Q. Module No.

Question Option 1 Option 2 Option 3 Option 4

No
1 The Concept You invest Rs.5000 at 8% Rs. 7000 Rs. 2346 Rs. 7346
of Money p.a. compound interest in a Rs.12346
bank. After 5 years, what is
the amount you have
received from the bank?

2 The Concept Your friend invests Rs. 4845.6 Rs. 4000 Rs. 12000 Rs. 4884.08
of Money Rs.8000 in the some bank
at 10% p.a. His interest is
getting compounded each
year. At the end of 5 years,
how much interest will he
have earned on his
investment?
3 The Concept Your brother calls you, Investment Investment Investment Investment Option:
of Money saying that he has found a Option: Bank Option: Bank Option: Co- Friend’s business,
great plot of land, which Fixed Deposit 1, Fixed Deposit 2, operative Rate of return
requires a payment of Rate of return Rate of return Bank FD, Rate offered: 18% p.a.
Rs.50, 000 immediately, offered: 11% p.a. offered: 11 % of return
which he has made. He semi annually – offered: 14%
asks you to pay the Rs.2, compounded p.a
50,000 which is due after every 6 mths
one year. You have Rs.2,
25,000 right now, and
want to invest it right
away, to yield the desired
amount after one year.
However, it is also your
hard-earned money, and
rather than simple go for
the highest return, you
want to find the right risk-
return balance. Here the
options open to you, which
one would you chose?

4 The Concept Present Value of Rs.600 510 521.7 690 517.2

of Money received one year from
now (using 15% time
value rate) is
5 The Concept An investor is considering 22512 22558 23021 21000
of Money the purchase of a financial
instrument that promises
to make the following
payments:
Yrs from nowPromised
Payments
1 Rs. 2000
2 Rs. 2000
3 Rs. 22500
Investor wants exactly 6%
return on the investment.
At what price should the
investor buy the
instrument?

6 The Concept A person borrows $12,000 9.50%, 13.50% 9.50%, 5.50% 9.50%, 9.50% 9.50%, information
of Money from a private money not sufficient for
lender at a rate of 9.50% finding real rate of
for a period of 1 year, interest
when the average inflation
rate for the period is 4%.
The real rate of interest is
____ while the nominal
rate of interest is _____.

7 The Concept The real rate of interest is 2.10% -2.10% 13.10% 0%

of Money 7.60% while the nominal
rate of interest is 9.70%.
The applicable inflation
rate is:
8 The Concept As nominal interest rates Decrease Remain same Increase Depends on rate
of Money increase in the economy, the of increase in real
inflation should ideally: interest rates
9 The Concept A person wants to borrow Bank A Bank B Bank C All of them are the
of Money money from the banking same
system for the purpose of
an overseas holiday. Bank
A offers him an interest
rate of 5.15% p.a. payable
monthly, bank B offers him
5.20% p.a. payable semi-
annually while Bank C
offers him 5.25% p.a.
payable annually. Which is
the cheapest option for the
borrower?

10 The Concept Find the future value of 1465.2 1280.95 1549.55 1987.4
of Money $1200 invested at 5.25%
p.a. payable quarterly,
after 5 years?
11 The Concept Find the future value of 1231.1 1243.1 1235 1345.1
of Money $1200 invested at 5.25%
p.a. payable annually, after
6 months?
12 The Concept Find the present value of 1131.1 1078 1065 1086.36
of Money $1200 payable after 2
years, assuming the
applicable interest rate is
5.10%?
13 The Concept Person A wins a lottery and Receive Receive $135,000 Both options Depends on bank
of Money the lottery organizers give $120,000 now after 18 months are equally rates at the end of
the man the following good 18 months
options: Receive $120,000
now or receive $135,000
after 18 months? Assuming
bank rates are at 8% p.a.
payable quarterly, which is
the better option?

14 The Concept An investment of 12,000 at the $201.20 $3,500.00 $1,012.20 $181.20

of Money beginning of Year 1 yields $1000
at the end of Year 1, $1200 at
the end of Year 2 and $1300 at
the end of Year 3, apart from
recovery of principal. What is
the NPV of the investment
assuming re-investment and a
cut-off yield of 9.00%?

15 The Concept An investment of 10,000 at the $14,000.00 $13,423.67 $11,896.75 $12,345.90

of Money beginning of Year 1 yields $1200
at the end of Year 1, $1500 at
the end of Year 2. What should
be the return at the end of Year
3, apart from principal recovery,
to justify the investment with a
cut-off yield of 15.00%?
16 The Concept A consumer goods company No Yes Maybe Insufficient
of Money has a market share of 23% in information
the Flat screen television
industry. The company is
weighing the option of investing
an additional $1.2 million in
modernization and expansion,
which is expected to yield
additional revenues of $0.4
million over the first 3 years
while it would yield $0.3 million
and $0.1 million each in years 4
and 5. Assuming that the time
window for the investment is 5
years and the hurdle rate for
investments is 15%, should the
company go for the investment
from a purely financial
perspective?

17 The Concept An investor has multiple IRR NPV Either of Insufficient

of Money investment options these information
yielding various dollar
returns at various points of
time, while he is
comfortable with a return
of X% p.a. Which method
should he use to compare
the various investments?
18 The Concept An investor estimates an Yes No Maybe Insufficient
of Money investment of $15,000 to information
yield returns of $1200 each
at the end of the first 3
years apart from return of
principal at the end of 3
years. Assuming that the
inflation rate is 5%, should
the investor opt for the
investment?
19 The Concept What is the IRR for an 5.55% 7.65% 8.47% Insufficient
of Money investment of $ 10,000 information
that yields a return of
$1000 at the end of each of
the first 3 years, $600 at
the end of the 4th and 5th
years and principal recovery at
the end of 5 years?

20 The Concept The following concepts are Present value Future value IRR Net Present Value
of Money derived from the basic
concept of time value of
money except:
1 Financial A young student looking Bank deposits & Regular Blue-chip Zero coupon bonds
Instruments for monthly income should Fixed Interest dividend paying shares
invest most of his savings instruments companies
in
2 Financial Savings bonds are: Issued by Unregistered Transferable Issued by
Instruments department of without department of
Treasury registration Treasury and
Transferable without
registration

3 Financial The interest rate on a bond Years to Maturity Credit Rating of Currency of Bond Face Value
Instruments doesn’t depends on the Issuer Issue
4 Financial What is the Yield to 7.50% 6% 11% 7%
Instruments Maturity for a 6% - 5 years
bond with face value $
1000 trading at $ 800 after
one year?
5 Financial Unsecured bonds are: Issued only by Secured by Have lower Issued only by large
Instruments large and assets of the priority for and financially
financially sound issuing company. repayment sound companies
companies than secured and Secured by
debt assets of the issuing
company.

6 Financial In what form are bond’s Physical, Electronic, Physical, Physical,

Instruments typically issued in US? Registered Registered Registered Unregistered
and Electronic,
Registered

7 Financial What is the backing for a No backing Bank Guarantee The credit Real estate owned
Instruments Mortgaged Bond? worthiness of by the Issuer
the issuing
company
8 Financial What secured debt Debentures Bearer Bonds Collateral Junk bonds
Instruments securities are generally Trust Bonds
backed by a portfolio of
non-issuer securities,
usually U.S. Government
Securities?
9 Financial What bondholders would Debentures Bearer bonds Unsecured Junk bonds
Instruments have a general creditor bonds
status?
10 Financial What is the S & P ratings Less than AAA Less than BBB Less than CCC D
Instruments below which bonds are
considered to be
speculative?
11 Financial What securities experience Cumulative Callable Zero Junk bonds
Instruments Reinvestment Risk? Interest Bonds bonds coupon bonds

12 Financial What are the current 1, 2 and 3 3, 6 and 12 1, 2 and 3 1 month only
Instruments maturities for T-Bills? months months years
13 Financial What is the maximum maturity 90 days 180 days 270 days 360 days
Instruments for Commercial Paper?

14 Financial Who sets the Fed Funds Federal Reserve Banks SEC Stock Exchanges
Instruments Rate?
15 Financial Negotiable securities are: Sale price can be Freely Can only be Can’t be sold except
Instruments negotiated transferable sold to the on maturity
issuer
16 Financial Mutual funds Are often riskier Require investors Are less Give much greater
Instruments than investing in to invest very riskier than returns than the
individual stocks. large sums of individual stock index
money, which stocks as the
eliminates small fund
investors. managers
invest in a
diversified
portfolio
17 Financial Hybrid securities are Combination of Combination of Combination Combination of
Instruments Preference and put and call of debt and growth and income
Common stock equity

18 Financial Why would an investor Investor looking Investor Arbitrageur Investor looking for
Instruments choose to invest in Money for capital gains looking for regular income
Market Securities? liquidity
19 Financial Which of the following Subordinated Debenture bonds. Collateral Mortgage bonds
Instruments bonds involves highest debenture bonds.
risk? bonds.
20 Financial Which of the following Future prices Risk is often Financial Investors may
Instruments statements is true about are paid for increased when futures are hedge their risk
futures? current dealing in futures traded by entering into
transactions because buyers primarily at futures
and sellers may the New York
be required to Stock
accept a price Exchange.
other than the
one to which they
agreed.

21 Financial The responsibility of A clearing house. The brokers who Banks The buyer and
Instruments enforcing futures contracts struck the deal. seller.
is taken on by
22 Financial What provides the The seller stands The seller stands Selling options The seller earns
Instruments incentive for someone to to gain from to gain from is relatively commission
sell an option when that changes in changes in prices. risk free
individual has no rights, interest rates.
just obligations?
23 Financial Which of the following is Swaps. Put options. Futures Call options
Instruments used primarily by financial
intermediaries to hedge
interest rate risk for long
periods of time (up to 15
years)?
24 Financial Which of the following is Financial Options Preferred Swaps
Instruments not an example of a derivative? futures stock of a
company
25 Financial Company ABC Inc. 30, 140 and 10 60, 60 and 60 93, 20 and 67 140, 30 and 10
Instruments Declares bankruptcy. Now,
$180 million has been
accumulated through
liquidation of its assets.
The main stake holders in
the firm are debt holders
(Bank of New York - $140
million, Union Bank of
California - $30 Million)
and equity holders
(Templeton Investments -
$100 million). What is the
amount that the three
stake holders end up with
(in $ million)? (In the
order, BNY, UBC and TI)

26 Financial If General Electric would Leverage ratio Leverage Leverage Leverage ratio
Instruments borrow $300 million from would remain the ratio would ratio would has no relation with
Bank of America, how same increase decrease borrowing
would its balance sheet be
affected in terms on
leverage ratio?
27 Financial People who buy stock in a Part owners of Part owners of Receive Creditors of Coca
Instruments corporation such as Coca Coca Cola, so the Coca Cola, but interest Cola, so the benefits
Cola become benefits of the benefits of of holding the stock
holding the stock holding the depend on Coca
depend on Coca stock do not Cola’s profits
Cola’s profits depend on Coca
Cola’s profits
28 Financial Assuming that IBM has No IBM has only IBM has paid IBM will pay
Instruments paid handsome dividends relationship paid dividends the interest if it has
to its shareholders this between interest and no interest dividends enough cash after
year, what would be a right and dividend on its issued after paying its dividend payout
assumption to make? payouts bonds interest to
its
bondholders
29 Financial Municipal bonds Are exempt Usually have Are Usually support
Instruments from federal yields that are guaranteed by real estate spending
taxes. higher than U.S. the federal and student loans.
government government.
securities with
similar
maturities.
30 Financial Bonds with relatively low Zero coupon Junk bonds Investment Price-premium
Instruments risk of default are called bonds grade bonds bonds
31 Financial A young investor comes to Income Fund Liquid Fund Growth Balanced Fund
Instruments an Investment Consultant Fund
and asks him for advice for
his investments. He
declares that he doesn’t
mind the risk but he would
definitely like his money to
grow as fast as possible.
He would like to invest in a
Mutual Fund which would
satisfy these criteria. What
would the consultants
choice for his profile?
32 Financial Reliance Industries American Indian Share Public Global
Instruments Limited, India would like to Depository offering in Depository Receipt
raise money in NYSE for Receipt India
expanding its operations in
the domestic market
(India). The securities
issued would be

33 Financial If I expect the price CTS Buy a put option Sell a put option Buy a call Sell a call option on
Instruments share price to rise by $5 on CTS stock on CTS stock option on CTS stock
from its current levels CTS stock
within 1 month, then which
would be the best option?

34 Financial Casablanca Inc. Issues Convertible Preferred Stock Stock Option Forward Contract
Instruments $100 million worth of Bond
securities which will
continue to pay a fixed
coupon of 2% annually for
next five years. The
investors also have an
option of converting the
security into equity after
the first year. Such a
security would be termed
as
35 Financial State and local government They are exempt They are State and State and local
Instruments or municipal bonds have from state exempt from municipal municipal bonds are
one unique feature that taxation for all federal and bonds usually all revenue bonds
makes them attractive to investors state (resident have coupon
wealthy investors. Which investors) rates
of the following is that income taxation
unique feature of "muni"
bonds?
36 Financial If IBM finds it much Future LEAPS Vanilla Call Forward
Instruments cheaper to raise money in contract Option Contract
US and Vodafone in UK.
However, both IBM would
like to raise money in UK
and Vodafone in US, both
of which are costlier
propositions for the firms.
What would be best
possible solution to this
problem?

37 Financial Forward contracts are On a futures On a specific At a At a specific

Instruments promises to buy or sell exchange at future date at a specific forex price on a
foreign exchange: some time in the price established rate at some specified future
future. on that specific time during date.
future date. the contract
period.
38 Financial If the forward rate No forecast The U.S. The foreign The spot rate is
Instruments (Forex/U.S. dollar) is can be made with dollar is currency is expected to remain
selling at a premium over forward contracts expected to expected to constant
the spot rate, which of the appreciate appreciate
following statements best
reflects the expectations of
the foreign exchange
market?

39 Financial A U.S. importer who owes Take no action Wait and buy Sell Canadian Buy Canadian
Instruments 1 million Canadian $ in 90 Canadian in the dollars dollars forward for
days and wishes to hedge spot market in 90 forward for delivery in 60 days
his/her foreign exchange days delivery in 90
risk would: days
40 Financial A U.S. importer of Pay the invoice Buy a forward Sell Canadian Sell US dollars in
Instruments Canadian nickel ore with in thirty days. contract in U.S. dollars in the futures market
an invoice to pay $1 million dollars for futures
U.S. dollars in thirty days delivery in thirty market.
would days.
41 Financial A U.S. importer who has A foreign Expecting the A hedger Planning to pay
Instruments agreed to pay 1 million exchange dollar to in the foreign a set amount of
Euros to a French exporter speculator depreciate exchange dollars for the items
in 60 days decides to wait against the Euro market purchase
the full 60 days before
paying. The importer is

42 Financial A hedger in the financial Usually buys Usually sells Either buys Either buys or
Instruments futures market financial futures financial futures or sells sells financial
to hedge to hedge financial futures contracts
futures so that the
contracts so underlying asset
that the spot gains/losses
underlying are inversely
asset spot related to
gains/losses financial futures
are directly contract
related to gains/losses
futures
contract
gains/losses
43 Financial Who will lose money if the The seller of a The buyer of a The writer The buyer of a
Instruments price of any underlying futures contract put. of a call. futures contact.
instrument falls?
44 Financial The value of options Varies Varies directly Varies Increases with
Instruments inversely with the with the length of inversely with the decreased
price variance of time to the level of volatility of the
the underlying expiration. interest rates underlying asset.
asset.

45 Financial A Standard and Poor's High quality Bonds of high Non- Government
Instruments bond rating of AAA refers investment grade quality, but with investment bonds only
to bonds. an elevated risk grade bonds,
of long-term with uncertain
default. long-term
prospects.

46 Financial The first time a company An initial A secondary A stock Internal

Instruments issues stock to the public public offering offering. option. financing.
the issue is called (IPO).

47 Financial Common stockholders Interest income; A prior claim on A prior claim Their residual
Instruments usually trade ________ to voting rights dividends; higher on claim on assets in
preferred stockholders in dividend income dividends; liquidation;
return for __________. voting rights preferred claim on
dividends
48 Financial Leverage financing refers Using Leveraging Using debt Selling assets to
Instruments to Promoter’s brand value to finance raise money
credibility to raise issue equity
money
49 Financial Preferred stock dividends Each year on After common Before If declared by the
Instruments are paid a contractual dividends are interest is paid board of
basis, but before paid. on debt. directors.
common
dividends.
50 Financial The purchase of U.S. Stock Option Spot Futures
Instruments Treasury bonds for
immediate delivery is a
______ market transaction

1 Financial Suppose Ruthie has the She should The present She should She should take
Markets option of receiving a take the $10,800 value of the take the the $15,000 in six
$10,800 payment today or today because $10,800 is $15,000 in six years because the
a $15,868.7 payment in six the present value $15,868.74. years because future value of
years. Which of the of the $15,868 $15,000 is $10,800 is only
following statements is paid in six years more than $15,000.
true if the interest rate is 8 is only $10,000.
percent? $9,752.54.
2 Financial The buying or selling of Speculation. The spot The futures
Markets securities with the hope of market. Arbitraging market.
profiting from privileged
information is known as

3 Financial If the issue price of a 5 The interest The return on Both The Only 1
Markets year zero-coupon bond is for the 5-year the investment of interest for
$960 and its redemption period $960 the 5-year
price is $1000, market period and
price $955, then the The return on
difference amount of $45 the
stands for investment of
$960
4 Financial The effective interest rate Is lower than Is always Increases Is greater than
Markets on a bond, (when the price the coupon equal to the as the bond the coupon rate.
of the bond is greater than rate. coupon rate. price
its par value) decreases.
5 Financial John holds 2007 maturity Sell it, if Sell it, if Sell it with Sell it now or
Markets government security which interest rate is interest rate is the next hold it till maturity
pays a semi-annual coupon increasing decreasing coupon date,
of 8%. What should John irrespective of
do with this security? interest rates
movement

6 Financial If bond portfolio managers They will They will They will They will
Markets expect interest rates to anticipate a probably buy wait for the probably sell more
increase decrease in bonds now to rates to bonds now before
bond prices. avoid capital actually the bond prices
losses. change before decreases.
taking any
action.
7 Financial Which of the following is They trade They have an They are They are beyond
Markets not a characteristic of in a central active secondary wholesale the reach of small
money markets? location. market. markets. investors.

8 Financial Investors use the money To reduce the To reduce the To gain To earn high returns
Markets market liquidity of their opportunity from expected on their
funds. cost of idle declines in investments.
funds. future interest
rates.

9 Financial Which of the following is It can be It can be It can be It is cost of

Markets true for The Fed funds rate raised if the Govt. raised if the raised if the borrowing
buys securities Treasury will sell Govt. immediately
from the public. more bills. announces an available funds
increase in the for one day.
rate at its
regular
meeting.
10 Financial If John, a foreign exchange Arbitrage Hedging Taking Both arbitrage
Markets trader sees that EUR/USD, trading high risks to trading and hedging
EUR/JPY and USD/JPY get high
show that he could make returns
money by buying two of
them and selling the other,
then what is he trying to
do?
11 Financial One potential problem that Lower That a That the That economic
Markets could be caused by the standards of disturbance in additional growth will be likely
tremendous growth of the living around the one financial transactions to slow down in
international financial world. market can will make the many countries
system in recent years is spread more international
quickly to other financial
countries. markets less
efficient.
12 Financial Primary markets Are markets Are markets Are Are markets in
Markets in which primary in which short- markets in which newly
goods and term debt is which claims issued claims are
service, i.e. raw traded. that have sold to initial
materials are already been buyers.
traded. issued are sold
by one
investor to
another.
13 Financial The current market $1000. $0. $300. $200.
Markets interest rate is 10%. A
coupon bond with a coupon
payment of $70, a face
value of $1000, and with
still ten years to maturity,
will trade at what
discount?
14 Financial "Liquidity" is a term that is The ease Financial The Money.
Markets used to refer to with which assets in general. practice of
assets can be converting
converted into financial
goods and assets into
services. money.
15 Financial Discount bonds are Bonds that Bonds that Bonds that Bonds that are
Markets are currently are currently are sold sold at face value,
trading below trading above below their but which yield
their face value. their face value. face value, interest payments in
which yield one lump sum at
interest the day of maturity.
payments in
one lump
sum at the
day of
maturity.
16 Financial The money market trades of a short- of a medium- of a of a long-term
Markets debt term maturity. term maturity. medium-to- maturity.
long-term
maturity.
17 Financial Say you buy a bond with a 70%. 14%. 10% 7%
Markets face value of $1000 at a
discount for $750. The
bond still has 10 years to
maturity, and the coupon
rate on the bond is 10%.
The yield to maturity of
this bond is approximately

18 Financial Which of the following Debt vs. Money vs. Spot vs. Primary vs.
Markets classifies financial markets equity market capital market futures market secondary market
by term to maturity?
19 Financial The initial sale of a security Primary; Secondary; Money; Spot; futures
Markets is in the ______ market, secondary primary capital
while subsequent trading
in the security is in the
________ market
20 Financial Which of the following Speculation; Payments Risk Funds
Markets functions of financial raise funds system; risk management intermediation; risk
markets best describes the management ; speculation management
primary functions of the
financial futures market
where trading is done for
delivery some time in the
future?
21 Financial The financial system Provides risk Provides liquidity Provides Refers to the
Markets sharing, services only. information banking system
liquidity and services only. only.
information
services.
22 Financial While the primary market Funds; A place for Funds; low Securities; funds
Markets provides ________ for liquidity investing; risk
spenders, the secondary liquidity
market provides ________
for investors

23 Financial Which of the following is Increased Increased Increase in Increased

Markets associated with increased transactions costs time it takes to taxes for number of dealers
liquidity of a security? sell a security every trading the
transaction security
24 Financial Which of the following is Short-term Marketable High quality Equity securities
Markets not associated with money
market securities?
25 Financial The second largest amount Corporate and Mortgages U.S. U.S. Agency
Markets of capital market securities foreign bonds Treasury securities
outstanding, after common securities
stock, is
26 Financial Regulations limiting risk The social costs The costs of The private The social
Markets taking of financial to shareholders regulation exceed costs of a costs of a general
institutions are imposed of a general bank the benefits. bank failure bank failure
for which of the following failure are more exceed the exceed the
reasons? than the private social costs of private costs to
cost of the bank general bank the shareholders
failure. panic. of the bank that
failed.

27 Financial Which of the following is To provide To serve To To offset the

Markets associated with the stability of the certain social prevent moral hazard
purpose of regulating money supply objectives failure of any incentives provided
financial institutions? financial by deposit insurance
institution and other
guarantees.

28 Financial Regulatory balance sheet Limit the size Limit risk- Limit Encourage high
Markets restrictions are designed to of depository taking and to excessive risk-taking by
institutions. encourage diversification. proper
diversification. diversification.
29 Financial Regulators' attempting to To promote To promote To To protect the
Markets limit competition by competition in the limited quantities promote soundness of the
restricted entry, exclusive financial services of financial safety and deposit insurance
services, etc. was an markets. services at soundness of fund.
attempt to serve which of maximum prices. depository
the following purposes of institutions.
regulation?
30 Financial Which of the following are Ginnie Mae Fed SEC The US
Markets involved in the regulation government
of Capital Markets in the
US?
31 Financial Who among the following Banks Central Bank Small Companies
Markets would not be a participant Investor
in the money-markets

32 Financial Repo’s are considered the They are They are of They come They are backed
Markets safest financial backed by the very short-term in very small by all big banks and
instruments as government maturity denominations companies

33 Financial Individual investors are the primary a brokered an a block

Markets most likely to trade market market auction transaction
securities in market
34 Financial Financial intermediaries illiquid. owned by real. financial
Markets differ from other government
businesses in that both
their assets and their
liabilities are mostly
35 Financial Insurance or a guarantee Which is an Which is an Which is an Which is an
Markets to cover losses of a increase in the incentive to incentive to incentive to
financial institution may chance that a decrease risk- increase risk- increase risk-
create a moral hazard random negative taking by the taking by the taking by the
economic event insured. insurance insured.
will occur. authority.
36 Financial In what roles do design market new provide None of the
Markets investment bankers securities with stock and bond advice to the listed options
perform? desirable issues for firms firms as to
properties market
conditions,
price, etc.
37 Financial Financial intermediaries gather advertise for monitor diversify their
Markets exist because small information needed their portfolios portfolios
investors cannot efficiently investments
38 Financial Exchange rate risk results from can be cannot be Both results from
Markets changes in the hedged by using eliminated. changes in the
exchange rates in a forward or exchange rates in
the currencies of futures contract the currencies of
the investor and in foreign the investor and
the country in exchange. the country in
which the which the
investment is investment is
made. made and can be
hedged by using a
forward or
futures contract
in foreign
exchange.

39 Financial A coupon bond is a bond does not pay pays interest can always always sells at
Markets that interest on a on a regular be converted par
regular basis but basis (typically into a specific
pays a lump sum every six number of
at maturity months) shares of
common stock
in the issuing
company
40 Financial Under the present Exchange Central banks Supply Supply and
Markets international monetary rates fluctuate determine the and demand demand are the
system, freely without exchange rates in are the only primary forces that
government all countries factors for determine exchange
intervention. price rates, but central
determinatio banks may
n. Central intervene if they
banks don’t believe currency
intervene values are over- or
undervalued.

1 Risk The presence of risk means Few outcomes Investors will Investors will The standard
Management that possible lose money gain money deviation of the
return is large
2 Risk Which asset class would Property Shares Bonds Cash
Management provide highest returns for
the lowest risk?
3 Risk Which asset class would Property Gold Bank deposits Cash
Management provide lowest returns for
the highest risk?
4 Risk If REAL rate of return was 3.30% 7% 13% 30%
Management 10% last year and inflation
was 3%, what was your
investment returned?

5 Risk Which of the following They will only They accept They only They will only
Management statements regarding risk- accept lower investments that care about accept higher
averse investors is true? returns and low provide high rate of return. returns and low
risk returns. risk
6 Risk Alex is a more risk-averse For the same For the same For the same For the same
Management investor than Olivia. risk, Alex return, Alex risk, Alex return, Olivia
Therefore requires a tolerates higher requires a tolerates lesser risk
higher rate of risk than Olivia. lower rate of than Alex.
return than return than
Olivia. Olivia.
7 Risk If a T-bill pays 5 percent, An asset that An asset that An asset that An asset that
Management which of the following pays 10 percent pays 10 percent pays 10 pays 10 percent
investments would not be with a probability with a probability percent with a with a probability
chosen by a risk-averse of 0.60 or 2 of 0.40 or 2 probability of of 0.20 or 3.75
investor? percent with a percent with a 0.30 or 3.75 percent with a
probability of probability of percent with a probability of 0.80
0.40. 0.60. probability of
0.70.

8 Risk You purchased a share of 45% 5% 50% 40%

Management stock for $20. One year
later you received $1 as
dividend and sold the share
for $29. What was your
holding period return

9 Risk Bank of America charges a Market Risk Credit Risk Liquidity Risk Legal Risk
Management lower rate of interest to
Lockheed Martin than to
General Electric. This can
be attributed to lower
________ risk from
Lockheed as compared to
GE for Bank of America
10 Risk If Bank of New York has Liquidity Risk Market Risk Credit Risk Country Risk
Management found errors in settlement
of transactions with some
of its customers, as there
is some mistake in some of
its systems. This would be
classified as

11 Risk VaR is used for which of Risk Risk Mitigation Risk Taking Risk Assumption
Management the following Measurement
12 Risk A trader lost more than Yes because No, it is Yes but only if Both a and c
Management $50 million as the market VaR does not impossible the trader
moved against his cover 100% of must have
positions. However, when the outcomes broken the
measured the previous day VaR limit
by his risk manager, his purposely
VaR for a single day was
defined at $20 million. Is
this possible that the VaR
is right

13 Risk Risk is best measured At a Macro level At the lowest At a sub- At organizational
Management when looked at possible level macro level level
14 Risk Which percentage of 99% 95% 96% 90%
Management confidence for VaR is the
most conservative?
15 Risk Which of the following is Diversification Hedging Insurance Budgeting
Management not a risk management
measure?
16 Risk Risk is best measured At a Macro level At the lowest At a sub- At a super-macro
Management when looked at possible level macro level or organizational
level
17 Risk Value-at-Risk can be Monte Carlo Historical Variance- Parametric
Management estimated using Simulation Simulation Covariance methods
Matrix
18 Risk Is time horizon of Only for certain Yes, for all No. It is not a Yes but only time
Management importance when instruments financial factor used for horizons lesser than
calculating VaR? instruments calculations. a week

19 Risk What would be the most Monte Carlo Historical Variance- Cannot Say
Management accurate VaR estimation Simulation Simulation Covariance
method? Matrix
20 Risk VaR helps in describing How big the How to minimize Approximately Explains the loss on
Management which of the following? loss would be the loss on bad predict a bad day as
on a bad day. days movements of compared to other
asset to help days
minimize
losses
21 Risk A 2.33 sigma limit for 95% 99% 99.99% 50%
Management calculating risk would refer
to what level of
confidence?
22 Risk Risk-based capital Default risk Interest rate risk Liquidity risk Political risk
Management requirements, under the
Basel Accord, focused on
what area of commercial
bank risk?
23 Risk An investor's strategy of Spread Specialization Securitization.
Management holding many risky assets management Coincidentializ
in an attempt to reduce ation
overall risk is called
------------
24 Risk If a financial instrument 0.008 0.036 0.053 0.017
Management has a 35 percent chance of
paying 29 percent and a 65
percent chance of paying -
13 percent, it expected
return would be
25 Risk Risk is usually measured as Potential loss. Variability of Probability of Potential expected
Management the outcomes expected loss.
around some values.
expected value.
26 Risk The term "risk averse" An individual Most investors An Only investment
Management means that refuses to take and businessmen individual proposals with no
risks. seek risk. will seek to risk should be
avoid risk or accepted.
be
compensated
with a higher
return.

27 Risk If one project has a higher It has a It has a higher It has more
It may be riskier,
Management standard deviation than greater risk. expected value. possible
but this can only be
another determined by the
outcomes.
coefficient of
variation.
28 Risk Which of the following is a Risky Risky The standard Risk-averse
Management false statement? investments may investments may deviation of investors cannot
produce large produce large returns is a be induced to
losses. gains. risk measure. invest in risky
assets.

29 Risk Risk, as used in financial The probability The probability The The overall rate of
Management markets, means of a loss. of a gain. probability return.
of a gain and
the
probability
of a loss.
30 Risk Legal risk is the Possibility that Loss you could Possibility Possibility of loss
Management you will face legal incur when legal of loss when from errors in
action action is taken a contract instructing
against you cannot be payments or settling
enforced transactions
31 Risk The monetary value at risk A number Possible impact (1)*(2) can’t be assigned
Management is expressed as between 0 and 1 in Dollars

32 Risk A Portfolio Manager is Her VaR is Her VaR is $ Her VaR is $ Her VaR is $1
Management examining the stock $50,000 with a 5,000 with a 50,000 with a Million with a
performance of Company confidence level confidence level confidence confidence level of
Dee. She sees that, in the of 100% of 100% level of 0% 100%
past, the maximum the
stock has ever fallen is
5%. She buys 1 million
worth of Company Dee
stock. Which of the
following statements is
true?
33 Risk State which of the There is no risk There is no Increasing BothThere is no
Management following statement(s) is without reward reward without business in reward without
(are) true risk Europe also risk and
reduces a Increasing
certain risk to business in
Cognizant’s Europe also
business reduces a certain
risk to
Cognizant’s
business
34 Risk State which of the Microsoft stock is It is better not to Risk All of above
Management following statement(s) is the safest spend time and management
(are) true investment effort to identify initiatives
and measure a should reduce
risk if in the end the risk to
we may not zero to obtain
undertake any maximum
risk mitigation benefit
measure
35 Risk It is estimated that the Compare the Take immediate Ignore the Cannot say
Management probability of a particular cost of risk action to reduce risk – the
risk in a project is 0.3 and management the probability to monetary
the impact, should the risk with the value as low as possible value is
materialize, is $ 5,000, at risk and negligible
while the project is worth decide on
$ 3 million. The Project optimum
Manager should strategy

36 Risk In 2002, interest earned on Bank deposits The scenario The risk- Cannot say
Management bank deposits was higher are actually described above reward
than profit from stock riskier form of is impossible; principle
market investments, even investment than there must be an holds true
though deposits were share prices, error in over a long
supposed to have less risk since reward has measurement period, while
associated with them. It to be proportional in the short
means to risk term it is
less certain

37 Risk Following are the list of exchange rate protective attrition payment default
Management risks that Cognizant faces fluctuation legislation by
at an organization level U.S/U.K
EXCEPT
38 Risk Following are the list of attrition cost & time over- incorrect
Management risks that your project or a run requirements requirementevolutio
typical project in Cognizant n
is exposed to EXCEPT

39 Risk The extent of risk return liquidity total investment

Management diversification affects the
following EXCEPT
40 Risk Indian software firms lost Liquidity Risk Market Risk Credit Risk Legal Risk
Management a lot of money due to the
Dollar appreciating against
the Indian Rupee. This risk
could be term
1 Introduction Fill in the blanks: The Deposits, Savings accounts Long term Loans, deposits.
to Banking liability of a bank include loans. and large time deposits and
____________, while the deposits, short term
assets of a bank include checking loans
_____________ accounts.

2 Introduction What is the best basis for interest spread exchange rate interest rate equity yield
to Banking the comparison of dividend
paying stocks with other
investments such as bonds,
certificates of deposits etc

3 Introduction Banks are financial Link lenders Evaluate the Create BothLink lenders
to Banking intermediaries that (depositors) to likelihood of monopolies, (depositors) to
borrowers borrower monetary & borrowers and
repayment, fiscal policies. Create monopolies,
reducing risk by monetary & fiscal
developing a policies.
diversified
portfolio rather
than lending to a
single borrower.
4 Introduction A bank failure is more bank increases bank holds more bank large bank increases its
to Banking likely to occur when its equity capital short-term loans outflows holdings of excess
riskless securities reserves

5 Introduction When you deposit $200 in its assets decline its reserves its liabilities each of the above
to Banking currency into your bank by $200 decline by $200 increase by occur
$200

6 Introduction Which of the following is Monitoring Stability of the Conducting Regulating the
to Banking NOT under the purview of foreign currency financial system the nations Banking institutions
the Central Bank inflow and fiscal policy
outflow
7 Introduction Which of the following The capacity to The ability to The ability to The ability, through
to Banking represent tools available to make direct inject or write its Internal Revenue
the Fed to control the commercial loans remove money legislation to Service division, to
money supply? to the public. held by the generate change federal
public by increased income tax rates,
buying or government and thus vary cash
selling U.S. spending on holdings by the
Treasury public works public.
Bonds. projects such
as building
trails, parks,
and bridges.
8 Introduction CRR stands for which of Cash Reserve Common Cash Refund Cash Re-service
to Banking the following Ratio Reserve Ratio Ratio Ratio
9 Introduction Increasing the Cash Increased Money Reduced interest Reduced Profitability of firms
to Banking Reserve Ratio for banks Supply in the rates Money
would have an impact on economy Supply in the
which of the following economy

10 Introduction Which two risks of a Credit risk and Interest rate Credit risk Liquidity risk and
to Banking financial institution may interest rate risk risk and foreign and foreign credit risk
bring gains as well as exchange risk exchange risk
losses?
11 Introduction How does the central bank By reducing By buying By increasing By selling
to Banking increase money supply in the Cash foreign currency the wages of Government
the economy? Reserve Ratio the salaried Securities in the
(CRR) class open market
12 Introduction When the interest rate Less likely to More likely to Less likely More likely to
to Banking rises, people are borrow, that is, borrow, that is, to borrow, borrow, that is,
sell a financial sell a financial that is, purchase a financial
asset. asset. purchase a asset.
financial
asset.
13 Introduction Banks must keep a Required Excess reserves. Savings Home loans
to Banking percentage of their reserves. accounts.
deposits on hand as
14 Introduction When a large majority of a Will not Will not Will Will fail unless it
to Banking bank's depositors lose faith experience experience experience can obtain
in it and attempt to difficulties difficulties difficulties but additional
withdraw their deposits, because its because it will will not fail reserves or
the bank required reserves hold sufficient government
will be adequate excess reserves assistance
to meet to meet
withdrawals withdrawals
15 Introduction A financial asset is liquid If it can be If it can be Only if it If it is held by the
to Banking carried easily readily takes the form public and earning
from one place to exchanged for of cash. interest.
another. another asset
or good.

16 Introduction In Harvey, N.D. three local Although less Although less Are not Are not money
to Banking banks have issued no- liquid than Fed liquid than Fed money because they are
interest loans in the form Notes, are money Notes, are money because they not backed by the
of Harvey Bucks. They can because they are because they are are liabilities Federal
be spent in local stores. accepted as assets of for government.
Retailers get 95 U.S. cents money. everyone who consumers
for each Harvey Buck. holds them. who have
From this information you been issued
can conclude that Harvey Harvey
Bucks Bucks.

17 Introduction If Bank of Japan was To protect To protect For Both To protect

to Banking buying Dollars fervently, it Japanese Japanese speculative Japanese exporters
would most likely be for exporters from importers from purposes from loss due to
which of the following loss due to loss due to movement in Yen
reasons movement in Yen movement in and For speculative
Yen purposes

18 Introduction A Commercial bank would Make the lending Make the lending Keep the EitherMake the
to Banking be able to make money in rate below the rate equal to the lending rate lending rate below
which of the following deposit rate deposit rate above the the deposit rate or
ways deposit rate Make the lending
but play the rate equal to the
volume deposit rate
game
19 Introduction Retail Banking division in a Personal Loans Home Mortgages Derivatives Consumer Loans
to Banking bank would not include Trading
which if the following
departments
20 Introduction Glass-Steagall act (1933) Create a Create a Chinese To make the To promote the
to Banking was created to ensure Chinese wall wall between banks more concept of Universal
which of the following between Corporate efficient Banking
Commercial Banking and
Banking and Retail Banking
Securities Business
Business
21 Introduction Money Multiplier effect An increase in An increase in A decrease in Both An increase
to Banking would imply the total money the total money the total in the total money
lent out into the in the bank money in the lent out into the
system reserves in the bank reserves system andAn
system in the system increase in the
total money in the
bank reserves in
the system

22 Introduction Cash Reserve Ratio is To ensure that To ensure that To contribute BothTo ensure that
to Banking maintained for which of the Bank the Central Bank towards the Central Bank
the following reasons? doesn’t face a can take this cash government can take this cash in
cash crunch in case of its needs in times case of its need and
due to heavy need of crisis To contribute
withdrawals towards
government needs
in times of crisis
23 Introduction The Fed has been reducing Increasing the Decreasing the Help interest- BothIncreasing the
to Banking the interest rates with aim growth rate of growth rate of rate traders growth rate of the
of achieving which of the the economy the economy book profit economy and Help
following interest-rate traders
book profit
24 Introduction Which of the following is Ensure super- Channelize Provide credit Provide investment
to Banking NOT a function of the normal returns Savings facilities to avenues to
bank? to its small borrower investors
depositors
25 Introduction Regulations limiting risk The social costs The costs of The private The social costs
to Banking taking of financial to shareholders regulation exceed costs of a of a general bank
institutions are imposed of a general bank the benefits. bank failure failure exceed the
for which of the following failure are more exceed the private costs to
reasons? than the private social costs of the shareholders
cost of the bank general bank of the bank that
failure. panic. failed.

26 Introduction Which of the following is
to Banking associated with the
purpose of regulating
financial institutions?
To provide To serve certain To prevent To offset the moral
stability of the social objectives failure of any hazard incentives
money supply financial provided by deposit
institution insurance and other
guarantees.

27 Introduction Regulators' attempting to To promote To promote To promote To protect the

to Banking limit competition by competition in the limited quantities safety and soundness of the
restricted entry, exclusive financial services of financial soundness of deposit insurance
services, etc. was an markets. services at depository fund.
attempt to serve which of maximum prices. institutions.
the following purposes of
regulation?
28 Introduction Regulatory balance sheet Limit the size of Limit risk- limit to promote
to Banking restrictions are designed to depository taking and to excessive Universal Banking
institutions. encourage diversification
diversification.
29 Introduction A bank that is earning 7% Have a negative Have a positive Have a Will always have
to Banking on its earning assets and is spread. GAP position. positive positive net
paying 4% on its interest- spread. earnings.
earning liabilities is said to

30 Introduction Which of the following is Corporate Investment Public Retail banking

to Banking not a commonly used term banking banking banking
in the context of Banking?

31 Introduction The term ‘Spread’ refers to The amount of The difference in The difference Both The
to Banking profit a bank the purchase and between the difference in the
makes after sale prices of any lending rates purchase and sale
clearing all its financial and deposit prices of any
costs including instrument rates of a financial
payment of quoted by any bank. instrument
interest to financial quoted by any
deposit holders. “intermediary” financial
such as a bank, a “intermediary”
broker, etc. such as a bank, a
broker, etc. and
The difference
between the
lending rates and
deposit rates of a
bank.
32 Introduction Why do we need banks? Banks are in the Deposits are Banks are in All of above of
to Banking best position to participants in the best small investors
lend out money primary and position to are protected,
at competitive secondary lend out hence it is a low
rates to markets money at risk investment
businesses and competitive avenue
individuals rates to
businesses
and individuals
and Deposits
are
participants in
primary and
secondary
markets

33 Introduction CRR stands for Cash Cash Reserve Cash Cash Requirement
to Banking Requirement Requirement Reserve Reserve
Ratio Ratio
34 Introduction The central bank in the US Federal Reserve Federal Reserve Bank Central Bank of
to Banking is called Reserve Board of United United States
States
35 Introduction Investment Banking Underwriting and Leasing Mergers and Valuation of firms
to Banking division of a bank offers all distribution of services acquisitions
of the following except equity issues
36 Introduction Which division provides Corporate Investment Retail banking Private banking
to Banking services to High Net Worth banking banking
individuals?
37 Introduction Which of the following Banks may loan When the When the All of the listed
to Banking statements is true out all the money central bank central bank options
they receive reduces CRR, issues
through deposits amount of securities in
money in the market,
circulation in amount of
the economy liquidity in the
goes up economy goes
up
38 Introduction Which of the following US Bank of America J.P. Morgan Citigroup, ABN AMRO
to Banking banks is the biggest based Chase & Co Inc
on the asset size as on July
2003
39 Introduction If a bank gets a deposit of create a reserve loan of $244 create loan of $171
to Banking $100, assuming a reserve of $10 reserve of $19
requirement (CRR) of 10%,
and that it circulates
through 2 more banks,
leading to the following
money multiplier effect

40 Introduction Today, the most important bank capital discount rate open market
to Banking monetary policy tool is examination and requirements policy operation
supervise
1 Retail Bankng Which of the following is Loan for Hire Purchase Bill Lease
not covered under retail Consumer Discounting
operations of a Bank? durables
2 Retail Bankng Which of the following is The financer is Loan amount is They are No security
not correct for a personal not interested in linked to short term required
loan? the intention of borrowers’ loans
the loan repayment
capacity
3 Retail Bankng Thumb rules for calculation (b) and (c) (a) and (d) (a) and (c) (b) and (d)
of Maximum loan amount
in case of auto loan are? a)
Not greater than 3 times
the yearly income of the
borrower
b) Not greater than 2 times
the yearly income of the
borrower
c) The EMI should be less
than 70 pct of the gross
monthly income
d) The EMI should be less
than 60 pct of the gross
monthly income

4 Retail Bankng Interest rate charged on Greater than the Always equal to Lesser than all of the listed
asset based loans is personal loans the personal the personal options
loans loans

5 Retail Bankng Which is true for a closed There is no end Overdraft is notInterest is The borrower gets
ended loan? to such loans allowed in such calculated on a credit card along
loans daily with the loan
outstanding
balance
6 Retail Bankng If the Limit = $1200, $1,500 $1,200 $1,600 $900
margin = 20% and Asset
Value = $2000 then
Drawing Power for an
Open ended loan is equal
to
7 Retail Bankng If the Limit = $1200, $1,500 $1,200 $960 $900
margin = 20% and Asset
Value = $1200 then
Drawing Power for an
Open ended loan is equal
to?
8 Retail Bankng Which of the following is The financier Depreciation is Callable Tax deduction can
true? owns the asset in claimed by the bonds be claimed for the
case of “Lease” financier both in full value of the
but not in case of Lease and Hire payment in lease
“Hire Purchase” Purchase but only to the
extent of interest
paid in Hire
Purchase
9 Retail Bankng Which of the following is Customers who Customers who Customers all of the listed
the most profitable for always pay in never pay who default options
Credit Card Company? time but finally
pay
10 Retail Bankng Which of the following is Post dated Salary Direct Direct debits
not a repayment method? checks deductions receipts

11 Retail Bankng Which of the following is Slice payment Step up Step down Bullet payment
not a kind of repayment?
12 Retail Bankng Interest rate spread is Current rate – Current rate – Base rate – Cap – Current rate
equal to? Base rate Floor Floor
13 Retail Bankng Collateral is? A form of loan Asset put up as Obligations to A bad loan
security be fulfilled by
the borrower

14 Retail Bankng While comparing Internal rate of Annual Net present Rate of Interest
mortgages, one should return Percentage Value applicable for the
use? Return loan
15 Retail Bankng While taking a Mortgage, Discounted Capped rate Standard Standard variable
one needs a large sum to interest rate variable rate rate with cash
furnish the home, then back
which interest rate deal
should be chosen?
16 Retail Bankng In case of discounted One receives a Interest rate is The The payments go
interest rate deal for a substantial cash guaranteed to be payments up and down as the
mortgage the following is sum when one set amount below are set at mortgage rate
true? takes the loan. the base rate less than changes but are
that lender’s guaranteed not to
going rate go above a set level
for a fixed
period of
time.

17 Retail Bankng Capped rate of interest in The rate of The rate of The collar of The spread of the
case of Mortgage implies interest can’t interest can’t the interest interest rate can’t
move above a move below a set rate can’t move above a set
set level level move above a level
set level
18 Retail Bankng Which is not true in case of Monthly If all the monthly Monthly Monthly payments
Repayment Mortgage? payments goes payments are payments would decrease in
partly towards made, the loan would increase interest rates fall
the interest and will be repaid by if interest
partly towards the end of the rates rise
the principal term
19 Retail Bankng Endowment mortgage An interest An interest only Another name An interest only
refers to the following? only mortgage, mortgage that of interest mortgage combined
along with a comes with life only mortgage with tax saving
endowment insurance policy investment policies
policy to
mature at the
same time as
the term of the
loan

20 Retail Bankng Annual Percentage Rate for The interest rate When and how Other charges When and how
a loan takes into account charged often the interest such as often these other
the following? must be paid arrangement charges must be
fee paid

21 Retail Bankng Freddie Mac, Ginnie Maes & Marketing Lenders to the Regulatory Primarily asset
Fannie Mae are? institutions selling banks for home bodies management
home loans loan bought by governing companies
retail home loan
customers market in US

22 Retail Bankng Which is not true for an They approve a They collect the They are They are
Acquiring bank merchant for merchant's online members of members of
accepting creditpayments Visa and Dinner’s club
cards Master Card
Associations
23 Retail Bankng Which of the following is They provide They process the They keep They work on
not true Independent sales merchant funds of reports of all behalf of Acquiring
organization? accounts merchants the activity of banks
merchant
accounts
24 Retail Bankng Which of the following is Independent Merchant Payment Associations
not involved in a credit sales organization gateway
card transaction?
25 Retail Bankng After a credit card Payment Merchant’s Issuing Acquiring bank’s
transaction is initiated by a Processor payment bank’s payment gateway
customer in a shop, the gateway payment
transaction’s information is gateway
sent to?
26 Retail Bankng Who checks for the credit Payment Acquiring banks Payment Issuing bank
limit of the card before processor gateway
approving the transaction?

27 Retail Bankng When the merchant clicks Payment Merchant’s Issuing Acquiring bank’s
the Bill Orders button in Processor payment bank’s payment gateway
the store to "capture" the gateway payment
funds, the store sends the gateway
capture information to?

28 Retail Bankng Which information is not Credit History Report inquiries Personal Public Records
provided by a Credit Identifying
Bureau? Information
29 Retail Bankng Which of the following data Bank account Race & Religion Health Income & Driving
appear on a credit report? balances records

30 Retail Bankng Which of the following is Its based on Its a number Its used by Its a three digit
not true for the credit one’s calculated based lenders for a number varying
score? consolidated on one’s credit simpler between 300 – 900
financial history "lend/don't
information from lend" answer
the Credit Report

31 Retail Bankng Which one of the following Bank account Personal Assets One’s Types of existing
contributes to one’s credit balance qualification credit
report?
32 Retail Bankng Which of the following Expenses Annual Utility Bills Late payment
does not contributes to the incurred Percentage rate paid through charges
cost of using credit card? through credit credit card
cards
33 Retail Bankng Which is not a banking Checking Money Market Demat Time Deposits
account? Accounts Deposit Accounts Account

34 Retail Bankng One should have the Quick, A high rate of Guaranteed Low fee
checking account if one is convenient and, interest rate of interest
looking for? frequent-access
to the money

35 Retail Bankng One should have the MMDA Quick, A high rate of Guaranteed Low fee
if one is looking for? convenient and, interest rate of interest
frequent-access
to the money
36 Retail Bankng One should have the Time Quick, A high rate of Guaranteed Low fee
Deposits if one is looking convenient and, interest rate of
for? frequent-access interest
to the money
37 Retail Bankng One should have the Basic Quick, A high rate of Guaranteed Low fee
Account if one is looking convenient and, interest rate of interest
for? frequent-access
to the money
38 Retail Bankng One should have the Quick, A high rate of Guaranteed Low fee
Savings account if one is convenient and, interest rate of interest
looking for? frequent-access
to the money
39 Retail Bankng Which one is true for a Monthly Monthly The interest Such loans come at
capitalized loan? payments go payments goes due and not a very low
towards the partly towards paid is added processing fee
interest, while a the interest and to the
lump sum partly towards principal
payment at the the principal balance of
end of the term the loan.
goes towards the interest
principal becomes
part of the
principle of
the loans
40 Retail Bankng The term “Capture” in Capture of credit Capture of the Conversion Recording of a
context of credit cards card number by person using a of the person’s credit
refers to? the issuing bank card not owned authorizatio details in the credit
during a by him n amount report.
transaction for into a
authentication billable
transaction
record.
41 Retail Bankng Considering the amount of Single customer Increasing their Improving all of the listed
competition in the retail interface across cross-sell internal options
market, which of the multiple opportunities to processing
following are the upcoming departments customers efficiency and
challenge/s for the banks quality
42 Retail Bankng A bank has provided the Option (a) is Option (b) is the Option (c) all of the listed
following options to the the cheapest cheapest for the and (d) are options
borrower for $50,000 of for the borrower equally costly
lending for duration of 5 borrower to the
years. borrower
a. Pay $80,525.5 at the end
of 5 years
b. Pay $25,500 now and
$50,000 at the end of 5
years
c. Pay $16,105.1 end of
every year for 5 years
d. Pay $16,105.1 beginning
of every year for 5 years
Considering 10% as IRR
for the borrower

1 Electronic Electronic banking doesn’t Pay-byPhone ATM System Point of Sale all of the listed
Banking covers the following system system options
service/s
2 Electronic EFT act covers Prepaid ‘Gift’ cards Mass transit Both Prepaid
Banking Telephone cards passes Telephone cards
& ‘Gift’ cards
3 Electronic What is Checking Account? An account at a An account, A type of A form of
Banking bank where folder, or file bank account documentation for
funds have where checks are that allows transactions
been deposited stored withdrawals between you and
against which by phone or the bank
checks may be Internet
written

4 Electronic Net Settlement stands for Settlement of Posting net Real time all of the listed
Banking funds over the debit or net settlement options
Internet credit
5 Electronic Direct debits Authorizes Authorizes all Pre- Pre-authorization to
Banking specific deposits deposits directly Authorized withdraw from
to your account to your account direct others account
on regular basis withdrawal
6 Electronic EFTA stands for Electronic Funds Electronic Electronic Electronic Fee
Banking Trading Act Financial Transfer Funds Transfer Act
Act Transfer Act
7 Electronic ______________ Pay-by-Phone EFT Direct Debit Direct Credit
Banking preauthorizes banks to pay System
recurring bills like
insurance premium, utility
bills automatically
8 Electronic ATM stands for Automatic Automated Automatic Automated Teller
Banking Transaction Teller Machine; Transaction Machine; Direct
Machine; Almost Remote Machine; Fund Deposit
anytime banking location transfer
transactions between
accounts
9 Electronic Debit Card is a ‘stored provide credit transfer Only provide credit
Banking value’ card line money at line and transfer
Point of Sale money at Point of
Sale
10 Electronic EFT systems are a major Electronic Encrypt Fund Electronic Electronic Fund
Banking form of electronic payment Financial Transfer Fund Transfer
systems in banking and Transactions Transactions
retailing industries. EFT is
an acronym for

11 Electronic EFT services require Summary of Summary of List of Circumstances

Banking institution to tell the Customer’s institution's institute under which
following to the customers assets for liability if it holidays institute will not
unauthorized fails stop disclose information
transfers certain to third party.
transactions.
12 Electronic A transaction error has Customer has 30 Financial Financial Financial Institution
Banking occurred in customer’s days to notify the Institution has 15 Institution has to correct the
account. Which of the error from the days to has to error within one
following holds as per EFT date a statement investigate the communicat working day after
act? is received errors e within 7 detecting the same.
working
days the
result after
completion
of the
investigation

13 Electronic Customer can lose much Credit Card; Credit Card; ATM Credit Card; Debit Card; ATM
Banking more on Debit Card Card Stored Card Card
________________ loss
than on _____________
loss
14 Electronic In the case of Debit or ATM Customer liability Customer Customer Notification period
Banking card is limited if the liability varies liability is can’t be extended
loss is reported depending on limited if the even in the case of
before it is used the delay in the unauthorized extenuating
without his/her reporting of the use occurs circumstances.
permission. loss, if before
unauthorized reporting the
use occur loss.
before
reporting
15 Electronic Stop-Payment privilege right to customer customer can customer customers don’t
Banking provides to stop payment stop payment if can stop have privileges for
on any EFT the purchase is payment any transaction
transaction defective or not only for
delivered preauthorize
d regular
payments
16 Electronic Terminal Receipts issued for entitled to provides must show the
Banking regularly customer only statement of amount and date
occurring when the all the of the transfer,
electronic electronic transactions and its type, such
payments that transaction is terminated for as "from savings
are pre- terminated a given period to checking”
authorized
17 Electronic The Federal Reserve offers make a profit promote foster promote efficiency
Banking financial services to banks competition innovation in the payments
and the U.S. government system
for all of the following
reasons except to

18 Electronic Which of the following each year the funds transfers financial all of the listed
Banking statements about the Fed's Fed conducts are originated institutions options
involvement in electronic billions of and received can move
banking is true? transactions through a their balances
valued in the sophisticated at the Fed or
trillions of dollars telecommunicatio send funds to
ns network called another
FedWire institution
through
electronic
banking
19 Electronic The Federal Reserve 1/5 2/3 1/3 4/5
Banking System processes about
___ of all checks written in
the country
20 Electronic Just after you write a your checking the store the store your checking
Banking check at a store to make a account at a manager sends manager account at a
purchase financial the check to a deposits the financial institution
institution is Federal Reserve check in the is increased by the
instantly reduced Bank to be store’s value of the check
by the value of processed account at a after it has been
the check local processed by a
financial Federal Reserve
institution Bank or a
correspondent bank

21 Electronic A one-time written order check Automatic currency debit

Banking that instructs a financial Clearinghouse
institution to transfer (ACH)
funds from your account to transaction.
the account of an
individual or business is
called
22 Electronic CHIPS stand for Clearing House Clearing House Clearing Head Clearing Head of
Banking for International for Interbank of Interbank international
Payments Payment Payment Payment Settlement
Settlement System Settlement

23 Electronic FEDWIRE involves the Inter District Federal Reserve Treasury & Depository
Banking following intermediaries Settlement Fund bank Government institutions
for the fund transfer agencies
EXCEPT
24 Electronic CHIPS uses ACH; Federal EFT; Federal FEDWIRE; Inter District
Banking ______________ to & Reserve Bank Reserve Bank New York Settlement Fund;
from special settlement Fed Federal Reserve
account on the booking of Bank
the _____________
25 Electronic Following are all Private- Check Clearing Inter District Automated CHIPS
Banking sector payment systems System Settlement Clearing
EXCEPT Fund Houses
26 Electronic Two Financial Institutions At the of the At the end of the At the end All the transactions
Banking conducted the following day, $17m will be day, $25m will be of the day, would settle
transactions over CHIPS on transferred to B transferred to A $8m will be individually real-
30th Jan 2004. transferred time
A transferred $5m to B at to A
9:45 AM
B transferred $10m to A at
11:30 AM
A transferred $12m to B at
2PM
B transferred % 15m to A
at 3:30PM
Which of the following
holds true?

27 Electronic EFT offers the following Electronic check Pay by Phone Direct Debit Direct Deposit
Banking services EXCEPT Conversion

28 Electronic What is the electronic Check Funds transfer Treasury Automated

Banking payment delivery system payments Clearinghouse
most often used to process (ACH)
low-dollar repetitive retail
payments?
29 Electronic Which of the following Credit Card Money Order Checks Debit card
Banking results in a direct,
immediate, electronic
payment from the
cardholder's checking
account to a merchant?
30 Electronic If you use your debit card Typically In whole-dollar The next The amount is not
Banking to make a purchase, the within one day amounts business day transferred, but
amount will be transferred added to your credit
out of your account card bill

31 Electronic The Federal Reserve regulating banks creating a stable managing monetary policy
Banking System is responsible for and financial economic regional and
institutions environment national check
clearing

32 Electronic Which of the following is ATM Debit card Credit card POS system
Banking probably the most familiar
form of electronic banking?

33 Electronic Which of the following ATM deposit Deposit at Direct deposit Electronic fund
Banking transactions would cost Teller window transfer
the most?
34 Electronic FEDWIRE transfer involves are free of cost handle high are settled on net
Banking relatively large volume of settlement basis
no. of book small
keeping entries transactions
35 Electronic Which of the following Payment by Payment via Debit card for ATM withdrawal
Banking transactions costs the personal check ACH point of sale
least? purchase
36 Electronic FEDWIRE differs from FEDWIRE is FEDWIRE is a CHIPS FEDWIRE offers
Banking CHIPS in that gross private sector provide free services
settlement fund transfer international
system system fund
settlement
37 Electronic Which of the following
Banking transfers are covered by
the Electronic Funds
Transfer Act?
Bob’s purchase Joe’s transfer, Larry’s check Tim’s point of sale
of an electronic made in person, written at the purchase from his
toilet seat with a from his Three Strikes business account to
wire transfer checking to his and Your Out buy that new
savings Bowling Alley hardware store he
account, to post has always wanted
bail from prison

38 Electronic Inter District Settlement Fund Transfer Electronic Bill Settlement Booking System
Banking Fund is a System Presentment Account
System
39 Electronic John loses his ATM card, $500 40 hours of Half of the $50
Banking which has his PIN written community $9,000
on the back of the card. He service teaching
doesn’t discover this until classes on why to
two weeks later and not write your
immediately notifies the PIN on the back
bank. During the two of your card
weeks that his card was
lost, $9,000 worth of
withdrawals have been
made from his account.
Tim is liable for which of
the following
40 Electronic ‘Stored value’ cards are like are all covered stores are used for
Banking prepaid mobile by EFT act encrypted accessing personal
cards, mass code for bank account
transit passes accessibility
etc.,
1 Private What does the ‘Federal “personalized “personalized “service “personalized
Banking Reserve Supervisory services such services such as provided by services provided by
Letter’ define private as money cheque collection private banks private and public
banking as? management, and other retail to all clients” banks to all clients”
financial advice, banking services
and investment for high net worth
services for clients”
high net worth
clients”

2 Private Which of the following is Investment Issuer Capital Trade Access to

Banking NOT a service provided by Management and Formation Finance investment banking
a Private Banking firm? Advice Management and institutional
and Advice services

3 Private Private Banking clients can Volume of Traditional Net Worth Retail Banking
Banking be based on business banking business business
4 Private Which of the following is Tax benefit Huge startup fee Annual Foreign Check
Banking true for the Personal Administration Writing Services
Investment Companies Fee
(PICs) setup
5 Private Typical Fee charged for Less than 1% Between 1 to Between 6 to More than 10%
Banking private banking services 4% 10%
6 Private Client relationship Liquidity Capital Base Tax planning Arbitrage trading
Banking manager doesn’t have to requirement
understand which of the
following need/s for
investment management
and advice
7 Private High-Net worth individuals Household Networth Market all of the listed
Banking generally have income atleast greater than capitalization options
$50,000 $500,000 more than
$200,000
8 Private The process flow in a Servicing Client Client Middle Office =>
Banking Private banking firm goes Specialist => Representative Representativ Back Office =>
as Client => Servicing e => Servicing Specialist
Representative Specialist => Servicing => Client
=> Middle Office Middle Office Specialist => Representative
=> Back Office => Back Office Back Office
=> Middle
Office
9 Private In the case of ‘self directed Bank’s Bank’s portfolio Bank’s Bank’s portfolio
Banking investment management’ portfolio managers make portfolio managers make
in Private banking managers make ‘self-directed’ managers investment
investment investment make decisions behalf of
decisions only decisions investment all the customer
after customer decisions on
approval behalf of the
customer
10 Private Which of the following Services Middle Office; Front Office; Back Office: Risk
Banking roles and responsibilities Provider; Tax Statements & Client Management
are correctly stated? Services Advices Reporting
11 Private “High net worth” Household Net Worth Value of Both Net Worth and
Banking individuals are normally income shares held by Value of shares held
defined based on the the household by the household +
+ household household income
income

12 Private Which of the following Account Domestic Global Cash Sales &
Banking is/are not a responsibility Aggregation Settlement Processing Brokerage
of the Middle office?

13 Private Private Banking doesn’t Tax & estate Insurance Foreign Automated credit
Banking deal with the following planning exchange entitlement
services EXCEPT
14 Private A Private Banking division Efficient Portfolio Asset Allocation High all of the listed
Banking would entail the need for Analysis techniques Technology options
which of the following Investment

15 Private Private clients trade in larger; larger small; larger small; small larger; small
Banking ____________ volumes
and ___________ fees and
commissions
16 Private “Sweep” facility provides automatic automatic automatic Bothautomatic
Banking transfer of funds transfer of funds transfer of transfer of funds
from one account from one account funds from from one account to
to another to another one account, another account,
account, whose account, whose whose whose balances
balances have balances have balances have have fallen below
fallen below the exceeded pre- exceeded pre- the pre-determined
pre-determined determined limit determined limit andautomatic
limit limit, to transfer of funds
another from one account,
account whose balances
have exceeded pre-
determined limit, to
another account

17 Private Managing client’s liquidity Short term credit Flexible cash Optimizing all of the listed
Banking assumes paramount facilities management returns on options
importance in private short term
banking, it involves cash
18 Private The two most Liquidity Specialist advice; Wealth Extensive research;
Banking distinguishing features of management; risk management management; specialist advice
Private banking are risk management financial
_____________ and advice
_____________.
19 Private Private Banking providing Eliminate risk Reduce risk and Avoids risk Transfers risk and
Banking Risk management services and maximize optimize returns and optimize maximize returns
thereby strives to returns returns

20 Private Private Banking provides It is less Client portfolios Client Both It is less
Banking plethora of specialized dependent on are reflected on portfolios are dependent on
services to it clients. Which accepting the liability side reflected on accepting deposits
of the following statements deposits than of the bank’s the asset side than retail banking
holds true? retail banking. balance sheet of the bank’s and Client portfolios
balance sheet are reflected on the
asset side of the
bank’s balance
sheet

21 Private Which of the following Credit Suisse Fidelity Merrill Lynch all of the listed
Banking companies offer Private options
banking services?
22 Private _____________ provides Credit Suisse; Fidelity; UBS Mellon and All of above
Banking Private banking in the Salomon Smith Bank One;
Trust or Investment Barney Salomon
management division Smith Barney
whereas_______________
provides Private Client
Services (PCS)
23 Private The below stated Services Provider Client Back office Front Office
Banking responsibilities are carried Representative
out by which of the
following players. Cash
Services/Client
Reporting/Statements &
Advices/Domestic & Global
Settlements
24 Private Private banking offers Customized Long-term Advice-led Credit solutions to
Banking “structured lending” that asset-based liquidity to clients credit High Net worth
provides credit solutions solutions individuals
25 Private Private Banking customers Risk taking Investible assets Networth Both Investible
Banking can be categorized based capability assets and Networth
on the following
parameters
26 Private In the case of Bank’s portfolio Bank’s portfolio Bank’s Bank’s portfolio
Banking ‘discretionary investment managers make managers make portfolio managers make
management’ in Private investment ‘self-directed’ managers investment
banking decisions only investment make decisions behalf of
after customer decisions investment all the customer
approval decisions on
behalf of the
customer
27 Private Jim Morrison, 52 years old, Issuer Capital Investment Structured Hedge Funds
Banking founder, chairman and formation Management Lending
largest shareholder of a Services
small Australian listed
company, seeking to
borrow A$8 million secured
against his 45 percent
shareholding (valued at
A$30 million) to diversify
his asset base and invest in
a separate business
venture. He has existing
relationship with the bank.
Given the fact that loan
represented quasi-equity
as it would be almost
impossible to offload the
shares into the market,
what kind of solution can
be provided by the bank to
the client?

28 Private Increasing numbers of Tax haven Flexible Highly Numerous capable

Banking hedge funds are locating to legislation sophisticated professionals
‘Cayman Islands’ because venue
al EXCEPT
29 Private Hedge funds have Highly Private Highly Consistent
Banking attracted investors' speculative investment leveraged performance
attention due to some partnership
spectacular & successes &
failures, but in fact they
aim to provide a low risk
investment solution. Which
of the following does hold
true for hedge funds?

30 Private Financial planning involves Cash flow Retirement Risk Tax planning
Banking all EXCEPT management planning management
1 Corporate Which of the following is Overdraft on Personal lines of Study loan Credit cards
Lending not a secured loan? checking. credit.
2 Corporate Which of the following Requires Rates are If a person Having a good
Lending statements is true? "collateral" or generally lesser with a less credit record of
something, which for unsecured than perfect lender is a critical
the lender can loans. credit history factor because
easily sell and gets a loan it higher interest rate
use to pay off the will be at a can be charged to
loan if the lower interest that individual.
borrower rate.
defaults.
3 Corporate Which of the following The amount of The interest rate Loans can be Loan is considered
Lending statements is false about the loan that is on a loan disbursed in as a liability for the
loan? disbursed is an depends on the multiple customer.
asset for the disbursed amount currencies
bank and Schedule. with different
schedules.
4 Corporate Which of the following Enhancing the Evaluating the Mechanism to Increasing the
Lending statement is faulty about duration of the feasibility of improve the credit limit for the
‘credit enhancement’? credit given to extending the original rating corporate
the corporate credit facility to of the credit
the borrower. for the
borrower.
5 Corporate Which of the following is Working capital 25% of the Overdraft Part of the current
Lending true about Working requirements Working capital limit is liabilities need to be
Capital? depends on the gap has to be extended to funded through the
current assets fulfilled by long corporate to current assets.
and current term funding and manage their
liabilities of the 75% by short day to day
corporate. term loans and cash flow
overdrafts. needs
6 Corporate Supplier or Dealer loans Assurance from Immediate loans Long term all of the listed
Lending provide the Corporate in to the suppliers loans to the options
case of default by and dealers of suppliers and
suppliers and the corporate at dealers by the
dealers higher rate of banks
interest.
7 Corporate Which of the following is Assignment Participation. Securities Sub-Participation
Lending NOT a Settlement Method Repository.
for Bank Loans?
8 Corporate Once the Syndicate has Primary market Index market Secondary Participation
Lending closed, all other trades, market market
Participations, Sub-
participations and
Assignments are
considered trades in what
market?
9 Corporate Consider a loan of USD 600 USD 400 USD 1400 USD 1350 USD
Lending 10,000 which is agreed to
be lent for a period of six
months on Jan 1, 2004 at
an interest rate of LIBOR +
2%. Here, the base rate is
LIBOR and the spread is
2%. Further, consider that
the LIBOR was 7% p.a. on
Jan 1, 4% p.a. on May 1.
What would be the interest
paid at the end of six
months?

10 Corporate Consider a one-year loan of 11,000 USD 600 USD 1,000 USD 5,500 USD
Lending USD 10,000 given by bank
to a borrower on Jan 1,
2004. The loan carries an
interest rate of 10% p.a. As
per the terms and conditions
of the loan, the borrower has to
pay the interest amount
together with principal amount
on Dec 31, 2004. The Bank
follows straight-line accrual
with monthly frequency. What
would be bank’s income as on
June 31, 2004?
11 Corporate Which of the following type Demand loan True discounted Discounted Capitalized Loan
Lending of loan requires the Loan Loan
amount of interest that
would be earned on the
amount of interest paid
upfront by the borrower?
12 Corporate Interest rates are The prices paid The prices paid The prices The prices paid for
Lending for the use of a for the use of a paid for the the use of a
real liability. real asset. use of a financial asset.
financial
liability.
13 Corporate A loan that can be paid in Amortized Loan Capitalized Loan Annuities Discounted loan
Lending periodic equated
installments with
capitalized interest is
called
14 Corporate Loan can take many of the Overdrafts Bills and Corporate Advances
Lending following basic forms promissory notes bonds
EXCEPT
15 Corporate If a fund purchases a loan Allocation Syndicate Secondary Assignment
Lending in the Primary, they also
use another word for that.
Which term is used to
indicate the initial group of
lenders (Primary Lenders)?

16 Corporate In the case of floating rate Base rate can be Spread is applied The spread Spread can be
Lending loan, which of the reset at mutually over and above varies over negative.
following is false? agreed time the base rate. the life of the
period or it can loan.
be periodic.
17 Corporate What does ‘loan To create the Loan All of above To create buffer
Lending provisioning’ stand for? provisions for provisioning is against the loss of
doing business in done to classify the non-performing
different lines of and grade the loans.
businesses. loans.
18 Corporate Credit risk in the swap Extensive. Equal to the total Limited to the BothExtensive and
Lending market is value of the difference Limited to the
payments that between the difference between
the floating rate values of the the values of the
payer was fixed rate and fixed rate and
obligated to make floating rate floating rate
obligations. obligations.

19 Corporate When a firm needs short- Compensating Revolving credit Transaction Line of credit
Lending term funds for a specific balance agreement loan.
purpose, the bank loan will arrangement
likely be a
20 Corporate Which of the following are Credit Credit Credit All of above
Lending the benefits of using credit derivatives can derivatives can derivatives
derivatives? be used either to be used to create can be used
take on more risk positions that can both to
or to avoid otherwise not diversify their
(hedge) it. easily be credit risk
established in the exposures and
cash market. free up capital
from
regulatory
constraints.
21 Corporate A formal, legal Letter of credit Revolving credit Line of credit Trade credit
Lending commitment to extend agreement
credit up to some
maximum amount over a
stated period of time
22 Corporate Utility companies and Revolving Single payment Installment Retail
Lending medical service
organizations commonly
offer (fill in the blank)
credit
23 Corporate A common advantage of less impulse lower cost for ability to lower chance of
Lending using credit is buying items purchased obtain needed overspending
items now

24 Corporate A Company has negotiated 11.50% 15% 26.50% 13.25%

Lending a $500,000 revolving credit
agreement with a National
Bank. The agreement calls
for an interest rate of 10%
on fund used and a
commitment fee of 1% on
the unused amount of the
credit line. The effective
annual interest cost if the
firm borrows $200,000 for
one year is closest to

25 Corporate Which of the following is Credit linked Total return Credit default Currency swap.
Lending not a credit derivative? Notes. swaps. swap.
26 Corporate Secondary loan trading Approving; new Buying/Selling; Selling; new Buying/Selling;
Lending refers to ______________ debts only bad debts debts existing debts
of _____________ on the
secondary market.
27 Corporate Asset securitization refers financing vehicle financing vehicle financing financing vehicle
Lending to consisting of consisting of vehicle consisting of pooling
pooling of pooling of consisting of of corporate bonds
existing debts as government the pooling and equities as
collateralized securities as financial collateralized asset
asset for the collateralized assets, and for the issuance of
issuance of the asset for the the issuance debt
debt issuance of debt of debt
collateralized
by these
assets
28 Corporate Credit derivatives can be Transfer; Diversify; reduce Eliminate; Manage; avoid
Lending used to ___________ the increase improve
risk and ___________ the
regulatory capital
requirements
29 Corporate Credit derivative is all BUT Financial Transfers risk Traded over Facilitate greater
Lending Instrument the counter efficiency
30 Corporate Which of the following is Equity Loans Secured Loans Equity Lines Personal Loans
Lending not a secured loan? with Savings of Credit
31 Corporate In the inflationary Option A Option B Option C Option D
Lending economy, which of the
following is the best option
for the bank while lending,
$10,000 to a corporate
borrow (Assume IRR at
10%)
A. Discounted loan @ 10%
interest rate
B. Bullet payment loan
@10% interest rate
C. True discounted loan
@10% rate of interest
D. Equated installed loan
@10% interest rate
1 Trade Finance The key feature of letter of Basis for Distributes risk Opportunity to Basis for devising
credit devising proper between buyer receive proper currency
currency hedging and seller payment in hedging strategy
strategy advance of the and Opportunity to
due date receive payment in
advance of the due
date
2 Trade Finance USExport and EURImport 3000 250 2500 300
agree to carry out the
transaction, goods worth
$1,000,000 under a
confirmed term Letter of
Credit with a maturity date of
60 days from the time of
shipment. The Acceptance
commission @ 1.5% pa equals
3 Trade Finance A company called Wrongful Country risk The Risk of default.
FixImport Co. awards demand against remainder of
USExport a contract that the Advance the payment
requires not only making a Payment might not be
large quantity of widgets, Guarantee. made on time
but also installing and
integrating them into an
existing manufacturing
process at FixImport's
plant. So, USExport asks
for 25% down payment to
finance the pre-shipment
production. FixImport
agrees provided that an
Advance Payment
Guarantee is issued on its
behalf. To what risk has
CanExport exposed itself
as a result of issuing the
Advance Payment
Guarantee?

4 Trade Finance Which if the following is Buyer can refuse Quality of the Buyer is Payments made
true in the case of sight to take the Good is expected to based on only bill of
draft? delivery guaranteed make the lading
payment after
specified
credit days
5 Trade Finance UKImport, a financially 1700 1900 190 170
sound G-7 company,
convinces to buy widgets
from USExport on open
account basis, with 60
days credit. The goods
were dispatched by
USExport on 15th Oct, value
being 10,000$. Therefore, the
payment was due on 14th of Dec.
However the payment was made
by UKImport on 21st Feb. The
delay in payment cost
USExporter$…………. because
of overdrawn account (consider
9% pa interest rate)

6 Trade Finance USExport and CanImport Requesting a Applying for Discounting Taking Advance
agree to carry out Sight Letter of Bank Loan the term letter from the Issuing
transaction under a Credit of credit Bank
confirmed letter of credit
with maturity date of 180
days from the time of
shipment. But after
shipping the goods,
USExport realizes that it
doesn’t have the cash flow
to wait 180 days to receive
the payment? Which of the
following options can USExport
use to collect the payment
before the maturity date?
7 Trade Finance The trade terms "15/2, net 2% discount is 15% discount is 2% discount 15% discount is
30" indicate that offered if offered if is offered if offered if payment
payment is made payment is made payment is is made between 2
within 15 days within 2 days made within and 30 days
30 days
8 Trade Finance The basic four parties Issuing Bank Seller Beneficiary’s Bank
involved in any transaction ReimbursementB
using LC (Letter of Credit) ank
are the following EXCEPT

9 Trade Finance The Advising bank is used Issuing bank; Beneficiary Importer; Issuing bank;
as a trusted bridge Confirming bank bank; Exporter Beneficiary bank
between the __________ Reimbursing bank
and _______________
when they do not have an
active relationship
10 Trade Finance Which of the following is Confirmed Letter Irrevocable Red Clause Standby Letter of
the safest type of letter of of Credit Letter of Credit Credit
credit from seller point of
view?
11 Trade Finance Credit cards Create financial Create financial Create money Create money for
liabilities for liabilities for the for those who those who issue
those who use issuer once they use them them
them. are used by the
holder
12 Trade Finance Which of the following Discount Purchase Acceptance Collection
operations can’t be done
on a LC (Letter of Credit)?
13 Trade Finance A Revocable LC (Letter of can be revoked can be revoked can be can’t be revoked
Credit) without the without the revoked with the consent of
consent of the consent of the without the the Advising bank
Exporter Exporter’s bank consent of the
Importer’s
bank

14 Trade Finance Standby LC (letter of Is used as Promises Promises Can remain valid
Credit) primary payment payment only if payment only for short duration
method. the buyer fails to if the seller only.
make an fails to meet
arranged pre-
payment determined
terms and
conditions
15 Trade Finance Back to Back LC (letter of buyer to open seller to use the buyer to use seller to receive
Credit) allows new LC against LC received from the LC one more LC
an already issued his buyer to open received from against an already
LC his own LC his seller to issues LC from his
open his own buyer
LC
16 Trade Finance ________________ Transferable LC; Confirmed LC; Green Clause; Confirmed LC;
evidences delivery of Confirmed LC Red Clause Back to Back Standby LC
goods and services LC
whereas
_______________ relates
to the apparent
performance / non-
performance of an
obligation of the applicant
17 Trade Finance What term is used to Evergreen Red Clause Irrevocable Revolving LC
describe an LC that Clause LC
remains valid for years
thereby eliminating the
cost of separate LCs for
each transaction with a
regular client?
18 Trade Finance Which of the following Shifts credit risk Deals with Are typically One of the
holds true for an LC (Letter from the products and not revocable relatively cheaper
of Credit) Importer to the with documents unless forms of payment
Importer's Bank specified guarantee.
(Issuing Bank). otherwise.
19 Trade Finance Draft can be called bill of be a written be a offer more
exchange order by one negotiable flexibility than LCs
party directing a instruments
second party to that facilitate
pay a third party international
payments
through
respected
intermediaries
20 Trade Finance Banker’s acceptance defers Sight drafts are Banker’s Banker’s Bank can raise
from sight draft in that negotiable acceptance acceptance funds by selling the
instruments demands reduces bank’s acceptance
immediate lending
payment. capacity
21 Trade Finance Counter-trade or barter is has access to finds that rates will can’t exchange for
most likely used when convertible are favorable compensate products or services
buyer currency the seller in a desirable to the
manner other seller
than transfer
or money or
products
22 Trade Finance Factoring is a discounting works with short works mostly works with medium
method with term receivables with capital and long term
recourse goods receivables
23 Trade Finance Fundamental difference transferring the removal of term of the difference in the
between factoring and credit risk to the contingent contract viz., risk profiles of the
forfeiting lies in third party liabilities from short, medium receivables
(Factor) balance sheet or long term

24 Trade Finance An Asian Importer wants Bill Discounting Factoring Forfaiting Letter of Credit
to purchase machinery that
he is unwilling or unable to
pay for in cash until that
machinery begins to
generate income. At the
same time, the exporter
wants immediate payment
in full in order to meet his
on-going business
commitments. Which of the
following solutions best
suit the situation?

25 Trade Finance Which of the following Documentary Open Account Letter of Counter trade
methods of payment is Collection Credit
most risky to the Seller?
26 Trade Finance Which of the following are Time consuming Costly Specific and Deals with
disadvantages of using LC Binding documents and not
(Letter of Credit)? with products
27 Trade Finance Which of the options best 1,2,3,4,5 4,1,3,2,5 3,4,2,5,1 4,5,2,3,1
describes the sequence of
following events?
1. Issuing bank arranges
for advising bank to make
payment
2. Freight forwarder sends
documents to the advising
bank
3. Issuing bank issues the
letter of credit (LC)
4. Advising bank advises
seller that an LC has been
opened
5. Advising bank sends
documents to the issuing
bank

28 Trade Finance BOL stands for Bill of Letter Banker’s Bank of Bill of Leasing
Overdraft Limit London
29 Trade Finance BAFT stands for Bankers Bankers Bankers Bankers
Acceptance for Association for Acceptance for Association for
Factoring Foreign Trade Foreign Forfaiting &
Transactions transactions Factoring
transaction
30 Trade Finance Bill of Lading is a contract a receipt issued a contract A receipt issued by
between Importer by importer to between a exporter to importer
and Exporter for exporter for carrier and a for goods delivered.
transportation of goods received shipper for the
goods for transportation transportation
of goods
31 Trade Finance Foreign Credit Insurance A collection of A forum for A forum to A forum to set up a
Underwriters and Brokers banking analysis, insure trade finance
is institutions, discussion and repayment of database with a
dedicated to action among export credit grant from the U.S.
promoting international against Department of
American financial nonpayment Commerce
exports, professionals on a due to political
international wide range of and/or
trade, and topics affecting commercial
finance and international causes
investment trade and
between U.S. finance, including
firms and their legislative/regulat
trading partners ory issues.
32 Trade Finance An Asian Buyer entered $1,200 $1,700 $710 $990
into deal with Swedish
Exporting company on
open account terms. The
Asian Buyer obtained 60
days credit, calculated
from the date of the
invoice. The value of the
order was USD 100, 000
and the goods were
dispatched and invoiced by
the Swedish Exporter on
the 15th July 2003. The
payment from Asia was
due on the 15th Sept 2003.
The payment eventually
arrived on the 15th Nov
2003, over two months
late leading to interest loss
for two months @ 9%.
However if confirmed
Letter of credit had been
required, what would have
been the exporter benefit?
Given that the
Confirmation Fee &
Acceptance Commission is
1.5% each, Negotiation
Fee of $150, and other
administration expenses of
about $60.
33 Trade Finance Which of the following Wire transfer; Foreign Checks; Commercial Standby letter of
combinations holds true? more costly than Useful when letter of credit; less costly
other payment information/docu credit; than documentary
alternatives mentation must Improves collection
accompany applicant’s
payment credit facilities

34 Trade Finance Standby letter of credit is Less; open More; More; Less; commercial
__________ secure than account documentary commercial letter of credit
documentary collection collection letter of credit
and cheaper than
__________________
35 Trade Finance Banker acceptances are Long term; Long term; non- Short term; Short term;
________________ credit financial firms financial firms non-financial financial firms
investment created by firms
___________ and used for
financing imports, exports
and domestic shipping

36 Trade Finance Discounting method for Factoring Leasing Forfaiting Bill discounting
long term account
receivables on non-
recourse basis is termed as

37 Trade Finance Due Diligence is performed Assess the risk Performed by the Performed on Executed after
to buyer the seller contract is signed
38 Trade Finance Which of the following Back to back Standby Letter Documentary Letter of Credit
methods eliminate country Letter of Credit of Credit Collection
risk and commercial risk
upon confirmation?

39 Trade Finance Documentary Letter of Cheaper than More rigid than No strict No credit facilities
credit provides all BUT letter of credit letter of credit compliance required
rules
40 Trade Finance Which of the following Time frame Exporter’s Fund Government Cost of financing
factors affect the choice of Guarantee
payment methods? Program
1 Treasury The treasury services Research market Managing Managing Risk Management
Services and department performs all of factors e.g., corporate liquidity and services
Cash the following functions Interest rate collections and cash position
Management except monitoring payments
2 Treasury A bank treasury manages Money market Treasury Debt Deposits with other
Services and investment of surplus cash instruments securities banks
Cash in which of the following
Management instruments EXCEPT

3 Treasury Assume that Bank A Forex risk Repricing risk Optionality Basis risk
Services and treasury borrows $2.0
Cash million for 2-years from
Management another bank at US
Treasury Bill rate and lends
it to a corporate borrower
in US for 2 years at LIBOR
+ 1.5%. Which of the
following risks is the bank
exposed to?
4 Treasury The following are interest Interest rate Forward rate Swaption Interest rate
Services and rate risk management swap agreement guarantee
Cash instruments EXCEPT?
Management
5 Treasury The following forex risk Cross currency Spot Forex Options Forward Forex
Services and management instruments swap contract contract
Cash used for foreign exchange
Management risk EXCEPT?
6 Treasury On October 15, ABC Bank A loses ABC Limited There is Loss/Gain depends
Services and Limited enters in to a 3- money in the deal loses money in insufficient on forward rate at
Cash month forward contract the deal information to the end of 3 months
Management with Bank A for delivering answer the
USD 20.0 million at INR question
46.50 /USD, while the spot
rate is INR 46.20/USD.
Subsequently, USD
depreciates to INR
47.05/USD by the end of 3
months. Assuming this as a
stand-alone deal, which of
the following is true

7 Treasury Bank A has significant Both banks see Bank A portfolio Bank B Both banks see a
Services and investments in 10-year an increase in value increases portfolio value decrease in portfolio
Cash treasury bonds at a coupon portfolio value while Bank B’s decreases value
Management rate of 4.9% and Bank B decrease while Bank A’s
has significant investments increase
in 10-year treasury bonds
at a coupon rate of 5.2%.
When market yield for 10-
year treasury bonds start
moving upwards from the
current level of 5.0%,

8 Treasury A corporate has on books a Retain the Convert to fixed Wait for the Wait for the
Services and 5-year floating rate loan at floating rate loan rate loan interest rates interest rates to rise
Cash LIBOR+2%. Suppose immediately to rise and and then go for a
Management interest rates are then go for a fresh floating rate
anticipated to rise in the fresh fixed loan to repay the
near term. The corporate rate loan to old loan
should ideally repay the old
loan
9 Treasury Assume hypothetically that Bank A stands to Bank A stands to Depends on Insufficient
Services and Bank A has hedged a long lose money gain money interest rates information
Cash position in 5 year of the
Management government bonds with a instruments
short position in 3 year
government notes. When
the yield curve steepens
10 Treasury A financial entity XYZ Ltd Repricing risk Basis risk Yield curve Political risk
Services and borrows 5-year money risk
Cash from Bank A at
Management LIBOR+2.25% and lends
the money to a corporate
borrower ABC Ltd at 5-year
T-bill rate + 2.00%. XYZ
Ltd is exposed to the
following risk
11 Treasury ABC Ltd in US has to make 3-month forward Purchase of a 3- Purchase a 3- Sell a 3-month put
Services and an import payment of Euro purchase of Euro month Euro month Call option on the Euro
Cash 2.3 million after 3 months. future option on the
Management Market feels that Euro will Euro
appreciate against the US
dollar in the near term
however the final rate
would depend on the
results of the US
presidential elections
which would be happening
after 1 month. Prima facie,
ABC Ltd should go for
12 Treasury Assume that Euro/USD is 1.2476/0.8200 0.6793/0.6802 1.2481/0.8195
Services and quoting at 1.2476/0.2481 0.6854/0.686
Cash and GBP/USD is at 0..
Management 1.8195/0.8200. What
would be the cross
currency rate for
Euro/GBP?
13 Treasury Assume that INR/USD is 55.2344/0.4565 36.3300/0.4016 56.5787/0.6138..
Services and quoting at 45.35/0.36 and 56.3849/0.52
Cash Euro/USD is at 31
Management 1.2476/0.2481. What
would be the cross
currency rate for
Euro/INR?
14 Treasury Which of the following is a Purchase a put Purchase a call Sell a call Both Purchase a
Services and valid forex risk option on a option on a option on a put option on a
Cash management strategy? currency which is currency which is currency currency which is
Management anticipated to anticipated to which is anticipated to
appreciate appreciate anticipated to appreciate and
appreciate Purchase a call
option on a currency
which is anticipated
to appreciate

15 Treasury The USD/INR spot rate is 45.37/45.32 45.37/45/46 45.37/45.40 45.39/45.38

Services and 45.35/0.36 and the 3-
Cash month forward premium
Management quote is 0.02/0.04. What is
the forward rate
applicable?
16 Treasury Which of the following is As interest rates As interest rates As interest Both As interest
Services and true theoretically? in India rise, in India rise, rates in India rates in India rise,
Cash forward premium forward premium fall, forward forward premium
Management for USD/INR rise for USD/INR fall premium for for USD/INR rise
USD/INR fall and As interest
rates in India fall,
forward premium
for USD/INR fall
17 Treasury Which of the following is Swaps are not Swaption is a Swaps can be Both Swaption is a
Services and correct? derivative combination of a used for combination of a
Cash instruments swap and an covering swap and an option
Management option interest rate and Swaps can be
risk and forex used for covering
risk interest rate risk
and forex risk

18 Treasury ICICI Bank has an account Nostro account Vostro account BothVostro account
Services and with Chase Manhattan for of ICICI Bank of ICICI Bank Correspondent of ICICI Bank and
Cash settling forex transactions. Vostro account Correspondent
Management Such an account is called Vostro account

19 Treasury Cash management Pooling Netting Swapping Both Pooling and

Services and techniques include Netting
Cash
Management
20 Treasury Cheque Lock box refers to The main The main Electronic BothThe main
Services and method of method of Finds transfer method of
Cash collections payments collections
Management management management management and
Electronic Finds
transfer
21 Treasury The following happens in Cash balances Cash balances of Cash balances All of the listed
Services and zero-balance structure are pooled to a surplus accounts are made zero options
Cash central account are use to top up in surplus
Management deficit accounts accounts

22 Treasury All of the following are EFT Cheque Debit to Lockbox

Services and paymentmodes except account
Cash through Debit
Management card
23 Treasury A traditional cash Pooling Electronic bill Cash funding Netting receipts
Services and management system takes collections to one presentment and for purchase and payments
Cash care of the following central account payment of capital globally
Management except equipment
24 Treasury ACH payments are usually Large value, Small value, Transfers to All of the listed
Services and used for single transfers periodic transfers distant parties options
Cash
Management
25 Treasury The following parties can National Banks Regional banks Corporates National Banks and
Services and act as clearing members Regional Banks
Cash
Management
26 Treasury In RTGS, the following is All members Settlements are Settlements BothAll members
Services and true need to maintain done at a are done on a need to maintain a
Cash a central account transaction level batch mode central account with
Management with the nodal the nodal agency
agency and Settlements are
done at a
transaction level
27 Treasury A traditional end-of-day Credit risk Interest rate risk Operational Systemic risk
Services and settlement process results risk
Cash in the following risks
Management except
28 Treasury Continuous Linked Domestic cash Domestic Electronic International forex
Services and Settlement is applicable to payment collections Funds Transfer transfers
Cash
Management
29 Treasury Continuous Linked Exchange risk Temporal risk Country risk All of these
Services and Settlement removes which
Cash of the following risks
Management primarily
30 Treasury Treasury & cash Liquidity risk Interest rate risk Forex risk Credit risk of
Services and Management takes care of corporate borrowers
Cash all of the following except
Management
1 Asset Asset Managers uses which Screens and Capital Alternatives All of the listed
Management of the following Filters Preservations investments options
principles/approaches
2 Asset The difference between Investment Type of returns Type of Extensive Research
Management private banking and asset management promised investors techniques
management lies in techniques

3 Asset The following major UBS Aberdeen Asset JP Morgan All of the listed
Management players provide asset Management Chase options
management services
4 Asset Active Approach to Asset Diversification to Successful Invest in a Both Diversification
Management Management refers to minimize risk and market timing single line of to minimize risk and
maximize return assets maximize return
andSuccessful
market timing
5 Asset The philosophy that ‘if Contrarians Market Timing Momentum Passive Value
Management prices go up, they tend to Investing Investing Investing
keep going up, is known as

6 Asset The philosophy that Contrarians Market Timing Momentum Passive value
Management ‘markets systematically Investing Investing Investing
undervalue certain
companies’, is known as
7 Asset For portfolio objectives of Common stocks Corporate bonds Preferred U.S. Treasury
Management growth of income and stock bonds
capital appreciation, which
of the following securities
will most likely have to be
in the portfolio?

8 Asset Which of the following is The choice of The selection of The selection The selection of
Management best associated with asset assets to use for asset classes of the asset classes for
allocation in portfolio consumption for within which to proportion of investment and the
management? the year. invest portfolio funds for each proportion of each
funds. asset class. asset class for
portfolio funds.

9 Asset A portfolio strategy resistance active passive resilient

Management associated with little management. management. management. management.
trading or change once
established is called
10 Asset Which of the following are Diversification Screens and Capital All of the listed
Management principles used by an asset Filters preservation options
manager?

11 Asset A buy-and-hold strategy is active. passive. indecisive. rebalanced.

Management representative of a(n) ___
portfolio management
style
12 Asset The components involved Bid-ask Spread Illiquidity Tax impact All of the listed
Management in the cost of portfolio options
execution are
13 Asset The dimensions to portfolio Cost of execution Trading speed Portfolio Risk All of the listed
Management execution could be Management options

14 Asset “Momentum investing” Follow Invest in high Following Create portfolio

Management would refer to fundamental dividend yield charts and similar to index
financial ratios to stocks indicators to
make decisions trade

15 Asset The performance of an currency country selection stock All of the listed
Management internationally diversified selection selection options
portfolio may be affected
by
16 Asset In the long run, Under all U. S. When U.S. When U.S. Under no
Management diversifying into market markets are markets are circumstances.
international markets is conditions. performing well. performing
most likely to benefit U.S. poorly.
investors
17 Asset When an investor adds it will raise her she needs to she will it will have no
Management international stocks to her risk relative to seek professional increase her significant impact
portfolio the risk she management expected on either the risk or
would face just because she return, but the return of her
holding U.S. doesn't have must also take portfolio.
stocks. access to on more risk.
international
stocks on her
own.

18 Asset “Contrarian Market Single direction Market timing Momentum

Management Investing”refers to correction due to market for greater Investing
investing on the basis of accelerated movement – Bull gains
movement or Bear run
19 Asset "Don't put all your eggs in risk averse diversification risk/return time value of
Management one basket" is a phrase tradeoff money
used to describe which of
the following?
20 Asset By alternative investments Hedge funds Futures Savings bank All of the listed
Management (other than debt and accounts options
equity), what are the
investment avenues for a
asset manager?

21 Asset Bid-Ask spread refers to Difference in Difference in Difference Both Difference in

Management price between opinion between between the price between
buying one asset the seller and buying and buying one asset
and another buyer on the selling price of and another similar
similar one price of an asset the same one and Difference
asset in opinion between
the seller and buyer
on the price of an
asset
22 Asset Which of the following I only II only Both I and II Neither I or II
Management statements concerning
correlation coefficients is
(are) correct?
I. A correlation coefficient
of -1 for the returns of two
securities would indicate
that both of them should
be carefully considered for
inclusion in a portfolio
since maximum risk
reduction could be
achieved by including both.
II. The returns of security
B would increase 8% if the
returns of security A
increased 8% if the
correlation coefficient for
the returns of the two
securities was +1.

23 Asset Beverly Drake has two These stocks are These stocks are These stocks These stocks will
Management stocks with a correlation well diversified well diversified are not well move independently
coefficient of zero. Which because as one because they will diversified of each other.
of the following is true? stock appreciates move in unison. because they
in value, the move in
other decreases. unison.

24 Asset Which of the following are Cash (or cash Stocks Bonds Real Estate
Management major categories of equivalents such (including Real
investments? as money market Estate Investment
funds) Trusts)
25 Asset A very effective way to Invest in an Buy all Stocks on Invest money Buy few securities
Management employ a passive strategy indexed portfolio the index in a bank which reflect the
is to index

26 Asset Risk reduction Investing in a Investing is as Buying an Investing in an

Management (Diversification) in a stock few less risky many stocks on option to index option
portfolio can be achieved stocks the index as hedge risk on
by possible all stocks in
portfolio
27 Asset A buy-and-hold strategy Reducing Reduce costs Wait till the All of the listed
Management would be with the aim of Transaction costs involved in investors options
constant objective is
researching of met
stocks

28 Asset The derivatives market Increase trading Reduce cost of Hedge BothIncrease
Management provide the asset manager speed execution portfolio risks trading speed and
a tool to Reduce cost of
execution
29 Asset Which of the following I only I and II only I and III only II and III only
Management statements concerning
diversification is (are)
correct?
I. Studies suggest a
portfolio of 100 or more
different common stocks is
needed to substantially
reduce unsystematic risk.
II. The key to effective
risk reduction through
diversification is combining
assets whose returns show
negative, low, or no
correlation over time.
III. Security analysis will
permit investors to
consistently earn returns
superior to the market.

30 Asset Bottom-Up approach would Building country- Validating the Selecting few BothBuilding
Management involve by-country forecasting scripts, country-by-country
forecasting models and forecasting forecasting models
models investing in their andValidating the
portfolio of high performance forecasting models
yield countries and investing and investing in
based on the portfolio of high
forecasts yield countries
1 Investment Underwriting in Process of Guarantees the Processed of All of the listed
Banking Investment banking stands understanding capital issue and getting the options
for the risks and making good for shortfall
return profile for any shortfall insured from
investment an insurance
portfolio company
2 Investment The process of ‘Hiring of Red Herring Road-show Investment Advisor Contest
Banking the Lead Managers’ in the Manager
case of IPO is referred to Contest
as
3 Investment The top tier investment Salomon Smith Sallie Mae Credit Suisse UBS
Banking banks are EXCEPT Barney First Boston
4 Investment The “Chinese Wall” in an The separation The separation The The separation of
Banking investment bank refers to of Legal and of Sales and separation of Senior Management
Marketing Trading Corporate and Brokers
Finance and
Research
5 Investment Syndicate in Investment Hub of the Determination of Merger and Facilitating placing
Banking banking refers to all Except investment allocation of Acquisition of securities in
banking wheel bonds advisory public offering

6 Investment Sales function in Retail Broker Institutional Private client All of the listed
Banking Investment banking takes Sales Person service options
the form of representative

7 Investment The ECNs (like Instinet) Involve Stock Don’t Involve Also called as Both Involve Stock
Banking offer after the market Exchange Brokers Stock Exchange “Fourth Exchange Brokers
trading facilities. They Brokers Market” and Also called as
“Fourth Market”

8 Investment “Specialist” in broking Specializes in Employee of Specializes in Only person

Banking parlance refers to one one or few stocks stock exchange all equities authorized to buy or
and offer buy as sell a particular
well as sell stock
quotes
9 Investment “Dealer” in broking Employee of Matches Acts as a Only person
Banking parlance refers to one stock exchange customer orders “Principal” and authorized to buy or
with other executes sell a particular
brokers trades for stock
his/her
personal
account
10 Investment The latest quote for IBM is The order will The stock will The stock will The order will get
Banking $ 90. A “Stop Order” to sell get released only get sold get sold released
IBM at $ 85 means when the Market immediately at immediately at immediately and the
Price hits $ 85 Current Market Current stock will get sold
Price – but not Market Price – between $ 85 - $ 90
less than $ 85 but not less
than $ 90
11 Investment The latest quote for IBM is The stock will The stock will The order will The order will get
Banking $ 90. A “Stop Limit Order” get sold get sold get released released only when
to sell IBM at $ 85 stop & $ immediately at immediately at immediately the Market Price hits
87 limit means Current Market Current Market and the stock $ 85 as a Market
Price – but not Price – but not will get sold Order
less than $ 85 less than $ 87 between $ 85
- $ 87

12 Investment The difference between “Fill or Kill” “All or None” can They are “Fill or Kill” can be
Banking “Fill orKill” and “All or allows multiple be a Good Till synonyms valid till end of day
None” order is trades Cancelled order

13 Investment The quote for CTSH in $0.50 ($0.50) $1.00 ($1.00)

Banking NASDAQ was $ 43. The
best buyer was at $ 42.5
and the best seller at $
43.5. How much is the bid-
ask spread
14 Investment “Figuration” in brokerage Monetary value Number of Settlement Payment
Banking industry means of a transaction shares details instrument details
bought/sold
15 Investment Movement of securities and Margin Cashiering Corporate Purchase and Sales
Banking funds within a brokerage Department department Actions team
firm is done by
16 Investment CTSH has announced a Jan 01, 2003 Dec 19, 2003 Dec 18, 2003 Dec 20, 2003
Banking stock split of 3 shares for 1
share. The record date for
the same is Dec 19, 2003.
The holder will be eligible
for the bonus only if he
holds the shares as of close
of business on
17 Investment A brokerage or analyst Detailed Opinion on why Target price or
Banking report will contain all of description of the the analyst Recommendati performance
the following except? company, and its believes the ons to buy, prediction for the
industry. company will sell, or hold stock in a year.
succeed or fail. the company.
18 Investment Dow Jones Industrial Both are Price Both are Value DJIA is Value DJIA is Price
Banking Average (DJIA) and Weighted Weighted Weighted & Weighted & Sensex
Bombay Stock Exchange Sensex is is Value Weighted
Index (Sensex) are Price Weighted

19 Investment A “Value Weighted Index” Equal proportion Each stock in Each stock in Each stock in
Banking has stocks in proportion to its proportion to proportion to its
intrinsic value its free float equity capital
20 Investment Consider an index with 14.14% 20% 33.33% 50%
Banking only 3 stocks
Stock A – 2 million shares
– Market Price $ 50
Stock B – 4 million shares
– Market Price $ 40
Stock C – 8 million shares
– Market Price $ 30
The Weightage for Stock A
in Value Weighted Index is

21 Investment The FTSE (Footsie) Index London Europe Asia Americas

Banking reflects share prices in
22 Investment Which equity securities Eurodollars American Foreign Sterling shares
Banking provide for the domestic Depository stocks
trading of foreign stock? Receipts
23 Investment In general, how frequently Annual Half Yearly Quarterly Monthly
Banking do companies declare Cash
Dividends?
24 Investment What would happen to Conversion price Conversion price Conversion No impact
Banking Convertible Preferred would be would be price remains
Stock if the underlying reduced, and the reduced, and the the same, and
common stock experienced number of number of the number of
a 2 for 1 stock split? convertible convertible convertible
shares would shares remain shares would
increase. the same increase

25 Investment What date represents the Book Closure Record Date Declaration Dividend date
Banking announcement by the date Date
board of directors that a
dividend will be paid?
26 Investment If the payable date is December 4 December 6 January 12 January 10
Banking Friday, December 6, and
the record date is Monday
Jan 12, when is the Ex-
Dividend Date?
27 Investment Which term refers to Secondary Outright Sale Primary Select Sale
Banking securities that are sold by Offering Offering
the issuer to investors?

28 Investment When are shareholders of Primary Offering Secondary Outright Sale Select Sale
Banking record determined for Offering
dividend purposes?
29 Investment If a stock trades on May 3 May 4 May 5 May 7
Banking Wednesday, May 2, when
will Regular Settlement
occur in US markets?
30 Investment Consider an index with 14.14% 20% 33.33% 50%
Banking only 3 stocks
Stock A – 2 million shares
– Market Price $ 50
Stock B – 4 million shares
– Market Price $ 40
Stock C – 8 million shares
– Market Price $ 30
The Weightage for Stock A
in Price Weighted Index is

31 Investment All of these are different Margin Account Nostro Account Cash Account IRA Account
Banking types of brokerage
accounts except?
32 Investment The NYSE is an example of Primary Market Secondary OTC Market Fourth Market
Banking Market
33 Investment What is the key regulatory Federal Reserve FDIC DTCC ASA
Banking authority over the
American securities
industry?
34 Investment If a company announces a Price will go Price will go Price will Price and shares
Banking 2 for 1 Stock Dividend, down by 50% down by 50% remain the outstanding would
what will happen to the while shares while shares same while double
price and number of shares outstanding outstanding shares
outstanding on the ex- would double would remain the outstanding
date? same would double
35 Investment What is the term for Treasury Stock Preference Stock Promoter Trade able Stock
Banking previously issued stock Stock
that has been re-
purchased by the issuer in
the secondary market?
36 Investment If a corporate bond which 0 70 days 71 days 74 days
Banking pays its coupon on April 1
and October 1 is traded on
Wed, June 10, how many
days of accrued interest
does the buyer owe the
seller?
37 Investment What is the Effective Yield Less than Same as interest More than No relationship
Banking for a bond trading at a interest indicated indicated in the interest between the
discount? in the bond bond indicated in interest and
the bond effective yield
38 Investment What securities do not Bearer bonds Registered Unregistered Warrants
Banking require proof of ownership Securities Securities
to receive interest or
principal payments?

39 Investment Who is at risk during a best Investor Underwriter Issuer Stock Exchanges
Banking efforts underwriting?
40 Investment When must GTC orders be End of every day End of every End of every End of every
Banking reconfirmed? week month quarter
41 Investment What is the term for the Difference Spread Profit Quote
Banking difference between bid and
ask?
42 Investment What is the Third Market? NASDAQ OTC NYSE Instinet
Banking
43 Investment What is the term for a Issuer Investor Underwriter Stock Exchanges
Banking broker/dealer that
maintains an inventory of
stock and disseminates
quotes on that stock to
other broker/dealers?
44 Investment “Corporate Action” refers All company All stock New investments
Banking to announcements exchange Dividends/Sto
announcements ck Splits
45 Investment DowJones Industrial All companies 30 large Top 10% of Top 10% of
Banking Average (DJIA) has listed at NYSE companies listed NYSE NASDAQ
at NYSE
46 Investment “Insiders” of the company Holding Period Blackout Period Buy & Hold Book Closure
Banking cannot sell any shares for a Period Period
specified period of time,
this is known as

47 Investment In a “Rights” offering of Firm Stand by Best Efforts Outright Sales

Banking shares, which of the commitment underwriting underwriting
following is used?
48 Investment The “Fourth Market” refers NASDAQ OTC NYSE Instinet
Banking to
49 Investment The coming together of Chrysler Merger of An informal Daimler acquiring
Banking Daimler AG of Germany acquiring Daimler Daimler & arrangement Chrysler
and Chrysler of US to form Chrysler to form between the
Daimler Chrysler can be a new company two companies
termed as to
manufacture
and sell each
other’s
products
50 Investment What is a meant by a buy Buy at exactly Buy Price + Buy at 46 or Buy Price +
Banking limit at 46? 46 + brokerage Brokerage exactly lower + Brokerage equal to
equal to 46 brokerage or lower than 46

1 Investor Which of the following Foreign Liquidity risk Credit risk Equity risk
Services risks need to be managed exchange risk
while lending securities
2 Investor Development of investment Fund Asset Allocation Compliance Investment
Services objectives and investment Administration reporting Manager Universe
policy falls under the
purview
3 Investor Schroeder’s PLC presently Account Transition Brokerage Administration
Services has State Street as its Management Management Services
custodian. They would like
to move the assets to JP
Morgan Chase as the new
custodian because of
better pricing and services.
Which of the following
teams in JPMC will handle
this change?

4 Investor Core Custody Services Price securities Record Keeping Fiduciary and Reporting services
Services performs the following positions compliance
functions except monitoring
5 Investor “Transition Management” Multi-currency Brokerage to Institutional Setting brokerage
Services under the purview of collateral minimize costs investors rates
trading services help management and and maximize reduce their
reporting efficiency trading costs
6 Investor Which of the following Stock repurchase Transition Commission Both 2 and 3
Services trading services provide program management recapture
institutional investors
reduce their trading costs
7 Investor “Alternate Investments” Diversification Investment into Forex trading Arbitraging
Services refer to from equity into non-regular asset
debt categories
8 Investor Corporate Actions are MT 15022 MT 5022 MT 2001 MT 199
Services communicated to the
clients by custodians using

9 Investor Which one of the following Distressed debt Private Equity Venture IBM stock
Services is NOT an “Alternate Funds
Asset”
10 Investor “Income Processing” team Stock splits Trade Processing Global income Settlements
Services of a custodian takes care and payments
of: on due dates

11 Investor Asset-Liability analysis Determining Estimating Effect of Both 2 and 3

Services results in excess of assets Future economic return
over liabilities wealth volatility
12 Investor Which of the following Foreign Transition Commission Local fund servicing
Services services doesn’t fall under exchange management recapture
the purview of Trading?

13 Investor Which of the following Performance Investor Cash Cash & short term
Services services doesn’t fall under management management projection management
the purview of Trading? universe
14 Investor Fund administration covers Fund Portfolio Transfer Corporate Stock
Services the administrative and Development evaluation agency Repurchase
legal services to meet the
needs of the fund. Which of
the following items are not
covered?

15 Investor Transition management is Minimize risk; Maximize Minimize Minimize liquidity;

Services a systematic, controlled maximize profits liquidity; cost ; maximize efficiency
process that utilizes all minimize risk maximize
available sources of efficiency
liquidity to simultaneously
_____________ and
_____________

16 Investor Securities lending experts Credit risk Liquidity risk Interest rate Both Credit risk
Services specializes in market risk and Liquidity Risk
information and
negotiation skills to
provide profitability to the
lender while managing

17 Investor In the case of securities Conduct specialize in target clients become a principal
Services lending services, the “Third transactions particular types that are to the transaction
party intermediaries” directly with the of securities dissatisfied
lender and loaned with the
borrower performance
of their
custody banks
18 Investor In the case of securities conduct specialize in target clients becoming a
Services lending services, the transactions particular types that are principal to the
“Wholesale intermediaries” directly with the of securities dissatisfied transaction
lender and loaned with the
borrower performance
of their
custody banks

19 Investor ______________ for Wholesale Internet auction Custodian and Niche

Services securities lending, which intermediaries; systems; third party intermediaries;
bring lenders and Niche custodian and intermediaries custodian and third
borrowers together, may intermediaries third party : Niche party intermediaries
eliminate intermediaries intermediaries
_______________
20 Investor “Offshore” securities lending the settlement of the settlement of the the settlement of
Services markets required securities lending securities lending settlement of securities lending
transactions on transactions on securities transactions on the
the books of the books of lending books of foreign sub
Global custodians domesticcustodia transactions domestic custodians
ns on the books
of foreign sub
custodians
21 Investor The reason for the Unfavorable tax Assorted Legalities of All of the listed
Services development of “offshore” treatment securities transaction options
securities lending is restrictions

22 Investor “Distressed debt” refer to distressed state loan/debt that corporate All of the listed
Services of market for has become bonds of options
debts/loans watchlist or companies
impaired that have filed
for bankruptcy
23 Investor Besides providing core Foreign Futures & Tax reclaims Both Foreign
Services custody services, the exchange Options Clearing processing exchange
global custodian typically transactions and Execution transactions and
provides which of the Futures & Options
following services? Clearing and
Execution
24 Investor When an entity is able to Corporate stock Leveraged Corporate Busted takeover
Services control a majority of repurchase buyout lending
shares by using borrowed
money, it is called
25 Investor Managers' returns are Financial Income Investment Investment
Services analyzed using a market reporting processing manager manager portfolio
factor-based performance universe
analysis model that allows
us to create accurate
manager peer groups
based on market
exposures, what is it called
as
26 Investor What is one of the best Hedging Market timing Insurance Diversification
Services investment strategies to
protect an investor from
volatility?
27 Investor Standard & Poor's and Stockbrokers securities stock investor's services
Services Moody's are companies exchanges regulations
that would be examples of

28 Investor The most readily available the daily government corporate investor
Services source of information for newspaper publications reports newsletters
an investor

29 Investor In the case of Single Premium is an Premium is a Deferred Deferred annuities

Services Premium Deferred asset for the liability for the annuities are are liability for the
Annuities (SPDA), bank customer an asset for customer
the bank
30 Investor Asset allocation process Lowest possible Highest possible Meet planned All of above
Services generate risk returns objectives

31 Investor SWIFT is a Proprietary Open standard Message Both Open

Services network interface network interface based network standard network
interface interface & Message
based network
interface
32 Investor Compliance reporting Provides Provides Highlights All of the listed
Services exception-based standard potential options
information template based violations for
information internal
regulations
33 Investor Compliance reporting Hedging and Weighted Prohibited Suspicious activity
Services covers all of the following gearing reports average analytics investments reports
services EXCEPT
34 Investor Custody clients' trade SWIFT network FEDWIRE CHIPS Clearing
Services instructions are typically
communicated using
35 Investor Tax processing investor make pursue tax relief manage All of the listed
Services services include reclamations for at the source clients' options
client accounts investment-
related tax
issues
36 Investor _____________, the Charles Schwab Brown & Ameritrade All of the listed
Services largest discount brokerage company, J P options
house, uses the Internet to Morgan Chase
deliver both high-tech and
high-touch services to its
clients

37 Investor Private Equity Requires very Quoted on the Listed on All of the listed
Services large investment stock market stock options
exchange
38 Investor Asset Allocation involves “Immunization” Use of options Use of Use of venture
Services techniques emerging funds
market
equities
39 Investor Does Asset Allocation help No - It only It increases risk Yes It increases choice
Services reduce the investment maximizes return – No impact on risk
risk?
40 Investor Services like the Custodian Broker Investment Fund Administrator
Services settlement, safekeeping, bank
and reporting of
customers’ marketable
securities and cash are
provided by
_________________
41 Investor 41) Asset Allocation in an Invest in high Invest in shares Investment in Invest in lower
Services investment policy is quality bonds of rapidly growing both shares quality bonds
designed to meet the companies and bonds
required rate of return. If
the investment objective is
“Generate as much income
as possible”. Which of the
following asset allocation
strategy would be suitable
for the above objective?

42 Investor 42) Custody as an industry Increasing Infrastructure Disintegration Increasing

Services is going through a period regulation and rapidly changing of the Global regulation and
of massive change. What transparency towards tight cost custody transparency
do you think are the major base and market andInfrastructure
driver/s changing the way automated trade rapidly changing
the business is done? workflows towards tight cost
base and automated
trade workflows
1 Recent Sarbanes-Oxley Act Section 401 seek Section 201 Section 501 all of the listed
Development comprises of to improve specifies prohibits non options
objectivity of enhanced audit services
research by financial
recommending disclosures
rules
2 Recent Federal communication Three tiered prohibits privacy All of the listed
Development privacy law features system electronic protection options
eavesdropping on covers
telephone telephone
conversations, records, e-
face-to-face mail held in
conversations, or third party
computer and storage
other forms of
electronic
communications
3 Recent Which of the following Securities Mutual Funds Banks and All of the listed
Development financial institutions are brokers and Trust options
covered under the Anti- dealers companies
money laundering, US
Patriot Act
4 Recent The US Patriot act deals Proceeds from Proceeds from Counterfeiting All of the listed
Development with the following money foreign crimes of cyber crime options
laundering crime violence and
political
corruption
5 Recent Check21 provides Fully automated Decreased Compressed Only privately-held
Development Day 1 processing collection float processing companies that are
due to faster windows to headquartered in
clearing process enable later the U.S.
branch cutoff
times
6 Recent The US Patriot Act doesn’t US enforcement Seizure of Confiscation All of the listed
Development allows for of foreign correspondent of property options
forfeiture orders accounts held in located in US
U.S. financial for crimes
institutions for committed in
foreign banks violation of
foreign laws
7 Recent Under the new rules, an Broker or dealer, Financial Appraisal or Tax services
Development accounting firm that does investment Information Valuation
an audit is prohibited from adviser, or Systems Design Services
providing many other investment and
accounting services. Which banking services Implementation
of the following is
specifically permitted
under Sarbanes-Oxley?

8 Recent Not all possible services If no one on the If the audit Only in an Without any
Development that might be provided by board objects committee gives emergency prohibitions or pre-
the auditing firm are its prior approval and only if the conditions
expressly prohibited by If the audit company whatsoever
Sarbanes-Oxley. If a non- committee gives being audited
audit service is not its prior approval has not been
expressly prohibited, the able to find
auditing firm may provide another
that service accounting
firm to provide
this service
after making a
good-faith
effort

9 Recent Sarbanes-Oxley Act, Book Keeping Balance sheet Commission Rules for greater
Development section 501, specifies and Actuarial transactions rules on pro public confidence in
Services forma figures securities research
10 Recent The stated objectives of To protect the To improve the To deter and To ensure justice
Development the stringent rules under interest of accuracy and punish for wrongdoers
Sarbanes-Oxley Act are investors reliability of corporate and
corporate accounting
disclosures frauds

11 Recent USA PATRIOT Act enforces Criminal Foreign Money All of the listed
Development which of the following Investigations Intelligence Laundering options
Investigations
12 Recent Money laundering refers to Money Extending loans Short term All of the listed
Development facilitating to corporate borrowing & options
criminal offences placements
13 Recent Money laundering can best money gained criminals money gained the police attempt
Development be described as the from criminal attempt to from to investigate
process by which activity is defraud the legitimate organized crime
processed so it government sources is
appears to be hidden to
gained from avoid taxes
legitimate
sources
14 Recent Which of the following is Exchanging Repeated Setting up an All of the listed
Development not an example of money many small deposits of cash offshore options
laundering during the denomination into a financial "shell"
placement stage? bills (i.e. tens, institution just corporation to
twenties and below mandatory "lend" yourself
fifties) for larger reporting money for a
bills and bank threshold new house
drafts
15 Recent Federal authorities attack Regulations Criminal Forfeiture All of the listed
Development money laundering through sanctions options
16 Recent The US Patriot Act expands Secretary of the Secretary of the Securities Securities
Development the authority of the Treasury; Treasury; foreign Exchange Exchange
________________ to domestic individuals Corporation; Corporation; foreign
regulate the activities of individuals domestic individuals
U.S. financial institutions, individuals
particularly their relations
with ______________and
entities

17 Recent SARs in the context of anti stands for Needs to be filed Requiring Both stands for
Development money laundering Suspicious by Securities businesses, Suspicious activity
activity reports brokers and which were reports & Needs to
dealers as well as only to report be filed by
commodity cash Securities brokers
merchants transactions and dealers as well
involving more as commodity
than merchants
$1,000,000 to
the IRS to file

18 Recent Which of the following Encouraging Prohibiting U.S. Establishing Requiring financial
Development regulations are not financial financial minimum new institutions to
covered under the US institutions and institutions from customer maintain anti-
Patriot act? law enforcement maintaining identification money laundering
agencies to keep correspondent standards and programs which
confidential accounts for record- must include at
information foreign shell keeping least a compliance
concerning banks officer
suspected money
laundering and
terrorist activities
19 Recent Forfeiture regulation under permits Calls for the Permits All of the listed
Development the US patriot act allows confiscation of seizure of foreign options
any property correspondent enforcement
derived from or accounts held in of domestic
used to facilitate foreign financial forfeiture
domestic or institutions for orders
international domestic banks
terrorism who are in turn
holding forfeitable
assets

20 Recent US Patriot act incorporates terrorist attacks for biological for fraudulent All of the listed
Development the following new crimes on mass weapons offences charitable options
transportation solicitation
facilities
21 Recent 21) Federal All the levels First & Second Only Second Second & third
Development communications privacy level
law features a three tiered
system under US Patriot
act
First level: prohibits
electronic eavesdropping
on telephone
conversations, face-to-face
conversations, or computer
and other forms of
electronic communications
Second level: telephone
records, e-mail held in
third party storage, and
the like
Third level: in the case of
serious criminal cases, law
enforcement officers may
seek a court order
authorizing them to
secretly capture
conversations

Which of the above levels

are correctly described?

22 Recent Which of the following Credit unions Securities Mutual funds Futures commission
Development institutions are not brokers and
covered under the AMR dealers
guidelines
23 Recent The Customer Collecting Verifying identity Checking Reliance on other
Development Identification program information terrorist list financial institution
includes all of the following
EXCEPT
24 Recent For the customer dictates which financial risk based Both financial
Development identification program, the forms of institutions approach to institutions
AMR guidelines identification responsible for determine the responsible for
documents assessing and form of assessing and
financial minimizing the identification minimizing the risk
institutions can risk associated associated with the
accept with the documents and risk
documents based approach to
determine the form
of identification

25 Recent Which of the following risk A, C, F E,B,F A, B, G B,D,G

Development categories are covered
under Basel II
A. Interest risk
B. Market risk
C. Foreign exchange risk
D. Liquidity risk
E. Credit risk
F. Operational risk
G. Qualitative risk
26 Recent The deadline for the December 2005 December 2007 December December 2004
Development implementation of BASEL 2006
II for all the foreign and
financial institutions is
27 Recent The aim of Basel II is To promote To promote To promote To establishing a
Development safety and efficiency in the standardizatio more sophisticated
soundness in the financial system n in the framework for
financial system by allocating financial banks to measure
by allocating capital in system by risk and ensure
capital in organizations allocating sufficient capital to
organizations to efficiently to capital in cover losses from
reflect risk more minimize risk and organizations market and credit
accurately maximize returns to obtain risk
optimal risk
return profile
28 Recent How many countries so far 10 92 110 176
Development have signed the new
capital accord Basel II
29 Recent Basel capital accord was 1998 1978 1988 1992
Development established in
30 Recent Three pillars of the new Quantitative; Qualitative; Quantitative; Quantitative;
Development capital accord, Basel II, Supervisory; Market Forces; Operational; Qualitative; Market
are General Geographic Supervisory Forces

31 Recent Basel capital accord was Maximum; Minimum; Maximum; Minimum;

Development instituted to coordinate overcapitalized overcapitalized undercapitaliz undercapitalized
global regulatory efforts to financial banks ed financial banks
institute institutions institutions
_______________ capital
requirements to eliminate
the threat posed by
_____________
32 Recent The “Qualitative” pillar of Capital Trading book Disclosure Operational risk
Development the Basel II encompasses management changes requirements
processes
33 Recent Which of the following Operational risk Market risk Interest risk Exchange risk
Development risks has been
incorporated in the new
framework for the first
time?
34 Recent Which of the following Basic indicator Internal ratings Advanced all of the listed
Development method can be utilized for approach based approach internal rating options
the evaluation of based
operational risk? approach
35 Recent Under the “standardized Allocates risk Calculates sum Risk weights Risk weights can be
Development approach” for credit risk weights to each of risk-weighted depend on the refined by reference
assessment, bank of the assets and asset values broad to external ratings
off-balance sheet category of
positions borrower
36 Recent Capital adequacy ratio Amount of Amount of Amount of Amount of bank’s
Development refers to bank’s capital bank’s capital bank’s capital capital expressed as
expressed as expressed as expressed as percentage of the
percentage of the percentage of the percentage of risk weighted credit
risk weighted risk weighted the risk exposure,
credit exposure credit exposure & weighted operational risk &
operational risk credit market risk
exposure, &
market risk
37 Recent Operational risk results Internal People System or All of above
Development from inadequate processes from External
events
38 Recent Under “standardized capital charge is capital charge is capital charge factor can applied
Development approach” for operational calculated by calculated by is calculated for any bank
risk multiplying a multiplying a by multiplying regardless of its
bank’s broad bank’s broad a bank’s broad complexity or
financial indicator financial indicator financial sophistication
by a ‘beta’ factor by a ‘alpha’ factor indicator by a
‘gamma’
factor
39 Recent The “internal rating based IRB results in IRB uses diverse IRB is simpler IRB leads to lower
Development approach” differs from lesser risk range of risk approach capital charges
“standardized approach” sensitivity weights
for credit risk assessment,
in that
40 Recent USA PATRIOT Act has been very high profile the terrorists’ growing high tax payers
Development enacted in response to corporate attacks of complexity, defaults
scandals such as September 11, volatility, and
Enron 2001 interdependen
ce among
international
financial
markets
41 Recent In order to implement new
Development capital adequacy
framework by 2006, banks
are planning to go for
different approaches for
credit and operational
risks, as specified in the
framework, based on its
readiness in terms of
systems and processes.
What could be the Re-
challenges that would be engineer Only Availability
faced by these financial Availability of System business of historic data and
institutions? historic data Integration process System Integration
42 Recent Which of the following
Development benefits can accrue to the
banks implementing the Increased
new capital adequacy corporate and Only Better risk
norms besides reduced emerging based pricing and
capital adequacy Better risk Improved markets Improved capital
requirements? based pricing capital allocation lending allocation
43 Recent The migration to Check21
Development environment requires
substantial investment in
imaging, storage and
image exchange
technology. Some of these
investments can be
avoided by outsourcing
some of these processes to
third party ASP Solutions.
Which of the following
factors are likely to
influence the decisions of ‘AS IS’
the banks to outsource or Capacity Security process All of the listed
not? planning Analysis analysis options
44 Recent Which of the following
Development activities can invite the Only Purchase or
application of Anti Money Purchase or Depositing sale of same good
Laundering guidelines? sale of same Multiple cash in big and Multiple
good transfer of money amounts transfer of money
45 Recent Which of the following
Development methods, parameters used,
for measuring credit risk is
more reliable while
processing credit
application, assume that
the calculation engine
allocate equal weightage
to different factors: Method A Method B Method C Method D
Option 5 Correct Answer

Rs. 7346

4
None of the listed
Options

4
Investment
Option: Share
market

2
None of the listed
Options

2
21500

2
None of the
listed Options

5
None of the listed
Options

1
None of the listed
Options

4
Both Bank B &
Bank C

3
None of the listed
Options

3
None of the listed
Options

1
None of the listed
Options

4
None of the listed
Options

1
None of the listed Option 1
Options

4
None of the listed Option 2 1500/1.15 +
Options 1500/1.15^2 +
1500/1.15^3
= 1200/1.15 +
1500/1.15^2 +
X/1.15^3

3
None of the listed Option 3
Options

1
None of the listed Option 4
Options

3
None of the listed Option 5
Options

4
None of the listed
Options

3
None of the
listed Options

5
Real estate

2
Unregistered and
Transferable
without
registration

1
All of the listed
options 4
10%

3
Secured by assets
of the issuing
company and Have
lower priority for
repayment than
secured debt
3
Electronic,
Unregistered

2
None of the listed
Options

4
Equipment Trust
Debenture

3
Equipment Trust
debenture
1
Junk grade

2
None of the listed
Options
2
None of the listed
Options 2
None of the listed
Options
3
Investors
1
Have a lock in
period
2
Carry no risk

3
None of the listed
Options

3
None of the listed
Options
2
None of the listed
Options
1
Futures are same
as Options

4
Arbitrageurs

5
The buyer must
pay an option
premium to the
seller.
5
LEAPS

1
Swaptions

3
140, 30 and 0

4
None of the
listed options

2
Creditors of Coca
Cola, but the
benefits of holding
the stock do not
depend on Coca
Cola’s profits

2
 IBM will pay
interest only if it is
still in profit zone
after the dividend
payout

3
Are junk grade
bonds

1
High Yield bonds
3
Bank Deposit

3
 None of the
listed options

1
Buy a put as well
as a call at
different strike
prices

3
Futures

1
They have high
credit rating

2
Currency Swap

5
None of the listed
Options

4
None of the listed
Options

2
Buy Canadian
dollars forward
for delivery in 90
days
5
Purchase Canadian
dollars for delivery
in thirty days.

1
None of the listed
Options

1
None of the listed
Options

4
None of the listed
Options

2
None of the listed
Options

4
None of the listed
Options

4
An initial public
offering (IPO) and
Internal financing
1
Both 2 and 3

3
Use of retained
profits for
expansion
3
After both
interest and
common dividends
are paid
4
Forward

3
Both are
equal

5
The term to
maturity.

3
Premium on the
bond

5
None of the listed
Options

1
 Can never sell

1
They will buy
short-term bonds.

1
They trade in short
term instruments

1
To manage long-
term cash
requirements

2
The Fed can’t
do anything
because it is
market
determined.

4
 Can’t say

1
Higher Income
inequality

2
Are markets in
which shares are
actively traded.

4
$70

4
 The
devaluation of
assets in general.

1
Bonds that can be
redeemed anytime
at a discount

3
of all types of
maturities.

1
12.5%

2
None of the listed
Options

2
 Debt; equity

1
Raise funds;
payment system

3
Where only
financial assets are
bought & sold

1
Low risk; high
returns

1
All of the listed
options

4
Repo

4
 Municipal
Bonds

2
Private costs to
the shareholders
of the bank
exceeds the social
costs of the a
general bank
failure.

4
All of the listed
options

3
Limit
diversification and
encourage risk
taking 2
None of the listed
Options

3
None of the listed
Options

3
 Financial
Institutions

3
They offer
lowest interest
rates.

1
a direct search
market
3
regulated.

3
Which is an
incentive to
decrease risk-
taking by the
insured
4
All of the listed
options

5
All of the listed
options

5
 results from
changes in the
exchange rates in
the currencies of
the investor and
the country in
which the
investment is
made,can be
hedged by using a
forward or futures
contract in foreign
exchange and
cannot be
eliminated.
4
None of the
listed options

2
 It is illegal for
central banks of
major countries to
coordinate their
intervention
activities.

4
Final wealth will
be lower than the
initial wealth 4
Can’t be
answered
5
Can’t be
answered
5
10%

3
None of the listed
options

4
Both 2 and 3

1
 An asset that
pays 10 percent
with a probability
of 0.50 or 2.75
percent with a
probability of 0.50

4
None of the listed
options

3
None of Above

2
Operational Risk

5
None of the listed
options 1
 None of the listed
options

1
At country level
2
68%

1
All are risk
management
techniques 4
At a macro level
and at the lowest
possible level 2
All of the listed
options
5
Yes but only high
value financial
instruments
2
Analytical
Methods
4
 None of the listed
options

1
100%

2
None of the listed
options

1
Diversification

5
-0.029

4
None of the listed
options

2
Both An individual
refuses to take
risks andOnly
investment
proposals with no
risk should be
accepted

3
Both It has a
greater risk and It
has a higher
expected value
1
Both Risky
investments may
produce large
losses and Risky
investments may
produce large
gains 4
The present value
of a financial
instrument.

3
None of the listed
options

3
 None of the listed
options
3
Her VaR is $ 1
Million with a
confidence level of
0%

1
Risk doesn’t
change with time

4
None of the
listed options

5
 Shouldn’t take up
the project

1
The risk-reward
principle holds true
over a short
period, while in
the long term it is
less certain

3
None of the
listed Options

5
None of the
listed Options

5
None of the listed
Options
4
Price Risk

2
None of the listed
Options

1
dividend yield

5
Both Link
lenders
(depositors) to
borrowers and
Evaluate the
likelihood of
borrower
repayment,
reducing risk by
developing a
diversified
portfolio rather
than lending to a
single borrower
5
 capital
adequacy ratio is
reduced
5
its assets decline
by $200 andits
reserves decline
by $200 3
Conducting the
nations monetary
policy
3
all of the listed
options.

2
Cash Reserve Risk
1
BothIncreased
Money Supply in
the economy
andReduced
interest rates 3
None of the listed
options

2
 By maintaining a
high interest rate

1
Would be neutral
to borrowing

3
Safe deposit
reserves.
1
BothWill not
experience
difficulties because
its required
reserves will be
adequate to meet
withdrawals and
Will not experience
difficulties because
it will hold
sufficient excess
reserves to meet
withdrawals

4
BothIf it can be
carried easily from
one place to
another and If it
can be readily
exchanged for
another asset or
good. 2
None of the listed
options

3
None of the listed
options

1
EitherMake the
lending rate equal
to the deposit rate
or Keep the
lending rate above
the deposit rate
but play the
volume game
3
Vehicle Loans

3
BothTo make the
banks more
efficient and To
promote the
concept of
Universal Banking
1
Both An increase
in the total money
lent out into the
system and a
decrease in the
total money in the
bank reserves in
the system

4
None of the listed
Options

1
To help the
government raise
funds

1
 Facilitate the
trade and
commerce
dealings 1
None of the listed
Options

4
Both To serve
certain social
objectives and To
offset the moral
hazard incentives
provided by
deposit insurance
and other
guarantees.
3
Both To promote
limited quantities
of financial
services at
maximum prices
and To promote
safety and
soundness of
depository
institutions 3
 encourage high
risk-taking by
proper
diversification 2
Both Have a
negative spread
and Will always
have positive net
earnings 3
Private banking

3
None of the listed
Options

4
Banks

4
Capital Reserve
Requirement
3
Reserve Bank of
America
1
None of the listed
Options
2
None of the listed
Options
4
None of the listed
Options

2
Bank One
Corporation

3
None of the listed
Options

2
required reserves
policy
4
Auto Loans

3
None of the
listed Options

5
None of the listed
Options

2
None of the listed
Options

3
None of the
listed Options

5
None of the listed
Options

2
None of the listed
Options

3
None of the
listed Options

5
None of the listed
Options

3
None of the
listed Options
5
None of the listed
Options 1
None of the listed
Options 1
None of the listed
Options

2
None of the listed
Options
2
None of the listed
Options

4
None of the listed
Options

3
None of the listed
Options

1
None of the
listed Options

5
 None of the listed
options

1
All of the listed
options

5
None of the listed
Options

2
None of the listed
Options

4
None of the
listed Options

5
None of the listed
Options
4
None of the listed
Options

2
None of the listed
Options

4
None of the listed
Options

2
None of the
listed Options
5
None of the
listed Options
5
None of the
listed Options

5
None of the listed
Options
4
None of the listed
Options

1
None of the listed
Options
3
None of the listed
Options

1
None of the listed
Options

2
None of the listed
Options

3
None of the listed
Options

4
None of the
listed Options

5
None of the listed
Options

3
None of the listed
Options

3
None of the listed
Options

4
None of the listed
Options

1
None of the
listed Options
5
None of the
listed Options
5
None of the listed
Options

1
None of the listed
Options
2
None of the listed
Options

3
Electronic Funds
Telecommunicatio
n Act 3
Direct Deposit

3
Automatic
Transaction
Machine; Personal
Banking

2
None of the
listed Options

5
External Fund
Transfer

4
None of the listed
Options

2
 BothFinancial
Institution has to
communicate
within 7 working
days the result
after completion of
the investigation
and Financial
Institution has to
correct the error
within one working
day after detecting
the same.

4
Debit Card;
Credit Card

5
There can’t be
unlimited liability

2
None of the listed
Options

3
None of the listed
Options

4
None of the listed
Options

1
None of the listed
Options

4
All

3
All of the listed
options

3
credit

1
Clearing House
for Interbank
Payment
Settlement
2
None of the
listed Options

5
FEDWIRE; Federal
Reserve bank

3
FEDWIRE

2
Both At the of the
day, $17m will be
transferred to B
and At the end of
the day, $25m will
be transferred to A

3
All Stored value
cards
5
FEDWIRE

4
ATM card

4
Depends on the
billing cycle

1
All of the listed
options

5
ACH

1
None of the listed
Options
2
handle high
value
transactions
5
Withdrawal at
teller window
2
FEDWIRE
provides domestic
fund settlement

1
None of the listed
Options

5
Transaction
System
4
None of the listed
Options

4
are like debit
cards, credit cards
etc.,

1
None of the listed
Options

1
Structured
Lending

3
All of the listed
options 3
None of the listed
Options

4
None of the listed
Options 2
None of the listed
Options

4
None of the listed
Options

2
 Client
Representative =>
Middle Office =>
Servicing
Specialist => Back
Office

2
None of the listed
Options

1
Middle Office;
Custodial Services
1
BothHousehold
income and Net
Worth

5
Both Account
Aggregation
andSales &
Brokerage 4
all of the listed
options
5
 Only Efficient
Portfolio Analysis
and Asset
Allocation
techniques 4
Either small;
larger or larger;
small
1
Both automatic
transfer of funds
from one account
to another
account, whose
balances have
fallen below the
pre-determined
limit and
automatic transfer
of funds from one
account to another
account, whose
balances have
exceeded pre-
determined limit
4
None of the listed
Options

4
 Liquidity
management;
structured lending

1
all of the listed
options

2
Both Client
portfolios are
reflected on the
liability side of the
bank’s balance
sheet and Client
portfolios are
reflected on the
asset side of the
bank’s balance
sheet
1
None of the listed
Options
1
None of the listed
Options

3
Middle Office

3
All of the listed
options
5
All of the listed
options

4
None of the listed
Options

3
 Payable Through
Account

3
None of the listed
Options

5
 Investor needs to
be fully accredited

4
Portfolio
management 5
All of the listed
options 5
Rates are
generally greater
for secured loans

1
Loan can be
prepaid with or
without penalty

2
None of the listed
Options

3
None of the listed
Options

5
None of the listed
Options

1
Preclosure

3
Over the counter
market

3
350 USD

2
10,000 USD

2
Amortized Loan

2
The price paid for
the use of a
contingent asset

3
True discounted
Loan

3
Credit line

3
None of the listed
Options

2
None of the listed
Options

3
None of the listed
Options

4
None of the listed
Options

3
Term Loan

3
None of the listed
Options

4
Irrevocable Credit

2
Corporate

2
None of the listed
Options

3
11.50%

5
All of the listed
options 4
Reassignment;
debts

4
None of the listed
Options

3
Assess; estimate

2
None of the listed
Options 5
Car Loan
4
All of the listed
options

1
All of the listed
options

5
None of the listed
Options

3
Interest Risk

1
None of the listed
Options

1
 2100

4
Not Possible
before date of
maturity

3
 30% discount is
offered if payment
is made before 15
of the month
2
Buyer

2
Reimbursing
bank; Beneficiary
bank

4
Revolving Letter
of Credit.

4
Create financial
asset for those
who use them

1
None of the listed
Options

5
 can’t be revoked
without the
consent of
Exporter.

1
Involves complex
process and
complicated
documentation

2
Buyer to open one
more LC based on
an already issued
LC

2
None of the listed
Options

4
None of the listed
Options

1
Advising bank has
the liability for the
payment of the LC.

1
not be transferred
from one party to
another party

5
None of the listed
Options

4
None of the listed
Options

3
 sharing risk with
third party
2
the structuring of
the contract with
the third party

4
Consignment

3
Cash in Advance

2
Credit Line tied
up.
4
2,5,1,3,4

3
Bill of Lading
5
Bankers
association for
Factoring Trade.

2
None of the listed
options

3
None of the listed
Options

3
$250

4
 Documentary
collection; strict
compliance rules
apply

2
None of the listed
Options

3
Medium terms;
banks

3
None of the listed
Options

3
All of the listed
options 1
Both Standby
Letter of Credit &
Letter of Credit

5
No guarantee of
payment by bank
5
All of the listed
options
5
None of the listed
Options

5
None of the listed
Options

5
All of the listed
options

4
None of the listed
Options

5
Both Cross
currency swap and
Options

3
 Neither party
loses money in the
deal

2
Insufficient
information for
answering the
question

4
None of the listed
Options

2
None of the listed
Options

1
None of the listed
Options

2
3-month forward
sale of Euro

3
None of the listed
Options

3
None of the listed
Options

4
Both Purchase a
put option on a
currency which is
anticipated to
appreciate and Sell
a call option on a
currency which is
anticipated to
appreciate
2
None of the listed
Options

3
None of the listed
Options

4
None of the listed
Options

4
None of the listed
Options

1
Pooling, Netting
and Swapping

4
None of the listed
Options

1
None of the listed
Options

2
None of the listed
Options

4
Providing
customized MIS
for cash flow
monitoring 3
None of the listed
Options

2
National Banks,
Regional Banks
and Corporates
4
All members need
to maintain a
central account
with the nodal
agency,
Settlements are
done at a
transaction level
and Settlements
are done on a
batch mode 4
None of the listed
Options

4
All of the listed
options

4
None of the listed
Options

2
None of the listed
Options

4
None of the listed
Options
4
Both Investment
management
techniques
andExtensive
Research
techniques 3
None of the listed
Options
4
Both
Diversification to
minimize risk and
maximize return
and Invest in a
single line of
assets 2
None of the listed
Options

3
None of the listed
Options

4
Municipal Bonds

1
The selection of
assets in a
particular asset
class.

4
Top-down
management

OnlyDiversification
and Screens and
Filters 4
resilient

2
 Only Bid-ask
Spread andTax
impact 4
Both Cost of
execution and
trading speed 4
Try best to
market

3
None of the listed
Options

4
Only when
currency risk is
hedged.

3
she can reduce its
risk relative to the
risk she would face
just holding U.S.
stocks.

5
None of the listed
Options

1
budgeting

2
Both Hedge funds
and Futures

5
None of the listed
Options

3
None of the listed
Options

3
None of the listed
options.

4
All of the listed
options

5
 Both Invest
money in a bank
and Buy few
securities which
reflect the index 1
None of the listed
Options

2
BothReduce costs
involved in
constant
researching of
stocks andWait till
the investors
objective is met 4
Both Reduce cost
of execution
andHedge portfolio
risks 3
I, II, and II

4
BothValidating the
forecasting models
and investing in
portfolio of high
yield countries
andSelecting few
scripts, forecasting
their performance
and investing
based on the
forecasts
3
None of the listed
Options

2
Beauty Contest

5
None of the listed
Options 2
The separation of
Underwriting and
Sales

3
None of the listed
Options

3
None of the listed
Options

4
Both Don’t
Involve Stock
Exchange Brokers
andAlso called as
“Fourth Market” 4
Charges
commission for
trades

1
 Charges
commission for
trades

3
The order will get
released at $ 85
as a limit order at
$ 90

1
The order will get
released at $ 85
as a limit order at
$ 87

5
“Fill or Kill” allows
partial execution

2
$86

3
Dividend
payable/receivable
1
Accounting
Department
2
Dec 31, 2003

1
Track record of
the analyst writing
the report.

3
None of the listed
options

1
Each stock in
proportion to its
market value
5
 41.66%

2
Australia
1
International
equities
2
Irregular

1
Conversion price
would be
increased, and the
number of
convertible shares
would increase

3
Payment Date

3
January 8

5
None of the listed
Options

3
None of the listed
Options
5
May 8

1
41.66%

5
Power of Attorney
Account
2
None of the listed
Options 2
 Securities
Exchange
Commission
5
Price and shares
outstanding would
remain the same

2
Non voting Stock

1
75 days

2
None of the listed
Options

3
Debentures

2
Securities
Exchange
Commission 3
End of April and
October 5
None of the listed
Options
2
None of the listed
Options 2
Market Maker

5
None of the listed
options
3
30 large
companies listed
at NASDAQ 2
None of the listed
Options

5
None of the listed
Options
2
None of the listed
Options 4
 A technical
collaboration

4
None of the listed
Options

3
All of the listed
options
3
Asset Liability
Analysis

5
Treasury

2
Processes
corporate actions

3
None of the listed
options

2
None of the listed
Options

3
None of the listed
Options
5
None of the listed
Options

5
LBOs

4
Clearing

3
Term mismatch of
assets and
liabilities 4
Cash & short term
investment

4
Fund
administration

4
 Fiduciary and
compliance
monitoring

4
None of the listed
Options

3
Both Credit risk
and Interest Rate
Risk

5
Both Conduct
transactions
directly with the
lender and
borrower and

3
 Both conduct
transactions
directly with the
lender and
borrower &
becoming a
principal to the
transaction
5
Internet auction
systems; Niche
intermediaries

2
None of the listed
Options

3
None of the listed
Options

4
None of the listed
Options

3
 Both Foreign
exchange
transactions & Tax
reclaims
processing
5
Management
buyout

2
None of the listed
Options

3
None of the listed
Options

4
stock underwriter

1
business
periodicals

5
None of the listed
Options

5
None of above

3
Both Proprietary
network interface
& Message based
network interface
4
None of the listed
Options

1
Sharing holding
restrictions
4
None of the listed
Options
5
None of the listed
Options

4
None of the listed
Options

4
None of the listed
Options
1
All of the listed
options

5
None of the listed
Options
3
Dealer

1
None of the listed
Options

4
All of the listed
options

4
None of the listed
Options

5
None of the listed
Options

4
None of the listed
Options

4
None of the listed
Options

4
None of the listed
Options

3
None of the listed
Options

5
All of the listed
options

4
None of the listed
Options

2
None of the listed
Options

4
All of the listed
options

5
None of the listed
Options
4
None of the listed
Options
1
None of the listed
Options

1
None of the listed
Options

3
None of the listed
Options
4
None of the listed
Options

2
All of the listed
options

4
None of the listed
Options

1
None of the listed
Options

1
None of the listed
Options

4
None of the listed
Options

2
None of the listed
Options

5
None of the listed
Options

5
All of the listed
options

4
E,C,A

2
None of the listed
Options

3
None of the listed
Options

1
21

3
None of the listed
Options 3
Qualitative;
Mandatory;
Quantitative
4
None of the listed
Options

4
Capital structure

1
Credit risk

1
None of the listed
Options

1
All of the listed
options

5
None of the listed
Options

4
None of the listed
Options
4
None of the listed
Options

1
All of the listed
options

2
None of the listed
Options

All of the listed

options 5

All of the listed

options 4
None of the listed
options 4
Only Multiple
transfer of money
and Depositing
cash in big
amounts 4

Both Method A
and Method D 2