Where there are large number of buyers and sellers then there is larger
A. liquidity
B. speculation
C. hedging
D. forward rate
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In derivative contract, settlement by offset, denotes which one of the following?
A. Settlement of a maturing futures contract by cash payment in order to offset the mutal obligation on the contract
B. Closing out futures contract before maturity with an offsetting trade
C. Terminating a futures contract by executing a new contract by way of payment of cash in a mutually agreed proportion
D. A fresh contract is entered into by discarding the earlier contract outside the exchange
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Which one of the following transactions can be carried on without any restriction or regulation of the RBI under the FEMA?
A. Transfer for issue of any foreign security by a person resident in India
B. Transfer or issue of any foreign security by a person resident in India
C. Drawal of foreign exchange for payments due on account of amortisation of loans or for depreciation of direct investment
D. Export, import or holding of currency notes
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Which of the following statement is true?
A. IFM is a branch of finance that deals with managing global operations
B. IFM is a monetary authority that sanctions loans to the countries
C. IFM is a social science which learns the behaviour of employees in a multinational
D. None of the above
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Global bond market consists of all bonds sold by issued companies, governments, or other firms
A. within their own countries
B. outside their own countries
C. to London banks
D. to developing nations only
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Which of the following statement is true?
Statement I Exchange rate fluctuates to equate imports and exports.
Statement II Exchange rates fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied.
A. Both statements are correct
B. Both statements are incorrect
C. Statement I is correct, but Statement II is incorrect
D. Statement I is incorrect, but Statement II is correct
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The date of settlement for a foreign exchange transaction is referred to as
A. clearing date
B. swap date
C. maturity date
D. value date
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Interest Rate Parity (IRP) implies that
A. interest rates should change by an equal amount but in the opposite direction to the difference in inflation rates between two countries
B. the difference in interest rates in different currencies for securities of similar risk and maturity should be consistent with the forward rate discount or premium for the foreign currency
C. the interest rates between two countries start in equilibrium, any change in the differential rate of inflation between the two countries tends to be offset over the long-term by an equal but opposite change in the spot exchange rate
D. in the long run real interest rate between two countries will be equal
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The statement "This market enhances immediate exchange of currencies" refers to which of the following?
A. Forward market
B. Option market
C. Future market
D. Spot market
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A forward currency transaction
A. is always at a premium over the spot rate
B. means that delivery and payment must be made within one business day (USA/Canada) or two business days after the transaction date
C. calls for exchange in the future of currencies at an agreed rate of exchange
D. sets the future date when delivery of a currency must be made at an unknown spot exchange rate
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Which among the following statements is not true relating to 'Crawling Peg System' of exchange rate?
A. It was introduced as an alternative to the adjustable peg system
B. It allows a narrow margin of fluctuations as compared to adjustable peg system
C. It takes a position in between the fixed exchange rate system and the flexible exchange rate system
D. It was introduced by IMF in 1971
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An appreciation of the currency is likely to occur if,
A. domestic interest rates fall
B. there is an increase in demand for imports
C. there is an increase in demand for exports
D. there is an increase in the balance of payments deficit determination of ER
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Which of the following is true of foreign exchange markets?
A. The futures market is mainly used by hedgers while the forward market is mainly used for speculating
B. The futures market and the forward market are mainly used for hedging
C. The futures market is mainly used by speculators while the forward market is mainly used for hedging
D. The futures market and the forward market are mainly used for speculating
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If the spot rate of US dollar is Rs. 60 and one mouth forward rate is Rs. 62, the forward rate premium (p) will be
A. 40%
B. (-) 40%
C. 33%
D. (-) 33%
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If a company agreements today for several future date of real currency exchange, they will be building use of a
A. stock rate
B. futures rate
C. forward rate
D. None of the above
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In commodity market, the foreign exchange rate is determined as per
A. equilibrium rate of foreign exchange
B. comparative price of foreign currency
C. demand and supply of foreign currency
D. SDR
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Environmental factors affecting international operations are as follows except
A. foreign customs
B. foreign economic factors
C. foreign political situations
D. international distance
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The difference between the value of a call option and a put option with the same exercise price is due primarily to
A. the greater liquidity of call options
B. the use of continuous as opposed to discrete discounting
C. the differential between the current stock price and the exercise price in present value terms
D. the effect of dividends on the two securities
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Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R) . Read the statements and choose the correct answer:
Assertion (A) The nominal interest rate comprises of a real interest rate and an expected rate of inflation and it adjusts when the inflation rate is expected to change. Hence, in the perfect international capital markets, real rate of returns are equal in the two countries.
Reason (R) The international fisher effects states that the nominal interest rate differential must be equal to the expected inflation rate differential In the two countries.
A. Both (A) and (R) are correct and (R) is the right explanation of (A)
B. Both (A) and (R) are correct, but (R) is not the right explanation of (A)
C. (A) is correct, but (R) is not correct
D. Both (A) and (R) are incorrect
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If your local currency is in variable form and foreign currency is in fixed form quotation will be
A. indirect
B. direct
C. local form
D. foreign form
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