International Finance Question Bank


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Question 3

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The following is the Question Bank of the Old Syllabus

Chp. Balance of payments
Concepts:-
1) Balance of visible trade/ merchandise/ balance of trade
2) Autonomous transactions/transaction above the line
3) Accommodating capital flows/transaction below the line
4) Treatment of goodwill in BOP/ invisibles
5) Unilateral transfers/unrequited payments/ transfer payments

5 mks:-
1) What is BOP? What are its components? OR
2) Give the outline of BOP statements.
3) In the accounting sense, BOP always balances. Explain the statement.
4) What are the errors and omissions in BOP?
5) How will you identify the surplus/deficit in BOP?

Chp. International Monetary system

Concepts:-
1) Exchange rate
2) Gold species standard
3) Gold bullion standard
4) Fiat money
5) Gold exchange standard
6) Mint par of exchange
7) Bretton woods system
8 ) Triffin paradox
9) Free float
10) Dirty float/ managed float
11) RBI intervention
12) Dollar standard
13) Devaluation
14) Revaluation
15) LERMS
16) Seignorage
17) Currency basket/board
18) Special drawing rights/ paper gold
19) Extended fund facility / EFF
20) Credit trance position/ policies
21) Reserve tranche policies
22) Compensatory financing facility (CFF)
23) Supplemental reserve facility (SRF)
24) Contingent credit line
25) FTA( free trade area)
26) Customs union
27) Parity grid
28) Divergence indicator
29) Snake in the tunnel
30) Euro
5 mks:-
1) Explain the features of Gold standard OR
2) How to find out exchange rate in gold standard OR
3) Explain the various types of gold standard system and its advantages OR
4) What are the essentials to make gold system successful? Why did it fail? OR
5) What are the fixed exchange rate system?
6) Bretton woods and the reasons for failure OR
7) Triffin paradox OR
8 ) Smith sonion agreement
9) Capital a/c convertibility. Explain with special reference to India.
10) LERMS
11) Advantages and disadvantages of devaluation of currency
12) Exchange rate regimes OR
13) Modern exchange rate system
14) What is IMF? What are its objectives and how far the objectives are achieved?
15) Facilitating mechanism of IMF
16) SDR
17) Examine the transformation of European Union OR
18) European monetary system from political and economic union to monetary union OR
19) Criteria to become the member of European union OR
20) Impact of euro currency on international trade
21) Evolution of euro markets

Chp. Foreign Exchange Market
Concepts-
1) Value date/settlement date
2) Spot rate
3) Forward rate
4) Forward transactions
5) SWAPs
6) Tom and cash
7) Vehicle currency
8 ) CHIPs
9) SWIFT
10) Bid rate
11) Ask rate
12) Cross rate
13) Direct quote
14) Indirect quote
15) American quotes
16) European terms

5mks:-
1) What is Foreign Exchange Market? Explain the participants.
2) Dist b/w Direct quote and indirect quote.
3) What is arbitrage? Explain its types.
4) Explain in detail purchasing power parity (PPP) theory?
5) SN on covered interest parity theory

Chp. International Financial Markets
Concepts:-
1) Bond with option
2) Zero coupon bonds
3) International financial market
4) Samurai bon
5) Yankee bonds
6) Euro CPs
7) Petro dollars
8 ) Junk bonds
9) Floating rate Note (FRN)
10) Bull dog
11) Flip flop FRN
5mks:-
1) Briefly discuss the evolution of euro currency markets.
2) Compare Euro credit and Euro bonds.

Chp. International Equity markets

Concepts-
1) GDR
2) ADR
3) FCCB
4) Sponsored Depository Receipts
5) Unsponsored Depository Receipts
6) Euro equities

5 mks:-
1) What is GDR? Parties and steps in GDR
2) Explain the term FDI
3) SN on FCCB
4) Different instruments available with a corporate body in India to raise funds abroad
5) Dist b/w FDI and FPI

Chp. Multilateral Financial Institutions
Concepts:-
1) ODA
2) Foreign aid
3) Multilateral investment guarantee
4) Multilateral aid
5) IBRD
6) IDA
7) IFC
8 ) MIGA

5mks:-
1) Dist b/w Foreign Capital and Foreign aid
2) Channels through which capital flow from right country to poor country
3) IBRD
4) IDA
5) Dist b/w IDA and IFC
6) MIGA

Chp. Exposure and Risk in International Finance
Concepts:-
1) Hedging
2) Inflation risk
3) Hot money
4) Bulls and bears
5) Long position and short position
6) Position risk
7) Translation risk
8 ) Futures
9) Strike price/exercise price
10) American option
11) European option
12) Marking to market
13) Price discovery
5mks:-
1) Bring out the arguments in favour and against hedging
2) Dist b/w forwards and future contracts
3) How can the companies cover their position by using currency future market? OR
4) What do you mean by currency futures? What are its features?
5) Explain with example, how options are used to cover exchange risk.
6) Explain – Currency SWAPs and currency options.
7) What are the different types of financial SWAPs.
8 ) What are the different types of exchange exposure that the multinational companies are exposed to?
9) What do you mean by currency risk? Explain with examples. OR
10) Explain various types of risk and exposure and internal techniques used to deal with? OR
11) Discuss the exposure and risk occurring due to changes in interest rate and exchange rates?

sums on
1) arbitrage gain
2) interest rate arbitrage
3) triangular arbitrage
4) outright forward and spread

Questions :-

1. Explain the meaning and scope of International finance
2. Explain Balance of payments as determinant of demand for and supply of currency
3. Explain Exchange rate and Determinants of/factors affecting exchange rates.
4. Explain Current account deficit v/s Balance of trade and their implications on exchange rate
5. Explain Exchange rate quotations, Direct and Indirect rates, cross currency rates, vehicle currency.
6. Problems/Numericals on % spread, calculation of cross rates.
7. Explain the Classification of rates in terms of settlement (cash, tom, spot and forward).
8. Explain Arbitrage, Speculation and Trading
9. Numericals on Spot rate arbitrage calculation
10. Explain the Relationship between exchange rates, interest rates, and commodity prices (through international parity conditions namely Purchasing Power Parity, and Fisher Parity)
11. Explain the Use of Covered Interest Parity theory in arbitrage, borrowing and investment decisions.
12. Numericals on Calculation of forward rates through use of forward schedules, through use of formula, annualized forward margin, calculation of swap points (calculations for cash/ tom rates to be excluded)
13. Write a note on Exchange rate regimes
14. Write a note on Features of Gold Standard
15. Write a note on Bretton Woods System – Background and Features, reasons for its failure, Smithsonian agreement, SDRs.
16. Explain Flexible exchange rate system – Features, Managed float, Central Bank intervention.
17. Explain Merits and Demerits of Fixed and Flexible Exchange rate systems.
18. Explain the Characteristics of International Foreign Exchange Markets.
19. Explain the Origin and reasons for the growth of Euro currency (off shore) markets, their characteristics and components.
20. Write a note on Euro-currency deposit, loans, bonds and notes market.
21. Explain the Concept of off shore banking as a form of globalization of the Euro currency concept, its introduction in India, tax havens.
22. Explain International Equity Markets
23. Explain the Concept of Depository Receipt.
24. Explain Global Depository Receipt- characteristics, mechanism of issue, participants involved.
25. Explain American Depository Receipt – types and characteristics
26. Explain Foreign Currency Convertible Bonds and Foreign Currency
27. Explain Foreign Direct Investment and Foreign Portfolio Investment
28. Explain Participatory notes
29. Write a note on Foreign Exchange Management in India
30. Explain the Retail and Wholesale components of the Indian foreign exchange market.
31. Explain Capital account Convertibility
32. Write a note on Reserve Management
33. Explain the Role of FEDAI in the Indian foreign exchange market.
34. Explain Risk versus exposure
35. Explain Transaction, Translation and Economic risks faced by Corporate entities
36. Explain Transaction, Position, Pre-settlement, Settlement risks faced by commercial banks
37. Write a note on Internal and external hedging
38. Explain Foreign currency derivatives as instruments of risk management i.e. Forward contracts, Swaps, Futures and Options.
39. Write a note on Overview of Non-deliverable forward Market (NDF market)
40. Explain the Contribution of Bank for International Settlements in risk management system
41. Write a note on European Central Bank

Also Problems/Sums are expected based on the above topics.

P.S. The Question Banks and Important Topics provided by us may or may not appear in the exams. It’s just for you to be aware of the topics related to the subject. Do prepare and study more than this. We are not responsible and are just here to provide you with the best required information.

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