Question 1

Which of the following are specifically quoted in terms of a yield-to-maturity?

Accepted Answer

A)  US Treasury bill 
B)  CD 
C)  Interbank deposit 
D)  USCP

Question 2

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:

Accepted Answer

A)  an interest rate swap 
B)  a forward rate agreement 
C)  a short term interest rate future 
D)  an interest rate collar

Question 3

If the daily 90% confidence level VaR of a portfolio is correctly estimated to be USD 5,000.00, one would expect that:

Accepted Answer

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.

Question 4

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?

Accepted Answer

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

Question 5

What are IMM dates?

Accepted Answer

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.

Question 6

A short USD put/JPY call option:

Accepted Answer

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

Question 7

Which of the following is not transferable?

Accepted Answer

A)  Euro certificate of deposit 
B)  US Treasury bill 
C)  CP 
D)  Call deposit

Question 8

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

Accepted Answer

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.

Question 9

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

Accepted Answer

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%

Question 10

What is a Vostro account?

Accepted Answer

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

Question 11

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

Accepted Answer

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

Question 12

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

Accepted Answer

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

Question 13

When is your settlement risk greatest on a spot FX deal?

Accepted Answer

A)  Today 
B)  Tomorrow 
C)  After you make an irrevocable payment 
D)  On the spot value date

Question 14

How frequently should business contingency procedures be tested and updated?

Accepted Answer

A)  quarterly tests I updates as needed 
B)  at least every second year 
C)  half-yearly tests / yearly updates 
D)  at least yearly

Question 15

When you are accepting a stop loss order, you must:

Accepted Answer

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.

Question 16

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.

Accepted Answer

A)  Thursday 27th June 
B)  Friday 28th June 
C)  Saturday 29th June 
D)  Monday 1st July

Question 17

In foreign exchange markets, the first currency in a currency pair is:

Accepted Answer

A)  The quoted currency 
B)  The base currency 
C)  The counter currency 
D)  The terms currency

Question 18

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?

Accepted Answer

A)  0.008520 
B)  0.009510 
C)  0.009515 
D)  0.009518

Question 19

What is the Purchase Price of a repo?

Accepted Answer

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

Question 20

You are quoted the following rates: Spot USD/JPY        97.10-15 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?

Accepted Answer

A)  104.14 
B)  104.21 
C)  104.23 
D)  104.30

Exam 2: ACI Dealing Certificate-Part B