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Question 1 reset

The generalized formula for interest rate parity is given below:
F = S + (S × (R_QC – R_BC) × Period)

. Where

S = spot price

F = forward price

RBC = interest rate on base currency

RQC = interest rate on quoting currency

Period = forward period in years

All of the above

Question 2 reset

In any currency pair, future value of a currency with high interest rate is at a discount (in relation to spot price) to the currency with low interest rate.

True

False

Question 3 reset

Suppose 6 month interest rate in India is 5% (or 10% per annum) and in USA are 1% (2% per annum). The current USDINR spot rate is 68. What is the likely 6 month USDINR futures price?

67.69

68.69

69.69

70.69

Question 4 reset

Which types of participants have a real exposure to foreign currency risk on account of their underlying business?

Hedgers

Speculators

Arbitrageurs

Question 5 reset

Objective of hedgers is to

remove the FX risk using currency futures.

reduce the volatility in future cash flows by locking in the future currency rates.

both the above

Question 6 reset

Which set of market participants does not have a real exposure to foreign currency risk?

Hedgers

Speculators

Arbitrageurs

Question 7 reset

Speculator assume FX risk by taking a view on the market direction and hope to make returns by taking the price risk.

True

False

Question 8 reset

Which set of market participants have neither exposure to risk and nor do they take the risk?

Hedgers

Speculators

Arbitrageurs

Question 9 reset

Which set of market participants identify mispricing in the market and use it for making profit?

Arbitrageurs

Speculators

Hedgers

Question 10 reset

Arbitrageurs lock in a profit by simultaneously entering opposite side transactions in two or more markets.

True

False

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