<<123456789101112131415161718192021222324252627>> 1. All the exchange rates quoted on the screen or in print are for__ unless otherwise mentioned.Forward transactionsCash transactionsSpot transactionsTom transactionsQuestion 1 of 27 2. Forward rates fully reflect interest rate differentials only inControlled economiesDeveloping economiesEconomies where interest rates are freeIn perfect markets where the currencies are fully convertible and the markets are highly liquidQuestion 2 of 27 3. 'Nostro accounts' areAccounts meant for reconciliationAccounts of foreign banks with Indian banksCurrent accounts denominated in foreign currency maintained by banks with their correspondent banksShort term investments with AAA rated foreign banksQuestion 3 of 27 4. Notice money refers toFunds placed overnightFunds placed after giving a notice of placementFunds placed for periods in excess of 3 months but not exceeding 1 yearPlacement of funds beyond overnight but not exceeding 14 daysQuestion 4 of 27 5. The salient feature of convertible bond isConversion of physical bonds into demat formAbsence of couponAutomatic reinvestment in another bond on maturityOption to convert the bond in to equity on a fixed date or during a fixed period and the price is pre-determinedQuestion 5 of 27 6. What contributes to the high liquidity of the foreign exchange market?Physical boundariesLimited information disseminationOnline trading across time zonesGovernment regulationsQuestion 6 of 27 7. Which of the following is a feature of the foreign exchange market?Limited trading volumeSlow information disseminationWide buy-sell spreadEfficient price discovery mechanismQuestion 7 of 27 8. In the foreign exchange market, what does "spot" refer to?Settlement of funds on the same daySettlement of funds on the next working daySettlement of funds two working days from the trade dateSettlement of funds three working days from the trade dateQuestion 8 of 27 9. What distinguishes forward contracts from spot trades in the foreign exchange market?Forward contracts are settled immediately, while spot trades are settled on a future date.Forward contracts involve the purchase or sale of currency on a future date, while spot trades involve current transactions.Forward contracts are only entered into by importers and exporters, while spot trades involve banks.Spot trades are regulated by local authorities, while forward contracts are not subject to regulatory oversight.Question 9 of 27 10. How are forward exchange rates determined?By forecasting future rate movements in the market.Based on the demand and supply of currencies in the forward market.Solely by the interest rate differentials of two currencies.Through government interventions to stabilize currency values.Question 10 of 27 11. What is a key characteristic of Non-Deliverable Forwards (NDF) contracts?They require physical delivery of currencies at maturity.They are traded onshore in regulated financial markets.They involve speculative trading in emerging Asian economies.They do not require physical delivery of currencies at maturity and are traded in offshore markets.Question 11 of 27 12. Who are the major participants in the NDF market?Only foreign investors facing exchange controls.Only residents and non-residents with access to onshore markets.Only hedge funds and investment banks.Foreign investors facing exchange controls, entities like hedge funds, commercial and investment banks, and participants with access to both onshore and offshore markets.Question 12 of 27 13. How does a futures contract differ from a forward contract?Futures contracts are traded over the counter, while forward contracts are traded on an exchange.Futures contracts are standardized in terms of size and maturities, while forward contracts are not.Futures contracts involve physical delivery of the asset, while forward contracts do not.Futures contracts are only available for currencies, while forward contracts cover a wider range of assets.Question 13 of 27 14. What role does the exchange play in the trading of futures contracts?The exchange sets the prices for futures contracts.The exchange guarantees the settlement between parties and eliminates counterparty risk.The exchange maintains margins for participants.The exchange ensures physical delivery of the asset.Question 14 of 27 15. How are positions in futures contracts typically closed out?By physical delivery of the asset.By maintaining margins with the exchange.By opposite trades.By holding the position until maturity.Question 15 of 27 16. Which of the following assets can futures contracts be based on?Only currencies.Only commodities.Only stock indices.Currencies, bonds, interest rates, stock indices, commodities, etc.Question 16 of 27 17. What is the main difference between an American style option and a European style option?An American option can only be exercised on the expiration date, while a European option can be exercised before the expiration date.An American option can be exercised by the buyer at any time before the expiration date, while a European option can only be exercised on the expiration date.An American option can only be exercised by the seller, while a European option can only be exercised by the buyer.An American option can only be exercised by the buyer, while a European option can only be exercised by the seller.Question 17 of 27 18. What does a call option give the holder the right to do?Sell the underlying asset at the strike price.Buy the underlying asset at the strike price.Sell the underlying asset at a price higher than the strike price.Buy the underlying asset at a price lower than the strike price.Question 18 of 27 19. What is the obligation of the seller (writer) of a put option?To sell the underlying asset at the strike price if the buyer decides to exercise the option.To buy the underlying asset at the strike price if the buyer decides to exercise the option.To sell the underlying asset at a price higher than the strike price.To buy the underlying asset at a price lower than the strike price.Question 19 of 27 20. What can be the underlying assets for options contracts?Only physical commodities like wheat, rice, cotton, gold, or oil.Only financial instruments like equity stocks or stock indices.Both physical commodities and financial instruments.Only equity stocks.Question 20 of 27 21. What is a swap transaction in the foreign exchange market?A transaction involving the simultaneous purchase and sale of the same currency on two forward dates.A transaction involving the exchange of cash flows between two parties.A transaction where currencies are bought and sold at spot and forward rates simultaneously.A transaction where currencies are exchanged without any forward commitment.Question 21 of 27 22. When does a swap transaction present a profit opportunity from interest rate arbitrage?When the interest rate differential between two currencies is zero.When the interest earned on an investment exceeds the cost of funds obtained through the swap.When both currencies involved are fully convertible.When the forward premium/discount equals the interest rate differentials.Question 22 of 27 23. What is the primary purpose of using the swap route in foreign exchange transactions?To eliminate currency and interest rate mismatches.To generate profits from speculative trading.To take advantage of interest rate differentials between two currencies.To facilitate immediate conversion of one currency into another.Question 23 of 27 24. What distinguishes currency swaps from short-term funding swaps?Currency swaps involve the exchange of cash flows, while short-term funding swaps involve actual exchange of funds.Currency swaps are used for principal and interest payments of loans, while short-term funding swaps are used for investment purposes.Currency swaps are more common in treasury dealings, while short-term funding swaps are used for converting cash flows.Currency swaps involve the simultaneous purchase and sale of currencies, while short-term funding swaps involve forward commitments.Question 24 of 27 25. What are the sources of foreign exchange surpluses for banks?Profits from domestic branch operationsProfits from equity investmentsProfits from overseas branch operationsProfits from retail banking servicesQuestion 25 of 27 26. What are Nostro accounts used for in banking?To invest in long-term securitiesTo hold funds pending utilization or customer withdrawalsTo provide loans to customersTo maintain reserves with the central bankQuestion 26 of 27 27. How do correspondent banks typically handle excess funds in Nostro accounts?By converting them into local currencyBy offering automatic investment facilities in the money marketBy transferring them to other banksBy holding them as reservesQuestion 27 of 27 Loading...
