MCQs on Foreign Exchange Management - 5

1. For the purpose of translations, current rate refers to 

(A) The rate current at the time of transaction. 
(B) The rate prevailing on the date of the balance sheet. 
(C) The rate prevailing on the date of preparation of the balance sheet. 
(D) The spot rate

2. Exposed assets are those translated at 

(A) Historical rate. 
(B) Average rate. 
(C) Current rate. 
(D) Current rate or average rate.

3. This is not established method of translation 

(A) Current rate method. 
(B) Monetary/Non-monetary method. 
(C) Current/Non-current method  
(D) Temporary method.

4. A positive exposure will lead to when the currency of the subsidiary company appreciates.

(A) Translation gain. 
(B) Translation loss 
(C) Exchange gain. 
(D) Exchange loss.

5. Translation loss may occur when 

(A) Exposed assets exceed exposed liabilities and foreign currency appreciates. 
(B) Exposed assets exceed exposed liabilities and foreign currency depreciates. 
(C) The subsidiary's balance sheet shows a loss. 
(D) The foreign currency depreciates.

6. The following method cannot be used for managing translation exposure 

(A) Forward contract. 
(B) Option contract 
(C) Exposure netting. 
(D) Leading and lagging.

7. Economic exposure does not deal with 

(A) Changes in real exchange rates. 
(B) Future cash flow of the firm 
(C) Expected exchange rate changes. 
(D) None of the above.

8. The __________ refers to the orderly relationship between spot and forward currency exchange rates and the rates of interest between countries. 

(A) one-price rule 
(B) interest-rate parity 
(C) purchasing-power parity 
(D) exchange-power parity

9. The __________ is especially well suited to offer hedging protection against transactions risk exposure. 

(A) forward market 
(B) spot market 
(C) transactions market 
(D) inflation-rate market

10. A multinational company that is faced with mild interference up to complete confiscation of all assets is encountering__________. 

(A) translation risk exposure 
(B) transactions risk exposure 
(C) political risk exposure 
(D) a very bad day

More MCQs on Foreign Exchange Management


1 comment:

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