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

ques. Paper
International Finance and Trade – I (221) : April 2006


part A : Basic Concepts (30 Marks)



· This part consists of ques. with serial number one - 30.

· ans all ques..

· every ques. carries 1 mark.

· Maximum time for answering part A is 30 Minutes.





1.
The supply of domestic currency (assume full convertibility) in the foreign exchange market falls when:

I. Foreign inflation is greater than domestic inflation.

II. Foreign income rises.

III. Foreign real interest rate is greater than domestic real interest rate.

(a) Only (I) above (b) Only (II) above

(c) Both (I) and (III) above (d) Both (II) and (III) above

(e) All (I), (II) and (III) above.
< ans >

2.
If India can produce 1000 tons of wheat or 500 tons of rice per day and Indonesia can produce either 100 tons of wheat or 50 tons of rice per day, which nation, if any has the comparative advantage in wheat?

(a) India has a comparative advantage in wheat

(b) India has a comparative advantage in rice

(c) India has a comparative advantage in rice and wheat

(d) Indonesia has a comparative advantage in wheat

(e) No trade takes place as terms of trade for both the countries are the identical.
< ans >

3.
When the seller places the goods at his premises at the disposal of the buyer or any other named place, say works, factory, warehouse etc., then it is a contract of

(a) Free carrier (FCA) (b) Exworks (EXW)

(c) Cost and Freight (CFR) (d) Free on Board (FOB)

(e) Carriage paid to (CPT).
< ans >

4.
The dollar is trading at CHF 1.6640. Interest rates prevailing in Switzerland and U.S.A. are 2% p.a. and 3% p.a. respectively. What is the three months forward quote for CHF / $?

(a) 1.6478 (b) 1.6599 (c) 1.6681 (d) 1.6803 (e) 1.6767.
< ans >

5.
The inter-bank market rates are as under:

Euro/$
Spot
0.8290/0.8300


one month
0.8030/0.8035


two months
0.8250/0.8255

Earning:   Approval pending.