Click on the Detail Button to view the Formula Sheet. What is the purpose of an initial margin on a futures exchange?
A. To cover losses incurred between variation margin payments
B. To exclude retail investors
C. To pay reserve requirements
D. To cover fees due to the clearing house
Click on the Detail Button to view the Formula Sheet. The major difference between futures and OTC instruments like FRAs and interest rate swaps is that futures are:
A. Exchange-traded
B. Guaranteed
C. Standardised
D. All of the above
Click on the Detail Button to view the Formula Sheet. 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. 6month LIBOR for the next payment date is fixed today at 4.95%. You expect 6-month LIBOR in 6 months to fix at 5.25%, in 12 months at 5.35% and in 18 months at 5.40%. What do you expect the net settlement amounts to be over the next 2 years? Assume 30-day months.
A. pay 250, receive 1,250, receive 1,750, receive 2,000
B. receive 250, pay 1,250, pay 1,750, pay 2,000
C. pay 2,500, receive 12,500, receive 17,500, receive 20,000
D. receive 2,500, pay 12,500, pay 17,500, pay 20,000
Click on the Detail Button to view the Formula Sheet. You bought a USD 4,000,000 6x9 FRA at 6.75%. The settlement rate is 3-month (90-day) BBA LIBOR, which is fixed at 5.50%. What is the settlement amount at maturity?
A. You receive USD 12,330.46
B. You pay USD 12,330.46
C. You pay USD 12,163.81
D. You receive USD 12,163.81
Click on the Detail Button to view the Formula Sheet. In the international market, a FRA in USD is usually settled with reference to:
A. BBA LIBOR
B. Fed funds
C. ISDA LIBOR
D. EURIBOR
Click on the Detail Button to view the Formula Sheet. Which of the following statements is correct?
A. An adjusted settlement amount is paid at the end of the FRA contract period that includes reinvestment interest for late payment
B. An unadjusted settlement amount is paid at the end of the FRA contract period
C. An adjusted settlement amount is paid at the start of the FRA contract period that is discounted for early payment
D. An unadjusted settlement amount is paid at the start of the FRA contract period
Click on the Detail Button to view the Formula Sheet. Borrowing USD for 12 months and lending them for 6 months (means that you are making):
A. Forward-forward loan
B. Forward-forward deposit
C. Negative gap
D. An over-lent position
Click on the Detail Button to view the Formula Sheet. It is June. You are over-borrowed from October to January on your deposit book. How would you hedge using FRAs?
A. Sell 3x6
B. Buy 3x6
C. Sell 4x7
D. Buy 4x7
Click on the Detail Button to view the Formula Sheet. You have a USD loan that is priced at 3-month
LIBOR+50. LIBOR for the loan will be re-fixed in exactly one month. The market is quoting:
1x3 USD FRA. 1.95-98%
1x4 USD FRA. 2.07-10%
1x6 USD FRA. 2.25-28%
To hedge the next LIBOR fixing, you should:
A. Sell a 1x3 FRA at 1.95%
B. Buy a 1x3 FRA at 1.98%
C. Buy a 1x4 FRA at 2.10%
D. Sell a 1x4 FRA at 2.10%
Click on the Detail Button to view the Formula Sheet.
Your are quoted the following rates:
spot CHF/JPY 80.12-22
3M CHF/JPY 25.5/22.5
At what rate can you buy 3-month outright JPY against CHF?
A. 79.995
B. 79.965
C. 79.895
D. 79.865
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