Total of 50 questions

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Finance

Finance Part 1 Completed

Finance Part 2 Completed

Finance Part 3 Completed

Finance Part 4
Today
Finance Part 5
Question 1 - Consider the following statements and choose the correct one
1. Going short means an obligation to buy shares in future
2. Going long means an obligation to sell shares in future
3. Equity is the only underlying asset in a futures contract

A. 1 and 2
B. 2 and 3
C. 1 and 3
D. Only 1
E. None of the above
 Answer: Option E

• Investors maintain “long” security positions with the expectation that the stock will rise in value in the future.
• The opposite of a “long” position is a “short” position. A "short" position is for the sale of stock.
• The underlying asset in a futures contract could be commodities, stocks, currencies and interest rates. The futures
contract is held at a recognized stock exchange. The exchange acts as a mediator and facilitator between the parties.
Question 2 - You bought January Satyam Futures at Rs 268 and the lot size is 1,200. What is your total profit or loss if you
sell at Rs 270?

A. Rs.3400
B. Rs.1400
C. Rs.2400
D. Rs.400
E. Rs.3422
 Answer: Option C

• Purchase Price : Rs. 268

• Sales price : Rs. 270
• Profit per unit : Rs. 2
• Lot size : 1,200
• Profit = (270 – 268) x 1,200 = Rs. 2,400
Question 3 - Which of the following type of derivative would have a linear payoff ?

1. Futures
2. Forwards
3. Options

A. 1 and 2
B. 2 and 3
C. 1 and 3
D. Only 1
E. None of the above
 Answer: Option A

Any trade that derives from an underlying asset, but does not involve the direct purchase or sale of that asset, is known as a
derivative. Common classes of derivatives are forwards and futures, swaps and options. Derivatives are often divided into
linear and nonlinear

Linear Payoff - The simpler set of derivatives are linear products. This means that the payoff is related linearly to the spot
price of the underlying asset. For example
Question 4 - You buy a call option of MNP stock with a strike price of ₹ 200. You paid ₹ 10 per share as the premium for
the option. If the spot price at the expiry date is ₹ 196, which of the following statements is correct?

A. You (buyer) will not exercise the contract

B. The total loss to the option seller is ₹ 10
C. The total profit to the option buyer is ₹ 10
D. The total loss to the option seller is ₹ 12
E. The total profit to the option buyer is ₹ 12
 Answer: Option A

In this scenario, if the spot price at the expiry date is ₹196 and the strike price of the call option is ₹200, it is more profitable
for the buyer not to exercise the contract since it allows them to avoid purchasing the stock at a higher price than the
current spot price.
• Therefore, the correct statement is: You (buyer) will not exercise the contract.
Question 5 - Consider the following statements concerning the corporate bonds in India and choose the correct one
1. Corporate bonds can be issued through the public listing alone
2. Under the private placement, an offer to subscribe can be made to up to 250 individuals
3. Private placement is not legal in India

A. 1 and 2
B. 2 and 3
C. 1 and 3
D. Only 1
E. None of the above
 Answer: Option E

Corporate Debt can be raised through public issues or private placement routes. Private Placement is defined as ‘any offer
of securities or invitation to subscribe securities to a select group of persons (less than 200) by a company (other than by
way of public offer) through the issue of the private placement offer letter.

While a Public Issue is an offer made to the public, in general, to subscribe to the debentures/bonds.
Question 6 – Consider the following statements and choose the correct one
1. Overnight repo lasts only one day
2. Open repo has no fixed maturity period
3. Term repo is a long-term instrument with a maturity period of more than a year

A. 1 and 2
B. 2 and 3
C. 1 and 3
D. Only 1
E. None of the above
 Answer: Option A

• The overnight repo rate is the interest rate at which different market participants swap treasuries for cash to cover short-
term cash needs (one day).
• In an open repo, there is no such fixed maturity period and the interest rate would change from day to day depending
on the money market conditions.
• A term repo is a repo of more than one-day duration. In India, the term repo has different durations.
• The usual durations are 7 days, 14 days, and 28 days. Overall, the objective of the term repo is to ensure liquidity in the
banking system.
Question 7 – You are the owner of a good producing form. Recently you decided to go global and export your goods to
some countries. However, you often have been struggling with working capital management and it will be difficult for
you to keep manufacturing the next batch of goods if the importers don't pay you immediately.Which of the following
arrangements may solve this working capital issue?

A. Venture Capitalist
B. Crowdfunding
C. Factoring
D. Leasing
E. None of the above
 Answer: Option C

Working Capital is the term used basically to indicate the financial condition of a firm or an organization in the short term.
Meaning, ability to manage and bear the costs of the day-to-day operations.
• A lease is a contract whereby the owner of an asset (the lessor) grants to another person (the lessee) exclusive right to
use the asset for an agreed period, in return for the payment of rent. Hence, leasing is not applicable in this question.
• Factoring is a transaction where an entity (exporters, in case of international trade) sells its receivables (dues from a
customer, in this case, an importer) to a third party (a factor, banks or NBFCs) for immediate funds. Hence, B is the
correct answer.
• Peer-to-peer (P2P) lending enables individuals to obtain loans directly from other individuals, cutting out the financial
institution as the middleman. However, cross-boundary lending is prohibited as per the RBI's regulations.
• An angel investor is a wealthy individual who provides funding for a startup, often in exchange for an ownership stake in
the company.
 Q.8

DICGC came into existence in 1978 after the merger of Deposit Insurance Corporation (DIC) and Credit
Guarantee Corporation of India Ltd. (CGCI) after passing of the Deposit Insurance and Credit Guarantee
Corporation Act, 1961 by the Parliament. DICGC charges ________”X”_________ held by a bank. The
premium paid by the insured banks to the Corporation is paid by the banks and is not to be passed on to
depositors.

A. 10 paise per ₹ 100 of deposits

B. 12 paise per ₹ 10 of deposits
C. 12 paise per ₹ 1000 of deposits
D. 10 paise per ₹ 1000 of deposits
E. 12 paise per ₹ 100 of deposits
Answer: Option E
Question 9 – IFSCA has constituted a “Standing Committee on Primary Markets” (“Standing Committee”) for seeking
suggestions and recommendations from the market experts on the various policy and regulatory matters to facilitate the
development of a vibrant and robust ecosystem for primary markets in GIFT IFSC. Who is the head of this committee?

A. Shri B. Narasimhan
B. Shri Bahram Vakil
C. Shri Amitabh Malhotra
D. Shri J. V. N. Subramanyam
E. Shri T. V. Mohandas Pai
 Answer: Option E

IFSCA has constituted a “Standing Committee on Primary Markets” (“Standing Committee”) for seeking suggestions and
recommendations from the market experts on the various policy and regulatory matters to facilitate the development of a
vibrant and robust ecosystem for primary markets in GIFT IFSC, headed by shri T. V. Mohandas Pai

Terms of Reference
• To advise IFSCA on the various policy and regulatory matters on a periodic basis to facilitate the development of a vibrant
and robust ecosystem for primary markets in the IFSC.
• To advise IFSCA on the roadmap and strategy for successful implementation of direct listing of public Indian companies
on the stock exchanges in the IFSC
• To advise IFSCA on introduction of new financial instruments for facilitating capital raising in the primary markets in the
IFSC
• To advise IFSCA on scaling up global debt market in the IFSC
• To advise IFSCA on matters relating to development and regulation of primary markets in the IFSC
 Q.10

The offer is categorized as offer being made to public and offer being made to promoters. There are 3 types
of investors under public - Retail, QIBs and Non-Institutional Investor. Wherein retail investors are the one
who invest maximum up-to __________ amount.

A. 1 Lakh
B. 2 Lakh
C. 3 Lakh
D. 4 Lakh
E. 5 Lakh
Answer: Option B
The offer is categorized as offer being made to public and offer being made to promoters. There are 3 types of investors under public - Retail, QIBs and Non-
Institutional Investor.

Under Offer to public there are 3 types of Investors

Retail Investor: The one which invests less than 2 lakhs

QIBs: Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and
invest in the stock markets. As per SEBI a 'Qualified Institutional Buyer' shall mean:

• Public financial institution as defined in section 4A of the Companies Act, 1956;

• Scheduled commercial banks;
• Mutual funds;
• Foreign institutional investor registered with SEBI;
• Multilateral and bilateral development financial institutions;
• Provident Funds with minimum corpus of Rs.25 crores
• Pension Funds with minimum corpus of Rs. 25 crores

These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for
participating in primary markets

Non-Institutional Investor: The investor which is neither a retail investor nor a QIB would be called Non-Institutional Investor
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