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This set of Foreign Exchange Management Multiple Choice Questions & Answers (MCQs) focuses on Foreign Exchange Management Set 4

Q1 | ____________ means using short-term forward contracts to offset “paper” gainsand losses on the long-term assets and liabilities of foreign subsidiaries.
  • Hedging transaction exposure
  • Hedging balance-sheet exposure
  • Hedging economic exposure
  • Hedging cost exposure
Q2 | Which exchange rate theory focuses on the inflation – exchange rate relationship?
  • Interest rate parity
  • International Fisher Effect
  • Purchasing power parity
  • Traditional Model
Q3 | The exchange rate prevailing at a financial reporting date
  • Closing exchange rate
  • Opening exchange rate
  • Fixed exchange rate
  • Fluctuating exchange rate
Q4 | The bank account of a non-resident of a country, where the amount of currency inthe account cannot be transferred to another country is called as
  • Nostro account
  • Blocked Account
  • Foreign account
  • Capital account
Q5 | Funds that cannot be remitted from the subsidiary to the parent due to hostgovernment restrictions is known as
  • Close – ended funds
  • Open – ended funds
  • Blocked funds
  • Restricted funds
Q6 | Exchange rate between currency A and currency B, given the values of currencies Aand B with respect to a third currency is known as
  • Golden standard
  • Flexible exchange rate
  • Fixed exchange rate
  • Cross exchange rate A
Q7 | Agreement to exchange one currency for another at a specified exchange rate anddate is
  • Currency swap
  • Swap points
  • Currency put option
  • Currency call option
Q8 | Long– term securities denominated in two currencies is called as
  • Euro bond
  • Dual – currency bonds
  • Foreign bonds
  • Euro dollar deposit.
Q9 | Foreign exchange transactions involve monetary transactions
  • among residents of the same country
  • between residents of two countries only
  • between residents of two or more countries
  • among residents of at least three countries
Q10 | A foreign currency account maintained by a bank abroad is its
  • nostro account
  • vostro account
  • loro account
  • foreign bank account
Q11 | Non-resident Bank Accounts’ refer to
  • nostro account
  • vostro account
  • accounts opened in offshore centers
  • foreign bank account
Q12 | The number of nostro accounts that can be maintained by a bank in a particularcurrency is
  • One
  • not exceeding three
  • minimum two
  • no such limit
Q13 | Full fledged money changers are authorized to undertake
  • only sale transactions
  • only purchase transactions
  • all types of foreign exchange transactions
  • purchase and sale of foreign currency notes, coins and travelers cheques
Q14 | . IMF augments its resources by borrowing under
  • General arrangements to borrow
  • New arrangements to borrow
  • Trust funds
  • All the above
Q15 | The abbreviations SDR stands for
  • Special Drawing Rights
  • Specific Drawing Rights
  • Special Depository Rules
  • Specific Depository Rules
Q16 | The value of SDR is
  • 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
Q17 | The term World Bank refers to
  • IBRD
  • IDA
  • Both IBRD and IDA
  • IFC
Q18 | . IBRD lending is not available for
  • middle income countries
  • low income countries
  • multilateral agencies
  • developed countries
Q19 | The eligibility to borrow from IDA is based on
  • relative poverty
  • lack of creditworthiness to borrow on market terms
  • good policy performance
  • all the above
Q20 | Financial products of IFC does not include
  • loans
  • equity participation
  • risk management products
  • none of the above
Q21 | MIGA stands for
  • Multilateral Investment Guarantee Agency
  • Multilateral Institutional and Government Agencies
  • Mutual Interest Guaranteeing Agencies
  • Mutual Institutional and Government Agencies
Q22 | Guarantee provided by MIGA to private investors covers risk of
  • transfer restriction
  • expropriation
  • breach of contract
  • all the above
Q23 | The activities of ADB include
  • project financing
  • guaranteeing loans
  • both a and b
  • risk management products
Q24 | A ‘credit’ in balance of payments indicates
  • Accumulation of bank balances abroad
  • Foreign direct investment received into the country
  • Earning of foreign exchange by the country
  • Earning of foreign exchange or incurring of liability abroad or decrease in asset abroad
Q25 | The current account of balance of payments does not include
  • Trade in goods
  • Trade in services
  • Income on investments
  • None of the above