Question 1

The major difference between futures and OTC instruments like FRAs and interest rate swaps is that futures are:
A) Exchange-traded
B) Guaranteed
C) Standardised
D) All of the above

Accepted Answer

Futures are exchange-traded, which means they are traded on a centralized exchange. They are also guaranteed by the exchange clearinghouse, which ensures that both parties fulfill their obligations. Additionally, futures contracts are standardized, meaning that they have a specified contract size, expiration date, and underlying asset, which makes them easier to trade and understand. Therefore, all of the above options are correct.

Question 2

If GBP/USD is 1.5350-53 and USD/JPY is 106.50-53, what is GBP/JPY ?
A) 163.48-56
B) 163.51-52
C) 69.36-39
D) 69.38-39

Accepted Answer

To find GBP/JPY, multiply GBP/USD by USD/JPY. The bid is 1.5350 * 106.50 = 163.4775, rounded to 163.48. The ask is 1.5353 * 106.53 = 163.5619, rounded to 163.56. Thus, GBP/JPY is 163.48-56.

Question 3

What is the purpose of an initial margin on a futures exchange?
A) To cover losses incurred between variation margin
B) To exclude retail investors
C) To pay reserve requirements
D) To cover fees due to the clearing house

Accepted Answer

The purpose of an initial margin on a futures exchange is to cover any potential losses incurred between variation margin payments. This is necessary because futures contracts involve a high degree of leverage, allowing traders to control large positions with relatively little capital. The initial margin ensures that traders have a sufficient amount of capital to cover any losses that may occur before the next variation margin payment is due.

Question 4

When you are accepting a stop loss order, you must:
A) Ensure that your counterparty understands the term
B) Ensure that your counterparty can be contacted in
C) Ensure that your counterparty understands that any
D) All of the above.

Accepted Answer

The answer of When you are accepting a stop loss...

Question 5

To curb attempted fraud, banks should:
A) Require greater vigilance by the management and st
B) Take particular care when the beneficiary is a thi
C) Ensure that details of all telephone deals which d
D) All of the above.

Accepted Answer

All of the above options are important in order to curb attempted fraud. A bank should have greater vigilance by the management and staff, take particular care when the beneficiary is a third party, and ensure that details of all telephone deals which take place are recorded. Only then can the bank ensure that fraudulent activities are minimized.

Question 6

A customer gives you GBP 25 million at 6.625% same day for 7 days. Through a broker, you place the funds with a bank for the same period at 6.6875%. Brokerage is charged at 2 basis points per annum. What is the net profit or loss on the deal?
A) Profit of GBP 299.66
B) Profit of GBP 203.77
C) Loss of GBP 299.66
D) Loss of GBP 203.77

Accepted Answer

The interest earned on placing GBP 25 million at 6.6875% for 7 days = (25,000,000 * 6.6875% * 7/365) = GBP 34,760.27
The interest to be paid to the customer at 6.625% for 7 days = (25,000,000 * 6.625% * 7/365) = GBP 34,556.5
Brokerage charged for 7 days = (25,000,000 * 2 basis points * 7/365) = GBP 958.9
Net profit = 34,760.27 - 34,556.5 - 958.9 = GBP 203.77

Question 7

In all dealing conversations, the Model Code strongly recommends:
A) Dealers stick to market terminology in order to av
B) Dealers clarify what is being proposed rather than
C) Dealers restrict themselves to terminology listed
D) Dealers define complex terminology in the confirma

Accepted Answer

The Model Code recommends that dealers clarify what is being proposed rather than restrict themselves to market terminology or listing all terminology in the confirmation. This ensures that all parties involved understand the terms of the deal.

Question 8

An option is:
A) The right to buy or sell a commodity at a fixed pr
B) The right to buy a commodity at a fixed price
C) The right but not the obligation to buy or sell a
D) The right but not the obligation to buy commodity

Accepted Answer

An option is a financial contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset (such as a stock or commodity) at a predetermined price and within a specified time frame. Therefore, option C is the correct answer, as it accurately describes the definition of an option. Option A and B are incorrect because they do not include the element of choice, and option D is incorrect because it only refers to buying a commodity and does not include selling.

Question 9

What is an FX swap?
A) An exchange of two streams of interest payments in
B) A spot sale (purchase) and a forward purchase (sal
C) An exchange of currencies on a date beyond spot an
D) None of the above

Accepted Answer

An FX swap involves a spot sale or purchase of a currency and a forward purchase or sale of the same currency at a different date. This is different from an exchange of interest payments (A) or an exchange of currencies on a date beyond spot (C). Option D is incorrect as one of the other options is the correct answer.

Question 10

3-month EUR/USD FX swaps are quoted to you at 15/19. If the "points are in your favour", what have you done?
A) Bought and sold 3-month EUR/USD through the swap
B) Sold and bought 3-month EUR/USD through the swap
C) Made the quote
D) Cannot say

Accepted Answer

When the points are in your favor, it means you have bought the base currency (EUR) and sold the quote currency (USD) at a lower forward rate, and sold the base currency and bought the quote currency at a higher forward rate, thus benefiting from the swap points.

Question 11

Where the matter of dealing for personal account is concerned, the Model Code recommends that:
A) Subject to local legal requirements, this matter i
B) Bank management should encourage such activities b
C) Where this is allowed, bank management should have
D) Bank management should allow staff to deal for the

Accepted Answer

The Model Code recommends that bank management should have clear policies and procedures in place to govern personal account dealing by staff where it is allowed. This suggests that personal account dealing should be allowed only under certain conditions and with proper oversight and regulation by the bank management. Option A states that local legal requirements should be considered, but does not provide any specific guidance on how personal account dealing should be managed. Option B suggests that bank management should encourage personal account dealing, which could create conflicts of interest and undermine the integrity of the bank's operations. Option D suggests that staff should be allowed to deal for their personal accounts without any restrictions or regulations, which is not a responsible approach to managing the risks associated with personal account dealing.

Question 12

You are quoted the following market rates: spot USD/JPY 123.65 1M (30-day) USD. 2.15% 1M (30-day) JPY 0.10% What is 1-month USD/JPY?
A) 123.44
B) 123.65
C) 123.86
D) 123.90

Accepted Answer

1-month USD/JPY = 123.65 * (1 + 0.0215/100) / (1 + 0.0010/100) = 123.44

Question 13

A broker offers a dealer an incentive in the form of a reduction to the agreed schedule of brokerage between the firms.
A) This is a normal volume discount.
B) The offer requires approval in writing by both sen
C) The offer requires agreement in writing between th
D) This is illegal.

Accepted Answer

The answer of A broker offers a dealer an incentive...

Question 14

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%. You expect 6-month LIBOR in 6 months to fix at 5.25%, in 12 months at 5.35% and in 18 months at 5.40%. What do you expect the net settlement amounts to be over the next 2 years? Assume 30-day months.
A) pay 250, receive 1,250, receive 1,750, receive 2,0
B) receive 250, pay 1,250, pay 1,750, pay 2,000
C) pay 2,500, receive 12,500, receive 17,500, receive
D) receive 2,500, pay 12,500, pay 17,500, pay 20,000

Accepted Answer

The answer of You are paying 5% per annum paid...

Question 15

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 writt
B) The matter will have to be submitted to arbitratio
C) It depends on local law.
D) The verbal agreement is binding.

Accepted Answer

The answer of You deal over the phone with a...

Question 16

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 in
B) The dealer should make his intention to assign cle
C) The dealer should agree the method of assignment b
D) The counterparty should specify whether or not ass

Accepted Answer

The dealer should make his intention to assign clear to the counterparty. This is important in order to avoid any misunderstandings or disputes about the terms of the deal and the responsibilities of each party. It is also a matter of transparency and good faith in business dealings.

Question 17

If EUR/USD is quoted to you as 1.1050-53, does this price represent?
A) The number of EUR per USD
B) The number of USD per EUR
C) Depends on whether the price is being quoted in Eu
D) Depends on whether the price is being quoted inter

Accepted Answer

The first number (1.1050) represents how much USD you would need to buy 1 EUR, so it is the number of USD per EUR. The second number (1.1053) represents how much USD you would receive if you sold 1 EUR, so it is also the number of USD per EUR.

Question 18

Gambling or betting amongst market participants has obvious dangers and:
A) Should be forbidden.
B) Should be strongly discouraged.
C) Should be monitored by management.
D) All of the above.

Accepted Answer

While outright banning gambling or betting may be difficult and monitoring it may not be effective enough, it is important for management to discourage such activities in order to promote responsible and informed decision making among market participants.

Question 19

The Model Code rules that deals at non-current rates:
A) Are forbidden.
B) Require prior regulatory approval.
C) Require the prior express permission of the senior
D) Should be marked to market daily.

Accepted Answer

The Model Code requires that deals at non-current rates must have the prior express permission of senior management to ensure proper oversight and risk management.

Question 20

What is a Vostro account?
A) Your account at another bank
B) A foreign bank's account in your bank in your dome
C) An account in your bank used for internal transact
D) A customer's account at your bank

Accepted Answer

A Vostro account is an account that a foreign bank holds in a domestic bank, allowing the foreign bank to manage transactions in the domestic currency.

Exam 1: ACI Dealing Certificate-Part A

The major difference between futures and OTC instruments like FRAs and interest rate swaps is that futures are:

If GBP/USD is 1.5350-53 and USD/JPY is 106.50-53, what is GBP/JPY ?

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

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

To curb attempted fraud, banks should:

A customer gives you GBP 25 million at 6.625% same day for 7 days. Through a broker, you place the funds with a bank for the same period at 6.6875%. Brokerage is charged at 2 basis points per annum. What is the net profit or loss on the deal?

In all dealing conversations, the Model Code strongly recommends:

An option is:

What is an FX swap?

3-month EUR/USD FX swaps are quoted to you at 15/19. If the "points are in your favour", what have you done?

Where the matter of dealing for personal account is concerned, the Model Code recommends that:

You are quoted the following market rates: spot USD/JPY 123.65 1M (30-day) USD. 2.15% 1M (30-day) JPY 0.10% What is 1-month USD/JPY?

A broker offers a dealer an incentive in the form of a reduction to the agreed schedule of brokerage between the firms.

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

If a dealer has any intention of assigning an interest rate swap to a third party soon after transacting that swap:

If EUR/USD is quoted to you as 1.1050-53, does this price represent?

Gambling or betting amongst market participants has obvious dangers and:

The Model Code rules that deals at non-current rates:

What is a Vostro account?