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3I0-012
ACI Dealing Certificate Questions and Answers

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Viewing questions 61-75 out of questions

Questions # 61:

Which of the following statements does not explain why banks accept some amount of interest rate risk?

Options:

In their function as intermediaries, banks must necessarily accept some degree of interest rate risk.

Banks incur interest rate risk to increase income

Banks prefer c red it risk to market risk.

If banks failed to take on interest rate risk they would not be able to meet the needs of their deposit and loan customers.

Answer

Questions # 62:

Under what circumstances are banks allowed to “park” deals or positions with a counterparty?

Options:

Not under any circumstances, since the “parking” of deals or positions should be prohibited

in conditions of exceptional volatility

only if the two counterparties to the deal agree

only if “parking” of deals or positions has been approved by senior management

Answer

Questions # 63:

If you took a short position in USD/JPY, how could the Fed “squeeze” you?

Options:

Raise USD interest rates

Lower USD interest rates

Lower reserve requirements

It could not squeeze you

Answer

Questions # 64:

What is a hedge?

Options:

A means by which to reduce a risk

An equal and opposite risk

A riskless transaction

A means of cancelling a deal

Answer

Questions # 65:

The vega of an option is:

Options:

The sensitivity of the option value to changes in interest rates

The sensitivity of the option value to changes in implied volatility

The sensitivity of the option value to changes in the time to expiry

The sensitivity of the option value to changes in the price of the underlying

Answer

Questions # 66:

Which of the following is a Eurocurrency deposit?

Options:

A 3-month deposit of USD 10,000,000.00 offered by a US bank in New York

A 3-month deposit of USD 10,000,000.00 offered by the US branch of a UK bank in New York

A 3-month deposit of USD 10,000,000.00 offered by a US bank in London

A 3-month deposit of GBP 10,000,000.00 offered by the UK branch of a US bank in London

Answer

Questions # 67:

An option is:

Options:

The right to buy or sell a commodity at a fixed price

The right to buy a commodity at a fixed price

The right but not the obligation to buy or sell a commodity at a fixed price

The right but not the obligation to buy a commodity at a fixed price

Answer

Questions # 68:

A 30-day 4% CD with a face value of GBP 20,000,000.00 is trading in the secondary market with 20 days remaining to maturity at 4.05%.

What would be your holding period yield if you bought the CD now and held it to maturity?

Options:

4.05%

4.0%

3.891%

3.838%

Answer

Questions # 69:

The mid-rate for USD/CHF is 0.9300 and the mid-rate for NZD/USD is 0.8560. What is the mid rate for NZD/CHF?

Options:

0.7961

1.0864

1.7860

1.2561

Answer

Questions # 70:

What ought to be done in the event a trade erroneously occurs at an off-market rate?

Options:

By agreement between the two counterparties, the trade must be cancelled as soon as practically possible since a rate amendment is prohibited.

By agreement between the two counterparts, the trade should, as soon as practically possible, either be cancelled or have its rate amended to an appropriate market rate.

The off-market rate should be adjusted as soon as possible to the appropriate current market rate and a new authenticated SWIFT confirmation sent immediately to the counterparty.

Nothing need be done, since once a trade is agreed to by the front office it is a binding agreement for both counterparties.

Answer

Questions # 71:

Assuming a flat yield curve in both currencies, when quoting a 1- to 2-month forward FX time option price in a currency pair trading at a discount to a customer:

Options:

you would take as bid rate the bid side of the 2-month forward and as offered rate the offered side of the 1-month forward

you would take as bid rate the offered side of the 2-month forward and as offered rate the bid side of the 1-month forward

you would take as bid rate the offered side of the 1-month forward and as offered rate the offered side of the 2-month forward

you would take as bid rate the bid side of the 1-month forward and as offered rate the bid side of the 2-month forward

Answer

Questions # 72:

Your agent bank accepts your back-valuation request for 1 day on an amount of EUR 50,000,000.00. EONIA is 0.375% and the ECB marginal lending facility rate is 1.50%. Applying conventional administration fees, how much will this be charged?