Question 1

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

Accepted Answer

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 
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

Question 2

Where dealing through an intermediary with an unidentified principal, the Model Code recommends:

Accepted Answer

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. 
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.

Question 3

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

Accepted Answer

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

Question 4

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

Accepted Answer

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

Question 5

Where answer phone equipment is used for reporting and recording of off-premises transactions, it should be:

Accepted Answer

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. 
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.

Question 6

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

Accepted Answer

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 
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

Question 7

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?

Accepted Answer

A)  FRA 
B)  Futures 
C)  No difference 
D)  Too little information to decide 
A)  FRA 
B)  Futures 
C)  No difference 
D)  Too little information to decide

Question 8

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:

Accepted Answer

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 
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

Question 9

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

Accepted Answer

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

Question 10

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?

Accepted Answer

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 
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

Question 11

What is a long straddle option strategy?

Accepted Answer

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 
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

Question 12

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

Accepted Answer

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 
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

Question 13

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?

Accepted Answer

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

Question 14

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

Accepted Answer

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 
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

Question 15

You deal over the phone with a counterparty. The subsequent confirmation differs from the terms agreed verbally. What is the result?

Accepted Answer

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. 
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.

Question 16

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

Accepted Answer

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. 
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.

Question 17

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?

Accepted Answer

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

Question 18

Which of the following is not true?

Accepted Answer

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. 
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.

Question 19

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?

Accepted Answer

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 
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

Question 20

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

Accepted Answer

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 
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

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

Where dealing through an intermediary with an unidentified principal, the Model Code recommends:

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

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

Where answer phone equipment is used for reporting and recording of off-premises transactions, it should be:

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

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?

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:

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

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?

What is a long straddle option strategy?

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

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?

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

You deal over the phone with a counterparty. The subsequent confirmation differs from the terms agreed verbally. What is the result?

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

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?

Which of the following is not true?

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?

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

ACI Dealing Certificate-Part A

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Exam 2: ACI Dealing Certificate-Part B

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

Where dealing through an intermediary with an unidentified principal, the Model Code recommends:

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

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

Where answer phone equipment is used for reporting and recording of off-premises transactions, it should be:

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

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?

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:

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

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?

What is a long straddle option strategy?

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

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?

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

You deal over the phone with a counterparty. The subsequent confirmation differs from the terms agreed verbally. What is the result?

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

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?

Which of the following is not true?

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?

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

ACI Dealing Certificate-Part A

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