Question 1

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

Accepted Answer

The FRA was sold at 2.55% and the prevailing LIBOR rate at the fixing date is 2.7175%, meaning that the LIBOR rate is higher than the fixed rate agreed upon in the FRA. This implies that the buyer of the FRA would be better off receiving the fixed rate from the seller rather than the floating rate prevailing in the market. Therefore, the seller of the FRA (in this case, "you") would have to compensate the buyer by paying a net settlement amount to reflect the difference between the fixed rate and the prevailing LIBOR rate.

Question 2

If the issuer of the collateral used in a repo defaults during the term of the transaction, who suffers the loss?
A) Buyer
B) Seller
C) Issuer
D) It depends on the agreement between the buyer and seller

Accepted Answer

The answer of If the issuer of the collateral used...

Question 3

A negative yield curve is one in which:
A) Longer rates are lower than short rates
B) Forward exchange rates are at a discount
C) Short term rates are lower than long
D) Forward exchange rates are a premium

Accepted Answer

A negative yield curve, also known as an inverted yield curve, occurs when long-term interest rates are lower than short-term interest rates.

Question 4

What should a broker do if his quoted price is hit simultaneously by several dealers for a total amount greater than that for which the price concerned was valid?
A) allot the amount for which the price is valid pro rata amongst some principals in accordance with the amount proposed by each and inform the other dealers that "nothing was done"
B) decide which principals he will allot the amount for which the price is valid and inform the other dealers that "nothing was done"
C) evenly allocate the amount for which the price is valid amongst all the principals and inform all the relevant dealers
D) apportion the amount for which the price is valid pro rata amongst all the principals concerned in accordance with the amount proposed by each and inform all the relevant dealers

Accepted Answer

When a broker's quoted price is hit simultaneously by several dealers for a total amount greater than that for which the price concerned was valid, the broker should apportion the amount for which the price is valid pro rata amongst all the principals concerned in accordance with the amount proposed by each and inform all the relevant dealers. This ensures a fair apportionment of the trade among all interested parties.

Question 5

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.

Accepted Answer

The answer of Under the Model Code, if a broker...

Question 6

EURIBOR is the:
A) Daily fixing of EUR interbank deposit rates in the European market
B) Daily fixing of EUR interbank deposit rates in the London market
C) Another name for EUR LIBOR
D) The ECB's official repo rate

Accepted Answer

EURIBOR (Euro Interbank Offered Rate) is the daily fixing of EUR interbank deposit rates in the European market. It is based on the average interest rates submitted by a panel of banks. It is used as a reference rate for many financial instruments, including loans and derivatives.

Question 7

The 180-day CAD/CHF rate is bid 62 and the 90-day CAD/CHF rate is bid 29. What is the bid rate for 120 days, assuming straight-line interpolation?
A) 33
B) 42
C) 27
D) 40

Accepted Answer

To find the 120-day bid rate using straight-line interpolation, calculate the rate per day between the 90-day and 180-day rates, then apply it to the 30-day difference from 90 to 120 days. The rate per day is (62-29)/(180-90) = 33/90 = 0.3667. For 30 days, the increase is 0.3667 * 30 = 11. Therefore, the 120-day rate is 29 + 11 = 40.

Question 8

Which of the following currencies is quoted on an ACT/365 basis for the calculation of interest on interbank deposits in London?
A) EUR
B) JPY
C) HKD
D) AUD

Accepted Answer

The answer of Which of the following currencies is quoted...

Question 9

In order to be introduced in a controlled manner, which areas should be involved before a new product or business strategy is launched?
A) Product Control, Legal and Compliance, Front Office, Treasury and Operations
B) Senior management only
C) Front Office and Treasury Middle Office
D) All relevant areas

Accepted Answer

All relevant areas should be involved in order to ensure a smooth and controlled introduction of a new product or business strategy. This includes Product Control, Legal and Compliance, Front Office, Treasury, Operations, and any other areas that may be impacted by the new product or strategy. Senior management should also be involved, but they should not be the only area involved in the process.

Question 10

When would an exporter commonly use an NDF?
A) when receiving THB in 1 month
B) when receiving HKD in 2 months
C) when receiving PHP in 2 bank business days
D) when receiving KRW in 3 months

Accepted Answer

An NDF, or Non-Deliverable Forward, is commonly used by exporters when receiving a foreign currency in a future date, typically several months in advance. Therefore, choice D, which mentions receiving KRW in 3 months, is the best choice for when an exporter would commonly use an NDF. Choices A, B, and C do not specify a need to receive foreign currency in a future date or timeframe that would warrant the use of an NDF.

Question 11

What is the day count/annual basis convention for JPY money market deposits?
A) ACT/365
B) ACT/360
C) ACT/ACT
D) 30E/360

Accepted Answer

The day count/annual basis convention for JPY money market deposits is ACT/360, which means the actual number of days in the deposit period is divided by 360 to determine the interest accrual. Therefore, the best choice is B, ACT/360.

Question 12

What is the Purchase Price of a repo?
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

Accepted Answer

The Purchase Price of a repo is the amount of cash actually paid for the collateral at the start of the repo.

Question 13

You are quoted the following rates: Spot cable        1.5340-43 0/N cable swap    0.14/0.11 T/N cable swap    0.16/0.13 S/N cable swap    0.43/0.37 At what rate can you buy cable for value tomorrow?
A) 1.534284
B) 1.534316
C) 1.534287
D) 1.534313

Accepted Answer

To buy cable for value tomorrow, we need to use the T/N cable swap rate. The rate for this is 0.16/0.13, which means if we pay 0.16 we can buy cable and receive it the next day, and if we sell cable the next day we can receive 0.13. To calculate the rate we add the spot rate (1.5340) to the points (0.14) which gives us 1.5340+0.0014=1.534316. Therefore, the best choice is B.

Question 14

You quote spot EUR/USD at 1.3023-26 in 5 to another bank. He says, "Take 5, could do 8". How much are you obliged to do?
A) Nothing, as he changed the terms of the deal
B) EUR 5,000,000.00
C) More than EUR 5,000,000.00, but a maximum of EUR 8,000,000.00
D) EUR 8,000,000.00

Accepted Answer

The phrase "Take 5" indicates an agreement to trade EUR 5,000,000.00 at the quoted rate. The counterparty's suggestion of "could do 8" is a proposal to increase the trade size, but it does not obligate you to trade more than the initially agreed EUR 5,000,000.00.

Question 15

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

Accepted Answer

Panel banks should contribute the offer side of the interbank quotes they observe being made by prime banks. This is because EURIBOR is meant to reflect the rates at which prime banks are lending to each other, and only by observing interbank quotes can a panel bank accurately contribute to the fixings. Contributions based on the quotes a panel bank is making or receiving, or the actual rates it has borrowed at, would not be representative of the interbank market as a whole.

Question 16

The market is quoting: 1-month (30-day) GBP     0.47% 7-month (213-day) GBP     0.74% What is the 1x7 rate in GBP?
A) 0.7956%
B) 0.7946%
C) 0.7840%
D) 0.7732%

Accepted Answer

The 1x7 rate is the forward rate for the period starting in 1 month and ending in 7 months. It can be calculated using the formula: [(1 + 0.74% * (213/360)) / (1 + 0.47% * (30/360))]^(360/183) - 1. This results in approximately 0.7956%.

Question 17

A USD deposit traded in London between two German banks is cleared:
A) Wherever the parties agree
B) In London
C) In NewYork
D) In Frankfurt

Accepted Answer

The answer of A USD deposit traded in London between...

Question 18

How many Yen would you pay to buy 1 ounce of gold if you were quoted the following? XAU/USD 1575.25-75 USD/JPY 96.55-60
A) JPY 152,090
B) JPY 152,139
C) JPY 152,169
D) JPY 152,217

Accepted Answer

To find the cost in Yen, multiply the higher end of the XAU/USD quote (1575.75) by the higher end of the USD/JPY quote (96.60). This gives 1575.75 * 96.60 = 152,217.45, which rounds to JPY 152,217.

Question 19

A CD with a face value of USD 250,000,000.00 was issued at par with a coupon of 5% for 91 days. You buy it in the secondary market when it has 30 days remaining to maturity and is trading at 5.25%. How much do you pay?
A) USD 252,056,972.97
B) USD 252,028,916.32
C) USD 250,000,000.00
D) USD 248,911,014.31

Accepted Answer

The correct answer is A because the bond is trading at a premium, so you will pay more than the face value. The premium is calculated as the difference between the market price and the face value, which is USD 2,056,972.97. The total amount you will pay is the face value plus the premium, which is USD 252,056,972.97.

Question 20

What is the value date of a 1-month outright forward FX transaction dealt today, if today's spot date is Monday, 30th January? Assume there are no bank holidays and that the year is not a leap year.
A) 2nd March
B) 1st March
C) 2gth February
D) 28th February

Accepted Answer

The answer of What is the value date of a...

Exam 2: ACI Dealing Certificate-Part B

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?

If the issuer of the collateral used in a repo defaults during the term of the transaction, who suffers the loss?

A negative yield curve is one in which:

What should a broker do if his quoted price is hit simultaneously by several dealers for a total amount greater than that for which the price concerned was valid?

Under the Model Code, if a broker shouts "done" or "mine" at the very moment a dealer shouts "off":

EURIBOR is the:

The 180-day CAD/CHF rate is bid 62 and the 90-day CAD/CHF rate is bid 29. What is the bid rate for 120 days, assuming straight-line interpolation?

Which of the following currencies is quoted on an ACT/365 basis for the calculation of interest on interbank deposits in London?

In order to be introduced in a controlled manner, which areas should be involved before a new product or business strategy is launched?

When would an exporter commonly use an NDF?

What is the day count/annual basis convention for JPY money market deposits?

What is the Purchase Price of a repo?

You are quoted the following rates: Spot cable 1.5340-43 0/N cable swap 0.14/0.11 T/N cable swap 0.16/0.13 S/N cable swap 0.43/0.37 At what rate can you buy cable for value tomorrow?

You quote spot EUR/USD at 1.3023-26 in 5 to another bank. He says, "Take 5, could do 8". How much are you obliged to do?

What rates should a panel bank contribute to the EURIBOR fixings?

The market is quoting: 1-month (30-day) GBP 0.47% 7-month (213-day) GBP 0.74% What is the 1x7 rate in GBP?

A USD deposit traded in London between two German banks is cleared:

How many Yen would you pay to buy 1 ounce of gold if you were quoted the following? XAU/USD 1575.25-75 USD/JPY 96.55-60

A CD with a face value of USD 250,000,000.00 was issued at par with a coupon of 5% for 91 days. You buy it in the secondary market when it has 30 days remaining to maturity and is trading at 5.25%. How much do you pay?

What is the value date of a 1-month outright forward FX transaction dealt today, if today's spot date is Monday, 30th January? Assume there are no bank holidays and that the year is not a leap year.