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

(e) 2.40 Canadian dollars per U.S. dollar
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18.
Which of the subsequent is not an improper hedging strategy for a likely devaluation of a currency?

(a) decrease the level of cash (b) decrease the local borrowing

(c) Delay accounts payable (d) Sell the weak currency forward

(e) Tighten credit terms.
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19.
In a swap-out deal, the foreign currency is

(a) Bought both spot and forward

(b) Sold both spot and forward

(c) Sold spot and bought forward

(d) Sold forward with various maturities

(e) Bought forward with various maturities.
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20.
The eurodollar interest rates in London are as under

1 month
4.00% p.a.

2 months
4.50% p.a.

3 months
5.00% p.a.


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

(a) 5.35% p.a. (b) 5.44% p.a. (c) 5.55% p.a. (d) 5.76% p.a. (e) 5.96% p.a.
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21.
The discount rate used in the APV method to compute savings due to concessionary loans is

(a) Risk free rate of interest in home country

(b) Competitive borrowing rate in home country

(c) Risk free rate of interest in host country

(d) Competitive borrowing rate in host country

(e) The cost of capital for the parent company.
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22.
Consider the subsequent rates:

Rs/$ Spot 48.20/22

Forward three months 30/31

The annualized premium on dollar is

(a) 2.25% (b) 2.53% (c) 2.76% (d) 3.01% (e) 3.25%.
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23.
Consider the subsequent information:

(Rs./$) Spot (S) = Rs.45.40/$

1 year Dollar interest rate ( ) = 4%

Rs./$ Forward 1-year (F) = Rs.48.35/$.

If a borrower wants to borrow Rs.1,00,000, he would prefer to borrow in rupees if,

Earning:   Approval pending.