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Basic Concepts Department: Exam

Promotion Exam

Close-up on a man's face

Right. Let's see what you have learnt.

If you want to be promoted to the next department, you must demonstrate that you have a good understanding of the basic concepts in investment banking.

Don't worry, you have enough knowledge to answer these questions!

The next department is the trading department. Can you demonstrate enough knowledge to get there?

To get to the next stage in your career at the bank, you must pass the examination. Try to get at least 8 out of 9 correct before moving on to the next section. If you get less than this, go back over your working to make sure you understand the principles before moving on.

The Examination:

Q1. What is the equivalent annual rate of a bond with a 9% biannual interest rate?

(Select one answer)

(a) * 4%
(b) * 4.4%
(c) * 4.5%
(d) * 9%
Q2. How much money you have to invest to get 1580? in four years, if you are going to receive a 6% annual rate?

(Select one answer)

(a) * £263
(b) * £1200.80
(c) * £1251.50
(d) * £1580
Q3. If you buy a two months €2000 principal treasury bill (these are short term bonds) and they are going to pay you a 6% bi-monthly interest rate, you will have earned at maturity:

(Select one answer)

(a) * €120
(b) * €2120
(c) * €2247.2
(d) * €2500
Q4. Which period of time is a division between the short and the long-term?

(Select one answer)

(a) * 2 months
(b) * 6 months
(c) * 12 months
(d) * 15 months
Q5. When you reinvest interest rates, you should use...

(Select one answer)

(a) * Simple interest
(b) * Compound interest
(c) * Fixed interest
Q6. If you have a bond with a 7% annual interest rate paid monthly and £100 principal, you ought to...

(Select one answer)

(a) * Start calculating future value with compound interest formula
(b) * Request for more data to calculate monthly coupons
(c) * Put the data into the same period of time
Q7. You want to buy a issued gilt with these characteristics:

3.5% interest rate paid annually. Maturity: 12 months. Principal: £1,000,000.

What amount of money will you receive at maturity if you buy this bond?

(Select one answer)

(a) * £965,000
(b) * £1,000,000
(c) * £1,035,000
(d) * £1,050,000
Q8. In which bond are you going to receive more money as interest rate a bond with normal simple interest rate or a bond issued at a discount?

(Select one answer)

(a) * With the normal bond with simple interest rate
(b) * With the bond issued at a discount
(c) * Both bonds have equivalent interest rates payments
Q9. Which instrument gives you a higher future value?

(Select one answer)

(a) * Simple interest rate bond calculated
(b) * At discount interest rate bond calculated
(c) * Compound interest rate bond calculated

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Submitted by bized on Wed, 01/08/2007 - 12:00