International Finance and Treasury MCQ Questions and Solutions with Explanations

61

Which of the following statement is true?
1. Rs. 63/USD is direct quote in India.
2. Rs. 63/USD is direct quote in USA.
3. 1 Rupee = 0.0158 dollars is indirect quote in India.
4. 1 Rupee = 0.0158 dollars in indirect quote in USA

A) Both 1 and 2 B) Both 2 and 3 C) Both 1 and 3 D) Both 2 and 4

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Answer & Solution

Answer: Option C

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62

A company that purpose to connect sellers and buyers of foreign currency-denominated bank deposits is entitled

A) a wholesaler B) a broker C) a bank D) an investor

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Answer & Solution

Answer: Option B

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63

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

A) $$\frac{{\left( {1 + {r_d}} \right)}}{{\left( {1 + {r_f}} \right)}} = \frac{{\frac{{{f_F}}}{D}}}{{\frac{{{S_F}}}{D}}}$$ B) $$\frac{{\left( {1 + {r_f}} \right)}}{{\left( {1 + {r_d}} \right)}} = \frac{{\frac{{{S_F}}}{D}}}{{\frac{{{f_F}}}{D}}}$$ C) $$\frac{{\left( {1 + {r_f}} \right)}}{{\left( {1 + {r_d}} \right)}} = \frac{{\frac{{{f_F}}}{D}}}{{\frac{{{S_F}}}{D}}}$$ D) None of these

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Answer & Solution

Answer: Option C

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64

Which of the following is an interest rate derivative used for interest rate management?

A) Swap B) Cap C) Floor D) All of the above

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Answer & Solution

Answer: Option D

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65

Forward premium/differential depends upon

A) currencies fluctuation B) interest rate differential between two countries C) demand and supply of two currencies D) stock market returns

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Answer & Solution

Answer: Option B

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66

IN the statement, INR/USD: 1.1250/1.1251, which of the following represent bid quote?
1. 1.1250
2. 1.1252
3. 1.1251-1.1250

A) Only statement 1 is correct B) Only statement 3 is correct C) Both statements 1 and 3 are correct D) Both statements 2 and 3 are correct

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Answer & Solution

Answer: Option A

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67

Which of the following statement is correct?
Statement I In currency quotation, the first currency is the base Currency and the second currency is known as the quoted currency.
Statement II A currency pair is generally represented by using a hyphen or an oblique.

A) Both statements are correct B) Both statements are incorrect C) Statement I is correct, but Statement II is incorrect D) Statement II is correct, but Statement I is incorrect

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Answer & Solution

Answer: Option A

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68

If there is a fall in the external value of a currency

A) may cause an outward shift in the demand for the currency B) may cause an inward shift in the supply for the currency C) may lead to a movement along the demand curve for a currency D) may be due to an increase in demand for the country's exports

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Answer & Solution

Answer: Option C

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69

Match the correct combination for Assertion and Reason as argued by Shapiro and Timan.
Assertion (A) Management decisions to insure or hedge asset appear at best neutral mutation.
Reason (R) The price of systematic risk is identical for all the participants in the financial market.

A) (A) is correct, but (R) is incorrect B) (A) is incorrect, but (R) is correc C) Both (A) and (R) are incorrect D) Both (A) and (R) are correct

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Answer & Solution

Answer: Option D

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70

If purchasing power parity were to hold even in the short run, then

A) real exchange rates should tend to decrease over time B) quoted nominal exchange rates should be stable over time C) real exchange rates should tend to increase over time D) real exchange rates should be stable over time

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Answer & Solution

Answer: Option B

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