Foreign Exchange Management MCQ Questions and Answers Part – 3

Foreign Exchange Management MCQ Questions and Answers Part – 1

Foreign Exchange Management MCQ Questions and Answers Part – 2

Foreign Exchange Management MCQ Questions and Answers Part – 3

101. For cross-currency quotation rounding off is done to the nearest multiple of-
A. 0.0001
B. 0.0025
C. 0.001
D. No rounding off.
ANSWER: B
102. for option forward purchase transactions the forward premium will be reckoned
A. based on earliest delivery date
B. based on latest delivery date
C. based on the average due date for delivery
D. none of the above.
ANSWER: A
103. cover deal by a dealer of an authorised dealer is undertaken to-
A. profit from exchange rate movements
B. cover up mistakes done by the dealer
C. square up the position resulting from dealings with customers
D. none of the above.
ANSWER: C
104. For funding the vostro acount, the bank in India will apply-
A. its TT buying rate
B. its TT selling rate
C. interbank spot buying rate
D. interbank spot selling rate
ANSWER: C
105. The objective of trading inforeign exchange by a dealer of a bank is to-
A. make profit out of exchange rate fluctuations
B. insulate the bank from exchange rate changes
C. comply with exchange control regulations
D. none of the above
ANSWER: A
106. For the banker, the spread will be wider when-
A. purchase of foreign currency from a customer is covered by a sale to another customer of the bank
B. merchant trades are covered by interbank deals
C. exposure in one currency is covered by a position in another currency
D. purchase of foreign currency from a customer is covered by sale to customer of another bank
ANSWER: A
107. Both legs of swap will be executed
A. at the same rate
B. on the same date
C. at different rates
D. at different rates on different dates
ANSWER: D
108. A swap deal is executed by
A. settling the difference int he rates
B. actual delivery of currencies
C. entering into another swap deal
D. none of the above
ANSWER: B
109. Foreign Exchange Management Act Passed in the year
A. 1997
B. 1998
C. 1999
D. 2000
ANSWER: C
110. Euro was launched on
A. 1999
B. 2000
C. 2001
D. 2002
ANSWER: A
111. ——– transaction the quoting bank acquires foreign currency and parts with home currency
A. Sale
B. purchase
C. spot
D. forward
ANSWER: B
112. In a ———— transaction the quoting bank parts with foreign currency and acquires home currency
A. sale
B. purchase
C. spot
D. forward
ANSWER: B
113. TT stands for
A. Telegraphic Transfer
B. Telex Transfer
C. Telephone Transfer
D. Today Transfer
ANSWER: A
114. The rate applied when the Nostro account of the bank would already have been credited
A. TT selling rate
B. Bill buying rate
C. Bill selling rate
D. TT buying Rate
ANSWER: D
115. The rate applied when payment of demand draft drawn on the bank where bank’s nostro account is
already credited
A. TT selling rate
B. Bill selling rate
C. Bill buying rate
D. TT buying Rate
ANSWER: C
116. The rate applied when payment of mail transfers drawn on the bank where bank’s Nostro account is already credited
A. TT selling rate
B. Bill selling rate
C. TT buying Rate
D. Bill buying rate
ANSWER: C
117. The rate applied when payment of telegraphic transfers drawn on the bank where bank’s Nostro account is already credited
A. TT selling rate
B. Bill selling rate
C. Bill buying rate
D. TT buying Rate
ANSWER: D
118. The rate applied when foreign bills collected and the bank’s Nostro account abroad is credited
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: A
119. The rate applied when a foreign bills is purchased
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: D
120. The rate used for all transactions that do not involve handling of documents by the banks is
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: B
121. TT selling rate is calculated on the basis of ——selling rate
A. interbank
B. merchant
C. spot
D. security
ANSWER: A
122. Exchange margin enters into the bills selling rate
A. one time only
B. twice
C. three times
D. none of the above
ANSWER: B
123. The bills selling rate is calculated by adding exchange margin to the
A. TT buying rate
B. TT selling rate
C. Bills buying rate
D. Bills selling rate
ANSWER: B
124. In India exchange rates for foreign currencies other than US dollar are calculated as
A. TT buying rate
B. Cross rates
C. TT sellling rate
D. Bill sellling rate
ANSWER: B
125. ——– are authorised to carry out all current account and capital account transaction.
A. Authorised Dealer – Category I
B. Authorised Dealer – Category II
C. Authorised Dealer – Category II
D. money changers
ANSWER: A
126. FEDAI was established in
A. 1956
B. 1957
C. 1958
D. 1959
ANSWER: C
127. FEDAI has its headquarters at
A. Delhi
B. Mumbai
C. Kolkatta
D. Bangalore
ANSWER: B
128. With regard to charging of commission, quotation of rates, etc., the authorised dealer should also comply with the rules of
A. RBI
B. FEDAI
C. Central Government
D. Bank
ANSWER: B
129. The system under which maintenance of external value of the currency at a predetermined level is
A. fixed exchange rate
B. floating exchange rate
C. gold standard
D. par value system
ANSWER: A
130. In a pure form fixed exchange rate system the exchange rate for currency is determined by the ———
A. Demand forces
B. Supply forces
C. Government
D. Banks
ANSWER: C
131. The reduction in the value of a currency due to market forces is known as
A. Appreciation
B. Revaluation
C. Depletion
D. Depreciation
ANSWER: D
132. The purchase or sale of foreign exchange by the central bank of the country to influence the exchange rate is known as —–
A. Appreciation
B. official intervention
C. Depreciation
D. Inflation
ANSWER: B
133. Paper currency was used for internal use and gold was used for international settlement under ———- standard
A. IMF
B. gold bullion
C. fixed
D. floating
ANSWER: B
134. Rupee is partially convertible on
A. current account
B. Vostro account
C. capital account
D. Nostro account
ANSWER: C
135. Convertibility of rupee refers to its convertibility into a ______ as desired by its holder.
A. foreign currency
B. local currency
C. Bank Notes
D. Demand Draft
ANSWER: A
136. IMF classifies Indian currency system as
A. Currency Board Arrangements
B. Independently floating
C. Managed floating with no predetermined path for the exchange rate
D. Exchange rates within crawling banks
ANSWER: C
137. Balance of payment records ———transactions of the country with outsiders
A. economic
B. debit
C. credit
D. cash
ANSWER: A
138. For balance of payments statistics, visible trade refers to trade-in
A. goods only
B. service only
C. goods/commodities
D. gold
ANSWER: C
139. Generally, imports are recorded at ———- value in the balance of payments
A. FOB
B. CIF
C. CPT
D. CIP
ANSWER: B
140. Generally, exports are recorded at ——value in the balance of payments
A. FOB
B. CIF
C. CPT
D. CIP
ANSWER: A
141. Difference in balance of payments due to statistical discrepancies are recorded as
A. balance of trade
B. balance of payment
C. errors and omissions
D. deficit
ANSWER: C
142. A ‘credit in balance of payments indicates
A. accumulation of bank balances abroad
B. foreign direct investment received into the country
C. earning of foreign exchange by the country
D. earning of foreign exchange or incurring of liability abroad or decrease in asset abroad
ANSWER: D
143. A debit in the balance of payments does not indicate
A. import of goods and services
B. foreign tourists encashing travellers cheque in the country
C. investments made abroad
D. none of the above
ANSWER: B
144. The current account of the balance of payments includes
A. unilateral payments
B. portfolio investments
C. short term borrowings
D. long term borrowings
ANSWER: A
145. The balance of payment does not include
A. transactions in real assets
B. transactions of financial claims
C. transactions between two non-residents
D. transactions in gold
ANSWER: C
146. Country A imports gold worth USD 100 million for commercial purposes. The transaction will affect
A. current account only
B. capital account only
C. official reserves account only
D. both current account and capital account
ANSWER: D
147. Basic balance in balance of payments refers to
A. the balance of payments on current account
B. the combined balance of current and capital accounts
C. the balance in the official reserves account
D. the total balance of current account and balances on long term items in capital account.
ANSWER: D
148. Autonomous transactions in balance of payments take place
A. only among private individuals
B. without the approval of the government
C. generally for-profit motive
D. as an effect of exchange rate changes
ANSWER: C
149. Exchange control as a method of correcting balance of payments disequilibrium does not include
A. exchange restriction
B. exchange reserves
C. exchange intervention
D. exchange clearing arrangement
ANSWER: B
150. The strategy of deflation employed to correct the balance of payments deficit includes the use of
A. monetary policy
B. fiscal policy
C. both fiscal and monetary policy
D. exchange rate policy
ANSWER: C

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Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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