SSC Economics Sample Paper NCERT Sample Paper-7

  • question_answer
    India and Japan have expanded their bilateral 'Currency Swap Agreement' designed to help each other in the event of a FOREX crisis or a short-term liquidity crisis. Under this Agreement
    1. Bank of Japan will give dollars for rupees to the RBI
    2. Bank of Japan will give dollars to Indian Infrastructure companies for importing.
    3. RBI will take yen and give rupees to Bank of Japan
    4. When FOREX reserves deplete in India of Japan this agreement will become operative. Select the correct statements using the codes given below:

    A)  1 and 2 only    

    B)  2 and 3 only

    C)  1 and 4 only    

    D)  3 and 4 only

    Correct Answer: C

    Solution :

    [c] A currency swap (or a cross currency swap) is a foreign exchange derivative between two institutions to exchange the principal and/or interest payments of a loan in one currency for equivalent amounts, in net present value terms, in another currency.

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