CA Foundation · Paper 4 · 75 Questions · 3 Levels
Direct recall: exchange rate definition, 4 types of foreign currency transactions, 3 exchange rate systems (free float, managed float, fixed), advantages of fixed vs floating regimes, direct and indirect quotes, spot vs forward rates, vehicle currency, appreciation vs depreciation basics, devaluation vs revaluation.
Applied: nominal vs real exchange rate formula and calculation, REER meaning, forex market players (active vs passive, market makers), demand and supply drivers for foreign currency, forward premium vs discount, managed float mechanics, impact of depreciation on exports/imports/inflation/ECBs/government debt, cross rates.
Analytical: Statement I/II type, RER numerical problems, hard peg vs soft peg, appreciation effects on business cycle/current account/competitiveness/inflation, depreciation effects on capital flows/FDI/fiscal health, India-Russia trade settlement context, arbitrage, expansionary vs contractionary effects, policy trade-offs.
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