Question 1

If the yield curve is upward sloping, a bank would not profit from:

Options :

A : borrowing long and lending short

B : borrowing short and lending long

C : paying a higher rate on deposits than the market

D : increasing the banks leverage

Answer: A

Question 2

Lending for 3 months and borrowing for 6 months creates a 3x6 forward-forward deposit. The cost of that deposit is called:

Options :

A : Forward-forward rate

B : All of the above

C : Implied rate

D : Break-even rate

Answer: B

Question 3

When quoting the exchange rate between the USD and AUDI which is conventionally the base currency?

Options :

A : AUD

B : USD

C : Depends on whether the price is being quoted in Australia or the US

D : Depends on whether the price is being quoted interbank or to a customer

Answer: A

Question 4

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 5

You have quoted a Swiss customer spot USD/CHF as 1.3710-15, but he asks you to quote it as CHF/USD.What do you quote?

Options :

A : 1.3710-15

B : 0.7294-91

C : 0.7291-94

D : None of these

Answer: C

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