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Principals who enter into an interest rate swap with the intention of shortly afterwards assigning or transferring the swap to a third party:

A.

should never reveal their future dealing intentions to their counterparties

B.

should make clear their intention to do so when initially negotiating the deal

C.

should agree upon the method of assignment before transacting

D.

should only reveal any such intentions after the confirmations have been exchanged

Which of the following statements is correct?

A.

The best strategy to treat and mitigate risk is avoiding the risk by avoiding the business

B.

The best strategy to treat and mitigate risk is transferring the risk to another party, e. g. by transfer to an insurance company

C.

The best strategy to treat and mitigate risk is to establish the appropriate processes for identifying, assessing, managing, monitoring and reporting risks

D.

The best strategy to treat and mitigate risk is to reduce the negative effect of the risk, e. g. by hedging

What is the major difference between a CD and a deposit?

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

The buyer of a currency put option has:

A.

Substantial opportunity for gain and limited risk of loss

B.

Substantial risk of loss and substantial opportunity for gain

C.

Limited risk of loss and limited opportunity for gain

D.

Substantial risk of loss and limited opportunity for gain

Which of the following statements about requirements for limit setting is correct?

A.

In the case of trading transactions, counterparty limits are to be set by the front office and issuer limits are to be set by the back office

B.

In the case of trading transactions, counterparty and issuer limits are to be set by the credit committee

C.

In the case of trading transactions, counterparty limits are to be set by a front office vote and market risk limits are to be set by the back office

D.

In the case of trading transactions, counterparty limits and issuer limits are to be set by the front office

The buyer of a USD/ARS NDF could be:

A.

a buyer of Argentine Pesos

B.

expecting a falling USD/ARS rate

C.

hedging against a weakening of the Argentine Peso

D.

speculating on an appreciation of the Argentine Peso

You bought a USD 4,000000 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

Deliberately inputting incorrect big figures into an electronic dealing platform is:

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.

What is the maximum maturity of a London CD?

A.

One year

B.

270 days

C.

183 days

D.

5years

What is the primary function of GC repo, particularly very short -term transactions?

A.

Financing long positions

B.

Covering short positions

C.

Interest rate positioning

D.

Dividend tax arbitrage

You have made a price by a Japanese bank in (SD 2,000,000.00 against JPY. They made you

98.95-03 and you took the offer. USD/JPY is now quoted 98.78-81 and you square your position.

What is your profit or loss?

A.

Profit of JPY 340.000

B.

Profit of JPY 1.500,000

C.

Loss of JPY 340.000

D.

LossofJPV 500.000

On fixing date, the settlement payment of an NDF reflects the differential between the agreed forward rate and:

A.

the fixing spot rate

B.

the daily high

C.

the days’ average rate

D.

the average rate over the NDF period

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 tn-party agent in the name of the buyer

D.

It is frozen in the sellers account with the tri-panty agent

The Interest Rate Parity Theorem states that:

A.

Interest rates in different currencies will tend to move into line with each other over time

B.

Interest rates in different currencies differ due to differences in expectations about inflation

C.

Selling a low interest rate currency to invest a high interest rate currency will only be profitable if one hedges the currency risk

D.

Selling a low interest rate currency to invest in a high interest rate currency should not be profitable if one hedges the currency risk

Which position below is NOT a component of common equity Tier 1 capital?

A.

innovative hybrid capital instruments with incentives to redeem

B.

common shares issued by bank

C.

retained earnings

D.

stock surplus (share premium)