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Sunday, 11 August 2024

BFM Module A, (Q & A) UNIT 1. Exchange Rate and Forex Business

 



BFM Module A

(Question-Answer)

UNIT 1. Exchange Rate and Forex Business

 

Fill in the blanks:

1. The term Foreign Exchange is used to denote ______ as well as the _______ of one currency into another.

2. The exchange rates of major currencies fluctuate every______ seconds.

3. Main factors affecting exchange rates are technical, _________ and speculation.

 4. In a spot contract, settlement of funds takes place on the_________ working day following the date of contract.

 5. If the currency is costlier in forward, it is said to be at a _________

 6. If the forward value of the currency is cheaper, it is said to be at a_________.

 7. The date of settlement of funds is known as_________ date.

 8. The rate at which the quoting party is ready to buy the currency is called_________ rate.

9. The dealers are officials, who are actually involved in the ________and________ of currencies.

10.  The section which handles processing of deals, reconciliation, etc., is called________ office.

11. Banks permitted to deal in foreign exchange are called ________ persons.

12. Unpaid Import bills drawn under Letters of Credit must be crystallized into Rupees as per the policy of the________.

13. In terms of FEDAI rules, besides, Japanese Yen, _______, and________ are the other currencies which are quoted as 100 units = so much Rupee

14. Exchange rate denotes a__________ at which one currency exchanged for another.

15. Foreign Exchange Markets are__________ Markets, with no barriers.

16. The currency appreciates due to inflow of overseas capital, if local interest rates are__________

17.  __________ deals provide depth and liquidity to the market.

18. Direct quotes are also called__________ currency quotations.

19.  The part of dealing room operations, which deals with risk management is called__________ office.

20. Risk of loss arising due to inability or unwillingness of the counter party to meet its obligations is called__________ risk.

21.  __________ guidelines prescribe code of conduct for dealers’ brokers.

 

State True or False:

1. The FOREX markets are dynamic and round the clock markets.

2. FOREX markets are not affected by government policies.  

3. A large part of the total global FOREX turnover results from global commodities trade

 

Terminal Questions.

1. Foreign Exchange markets are

 (a) regional markets.

(b) domestic markets.

(c) global markets.

(d) localized exchange traded markets.

 

2. Foreign exchange does not include:

(a) Deposits payable in foreign currency.

(b) Instruments drawn in foreign currency and payable in a foreign currency.

(c) instruments drawn in Indian rupees on a checking account of the drawer and payable abroad.

(d) instruments drawn in Indian rupees on a current account of an Indian company and payable in India.

 

3. Out of the several factors, the following factor does not have an effect in the movement of exchange rates:

(a) Political instability

(b) Increase in domestic interest rates

(c) Change in Taxation policy

(d) Increase in domestic tourism

 

4. Spot dealing in FX market means:

(a) Delivery of funds is on the 30th working day from the date of deal.

(b) Delivery of funds is on the second working day from the date of deal.

(c) Delivery of funds is next date from the date of deal.

(d) Delivery of funds is one week after the date of deal.

 

5. The rate at which the quoting bank is ready to sell the currency is called-

(a) Bid rate.

(b) Offer Rate.

(c) TT Buying Rate.

(d) Swap rate.

 

6. Operational Risk does not include:

(a) movement in exchange rates.

(b) Human errors.

(c) Technical Faults.

(d) Systemic failures.

 

7. Cancellation of forward contacts is to be done at:

(a) Opposite Bill rate.

(b) Opposite Cash rate.

(c) Opposite TT rate.

(d) Opposite TC rate.

 

8. Crystallization of export bills is to be done:

(a) On the 10th day from the due date of the bills.

(b) Before the due date.

(c) As per the policy of the Bank.

(d) On the due date itself.

 

 

Answer Key

Fill in the Blanks

1

Foreign currency, Exchange

8

Bid

15

Communication System based

2

Four

9

Buying & Selling

16

High

3

Fundamental

10

Back office

17

Speculative

4

Second

11

Authorized

18

Home

5

Premium

12

Bank

19

Credit

6

Discount

13

Indonesian Rupiah/Kenyan Shilling

20

FEDAI

7

Value

14

Price/Ratio/Value

21

 

True & False

1

True

2

False

3

False

Terminal Question

1

c

4

b

7

c

2

d

5

b

8

d

3

d

6

a

 

 

 



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