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// EXAM HALL25 QUESTIONS · 30 MINUTES

Sales and Trading Practice Test

Markets arithmetic, a desk at the close, and the conduct that goes with the seat.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A sales and trading practice test checks that you can do markets arithmetic quickly and keep your discipline when a position moves against you. This paper has three parts: basis points, forwards, duration and options; one desk's positions against its limits, set on an exhibit; and calls on front-running, mark-ups and a client's lost hedge. Every question is original, and none comes from any bank's test. It does not replace a desk's own mental arithmetic round, so practise speed as well. Sit it against a thirty-minute clock, or take it as practice.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// HOW TO SIT IT

Answer below as practice, and each read opens as you go. Or sit it as a test: 30 minutes, with every read held back until you finish.

PART A

The desk's arithmetic

Do these without a calculator if you can. A desk will ask you to work out loud, and how you get there counts.

PART A · QUESTION 1

A client has US$50m of floating-rate debt. Rates rise by one basis point.

What does that add to the client's interest bill over a year?

PART A · QUESTION 2

Spot EUR/USD is 1.2000. One-year interest rates are 5% on dollars and 3% on euros.

Roughly where is the one-year forward?

PART A · QUESTION 3

You quote a client EUR/USD at 1.0795/1.0805. The client wants to sell EUR 5m.

At what rate does the client sell?

PART A · QUESTION 4

A bond has a duration of about 4.5 years. Its yield rises by half a percentage point.

Roughly what happens to its price?

PART A · QUESTION 5

Without a calculator, in the time it takes to say it. A client buys US$7.5m at 12 basis points over your cost.

What does the trade make?

PART A · QUESTION 6

A company pays 4.0% fixed and receives floating on a US$10m interest rate swap. Floating is now 5.0%.

What is this year's net swap payment, at that rate?

PART A · QUESTION 7

An exporter buys an option to sell EUR 1m at 1.08, for a premium of US$15,000. At expiry the rate is 1.12.

What does the exporter end up with, after the premium?

PART A · QUESTION 8

An estimation question. A country of 5 million adults each spends about US$20,000 a year by card. Someone proposes a fee of 0.1% on card spending.

Roughly what would the fee raise in a year?

PART B

The desk at the close

One desk, eight questions. Read the positions against their limits before you read the day's result.

EXHIBIT G · THE DESK AT THE CLOSE

A bank's foreign exchange and rates desk at the end of the day. One position line per product, with its limit.

Positions
HeldLimitRate
EUR/USDlong EUR 12mEUR 10m1.0800
GBP/USDshort GBP 4mGBP 8m1.2500
USD/JPYlong USD 6mUSD 10m150.00
Rates book, long bondsDV01 US$18,000US$25,000
Today, US$000
US$000
Client margin140
Positions(450)
The day(310)
Daily stop-loss(400)

At 4:52pm an exporter sold EUR 15m six months forward to the desk. The desk sold EUR 3m spot against it, and has not sold more.

PART B · QUESTION 9

From Exhibit G.

Which position is outside its limit, and by how much?

BACK TO EXHIBIT G ↑
PART B · QUESTION 10

In Exhibit G, the desk is long EUR 12m at 1.0800.

What does a one-cent fall in EUR/USD cost?

BACK TO EXHIBIT G ↑
PART B · QUESTION 11

In Exhibit G, the desk has lost US$310,000 today against a daily stop-loss of US$400,000. Assume only the EUR position moves.

How far can EUR/USD fall before the stop-loss is hit?

BACK TO EXHIBIT G ↑
PART B · QUESTION 12

In Exhibit G, the rates book is long bonds, with a DV01 of US$18,000.

What does a 10 basis point rise in yields do?

BACK TO EXHIBIT G ↑
PART B · QUESTION 13

In Exhibit G, the EUR line went over its limit at 4:52pm, on a client's trade. The trader says: 'It is client flow. I will clear it in the morning.'

What should happen before the desk goes home?

BACK TO EXHIBIT G ↑
PART B · QUESTION 14

Exhibit G's exporter sold EUR 15m six months forward. Suppose the desk now sells the whole EUR 15m spot. The exchange-rate risk has gone.

What market risk is left in the book?

BACK TO EXHIBIT G ↑
PART B · QUESTION 15

In Exhibit G, the trader has lost US$450,000 on positions today, and says of the new EUR long: 'The euro has to rise. If I double this tonight I make the whole day back.'

What is the right response?

BACK TO EXHIBIT G ↑
PART B · QUESTION 16

Exhibit G's day: US$140,000 of client margin, less US$450,000 on positions. A salesperson says: 'Great day for the franchise.'

What does that split tell you?

BACK TO EXHIBIT G ↑

PART C

The calls

Clients, colleagues and the conduct rules that apply to both.

PART C · QUESTION 17

A year ago you sold an exporter a forward. The currency then moved so that the client would have been better off unhedged, and its chief executive rings: 'You cost us US$400,000.'

What do you do?

PART C · QUESTION 18

A corporate client will sell EUR 50m at this afternoon's fixing. A colleague says: 'We know it is coming. Let us sell some first, for the book, and buy back when the fixing pushes it down.'

Your move?

PART C · QUESTION 19

A trader you know at another bank messages you before the fixing: 'How are you positioned? We can both avoid getting run over.'

Your move?

PART C · QUESTION 20

Two exporters of similar size trade the same currency with you. One checks every price; the other does not, and has been paying three times the mark-up for years.

What do you do?

PART C · QUESTION 21

For months you have told clients that rates will fall, and some have stayed floating on that view. This week's data points the other way, and you have changed your mind.

What do you do?

PART C · QUESTION 22

A thinly traded bond in your book has no recent trade. You mark it at 98, on your own judgement. The product controller's sources say 94, and they ask for your evidence.

Your move?

PART C · QUESTION 23

A small exporter has about EUR 2m of sales a year, hedged in line with its policy. You think the euro will fall sharply. The owner says: 'Should I sell EUR 5m forward and make some money?'

Your answer?

PART C · QUESTION 24

A floating-rate borrower is offered two products: a swap that fixes its rate at 5%, or a cap that limits its rate to 6% for a fee paid upfront.

What is the difference that matters most?

PART C · QUESTION 25

An importer's policy is to hedge half of the next twelve months' purchases. Its currency has fallen 25% in three months, and the board proposes to stop hedging until the currency bounces back.

Signal or noise?

0 OF 25 ANSWERED · 0 WITH THE SENIOR READ · 0 STANDS UP · 0 OFF THE LINE

// THE REST OF THE ROUND

Every question here is original; none is any bank's real test. Written for: Markets salesperson, Trader.