Question: 1

In the US commercial paper market, commercial paper is limited to:

A. a 270-day tenor
B. a 360-day tenor
C. a 365-day tenor
D. a 366-day tenor

Answer: A

Question: 2
When a deal is done via a broker:

A. It need not be confirmed between the counterparties as the broker confirms it immediately with
both counterparties
B. It should also be confirmed directly between the two counterparties
C. It is important to note that broker confirmations are bilateral confirmations between the
principals of the trade
D. The dealer should obtain acknowledgement that the deal has been agreed to but may assume
agreement to the trade in the absence of such acknowledgement

Answer: B

Question: 3
Your dealers have made the following deals in spot USD/JPY:
Sold USD 5,000,000.00 at 93.60
Bought USD 3,500,000.00 at 93.20
Bought USD 2,000,000.00 at 93.50
Sold USD 2,000,000.00 at 93.55
What is your position?

A. Short USD 1,500,000.00 at 94.60

B. Short USD 1,500,000.00 at 94.5857
C. Long USD 1,500,000.00 at 94.60
D. Short USD 1,500,000.00 at 93.55

Answer: D
 Question: 4
Which of the following is considered a non-negotiable instrument?

A. Certificate of Deposit (CD)

B. FRA
C. US Treasury Note
D. ECP

Answer: C

Question: 5
What is the maximum term London Certificates of Deposit are issued?

A. 12 months
B. 18 months
C. 5 years
D. 2 years

Answer: A

Question: 6
A forward rate agreement (FRA) is:

A. A future rate agreement involving two different currencies

B. An interest rate agreement where buyer and seller will exchange an interest rate differential at a
given date in the future
C. An interest rate to be applied to a loan or deposit that begins and matures in the future
D. An agreement to exchange cash flows starting on a specific date in the future

Answer: A

Question: 7
When do you use a SWIFT message type 202?

A. For a foreign exchange confirmation

B. For multiple general financial institution transfers
C. For a general financial institution transfer
D. For a customer transfer

Answer: C

Question: 8
In the unexpected event that a public holiday is declared on the date a particular contract matures,
what is the normal market practice?

A. If that day is not the final trading day of the month, all contracts maturing on that day are
extended to the next business day
B. If that day is not the final trading day of the month, all contracts maturing on that day are
shortened to the preceding business day
C. All new maturity dates have to be agreed upon with the counterparties involved
D. Decisions about the maturity dates of trading contracts are made by ACI’s Committee for
Professionalism on a case-by-case basis and must be adhered to

Answer: A

Question: 9
How are accounting entries usually generated?

A. They are generated based on a code profile held for each product type on a time event basis. B.
They are generated based on a code profile held for each front office staff member.
C. They are generated based on the nature of instruments (debits = first priority / credits = second
priority).
D. They are generated in the morning at start of business when there is no direct link to other
systems.

Answer: A

Question: 10
What is a SWIFT message type 210?

A. A request for financial institution transfer

B. A general financial institution transfer
C. A financial institution transfer for its own account
D. A notice to receive
 Answer: D

Question: 11
What is done with counterparties’ confirmations?

A. They are scanned for money laundering activities and afterwards destroyed
B. They are forwarded to the deal capturer to check the completeness of the deal
C. They are matched as soon as possible after receipt
D. They are archived after reception

Answer: C

Question: 12
What is the purpose of “internal cash reconciliation”?

A. To control the bank’s cash and derivative positions

B. To reconcile and control the cash balance for the Bank for International Settlements (BIS)
C. To reconcile and control the cash balance for the central bank
D. Cash forecasting, cash collateral and cash positions control

Answer: D

Question: 13
What information is essential for an interbank FX confirmation?

A. Specification of the applicable law

B. The value date
C. The brokerage cost
D. The name of the person(s) originating the deal

Answer: B

Question: 14
What is the most frequently used settlement process for securities?

A. Free of settlement payment

B. Cash settlement
C. Same day value settlement
D. Delivery-versus-payment

Answer: D

Question: 15
Which of the following types of payment demands extra diligence and review procedures?

A. Nostro funding payment

B. Third party payment
C. Value spot USD payment
D. Value spot payment for currency equivalents> USD 3,000,000.00

Answer: B

Question: 16
Which of the following best describes TARGET2?

A. The real-time gross settlement (RTGS) system owned and operated by the Eurosystem
B. The system used in Germany for settling high value domestic securities transactions
C. The pan-Europe netting system used for reducing credit risk for derivative transactions
D. The system used by the European Banking Federation to clear cross border Euro payments

Answer: A

Question: 17
What is a settlement date?

A. The date by which the interest payment on an operation must be made

B. The last date by which the minimum reserve amount can be paid to the central bank
C. The date, on which settlement must be made on the contracted amount or the differential
amount of an operation
D. The date a deal is processed

Answer: C
 Question: 18
What is the main difference between TARGET and TARGET2?

A. Finland did not participate in TARGET but it does participate in TARGET2

B. The cut-off time for TARGET2 is 20:00 (8.00 p.m.) CET, whereas the cut-off time for TARGET was
18:00 (6.00 p.m.) CET
C. TARGET2 runs on a single shared technical platform whereas TARGET did not
D. TARGET2 processes payment orders denominated in EUR as well as USD

Answer: C

Question: 19
Which of the following best describes the main benefit of the RTGS payment system?

A. Final settlement of interbank funds transfers on a continuous, trade by trade basis throughout the
day
B. Lower costs through fewer payments passing through nostro accounts
C. Lower costs through less labor intensive methods
D. Reduced market risk due to smaller values of open positions

Answer: A

Question: 20
A payment is made from Germany to a second Euro zone country. Which international payment
system would normally be used?

A. TARGET2
B. Euro Link System (ELS)
C. Euroclear
D. Clearstream

Answer: A

Question: 21
What are the principal functionalities of interbank funds transfer systems?

A. The matching of confirmations

B. The dealing and archiving of payment orders
C. Reconciliation and correspondent banking
D. The transfer of information and settlement

Answer: D

Question: 22
Which of the following currencies is eligible for CLS settlement?

A. ZAR
B. TRY
C. MYR
D. CNY

Answer: A

Question: 23
A message received and accepted by SWIFT will be acknowledged with:

A. OK
B. ACK
C. MAK
D. NAK

Answer: B

Question: 24
Which of the following processes are offered by the CLS settlement system?

A. The close-out process

B. The customer matching process
C. The settlement process
D. The securities lending process

Answer: C

Question: 25
CHIPS is the name commonly used for the domestic clearing system in:

A. London
B. Frankfurt
C. New York
D. Hong Kong

Answer: C

Question: 26
You have five outstanding amounts with five different values. Which of the following should be
investigated first?

A. The most recently processed deal

B. The counterparties in your own country
C. The counterparty which claims first
D. Those positions with the highest loss potential

Answer: D

Question: 27
What is the primary role of the position-keeper in a dealing room?

A. To keep the multilateral limits updated

B. To invest funds at the highest available interest rate
C. To keep the balance or position of the accounts or nostros in each currency representing the
accounts held by the bank’s agents
D. To keep the management informed about interest rate developments

Answer: C

Question: 28
What is an essential feature of nostro reconciliations?

A. That a daily nostro reconciliation report is sent out to the correspondent bank
B. That they are performed before the next business day
C. That they are performed in a timely and efficient way
D. That open items are booked on an internal account
 Answer: C

Question: 29
You have two nostro accounts in USD, one account is long USD 5,000,000.00 and the other is short
USD 5,000,000.00. What action should be taken to reconcile the accounts?

A. No action is required. The credit interest earned on the credit balance will offset the debit interest
incurred on the short balance
B. You should borrow USD 5,000,000.00 to cover the short balance and leave the long balance as it is
C. You should lend the surplus USD 5,000,000.00 in order to compensate the overdraft charges on
the short balance with the interest earned on the loan
D. You should instruct the bank with the long balance to transfer USD 5,000,000.00 to your nostro
account at the other bank

Answer: D

Question: 30
Which kind of report is a reconciliation system unable to produce?

A. A “probable matched items report” (a report in which most fields match but there are some
discrepancies)
B. A “calculated fees report” (a report of the expected fees owed)
C. A “matched items report” (a report of all fields that match)
D. An “unmatched items report” (a report of items for which one is unable to find matches)

Answer: B

Question: 31
What is the function of the cash positions keeper?

A. He/she acts as a running control on the balance of a nostro, alerting the treasury dealer when
funds are running too low or too high for a particular value day measured by agreed upon internal
parameters
B. He/she assists the dealer in deciding which currency to invest in
C. He/she informs back office staff about which kind of confirmations are to be used
D. He/she acts as a running control on the balance of an internal account, alerting the treasury
dealer when fees are running too low or high for a particular value day
 Answer: A

Question: 32
What is the most important feature of a brokerage reconciliation?

A. It must be processed once a year

B. Brokers’ bills should be reconciled during the night when no other system is running
C. Brokers’ bills must be reconciled promptly at month-end prior to payment
D. The existence of a single reference currency for all the brokers with whom your institution is
dealing

Answer: C

Question: 33
What is the first task of the cash positions keeper every day?

A. Makes sure the opening position for the current day is the agreed and reconciled position from
the previous day
B. Makes sure the previous day1s pending position is the opening position for the current day
C. He/she checks to see which dealer is in charge of which currency for that day
D. He/she checks to see which countries have bank holidays that day

Answer: A

Question: 34
When completing a nostro reconciliation, what does an unresolved ledger credit signify?

A. The duplicate receipt of funds from a counterparty

B. The non-payment of funds to a counterparty
C. The duplicate payment of funds to a counterparty
D. The non-receipt of funds from a counterparty

Answer: B

Question: 35
What is a future nostro balances report?
A. A list of the final maturity of bonds per value date
B. An account of the possible fees to be paid
C. A comparison of the overdraft interest to be paid on different nostro accounts
D. A report produced to show the anticipated balance on the account as a result of running off
existing business

Answer: D

Question: 36
The use of standard settlement instructions (SSI’s) is strongly encouraged because:

A. A dealer does not need to confirm payment details by phone

B. It splits differences arising from failed settlements between the two counterparties
C. It eliminates the need to send out SWIFT payment authorizations on a case-by-case basis
D. It avoids having to confirm each deal separately

Answer: A

Question: 37
Which of the following is a fundamental element or module in the “securities dealing and
processing” part of a treasury system?

A. The financial reporting standard

B. Brokerage accounting
C. The custodian account reconciliation function
D. The country limit overview

Answer: C

Question: 38
An input message for the SWIFT network is composed of up to which five parts?

A. 1. Basic header block, 2. Communication header block, 3. Currency block, 4. Text block, 5. Trailers
block
B. 1. Basic header block, 2. Application header block, 3. User header block (optional), 4. Text block, 5.
Trailers block
C. 1. Sending header block, 2. Application header block, 3. User header block, 4. Text block
(optional), 5. Transmission block
D. 1. Basic header block, 2. System header blocks (optional), 3. User header block, 4. Text block, 5.
Security block

Answer: B

Question: 39
How many characters does a BIC have? (Under ISO standard 9362: 2009)

A. 6 or 9 characters
B. 9 or 12 characters
C. 7 or 10 characters
D. 8 or 11 characters

Answer: D

Question: 40
Which of the following BIC-addresses belongs to a bank based in Germany?

A. FRNYUS33
B. ECBFDEFF
C. BCLXLULL
D. SNBZCHZZ

Answer: B

Question: 41
Which of the following statements best describes collateral?

A. Liquid assets pledged by one or both counterparties to the other to reduce credit risk
B. Deposits placed by a commercial bank with a central bank to fulfill reserve asset ratios
C. Any deposit placed by an institution with another institution of a lower credit rating
D. Any cross border payment of currency

Answer: A

Question: 42
In the absence of his normal dealer contact, a counterparty calls the back office and asks the clerk
for his opinion about how long his money should be placed on deposit. What action should the back
office clerk take?

A. He should give his opinion.

B. He should give his opinion and tell the counterparty that he is not qualified to do so.
C. He should tell the counterparty that he is not qualified to give an opinion and refer the
counterparty to another dealer.
D. He should give his opinion and refer the counterparty to another dealer.

Answer: C

Question: 43
A middle or back office clerk receives an FX ticket in which the counterparty is not clearly identified.
What should he/she do?

A. Keep the ticket in “stand-by mode” until a matching confirmation is received

B. Immediately refer the ticket to the compliance officer
C. Refer the ticket to the FX dealer for further details
D. Refer the ticket to the nostro account manager for further instructions

Answer: C

Question: 44
Which risk factors fall under counterparty risk?

A. Currency risk, interest rate risk and swap risk

B. Settlement risk, delivery risk and replacement cost
C. Operational risk
D. Settlement risk and swap risk

Answer: B

Question: 45
What are the three successive stages of money laundering?

A. Integration, layering, placement

B. Integration, placement, layering
C. Placement, layering, integration
D. Layering, integration, placement

Answer: B

Question: 46
You spot a rate discrepancy between you and your counterparty on a AUD/USD deal. The deal was
traded direct. You refer the discrepancy to the dealer and he tells you to change the rate.
What should you do?

A. Amend the rate yourself

B. Ask the settlements clerk to amend the rate for you
C. Ask the dealer to manually amend the rate on the ticket and then pass it to the settlements clerk
to amend
D. Make no amendment

Answer: C

Question: 47
You have been given collateral. In which case would you be least concerned about insisting on a
“haircut”?

A. Non-cash emerging markets collateral

B. Cash collateral in JPY, your base currency is GBP
C. Cash collateral in USD, your base currency is USD
D. Non-cash high yield collateral

Answer: C

Question: 48
You have just opened a position in EUR/USD that you run overnight. What risk is present?

A. Settlement, counterparty and equity risk

B. Only counterparty risk
C. Only currency and interest rate risks
D. Settlement, counterparty and market risk

Answer: D
 Question: 49
A EUR based bank has a USD-convertible bond. What market risks are present?

A. Interest rate and currency risks

B. Interest rate, stock price and currency risks
C. Stock price and currency risks
D. Stock price risk

Answer: B

Question: 50
For which of the following transactions are proper and completed bilateral master agreements
considered essential prior to any dealing?

A. Spot FX
B. Repo
C. Forward FX
D. FRAs

Answer: B

Question: 51
Most non deliverable forwards (NDFs) are cash-settled in:

A. GBP
B. USD
C. CHF
D. EUR

Answer: B

Question: 52
What information is not explicitly confirmed between the two counterparties of a FX swap
transaction using a MT 300?

A. The rate
B. The amount
C. The swap points
D. Settlement information

Answer: C

Question: 53
Which of the following statements apply to an FX Swap?

A. It consists of two separate transactions, dealt with two different counterparties.

B. It replaces a pair of foreign exchange transactions.
C. It fully eliminates counterparty risk.
D. It reduces credit risk with the counterparty, as compared to money market deals.

Answer: D

Question: 54
Which interest rates are used to calculate the exchange rate of an outright transaction value
tomorrow (over tom)?

A. The overnight interest rates of both currencies

B. The spot next interest rates of both currencies
C. The one week interest rates of both currencies
D. The torn next interest rates of both currencies

Answer: D

Question: 55
Your FX swap dealer sold and bought 2 months USD/CHF 10,000,000.00; rates were set to 0.9300
against 0.9285. What payment is your bank expecting in two months from now?

A. CHF 9,300,000.00
B. CHF 10,770,059.24
C. CHF 9,285,000.00
D. USD 10,000,000.00

Answer: D
 Question: 56
A month ago, a customer placed NZD 100,000.00 at 2.00% on a time deposit for 90 days. Today,
30 days later, he requests an anticipated close of his deposit. 2 and 3 month interbank rates are
2.10% bid and 2.20% offered. What do you do?

A. You agree and pay back to the customer the capital plus 2.00% interest calculated on 30 days
B. You agree and pay back to the customer the capital plus 2.00% interest on 30 days less your
refinancing costs of 0.20% calculated on 30 days
C. You agree and pay back to the customer the capital plus 2.00% interest on 30 days less your
refinancing costs of 0.10% calculated on 60 days
D. You agree and pay back to the customer the capital plus 2.00% interest on 90 days minus the
actualization of this amount at 2.20% calculated over 60 days

Answer: D

Question: 57
If the 90-day rate is 3.10% and the 180-day is 3.50%, what is the 120-day rate using straight-line
interpolation?

A. 3.20%
B. 3.21%
C. 3.23%
D. 3.30%

Answer: C

Question: 58
Which of the following are considered money market, cash or derivative instruments?

A. Currency futures
B. Forward FXs
C. Currency options
D. Forward rate agreements (FRA)

Answer: D

Question: 59
On Friday, your trader lends GBP 10,000,000.00 overnight at 0.60%. The instructions are for
repayment of principal + interest. How much would you expect to be repaid?

A. GBP 10,000,500.00
B. GBP 10,000,164.38
C. GBP 10,000,493.15
D. GBP 10,000,166.67

Answer: C

Question: 60
A Certificate of Deposit (CD) was issued at 2.50% which you now purchase at 1.75%. What would you
expect to pay?

A. The original face value of the CD

B. More than the originally paid value
C. Less than the originally paid value
D. There is too little information to decide

Answer: B

Question: 61
Internationally, USD FRAs are settled with reference to which market rate?

A. LIBOR
B. FEDFUNDS
C. LIBID
D. EURIBOR

Answer: A

Question: 62
EURIBOR is a:

A. Daily fixing of EUR interest rates within the EMU zone

B. Daily fixing of EUR interest rates in London
C. A rate used for the settlement of USD FRAs between European counterparties
D. The official successor to LIBOR rates
 Answer: A

Question: 63
An interest rate CAP can be defined as:

A. A series of American call options on FRAs

B. A series of European call options on FRAs
C. A series of American put options on FRAs
D. A series of European put options on FRAs

Answer: B

Question: 64
As to futures contracts:

A. The maintenance margin is a predetermined fraction of initial margin

B. The initial margin is a predetermined fraction of maintenance margin
C. The maintenance margin represents the brokerage costs
D. The maintenance margin represents management fees

Answer: A

Question: 65
Which of these statements is correct?

A. The strike price of a Bermudan option is an average.

B. A Bermudan option can be exercised only on a few specific dates prior to expiration.
C. A Bermudan option can be exercised at any time before its maturity date.
D. A Bermudan option can be exercised only at maturity.

Answer: B

Question: 66
You bought a 6x9 EUR 8,000,000.00 FRA at 0.75%. Settlement is now due and 3 months (90 days)
EURIBOR is 0.25%. What amount do you pay or receive?
A. Pay EUR 10,000.00
B. Receive EUR 10,000.00
C. Pay EUR 9,993.75
D. Receive EUR 9,993.75

Answer: C

Question: 67
What deals are usually associated with a collar?

A. A purchase of a cap and a sale of a cap at higher reference rate

B. A purchase of a floor and a sale of a cap or vice versa
C. A purchase of a cap and a purchase of a floor
D. A purchase of a step-up cap and a sale of a step-down floor

Answer: B

Question: 68
Which of the following is true about interest rate swaps (IRS)?

A. The fixed rate and the floating rate payers know the cash value of their payments at the outset
B. There is exchange of principal at the start and at the end of the swap
C. Payment netting is only allowed through a third party
D. The notional amount of the swap is generally not exchanged between counterparties

Answer: D

Question: 69
When is the settlement amount of a FRA normally payable?

A. At the beginning of the forward period

B. On the trade date
C. On the maturity (final) date
D. At any time before the contract’s maturity date

Answer: A
 Question: 70
What financial product involves exchanging a fixed interest rate for a floating interest rate?

A. A FX Swap
B. A repurchase agreement
C. An interest rate swap (IRS)
D. A dual swaption

Answer: C

Question: 71
What is a junk bond?

A. An AAA-rated security in payment default

B. A sub-investment grade instrument
C. An OECD Government bond
D. A bond typically paying lower yields than an investment grade instrument

Answer: B

Question: 72
In a scenario where long-term interest rates are higher than short-term interest rates, the yield
curve would best be described as:

A. Flat
B. Negative or inverse
C. Positive
D. Neutral

Answer: C

Question: 73
A USD 1,0000,000.00 US Treasury Bill (91 days) is offered at a discount rate of 0.75%. The offer price
will be:

A. USD 1,000,000.00
B. USD 998,104.17
C. USD 992,500.00
D. USD 998,130.14

Answer: B

Question: 74
Major amendments to a prospectus can be made:

A. At the discretion of the issuer and after the launch

B. Only with the consent of the note holders
C. Always in the case of default payment
D. Only by the custodian with the consent of the issuer

Answer: B

Question: 75
Which of the following are primary markets?

A. Auction markets conducted by the U.S. Treasury for U.S. Treasury bills
B. The repo market
C. The foreign exchange market
D. The over-the-counter market for U.S. Government Bonds

Answer: A

Question: 76
In trade confirmation, which one of the following statements about “matching” is correct?

A. Matching should be performed by no later than the day after trading day
B. Matching processes are manual and may not be automated
C. Matching should be performed as soon as possible upon receipt of the confirmation
D. Confirmation matching should be a post-settlement workflow activity

Answer: C

Question: 77
Which interest rate is to be applied in the calculation methodology for back-valuations in EUR?

A. The flat ECB marginal lending facility rate

B. The ECB marginal lending facility rate plus 25 b.p.
C. The average of each day’s EONIA rate minus 25 b.p.
D. The average of each day’s EONIA rate plus 25 b.p. unless that is higher than the ECB marginal
lending facility rate

Answer: D

Question: 78
In FX trading a “third party beneficiary” is best described as:

A. The issuer 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 distinct from the counterparty
D. The recipient of a payment for the relevant trade identical to the counterparty

Answer: C

Question: 79
How frequently should business contingency procedures be tested and updated?

A. Quarterly tests / updates as needed

B. At least every second year
C. Half-yearly tests / yearly updates
D. At least yearly

Answer: D

Question: 80
Which of the following types of institutions do not generally make up the “buy side”?

A. Corporate and governments

B. Asset managers and insurance firms
C. Retail banks and commercial banks
D. Mutual and hedge funds
 Answer: C

Question: 81
Which of the following is the best description of a broken trade”?

A. When a trade has been agreed to with dates (maturities) different from the standard dates
B. When one of the parties to the deal unilaterally decides to withdraw from the on-going
transaction
C. When, due to a system break, one or both parties to the deal chooses to withdraw from the
ongoing transaction
D. When, due to a system break, one or both parties to the deal are unclear as to whether the deal
has been done

Answer: D

Question: 82
Which one of the following statements regarding “single changes to default SSIs” is correct?

A. The counterparty does not need to be notified about any alterations to original payment
instructions or SSIs.
B. Any alterations to original payment instructions or SSIs are to be agreed to by the relevant parties
involved either by fax or e-mail.
C. Alterations must be agreed to by the parties involved via a written legally binding document or an
authenticated confirmation message.
D. Alterations need to be agreed to by the relevant parties involved and must be verbally confirmed.

Answer: C

Question: 83
Which details do not need to be mentioned in a trade confirmation?

A. Economic: such as initial and final amounts, rates

B. Product identification: counterparty, currency, index
C. Identification of the dealer: identity, title, direct phone number
D. Dates including the trade day: initial day, final day, settlement day

Answer: C
 Question: 84
What needs to be done in the event that a trade is amended by one or both parties?

A. A new confirmation should be generated by both parties but there is no need to restart the
confirmation cycle.
B. The amending party should verbally inform the other party.
C. A new confirmation should be generated and the confirmation cycle should restart and continue
until the trade is completely matched by both parties.
D. A new confirmation need not be generated but the confirmation cycle must restart and continue
until the trade is completely matched by both parties.

Answer: C

Question: 85
Which one of the following statements regarding the segregation of duties in the confirmation
process is incorrect?

A. Front office staff should not be able to modify confirmations.

B. The staff who confirm trades should be distinct from those who agree to and execute trades.
C. The process of confirming trades should be done only by Operations staff.
D. Only staff who agree to and execute trades should be permitted to modify any details of the
written confirmation.

Answer: D

Question: 86
Which clearing system allows a transfer to be settled with immediate finality?

A. EAF
B. EBA
C. RTGS
D. SWIFT

Answer: A

Question: 87
In the Euro deposit markets, what is spot?
A. Value one bank business day forward
B. Value two bank business days forward
C. Value one calendar day forward
D. Value two calendar days forward

Answer: B

Question: 88
What is the deadline for settling interbank spot-deals in EUR via the TARGET2 system?

A. 10:00 CET
B. 18:00 CET
C. 12:00 CET
D. 15:00 CET

Answer: A

Question: 89
According to ISDA definitions, if an USD IRS payment is due value Saturday, 31 May and the
documentation states that the “modified following business day convention” will be used, what
value date should be applied to the payment?

A. Saturday, 31 May
B. Tuesday, 3 June
C. Monday, 2 June
D. Friday, 30 May

Answer: A

Question: 90
Which one of the following excerpts completes this statement of a best market practice? “Any
exception to the confirmation process should be resolved?

A. No later than the value date

B. Within 2 days
C. Within 1 week
D. On the day it is discovered
 Answer: B

Question: 91
The organization “SWIFT” belongs to:

A. The members of the system (member-owned cooperative)

B. The European Banking Federation based in Brussels
C. The European Central Bank
D. The IMF

Answer: B

Question: 92
Which of the following steps is typical for an interbank FX trade process flow?

A. Physical delivery
B. Collateral management
C. Negotiation of fees
D. Settlement

Answer: A

Question: 93
Which SWIFT message type family is used for securities transactions?

A. MT 3XX
B. MT 2XX
C. MT 5XX
D. MT 1XX

Answer: A

Question: 94
If the back office staff receive a trade that is incomplete, which information is absolutely essential
for processing the trade?
A. The clearing house phone number
B. The account number to which fees are booked
C. The identity of the counterparty’s dealer
D. The name of the counterparty

Answer: A

Question: 95
The trade life cycle of a treasury deal starts with input and ends with:

A. Accounting
B. Adjustment of bilateral limits
C. Netting
D. Nostro reconciliation

Answer: A

Question: 96
When would you use a SWIFT message type 103?

A. For a foreign exchange confirmation

B. For a multiple general financial institution transfer
C. For a general financial institution transfer
D. For a customer transfer

Answer: C

Question: 97
Why are confirmations necessary?

A. Confirmations authenticate the transaction to the risk manager, as well as providing essential
information regarding bilateral limits.
B. in order to authenticate the BIC-code of the counterparty when the confirmation is sent via
SWIFT.
C. in order to have the exact mailing address of the counterparty when the confirmation is sent via
mail.
D. Confirmations authenticate transactions to staff independent of the dealing room, as well as
providing essential information regarding settlement.
 Answer: B

Question: 98
The prompt sending and checking of confirmations is considered a best practice when dealing in:

A. Amounts higher than USD 10,000,000.00 or the equivalent in other currencies

B. Amounts higher than USD 1,000,000.00 or the equivalent in other currencies
C. Any amount unless dealt via a broker
D. Any amount by any counter party

Answer: A

Question: 99
What payment system has to be used for all payments involving the Eurosystem?

A. SWIFT
B. CHAPS
C. Euro Link System (ELS)
D. TARGET2

Answer: B

Question: 100
With respect to financial payments, what does “bridge” mean?

A. It refers to an electronic settlement between Euroclear and Clearstream

B. It is an electronic settlement between Western Union and Clearcom
C. It refers to the relationship between two correspondent banks
D. It designates the exchange of payment orders between a nostro and a vostro account

Answer: B

Question: 101
When is the general cut-off time for interbank payments using TARGET2?

A. 17:00 (5.00 p.m.) Central European Time (CET)

B. 18:00 (6.00 p.m.) Central European Time (CET)
C. 18:30 (6.30 p.m.) Central European Time (CET)
D. 18:30 (6.30 p.m.) CET, but on the last minimum reserve fulfillment day (23rd of a month) 19:30
(7.30 p.m.) CET

Answer: C

Question: 102
Which two countries are not participating in TARGET2?

A. Denmark and Finland

B. Latvia and Lithuania
C. The Czeck Republic and the United Kingdom
D. Bulgaria and Romania

Answer: C

Question: 103
Which of the following is a US payment system?

A. CHAPS
B. CHIPS
C. BOJ-NET
D. TARGET

Answer: A

Question: 104
Which SWIFT message type is not accepted in TARGET2?

A. SWIFT MT 103+
B. SWIFT MT 202
C. SWIFT MT 204
D. SWIFT MT 210

Answer: C
 Question: 105
What is a loro or vostro bank account?

A. An account that you hold with another commercial bank

B. An account that another bank holds with you
C. An account that you hold with the Bank of England
D. Your suspense account at the European Central Bank

Answer: D

Question: 106
What is the standard for settlement of cross-border DVP systems?

A. T+3, meaning that settlement is due three days after the deal date
B. T+4, meaning that settlement is due four days after the deal date
C. T+1, meaning that settlement is due one day after the deal date
D. T+2, meaning that settlement is due two days after the deal date

Answer: B

Question: 107
If a bank incurs interest charges from having overdrawn an account due to a late payment from a
counterparty:

A. The bank is entitled to seek reimbursement from the party responsible for the late payment.
B. Nothing can be done to compensate the bank for the interest charges it incurs.
C. The bank should file a complaint with ACI’s Committee for Professionalism.
D. The bank will automatically be reimbursed by the party responsible for the late payment.

Answer: C

Question: 108
What is the cut-off time for a same day customer payment using TARGET2?

A. 16:00 (4:00 p.m.) Central European Time (CET)

B. 17:00 (5:00 p.m.) Central European Time (CET)
C. 18:00 (6:00 p.m.) Central European Time (CET)
D. 18:30 (6:30 p.m.) Central European Time (CET)

Answer: C

Question: 109
You find that you have paid an amount to the wrong counterparty. What action should you take?

A. Wait until the counterparty contacts you to before deciding what to do

B. Immediately contact the counterparty to find the most appropriate way to have the funds
returned as quickly as possible to minimize the loss of value days
C. Ask the counterparty to keep the money and to place (invest) it at a special rate
D. Ask your accounting department to book the amount as a loss

Answer: B

Question: 110
The use of a net open positions report:

A. can be used to show the counterparty the amounts it has to pay

B. can be used as the basis of reporting the bank’s position to the relevant central bank of the
country concerned, against the limit granted for the bank
C. can be used as the basis of reporting the bank’s position to the relevant tax regulations office of
the country concerned
D. can be used to adjust the country limits

Answer: C

Question: 111
You have 10 credited amounts of 1 million each with same value date and same currency. Which of
the following items is most helpful in reconciling these amounts?

A. When the deal was processed is a good indication of the amounts to be reconciled
B. Each deal is registered according to a unique reference which helps in reconciling the items
C. The BIC-address helps you to reconcile the open items
D. None of the above. You should telephone your counterparties to request more information

Answer: B
 Question: 112
Why should the maturity profile of unreconciled items be frequently reviewed?

A. It allows the compliance officer to see how often the reconciliation staff has claimed for an
outstanding item
B. It allows management to see what items are pending by value and counterparty, but also how
long items have been outstanding and whether there is an improvement in the pace of
reconciliations.
C. It allows reconciliation staff to check the bilateral limits with counterparties and to adjust these
limits as necessary
D. Because the most recent figures have to be published in the balance report

Answer: C

Question: 113
Why is securities reconciliation necessary?

A. To prevent that a failed order results in a failure to settle that day, which in turn would lead to an
incompletely-reconciled account.
B. To facilitate the handling of complex security transactions.
C. In order to save data capacity in electronic archiving systems.
D. To anticipate the fact that clearing houses stop processing in the afternoon, whereas payment
orders may still be processed until 6 p.m.

Answer: B

Question: 114
What criteria should reconciliation escalation be based on?

A. It should be based on the days’ past settlement date, value and/or likely compensation
B. It should be based on the BIC-address and country
C. It should be based on bilateral limits
D. It should be based on the relationships of the institutions involved

Answer: D

Question: 115
Physical securities reconciliation software packages are based on:

A. SWIFT MT 5XX
B. SWIFT MT 2XX
C. SWIFT MT 320
D. SWIFT MT 400

Answer: C

Question: 116
What is the main purpose of nostro reconciliations?

A. To compare the cash entries that have passed through the bank’s internal nostro accounts, with
the actual cash movements at the bank’s agent account. Thus, expected cash movements are
reconciled with actual cash movements.
B. To compare the securities entries that have passed through the bank’s internal nostro accounts,
with the actual securities movements at the bank’s agent account
C. To compare expected securities movements with actual securities movements
D. To provide an overview of all the transactions listed by counterparty

Answer: D

Question: 117
When completing a nostro reconciliation, what does an unresolved ledger debit signify?

A. The non-receipt of funds from a counterparty

B. The non-payment of funds to a counterparty
C. The duplicate payment of funds to a counterparty
D. The duplicate receipt of funds from a counterparty

Answer: C

Question: 118
A counterparty pays your bank USD 10,000,000.00 5 days late requiring you to pay overdraft charges
of 8% p.
a. What expenses would you claim from the counterparty in GBP at an exchange rate of 1.6000?
A. GBP 6,944.44
B. GBP 7,944.44
C. GBP 17,777.77
D. GBP 6,849.32

Answer: D

Question: 119
Loan/deposit input and mismatch analysis capability belongs to which module in a treasury system?

A. The FX spot and forward dealing input and processing module

B. Standard back office features
C. The money market dealing and processing module
D. The securities trading and processing module

Answer: C

Question: 120
What is the Bank Identifier Code (BIC)?

A. A worldwide unique identification code for both financial and non-financial institutions
B. A unique identification code for European financial institutions
C. The short form of the IBAN-code
D. A unique access-code to SWIFT-platforms

Answer: A

Question: 121
Which country does the BIC-address BKENGB33CUS belong to?

A. The United Kingdom

B. The United States of America
C. Kenya
D. Gambia

Answer: D

Question: 122
Which of the following is an example of market risk?
A. Counterparty risk
B. Country risk
C. Settlement risk
D. Stock price risk

Answer: C

Question: 123
What does FSA stand for?

A. Financial Standards Authority

B. Financial Supervisory Association
C. Financial Services Authority
D. Financial Securities Association

Answer: D

Question: 124
Bank A has a large number of forward OTC trades with Bank B. What risks will be reduced by
concluding a netting agreement?

A. Market-price-risk and replacement risk

B. Market-price-risk and delivery risk
C. Replacement risk and delivery risk
D. Replacement risk and basis risk

Answer: D

Question: 125
The market standard legal agreement for Interest Rate Swaps is:

A. ISDA
B. ACI
C. SIFMA/ICMA
D. ICMA

Answer: B
 Question: 126
The process used to disguise the trail of laundered funds within the financial system is known as:

A. Streamlining
B. Layering
C. Reinvesting
D. Channeling

Answer: A

Question: 127
Settlement risk is:

A. The risk that a bank makes its payment but does not receive a return payment in the exchanged
currency
B. The risk that exchange rates move against a bank’s position
C. The risk a counterparty defaults on a contract and a bank has to replace that contract at adverse
rates
D. The risk of a disaster that disables a bank’s trading floor

Answer: B

Question: 128
In the weekend newspapers you read that one of your FX counterparties has gone into liquidation.
You have no netting or close-out agreements in place with this counterparty and remember that you
have one forward deal outstanding. What is the main risk affecting your bank?

A. The loss of the entire principal amount of the deal

B. The “replacement risk”, also known as “replacement-cost risk”
C. The loss of the negative mark-to-market value of the deal
D. As the deal is in the future, there is no impact on P&L

Answer: C

Question: 129
The CLS-Bank (Continuous Linked Settlement) is one of the ways through which FX transactions can
be settled. Why was this bank founded?

A. To simplify domestic payments

B. To handle interbank liquidity more efficiently
C. To accelerate cross-border payments
D. To minimize settlement risks

Answer: A

Question: 130
Your dealer has sold USD 10,000,000.00 against JPY at a rate of 95.00. In settlement you would
expect to:

A. Receive JPY 105,263.16

B. Pay JPY 950,000,000
C. Receive JPY 950,000,000
D. Pay JPY 105,263

Answer: A

Question: 131
What are the factors determining if a FX transaction can be settled through the CLS Bank?

A. Currency pair, price

B. Currency pair, counterparty, time
C. Currency pair, price, counterparty
D. Counterparty, price

Answer: D

Question: 132
Which of the following are examples of “contracts for difference”?

A. Forward rate agreement (FRA) and non deliverable forward (NDF)

B. FX Swap and interest rate swap
C. Spot FX deal and non deliverable forward (NDF)
D. FX Swap and currency future
 Answer: C

Question: 133
How is a call money market transaction generally confirmed?

A. By a SWIFT MT 320
B. By a SWIFT MT 330
C. By a SWIFT MT 340
D. By a SWIFT MT 360

Answer: B

Question: 134
Today is Friday, 28 July. Considering that there is a bank holiday in Switzerland on Tuesday, 1 August,
what is the value date of a money market deal in CHF?

A. 31 July
B. 1 August
C. 2 August
D. 3 August

Answer: B

Question: 135
Under normal circumstances, which of the following is a non-negotiable instrument?

A. A Medium Term Note

B. A Banker’s Acceptance
C. A Money Market Deposit
D. A Treasury Bill

Answer: B

Question: 136
A dealer, seeking to refinance a money market short position in USD, could choose to:
A. Sell EUR/USD or GBP/USD spot
B. Deal Reverse Repos (Reverse Sale and Repurchase Agreements)
C. Place USD in torn next
D. Deal Repos (Sale and Repurchase Agreements)

Answer: D

Question: 137
Your dealer has sold a 3x6 AUD 10,000,000.00 FRA at 3.10%. On settlement day the 3-month (90-
day) fixing is 3.00%. What would you do?

A. Pay AUD 2,447.65

B. Receive AUD 2,500.00
C. Pay AUD 2,481.39
D. Receive AUD 2,481.39

Answer: A

Question: 138
Today is Monday, 8 December. You sell a 9x12 FRA in EUR. When will the settlement amount be paid
or received, assuming that there are no bank holidays?

A. 8 September
B. 10 September
C. 8 December
D. 10 December

Answer: A

Question: 139
Today is the fixing date for 6x9 FRA that you sold at 5.50% and for which the LIBOR is now 6.00%.
Which of the following is true?

A. You will pay a cash settlement to the counterparty

B. You will receive the cash settlement
C. There is no cash settlement pending
D. There is insufficient information to make a determination
 Answer: B

Question: 140
Your bank purchases a FRA at 0.75% in USD. Under what conditions will you pay a cash settlement?

A. If EURIBOR is higher than 0.75%

B. If EURIBOR is lower than 0.75%
C. If LIBOR is lower than 0.75%
D. If LIBOR is higher than 0.75%

Answer: B

Question: 141
A plain vanilla interest rate swap (IRS) is:

A. An agreement to exchange one stream of interest payments for another (fixed against floating)
B. A fixed rate leg in one currency and a fixed rate leg in another currency
C. Two floating rate legs on different indexes
D. An agreement to borrow and lend one currency for another at two different value dates

Answer: B

Question: 142
The clearing house of a financial futures exchange:

A. Acts as counterparty to each buyer and seller

B. Is responsible for market making
C. Requires members to cover their commitments on a week-to-week basis
D. Does not regulate trader’s activities

Answer: B

Question: 143
A 3-month Eurodollar futures price of 99.25 implies a forward rate of:

A. 0.9925%
B. 0.75%
C. 0.0075%
D. 0.25%

Answer: A

Question: 144
Which of the following is a description of a long OTC foreign currency option position?

A. The obligation to buy one currency and to sell another currency at a predetermined price
B. An option that uses 1MM maturities
C. An option dealt directly between two counterparties
D. An interest rate protection instrument dealt on an exchange trading floor

Answer: B

Question: 145
The exercise price (strike price) of an option contract is:

A. The price of the underlying instrument at the time of the transaction

B. The price at which the transaction on the underlying instrument will be carried out if the option is
exercised
C. The price the buyer of the option pays to the seller when entering into the options trade
D. The price at which the two counterparties can closeout their position

Answer: A

Question: 146
The yield of a 1 month FRN in EUR depends on

A. The level of short-term EUR interest rates

B. The level of medium-term EUR interest rates
C. The slope of EUR yield curve
D. The level of long-term EUR interest rates

Answer: A
 Question: 147
A bank responsible for making due payments of principal and interest on a bond is called the

A. Purchase agent
B. Paying agent
C. Fiscal agent
D. Market maker

Answer: A

Question: 148
A bond selling at a discount will be selling for:

A. Less than 100%

B. 100%
C. More than 100%
D. More than a bond selling at a premium

Answer: A

Question: 149
In the bond market, which of the following is true about the settlement amount?

A. The settlement amount is the sum of the redemption value plus all coupons paid by the issuer.
B. If the yield and the coupon are exactly the same, the settlement amount and the face value will be
identical.
C. The settlement amount is always calculated using the redemption price.
D. On a coupon date, if the bond quotes at par, the settlement amount and the face value will be
identical.

Answer: D

Question: 150
On 15 April 2010 you buy a bond whose coupon falls on 15 January 2010. The interest basis is
30/360. Using bond settlement T+1, how many days do you apply for the interest calculation?

A. 89 days
B. 90 days
C. 91 days
D. 92 days

Answer: C

Question: 151
What is the documentation in which the parties agree to the terms that will govern future
transactions?

A. Standard settlement instructions

B. Netting agreement
C. Terms of engagement
D. Master agreement

Answer: B

Question: 152
Which of the following is considered a good practice in trade confirmation?

A. Confirmations should be issued to non-front office personnel only

B. All confirmations must be sent on the day following the trade date at the latest
C. Multiple confirmations sent through different distribution channels reduce potential errors
D. Counterparties should send confirmations, or positively affirm trades within 24 hours of the trade
booking

Answer: B

Question: 153
Which of the following risks is best mitigated by CLS?

A. Currency risk
B. Operational risk
C. Liquidity risk
D. Settlement risk

Answer: D
 Question: 154
Which of the statements about pricing on electronic trading platforms is incorrect?

A. Market makers must ensure that their prices are adequate and appropriate for their trading style
B. Prices must be posted with the clear intent to be tradable
C. There need not be a clear and genuine intent to trade on each posted price
D. Prices quoted should be firm unless clearly labeled as indicative

Answer: D

Question: 155
What guidelines does the Model Code provide concerning the practice in the interbank market of
only one party to a transaction sending a written confirmation?

A. It is only permissible in derivatives markets

B. Both parties of a trade should send confirmations
C. It is recommended
D. It is only permissible when dealing value today

Answer: A

Question: 156
Which one of the following statements about claims is true?

A. Claims are not expected to be submitted after 15 days from the actual settlement date.
B. Claims of less than USD 5,000.00 are not expected to be submitted.
C. Claims are calculated on the full principal amount of the failed transaction. Interest rates are
imposed by the agent banks, unless a higher negotiated rate is to be applied.
D. Acknowledgement of receipt of a claim should be confirmed within 48 hours by email or SWIFT.

Answer: A

Question: 157
As regards controls, which of the following best practices for counterparty identification is incorrect?

A. Amendments to customer standing data should be subject to 4 eyes control and only changed if
the appropriately authorized documentation is provided.
B. The set up of settlement instructions and the confirmation method should be fixed when setting
the first transaction.
C. No trading should be done without first identifying and setting up the counterparty.
D. Counterparty identification and setup of settlement instructions should be completed in less than
2 working days.

Answer: D

Question: 158
Experience has shown that recourse to taped telephone conversations proves invaluable to the
speedy resolution of disputes. Therefore, the Model Code recommends:

A. That all telephone conversations (internal and external) be taped without informing
counterparties
B. That only conversations undertaken by dealers and brokers should be recorded
C. That all conversations undertaken by dealers and brokers should be recorded, together with back
office telephone lines used by those responsible for confirming deals or passing payments to other
institutions
D. That only telephone conversations between dealers and brokers be recorded

Answer: C

Question: 159
If manual trade capture methods are used, when should deals be recorded in systems used for this
purpose?

A. The same day they are dealt

B. Promptly
C. Within 24 hours of execution
D. Within an hour of execution

Answer: A

Question: 160
A dealer belongs to:

A. The compliance staff

B. The middle office staff
C. The front office staff
D. The back office staff

Answer: C

Question: 161
How is the price of an interest rate swap (IRS) expressed?

A. As an exchange rate
B. As a cash flow
C. As a margin added to the floating rate
D. As an interest rate expressed in percentage terms

Answer: D

Question: 162
A "basis point", expressed as a percentage, is:

A. 1%
B. 0.01%
C. 0.1%
D. 0.0001%

Answer: B

Question: 163
Which of the following factors must be considered when making interbank EUR payments in RTGS
systems between 17:00 CET and 18:00 CET with same day value?

A. No special requirements need to be considered

B. The receiver has to approve the transfer
C. Interest has to be paid to the receiver
D. The receiver is required to accept the payment amount

Answer: A

Question: 164
As to deal confirmations, who is your counterparty on futures contracts?

A. The futures exchange itself

B. The clearing house of the futures exchange
C. Your broker
D. The ISDA

Answer: B

Question: 165
What is the advantage of instantaneous matching?

A. It gives the counterparty more time to cancel a deal

B. It reduces errors and costs
C. It gives front-office staff more time to process the payment orders
D. It reduces the number of trades

Answer: B

Question: 166
Which of the following is essential for the effective and timely execution of outward payments?

A. Confirmation of the exact processing time of the payment order with the central bank of your
counterparty
B. The strict adherence to the cut-off times of your domestic payment system
C. Confirmation of the time of processing of the payment order with your own central bank
D. The strict adherence to the cut-off times for payments made worldwide

Answer: D

Question: 167
What is the meaning of "good value" in FX?

A. The funds must be in the nostro account of the beneficiary institution by close of business on the
agreed upon value date
B. The funds must be in the nostro account of the beneficiary institution by the beginning of the next
business day
C. The value of interest to be received is higher than the value of fees to be paid
D. The funds must be in the internal cash account of the clearing house by close of business on the
agreed upon value date

Answer: A

Question: 168
What is a correspondent bank?

A. A bank which processes payment orders on behalf of another bank

B. A bank which processes payment orders on national level only
C. A bank which has subsidiaries in CLS-countries
D. A bank which has a minimum reserve account in more than one country

Answer: A

Question: 169
What is the RTGS single technical platform inter-linking the ECB and the national central banks of the
EU member states which have adopted the Euro?

A. CHAPS
B. TARGET 2
C. EAF
D. FX-NET

Answer: B

Question: 170
What is a nostro bank account?

A. An account held with another bank

B. An account another bank holds with you
C. A trust account
D. A suspense account

Answer: A

Question: 171
Which of the following best describes the main objective of the nostro reconciliation function?

A. To ensure efficient cash management

B. To ensure that ail receipts of foreign currency are made in a timely fashion
C. To reduce the amounts paid in interest rate claims due to late payments
D. To ensure that expected cash movements agree with the actual movements of currency

Answer: B

Question: 172
What is a ladder maturity report?

A. A report that starts with the net open position and runs off day by day to arrive at a zero balance
B. A report of outstanding securities transactions
C. A report that begins with a zero balance and at the end of the day, lists all FX deals by maturity
D. A list of the maturity of all deals per value date

Answer: D

Question: 173
Due to an error by your dealers, your bank is 5 days late in paying EUR 10,000,000.00. Your
correspondent bank says it will charge you 6% p.
a. plus reserve costs of EUR 1.00 per thousand. How much will your account be charged for this
overdraft?
A. EUR 8,219.18
B. EUR 8,333.33
C. EUR 18,219.18
D. EUR 18,333.33

Answer: D

Question: 174
Which SWIFT message type is a nostro cash reconciliation software package based on?

A. SWIFT MT 300
B. SWIFT MT 292
C. SWIFT MT 571 (i.e. a statement of holdings)
D. SWIFT MT 940 and MT 950 (i.e. a statement of account)
 Answer: D

Question: 175
Why is a failed trade log important?

A. It helps the risk manager to adjust the limits

B. It allows the cash positions keeper to retrace the arrival of the funds
C. It is essential in determining compensation arrangements at a later date
D. The auditors require these logs for their statistics

Answer: C

Question: 176
Which of the following is an example of a foreign currency nostro account from the perspective of a
bank in London?

A. A GBP account with another UK bank

B. A CHF account with a bank in Zurich
C. A CHF account that it holds for a customer in London
D. A GBP account that it holds for a bank in New York

Answer: B

Question: 177
When completing a nostro reconciliation, what does an outstanding statement credit possibly
signify?

A. The non-receipt of funds from a counterparty

B. The non-payment of funds to a counterparty
C. The duplicate payment of funds by a counterparty
D. The duplicate receipt of funds from a counterparty

Answer: D

Question: 178
You receive a trade to process with counterparty settlement instructions that differ from those you
hold on your standard settlement instruction file (SSI).

A. You should make the payment in accordance with the SSI you are holding without referring to
your dealer or contacting the counterparty
B. You should make the payment in accordance with the trade instructions
C. You should check the SSI with your dealer and contact the counterparty to seek his specific
instructions
D. You should not make the payment

Answer: C

Question: 179
Inexplicably, the Chief FX trader asks the junior settlements clerk to hold back a deal input until the
following morning. Which of the following courses of action should you recommend?

A. Refuse, input the deal as normal but keep the request to yourself
B. Input the deal the following morning as requested by the Chief FX trader
C. Refuse, input the deal and tell another spot trader
D. Refuse, input the deal and report the incident to your superior

Answer: D

Question: 180
You suspect that a colleague is guilty of embezzlement. What should you do?

A. Keep the information to yourself

B. Tell your supervisor
C. Tell your work-mates but not your supervisor
D. Talk to the colleague in question

Answer: B

Question: 181
«Illiquid» describes an instrument which:

A. Does not trade in an active market

B. Does not trade on any exchange
C. Cannot be easily hedged
D. Is an over-the-counter (OTC) product

Answer: A

Question: 182
You are in the pub with a friend who works for another financial institution. The friend asks you for
information about a mutual customer's forward foreign exchange dealing volumes. What should you
do?

A. Tell him all you know

B. Tell him nothing
C. Give him some of the information because the deal involves a mutual customer
D. Tell him you will investigate and get back to him with the information

Answer: B

Question: 183
What are the consequences for credit risk when a collateral agreement is added to a netting
agreement?

A. A collateral agreement eliminates the future replacement risk

B. A collateral agreement can reduce market risk
C. A collateral agreement can reduce operational risk
D. A collateral agreement can reduce the replacement risk

Answer: D

Question: 184
As far as interest rate swaps are concerned, which risk is reduced or eliminated when a close-out
netting agreement is in place?

A. Replacement risk
B. Volatility risk
C. Commercial risk
D. Market risk is reduced to a predefined amount

Answer: A
 Question: 185
The use of netting in foreign exchange dealings has increased because it reduces:

A. The volume of confirmations that have to be sent to the counterparties

B. Foreign exchange dealing limits and the currency risk exposure of the banks
C. The potential foreign exchange trading losses incurred by banks
D. Interbank payments, counterparty credit risk exposure, as well as the amount of capital allocated
to foreign exchange activity

Answer: D

Question: 186
Your FX swap dealer bought and sold 1 month GBP/USD 25,000,000,00; rates were set to 1,5305
against 1.5300. What payment is your bank expecting in a month from now?

A. USD 38,250,000.00
B. USD 38,262,500.00
C. GBP 25,000,000.00
D. USD 16,339,869.28

Answer: A

Question: 187
In FX swaps, the rate of the spot leg:

A. May be freely chosen by the quoting party as long as both parties agree on it
B. Must always be fixed immediately at the current mid rate, to reflect the rate at the time the deal
was made
C. Should be fixed immediately within the current spread, to reflect current rates at the time the
transaction was made
D. Should always be fixed off the current spread in order not to be mistaken for a spot FX transaction

Answer: C

Question: 188
Today, the spot value for a USD deposit is Wednesday, 29 February. What is the 4 months maturity
date? (Assume that there are no bank holidays)
A. Thursday, 27 June
B. Friday, 28 June
C. Saturday, 29 June
D. Monday, 1 July

Answer: B

Question: 189
The capital market is the general term for a financial market in which:

A. Short-term debt, equities and securities, as well as short-term financial instruments are traded;
maturities are generally less than one year
B. Medium to long-term debt and financial instruments, as well as medium and long-term securities
are traded until they reach maturity
C. Only long-term corporate bonds, with maturities of five years or more, are bought and sold
D. Only short-term financial instruments and short-term securities are traded

Answer: B

Question: 190
Your money market dealer has accepted a deposit of NOK 10,000,000.00 at 2.375% for 12 months
(365 days). How much will you have to pay back in capital plus accrued interest at maturity?

A. NOK 10,240,799.00
B. NOK 240,798.61
C. NOK 10,237,500.00
D. NOK 10,240,798.61

Answer: D

Question: 191
If the maturity of a straight 3-month deposit fails on a Saturday, which is also the last day of the
month, what will be the final end date of this transaction?

A. The following Monday

B. Saturday
C. The last business day of the month
D. The first business day of the following month
 Answer: C

Question: 192
The notional amount in an interest rate swap is:

A. The sum of all the fixed and floating rate payments

B. The net difference between fixed and floating rate payments
C. The amount on which floating and fixed interest payments are calculated
D. The amount at which the two counterparties can close-out their transaction

Answer: C

Question: 193
What is the "spread" in an interest rate swap (IRS)?

A. The interest rate differential between the fixed and floating leg of the swap
B. The brokerage fee for an interest rate swap transaction
C. The payment made when a swap is terminated
D. The difference between the swap rate and the benchmark government yield

Answer: D

Question: 194
The writer of an options contract:

A. Bears a risk limited to the premium paid

B. Bears a substantial risk
C. Bears a risk limited to the premium received
D. Bears no risk

Answer: B

Question: 195
An American-style option is:
A. An option traded in USD
B. An option which can be exercised at any time between the purchase and expiration date
C. An option based on any US dollar instrument
D. An option which can be exercised only on its expiry date

Answer: B

Question: 196
Which one of the following bonds uses variable rates?

A. Bond warrants
B. Reverse convertibles
C. Zero coupons
D. Mini-Max (collared) FRN

Answer: D

Question: 197
The coupon of this type of bond can be based on a country's CPI (Consumer Price Index);

A. "Step up" bonds

B. Index linked bonds
C. Premium bonds
D. Par bonds

Answer: B

Question: 198
Sterling Treasury bills can be issued with maturities of:

A. 3 months, 6 months and 9 months

B. 1 month only
C. Up to 2 years
D. 1 month, 3 months, 6 months and 12 months

Answer: D
 Question: 199
Between which departments are clear and structured escalation procedures required for the
management of incorrect funding balances?

A. Nostro reconciliations, the Cash Management Department and Operations

B. Front Office, the Cash Management Department and Operations
C. Front Office, Nostro reconciliations and Operations
D. Front Office, Nostro reconciliations and the Cash Management Department

Answer: B

Question: 200
Which of the following statements about "standard settlement instructions" (SSI) is correct?

A. The Head of Operations has the sole responsibility of ensuring the correctness and validity of the
SSI set up.
B. SSIs should be stored and maintained in the bank's general static data system.
C. Each institution should have a separate SSI team to prevent / minimize the potential risk of fraud.
D. SSI staff should be fully integrated within Operations to insure consistent and reliable settlement
guidelines.

Answer: C

Question: 201
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.

Answer: B

Question: 202
Who is in charge of maintaining complete records of all transactions and any additional
documentation in accord with internal guidelines and regulatory requirements?
A. Operations
B. Compliance
C. Internal Audit
D. Archives

Answer: A

Question: 203
With regard to operational risk awareness, which of the following best practices is incorrect?

A. A report describing operational risks, the most significant incidents and corrective plans of action
should be established on a quarterly basis.
B. It is good practice to collect and analyze incidents and near-misses so as to set up preventive
action plans for the future.
C. Every time a report describing operational risks is produced, it should be provided to senior
management.
D. Whenever possible action plans should be put in place that mitigate operational risks that have
been identified.

Answer: A

Question: 204
In settlement, which "know your trade" best practice is incorrect?

A. Each transaction should be processed always in advance of the payment cut-off time.
B. Know the status of your trade.
C. Prioritize trade settlement considering payment cut off times including currency sensitivity and
size of amount.
D. A trade booked in the front office should be available to the cash management department no
later than the close of trading day for nostro account management.

Answer: D

Question: 205
Which of the following statements about operational risk awareness is correct?

A. It is good practice to collect and disclose incidents and near-misses for the future benefit of the
professional community.
B. It is good practice to collect and analyze incidents and near-misses so as to set up preventive
action plans for the future.
C. A report describing operational risks should be made at the request of the front office.
D. A report describing operational risks should be made at least once a year and provided to the
front office.

Answer: B

Question: 206
Payments to the wrong correspondent, payments in the wrong amount, late or duplicate payments
are considered:

A. Transaction irregularities
B. Confirmation discrepancies
C. CIS mismatches
D. Settlement discrepancies

Answer: D

Question: 207
What does LIBOR stand for?

A. London Interbank Overseas Rate

B. London Interbank Offered Rate
C. Lending Interbank Offered Rate
D. Leading Interbank Offered Rate

Answer: C

Question: 208
The difference between the bid and the offer rate of a money market quotation is called:

A. The margin
B. The spread
C. The variation
D. The premium

Answer: A
 Question: 209
Which department is responsible for originating deals?

A. The front office

B. The back office
C. The middle office
D. The compliance department

Answer: B

Question: 210
Confirmation is a function that can be performed by:

A. Any dealer as long as he/she is not a party to the trade

B. Back-office/operations staff
C. Dealing room staff who are not currently dealing
D. Any staff outside the dealing room

Answer: D

Question: 211
In trading, which is the most often used deal capture system?

A. An internet-based input system

B. A SWIFT-based input system
C. A TARGET-based input system
D. A screen-based input system

Answer: D

Question: 212
A bank in Luxembourg has dealt an interbank money market trade with a Canadian bank and must
pay USD. Whom does the Luxembourg bank you instruct for payment?

A. Its correspondent bank in Canada

B. Its national central bank
C. The European Central Bank
D. Its correspondent bank in the USA

Answer: C

Question: 213
What is a feature of multilateral netting?

A. There are no more than two participants involved in the netting process
B. There is no redistribution of default risk
C. There is a central clearing house
D. No legal entity is required

Answer: C

Question: 214
When is the final cut-off time for foreign payment orders in the Fedwire Funds Service?

A. 17:00 (5:00 p.m.) Eastern Time (ET)

B. 17:30 (5:30 p.m.) Eastern Time (ET)
C. 18:00 (6:00 p.m.) Eastern Time (ET)
D. 19:00 (7:00 p.m.) Eastern Time (ET)

Answer: B

Question: 215
What is the meaning of settlement (Herstatt) risk?

A. The risk a payment order will not be processed due to a power failure in which the disaster
recovery back-up system fails
B. Any amount that is due to be received under a contract should be regarded as a settlement risk
until final confirmation of receipt is confirmed
C. The risk that settlement arrangements will be made with the wrong counterparty
D. The risk of aborting settlement procedures due to the unavailability of back office staff

Answer: C
 Question: 216
What are the communication channels most often used for investigations?

A. VoIP
B. Mail, fax
C. Phone, SWIFT
D. Reuter Dealing

Answer: A

Question: 217
Which of the following is the main objective of position-keeping?

A. Measuring market exposure

B. Defining capital adequacy
C. Evaluating country risk
D. Monitoring counterparty credit risk

Answer: C

Question: 218
Which of the following steps describes the correct sequence for running an investigation?

A. 1. Gather all the required documentation; 2, Reach an agreement with your dealer; 3. Send a
claim to the counterparty
B. 1. Inform the compliance officer; 2, Gather all required documentation; 3. Contact the
counterparty's dealer; 4. Reach an agreement with the counterparty's dealer
C. 1. Contact the banks' attorney; 2. Ask your dealer to amend or to cancel the deal; 3, ask the
accounting department to the adjust value date
D. 1. Gather all required documentation; 2. Determine the origin of any discrepancy 3, get in contact
with the counterparty and submit the facts 4. Reach an agreement with the counterparty

Answer: D

Question: 219
What is a bank required to do when entering into a new business relationship with a natural person?
A. Inform the central bank of their country
B. No action is required
C. Verify the identity of the person
D. Inform the risk management department

Answer: C

Question: 220
The risk that an institution will experience a loss on a trade or a position due to an adverse
exchange/interest rate movement is best described as:

A. Operational risk
B. Market risk
C. Systemic risk
D. Credit risk

Answer: D

Question: 221
Which of the following trades involves replacement risk?

A. The purchase of shares through Eurex Clearing (payment against delivery)

B. The purchase of an OTC call option
C. The taking of call money
D. A long position in Bund futures

Answer: B

Question: 222
A large corporate client sends you a case of expensive wine as a reward for settling a compensation
case in their favor. What should you do?

A. You should decline the gift.

B. You should share the gift amongst your back office colleagues.
C. You should report the gift to management and leave it to the management's discretion as to
whether you are allowed to keep the gift.
D. You should accept the gift without question as it was personally addressed to you.
 Answer: D

Question: 223
What type of documentation is recommended for repos in the international markets?

A. The SEC Emergency Short Sale Rules

B. The ISDA Master Agreement
C. The Global Master Repurchase Agreement published by the ICMA
D. An International Securities Lending Agreement

Answer: C

Question: 224
If you had bought USD/CNY at 6.2500 in a NDF and if it fixed at a spot rate of 6.3000, you would
expect to:

A. Pay a cash settlement in USD

B. Pay a cash settlement in CNY
C. Receive a cash settlement in USD
D. Receive a cash settlement in CNY

Answer: B

Question: 225
If a spot next EUR/USD FX Swap is traded on Monday, 18 August, and there are no holidays in the
relevant currencies during the week of August 18 - 22 what would be the value dates of the two
swap legs?

A. 18 -19 August
B. 20 August - 20 September
C. 20 - 21 August
D. 19 - 20 August

Answer: D

Question: 226
The discount or premium on forward foreign exchange points is calculated based on:

A. The level of interest rates in the base currency

B. The level of interest rates in the counter currency
C. The differential between the interest rates in the two currencies
D. The current volatility in the FX markets

Answer: A

Question: 227
If the EUR/USD is quoted to you as 1.3550-53, what does this price represent?

A. EUR per USD

B. USD per EUR
C. The interest rate differential between EUR and USD
D. The fact that one USD is worth more than one EUR

Answer: C

Question: 228
Forward points represent:

A. The value of a currency against its base

B. Largely the interest rate differential between two currencies
C. The time/value ratio of one currency versus another
D. The future value of a currency

Answer: C

Question: 229
Which of the following are products used in bank liquidity management?

A. Money market taking and placing, sale and repurchase agreements (repos)
B. Currency options and currency futures
C. Spot FX transactions
D. Caps, floors, collars, and interest rate futures

Answer: B
 Question: 230
On the sale of a CD, the seller:

A. Receives a lower price than he originally paid

B. Receives a higher price than he originally paid
C. Receives a price calculated using the price originally paid
D. There is not enough information to know how much the seller receives

Answer: B

Question: 231
The interest earned on a HUF 5.000.000.00 money market deposit for 90 days is HUF 62,500.00.
What was the interest rate?

A. 5.07%
B. 5.06%
C. 4.93%
D. 5.00%

Answer: D

Question: 232
Which of the following is caracteristical of a CD?

A. A CD is a certificate for a gold deposit

B. The CD issuer can redeem the certificate at any time
C. It is a non-negotiable instrument
D. A CD is a certificate for a time deposit

Answer: C

Question: 233
What is the rate of interest paid by the European Central Bank on cash amounts exceeding the
minimum reserve requirement (excess reserves)?

A. EONIA - 5 basis points

B. EONIA flat
C. 0%
D. EONIA -10 basis points

Answer: D

Question: 234
When is the settlement amount of a FRA normally payable?

A. At the beginning of the forward period

B. On the trade date
C. On the maturity (final) date
D. At any time before the contracts maturity date

Answer: A

Question: 235
How could you close out a futures contract?

A. Reverse and cash trade

B. Cash and carry
C. Reverse cash and carry
D. Offset

Answer: C

Question: 236
A callable bond attributes a right to:

A. The lead manager to acquire the entire issue

B. The lead manager to acquire the entire issue and the issuer to redeem the note at specified dates
C. The issuer to redeem agreed upon quantities of the note at specified dates
D. The note holder to sell the notes at specified dates

Answer: D

Question: 237
In the UK, Sterling T-Bills are issued by:

A. The Government (Debt Management Office)

B. The Bank of England
C. The FSA
D. The International Monetary Fund (IMF)

Answer: D

Question: 238
By what means should a financial institution preferably submit SSI changes and notifications to its
clients?

A. E-mail
B. Fax or letter
C. MTn99 Swift message
D. MT670/671 Swift message

Answer: B

Question: 239
Which of the following statements about the time frame for claims is incorrect?

A. Claims after 30 days of the actual settlement date need not to be submitted.
B. Claims should be sent to the counterparty as soon as possible and within 30 days at the latest.
C. Claims must be sent to the counterparty within 15 days of the actual settlement date,
D. The maximum time limit for a claim submission is 60 days.

Answer: D

Question: 240
When is a trade considered a binding agreement for the counterparties?

A. Once the trade is agreed to by both the front offices

B. As soon as one of the counterparties has confirmed the trade
C. Once the confirmation is accepted by both parties to a trade
D. As soon as the master agreement has been signed by both parties
 Answer: D

Question: 241
Your agent bank accepts your back-valuation request for 1 day on an amount of EUR 75,000,000.00.
EONIA is 1.312% and the ECB marginal lending facility rate is 1.50%. Applying conventional
administration fees, how much will this be charged?

A. EUR 3,354.17
B. EUR 3,225.00
C. EUR 3,125.00
D. EUR 2,833.33

Answer: C

Question: 242
If today is Thursday, 12 December, what is the spot date for a EUR/USD transaction?

A. 14 December
B. 15 December
C. 16 December
D. 17 December

Answer: C

Question: 243
If today is Wednesday, what are the value days of a spot next money market deal assuming there
are no intervening bank holidays?

A. Wednesday against Thursday

B. Thursday against Friday
C. Friday against Monday
D. Monday against Tuesday

Answer: B

Question: 244
If an overnight EUR/USD FX swap is traded on Tuesday, 19 June, and there are no currency holidays
during the week of June 18 - 22, what would be the value dates of the two swap legs?

A. 18 June against 19 June

B. 19 June against 20 June
C. 20 June against 21 June
D. 21 June against 22 June

Answer: A

Question: 245
What is a "tick" in the futures markets?

A. The maximum daily price change permissible on the futures exchange

B. A temporary suspension of trading at a futures exchange
C. The initial margin requirements at a futures exchange
D. The minimum fluctuation in price allowed for a futures contract as specified by the contract terms

Answer: A

Question: 246
If a GBP/CHF trade is made on the spot foreign exchange market on Tuesday, when will the two
currencies be settled if tomorrow (Wednesday) is a bank holiday in the U.K.?

A. Both currencies will be settled value date Friday

B. GBP will be settled value Friday, CHF value Thursday
C. Both currencies will be settled value Thursday
D. GBP will be settled value today, CHF will be settled value Friday

Answer: C

Question: 247
Which department is responsible for deal settlement?

A. The front office

B. The back office (Operations)
C. The U department
D. The middle office
 Answer: C

Question: 248
What does "SWIFT" stand for?

A. Society for World-wide Interbank Financial Transactions

B. Society for World-wide Interbank Financial Telecommunications
C. Society for World-wide International Financial Transactions
D. Society for World-wide International Financial Trading

Answer: B

Question: 249
When should discrepancies between front-office and back-office systems be resolved?

A. By the end of the trading day

B. On the next business day
C. On the value date
D. As soon as they become apparent

Answer: D

Question: 250
You have received the requisite notification from a non-swapping counterparty that their USD
correspondent is to be changed from Bank A to Bank B taking effect from value date 15 June. On 14
June, you buy JPY 50,000,000 from your counterparty against USD for value spot. What payment will
you execute?

A. USD payment to Bank A

B. USD payment to Bank B
C. JPY payment to Bank A
D. JPY payment to Bank B

Answer: C

Question: 251
Why is the use of netting systems encouraged?

A. To avoid too heavy a workload for operations staff

B. To reduce settlement and credit risk
C. To enhance the straight through processing
D. To reduce the brokerage fees

Answer: A

Question: 252
Which one of the following best describes the correct order of the settlements process?

A. Netting, trade entry, settlement, confirmation, nostro reconciliation

B. Confirmation, netting, trade entry, settlement, nostro reconciliation
C. Trade entry, confirmation, netting, settlement, nostro reconciliation
D. Trade entry, confirmation, settlement, nostro reconciliation, netting

Answer: B

Question: 253
A message received but not accepted by SWIFT will be acknowledged with:

A. NOK
B. ACK
C. PAC
D. NAK

Answer: A

Question: 254
What are the key fields for matching criteria in a spot FX transaction?

A. Value date, currency and the amount bought or sold in the two currencies
B. Value date, currency and the amount bought in that currency, currency and the amount sold in
that currency, exchange rate
C. Deal date, value date and exchange rate
D. Value date, account number and BIC-address
 Answer: D

Question: 255
What is the disadvantage having separate cash accounts?

A. You need more back office staff to book the fees

B. One account could be overdrawn while the other has excess funds. The surplus balance would
earn less interest than the amount being charged on the corresponding overdraft if an error occurs
in settlement. Thus there is a risk of overdraft interest versus idle balances
C. One securities account could be overdrawn while the other has excess securities. The surplus
balance would earn less interest, if any, than that being charged on the corresponding overdraft if an
error occurs in settlement
D. The workload of the auditors, compliance officers, risk managers and dealers will be higher

Answer: C

Question: 256
S.S.I. stands for:

A. Secure Software Integration

B. Standard Settlement Instructions
C. Swiss Spot Index
D. SWIFT Settlement Instruction

Answer: B

Question: 257
To ensure effective risk management within a large financial institution, the head of risk
management should report to:

A. The head of trading

B. The head of IT
C. The board of directors (top management)
D. One cannot say, it depends on the financial institution

Answer: A
 Question: 258
What are the main advantages of settling an FX transaction through the CLS Bank?

A. CLS eliminates foreign exchange risk and thus increases bank profits on FX deals
B. CLS minimizes the settlement risk
C. CLS reduces operational banking costs
D. CLS eliminates the settlement risk but reduces operational efficiency

Answer: A

Question: 259
Depending on the interest rates of the two currencies involved, the forward foreign exchange rate:

A. Can only be higher or equal to the current spot rate

B. Can only be lower or equal to the current spot rate
C. Can never be equal to the current spot rate
D. Can either be higher, lower or equal to the current spot rate

Answer: A

Question: 260
What are the ISO codes for the Canadian Dollar, the Singapore Dollar, the South African Rand and
the Swiss Franc (though not necessarily in that order)?

A. SAR, CAD, SFR, SGD

B. CAD, CHF, SGD, SAR
C. SFR, SGD, ZAR, CAD
D. SGD, ZAR, CAD, CHF

Answer: C

Question: 261
Which of the following currency risks could only be hedged by a non deliverable forward (NDF)?

A. An exposure in Singapore Dollar (SGD)

B. An exposure in Thai Baht (THB)
C. An exposure in Philippine Peso (PHP)
D. An exposure in Hong Kong Dollar (HKD)

Answer: C

Question: 262
If today's spot date were Friday, 27 February, what would the normal one-month deposit maturity
date be? (Assume there are no bank holidays)

A. 28 March
B. 29 March
C. 30 March
D. 31 March

Answer: B

Question: 263
EURIBOR, the Euro Interbank Offered Rate is:

A. The rate at which Euro interbank term deposits are offered by one prime bank to another prime
bank published at 11.00 a.m. CET
B. The interest reference rate for the Euro calculated daily from the rates of 15 London banks
C. The interest reference rate for all major currencies calculated daily from the rates of panel banks
from EU countries
D. The rate at which Euro interbank term deposits are offered by prime banks to corporate
published at 11.00 a.m. CET

Answer: D

Question: 264
Generally, "initial margin" means:

A. The notional amount of a contract

B. A deposit amount per contract that is determined by the futures exchange
C. The maximum net loss during the contract period
D. The minimum net loss during the contract period

Answer: C
 Question: 265
You are an issuer of a straight bond and you want to change your exposure from a fixed rate to a
floating rate because you expect a fail in interest rates. What would you do?

A. Buy an IRS
B. Sell an IRS
C. Buy a FRA
D. Do nothing because the bond coupon is already a fixed rate

Answer: C

Question: 266
What is a straddle?

A. A level of risk on derivatives

B. A type of option
C. A derivative benchmark
D. A derivative strategy using options

Answer: B

Question: 267
A 7% bond, maturing in 10 years, is selling at 92.00. What is its current yield?

A. 7.61%
B. 6.40%
C. 7%
D. The yield cannot be determined

Answer: D

Question: 268
The "centralized collateral management service" offers which of the following services for its clients?

A. The valuation and transfer of collateral in general collateral (GC) repos only
B. The valuation and transfer of collateral in tri party repos only
C. The valuation and transfer of collateral in special repos only
D. The valuation and transfer of collateral in any type of repo

Answer: B

Question: 269
Which of the following institutions is a cross-border clearing house?

A. Monte Titoli, Milano

B. Eurocontrol, Brussels
C. CME Group, Chicago
D. Western Union

Answer: D

Question: 270
In order to be introduced in a controlled manner, which areas should be involved before a new
product or business strategy is launched?

A. Product Control, Legal and Compliance, Front Office, Treasury and Operations
B. Senior management only
C. Front Office and Treasury Middle Office
D. All relevant areas

Answer: B

Question: 271
Which kind of confirmation does the Model Code strongly recommend?

A. Verbal confirmation
B. Voice affirmation
C. Electronic confirmation
D. Physical confirmation

Answer: D

Question: 272
If a trade is to settle in a CCP or CLS:

A. The parties may agree verbally not to exchange confirmations

B. A party can unilaterally eliminate confirmations for these trades
C. It is left to the discretion of each party to send a confirmation or not
D. The parties may agree in writing not to exchange confirmations

Answer: C

Question: 273
Which of the following is the primary responsibility of an Operations Department?

A. Writing the deal ticket

B. Arranging the delivery of currency payments
C. Checking the availability of counterparty limits
D. Agreeing on the FX rate with the counterparty's middle office

Answer: C

Question: 274
Under what circumstances should you ask for "use of funds"?

A. If you have credit balances on several nostro accounts and have to use these balances to cover
your outstanding payment orders
B. If your nostro A shows a debit whereas your nostro B shows a credit balance, you allow
correspondent B to use your credit balance to work with, in order to receive credit interests to
partially or totally cover the overdraft interests on nostro A.
C. If at the end of a month, you want to collect the credit balances and to ask for credit interest
D. If the net balance on a nostro account is higher than the amount agreed upon with your
counterparty

Answer: D

Question: 275
In settling a money market placing between your dealer and a counterparty, what would be the
financial consequences of a payment made one day late?

A. The counterparty would cancel the deal

B. The bilateral limit with the counterparty would have to be adjusted
C. The counterparty would demand interest on the late payment
D. There are no adverse financial consequences

Answer: B

Question: 276
What documents and/or information should you hold in order to start an investigation?

A. From the counterparty: the trade confirmation, In-house: the trade confirmation, nostro
reconciliation details, the dealing ticket and eventually dealing-system conversation printout
B. From the counterparty: the dealers name and phone number. In-house: dealer's name as well as
the exact time the deal was processed
C. From the counterparty: the trade confirmation, In-house: the open item list, nostro reconciliation
details and the dealing ticket
D. From counterparty: the balance report and the trade confirmation; In-house: the dealing-system
conversation printout

Answer: B

Question: 277
Where is the bank with the BIC-address "BOJPJPJT" located?

A. Jamaica
B. Jordan
C. Bosnia
D. Japan

Answer: D

Question: 278
Open position and exchange risk management by currency belongs to which treasury system
module?

A. The derivatives dealing and processing module

B. Standard back office features
C. The FX spot and forward dealing input and processing module
D. The securities trading and processing module
 Answer: A

Question: 279
For the third time in a month, a back office clerk has been questioned by one of his spot FX dealers
about back office payment authorization and confirmation procedures. What should he/she do?

A. He/she should report this to his/her supervisor

B. He/she should respond to the questions
C. He/she should avoid the dealer
D. He/she should refuse to answer the questions

Answer: B

Question: 280
What are the major objectives of the Model Code?

A. To promote the Basel agreements and their objective to enhance understanding of key
supervisory issues and improve the quality of banking supervision worldwide
B. To promote international cooperation to prevent the use of the financial system for the purpose
of money laundering
C. To promote domestic financial regulations
D. To promote a high level of ethical and professional conduct in order to create an efficient market

Answer: B

Question: 281
Which of the following are considered best practices?

A. Front office and back office should have different management reporting lines
B. Confirmation discrepancies should be investigated within 48 hours
C. Confirmations need only be exchanged if the amount involved is higher than USD 1,000,000.00 or
equivalent
D. Money market and FX dealers should have different management reporting lines

Answer: A

Question: 282
Which of the following statements would be regarded as describing best practice?

A. Internal transactions should not be confirmed as there is no credit risk involved

B. Chasers on internal confirmations should be sent less frequently than those for external
confirmations
C. Internal confirmations should be subject to the same procedures as those in place for external
clients
D. Control procedures should be relaxed generally for internal confirmations

Answer: C

Question: 283
In what order would the currencies of the major currency pairs generally be quoted in forex?

A. EUR/USD, USD/JPY, USD/GBP, USD/CHF, USD/CAD, USD/AUD

B. EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD
C. EUR/USD, USD/JPY, GBP/USD, USD/CHF, CAD/USD, AUD/USD
D. EUR/USD, USD/JPY, GBP/USD, USD/CHF, CAD/USD, USD/AUD

Answer: D

Question: 284
Your dealer bought a 6x9 USD 4,000,000.00 FRA at 0.75%. Settlement is now due and 3 months (90
days) USD LIBOR is 0.40%. What amount do you pay or receive?

A. Receive USD 3,496.50

B. Pay USD 3,496.50
C. Pay USD 3,500.00
D. Pay USD 3,448.65

Answer: D

Question: 285
The fixing of a EUR FRA usually takes place:

A. At the end of the FRA period

B. When the deal is done
C. Two business days before the start date of the FRA period
D. On the third Monday of the contract month

Answer: A

Question: 286
Settlement prices on futures contracts are:

A. Official prices calculated by the exchange at the close of trading for the purpose of making margin
calculations
B. Official prices calculated by a panel of central banks
C. Official prices calculated by the central bank where the stock exchange is located
D. Never used

Answer: B

Question: 287
When an over-the-counter broker executes an order for your bank, what information is required on
the confirmation you are sent?

A. The price of the security

B. The price of the security; the role played by the broker
C. The price of the security; the role played by the broker; and the commission, if any, that was
charged
D. The price of the security; the role played by the broker; the commission, if any, that was charged
and the security that was bought or sold

Answer: D

Question: 288
Which of the following is required for institutions acting as prime brokers?

A. They must remain neutral and stay out of disputes between their customers.
B. They must rely on the execution venue to resolve disputes.
C. They must delegate the resolution of broken trades downstream to their clients.
D. They must take responsibility for the swift resolution of any disputes.

Answer: D
 Question: 289
Which interest rate should be applied in calculating use of funds requests in EUR?

A. The flat ECB deposit facility rate

B. The ECB deposit facility rate minus 25 b.p.
C. The average of each day's EONIA rate minus 25 b,p,
D. The average of each day's EONIA rate minus 25 b.p. unless that is lower than the ECB deposit
facility rate

Answer: C

Question: 290
Which of the following is not considered a best practice concerning access to electronic trading
systems?

A. The access to systems internally and at the client interface is to be controlled strictly and solely by
front office risk managers
B. The sharing of user ids and passwords should be prohibited
C. The ability to initiate deals via e-trading must be subject to documented controls and appropriate
approval rights
D. Participants should only use their own user id and password

Answer: B

Question: 291
Operational efficiency, STP rates, quality and control effectiveness are the main indicators of
operational performance. With whom and how often should they be reviewed?

A. On a monthly basis with senior management and operations

B. At least monthly with compliance and risk management; on a more frequent and regular basis
within operations
C. Quarterly with senior management and on a monthly basis within operations
D. At least monthly with senior management and on a more frequent and regular basis within
operations

Answer: A

Question: 292
The "value date" is best described as:

A. The date a trade is undertaken

B. The date the fixing rate is agreed upon
C. The date the settlement occurs
D. The date confirmations are exchanged between counterparties

Answer: C

Question: 293
The use of a bilateral netting scheme for FX settlements results in:

A. One net settlement per currency, per counterparty, per day

B. One net settlement per currency, per day
C. A single net settlement per day
D. Multiple settlements per currency, per counterparty, per day for those netted settlements

Answer: B

Question: 294
If a money market dealer considers placing a given amount at another bank, he must first of all
check:

A. The level of the prevailing market rates

B. If the funds are available on the nostro account of the bank
C. If they will be able to generate the outgoing payment
D. The availability on the country limit and the credit line of his counterparty

Answer: C

Question: 295
Which of the following types of payment cannot be executed in the United States?

A. Same day value payment in JPY

B. Same day value payment in EUR
C. Value tomorrow payment in AUD
D. Value tomorrow payment in NZD
 Answer: B

Question: 296
The premium for a EUR/USD vanilla FX option is paid:

A. When the option is exercised

B. Two business days after the trade
C. When the option transaction takes place, and it is repaid to the buyer when he exercises the
option
D. In monthly installments until the option is exercised

Answer: C

Question: 297
What is a convertible security?

A. A security the owner has the right to convert

B. A security the issuer has the right to redeem
C. A security the owner has the right to redeem
D. A security the issuer has the right to convert

Answer: C

Question: 298
The owner of a convertible bond:

A. Has the obligation to convert his bond

B. Has the right to convert his bond
C. Must wait for the decision of the issuer if he wants to convert his bond
D. Has the obligation to convert the coupon into a variable or a fixed rate

Answer: B

Question: 299
If not mentioned in the master agreement, the operational process should be supported by
establishing a legally binding netting agreement. What do parties not need to agree upon?
A. Confirmation procedures
B. Cut-off times
C. Procedures for confirming bilateral net amounts
D. Alternative procedures in case netting cannot be performed

Answer: B

Question: 300
You request use of funds from your agent bank for 2 days on an amount of EUR 25,000,000.00.
EONIA is 0.790% on the first day and 0.836% on the second day. The ECB deposit facility rate is
0.75% on both days. What use of funds settlement amount should you expect?

A. EUR 694.44
B. EUR 781.94
C. EUR 1,041.67
D. EUR 1,129.17

Answer: A

Question: 301
What is the main role of back office staff?

A. To confirm the accuracy of counterparties' mailing addresses

B. To inform the central bank when a country limit is higher than a fixed level
C. To ensure that trades are confirmed and settled correctly in accord with best market practice
recommendations
D. To be in constant contact with the counterparties' front office staff

Answer: A

Question: 302
Who is responsible for producing the Model Code?

A. The Federation of Bankers Associations

B. The International Foreign Exchange Market Practices Committee
C. The G7 Committee of Central Banks
D. ACI - The Financial Markets Association
 Answer: C

Question: 303
Which of the following is characteristic of derivative instruments?

A. Trades are executed in nominal amounts

B. Derivates are bought and sold only over the counter (OTC)
C. The final settlement of a derivates trade can only be made by physical delivery
D. The accounting for derivative instruments is off balance sheet

Answer: C

Question: 304
When is the final cut-off time for settlement payment orders using the Fedwire Funds Service?

A. 17:30 (5:30 p.m.) Eastern Time (ET)

B. 18:00 (6:00 p.m.) Eastern Time (ET)
C. 18:30 (6:30 p.m.) Eastern Time (ET)
D. 19:00 (7:00 p.m.) Eastern Time (ET)

Answer: D

Question: 305
Which of the following characterize "delivery against payment" also known as "delivery versus
payment"?

A. Securities are first delivered and then the payment is processed

B. The payment order is first blocked and then the payout of securities is processed
C. Securities are exchanged into a defined currency
D. Delivery is insured if and only if payment occurs

Answer: B

Question: 306
Which combination of risks: market risk, settlement risk, basis risk, counterparty risk, is associated
with a forward FX deal?
A. Market risk and settlement risk
B. Market risk, settlement risk and basis risk
C. Market risk, settlement risk and counterparty risk
D. Settlement risk and counterparty risk

Answer: D

Question: 307
Which settlement system offers the lowest risks?

A. EBA
B. CLS
C. TARGET2
D. CHAPS

Answer: B

Question: 308
What normally happens on the settlement date of a USD/TWD non deliverable forward (NDF)?

A. Both currencies (USD and TWO) are exchanged

B. The notional amount is paid out in USD
C. A cash settlement is paid out in TVVD
D. A cash settlement is paid out in USD

Answer: D

Question: 309
Minimum reserves at the European Central Bank are:

A. Never remunerated
B. Remunerated at the EONIA rate
C. Remunerated at the rate of the deposit facility
D. Remunerated at the main refinancing rate

Answer: B
 Question: 310
What are the value dates of a torn next money market trade dealt Friday, 13 August?

A. 13 August-16 August
B. 16 August-17 August
C. 17 August-18 August
D. 13 August -17 August

Answer: C

Question: 311
Which of the following statements is correct?

A. The settlement of a FRA is paid at maturity date.

B. The settlement amount is paid at the trade date of a FRA.
C. The cash settlement amount on a FRA is usually a discounted amount.
D. The settlement amount on a FRA is not based on the LIBOR for the relevant period.

Answer: A

Question: 312
The purchase price of a coupon bond:

A. Is higher than its face value if, and only if, its coupon rate is higher than its yield to maturity on the
coupon date
B. Is higher than its face value if, and only if, its coupon rate is lower than its yield to maturity on the
coupon date
C. Is lower than its face value if, and only if, its coupon rate is higher than its yield to maturity on the
coupon date
D. Is always higher than its face value

Answer: A

Question: 313
What are "de minimis" claims?

A. Claims of less than USD 100.00

B. Claims of less than USD 1,000.00
C. Claims of less than EUR 100.00
D. Claims of less than EUR 1,000.00

Answer: A

Question: 314
Which one of the following statements about "CLS rescinds" is correct?

A. CLS settlement members may rescind instructions unilaterally provided that the rescind messages
reach the CLS Bank before the 00:00 CET deadline.
B. CLS settlement members may rescind instructions unilaterally provided that the rescind messages
reach the CLS Bank before the 06:30 CET deadline.
C. CLS settlement members may rescind instructions bilaterally only if the rescind messages reach
the CLS Bank before the 00:00 CET deadline.
D. CLS settlement members may rescind instructions bilaterally only if the rescind messages reach
the CLS Bank after the 06:30 CET deadline.

Answer: C

Question: 315
What static data should an institution's on-boarding procedure include?

A. SSIs, confirmation methods, global settlement limits, client contacts

B. SSIs and confirmation methods only
C. Credit lines and trading limits only
D. Solely client contacts for the Front Office and Operations

Answer: A

Question: 316
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
 Answer: B

Question: 317
What does "arrange good value payment" mean?

A. To cancel an initial payment order and to process a new one with a higher amount
B. To suspend a payment order until the balance becomes positive again
C. To adjust the amount of fees to be paid
D. To change the value date of a payment order

Answer: B

Question: 318
Your dealer has sold EUR 5,000,000.00 against USD at 1.3545. How much would you expect to
receive in settlement?

A. USD 3,691,399.04
B. USD 3,691,399.00
C. USD 6,772,500.00
D. USD 6,773,000.00

Answer: C

Question: 319
A non deliverable forward (NDF) is a:

A. Cash-settled currency forward between two counterparties

B. Exchange-traded, cash-settled currency forward
C. Over-the-counter, cash-settled spot FX
D. Principal-settled currency forward between two counterparties

Answer: A

Question: 320
A dealer makes the following deals in EUR/USD:
Sells EUR 1,500,000.00 at 1.3560
Buys EUR 3,250,000.00 at 1.3542
Sells USD 2,709,600.00 at 1.3548
Buys USD 1,762,410.00 at 1.3557
What is the dealer's position as a result of these trades?

A. Short EUR 2,450,000.00 at 1.3528

B. Long EUR 2,450,000.00 at 1.3528
C. Long EUR 2,000,000.00 at 1.3532
D. Long EUR 2,450,000.00 at 1.3525

Answer: B

Question: 321
Calculation basis for EUR money market transaction is:

A. 30/360
B. ACT/365
C. ACT/ACT
D. ACT/360

Answer: A

Question: 322
Which of the following is a negotiable instrument?

A. A fixed time deposit

B. An on call deposit
C. A fiduciary deposit
D. A certificate of deposit

Answer: D

Question: 323
In hedging, caps are:

A. Frequently purchased by issuers of floating rate debt

B. Frequently sold by issuers of floating rate debt
C. Frequently sold by issuers having an FX risk
D. Frequently purchased by issuers having an FX risk

Answer: B

Question: 324
A redemption premium for a bond is:

A. Always paid in case of an early redemption

B. Paid, if stipulated in the prospectus, at an early redemption
C. Always paid at final maturity
D. Only paid if a bond is redeemed after its initially scheduled maturity

Answer: B

Question: 325
Whose compliance rules, regulations and best practices should be followed in FX electronic trading?

A. Solely those of the electronic trading platforms vendors

B. Exclusively ACI's Model Code Best Practices
C. ACI's Model Code Best Practices and ICMA's Market Practice & Regulatory Policy
D. The electronic trading platforms vendors' and the ACI's Model Code Best Practices guidelines

Answer: A

Question: 326
How would you denote that EUR funds are to be paid via TARGET2 on a typical MT 202 message?

A. There is no need to note this separately as payments via TARGET2 are made only in EUR.
B. The code word "viaTARGET2" is used in field 72 - "Bank to Bank Information".
C. 7/RT" is indicated once in the optional account number field 56A, 57A or 58A.
D. The code word "TARGET2" is used in the "Pay To Bank" field.

Answer: C

Question: 327
What does a holiday file contain?
A. It contains all weekends and bank holidays for all currencies held in the currency file
B. It contains Saturdays, Sundays and domestic bank holidays
C. It contains a list of deals maturing on a domestic bank holiday
D. It contains a list of all deals where the maturity date is a weekend

Answer: A

Question: 328
Herstatt Risk is also known as:

A. Settlement risk
B. Translation risk
C. Replacement risk
D. Operational risk

Answer: A

Question: 329
A yield curve can be drawn for a wide variety of financial instruments. The most widely analyzed
yield curves are those for benchmark instruments such as:

A. Consumption and inflation levels

B. Money market rates and government bonds
C. Mortgage rates
D. Commodities

Answer: B

Question: 330
A Luxembourg based bank, which regularly buys American securities for its customers, will
preferably:

A. Buy the American securities directly on the NYSE

B. Open a bank account in the United States
C. Open an account in a bank in the U.S. that has an account at the NYSE
D. Buy the securities directly in Luxembourg
 Answer: C

Question: 331
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

Answer: B

Question: 332
If your trader has dealt a 6-month USD/JPY FX-swap, selling and buying USD 10,000,000.00, will you:

A. Expect a credit statement on your JPY nostro account on the near date
B. Be required to obtain and execute the ICMA Master Agreement to document the transaction
C. Need to instruct your USD nostro bank to pay out USD on the far date
D. Anticipate no movement of principal, but a cash settlement on the far date

Answer: B

Question: 333
What is the replacement risk of an OTC derivative trade?

A. The risk that there is no liquid market at the exchange to close a trade
B. The risk that the present value of a trade will be negative one day prior to value date
C. The risk that an OTC-derivative product cannot be closed before maturity
D. The loss incurred if the counterparty defaults

Answer: D

Question: 334
A "turn of the month" deposit would be a transaction:
A. Value first business day of a month against last business day of the same month
B. Value last business day of a month against first business day of the next month
C. Value last business day of a month against last business day of the following month
D. Value first business day of a month against first business day of the following month

Answer: B

Question: 335
The effective Euro overnight reference rate, computed as a weighted average of ail overnight
unsecured lending transactions undertaken in the interbank market and computed with the help of
the European Central Bank, is called:

A. EURIBOR
B. SONIA
C. EONIA
D. EURONIA

Answer: C

Question: 336
The payments due on a FRA are settled:

A. On the trade date

B. On the maturity date of the FRA
C. Daily in accruals
D. On the start date of the FRA

Answer: C

Question: 337
A UK Treasury Bill has 91 days to maturity. Its redemption value is GBP 100,000.00, What is the
purchase price of this bill using a discount rate of 1,25% per annum?

A. GBP 98,750.00
B. GBP 100,000.00
C. GBP 99,688.36
D. GBP 99,684.03
 Answer: C

Question: 338
A collateral pool can be defined as:

A. Assets lent by members of a payment system collectively available to the system as collateral to
enable them to obtain funds in specific circumstances
B. Liabilities owned by members of a payments system collectively available to the system as
collateral to enable them to obtain funds in specific circumstances
C. Assets owned by members of a payment system collectively available to the system as collateral
to enable them to obtain funds in specific circumstances
D. Assets swapped by members of a payment system collectively available to the system as collateral
to enable them to obtain funds in specific circumstances

Answer: C

Question: 339
In the event that standard settlement instructions are provided by a third party, full authentication
and authorization of those SSIs should be independently performed by?

A. Sales / trading staff

B. Operations staff
C. Nostro staff
D. Front office staff

Answer: B

Question: 340
What happens if an instruction remains unmatched and/or unsettled through CLS Bank?

A. If there is more than one FX trade with a single counterparty to settle in the identical currencies,
then both sides should bilaterally agree to settle the trades outside of CLS Bank on a net basis.
B. If there is only one FX trade with a single counterparty to settle in the identical currencies, then
either side can unilaterally decide to settle the trade outside of CLS Bank on a net basis.
C. If there is more than one FX trade with a single counterparty to settle in the identical currencies,
then both sides should bilaterally agree to settle the trade outside CLS Bank on a gross basis.
D. If there is more than one FX trade with a single counterparty to settle in the identical currencies,
then either side can unilaterally instruct the CLS Bank to settle the trades.
 Answer: B

Question: 341
When would you use a SWIFT message type 300?

A. For a multiple general financial institution transfer

B. For a general financial institution transfer
C. For a foreign exchange confirmation
D. For a customer transfer

Answer: C

Question: 342
Internal nostro ledger accounts:

A. Are commonly used to register off-balance sheet movements

B. Are used to book internal tax related items
C. Generally mirror the nostro statements
D. Are reserved for audit and compliance purposes only

Answer: D

Question: 343
Your forward CHF dealer asks you, the junior settlements clerk, to amend revaluation rates for the
forward CHF book before they are submitted to the risk management department for input. What
should you do?

A. Amend the rates as requested

B. Refuse to amend the rates, but say nothing
C. Refuse and report the incident to your superior
D. Refuse and report the incident to your colleague

Answer: A

Question: 344
Two days ago, your dealer sold EUR 500,000.00 against JPY. JPY 62,750,000 were credited to your
JPY nostro account. The deal was made at what rate?

A. At 0.1255
B. At 1.2550
C. At 12.5500
D. At 125.50

Answer: A

Question: 345
FX Swaps can be used to:

A. Swap a fixed leg into a variable leg

B. Buy or sell the currency of your choice
C. Arbitrage between foreign exchange and interest rates
D. Arbitrage between deposits and forward points

Answer: B

Question: 346
If a dealer buys 1,000,000,00 EUR/USD at 1.3522, 2,000,000,00 EUR/USD at 1.3532, 3,000,000.00
EUR/USD at 1.3575 and sells 1,000,000,00 EUR/USD at 1.3585, what position is he left with?

A. Long 5,000,000.00 EUR/USD at 1.3552

B. Long 5,000,000.00 EUR/USD at 1.3545
C. Short 5,000,000.00 EUR/USD at 1.3585
D. Short 5,000,000.00 EUR/USD at 1.3545

Answer: A

Question: 347
The standard benchmark measure used for the cost of funds in the London Market is:

A. LIBID
B. Base Rate
C. LIBOR
D. UMEAN
 Answer: D

Question: 348
AFRA is:

A. An instrument for managing interest rate risk

B. An instrument for managing credit rate risk
C. An instrument that never impacts P/L
D. The forward leg of an FX swap

Answer: B

Question: 349
Which interest convention is used in the bond market for GBP?

A. ACT/360
B. ACT/ACT
C. 360/360
D. ACT/365

Answer: B

Question: 350
Commercial Paper for USD 5,000,000.00 was issued at 0.75%, which you now buy to yield 0.50%.
What would you expect to pay?

A. The face value of 5,000,000.00

B. More than 5,000,000.00
C. Less than 5,000,000.00
D. Cannot decide based on the information supplied

Answer: C

Question: 351
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.

Answer: B

Question: 352
Under what circumstances would you have to pay overdraft interest?

A. If the counterparty's fees are higher than yours

B. If your nostro account balance at the end of the month is less than the amount of fees paid
C. If your nostro account shows a debit balance you will be charged overdraft interest on the
remaining debit amount.
D. Overdraft interest is charged if your collateral at the central bank is lower than your cash balance

Answer: D

Question: 353
In error, your dealer enters a trade whereby he buys GBP 8,000,000.00 against USD at 1.5500, but
manages to cover it at the same rate. When the initial mistaken trade is cancelled, however, the rate
has since changed to 1.5200. What is the effect on P&L?

A. Profit GBP 240,000.00

B. Loss GBP 240,000.00
C. Profit USD 240,000.00
D. Loss USD 240,000.00

Answer: B

Question: 354
You buy a 90-day Treasury Bill with a true yield of 3.91%. The face amount is USD 10,000,000.00.
What would you expect to pay?

A. USD 9,900,000.00
B. USD 10,000,000.00
C. USD 9,903,196.26
D. USD 10,097,750.00

Answer: D

Question: 355
If Bank A sells securities to Bank B, and at the same time and as part of the same transaction,
commits to repurchase equivalent securities on a specified future date, Bank A has dealt:

A. An asset swap
B. A CFD (contract for difference)
C. A repo
D. A securities lending

Answer: A

Question: 356
What risks arise from not receiving the securities purchased or not receiving payment for securities
sold?

A. Liquidity, market and counterparty risk

B. Only a funding risk
C. Only a liquidity and a funding risk
D. Settlement, funding and liquidity risk

Answer: D

Question: 357
Claims should be communicated in writing via e-mail or preferablely by authenticated SWIFT. What
information should be provided in the claim?

A. The details of the transaction involved, the number of days the payment was delayed and the
resulting cost
B. The details of the transaction involved, the number of days the payment was delayed and the
cost, together with Central Bank rate to be applied
C. The details of the transaction involved, the number of days the payment was delayed and the
cost, together with reference rates to be applied
D. The details of the transaction involved, the number of days the payment was delayed and the
cost, together with the calculation methodology being claimed

Answer: D

Question: 358
Which action results in the highest STP-Rate?

A. The daily reconciliation of nostro accounts

B. The use of a Continuous Linked Settlement
C. The use of internal limits regulations such as counterparty limits and country limits
D. A trade confirmation check

Answer: B

Question: 359
A corporate client instructs you to make a USD payment to his account in London. What two
message types should you send?

A. MT 202 and MT 103

B. MT 202 and MT 210
C. MT 200 and MT 103
D. MT 103 and MT 210

Answer: A

Question: 360
What do FX swap rates represent?

A. Largely the interest rate differential between two currencies

B. The price of an option
C. The expectation of an appreciation of a currency
D. The volatility of a currency

Answer: B

Question: 361
Which of the following statements concerning "account reconciliations" is incorrect?

A. Account reconciliations are necessary for the early detection of missing, failed or erroneous
entries.
B. Custody accounts should be reconciled after each account movement or at least once a month.
C. Reconciliations related to transactions and balances should only be conducted for cash accounts.
D. Cash accounts should be reconciled as soon as an updated account statement is available.

Answer: D

Question: 362
The two main risks to which treasuries are exposed can be grouped into:

A. Market and loss

B. Market and money
C. Market and credit
D. Market and unavailability

Answer: C

Question: 363
The calculation method of the foreign exchange rates for value today or for value tomorrow
outrights:

A. Is based on the interest rate differential between the two currencies

B. Is based on the same calculation method as the forward rate agreements (FRA)
C. Is based on linear interpolation
D. Is based on the calculation of compound interest rates

Answer: A

Question: 364
Your money market dealer has lent NZD 5,000,000.00 at 3,00% for 6 months (183 days). How much
must the counterparty pay back to you in capital plus accrued interest at maturity?

A. NZD 5,000,000.00
B. NZD 5,076,205.48
C. NZD 5,076,250.00
D. NZD 5,075,000.00

Answer: C

Question: 365
Rising interest rates will cause:

A. A higher volume on settlement

B. Government borrowing to fall
C. Bond prices to rise in response to higher interest rates
D. Bond prices to fall

Answer: D

Question: 366
The depositary of your securities:

A. Is responsible only for the settlement of those securities

B. Is responsible only for safeguarding the securities that you have on your account
C. Is responsible for safeguarding both the securities that you have on your account and their
settlement
D. Is never responsible for safeguarding securities

Answer: C

Question: 367
Which SWIFT message should be used to advise the netting position of a currency resulting from FX,
NDF, options and other trades?

A. MTn99
B. MT300
C. MT370
D. MT670/671

Answer: C

Question: 368
Some large losses occurred in the past from derivatives trading because:

A. Derivatives brokers significantly over-charged their clients

B. Institutions did not understand the leverage of their transactions
C. Money managers engaged in intra-day trading
D. Money managers embezzled money using derivatives

Answer: D

Question: 369
The risk associated with the failure of the overall financial system is best described as:

A. Operational Risk
B. Market Risk
C. Systemic Risk
D. Credit Risk

Answer: A

Question: 370
If you execute a sale of bonds, and the securities have not been delivered 2 days after you have
received payment on the agreed settlement date, which of the following is correct:

A. You will have to pay at least 2 days of funding costs on top of the coupon
B. The counterparty will have to pay at least 2 days of interest charges on top of the coupon
C. You have no debt to the counterparty
D. The counterparty has a debt to you

Answer: A

Question: 371
CLS stands for which of the following:

A. Continuous Linked Settlement

B. Cash Linked Settlement
C. Credit Linked Securities
D. Counterparty Limit System
 Answer: C

Question: 372
If today's spot date were Monday, 1 March, what would be the maturity of a 1-month CHF interbank
deposit, assuming that there are no intervening bank holidays?

A. Tuesday, 30 March
B. Wednesday, 31 March
C. Thursday, 1 April
D. Friday, 2 April

Answer: B

Question: 373
You borrow GBP 2,500,000.00 at 0.80% for 165 days. How much do you have to repay, including
interest?

A. GBP 2,509,166.67
B. GBP 2,509,041.10
C. GBP 2,509,016.39
D. GBP 2,520,000.00

Answer: D

Question: 374
The price of a zero coupon, maturing in 2 years, is

A. Always close to 100%

B. Above 100%
C. Below 100%
D. Always precisely 100%

Answer: B

Question: 375
The control failings involving Barings and Daiwa highlight the critical importance of what operational
risk management practice?

A. The taping of conversations between counterparties

B. Model signing-off and implementation controls
C. The separation between front/back office duties
D. The existence of contingency plans

Answer: B

Question: 376
Counterparties, such as prime brokers, who provide others access to liquidity venues are responsible
for their end users. They are not liable for:

A. The activities of their end users

B. The end user's observance of the rules of individual execution venues
C. The end user's membership in a registered trade association
D. The end users adherence to market best practice

Answer: A

Question: 377
In using futures contracts there is:

A. Only market risk

B. Only credit risk
C. Market risk and credit risk
D. Market risk, credit risk and delivery risk

Answer: A

Question: 378
Which of the following statements best describes an asset swap?

A. A combination of a fixed rate bond and a fixed/floating interest rate swap

B. An option on fixed/floating interest rate swap
C. The sale of a bond against cash with a simultaneous agreement to buy the bond at an agreed
upon rate and date
D. The sale of a fixed rate bond against the simultaneous purchase of a floating rate note
 Answer: A

Question: 379
The abbreviation "FRN" stands for:

A. Fixed rate notional

B. Forward rate note
C. Fixed rate note
D. Floating rate note

Answer: D

Question: 380
Which is the most accurate definition of Euro Commercial Paper - "Short-term promissory notes
issued in bearer form with a maturity of ..."

A. 30 days < 360 days

B. 360 days < 5 years
C. 180 days < 365 days
D. 1 day < 365 days

Answer: D

Question: 381
You take a EUR deposit on Monday, 13 February. Assuming there are no intervening bank holidays,
what is the one-month maturity date?

A. Monday, 13 March
B. Tuesday, 14 March
C. Wednesday, 15 March
D. Thursday, 16 March

Answer: C

Question: 382
A broker:

A. Is an agent who mediates between buyers and sellers, for their mutual financial interest
B. Controls country limits in cooperation with the compliance officer
C. Is responsible for reducing transaction fees
D. Acts as a correspondent bank

Answer: A

Question: 383
What does “modified following business day convention” mean?

A. A convention whereby a transaction is dated the following business day, unless that day extends
into the next month, in which case it is dated the preceding business day
B. A convention whereby a transaction is dated the following business day
C. A convention whereby a transaction is dated the preceding business day
D. A convention whereby a transaction is dated the next business day that corresponds to the same
numerical day of the month as the preceding payment

Answer: A

Question: 384
What does ISDA stand for?

A. International Swaps and Derivatives Association

B. Integrated System Data Association
C. International Swap Derivatives Agreement
D. International Swaps Dealer Association

Answer: A

Question: 385
What is volatility?

A. The difference between the current price of an asset and its previous close
B. A statistical measure of price fluctuations as an annualized percentage
C. The measure of the liquidity of a contract or security
D. The difference between the annual high and low of a security
 Answer: B

Question: 386
Which SWIFT message formats would you use for a foreign exchange confirmation and fixed money
market confirmation, respectively?

A. MT 400, MT 950
B. MT 200, MT 100
C. MT 300, MT 950
D. MT 300, MT 320

Answer: D