Deck 4: Foreign Exchange and International Finance

Question 1

____________ means using short-term forward contracts to offset "paper" gains and 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 1

Hedging balance-sheet exposure

Question 2

Which exchange rate theory focuses on the inflation - exchange rate relationship?

A)Interest rate parity
B)International Fisher Effect
C)Purchasing power parity
D)Traditional Model

Answer 2

Purchasing power parity

Question 3

The exchange rate prevailing at a financial reporting date

A)Closing exchange rate
B)Opening exchange rate
C)Fixed exchange rate
D)Fluctuating exchange rate

Answer 3

Closing exchange rate

Question 4

The bank account of a non-resident of a country, where the amount of currency in the account cannot be transferred to another country is called as

A)Nostro account
B)Blocked Account
C)Foreign account
D)Capital account

Question 5

Funds that cannot be remitted from the subsidiary to the parent due to host government restrictions is known as

A)Close - ended funds
B)Open - ended funds
C)Blocked funds
D)Restricted funds

Question 6

Exchange rate between currency A and currency B, given the values of currencies A and B with respect to a third currency is known as

A)Golden standard
B)Flexible exchange rate
C)Fixed exchange rate
D)Cross exchange rate A

Question 7

Agreement to exchange one currency for another at a specified exchange rate and date is

A)Currency swap
B)Swap points
C)Currency put option
D)Currency call option

Question 8

Long- term securities denominated in two currencies is called as

A)Euro bond
B)Dual - currency bonds
C)Foreign bonds
D)Euro dollar deposit.

Question 9

Foreign exchange transactions involve monetary transactions

A)among residents of the same country
B)between residents of two countries only
C)between residents of two or more countries
D)among residents of at least three countries

Question 10

A foreign currency account maintained by a bank abroad is its

A)nostro account
B)vostro account
C)loro account
D)foreign bank account

Question 11

Non-resident Bank Accounts' refer to

A)nostro account
B)vostro account
C)accounts opened in offshore centers
D)foreign bank account

Question 12

The number of nostro accounts that can be maintained by a bank in a particular currency is

A)One
B)not exceeding three
C)minimum two
D)no such limit

Question 13

Full fledged money changers are authorized to undertake

A)only sale transactions
B)only purchase transactions
C)all types of foreign exchange transactions
D)purchase and sale of foreign currency notes, coins and travelers cheques

Question 14

. IMF augments its resources by borrowing under

A)General arrangements to borrow
B)New arrangements to borrow
C)Trust funds
D)All the above

Question 15

The value of SDR is

A)equivalent to one US dollar
B)based on value of gold
C)average of the value of US dollar and Euro
D)based on basket of five currencies

Question 16

The term World Bank refers to

A)IBRD
B)IDA
C)Both IBRD and IDA
D)IFC

Question 17

. IBRD lending is not available for

A)middle income countries
B)low income countries
C)multilateral agencies
D)developed countries

Question 18

The eligibility to borrow from IDA is based on

A)relative poverty
B)lack of creditworthiness to borrow on market terms
C)good policy performance
D)all the above

Question 19

Financial products of IFC does not include

A)loans
B)equity participation
C)risk management products
D)none of the above

Question 20

MIGA stands for

A)Multilateral Investment Guarantee Agency
B)Multilateral Institutional and Government Agencies
C)Mutual Interest Guaranteeing Agencies
D)Mutual Institutional and Government Agencies

Question 21

Guarantee provided by MIGA to private investors covers risk of

A)transfer restriction
B)expropriation
C)breach of contract
D)all the above

Question 22

The activities of ADB include

A)project financing
B)guaranteeing loans
C)both a and b
D)risk management products

Question 23

A 'credit' in balance of payments indicates

A)Accumulation of bank balances abroad
B)Foreign direct investment received into the country
C)Earning of foreign exchange by the country
D)Earning of foreign exchange or incurring of liability abroad or decrease in asset abroad

Question 24

The current account of balance of payments does not include

A)Trade in goods
B)Trade in services
C)Income on investments
D)None of the above