ACI ACI Certifications 3I0-012 Questions & Answers

• Question 541:

  When considering interest rate risk in the banking book, retail demand deposits without fixed contractual maturity:

  A. should be assumed to have zero duration

  B. should be treated like other instantly variable rate liabilities, such as overnight money market borrowing.

  C. should be assumed to have a low correlation with money market reference rates

  D. represent a minor contributor to interest rate risk and can safely be disregarded

  Correct Answer: C

• Question 542:

  If the duration gap is zero, how will a small parallel shift in interest rates affect the market value of the bank's equity?

  A. If interest rates rise, the market value of equity will increase.

  B. If interest rates rise, the market value of equity will decrease..

  C. The bank is immunised from changes in interest rates.

  D. The market value of equity will decrease due to an increase in interest rates

  Correct Answer: C

• Question 543:

  An option contract that gives the buyer the right to exercise the option at several distinct points during its life is called:

  A. European-style option

  B. American-style option

  C. Bermudan option

  D. Asian option

  Correct Answer: C

• Question 544:

  How would you delta hedge an `at-the-money' long call option?

  A. Go short of the underlying commodity equal to 50% of the size of the option contract

  B. Go long of the underlying commodity equal to 50% of the size of the option contract

  C. Go long of the underlying commodity equal to the full size of the option contract

  D. Go short of the underlying commodity equal to the full size of the option contract

  Correct Answer: A

• Question 545:

  The gamma of an option is:

  A. The sensitivity of the option value to changes in volatility

  B. The sensitivity of the option value to changes in the time to expiry

  C. The sensitivity of the delta to changes in the value of the underlying

  D. The sensitivity of the option value to changes in the price of the underlying

  Correct Answer: C

• Question 546:

  The seller of a call option has:

  A. Substantial opportunity for gain and limited risk of loss

  B. Substantial risk of loss and substantial opportunity for gain

  C. Limited risk of loss and limited opportunity for gain

  D. Substantial risk of loss and limited opportunity for gain

  Correct Answer: D

• Question 547:

  An option premium is normally a positive function of:

  A. the traded volume

  B. the historical volatility of the price of the underlying commodity

  C. the style (European or American) of the option

  D. the implied volatility of the price of the underlying

  Correct Answer: D

• Question 548:

  A forward-forward lender has an exposure to the risk of:

  A. Higher interest rates

  B. Lower interest rates

  C. Flattening yield curve

  D. Parallel shift downwards in the yield curve

  Correct Answer: A

• Question 549:

  What is the Overnight Index for GBP?

  A. SONIA

  B. STINA

  C. STONIA

  D. EONIA

  Correct Answer: A

• Question 550:

  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

  Correct Answer: C