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

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23.
Answer: (e)

Reason: If a particular country simultaneously importing and exporting the identical product the phenomena is called as intra-industry trade.
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24.
Answer: (d)

Reason: Let the quote be 100 Ps/$

Indirect quote is 1Ps = 0.01 $

If Peso devalues by 30%

1 Ps = (1-0.30) × 0.01$

= 0.007 $

Or one $ = 142.86 Ps

$ appreciation = (142.86 - 100)/100 = 42.86%
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25.
Answer: (c)

Reason: Under deferred credit a portion of goods is paid for by the buyer after verification of goods or after assessing the value of the goods taking into account the quality, shortages, etc., Date for payment of the undrawn balance may or may not be specified. Hence, such kinds of credit is called as deferred credit.
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26.
ans : (d)

cause : Efficient market hypothesis approach also known as the asset approach states that the modifications that are expected to occur in the value of a currency in future, gets reflected in the exchange rates immediately.
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27.
Answer: (d)

Reason: The J-curve suggests that short run demand for domestic and foreign goods is inelastic, which means they will not change easily. This is a outcome of contracts that may already be in place and the speed in which buyer behavior will change. In fact the current account will become more negative at 1st as importers pay even higher prices for quantities they cannot decrease and exporters can’t benefit from additional sales until quantities can be increased.
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28.
Answer: (e)

Reason: Gain or loss on a hedge using forward contract is based on the forward rate.

{ (10,00,000/1.2820) – ( 10,00,000/1.2720) }= € (780,031.20 – 786,163.52) = € (6132.32)
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29.
Answer: (c)

Reason: As per Article 13 of UCPDC, the issuing bank, the confirming bank, if any, or a nominated bank acting on their behalf shall every have a reasonable time, not to exceed 7 banking days subsequent the day of receipt of documents.
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30.
ans : (b)

Reason: choice (a)Overdraft $ 70,000 at 9% cost $525

choice (b) Term Loan $ 100,000 at 6% cost $500

Surplus $ 30,000 deposited in bank fetch @ 5% $125

Earning:   Approval pending.