In the US commercial paper market, commercial paper is limited to:

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1 Question: 1 In the US commercial paper market, commercial paper is limited to: A. a 270-day tenor B. a 360-day tenor C. a 365-day tenor D. a 366-day tenor Question: 2 When a deal is done via a broker: A. It need not be confirmed between the counterparties as the broker confirms it immediately with both counterparties B. It should also be confirmed directly between the two counterparties C. It is important to note that broker confirmations are bilateral confirmations between the principals of the trade D. The dealer should obtain acknowledgement that the deal has been agreed to but may assume agreement to the trade in the absence of such acknowledgement Question: 3 Your dealers have made the following deals in spot USD/JPY: Sold USD 5,000, at Bought USD 3,500, at Bought USD 2,000, at Sold USD 2,000, at What is your position? A. Short USD 1,500, at B. Short USD 1,500, at C. Long USD 1,500, at D. Short USD 1,500, at 93.55

2 Question: 4 Which of the following is considered a non-negotiable instrument? A. Certificate of Deposit (CD) B. FRA C. US Treasury Note D. ECP Question: 5 What is the maximum term London Certificates of Deposit are issued? A. 12 months B. 18 months C. 5 years D. 2 years Question: 6 A forward rate agreement (FRA) is: A. A future rate agreement involving two different currencies B. An interest rate agreement where buyer and seller will exchange an interest rate differential at a given date in the future C. An interest rate to be applied to a loan or deposit that begins and matures in the future D. An agreement to exchange cash flows starting on a specific date in the future Question: 7 When do you use a SWIFT message type 202? A. For a foreign exchange confirmation B. For multiple general financial institution transfers

3 C. For a general financial institution transfer D. For a customer transfer Question: 8 In the unexpected event that a public holiday is declared on the date a particular contract matures, what is the normal market practice? A. If that day is not the final trading day of the month, all contracts maturing on that day are extended to the next business day B. If that day is not the final trading day of the month, all contracts maturing on that day are shortened to the preceding business day C. All new maturity dates have to be agreed upon with the counterparties involved D. Decisions about the maturity dates of trading contracts are made by ACI s Committee for Professionalism on a case-by-case basis and must be adhered to Question: 9 How are accounting entries usually generated? A. They are generated based on a code profile held for each product type on a time event basis. B. They are generated based on a code profile held for each front office staff member. C. They are generated based on the nature of instruments (debits = first priority / credits = second priority). D. They are generated in the morning at start of business when there is no direct link to other systems. Question: 10 What is a SWIFT message type 210? A. A request for financial institution transfer B. A general financial institution transfer C. A financial institution transfer for its own account D. A notice to receive

4 Question: 11 What is done with counterparties confirmations? A. They are scanned for money laundering activities and afterwards destroyed B. They are forwarded to the deal capturer to check the completeness of the deal C. They are matched as soon as possible after receipt D. They are archived after reception Question: 12 What is the purpose of internal cash reconciliation? A. To control the bank s cash and derivative positions B. To reconcile and control the cash balance for the Bank for International Settlements (BIS) C. To reconcile and control the cash balance for the central bank D. Cash forecasting, cash collateral and cash positions control Question: 13 What information is essential for an interbank FX confirmation? A. Specification of the applicable law B. The value date C. The brokerage cost D. The name of the person(s) originating the deal Question: 14 What is the most frequently used settlement process for securities? A. Free of settlement payment

5 B. Cash settlement C. Same day value settlement D. Delivery-versus-payment Question: 15 Which of the following types of payment demands extra diligence and review procedures? A. Nostro funding payment B. Third party payment C. Value spot USD payment D. Value spot payment for currency equivalents> USD 3,000, Question: 16 Which of the following best describes TARGET2? A. The real-time gross settlement (RTGS) system owned and operated by the Eurosystem B. The system used in Germany for settling high value domestic securities transactions C. The pan-europe netting system used for reducing credit risk for derivative transactions D. The system used by the European Banking Federation to clear cross border Euro payments Question: 17 What is a settlement date? A. The date by which the interest payment on an operation must be made B. The last date by which the minimum reserve amount can be paid to the central bank C. The date, on which settlement must be made on the contracted amount or the differential amount of an operation D. The date a deal is processed

6 Question: 18 What is the main difference between TARGET and TARGET2? A. Finland did not participate in TARGET but it does participate in TARGET2 B. The cut-off time for TARGET2 is 20:00 (8.00 p.m.) CET, whereas the cut-off time for TARGET was 18:00 (6.00 p.m.) CET C. TARGET2 runs on a single shared technical platform whereas TARGET did not D. TARGET2 processes payment orders denominated in EUR as well as USD Question: 19 Which of the following best describes the main benefit of the RTGS payment system? A. Final settlement of interbank funds transfers on a continuous, trade by trade basis throughout the day B. Lower costs through fewer payments passing through nostro accounts C. Lower costs through less labor intensive methods D. Reduced market risk due to smaller values of open positions Question: 20 A payment is made from Germany to a second Euro zone country. Which international payment system would normally be used? A. TARGET2 B. Euro Link System (ELS) C. Euroclear D. Clearstream Question: 21 What are the principal functionalities of interbank funds transfer systems? A. The matching of confirmations

7 B. The dealing and archiving of payment orders C. Reconciliation and correspondent banking D. The transfer of information and settlement Question: 22 Which of the following currencies is eligible for CLS settlement? A. ZAR B. TRY C. MYR D. CNY Question: 23 A message received and accepted by SWIFT will be acknowledged with: A. OK B. ACK C. MAK D. NAK Question: 24 Which of the following processes are offered by the CLS settlement system? A. The close-out process B. The customer matching process C. The settlement process D. The securities lending process Question: 25

8 CHIPS is the name commonly used for the domestic clearing system in: A. London B. Frankfurt C. New York D. Hong Kong Question: 26 You have five outstanding amounts with five different values. Which of the following should be investigated first? A. The most recently processed deal B. The counterparties in your own country C. The counterparty which claims first D. Those positions with the highest loss potential Question: 27 What is the primary role of the position-keeper in a dealing room? A. To keep the multilateral limits updated B. To invest funds at the highest available interest rate C. To keep the balance or position of the accounts or nostros in each currency representing the accounts held by the bank s agents D. To keep the management informed about interest rate developments Question: 28 What is an essential feature of nostro reconciliations? A. That a daily nostro reconciliation report is sent out to the correspondent bank B. That they are performed before the next business day C. That they are performed in a timely and efficient way D. That open items are booked on an internal account

9 Question: 29 You have two nostro accounts in USD, one account is long USD 5,000, and the other is short USD 5,000, What action should be taken to reconcile the accounts? A. No action is required. The credit interest earned on the credit balance will offset the debit interest incurred on the short balance B. You should borrow USD 5,000, to cover the short balance and leave the long balance as it is C. You should lend the surplus USD 5,000, in order to compensate the overdraft charges on the short balance with the interest earned on the loan D. You should instruct the bank with the long balance to transfer USD 5,000, to your nostro account at the other bank Question: 30 Which kind of report is a reconciliation system unable to produce? A. A probable matched items report (a report in which most fields match but there are some discrepancies) B. A calculated fees report (a report of the expected fees owed) C. A matched items report (a report of all fields that match) D. An unmatched items report (a report of items for which one is unable to find matches) Question: 31 What is the function of the cash positions keeper? A. He/she acts as a running control on the balance of a nostro, alerting the treasury dealer when funds are running too low or too high for a particular value day measured by agreed upon internal parameters B. He/she assists the dealer in deciding which currency to invest in C. He/she informs back office staff about which kind of confirmations are to be used D. He/she acts as a running control on the balance of an internal account, alerting the treasury dealer when fees are running too low or high for a particular value day

10 Question: 32 What is the most important feature of a brokerage reconciliation? A. It must be processed once a year B. Brokers bills should be reconciled during the night when no other system is running C. Brokers bills must be reconciled promptly at month-end prior to payment D. The existence of a single reference currency for all the brokers with whom your institution is dealing Question: 33 What is the first task of the cash positions keeper every day? A. Makes sure the opening position for the current day is the agreed and reconciled position from the previous day B. Makes sure the previous day1s pending position is the opening position for the current day C. He/she checks to see which dealer is in charge of which currency for that day D. He/she checks to see which countries have bank holidays that day Question: 34 When completing a nostro reconciliation, what does an unresolved ledger credit signify? A. The duplicate receipt of funds from a counterparty B. The non-payment of funds to a counterparty C. The duplicate payment of funds to a counterparty D. The non-receipt of funds from a counterparty Question: 35 What is a future nostro balances report?

11 A. A list of the final maturity of bonds per value date B. An account of the possible fees to be paid C. A comparison of the overdraft interest to be paid on different nostro accounts D. A report produced to show the anticipated balance on the account as a result of running off existing business Question: 36 The use of standard settlement instructions (SSI s) is strongly encouraged because: A. A dealer does not need to confirm payment details by phone B. It splits differences arising from failed settlements between the two counterparties C. It eliminates the need to send out SWIFT payment authorizations on a case-by-case basis D. It avoids having to confirm each deal separately Question: 37 Which of the following is a fundamental element or module in the securities dealing and processing part of a treasury system? A. The financial reporting standard B. Brokerage accounting C. The custodian account reconciliation function D. The country limit overview Question: 38 An input message for the SWIFT network is composed of up to which five parts? A. 1. Basic header block, 2. Communication header block, 3. Currency block, 4. Text block, 5. Trailers block B. 1. Basic header block, 2. Application header block, 3. User header block (optional), 4. Text block, 5. Trailers block C. 1. Sending header block, 2. Application header block, 3. User header block, 4. Text block (optional), 5. Transmission block

12 D. 1. Basic header block, 2. System header blocks (optional), 3. User header block, 4. Text block, 5. Security block Question: 39 How many characters does a BIC have? (Under ISO standard 9362: 2009) A. 6 or 9 characters B. 9 or 12 characters C. 7 or 10 characters D. 8 or 11 characters Question: 40 Which of the following BIC-addresses belongs to a bank based in Germany? A. FRNYUS33 B. ECBFDEFF C. BCLXLULL D. SNBZCHZZ Question: 41 Which of the following statements best describes collateral? A. Liquid assets pledged by one or both counterparties to the other to reduce credit risk B. Deposits placed by a commercial bank with a central bank to fulfill reserve asset ratios C. Any deposit placed by an institution with another institution of a lower credit rating D. Any cross border payment of currency Question: 42

13 In the absence of his normal dealer contact, a counterparty calls the back office and asks the clerk for his opinion about how long his money should be placed on deposit. What action should the back office clerk take? A. He should give his opinion. B. He should give his opinion and tell the counterparty that he is not qualified to do so. C. He should tell the counterparty that he is not qualified to give an opinion and refer the counterparty to another dealer. D. He should give his opinion and refer the counterparty to another dealer. Question: 43 A middle or back office clerk receives an FX ticket in which the counterparty is not clearly identified. What should he/she do? A. Keep the ticket in stand-by mode until a matching confirmation is received B. Immediately refer the ticket to the compliance officer C. Refer the ticket to the FX dealer for further details D. Refer the ticket to the nostro account manager for further instructions Question: 44 Which risk factors fall under counterparty risk? A. Currency risk, interest rate risk and swap risk B. Settlement risk, delivery risk and replacement cost C. Operational risk D. Settlement risk and swap risk Question: 45 What are the three successive stages of money laundering? A. Integration, layering, placement B. Integration, placement, layering C. Placement, layering, integration

14 D. Layering, integration, placement Question: 46 You spot a rate discrepancy between you and your counterparty on a AUD/USD deal. The deal was traded direct. You refer the discrepancy to the dealer and he tells you to change the rate. What should you do? A. Amend the rate yourself B. Ask the settlements clerk to amend the rate for you C. Ask the dealer to manually amend the rate on the ticket and then pass it to the settlements clerk to amend D. Make no amendment Question: 47 You have been given collateral. In which case would you be least concerned about insisting on a haircut? A. Non-cash emerging markets collateral B. Cash collateral in JPY, your base currency is GBP C. Cash collateral in USD, your base currency is USD D. Non-cash high yield collateral Question: 48 You have just opened a position in EUR/USD that you run overnight. What risk is present? A. Settlement, counterparty and equity risk B. Only counterparty risk C. Only currency and interest rate risks D. Settlement, counterparty and market risk

15 Question: 49 A EUR based bank has a USD-convertible bond. What market risks are present? A. Interest rate and currency risks B. Interest rate, stock price and currency risks C. Stock price and currency risks D. Stock price risk Question: 50 For which of the following transactions are proper and completed bilateral master agreements considered essential prior to any dealing? A. Spot FX B. Repo C. Forward FX D. FRAs Question: 51 Most non deliverable forwards (NDFs) are cash-settled in: A. GBP B. USD C. CHF D. EUR Question: 52 What information is not explicitly confirmed between the two counterparties of a FX swap transaction using a MT 300? A. The rate B. The amount

16 C. The swap points D. Settlement information Question: 53 Which of the following statements apply to an FX Swap? A. It consists of two separate transactions, dealt with two different counterparties. B. It replaces a pair of foreign exchange transactions. C. It fully eliminates counterparty risk. D. It reduces credit risk with the counterparty, as compared to money market deals. Question: 54 Which interest rates are used to calculate the exchange rate of an outright transaction value tomorrow (over tom)? A. The overnight interest rates of both currencies B. The spot next interest rates of both currencies C. The one week interest rates of both currencies D. The torn next interest rates of both currencies Question: 55 Your FX swap dealer sold and bought 2 months USD/CHF 10,000,000.00; rates were set to against What payment is your bank expecting in two months from now? A. CHF 9,300, B. CHF 10,770, C. CHF 9,285, D. USD 10,000,000.00

17 Question: 56 A month ago, a customer placed NZD 100, at 2.00% on a time deposit for 90 days. Today, 30 days later, he requests an anticipated close of his deposit. 2 and 3 month interbank rates are 2.10% bid and 2.20% offered. What do you do? A. You agree and pay back to the customer the capital plus 2.00% interest calculated on 30 days B. You agree and pay back to the customer the capital plus 2.00% interest on 30 days less your refinancing costs of 0.20% calculated on 30 days C. You agree and pay back to the customer the capital plus 2.00% interest on 30 days less your refinancing costs of 0.10% calculated on 60 days D. You agree and pay back to the customer the capital plus 2.00% interest on 90 days minus the actualization of this amount at 2.20% calculated over 60 days Question: 57 If the 90-day rate is 3.10% and the 180-day is 3.50%, what is the 120-day rate using straight-line interpolation? A. 3.20% B. 3.21% C. 3.23% D. 3.30% Question: 58 Which of the following are considered money market, cash or derivative instruments? A. Currency futures B. Forward FXs C. Currency options D. Forward rate agreements (FRA) Question: 59

18 On Friday, your trader lends GBP 10,000, overnight at 0.60%. The instructions are for repayment of principal + interest. How much would you expect to be repaid? A. GBP 10,000, B. GBP 10,000, C. GBP 10,000, D. GBP 10,000, Question: 60 A Certificate of Deposit (CD) was issued at 2.50% which you now purchase at 1.75%. What would you expect to pay? A. The original face value of the CD B. More than the originally paid value C. Less than the originally paid value D. There is too little information to decide Question: 61 Internationally, USD FRAs are settled with reference to which market rate? A. LIBOR B. FEDFUNDS C. LIBID D. EURIBOR Question: 62 EURIBOR is a: A. Daily fixing of EUR interest rates within the EMU zone B. Daily fixing of EUR interest rates in London C. A rate used for the settlement of USD FRAs between European counterparties D. The official successor to LIBOR rates

19 Question: 63 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 Question: 64 As to futures contracts: 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 Question: 65 Which of these statements is correct? A. The strike price of a Bermudan option is an average. B. A Bermudan option can be exercised only on a few specific dates prior to expiration. C. A Bermudan option can be exercised at any time before its maturity date. D. A Bermudan option can be exercised only at maturity. Question: 66 You bought a 6x9 EUR 8,000, FRA at 0.75%. Settlement is now due and 3 months (90 days) EURIBOR is 0.25%. What amount do you pay or receive?

20 A. Pay EUR 10, B. Receive EUR 10, C. Pay EUR 9, D. Receive EUR 9, Question: 67 What deals are usually associated with a collar? A. A purchase of a cap and a sale of a cap at higher reference rate B. A purchase of a floor and a sale of a cap or vice versa C. A purchase of a cap and a purchase of a floor D. A purchase of a step-up cap and a sale of a step-down floor Question: 68 Which of the following is true about interest rate swaps (IRS)? A. The fixed rate and the floating rate payers know the cash value of their payments at the outset B. There is exchange of principal at the start and at the end of the swap C. Payment netting is only allowed through a third party D. The notional amount of the swap is generally not exchanged between counterparties Question: 69 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

21 Question: 70 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 (IRS) D. A dual swaption Question: 71 What is a junk bond? A. An AAA-rated security in payment default B. A sub-investment grade instrument C. An OECD Government bond D. A bond typically paying lower yields than an investment grade instrument Question: 72 In a scenario where long-term interest rates are higher than short-term interest rates, the yield curve would best be described as: A. Flat B. Negative or inverse C. Positive D. Neutral Question: 73 A USD 1,0000, US Treasury Bill (91 days) is offered at a discount rate of 0.75%. The offer price will be: A. USD 1,000, B. USD 998,104.17

22 C. USD 992, D. USD 998, Question: 74 Major amendments to a prospectus can be made: A. At the discretion of the issuer and after the launch B. Only with the consent of the note holders C. Always in the case of default payment D. Only by the custodian with the consent of the issuer Question: 75 Which of the following are primary markets? A. Auction markets conducted by the U.S. Treasury for U.S. Treasury bills B. The repo market C. The foreign exchange market D. The over-the-counter market for U.S. Government Bonds Question: 76 In trade confirmation, which one of the following statements about matching is correct? A. Matching should be performed by no later than the day after trading day B. Matching processes are manual and may not be automated C. Matching should be performed as soon as possible upon receipt of the confirmation D. Confirmation matching should be a post-settlement workflow activity Question: 77

23 Which interest rate is to be applied in the calculation methodology for back-valuations in EUR? A. The flat ECB marginal lending facility rate B. The ECB marginal lending facility rate plus 25 b.p. C. The average of each day s EONIA rate minus 25 b.p. D. The average of each day s EONIA rate plus 25 b.p. unless that is higher than the ECB marginal lending facility rate Question: 78 In FX trading a third party beneficiary is best described as: A. The issuer of a payment for the relevant trade distinct from the counterparty B. The issuer of a payment for the relevant trade identical to the counterparty C. The recipient of a payment for the relevant trade distinct from the counterparty D. The recipient of a payment for the relevant trade identical to the counterparty Question: 79 How frequently should business contingency procedures be tested and updated? A. Quarterly tests / updates as needed B. At least every second year C. Half-yearly tests / yearly updates D. At least yearly Question: 80 Which of the following types of institutions do not generally make up the buy side? A. Corporate and governments B. Asset managers and insurance firms C. Retail banks and commercial banks D. Mutual and hedge funds

24 Question: 81 Which of the following is the best description of a broken trade? A. When a trade has been agreed to with dates (maturities) different from the standard dates B. When one of the parties to the deal unilaterally decides to withdraw from the on-going transaction C. When, due to a system break, one or both parties to the deal chooses to withdraw from the ongoing transaction D. When, due to a system break, one or both parties to the deal are unclear as to whether the deal has been done Question: 82 Which one of the following statements regarding single changes to default SSIs is correct? A. The counterparty does not need to be notified about any alterations to original payment instructions or SSIs. B. Any alterations to original payment instructions or SSIs are to be agreed to by the relevant parties involved either by fax or . C. Alterations must be agreed to by the parties involved via a written legally binding document or an authenticated confirmation message. D. Alterations need to be agreed to by the relevant parties involved and must be verbally confirmed. Question: 83 Which details do not need to be mentioned in a trade confirmation? A. Economic: such as initial and final amounts, rates B. Product identification: counterparty, currency, index C. Identification of the dealer: identity, title, direct phone number D. Dates including the trade day: initial day, final day, settlement day

25 Question: 84 What needs to be done in the event that a trade is amended by one or both parties? A. A new confirmation should be generated by both parties but there is no need to restart the confirmation cycle. B. The amending party should verbally inform the other party. C. A new confirmation should be generated and the confirmation cycle should restart and continue until the trade is completely matched by both parties. D. A new confirmation need not be generated but the confirmation cycle must restart and continue until the trade is completely matched by both parties. Question: 85 Which one of the following statements regarding the segregation of duties in the confirmation process is incorrect? A. Front office staff should not be able to modify confirmations. B. The staff who confirm trades should be distinct from those who agree to and execute trades. C. The process of confirming trades should be done only by Operations staff. D. Only staff who agree to and execute trades should be permitted to modify any details of the written confirmation. Question: 86 Which clearing system allows a transfer to be settled with immediate finality? A. EAF B. EBA C. RTGS D. SWIFT Question: 87 In the Euro deposit markets, what is spot?

26 A. Value one bank business day forward B. Value two bank business days forward C. Value one calendar day forward D. Value two calendar days forward Question: 88 What is the deadline for settling interbank spot-deals in EUR via the TARGET2 system? A. 10:00 CET B. 18:00 CET C. 12:00 CET D. 15:00 CET Question: 89 According to ISDA definitions, if an USD IRS payment is due value Saturday, 31 May and the documentation states that the modified following business day convention will be used, what value date should be applied to the payment? A. Saturday, 31 May B. Tuesday, 3 June C. Monday, 2 June D. Friday, 30 May Question: 90 Which one of the following excerpts completes this statement of a best market practice? Any exception to the confirmation process should be resolved? A. No later than the value date B. Within 2 days C. Within 1 week D. On the day it is discovered

27 Question: 91 The organization SWIFT belongs to: A. The members of the system (member-owned cooperative) B. The European Banking Federation based in Brussels C. The European Central Bank D. The IMF Question: 92 Which of the following steps is typical for an interbank FX trade process flow? A. Physical delivery B. Collateral management C. Negotiation of fees D. Settlement Question: 93 Which SWIFT message type family is used for securities transactions? A. MT 3XX B. MT 2XX C. MT 5XX D. MT 1XX Question: 94 If the back office staff receive a trade that is incomplete, which information is absolutely essential for processing the trade?

28 A. The clearing house phone number B. The account number to which fees are booked C. The identity of the counterparty s dealer D. The name of the counterparty Question: 95 The trade life cycle of a treasury deal starts with input and ends with: A. Accounting B. Adjustment of bilateral limits C. Netting D. Nostro reconciliation Question: 96 When would you use a SWIFT message type 103? A. For a foreign exchange confirmation B. For a multiple general financial institution transfer C. For a general financial institution transfer D. For a customer transfer Question: 97 Why are confirmations necessary? A. Confirmations authenticate the transaction to the risk manager, as well as providing essential information regarding bilateral limits. B. in order to authenticate the BIC-code of the counterparty when the confirmation is sent via SWIFT. C. in order to have the exact mailing address of the counterparty when the confirmation is sent via mail. D. Confirmations authenticate transactions to staff independent of the dealing room, as well as providing essential information regarding settlement.

29 Question: 98 The prompt sending and checking of confirmations is considered a best practice when dealing in: A. Amounts higher than USD 10,000, or the equivalent in other currencies B. Amounts higher than USD 1,000, or the equivalent in other currencies C. Any amount unless dealt via a broker D. Any amount by any counter party Question: 99 What payment system has to be used for all payments involving the Eurosystem? A. SWIFT B. CHAPS C. Euro Link System (ELS) D. TARGET2 Question: 100 With respect to financial payments, what does bridge mean? A. It refers to an electronic settlement between Euroclear and Clearstream B. It is an electronic settlement between Western Union and Clearcom C. It refers to the relationship between two correspondent banks D. It designates the exchange of payment orders between a nostro and a vostro account Question: 101 When is the general cut-off time for interbank payments using TARGET2? A. 17:00 (5.00 p.m.) Central European Time (CET)

30 B. 18:00 (6.00 p.m.) Central European Time (CET) C. 18:30 (6.30 p.m.) Central European Time (CET) D. 18:30 (6.30 p.m.) CET, but on the last minimum reserve fulfillment day (23rd of a month) 19:30 (7.30 p.m.) CET Question: 102 Which two countries are not participating in TARGET2? A. Denmark and Finland B. Latvia and Lithuania C. The Czeck Republic and the United Kingdom D. Bulgaria and Romania Question: 103 Which of the following is a US payment system? A. CHAPS B. CHIPS C. BOJ-NET D. TARGET Question: 104 Which SWIFT message type is not accepted in TARGET2? A. SWIFT MT 103+ B. SWIFT MT 202 C. SWIFT MT 204 D. SWIFT MT 210

31 Question: 105 What is a loro or vostro bank account? A. An account that you hold with another commercial bank B. An account that another bank holds with you C. An account that you hold with the Bank of England D. Your suspense account at the European Central Bank Question: 106 What is the standard for settlement of cross-border DVP systems? A. T+3, meaning that settlement is due three days after the deal date B. T+4, meaning that settlement is due four days after the deal date C. T+1, meaning that settlement is due one day after the deal date D. T+2, meaning that settlement is due two days after the deal date Question: 107 If a bank incurs interest charges from having overdrawn an account due to a late payment from a counterparty: A. The bank is entitled to seek reimbursement from the party responsible for the late payment. B. Nothing can be done to compensate the bank for the interest charges it incurs. C. The bank should file a complaint with ACI s Committee for Professionalism. D. The bank will automatically be reimbursed by the party responsible for the late payment. Question: 108 What is the cut-off time for a same day customer payment using TARGET2? A. 16:00 (4:00 p.m.) Central European Time (CET) B. 17:00 (5:00 p.m.) Central European Time (CET) C. 18:00 (6:00 p.m.) Central European Time (CET)

32 D. 18:30 (6:30 p.m.) Central European Time (CET) Question: 109 You find that you have paid an amount to the wrong counterparty. What action should you take? A. Wait until the counterparty contacts you to before deciding what to do B. Immediately contact the counterparty to find the most appropriate way to have the funds returned as quickly as possible to minimize the loss of value days C. Ask the counterparty to keep the money and to place (invest) it at a special rate D. Ask your accounting department to book the amount as a loss Question: 110 The use of a net open positions report: A. can be used to show the counterparty the amounts it has to pay B. can be used as the basis of reporting the bank s position to the relevant central bank of the country concerned, against the limit granted for the bank C. can be used as the basis of reporting the bank s position to the relevant tax regulations office of the country concerned D. can be used to adjust the country limits Question: 111 You have 10 credited amounts of 1 million each with same value date and same currency. Which of the following items is most helpful in reconciling these amounts? A. When the deal was processed is a good indication of the amounts to be reconciled B. Each deal is registered according to a unique reference which helps in reconciling the items C. The BIC-address helps you to reconcile the open items D. None of the above. You should telephone your counterparties to request more information

33 Question: 112 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 Question: 113 Why is securities reconciliation necessary? A. To prevent that a failed order results in a failure to settle that day, which in turn would lead to an incompletely-reconciled account. B. To facilitate the handling of complex security transactions. C. In order to save data capacity in electronic archiving systems. D. To anticipate the fact that clearing houses stop processing in the afternoon, whereas payment orders may still be processed until 6 p.m. Question: 114 What criteria should reconciliation escalation be based on? A. It should be based on the days past settlement date, value and/or likely compensation B. It should be based on the BIC-address and country C. It should be based on bilateral limits D. It should be based on the relationships of the institutions involved Question: 115

34 Physical securities reconciliation software packages are based on: A. SWIFT MT 5XX B. SWIFT MT 2XX C. SWIFT MT 320 D. SWIFT MT 400 Question: 116 What is the main purpose of nostro reconciliations? A. To compare the cash entries that have passed through the bank s internal nostro accounts, with the actual cash movements at the bank s agent account. Thus, expected cash movements are reconciled with actual cash movements. B. To compare the securities entries that have passed through the bank s internal nostro accounts, with the actual securities movements at the bank s agent account C. To compare expected securities movements with actual securities movements D. To provide an overview of all the transactions listed by counterparty Question: 117 When completing a nostro reconciliation, what does an unresolved ledger debit signify? A. The non-receipt of funds from a counterparty B. The non-payment of funds to a counterparty C. The duplicate payment of funds to a counterparty D. The duplicate receipt of funds from a counterparty Question: 118 A counterparty pays your bank USD 10,000, days late requiring you to pay overdraft charges of 8% p. a. What expenses would you claim from the counterparty in GBP at an exchange rate of ? A. GBP 6, B. GBP 7, C. GBP 17,777.77

35 D. GBP 6, Question: 119 Loan/deposit input and mismatch analysis capability belongs to which module in a treasury system? A. The FX spot and forward dealing input and processing module B. Standard back office features C. The money market dealing and processing module D. The securities trading and processing module Question: 120 What is the Bank Identifier Code (BIC)? A. A worldwide unique identification code for both financial and non-financial institutions B. A unique identification code for European financial institutions C. The short form of the IBAN-code D. A unique access-code to SWIFT-platforms Question: 121 Which country does the BIC-address BKENGB33CUS belong to? A. The United Kingdom B. The United States of America C. Kenya D. Gambia Question: 122 Which of the following is an example of market risk?

36 A. Counterparty risk B. Country risk C. Settlement risk D. Stock price risk Question: 123 What does FSA stand for? A. Financial Standards Authority B. Financial Supervisory Association C. Financial Services Authority D. Financial Securities Association Question: 124 Bank A has a large number of forward OTC trades with Bank B. What risks will be reduced by concluding a netting agreement? A. Market-price-risk and replacement risk B. Market-price-risk and delivery risk C. Replacement risk and delivery risk D. Replacement risk and basis risk Question: 125 The market standard legal agreement for Interest Rate Swaps is: A. ISDA B. ACI C. SIFMA/ICMA D. ICMA

37 Question: 126 The process used to disguise the trail of laundered funds within the financial system is known as: A. Streamlining B. Layering C. Reinvesting D. Channeling Question: 127 Settlement risk is: A. The risk that a bank makes its payment but does not receive a return payment in the exchanged currency B. The risk that exchange rates move against a bank s position C. The risk a counterparty defaults on a contract and a bank has to replace that contract at adverse rates D. The risk of a disaster that disables a bank s trading floor Question: 128 In the weekend newspapers you read that one of your FX counterparties has gone into liquidation. You have no netting or close-out agreements in place with this counterparty and remember that you have one forward deal outstanding. What is the main risk affecting your bank? A. The loss of the entire principal amount of the deal B. The replacement risk, also known as replacement-cost risk C. The loss of the negative mark-to-market value of the deal D. As the deal is in the future, there is no impact on P&L Question: 129

38 The CLS-Bank (Continuous Linked Settlement) is one of the ways through which FX transactions can be settled. Why was this bank founded? A. To simplify domestic payments B. To handle interbank liquidity more efficiently C. To accelerate cross-border payments D. To minimize settlement risks Question: 130 Your dealer has sold USD 10,000, against JPY at a rate of In settlement you would expect to: A. Receive JPY 105, B. Pay JPY 950,000,000 C. Receive JPY 950,000,000 D. Pay JPY 105,263 Question: 131 What are the factors determining if a FX transaction can be settled through the CLS Bank? A. Currency pair, price B. Currency pair, counterparty, time C. Currency pair, price, counterparty D. Counterparty, price Question: 132 Which of the following are examples of contracts for difference? A. Forward rate agreement (FRA) and non deliverable forward (NDF) B. FX Swap and interest rate swap C. Spot FX deal and non deliverable forward (NDF) D. FX Swap and currency future

39 Question: 133 How is a call money market transaction generally confirmed? A. By a SWIFT MT 320 B. By a SWIFT MT 330 C. By a SWIFT MT 340 D. By a SWIFT MT 360 Question: 134 Today is Friday, 28 July. Considering that there is a bank holiday in Switzerland on Tuesday, 1 August, what is the value date of a money market deal in CHF? A. 31 July B. 1 August C. 2 August D. 3 August Question: 135 Under normal circumstances, which of the following is a non-negotiable instrument? A. A Medium Term Note B. A Banker s Acceptance C. A Money Market Deposit D. A Treasury Bill Question: 136 A dealer, seeking to refinance a money market short position in USD, could choose to:

40 A. Sell EUR/USD or GBP/USD spot B. Deal Reverse Repos (Reverse Sale and Repurchase Agreements) C. Place USD in torn next D. Deal Repos (Sale and Repurchase Agreements) Question: 137 Your dealer has sold a 3x6 AUD 10,000, FRA at 3.10%. On settlement day the 3-month (90- day) fixing is 3.00%. What would you do? A. Pay AUD 2, B. Receive AUD 2, C. Pay AUD 2, D. Receive AUD 2, Question: 138 Today is Monday, 8 December. You sell a 9x12 FRA in EUR. When will the settlement amount be paid or received, assuming that there are no bank holidays? A. 8 September B. 10 September C. 8 December D. 10 December Question: 139 Today is the fixing date for 6x9 FRA that you sold at 5.50% and for which the LIBOR is now 6.00%. Which of the following is true? A. You will pay a cash settlement to the counterparty B. You will receive the cash settlement C. There is no cash settlement pending D. There is insufficient information to make a determination

41 Question: 140 Your bank purchases a FRA at 0.75% in USD. Under what conditions will you pay a cash settlement? A. If EURIBOR is higher than 0.75% B. If EURIBOR is lower than 0.75% C. If LIBOR is lower than 0.75% D. If LIBOR is higher than 0.75% Question: 141 A plain vanilla interest rate swap (IRS) is: A. An agreement to exchange one stream of interest payments for another (fixed against floating) B. A fixed rate leg in one currency and a fixed rate leg in another currency C. Two floating rate legs on different indexes D. An agreement to borrow and lend one currency for another at two different value dates Question: 142 The clearing house of a financial futures exchange: A. Acts as counterparty to each buyer and seller B. Is responsible for market making C. Requires members to cover their commitments on a week-to-week basis D. Does not regulate trader s activities Question: 143 A 3-month Eurodollar futures price of implies a forward rate of: A %

42 B. 0.75% C % D. 0.25% Question: 144 Which of the following is a description of a long OTC foreign currency option position? A. The obligation to buy one currency and to sell another currency at a predetermined price B. An option that uses 1MM maturities C. An option dealt directly between two counterparties D. An interest rate protection instrument dealt on an exchange trading floor Question: 145 The exercise price (strike price) of an option contract is: A. The price of the underlying instrument at the time of the transaction B. The price at which the transaction on the underlying instrument will be carried out if the option is exercised C. The price the buyer of the option pays to the seller when entering into the options trade D. The price at which the two counterparties can closeout their position Question: 146 The yield of a 1 month FRN in EUR depends on A. The level of short-term EUR interest rates B. The level of medium-term EUR interest rates C. The slope of EUR yield curve D. The level of long-term EUR interest rates

43 Question: 147 A bank responsible for making due payments of principal and interest on a bond is called the A. Purchase agent B. Paying agent C. Fiscal agent D. Market maker Question: 148 A bond selling at a discount will be selling for: A. Less than 100% B. 100% C. More than 100% D. More than a bond selling at a premium Question: 149 In the bond market, which of the following is true about the settlement amount? A. The settlement amount is the sum of the redemption value plus all coupons paid by the issuer. B. If the yield and the coupon are exactly the same, the settlement amount and the face value will be identical. C. The settlement amount is always calculated using the redemption price. D. On a coupon date, if the bond quotes at par, the settlement amount and the face value will be identical. Question: 150 On 15 April 2010 you buy a bond whose coupon falls on 15 January The interest basis is 30/360. Using bond settlement T+1, how many days do you apply for the interest calculation? A. 89 days

44 B. 90 days C. 91 days D. 92 days Question: 151 What is the documentation in which the parties agree to the terms that will govern future transactions? A. Standard settlement instructions B. Netting agreement C. Terms of engagement D. Master agreement Question: 152 Which of the following is considered a good practice in trade confirmation? A. Confirmations should be issued to non-front office personnel only B. All confirmations must be sent on the day following the trade date at the latest C. Multiple confirmations sent through different distribution channels reduce potential errors D. Counterparties should send confirmations, or positively affirm trades within 24 hours of the trade booking Question: 153 Which of the following risks is best mitigated by CLS? A. Currency risk B. Operational risk C. Liquidity risk D. Settlement risk

45 Question: 154 Which of the statements about pricing on electronic trading platforms is incorrect? A. Market makers must ensure that their prices are adequate and appropriate for their trading style B. Prices must be posted with the clear intent to be tradable C. There need not be a clear and genuine intent to trade on each posted price D. Prices quoted should be firm unless clearly labeled as indicative Question: 155 What guidelines does the Model Code provide concerning the practice in the interbank market of only one party to a transaction sending a written confirmation? A. It is only permissible in derivatives markets B. Both parties of a trade should send confirmations C. It is recommended D. It is only permissible when dealing value today Question: 156 Which one of the following statements about claims is true? A. Claims are not expected to be submitted after 15 days from the actual settlement date. B. Claims of less than USD 5, are not expected to be submitted. C. Claims are calculated on the full principal amount of the failed transaction. Interest rates are imposed by the agent banks, unless a higher negotiated rate is to be applied. D. Acknowledgement of receipt of a claim should be confirmed within 48 hours by or SWIFT. Question: 157 As regards controls, which of the following best practices for counterparty identification is incorrect? A. Amendments to customer standing data should be subject to 4 eyes control and only changed if the appropriately authorized documentation is provided.

46 B. The set up of settlement instructions and the confirmation method should be fixed when setting the first transaction. C. No trading should be done without first identifying and setting up the counterparty. D. Counterparty identification and setup of settlement instructions should be completed in less than 2 working days. Question: 158 Experience has shown that recourse to taped telephone conversations proves invaluable to the speedy resolution of disputes. Therefore, the Model Code recommends: A. That all telephone conversations (internal and external) be taped without informing counterparties B. That only conversations undertaken by dealers and brokers should be recorded C. That all conversations undertaken by dealers and brokers should be recorded, together with back office telephone lines used by those responsible for confirming deals or passing payments to other institutions D. That only telephone conversations between dealers and brokers be recorded Question: 159 If manual trade capture methods are used, when should deals be recorded in systems used for this purpose? A. The same day they are dealt B. Promptly C. Within 24 hours of execution D. Within an hour of execution Question: 160 A dealer belongs to: A. The compliance staff B. The middle office staff C. The front office staff

47 D. The back office staff Question: 161 How is the price of an interest rate swap (IRS) expressed? A. As an exchange rate B. As a cash flow C. As a margin added to the floating rate D. As an interest rate expressed in percentage terms Question: 162 A "basis point", expressed as a percentage, is: A. 1% B. 0.01% C. 0.1% D % Question: 163 Which of the following factors must be considered when making interbank EUR payments in RTGS systems between 17:00 CET and 18:00 CET with same day value? A. No special requirements need to be considered B. The receiver has to approve the transfer C. Interest has to be paid to the receiver D. The receiver is required to accept the payment amount Question: 164

48 As to deal confirmations, who is your counterparty on futures contracts? A. The futures exchange itself B. The clearing house of the futures exchange C. Your broker D. The ISDA Question: 165 What is the advantage of instantaneous matching? A. It gives the counterparty more time to cancel a deal B. It reduces errors and costs C. It gives front-office staff more time to process the payment orders D. It reduces the number of trades Question: 166 Which of the following is essential for the effective and timely execution of outward payments? A. Confirmation of the exact processing time of the payment order with the central bank of your counterparty B. The strict adherence to the cut-off times of your domestic payment system C. Confirmation of the time of processing of the payment order with your own central bank D. The strict adherence to the cut-off times for payments made worldwide Question: 167 What is the meaning of "good value" in FX? A. The funds must be in the nostro account of the beneficiary institution by close of business on the agreed upon value date B. The funds must be in the nostro account of the beneficiary institution by the beginning of the next business day C. The value of interest to be received is higher than the value of fees to be paid