Banking and Finance 2 MCQs and Notes

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📊 Banking and Finance 2
Q. Forward exchange rates
  • (A) Involve the immediate exchange of bank deposits.
  • (B) Involve the exchange of bank deposits at some specified future date.
  • (C) Involve the immediate exchange of imports and exports.
  • (D) None of the above.
💬 Discuss
✅ Correct Answer: (B) Involve the exchange of bank deposits at some specified future date.
📊 Banking and Finance 2
Q. A spot transaction in the foreign exchange market involves the
  • (A) Exchange of exports and imports at a specified future date.
  • (B) Exchange of bank deposits at a specified future date.
  • (C) Immediate (within two days) exchange of exports and imports.
  • (D) Immediate (within two days) exchange of bank deposits.
💬 Discuss
✅ Correct Answer: (D) Immediate (within two days) exchange of bank deposits.
📊 Banking and Finance 2
Q. If PPP holds
  • (A) The nominal exchange rate will not change.
  • (B) The real exchange rate will not change.
  • (C) Both real and nominal exchange rates will not change.
  • (D) Both real and nominal exchange will move together
💬 Discuss
✅ Correct Answer: (B) The real exchange rate will not change.
📊 Banking and Finance 2
Q. The demand for domestic currency in the foreign exchange market is indicated by the following transactions in balance of payment.
  • (A) Export of goods and services
  • (B) Import of goods and services.
  • (C) Export of goods and services and capital inflows.
  • (D) Import of goods and services and capital outflows.
💬 Discuss
✅ Correct Answer: (C) Export of goods and services and capital inflows.
📊 Banking and Finance 2
Q. The effect of speculation on exchange rate is
  • (A) It causes violent fluctuations in exchange rate.
  • (B) It aggravates the market trends.
  • (C) Either or both of A and B.
  • (D) Neither A nor B.
💬 Discuss
✅ Correct Answer: (C) Either or both of A and B.
📊 Banking and Finance 2
Q. India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to
  • (A) Depreciate.
  • (B) Appreciate.
  • (C) Show no specific tendency.
  • (D) Depreciate against currencies of the countries with positive balance of payment and appreciate
💬 Discuss
✅ Correct Answer: (A) Depreciate.
📊 Banking and Finance 2
Q. The exchange rate is
  • (A) The price of one currency relative to gold.
  • (B) The value of a currency relative to inflation.
  • (C) The change in the value of money over time.
  • (D) The price of one currency relative to another.
💬 Discuss
✅ Correct Answer: (D) The price of one currency relative to another.
📊 Banking and Finance 2
Q. Indirect rate in foreign exchange means
  • (A) The rate quoted with the units of home currency kept fixed.
  • (B) The rate quoted with units of foreign currency kept fixed.
  • (C) The rate quoted in terms of a third currency.
  • (D) None of the above.
💬 Discuss
✅ Correct Answer: (A) The rate quoted with the units of home currency kept fixed.
📊 Banking and Finance 2
Q. The acronym SWIFT stands for
  • (A) Safety Width in Financial Transactions.
  • (B) Society for Worldwide International Financial Telecommunication.
  • (C) Society for Worldwide Interbank Financial Telecommunication.
  • (D) Swift Worldwide Information for Financial Transaction.
💬 Discuss
✅ Correct Answer: (C) Society for Worldwide Interbank Financial Telecommunication.
📊 Banking and Finance 2
Q. Hedging transaction is indicated by
  • (A) Transactions in odd amounts
  • (B) Presentation of documentary support
  • (C) Frequency of such transactions
  • (D) None of the above
💬 Discuss
✅ Correct Answer: (D) None of the above

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