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Question 1

You are paying 5% per annum paid semi-annually and receiving 6-month LIBOR on a USD 10 million interest rate swap with exactly two years to maturity. 6-month LIBOR for the next payment date is fixed today at 4.95%. How would you hedge the swap using FRAs? How to hedge an IRS with a strip of FRAs?

Options :

A : sell a strip of 0x6, 6x12, 12x18 and 18x24 FRAs

B : buy a strip of 6x12, 12x10 and 16x24 FRAs

C : buy a strip of 0x6, 6x12, 12x18 and 18x24 FRAs

D : sell a strip of 6x12, 12x18 and 18x24 FRAs

Answer: D

Question 2

Click on the Exhibit Button to view the Formula Sheet, If GBP/USD is 1.5350-53 and USD/JPY is 106.50-53, what is GBP/JPY?

Options :

A : 69.36-39

B : 163.48-56

C : 163.51-52

Answer: B

Question 3

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

Question 4

You borrow GBP 2,500,000.00 at 0.625% for 165 days. How much do you repay including interest?

Options :

A : GBP 2,507,106.16

B : GBP 2,507,161.46

C : GBP 2,507,006.85

D : GBP 2,507,063.36

Answer: D

Question 5

Forward points represent:

Options :

A : The expected appreciation or depreciation of the quoted currency

B : The expected appreciation or depreciation of the base currency

C : Solely, the interest rate differential between two currencies

D : Largely, the interest rate differential between two currencies

Answer: D