61. There is a close link between the interest rates in two countries and the forward rate premium or discount. The theory about this is :
Purchasing Power Parity
Expectations Theory
Covered Interest Arbitrage and Interest Rate Parity
None of the above
Answer.3. Covered Interest Arbitrage and Interest Rate Parity
Explanation:
There is a close link between the interest rates in the two countries and the forward rate premium or discount. The theory about this is Covered Interest Arbitrage and Interest Rate Parity.
The covered interest rate parity situation means there is no opportunity for arbitrage using forward contracts, which often exists between countries with different interest rates. Covered interest rate parity (CIP) can be compared with uncovered interest rate parity (UIP).
62. According to Fisher effect, the nominal rate is equal to the real interest rate plus an adjustment for _______
FD Rate
Spot Rate
Inflation
Premium
Answer.3. Inflation
Explanation:
According to the Fisher Effect, nominal interest rate equals real interest rate plus the expected inflation rate.
63. The acquisition of existing firms or plants as a means of FDI is called ______
Green Field Investments
Dark Zone Investments
Growing Zone Investments
Brown Field Investments
Answer.4. Brown Field Investments
Explanation:
The acquisition of existing firms or plants as a means of FDI is called brown Field Investments.
A brownfield (also known as “brown-field”) investment is when a company or government entity purchases or leases existing production facilities to launch a new production activity. This is one strategy used in foreign direct investment.
64. McDonald’s purchasing farms in India to grow potatoes is which type of FDI?
Green Field
Agriculture
Vertical
Horizontal
Answer.3. Vertical
Explanation:
McDonald’s purchasing farms in India to grow potatoes is Vertical FDI. Vertical foreign direct investment occurs when a multinational acquires an operation that either acts as a supplier or distributor.
For example, a U.S. manufacturer might acquire an interest in a foreign company that supplies it with the raw materials it needs.
65. When an American Company acquires a division or unit of an Indian company, the US is said to be a ______ Country.
Sending
Receiving
Promoting
None of the above
Answer.1. Sending
Explanation:
When an American Company acquires a division or unit of an Indian company, the US is said to be a Sending Country. An acquisition is when one company takes over another company, and the acquiring company becomes the owner of the target company.
66. An act of buying currency in one market at a lower price and selling it in another at a higher price resulting in equilibrium in exchange rates of different currencies is called _________.
Hedging
Speculation
Trading
Arbitrage
Answer.4. Arbitrage
Explanation:
An act of buying currency in one market at a lower price and selling it in another at a higher price resulting in equilibrium in exchange rates of different currencies is called arbitrage.
Currency arbitrage involves the exploitation of the differences in quotes rather than movements in the exchange rates of the currencies in the currency pair.
Forex traders typically practice two-currency arbitrage, in which the differences between the spreads of two currencies are exploited.
67. Which of these are considered as nerve centers of foreign exchange activity?
London, New York and Tokyo
London, New Jersey and Mumbai
London, New York and Moscow
London, New York and Delhi
Answer.1. London, New York and Tokyo
Explanation:
London, New York, and Tokyo are the nerve center for financial activities not only in UK but across Europe. ; Nearly 30% of the people engaged in the financial services industry work in London. Nearly For a Tong time, it had held the position of the financial capital of the world till it got replaced by New York.
68. Who are key participants of the Foreign Exchange Market?
Importers & Exporters
Traders and Foreign Exchange Brokers
Speculators
All of the above
Answer.1.
Explanation:
Participants in the Foreign exchange market can be categorized into five major groups, viz
Commercial banks
Foreign exchange brokers
Central banks, MNCs
Individuals and Small businesses.
Speculators
69. When the exposed position in a foreign currency is covered through borrowing or lending in the money market, it is called _____.
Borrowing-Lending technique
Futures Contract
Currency Swap
Money Market Hedge
Answer.4. Money Market Hedge
Explanation:
When the exposed position in a foreign currency is covered through borrowing or lending in the money market, it is called a money Market Hedge.
A money market hedge is a technique used to lock in the value of a foreign currency transaction in a company’s domestic currency.
A money market hedge can help a domestic company reduce its exchange rate or currency risk when conducting business transactions with a foreign company.
70. An efficient Capital Market provides operational efficiency through
Simplified transaction procedure
Lowering settlement timings
Lowering transaction costs
All of the above
Answer.4. All of the above
Explanation:
Market efficiency refers to the degree to which market prices reflect all available, relevant information.
An efficient Capital Market provides operational efficiency through
Simplified transaction procedure
Lowering settlement timings
Lowering transaction costs
71. Full form of WDM segment is
Wholesale Debt Market
Wholesale Debenture Market
Wholesale Demand Management
Wholesale Deposit Market
Answer.1. Wholesale Debt Market
Explanation:
Full form of WDM segment is Wholesale Debt Market.
It is a market where institutional investors such as Banks, Financial Institutions, Mutual Funds, Insurers, Primary Dealers, Corporates, Foreign Portfolio Investors et all participate in the trading of Government Securities and bonds.
72. A facility for carrying forward the transaction from one settlement to another in BSE was called _______
Carry forward
Badla
Vayda
Forward
Answer.2. Badla
Explanation:
A facility for carrying forward the transaction from one settlement to another in BSE was called Badla.
Badla was a unique selling proposition for the BSE. Badla provided the facility for carrying forward the transaction from one settlement to another.
In simple terms, it was the postponement of the delivery of or payment for the purchase of securities from one settlement period to another.
73. For Book Building Process a merchant banker is appointed as a __________
Book Keeper
Book Writer
Book Runner
None of the Above
Answer.3. Book Runner
Explanation:
For Book Building Process a merchant banker is appointed as a Book Runner.
The term book runner or a bookrunner refers to the primary underwriter or lead coordinator in the issuance of new equity, debt, or securities instruments. The book runner is the lead underwriting firm that runs or is in charge of the books in investment banking.
74. Which one of the below is NOT a category of participant in the Primary Capital Market?
Issuers of securities
Investors in securities
Traders of securities
Intermediaries
Answer.3. Traders of securities
Explanation:
A primary market is a source of new securities. Often on an exchange, it’s where companies, governments, and other groups go to obtain financing through debt-based or equity-based securities.
Trading securities is a part of the secondary market.
75. Which of the below financial products/instrument can be traded in the secondary market?
Equity Shares
Commercial Paper
Bonds
All of the above
Answer.4. All of the above
Explanation:
The secondary market is where securities are traded after the company has sold its offering on the primary market. It is also referred to as the stock market. The instruments traded in a secondary market consist of fixed income instruments, variable income instruments, and hybrid instruments.
The products/instrument traded in the secondary market are
