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 2 of 9

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Q11.
What is the term used for banks located in countries different from the settlement locations but involved in foreign exchange transactions?

a.

Transactional banks

b.

Settlement banks

c.

Trading banks

d.

Dealing locations

Discuss
Answer: (d).Dealing locations Explanation:Banks located in countries different from the settlement locations but involved in foreign exchange transactions are referred to as 'Dealing Locations.'
Q12.
What is a Spot Transaction in the context of the Foreign Exchange Market?

a.

A financial transaction with a settlement date two days ahead

b.

An immediate exchange of currencies, goods, and services

c.

A transaction with a fixed rate of exchange for the future

d.

A transaction involving the US dollar, Canadian Dollar, or Russian Ruble

Discuss
Answer: (b).An immediate exchange of currencies, goods, and services Explanation:A Spot Transaction involves the immediate exchange of currencies, goods, and services among countries without interest charges.
Q13.
In a Spot Transaction, what is the settlement date for currencies like the US dollar, Canadian Dollar, or Russian Ruble?

a.

One working day

b.

Two days ahead of the transaction

c.

Same day as the transaction

d.

Three days after the transaction

Discuss
Answer: (a).One working day Explanation:For currencies like the US dollar, Canadian Dollar, or Russian Ruble, the settlement date in a Spot Transaction is the next working day.
Q14.
What is the purpose of the two-day time lag in a Spot Transaction settlement date?

a.

To facilitate currency conversion

b.

To allow verification and confirmation of the transaction

c.

To accommodate holidays in the location countries

d.

To ensure immediate exchange without delays

Discuss
Answer: (b).To allow verification and confirmation of the transaction Explanation:The two-day time lag is required for verifying and confirming the transaction through telecommunication networks like SWIFT.
Q15.
How is the settlement date determined in a Forward Transaction of currencies?

a.

By adding a given number of weeks or months to the spot transaction's settlement date

b.

By subtracting the number of days from the transaction date

c.

By referencing the currency exchange rate on the transaction date

d.

By aligning it with the transaction date of spot currencies between the same currencies

Discuss
Answer: (a).By adding a given number of weeks or months to the spot transaction's settlement date Explanation:The settlement date of a Forward Transaction is determined by adding a given number of weeks or months to the spot transaction's settlement date for the same currencies.
Q16.
What happens if the value date or settlement date of a Forward Transaction falls on a holiday?

a.

The settlement date remains unchanged

b.

The settlement date shifts to the next working date

c.

The transaction is canceled

d.

The settlement date is postponed by a week

Discuss
Answer: (b).The settlement date shifts to the next working date Explanation:If the value date or settlement date falls on a holiday, the settlement date of a Forward Transaction shifts to the next working date.
Q17.
How do banks handle maturity periods in non-whole number months for Forward Transactions?

a.

They round down to the nearest whole number of months

b.

They round up to the nearest whole number of months

c.

They provide the maturity period without any adjustment

d.

They extend the maturity period to the next whole number of months

Discuss
Answer: (c).They provide the maturity period without any adjustment Explanation:Banks generally provide maturity periods for Forward Transactions without any adjustment for non-whole number months.
Q18.
What is a Swap Transaction in the context of the Foreign Exchange Market?

a.

A simultaneous exchange of currencies at a fixed rate

b.

A temporary transaction with a condition to reverse in the future

c.

An immediate exchange of currencies, goods, and services

d.

A fixed-rate transaction with a deferred settlement date

Discuss
Answer: (b).A temporary transaction with a condition to reverse in the future Explanation:A Swap Transaction involves a temporary transaction on spot with a condition to move back in the opposite direction in the future.
Q19.
What is the hybrid nature of a Swap Transaction?

a.

It combines features of Spot and Forward transactions

b.

It combines features of Spot and Swap transactions

c.

It combines features of Forward and Swap transactions

d.

It combines features of all three types of transactions

Discuss
Answer: (a).It combines features of Spot and Forward transactions Explanation:A Swap Transaction is a hybrid of Spot and Forward transactions in different directions, requiring parties to exchange currencies for a fixed period and reverse the transaction in the future.
Q20.
What are the two types of Swap Transactions?

i. Spot-Forward transaction
ii. Forward-Forward transaction
iii. Spot-Swap transaction
iv. Swap-Swap transaction

a.

i and ii

b.

i and iii

c.

ii and iv

d.

i and iv

Discuss
Answer: (a).i and ii Explanation:The two types of Swap Transactions are i. Spot-Forward transaction and ii. Forward-Forward transaction.
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