PGCBM Sample Exam Questions

(Answer All, Tick the Correct Answer)

Appreciation of the Indian rupee will typically coincide with one of the following::
a. Reduction in capital inflows into India
b. Rising domestic inflation rates
c. Lower fiscal deficits due to higher revenues
d. Productivity decrease in home economies
e. Low domestic interest rate as compared to US

Which of the following is not a form of exposure to exchange rate fluctuations?

a. Transaction exposure
b. Credit exposure
c. Economic exposure
d. Translation exposure

Assuming zero transaction costs, if the 90-day forward rate of the Rs/USD is an accurate
estimate of the spot rate 90 days from now, then the real cost of hedging payables will be:
a. positive.
b. negative.
c. zero.

A ____ involves right to purchase foreign currencies at a specified exchange rate and future
date.
a. long-term forward contract
b. currency option contract
c. currency swap contract
d. money market hedge

Capital flows to emerging market countries like India occur because :

a. foreign investors have moral obligations to invest in poorer countries
b. Investors would like to diversify into countries that have high country risk
c. Emerging markets give better diversification benefits due to low correlation
d. Foreign investors benefit as emerging country currencies have depreciation bias

A Company receives a lump sum payment from a foreign vendor of 2,000 Euros and intends to
convert them to US $. If the market quote given is €0.6250-0.6667/US$, how much US$ will be
realized by selling Euro? 2 Marks
A) $3,200
B) $3,000
C) $1,250
D) $1,334
The fourth decimal place in a dealer's quote in the trade jargon is known as the
A) pip
B) spread
C) basis

If the forward price of a currency contract is higher than the spot rate, the currency is said to be
at a
A) forward discount.
B) forward premium.
C) future expected exchange rate.
D) forward swap rate.

A balance of trade deficit results in a capital account

A) deficit.
B) surplus.
C) not related

The DM/$ spot exchange rate is 1.60, the CD/$ spot rate is 1.33 and the DM/CD cross rate is
1.15. Determine the triangular arbitrage profit that is possible if you have $1,000,000, from
one of the following:
a. $44,063 profit
b. $46,093 loss
c. $46,093 profit

Assume the spot rate of a currency is $.37 and the 90-day forward rate is $.36. The forward rate
of this currency exhibits a _______ of _______ on an annualized basis. 2 marks
A) discount; 11.11%
B) premium; 10.81%
C) discount; 10.81%

When the futures price is equal to the spot rate of a given currency, and the foreign country
exhibits a higher interest rate than the U.S. interest rate, astute investors may attempt to
simultaneously _______ the foreign currency, invest it in the foreign country, and _______
futures in the foreign currency.
A) buy; buy
B) sell; buy
C) buy; sell
D) buy; buy