Multiple Choice Questions.

1. Foreign exchange transactions involve monetary transactions

A. among residents of the same country
B. between residents of two countries only
C. between residents of two or more countries
D. among residents of at least three countries
ANSWER: B

2. Under FEMA, the RBI has been authorised to make ------ to carry out the
provisions of the Act.
A. rules
B. regulations
C. both rules and regulations
D. notifications
ANSWER: B

3. A foreign currency account maintained by a bank abroad is its

A. nostro account
B. vostro account
C. loro account
D. foreign bank account
ANSWER: A

-4. 'Non-resident Bank Accounts' refer to

A. nostro account
B. vostro account
C. accounts opened in offshore centres
D. none of the above
ANSWER: B

5. Non-resident bank accounts are maintained in

A. the permitted currencies
B. the currency of the country of the bank maintaining the account
C. the currencies in which FCNR accounts are permitted to be maintained
D. Indian Rupee
ANSWER: D
.
6. The statutory basis for administration of foreign exchange in India is
A. Foreign Exchange Regulation Act, 1973
B. Conservation of foreign Exchange and Prevention of Smuggling Act.
C. Foreign Exchange Management Act, 1999
D. Exchange Control Manual
ANSWER: C
7. Full fledged money changers are authorized to undertake
A. only sale transactions
B. only purchase transactions
C. all types of foreign exchange transactions
D. purchase and sale of foreign currency notes, coins and travellers cheques
ANSWER: D

8. The acronym FEDAI stands for

A. Foreign Exchange Dealers' Association of India
B. Federal Export Dealers' Association of India
C. Fixed Earners' Draft Agreement on Interest
D. None of the above
ANSWER: A

9. An authorised person under FEMA does not include

A. an authorised dealer
B. an authorised money changer
C. an off-shore banking unit
D. an exchange broker
ANSWER: D

10. The authorised dealers under FEMA are classified into ----- categories
A. Three
B. one
C. two
D. four
ANSWER: A

11. The term 'loro account' means

A. our account with you
B. your account with us
C. their account with them
D. none of the above
ANSWER: C

12. The term 'Nostro account' means

A. our account with you
B. your account with us
C. their account with them
D. none of the above
ANSWER: A

13. The term 'Vostro account' means

A. our account with you
B. your account with us
C. their account with them
D. none of the above
ANSWER: B
14. The market forces influencing the exchange rate are not fully operational
under
A. floating exchange rate system
B. speculative attack on the market
C. fixed exchange rate system
D. current regulations of IMF
ANSWER: C

15. According to classification by IMF, the currency system of India falls under
A. managed floating
B. independently floating
C. crawling peg
D. pegged to basked of currencies
ANSWER: A

16. Under fixed exchange rate system, the currency rate in the market is
maintained through
A. official intervention
B. rationing of foreign exchange
C. centralising all foreign exchange operations with central bank of the country
D. none of the above
ANSWER: A

17. The reduction in the value of a currency due to market forces is known as
A. revaluation
B. depreciation
C. appreciation
D. inflation
ANSWER: B

18. The largest foreign exchange market in the world is

A. Newyork
B. London
C. Japan
D. Swiss
ANSWER: B

19. Foreign exchange market is considered 24 hours market because

A. it is open all through the day
B. all transactions are to be settled with in 24 hours
C. due to geographical dispersal at least one market is active at any point of time
D. minimum 24 hours must lapse before any transaction is settled
ANSWER: C
20. The major players in the foreign exchange market are
A. commercial banks
B. corporates
C. exchange brokers
D. central bank of the country and the central government
ANSWER: A

21. Speculation in foreign exchange market refers to

A. buying or selling of currencies in large volumes
B. booking of forward contracts without intention to execute
C. buying or selling with a view to make profits from movement in rates
D. buying or selling with a view to making riskless profits.
ANSWER: C

22. Arbitrageur in a foreign exchange market

A. buys when the currency is low and sells when it is high
B. buys and sells simultaneously the currency with a view to making riskless
profit
C. sells the currency when he has a receivable in furture
D. buys or sells to make advantage of market imperfections
ANSWER: B

23. The acronym SWIFT stands for -

A. Safety Width in Financial Transactions
B. Society for Worldwide International Financial Telecommunication
C. Society for Worldwide Interbank Financial Telecommunication
D. Swift Worldwide Information for Financial Transactions
ANSWER: C

24. Indirect rate in foreign exchange means -

A. the rate quoted with the units of home currency kept fixed
B. the rate quoted with units of foreign currency kept fixed
C. the rate quoted in terms of a third currency
D. none of the above
ANSWER: A

25. Indirect rate of exchange is quoted in India for -

A. sale of foreign travellers cheque
B. sale of rupee travellers cheques
C. purchase of personal cheques
D. none of the above
ANSWER: D

26. In direct quotation, the unit kept constant is -

A. the local currency
B. the foreign currency
C. the subsidiary currency
D. none of the above.
ANSWER: B

27. The maxim 'buy low; sell high' is applicable for -

A. quotation of pound-sterling
B. indirect rates
C. direct rates
D. US dollars
ANSWER: C

28. In Mumbai, US Dollar is quoted as under: USD 1 = Rs.43.6725/6875. It

means-
A. The buying rate is Rs.43.6725 and selling rate is Rs.43.6875.
B. The buying rate is Rs.43.6875 and selling rate is Rs.43.6725
C. The dollar is appreciating in value.
D. The dollar is depreciating in value
ANSWER: A

29. In foreign exchange markets, 'American Quotation' refers to-

A. quotation by a US based bank
B. quotation in New York foreign exchange market
C. quotation in which the value of foreign currency is expressed per US dollar.
D. quotation in which the value of US dollar is expressed per unit of foreign
currency
ANSWER: D

30. Forward margin is-

A. the profit on forward contract
B. commission payable to exchange brokers.
C. difference between the spot rate and forward rate
D. none of the above
ANSWER: C

31. In the following quote: Spot USD 1 = Rs.45.6500/650 Spot September

100/150 September forward
buying rate for dollar is -
A. Rs.45.6800
B. Rs.45.6600
C. Rs.45.7500
D. Rs.45.6500
ANSWER: B

32. the transaction where the exchange of currencies takes place two days after
the date of the contract is
known as
A. ready transaction
B. value today
C. spot transactions
D. value tomorrow
ANSWER: C

33. The transaction where the exchange of currencies takes place on the same
date is known as
A. tom
B. ready transaction
C. spot transactions
D. value tomorrow
ANSWER: B

34. A transaction in which the currencies to be exchanged the next dayof the
transaction is known as
A. ready transaction
B. value today
C. spot transactions
D. Value tomorrow
ANSWER: D

35. The transaction in which the exchange of currencies takes place at a

specified future date, subsequent
to the spot date is known as a
A. swap transaction
B. forward transaction
C. future transaction
D. non-deliverable forwards
ANSWER: B

36. One month forward contract entered into on 22nd March will fall due on
A. 21th April
B. 22nd April
C. 23rd April
D. 24th April
ANSWER: D

37. The buying rate is also known as the

A. bid rate
B. offer rate
C. spread
D. swap
ANSWER: A

38. The selling rate is also known as

A. bid rate
B. offer rate
C. spread
D. swap
ANSWER: B

39. The difference between buying rate and selling rate is the gross profit for the
bank and is know as the
A. bid rate
B. offer rate
C. spread
D. swap

ANSWER: C

40. Direct quotation is also known as

A. home currency quotation
B. foreign currency quotation
C. currency quotation
D. American quotation
ANSWER: A

41. In direct quotation the principle adopted by the bank is to

A. buy low only
B. buy low; sell high
C. buy high; sell low
D. sell low only
ANSWER: B

42. In indirect quotation the principle adopted by the bank is to

A. buy low only
B. buy low; sell high
C. buy high; sell low
D. sell low only
ANSWER: C

43. Indirect quotation is also known as

A. home currency quotation
B. foreign currency quotation
C. European quotation
D. American quotation
ANSWER: B

44. Derivatives can be used by an exporter for managing-

A. currency risk
B. cargo risk
C. credit risk
D. all the above
ANSWER: A

45. The term risk in business refers to-

A. chance of losing business
B. chance of making losses
C. uncertainty associated with expected event leading to losses or gains
D. threat from competitors
ANSWER: C

46. Under the forward exchange contract-

A. the exchange rate is determined on the future date
B. the parties agree to meet at a future date for finalisation
C. delivery of foreign exchange is done on a predetermined future date
D. none of the above
ANSWER: C

47. The bank should verify the letter of credit/sale contract for booking a-
A. forward sale contract
B. forward purchase contract
C. cancelleing a forward contract
D. none of the above
ANSWER: B

48. Normally forward purchase contract booked should be used by the customer-
A. for executing the export order for which the contract was booked
B. for any export order from the same buyer
C. for any export order for the same commodity
D. for any export order
ANSWER: A

49. A currency future is not

A. traded on futures exchanges
B. a special type of forward contract
C. of standard size
D. available in India
ANSWER: D

50. Which of the following statements is true?

A. Exchange exposure leads to exchange risk
B. exchange risk leads to exchange exposure
C. exchange exposure and exchange risk are unrelated
D. none of the above

ANSWER: A
51. The net potential gain or loss likely to arise from exchange rate changes is-
A. exchange exposure
B. exchange risk
C. profit/loss on foreign exchange
D. exchange difference
ANSWER: B

52. The exchange loss/gain due to transaction exposure is reckoned on-

A. entering into a transaction in foreign exchange
B. quoting a price for a foreign currency transaction
C. conversion of foreign currency into domestic currency
D. entry in the books of accounts
ANSWER: C

53. Transaction exposure can be hedged

A. by internal methods only
B. by external methods only
C. either by internal methods or by external methods, but not by both
D. either by internal methods or by external methods or a combination of both
ANSWER: D

54. The external methods of hedging transaction exposure does not include-
A. forward contract hedge
B. money market hedge
C. cross hedging
D. futures hedging
ANSWER: C

55. The true cost of hedging transaction exposure by using forward market is-
A. the difference between agreed rate and the spot rate at the time of entering
into the contact
B. the difference between agreed rate and the spot rate on the due date of the
contract.
C. the forward premium/discount annualised
D. none of the above
ANSWER: B

56. Money market hedge involves-

A. borrowing/investing the concerned currency in the money market and squaring
the position on the
due date of receivable/payable
B. borrowing/investing the concerned currency in the money market and covering
the position
immediately in the forward market.
C. covering an exposure int he domestic currency
D. simultaneous borrowing and lending int he money market.
ANSWER: A
57. The cost of hedging through options includes-
A. option premium
B. interest on option premium till due date of the contract
C. both (a) and (b) above
D. (a) above and differences between option price and spot price.
ANSWER: C

58. Hedging with options is best recommended for-

A. hedging receivables
B. hedging contingency exposures
C. hedging foreign currency loans.
D. hedging payables
ANSWER: B

59. A firm operating in India cannot hedge its foreign currency exposure through
A. forwards
B. futures
C. options
D. none of the above
ANSWER: B

60. Internal hedge for transaction exposure does not include-

A. exposure netting
B. choosing currency of invoicing
C. cross hedging
D. none of the above

1. The _rst phase of globalization started around 1870 and ended with …..
a. The World War I
b. The World War II
c. The Establishment of GATT
d. In 1913 when GDP was High
Ans: a

2. IBRD (International Bank for Reconstruction and Development) also known as

a. Exim Bank
b. World Bank
c. International Monetary fund
d. International Bank
Ans: b

3. Ultimately ………………was replaced by the …………….on 1st Jan 1995

a. GATS, WTO
b. WTO, GATT
c. GATT, WTO
d. IMF, GATT
Answer: c
4. Which is the right sequence of a stages of Internationalization
a. Domestic, Transnational, Global, International, Multinational
b. Domestic, International, Multinational, Global, Transnational
c. Domestic, Multinatinal, International, Transnational, Global
d. Domestic, Internatinal, Transnational, Multinational, Global
Answer: b

5. Subsidiaries consider regional environment for policy / Strategy formulation is known as

a. Polycentric Approach
b. Regiocentric Approach
c. Ethnocentric Approach
d. Geocentric Approach
Answer: b

6. According to this theory the holdings of a country’s treasure primarily in the form of gold
constituted
its wealth.
a. Gold Theory
b. Ricardo Theory
c. Mercantilism
d. Hecksher Theory
Answer:c

7. The Theory of Absolute Cost Advantage is given by

a. David Ricardo
b. Adam Smith
c. F W Taylor
d. Ohlin and Heckscher
Answer:b

8. The Theory of Relative Factor Endowments is given by

a. David Ricardo
b. Adam Smith
c. F W Taussig
d. Ohlin and Hecksher
Answer: d

9. The theory of Comparative cost advantage is given by

a. David Ricardo
b. Adam Smith
c. F W Taussig
d. Ohlin and Hecksher
Answer: a
10. ……………is application of knowledge which redone the boundaries of global business
a. Cultural Values
b. Society
c. Technology
d. Economy

Answer:c

11. Capitalistic, communistic and Mixed are the types of

a. Economic System
b. Social System
c. Cultural Attitudes
d. Political System
Answer:a

12. Which is not an Indian Multinational Company?

a. Unilever
b. Asian Paints
c. Piramal
d. Wipro
Answer: a

13. Globalization refers to:

a) Lower incomes worldwide
b) Less foreign trade and investment
c) Global warming and their effects
d) A more integrated and interdependent world
Answer: d

14. Which of the following is not a force in the Porter Five Forces model?
a. Buyers
b. Suppliers
c. Complementary products
d. Industry rivalry
Answer:c

15. Comparative Cost Trade Theory is given by

a. Adam Smith
b. David Ricardo
c. Gottfried Haberler
d. Heckscher Ohlin
Answer: b

16. …….is the payment method most often used in International Trade which offers the exporter
best
assurance of being paid for the products sold internationally.
a. Bill of Lading
b. Letter of Credit
c. Open Account
d. Drafts
Answer: b

17. Key controllable factors in global marketing are:

a. Government policy and legislation
b. social and technical changes
c. marketing activities and plans
d. all of the above.
Answer: c

18. Select example of Indian Multinational Company

a. Hindusthan Unilever
b. Videocon
c. Cargill
d. Tesco
Answer:b
Multinational Corporations

19. …………………corporation produces in home country or in a single country and focuses on

marketing these products globally or vice a versa.
a. Global
b. International
c. Transnational
d. None of the above
Ans: a

20. —————-comapny produces, markets, invests and operates across the world
a. Global
b. International
c. Transnational
d. Multinational
Ans: c

21. …..is only a legal agreementand it is not an institution, but ….. is a permanent institution.
a. GATT, WTO
b. WTO, GATT
c.WTO, IMF
d. IMF, GATT
ans: a

22. The WTO was established to implement the _nal act of Uruguay Round agreement of ……
a. MFA
b. GATT
c. TRIP’s
d. UNO
Ans: GATT

23. WTO stands for

a. World technology association
b. World time organization
c. World trade organization
d. World tourism organization
Ans: c

24. NAFTA stands for

a. North African trade association
b. North American free trade agreement
c. Northern Atlantic trade agreement
d. Northern association for trade
Ans: b

25. IPR stands for

a. Intellectual property rights
b. International property rights
c. Internal promotion rights
d. Interior promotional rights
Ans: a

26. The main promoter of trade liberalization was

a. GATT
b. NAFTA
c. CEPTA
d. CISA
Ans. a. GATT

27. MNC Stands for

a. Multi National Coopertion
b. Multi National Corporation
c. Multi Nation Company
d. Multi National Collaboration
Ans: b

28. _______ is the _rst step in the internationalization process.

a. License
b. Foreign Investment
c. Sales
d. Export
Answer: a

29. SMEs stands for:

a. Small and Medium Entrepreuners
b. Small Management of Enterprises
c. Small and Medium-sized Enterprises.
d. Societies for Managing Exports
Answer: c

30. The OECD stands for:

a. Organization for Economic Co-operation and Development
b. Organization for Economic Coordination and Development
c. Organization for Environmental Cooperation and Development.
d. Organization for Environmental Control and Development
Answer: a