Which of the following takes place in a cross border trade transaction?

a) The seller gets paid in foreign currency

b) The buyer pays in his local currency
c) The seller converts the foreign currency into domestic currency
d) All the above take place
2. There are a large no. of participants in forex market that may include
(a) Central Banks (b) commercial banks (c) investment banks
(d) forex brokers (e) companies (f) Individuals.
Which of the following combination is correct in the above context?
a) a, b, c, d, e only b) a, b, c ,d ,f only
c) a, b ,c, e, f only d) a, b ,c, d, e, f all
3. Which of the following factors do affect the foreign exchange rates in the long run;
a) balance of payment & fiscal policy
b) economic growth rate & interest rate
c) monetary policy
d) all the above
4. Which among the following is true?
a) The entire turnover in in forex market arises only on account of trade in goods and services
b) A smaller portion of the turnover is contributed by investments and speculative trading
c) The major portion of the turnover is contributed by investments or speculative trading
d) The major portion of the turnover is contributed by trade in goods and services
5. Fundamental factors influencing exchange rate movement can be of the domestic country;
a) Balance of payment position
b) Economic growth rate
c) Fiscal policy
d) Monetary policy
e) None of the above
f) All the above
6. Which among the following is correct with regard to direct and indirect rates;
a) direct rate means so many units of home currency for one unit of foreign currency.
b) indirect rate means so many units of foreign currency for fixed unit of home currency
c) a is correct and b is not
d) and b are correct

7. Which among the following is a correct statement;

a) buying rate is also called bid rate
b) selling rate is also called offer rate
c) a is correct and b is wrong
d) a and b both are correct

8. If the value of a foreign currency is more for a future date than the spot rate, the currency is said to be at a
a) Premium b) Discount c) Neither of the above

9. Which of the following does not match with regard to the risk represented);
a) credit risk – risk on account of inability or unwillingness of the counter party
b) exchange risk – risk associated with fluctuations in exchange rates or mismatch
c) settlement risk – risk arising on account of failure of another country to make the payment unwillingly
d) liquidity risk – risk arising on account of mismatch in maturity of assets and liabilities.
10. Which among the following currencies is quoted in direct quote?
a) GBP b) Euro c) AUD d) NZD e) All the above
11. The parity between exchange rate and interest rate is called
a) interest rate parity
b) exchange rate parity
c) interest rate-cum-exchange rate parity
d) none of the above

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12. Forex dealing room operation consists of
a) Covering the customer transactions in the market
b) Managing the foreign currency assets and liabilities of the bank
c) Funding and managing the nostrum accounts of the bank
d) Making proprietary trading in the market for the bank
e) All the above
13. Forex Dealing Room maintains:
a) Funds position b) Currency position
c) Both the above d) None of the above
14. An exporter had sent a bill for collection through International Bank Ltd New Delhi to UK against exports of
books and the importer has paid the bill and deposited the proceeds in an account of International Bank Ltd opened
with a bank in London. What rate will be applied by the International Bank Limited while crediting the export
proceeds?
a) TT buying rate
b) Bills buying rate
c) Spot buying rate
d) Forward buying rate
e) any of the above rates
15. What is Risk?
a) Is an unexpected event or uncertainty
b) Has the potential to reduce the earnings
c) Has the potential to create a loss
d) All the above
16. International trade may face
(a) bank failure risk (b) competition risk (c) price risk
(d) legal risk (e) spread risk. Which of these is correct)
a) a, b ,d, e only b) a ,b, c, e only
c) a, b, d, c only d) a, b ,c, d, e, all
17. In order to cover risk, which of the following kinds of limits are fixed by the bank, because individual transactions
are not possible to be covered)
a) day light & overnight limit
b) position limit and volume limit
c) stop loss limit and forward mismatch limit
d) all the above
18. Day light position limit will generally be higher than the overnight position limit because:
a) The dealer must have enough cushion to trade in the market
b) Since the market is open for business during the day, if emergency arises the dealer can always unwind his
position and reduce possible loss
c) Both the above
d) None of the above
19. Sovereign risk may arise on account of which of the following:
a) change in govt.
b) change in govt. policies
c) govt. or govt. agencies seeking immunity
d) all the above
20. Which of the following is a correct statement regarding derivatives:
a) exchange traded derivatives are more expensive compared to OTC products.
b) exchange traded derivatives are equally expensive compared to OTC products.
c) exchange traded derivatives are less expensive compared to OTC products
21. country risk or sovereign risk may arise due to:
a) Restriction imposed by the Central bank the country for repatriation of funds
b) Changes of policy of the country’s Government
c) Economic or political issues
d) Liquidity crisis in the country
e) All the above
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22. The derivatives are used with which of the following objectives:
a) to reduce the exposure of the underlying contracts
b) to neutralize the exposure of the underlying contracts
c) to hedge against uncertain movements of the prices of underlying contracts
d) all the above
23. Operational risk arises mainly from internal issues. It may arise due to
a) Inadequate internal controls
b) Insufficiency or ineffective systems and procedures
c) Human errors
d) Defective or ineffective infrastructure
e) All the above
24. Risks that can be quantified are:
a) Exchange risk b) Interest rate risk c) Liquidity risk
d) Settlement risk e) All the above
25. CCIL conducts clearing operations in :
a) Repo b) CBLO c) Gilts
d) Forex deals e) All the above
26. Which of the following is not a feature of the futures contract.
a)these are exchange traded contracts
b) these are the contract between the futures exchange and buyer or seller
c) these are not the contracts between the buyer or seller
d) delivery under a futures contract is must
27. Derivative contracts are used by:
a) Exporters and importers who have actual exposures to foreign currency
b) Arbitrageurs
c) Speculators
d) All the above
28. A right to buy or sell an agreed quantity ofcurrency or commodity, without obligation to do so, is called
a)futures b) forward c) option d) dynamic derivative
29. The price at which the option may be exercised and the underlying asset is bought or sold is called:
a) sale price b) buy price c) sale or buy price d) strike or exercise price
30. When the strike price is below the spot price in case of put option and above the spot price in case of call
option , it is called:
a ) money option b) out of money c) at the money d) in money
31. Which of the following is a service rendered by the correspondent bank?
a) Facilitation of receipt and payment of funds
b) Collection of cheques and bills
c) Carrying out payment instructions
d) extending overdraft and loan facilities
e) Providing investment services
f) All the above
32. In case of cross currency interest swaps, what is exchanged:
a)streams of currencies only
b) streams of interest rates only
c) streams of currencies & streams of currency structures
d) any of the above
33. Which of the following permits the trading of different kinds of derivatives in India)
a) BSE & NSE b) NCDEX c) MCDEX d) all the above
34. What kind of services are rendered by correspondent banks)
a) clearing house functions
b) collection of instrument
c) payment services
d) all the above

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35. SBI account with CITI Bank in New York in U.S $ is called;
a) NOSTRO b) VOSTRO c) LORO d) Mirror
36. International Bank Limited has opened a current account under Resident Foreign Currency deposit scheme for a
returning Indian Mr. Suresh Chander, who expired 4 months back. The legal heirs claim interest on the balance in
the current account)
a) interest applicable to saving bank can be allowed
b) interest applicable to saving bank RFC account can be permitted
c) interest applicable to term deposit RFC for the corresponding maturity cab be allowed
d) no interest can be allowed being a RFC account
e) none of the above
37. Fresh NRO/ NRE/ FCNRB accounts can be opened only with
a) Inward remittance from abroad
b) Transfer of funds from an existing NRE/ FCNRB account
c) deposit of foreign currency or foreign currency travelers cheques
d) All the above
38. A foreign national visiting India wants to open an NRO account during his visit:
a) account can be opened
b) account cannot be opened
c) account can be opened with RBI permission only
d) account can be opened for foreign currency transactions
39. Rupee loans against the security of term deposits of NRIs can be extended to them for:
a) Their personal or permitted business purposes
b) Making direct investment on non repatriable basis in Indian companies
c) Purchase of residential houses/ flats
d) All the above
40. Which of the following credit is not allowed in an NRE account
a) remittance to India in any permitted currency
b) transfer from any other NRE / FCNR account
c) foreign currency / bank notes tendered during NRI’s temporary visit to India
d) none of the above
41. A small scale industry unit dealing with your branch has received an export order on FOB terms. In this case)
a) the cost of insurance is to be borne by the exporter
b) the cost of freight is to be borne by the exporter
c) the cost of goods and also the insurance and
freight is to the account of exporter
d) cost of insurance and freight is to borne by the importer
42. An exporter M/s Delhi Exports dealing with your branch receives an export order for export of certain spices. As
per terms of the contract for sale of which a letter of credit is to be received subsequently, the goods are to be
delivered by the exporter to the shipping company without putting the goods on the following kinds of contract it will
be termed?
a) Free on Board ( FOB )
b) Ex-Quay
c) Cost and freight ( C & F )
d) Free alongside the ship ( FAS )
e) Ex-works
43. The quantity of goods mentioned in a letter of credit is 1000 units but it does not specify as to by how much
quantity cannot be exceeded. In the bills submitted for negotiated the quantity is stated 1090 units)
a) quantity being within 10% of the stated quantity, the documents can be accepted.
b) quantity being more than 5% of the stated quantity, documents cannot be accepted
c) quantity being different the documents cannot be negotiated
d) any of the above

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44. Credit International Bank receives a letter of credit opened by a foreign bank in favour of M/s Fine Hosiery Ltd
which is not a customer of the bank and advised to the beneficiary. Subsequently, after shipment of the
consignments under the letter of credit the exporter presents the bills for negotiation to the advising bank but the
bank does not entertain the request of the exporter:
a) by advising the letter of credit the advising bank also undertaken the obligation of negotiation of the bills
b) by advising the letter of credit, the advising bank also steps into the shoes of the issuing bank due to which it
cannot refuse to negotiate
c) by advising the letter of credit, the advising bank is under obligation to reimburse the negotiating bank
d) by advising the credit, the advising bank is not under any obligation to negotiate the documents
e) a and b above
45. An exporter from India M/s Jaipur Marbles Limited delivers the export consignment to Air India, the named
carrier in the export letter of credit, in fulfillment of their obligation of export. What kind of transaction will it be
categorized:
a) free on board ( FOB)
b) cost, insurance and freight ( CIF)
c) cost and freight ( CF)
d) free carrier allowance ( FCA)
e) none of the above
46. Irrevocable letter of credit constitute:
a) a definite undertaking of issuing bank
b) to make payment for the documents on presentation
c) documents should be drawn strictly as per terms of the letter of credit
d) all the above together
e) none of the above
47. In a bill of lading the specified goods have been consigned to the named person. Such kind of Bill of lading is
called :
a) short bill of lading
b) consigned bill of lading
c) straight bill of lading
d) claused bill of lading
48. Claused bill of lading means that
a) It has a number of clauses regarding shipment
b) It contains onerous clauses affecting the interest of the consignor
c) It contains onerous clauses affecting the interest of the consignee
d) It contains remarks regarding the quality of packaging
49. International Bank Limited negotiate documents worth Euro 15000 against a without-recourse irrevocable letter
of credit issued by a bank in UK. When the documents were sent to the opening bank in UK , these were returned
with the reason that the bill of lading and the insurance certificate attached to the documents are fake. Opening
bank also refused to make the payment against these documents, which are otherwise as per terms of the credit.
What is the position International Bank Limited?
a) Bank has acted negligently by accepting fake documents due to which it cannot recover the money from opening
bank
b) Bank has the option to recover the money from the seller who has tendered fake documents
c) Bank can rightly claim the money from opening bank under UCPDC provisions since the bank was to see the
regularity of the documents and was not responsible for their being fake
d) bank will have to approach international court
e) a and b above
50. An SSI unit dealing with your branch receives an export order for US dollar 15000. The exporter wants to avail
pre-shipment credit for this letter of credit. On careful examination of the letter of credit, it is found that nothing is
written whether the LC is irrevocable or revocable due to which bank is apprehensive of cancellation of the letter of
credit?
a) bank can treat the credit as irrevocable under the UCPDC provisions and allow the advance
b) the letter of credit is silent about being revocable or otherwise, due to which the bank cannot take risk
c) the LC would be treated as revocable on the basis of which the bank should not grant the advance
d) the LC should be sent back to the opening bank for clarification
e) none of the above

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