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Practice ACI 3I0-012 exam question 1-13
QUESTION 1
A disgruntled customer claims that he should not have to settle an FRA with you because it is really just a wager. What
type of risk are you exposed to?
A. Credit risk
B. Legal risk
C. Settlement risk
D. Basis risk
Correct Answer: B
QUESTION 2
The mid-rate for USD/CHF is 1.3950 and the mid-rate for AUD/USD is 0.7060. What is the midrate for CHF/AUD?
A. 0.9849
B. 1.0154
C. 1.9759
D. 0.5061
Correct Answer: A
QUESTION 3
Which of following terms is not used as an expression for dates other than regular dates/periods?
A. cock dates
B. broken dates
C. odd dates
D. weird dates
Correct Answer: D
QUESTION 4
VaR increases with:
A. lower correlation of underlying risk factors
B. a shorter time horizon
C. a lower confidence level
D. a higher confidence level
Correct Answer: C
QUESTION 5
A 6-month SEK/NOK Swap is quoted 40/50. Spot is 1.1145. Which of the following statements is correct?
A. SEK interest rates are higher than NOK interest rates
B. NOK interest rates are higher than SEK interest rates
C. NOK interest rates are higher than USD interest rates
D. SEK interest rates and NOK interest rates are converging
Correct Answer: B
QUESTION 6
How long does the Model Code recommend that tapes and other records of dealers/brokers be kept?
A. at least two months
B. one year
C. up to one month
D. at least three months
Correct Answer: A
QUESTION 7
Assume the following scenario:
Bank A bids for EUR 5,000,000.00 at 1.3592.
Bank B offers EUR 10,000,000.00 at 1.3597.
Broker XYZ quotes to the market EUR/USD 1.3592/97.
Bank C takes the offer at 1.3597.
What information is the broker obliged to reveal?
A. the name of Bank A and Bank B
B. the names of Bank B and Bank C
C. the amount that was bid but not the name of Bank A
D. the amount taken by Bank C as well as the amount that was bid
Correct Answer: B
QUESTION 8
Which of the following pays a return in the form of a discount to face value?
A. Treasury bill
B. CD
C. Interbank deposit
D. Classic repo
Correct Answer: A
QUESTION 9
Which of the following scenarios offer an example of wrong way risk?
A. A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a US mortgage
bank
B. A bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index crosses the 200
bps level
C. A bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility moves up to
substantially higher levels
D. A bank enters into a receiver\\’s swap while interest rates are increasing
Correct Answer: A
QUESTION 10
Which one of the following statements regarding the variance-covariance method for calculating value- at- risk is true?
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.
Correct Answer: D
QUESTION 11
How many GBP would you have to invest at 0.55% to be repaid GBP 2,000,000.00 (principal plus interest) in 90 days?
A. GBP 1,997,253.78
B. GBP 1,997,291.34
C. GBP 1,997,287.67
D. GBP 1,997,250.00
Correct Answer: B
QUESTION 12
Brokers should confirm all transactions:
A. Initially by fax or other acceptable electronic means, then in writing.
B. Only if the deal is between overseas counterparties and for value today.
C. Only if the transaction is not for a marketable amount.
D. To both counterparties immediately by fax or other acceptable electronic means.
Correct Answer: D
QUESTION 13
A corporate wishing to hedge the interest rate risk on its floating-rate borrowing would:
A. Sell interest rate caps
B. Sell futures
C. Sell FRAs
D. Buy futures
Correct Answer: B
The last sentence:
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