Question 1

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%

Accepted Answer

The rate of return can be calculated using the formula:Rate of return = (Return / Investment) x (365 / Days) x 100Substituting the given values:Rate of return = (100,000 / 15,500,000) x (365 / 182) x 100= 1.28%

Question 2

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.

Accepted Answer

The Model Code recommends that liquidity providers be aware of reputational risks associated with supplying liquidity for onward third party consumption.

Answer: D
 The Model Code recommends that access to systems be strictly controlled by dealers, both internally and at the client interface.

Option B is incorrect because the Model Code requires market participants to seek information as to the legal status of a potential counterparty before allocating credit or trading status, and Option C is incorrect because the Model Code's recommendations regarding the handling of transactions are not limited to the regulator's dealing rule book.

Question 3

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

Accepted Answer

In a to-party repo, the buyer takes on the counterparty risk of the seller. This means that if the seller defaults, the buyer is exposed to potential losses.

Question 4

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

Accepted Answer

The day count convention for SGD money market deposits is ACT/365, which means the actual number of days in the period is divided by 365.

Question 5

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

Accepted Answer

The CFP of the ACI is not responsible for bringing the matter to the appropriate court of justice. This is the responsibility of the aggrieved party or relevant legal authority. The other options, including consulting the local ACI national association, examining the complaint, and bringing the matter to the attention of the appropriate regulatory body, are potential steps that the CFP could take.

Question 6

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

Accepted Answer

The "double indemnity" in a repo transaction refers to the creditworthiness of both the counterparty and the collateral, providing two layers of security for the lender.

Question 7

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

Accepted Answer

Certificates of Deposit (CDs) are quoted in terms of yield-to-maturity, which reflects the total return an investor can expect if the CD is held until it matures.

Question 8

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%

Accepted Answer

The answer of A US security yields 7% on an...

Question 9

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

Accepted Answer

The Repurchase Price is calculated using the formula: Repurchase Price = Sale Price * (1 + (Repo Rate * (Days/360))). Using the given repo rate of 3.75% and the collateral value of EUR 28,137,500.00, the calculation yields EUR 28,228,360.69.

Question 10

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

Accepted Answer

Since February 29th is a leap day, adding 4 months results in June 29th. However, June 29th, 2024, is a Saturday, so the maturity date is the previous business day, which is Friday, June 28th.

Question 11

What is the ISO code for the currency of China?
A) CHY
B) CNR
C) CHR
D) CNY

Accepted Answer

The ISO code for the currency of China is CNY (Chinese Yuan Renminbi). Option A (CHY) and option C (CHR) are not valid ISO codes, while option B (CNR) is the ISO code for the currency of Yemen.

Question 12

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

Accepted Answer

The answer of Experience has shown that recourse to taped...

Question 13

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

Accepted Answer

The forward rate is the exchange rate that will be used to settle a currency transaction at a future date. In this case, the 6-month USD/CAD forward rate is quoted at 40/45, which means that the market expects the CAD to appreciate against the USD in the next 6 months. The bid rate of 40 indicates the price at which someone can sell USD and buy CAD, while the ask rate of 45 indicates the price at which someone can sell CAD and buy USD. Therefore, CAD rates are higher than USD rates in the 6-month period.

Question 14

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

Accepted Answer

The answer of For which of the following might an...

Question 15

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

Accepted Answer

The answer of What are the secondary market proceeds of...

Question 16

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%

Accepted Answer

To calculate the implied cash rate, we need to first find the 3-month rate for the second leg of the FRA. We can do this by using the formula:

FRA rate = [(R2 - R1) x (t2 - t1) / (1 - R2 x (t2 - t1))] x (365 / t2)

Where:
R1 = 3M deposit rate = 2.35%
R2 = Unknown 3-month rate
t1 = Days in the deposit = 91/365
t2 = Days in the FRA = 90/365

Plugging in the numbers, we get:

2.55% = [(R2 - 2.35%) x (90/365 - 91/365) / (1 - R2 x (90/365 - 91/365))] x (365 / 90)

Solving for R2, we get:

R2 = 2.94%

Now that we have the 3-month rate for the second leg of the FRA, we can calculate the implied 6-month cash rate using the formula:

Implied 6-month rate = [((1 + R1 x (91/365)) x (1 + R2 x (90/365)))^(365/180) - 1]

Plugging in the numbers, we get:

Implied 6-month rate = [((1 + 2.35% x (91/365)) x (1 + 2.94% x (90/365)))^(365/180) - 1] = 2.46%

Therefore, the answer is B, 2.46%.

Question 17

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%

Accepted Answer

First, let's calculate the interest earned on the CD:

Interest = (20,000,000 x 0.04 x 30/360) = 66,667

After 10 days, the CD has a remaining term of 20 days. Let's calculate its value in the secondary market using the following formula:

CD value = Face value / (1 + (Market rate x time until maturity/360))

CD value = 20,000,000 / (1 + (0.0405 x 20/360)) = 20,011,000.00

The gain from selling the CD is:

Gain = CD value - Face value - Interest = 20,011,000.00 - 20,000,000 - 66,667 = 11,333.00

The holding period yield can be calculated as follows:

Holding period yield = (Gain / Face value) x (360 / days held)

Holding period yield = (11,333.00 / 20,000,000) x (360/10) = 0.01891

Therefore, the holding period yield is 1.891%, which is option B.

Question 18

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

Accepted Answer

The answer of In which type of repo is "double...

Question 19

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.

Accepted Answer

The broker has a responsibility to immediately inform their client if their quoted price has been hit by another bank. Therefore, the broker is to blame for not providing prompt notification.

Question 20

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

Accepted Answer

The answer of The "spot basis" of a 2 against...

Exam 2: ACI Dealing Certificate-Part B

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?

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

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

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

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?

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

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

A US security yields 7% on an annually-compounded bond basis. What is the equivalent annually- compounded money market yield?

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:

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.

What is the ISO code for the currency of China?

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

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

For which of the following might an MT370 be used?

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?

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.

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?

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

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?

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