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3I0-013 ACI Operations Certificate challenging Questions and Answers

Questions 4

What normally happens on the settlement date of a USD/TWD non deliverable forward (NDF)?

Options:

A.

Both currencies (USD and TWO) are exchanged

B.

The notional amount is paid out in USD

C.

A cash settlement is paid out in TVVD

D.

A cash settlement is paid out in USD

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Questions 5

AFRA is:

Options:

A.

An instrument for managing interest rate risk

B.

An instrument for managing credit rate risk

C.

An instrument that never impacts P/L

D.

The forward leg of an FX swap

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Questions 6

A "turn of the month" deposit would be a transaction:

Options:

A.

Value first business day of a month against last business day of the same month

B.

Value last business day of a month against first business day of the next month

C.

Value last business day of a month against last business day of the following month

D.

Value first business day of a month against first business day of the following month

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Questions 7

If you execute a sale of bonds, and the securities have not been delivered 2 days after you have received payment on the agreed settlement date, which of the following is correct:

Options:

A.

You will have to pay at least 2 days of funding costs on top of the coupon

B.

The counterparty will have to pay at least 2 days of interest charges on top of the coupon

C.

You have no debt to the counterparty

D.

The counterparty has a debt to you

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Questions 8

Counterparties, such as prime brokers, who provide others access to liquidity venues are responsible for their end users. They are not liable for:

Options:

A.

The activities of their end users

B.

The end user's observance of the rules of individual execution venues

C.

The end user's membership in a registered trade association

D.

The end users adherence to market best practice

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Questions 9

What are "de minimis" claims?

Options:

A.

Claims of less than USD 100.00

B.

Claims of less than USD 1,000.00

C.

Claims of less than EUR 100.00

D.

Claims of less than EUR 1,000.00

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Questions 10

FX Swaps can be used to:

Options:

A.

Swap a fixed leg into a variable leg

B.

Buy or sell the currency of your choice

C.

Arbitrage between foreign exchange and interest rates

D.

Arbitrage between deposits and forward points

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Questions 11

A dealer makes the following deals in EUR/USD:

Sells EUR 1,500,000.00 at 1.3560

Buys EUR 3,250,000.00 at 1.3542

Sells USD 2,709,600.00 at 1.3548

Buys USD 1,762,410.00 at 1.3557

What is the dealer's position as a result of these trades?

Options:

A.

Short EUR 2,450,000.00 at 1.3528

B.

Long EUR 2,450,000.00 at 1.3528

C.

Long EUR 2,000,000.00 at 1.3532

D.

Long EUR 2,450,000.00 at 1.3525

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Questions 12

The abbreviation "FRN" stands for:

Options:

A.

Fixed rate notional

B.

Forward rate note

C.

Fixed rate note

D.

Floating rate note

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Questions 13

Your agent bank accepts your back-valuation request for 1 day on an amount of EUR 50,000,000.00, EONIA is 0,375% and the ECB marginal lending facility rate is 1.50%. Applying conventional administration fees, how much will this be charged?

Options:

A.

EUR 620.83

B.

EUR 868.06

C.

EUR 968.06

D.

EUR 2,183.33

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Questions 14

The risk associated with the failure of the overall financial system is best described as:

Options:

A.

Operational Risk

B.

Market Risk

C.

Systemic Risk

D.

Credit Risk

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Questions 15

The standard benchmark measure used for the cost of funds in the London Market is:

Options:

A.

LIBID

B.

Base Rate

C.

LIBOR

D.

UMEAN

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Questions 16

Who is in charge of maintaining complete records of all transactions and any additional documentation in accord with internal guidelines and regulatory requirements?

Options:

A.

Operations

B.

Compliance

C.

Internal Audit

D.

Archives

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Questions 17

Payments to the wrong correspondent, payments in the wrong amount, late or duplicate payments are considered:

Options:

A.

Transaction irregularities

B.

Confirmation discrepancies

C.

CIS mismatches

D.

Settlement discrepancies

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Questions 18

Which of the following statements about operational risk awareness is correct?

Options:

A.

It is good practice to collect and disclose incidents and near-misses for the future benefit of the professional community.

B.

It is good practice to collect and analyze incidents and near-misses so as to set up preventive action plans for the future.

C.

A report describing operational risks should be made at the request of the front office.

D.

A report describing operational risks should be made at least once a year and provided to the front office.

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Questions 19

Which of the following is the main objective of position-keeping?

Options:

A.

Measuring market exposure

B.

Defining capital adequacy

C.

Evaluating country risk

D.

Monitoring counterparty credit risk

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Questions 20

The "value date" is best described as:

Options:

A.

The date a trade is undertaken

B.

The date the fixing rate is agreed upon

C.

The date the settlement occurs

D.

The date confirmations are exchanged between counterparties

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Questions 21

The risk that an institution will experience a loss on a trade or a position due to an adverse exchange/interest rate movement is best described as:

Options:

A.

Operational risk

B.

Market risk

C.

Systemic risk

D.

Credit risk

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Questions 22

Where is the bank with the BIC-address "BOJPJPJT" located?

Options:

A.

Jamaica

B.

Jordan

C.

Bosnia

D.

Japan

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Questions 23

In the UK, Sterling T-Bills are issued by:

Options:

A.

The Government (Debt Management Office)

B.

The Bank of England

C.

The FSA

D.

The International Monetary Fund (IMF)

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Questions 24

The discount or premium on forward foreign exchange points is calculated based on:

Options:

A.

The level of interest rates in the base currency

B.

The level of interest rates in the counter currency

C.

The differential between the interest rates in the two currencies

D.

The current volatility in the FX markets

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Questions 25

When is a trade considered a binding agreement for the counterparties?

Options:

A.

Once the trade is agreed to by both the front offices

B.

As soon as one of the counterparties has confirmed the trade

C.

Once the confirmation is accepted by both parties to a trade

D.

As soon as the master agreement has been signed by both parties

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Questions 26

Which of the following are products used in bank liquidity management?

Options:

A.

Money market taking and placing, sale and repurchase agreements (repos)

B.

Currency options and currency futures

C.

Spot FX transactions

D.

Caps, floors, collars, and interest rate futures

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Questions 27

The difference between the bid and the offer rate of a money market quotation is called:

Options:

A.

The margin

B.

The spread

C.

The variation

D.

The premium

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Questions 28

Which kind of confirmation does the Model Code strongly recommend?

Options:

A.

Verbal confirmation

B.

Voice affirmation

C.

Electronic confirmation

D.

Physical confirmation

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Questions 29

What does "SWIFT" stand for?

Options:

A.

Society for World-wide Interbank Financial Transactions

B.

Society for World-wide Interbank Financial Telecommunications

C.

Society for World-wide International Financial Transactions

D.

Society for World-wide International Financial Trading

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Questions 30

What is a "tick" in the futures markets?

Options:

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 fluctuation in price allowed for a futures contract as specified by the contract terms

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Questions 31

The use of a net open positions report:

Options:

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

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Questions 32

Which of the following is an example of market risk?

Options:

A.

Counterparty risk

B.

Country risk

C.

Settlement risk

D.

Stock price risk

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Questions 33

You are in the pub with a friend who works for another financial institution. The friend asks you for information about a mutual customer's forward foreign exchange dealing volumes. What should you do?

Options:

A.

Tell him all you know

B.

Tell him nothing

C.

Give him some of the information because the deal involves a mutual customer

D.

Tell him you will investigate and get back to him with the information

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Questions 34

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?

Options:

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

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Questions 35

What criteria should reconciliation escalation be based on?

Options:

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

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Questions 36

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?

Options:

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

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Questions 37

As regards controls, which of the following best practices for counterparty identification is incorrect?

Options:

A.

Amendments to customer standing data should be subject to 4 eyes control and only changed if the appropriately authorized documentation is provided.

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.

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Questions 38

A bond selling at a discount will be selling for:

Options:

A.

Less than 100%

B.

100%

C.

More than 100%

D.

More than a bond selling at a premium

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Questions 39

What is a ladder maturity report?

Options:

A.

A report that starts with the net open position and runs off day by day to arrive at a zero balance

B.

A report of outstanding securities transactions

C.

A report that begins with a zero balance and at the end of the day, lists all FX deals by maturity

D.

A list of the maturity of all deals per value date

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Questions 40

The clearing house of a financial futures exchange:

Options:

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

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Questions 41

What is the advantage of instantaneous matching?

Options:

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

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Questions 42

A dealer, seeking to refinance a money market short position in USD, could choose to:

Options:

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)

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Questions 43

A counterparty pays your bank USD 10,000,000.00 5 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 1.6000?

Options:

A.

GBP 6,944.44

B.

GBP 7,944.44

C.

GBP 17,777.77

D.

GBP 6,849.32

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Questions 44

Which two countries are not participating in TARGET2?

Options:

A.

Denmark and Finland

B.

Latvia and Lithuania

C.

The Czeck Republic and the United Kingdom

D.

Bulgaria and Romania

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Questions 45

In FX swaps, the rate of the spot leg:

Options:

A.

May be freely chosen by the quoting party as long as both parties agree on it

B.

Must always be fixed immediately at the current mid rate, to reflect the rate at the time the deal was made

C.

Should be fixed immediately within the current spread, to reflect current rates at the time the transaction was made

D.

Should always be fixed off the current spread in order not to be mistaken for a spot FX transaction

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Questions 46

Which of the following processes are offered by the CLS settlement system?

Options:

A.

The close-out process

B.

The customer matching process

C.

The settlement process

D.

The securities lending process

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Questions 47

Which details do not need to be mentioned in a trade confirmation?

Options:

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

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Questions 48

What does “modified following business day convention” mean?

Options:

A.

A convention whereby a transaction is dated the following business day, unless that day extends into the next month, in which case it is dated the preceding business day

B.

A convention whereby a transaction is dated the following business day

C.

A convention whereby a transaction is dated the preceding business day

D.

A convention whereby a transaction is dated the next business day that corresponds to the same numerical day of the month as the preceding payment

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Questions 49

What deals are usually associated with a collar?

Options:

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

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Questions 50

Which risk factors fall under counterparty risk?

Options:

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

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Questions 51

A EUR based bank has a USD-convertible bond. What market risks are present?

Options:

A.

Interest rate and currency risks

B.

Interest rate, stock price and currency risks

C.

Stock price and currency risks

D.

Stock price risk

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Questions 52

What is done with counterparties’ confirmations?

Options:

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

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Questions 53

Which one of the following excerpts completes this statement of a best market practice? “Any exception to the confirmation process should be resolved?

Options:

A.

No later than the value date

B.

Within 2 days

C.

Within 1 week

D.

On the day it is discovered

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Questions 54

The trade life cycle of a treasury deal starts with input and ends with:

Options:

A.

Accounting

B.

Adjustment of bilateral limits

C.

Netting

D.

Nostro reconciliation

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Questions 55

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?

Options:

A.

Saturday, 31 May

B.

Tuesday, 3 June

C.

Monday, 2 June

D.

Friday, 30 May

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Questions 56

What is a junk bond?

Options:

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

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Questions 57

Which of the following is the best description of a broken trade”?

Options:

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

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Exam Code: 3I0-013
Exam Name: ACI Operations Certificate challenging
Last Update: Nov 21, 2024
Questions: 386
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