1. For contingency exposure of foreign exchange, the best derivative that can be used to hedge is 

 (A) Forwards. 
(B) Futures. 
(C) Options. 
(D) Swaps.



2. The strike price under an option is 

 (A) The price at which the option is auctioned 
(B) The exchange rate which the currencies are agreed to be exchanged under the contract
(C)  Lower of the market price and the agreed price 
(D) None of the above


3. An option at-the-money when 

 (A) The strike price is greater than the spot price, in the case of a call option. 
(B) The strike price is greater than spot price, in the case of a put option. 
(C) The option has a ready market. 
(D) The strike price and the spot price are the same.



4. Where an option is out of the money 

 (A) The premium will be refunded to the buyer. 
(B) The buyer is unable to take up the contract 
(C) The seller gains to the extent of the premium received. 
(D) No further purchase by the buyer is permitted.



5. Banks permitted to run option book is required to fulfill the condition of 

 (A) Continuous profit for at least three years. 
(B) Minimum CRAR of 9%. 
(C) Minimum net worth of Rs.200 crores. 
(D) All the above.



6. Zero coupon swap is an arrangement 

 (A) Involving exchange of zero coupon bonds. 
(B) Whereby only one party makes payment periodically. 
(C) Whereby one of the counter-parties makes payment in lump sum instead of periodically. 
(D) None of the above.



7. The acronym CIRCUS stands for 

 (A) Current Interest Rate Swap. 
(B) Circular Currency Swap. 
(C) Combined Income Range Currency Swap. 
(D) Combined Interest Rate and Currency Swap.



8. A forward rate agreement helps the user to 

 (A) Fix the cost of borrowing. 
(B) Reduce the cost of borrowing. 
(C) Cover exchange risk 
(D) Avail tax benefit


9. The swap arrangement where principal amounts are not exchanged, but periodical payments will be a 

 (A) Currency swap 
(B) Cross currency interest swap 
(C) Interest rate swap. 
(D) Non-Financial swap.



10. An interest rate cap is a series of 

 (A) Call options 
(B) Put options. 
(C) Periodical payments 
(D) Differential payments.




More MCQs on Foreign Exchange Management