Question Bank 2014

2014
ACI DEALING CERTIFICATE
Examination Question Database
Paper 1 - Pre-course assessment

Paper 2 - 100 practice questions
Paper 3 - 116 practice questions
Paper 4 – 100 MC practice questions
Paper 5 – 90 practice questions
Paper 6 – 23 questions
1 ACI Dealing Questions and Solutions

Paper 1 – pre-course assessment
Section 1-Basic Interest Rate Calculations
1 A 3-month (91-day) deposit of EUR25 million is made at 3.25%. At maturity, it is rolled over
three times at 3.55% for 90 days, 4.15% for 91 days and 4.19% for 89 days. At the end of 12
months, how much is repaid (principal plus interest)?
(a) EUR 25,962,011.01
(b) EUR 25,959,714.91
(c) EUR 25,948,878.47
(d) EUR 25,948,648.82
Section 2 -Cash Money Market

1. If the UK branch of a US bank issues a USD-denominated certificate of deposit in London, which of
the following types of CD has it issued?
(a) euro
(b) foreign
(c) domestic
(d) Yankee
2. A Eurodollar deposit is done in London between two German Banks. Where is settlement
of the deal affected?
a. New York
b. London
c. Frankfurt
d. too little information to decide
3. How can collateral maintenance be affected on a sell/buy back repo transaction?

a. By margining
b. by repricing
c. either a) or b) but usually by b)
d. either a) or b) but usually by a)
4. Where the seller of a repo is in default, which of the following is true?

a. the buyer can sell the collateral
b. the buyer must sell the collateral
c. the buyer can only sell the collateral once the seller is declared insolvent
d. the buyer cannot sell the collateral without the sellers permission
Section 3 -Cash Money Market Calculations

1 What is the value at maturity of a new 3-month (91-day) CD with a face value of GBP200
million and a coupon of 4%?
(a) GBP 198,025,173.61
(b) GBP 200,000,000.00
(c) GBP 201,994,520.55
(d) GBP 202,022,222.22
2 What is the secondary market value of a GBP200 million 4% CD originally issued for 3
months (91 days) that is trading at 3.65% after 60 days?
(a) GBP 200,789,781.86
(b) GBP 200,800,684.72
(c) GBP 201,370,272.70
(d) GBP 201,389,244.64
3. You take in EUR 10mio at 3.50%, EUR 5 mio at 3.40% and EUR 5 mio at 3.60%. What
rate is the average rate on your position?
a. 3.475%
b. 3.60%
c. 3.50%
d. 3.40%

4. A CD with a coupon of 3% in USD 5,000,000 which was originally issued for 182 days is
now purchased at a rate of 3 % with only 7 days to maturity. What is the consideration
payable?
a. 5,075,833.33
b. 5,072,874.15
c. 4,924,166.67
d. 5,000,000
5. A CD was issued at 4.50% in USD 10,000,000 150 days ago. The CD has 30 days to
maturity when you purchase it at 4.05%. What is your holding period return if you hold the
CD to maturity?
a. 4.50%
b. 4.05%
c. 4.27%
d. to little information provided
6. A two week repo against 5.50% 2015 German Bund is undertaken when the repo rates
are 3.33/38%. The collateral value is 266,125,000. You undertake the reverse repo against
this collateral with no margin taken. What is the repo interest at expiry to the nearest EUR?
a. 349,807
b. 333,333
c. 344,632
d. 266,125
7. Tom/next repo rates are quoted 1.75%/1.80%. You sell EUR10, 000,000 3.80% German
Bunds with a market value of 11,260,000. What is the repurchase price at maturity?
a. 11,260,563
b. 11,260,000
c. 11,261,189
d. 11,260,547.36
Section 4 Foreign Exchange

1 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
2. Spot USD / CHF is 1.4870 / 80 and four month forward points are 48/43. Are:
a) USD rates higher than CHF rates
b) CHF rates higher than USD
c) USD rates the same as CHF
d) USD yield curve inverted
3. You want to make a spot USD / JPY price to a customer. You believe he is a buyer of JPY.
What is the most profitable price for you
a) 97.25 / 35
b) 97.40 / 50
c) 97.45 / 55
d) 97.60 / 70
Section 5- Foreign Exchange Calculations

1 Spot USD/CHF is quoted to you at 1.1250-55. If you sold CHF 15,000,000 at this quote, how
many USD would you receive in exchange?
(a) USD 16,882,500.00
(b) USD 16,875,000.00
(c) USD 13,333,333.33
(d) USD 13,327,410.04

2 Spot EUR/USD is quoted at 1.0055-60 and spot GBP/USD at 1.5575-80. What is the
EUR/GBP cross-rate?
(a) 0.6456-57
(b) 0.6454-59
(c) 1.5482-95
(d) 1.5661-73
Section 6 - Forward-Forwards, FRAs, money market futures & swaps

1 In order to hedge a 6x12 forward-forward loan that you have made, you could;
(a) Buy a 6x12 FRA
(b) Buy a strip of money market futures if contracts were available for the period
(c) Receive fixed on a 1-year annual/6s interest rate swap
(d) Take a 12-month deposit
2 You have taken a position on future interest rates by buying a 1x4 (89-day) EUR 150 million
FRA at 3.15%. If EURIBOR for the contract period turns out to be 3.27%, what is the
settlement amount and do you pay or receive?
(a) you pay EUR 44,143.14
(b) you receive EUR 44,143.14
(c) you pay EUR 44,500.00
(d) you receive EUR 44,500.00
3 How are overnight index swaps settled?

(a) Upfront with exchange of principal at the end
(b) fixed and settled daily
(c) after maturity by exchange of fixed and floating payments
(d) after maturity by net payment
Section 7 - Options
1 What is the name for an option which gives the holder the right but not the obligation to
exercise the option on any day prior to expiry of the option?
(a) European
(b) American
(c) Bermudan
(d) Asian
2 What are the components of the premium on an out-of-the-money option?

(a) intrinsic value + zero time value
(b) zero intrinsic value + zero time value
(c) zero intrinsic value + time value
(d) intrinsic value + time value
Section 8 – Asset and Liability Management

1. Which of the following transactions would have the effect of lengthening the average duration of
assets in the banking book?
A. buying futures contracts on 30-year German Government bonds
B. selling futures contracts on 30-year German Government bonds
C. buying put options on 30-year German Government bonds
D. buying a 3x6 forward rate agreement
2. What is a ‘duration gap’?

A. the average maturity of liabilities on a balance sheet
B. the difference between the duration of assets and liabilities
C. the difference between the duration of the longest and shortest-held liabilities on the balance sheet
D. the average maturity of the portfolio on the asset side of a balance sheet
3. Which statement about modern matched-maturity transfer pricing in banks is correct?

A. It is now a widely accepted standard that banks should use a single representative transfer price
across the entire maturity spectrum.
B. Modern matched-maturity pricing systems include an additional liquidity surcharge that is
specifically applied to more liquid short maturities.
C. Matched-maturity transfer prices should represent a weighted average cost of capital that
incorporates the cost of equity into the cost of borrowed funds.
D. Modern matched-maturity systems differentiate transfer prices by the maturity of the commitment
and also apply a marginal funding cost perspective.
Section 9 - Principles of Risk
1 What is a ‘vostro’ account?
(a) your account in a foreign currency with another bank
(b) your account in 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
2 A dealer makes the following spot EUR/USD transactions:

Buy EUR10,000,000 at 1.1001
Buy EUR 25,500,000 at 1.0993
Sell EUR 20,000,000 at 1.1011
If the end-of-day revaluation rate is 1.0990, what is his profit or loss?

(a) USD 23,350 profit
(b) USD 23,350 loss
(c) USD 23,500 profit
(d) USD 23,500 loss
Section 10 - The Model Code

1. The Model Code recommends that when banks accept a stop-loss order:
a) Management ensure ongoing lines of communication between the parties
b) Management must report to the central bank.
c) Allow only experienced dealers to take such orders.
d) Secure the approval of the management of the counterparty to accept such orders.
2. Where the matter of dealing for personal account is concerned, the Model Code recommends
that:
a) Subject to local legal requirements, the matter is one for bank management to decide.
b) Bank management should encourage such activities because it allows banks to
monitor the gambling habits of their staff.
c) Where this is allowed, bank management should have a clearly defined policy and
written procedures.
d) Bank management should allow staff to deal with the bank on a case to case basis.
3. Written confirmation is a function that can be done by:

(a) Any dealer as long as he/she is not a party to the trade.
(b) Staff in the back-office.
(c) Staff in the dealing room who are not dealing.
(d) Any staff outside the dealing room.
4. Which of the following is not in the Model Code?

(a) Banks and brokers should record, by tapes or other such means, conversations
between dealing counterparties.
(b) Firms do not need to inform new counterparties and clients that conversations will
be recorded.
(c) On completion of recordings, tapes should be kept for a period sufficient to
enable the details of any transaction contained therein to be confirmed.
(d) The storage of recorded tapes should be strictly managed to prevent their
contents from being tampered with.
5. Brokers or principals assigning interest rate swaps to a third party must ensure:
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,
prior approval has been secured from its 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.

6. Confidential information may be divulged
a) When the dealer is requested to by a 3rd party
b) When the dealer’s boss tells him to
c) When the dealer owes a 3rd party a favour
d) When the dealer is required by law
7. A broker quotes 40 – 45, pay for 6 USD / JPY. Bank A and B simultaneously respond 8 yours
and 5 yours respectively. How should the broker react
a) Do the full amount with bank A
b) Apportion $3mm each to both banks because they hit the bank at the same time and ask if
the bidder pays on
c) Apportion the amount per bank in accordance with the amount hit by each
d) The broker has to honour each amount hit by the two banks
8. After hours dealing should only be allowed upon satisfaction of

a) prior permission from management
b) guidelines detailing names of persons authorised, transactions and amounts etc being in
place
c) a control system being in place
d) all of the above
9. In the case of a new national holiday, value dates in FX trades will only be split
1) When both parties agree
2) where local practices allow, such as in Islamic countries
3) Always
4) Never
a) all of the above

b) 1) and 2)
c) 3)
d) 4)

Paper 2 - 100 ACI Dealing Certificate examination practice questions
1 You wish to sell USD against the EUR. Which of the following EUR/USD quotes is the best
price for you as market user?
a. 1.1565
b. 1.1578
c. 1.1573
d. 1.1563
2 You need to buy USD 5,000,000 against the GBP and receive two quotes from different
banks: 1.6144/49 and 1.6148/53. At which rate would you trade?
a. 1.6144
b. 1.6148
c. 1.6149
d. 1.6153
3 You quote a price to a counterparty EUR/USD 1.2050/60. They say “10 mine”. You have:
a. Sold USD 10m at 1.2060
b. Bought USD 10m at 1.2050
c. Sold EUR 10m at 1.2060
d. Bought EUR 10m at 1.2050.
4 Which of the following is NOT a direct quote?

a. USD/JPY
b. USD/CHF
c. USD/CAD
d. GBP/CHF
5 You purchase USD 5,000,000 against the CHF at 1.6500. At close of trade the market is
trading at 1.6515/20. What will your profit/loss be if you can square your position off at this
rate?
a. profit of 15 points on USD 5,000,000
b. profit of 20 points on USD 5,000,000
c. loss of 15 points on USD 5,000,000
d. loss of 20 points on USD 5,000,000
6 If you are quoted EUR/USD at 1.2499/05 and you sold EUR 5,000,000, how many USD
would you buy?
a. USD 6,249,500
b. USD 5,249,000
c. USD 7,000,500
d. USD 5,000,000
7 You have a short USD/CHF position. Which one of the following is the best quote to
square your position?
a. 1.5316/18
b. 1.5299/05
c. 1.5310/15
d. 1.5304/10
8 If AUD/USD is 0.8012/17 and USD/CHF is 1.5289/01 what would you quote AUD/CHF to a
customer based on those quotes which incorporates a 1 point profit for yourself on both
sides of the price?
a. 1.2248/68
b. 1.2258/66
c. 1.9093/97
d. 1.9092/98
9 You do the following deals: Sell USD 3,000,000 against CHF at 1.3763, Sell USD
4,500,000 at 1.3771 and sell USD 1,345,000 at 1.3785. You then buy USD 3,750,000 at
1.3759. What is your position and average price after all these transactions?
a. short USD 12,595,000 at 1.3767

b. short USD 5,095,000 at 1.3775
c. short USD 5,095,000 at 1.3781
d. short USD 5,095,000 at 1.3779
10 What equivalent rate would you pay annually if you were prepared to pay 6% semi-
annually?
a. 6%
b. 6.5%
c. 6.09%
d. 5.91%
11 If you borrowed EUR 5,000,000 for 182 days at 3.1/16 %, what amount would you repay at
maturity?
a. 5,076,352.74
b. 5,077,413.19
c. 5,000,000
d. 5,079,997.78
12 Which of the following trades on a true yield basis?
a. Bankers Acceptances
b. Eligible Bills
c. US Commercial Paper
d. CDs
13 If the 90 day USD interest rate is 3.10% p.a. and the 180 day USD interest rate is 3.50%
p.a., what is the 120 day interest rate using straight line interpolation?
a. 3.20%
b. 3.21%
c. 3.22%
d. 3.23%
14 What does it mean to be over borrowed?

a. You have more liabilities than assets
b. You have borrowed forward against FRAs
c. You have more assets than liabilities
d. None of the above
15 You lend currency for 360 days at 8.25% and the borrower agrees to pay interest every 3
months. What approximate effect will these terms have on the yield to maturity?
a. none
b. decrease the yield by 5 basis points
c. increase the yield by 25 basis points
d. decrease the yield by 25 basis points

16 You agree to pay a client 6% for a one year deposit. He asks for interest to be credited to
his account on a semi-annual basis. What rate will you pay him on this basis?
a. more than 6%
b. 6%
c. less than 6%
d. to little information given
17 In a repo, who has the market risk on a bond used as collateral?
a. the supplier of the collateral

b. the supplier of cash
c. neither
d. both
18 In a tri-party agreement, to who does legal title belong during the life of the repo?
a. to the custodian
b. to the provider of cash
c. to the provider of collateral
d. to the custodian and the provider of collateral
19 If a bond’s dirty price is at 98.00 and you wish to repo for a cash amount of $10,000,000
what amount of face value bonds will you provide as security?
a. 10,000,000 face value

b. less than 10,000,000 face value
c. more than 10,000,000 face value
d. to little to decide
20 What is the major advantage of a tri-party repo agreement?
a. the rate is lower

b. the quality of collateral is better
c. delivery risk of collateral is avoided
d. none of the above
21 In a sell/buy back any coupon payment during the life of the repo trade is:
a. paid to the original owner of the bond

b. paid to the new owner of the bond
c. paid to the original owner by the reverse repo by calculating it into the price at the
buyback date
22 When a bond goes special it usually means that:
a. the issuer has been downgraded

b. the repo rate is lower than the money market rate
c. the coupon payment will be paid in 5 days time
d. the repo rate is higher than the money market rate
23 If you are quoted USD/CHF spot rate of 1.5770/75 and a 3-month forward outright of
1.5970/75, what would this imply?
a. USD interest rates are higher than CHF

b. CHF interest rates are higher than USD
c. The USD and CHF interest rates are the same
d. not enough information provided to decide

24 If 3 month forward USD/CHF is quoted as 320/325 points and the CHF interest rates fall
by 0.50%, then which of the following would you expect to happen?
a. the forward points would increase

b. the forward points would decrease
c. the points will not be effected
d. to little info provided
25 Given USD/JPY spot as 84.00/10 and 1-month swap points of 31/30, what is the bid offer
outright 1-month forward quote?
a. 83.70 – 83.70
b. 84.31 – 84.40
c. 83.71 – 83.81
d. 83.69 – 83.80
26 If GBP interest rates are higher than USD interest rates and you sell GBP outright
forward, would you expect to get?
a. more USD on the forward date

b. less USD on the forward date
c. the same USD amount as you would receive on the current the spot date
d. to little information to decide
27 The 6-month USD /SEK forward is quoted 500/550. SEK interest rate then fall sharply.
What would you expect the next 6-month forward price to be?
a. 475/525
b. 525/575
c. 600/650
d. 400/450
28 If one month forward USD/CHF is quoted 33/30 and then narrows to 26/23, which of the
following might have caused this?
a. USD interest rates down
b. CHF interest rates up
c. A major change in the USD/CHF exchange rate
d. any of these above
29 You have purchased a 12-month CD and taken a 6-month deposit in the same currency.
What would you need to do to hedge your exposure?
a. sell a 6x12 FRA
b. buy a 6x12 FRA
c. sell a 12x18 FRA
d. buy a 12x18 FRA
30 You are long a 3x9 AUD FRA at 8.59%. On fixing day AUD LIBORs fix as follows: 3-
months 8.50%, 6-months 8.625%, 9-months 8.8125%. What is the result?
a. you have lost 9 basis points
b. you have lost 3.5 basis points
c. you have gained 9 basis points
d. you have gained 3.5 basis points
31 There is a possibility that interest rates will fall within the next 6 months. Which of the
following would you do?
a. Sell 0x3 FRAs
b. buy 3x6 FRAs
c. Sell 6x12 FRAs
d. buy 6x12 FRAs

32 You have a 6-month liability and have a 3-month asset. What of the following would be
the best cover for the remaining three months?
a. buy a 0x6 FRA and take 3 month cash in 3 months time

b. sell a 0x6 FRA and lend 3 month cash in 3 months time
c. buy a 3x6 FRA and take 3 month cash in 3 months time
d. sell a 3x6 FRA and lend 3 month cash in 3 months time
33 There is a positive yield curve which you expect to flatten. To take advantage of this you
would:
a. buy 3x6 FRAs and buy 6x9 FRAs

b. sell 3x6 FRAs and sell 6x9 FRAs
c. sell 3x6 FRAs and buy 6x9 FRAs
d. buy 3x6 FRAs and sell 6x9 FRAs
34 In October you buy Dec Eurodollar futures. What is the FRA equivalent?
a. Long 0x3 FRAs IMM

b. short 0x3 FRAs IMM
c. long 2x5 FRAs IMM
d. short 2x5 FRAs IMM
35 You sold a 4x7 FRA in November; you hedge this position using futures. What have you
done?
a. bought Dec futures

b. Sold Dec futures
c. Sold March futures
d. Bought March futures
36 You have a short 6x12 20 million USD FRA position in September. What would be the
best hedge available in the futures market?
a. buy 20 March and buy 20 June 3-month Eurodollar futures

b. buy 20 March and sell 20 June 3-month Eurodollar futures
c. sell 20 March and sell 20 June 3-month Eurodollar futures
d. sell 20 March and buy 20 June 3-month Eurodollar futures
37 Which of the following does not directly determine an options fair value price?
a. the underlying assets current market price

b. volatility
c. market expectation as to future trends
d. time to maturity
38 If an option is out of the money, the delta would tend towards:
a. zero
b. 1
c.0.5
d. the delta never changes
39 What is volatility?
a. the measure of variability but not the direction of the underlying asset price
b. the measure of variability and the direction of the underlying asset price
c. the measure of the direction of the underlying asset price
d. all of the above

40 A 1-month USD put CHF call option has a strike price of 1.5120. The current spot price is
1.5000/10 and the 1-month USD/CHF forward is 1.5180/90. Is the option:
a. in the money forward

b. out the money forward
c. at the money forward
d. out the money spot
41 An option trader tells you he is long a straddle. What has he done?
a. bought a call and bought a put option with the same strike price
b. bought a call and sold a put option with the same strike price
c. sold a call and sold a put option with the same strike price
d. bought a call and bought a put option with the different strike prices
42 Which of the following swap structures cannot have a fixed rate component?
a. plain vanilla interest rate swap

b. basis swap
c. asset swap
d. cross currency swap
43 If your counterparty defaults on a liability interest rate swap transaction to what are you
exposed?
a. replacement cost including interest related cash flows

b. full principal amount plus replacement costs including interest related cash flows
c. full principal amount
44 Which of the following best describes an amortised swap?
a. a swap with quarterly interest payments

b. a swap with capped interest payments
c. a swap which includes the exchange of principal
d. a swap with a decreasing notional principal
45 You have issued a bond at 85bp over Treasury bonds. You swap it to floating on a quote
of Treasury plus 80/90 bp. Your effective cost of funding is?
a. more than LIBOR
b. less than LIBOR
c. LIBOR
d. none of these
46 Which of the following would best describe a currency swap?

a. an exchange of interest payments in a currency other than the base currency
b. the exchange of interest payments in different currencies on the designated payment
dates, together with an exchange of principal in different currencies at the maturity of the
swap
c. the exchange of interest payments only in different currencies on the designated
payment dates
d. a possible exchange of principal in different currencies at the start and a certain
exchange at maturity of the swap plus the exchange of interest payments on different
currencies on the designated payment dates
47 Which of the following is NOT achieved by entering into an interest rate swap?
a. increasing your borrowing
b. reduce cost of borrowing
c. enhance yield
d. access markets indirectly
48 If a bank accepts a GBP deposit for 19 months, when will the interest be payable?
a. quarterly and then at maturity
b. annually and then at maturity
c. in the first month, then every six months
d. at maturity only
49 What is the name given to the form of netting where a new contract replaces all contracts
netted?
a. Netting +
b. multilateral netting
c. netting by novation
d. close-out netting
50 The global RTGS arrangement called CLS was developed to eradicate:
a. market risk
b. settlement risk
c. reputation risk
d. none of these
51 Four banks in the international market quote you spot USD/JPY. Which is the best quote
for you as a buyer of JPY?
a. 121.49 – 53
b. 121.45 – 51
c. 121.50 – 57
d. 121.47 – 52
52 Four banks offer a corporate treasurer a two-way price in NZD/USD. From which bank
will he buy NZD against USD?
a. 0.5270/75
b. 0.5272/77
c. 0.5274/79
d. 0.5268/73
53 You Quote a customer EUR/GBP 0.7365/70. She asks you to deal with her at the
reciprocal rate of 1.3578. What have you done?
a. you buy EUR at 1.3578

b. you buy EUR at 0.7370
c. you sell EUR at 1.3578
d. you sell EUR at 0.7365
54 A client wants to sell CHF against GBP. The USD/CHF rate is 1.4915/20 and the
GBP/USD rate is 1.4628/33. What rate do you quote the client?
a. 2.1824
b. 2.1832
c. 2.1817
d. 2.1847
55 USD/CHF is 1.5255/75 and USD/JPY is 120.20/25. What price would you quote to a
customer who wishes to sell JPY against CHF?
a. 78.79
b. 78.83
c. 78.81
d. 78.75
56 USD/CHF is quoted 1.5005/15 and GBP/USD is quoted as 1.6120/30. At what rate could
you buy GBP and sell CHF?
a. 2.4188
b. 2.4203
c. 2.4219
d. 1.0742
57 Spot EUR/USD is quoted by the broker as 1.2300 - 10. You have an interest to sell EUR
at 1.2307 and tell him he can include your price in his quote. What does he now quote?
a. 1.2300 – 10
b. 1.2300 - 07
c. 1.2307 – 10
d. 1.2300 - 17
58 You invest in a GBP CD for 1 year (365 days) at an interest rate of 3.75% what is your
return if you hold it to maturity?
a. 3.73%
b. 3.74%
c. 3.75%
d. 3.76%
59. You want to borrow six month USD in the London Market. Bank A quotes 3 7/8 – 33/4
and bank B quotes you 3 13/16 – 311/16 Which Bank is quoting you the best rate and at
which rate will you deal?
a. Bank B 3 13/16
b. Bank A 3 7/8
c. Bank A 3 3/4
d. Bank B 3 11/16
60. You work for Major Bank in London and it is 1pm on Wednesday. You have a call
account in your books in GBP. The depositor calls and requests payment. When will
payment be effected?
a. Value today
b. Value Tomorrow
c. Value spot
d. Value next Monday
61. If the maturity of a Eurodollar transaction falls on a Saturday, which also happens to be
the last day of the month, when will the transaction be settled?
a. On the Saturday
b. on the last working day of the month
c. on the following Monday
d. on the next working day
62. Which of the following currencies/products is quoted on an actual/360 basis?

a. GBP Treasury-bills
b. EUR deposits
c. JPY Government bonds
d. USD Eurobonds
63. What is the equivalent of a money market yield of 6.00 percent in terms of eurobond
coupon rate?
a. 6.00%
b. 6.0833%
c. 5.9178%
d. 5.875%

64. Which of the following rates represent the best yield?
a. Semi-annual money market rate of 4.50%
b. Semi-annual bond rate of 4.50%
c. Annual bond rate of 4.50%
d. Annual money market rate of 4.50%
65. If you have invested EUR 10 million for 182 days at 6% and borrowed EUR 7 million for
182 days at 5.8125%, what is the average (breakeven) rate of the remaining uncovered
EUR 3 million position?
a. 6.50%
b. 5.5625%
c. 6.5625%
d. 6.4375%
66. What does the term “mismatched” in respect of money market maturities mean?
a. you have borrowed forward/forward against along futures position
b. your assets and liabilities are not traded for exactly matching dates
c. you have borrowed cash against securities
d. you have short date deposits accepted surplus to requirements
67. You are a buyer of three-month GBP eligible bills in the London market.
Bank A quotes you 7.1/16 – 6.15/16 and Bank B quotes you 7.00 – 6.7/8. Which bank is quoting
you the best rate and at which rate will you deal?
a. Bank B 7.00%
b. Bank A 6 15/16%
c. Bank A 7 1/16%
d. Bank B 6 7/8%
68. If eligible bills are being quoted at 6 7/8 for 92 days then what is the equivalent true
yield?
a. 6.5346%
b. 6.8854%
c. 6.875%
d. 6.9962%
69. You are a seller of GBP CDs in the secondary market. Bank A quotes 6 7/8 – 6 3/4 and
Bank B quotes 6.13/16 – 6.11/16. Which bank is quoting the best rate and at which rate
will you deal?
a. Bank B 6.11/16 %
b. Bank B 6.13/16 %
c. Bank A 6.7/8 %
d. Bank A 6.3/4%
70. As an investor, what will you pay for 1-month commercial paper with a face value of
GBP 5mio with 30 days to maturity at LIBOR plus 25 bp? One month LIBOR today was
fixed at 5.00%
a. GBP 5,021,482.64
b. GBP 5,000,000
c. GBP 4.978,517.36
d. GBP 4,978,424.66
71. What will an investor pay for 1-month US Domestic CP with a face value of USD 25 mio
for 30 days at a rate of 4.25%?
a. USD 24,911,770.81
b. USD 24,911,458.33
c. USD 25,000,000
d. USD24,912,671.23

72. A dealer repos out GBP 10 mio UK gilts Treasury 5.50% 2012 with a dirty price of
95.00. What is the initial consideration paid across to him where the repo is done on a
flat basis?
a. GBP 9,500,000
b. GBP 950,000
c. GBP 1,000,000
d. GBP 10,000,000
73. If you believe that the short-term money market yield curve, which is currently positive,
will flatten, which futures position should you take?
a. Buy far contract and sell near contract
b. Buy near contract and sell far contract
c. Buy near contract and buy far contract
d. sell near contract and sell far contract
74. Using the following rates- three month EUR 3.50% (90 days) six month EUR 3.75%
(180days) – what is the rate for 3x6 EUR deposits?
a. 3.965%
b. 3.625%
c. 3.285%
d. 3.835%
75. Your dealer takes a 3 month SGD deposit and at the same time lends out an equivalent
amount of SGD for 6 months. How would you describe the position created?
a. Short SGD 0x3 cash
b. Long SGD 6x9 cash
c. Short SGD 3x6 cash
d. long SGD 0x3 cash
76. Which of the following is a recognised financial futures exchange?

a. MATIF
b. TARGET
c. CMO
d. CREST
77. How is the variation margin on a futures contract usually calculated?

a. A fixed margin per contract
b. Revaluation against the closing price on exchange
c. Revaluation against LIBOR fixing
d. Revaluation against a weighted average price
78. A trader is using only March 0X short sterling futures to hedge the rate on a GBP loan
which rolls over in March, June, September, and December 0X. What kind of hedge is
this?
a. A strip hedge
b. A stack hedge
c. A perfect hedge
d. A cross hedge
79. A futures price is quoted as 97.25 what is the equivalent interest rate?
a. 2.75%
b. 97.25%
c. 7.25%
d. 9.725%
80. Which of the following pairs of financial instruments provide arbitrage opportunities?
a. Swap points and futures margins
b. FRAs and interest rate futures
c. Currency swaps and currency options
d. Interest rate swaps and CDs
81. You believe that a positive short-term money market yield curve will flatten in the longer
end. To take advantage of this you would:
a. Buy 3/6 FRA and sell 6/9 FRA
b. Buy 3/6 FRA and buy 6/9 FRA
c. Sell 3/6 FRA and sell 6/9 FRA
d. Buy 3/6 FRA and buy 6/9 FRA
82. How is a USD-denominated “plain vanilla” interest rate swap frequently priced and
quoted in the interbank market?
a. By reference to the floating side
b. As a spread above corresponding US Treasuries
c. As the differential between the fixed rate and LIBOR
d. An all-in rate for the fixed side
83. Which “off balance sheet” derivative product can still involve the exchange of principal
at maturity?
a. A currency swap
b. an FRA
c. A collar
d. A swaption
84. Interest rate swaps and currency swaps can be used for many different purposes.
Which of the following would not be an appropriate application of the instrument?
a. Generating foreign currency assets from the purchase of domestic securities
b. covering short term outright forward foreign exchange outstandings
c. hedging long-term lease contracts
d. Arbitraging capital markets
85. Which of the following is a basis swap?

a. prime vs 3 months USD LIBOR
b. 5-year JPY fixed vs 6 months EUR LIBOR
c. 3-year USD fixed vs 6 months GBP LIBOR
d. A CHF zero coupon swap
86. In London which is the most frequently used benchmark for the floating leg of swaps?
a. UK Clearing Banks rate
b. US prime Banks rate
c. A rate agreed between bank and counterparty at re-rating dates
d. LIBOR
87. Spot EUR/USD is quoted by the broker 1.2800 – 10. You have and interest to sell EUR
at 1.2807 and put him on at that level. What does he now quote the market as a two-
way price?
a. 1.2807 – 10
b. 1.2800 – 07
c. 1.2800 either way
d. 1.2800 - 10
88. The forward points for six month USD/CHF are quoted at a USD discount (international
terminology) how would you expect them to be displayed on the dealers rates screen?
a. too little information to decide
b. “high-low”
c. “low-high”
d. Around par

89. If a 3-month USD/SEK swap is quoted 5-8 and 6-months is quoted 35-30, what is the
forward/forward three month against six-month swap?
a. 40-38
b. 38-43
c. 43-35
d. 54-35
90. Spot EUR/USD is quoted 1.28. If six month (180 days) USD interest rates are 5.50%
and EUR interest rates are 4.50% for the same period, what is the approximate level of
EUR/USD forward swap points in dealer terms?
a. 63 – 66
b. 66 – 63
c. 6.3 – 6.6
d. 6.6 - 6.3
91. What does volatility measure in respect of currency options?

a. The number of times a currency option may be in the money during its life.
b. The variability but not the direction of the price of the underlying exchange rate
c. The direction of the price of the underlying currency
d. The variability and direction of the underlying currency exchange rate
92. If a currency option is described as “out of the money”, the delta:

a. tends towards 1
b. tends towards 0.50
c. is equal to zero
d. tends towards zero
93. Which of the following is not a vital element in data recorded on a banks dealing ticket
recording a routine forward exchange deal?
a. Dealing date
b. Value date
c. Current interest rate
d. Forward exchange rate
94. Which of the following is not a limit to control market risk?

a. Counterparty limit
b. overnight position limit
c. stop loss limit
d. forward gap limit
95. Which combination of the following types of risk is associated with a forward FX deal.
(1) market risk (2) settlement risk (3) basis risk (4) counterparty risk
a. (1), (2), and (4)
b. (1) and (2)
c. (1), (2), and (3)
d. (2) and (4)
96. According to BIS Basel capital adequacy requirements, which of the following
constitutes Tier 1 capital?
a. Undisclosed reserves, general provisions, perpetual subordinated debt
b. Shareholders equity, disclosed reserves, published current years profit
c. good will and other intangible assets
d. minor interests in permanent shareholders equity, minority interest in Tier 2 shares
97. Under the BIS amendments, the risk weight category applied to aggregate net short
open foreign exchange positions is:
a. 8%
b. 5%
c. 10%
d. 100%
98. Spot EUR/USD is 1.2050. As market user you close a six-month forward exchange
deal at 100 points your favour with XYZ Bank by phone. You buy and sell EUR and
XZY fixes the rates. Which of the following would be the correct exchange rates for the
spot and forward deals?
a. 1.2150 – 1.2250
b. 1.2050 – 1.1950
c. 1.1950 – 1.2050
d. 1.2050 – 1.2150
99. If a rate shown by a bank is “firm subject to credit” and the name of the counterparty not
acceptable to the bank is disclosed, the bank
a. can revise the rate according to his credit position of the counterparty
b. should revise the rate but only with the consent of senior management
c. should just complete the deal
d. should not revise the rate because the identity of the counterparty has been
disclosed
100. Under the Model Code guidelines, where a dealer shouts “done” or “yours” at the very
instant the broker calls “off”
a. Fifty percent of the deal amount must be agreed
b. The full deal must be agreed
c. No deal is done
d. none of these apply

Paper 3 - 116 ACI dealing certificate practice questions
1. The “know your customer” principle is important because

a. it helps the bank do more business with the customer
b. it gives the bank a broad customer base
c. it helps identify money laundering issues
d. it makes marketing easier
2. Bank dealers are allowed to deal from brokers offices

a. When it is convenient ie on the way back from lunch
b. With approval from both sets of management
c. If it reduces brokerage
d. Never in principle, except where necessary as part of contingency arrangements
3. You ask for a price through a broker and deal in the minimum amount. You have more to
do and call the bank direct.
a. this is ethical and saves brokerage
b. this is international practice
c. this is not ethical
4. The London code defines Core Principals as

a. banks, building societies plus financial institutions authorised under the Financial
services Act
b. banks, insurance companies and brokers authorised as above
c. banks, brokers and pension funds as authorised above
5. Personal account dealing

a. is strictly forbidden
b. requires adequate safeguards to be taken to prevent abuse
c. Is the norm
6. Confirmation can be done by

a. Any dealer as long as he is not a party to the trade
b. Staff in the dealing room who are not dealing
c. any staff outside the dealing room
d. back office staff who are independent of the trade
7. The Code allows for a confirmation to be sent by only one party

a. In the case of derivatives if both principals agree
b. For spot FX
c. For short date deposits
8. The Code discourages the practice of sending two conformations because

a. It’s a waste of time and money
b. it could cause confusion and uncertainty, particularly if the second confirmation is
sent through the mail and arrives after the trade is settled
c. modern technology is reliable enough
d. details might change
9. The CFP will arbitrate if

a. Counterparties have exhausted all efforts to resolve it themselves
b. The amount is over £1mm
c. The amount is over £5mm
d. The is requested by from the Wholesale Markets Brokers Association

10. Once a deposit lender enquires “who pays?”, he is
a. Considered committed to do business at the price quoted with that name or with an
alternative acceptable name if offered immediately
b. considered committed to the deal irrevocably
c. considered committed to that rate irrespective of the counterparty
11. The practice of dealing “subject to documentation”

a. Is recommended by the FSA
b. Is the normal market practice
c. Is not to be encouraged
d. Non of the above
12. Bank A pays for USD 5mm at 1.5125. Bank B offers USD 10mm at 1.5130. Broker Z
quotes the market 1.5125 / 1.5130. Bank C hits the bid at 25. The broker is obliged to
reveal
a. The name of banks A and B
b. The name of bank B only
c. The name of Bank A only
d. The amount offered by B
13. Settlement risk is an example of

a. market risk
b. credit risk
c. liquidity risk
d. legal risk
14. If a swap rate is firm “subject to credit” through the broker, and the name of a
counterparty is not acceptable to the quoting bank
a. the quoting bank can revise the rate
b. the quoting bank should not revise the rate since the counterparty name has been
revealed
c. the quoting bank should revise the rate with consent from senior management
d. the quoting bank should complete the deal
15. If through a broker, bank A is unable to lend to bank B because of limit problems
a. The broker is liable for any loss suffered by A or B
b. The broker is liable for any loss by A
c. The broker is liable for any loss by B
d. The broker is not liable for an loss
16. If there are special conditions attached to an order, the broker must
a. refuse to take the order
b. indicate those conditions only if he thinks them appropriate
c. Ignore them if it helps complete the order
d. Relay the conditions at all times
17. You need to sell USD 50mm against CHF at 1.5125. The broker shows you a bid “for
large” at the price. Do you
a. Offer large at 1.5130
b. Say “yours” at 25
c. Ask the size before hitting the bid
18. Tape recordings of dealing room conversations are used

a. to ensure that dealers do not breach confidentiality
b. To check on productivity
c. To measure turnover
d. To investigate and resolve differences / disputes

19. When accepting a stop loss order, you must
a. ensure the counterparty understands the terms under which your bank accepts the
order
b. ensure that your counterparty can be contacted in the event of unusual market
situations, events or volatile situations
c. ensure that a) and b) are complied with
20. If a dealer has insufficient limits for counterparty A and wants to increase the limit for
counterparty A to accommodate the transaction:
a. the broker can hold counterparty A to the total transaction
b. the broker is liable for the whole transaction to the dealer
c. the broker cannot be held liable if the dealer takes too long to increase the limit and
counterparty A has executed the deal with another bank
21. A 90 day Sterling Bill is discounted at 5.25%. The true yield is

a. 5.25%
b. 5.3189%
c. 5.3198%
d. 5.1906%
22. You borrow cash for 120 days and lend the same amount for 30 days. Are you?
a. Long 1x4 cash
b. Short 1x4 cash
c. Long 90 day cash
d. Short 90 day cash
23. A CD originally issued for 181days in £5million with a coupon of 8.50% is now traded
at a rate of 8.625% with 91 days to maturity. What are the secondary market proceeds?
a. GBP 5,034,011.78
b. GBP 5,170,995.52
c. GBP 5,101,063.10
d. GBP 5,102,436.80
24. USD cash 3.25%

CHF deposit 1.875%
Day count 90 days
USD / CHF spot 1.5110
What are the 3-month swap points?
a. -53
b. -51.5
c. +51.5
d. +51
25. If after quoting your two way EUR / USD price, your counterparty says “5 mine”, he
means that
a. He buys USD 5million
b. He buys 5 million EUR
c. He sells 5million EUR
d. He sells USD 5million
26. The daylight limit is intended to control

a. The size of the position at the end of the day
b. The amount to be settled on a given day
c. Market risk during the day
d. Credit risk

27. If 60 day LIMEAN is 3.50% for USD and 4.25% for CHF and spot USD / CHF is
1.4270, what would the swap points be
a. +0.0018
b. -0.0180
c. +0.018
d. -0.0018
28. What would the answer have been if the spot was 1.5270 instead of 1.4270
a. The same
b. +0.0019
c. -0.0190
d. +0.0017
29. Last week you went long of 10 Three month Eurodollar contracts. Today’s closing
price is 15 ticks higher. What is your p /l
a. USD 3,750 profit
b. USD 3,000 profit
c. USD 3,000 loss
d. USD 1,500 profit
30. USD cash rates are:

90 day 4.75%
180 day 5.00%
What is the 3 v 6 forward?
a. 5.1884%
b. 4.8116%
c. 4.7116%
d. 5.2884%
31. In 3 months’ time for a period of 3 months you have a short position on your USD
book which you wish to cover.
Cash rates are:
3 months (90)day 5.75%
6 months (180)day 6.00%
What is the 3 v 6 forward / forward
a. 6.1614%
b. 5.8116%
c. 5.7116%
d. 6.2884%
32) You lend $10mm in the inter bank market at LIBOR – 0.0625, $5mm to a customer at
LIBOR + 0.5 and $10mm at LIBOR – 0.125. What is your weighted average rate?
a) LIMEAN
b) LIBOR + 2.5bp
c) LIBID + 2.5bp
d) LIBOR – 4.5bp
33) Spot £/$ is 1.5765 and the 90 day forward is –0.0018. If the US $ interest rate for 90
days is 6.25%, what is the £ rate of interest for that period?
a) 6.23%
b) 6.32%
c) 6.74%
d) 6.81%
34) AUD / USD is 0.7375 and NZD / USD is 0.6302. What is AUD / NZD?
a) 1.1703
b) 0.4648
c) 0.8545
d) 1.2205

35) If you borrowed USD for 90 days at 6% and invested it in gold at $375 per ounce, in
order to extract a profit the price of gold would have to:
a) Rise above $375
b) Rise above $380.625
c) Rise above $381.757
d) Rise above $382.625
36) If you paid 5% for 90 day USD and 5.35% for the 90 day 3 x 6 FRA, at what rate
would you have to lend 6 months USD to break even?
a) 5.208%
b) 5.625%
c) 5.175%
d) 4.875%
37) A swap with 2 floating legs is a

a) basis swap
b) zero coupon swap
c) coupon swap
d) asset swap
38) You have bought a 3 month CHF call with a strike of 1.4950 and 2 months later the
current market rate for $/CHF is 1.4910 / 20. Is your option:
a) In the money
b) At the money
c) Out the money
d) Under the money
39) USD / CHF is 1.4920 / 25. One year forward points are 220 /215. Your customer
wants to buy CHF 20mm. How many USD will he pay you in 1 years’ time?
a) USD13,605,442
b) USD 13,600,816
c) USD 13, 596,193
d) USD 29,840,000
40) The current shape of the yield curve is upward sloping. I expect the curve to flatten.
Using the June and Sep Futures contracts, how do I position myself?
a) Buy the Jun and sell the Sep
b) Buy the Jun and the Sep
c) Sell the Jun and buy the Sep
d) Sell the Jun and the Sep
41) You buy a 1-year strip of USD FRAs to hedge your borrowing cost of $50 million.
What have you done?
a) Bought 3x6, 6x9, 9x12 FRAs all with a $50 notional principal
b) sold 3x6, bought 6x9, sold 9x12 FRAs all with the same notional principal
c) bought 200 million 3x6 FRAs
d) Bought 200 million 9x12 FRAs
42) You bought a $50m 3x6 FRA (90 days) at a rate of 7.80%. On the settlement date of
an FRA, the settlement rate is 7.85%. What will be the settlement amount due?
a) You receive
b) You receive
c) You pay
d) You receive
43) A currency swap

a) Always involves an initial and final exchange of principal
b) Always involves an initial and sometimes a final exchange of principal
c) Always involves a final exchange and sometimes an initial exchange of principal
d) Involves no exchange of principal
44) What is historic volatility
a) A measure of the variability but not the direction of price of the underlying instrument
b) A measure of the direction of the price of the underlying instrument
c) A measure of the variability and direction of the price of the underlying instrument
d) A measure of the average price of the underlying instrument
45) You are offered the following prices for USD/SGD by two banks: Bank A 1.2595/05
and Bank B 1.2596/06. Which one is the best for you as a buyer of SGD?
a) Bank A at 1.2595
b) Bank A at 1.2605
c) Bank B at 1.2596
d) Bank B at 1.2606
46) You have taken a 3 month CHF deposit for value 30th January. The 30th April is a
Sunday. What would the end date be
a) 28th April
b) 29th April
c) 1st May
d) 30th April
47) As a writer of a call option, your risk could best be described as

a) Limited downside risk, unlimited profit potential
b) Unlimited downside risk, unlimited profit potential
c) Limited downside risk, limited profit potential
d) Unlimited downside risk, limited profit potential
48) In spot $ / CHF you are quoted 1.3315 / 20. What would be the reciprocal?
A) 0.7508 / 10
b) 7.5075 / 103
c) 0.7510 / 08
d) 7.5103 / 075
49) The USD / CAD 6 month points move from 155/ 150 to 90 / 85. This could be
explained by
a) USD interest rates rising
b) USD interest rates falling
c) Increased liquidity
d) Not enough information
50) You buy a $5mm 4 year zero coupon bond yielding 7%. How much do you receive at
maturity
a) USD 0
b) USD 3,824,476.06
c) USD 5,000,000
d) USD 6,553,980.05
51. Four banks in the international market quote you spotUSD/JPY. Which is the best quote
for you as a buyer of JPY?
a. 121.49 – 53
b. 121.45 – 51
c. 121.50 – 57
d. 121.47 – 52
52. Four banks offer a corporate treasurer a two-way price in NZD/USD. Form which bank
will he buy NZD against USD?
a. 0.5270/75
b. 0.5272/77
c. 0.5274/79
d. 0.5268/73
53. You Quote a customer EUR/GBP 0.7365/70. She asks you to deal with her at the
reciprocal rate of 1.3578. What have you done?
a. you buy EUR at 1.3578
b. you buy EUR at 0.7370
c. you sell EUR at 1.3578
d. you sell EUR at 0.7365
54. A client wants to sell CHF against GBP. The USD/CHF rate is 1.4915/20 and the
GBP/USD rate is 1.4628/33. What rate do you quote the client?
a. 2.1824
b. 2.1832
c. 2.1817
d. 2.1847
55. USD/CHF is 1.5255/75 and USD/JPY is 120.20/25. What price would you quote to a
customer who wishes to sell JPY against CHF?
a. 78.79
b. 78.83
c. 78.81
d. 78.75
56. USD/CHF is quoted 1.5005/15 and GBP/USD is quoted as 1.6120/30. At what rate could
you buy GBP and sell CHF?
a. 2.4188
b. 2.4203
c. 2.4219
d. 1.0742
57. Spot EUR/USD is quoted by the broker as 1.2300 - 10. You have an interest to sell EUR
at 1.2307 and tell him he can include your price in his quote. What does he now quote the
market as a two-way price?
a. 1.2307 – 10
b. 1.2300 – 07
c. 1.2307 either way (choice price)
d. 1.2300 - 10
58. USD/SGD is quoted 1.5000/10. What is the value of a 1 point movement on USD 1
million in the USD/SGD spot rate?
a. SGD 1,000
b. SGD 100
c. SGD 10,000
d. USD 100
59. IF you have sold USD 3 million against SGD at 1.7550, bought USD 4 million at 1.7565
and sold a further USD 5 million at 1.7540, what is your current position and average rate
(breakeven)?
a. oversold USD 4 million at 1.7523
b. oversold USD 4 million at 1.7565
c. oversold SGD 4 million at 1.7523
d. overbought USD 4 million at 1.7523
60. If today’s date is Tuesday 27th February 200X (a leap year), what would the two month
maturity date from spot for forward foreign exchange dealing be?
a. Wednesday 1st May 200X
b. Tuesday 30th April 200X
c. Monday 29th April 200X
d. Friday 26th April 200X

61. If USD interest rates are quoted at 6% in the three months and the same period SGD interest
rates are quoted at 5%, how would you expect the forward swap points to be quoted?
a. at a forward SGD premium
b. at a forward SGD discount
c. around par
d. not enough info provided
62. If spot USD/CHF is quoted to you as 1.6260/70 and the three-month forward points are
quoted to you as 28 – 23, at what rate can you buy USD outright?
a. 1.6242
b. 1.6247
c. 1.6232
d. 1.6237
63. You are quoted the following rates: Spot USD/DKK 7.8350/60. 3 months USD/DKK swap
340-380. Spot GBP/USD 1.5400/05. 3 months GBP/USD swap 70-65. Where can you buy
DKK against GBP 3 months outright?
a. 5.1330
b. 12.0787
c. 12.0632
d. 12.0708
64. If you are told that the forward points for six months USD/CHF are quoted at a USD
discount, how would you expect them to be displayed on the dealers rate screen?
a. insufficient information
b. “high-low”
c. “low-high”
d. Around par
65. if the three month USD/NOK swap is quoted 5 – 8 and the six months is quoted 35 – 30,
what is the forward/forward three months against six months swap?
a. 40 - 38
b. 38 - 43
c. 43 - 35
d. 54 - 35
66. If the three month USD/CHF swap is quoted 25 – 28 and six months is quoted 37 – 42,
what would the interpolated five month forward swap point be quoted approximately?
a. 33 - 37
b. 37 - 42
c. 27 - 33
d. 33 - 27
67. GBP/USD spot is quoted 1.6656/60 and T/N GBP/USD swap points are 1.3/1.2. What is
the theoretical quote GBP/USD outright value tomorrow?
a. 1.66547/1.66588
b. 1.66572/1.66613
c. 1.6669/1.6672
d. 1.66573/1.66612
68. CHIPS is the commonly used name for the domestic clearing system in:
a. Hong Kong
b. Frankfurt
c. London
d. New York
69. What would best define market risk?
a. the risk involved between two different markets
b. the risk your position might be wrong
c. the risk you may choose the wrong currency pair to trade a certain movement
d. the risk that your position might change in value because of a move in the rate
70. Herstatt risk is also known as:
a. operational risk
b. settlement risk
c. replacement risk
d. translation risk
71. You wish to sell a customer GBP/USD for value tomorrow. How can you Hedge
yourself?
a. Sell & Buy GBP/USD T/N
b. BUY & SELL GBP/USD T/N
c. Sell GBP/USD Spot & Sell & by GBP/USD T/N
d. Buy GBP/USD, & Buy &SELL GBP/USD T/N
72. Major Risk to effectiveness of netting is

a. Credit risk
b. Settlement risk
c. Liquidity risk
d. Legal risk
73. You are short a 6 Dec Eurodollar futures contracts at 98.10. Yesterday the closing price
was 98.15. Today closing price is 97.905. What variation margin will be done?
a. $ 3675
b. $ 24.5
c. $ 245
d. $6000
74. Overnight index for USD

a. Fed funds effective
b. H-15 Index
c. Prime rate
d. Overnight Fed Funds
75. What is the primary function of GC repo, particularly very short-term transactions?
a. Financing long position
b. Covering short position
c. Interest rate position
d. Dividend tax arbitrage
76. You are quoted the following market rates

Spot USD/CHF 1.4320 – 25
O/N USD/CHF Swap 3.21/3.11
TN USD/CHF Swap 1.3/1.27
SN USD/CHF Swap 1.31/1.28
Where can you buy USD against CHF for Value tomorrow?
a. 1.432627
b. 1.43263
c. 1.43237
d. 1.432373
77. You have created a synthetic FX currency asset by buying and selling USD/CHF Swap.
What have you done?
a. Created an exposure to the CHF
b. Created an exposure to the USD
c. Switch a CHF asset temporarily into USD without taking currency risk
d. Switch a USD asset temporarily into CHF without taking currency risk

78. A bond is trading at 50 basis points special for 1 week, while 1 week GC repo rate is
3.25%. If you held GBP 10,500,000 of this bond, what would be the cost of borrowing it in
the repo market?
a. GBP 7551.37
b. GBP 6544.52
c. GBP 5537.67
d. GBP 1006.85
79. Which of the following will tend to have a higher yield?

a. Treasury bills
b. Repo against Treasury Bill Collateral
c. Have the same
d. Cannot say
80. A counter party refuses to pay the profit due to you on derivatives transaction and argues
that you dealt with an unauthorized member of their treasury staff. What type of risk are you
exposed to?
a. Legal
b. Market
c. Basis
d. Settlement
81. The T/N GC Repo rate for German Government bonds is quoted to you at 1.75-1.80%.
As collateral you sell EUR 10mio nominal 5.025% bund July 2012, which is worth EUR
11,260,000. If you have to give an initial margin of 2%, The repurchase price is?
a. 11,1035,336.41
b. 11,035,351.74
c. 11,039,752.32
d. 11,039,767.65
82. What does the expression turn of the month refer to?
a. Rolling over a month end deposit
b. Value the last business day of the month against the first business day of the next
month
c. Extending a CD maturity date
d. doing a fx swap for two months
83. What are short dates in the forward foreign exchange markets?
a. periods less than 1 month
b. periods shorter than 1year
c. periods shorter than 1 week
d. periods shorter than 1 day
84. A dealer wishes to roll a long USD/JPY fx position into the tom-next. Which of the
following statements is true?
a. the dealer must sell USD/JPY value tom and buy USD/JPY for value spot
b. the dealer must buy USD/JPY for value spot
c. the dealer must buy USD/JPY value tom
d. the dealer must sell USD/JPY value tom
85. A client is unhappy with the execution of a trade via a banks internet service. What
does the MC say about this eventuality?
a. there is no recourse as the internet is unsecured
b. trading via the internet is discouraged
c. conditions and controls should be comprehensively stated in the banks rule book
d. all of the above

86. It is now June and your liabilities exceed your assets from Sept to Dec. Which method
would be the most suitable hedge for this position?
a. Buy a 3x6 FRA
b. Sell a 6x9 FRA
c. Buy a 6x9 FRA
d. Sell a 3x6 FRA
87. Which of the following are applicable according to the model code regarding the use
of margin account dealing facilities for clients?
a. they should be fully documented
b. they should be signed in advance of any trades
c. the close procedure in the event of negative equity of the client should be clearly
stipulated in a written agreement
d. All of the above
88. While dealing on the EBS there is a power failure. What does the Model Code
recommend in this instance?
a. The dealing rulebook of the vendor should be consulted
b. the deals proposed is cancelled
c. the deals will be done at the rate ruling when the system is resorted
d. the Model Code does not deal with this issue
89. A bank dealer says “your risk” to his client that he is quoting. What does this mean?
a. The price may have to be re-quoted
b. the dealer has dealt at the price proposed
c. the deal is subject to a credit check
d. the price is only good for another 5 minutes
90. How, according to the Model Code may a bank reduce its risk of dealing with
unidentified principals?
a. by using multilateral netting
b. by only concluding deals after the agent has revealed the identity of the ultimate
principal to the compliance, legal or credit functions of the bank
c. by using bilateral netting
d. by using novation netting
91. Which of the custodial arrangements represents the least risk to a repo buyer
a. tri party
b. hold –in custody
c. delivery
d. all of the above present the same risk
92. What is a connected broker?

a. a broker who uses a Reuters dealing system
b. A broker with management or shareholding linked to a principal
c. A broker who has membership of a futures exchange
d. A broker who has offices in more than one centre
93. When accepting a stop-loss order from a counterparty, which of the following is
recommended by the Model Code?
a. the stop-loss must be executed at the agreed rate at all times
b. the stop-loss will only be executed once the counterparty is contacted
c. there should be an arrangement to facilitate ongoing communication
d. the counterparty will only accept deals done if it suits them
94. How are overnight index swaps (OISs) settled?

a. daily on a net basis
b. after maturity by a net cash settlement
c. monthly in arrears
d. weekly in advance
95. What happens when a coupon is paid during the life of a sell/buy back repo?
a. it is refunded to the original holder of the bond
b. the equivalent value plus reinvestment income is deducted from the repurchase
price
c. it is added to the repurchase price
d. nothing
96. What is the advantage of futures over FRAs?

a. futures have no credit risk
b. futures do not require delivery of the notional principal
c. futures can be traded for any period
d. the futures market is less liquid than the FRA market
97. You are short CHF deposits. You fill the gap by borrowing USD and utilising the
USD/CHF foreign exchange swap market. Which of the following USD/CHF forward
points would best assist this transaction?
a. 25/26
b. 26/27
c. 22/23
d. 20/21
98. You do a spot deal today and tomorrow your counterparty is in default. What risk
does this represent?
a. replacement risk
b. default risk
c. both a. and b.
99. Who, According to the Model Code, should have prompt access to taped telephone
conversations?
a. the dealers
b. the Money Laundering Officer if required by law
c. the back office clerk
d. the nostro reconciliation clerk
100. The net settlement payment of a USD FRA traded in London is calculated
a. on the same day as settlement
b. at the end of the notional borrowing period
c. on deal date
d. 2 days prior to the forward period
101. What is the major difference between deposits and CDs

a. one trades on a discount the other on a true yield
b. negotiability
c. the CD only pays back capital at maturity while the depo pays capital plus interest
d. Depos always pay a lower rate of interest
102. Who is primarily responsible for the conduct of dealers at a bank?

a. the ACI Model Code
b. The ACI Committee for Professionalism
c. senior management of the bank
d. the Bank of England
103. You are short EUR/USD that you intend rolling into spot-next. How may the ECB
“squeeze” you?
a. by lowering interest rates
b. by leaving interest rates unchanged
c. the ECB cannot “squeeze” you
d. by raising interest rates
104. When transacting in the CD market via a broker, a dealer may request which
information before consummating a deal?
a. the name of the counterparty bank proposing the trade
b. the name of the dealer at the counterparty bank proposing the trade
c. the name of the issuer of the paper
d. all of the above
105. When a complaint is made against a bank in relation to a transaction, what does the
model code recommend?
a. Management should ensure that employees who were not directly involved in the
transaction investigate the complaint
b. the dealers sort out the problem
c. the ACI committee for professionalism be contacted immediately
d. the ACI dealing code does not deal with issues of this kind
106. From which are Eurodollar deposits exempt?

a. Minimum reserves
b. Withholding tax
c. Exchange controls
d. all of the above
107. When transacting an interest rate swap, which of the following statements is true?
a. A fixed rate payer is protected form rates falling
b. A firm rate that has been quoted may be revised once the name of the
counterparty has been revealed, if the counterparties creditworthiness, although
acceptable is deemed to require additional margin
c. The full notional becomes payable at expiry of a vanilla swap
d. The floating rate benchmark is only applied at the end of the swap
108. A broker needs to switch a name, he may do so

a. Only once the broker has his bosses permission
b. Only after ACI CFP permission
c. Provided the deal is marked as a switch
d. Only if the switch is done at the market rates when the switch as proposed
109. When is the Gamma on an option at its highest (all other things being equal
a. When the option is deep out of the money
b. when the option is deep in the money
c. when the option is close to expiry when the option is near or at the money
d. when the option is at the money with six month to expiry
110. Which of the following statements does the MC make concerning the enforceability of
reciprocal dealing?
a. they may be enforceable if agreed to in writing
b. they are never enforceable
c. they are enforceable irrespective of market conditions
d. they only apply to deposit markets
111. The sale of a put and purchase of a call with the same, nominal, strike, and term to
maturity create what?
a. a collar
b. a staddle
c. a stangle
d. a synthetic long position in the underlying asset.

112. When a bank deals with another bank and they both have straight through
processing, then what is the conventional confirmation procedure?
a. only one party need send a written confirmation
b. it is unnecessary for parties to send confirmations
c. confirmations are done telephonically
d. confirmations are still set in writing
113. Which of the following will make use of repo?

a. borrowers
b. issuers
c. banks
d. all of the above
114. When comparing the rate on a GC repo with the TB rate for the same period, which
would you expect to be higher?
a. Not enough info provided
b. the GC repo rate
c. the TB rate
d. they are always the same
115. If you purchase a 9x12 FRA on 8th December 2012 for value 10 December 2012 then
when will settlement take place?
a. 8th December 2012
b. 8th September 2012
c. 10th September 2012
d. 8th December 2012
116. Which of the following best describes estimated and implied volatility?
a. estimated volatility is determined by the market and implied volatility is determined
by the trader
b. estimated volatility is historical volatility and implied volatility is actual volatility
c. they are both the same
d. estimated volatility is the approximate price of an option and implied volatility is the
actual price of an option

Paper 4
ACI Dealing Certificate - Code of Conduct Sample Questions
1) Confidential information may be divulged

a) When the dealer is requested to by a 3rd party
b) When the dealer’s boss tells him to
c) When the dealer owes a 3rd party a favour
d) When the dealer is required by law
2) A broker quotes 40 – 45, pay for 6 USD / JPY. Bank A and B simultaneously respond 8
yours and 5 yours respectively. How should the broker react
a) Do the full amount with bank A
b) Apportion $3mm each to both banks because they hit the bank at the same time and ask
if the bidder pays on
c) Apportion the amount per bank in accordance with the amount hit by each
d) The broker has to honour each amount hit by the two banks
3) After hours dealing should only be allowed upon satisfaction of

a) prior permission from management
b) guidelines detailing names of persons authorised, transactions and amounts etc being in
place
c) a control system being in place
d) all of the above
4) Where the market is volatile traders should

a) Not pick up calls from banks, only from corporates
b) Quote a big spread
c) Avoid perpetrating rumours which may reflect on the professionalism of the trader
d) None of the above
5) If Bank A is turned down by Bank B because of a name problem, bank A can

a) Ask the Bank of England to arbitrate
b) Demand the broker to divulge the name of Bank B
c) Ask the market to substantiate Bank B’s quote
6) Confirmations can be handled by

a) Any dealer
b) Dealing room staff
c) Any staff outside the dealing room
d) back office staff independent from the dealing room
7) Which of the following is untrue

a) SSIs remove the need to confirm payment details by phone
b) SSIs reduce the size of discrepancies arising from mistaken settlements
c) SSIs remove the need for checking deal conformations
d) SSIs should not be established via SWIFT broadcast
8) The Model Code of Conduct covers

1) Interest Rate Swaps
2) Spot and Forward FX
3) Gold bullion
4) FRAs
a) 1) only
b) 1) and 2) only
c) 1),2) and 3) only
d) All of the above

9) You are a broker. Bank ABC took your offer for USD / JPY at 110.35 for USD 20mm. The
quoting bank could only do USD 15mm because it is full with ABC
a) Bank ABC can insist that the full amount goes through with the quoting bank
b) You are obliged to do a name switch in order to close the deal in USD20mm
c) As a broker you should make an either way price for the remaining USD 5mm
10) A money broker can take a position if

a) the position results from being dropped by a bank
b) the position is profitable
c) the position is smaller than $1mm
d) none of the above
11) Which is true

a) The use of the “points” system to settle differences is strictly not allowed
b) The Code permits use of points for FX deals if both parties agree
c) Cheques are not acceptable as a means of difference settlement
d) Adjusted brokerage bills are not allowed as difference settlements
12) For electronic brokering, The Dealing Rule Book should state procedures and
responsibilities in the event of
a) Credit line problems
b) Volatile markets
c) Off market discrepancies
d) Market early closing
13) Under the Code, in the event of a new bank holiday preventing settlement of an FX deal
a) Value dates will be split in non Islamic countries
b) The exchange rate will be adjusted
c) no change will be made to the value date
14) The start of normal market hours is Monday

a) 5 am London time
b) 5 am New York time
c) 5 am Tokyo time
d) 5 am Sydney time
15) Name switching involves

a) The broker finding a counterparty with a better price
b) Changing the name in which you are dealing to full branch status
c) The broker introducing a third party between the two original parties in order to clear the
deal
d) The broker giving different rates to different counterparties
16) In countries where brokerage is freely negotiable, the charges are to be agreed by
a) The individual broker and the dealer verbally
b) The individual broker and dealer in writing
c) Directors or senior management of both parties and in writing
d) By the Heads of Accounts
17) A bank quotes you “at your risk”. Does this mean
a) There is a chance that you won’t be able to deal due to line problems
b) The rate is subject to change at the risk of the receiver
c) The bank quoting has give the same rate to other banks in the market
d) The market is volatile

18) A broker shows you a price which is “under ref”. Does this mean
a) The quote is not particularly good versus market
b) The bank quoting is under review by the authorities
c) The broker cannot conclude the deal without reference to the quoting bank
d) The quote is good for a certain time limit
19) Dealing at non market rates may result in

a) the concealment of a profit or loss
b) the perpetration of a fraud
c) the giving of an authorised extension of credit
d) all of the above
20) With regard to taping conversations, which of the following is untrue

a) All back office conversations regarding deal confirmations or passing payment instructions
should be taped
b) When installing tapes or taking on new clients, firms should advise their counterparties
and clients that conversations will be taped
c) Tapes should be kept for one month
d) Firms dealing in IRS may consider it prudent to keep tapes relevant to these transactions
for longer periods
21) Where a broker quotes subject to the arbitrage, this means

a) the price is firm
b) the broker can only close the deal after referring to the quoting bank who is working an
arbitrage
c) the deal must be executed by the price taking bank against an arbitrage
22) Under the Code, historic rate rollovers

a) are strictly forbidden
b) should be brought to senior management’s attention when they are proposed and fully
documented
c) are acceptable providing the deal is for a maturity of less than 6 months
d) are the norm and no special procedures are required
23) Under the Code, upon agreeing an FX swap

a) it is acceptable to fix the spot rate at close of business
b) it is acceptable to pressurise the counterparty to delay agreeing the spot rate
c) the spot rate should be determined immediately upon agreeing the swap
d) the spot rate is per the 11 o’clock fixing
24) The letter issued by the Bank of England authorising banks regarding conduct is
a) the O'Toole Letter
b) the O'Malley Letter
c) the O'Brien Letter
d) the O' Shane Letter
25) The recognised close of the market week is

a) 5pm London
b) 5pm Frankfurt
c) 5pm New York
d) 5pm San Francisco
26) In the event of a telephone deal not including pre-agreed SSIs,

a) An answer back on telex or similar means should be sought
b) The deal should be automatically settled as per the conversation
c) The deal will not be done
d) Settlement will be agreed later

27) If an error occurs on a deal done through a broker and if this is the bank’s error
a) The broker must reimburse the bank for any loss involved
b) The bank remains liable throughout
c) The bank and broker should share the loss
d) The bank is not liable as the deal was done through a broker
28) It is deemed normal market practice for brokers to

a) offer gifts to dealers to build a good relationship
b) entertain dealers lavishly on a regular basis
c) not offer cash incentives for business
d) pay the bill for the bank chief dealer’s holiday
29) The use of mobile phones in the dealing room is

a) Good practice
b) Should be used only in emergency
c) Not mentioned in the Code
d) Is generally accepted as market norm
30) In the case of a new national holiday, value dates in FX trades will only be split
a) When both parties agree
b) where local practices allow, such as in Islamic countries
c) Always
d) Never
1) a), b), c), d)
2) a) and b)
3) c)
4) d)
31) Entertainment offered and underwritten by the host, but not attended by the host, should
a) be declined
b) be accepted as norm
c) not be offered
d) be frequently offered
1) a)
2) a) and c)
3) c)
4) b) and d)
32) Who should decide whether to undertake business with institutions dealing on behalf of
clients on a discretionary management basis?
a) Dealers themselves
b) Head of Treasury
c) Senior Management
d) Financial Controller
33) Own account day trading, if allowed, requires

a) no additional controls
b) full disclosure and transparency requirements to ensure that traders give full attention to
the institute's business
c) collateral to be posted
d) b) and c)
34) Centralised back office functions covering dealing activities of several centres
a) are not allowed
b) are allowed without special ruling
c) require the approval of the regulatory authorities in the centres involved

35) Incentive and compensation plans for back and middle office staff
a) should be directly related to the traders performance
b) should not be directly related to the traders performance
c) are decided by the Chief Dealer
36) A bank receiving an incorrect confirmation must

a) notify the bank immediately
b) request a correct confirmation
c) refuse to honour the deal
d) ignore the error
1) a) and c)
2) a) and b)
3) b) and c)
4) None of the above
37) The Model Code

a) recommends netting to reduce settlement and credit risk
b) recommends netting to reduce market risk
c) recommends bilateral netting only
d) does not recommend netting
38) When initially installing recording equipment and / or taking on a new client, a bank
should
a) Advise the counterparty so
b) not advise the counterparty
c) Not tape those calls if the counterparty requests
39) Brokers are chosen by

a) the dealer
b) the head of sales
c) senior management
d) Financial Controller
40) Deals done via electronic brokers should be done

a) In accordance with standard voice - brokered procedures
b) in accordance with the system vendor's Dealing Rule Book
c) In accordance with each counterparty's internal regulations
41) Brokers and principals assigning or transferring a swap to a third party must ensure that
a) The deal is profitable
b) their staff are well trained in the practices of the market place and are aware of the firm's
business responsibilities
c) Principals are aware that they are responsible for assessing the creditworthiness of a
counterparty
d) The deal is within market risk limits
1) all the above

2) none of the above
3) b) and c)
4) c) and d)
42) The “know your customer” principle is important because

a) it helps the bank do more business with the customer
b) it gives the bank a broad customer base
c) it helps identify money laundering issues
d) it makes marketing easier

43) Bank dealers are allowed to deal from brokers offices
a) When it is convenient ie on the way back from lunch
b) With approval from both sets of management
c) If it reduces brokerage
d) Never in principle, except where necessary as part of contingency arrangements
44) You ask for a price through a broker and deal in the minimum amount. You have
more to do and call the bank direct.
a) this is ethical and saves brokerage
b) this is international practice
c) this is not ethical
45) Personal account dealing

a) is strictly forbidden
b) requires adequate safeguards to be taken to prevent abuse
c) Is the norm
46) Confirmation can be done by

a) Any dealer as long as he is not a party to the trade
b) Staff in the dealing room who are not dealing
c) any staff outside the dealing room
d) back office staff who are independent of the trade
47) The Code allows for a confirmation to be sent by only one party
a) In the case of derivatives if both principals agree
b) For spot FX
c) For short date deposits
48) The Code discourages the practice of sending two confirmations because
a) It’s a waste of time and money
b) it could cause confusion and uncertainty, particularly if the second confirmation is
sent through the mail and arrives after the trade is settled
c) modern technology is reliable enough
d) details might change
49) The CFP will arbitrate if

a) Counterparties have exhausted all efforts to resolve it themselves
b) The amount is over £1mm
c) The amount is over £5mm
d) The is requested by from the Wholesale Markets Brokers Association
50) Once a deposit lender enquires “who pays?”, he is

a) Considered committed to do business at the price quoted with that name or with an
alternative acceptable name if offered immediately
b) considered committed to the deal irrevocably
c) considered committed to that rate irrespective of the counterparty
51) The practice of dealing “subject to documentation”

a) Is recommended by the FSA
b) Is the normal market practice
c) Is not to be encouraged
d) Non of the above

52) Bank A pays for USD 5mm at 1.5125. Bank B offers USD 10mm at 1.5130. Broker Z
quotes the market 1.5125 / 1.5130. Bank C hits the bid at 25. The broker is obliged to reveal
a) The name of banks A and B
b) The name of bank B only
c) The name of Bank A only
d) The amount offered by B
53) Settlement risk is an example of

a) market risk
b) credit risk
c) liquidity risk
d) legal risk
54) If a swap rate is firm “subject to credit” through the broker, and the name of a
counterparty is not acceptable to the quoting bank
a) the quoting bank can revise the rate
b) the quoting bank should not revise the rate as the counterparty name has been revealed
c) the quoting bank should revise the rate with consent from senior management
d) the quoting bank should complete the deal
55) If through a broker, bank A is unable to lend to bank B because of limit problems
a) The broker is liable for any loss suffered by A or B
b) The broker is liable for any loss by A
c) The broker is liable for any loss by B
d) The broker is not liable for an loss
56) If there are special conditions attached to an order, the broker must
a) refuse to take the order
b) indicate those conditions only if he thinks them appropriate
c) Ignore them if it helps complete the order
d) Relay the conditions at all times
57) You need to sell USD 50mm against CHF at 1.5125. The broker shows you a bid “for
large” at the price. Do you
a) Offer large at 1.5130
b) Say “yours” at 25
c) Ask the size before hitting the bid
58) Tape recordings of dealing room conversations are used

a) to ensure that dealers do not breach confidentiality
b) To check on productivity
c) To measure turnover
d) To investigate and resolve differences / disputes
59) When accepting a stop loss order, you must

a) ensure the counterparty understands the terms under which your bank accepts the order
b) ensure that your counterparty can be contacted in the event of unusual market situations,
events or volatile situations
c) ensure that a) and b) are complied with
60) If a dealer has insufficient limits for counterparty A and wants to increase the limit for
counterparty A to accommodate the transaction:
a) the broker can hold counterparty A to the total transaction
b) the broker is liable for the whole transaction to the dealer
c) the broker cannot be held liable if the dealer takes too long to increase the limit and
counterparty A has executed the deal with another bank

61. For which of the following reasons is the extension of forward contracts at non-current rates is
discouraged:
i. These could be used to conceal profit or losses.
ii. These could be used to perpetrate fraud.
iii. These could result in an unauthorised extension of credit.
iv. These could result in confusing settlement instructions.
A. (i), (ii), (iii), & (iv).
B. (i), (ii) & (iii).
C. (i) & (iii).
D. none of the above.
62. Confirmations must be sent out

A. Immediately after the deal is done.
B. As quickly as possible after the deal is done.
C. By electronic media only, e.g.fax, telex.
D. Not later than the value date of the first leg of the transaction.
63. Where the matter of dealing for personal account is concerned, the Model Code recommends that
A. Subject to local legal requirements, this matter is one for bank management to decide.
B. Bank management should encourage such activities because it allows banks to monitor the
gambling habits of their staff.
C. Where this is allowed, bank management should have a clearly defined policy and written
procedures.
D. Bank management should allow staff to deal for their personal account on a case to case basis.
64. To curb attempted fraud, banks should:

A. Require greater vigilance by the management and staff.
B. Take particular care when the beneficiary is a third party to the deal.
C. Ensure that details of all telephone deals which do not include pre-agreed standard settlement
Instructions are confirmed by telex or similar means without delay.
D. All of the above.
65. Written confirmation is a function that can be done by:

A. Any dealer as long as he/she is not a party to the trade.
B. Staff in the back-office.
C. Staff in the dealing room who are not dealing.
D. Any staff outside the dealing room.
66. Which of following is NOT true?

A. Inter-bank market participants have a duty to make absolutely clear whether the prices they are
quoting are firm or merely indicative.
B. It is the duty of the dealer to periodically confirm with the broker the validity of his price.
C. It is the responsibility of the dealer to ensure that prices given to a broker are taken off if they have
not been hit or were subject to a time limit.
D. No deal is done if one counterparty is unable to conclude a deal due to credit line problems and a
name switch is not found within a reasonable period of time.
67. Which of the following statements is true?

A. Banks should not ask brokers to disclose details of third party transactions unless they are
between overseas principals.
B. Banks should not ask brokers to disclose details of third party transactions unless these
transactions are already settled.
C. Banks should not ask brokers to disclose transactions between third parties in any circumstances.
D. Banks should not ask brokers for details of third party transactions unless senior management has
approved.
68. Bank A pays for EURO 5 m at 1.1592.Bank B offers EURO 10 m at 1.1597.Broker XYZ quotes to
the market EURO /USD 1.1592/97.Bank C takes the offer at 97.The broker is obliged to reveal:
A. The name of Banks A and B.
B. The name of Bank B only.
C. The amount that was bid but not the name of Bank A.
D. None of the above

69. When you are accepting a stop loss order, you must:
A. Ensure that your counterparty understands the terms under which your bank accepts the order.
B. Ensure that your counterpart can be contacted in the event of unusual situations or events or
extremely volatile market conditions.
C. Ensure that your counterparty understands that any guarantee or fixed price execution requires
agreement in writing.
70. Brokers shall not reveal the identity of a counterparty unless:

A. They are forced to do so.
B. Explicitly authorised to do so by the counterparty.
C. They know the counterparty very well.
D. They are asked by their senior management to do so.
71. Which of the following statements reflects the Model Code on gambling or betting amongst market
participants?
A. Gambling and betting between market participants should be strongly discouraged.
B. Gambling and betting between market participants can be allowed if it is monitored by
management.
C. Gambling and betting between market participants should be forbidden.
72. Where answer phone equipment is used for reporting and recording of off-premises transactions,
it should be:
A. On a special number known only to the chief dealer.
B. On a number located in the office of the internal auditor.
C. Secured so that reported transactions cannot be erased without senior management approval.
D. Secured by recordings that are stored for a suitable period.
73. 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.
74. Confirmations should be sent out by both counterparties through an efficient and secure means of
communication, preferably electronic:
A. Within 24 hours of the deal.
B. Within two business days of the deal.
C. Before the value date.
D. As soon as possible.
75. Payment and settlement instructions should be passed:

A. As quickly as possible.
B. Within 24 hours of the transaction.
C. Before 10:00 am on the value date.
D. Before close of business on the transaction date.
76. 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 management of both counterparties.
D. Should be marked to market daily.
77. You quote a price to a broker on EUR 100 million. Your price is hit for EUR 50 million. What does
the Model Code say about this situation?
A. You have a right to qualify your quotes in terms of amounts, if you do so when you make the price.
B. You have a right to qualify your quotes in terms of amounts, provided the amounts are marketable.
C. You have a right to qualify your quotes in terms of amounts, once you have discovered the name
of the counterparty for credit reasons.
D. You have a right to qualify your quotes in terms of amounts.

78. You are quoting forward FX prices to a broker subject to finding a counterparly for a matching
transaction. The Model Code says:
A. You must tell the broker, who must qualify your quotes.
B. For credit reasons, you must tell the broker when he presents a name.
C. You cannot do this.
D. The Model Code does not make recommendations on this subject.
79. Deliberately inputting incorrect big figures into an electronic dealing platform is:
A. Technically impossible on electronic platforms
B. Not an uncommon practice and something which professional dealers should be able to guard
against.
C. Not good practice.
D. A criminal offence.
80. 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 written contract.
B. The matter will have to be submitted to arbitration in order to establish the mutual intent of the
parties.
C. It depends on local law.
D. The verbal agreement is binding.
81. 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 senior managements.
C. The offer requires agreement in writing between the broker and the dealer.
D. This is illegal.
82. It is now permissible in most markets for brokers to be owned by banks and other principals.
Where there is shared management, or a share holding or other investment in a broker by a
counterparty:
A. The broker is not obligated to reveal the connection provided Chinese Walls are in place.
B. The broker is not obligated to reveal the connection in the professional market.
C. The broker should advise the other counterparty of the connection.
D. The matter is covered in the Model Code.
83. 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 intentions to his counterparty.
B. The dealer should make his intention to assign clear before transacting.
C. The dealer should agree the method of assignment before transacting.
D. The counterparty should specify whether or not assignment would be acceptable in negotiations.
84. A dealer has indicated his intention of assigning an interest rate swap to a third party soon after
transacting that swap. When about to execute an assignment
A. The dealer is entitled to provide the name of the original counterparty to the assignee.
B. The dealer is entitled to provide the name of the assignee to the original counterparty.
C. The dealer should seek the permission of the assignee before releasing the name to the original
counterparty.
D. The dealer should seek the permission of the original counterparty before releasing the name to
the assignee.
85. What does the Model Code say about netting?

A. Market participants are strongly recommended to net bilateral transactions with counterparties
where activity justifies it.
B. Market participants should establish payments netting agreements with cross-border
counterparties where activity justifies it.
C. Market participants should establish legally viable bilateral netting agreements with counterparties
where activity justifies it.
D. Market participants should establish legally viable multilateral netting agreements where activity
justifies it.
86. The Model Code recommends that, in the case or complaints about transactions, management
should:

A. Ensure complaints are investigated by the senior management or a firm not involved in the
disputed transaction.
B. Ensure complaints are rarely and independently investigated, in the first instance, by the ACIs
Committee for Professionalism.
C. Ensure complaints are investigated by representatives of a broking firm not directly involved in the
disputed transaction and selected by both parties to the dispute.
D. Ensure complaints are fairly and independently investigated, whenever practicable, by staff not
directly involved in the disputed transaction.
87. If a broker refers to “the payer of 5-year euro at 4.12”, what is this party doing?
A. Paying a fixed rate of 4.12% per annum on a 30/360 basis over 5 years in euros through an
interest rate swap in exchange for receiving a floating rate of 6-month Euribor on an actual/360 basis
reset semi-annually and paid in arrears.
B. Paying a fixed rate of 4.12% per annum on an actual/actual basis over 5 years in euros through an
interest rate swap in exchange for receiving a floating rate of 6-month Euribor on an actual/360 basis
reset semi-annually and paid in arrears.
C. Paying a 5-year euro deposit and receiving a rate of interest of 4.12% on an actual/360 basis.
D. Taking a 5-year euro deposit and paying a rate ol interest of 4.12% on an actual/360 basis.
88. What is meant by “short dates”?

A. Maturities of less than one week.
B. Maturities of less than one month.
C. Maturities of less than one year.
D. Maturities in the same calendar month.
89. In all dealing conversations, the Model Code strongly recommends:

A. Dealers stick to market terminology in order to avoid the impression that they are offering an
advisory or fiduciary role.
B. Dealers clarify what is being proposed rather than using any terminology that could be
misinterpreted.
C. Dealers restrict themselves to terminology listed and explained in Chapter 11 of the Model Code.
D. Dealers define complex terminology in the confirmation of a deal.
90. When banks transact FX swaps, the spot price should be determined:
A. anytime after the swap is transacted
B. before the swap is transacted
C. immediately after the swap is transacted
D. no less than 24 hours after the completion of the swap
91. Which of the following statements is true?

A. Prices quoted by brokers should be taken to be firm in marketable amounts unless otherwise
qualified
B. Prices quoted by brokers should be taken to be indicative in marketable amounts unless otherwise
qualified
C. Prices quoted by brokers should be taken to be firm in amounts of 1,000,000.00 of the quoted
currency unless otherwise qualified
D. Prices quoted by brokers should be taken to be indicative in amounts of 1,000,000.00 of the base
currency unless otherwise qualified
92. A broker offers a dealer a financial incentive in the form of a price reduction to the previously
agreed brokerage arrangements between the firms.
A. This is considered as a normal discount for bulk business.
B. The offer should be agreed only by directors or senior management on each side and should be
recorded in writing.
C. The offer should be expressly approved by both the individuals concerned and clearly recorded in
writing.
D. The Model Code strongly discourages such practices.
93. What ought to be done in the event a trade erroneously occurs at an off-market rate?
A. By agreement between the two counterparties, the trade must be cancelled as soon as practically
possible since a rate amendment is prohibited.
B. 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.
C. 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.

D. Nothing need be done, since once a trade is agreed to by the front office it is a binding agreement
for both counterparties.
94. How long does the Model Code recommend that tapes and other records of dealers/brokers be
kept?
A. at least two months
B. one year
C. up to one month
D. at least three months
95. What is the meaning of “under reference” in the terminology of trading?

A. a term the quoting dealer uses to caution the receiver of the quote that the price may have to be re-
quoted at the receiver’s risk
B. the qualification that the rate quoted in the market may no longer be valid and requires confirmation
before any trades can be agreed upon
C. the statement that the rates quoted by the broker are for indication only
D. an acknowledgement by the dealer receiving the quote that the rate may have to be re-quoted at
the receiver’s risk
96. You request use of funds from your agent bank for 1 day on an amount of EUR 100,000,000.00,
EONIA was 0.812% and the ECB deposit facility rate is 0.50%.What use of funds settlement amount
should you expect?
A. EUR 1,388,89
B. EUR 1,561.11
C. EUR 2,255.56
D. EUR 2,951.39
97. If the value date of a forward USD/JPY transaction is declared a holiday in either New York or
Tokyo, the correct value date will be:
A. the value date of the financial centre that is open
B. the next business day of the financial centre which is closed
C. the next business day when both New York and Tokyo are open
D. the previous business day when both New York and Tokyo are open
98. How frequently should business contingency procedures be tested and updated?
A. quarterly tests I updates as needed
B. at least every second year
C. half-yearly tests / yearly updates
D. at least yearly
99. Which of the following does the Model Code mention with regards to recording telephone
conversations?
A. There is no need to inform new counterparties and clients that conversations will be recorded.
B. It is normal practice that tapes and other records should be kept for at least twelve months.
C. The periods for which tapes and other records should be retained should reflect the way in which
the terms and conditions of transactions have been agreed, and the duration of transactions.
D. Dealers and other staff are reminded that telephones and electronic text messaging systems in the
firm are intended for business and private use and that conversations and exchanges of text
messages should be conducted in a casual manner.
100. Regarding access to production systems, which of the following is incorrect?

A. Profiles for functions are encouraged and should be reviewed semi-annually by a manager.
B. Developers should have unrestricted access to production systems.
C. Access to production systems should be rigorously controlled.
D. Users should not have access to change system functionalities.

ACI Dealing Practice Paper 5
1. What is the day count/annual basis convention for euroyen deposits?
a. Actual/365
b. Actual/360
c. Actual/Actual
d. 30E360
2. What is EONIA?
a. Volume –weighted average overnight EUR Deposit rate
b. Volume- weighted average overnight EUR LIBOR
c. Arithmetic average overnight EUR deposit rate
d. ECB overnight lending rate
3. What is the name for the index against which most Eurodollar and Euroyen deposits and loans are
fixed in London?
a. EURIBOR
b. EONIA
c. LIBOR
d. SONIA
4. EURIBOR is the
a. Daily fixing of EUR Interbank deposits 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
5. A US security yields 7% of 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%
6. Using the following rates:

6M (184-day) USD deposit 0.50%
12M (366-day) USD deposit 1.00%
What is the rate for a USD deposit, which runs from 6 to 12 months?
a. 0.50%
b. 0.75%
c. 1.00%
d. 1.50%
7. Which of the following is always a secured instrument?

a. ECP
b. Repo
c. Interbank deposit
d. CD
8. Which of the following are quoted in terms of a yield-to-maturity?

a. USCP
b. ECP
c. Treasury bill
d. BA
9. Which of the following is a Eurocurrency deposit?

a. A 3-month deposit of USD 10 million offered by a US bank in New York
b. A 3-month deposit of USD 10 million offered by the US branch of a UK bank in New York
c. A 3-month deposit of USD 10 million offered by US bank in London
d. A 3-month deposit of GBP 10 million offered by the UK branch of a US bank in London
10. If the value of the collateral in a repo has fallen during the term of the transaction who suffers the
loss?
a. Seller
b. Buyer
c. Issuer
d. It depends on the agreement between the buyer and seller
11. What functions does a tri-party repo agent perform?
a. It checks the eligibility and sufficiency of collateral
b. It imposes an initial margin on behalf of the buyer and manager’s margin calls
c. It manages substitution of collateral on behalf of the seller
d. All of the above
12. A GBP deposit traded in Luxembourg between two Swiss banks is cleared:
a. wherever the parties agree
b. in Zürich
c. in Luxembourg
d. in London
13. A 2.50% CD was recently issued at par which you now purchase at 2.35%. You would expect to
pay:
a. The face value of the CD
b. More than the face value
c. Less than the face value
d. Too little information to decide
14. A CD with a face value of EUR 10 million and a coupon of 3% was issued at par for 182 days and
is now trading at 3.10% with 120 days remaining to maturity. What has been the capital gain or loss
since issue?
a. -EUR 52,161.00
b. +EUR 47,839.00
c. -EUR 3,827.67
d. Nil
15. You buy a 30-day 4% CD with a face value of GBP 20 million at par when it is issued. You sell it
in the secondary market after 10 days at 4.05%. What is your holding period return?
a. 4.05%
b. 3.891%
c. 3.838%
d. 1.946%
16. The tom/next GC repo rate for German government bonds is quoted to you at 1.75-80%.
As collateral, you sell EUR 10 million nominal of the 5.25% bund July 2012, which is worth EUR
11.260,000. If you have to give an initial margin of 2%, the Repurchase Price:
a. EUR 11,035,336.41
b. EUR 11,035,351.74
c. EUR 11,039,752.32
d. EUR 11,039,767.65
17. The spot/week repo rate for the 4.25% DSL 2008 IS QUOTED TO YOU AT 2.35-38%. You buy
bonds with a market value of EUR 3,295,500 through a sell/buy-back. The Repurchase price is:
a. EUR 3,297,004.19
b. EUR 3,297,005.86
c. EUR 3,297,025.09
d. EUR 3,296,985.23
18. What market value of collateral does a dealer need against USD 50,000,000.00 in cash in a 3-day
reverse repo at a rate of 2.10% if he takes an initial margin of 2%?
a. USD 52,000,000.00
b. USD 51,000,000.00
c. USD 50,000,000.00
d. USD 49,000,000.00
19. Which of the following CHF/JPY quotes that you have received is the best rate for you to buy
CHF?
a. 79.80
b. 79.75
c. 79.70
d. 79.85

20. You need to sell CHF against JPY. You are quoted the following rates. Which is the best for
you?
a. CHF/JPY 82.62
b. JPY/CHF 1.2101 PER 100 JPY
c. CHF/JPY 82.65
d. JPY/CHF 1.2093 PER 100 JPY
21. Clients of a voice-broker quote EUR/GBP at 0.6345-50, 0.6346-51, 0.6348-53 and 0.6349-53.
What will be the broker’s price?
a. 0.6345-53
b. 0.6345-50
c. 0.6349-50
d. 0.6349-53
22. The forward points are calculated from:

a. The level interest rates in the base currency
b. The level of interest rates in the quoted currency
c. The interest rates in the two currencies
d. Your expectations of the future spot rate
23. Spot EUR/USD is 1.1050-53 and EUR interest rates are lower than USD. Would you expect the
forward points for EUR/USD to be:
a. Added to spot
b. Subtracted from spot
c. Neither of the above
d. Insufficient information to decide
24. A 6-month SEK/NOK swap is quoted 140/150. Spot is 0.9445. Which of the following statement is
correct?
a. SEK interest rates are higher than NOK interest rates
b. NOK interest rates are higher than SEK interest rates
c. NOK interest rates are higher than USD interest rates
d. SEK interest rates and NOK interest rates are converging
25. The interest Rate Parity Theorem should work because, when one sells a low interest rate
currency to invest in high interest rate currency and hedges the currency risk
a. The cost of hedging is given by the forward points, which are equal to the interest rate
differential between the two currencies
b. The high interest rate currency will depreciate
c. The profit from the appreciation of the high interest rate currency has been hedged away
d. Interest rates are mean reverting, which means the low interest rate will tend to rise and the
high interest rate will tend to fall
26. If I say that I have “bought and sold” EUR/USD in an FX swap, what have I done?
a. Bought EUR and sold USD spot, and sold EUR and bought USD forward
b. Bought EUR/USD spot then sold EUR/USD forward
c. Taken a EUR loan in exchange for making a USD loan with the same counterparty
d. All of the above
27. What is he ISO code for silver?

a. XAU
b. XAG
c. XPT
d. XPD
28. Which of the following gold coins has a purity of 0.9999 (24 carats)?
a. Kruger Rand
b. American Eagle
c. Canadian Maple Leaf
d. British Sovereign
29. Four banks provide you with quotes in EUR/NOK. Which is the best price for you to buy NOK?
a. 7.8725
b. 7.8723
c. 7.8727
d. 7.8721
30. The “spot basis” of a 3 against 6 months EUR/CHF forward/forward swap is:
a. always the forward EUR/CHF bid rate of the first swap leg
b. generally the prevailing 3-month forward EUR/CHF mid-rate
c. commonly the prevailing 6-month forward EUR/CHF mid-rate
d. normally the current spot EUR/CHF mid-market rate
31. Your USD/CHF rate is 1.3710-15. How may USD would your customer have to give you to buy
CHF 10,000,000?
a. 7,291,286.91
b. 7,293,946.02
c. 13,710,000.00
d. 13,715,000.00
32. You are quoted spot NZD/USD 0.6821-28 and USD/CHF 1.4652-56, at what price can you buy
CHF against NZD?
a. 0.9993
b. 1.0006
c. 1.0007
d. 0.9994
33. You are quoted the following rates:

Spot CHF/ JPY 89.20-25
3m CHF/JPY 28/27
At what rate can you buy 3-month outright JPY against CHF
a. 88.93
b. 88.92
c. 88.97
d. 88.98
34. You are quoted the following rates:

Spot cable 1.6540-43
O/N cable swap 1.20/1.15
T/N cable swap 1.80/1.72
S/W cable 5.23/5.20
At what rate can you buy cable for value tomorrow?
a. 1.65444.15
b. 1.654480
c. 1.654185
d. 1.653880
35. Using straight line interpolation and from the following rates:
3m (90-day) EUR/USD swap 53.5/54
6m (180-day) EUR/USD swap 112/113
What is the price for 5-month (150-day) EUR/USD swap?
a. 58/59.5
b. 92.66/93.16
c. 93.33/94.17
d. 92.5/93.33
36. The 92-day EUR/NOK rate is bid 302 and the 61-day EUR/NOK rate is bid 186. What is the
EUR/NOK bid rate for 81 days, assuming straight-line interpolation?
a. 244
b. 255
c. 261
d. 259
37. In the international market, a FRA in USD is usually settled with reference to:
a. BBA LIBOR
b. Fed funds
c. ISDA LIBOR
d. EURIBOR

th th
38. Today is Monday, 8 December. You sell a 9x12 FRA for value Thursday,10 September next
year. On what date is the settlement amount due to be paid or received (assuming that there are no
holidays)?
th
a. 8 September next year
th
b. 10 September next year
th
c. 8 December next year
th
d. 10 December next year
39. You bought a EUR 8,000,000 6x9 FRA at 4.50%. The settlement rate is3-month (90-day)
EURIBOR, which is fixed at 3.50%. What is the settlement amount at maturity?
a. You pay EUR 20,000.00
b. You receive EUR 20,000.00
c. You pay EUR 19,826.52
d. You receive EUR 19,826.52
40. A customer sells a LIFFE Euro Swiss futures contact. Which of the following risks could he be
trying to hedge?
a. An increase in forward USD/CHF
b. Falling CHF interest rates
c. A decrease in forward USD/CHF
d. Rising CHF interest rates
41. Which of the following is true?

a. The Euronext LIFFE short sterling futures contract has a tick value of GBP 12.50 and a face
value of GBP 1,000,000
b. The Euronext LIFFE JPY Futures contract has a tick value of JPY 2.500 and a face value of
JPY 1,000,000,000
c. The CME Eurodollar futures contract has a minimum price interval of one-quarter tick (0.0025)
for the nearest contract
d. All of the above
42. An important reason for trading a futures contract rather than an FRA is:
a. The expense of settling an FRA
b. The reduced counterparty risk on a futures exchange
c. Reduced basis risk
d. All of the above
43. An interest rate swap is:

a. A contract to exchange one stream of income payments for another
b. A temporary exchange of one deposit for another of a longer maturity in the same currency
c. A forward-forward contract
d. All of the above
44. An overnight Indexed Swap is;

a. A fixed –floating money market swap in which the floating rate is an overnight index fixed
periodically over the term of the swap
b. A fixed –floating money market swap in which the floating rate is the mean of the overnight
index over the term of the swap
c. A fixed-floating money market swap in which the floating rate is an overnight index
compounded daily
d. All of the above
45. You are paying 5% per annum paid semi-annually and receiving 6-month LIBOR on USD 10
million interest rate swap with exactly two years 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%, and in 12 months a
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 2,000
b. Receive 250,pay 1,250, pay 1,750 pay 2,000
c. Pay 2,500, receive 12,500 receive 17,500, receive 20,000
d. Receive 2,500, pay 12,500, pay 17,500, pay 20,000
46. 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%. How would you hedge the swap using FRA’s
a. Buy a strip of 0x6, 6x12, 12x18 and 18x24 FRA’s
b. Sell a strip of 0x6, 6x12, 12x18 and 18x24 FRA’s
c. Buy a strip of 6x12, 12x18 and 18x24 FRA’s
d. Sell a strip of 6x12, 12x18 and 18x24 FRA’s
47. Today, you bought 25 June EURODOLLAR futures contracts at 99.50. The closing price is fixed
by the exchange at 99.45. What variation margin will be due?
a. You will have to pay USD 3,125.00
b. You will receive USD 3,125.00
c. You will have to pay USD 1,562.50
d. You will receive USD 1,562.50
48. You have made a forward-forward loan for 3 months starting in 6 months time. Which of the
following would be the best hedge for this position?
a. borrow money for 3 months and lend the equivalent amount for 6 months
b. Buy a 3X6 FRA in an amount equal to the loan notional value
c. by the near interest rate futures contracts in an equivalent notional of the loan
d. Buy a 6X9 FRA in an amount equal to the loan notional value
49. The buyer of a call option has:

a. Unlimited opportunity for gain and limited risk of loss
b. Unlimited risk of loss and unlimited opportunity for gain
c. Limited risk of loss and limited opportunity for gain
d. Unlimited risk of loss and limited opportunity for gain
50. The intrinsic value of a long call option:

a. Falls and rises with the price of the underlying commodity, but is always positive
b. Rises if the price of the underlying commodity falls and vice versa
c. Depends solely on the volatility of the price of the underlying commodity
d. Becomes negative if the market price of the underlying commodity falls below the strike price
51. A call option is ‘in-the money’ if

a. Its strike price is higher than the current market price of the underlying commodity
b. If the current market price of the underlying commodity is higher than the strike price of the
option
c. Its strike price is equal to the current market price of the underlying commodity
d. If the current market price of the underlying commodity is lower than the strike price of the
option
52. What is the purpose of a short straddle option strategy?

a. To anticipate very low volatility in the price of the underlying commodity
b. To anticipate moderately high volatility in the price of the underlying commodity
c. To anticipate moderate volatility in the price of the underlying commodity
d. To anticipate very high volatility in the price of the underlying commodity
53. The buyer of a cap:

a. Receives compensation if a reference interest rate falls below an agreed level
b. Pays compensation if a reference interest rate falls below an agreed level
c. Receives compensation if a reference interest rate rises above an agreed level
d. Pays compensation if a reference interest rate rises above an agreed level
54. The Rho of an option is:

a. The sensitivity of the option value to changes in the price of the underlying
b. The sensitivity of the option value to changes in the time to expiry
c. The sensitivity of the option value to changes in implied volatility
d. The sensitivity of the option value to changes in interest rates
55. Which instrument is normally used to hedge an interest rate risk in the banking book?
a) Bond future
b) FRA
c) Cap
d) Interest rate swap

56. What is a difference between the Liquidity Coverage Ratio (LCR) and the Net Stable Funding ratio
(NSFR)?
a) The scope of the NSFR is longer than that for LCR
b) NSFR only looks at the liability side of the balance sheet whilst LCR takes both sides of the
balance sheet into consideration
c) NSFR is a measure to indicate interest risk van LCR is a measure to indicate liquidity risk
d) The NSFR includes elements of stress testing whilst the LCR does not
57. How is the premium for liquidity management normally expressed?

a) As an add-on over the yield curve for Government bonds
b) As an add-on over the LIBOR IRS curve
c) As an add-on over the OIS curve
d) As an add-on over a zero-coupon curve
58. What was the reason that banks before the Global Financial Crisis did not use liquidity premiums
or discounts?
a) They did not expect that their clients would default
b) They thought that the general level of interest rates would stay low
c) They did not expect a bank run
d) They thought that liquidity would always be ample available
59. What is the initial fair value on trade date of an interest rate swap dealt at current market rates?
a) nil
b) positive fair value
c) negative fair value
d) the net present value
60. Which of the following is most likely to be used in in-house Funds Transfer Pricing?
a. EONIA
b. LIBOR
c. EDSP
d. Base rate
61. What is being described here? ‘Undisclosed reserves, revaluation reserves, general provisions,
hybrid instruments and subordinated term debt’.
a) Tier 1 capital
b) Supplementary capital
c) NSFR
d) Shareholders’ equity
62. What is the purpose of the Liquidity Coverage Ratio?

a) to mitigate market replacement risk across markets
b) to minimise duration risk on a bank’s assets over a one-year horizon
c) to ensure banks have enough high-quality liquid assets to survive a 30-day period of acute
market stress
d) to eliminate funding mismatches by establishing a minimum acceptable amount of stable
funding
63. If you buy GBP 2,000,000 against USD at 1.6020, GBP 1,000,000 at 1.6035 and GBP 3,000,000
at 1.6028, what is the average rate of your position?
a. 1.6035
b. 1.6027
c. 1.6030
d. 1.6023
64. What type of risk would you face if a payments system failed?
a. Credit risk
b. Market risk
c. Liquidity risk
d. Legal risk
65. What types of risk apply to collateral that you have against a counterparty’s credit risk
a. Market risk
b. Legal risk
c. Operational risk
d. All of the above
66. If a counterparty refuses to pay the profit due to you on a derivatives transaction and argues that
you dealt with an unauthorized member of their treasury staff what type of risk are you exposed to?
a. Legal risk
b. Market risk
c. Basis risk
d. Settlement risk
67. Does a spot FX deal create a transaction, translation or economic exposure?

a. Transaction exposure
b. Translation exposure
c. Economic exposure
d. All of the above
68. Which of the following methods is a means of credit risk mitigation?

a. investing only in sizeable and liquid markets
b. entering into a plain vanilla IRS
c. entering into collateral agreements
d. hedging a portfolio’s USD exposure
69. Interest rate risk and equity risk are:

a. credit risks
b. settlement risks
c. operational risks
d. market risks
70. What is the correct interpretation of a EUR 5,000,000.00 overnight VaR figure with a 95%
confidence level?
a. A loss of at least EUR 5,000,000.00 can be expected in 5 out of the next 100 days.
b. A loss of at least EUR 5,000,000.00 can be expected in 95 out of the next 100 days.
c. A loss of at most EUR 5,000,000.00 can be expected in 5 out of the next 100 days.
d. A loss of at least EUR 5,000,000.00 can be expected in 5 out of the next 1000 days.
1 1 1
71. Bank A offer 3-month EUR deposits at 3 /8 – 3 /4 % to his broker. The broker lifts offer at 3 /4 %.
Which of the following steps must the broker take?
a. The broker must show the borrower’s name to the lender first and disclose the lender’s name
only if the borrower is acceptable to the lender
b. The broker must show the lender’s name to the borrower first and disclose the borrower’s
name only of the lender is acceptable to the borrower
c. The broker must show the borrower and lender’s name to each other at the same time
72. A broker can consider a deal as done if:

a. He is confident that the dealer will not back out of the deal
b. Both parties have established credit lines for each other
c. One party acknowledges interest
d. He receives verbal acknowledgement from the dealer
73. For which of the following reasons is the extension of forward contracts at non-current rates
discouraged:
1. These could be used to conceal profit or losses
2. These could be used to perpetrate fraud
3. These could result in an unauthorized extension of credit
4. These could result in confusing settlement instructions.
a. 1, 2, 3, & 4
b. 1, 2, & 3
c. 1 & 3
74. To curb attempted fraud, banks should:

a. Require greater vigilance by the management and staff
b. Take particular care when the beneficiary is a third party to the deal
c. Ensure that details of all telephone deals which do not include pre-agreed standard settlement
instructions are confirmed by telex or similar means without delay
d. All of the above

75. Prompt sending and checking of confirmations is considered as best practice when dealing with:
a. Bank counterparties through brokers
b. Banks directly
c. Corporates and other customers
d. All of the above
76. The use of off-market rates is discouraged and should be permitted only:
a. When the bank’s income is secured on the trade
b. If the unsecured credit is taken into account
c. If the bank knows the customer very well
d. When there are written procedures and policies for such transactions
77. The ACI’s Committee for Professionalism will deliver expert opinion in disputes between firms if
a. Both parties to the dispute are members of the ACI and agree to submit the dispute to the ACI
b. One of the counterparties request ACI’s Committee for Professionalism to assist
c. The two counterparties are located in the different financial centre’s
d. The amount of the dispute is more than USD 100,000
78. In a dispute between the dealer and a broker, the Model Code recommends that this should be
referred in the first instance to:
a. Central Bank
b. Senior management of the bank and the brokerage firm
c. Head of compliance
d. ACI’s Committee for Professionalism (CFP)
79. Which of the following is not true?

a. Inter-bank market participants have a duty to make absolutely clear whether the prices they
are quoting are firm or merely indicative
b. It is the duty of the dealer to periodically confirm with the broker the validity of his price
c. It is the responsibility of the dealer to ensure that the prices given to a broker are taken off if
they have not been hit or were subject to a time limit
d. No deal is done if one counterparty is unable to conclude a deal due to credit line problems
and a name switch is not found within reasonable period of time
80. If the value date of forward USD/JPY transactions is declared a holiday in either New York or
Tokyo, the correct value date will be
a. The value date of the centre which is open
b. The next business day of the centre this is closed.
c. The next business day when both New York AND Tokyo are open
81. In Interbank trading, if a dealer is calling “off” at the same time as the broker is hitting a price:
a. No transaction is concluded
b. A transaction should be concluded
c. The dealer has he choice to conclude the transaction or leave it
d. The broker decides whether the transaction is concluded or not
82. A broker can act as a principal if:

a. One principal refuses to honor the deal
b. If the position is profitable
c. If the position is less than EUR 1 million
83. If a dealer has interest on one side, and the other side is dealt away, the broker should:
a. Immediately put the price “under reference” and check with the dealer to ascertain his original
intention.
b. Cancel the order
c. Continue with the above

84. When you are accepting a stop loss order, you must:
a. Ensure that your counterparty understands the terms under which your bank accepts the order
b. Ensure that your counterparty can be contacted in the event of unusual situations or event or
extremely volatile market conditions
c. Ensure that your counterparty understand that any guarantee of fixed price execution requires
agreement in writing
d. All of the above
85. The organizational structure of market participants should ensure a strict segregation between
front and back office of:
a. Duties and reporting lines
b. Systems
c. Career paths
d. All the above
86. 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?
a. EUR 620.83
b. EUR 868.06
c. EUR 968.06
d. EUR 2,183.33
87. Market participants should, where activity justifies it, aim to reduce settlement and related credit
risk on currency transactions by:
a. Establishing realistic daylight limits for counterparties
b. Monitoring all payments to counterparties who are known to be experiencing difficulties
c. Establishing legally binding bilateral netting agreements with counterparties or participating in
a multilateral netting system
d. Seeking pre- payment
88. In FX trading a “third party beneficiary” is best described as:

a. the recipient of a payment for the relevant trade distinct from the counterparty
b. the issuer of a payment for the relevant trade identical to the counterparty
c. the recipient of a payment for the relevant trade identical to the counterparty
d. the issuer of a payment for the relevant trade distinct from the counterparty
89. Your agent bank accepts your back-valuation request for 1 day on an amount of EUR
12,500,000.00. EONIA is 1.201% and the ECB marginal lending facility rate is 1.50%. Applying
conventional administration fees, how much will this be charged?
a. EUR 417.01
b. EUR 520.83
c. EUR 517.01
d. EUR 620.83
90. Which SWIFT message should be used to advise the netting position of a currency resulting from
FX, NDF, options and other trades?
a. MT300
b. MT670/671
c. MT370
d. MTn99

Paper 6 ACI DEALING QUESTIONS
1. If the EUR 3 month (90 day) rate is quoted as 2.35% and the 3x6 (91 day) FRA rate is
2.55% then what is the 6 month effective rate?
a. 2.37%
b. 2.58%
c. 2.40%
d. 2.46%
2. Which of the following is NOT a negotiable instrument?

a. Treasury Bill
b. CD
c. FRA
d. Commercial Paper
3. Which of the following is issued in an auction?

a. Treasury Bill
b. CD
c. Eligible Bills
d. Commercial Paper
4. A Eurodollar deposit is done in London between two German Banks. Where is

settlement of the deal affected?
a. New York
b. London
c. Frankfurt
d. too little information to decide
5. How can collateral maintenance be affected on a sell/buy back repo transaction?

a. By margining
b. by repricing
c. either a) or b) but usually by b)
d. either a) or b) but usually by a)
6. Where the seller of a repo is in default, which of the following is true?

a. the buyer can sell the collateral
b. the buyer must sell the collateral
c. the buyer can only sell the collateral once the seller is declared insolvent
d. the buyer cannot sell the collateral without the sellers permission
7. You take in EUR 10mio at 3.50%, EUR 5 mio at 3.40% and EUR 5 mio at 3.60%. What
rate is the average rate on your position?
a. 3.475%
b. 3.60%
c. 3.50%
d. 3.40%
8. A CD with a coupon of 3% in USD 5,000,000 which was originally issued for 182 days
is now purchased at a rate of 3 % with only 7 days to maturity. What is the consideration
payable?
a. 5,075,833.33
b. 5,072,874.15
c. 4,924,166.67
d. 5,000,000

9. A CD was issued at 4.50% in USD 10,000,000 150 days ago. The CD has 30 days to
maturity when you purchase it at 4.05%. What is your holding period return if you hold the CD to
maturity?
a. 4.50%
b. 4.05%
c. 4.27%
d. to little information provided
10. A two week repo against 5.50% 2015 German Bund is undertaken when the repo rates are
3.33/38%. The collateral value is 266,125,000. You undertake the reverse repo against this
collateral with no margin taken. What is the repo interest at expiry to the nearest EUR?
a. 349,807
b. 333,333
c. 344,632
d. 266,125
11. Tom/next repo rates are quoted 1.75%/1.80%. You sell EUR10, 000,000 3.80% German
Bunds with a market value of 11,260,000. What is the repurchase price at maturity?
a. 11,260,563
b. 11,260,000
c. 11,261,189
d. 11,260,547.36
12. You sell CHF against the JPY. Which of the following is the most advantageous rate for you
to deal at?
a. 82.35
b. CHF 1.2093 per 100 JPY
c. 82.40
d. CHF 1.2114 per 100 JPY
13. You quote a client cable at 1.6350/55. He says “5 yours”. What have you done?
a. Bought USD 5m at 1.6350
b. Sold USD 5m at 1.6355
c. bought GBP 5m at 1.6350
d. sold GBP 5m at 1.6355
14. You quote a client 3 month GBP/SEK swap at 327/320. He says “5 mine”. What have you
done?
a. bought GBP 5m spot and sold GBP 5m 3 months at 320 pips
b. sold GBP 5m spot and bought GBP 5m 3 months at 327 pips
c. sold GBP 5m spot and sold GBP 5m 3 months at 320 pips
d. bought GBP 5m spot and sold GBP 5m 3 months at 327 pips
15. Spot EUR/USD at 1.3250/55 and T/N 3/2. What rate will you buy USD at value tom?
a. 1.3252
b. 1.3256
c. 1.3250
d. 1.3255
16. Today you borrow USD for 12 months and lend the same amount for 6 months. What have
you done in the forward period?
a. created a forward forward loan
b. created a forward forward deposit
c. created a long 3x6 FRA
d. created a short 3x6 FRA

17. What is the purpose of initial margin on a futures exchange?
a. to cover any losses between variation margin calls
b. to protect the seller of a futures contract from default by the buyer
c. to protect the buyer of a futures contract from default by the seller
d. to cover all the variation margin payments during the life of the futures contract
18. The delta on a short “in the money” call is usually

a. +0.50
b. between -0.5 and -1.0
c. 1.0
d. zero
19. The delta on a long “in the money” put is usually

a. +0.50
b. between +0.5 and +1.0
c. between -0.50 and -1.0
d. zero
20. Which of the following risks are NOT present in a short USD/CHF spot position done
today?
a. market risk
b. counterparty risk
c. basis risk
d. settlement risk
21. Which limit changes as price in the market changes?

a. market risk limit
b. counterparty limit
c. loss limit
22. What is known as two name paper?

a. Eligible bills which are discountable at the Bank of England
b. Commercial paper issued to a pension fund
c. government bonds held by a bank
d. all of the above qualify as two name paper
23. On which of the following instruments can you earn both interest and a capital gain?
a. Commercial paper
b. Treasuries
c. CDs
d. Eligible bills

ACI – THE FINANCIAL MARKETS ASSOCIATION
EXAMINATION FORMULAE – 2012 VERSION
In all the formulae:
• interest rates, yields, coupon rates and rates of discount are expressed as a decimal, eg 8.53%
will be expressed as 0.0853
• ‘annual basis’ is the number of days in a year assumed under the appropriate rate convention
• ‘term’ is the number of days from settlement to maturity of the instrument in question
• day count’ is the number of days from settlement to maturity of the instrument in question.
INTEREST RATE CONVERSIONS
Converting between bond basis and money market basis (Act/360)
365
rate bond basis = rate money market basis
360
360
rate money market basis = rate bond basis
365
Converting between annually and semi-annually compounding frequencies
2
 rate semi -annually compounded 
rate annually -compounded = 1 +  -1
 2 
 
rate semi-annually compounded = ( 1 + rate annually compounded −1 2)

The formulae for converting between annually and semi-annually compounded rate apply only to rates quoted
on a bond basis, not a money market basis.
MONEY MARKET
Certificates of deposit
proceeds at maturity = face value ( 1 + coupon x term )

annual basis
proceeds at maturity
secondary market proceeds =
yield x day count
1+
annual basis

Discount-paying instruments quoted as a true yield
face value
secondary market proceeds =
yield x day count
1+
annual basis
Discount-paying instruments quoted as a rate of discount
rate of discount x day count

discount amount = face value
annual basis
 rate of discount x day count 

secondary market proceeds = face value 1 - 
 annual basis 
rate of discount
true yield =
rate of discount x day count
1-
annual basis
Forward price of sell/buy-back
forward price =
(repurchase price - accrued interest on collateral at terminatio n) 100
nominal price of collateral
FORWARD-FORWARDS & FORWARD RATE AGREEMENTS

forward - forward rate =
 interest rate long period x day count long period 
 1+  annual basis
 annual basis − 1
 interest rate short period x day count short period  day count forward - forward period
1 + 
 annual basis 
 (FRA rate - settlement rate ) x d ay count 

 
FRA settlement amount = notional principal amount  annual basis 
 settlement rate x day count 
1 + 
 annual basis 

FOREIGN EXCHANGE
Forward FX rate
interest rate quoted currency x day count
1+
annual basis quoted currency
forward rate = spot rate
interest rate base currency x day count
1+
annual basis base currency
Covered interest arbitrage
synthetic quoted currency interest rate =

  interest rate base currency x day count  forward rate   annual basis quoted currency
 1 +   − 1
  annual basis base currency  spot rate  
  
day count

synthetic base currency interest rate =

  interest rate quoted currency x day count  spot rate   annual basis base currency
 1 +   − 1
  annual basis quoted currency  forward rate  
  
day count

interest rate quoted currency x day count

1+
annual basis quoted currency
forward rate = spot rate
interest rate base currency x day count
1+
annual basis base currency

Solutions to Papers
Paper 1 - Solutions
Section 1 Int rates 1a

Section 2 MM 1a 2a 3c 4a
Section 3 MM 1c 2c 3c 4b 5b 6c 7a
Section 4 FX 1d 2a 3a
Section 5 FX 1d 2b
Section 6 Derivatives 1a 2b 3b
Section 7 Options 1b 2c
Section 8 ALM 1a 2b 3d
Section 9 Risk 1d 2a
Section 10 Model code 1a 2c 3b 4b 5a 6d 7c 8d 9b
Paper 2 - Solutions
1d 8a 15 c 22 b 29 b 36 c 43 a 50 b 57 b 64 a 71 b 78 b 85 a 92 d
2b 9d 16 c 23 b 30 d 37 c 44 d 51 c 58 c 65 d 72 a 79 a 86 d 93 c
3c 10 c 17 a 24 b 31 c 38 a 45 a 52 d 59 a 66 b 73 a 80 b 87 b 94 a
4d 11 b 18 b 25 d 32 d 39 a 46 d 53 a 60 b 67 b 74 a 81 a 88 b 95 a
5a 12 d 19 c 26 b 33 d 40 b 47 a 54 b 61 b 68 d 75 c 82 b 89 c 96 b
6a 13 d 20 c 27 d 34 d 41 a 48 b 55 b 62 b 69 b 76 a 83 a 90 a 97 d
7b 14 a 21 c 28 d 35 c 42 b 49 c 56 c 63 b 70 c 77 d 84 b 91 b 98 d
99 d
100 c
Paper 3 – Solutions
1c 2d 3c 4a 5b 6d 7a 8b 9a 10a 11c 12c 13b 14b

15d 16d 17c 18d 19c 20c 21b 22a 23c 24b 25b 26c 27a 28b
29a 30a 31a 32b 33d 34a 35b 36a 37a 38a 39a 40c 41a 42a
43c 44a 45c 46a 47d 48a 49b 50c 51c 52d 53a 54b 55d 56c
57b 58b 59a 60b 61a 62b 63c 64b 65c 66a 67b 68d 69d 70b
71d 72d 73a 74a 75c 76b 77c 78c 79b 80a 81d 82b 83a 84a
85c 86a 87d 88a 89a 90b 91c 92b 93c 94b 95b 96a 97d 98a
99b 100d 101b 102c 103d 104c 105c 106d 107b 108d 109c 110b 111d 112b
113d 114b 115c 116a
1d 2c 3d 4c 5d 6d 7c 8d 9d 10d 11b 12c 13d 14d

15c 16c 17b 18c 19d 20c 21b 22b 23c 24c 25c 26a 27b 28c
29b 30.2 31.2 32c 33b 34c 35b 362 37a 38a 39c 40b 41.3 42c
43d 44c 45b 46d 47a 48b 49a 50a 51c 52c 53b 54b 55d 56d
57c 58d 59c 60c 61 b 62 b 63 c 64 d 65 b 66 b 67 c 68 b 69c 70b
71a 72c 73b 74d 75a 76c 77a 78a 79c 80b 81d 82c 83b 84c
85c 86d 87a 88b 89b 90c 91a 92b 93b 94a 95b 96b 97c 98d
99c 100b
1.a 2.a 3.c 4.a 5.c 6. d 7.b 8.b 9.c 10.a 11.d 12.d
13.b 14.c 15.b 16.d 17.b 18.b 19.c 20.d 21.c 22.c 23.a 24.b
25.a 26.d 27.b 28.c 29.c 30.b 31.b 32.d 33.b 34.b 35.d 36.c
37.a 38.b 39.c 40.d 41.c 42.b 43.a 44.c 45.c 46.d 47.a 48.d
49.a 50.a 51.b 52.a 53.c 54.d 55.d 56.a 57.b 58.d 59.a 60.b
61.b 62.c 63.b 64.c 65.d 66.a 67.a 68.c 69.d 70.c 71.a 72.d
73.b 74.d 75.d 76.d 77.b 78.b 79.b 80.c 81.d 82.b 83.d 84.b
85.d 86.c 87.a 88.a 89.c 90.c

1d 2c 3a 4a 5c 6a 7c 8b 9b 10 c 11 a 12 b 13 c 14 a
15 a 16 b 17 a 18 b 19 c 20 c 21 d 22 a 23 b
Paper 6 solutions explained
1. 1x (1+(0.0235/360x90)) = 1.005875. 1.005875 x (1 + (0.0255/360x91) = 1.012359
1.012359 -1 = 0.012359 this is a periodic rate for 181 days so it needs to be annualised.
0.012359 x 360/181 x 100 = 2.458 or 2.46%.
2. FRAs are not negotiable
3. Only TBs are auctioned
4. USD can only be cleared in the USA and the CHIPS system in NY is the interbank clearing system.
5. Sell/buy backs are very difficult to margin, but if they are margined, they are usually repriced.
6. Where the seller of a repo has title and will sell the collateral to recover their cash.
7. A weighted average rate calculation is required.
10 x 3.50 = 35, 5 x 3.40 = 17, and 5 x 3.60 = 18. then (35+17+28)/20 = 3.50%
8. Work out maturity value then calculate the secondary market price.
5,000,000 + (5,000,000 x 0.03 x 182/360) = 5,075,833.33
5,075,833.33/(1+(0.03 x 7/360) = 5.072,874.16
9. If you purchase A CD and hold it to maturity, the holding period return will be equal to the yield at
which you purchase the CD. There was therefore no calculation required in this case. The answer
is simply 4.05% the yield at which you purchased it.
10. As you are doing the reverse, you will be LENDING cash therefore you must deal at the lower of
the two repo rates which is 3.33%. As you are given the calculated collateral value and there is no
margin, the calculation of the repo interest value is a simple interest calculation using the REPO
rate and the value of the collateral.
266,125,000 x 0.0333 x 14/360 = 344.631.88. All the information regarding the bond is superfluous
it could just as well be a Mickey Mouse bond…… it is irrelevant.
11. As you are doing the repo, you will be BORROWING cash therefore you must deal at the HIGHER
of the two repo rates which is 1.80%. As you are given the calculated collateral value and there is
no margin, the calculation of the repo interest value is a simple interest calculation using the REPO
rate and the value of the collateral.
11,260,000 x 0.0180 x 1/360 + 11,260,000 = 11,260,563. All the information regarding the bond is
superfluous it could just as well be a Mickey Mouse bond…… it is irrelevant.
12. As you are selling CHF against the JPY you want the MOST JPY for your CHF.
If 1.2093 CHF = 100 JPY, then 1 CHF = 100/1.2093 = 82.69 JPY which is the most JPY for your
CHF.
13. As your client is giving you cable he is selling you GBP at your bid of 1.6350.
14. Your client has purchased 3 months and sold spot. So you are buying spot GBP and selling 3
months at your offer.
15. Tom rate is calculated by switching the points changing the sign and adding to spot.
1.3250 1.3255
+0.0002 +0.0003
1.3252 1.3258
As you are buying USD you are selling EUR value tom which means you must deal on the bid side.
16. This question is open to debate, but I like the deposit being created.
17. Initial margin is held by the exchange to cover a one day loss. If you have not paid variation margin
by cut off time, your initial margin will be used to expunge any losses which you have not covered.
18. The delta on a short call is negative as the writer is short of the underlying as he needs to buy to
deliver against the in-the-money option. The delta of an in the money call is between 0.5 and 1.
19. The delta on a long put is negative as the holder will need to buy the underlying to deliver the
underlying for the in-the-money option. The delta of an in the money put is between 0.5 and 1.
20. Basis risk describes the risk which exists between the price movement of a hedging instrument and
that of the underlying hedged instrument.
21. Limits don’t change when market prices move.
22. Eligible bills are issued by a client and endorsed by the bank which then rediscounts them thus
reflecting two names which have accepted liability on the paper
23. Treasuries are US government bonds not to be confused with Treasury Bills which are money
market assets. Therefore if you buy T-Bills at a price lower than par, you can make both a capital
gain holding them to maturity while receiving coupon interest 6-monthly.

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2014

ACI DEALING CERTIFICATE

Examination Question Database

Paper 1 - Pre-course assessment

1 ACI Dealing Questions and Solutions

Section 2 -Cash Money Market

3. How can collateral maintenance be affected on a sell/buy back repo transaction?

4. Where the seller of a repo is in default, which of the following is true?

Section 3 -Cash Money Market Calculations

2 ACI Dealing Questions and Solutions

Section 4 Foreign Exchange

Section 5- Foreign Exchange Calculations

3 ACI Dealing Questions and Solutions

Section 6 - Forward-Forwards, FRAs, money market futures & swaps

3 How are overnight index swaps settled?

2 What are the components of the premium on an out-of-the-money option?

Section 8 – Asset and Liability Management

2. What is a ‘duration gap’?

3. Which statement about modern matched-maturity transfer pricing in banks is correct?

2 A dealer makes the following spot EUR/USD transactions:

If the end-of-day revaluation rate is 1.0990, what is his profit or loss?

Section 10 - The Model Code

3. Written confirmation is a function that can be done by:

4. Which of the following is not in the Model Code?

5 ACI Dealing Questions and Solutions

8. After hours dealing should only be allowed upon satisfaction of

a) all of the above

6 ACI Dealing Questions and Solutions

4 Which of the following is NOT a direct quote?

a. short USD 12,595,000 at 1.3767

12 Which of the following trades on a true yield basis?

14 What does it mean to be over borrowed?

8 ACI Dealing Questions and Solutions

17 In a repo, who has the market risk on a bond used as collateral?

a. the supplier of the collateral

a. 10,000,000 face value

20 What is the major advantage of a tri-party repo agreement?

a. the rate is lower

a. paid to the original owner of the bond

22 When a bond goes special it usually means that:

a. the issuer has been downgraded

a. USD interest rates are higher than CHF

9 ACI Dealing Questions and Solutions

a. the forward points would increase

a. more USD on the forward date

10 ACI Dealing Questions and Solutions

a. buy a 0x6 FRA and take 3 month cash in 3 months time

a. buy 3x6 FRAs and buy 6x9 FRAs

a. Long 0x3 FRAs IMM

a. bought Dec futures

a. buy 20 March and buy 20 June 3-month Eurodollar futures

a. the underlying assets current market price

38 If an option is out of the money, the delta would tend towards:

11 ACI Dealing Questions and Solutions

a. in the money forward

41 An option trader tells you he is long a straddle. What has he done?

a. plain vanilla interest rate swap

a. replacement cost including interest related cash flows

44 Which of the following best describes an amortised swap?

a. a swap with quarterly interest payments

46 Which of the following would best describe a currency swap?

50 The global RTGS arrangement called CLS was developed to eradicate:

a. you buy EUR at 1.3578