3I0-012 Practice Exam Questions and Answers

A.  

Is not considered good practice.

B.  

Is accepted in case of direct deal input into the bank’s system.

C.  

Is accepted for senior dealers.

D.  

Is accepted for hedging transactions.

A.  

You should provide all reasonable assistance.

B.  

You should report the request immediately to senior management.

C.  

Do not get involved; you may be at risk.

D.  

There is no recommendation in the Model Code.

A.  

1.1380-1.11405

B.  

1.11375-1.1141

C.  

1.09125-1.0915

D.  

None of these

A.  

Market participants are strongly recommended to net bilateral transactions with counterparties where activity justifies it.

B.  

Market participants should establish payments netting agreements with cross-border counterparties where activity justifies it.

C.  

Market participants should establish legally viable bilateral netting agreements with counterparties where activity justifies it.

D.  

Market participants should establish legally viable multilateral netting agreements where activity justifies it.

A.  

The deal is done. You should confirm with your counterparts.

B.  

If the knock-in is confirmed by a New York price source, the deal is done and you should confirm with your counterparty.

C.  

The recognised closing time for the currency markets is 6:00pm New York time in Friday, so the deal is done and you should confirm with your counterparty.

D.  

The recognised closing time for the currency markets is 5:00pm NewYork time in Friday, so no deal is done.

A.  

3,704,500

B.  

6,748,549

C.  

3,703,000

D.  

6,751,283

A.  

Management should ensure dealers fully understand the systems they use and dealers should read the manuals.

B.  

Management, dealers and vendors share responsibility.

C.  

Dealers are required to pass the ACI Dealing Certificate before being allowed to access electronic dealing platforms.

D.  

Given the wide range of electronic dealing platforms used by banks, it is the responsibility of the vendors to ensure individual users are adequately trained.

A.  

unchanged

B.  

118/116

C.  

109/107

D.  

106/104

A.  

1.6045

B.  

1.6047

C.  

1.6050

D.  

1.6052

A.  

USCP

B.  

ECP

C.  

Treasury bill

D.  

BA

A.  

SEK interest rates are higher than NOK interest rates

B.  

NOK interest rates are higher than SEK interest rates

C.  

NOK interest rates are higher than USD interest rates

D.  

SEK interest rates and NOK interest rates are converging

A.  

1.4323-26

B.  

1.4320-25

C.  

1.4315-20

D.  

1.4318-23

A.  

USD 4,884,500.00

B.  

USD 4,990,375.00

C.  

USD 4,990.506.85

D.  

USD 4,990,393.49

A.  

The Model Code is published by ACI’s Committee for Professionalism.

B.  

The Model Code sets out the practicalities of dealing in those financial instruments listed in the Model Code.

C.  

The Model Code is an attempt to deal with the legal issues relating to every conceivable financial instrument.

D.  

The Model Code sets out the manner and spirit in which foreign exchange and money market business should be conducted in order that participants maintain high standards of professionalism, integrity and ethical conduct.

A.  

You pay EUR 20,000.00

B.  

You receive EUR 20,000.00

C.  

You pay EUR 19,826.52

D.  

You receive EUR 19,826.52

A.  

He is confident that the dealer will not back out of the deal.

B.  

Both parties have established credit lines for each other.

C.  

One party acknowledges interest.

D.  

He receives verbal acknowledgement from the dealer.

A.  

at least 995/1000 pure gold; weight between 350 and 430 fine ounces

B.  

minimum 999.9/1000 pure gold; weight between 350 and 430 fine ounces

C.  

at least 995/1000 pure gold; weight of 400 fine ounces

D.  

minimum 995/1000 pure gold; weight of 400 fine ounces

A.  

105.80

B.  

105.75

C.  

105.70

D.  

105.85

A.  

The risk of an adverse change in the futures price

B.  

The risk of an adverse change in the spread between futures and cash prices

C.  

The progressive illiquidity of a futures contract as it approaches expiry

D.  

The risk of a divergence between the futures price and the final fixing of the underlying interest rate

A.  

Credit institution

B.  

Investment bank

C.  

Corporate

D.  

Central Bank

A.  

The sensitivity of the option value to changes in interest rates

B.  

The sensitivity of the option value to changes in implied volatility

C.  

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

D.  

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

A.  

EUR 11,035,336.41

B.  

EUR 11,035,351.74

C.  

EUR 11,039,752.32

D.  

EUR 11,039,767.65

A.  

-30

B.  

+29

C.  

-29

D.  

+30

A.  

EUR 1,388,89

B.  

EUR 1,561.11

C.  

EUR 2,255.56

D.  

EUR 2,951.39

A.  

at least two months

B.  

one year

C.  

up to one month

D.  

at least three months

A.  

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

B.  

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

C.  

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

D.  

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

A.  

Implicit nominal rate

B.  

Implied forward rate

C.  

Funding rate

D.  

Effective future rate

A.  

Never

B.  

For very large movements and longer terms

C.  

Always

D.  

Spot is the principal influence

A.  

Brokers should only show the names of banks to counterparties who have prime credit ratings.

B.  

Brokers should only show the names of banks to counterparties who provide good liquidity to the brokered market.

C.  

Brokers should only show the names of banks to counterparties whom they know well.

D.  

Brokers should only show the names of bank counterparties if both sides display a serious intention to transact

A.  

The 3-month EURODOLLAR futures contract has a basis point value of USD 50.00 and a face value of USD 1,000,000.00

B.  

The 3-month EURIBOR futures contract has a a basis point value of EUR 12.50 and a face value of EUR 500,000.00

C.  

The 3-month Sterling (SHORT STERLING) futures contract has a a basis point value of GBP 12.50 and a face value of GBP 500,000.00

D.  

The 3-month Euro Swiss Franc (EUROSWISS) futures contract has a a basis point value of CHF 50.00 and a face value of CHF 2,000,000.00

A.  

ECP

B.  

Repo

C.  

Interbank deposit

D.  

CD

A.  

The number of EUR per USD

B.  

The number of USD per EUR

C.  

Depends on whether the price is being quoted in Europe or the US

D.  

Depends on whether the price is being quoted interbank or to a customer

A.  

An exchange of two streams of interest payments in different currencies and an exchange of the principal amounts of those currencies at maturity

B.  

A spot sale (purchase) and a forward purchase (sale) of two currencies agreed simultaneously between two parties

C.  

An exchange of currencies on a date beyond spot and at a price fixed today

D.  

An agreement to buy (sell) an amount of base currency value spot and simultaneously resell (buy back) the same amount to the same counterpart value today

A.  

XAU

B.  

XAG

C.  

XPT

D.  

XPD

A.  

1.0759

B.  

0.9299

C.  

1.5909

D.  

0.9295

A.  

Thursday 27th June

B.  

Friday 28th June

C.  

Saturday 29th June

D.  

Monday 1st July

A.  

EUR 5,798,982

B.  

EUR 5,799,497

C.  

EUR 5,746,376

D.  

EUR 5,000,694

A.  

To cover losses incurred between variation margin payments

B.  

To exclude retail investors

C.  

To pay reserve requirements

D.  

To cover fees due to the clearing house

A.  

USD rates are higher than CAD rates in the 6-month

B.  

CAD rates are higher than USD rates in the 6-month

C.  

There is a positive USD yield curve

D.  

There is not enough information to decide

A.  

an exposure in Latvian Lats (LVL)

B.  

an exposure in Russian Rouble (RUB)

C.  

an exposure in Romanian Leu (RON)

D.  

an exposure in Bulgarian Lev (BGN)

A.  

1.32%

B.  

1.29%

C.  

1.28%

D.  

0.65%

A.  

the traded volume

B.  

the historical volatility of the price of the underlying commodity

C.  

the style (European or American) of the option

D.  

the implied volatility of the price of the underlying

A.  

SONIA

B.  

STINA

C.  

STONIA

D.  

EONIA

A.  

An adjusted settlement amount is paid at the end of the FRA contract period that includes reinvestment interest for late payment

B.  

An unadjusted settlement amount is paid at the end of the FRA contract period

C.  

An adjusted settlement amount is paid at the start of the FRA contract period that is discounted for early payment

D.  

An unadjusted settlement amount is paid at the start of the FRA contract period

A.  

3,704,500.00

B.  

6,748,549.06

C.  

3,703,000.00

D.  

6,751,282.74

A.  

Pay 250.00, receive 1,250.00, receive 1,750.00, receive 2,000.00

B.  

Receive 250.00, pay 1,250.00, pay 1,750.00, pay 2,000.00

C.  

Pay 2,500.00, receive 12,500.00, receive 17,500.00, receive 20,000.00

D.  

Receive 2,500.00, pay 12,500.00, pay 17,500.00, pay 20,000.00

A.  

the last calendar day of the month

B.  

the last bank business day of the month

C.  

value last business day of the month against first business day of the next month

D.  

value first business day of the month against last business day of the same month

A.  

A forward-forward rate of 0.685%

B.  

A forward-forward rate of 0.315%

C.  

Current 3-month LIBOR of 0.6850%

D.  

Current 3-month LIBOR of 0.3150%

A.  

A spot sale (purchase) and a forward purchase (sale)

B.  

A spot sale (purchase) and a forward sale (purchase)

C.  

An exchange of currencies on a date beyond spot and at a price fixed today

D.  

An exchange of currencies on a date beyond spot

A.  

the trade is not within the specified tenor limits

B.  

the trade is not within the specified credit limits

C.  

the trade details provided by the executing dealer and the client match

D.  

the trade is a permitted transaction type as specified in the give-up agreement with the executing dealer

A.  

Margin maintenance

B.  

Re-pricing

C.  

Margin maintenance or re-pricing, but usually margin maintenance

D.  

Margin maintenance or re-pricing, but usually re-pricing

A.  

Sell and buy GBP/USD T/N

B.  

Buy and sell GBP/USD T/N

C.  

Sell GBP/USD spot, and sell and buy GBP/USD T/N

D.  

Buy GBP/USD spot, and buy and sell GBP/USD T/N

A.  

uncertainty of valuation

B.  

high correlation with risky assets

C.  

listed on a developed and recognized exchange

D.  

readily marketable

A.  

any dealer as long as he/she is not a party to the trade

B.  

staff in the back-office/operations who are independent of the trade

C.  

staff in the dealing room who are not dealing

D.  

any staff outside the dealing room

A.  

Yes, it is allowed for sporting events.

B.  

Yes, it is allowed if no money is involved.

C.  

Although not prohibited, it is strongly discouraged.

D.  

It is allowed for purposes of charity.

A.  

Between +0.5 and +1

B.  

+0.5

C.  

Between 0 and +0.5

D.  

Zero

A.  

upward shift of the swap curve and rating downgrade of party A

B.  

downward shift of the swap curve and rating downgrade of party A

C.  

downward shift of the swap curve and rating downgrade of party B

D.  

downward shift of the swap curve only

A.  

the expected loss on the portfolio in the worst 95% of cases

B.  

the expected loss in those cases where the loss exceeds the VaR at the 95% level

C.  

the maximum loss in those cases where the loss exceeds the VaR at the 95% level

D.  

the expected loss in those cases where the loss exceeds the VaR at the 5% level

A.  

Treasury bill

B.  

Repo against Treasury bill collateral

C.  

They have the same yield

D.  

Cannot say

A.  

Assets are classified with an available stable funding factor (ASF).

B.  

Liabilities are classified with a required stable funding factor (RSF).

C.  

The ratio of available funding to required funding has to be higher than 50%n

D.  

Equity has an available stable funding factor of 100%.

A.  

Covenants are clauses in bank credit agreements and bond indentures designed to assure debt holders that the creditworthiness of the borrower(s)/issuer(s) will remain satisfactory

B.  

Covenants must be tailored to reflect the specific needs of the borrower/issuer and the specific risks perceived by the debt holders.

C.  

Covenants require the holder of the debt to refrain from doing certain specific things.

D.  

Three different types of covenants in credit agreements and bond indentures are affirmative, negative and financial.

A.  

FRA

B.  

Futures

C.  

No difference

D.  

Too little information to decide

A.  

the gold price fixed twice a day to balance supply and demand in the London bullion market

B.  

the gold price fixed at the end of the day in the London bullion market

C.  

the gold price fixed at 11:00 am. local time in the London bullion market from a panel of gold traders

D.  

the gold price fixed at 11:00 a.m. to settle gold contracts in the London bullion market

A.  

1.42%

B.  

1.39%

C.  

2.01%

D.  

4.21%

A.  

Kosovo

B.  

Andorra

C.  

Albania

D.  

Montenegro

A.  

Nothing

B.  

A margin call is triggered on the seller

C.  

A manufactured payment is made to the seller

D.  

The equivalent value plus reinvestment income is deducted from the repurchase price

A.  

The CD yields a higher rate of return

B.  

The CD has less credit risk

C.  

The CD is a transferable instrument

D.  

The CD has a shorter range of maturities

A.  

1.299971

B.  

1.309966

C.  

1.309971

D.  

1.310029

A.  

greater, the higher the market swap rate and the shorter the term

B.  

lower, the lower the market swap rate and the shorter the term

C.  

lower, the lower the market swap rate and the longer the term

D.  

greater, the higher the market swap rate and the longer the term

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 I minimise the potential risk of fraud.

D.  

SSI staff should be fully integrated within Operations to insure consistent and reliable settlement guidelines.

A.  

interest rate risk

B.  

model risk

C.  

currency risk

D.  

specific risk

A.  

is a contract by which the maturity of a regular FX swap can be extended at an historic (noncurrent) rate

B.  

is a swap transaction where the near leg is traded either value today or value tomorrow and the far leg is traded spot

C.  

is a swap that does not start spot and where both the near and the far leg are traded forward

D.  

is a transaction by which a maturing outright forward FX is prolonged at an historic (non-current) rate

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

A.  

7.525322

B.  

7.525312

C.  

7.524688

D.  

7.524678

A.  

Economic capital is calculated externally and is the amount of capital the firm should have to support its target credit rating

B.  

Economic capital is calculated on an expected shortfall basis with a specific time horizon and confidence level.

C.  

Economic capital is used for measuring and reporting risks across a financial organisation.

D.  

Economic capital is always lower than regulatory capital because of the more adequate modelling of correlation effects compared to the regulatory approach.

A.  

When trading in financial products described by the Model Code, dealers and voice brokers need not clarify whether they propose to use standard terms.

B.  

Standard terms and conditions should be signed bilaterally by senior management of both principals before any applicable market transactions are entered into.

C.  

When using legal agreements any proposed modifications or choices offered in the agreement must be clearly stated as soon as the trade is agreed.

D.  

For many instruments, standard master agreements issued by recognized authorities need not be signed by senior management of the principals intending to transact business.

A.  

14th December

B.  

15th December

C.  

16th December

D.  

17th December

A.  

LIBID

B.  

LIBOR

C.  

EURIBOR

D.  

EURO LIBOR

A.  

the Asset Liability Management Committee (ALCO)

B.  

the Financial Resources and Compensation Committee

C.  

the Credit Committee

D.  

the Federal Open Market Committee

A.  

Created an exposure to the CHF

B.  

Created an exposure to the USD

C.  

Switched a CI-IF asset temporarily into USD without taking currency risk

D.  

Switched a USD asset temporarily into CHF without taking currency risk

A.  

for a short length of time, usually 30 seconds

B.  

until the price has been taken “off” by the dealer

C.  

for a short length of time, typically a matter of seconds

D.  

for a minute or two

A.  

A manual “kill button” to disable the system’s ability to trade and cancel all resting orders.

B.  

An ‘inbound message rate” feature that monitors the number of confirmation messages that are sent from trading venues within a specific time period.

C.  

A “repeated automated execution throttle” monitoring the frequency of strategies that are filled and then re-entered into the market without human intervention through automated trading systems.

D.  

A “fat-finger quantity” feature limiting the size of orders that can be sent from the trading systems and preventing order quantities above the fat-finger limit from leaving the system.

A.  

The market value of bond collateral at the start of the repo at the clean price of the bond

B.  

The market value of bond collateral at the start of the repo at the dirty price of the bond

C.  

The amount of cash actually paid for collateral at the start of the repo

D.  

The amount of cash actually paid for collateral at the start of the repo plus repo interest

A.  

Wherever the parties agree

B.  

In London

C.  

In NewYork

D.  

In Frankfurt

A.  

USD 252,056,972.97

B.  

USD 252,028,916.32

C.  

USD 250,000,000.00

D.  

USD 248,911,014.31

A.  

The market value of bond collateral at the end of the repo at the clean price of the bond

B.  

The market value of bond collateral at the end of the repo at the dirty price of the bond

C.  

The amount of cash actually paid for collateral at the start of the repo

D.  

The amount of cash actually paid for collateral at the start of the repo plus repo interest

A.  

the price differential between spot and forward gold prices

B.  

the rate at which dealers will lend gold against US dollars

C.  

the implied forward price of gold

D.  

the price of gold for forward delivery

A.  

3.2281%

B.  

3.2278%

C.  

3.00%

D.  

2.875%

A.  

The “big figure” should not be included in outright quotations.

B.  

In order to avoid misunderstandings, the “big figure” should not be mentioned when repeating the details (facts/rates) of the deal.

C.  

For the sake of brevity and efficiency, “big figures” should never be quoted at all in spot FX trading.

D.  

The Model Code recommends that the “big figure” be included in all outright and spot FX quotations.

A.  

9.8141-9.8246

B.  

9.8108-9.8279

C.  

9.8098-9.8289

D.  

9.8151-9.8236

A.  

Daily fixing of EUR interbank deposit rates in the European market

B.  

Daily fixing of EUR interbank deposit rates in the London market

C.  

Another name for EUR LIBOR

D.  

The ECB’s official repo rate

A.  

if he is confident that the dealer will not back out of the deal

B.  

if both parties to the deal have established credit lines for each other

C.  

if one party to the deal acknowledges interest

D.  

if he receives acknowledgement from both the dealers involved

A.  

The offer side of the quotes it is making to other banks

B.  

The offer side of the quotes which it is receiving from other banks

C.  

The offer side of the interbank quotes it observes being made by prime banks

D.  

The offer side of the quotes it has actually borrowed at

A.  

allot the amount for which the price is valid pro rata amongst some principals in accordance with the amount proposed by each and inform the other dealers that “nothing was done”

B.  

decide which principals he will allot the amount for which the price is valid and inform the other dealers that “nothing was done”

C.  

evenly allocate the amount for which the price is valid amongst all the principals and inform all the relevant dealers

D.  

apportion the amount for which the price is valid pro rata amongst all the principals concerned in accordance with the amount proposed by each and inform all the relevant dealers

A.  

The volatilities of the underlying assets are normally distributed and the prices remain constant.

B.  

The risk factors are normally distributed and volatilities of risk factors and correlations between risk factors are constant.

C.  

The prices of underlying assets are normally distributed, the volatilities of risk factors follow a GARCH process and correlations between risk factors are constant.

D.  

The returns of underlying assets are normally distributed and volatilities of risk factors and correlations between risk factors are constant.

A.  

interest rate, currency, equity and commodity risk

B.  

interest rate, currency, equity and default risk

C.  

interest rate, equity, liquidity and default risk

D.  

legal, reputation and regulatory risk

A.  

Commission paid by both parties at rates agreed beforehand

B.  

A fee paid by the seller

C.  

Bid/offer spread

D.  

A share of the bid/offer spread

A.  

Sell

B.  

Sell and subsequently buy back

C.  

Sell and borrow

D.  

Sell, borrow and buy back simultaneously

A.  

Currency risk

B.  

Interest rate risk

C.  

Operational risk

D.  

Credit risk

A.  

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

B.  

Staff in the back-office.

C.  

Staff in the dealing room who are not dealing.

D.  

Any staff outside the dealing room.

A.  

enable the parties to comply with any capital adequacy requirements

B.  

provide for the absolute transfer of title to securities

C.  

provide for the calculation of initial consideration of the repo transaction

D.  

detail the course of action in the case of defaults, for example the rights and obligations of the counterparties and the full set-off of claims between the parties

A.  

The number of EUP per USD

B.  

The number of USD per EUR

C.  

Depends on whether the price is being quoted in Europe or the US

D.  

Depends on whether the price is being quoted interbank or to a customer

A.  

Technically impossible on electronic platforms

B.  

Not an uncommon practice and something which professional dealers should be able to guard against.

C.  

Not good practice.

D.  

A criminal offence.

A.  

Gambling and betting between market participants should be strongly discouraged.

B.  

Gambling and betting between market participants can be allowed if it is monitored by management.

C.  

Gambling and betting between market participants should be forbidden.

D.  

All of the above.

A.  

The level of interest rates in the base currency

B.  

The level of interest rates in the quoted currency

C.  

The interest rates in the two currencies

D.  

Your expectations of the future spot rate

A.  

USD 124,641,442.43

B.  

USD 124,636,476.94

C.  

USD 124,635,416.67

D.  

USD 123,915,737.30

A.  

are invalid

B.  

must be approved by senior management before confirmation

C.  

cannot be entered into without the approval of the local regulator

D.  

are not considered to have been done in normal conditions or normal market hours

A.  

Require greater vigilance by the management and staff.

B.  

Take particular care when the beneficiary is a third party to the deal.

C.  

Ensure that details of all telephone deals which do not include pre-agreed standard settlement instructions are confirmed by telex or similar means without delay.

D.  

All of the above.

A.  

Should be forbidden.

B.  

Should be strongly discouraged.

C.  

Should be monitored by management.

D.  

All of the above.

A.  

One year

B.  

270 days

C.  

183 days

D.  

5years

A.  

Are forbidden.

B.  

Require prior regulatory approval.

C.  

Require the prior express permission of the senior management of both counterparties.

D.  

Should be marked to market daily.