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Series 34 study materials
Series 34 study resources

Series 34 practice questions

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Question 1Forex Terminology, Products, and Market Concepts

For most currency pairs, one pip is equal to a price movement of:

  1. 0.01 in the exchange rate
  2. 0.0001 in the exchange rate Correct answer.
  3. 0.001 in the exchange rate
  4. 0.10 in the exchange rate

Explanation

A pip is the standard unit of price change in the FX market and equals the fourth decimal place (0.0001) for most pairs. Pairs quoted against the Japanese yen are the exception, where one pip equals 0.01 because those rates are carried to only two decimals.

Question 2Forex Terminology, Products, and Market Concepts

In the quotation USD/CHF, the U.S. dollar is the:

  1. Base currency Correct answer.
  2. Settlement currency
  3. Cross currency
  4. Quote currency

Explanation

Quote convention lists the base currency first and the quote (terms) currency second, with the rate expressing how many units of the quote currency one unit of the base currency costs. In USD/CHF the dollar is therefore the base and the Swiss franc is the quote currency.

Question 3Forex Terminology, Products, and Market Concepts

Standard settlement for a spot foreign exchange transaction is:

  1. One month after the trade date
  2. The next business day (T+1)
  3. Two business days after the trade date (T+2) Correct answer.
  4. Same day (T+0)

Explanation

Spot FX conventionally settles on the second business day after the trade date, commonly written T+2. Any date beyond that convention is a forward date rather than spot.

Question 4Forex Terminology, Products, and Market Concepts

The ask price in a two-way FX quote is the rate at which the dealer will:

  1. Sell the base currency to the client Correct answer.
  2. Pay interest on the open position
  3. Buy the base currency from the client
  4. Buy the quote currency from the client

Explanation

A dealer quotes a bid at which it buys the base currency and an ask (offer) at which it sells the base currency. The ask is always the higher of the two, and the difference between them is the spread that compensates the dealer.

Question 5Forex Terminology, Products, and Market Concepts

Which of the following is classified as a major currency pair?

  1. GBP/ZAR
  2. USD/JPY Correct answer.
  3. EUR/TRY
  4. USD/MXN

Explanation

Major pairs combine the U.S. dollar with another heavily traded, freely convertible currency such as the euro, yen, sterling, Swiss franc, Canadian dollar, Australian dollar, or New Zealand dollar. USD/JPY is the classic example of such a pair.

Question 6Forex Terminology, Products, and Market Concepts

Under NFA rules, the maximum leverage a retail forex dealer member may offer a customer on a major currency pair is:

  1. 50:1 Correct answer.
  2. 100:1
  3. 10:1
  4. 400:1

Explanation

NFA rules require a security deposit of 2% of the notional value for major currency pairs, which equates to maximum leverage of 50:1. Non-major pairs carry a higher 5% requirement, or 20:1 leverage.

Question 7Forex Terminology, Products, and Market Concepts

A currency pair in which neither currency is the U.S. dollar is called:

  1. An outright forward
  2. A forward point
  3. A swap rate
  4. A cross rate Correct answer.

Explanation

A cross rate is a quoted exchange rate between two currencies neither of which is the U.S. dollar, such as EUR/GBP or AUD/JPY. Cross rates are typically derived from each currency's rate against the dollar.

Question 8Forex Terminology, Products, and Market Concepts

Which characteristic distinguishes currency futures from currency forwards?

  1. Futures are settled only at maturity
  2. Futures are exchange-traded and standardized Correct answer.
  3. Futures are customized as to amount and date
  4. Futures are traded over the counter

Explanation

Currency futures trade on organized exchanges in fixed contract sizes with standardized delivery months and are marked to market daily through a clearinghouse. Forwards are private over-the-counter contracts whose size and value date can be tailored to the parties' needs.

Question 9Forex Terminology, Products, and Market Concepts

A dealer agrees to buy EUR 10 million spot and simultaneously sell EUR 10 million forward. This transaction is:

  1. An outright forward
  2. A futures strip
  3. An FX swap Correct answer.
  4. A currency option

Explanation

An FX swap combines a spot leg and an offsetting forward leg in the same currency pair and amount, effectively lending one currency and borrowing the other for the period between the two value dates. Neither leg stands alone as a directional trade.

Question 10Forex Terminology, Products, and Market Concepts

A trader borrows in a low-interest-rate currency and invests the proceeds in a higher-interest-rate currency while leaving the exchange rate unhedged. This strategy is:

  1. Covered interest arbitrage
  2. A forward-forward swap
  3. Triangular arbitrage
  4. A carry trade Correct answer.

Explanation

A carry trade earns the interest rate differential between two currencies and accepts the currency risk that the funding currency may appreciate. It is uncovered precisely because no forward or option hedge is used.

Question 11Forex Terminology, Products, and Market Concepts

Spot EUR/USD is 1.1000. The one-year U.S. dollar interest rate is 5.00% and the one-year euro rate is 3.00%. Ignoring transaction costs, the one-year forward EUR/USD rate under covered interest parity is closest to:

  1. 1.0790
  2. 1.1800
  3. 1.1000
  4. 1.1214 Correct answer.

Explanation

Covered interest parity sets the forward rate equal to the spot rate multiplied by the ratio of the quote-currency interest factor to the base-currency interest factor: 1.1000 x (1.05 / 1.03) = 1.1214. Because the dollar interest rate is higher, the dollar trades at a forward discount and the euro at a forward premium.

Question 12Forex Terminology, Products, and Market Concepts

Six-month USD/JPY forward quotes are higher than the spot rate. This means the U.S. dollar is trading at a forward _____ against the yen, which is consistent with U.S. interest rates being _____ than Japanese rates.

  1. premium; higher
  2. discount; higher
  3. discount; lower
  4. premium; lower Correct answer.

Explanation

When the forward rate for a pair exceeds spot, the base currency is at a forward premium. Under covered interest parity the currency with the lower interest rate trades at a forward premium, so a forward premium on the dollar implies dollar rates are below yen rates.

Question 13Forex Terminology, Products, and Market Concepts

Which statement best describes a non-deliverable forward (NDF)?

  1. An interest rate agreement with no currency exposure
  2. An exchange-traded contract marked to market daily
  3. A forward that must be settled by physical delivery of both currencies
  4. A cash-settled forward used for currencies subject to capital controls or restricted convertibility Correct answer.

Explanation

An NDF references a restricted or non-convertible currency but settles in a freely convertible currency by paying the difference between the contracted rate and the fixing rate. No principal is ever exchanged in the restricted currency.

Question 14Forex Terminology, Products, and Market Concepts

A firm that acts as the counterparty to retail forex trades for U.S. customers and is not a futures commission merchant must register with the CFTC as:

  1. An introducing broker
  2. A commodity trading advisor
  3. A commodity pool operator
  4. A retail foreign exchange dealer (RFED) Correct answer.

Explanation

An entity that offers retail forex accounts, takes the opposite side of customer trades, and is not an FCM registers as a retail foreign exchange dealer and must be an NFA member subject to minimum net capital rules.

Question 15Forex Terminology, Products, and Market Concepts

The buyer of a currency call option:

  1. Has the right to sell the underlying currency at the strike
  2. Is obligated to buy the underlying currency at the strike
  3. Receives the premium from the option seller
  4. Has the right but not the obligation to buy the underlying currency at the strike Correct answer.

Explanation

An option buyer purchases a right and incurs no obligation; a call conveys the right to buy the underlying currency at the strike price. The buyer pays the premium, and the seller is the party that is obligated if the option is exercised.

Question 16Forex Terminology, Products, and Market Concepts

An FX option has a delta of 0.30. This most nearly means that:

  1. The option has a 30% chance of expiring worthless
  2. The premium changes by about 0.30 units for a one-unit change in the spot rate Correct answer.
  3. The strike is 30% away from the current spot rate
  4. The option expires in 30 days

Explanation

Delta measures the sensitivity of the option premium to a small change in the underlying spot rate. A delta of 0.30 indicates the premium moves roughly 0.30 units for each one-unit move in spot, all else equal.

Question 17Forex Terminology, Products, and Market Concepts

Purchasing power parity predicts that exchange rates will adjust so that:

  1. Central banks hold equal reserves
  2. Identical goods cost the same across countries when priced in a common currency Correct answer.
  3. Interest rates are equal across countries
  4. Real interest rates are zero

Explanation

Purchasing power parity links exchange rates to relative price levels, holding that a basket of goods should command the same price in different countries once converted to a common currency. It is a long-run theory of exchange rate determination.

Question 18Forex Terminology, Products, and Market Concepts

A central bank that buys its own currency in the foreign exchange market is attempting to:

  1. Increase domestic inflation
  2. Depreciate its currency
  3. Appreciate or support its currency Correct answer.
  4. Widen the bid-ask spread

Explanation

Purchasing its own currency with foreign reserves increases demand for that currency and reduces the supply available, putting upward pressure on its value. Such intervention is typically used to defend or strengthen a currency.

Question 19Forex Terminology, Products, and Market Concepts

Settlement risk in FX, meaning the risk that one party pays out a currency but never receives the counter-currency, is most reduced by:

  1. Continuous linked settlement (CLS) Correct answer.
  2. Extending the forward date
  3. Using an NDF instead of a spot trade
  4. Trading only during local business hours

Explanation

CLS settles both legs of an FX transaction simultaneously through a single settlement bank, so neither party delivers its currency without receiving the other. This eliminates the timing mismatch that creates settlement, or Herstatt, risk.

Question 20Forex Terminology, Products, and Market Concepts

If a retail forex customer's account equity falls below the required maintenance level, the dealer will typically:

  1. Extend the settlement date by two business days
  2. Convert the account into a futures account
  3. Automatically double the customer's position
  4. Issue a margin call requiring additional funds or close out positions Correct answer.

Explanation

Retail forex accounts are maintained on a margined basis, and the dealer requires a minimum security deposit relative to position size. If equity falls below that level, the dealer demands additional funds or liquidates positions to restore compliance.

Question 21Forex Terminology, Products, and Market Concepts

Spot EUR/USD is 1.1000, spot USD/JPY is 150.00, and EUR/JPY is quoted at 165.50. A trader can capture an arbitrage profit by:

  1. Buying EUR/JPY and buying EUR/USD at the same time
  2. Selling EUR/USD and selling USD/JPY only
  3. Buying EUR/JPY, selling EUR/USD, and selling USD/JPY
  4. Selling EUR/JPY, buying EUR/USD, and buying USD/JPY Correct answer.

Explanation

The implied cross from the two dollar legs is 1.1000 x 150.00 = 165.00, so EUR/JPY at 165.50 makes the euro too expensive in the cross. Selling EUR/JPY and rebuilding the euro through EUR/USD while converting dollars to yen in USD/JPY locks in about 0.50 yen per euro.

Question 22Forex Terminology, Products, and Market Concepts

A trader buys a EUR/USD call with a strike of 1.1000 and pays a premium of 0.0100. At expiration the trade breaks even at a spot rate of:

  1. 1.1100 Correct answer.
  2. 1.1200
  3. 1.0900
  4. 1.1000

Explanation

A long call breaks even when the spot rate at expiration equals the strike plus the premium paid, because that is the point at which the intrinsic value exactly recovers the cost. Here 1.1000 plus 0.0100 gives 1.1100.

Question 23Forex Terminology, Products, and Market Concepts

Under NFA rules, the security deposit required for a retail forex position in a non-major currency pair is:

  1. 5%, allowing 20:1 leverage Correct answer.
  2. There is no minimum security deposit for non-major pairs
  3. 2%, allowing 50:1 leverage
  4. 10%, allowing 10:1 leverage

Explanation

NFA rules set the retail forex security deposit at 2% of notional for major currency pairs and 5% for all other pairs. The 5% requirement corresponds to a maximum leverage of 20:1.

Question 24Forex Terminology, Products, and Market Concepts

A tom-next FX swap is used to:

  1. Settle a trade on the same day it is executed
  2. Convert a forward contract into a futures contract
  3. Roll a position from tomorrow's value date to the following business day Correct answer.
  4. Roll a position forward one month

Explanation

A tom-next swap pairs a sale and purchase (or purchase and sale) whose value dates are tomorrow and the next business day, moving a near-dated position forward by one day. It is the standard tool for rolling a spot position that is about to mature.

Question 25Forex Terminology, Products, and Market Concepts

Spot USD/CHF is 0.9000 and the three-month forward is 0.9045. The annualized forward premium on the U.S. dollar is approximately:

  1. 2.000% Correct answer.
  2. 0.500%
  3. 0.125%
  4. 4.000%

Explanation

The forward premium over the period is (0.9045 - 0.9000) / 0.9000 = 0.005, or 0.50% for three months. Annualizing by multiplying by four quarters gives approximately 2.00%.

Question 26Forex Terminology, Products, and Market Concepts

In the quotation EUR/USD = 1.1000, which currency is the base currency and why?

  1. Neither, since the base currency depends on the trade direction
  2. The euro, since the euro has the higher interest rate
  3. The U.S. dollar, since the dollar is always the base currency
  4. The euro, since the pair states dollars per one euro Correct answer.

Explanation

Every FX quotation has a base currency (the one being priced) written first and a quote currency written second. EUR/USD = 1.1000 means one euro costs 1.1000 U.S. dollars, so the euro is the base.

Question 27Forex Terminology, Products, and Market Concepts

For a currency pair quoted to four decimal places, such as GBP/USD, one pip is a price change of:

  1. 0.00001
  2. 0.0100
  3. 0.0010
  4. 0.0001 Correct answer.

Explanation

A pip is the standard minimum price increment for a currency pair, equal to 0.0001 for pairs quoted to four decimal places. Pairs involving the yen are the common exception, quoted to two decimals with a pip of 0.01.

Question 28Forex Terminology, Products, and Market Concepts

A standard lot in the retail spot foreign exchange market represents a notional amount of:

  1. 1,000 units of the base currency
  2. 10,000 units of the base currency
  3. 1,000,000 units of the base currency
  4. 100,000 units of the base currency Correct answer.

Explanation

Position sizes in retail FX are conventionally quoted in lots, where a standard lot equals 100,000 units of the base currency. A mini lot is 10,000 units and a micro lot is 1,000 units.

Question 29Forex Terminology, Products, and Market Concepts

Under standard market convention, a spot foreign exchange transaction between two major currencies settles:

  1. two business days after the trade date Correct answer.
  2. one business day after the trade date
  3. three business days after the trade date
  4. on the trade date

Explanation

Spot FX conventionally settles two business days after the trade date, known as T+2, because that is the time historically needed to confirm and clear payments in both currencies. Certain pairs such as USD/CAD settle T+1 by local convention.

Question 30Forex Terminology, Products, and Market Concepts

A dealer quotes EUR/USD at 1.0990/1.0994. The price at which the dealer will sell euros to a customer is:

  1. 1.0994 Correct answer.
  2. 1.0990
  3. 1.0986
  4. 1.0992

Explanation

A two-way quote is stated as bid/ask, and the dealer sells the base currency at the ask, which is the higher of the two prices. The bid of 1.0990 is the price at which the dealer is willing to buy euros.

Question 31Forex Terminology, Products, and Market Concepts

Which of the following pairs is classified as a major currency pair?

  1. USD/ZAR
  2. USD/BRL
  3. USD/MXN
  4. USD/CAD Correct answer.

Explanation

Major pairs combine the U.S. dollar with another highly liquid developed-market currency such as the euro, yen, pound, Swiss franc, Canadian dollar, Australian dollar, or New Zealand dollar. Pairs with emerging-market currencies are classified as emerging or exotic.

Question 32Forex Terminology, Products, and Market Concepts

In a floating exchange rate system, a currency that depreciates:

  1. is fixed within a narrow trading band
  2. loses value against other currencies through market trading Correct answer.
  3. buys more foreign currency than before
  4. has been officially lowered by its government

Explanation

Depreciation is a market-driven decline in a currency's value, meaning it buys fewer units of other currencies. An official reduction in a fixed rate is instead called a devaluation.

Question 33Forex Terminology, Products, and Market Concepts

The premium paid by the buyer of a currency option is:

  1. refunded if the option expires unexercised
  2. collected only when the option is exercised
  3. paid to the seller and never refunded Correct answer.
  4. held in escrow by the dealer until expiry

Explanation

An option premium is the price of the right granted by the contract and is paid up front to the seller. It is retained by the seller whether or not the buyer exercises.

Question 34Forex Terminology, Products, and Market Concepts

A dealer quotes EUR/USD at 1.1000/1.1004. A customer buys EUR 100,000 at the ask and immediately sells the position back at the bid. Ignoring other costs, the customer's loss is closest to:

  1. $4
  2. $400
  3. $0
  4. $40 Correct answer.

Explanation

The customer crosses the 4-pip spread, paying the ask and receiving the bid. A pip on EUR 100,000 is worth about $10, so 4 pips costs roughly $40.

Question 35Forex Terminology, Products, and Market Concepts

Spot USD/CHF is 0.9050 and three-month forward points are quoted as -35 (each point is 0.0001). The three-month outright forward rate is:

  1. 0.9046
  2. 0.9015 Correct answer.
  3. 0.8700
  4. 0.9085

Explanation

An outright forward equals spot plus the forward points expressed in price terms. Here -35 points equals -0.0035, so 0.9050 - 0.0035 = 0.9015.

Question 36Forex Terminology, Products, and Market Concepts

In a cross-currency swap, the two counterparties typically:

  1. make one exchange of principal at a single future date
  2. exchange principal and pay interest in both currencies Correct answer.
  3. settle only the net difference between two exchange rates
  4. swap only interest streams and never principal

Explanation

A cross-currency swap involves an initial exchange of principal, periodic interest payments in each currency, and a reversal of the principal exchange at maturity. Firms use it to obtain funding in a foreign currency while managing the associated interest and FX cash flows.

Question 37Forex Terminology, Products, and Market Concepts

A trader buys a long straddle on EUR/USD, consisting of a call and a put with the same strike and expiry. The position is profitable at expiration if:

  1. the spot rate at expiration finishes below the strike price
  2. the spot rate at expiration finishes exactly at the strike price
  3. spot moves sharply away from the strike in either direction Correct answer.
  4. the spot rate at expiration finishes above the strike price

Explanation

A long straddle combines a purchased call and put at the same strike, so it gains on large moves in either direction. The move must be big enough to overcome the total premium paid for both options.

Question 38Forex Terminology, Products, and Market Concepts

A one-year nominal interest rate is 6.0% and expected inflation over the same period is 2.0%. Using the approximate Fisher relationship, the real interest rate is:

  1. 8.0%
  2. 12.0%
  3. 3.0%
  4. 4.0% Correct answer.

Explanation

The Fisher relationship states that the nominal rate approximately equals the real rate plus expected inflation, so the real rate is nominal minus inflation. Here 6.0% - 2.0% = 4.0%.

Question 39Forex Terminology, Products, and Market Concepts

All else equal, a widening current account deficit tends to put downward pressure on a country's currency because:

  1. the country's exports become more expensive for foreign buyers
  2. it must attract larger capital inflows to fund the gap Correct answer.
  3. the deficit automatically reduces the domestic money supply
  4. the central bank is required to raise domestic interest rates

Explanation

A current account deficit means a country is paying out more to the rest of the world than it receives, so it must be financed by net capital inflows. Attracting those inflows typically requires a more attractive exchange rate, which pressures the currency lower.

Question 40Forex Terminology, Products, and Market Concepts

A currency board arrangement requires that:

  1. capital flows in and out of the country be unrestricted at all times
  2. the central bank actively manages the money supply to hit an inflation target
  3. the domestic money supply be fully backed by foreign reserves Correct answer.
  4. the exchange rate floats freely within a wide band set by the government

Explanation

A currency board fixes the domestic currency to a reserve currency and issues domestic money only against foreign reserve holdings, so the monetary base is fully backed. This removes discretionary monetary policy and ties domestic interest rates closely to the anchor currency.

Question 41Forex Terminology, Products, and Market Concepts

All else equal, a rise in the implied volatility of a currency pair will:

  1. leave premiums unchanged until the option is exercised
  2. lower the premiums of both calls and puts
  3. raise call premiums and lower put premiums
  4. raise the premiums of both calls and puts Correct answer.

Explanation

Implied volatility measures the market's expectation of future price movement and is a direct input to option pricing models. Higher volatility increases the chance a given option finishes in the money, so premiums for both calls and puts rise.

Question 42Forex Terminology, Products, and Market Concepts

The standard CME euro FX futures contract has a notional size of:

  1. 1,000,000 euros
  2. 62,500 euros
  3. 125,000 euros Correct answer.
  4. 100,000 euros

Explanation

The benchmark CME euro FX futures contract is sized at 125,000 euros, with prices quoted in U.S. dollars per euro. Other currency contracts have their own standardized sizes set by the exchange.

Question 43Forex Terminology, Products, and Market Concepts

A U.S. exporter expects to receive EUR 5,000,000 in 90 days and will convert the proceeds into dollars. The exposure this creates is best described as:

  1. accounting exposure, hedged by matching euro assets and liabilities
  2. translation exposure, hedged by remeasuring the receivable at spot
  3. economic exposure, hedged by buying euro puts and selling calls
  4. transaction exposure, hedged by selling euros forward for 90 days Correct answer.

Explanation

A known foreign-currency receivable to be converted on a future date creates transaction exposure, because the dollar value depends on the exchange rate at conversion. A forward sale of euros locks in the conversion rate and offsets that exposure.

Question 44Forex Terminology, Products, and Market Concepts

A currency option that may be exercised at any time up to and including the expiration date is called:

  1. a European-style option
  2. a forward-start option
  3. a barrier option
  4. an American-style option Correct answer.

Explanation

American-style options allow exercise on any business day before expiration, while European-style options allow exercise only at expiry. Because early exercise adds flexibility, American-style options can be worth more than otherwise identical European ones.

Question 45Forex Terminology, Products, and Market Concepts

From the perspective of a U.S.-based observer, a quote of USD/JPY 150.00, stated as yen per dollar, is:

  1. an outright forward quotation
  2. a direct quotation in American terms
  3. a cross rate quotation
  4. an indirect quotation in European terms Correct answer.

Explanation

A U.S. direct quote expresses the price of one unit of foreign currency in dollars (American terms). USD/JPY states the number of yen per dollar, which is European terms and therefore an indirect quote for a U.S. observer.

Question 46Forex Terminology, Products, and Market Concepts

A trader holds a long USD/JPY position of 100,000 U.S. dollars at a rate of 150.00. One pip in USD/JPY is 0.01 yen. The value of one pip on this position is closest to:

  1. $1.00
  2. $66.67
  3. $10.00
  4. $6.67 Correct answer.

Explanation

One pip on 100,000 dollars equals 100,000 x 0.01 = 1,000 yen. Dividing by the exchange rate of 150.00 yen per dollar converts that amount to about $6.67.

Question 47Forex Terminology, Products, and Market Concepts

A trader buys a EUR/USD call with a strike of 1.1000 for a premium of 0.0120 and simultaneously sells a EUR/USD call with a strike of 1.1100 for a premium of 0.0060. The maximum loss on this position is:

  1. 0.0120 per euro
  2. 0.0040 per euro
  3. unlimited
  4. 0.0060 per euro Correct answer.

Explanation

This is a bull call spread, which carries a net debit of 0.0060 per euro after netting the two premiums. Because both legs are long and short calls, the loss is capped at the net premium paid, while the maximum gain is the 0.0100 strike width minus that debit.

Question 48Forex Terminology, Products, and Market Concepts

A trader buys a EUR/USD put with a strike of 1.2500 and pays a premium of 0.0200. At expiration the spot rate is 1.2100. The trader's profit per euro is:

  1. 0.0000
  2. 0.0400
  3. 0.0600
  4. 0.0200 Correct answer.

Explanation

The put's intrinsic value at expiration is the strike minus spot, or 1.2500 - 1.2100 = 0.0400 per euro. Profit equals intrinsic value less the 0.0200 premium, which is 0.0200 per euro.

Question 49Forex Terminology, Products, and Market Concepts

A dealer is short 100 EUR/USD call options, each with a delta of 0.40 and each covering one futures-equivalent contract. To become delta neutral, the dealer should:

  1. sell 40 euro futures contracts
  2. buy 100 euro futures contracts
  3. buy 40 euro futures contracts Correct answer.
  4. sell 100 euro futures contracts

Explanation

A short call position has a negative delta exposure, here about -0.40 contracts per option, or -40 contracts in total. Delta neutrality requires an offsetting positive exposure of the same size, so the dealer buys 40 contracts.

Question 50Forex Terminology, Products, and Market Concepts

A trader buys a EUR/USD strangle: a put with a strike of 1.1000 for 0.0080 and a call with a strike of 1.1200 for 0.0090. Total premium paid is 0.0170. The upper breakeven at expiration is:

  1. 1.0830
  2. 1.1030
  3. 1.1370 Correct answer.
  4. 1.1200

Explanation

For a long strangle, the upper breakeven equals the call strike plus the total premium paid for both options. Here 1.1200 + 0.0170 = 1.1370, while the lower breakeven is 1.1000 - 0.0170 = 1.0830.