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

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14.
ans : (b)

Reason: In order to avail post – shipment fiannce the exporer is needed to submit the document evidencing exports to the bank within 21 days from the date of shipment of goods.

Hence, choice (b) is the accurate ans.
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15.
ans : (d)

Reason: When country’s Central Bank increases the money supply, the currency loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.

Hence, choice (d) is the accurate ans.
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16.
ans : (c)

Reason: When the goods are imported without authority but cleared by the custom authorities the authorized dealer can permit remittance up to C.I.F value of goods.

Hence, choice (c) is the accurate ans.
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17.
ans : (d)

Reason: Since the real exchange rate is ½ gallon of Canadian gasoline per gallon of U.S. gasoline and a gallon of Canadian gasoline costs C$ 3.90, half gallon of Canadian gasoline will cost C$ 1.95. Now, half gallon of Canadian gasoline is equal to 1 gallon of U.S. gasoline and 1 gallon of U.S. gasoline costs $1.50. So, we can say that C$1.95 = $1.5. Hence, nominal exchange rate is = C$1.3/$.

Hence, choice (d) is the accurate ans.
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18.
ans : (b)

Reason: Reducing the local borrowing is not a hedging strategy for a likely devaluation of a currency since as the local currency devalue, borrowing will be cheaper.
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19.
ans : (c)

Reason: In a swap-out deal, the foreign currency is sold spot and bought forward. choices in (a), (b) (d) and (e) are not accurate.
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20.
ans : (e)

Reason: The 1 month interest rate after two months is expected to be

=
r =
r = 5.96%.
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21.
ans : (d)

Reason: As the nominal foreign currency interest rate would have had to be paid in absence of the concessionary loan, that rate should be ussed as the discount rate for calculating the current value of the repayment of concessioanry loans.

Hence, choice (d) is the accurate ans.
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22.
ans : (b)

Reason:

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23.
ans : (b)

Reason: The borrower will borrow in currency A if,

Earning:   Approval pending.