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ACI Dealing Certificate: Mock Exam 3

Mock Exam 3 (Recent Questions)

1. What is the ISO code for the Mexican Peso?


a) MEX
b) MXO
c) MCN
d) MXN

2. What is the ISO code for the Swedish Krone?


a) SWK
b) SEK
c) SWD
d) SED

3. Which type of repo gives the biggest (if any) risk of ‘double dipping’?
a) HIC
b) Delivery repo
c) Tri-party repo
d) None of the above

4. What is the ISO code for Gold:


a) XGD
b) GLD
c) XAU
d) GOL

5. The ISO code for Palladium is:


a) PLD
b) PLA
c) XPL
d) XPD

6. The Interest Rate Parity Theorum states that:


a) Interest rates are a function of supply and demand
b) Interest rates tend towards the mean
c) Interest rates in one country should be the same as another
d) Interest rate differential between 2 countries is equal to the differential between
the forward rate and the spot exchange rate

7. What is the ISO code for Silver in $/oz:


a) XSV
b) XAG
c) XSL
d) XAS

© Resource City™ 2010 1


ACI Dealing Certificate: Mock Exam 3

8. A broker gets 4 quotes from his banks on Cable: 1.5025/35, 1.5035/45, 1.5030/40 and
1.5032/37. What two-way price would he now put forward to his customer?
a) 1.5032/37
b) 1.5025/45
c) 1.5035/40
d) 1.5035/37

9. The ‘IMMY’ dates for STIRS are:


a) Jan, April, July, Oct
b) Feb, May, Aug, Nov
c) Mar, Jun, Sep, Dec
d) None of the above

10. You are long a put. Your risk profile is:


a) substantial opportunity for gain and limited loss
b) limited opportunity for gain and substantial loss
c) limited opportunity for gain and limited loss
d) substantial opportunity for gain and substantial loss

11. What is the capital gain on a £1m CD with 3% coupon, originally issued for 6 months (182
days), sold after 62 days at 3.10%?
a) GBP 1,014,958.90
b) GBP 1,004,719.02
c) GBP 14,958.90
d) GBP 4,719.02

12. What is the definition of an EONIA OIS?


a) Floating rate fixed at the average of the rates given
b) compounded daily
c) the difference between the bid and offer on the overnight rate
d) None of the above

13. You sell a customer GBP/ USD value tomorrow.. How do you cover your position?
a) Buy a T/N GBP/USD swap
b) Sell a T/N GBP/USD swap
c) Buy GBP spot, then B & S GBP T/N
d) Sell GBP spot, then S & B GBP T/N

14. Who can usually issue a CD?


a) Investment Banks
b) Credit Institutions
c) Discount Houses
d) All of the above

© Resource City™ 2010 2


ACI Dealing Certificate: Mock Exam 3

15. What are the contract size for STIRS?


a) EUR/USD/GBP all with contract size of 1m and tick size of 25
b) EUR/USD/CHF/GBP all with contract size of 1m/ tick size 25
c) EUR/USD/CHF all with contract size of 1m/ tick size 25
d) None of the above

16. You have taken a EUR/USD position that you run overnight. What risk do you run?
a) Settlement risk
b) Counterparty risk
c) Delivery risk
d) Market risk

17. You do a deal with a counterparty, who refuses to pay you profit/cash earned on a OTC
derivative transaction. What risk are you open to:
a) Settlement risk
b) Legal risk
c) Market risk
d) All of the above

18. Which scenario (if any) would give you the opportunity to create a covered interest arbitrage:-
a) A parallel drop in the yield curve
b) A differential opening up between interest rates and FX rates
c) A devaluation
d) None of the above

19. FX Swaps can be used to:


a) Roll a spot position
b) Hedge an outright forward
c) Create a synthetic foreign currency asset or liability
d) All of the above

20. The main difference between an Overnight limit and a Daylight limit is that:
a) Daylight limits are for daylight hours in London only
b) Overnight limits are for night time in London only
c) Only a more experienced dealer would normally have Overnight Limits
d) None of the above are correct

21. You are long USD/Yen at Y95.10. You place an Overnight ‘stop loss’ limit. Would this limit be
higher than Y95.10, or lower than Y95.10 and would it be to sell, or to buy?
a) Buy $/Yen at 96.10 on a stop
b) Sell $/Y at 96.10 on a stop
c) Buy $/Y at 94.10 on a stop
d) Sell $/Y at 94.10 on a stop

© Resource City™ 2010 3


ACI Dealing Certificate: Mock Exam 3

22. Gold is quoted as $1,400. What is the cost of one fine troy ounce?
a) $140
b) $1,400
c) $45.01
d) $4,501

23. On a Reuters dealer screen do counterparties:


a) Show their name next to their price
b) Appear anonymously
c) Have the choice of appearing or not
d) Anonymous until deal is struck, then revealed to counterparty

24. If the UK branch of a US Bank issues a USD-denominated CD in London, what type of CD has
it issued?
a) Euro CD
b) Foreign CD
c) Domestic
d) Yankee CD

25. Which counterparty in a classic repo is subject to margin maintenance?


a) Seller
b) Buyer
c) Both
d) Neither

26. The function of a voice broker is:


a) To match buyer and seller as an agent
b) To discover and disseminate the best bid and offer rates in the market
c) To aid price discovery in the market
d) All of the above

27. What is the variation margin due on 10 Euribor futures contracts sold at 97.255 if the closing
rate on the same day is 97.45?
a) You must pay €48.75
b) You will receive €487.50
c) You must pay €4,875.00
d) You will receive €4,875.00

28. How are Overnight-Indexed Swaps settled?


a) Periodic exchange of fixed and floating payments up to and including maturity
b) At maturity by net payment
c) After maturity by exchange of fixed and floating payments
d) After maturity by net payment

© Resource City™ 2010 4


ACI Dealing Certificate: Mock Exam 3

29. The most heavily traded STIR futures contract traded on Euronext/LIFFE is:
a) Short Sterling
b) Euroyen
c) Euroswiss
d) Euribor

30. What is the contract size of the Eurodollar Futures contract and where is it traded?
a) $500,000 on Euronext/LIFFE
b) $1,000,000 on Euronext/LIFFE
c) $1,000,000 on CME
d) $500,000 on NYSE

31. What is the ISO code for the Lebanese Pound?


a) LBP
b) LEB
c) LPD
d) LEP

32. What is the ISO code for the Argentinian Peso


a) ARP
b) ARG
c) ARS
d) AGP

33. What is meant by the Market Segmentation Hypothesis?


a) That different markets trade independently of each other
b) That FX rates are largely determined by supply & demand of the local currency
concerned
c) That supply and demand in the markets for short term and long term
instruments is largely determined independently
d) That financial instruments of different terms are substitutable

34. What is the definition of a long butterfly:


a) buy a call at a higher strike, sell 2 puts at mid strike, buy 1 call at a lower strike
b) buy a call at a lower strike, sell 2 calls at mid strike, buy 1 call at a higher strike
c) buy 2 puts at a lower strike, sell 1 call at mid strike, buy 2 puts at a higher strike
d) sell a call at a lower strike, buy 2 calls at mid strike, sell a call at a higher strike

35. What is the difference between a Straddle and a Strangle?


a) The premium cost is greater in a Straddle
b) The premium cost is greater in a Strangle
c) The Straddle is a more conservative play than a Strangle
d) None of the above

© Resource City™ 2010 5


ACI Dealing Certificate: Mock Exam 3

36. What is meant by an Asian Option?


a) Is where the payoff is determined at certain set periods
b) Is where the payoff is determined by the average underlying price over a set
period of time
c) Is where the option is traded only in Asian time zones
d) Is where the option only relates to Asian currencies

37. A ‘cock date’ or ‘broken date’ transaction refers to:


a) A non-standard period
b) A standard period
c) A transaction where the price has been given incorrectly and needs to be cancelled
d) None of the above

38. An ITM put option means that


a) The strike price is lower than the underlying price
b) The strike price is higher than the underlying price
c) The put and call premiums are worth the same
d) Both b and c are correct

39. What is a Nostro Account?


a) Your account in a foreign currency with another bank overseas
b) Your account in a domestic currency with another bank
c) An account held with your bank by another in a foreign currency
d) An account held with your bank by another in your currency

40. What risks are increased by taking collateral?


a) Operational risk
b) Legal risk
c) Liquidity risk
d) All of the above

41. Brokers or principals assigning interest rate swaps to a third party must ensure that:
a) The principals are aware that they are responsible for assessing the credit of a
counterparty and staff are well trained in market practice and aware of the
firm’s business responsibilities
b) The third party is capable of undertaking complex transactions such as assignment
and that prior approval has been secured from senior management and its staff
understand the risks and obligations
c) The assignment is enforceable under local law, that the third party has the legal
capacity to act as assignee and that the broker has conducted due diligence on the
third party
d) The swap has been adequately documented and its assignment is executed under an
appropriately structured and clearly written supplementary annex to the master
agreement

© Resource City™ 2010 6


ACI Dealing Certificate: Mock Exam 3

42. What should you do it you want to assign an IRS to an alternative name:
a) This is impossible
b) Ask the other counterparty before revealing their name to the new counterparty
c) Go ahead and assign without referring to the other counterparty
d) None of the above

43. The Gold ‘Fixing’ refers to the


a) the price set daily by panel at 11am
b) the price set daily by panel at 3pm
c) the price set twice daily by panel at 10.30am and 3pm
d) the price set twice daily by panel at 11am and 5pm

44. You buy 10 Short Sterling at 99.25 and sell them at 99.08. What is your P & L?
a) €4,250 profit
b) £4,250 loss
c) £2,125 loss
d) £2,125 profit

45. An IRS price is quoted to you as ‘3.25 – 22’ and you ‘give’ the swap
Have you:
a) Dealt at 3.25 as the market maker
b) Dealt at 3.22 as the market maker
c) Dealt at 3.25 as the market user
d) Dealt at 3.22 as the market user

46. You are over-lent in 1 month CHF deposit. You need to square using the USD deposit market
and the $/CHF swap. You are quoted the following USD/CHF swap rates. Which would be the
best rate to use?
a) 22/30
b) 25/35
c) 21/31
d) 24/36

47. What is the ISO code for the South African Rand?
a) SAR
b) ZAR
c) RND
d) SRD

48. What is the ISO code for Platinum?


a) XPL
b) XPD
c) XPA
d) XPT

© Resource City™ 2010 7


ACI Dealing Certificate: Mock Exam 3

49. Re-assignment of an IRS is done by a process known as:


a) Absorption
b) Novation
c) Transfer
d) Adoption

50. VAR refers to


a) Variation at risk
b) Volatility at Risk
c) Value at Risk
d) Variation Margin

© Resource City™ 2010 8