25, A s the term used to describe a foreign currency agreement between two parti

Question

25, A s the term used to describe a foreign currency agreement between two parties to hange a given amount of one currency for another, and after a period of time, to give back the exc original amounts. a) matched flow b) currency swap c) back-to-back loan d) credit swap e) None of the above 26. A foreign subsidiary' A) local B) integrated C) notational dollar D) functional s- currency is the currency used in the firm's day-to-day operations. 27. If an imbalance results from the accounting method used for translation, the imbalance is taken either to A) the bank; the post office B) depreciation; the market for foreign exchange swaps C) current income; equity reserves D) current liabilities; equity reserves 28. If the goal were to decrease the value of a country's currency -to fight an appreciation of the domestic currency in exchange for foreign currency- the central bank would: A) buy its own currency in exchange for foreign currency B) follow a restrictive monetary policy C) drive real rates of interest up D) sell its own currency in exchange for foreign currency E) none of the above. C) d) e) ,on 4

Explanation / Answer

25.) Answer is A - Matched Flow. Given amounts of currencies are exchanged at a particular period of time between two parties. This flow of currencies between two parties is termed as matched flow which is used for different business requirements.

26.) Answer is D - Functional Currency. A functional currency is used by an organisation for its business or day to day activities. Functional currency may or may not be same as local currency. For example an Indian IT company having its bulk of operations in US Geography will have its functional currency as US Dollar.

27.) Answer is C - Current Income, Equity Reserves. The imbalance resulting from accounting method used for translation is shown as loss / profit in income statement or as one of the reserves in Shareholder's Equity. This imbalance is also termed as translation exposure.

28.) Answer is D - Sell its own currency in exchange for foreign currency. By selling country's own currency supply will increase in the domestic market. Because of increase in supply of local currency and decrease in availability of foreign currency (since local currency is sold and foreign currency is bought), the local currency will depreciate.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.