Question 1

Which of the following statements is correct?

Accepted Answer

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. 
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.

Question 2

Which of the following statements is an incorrect statement in respect of Model Code recommendations concerning electronic trading?

Accepted Answer

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 
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

Question 3

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

Accepted Answer

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 
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

Question 4

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?

Accepted Answer

A)  0.8500 
B)  0.8506 
C)  0.8512 
D)  0.8505 
A)  0.8500 
B)  0.8506 
C)  0.8512 
D)  0.8505

Question 5

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:

Accepted Answer

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 
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

Question 6

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

Accepted Answer

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. 
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.

Question 7

Which of the following statements about hedge accounting is not correct?

Accepted Answer

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. 
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.

Question 8

Is gambling or betting between market participants allowed?

Accepted Answer

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. 
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.

Question 9

Deals transacted directly or via a broker prior to 5:00 am Sydney time on Monday morning:

Accepted Answer

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 
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

Question 10

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:

Accepted Answer

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

Question 11

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

Accepted Answer

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

Question 12

The term "under reference" refers to:

Accepted Answer

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. 
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.

Question 13

Which of the following is true?

Accepted Answer

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 
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

Question 14

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

Accepted Answer

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

Question 15

Which of the following statements is correct regarding duration?

Accepted Answer

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 
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

Question 16

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

Accepted Answer

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 
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

Question 17

What is a short 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 18

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

Accepted Answer

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. 
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.

Question 19

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

Accepted Answer

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 
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

Question 20

What are financial market professionals not explicitly required by the Model Code to clarify and agree to in writing?

Accepted Answer

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. 
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.

Which of the following statements is correct?

Which of the following statements is an incorrect statement in respect of Model Code recommendations concerning electronic trading?

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

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?

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:

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

Which of the following statements about hedge accounting is not correct?

Is gambling or betting between market participants allowed?

Deals transacted directly or via a broker prior to 5:00 am Sydney time on Monday morning:

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:

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

The term "under reference" refers to:

Which of the following is true?

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

Which of the following statements is correct regarding duration?

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

What is a short straddle option strategy?

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

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

What are financial market professionals not explicitly required by the Model Code to clarify and agree to in writing?

ACI Dealing Certificate-Part A

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Exam 2: ACI Dealing Certificate-Part B

Which of the following statements is correct?

Which of the following statements is an incorrect statement in respect of Model Code recommendations concerning electronic trading?

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

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?

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:

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

Which of the following statements about hedge accounting is not correct?

Is gambling or betting between market participants allowed?

Deals transacted directly or via a broker prior to 5:00 am Sydney time on Monday morning:

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:

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

The term "under reference" refers to:

Which of the following is true?

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

Which of the following statements is correct regarding duration?

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

What is a short straddle option strategy?

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

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

What are financial market professionals not explicitly required by the Model Code to clarify and agree to in writing?

ACI Dealing Certificate-Part A

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