International Finance And Treasury MCQ

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• Which of the following statement is correct?<br>1. The interest rate in international credit market is depended on the LIBOR rate.<br>2. LIBOR varies in countries due to difference in the supply demand of a particular currency.<br>3. LIBOR is a fixed interest rate at which banks give loans to each other.
  ক

  Both 2 and 3

  খ

  Both 1 and 3

  গ

  Both 1 and 2

  ঘ

  All of the above
• Which of the following is not a feature of IFM?
  ক

  IFM faces foreign exchange exposure

  খ

  IFM works in perfect market situations

  গ

  IFM deals with expanding operation sets of the company

  ঘ

  IFM incorporates political risk
• The given statements are related to financial derivatives. Choose the correct answer for the statements being correct or incorrect.<br>Statement I A speculator will gain, if he sells foreign currency under a forward contract, when the spot price is higher than the forward price.<br>Statement II In currency futures, intra currency spread exists when a speculator buys/sells the same currency for two delivery dates.
  ক

  Statement I is correct, but Statement II is incorrect

  খ

  Statement II is correct, but Statement I is incorrect

  গ

  Both statement are correct

  ঘ

  Both statements are incorrect
• In international financial environment for settlement of debts there is a practice known as netting practice. The netting practice pertains to which one of the following?
  ক

  A practice by which subsidiaries of affiliates within the TNC network settle inter-subsidiary debts for the net amount owed during the post-transaction period

  খ

  A practice involving the sale of export accounts receivable to a third party within the TNC network

  গ

  A practice of purchasing an account receivable where the credit term exceeds the permissible limit within the TNC network

  ঘ

  Where the difference between international transaction of gross capital account receivables and payables are settled against current account receivables and payables
• If purchasing power parity were to hold even in the short run, then
  ক

  real exchange rates should tend to decrease over time

  খ

  quoted nominal exchange rates should be stable over time

  গ

  real exchange rates should tend to increase over time

  ঘ

  real exchange rates should be stable over time
• Match the correct combination for Assertion andReason as argued by Shapiro and Timan.<br>Assertion (A) Management decisions to insure or hedge asset appear at best neutral mutation.<br>Reason (R) The price of systematic risk is identical for all the participants in the financialmarket.
  ক

  (A) is correct, but (R) is incorrect

  খ

  (A) is incorrect, but (R) is correc

  গ

  Both (A) and (R) are incorrect

  ঘ

  Both (A) and (R) are correct
• If there is a fall in the external value of a currency
  ক

  may cause an outward shift in the demand for the currency

  খ

  may cause an inward shift in the supply for the currency

  গ

  may lead to a movement along the demand curve for a currency

  ঘ

  may be due to an increase in demand for the country's exports
• Which of the following statement is correct?<br>Statement I In currency quotation, the first currency is the base Currency and the second currency is known as the quoted currency.<br>Statement II A currency pair is generally represented by using a hyphen or an oblique.
  ক

  Both statements are correct

  খ

  Both statements are incorrect

  গ

  Statement I is correct, but Statement II is incorrect

  ঘ

  Statement II is correct, but Statement I is incorrect
• IN the statement, INR/USD: 1.1250/1.1251, which of the following represent bid quote?<br>1. 1.1250<br>2. 1.1252<br>3. 1.1251-1.1250
  ক

  Only statement 1 is correct

  খ

  Only statement 1 is correct

  গ

  Both statements 1 and 3 are correct

  ঘ

  Both statements 2 and 3 are correct
• Forward premium/differential depends upon
  ক

  currencies fluctuation

  খ

  interest rate differential between two countries

  গ

  demand and supply of two currencies

  ঘ

  stock market returns
• Which of the following is an interest rate derivative used for interest rate management?
  ক

  Swap

  খ

  Cap

  গ

  Floor

  ঘ

  All of the above
• If r_f and r_d are the interest rates of a foreign country and domestic country, respectively and if $${S_{\frac{F}{D}}}$$ and $${S_{\frac{F}{D}}}$$ are spot exchange rate and forward exchange rate between the countries F and D, the interest rate parity is indicated by
  ক

  $$\frac{{\left( {1 + {r_d}} \right)}}{{\left( {1 + {r_f}} \right)}} = \frac{{\frac{{{f_F}}}{D}}}{{\frac{{{S_F}}}{D}}}$$

  খ

  $$\frac{{\left( {1 + {r_f}} \right)}}{{\left( {1 + {r_d}} \right)}} = \frac{{\frac{{{S_F}}}{D}}}{{\frac{{{f_F}}}{D}}}$$

  গ

  $$\frac{{\left( {1 + {r_f}} \right)}}{{\left( {1 + {r_d}} \right)}} = \frac{{\frac{{{f_F}}}{D}}}{{\frac{{{S_F}}}{D}}}$$

  ঘ

  None of these
• A company that purpose to connect sellers and buyers of foreign currency-denominated bank deposits is entitled
  ক

  a wholesaler

  খ

  a broker

  গ

  a bank

  ঘ

  an investor
• Which of the following statement is true?<br>1. Rs. 63/USD is direct quote in India.<br>2. Rs. 63/USD is direct quote in USA.<br>3. 1 Rupee = 0.0158 dollars is indirect quote in India.<br>4. 1 Rupee = 0.0158 dollars in indirect quote in USA
  ক

  Both 1 and 2

  খ

  Both 2 and 3

  গ

  Both 1 and 3

  ঘ

  Both 2 and 4
• If inflation is expected to be 5% htgher in the United Kingdom than in Switzerland, then
  ক

  purchasing power parity would predict that the UK spot rate should decline by about 5%

  খ

  the theory of purchasing power parity would predict a drop in nominal interest rates in the United Kingdom of approximately 5%

  গ

  expectations theory would suggest that the spot exchange rates between the two countries should remain unchanged over the long run

  ঘ

  the efficient market hypothesis suggests that no predictions can be made under a system of freely floating rates
• Which of the statements is/are true?<br>1. American option allows the option buyer to exercise his rights at any point before the expiry date.<br>2. Under European options, the option buyer can exercise his right only on the date specified in the option and not before that.
  ক

  Only Statement 1 is correct

  খ

  Only Statement 2 is correct

  গ

  Both statements are correct

  ঘ

  Both statements are incorrect
• Which of the following statement is not aim of international capital market?
  ক

  Preserving hard currencies to finance trade deficits

  খ

  Reducing cost of money to borrowers

  গ

  Reducing investor risk

  ঘ

  Expanding money supply for borrowers
• Indicate correct codes for the following statements of Assertion (A) and Reason (R).<br>Assertion (A) The Global Managers must develop systems and policies that address floor price ceiling price and optimum price.<br>Reason (R) The Global Managers must be in line with global opportunities and constraints.
  ক

  (A) is correct, but (R) is not the right explanation of (A)

  খ

  Both (A) and (R) are correct, but (R) is not the right explanation of (A)

  গ

  Both (A) and (R) are correct, but (R) is the right explanation of (A)

  ঘ

  Both (A) and (R) are incorrect
• Which of the following option is correct?<br>Statement I Direct quote is when the foreign currency remains fixed and the home currency keeps on varying.<br>Statement II Quotations in direct quote are the ones that represent the value of a foreign currency in rupees (number of rupees per currency) are denoted as direct quotations.
  ক

  Both statements are correct

  খ

  Both statements are incorrect

  গ

  Statement I is correct and Statement II is incorrect

  ঘ

  Statement II is correct and Statement I is incorrect
• Which of the following statement is correct?<br>Statement I Indian MNC issuing bond denominated in Indian, which is sold to investors in USA is an example of European Bond.<br>Statement II If, an Indian firm issues dollar denominated bonds in Europe then it is a foreign bond.
  ক

  Both statements are correct

  খ

  Both statements are incorrect

  গ

  Statement I is correct, but Statement II is incorrect

  ঘ

  Statement II is correct, but Statement I is incorrect
• If one anticipates that the rupee is going to appreciate against the US dollar, one might speculate by . . . . . . . . rupee call options or . . . . . . . . rupee put options.
  ক

  buying, buying

  খ

  selling, buying

  গ

  selling, selling

  ঘ

  buying, selling
• Which of the following statements are correct?<br>Statement I In a forward market, the delivery and payment takes in future at a predetermined price. The prices are determined today, but the currencies are exchanged in future. Forward market comprises of trade of various instruments however, it is central to the exchange of foreign currency.<br>Statement II A forward market is an Over-the-Counter market which sets the rate for future delivery of currency, assets or financial securities.
  ক

  Both statements are correct

  খ

  Both statements are incorrect

  গ

  Statement I is correct and Statement II is incorrect

  ঘ

  Statement II is correct and Statement I is incorrect
• Under foreign exchange risk measurement, economic risk emerges out of which of the following?<br>1. Riskiness of company's foreign exchange positions resulting from its business activities.<br>2. The holding period or length of time over which the foreign exchange position is planned to be held.<br>3. A change in the present value of the future after tax cash flows due to changes in exchange rates.<br>4. The unit of currency to be used for the denomination of the value of currency.
  ক

  Only 1

  খ

  Both 1 and 2

  গ

  Only 3

  ঘ

  Only 4
• Exchange rate entail delivery of trade currency within two business days known as
  ক

  currency forward rate

  খ

  currency future rate

  গ

  current/spot rate

  ঘ

  bid rate
• Which of the following agencies does not facilitate international finance?
  ক

  IMF

  খ

  World Bank

  গ

  BIS

  ঘ

  IDBI
• Which of the following statement is true for BIS (Banks for International Settlement)?
  ক

  It seeks to promote global cooperation between countries. It also helps nations suffering from a financial crisis

  খ

  It is sometimes called 'the central bank of central banks' or 'the last resort lender'

  গ

  Both A and B are correct

  ঘ

  Both A and B are incorrect
• In India, the spot market settlement is done in
  ক

  1 day

  খ

  2 days

  গ

  4 days

  ঘ

  on that day
• The difference between a forward trade and a derivative may be attributed to which one of the following?
  ক

  The position of owning a good that one plans to sell in the future, the position of expecting to purchase the good in the future

  খ

  The parties agree to trade at a specified time in the future, at a price set now; derivative involves only payments of money, with no delivery of any commodity or assets

  গ

  The parties agree to trade at a future time, at a price to be decided in future; a derivative involves payments at a future specified time along with physical delivery of any commodity or asset

  ঘ

  The parties agree to trade and the amounts to be paid or received will not depend on the value at that time
• Three major reasons to study international finance include
  ক

  to understand a global economy

  খ

  to understand the impact of global finance on businesses

  গ

  to make intelligent personal decisions

  ঘ

  all of the above
• Which of the following organsations play an active role to prevent the contagion situation of crisis, such as the Greek Sovereign debt crisis?
  ক

  IMF

  খ

  World Bank

  গ

  WTO

  ঘ

  UNCTAD