50+ Foreign Exchange Market MCQ’s | (Free Resource) Business Economics

Foreign Exchange Market MCQ

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1. Hedging refers to _______ .
a) the covering of a foreign exchange risk
b) foreign exchange speculation, the acceptance of foreign exchange risk
c) interest rate arbitrage

2. Under flexible exchange rate system, exchange rate is determined by _______ .
a) the demand and supply of foreign exchange
b) Central Bank intervention
c) the price of gold
d) none of the above

3. Functions of forex market include ________ .
a) all the below
b) provision of facilities for funds transfer
c) trading, short term finance

4. Which of the following is not a function of the foreign exchange market?
a) Import and export of goods and services
b) transfer of purchasing power
c) coverage of risk
d) provision of credit instruments and credit

5. _______ helps to equalize the exchange rate in all part of the foreign exchange market.
a) speculation
b) interest arbitrage
c) hedging

6. Forward market in foreign exchange refers to _______ market.
a) Short and long run
b) a short run, a long run
c) a spot

7. Speculation in foreign exchange market refers to _______ .
a) accepting risk to make profits
b) hedging
c) interest arbitrage
d) none of the above

8. India adopts _________ exchange rate system.
a) managed flexibility
b) fixed exchange rate
c) flexible exchange rate
d) none of the above

9. The rate at which the foreign currency is exchanged at current rate is called ______ rate.
a) spot
b) forward
c) arbitrage
d) none of the above

10. Vehicle currency is ________ .
a) a standard internationally accepted currency
b) a currency of IMF
c) a currency issued by RBI
d) none of the above

Answers: 1)the covering of a foreign exchange risk 2)the demand and supply of foreign exchange 3)all the below 4)Import and export of goods and services 5)speculation 6)Short and long run 7)accepting risk to make profits 8)managed flexibility 9)spot 10)a standard internationally accepted currency