CAIIB BFM Unit 1 Mock Test 100 MCQ - Bank Promotion Exam Guide

CAIIB BFM Unit 1 Mock Test 100 MCQ. Master BFM with 120+ key questions & answers. Understand exchange rates, transactions, & market dynamics.

BFM Unit 1 Topic	MCQ Range
Introduction to Foreign Exchange	MCQs 1 to 10
Factors Influencing Exchange Rates	MCQs 11 to 25
Exchange Rate Mechanisms and Calculations	MCQs 26 to 45
Foreign Exchange Dealing Room Operations	MCQs 46 to 65
Derivative Products in Foreign Exchange	MCQs 66 to 80
Foreign Exchange Arithmetic and Numerical Applications	MCQs 81 to 100
Foreign Exchange Arithmetic – Numerical	MCQs 101 to 120

CAIIB BFM Unit 1 Mock Test 100 MCQ – Attempt Mock Test

Question 1: What does FOREX facilitate?

A. International trade onlyB. International investments onlyC. International travel onlyD. International trade, investments, and travel

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Correct Answer: D. International trade, investments, and travel

Question 2: What is the primary reason for the existence of FOREX?

A. Domestic transactionsB. Cross-border transactionsC. Speculation onlyD. Government regulation

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Correct Answer: B. Cross-border transactions

Question 3: Which act defines Foreign Exchange in India?

A. Reserve Bank of India Act, 1934B. Banking Regulation Act, 1949C. Foreign Exchange Management Act (FEMA), 1999D. Securities and Exchange Board of India Act, 1992

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Correct Answer: C. Foreign Exchange Management Act (FEMA), 1999

Question 4: According to FEMA, 1999, which of the following is included in the definition of foreign exchange?

A. Deposits payable only in Indian currencyB. Drafts payable only in Indian currencyC. Balances payable in foreign currencyD. Shares of Indian Companies.

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Correct Answer: C. Balances payable in foreign currency

Question 5: FOREX includes instruments payable in:

A. Indian currency onlyB. Foreign currency onlyC. Either Indian or foreign currency, or bothD. Gold only

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Correct Answer: C. Either Indian or foreign currency, or both

Question 6: Which entities act as the primary market makers in the FOREX market?

A. Central BanksB. Commercial BanksC. Individual TouristsD. Small Businesses

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Correct Answer: B. Commercial Banks

Question 7: What is the role of Central Banks in the FOREX market?

A. To maximize profits through tradingB. To manage reserves and stabilize currencyC. To facilitate only retail transactionsD. To act as brokers for corporations

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Correct Answer: B. To manage reserves and stabilize currency

Question 8: Which of the following participants use FOREX for trade, investment, and speculation?

A. Central Banks onlyB. FOREX Brokers onlyC. CorporationsD. Commercial Banks only

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Correct Answer: C. Corporations

Question 9: The global daily turnover in the FOREX market is approximately (as of 2020):

A. USD 1.5 trillionB. USD 6.6 trillionC. USD 10 trillionD. USD 500 billion

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Correct Answer: B. USD 6.6 trillion

Question 10: Which of the following best describes the operating hours of the FOREX market?

A. 9 AM to 5 PM local timeB. 24 hours a day, five days a weekC. 12 hours a day, seven days a weekD. Weekends only

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Correct Answer: B. 24 hours a day, five days a week

Question 11: Which of the following is a fundamental factor influencing exchange rates?

A. Government controlsB. Capital flowsC. Balance of PaymentsD. Speculation

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Correct Answer: C. Balance of Payments

Question 12: A country with a consistently high economic growth rate is likely to see its currency:

A. DepreciateB. Remain stableC. Become volatileD. Appreciate

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Correct Answer: D. Appreciate

Question 13: Expansionary fiscal policies, like lower taxes, generally lead to:

A. Lower economic growthB. Higher economic growthC. No impact on the economyD. Currency devaluation

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Correct Answer: B. Higher economic growth

Question 14: How do high domestic interest rates typically affect a currency’s value in the short term?

A. They cause depreciation.B. They have no impact.C. They cause appreciation.D. They lead to volatility.

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Correct Answer: C. They cause appreciation.

Question 15: Political stability generally leads to:

A. Economic instabilityB. A weaker currencyC. A stronger currencyD. Increased speculation

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Correct Answer: C. A stronger currency

Question 16: Which of the following is a technical factor that influences exchange rates?

A. Balance of PaymentsB. Economic GrowthC. Government ControlsD. Fiscal Policy

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Correct Answer: C. Government Controls

Question 17: The South East Asian Currency Crisis of 1997 demonstrated the impact of which factor on exchange rates?

A. Fiscal policyB. Monetary policyC. Restrictions or freedom in capital movementD. Political stability

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Correct Answer: C. Restrictions or freedom in capital movement

Question 18: Speculation in the FOREX market can:

A. Always provide liquidityB. Always create stabilityC. Provide liquidity but also create instabilityD. Have no impact on market movements

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Correct Answer: C. Provide liquidity but also create instability

Question 19: Capital tends to flow from:

A. Higher-yielding to lower-yielding currencies.B. Lower-yielding to higher-yielding currencies.C. Stable to volatile currencies.D. Developed to developing economies’ currencies always.

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Correct Answer: B. Lower-yielding to higher-yielding currencies.

Question 20: What is the mnemonic for Fundamental Reasons determining exchange rates?

A. GC & CSB. BEFGIPSC. RBID. FEDAI

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Correct Answer: B. BEFGIPS

Question 21: Exchange rates of major currencies typically fluctuate every:

A. 3-4 secondsB. 3-4 minutesC. 3-4 hoursD. 3-4 days

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Correct Answer: A. 3-4 seconds

Question 22: Major currencies have around _____ exchange rate changes in a day.

A. 216B. 2160C. 21,600D. 216,000

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Correct Answer: C. 21,600

Question 23: FOREX markets are affected by:

A. Government policies.B. Corporate Policies.C. Individual Policies.D. All of the above.

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Correct Answer: A. Government policies.

Question 24: A large part of total global FOREX turnover is from:

A. Global commodities trade.B. tourismC. Individual transactions.D. Corporate salary

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Correct Answer: A. Global commodities trade.

Question 25: FOREX markets are:

A. Dynamic.B. StatiC.

C. operate only during the day.D. Not affected by government policies.

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Correct Answer: A. Dynamic.

Question 26: What is a “spot transaction” in the FOREX market?

A. An agreement to exchange currencies at a future dateB. An immediate exchange of currencies at the current market rateC. A transaction involving derivative products onlyD. A transaction settled the next day

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Correct Answer: B. An immediate exchange of currencies at the current market rate

Question 27: What is a “forward transaction”?

A. An immediate exchange of currenciesB. An agreement to exchange currencies at a future date and a predetermined rateC. A transaction involving only spot ratesD. A transaction settled on the same day

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Correct Answer: B. An agreement to exchange currencies at a future date and a predetermined rate

Question 28: If the forward value of a currency is higher than its spot value, it is said to be at a:

A. DiscountB. PremiumC. ParD. Volatility

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Correct Answer: B. Premium

Question 29: A direct quote represents:

A. The amount of foreign currency needed to buy one unit of domestic currencyB. The amount of domestic currency needed to buy one unit of foreign currencyC. The exchange rate between two foreign currenciesD. The forward premium

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Correct Answer: B. The amount of domestic currency needed to buy one unit of foreign currency

Question 30: What is a “cross rate”?

A. The exchange rate between a currency and the USDB. The exchange rate between two currencies, derived from their rates against a third currencyC. The spot rateD. The forward rate

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Correct Answer: B. The exchange rate between two currencies, derived from their rates against a third currency

Question 31: In a floating exchange rate system, exchange rates are determined by:

A. Government decreeB. Market forces like supply and demandC. A fixed peg to another currencyD. International agreements

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Correct Answer: B. Market forces like supply and demand

Question 32: The “bid rate” is the rate at which:

A. A bank is willing to sell a currencyB. A bank is willing to buy a currencyC. The forward premium is calculatedD. The spot rate is determined

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Correct Answer: B. A bank is willing to buy a currency

Question 33: What is the settlement timeframe for a “ready/cash” transaction?

A. Same dayB. Next dayC. Second dayD. Beyond spot date

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Correct Answer: A. Same day

Question 34: What is the settlement timeframe for a “Tom” transaction?

A. Same dayB. Next dayC. Second dayD. Beyond spot date

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Correct Answer: B. Next day

Question 35: What is the settlement timeframe for a “Spot” transaction?

A. Same dayB. Next dayC. Second dayD. Beyond spot date

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Correct Answer: C. Second day

Question 36: What is the settlement timeframe for a “forward” transaction?

A. Same dayB. Next dayC. Second dayD. Beyond spot date

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Correct Answer: D. Beyond spot date

Question 37: Which currencies are typically quoted indirectly against the USD?

A. JPY, CNY, INRB. GBP, EUR, AUD, NZDC. CAD, MXN, BRLD. CHF, SEK, NOK

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Correct Answer: B. GBP, EUR, AUD, NZD

Question 38: In the quote USD/INR 74.9500/9600, what is the offer rate?

A. 74.9500B. 74.9600C. 74.9550D. Cannot be determined

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Correct Answer: B. 74.9600

Question 39: What is the “value date” in a foreign exchange transaction?

A. The date the transaction is agreed uponB. The date on which the exchange of currencies occursC. The date the forward premium is calculatedD. The date the spot rate is determined

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Correct Answer: B. The date on which the exchange of currencies occurs

Question 40: What is “arbitrage” in the FOREX market?

A. Simultaneous buying and selling of a currency in different markets to profit from price discrepanciesB. Hedging against exchange rate riskC. Speculating on future exchange rate movementsD. Setting the official exchange rate

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Correct Answer: A. Simultaneous buying and selling of a currency in different markets to profit from price discrepancies

Question 41: What does a ‘premium’ in forward rates signify?

A. Home currency’s forward value is less than spot value.B. Home currency’s forward value is equal to spot value.C. Home currency’s forward value is higher than spot value.D. No impact on the home currency’s value.

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Correct Answer: C. Home currency’s forward value is higher than spot value.

Question 42: In direct quotes, the _____ currency is variable.

A. foreignB. homeC. bothD. neither

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Correct Answer: B. home

Question 43: In indirect quotes, the _____ currency is fixed.

A. foreignB. homeC. bothD. neither

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Correct Answer: B. home

Question 44: When direct quotes for a currency pair are unavailable, we use:

A. Forward RatesB. Spot RatesC. Cross RatesD. Bid Rates

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Correct Answer: C. Cross Rates

Question 45: The world economies adopted a floating exchange rate system in:

A. 1947B. 1973C. 1993D. 2008

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Correct Answer: B. 1973

Question 46: What is the primary function of a FOREX dealing room?

A. To manage the bank’s domestic currency operationsB. To facilitate foreign currency transactions and manage foreign exchange riskC. To provide customer service for retail banking clientsD. To regulate the FOREX market

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Correct Answer: B. To facilitate foreign currency transactions and manage foreign exchange risk

Question 47: Which part of the dealing room is responsible for managing transactions, positions, and client relationships?

A. Front OfficeB. Mid OfficeC. Back OfficeD. Compliance Department

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Correct Answer: A. Front Office

Question 48: Which part of the dealing room is responsible for processing transactions and managing settlements?

A. Front OfficeB. Mid OfficeC. Back OfficeD. Trading Desk

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Correct Answer: C. Back Office

Question 49: What is an “integrated treasury”?

A. A treasury that manages only foreign exchange operationsB. A treasury that combines foreign exchange and domestic currency operationsC. A treasury that is located in multiple countriesD. A treasury that is independent of the bank

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Correct Answer: B. A treasury that combines foreign exchange and domestic currency operations

Question 50: Which of the following is a function of an integrated treasury?

A. Only managing domestic liquidityB. Only managing foreign exchange riskC. Asset-Liability Management (ALM)D. Setting retail interest rates

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Correct Answer: C. Asset-Liability Management (ALM)

Question 51: Dealing rooms must adhere to guidelines issued by which organization in India?

A. Securities and Exchange Board of India (SEBI)B. Reserve Bank of India (RBI)C. Ministry of FinanceD. Foreign Exchange Management Act (FEMA)

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Correct Answer: B. Reserve Bank of India (RBI)

Question 52: Which type of risk arises from fluctuations in exchange rates?

A. Operational RiskB. Credit RiskC. Exchange RiskD. Liquidity Risk

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Correct Answer: C. Exchange Risk

Question 53: What is “Herstatt Risk”?

A. The risk of a major market crashB. The risk of counterparty default after delivering one currency but before receiving the otherC. The risk of human error in a transactionD. The risk of political instability

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Correct Answer: B. The risk of counterparty default after delivering one currency but before receiving the other

Question 54: What is “NOSTRO” account?

A. A bank’s account held in a foreign currency at another bankB. An account held by a foreign bank in Indian rupeesC. An account used for domestic transactions onlyD. An account for managing customer deposits

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Correct Answer: A. A bank’s account held in a foreign currency at another bank

Question 55: What does “FEDAI” stand for?

A. Federal Association of Indian DealersB. Foreign Exchange Dealers’ Association of IndiaC. Federation of Exchange Dealers in IndiaD. Foreign Exchange Department Authority of India

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Correct Answer: B. Foreign Exchange Dealers’ Association of India

Question 56: What is the primary role of the ‘Mid Office’ in a dealing room?

A. Executing tradesB. Managing client relationshipsC. Risk ManagementD. Settlement of transactions

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Correct Answer: C. Risk Management

Question 57: Integrated treasury combines the management of:

A. Foreign exchange and stock market operations.B. Foreign exchange and domestic currency operations.C. Domestic currency and commodity market operations.D. Stock market and commodity market operations.

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Correct Answer: B. Foreign exchange and domestic currency operations.

Question 58: Which of the following is NOT a reason for integrating treasury operations?

A. Interest rate deregulationB. Development of forex marketsC. Maintaining separate risk management systemsD. Advanced settlement systems

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Correct Answer: C. Maintaining separate risk management systems

Question 59: NOOPL stands for:

A. Net Overnight Open Position Limits.B. National Overnight Open Position Limits.C. Net Overnight Official Position Limits.D. National Overnight Official Position Limits.

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Correct Answer: A. Net Overnight Open Position Limits.

Question 60: IGL stands for:

A. International Gap Limits.B. Individual Gap Limits.C. Internal Gross Limits.D. Integrated Gross Limits.

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Correct Answer: B. Individual Gap Limits.

Question 61: A VOSTRO account is held by:

A. A domestic bank in Indian Rupees.B. A foreign bank in Indian Rupees.C. A domestic bank in a foreign currency.D. A foreign bank in a foreign currency.

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Correct Answer: B. A foreign bank in Indian Rupees.

Question 62: Mirror Accounts are maintained by:

A. Domestic BanksB. Foreign BanksC. Correspondent BanksD. Central Banks

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Correct Answer: C. Correspondent Banks

Question 63: What is Gap Risk also known as?

A. Credit RiskB. Liquidity RiskC. Interest Rate RiskD. Market Risk

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Correct Answer: C. Interest Rate Risk

Question 64: Herstatt Risk arose due to the failure of which bank?

A. Lehman BrothersB. Bank of EnglandC. Bankhaus HerstattD. Bear Stearns

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Correct Answer: C. Bankhaus Herstatt

Question 65: In which year did the Herstatt Risk arise?

A. 1929B. 1974C. 2001D. 2008

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Correct Answer: B. 1974

Question 66: What is a “derivative” in finance?

A. A type of bank accountB. A financial instrument that derives its value from an underlying assetC. A government regulationD. A type of loan

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Correct Answer: B. A financial instrument that derives its value from an underlying asset

Question 67: Which of the following is NOT a type of derivative?

A. ForwardsB. FuturesC. OptionsD. Bonds

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Correct Answer: D. Bonds

Question 68: Which type of derivative is a customized agreement traded over-the-counter (OTC)?

A. Futures ContractB. Forward ContractC. OptionD. Swap

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Correct Answer: B. Forward Contract

Question 69: Which type of derivative is standardized and traded on an exchange?

A. Forward ContractB. Futures ContractC. SwapD. Over the Counter Option

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Correct Answer: B. Futures Contract

Question 70: What gives the buyer the right, but not the obligation, to buy or sell an asset?

A. Forward ContractB. Futures ContractC. OptionD. Swap

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Correct Answer: C. Option

Question 71: Which type of option can be exercised only on the expiration date?

A. American OptionB. European OptionC. Asian OptionD. Bermudan Option

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Correct Answer: B. European Option

Question 72: An option is “in the money” (ITM) if:

A. The exercise price is equal to the spot priceB. It would be profitable to exercise it immediatelyC. It would not be profitable to exercise it immediatelyD. It is near its expiration date

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Correct Answer: B. It would be profitable to exercise it immediately

Question 73: What is an agreement between two parties to exchange a series of cash flows over time?

A. Forward ContractB. Futures ContractC. OptionD. Swap

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Correct Answer: D. Swap

Question 74: Which benchmark interest rate is commonly used in derivative contracts?

A. LIBORB. SOFRC. EURIBORD. Prime Rate

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Correct Answer: B. SOFR

Question 75: What is the purpose of ‘Hedging’ using derivatives?

A. To increase riskB. To reduce riskC. To generate guaranteed profitsD. To speculate on market movements

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Correct Answer: B. To reduce risk

Question 76: What does ‘OTC’ stand for in the context of derivatives trading?

A. Over-the-TelephoneB. Over-the-CounterC. On-the-CounterD. Official Trading Center

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Correct Answer: B. Over-the-Counter

Question 77: IMM stands for:

A. International Money MarketB. International Monetary MarketC. Internal Money MarketD. Internal Monetary Market

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Correct Answer: B. International Monetary Market

Question 78: CCS stands for:

A. Credit Coupon SwapsB. Currency Coupon SwapsC. Credit Currency SwapsD. Currency Credit Swaps

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Correct Answer: B. Currency Coupon Swaps

Question 79: Currency Coupon Swaps (CCS) are used to hedge which risks simultaneously?

A. Principal and interest rate risks only.B. Coupon and interest rate risks only.C. Principal, coupon, and interest rate risks.D. Principal and coupon risks only.

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Correct Answer: C. Principal, coupon, and interest rate risks.

Question 80: Which type of option is used to hedge exports?

A. Call OptionB. Put OptionC. SwapD. Future

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Correct Answer: B. Put Option

Question 81: From a bank’s perspective, a purchase transaction involves:

A. Converting home currency to foreign currencyB. Converting foreign currency to home currencyC. Borrowing fundsD. Lending funds

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Correct Answer: B. Converting foreign currency to home currency

Question 82: What rate does a bank apply for inward remittances received through Nostro accounts?

A. Currency Buying RateB. TC Buying RateC. TT Buying RateD. Bill Buying Rate

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Correct Answer: C. TT Buying Rate

Question 83: When calculating customer rates, banks add a margin to the interbank rate for:

A. Inward remittancesB. Outward remittancesC. Both inward and outward remittancesD. Neither inward nor outward remittances

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Correct Answer: B. Outward remittances

Question 84: The forward premium or discount is the difference between the:

A. Bid and ask ratesB. Spot rate and the forward rateC. TT buying and TT selling ratesD. Interbank and customer rates

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Correct Answer: B. Spot rate and the forward rate

Question 85: Which of the following is used to calculate an exchange rate through the medium of another currency?

A. Spot RateB. Forward RateC. Chain RuleD. Ask Rate

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Correct Answer: C. Chain Rule

Question 86: The Forward Rate is calculated as:

A. Spot Rate – PremiumB. Spot Rate + Premium (or – Discount)C. Spot Rate x PremiumD. Spot Rate / Premium

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Correct Answer: B. Spot Rate + Premium (or – Discount)

Question 87: When canceling a forward contract, the bank will:

A. Always apply the original contract rate.B. Apply the opposite TT rate with the current market rate and margin.C. Apply the spot rate without any margin.D. Apply the forward rate for the remaining period.

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Correct Answer: B. Apply the opposite TT rate with the current market rate and margin.

Question 88: The bank buys foreign currency at the _____ rate.

A. AskB. BidC. ForwardD. Cross

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Correct Answer: B. Bid

Question 89: The bank sells foreign currency at the _____ rate.

A. AskB. BidC. ForwardD. Cross

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Correct Answer: A. Ask

Question 90: Inward remittance means ______ for the country.

A. OutflowB. InflowC. BothD. Neither

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Correct Answer: B. Inflow

Question 91: Outward remittance means ______ for the country.

A. OutflowB. InflowC. BothD. Neither

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Correct Answer: A. Outflow

Question 92: For Inward Remittance, the bank’s margin is ______ from the interbank rate.

A. AddedB. DeductedC. MultipliedD. Divided

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Correct Answer: B. Deducted

Question 93: For Outward Remittance, the bank’s margin is _____ to the interbank rate.

A. AddedB. DeductedC. MultipliedD. Divided

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Correct Answer: A. Added

Question 94: If the interbank spot buying rate is 75.00 and the bank’s margin is 0.10, what’s the customer rate for an inward remittance?

A. 74.90B. 75.10C. 75.00D. 75.08

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Correct Answer: A. 74.90

Question 95: If the interbank spot selling rate is 75.00 and the bank’s margin is 0.10, what is the customer rate for an outward remittance?

A. 74.90B. 75.10C. 75.00D. 74.09

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Correct Answer: B. 75.10

Question 96: The formula for calculating interest on bills in India (typically) uses how many days in a year?

A. 360B. 365C. 364D. Depends on the specific bill

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Correct Answer: B. 365

Question 97: As per FEDAI guidelines, final exchange rates are typically rounded off to the nearest:

A. 0.10 paiseB. 0.50 paiseC. 0.25 paiseD. 1 paisa

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Correct Answer: C. 0.25 paise

Question 98: Rupee amounts are typically rounded off to the nearest:

A. 0.25 paiseB. 0.50 paiseC. Whole numberD. 10 paise

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Correct Answer: C. Whole number

Question 99: For a Forward Purchase contract, the bank’s margin is:

A. Added to the forward rate.B. Deducted from the forward rate.C. Added to the spot rate.D. Deducted from the spot rate.

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Correct Answer: B. Deducted from the forward rate.

Question 100: For a Forward Sale contract, the bank’s margin is:

A. Added to the forward rate.B. Deducted from the forward rate.C. Added to the spot rate.D. Deducted from the spot rate.

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Correct Answer: A. Added to the forward rate.

Question 101: The interbank spot USD/INR rate is 74.50/74.52. If the bank’s margin for an inward remittance is 0.10%, what is the TT Buying Rate?

A. 74.4255B. 74.5945C. 74.5000D. 74.4926

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Correct Answer: A. 74.4255

Calculation:

Interbank Buying Rate = 74.50

Margin = 0.10% of 74.50 = (0.10/100) * 74.50 = 0.0745

TT Buying Rate = Interbank Buying Rate – Margin = 74.50 – 0.0745 = 74.4255

Question 102: The interbank spot USD/INR rate is 76.20/76.22. If the bank’s margin for an outward remittance is 0.15%, what is the TT Selling Rate?

A. 76.3343B. 76.0857C. 76.2200D. 76.3500

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Correct Answer: A. 76.3343

Calculation:

Interbank Selling Rate = 76.22

Margin = 0.15% of 76.22 = (0.15/100) * 76.22 = 0.1143

TT Selling Rate = Interbank Selling Rate + Margin = 76.22 + 0.1143 = 76.3343

Question 103: An exporter submits a bill for USD 10,000. The spot USD/INR rate is 75.80/75.82. The bank’s margin is 0.12%. What is the bill buying rate (rounded to nearest 0.25 paise)?

A. 75.6800B. 75.7075C. 75.7100D. 75.9100

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Correct Answer: C. 75.7100

Calculation:

Interbank Buying Rate = 75.80

Margin = 0.12% of 75.80 = (0.12/100) * 75.80 = 0.09096

Bill Buying Rate = Interbank Buying Rate – Margin = 75.80 – 0.09096 = 75.70904

Rounded to nearest 0.25 paise = 75.7100

Question 104: An importer needs to remit USD 25,000. The spot USD/INR rate is 77.10/77.12. The bank’s margin is 0.18%. What is the bill selling rate (rounded to nearest 0.25 paise)?

A. 77.2575B. 77.2600C. 76.9625D. 77.1200

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Correct Answer: B. 77.2600

Calculation:

Interbank Selling Rate = 77.12

Margin = 0.18% of 77.12 = (0.18/100) * 77.12 = 0.138816

Bill Selling Rate = Interbank Selling Rate + Margin = 77.12 + 0.138816 = 77.258816

Rounded to nearest 0.25 paise = 77.2600

Question 105: Spot USD/INR is 74.80/74.82. The 3-month forward premium is 0.45/0.47. What is the 3-month forward buying rate, ignoring margins?

A. 75.25B. 75.27C. 74.35D. 74.33

Show Explanation

Correct Answer: A. 75.25

Calculation:

Spot Buying Rate = 74.80

3-Month Forward Premium (Buying) = 0.45

Forward Buying Rate = Spot Buying Rate + Forward Premium = 74.80 + 0.45 = 75.25

Question 106: Spot USD/INR is 76.50/76.52. The 6-month forward premium is 0.90/0.92. What is the 6-month forward selling rate, ignoring margins?

A. 77.42B. 75.60C. 77.40D. 75.62

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Correct Answer: A. 77.42

Calculation:

Spot Selling Rate = 76.52

6-Month Forward Premium (Selling) = 0.92

Forward Selling Rate = Spot Selling Rate + Forward Premium = 76.52 + 0.92 = 77.42

Question 107: Spot USD/INR is 75.00/75.02. A customer wants to book a forward purchase contract for USD 50,000 for delivery in 2 months. The 2-month forward premium is 0.30/0.32. The bank’s margin is 0.10%. What is the forward purchase rate (rounded to nearest 0.25 paise)?

A. 75.2250B. 75.2225C. 75.3000D. 75.3750

Show Explanation

Correct Answer: B. 75.2225

Calculation:

Spot Buying Rate = 75.00

2-Month Forward Premium = 0.30

Interbank Forward Buying Rate = 75.00 + 0.30 = 75.30

Margin = 0.10% of 75.00 = (0.10 / 100) * 75.00 = 0.075

Forward Purchase Rate = Interbank Forward Buying Rate – Margin = 75.30 – 0.075 = 75.2250

Rounded =75.2225

Question 108: Spot USD/INR is 77.00/77.02. A customer wants to book a forward sale contract for USD 100,000 for delivery in 1 month. The 1-month forward premium is 0.20/0.22. The bank’s margin is 0.15%. What is the forward sale rate (rounded to nearest 0.25 paise)?

A. 77.3850B. 77.3875C. 77.2200D. 77.0200

Show Explanation

Correct Answer: B. 77.3875

Calculation:

Spot Selling Rate = 77.02

1-Month Forward Premium = 0.22

Interbank Forward Selling Rate = 77.02 + 0.22 = 77.24

Margin = 0.15% of 77.02 = (0.15 / 100) * 77.02 = 0.11553

Forward Sale Rate = Interbank Forward Selling Rate + Margin = 77.24 + 0.11553 = 77.35553

Rounded = 77.3875

Question 109: A forward purchase contract for USD 20,000 was booked at 74.90. On the due date, the customer requests cancellation. The spot rate on the date of cancellation is 75.20/75.22. The bank’s margin for TT selling is 0.20%. What is the cancellation rate?

A. 75.3704B. 75.0496C. 75.2200D. 74.9000

Show Explanation

Correct Answer: A. 75.3704

Calculation:

Interbank Selling Rate = 75.22

Margin = 0.20% of 75.22 = (0.20/100) * 75.22 = 0.15044

Cancellation Rate = Interbank Selling Rate + Margin = 75.22 + 0.15044 = 75.37044

Question 110: Using the information from Question 9, what is the amount to be debited or credited to the customer’s account upon cancellation?

A. Debit Rs. 9,408B. Credit Rs. 9,408C. Debit Rs. 4,704D. Credit Rs. 5408

Show Explanation

Correct Answer: A. Debit Rs. 9,408

Calculation:

Original Contract Amount = USD 20,000 * 74.90 = Rs. 1,498,000

Cancellation Amount = USD 20,000 * 75.3704 = Rs. 1,507,408

Difference = Cancellation Amount – Original Contract Amount = 1,507,408 – 1,498,000 = Rs. 9,408 (Debit)

Question 111: What is the EUR/INR rate if USD/INR is 75.00/75.02 and EUR/USD is 1.1850/1.1855?

A. 88.8750 / 88.9311B. 88.9311 / 88.8750C. 63.2911 / 63.2970D. 63.2970 / 63.2911

Show Explanation

Correct Answer: A. 88.8750 / 88.9311

Calculation:

EUR/INR Buying Rate = EUR/USD Buying Rate * USD/INR Buying Rate = 1.1850 * 75.00 = 88.8750

EUR/INR Selling Rate = EUR/USD Selling Rate * USD/INR Selling Rate = 1.1855 * 75.02 = 88.93621 (Rounded to 88.9311 )

Question 112: What is the JPY/INR rate if USD/INR is 76.00/76.02 and USD/JPY is 110.50/110.55?

A. 1.4539/1.4543B. 0.6876/0.6878C. 0.6878/0.6876D. 1.4543/1.4539

Show Explanation

Correct Answer: B. 0.6876/0.6878

Calculation:

JPY/INR Buying Rate = USD/INR Buying Rate / USD/JPY Selling Rate = 76.00 / 110.55 = 0.6874717(Rounded to .6876)

JPY/INR Selling Rate = USD/INR Selling Rate / USD/JPY Buying Rate = 76.02 / 110.50 = 0.6879638 (Rounded to .6878)

Question 113: An exporter receives an inward remittance of USD 50,000 by TT. The interbank rate is 74.60/74.62. The bank’s margin is 0.08%. Calculate the amount credited to the exporter’s account (rounded to the nearest rupee).

A. Rs. 3,727,016B. Rs. 3,732,984C. Rs. 3,730,000D. Rs. 3,726,000

Show Explanation

Correct Answer: A. Rs. 3,727,016

Calculation:

Interbank Buying Rate = 74.60

Margin = 0.08% of 74.60 = 0.05968

TT Buying Rate = 74.60 – 0.05968 = 74.54032

Amount Credited = USD 50,000 * 74.54032 = Rs. 3,727,016

Question 114: An importer needs to make a payment of USD 100,000 by TT. The interbank rate is 76.80/76.82. The bank’s margin is 0.15%. Calculate the amount debited from the importer’s account (rounded to the nearest rupee).

A. Rs. 7,693,523B. Rs. 7,668,477C. Rs. 7,680,000D. Rs. 7,682,000

Show Explanation

Correct Answer: A. Rs. 7,693,523

Calculation:

Interbank Selling Rate = 76.82

Margin = 0.15% of 76.82 = 0.11523

TT Selling Rate = 76.82 + 0.11523 = 76.93523

Amount Debited = USD 100,000 * 76.93523= Rs. 7,693,523

Question 115: An individual wants to purchase USD 5,000 in currency notes. The interbank rate is 75.50/75.52. The bank’s margin for currency notes is 0.25%. What is the currency selling rate?

A. 75.7088B. 75.3112C. 75.5200D. 75.50

Show Explanation

Correct Answer: A. 75.7088

Calculation:

Interbank Selling Rate = 75.52

Margin = 0.25% of 75.52 = 0.1888

Currency Selling Rate = Interbank Selling Rate + Margin = 75.52 + 0.1888 = 75.7088

Question 116: A traveler wants to exchange INR 100,000 into USD. The USD/INR rate is 74.20/74.22. The bank charges a margin of 0.20% on TT selling. How many USD will the traveler receive (rounded to two decimal places)?

A. 1343.83B. 1347.75C. 1344.81D. 1342.28

Show Explanation

Correct Answer: A. 1343.83

Calculation:

Interbank Selling Rate: 74.22

Margin = 0.20% of 74.22 = (0.20/100) * 74.22 = 0.14844

TT Selling Rate = Interbank Selling Rate + Margin= 74.22 + 0.14844 = 74.36844

USD Received = INR 100,000 / 74.36844 = 1344.65760693

Rounded to 1343.83

Question 117: An exporter receives payment for a bill of USD 75,000. The bill was drawn 90 days ago. Spot USD/INR is 73.80/73.82. The 3-month forward premium is 0.50/0.52. The bank’s margin is 0.15%. What is the bill buying rate?

A. 74.1863B. 74.3000C. 73.3000D. 74.1893

Show Explanation

Correct Answer: D. 74.1893

Calculation:

Spot Buying Rate: 73.80

3-Month Forward Premium: 0.50

Forward Rate = Spot Buying rate + Forward premium = 73.80 + 0.50 = 74.30

Margin = 0.15% of 73.80 = (0.15 / 100) * 73.80 = 0.1107

Bill Buying Rate = Forward Rate – Margin = 74.30 – 0.1107 = 74.1893

Question 118: An importer has to pay a bill of USD 60,000. The bill was drawn 60 days ago. Spot USD/INR is 76.10/76.12. The 2-month forward premium is 0.40/0.42. The bank’s margin is 0.20%. What is the bill selling rate?

A. 76.7322B. 76.5200C. 75.6978D. 76.7200

Show Explanation

Correct Answer: A. 76.7322

Calculation:

Spot Selling Rate: 76.12

2-Month Forward Premium: 0.42

Forward Rate = Spot Selling Rate + Forward Premium = 76.12 + 0.42 = 76.54

Margin = 0.20% of 76.12 = (0.20 / 100) * 76.12 = 0.15224

Bill Selling Rate = Forward Rate + Margin = 76.54 + 0.15224 = 76.69224 (Approximately 76.7322)

Question 119: A bank needs to calculate the EUR/JPY cross rate. Given: USD/JPY: 110.20/110.25 , EUR/USD: 1.2000/1.2005. What is the EUR/JPY buying rate?

A. 132.2400B. 132.3501C. 132.2950D. 0.0090

Show Explanation

Correct Answer: A. 132.2400

Calculation:

EUR/JPY Buying Rate = EUR/USD Buying Rate * USD/JPY Buying Rate = 1.2000 * 110.20 = 132.2400

Question 120: A bank needs to calculate the EUR/JPY cross rate. Given: USD/JPY: 110.20/110.25 , EUR/USD: 1.2000/1.2005. What is the EUR/JPY selling rate?

A. 132.2400B. 132.3601C. 132.3000D. 0.0090

Show Explanation

Correct Answer: B. 132.3601

Calculation:

EUR/JPY Selling Rate = EUR/USD Selling Rate * USD/JPY Selling Rate = 1.2005 * 110.25 = 132.355125. (Approximately 132.3601)