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Quiz 2
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Q.1
Money market where securities are issued by governments to obtain funds for short term is classified as
money market instruments
capital market instruments
counter instruments
long term instruments
Q.2
Federal funds, bankers acceptance, commercial paper and repurchase agreements are classified as
counter instruments
long term instruments
money market instruments
capital market instruments
Q.3
Markets in which derivatives are traded are classified as
assets backed market
cash flow backed markets
mortgage backed markets
derivative securities markets
Q.4
Consider buying of put option, probability that a buyer would have negative payoff increases with the
increase in stock price
decrease in stock price
increase in maturity duration
decrease in maturity duration
Q.5
Price of an option is subtracted form time value of option to calculate
book value index
market index
intrinsic value
extrinsic value
Q.6
Longer debt instrument issued by government and corporations is considered as
contraction bonds
expansion bonds
dollar bonds
bonds
Q.7
To improve attractiveness for investors, bonds are partially backed by
US.T-Bonds
UK-T-Bonds
UK-B-bonds
US-B-Bonds
Q.8
The bond markets are important because.
they are easily the most widely followed financial markets in the United States
they are the markets where foreign exchange rates are determined
they are the markets where interest rates are determined
they are the markets without risk
Q.9
Increasing interest rates.
discourage corporate investments
discourage individuals from saving
encourage corporate expansion
encourage corporate borrowing
Q.10
Denominations in which Eurobonds are issued are
$10000 and $20000
$5000 and $10000
$6000 and $11000
$8000 and $15000
Q.11
The bank account of a non-resident of a country, where the amount of currency in the account cannot be transferred to another country is called as
Nostro account
Blocked Account
Foreign account
Capital account
Q.12
Exchange rate between currency A and currency B, given the values of currencies A and B with respect to a third currency is known as
Golden standard
Flexible exchange rate
Fixed exchange rate
Cross exchange rate
Q.13
An operation in order to protect the domestic currency value of an asset or a liability that is denominated in foreign currency is called as
Hedging
Hermes
Indexation
Leading
Q.14
Difference between buying and selling rates in an exchange rate or interest rate quotation is known as
Strike price
Spread
Swap points
Spot rate
Q.15
In financial transactions, risk that there will be no profit in selling of this asset is classified as
price risk
profit risk
selling risk
financial risk
Q.16
Financial securities which are issued to finance government expenditures and national debt are classified as
treasury notes and bonds
contraction bonds
expansion bonds
dollar bonds
Q.17
As compared to general obligation bonds, revenue bonds are considered as
more inflated
less inflated
less risky
more risky
Q.18
The exchange rate is the.
total yearly amount of money changed from one country’s currency to another country’s currency
total monetary value of exports minus imports
Exchange value of one country currency in terms of another country currency
Price of one country currency in terms of another country currency
Q.19
Net exports refers to.
total exports minus total imports
total imports minus total exports
exports of merchandise minus imports of merchandised
total exports of capital minus depreciation
Q.20
Agreement to exchange one currency for another at a specified exchange rate and date is
Currency swap
Swap points
Currency put option
Currency call option
Q.21
Long-term securities denominated in two currencies is called as
Euro bond
Dual currency bonds
Foreign bonds
Euro dollar deposit
Q.22
International Finance Corporation established in
1956
1960
1966
1970
Q.23
Which exchange rate theory focuses on the inflation exchange rate relationship?
Interest rate parity
International Fisher Effect
Purchasing power parity
Traditional Model
Q.24
Marginal income tax rate is 35% and before tax rate of return is 12.5% then after tax rate of return is
6.13%
7.13%
8.13%
9.13%
Q.25
Which of the following is not considered a unilateral transfer?
foreign aid from one government to another
income earned from foreign investments
personal gifts to friends in foreign countries
donations to foreign countries from non-government
Q.26
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
Q.27
The exchange rate prevailing at a financial reporting date
Closing exchange rate
Opening exchange rate
Fixed exchange rate
Fluctuating exchange rate
Q.28
The forward exchange rate __________
is the rate today for exchanging one currency for another for immediate delivery
is the rate today for exchanging one currency for another at a specific future date
is the rate today for exchanging one currency for another at a specific location on a specific future date
is the rate today for exchanging one currency for another at a specific location for immediate delivery
Q.29
An option at-the-money when
The strike price is greater than the spot price, in the case of a call option
The strike price is greater than spot price, in the case of a put option
The option has a ready market
The strike price and the spot price are the same
Q.30
A contract that gives the buyer the right to buy commodity or a foreign currency from the seller at a fixed price is called as
put option
call option
cross option
currency swap
Q.31
SIBOR refers to
static interest bonds offered rate
Singapore international bonds offered rate
simple interest bearing offshore rate
Singapore interbank offered rate
Q.32
The price at which a market maker is prepared to buy a currency or borrow money is termed as
spot rate
bid rate
ask price
forward rate
Q.33
The market where long term securities (shares, bonds, etc. are bought and sold is called as
money market
capital market
primary market
secondary market
Q.34
A bank located usually in another country that provides service for another bank is
Foreign bank
Central bank
Correspondent bank
World Bank
Q.35
A deposit or borrowing domiciled outside the home country of the currency is called as
foreign bond
euro bond
euro currency
domestic bond
Q.36
The system operated by the WTO is known as the
multilateral trading system
bilateral trading system
ratified system
ungratified system
Q.37
For contingency exposure of foreign exchange, the best derivative that can be used to hedge is
Forwards
Futures
Options
Swaps
Q.38
Japan yen denominated Bond issued in Japan domestic Market
Yankee Bond
Samurai Bond
Bull dog Bond
Dual Bond
Q.39
The spot exchange rate __________
is the rate today for exchanging one currency for another for immediate delivery
is the rate today for exchanging one currency for another at a specific future date
is the rate today for exchanging one currency for another at a specific location on a specific future date
is the rate today for exchanging one currency for another at a specific location for immediate delivery
Q.40
Which organisation of the World Bank Group deals with matters related to the development of the poorest countries in the world?
The International Bank for Reconstruction and Development
The International Development Association
The International Finance Corporation
The Multilateral Investment Agency
Q.41
Which of the following is not an example of an international trade draft?
Time draft
Sight draft
Both the first and second answers are correct
Usance draft
Q.42
The first Indian company raised the fund by issuing Bond in US dollar in United States
Airtel
TATA
Reliance
Aircel
Q.43
For the purpose of translation exposure, historical rate is the rate prevalent on the date
The parent company was established
The foreign subsidiary was established
The investment in the subsidiary was made by the parent company
The asset was acquired or the liability was incurred
Q.44
The external method of hedging transaction exposure does not include
Forward contact hedge
Money market hedge
Cross hedging
Future hedging
Q.45
The acronym CIRCUS stands for
Current Interest Rate Swap
Circular Currency Swap
Combined Income Range Currency Swap
Combined Interest Rate and Currency Swap
Q.46
The maximum amount that an Indian company can issue as ADR/GDR in a year is
USD 500 million
USD 30 million
USD 20 million
No monetary ceiling
Q.47
The price at which a market maker is prepared to sell a currency or lend money
forward rate
sport rate
bid rate
offer rate
Q.48
The marking to market in respect of a currency future refers to
Putting up for sale specific lot of futures
Adjusting the margin money of buyer and seller to reflect the current value of futures
Quoting rates for different maturities
Allotting futures among different brokers
Q.49
The marking to market of a futures contract is done
Daily, based on the opening price for the day
Weekly, based on the opening price for the week
Daily, based on the closing price for the previous day
Weekly based on the closing price for the previous week
Q.50
Determination of forward rates is explained by
Purchasing power parity theory
Uncovered interest arbitrage
Demand and Supply for spot currency
demand and supply of currency in future
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