IBM ASSIGNMENT 4 (CO5)

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All questions are compulsory.

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Student Name *

Section *

The primary component of the current account is the: *

1 point

balance of trade.

balance of money market flows

balance of capital market flows

unilateral transfers.

Which of the following is NOT a payment method for international trade? *

1 point

Prepayment

A bill of exchange

Consigment

factoring

Eurodollars are *

1 point

Currency

Deposits

Bonds

Equity

Equilibrium exchange rates between the curriencies depend on: *

1 point

Quality of foreign currency demand

Wuantity of foreign currency supply

Rate remains dynamic over aperiod of time & is affected by the inflation rate

All of the above

For which of the following reasons MNC's use the forward contracts? *

1 point

To hedge their imports

To hedge their exports

To sepculate on the currency movements & to earn arbitrage

All of the above

Disadvantage of the fixed exchange rate system is *

1 point

Risk that the government will alter the exchange rate

MNC's can engage international trade without worry

Exchange rates are held constant

None of the above

Which is the charecteristic/s of the freely floating exchange rate system? *

1 point

Exchange rate values are determined by the market forces

Country having this system is more insulated from inflation of the other countires

All to co-operate

All of the above

Forward transactions involves exchange of currency at ----- rate. *

1 point

Swap rate

Reverse transaction rate

Forward rate

Spot rate

Which of the following is the rate at which banker is willing to buy foreign currency? *

1 point

Spread rate

Spot rate

Forward rate

Reverse transaction rate

Which of the following theory best defines the relationship between curriencies on the basis of rate of inflation *

1 point

Interest rate parity theory

Purchasing power parity theory

Relative inflation theory

Foreign exchange parity theory

Maintaining a foreign currency account is helpful to *

1 point

Avoid transaction cost.

Avoid exchange risk.

Avoid both transaction cost and exchange risk

None

India’s foreign exchange rate system is? *

1 point

Free float

Managed float

Fixed .

Fixed target of band

Hedging transaction is indicated by *

1 point

Transactions in odd amounts

Presentation of documentary support.

Frequency of such transactions.

None of the above

The acronym SWIFT stands for *

1 point

Safety Width In Financial Transactions.

Society for Worldwide International Financial Telecommunication.

Society for Worldwide Interbank Financial Telecommunication.

Swift Worldwide Information for Financial Transaction.

Indirect rate in foreign exchange means *

1 point

The rate quoted with the units of home currency kept fixed.

The rate quoted with units of foreign currency kept fixed

The rate quoted in terms of a third currency.

None of the above

India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to *

1 point

Depreciate.

Appreciate

Show no specific tendency

Depreciate against currencies of the countries with positive balance of payment and appreciate against countries with negative balance of payment.

LIBOR is: *

1 point

the interest rate commonly charged for loans between banks

the average inflation rate in European countries.

the maximum loan rate ceiling on loans in the international money

the maximum interest rate offered on bonds that are issued in London

The value of SDR is *

1 point

equivalent to one US dollar

based on value of gold

average of the value of US dollar and Euro

based on basket of five currencies

The abbreviations SDR stands for *

1 point

Special Drawing Rights

Specific Drawing Rights

Special Depository Rules

Specific Depository Rules

Agreement to exchange one currency for another at a specified exchange rate and date is *

1 point

Currency swap

Swap points

Currency put option

Currency call option

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