Question 1

The strike price under an option is

Accepted Answer

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 
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 B

Question 2

Determination of forward rates is explained by

Accepted Answer

A) Uncovered interest arbitrage. 
B) Purchasing power parity theory. 
C) Demand and Supply for spot currency. 
D) None of the above. 
A) Uncovered interest arbitrage. 
B) Purchasing power parity theory. 
C) Demand and Supply for spot currency. 
D) None of the above. D

Question 3

The demand for domestic currency in the foreign exchange market is indicated by the following transactions in balance of payment

Accepted Answer

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. 
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. C

Question 4

Hedging transaction is indicated by

Accepted Answer

A) Transactions in odd amounts 
B) Presentation of documentary support. 
C) Frequency of such transactions. 
D) None of the above. 
A) Transactions in odd amounts 
B) Presentation of documentary support. 
C) Frequency of such transactions. 
D) None of the above.

Question 5

Where an option is out of the money

Accepted Answer

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 
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

Question 6

The following statement with respect to currency option is wrong

Accepted Answer

A) Call option will be used by exporters. 
B) Put option gives the buyer the right to sell the foreign currency. 
C) Foreign currency- Rupee option is available in India. 
D) An American option can be executed on any day during its currency. 
A) Call option will be used by exporters. 
B) Put option gives the buyer the right to sell the foreign currency. 
C) Foreign currency- Rupee option is available in India. 
D) An American option can be executed on any day during its currency.

Question 7

If PPP holds

Accepted Answer

A) The nominal exchange rate will not change. 
B) The real exchange rate will not change. 
C) Both real and nominal exchange rates will not change. 
D) Both real and nominal exchange will move together 
A) The nominal exchange rate will not change. 
B) The real exchange rate will not change. 
C) Both real and nominal exchange rates will not change. 
D) Both real and nominal exchange will move together

Question 8

India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to

Accepted Answer

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. 
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.

Question 9

For the balance kept in the margin account for futures

Accepted Answer

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. 
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.

Question 10

An option at-the-money when

Accepted Answer

A) The strike price is greater than the spot price, in the case of a call option. 
B) The strike price is greater than spot price, in the case of a put option. 
C) The option has a ready market. 
D) The strike price and the spot price are the same. 
A) The strike price is greater than the spot price, in the case of a call option. 
B) The strike price is greater than spot price, in the case of a put option. 
C) The option has a ready market. 
D) The strike price and the spot price are the same.

Question 11

Banks permitted to run option book is required to fulfill the condition of

Accepted Answer

A) Continuous profit for at least three years. 
B) Minimum CRAR of 9%. 
C) Minimum net worth of Rs.200 crores. 
D) All the above. 
A) Continuous profit for at least three years. 
B) Minimum CRAR of 9%. 
C) Minimum net worth of Rs.200 crores. 
D) All the above.

Question 12

The effect of speculation on exchange rate is

Accepted Answer

A) It causes violent fluctuations in exchange rate. 
B) It aggravates the market trends. 
C) Either or both of A and B. 
D) Neither A nor B. 
A) It causes violent fluctuations in exchange rate. 
B) It aggravates the market trends. 
C) Either or both of A and B. 
D) Neither A nor B.

Question 13

For contingency exposure of foreign exchange, the best derivative that can be used to hedge is

Accepted Answer

A) Forwards. 
B) Futures. 
C) Options. 
D) Swaps. 
A) Forwards. 
B) Futures. 
C) Options. 
D) Swaps.

Question 14

The forward US dollar is quoted at premium against Indian Rupees. This implies

Accepted Answer

A) Money market rates are higher in India than in the US. 
B) Money market rates are lower in India than in the US. 
C) Market yield is higher in US than in India. 
D) Dollar has a better value than Indian Rupee. 
A) Money market rates are higher in India than in the US. 
B) Money market rates are lower in India than in the US. 
C) Market yield is higher in US than in India. 
D) Dollar has a better value than Indian Rupee.

Question 15

Indirect rate in foreign exchange means

Accepted Answer

A) The rate quoted with the units of home currency kept fixed. 
B) The rate quoted with units of foreign currency kept fixed. 
C) The rate quoted in terms of a third currency. 
D) None of the above. 
A) The rate quoted with the units of home currency kept fixed. 
B) The rate quoted with units of foreign currency kept fixed. 
C) The rate quoted in terms of a third currency. 
D) None of the above.

Question 16

The maxim 'buy low; sell high' is applicable for

Accepted Answer

A) Quotation of Pound-Sterling. 
B) Indirect rates. 
C) Direct rates. 
D) USDOLLARS. 
A) Quotation of Pound-Sterling. 
B) Indirect rates. 
C) Direct rates. 
D) USDOLLARS.

Question 17

Maintaining a foreign currency account is helpful to

Accepted Answer

A) Avoid transaction cost. 
B) Avoid exchange risk. 
C) Avoid both transaction cost and exchange risk. 
D) Avoid exchange risk and domestic currency depreciation 
A) Avoid transaction cost. 
B) Avoid exchange risk. 
C) Avoid both transaction cost and exchange risk. 
D) Avoid exchange risk and domestic currency depreciation

Question 18

According to International Fisher Effect

Accepted Answer

A) Forward Premium for a currency indicates its depreciation in future. 
B) Forward Premium for a currency indicates its appreciation in future. 
C) Forward Rates and spot rates are not linked 
D) Forward Rates are based on expected future spot rates. 
A) Forward Premium for a currency indicates its depreciation in future. 
B) Forward Premium for a currency indicates its appreciation in future. 
C) Forward Rates and spot rates are not linked 
D) Forward Rates are based on expected future spot rates.

Question 19

Cash and carry arbitrage explains the determination of

Accepted Answer

A) Forward Rates for currencies. 
B) Spot rates for currencies. 
C) Both forward and spot rates for currencies. 
D) Penalty for non-execution of forward contracts. 
A) Forward Rates for currencies. 
B) Spot rates for currencies. 
C) Both forward and spot rates for currencies. 
D) Penalty for non-execution of forward contracts.

Question 20

India's foreign exchange rate system is?

Accepted Answer

A) Free float 
B) Managed float 
C) Fixed . 
D) Fixed target of band 
A) Free float 
B) Managed float 
C) Fixed . 
D) Fixed target of band

The strike price under an option is

Determination of forward rates is explained by

The demand for domestic currency in the foreign exchange market is indicated by the following transactions in balance of payment

Hedging transaction is indicated by

Where an option is out of the money

The following statement with respect to currency option is wrong

If PPP holds

India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to

For the balance kept in the margin account for futures

An option at-the-money when

Banks permitted to run option book is required to fulfill the condition of

The effect of speculation on exchange rate is

For contingency exposure of foreign exchange, the best derivative that can be used to hedge is

The forward US dollar is quoted at premium against Indian Rupees. This implies

Indirect rate in foreign exchange means

The maxim 'buy low; sell high' is applicable for

Maintaining a foreign currency account is helpful to

According to International Fisher Effect

Cash and carry arbitrage explains the determination of

India's foreign exchange rate system is?

Foreign Exchange and Hedging Exposures

International Trade and Finance Terminology and Concepts

Foreign Exchange and International Finance

Foreign Trade and Financial Considerations

Filters

Exam 1: Foreign Currency Accounts, Exchange Rates, and Derivatives: Exploring the World of Foreign Exchange

The strike price under an option is

Determination of forward rates is explained by

The demand for domestic currency in the foreign exchange market is indicated by the following transactions in balance of payment

Hedging transaction is indicated by

Where an option is out of the money

The following statement with respect to currency option is wrong

If PPP holds

India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to

For the balance kept in the margin account for futures

An option at-the-money when

Banks permitted to run option book is required to fulfill the condition of

The effect of speculation on exchange rate is

For contingency exposure of foreign exchange, the best derivative that can be used to hedge is

The forward US dollar is quoted at premium against Indian Rupees. This implies

Indirect rate in foreign exchange means

The maxim 'buy low; sell high' is applicable for

Maintaining a foreign currency account is helpful to

According to International Fisher Effect

Cash and carry arbitrage explains the determination of

India's foreign exchange rate system is?

Foreign Exchange and Hedging Exposures

International Trade and Finance Terminology and Concepts

Foreign Exchange and International Finance

Foreign Trade and Financial Considerations

Filters