Clients of a voice-broker quote EUR/USD at 1.3556-61, 1.3559-62, 1.3557-63 and 1.3555- 59. What will be the broker’s price?

A.

1.3559 choice

B.

1.3555-63

C.

1.3559-62

D.

1.3556-59

A 7% CD was issued at par, which you now purchase at 6.75%. You would expect to pay:

A.

The face value of the CD

B.

More than the face value

C.

Less than the face value

D.

Too little information to decide

The tom/next GC repo rate for German government bonds is quoted to you at 1.75-80%. As collateral, you sell EUR 10,000,000.00 nominal of the 5.25% Bund July 2012, which is worth EUR 11,260,000.00, with no initial margin. The Repurchase Price is:

A.

EUR 10,000,500.00

B.

EUR 10,000,486.11

C.

EUR 11,260,563.00

D.

EUR 11,260,547.36

Basis risk on a futures contract is:

A.

The risk of an adverse change in the futures price

B.

The risk of an adverse change in the spread between futures and cash prices

C.

The progressive illiquidity of a futures contract as it approaches expiry

D.

The risk of a divergence between the futures price and the final fixing of the underlying interest rate

Which statement about modern matched-maturity transfer pricing in banks is correct?

A.

It is now a widely accepted standard that banks should use a single representative transfer price across the entire maturity spectrum.

B.

Modern matched-maturity pricing systems include an additional liquidity surcharge that
is specifically applied to more liquid short maturities.

C.

Matched-maturity transfer prices should represent a weighted average cost of capital that incorporates the cost of equity into the cost of borrowed funds.

D.

Modern matched-maturity systems differentiate transfer prices by the maturity of the commitment and also apply a marginal funding cost perspective.

A 3-month (91-day) US Treasury bill is quoted at a rate of discount of 4.25%. What is its true yield?

A.

4.19%

B.

4.25%

C.

4.30%

D.

4.31%

What is a ‘duration gap’?

A.

the average maturity of liabilities on a balance sheet

B.

the difference between the duration of assets and liabilities

C.

the difference between the duration of the longest-held and shortest-held liabilities on the balance sheet

D.

the average maturity of the portfolio on the asset side of a balance sheet

Which of the following transactions would have the effect of lengthening the average duration of assets in the banking book?

A.

buying futures contracts on 30-year German Government bonds

B.

selling futures contracts on 30-year German Government bonds

C.

buying put options on 30-year German Government bonds

D.

buying a 3x6 forward rate agreement

The mid-rate for USD/CHF is 0.9300 and the mid-rate for NZD/USD is 0.8560. What is the
mid rate for NZD/CHF?

A.

0.7961

B.

1.0864

C.

1.7860

D.

1.2561

A put option is ‘out-of-the-money’ if:

A.

Its strike price is higher than the current market price of the underlying commodity

B.

If the current market price of the underlying commodity is higher than the strike price of the option

C.

Its strike price is equal to the current market price of the underlying commodity

D.

If the current market price of the underlying commodity is lower than the strike price of the option