Foreign Exchange Management - Questions & Answers for Competitive Exams | GkSeries

13. Indirect quotation is also known as

• [A] home currency quotation
• [B] foreign currency quotation
• [C] European quotation
• [D] American quotation

Answer: Option [B]

14. 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: Option [C]

15. 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] none of the above

Answer: Option [C]

16. 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: Option [D]

17. The external methods of hedging transaction exposure does not include-

• [A] forward contract hedg
• [B] money market hedge
• [C] cross hedging
• [D] futures hedging

Answer: Option [C]

18. 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: Option [C]

19. Foreign currency exposure can be avoided by

• [A] entering into forward contracts
• [B] denominating the transaction in domestic currency
• [C] exposure netting
• [D] none of the above

Answer: Option [B]

20. Leading refers to-

• [A] advancing of receivable
• [B] advancing of payable
• [C] advancing payments either receivables or payables
• [D] advancing of receivables and delaying of payables

Answer: Option [C]

21. Translation loss is-

• [A] a loss to the parent company
• [B] a loss to the subsidiary company
• [C] a notional loss
• [D] none of the above

Answer: Option [C]

22. Exposed assets are those translated at-

• [A] historical rate
• [B] average rate
• [C] current rate
• [D] current rate or average rate.

Answer: Option [C]

23. The method of managing translation exposure that is also available for managing transaction exposure is-

• [A] balance sheet hedge
• [B] transfer pricing
• [C] swaps
• [D] none of the above

Answer: Option [D]

24. Economic exposure does not deal with-

• [A] changes in real exchange rates
• [B] future cash flows of the firm
• [C] expected exchange rate changes
• [D] none of the above

Answer: Option [C]