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

Therefore here the borrower will borrow in rupee if


<10.76%

Hence, choice (b) is the accurate ans.
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24.
ans : (d)

Reason: EXIM bank will participate in the credit, if the requirement of pre-shipment credit by exporters is for a period more than 180 days.

Hence, choice (d) is the accurate ans.
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25.
ans : (a)

Reason: A specific duty is a flat duty based on the number of units regardless of the value of the goods.

Hence, choice (a) is the accurate ans.
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26.
ans : (c)

Reason: To invest $1, the Indian investor needs Rs. 46.50. The net return is

Net return = = 18.06%
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27.
ans : (d)

Reason: The supply of domestic currency (assuming full convertibility) in the foreign exchange market rises when inflation in foreign countries rises slower than domestic inflation. If foreign inflation is lower than domestic inflation then domestic residents will want to buy the relatively cheaper ‘foreign’ goods and therefore, they will increase the demand for the foreign currency, which means increasing the supply of the domestic currency in the foreign exchange market.

Statement II is false because a reduce in foreign income will reason a reduce in the demand for imports and therefore a reduce in the demand for the currency of other nations. Statement III is true, because if foreign interest rates rise faster than domestic rates, then there would be an increase in the demand for foreign currency, which means the supply of domestic currency, would rise in the foreign exchange market. Hence, choice (d) is the accurate ans.
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28.
ans : (c)

Reason: If a country has a Balance of Payments deficit and the Central Bank is subsequent floating exchange rate system, the foreign exchange rate for its currency would fall. This is due to the depriciation of the domestic currency. When the domestic currency depreciates, exports would increase and imports would become uncompetitive. The exporter’s inflow in domestic currency would be more due to depreciation of domestic currency. The depreciation of domestic currency discourages people to import less. Therefore accurate ans is (c).
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29.
ans : (a)

Reason: The transaction exposure of a firm can be managed by exposure netting. All others are techniques for managing economic exposure of a firm.

Earning:   Approval pending.