Forex Reserves of India and Forex Management

46. Which of the following exchange rate regimes provides the highest level of exchange rate stability?
a. Freely floating exchange rate regime
b. Fixed exchange rate regime
c. Managed floating exchange rate regime
d. Pegged exchange rate regime

47. What is a devaluation of the domestic currency?
a. It increases the value of the domestic currency relative to other currencies.
b. It decreases the value of the domestic currency relative to other currencies.
c. It eliminates the exchange rate risk associated with the domestic currency.
d. It stabilizes the domestic economy by reducing inflation.

48. What is a revaluation of the domestic currency?
a. It increases the value of the domestic currency relative to other currencies.
b. It decreases the value of the domestic currency relative to other currencies.
c. It eliminates the exchange rate risk associated with the domestic currency.
d. It stabilizes the domestic economy by reducing inflation.

49. What is the purpose of a currency swap in Forex Management?
a. To exchange one currency for another at a predetermined exchange rate
b. To speculate on currency movements and earn profits
c. To borrow funds in one currency and lend in another currency
d. To hedge against exchange rate fluctuations

50. Which financial instrument is commonly used for hedging foreign exchange risk?
a. Forward contracts
b. Options contracts
c. Futures contracts
d. Swaps contracts