Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance International and Trade – I - exam paper

Hence, choice (b) is the accurate ans.
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7.
ans : (c)

Reason: If the capital gains tax rate is lower than the income tax rate, then investors would like to invest in those curencies which are at a premium and borrowers would like to borrow in a foreign currency which is a discount.

Hence, choice (c) is the accurate ans.
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8.
ans : (d)

Reason: According to the Monetary Approach, an increase in the money supply causes the currency to depreciate. The result of the increase in money supply in excess of real output growth is inflation.
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9.
ans : (d)

Reason: Leading involves advancing a payment. That is making a payment before it is due. Lagging on the other hand refers to postponing a payment. A company can lead payments needed to be made in a currency that is likely to appreciate and reduce its holding and lag the payments that it needs to make in a currency that is likely to depreciate and increase its holding of that currency. This strategy is called leading and lagging.

Netting means matching receivables with payables in the identical currency to arrive at the net amount. accurate ans is (d).
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10.
ans : (c)

Reason: Euro Commercial papers are short – term unsecured promissory notes which repays a fixed amount on a certain future date. Hence, statement (I) is actual. It is not mendatory to have credit rating in case of Euro Commercial Paper. Hence, statement (II) is actual. Euro Commercial Papers are not underwritten. Hence, statement (III) is false.

Hence, choice (c) is the accurate ans.
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11.
ans : (e)

Reason: A current account surplus implies that, the country is a net lender to the rest of the world and foreign investment in domestic securities is at very high levels.

Hence the accurate ans is (e).
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12.
ans : (c)

Reason: Under advance license, duty free imports of inputs are permitted on fulfillment of value addition and export obligation within a certain time – frame.

Hence, choice (c) is the accurate ans.
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13.
ans : (e)

Reason: Stand by L/C is mostly used in countries where financial gurantees are prohibited by legal regulations.

Hence, choice (e) is the accurate ans.

Earning:   Approval pending.