3I0-012 Online Practice Questions and Answers

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

Which of the following scenarios offer an example of wrong way risk?

A. A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a US mortgage bank

B. A bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index crosses the 200 bps level

C. A bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility moves up to substantially higher levels

D. A bank enters into a receiver's swap while interest rates are increasing

Which of the following rates represents the highest investment yield in the Euromarket?

A. Semi-annual bond yield of 3.75%

B. Annual bond yield of 3.75%

C. Semi-annual money market yield of 3.75%

D. Annual money market rate of 3.75%

What is the probability of an `at-the-money' option being exercised?

A. Less than 50% probability

B. 50% probability

C. More than 50% probability

D. Zero probability

What are the secondary market proceeds of a CD with a face value of EUR 5,000,000.00 and a coupon of 3% that was issued at par for 182 days and is now trading at 3% but with only 7 days remaining to maturity?

A. EUR 4,997,085.03

B. EUR 5,000,000.00

C. EUR 5,071,086.45

D. EUR 5,072,874.16

Selling a FRA has the same interest rate exposure as:

A. Opening a positive gap

B. Going over-borrowed

C. Making a forward-forward loan

D. Taking a forward-forward deposit

An option premium is normally a positive function of:

A. the traded volume

B. the historical volatility of the price of the underlying commodity

C. the style (European or American) of the option

D. the implied volatility of the price of the underlying

Is gambling or betting between market participants allowed?

A. Yes, it is allowed for sporting events.

B. Yes, it is allowed if no money is involved.

C. Although not prohibited, it is strongly discouraged.

D. It is allowed for purposes of charity.

The seller of a floor:

A. Receives compensation if a reference interest rate falls below an agreed level

B. Pays compensation if a reference interest rate falls below an agreed level

C. Receives compensation if a reference interest rate rises above an agreed level

D. Pays compensation if a reference interest rate rises above an agreed level

A bank wants to use STIR futures for establishing a macro hedge for the asset portfolio. Which of the following statements is correct?

A. It is reasonable for the bank to purchase futures contracts if they expect interest rates to rise.

B. It is reasonable for the bank to take a long position in anticipation of rising rates.

C. Losses (or gains) in the value of the cash position can be largely offset by gains (or losses) in the value of the futures position

D. It is reasonable for the bank to sell futures contracts if it expects interest rates to fall