Quiz On International Finance! Trivia

20 Questions | By Mbaiifin | Last updated: Mar 20, 2022 | Total Attempts: 135

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Quiz On International Finance! Trivia - Quiz

What we have here is a quiz on international finance trivia. When one learns what international finance is all about they get a better chance at seeing what it takes to get or invest in financial markets in different countries. Do you know the different securities you could invest in? Just how informed are you when it comes to this course? Do take up the quiz and see how well you will do!

Questions and Answers

1.

The true cost of hedging transaction exposure by using the forward market is
- A.
  
  Difference between agreed rate and spot rate on the due date of contract
- B.
  
  Difference between agreed rate and spot rate at the time of entering into contract
- C.
  
  Forward premium / discount annualized
- D.
  
  None of these
2.

The abbreviations SDR stands for
- A.
  
  Special Drawing Rights
- B.
  
  Specific Depository Rules
- C.
  
  Specific Drawing Rights
- D.
  
  Special Depository Rules
3.

An option at-the-money when
- A.
  
  The strike price and the spot price are the same
- B.
  
  An option at-the-money when The strike price is greater than the spot price, in the case of a call option
- C.
  
  The option has a ready market
- D.
  
  The strike price is greater than spot price, in the case of a put option
4.

The acronym SWIFT stands for
- A.
  
  Society for Worldwide Interbank Financial Telecommunication
- B.
  
  Swift Worldwide Information for Financial Transaction
- C.
  
  Society for Worldwide International Financial Telecommunication
- D.
  
  Safety Width in Financial Transactions
5.

Exposed assets are those translated at
- A.
  
  Current rate
- B.
  
  Historical rate
- C.
  
  Current rate or average rate
- D.
  
  Average rate
6.

The strike price under an option is
- A.
  
  The exchange rate which the currencies are agreed to be exchanged under the contract
- B.
  
  Lower of the market price and the agreed price
- C.
  
  The price at which the option is auctioned
- D.
  
  None of these
7.

Maintaining a foreign currency account is helpful to
- A.
  
  Avoid both transaction cost and exchange risk
- B.
  
  Avoid exchange risk
- C.
  
  Avoid transaction cost
- D.
  
  Avoid exchange risk and domestic currency depreciation
8.

Non-resident Bank Accounts refer to
- A.
  
  Vostro account
- B.
  
  Nostro account
- C.
  
  Accounts opened in offshore centres
- D.
  
  Foreign bank account
9.

Translation loss may occur when
- A.
  
  Exposed assets exceed exposed liabilities and foreign currency depreciates
- B.
  
  The foreign currency depreciates
- C.
  
  Exposed assets exceed exposed liabilities and foreign currency appreciates
- D.
  
  The subsidiary's balance sheet shows a loss
10.

India is facing a continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to
- A.
  
  Depreciate
- B.
  
  Appreciate
- C.
  
  Show no specific tendency
- D.
  
  Depreciate against currencies of the countries with positive balance of payment and appreciate against countries
11.

If PPP holds
- A.
  
  The real exchange rate will not change
- B.
  
  Both real and nominal exchange rates will not change
- C.
  
  Both real and nominal exchange will move together
- D.
  
  The nominal exchange rate will not change
12.

A firm operating in India cannot hedge its foreign currency exposure through
- A.
  
  Futures
- B.
  
  Forwards
- C.
  
  None of these
- D.
  
  Options
13.

The value of SDR is
- A.
  
  Based on basket of five currencies
- B.
  
  Based on value of gold
- C.
  
  Average of the value of US dollar and Euro
- D.
  
  Equivalent to one US dollar
14.

The following method cannot be used for managing translation exposure
- A.
  
  Option contract
- B.
  
  Forward contract
- C.
  
  Exposure netting
- D.
  
  Leading and lagging
15.

The __________ refers to the orderly relationship between spot and forward currency exchange rates and the rates of interest between
- A.
  
  Interest-rate parity
- B.
  
  One-price rule
- C.
  
  Exchange-power parity
- D.
  
  Purchasing-power parity
16.

Economic exposure does not deal with
- A.
  
  Expected exchange rate changes
- B.
  
  None of these
- C.
  
  Future cash flow of the firm
- D.
  
  Changes in real exchange rates
17.

For the purpose of translations, current rate refers to
- A.
  
  The rate prevailing on the date of the balance sheet
- B.
  
  The rate prevailing on the date of preparation of the balance sheet
- C.
  
  The spot rate
- D.
  
  The rate current at the time of transaction
18.

The translation exposure is positive when
- A.
  
  Exposed liabilities are lesser than exposed assets.
- B.
  
  The exposure results in profit.
- C.
  
  There are no liabilities
- D.
  
  Exposed assets are lesser than exposed liabilities.
19.

The demand for domestic currency in the foreign exchange market is indicated by the following transactions in the balance of payment.
- A.
  
  Export of goods and services and capital inflows
- B.
  
  Export of goods and services
- C.
  
  Import of goods and services
- D.
  
  Import of goods and services and capital outflows
20.

Foreign currency exposures can be avoided by
- A.
  
  Denominating the transaction in domestic currency
- B.
  
  Exposure netting
- C.
  
  Entering into forward contracts
- D.
  
  Maintaining foreign currency accounts