The Market Segmentation hypothesis suggests that the yield curve bends at some point along its length because:

A.

Investors have less appetite for longer-term investments

B.

Borrowers prefer to borrow long-term but lenders prefer to lend short-term

C.

Different types of institution tend to specialize in different maturity ranges

D.

The risk premium becomes significant only at longer maturities

Confirmations of non-prime brokerage deals using CLS should be exchanged:

A.

within 2 hours after deal agreed with counterparty

B.

before the value date of the trade

C.

by the end of the trade date

D.

within 24 hours

Under Basel rules, what is the meaning of EEPE?

A.

Effective Expected Potential Exposure

B.

Effective Expected Positive Exposure

C.

Effective Expected Price Earning

D.

Effective Expected Payment Exposure

What are the primary reasons for taking an initial margin in a classic repo?

A.

Counterparty risk and operational risk

B.

Counterparty risk and legal risk

C.

Collateral illiquidity and counterparty risk

D.

Collateral illiquidity and legal risk

A “time option” is an outright forward FX transaction where the customer:

A.

has the option to fulfill the outright forward or not at maturity

B.

may freely choose the maturity, given a 24-hour notice to the bank

C.

can choose any maturity within a previously fixed period

D.

may decide to deal at the regular maturity or on either the business day before or after

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

The major risk to the effectiveness of netting is:

A.

Credit risk

B.

Settlement risk

C.

Liquidity risk

D.

Legal risk

You quote a customer spot AUD/USD at 1.0350-55. The T/N swap is quoted to you at 3/2.
The customer asks to buy USD for value tomorrow. What rate should you quote him to
break-even against the other rates?

A.

1.0352

B.

1.0353

C.

1.0347

D.

1.0348

Which of the following statements is true concerning dealing and rollovers at non-current
rates?

A.

When setting the rates for an FX swap to extend the maturity, the spot rate should be
fixed immediately within the current spread

B.

Where the use of non-current rates may be necessary, they should only be entered into with the prior explicit permission of the quoting party’s senior management

C.

Dealing and rollovers at non-current rates are relatively common market practice and therefore should not be treated differently from any other transaction

D.

Dealing and rollovers at non-current rates are forbidden as they can help perpetrate fraud and tax evasion

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