Question 1

You are quoted the following market rates: spot GBP/USD. 1.6530 9M (272-day) GBP. 3.60% 9M (272-day) USD. 1.95% What are the 9-month GBP/USD forward points?
A) +206
B) +197
C) -195
D) -204

Accepted Answer

The answer of You are quoted the following market rates:...

Question 2

Which of the following is true?
A) The Euronext.LIFFE short sterling futures contract
B) The Euronext.LIFFE JPY futures contract has a tick
C) The CME eurodollar futures contract has a minimum
D) All of the above

Accepted Answer

The CME eurodollar futures contract has a minimum tick size, which is a standard feature of futures contracts to define the smallest price movement.

Question 3

Which of the following are quoted in terms of a yield-to-maturity?
A) USCP
B) ECP
C) Treasury bill
D) BA

Accepted Answer

The answer of Which of the following are quoted in...

Question 4

If you bought USD 2,000,000 against CHF at 1.1020, USD 3,000,000 at 1.1040 and USD 5,000,000 at 1.1032, what is the average rate of your position?
A) 1.1030
B) 1.1035
C) 1.1028
D) 1.1032

Accepted Answer

The answer of If you bought USD 2,000,000 against CHF...

Question 5

Which of the following is not in the Model Code?
A) Banks and brokers should record, by tapes or other
B) There is no need to inform new counterparties and
C) On completion of recordings, tapes should be kept
D) The storage of recorded tapes should be strictly m

Accepted Answer

The Model Code includes guidelines for the conduct of financial market participants, including record-keeping requirements. Choice B, however, is not found in the Model Code and is therefore not applicable.

Question 6

When is a broker allowed to assume a deal is closed:
A) When one of the principals confirms the deal.
B) When the principals give a written undertaking for
C) When an acknowledgement is received from the princ
D) When both back offices acknowledge the deal.

Accepted Answer

The answer of When is a broker allowed to assume...

Question 7

In GBP/CHF, you are quoted the following prices by four different banks. You are a buyer of CHF. Which is the best quote for you?
A) 2.3840
B) 2.3843
C) 2.3837
D) 2.3835

Accepted Answer

The higher the quote, the more CHF you get for your GBP.

Question 8

What is replacement cost a function of?
A) Credit risk
B) Market risk
C) Both of the above
D) None of the above

Accepted Answer

The answer of What is replacement cost a function of?
A)...

Question 9

If you funded a fixed-income investment portfolio with short-term deposits, how would you hedge your interest rate exposure with interest rate swaps?
A) Pay fixed and receive floating through swaps for t
B) Pay floating and receive fixed through swaps for t
C) You cannot : the maturity of the swaps would be lo
D) You should not: there would be too much basis risk

Accepted Answer

Pay fixed and receive floating through swaps for t

Question 10

Selling a FRA is the same as:
A) Making a forward-forward loan
B) Going over-borrowed
C) Opening a positive gap
D) All of the above

Accepted Answer

Selling a FRA means agreeing to lend money at a fixed interest rate in the future. This is essentially the same as making a forward-forward loan, where the lender agrees to lend money at a future date at a fixed rate. Going over-borrowed and opening a positive gap are not related to selling a FRA.

Question 11

You are quoted the following market rates: spot EUR/GBP 0.6670 6M (182-day) EUR 2.35% 6M (182-day) GBP 3.75% What is 6-month EUR/GBP?
A) 0.6675
B) 0.6715
C) 0.6717
D) 0.6718

Accepted Answer

The answer of You are quoted the following market rates:...

Question 12

A CD with a face value of EUR10 million and a coupon of 3% was issued at par for 182 days and is now trading at 3.10% with 120 days remaining to maturity. What has been the capital gain or loss since issue?
A) -EUR 52,161.00
B) +EUR 47,839.00
C) -EUR 3,827.67
D) Nil

Accepted Answer

The answer of A CD with a face value of...

Question 13

If you sell USD 3-month forward to a client against EUR, what should you do to hedge your position?
A) Buy USD spot, and buy and sell a 3-month EUR/USD F
B) Sell EUR/USD in the spot market, borrow EUR for 3
C) Sell a 3-month EUR/USD outright forward
D) Any of the above

Accepted Answer

By selling a 3-month EUR/USD outright forward, the bank can hedge its position against the risk of EUR/USD exchange rate fluctuations.

Question 14

The market is quoting: 1-month (31-day) USD. 1.75% 3-month (91-day) USD. 2.05% What is the 1x3 rate in USD?
A) 4.261%
B) 2.202%
C) 1.900%
D) 1.592%

Accepted Answer

The 1x3 rate is calculated as [(1 + 0.0175)^(31/365) x (1 + 0.0205)^(91/365) - 1] x 100 = 2.202% (rounded to three decimal places). Therefore, the answer is choice B.

Question 15

What is the buyers primary risk in a repo?
A) The credit risk on the collateral
B) The credit risk on the repo counterparty
C) The legal risk on the contract
D) The operational risk on margin maintenance

Accepted Answer

The primary risk for the buyer in a repo is the credit risk on the repo counterparty. If the counterparty defaults before the end of the repo term, the buyer may not receive their cash investment or be able to recover the collateral. While credit risk on the collateral and legal and operational risks exist, they are secondary to the risk of default by the counterparty.

Question 16

If you buy GBP 2,000,000 against USD at 1.6020; GBP 1,000,000 at 1.6035 and GBP 3,000,000 at 1.6028, what is the average rate of your position?
A) 1.6035
B) 1.6027
C) 1.6030
D) 1.6023

Accepted Answer

To find the average rate of the position, we need to calculate the total amount of GBP bought and the total cost in USD.

GBP 2,000,000 at 1.6020 = USD 3,204,000 
GBP 1,000,000 at 1.6035 = USD 1,603,500 
GBP 3,000,000 at 1.6028 = USD 4,808,400

Total GBP bought = GBP 6,000,000 
Total cost in USD = USD 9,616,900

Average rate = Total cost in USD / Total GBP bought 
= USD 9,616,900 / GBP 6,000,000 
= 1.60282

Therefore, the average rate of the position is 1.6028, which is closest to option B (1.6027).

Question 17

What is an outright forward FX transaction?
A) A spot sale (purchase) and a forward purchase (sal
B) A spot sale (purchase) and a forward sale (purchas
C) An exchange of currencies on a date beyond spot an
D) An exchange of currencies on a date beyond spot

Accepted Answer

An outright forward FX transaction is an exchange of currencies on a specific date in the future, beyond the spot date. This means that the exchange rate is agreed upon at the present time, but the actual exchange of currencies will take place on the agreed-upon future date. Option A and B involve a combination of spot and forward transactions, but not an outright forward transaction. Option D is incorrect, as it does not specify any type of transaction.

Question 18

You need to buy USD 5,000,000 against GBP and are quoted the following rates concurrently by two separate banks: 1.6045-50 and 1.6047-52. At which rate do you trade?
A) 1.6045
B) 1.6047
C) 1.6050
D) 1.6052

Accepted Answer

In this scenario, you want to buy USD, which means you need to sell GBP. The best rate to sell GBP would be the highest bid rate, which is 1.6047. Therefore, you should trade at a rate of 1.6047.

Question 19

The Committee for Professionalism strongly recommends intra-day oral deal checks to help reduce the number and size of differences, particularly when dealing through voice- brokers, for deals involving foreign counterparties, in faster moving markets such as FX and when dealing in other instruments which have very short settlement periods. This checking should:
A) Be carried out at least three times a day.
B) Be agreed between the parties.
C) Be done at the end of each day.
D) Be decided by the broker.

Accepted Answer

The recommendation of intra-day oral deal checks should be agreed upon between the parties involved rather than being decided by a broker. The recommendation does not specify a certain number of times the checks should be carried out or that they need to be done at the end of each day.

Question 20

The use of mobile phones from within the dealing room for transacting business:
A) Is not considered good practice.
B) Is accepted in case of direct deal input into the
C) Is accepted for senior dealers.
D) Is accepted for hedging transactions.

Accepted Answer

The use of mobile phones from within the dealing room for transacting business is not considered good practice as it can compromise the security and confidentiality of the transactions. It is advisable to use only the authorized terminals and systems within the dealing room for transacting business.

Exam 1: ACI Dealing Certificate-Part A

You are quoted the following market rates: spot GBP/USD. 1.6530 9M (272-day) GBP. 3.60% 9M (272-day) USD. 1.95% What are the 9-month GBP/USD forward points?

Which of the following is true?

Which of the following are quoted in terms of a yield-to-maturity?

If you bought USD 2,000,000 against CHF at 1.1020, USD 3,000,000 at 1.1040 and USD 5,000,000 at 1.1032, what is the average rate of your position?

Which of the following is not in the Model Code?

When is a broker allowed to assume a deal is closed:

In GBP/CHF, you are quoted the following prices by four different banks. You are a buyer of CHF. Which is the best quote for you?

What is replacement cost a function of?

If you funded a fixed-income investment portfolio with short-term deposits, how would you hedge your interest rate exposure with interest rate swaps?

Selling a FRA is the same as:

You are quoted the following market rates: spot EUR/GBP 0.6670 6M (182-day) EUR 2.35% 6M (182-day) GBP 3.75% What is 6-month EUR/GBP?

A CD with a face value of EUR10 million and a coupon of 3% was issued at par for 182 days and is now trading at 3.10% with 120 days remaining to maturity. What has been the capital gain or loss since issue?

If you sell USD 3-month forward to a client against EUR, what should you do to hedge your position?

The market is quoting: 1-month (31-day) USD. 1.75% 3-month (91-day) USD. 2.05% What is the 1x3 rate in USD?

What is the buyers primary risk in a repo?

If you buy GBP 2,000,000 against USD at 1.6020; GBP 1,000,000 at 1.6035 and GBP 3,000,000 at 1.6028, what is the average rate of your position?

What is an outright forward FX transaction?

You need to buy USD 5,000,000 against GBP and are quoted the following rates concurrently by two separate banks: 1.6045-50 and 1.6047-52. At which rate do you trade?

The use of mobile phones from within the dealing room for transacting business: