3I0-010 Online Practice Questions and Answers

What is a "tick" in the futures markets?

A. the maximum daily price change permissible on the futures exchange

B. a temporary suspension of trading at a futures exchange

C. the initial margin requirements at a futures exchange

D. the minimum price movement defined by the futures exchange

The interest rate below which the coupon for a FRN may not be fixed is called the:

A. variable rate

B. fixed rate

C. floating rate

D. minimum or floor rate

Which of the following is characteristic of derivative instruments?

A. trades are executed in nominal amounts

B. derivates are bought and sold only over the counter (OTC)

C. the final settlement of a derivates trade can only be made by physical delivery

D. the accounting for derivative instruments is off balance sheet

Why should the maturity profile of unreconciled items be frequently reviewed?

A. It allows the compliance officer to see how often the reconciliation staff has claimed for an outstanding item

B. It allows management to see what items are pending by value and counterparty, but also how long items have been outstanding and whether there is an improvement in the pace of reconciliations.

C. It allows reconciliation staff to check the bilateral limits with counterparties and to adjust these limits as necessary

D. because the most recent figures have to be published in the balance report

What is the replacement risk of an OTC derivative trade?

A. the risk that there is no liquid market at the exchange to close a trade

B. the risk that the present value of a trade will be negative one day prior to value date

C. the risk that an OTC-derivative product cannot be closed before maturity

D. the loss incurred if the counterparty defaults

Who produces the London Code of Conduct?

A. SFA

B. the Bank of England

C. ACI

D. FSA

An interest rate CAP can be defined as:

A. a series of American call options on FRAs

B. a series of European call options on FRAs

C. a series of American put options on FRAs

D. a series of European put options on FRAs

A European-style option is:

A. an option traded in EUR

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

C. an option with premium payable only on its expiry date

D. an option which can be exercised only at maturity

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

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