Question 1

What is a difference between currency swaps and interest rate swaps?

Options :

A : Currency swaps do not require the exchange of notional principal on maturity.

B :

Currency swaps allow banks and customers to obtain the risk/reward profile of long-term

interest rates without having to use long-term funding.

C : Currency swaps are OTC derivative contracts.

D : Currency swaps generate foreign exchange rate risk in addition to interest rate risk.

Answer: D

Question 2

Which one of the following four statements about the relationship between exchange rates and option values is correct?

Options :

A : As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate decreases

B : As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate increases.

C : As the dollar depreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate increases.

D : As the dollar appreciates relative to the pound, the right to sell dollars at a fixed pound exchange rate increases.

Answer: B

Question 3

The value of which one of the following four option types is typically dependent on both the final price of its underlying asset and its own price history?

Options :

A : Stout options

B : Power options

C : Chooser options

D : Basket options

Answer: D

Question 4

Which one of the four following statements about consortium databases is correct?

Consortium databases

Options :

A : Gather information from news articles.

B : Use data from the top 5% of the industry.

C : Provide data to map risk categories with causes.

D : Contain anonymous information.

Answer: D

Question 5

Which one of the following statements describes Macauley's duration?

Options :

A : The change in value of a bond when yields increase by 1 basis point.

B : The weighted average life of the bond payments.

C : The present value of the future cash flows of a bond calculated at a yield equal to 1%.

D : The percentage change in a bond price when the yields change by 1%.

Answer: B

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