Deck 6: International Finance and Investment

Question 1

Non-cash adjustments like Depreciation, Preliminary Expenses and Goodwill Written off are shown on the debit side of which account?

A)Balance Sheet
B)Funds Flow Statement
C)Adjusted Profit and Loss Account
D)Working Capital Statement

Answer 1

Adjusted Profit and Loss Account

Question 2

Part of Profit transferred to General Reserve will be shown on the debit side of _________

A)Balance Sheet
B)Funds Flow
C)Cash Flow
D)Adjusted Profit and Loss Account

Answer 2

Adjusted Profit and Loss Account

Question 3

A projected Funds Flow Statement informs the management about

A)Future Financial Stringency
B)Future Requirement of Funds
C)Funds Position of the Company
D)All of the above

Answer 3

All of the above

Question 4

Funds Flow Statement can be prepared in which form?

A)Vertical Form
B)Horizontal Form
C)Complex Form
D)Both a and b

Question 5

Funds flow statement being based on ________________, which is of limited utility for future planning is a limitation of funds flow statement.

A)Historical Facts
B)Traditional Facts
C)Hypothetical Facts
D)Current Facts

Question 6

Which one of the following is NOT a theory of International Parity Relationship

A)Purchasing Power Parity
B)Covered Interest Arbitrage and Interest Rate Parity
C)Money Market Hedge Theory
D)Expectations Theory

Question 7

Indirect Quotation is also known as ___________

A)European Quotation
B)Indian Quotation
C)American Quotation
D)Euro Quotation

Question 8

The spread in a two way quotation is affected by

A)Currency involved
B)The volume of business
C)Market sentiments/rumours about the currency
D)All of the above

Question 9

The Rate of Exchange applicable for delivery of Foreign Exchange at a future date is called ______

A)Spot Rate
B)Current Rate
C)Forward Rate
D)Expected Rate

Question 10

The act of arbitrage that involves three foreign currencies involving three different foreign exchange market is called __________

A)Geographical Arbitrage
B)Triangular Arbitrage
C)Cross Arbitrage
D)None of the Above

Question 11

An option to buy is called a _______

A)Put Option
B)Bid Option
C)Call Option
D)Preemptive Option

Question 12

'Speculators' in the market _______________

A)Need foreign currency to pay their import obligations
B)Invest in securities of foreign country
C)Try to profit from exchange rate movements
D)None of the Above

Question 13

Which one of the following is NOT a Foreign Exchange Risk Management Technique

A)Forward Contract
B)Futures Contract
C)External Commercial Borrowing
D)Currency Options

Question 14

Default risk is higher in which one of the following?

A)Forward Contracts
B)Futures Contracts
C)Equal in both a and b
D)None of the Above

Question 15

A financial instrument that provides its holder a right but no obligation to buy or sell a pre-specified amount of a foreign currency at a pre-determined rate is referred to as ____________

A)A Promise
B)An Option
C)An Obligation
D)A Swap

Question 16

Establishment of new plants and offices overseas by MNC as a mean of FDI is

A)A Greenfield Investment
B)A Brownfield Investment
C)Vertical FDI
D)None of the Above

Question 17

Hilton Hotels of United States opening a hotel in Mumbai, India is ____________

A)A Horizontal FDI
B)A Vertical FDI
C)A Conglomerate FDI
D)None of the Above

Question 18

There are basically two approaches to find out NPV of a foreign based project's capital budgeting exercise. Which are those two?

A)Home Currency and foreign currency approaches
B)One Currency and Multi Currency Approaches
C)Home Country and Foreign Country Approaches
D)None of the Above

Question 19

If there are no costs or other barriers associated with the movement of goods or services across countries, the price of each product should be the same in each country, after making appropriate currency conversions. It is called ____________ in Economics.

A)Law of Similar Mortgage Rate
B)Law of Similar Labour Rules
C)Law of One Price
D)Law of One type of Manufacturing

Question 20

The current spot rate for the Euro is Rs. 86,the expected inflation rate is 5 in India and 3 in Europe. What is the expected Spot Rate of Euro one year hence?

A)Rs. 87.67/Euro
B)Rs. 84.36/Euro
C)Rs. 86/Euro
D)Rs. 93/Euro

Question 21

When an Option can be exercised on any date up to maturity, it is called

A)A Flexible Option
B)An European Option
C)A British Option
D)An American Option

Question 22

Is it necessary for an organization to own 100 % of an overseas firm for its investment to be classified as an FDI?

Question 23

Capital investment made by firms in another county is called______

A)Foreign Direct Investment
B)Foreign Direct Involvement
C)Foreign Debt Investment
D)None of he Above