Top 80+ Solved Foreign Exchange Management MCQ Questions Answer
Q. Maintaining a foreign currency account is helpful to
a. Avoid transaction cost.
b. Avoid exchange risk.
c. Avoid both transaction cost and exchange risk.
d. Avoid exchange risk and domestic currency depreciation
Q. India’s foreign exchange rate system is?
a. Free float
b. Managed float
c. Fixed .
d. Fixed target of band
Q. Hedging transaction is indicated by
a. Transactions in odd amounts
b. Presentation of documentary support.
c. Frequency of such transactions.
d. None of the above.
Q. The acronym SWIFT stands for
a. Safety Width In Financial Transactions.
b. Society for Worldwide International Financial Telecommunication.
c. Society for Worldwide Interbank Financial Telecommunication.
d. Swift Worldwide Information for Financial Transaction.
Q. Indirect rate in foreign exchange means
a. The rate quoted with the units of home currency kept fixed.
b. The rate quoted with units of foreign currency kept fixed.
c. The rate quoted in terms of a third currency.
d. None of the above.
Q. The maxim 'buy low; sell high' is applicable for
a. Quotation of Pound-Sterling.
b. Indirect rates.
c. Direct rates.
d. USDOLLARS.
Q. India is facing continuous deficit in its balance of payments. In the foreign exchangemarket rupee is expected to
a. Depreciate.
b. Appreciate.
c. Show no specific tendency.
d. Depreciate against currencies of the countries with positive balance of payment and appreciate against countries with negative balance of payment.
Q. The effect of speculation on exchange rate is
a. It causes violent fluctuations in exchange rate.
b. It aggravates the market trends.
c. Either or both of A and B.
d. Neither A nor B.
Q. The demand for domestic currency in the foreign exchange market is indicated by thefollowing transactions in balance of payment
a. Export of goods and services
b. Import of goods and services.
c. Export of goods and services and capital inflows.
d. Import of goods and services and capital outflows.
Q. If PPP holds
a. The nominal exchange rate will not change.
b. The real exchange rate will not change.
c. Both real and nominal exchange rates will not change.
d. Both real and nominal exchange will move together
Q. The forward US dollar is quoted at premium against Indian Rupees. This implies
a. Money market rates are higher in India than in the US.
b. Money market rates are lower in India than in the US.
c. Market yield is higher in US than in India.
d. Dollar has a better value than Indian Rupee.
Q. Determination of forward rates is explained by
a. Uncovered interest arbitrage.
b. Purchasing power parity theory.
c. Demand and Supply for spot currency.
d. None of the above.
Q. According to International Fisher Effect
a. Forward Premium for a currency indicates its depreciation in future.
b. Forward Premium for a currency indicates its appreciation in future.
c. Forward Rates and spot rates are not linked
d. Forward Rates are based on expected future spot rates.
Q. Cash and carry arbitrage explains the determination of
a. Forward Rates for currencies.
b. Spot rates for currencies.
c. Both forward and spot rates for currencies.
d. Penalty for non-execution of forward contracts.
Q. LIBOR is:
a. the interest rate commonly charged for loans between banks.
b. the average inflation rate in European countries.
c. the maximum loan rate ceiling on loans in the international money
d. the maximum interest rate offered on bonds that are issued in London.