3I0-012

3I0-012 practice questions, page 3 of 30, with answer review and explanations.

Question 11

What are the primary reasons for taking an initial margin in a classic repo?

  1. Counterparty risk and operational risk
  2. Counterparty risk and legal risk
  3. Collateral illiquidity and counterparty risk
  4. Collateral illiquidity and legal risk

Question 12

What happens when a coupon is paid on bond collateral during the term of a classic repo?

  1. Nothing
  2. A margin call is triggered on the seller
  3. A manufactured payment is made to the seller
  4. Equivalent value plus reinvestment income is deducted from the repurchase price

Question 13

A CD with a face value of EUR 10,000,000.00 and a coupon of 3% was issued at par for 182 days and is now trading at 3.10% with 120 days remaining to maturity. What has been the capital gain or loss since issue?

  1. -EUR 52,161.00
  2. -t-EUR 47,839.00
  3. -EUR 3,827.67
  4. Nil

Question 14

You have taken 3-month (92 days) deposits of CAD 12,000,000.00 at 1.10% and CAD 6,000,000.00 at 1.04%. Minutes later, you quote 3-month CAD 1.09-14% to another bank. The other dealer takes the CAD 18,000,000.00 at your quoted price. What is your profit or loss on this deal?

  1. CAD 2,722.19
  2. CAD 460.00
  3. CAD 3,220.00
  4. CAD 2,760.00

Question 15

A 7% CD was issued at par, which you now purchase at 6.75%. You would expect to pay:

  1. The face value of the CD
  2. More than the face value
  3. Less than the face value
  4. Too little information to decide