Question 1

Which of the following is true regarding the consummation of a deal?

Options :

A : written confirmations always override terms verbally agreed to

B : verbal agreements are considered binding

C : deals agreed to verbally can be done subject to documentation

D : verbal agreements are never to be considered legally binding

Answer: C

Question 2

Which one of the formulae below is correct?

Options :

A : Long a FRN + pay floating on a swap = long a synthetic straight bond.

B : Long a FRN + pay fixed on a swap = long a synthetic straight bond

C : Long a FRN + pay floating on a swap = short a synthetic straight bond

D : Long a FRN + receive floating on a swap = long a synthetic straight bond

Answer: A

Question 3

All other things being equal, if a bank borrows short and lends long what is the effect on the liquidity risk of the bank?

Options :

A : changes only when interest rates levels are low

B : positive

C : negative

D : changes only when interest rates levels are high

Answer: C

Question 4

How is a USD Overnight Indexed Swap (OIS) settled?

Options :

A : Two days after maturity by net payment

B : Periodic exchange of fixed and floating payments up to and including maturity

C : After maturity by exchange of fixed and floating payments

D : At maturity by net payment

Answer: A

Question 5

Where answer phone equipment is used for reporting and recording of off-premises transactions, it should be:

Options :

A : Secured so that reported transactions cannot be erased without senior management approval.

B : Secured by recordings that are stored for a suitable period.

C : On a number located in the office of the internal auditor.

D : On an special number known only to the chief dealer.

Answer: A