LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Multiple Answer

Question What schemes have been floated by RBI for facilitating Inter
bank transactions?
Correct Answer Clearing house for settlement and clearance for the operations
of Ads , Set up a market intelligence cell to study and monitor
developments in Forex Market
Your Answer Clearing house for settlement and clearance for the operations
of Ads , Make additional foreign currency available to ADs at
cheaper rates

Select The Blank

Question ________ is the agency of ICC which deals with the maritime
crime.
Correct Answer International Maritime Bureau

Your Answer International Maritime Bureau

Multiple Choice Single Answer

Question Which of them are special funding facilities of IMF ?

Correct Answer Buffer Stock Facility

Your Answer Buffer Stock Facility

True/False
Question Cross currency forward contract is not meaningful if original
contract is in Rupees to USD
Correct Answer True

Your Answer True

Multiple Choice Multiple Answer

Question What does a speculator accept while dealing with an option?

Correct Answer The exercise or strike price, the amount , The expiration date
and time, the method of payment
Your Answer The exercise or strike price, the amount , The expiration date
and time, the method of payment , The Market report of the
exchange which trades the option

Multiple Choice Single Answer

Question Which is the most actively traded currency in the international
market today?
Correct Answer US Dollar

Your Answer US Dollar

Match The Following

Question Correct Answer Your Answer
Chapter – 1 – Introduction to international capital markets 1
Euro currency ; domestic markets ; US Japan ; Switzerland ; UK ; Australia ; Canada ;
European ; centers in ECU;
Chapter – 2 – International Finance Markets - the U.S. dollar Market ; 5 – 10
The U.S. Dollar Market ; The Japanese Yen Market ; The Sterling Market ; The Euro
Market Has Been discussed in the next chapter ; Recent development in international
Finance Markets ;
Chapter – 3 – International Monetary and Financial System 13 – 14
The country’s central ban agreed to buy back their currency at a certain rate of gold;
Melting down of gold was freely allowed ; There was unrestricted movement of gold (i.e.
import and / or export)
The total money supply in the country was determined by the quantum of gold reserves in
the country
The international monetary fund ; quotas ; funding facilities ; regular facilities tranche 15 – 17
policies ; restore Tranche credit Tranche ; extended arrangement (extended fund facility
(EEF) ; Standard Arrangement (enlarged Arrears Policy)
Special facilities (compensatory and contingency financing facility (CCFF)
Buffer stock Financing Facility ; Supplemental Reserve Policy (SRP); Reserve Tranche ;
Credit Tranche ; Stand by arrangement ;
Extended arrangement or extended fund facilities (EFF) special facilities ; CCFF ; Buffer 18 – 19
stock financing Facility (BSFF) ; Supplemental resources facility (SRF) Enhanced
structural adjustment facility (ESAF) The fixed exchange rate system
Problems faced by the fixed exchange rate system ; failure of fixed rate system ; the 20 – 23
European monetary system (EMS) ; Economic and monetary union ; Recent developments ;
post – Maastricht developments; emergence of EURO
The group of seven ; special drawing rights (SDRS) ; The liquidity problems (SDRS) ; the 24 – 27
world bank group ; the world bank; international development agency (IDA) ; international
finance corporation (IFC) ; The multinational investment Guarantee Agency (MIGA)
Chapter – 4 – External commercial borrowing – country ; company ; Equity ; Fund raising ; 31 – 35
underwriting ; hedging ; arbitraging ; note issuance facility ; Mechanism and
documentation ; syndicated loans ; floating rate notes ;
Flip – Flop FRN ; MIS – Mich FRN ; MINI Max FRN ; Capped FRNs, Perpetual FRNs; 36 – 39
VRN structured FRNs; Terms and conditions of FRN Ero Commercial paper (ECP) ; ADRs
and GDRs; GDR – Global depositary Receipts ; The roles of different parties involved in
launching of GDR
GDR – Global Depositary Receipts ; The roles of different parties involved in launching of
GDR steps involved in issuance of GDR are as follows
Pricing and Closing ; costs ; Advantages & Disadvantages of external commercial 40 – 41
borrowing
Chapter – 5 – Documents used in International Trade ; 43 – 46
Regulatory requirements ; operational requirements ; commercial documents ; financial
documents transport documents ; risk covering documents ; official / regulatory
documents ; miscellaneous documents ; Commercial documents ; proforma invoice ;
commercial invoice ; consular invoice customs invoice ; legalized invoice ; combined
certificate of origin and value ; financial documents ; bill of exchange ;
The second of the same tenor and date unpaid ; the first of the same tenor and date unpaid ; 47 – 49
or similar words ; sight B/E; Tenor ; time B/E; DP Basis ; document against Payment
Basis ; Documents against Acceptance Basis Transport documents; bill of lading ; received
for shipment bill of lading ; on board bill of lading ;
Short form bill of lading ; long form bill of lading clean bill of lading ; claused bill of lading 50 – 53
; through bill of lading ; straight bill of lading ; charter party Bill of lading ; container bill of
lading container bill of lading ; combined transport B/L or Mulit Modal B/L lash bill of
lading house bill of lading ; Airway bill ; Air consignment Note ; House Air way bill ;
Postal Receipt ; Courier /Expected delivery service ; multimodal transport document ; risk
covering documents ; insurance policy ;
Insurance cover note ; official documents export declaration forms ; export certificate; 55 – 57
Certificate of origin ; Miscellaneous documents ; packing list ; weight certificate ;
certificate of analysis and quality ; certificate of inspection ; health certificate ;
phytosanitary / Radiation / Fumigation
Chapter 6 – Methods of payment ; advance payment ; bill for collection ; open account ; 61 – 66
barter trade ; bank guarantee ; letter of credit (L / C) Seller wants buyer wants ; parties to a
documentary credit ; applicant issuing bank advising ; confirming bank beneficiary ;
negotiating bank ; reimbursing bank
Types of letters of credit ; revocal letter of credit ; irrevocable letter of credit ; confimed 67 – 69
irrevocable letter of credit ; transferable l / c revolving letter of credit ; credit available by
installments; back to back letter of credit ; anticipatory credit or red clause letter of credit ;
green clause letter of credit ; deferred payment letter of credit ; standby letter of credit ;
flow chart of export transaction under letter of credit
Flow chart of export transaction under letter of credit ; various steps in the transaction are as 70 – 71
under ; steps no. description
Chapter 7 – Export / Import Finance ; - Part I import finance ; import financing through 73 – 74
trust receipts / import loans ; import financing through issuing l/ c or bank guarantee ; part
II – Export Finance Timely ; adequate ; cheaper on liberal terms ; sources for raising
finance ; own funds ; 2 friends and relative ; 3 advance payment from buyer ; 4 Trade credit
from suppliers 5 banks and financial institutions ; pre-shipment credit (P.C)
Post shipment credit ; advance against cash incentives / duty draw back ; forfeiting ; 75 -76
rediscounting of export bills abroad ; buyer’s credit ; supplier’s credit
Chapter – 8 – Procedure in connection with foreign investment in India – Seciton – I 79 – 83
foreign direct investment ; FERA ; the practice at which a company can issue shares to non
residents ; fema ; esop ; section II – Foreign technical collaboration ;
General Hotel & Tourism Related Industries ; procedure for granting approval; I / We 84 – 88
hereby certify that ; Documentation ; Standard conditions attached to approval for
technology agreement ; no objection ; the agreement shall be subject to Indian laws:
Section – III – Portfolio investment ; explanation ; the regulations regarding portfolio 89 - 92
investments by NRIs / PIOs are as under ; NRI / PIOs ; Section – IV – Other investments ;
Section V – procedure for opening branch / project / Liaison office ;
Chapter – 9 – Direct investment outside India – overseas investment division TDR ADR 95 – 99
GDR the criteria for investment under the automatic route are as under ; JV/WOS; ODA;
The schemes for overseas investment by partnership firms ; criteria for overseas investment
by a registered partnership firm under the automatic route ;
The procedure to be followed by a partnership firm for making investment under the 100 – 102
automatic route ; the procedure to be followed by partnership firms which are not eligible
under the automatic route ; restrictions for setting up of a second generation company ;
resident individual India can acquire foreign securities without prior approval in the
following cases ; provided that ; WOS
Chapter – 10 – Taxation ; Bilateral relief 105 – 106
Unilateral relief ; for the purpose of this provision
Part – 2 Forex risk management and hedging techniques
Chapter – 1 Foreign exchange markets – The international Market ; survey were ; the 109 – 114
market ; the participants ; information and communication system ; the payment system ;
the foreign exchange market in India
Chapter – 2 – Exchange Rates – Exchange rage quotes ; direct and indirect rates ; direct 117 – 123
rates ; indirect rates; spot and forward rates value rate; ready or cash ; value today ; TOM;
spot ; forwards; glossary of market terms; Foreign exchange risks ; transactions exposure ;
translation exposure ; economic exposure;
Translation – moving towards a consensus ; economic exposure ; an overview ; scenario 124 – 127
exchange rages in India ; Inward remittances export encashment of foreign currency
travelers cheques ; encashment of foreign currency notes; outward remittances ; imports ;
issuing foreign currency travelers cheques issuing foreign currency notes ;
Type of transaction exchange rate nomenclature ; Factors affecting movement of exchange 128 – 129
rates ; summary
Chapter – 3 – Forward contracts - Forward cover for merchants – forward purchase cover - 131 – 137
forward sales contract - repayment of foreign currency loans – period of delivery – cross
currency booking (sale / Purchase ) ; utilization of the forward cover ; cancellation ;
calculation of exchange rates for forward contracts
Cancellation ; early delivery and rollover of forward contracts ; forward sale contracts ; 138 – 141
forward purchase contract ; early delivery ; rollover charges
Chapter 4 – Options and Futures – History and development ; recent trends ; key features of 143- 147
options and futures ; premium ; maturity or expiration date ; exercise ; in the money ; at the
money ; out of the money American option European option ; underlying asset price time
before expiration ; underlying asset price ; time before expiration the rate of interest
volatility
Pricing and analysis ; pricing of options ; underlying asset price ; exercise price ; options 148 – 152
and futures products today ; interest rate options ; foreign exchange options and futures ;
equity linked options ; commodity linked futures and options
Chapter – 5 - Swaps 155 – 157
What are swaps ; interest rate swaps ; lowering financial cost ; hedge exposure to interest
rate risk ; restructuring the debt in the balance sheet ; amortizing and accreting swaps ;
forward swaps ; Reversible swaps ; basis swaps
Currency swaps ; lowering funding cost ; entering restricted capital markets ; reducing 158 – 161
currency risk ; supply demand imbalances in the markets ; amortizing currency swaps ;
accreting currency swaps ; floating – for floating rate currency swaps ; interest payments ;
asset swaps
PART 3 – AGENCIES INVOLVED IN INTERNATIONAL TRADE
Chapter – 1 – Export import Bank of India ; Functions of Exim Bank ; the exim bank 163 – 166
performs the following functions ; incidental functions ; operations programmes ; direct
financial assistance to exporters ; consultancy and technology services ; pre-shipment
credit ; facilities for export – oriented units ; overseas investment facility buyer credit
facilities for deemed exports small scale industry export bills rediscounting; the latest new
schemes in operation since 1992 are the following
Chapter – 2 – Reserve Bank of India Exchange controls in India – RBI as the exchange 169 – 173
control authority ; Authorized dealers (Ads) ; Money changers ; other receipts ; payment for
imports ; other payments ; delegation to Ads; securities ; foreign currency accounts;
liberalization of exchange control
Sodhani Committee Recommendations ; Exchange rate management ; 174 – 177
Chapter – 3 – Foreign Exchange dealers association of India ; Uniform customs and 179 – 180
practice for collection ;
Chapter 4 – International chamber of commerce – ICC – WCF – IBCC – WCF 183 – 183
Chapter – 5 – Export credit guarantee corporation of India ; ECGC; need for export credit 189 – 190
insurance ; credit insurance policies ; scr or standard policy ; turnover policy ; small
exporter policy ; specific shipment policy (short term); buyer wise policy ; specific policy
for supply contract insurance cover for buyer’s credit and line of credit
Services Policy ; construction works policy ; maturity factoring ; Guarantees to banks ; 191
packing credit guarantee ; export production finance guarantee ; post – shipment credit
guarantee ; export finance guarantee ; export performance guarantee; export finance
(overseas lending ) Guarantee
Part – 4 – Miscellaneous
Chapter 1 – Exchange Earner’s foreign currency (EEFC) 195
Status holder exporter ; individual professional ; others; permissible credits ; permissible
debits ;
Chapter 2 – Country Risk ; Quantifying country risk ; A comprehensive example ; use of 199
country risk ; assessment ;
Chapter 3 – International capital Budgeting - The Basic Frame work 203 – 204
Chapter 4 – Incoterms – Group E departure EXW ; Group F Main carriage unpaid ; FAS ; 207- 212
FOB ; CFR ; CIF ; CPT ; CIP ; Group C; Group D ; Arrival DAF ; DES ; DEQ; DDU
CTD / MTO ; DDP ; delivered duty paid (CTD / MTO)
Chapter – 5 – Actuals ; arbitrage ; bankers’ acceptance bond (BAS) ; Bearer Bond ; Bid rate 215 – 217
; Bond ; Bull; call option ; caps ; cash commodity ; cash market ; cedel ; certificate of
deposit (CD) class of option ; closing price ; commission ; commercial paper (CP) ; contract
specifications ; convertible bond ; coupon ; cover; delivery ; delivery month ; equity ; equity
swaps ; equity collar ; Eurobond ; Euro clear ; euro commercial paper; euro –currency ;
Exercise price ; expiration date; floating rate note ; fundamental Analysis ; futures contract 218 -219
hedge ; Hybrid ; Interest Rate swap; Intermediation ; Intrinsic Value ; Libor ; Long
margin ; margin call maturity naked position ; note issuance facility (NIF)
Option ; overbought ; oversold ; physical market ; position ; premium purchaser ; put option 220 – 221
; settlement price short ; speculator ; strike price ; straight debt tap ; technical analysis
tranche ; tombstone volatility ; volume ; withholding tax ; yankee bond ;

Chapter – 1 – Introduction to international capital markets 1

Ero currency market ; Domestic market ; US, Japan Switzerland ; uk, australia
canada ; european conters in ECU ; Euro ; Asian doller market ; forex marker 1
SDR ; ECU ; US dollar ; German ; Swiss ; Japanees ; France ; Canada ; Australia; 2
Chaper - 2 - International financial Markets - The U.S.Dollar Market ; pricing ;
federal reservice board; curency ; central bank of US ; 5
The Japanese Yen Market ; Mof; Long Term Prime Rate ; 1970 japanese 6
The Sterling Market ; 20th 19th century 1979 ; OECD Organization for economic
co-operation & development EMS Exchange rate Mechanism; FRN ; Bulldog; 7
the EURO Market has been discussed in the nex chapter Recent development in
international financial markets ; septer 11 enron 7
LtCN (Long term capital Management Brazil china and mexico; 8
1990 ; 1980 ; severe tests financial system; securitization forces banks ; attractive
to browwerw; legal issues flexibility ; financial market development segement of ; 9
swaps cash flow ; roject related; gain access to international ; marketability ; new
financing techniques; 10
Chapter – 3 – International Monetary and Financial System 13
1945 ; 1944 ; intenrational world Bank for reconstruciton and development; second
world war was european ; IMF International Monetary Fund; Gold standard first
world war 13
The country's Central Bank agreed to buy back their currency at a certain rate of
gold; 13
melting down of gold was freely allowed 13
There was unrestricted movement of gold (I.e. import and / export 14
The total money supply in the country was determined by the quantum of gold
reserves in the country 14
1870 ; 1914 ; 1821 ; 1834 ; 1870 ; European countries gold standard in 1933 ;
1930 International Monetary Co-operation ; IBRD ; IMF ; 14
popularly known as world bank IMF ; the international monetary fund 1945 ;
1971 ; 25 years ; aims 15
SDR ((special drawing rights ) 25% 1960 ; 1963 ; Gross domestic product; 5
years ; SDR 146 bn to SDR 212 ; 45% ; 1998 ; Two parts 16
Funding Facilities ; Regular Facilities ; Special facilities ; restore tranche credit
tranche ; compensatory and contingency financing facility (CCFF) ; 16
Extended arrangement (Extended Fund Facility EEF) ; Buffer stock Financing
Facility ; 16
Standard Arrangement (Enlarged Arrears Policy ) ; Supplemental Reserve Policy
(Supplemental Reserve Policy (SRP 17
Reserve Tranche ; Credit Tranches ; Stand - By Arrangement 17
Extended arrangement or extended fund facilities (EFF) 18
Special Facilities ; CCFF ; Buffer Stock Financing Facility ; BSFF ; Supplemental
Resource Facility (SRF) ; 1997 18
Enhance Structural Adjustment Facility (ESAF) ; The fixed exchange rate system
US dollars 35 ounce of gold 19
Problem faced by the fixed exchange rate system ; 1960 ; value apprehension ;
delay in adjustment 20
failure of fixed rate system ; the european monetary system (EMS) European
Community 20
Currency Snake ; 1973 ; EMS EC ECU European Currency Unit ; SDR ; ERM ;
DM ; matrix german bundesbank 21
EM ; PST ; ERM ; Economic and monetary Union ;
LIST OF ATTEMPTED QUESTIONS AND ANSWERS
True/False
Question Integrated branches of Commercial banks handle forex
transactions as well as options, swaps, futures, arbitrage
operations
Correct Answer True

Your Answer True

True/False
Question JV means Joint venture and WOS means World of Security.

Correct Answer False

Your Answer False

Select The Blank

Question The rate of interest on rupee finance for exports is not
exceeding ________ less than PLR.
Correct Answer 0.025

Your Answer 50 basis points over LIBOR

Multiple Choice Multiple Answer

Question What does a speculator accept while dealing with an option?

Correct Answer The exercise or strike price, the amount , The expiration date
and time, the method of payment
Your Answer The exercise or strike price, the amount , The expiration date
and time, the method of payment

Multiple Choice Single Answer

Question In the syndicated loan arrangement the borrower has to execute
:-
Correct Answer Single Principal loan agreement

Your Answer Single Principal loan agreement

True/False
Question At Least one principal Lender bank is essential for issue of the
ADR or GDR.
Correct Answer False

Your Answer True

Multiple Choice Single Answer

Question US financial system is the freest system because

Correct Answer Institutions can introduce new products and instuments at the