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

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

• [A] nostro account
• [B] vostro account
• [C] loro account
• [D] oreign bank account

Answer: Option [A]

2. 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: Option [D]

3. 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: Option [D]

4. 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: Option [C]

5. 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: Option [C]

6. The reduction in the value of a currency due to market forces is known as

• [A] revaluation
• [B] depreciation
• [C] appreciation
• [D] none of the above

Answer: Option [B]

7. 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: Option [B]

8. 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: Option [A]

9. 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: Option [B]

10. 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: Option [B]

11. The selling rate is also known as

• [A] bid rate
• [B] offer rate
• [C] spread
• [D] none of the above

Answer: Option [B]

12. 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] none of the above

Answer: Option [B]