Free Practice Questions for ICMA FMFQ Exam

Question 1

How is the yield curve normally represented?

AYield against term

BCoupon against term

CYield against coupon

DYield against price

Correct Answer: A. Yield against term

Question 2

Which of the following best describes LIBOR?

AThe average rate at which wholesale bank deposits have taken place over the past 24 hours (since the last LIBOR fix)

BThe average rate at which wholesale banks are offering one another money at fixing time

CThe highest rate at which wholesale banks are offering one another money at fixing time

DThe average rate at which wholesale banks have offered money to their customers over the past 24 hours (since the last LIBOR fix)

Correct Answer: B. The average rate at which wholesale banks are offering one another money at fixing time

Question 3

The study of patterns of historic price movements to determine expected future patterns is known as:?

ATechnical analysis

BFundamental analysis

CValue analysis

DMomentum analysis

Correct Answer: A. Technical analysis

Question 4

You have bought a call option on a stock at a strike of EUR 29, and paid a premium of EUR 1.5 for this option. What is your breakeven price on this position?

AEUR 27.50

BEUR 29.00

CEUR 30.50

DEUR 32.00

Correct Answer: C. EUR 30.50

Question 5

What is the credit spread on a corporate bond?

AThe increased size of the bid/ask spread in a trade price

BThe difference in price between a corporate bond and a benchmark treasury

CThe additional yield required by investors to offset the credit risk of the security

DThe difference between the coupon rate of a corporate bond and the dividend of the issuing company

Correct Answer: C. The additional yield required by investors to offset the credit risk of the security

Question 6

Where is the largest centre for FX trading?

ALondon

BNew York

CSingapore

DHong Kong

Correct Answer: A. London