International Financial Management: Exam Questions

Examination Paper IIBM Institute of Business Management Examination Paper International Financial Management Section A: Objective Type (30 marks) • This section consists of Multiple choice & Short Answer type questions. • Answer all the questions. • Part One questions carry 1 mark each & Part Two questions carry 5 marks each. Part One: Multiple choices: 1. Maintenance margin money denotes the minimum level to which the margin is allowed to fall in the sequel of loss, if the balance drops below this, one has to deposit, a. Initial margin amount b. Variation margin amount c. Maintenance margin amount d. Initial as well as variation margin amount. 2. The two kind of swap in the forward market are a. Forward swap and reverse swap. b. Reverse swap and option swap. c. Forward and option less swap. d. Forward swap and option swap. 3. International Fisher Effect or generalized version of the Fisher effect is a combination of a. PPP theory and Fisher’s open proposition. b. Fisher’s open and closed proposition. c. PPP theory and Fisher’s closed proposition. d. None of the above. 4. Exchange rates are quoted as ‘direct’ and ‘indirect’ ,if the direct quote of a country ‘X’ (currency unit ‘a’) with country ‘Y’ (currency unit ‘b’), is “ a 50/ b 20” then the indirect quote will be a. b 2.5/ a 1 b. b 0.4/ a 1 c. b 10/ a 1 d. Can not be calculated. 5. If the investors are risk neutral ie forward prices are equal to the expected spot prices at delivery then the covariance of marginal rate of substitution and the exchange rate of contract at delivery is a. Always unity b. Zero c. Infinite d. Between Zero and unity 1 IIBM Institute of Business Management MM.100

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6. In cylinder or tunnel option, the correct option is a. If the spot rate is lower than the lower strike rate then buyer has to pay lower spot rate. b. If the spot rate is lower than the lower strike rate then buyer has to pay lower strike rate. c. If the spot rate is higher than the higher strike rate