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

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3.
ans : (b)

Reason: The responsibility of the seller ceases, once the goods are made available at buyer premises or at any other named place. This contract is called as Ex works contract.
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4.
ans : (b)

Reason: 1.6640 ´ = 1.6599.
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5.
ans : (a)

Reason: The forward margin is in discount and discount is to be deducted from the spot rates to arrive at the forward rates. The bank assumes that the choice for purchase of foreign currency (from the customer) is exercised on the last day of the choice period. Hence the maximum discount of three months is provided. The forward bid rate with choice to deliver in third month is spot bid rate – three months discount

=
0.8290

=
Less 0.8176


0.114


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6.
ans : (a)

Reason: Free trade benefits consumers through better quality and lower prices. Through the legal regulations of comparative advantage, countires will import that which can be bought at a lower price than it would cost to produce domestically. The reverse holds actual for exports. Hence choice (III) is accurate. choice (I) is wrong becuuse even if a country has absolute advantage in all products, does not mean it will export all of them. legal regulations of competitive advantage truly states that a country will select to import such products in a few cases. choice (II) is a false statement. It would be actual for lower oppurtunity costs.
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7.
ans : (d)

cause : Statements in choices (a), (b), (c) and (e) are accurate. It is incorrect that IFC insists on government guarantee for financing projects. In fact IFC does not insist on government guarantee. accurate ans is (d).
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8.
ans : (d)

Reason: Since the dealer has over bought position, he should reduce both bid and ask rates for the subsequent reasons, to ensure a square position. By decreasing bid rate, he is discouraging the sellers of HK$ and by decreasing ask rate he wants to encourage buyer of HK$.
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9.
ans : (a)

Reason: In devaluation government lowers the value of domestic currency when fixed exchange rate system prevails.
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10.
ans : (d)

Reason: The risk-free interst rate in country A is 3% and in country B is 5%, then a hedged investor in country A will earn 3% in A’s currecny by investing in country B.

Earning:   Approval pending.