Question 1

What is meant by "short dates"?
A) Maturities of less than one week.
B) Maturities of less than one month.
C) Maturities of less than one year.
D) Maturities in the same calendar month.

Accepted Answer

"Short dates" typically refer to maturities of less than one month.

Question 2

Which of the following are transferable instruments?
A) Eurocertificate of deposit
B) US Treasury bill
C) CP
D) All of the above

Accepted Answer

Eurocertificate of deposit, US Treasury bill, and CP are all transferable instruments. They can be bought and sold on secondary markets without restriction.

Question 3

What is the Gold Offered Forward Rate?
A) The price differential between spot and forward go
B) The rate at which dealers will lend gold against U
C) The implied forward price of gold
D) The price of gold for forward delivery

Accepted Answer

The Gold Offered Forward Rate (GOFO) is the rate at which dealers are willing to lend gold in exchange for U.S. dollars, essentially the interest rate on a gold loan.

Question 4

The forward points are calculated from:
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

Accepted Answer

Forward points are calculated based on the difference between the interest rates of the two currencies involved in the transaction. Therefore, option C is the correct choice. Option A and B relate to interest rate differentials, but do not fully capture the calculation of forward points. Option D refers to expectations of future spot rates, which is not directly related to the calculation of forward points.

Question 5

A dealer does the following deals in EUR/USD: buys EUR 1 m at 1.1020 sells EUR 3 m at 1.1022 buys EUR 2 m at 1.1002 buys EUR 1.5 m at 1.1012 What position does the dealer now have?
A) Long EUR 1.5 m at 1.0984
B) Short EUR 1.5 m at 1.1036
C) Long EUR 1.5 m at 1.1012
D) Short EUR 3.0 m at 1.1025

Accepted Answer

The answer of A dealer does the following deals in...

Question 6

Brokers shall not reveal the identity of a counterparty unless:
A) They are forced to do so.
B) Explicitly authorised to do so by the counterparty
C) They know the counterparty very well.
D) They are asked by their senior management to do so

Accepted Answer

Brokers should not reveal the identity of a counterparty unless explicitly authorised to do so by the counterparty. This is to maintain confidentiality and protect the interests of the counterparty. If brokers are forced to reveal the identity of a counterparty or do so without authorisation, it can damage their reputation and result in legal consequences. Knowing the counterparty well or being asked by senior management to reveal their identity does not automatically permit brokers to do so without explicit authorisation from the counterparty.

Question 7

You bought a USD 4,000,000 6x9 FRA at 6.75%. The settlement rate is 3-month (90-day) BBA LIBOR, which is fixed at 5.50%. What is the settlement amount at maturity?
A) You receive USD 12,330.46
B) You pay USD 12,330.46
C) You pay USD 12,163.81
D) You receive USD 12,163.81

Accepted Answer

To calculate the settlement amount, we need to first calculate the settlement rate using the formula:

Settlement rate = Forward rate - Spot rate
Settlement rate = 6.75% - 5.50%
Settlement rate = 1.25%

The settlement amount is then calculated as:

Settlement amount = Notional amount x Settlement rate x (days in the contract/360)
Settlement amount = 4,000,000 x 1.25% x (90/360)
Settlement amount = $12,330.46

Since the FRA was bought at 6.75% and the settlement rate is lower at 5.50%, the buyer of the FRA would need to pay the settlement amount of $12,330.46 to the counterparty at maturity, making the correct answer B.

Question 8

What is the probability of an at-the- money option being exercised?
A) Less than 50% probability
B) 50% probability
C) More than 50% probability
D) Zero probability

Accepted Answer

An at-the-money option has a 50% probability of being exercised because the underlying asset's price is equal to the option's strike price, making it equally likely to move above or below the strike price.

Question 9

You have a USD loan that is priced at 3-month LIBOR+50. LIBOR for the loan will be re- fixed in exactly one month. The market is quoting:
A) Sell a 1x3 FRA at 1.95%
B) Buy a 1x3 FRA at 1.98%
C) Buy a 1x4 FRA at 2.10%
D) Sell a 1x4 FRA at 2.10%

Accepted Answer

The answer of You have a USD loan that is...

Question 10

How much is a big figure worth per million of base currency if EUR/GBP is 0.6990?
A) GBP 10,000
B) EUR 10,000
C) GBP 6,990
D) EUR 6,990

Accepted Answer

A big figure is worth GBP 10,000 per million of base currency when EUR/GBP is 0.6990.

Question 11

What usually happens to the collateral in a tri-party repo?
A) It is put at the disposal of the buyer
B) It is held by the seller in the name of the buyer
C) It is held by the tri-party agent in the name of t
D) It is frozen in the sellers account with the tri-p

Accepted Answer

In a tri-party repo, the collateral is held by the tri-party agent in the name of the buyer. The tri-party agent acts as an intermediary between the buyer and the seller, and provides services such as collateral management and settlement. This arrangement helps to mitigate counterparty risk and provides greater transparency and efficiency in the repo market.

Question 12

Bank A pays for EURO 5 m at 1.1592. Bank B offers EURO 10 m at 1.1597. Broker XYZ quotes to the market EURO / USD 1.1592/97. Bank C takes the offer at 97. The broker is obliged to reveal:
A) The name of Banks A and B.
B) The name of Bank B only.
C) The amount that was bid but not the name of Bank A
D) None of the above

Accepted Answer

The broker is only obliged to reveal the name of the bank offering the better bid, which in this case is Bank B. They are not required to disclose the name of Bank A or the amount bid by them.

Question 13

In the international market, a FRA in USD is usually settled with reference to:
A) BBA LIBOR
B) Fed funds
C) ISDA LIBOR
D) EURIBOR

Accepted Answer

BBA LIBOR (also known as ICE LIBOR) is the most commonly used reference rate in the international market for FRAs in USD. Fed funds and ISDA LIBOR are not commonly used for USD FRAs, while EURIBOR is a reference rate for Euro-denominated FRAs.

Question 14

Your are quoted the following rates: spot CHF/JPY 80.12-22 3M CHF/JPY 25.5/22.5 At what rate can you buy 3-month outright JPY against CHF?
A) 79.995
B) 79.965
C) 79.895
D) 79.865

Accepted Answer

The answer of Your are quoted the following rates: spot...

Question 15

The Interest Rate Parity Theorem states that:
A) Interest rates in different currencies will tend t
B) Interest rates in different currencies differ due
C) Selling a low interest rate currency to invest a h
D) Selling a low interest rate currency to invest in

Accepted Answer

The answer of The Interest Rate Parity Theorem states that:
A)...

Question 16

Todays date is Thursday 12th December. What is the spot value date? Assume no bank holidays.
A) 14th December
B) 15th December
C) 16th December
D) 17th December

Accepted Answer

The answer of Todays date is Thursday 12th December. What...

Question 17

What is the day count/annual basis convention for euroyen deposits?
A) Actual/365
B) Actual/360
C) Actual/actual
D) 30E/360

Accepted Answer

Euroyen deposits typically use the Actual/360 day count/annual basis convention, which means that the actual number of days in a year (360) is used as the denominator in calculations of interest.

Question 18

Written confirmation is a function that can be done by:
A) Any dealer as long as he/she is not a party to the
B) Staff in the back-office.
C) Staff in the dealing room who are not dealing.
D) Any staff outside the dealing room.

Accepted Answer

Written confirmation is typically done by the back-office staff, as they are responsible for processing trades and ensuring that all necessary documentation is completed accurately. Dealers may be involved in preparing the trade but cannot be a party to the confirmation as it would compromise their objectivity and independence. Staff in the dealing room may also be involved in the trade but should not be responsible for confirmation as they are involved in executing trades. Staff outside of the dealing room may not have the necessary knowledge or access to the relevant systems and processes to complete a confirmation.

Question 19

A forward-forward loan creates an exposure to the risk of:
A) Higher interest rates
B) Lower interest rates
C) Steepening yield curve
D) Parallel shift downwards in the yield curve

Accepted Answer

A forward-forward loan involves borrowing at a fixed rate for a future period. Therefore, if interest rates rise during that period, the borrower will be exposed to the risk of having to make payments at a higher rate.

Question 20

Confirmations should be sent out by both counterparties through an efficient and secure means of communication, preferably electronic:
A) Within 24 hours of the deal.
B) Within two business days of the deal.
C) Before the value date.
D) As soon as possible.

Accepted Answer

The answer of Confirmations should be sent out by both...

Exam 1: ACI Dealing Certificate-Part A

What is meant by "short dates"?

Which of the following are transferable instruments?

What is the Gold Offered Forward Rate?

The forward points are calculated from:

A dealer does the following deals in EUR/USD: buys EUR 1 m at 1.1020 sells EUR 3 m at 1.1022 buys EUR 2 m at 1.1002 buys EUR 1.5 m at 1.1012 What position does the dealer now have?

Brokers shall not reveal the identity of a counterparty unless:

You bought a USD 4,000,000 6x9 FRA at 6.75%. The settlement rate is 3-month (90-day) BBA LIBOR, which is fixed at 5.50%. What is the settlement amount at maturity?

What is the probability of an at-the- money option being exercised?

You have a USD loan that is priced at 3-month LIBOR+50. LIBOR for the loan will be re- fixed in exactly one month. The market is quoting:

How much is a big figure worth per million of base currency if EUR/GBP is 0.6990?

What usually happens to the collateral in a tri-party repo?

Bank A pays for EURO 5 m at 1.1592. Bank B offers EURO 10 m at 1.1597. Broker XYZ quotes to the market EURO / USD 1.1592/97. Bank C takes the offer at 97. The broker is obliged to reveal:

In the international market, a FRA in USD is usually settled with reference to:

Your are quoted the following rates: spot CHF/JPY 80.12-22 3M CHF/JPY 25.5/22.5 At what rate can you buy 3-month outright JPY against CHF?

The Interest Rate Parity Theorem states that:

Todays date is Thursday 12th December. What is the spot value date? Assume no bank holidays.

What is the day count/annual basis convention for euroyen deposits?

Written confirmation is a function that can be done by:

A forward-forward loan creates an exposure to the risk of:

Confirmations should be sent out by both counterparties through an efficient and secure means of communication, preferably electronic: