International Finance and Treasury MCQ Questions and Solutions with Explanations

91

In a derivative transaction, the term margin denotes to which one of the following?

A) Cash or collateral provided by a customer to a broker to protect the broker from loss on a contract B) Cash or collateral provided by a broker to a customer to protect the customer from loss on contract C) A broker's request for more collateral to bring a customer's margin requirement to a premium margin level D) A customer's request for more collateral to bring a broker's margin requirement to a minimum standard level

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Answer & Solution

Answer: Option A

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92

Match the following.

List-I	List-II
a. IRP	1. Law of one price
b. PPP	2. Nominal interest rate
c. IFE	3. Covered interest arbitrage
d. Call option	4. Right to purchase

A) a-2, b-1, c-3, d-4 B) a-3, b-1, c-2, d-4 C) a-2, b-3, c-1, d-4 D) a-3, b-4, c-1, d-2

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Answer & Solution

Answer: Option C

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93

Which of the following statements are true with regard to currency appreciation?

A) The value of all currencies fall relative to gold B) The value of all currencies rise relative to gold C) The value of one currency rises relative to another currency D) The value of one currency falls relative to another currency

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Answer & Solution

Answer: Option C

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94

The international money market usually has a period of

A) 1 years B) 2 years C) 5 years D) 10 years

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Answer & Solution

Answer: Option A

Solution:

The correct answer is Option A: 1 year.
Here's why:
The international money market deals with short-term financial instruments.
Short-term generally means maturities of one year or less.
Options B, C, and D (2 years, 5 years, and 10 years) represent longer-term investments typically found in the capital market, not the money market.

95

Which of the following causes do investors employ foreign exchange market?

A) Currency hedging B) Currency speculation C) Currency conversion D) All of the above

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Answer & Solution

Answer: Option A

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96

Differences in nominal interest rates are removed in exchange rate is

A) Fisher effect B) Leontief paradox C) combined equilibrium theory D) purchasing power parity

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Answer & Solution

Answer: Option A

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97

An Indian company is importing machine at a price of $ 5,00,000, payable after six month. The current exchange rate is Rs. 63 US $. The forward contract for six months is available @ Rs. 64 per US $. If the rate turns out to be Rs. 64.25 per US $, the net gain to the importer in case he has entered into contract will be

A) $ 1,25,000 B) $ 2,50,000 C) $ 5,00,000 D) $ 6,25,000

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Answer & Solution

Answer: Option A

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98

The sources of finance for an international financial manager are

A) ADR and GDRs B) international credit market C) international money market D) all of the above

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Answer & Solution

Answer: Option D

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99

Ask quote is for

A) seller B) buyer C) hedger D) speculator

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Answer & Solution

Answer: Option A

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100

Which of the following statement is correct when it is given a home country and a foreign country, purchasing power parity suggests that

A) the home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate B) the home currency will depreciate if the current home interest rate exceeds the current foreign interest rate C) the home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate D) the home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate

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Answer & Solution

Answer: Option C

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International Finance and Treasury MCQ Questions and Solutions with Explanations | Management