CA Inter FM and Eco Important Questions For May 2019 | Last 15 Days Preparation


Check CA Inter FM and Eco Important Questions For May 2019 | Last 15 Days Preparation. In the previous articles, we have given CA Inter Advanced Accounting and Auditing chapter wise important questions for May 2019 attempt. Today we are providing CA Inter Financial Management & Economics for Finance most important questions for May 2019 attempt (सीए इंटर फाइनेंसियल मैनेजमेंट और इकोनॉमिक्स फर फाइनेंस इम्पोर्टेन्ट प्रश्न). With only a few days left for the CA Inter exam May 2019, students have very less time to cement their learnings and get well prepared to write the perfect exams. During these days before the exams, students should avoid studying anything new. They must focus on practising and revising what they have studied until now.

Moreover, they must go through the important topics and practice the questions related to those topics. This will help to fine-tune your preparations for the board exams. It’s very essential that students pick reliable study material and practice manual, which provide only important and meaningful stuff so that students are able to make an effective preparation for the exam.

Here we have given all the important question on Group II FM and Eco Paper. Here we have mainly given the expected important questions for Financial Management & Economics for Finance. Expected questions are given for both theory questions and practical questions. People who are preparing for the CA Inter- Financial Management & Economics for Finance Exam can follow these questions for their exams preparation. If you don’t have time, here we have given all 4 marks important questions, 8 marks important questions and 16 marks important questions. So prepare all these short answers questions and long answers questions.

CA Inter FM and Eco Important Questions For May 2019

Here we have given the CA Inter FM and Eco important theory questions. The below-given questions are the guess questions for the Financial Management & Economics for Finance. Here we have given CA Inter FM and Eco expected questions related on 4 Marks, 8 Marks and 16 Marks. Please have a look!

CA Inter Financial Management (FM) Important Topics May 2019


  1. Explain as to how the wealth maximization objective is superior to the profit maximization objective?
  2. Discuss the functions of a Chief Financial Officer.
  3. Explain the two basic functions of Financial Management.


  1. Explain the relevance of Time value of money in financial decisions?


  1. Distinguish between Net Present Value and Internal Rate of Return.


  1. Discuss the major considerations in Capital Structure planning
  2. What is Over Capitalisation? State its causes and consequences
  3. What is Under capitalisation? State its causes and consequences.


  1. Differentiate between Business risk and Financial risk?


  1. Discuss the liquidity vs. Profitability issue in Management of Working Capital.
  2. Define Treasury Management? What are the functions of Treasury Management?
  3. Explain the following 1. Concentration Banking 2. Lock Box System
  4. Write a short note on Different kinds of float with reference to the management of cash.
  5. Write a short note on William J. Baumal vs. Miller-Orr Cash Management Model.
  6. What is Virtual Banking? State its advantages


  1. What is Venture Capital Financing? What are the characteristics of Venture Capital Financing? What is debt securitization? Explain the basics of debt securitization process?
  2. Distinguish between Financial lease and Operating Lease.
  3. What are the other types of Leases?
  4. Write short notes on Global Depository Receipts (GDR’S)?
  5. What are the other sources of finance?
  • Seed Capital Assistance
  • Deep Discount Bonds
  • Zero Interest Fully Convertible Debentures
  • Zero Coupon Bonds
  1. Write a short note on Bridge Finance?

CA Inter Economics For Finance (Eco) Important Topics May 2019


  1. What function does the System of National Accounts (SNA) serve?
  2. Illustrate the circular flow of income.
  3. Describe the generally used concepts of national income.
  4. Define ‘mixed income of self- employed’.
  5. Define ‘Private income’ as used in India.
  6. How do you arrive at ‘gross value added’?
  7. What is meant by intermediate consumption?
  8. How is production for self-consumption treated in national income accounts?
  9. What purpose does real GDP serve?
  10. What are the different methods of calculation of national income?
  11. Explain with illustrations the limitations of national income computation?
  12. Differentiate the following:
  13. GDP and GNP
  14. GDP and NDP
  15. GNP and NNP
  16. Personal Income and National Income
  17. Personal Income and Personal Disposable Income
  18. National Income and Percapita Income
  19. Market Price and Factor Cost
  20. Gross and Net
  21. Real GDP and Nominal GDP
  22. Taxes on Production and Product Taxes


  1. Compute National income.
Government Purchases100
(ANS.: Y = RS. 1,000)


  1. Calculate Gross Domestic Product at market Prices (GDPMp) and derive national income from the following data
(Rs. in Crores)

Inventory Investment100
Indirect taxes100
Net factor income from abroad(50)
Personal Consumption Expenditure3,500
Gross residential construction investment300
Government purchases of goods and services1,000
Gross public investment200
Gross business fixed investment300

Find GDP and GNP MP from the following data (in Crores of Rs) using the income method. Show that it is the same as that obtained by the expenditure method.

Personal Consumption7,314
Indirect Business Taxes1,000
Domestic Investment1,482
Government Expenditures2,196
Rental Income34
Corporate Profits682
Net Factor Income from Abroad40
3. Find GDP and GNP MP from the following data (in Crores of Rs) using the income method. Show that it is the same as that obtained by the expenditure method.


4. From, the following data calculate the Gross National Product at Market Price using Value Added method.

Value of output in primary sector500
Net factor income from abroad(20)
Value of output in tertiary sector700
Intermediate consumption in secondary sector400
Value of output in secondary sector900
Government Transfer Payments600
Intermediate consumption in tertiary sector300
Intermediate consumption in primary sector250
Value of output in secondary sector900
Intermediate consumption in secondary sector /^_________________________________300


i) Sale                                                   ^300
ii) Change in stock-10
iii) Depreciation20
iv) Net in direct taxes30
v) Purchase of machinery100
vi) Purchase of intermediate product.150




6. Calculate personal disposable income from the given data:

ITEMS(Rs. in Crores)
i) Net current transferred from rest of the world.3
ii) Private income200
iii) Personal taxes30
iv) National debt interest5
v) Corporate profit tax20
vi) Undistributed profit.10

(ANS.: RS. 140 CRORES)



7. Calculate personal disposable income from the given data:

ITEMS(Rs. in crores)
i) Net current transferred from rest of the world.15
ii) Net domestic product accruing to private sector.500
iii) Net factor income from abroad.(-)10



iv) National debt interest40
v) Corporate profit tax55
vi) Undistributed profit of corporation20
vii) Net current transferred from Govt.15
(ANS.: RS. 485 CRORES)


8. Calculate net value added at market price of a firm:

i) Sale in domestic market.250
ii) Opening stock.20
iii) Closing in stock50
iv) Depreciation15
v) Net Indirect taxes25
vi) Intermediate cost200
vii) Export10

(ANS.: RS. 160 LAKHS)




From the following data, Calculate

a) National Income                                                             b) Personal disposable income

ITEMS(Rs. IN Crores)
i) Compensation of employee1200
ii) Rent.400
iii) Profit                                                                      ^800
v) M 11000
vi) Private income3600
vii) NFIA-50
viii) Net retained earnings of private enterprises.200
ix) Interest250
x) NIT350
xi) Net Export.-60
xii) Direct taxes150
xiii) Corporation tax.100



(ANS. Nl RS. 3,600 CRORES; PI = RS. 3,150)

10. Calculate Gross National product at Market Price’ by the production method and Income method:

ITEMS(Rs. in Crores)
i) Value of output of the primary sector1000
ii) Indirect taxes200
iii) Compensation of employee780
iv) Net factor income from abroad.100
v) Intermediate purchase by all the sector2900
vi) Rent300
vii) Value of output by secondary sector2000
viii) Subsidies50
ix) Interest600
x) Consumption of fixed capital.120
xi) Value of output of the secondary sector3000
xii) Profit320
xiii) Mixed income of self employed830

(ANS.: RS. 3,000 CRORES.)



11. Calculate National income by Income method and Expenditure method.

ITEMS(Rs. in Crores)
i) Profit200





ii) Private final consumption expenditure440
iii) Government final consumption expenditure250
iv) Compensation of employee350
v) Gross domestic capital formation90
vi) Consumption of fixed capital20
vii) Net export-20
viii) Interest60
ix) Rent70
x) Net factor income from abroad50
xi) Net indirect taxes60

(ANS.: (A) RS. 630 CRORES (B) RS. 630 CRORES.)




1.     Define equilibrium output?

2.     Define consumption function and saving function?

3.     Explain the concepts of APC, APS, MPC & MPS?

4.     Distinguish between saving function and marginal propensity to save.

5.     What is meant by autonomous expenditure?

6.     What would happen if aggregate expenditures were to exceed the economy’s production capacity?

7.     Draw a relation between MPC and Investment Multiplier.

8.     Outline the relationship between marginal propensity to consume and multiplier?

9.     Differentiate Leakages and injections in a Keynesian two, three and four sector models.

10.    What is the effect of leakages on multiplier?

11.    Explain national income determination in a three sector economy?

12.    Explain national income determination in a four sector economy?


Explain the Investment Multiplier graphically under two Sector Model with an example.


  1. In a two sector economy, the business sectoj^&oSlilces 7000 units at an average price of Rs. 5.
  2. What is the money value of output?\^y
  3. What is the money income of households?
  4. If households spend 80 percent of their income, what is the total consumer expenditure?
  5. What is the total money revenues received by the business sector?
  6. What should happen to the level of output?
  7. Assume that an economy’s consumption function is specified by the equation C = 500 + 0.80Y.
  8. What will be the consumption when disposable income (Y) is Rs. 4,000, Rs. 5,000, and Rs. 6,000?
  9. Find saving when disposable income is Rs. 4,000, Rs. 5,000, and Rs. 6,000.
  10. What amount of consumption for consumption function C is autonomous?
  11. What amount is induced when disposable income is Rs. 4,000? Rs. 5,000? Rs. 6,000?
  12. Find the value of the multiplier when
  13. MPC is 0.2 b) MPC is 0.5                                       c) MPC is 0.8
  14. For the linear consumption function is C = 700 + 0.8Y; I is Rs. 1200 and Net Exports X-M = 100. Find equilibrium output?
  15. Suppose that the economy is characterized by the following structural Equations:

C = 160 + 0.6 (Y -T)

I =150; G = 150; T = 100.

Where C is consumption, I is investment, G is Government expenditure, T is income tax and Y is income or output.

  1. Determine the equilibrium output level. (ans.: y=i,ooo)
  2. If G rises to 200, what is the how equilibrium level of output? What is the Value of the govt, expenditure multiplier? Interpret the results.
  3. If tax falls to 50, by how much will equilibrium output rise? What is the value of tax multiplier? (ans.: 1.5 times)

Given the values of Marginal Propensity to Consume (MPC) = 0.60 and Marginal Propensity to Import = 0.10. The value of Foreign Trade Multiplier (FTM) is   (ans.:2)

  1. Give the Consumption Function (C) = 100+0.80Y; the value of Keynesian Investment Multiplier (K) and Marginal Propensity to Save (MPS) are respectively are:


Explain the role of Government in an economic system in the words of “Richard Musgrave”.

Define Contagion effect.

What are the different instruments available to the government to improve allocation efficiency in an economy? Give some examples of redistributive function performed by the government.

Describe the rationale for the stabilization function of government policy.

Flow does monopoly power affect efficiency of markets?

Flow does the government expenditure acts as an instrument of fiscal policy?

Flow does the taxes acts as an instrument of fiscal policy?

Explain non-discretionary fiscal policy (or) automatic stabilizers.

  1. Define the terms ‘recessionary gap’ and ‘inflationary gap’.
  2. Explain the term “Crowding Out” with suitable example.
  3. What are the objectives of fiscal policy?
  4. What should be the tax policy during recession and depression?
  5. What is the consequence excessive taxation will have on business?
  6. Distinguish between pump priming and the ‘compensatory spending’.
  7. What is the impact of automatic stabilizers during recession and also inflation in an economy? (Two questions)
  8. Explain the term contractionary fiscal policy. What are the limitations in pursuing a contractionary fiscal policy?


  1. The government decides to levy up to Rs. 20,500 per flight from private airlines on major routes in order to fund an ambitious regional connectivity scheme which seeks to connect small cities by air and to make flying more affordable for the masses. Critically examine the implications of this policy on the airlines market.

Very soon prices started spiraling and there was general unrest among people especially the poor.

  1. Analyze each of the above measures from a fiscal policy perspective.
  2. Why did overall prices increase?
  • What policies do you suggest to solve the problem of price rise?
  1. What are the limitations?

In the above example, suppose that the increase in government spending has been Rs. 5 billion. Assume that the marginal propensity to consume of people is equal to 0.6.

  1. What will be the government spending multiplier?
  2. What impact would a Rs. 5 billion increase in government expenditure have on equilibrium GDP?

What effect will a $30 billion decrease in autonomous investment have on total expenditures if the MPC is 0.9?      (ANS: NATIONAL INCOME AND TOTAL EXPENDITURES WILL DECLINE, IN EQUILIBRIUM, BY $300 BILLION.)

What happens to the level of national income in an economy with an MPC of 0.8 and if autonomous consumption increases by $20 billion, autonomous investment increases by $5 billion, autonomous government expenditures decrease by $ 10 billion, and autonomous net exports increase by $15 billion?

(ANS: EQUILIBRIUM WOULD BEAN INCREASE OF$150 BILLION.) Government purchases and lump sum taxes are $500 and $400, respectively. Investment equals $200. The autonomous part of consumption is $100. The marginal propensity to consume is 0.9.

AE = C + I + G + NX C = 100 + 0.9 YD YD = Y – 400


I = 200 G = 500 NX = 0

What is the level of GDP?                                                                                                                                                                                                                                                                                                                                                                                                                                  (ans.: y=level ofgdp=$4,400)

  1. Consider an economy similar to Problem 1, but with an income tax that is one-third of income.

AE = C + I + G + NX

C = 100 + 0.9 YD YD = Y – 0.33 Y – 400

I = 200 G = 500 NX = 0

The government decides to increase spending in order to increase GDP by $750. How much should government spending increase?                                                                            (ans.: government spending should increase by $300.)

  1. Let us introduce a foreign sector into the national economy. The following equations describe the economy:

AE = C + I + G + NX

C = 20 + 0.75 (1 -1) Y I = 25 G = 15

NX = exports – imports = 20 – 0.1 Y YD = Y + TR – TA TA (lump sum taxes) = TA0

If the government seeks to maintain a zero trade balance (NX = 0), what proportional income tax rate, t, should be set?

(ANS.: T = 6.67%)

  2. Graphically explain the problem related as a relationship negative externalities and loss of social welfare
  3. Define Public goods. What are the characteristics public goods?
  4. What are Quasi-Public Goods (MixedGoods)?Explain the features of Quasi-Public Goods.
  5. Explain, with the aid of examples, the main characteristics
  6. Explain the free rider problem. Give examples
  7. How can social costs be differentiated from private cost?
  8. Describe the term ‘Tragedy of Commons’
  9. Define common resources. Why are they overused?
  10. Define Market for Lemons.
  11. Define Pigouvian taxes
  12. Explain the method of Cap-and-Trade System in generating a market price for pollution?
  13. What would be the outcome of Government intervention in case of demerit goods
  14. Explain why governments provide subsidies? Illustrate a few examples of subsidies.
  15. Define the concept of market failure. Describe the different sources of market failure
  16. Support the sentence “Externalities can be positive or negative” with suitable examples
  17. Distinguish between different types of public goods. How do public goods cause market failure?
  18. Explain using diagram and examples, the concepts of negative externalities of production and consumption, and the welfare loss associated with the production or consumption of a good or service.
  19. Explain with the aid of examples, the main characteristics of merit goods.
  20. Explain the Market Outcomes of Pollution Tax.
  21. What would be the outcome of Government intervention in case of merit goods?
  22. What would be the outcome of Government intervention in case of incomplete information?
  23. What is meant by Price Intervention by the government (Non Market Pricing)? Describe graphically about market outcomes in case of price floor and price ceiling

Explain the market based methods for solving the problems of negative externalities?


  1. Identify the market outcomes for each of the following situations
  2. A few youngsters play loud music at night.
  3. Neighbours may not be able to sleep.
  4. Ram buys a large SUV which is very heavy
  5. X smokes in a public place
  6. Rural school students given vaccination against measles
  7. Traffic congestion making travel very uncomfortable
  8. Piracy of computer programs
  9. Some species of fish are now getting extinct because they have been caught indiscriminately.
  10. The municipality provides sirens four times a day
  11. Burglar alarms are installed by many in your locality
  12. Global warming increases due to emissions of fossil fuels
  13. The pharmaceutical industry is involved in innovation, development, production, and marketing of medicines in India. Ensuring the availability of lifesaving drugs at reasonable prices is the duty of the government. The National Pharmaceutical Pricing Authority (NPPA) is the watchdog in India, which controls the prices of drugs. Government has to consider the interest of both the producers and the buyers.


  1. Elucidate the market outcomes if matters relating to drugs are entirely left to the pharmaceutical industry.
  2. Appraise the need for government action in the above case. Do you consider government action necessary in the case of medicines? Why?
  • What are the different policy options available to go

The draft of New Education Policy, 2016 proposes Explain the rationale for government action to stream

The Commission for Agricultural Costs and Pric^fGA^P) advises the government on minimum support prices of 23 agricultural commodities which comprisafxgyfedls, 5 pulses, 7 oilseeds, and 4 commercial crops.

  1. What is the underlying principle Qf^ramfrhum support prices? Do you think MSP is a form of market

intervention? Why?                          \r

  1. Why do you consider free markets undesirable for the above mentioned agricultural commodities?

Define International trade and describe how it differs from internal trade?

What is meant by opportunity cost?

What is meant by absolute advantage?

What is the major idea behind Mercantilist’s view of trade?

What is the essence of the theory of absolute advantage?

What do you understand by ‘factor-price equalization’ in the context of international trade? Define trade policy. What are the main types of trade policy instruments?

Define Tariff. What are the effects of Tariffs?

What is meant by ‘specific tariff’?

Explain the term ‘ad valorem tariff’?

What is meant by mixed tariff?

Define ‘bound tariff’

How does ‘escalated tariff structure’ work?

Define ‘dumping’?

What is meant by an ‘Anti-dumping’ measure?

Why are countervailing duties imposed?

Describe the term ‘Non-Tariff measure (NTM).


  1. Explain the Nature and Characteristics of Money, (or) Explain the features of Money (or) Introduction of Money over comes the drawbacks of barter system. Explain it?
  2. Explain the functions of money.
  3. Define Demand for Money. Explain the determinants q®feh^md for Money.
  4. Name the different approaches of demand for mon^grratheir purpose.
  5. Explain about the Keynesian Theory of Demanc^roKMoney.
  6. Define Money supply. How can RBI Measures^fe)Money Supply & Explain various components of it?
  7. Explain about various instruments of Monetary aolicy?
  8. Explain liquidity preference theory of Keynes demand for money?
  9. Define monetary policy and explain various instruments of monetary policy to control / creation of credit in the economy.
  10. Define multiplier and explain the behavior of central bank, Commercial banks and public in Determining the money supply?
  11. Explain about Milton Fried Man’s Restatement of quantity theory of money?
  12. Explain the concept of risk-aversion theory given by Tobin?
  13. Baumol and Tobin model is better than Keynes Liquidity preference theory? Comment on it?
  14. Distinguish between Narrow money and Reserve money?
  15. Explain about Monetary Transmission Mechanism (in terms of the interest rate channel, the exchange rate channel, the quantum channel and the asset price channel).
  16. Explain Monetary Policy Framework.
  17. Explain the role of Monetary Policy Committee (MPC) in Indian Monetary Policy.
  18. Differentiate the following:
  19. Cash Reserve Ratio and Statutory Liquidity Ratio
  20. Liquidity Adjustment Facility (LAF) & Marginal Standing facility
  21. Repo Vs. Reverse Repo
  22. Policy rate Vs. Bank Rate
  23. Market Stabilisation Scheme (MSS) Vs. Open Market Operations (OMO)


  1. Why should you hold money balances?
  2. Will you choose to hold only interest bearing assets?
  3. What would your choice be if you can pay for nearly all transactions through online transfers?
  4. Do you think money is a unique store of value?
  5. Compute Reserve Money from the following data published by RBI Components (In billions of Rs.) As on 7 July 2017
Currency in Circulation15,428.40
Banker’s Deposits with RBI4,596.18
‘Other’ Deposits with RBI183.30

Compute M3 from the following data published by RBI

Components(In billions of Rs.) As on 31 March, 2017
Currency with the Public12,637.1
Demand Deposits with Banks14,106.3
Time Deposits with Banks1,01,489.5
‘Other’ Deposits with Reserve Bank210.9

What will be the total credit created by the commercial banking system for an initial deposit of Rs. 1,000/- for required reserve ratio 0.02, 0.05 and 0.10 percent respectively? Compute credit multiplier.

  1. How would each of the following affect money multiplier and money supply?
  1. Commercial banks in India decide to hold more excess reserves
  2. Fearing shortage of money in ATMs, people decide to hoard money
  • Banks open large number ATMs all over the country
  1. E banking becomes very common and nearly all people use them
  2. During festival season, people decide to use ATMS very often
  3. If banks decide to keep 100% reserves. What would be the effect on money multiplier and money supply?
  • Suppose banks need to keep no reserves only 0% reserves are there.
  1. What will be the nature of the monetary policy undertaken by RBI in the following?
  1. Increases repo rate by 50 basis points
  2. Reduces the cash reserve ratio
  • Increases the supply of currency and coins
  1. Terminates marginal standing facility
  2. Increases the interest rates chargeable by commercial banks
  3. Sells securities in the open market
  • Initiates reverse repo operation
  • Changes in the SLR

Given the values of Deposit Expansion Multiplier (DEM) = 2 and Requires Reserves Ratio against Demand Deposits (rd) = 0.20. The value of Currency Deposit Ratio (c) would be:                                                                           (ans.:0.3)

Given the values of Government Investment Rs. 2000 and public spending Rs. 1,500, the increase in income, based on the concept of balanced budget multiplier is:                                                                                       (ans.:2,000)

Which of the following statement(s) is/ are true?                                                                  (ans.: a and b only)

  1. The money multiplier is large, the smaller the reserves to deposits ratio
  2. The money multiplier is large, the smaller the currency deposit ratio.
  3. The money multiplier is higher, the large the reserves to deposit ratio.
  4. There is direct and proportional relationship between money multiplier and currency deposit ratio.


  1. Explain about FDI?
  2. What is the difference between FDI & FI I ?
  3. What are the Pros and Cons of FDI?
  4. Explain the different modes of FDI.
  5. Explain about the importance of FDI?
  6. What are the steps taken by Indian Government to promote FDI and FI I?
  7. What are the factors to be considered in FDI?
  8. List out the sectors allowed and Prohibited in India?
  9. What is the impact of FDI in India?
  10. What are the factors responsible for FDI in a Country?
  11. Explain about FDI inflows and outflows with the help of some examples?


  1. Which of the following is a FDI?

Claram Joe, a German investor buys 5000 shares of Ford, a US Automobile company.

Annette D, the US Company acquires all the equity shares of Emeline & Co in Alice Land which makes computer components.

A Bulgarian investor Boryana Gergiev pays cash and buys 0.2 % of all outstanding equity shares of Mariette company which makes computer peripherals

Maansi Tech solutions purchase 52% stake in a Sarra, a Jamaican technology firm Kora extends a loan to Christa Victorine, a power producing firm in which it holds 60 percent of equity Augusta Corp lends pounds 10 million to Lee Sud, a Dutch parts making firm in which it holds 79 percent of equity

Labour group in your country oppose the flow of FDI irrtdiife^ country on grounds of perceived inequities consequent on FDI. What are their arguments?

viii) Beth & Sushil are members of the committee for re^oiutjdn of the issue cited under What arguments would
they put forth to convince the labour groups of tl^evra^re implications for labour that may arise from FDI?


  1. Define Exchange rate and explain various types of it?
  2. Explain the difference between Fixed and Floating Exchange rates? What are the advantages of Fixed and Floating Exchange rates?
  3. Explain Exchange rate Equilibrium with the help of graph?
  4. What do you mean by Currency appreciation and Depreciation? Explain it with the help of a graph?
  5. Write about the impact of Exchange rate Fluctuations on an Economy?
  6. Define Peg and distinguish between Soft Peg and Hard peg?
  7. Explain about Foreign exchange markets?
  8. What do you mean by arbitrage?
  9. Differentiate between currency Devaluation and Depreciation?
  10. Explain briefly the reasons of demand of Foreign exchange?
  11. If the rate of Foreign exchange determined (Demand=supply). What could be the impacts if there exist increase in demand in demand of Foreign Exchange?
  12. Explain about Foreign exchange market and its features?
  13. What are the advantages of Fixed and Floating exchange rates?
  14. What do you mean by Nominal Exchange rate? Explain it with the help of graph?
  15. Explain about the exchange rate fluctuations? (Appreciation and Depreciation) on Domestic Economy?


    1. Explain the implications of the following on the demand and supply of foreign exchange and the exchange rate in spot foreign exchange market.

i) Sherry Land’s exports remained more or less stagnant in the years 2005- 06 to 2016-17. However, due to heavy thrust on industrialization, import of machinery, raw materials and components as well as associated services of different types increased.

ii) The investors of Merry Land find investments in financial assets in UK highly attractive and the government of Merry Land which has a liberal attitude on foreign investments permits such investments.

iii) Many foreign investors who had previously acquired Roseland’s financial assets sell them

iv) Effect on Country Y if Country X borrows $ 100 billion from country Y

  1. Explain how the exchange value of Indian Rupee will be affected in each of the following cases. What are the possible consequences on exports and imports?
  • The spot exchange rate changes from Rs 61/ 1$ to Rs 64/1$
  • The spot exchange rate changes from Rs 66/ 1$ to Rs 63/1$
  1. In 1983 Australia decided to float its dollar. Assuming free trade, explain the effects of each of the following on the spot exchange rate between AUD and USD.

i) There is a substantial increase demand in Australia for US exports of services. Since Australia manufactures were favoured over others, there is a proportionate increase in exports of Australian products to the US

ii) Investors in Australia perceive that the returns on investments in the US would be much more lucrative than elsewhere. As a result, there is a huge increase in demand for investments in US dollar denominated financial investments

iii) Political uncertainties in the US due to presidential elections caused large scale shift of Australian financial investments back in to Australia

iv) An epidemic in some parts of Australia made the US evoke SPS measures and ban the entry of a number of food items to the US.


Identify Whether the following quotes offered by a Kolkata Bank, are in direct or indirect format, and provide the corresponding indirect or direct quotes.

a)Rand (ZAR)5.8781Rupees per Rand
b)Krona (SEK)0.1040Krona per Rupee
c)Pound (GBP)101-808Rupees per pound
d)Saudi Riyal (SAR)0.0607Riyal per Rupee


  1. For the information you are required to specify the direct or indirect format of quote and convert the rates into other format?
S.No.Place of QuoteProductPriceRate
c)GenevaUAE DirhamCHF0.242
d)SingaporeMalay Ringits (MYR)SGD0.38477



6. Consider the following and determine the cross rates, as indicated

i) INR/NOK = 10.14ii) USD/AUD = 0.8925
INR/GBP= 101.80INR/AUD = 55.00
NOK/GBP = ?a) USD/INR &b) INR/USD = ?

(ANS.: I) 10.04; II) A) USD/INR = 0.02, B) INR/USD = 1.120)



  1. UTI bank quotes Rs.26.45 for Australian dollar. Show what they would quote if it were an indirect quote.

(ANS.: RS. 1 = AUD 0.0378)

8. The following rates appear in the foreign exchange market:

Spot rate2 months Forward
Rs./US $Rs.45.80/46.05Rs.46.50/47.00


  • How many dollars should a firm sell to get Rs. 5 crores after 2 months?

(ANS.: RS. 1 = $ 0.0215, FOR RS. 5 CRORES = $ 10,75,000)

  • How many rupees is the firm required to pay obtain US$ 2,00,000 in the spot market? (ans.:rs. 92,10,000)
  • Assume the firm has US$ 50,000. How many rupees does the firm in exchange of US$? (ans.:rs. 22,90,000)
  1. The exchange rate for Mexican peso was 0.1086 in December 2004 and 0.0913 in November 2004, against dollar.

Which currency has depreciated and by how much?  (ans.: $ has depreciated by is.89% against Mexican peso.)

  1. The following direct quotes have been observed from the forex market:

Rs./S        :     43.70

DM/$          :     1.578(overseas)

Find cross rates for Rs. /DM                                                                                         (ans.: rs. /dm=27.6933)

  1. Determine if there is a spot arbitrage opportunity among each of the following two sets of spots rates. Next, show how an investor can take advantage of it, if there is one. Assume that the dollar is your home currency.
  • $/pound =$1.65
  • $/DM = $ 554
  • DM/POUND = DM 3 (ANS.: $0,072 AS A PART OF ARBITRAGE TRANSACTION. FOR $ 1,000,000 = $ 7,200 ON THE SPOT)

We hope with the help of this article, now you know the what are the important topics in CA Inter FM and Eco for May 2019 (सीए इंटर फाइनेंसियल मैनेजमेंट और इकोनॉमिक्स फर फाइनेंस इम्पोर्टेन्ट प्रश्न) attempt. People who are searching for the CA Inter-Financial Management and Economics For Finance important Questions for CA exam can utilize these questions for their exam preparation. Students should understand that it is not recommended to skip some topics and read only a few important ones. Try to cover entire CA Inter syllabus and that’s what ICAI expects from you and even CA Inter question papers are based on that. These important questions are for those students who don’t prepare well for the exam and try to get at least 40 marks. So don’t depend on these questions if you have so much time for the exams. If you have any doubts the comment below. We will try to help you. And don’t forget to share this article with your friends who are going to write CA Inter exams in May 2019.

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