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QUESTION: 26 Topic: 1, Volume A

A 12-month EUR/USD swap is quoted at 41/44. EUR interest rates are expected to fall, with USD interest rates remaining stable.

Assuming no change in the spot rate what effect would you expect on the forward points?

Unchanged
Move towards 28/31
Move towards 5 7/60
Insufficient information

Answer(s): C

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QUESTION: 27 Topic: 1, Volume A

Assuming a flat yield curve in both currencies, when quoting a 1- to 2-month forward FX time option price in a currency pair trading at a discount to a customer:

you would take as bid rate the bid side of the 2-month forward and as offered rate the offered side of the 1-month forward
you would take as bid rate the offered side of the 2-month forward and as offered rate the bid side of the 1-month forward
you would take as bid rate the offered side of the 1-month forward and as offered rate the offered side of the 2-month forward
you would take as bid rate the bid side of the 1-month forward and as offered rate the bid side of the 2-month forward

Answer(s): A

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QUESTION: 28 Topic: 1, Volume A

Clients of a voice-broker quote EUR/USD at 1.3556-61, 1.3559-62, 1.3557-63 and 1.3555-59.

What will be the broker’s price?

1.3559 choice
1.3555-63
1.3559-62
1.3556-59

Answer(s): A

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QUESTION: 29 Topic: 1, Volume A

A “time option” is an outright forward FX transaction where the customer:

has the option to fulfill the outright forward or not at maturity
may freely choose the maturity, given a 24-hour notice to the bank
can choose any maturity within a previously fixed period
may decide to deal at the regular maturity or on either the business day before or after

Answer(s): C

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