MCQOPTIONS
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MCQOPTIONS
This section includes 657 Mcqs, each offering curated multiple-choice questions to sharpen your Testing Subject knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Exposed assets are those translated at |
| A. | Historical rate. |
| B. | Average rate. |
| C. | Current rate. |
| D. | Current rate or average rate. |
| Answer» D. Current rate or average rate. | |
| 2. |
The bank account of a non-resident of a country, where the amount of currency inthe account cannot be transferred to another country is called as |
| A. | Nostro account |
| B. | Blocked Account |
| C. | Foreign account |
| D. | Capital account |
| Answer» C. Foreign account | |
| 3. |
Which of the following would likely have the least direct influence on a country'scurrent account? |
| A. | Inflation. |
| B. | National income. |
| C. | Exchange rates |
| D. | A tax on income earned from foreign stocks |
| Answer» B. National income. | |
| 4. |
A foreign currency account maintained by a bank abroad is its |
| A. | nostro account |
| B. | vostro account |
| C. | loro account |
| D. | foreign bank account |
| Answer» B. vostro account | |
| 5. |
For contingency exposure of foreign exchange, the best derivative that can be usedto hedge is |
| A. | Forwards. |
| B. | Futures. |
| C. | Options. |
| D. | Swaps. |
| Answer» D. Swaps. | |
| 6. |
India is facing continuous deficit in its balance of payments. In the foreign exchangemarket rupee is expected to |
| A. | Depreciate. |
| B. | Appreciate. |
| C. | Show no specific tendency. |
| D. | Depreciate against currencies of the countries with positive balance of payment and appreciate against countries with negative balance of payment. |
| Answer» B. Appreciate. | |
| 7. |
The true cost of hedging transaction exposure by using forward market is |
| A. | Difference between agreed rate and spot rate at the time of entering into contract. |
| B. | Difference between agreed rate and spot rate on the due date of contract |
| C. | Forward premium / discount annualiz |
| Answer» C. Forward premium / discount annualiz | |
| 8. |
____________ means using short-term forward contracts to offset “paper” gainsand losses on the long-term assets and liabilities of foreign subsidiaries. |
| A. | Hedging transaction exposure |
| B. | Hedging balance-sheet exposure |
| C. | Hedging economic exposure |
| D. | Hedging cost exposure |
| Answer» C. Hedging economic exposure | |
| 9. |
To what extent is FDI permitted in the FTWZ? |
| A. | 50% |
| B. | 60% |
| C. | 75% |
| D. | 100% |
| Answer» B. 60% | |
| 10. |
The market where long term securities (shares, bonds, etc) are bought and sold iscalled as |
| A. | money market |
| B. | capital market |
| C. | primary market |
| D. | secondary market |
| Answer» C. primary market | |
| 11. |
Leading refers to |
| A. | Advancing of receivables. |
| B. | Advancing of payables. |
| C. | Advancing payments either receivables or payables. |
| D. | Advancing of receivables and delaying of payables. |
| Answer» D. Advancing of receivables and delaying of payables. | |
| 12. |
The maxim 'buy low; sell high' is applicable for |
| A. | Quotation of Pound-Sterling. |
| B. | Indirect rates. |
| C. | Direct rates. |
| D. | USDOLLARS. |
| Answer» D. USDOLLARS. | |
| 13. |
A firm operating in India cannot hedge its foreign currency exposure through |
| A. | Forwards. |
| B. | Futures. |
| C. | Options. |
| D. | None of the above. |
| Answer» C. Options. | |
| 14. |
A forward rate agreement helps the user to |
| A. | Fix the cost of borrowing. |
| B. | Reduce the cost of borrowing. |
| C. | Cover exchange risk |
| D. | Avail tax benefit |
| Answer» B. Reduce the cost of borrowing. | |
| 15. |
Where an option is out of the money |
| A. | The premium will be refunded to the buyer. |
| B. | The buyer is unable to take up the contract |
| C. | The seller gains to the extent of the premium receiv |
| Answer» D. | |
| 16. |
A multinational company that is faced with mild interference up to completeconfiscation of all assets is encountering__________. |
| A. | translation risk exposure |
| B. | transactions risk exposure |
| C. | political risk exposure |
| D. | a very bad day |
| Answer» D. a very bad day | |
| 17. |
Funds that cannot be remitted from the subsidiary to the parent due to hostgovernment restrictions is known as |
| A. | Close – ended funds |
| B. | Open – ended funds |
| C. | Blocked funds |
| D. | Restricted funds |
| Answer» D. Restricted funds | |
| 18. |
The swap arrangement where principal amounts are not exchanged, but periodicalpayments will be a |
| A. | Currency swap |
| B. | Cross currency interest swap |
| C. | Interest rate swap. |
| D. | Non-Financial swap. |
| Answer» D. Non-Financial swap. | |
| 19. |
FOB stands for |
| A. | Freight on board |
| B. | Free on board |
| C. | Flexible on board |
| D. | Future on board |
| Answer» C. Flexible on board | |
| 20. |
_______________ is a process of taking advantage of differentials in interest ratesof two currencies while eliminating exchange risk. |
| A. | Hedging |
| B. | Insurance |
| C. | Covered – Interest Arbitrage |
| D. | Exposure |
| Answer» D. Exposure | |
| 21. |
The __________ refers to the orderly relationship between spot and forwardcurrency exchange rates and the rates of interest between countries. |
| A. | one-price rule |
| B. | interest-rate parity |
| C. | purchasing-power parity |
| D. | exchange-power parity |
| Answer» C. purchasing-power parity | |
| 22. |
Hedging with options is best recommended for |
| A. | Hedging receivables. |
| B. | Hedging payables. |
| C. | Hedging contingency exposures. |
| D. | Hedging foreign currency loans |
| Answer» D. Hedging foreign currency loans | |
| 23. |
The bond that does not pay any interest and issued at a price lower than itsreimbursement value is called as |
| A. | Zero coupon bond |
| B. | Coupon bond |
| C. | Euro bond |
| D. | Domestic bond |
| Answer» B. Coupon bond | |
| 24. |
The bond markets are important because |
| A. | they are easily the most widely followed financial markets in the United States. |
| B. | they are the markets where foreign exchange rates are determined. |
| C. | they are the markets where interest rates are determin |
| Answer» C. they are the markets where interest rates are determin | |
| 25. |
. IMF augments its resources by borrowing under |
| A. | General arrangements to borrow |
| B. | New arrangements to borrow |
| C. | Trust funds |
| D. | All the above |
| Answer» E. | |
| 26. |
The Foreign Trade policy was first introduced in the year: |
| A. | 1981. |
| B. | 1947. |
| C. | 1992. |
| D. | 2000. |
| Answer» D. 2000. | |
| 27. |
What are the forms of assistance that the World Bank provides to its members? |
| A. | Technical and financial |
| B. | Political and financial |
| C. | Political and economic |
| D. | Technical and military |
| Answer» B. Political and financial | |
| 28. |
Agreement to exchange one currency for another at a specified exchange rate anddate is |
| A. | Currency swap |
| B. | Swap points |
| C. | Currency put option |
| D. | Currency call option |
| Answer» B. Swap points | |
| 29. |
For the balance kept in the margin account for futures |
| A. | Interest is paid at riskless rate. |
| B. | Interest is paid at LIBOR rate |
| C. | Interest is paid for the surplus over the required minimum. |
| D. | No interest is paid. |
| Answer» E. | |
| 30. |
The EU is the major provider of FDI for: |
| A. | Eastern Europe. |
| B. | South America. |
| C. | developing Asian countries |
| D. | all of these regions. |
| Answer» D. all of these regions. | |
| 31. |
Increasing interest rates |
| A. | discourage corporate investments. |
| B. | . discourage individuals from saving. |
| C. | encourage corporate expansion. |
| D. | encourage corporate borrowing. |
| Answer» E. | |
| 32. |
The strike price under an option is |
| A. | The price at which the option is auctioned |
| B. | The exchange rate which the currencies are agreed to be exchanged under the contract |
| C. | . Lower of the market price and the agreed price |
| D. | None of the above |
| Answer» C. . Lower of the market price and the agreed price | |
| 33. |
The demand for domestic currency in the foreign exchange market is indicated by thefollowing transactions in balance of payment |
| A. | Export of goods and services |
| B. | Import of goods and services. |
| C. | Export of goods and services and capital inflows. |
| D. | Import of goods and services and capital outflows. |
| Answer» D. Import of goods and services and capital outflows. | |
| 34. |
Quotation where the price of one unit of foreign currency is given in terms of localcurrency units is called as |
| A. | Indirect quotation |
| B. | . Direct quotation |
| C. | Open-ended quotation |
| D. | Close – ended quotation |
| Answer» C. Open-ended quotation | |
| 35. |
FRAs can’t+ be used for |
| A. | Hedging. |
| B. | Arbitraging. |
| C. | Speculating. |
| D. | Any of the Above. |
| Answer» E. | |
| 36. |
The spot exchange rate __________. |
| A. | is the rate today for exchanging one currency for another for immediate delivery |
| B. | is the rate today for exchanging one currency for another at a specific future date |
| C. | is the rate today for exchanging one currency for another at a specific location on a specific future date |
| D. | is the rate today for exchanging one currency for another at a specific location for immediate delivery |
| Answer» B. is the rate today for exchanging one currency for another at a specific future date | |
| 37. |
Derivatives can be used by an exporter for managing |
| A. | currency risk. |
| B. | cargo risk. |
| C. | credit risk. |
| D. | business risk. |
| Answer» D. business risk. | |
| 38. |
Difference between buying and selling rates in an exchange rate or interest ratequotation is known as |
| A. | Strike price |
| B. | Spread |
| C. | Swap points |
| D. | Spot rate |
| Answer» C. Swap points | |
| 39. |
International Development Association established in |
| A. | 1970 |
| B. | 1962 |
| C. | 1960 |
| D. | 1958 |
| Answer» D. 1958 | |
| 40. |
The total value of the products and services marketed by a nation is called: |
| A. | Gross Domestic Product. |
| B. | Gross National Product. |
| C. | National Income |
| D. | Per capita income. |
| Answer» E. | |
| 41. |
The forward market is especially well-suited to offer hedging protection against |
| A. | translation risk exposure. |
| B. | transactions risk exposure. |
| C. | political risk exposure. |
| D. | taxation |
| Answer» D. taxation | |
| 42. |
The following method does not result in sharing of an exchange risk betweenimporter and exporter |
| A. | Denominating in a third currency. |
| B. | Denominating partly in importer's currency and partly in exporter's currency. |
| C. | Entering a exchange rate clause in the contract. |
| D. | Denominating in domestic currency. |
| Answer» E. | |
| 43. |
The __________ is especially well suited to offer hedging protection againsttransactions risk exposure. |
| A. | forward market |
| B. | spot market |
| C. | transactions market |
| D. | inflation-rate market |
| Answer» B. spot market | |
| 44. |
The major players in the foreign exchange market are |
| A. | commercial banks. |
| B. | corporate. |
| C. | exchange brokers. |
| D. | central bank of the country and the Central Government |
| Answer» D. central bank of the country and the Central Government | |
| 45. |
. A country has a negative balance of trade. It means the balance of payments oncurrent account |
| A. | Should also be negative |
| B. | Should be positive |
| C. | May be positive or negative |
| D. | Should be same as balance of trade |
| Answer» D. Should be same as balance of trade | |
| 46. |
The forward exchange rate __________. |
| A. | is the rate today for exchanging one currency for another for immediate delivery |
| B. | is the rate today for exchanging one currency for another at a specific future date |
| C. | is the rate today for exchanging one currency for another at a specific location on a specific future date |
| D. | is the rate today for exchanging one currency for another at a specific location for immediate delivery |
| Answer» C. is the rate today for exchanging one currency for another at a specific location on a specific future date | |
| 47. |
The price at which a market maker is prepared to buy (a currency) or borrow (money) is termed as |
| A. | spot rate |
| B. | bid rate |
| C. | ask price |
| D. | forward rate |
| Answer» C. ask price | |
| 48. |
The primary component of the current account is the: |
| A. | balance of trade. |
| B. | balance of money market flows |
| C. | balance of capital market flows |
| D. | unilateral transfers. |
| Answer» C. balance of capital market flows | |
| 49. |
Long– term securities denominated in two currencies is called as |
| A. | Euro bond |
| B. | Dual – currency bonds |
| C. | Foreign bonds |
| D. | Euro dollar deposit. |
| Answer» C. Foreign bonds | |
| 50. |
Translation loss may occur when |
| A. | Exposed assets exceed exposed liabilities and foreign currency appreciates. |
| B. | Exposed assets exceed exposed liabilities and foreign currency depreciates. |
| C. | The subsidiary's balance sheet shows a loss. |
| D. | The foreign currency depreciates. |
| Answer» C. The subsidiary's balance sheet shows a loss. | |