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International Banking Previous Year Questions

1. The authorized dealers under FEMA are classified into

A. Two categories
B. Three categories
C. Four categories
D. Five categories.

2. The term Loro account means

A. My account with you.
B. Our account with you.
C. Your account with us.
D. Their account with you.

3. Foreign exchange transactions involve monetary transactions

A. Among residents of the same country
B. Between the residents of two countries only.
C. Between residents of two or more countries.
D. Among residents of at least three countries.

4. Full-fledged money changers are authorized to undertake

A. Only sales transactions
B. Only purchase transactions
C. All types of foreign exchange transactions
D. Purchase and sales of foreign currency notes, coins and travellers cheques

5. Category I of Authorized dealers in India are

A. All scheduled commercial banks in India
B. All public sector banks in India
C. The banks that have been authorized by RBI to deal in foreign exchange
D. Selected financial and other institutions

6. 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. Foreign Exchange Draft Agreement on Interest

7. In India the rates of chargers for foreign exchange business to be recovered by banks from their customers are determined by

A. FEDAI.
B. RBI.
C. FEDAI in consultation with IBA.
D. the bank concerned.

8. An authorized person under FEMA does not  include

A. An authorized dealer.
B. An authorized money changer
C. An offshore banking unit
D. An exchange broker.

9. Amendments of FEMA regulations are communicated by RBI in the form of

A. AD (MA) Circulars.
B. AD (GP) Circulars
C. AP (Dir Series) Circulars
D. public notices.

10. The responsibility for administration of FEMA is vested with

A. RBI.
B. Central Government.
C. RBI and Central Government
D. State Government.

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

A. depreciation.
B. devaluation.
C. appreciation.
D. revaluation.

12. . Paper currency was used for internal use and gold was used for international settlement under ______________ standard.

A. Gold.
B. Gold bullion.
C. Gold currency
D. Gold exchange.

13. The anchor currency that was used in the original scheme of IMF was

A. US dollar.
B. Euro.
C. Pound Sterling.
D. Yen.

14. The system of fixed peg where adjustments in exchange rates are made periodically is

A. Crawling peg.
B. Crawling band.
C. Horizontal band.
D. Independently floating.

15. The market forces influencing the exchange rate are not operational under

A. Floating exchange rate system.
B. Speculation attack on the market.
C. Fixed exchange rate system.
D. Current regulation of IMF.

16. Under fixed peg arrangement of currency regime

A. domestic currency cannot fluctuate in the market from the official rate
B. domestic currency cannot fluctuate in the market within narrow band of 1%.
C. currency issue is decided by the currency board.
D. the country pegging its currency should maintain account with the country to whose currency its currency is pegged.

17. According to classification by IMF, the currency system of India falls under

A. managed floating.
B. independently floating.
C. crawling peg.
D. pegged to basket of currencies

18. Under fixed exchange rate system, the currency rate in the market is maintained through

A. official intervention
B. rationing of foreign exchange
C. centralizing all foreign exchange operations with central bank of the country
D. Decentralizing.

19. At present the role of IMF in the exchange rate policies of its members is to

A. prohibit floating rate.
B. have surveillance and express opinion on policies
C. restrict the exchange fluctuations within a band.
D. permit free floating exchange rate.

20. Euro is not a legal tender in the following country

A. Spain.
B. Greece.
C. Finland.e.
D. None of the above.

21. Convertibility of a currency is indicated by its

A. Conversion at market rates
B. Conversion at market rates, but subject to quantity restriction by government.
C. conversion at market rates without any quantitative restriction by government
D. Conversion at official rates.

22. Adjustment of BOP disequilibrium is automatic under

A. floating exchange rate system
B. speculation attack on the market.
C. fixed exchange rate system.
D. current regulation of IMF

23. The monetary system where gold coins of a definite weight and fineness circulated as the standard unit of currency is __________ standard.

A. gold.
B. gold bullion
C. gold currency.
D. gold exchange.

24. Generally imports are recorded at ________ value in BOP.

A. FOB.
B. CIF.
C. CFR.
D. Actual cost

25. For balance of payment statistics, visible trade refers to trade in

A. goods/ commodities.
B. services.
C. fund inflow.
D. fund outflow.

26. A credit in BOP indicates

A. accumulation of bank balances abroad.
B. foreign direct investment received into the country.
C. earnings of foreign exchange by the country.
D. earnings of foreign exchange or incurring of liability abroad or decrease in asset abroad

27. The current account of the BOP includes

A. unilateral payments
B. portfolio investments.
C. short term borrowings.
D. long term borrowings.

28. A country has a negative balance of trade. It means the balance of payment on the  current account

A. should also be negative
B. Should be positive
C. may be positive or negative.
D. Should be same as the balance of trade

29. The capital account of balance of payment represents

A. the balances the central bank of the country maintain with IMF
B. balances held by commercial banks of the country with the central bank of the country.
C. investment made by the country’s residents abroad, but not vice versa.
D. transfer of money and other capital items as changes in the country’s foreign assets and Liabilities

30. The abbreviation for SDR is

A. Special Drawings Right.
B. Specific Drawing Rights.
C. Special Depository Rights.
D. Specific Depository Rights

31. The value of SDR is

A. Equivalent to one US dollar.
B. Based on the value of gold.
C. Average of the value of US dollar and Euro.
D. Based on basket of five currencies.

32. The largest foreign exchange market in the world is

A. the London market
B. The US market.
C. The Newyork market.
D. The Japanese market

33. A two month forward contract booked on 25th March will due on

A. 24th May.
B. 25th May.
C. 26th May.
D. 27th May.

34. The difference in the bid rate rate and the ask rate in the interbank quotation is called

A. swap points.
B. Margin.
C. Spread.
D. None of the above

35. A transaction in the inter bank market to be executed on the same day is known as

A. spot transaction.
B. Forward transaction
C. Swap deal.
D. Cover deal.

36. Forward margin in the foreign exchange market is also known as

A. Swap points
B. Margin.
C. Spread.
D. None of the above.

37. Foreign exchange market is considered 24-hour market because

A. it is open all through the day.
B. All transactions are to be settled within 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.

38. 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.

39. Speculation in foreign exchange market refers to

A. buying and selling of currencies in large volumes
B. Booking of forward contracts without intention to execute.
C. buying and selling in the view to make profits from movements in rates
D. buying and selling with the view to making riskless profits.

40. 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. Sella the currency when he has a receivable in the future.
D. Buys and sells to make advantage of market imperfections.

41. Hedging transactions is indicated by

A. transactions in odd amounts.
B. Presentation of documentary support.
C. Frequency of such transactions
D. None of the above.

42. Which of the expansions of abbreviations is correct?

A. CHIPS- Clearing House Interbank Payment System
B. CHAPS- Clearing House American Payment System
C. CHIPS- Chartered House International Payment System.
D. CHAPS- Clearing house International Payment System.

43. Indirect rate in foreign exchange means

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

44. Indirect rate of exchange is quoted in India for

A. sale of foreign travellers cheques.
B. Sale of rupees travellers cheques
C. Purchase of personal cheques.
D. None of the above.

45. In direct quotation, the unit kept constant is

A. the local currency.
B. The foreign currency.
C. The subsidiary currency
D. The Gold rate.

46. In Mumbai, US dollar is quoted as under USD 1 = Rs.6725/6875. It means

A. the buying rate is 43.6725 and selling rate is 43.6875
B. the buying rate is 43.6875 and selling rate is 43.6725
C. the dollar is appreciating in value.
D. The dollar is depreciating in value.

47. The maxim buy low; sell high is applicable for

A. quotation of pound sterling
B. Indirect rates.
C. Direct rates.
D. US dollars.

48. 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.

49. US dollar was quoted at Rs. 67.25 yesterday and is today quoted at Rs.67.34. It means

A. Rupee has appreciated in value.
B. Dollar has appreciated in value
C. Either rupee has appreciated in value or dollar has depreciated in value.
D. Either rupee has depreciated in value or dollar has appreciated in value.

50. Under FEMA, the RBI has been authorized to make _____________ to carry out the provisions of the Act.

A. Rules. .
B. Regulations.
C. Both rules and regulations.
D. Notifications

51. Which of the following statement is true?

A. Foreign exchange leads to foreign trade.
B. Foreign trade leads to foreign exchange
C. No foreign exchange is involved in foreign trade
D. There is no link between foreign trade and foreign exchange

52 The acronym SWIFT stands for

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

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

A. Nostro account.
B. Vostro account
C. Loro account
D. Account opened in offshore centers

54. Non- resident bank accounts refer to

A. Vostro account
B. loro account.
C. account opened in offshore centers
D. EEFC accounts.

55. The number of nostro accounts that can be maintained by a bank in a particular currency is

A. One.
B. Not exceeding three.
C. Minimum two.
D. No such limit.

56. 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 are permitted to be maintained.
D. Indian rupees.

57. 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 Manuals.

58. Restricted money changers are authorized to undertake

A. Purchase and sell travellers cheques
B. Deal in foreign exchange transactions of all kinds up to a certain limit.
C. Deal only in currencies approved by RBI.
D. Purchase foreign travellers cheques and notes and coins.

59. FEDAI does not cover

A. Hours of business of foreign exchange market.
B. Interest for late settlement interbank dealings
C. Forward contract with customers
D. None of the above.

60. 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.

61. Forward margin is

A. The profit on forward contract
B. Commission payable to exchange brokers
C. Difference between the spot rate and the forward rate.
D. Difference between the ask rate and the bid rate.

62. When forward dollar is quoted at a discount against Euro, it means

A. Spot rates are costlier than forward dollars against Euro.
B. Spot dollars are cheaper than forward dollars against Euro
C. It is advantageous to buy dollar in the forward market
D. It is better to do transactions in Euro than in dollars.

63. In the following quote: Spot USD 1=Rs. 45.6500/650 Spot September 100/150 September forward buying rate for dollar is

A. . 45.6800
B. Rs. 45.6600
C. Rs.45.7500
D. None of the above.

64. In the quotation Spot USD 1= Rs. 45.6500/6600 Spot /November 500/550 means

A. Spot dollar is at premium.
B. Forward dollar is at premium
C. Forward dollar is at discount
D. Spot dollar is at discount.

65. Derivatives can be used by an exporter for managing

A. currency risk.
B. Credit risk
C. Cargo risk
D. Market risk

66. 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

67. Derivatives are so called because

A. They are subsidiary products in the market
B. They are derived form combination of different assets
C. Their value is dependent on the value of some other fundamental variable.
D. They are traded on derivative exchanges.

68. The option period for a forward contract can be for a maximum period of

A. 21 days.
B. One month
C. 10 days.
D. Six months

69. The exchange exposure that does not lead to changes in cash flow is

A. Transaction exposure
B. Translation exposure
C. Economic exposure.
D. None of the above

70. Money market hedging is also called as

A. Cross hedging
B. Spot market hedging
C. Forward market hedging.
D. Hedging with options.

71. The method of hedging with another currency, when forward cover is not available in a currency of exposure is

A. Cross hedging.
B. Spot market hedging.
C. Forward market hedging
D. Hedging with options.

72. Which of the following statement 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.

73. The net potential gain or loss likely to arise from the exchange rate changes is

A. Exchange exposure.
B. Exchange risk.
C. Profit or loss of foreign exchange
D. Exchange difference.

76. The external method of hedging transaction exposure does not include

A. Forward contract hedge
B. Money market hedge.
C. Cross hedging.
D. Future hedging.

77. An export customer wishes to book a forward contract due on 4th November under which he will be tendering a US dollar bill payable 30 days from sight. The notional due date that will be considered by the bank for this transaction will be

A. December 4.
B. December 29.
C. November 29.
D. January 4.

78. Translation exposure is not relevant in the following cases:

A. Foreign currency loans availed and outstanding as on the date of balance sheet.
B. Balance sheet of foreign subsidiary included in the consolidated balance sheet of the parent Company
C. Balance sheet of the foreign subsidiary annexed to the balance sheet of the parent company
D. Investment made by parent company in foreign subsidiary shown as an asset in the balance sheet of parent company

79. Translation exposure arises in respect of item translated at-

A. Current rate.
B. Historic rate.
C. Average rate.
D. All the above

80. The translation exposure is positive when

A. Exposed assets are lesser than exposed liabilities.
B. Exposed liabilities are lesser than exposed assets
C. The exposure results in profit
D. There are no agreed liabilities.

81. The impact of real exchange rate changes on cash inflows of the firm engaged in export is-

A. Domestic or imported inputs
B. Supplier reaction
C. Government reaction
D. All the above.

82. TT selling rate is applicable for the transaction of-

A. Issue of telegraphic transfers
B. Outward remittances other than for remittances of import bill.
C. Retirement of import bill for which remittance is sent by TT
D. Payment of telegraphic transfer

83. For funding the Vostro account, the bank in India will apply

A.It s TT buying rate
B. It s TT selling rate.
C. Interbank spot buying rate
D. Interbank spot selling rate

83. The objective of trading in foreign exchange by a dealer of a bank is to-

A. Make profit out of exchange rate fluctuations
B. Insulate the bank from exchange rate changes
C. Comply with exchange control regulation
D. None of the above.

84. For the bankers, the spread will be wider when-

A. Purchase of foreign currency from a customer is covered by a sale to another customer of the bank.
B. Merchant trades are covered by interbank deals
C. Exposure is one currency is covered by a position in another currency
D. Purchase of foreign currency from a customer is covered by sale to customer of another bank.

85. India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to

A. Depreciate.
B. Appreciate
C. Show no specific tendency.
D. Depreciate against currencies of the countries with positive balance of payment and appreciate against countries with negative balance of payment

86. The effect of speculation on exchange rate is

A. It causes violent fluctuations in exchange rate.
B. It aggravates the market trends.
C. Either or both of 1 and 2.
D. Neither 1 nor 2.

87. The demand for domestic currency in the foreign exchange market is indicated by the

following transactions in balance of payment
A. Export of goods and services
B. Import of goods and services.
C. Export of goods and services and capital inflows
D. Import of goods and services and capital outflows.

88. The forward US dollar is quoted at premium against Indian Rupees. This implies

A. Money market rates are higher in India than in the US
B. Money market rates are lower in India than in the US.
C. Market yield is higher in US than in India.
D. Dollar has a better value than Indian Rupee.

89. Determination of forward rates is explained by

A. Uncovered interest arbitrage
B. . Purchasing power parity theory
C. Demand and Supply for spot currency.
D. None of the above.

90. The bond markets are important because

A. They are easily the most widely followed financial markets.
B. They are the markets where foreign exchange rates are determined.
C. They are the markets where interest rates are determined.
D. They are the markets without risk

91. Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called

A. commodity markets
B. fund-available markets.
C. derivative exchange markets.
D. financial markets.

91. Exchange rate between currency A and currency B, given the values of currencies A and B with respect to a third currency is known as

A. Golden standard
B. Flexible exchange rate
C. Fixed exchange rate
D. Cross exchange rate

92. Difference between buying and selling rates in an exchange rate or interest rate quotation is

known as
A. Strike price
B. Spread
C. Swap points
D. Spot rate

93. Quotation where the price of one unit of foreign currency is given in terms of local currency units is called as

A. Indirect Quotation
B. Direct Quotation
C. Open ended quotation
D. Close ended quotation

94. _______________ is a process of taking advantage of differentials in interest rates of two currencies while eliminating exchange risk.

A. Hedging
B. Insurance
C. Covered Interest Arbitrage
D. Exposure

95. A bank located usually in another country that provides service for another bank is

A. Foreign bank
B. Central bank
C. Correspondent bank
D. World bank.

96. The market where long term securities (shares, bonds, etc) are bought and sold is called as

A. Money market
B. Capital market
C. Secondary Market
D. primary market

97. The price at which a market maker is prepared to buy (a currency) or borrow (money) is termed as

A. Spot rate
B. Bid rate
C. Ask price
D. Forward rate

98. The number of units of one currency that buys one unit of another currency is known as

A. Exchange Rate
B. Margin Rate
C. Spread margin
D. swap point

99. Suppose that the Euro is selling at a forward discount in the forward-exchange market. This implies that most likely __________.

A. The Euro has low exchange-rate risk
B. The Euro is gaining strength in relation to the dollar
C. Interest rates are higher in Euroland
D. Interest rates are declining in Europe

100. A multinational company that is faced with mild interference up to complete confiscation of all assets is encountering __________.

A. Translation risk exposure
B. Translation risk exposure
C. Political risk exposure
D. A very bad day

101. The __________ is especially well suited to offer hedging protection against transactions risk exposure

A. Forward market
B. Spot market
C. Transactions market
D. Inflation-rate market

102. The __________ refers to the orderly relationship between spot and forward currency exchange rates and the rates of interest between countries

A. One-price rule
B. Interest-rate parity
C. Purchasing-power parity
D. Exchange-power parity

103. For contingency exposure of foreign exchange, the best derivative that can be used to

hedge is
A. Forwards.
B. Futures.
C. Options.
D. Swaps.

104. The marking to market of a futures contract is done

A. Daily, based on the opening price for the day.
B. Weekly, based on the opening price for the week.
C. Daily, based on the closing price for the previous day.
D. Weekly based on the closing price for the previous week.

105. Category III of Authorized dealers in India are

A. All scheduled commercial banks in India.
B. All public sector banks in India.
C. The banks that have been authorized by RBI to deal in foreign exchange.
D. Selected financial and other institutions

106. In a spot transaction, exchange currencies takes place on same date is known as

A. Cash transaction
B. Ready transaction
C. Value today
D. All of the Above
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