Question 1

The __________ refers to the orderly relationship between spot and forward currency exchange rates and the rates of interest between countries.

Accepted Answer

A) one-price rule 
B) interest-rate parity 
C) purchasing-power parity 
D) exchange-power parity 
A) one-price rule 
B) interest-rate parity 
C) purchasing-power parity 
D) exchange-power parity B

Question 2

Translation loss may occur when

Accepted Answer

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. 
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. B

Question 3

A positive exposure will lead to when the currency of the subsidiary company appreciates.

Accepted Answer

A) Translation gain. 
B) Translation loss 
C) Exchange gain. 
D) Exchange loss. 
A) Translation gain. 
B) Translation loss 
C) Exchange gain. 
D) Exchange loss. A

Question 4

For the purpose of translations, current rate refers to

Accepted Answer

A) The rate current at the time of transaction. 
B) The rate prevailing on the date of the balance sheet. 
C) The rate prevailing on the date of preparation of the balance sheet. 
D) The spot rate 
A) The rate current at the time of transaction. 
B) The rate prevailing on the date of the balance sheet. 
C) The rate prevailing on the date of preparation of the balance sheet. 
D) The spot rate

Question 5

The translation exposure is positive when

Accepted Answer

A) Exposed assets are lesser than exposed liabilities. 
B) Exposed liabilities are lesser than exposed assets. 
C) The exposure results in profit. 
D) There are no liabilities. 
A) Exposed assets are lesser than exposed liabilities. 
B) Exposed liabilities are lesser than exposed assets. 
C) The exposure results in profit. 
D) There are no liabilities.

Question 6

Foreign currency exposures can be avoided by

Accepted Answer

A) Entering into forward contracts. 
B) Denominating the transaction in domestic currency. 
C) Exposure netting 
D) Maintaining foreign currency accounts. 
A) Entering into forward contracts. 
B) Denominating the transaction in domestic currency. 
C) Exposure netting 
D) Maintaining foreign currency accounts.

Question 7

FRAs can't+ be used for

Accepted Answer

A) Hedging. 
B) Arbitraging. 
C) Speculating. 
D) Any of the Above. 
A) Hedging. 
B) Arbitraging. 
C) Speculating. 
D) Any of the Above.

Question 8

A multinational company that is faced with mild interference up to complete confiscation of all assets is encountering__________.

Accepted Answer

A) translation risk exposure 
B) transactions risk exposure 
C) political risk exposure 
D) a very bad day 
A) translation risk exposure 
B) transactions risk exposure 
C) political risk exposure 
D) a very bad day

Question 9

An interest rate cap is a series of

Accepted Answer

A) Call options 
B) Put options. 
C) Periodical payments 
D) Differential payments. 
A) Call options 
B) Put options. 
C) Periodical payments 
D) Differential payments.

Question 10

Economic exposure does not deal with

Accepted Answer

A) Changes in real exchange rates. 
B) Future cash flow of the firm 
C) Expected exchange rate changes. 
D) None of the above. 
A) Changes in real exchange rates. 
B) Future cash flow of the firm 
C) Expected exchange rate changes. 
D) None of the above.

Question 11

A firm operating in India cannot hedge its foreign currency exposure through

Accepted Answer

A) Forwards. 
B) Futures. 
C) Options. 
D) None of the above. 
A) Forwards. 
B) Futures. 
C) Options. 
D) None of the above.

Question 12

The following method cannot be used for managing translation exposure

Accepted Answer

A) Forward contract. 
B) Option contract 
C) Exposure netting. 
D) Leading and lagging. 
A) Forward contract. 
B) Option contract 
C) Exposure netting. 
D) Leading and lagging.

Question 13

Zero coupon swap is an arrangement

Accepted Answer

A) Involving exchange of zero coupon bonds. 
B) Whereby only one party makes payment periodically. 
C) Whereby one of the counter-parties makes payment in lump sum instead of periodically. 
D) None of the above. 
A) Involving exchange of zero coupon bonds. 
B) Whereby only one party makes payment periodically. 
C) Whereby one of the counter-parties makes payment in lump sum instead of periodically. 
D) None of the above.

Question 14

The following method does not result in sharing of an exchange risk between importer and exporter

Accepted Answer

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. 
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.

Question 15

Translation loss is

Accepted Answer

A) A loss to the parent company. 
B) A loss to the subsidiary company. 
C) A notional loss. 
D) An actual loss. 
A) A loss to the parent company. 
B) A loss to the subsidiary company. 
C) A notional loss. 
D) An actual loss.

Question 16

Translation exposure arises in respect of items translated at

Accepted Answer

A) Current rate. 
B) Historical rate. 
C) Average rate. 
D) All of the above. 
A) Current rate. 
B) Historical rate. 
C) Average rate. 
D) All of the above.

Question 17

The acronym CIRCUS stands for

Accepted Answer

A) Current Interest Rate Swap. 
B) Circular Currency Swap. 
C) Combined Income Range Currency Swap. 
D) Combined Interest Rate and Currency Swap. 
A) Current Interest Rate Swap. 
B) Circular Currency Swap. 
C) Combined Income Range Currency Swap. 
D) Combined Interest Rate and Currency Swap.

Question 18

The __________ is especially well suited to offer hedging protection against transactions risk exposure.

Accepted Answer

A) forward market 
B) spot market 
C) transactions market 
D) inflation-rate market 
A) forward market 
B) spot market 
C) transactions market 
D) inflation-rate market

Question 19

The true cost of hedging transaction exposure by using forward market is

Accepted Answer

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 
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

Question 20

This is not established method of translation

Accepted Answer

A) Current rate method. 
B) Monetary/Non-monetary method. 
C) Temporary meth 
D) D. Current/Non-current method 
A) Current rate method. 
B) Monetary/Non-monetary method. 
C) Temporary meth 
D) D. Current/Non-current method

The __________ refers to the orderly relationship between spot and forward currency exchange rates and the rates of interest between countries.

Translation loss may occur when

A positive exposure will lead to when the currency of the subsidiary company appreciates.

For the purpose of translations, current rate refers to

The translation exposure is positive when

Foreign currency exposures can be avoided by

FRAs can't+ be used for

A multinational company that is faced with mild interference up to complete confiscation of all assets is encountering__________.

An interest rate cap is a series of

Economic exposure does not deal with

A firm operating in India cannot hedge its foreign currency exposure through

The following method cannot be used for managing translation exposure

Zero coupon swap is an arrangement

The following method does not result in sharing of an exchange risk between importer and exporter

Translation loss is

Translation exposure arises in respect of items translated at

The acronym CIRCUS stands for

The __________ is especially well suited to offer hedging protection against transactions risk exposure.

The true cost of hedging transaction exposure by using forward market is

This is not established method of translation

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

International Trade and Finance Terminology and Concepts

Foreign Exchange and International Finance

Foreign Trade and Financial Considerations

Filters

Exam 2: Foreign Exchange and Hedging Exposures

The __________ refers to the orderly relationship between spot and forward currency exchange rates and the rates of interest between countries.

Translation loss may occur when

A positive exposure will lead to when the currency of the subsidiary company appreciates.

For the purpose of translations, current rate refers to

The translation exposure is positive when

Foreign currency exposures can be avoided by

FRAs can't+ be used for

A multinational company that is faced with mild interference up to complete confiscation of all assets is encountering__________.

An interest rate cap is a series of

Economic exposure does not deal with

A firm operating in India cannot hedge its foreign currency exposure through

The following method cannot be used for managing translation exposure

Zero coupon swap is an arrangement

The following method does not result in sharing of an exchange risk between importer and exporter

Translation loss is

Translation exposure arises in respect of items translated at

The acronym CIRCUS stands for

The __________ is especially well suited to offer hedging protection against transactions risk exposure.

The true cost of hedging transaction exposure by using forward market is

This is not established method of translation

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

International Trade and Finance Terminology and Concepts

Foreign Exchange and International Finance

Foreign Trade and Financial Considerations

Filters