ACI ACI Certifications 3I0-012 Questions & Answers

• Question 681:

  Which one of the following statements is incorrect? Hedge accounting of an existing position no longer applies when:

  A. the trader acquires additional exposure in the hedged item.

  B. the hedging instrument is sold, terminated or exercised.

  C. the hedged item is sold or settled.

  D. a hedge fails the effectiveness test.

  Correct Answer: A

• Question 682:

  Which of the following is a function of asset and liability management (ALM)?

  A. coordinated limit management of a financial institution's credit portfolio

  B. running a matched trading book

  C. monitoring credit quality of assets and establishing a early warning system

  D. managing the financial risk of the bank by protecting it from the adverse effects of changing interest rates

  Correct Answer: B

• Question 683:

  Supervisors would generally consider interest rate risk exposure in the banking book excessive beginning at what level of losses given a +1- 200 bps market rate movement?

  A. > 2% of 6 months forward earnings

  B. > 20% of regulatory capital

  C. <10% of regulatory capital

  D. < 5% of 12 months forward earnings

  Correct Answer: B

• Question 684:

  Which statement about modern matched-maturity transfer pricing in banks is correct?

  A. It is now a widely accepted standard that banks should use a single representative transfer price across the entire maturity spectrum.

  B. Modern matched-maturity pricing systems include an additional liquidity surcharge that is specifically applied to more liquid short maturities.

  C. Matched-maturity transfer prices should represent a weighted average cost of capital that incorporates the cost of equity into the cost of borrowed funds.

  D. Modern matched-maturity systems differentiate transfer prices by the maturity of the commitment and also apply a marginal funding cost perspective.

  Correct Answer: D

• Question 685:

  Which of the following transactions would have the effect of lengthening the average duration of assets in the banking book?

  A. buying futures contracts on 30-year German Government bonds

  B. selling futures contracts on 30-year German Government bonds

  C. buying put options on 30-year German Government bonds

  D. buying a 3x6 forward rate agreement

  Correct Answer: A

• Question 686:

  What is a `duration gap'?

  A. the average maturity of liabilities on a balance sheet

  B. the difference between the duration of assets and liabilities

  C. the difference between the duration of the longest-held and shortest-held liabilities on the balance sheet

  D. the average maturity of the portfolio on the asset side of a balance sheet

  Correct Answer: B

• Question 687:

  A put option is `out-of-the-money' if:

  A. Its strike price is higher than the current market price of the underlying commodity

  B. If the current market price of the underlying commodity is higher than the strike price of the option

  C. Its strike price is equal to the current market price of the underlying commodity

  D. If the current market price of the underlying commodity is lower than the strike price of the option

  Correct Answer: B

• Question 688:

  An option is:

  A. The right to buy or sell a commodity at a fixed price

  B. The right to buy a commodity at a fixed price

  C. The right but not the obligation to buy or sell a commodity at a fixed price

  D. The right but not the obligation to buy a commodity at a fixed price

  Correct Answer: C

• Question 689:

  An `at-the-money' option has:

  A. Intrinsic value but no time value

  B. Time value but no intrinsic value

  C. Both time value and intrinsic value

  D. Neither time value nor intrinsic value

  Correct Answer: B

• Question 690:

  The vega of an option is:

  A. The sensitivity of the option value to changes in interest rates

  B. The sensitivity of the option value to changes in implied volatility

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

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

  Correct Answer: B