MCQ for CA Final SFM - Chapter 6 Foreign Exchange Exposure and Risk Management

Sample Multiple Choice Questions (MCQ's) for CA Final - Paper 2 - Strategic Financial Management - Chapter 6: Foreign Exchange Exposure and Risk Management - For Practice relevant for May/Nov 23 Examinations

 

Q:1 ABN-Amro Bank, Amsterdam, wants to purchase`15 million against US$ for funding their Nostro account with Canara Bank, New Delhi. Assuming the inter-bank, rates of US$ is`Rs.51.3625/3700, what would be the rate Canara Bank would quote to ABN-Amro Bank?

Further, if the deal is struck, what would be the equivalent US$ amount

 

  1. US$ 2,95,250
  2. US$ 2,95,050
  3. US$ 2,92,050
  4. US$ 2,90,550

Answer: 3

 

Q:2 You sold Hong Kong Dollar 1,00,00,000 value spot to your customer at `5.70 & covered yourself in London market on the same day, when the exchange rates were

US$ 1=                            H.K.$ 7.5880                     7.5920

Local inter bank market rates for US$ were

Spot US$ 1=                 `Rs. 42.70                           42.85

Calculate cover rate and ascertain the profit or loss in the transaction. Ignore brokerage

 

  1. Profit Rs. 529000
  2. Profit Rs. 29000
  3. Profit Rs. 290000
  4. Profit Rs. 590000

Answer: 1

 

Q:3 Excel Exporters are holding an Export bill in United States Dollar (USD) 1,00,000 due 60 days hence. They are worried about the falling USD value which is currently at`45.60 per USD. The concerned Export Consignment has been priced on an Exchange rate of`45.50 per USD. The Firm’s Bankers have quoted a 60-day forward rate of`45.20.

 

    1. 5.63%
    2. 5.33%
    3. 3.33%
    4. 3.63%

Answer: 2

 

Q:4 In International Monetary Market an international forward bid for December, 15 on pound sterling is $ 1.2816 at the same time that the price of IMM sterling future for delivery on December, 15 is $ 1.2806. The contract size of pound sterling is £ 62,500. How could the dealer use arbitrage in profit from this situation and how much profit is earned?

 

  1. $ 60.5
  2. $ 61.5
  3. $ 62.5
  4. $ 65.5

Answer: 3

 

Q:5 In International Monetary Market an international forward bid for December, 15 on pound sterling is $ 1.2816 at the same time that the price of IMM sterling future for delivery on December, 15 is $ 1.2806. The contract size of pound sterling is £ 62,500. How could the dealer use arbitrage in profit from this situation and how much profit is earned?

 

  1. $ 60.5
  2. $ 61.5
  3. $ 62.5
  4. $ 65.5

Answer: 3

 

Q:6 On April 1, 3 months interest rate in the UK £ and US $ are 7.5% and 3.5% per annum respectively. The UK £/US $ spot rate is 0.7570. What would be the forward rate for US $ for delivery on 30th June?

 

  1. UK £0.6745 / US$
  2. UK £0.7645 / US$
  3. UK £0.7750 / US$
  4. UK £0.7754 / US$

Answer: 2

 

Q:7 XYZ, an Indian firm, will need to pay JAPANESE YEN (JY) 5,00,000 on 30 th June. In order to hedge the risk involved in foreign currency transaction, the firm is considering two alternative methods i.e. forward market cover and currency option contract.

On 1st April, following quotations (JY/INR) are made available:

Spot                                            3 months forward

1.9516/1.9711                                    1.9726./1.9923

The prices for forex currency option on purchase are as follows:

Strike Price                                      JY 2.125

Call option (June)                           JY 0.047

Put option (June)                                JY 0.098

For excess or balance of JY covered, the firm would use forward rate as future spot rate.

 

  1. Rs.235000
  2. Rs.253000
  3. Rs.253500
  4. none of these

Answer: 3

 

Q:8 A customer with whom the Bank had entered into 3 months’ forward purchase contract for Swiss Francs 10,000 at the rate of`27.25 comes to the bank after 2 months and requests cancellation of the contract. On this date, the rates, prevailing, are:

Spot                            CHF 1 =`27.30                           27.35

One month forward   `Rs. 27.45                                  27.52

What is the loss/gain to the customer on cancellation?

 

  1. Rs.2500
  2. Rs.3500
  3. Rs.2800
  4. Rs.2700

Answer: 4

 

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