IR Certification For Sales Roles: Quiz!

20 Questions | Total Attempts: 33

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IR Certification For Sales Roles: Quiz!


Questions and Answers
  • 1. 
    Which of the following statements is true about the fixed rate of a putable swap relative to a vanilla swap over the same term where the receiver of the fixed-rate has the right to cancel.  The fixed ratepayer will pay a:
    • A. 

      Higher fixed rate than the vanilla swap because he has the right to cancel the swap

    • B. 

      Lower fixed rate than the vanilla swap because he has passed the right to cancel the swap to the other party

    • C. 

      Higher floating rate than the vanilla swap because he has the right to cancel the swap

    • D. 

      Lower floating rate than the vanilla swap because he has passed the right to cancel the swap to the other party

  • 2. 
    A floating-rate borrower wants to hedge him/herself against a significant upward shift in the yield curve. In order to achieve this s/he should:
    • A. 

      Sell a cap

    • B. 

      Buy a floor

    • C. 

      Enter into a Payer Swap

    • D. 

      Enter into a Receiver Swap

    • E. 

      Both the Floor and the Payer Swap will provide him protection against rising interest rates

  • 3. 
    Which of the following statements is true about the decision to exercise a 1Y5Y Payer Swaption with a strike of 1.75%?
    • A. 

      The holder of the swaption will only exercise his option if the market rate for a 5Y swap at expiry is greater than 1.75%

    • B. 

      The holder of the swaption will only exercise his option if the relevant LIBOR rate at expiry is greater than 1.75%.

    • C. 

      The holder of the swaption will exercise if the market rate for a 5Y swap is less than 1.75%

    • D. 

      The holder of the swaption will only exercise his option if the LIBOR rate at expiry isless than 1.75%

  • 4. 
    Consider an IRS with the following characteristics: 5 Year USD IRS, Pay Fixed 1.75% Receive Float 3M Libor + 15 bp, Notional 100M USD,  DV01 45,800 Yesterday's MTM  +87,200 USD Assume markets moved down by 5 bp in today's  trading.  What would you expect the current MTM to be around?  
    • A. 

      Around -140,000 USD

    • B. 

      Around 40,000 USD

    • C. 

      Around 130,000 USD

    • D. 

      Around 315,000 USD

  • 5. 
    Why would a corporate most likely enter into an amortising swap?
    • A. 

      Because it creates a lower fixed rate where the yield curve is steep

    • B. 

      Because they have a loan with a single repayment on maturity

    • C. 

      Because they have the right to pay back their loan early

    • D. 

      Because they hold or about to take a loan which they are scheduled to pay back incrementally over the loan's life.

  • 6. 
    A US corporate is considering to enter into a cross currency swap to hedge a floating rate Euro denominated bond on 100M EUR that they are about to issue.  Given the swap below and the issued bond, what will be the corporate’s net liability after the entering into the swap?  They will effectively ... Swap Term 2Y Pay USD Fixed 1.5% Receive EUR Float 6M Euribor USD Notional 137 M EUR Notional 100 M Exchange Notional Both at Start and End Date
    • A. 

      Pay fixed USD interest and EUR floating interest

    • B. 

      Pay EUR floating interest on 100M EUR

    • C. 

      Pay no interest as the swap and the bond interest cancel out

    • D. 

      Pay USD fixed interest on $137m

  • 7. 
    If you know that a fixed coupon bond is trading at discount to par, which of the following statements is correct?
    • A. 

      The yield must be less than the coupon the bond is paying

    • B. 

      The yield must be equal to the coupon the bond is paying

    • C. 

      The yield must be greater than the coupon the bond is paying

    • D. 

      It is impossible to say

  • 8. 
    A salesperson offers a client the following four trades to hedge his exposure to higher rates.  Which of the following is likely to require an upfront payment:
    • A. 

      Pay fixed swaption collar

    • B. 

      Callable swap

    • C. 

      Pay fixed swap

    • D. 

      Pay fixed swaption

  • 9. 
    A Corporate takes out a 10 year loan at Libor + 150 basis points:  In order to hedge his exposure to rising rates, his bank offers him an interest rate collar with cap and floor strikes of 4% and 2% respectively.  If the corporate takes up the offer, which of the following are true about their future net maximum and minimum payments?
    • A. 

      Maximum 4% Minimum 2%

    • B. 

      Maximum 4% Minimum 1.5%

    • C. 

      Maximum 5.5% Minimum 0.5%

    • D. 

      Maximum 5.5% Minimum 3.5%

  • 10. 
    The three main components used to build the majority of SD's yield curves are:
    • A. 

      Interbank deposit rates (eg LIBOR), FX Swaps, and IRS

    • B. 

      Interbank deposit rates (eg LIBOR), Government Bonds or CME Futures, and CMSs

    • C. 

      Interbank deposit rates (eg LIBOR), Futures or FRAs and IRS

    • D. 

      Interbank deposit rates (eg LIBOR), Futures and Swaptions

  • 11. 
     Which of the following sentences is NOT true in regards to the following Range Accrual Swap? USD, 5Y Pay Fixed 3% , on range condition as below Observed Index: 3M Libor High Barrier  3% Low Barrier  0.5% Min Coupon 0.6% Receive Float 3M Libor Notional    100M USD
    • A. 

      The minimum payment is 0.6% even if Libor is outside the range over the observation dates

    • B. 

      The structured coupon payer will benefit if 3m Libor moves outside the range 0.5 - 3%

    • C. 

      The floating leg payer will benefit if 3m Libor moves outside the range 0.5 - 3%

  • 12. 
    A regular callable swap where the payer of the fixed leg has the right to cancel can be structured as a combination of:
    • A. 

      Payer swap + Receiver swap with different frequency

    • B. 

      Payer swap + Buy Receiver swaption

    • C. 

      Payer swap + Sell Receiver swaption

    • D. 

      Payer swap+ Buy Payer swaption

    • E. 

      Payer swap+ Sell Payer swaption

  • 13. 
    A client is reviewing SD’s pricing screen and asks you about DVO1.   You respond that this shows the change in NPV of a position due to a shift of:
    • A. 

      1 bp in LIBOR

    • B. 

      1% in LIBOR

    • C. 

      1 bp in the yield curve

    • D. 

      1% in the yield curve

  • 14. 
    The ability to post collateral in several different currencies enables counterparties to :
    • A. 

      Enables the counterparty receiving the collateral to choose which currency they want as collateral

    • B. 

      Does not have any effect on the swap, but enables greater convenience in collateral management

    • C. 

      Choose to post collateral in the currency that will give the highest return

    • D. 

      Raise the margin thresholds in the underlying CSA

  • 15. 
    When would a customer most likely use the LIBOR curve for discounting cash flows, as opposed to OIS curves?
    • A. 

      When the customer is trading with a CSA and posts daily collateral

    • B. 

      When the customer is trading without a CSA and does not post daily collateral

    • C. 

      When the customer is doing long tenor trades

    • D. 

      When the customer is doing short tenor trades

  • 16. 
    Which of the following is NOT true of a Bermudan Swaption
    • A. 

      It has multiple expiry dates

    • B. 

      The underlying swap of a Bermudan Swaption has the same tenor regardless of the expiry date chosen

    • C. 

      A Bermudan Swaption is more expensive than the same Vanilla Swaption (same strike, tenor, etc)

    • D. 

      A Bermudan Swaption will have the same ATMF Rate as the Vanilla with the same charecteristics (tenor, currency, etc)

  • 17. 
    A corporate treasurer wants to price the following: In 1 year, enter a 5 year USD  payer swap; Fixed rate: 3%; Semi annual Receive: observation index 3m LIBOR; Frequency monthly; payment frequency semi-annual Notional: 100 million USD How would he do it on SDX-IR?
    • A. 

      1y5y swaption with strike of 3% observation index 1M LIBOR

    • B. 

      1y Forward starting 5y General swap

    • C. 

      1y Forward starting 5y Vanilla swap

    • D. 

      6y callable swap observation index 6m LIBOR

  • 18. 
    Pricing an IRS  with a 30/360 daycount basis for 16 months (pay fixed semi annually), you choose a last long stub in the cash flow & dates, what would you expect the division of days per fixing to be on the payer side?
    • A. 

      180; 120; 180

    • B. 

      120; 180; 180

    • C. 

      180; 300

    • D. 

      300; 180

  • 19. 
    An SDX-IR user wants to calculate the effect of a 10 bp parallel shift of the cure on the MV (market value) of his payer swap. How could he do it?
    • A. 

      A. Open Pricing table and shift the floating spread by 10bp

    • B. 

      B. Shift yield curve by 10 bp; accept and recalculate pricer for updated NPV using original fixed rate

    • C. 

      C. Subtract the value of vega * 10 from the NPV

    • D. 

      D. Use the new scenario tool to set curve shifts and view MV

    • E. 

      both b and d are correct

  • 20. 
    A customer enters into a 2Y USD "in arrears" Pay Fixed, Receive Floating IRS, Payment Frequency: Quarterly Assuming today is April 1, 2014.  When is the first fixing date of this swap?
    • A. 

      April 1, 2014

    • B. 

      July 1, 2014

    • C. 

      April 4, 2016