Book - Chapter 3 ST Questions Flashcards
- In what circumstances can someone working abroad be eligible to invest in a cash ISA?
Eligibility for a cash ISA is restricted to UK residents with the exception of Crown employees who are working overseas and their spouse or civil partner.
- What is a tier one ratio and what would it indicate?
This is the ratio that regulatory authorities us• to judge the adequacy of a bank’s capital position and is expressed as a percenitage, so the higher the percentage the greater its strength.
- Interest on a savings account is 3% per annum paid monthly. What is the effective annual rate?
(1+0.03/12)to the power of 12 = 3.04%
- What is a real rate of return?
The real rate of return measures the effect of inflation by deducting the rate of inflation from the nominal rate.
- Which government department is responsible for the issue of treasury bills in the UK?
The Debt Management Office is responsible for the issue of treasury bills, which it issues at weekly auctions.
- Is a banker’s acceptance an interest-bea1ring money market instrument or a form of zero coupon bond?
A banker’s acceptance is a discount instrument and so is a type of zero coupon bond
- Which type of money market instrument would you typically expect to offer the highest yield and why would that be the ,case?
Typically, you would expect commercial paper to offer the highest yield as it carries greater risk of default.
- The mid-quote for GBP:USD is 1.2550. This would imply that $1 is worth how much in sterling?
If the GBP:USD rate is 1.2550 then $1 would be worth £0.7968
- When interest rates in the UK are lower than in the Eurozone, would the GBP:EUR forward rate be at a premium or discount to the spot rate?
Where interest rates in the base currency are lower than the quote currency then the forward rate will be at a premium to the spot rate.
How does the CLS payment versus payment system reduce settlement risk in FX transactions?
CLS uses a payment versus payment system, which means that it only settles the transaction when both parties have input matching instructions and the funds are available.
