3I0-008 Online Practice Questions and Answers

Click on the Detail Button to view the Formula Sheet. The Interest Rate Parity Theorem states that:

A. Interest rates in different currencies will tend to move into line with each other over time

B. Interest rates in different currencies differ due to differences in expectations about inflation

C. Selling a low interest rate currency to invest a high interest rate currency will only be profitable if one hedges the currency risk

D. Selling a low interest rate currency to invest in a high interest rate currency should not be profitable if one hedges the currency risk

Click on the Detail Button to view the Formula Sheet. The intrinsic value of a long call option:

A. Falls and rises with the price of the underlying commodity, but is always positive

B. Rises if the price of the underlying commodity falls and vice versa

C. Depends solely on the volatility of the price of the underlying commodity

D. Becomes negative if the market price of the underlying commodity falls below the strike price of the option

Click on the Detail Button to view the Formula Sheet. A CD with a face value of USD50 million and a coupon of 4.50% was issued at par for 90 days and is now trading at 4.50% with 30 days remaining to maturity. What has been the capital gain or loss since issue?

A. +USD 373,599.00

B. +USD 186,099.00

C. -USD 1,400.99

D. Nil

Click on the Detail Button to view the Formula Sheet. If EUR/USD is 1.1025-28 and the 6-month swap is 112.50/113, what is the 6-month outright price?

A. 1.1380-1.11405

B. 1.11375-1.1141

C. 1.09125-1.0915

D. None of these

Click on the Detail Button to view the Formula Sheet. Eurodollar futures are:

A. Traded on the CME and have a face value of USD 500,000

B. Traded on the CBOT and have a face value of USD 1,000,000

C. Traded on the CBOT and have a face value of USD 500,000

D. Traded on the CME and have a face value of USD 1,000,000

Click on the Detail Button to view the Formula Sheet. Where repos or securities lending transactions are entered into, the Model Code recommends:

A. Documentation should be in place beforehand.

B. Management should approve all transactions.

C. Copies of the underlying documentation should be lodged with regulators.

D. All of the above.

Click on the Detail Button to view the Formula Sheet. What is an outright forward FX transaction?

A. A spot sale (purchase) and a forward purchase (sale)

B. A spot sale (purchase) and a forward sale (purchase)

C. An exchange of currencies on a date beyond spot and at a price fixed today

D. An exchange of currencies on a date beyond spot

Click on the Detail Button to view the Formula Sheet. What is the Gold Offered Forward Rate?

A. The price differential between spot and forward gold prices

B. The rate at which dealers will lend gold against US dollars

C. The implied forward price of gold

D. The price of gold for forward delivery

Click on the Detail Button to view the Formula Sheet. You are quoted spot NZD/USD 0.6821-28 and USD/ CHF 1.4652-56, at what price can you buy CHF against NZD?

A. 0.9993

B. 1.0006

C. 1.0007

D. 0.9994

Click on the Detail Button to view the Formula Sheet. You deal over the phone with a counterparty. The subsequent confirmation differs from the terms agreed verbally. What is the result?

A. The confirmation takes precedence as it is a written contract.

B. The matter will have to be submitted to arbitration in order to establish the mutual intent of the parties.

C. It depends on local law.

D. The verbal agreement is binding.