SOLVED CAIIB COMBINED PAPER 29:
1. A 'Green Clause' letter of credit is not an extension of ......
(i) transferable credit,
(ii) confirmed irrevocable credit,
(iii) red clause credit
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - a
2. Your non-resident customer presents a draft in foreign currency for which cover has already been provided in Nostro account. The rate of exchange to be applied to the transaction will be ......
(i) TT selling, (ii) Bills selling
a. Only (i)
b. Only (ii)
c. Either (i) or (ii)
d. Neither (i) nor (ii)
Ans - d
3. A mechanism for financing by discounting of export receivables for a medium term on a fixed rate basis for full value of the contract is called:
a. book debt financing
b. bills discounting facility
c. factoring
d. forfeiting
Ans - d
4. Regulations relating to payment of imports and export are part of:
a. Foreign Trade Policy
b. Monetary Policy
c. Customs Policy
d. Exchange Control Regulations
Ans - d
5. Mr. X purchases a put option for 300 shares of A with strike price of Rs. 2000 having maturity after 02 months for Rs. 50. On maturity, shares of A were priced at Rs. 1900. What is the profit/lost for the individual on the transaction (without taking the interest cost and exchange commission into calculation)?
a. Profit of Rs. 30000
b. Profit of Rs. 15000
c. Loss of Rs. 30000
d. Loss of Rs. 15000
Ans - b
Explanation.
This is put option, so it is assumed that,
He will sell 300 shares of A at a price of 2000
Total value of shares is = 600000
Then he will buy the total shares in the market at a price of 1900.
300 × 1900 = 570000
So profit of 30000 in the transaction. .
But he has to paid Rs. 50 per share to buy put options.
=300 × 50 = 15000
Total profit or loss = 600000 - 570000 - 15000
= 15000
6. XYZ Bank’s foreign correspondent maintaining a Nostro Rupee account with XYZ bank, wants to fund his account by purchase of Rs. 10.00 million, against US dollars. Assuming that the USD/INR interbank market is at 56.2380/2420, what rate would be quoted to the correspondent, ignoring exchange margin?
Calculate amount of USD XYZ Bank would receive in its USD Nostro account, if the deal is struck.
a. 175438.60
b. 177803.07
c. 177815.71
d. 178571.43
Ans - c
Explanation :
The transaction is to sell Rs 10.00 million, against US dollars, and hence the XYZ Bank would quote the lower of the two rates,
i.e. 56.2380.
If the deal is struck, the foreign bank would pay USD 177815.71 to XYZ Bank USD Nostro account.
7. A bank borrows US $ for 03 months @ 3.0% and swaps the same in to INR for 03 months for deployment in CPs @ 5%. The 3 months premium on US $ is 0.5%. What is the margin(gain/loss) generated by the bank in the transaction?
a. 2%
b. 3%
c. 1.5%
d. 2.5%
Ans - c
Explanation :
Bank borrow US $ for 3 months @ 3%
Same will invest in CP for 3 months @ 5%
So, it gains 2% by interest rate margin here.
But when bank repay its borrowing in $, it has pay 0.5% extra because US $ will be costly by 0.5% as US $ is at premium.
So it will reduce bank gain by 0.5%.
2.0% - 0.5 %
= 1.5%
8. On which of the following TT buying rate will be applied?
(i) purchase of foreign DD drawn abroad,
(ii) Payment of DO drawn on the paying bank,
(iii) Conversion of proceeds of instruments sent for collection
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - c
9. A customer wants to subscribe to a magazine published in Paris. The exchange rate for draft will be ......
(i) TT selling, (ii) Bills selling
a. Only (i)
b. Only (ii)
c. Either (i) or (ii)
d. Neither (i) nor (ii)
Ans - a
10. Normally, who will request for the confirmation of LC from the confirming bank?
a. Exporter
b. Importer
c. Opening Bank
d. Advising Bank
Ans - c
11. If Floating interest rates based on one bench mark is swapped with floating interest rates based on another bench mark, it is called as ...... Swaps.
a. Financial
b. Coupon
c. Currency
d. Index
Ans - d
12. When the strike price is below the spot price for the put option, the option is ......
a. at the money
b. out of money
c. in the money
d. any of the above
Ans - b
(i) transferable credit,
(ii) confirmed irrevocable credit,
(iii) red clause credit
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - a
2. Your non-resident customer presents a draft in foreign currency for which cover has already been provided in Nostro account. The rate of exchange to be applied to the transaction will be ......
(i) TT selling, (ii) Bills selling
a. Only (i)
b. Only (ii)
c. Either (i) or (ii)
d. Neither (i) nor (ii)
Ans - d
3. A mechanism for financing by discounting of export receivables for a medium term on a fixed rate basis for full value of the contract is called:
a. book debt financing
b. bills discounting facility
c. factoring
d. forfeiting
Ans - d
4. Regulations relating to payment of imports and export are part of:
a. Foreign Trade Policy
b. Monetary Policy
c. Customs Policy
d. Exchange Control Regulations
Ans - d
5. Mr. X purchases a put option for 300 shares of A with strike price of Rs. 2000 having maturity after 02 months for Rs. 50. On maturity, shares of A were priced at Rs. 1900. What is the profit/lost for the individual on the transaction (without taking the interest cost and exchange commission into calculation)?
a. Profit of Rs. 30000
b. Profit of Rs. 15000
c. Loss of Rs. 30000
d. Loss of Rs. 15000
Ans - b
Explanation.
This is put option, so it is assumed that,
He will sell 300 shares of A at a price of 2000
Total value of shares is = 600000
Then he will buy the total shares in the market at a price of 1900.
300 × 1900 = 570000
So profit of 30000 in the transaction. .
But he has to paid Rs. 50 per share to buy put options.
=300 × 50 = 15000
Total profit or loss = 600000 - 570000 - 15000
= 15000
6. XYZ Bank’s foreign correspondent maintaining a Nostro Rupee account with XYZ bank, wants to fund his account by purchase of Rs. 10.00 million, against US dollars. Assuming that the USD/INR interbank market is at 56.2380/2420, what rate would be quoted to the correspondent, ignoring exchange margin?
Calculate amount of USD XYZ Bank would receive in its USD Nostro account, if the deal is struck.
a. 175438.60
b. 177803.07
c. 177815.71
d. 178571.43
Ans - c
Explanation :
The transaction is to sell Rs 10.00 million, against US dollars, and hence the XYZ Bank would quote the lower of the two rates,
i.e. 56.2380.
If the deal is struck, the foreign bank would pay USD 177815.71 to XYZ Bank USD Nostro account.
7. A bank borrows US $ for 03 months @ 3.0% and swaps the same in to INR for 03 months for deployment in CPs @ 5%. The 3 months premium on US $ is 0.5%. What is the margin(gain/loss) generated by the bank in the transaction?
a. 2%
b. 3%
c. 1.5%
d. 2.5%
Ans - c
Explanation :
Bank borrow US $ for 3 months @ 3%
Same will invest in CP for 3 months @ 5%
So, it gains 2% by interest rate margin here.
But when bank repay its borrowing in $, it has pay 0.5% extra because US $ will be costly by 0.5% as US $ is at premium.
So it will reduce bank gain by 0.5%.
2.0% - 0.5 %
= 1.5%
8. On which of the following TT buying rate will be applied?
(i) purchase of foreign DD drawn abroad,
(ii) Payment of DO drawn on the paying bank,
(iii) Conversion of proceeds of instruments sent for collection
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - c
9. A customer wants to subscribe to a magazine published in Paris. The exchange rate for draft will be ......
(i) TT selling, (ii) Bills selling
a. Only (i)
b. Only (ii)
c. Either (i) or (ii)
d. Neither (i) nor (ii)
Ans - a
10. Normally, who will request for the confirmation of LC from the confirming bank?
a. Exporter
b. Importer
c. Opening Bank
d. Advising Bank
Ans - c
11. If Floating interest rates based on one bench mark is swapped with floating interest rates based on another bench mark, it is called as ...... Swaps.
a. Financial
b. Coupon
c. Currency
d. Index
Ans - d
12. When the strike price is below the spot price for the put option, the option is ......
a. at the money
b. out of money
c. in the money
d. any of the above
Ans - b