ACI ACI-Financial Markets Association 3I0-010 Questions & Answers

• Question 1:

  When is the settlement amount of a FRA normally payable?

  A. at the beginning of the forward period

  B. on the trade date

  C. on the maturity (final) date

  D. at any time before the contract's maturity date

  Correct Answer: A

• Question 2:

  Which of the following statements best describes an asset swap?

  A. a combination of a fixed rate bond and a fixed/floating interest rate swap

  B. an option on fixed/floating interest rate swap

  C. the sale of a bond against cash with a simultaneous agreement to buy the bond at an agreed upon rate and date

  D. the sale of a fixed rate bond against the simultaneous purchase of a floating rate note

  Correct Answer: A

• Question 3:

  An American-style option is:

  A. an option traded in USD

  B. an option which can be exercised at any time between the purchase and expiration date

  C. an option based on any US dollar instrument

  D. an option which can be exercised only at maturity

  Correct Answer: B

• Question 4:

  What financial product involves exchanging a fixed interest rate for a floating interest rate?

  A. a FX swap

  B. a repurchase agreement

  C. an interest rate swap

  D. a dual swaption

  Correct Answer: C

• Question 5:

  Your dealer has sold a 3x6 USD 10,000,000.00 FRA at 5.55%. On settlement day the 3-month (90-day) fixing is 5.45%. What would you do?

  A. pay USD 2,466.40

  B. receive USD 2,465.79

  C. pay USD 2,465.79

  D. receive USD 2,466.40

  Correct Answer: D

• Question 6:

  A trader purchases a six month over-the-counter straddle (options strategy) for a 1 million premium from a counterparty. The maximum credit exposure over the life of the trade is:

  A. less than 1 million

  B. there is no credit exposure

  C. exactly 1 million

  D. none of the above

  Correct Answer: D

• Question 7:

  Your bank purchases a FRA at 5.75% in USD. Under what conditions will you pay a cash settlement?

  A. if EURIBOR is higher than 5.75%

  B. if EURIBOR is lower than 5.75%

  C. if LIBOR is lower than 5.75%

  D. if LIBOR is higher than 5.75%

  Correct Answer: C

• Question 8:

  In using futures contracts there is:

  A. only market risk

  B. only credit risk

  C. market risk and credit risk

  D. market risk, credit risk and delivery risk

  Correct Answer: A

• Question 9:

  Generally, "initial margin" means:

  A. the notional amount of a contract

  B. a deposit amount per contract that is determined by the futures exchange

  C. the maximum net loss during the contract period

  D. the minimum net loss during the contract period

  Correct Answer: B

• Question 10:

  For futures contracts quoted on an exchange:

  A. the maintenance margin is a predetermined fraction of initial margin

  B. the initial margin is a predetermined fraction of maintenance margin

  C. the maintenance margin represents the brokerage costs

  D. the maintenance margin represents management fees

  Correct Answer: A