Question 1

An option to buy is called a _______

Accepted Answer

A)  Put Option
B)  Bid Option
C)  Call Option
D)  Preemptive Option C

Question 2

Indirect Quotation is also known as ___________

Accepted Answer

A)  European Quotation
B)  Indian Quotation
C)  American Quotation
D)  Euro Quotation C

Question 3

Default risk is higher in which one of the following?

Accepted Answer

A)  Forward Contracts
B)  Futures Contracts
C)  Equal in both a and b
D)  None of the Above A

Question 4

Part of Profit transferred to General Reserve will be shown on the debit side of _________

Accepted Answer

A)  Balance Sheet
B)  Funds Flow
C)  Cash Flow
D)  Adjusted Profit and Loss Account

Question 5

The spread in a two way quotation is affected by

Accepted Answer

A)  Currency involved
B)  The volume of business
C)  Market sentiments/rumours about the currency
D)  All of the above

Question 6

If there are no costs or other barriers associated with the movement of goods or services across countries, the price of each product should be the same in each country, after making appropriate currency conversions. It is called ____________ in Economics.

Accepted Answer

A)  Law of Similar Mortgage Rate
B)  Law of Similar Labour Rules
C)  Law of One Price
D)  Law of One type of Manufacturing

Question 7

The Rate of Exchange applicable for delivery of Foreign Exchange at a future date is called ______

Accepted Answer

A)  Spot Rate
B)  Current Rate
C)  Forward Rate
D)  Expected Rate

Question 8

Is it necessary for an organization to own 100 % of an overseas firm for its investment to be classified as an FDI?

Accepted Answer

A) True 
 B)False

Question 9

Establishment of new plants and offices overseas by MNC as a mean of FDI is

Accepted Answer

A)  A Greenfield Investment
B)  A Brownfield Investment
C)  Vertical FDI
D)  None of the Above

Question 10

When an Option can be exercised on any date up to maturity, it is called

Accepted Answer

A)  A Flexible Option
B)  An European Option
C)  A British Option
D)  An American Option

Question 11

A projected Funds Flow Statement informs the management about

Accepted Answer

A)  Future Financial Stringency
B)  Future Requirement of Funds
C)  Funds Position of the Company
D)  All of the above

Question 12

There are basically two approaches to find out NPV of a foreign based project's capital budgeting exercise. Which are those two?

Accepted Answer

A)  Home Currency and foreign currency approaches
B)  One Currency and Multi Currency Approaches
C)  Home Country and Foreign Country Approaches
D)  None of the Above

Question 13

Which one of the following is NOT a Foreign Exchange Risk Management Technique

Accepted Answer

A)  Forward Contract
B)  Futures Contract
C)  External Commercial Borrowing
D)  Currency Options

Question 14

Funds Flow Statement can be prepared in which form?

Accepted Answer

A)  Vertical Form
B)  Horizontal Form
C)  Complex Form
D)  Both a and b

Question 15

The act of arbitrage that involves three foreign currencies involving three different foreign exchange market is called __________

Accepted Answer

A)  Geographical Arbitrage
B)  Triangular Arbitrage
C)  Cross Arbitrage
D)  None of the Above

Question 16

'Speculators' in the market _______________

Accepted Answer

A)  Need foreign currency to pay their import obligations
B)  Invest in securities of foreign country
C)  Try to profit from exchange rate movements
D)  None of the Above

Question 17

Funds flow statement being based on ________________, which is of limited utility for future planning is a limitation of funds flow statement.

Accepted Answer

A)  Historical Facts
B)  Traditional Facts
C)  Hypothetical Facts
D)  Current Facts

Question 18

A financial instrument that provides its holder a right but no obligation to buy or sell a pre-specified amount of a foreign currency at a pre-determined rate is referred to as ____________

Accepted Answer

A)  A Promise
B)  An Option
C)  An Obligation
D)  A Swap

Question 19

Non-cash adjustments like Depreciation, Preliminary Expenses and Goodwill Written off are shown on the debit side of which account?

Accepted Answer

A)  Balance Sheet
B)  Funds Flow Statement
C)  Adjusted Profit and Loss Account
D)  Working Capital Statement

Question 20

Which one of the following is NOT a theory of International Parity Relationship

Accepted Answer

A)  Purchasing Power Parity
B)  Covered Interest Arbitrage and Interest Rate Parity
C)  Money Market Hedge Theory
D)  Expectations Theory

Exam 6: International Finance and Investment