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3I0-012 Questions and Answers

Question # 6

The major risk to the effectiveness of netting is:

A.

Credit risk

B.

Settlement risk

C.

Liquidity risk

D.

Legal risk

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Question # 7

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

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Question # 8

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

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Question # 9

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

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Question # 10

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%

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Question # 11

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

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Question # 12

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

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Question # 13

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

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Question # 14

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

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Question # 15

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

A.

SGD

B.

PLN

C.

GBP

D.

NZD

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Question # 16

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

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Question # 17

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%

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Question # 18

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

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Question # 19

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

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Question # 20

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

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Question # 21

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

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Question # 22

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

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Question # 23

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

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Question # 24

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

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Question # 25

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.

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Question # 26

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

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Question # 27

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

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Question # 28

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%

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Question # 29

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.

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Question # 30

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.

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Question # 31

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

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Question # 32

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

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Question # 33

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

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Question # 34

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

A.

0%

B.

15%

C.

20%

D.

75%

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Question # 35

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”

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Question # 36

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

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Question # 37

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

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Question # 38

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

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Question # 39

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

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Question # 40

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

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Question # 41

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

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Question # 42

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

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Question # 43

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

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Question # 44

Which of the following is not a negotiable instrument?

A.

CD

B.

FRA

C.

BA

D.

ECP

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Question # 45

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%

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Question # 46

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.

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Question # 47

What is the ISO code for palladium?

A.

XAU

B.

XAG

C.

XPT

D.

XPD

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Question # 48

What is the ISO code for the Argentine peso?

A.

ARP

B.

ARS

C.

ARA

D.

AED

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Question # 49

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

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Question # 50

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

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Question # 51

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%

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Question # 52

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.

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Question # 53

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.

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Question # 54

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.

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Question # 55

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

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Question # 56

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.

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Question # 57

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.

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Question # 58

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.

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Question # 59

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.

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Question # 60

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

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Question # 61

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%

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Question # 62

What type of institution is the typical issuer of bank bills?

A.

Credit institution

B.

lnvestment bank

C.

Corporate

D.

All of the above

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Question # 63

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.

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Question # 64

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

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Question # 65

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

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Question # 66

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.

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Question # 67

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

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Question # 68

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,

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Question # 69

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

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Question # 70

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

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Question # 71

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

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Question # 72

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

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Question # 73

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

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Question # 74

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%

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Question # 75

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

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Question # 76

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

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Question # 77

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

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Question # 78

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

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Question # 79

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

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Question # 80

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.

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Question # 81

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

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Question # 82

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

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Question # 83

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.

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Question # 84

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

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Question # 85

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.

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Question # 86

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

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Question # 87

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

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Question # 88

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

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Question # 89

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

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Question # 90

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

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Question # 91

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

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Question # 92

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

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Question # 93

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

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Question # 94

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

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Question # 95

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

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Question # 96

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

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Question # 97

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

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Question # 98

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

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Question # 99

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.

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Question # 100

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

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Question # 101

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.

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Question # 102

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

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Question # 103

Which of the following cannot produce a capital gain?

A.

Treasury bill

B.

CD

C.

ECP

D.

Classic repo

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Question # 104

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

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Question # 105

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.

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Question # 106

What is the incentive for market-making?

A.

Bid/offer spread

B.

Flow information

C.

Relationships

D.

All of the above

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Question # 107

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

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Question # 108

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

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Question # 109

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

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Question # 110

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

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Question # 111

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.

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