MBA (n2) -4(Finance) International Financial Management (MF0015)

(Unit-1) International Financial Environment

Q: 1) . Means a company involved in producing and selling goods services in more than one country? Ans: Multinational Corporation Q:2) The full form of MNC is Ans: Multinational Corporation Q:3) The reduction of relative and absolute poverty , the increase of employment and the improvement of social welfare are additional .. Of MNC? Ans: Goals Q:4) As business expands, the awareness of opportunities in foreign markets also ? Ans: Increases Q:5) The liberalization and Globalization have propelled the growth of ..? Ans: Indian Companies .?

Q:6) How many Indian Companies have entered the elite list of fortune 500? Ans: 6 Indian Companies Q:7) The term globalization encompasses a range of Ans: Social, Political and economic changes Q:8) Globalization increases the ability f firms to do business across .? Ans: National boundaries Q:9) to ignore? is a phenomenon that no development agenda can afford ?

Ans: Globalization Q: 10) . Hs grown more quickly than the world economy in recent years, a trend that is likely to continue? Ans: Foreign trade Q: 11) An .. Is necessary so that all decisions of the organization contribute towards the fulfillment of this purpose? Ans: Objective Q: 12) The usually accepted objective of an MNC is to Ans: Maximize the shareholders wealth Q: 13) makes the MNC task much more complex than that of the domestic firms? Ans: The objective of maximizing the wealth of the shareholders ?

Q: 14) In Foreign Exchange market currency future options and derivatives are regularly traded. State true or false? Ans: True Q: 15) The manager can use the tax burden? Ans: Taxation tool Q: 16) .. Enables a firm to use its technology in foreign markets without a substantial investment in foreign countries? Ans: Licensing Q: 17) Methods of International business are ? . Tool to reduce the firms overall

Ans: 1) Licensing 2) Franchising 3) Joint ventures 4) Management contracts 5) Establishing new foreign subsidiary Q:18) means a firm in one country authorizing a firm in another country to utilize its brand names , logos etc. for some royalty payment? Ans: Franchising Q: 19) The 2 days or less? Ans: Spot Q: 20) or more? .. Market is for foreign exchange to be delivered in 3 days . Market deals with foreign exchange delivered within

Ans: The forward market

Q: 21) In quoting the forward rate of currency, a bank will quote a .. And offer rate for delivery? Ans: Bid Q: 22) .. is the effect that unexpected Exchange rate changes have on the value of the firm? Ans: Exchange Risk Q: 23) If the value of the foreign currency rises than ?

Ans: The Indian firm has to pay more domestic currency to get the required amount of foreign currency? Q: 24) The type of Foreign exchange exposures are Ans: 1) Translation 2) Transaction 3) Economy Q: 25) Match the stages of International Monetary System with the appropriate years:A) The Gold Standard B) The Inter-War Years C) The Bretton Woods System D) D) Flexible Exchange Rate Regime Ans: A-ii, B-iii, C-iv, D-i Q: 26) A company can have .. to say Pound /Rupee rates even if it does not have any transaction or translation exposure in the British currency? Ans: Economy Exposures i) 1973 ii) 1876-1913 iii) 1914-1944 iv) 1945-1973 ..?

Q:27) arises from the possibility of incurring foreign exchange Gains or losses on transaction already entered into and denominated in a foreign currency? Ans: Transaction exposures Q: 28) The Revived Bretton Woods System was identified in Ans: 2003 Q: 29) The full form of SDR is Ans: Special Drawing Right Q: 30) State the full form of:A) ERM ..? ..? ?

Ans: European exchange rate mechanism B) ECU ..?

Ans: European currency unit Q: 31) The Smithsonian Agreement was signed in known as the ..? Ans: December1971, Snake Q: 32) The was Designed to keep the European Economic Community Countries Exchange rates within a narrower band of . For their currencies? Ans: Snake, 1.125% Q: 33) . Is moving in a direction similar to that of Japan nearly a quarter of e century ago? .. And was also

Ans: South Korea Q: 34) The World Bank is the International Bank for .? Ans: IBRD & IDA Q: 35) The IBRD has two affiliates and these are Ans: IFC and MIGA Q: 36) The IFC and MOGA are sometimes referred to as Ans: World Bank group Q: 37) State the full form of the following:A) IBRD ? .? ? .&

Ans: International bank for reconstruction and development B) IDA ..?

Ans: International development association C) IFC ?

Ans: International Finance Corporation D) MIGA .?

Ans: Multilateral investment guarantee agency Q: 38) More than Ans: 40 Q: 39) There are . Countries that are members of the IFC? countries are eligible for IDA financing?

Ans: 182 Q: 40) MIGA was established in Ans: 1988 Q: 41) Currently MIGA has Ans: 175 Q: 42) Asian Development Bank is owned and financed by it s Members? Ans: 67 . . Members? .. ?

(Unit-2) The balance of payments

Q: 43) .. Includes exports and imports of goods and services, capital inflows and outflows? Ans: Economic transactions Q; 44) changes in Bop may predict the imposition or removal of foreign exchange controls. True or false? Ans: True Q: 45) The BOP helps to forecast resident of service in an India hotel is a transaction? Ans: Credit

Q: 47) Transactions that expend or use up foreign exchange are recorded as and are entered with a sign? Ans: Debits, (-) Q: 48) When India residents purchase foreign services, foreign exchange is used and the entry is recorded as ? Ans: Debit Q: 49) The transaction that involves the receipts of payments from foreigners is .? Ans: Credit transactions Q: 50) An increase in foreign assets of the nation and a reduction in the assets abroad are the forms of ? Ans: Capital inflows Q: 51) When an India resident sells a foreign stock, Indian assets abroad ? Ans: Decreases Q: 52) The balance of payment statement records all types of . That a country consummates over a certain period of time? Ans: International transactions Q: 53) The current account is divided into ..? 3) The

Ans: 1) The merchandise trade balance 2) The service balance balance on unilateral transfers

Q: 54) A while a

. In the current account represents an inflow of funds . Represents an outflow of funds?

Ans: Surplus, Deficit Q: 55) govt.? .. are the gifts and grants by both private parties and

Ans: Unilateral transfers Q: 56) Govt. transfers includes ?

Ans: Money, gods and services sent as aid to other countries Q: 57) Capital account is divided into ?

Ans : 1) Direct Investment 2) Portfolio investment 3) Other capital flows Q; 58) Capital flows represent the . Of capital account and represent claims with a maturity of less than .? Ans: Third category, one year Q: 59) Officials reserves are Ans: Govt. owned assets Q: 60) The official reserves account represents only purchases and sales by the . Of the country? Ans: Central Bank (RBI) Q: 61) The BOP has Ans: Three categories? .?

Q: 62) There are transaction rules in Current account given below, Complete them correctly:A) In investment, income pay is Ans: Debit, Credit B) In Unilateral Transfers, Give is Ans: Debit and Credit Q: 63) Portfolio investments are of Ans: Long-term and short-term ? . And receive is ? and Receive is .?

(Unit-3) The Foreign Exchange market

Q: 64) Globally, operations in foreign exchange market started in ? Ans: After the breakdown of Bretton Woods System 1971 Q: 65) A .. Is only freely convertible currency deposited in a bank outside its country of origin? Ans: Eurocurrency Q: 66) Any convertible currency can exist in Ans: Euro .?

Q: 67) Banks in which Eurocurrencies are deposited are called as ..? Ans: Euro banks Q: 68) The Eurocurrency market is mainly a Ans: Euro dollar Q: 69) euro currency market exists for demand deposits. True or false? Ans: False because it exists only for the savings and time deposits Q: 70) At the end of each period, the interest for the next period is calculated at the same fixed margin over the new ? Ans: LIBOR Q: 71) In Euro currency market the maturity of loan can vary from ? Ans: 3 to10 years Q: 72) Lenders in this market are almost exclusively Ans: Banks Q: 73) The managers charge the borrower a once and for all fee of .. Of the loan value? Ans: 0.25% to 1% Q: 74) Forward rates are usually quoted for fixes periods of From the day of the contract? Ans: 30, 60, 90 or 180 . ? ..?

Q: 75) In European terms, the rate is quoted in terms of the number of units if the foreign currency for one unit of domestic currency is called .? Ans: An indirect quote Q; 76) The difference between the spot rate and the forward rate is ? Ans: spread Q: 77) The foreign exchange transaction that are settled immediately are said to be occur in the ? Ans: Spot market Q: 78) Crude oil is an example of Ans: Future Q: 79) The settlement of foreign exchange transaction are made through the .? Ans: 1) NASTRO a/c 2) VOSTRO a/c 3) LORO a/c ?

Q: 80) The a/c maintain by an authorized dealer with a foreign bank is called ? Ans: NOSTRO a/c or Our a/c with you Q: 81) The exchange rate between any two non-dollar currencies is referred to as a .? Ans: Cross rate

Q: 82) The number of units of a foreign currency that are required to purchase one dollar is ? Ans: Indirect quotation Q: 83) Direct quotation is also known as Ans: American quotation Q: 84) Direct exchange rate quotations are most frequently used by the banks in dealing with ? Ans: Non bank customers Q: 85) The exchange rate between any two non-dollar currencies is referred to as a ..? Ans: cross rate Q: 86) The practice of taking advantage of a price differential between two or more markets is .? Ans: Arbitrage Q: 87) Arbitrage is Ans: Risk- free profit Q: 88) The rate of the exchange foe that currency at that exact particular time is ? Ans: The spot rate Q: 89) The differential that exists between the forward and the spot rate is known as ..? Ans: The swap rate .? ?

Q: 90) The floating that exists between the forward and the spot rate is known as ? Ans: The swap rate Q: 91) The types of pegged floats are .?

Ans: 1) The crawling bands 2) Pegging with horizontal bands and crawling bands Q: 92) State the full forms of:A) FEDAI ..?

Ans: Foreign exchange dealers association of India B) CCIL ?

Ans: Clearing Corporation of India Limited Q: 93) The Sodhani Committee was set up in Ans: 1994 ?

(Unit-4) Forwards, Swaps and Interest Parity

Q: 94) is a negotiated agreement between two parties?

Ans: a forward contract

Q: 95) The process of .. helps in keeping the exchange rate between any two currencies the same in different monetary centers? Ans: arbitrage Q: 96) The triangular arbitrage operates in the same manner as ..? Ans: Two-point arbitrage Q: 97) . To the international flow of short-term liquid capital to earn a higher return abroad? Ans: Interest arbitrage Q: 98) State the full form of CIA Ans: Covered interest arbitrage Q: 99) A .. Is a contract between two counter parties to exchange two streams of payments for an agreed period of time? Ans: Swap Q: 100) Swaps are not debt instruments to raise capital, but a tool used for .? Ans: Financial management Q: 101) are given a bid and ask? .?

Ans: Interbank quotations Q: 102) .. Is the price at which a dealer will sell the other currency?

Ans: An offer or ask

Q: 103) A .. is the price in one currency at which a dealer will buy another currency? Ans: Bid Q: 104) A . Is a double leg deal in which one buys spot currency X selling currency Y and simultaneously sells forward currency X buying currency Y? Ans: Swap transaction Q: 105) Options could be of Ans: European and American style Q: 106) is one option, which can be exercised by the buyer on or before the expiration date? Ans: American Style option Q: 107) The person selling an option in the market is known as ..? Ans: Option writer .?

(Unit-5)Currency and Interest rates Futures

Q: 108) A forward contract is a negotiated parties? Ans: Agreement .. between two

Q: 109) State the full form of:A) IMM .?

Ans: International Money Exchange B) CME ?

Ans: Chicago Mercantile Exchange Q: 110) CME? . In currency futures has expanded rapidly at the

Ans: Trading activity Q: 111) The Specified price is known as Ans: The future price Q: 112) Each contract also specifies the nearly or more deferred in time? Ans: Delivery month Q: 113) Future contract represents an ? which may be .?

Ans: Institutionalized, standardized form of forward contract Q: 114) . Category of futures contracts of futures contacts includes genuine metal and petroleum contracts? Ans: Metallurgical futures contracts Q: 115) The contracts months depends on the Ans: Seasonality and trading activity Q: 116) Complete the formula:..?

FB= Ans: IB+ (RF-D)

.?

Q: 117) The margin levels may allow leverage of up to Ans: 30-40 times

.?

Q: 118) The changing nature of the futures market has meant new types of .? Ans: market participants Q: 119) In Ans: Forward Q: 120) There are only few maturity dates in Ans: Futures contracts Q: 121) delivery? .. Of currency futures contracts are settled through ..? contracts no cash flows occur until delivery?

Ans: Les than 2% Q: 122) Normally futures contracts are settled through Ans: Contract reversal Q: 123) The mechanics of futures trading consists of ..? .?

Ans: 1) Components of futures trade 2) Execution of futures trade Q: 124) Upon completion of the futures contracts, the returned? Ans: Margin is

Q: 125) For most futures contracts the initial margin are the underlying commodity s value? Ans: 5% or less Q: 126) The daily resettlement is also known as Ans: Market to market Q: 127) In futures market out via a reversing trade? Ans: 99% Q: 128) order triggers a reversing trade when prices hit a prescribed limit? Ans: Stop order Q: 129) Bid asks Ans: Spreads Q: 130) are incurred in case of actual delivery? ? ?

of

of all futures positions are closed

Ans: Delivery costs Q: 131) Brokerage Commission is Ans: Tax deductible Q: 132) Traders are conducted through the use of Ans: Sophisticated hand signals Q: 133) Futures prices might be treated as a .. By the market regarding future prices for certain commodities? ..? ?

Ans: Consensus forecast Q: 134) Speculators are categorized by the a position? Ans: Length of time Q: 135) have longer horizons holding positions overnight and often as long as few months? Ans: Position traders Q: 136) When engaging in futures contracts in order to reduce risk in the spot position, the futures a trader is said to establish a ? Ans: Hedge Q; 137) When a trader writes a futures contract on another underlying asset, he is said to establish a ? Ans: Cross hedge Q: 138) . Is the price of a particular currency for settlement at a specified future date? Ans: Currency futures Q:139) are based off an underlying security which is a debt obligation and moves in value as interest rates change? Ans: Interest Rate factor Q: 140) The group of assets held by an investor is Ans: Portfolio ? .. they plan to hold

(Unit-6)Exchange Rate determination and forecasting

Q: 141) Sate the full form of PPP Ans: Purchasing Power Parity Q; 142) The PPP theory focuses on the Ans: Inflation-Exchange rate Q: 143) . Has popularized the PPP in the 1920s? Relationship? ..?

Ans: A Swedish Economist, Gustav Cassel Q; 144) The PPP theory become popular against Ans: Historical backdrop Q: 145) . Is an alternative version of PPP? Ans: The relative form of PPP theory Q: 146) If subscript o refers to the base period and 1 to a subsequent period than relative PPP theory postulates that ? Ans Rab1 = Rabo .? .?

Q: 147) The vertical axis measures the

Ans: Percentage of appreciation or depreciation of the currency Q: 148) .. research has been done to test the validity of PPP theory?

Ans: Substantial Empirical Research

Q: 149) Interest rate parity is Ans: An economic identity Q: 150) IRP is expressed as a Ans: basic algebraic identity

..?

Q: 151) If interest rate parity is violated, than an Ans: Arbitrage opportunity Q: 152) The types of Interest Rate Parity are Ans: 1) Covered interest rate parity Q: 153) IFE stands for Ans: International fisher effect Q: 154) IFE is closely related to the Ans: PPP Q: 155) The nominal interest rate is consists of a Ans: Real rate of return and anticipated inflation ? ..? ?

. Exists?

2) Uncovered interest rate parity

..?

Q: 156) The nominal interest rate would also incorporate the Of an investment? Ans: Default risk Q: 157) IFE uses Ans: Interest rates Q: 158) International trade tends to equate the ? .?

Ans: Prices of traded goods and services

(Unit-7) Management of translation exposures

Q: 159) accounting exposures are also known as Ans: Translation exposures Q: 160) MNC face three kinds of risks and they are Ans: 1) Translation 2) Transaction 3) Economic .? .? ..?

Q: 161) Translation Exposures= Ans: Exposed assets Exposed liabilities

Q: 162) Assets and liabilities are to be translated at the Ans: Current rate Q: 163) Translation adjustments are to be charged to the reporting company? Ans: Net income Q: 164) Items occurring numerous times can be used? Ans: Weighted averages

.?

. For exchange rates

Q: 165) . Exposures refer to the extent to which the future value of firm s domestic cash flows is affected by exchange rate fluctuations? Ans: Transaction exposures

Q: 166) The degree of translation exposures depends on the extent to which a firm transaction in ..? Ans: Foreign currency Q: 167) An entity cannot have transactions are measured? Ans: An expense Q: 168) If the Pound weakens, the company loses it s Ans: Competitiveness Q: 169) Under the Indian Exchange Control, cannot be hedged? Ans: Economic exposures Q: 170) Futures contracts differ from Ans: Forwards Q: 171) ..is one where the customer has the right but not the obligation to contract on maturity date? Ans: Option contract Q: 172) The option premium depends on the ? in 3 important ways? ..? in the currency in which its

Ans: 1) Strike price 2) Maturity date 3) Current Spot Rate 4) Volatility Q: 173) CTA account helps in Ans: Balancing the balance sheet Q:174) State the full form of CTA .? ?

Ans: Cumulative Translation Adjustment

Q: 175)

..items are translated at historical rates?

Ans: Non- monetary Q: 176) Income statements items translated at Ans: Average exchange rate Q: 177) . Method is a modified version of the monetary and nonmonetary method? Ans: Temporal method Q: 178) Inventory is shown in the Ans: balance sheet Q: 179) The cost of goods sold and depreciation are translated at ..? Ans: Historical rates Q: 180) method is perhaps the oldest approach? ..? ..?

Ans: Current/non-current Q: 181) FASB52 was issued in Ans: December 1981 Q: 182) FASB stands for ? .?

Ans: Financial accounting standards board statement Q: 183) The currency of the primary economic environment in which the affiliate operates and in which it generates cash flows is ..? Ans: Functional currency

Q: 184) is the currency in which the parent firm prepares its own financial statements? Ans: The reporting currency Q: 185) If the foreign functional currency is deemed to be the parent s currency, translation of the affiliate s statements employee the temporal method of ..? Ans: FAS#8 Q: 186) All financial statement items restated in terms of the parent currency are the .. amount multiplied by the appropriate exchange rate? Ans: Functional currency

(Unit-8) management of transaction exposures

Q: 187) deals with changes in cash flows that result from existing contractual obligations? Ans: Transaction exposures Q: 188) Transaction exposures measures gain or losses that arise from the settlement of ..? Ans: Existing financial obligation Q: 189) MNC have their own method for developing exchange rate ?

Ans: Projections Q: 190) If a company is a short in a foreign currency will currency forward? Ans: Buy Q: 191) Funds on hand or to be received are matched by Ans: Funds to be paid Q: 192) The simultaneously borrowing and lending activities enable a company to create a ..? Ans: Home- made forward contract Q: 193) If the funds to repay the loan are generated from business operation than the is covered? Ans: Money market Q: 194) Call option is the Ans: Right Q: 195) of the firm should manage exchange exposures? , but not the obligation? ? .. the

Ans: Management Q: 196) For individual shareholders, the transaction costs can be ..? Ans: Substantial Q: 197) In a corporate hedging, probability of lower? Ans: Default cost is significant

Q: 198) period?

is a measure of the change in price over a given time

Ans: The volatility of a currency Q: 199) .. involves offsetting exposures in one currency with exposures in the same or another currency? Ans: Exposure netting

(Unit-9) Management of Economic and operational exposures

Q: 200) Product sourcing, Input mix, plant location, raising productivity is .. ? Ans: Production initiatives Q: 201) Every forex trader should have a Ans: Forex trading strategy Q; 202) Major strategy considerations for an exporter are the market in which to sell is ..? Ans: Market selection Q: 203) Promotional Strategy should take into account Ans: Anticipated exchange rate changes .? .?

Q: 204) A key issue in any marketing programme is the size of the .? Ans: Promotional budget Q: 205) .. & . Are the principle variables that companies manipulate to manage competitive risks? Ans: Product sourcing and plant location Q: 206) outright additions to facilitates overseas accomplish a ? Ans: Manufacturing shift Q: 207) A strategy of production shifting that a company has already created a portfolio of plants worldwide? Ans: Presupposes Q: 208) .. can also be used to heighten productivity and improve product quality? Ans: Employee motivation Q: 209) Economic exposures can be managed by a combination of & ? Ans: marketing & Production initiatives Q: 210) Outright additions to facilities overseas accomplish a manufacturing shift is .? Ans: Input mix

(Unit-10)Management of economic and operational exposures

Q: 211) Exposures to exchange rate fluctuation could lead to a ..? Ans: Higher cost of capital Q: 212) CAPM stands for Ans: Capital Asset pricing model Q: 213) Political risk impacts the cost of capital of MNC by moving it as compared to a domestic firm? Ans: Upward Q: 214) A subsidiary with a capital structure similar to its parent may out on profitable opportunities to lower its cost of funds. Is it true or false? Ans: True Q: 215) The differential tax advantage to debt across markets for foreign affiliates is a function of the ? Ans: International tax system Q: 216) If foreign tax rates are below home rates, dividends will generally lead to ? Ans: Increased taxes Q: 217) The objective of capital structure management is to mix the ? ..?

Ans: Permanent sources of funds Q: 218) . Is the required rate of return needed to motivate the investors to buy the firm s stock? Ans: The cost of capital Q: 219) The dividend growth model is also known as Ans: Gorden model Q: 220) The formula of CAPM for calculating cost of equity is:E(Rj) = Ans: Rf+ j (E (Rm Rf) Q: 221) When a firm has both debt and equity in its capital structure its financing cost can be represented by the .? Ans: Weighted average cost of capital Q: 222) .. Is a function of supply and demand any factors affecting the supply and demand will affect? Ans: Risk free rate Q: 223) . May affect the interest rates in a country? ..? ..?

Ans: Demographics Q: 224) funds? . Affects interest rates through the supply of loanable

Ans: Monetary policy Q: 225) Stable economic conditions results in a ..?

Ans: Low risk of recession Q: 226) Pecking order of financing was first discovered by Ans: Donaldson Q: 227) . Is the most efficient way to finance a firm as they incur the minimum cost compared to debt or equity? Ans: Retained earnings Q: 228) Each firm has an Competitive strategy? .. , .& . ?

Ans: Efficient, unique and powerful Q: 229) Risk arises due to changes in exchange rate is Ans: Foreign exchange rate .?

(Unit-11) Multinational capital budgeting

Q: 230) Ans: Parents Q: 231) Multinational firms investing abroad are exposed to Ans: Foreign exchange risk Q: 232) Project cash flows consist of Ans: Profits & Depreciation .& .. Charges? .? cash flows are different from project cash flows?

Q: 233) Accounting for . In the capital budgeting process depends on the opportunity cost of blocked funds? Ans: Blocked funds Q:234) can exist between the project and parent cash flows because of tax regulations and exchange control? Ans: Substantial differences Q: 235) Evaluating a project on the basis of its some useful purposes? Ans: own cash flows Q: 236) .. and . Have suggested a three stage of financial analysis of foreign projects? Ans: Stonehill and Nathanson Q: 237) Royalties and other license fees are normally calculated of projects ..? Ans: Sales revenue or volume Q: 238) DCF stands for Ans: Discounted cash flow Q: 239) The two most criteria of DCF techniques are Ans: 1) Net Present Value Q: 240) 2) Internal rate of Return .? ? . Services

. Is the present value of all cash inflows?

Ans: The NPV of a project

Q: 241) APV stands for Ans: Adjusted Present Value

.?

Q: 242) The APV model is a value additivity approach to Ans: capital budgeting Q: 243) DCF techniques involve the use of the project evaluation? Ans: Time value of money Q: 244) The APV approach uses different segments of the total cash flows? Ans: Discount rates

..?

.. principle to

.. for different

(Unit-12)Country risk analysis

Q: 245) .. is an indispensable tool for asset management as it requires the assessment of economic opportunity against political odds? Ans: Country risk Q: 246) The list of factors to be analyzed in a country risk analysis study varies from ? Ans: Forecaster to forecaster

Q: 247) Political risk is 50% of the exercise but inseparable from economic risks. This line was said by .? Ans: Hans Belesak Q: 248) A subsidiary will not necessarily be affected changing Govt, if the attitude towards the subsidiary remains the same. True or false? Ans: True Q: 249) Along with political factors when assessing country risk? Ans: Economic risk factors Q: 250) . Is used as a measure of economic instability, description and govt. mismanagement? Ans: The Inflation Rate Q: 251) A MNC that exports to a country or develops a subsidiary in a country is highly concerned with . For its product? Ans: Country s demand Q: 252) The resource base of a country consists of its & ..? Ans: National, human and financial resources Q: 253) . Related factors are the quickest and commonest variables employed to test the possibility of a country defaulting? Ans: Debt Q: 254) Difficulties in debt service could be a result of shortterm ? Ans: Liquidity problems ., should also considered

Q: 255) The balance of payment management is a function of & ..? Ans: Internal goals & Changing external circumstances Q: 256) A very useful indicator of country risk analysis is the Ans: Current account balance

Q: 257) . Indicates the rate at which a country is building foreign assets or accumulating foreign liabilities? Ans: Current account balance Q: 258) Countries with large current account deficits are Ans: Less creditworthy Q: 259) .. provide a short- term safeguard against fluctuation in foreign receipts? Ans: Reserves Q: 260) The inflation rate can be regarded as a economic management? Ans: Proxy Q: 261) . Can be measured by a set of ratio s that focus on the long-term growth prospects and any economic imbalances of the economy? Ans: The economic performance Q: 262) . Ratio is called the propensity to invest ratio and capture s a country s prospects for future? Ans: Gross Investment/Gross domestic product . For the quality of .?

Q: 263) rating of a country s credit worthiness is mainly compiled by .& ? Ans: Institutional Investor and Euro money Q: 264) Euro money the ratings are available since Ans: 1982 Q: 265) .. refers to the degree or level of risk and is a device used to denote the degree of country risk by a figure? Ans: Country risk rating Q: 266) . Means taxation of same income of a person in more than one country? Ans: Double taxation Q: 267) The two main rules of income taxation are Ans: 1) Source of income rule 2) Residence rule ..? .?

Q: 268) The income earner may be taxed on the basis of his residual status in that country. Is it true or false? Ans: True Q: 269) . May be in the form of credit for tax payable in another country or by charging tax at lower rate? Ans: Relief Q: 270) Relief from double taxation is provided by Ans: Abatement Q: 271) State the full form of OECD .? .?

Ans: Organisation of Economic Co- operation and development

Q: 272) Limited agreements are generally entered into to avoid double taxation relating to income derived from operation of .? Ans: Aircraft, ships, carriage of cargo and freight Q: 273) India has agreements for avoidance of double taxation with over .? Ans: 60 countries Q: 274) total income? .. means the tax payable on total income divided by the

Ans: Average rate of tax Q: 275) Any income arising from an international transaction shall be computed having regard to the ..? Ans: Arm s length price Q: 276) .. means a transaction between two or more enterprise, either or both of whom are non-resident? Ans: International transaction Q: 277) .includes a number of closely lined transactions?

Ans: Transaction Q: 278) .. is the total market value of all final goods and services produced in a given year? Ans: Gross Domestic Product (GDP)

(Unit-13)International Banking

Q: 279) The debt crisis of the Ans: 1980s

affected all the countries?

Q: 280) As countries trade with each other, economics are Ans: Integrated Q: 281) LCD stands for Ans: Less Developed Countries ?

Q;282) In August 1982, ..announced that is was unable to pay its debt to international creditors? Ans: Mexico Q: 283) March, 1989, saw new international debt strategy in the form of ? Ans: Brady Plan Q: 284) The major problem with the Brady Plan was that it required ? Ans: Commercial banks Q: 285) Money banks, used the Brandy Plan as an opportunity to exist from the ..? Ans: LDC debt market Q: 286) The South Asian countries experienced only Ans: Mild impact Q: 287) IMF stands for ..? .?

Ans: International Monetary Fund

Q: 288) . Is the practice of extending credit to borrowers with certain credit characteristics? Ans: Subprime lending Q: 289) Sub-prime lending is a common first step towards Ans: Credit repair Q: 290) .. seemed an unstoppable trend from the mid- 1990s through to today? Ans: Home Price Appreciation Q: 291) became extremely popular in the U.S.? ?

Ans: Adjustable Rate mortgages Q: 292) FFR stands for Ans: Federal Funds Rate Q: 293) International organization is placing a lot of emphasis on the development and implementation of .? Ans: International Standards and principles Q: 294) . Was launched in 1988 became a global standard by which the financial soundness of the bank is assessed? Ans: The Basel Capital Accord Q: 295) State the full form of CAR Ans: capital Adequacy Ratio Q: 296) The OECD has developed a set of principles of were endorsed in May 1999? Ans: Corporate Governance which ..? .?

Q: 297) The MPI stands for Ans: Macro prudential indicators

..?

Q: 298) .. is the risk of adverse changes in a currency rate or in an interest rate? Ans: Market risk Q: 299) is inherent in foreign exchange trading?

Ans: Exchange Rate Risk Q: 300) time? Ans: Credit risk Q: 301) When an institution provides credit, it expects to be Ans: Repaid Q: 302) .. is a variation of credit risk which is very important and relevant in foreign exchange trading? Ans: Sovereign Risk Q: 303) The growth in International banking has also significantly increased ..? Ans: The risk of international banking .? . Refers to the risk of not getting back the payment on

(Unit-14) Interest rates and currency swaps

Q: 304) The concepts of the Swap has broad finance? Ans: Implications & Applications Q:305) The five basic components of financing are Ans: 1) Credit 2) Funding 3) Tenor

&

.. in

.?

4) Currency 5) Interest rate

Q:306) means of financing investment abroad in the face of exchange control regulations and are regarded as the forerunners of swap? Ans: parallel loans Q: 307) Parallel loans involve at least (1) . And usually the parties consist of (2) .. of affiliated companies? Ans: 1) Four parties Q: 308) 2) two pairs

.. resemble to parallel loans?

Ans: back- to- back loans Q: 309) Swaps are Ans: Mutual obligations Q: 310) The swap of facilitators are known as Ans: swap banks or simply Q: 311) Swap broker is Ans: An economic agent Q: 312) A Swap broker is also called a Ans: market maker .? ? .? . Among the swap parties?

Q: 313) . Is the principal amount on which the interest calculation is made? Ans: Notional principal Q: 314) refers to the fixed rate of interest on the Swap?

Ans: Swap coupon Q:315) A Swap in which a stream of floating interest rates are exchanged for another stream of interest rates is known as Ans: Basis Swap Q: 316) If the interest rate rise, Rate payer will terminate the swap? Ans: The floating Q: 317) An interest rate swap, which incorporates the cap feature, is called a .? Ans: Rate capped swap Q: 318) A benchmark rate plays an important role in the growth and development of the ..? Ans: Interest rate swap market Q: 319) .. is a contract to exchange interest payments in one currency for those denominated in another currency? Ans: A currency swap Q: 320) MIBOR stands for ..? ..?

Ans: Mumbai Inter- Bank offered rate Q:321) entails the exchange of debt denominated in one currency for debt denominated in another currency?

Ans: A standard currency swap Q: 322) . Are very popular for lease based transaction where the principal reduces annually or even more frequently? Ans: Amortizing swaps Q: 323) A variation on the amortizing swap is the Ans: Roller- coaster swap Q: 324) LIBOR is normally set payment date? Ans: 1) 6 months 2) 2 days . Of the cap and swap are also
(1)

..?

.. &

(2)

.. before a

Q: 325) The .& identically matched? Ans: Term & Periodicity

Q: 326) There is no up-front premium payable in Ans: Participation swaps

..?

Q; 327) The ultimate fixed payment is a . Based on the compounding of the immediate cash flows at the swap rate? Ans: Single forward rate Q: 328) In an .. the fixed rate payer gets the right to extend the swap maturity date? Ans: Extendible swaps Q: 329) Currency swaps may or may not involve initial exchange of principal. Is it true or False? Ans: true

(Unit-15) Global vs. American Depository receipts

Q: 330) State the full form of:A) ADR .?

Ans: American Depository Receipt B) SEC ..?

Ans: Securities Exchange Commission C) NYSE .? D) Ans: New York Stock Exchange Q: 331) Non-U.S. companies have a choice of facilities? Ans: Five Q: 332) market? Ans: The U.S. Q: 333) To set up a successful ADR Programme the issuing company must be a significant player in the ..? Ans: Global arena Q: 334) Normally grants the approval of the registration statement within a short period of time? Ans: SEC (Security Exchange Commission) . Is the world s largest and most liquid capital types of ADR

1 Q: 335) An unsponsored ADR programs are ..From full compliance with the SEC s reporting requirement, they can only be 2 traded on the ?

Ans: 1) Exempt

2) OTC market ?

Q: 336) QIB stands for Ans: Qualified institutional buyers

Q: 337) n are as liquid as their underlying securities because they are interchangeable? Ans: Depository receipts Q: 338) Depository receipts are Ans: Negotiable Q: 339) Dividends and other cash distributions are converted into dollars at competitive .? Ans: Foreign exchange rates Q: 340) The ESOP stands for Ans: Employee Stock Options Q: 341) India entered the international arena in Ans: May 1992 Q: 342) GDR stands for ..? ..? ? . U.S. Securities?

Ans: Global Depository Receipts Q: 343) The types of depository receipts are Ans: 1) GDRs and 2) ADRs & .?