correct Answer: C

QUESTION 495
Under Basel rules the risk weight for AM-rated claims on corporates in the standardized approach is:

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

Correct Answer: C

QUESTION 496
A customer based in the UK exports automotive parts to the US. His main competitor is in France. What
type of exposure to currency risk is posed by movements in EUR/USD?
A. Transaction exposure
B. Translation exposure
C. Economic exposure
D. None

Correct Answer: C

QUESTION 497
If you took a short position in USD/JPY, how could the Fed "squeeze" you?

A. Raise USD interest rates

B. Lower USD interest rates
C. Lower reserve requirements
D. It could not squeeze you

Correct Answer: A

QUESTION 498
Under Basel III the Credit Value Adjustment will apply to:

A. bilaterally cleared ABS trades only

B. exchange traded derivatives only
C. derivatives cleared via a CCP
D. bilaterally settled OTC derivatives trades

Correct Answer: D

QUESTION 499
With regard to operational risk awareness, which of the following best practices is incorrect?

A. A report describing operational risks, the most significant incidents and corrective plans of action
should be established on a quarterly basis.
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. Every time a report describing operational risks is produced, it should be provided to senior
management.
D. Whenever possible action plans should be put in place that mitigate operational risks that have been
identified.

Correct Answer: A

QUESTION 500
In the deposit broker market, which one of the following is not a valid reason for the proposed borrower to
decline the lenders name?

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.

Correct Answer: C

QUESTION 501
ACI's Committee for Professionalism will offer expert opinion in disputes between firms if:
A. both parties to the dispute are members of the ACI and agree to submit the dispute to the ACI
B. one of the counterparties requests the assistance of ACI's Committee for Professionalism
C. the two counterparties are located in different financial centers
D. the amount in dispute is more than USD 100,000.00 or equivalent

Correct Answer: B

QUESTION 502
The term "under reference" refers to:

A. an unavailability of a credit limit for the counterparty

B. a qualification stating that a transaction needs to be reconfirmed
C. the unacceptability of the counterparty's name
D. a qualification stating that the rate quoted may no longer be valid and requires confirmation before any
trades can be agreed

Correct Answer: D

QUESTION 503
When a stop-loss/profit order is taken, the rate specified in the order:

A. must be transacted regardless of where the market moved

B. must be transacted if a broker confirms that the specified rate was reached
C. cannot be taken as a fixed-price guarantee unless agreed in writing
D. will always be the stop loss rate, if the order is executed

Correct Answer: C

QUESTION 504
What is one of the responsibilities of the Middle Office according to the Model Code?

A. Sending settlement instructions

B. Investigating settlement discrepancies
C. Keeping a contact list of all back office staff of the bank's counterparties
D. Exchanging standard settlement instructions (SSIs)

Correct Answer: B

QUESTION 505
Name switching is:

A. the practice of a dealer attempting to replace one customer by a new one in a previously dealt
transaction
B. the practice of a broker having to show a new name to the dealer, although he was full on the first
name presented to him
C. the practice of a broker attempting to substitute a third name between the two original counterparties to
clear the transaction
D. the practice of a broker attempting to show a substitution name to get out of a situation in which he was
stuffed by a dealer

Correct Answer: C

QUESTION 506
Deals transacted directly or via a broker prior to 5:00 am Sydney time on Monday morning:

A. are invalid
B. must be approved by senior management before confirmation
C. cannot be entered into without the approval of the local regulator
D. are not considered to have been done in normal conditions or normal market hours

Correct Answer: D

QUESTION 507
Which of the following cannot produce a capital gain?

A. Treasury bill
B. CD
C. ECP
D. Classic repo

Correct Answer: D

QUESTION 508
What is the maximum maturity of a London CD?

A. One year
B. 270 days
C. 183 days
D. 5years

Correct Answer: D

QUESTION 509
What is the primary function of GC repo, particularly very short -term transactions?

A. Financing long positions

B. Covering short positions
C. Interest rate positioning
D. Dividend tax arbitrage

Correct Answer: A

QUESTION 510
Voice-brokers in spot FX are remunerated with:

A. Commission paid by both parties at rates agreed beforehand

B. A fee paid by the seller
C. Bid/offer spread
D. A share of the bid/offer spread

Correct Answer: A

QUESTION 511
You are quoted the following market rates:

Spot AUD/USD 1.0380-85

0/N AUD/USD swap 2.42/2.35
TIN AUD/USD swap 0.82/0.79
S/N AUD/USD swap 0.80/0.77

Where can you buy AUD against USD for value tomorrow?

A. 1.038579
B. 1.038582
C. 1.038418
D. 1.038421

Correct Answer: B

QUESTION 512
You are quoted the following rates:

Spot JPY/CHF 0.009520-25

6M JPY/CHF 10/7

At what rate can you buy 6-month outright CHF against JPY?

A. 0.008520
B. 0.009510
C. 0.009515
D. 0.009518

Correct Answer: B

QUESTION 513
How can options be used to synthesize a short position in the underlying commodity?

A. A short put option + long call option at the same strike price
B. A long put option + short call option at the same strike price
C. A short put option + short call option at the same strike price
D. A long put option + long call option at the same strike price

Correct Answer: B

QUESTION 514
A payer's 3-month USD LIBOR swap with a remaining term of five years must be reported as:

A. a five-year liability and a three-month asset

B. a five-year asset and a three-month liability
C. a five-year asset only
D. a three-month liability only

Correct Answer: A

QUESTION 515
What is the principal risk identified by gap management reporting?

A. Currency risk
B. Interest rate risk
C. Operational risk
D. Credit risk

Correct Answer: B

QUESTION 516
A Eurozone-based bank that is liability-sensitive to market interest rate changes might reduce interest rate
risk by:

A. entering into a pay fixed I receive variable standard interest rate swap
B. entering into a receive fixed I pay variable amortizing interest rate swap
C. entering into a EUR/USD FX swap
D. entering into a receive fixed I pay variable standard interest rate swap
Correct Answer: A

QUESTION 517
A sold JUN 3-month STIR-future should be reported in the gap report as of 22 May:

A. as a given deposit with a term of one month and a taken deposit with a term of four months
B. as a taken deposit with a term of one month
C. as a taken deposit with a term of one month and a given deposit with a term of four months
D. as a given deposit with a term of four months

Correct Answer: A

QUESTION 518
You have made a price by a Japanese bank in (SD 2,000,000.00 against JPY. They made you 98.95-03
and you took the offer. USD/JPY is now quoted 98.78-81 and you square your position.
What is your profit or loss?

A. Profit of JPY 340.000

B. Profit of JPY 1.500,000
C. Loss of JPY 340.000
D. LossofJPV 500.000

Correct Answer: D

QUESTION 519
To establish and maintain a short position in deliverable securities, you must:

A. Sell
B. Sell and subsequently buy back
C. Sell and borrow
D. Sell, borrow and buy back simultaneously

Correct Answer: C

QUESTION 520
What is the minimum basis on which a BCP should be updated and tested?

A. Every 6 months
B. Yearly
C. Whenever the BCP procedures are changed
D. Every 3 months

Correct Answer: B

QUESTION 521
What does the Model Code recommend with regard to any give-up agreement between a prime broker
and an executing dealer?

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.

Correct Answer: A
QUESTION 522
When initially negotiating an interest rate swap, a principal indicated his intention to assign it to a third
party. In executing such a transfer:

A. The principal is entitled to provide the name of the original counterparty to the transferee.
B. The principal is entitled to provide the name of the transferee to the original counterparty.
C. The principal should obtain the consent of the transferee before releasing its name.
D. The principal should obtain the consent of the original counterparty before releasing its name to the
transferee.

Correct Answer: C

QUESTION 523
When an employee executes a personal trade in advance of a client's or institution's order to benefit from
the anticipated movement in the market price following the execution of a large trade, it is called:

A. front running
B. ex ante trading
C. insider dealing
D. forward-facing

Correct Answer: A

QUESTION 524
Dealers are allowed to trade for their own account only if:

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

Correct Answer: C

QUESTION 525
What does the Model Code recommend regarding the practice of "name switching/substitution"?

A. Dealers may seek a compensation payment in favor of the bank or an adjustment to brokerage bills
from the broker for switching names.
B. If requested by a broker to clear a transaction through name switching, a dealer must ensure that such
activities have the prior approval of senior management.
C. The practice of name switching/substitution is neither acceptable nor desirable.
D. Name switching/substitution transactions should be executed as promptly as possible not considering
credit limits and policy guidelines.

Correct Answer: B

QUESTION 526
If there is a need for assistance to help resolve a dispute over differences between a broker and a bank,
the Model Code suggests turning to:

A. the monetary authority in the country where the broker is located

B. the banking association in the country where the bank is located
C. the Committee for Professionalism of the ACI
D. the local foreign exchange market committee

Correct Answer: C

QUESTION 527
In spite of having agreed to a deal, dealers are not bound to its terms if it is "subject to documentation".
What position does the Model Code take with regard to this practice?

A. The practice of making a transaction subject to documentation is not regarded as good practice.
B. It urges dealers to be bear in mind that this is a common practice for capital market deals.
C. The Model Code does not comment on the matter.
D. It recommends that national ACI Associations deal with this issue according to their local customs.

Correct Answer: A

QUESTION 528
What recommendation does the Model Code make in cases of market disruption?

A. Market participants should strictly adhere to the rules issued by local regulators, supervisors or central
banks in order to maintain efficiency and avoid disputes.
B. Even if local provisions are in place, market participants should only adhere to the ACI best practices of
the Model Code in order to maintain efficiency and avoid disputes.
C. Participants must at all times adhere to the rules issued by local regulators, supervisors or central
banks even if these rules or procedures conflict with any provision of an existing written agreement.
D. Parties may unilaterally decide whether they wish to adhere to the terms of the agreement or to amend
the terms of the transaction to follow the relevant procedure.

Correct Answer: A

QUESTION 529
What are 1MM dates?

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

Correct Answer: D

QUESTION 530
A 3-month (91-day) UK Treasury bill with a face value of GBP 50,000,000.00 is quoted at a yield of 4.25%.
How much is the bill worth?

A. GBP 47,875,000.00
B. GBP 49,462,847.22
C. GBP 49,470,205.48
D. GBP 49,475,760.27

Correct Answer: D

QUESTION 531
Which of the following are quoted in terms of a discount rate?

A. USTreasury bill
B. CD
C. Interbank deposit
D. ECP

Correct Answer: A

QUESTION 532
In case of a default on a repo by the seller:
A. The buyer can liquidate the collateral
B. The buyer has to liquidate the collateral
C. The buyer cannot liquidate the collateral until the seller is declared insolvent
D. A court is appointed to decide what happens to the collateral

Correct Answer: A

QUESTION 533
On fixing date, the settlement payment of an NDF reflects the differential between the agreed forward rate
and:

A. the fixing spot rate

B. the daily high
C. the days' average rate
D. the average rate over the NDF period

Correct Answer: A

QUESTION 534
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?

A. 0.8500
B. 0.8506
C. 0.8512
D. 0.8505

Correct Answer: C

QUESTION 535
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?

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.

Correct Answer: A

QUESTION 536
Risk capital is intended to ensure that an institution can:

A. Survive a liquidity crisis

B. Absorb credit losses
C. Absorb any type of unexpected loss
D. Absorb any type of expected loss

Correct Answer: C

QUESTION 537
You have just sold USD 5,000,000.00 spot against JPY. What type of risk does not apply?

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

Correct Answer: C

QUESTION 538
If the daily 90% confidence level VaR of a portfolio is correctly estimated to be USD 5,000.00, one would
expect that:

A. in 1 out of 10 days, the portfolio value will decline by USD 5,000.00 or less.
B. in 1 out of 90 days, the portfolio value will decline by USD 5,000.00 or less.
C. in 1 out of 10 days, the portfolio value will decline by USD 5,000.00 or more.
D. in 1 out of 90 days, the portfolio value will decline by USD 5,000.00 or more.

Correct Answer: C

QUESTION 539
Which of the following definitions of a nostro account is correct?

A. A nostro account is an account held by a bank in a foreign country in the banks domestic currency.
B. A nostro account is an account held by a bank in a foreign country for cash collateralising OTC
derivative positions with banks in that country.
C. A nostro account is an account held by a bank in a foreign country in the currency of that country.
D. A nostro account is an account held by a bank in its home country in a foreign currency.

Correct Answer: C

QUESTION 540
Under Basel rules, what is the meaning of IRB?

A. Internal Risk Based

B. Internal Ratings Based
C. Intrinsic Risk Based
D. Internal Rule Based

Correct Answer: B

QUESTION 541
Which position below is NOT a component of common equity Tier 1 capital?

A. innovative hybrid capital instruments with incentives to redeem

B. common shares issued by bank
C. retained earnings
D. stock surplus (share premium)

Correct Answer: A

QUESTION 542
With reference to dealing periods, what does the term "short dates" refer to?

A. overnight, tom-next and spot-next

B. maturities up to one week
C. maturity dates of less than one month
D. maturity dates of less than 10 days

Correct Answer: C

QUESTION 543
Which of the following statements is false? The repo legal agreement between the two parties concerned
should:

A. enable the parties to comply with any capital adequacy requirements

B. provide for the absolute transfer of title to securities
C. provide for the calculation of initial consideration of the repo transaction
D. detail the course of action in the case of defaults, for example the rights and obligations of the
counterparties and the full set-off of claims between the parties

Correct Answer: C

QUESTION 544
An option granted by the seller that gives the buyer the right to enter into an underlying interest rate swap
transaction is ca lied:

A. a swap
B. a cap
C. a swaption
D. a collar

Correct Answer: C

QUESTION 545
What rate should be used if the settlement date in a foreign exchange transaction is no longer a "good"
date?

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

Correct Answer: C

QUESTION 546
How many USD would you have to invest at 3.5% to be repaid USD125 million (principal plus interest) in
30 days?
A. USD 124,641,442.43
B. USD 124,636,476.94
C. USD 124,635,416.67
D. USD 123,915,737.30

Correct Answer: B

QUESTION 547
What is the day count/annual basis convention for euroyen deposits?

A. Actual/365
B. Actual/360
C. Actual/actual
D. 30E/360

Correct Answer: B

QUESTION 548
Which of the following are transferable instruments?

A. Eurocertificate of deposit
B. US Treasury bill
C. CP
D. All of the above

Correct Answer: D

QUESTION 549
Which of the following is sometimes called two-name paper?

A. ECP
B. BA or bank bill
C. Treasury bill
D. CD

Correct Answer: B

QUESTION 550
What usually happens to the collateral in a tri-party repo?

A. It is put at the disposal of the buyer

B. It is held by the seller in the name of the buyer
C. It is held by the tn-party agent in the name of the buyer
D. It is frozen in the sellers account with the tri-panty agent

Correct Answer: C

QUESTION 551
Which type of repo is the least risky for the buyer?

A. Delivery repo
B. HlC repo
C. Tri-party repo
D. There is no real difference

Correct Answer: A

QUESTION 552
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:

A. EUR 27,947,276.43
B. EUR 27,946,077.08
C. EUR 27,950,071.43
D. EUR 27,948,871.97

Correct Answer: D

QUESTION 553
If EUR/USD is quoted to you as 1.1050-53, does this price represent?

A. The number of EUP per USD

B. The number of USD per EUR
C. Depends on whether the price is being quoted in Europe or the US
D. Depends on whether the price is being quoted interbank or to a customer

Correct Answer: B

QUESTION 554
How much is a big figure worth per million of base currency it EUR/GBP is 0.6990?

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

Correct Answer: A

QUESTION 555
What is the incentive for market-making?

A. Bid/offer spread
B. Flow information
C. Relationships
D. All of the above

Correct Answer: D

QUESTION 556
The torward points are calculated from:

A. The level of interest rates in the base currency

B. The level of interest rates in the quoted currency
C. The interest rates in the two currencies
D. Your expectations of the future spot rate

Correct Answer: C

QUESTION 557
If 6-month EUR/AUD is quoted at 29/32, which of the following statements is correct?

A. EUR rates are higher than AUD rates in the 6-month

B. AUD rates are higher than EUR rates in the 6-month
C. There is a positive EUR yield curie
D. There is not enough information to decide
Correct Answer: B

QUESTION 558
The Interest Rate Parity Theorem states that:

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

Correct Answer: D

QUESTION 559
What is an FX swap?

A. An exchange ot two streams of interest payments in different currencies and an exchange of the
principal amounts of those currencies at maturity
B. A spot sale (purchase) and a forward purchase (sale) of two currencies agreed simultaneously
between two parties
C. An exchange of currencies on a date beyond spot and at a price fixed today
D. None of the above

Correct Answer: B

QUESTION 560
If I say that I have "bought and sold" EUR/USD in an FX swap, what have I done?

A. Bought EUR and sold USD spot, and sold FUR and bought USD forward
B. Bought EUR/USD spot and sold EUR/USD forward
C. Taken a EUR loan in exchange for making a USD loan with the same counterparly
D. All of the above

Correct Answer: D

QUESTION 561
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?

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

Correct Answer: A

QUESTION 562
Click on the Exhibit Button to view the Formula Sheet, If GBP/USD is 1.5350-53 and USD/JPY is 106.50-
53, what is GBP/JPY?

A. 163.48-56
B. 163.51-52
C. 69.36-39
D. 69.36-39

Correct Answer: A
QUESTION 563
If spot GBP/CHF is quoted 2.3875-80 and the 3-month forward outright is 2.3660-70, what are the forward
points?

A. 21.5/21
B. 210/215
C. 215/210
D. 21/21.5

Correct Answer: C

QUESTION 564
Your are quoted the following rates:

spot CHF/JPY 60.12-22

3M CHF/JPY 25.5/22.5

At what rate can you buy 3-month outright JPY against CHF?

A. 79.995
B. 79.965
C. 79.895
D. 79.865

Correct Answer: D

QUESTION 565
You are quoted the following market rates:

Spot USD/JPY 123.65

1M (30-day) USD. 2.15%
1M (30-day)JPY 0.10%

What is 1-month USD/JPY?

A. 123.44
B. 123.65
C. 123.86
D. 123.90

Correct Answer: A

QUESTION 566
A forward-forward loan creates an exposure to the risk of:

A. Higher interest rates

B. Lower interest rates
C. Steepening yield curve
D. Parallel shift downwards in the yield curve

Correct Answer: A

QUESTION 567
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:

1x3 USD FRA. 1.95-98%

1x4 USD FRA. 2.07-10%
1x6 USD FRA 2.25-28%

To hedge the next LIBOR fixing, you should:

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%

Correct Answer: C

QUESTION 568
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?

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

Correct Answer: B

QUESTION 569
The major difference between futures and OTC instruments like FRAs and interest rate swaps is that
futures are:

A. Exchange-traded
B. Guaranteed
C. Standardised
D. All of the above

Correct Answer: D

QUESTION 570
You are paying 5% per annum paid semi-annually and receiving 6-month LIBOR on a USD 10 million
interest rate swap with exactly two years to maturity . 6-month LIBOR for the next payment date is fixed
today at 4.95%. You expect 6-month LIBOR in 6 months to fix at 5.25%, in 12 months at 5.35% and in 18
months at 5.40%. What do you expect the net settlement amounts to be over the next 2 years? Assume
30-day months.

A. pay 250, receive 1,250, receive 1,750, receive 2,000

B. receive 250, pay 1,250, pay 1,750, pay 2,000
C. pay 2,500, receive 12,500, receive 17,500, receive 20,000
D. receive 2,500, pay 12,500, pay 17,500, pay 20,000

Correct Answer: C

QUESTION 571
The intrinsic value of a long call option:

A. Falls and rises with the price of the underlying commodity, but is always positive
B. Rises if the price of the underlying commodity falls and vice versa
C. Depends solely on the volatility of the price of the underlying commodity
D. Becomes negative if the market price of the underlying commodity falls below the strike price of the
option

Correct Answer: A
QUESTION 572
What is the probability of an at-the-money option being exercised?

A. Less than 50% probability

B. 50% probability
C. More than 50% probability
D. Zero probability

Correct Answer: B

QUESTION 573
A dealer does the following deals in EUR/USD:

buys EUR 1 m at 11020

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?

A. Long EUR 1.5 m at 1.0984

B. Short EUP 1.5 m at 1.1036
C. Long EUR 1.5 m at 1.1012
D. Short EUR 3.0 mat 1.1025

Correct Answer: A

QUESTION 574
Fraud is typically classified as:

A. Credit risk
B. Market risk
C. Legal risk
D. Operational risk

Correct Answer: D

QUESTION 575
What is the effect of netting?

A. To reduce the number and size of payments and transfers

B. To reduce exposure to credit risk
C. To reduce the size of the balance sheet
D. All of the above

Correct Answer: D

QUESTION 576
What is a Vostro account?

A. Your account at another bank

B. A foreign bank's account in your bank in your domestic currency
C. An account in your bank used for internal transactions
D. A customer's account at your bank

Correct Answer: B

QUESTION 577
For which of the following reasons is the extension of forward contracts at non-current rates is
discouraged:
i. These could be used to conceal profit or losses.
ii. These could be used to perpetrate fraud.
iii. These could result in an unauthorised extension of credit.
iv. These could result in confusing settlement instructions.

A. (i), (ii), (iii), & (iv).

B. (i), (ii) & (iii).
C. (i) & (iii).
D. none of the above.

Correct Answer: B

QUESTION 578
Confirmations must be sent out

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.

Correct Answer: B

QUESTION 579
Where the matter of dealing for personal account is concerned, the Model Code recommends that

A. Subject to local legal requirements, this matter is one for bank management to decide.
B. Bank management should encourage such activities because it allows banks to monitor the gambling
habits of their staff.
C. Where this is allowed, bank management should have a clearly defined policy and written procedures.
D. Bank management should allow staff to deal for their personal account on a case to case basis.

Correct Answer: C

QUESTION 580
To curb attempted fraud, banks should:

A. Require greater vigilance by the management and staff.

B. Take particular care when the beneficiary is a third party to the deal.
C. Ensure that details of all telephone deals which do not include pre-agreed standard settlement
instructions are confirmed by telex or similar means without delay.
D. All of the above.

Correct Answer: D

QUESTION 581
Written confirmation is a function that can be done by:

A. Any dealer as long as he/she is not a party to the trade.

B. Staff in the back-office.
C. Staff in the dealing room who are not dealing.
D. Any staff outside the dealing room.

Correct Answer: B

QUESTION 582
Which of following is not true?
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.

Correct Answer: B

QUESTION 583
Which of the following statements is true?

A. Banks should not ask brokers to disclose details of third party transactions unless they are between
overseas principals.
B. Banks should not ask brokers to disclose details of third party transactions unless these transactions
are already settled.
C. Banks should not ask brokers to disclose transactions between third parties in any circumstances.
D. Banks should not ask brokers for details of third party transactions unless senior management has
approved.

Correct Answer: C

QUESTION 584
Click on the Exhibit Button to view the Formula Sheet. Bank A pays for EURO 5 m at 1.1592. Bank B
offers EURO 10 m at 1.1597. Broker XYZ quotes to the market EURO /USD 1.1592/97. Bank C takes the
offer at 97. The broker is obliged to reveal:

A. The name of Banks A and B.

B. The name of Bank B only.
C. The amount that was bid but not the name of Bank A.
D. None of the above

Correct Answer: B

QUESTION 585
When you are accepting a stop loss order, you must:

A. Ensure that your counterparty understands the terms under which your bank accepts the order.
B. Ensure that your counterpart can be contacted in the event of unusual situations or events or extremely
volatile market conditions.
C. Ensure that your counterparty understands that any guarantee or fixed price execution requires
agreement in writing.
D. All of the above.

Correct Answer: C

QUESTION 586
Brokers shall not reveal the identity of a counterparty unless:

A. They are forced to do so.

B. Explicitly authorised to do so by the counterparty.
C. They know the counterparty very well.
D. They are asked by their senior management to do so.

Correct Answer: B
QUESTION 587
Which of the following statements reflects the Model Code on gambling or betting amongst market
participants?

A. Gambling and betting between market participants should be strongly discouraged.

B. Gambling and betting between market participants can be allowed if it is monitored by management.
C. Gambling and betting between market participants should be forbidden.
D. All of the above.

Correct Answer: A

QUESTION 588
Where answer phone equipment is used for reporting and recording of off-premises transactions, it should
be:

A. On an special number known only to the chief dealer.

B. On a number located in the office of the internal auditor.
C. Secured so that reported transactions cannot be erased without senior management approval.
D. Secured by recordings that are stored for a suitable period.

Correct Answer: C

QUESTION 589
Gambling or betting amongst market participants has obvious dangers and:

A. Should be forbidden.
B. Should be strongly discouraged.
C. Should be monitored by management.
D. All of the above.

Correct Answer: B

QUESTION 590
Confirmations should be sent out by both counterparties through an efficient and secure means of
communication, preferably electronic:

A. Within 24 hours of the deal.

B. Within two business days of the deal.
C. Before the value date.
D. As soon as possible.

Correct Answer: D

QUESTION 591
Payment and settlement instructions should be passed:

A. As quickly as possible.
B. Within 24 hours of the transaction.
C. Setore 10:00 am on the value date.
D. Betore close of business on the transaction date.

Correct Answer: A

QUESTION 592
The Model Code rules that deals at non-current rates:

A. Are forbidden.
B. Require prior regulatory approval.
C. Require the prior express permission of the senior management of both counterparties.
D. Should be marked to market daily.

Correct Answer: C

QUESTION 593
You quote a price to a broker on EUR 100 million. Your price is hit for EUR 50 million. What does the
Model Code say about this situation?

A. You have a right to qualify your quotes in terms of amounts, if you do so when you make the price.
B. You have a right to qualify your quotes in terms of amounts, provided the amounts are marketable.
C. You have a right to qualify your quotes in terms of amounts, once you have discovered the name of the
counterparty for credit reasons.
D. You have a right to qualify your quotes in terms of amounts.

Correct Answer: A

QUESTION 594
You are quoting forward FX prices to a broker subject to finding a counterparly for a matching transaction.
The Model Code says:

A. You must tell the broker, who must qualify your quotes.
B. For credit reasons, you must tell the broker when he presents a name.
C. You cannot do this.
D. The Model Code does not make recommendations on this subject.

Correct Answer: A

QUESTION 595
Deliberately inputting incorrect big figures into an electronic dealing platform is:

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.

Correct Answer: C

QUESTION 596
You deal over the phone with a counterparty. The subsequent confirmation differs from the terms agreed
verbally. What is the result?

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.

Correct Answer: D

QUESTION 597
A broker offers a dealer an incentive in the form of a reduction to the agreed schedule of brokerage
between the firms.

A. This is a normal volume discount.

B. The offer requires approval in writing by both senior managements.
C. The offer requires agreement in writing between the broker and the dealer.
D. This is illegal.

Correct Answer: B

QUESTION 598
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:

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.

Correct Answer: C

QUESTION 599
If a dealer has any intention of assigning an interest rate swap to a third party soon after transacting that
swap:

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.

Correct Answer: B

QUESTION 600
A dealer has indicated his intention of assigning an interest rate swap to a third party soon after
transacting that swap. When about to execute an assignment

A. The dealer is entitled to provide the name of the original counterparty to the assignee.
B. The dealer is entitled to provide the name of the assignee to the original counterparty.
C. The dealer should seek the permission of the assignee before releasing the name to the original
counterparty.
D. The dealer should seek the permission of the original counterparty before releasing the name to the
assignee.

Correct Answer: C

QUESTION 601
What does the Model Code say about netting?

A. Market participants are strongly recommended to net bilateral transactions with counterparties where
activity justifies it.
B. Market participants should establish payments netting agreements with cross-border counterparties
where activity justifies it.
C. Market participants should establish legally viable bilateral netting agreements with counterparties
where activity justifies it.
D. Market participants should establish legally viable multilateral netting agreements where activity
justifies it.

Correct Answer: C

QUESTION 602
The Model Code recommends that, in the case or complaints about transactions, management should:

A. Ensure complaints are investigated by the senior management or a firm not involved in the disputed
transaction.
B. Ensure complaints are rairly and independently investigated, in the first instance, by the ACIs
Committee for Professionalism.
C. Ensure complaints are investigated by representatives of a broking firm not directly involved in the
disputed transaction and selected by both parties to the dispute.
D. Ensure complaints are fairly and independently investigated, whenever practicable, by staff not directly
involved in the disputed transaction.

Correct Answer: D

QUESTION 603
If a broker refers to "the payer of 5-year euro at 4.12", what is this party doing?

A. Paying a fixed rate of 4.12% per annum on a 30/360 basis over 5 years in euros through an interest
rate swap in exchange for receiving a floating rate of 6-month Euribor on an actual/360 basis reset
semi-annually and paid in arrears.
B. Paying a fixed rate of 4.12% per annum on an actual/actual basis over 5 years in euros through an
interest rate swap in exchange for receiving a floating rate of 6-month Euribor on an actual/360 basis
reset semi-annually and paid in arrears.
C. Paying a 5-year euro deposit and receiving a rate of interest of 4.12% on an actual/360 basis. Taking a
5-year euro deposit and paying a rate ol interest of 4.12% on an actual/360 basis.

Correct Answer: A

QUESTION 604
What is meant by "short dates"?

A. Maturities of less than one week.

B. Maturities of less than one month.
C. Maturities of less than one year.
D. Maturities in the same calendar month.

Correct Answer: B

QUESTION 605
In all dealing conversations, the Model Code strongly recommends:

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.

Correct Answer: B

QUESTION 606
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)?

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

Correct Answer: A

QUESTION 607
Click on the Exhibit Button to view the Formula Sheet. A 6-month (182-day) investment of CHF15.5 million
yields a return of CHF100,000. What is the rate of return?
A. 1.32%
B. 1.29%
C. 1.28%
D. 0.65%

Correct Answer: C

QUESTION 608
Using the following rates:

3M (90-day) eurodeposits3.50%
6M (180-day) eurodeposits3.75%

What is the rate for a deposit, which runs from 3 to 6 months?

A. 3.625%
B. 3.285%
C. 3.965%
D. 3.835%

Correct Answer: C

QUESTION 609
You have quoted your customer the following eurodollar deposit rates:

1M 5.375-25%
2M 5.4375-3125%
3M 5.5-375%

The customer says, "I give you USD 20 million in the two's".
What have you done?

A. Borrowed USD 20 million at 5.3125%

B. Lent USD 20 million at 5.4375%
C. Borrowed USD 20 million at 5.4375%
D. Lent USD 20 million at 5.3125%

Correct Answer: A

QUESTION 610
You buy a 181-day 2.75% CD with a face value of USD 1,500,000 at par when it is issued. You sell it in the
secondary market after 150 days at 2.60%. What is your holding period yield?

A. 2.60%
B. 2.75%
C. 2.775%
D. 2.813%

Correct Answer: C

QUESTION 611
When quoting the exchange rate between the EUR and AUDI which is conventionally the base currency?

A. EUR
B. AUD
C. Depends on whether the price is being quoted in Europe or Australia
D. Depends on whether the price is being quoted interbank or to a customer
Correct Answer: A

QUESTION 612
Are the forward points materially affected by changes in the spot rate?

A. never
B. Only for very large movements and longer terms
C. always
D. spot is the principal influence

Correct Answer: B

QUESTION 613
A 6-month SEK/NOK Swap is quoted 140/150. Spot is 0.9445. Which of the following statements is
correct?

A. SEK interest rates are higher than NOK interest rates

B. NOK interest rates are higher than SEK interest rates
C. NOK interest rates are higher than USD interest rates
D. SEK interest rates and NOK interest rates are converging

Correct Answer: B

QUESTION 614
How is an outright forward FX transaction quoted?

A. Forward points
B. Full forward exchange rate
C. Depends on whether is interbank or to a customer
D. Depends on the currency pair and sometimes the term

Correct Answer: B

QUESTION 615
Spot cable is quoted at 1.6048-53 in the brokers and you quote a customer 1.6050-55 in USD 3 million, If
they sell USD to you, how much GSP will you be short of?

A. 4,816,500.00
B. 1,868,809.57
C. 1.868,576.77
D. 4,815,900.00

Correct Answer: C

QUESTION 616
If spot AUD/USD is quoted to you as 0.7406-09. How many AUD would you receive in exchange for USD
5,000,000 if you dealt on the price?

A. 3,704,500
B. 6,748,549
C. 3,703,000
D. 6,751,283

Correct Answer: B

QUESTION 617
If GSP/USD is quoted to you at 1.61 20-30, how much GSP would you receive if you sold USD 2000,000?
A. 1,239,925.60
B. 1,237,873.80
C. 1,240,694.79
D. 1,242,720.50

Correct Answer: A

QUESTION 618
If EUR/USD is 1.1025-28 and the 6-month swap is 112.50/113, what is the 6-month outright price?

A. 1.1380-1.11405
B. 1.11375-1.1141
C. 1.09125-1.0915
D. None of these

Correct Answer: B

QUESTION 619
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?

A. 2.1890
B. 2.2125
C. 2.1895
D. 2.1885

Correct Answer: C

QUESTION 620
Lending for 3 months and borrowing for 6 months creates a 3x6 forward-forward deposit. The cost of that
deposit is called:

A. Break-even rate
B. Implied rate
C. Forward-forward rate
D. All of the above

Correct Answer: D

QUESTION 621
Today is Monday, 8th December. You sell a 9x12 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)?

A. 8th September next year

B. 10th September next year
C. 8th December next year
D. 10th December next year

Correct Answer: B

QUESTION 622
Click on the Exhibit Button to view the Formula Sheet. You are short of 6 Dec euro dollar futures contracts
at 98.10. Yesterday, the closing price was 98.15. Today's closing price is 97.905.Whatvariation margin will
be due?

A. You will have to pay USD 612.50

B. You will receive USD 612.50
C. You will have to pay USD 3,675.00
D. You will receive USD 3,675.00

Correct Answer: D

QUESTION 623
Which of the following is true?

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

Correct Answer: D

QUESTION 624
You are paying 5% per annum paid semi-annually and receiving 6-month LIBOR on a USD 10 million
interest rate swap with exactly two years to maturity. 6-month LIBOR for the next payment date is fixed
today at 4.95%. How would you hedge the swap using FRAs? How to hedge an IRS with a strip of FRAs?

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, 12x10 and 16x24 FRAs
D. sell a strip of 6x12, 12x18 and 18x24 FRAs

Correct Answer: D

QUESTION 625
The premium on an option contract is:

A. The price of the underlying commodity at the time of the transaction

B. The price at which the transaction on the underlying commodity will be carried out if and when the
option is exercised
C. The price the buyer of the option pays to the seller when entering into the options contract
D. The price at which the two counterparties can close-out their position

Correct Answer: C

QUESTION 626
The delta of an at-the-money long call option is:

A. Between +0.5 and +1

B. +0.5
C. Between 0 and +0.5
D. Zero

Correct Answer: B

QUESTION 627
You bought USD 5,000,000 against EUR at 1.1037 and 3,000,000 at 1.1052. If the EUR/USD rate is now
quoted 1.1015/17, and it you deal at that rate, what profitwould you make?

A. Nil
B. A profit of EUR 16,847.58
C. A loss
D. A profit of EUR 18,166.05

Correct Answer: B

QUESTION 628
A disgruntled customer claims that he should not have to settle an FRA with you because it is really just a
wager. What type of risk are you exposed to?

A. Credit risk
B. Legal risk
C. Settlement risk
D. Basis risk

Correct Answer: B

QUESTION 629
Which of the following is not true?

A. The Model Code is published by ACI's Committee for Professionalism.

B. The Model Code sets out the practicalities of dealing in those financial instruments listed in the Model
Code.
C. The Model Code is an attempt to deal with the legal issues relating to every conceivable financial
instrument.
D. The Model Code sets out the manner and spirit in which foreign exchange and money market business
should be conducted in order that participants maintain high standards of professionalism, integrity and
ethical conduct.

Correct Answer: C

QUESTION 630
In spite of having agreed to a deal, dealers are not bound to the deal if it is subject to documentation.
The Model Code:

A. Does not regard this as a good practice.

B. Urge dealers to be bear this in mind, as this is common practice for capital market deals.
C. Does not comment on this matter.
D. Recommends that national ACI Associations deal with this according to their local customs.

Correct Answer: A

QUESTION 631
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:

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.

Correct Answer: D

QUESTION 632
The use of standard settlement instructions (SSI's) is strongly encouraged because:

A. It reduces operational risk.

B. It splits differences arising from failed settlement between the two counterparties.
C. It removes the need for sending out SWIFT payment authorisations.
D. All of the above.

Correct Answer: A

QUESTION 633
Under which circumstances are banks allowed to park positions with a counterparty?:

A. It is forbidden to park positions.

B. In conditions of exceptional volatility.
C. If the two counterparties agree.
D. If approved by senior management.

Correct Answer: A

QUESTION 634
In a dispute between the dealer and a broker, the Model Code recommends that this should be referred in
the first instance to:

A. Central bank.
B. Senior management of the bank and the brokerage firm.
C. Head of compliance.
D. ACI's Committee for Professionalism (CFP).

Correct Answer: B

QUESTION 635
The term "under reference" refers to:

A. An unavailability of credit limit for the counterparty.

B. The need to reconfirm a transaction.
C. The unacceptability of the counterparty's name.
D. The rate quoted is going to be revised.

Correct Answer: B

QUESTION 636
When a broker calls "off" at the very instant a dealer "hits" the broker's price:

A. The transaction should be concluded.

B. The broker decides whether or not the deal is done.
C. ACI's Committee for Professionalism will decide whether the transaction should be concluded.
D. The transaction should not be concluded.

Correct Answer: D

QUESTION 637
If a dealer has interest on one side, and the other side is dealt away, the broker should:

A. Immediately put the price "under reference" and check with the dealer to ascertain his original
intention.
B. Cancel the order.
C. Continue with the order.
D. None of the above.

Correct Answer: A

QUESTION 638
Bank XYZ calls you for a quote in EUR/USD for EURO 20 million. If you decide to quote to Bank XYZ:
A. You must be prepared to deal up to EUR 20 million.
B. You may quote without stating the amount you are prepared to deal.
C. You are only committed to deal in a marketable amount.
D. None or the above.

Correct Answer: A

QUESTION 639
The use of mobile phones within the dealing room is not considered good practice except

A. In volatile markets.
B. When dealing with emerging markets.
C. In an emergency.
D. When quoting for information only.

Correct Answer: C

QUESTION 640
The organisational structure of market participants should ensure a strict segregation between front and
back office of:

A. Duties and reporting lines.

B. Systems.
C. Career paths.
D. All of the above.

Correct Answer: A

QUESTION 641
The Chairman and members of the ACls Committee for Professionalism are ready to assist in resolving
disputes through the ACIs Expert Determination Service in situations where:

A. The amount of the deal exceeds EUR 5 million.

B. The local regulator or central bank declines to intervene.
C. Litigation has already commenced.
D. At the request of one of the counterparties.

Correct Answer: D

QUESTION 642
Where the Committee for Professionalism of the ACI has been notified of a breach of the letter or spirit of
the Model Code, it

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.

Correct Answer: A

QUESTION 643
Where repos or securities lending transactions are entered into, the Model Code recommends:

A. Documentation should be in place beforehand.

B. Management should approve all transactions.
C. Copies of the underlying documentation should be lodged with regulators.
D. All of the above.

Correct Answer: A

QUESTION 644
Where internet trading facilities are established by a bank for a client, the conditions and controls should
be stated in a rulebook produced by:

A. The bank.
B. The local bankers association.
C. The local regulator.
D. Negotiation between the bank and client.

Correct Answer: A

QUESTION 645
You and a dealer at another bank have an informal bilateral reciprocal arrangement to quote each other
two-way prices. During periods of high volatility, the other dealer refuses to quote to you. The Model Code
states that

A. The other dealer should act with honour, honesty and integrity.
B. It is a purely matter for your two institutions.
C. Such arrangements are not in any way enforceable or binding.
D. All of the above.

Correct Answer: B

QUESTION 646
Management policy on the use of mobile devices by trading sales and settlement staff should:

A. Ban them from the dealing room or back office.

B. State whether they are allowed in the dealing room and back office, and can be used.
C. Ban their use in the dealing room or back office.
D. Restrict their use to senior management and authorised out-of-hours trading and sales staff.

Correct Answer: B

QUESTION 647
When dealing with a fund manager, who will allocate shares in a transaction to his unknown clients after
the transaction has been executed with you, you should:

A. Agree in writing with the fund manager that the allocation will be confirmed as soon as practicable after
the transaction is executed.
B. Insist on the allocation being made and confirmed before the transaction is executed.
C. Agree in writing with the fund manager that he will guarantee the transaction until the allocation is
confirmed.
D. Any of the above.

Correct Answer: A

QUESTION 648
What is the risk of dealing through an agent with an unknown principal?

A. You may not be able to ensure that your firm can avoid suspicion of trading on non-public information
or other allegations of bad or illegal trading practice.
B. You may not be able to net your exposure in an insolvency.
C. You may not be able to net your exposure for capital adequacy purposes.
D. All of the above.
Correct Answer: D

QUESTION 649
Which of the following currencies is quoted on an actual/360 basis?

A. EUR
B. JPY
C. CHF
D. All of the above

Correct Answer: D

QUESTION 650
When is interest conventionally due on a 3-year interbank eurodollar deposit?

A. At maturity
B. Annually
C. Semi-annually
D. Quarterly

Correct Answer: B

QUESTION 651
Today's date is Thursday 12th December. What is the spot value date? Assume no bank holidays.

A. 14th December
B. 15th December
C. 16th December
D. 17th December

Correct Answer: C

QUESTION 652
From the following GBP deposit rates:

1M (31-day) GBP deposits 3.15%

2M (61-day) GBP deposits 3.25%
3M (91-day) GBP deposits 3.41%
4M (120-day) GBP deposits 3.56%
5M (152-day) GBP deposits 3.73%
6M (182-day) GBP deposits 3.90%

calculate the 3x4 forward-forward rate.

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

Correct Answer: D

QUESTION 653
Which of the following are quoted in terms of a yield-to-maturity?

A. USCP
B. ECP
C. Treasury bill
D. BA

Correct Answer: B

QUESTION 654
What is the buyers primary risk in a repo?

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

Correct Answer: B

QUESTION 655
How can material divergences between the value of cash and collateral be managed in a documented sell/
buy-back?

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

Correct Answer: D

QUESTION 656
The two-week repo rate br the 5.25% bund 2007 is quoted to you at 3.33-38%. You agree to reverse in
bonds worth EUR 266,125,000 with no initial margin. You would earn repo interest ot

A. EUR 349,806
B. EUR 344,632
C. EUR 319,315
D. EUR 324,110

Correct Answer: B

QUESTION 657
What is the ISO code for the Lebanon pound?

A. LEP
B. LBD
C. LBP
D. LNP

Correct Answer: C

QUESTION 658
A dealer needs to buy USD against SGD. Of the following rates quoted to him, which is the best rate for
him?

A. 1.4323-26
B. 1.4320-25
C. 1.4315-20
D. 1.4318-23

Correct Answer: C

QUESTION 659
You need to buy USD 5,000,000 against GBP and are quoted the following rates concurrently by two
separate banks: 1.6045-50 and 1.6047-52. At which rate do you trade?

A. 1.6045
B. 1.6047
C. 1.6050
D. 1.6052

Correct Answer: B

QUESTION 660
Cable is quoted at 1.6075-80 and you say "5 yours!" to the broker. What have you done?

A. Sold USD 5 million at 1.6075

B. Sold GBP 5 million at 1.6075
C. Bought GBP 5 million at 1.60B0
D. Bought USD 5 million at 1.6080

Correct Answer: B

QUESTION 661
You are quoted spot NZD/USD 0.6821-26 and USD/CHF 1.4652-56 at what price can you buy CHF
against NZD?

A. 0.9993
B. 1.0006
C. 1.0007
D. 0.9994

Correct Answer: D

QUESTION 662
You have quoted a Swiss customer spot USD/CHF as 1.3710-15, but he asks you to quote it as CHF/
USD. What do you quote?

A. 0.7291-94
B. 0.7294-91
C. 1.3710-15
D. None of these

Correct Answer: A

QUESTION 663
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?

A. +121
B. +120
C. -116
D. -119

Correct Answer: D
QUESTION 664
Using the following rates:

spot GBP/CHF 2.3785-15

spot CHF/SEK 5.5975-85
3M GBP/SEK swap 725/690

What is the price for 3-month outright GBP/SEK?

A. 13.3860-13.4020
B. 13.2435-13.2615
C. 13.2412-13.2638
D. 13.2445-13.2605

Correct Answer: C

QUESTION 665
The market is quoting:

1-month (31-day) USD. 1.75%

3-month (91-day) USD. 2.05%

What is the 1x3 rate in USD?

A. 4.261%
B. 2.202%
C. 1.900%
D. 1.592%

Correct Answer: B

QUESTION 666
A customer sells a LIFFE Euro Swiss futures contract. Which of the following risks could he be trying to
hedge?

A. An increase in forward USD/CHF

B. Falling CHF interest rates
C. A decrease in forward USD/CHF
D. Rising CHF interest rates

Correct Answer: D

QUESTION 667
Purchasing a USD/JPY call option is equivalent to:

A. Selling an JPY/USD put option

B. Selling a JPY/USD call option
C. Purchasing an JPY/USD put option
D. None of the above

Correct Answer: C

QUESTION 668
An option premium is a positive function of:

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

Correct Answer: D

QUESTION 669
The delta of an option is:

A. The sensitivily 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

Correct Answer: D

QUESTION 670
What is the purpose of a long strangle option strategy?

A. To anticipate very low volatility in the price of the underlying commodity

B. To anticipate moderately high volatility in the price of the underlying commodity
C. To anticipate moderate volatility in the price of the underlying commodity
D. To anticipate very high volatility in the price of the underlying commodity

Correct Answer: D

QUESTION 671
If you buy GBP 2,000,000 against USD at 1.6020; GSP 1,000,000 at 1.6035 and GBP 3,000,000 at
1.6028, what is the average rate of your position?

A. 1.6035
B. 1.6027
C. 1.6030
D. 1.6023

Correct Answer: B

QUESTION 672
What is replacement cost a function of?

A. Credit risk
B. Market risk
C. Both of the above
D. None of the above

Correct Answer: A

QUESTION 673
What is a master agreement intended to do?

A. Describe the parameters of a dealing relationship

B. Set out the rights and obligations of two parties
C. Apply to all transactions between two parties
D. All of the above

Correct Answer: D

QUESTION 674
The Model Code recommends that when banks accept a stop-loss order
A. Management must ensure ongoing lines of communication are in place between the parties.
B. Management must report to the central bank.
C. Management allows only experienced dealers to take such orders.
D. Bank staff must secure the approval of the counterpartqs management to accept such orders.

Correct Answer: A

QUESTION 675
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:

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.

Correct Answer: B

QUESTION 676
How long does the Model Code recommend that tape recordings of dealers/brokers should be kept?

A. At least 2 months
B. One year
C. Up to one month
D. Until the maturity of the deal

Correct Answer: A

QUESTION 677
Dealers should not conduct dealing activities outside the bank unless:

A. Clear written guidelines issued by management are in place.

B. They are in an approved brokers office.
C. There are on holiday.
D. None of the above.

Correct Answer: A

QUESTION 678
Banks have a fiduciary responsibility to ensure that clients have all necessary information to understand
the transaction because this:

A. Will encourage clients to do more business.

B. Will help prevent potential litigation.
C. Will help banks sell sophisticated risk management solutions.
D. Is required by all regulators.

Correct Answer: B

QUESTION 679
When is a broker allowed to assume a deal is closed:

A. When one of the principals confirms the deal.

B. When the principals give a written undertaking for all deals done at the end of the day.
C. When an acknowledgement is received from the principal that the deal is done.
D. When both back offices acknowledge the deal.

Correct Answer: C

QUESTION 680
Which of the following is not in the Model Code?

A. Banks and brokers should record, by tapes or other such means, conversations between dealing
counterparties.
B. There is no need to inform new counterparties and clients that conversations will be recorded.
C. On completion of recordings, tapes should be kept for a period sufficient to enable the details of any
transaction contained therein to be confirmed.
D. The storage of recorded tapes should be strictly managed to prevent their contents from being
tampered with.

Correct Answer: B

QUESTION 681
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:

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.

Correct Answer: C

QUESTION 682
Bank participants have a duty to make it clear that their prices are firm or merely indicative:

A. Only if they are dealing with brokers.

B. Only if they are dealing in a fast moving market.
C. Only if the amount is not marketable.
D. At all times.

Correct Answer: D

QUESTION 683
The extension of forward FX contracts at their historic rates is only allowed when:

A. Prior management approval has been sought.

B. They are executed within six months.
C. They are extended for not more than one year.
D. All of the above.

Correct Answer: A

QUESTION 684
You have received a gift from a good friend who also happens to be your USD/YEN broker. Under such
circumstances, the Model Code recommends that you should:

A. Always decline gifts.

B. Give the gift to charity.
C. Keepthe gift.
D. Report the gift to management.
Correct Answer: D

QUESTION 685
Brokers should confirm all transactions:

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.

Correct Answer: D

QUESTION 686
Making interest rate swap transactions subject to agreement on documentation:

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.

Correct Answer: C

QUESTION 687
Where dealing through an intermediary with an unidentified principal, the Model Code recommends:

A. It is good practice for compliance, legal or credit functions to identity counterparties before the
execution of a deal.
B. Management should have in place a clearwritten policy and procedures governing such transactions.
C. Management needs to be aware of the risks involved, particularly with respect to credit exposure and
money laundering.
D. All of the above.

Correct Answer: D

QUESTION 688
You hear from a client of good standing that a major market participant has taken major losses on its
proprietary trading book and is desperate for liquidity. You are not convinced that the story is true, but have
a friend at another bank who you know has very large exposures to this firm and would be seriously
damaged by a default. What advice does the Model Code give?

A. Unsubstantiated information which you suspect to be inaccurate and which could be damaging to a
third party should not be passed on in any circumstances.
B. Unsubstantiated information which you suspect to be inaccurate and which could be damaging to a
third party should be discussed only with great care.
C. Unsubstantiated information which you suspect to be inaccurate and which could be damaging to a
third party should be reported to the regulator in order to provide warning of possible systemic
problems.
D. You have a duty to warn counterparties but should make clear that the information is unsubstantiated.

Correct Answer: B

QUESTION 689
You hear from several counterparties that a major market participant has taken major losses on long USD/
JPY positions. You know the reports are untrue, as you have in fact bought large amounts of USD/JPY
from that very firm, which means that the impact of the reports on the market would be helpful to your
position.

A. As you have heard the reports from other parties, you are entitled to pass them on to market news
services.
B. As you have heard the reports from other parties, you are entitled to pass them on to other market
participants.
C. You should not pass any information you know to be false.
D. You should contradict the reports.

Correct Answer: C

QUESTION 690
Which of the following would not constitute an event of market isruption under the Model Code?

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.

Correct Answer: D

QUESTION 691
One of your brokers asks you to buy and sell EUR/USD at the same price net of brokerage in order to
allow him to clear a transaction.

A. You must have prior senior management approval.

B. You must have the authoritq to switch names.
C. You must execute such transactions as promptly as possible within policy guidelines
D. All of the above.

Correct Answer: D

QUESTION 692
You have written a EUR/USD knock-in option for a bank counterparty. At 6pm New York time on Friday,
the instrike point is breached. This is confirmed on screens. The counterparty contacts you to confirm that
the option has been knocked in.

A. The deal is done. You should confirm with your counterparts.

B. If the knock-in is confirmed by a New York price source, the deal is done and you should confirm with
your counterparty.
C. The recognised closing time for the currency markets is 6:00pm New York time in Friday, so the deal is
done and you should confirm with your counterparty.
D. The recognised closing time for the currency markets is 5:00pm NewYork time in Friday, so no deal is
done.

Correct Answer: D

QUESTION 693
When dealing with customers, financial market professionals are advised by the Model Code to clarify that
all transactions are entered into solely at each partys risk by explicitly agreeing in writing that:

A. The customer understands the structure of the transaction.

B. The customer has made its own assessment and independent decision to enter into the transaction
and is doing so at its own risk and for its own account.
C. No fiduciary or advisory relationship exists between the parties, and all the information is has received
is not to be construed as investment advice or a recommendation to transact.
D. All of the above.

Correct Answer: D

QUESTION 694
The Model Code strongly recommends that intra-day oral deal checks should:
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.

Correct Answer: C

QUESTION 695
A 3-month (90-day) USD deposit is 5.5625% and 6-month (180-day) USD deposit is 5.75%. What is the
3x6 USD deposit rate?

A. 5.8342%
B. 5.8561%
C. 5.8425%
D. 5.75%

Correct Answer: B

QUESTION 696
A 7-day piece of USCP is quoted at a rate of discount of 1.75%. What is its true yield?

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

Correct Answer: B

QUESTION 697
A 1-month (30-day) USCP with a race value of USD 5 million is quoted at a rate of discount of 2.31%.
How much is the paper worth?

A. USD 4,884,500.00
B. USD 4,990,375.00
C. USD 4,990.506.85
D. USD 4,990,393.49

Correct Answer: B

QUESTION 698
Which of the following is issued by auction?

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

Correct Answer: A

QUESTION 699
What type of institution is the typical issuer of bank bills?

A. Credit institution
B. lnvestment bank
C. Corporate
D. All of the above
Correct Answer: C

QUESTION 700
A CD with a face value of USD 50 million and a coupon of 4.50% was issued at par for 90 days and is now
trading at 4.50% with 30 days remaining to maturity. What has been the capital gain or loss since issue?

A. +USD 373,599.00
B. ÷USD 186,099.00
C. -USD 1,400.99
D. Nil

Correct Answer: C

QUESTION 701
The spot/next repo rate for the 5% bund 2006 is quoted to you at 1.75-80%. You sell bonds with a market
value of EUR 5,798,692 through a sell/buy-back. The Repurchase Price is:

A. EUR 5,798,982
B. EUR 5,799,497
C. EUR 5,746,376
D. EUR 5,000,694

Correct Answer: A

QUESTION 702
What is the ISO code for the currency of Hungary?

A. HUG
B. HKD
C. HRN
D. HUF

Correct Answer: D

QUESTION 703
3-month USD/CHF is quoted at 112/110. Interest rates in Switzerland are reduced but USD rates (which
are higher) are unchanged. What would you expect the 3-month forward USD/CHF rate to be?

A. unchanged
B. 118/116
C. 109/107
D. 106/104

Correct Answer: B

QUESTION 704
If a 6-month AUD/NZD swap is quoted 173/165, which of the following statements would you consider to
be correct?

A. 6-month AUD rates are higher than 6-month NZD rates

B. 6-month AUD rates are lower than 6-month NZD rates
C. Spot AUD/NZD will be higher by approximately 170 points in 6 months
D. The AUD yield curve is positive, whilst the NZD curve is negative

Correct Answer: A

QUESTION 705
What is the value date of a 6-month outright forward FX transaction dealt today, if todays spot date is
Monday, 30th June? Assume there are no bank holidays.

A. 27th December
B. 30th December
C. 31stDecember
D. 1st January

Correct Answer: C

QUESTION 706
If you sell USD 3-month forward to a client against EUR, what should you do to hedge your position?

A. Buy USD spot, and buy and sell a 3-month EUR/USD FX swap
B. Sell EUR/USD in the spot market, borrow EUR for 3 months and lend USD for 3 months
C. Sell a 3-month EUR/USD outright forward
D. Any of the above

Correct Answer: D

QUESTION 707
A customer asks for a price in 3-month CHF/JPY. You quote 56/54. The customer deals at 54. What have
you done?

A. Bought CHF against JPY spot and sold JPY against CHF 3-month forward
B. Sold CHF against JPY spot and bought CHF against JPY 3-month forward
C. Bought CHF against JPY spot and sold CHF against JPY 3-month forward
D. Bought JPY against CHF 3-month outright

Correct Answer: C

QUESTION 708
You are quoted the following market rates:

spot EUR/USD. 1.2250

3M (91-day) EUR 2.55%
3M (91-day) USD. 2.00%

What is 3-month EUR/USD?

A. 1.2232
B. 1.2233
C. 1.2234
D. 1.2267

Correct Answer: B

QUESTION 709
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?

A. 0.6675
B. 0.6715
C. 0.6717
D. 0.6718

Correct Answer: B

QUESTION 710
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?

A. +206
B. +197
C. -195
D. -204

Correct Answer: C

QUESTION 711
You bought a EUR 8,000,000 6x9 FRA at 4.50%. The settlement rate is 3-month (90-day) EURIBOR,
which is fixed at 3.50%. What is the settlement amount at maturity?

A. You pay EUR 20,000.00

B. You receive EUR 20,000.00
C. You pay EUR 19,826.52
D. You receive EUR 19,826.52

Correct Answer: C

QUESTION 712
Which of the following is true?

A. The Euronext.LIFFE short sterling futures contract has a tick value of GBP 12.50 and a face value of
GBP 1,000,000
B. The Euronext.LIFFE JPY futures contract has a tick value of JPY 2,500 and a face value of JPY
1,000,000,000
C. The CME eurodollar futures contract has a minimum price interval of one-quarter tick(0.0025) for the
nearest contract
D. All of the above

Correct Answer: C

QUESTION 713
An interest rate swap is:

A. A contract to exchange one stream of income payments for another

B. A temporary exchange of one deposit for another of a longer maturity in the same currency
C. A forward-forward contract
D. All of the above

Correct Answer: A

QUESTION 714
How are Overnight Indexed Swaps settled?

A. periodic exchange of fixed and floating payments up to and including maturity

B. at maturity by net payment
C. after maturity by exchange of fixed and floating payments
D. after maturity by net payment

Correct Answer: D

QUESTION 715
An at-the-money call option:

A. Costs more than an in-the-money call option

B. Costs less than an out-of-the-money call option
C. Costs more than an out-of-the-money call option
D. Costs the same as an at-the-money put option

Correct Answer: C

QUESTION 716
What is a long straddle option strategy?

A. A long call option + long put option with the same strike prices
B. A short call option + short put option with the same strike prices
C. A long call option + short put option with the same strike prices
D. A short call option + long put option with the same strike prices

Correct Answer: A

QUESTION 717
Click on the Exhibit Button to view the Formula Sheet. 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?

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

Correct Answer: D

QUESTION 718
You have done the following deals in spot USD/JPY:

Sold USD 5.0 million at 111.60

Bought USD 3.5 million at 111.20
Bought USD 2.0 million at 111.50
Sold USD 2.0 million at 111.55

What position do you now have?

A. Short USD 1.50 million at 112.60

B. Short USD 3.50 million at 111.75
C. Long USD 1.50 million at 111.10
D. Long USD 3.50 million at 111.55

Correct Answer: A

QUESTION 719
Half an hour ago you were made a price in USD/CAD of 1.5250-55 and sold USD 10 million. The price is
now 1.5232-37 and you square your position. What is your profit or loss?
A. +CAD 23,000
B. +CAD 13,000
C. +CAD 16,000
D. -CAD 13,000

Correct Answer: B

QUESTION 720
At the end of the day you are short EUR 10 million against GBP at 0.6712. You are asked to revalue your
position at a EUR/GBP rate of 0.6729. What is the resulting profit or loss?

A. Loss of GBP 17000

B. Profit of GBP 17,000
C. Loss of EUR 17,000
D. Profit of EUR of 17,000

Correct Answer: A

QUESTION 721
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?

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

Correct Answer: C

QUESTION 722
A broker can consider a deal as done if:

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.

Correct Answer: D

QUESTION 723
In the unforeseen event that a particular maturity date is declared a public holiday, what is normal market
practice for spot FX?:

A. Extend the contract to the next business day

B. Shorten the contract to the previous business day
C. A new maturity date has to be agreed by the two parties involved
D. ACI's Committee for Professionalism decides on a case by case basis

Correct Answer: A

QUESTION 724
A bank that has quoted a firm price is obliged to deal:
A. At that price.
B. At that price in a marketable amount.
C. At that price in a marketable amount with an acceptable name.
D. At that price in a marketable amount with an acceptable name and provided the market price has not
moved excessively.

Correct Answer: C

QUESTION 725
What is Model Codes recommendation on the settlement of dirrerences by "points"?

A. It is not favoured.
B. It may be permitted when allowed by the local market regulator.
C. Itis unconditionally accepted bythe Code.
D. It is allowed only if senior management approval is obtained.

Correct Answer: A

QUESTION 726
Which of the following is true?

A. It is the responsibility of the broking firm to conduct due diligence before transacting a deal.
B. All principals have the responsibility for assessing the creditworthiness of their counterparties or
potential counterparties whether dealing direct or through a broking firm.
C. The principal is obliged to take into account any information provided by a broker as they are bound by
a professional relationship.
D. All of the above.

Correct Answer: B

QUESTION 727
A dealer has been asked by a broker to go to an exclusive club for the third time in a week. He should:

A. Agree. Entertainment is a normal part of business.

B. Refuse. This entertainment is excessive in value and frequency.
C. Agree but insist on paying halt the cost.
D. Refuse. Going back to the same club is clearly excessive entertainment.

Correct Answer: B

QUESTION 728
The use of off-market rates is discouraged and should be permitted only:

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.

Correct Answer: D

QUESTION 729
Dealers are allowed to trade for their own account if:

A. The dealers have good track records in their dealing both for the institution and for themselves.
B. There has been no previous conflicts of interest in the dealing room.
C. There is a clearly laFd down policy.
D. The dealers see no conflict of Interest in such dealing.

Correct Answer: C

QUESTION 730
When a stop-loss/profit order is taken, the rate specified in the order:

A. Must be transacted regardless of where the market moved.

B. Must be transacted if a broker confirms that the rate specified was reached.
C. Cannot be taken as a fixed-price guarantee.
D. None of the above.

Correct Answer: C

QUESTION 731
The use of mobile phones from within the dealing room for transacting business:

A. Is not considered good practice.

B. Is accepted in case of direct deal input into the bank's system.
C. Is accepted for senior dealers.
D. Is accepted for hedging transactions.

Correct Answer: A

QUESTION 732
When a broker makes an error on payment instructions The Model Code recommends that

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.

Correct Answer: D

QUESTION 733
Under the Model Code, it a broker shouts "done" or "mine" at the very moment a dealer shouts "off":

A. No deal is done.
B. The deal is done.
C. It should be resolved in consultation with senior management.
D. The central bank should be consulted.

Correct Answer: B

QUESTION 734
Market participants should, where activity justifies it, aim to reduce settlement and related credit risk on
currency transactions by:

A. Establishing realistic daylight limits for counterparties.

B. Monitoring all payments to counterparties who are known to be experiencing difficulties.
C. Establishing legally binding bilateral netting agreements with counterparties or participating in a
multilateral netting system.
D. Seeking pre-payment.

Correct Answer: C

QUESTION 735
What does the Model Code say about the responsibility of a broker in handling suspicious transactions?

A. Suspicious transactions should be reported by the principals.

B. Brokers need to make staff aware of the problem and exercise vigilance.
C. A broker should report any suspicions about a transaction to the other counterparty.
D. Brokers should advise clients to reject the name.

Correct Answer: B

QUESTION 736
A person who appears to be a technician asks for your help in accessing treasury systems as he has
forgotten his list of access codes. The Model Code recommends:

A. You should provide all reasonable assistance.

B. You should report the request immediately to senior management.
C. Do not get involved; you may be at risk.
D. There is no recommendation in the Model Code.

Correct Answer: B

QUESTION 737
One or your brokers asks you to buy and sell EUP/USD at the same price net of brokerage in order to
allow him to clear a transaction.

A. You must have prior senior management approval.

B. You must have the authority to switch names.
C. You must execute such transactions as promptly as possible within policy guidelines
D. All of the above.

Correct Answer: D

QUESTION 738
It is up to the vendors of electronic dealing platforms to ensure that dealers are trained to use their
systems.

A. Management should ensure dealers fully understand the systems they use and dealers should read the
manuals.
B. Management, dealers and vendors share responsibility.
C. Dealers are required to pass the ACI Dealing Certificate before being allowed to access electronic
dealing platforms.
D. Given the wide range of electronic dealing platforms used by banks, it is the responsibility of the
vendors to ensure individual users are adequately trained.

Correct Answer: A

QUESTION 739
When using legal documentation proposed modifications:

A. Should be documented as soon as possible after a deal is done.

B. Should be clearly stated before a deal.
C. Can be agreed verbally.
D. Are not permissible.

Correct Answer: B

QUESTION 740
What are IMM dates?
A. The 10th of March, June, September and December.
B. The third Wednesdays of January, April, July and October.
C. The Mondays before the third Wednesdays of March, June, September and December.
D. The third Wednesdays of March, June, September and December.

Correct Answer: D
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