MCQ & True/false : International Financial Management: 1. Changes in relative inflation rates can affect international trade activity, which influences the demand for and supply of currencies and therefore influences exchange rates. (a) True                   (b) False 2. Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6% premium. Today’s spot rate of the Canadian dollar is £0.47. The spot rate forecasted for one year ahead is: (a) £0.4418 (b) £0.3418 (c) £0.4982 (d) £0.5418 3. A currency call option grants the right to buy a specific currency at a designated price within a specific period of time. (a) True                 (b) False

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Q: 3

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.