Which of the following statements are correct?<br>Statement I In a forward market, the delivery and payment takes in future at a predetermined price. The prices are determined today, but the currencies are exchanged in future. Forward market comprises of trade of various instruments however, it is central to the exchange of foreign currency.<br>Statement II A forward market is an Over-the-Counter market which sets the rate for future delivery of currency, assets or financial securities.

The given statements are related to financial derivatives. Choose the correct answer for the statements being correct or incorrect.
Statement I A speculator will gain, if he sells foreign currency under a forward contract, when the spot price is higher than the forward price.
Statement II In currency futures, intra currency spread exists when a speculator buys/sells the same currency for two delivery dates.

A

Statement I is correct, but Statement II is incorrect

B

Statement II is correct, but Statement I is incorrect

C

Both statement are correct

D

Both statements are incorrect

Under foreign exchange risk measurement, economic risk emerges out of which of the following?
1. Riskiness of company's foreign exchange positions resulting from its business activities.
2. The holding period or length of time over which the foreign exchange position is planned to be held.
3. A change in the present value of the future after tax cash flows due to changes in exchange rates.
4. The unit of currency to be used for the denomination of the value of currency.

A

Only 1

B

Both 1 and 2

C

Only 3

D

Only 4

Which of the following statement is true?
Statement I Cross rate represents when one unit of foreign currency is represented in the terms of another foreign currency.
Statement II Cross rates are determined only with the help of domestic currency and the foreign currency.

A

Both statements are correct

B

Both statements are incorrect

C

Statement I is correct, but Statement II is incorrect

D

Statement II is correct, but Statement I is incorrect

Which of the following are the different functions that are performed by the financial markets?
1. Determination of the prices where financial markets help in price discovery of various financial instruments.
2. Mobilization of the funds
3. Providing an opportunity to different investors to buy or sell their respective financial instrument at the fair value that is prevailing in market.
4. Providing the various types of information to traders that help in decision making.
5. The sharing of the risk with investors.

A

2, 3 and 5

B

1, 2 and 3

C

3 and 4

D

1, 2, 3, 4 and 5

Which of the following policies of the financial sectors is basically designed to transfer local financial assets into foreign financial assets freely and at market determined exchange rates?

A

Capital Account Convertibility

B

Financial Deficit Management

C

Mimimum Support Price

D

Restrictive Trade Practices

The exchange rate is the ruling official rate of exchange of Taka for other currencies. It determines the value of Bangladeshi goods in relation to foreign foods. If the Taka is devalued in terms other currencies Bangladeshi exports (which are paid for in Taka ) become cheaper to foreigners and Bangladeshi imports become more expensive to holders of Taka. What conclusion can be drawn form the information above?

A

There are certain disadvantages for the Bangladesh economy attached to devaluation

B

The prospect of devaluation results in a speculative outflow of funds.

C

The difference between imports and exports in called the Trade Gap.

D

It is possible that inflation neutralized the beneficial effects of devaluation

The exchange rate is the ruling official rate of exchange of dollars for other currencies . It determines the value of American goods in relation to foreign goods. If the the dollar is devalued in terms of other currencies , American exports ( which are

A

There are certain disadvantages for the United States economy attached to devaluation

B

The prospect of devaluation results in a speculative outflow of funds

C

By encouraging exports and discouraging imports, devaluation can improve the American balance of payments

D

The difference between the exports and imports is called the trade gap

Which of the following statements are correct in context of Statutory Liquidity Ratio (SLR)?
1. SLR consists of a certain percentage of liquid assets of NDTL.
2. Liquid assets for the purpose are those assets that one can easily convert into cash, gold, treasury bills, govt-approved securities, government bonds, and cash reserves.
3. SLR includes securities, eligible under Market Stabilization Schemes and those under the Market Borrowing Programmes.
4. The limit of SLR set is 0 to 40% of NDTL.

A

1 and 3 are correct

B

2 and 3 are correct

C

1, 2, 3 and 4 are correct

D

2, 3 and 4 are correct

Read the following passage carefully and choose the most appropriate answer to the question out of the four alternatives.
Most economists in the United States seem captivated by the spell of the free market. Consequently, nothing seems good or normal that does notaccord with the requirements of the free market. A price that is determined by the seller or, for that matter (for that matter: so far as that isconcerned), established by anyone other than the aggregate of consumers seems pernicious. Accordingly, it requires a major act of will to thinkof price-fixing (the determination of prices by the seller) as both "normal" and having a valuable economic function. In fact, price-fixing is normalin all industrialized societies because the industrial system itself provides, as an effortless consequence of its own development, the price-fixingthat it requires. Modern industrial planning requires and rewards great size. Hence, a comparatively small number of large firms will be competingfor the same group of consumers. That each large firm will act with consideration of its own needs and thus avoid selling its products for morethan its competitors charge is commonly recognized by advocates of free-market economic theories. But each large firm will also act with fullconsideration of the needs that it has in common with the other large firms competing for the same customers. Who, according to the economists, are the right group of people to set the price of a commodity?

A

the aggregate of consumers

B

the buyers

C

the sellers

D

the economists

Read the following passage carefully and choose the most appropriate answer to the question out of the four alternatives.
Most economists in the United States seem captivated by the spell of the free market. Consequently, nothing seems good or normal that does notaccord with the requirements of the free market. A price that is determined by the seller or, for that matter (for that matter: so far as that isconcerned), established by anyone other than the aggregate of consumers seems pernicious. Accordingly, it requires a major act of will to thinkof price-fixing (the determination of prices by the seller) as both "normal" and having a valuable economic function. In fact, price-fixing is normalin all industrialized societies because the industrial system itself provides, as an effortless consequence of its own development, the price-fixingthat it requires. Modern industrial planning requires and rewards great size. Hence, a comparatively small number of large firms will be competingfor the same group of consumers. That each large firm will act with consideration of its own needs and thus avoid selling its products for morethan its competitors charge is commonly recognized by advocates of free-market economic theories. But each large firm will also act with fullconsideration of the needs that it has in common with the other large firms competing for the same customers. Price-fixing is a phenomenon that is normal in -

A

agricultural societies

B

industrialized societies

C

pre-industrial societies

D

globalised societies