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 3 of 9

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Q21.
What percentage of transactions in the foreign exchange market are Swap Transactions according to the recent study?

a.

10%

b.

20%

c.

40%

d.

50%

Discuss
Answer: (d).50% Explanation:According to the recent study, 50% of transactions in the foreign exchange market are Swap Transactions.
Q22.
What is an Exchange Rate Quotation in the context of the Foreign Exchange Market?

a.

The rate at which currencies are bought or sold

b.

The rate at which a country's currency is exchanged for another country's currency

c.

The rate at which currencies are converted into commodities

d.

The rate at which spot and forward transactions are combined

Discuss
Answer: (b).The rate at which a country's currency is exchanged for another country's currency Explanation:An Exchange Rate Quotation is the rate at which the currency of one country is exchanged for or converted into the currency of another country.
Q23.
What is a Direct Quotation in the context of Exchange Rate?

a.

A quotation indicating the unit of domestic currency against a single unit of foreign currency

b.

A quotation indicating the unit of foreign currency against a single unit of domestic currency

c.

A quotation indicating the exchange rate between two foreign currencies

d.

A quotation indicating the exchange rate between two domestic currencies

Discuss
Answer: (a).A quotation indicating the unit of domestic currency against a single unit of foreign currency Explanation:A Direct Quotation indicates the unit of domestic currency as against a single unit of the foreign currency.
Q24.
What is the main characteristic of a Direct Quote?

a.

The home currency price of one unit of foreign currency

b.

The foreign currency price of one unit of home currency

c.

The exchange rate between two foreign currencies

d.

The exchange rate between two domestic currencies

Discuss
Answer: (a).The home currency price of one unit of foreign currency Explanation:The main characteristic of a Direct Quote is that it represents the home currency price of one unit of foreign currency.
Q25.
What is an Indirect Quotation in the context of Exchange Rate?

a.

A quotation indicating the unit of domestic currency against a single unit of foreign currency

b.

A quotation indicating the unit of foreign currency against a single unit of domestic currency

c.

A quotation indicating the exchange rate between two foreign currencies

d.

A quotation indicating the exchange rate between two domestic currencies

Discuss
Answer: (b).A quotation indicating the unit of foreign currency against a single unit of domestic currency Explanation:An Indirect Quotation is a quotation in which the domestic currency of a country is treated as the base currency against the foreign currency.
Q26.
How are Direct and Indirect Quotes related to each other?

a.

They are unrelated

b.

They are identical

c.

They are reciprocals of each other

d.

They represent the same type of quotation

Discuss
Answer: (c).They are reciprocals of each other Explanation:Direct and indirect quotes are reciprocals of each other.
Q27.
What is the Bid in the context of Foreign Exchange Quotes?

a.

The rate at which a dealer is willing to buy another currency

b.

The rate at which a dealer is willing to sell another currency

c.

The rate at which two foreign currencies are exchanged

d.

The rate at which two domestic currencies are exchanged

Discuss
Answer: (a).The rate at which a dealer is willing to buy another currency Explanation:Bid is the price at which the dealer is willing to buy another currency in foreign exchange quotes.
Q28.
What is the Offer (Ask) in the context of Foreign Exchange Quotes?

a.

The rate at which a dealer is willing to buy another currency

b.

The rate at which a dealer is willing to sell another currency

c.

The rate at which two foreign currencies are exchanged

d.

The rate at which two domestic currencies are exchanged

Discuss
Answer: (b).The rate at which a dealer is willing to sell another currency Explanation:The offer is the rate at which the dealer is willing to sell another currency in foreign exchange quotes.
Q29.
What is the Spread in the context of Foreign Exchange Quotes?

a.

The rate at which a dealer is willing to buy another currency

b.

The rate at which a dealer is willing to sell another currency

c.

The difference between bid and offer prices

d.

The exchange rate between two foreign currencies

Discuss
Answer: (c).The difference between bid and offer prices Explanation:The spread is the difference between bid and offer prices in foreign exchange quotes.
Q30.
Why is the offer always higher than the bid in Foreign Exchange?

a.

To attract more buyers

b.

To attract more sellers

c.

To make money by buying at the bid and selling at the offer

d.

It is a convention in foreign exchange markets

Discuss
Answer: (c).To make money by buying at the bid and selling at the offer Explanation:The offer is always higher than the bid as inter-bank dealers make money by buying at the bid and selling at the offer.
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