Foreign Exchange Market and Management of Exchange Rate MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Foreign Exchange Market and Management of Exchange Rate, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Foreign Exchange Market and Management of Exchange Rate MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Foreign Exchange Market and Management of Exchange Rate mcq questions that explore various aspects of Foreign Exchange Market and Management of Exchange Rate problems. Each MCQ is crafted to challenge your understanding of Foreign Exchange Market and Management of Exchange Rate principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Foreign Exchange Market and Management of Exchange Rate MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

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Foreign Exchange Market and Management of Exchange Rate MCQs | Page 1 of 9

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Q1.
What is the main objective of the foreign exchange market?

a.

To facilitate international trade in goods and services

b.

To determine exchange rates between two countries

c.

To permit transfer of purchasing power between currencies

d.

To regulate global financial transactions

Discuss
Answer: (c).To permit transfer of purchasing power between currencies Explanation:The primary goal of the foreign exchange market is to enable the transfer of purchasing power denominated in one currency to another, facilitating trade between countries.
Q2.
How is the exchange rate defined?

a.

The value of a country's goods and services in the global market

b.

The price of one country's currency in terms of another currency

c.

The interest rate set by central banks in different countries

d.

The rate at which commodities are exchanged internationally

Discuss
Answer: (b).The price of one country's currency in terms of another currency Explanation:The exchange rate represents the price of one country's currency in terms of another currency, determined in the foreign exchange market.
Q3.
What role does the foreign exchange market play?

a.

Directly involved in trade negotiations

b.

Acts as an intermediary for currency exchange

c.

Sets the exchange rates for tea and machines

d.

Regulates the flow of goods and services

Discuss
Answer: (b).Acts as an intermediary for currency exchange Explanation:The foreign exchange market acts as an intermediary, facilitating the exchange of currencies between parties involved in international trade.
Q4.
In the context of the foreign exchange market, what does "invoicing in a single currency" mean?

a.

Using a common currency for all global transactions

b.

Accepting payments only in the local currency

c.

Agreeing to trade in a specific foreign currency

d.

Restricting trade to a single commodity currency

Discuss
Answer: (c).Agreeing to trade in a specific foreign currency Explanation:"Invoicing in a single currency" refers to the practice of agreeing to conduct trade using a specific foreign currency, providing a common ground for transactions.**
Q5.
In the foreign exchange market, what primarily determines the trading of currency pairs?

a.

Domestic economic conditions

b.

The condition of a particular country's economy

c.

Global economic factors and demand-supply dynamics

d.

Currency regulations of specific nations

Discuss
Answer: (c).Global economic factors and demand-supply dynamics Explanation:Currency pairs are traded based on the demand and supply of currencies in the international market and their exchange values, influenced by global economic conditions.
Q6.
What is the basis for most foreign exchange market transactions?

a.

Economic conditions of a particular country

b.

Market speculations and forecasts

c.

Currency regulations and policies

d.

Inter-bank trading systems

Discuss
Answer: (b).Market speculations and forecasts Explanation:Most foreign exchange market transactions are carried out on the basis of market speculations and forecasts made by trade analysts and researchers.
Q7.
In the foreign exchange market, when are inter-bank transactions typically carried out during the week?

a.

7 days a week

b.

5.5 days from Monday to mid-Saturday

c.

Only on weekdays

d.

3 days a week

Discuss
Answer: (b).5.5 days from Monday to mid-Saturday Explanation:Inter-bank transactions in the foreign exchange market occur for 5.5 days, from Monday to mid-Saturday.
Q8.
What is the term used to describe the relative value of one currency against another in foreign exchange trading?

a.

Exchange rate

b.

Settlement date

c.

Trading value

d.

Currency quotient

Discuss
Answer: (a).Exchange rate Explanation:In foreign exchange trading, the relative value of one currency against another is referred to as the exchange rate.
Q9.
What is the date on which foreign exchange transactions take place called?

a.

Trading date

b.

Currency valuation date

c.

Settlement date

d.

Market day

Discuss
Answer: (c).Settlement date Explanation:The date on which foreign exchange transactions take place is known as the settlement date.
Q10.
What are the countries where foreign exchange trading occurs referred to as?

a.

Trading nations

b.

Currency hubs

c.

Economic centers

d.

Settlement Locations

Discuss
Answer: (d).Settlement Locations Explanation:The countries involved in foreign exchange trading are called 'Settlement Locations'.
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