You are on page 1of 360

1. Which of the following is true?

a) Depreciation is claimed by financier in Lease & not in case of hire


purchase
b) Tax deduction can be claimed for the full value of the rental paid in
case of lease
c) All
d) The financier owns the asset both in case of lease and Hire
Purchase
Lease is a long-term rental agreement for the asset, while Hire Purchase is allows the
user to own the asset after all the payments have been made to the lender.
Lease
Two main types operating, financial
The Financier owns the asset.
Depreciation is claimed by the financier.
Tax deduction can be claimed for the full value of the rental paid.
Financier takes care of maintenance, insurance etc.
Hire Purchase
The asset is owned by the financier.
Depreciation can be claimed by the borrower.
Tax deduction can be claimed only to the extent of the interest repayment.

2. Annuities are:
a)
b)
c)
d)
e)

Discounted loan
Capitalized loan
Amortized loan
True discounted loan
A loan that is paid in periodic installments with capitalized
interest

3. The counterparty in futures contracts trade is


a)
b)
c)
d)
e)

Government
Banks
The brokers who stuck in deal
The exchange
The buyer and seller

4. A person purchases a share at 50$. After 2 years the price is at 75$


and he decides to sell the share at that price. What is the annualized
return that person has earned?
FV = 75
PV=50
Fv=pv(1+i)n i : Interest rate per unit time period n : Number of time periods
I = 0.2247

5. Bank operations are divided into?


a)
b)
c)
d)

Middle office
Front office
Back office
All

6. Primary source of income for banks?


a)
b)
c)
d)
e)

Interest income
Fees for services
None
Deposits from public
Grants from Central banks

A bank makes a profit by investing or lending money that is earning a


higher rate of interest than it pays to its depositors.
They borrow money from individual or businesses who have money, and
lend it to those who need money, by adding a mark up, to pay for
expenses and profit. The difference between the rates, which banks offer
to depositors and lenders, is generally referred to as Spread.
7. If a bank charges 8% for 1 year from customer A and 10% from
customer B for similar loan, this can be attributed to
a) Interest rate risk
b) Credit risk
c) Liquidity risk
d) Operational risk
e) Market risk

Market risk is the risk that the value of a portfolio, either an investment
portfolio or a trading portfolio, will decrease due to the change in value of
the market risk factors. The four standard market risk factors are stock
prices, interest rates, foreign exchange rates, and commodity prices. The
associated market risks are:

Equity risk, the risk that stock prices and/or the implied volatility will
change.
Interest rate risk is the risk (variability in value) borne by an
interest-bearing asset, such as a loan or a bond, due to variability
of interest rates.
Currency risk, the risk that foreign exchange rates and/or the
implied volatility will change.
Commodity risk, the risk that commodity prices (e.g. corn, copper,
crude oil) and/or implied volatility will change.

Credit risk is an investor's risk of loss arising from a borrower who does
not make payments as promised.
Liquidity risk is the risk that a given security or asset cannot be traded
quickly enough in the market to prevent a loss (or make the required
profit).
An operational risk is, as the name suggests, a risk arising from execution
of a company's business functions.

8. Check 21 act facilitates:


a)
b)
c)
d)
e)

Netting of checks at day end


Netting and substitution of checks at day end
Netting and pooling of checks at day end
Clearing check by manually processing the check
Check truncation and creation of substitute check

The law allows the recipient of the original paper check to create a digital
version of the original checkcalled a "substitute check," thereby
eliminating the need for further handling of the physical document.
9. Tax and insurance premiums collected as part of loan repayment are
handled through which of the following type of account?
a) Escrow
b) DMAT
c) MFA
Escrow account - A trust account held in the borrower's name to pay obligations
such as property taxes and insurance premiums.
Pick the odd one
a) Agency loans
b) FHA loans
c) VA loans
d) Interest only loans

10.

Agency loan - A conventional loan is a mortgage that is not guaranteed or


insured by any government agency, including the Federal Housing Administration
(FHA), the Farmers Home Administration (FmHA) and the Department of
Veterans Affairs (VA). It is typically fixed in its terms and rate.
FHA loans - A mortgage issued by federally qualified lenders and insured by the
Federal Housing Administration (FHA). FHA loans are designed for low to
moderate income borrowers who are unable to make a large down payment.
FHA loans allow the borrower to borrow up to 97% of the value of the home. The
3% down payment requirement can come from a gift or a grant, which makes
FHA loans popular with first-time buyers.

VA loans - A mortgage loan program established by the United States


Department of Veterans Affairs to help veterans and their families obtain
home financing
Interest only loans - Mortgage in which the borrower pays only interest for
a set term. At the end of this term, typically five to ten years in the United
States, the loan converts to a fully amortizing loan in which both interest
and principal are paid. An interest-only loan reduces loan payments in the
early years of a loan, so borrowers who expect their income will grow over
the loan term can take out a larger Mortgage for purchase of a home.

11.

Bank A, bases in US, provides safekeeping services for securities


to its US clients. IT also has clients in France & Belgium and provides
securities safekeeping services to these clients through Banks C and D
respectively. Which of the following terms best describes Bank A?
a) Secondary custodian
b) Global custodian
c) None
d) Main custodian
e) Sub custodian
A global custodian provides custody services for cross-border securities
transactions. In addition to providing core custody services in a number of
foreign markets, a global custodian typically provides services such as executing
foreign exchange transactions and processing tax reclaims.
A global custodian typically has a sub-custodian, or agent bank, in each local
market to help provide custody services in the foreign country.

12.
a)
b)
c)
d)
e)

In Normal distribution 99% confidence interval corresponds to __


1.65sd
1sd
3sd
2.33sd
1.96sd

Value at Risk is an estimate of the worst expected loss on a portfolio


under normal market conditions over a specific time interval at a given
confidence level.
VaR Calculation:
99% = 2.33 * standard deviation
13.
a)
b)
c)
d)

All of following are benefits of netting EXCEPT:


Reduction in cost of settlement
Reduction in the no. of deliveries and receipts
Reduction in compliance risk
Reduction in systemic risk

Clearing is the process of determination of obligations, i.e. who owes


what, to whom and how much. Settlement on net basis reduces the
number of transactions to be settled drastically reducing the overall
transaction cost for everyone. As per an estimate, netting reduces the
number of settlements needed by more than 95%.
Settlement for clearing cheques presented to the clearing houses takes
place on a netting basis at a particular time either same day or on the next
day. This system gives rise to risks such as credit risk, liquidity risk, legal
risk, operational risk and systemic risk.
Compliance risk are Associated with Custody Services.
14.
All the following statements concerning US government
securities are correct EXCEPT:
a) Treasury bills have their interest paid in a lump sum at maturity

b) Treasury bonds have maturity dates up to 30 years


c) Treasury notes have maturity dates up to 10 years
d) Treasury bills have a greater interest rate risk than either Treasury
bonds or Treasury notes.
15.
SPV = Special purpose vehicle

16.

i.

ii.
iii.
a) I

VISA is involved in which of the following


Provide the interchange systems to transfer data and
funds between members
Set credit limits
Issue credit cards
b) II c) III d) I and II

Visa does not issue cards, extend credit or set rates and fees for
consumers; rather, Visa provides financial institutions with Visa-branded
payment products that they then use to offer credit, debit, prepaid and
cash-access programs to their customers
17.
In reality people hold part of their loans as cash. This makes the
multiplier:
a) Same as if people did not hold cash
b) Larger
c) Zero
d) Smaller

18.
a)
b)
c)
d)
e)

The share price of a company may drop considerably from its


current levels. In scenario, what type of risk are the investors facing?
Liquidity risk
Company risk
Market risk
Business risk
Credit risks

19.

a)
b)
c)
d)

Securities functionality is a function of _____


Back office
Specialists
Front office
Mid office

e) Traders
Security is a financial instrument that signifies ownership in a company (a stock),
a creditor relationship with a corporation or government agency (a bond), or
rights to ownership (an option).

Private Banking Front Office covers functions like Sales & Client
prospecting, Contact Management, Account Aggregation and Financial
Advisory services.

Private Banking Middle/Back Office covers functions like Asset Allocation,


Research, Portfolio Analysis, Risk Management, Trade Processing,
Compliance and documentation.
Traders facilitate the buying and selling of stock, bonds, or other securities
such as currencies, either by carrying an inventory of securities for sale or
by executing a given trade for a client. Traders deal with transactions large
and small and provide liquidity (the ability to buy and sell securities) for
the market. (This is often called making a market.) Traders make money
by purchasing securities and selling them at a slightly higher price. This
price differential is called the "bid ask spread."
20.
Generally if bond X had a lower rating than bond Y, the yield on
bond X would be
a) Same as that of Bond y
b) Lower than that of bond Y

c) Higher than that of Bond Y


d) Volatile

Annual rate of return (also called Coupon, Fixed, Stated or Nominal Yield)
Higher the credit rating, the lower the Yield

21.

Trade Finance primarily helps in


a) Facilitating corporate lending
b) Facilitating setting up of new factories
c) Facilitating intercompany transaction

d) Facilitating international transactions


e) Facilitating intra=company transactions

The main objective of trade finance is to facilitate transactions. There are


many financing options available to facilitate international trade such as preshipment finance to produce or purchase a product, and post-shipment
finance of the receivables.
22.

Which of the following is a type of underwriting spread?


a) Underwriters allowance

b) All

c) None
d) Concession
e) Managers Fee

An Underwriter is a broker/dealer or an investment bank. He guarantees


that the capital issue will be subscribed to the extent of his underwritten
amount. He will make good of any shortfall. The contract between the
issuer and the Lead or Managing Underwriter is the Underwriting
Agreement. The agreement states the terms and conditions of the
offering, such as, the Underwriting Spread (the amount the underwriters
make on sales), the Public Offering Price (POP), and the amount of
proceeds from the offering that will go to the issuer.

Underwriters earn 3 types of Underwriting Spread:

Manager's fee - The lead underwriter receives this fee on all securities sold.
Underwriter's Allowance is the total spread minus the Manager's fee. This fee
is shared by syndicate members based on the type of syndicate account.
Concession - It is typically the largest part of the spread and is paid to the
broker/dealer that actually took the clients order.
23.
Coming together of BNY and Mellon together is an example of
____
a) All
b) Takeover
c) Acquisition

d) Merger

e) Brokerage
ABC co wants to identify the best way for making salary credits
to its huge employee base. Can you select the best option?
a) Paper checks
b) Contactless payments
c) Cash

24.

d) Automated clearing house


25.

In private banking PTA is Payable thorough account

26.
27.

Loc is Letter of credit


On trading day at an exchange, a broker undertakes the
following trades.
Buy/Sell
Compan No of shares
Share
y
price
Buy
MS
200
$10
Sell
MS
100
$10.5
Buy
Google
100
$20
Sell
MS
30
$ 11
Sell
Google
50
20.5
Sell
MS
40
$9

How much did the broker payout to exchange on total in-case of a) gross settlement
system b) net settlement system?
a) (a) $4000 (b) $1235
b)
c)
d)
e)

(a) $1235 (b) $2235


(a) $260 for Microsoft $ 975 for Google & $260 for MS
None
(a) $ 1235 (b) $ 4000

Gross
Buy
Buy

200
100

$10
$20

-$2,000
-$2,000

$ 4000 needs to be paid to exchange to get 200 MS share and 100 google shares.

Netting
Net position for MS: +200-100-30-40 = 30
Net position for Google: +100-50 = 50
So broker would receive 30 MS shares and 50 Google shares from the exchange. The broker
has to pay $1235 only to get 30 MS shares and 50 Google shares from the exchange.
Buy
Sell
Buy
Sell
Sell
Sell

200
100
100
30
50
40

$10
$10.50
$20
$11
20.5
$9

Total

-$2,000
$1,050
-$2,000
$330
$1,025
$360
-$1,235

28.

There are 5 participants A, B, C, D, E in a 25M USD syndicated


loan and A is the lead manager. The borrower has agreed to pay 0.4%
($ 1,00,000) participant fee. How much each participant will share in
participant fee?
a) ($ 1,00,000) will be received every time money is withdrawn
b) None
c) (%$1,00,000) will be charged towards undrawn portion

d) ($ 1,00,000) will be received affront


e) ($1,00,000) will be received every month

29.

Find out the one which does NOT come under retail banking
service?
a) Personal loans
b) Credit card services

c) Trade finance

d) Electronic banking
Retail Banking
o Electronic Banking
o Credit Card services
o Retail Lending Personal Loans, Home Mortgages, Consumer Loans, Vehicle Loans
o Private Banking
o Asset Management

30.

Which of the following is NOT a feature of online trading


a) Fund transfer
b) Bill payment
c) Secure chat

d) Outbound calls
31.
Which of the following is NOT an example of an option?
a)
b)
c)
d)

LEAPS (Long term options)


Call option
swaps
put option

e) oil futures

Call Options are options to buy a stock at a specific price on or before a certain
date.
Put Options are options to sell a stock at a specific price on or before a certain date.
Long-Term Options are options with holding period of one or more years, and they
are called LEAPS (Long-Term Equity Anticipation Securities).
Swaps are the exchange of cash flows or one security for another to change the
maturity

32.
What could be the type of mortgage interest?
a) All
b) Fixed
c) Floating
d) Hybrid

A mortgage loan is a loan secured by real property through the use of a mortgage
note which evidences the existence of the loan and the encumbrance of that realty
through the granting of a mortgage which secures the loan.
The two basic types of amortized loans are the fixed rate mortgages (FRM) and
adjustable rate mortgages (ARM) (also known as a floating rate or variable rate
mortgage). Combinations of fixed and floating rate are also common, whereby a
mortgage loan will have a fixed rate for some period, and vary after the end of that
period.

33.

a)
b)
c)
d)

Banks are financial intermediaries that


Help connect public to the central banks
Do not operate efficiently in the financial system
Should not be allowed to open savings accounts
Are not required

e) Link depositors to borrowers


34.
In electronic check conversion (ECC), what happens once the
check is processed?
a) Receive cash immediately

b) The customer signs a receipt authorizing the store to


present the check to bank electronically and deposit
the funds into the stores account
c) All
d) The customer can present a check to store cashier

35.
Which is NOT a Captive finance company?
a) Bank of America
b)
c)
d)
e)

Ford Motor credit


Hyundai Motor Finance Company
General Motors Acceptance Corporation
None

Captive finance company is a subsidiary whose purpose is to provide financing to


customers buying the parent company's product.
The captive finance company is usually wholly owned by the parent company.
Although there are numerous examples of these, the best ones occur in the
automotive industry.
General Motors has General Motors Acceptance Corporation (GMAC),

Daimler Chrysler has Chrysler Financial, and


Ford Motor Company has Ford Motor Credit Company (FMCC)
Similarly Hyundai Motor Finance Company serves Hyundai dealers
36.
What is OTC?
a) Operating the company

b) Over the counter


c) Options on the counter
d) None

37.

XYZ Corporation is a large client of bank and on average for a period it


maintains $20 million in its bank account. However the bank allows the
authorized representatives off XYZ to utilize funds up to 15% over the balance
maintained. This is an example of which of the following option?
a) Accrual loan
b) Committed loans
c) Held for sale loans

d) Overdraft

e) Undrawn loan
Overdraft limits are extended to help the corporate manage the day-to-day cash flow
needs of the business. The bank makes available a certain sum of money for a
period of time (say, USD 20.0 million for a period of 1 year). There would be a
separate account called the overdraft account created to monitor withdrawals under
this loan. Whenever the corporate has a deficit in its main business account, it can
draw money from the overdraft account (up to the limit of USD 20.0 million). It can
also put back money in the overdraft account as and when they have surpluses in
the business account.

38.

You purchase a stock for $40. One year later you receive $2 as
dividend and sold the share for $48. How much is the return of holding
period?
a) 45%
b) None

c) 25%
d) 10%
e) 50%

39.
a)
b)
c)
d)
e)

40.

Which of the following is NOT a core private banking function?


Investment analysis and advise
sales and marketing
deposit mobilization
client management
research

Treasury bills can be transacted and settled on the same date?


(TRUE)
41.
Identity the odd one out
a) Equities
b) Shares
c) Stocks

d) Common stock

e) Conversible bond
42.

The amount owed by a company to suppliers in the next one year will
be categorized under ____

a) Current liabilities
b) Deferred liabilities
c) Annual liabilities
d) Accrued liabilities
43.
Company ABC has a gross profit of $50000. The operating expenses
amounts to $10000. The interest on loans availed amounts to $5000 and
taxes to be paid amounts to $5000. Calculate the EPS if there are total of
20000 shares.

a) 1.5
b) 1.25
c) 2.5
d) 2
Gross profit = 50000
Operating expenses = 10000
Operating Income = Gross profit - Operating expenses = 40000
EBIT (Earnings Before Interest and Taxes) = Operating Income + other income other expenses
= 40000
Profit Before Tax (PBT) = EBIT - Interest Expenses = 40000 5000 = 35000
Net Income or PAT (Profit after Tax) = Profit Before Tax (PBT) income taxes = 30000
EPS (Earnings Per Share) = Profit after Tax / No. of Shares = 30000/20000 = 1.5

44.

In an account earning simple interest from the first year is


reinvested at the beginning of the second year. FALSE

45.

An investor has multiple investment options yielding various


dollar returns at various points of time, while he is comfortable with a
return of X% pa. Which method should he use to compare the various
investments?
a) External rate of return

b) Net present value


c) Simple interest
d) Compound interest

Net Present Value (NPV) is a concept often used to evaluate projects/investments using
the
Discounted Cash Flow (DCF) method. The DCF method simply uses the time value
concept and
discounts future cash flows by the applicable interest rate factor to arrive at the present
value of the cash flows.

46.

P & L statements represent transactions over a period of time


while the balance sheet information as of a specific date. TRUE
47.
Which of the following LCs is similar to a bank guarantee?
a) Straight
b) Negotiable
c) Back to back

d) Standby

e) Revolving

48.

The BASEL 2 frameworks has 3 main pillars. From the options


given below, find the one that is NOT a part of it.

a) Operational effectiveness
b) Market discipline
c) Minimum capital requirements
d) Supervisory review

49.

Premature withdrawal of principal attracts penalty in a CD


account. TRUE
50.
_____ is the legal and professional proceeding in which a lender.
Obtains a court ordered termination of a borrowers equation right of
redemption
a) Securitization

b) Foreclosure

c) Sub-prime
d) Credit freeze
51.
The BSE is large primary financial market in which the initial
issuer receives the proceeds for the sale of securities. TRUE
52.
FICO score represents the credit worthiness of the borrower.
The FICO score is a key tool used by many lenders to assess the creditworthiness of a
borrower; it conducts a probability analysis on a borrowers credit report assessing the
ability of an individual to repay his/her debts.
53.
If total spread of underwriting is $100000. What is the amount which
will be distributed in the syndicate?
a) 100000
b) 400000
c) 500000

d) Cannot be determined
e) 600000

Syndicate - To share the risk, and more efficiently distribute the offering to the public,
broker/dealers will join together in a Joint Trading Account. The syndicate profits by
selling the
securities and earning a Spread (i.e., the POP less the amount paid to the issuer).
Syndicate
members share the risk and are responsible for any unsold securities.

54.

Purchase of account receivables at a discount is called


FACTORING
Factoring is a financial transaction whereby a business sells its accounts receivable (i.e.,
invoices) to a third party (called a factor) at a discount in exchange for immediate money
with which to finance continued business.

55.

Choose the right option


a) None of the mutual funds are listed on stock exchanges

b) Only close ended mutual funds are listed on stock


exchanges
c) Only open ended mutual funds are listed on stock exchanges

d) Both close and open ended funds are listed on stock exchanges
You can buy mutual funds when mutual fund companies make initial public offerings.
Filling out an application form with a payment of some initial deposit is all it takes.
Buying mutual funds called closed end funds is from stock exchanges. Closed end funds
are initially sold by fund companies in limited numbers and they are listed in a stock
exchange to facilitate trading by investors. These will be usually at premium prices or as
dictated by demands in the market (higher demands for various reasons attract higher
premiums).
You can also buy mutual funds (open end funds - funds purchasable perpetually from the
company). Here the price at which you buy will be a figure called as NAV in the industry
circles.

56.
a)
b)
c)
d)

Warrants are the combination of which of these instruments?


Put options and swaps
Cash and call options
Call and put options
Equities and futures

e) Equities and call options


On trading at NYSE, a broker undertakes the following trades

57.

Buy

IBM

100

$11

Sell

IBM

50

$10.50

Buy

MS

100

$20

Sell

IBM

20

$11

Sell

MS

10

20.5

Sell

IBM

30

$9

How much did the broker pay to exchange? A) gross B)net


Answer : 3100 (gross) 1880 (Net)
Buy

IBM

100

$11

Sell
Buy

-$1,100

100

IBM

50

$10.50

$525

-50

MS

100

$20

-$2,000

100

Sell

IBM

20

$11

$220

-20

Sell

MS

10

20.5

$205

-10

Sell

IBM

30

$9

$270

-30

Netting

-$1,880

30 IBM 90 MS

Gross

-$3,100

to buy 100 IBM & 100 MS

58.

Which institution is responsible for monetary policy for the


country? CENTRAL BANK

59.

Which of the following represents the correct hierarchy of


corporate ratings (highest to lowest)?

a) AAA, AA, D, BBB


b) D,AA,B,AAA

c) AAA,AA+,D
d) D,CB,A

Bond Rating
Moody's

60.

a)
b)
c)
d)

Grade

Risk

Standard & Poor's

Aaa

AAA

Investment

Lowest Risk

Aa

AA

Investment

Low Risk

Investment

Low Risk

Baa

BBB

Investment

Medium Risk

Ba, B

BB, B

Junk

High Risk

Caa/Ca/C

CCC/CC/C

Junk

Highest Risk

Junk

In Default

Which of the following is treasury management system?


Pinnacle
Flex cube
TS2
Finnacle

e) Front Arena
Treasury Management Systems are
Sungard / Front Arena
Summit
Calypso
Wall Street Systems

61.

Corporate loans are:


a) Never secured
b) Never unsecured

c) Secured or unsecured
d) Always unsecured
e) Always secured
Corporate Lending refers to various forms of loans extended by banks to corporate
bodies like
proprietorship, partnership, private limited companies or public limited companies. Banks
lend to
such entities on the strength of their balance sheet and business cash flows.
Corporate loans are provided by banks for various purposes like new projects, capacity
expansion or plant modernization, daily cash flow requirements (working capital) etc.
Depending on the nature of the requirement, loans may be long-term or short-term in
nature.
Loans can be either secured or unsecured in nature. In case of secured loans, if the
corporate

defaults on payment of principal or interest on the loan, the bank can take possession of
the
security and sell off the same to meet principal or interest payment on the loan. Security
is usually
in the form of land, buildings, plant and machinery, physical stock of the raw material,
goods for
sale etc.

62.

Two major functions of corporate finance division of investment


banks are?
a) Technology and m&a s
b) Risk management and underwriting
c) Security trading and underwriting

d) Mergers and acquisitions advisory and underwriting

e) Short selling
63.
Which of the following are NOT the benefits of using credit
derivatives?
a) Credit derivatives can be used either to take more risk or to avoid
(hedge) it
b) Credit derivatives can be used to credit positions that can otherwise
not easily be established in cash market.

c) Increasing the credit limit of a corporate

d) Credit derivatives can be used both to diversify their credit risk


exposures and free up capital from regulatory constraints.
Uses of Credit Derivatives
Like any other derivative instrument, credit derivatives can be used either to take
on more risk or to avoid (hedge) it.
credit derivatives can be used to create positions that can otherwise not easily be
established in the cash market.
Banks use credit derivatives both to diversify their credit risk exposures and to
free up capital from regulatory constraints

64.

Which of the following represents that the company is


incorporated in USA?
a) LTD
b) PTE
c) PLC
d) INC

65.

GE shares are selling for $15 each. You bought 200 shares one
year ago at $12 are received dividend payments of $2 per share. What
was your total dollar capital gain this year?
a) 200

b) 600

c) None
d) 1000
e) 400

66.

If the nominal interest rate is 10% and rate of inflation is 2%,


what is the real interest rate?

a) 12

b) 8

c) 20
d) 5
e) None
71.
A card holder swipes his card for USD 100. How much does the
merchant
i.
Deduct from the card holder?
ii.
Receive from the acquirer?

Assume merchant discount at 2%


a) USD 100, USD 100
b) USD 100, USD 98

c) USD 100, USD 2


d) USD 98, USD 98

Following are the


Income and Expense sources in an Acquirer business
Income:
Merchant discount (14% of transaction value)

Processing fees ($ 0.20 $ 0.40 per transaction)


Monthly minimum fees
Customer service fees
POS Equipment sales/service
Expense:
Interchange fees paid to Issuer
ISO/MSP fees
Data processing & Communications expenses
Risk Management
Losses on Merchant Charge backs & Fraud

72.

Which of the following operations cannot be done on LC?


a) Purchase
b) Discount

c) None

d) Acceptance
73.
When would a company pay nominal interest on committed
position?
i)
Always
ii)
In some cases
iii)
If it wishes to pay
a) All
b) III only
c) I only

d) II only
Interest is usually paid on the disbursed amount of the loan. In some cases, a nominal
interest if

also payable on the committed amount of the loan. Also, in most cases, the corporate
would have
to pay a certain amount as processing fees for the loan. This would cover the banks
overhead
costs in the loan process.

74.

Securities with an original maturity of lesser than 1-year are


traded on money markets?
TRUE
Money market is for short term financial instruments, usually a day to less than a year.
Treasury bills of very short tenure, commercial paper, certificates of deposits etc. are also
considered as money market instruments.

75.

Product development in sales and marketing refers to which of


the following option?
a) Collateral e.g. cars in case of car loans, houses in case of
mortgages
b) Products that are bought using online payment such as e-commerce
c) Developing and differentiating deposits, loans etc
d) All
e) Identifying products such as SAP, Oracle for the bank
76.
___ of securities trade involves the transfer of the securities from
the seller to the buyer.
a) Clearing

b) Settlement
c) Netting
d) Trading

Settlement of securities is a business process whereby securities or interests in


securities are delivered, usually against (in simultaneous exchange for) payment of
money, to fulfill contractual obligations, such as those arising under securities trades
A number of risks arise for the parties during the settlement interval, which are
managed by the process of clearing, which follows trading and precedes
settlement. Clearing involves modifying those contractual obligations so as to
facilitate settlement, often by netting and novation. clearing denotes all activities
from the time a commitment is made for a transaction until it is settled.

77.

The type of loan in which spread varies over the life of the loan
is called ____
a) Positive spread loan

b) Floating rate loan


c) Semi-fixed rate loan
d) Negative spread loan
e) Fixed rate loan

78.

Which two risks of a financial institution may gain as well as


losses?

a) Interest rate risk and foreign exchange risk


b)
c)
d)
e)

None
Credit risk and foreign exchange risk
Liquidity risk and credit risk
Credit risk and interest rate risk

79.

What is the settlement standard followed in the US?


a) T+2

b) T+3

c) T+4
d) T+1
80.
What is the difference between residential and commercial
mortgage?
a) Type of property being collateralized
b) Range of loan tenure

c) All
d) Type of customer
81.
What are Yankee bonds also known as? junk bonds
82.
Who is participating bank?
a) A bank which participates in every process of
syndication
b)
c)
d)
e)

83.

a)
b)
c)
d)

Bank which underwrites a loan


Bank which participates in arranging a loan
Bank which participates in disbursing a loan
Bank that participates in the syndication by lending a portion of the
total amount required
Dividend declaration is an example of
Private banking
Initial public offer
Merger & acquisition
Investment banking

e) Corporate action
Corporate Action refers to dividend declarations, stock splits etc. The Corporate Action
Department makes sure that the rightful owners (as on the Record Date) receive the
dividends, Splits etc.

84.

From the given options identify the services that can be


categorized under asset servicing line of business
i.
Corporate action processing
iii. Transfer agency
services
ii.
Income processing
iv. All
a) I only
b) Iii only
c) II only
d) Both I and II

e) IV
85.

How would you categorize account activity alerts in mobile


banking?
a) Account information
b) Support
c) Investment

d) Transactions
86.

Which of the following is involved in the retail brokerage


business in US?
a) Freddie Mac
b) Sallie Mae
c) Ginnie Mae
d) Federal Reserve

e) E-Trade
A brokerage that primarily serves retail investors rather than institutional investors is
referred to as a retail brokerage. Registered representatives who work for these retail
brokerage firms are expected to market their services directly to individual investors and
offer investment advice.

87.

Money laundering refers to which of the following option?


a) Extending loans to corporate
b) All
c) Short term borrowing & placements

d) Converting the profits from criminal activities into


legitimate funds
Money laundering is generally regarded as the practice of engaging in financial
transactions to conceal the identity, source, and/or destination of illegally gained
money by which the proceeds of crime are converted into assets which appear to
have a legitimate origin.
Money laundering occurs over a period of three steps, which include the physical
distribution of the cash (placement), the second step involves carrying out complex
financial transactions in order to camouflage the illegal source (layering), and the
final step which entails acquiring wealth generated from the transactions of the illicit
funds (integration).

88.

All of the following are valid means for custody client to


communicate trade instructions to its custodian EXCEP
a) FEDWIRE
b) By Fax

c) By telephone
d) SWIFT network

89.

Which of the following is an issuer and acquirer?


a) Elavon

b) Amex

c) Tsys
d) First Data Corporation
First Data Corp (Processor)
TSYS (Processor)
American Express (Acquirer, Card Organization & Issuer)

90.

If a financial instrument has a 20% chance of paying 80% and an


80% chance of paying 50% what would be the expected return?

a) 0.2
b) 0.44
c) 0.28

d) 0.56
E(R)= Sum( probability (in scenario i) * the return (in scenario i))
ER = ( 0.2 * 0.8 ) + (0.8 * 0.5) = 0.16 + 0.4 = 0.56
91.

An open end funds with 10,000 units outstanding had the total
assets of Rs 120,000 and the liabilities of Rs 25,000. Calculate the
funds NAV per unit.

Answer: NAV = Assets liabilities / no. of outstanding


shares = (95,000/10,000) = 9.5
Net asset value," or "NAV," of an investment company or a mutual fund is the
company/funds
total assets minus its total liabilities. For example, if an investment company has
securities and
other assets worth $100 million and has liabilities of $10 million, the investment
companys NAV
will be $90 million. Because an investment companys assets and liabilities change daily,
NAV will
also change daily. NAV might be $90 million one day, $100 million the next, and $80
million the
day after.
The investment company/fund calculates the NAV of a single share (or the "per share
NAV") by
dividing its NAV by the number of shares that are outstanding.

92.

The components to determine the rate of exchange in a Forward


contract are:
a) Cross currency Rate and forward rate adjustment

b) Current spot rate and forward rate adjustment

c) Forward rate adjustment and amount of currency bought/sold


d) Current spot rate, amount of currency bought/sold
The most basics tools of forex risk management are 'spot' and 'forward' contracts. These
are
contracts between end users and financial institutions that specify the terms of an
exchange of
two currencies. In a spot transaction the currency that is bought will be receivable in two
days whilst the currency that is sold will be payable in two days.
Most market participants want to exchange the currencies at a time other than two days
in
advance but would like to know the rate of exchange now. This is done through a forward
contract to exchange the currencies at a specified exchange rate at a specified date. In
determining the rate of exchange in six months time there are two components:
the current spot rate (is simply the current market rate as determined by supply and
demand)
the forward rate adjustment (Forward rate (Local currency/USD) = Spot rate *(1+
interest rate in US) / (1+ local interest rate))

93.

In trade finance, which of the following factors are considered


while choosing mode of financing?

a) Exporters fund, risk factors, cost of financing, time


frame
b) None
c) Time frame, cost of financing, buyers trade associates
d) Government guarantee program, seller preference

FACTORS IN CHOOSING THE MODE OF FINANCING Costs, Time frame, risk factors,
government guarantee program and exporters funds.

94. A custodian processes interest proceeds from the fixed income


securities held under its custody. Which division, within the custodian
company, is responsible for carrying out the position
a) Transaction management
b) Income management

c) Cash management

d) Brokerage services
e) Fund administration
95. A bank has a portfolio of %50 million worth of loans of which it wants
to hedge $20 million worth of loan. What is the process called?

a) Held for sale loans


b)
c)
d)
e)

Committed loans
Undrawn loans
Trading loans
Accrual loans

96.

What term is used to describe an LC that remains valid for years there
by eliminating the cost of separate LCs for each transaction with a regular
client?
a) Revolving LC

b) Evergreen clause
c) Green clause
d) Irrevocable LC
e) Fixed clause

The standby LC can remain valid for years (Evergreen Clause) it eliminates the cost of
separate LCs for each transaction with a regular client.

97. Interest rate spread is equal to?


a) Cap-current rate
b) Current rate floor

c) Current rate base rate


d) None
e) Base rate floor

98. A settlement can be considered as final only if :


a) The settlement is unconditional
b) The settlement is irrevocable
c) The transfer of funds and securities take place
simultaneously
d) The settlement is unconditional as well as irrevocable

99. Credit derivatives can be used to reduce the regulatory capital


requirement and a diversify credit risk.
100.

Which of the following combination holds true?


a) Documentation collection, strict compliance rules apply

b) Standby letter of credit, less costly than documentary


collection
c) Wire transfer, more costly than other payment alternatives
d) Foreign checks, not useful for cross border trade
e) Commercial letter of credit, improves applicants credit facilities

101.

Increasing the cash reserve ratio for banks would have an


impact on which of the following
a) Increased interest rates
b) Increased money supply in the economy
c) Profitability of firms

d) Reduced money supply the economy


102.

In defined benefit plans, the benefits is expressed as an ___ and


in defined contribution plans, the benefit is expressed as an_____
a) Account balance, account balance
b) Account balance, annuity
c) Annuity, annuity

d) Annuity, account balance


103.

Identify the services offered by retail banks:


a) Savings and checking accounts
b) Personal loans
c) Debit cards

d) All

104.

Trading of previously issued securities takes place where?


a) At company headquarters

b) Secondary market

c) All
d) Primary market
e) Through private placement

105.

NASDAQ is based out of __________


a) London
b) Chicago

c) None

d) Singapore
e) Hong Kong
NASDAQ is an American stock exchange (located in New York).
"NASDAQ" originally stood for "National Association of Securities
Dealers Automated Quotations.
106.
In a securities lending transaction, if the buyer of securities
provides cash as collateral, then the seller of securities has to provide
the buyer with an interest amount for the cash. What is this interest
amount called?
a) Collateral interest
b) None
c) Interest rate

d) Rebate rate
e) Return rate

Securities lending or stock lending refers to the lending of securities by one party to
another. The terms of the loan will be governed by a "Securities Lending Agreement",
which requires that the borrower provides the lender with collateral, in the form of cash,
government securities, or a Letter of Credit of value equal to or greater than the loaned
securities. The agreement is a contract enforceable under relevant state law, which is
often specified in the agreement.
As payment for the loan, the parties negotiate a fee, quoted as an annualized percentage
of the value of the loaned securities. If the agreed form of collateral is cash, then the fee
may be quoted as a "rebate", meaning that the lender will earn all of the interest which
accrues on the cash collateral, and will "rebate" an agreed rate of interest to the borrower

107.
Inflation represents which of the following option?
a) Increase in prices
b)
c)
d)
e)

108.

Very high change in prices


Currency crisis
Decrease in prices
Economic crises

TARP stands for: Troubled Asset Relief Program

109.

Ram deposits $100 in xyz bank. Puja takes a loan of $100 from
XYZ bank. Which of the following is most likely to happen?
a) None
b) Bank is charging 3% interest to Puja and paying 5% interest to Ram
c) Bank is charging 5% interest to Ram and paying 5% interest to Puja

d) Bank is charging 5% interest to Puja and paying 3%


interest to Ram

e) Bank is charging 3% interest to Puja and paying 5% interest to Ram

110.

If the limit = $2000, margin = 20% and asset value = $ 2000,


then drawing power for an open ended loan is equal to?
a) 2000

b) 1600

c) 2200
d) 2400
Drawing Power (DP) - lower of L and (1-M)*AV
Limit (L) max outstanding allowed
Margin (M) percentage of limit that can be drawn
Asset value (AV) value of underlying asset
L=2000 => max value for DP is not greater than 2000
(1-M)AV = (1-0.2)2000 = 1600

111.

Direct investment in stock markets can be a better option


investing through mutual funds if:

a) The investor has large capital, knowledge and


resources for research

b) The investor has identified a bullish phase in the stock market


c) The investor wants to invest for the long term
d) The investor wants better returns than those offered by mutual
funds

112.

The process of creating buffer against the potential loss of nonperformed loans is called:
a) Loan classifying

b) Loan provisioning
c) Loan buffering
d) Loan monitoring

113.

Retail loans are asset products offered by the bank. TRUE

114.

Which of the following is a corporate action?


a) All
b) Declaring dividend

c) Stock split
d) Rights issue
e) M&A

115.
With reference to settlement, FOP stands for: FREE OF
PAYMENT
Bank of America charges a 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
Market Risk
Credit Risk
Liquidity Risk
Legal Risk
None of Above
If Bank of New York has 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
Liquidity Risk
Market Risk
Credit Risk
Country Risk
Operational Risk
What would be the most accurate VaR estimation method?
Monte Carlo Simulation
Historical Simulation
Variance-Covariance Matrix
Cannot Say
Analytical Methods
If a financial instrument has a 35 percent chance of paying 29 percent and a 65 percent
chance of paying - 13 percent, it expected return would be
0.008
0.036
0.053
0.017
-0.029
Money Multiplier effect would imply
An increase in the total money lent out into the system
An increase in the total money in the bank reserves in the system
A decrease in the total money in the bank reserves in the system
Both An increase in the total money lent out into the system and an increase in the total
money in the bank reserves in the system
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
Which of the following is associated with the purpose of regulating financial institutions?
To provide stability of the money supply
To serve certain social objectives
To prevent failure of any financial institution
To offset the moral hazard incentives provided by deposit insurance and other guarantees.
Both To serve certain social objectives and To offset the moral hazard incentives provided by
deposit insurance and other guarantees
The central bank in the US is called

Federal Reserve
Federal Reserve Board
Reserve Bank of United States
Central Bank of United States
Reserve Bank of America
If the Limit = $1500, margin = 20% and Asset Value = $2000 then Drawing Power for an
Open ended loan is equal to
$1,500
$1,200
$1,600
$900
None of the listed Options
Which of the following is the most profitable for Credit Card Company?
Customers who always pay in time
Customers who never pay
Customers who default but finally pay
all of the listed options
None of the listed Options
Which of the following is not involved in a credit card transaction?
Independent sales organization
Merchant
Payment gateway
Associations
Who checks for the credit limit of the card before approving the transaction?
Payment processor
Acquiring banks
Payment gateway
Issuing bank
None of the listed Options
One should have the Time Deposits if one is looking for?
Quick, convenient and, frequent-access to the money
A high rate of interest
Guaranteed rate of interest
Low fee
None of the listed Options
EFTA stands for
Electronic Funds Trading Act
Electronic Financial Transfer Act
Electronic Funds Transfer Act
Electronic Fee Transfer Act
Electronic Funds Telecommunication Act
CHIPS stand for
Clearing House for International Payments Settlement
Clearing House for Interbank Payment System
Clearing Head of Interbank Payment Settlement
Clearing Head of international Payment Settlement
Clearing House for Interbank Payment Settlement
The process flow in a Private banking firm goes as

Servicing Specialist => Client Representative => Middle Office => Back Office
Client Representative => Servicing Specialist => Middle Office => Back Office
Client Representative => Servicing Specialist => Back Office => Middle Office
Middle Office => Back Office => Servicing Specialist => Client Representative
Client Representative => Middle Office => Servicing Specialist => Back Office
Which of the following roles and responsibilities are correctly stated?
Services Provider; Tax Services
Middle Office; Statements & Advices
Front Office; Client Reporting
Back Office: Risk Management
Middle Office; Custodial Services
The below stated responsibilities are carried out by which of the following players. Cash
Services/Client Reporting/Statements & Advices/Domestic & Global Settlements
Services Provider
Client Representative
Back office
Front Office
Middle Office
Private banking offers structured lending that provides
Customized asset-based credit solutions
Long-term liquidity to clients
Advice-led credit solutions
Credit solutions to High Net worth individuals
All of the listed options
Financial planning involves all EXCEPT
Cash flow management
Retirement planning
Risk management
Tax planning
Portfolio management
Loan can take many of the following basic forms EXCEPT
Overdrafts
Bills and promissory notes
Corporate bonds
Advances
Credit line
If a fund purchases a loan in the Primary, they also use another word for that. Which term
is used to indicate the initial group of lenders (Primary Lenders)?
Allocation
Syndicate
Secondary
Assignment
None of the listed Options
Which of the following is not a secured loan?
Equity Loans
Secured Loans with Savings
Equity Lines of Credit
Personal Loans
Car Loan

Which if the following is true in the case of sight draft?


Buyer can refuse to take the delivery
Quality of the Good is guaranteed
Buyer is expected to make the payment after specified credit days
Payments made based on only bill of lading
None of the listed Options
The basic four parties involved in any transaction using LC (Letter of Credit) are the
following EXCEPT
Issuing Bank
Reimbursement Bank
Seller
Beneficiarys Bank
Buyer
Which of the following is the safest type of letter of credit from seller point of view?
Confirmed Letter of Credit
Irrevocable Letter of Credit
Red Clause
Standby Letter of Credit
Revolving Letter of Credit
Which of the following methods of payment is most risky to the Seller?
Documentary Collection
Open Account
Letter of Credit
Counter trade
Cash in Advance
BOL stands for
Bill of Letter
Bankers Overdraft Limit
Bank of London
Bill of Leasing
Bill of Lading
BAFT stands for
Bankers Acceptance for Factoring Transactions
Bankers Association for Foreign Trade
Bankers Acceptance for Foreign transactions
Bankers Association for Forfaiting & Factoring transaction
Bankers association for Factoring Trade
Bill of Lading is
a contract between Importer and Exporter for transportation of goods
a receipt issued by importer to exporter for goods received for transportation
a contract between a carrier and a shipper for the transportation of goods
A receipt issued by exporter to importer for goods delivered.
None of the listed options
Which of the following methods eliminate country risk and commercial risk upon
confirmation?
Back to back Letter of Credit
Standby Letter of Credit

Documentary Collection
Letter of Credit
Both Standby Letter of Credit & Letter of Credit
Cash management techniques include
Pooling
Netting
Swapping
Both Pooling and Netting
Pooling, Netting and Swapping
All of the following are payment modes except
EFT
Cheque
Debit to account through Debit card
Lockbox
None of the listed Options
Which of the following are principles used by an asset manager?
Diversification
Screens and Filters
Capital preservation
All of the listed options
Only Diversification and Screens and Filters
Bid-Ask spread refers to
Difference in price between buying one asset and another similar one
Difference in opinion between the seller and buyer on the price of an asset
Difference between the buying and selling price of the same asset
Both Difference in price between buying one asset and another similar one and Difference in
opinion between the seller and buyer on the price of an asset
None of the listed Options
The process of Hiring of the Lead Managers in the case of IPO is referred to as
Red Herring
Road-show
Investment Manager Contest
Advisor Contest
Beauty Contest
The difference between Fill or Kill and All or None order is
Fill or Kill allows multiple trades
All or None can be a Good Till Cancelled order
They are synonyms
Fill or Kill can be valid till end of day
Fill or Kill allows partial execution
What is the key regulatory authority over the American securities industry?
Federal Reserve
FDIC
DTCC
ASA
Securities Exchange Commission
What is the Third Market?
NASDAQ

OTC
NYSE
Instinet
None of the listed Options
The Fourth Market refers to
NASDAQ
OTC
NYSE
Instinet
None of the listed Options
Core Custody Services performs the following functions except
Price securities positions
Record Keeping
Fiduciary and compliance monitoring
Reporting services
Processes corporate actions
Services like the settlement, safekeeping, and reporting of customers marketable
securities and cash are provided by _________________
Custodian
Broker
Investment bank
Fund Administrator
Dealer
Three pillars of the new capital accord, Basel II, are
Quantitative; Supervisory; General
Qualitative; Market Forces; Geographic
Quantitative; Operational; Supervisory
Quantitative; Qualitative; Market Forces
Qualitative; Mandatory; Quantitative

1. Auto loans are given by which of the following entities? Marks: 1


Answer: a. All of the listed Options
b. Banks
C. Dealerships
d. Auto manufacturers
e. Credit Unions

2. XYZ corporation is a large client of bank and on a average for a


period it maintains $20 million in its bank account However. the bank
allows the authorized representatives off XYZ to utilize funds up to 1
5% over the balance maintained This is an example of which of the

following option? Marks: 1


Answer: a. Committed Loans
b. Undrawn Loan
c. Held for Sale Loans
d Accrual Loan
e. Overdraft
3. Company ABC has a gross profit of $50000. The operating
expenses amounts to $10000. The interest on loans availed amounts
to $5000 and the taxes to
be paid amounts to $5000. Calculate the EPS if there are total of
20000 shares. Marks: 3
Answer: a. 2.5 b.1.25
c.2
d. 1.5
5. Which of the following is a corporate action? Marks:3
Answer: a. All of the listed options
b. Rights Issue
c. M&A
d. Declaring Dividend
e. Stock split

7. BAFT stands for: Marks: 1


Answer a. Bankers Association for Foreign Trade
b. Bankers Acceptance for Foreign transactions
c. Bankers association for Factoring Trade.
d. Bankers Acceptance for Factoring Transactions
e. Bankers Association for Forfaiting & Factoring transaction

9 In a economy where inflation is 4%, future value of 100 units of

money after 2 year would be which of the following option? Marks: 2


Answer: a. Around Rs 104
b. None of the listed options
c. Exactly 108
d.108.16
e. Exactly 100

10. The type of loan in which spread varies over the life of the loan is
called Marks: 3
Answer: a. Fixed rate loan
b. Semi-fixed rate loan
c. Positive spread loan
d. Negative spread loan
e. Floating rate loan

11 Simple interest is calculated on which of the following basis? Marks: 1

Answer: a. Beginning principal only


b Accumulated interest in each period
c. beginning principal + accumulated interest in each period
d. None of the listed Options

12 Bank ABC interest rate on deposits is 7.20% and its interest rate
on loans is 9.25% during 2009. What is the spread for Bank ABC?
Marks: 3
Answer: a. 10195
b. 00225
c. None of the listed options
d. 01655
16. With continuous compounding at 10 percent for 3 years. the
future value of an initial investment of $2000 is closest to
Marks:
____________

3
Answer: a. 2870
b. 2662
c. 3000
d. 2700

17. Which are true in a Basic or No Frill Checking Account?

Marks:

3
I: Limit the number of checks written
II: Interest paid
III: Limit the number of withdrawals made
Answer: a. All of the listed Options
b. II and III
c. I and III
d. I and II

18. When Checks are deposited they are converted into digital files
and then images are transferred to financial intermediaries. What is
the process of clearing
and settlement called? Marks: 3
Answer: a. Check Imaging
b. Paper check processing
c. None ofthe listed options
d. Certified check

19. VISA is involved in which of the following?

Marks: 2
I: Provide the interchange systems to transfer data and funds between
members
II: Set credit limits
Ill: Issue credit cards
Answer: a. I only
b. Both I and II

c. II only
d III only

20. Tax and Insurance premiums collected as part of Loan repayment


are handled through which of the following type of account? Marks:
2
Answer: a. Mutual fund account
b. Fixed deposit
c. DMAT account
d. Escrow account

21 Number of stages in loan syndication are


Answer: a. 1

_____

Marks: 2

b. 4
c. 3
d. 5
e. 2

22. Choose the correct order of occurrence of following


activities: Marks. 3
Answer: a. Trade execution. Trade confirmation, Trade matching.
Trade clearance, Trade settlement
b. Trade execution, Trade matching. Trade clearance. Trade
confirmation, Trade settlement
c. Trade execution. Trade matching, Trade confirmation. Trade
clearance. Trade settlement
d. Trade matching. Trade execution. Trade confirmation. Trade
clearance, Trade settlement
-

23. The counterparty in a futures contracts trade is:


Answer a. The brokers who struck the deal

Marks: 3

b. Banks
c. The Exchange
d. Government seller
24. P&L Statements represent transactions over a period of time
while the balance sheet show information as of a specific data
State True or False Marks: 1 Answer: True False
29. Hedge Funds are now regulated by: Marks: 3
Answer: a.SEC
b. Industry wide SROs
c. State regulatory agencies
d. None of the listed options
30. What happens when the interest rates rise? Marks: 1
Answer: a. Bond prices decrease
b. Bond prices do not change
c. Interest rates never fall, they always go up
d. Bond prices increase

31. Bank A, based in the US, provides safekeeping services for


securities to its US clients. It also has clients in France and Belgium.
and provides securities safekeeping services to these clients through
Banks C and D respectively. Which of the following terms best
describes Bank A? Marks: 2

Answer: a. Secondary Custodian


b. None of the listed Options
c. Sub Custodian
d. Global Custodian
e. Main Custodian
32 SMA oners investors a customized approach to investing. Rawer than a
generic product State True or False. Marks: 2
Answer: True False

33 What is the role of a Central Bank in Forex market of a country?


Marks: 2 ,
Answer: a. Regulatory role depending on countrys economic policies b.
Acts as a trader for maximum profit making
c. Encouraging trading in all currencies and not be limited to USD only d.
Seller of USD
34 What are Yankee bonds also known as? Marks: 3
Answer: a. Shares
b. T-Bills
c. None of the listed Options
d. Call Options
e. Junk bonds
35. Which of the following LCs is similar to a Bank Guarantee? Marks:
2
Answer: a. Stand by
b. Negotiable
c. Back to Back
d. Straight
e. Revolving
36. You purchased a stock for $40. One year later you received $2 as

dividend and sold the share for $48. How much is the return of
holding period? Marks: 3
Answer: a. 10 percentage
b. 50 percentage
c. None of the listed options
d. 45 percentage
e. 25 percentage

37. Banks operations are divided into which of the following option?
Marks: 2
Answer: a. Back Office
b. All of the listed options
c. Middle Office
d. Front office
39 Which of the following Mechanisms is used for financing for auto
loans? Marks: 2
Answer: a. Dealer financing
b. Direct Lending
c. Leasing
d. All of the listed Options
41. Which of the following methods eliminate country risk and
commercial risk upon confirmation? Marks: 1
Answer: a. Documentary Collection, Letter of Credit
b Letter of Credit, Back to back Letter of Credit
c. Stand by Letter of Credit, Letter of credit
d. Documentary collection. Stand by letter of credit
e. Back to back Letter of Credit. Documentary collection

42. Which of the following methods of payment is most risky to the


Buyer? Marks: 2
Answer: a. Open Account

b. Letter of Credit
c. Documentary Collection
d. Cash in Advance
e. Counter trade
44. TARP stands for which of the following option? Marks: 1
Answer: a. Term Assets Relief Program
b. Troubled Assets Relief Program
c. Troubled Assets Reform Program
d. Term Assets Reform Program
e. None of the listed options

45. Hedge Funds can use which of the following investment


Strategies? Marks: 1
Answer a. Short Bias
b. All of the listed options
c. Short Selling
d. Regulation D
e. Credit Arbitrage

46. Which two risks of a financial institution may bring gains as well
as losses? Marks: 3
Answer: a. Interest rate risk and foreign exchange risk
b. None of the listed options
c. Liquidity risk and credit risk
d. Credit risk and foreign exchange risk
e. Credit risk and interest rate risk

47. Which of the following is NOT a core private banking function?


Marks: 3
Answer: a. Investment Analysis and Advise
b. Client Management

c. Sales and Marketing


d. Deposit Mobilization
e. Research

50 There are 5 participants A, B, C, D, E in a 25M USD syndicated loan


and A is the lead manager. The borrower has agreed to pay 0.4% ($1 ,
00,000)
participant fee How much each participants will share in participant
fee? Marks: 3
Answer: a. $1 ,00.000 will be received every time money is withdrawn
b. $1 ,00.000 will be charged towards undrawn portion
c. None of the listed Options
d. $1 ,00.000 will be received every month
e. $1 ,00.000 will be received affront

51 A Custodian processes Interest proceeds from the fixed


income securities held under its custody. Which division within
the custodian company is responsible for carrying out the
process. Marks: 2
Answer: a. Transaction management
b. Income processing
c. Brokerage services
d. Cash Management
e. Fund administration
52 Check 21 Act facilitates Marks: 1
Answer: a. Netting and pooling of checks at day end
b. Check truncation and creation of substitute check
c. Netting and substitution of checks at day end

d. Clearing check by manually processing the check


e. Netting of checks at day end
54
assumes the counter party risk of each member and
guarantees financial settlement. Marks: 3
Answer: a. Depository
b. Custodian
c. clearing house
d. Stock Exchange
______________

55 Which of the following is a Top 10 US Bank?


Answer: a. HDFC
b. INC Bank
c. Rabo bank
d. Morgan Stanley
e. Wells Fargo

Marks: 1

56 SPV means: Marks: 2


Answer: a. Special Purpose Vehicle
b. Security Purpose Vehicle
c. Special Principal Vehicle
d. Securitized Planning Vehicle
e. None of the listed options

57 The term OTC usually stands for which ofthe following in the
context of financial markets? Marks: 1
Answer: a. Over the cash
b. Overview of trading courses
c. Online trading in commodities

d. Out of the cash


e. Over the counter

58 Company A has higher credit rating than Company B. What


does this means? Marks: 1
Answer: a. Company B is more risky
b. All of the listed options
c. Both are equally risky
d. There is no relation between credit rating and risk
e. Company A is more risky
Marks: 3
Answer: a. True discounted Loan
b. A loan that is paid in periodic equated installments with capitalized
interest
c. Amortized Loan
d. Discounted loan
e. Capitalized Loan

60 Annuities are:

63 An investor has multiple investment options yielding various


dollar returns at various points of time. While he is comfortable with a
return of X%. Which
method should he use to compare the various investments? Marks:
3
Answer: a. Net Present Value
b. Internal Rate of Return
c. Simple Interest
d. External Rate of Return
e. Compound Interest

65 What is NOT true about Back to Back LC (letter of Credit)? Marks:


3

I: Buyer to open new LC against an already issued LC


II: Seller to use the LC received from his buyer in favor of another
Ill: Buyer to use the LC received from his seller to open his own LC
IV: Seller to receive one more LC against an already issues LC from his
buyer
Answer: a. I only
b. I. III and IV
c. III only
d. IV only
e. II only
67. Which of the following is NOT a Settlement Method for Bank
Loans? Marks: 3
Answer: a Securities Repository
b. Assignment
c Participation
d Sub-Participation
e Pre closure

68 Which of the following operations cannot be done on a LC (Letter


of Credit)? Marks: 2 ,
Answer: a Purchase
b None of the listed Options
c Discount
d. Acceptance
71 In a Securities lending transaction, if the buyer of securities
provides cash as collateral. Then the seller of securities has to
provide the buyer with a interest amount for the cash What is this
interest amount called? Marks: 3
Answer: a Interest Rate
b Rebate Rate
c Collateral Interest

d. Return Rate
e None of the listed Options

72 The term settlement cycle refers to which of the following


option? Marks: 1
Answer: a time period between the date on which an investor first makes
the decision to enter a trade and the date when the trade is settled b None
of the listed option are correct
c time period between the date on which the trade is cleared and the date
when the trade is settled
d time period between the date on which the trade is executed and the date
when the trade is settled
74 Jet Airways and Citibank have tied up to offer this type of credit
card what type of card is it? Marks: 2
Answer: a. Gift Card
b Co Branded card
c Smart Card
d Affinity Card
77 The share price of a company may drop considerably from its
current levels. In this scenario, what type of risk are the investors
facing? Marks: 3
Answer: a. Market Risk
b. Credit Risk
c. Company Risk
d. Business Risk
e Liquidity Risk

81
represents the credit worthiness of the borrower
2
Answer: a. LOAN score
b. score
__________

Marks:

c. FICO score
d. Interest score
82 In Trade Finance, which of the following factors are
considered while choosing mode of financing? Marks: 2
Answer: a. Exporters Fund, Risk Factors, Cost of financing. Time
frame
b none of the listed options
c Government Guarantee Program. Seller preference
d Time frame, Cost of financing. Buyers trade associates
83 How would you categorize account activity alerts in mobile
banking? Marks: 2
Answer: a Transactions
b Support
c Investment
d Account Information
85 The BASEL 2 framework has 3 main pillars From the options
given below. find the one that is NOT a part of it: Marks: 1
Answer: Q a. Operational Effectiveness
b Minimum Capital Requirements
c. Market Discipline
d. Supervisory Review
91 In any task undertaken by a company, the presence of risk implies
that Marks 1
Answer: a. The shareholders of the company will lose money
b. The outcome of the tasks undertaken by the company is uncertain
c. The company will not fare better than its competitors

d. The companys management has not done a good job


e. The standard deviation of the return is zero

92 Trading of a corporations stock or other securities (eg bonds or


stock options) by individuals with potential access to non-public
information about the company is called: Marks: 2
Answer: a. Insider Holdings
b. Lock in Period
c Insider Trading
d Hedging
e Initial Public Offer

93 If total spread on underwriting is $ 500000 and Managers fee is S


100000. What is the amount which will be distributed in the
syndicate? Marks:3
Answer a. Cannot be determines
b. 100000
c. 400000
d. 600000
e. 500000
....

94 If an investment company has securities and other assets worth


$100 million and has liabilities of $10 million. the investment
companys NAV will be? Marks: 2
Answer a. $110 million
b. $10 million
c. $100 million
d. $90 million

95 is the amount of net income related to each share. Marks: 1


Answer a. EBIT

b. PAT
c. PBT
d. LEPS
98 What is Line of credit? Marks: 2
Answer: a. None of the listed Options
b. Irrevocable credit provided by financial institution
c. A formal, legal commitment to extend credit up to some maximum
amount over a stated period of time
d. Similar to credit card
e. Removing credit agreement

100 Dividend declaration is an example of:


Answer: a. Private Banking
b. Investment Banking
c. Merger and acquisition
d. Initial Public Offer
e. Corporate action

Marks: 3

101 Which is NOT a type of corporate bond?


Answer: a. Unsecured bonds
b. Sub-ordinated debentures
c. T-BiIIs
d. Secured Bonds

Marks: 1

105 At the end of the trade cycle. the trades are to determine the
obligation of the trading members to deliver securities/funds as
per settlement
schedule. Marks: 2
Answer: a. Offset
b. Grossed

c. Netted
d. Aggregated
107 From the given options identify the service(s) that can be
categorized under Asset Servicing line of business.
I: Corporate Action processing
Marks: 1 II: Income Processing
Ill: Transfer Agency services
IV: All of the listed options
Answer: a. Ill only
b. I only
c. Both I and II
d .IV
0 e. II only
108 Identify the odd one out:
Answer: a. Treasury Notes
b. Stocks
c. Treasury Bills
d. Bill of Exchange
e. Commercial Papers

Marks: 1

109 Which of the following is NOT an example of an option?


Marks: 1
Answer: a. Oil Futures
b. Call Option
c. LEAPS (Long Term Options)
d. Swap option
e. Put Option

111
of a securities trade involves the transfer of the
securities from the seller to the buyer. Marks:2
Answer: a. Settlement
b. Netting
c
_____________

115. In Electronic Check Conversion (ECC), what happens once


the check is processed? Marks: 3
Answer: a. Receive Cash immediately
b. The customer signs a receipt authorizing the store to present the
check to the bank electronically and deposit the funds into the stores
account
c. The customer can present a check to a store cashier
d. All of the listed options
117 Open ended loan allow the borrower to borrow additional
amount subject to the maximum amount less then a set value.
State True or False Marks: 1
Answer: True False
118 Private Banking Clients have high
Answer a Investible Assets
b. Net worth. Investible assets and Income
c. Income
d. Net worth

_________

Marks: 1

119 Which of the following risks for the investor is associated


with corporate bonds but NOT U.S. Treasury securities?
Marks: 2

Answer: a. Credit Rating Risk


b. Interest Rate Risk
c. None of the listed options
d. Default Risk
e. Reinvestment Risk
121 On a trading day at an exchange. a broker undertakes the
following trades: Marks: 3
Buy 200 Microsoft shares for S10.00 each
Sell 100 Microsoft shares for S10.00 each
Buy 100 Google shares for $20.00 each
Sell 30 Microsoft shares for $11. 00 each
Sell 50 Google shares for $20.50 each
Sell 40 Microsoft shares for $9.00 each
How much did the broker pay out to the exchange in total in case of (a)
gross settlement system (b) net settlement system?
Answer: a. (a) $4000 (b) $1285
b. (a) $1235 (b) $2235
c. (a) $260 for Microsoft $975 for Google (b) $975 for Google & $260 for
Microsoft
d. (a) $1235 (b) $4,000
e. None ofthe listed Options

122 On a trading day at the NYSE. a broker undertakes the following


trades: Marks: 2
Buy 120 Dell shares for $10.00 each
Sell 70 Dell shares for $10.50 each
Buy 200 Cisco shares for $20.00 each
Sell 20 Dell shares for $1 1.00 each
Sell 50 Cisco shares for $20.50 each
Sell 1 0 Dell shares for $9.00 each
Given that a net settlement system is being used, find out the net position

of the broker at the end of the day.


Answer: a. Dell: 70 shares to give out: Cisco: 90 shares to receive: $3,000
to pay out to the exchange
b. Dell: 20 shares to receive: Cisco: 1 50 shares to receive: $31 30 to pay
out to the exchange
c. Dell: 150 shares to receive: Cisco: 20 shares to receive: $3130to receive
from the exchange
d. None of the listed Options
e. Dell: 20 shares to pay out: Cisco: 1 50 shares to receive: $3,780 to pay
out to the exchange

123 The process of netting:Marks. 1

Answer: a. Increases the number of settlements


b. Neither reduces nor increases the number of settlements
c. Increases the transaction costs
d Reduces the number of settlements
.

124 On a trading day at the NYSE. a broker undertakes the following


trades: Marks: 3
Buy 100 IBM sharesfor$11.00 each
Sell 50 IBM shares for $10.50 each
Buy I 00 MSFT shares for $20.00 each
Sell 20 IBM shares for $1 1 .00 each
Sell 1 0 MSFT shares for $20.50 each
Sell 30 IBM shares for $9.00 each
How much did the broker pay outto the exchange in total in case of (a)
gross settlement system (b) net settlement system?
Answer: a. (a) $3100 (b) $1880
b.(a) $1880 (b) $3100
c. None of the listed Options
d. (a) 0 for IBM, $1 ,795 for MSFT (b) $1,780
e. (a) $1 .780 (b) 0 for IBM. $1 ,795 for MSFT

126 If a financial instrument has a 50% chance of paying 20% and a


50% chance of paying 60% percent, what would be the expected
return? Marks:2
Answer: a. 0.2
b. 0.8
c.0.4
d. 0.5
127 Warrants are the combination of which of these instruments?
Marks: 3
Answer:
a. Put Options and Swaps
b. Cash and Call Options
c. Equities and Call Options
d. Equities and Futures
e. Call and Put Options

128 is the legal and professional proceeding in which a lender,


obtains a court ordered termination of a borrowers equitable right of
redemption. Marks: 3
Answer:
a. Credit-Freeze
b. Foreclosure
c. Securitization
d. Sub-Prime
129 The components to determine the rate of exchange in a Forward
Contract are: Marks: 2 ,
Answer

a. Current Spot Rate and Forward rate adjustment


b. Forward rate adjustment and amount of currency bought 7 sold
c. Current Spot Rate, amount of currency bought / sold
d. Cross Currency Rate and forward rate adjustment

130 Money laundering refers to which of the following option?


Marks. 1
Answer:
.

a Extending loans to corporate


b. Converting the profits from criminal activities into legitimate funds
c. Short term borrowing & placements
d. All of the listed options
1.

If the price of share pf cognizant changes from 65 to 60 this can be attributed to:
a. Market risk
b. Interest rate risk
c. Credit risk
d. Operational risk
e. Liquidity risk

2.

Account maintained in the home currency by one bank is the name of another
bank based abroad is called as:
a. Current account
b. Nostro account
c. Vostro account
d. Forex account
e. Overseas account

23. Which is not banks primary use for deposits?


a. Payment to employers
b. None
c. Investment
d. Loan
e. Withdrawal
27. On the trading day at the NYSE a broker undertakes the following trades
Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MFST share for $20.00 each

Sell 20 IBM shares $11 each


Sell 10 MFST share at 20.50 each
Sell 30 IBM shares for 9.00 each
How much did the broker pay out to the exchange in total in case of (i) Gross
settlement system (ii) Net Settlement System?
a. (i) $1780 (ii) $3000
b. (i) 0 for IBM, $1795 for MSFT (ii) $1780.
c. (i) $3000 (ii) $1780
d. None
e. (i) $1780 (ii) 0 for IBM, $1795 for MSFT
31. While providing security lending services to its clients which risk will a
custodian have to manage for its clients
A) Liquidity risk
B) Both Credit risk and interest rate risk
C) Interest rate risk
D) Credit risk
E) Both credit risk and liquidity risk.
50. Which of the following is not a treasury management system?
A) Calypso
B) Summit
C) Wall street system
D) Front arena
E) Flex cube
51. Syndicate helps in all of the following activity but
A) Managing large bond issues
B) Raising huge money from the bank
C) Managing large capital raising act
D) Managing conflict between investment banks.
A) IPO distribution
56. in an international securities transaction, which of the following participant will
not be involved
A) Global custodian , domestic sub custodian , depository in foreign country and
sometime stock exchange in foreign country
B) Depository in foreign country
C) Global Custodian
D) stock exchange in foreign country
E) domestic sub custodian
65. A formal Legal commitment to extend credit to some max amount over a state
period of time is description of

a.
b.
c.
d.
e.

Trade Credit
Revolving Credit agreement
Agreement Irrevocable Credit
Line of Credit
Letter of Credit

69. Which of the following factors affect the choice of Payment Method?
a. Exporters Fund
b. All
c. Government Guarantee Program
d. Time Frame
e. Cost of Financing

76. Which of the following according to you has resulted in defining contribution
plans gaining popularity over defined benefit plans
a. DC plans fix the monthly contribution from the employee making his financial
planning easier.
b. DC plans are seen by employees as investment which to accumulate retirement
income.
c. All
d. Employer increasing wants employees to share responsibility for retirement
77. ________is typically largest part of spread and is paid to broker\dealer or that
actually took clients order
a. Salary
b. Manager fee
c. Wage
d. Concession
e. Underwriter
78. NASD is not an SRO for
a. Listed market
b. Over the counter market
c. Third market
d. Fourth market
79. High net worth individuals generally have ____________.
a. Market capitalization more than $200000
b. All
c. Net worth greater than $500000
d. Household income of max $50000 year.
80. Which is true about retail banking?
a. The business focuses on small no. of high net worth individuals.

b. The business focuses on small and medium enterprises.


c. The business focuses on large no. of individuals.
d. The business focuses on large no. of corporation bodies.
81. Offer is price at which a firm
a. Trades in securities
b. Quotes to its bets customer
c. Intends to buy
d. Intends to sell
e. Quotes when it does not want to trade.
82. Securities with original maturity greater than 1 year are traded on money
market.
a. True
b. False
83. Which is not a banking service?
a. Stock market
b. Retail banking
c. Corporate banking
d. Customer lending
84. Which is true?
a. Financer owns the asset both in case of Lease and hire Purchase.
b. Tax deduction cab be claimed fro the full value of the rental paid in case of lease
c. All
d. Depreciation in claimed by the financer in lease and not in case of hire
purchase.
85. Bank a based in US provides safe keeping services for securities to its US clients.
It also has clients in France and Belgium and provides securities safe keeping
services to these clients through banks C & D respectively. Which best describes
bank A?
a. Global custodian,
b. None
c. Main custodian
d. Sub custodian
e. Secondary custodian
86. All following statements relating to Bonds are correct except.
A) Bonds sell at a discount when Coupon Rate is less than Market Interest rate.
B) None
C) Bond is debt instrument giving issues.
87. Which of the following type of loan requires the amount of interest that
would be earned on the loan to be paid upfront by the borrower?
A) Capitalized loan
B) True Discounted loan
C) Amortized loan

D) Demand loan
E) Discounted loan
88. Who are involved in the preparation of prospectus of IPO?
A) Commercial bankers
B) Investment Bankers
C) None
D) Company Management
E) Company Management and Investment Bankers
89. Bankers Acceptance differs from Sight Draft in that
A) Bankers Acceptance reduces lending capacity
B) Sight Drafts are negotiable instruments
C) Bankers Acceptance demands immediate payment.
D) None
E) Banks can raise funds by selling acceptance.
90. Clients of a private banker are generally not segregated on the basis of
A) Investible assets
B) Location
C) Age
D) Net worth
E) Name
91. The initial sale of the security is in the market, while subsequent
trading in the security is in the .. market
A) Spot, futures
B) Debt , Equity
C) Primary , Secondary
D) Money, Capital
E) Secondary, Primary
92. Under what category can services like asset/liability analysis, asset
allocation, cash projection, compliance reporting, fund administration,
investment Management universe etc. provided by an institution can be
classified?
A) Investment Management
B) Asset Servicing
C) None
D) Trading
E) Investor Services.
93. CIP in the context of anti-money laundering is
A) All
B) Stands for Suspicious Activity Reports
C) Customer Identification Program

D) Requiring Businesses, which were only to report cash transactions involving more
than 1.00,000?
94. On a trading day at a stock exchange a broker undertakes the foll trades:
Buy 100 IBM shares for 10$ each
Sell 50 IBM shares for 10.5 $each
Buy 100 MSFT shares for 20$ each
Sell 20 IBM shares for 11$ each
Sell 10 MSFT shares for 20.5 each
Sell 30 1bm shares for 9$ each
At the end of the day, the broker owes 1780 to the exchange while exchange owes
him 90 shares of MSFT. Is it possible?
A) Yes under RTGS
B) No
C) Yes under net-settlement system
95. Dow Jones industrial average is made of
A) 30 stocks
B) 20 stocks
C) 40 stocks
D) 10 stocks
E) 50 stocks
96. Which is the key feature of Letter of Credit?
A) basis for devising proper currency hedging strategy
B) Distributes risk between buyer n sellers.
C) basis for devising proper currency hedging strategy and opportunity for receiving
payment in advance of the due date.
D) All
E) Opportunity for receiving payment in advance of the due date.
97. Which risks bring gain and losses?
A) Interest rate and foreign exchange
B) Liquidity and credit
C) Credit and Interest rate
D) Credit and Foreign exchange
E) All
98. Find the future value of $1200 invested at 5.25 % per annum payable
annually after 6 months? Marks: 2
1. 1345.1
2. 1243.1
3. 1231.1
4. None
5. 1235

99. Investor services like brokerage, cash management and short term
investments, commission re-capture, foreign exchange transactions,
transaction management etc. can be classified under ____ group of services.
Marks: 1.
1. Trading
2. Investment Management
3. Investor service
4. None
5. Asset Servicing
101. The term CP is used in corporate lending for ____. Marks: 1
1. Collateral provision
2. Client Partner
3. Commercial Paper
4. Commodity Put options
5. Credit Provision
102 What are the risks associated with the Hedge funds? Marks: 3
1. All of the above
2. High exposures in derivatives
3. High Leveraging
4. High Speculation

103. The trade terms 15/2 net 30indicates that _____. Marks: 3
a. 2% discount is offered if payment is made within 15 days.
b. 15% discount is offered if payment is made within 2 days; the payment
should however be made in 30 days.
c. 30% discount is offered if payment is made before 15 of the month.
d. 15% discount is offered if payment is made between 2 & 30 days;
e. 15% discount is offered if payment is made within 30 days.
104. A bank is required to hold reverses at least equal to a pre-scribed fraction of its
total deposit liabilities.
a. True
b. False

105 What term is used to describe n LC that remains valid for years thereby
eliminating the cost of separate LCs for each transaction with a regular client?(not
sure bout the answer)
a. Irrevocable LC
b. None

c. Red clause
d. Revolving LC
e. Evergreen clause
106 Who appoints investment manager to manage a benefit plan?
a. Plan sponsor
b. Plan administrator
c. Fund trustee
d. None
e. Government
107 A company would pay the interest on what portion of loan?
a. Committed amount
b. Either disbursed or committed loan
c. Unused amount of loan
d. Disbursed amount
e. None
108 In the exchange on a particular trading there is a buy market order for 100
CTSH shares and two sell market orders for 50 and 40 CTSH shares each, can the
buy order be matched against the two sell orders.
a. Yes
b. No
c. Yes, but if prices on the buy & sell side match.
109 If the limit = $2000, margin = 20% and asset value = $2000 then drawing power
for an open ended loan is equal to?
a. None
b. $1600
c. $2200
d. $2400
e. $2000
110 Risk cannot be migrated by
a. Setting risk limits
b. Hedging
c. Diversification
d. Arbitrage
e. Insurance
111 A fixed income analyst will analyze all but
a. Municipal bonds
b. Bonds of govt. sponsed enterprise
c. Corporate bonds
d. US treasuries
e. Shares

112 In benefit administration what are the relationships that exits between the plan
administrator and the investment manager, and between Trustee and the investment
manager.
a. None
b. Plan administrator & trustee both have outsourced plan administration as well as
fund management to investment manager
c. Any
d. Plan administrator gives investment instruction to investment manager while
trustee appoints the investment manager.
e. Trustee gives investment instruction to investment manager, while plan
administrator appoints the investment manager.
113 Which entity provides credit scores that are used by issuers to process card
application?
a. Issuer processor
b. Collection agency
c. Issuing bank
d. Authorization engine
e. Credit bureau.
114 CPI stands for which of the following?
a. Consolidated Price index
b. Consument popularity index
c. Consumer product index
d. Consumer price index
e. None
115 A bank decides to sanction only 10% of the loan sought by a company. The
company goes and pledges extra assets with the bank and the bank then agree to
sanction 50% of the loan sought. The company has indulged in the process of
a. Credit scoring
b. Credit increase
c. Credit incrementation
d. Credit revision
e. Credit enhancement.
116 FX spot deal assumes maturity of how many business days ahead ?
a) 4
b) 5
c) 3
d) 1
e) 2
117 Which of the following is best VaR estimation Model?
a) Monte- Carlo
b) Historical

c) Variance-Covariance
d) Variance-Covariance and Monte- Carlo
118 Which of them represent company is incorporated in USA?
a) Plc
b) Pte
c) Ltd
d) Inc
119 Which of the factors affect the choice of payment methods?
a) Govt. guarantee Program
b) Time frame
c) All
d) Cost of financing
e) Exporter fund.
120 Organization level risk appetite is determined by:
a) Risk management
b) Front office
c) Back office
d) Trade
e) Board of director
121 Risk management is function of:
a) Traders
b) Back office
c) Specialist
d) Front office
e) Mid office
122 Purely competitive financial market is not characterized by
a) Govt. regulation
b) Many traders
c) Full info
d) Cost effective trading
123 NOT player in typical trade cycle;
a) Custodian bank
b) Clearing bank
c) Clearing member
d) Trading member
e) Regulator
124 Once syndicate has sold all other trades participant, sub participant and
assignment are considered trade in what market?

a)
b)
c)
d)
e)

Primary
Secondary
Participant
OTC
Index

125 Question relates to price weighted index?


1. DJIA
2. Hangseng
3. EAFE index
4. NASDAQ composite index
5. S&P 500
126 In defined contribution retirement plan .Tax sheltered annuities fall under
section of _________ERISA
403b
401k
401b
403k
None
126 In benefits administration, trustee and plan administrator submit compliance
report to______ which in turn qualifies the plan.
Participant
None (answer is TRUST)
Government
Investment manager
Sponsor
127 Full form of ADR
Answer: American Depository Receipts
128 Question related to BASEL II
Answer: Capital adequacy
129 What is interest rate charged on asset based loan?
Answer: The interest rate charged is lower than personal loans
130 Question related to credit derivatives as which of the following function is not done by
credit derivatives

Answer: Answer was something as Transfer to over the counter


131 Question related to credit derivatives it was fill up the blanks? Exactly dont remember
the question/

Answer: option having TRANSFER


132 Question related to non-discretionary Investment Management

Answer: the bank offers investment recommendations based on the Clients


approval.
133 Question having few options like Income Processing, Tax Information Services, Cash
Sweep

Answer: ASSET SERVICING


134 Question related to Underwriting?
Options:
1. Underwriting Spread
2. Public Offering Price (POP),
3. Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it)
4. All

Answer is ALL the listed option


Risk Matrices was developed by:- JP Morgan, Bank of California, Credit Suisse,
SBI
2. Research analyst may recommend to :- buy, hold and sell
3. Reducing CRR for banks would have impact on:a. Increased money supply
b. Reduced interest rates
c. Reduced money supply in the economy
d. Profitability of firms
e. None
4. Under corporate stock repurchase program
a. Corporate purchase their own shares from shareholders
1.

5.

Private banking providing risk management services strives to:a. Eliminate risk and maximize returns
b. Eliminate risk without worrying about returns
c. Reduce risk and optimize returns
d. Avoid risk and returns
e. All
f.

6.

One would go for bank deposits because


a. Money easily available
b. Interest earned
c. Insurance cover available
d. All

7.

Basic 4 parties involved in any transaction using letter of credit are following
except
a. Issuing bank
b. Buyer
c. Reimbursement bank
d. Seller

e.

Beneficiary bank

8.

From sellers point of view which method has least risk


a. LC
b. Direct debit
c. Documentary collection
d. Counter trade
e. Cash in advance

9.

ABC rated as AA+ and XYZ rated D. Who gets loan from bank
a. Equally unlikely
b. Equally likely
c. ABC
d. XYZ
e. None

10.

Which is not the settlement method for bank loans?


a. Pre-closure
b. Assignment
c. Participation
d. Sub participation
e. Securities repository

11.

Which is correct hierarchy of corporate ratings (high to low)?


a. AAA,AA+,BBB,D

12.

Inflation- 9%. Future value of 100 units of money after 2 years:


a. 118.8
b. Exactly 100
c. Exactly 200
d. Around 109
e. None

13.

Brokerage firms are regulated by


a. SEC
b. Industry wide SROs
c. State regulatory Agency
d. All

14.

Odd man out:a. SEC


b. NYSE
c. NASDAQ
d. LSE
e. NSE

15.

From investor stand point a debenture issued by excellent company will appear
risky than share of preferred stock issued by excellent company
a. True
b. False

16.

Risk associated with hedge funds:a. High exposure in derivatives


b. All
c. High speculation
d. High leveraging

17.

Not a feature of private banking:a. High investment in technology


b. Lot of research
c. Commercial lending
d. Specialist advice
e. Understanding capital and investment needs

18.

Which of the following affects the choice of payment method


a. All
b. Government guarantee method
c. Exporters fund
d. Time frame
e. Cost of financing

19.

Which risk may bring gains and losses?


a. Credit risk and interest rate risk
b. All
c. Liquidity risk and foreign exchange risk
d. Credit risk and foreign exchange risk

20.

Bankers acceptance differs from sight draft in that


a. Sight drafts are negotiable instruments
b. Bankers acceptance demand immediate payments
c. Bank can raise funds by selling acceptance
d. Bank acceptance reduces banks lending capacity
e. None

21.

Formal legal commitment to extend credit up to some maximum amount over a


period of time is a description of
a. Line of credit
b. Irrevocable credit
c. Letter of credit
d. Revolving credit agreement
e. Trade credit

22.

Security settlement is function of


a. Specialist
b. Traders
c. Back office
d. Front office
e. Mid office

23.

Which of these instruments is not included as part of asset servicing services and
the category Pricing/ Holdings Valuation which includes accurate pricing, rating
etc.
a. Equities
b. Certificate of participation
c. Government securities
d. Certificate of deposit
e. Services may be provided for all

24.

Which of the following is involved in retails brokerage business in US


a. E-trade
b. Charles Schwab
c. Sallie Mae
d. Federal reserve
e. a and b both

25.

Measures of performance of an investment portfolio are all of the following


except:a. Risk adjusted return
b. Style maps score
c. Profit/loss on portfolio
d. Alpha
e. Up/down market analysis

26.

Interest rate spread:a. Current rate floor


b. Cap current rate
c. Current rate-base rate
d. Base rate-floor rate
e. None

27.

Who insures stocks in stock market


a. Security and exchange commission
b. Federal deposit insurance corporation
c. Us department of treasury
d. None

28.

NASD is not an SRO for


a. 4th market

b.
c.
d.
e.

3rd market
Listed market
2nd market
OTC market

29.

Which of the following loan requires the amount of interest that would be earned on
the loan to be paid upfront by borrower:a. Discounted loans
b. True discount check not sure
c. Capitalized
d. Demand
e. Amortized

30.

Limit = $2000 Margin=20% Asset value=2000


a. Drawing power = 1600

31.

Over the counter market is also called


a. Unlisted market
b. 2nd , unlisted and OTC market
c. Unlisted
d. Super
e. 2nd market

32.

Liquidity issues of credit can be addressed by:a. Sweep facility


b. Structured lending to client
c. All
d. Short term credit facilities
e. Overdraft

33.

Standby letter is _____ secure than documentary collection and cheaper than ____
a. More, commercial LOC

34.

Which is not an option


a. Call
b. Put
c. Swaption
d. Oil futures
e. Leaps

35.

question on top 10 US bank REBO

36.

ACH transaction involves


a. Cash
b. Electronic data

Docs
Checks and drafts
All
37. Interest rates falls
a. Bond prices increase
b. Bond prices decrease
c. Do not change
d. Economy goes to deflation
38. Rate at which bank purchases US dollars against home currency is :a. Bid
b. Indirect
c. Direct
d. Cross currency
e. Ask rate
c.
d.
e.

39 Offer price is the price at which the firm


f. Intends to buy
g. Intends to sell
h. Trades in securities
i. None
39. Bid price is the price at which the firm
The price at which market makers will buy or sell a particular security.
41 Presence of risk implies
a. Standard deviation of return is 0
b. Uncertainties of final outcome
c. Final wealth is lower
d. Investment gain
40. Company would pay interest on what portion of the loan?
a. Disbursed amount
b. Committed amount
c. Both
d. Either
e. None
41. Odd man out?
a. Equity
b. Stocks
c. Shares
d. Convertible bonds
e. Common stock
42. A bank cannot cover the money demanded by depositor, then it goes out to
a. Federal reserve bank
43. Institutions involved in benefit administration process, discussing plans
a. Sponsor
b. Custodian
c. Plan administration

Record keeper
Participant
44. Which of the following eliminates both country risk and commercial risk?
a. Both standby LOC and LOC
45. When bank goes to the fed to borrow funds then the interest rate charged by fed is
known as
a. Prime rate
b. Bond rate
c. Discount rate
d. Federal rate
d.
e.

Some important questions:


There will be 1,2,3 marks questions
There will be 121 questions
1) Page 5
State T/F
Simple interest is calculated only on the beginning principal.

2) Page 6
INFLATION
There will be three questions based on this formula:The relationship between the R (real rate of interest), N (nominal rate of interest)
and I (rate of inflation) is as:
R= N-I.
3) Page 8
One question on future value
The formula for Future Value is:
FV = PV*(1 + i)n
4) Page 8
One question on Intra-year compounding

Question was like this if rate of interest is 4% and compounded quaterley for 4
years then what is the value of r and t
8) Page 16
Treasury Securities
Treasury bills issued for one year or less.
Treasury notes have a term of more than one year, but not more than 10 years
Treasury bonds greater than ten years

12) Page 20
American Depository Receipts (ADR)
The purpose of an ADR is to facilitate the domestic trading of a foreign stock.
16) page21
Two questions will come:
Hedging involves protecting an existing asset position from future adverse price movements. In
order to hedge a position, a market player needs to take an equal and opposite position in the

futures market to the one held in the cash market.


Arbitrage: An arbitrageur is basically risk averse. He enters into those contracts were he can
earn risk less profits. When markets are imperfect, buying in one market and simultaneously
selling in other market gives risk less profit. Arbitrageurs are always in the look out for such
imperfections.
24)Page 29
What is Money Market?
Money market is for short term financial instruments, usually a day to less than a year.
25) Page 29
What is a repo?
A repo is a contract in which the seller of securities, such as Treasury Bills, agrees to buy them
back at a specified time and price.
26) Page 30
regulator(s) and supervisor(s) forthe financial markets.
Thus India has Securities and Exchange Board of India (SEBI)
and the US has Securities and Exchange Commission (SEC).
27) Page 30
What do u mean by portfolio management system?
These systems allow the investment managers to choose the instruments to invest in, based on
the requirements or inputs such as amount to be invested, expected returns, duration (or tenure)
of investment, risk tolerance etc. and analysis of price and other data on the instruments and
issuers
29) Page 50
There will two or three questions from CRR..
What do u mean by CRR (Cash Reserve Ratio).
There will be two numericals also..
Same from book example?
31) Page 54
What is Glass-Steagall Act ?
Glass-Steagall Act of 1933, created a Chinese wall between commercial banking and securities
businesses in US. That act was intended to address the perceived causes of bank failures during
the Great Depression of 1929.
32)Page 57
Read this page carefully .. three questions will come
Checking Accounts
Quick, convenient and, frequent-access to the money.
Some banks pay interest while many do not.
Money Market Deposit Accounts
Pays a higher rate of interest than a checking or savings account
MMDAs often require a higher minimum balance to start earning interest
Savings Account
Allows making withdrawals, but checks writing facility is not there.
Number of withdrawals or transfers one can make on the account each month is limited.

Time Deposits (Certificates of Deposit)


Guaranteed rate of interest for a term or length of time specified by the account holder.
The rate of interest is often higher than savings or any other account
Basic or No Frill Banking Accounts
Checking accounts, but with a limit on the number of checks one can write and the number of
deposits and withdrawals one can make
Interest is generally not paid.
34)Page 61
What is EFT?
Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic
technology as a substitute for checks and other paper transactions. EFTs are initiated through
devices like ATM cards or codes that let one to access your account. Many financial institutions
use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose.
35) Page 63
Read section Lost or Stolen ATM or Debit Cards
If unauthorized use occurs before reporting, the liability of the customer varies depending on the
delay in reporting the loss to the card issuer.
Within two business days Liability limited to $50 for unauthorized use.
Between 2 - 60 days Liability limited to $500 because of an unauthorized transfer.
If the loss is not reported within 60 days, the liability has no limits.
36) page 64
What is EBPP and its advantages?

ELECTRONIC BILLING PRESENTATION AND PAYMENT


37) page 65-66
Read thoroughly.. Some of the questions were
What is Fedwire?
Fedwire is an electronic transfer system developed and maintained by the Federal Reserve
System. The system connects Federal Reserve Banks and Branches, the Treasury and other
government agencies
Full form of CHIPS?
Clearing House Interbank Payments System
What is SWIFT?
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) runs a worldwide
network by which messages concerning financial transactions are exchanged among banks and
other financial institutions
What is latest version of SWIFT?
SWIFT 15022
39) Page 70 VVimp
One question ie numerical atleast on :

c. Limit (L) max outstanding allowed


d. Margin (M) percentage of limit that can be drawn
e. Asset value (AV) value of underlying asset
f. Drawing Power (DP) - lower of L and (1-M)*AV
40) Page 71
One question which is not a repayment kind?
Kinds of repayments
o EMI same installment amount
o Fixed Principal constant principal, decreasing interest amt
o Step-up principal amount increases in steps
o Step-down principal amount decreases in steps
o Balloon notional amount initially, large last payment
o Bullet interest payment initially, entire principal at one shot
o Random schedule & amount of installments undecided
o Special products combination of above
42) Page 73
What is Collar and Spread?
Spread= current rate base rate
Collar = cap-floor
43) Page 73
Charge Types
Pledge gold, bank has possession
Hypothecation vehicle, borrower has possession
Lien against bank deposits
Assignment insurance policies, rights get transferred to bank
Shares - periodic drawing power calculation
Mortgage immovable property
44) Page 76
What are Freddie Mac, Ginnie Maes & Fannie Mae?
Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage
Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or
Freddie Mac) are all "secondary market lenders".
46) Page 82
What is the meaning of corporate lending?
Corporate Lending refers to various forms of loans extended by banks to corporate bodies like
proprietorship, partnership, private limited companies or public limited companies.
49) Page 85
What do u mean by Commercial Paper?
Commercial Paper (CPs as commonly known) is an instrument by which a corporate borrows
money from banks for short periods of time. A CP binds the corporate to make a payment equal
to the face value of the CP to the issuing bank on a specified due date. In this sense, a CP is like
a short term unsecured loan.
51) page 87
Atleast two questions will come from credit derivatives
Credit derivatives are financial contracts that transfer credit risk from one party to another,

facilitating greater efficiency in the pricing and distribution of credit risk among market players.
In market parlance, the corporate bond investor in this example is the buyer of protection, the
dealers the protection seller, and the issuer of the corporate bond is called the reference entity
53) Page 90
What do u mean by:
Forward Rate Agreement (FRA) - A contract that determines the rate of interest,
or currency exchange rate, to be paid, or received, on an obligation beginning at a some
future start date. It is also referred to as Future Rate Agreement.
Interest Rate Swap (IRS) - A deal between banks or companies where borrowers switch
floating-rate loans for fixed rate loans in another country. These can be either the same
or different currencies. The motive may be the competitive advantage of one company to
have access to lower fixed rates than another company. The other company may be
competitively placed to have access to lower floating rates. A swap would be beneficial
to both. The swap is measured by its notional principal.
54) page 91
What do u mean by CMS?
Cash Management Services - CMS is a service provided by banks to its corporate clients for
a fee to reduce the float on collections and to ease the bulk payment transactions of the
client. The three elements of CMS are:
Receivables Management
Payables Management
Liquidity Managemet
55) Page 92
What are the causes of interest rate risk?
Repricing risk
Yield curve risk.
Basis risk
Optionality
56) Page 94
One numerical on:
INR/USD quote: 45.26/.36 (here, 0.01 is the smallest count, referred to as one pip)
EUR/USD quote: 1.2458/.2461 (here, 0.0001 is the smallest count, referred to as one pip)
While the derived cross currency rate would be:
INR/Euro quote: (45.26*1.2461)/ (45.36*1.2458) = 56.40/.51
How many business days are required for spot deal?
Answer two days
57) Page 95
Which are the inter banks:
Front Arena
Summit
Calapso
Wall Street Systems
64)page 104
What are risk factors choosing the mode of financing?
Costs
Time frame
Risk factors

Govt gurantee programs


Exporters funds
66) page 105

PAYMENT METHODS
Cash in advance
Letter of credit
Documentary collection
Open account or credit
Counter-trade or Barter
68)page 107
four parties are involved in any transaction using an LC:
1. Buyer or Applicant
2. Issuing bank
3. Beneficiarys bank
4. Beneficiary or Seller
70) page 110( positively come)
The standby LC is like a bank guarantee. It is not used as the primary payment method but as a
fail safe method or guarantee for long-term projects.
Back to Back LC allows a seller to use the LC received from his buyer as collateral with the bank
to open his own LC to buy inputs necessary to fill his buyers order.
71) page 110
DOCUMENTARY COLLECTION
Documentary collection carries the risk that the buyer will not or cannot pay for the goods upon
receipt of the draft and documents.
72) page 111

OPEN ACCOUNT
This can be a very risky method for the seller, unless he has a long and favorable relationship
with the buyer or the buyer has an excellent credit rating.
82) page 131-132
See the diagram and learn all the front office and back office functions? Two questions will
atleast come
83)page 133
In achieving the above goals, an Investment Manager uses the following approaches/principles:
Asset Mix
International Diversification
Screens/Filters.
Capital preservation
Alternative Investments
86) page 139
Read mutual funds ..two questions will atleast come..

89) page 143

What is the name of pension funds?


401k,IRA
92) page 149

What do u mean by THE CHINESE WALL?


93) page 150

UNDERWRITING
Underwriters earn 3 types of Underwriting Spread:
Manager's fee - The lead underwriter receives this fee on all securities sold.
Underwriter's Allowance is the total spread minus the Manager's fee. This fee is shared by
syndicate members based on the type of syndicate account.
Concession - It is typically the largest part of the spread and is paid to the broker/dealer that
actually took the clients order.
94) page 151

SECONDARY MARKET TRADING


there will three questions atleast come, read it carefully:
Examples: Stock Exchanges: NYSE, AMEX
NASDAQ is a good example of OTC market.
Another name for fourth market: Instinet
95) page 153
Bid or ask rate:
An individual firm could act as a broker on one trade and a dealer on another. When acting as a
broker, the firm is taking customer orders and acting as their agent to buy or sell the security. For
this service, the broker charges a commission. A firm acting as a dealer is the actual buyer or
seller, taking the other side of a trade. The price at which market makers will buy or sell a
particular security is known as the Bid or Ask Price.

96) page 154


Order Types (Based on Volume)
Fill or Kill (FOK) The order must be immediately filled in one trade or canceled completely.
All or None (AON) - The entire order must be filled or canceled completely, but unlike FOK, AON
can remain good till cancelled.
Immediate or Cancel (IOC) must immediately be filled for as much of the order as possible in
one trade, with the remainder being cancelled.
Market Not Held order The floor broker has the discretion concerning time and price. A key
point is that Market Not Held orders are never on the Specialist's Book.
Question: diff between FOK and AON?
97)page 160

The important markets and the indices used are presented below:
US Diversified market Dow Jones Industrial Average (Dow)
US Technology NASDAQ 100
UK (London) Financial Times Stock Exchange Index (FTSE)
Germany (Frankfurt) DAX
France (Paris) CAC
Switzerland (Zurich) SMI
Japan (Tokyo) Nikkei
Hong Kong Hang Seng
Singapore Strait Times Index (STI)
98) page 164
See XL sheet sure three questione will come from risk
Credit risk is the possibility of loss as a result of default, such as when a customer defaults on a
loan, or more generally, any type of financial contract.
Liquidity risk is the possibility that a firm will be unable to generate funds to meet contractual
obligations as they fall due.
Operational risk is the possibility of loss resulting from errors in instructing payments or settling
transactions.
Legal risk is the possibility of loss when a contract cannot be enforced -- for example, because
the customer had no authority to enter into the contract or the contract turns out to be
unenforceable in a bankruptcy.
Market risk is the possibility of loss over a given period of time related to uncertain movements in
market factors, such as interest rates, currencies, equities, and commodities.
101) page 165
Numerical..
Example VaR Calculation
Assume that you have a holding in IBM Stock worth $10 million. You have calculated the
standard deviation (SD) of change over one day in IBM is $ 0.20.
Therefore for the entire position, SD of change over 1 day = $200,000
The SD of change over 10 days = $200,000 * (10) = $632,456
The 99% VaR over 10 days = 2.33 * 632,456 = $1,473,621
102) page 165
What is monto-carlo?
Ans: A simulation technique
104) page 166

MANAGING RISKS
There are multiple strategies to manage risks. Some of the commonly followed ones are:
1. Diversification
2. Hedging or Insurance
3. Setting Risk Limits
4. Ignore the risk!
109) page 184-185
The primary employee benefits are
Defined Benefits
Defined Contribution
Health and Welfare
Defined contribution plans have gained popularity as employers have begun to ask their
employees to share responsibility for their retirement. The main purpose of a defined
contributionplan is to provide an investment vehicle for employees to accumulate
retirement income.( state true or false) true

diff between Defined Benefit Plan vs Defined Contribution Plan ?

110) page 186


The following plans are designated as defined contribution plans:
Profit Sharing Plans
Cash Or Deferred Arrangements Or 401(k) Plans
Stock Bonus Plans And Employee Stock Ownership Plans
Simplified employee pensions (SEP)
Tax Sheltered Annuities Or 403(b) Arrangements

Some common questions:


1)Which is the best market ? New York
2) which is not a function of private bank?
Ans: to print notes
3) Reliance Industries Limited, India would like to raise money in NYSE for expanding its
operations in the domestic market (India). The securities issued would be
American Depository Receipt

1.An underwriter ______________.


a. guarantees & makes good of any shortfall in subscription to the extent of his
underwriting
b. decides the insurance premium
c. is typically an investment bank
d. guarantees that the capital issue will be subscribed at premium
e. All of the listed options
2. Which of the options best 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

a. 4,1,3,2,5

b. 4,5,2,3,1

c. 1,2,3,4,5 d. 3,4,2,5,1 e. 2,5,1,3,4

3. Corporate Lending refers to:


a. Loans provided by companies to individuals
b. Loans provided to high net worth individuals
c. Loans provided to individuals
d. Loans provided to companies by Government
e. Loans provided to companies
4. A choice quote is _______________.
a. price at which a firm is ready to buy or sell. It also means when bid is equal to offer
b. when bid is equal to offer
c. where the firm has a choice of deciding the security to take

d. price at which a firm is ready to buy or sell

5. In an international securities transaction, which of the following participants will NOT be


involved?
a. Domestic Sub-custodian
b. b. Stock exchange in foreign country
c. c. Global Custodian, Domestic Sub Custodian, Depository in Foreign Country and
Sometimes Stock exchange in foreign Country
d. d. Depository in foreign country
e. Global Custodian
6. Stock A is more volatile than Stock B. Which stock is more risky?
a. Data on SD is required for this
b. A
c. B
d. Depends
e. Both are equally risky
7. Which of the following would be most attractive private banking destination
a. Delhi
b. Jakarta
c. Thimpu
d. NewYork
e. Lahore
8.
a.
b.
c.
d.
e.

A good risk management system


sends alerts automatically when the risk crosses a defined tolerance limit.
allows the risk managers to drill down the risk to lowest components
All of the given options
carries out sensitivity, what-if analyses,
generates customizable reports

9. On a trading day at the NYSE, a broker undertakes the following trades:


Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MSFT shares for $20.00 each
Sell 20 IBM shares for $11.00 each
Sell 10 MSFT shares for $20.50 each
Sell 30 IBM shares for $9.00 each
How much did the broker pay out to the exchange in total in case of (a) gross settlement
system (b) net settlement system?
a. (a) $1,780 (b) 0 for IBM, $1,795 for MSFT
b. (a) $1,780 (b) $3,000
c. (a) 0 for IBM, $1,795 for MSFT (b) $1,780
d. None of the listed Options
e. (a) $3,000 (b) $1,780
10. Which of the following is likely to have the highest interest rate
a. 12 month deposit with minimum balance of 1000$
b. Cannot be determined
c. 6 month deposit with minimum balance of 1000$
d. 3 month deposit with minimum balance of 4000$
e. 6 month deposit with minimum balance of 2000$
11. A Central Bank in an economy is also known as:
a. The Retail Depositors' Bank b. The Banking Boss
c. None of the listed Options d. The Big Boss e. The Bankers' Bank
12. Retail loans are asset products offered by the bank. State True or False .
True
False
13. Which of the following methods of payment is most risky to the Seller?

a. Counter trade
Letter of Credit

b. Open Account
e. Documentary Collection

c. Cash in Advance

d.

14. If the price of a security on day 1 & 2 are $ 100 and $ 102 respectively the return is
a. 1% b. 2% c. Very high
d. -1%
e. -2%
15. Cash management solutions help corporations to ___________
a. manage surpluses and deficits
b. reduce float on collections
c. outsource collections
d. All of the listed options
e. automate collections
16. What is the role of a Central Bank in Forex market of a country?
a. Acts as a trader for maximum profit making
b. Encouraging trading in all currencies and not be limited to USD only
c. Seller of USD
d. Regulatory role depending on country's economic policies
e. No role
17. If a bank gets a deposit of $1000, assuming a reserve requirement (CRR) of 10%, and
that it circulates through 2 more banks, leading to the following money multiplier effect
a. Loan of $1710
b. Create reserve of $190
c. None of the listed Options
d. Create a reserve of $100
e. Loan of $2439

18. High-Net worth individuals generally have _______.


a. Networth greater than $500,000
b. All of the listed options
c. Market capitalization more than $200,000
d. Household income of maximum $50,000 per year
19. Which of these instruments is not included as part of Asset servicing services under the
category "Pricing/Holdings Valuation", which includes accurate pricing, ratings, etc. ?
a. Equities
b. The service may be provided for all of these instruments
c. Government securities
d. Certificates of participation
e. Certificates of deposit
20. In the Historical Simulation method of VaR calculation
a. no assumption is made about the distribution of returns
b. random returns are generated to calculate VaR
c. returns are assumed to be not normally distributed
d. returns are assumed to be normally distributed
e. returns are not required at all
21.Which is the most risky of the following:
a. An asset with a standard deviation of 3
b. An asset with a standard deviation of 1
c. An asset with a standard deviation of 2
d. An asset with a standard deviation of 5
e. An asset with a standard deviation of 4

22. A mutual fund with investment objective of achieving high capital growth approaches an
investor services firm for advice. The firm advises the mutual fund to invest 80% of the fund
in govt. debt, and 20% in equity. The allocation towards debt advised by the firm:
a. Cannot be determined, depends on market conditions prevailing at the time
b. Is too high
c. Is about right
d. Is too low
23. In which of the following cases can the Securities Lending service of a custodian be
used to borrow securities?
a. A broker has made a sale of securities, but some of the securities were delivered
defective
b. All of the listed options
c. A hedge fund manager wants to trade with borrowed shares as part of his arbitrage
strategy
d. A broker has made a short sale of a security, and wants to cover it
24. The process of transferring obligation from one party to another is called _________
a. Settlement b. Novation c. Netting d. None of the listed Options e. Counterparty risk
25. Which of the following methods eliminate country risk and commercial risk upon
confirmation?
a. Standby Letter of Credit
b. Both Standby Letter of Credit & Letter of Credit
c. Letter of Credit
d. Back to back Letter of Credit
e. Documentary Collection

26. ADR stands for which of the following?


a. American Demand of Russian bond
b. American Demand of Rented homes
c. American Demand Receivables
d. American Dollar Receivables
e. American Depository Receipts
27. Which of the following are examples of Payment Methods?
a. Letter of credit
b. Open account or credit
c. Cash in advance
d. All of the listed options
e. Documentary collection
28. All broker/dealers involved in the underwriting of non-exempt securities must be
a. NASDAQ Member
b. No such membership is required
c. NYSE Member
d. SEC Member
e. NASD Member
29. Credit derivative have all of the following characteristics EXCEPT:
a. Traded over the counter
b. Financial Instrument
c. None of the listed Options
d. Transfers risk
e. Facilitate greater efficiency
30. Risk Management is a function of
a. Back Office
b. Mid Office
c. Traders
31. Pick the odd one out
a. Demat
d. Hire Purchase

d. Front Office

b. Personal Loans
e. Auto Loans

32. The term CP is used in Corporate Lending for:


a. Client Partner
b. Credit Provision
d. Commodity Put Options
e. Collateral Provision

e. Specialists

c. None of the listed Options

c. Commercial Paper

33. In defined contribution retirement plans, Tax-sheltered Annuities fall under Section
______ of ERISA
a. 401(b)
b. None of the listed Options
c. 401(k)
d. 403(b)
e. 403(k)
34._____________ is typically the largest part of the spread and is paid to the broker/dealer
that actually took the clients order.
a. Underwriter's Allowance b. Wage
c. Manager's fee
d. Concession
e. Salary
35. Which of the following type of loan requires the amount of interest that would be earned
on the loan to be paid upfront by the borrower?
a. True discounted Loan
b. Discounted Loan
c. Capitalized Loan
d. Demand loan
e. Amortized Loan
36. Auto loans are loans financed for vehicles for business use. State True or False.
True
False
37. The real rate of interest is 9.50% while the nominal rate of interest is 11.70%. The
applicable inflation rate is:
a. 2.2
b. 2.1
c. None of the listed Options
d. 0
e. -2.2
38. If the price of a security on day 1 & 2 are $ 102 and $ 100 respectively the return is
a. 2%
b. -2%
c. -1.96%
d. 1 to 2%
e. Very high
39. Which of the following is NOT a category of health & welfare plan?
a. Property insurance
b. Survivor benefits
c. All of these are valid categories
d. Disability income
e. Health care plan
40. If total spread on underwriting is $ 500000 and Manager's fee is $ 100000, what is the
amount which will be distributed in the syndicate?
a. $400,000
b. $500,000
c. $600,000 d. Cannot be determined e. $100,000
41. What are the risks associated with Hedge Funds?
a. High Leveraging
b. High Speculation
c. High Exposure in Derivatives
d. All of the listed options
42. Which is the best VaR estimation model
a. Variance-Covariance Matrix
b. Cannot Say - depends on case to case
c. Historical Simulation d. A combination of Monte Carlo and Historical Simulation
e. Monte Carlo Simulation
43. A bank decides to sacntion only 10% of the loan sought by a company. The company
goes and pledges extra assets with the bank and the bank then agrees to sanction 50% of
the loan sought. The company has indulged in the process of:
a. Credit Revision
d. Credit Enhancement

b. Credit Increase
e. Credit Incrementation

c. Credit scoring

44. A purely competitive financial market is not characterized by:


a. Many Traders
b. Government Regulation
c. Cost effective Trading
d. Full Information
45. On a trading day at the NYSE, a broker undertakes the following trades:
Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MSFT shares for $20.00 each

Sell 20 IBM shares for $11.00 each


Sell 10 MSFT shares for $20.50 each
Sell 30 IBM shares for $9.00 each
Given that a net settlement system is being used, find out the net position of the broker at
the end of the day.
a. IBM: 70 shares to give out; MSFT: 90 shares to receive; $3,000 to pay out to the
exchange
b. IBM: no exchange of shares; MSFT: 90 shares to receive; $3,000 to pay out to the
exchange
c. IBM: no exchange of shares; MSFT: 90 shares to receive; $1,780 to pay out to the
exchange
d. None of the listed Options
e. IBM: no exchange of shares; MSFT: 90 shares to receive; $1,780 to receive from the
exchange
46. Card associations provide which of the following services ?
a. Set interest rates
b. Set card fees
c. Issue cards
d. Set credit limits
e. Security/Risk management
47. FX Spot Deal in US assumes a maturity of how many business days ahead?
a. Five days b. Three days c. Four days d. Two days e. One days
48. A fixed income analyst will analyze all but
a. Municipal Bonds b. Shares c. US Treasuries
d. Corporate Bonds e. Bonds of Government Sponsored Enterprises
49. Which of the following is not correct for a personal loan?
a. Loan amount is not linked to borrowers repayment capacity
b. No security required
c. The financer is not interested in the intention of the loan
d. They are short term loans
e. None of the listed Options
50. In Check 21, IRD stands for:
a. Investor Replacement Document
c. Internal Rating Document

b. Institutional Replacement Document


d. Image Replacement Document

51. In an account earning simple interest, the interest from the first year is reinvested at the
beginning of the second year. State True or False.
True
False
52.Which of the following is not a Charge Type
a. Hypothecation
b. Pledge
c. Collateral

d. Lien

53.Jo inherited an antique tie pin. It was valued at $1350. Each year its value appreciated by
5%. Approximately how much was the tie pin expected to be worth 5 years later
a. $1,723
b. $1,450
c. None of the listed options d. $1,688
e. $1,045
54. Which of the following represents the correct hierarchy of corporate ratings (highest to
lowest)?
a. AAA, AA+, BBB, D
b. AAA, AA-, D, BBB
c. D,C,B,A
d. D, AA-, B, AAA
e. AAA, AA+, D, AA-

55. The rate at which the bank will purchase US dollars against home currency is called as
___________.
a. Direct Rate
b. Ask Rate c. Bid Rate d. Indirect Rate e. Cross Currency Rate
56. Which among the following is an investment company that pools money from unitholders
and invests in a variety of securities?
a. Mutual Fund
b. None of the listed options
c. Stock Exchange
d. Mortgage Company
57. Pick the odd one out.
a. George Soros b. Bill Gates

c. Warren Buffet

d. Ben Graham

e. Peter Lynch

58. USExport and EURImport 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 ___________.
a. 2500
b. None of the listed Options
c. 300
d. 250
e. 3000
59. Which of the following, according to you, has resulted in defined contribution plans
gaining popularity over defined benefit plans?
a. All of the listed options
b. Employers increasingly want employees to share responsibility for their retirement
c. DC plans fix the monthly contribution from the employee, making his financial planning
easier
d. DC plans are seen by employees as an investment vehicle to accumulate retirement
income

60. Which of the following financial institutions are covered under the Anti-money
laundering, US Patriot Act
a. Mutual Funds
b. Securities brokers and dealers
c. All of the listed options
d. Banks and Trust companies
61. All the following statements concerning U.S. Government securities are correct EXCEPT:
a. Treasury bills have a greater interest rate risk than either Treasury bonds or
Treasury notes.
b. None of the listed options
c. Treasury notes have maturity dates up to 10 years.
d. Treasury bonds have maturity dates up to 30 years
e. Treasury bills have their interest paid in a lump sum at maturity.
62. Legitimate ways to cancel the credit card transactions within a limited time frame are
_________________
a. Chargeback and Chargeback reversals
b. Chargeback reversals
c. Chargeback
d. Presentment
63. Syndicate helps in all the following activities but
a. raising huge money from the banks
b. managing large capital raising activity
c. IPO Distribution
d. managing conflicts between investment banks
e. managing large bond issues
64. Bank New has a portfolio of $30 million worth of loans, which it wants to hedge. This is
an example of what kind of loan?

a. Held for Sale Loans


d. Accrual Loans

b. Trading Loans
e. Undrawn Loan

c. Committed Loans

65. Operational Risk is defined as


a. the risk of loss resulting from errors in processes, people and systems
b. he possibility of loss as a result of default, such as when a customer defaults on a loan
c. the possibility of loss over a given period of time related to uncertain movements in
market factors
d. the possibility that a firm will be unable to generate funds to meet contractual obligations
as they fall due.
e. the possibility of loss when a contract cannot be enforced
66. Open ended loan allow the borrower to borrow additional amount subject to the
maximum amount less then a set value. State True or False.
True
False
67. Which risks may bring gains as well as losses?
a. Credit risk and interest rate risk
b. Liquidity risk and credit risk
c. All these risks may lead to profits as well as losses
d. Credit risk and foreign exchange risk
e. Interest rate risk and foreign exchange risk

68. Banks are financial institutions that are licensed to accept deposits and issue loans
True
False
69. Bank A, based in the US, provides safekeeping services for securities to its US clients. It
also has clients in France and Belgium, and provides securities safekeeping services to
these clients through Banks C and D respectively. Which of the following terms best
describes Bank A?
a. Sub Custodian
b. Secondary Custodian
c. None of the listed Options
d. Main Custodian
e. Global Custodian
70. Credit derivatives can be used to ___________ the risk and ___________ the regulatory
capital requirements.
a. Diversify; reduce
b. Manage; avoid
c. Transfer; increase
d. Assess; estimate
e. Eliminate; improve
71. Liquidity refers to the ease with which an asset can be converted into cash. State True
or False.
True
False
72. Trade Finance helps in:
a. Facilitating corpoate lending
b. Facilitating intra-company transactions
c. Facilitating International transactions, corporate lending and setting up of new factories
d. Facilitating International transactions
e. Facilitating setting up of new factories
73. Which of the following is not a core private banking function?
a. Investment Analysis and Advise
b. Sales and Marketing
c. Deposit Mobilization
d. Client Management
e. Research

74. An insurer undertakes an analysis of a portfolio of insurance policies by exploring


scenarios for the paths followed by swap rates, policy surrender rates, mortgage
prepayment rates for the mortgage-backed securities in the portfolio, etc. What is this
process called?
a. Cash projections
b. Fund Administration
c. Asset/Liability analysis
d. Investment Manager Universe
e. Asset allocation
75. The Brokerage firms are regulated by:
a. State regulatory agencies b. Industry wide SROs

c. SEC d. All of the listed options

76. Which of the following factors affect the choice of payment methods?
a. Government Guarantee Program
b. All of the listed options
c. Cost of financing
d. Time frame
e. Exporters Fund

77. Which of the following is associated with the purpose of regulating financial institutions?
a. To offset the moral hazard incentives provided by deposit insurance and other
guarantees.
b. To provide stability of the money supply
c. None of the listed options
d. To prevent failure of any financial institution
e. To serve certain social objectives

78. Retail banking is banking services provided for corporates. State True or False.
True

False

79. If the funding cost of a Company goes up due to hardening of interest rates, this can be
attributed to
a. Commodity Risk
d. Legal Risk

b. Liquidity Risk
e. Interest Rate Risk

c. Operational Risk

80. I deposit $100 in a bank. Bank loans out $90 out of it to someone else who then invests
the money in setting up a new factory. This process is called?
a. Profit making tendancies of the Bank
b. None of the listed options
c. Monetery Policy
d. Money Multiplier Effect
e. Fiscal Policy
81. Which of the following is NOT an example of an Asset Based Loan?
a. Auto Loan
b. Home Loan
c. Personal Loan
d. All of the listed Options
82. The purchase of any stock for immediate delivery is a ______ market transaction.
a. Option
b. Forward
c. Spot
d. Futures
e. Stock
83. Universal banks provide commercial banking as well as investment bank services under
one roof. State True or False.
True
False
84. If 1 day VaR is $ 1 million, 9 Day VaR is
a. $ 9 Mn
b. $ 3 Mn
c. $ 4.5 Mn

d. $ 4.4 Mn

e. $ 1 Mn

85. Which of the following is NOT a potential benefit of Straight Through Processing ?
a. Increased diversity in IT systems of various players supporting the trade cycle
b. Increased liquidity
c. Reduction in trade processing time
d. Drastic reduction in operational risk through reduction of human element
e. Elimination of delays in settlement

86. The "Compliance reporting" service, offered as part of Investor services in the US,
provides automated, __________, information highlighting potential violations of pre-agreed
investment guidelines, external regulations & internal risk exposure limits
a. Risk-based
b. Exception-based
c. Rule-based
d. Client instruction-based
87. The Advising bank is used as a trusted bridge between the __________ and
_______________ when they do not have an active relationship
a. Issuing bank; Confirming bank
b. Beneficiary bank; Reimbursing bank
c. Issuing bank; Beneficiary bank
d. Importer; Exporter
e. Reimbursing bank; Beneficiary bank
88. Pick the odd one out
a. Merill Lynch
b. Federal Reserve
e. Saloman Smith Barney

c. CSFB

d. UBS

89. Which of the following are disadvantages of using LC (Letter of Credit)?


a. Credit Line tied up.
b. Costly
c. Specific and Binding
d. Deals with documents and not with products
e. Time consuming
90. CPI stands for which of the following?
a. Consumer Popularity Index
b. Consumer Product Index
c. Consumer Price Index
d. None of the listed options
e. Consolidated Price Index
91. Which of the following holds true for an LC (Letter of Credit)
a. Are typically revocable unless specified otherwise.
b. Advising bank has the liability for the payment of the LC.
c. Shifts credit risk from the Importer to the Importer's Bank (Issuing Bank).
d. Deals with products and not with documents
e. One of the relatively cheaper forms of payment guarantee.

92. Which of the following is not a derivatives instrument?


a. Futures

b. Corporate Bonds

c. Put Options d. Call Options

e. Swaps

93. In a 2 way quote for a share the bid is


a. more than offer
d. 2% less than offer

b. equal to offer
c. less than offer
e. dependent on dealer's skill

94. HPPL shares are currently selling for $25.00 each. You bought 200 shares one year ago
at $24 and received dividend payments of $1.50 per share. What was your total dollar
capital gain this year?
a. $300
b. $200
c. $400
d. $500
e. None of the listed options
95. A bank providing custody services is in a good position to offer securities lending
services to its clients as well. State True or False.

True

False

96. Which of the following operations can be done on a LC (Letter of Credit)?


a. Purchase

b. Negotiate

c. Acceptance d. All of the listed Options

e. Discount

97. Under what category can services like asset/liability analysis, asset allocation, cash
projection, compliance reporting, fund administration, investment manager universe, etc.
provided by an institution be classified?
a. Asset servicing
b. Investment management
c. Investor services
d. Trading
e. None of the listed Options
98. Which of the following best describes bank systems?
a. Unregulated and safe
b. Unregulated and unsafe
c. Regulated and unsafe
d. None of the listed Options
e. Regulated and safe
99. In a economy where inflation is 9%, future value of 100 units of money after 2 year
would be which of the following?
a. Around Rs 109
b. None of the listed options c. 118.8
d. Exactly 120
e. Exactly 100
100. An investor wants to undertake a cross-border transaction in a security. Which of the
following does NOT correctly represent a way in which such a trade may be settled?
a. Directly through a local agent who is a member of the local depository
b. All of these are valid ways for settling the cross-border trade
c. Through a Global Custodian, operating through a local agent, who is a member of the
local depository
d. Through an International Central Securities Depository, which has direct links with the
local depository
e. Through direct communication link between investor's depository and local depository
101. You purchased a stock for $40. One year later you received $2 as dividend and sold
the share for $48. What was your holding period return?
a. 10%
b. 50%
c. 45%
d. None of the listed options e. 25%
102. NASD is an not an SRO for ____________.
a. Over the counter market
b. Second Market
d. Listed Market
e. Third Market

c. Fourth Market

103. A successful wealth manager needs to know about ___________.


a. All of the listed options
b. 401 k rollovers
c. tax and estate planning
d. fixed income investments e. equity investments
104. Offer is the price at which a firm
a. intends to buy
b. trades in securities c. quotes when it does not want to trade
d. quotes to its best customers
e. Intends to sell

105. Which of the following best describes how banks make loans?
a. None of the listed Options
b. Reasonably, not depending upon risk
c. Without limitation
d. Blindly with equal offers to all customers
e. Reasonably, depending upon risk
106. Which of the following is not an example of an option?
a. Oil Futures b. Call Option c. Put Option d. Swaption e. LEAPS (Long Term Options)
107. If the price of shares of Cognizant change from $ 65 to $ 60, this can be attributed to
a. Credit Risk b. Interest Rate Risk c. Operational Risk d. Liquidity Risk e. Market Risk

108. A company would pay the interest on what portion of the loan?

a. Disbursed amount
b. Unused amount of the loan c. None of the listed Options
d. Either disbursed or committed amount
e. Committed amount
109. A bank is required to hold reserves at least equal to a prescribed fraction of its total
deposit liabilities. State True or False
True
False
110. Securities with an original maturity of greater than 1-year are traded on money markets.
State True or False.
True
False
111. Interest rates are ____________.
a. the prices paid for the use of a real asset b. the prices paid for the use of a real liability
c. the prices paid for the use of a financial liability
d. the prices paid for the use of a financial asset
e. the prices paid for the use of a financial liability and the prices paid for the use of a
financial asset
112. Basel capital accord was instituted to coordinate global regulatory efforts to institute
_______________ capital requirements to eliminate the threat posed by _____________
a. Minimum; undercapitalized banks
b. Maximum; undercapitalized financial institutions
c. Minimum; overcapitalized banks
d. Maximum; overcapitalized financial institutions
e. None of the listed Options

113. Which of the following trading services reduces the trading costs for institutional
investors?
a. Transition management
b. None of the listed Options
c. Transition management and commission recapture
d. Commission recapture
e. Stock repurchase program
114. Money Market accounts never require a minimum balance to operate. State True or
False.
True
False
114. which of the following is not a feature of private banking?
a. Specialist Advice
b. Commercial Lending
c. Lot of research
d. High Investment in technology
e. Understanding the capital and investment needs

115. What happens when the interest rates fall?


a. Interest rates never fall, they always go up
b. Economy goes into a deflation
c. Bond prices decrease
d. Bond prices do not change e. Bond prices increase
116. What are the two types of portfolio management services?
a. Penny wise and Pound wise
b. X and Y
c. Directed and Straight
d. Discretionary and Non Discretionary
e. Universal and Local
117. Who backs the dollar?
a. None of the listed Options
c. Private companies

b. The treasury
d. The government

e. The Fed

118. Warrants are the combination of which of these instruments?


a. Cash and Call Options
b. Equities and Futures
c. Call and Put Options
d. Equities and Call Options e. Put Options and Swaps
119. Which of the following is computationally the fastest method for calculating VaR
a. Monte Carlo Simulation
b. Historical Simulation
c. All would take equal time if done using a software
d. Variance-Covariance Matrix
e. A combination of Monte Carlo and Historical Simulation
120.Factoring is______________
a. Purchase of account receivables at a discount
b. works mostly with capital goods
c. sharing risk with third party
d. works with medium and long term receivables
e. a discounting method without recourse

121.A life insurance company has guaranteed a payment of $ 8 Million to a pension fund,
4 years from now. If the Insurance company has received a total premium of $ 6.5
million, and can invest this entire amount for 3 years at 6.75 %, will it have sufficient
funds to meet the $ 8 million obligation?
a) No
b) Yes
c) Insufficient data to draw any conclusions
You have invested $5000, for 5 years and 3 months @ an annual interest rate of 6%.
What is the future value of this amount?
a) $ 6890.42
b) $ 6789.31
c) $ 6780.24
d) $ 7346.51
122.

123. An investor is considering the purchase of a financial instrument, that promises to


make the following payments:
Year 1
$ 100
Year 2
$ 100
Year 3
$ 100
Year 4
$ 1,200
What is the price she should pay for this instrument, assuming she wants a 7% annual
interest rate?*
* PV Values of $ 1: PV(1,0.7) (i.e. discounted over 1 period by 7%) = 0.9346
PV(2,0.7)=0.8734; PV(3,0.7) = 0.8163; PV(4,0.7)= 0.7629600
a.
b.
c.
d.

$1500
$ 1231.31
$ 1177.91
$ 1096.28

Data for questions 4-7: The following data is gathered from Cognizants annual report
2002 (it is not an exact copy).Use this to answer the next 3 questions. (all $ values in
millions)
Total Revenue :
$ 229.08
Direct Cost

$ 122.7

Tax

23.35%

Interest Income

1.8

Depreciation & Amortization

7.84

# shares outstanding

59.2 Mn

Selling,
General
Administrative Expense

& $ 53.34

Other expenses

1.9

124.What is the Gross Profit?


a. $ 106.38 Mn
b. $ 227.18 Mn
c. $ 104.48 Mn
d. $ 51.14 Mn
125. What is the EBIT?
a. $ 106.38 Mn
b. $ 53.04 Mn
c. $ 52.94 Mn
d. $ 45.10 Mn
126. What is the PAT?
a)
b)
c)
d)

$ 45.1 Mn
$ 35.5 Mn
$ 34.56 Mn
$ 52.94 Mn

127. What is the EPS?


a. 0.76
b. 0.599
c. 0.58
d. 0.63
128. .A firms undistributed profit falls under which category in the balance sheet?

a)
b)
c)
d)

Working Capital
Asset
Owners Equity
Borrowings

Leary Corporation's snapshot as of December 31, 2002 is presented below in random


order.
Accounts receivable $60,000
Shareholders' equity $377,000
Short term debt $130,000
Accounts payable $37,000
Inventory $165,000
Equipment $500,000
Long-term debt payable $ 350,000
Land $194,000
Cash $25,000
Prepare the balance sheet for December 31, 2003, and answer questions 9-13.
Assume depreciation @ 10%, using straight-line method
129. With the above data, what is the total of the assets /or liabilities+shareholders equity
?
a) $ 944,000
b) $ 894,000
c) $ 900,000
d) $ 874,600
130. What is the total of the Current Assets?
a. $ 250,000
b. $ 85,000
c. $ 225,000
d. $ 190,000
131. What is the total of the Current Liabilities?
a) $ 165,000
b) $ 377,000
c) $ 350,000
d) $ 167,000
132.What is the amount of depreciation?
a. $ 0
b. $ 19,400
c. $ 50,000
d. $ 69,400

133. What is the total of short term liabilities?


a) $ 727,000
b) $ 377,000
c) $ 350,000
d) $ 167,000
134. ABC

Corporation Ltd.s capital structure is given below. How much minimum cash
will the company need to meet its necessary payment obligations to investors this year?
Pref. equity
$ 1,000,000 dividend rate 9%
Debentures
$ 500,000
8% interest rate
Secured Loans$1,200,000
5% interest rate
Common shares
$1,000,000
Assume that principal need not be repaid this year on any debt, and that ABC Corp is
making no profits this year.
a. $0
b. $190,000
c. $100,000
d. $60,000
135. The following are the cash flows for a trader over the next 7 days. He has Rs. 10,000
in his current account with the bank. The bank also offers an overdraft facility. Does the
trader need to use overdraft on his account? If yes, how much should be the minimum
overdraft allowed by the bank? Assume that all payments are made using checks on the
account and similarly all incoming payments are deposited directly in the same account.
Assume that he gets a 1-day float on the payments made using checks, and checks he
receives get credited immediately. Also assume that debits and credits for a day take
place at the same time.
Day 1:
Pay supplier
Rs. 5,400
Day 2:
Pay telephone bill
Rs. 4,000
Receive payment
Rs. 1,800
Day 3:
Pay instalment on Loan
Rs. 5,200
Day 4:
Receive payments
Rs. 3,900
Day 5:
Pay salaries
Rs. 2,500
Receive payments
Rs. 1,700
Pay to Supplier
Rs. 5,500
Day 6:
Reimburse expenses
Rs. 1,400
Day 7:
Receive payment
Rs. 1,950
a.
b.
c.
d.

No, he doesnt need an overdraft


Yes, and the min. limit should be Rs. 4,650
Yes, and the min. limit should be Rs. 6,600
Yes, and the min. limit should be Rs. 5,200

136. Using the data of the question above: The following are the cash flows for a trader
over the next 7 days. He has Rs. 10,000 in his current account with the bank. The bank
also offers an overdraft facility. Does the trader need to use overdraft on his account? If
yes, how much should be the minimum overdraft allowed by the bank? Assume that all
payments are made using checks on the account and similarly all incoming payments are
deposited directly in the same account. Assume that he does not get a 1-day float on the
payments he makes using checks. Checks he receives get credited immediately. Also
assume that debits and credits for a day take place at the same time.
Day 1:
Pay supplier
Rs. 5,400
Day 2:
Pay telephone bill
Rs. 4,000
Receive payment
Rs. 1,800
Day 3:
Pay instalment on Loan
Rs. 5,200
Day 4:
Receive payments
Rs. 3,900
Day 5:
Pay salaries
Rs. 2,500
Receive payments
Rs. 1,700
Pay to Supplier
Rs. 5,500
Day 6:
Reimburse expenses
Rs. 1,400
Day 7:
Receive payment
Rs. 1,950
a.
b.
c.
d.

No, he doesnt need an overdraft


Yes, and the min. limit should be Rs. 4,650
Yes, and the min. limit should be Rs. 6,600
Yes, and the min. limit should be Rs. 5,200

1. You invest Rs.5000 at 8% p.a. compound interest in a bank. After 5 years, what is the
amount you have received from the bank?
Rs.12346
Rs. 7000
Rs. 2346
Rs. 7346
Rs. 7546
2. Your friend invests 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?
Rs. 4845.6
Rs. 4000
Rs. 12000
Rs. 4884.08
None of the listed
Options
3. Your brother calls you, saying that he has found a great plot of land, which requires a payment
of Rs.50, 000 immediately, which he has made. He asks you to pay the Rs.2, 50,000 which is due
after 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?
a. Investment Option: Bank Fixed Deposit 1, Rate of return offered: 11% p.a.
b. Investment Option: Bank Fixed Deposit 2, Rate of return offered: 11 % semi annually
compounded every 6 mths
c. Investment Option: Co-operative Bank FD, Rate of return offered: 14% p.a
d. Investment Option: Friends business, Rate of return offered: 18% p.a.
e. Investment Option: Share market
4. Present Value of Rs.600 received one year from now (using 15% time value rate) is

510

521.7

690

517.2

None of the listed Options

5. An investor is considering the purchase of a financial instrument that promises to make the
following payments:
Yrs from now Promised 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?
22512
22558
23021
21000
21500
6. A person borrows $12,000 from a private money lender at a rate of 9.50% for a period of 1
year, when the average inflation rate for the period is 4%. The real rate of interest is ____ while
the nominal rate of interest is _____.
9.50%, 13.50%
9.50%, 5.50%
9.50%, 9.50%
9.50%, information not sufficient for finding real rate of interest
None of the listed Options
7. The real rate of interest is 7.60% while the nominal rate of interest is 9.70%. The applicable
inflation rate is:
2.10%
-2.10%
13.10%
0%
None of the listed Options
8. As nominal interest rates increase in the economy, the inflation should ideally:
Decrease
Remain same
Increase
Depends on rate of increase in real interest rates
None of the listed Options
9. A person wants to borrow money from the banking 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?
Bank A
Bank B
Bank C
All of them are the same
Both Bank B & Bank C
10. Find the future value of $1200 invested at 5.25% p.a. payable quarterly, after 5 years?
1465.2
1280.95
1557.55
1987.4
None of the listed Options
11. Find the future value of $1200 invested at 5.25% p.a. payable annually, after 6 months?
1231.1
1243.1
1235
1345.1
None of the listed Options
12. Find the present value of $1200 payable after 2 years, assuming the applicable interest rate is
5.10%?
1131.1
1078
1065
1086.36
None of the listed Options
13. Person A wins a lottery and the lottery organizers give the man the following options: Receive
$120,000 no or receive $135,000 after 18 months? Assuming bank rates are at 8% p.a. payable
quarterly, which is the better option?
Receive $120,000 now
Receive $135,000 after 18 months
Both options are equally good Depends on bank rates at the end of 18 months
None of the listed Options
14. An investment of 12,000 at the 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%?
$201.20
$3,500.00
$1,012.20
$181.20
None of the listed Options

15. An investment of 10,000 at the 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%?
$14,000.00
$13,423.67
$11,896.75
$12,345.90
None of the listed Options
16. A consumer goods company has a market share of 23% in 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?
No
Yes
Maybe
Insufficient information
None of the listed Options
17. An investor has multiple investment options 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?
IRR
NPV
Either of these
Insufficient information
None of the listed Options
18. An investor estimates an investment of $15,000 to 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?
No
Yes
Maybe
Insufficient information
None of the listed Options
19. What is the IRR for an investment of $ 10,000 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?
5.55% 7.65% 8.47%
Insufficient information
None of the listed Options
20. The following concepts are derived from the basic concept of time value of money except:
Present value Future value
IRR
Net Present Value
None of the listed Options
21. A young student looking for monthly income should invest most of his savings in
Bank deposits & Fixed Interest instruments
Regular dividend paying companies
Blue-chip shares
Zero coupon bonds
Real estate
22. Savings bonds are:
Issued by department of Treasury
Unregistered
Transferable without registration
Issued by department of Treasury and Transferable without registration
Unregistered and Transferable without registration
23. The interest rate on a bond doesnt depends on
Years to Maturity
Credit Rating of the Issuer
Bond Face Value
All of the listed options

Currency of Issue

24. What is the Yield to Maturity for a 6% - 5 years bond with face value $ 1000 trading at $ 800
after one year?
7.50%
6%
11%
7%
10%
25. Unsecured bonds are:
Issued only by large and financially sound companies
Secured by assets of the issuing company.
Have lower priority for repayment than secured debt
Issued only by large and financially sound companies and Secured by assets of the issuing
company.

Secured by assets of the issuing company and Have lower priority for repayment than secured
debt
26. In what form are bonds typically issued in US?
Physical, Registered
Electronic, Registered
Physical, Registered and Electronic, Registered
Physical, Unregistered
Electronic, Unregistered
27. What is the backing for a Mortgaged Bond?
No backing
Bank Guarantee
The credit worthiness of the issuing company
Real estate owned by the Issuer
None of the listed Options
28. What secured debt securities are generally backed by a portfolio of non-issuer securities,
usually U.S. Government Securities?
Debentures
Bearer Bonds Collateral Trust Bonds
Junk bonds
Equipment
Trust Debenture
29. What bondholders would have a general creditor status?
Debentures
Bearer bonds Unsecured bonds
Junk bonds
debenture

Equipment Trust

30. What is the S & P ratings below which bonds are considered to be speculative?
Less than AAA
Less than BBB
Less than CCC
D
Junk grade
31. What securities experience Reinvestment Risk?
Cumulative Interest Bonds
Callable bonds
None of the listed Options
32. What are the current maturities for T-Bills?
1, 2 and 3 months
3, 6 and 12 months
listed Options

1, 2 and 3 years1 month only

33. What is the maximum maturity for Commercial Paper?


90 days
180 days
270 days
360 days
34. Who sets the Fed Funds Rate?
Federal Reserve
Banks
35. Negotiable securities are:
Sale price can be negotiated
Can only be sold to the issuer
Have a lock in period

SEC

Zero coupon bonds

Junk bonds

None of the

None of the listed Options

Stock Exchanges

Investors

Freely transferable
Cant be sold except on maturity

36. Mutual funds


Are often riskier than investing in individual stocks.
Require investors to invest very large sums of money, which eliminates small investors.
Are less riskier than individual stocks as the fund managers invest in a diversified
portfolio
Give much greater returns than the stock index
Carry no risk
37. Hybrid securities are
Combination of Preference and Common stock
Combination of put and call
Combination of debt and equity
Combination of growth and income
None of the listed Options

38. Why would an investor choose to invest in Money Market Securities?


Investor looking for capital gains
Investor looking for liquidity
Arbitrageur
Investor looking for regular income None of the listed Options
39. Which of the following bonds involves highest risk?
Subordinated debenture bonds.
Debenture bonds.
Collateral bonds.
Mortgage bonds
None of the listed Options
40.Which of the following statements is true about futures?
Future prices are paid for current transactions
Risk is often increased when dealing in futures because buyers and sellers may be required to
accept a price other than the one to which they agreed.
Financial futures are traded primarily at the New York Stock Exchange.
Investors may hedge their risk by entering into futures
Futures are same as Options
41.The responsibility of enforcing futures contracts is taken on by
A clearing house.
The brokers who struck the deal.
Banks
The buyer and seller.
Arbitrageurs
42.What provides the incentive for someone to sell an option when that individual has no rights,
just obligations?
The seller stands to gain from changes in interest rates.
The seller stands to gain from changes in prices.
Selling options is relatively risk free
The seller earns commission
The buyer must pay an option premium to the seller.
43. Which of the following is used primarily by financial intermediaries to hedge interest rate risk
for long periods of time (up to 15 years)?
Swaps.
Put options.
Futures
Call options
LEAPS
44. Which of the following is not an example of a derivative?
Financial futures
Options
Preferred stock of a company
Swaptions

Swaps

45. Company ABC Inc. 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)
30, 140 and 10
60, 60 and 60
93, 20 and 67
140, 30 and 10
140, 30 and 0
46. If General Electric would borrow $300 million from Bank of America, how would its balance
sheet be affected in terms on leverage ratio?
Leverage ratio would remain the same Leverage ratio would increase
Leverage ratio would decrease
Leverage ratio has no relation with borrowing
None of the listed options
47. People who buy stock in a corporation such as Coca Cola become
Part owners of Coca Cola, so the benefits of holding the stock depend on Coca Colas profits
Part owners of Coca Cola, but the benefits of holding the stock do not depend on Coca
Colas profits

Receive interest
Creditors of Coca Cola, so the benefits of holding the stock depend on Coca Colas profits
Creditors of Coca Cola, but the benefits of holding the stock do not depend on Coca Colas profits
48. Assuming that IBM has paid handsome dividends to its shareholders this year, what would be
a right assumption to make?
No relationship between interest and dividend payouts
IBM has only paid dividends and no interest on its issued bonds
IBM has paid the dividends after paying interest to its bondholders
IBM will pay interest if it has enough cash after its dividend payout
IBM will pay interest only if it is still in profit zone after the dividend payout
49. Municipal bonds
Are exempt from federal taxes.
Usually have yields that are higher than U.S. government securities with similar maturities.
Are guaranteed by the federal government.
Usually support real estate spending and student loans.
Are junk grade bonds
50.Bonds with relatively low risk of default are called
Zero coupon bonds
Junk bonds
Investment grade bonds
bonds
High Yield bonds

Price-premium

51. A young investor comes to an Investment Consultant and asks him for advice for his
investments. He declares that he doesnt 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?
Income Fund

Liquid Fund

Growth Fund

Balanced Fund

Bank Deposit

52. Reliance Industries Limited, India would like to raise money in NYSE for expanding its
operations in the domestic market (India).The securities issued would be
American Depository Receipt
Indian Share
Public offering in India
Global Depository Receipt
None of the listed options
53. If I expect the price CTS share price to rise by $5 from its current levels within 1 month, then
which would be the best option?
Buy a put option on CTS stock
Sell a put option on CTS stock
Buy a call option on CTS stock
Sell a put option on CTS stock
Buy a put as well as a call at different strike prices
54. Casablanca Inc. Issues $100 million worth of 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
Convertible Bond
Preferred Stock Stock Option
Forward Contract
Futures
55. State and local government or municipal bonds have one unique feature that makes them
attractive to wealthy investors.Which of the following is that unique feature of "muni" bonds?
They are exempt from state taxation for all investors
They are exempt from federal and state (resident investors) income taxation
State and municipal bonds usually have coupon rates
State and local municipal bonds are all revenue bonds
They have high credit rating

56. If IBM finds it much cheaper to raise money in 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?
Future contract
LEAPS
Vanilla Call Option Forward Contract
Currency Swap
57.Forward contracts are promises to buy or sell foreign exchange:
On a futures exchange at some time in the future.
On a specific future date at a price established on that specific future date.
At a specific forex rate at some time during the contract period.
At a specific price on a specified future date.
None of the listed Options
58. If the forward rate (Forex/U.S. dollar) is selling at a premium over the spot rate, which of the
following statements best reflects the expectations of the foreign exchange market?
No forecast can be made with forward contracts
The U.S. dollar is expected to appreciate
The foreign currency is expected to appreciate
The spot rate is expected to remain constant
None of the listed Options
59. A U.S. importer who owes 1 million Canadian $ in 90 days and wishes to hedge his/her
foreign exchange risk would:
Take no action
Wait and buy Canadian in the spot market in 90 days
Sell Canadian dollars forward for delivery in 90 days
Buy Canadian dollars forward for delivery in 60 days
Buy Canadian dollars forward for delivery in 90 days
60. A U.S. importer of Canadian nickel ore with an invoice to pay $1 million U.S. dollars in thirty
days would
Pay the invoice in thirty days.
Buy a forward contract in U.S. dollars for delivery in thirty days.
Sell Canadian dollars in the futures market.
Sell US dollars in futures market
Purchase Canadian dollars for delivery in thirty days.
61. A U.S. importer who has agreed to pay 1 million Euros to a French exporter in 60 days
decides to wait the full 60 days before paying. The importer is
A foreign exchange speculator
Expecting the dollar to depreciate against the Euro
A hedger in the foreign exchange market
Planning to pay a set amount of dollars for the items purchase
None of the listed Options
62. A hedger in the financial futures market
Usually buys financial futures to hedge
Usually sells financial futures to hedge
Either buys or sells financial futures contracts so that the underlying asset spot gains/losses are
directly related to futures contract gains/losses
Either buys or sells financial futures contracts so that the underlying asset spot
gains/losses are inversely related to financial futures contract gains/losses
None of the listed Options
63. Who will lose money if the price of any underlying instrument falls?
The seller of a futures contract
The buyer of a put.

The writer of a call.


None of the listed Options

The buyer of a futures contact.

64. The value of options


Varies inversely with the price variance of the underlying asset.
Varies directly with the length of time to expiration.
Varies inversely with the level of interest rates
Increases with the decreased volatility of the underlying asset.
None of the listed Options
65. A Standard and Poor's bond rating of AAA refers to
High quality investment grade bonds.
Bonds of high quality, but with an elevated risk of long-term default.
Non-investment grade bonds, with uncertain long-term prospects.
Government bonds only
None of the listed Options
66. The first time a company issues stock to the public the issue is called
An initial public offering (IPO).
A secondary offering.
A stock option.
Internal financing.
An initial public offering (IPO) and Internal financing
67. Common stockholders usually trade ________ to preferred stockholders in return for
__________.
Interest income; voting rights
A prior claim on dividends; higher dividend income
A prior claim on dividends; voting rights
Their residual claim on assets in liquidation; preferred claim on dividends
Both 2 and 3
68. Leverage financing refers to
Using Promoters credibility to raise money
Leveraging brand value to issue equity
Using debt finance
Selling assets to raise money
Use of retained profits for expansion
69. Preferred stock dividends are paid
Each year on a contractual basis, but before common dividends.
After common dividends are paid.
Before interest is paid on debt.
If declared by the board of directors.
After both interest and common dividends are paid
70. The purchase of U.S. Treasury bonds for immediate delivery is a ______ market transaction
Stock
Option
Spot
Futures
Forward
71. Suppose Ruthie has the option of receiving a $10,800 payment today or a $15,868.7 payment
in six years. Which of the following statements is true if the interest rate is 8 percent?
She should take the $10,800 today because the present value of the $15,868 paid in six years is
only $9,752.54.
The present value of the $10,800 is $15,868.74.
She should take the $15,000 in six years because $15,000 is more than $10,000.

She should take the $15,000 in six years because the future value of $10,800 is only $15,000.
Both are equal
72. The buying or selling of securities with the hope of profiting from privileged information is
known as
Speculation.
The spot market. Arbitraging
The futures market.
The term to maturity.
73. If the issue price of a 5 year zero-coupon bond is $940 and its redemption price is $1000,
market price $955,then the difference amount of $45 stands for
The interest for the 5-year period
The return on the investment of $960
Both The interest for the 5-year period and The return on the investment of $960
Only 1
Premium on the bond
74. The effective interest rate on a bond, (when the price of the bond is greater than its par value)
Is lower than the coupon rate.
Is always equal to the coupon rate.
Increases as the bond price decreases.
Is greater than the coupon rate.
None of the listed Options
75. John holds 2007 maturity government security which pays a semi-annual coupon of 8%. What
should John do with this security?
Sell it, if interest rate is increasing
Sell it, if interest rate is decreasing
Sell it with the next coupon date, irrespective of interest rates movement
Sell it now or hold it till maturity
Can never sell
76. If bond portfolio managers expect interest rates to increase
They will anticipate a decrease in bond prices.
They will probably buy bonds now to avoid capital losses.
They will wait for the rates to actually change before taking any action.
They will probably sell more bonds now before the bond prices decreases.
They will buy short-term bonds.
77. Which of the following is not a characteristic of money markets?
They trade in a central location.
They have an active secondary market.
They are wholesale markets.
They are beyond the reach of small investors.
They trade in short term instruments
78. Investors use the money market
To reduce the liquidity of their funds.
To reduce the opportunity cost of idle funds.
To gain from expected declines in future interest rates.
To earn high returns on their investments.
To manage long-term cash requirements
79. Which of the following is true for The Fed funds rate
It can be raised if the Govt. buys securities from the public.
It can be raised if the Treasury will sell more bills.
It can be raised if the Govt. announces an increase in the rate at its regular meeting.
It is cost of borrowing immediately available funds for one day.

The Fed cant do anything because it is market determined.


80. If John, a foreign exchange trader sees that EUR/USD, EUR/JPY and USD/JPY show that he
could make money by buying two of them and selling the other, then what is he trying to do?
Arbitrage trading
Hedging
Taking high risks to get high returns
Both arbitrage trading and hedging
Cant say
81.One potential problem that could be caused by the tremendous growth of the international
financial system in recent years is
Lower standards of living around the world.
That a disturbance in one financial market can spread more quickly to other countries.
That the additional transactions will make the international financial markets less efficient.
That economic growth will be likely to slow down in many countries
Higher Income inequality
82. Primary markets
Are markets in which primary goods and service, i.e. raw materials are traded.
Are markets in which short-term debt is traded.
Are markets in which claims that have already been issued are sold by one investor to another.
Are markets in which newly issued claims are sold to initial buyers.
Are markets in which shares are actively traded.
83. The current market 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?
$1000.
$0.
$300.
$200.
$70
84. "Liquidity" is a term that is used to refer to
The ease with which assets can be converted into goods and services.
Financial assets in general.
The practice of converting financial assets into money.
Money.
The devaluation of assets in general.
85. Discount bonds are
Bonds that are currently trading below their face value.
Bonds that are currently trading above their face value.
Bonds that are sold below their face value, which yield interest payments in one lump sum
at the day of maturity.
Bonds that are sold at face value, but which yield interest payments in one lump sum at the day
of maturity.
Bonds that can be redeemed anytime at a discount
3
86. The money market trades debt
of a short-term maturity.
of a medium-term maturity.
of a medium-to-long-term maturity.
of a long-term maturity.
of all types of maturities.
87. Say you buy a bond with a 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
70%.
14%.
10%
7%
12.5%
88. Which of the following classifies financial markets by term to maturity?
Debt vs. equity market

Money vs. capital market


Spot vs. futures market
Primary vs. secondary market
None of the listed Options
89. The initial sale of a security is in the ______ market, while subsequent trading in the security
is in the ________ market
Primary; secondary
Secondary; primary
Money; capital
Spot; futures
Debt; equity
90. Which of the following functions of financial markets best describes the primary functions of
the financial futures market where trading is done for delivery some time in the future?
Speculation; raise funds
Payments system; risk management
Risk management; speculation
Funds intermediation; risk management
Raise funds; payment system
91. The financial system
Provides risk sharing, liquidity and information services.
Provides liquidity services only.
Provides information services only.
Refers to the banking system only.
Where only financial assets are bought & sold
92. While the primary market provides ________ for spenders, the secondary market
provides ________ for investors
Funds; liquidity
A place for investing; liquidity
Funds; low risk
Securities; funds
Low risk; high returns
93. Which of the following is associated with increased liquidity of a security?
Increased transactions costs
Increased time it takes to sell a security
Increase in taxes for every transaction
Increased number of dealers trading the security
All of the listed options
94. Which of the following is not associated with money market securities?
Short-term
Marketable High quality Equity securities
Repo
95. The second largest amount of capital market securities outstanding, after common stock,
is
Corporate and foreign bonds Mortgages
U.S. Treasury securities
U.S. Agency securities
Municipal Bonds
96. Regulations limiting risk taking of financial institutions are imposed for which of the
following reasons?
The social costs to shareholders of a general bank failure are more than the private cost of
the bank failure.

The costs of regulation exceed the benefits.


The private costs of a bank failure exceed the social costs of general bank panic.
The social costs of a general bank failure exceed the private costs to the shareholders
of the bank that failed.
Private costs to the shareholders of the bank exceeds the social costs of the a general bank
failure.
97. Which of the following is associated with the purpose of regulating financial institutions?
To provide stability of the money supply
To serve certain social objectives
To prevent failure of any financial institution
To offset the moral hazard incentives provided by deposit insurance and other guarantees.
All of the listed options
98. Regulatory balance sheet restrictions are designed to
Limit the size of depository institutions.
Limit risk-taking and to encourage diversification.
Limit excessive diversification.
Encourage high risk-taking by proper diversification.
Limit diversification and encourage risk taking
99. Regulators' attempting to limit competition by restricted entry, exclusive services, etc.
was an attempt to serve which of the following purposes of regulation?
To promote competition in the financial services markets.
To promote limited quantities of financial services at maximum prices.
To promote safety and soundness of depository institutions.
To protect the soundness of the deposit insurance fund.
None of the listed Options
100. Which of the following are involved in the regulation of Capital Markets in the US?
Ginnie Mae
Fed
SEC
The US government
None of the listed Options
101. Who among the following would not be a participant in the money-markets
Banks
Central Bank
Small Investor
Companies
Financial Institutions
102. Repos are considered the safest financial instruments as
They are backed by the government
They are of very short-term maturity
They come in very small denominations
They are backed by all big banks and companies
They offer lowest interest rates.
103. Individual investors are most likely to trade securities in
The primary market
a brokered market
an auction market
a block transaction
a direct search market
104. Financial intermediaries differ from other businesses in that both their assets and their
liabilities are mostly
illiquid.
owned by government
real.
financial
regulated. 3
105. Insurance or a guarantee to cover losses of a financial institution may create a moral
hazard
Which is an increase in the chance that a random negative economic event will occur.
Which is an incentive to decrease risk-taking by the insured.
Which is an incentive to increase risk-taking by the insurance authority.
Which is an incentive to increase risk-taking by the insured.

Which is an incentive to decrease risk-taking by the insured


106. In what roles do investment bankers perform?
design securities with desirable properties
market new stock and bond issues for firms
provide advice to the firms as to market conditions, price, etc.
None of the listed options
All of the listed options
107. Financial intermediaries exist because small investors cannot efficiently
gather information
advertise for needed investments
monitor their portfolios
diversify their portfolios
All of the listed options
108. Exchange rate risk
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.
cannot be eliminated.
Both results from changes in the exchange rates in the currencies of the investor and
the country in which the investment is made and can be hedged by using a forward or
futures contract in foreign exchange.
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.
109. A coupon bond is a bond that
does not pay interest on a regular basis but pays a lump sum at maturity
pays interest on a regular basis (typically every six months)
can always be converted into a specific number of shares of common stock in the issuing
company
always sells at par
None of the listed options
110. Under the present international monetary system,
Exchange rates fluctuate freely without government intervention.
Central banks determine the exchange rates in all countries
Supply and demand are the only factors for price determination. Central banks dont
intervene
Supply and demand are the primary forces that determine exchange rates, but central
banks may intervene if they believe currency values are over- or undervalued.
It is illegal for central banks of major countries to coordinate their intervention activities.
111. The presence of risk means that
Few outcomes possible
Investors will lose money
Investors will gain money
The standard deviation of the return is large
Final wealth will be lower than the initial wealth
112. Which asset class would provide highest returns for the lowest risk?
Property
Shares
Bonds Cash Cant be answered
113. Which asset class would provide lowest returns for the highest risk?
Property
Gold
Bank deposits
Cash
Cant be answered

114. If REAL rate of return was 10% last year and inflation was 3%, what was your
investment returned?
3.30%
7%
13%
30%
10%
115. Which of the following statements regarding risk-averse investors is true?
They will only accept lower returns and low risk
They accept investments that provide high returns.
They only care about rate of return.
They will only accept higher returns and low risk
None of the listed options

116. Alex is a more risk-averse investor than Olivia. Therefore


For the same risk, Alex requires a higher rate of return than Olivia.
For the same return, Alex tolerates higher risk than Olivia.
For the same risk, Alex requires a lower rate of return than Olivia.
For the same return, Olivia tolerates lesser risk than Alex.
Both 2 and 3
117. If a T-bill pays 5 percent, which of the following investments would not be chosen by a
risk-averse investor?
An asset that pays 10 percent with a probability of 0.60 or 2 percent with a probability of
0.40.
An asset that pays 10 percent with a probability of 0.40 or 2 percent with a probability of
0.60.
An asset that pays 10 percent with a probability of 0.30 or 3.75 percent with a probability of
0.70.
An asset that pays 10 percent with a probability of 0.20 or 3.75 percent with a
probability of 0.80
An asset that pays 10 percent with a probability of 0.50 or 2.75 percent with a probability of
0.50
118. You purchased a share of stock for $20. One year later you received $1 as dividend
and sold the share for $29. What was your holding period return
45%
5%
50%
40%
None of the listed options
119. Bank of America charges a 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
Market Risk
Credit Risk
Liquidity Risk Legal Risk
None of Above
120. If Bank of New York has 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
Liquidity Risk Market Risk
Credit Risk
Country Risk Operational Risk
121. VaR is used for which of the following
Risk Measurement
Risk Mitigation
Risk Taking
Risk Assumption
None of the listed options
122. A trader lost more than $50 million as the market moved against his positions.
However, when measured the previous day by hisrisk manager, his VaR for a single day was
defined at $20 million. Is this possible that the VaR is right
Yes because VaR does not cover 100% of the outcomes

No, it is impossible
Yes but only if the trader must have broken the VaR limit purposely
Both a and c
None of the listed options
123. Risk is best measured when looked at
At a Macro level
At the lowest possible level
At a sub-macro level
At organizational level
At country level
124. Which percentage of confidence for VaR is the most conservative?
99%
95%
96%
90%
68%
125. Which of the following is not a risk management measure?
Diversification Hedging
Insurance
Budgeting All are risk management techniques
126. Risk is best measured when looked at
At a Macro level
At the lowest possible level
At a super-macro or organizational level
At a macro level and at the lowest possible level

At a sub-macro level

127. Value-at-Risk can be estimated using


Monte Carlo Simulation
Historical Simulation
Variance-Covariance Matrix
Parametric methods
All of the listed options
128. Is time horizon of importance when calculating VaR?
Only for certain instruments
Yes, for all financial instruments
No. It is not a factor used for calculations.
Yes but only time horizons lesser than a week
Yes but only high value financial instruments 2
129. What would be the most accurate VaR estimation method?
Monte Carlo Simulation
Historical Simulation
Variance-Covariance Matrix
Cannot Say Analytical Methods
130. VaR helps in describing which of the following?
How big the loss would be on a bad day.
How to minimize the loss on bad days
Approximately predict movements of asset to help minimize losses
Explains the loss on a bad day as compared to other days
None of the listed options
1
131. A 2.33 sigma limit for calculating risk would refer to what level of confidence?
95%
99%
99.99%
50%
100%
132. Risk-based capital requirements, under the Basel Accord, focused on what area of
commercial bank risk?
Default risk
Interest rate risk
Liquidity risk
Political risk
None of the listed options
133. An investor's strategy of holding many risky assets in an attempt to reduce overall risk
is called ------------

Spread management
Securitization.

Specialization
Diversification

Coincidentialization

134. If a financial instrument has a 35 percent chance of paying 29 percent and a 65 percent
chance of paying - 13 percent,it expected return would be
0.008
0.036
0.053
0.017
-0.029 4
135. Risk is usually measured as the
Potential loss.
Variability of outcomes around some expected value.
Probability of expected values.
Potential expected loss.
None of the listed options
136. The term "risk averse" means that
An individual refuses to take risks.
Most investors and businessmen seek risk.
An individual will seek to avoid risk or be compensated with a higher return.
Only investment proposals with no risk should be accepted.
Both An individual refuses to take risks and Only investment proposals with no risk should
be accepted
137. If one project has a higher standard deviation than another
It has a greater risk. It has a higher expected value.
It has more possible outcomes.
It may be riskier, but this can only be determined by the coefficient of variation.
Both It has a greater risk and It has a higher expected value 1
138. Which of the following is a false statement?
Risky investments may produce large losses.
Risky investments may produce large gains.
The standard deviation of returns is a risk measure.
Risk-averse investors cannot be induced to invest in risky assets.
Both Risky investments may produce large losses and Risky investments may produce large
gains 4
139. Risk, as used in financial markets, means
The probability of a loss.
The probability of a gain.
The probability of a gain and the probability of a loss.
The overall rate of return.
The present value of a financial instrument.

140. Legal risk is the


Possibility that you will face legal action
Loss you could incur when legal action is taken against you
Possibility of loss when a contract cannot be enforced
Possibility of loss from errors in instructing payments or settling transactions
None of the listed options
141. The monetary value at risk is expressed as
A number between 0 and 1
Possible impact in Dollars
(1) * (2)
cant be assigned
None of the listed options
142. A Portfolio Manager is examining the stock performance of Company Dee. She sees
that, in the 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?
Her VaR is $50,000 with a confidence level of 100%
Her VaR is $ 5,000 with a confidence level of 100%

Her VaR is $ 50,000 with a confidence level of 0%


Her VaR is $1 Million with a confidence level of 100%
Her VaR is $ 1 Million with a confidence level of 0%
143. State which of the following statement(s) is (are) true
There is no risk without reward
There is no reward without risk
Increasing business in Europe also reduces a certain risk to Cognizants business
Both There is no reward without risk and Increasing business in Europe also reduces
a certain risk to Cognizants business
Risk doesnt change with time
144. State which of the following statement(s) is (are) true
Microsoft stock is the safest investment
It is better not to spend time and effort to identify and measure a risk if in the end we may
not undertake any risk mitigation measure
Risk management initiatives should reduce the risk to zero to obtain maximum benefit
All of above
None of the listed options
145. It is estimated that the probability of a particular risk in a project is 0.3 and the impact,
should the risk materialize, is $ 5,000, while the project is worth $ 3 million. The Project
Manager should
Compare the cost of risk management with the value at risk and decide on optimum
strategy
Take immediate action to reduce the probability to as low as possible
Ignore the risk the monetary value is negligible
Cannot say
Shouldnt take up the project
146. In 2002, interest earned on bank deposits was higher than profit from stock market
investments, even though deposits were supposed to have less risk associated with them. It
means
Bank deposits are actually riskier form of investment than share prices, since reward has to
be proportional to risk
The scenario described above is impossible; there must be an error in measurement
The risk-reward principle holds true over a long period, while in the short term it is
less certain
Cannot say
The risk-reward principle holds true over a short period, while in the long term it is less
certain
147. Following are the list of risks that Cognizant faces at an organization level EXCEPT
exchange rate fluctuation
protective legislation by U.S/U.K
attrition
payment default
None of the listed Options
148. Following are the list of risks that your project or a typical project in Cognizant is
exposed to EXCEPT
attrition
cost & time over-run
incorrect requirements
requirement evolution
None of the listed Options
149. The extent of diversification affects the following EXCEPT
risk
return
liquidity
total investment
None of the listed Options
150. Indian software firms lost a lot of money due to the Dollar appreciating against the
Indian Rupee. This risk could be term

Liquidity Risk

Market Risk

Credit Risk

Legal Risk

Price Risk

151. Fill in the blanks: The liability of a bank include ____________, while the assets of a
bank include _____________
Deposits, loans.
Savings accounts and large time deposits, checking accounts.
Long term deposits and short term loans
Loans, deposits.
None of the listed Options
152. What is the best basis for the comparison of dividend paying stocks with other
investments such as bonds, certificates of deposits etc
interest spread
exchange rate
interest rate
equity yield
dividend yield
153. Banks are financial intermediaries that
a) Link lenders (depositors) to borrowers
b) Evaluate the likelihood of borrower repayment, reducing risk by developing a
diversified portfolio rather than lending to a single borrower.
c) Create monopolies, monetary & fiscal policies.
d) Both Link lenders (depositors) to borrowers and Create monopolies, monetary &
fiscal policies.
e) 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
154. A bank failure is more likely to occur when
bank increases its equity capital
bank holds more short-term riskless securities
bank large loans outflows
bank increases its holdings of excess reserves
capital adequacy ratio is reduced
155. When you deposit $200 in currency into your bank
its assets decline by $200
its reserves decline by $200
its liabilities increase by $200
each of the above occur
its assets decline by $200 and its reserves decline by $200
156. Which of the following is NOT under the purview of the Central Bank
Monitoring foreign currency inflow and outflow
Stability of the financial system
Conducting the nations fiscal policy
Regulating the Banking institutions
Conducting the nations monetary policy
157. Which of the following represent tools available to the Fed to control the money supply?
a) The capacity to make direct commercial loans to the public.
b) The ability to inject or remove money held by the public by buying or selling
U.S. Treasury Bonds.
c) The ability to write legislation to generate increased government spending on public
works projects such as building trails, parks, and bridges.
d) The ability, through its Internal Revenue Service division, to change federal income
tax rates, and thus vary cash holdings by the public.
e) all of the listed options.
158. CRR stands for which of the following
Cash Reserve Ratio
Common Reserve Ratio
Cash Re-service Ratio
Cash Reserve Risk

Cash Refund Ratio

159. Increasing the Cash Reserve Ratio for banks would have an impact on which of the
following
Increased Money Supply in the economy
Reduced interest rates
Reduced Money Supply in the economy
Profitability of firms
Both Increased Money Supply in the economy and Reduced interest rates 3
160. Which two risks of a financial institution may bring gains as well as losses?
Credit risk and interest rate risk
Interest rate risk and foreign exchange risk
Credit risk and foreign exchange risk
Liquidity risk and credit risk
None of the listed options
161. How does the central bank increase money supply in the economy?
By reducing the Cash Reserve Ratio (CRR)
By buying foreign currency
By increasing the wages of the salaried class
By selling Government Securities in the open market
By maintaining a high interest rate
162. When the interest rate rises, people are
Less likely to borrow, that is, sell a financial asset.
More likely to borrow, that is, sell a financial asset.
Less likely to borrow, that is, purchase a financial asset.
More likely to borrow, that is, purchase a financial asset.
Would be neutral to borrowing
163.Banks must keep a percentage of their deposits on hand as
Required reserves.
Excess reserves.
Savings accounts.
Home loans
Safe deposit reserves. 1
164. When a large majority of a bank's depositors lose faith in it and attempt to withdraw
their deposits, the bank
a) Will not experience difficulties because its required reserves will be adequate to
meet withdrawals
b) Will not experience difficulties because it will hold sufficient excess reserves to meet
withdrawals
c) Will experience difficulties but will not fail
d) Will fail unless it can obtain additional reserves or government assistance
e) Both Will 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
165. A financial asset is liquid
a) If it can be carried easily from one place to another.
b) If it can be readily exchanged for another asset or good.
c) Only if it takes the form of cash.
d) If it is held by the public and earning interest.
e) Both If it can be carried easily from one place to another and If it can be readily
exchanged for another asset or good.
166. In Harvey, N.D. three local banks have issued no-interest loans in the form of Harvey
Bucks. They can be spent in local stores. Retailers get 95 U.S. cents for each Harvey Buck.
From this information you can conclude that Harvey Bucks

a) Although less liquid than Fed Notes, are money because they are accepted as
money.
b) Although less liquid than Fed Notes, are money because they are assets of
everyone who holds them.
c) Are not money because they are liabilities for consumers who have been
issued Harvey Bucks.
d) Are not money because they are not backed by the Federal government.
e) None of the listed options
167. If Bank of Japan was buying Dollars fervently, it would most likely be for which of the
following reasons
a) To protect Japanese exporters from loss due to movement in Yen
b) To protect Japanese importers from loss due to movement in Yen
c) For speculative purposes
d) Both To protect Japanese exporters from loss due to movement in Yen and For
speculative purposes
e) None of the listed options
168. A Commercial bank would be able to make money in which of the following ways
a) Make the lending rate below the deposit rate
b) Make the lending rate equal to the deposit rate
c) Keep the lending rate above the deposit rate but play the volume game
d) Either Make the lending rate below the deposit rate or Make the lending rate equal
to the deposit rate
e) Either Make the lending rate equal to the deposit rate or Keep the lending rate
above the deposit rate but play the volume game
169. Retail Banking division in a bank would not include which if the following departments
Personal Loans
Home Mortgages
Vehicle Loans

Derivatives Trading

Consumer Loans

170. Glass-Steagall act (1933) was created to ensure which of the following
a) Create a Chinese wall between Commercial Banking and Securities Business
b) Create a Chinese wall between Corporate Banking and Retail Banking Business
c) To make the banks more efficient
d) To promote the concept of Universal Banking
e) Both To make the banks more efficient and To promote the concept of Universal
Banking
171. Money Multiplier effect would imply
a) An increase in the total money lent out into the system
b) An increase in the total money in the bank reserves in the system
c) A decrease in the total money in the bank reserves in the system
d) Both An increase in the total money lent out into the system and An increase
in the total money in the bank reserves in the system
e) 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
172. Cash Reserve Ratio is maintained for which of the following reasons?
a) To ensure that the Bank doesnt face a cash crunch due to heavy withdrawals
b) To ensure that the Central Bank can take this cash in case of its need
c) To contribute towards government needs in times of crisis

d) Both To ensure that the Central Bank can take this cash in case of its need and To
contribute towards government needs in times of crisis
e) None of the listed Options
173. The Fed has been reducing the interest rates with aim of achieving which of the
following
a) Increasing the growth rate of the economy
b) Decreasing the growth rate of the economy
c) Help interest-rate traders book profit
d) Both Increasing the growth rate of the economy and Help interest-rate traders book
profit
e) To help the government raise funds
174. Which of the following is NOT a function of the bank?
Ensure super-normal returns to its small depositors
Channelize Savings
Provide credit facilities to borrower
Provide investment avenues to investors
Facilitate the trade and commerce dealings
1
175. Regulations limiting risk taking of financial institutions are imposed for which of the
following reasons?
a) The social costs to shareholders of a general bank failure are more than the private
cost of the bank failure.
b) The costs of regulation exceed the benefits.
c) The private costs of a bank failure exceed the social costs of general bank panic.
d) The social costs of a general bank failure exceed the private costs to the
shareholders of the bank that failed.
e) None of the listed Options
176. Which of the following is associated with the purpose of regulating financial
institutions?
To provide stability of the money supply
To serve certain social objectives
To prevent failure of any financial institution
To offset the moral hazard incentives provided by deposit insurance and other guarantees.
Both To serve certain social objectives and To offset the moral hazard incentives provided by
deposit insurance and other guarantees.
177. Regulators' attempting to limit competition by restricted entry, exclusive services, etc.
was an attempt to serve which of the following purposes of regulation?
a) To promote competition in the financial services markets.
b) To promote limited quantities of financial services at maximum prices.
c) To promote safety and soundness of depository institutions.
d) To protect the soundness of the deposit insurance fund.
e) Both To promote limited quantities of financial services at maximum prices and To
promote safety and soundness of depository institutions
178. Regulatory balance sheet restrictions are designed to
Limit the size of depository institutions.
Limit risk-taking and to encourage diversification.
limit excessive diversification
to promote Universal Banking
encourage high risk-taking by proper diversification 2

179. A bank that is earning 7% on its earning assets and is paying 4% on its interest-earning
liabilities is said to
Have a negative spread.
Have a positive GAP position.
Have a positive spread.
Will always have positive net earnings.
Both Have a negative spread and Will always have positive net earnings
180. Which of the following is not a commonly used term in the context of Banking?
Corporate banking
Investment banking
Public banking
Retail banking
Private banking
181. The term Spread refers to
a) The amount of profit a bank makes after clearing all its costs including payment of
interest to deposit holders.
b) The difference in the purchase and sale prices of any financial instrument quoted by
any financial intermediary such as a bank, a broker, etc.
c) The difference between the lending rates and deposit rates of a bank.
d) Both The difference in the purchase and sale prices of any financial instrument
quoted by any financial intermediary such as a bank, a broker, etc. and The
difference between the lending rates and deposit rates of a bank.
e) None of the listed Options
182. Why do we need banks?
a) Banks are in the best position to lend out money at competitive rates to businesses
and individuals
b) Deposits are participants in primary and secondary markets
c) Banks are in the best position to lend out money at competitive rates to businesses
and individuals and Deposits are participants in primary and secondary markets
d) All of above of small investors are protected, hence it is a low risk investment
avenue
e) Banks
183. CRR stands for
Cash Requirement Ratio
Cash Requirement Reserve

Cash Reserve Requirement


Capital Reserve Requirement

184. The central bank in the US is called


Federal Reserve
Federal Reserve Board
Central Bank of United States

Cash Reserve Ratio

Reserve Bank of United States


Reserve Bank of America

185. Investment Banking division of a bank offers all of the following except
Underwriting and distribution of equity issues
Leasing services
Mergers and acquisitions
Valuation of firms
None of the listed Options
186. Which division provides services to High Net Worth individuals?
Corporate banking
Investment banking
Retail banking
Private banking
None of the listed Options
187. Which of the following statements is true
a) Banks may loan out all the money they receive through deposits
b) When the central bank reduces CRR, amount of money in circulation in the
economy goes up
c) When the central bank issues securities in the market, amount of liquidity in the
economy goes up

d) All of the listed options


e) None of the listed Options
188. Which of the following US banks is the biggest based on the asset size as on July 2003
Bank of America
J.P. Morgan Chase & Co
Citigroup, Inc
ABN AMRO
Bank One Corporation
189. If a bank gets a deposit of $100, assuming a reserve requirement (CRR) of 10%, and
that it circulates through 2 more banks, leading to the following money multiplier effect
create a reserve of $10
loan of $244
create reserve of $19
loan of $171
None of the listed Options
190. Today, the most important monetary policy tool is
bank examination and supervise
capital requirements
discount rate policy
open market policy
required reserves policy
191. Which of the following is not covered under retail operations of a Bank?
Loan for Consumer durables Hire Purchase
Bill Discounting
Lease
Auto Loans
192. Which of the following is not correct for a personal loan?
The financer is not interested in the intention of the loan
Loan amount is linked to borrowers repayment capacity
They are short term loans
No security required
None of the listed Options
193. "Thumb rules for calculation 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"
(b) and (c)
(a) and (d)
(a) and (c)
(b) and (d)
None of the listed Options
194. Interest rate charged on asset based loans is
Greater than the personal loans
Always equal to the personal loans
Lesser than the personal loans
all of the listed options
None of the listed Options
196. Which is true for a closed ended loan?
There is no end to such loans
Overdraft is not allowed in such loans
Interest is calculated on daily outstanding balance
The borrower gets a credit card along with the loan
None of the listed Options
197. If the Limit = $1500, margin = 20% and Asset Value = $2000 then Drawing Power for an
Open ended loan is equal to
$1,500
$1,200
$1,600
$900 None of the listed Options
198. If the Limit = $1200, margin = 20% and Asset Value = $1200 then Drawing Power for an
Open ended loan is equal to?
$1,500
$1,200
$960
$900 None of the listed Options
199. Which of the following is true?

a) The financier owns the asset in case of Lease but not in case of Hire Purchase
b) Depreciation is claimed by the financier both in Lease and Hire Purchase
c) Callable bonds
d) Tax deduction can be claimed for the full value of the payment in lease but only to
the extent of interest paid in Hire Purchase
e) None of the listed Options
200. Which of the following is the most profitable for Credit Card Company?
Customers who always pay in time
Customers who never pay
Customers who default but finally pay
all of the listed options
None of the listed Options
201. Which of the following is not a repayment method?
Post dated checks
Salary deductions
Direct debits
None of the listed Options
202. Which of the following is not a kind of repayment?
Slice payment Step up Step down Bullet payment

Direct receipts

None of the listed Options

203. Interest rate spread is equal to?


Current rate Base rate
Current rate Floor
Base rate Floor
Cap Current rate
None of the listed Options
204. Collateral is?
A form of loan Asset put up as security
Obligations to be fulfilled by the borrower
A bad loan
None of the listed Options
205. While comparing mortgages, one should use?
Internal rate of return
Annual Percentage Return
Net present Value
Rate of Interest applicable for the loan
None of the listed Options
206. While taking a Mortgage, one needs a large sum to furnish the home, then which
interest rate deal should be chosen?
Discounted interest rate
Capped rate
Standard variable rate
Standard variable rate with cash back
None of the listed Options
207. In
a)
b)
c)

case of discounted interest rate deal for a mortgage the following is true?
One receives a substantial cash sum when one takes the loan.
Interest rate is guaranteed to be set amount below the base rate
The payments are set at less than that lenders going rate for a fixed period of
time.
d) The payments go up and down as the mortgage rate changes but are guaranteed
not to go above a set level
e) None of the listed Options

208. Capped rate of interest in case of Mortgage implies


a) The rate of interest cant move above a set level
b) The rate of interest cant move below a set level
c) The collar of the interest rate cant move above a set level
d) The spread of the interest rate cant move above a set level
e) None of the listed Options

209. Which is not true in case of Repayment Mortgage?


a) Monthly payments goes partly towards the interest and partly towards the principal
b) If all the monthly payments are made, the loan will be repaid by the end of the term
c) Monthly payments would increase if interest rates rise
d) Monthly payments would decrease in interest rates fall
e) None of the listed Options
210. Endowment mortgage refers to the following?
a) An interest only mortgage, along with a endowment policy to mature at the
same time as the term of the loan
b) An interest only mortgage that comes with life insurance policy
c) Another name of interest only mortgage
d) An interest only mortgage combined with tax saving investment policies
e) None of the listed options
211. Annual Percentage Rate for a loan takes into account the following?
a) The interest rate charged
b) When and how often the interest must be paid
c) Other charges such as arrangement fee
d) When and how often these other charges must be paid
e) All of the listed options
212. Freddie Mac, Ginnie Maes & Fannie Mae are?
a) Marketing institutions selling home loans
b) Lenders to the banks for home loan bought by retail customers
c) Regulatory bodies governing home loan market in US
d) Primarily asset management companies
e) None of the listed Options
213. Which is not true for an Acquiring bank
a) They approve a merchant for accepting credit cards
b) They collect the merchant's online payments
c) They are members of Visa and Master Card Associations
d) They are members of Dinners club
e) None of the listed Options
214. Which of the following is not true Independent sales organization?
a) They provide merchant accounts
b) They process the funds of merchants
c) They keep reports of all the activity of merchant accounts
d) They work on behalf of Acquiring banks
e) None of the listed Options
215. Which of the following is not involved in a credit card transaction?
Independent sales organization
Merchant
Payment gateway
Associations
None of the listed Options
216. After a credit card transaction is initiated by a customer in a shop, the transactions
information is sent to?
Payment Processor
Merchants payment gateway
Issuing banks payment gateway
Acquiring banks payment gateway
None of the listed Options
217. Who checks for the credit limit of the card before approving the transaction?
Payment processor
Acquiring banks
Payment gateway

Issuing bank

None of the listed Options

218. When the merchant clicks the Bill Orders button in the store to "capture" the funds, the
store sends the capture information to?
Payment Processor
Merchants payment gateway
Issuing banks payment gateway
Acquiring banks payment gateway
None of the listed Options
219. Which information is not provided by a Credit Bureau?
Credit History
Report inquiries
Personal Identifying Information
Public Records
None of the listed Options
220. Which of the following data appear on a credit report?
Bank account balances
Race & Religion
Income & Driving records
None of the listed Options

Health

221. Which of the following is not true for the credit score?
a) Its based on ones consolidated financial information from the Credit Report
b) Its a number calculated based on ones credit history
c) Its used by lenders for a simpler "lend/don't lend" answer
d) Its a three digit number varying between 300 900
e) None of the listed Options
222. Which one of the following contributes to ones credit report?
Bank account balance
Personal Assets
Ones qualification
Types of existing credit
None of the listed Options
223. Which of the following does not contributes to the cost of using credit card?
Expenses incurred through credit cards
Annual Percentage rate
Utility Bills paid through credit card
Late payment charges
None of the listed Options
224. Which is not a banking account?
Checking Accounts
Money Market Deposit Accounts
Demat Account
Time Deposits
None of the listed Options
225. One should have the checking account if one is looking for?
Quick, convenient and, frequent-access to the money
A high rate of interest
Guaranteed rate of interest
Low fee
None of the listed Options
226. One should have the MMDA if one is looking for?
Quick, convenient and, frequent-access to the money
A high rate of interest
Guaranteed rate of interest
Low fee
None of the listed Options
227. One should have the Time Deposits if one is looking for?
Quick, convenient and, frequent-access to the money
A high rate of interest
Guaranteed rate of interest
Low fee
None of the listed Options
228. One should have the Basic Account if one is looking for?
Quick, convenient and, frequent-access to the money
A high rate of interest
Guaranteed rate of interest
Low fee
None of the listed Options

229. One should have the Savings account if one is looking for?
Quick, convenient and, frequent-access to the money
A high rate of interest
Guaranteed rate of interest
Low fee
None of the listed Options

230. Which one is true for a capitalized loan?


a) Monthly payments go towards the interest, while a lump sum payment at the end of
the term goes towards the principal
b) Monthly payments goes partly towards the interest and partly towards the principal
c) The interest due and not paid is added to the principal balance of the loan.
interest becomes part of the principle of the loans
d) Such loans come at a very low processing fee
e) None of the listed Options
231. The term Capture in context of credit cards refers to?
a) Capture of credit card number by the issuing bank during a transaction for
authentication
b) Capture of the person using a card not owned by him
c) Conversion of the authorization amount into a billable transaction record.
d) Recording of a persons credit details in the credit report.
e) None of the listed Options
232. Considering the amount of competition in the retail market, which of the following are
the upcoming challenge/s for the banks
a) Single customer interface across multiple departments
b) Increasing their cross-sell opportunities to customers
c) Improving internal processing efficiency and quality
d) all of the listed options
e) None of the listed Options
233. "A bank has provided the following options to the borrower for $50,000 of lending for
duration of 5 years.
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"
Option (a) is the cheapest for the borrower
Option (b) is the cheapest for the borrower
Option (c) and (d) are equally costly to the borrower
all of the listed options
None of the listed Options
234. Electronic banking doesnt covers the following service/s
Pay-by Phone system
ATM System
Point of Sale system
all of the listed options
None of the listed Options
235. EFT act covers
Prepaid Telephone cards
Gift cards
Both Prepaid Telephone cards & Gift cards

Mass transit passes


None of the listed Options

236. What is Checking Account?


a) An account at a bank where funds have been deposited against which checks
may be written
b) An account, folder, or file where checks are stored

c) A type of bank account that allows withdrawals by phone or Internet


d) A form of documentation for transactions between you and the bank
e) None of the listed Options
237. Net Settlement stands for
Settlement of funds over the Internet
Real time settlement
all of the listed options

Posting net debit or net credit


None of the listed Options

238. Direct debits


Authorizes specific deposits to your account on regular basis
Authorizes all deposits directly to your account
Pre-Authorized direct withdrawal
Pre-authorization to withdraw from others account

None of the listed Options

239. EFTA stands for


Electronic Funds Trading Act
Electronic Financial Transfer Act
Electronic Funds Transfer Act
Electronic Fee Transfer Act
Electronic Funds Telecommunication Act
240. ______________ preauthorizes banks to pay recurring bills like insurance premium,
utility bills automatically
Pay-by-Phone System EFT
Direct Debit
Direct Credit
Direct Deposit

241. ATM stands for


a) Automatic Transaction Machine; Almost anytime banking
b) Automated Teller Machine; Remote location transactions
c) Automatic Transaction Machine; Fund transfer between accounts
d) Automated Teller Machine; Direct Deposit
e) Automatic Transaction Machine; Personal Banking
242. Debit Card
is a stored value card

provide credit line

transfer money at Point of Sale

Only provide credit line and transfer money at Point of Sale


None of the listed Options 5
243. EFT systems are a major form of electronic payment systems in banking and
retailing industries. EFT is an acronym for
Electronic Financial Transactions
Encrypt Fund Transfer
Electronic Fund Transactions
Electronic Fund Transfer
External Fund Transfer
244. EFT services require institution to tell the following to the customers
a) Summary of Customers assets for unauthorized transfers
b) Summary of institution's liability if it fails stop certain transactions.
c) List of institute holidays
d) Circumstances under which institute will not disclose information to third party.
e) None of the listed Options

245. A transaction error has occurred in customers account. Which of the following
holds as per EFT act?
a) Customer has 30 days to notify the error from the date a statement is received
b) Financial Institution has 15 days to investigate the errors
c) Financial Institution has to communicate within 7 working days the result after
completion of the investigation
d) Financial Institution has to correct the error within one working day after
detecting the same.
e) Both Financial 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.
246. Customer can lose much more on ________________ loss than on _____________
loss
Credit Card; Debit Card
Credit Card; ATM Card
Credit Card; Stored Card
Debit Card; ATM Card
Debit Card; Credit Card 5
247. In the case of Debit or ATM card
a) Customer liability is limited if the loss is reported before it is used without his/her
permission.
b) Customer liability varies depending on the delay in the reporting of the loss,
if unauthorized use occur before reporting
c) Customer liability is limited if the unauthorized use occurs before reporting the
loss.
d) Notification period cant be extended even in the case of extenuating
circumstances.
e) There cant be unlimited liability
248. Stop-Payment privilege provides
a) right to customer to stop payment on any EFT transaction
b) customer can stop payment if the purchase is defective or not delivered
c) customer can stop payment only for preauthorized regular payments
d) customers dont have privileges for any transaction
e) None of the listed Options
249. Terminal Receipts
a) issued for regularly occurring electronic payments that are pre-authorized
b) entitled to customer only when the electronic transaction is terminated
c) provides statement of all the transactions terminated for a given period
d) must show the amount and date of the transfer, and its type, such as "from savings
to checking
e) None of the listed Options
250. The Federal Reserve offers financial services to banks and the U.S. government for
all of the following reasons except to

make a profit

promote competition

foster innovation

promote efficiency in the payments system


None of the listed Options
251. Which of the following statements about the Fed's involvement in electronic
banking is true?
a) each year the Fed conducts billions of transactions valued in the trillions of
dollars
b) funds transfers are originated and received through a sophisticated
telecommunications network called FedWire
c) financial institutions can move their balances at the Fed or send funds to another
institution through electronic banking
d) all of the listed options
e) None of the listed Options
252. The Federal Reserve System processes about ___ of all checks written in the country
1/5
2/3
1/3
4/5
All
253. Just after you write a check at a store to make a purchase
a) your checking account at a financial institution is instantly reduced by the value
of the check
b) the store manager sends the check to a Federal Reserve Bank to be processed
c) the store manager deposits the check in the stores account at a local financial
institution
d) your checking account at a financial institution is increased by the value of the
check after it has been processed by a Federal Reserve Bank or a correspondent
bank
e) All of the listed options
254. A one-time written order that instructs a financial institution to transfer funds from
your account to the account of an individual or business is called
check Automatic Clearinghouse (ACH) transaction. currency debit credit 1
255. CHIPS stand for
Clearing House for International Payments Settlement
Clearing House for Interbank Payment System
Clearing Head of Interbank Payment Settlement
Clearing Head of international Payment Settlement
Clearing House for Interbank Payment Settlement
256. FEDWIRE involves the following intermediaries for the fund transfer EXCEPT
Inter District Settlement Fund
Federal Reserve bank
Treasury & Government agencies
Depository institutions
None of the listed Options

257. CHIPS uses ______________ to & from special settlement account on the booking
of the _____________
ACH; Federal Reserve Bank
EFT; Federal Reserve Bank
FEDWIRE; New York Fed
Inter District Settlement Fund; Federal Reserve Bank
FEDWIRE; Federal Reserve bank
258. Following are all Private-sector payment systems EXCEPT
Check Clearing System
Inter District Settlement Fund
Automated Clearing Houses
CHIPS
FEDWIRE
259. "Two Financial Institutions conducted the following transactions over CHIPS on
30th Jan 2004.
A transferred $5m to B at 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?"
a) At the of the day, $17m will be transferred to B
b) At the end of the day, $25m will be transferred to A
c) At the end of the day, $8m will be transferred to A
d) All the transactions would settle individually real-time
e) 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
260. EFT offers the following services EXCEPT
Electronic check Conversion
Pay by Phone
Direct Debit
Direct Deposit
All Stored value cards
261. What is the electronic payment delivery system most often used to process lowdollar repetitive retail payments?
Check
Funds transfer
Treasury payments
Automated Clearinghouse (ACH) FEDWIRE
262. Which of the following results in a direct, immediate, electronic payment from the
cardholder's checking account to a merchant?
Credit Card Money Order Checks
Debit card ATM card
263. If you use your debit card to make a purchase, the amount will be transferred out of
your account
Typically within one day
In whole-dollar amounts
The next business day
The amount is not transferred, but added to your credit card bill
Depends on the billing cycle

264. The Federal Reserve System is responsible for


regulating banks and financial institutions
creating a stable economic environment
managing regional and national check clearing
monetary policy
All of the listed options
5
265. Which of the following is probably the most familiar form of electronic banking?
ATM
Debit card
Credit card
POS system
ACH
266. Which of the following transactions would cost the most?
ATM deposit
Deposit at Teller window
Direct deposit
Electronic fund transfer
None of the listed Options
267. FEDWIRE transfer
involves relatively large no. of book keeping entries
are free of cost
handle high volume of small transactions
are settled on net settlement basis
handle high value transactions
268. Which of the following transactions costs the least?
Payment by personal check
Payment via ACH
Debit card for point of sale purchase
ATM withdrawal
Withdrawal at teller window
269. FEDWIRE differs from CHIPS in that
a) FEDWIRE is gross settlement system
b) FEDWIRE is a private sector fund transfer system
c) CHIPS provide international fund settlement
d) FEDWIRE offers free services
e) FEDWIRE provides domestic fund settlement
270. Which of the following transfers are covered by the Electronic Funds Transfer Act?
a) Bobs purchase of an electronic toilet seat with a wire transfer
b) Joes transfer, made in person, from his checking to his savings account, to post
bail from prison
c) Larrys check written at the Three Strikes and Your Out Bowling Alley
d) Tims point of sale purchase from his business account to buy that new hardware
store he has always wanted
e) None of the listed Options
271. Inter District Settlement Fund is a
a) Fund Transfer System
b) Electronic Bill Presentment System
c) Settlement Account
d) Booking System

e) Transaction System

272. John loses his ATM card, which has his PIN written on the back of the card. He doesnt
discover this until two weeks later and immediately notifies the bank. During the two 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
a) $500
b) 40 hours of community service teaching classes on why to not write your PIN on the
back of your card
c) Half of the $9,000
d) $50
e) None of the listed Options

273. Stored value cards


a) are like prepaid mobile cards, mass transit passes etc.,
b) are all covered by EFT act
c) stores encrypted code for accessibility
d) are used for accessing personal bank account
e) are like debit cards, credit cards etc.,
274. What does the Federal Reserve Supervisory Letter define private banking as?
a) personalized services such as money management, financial advice, and
investment services for high net worth clients
b) personalized services such as cheque collection and other retail banking services for
high net worth clients
c) service provided by private banks to all clients
d) personalized services provided by private and public banks to all clients
e) None of the listed Options

275. Structured Lending


a) Investment Management and Advice
b) Issuer Capital Formation
c) Trade Finance Management and Advice
d) Access to investment banking and institutional services
e) Structured Lending
276. Private Banking clients can be based on
a) Volume of business
b) Traditional banking business
c) Net Worth
d) Retail Banking business
e) All of the listed options
277. Which of the following is true for the Personal Investment Companies (PICs) setup
a) Tax benefit
b) Huge startup fee
c) Annual Administration Fee
d) Foreign Check Writing Services

e) None of the listed Options


278. Typical Fee charged for private banking services
a) Less than 1%
b) Between 1 to 4%
c) Between 6 to 10%
d) More than 10%
e) None of the listed Options
279. Client relationship manager doesnt have to understand which of the following need/s for
investment management and advice
a) Liquidity requirement
b) Capital Base
c) Tax planning
d) Arbitrage trading
e) None of the listed Options
280. High-Net worth individuals generally have
a) Household income atleast $50,000
b) Networth greater than $500,000
c) Market capitalization more than $200,000
d) all of the listed options
e) None of the listed Options
281. The process flow in a Private banking firm goes as
a) Servicing Specialist => Client Representative => Middle Office => Back Office
b) Client Representative => Servicing Specialist => Middle Office => Back Office
c) Client Representative => Servicing Specialist => Back Office => Middle Office
d) Middle Office => Back Office => Servicing Specialist => Client Representative
e) Client Representative => Middle Office => Servicing Specialist => Back Office
282. In the case of self directed investment management in Private banking
a) Banks portfolio managers make investment decisions only after customer
approval
b) Banks portfolio managers make self-directed investment decisions
c) Banks portfolio managers make investment decisions on behalf of the customer
d) Banks portfolio managers make investment decisions behalf of all the customer
e) None of the listed Options
283. Which of the following roles and responsibilities are correctly stated?
a) Services Provider; Tax Services
b) Middle Office; Statements & Advices
c) Front Office; Client Reporting
d) Back Office: Risk Management
e) Middle Office; Custodial Services
284. High net worth individuals are normally defined based on the
a) Household income
b) Net Worth
c) Value of shares held by the household + household income
d) Both Net Worth and Value of shares held by the household + household income
e) Both Household income and Net Worth
285. Which of the following is/are not a responsibility of the Middle office?
a) Account Aggregation
b) Domestic Global Settlement

c) Cash Processing
d) Sales & Brokerage
e) Both Account Aggregation and Sales & Brokerage
286. Private Banking doesnt deal with the following services EXCEPT
a) Tax & estate planning
b) Insurance
c) Foreign exchange
d) Automated credit entitlement
e) all of the listed options
287. A Private Banking division would entail the need for which of the following
a) Efficient Portfolio Analysis
b) Asset Allocation techniques
c) High Technology Investment
d) all of the listed options
e) Only Efficient Portfolio Analysis and Asset Allocation techniques
288. Private clients trade in ____________ volumes and ___________ fees and commissions
a) larger; larger
b) small; larger
c) small; small
d) larger; small
e) Either small; larger or larger; small
289. Sweep facility provides
a) automatic transfer of funds from one account to another account, whose balances
have fallen below the pre-determined limit
b) automatic transfer of funds from one account to another account, whose balances
have exceeded pre-determined limit
c) automatic transfer of funds from one account, whose balances have exceeded predetermined limit, to another account
d) 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, whose balances have exceeded pre-determined limit, to another account
e) 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
290. Managing clients liquidity assumes paramount importance in private banking, it involves
a) Short term credit facilities
b) Flexible cash management
c) Optimizing returns on short term cash
d) all of the listed options
e) None of the listed Options
291. The two most distinguishing features of Private banking are _____________ and
_____________.
a) Liquidity management; risk management
b) Specialist advice; risk management
c) Wealth management; financial advice
d) Extensive research; specialist advice
e) Liquidity management; structured lending
292. Private Banking providing Risk management services thereby strives to
a) Eliminate risk and maximize returns

b) Reduce risk and optimize returns


c) Avoids risk and optimize returns
d) Transfers risk and maximize returns
e) all of the listed options
293. Private Banking provides plethora of specialized services to it clients. Which of the following
statements holds true?
a) It is less dependent on accepting deposits than retail banking.
b) Client portfolios are reflected on the liability side of the banks balance sheet
c) Client portfolios are reflected on the asset side of the banks balance sheet
d) Both It is less dependent on accepting deposits than retail banking and Client
portfolios are reflected on the asset side of the banks balance sheet
e) Both Client portfolios are reflected on the liability side of the banks balance sheet and
Client portfolios are reflected on the asset side of the banks balance sheet
294. Which of the following companies offer Private banking services?
a) Credit Suisse
b) Fidelity
c) Merrill Lynch
d) all of the listed options
e) None of the listed Options
295. _____________ provides Private banking in the Trust or Investment management division
whereas _______________ provides Private Client Services (PCS)
a) Credit Suisse; Salomon Smith Barney
b) Fidelity; UBS
c) Mellon and Bank One; Salomon Smith Barney
d) All of above
e) None of the listed Options
296. The below stated responsibilities are carried out by which of the following players. Cash
Services/Client Reporting/Statements & Advices/Domestic & Global Settlements
a) Services Provider
b) Client Representative
c) Back office
d) Front Office
e) Middle Office
297. Private banking offers structured lending that provides
a) Customized asset-based credit solutions
b) Long-term liquidity to clients
c) Advice-led credit solutions
d) Credit solutions to High Net worth individuals
e) All of the listed options
298. Private Banking customers can be categorized based on the following parameters
a) Risk taking capability
b) Investible assets
c) Networth
d) Both Investible assets and Networth
e) All of the listed options
299. In the case of discretionary investment management in Private banking
a) Banks portfolio managers make investment decisions only after customer approval
b) Banks portfolio managers make self-directed investment decisions
c) Banks portfolio managers make investment decisions on behalf of the customer

d) Banks portfolio managers make investment decisions behalf of all the customer
e) None of the listed Options

300. Jim Morrison, 52 years old, founder, chairman and largest shareholder of a 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?
a) Issuer Capital formation
b) Investment Management Services
c) Structured Lending
d) Hedge Funds
e) Payable Through Account

301. Increasing numbers of hedge funds are locating to Cayman Islands because al EXCEPT
a) Tax haven
b) Flexible legislation
c) Highly sophisticated venue
d) Numerous capable professionals
e) None of the listed Options
302. Hedge funds have attracted investors' attention due to some 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?
a) Highly speculative
b) Private investment partnership
c) Highly leveraged
d) Consistent performance
e) Investor needs to be fully accredited

303. Financial planning involves all EXCEPT


a) Cash flow management
b) Retirement planning
c) Risk management
d) Tax planning
e) Portfolio management
304. Which of the following is not a secured loan?
a) Overdraft on checking.
b) Personal lines of credit.
c) Study loan
d) Credit cards
e) All of the listed options
305. Which of the following statements is true?
a) Requires "collateral" or something, which the lender can easily sell and use to
pay off the loan if the borrower defaults.
b) Rates are generally lesser for unsecured loans.

c) If a person with a less than perfect credit history gets a loan it will be at a lower interest
rate.
d) Having a good credit record of lender is a critical factor because higher interest rate
can be charged to that individual.
e) Rates are generally greater for secured loans
306. Which of the following statements is false about loan?
a) The amount of the loan that is disbursed is an asset for the bank
b) The interest rate on a loan depends on the disbursed amount and Schedule.
c) Loans can be disbursed in multiple currencies with different schedules.
d) Loan is considered as a liability for the customer.
e) Loan can be prepaid with or without penalty
307. Which of the following statement is faulty about credit enhancement?
a) Enhancing the duration of the credit given to the corporate
b) Evaluating the feasibility of extending the credit facility to the borrower.
c) Mechanism to improve the original rating of the credit for the borrower.
d) Increasing the credit limit for the corporate
e) None of the listed Options
308. Which of the following is true about Working Capital?
a) Working capital requirements depends on the current assets and current liabilities of
the corporate.
b) 25% of the Working capital gap has to be fulfilled by long term funding and 75% by
short term loans and overdrafts.
c) Overdraft limit is extended to corporate to manage their day to day cash flow needs
d) Part of the current liabilities need to be funded through the current assets.
e) None of the listed Options
309. Supplier or Dealer loans provide
a) Assurance from the Corporate in case of default by suppliers and dealers
b) Immediate loans to the suppliers and dealers of the corporate at higher rate of interest.
c) Long term loans to the suppliers and dealers by the banks
d) all of the listed options
e) None of the listed Options
310. Which of the following is NOT a Settlement Method for Bank Loans?
a) Assignment
b) Participation.
c) Securities Repository.
d) Sub-Participation
e) Preclosure
311. Once the Syndicate has closed, all other trades, Participations, Sub-participations and
Assignments are considered trades in what market?
a) Primary market
b) Index market
c) Secondary market
d) Participation market
e) Over the counter market
312. Consider a loan of USD 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?
a) 600 USD

b) 400 USD
c) 1400 USD
d) 1350 USD
e) 350 USD
313. Consider a one-year loan of 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 banks income as on June 31, 2004?
a) 11,000 USD
b) 600 USD
c) 1,000 USD
d) 5,500 USD
e) 10,000 USD
314. Which of the following type of loan requires the amount of interest that would be earned on
the amount of interest paid upfront by the borrower?
a) Demand loan
b) True discounted Loan
c) Discounted Loan
d) Capitalized Loan
e) Amortized Loan
315. Interest rates are
a) The prices paid for the use of a real liability.
b) The prices paid for the use of a real asset.
c) The prices paid for the use of a financial liability.
d) The prices paid for the use of a financial asset.
e) The price paid for the use of a contingent asset
316. A loan that can be paid in periodic equated installments with capitalized interest is called
a) Amortized Loan
b) Capitalized Loan
c) Annuities
d) Discounted loan
e) True discounted Loan
317. Loan can take many of the following basic forms EXCEPT
a) Overdrafts
b) Bills and promissory notes
c) Corporate bonds
d) Advances
e) Credit line
318. If a fund purchases a loan in the Primary, they also use another word for that. Which term is
used to indicate the initial group of lenders (Primary Lenders)?
a) Allocation
b) Syndicate
c) Secondary
d) Assignment
e) None of the listed Options
319. In the case of floating rate loan, which of the following is false?
a) Base rate can be reset at mutually agreed time period or it can be periodic.
b) Spread is applied over and above the base rate.
c) The spread varies over the life of the loan.

d) Spread can be negative.


e) None of the listed Options
320. What does loan provisioning stand for?
a) To create the provisions for doing business in different lines of businesses.
b) Loan provisioning is done to classify and grade the loans.
c) All of above
d) To create buffer against the loss of the non-performing loans.
e) None of the listed Options
321. Credit risk in the swap market is
a) Extensive.
b) Equal to the total value of the payments that the floating rate payer was obligated to
make
c) Limited to the difference between the values of the fixed rate and floating rate
obligations.
d) Both Extensive and Limited to the difference between the values of the fixed rate and
floating rate obligations.
e) None of the listed Options
322. When a firm needs short-term funds for a specific purpose, the bank loan will likely be a
a) Compensating balance arrangement
b) Revolving credit agreement
c) Transaction loan.
d) Line of credit
e) Term Loan
323. Which of the following are the benefits of using credit derivatives?
a) Credit derivatives can be used either to take on more risk or to avoid (hedge) it.
b) Credit derivatives can be used to create positions that can otherwise not easily be
established in the cash market.
c) Credit derivatives can be used both to diversify their credit risk exposures and free up
capital from regulatory constraints.
d) All of above
e) None of the listed Options
324. A formal, legal commitment to extend credit up to some maximum amount over a stated
period of time
a) Letter of credit
b) Revolving credit agreement
c) Line of credit
d) Trade credit
e) Irrevocable Credit
325. Utility companies and medical service organizations commonly offer (fill in the blank) credit
a) Revolving
b) Single payment
c) Installment
d) Retail
e) Corporate
326. A common advantage of using credit is
a) less impulse buying
b) lower cost for items purchased
c) ability to obtain needed items now
d) lower chance of overspending

e) None of the listed Options

327. A Company has negotiated 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
a) 11.50%
b) 15%
c) 26.50%
d) 13.25%
e) 11.50%

328. Which of the following is not a credit derivative?


a) Credit linked Notes.
b) Total return swaps.
c) Credit default swap.
d) Currency swap.
e) All of the listed options
329. Secondary loan trading refers to ______________ of _____________ on the secondary
market.

a) Approving; new debts


b) Buying/Selling; only bad debts
c) Selling; new debts
d) Buying/Selling; existing debts
e) Reassignment; debts
330. Asset securitization refers to
a) financing vehicle consisting of pooling of existing debts as collateralized asset for the
issuance of the debt
b) financing vehicle consisting of pooling of government securities as collateralized asset
for the issuance of debt
c) financing vehicle consisting of the pooling financial assets, and the issuance of
debt collateralized by these assets
d) financing vehicle consisting of pooling of corporate bonds and equities as
collateralized asset for the issuance of debt
e) None of the listed Options

331. Credit derivatives can be used to ___________ the risk and ___________ the regulatory
capital requirements
a) Transfer; increase
b) Diversify; reduce
c) Eliminate; improve
d) Manage; avoid
e) Assess; estimate

332. Credit derivative is all BUT


a) Financial Instrument

b) Transfers risk
c) Traded over the counter
d) Facilitate greater efficiency
e) None of the listed Options
333. Which of the following is not a secured loan?
a) Equity Loans
b) Secured Loans with Savings
c) Equity Lines of Credit
d) Personal Loans
e) Car Loan
334. In the inflationary 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
a) Option A
b) Option B
c) Option C
d) Option D
e) All of the listed options
335. The key feature of letter of credit
a) Basis for devising proper currency hedging strategy
b) Distributes risk between buyer and seller
c) Opportunity to receive payment in advance of the due date
d) Basis for devising proper currency hedging strategy and Opportunity to receive
payment in advance of the due date
e) All of the listed options
336. USExport and EURImport 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
a) 3000
b) 250
c) 2500
d) 300
e) None of the listed Options
337. A company called FixImport Co. awards USExport a contract that requires not only making a
large quantity of widgets, 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 preshipment 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?
a) Wrongful demand against the Advance Payment Guarantee.
b) Country risk
c) The remainder of the payment might not be made on time
d) Risk of default.
e) Interest Risk
338. Which if the following is true in the case of sight draft?
a) Buyer can refuse to take the delivery

b) Quality of the Good is guaranteed


c) Buyer is expected to make the payment after specified credit days
d) Payments made based on only bill of lading
e) None of the listed Options
339. UKImport, a financially 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)
a) 1700
b) 1900
c) 190
d) 170
e) 2100
340. USExport and CanImport agree to carry out transaction under a confirmed letter of credit
with maturity date of 180 days from the time of shipment. But after shipping the goods, USExport
realizes that it doesnt 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?
a) Requesting a Sight Letter of Credit
b) Applying for Bank Loan
c) Discounting the term letter of credit
d) Taking Advance from the Issuing Bank
e) Not Possible before date of maturity
341. The trade terms "15/2, net 30" indicate that
a) 2% discount is offered if payment is made within 15 days
b) 15% discount is offered if payment is made within 2 days
c) 2% discount is offered if payment is made within 30 days
d) 15% discount is offered if payment is made between 2 and 30 days
e) 30% discount is offered if payment is made before 15 of the month
342. The basic four parties involved in any transaction using LC (Letter of Credit) are the
following EXCEPT
a) Issuing Bank
b) Reimbursement Bank
c) Seller
d) Beneficiarys Bank
e) Buyer
343. The Advising bank is used as a trusted bridge between the __________ and
_______________ when they do not have an active relationship
a) Issuing bank; Confirming bank
b) Beneficiary bank; Reimbursing bank
c) Importer; Exporter
d) Issuing bank; Beneficiary bank
e) Reimbursing bank; Beneficiary bank
344. Which of the following is the safest type of letter of credit from seller point of view?
a) Confirmed Letter of Credit
b) Irrevocable Letter of Credit
c) Red Clause
d) Standby Letter of Credit
e) Revolving Letter of Credit.

345. Credit cards


a) Create financial liabilities for those who use them.
b) Create financial liabilities for the issuer once they are used by the holder
c) Create money for those who use them
d) Create money for those who issue them
e) Create financial asset for those who use them
346. Which of the following operations cant be done on a LC (Letter of Credit)?
a) Discount
b) Purchase
c) Acceptance
d) Collection
e) None of the listed Options
347. A Revocable LC (Letter of Credit)
a) can be revoked without the consent of the Exporter
b) can be revoked without the consent of the Exporters bank
c) can be revoked without the consent of the Importers bank
d) cant be revoked with the consent of the Advising bank
e) cant be revoked without the consent of Exporter.
348. Standby LC (letter of Credit)
a) Is used as primary payment method.
b) Promises payment only if the buyer fails to make an arranged payment
c) Promises payment only if the seller fails to meet pre-determined terms and conditions
d) Can remain valid for short duration only.
e) Involves complex process and complicated documentation
349. Back to Back LC (letter of Credit) allows
a) buyer to open new LC against an already issued LC
b) seller to use the LC received from his buyer to open his own LC
c) buyer to use the LC received from his seller to open his own LC
d) seller to receive one more LC against an already issues LC from his buyer
e) Buyer to open one more LC based on an already issued LC
350. ________________ evidences delivery of goods and services whereas _______________
relates to the apparent performance / non-performance of an obligation of the applicant
a) Transferable LC; Confirmed LC
b) Confirmed LC; Red Clause
c) Green Clause; Back to Back LC
d) Confirmed LC; Standby LC
e) None of the listed Options
351. What term is used to describe an LC that remains valid for years thereby eliminating the cost
of separate LCs for each transaction with a regular client?
a) Evergreen Clause
b) Red Clause
c) Irrevocable LC
d) Revolving LC
e) None of the listed Options
352. Which of the following holds true for an LC (Letter of Credit)
a) Shifts credit risk from the Importer to the Importer's Bank (Issuing Bank).
b) Deals with products and not with documents
c) Are typically revocable unless specified otherwise.

d) One of the relatively cheaper forms of payment guarantee.


e) Advising bank has the liability for the payment of the LC.
353. Draft can
a) be called bill of exchange
b) be a written order by one party directing a second party to pay a third party
c) be a negotiable instruments that facilitate international payments through respected
intermediaries
d) offer more flexibility than LCs
e) not be transferred from one party to another party
354. Bankers acceptance defers from sight draft in that
a) Sight drafts are negotiable instruments
b) Bankers acceptance demands immediate payment.
c) Bankers acceptance reduces banks lending capacity
d) Bank can raise funds by selling the acceptance
e) None of the listed Options
355. Counter-trade or barter is most likely used when buyer
a) has access to convertible currency
b) finds that rates are favorable
c) will compensate the seller in a manner other than transfer or money or products
d) cant exchange for products or services desirable to the seller
e) None of the listed Options
356. Factoring is
a) a discounting method with recourse
b) works with short term receivables
c) works mostly with capital goods
d) works with medium and long term receivables
e) sharing risk with third party
357. Fundamental difference between factoring and forfeiting lies in
a) transferring the credit risk to the third party (Factor)
b) removal of contingent liabilities from balance sheet
c) term of the contract viz., short, medium or long term
d) difference in the risk profiles of the receivables
e) the structuring of the contract with the third party
358. An Asian Importer wants 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?
a) Bill Discounting
b) Factoring
c) Forfaiting
d) Letter of Credit
e) Consignment
359. Which of the following methods of payment is most risky to the Seller?
a) Documentary Collection
b) Open Account
c) Letter of Credit
d) Counter trade
e) Cash in Advance

360. Which of the following are disadvantages of using LC (Letter of Credit)?


a) Time consuming
b) Costly
c) Specific and Binding
d) Deals with documents and not with products
e) Credit Line tied up.
361. BOL stands for
a) Bill of Letter
b) Bankers Overdraft Limit
c) Bank of London
d) Bill of Leasing
e) Bill of Lading
362. BAFT stands for
a) Bankers Acceptance for Factoring Transactions
b) Bankers Association for Foreign Trade
c) Bankers Acceptance for Foreign transactions
d) Bankers Association for Forfaiting & Factoring transaction
e) Bankers association for Factoring Trade.
363. Bill of Lading is
a) a contract between Importer and Exporter for transportation of goods
b) a receipt issued by importer to exporter for goods received for transportation
c) a contract between a carrier and a shipper for the transportation of goods
d) A receipt issued by exporter to importer for goods delivered.
e) None of the listed options

364. Foreign Credit Insurance Underwriters and Brokers is


a) A collection of banking institutions, dedicated to promoting American exports,
international trade, and finance and investment between U.S. firms and their trading partners
b) A forum for analysis, discussion and action among international financial professionals
on a wide range of topics affecting international trade and finance, including legislative/regulatory
issues.
c) A forum to insure repayment of export credit against nonpayment due to
political and/or commercial causes
d) A forum to set up a trade finance database with a grant from the U.S. Department of
Commerce
e) None of the listed Options

365. An Asian Buyer entered 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.
a) $1,200
b) $1,700
c) $710
d) $990
e) $250

366. Which of the following combinations holds true?


a) Wire transfer; more costly than other payment alternatives
b) Foreign Checks; Useful when information/documentation must accompany
payment

c) Commercial letter of credit; Improves applicants credit facilities


d) Standby letter of credit; less costly than documentary collection
e) Documentary collection; strict compliance rules apply
367. Standby letter of credit is __________ secure than documentary collection and cheaper
than __________________
a) Less; open account
b) More; documentary collection
c) More; commercial letter of credit
d) Less; commercial letter of credit
e) None of the listed Options

368. Banker acceptances are ________________ credit investment created by ___________


and used for financing imports, exports and domestic shipping
a) Long term; financial firms
b) Long term; non-financial firms
c) Short term; non-financial firms
d) Short term; financial firms
e) Medium terms; banks

369. Discounting method for long term account receivables on non-recourse basis is termed as
a) Factoring
b) Leasing
c) Forfaiting
d) Bill discounting
e) None of the listed Options
370. Due Diligence is performed to
a) Assess the risk
b) Performed by the buyer
c) Performed on the seller
d) Executed after contract is signed
e) All of the listed options
371. Which of the following methods eliminate country risk and commercial risk upon
confirmation?
a) Back to back Letter of Credit
b) Standby Letter of Credit
c) Documentary Collection
d) Letter of Credit
e) Both Standby Letter of Credit & Letter of Credit

372. Documentary Letter of credit provides all BUT


a) Cheaper than letter of credit
b) More rigid than letter of credit
c) No strict compliance rules
d) No credit facilities required
e) No guarantee of payment by bank
373. Which of the following factors affect the choice of payment methods?
a) Time frame
b) Exporters Fund
c) Government Guarantee Program
d) Cost of financing
e) All of the listed options
374. The treasury services department performs all of the following functions except
a) Research market factors e.g., Interest rate monitoring
b) Managing corporate collections and payments
c) Managing liquidity and cash position
d) Risk Management services
e) None of the listed Options
375. A bank treasury manages investment of surplus cash in which of the following instruments
EXCEPT

a) Money market instruments


b) Treasury securities
c) Debt
d) Deposits with other banks
e) None of the listed Options
376. Assume that Bank A treasury borrows $2.0 million for 2-years from 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?
a) Forex risk
b) Repricing risk
c) Optionality
d) Basis risk
e) All of the listed options

377. The following are interest rate risk management instruments EXCEPT?
a) Interest rate swap
b) Forward rate agreement
c) Swaption
d) Interest rate guarantee
e) None of the listed Options
378. The following forex risk management instruments used for foreign exchange risk EXCEPT?
a) Cross currency swap

b) Spot Forex contract


c) Options
d) Forward Forex contract
e) Both Cross currency swap and Options
379. On October 15, ABC Limited enters in to a 3-month forward contract with Bank A for
delivering USD 20.0 million at INR 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
a) Bank A loses money in the deal
b) ABC Limited loses money in the deal
c) There is insufficient information to answer the question
d) Loss/Gain depends on forward rate at the end of 3 months
e) Neither party loses money in the deal

380. Bank A has significant investments in 10-year treasury bonds at a coupon rate of 4.9% and
Bank B has significant investments 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%,
a) Both banks see an increase in portfolio value
b) Bank A portfolio value increases while Bank Bs decrease
c) Bank B portfolio value decreases while Bank As increase
d) Both banks see a decrease in portfolio value
e) Insufficient information for answering the question

381. A corporate has on books a 5-year floating rate loan at LIBOR+2%. Suppose interest rates
are anticipated to rise in the near term. The corporate should ideally
a) Retain the floating rate loan
b) Convert to fixed rate loan immediately
c) Wait for the interest rates to rise and then go for a fresh fixed rate loan to repay the old
loan
d) Wait for the interest rates to rise and then go for a fresh floating rate loan to repay the
old loan
e) None of the listed Options

382. Assume hypothetically that Bank A has hedged a long position in 5 year government bonds
with a short position in 3 year government notes. When the yield curve steepens
a) Bank A stands to lose money
b) Bank A stands to gain money
c) Depends on interest rates of the instruments
d) Insufficient information
e) None of the listed Options

383. A financial entity XYZ Ltd borrows 5-year money from Bank A at 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
a) Repricing risk
b) Basis risk
c) Yield curve risk

d) Political risk
e) None of the listed Options
384. ABC Ltd in US has to make an import payment of Euro 2.3 million after 3 months. Market
feels that Euro will 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
a) 3-month forward purchase of Euro
b) Purchase of a 3-month Euro future
c) Purchase a 3-month Call option on the Euro
d) Sell a 3-month put option on the Euro
e) 3-month forward sale of Euro

385. Assume that Euro/USD is quoting at 1.2476/0.2481 and GBP/USD is at 1.8195/0.8200.


What would be the cross currency rate for Euro/GBP?
a) 1.2476/0.8200
b) 0.6793/0.6802
c) 0.6854/0.6860..
d) 1.2481/0.8195
e) None of the listed Options

386. Assume that INR/USD is quoting at 45.35/0.36 and Euro/USD is at 1.2476/0.2481. What
would be the cross currency rate for Euro/INR?
a) 55.2344/0.4565
b) 36.3300/0.4016
c) 56.3849/0.5231
d) 56.5787/0.6138..
e) None of the listed Options

387. Which of the following is a valid forex risk management strategy?


a) Purchase a put option on a currency which is anticipated to appreciate
b) Purchase a call option on a currency which is anticipated to appreciate
c) Sell a call option on a currency which is anticipated to appreciate
d) Both Purchase a put option on a currency which is anticipated to appreciate and
Purchase a call option on a currency which is anticipated to appreciate
e) 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

388. The USD/INR spot rate is 45.35/0.36 and the 3-month forward premium quote is 0.02/0.04.
What is the forward rate applicable?
a) 45.37/45.32
b) 45.37/45/46
c) 45.37/45.40
d) 45.39/45.38
e) None of the listed Options

389. Which of the following is true theoretically?


a) As interest rates in India rise, forward premium for USD/INR rise

b) As interest rates in India rise, forward premium for USD/INR fall


c) As interest rates in India fall, forward premium for USD/INR fall
d) Both As interest rates in India rise, forward premium for USD/INR rise and As
interest rates in India fall, forward premium for USD/INR fall
e) None of the listed Options

390. Which of the following is correct?


a) Swaps are not derivative instruments
b) Swaption is a combination of a swap and an option
c) Swaps can be used for covering interest rate risk and forex risk
d) Both Swaption is a combination of a swap and an option and Swaps can be
used for covering interest rate risk and forex risk
e) None of the listed Options

391. ICICI Bank has an account with Chase Manhattan for settling forex transactions. Such an
account is called
a) Nostro account of ICICI Bank
b) Vostro account of ICICI Bank
c) Correspondent Vostro account
d) Both Vostro account of ICICI Bank and Correspondent Vostro account
e) None of the listed Options

392. Cash management techniques include


a) Pooling
b) Netting
c) Swapping
d) Both Pooling and Netting
e) Pooling, Netting and Swapping
393. Cheque Lock box refers to
a) The main method of collections management
b) The main method of payments management
c) Electronic Finds transfer
d) Both The main method of collections management and Electronic Finds transfer
e) None of the listed Options
394. The following happens in zero-balance structure
a) Cash balances are pooled to a central account
b) Cash balances of surplus accounts are use to top up deficit accounts
c) Cash balances are made zero in surplus accounts
d) All of the listed options
e) None of the listed Options
395. All of the following are payment modes except
a) EFT
b) Cheque
c) Debit to account through Debit card
d) Lockbox

e) None of the listed Options


396. A traditional cash management system takes care of the following except
a) Pooling collections to one central account
b) Electronic bill presentment and payment
c) Cash funding for purchase of capital equipment
d) Netting receipts and payments globally
e) Providing customized MIS for cash flow monitoring
397. ACH payments are usually used for
a) Large value, single transfers
b) Small value, periodic transfers
c) Transfers to distant parties
d) All of the listed options
e) None of the listed Options
398. The following parties can act as clearing members
a) National Banks
b) Regional banks
c) Corporates
d) National Banks and Regional Banks
e) National Banks, Regional Banks and Corporates
399. In RTGS, the following is true
a) All members need to maintain a central account with the nodal agency
b) Settlements are done at a transaction level
c) Settlements are done on a batch mode
d) Both All members need to maintain a central account with the nodal agency
and Settlements are done at a transaction level
e) 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

400. A traditional end-of-day settlement process results in the following risks except
a) Credit risk
b) Interest rate risk
c) Operational risk
d) Systemic risk
e) None of the listed Options
401. Continuous Linked Settlement is applicable to
a) Domestic cash payment
b) Domestic collections
c) Electronic Funds Transfer
d) International forex transfers
e) All of the listed options
402. Continuous Linked Settlement removes which of the following risks primarily

a) Exchange risk
b) Temporal risk
c) Country risk
d) All of these
e) None of the listed Options
403. Treasury & cash Management takes care of all of the following except
a) Liquidity risk
b) Interest rate risk
c) Forex risk
d) Credit risk of corporate borrowers
e) None of the listed Options
404. Asset Managers uses which of the following principles/approaches
a) Screens and Filters
b) Capital Preservations
c) Alternatives investments
d) All of the listed options
e) None of the listed Options
405. The difference between private banking and asset management lies in
a) Investment management techniques
b) Type of returns promised
c) Type of investors
d) Extensive Research techniques
e) Both Investment management techniques and Extensive Research techniques
406. The following major players provide asset management services
a) UBS
b) Aberdeen Asset Management
c) JP Morgan Chase
d) All of the listed options
e) None of the listed Options
407. Active Approach to Asset Management refers to
a) Diversification to minimize risk and maximize return
b) Successful market timing
c) Invest in a single line of assets
d) Both Diversification to minimize risk and maximize return and Successful market
timing

e) Both Diversification to minimize risk and maximize return and Invest in a single line of
assets

408. The philosophy that if prices go up, they tend to keep going up, is known as
a) Contrarians Investing
b) Market Timing
c) Momentum Investing

d) Passive Value Investing


e) None of the listed Options
409. The philosophy that markets systematically undervalue certain companies, is known as
a) Contrarians Investing
b) Market Timing
c) Momentum Investing
d) Passive value Investing
e) None of the listed Options
410. For portfolio objectives of growth of income and capital appreciation, which of the following
securities will most likely have to be in the portfolio?
a) Common stocks
b) Corporate bonds
c) Preferred stock
d) U.S. Treasury bonds
e) Municipal Bonds

411. Which of the following is best associated with asset allocation in portfolio management?
a) The choice of assets to use for consumption for the year.
b) The selection of asset classes within which to invest portfolio funds.
c) The selection of the proportion of funds for each asset class.
d) The selection of asset classes for investment and the proportion of each asset
class for portfolio funds.
e) The selection of assets in a particular asset class.

412. A portfolio strategy associated with little trading or change once established is called
a) resistance management.
b) active management.
c) passive management.
d) resilient management.
e) Top-down management
413. Which of the following are principles used by an asset manager?
a) Diversification
b) Screens and Filters
c) Capital preservation
d) All of the listed options
e) Only Diversification and Screens and Filters
414. A buy-and-hold strategy is representative of a(n) ___ portfolio management style
a) active.
b) passive.
c) indecisive.
d) rebalanced.
e) resilient

415. The components involved in the cost of portfolio execution are


a) Bid-ask Spread
b) Illiquidity
c) Tax impact
d) All of the listed options
e) Only Bid-ask Spread and Tax impact
416. The dimensions to portfolio execution could be
a) Cost of execution
b) Trading speed
c) Portfolio Risk Management
d) All of the listed options
e) Both Cost of execution and trading speed
417. Momentum investing would refer to
a) Follow fundamental financial ratios to make decisions
b) Invest in high dividend yield stocks
c) Following charts and indicators to trade
d) Create portfolio similar to index
e) Try best to market
418. The performance of an internationally diversified portfolio may be affected by
a) currency selection
b) country selection
c) stock selection
d) All of the listed options
e) None of the listed Options
419. In the long run, diversifying into international markets is most likely to benefit U.S. investors
a) Under all U. S. market conditions.
b) When U.S. markets are performing well.
c) When U.S. markets are performing poorly.
d) Under no circumstances.
e) Only when currency risk is hedged.
420. When an investor adds international stocks to her portfolio
a) it will raise her risk relative to the risk she would face just holding U.S. stocks.
b) she needs to seek professional management because she doesn't have access to
international stocks on her own.
c) she will increase her expected return, but must also take on more risk.
d) it will have no significant impact on either the risk or the return of her portfolio.
e) she can reduce its risk relative to the risk she would face just holding U.S.
stocks.

421. Contrarian Investing refers to investing on the basis of


a) Market correction due to accelerated movement
b) Single direction market movement Bull or Bear run

c) Market timing for greater gains


d) Momentum Investing
e) None of the listed Options
422. "Don't put all your eggs in one basket" is a phrase used to describe which of the following?
a) risk averse
b) diversification
c) risk/return tradeoff
d) time value of money
e) budgeting
423. By alternative investments (other than debt and equity), what are the investment avenues
for a asset manager?
a) Hedge funds
b) Futures
c) Savings bank accounts
d) All of the listed options
e) Both Hedge funds and Futures

424. Bid-Ask spread refers to


a) Difference in price between buying one asset and another similar one
b) Difference in opinion between the seller and buyer on the price of an asset
c) Difference between the buying and selling price of the same asset
d) Both Difference in price between buying one asset and another similar one and
Difference in opinion between the seller and buyer on the price of an asset
e) None of the listed Options

425. Which of the following 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.
a) I only
b) II only
c) Both I and II
d) Neither I or II
e) None of the listed Options

426. Beverly Drake has two stocks with a correlation coefficient of zero. Which of the following is
true?

a) These stocks are well diversified because as one stock appreciates in value, the other
decreases.

b)
c)
d)
e)

These stocks are well diversified because they will move in unison.
These stocks are not well diversified because they move in unison.
These stocks will move independently of each other.
None of the listed options.

427. Which of the following are major categories of investments?


a) Cash (or cash equivalents such as money market funds)
b) Stocks
c) Bonds
d) Real Estate (including Real Estate Investment Trusts)
e) All of the listed options
428. A very effective way to employ a passive strategy is to
a) Invest in an indexed portfolio
b) Buy all Stocks on the index
c) Invest money in a bank
d) Buy few securities which reflect the index
e) Both Invest money in a bank and Buy few securities which reflect the index
429. Risk reduction (Diversification) in a stock portfolio can be achieved by
a) Investing in a few less risky stocks
b) Investing is as many stocks on the index as possible
c) Buying an option to hedge risk on all stocks in portfolio
d) Investing in an index option
e) None of the listed Options
430. A buy-and-hold strategy would be with the aim of
a) Reducing Transaction costs
b) Reduce costs involved in constant researching of stocks
c) Wait till the investors objective is met
d) All of the listed options
e) Both Reduce costs involved in constant researching of stocks and Wait till the
investors objective is met

431. The derivatives market provide the asset manager a tool to


a) Increase trading speed
b) Reduce cost of execution
c) Hedge portfolio risks
d) Both Increase trading speed and Reduce cost of execution
e) Both Reduce cost of execution and Hedge portfolio risks
432. Which of the following 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.
a) I only
b) I and II only
c) I and III only
d) II and III only
e) I, II, and II

433. Bottom-Up approach would involve


a) Building country-by-country forecasting models
b) Validating the forecasting models and investing in portfolio of high yield countries
c) Selecting few scripts, forecasting their performance and investing based on the
forecasts

d) Both Building country-by-country forecasting models and Validating the forecasting


models and investing in portfolio of high yield countries
e) Both Validating the forecasting models and investing in portfolio of high yield countries
and Selecting few scripts, forecasting their performance and investing based on the forecasts
434. Underwriting in Investment banking stands for
a) Process of understanding the risks and return profile for investment portfolio
b) Guarantees the capital issue and making good for any shortfall
c) Processed of getting the shortfall insured from an insurance company
d) All of the listed options
e) None of the listed Options
435. The process of Hiring of the Lead Managers in the case of IPO is referred to as
a) Red Herring
b) Road-show
c) Investment Manager Contest
d) Advisor Contest
e) Beauty Contest
436. The top tier investment banks are EXCEPT
a) Salomon Smith Barney
b) Sallie Mae
c) Credit Suisse First Boston
d) UBS
e) None of the listed Options
437. The Chinese Wall in an investment bank refers to
a) The separation of Legal and Marketing
b) The separation of Sales and Trading
c) The separation of Corporate Finance and Research
d) The separation of Senior Management and Brokers
e) The separation of Underwriting and Sales
438. Syndicate in Investment banking refers to all Except
a) Hub of the investment banking wheel
b) Determination of allocation of bonds
c) Merger and Acquisition advisory
d) Facilitating placing of securities in public offering
e) None of the listed Options
439. Sales function in Investment banking takes the form of

a) Retail Broker
b) Institutional Sales Person
c) Private client service representative
d) All of the listed options
e) None of the listed Options
440. The ECNs (like Instinet) offer after the market trading facilities. They
a) Involve Stock Exchange Brokers
b) Dont Involve Stock Exchange Brokers
c) Also called as Fourth Market
d) Both Involve Stock Exchange Brokers and Also called as Fourth Market
e) Both Dont Involve Stock Exchange Brokers and Also called as Fourth Market
441. Specialist in broking parlance refers to one
a) Specializes in one or few stocks and offer buy as well as sell quotes
b) Employee of stock exchange
c) Specializes in all equities
d) Only person authorized to buy or sell a particular stock
e) Charges commission for trades
442. Dealer in broking parlance refers to one
a) Employee of stock exchange
b) Matches customer orders with other brokers
c) Acts as a Principal and executes trades for his/her personal account
d) Only person authorized to buy or sell a particular stock
e) Charges commission for trades
443. The latest quote for IBM is $ 90. A Stop Order to sell IBM at $ 85 means
a) The order will get released only when the Market Price hits $ 85
b) The stock will get sold immediately at Current Market Price but not less than $ 85
c) The stock will get sold immediately at Current Market Price but not less than $ 90
d) The order will get released immediately and the stock will get sold between $ 85 - $ 90
e) The order will get released at $ 85 as a limit order at $ 90
444. The latest quote for IBM is $ 90. A Stop Limit Order to sell IBM at $ 85 stop & $ 87 limit
means

a) The stock will get sold immediately at Current Market Price but not less than $ 85
b) The stock will get sold immediately at Current Market Price but not less than $ 87
c) The order will get released immediately and the stock will get sold between $ 85 - $ 87
d) The order will get released only when the Market Price hits $ 85 as a Market Order
e) The order will get released at $ 85 as a limit order at $ 87
445. The difference between Fill or Kill and All or None order is
a) Fill or Kill allows multiple trades
b) All or None can be a Good Till Cancelled order
c) They are synonyms
d) Fill or Kill can be valid till end of day
e) Fill or Kill allows partial execution

446. The quote for CTSH in NASDAQ was $ 43. The best buyer was at $ 42.5 and the best seller
at $ 43.5. How much is the bid-ask spread
a) $0.50
b) ($0.50)
c) $1.00
d) ($1.00)
e) $86

447. Figuration in brokerage industry means


a) Monetary value of a transaction
b) Number of shares bought/sold
c) Settlement details
d) Payment instrument details
e) Dividend payable/receivable
448. Movement of securities and funds within a brokerage firm is done by
a) Margin Department
b) Cashiering department
c) Corporate Actions team
d) Purchase and Sales
e) Accounting Department
449. CTSH has announced a 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
a) Jan 01, 2003
b) Dec 19, 2003
c) Dec 18, 2003
d) Dec 20, 2003
e) Dec 31, 2003

450. A brokerage or analyst report will contain all of the following except?
a) Detailed description of the company, and its industry.
b) Opinion on why the analyst believes the company will succeed or fail.
c) Recommendations to buy, sell, or hold the company.
d) Target price or performance prediction for the stock in a year.
e) Track record of the analyst writing the report.
451. Dow Jones Industrial Average (DJIA) and Bombay Stock Exchange Index (Sensex) are
a) Both are Price Weighted
b) Both are Value Weighted
c) DJIA is Value Weighted & Sensex is Price Weighted
d) DJIA is Price Weighted & Sensex is Value Weighted
e) None of the listed options
452. A Value Weighted Index has stocks in

a) Equal proportion
b) Each stock in proportion to its intrinsic value
c) Each stock in proportion to its free float
d) Each stock in proportion to its equity capital
e) Each stock in proportion to its market value
453. Consider an index with 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
a) 14.14%
b) 20%
c) 33.33%
d) 50%
e) 41.66%

454. The FTSE (Footsie) Index reflects share prices in


a) London
b) Europe
c) Asia
d) Americas
e) Australia
455. Which equity securities provide for the domestic trading of foreign stock?
a) Eurodollars
b) American Depository Receipts
c) Foreign stocks
d) Sterling shares
e) International equities
456. In general, how frequently do companies declare Cash Dividends?
a) Annual
b) Half Yearly
c) Quarterly
d) Monthly
e) Irregular
457. What would happen to Convertible Preferred Stock if the underlying common stock
experienced a 2 for 1 stock split?
a) Conversion price would be reduced, and the number of convertible shares would
increase.
b) Conversion price would be reduced, and the number of convertible shares remain the
same
c) Conversion price remains the same, and the number of convertible shares
would increase
d) No impact
e) Conversion price would be increased, and the number of convertible shares would
increase

458. What date represents the announcement by the board of directors that a dividend will be
paid?

a) Book Closure date


b) Record Date
c) Declaration Date
d) Dividend date
e) Payment Date
459. If the payable date is Friday, December 6, and the record date is Monday Jan 12, when is
the Ex-Dividend Date?
a) December 4
b) December 6
c) January 12
d) January 10
e) January 8

460. Which term refers to securities that are sold by the issuer to investors?
a) Secondary Offering
b) Outright Sale
c) Primary Offering
d) Select Sale
e) None of the listed Options
461. When are shareholders of record determined for dividend purposes?
a) Primary Offering
b) Secondary Offering
c) Outright Sale
d) Select Sale
e) None of the listed Options
462. If a stock trades on Wednesday, May 2, when will Regular Settlement occur in US markets?
a) May 3
b) May 4
c) May 5
d) May 7
e) May 8
463. Consider an index with 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
a) 14.14%
b) 20%
c) 33.33%
d) 50%

e) 41.66%
464. All of these are different types of brokerage accounts except?
a) Margin Account
b) Nostro Account
c) Cash Account
d) IRA Account
e) Power of Attorney Account
465. The NYSE is an example of
a) Primary Market
b) Secondary Market
c) OTC Market
d) Fourth Market
e) None of the listed Options
466. What is the key regulatory authority over the American securities industry?
a) Federal Reserve
b) FDIC
c) DTCC
d) ASA
e) Securities Exchange Commission
467. If a company announces a 2 for 1 Stock Dividend, what will happen to the price and number
of shares outstanding on the ex-date?
a) Price will go down by 50% while shares outstanding would double
b) Price will go down by 50% while shares outstanding would remain the same
c) Price will remain the same while shares outstanding would double
d) Price and shares outstanding would double
e) Price and shares outstanding would remain the same

468. What is the term for previously issued stock that has been re- purchased by the issuer in the
secondary market?
a) Treasury Stock
b) Preference Stock
c) Promoter Stock
d) Trade able Stock
e) Non voting Stock

469. If a corporate bond which 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?
a) 0
b) 70 days
c) 71 days
d) 74 days
e) 75 days

470. What is the Effective Yield for a bond trading at a discount?


a) Less than interest indicated in the bond
b) Same as interest indicated in the bond
c) More than interest indicated in the bond
d) No relationship between the interest and effective yield
e) None of the listed Options
471. What securities do not require proof of ownership to receive interest or principal payments?
a) Bearer bonds
b) Registered Securities
c) Unregistered Securities
d) Warrants
e) Debentures
472. Who is at risk during a best efforts underwriting?
a) Investor
b) Underwriter
c) Issuer
d) Stock Exchanges
e) Securities Exchange Commission
473. When must GTC orders be reconfirmed?
a) End of every day
b) End of every week
c) End of every month
d) End of every quarter
e) End of April and October
474. What is the term for the difference between bid and ask?
a) Difference
b) Spread
c) Profit
d) Quote
e) None of the listed Options
475. What is the Third Market?
a) NASDAQ
b) OTC
c) NYSE
d) Instinet
e) None of the listed Options
476. What is the term for a broker/dealer that maintains an inventory of stock and disseminates
quotes on that stock to other broker/dealers?
a) Issuer
b) Investor
c) Underwriter

d) Stock Exchanges
e) Market Maker
477. Corporate Action refers to
a) All company announcements
b) All stock exchange announcements
c) Dividends/Stock Splits
d) New investments
e) None of the listed options
478. Dow Jones Industrial Average (DJIA) has
a) All companies listed at NYSE
b) 30 large companies listed at NYSE
c) Top 10% of NYSE
d) Top 10% of NASDAQ
e) 30 large companies listed at NASDAQ
479. Insiders of the company cannot sell any shares for a specified period of time, this is known
as

a) Holding Period
b) Blackout Period
c) Buy & Hold Period
d) Book Closure Period
e) None of the listed Options
480. In a Rights offering of shares, which of the following is used?
a) Firm commitment
b) Stand by underwriting
c) Best Efforts underwriting
d) Outright Sales
e) None of the listed Options
481. The Fourth Market refers to
a) NASDAQ
b) OTC
c) NYSE
d) Instinet
e) None of the listed Options

482. The coming together of Daimler AG of Germany and Chrysler of US to form Daimler
Chrysler can be termed as
a) Chrysler acquiring Daimler
b) Merger of Daimler & Chrysler to form a new company
c) An informal arrangement between the two companies to manufacture and sell each
others products
d) Daimler acquiring Chrysler
e) A technical collaboration

483. What is a meant by a buy limit at 46?

a) Buy at exactly 46 + brokerage


b) Buy Price + Brokerage exactly equal to 46
c) Buy at 46 or lower + brokerage
d) Buy Price + Brokerage equal to or lower than 46
e) None of the listed Options
484. Which of the following risks need to be managed while lending securities
a) Foreign exchange risk
b) Liquidity risk
c) Credit risk
d) Equity risk
e) All of the listed options
485. Development of investment objectives and investment policy falls under the purview
a) Fund Administration
b) Asset Allocation
c) Compliance reporting
d) Investment Manager Universe
e) Asset Liability Analysis
486. Schroeders PLC presently has State Street as its 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?
a) Account Management
b) Transition Management
c) Brokerage Services
d) Administration
e) Treasury

487. Core Custody Services performs the following functions except


a) Price securities positions
b) Record Keeping
c) Fiduciary and compliance monitoring
d) Reporting services
e) Processes corporate actions
488. Transition Management under the purview of trading services help
a) Multi-currency collateral management and reporting
b) Brokerage to minimize costs and maximize efficiency
c) Institutional investors reduce their trading costs
d) Setting brokerage rates
e) None of the listed options
489. Which of the following trading services provide institutional investors reduce their trading
costs

a) Stock repurchase program


b) Transition management

c) Commission recapture
d) Both 2 and 3
e) None of the listed Options
490. Alternate Investments refer to
a) Diversification from equity into debt
b) Investment into non-regular asset categories
c) Forex trading
d) Arbitraging
e) None of the listed Options
491. Corporate Actions are communicated to the clients by custodians using
a) MT 15022
b) MT 5022
c) MT 2001
d) MT 199
e) None of the listed Options
492. Which one of the following is NOT an Alternate Asset
a) Distressed debt
b) Private Equity
c) Venture Funds
d) IBM stock
e) LBOs
493. Income Processing team of a custodian takes care of:
a) Stock splits
b) Trade Processing
c) Global income and payments on due dates
d) Settlements
e) Clearing
494. Asset-Liability analysis results in
a) Determining excess of assets over liabilities
b) Estimating Future economic wealth
c) Effect of return volatility
d) Both 2 and 3
e) Term mismatch of assets and liabilities
495. Which of the following services doesnt fall under the purview of Trading?
a) Foreign exchange
b) Transition management
c) Commission recapture
d) Local fund servicing
e) Cash & short term investment

496. Which of the following services doesnt fall under the purview of Trading?
a) Performance management
b) Investor management universe
c) Cash projection
d) Cash & short term management
e) Fund administration
497. Fund administration covers the administrative and legal services to meet the needs of the
fund. Which of the following items are not covered?
a) Fund Development
b) Portfolio evaluation
c) Transfer agency
d) Corporate Stock Repurchase
e) Fiduciary and compliance monitoring

498. Transition management is a systematic, controlled process that utilizes all available sources
of liquidity to simultaneously _____________ and _____________
a) Minimize risk; maximize profits
b) Maximize liquidity; minimize risk
c) Minimize cost ; maximize efficiency
d) Minimize liquidity; maximize efficiency
e) None of the listed Options

499. Securities lending experts specializes in market information and negotiation skills to provide
profitability to the lender while managing
a) Credit risk
b) Liquidity risk
c) Interest rate risk
d) Both Credit risk and Liquidity Risk
e) Both Credit risk and Interest Rate Risk

500. In the case of securities lending services, the Third party intermediaries
a) Conduct transactions directly with the lender and borrower
b) specialize in particular types of securities loaned
c) target clients that are dissatisfied with the performance of their custody banks
d) become a principal to the transaction
e) Both Conduct transactions directly with the lender and borrower and
501. In the case of securities lending services, the Wholesale intermediaries
a) conduct transactions directly with the lender and borrower
b) specialize in particular types of securities loaned
c) target clients that are dissatisfied with the performance of their custody banks
d) becoming a principal to the transaction
e) Both conduct transactions directly with the lender and borrower & becoming a
principal to the transaction

502. ______________ for securities lending, which bring lenders and borrowers together, may
eliminate _______________
a) Wholesale intermediaries; Niche intermediaries
b) Internet auction systems; custodian and third party intermediaries
c) Custodian and third party intermediaries: Niche intermediaries
d) Niche intermediaries; custodian and third party intermediaries
e) Internet auction systems; Niche intermediaries

503. Offshore securities lending markets required


a) the settlement of securities lending transactions on the books of Global custodians
b) the settlement of securities lending transactions on the books of domestic custodians
c) the settlement of securities lending transactions on the books of foreign sub
custodians
d) the settlement of securities lending transactions on the books of foreign sub domestic
custodians
e) None of the listed Options

504. The reason for the development of offshore securities lending is


a) Unfavorable tax treatment
b) Assorted securities restrictions
c) Legalities of transaction
d) All of the listed options
e) None of the listed Options
505. Distressed debt refer to
a) distressed state of market for debts/loans
b) loan/debt that has become watchlist or impaired
c) corporate bonds of companies that have filed for bankruptcy
d) All of the listed options
e) None of the listed Options
506. Besides providing core custody services, the global custodian typically provides which of the
following services?
a) Foreign exchange transactions
b) Futures & Options Clearing and Execution
c) Tax reclaims processing
d) Both Foreign exchange transactions and Futures & Options Clearing and Execution
e) Both Foreign exchange transactions & Tax reclaims processing

507. When an entity is able to control a majority of shares by using borrowed money, it is called
a) Corporate stock repurchase
b) Leveraged buyout
c) Corporate lending
d) Busted takeover
e) Management buyout

508. Managers' returns are analyzed using a market factor-based performance analysis model
that allows us to create accurate manager peer groups based on market exposures, what is it
called as
a) Financial reporting
b) Income processing
c) Investment manager universe
d) Investment manager portfolio
e) None of the listed Options

509. What is one of the best investment strategies to protect an investor from volatility?
a) Hedging
b) Market timing
c) Insurance
d) Diversification
e) None of the listed Options
510. Standard & Poor's and Moody's are companies that would be examples of
a) Stockbrokers
b) securities exchanges
c) stock regulations
d) investor's services
e) stock underwriter
511. The most readily available source of information for an investor
a) the daily newspaper
b) government publications
c) corporate reports
d) investor newsletters
e) business periodicals
512. In the case of Single Premium Deferred Annuities (SPDA),
a) Premium is an asset for the bank
b) Premium is a liability for the customer
c) Deferred annuities are an asset for the bank
d) Deferred annuities are liability for the customer
e) None of the listed Options
513. Asset allocation process generate
a) Lowest possible risk
b) Highest possible returns
c) Meet planned objectives
d) All of above
e) None of above
514. SWIFT is a
a) Proprietary network interface
b) Open standard network interface

c) Message based network interface


d) Both Open standard network interface & Message based network interface
e) Both Proprietary network interface & Message based network interface
515. Compliance reporting
a) Provides exception-based information
b) Provides standard template based information
c) Highlights potential violations for internal regulations
d) All of the listed options
e) None of the listed Options
516. Compliance reporting covers all of the following services EXCEPT
a) Hedging and gearing reports
b) Weighted average analytics
c) Prohibited investments
d) Suspicious activity reports
e) Sharing holding restrictions
517. Custody clients' trade instructions are typically communicated using
a) SWIFT network
b) FEDWIRE
c) CHIPS
d) Clearing
e) None of the listed Options

518. Tax processing investor services include


a) make reclamations for client accounts
b) pursue tax relief at the source
c) manage clients' investment-related tax issues
d) All of the listed options
e) None of the listed Options
519. _____________, the largest discount brokerage house, uses the Internet to deliver both
high-tech and high-touch services to its clients
a) Charles Schwab
b) Brown & company, J P Morgan Chase
c) Ameritrade
d) All of the listed options
e) None of the listed Options

520. Private Equity


a) Requires very large investment
b) Quoted on the stock market
c) Listed on stock exchange
d) All of the listed options
e) None of the listed Options
521. Asset Allocation involves
a) Immunization techniques
b) Use of options

c) Use of emerging market equities


d) Use of venture funds
e) All of the listed options
522. Does Asset Allocation help reduce the investment risk?
a) No - It only maximizes return
b) It increases risk
c) Yes
d) It increases choice No impact on risk
e) None of the listed Options
523. Services like the settlement, safekeeping, and reporting of customers marketable securities
and cash are provided by _________________
a) Custodian
b) Broker
c) Investment bank
d) Fund Administrator
e) Dealer

524. Asset Allocation in an investment policy is designed to meet the 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?
a) Invest in high quality bonds
b) Invest in shares of rapidly growing companies
c) Investment in both shares and bonds
d) Invest in lower quality bonds
e) None of the listed Options

525. Custody as an industry is going through a period of massive change. What do you think are
the major driver/s changing the way the business is done?
a) Increasing regulation and transparency
b) Infrastructure rapidly changing towards tight cost base and automated trade workflows
c) Disintegration of the Global custody market
d) Increasing regulation and transparency and Infrastructure rapidly changing
towards tight cost base and automated trade workflows
e) All of the listed options

526. Sarbanes-Oxley Act comprises of


a) Section 401 seek to improve objectivity of research by recommending rules
b) Section 201 specifies enhanced financial disclosures
c) Section 501 prohibits non audit services
d) all of the listed options
e) None of the listed Options
527. Federal communication privacy law features
a) Three tiered system

b) prohibits electronic eavesdropping on telephone conversations, face-to-face


conversations, or computer and other forms of electronic communications
c) privacy protection covers telephone records, e-mail held in third party storage
d) All of the listed options
e) None of the listed Options
528. Which of the following financial institutions are covered under the Anti-money laundering,
US Patriot Act
a) Securities brokers and dealers
b) Mutual Funds
c) Banks and Trust companies
d) All of the listed options
e) None of the listed Options

529. The US Patriot act deals with the following money laundering crime
a) Proceeds from foreign crimes of violence and political corruption
b) Proceeds from cyber crime
c) Counterfeiting
d) All of the listed options
e) None of the listed Options
530. Check21 provides
a) Fully automated Day 1 processing
b) Decreased collection float due to faster clearing process
c) Compressed processing windows to enable later branch cutoff times
d) Only privately-held companies that are headquartered in the U.S.
e) None of the listed Options
531. The US Patriot Act doesnt allows for
a) US enforcement of foreign forfeiture orders
b) Seizure of correspondent accounts held in U.S. financial institutions for foreign banks
c) Confiscation of property located in US for crimes committed in violation of foreign laws
d) All of the listed options
e) None of the listed Options
532. Under the new rules, an accounting firm that does an audit is prohibited from providing
many other accounting services. Which of the following is specifically permitted under SarbanesOxley?
a) Broker or dealer, investment adviser, or investment banking services
b) Financial Information Systems Design and Implementation
c) Appraisal or Valuation Services
d) Tax services
e) All of the listed options

533. Not all possible services that might be provided by the auditing firm are expressly prohibited
by Sarbanes-Oxley. If a non-audit service is not expressly prohibited, the auditing firm may
provide that service

a) If no one on the board objects


b) If the audit committee gives its prior approval If the audit committee gives its
prior approval
c) Only in an emergency and only if the company being audited has not been able to find
another accounting firm to provide this service after making a good-faith effort
d) Without any prohibitions or pre-conditions whatsoever
e) None of the listed Options

534. Sarbanes-Oxley Act, section 501, specifies


a) Book Keeping and Actuarial Services
b) Balance sheet transactions
c) Commission rules on pro forma figures
d) Rules for greater public confidence in securities research
e) None of the listed Options
535. The stated objectives of the stringent rules under Sarbanes-Oxley Act are
a) To protect the interest of investors
b) To improve the accuracy and reliability of corporate disclosures
c) To deter and punish corporate and accounting frauds
d) To ensure justice for wrongdoers
e) All of the listed options
536. USA PATRIOT Act enforces which of the following
a) Criminal Investigations
b) Foreign Intelligence Investigations
c) Money Laundering
d) All of the listed options
e) None of the listed Options
537. Money laundering refers to
a) Money facilitating criminal offences
b) Extending loans to corporate
c) Short term borrowing & placements
d) All of the listed options
e) None of the listed Options
538. Money laundering can best be described as the process by which
a) Money gained from criminal activity is processed so it appears to be gained
from legitimate sources
b) Criminals attempt to defraud the government
c) Money gained from legitimate sources is hidden to avoid taxes
d) The police attempt to investigate organized crime
e) None of the listed Options

539. Which of the following is not an example of money laundering during the placement stage?
a) Exchanging many small denomination bills (i.e. tens, twenties and fifties) for larger bills
and bank drafts

b) Repeated deposits of cash into a financial institution just below mandatory reporting
threshold

c) Setting up an offshore "shell" corporation to "lend" yourself money for a new


house

d) All of the listed options


e) None of the listed Options
540. Federal authorities attack money laundering through
a) Regulations
b) Criminal sanctions
c) Forfeiture
d) All of the listed options
e) None of the listed Options
541. The US Patriot Act expands the authority of the ________________ to regulate the activities
of U.S. financial institutions, particularly their relations with ______________and entities
a) Secretary of the Treasury; domestic individuals
b) Secretary of the Treasury; foreign individuals
c) Securities Exchange Corporation; domestic individuals
d) Securities Exchange Corporation; foreign individuals
e) None of the listed Options

542. SARs in the context of anti money laundering


a) stands for Suspicious activity reports
b) Needs to be filed by Securities brokers and dealers as well as commodity merchants
c) Requiring businesses, which were only to report cash transactions involving more than
$1,000,000 to the IRS to file
d) Both stands for suspicious activity reports & Needs to be filed by Securities
brokers and dealers as well as commodity merchants
e) All of the listed options

543. Which of the following regulations are not covered under the US Patriot act?
a) Encouraging financial institutions and law enforcement agencies to keep
confidential information concerning suspected money laundering and terrorist activities
b) Prohibiting U.S. financial institutions from maintaining correspondent accounts for
foreign shell banks
c) Establishing minimum new customer identification standards and record-keeping
d) Requiring financial institutions to maintain anti-money laundering programs which
must include at least a compliance officer
e) None of the listed Options

544. Forfeiture regulation under the US patriot act allows


a) permits confiscation of any property derived from or used to facilitate domestic
or international terrorism
b) Calls for the seizure of correspondent accounts held in foreign financial institutions for
domestic banks who are in turn holding forfeitable assets
c) Permits foreign enforcement of domestic forfeiture orders
d) All of the listed options

e) None of the listed Options


545. US Patriot act incorporates the following new crimes
a) terrorist attacks on mass transportation facilities
b) for biological weapons offences
c) for fraudulent charitable solicitation
d) All of the listed options
e) None of the listed Options
546. Federal communications privacy 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?
a) All the levels
b) First & Second
c) Only Second level
d) Second & third
e) None of the listed Options

547. Which of the following institutions are not covered under the AMR guidelines?
a) Credit unions
b) Securities brokers and dealers
c) Mutual funds
d) Futures commission
e) None of the listed Options

548. The Customer Identification program includes all of the following EXCEPT
a) Collecting information
b) Verifying identity
c) Checking terrorist list
d) Reliance on other financial institution
e) None of the listed Options
549. For the customer identification program, the AMR guidelines
a) dictates which forms of identification documents financial institutions can accept
b) financial institutions responsible for assessing and minimizing the risk associated with
the documents
c) risk based approach to determine the form of identification
d) Both financial institutions responsible for assessing and minimizing the risk
associated with the documents and risk based approach to determine the form of
identification
e) All of the listed options

550. Which of the following risk 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
a) A, C, F
b) E,B,F
c) A, B, G
d) B,D,G
e) E,C,A

551. The deadline for the implementation of BASEL II for all the foreign and financial institutions
is

a) December 2005
b) December 2007
c) December 2006
d) December 2004
e) None of the listed Options
552. The aim of Basel II is
a) To promote safety and soundness in the financial system by allocating capital in
organizations to reflect risk more accurately
b) To promote efficiency in the financial system by allocating capital in organizations
efficiently to minimize risk and maximize returns
c) To promote standardization in the financial system by allocating capital in
organizations to obtain optimal risk return profile
d) To establishing a more sophisticated framework for banks to measure risk and ensure
sufficient capital to cover losses from market and credit risk
e) None of the listed Options

553. How many countries so far have signed the new capital accord Basel II
a) 10
b) 92
c) 110
d) 176
e) 21
554. Basel capital accord was established in
a) 1998
b) 1978
c) 1988
d) 1992
e) None of the listed Options
556. Three pillars of the new capital accord, Basel II, are
a) Quantitative; Supervisory; General
b) Qualitative; Market Forces; Geographic
c) Quantitative; Operational; Supervisory
d) Quantitative; Qualitative; Market Forces

e) Qualitative; Mandatory; Quantitative


557. Basel capital accord was instituted to coordinate global regulatory efforts to institute
_______________ capital requirements to eliminate the threat posed by _____________
a) Maximum; overcapitalized financial institutions
b) Minimum; overcapitalized banks
c) Maximum; undercapitalized financial institutions
d) Minimum; undercapitalized banks
e) None of the listed Options

558. The Qualitative pillar of the Basel II encompasses


a) Capital management processes
b) Trading book changes
c) Disclosure requirements
d) Operational risk
e) Capital structure
559. Which of the following risks has been incorporated in the new framework for the first time?
a) Operational risk
b) Market risk
c) Interest risk
d) Exchange risk
e) Credit risk
560. Which of the following method can be utilized for the evaluation of operational risk?
a) Basic indicator approach
b) Internal ratings based approach
c) Advanced internal rating based approach
d) all of the listed options
e) None of the listed Options
561. Under the standardized approach for credit risk assessment, bank
a) Allocates risk weights to each of the assets and off-balance sheet positions
b) Calculates sum of risk-weighted asset values
c) Risk weights depend on the broad category of borrower
d) Risk weights can be refined by reference to external ratings
e) All of the listed options
562. Capital adequacy ratio refers to
a) Amount of banks capital expressed as percentage of the risk weighted credit exposure
b) Amount of banks capital expressed as percentage of the risk weighted credit exposure
& operational risk
c) Amount of banks capital expressed as percentage of the risk weighted credit
exposure, & market risk
d) Amount of banks capital expressed as percentage of the risk weighted credit
exposure, operational risk & market risk
e) None of the listed Options

563. Operational risk results from inadequate


a) Internal processes
b) People
c) System or from External events
d) All of above
e) None of the listed Options
564. Under standardized approach for operational risk
a) Capital charge is calculated by multiplying a banks broad financial indicator by
a beta factor
b) Capital charge is calculated by multiplying a banks broad financial indicator by a
alpha factor
c) Capital charge is calculated by multiplying a banks broad financial indicator by a
gamma factor
d) Factor can applied for any bank regardless of its complexity or sophistication
e) None of the listed Options

565. The internal rating based approach differs from standardized approach for credit risk
assessment, in that
a) IRB results in lesser risk sensitivity
b) IRB uses diverse range of risk weights
c) IRB is simpler approach
d) IRB leads to lower capital charges
e) All of the listed options

567. USA PATRIOT Act has been enacted in response to


a) Very high profile corporate scandals such as Enron
b) The terrorists attacks of September 11, 2001
c) Growing complexity, volatility, and interdependence among international financial
markets

d) High tax payers defaults


e) None of the listed Options
568. In order to implement new 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 challenges that would be
faced by these financial institutions?
a) Availability of historic data
b) System Integration
c) Re-engineer business process
d) Only Availability of historic data and System Integration
e) All of the listed options
569. Which of the following benefits can accrue to the banks implementing the new capital
adequacy norms besides reduced capital adequacy requirements?
a)
Better risk based pricing
b)
Improved capital allocation
c)
Increased corporate and emerging markets lending

d)
Only Better risk based pricing and improved capital allocation
e) All of the listed options

570. The migration to Check21 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 the banks to outsource or not?
a) Capacity planning
b) Security Analysis
c) AS IS process analysis
d) All of the listed options
e) None of the listed options

571. Which of the following activities can invite the application of Anti Money Laundering
guidelines?

a)
b)
c)
d)
e)

Purchase or sale of same good


Multiple transfer of money
Depositing cash in big amounts
Only Purchase or sale of same good and Multiple transfer of money
Only Multiple transfers of money and Depositing cash in big amounts

572. Which of the following 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:
a) Method A
b) Method B
c) Method C
d) Method D
e) Both Method A and Method D

573. Assume that you have a holding in IBM Stock worth $10 million. You have calculated the
standard deviation (SD) of change over one day in IBM is $ 0.20.
Therefore for the entire position, SD of change over 1 day = $200,000
The SD of change over 10 days = $200,000 * (10) = $632,456
The 99% VaR over 10 days = 2.33 * 632,456 = $1,473,621

1.
2.
3.
4.
5.
6.
7.
8.
9.

vaR is a measure of _________ (164)


Expand vaR Value at Risk
Best method for vaR _______________variance co-variance model
Rate of Inflation R=N-I
Check21
Liquidity
DC and DB differences
hedge,syndicate
Back to Back LC

10. Electronic
BFS L0 LATEST DUMPS
1. Which of the following is NOT a settlement Method for Bank Loans
a. Securities Repository
b. Sub-Participation
c. Assignment
d. Participation
e. Preclosure
2. Tax and insurance Premiums Collected as part of Loan repayment are handled
through which of the following type of account?
a. DMAT account
b. Mutual fund account
c. Escrow account
d. Fixed despoait
3. What is the difference between Bankers acceptance and sight draft
a. Bank can raise funds by selling the acceptance
b. Sight drafts are negotiable instruments
c. Bankers acceptance reduces banks leading capacity
d. None of the listed Options
e. Bankers acceptance demands immediate payment
4. Red herring prospectus is issued during _______________
a. When a divided is declared
b. Poat-Acquisition
c. During Securitization
d. During a IPO
e. A merger
5. Which of the following is NOT a banking service?
a. Retail Banking
b. Private Banking
c. Stock market regulation
d. Corporate Banking
e. Consumer Lending
6. Who among the following offers private banking services?
a. Bank of New-York Melon
b. Bank One
c. All of the listed options
d. UBS

e. Credit Suisse
7. Ram deposits $100 in XYZ Bank. Puja takes a loan of $ 100 from XYZ Bank. Which
of the following is most likely to happen?
a. Bank is charging 3% interest to Puja and paying 5% interest to Ram
b. Bank giving 3% interest to Ram and Take 5% interest from Puja
c. .
d.
8. Bank ABC interest rate on deposits is 7.30% and its interest rate on loans is 9.25%
dur. Find the spread for Bank ABC?
a. 0.
b. 0.
c. N
d. 0.
9.25 7.30 = 1.95

9. If a bank gets a deposit of $5000, assuming reserve requirement(CRR) of 10%, and it


Circulate through 2 more banks, leading to which of the following money multiper
effect?
a. None
b. It crea..
c. It crea..
d. It crea..
e. It crea...
Solution:
CRR (Cash Reserve Ratio).
1
2
3

Deposit
5000
4500
4050

10% Reserve
500
450
405

Loaned Out
4500
4050
3645

An initial deposit of $5000 has created a reserve of $1355, and loan of $12195.

10. What does a CALL option give the buyer?


a. The right, but not the obligation, to sell
b. The Obligation to sell
c. The right and obligation to buy
d. The obligation to buy
e. The right, but not the obligation, to buy
Put Options - The right, but not the obligation, to sell

11. What is the purpose of rebalancing


a. To keep investments in line with original investment strategy
b. To Maximize the portfolio return by effectively timing the market
c. All of the listed options
d. Reallocation of assets classes to gain competitive advantage
12. Which two risks of a financial institution may bring gains as well as losses?
a. Credit risk and interest rate risk
b. Credit risk and foreign exchange risk
c. Liquidity risk and credit risk
d. None of the listed options
e. Interest rate risk and foreign exchange risk
13. Institution specializing transactions of mortgage loans for US banks are
a. Gennie Mae and indymac
b. Gennie Mae & Fannie Mae
c.
d.
Fannie Mae and Ginnie Mae are examples of institutions specializing in
securitisation transactions of mortgage loans for US banks.
Freddie Mac, Ginnie Maes & Fannie Mae - Federal National Mortgage Association
(FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae)
and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all "secondary
market lenders".

14. Assuming a 4% annual inflation rate, in how many years will the purchasing power of
$1,000 be cut in half?
a. 18 Years
b. 16 Years
c. 20 Years
d. 12 Years
e. 24 Years
15. The term Settlement cycle refers to which of the following options?
a. time period between the date on which the trade is executed and the
date when the trade is settled
b. Time period between the date on which an investor first makes the decision
to enter a trade and the date when the trade is settled.
c. Time period between the date on which the trade is cleared and the date
when the trade is settled.
d. None of the listed option are correct
16. When is a bank failure more likely to occur?
a. Capital adequacy ratio is increased
b. Cash Reserve ratio is increased

c. Bank increases its equity capital


d. Capital adequacy ratio is reduced
e. Bank holds more short-term riskless securities
17. GDR stand for which of the following option?
a. Gold Deposit Report
b. Global Depository Receivables
c. Global Deposit Report
d. Global Depositary Receipt
e. Global Derivatives Report
18. If the entry load is 2% and the NAV is Rs 10, then how much the investor will have to
pay for 100 units?
a. Rs. 1020
b. Rs 1500
c. Rs. 1200
d. Rs. 800
NAV Net Asset Value

(10+(2/100*10))*100 =1020
19. After a buyer and a seller enter into a trade agreement, who initiates the issues of LC?
a. None of the listed Options
b. Buyers bank
c. Seller
d. Advising bank
e. Sellers bank
20. If a financial instrument has a 50% chance of paying 20% and a 50% chance of
paying 60% percent. What would be the expected return?
a. 0.4
b. 0.2
c. 0.5
d. 0.8
= (50/100)*(20/100) + (50/100)*(60/100) = 0.4

21. Does a pure play investment bank accept deposits?


a. No
b. Only during IPO
c. Yes
d. Yes , if it is below
e. None of the listed Option
22. Which of the following is a corporate action?
a. Declaring Dividend
b. All of the listed options

c. Rights issue
d. M & A
e. Stock Split
23. In a typical credit card transaction processing cycle, which of the following is
I: The issuer and acquirer route authorization through the Association
II: Issuer transfers funds to the Acquirer
a. I only
b. Both I and II
c. II only
d. None of the listed options
Answer: I & II

24. Choose the correct order of occurrence of the following activities


a. Trade execution, Trade matching, Trade clearance, Trade confirmation,
Trade Settlement
b. Trade execution, Trade matching, Trade confirmation, Trade clearance,
Trade Settlement
c. Trade matching, Trade execution, Trade confirmation, Trade clearance,
Trade Settlement
d. Trade execution, Trade confirmation, Trade matching, Trade clearance,
Trade Settlement
25. From the given options the service(s) that can be categorized under A..
I: Corporate Action processing

II: income Processing


a.
b.
c.
d.
26. There are 5 participants A, B, C, D, E in a 25M USD syndicated loan and A is the
lead m has agreed to pay 0.4% ($1,00,000) participant fee. How much each
participant will share in participant fee?
a. $1,00,000 will be received every time money is withdrawn
b. $1,00,000 will be received every month
c. $1,00,000 will be received affront
d. $1,00,000 will be charged towards undrawn portion
e. None of the listed Options
27. Which of the following are NOT the benefits of using credit derivatives?
a. Increasing the credit limit of a corporate
b. Credit derivatives can be used both to diversity their credit risk exposures
and free up capital from regulatory constraints
c. Credit derivatives can be used to create positions that can otherwise not
established in the case market
d. Credit derivatives can be used either to take on more risk or to avoid (hedge)
it
28. The counterparty in a futures contracts trade is
a. The Exchange
b. Banks
c. The buyer and Seller
d. The brokers who
e. Government
29. What is OTC?
a. Over The Counter
b. .
c. .
d. .
e. .
30. All the following statement concerning U.S Governmernt securities are Correct
EXCEPT
a. Treasury notes have maturity dates up to 10 years
b. Treasury bonds have maturity dates up to 30 years
c. Treasury bills have a greater interest rate risk than either Treasury bill
d. Treasury bills have their interest paid in lump sum at maturity.

31. Interest rate spread is equal to?


a. Capital Rate Base Rate
b. Base Rate Current Rate
c. Current Rate
d. Current Rate Base Rate
e. None of Listed Options
32. Universal banks provide commercial banking as well as investment bank services
under one head . State True or False
a. True
b. False
33. Dividend declaration is an example of
a. Corporate Action
b. .
c. .
d. .
34. VISA involved in which of the following?
I: Provide the interchange systems to transfer data and funds between members
II: Set credit limits
III: Issue credit cards
a. I Only
b. II only
c. I & II
d. I, II & III
35. On a trading day at the NYSE, a broker undertakes the following trades:
Buy 120 DELL shares for $ 10.00 each
Sell 70 DELL shares for $ 10.50 each
Buy 200 CISCO shares for $ 20.00 each
Sell 20 DELL shares for $ 11.00 each
Sell 50 CISCO shares for $ 20.50 each
Sell 10 DELL shares for $ 9.00 each
Given that a net settlement system is being used. Find out the net position of the
broker
a. Dell 70 Shares to give out, Cisco 90 shares to receive, $3,000 to pay out to
the exchange
b. Dell 20 Shares to pay out, Cisco 150 shares to receive , $3,780 to pay out to
the exchange
c. Dell 20 Shares to receive, Cisco 150 shares to receive , $3,130 to pay out
to the exchange
d. None of the listed Options
e. Dell 150 shares to receive, Cisco 20 shares to receive, $3130 to receive from
the exchange

Solution:
Sock
DELL
DELL
CISCO
DELL
CISCO
DELL
Total

Buy/Sell
Buy
Sell
Buy
Sell
Sell
Sell

Quantity
120
70
200
20
50
10

Price
$10.00
$10.50
$20.00
$11.00
$20.50
$9.00

Amount
(1200)
735
(4000)
220
1025
90
(3130)

Net position for DELL: +120 70-20-10 = 20


Net position for CISCO: +200 50 = 150
So exchange will need to deliver 20 DELL & 150 CISCO shares to the broker.
This was what exchange owes to broker.
So the broker has to pay $3130 only and he gets 20 DELL & 70 CISCO shares from the
exchange.

36. In syndicate loan, borrowers will be charged even if they dont utilize the committed
fu
a. True
b. False
37. Inflation represents which of the following option?
a. Ver
b. Increase in price
c. Eco
d. Curr
e. Dec
38. Loan Servicing starts after underwriting state True or False
a. True
b. False
39. All of the following investments are examples of debt investments Except
a. Cash Value
b. Gold
c. Certificate of
d. Company Bond
e. Fixed Annuity
40. What is a credit union?
a. Operated for the purpose of promoting thrift
b. Providing other financial services to its members
c. Providing credit at reasonable rate
d. A cooperative financial institution that is owned and controlled b
e. All of the listed Options
41. Coming together of BNY and Mellon is an example of __________________

a.
b.
c.
d.
e.

Brokerage
Takeover
Acquisition
Merger
All of the listed options

42. CIP in the context of anti money laundering


a. Requiring businesses, which were only to report cash transactions involving
more than $1,000,000 to the IRS to file
b. Stands for Suspicious activity reports
c. Stands for customer identification program
d. N
e. eeds to be filled by Securities brokers and dealers as well as commodity
merchants
f. All of the listed Options
43. Which among the following is a key feature of letter of credit?
a. All of the listed options
b. Opportunity to receive payment in advance of the due date
c. Basis for devising proper currency hedging strategy and opportunity to
receive payment in advance of the due date
d. Distributes risk between buyer and seller
e. Basis for devising proper currency hedging strategy
44. Find out the one which does NOT come under the retail banking Service
a. Personal Loan
b. Transfer Fund
c. Credit Services
d. Electronic Transfer
45. How would you categorize account activity alerts in mobile banking?
a. Account information
b. Transactions
c. Investment
d. Support
46. Pooling and repackaging of cash-flow-producing financial assets into securities,
which are then sold to investors is called ____________
a. Leveraging
b. Securitization
c. Initial Public Offer
d. Short Selling
e. None of the listed options
47. An investor indulging in short selling on a share expects the share price to decrease.
State True or False

a. True
b. False
48. GE shares are currently selling for $15.00 each. You bought 200 shares one year ago
at $12 and received dividend payments of $2 per share. What was your total capital
gain this year?
a. 600
b. 400
c. 1000
d. None of the listed options
e. 200
Solution:
(200*15) + (200*2) (200*12) = 1000

49. Securities with an original maturity of lesser than 1-year are traded on money
markets. State True or False
a. True
b. False
50. Bank a based in US provides safe keeping services for securities to its US clients. It
also has clients in France and Belgium and provides securities safe keeping services
to these clients through banks C & D respectively. Which best describes bank A?
a. Secondary custodian
b. Global Custodian
c. Sub Custodian
d. None of the listed Options
e. Main Custodian
51. In Trade Finance, Which of the following factors are considered while choosing made
of financing?
a. Time frame, cost of financing, Buyer trade associates
b. Government Guarantee Program, Seller Preference
c. None of the listed options
d. Exporters Fund, Risk Factors, Cost of financing, Time frame
52. Company ABC has a gross profit of $50000. The operating expenses amounts to
$10000. The interest on loans availed amounts to $5000 and the taxes to be paid
amounts to $5000. Calculate the EPS if there are total of 20000 shares.
a. 2.5
b. 2
c. 1.25
d. 1.5
Solution:

Operating Income = Gross Profit - Operating Expenses


EPS (Earnings Per Share) = (Operating Income Interest on Loan Taxes Paid)
/ Number of shares
= (50000-10000-5000-5000) / 20000 = 1.5

53. Netting reduces the number of settlements needed by more than 95% state True or
False
a. True
b. False
54. The Components to determine the rate of exchange in a Forward Contract are
a. Cross Currency Rate and forward rate
b. Current Spot Rate and Forward rate a
c. Current Spot Rate, amount of currency
d. Forward rate adjustment and amount
55. High-Net worth individuals generally have ____________________.
a. Net worth greater than $500,000
b. Household income greater than $500,000
c. Market capitalization more than $200,000
d. Household income of maximum $50,000
56. Product development in sales and marketing refers to which of the following option?
a. Developing and differentiating deposits, loans etc
b. Products that are bought using online payment such as e-commence
c. All of the listed Options
d. Identifying products such as SAP, Oracle for the bank
e. Collateral e.g. Cars in case of car loans, houses in case of mortg
57. Which of the following methods of payment is most risky to the Buyer?
a. Open Account
b. Documentary Collection
c. Letter of Credit
d. Counter trade
e. Cash in advance
Methods of payment is most risky to the Seller Open Account

58. on a trading day at the NYSE, a broker undertakes the following trades
Buy 100 IBM shares for $11.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MSFT shares for $20.00 each
Sell 20 IBM shares for $11.00 each
Sell 10 MSFT shares for $20.50 each
Sell 30 IBM shares for $9.00 each

How much did the broker pay out to the exchange in total in case of (a) gross
settlement (b) Net settlement system?
a. None of the Listed Option
b. (a) $1880 (b)$ 3100
c. (a) $1,780 (b) 0 for IBM, $1795 for MSFT
d. (a) 0 for IBM, $1795 for MSFT (b) $1880
e. (a) $3100 (b) $1880
Solution:
Sock
IBM
IBM
MSFT
IBM
MSFT
IBM
Total

Buy/Sell
Buy
Sell
Buy
Sell
Sell
Sell

Quantity
100
50
100
20
10
30

Price
$11.00
$10.50
$20.00
$11.00
$20.50
$9.00

Amount
(1100)
525
(2000)
220
205
270
(1880)

Net position for IBM: +100 50-20-30 = 0


Net position for MSFT: +100 10 = 90
So broker would not receive any IBM shares from the exchange as he sold all the shares
that he bought during the day. But exchange will need to deliver 90 MSFT shares to the
broker.
This was what exchange owes to broker.
So the broker has to pay $1880 only and he gets 90 MSFT shares from the exchange
0 for IBM, $1,795 for MSFT,
It is worth understanding that, we have some markets where settlement happens on a
gross basis, meaning no netting is done and all the transactions need to be settled
individually. This is prevalent in Fixed Income markets in the US and the settlement
mechanism is known as Real Time Gross Settlement (RTGS). - (Page No 181 in BFS
PDF)

59. How much will be the 1% legal fee on 30M USD


a. 0.03M
b. 30M
c. None of listed Option
d. 3M
e. 0.3M
60. The arrangement fee paid by the borrower will be paid to:
a. Facility manager / agent
b. Every participant expect lead manager
c. Will be retained by lead manager
d. Underwriting bank
e. Every participant

61. In a securities lending transaction, if the buyer of securities provides cash as


collateral, then the seller of securities has to provide the buyer with a interest amount
for the cash. What is this interest amount called?
a. Rebate rate
b. Collateral Interest
c. Interest Rate
d. None of the listed Options
e. Return Rate
62. Corporate Loans are.
a. Never unsecured
b. Never secured
c. Always secured
d. Always unsecured
e. Secured or unsecured
63. Who is a underwriting Bank?
a. Bank which underwrites a IPO(not sur shd b thz)
b. Bank which commits supply of funds in a syndicated loan
c. Bank which does not insures a loan
d. Bank which underwrites a insurance
e. Bank which insures a loan
64. The amount owed by a company to suppliers in the next one year will be categorized
under __________________
a. Annual liabilities
b. Deferred Liabilities
c. Accrued Liabilities
d. Current Liabilities
65. What is a mutual fund?
a. A pool of funds used to purchase securities on behalf of investors
b. A collective investment vehicle
c. All of the listed options
d. A portfolio of stocks, bonds and other securities
66. The Advising bank is used as a trusted bridge between the ____________ and
_____________ when they do not have an active relationship
a. Reimbursing bank; beneficiary bank
b. Issuing bank; Confirming bank
c. Importer; Exporter
d. Applicant bank; Beneficiary bank (Issuing bank; Beneficiary bank)
e. Beneficiary bank; Reimbursing bank
67. Which of the following debt instrument involves lowest risk?

a.
b.
c.
d.
e.

Munis
Junk Bonds
Corporate bonds
Treasury Bills
Yarkee Bonds

68. Following are the types of market risks except


a. Currency Risk
b. Commodity Risk
c. Interest Rate Risk
d. Credit Risk
e. Equity Risk
69. When the Central Bank of a country decides to change the interest rates, it is a
manifestation of which of the following?
a. Money Policy
b. Money Making
c. Money Market
d. .
e. .
70. In terms of computation, which of the following is the fastest method for calculating
VaR?
a. All would take equal time if done using a software
b. Variance-Covariance Matrix
c. Morte carlo Simulation
d. Historical Simulation
e. A combination of Morte Carlo and Historical Simulation
71. ABC co. wants to identity the best way for making salary credits to its huge employee
base. Can you select the best option?
a. Paper Checks
b. Automated Clearing House
c. Cash
d. Contactless Payments
72. In a economy where inflation is 4%, future value of 100 units of money after 2 year
would be which of the following option?
a. Exactly 108
b. None of the listed options
c. Exactly 100
d. Around Rs. 104
e. 108.16
Solution:
FV = PV*(1 + i)n = 100(1+0.04)2 = 108.16

FV: Future Value at the end of n time periods,


PV: Beginning value OR Present Value
i: Interest rate per unit time period
n: Number of time periods

73. if R is the real rate of interest, N is the nominal rate of interest and I is the rate of
inflation, then:
a. R = N I
b. R = N * I
c. R = N + I
d. R = N/I
74. FFELP or the Federal Family Education Loan Program can be of which type?
a. Federal Stafford
b. Consolidation loans
c. Federal PLUS
d. Graduate Plus (its not their in FFELP type)
e. All of the listed Options
75. What is the settlement standard followed in the US?
a. T+1
b. T+4
c. T+2
d. T+3
Normal T+3 settlement cycle. When confirmation /affirmation completed are -> T+2

76. P&L Statements represent transactions over a period of time while the balance sheet
shows information as on Specific date. State True or False.
a. True
b. False
77. Which of the following is not the example of options?
a. Put Option
b. Oil Futures
c. Swaption
d. Call Option
e. LEAPS (Long Term Options)
78. What are Yankee bonds also Know as?
a. Junk bonds
b. None of the listed Options
c. Shares
d. Call Options
e. T-Bills

79. The share price of a company may drop considerably from its current levels. In this
scenario, what type of risk are the investors facing?
a. Market Risk
b. Business Risk
c. Credit Risk
d. Company Risk
e. Liquidity Risk
80. From the following options, find what type of risks that a software export company
may face?
a. Operational Risk
b. It can face all the risks
c. Legal Risk
d. Currency Risk
e. Credit Risk
81. The Federal funds rate
a. Is the rate commercial banks use as a benchmark for evaluating their largest
borrowers
b. Is inversely related to the prime rate
c. None of the listed Options
d. Is a primary policy target of the Fed in conducting monetary policy
e. Is the rate the Fed charges on overnight loans to commercial banks
82. A bank has a portfolio of $50 million worth of loans out of which it wants to sell $20
million worth of loan to another financial institution. What is this process called?
a. Held for Sale Loans
b. Trading Loans
c. Accrual Loans
d. Undrawn Loan
e. Committed Loans
83. You purchased a stock for $40. One year later you received $2 as dividend and sold
the share for $48. How much is the return of holding period?
a. 50 percentage
b. 45 percentage
c. 10 percentage
d. 25 percentage
e. None of the listed options
84. Money laundering refers to which of the following option?
a. All of the listed options
b. Extending loans to corporate
c. Short term borrowing & placements
d. Converting the profits from criminal activities into legitimate funds

85. Banks are financial institutions that are licensed to accept deposits and issue loans.
State True or False
a. True
b. False
86. In FOP mode of Settlement, there is no simultaneous exchange of securities and
payment State True or False
a. True
b. False
87. The type of loan in which spread varities over the life of the loan is called
___________.
a. Positive spread loan
b. Fixed rate loan
c. Semi-fixed rate loan
d. Negative spread loan
e. Floating rate loan
88. Which of the following combination holds true?
a. wire transfer, more costly than other payment alternatives
b. commercial letter of credit, Improves applicants credit facilities
c. Foreign Checks Not useful for cross border trade
d. Documentary collection, Strict compliance rules apply
e. Standby letter of credit, less costly than documentary collection
89. Which of the following type of loan requires the amount of interest that would be
earned on the amount of interest paid upfront by the borrower?
a. Demand loan
b. True discounted Loan
c. Capitalized loan
d. Amortized loan
e. Discounted loan
90. Which of the following is not a derivative?
a. Bonds
b. Futures
c. Options
d. Swaps
e. Forwards
91. TARP stands for which of the following options?
a. Term Assets Reform Program
b. None of the Listed options
c. Term Assets Relief Program
d. Troubled Assets Relief Program
e. Troubled Assets Reform Program

92. If the Limit = $2000, Margin = 20% and Asset value = $2000, then Drawing Power
for an Open ended loan is equal to
a. 2200
b. 2000
c. 1600
d. 2400
e. None of the listed options
Solution:
Limit (L) max outstanding allowed
Margin (M) percentage of limit that can be drawn
Asset value (AV) value of underlying asset
Drawing Power (DP) - lower of L and (1-M)*AV
DP = (1-0.20)*2000 = 1600

93. Customers usually interact extensively with the banks mid and back offices. State
True or False
a. True
b. False
94. In Normal Distribution 99% confidence interval corresponds to __________
a. 2.33 Sd
b. 1.65 Sd
c. 1.96 sd
d. 3 Sd
e. 1 Sd
95. At the end of an active trading day, a broker sees that he has a net position in 6
securities, and owes the system some money. How many settlement transactions will
take place at the end of the settlement cycle?
a. 6 any 5 as transfer of securities and 1 as securities-versus-cash
b. Neither the number of securities nor the number of cash tranactions can
be determined
c. 7, 6 as transfers of securities and 1 as transfer of cash
d. 6, all 6 as securities-verus-cash
e. 1 as transfer of cash, but the number of transactions for securities cannot be
determined.
96. A person purchases a share at $50. After 2 years, the price is at $75 and he decides to
sell the share at that price. What is the annualized return that the person has earned?
a. 0.6667
b. 0.3333
c. 0.5
d. 0.2247
e. None of the listed options

97. Which of the following operations cannot be done on a LC (Letter of Credit)?


a. Purchase
b. Discount
c. Acceptance
d. None of the Listed options
98. Which of the following are involved in the retail brokerage business in US?
a. Freddie Mae
b. E-Trade
c. Ginnie Mae
d. Sallie Mae
e. Federal Reserve
99. Which of the following methods eliminate county risk and commercial risk upon
confirmation?
a. Back to back Letter of Credit. Documentary collection
b. Documentary Collection, Letter of Credit
c. Letter of Credit, Back to back Letter of credit
d. Standby Letter of credit, Letter Credit
e. Documentary Collection, Stand by letter of Credit
100. All of the following are valid means for a custody client to communicate trade
instructions to its custodian, EXCEPT
a. SWIFT networks
b. FEDWIRE
c. By Fax
d. By Telephone
101.

SPV means
a. Security Purpose vehicle
b. None of the listed options
c. Securitized planning Vehicle
d. Special principal vehicle
e. Special purpose vehicle

102.

NPV stands for


a. Net Present Value
b. New Present Value
c. No Present Value
d. Net Past Value

103. SMA offers investors a customized approach to investing. Rather than a generic
product. State True or False
a. True
b. False

104. If total Spread on underwriting is $ 500000 and Managers fee is $100000. What
is the amount which will be disturbed in the syndicate?
a. Cannot be determined
b. 600000
c. 400000
d. 100000
e. 500000
105. An investor has multiple investment options 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?
a. External Rate of Return
b. Compound Interest
c. Simple Interest
d. Internal Rate of Return
e. Net present value
106. In case of Auto finance, monthly lease payments are usually lower than monthly
loan payments because of which reason?
a. Customer is paying only for depreciation
b. Customer is paying only for Fees
c. All of the listed Options
d. Customer is paying only for Taxes
e. Customer is paying only for Rent Charges
107. In Electronic Check Conversion (ECC). What happens once the check is
processed?
a. The customer can present a check to a store cashier
b. The customer signs a receipt authorizing the store to present the check
to the bank electronically and deposit the funds into the bank account
c. Receive Cash immediately
d. All of the Listed options
Missing Question
1. Which of the following represents the correct hierarchy of corporate ratings (highest
to lowest)?
a. AAA, AA+, BBB, D
b. AAA, AA-, D, BBB
c. D,C,B,A
d. D, AA-, B, AAA
e. AAA, AA+, D, AAMutual funds can not invest in
a. Bond
b. Equity

c. Share
d. None
2. There are five participant A, B, C, D, E and A is a manager. Profit is 500000 and
operating charges is 100000. Then how the profit will be distributed among all?
Ans: 20000
3. The initial sale of the security is in the market, while subsequent trading in the
security is in the .. market
a. Spot, futures
b. Debt , Equity
c. Primary , Secondary
d. Money, Capital
4. Among which is Issuer as well as Acquirer
a. Amex
b. T-sys
c. Elavon
d. Front Data Company
1) Page 5
State T/F
Simple interest is calculated only on the beginning principal.

2) Page 6
INFLATION
There will be three questions based on this formula:The relationship between the R (real rate of interest), N (nominal rate of interest)
and I (rate of inflation) is as:
R= N-I.
3) Page 8
One question on future value
The formula for Future Value is:
FV = PV*(1 + i)n
4) Page 8
One question on Intra-year compounding

Question was like this if rate of interest is 4% and compounded quaterley for 4
years then what is the value of r and t
5) Page 10
NPV of a project:
Increases with increase in future cash inflows for a given initial outlay
Decreases with increase in initial outlay for a given set of future cash inflows
Decreases with increase in required rate of return

6) Page 14
Read all the type of securities and their sub parts
7) Page 15

Types of secured bonds.


Mortgage Bonds are secured by real estate owned by the issuer
Equipment Trust Certificates are secured by equipment owned and used in the issuers business
Collateral Trust Bonds are secured by a portfolio of non-issuer securities. (usually U.S.
Government securities)
8) Page 16
Treasury Securities
Treasury bills issued for one year or less.
Treasury notes have a term of more than one year, but not more than 10 years
Treasury bonds greater than ten years
9) Page 16
What are zero coupon bonds?
Zeros generate no periodic interest payments but they are issued at a discount from face value.
10) Page 17
Commercial paper
An unsecured, short-term loan issued by a corporation, typically for financing accounts receivable
and inventories.
11) Page 19
What is meant by Preferred stock ?
Preference shares carry a stated dividend and they do not usually have voting rights
12) Page 20
American Depository Receipts (ADR)
The purpose of an ADR is to facilitate the domestic trading of a foreign stock.
13) Page 20
Warrants
Warrants are call options variants of equity.
14) Page 20
What are derivatives?
A derivative is a product whose value is derived from the value of an underlying asset, index or
reference rate.
15) Page 21
Forward contract
A forward contract is an agreement to buy or sell an asset (of a specified quantity) at a certain
future time for a certain price. No cash is exchanged when the contract is entered into.
Futures contract
A futures contract is an agreement between two parties to buy or sell an asset at a certain time in
the future at a certain price. Index futures are all futures contracts where the underlying is the
stock index and helps a trader to take a view on the market as a whole.
16) page21
Two questions will come:
Hedging involves protecting an existing asset position from future adverse price movements. In
order to hedge a position, a market player needs to take an equal and opposite position in the
futures market to the one held in the cash market.
Arbitrage: An arbitrageur is basically risk averse. He enters into those contracts were he can
earn risk less profits. When markets are imperfect, buying in one market and simultaneously
selling in other market gives risk less profit. Arbitrageurs are always in the look out for such

imperfections.
17) Page 22
Which is not a option?
Call Options
Put Options
LEAPS
Swaps
Oil futures( Answer)
18) Page 21
What is call and put option?
19) Page 22
Currency Swap involves the exchange of principal and interest in one currency for the same in
another currency.
20) Page25
What are primary and secondary markets?
21) Page 26
Which is not a stock market?
The important stock exchanges are as follows:
New York Stock Exchange (NYSE)
National Association of Securities Dealers Automated Quotations (NASDAQ)
London Stock Exchange (LSE)
Bombay Stock Exchange (BSE),
National Stock Exchange of India (NSE)
One will be different
22) Page 27
What is the name of central bank in America?
Federal Reserve
23) Page 27
What will haven if market rates go up?
Bond price will fall
Ie Bond price is inversely proportional to market interest rates
24)Page 29
What is Money Market?
Money market is for short term financial instruments, usually a day to less than a year.
25) Page 29
What is a repo?
A repo is a contract in which the seller of securities, such as Treasury Bills, agrees to buy them
back at a specified time and price.
26) Page 30
regulator(s) and supervisor(s) forthe financial markets.
Thus India has Securities and Exchange Board of India (SEBI)
and the US has Securities and Exchange Commission (SEC).
27) Page 30

What do u mean by portfolio management system?


These systems allow the investment managers to choose the instruments to invest in, based on
the requirements or inputs such as amount to be invested, expected returns, duration (or tenure)
of investment, risk tolerance etc. and analysis of price and other data on the instruments and
issuers
Just read Chapter Financial Statements only 1 question can come
28) Page 49
What is not a function of central bank?
Read all the functions of central bank
Answer- To appoint some governor
29) Page 50
There will two or three questions from CRR..
What do u mean by CRR (Cash Reserve Ratio).
There will be two numericals also..
Same from book example?
30) Page 52
Read the services offering by banks
31) Page 54
What is Glass-Steagall Act ?
Glass-Steagall Act of 1933, created a Chinese wall between commercial banking and securities
businesses in US. That act was intended to address the perceived causes of bank failures during
the Great Depression of 1929.
32)Page 57
Read this page carefully .. three questions will come
Checking Accounts
Quick, convenient and, frequent-access to the money.
Some banks pay interest while many do not.
Money Market Deposit Accounts
Pays a higher rate of interest than a checking or savings account
MMDAs often require a higher minimum balance to start earning interest
Savings Account
Allows making withdrawals, but checks writing facility is not there.
Number of withdrawals or transfers one can make on the account each month is limited.
Time Deposits (Certificates of Deposit)
Guaranteed rate of interest for a term or length of time specified by the account holder.
The rate of interest is often higher than savings or any other account
Basic or No Frill Banking Accounts
Checking accounts, but with a limit on the number of checks one can write and the number of
deposits and withdrawals one can make
Interest is generally not paid.
33) Page 60
What are the ways of Money Transfer?
Cheques/Checks

o Bearer Checks
o Account Payee Checks
o Travelers Checks
o Bankers Checks
Debit Cards
Demand Drafts
Automated Clearing House (ACH)
Standing Instructions
Electronic Transfer
34)Page 61
What is EFT?
Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic
technology as a substitute for checks and other paper transactions. EFTs are initiated through
devices like ATM cards or codes that let one to access your account. Many financial institutions
use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose.
35) Page 63
Read section Lost or Stolen ATM or Debit Cards
If unauthorized use occurs before reporting, the liability of the customer varies depending on the
delay in reporting the loss to the card issuer.
Within two business days Liability limited to $50 for unauthorized use.
Between 2 - 60 days Liability limited to $500 because of an unauthorized transfer.
If the loss is not reported within 60 days, the liability has no limits.
36) page 64
What is EBPP and its advantages?

ELECTRONIC BILLING PRESENTATION AND PAYMENT


37) page 65-66
Read thoroughly.. Some of the questions were
What is Fedwire?
Fedwire is an electronic transfer system developed and maintained by the Federal Reserve
System. The system connects Federal Reserve Banks and Branches, the Treasury and other
government agencies
Full form of CHIPS?
Clearing House Interbank Payments System
What is SWIFT?
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) runs a worldwide
network by which messages concerning financial transactions are exchanged among banks and
other financial institutions
What is latest version of SWIFT?
SWIFT 15022
38) Page 69
Read thoroughly..
Which is non secure loan?

Answer: Personal loan


Auto loans have Interest rate is lower as compared to Personal loans
39) Page 70 VVimp
One question ie numerical atleast on :
c. Limit (L) max outstanding allowed
d. Margin (M) percentage of limit that can be drawn
e. Asset value (AV) value of underlying asset
f. Drawing Power (DP) - lower of L and (1-M)*AV
There will be atleast 2 questions on difference between Lease and Hire..
Lease
Two main types operating, financial
The Financier owns the asset.
Depreciation is claimed by the financier.
Tax deduction can be claimed for the full value of the rental paid.
Financier takes care of maintenance, insurance etc.
Hire Purchase
The asset is owned by the financier.
Depreciation can be claimed by the borrower.
Tax deduction can be claimed only to the extent of the interest repayment.
40) Page 71
One question which is not a repayment kind?
Kinds of repayments
o EMI same installment amount
o Fixed Principal constant principal, decreasing interest amt
o Step-up principal amount increases in steps
o Step-down principal amount decreases in steps
o Balloon notional amount initially, large last payment
o Bullet interest payment initially, entire principal at one shot
o Random schedule & amount of installments undecided
o Special products combination of above
one will be extra given
41)Page 72
What is Floating Rate of Interest?
The rate of interest is linked to one of the rates prevailing in the market, for example it can be
linked to PLR (Prime Lending Rate) or LIBOR (London Interbank Offered Rate).
42) Page 73
What is Collar and Spread?
Spread= current rate base rate
Collar = cap-floor
43) Page 73
Charge Types
Pledge gold, bank has possession
Hypothecation vehicle, borrower has possession

Lien against bank deposits


Assignment insurance policies, rights get transferred to bank
Shares - periodic drawing power calculation
Mortgage immovable property
44) Page 76
What are Freddie Mac, Ginnie Maes & Fannie Mae?
Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage
Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or
Freddie Mac) are all "secondary market lenders".
45)Page 76-77
Read auto loans and student loans ? only one two question will come?
46) Page 82
What is the meaning of corporate lending?
Corporate Lending refers to various forms of loans extended by banks to corporate bodies like
proprietorship, partnership, private limited companies or public limited companies.
Why they are given by banks?
Corporate loans areprovided by banks for various purposes like new projects, capacity expansion
or plant modernization, daily cash flow requirements (working capital) etc.
Interest is usually paid on the disbursed amount of the loan.
47) page 83
Credit ratings
Rating levels might vary from AAA(highest), AA+, AA- to default ratings like D.
48) Page 84
What do u mean by Lines of Credit?
These are short term loans sanctioned for a fixed validity period, allowing the corporate to draw
the loan as and when required within the validity period and repay the loan after a certain period
(repayment period). Interest is either repayable in certain intervals or in one bullet installment at
the end of the repayment period
49) Page 85
What do u mean by Commercial Paper?
Commercial Paper (CPs as commonly known) is an instrument by which a corporate borrows
money from banks for short periods of time. A CP binds the corporate to make a payment equal
to the face value of the CP to the issuing bank on a specified due date. In this sense, a CP is like
a short term unsecured loan.
Read page 84-85 topics little bit.
50) page 86
What is the classification of loans:
Loans are classified and accounted for as follows:
AccrualLoans
Held-for-sale.
Trading
51) page 87

Atleast two questions will come from credit derivatives


Credit derivatives are financial contracts that transfer credit risk from one party to another,
facilitating greater efficiency in the pricing and distribution of credit risk among market players.
In market parlance, the corporate bond investor in this example is the buyer of protection, the
dealers the protection seller, and the issuer of the corporate bond is called the reference entity
Uses of Credit Derivatives
52) Page 89
Definition of treasury services and its functions?
53) Page 90
What do u mean by:
Forward Rate Agreement (FRA) - A contract that determines the rate of interest,
or currency exchange rate, to be paid, or received, on an obligation beginning at a some
future start date. It is also referred to as Future Rate Agreement.
Interest Rate Swap (IRS) - A deal between banks or companies where borrowers switch
floating-rate loans for fixed rate loans in another country. These can be either the same
or different currencies. The motive may be the competitive advantage of one company to
have access to lower fixed rates than another company. The other company may be
competitively placed to have access to lower floating rates. A swap would be beneficial
to both. The swap is measured by its notional principal.
54) page 91
What do u mean by CMS?
Cash Management Services - CMS is a service provided by banks to its corporate clients for
a fee to reduce the float on collections and to ease the bulk payment transactions of the
client. The three elements of CMS are:
Receivables Management
Payables Management
Liquidity Managemet
55) Page 92
What are the causes of interest rate risk?
Repricing risk
Yield curve risk.
Basis risk
Optionality
56) Page 94
One numerical on:
INR/USD quote: 45.26/.36 (here, 0.01 is the smallest count, referred to as one pip)
EUR/USD quote: 1.2458/.2461 (here, 0.0001 is the smallest count, referred to as one pip)
While the derived cross currency rate would be:
INR/Euro quote: (45.26*1.2461)/ (45.36*1.2458) = 56.40/.51
Definitions of:
Nostro (Our/my account with you): Current account maintained by one bank with another
bank abroad in the latters home currency
Vostro (Their account with me/us): Current account maintained in the home currency by one
bank in the name of another bank based abroad
How many business days are required for spot deal?
Answer two days

Read topic Spot and Forward Foreign Exchange Contracts


57) Page 95
Which are the interbanks:
Front Arena
Summit
Calapso
Wall Street Systems
58) Page 97
Read CMS functions..
59) Page 99
What do u mean by lock box service?
60) Page 99-100
What is pooling and netting ?
61) page 100
What is New Act - Check 21?
62)page 102
What is RGTS?
63)page 103
Read what is ACH?
64)page 104
What are risk factors choosing the mode of financing?
Costs
Time frame
Risk factors
Govt gurantee programs
Exporters funds
65)page 105
What is BOL?
Full form of BOL?
66) page 105

PAYMENT METHODS
Cash in advance
Letter of credit
Documentary collection
Open account or credit
Counter-trade or Barter
67) page 106
Advantages or disadvantages of LC (commercial letter of credit) in check box question
68)page 107
four parties are involved in any transaction using an LC:

1. Buyer or Applicant
2. Issuing bank
3. Beneficiarys bank
4. Beneficiary or Seller
69)page 108
Read the steps..
70) page 110( positively come)
The standby LC is like a bank guarantee. It is not used as the primary payment method but as a
fail safe method or guarantee for long-term projects.
Back to Back LC allows a seller to use the LC received from his buyer as collateral with the bank
to open his own LC to buy inputs necessary to fill his buyers order.
71) page 110
DOCUMENTARY COLLECTION
Documentary collection carries the risk that the buyer will not or cannot pay for the goods upon
receipt of the draft and documents.
Drafts
A draft (sometimes called a bill of exchange)
Read sight draft and Time Drafts thoroughly..

72) page 111

OPEN ACCOUNT
This can be a very risky method for the seller, unless he has a long and favorable relationship
with the buyer or the buyer has an excellent credit rating.
73) page 113
Full form of BAFT?
74) page 114
two questions will at least come from the table:

INTERNATIONAL PAYMENT INSTRUMENTS COMPARISON CHART


75)Page 117
What are chip cards?
76) page 119
What are the key activities in credit card market? Pls learn which comes under which category..
77)page 120
What are issuing anf acquiring services?
78) page 121
A card Association
Do Not Provide These Functions
Security/Risk management( this function is provided, it is odd one out)
Issue cards
Set credit limits
Set card fees

Set interest rates


Solicit merchants
Set discount rates
79) page 122
Only read the functions little bit
80) page 127
Private Banking covers banking services, including lending and investment management(true)
Investment Management and Advice
A client relationship Manager understands the clients liquidity, capital and investment needs. He
strives to develop an integrated approach to manage client investments and capital markets
trading. Access to specialist advice and extensive research is a key feature of private banking.
Self-directed or non-discretionary: This is largely investment advisory in which the bank offers
investment recommendations based on the Clients approval. The client may choose to ignore
this.
Discretionary: In this case, the banks portfolio managers make investment decisions on behalf
of the customer.

81) page 128-129

COMMON PRIVATE BANKING PRODUCTS


Personal Investment Companies (PICs)
Payable Through Account (PTA)
Hedge Funds
82) page 131-132
See the diagram and learn all the front office and back office functions? Two questions will
atleast come
83)page 133
In achieving the above goals, an Investment Manager uses the following approaches/principles:
Asset Mix
International Diversification
Screens/Filters.
Capital preservation
Alternative Investments
84) page 135-136
Active vs passive approach
Top Down Approach vs Bottom Up Approach
85) page 137
There are three dimensions to portfolio execution:
Cost of execution
Trading speed
Portfolio Risk Management
86) page 139
Read mutual funds ..two questions will atleast come..

87) page 141


What do u mean by NAV?
Some of the leading companies that offer mutual funds are:
Fidelity Investments
Vangaurd
ING Direct
Mellon
88) page 142
Difference between SMA and Mutual Funds?
Advantages and disadvantages of SMA?
89) page 143
What is the name of pension funds?
401k,IRA
90) page 148
2 questions

SYNDICATE
The hub of the investment banking wheel, syndicate provides a vital link between salespeople
and corporate finance. Syndicate exists to facilitate the placing of securities in a public offering, a
knock-down drag-out affair between and among buyers of offerings and the investment banks
managing the process. In a corporate or municipal debt deal, syndicate also determines the
allocation of bonds.
91) page 148-149
Full form of IPO? What it is?
An initial public offering (IPO) is the process by which a private company transforms itself into a
public company.(this will come)
The IPO process consists of these three major phases:
Hiring the Managers
Due Diligence and Drafting
Marketing
92) page 149

What do u mean by THE CHINESE WALL?


93) page 150

UNDERWRITING
Underwriters earn 3 types of Underwriting Spread:
Manager's fee - The lead underwriter receives this fee on all securities sold.
Underwriter's Allowance is the total spread minus the Manager's fee. This fee is shared by
syndicate members based on the type of syndicate account.
Concession - It is typically the largest part of the spread and is paid to the broker/dealer that
actually took the clients order.
Question: which is the largest part of spread?
Answer : concession

94) page 151

SECONDARY MARKET TRADING


there will three questions atleast come, read it carefully:
Examples: Stock Exchanges: NYSE, AMEX
NASDAQ is a good example of OTC market.
Another name for fourth market: Instinet
What is OTC?
95) page 153
Bid or ask rate:
An individual firm could act as a broker on one trade and a dealer on another. When acting as a
broker, the firm is taking customer orders and acting as their agent to buy or sell the security. For
this service, the broker charges a commission. A firm acting as a dealer is the actual buyer or
seller, taking the other side of a trade. The price at which market makers will buy or sell a
particular security is known as the Bid or Ask Price.

96) page 154


Order Types (Based on Volume)
Fill or Kill (FOK) The order must be immediately filled in one trade or canceled completely.
All or None (AON) - The entire order must be filled or canceled completely, but unlike FOK, AON
can remain good till cancelled.
Immediate or Cancel (IOC) must immediately be filled for as much of the order as possible in
one trade, with the remainder being cancelled.
Market Not Held order The floor broker has the discretion concerning time and price. A key
point is that Market Not Held orders are never on the Specialist's Book.
Question: diff between FOK and AON?
97)page 160
The important markets and the indices used are presented below:
US Diversified market Dow Jones Industrial Average (Dow)
US Technology NASDAQ 100
UK (London) Financial Times Stock Exchange Index (FTSE)
Germany (Frankfurt) DAX
France (Paris) CAC
Switzerland (Zurich) SMI
Japan (Tokyo) Nikkei
Hong Kong Hang Seng
Singapore Strait Times Index (STI)
98) page 164
See XL sheet sure three questione will come from risk
Credit risk is the possibility of loss as a result of default, such as when a customer defaults on a
loan, or more generally, any type of financial contract.
Liquidity risk is the possibility that a firm will be unable to generate funds to meet contractual

obligations as they fall due.


Operational risk is the possibility of loss resulting from errors in instructing payments or settling
transactions.
Legal risk is the possibility of loss when a contract cannot be enforced -- for example, because
the customer had no authority to enter into the contract or the contract turns out to be
unenforceable in a bankruptcy.
Market risk is the possibility of loss over a given period of time related to uncertain movements in
market factors, such as interest rates, currencies, equities, and commodities.
99) page 164

MEASURING RISKS
The probability
monetary impact
100) page 164
What is var?
101) page 165
Numerical..
Example VaR Calculation
Assume that you have a holding in IBM Stock worth $10 million. You have calculated the
standard deviation (SD) of change over one day in IBM is $ 0.20.
Therefore for the entire position, SD of change over 1 day = $200,000
The SD of change over 10 days = $200,000 * (10) = $632,456
The 99% VaR over 10 days = 2.33 * 632,456 = $1,473,621
102) page 165
What is monto-carlo?
Ans: A simulation technique
103) page 166
Variance-Covariance method
it is the computationally fastest method known today.
Which is the best VAR method? Ans- Cant say
104) page 166

MANAGING RISKS
There are multiple strategies to manage risks. Some of the commonly followed ones are:
1. Diversification
2. Hedging or Insurance
3. Setting Risk Limits
4. Ignore the risk!

Some common questions:


1)Which is the best market ? New York
2) which is not a function of private bank?
Ans: to print notes
3) Reliance Industries Limited, India would like to raise money in NYSE for expanding its
operations in the domestic market (India). The securities issued would be
American Depository Receipt

You purchased a share of stock for $20. One year later you received $1 as dividend and sold the
share for $29. What was your holding period return
45%
5%
50%
40%
None of the listed options
Bank of America charges a 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
Market Risk
Credit Risk
Liquidity Risk
Legal Risk
None of Above
If Bank of New York has 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
Liquidity Risk
Market Risk
Credit Risk
Country Risk
Operational Risk
Risk is best measured when looked at
At a Macro level
At the lowest possible level
At a sub-macro level
At organizational level
At country level
What would be the most accurate VaR estimation method?
Monte Carlo Simulation
Historical Simulation
Variance-Covariance Matrix
Cannot Say
Analytical Methods
If a financial instrument has a 35 percent chance of paying 29 percent and a 65 percent chance
of paying - 13 percent, it expected return would be simple {0.35 * 0.29+0.65 * (-0.13)}
0.008
0.036
0.053
0.017
-0.029

The term "risk averse" means that

An individual refuses to take risks.


Most investors and businessmen seek risk.
An individual will seek to avoid risk or be compensated with a higher return.
Only investment proposals with no risk should be accepted.
Both An individual refuses to take risks and Only investment proposals with no risk should be
accepted
CRR stands for which of the following
Cash Reserve Ratio
Common Reserve Ratio
Cash Refund Ratio
Cash Re-service Ratio
Cash Reserve Risk
Money Multiplier effect would imply
An increase in the total money lent out into the system
An increase in the total money in the bank reserves in the system
A decrease in the total money in the bank reserves in the system
Both An increase in the total money lent out into the system and An increase in the total
money in the bank reserves in the system
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
Which of the following is NOT a function of the bank?
Ensure super-normal returns to its small depositors
Channelize Savings
Provide credit facilities to borrower
Provide investment avenues to investors
Facilitate the trade and commerce dealings
Which of the following is associated with the purpose of regulating financial institutions?
To provide stability of the money supply
To serve certain social objectives
To prevent failure of any financial institution
To offset the moral hazard incentives provided by deposit insurance and other guarantees.
Both To serve certain social objectives and To offset the moral hazard incentives provided by
deposit insurance and other guarantees
The central bank in the US is called
Federal Reserve
Federal Reserve Board
Reserve Bank of United States
Central Bank of United States
Reserve Bank of America
If a bank gets a deposit of $100, assuming a reserve requirement (CRR) of 10%, and that it
circulates through 2 more banks, leading to the following money multiplier effect
create a reserve of $10
loan of $244
create reserve of $19
loan of $171
None of the listed Options
If the Limit = $1500, margin = 20% and Asset Value = $2000 then Drawing Power for an Open
ended loan is equal to

$1,500
$1,200
$1,600
$900
None of the listed Options
Which of the following is the most profitable for Credit Card Company?
Customers who always pay in time
Customers who never pay
Customers who default but finally pay
all of the listed options
None of the listed Options
Interest rate spread is equal to?
Current rate Base rate
Current rate Floor
Base rate Floor
Cap Current rate
None of the listed Options
Freddie Mac, Ginnie Maes & Fannie Mae are?
Marketing institutions selling home loans
Lenders to the banks for home loan bought by retail customers
Regulatory bodies governing home loan market in US
Primarily asset management companies
None of the listed Options
Which of the following is not involved in a credit card transaction?
Independent sales organization
Merchant
Payment gateway
Associations
None of the listed Options
Who checks for the credit limit of the card before approving the transaction?
Payment processor
Acquiring banks
Payment gateway
Issuing bank
None of the listed Options
Which is not a banking account?
Checking Accounts
Money Market Deposit Accounts
Demat Account
Time Deposits
None of the listed Options

One should have the Time Deposits if one is looking for?


Quick, convenient and, frequent-access to the money

A high rate of interest


Guaranteed rate of interest
Low fee
None of the listed Options
EFTA stands for
Electronic Funds Trading Act
Electronic Financial Transfer Act
Electronic Funds Transfer Act
Electronic Fee Transfer Act
Electronic Funds Telecommunication Act
The Federal Reserve offers financial services to banks and the U.S. government for all of the
following reasons except to
make a profit
promote competition
foster innovation
promote efficiency in the payments system
None of the listed Options
CHIPS stand for
Clearing House for International Payments Settlement
Clearing House for Interbank Payment System
Clearing Head of Interbank Payment Settlement
Clearing Head of international Payment Settlement
Clearing House for Interbank Payment Settlement
The process flow in a Private banking firm goes as
Servicing Specialist => Client Representative => Middle Office => Back Office
Client Representative => Servicing Specialist => Middle Office => Back Office
Client Representative => Servicing Specialist => Back Office => Middle Office
Middle Office => Back Office => Servicing Specialist => Client Representative
Client Representative => Middle Office => Servicing Specialist => Back Office
Which of the following roles and responsibilities are correctly stated?
Services Provider; Tax Services
Middle Office; Statements & Advices
Front Office; Client Reporting
Back Office: Risk Management
Middle Office; Custodial Services
The below stated responsibilities are carried out by which of the following players. Cash
Services/Client Reporting/Statements & Advices/Domestic & Global Settlements
Services Provider
Client Representative
Back office
Front Office
Middle Office

Private banking offers structured lending that provides


Customized asset-based credit solutions

Long-term liquidity to clients


Advice-led credit solutions
Credit solutions to High Net worth individuals
All of the listed options
Financial planning involves all EXCEPT
Cash flow management
Retirement planning
Risk management
Tax planning
Portfolio management
Loan can take many of the following basic forms EXCEPT
Overdrafts
Bills and promissory notes
Corporate bonds
Advances
Credit line
If a fund purchases a loan in the Primary, they also use another word for that. Which term is used
to indicate the initial group of lenders (Primary Lenders)?
Allocation
Syndicate
Secondary
Assignment
None of the listed Options
Which of the following is not a credit derivative?
Credit linked Notes.
Total return swaps.
Credit default swap.
Currency swap.
All of the listed options
Which of the following is not a secured loan?
Equity Loans
Secured Loans with Savings
Equity Lines of Credit
Personal Loans
Car Loan
Which if the following is true in the case of sight draft?
Buyer can refuse to take the delivery
Quality of the Good is guaranteed
Buyer is expected to make the payment after specified credit days
Payments made based on only bill of lading
None of the listed Options

The basic four parties involved in any transaction using LC (Letter of Credit) are the following
EXCEPT

Issuing Bank
Reimbursement Bank
Seller
Beneficiarys Bank
Buyer
Which of the following is the safest type of letter of credit from seller point of view?
Confirmed Letter of Credit
Irrevocable Letter of Credit
Red Clause
Standby Letter of Credit
Revolving Letter of Credit
Which of the following methods of payment is most risky to the Seller?
Documentary Collection
Open Account
Letter of Credit
Counter trade
Cash in Advance
BOL stands for
Bill of Letter
Bankers Overdraft Limit
Bank of London
Bill of Leasing
Bill of Lading
BAFT stands for
Bankers Acceptance for Factoring Transactions
Bankers Association for Foreign Trade
Bankers Acceptance for Foreign transactions
Bankers Association for Forfaiting & Factoring transaction
Bankers association for Factoring Trade
Bill of Lading is
a contract between Importer and Exporter for transportation of goods
a receipt issued by importer to exporter for goods received for transportation
a contract between a carrier and a shipper for the transportation of goods
A receipt issued by exporter to importer for goods delivered.
None of the listed options
Which of the following methods eliminate country risk and commercial risk upon confirmation?
Back to back Letter of Credit
Standby Letter of Credit
Documentary Collection
Letter of Credit
Both Standby Letter of Credit & Letter of Credit
The following are interest rate risk management instruments EXCEPT?
Interest rate swap
Forward rate agreement
Swaption
Interest rate guarantee
None of the listed Options
Cash management techniques include
Pooling

Netting
Swapping
Both Pooling and Netting
Pooling, Netting and Swapping
All of the following are payment modes except
EFT
Cheque
Debit to account through Debit card
Lockbox
None of the listed Options
Which of the following are principles used by an asset manager?
Diversification
Screens and Filters
Capital preservation
All of the listed options
Only Diversification and Screens and Filters
Bid-Ask spread refers to
Difference in price between buying one asset and another similar one
Difference in opinion between the seller and buyer on the price of an asset
Difference between the buying and selling price of the same asset
Both Difference in price between buying one asset and another similar one and Difference in
opinion between the seller and buyer on the price of an asset
None of the listed Options
The process of Hiring of the Lead Managers in the case of IPO is referred to as
Red Herring
Road-show
Investment Manager Contest
Advisor Contest
Beauty Contest
Syndicate in Investment banking refers to all Except
Hub of the investment banking wheel
Determination of allocation of bonds
Merger and Acquisition advisory
Facilitating placing of securities in public offering
None of the listed Options
The difference between Fill or Kill and All or None order is
Fill or Kill allows multiple trades
All or None can be a Good Till Cancelled order
They are synonyms
Fill or Kill can be valid till end of day
Fill or Kill allows partial execution
The NYSE is an example of
Primary Market
Secondary Market
OTC Market
Fourth Market
None of the listed Options
What is the key regulatory authority over the American securities industry?
Federal Reserve

FDIC
DTCC
ASA
Securities Exchange Commission
What is the term for the difference between bid and ask?
Difference
Spread
Profit
Quote
None of the listed Options
What is the Third Market?
NASDAQ
OTC
NYSE
Instinet
None of the listed Options
The Fourth Market refers to
NASDAQ
OTC
NYSE
Instinet
None of the listed Options
Core Custody Services performs the following functions except
Price securities positions
Record Keeping
Fiduciary and compliance monitoring
Reporting services
Processes corporate actions
Services like the settlement, safekeeping, and reporting of customers marketable securities and
cash are provided by _________________
Custodian
Broker
Investment bank
Fund Administrator
Dealer
Money laundering refers to
Money facilitating criminal offences
Extending loans to corporate
Short term borrowing & placements
All of the listed options
None of the listed Options
Federal authorities attack money laundering through
Regulations
Criminal sanctions
Forfeiture
All of the listed options
None of the listed Options
Three pillars of the new capital accord, Basel II, are
Quantitative; Supervisory; General

Qualitative; Market Forces; Geographic


Quantitative; Operational; Supervisory
Quantitative; Qualitative; Market Forces
Qualitative; Mandatory; Quantitative
Capital adequacy ratio refers to
Amount of banks capital expressed as percentage of the risk weighted credit exposure
Amount of banks capital expressed as percentage of the risk weighted credit exposure &
operational risk
Amount of banks capital expressed as percentage of the risk weighted credit exposure, &
market risk
Amount of banks capital expressed as percentage of the risk weighted credit exposure,
operational risk & market risk
None of the listed Options
Doc 111

Some pattern questions:


1)The central bank in US is called______
Federal reserve
2) Simple interest is calculated on which of the following
beginning principal only
3) An investment manager handles all of the following except -------Guaranteeing that the investor doesnt suffer a loss in any investment
4) Pick the odd one out
a. Rakesh Jhunjunwala
b. Sachin Tendulekar
c. Warren Buffet
d. George Soros
e Peter Ujnah
5) In retail banking the term PDC stands for which of the following
post dated cheques
6) A company would pay the interest on what portion of the loan?
Disbursed amount
7) Pick the odd one out
a. Notes
b. Stocks
c. Debentures
d. T-Bills
e. Minus
8) A formal, legal commitment to extend credit up to some maximum amount over a
stated period of time in a description of ________ Line of credit

9) As nominal interest rates increases in the economy the inflation should ideally
Increase
10) Which of the following is associated with the purpose of regulating financial
institution
To prevent failure of any financial institution
11) What is the maximum maturity for commercial paper? 270 days
12) The below stated responsibilities are carried out by which of the following players
Cash services/ client reporting/ statements & advice/ domestic & global settlements
Back office
13) In a financial instrument has a 20% chance of paying 20% & a 80% chance of paying
50%, its expected return would be 44%
14) Which division provides services to high net worth individual
Private banking
15) Which of the following instruments will carry the lowest interest rate
T-note
16) Which of the following instruments will carry the highest interest rate?
Commercial Paper

3. If an investment pays interest at an annual rate of 5% per year, compounded twice a year
than the effective yield larger than 5.5%

a. True

b. False

4. In a 2 way quote for a share the bid is


a. 2% less than offer
b. Less than offer
c. More than offer
d. Dependent on dealers skill
e. Equal to offer
5. Which of the following is usually not participant in stock market
a. Small individuals investors
b. Central banks
c. Companies
d. Financial institutions
6. In an account saving simple interest from the first year is reinvented at the beginning of the
second year?
a. True
b. False
7. Which of the following is a not current asset?
a. Goods for sale inventory
b. Terms loans
c. Cash
d. Raw material inventory
e. Receivables
8. Which of the following in not a feature of private banking?
a. Specialist advice
b. Lot of research
c. Commercial lending
d. High investment in technology
e. Understanding the capital and investment needs.
9. Retail loans are asset product offered by the bank
a. True
b. False
10. If the price of share pf cognizant changes from 65 to 60 this can be attributed to:
a. Market risk
b. Interest rate risk
c. Credit risk
d. Operational risk
e. Liquidity risk
11. Account maintained in the home currency by one bank is the name of another bank based
abroad is called as:
a. Current account
b. Nostro account
c. Vostro account
d. Forex account
e. Overseas account
12. Which of the following is not the settlement method for bank loans?
a. Pre-closure
b. Assignment
c. Participation
d. Sub participation

e. Securities repository
13. The process of transferring obligation from one party to another is called Novation
14. The purchase of any stock for immediate delivery is a __ market transaction.
a. Futures
b. Spot
c. Forward
d. Stock
e. Option
15. In the historical simulation method of VaR calculation:
a. Return are assumed to be not normally distributed
b. No assumption is made about the distribution
c. Random returns are generated to calculate VaR
d. Return are assumed to be normally distributed
e. Returns are not required at all.
16. What happens when interest rate fall:
a. Bond prices increase
b. Bond prices decrease
c. Bond prices do not change
d. Economy goes into deflation
e. Interest rate never fall, they always go up.
17. If the price of a security on day 1&2 is $102 and $100 respectively. The return is
a. -2%
b. 2%
c. -1.96%
d. Very high
e. 1-2%
18. If you invest $1000 for 3 years at 7% compound interest, how much will you have at the end
of the 3 years?
a. $1225
b. None of listed option
c. $1000
d. $1070
e. $1270
19. The trade finance the term LC stands for;
a. Letter of commercials
b. Letter of credit worthiness
c. Letter of credit
d. Letter of commerce
e. Letter of complaints
20. What is need for banks in the society?
a. Small investor are protected, hence it is a low risk investment avenue.
b. Banks are in the best position to lend out money at competitive
c. Depositors are participant in primary and secondary markets.
d. All of listed options.
21. A is more risk averse investor than B .therefore.
a. For the same return, B tolerates lesser risk than B.
b. For the same return, A tolerates higher rate of return.

c. For the same return, A tolerates lower rate of return.


d. For the same return, A takes higher risk.

22. Liquidity issues of credit can be addressed by:a. Sweep facility


b. Structured lending to client
c. All
d. Short term credit facilities
e. Overdraft
23. Which is associated with purpose of regulating financial institution?
a. None
b. To provide stability of money supply.
c. To serve certain social objectives.
d. To prevent failure of any financial institution.
e. To offset moral hazard incentive provided by deposit insurance and other
guarantees.
24. Fastest method for calculating VaR.
a. Monte- Carlo simulation.
b. All equal time with software.
c. Variance-Covariance matrix.
d. Combination of Monte- Carlo and Historical Simulation.
25. Which is not banks primary use for deposits?
f. Payment to employers
g. None
h. Investment
i. Loan
j. Withdrawal
26. If the 5 bids available for stock are 64, 65, 63, 62.5 and 66 which one u will sell?

-> 66

27. When a bank issue a loan its liabilities & reserves increases by the amount of the loan.
a. True
b. False
28. If the corporate isnt able to raise money from the market to pay off some loans the risk can
be refer.
a. Market risk
b. Interest rate risk
c. Commodity risk
d. Operational risk
e. Liquidity risk
29. On the trading day at the NYSE a broker undertakes the following trades
Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MFST share for $20.00 each
Sell 20 IBM shares $11 each
Sell 10 MFST share at 20.50 each
Sell 30 IBM shares for 9.00 each
How much did the broker pay out to the exchange in total in case of (i) Gross settlement
system (ii) Net Settlement System?

a. (i) $1780 (ii) $3000


b. (i) 0 for IBM, $1795 for MSFT (ii) $1780.
c. (i) $3000 (ii) $1780
d. None
e. (i) $1780 (ii) 0 for IBM, $1795 for MSFT

30. US export and Europe import agree to carry out the transaction of goods word $100000
under a confirmed term LC with a maturity date of 60 days from the time of shipment. The
acceptance commission @ 1.5 % PA equals
A) $2500
B) $3000
C) $300
D) none
E) $250
31. Operational risk is defined as?
32. The basic four parties involved in any transaction using LC are the following EXCEPT
A) Issuing Bank
B) Reimbursement Bank
C) Beneficiary Bank
D) Seller
E) Buyer
33. While providing security lending services to its clients, which risk will a custodian have to
manage for its clients?
A) Liquidity risk
B) Both Credit risk and interest rate risk
C) Interest rate risk
D) Credit risk
E) Both credit risk and liquidity risk.
34. If the price of securities on day 1 and 2 are $100 and $102 respectively .Returns is
A) A very high
B) 2
C) -1
D) -2
E) 1
35. Following are the list of risk that Cognizant faces at organizational level
A) Currency risk
B) Attrition
C) Credit risk
D) All of the above
E) Protective legislation by US/UK
36. Which of the following is not a core private banking function?
A) Client management
B) Deposit Mobilization
C) Investment analysis and advice
D) Research
E) Sales and Marketing

37. A mutual fund with investment objective of achieving high capital growth approaches investor
services firm for advice. The firm advices the mutual fund to invest 80% of the fund in govt
debt and 20% in equity. The allocation towards debt advised by the firm
A) Cannot be determined
B) is too high
C) Is about right
D) is too low

38. Which of the following operations can be done on a LC?


A) All the listed option
B) Acceptance
C) Negotiate
D) Purchase
E) Discount
39. Who among the following is most likely to be a private banking client of a bank?
A) A fresh engineer in his first job at cognizant
B) Tiger Woods
C) Any of the above
D) A cricket player who has never played national / international cricket
E) A manager at a manufacturing plant.
40. Which of the following method eliminate country risk and commercial risk upon confirmation?
A) Documentary collection
B) Back to back LC
C) LC
D) Standby LC
E) Both standby LC and LC
41. The act of the loan amount being handed over to the borrower by the bank is known as
disbursement. State TRUE or FALSE
a. True
b. False
42. On the trading day at the NYSE a broker undertakes the following trades
Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MFST share for $20.00 each
Sell 20 IBM shares $11 each
Sell 10 MFST share at 20.50 each
Sell 30 IBM shares for 9.00 each
Given that a net settlement system is being used, find out the net position of the broker at the
end of the day
A) IBM no exchange of shares ; MFST 90 shares to receive ; $1780 to pay out to the
exchange
B) None of these
C) IBM no exchange of shares ; MFST 90 share to receive ; $3000 to pay out to exchange
D) IBM 70 shares to given out ; MFST 90 shares to receive ; $3000 to pat out to exchange
E) IBM no exchange of shares ; MFST 90 share to receive ; $1780 receive from the
exchange
43. ACH transaction involves the transmission of _________
A) All of the listed option

B)
C)
D)
E)

Documents
Physical instrument like check and draft
Electronic data files
Cash

44. What should one use while using comparing mortgages?


A) APR
B) None
C) IRR
D) NPV
E) Rate of interest applicable for the loan
45. Which one of the following is not offered by investment banking division of a bank?
A) learning services
B) None
C) Merger and Acquisition
D) Valuation of firm
E) Underwriting and distribution of equity issues.
46. If total spread on underwriting is $500000 and manager fee is $100000. What is the amount
which will be distributed in the syndicate?
A)
B)
C)
D)
E)

500000
100000
400000
600000
Can not be determined

47. HPPL shares are currently selling for $25 each. You bought 200 shares one year ago at $24
each and received dividend payment as $1.50 per share what was total dollar capital gain this
year
A)
B)
C)
D)
E)

200
500
None
300
400

48. The brokerage firm is regulated by


A) State regularity agency
B) SEC
C) Industry wide SRO
D) All of the listed option
49. Pick odd one out
a. Demat
b. Personal loan
c. None
d. Hire Purchase
e. Auto loans
50. I deposited 100 in a bank .Bank loan out 90 out of it to someone else, who then invest the
money in setting u a new factory. This process is called
A) Monetary policy
B) None

C) Money multiplier effect


D) Profit making tendency of a bank
E) Fiscal policy
51. Capital adequacy ratio refers to
A) Amount of bank capital expressed as % of the risk weighted credit exposure & market
risk.
B) Amount of bank capital expressed as % of the risk weighted credit exposure
C) Amount of bank capital expressed as % of the risk weighted credit exposure & operational
risk.
D) Amount of bank capital expressed as % of the risk weighted credit exposure
operational risk & market risk.
E) None
52. Which of the following is not a treasury management system?
F) Calypso
G) Summit
H) Wall street system
I) Front arena
J) Flex cube
53. Syndicate helps in all of the following activity but
E) Managing large bond issues
F) Raising huge money from the bank
G) Managing large capital raising act
H) Managing conflict between investment banks.
I) IPO distribution.
54. All of the following statements concerning US govt securities are correct EXCEPT
A) Treasury bills have their interest paid in a lump sum at maturity
B) None
C) Treasury bills have greater interest risk than either treasury bond or treasury note
D) Treasury note has maturity dates up to 10 yrs
E) Treasury bonds have maturity dates up to 30 yrs
55. In defined benefit plan the benefit is expressed as ________ and in defined contribution plan
the benefit is expressed as an ________
A)
B)
C)
D)
E)

Account balance , Annuity


Annuity , Annuity
Account balance , Account balance
None
Annuity , Account balance

56. What is the term used to indicate the arrangement of LARGE borrowing for a corporate by a
group as lenders
B) none
C) Syndicate
D) Allocation
E) Assignment
F) Secondary
57. Card associate provide which of the following service

A)
B)
C)
D)
E)

issue card
Set credit limits
Set interest rates
Set card fees
Security/ Risk management

58. In an international securities transaction, which of the following participant will not be
involved?
F) Global custodian , domestic sub custodian , depository in foreign country and sometime
stock exchange in foreign country
G) Depository in foreign country
H) Global Custodian
I) stock exchange in foreign country
J) domestic sub custodian

59. An insurer undertakes an analysis of a portfolio of insurance policy by exploring scenarios for
the path followed by swap rates, policy surrender rates, mortgage prepayment rates for the
mortgage backed security in the portfolio, what is this process called?
A) Cash projection
B) Investment manages universe
C) Asset allocation
D) Fund administration
E) Asset / liabilities analysis
60. Trade finance helps in
A) Facilitating international transaction
B) Facilitating intra company transaction
C) Facilitating international transaction , corporate lending and settling up of new factories
D) Facilitating corporate lending
E) Facilitating setting up of new factories
61. A choice quote is
A) a price at which a firm is ready to buy or sell
B) When bid is equal to offer
C) When the firm has a choice of deciding the securities to take
D) a price at which a firm is ready to buy or sell it also means when bid is equal to
offer
62. Which of the following is likely to have the highest interest rate?
A) 6 month deposit of min balance of $1000
B) 3 month deposit of min balance of $4000
C) 12 month deposit of min balance of $1000
D) None
E) 6 month deposit of min balance of $2000
61. If 1 day VaR is $1 million, 9 day VaR is
A) $3mn
B) $4.5mn
C) $9mn
D) $4.4mn
E) $1mn
63. If a bank gets a deposit of $1000 assuming a CRR of 10% and that it circulates through 2
more banks, leading to the following money multiplier effect

A)
B)
C)
D)
E)

Loan of $2439
Loan of $1710
None
Create a reserve of $100
Create a reserve of $190

64. Which among the following is an investment company that pools money from unit holders and
invest in a variety of security?
A) Mutual Fund
B) Mortgage Company
C) None
D) Stock Exchange
65. You purchased a stock for $40. 1 year later you received $2 as Dividend. You sold it at $48.
What is your return?
a. 45%
b. 10%
c. 25%
d. 50%
e. None
66. A formal Legal commitment to extend credit to some max amount over a stated period of time
is description of
f. Trade Credit
g. Revolving Credit
h. Agreement Irrevocable Credit
i. Line of Credit
j. Letter of Credit
67. Odd 1 out
a. Warren Buffet
b. George Soros
c. Bill Gates
d. Ben Graham
e. Peter Lynch
68. Development of Investment Objective and Investment policy falls under the Purview of
a. Investment manager Universe
b. Asset Allocation
c. Asset Liability Analysis
d. Fund Admin
e. Compliance Reporting
69. Interest Rate Spread is equal to
a. Current rate Base Rate
b. Cap Current Rate
c. Current Rate Floor
d. Base Rate Floor
70. Which of the following factors affect the choice of Payment Method?
f. Exporters Fund
g. All
h. Government Guarantee Program
i. Time Frame
j. Cost of Financing

71. The NYSE is a large financial market in which the initial issue receives the proceeds for the
Sale of securities.
a. True
b. False
72. Which of the following trading services reduces the trading cost for institutional investors?
a. Stock Repurchase Program
b. Transition Management
c. Transition Management & Commission Recapture
d. Commission Recapture
e. None
73. A CALL option on futures gives the buyer
a. the obligation to buy a futures contract
b. the obligation to sell a futures contract
c. the right & obligation to buy a futures contract
d. the right but not the obligation to buy a futures contract
e. the right but not the obligation to sell a futures contract

74. Which is not an example of Option?


a. Call Option
b. Swaption
c. Leaps
d. Oil Futures
e. Put Options
75. Some banks pay interest on Checking A/c while many do not.
a. True
b. False
76. The advising bank is called as trusted bridge between the ___________ & __________ when
they do not have active relationship. Options wrong
a. Beneficiary Bank & Reimbursing Bank
b. Importer Exporter
c. Reimbursing Bank & Beneficiary Bank
d. Applicants bank & Beneficiarys bank
77. Which of the following according to you has resulted in defining contribution plans gaining
popularity over defined benefit plans
e. DC plans fix the monthly contribution from the employee making his financial planning
easier.
f. DC plans are seen by employees as investment which to accumulate retirement income.
g. All
h. Employer increasing wants employees to share responsibility for retirement
78. ________is typically largest part of spread and is paid to broker\dealer or that actually took
clients order
f. Salary
g. Manager fee
h. Wage
i. Concession
j. Underwriter

79. NASD is not an SRO for


e. Listed market
f. Over the counter market
g. Third market
h. Fourth market
80. High net worth individuals generally have ____________.
e. Market capitalization more than $200000
f. All
g. Net worth greater than $500000
h. Household income of max $50000 year.
81. Which is true about retail banking?
e. The business focuses on small no. of high net worth individuals.
f. The business focuses on small and medium enterprises.
g. The business focuses on large no. of individuals.
h. The business focuses on large no. of corporation bodies.
82. Offer is price at which a firm
f. Trades in securities
g. Quotes to its bets customer
h. Intends to buy
i. Intends to sell
j. Quotes when it does not want to trade.
83. Securities with original maturity greater than 1 year are traded on money market.
b. True
b. False
84. Which is not a banking service?
e. Stock market
f. Retail banking
g. Corporate banking
h. Customer lending
85. Which is true?
e. Financer owns the asset both in case of Lease and hire Purchase.
f. Tax deduction cab be claimed from the full value of the rental paid in case of lease
g. All
h. Depreciation is claimed by the financer in lease and not in case of hire purchase.
86. Bank a based in US provides safe keeping services for securities to its US clients. It also has
clients in France and Belgium and provides securities safe keeping services to these clients
through banks C & D respectively. Which best describes bank A?
f. Global custodian,
g. None
h. Main custodian
i. Sub custodian
j. Secondary custodian
87. All following statements relating to Bonds are correct except.
D) Bonds sell at a discount when Coupon Rate is less than Market Interest rate.
E) None
F) Bond is debt instrument giving issues.
88. Which of the following type of loan requires the amount of interest that would be earned on
the loan to be paid upfront by the borrower?
F) Capitalized loan

G)
H)
I)
J)

True Discounted loan


Amortized loan
Demand loan
Discounted loan

89. Who are involved in the preparation of prospectus of IPO?


F) Commercial bankers
G) Investment Bankers
H) None
I) Company Management
J) Company Management and Investment Bankers
90. Bankers Acceptance differs from Sight Draft in that
F) Bankers Acceptance reduces lending capacity
G) Sight Drafts are negotiable instruments
H) Bankers Acceptance demands immediate payment.
I) None
J) Banks can raise funds by selling acceptance.
91. Clients of a private banker are generally not segregated on the basis of
F) Investible assets
G) Location
H) Age
I) Net worth
J) Name
92. The initial sale of the security is in the market, while subsequent trading in the security
is in the .. market
F) Spot, futures
G) Debt , Equity
H) Primary , Secondary
I) Money, Capital
J) Secondary, Primary
93. Under what category can services like asset/liability analysis, asset allocation, cash
projection, compliance reporting, fund administration, investment Management universe etc.
provided by an institution can be classified?
F) Investment Management
G) Asset Servicing
H) None
I) Trading
J) Investor Services.
94. CIP in the context of anti-money laundering is
E) All
F) Stands for Suspicious Activity Reports
G) Customer Identification Program
H) Requiring Businesses, which were only to report cash transactions involving more than
1.00,000?
95. On a trading day at a stock exchange a broker undertakes the foll trades:
Buy 100 IBM shares for 10$ each
Sell 50 IBM shares for 10.5 $each
Buy 100 MSFT shares for 20$ each
Sell 20 IBM shares for 11$ each
Sell 10 MSFT shares for 20.5 each
Sell 30 1bm shares for 9$ each

At the end of the day, the broker owes 1780 to the exchange while exchange owes him 90
shares of MSFT. Is it possible?
D) Yes under RTGS
E) No
F) Yes under net-settlement system
96. Dow Jones industrial average is made of
F) 30 stocks
G) 20 stocks
H) 40 stocks
I) 10 stocks
J) 50 stocks
97. Which is the key feature of Letter of Credit?
A) basis for devising proper currency hedging strategy
B) Distributes risk between buyer n sellers.
C) basis for devising proper currency hedging strategy and opportunity for receiving payment
in advance of the due date.
D) All
E) Opportunity for receiving payment in advance of the due date.
98. Which risks bring gain and losses?
F) Interest rate and foreign exchange
G) Liquidity and credit
H) Credit and Interest rate
I) Credit and Foreign exchange
J) All
99. Find the future value of $1200 invested at 5.25 % per annum payable annually after 6
months? Marks: 2
1. 1345.1
2. 1243.1
3. 1231.1
4. None
5. 1235
100.
Investor services like brokerage, cash management and short term investments,
commission re-capture, foreign exchange transactions, transaction management etc. can be
classified under ____ group of services. Marks: 1.
1. Trading
2. Investment Management
3. Investor service
4. None
5. Asset Servicing
101.

The term CP is used in corporate lending for ____. Marks: 1


1. Collateral provision
2. Client Partner
3. Commercial Paper
4. Commodity Put options
5. Credit Provision

102. What are the risks associated with the Hedge funds? Marks: 3
1. All of the above
2. High exposures in derivatives

3. High Leveraging
4. High Speculation
103. The trade terms 15/2 net 30indicates that _____. Marks: 3
f. 2% discount is offered if payment is made within 15 days.
g.15% discount is offered if payment is made within 2 days; the payment should
however be made in 30 days.
h.30% discount is offered if payment is made before 15 of the month.
i. 15% discount is offered if payment is made between 2 & 30 days;
j. 15% discount is offered if payment is made within 30 days.

104. A bank is required to hold reverses at least equal to a pre-scribed fraction of its total deposit
liabilities.
b.True
b. False
105. What term is used to describe an LC that remains valid for years thereby eliminating the
cost of separate LCs for each transaction with a regular client?
f. Irrevocable LC
g.None
h.Red clause
i. Revolving LC
j. Evergreen clause
106. Who appoints investment manager to manage a benefit plan?
f. Plan sponsor
g.Plan administrator
h.Fund trustee
i. None
j. Government
107. A company would pay the interest on what portion of loan?
f. Committed amount
g.Either disbursed or committed loan
h.Unused amount of loan
i. Disbursed amount
j. None
108. In the exchange on a particular trading there is a buy market order for 100 CTSH shares
and two sell market orders for 50 and 40 CTSH shares each, can the buy order be matched
against the two sell orders.
d.Yes
e.No
f. Yes, but if prices on the buy & sell side match.
109. If the limit = $2000, margin = 20% and asset value = $2000 then drawing power for an open
ended loan is equal to?
f. None
g.Drawing power = $1600
h.$2200
i. $2400
j. $2000
110. Risk cannot be mitigated by
f. Setting risk limits

g.Hedging
h.Diversification
i. Arbitrage
j. Insurance
111. A fixed income analyst will analyze all but
f. Municipal bonds
g.Bonds of govt. sponsed enterprise
h.Corporate bonds
i. US treasuries
j. Shares
112. In benefit administration what are the relationships that exits between the plan
administrator and the investment manager, and between Trustee and the investment
manager.
f. None
g.Plan administrator & trustee both have outsourced plan administration as well as fund
management to investment manager
h.Any
i. Plan administrator gives investment instruction to investment manager while
trustee appoints the investment manager.
j. Trustee gives investment instruction to investment manager, while plan administrator
appoints the investment manager.
113. Which entity provides credit scores that are used by issuers to process card application?
f. Issuer processor
g.Collection agency
h.Issuing bank
i. Authorization engine
j. Credit bureau.
114. CPI stands for which of the following?
f. Consolidated Price index
g.Consumer popularity index
h.Consumer product index
i. Consumer price index
j. None
115. A bank decides to sanction only 10% of the loan sought by a company. The company goes
and pledges extra assets with the bank and the bank then agree to sanction 50% of the
loan sought. The company has indulged in the process of
f. Credit scoring
g.Credit increase
h.Credit incrementation
i. Credit revision
j. Credit enhancement.
116. FX spot deal assumes maturity of how many business days ahead?
f) 4
g)5
h)3
i) 1
j) 2
117. Which of the following is best VaR estimation Model?
e)Monte- Carlo

f) Historical
g) Variance-Covariance
h)Variance-Covariance and Monte- Carlo
118. Which of them represent company is incorporated in USA?
e)Plc
f) Pte
g)Ltd
h) Inc
119. Which of the factors affect the choice of payment methods?
f) Govt. guarantee Program
g)Time frame
h) All
i) Cost of financing
j) Exporter fund.
120. Organization level risk appetite is determined by:
f) Risk management
g)Front office
h)Back office
i) Trade
j) Board of director
121. Risk management is function of:
f) Traders
g)Back office
h)Specialist
i) Front office
j) Mid office
122. Purely competitive financial markets are not characterized by
e)Govt. regulation
f) Many traders
g)Full info
h)Cost effective trading
123. NOT player in typical trade cycle;
f) Custodian bank
g)Clearing bank
h)Clearing member
i) Trading member
j) Regulator
124. Once syndicate has sold all other trades participant, sub participant and assignment are
considered trade in what market?
f) Primary
g) Secondary
h)Participant
i) OTC
j) Index
125. Question related to price weighted index?
6.DJIA

7.Hangseng
8.EAFE index
9.NASDAQ composite index
10. S&P 500
126. In defined contribution retirement plan .Tax sheltered annuities fall under section of
_________ERISA
403b
401k
401b
403k
None
127. In benefits administration, trustee and plan administrator submit compliance report
to______ which in turn qualifies the plan.
Participant
None (answer is TRUST)
Government
Investment manager
Sponsor
128. Full form of ADR
Answer: American Depository Receipts
129. Question related to BASEL II
Answer: Capital adequacy
130. What is interest rate charged on asset based loan?
Answer: The interest rate charged is lower than personal loans
131. Question related to credit derivatives as which of the following function is not done by credit
derivatives
Answer: Answer was something as Transfer to over the counter
132. Question related to credit derivatives it was fill up the blanks? Exactly dont remember the
question/
Answer: option having TRANSFER
133. Question related to non-discretionary Investment Management
Answer: the bank offers investment recommendations based on the Clients approval.
134. Question having few options like Income Processing, Tax Information Services, Cash
Sweep
Answer: ASSET SERVICING
135. Question related to Underwriting?
Options:
5.Underwriting Spread
6.Public Offering Price (POP),
7.Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it)
8.All
BFS L0
1 Which of the following are not the benefits of using Credit derivatives?

a. A increasing the credit limit of the corporate


b. Credit derivatives can be used to create positions that can otherwise not
easily be established in the cash market
c. Credit derivates can be used either to take on more risk or to avoid (hedge) it
d. Credit derivatives can be used both to diversify their credit risk exposures and
free up capital from regulatory constraints
2. What is OTC?
a. On the counter
b. options on the counter
c. operating the company
d. over the counter
e. None of the listed options
3. In active approach, Asset allocation is more influenced by which of the following
option?
a. value of Investment
b. Market Views
c. None of the listed options
d. Investors risk preferences
4. A person purchase a share @ $50.00, after 2 years, the price is at $75 and he
decides to sell the share at that price. What is the annualized return that the
person has earned?
a. 0.5
b. 0.3333
c. 0.2247
d. 0.6667
e. None of the listed options
5. An open end fund with 10,000 units outstanding had the total assets of Rs. 120,
000 and the liabilities of Rs. 25,000. Calculate the funds NAV per unit.
a. Rs. 10
b. Rs. 12
c. Rs. 9.5
d. Rs. 14.5
6. Product development in sales and marketing refers to which of the following
options
a. Collateral e.g. cars in case of car loans, houses in case of mortgages
b. Products that are bought using online payment such as e-commerce
c. Developing and differentiating deposits, loans, etc
d. All of the listed options
e. Identifying products such as SAP, Oracle for the Bank

7. A bank has portfolio of $50 million worth of loans out of which it wants to sell $20
million worth of loan to another financial institution, what is this process called?
a. Accrual loan
b. Undrawn loan
c. Trading Loans
d. Committed 1oans
e. Held for sale loans
8. Trading occurs between clearing and settlement. State true of false
a. True
b. false
9. Which of the following are examples of emerging payments?
a. All of the listed options
b. Digital Cash
c. Proximity payments
d. EBPP
10. In defined benefits plan, the benefit is expressed as an ___________ and in
defined contributions plans, the benefit is expressed as an __________
a. account balance, annuity
b. account balance, account balance
c. annuity, account balances
d. annuity, annuity
11. Loan Serving starts after underwriting. State true or false
a. True
b. False
12. An investor has multiple investment options 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?
a. Compound Interest
b. External rate of return
c. Net present value
d. Simple Interest
e. Internal rate of return
13. Ram deposits $100 in XYZ Bank. Puja takes a loan of a %100 from XYZ bank.
Which of the following is most likely to happen?
a. Bank is charging 3% interest to Puja and paying 5% interest to Ram
b. Bank is paying 5% interest to Ram and charging 5% interest to Puja
c. None of the listed options
d. Bank is paying 3% interest to Puja and charging 5% interest to Ram
e. Bank is charging 5% interest to Puja and paying 3% interest to Ram
14. At the end of the trade cycle, the trades are ________ to determine the
obligation of the trading members to deliver securities/funds as per
settlement schedule
a. Grossed
b. Aggregated
c. Netted
d. Offset

15. Principle- Strip and Coupon-Strips are used in reference to _________


a. Swaps
b. Bonds
c. Futures
d. Equity
e. Forwards
16. What is the difference between bankers acceptance and single draft
a. None of the listed options
b. Bankers acceptance demands immediate payment
c. Single draft are negotiable instruments
d. Bankers acceptance reduces banks lending capacity
e. Bank can raise funds by selling the acceptance
17. An institutional investor holds 50000 Microsoft shares. A custodian does the
safe keeping on the investor behalf. During this period, Microsoft announces
dividend. Based on this scenario which is the correct option from the following
a. The dividend amount will be processed by the custodian and credited
to the institutional investor account
b. None of the listed options
c. Because the assets are with the custodian the dividend amount will be
credited to the custodian account
d. The custodian and the investor share a part of the dividend
18. Which
a.
b.
c.
d.
e.

of the following is a type of underwriting spread


Underwriters allowance
Managers fee
None of the listed options
Concession
All of the listed options

19. A custodian has different types of assets under its custody and those assets
earn returns to the original investor in various forms. What are the type of
returns that can be taxed?
I.
Dividend
II.
Interest
III.
Capital Gain
IV.
All of the listed options
a.
b.
c.
d.
e.

III only
I only
II only
Both I and II
IV

20. A company ABC has a gross profit of $50000. The operating expenses amount
to $10000. The interest on loans availed amounts to $5000 and the taxes to
be paid amount to $5000. Calculate the EPS if there are total of 20000 shares
a. 2.5
b. 1.25
c. 2
d. 1.5

21. Coming together of BNY and Mellon is an example of ____________


a. All of the listed options
b. Merger
c. Acquisition
d. Takeover
e. Brokerage
22. Which
a.
b.
c.
d.
e.

of the following is NOT a TOP 10 US bank?


Bank of America
JP Morgan Chase
Well Fargo
Citigroup
Lloyds TSB

23. Interest rate spread equal to?


a.
b.
c.
d.
e.

Current Rate- Base Rate


Current Rate-Floor
Base Rate Floor
None of the listed options
Cap- Current Rate

24. Which are true in a Basic or No fill Checking Account?


I.
Limit the number of checks written
II.
Interest paid
III.
Limit the number of withdrawals made
a. II and III
b. I and III
c. All of the listed options
d. I and II
25. In case of auto finance, monthly lease payments are usually lower than monthly
loan payments because of which reason?
a. Customer is only paying for depreciation
b. Customer is only paying for taxes
c. Customer is only paying for Fees
d. All of the listed options
e. Customer is only paying for rent charges
26. Which of this is a tax heaven?
a. Bermuda
b. US
c. Japan
d. Singapore
e. India

27. SPV means


a. Special principle vehicle
b. Security purpose vehicle
c. Special purpose vehicle
d. none of the listed option
e. Securitized planning vehicle
28. What does single EURO payment area (SEPA) do?
a. Creates a single payment market
b. Removes differences in intra and cross border payments
c. Applicable to direct debits, Credits and credit cards
d. All of the listed options
29. Which of the following is not Core private banking function?
a. Research
b. Investment analysis and advice
c. Client management
d. Deposit mobilization
e. Sales and marketing
30. The advising bank is used as trusted bridge between the _______ and ______
when they do not have an active relationship
a. Applicant bank, Beneficiary bank
b. Importer, Exporter
c. Beneficiary Bank, Reimbursing bank
d. Beneficiary bank and advisory Bank
(answer not in above 3 options) confirm
31. What is the primary source of incoming for the bank?
a. Deposits from public
b. Grants from central bank
c. Interest income
d. Fees for services
e. None of the listed options
32. Tax and insurance premiums collected as part of loan repayment are handled
through which of the following type of account
a. Escrow account
b. Fixed Deposit
c. DMAT Account
d. Mutual Account
33. Which of the following risks for the investor is associated with corporate bonds
but NOT U. S. Treasury Securities?
a. Interest rate risk
b. Reinvestment Risk
c. Credit Rating Risk
d. Default Risk
e. None of the listed options

34. On a trading day, at the NYSE, a broker undertakes the following trades
Buy 100 IBM shares for $11.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MSFT share for $20.00 each
Sell 20 IBM shares for $11.00 each
Sell 10 MSFT shares for $20.50 each
Sell 30 IBM shares for $9.00 each
How much did the broker pay out to the exchange in total in case of (a)
Gross settlement system (b) Net settlement system?
a. (a) $1780 (b) 0 for IBM, $1795 for MSFT
b. (a) $1880 (b) $3100
c. (a) $3100 (b) $1880
d. (a) 0 for IBM, $1795 for MSFT (b) $1780
e. None of the listed options
35. Number of stages in syndicate loans are ________
a. 4
b. 5
c. 1
d. 2
e. 3
36. Investment bank assists in Mergers and acquisitions through which of
the following options?
a. All of the listed options
b. Negotiating between the parties
c. Valuation of companies
d. Structuring the deals
e. Ensuring smooth transactions
37. The purpose of Community Development Banks (CDB) is to serve
residents and spur economic development in low to moderate income
(LM) geographical areas. State True of False
38. On a trading day at exchange, a broker undertakes the following trades
Buy 200 Microsoft shares for $10.00 each
Sell 100 Microsoft shares for $10.50 each
Buy 100 Google share for $20.00 each
Sell 30 Microsoft shares for $11.00 each
Sell 50 Google shares for $20.50 each
Sell 40 Microsoft shares for $9.00 each
How much did the broker pay out to the exchange in total in case of (a)
Gross settlement system (b) Net settlement system?
a. (a) $4000 (b) $1235
b. (a) $1235 (b) $2235
c. (a) $260 for Microsoft, $975 for Google (b) $975 for Google, #260 for
Microsoft
d. (a) $1235 (b) $4000
e. None of the listed options

39. What are Secondary markets defined as?


a. Market in which securities are resold after they are originally issued
b. Market where security is sold during IPO
c. None of the listed options
d. Either auction or dealers market are being OTC market
40. Annuities are
a. Discounted Loan
b. Capitalized Loan
c. A loan that is paid in periodic equated installments with capitalized
interest
d. True discounted loan
e. Amortized loan
41. __________ is the legal and professional proceeding in which a lender,
obtains a court order terminations of a borrowers equitable right of
redemption
a. Foreclosure
b. Securitization
c. Sub-Prime
d. Credit Freeze
42. All of the following are valid means for a custody client to communicate
trade instructions to its custodian, EXCEPT
a. By fax
b. FEDWIRE
c. By Telephone
d. SWIFT Network
43. In a nominal T+3 settlement cycle, when is the confirmation/
affirmation completed?
a. True
b. None of the listed options
c. T+2
d. T+3
e. T+1
44. Bank a base din US, provides safe keeping services for securities to its
US clients. It also has clients in France and Belgium, and provides
securities safe keeping services to these clients through banks C and D
respectively. Which of the following term best describes Bank A
a. Global Custodian
b. Secondary Custodian
c. None of the listed options
d. Main Custodian
e. Sub Custodian

45. In Electronic Check conversion (ECC), what happens once the check is
processed?
a. The customer can present a check to a store cashier
b. Receive cash immediately
c. All of the listed options
d. The customer signs a receipt authorizing the store to present the
check to the bank electronically and deposit the funds into the
stores account
46. P & L statements represent transactions over a period of time
while the balance sheet shows information as of a specific date.
State True of False
47. Which two risks of a financial institution may brings gains as well as
losses?
a. liquidity Risk and Credit Risk
b. Credit Risk and Foreign Exchange Risk
c. Credit Risk and interest rate risk
d. None of the listed options
e. Interest rate Risk and Foreign Exchange Risk
48. Which of the following is a corporate action?
a. Declaring Dividend
b. All of the listed options
c. M & A
d. Rights Issue
e. Stock split
49. NPV stands for
a. Net Past value
b. Net Present value
c. New present value
d. No present value
50. What are Yankee Bonds also known as
a. Junk Bonds
b. T- Bills
c. None of the listed options
d. Call options
e. Shares
51. The suitable strategy for an investor following active approach is to
a. Purchase both types of stocks
b. Purchase Undervalued stock and sell overvalued stock
c. Sell both type of stocks
d. Sell Undervalued stocks and purchase overvalued stock
52. The risk that a given security or asset cannot be traded quickly enough
in the market to prevent a loss (or make the required profit) is
a. Liquidity Risk
b. Credit Risk
c. Business Risk
d. Financial Risk

53. Which of the following is not a barter trade or a counter trade?


I.
Compensate the seller in the currency buyer likes
II.
Compensate the seller through bank draft
III.
Compensate the seller in the currency Seller likes
IV.
Compensate the seller in a manner other than transfer of
money
a. I only
b. II only
c. IV only
d. I, II, and II
e. III only
54. The components to determine the rate of exchange in a forward
contract are
a. Cross currency rate and forward rate adjustment
b. Current spot rate, amount of currency bought/Sold
c. Forward rate adjustment and amount of currency bought of sold
d. Currency spot rate and forward rate adjustment
55. Which of the following are the functions of the relationship manager in a
retails bank?
a. New account opening
b. All of the listed options
c. Product Sales
d. Account Maintenance
56. An investment strategy that arms to capitalize on the continuance of
existing trends in the market is called __________
a. Passive Investing
b. Momentum Investing
c. Contrarian Investing
d. Technical analysis
57. If the money multiplier is 1, the required reserve ratio must be
a. Zero
b. 0.5
c. 1
d. Greater than 100%
58. During Q1, 2008 the investment bank _________ was merged with
JPMC after it was unable to continue borrowing to finance its operations
a. Lehman Brothers
b. Bear Steams
c. AIG
d. Fannie- Mae
e. Washington Mutual
59. All of the following are the benefits of netting EXCEPT
a. Reduction in compliance risk
b. Reduction in the cost of the settlement
c. Reduction in the systemic Risk
d. Reduction in the number of deliveries and receipts

60. Which of the following is not a player in a typical trade cycle?


a. Clearing bank
b. Trading Members
c. Clearing members
d. Regulator
e. Custodian bank
61. Which of the following operation can not be done on LC (Letter of
Credit)?
a. Acceptance
b. Discount
c. None of the listed options
d. Purchase
62. On a trading day, at the NYSE, a broker undertakes the following trades
Buy 120 Dell shares for $10.00 each
Sell 70 Dell shares for $10.50 each
Buy 200 CISCO share for $20.00 each
Sell 20 Dell shares for $11.00 each
Sell 50 CISCO shares for $20.50 each
Sell 10 Dell shares for $9.00 each
Given that a net settlement system is being used. Find out the net position
of the broker at the end of the day
a. Dell 20 shares to receive, CISCO 150 shares to receive, $3130 to
pay out to the exchange
b. Dell 70 shares to give out, CISCO 90 shares to receive, $3000 to pay
out to the exchange
c. None of the listed options
d. Dell 150 shares to receive, CISCO 20 shares to receive, $3130 to receive
from exchange
e. Dell 20 shares to pay out, CISCO 150 shares to receive, $3780 to pay
out to exchange
63. A bank is required to hold reserves at least equal to a prescribed
traction of its total deposit liabilities is called
a. SLR
b. ALM
c. ERP
d. SAR
64. XYZ Corporation is a large client of a bank and on a average for a period
it maintains $20 million in its bank account. However, The bank allows
the authorized representatives of XYZ to utilize the funds up to 15%
over the balance maintained. This is example of which of the following
options?
a. Undrawn Loan
b. Accrual Loan
c. Overdraft
d. Held for sale loans
e. Committed loans

65. Which of the following methods of payment is most risky to the buyer?
a. Cash in Advance
b. Counter trade
c. Open account
d. Letter of credit
e. Documentary collection
66. Which of the following is not a example of an option?
a. Oil Futures
b. Swaption
c. Put option
d. LEAPS (Long term options)
e. Call option
67. IF the point of purchase is $52 and the amount given to the issuer is
$50. What is the underwriter spread?
a. 50
b.
None of the listed options
c. 102
d. 52
e. 2
68. A card holder swipes his card for USD 100. How much the merchant
I.
Deduct form the card holder
II.
Receive from the acquirer
Assume merchant discount at 2%
a. I. USD 98
II. USD 98
b. I. USD 100
II. USD 98
c. I. USD 100
II. USD 2
d. I. USD 100
II. USD 100
69. The counterparty in a futures contract trade is
a. Banks
b. The buyer and Seller
c. Government
d. The exchange
e. The brokers who struck the deal
70. Identify the odd one out
a. Treasury Bills
b. Commercial papers
c. Bill of exchange
d. Stocks
e. Treasury Notes
71. GE shares are currently selling for $15.00 each. You bought 200 shares
one year ago @ $12 and received dividend payments of $2 per share.
What was your total dollar capital gain this year?
a. 1000
b. 500
c. None of the listed options

d. 400
e. 200
72. Find out the one which does not come under the retail bank service?
a. Trade finance
b. Credit card services
c. Electronic banking
d. Personal loans
73. What does the call option gives buyer?
a. The right but not call option to buy
b. The right but not the obligation to sell
c. The obligation to sell
d. The right and obligation to buy
e. _______________
74. The money the bank receives ad deposits becomes a banks
a. Liability
b. Losses
c. All of the options
d. Assets
e. Profit
75. Trade finance primarily helps in
a. Facilitating intra-company transactions
b. Facilitating setting up of new factories
c. Facilitating inter company transactions
d. Facilitating corporate lending
e. Facilitating international transactions
76. Which of the following is a valid repayment type?
a. Bullet payment
b. All of the listed options
c. Step down
d. Step up
e. Balloon
77. Most common reason for a corporate seeking a loan from a bank
includes all of the following EXCEPT
a. Paying bonuses to the top executives
b. Daily cash flow requirements
c. Capacity expansions
d. Plain Modernization
e. New Projects
78. _________ are profit of the business that have not been distributed to
the owner as of the balance sheet date
a. Share capital
b. Gross profit
c. Revenue
d. Retained earnings

79. Treasury bills can be transacted and settled on the same date.
State true or false.
80. If you invest $200 for 3 year @ 8% compound interest. How much will
you have at the end of the 3 years?
a.
b.
c.
d.
e.

None of the listed options


248
252
272
310

81. In trade finance which of the following factors are considered while
choosing mode of financing?
a. Government guarantee program, Seller preference
b. Exporters fund, Risk factors, Cost of financing, time frame
c. None of the listed options
d. Time frame, Cost of financing, Buyers trade associates
82. What is line of credit?
a. Revolving credit agreement
b. A formal legal commitment to extend credit up to maximum
amount over a stated period of time
c. Similar to credit card
d. None of the listed options
e. Irrevocable credit provided by financial institution
83. TARP stands for which of the following options?
a. Troubled assets reform program
b. None of the listed options
c. Troubled asset relief program
d. Term asset Relief program
e. Term asset reform program
84. The type of loan in which spread varies over the life of the loan is called
________
a. Positive spread loan
b. Floating rate loan
c. Fixed rate loan
d. Semi- fixed rate loan
e. Negative spread loan
85. _________ of a securities trade involves the transfer of the securities
from the seller to the buyer
a. Trading
b. Settlement
c. Netting
d. Clearing
86. Banks are financial inter-mediatory that
a. should not be allowed to open saving accounts
b. link depositors to the borrowers
c. Do not operate efficiently in the financial system

d. Help connect public to the central banks


e. Are not required
87. Expand CNS
a. Continuous netting of securities
b. Companys net securities
c. Clearing Net settlement
d. Continuous Net settlement
88. If the limit= $2000, margin =20%, and asset value =$2000, then
drawing power for an open ended loans is equal to?
a. 2000
b. 1600
c. 2400
d. 2200
e. None of the listed options
89. In normal distribution 99% confidence interval corresponds to
_________
a. 1.96 Sd
b. 2.33 Sd
c. 1 Sd
d. 1.65 Sd
e. 3 Sd
90. An investor indulging in short selling on share expects the share
price to decrease. Sate true or false
91. Inflation represents which of the following option
a.
b.
c.
d.
e.

Increase in price
Decrease in price
Very high change in price
Economy crises
Currency Crises

92. Participation of more number of banks reduces the risk of lead


bank. State true or false
93. Money laundering refers to which of the following option
a.
b.
c.
d.

All of the listed options


Extending loans to corporate
Converting the profits from common activities into legitimate funds
Short term borrowing and placements

94. VISA is involved in which of the following?


I.
Providing the interchange the systems to transfer data and funds
between the members
II.
Set credit limits
III.
Issue Credit cards
a. both I and II
b. III only

c. I only
d. --------95. Which of the following combinations hold true?
a. Wire Transfer, more costly than other payment alternatives
b. Commercial letter of credit, improves applicants credit facilities
c. Foreign checks, not useful for cross border trade
d. Documentary collection, strict compliance rule apply
e. Standby letter of credit, less costly than documentary collection
96. There are 5 participants A, B, C, D, E in a 25 million USD syndicated
loan and A is the lead manager. The borrower has agreed to pay 0.4%
($1, 00,000) participant with share in participants will share in
participant fee?
a. $1,00,000 will be received every month
b. $1,00,000 will be received affront
c. $1,00, 000 will be changed towards undrawn portion
d. None of the listed options
e. $1,00, 000 will be received every time money is withdrawn
97. The price paid for use of a financial liability and financial asset is called
___________
a. Financial Asset
b. Principal Interest
c. Interest
d. Financial liability
98. If an invest pays an interest at an annual rate of r % per year,
compounded twice a year, then what is the effective yield?
a. All of the listed options
b. Greater than r %
c. Equal to r %
d. Less than r %
99. VaR is measure of _______
a. Market Risk
b. Liquidity Risk
c. Credit Risk
d. Legal Risk
e. Operation Risk
100. Open ended loan allows the borrower additional amount
subject to the maximum amount less than a set value. State true
or false
101. In private banking PTA stands for _______
a.
b.
c.
d.
e.

payment to automate
Payable through account
Payable to automated means
Pay through action
Permission to act

102. Which of the following is not a derivatives instrument?


a. Equity
b. Swaps
c. Overdraft
d. Put option
e. Call option
103. Bank ABC interest rate on deposits is 7.30% and the interest rate on
loans is 9.25% during 2009. What is the spread for the bank?
a. 0.1655
b. 0.0225
c. None of the listed options
d. 0.0195
104. If a bank gets a deposit of $5000. Assuming a reserve requirement of
10% and that it circulates through 2 more banks, leading to which of
the following money multiplier effect?
a. It create a loan of $8550
b. None of the listed options
c.
It creates a loan of $12195
d. It creates a reserve of $500
e.
It create a reserve of $1000
105. In a syndicated loan of 100M, each participant commit for 25% of
loan. But due to exigencies if one participant reduces his shares to 22%
and offers to share equality, what will be reserved share of other
participants?
a. 0.3
b. 0.26
c. 0.29
d. 0.31
e. 0.24
106. You purchased stock for $40. One year later you received $2 as
dividend and sold the share for $48, How much is the return of the
holding period?
a. 45 %
b. 10 %
c. 25 %
d. 50 %
e. None of the listed options
107. The share price of a company may drop considerably from its current
level, in this scenario, what type of risk are the investors facing?
a. Company Risk
b. Liquidity Risk
c. Business Risk
d. Market Risk
e. Credit Risk

108. If R is the real rate of interest, N is the nominal rate of interest and I is
the rate of inflation, then
a. R= N - I
b. R= N * I
c. R= N / I
d. R= N + I
109. A clearing system in which a payment instructions between banks are
processed and settled individually and continuously through out the day
is called
a. RTGS
b. Clearing Services
c. Continuous linked settlement
d. Automated clearing house
e. Collection Services
110. If a bank erroneously posts the interest proceeds from a security held
by a investor A, into the account of investor B, this can be attributed to
a. Interest rate risk
b. Market Risk
c. Security Risk
d. Operational Risk
e. Liquidity Risk
111. Which of the following represents the correct hierarchy of corporate
rating (highest to lowest)?
a. D, AA, B, A
b. AAA, AA+, B, D
c. AAA, AA+, D, B,
d. AAA, AA, D, BB
112. The initial sale of security is in the _____ market, while subsequent
trading in the security is in the market ______
a. Money, Capital
b. Debt, Equity
c. Spot, Futures
d. Primary, Secondary
e. Secondary, primary
113. Purchase of account receivables at a discount is called ________
a. Bill of La___
b. Bills purchase
c. Discount
d. Forfeiting
e. Factoring
114. If total spread on underwriting $500000 and managers fee is $100000,
What is the amount which will be distributed in the syndicate
a. 500000
b. 400000

c. 100000
d. 600000
115. Dividend declaration is an example of
a. initial public offering
b. Investment banking
c. Merger and acquisition
d. Corporate action
e. Private banking
116. I deposit $100 in a bank. Banks loans out $90 out of it to someone
else who then invest the money in setting up new factory, what is this
process called?
a. Profit making tendencies of the investors
b. Sub-Prime effect
c. Economic boom effect
d. Money multiplier effect
e. None of the listed options
117. The term settlement cycle refers to which of the following option?
a. Time period between the date on which the investor first makes the
decision to enter a trade and the date when the trade is settled
b. Time period between the date on which the trade is executed
and the date on which the trade is settled
c. None of the listed options are correct
d. Time period between the date on which the trade is cleared and the
date on which the trade is settled
118. If a finance instrument has 50% chance of paying 20% and 50%
chance of paying 60%. What would be the expected return?
a. 0.8
b. 0.5
c. 0.4
d. 0.2
119. which of the following is not correct for a personal loan
a. They are short term loans
b. The finance is not interested in the intention of the loan
c. No security required
d. Loan amount is not linked to borrowers repayment capacity
e. None of the listed options
120. Which of the following is not a measurement technique for Credit risk?
a. EAD
b. FIRB
c. Basic indicator approach
d. LGD
e. Probability of default
121. Which of the following is a treasury management system?
a. Front Arena
b. Pinnacle
c. Finnacle

d. TS2
e. Flex Cube
122. Which of the following is not a settlement method for a bank loans?
a. Participation
b. Securities Repository
c. Pre-closure
d. Sub-participation
e. Assignment
123. Company A has higher credit rating than company B, What does this
mean?
a. All of the listed options
b. Both are equally risky
c. Company B is more risky
d. Company A is more risky
e. There is no relation between credit rating and risk
124. Customer usually interact extensively with the banks mid and
back office. State true or false.
125. Secured bonds _______
a. are secured by assets of the issuing company and also have a
higher priority for repayment than unsecured debt
b. are only issued by large and financially sound companies
c. are secured by assets of the issuing company
d. have higher priority for repayment than unsecured debt
126. After a buyer and seller enter into a trade agreement, who indicates
the issue of LC?
a. None of the listed options Issuing bank
b. Buyers bank
c. Advising Bank
d. Sellers bank
e. Seller
127. Which of the following is true for stock market?
a. individual small investors can never make money in stock market
b. stock markets are always self regulated
c. stock markets are never fair
d. stock market facilitate secondary buying and selling of the
shares
e. There can only be one stock market in the country
128. Securities with an original maturity of lesser than one year are traded
on money market. State true or false

129. From the given options identify the service(s) that can be categorized
under asset servicing line of the business
I. Corporate Action processing
II. Incoming Processing
III. Transfer agency services
IV. All of the listed options
a. I only
b. both I and II
c. III only
d. II only
e. IV
130. Identify the services offered by retail banks
a.
b.
c.
d.

All of the listed options


Saving and checking accounts
Personal Loans
Debit Cards

136.
If an investment pays interest at an annual rate of 5% per year, compounded twice a year
than the effective yield larger than 5.5%
a. True
b. False
137.

In a 2 way quote for a share the bid is


a. 2% less than offer
b. Less than offer
c. More than offer
d. Dependent on dealers skill
e. Equal to offer

138.

Which of the following is usually not participant in stock market


a. Small individuals investors
b. Central banks
c. Companies
d. Financial institutions

139.
In an account saving simple interest from the first year is reinvented at the beginning of
the second year?
a. True
b. False
140.

Which of the following is a not current asset?


a. Goods for sale inventory
b. Terms loans
c. Cash
d. Raw material inventory
e. Receivables

141.

Which of the following in not a feature of private banking?


a. Specialist advice
b. Lot of research
c. Commercial lending
d. High investment in technology
e. Understanding the capital and investment needs.

142.

Retail loans are asset product offered by the bank


a. True
b. False

143.

If the price of share pf cognizant changes from 65 to 60 this can be attributed to:
a. Market risk
b. Interest rate risk
c. Credit risk
d. Operational risk
e. Liquidity risk

144.
Account maintained in the home currency by one bank is the name of another bank
based abroad is called as:
a. Current account
b. Nostro account
c. Vostro account
d. Forex account
e. Overseas account
145.

Which of the following is not the settlement method for bank loans?
a. Pre-closure
b. Assignment

c. Participation
d. Sub participation
e. Securities repository
146.

The process of transferring obligation from one party to another is called Novation

147.

The purchase of any stock for immediate delivery is a __ market transaction.


a. Futures
b. Spot
c. Forward
d. Stock
e. Option

148.

In the historical simulation method of VaR calculation:


a. Return are assumed to be not normally distributed
b. No assumption is made about the distribution
c. Random returns are generated to calculate VaR
d. Return are assumed to be normally distributed
e. Returns are not required at all.

149.

What happens when interest rate fall:


f. Bond prices increase
g. Bond prices decrease
h. Bond prices do not change
i. Economy goes into deflation
j. Interest rate never fall, they always go up.

150.

If the price of a security on day 1&2 is $102 and $100 respectively. The return is
f. -2%
g. 2%
h. -1.96%
i. Very high
j. 1-2%

151.
If you invest $1000 for 3 years at 7% compound interest, how much will you have at the
end of the 3 years?
f. $1225
g. None of listed option
h. $1000
i. $1070
j. $1270
152.
f.
g.
h.
i.
j.

The trade finance the term LC stands for;


Letter of commercials
Letter of credit worthiness
Letter of credit
Letter of commerce
Letter of complaints

153.
e.
f.
g.
h.

What is need for banks in the society?


Small investor are protected, hence it is a low risk investment avenue.
Banks are in the best position to lend out money at competitive
Depositors are participant in primary and secondary markets.
All of listed options.

154.

A is more risk averse investor than B .therefore.

e.
f.
g.
h.

For the same return, B tolerates lesser risk than B.


For the same return, A tolerates higher rate of return.
For the same return, A tolerates lower rate of return.
For the same return, A takes higher risk.

155.

Liquidity issues of credit can be addressed by:f. Sweep facility


g. Structured lending to client
h. All
i. Short term credit facilities
j. Overdraft

156.

Which is associated with purpose of regulating financial institution?


f. None
g. To provide stability of money supply.
h. To serve certain social objectives.
i. To prevent failure of any financial institution.
j. To offset moral hazard incentive provided by deposit insurance and other
guarantees.

157.
e.
f.
g.
h.

Fastest method for calculating VaR.


Monte- Carlo simulation.
All equal time with software.
Variance-Covariance matrix.
Combination of Monte- Carlo and Historical Simulation.

158.

Which is not banks primary use for deposits?


k. Payment to employers
l. None
m. Investment
n. Loan
o. Withdrawal

159.

If the 5 bids available for stock are 64, 65, 63, 62.5 and 66 which one u will sell?

160.

When a bank issue a loan its liabilities & reserves increases by the amount of the loan.
b. True
b. False

-> 66

161.
If the corporate isnt able to raise money from the market to pay off some loans the risk
can be refer.
f. Market risk
g. Interest rate risk
h. Commodity risk
i. Operational risk
j. Liquidity risk
162.
On the trading day at the NYSE a broker undertakes the following trades
Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MFST share for $20.00 each
Sell 20 IBM shares $11 each
Sell 10 MFST share at 20.50 each
Sell 30 IBM shares for 9.00 each

How much did the broker pay out to the exchange in total in case of (i) Gross settlement
system (ii) Net Settlement System?
a. (i) $1780 (ii) $3000
b. (i) 0 for IBM, $1795 for MSFT (ii) $1780.
c. (i) $3000 (ii) $1780
d. None
e. (i) $1780 (ii) 0 for IBM, $1795 for MSFT

163.
US export and Europe import agree to carry out the transaction of goods word $100000
under a confirmed term LC with a maturity date of 60 days from the time of shipment. The
acceptance commission @ 1.5 % PA equals
F) $2500
G) $3000
H) $300
I) none
J) $250
164.
165.

Operational risk is defined as?


The basic four parties involved in any transaction using LC are the following EXCEPT
A) Issuing Bank
B) Reimbursement Bank
C) Beneficiary Bank
D) Seller
E) Buyer

166.
While providing security lending services to its clients, which risk will a custodian have to
manage for its clients?
A) Liquidity risk
B) Both Credit risk and interest rate risk
C) Interest rate risk
D) Credit risk
E) Both credit risk and liquidity risk.
167.
If the price of securities on day 1 and 2 are $100 and $102 respectively .Returns is
A) A very high
B) 2
C) -1
D) -2
E) 1
168.
Following are the list of risk that Cognizant faces at organizational level
A) Currency risk
B) Attrition
C) Credit risk
D) All of the above
E) Protective legislation by US/UK
169.
Which of the following is not a core private banking function?
A) Client management
B) Deposit Mobilization
C) Investment analysis and advice
D) Research

E) Sales and Marketing


170.
A mutual fund with investment objective of achieving high capital growth approaches
investor services firm for advice. The firm advices the mutual fund to invest 80% of the fund in
govt debt and 20% in equity. The allocation towards debt advised by the firm
A) Cannot be determined
B) is too high
C) Is about right
D) is too low

171.

Which of the following operations can be done on a LC?

A) All the listed option


B) Acceptance
C) Negotiate
D) Purchase
E) Discount
172.

Who among the following is most likely to be a private banking client of a bank?
A) A fresh engineer in his first job at cognizant
B) Tiger Woods
C) Any of the above
D) A cricket player who has never played national / international cricket
E) A manager at a manufacturing plant.

173.
Which of the following method eliminate country risk and commercial risk upon
confirmation?
A) Documentary collection
B) Back to back LC
C) LC
D) Standby LC
E) Both standby LC and LC
174.
The act of the loan amount being handed over to the borrower by the bank is known as
disbursement. State TRUE or FALSE
a. True
b. False
175.
On the trading day at the NYSE a broker undertakes the following trades
Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MFST share for $20.00 each
Sell 20 IBM shares $11 each
Sell 10 MFST share at 20.50 each
Sell 30 IBM shares for 9.00 each
Given that a net settlement system is being used, find out the net position of the broker at the
end of the day
F) IBM no exchange of shares ; MFST 90 shares to receive ; $1780 to pay out to the
exchange
G) None of these
H) IBM no exchange of shares ; MFST 90 share to receive ; $3000 to pay out to exchange
I) IBM 70 shares to given out ; MFST 90 shares to receive ; $3000 to pat out to exchange
J) IBM no exchange of shares ; MFST 90 share to receive ; $1780 receive from the
exchange

176.
F)
G)
H)
I)
J)

ACH transaction involves the transmission of _________


All of the listed option
Documents
Physical instrument like check and draft
Electronic data files
Cash

177.
F)
G)
H)
I)
J)

What should one use while using comparing mortgages?


APR
None
IRR
NPV
Rate of interest applicable for the loan

178.
F)
G)
H)
I)
J)

Which one of the following is not offered by investment banking division of a bank?
learning services
None
Merger and Acquisition
Valuation of firm
Underwriting and distribution of equity issues.

179.
If total spread on underwriting is $500000 and manager fee is $100000. What is the
amount which will be distributed in the syndicate?
F)
G)
H)
I)
J)

500000
100000
400000
600000
Can not be determined

180.
HPPL shares are currently selling for $25 each. You bought 200 shares one year ago at
$24 each and received dividend payment as $1.50 per share what was total dollar capital
gain this year
F)
G)
H)
I)
J)

200
500
None
300
400

181.
E)
F)
G)
H)

The brokerage firm is regulated by


State regularity agency
SEC
Industry wide SRO
All of the listed option

182.

Pick odd one out


a. Demat
b. Personal loan
c. None
d. Hire Purchase
e. Auto loans

183.
I deposited 100 in a bank .Bank loan out 90 out of it to someone else, who then invest the
money in setting u a new factory. This process is called
F) Monetary policy
G) None
H) Money multiplier effect
I) Profit making tendency of a bank
J) Fiscal policy
184.
Capital adequacy ratio refers to
F) Amount of bank capital expressed as % of the risk weighted credit exposure & market
risk.
G) Amount of bank capital expressed as % of the risk weighted credit exposure
H) Amount of bank capital expressed as % of the risk weighted credit exposure & operational
risk.
I) Amount of bank capital expressed as % of the risk weighted credit exposure
operational risk & market risk.
J) None
185.
K)
L)
M)
N)
O)

Which of the following is not a treasury management system?


Calypso
Summit
Wall street system
Front arena
Flex cube

186.
J)
K)
L)
M)
N)

Syndicate helps in all of the following activity but


Managing large bond issues
Raising huge money from the bank
Managing large capital raising act
Managing conflict between investment banks.
IPO distribution.

187.

All of the following statements concerning US govt securities are correct EXCEPT
F) Treasury bills have their interest paid in a lump sum at maturity
G) None
H) Treasury bills have greater interest risk than either treasury bond or treasury note
I) Treasury note has maturity dates up to 10 yrs
J) Treasury bonds have maturity dates up to 30 yrs

188.
In defined benefit plan the benefit is expressed as ________ and in defined contribution
plan the benefit is expressed as an ________
F)
G)
H)
I)
J)

Account balance , Annuity


Annuity , Annuity
Account balance , Account balance
None
Annuity , Account balance

189.
What is the term used to indicate the arrangement of LARGE borrowing for a corporate
by a group as lenders
G) none
H) Syndicate
I) Allocation

J) Assignment
K) Secondary
190.
F)
G)
H)
I)
J)

Card associate provide which of the following service


issue card
Set credit limits
Set interest rates
Set card fees
Security/ Risk management

191.
In an international securities transaction, which of the following participant will not be
involved?
K) Global custodian , domestic sub custodian , depository in foreign country and sometime
stock exchange in foreign country
L) Depository in foreign country
M) Global Custodian
N) stock exchange in foreign country
O) domestic sub custodian

192.
An insurer undertakes an analysis of a portfolio of insurance policy by exploring
scenarios for the path followed by swap rates, policy surrender rates, mortgage prepayment
rates for the mortgage backed security in the portfolio, what is this process called?
F) Cash projection
G) Investment manages universe
H) Asset allocation
I) Fund administration
J) Asset / liabilities analysis
193.
F)
G)
H)
I)
J)
194.
E)
F)
G)
H)
195.
F)
G)
H)
I)
J)

Trade finance helps in


Facilitating international transaction
Facilitating intra company transaction
Facilitating international transaction , corporate lending and settling up of new factories
Facilitating corporate lending
Facilitating setting up of new factories
A choice quote is
a price at which a firm is ready to buy or sell
When bid is equal to offer
When the firm has a choice of deciding the securities to take
a price at which a firm is ready to buy or sell it also means when bid is equal to
offer
Which of the following is likely to have the highest interest rate?
6 month deposit of min balance of $1000
3 month deposit of min balance of $4000
12 month deposit of min balance of $1000
None
6 month deposit of min balance of $2000

61. If 1 day VaR is $1 million, 9 day VaR is


F) $3mn
G) $4.5mn
H) $9mn
I) $4.4mn

J) $1mn
196.
If a bank gets a deposit of $1000 assuming a CRR of 10% and that it circulates through 2
more banks, leading to the following money multiplier effect
F) Loan of $2439
G) Loan of $1710
H) None
I) Create a reserve of $100
J) Create a reserve of $190
197.
Which among the following is an investment company that pools money from unit holders
and invest in a variety of security?
E) Mutual Fund
F) Mortgage Company
G) None
H) Stock Exchange
198.
You purchased a stock for $40. 1 year later you received $2 as Dividend. You sold it at
$48. What is your return?
f. 45%
g. 10%
h. 25%
i. 50%
j. None
199.
A formal Legal commitment to extend credit to some max amount over a stated period of
time is description of
k. Trade Credit
l. Revolving Credit
m. Agreement Irrevocable Credit
n. Line of Credit
o. Letter of Credit
200.

Odd 1 out
f. Warren Buffet
g. George Soros
h. Bill Gates
i. Ben Graham
j. Peter Lynch

201.
f.
g.
h.
i.
j.

Development of Investment Objective and Investment policy falls under the Purview of
Investment manager Universe
Asset Allocation
Asset Liability Analysis
Fund Admin
Compliance Reporting

202.
e.
f.
g.
h.

Interest Rate Spread is equal to


Current rate Base Rate
Cap Current Rate
Current Rate Floor
Base Rate Floor

203.

Which of the following factors affect the choice of Payment Method?


k. Exporters Fund
l. All

m. Government Guarantee Program


n. Time Frame
o. Cost of Financing
204.
The NYSE is a large financial market in which the initial issue receives the proceeds for
the Sale of securities.
b. True
b. False
205.
f.
g.
h.
i.
j.

Which of the following trading services reduces the trading cost for institutional investors?
Stock Repurchase Program
Transition Management
Transition Management & Commission Recapture
Commission Recapture
None

206.
f.
g.
h.
i.
j.

A CALL option on futures gives the buyer


the obligation to buy a futures contract
the obligation to sell a futures contract
the right & obligation to buy a futures contract
the right but not the obligation to buy a futures contract
the right but not the obligation to sell a futures contract

207.
f.
g.
h.
i.
j.

Which is not an example of Option?


Call Option
Swaption
Leaps
Oil Futures
Put Options

208.
Some banks pay interest on Checking A/c while many do not.
c. True
d. False
209.
The advising bank is called as trusted bridge between the ___________ & __________
when they do not have active relationship. Options wrong
e. Beneficiary Bank & Reimbursing Bank
f. Importer Exporter
g. Reimbursing Bank & Beneficiary Bank
h. Applicants bank & Beneficiarys bank
210.
Which of the following according to you has resulted in defining contribution plans gaining
popularity over defined benefit plans
i. DC plans fix the monthly contribution from the employee making his financial planning
easier.
j. DC plans are seen by employees as investment which to accumulate retirement income.
k. All
l. Employer increasing wants employees to share responsibility for retirement
211.
________is typically largest part of spread and is paid to broker\dealer or that actually
took clients order
k. Salary
l. Manager fee

m. Wage
n. Concession
o. Underwriter
212.
i.
j.
k.
l.

NASD is not an SRO for


Listed market
Over the counter market
Third market
Fourth market

213.
i.
j.
k.
l.

High net worth individuals generally have ____________.


Market capitalization more than $200000
All
Net worth greater than $500000
Household income of max $50000 year.

214.
i.
j.
k.
l.

Which is true about retail banking?


The business focuses on small no. of high net worth individuals.
The business focuses on small and medium enterprises.
The business focuses on large no. of individuals.
The business focuses on large no. of corporation bodies.

215.
k.
l.
m.
n.
o.
216.
c.

Offer is price at which a firm


Trades in securities
Quotes to its bets customer
Intends to buy
Intends to sell
Quotes when it does not want to trade.
Securities with original maturity greater than 1 year are traded on money market.
True
b. False

217.
i.
j.
k.
l.

Which is not a banking service?


Stock market
Retail banking
Corporate banking
Customer lending

218.
i.
j.
k.
l.

Which is true?
Financer owns the asset both in case of Lease and hire Purchase.
Tax deduction cab be claimed from the full value of the rental paid in case of lease
All
Depreciation is claimed by the financer in lease and not in case of hire purchase.

219.
Bank a based in US provides safe keeping services for securities to its US clients. It also
has clients in France and Belgium and provides securities safe keeping services to these
clients through banks C & D respectively. Which best describes bank A?
k. Global custodian,
l. None
m. Main custodian
n. Sub custodian
o. Secondary custodian
220.
G)
H)
I)

All following statements relating to Bonds are correct except.


Bonds sell at a discount when Coupon Rate is less than Market Interest rate.
None
Bond is debt instrument giving issues.

221.
Which of the following type of loan requires the amount of interest that would be earned
on the loan to be paid upfront by the borrower?
K) Capitalized loan
L) True Discounted loan
M) Amortized loan
N) Demand loan
O) Discounted loan
222.
K)
L)
M)
N)
O)

Who are involved in the preparation of prospectus of IPO?


Commercial bankers
Investment Bankers
None
Company Management
Company Management and Investment Bankers

223.
K)
L)
M)
N)
O)

Bankers Acceptance differs from Sight Draft in that


Bankers Acceptance reduces lending capacity
Sight Drafts are negotiable instruments
Bankers Acceptance demands immediate payment.
None
Banks can raise funds by selling acceptance.

224.
Clients of a private banker are generally not segregated on the basis of
K) Investible assets
L) Location
M) Age
N) Net worth
O) Name
225.
The initial sale of the security is in the market, while subsequent trading in the
security is in the .. market
K) Spot, futures
L) Debt , Equity
M) Primary , Secondary
N) Money, Capital
O) Secondary, Primary
226.
Under what category can services like asset/liability analysis, asset allocation, cash
projection, compliance reporting, fund administration, investment Management universe etc.
provided by an institution can be classified?
K) Investment Management
L) Asset Servicing
M) None
N) Trading
O) Investor Services.
227.
I)
J)
K)
L)

CIP in the context of anti-money laundering is


All
Stands for Suspicious Activity Reports
Customer Identification Program
Requiring Businesses, which were only to report cash transactions involving more than
1.00,000?

228.
On a trading day at a stock exchange a broker undertakes the foll trades:
Buy 100 IBM shares for 10$ each
Sell 50 IBM shares for 10.5 $each

Buy 100 MSFT shares for 20$ each


Sell 20 IBM shares for 11$ each
Sell 10 MSFT shares for 20.5 each
Sell 30 1bm shares for 9$ each
At the end of the day, the broker owes 1780 to the exchange while exchange owes him 90
shares of MSFT. Is it possible?
G) Yes under RTGS
H) No
I) Yes under net-settlement system
229.
K)
L)
M)
N)
O)

Dow Jones industrial average is made of


30 stocks
20 stocks
40 stocks
10 stocks
50 stocks

230.
Which is the key feature of Letter of Credit?
A) basis for devising proper currency hedging strategy
B) Distributes risk between buyer n sellers.
C) basis for devising proper currency hedging strategy and opportunity for receiving payment
in advance of the due date.
D) All
E) Opportunity for receiving payment in advance of the due date.
231.
K)
L)
M)
N)
O)

Which risks bring gain and losses?


Interest rate and foreign exchange
Liquidity and credit
Credit and Interest rate
Credit and Foreign exchange
All

232.
Find the future value of $1200 invested at 5.25 % per annum payable annually after 6
months? Marks: 2
1. 1345.1
2. 1243.1
3. 1231.1
4. None
5. 1235
233.
Investor services like brokerage, cash management and short term investments,
commission re-capture, foreign exchange transactions, transaction management etc. can be
classified under ____ group of services. Marks: 1.
1. Trading
2. Investment Management
3. Investor service
4. None
5. Asset Servicing
234.

The term CP is used in corporate lending for ____. Marks: 1


1. Collateral provision
2. Client Partner
3. Commercial Paper
4. Commodity Put options
5. Credit Provision

235. What are the risks associated with the Hedge funds? Marks: 3
1. All of the above
2. High exposures in derivatives
3. High Leveraging
4. High Speculation
236. The trade terms 15/2 net 30indicates that _____. Marks: 3
k.2% discount is offered if payment is made within 15 days.
l. 15% discount is offered if payment is made within 2 days; the payment should
however be made in 30 days.
m. 30% discount is offered if payment is made before 15 of the month.
n.15% discount is offered if payment is made between 2 & 30 days;
o.15% discount is offered if payment is made within 30 days.

237. A bank is required to hold reverses at least equal to a pre-scribed fraction of its total deposit
liabilities.
c. True
b. False
238. What term is used to describe an LC that remains valid for years thereby eliminating the
cost of separate LCs for each transaction with a regular client?
k. Irrevocable LC
l. None
m.
Red clause
n.Revolving LC
o.Evergreen clause
239. Who appoints investment manager to manage a benefit plan?
k. Plan sponsor
l. Plan administrator
m. Fund trustee
n.None
o.Government
240. A company would pay the interest on what portion of loan?
k. Committed amount
l. Either disbursed or committed loan
m. Unused amount of loan
n.Disbursed amount
o.None
241. In the exchange on a particular trading there is a buy market order for 100 CTSH shares
and two sell market orders for 50 and 40 CTSH shares each, can the buy order be matched
against the two sell orders.
g.Yes
h.No
i. Yes, but if prices on the buy & sell side match.
242. If the limit = $2000, margin = 20% and asset value = $2000 then drawing power for an open
ended loan is equal to?
k. None
l. Drawing power = $1600
m. $2200
n.$2400

o.$2000
243. Risk cannot be mitigated by
k. Setting risk limits
l. Hedging
m. Diversification
n.Arbitrage
o.Insurance
244. A fixed income analyst will analyze all but
k. Municipal bonds
l. Bonds of govt. sponsed enterprise
m. Corporate bonds
n.US treasuries
o.Shares
245. In benefit administration what are the relationships that exits between the plan
administrator and the investment manager, and between Trustee and the investment
manager.
k. None
l. Plan administrator & trustee both have outsourced plan administration as well as fund
management to investment manager
m. Any
n.Plan administrator gives investment instruction to investment manager while
trustee appoints the investment manager.
o.Trustee gives investment instruction to investment manager, while plan administrator
appoints the investment manager.
246. Which entity provides credit scores that are used by issuers to process card application?
k. Issuer processor
l. Collection agency
m. Issuing bank
n.Authorization engine
o.Credit bureau.
247. CPI stands for which of the following?
k. Consolidated Price index
l. Consumer popularity index
m. Consumer product index
n.Consumer price index
o.None
248. A bank decides to sanction only 10% of the loan sought by a company. The company goes
and pledges extra assets with the bank and the bank then agree to sanction 50% of the
loan sought. The company has indulged in the process of
k. Credit scoring
l. Credit increase
m. Credit incrementation
n.Credit revision
o.Credit enhancement.
249. FX spot deal assumes maturity of how many business days ahead?
k)4
l) 5
m) 3
n)1

o) 2
250. Which of the following is best VaR estimation Model?
i) Monte- Carlo
j) Historical
k)Variance-Covariance
l) Variance-Covariance and Monte- Carlo
251. Which of them represent company is incorporated in USA?
i) Plc
j) Pte
k)Ltd
l) Inc
252. Which of the factors affect the choice of payment methods?
k)Govt. guarantee Program
l) Time frame
m) All
n)Cost of financing
o)Exporter fund.
253. Organization level risk appetite is determined by:
k)Risk management
l) Front office
m) Back office
n)Trade
o) Board of director
254. Risk management is function of:
k)Traders
l) Back office
m) Specialist
n)Front office
o) Mid office
255. Purely competitive financial markets are not characterized by
i) Govt. regulation
j) Many traders
k)Full info
l) Cost effective trading
256. NOT player in typical trade cycle;
k)Custodian bank
l) Clearing bank
m) Clearing member
n)Trading member
o) Regulator
257. Once syndicate has sold all other trades participant, sub participant and assignment are
considered trade in what market?
k)Primary
l) Secondary
m) Participant
n)OTC

o)Index
258. Question related to price weighted index?
11. DJIA
12. Hangseng
13. EAFE index
14. NASDAQ composite index
15. S&P 500
259. In defined contribution retirement plan .Tax sheltered annuities fall under section of
_________ERISA
403b
401k
401b
403k
None
260. In benefits administration, trustee and plan administrator submit compliance report
to______ which in turn qualifies the plan.
Participant
None (answer is TRUST)
Government
Investment manager
Sponsor
261. Full form of ADR
Answer: American Depository Receipts
262. Question related to BASEL II
Answer: Capital adequacy
263. What is interest rate charged on asset based loan?
Answer: The interest rate charged is lower than personal loans
264. Question related to credit derivatives as which of the following function is not done by credit
derivatives
Answer: Answer was something as Transfer to over the counter
265. Question related to credit derivatives it was fill up the blanks? Exactly dont remember the
question/
Answer: option having TRANSFER
266. Question related to non-discretionary Investment Management
Answer: the bank offers investment recommendations based on the Clients approval.
267. Question having few options like Income Processing, Tax Information Services, Cash
Sweep
Answer: ASSET SERVICING
268. Question related to Underwriting?
Options:
9.Underwriting Spread
10.
Public Offering Price (POP),
11.
Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it)
12.
All

Question Bank for


CCP in Fundamentals of Banking
1. Which of the following types does SWIFT belong?
a. Proprietary Network
b. Private Network
c. Proprietary and Messaging Service
2. A Share Holder has
a. Got ownership
b. Voting Rights
c. All the above
3. If Reliance Industries Limited wants to sell shares in USA, what should they do?
a. Use American Depository Receipt
4. Current account maintained by one bank with another bank abroad in the latters
home currency
a. VOSTRO
b. NOSTRO
5. Which of the following is not a Banking Activity?
a. Private Banking
b. Public Banking
c. Investment Banking
d. Retail Banking
6. What is LC in Banking Terms?
a. Line of Control
b. Legislative Council
c. Letter of Control
d. Letter of Credit
7. What is EMI?
a. Equated Monthly Installment
b. Equi Monthly Installment

c. Equal Monthly Installment


d. End Month Installment
8. What is CP?
a. Commercial Paper
b. Commercial Profit
9. Expand EFT.
a. Electronics Fund Transfer
10. Expand CLS.
a. Continuous Linked Settlements
11. Which of the following risks are avoided by Continuous Linked Settlements?
a. Temporal Risk
b. Spatial Risk
c. Market Risk
12. Which of the following locations is not specialized for Private Banking?
a. Switzerland
b. Mauritius
c. India
d. Cayman Islands
13. Dont put all your eggs in the same basket. This is a famous saying insisting
what?
a. Hedging
b. Active aapproach
c. Diversification
14. Calulate the amount you will receive by the end of two years if you have invested
Rs.5000 at 10% rate of interest compounded annually:
a. 6050
b. 6000
c. 7200
d. 5050
15. Simple Interest is calculated based on
a. Principal Only

b. Principal and Accumulated Interest


16. Compound Interest is calculated based on
a. Principal Only
b. Principal and Accumulated Interest
17. What is an Operational Risk?
a. Possibility of loss resulting from errors in instructing payments or
settling transactions.
b. Possibility that a firm will be unable to generate funds to meet contractual
obligations as they fall due.
c. Possibility of loss as a result of default, such as when a customer defaults
on a loan, or more generally, any type of financial contract.
d. Possibility of loss over a given period of time related to uncertain
movements in market factors, such as interest rates, currencies, equities,
and commodities.
18. Which of the following is not a possible risk while doing a project in Cognizant?
No idea of the options and the answer
19. ICICI bank in India comes under the category of
a. Private Bank
b. Public Bank
c. Co operative Bank
d. Corporation Bank
20. What are FreddieMac and GinnieMae?
a. Regulatory bodies of Insurance
b. Institutions in Mortgage Markets
c. Investment Banks
d. Brokerage Firms
21. Which of the following is not a Rating Agency?
a. RBI
22. What are the 3 pillars of Basel 2?
a. Quantitative, Qualitative and Market Forces
23. Losing which of the following cards will have more impact?

a. Credit Card
b. Debit Card
c. Stored Card
d. Gift Voucher
24. If you have 100 units of money and inflation being 5% what is the future value
after 1 year?
a. 105
b. 95
c. 90
d. 110
25. If banks increase their cash reserve ratio what will be the impact?(not the same
one but similar)
a. Money flow will be more
b. Money flow will be less
c. Reserve amount will be less
d. None of the above
26. Which of the following is not a bank account?
a. Money Market Deposit Account
b. Demat Account
c. Checking Account
d. Time Deposits
27. Expand IRR.
a. Internal Rate of Return
28. Which of the following is not a Retail Bank in India?
a. HSBC
b. ICICI
c. JPMC
d. SCB
29. Central Bank of a country is called as
a. Bankers Bank
30. Servicing High Net worth Clients is called

a. Asset Management
b. Private Banking
c. Retail Banking
31. PTA stands for
a. Payable Through Account
32. Which of the following is not a repayment method?
a. Direct Receipt
b. Direct Debit
c. Post Dated Cheques
d. Salary Deductions
e. None of the above
33. Details about 3 tiers of Federal communications privacy law.
34. US Government passed the USA PATRIOT Act in response to
a. November 30, 1982
b. September 11, 2001
c. June 09, 1984
d. August 10, 1984
35. Benefits of Check 21.
36. SuperDot is used in which Stock Exchange?
a. NYSE
b. BSE
c. FSE
d. LSE
37. FTSE index is used in which stock exchange?
a. New York
b. Bombay
c. London
d. Singapore
38. If the current market price of a share is $90 and you have placed a sell stop order
for $85 and Limit order for $87. Which of the following statements is correct?
a. Will be sold immediately but at a price >$87

b. Will be sold immediately but at a price >$85


c. Will be sold but at a price between $85 and $87
39. What are warrants?
40. Pick the odd man out.
a. Stocks
b. Shares
c. Equity
d. Convertible Bonds
e. Common Stocks
41. Define risk in financial terms.
a. Probability of loss

1. A brokerage or analyst report will contain all of the following except?


a. Detailed description of the company, and its industry.
b. Opinion on why the analyst believes the company will succeed or fail.
-c. Recommendations to buy, sell, or hold the company.
d. Target price or performance prediction for the stock in a year.
e. Track record of the analyst writing the report.

2. 2 Marks
One should have the MMDA if one is looking for _______________________.
a. Quick, convenient and, frequent-access to the money
-b. A high rate of interest
c. Guaranteed rate of interest
d. Low fee
e. None of the listed Options

3. 2 Marks
______________ for securities lending, which bring lenders and borrowers together, may
eliminate _______________.
a. Wholesale intermediaries; Niche intermediaries
b. Internet auction systems; custodian and third party intermediaries
c. Custodian and third party intermediaries: Niche intermediaries
d. Niche intermediaries; custodian and third party intermediaries
-e. Internet auction systems; Niche intermediaries

4. 2 Marks
Money laundering can best be described as the process by which
____________________________________________.
-a. money gained from criminal activity is processed so it appears to be gained
from legitimate sources
b. criminals attempt to defraud the government
c. money gained from legitimate sources is hidden to avoid taxes
d. the police attempt to investigate organized crime
e. None of the listed Options
5. 3 MarksA U.S. importer who has agreed to pay 1 million Euros to a French exporter
in 60 days decides to wait the full 60 days before paying. The importer is
______________________.
-a. a foreign exchange speculator
b. expecting the dollar to depreciate against the Euro
c. a hedger in the foreign exchange market
d. planning to pay a set amount of dollars for the items purchase
e. None of the listed Options
6. 1 Marks
The term POP stands for?

a. Private Offer Price


b. Private Option Price
-c. Public Offer Price
d. Public Option Price
e. Potential Offer Price
7. 1 Marks
Continuous Linked Settlement removes which of the following risks primarily
a. Exchange risk
-b. Temporal risk
c. Country risk
d. All of the listed options
e. None of the listed Options
8. 2 Marks
Which of the following is correct with reference to Indian banks?
a. Indian banks are unregulated
b. Saraswat Bank is the largest Indian bank
-c. Reserve Bank of India regulates the Indian banks
d. Indian banks cannot open branches outside of India
e. India's banking system is one of the weakest in the world
9. 1 Marks
EFT stands for _______________.
a. Express Funds Transfer
b. Electrical Funds Transfer
c. Elevated Funds Transfer
d. Emergency Funds Transfer
-e. Electronic Funds Transfer
10. 1 Marks
Banks are financial intermediaries that ____________________.
-a. link lenders (depositors) to borrowers
b. have been in existence now for over 50000 years
c. are not required
d. cause problems as their sales reps keep calling people to buy new products
e. should not be allowed to open Savings Accounts

11Which of the following is not a type of Swap?


Answer:a. Currency Swap'
b. Forward Swap
c. Swaption
-d. Interest Rate
12 Forfeiture regulation under the US patriot act allows _____________________________

Answer: -a. permits confiscation of any property derived from or used to facilitate
domestic or international terrorism
b. Calls for the seizure of correspondent accounts held in foreign financial institutions
for domestic banks who are in turn holding forfeitable assets
c. Permits foreign enforcement of domestic forfeiture orders
d. All of the listed options
e. None of the listed Options
13.Annual Percentage Rate for a loan takes into account the following?
Answer:
a. The interest rate charged
b. When and how often the interest must be paid
c. Other charges such as arrangement fee
d. When and how often these other charges must be paid
-e. All of the listed options
14. A young investor comes to an Investment Consultant and asks him for advice for his
investments. He declares that he doesnt 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 be the consultants choice for his profile?
Answer:
a. Income Fund
b. Liquid Fund
-c. Growth Fund
d. Balanced Fund
e. Bank Deposit
15 ABC corporation is a large client of BankNew and maintains $40 million in cash with
the bank. BankNew however allows authorized representatives off ABC to write checks
up to 10% over the balance maintained. This is an example of
____________________________________.
Answer:
-a. Overdraft
b. Accrual Loan
c. Held for Sale Loans
d. Undrawn Loan
e. Committed Loans
16.Which of the following is associated with the purpose of regulating financial
institutions?
a. To ensure everyone makes money in the market
b. To ensure companies can cheat small investors in buying their securities
-c. To prevent failure of any financial institution
d. To ensure that various government departments can be created for regulation thus
giving employment to many people

e. All of the listed options


17.Which of the following is true about Retail Banking business?
Answer:
a. The business focuses on small number of high net worth individuals
-b. The business focuses on large number of individuals each of whom may have a
small amount of money to deposit with the Bank
c. The business focuses on large corporate bodies
d. The business focuses on small and medium enterprises
e. The business focuses on giving financial advice to customers to generate maximum
returns on their investments
18. What is the best basis for the comparison of dividend paying stocks with other
investments such as bonds, certificates of deposits etc?
Answer:
a. Interest spread
b. Exchange rate
-c. Interest rate
d. Equity yield
e. Dividend yield
19. Corporate Loans are ___________________________________
Answer:
a. always secured
-b. secured or unsecured
c. never secured
d. always unsecured
e. None of the listed Options
20.Services like the settlement, safekeeping, and reporting of customers marketable
securities and cash are provided by _________________.
Answer:
-a. Custodian
b. Broker
c. Investment bank
d. Fund Administrator
e. Dealer
21. CRR stands for which of the following?
Answer:
-a. Cash Reserve Ratio
b. Common Reserve Ratio
c. Cash Refund Ratio
d. Cash Re-service Ratio
e. Cash Reserve Risk

22 1 Marks
The term CLS stands for
Answer:
-a. Cautious Linked Settlement
b. Continuous Linked Settlement
c. Competitive Linked Settlement
d. Comparitive Linked Settlement
e. Clearing Linked Settlement
23.1 Marks
Which of the following is not a risk management measure?
Answer:
a. Diversification
b. Hedging
c. Insurance
-d. Budgeting
e. All are risk management techniques
24 2 Marks
The quote for CTSH in NASDAQ was $ 43. The best buyer was at $ 42.5 and the best
seller at $ 43.5.</p><p> How much is the bid-ask spread?
Answer:
a. $0.50
b. ($0.50)
-c. $1.00
d. ($1.00)
e. $86
25 1 Marks
The easiest way to calculate IRR is
________________________________________________.
Answer:
a. writing a Java program with 100 FPs
-b. using MS-Excel
c. using a supercomputer
d. using a 2GHz processor
e. writing JCLs running on a powerful Mainframe
26 3 Marks
You invest Rs.5000 at 10% p.a. compound interest compounded annually in a bank.
After 2 years, what is the amount you have received from the bank?
Answer:
a. Rs. 12346
b. Rs. 7000
c. Rs. 2346
-d. Rs. 6050

e. Rs. 7546
27 1 Marks
The central bank in the US is called ________________.
Answer:
-a. Federal Reserve
b. Federal Reserve Board
c. Reserve Bank of United States
d. Central Bank of United States
e. Reserve Bank of America
28 ABC corporation is a large client of BankNew. BankNew extends a loan to XYZ
corporation which is a supplier of ABC. This is an example of _______________________.
Answer:
a. Bill Discounting
-b. Supplier Loan
c. Asset Securitization Loan
d. Working Capital Loan
e. Revolving Line of Credit
29 2 Marks
The act of a loan amount being handed over to the borrower by the Bank is know as?
Answer:
-a. Disbursement
b. Distribution
c. Displacement
d. Dispersement
e. Diversification
30 1 Marks
Momentum investing would refer to ___________________________.
Answer:
a. follow fundamental financial ratios to make decisions
b. invest in high dividend yield stocks
c. following charts and indicators to trade
d. create portfolio similar to index
-e. try best to market
31 3 Marks
Private clients trade in ____________ volumes and ___________ fees and commissions.
Answer:
-a. larger; larger
b. small; larger

c. small; small
d. larger; small
e. Either small; larger or larger; small
32 1 Marks
Bid-Ask spread refers to ________________________________.
Answer: a.difference in price between buying one asset and another similar one
b. difference in opinion between the seller and buyer on the price of an asset
-c. difference between the buying and selling price of the same asset
d. both difference in price between buying one asset and another similar one and
difference in opinion between the seller and buyer on the price of an asset
e. None of the listed Options
33 1 Marks
The process in which a privately held company offers its shares to public for the first
time is known as?
a. Public Offering
b. Corporate Action
c. Underwriting
-d. Initial Public Offering
e. None of the listed Options
34 3 Marks
Not all possible services that might be provided by the auditing firm are expressly
prohibited by Sarbanes-Oxley. If a non-audit service is not expressly prohibited, the
auditing firm may provide that service ___________________________
Answer:
a. If no one on the board objects.
-b. If the audit committee gives its prior approval.
c. Only in an emergency and only if the company being audited has not been able to
find another accounting firm to provide this service after making a good-faith effort.
d. Without any prohibitions or pre-conditions whatsoever.
e. None of the listed Options.
35 1 Marks
The performance of an internationally diversified portfolio may be affected by
________________________.
Answer:
a. currency selection
b. country selection
c. stock selection
-d. All of the listed options
e. None of the listed Options
36 1 Marks
Primary markets ____________________
Answer:
a. are markets in which primary goods and service, i.e. raw materials are traded.

b. are markets in which short-term debt is traded.


c. are markets in which claims that have already been issued are sold by one investor to
another.
-d. are markets in which newly issued claims are sold to initial buyers.
e. are markets in which shares are actively traded.
37 3 Marks
What does the Federal Reserve Supervisory Letter define private banking as?
Answer:
-a. personalized services such as money management, financial advice, and
investment services for high net worth clients
b. personalized services such as cheque collection and other retail banking services for
high net worth clients
c. service provided by private banks to all clients
d. personalized services provided by private and public banks to all clients
e. None of the listed Options
38 1 Marks
The term PTA refers to ______________________.
Answer:
a. Permission to Act
b. Payable Through Automated Means
c. Payment To Automate
-d. Payable Through Account
e. None of the listed Options
39 1 Marks
The city of Basel is located in which country?
Answer:
a. USA
b. India
c. Japan
d. UK
-e. Switzerland
40 1 Marks
Inflation represents which of the following?
Answer:
-a. Increase in prices
b. Decrease in prices
c. Very high change in prices
d. Economic crisis
e. Currency crisis
41 1 Marks
Financial intermediaries exist because small investors cannot efficiently
________________________.

Answer:
a. gather information
b. advertise for needed investments
c. monitor their portfolios
d. diversify their portfolios
-e. All of the listed options
42 1 Marks
Which is not a banking account?
Answer:
a. Checking Accounts
b. Money Market Deposit Accounts
-c. Demat Account
d. Time Deposits
e. None of the listed Options
43 1 Marks
Pick the odd one out.
Answer:
a. Warren Buffet
b. Peter Lynch
c. George Soros
-d. Sachin Tendulkar
e. Rakesh Jhunjhunwala
44 1 Marks
In a economy where inflation is 5%, future value of 100 units of money after 1 year
would be which of the following?
a. More than 100
-b. Less than 100
c. Exactly 100
d. 105, as inflation is 5%
e. None of the listed Options
45 2 Marks
What term is used to describe an LC that remains valid for years thereby eliminating
the cost of separate LCs for each transaction with a regular client?
Answer:
-a. Evergreen Clause
b. Red Clause
c. Irrevocable LC
d. Transferable LC
e. None of the listed Options
46 2 Marks
When the Central Bank of a country decides to change the interest rates, it is a
manifestation of which of the following?

Answer:
a. Money Policy
b. Money Market
c. Money Multiplier Effect
-d. Monetary Policy
e. Money making
47 3 Marks
Which of the following is not a rating agency?
Answer:
a. S&P
-b. Reserve Bank of India
c. Moody's
d. Fitch
e. Crisil
48 2 Marks
When you deposit $200 in currency into your bank _________________
Answer:
a. its assets decline by $200.
b. its reserves decline by $200.
-c. its liabilities increase by $200.
d. each of the above occur.
e. its assets decline by $200 and its reserves decline by $200.
50 2 Marks
Bank of America charges a 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.
Answer:
a. Market Risk
-b. Credit Risk
c. Liquidity Risk
d. Legal Risk
e. None of the listed Options
51 1 Marks
&quot;Don't put all your eggs in one basket&quot; is a phrase used to describe which of
the following?
a. risk averse
-b. diversification
c. risk/return tradeoff
d. time value of money
e. budgeting
52 1 Marks
Pick the odd one out.

Answer:
a. Visa
b. Mastercard
c. Amex
d. Discover
-e. HSBC Bank
53 1 Marks
Which of the following is not likely to be an electronic banking function?
Answer:
a. Direct Debit
b. Standing Order
c. Standing Instruction
-d. Account opening
e. Wire transfer
54 1 Marks
Which division provides services to High Net Worth individuals?
Answer:
a. Corporate banking
b. Investment banking
c. Retail banking
-d. Private banking
e. None of the listed Options
55 1 Marks
Which term refers to securities that are sold by the issuer to investors?
Answer:
a. Secondary Offering
b. Outright Sale
-c. Primary Offering
d. Select Sale
e. None of the listed Options
56 2 Marks
A bank that is earning 7% on its earning assets and is paying 4% on its interest-earning
liabilities is said to __________________
Answer:
a. have a negative spread.
b. have a positive GAP position.
-c. have a positive spread.
d. will always have positive net earnings.
e. both have a negative spread and will always have positive net earnings.
57 1 Marks
Due Diligence is performed to ____________________________________.

Answer:
-a. assess the risk
b. performed by the buyer
c. performed on the seller
d. executed after contract is signed
e. All of the listed options
58 1 Marks
______________ preauthorizes banks to pay recurring bills like insurance premium,
utility bills automatically.
a. Pay-by-Phone System
b. EFT
-c. Direct Debit
d. Direct Credit
e. Direct Deposit
59 1 Marks
BankNew has a portfolio of $30 million worth of loans, which it wants to hedge. This is
an example of what kind of drawn loans?
Answer:
a. Accrual Loans
b. Trading Loans
-c. Held for Sale Loans
d. Undrawn Loan
e. Committed Loans
60 3 Marks
Regulatory balance sheet restrictions are designed to _________________
Answer:
a. limit the size of depository institutions.
b. limit risk-taking and to encourage diversification.
c. limit excessive diversification.
d. to promote Universal Banking.
e. encourage high risk-taking by proper diversification.
62 The term CP is used in Corporate Lending for ___________________________.
Answer:
a. Client Partner
b. Credit Provision
-c. Commercial Paper
d. Collateral Provision
e. Commodity Put Option
63 1 Marks
Dealer in broking parlance refers to which one of the following?
Answer:

a. Employee of stock exchange


b. Matches customer orders with other brokers
-c. Acts as a Principal and executes trades for his/her personal account
d. Only person authorized to buy or sell a particular stock
e. Charges commission for trades
64 1 Marks
Pick the odd one out with respect to Private Banking services.
Answer:
a. Switzerland
b. Luxembourg
c. Caymen Islands
-d. Mumbai
e. Mauritius
65 Why do we need banks?
Answer:
a. Banks are in the best position to lend out money at competitive rates to businesses
and individuals
b. Deposits are participants in primary and secondary markets
c. Banks are in the best position to lend out money at competitive rates to businesses
and individuals
d. Small investors are protected, hence it is a low risk investment avenue
-e. All of the listed options
66 The key feature of letter of credit is ________________________________________.
Answer:
a. basis for devising proper currency hedging strategy
-b. distributes risk between buyer and seller
c. opportunity to receive payment in advance of the due date
d. basis for devising proper currency hedging strategy and Opportunity to receive
payment in advance of the due date
e. All of the listed options
67 Which of the following is not a function of a Custodian?
Answer:
a. Core Custody
b. Asset Servicing
-c. Corporate Lending
d. Securities Lending
e. Corporate Actions
68 1 Marks
The treasury services department performs all of the following functions EXCEPT
___________________________.
Answer:
a. Research market factors e.g., Interest rate monitoring

b. Managing corporate collections and payments


c. Managing liquidity and cash position
d. Risk Management services
-e. None of the listed Options
69 1 Marks
Which of the following is not covered under retail operations of a Bank?
Answer:
a. Loan for Consumer durables
b. Hire Purchase
-c. Bill Discounting
d. Lease
e. Auto Loans
70 IRR stands for which of the following?
Answer:
a. International Rate of Malaysian Ringit
b. International Rating of Rwanda
-c. Internal Rate of Return
d. Indian Rate of Return
e. International Rate of Return
71 3 Marks
Inter District Settlement Fund is a _____________.
Answer:
-a. Fund Transfer System
b. Electronic Bill Presentment System
c. Settlement Account
d. Booking System
e. Transaction System
72 Following are the list of risks that Cognizant faces at an organization level EXCEPT
______________________________________.
Answer:
a. Exchange rate fluctuation
b. Protective legislation by U.S/U.K
c. Attrition
d. Payment default
e. Cognizant faces all of the risks mentioned in the listed options
73 1 Marks
Which of the following is not a Retail Banking service?
Answer:
a. Current accounts
b. Savings accounts
c. Cheque book facility
-d. Investment advice

e. ATM facility
74 Warrants are the combination of which of these instruments?
Answer:
-a. Equities and Call Options
b. Call and Put Options
c. Equities and Futures
d. Cash and Call Options
e. Put Options and Swaps
75 1 Marks
Core Custody Services performs the following functions except ________________________.
Answer:
a. Price securities positions
b. Record Keeping
-c. NAV calculation
d. Reporting services
e. Processes corporate actions

76 What is the key regulatory authority over the American securities industry?
Answer:
a. Federal Reserve
b. FDIC
c. DTCC
d. ASA
-e. Securities Exchange Commission
77 After a buyer and a seller enter into a trade agreement, who initiates the issue of LC?
Answer:
a. Seller
b. Seller's bank
-c. Buyer's bank
d. Buyer
e. None of the listed Options
78 Which of the following is a foreign bank not operating in India as a retail bank?
Answer:
a. Citibank
b. HSBC
-c. JP Morgan Chase
d. Standard Chartered
e. ABN Amro
79 Legal risk is the __________________________________________.
Answer:

a. possibility that you will face legal action


b. loss you could incur when legal action is taken against you
-c. possibility of loss when a contract cannot be enforced
d. possibility of loss from errors in instructing payments or settling transactions
e. None of the listed Options
80 The term EMI stands for which of the following?
Answer:
a. Equal Monthly Income
b. Equalised Monetary Installments
c. Equated Money Inflow
d. European Monetary Inflows
-e. Equated Monthly Installments
81 Which of the following are involved in the mortgage business in US?
Answer:
a. Ginnie Mae
b. Fannie Mae
-c. Both Ginnie Mae and Fannie Mae
d. Sallie Mae
e. Federal Reserve
82 In Banking , the term LIBOR stands for?
Answer:
a. Limited Borrowing
b. Limited International Banking Operations
-c. London Interbank Offered Rate
d. Lending to International Borrowers
e. None of the listed Options
83 Loss of which of the following type of cards can cause the maximum financial impact
for the customer?
a. Debit Card
-b. ATM Card
c. Stored Card
d. Gift Voucher
e. Any of the listed options
84 Individual investors are most likely to trade securities in ________________________.
Answer:
a. Forex market
b. Money Market
-c. Stock Market
d. Mortgage Market
e. New York
85 A share represents __________________.

Answer:
a. ownership in a company
b. right to vote in important matters of the company
c. an instrument whose value might appreciate in secondary market
d. an instrument which can potentially earn dividends
-e. All of the listed options
86 Cash management techniques include ____________________________________.
Answer:
a. Pooling
b. Netting
c. Swapping
-d. Both Pooling and Netting
e. Pooling, Netting and Swapping
87 A very effective way to employ a passive strategy is to _____________________________.
Answer:
a. invest in an indexed portfolio
b. buy all Stocks on the index
c. invest money in a bank
-d. buy few securities which reflect the index
e. both invest money in a bank and buy few securities which reflect the index
88 In context of Treasury services, FRA stands for which of the following?
Answer:
a. Frivolous Rate Agreement
-b. Forward Rate Agreement
c. Free Rate Agreement
d. Factored Rate Agreement
e. Forfeited Rate Agreement
89 Which of the following is not associated with debt?
Answer:
a. Corporate Bonds
b. Debentures
-c. Shares
d. Loans
e. Government Bonds
90 Electronic banking doesnt cover the following services.
Answer:
a. Pay-by Phone system
b. ATM System
c. Point of Sale system
d. Internet payment
-e. Address check for verification of a loan application

91 Which kind of an investor should choose to invest in Money Market Securities?


Answer:
-a. Investor looking for capital gains
b. Investor looking for liquidity
c. Arbitrageur
d. Investor looking for regular income
e. None of the listed Options
92 SWIFT is a ______________________.
Answer:
a. Proprietary network interface
b. Open standard network interface
c. Message based network interface
d. Both open standard network interface AND message based network interface
-e. Both proprietary network interface & message based network interface
93 Two Financial Institutions A &amp; B conducted the following transactions over
CHIPS on 30th Jan 2004.A transferred $5m to B at 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?
Answer:
a. At the end of the day, $17m will be transferred to B
b. At the end of the day, $25m will be transferred to A
-c. At the end of the day, $8m will be transferred to A
d. All the transactions would settle individually real-time
e. Both, at the end of the day, $17m will be transferred to B AND at the end of the day,
$25m will be transferred to A
94 Research analysts do all of the following except ____________________.
Answer:
a. Follow stocks
b. Follow bonds
-c. Invest on behalf of the Investment Bank
d. Make buy / sell recommendations
e. Collect and analyse data on stocks and bonds
95 Which of the following is not a repayment method?
Answer:
a. Post dated checks
b. Salary deductions
c. Direct receipts
d. Direct debits
-e. All of the listed options are repayment methods
96 Coupon rate on a bond represents which of the following?
Answer:

a. Face value of the bond


b. Maturity duration of the bond
c. Credit rating of the bond
-d. Interest paid to the bondholders
e. Financial performance of the bond issuer

97 Which of the following is not a characteristic of money markets?


Answer
a. They trade in a central location.
b. They have an active secondary market.
c. They are wholesale markets.
d. They are beyond the reach of small investors.
e. They trade in short term instruments.
98 VaR is used for which of the following?
Answer:
-a. Risk Measurement
b. Risk Mitigation
c. Risk Taking
d. Risk Assumption
e. None of the listed Options
99 The Japanese Index is known as?
Answer:
a. Straits Times
-b. Nikkei
c. Footsie
d. DAX
e. CAC
100 Which of the following is the most profitable for Credit Card Company?
Answer:
a. Customers who always pay in time
b. Customers who never pay
-c. Customers who default but finally pay
d. All of the listed options
e. None of the listed Options

You purchased a share of stock for $20. One year later you received $1 as dividend and sold the
share for $29. What was your holding period return
45%
5%
50%
40%
None of the listed options

If Bank of New York has 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
Liquidity Risk
Market Risk
Credit Risk
Country Risk
Operational Risk
Risk is best measured when looked at
At a Macro level
At the lowest possible level
At a sub-macro level
At organizational level
At country level

What would be the most accurate VaR estimation method?


Monte Carlo Simulation
Historical Simulation
Variance-Covariance Matrix
Cannot Say
Analytical Methods
If a financial instrument has a 35 percent chance of paying 29 percent and a 65 percent chance
of paying - 13 percent, it expected return would be simple {0.35 * 0.29+0.65 * (-0.13)}
0.008
0.036
0.053
0.017
-0.029
The term "risk averse" means that
An individual refuses to take risks.
Most investors and businessmen seek risk.
An individual will seek to avoid risk or be compensated with a higher return.
Only investment proposals with no risk should be accepted.
Both An individual refuses to take risks and Only investment proposals with no risk should be
accepted
Money Multiplier effect would imply
An increase in the total money lent out into the system
An increase in the total money in the bank reserves in the system
A decrease in the total money in the bank reserves in the system
Both An increase in the total money lent out into the system and an increase in the total
money in the bank reserves.
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
Which of the following is NOT a function of the bank?
Ensure super-normal returns to its small depositors
Channelize Savings
Provide credit facilities to borrower
Provide investment avenues to investors

Facilitate the trade and commerce dealings


If a bank gets a deposit of $100, assuming a reserve requirement (CRR) of 10%, and that it
circulates through 2 more banks, leading to the following money multiplier effect
create a reserve of $10
loan of $244
create reserve of $19
loan of $171
None of the listed Options
If the Limit = $1500, margin = 20% and Asset Value = $2000 then Drawing Power for an Open
ended loan is equal to
$1,500
$1,200
$1,600
$900
None of the listed Options

Freddie Mac, Ginnie Maes & Fannie Mae are?


Marketing institutions selling home loans
Lenders to the banks for home loan bought by retail customers
Regulatory bodies governing home loan market in US
Primarily asset management companies
None of the listed Options
Which of the following is not involved in a credit card transaction?
Independent sales organization
Merchant
Payment gateway
Associations
None of the listed Options
Who checks for the credit limit of the card before approving the transaction?
Payment processor
Acquiring banks
Payment gateway
Issuing bank
None of the listed Options
One should have the Time Deposits if one is looking for?
Quick, convenient and, frequent-access to the money
A high rate of interest
Guaranteed rate of interest
Low fee
None of the listed Options
EFTA stands for
Electronic Funds Trading Act
Electronic Financial Transfer Act
Electronic Funds Transfer Act
Electronic Fee Transfer Act

Electronic Funds Telecommunication Act


The Federal Reserve offers financial services to banks and the U.S. government for all of the
following reasons except to
make a profit
promote competition
foster innovation
promote efficiency in the payments system
None of the listed Options
CHIPS stand for
Clearing House for International Payments Settlement
Clearing House for Interbank Payment System
Clearing Head of Interbank Payment Settlement
Clearing Head of international Payment Settlement
Clearing House for Interbank Payment Settlement
The process flow in a Private banking firm goes as
Servicing Specialist => Client Representative => Middle Office => Back Office
Client Representative => Servicing Specialist => Middle Office => Back Office
Client Representative => Servicing Specialist => Back Office => Middle Office
Middle Office => Back Office => Servicing Specialist => Client Representative
Client Representative => Middle Office => Servicing Specialist => Back Office
Which of the following roles and responsibilities are correctly stated?
Services Provider; Tax Services
Middle Office; Statements & Advices
Front Office; Client Reporting
Back Office: Risk Management
Middle Office; Custodial Services
The below stated responsibilities are carried out by which of the following players. Cash
Services/Client Reporting/Statements & Advices/Domestic & Global Settlements
Services Provider
Client Representative
Back office
Front Office
Middle Office
Private banking offers structured lending that provides
Customized asset-based credit solutions
Long-term liquidity to clients
Advice-led credit solutions
Credit solutions to High Net worth individuals
All of the listed options
Financial planning involves all EXCEPT
Cash flow management
Retirement planning
Risk management
Tax planning
Portfolio management
Loan can take many of the following basic forms EXCEPT
Overdrafts

Bills and promissory notes


Corporate bonds
Advances
Credit line
If a fund purchases a loan in the Primary, they also use another word for that. Which term is used
to indicate the initial group of lenders (Primary Lenders)?
Allocation
Syndicate
Secondary
Assignment
None of the listed Options
Which of the following is not a credit derivative?
Credit linked Notes.
Total return swaps.
Credit default swap.
Currency swap.
All of the listed options
Which of the following is not a secured loan?
Equity Loans
Secured Loans with Savings
Equity Lines of Credit
Personal Loans
Car Loan
Which if the following is true in the case of sight draft?
Buyer can refuse to take the delivery
Quality of the Good is guaranteed
Buyer is expected to make the payment after specified credit days
Payments made based on only bill of lading
None of the listed Options
The basic four parties involved in any transaction using LC (Letter of Credit) are the following
EXCEPT
Issuing Bank
Reimbursement Bank
Seller
Beneficiarys Bank
Buyer
Which of the following is the safest type of letter of credit from seller point of view?
Confirmed Letter of Credit
Irrevocable Letter of Credit
Red Clause
Standby Letter of Credit
Revolving Letter of Credit
Which of the following methods of payment is most risky to the Seller?
Documentary Collection
Open Account
Letter of Credit

Counter trade
Cash in Advance
BOL stands for
Bill of Letter
Bankers Overdraft Limit
Bank of London
Bill of Leasing
Bill of Lading
BAFT stands for
Bankers Acceptance for Factoring Transactions
Bankers Association for Foreign Trade
Bankers Acceptance for Foreign transactions
Bankers Association for Forfaiting & Factoring transaction
Bankers association for Factoring Trade
Bill of Lading is
a contract between Importer and Exporter for transportation of goods
a receipt issued by importer to exporter for goods received for transportation
a contract between a carrier and a shipper for the transportation of goods
A receipt issued by exporter to importer for goods delivered.
None of the listed options

Which of the following methods eliminate country risk and commercial risk upon confirmation?
Back to back Letter of Credit
Standby Letter of Credit
Documentary Collection
Letter of Credit
Both Standby Letter of Credit & Letter of Credit
The following are interest rate risk management instruments EXCEPT?
Interest rate swap
Forward rate agreement
Swaption
Interest rate guarantee
None of the listed Options
All of the following are payment modes except
EFT
Cheque
Debit to account through Debit card
Lockbox
None of the listed Options
Which of the following are principles used by an asset manager?
Diversification
Screens and Filters
Capital preservation
All of the listed options
Only Diversification and Screens and Filters
The process of Hiring of the Lead Managers in the case of IPO is referred to as

Red Herring
Road-show
Investment Manager Contest
Advisor Contest
Beauty Contest
Syndicate in Investment banking refers to all Except
Hub of the investment banking wheel
Determination of allocation of bonds
Merger and Acquisition advisory
Facilitating placing of securities in public offering
None of the listed Options
The difference between Fill or Kill and All or None order is
Fill or Kill allows multiple trades
All or None can be a Good Till Cancelled order
They are synonyms
Fill or Kill can be valid till end of day
Fill or Kill allows partial execution
The NYSE is an example of
Primary Market
Secondary Market
OTC Market
Fourth Market
None of the listed Options
What is the term for the difference between bid and ask?
Difference
Spread
Profit
Quote
None of the listed Options
What is the Third Market?
NASDAQ
OTC
NYSE
Instinet
None of the listed Options
The Fourth Market refers to
NASDAQ
OTC
NYSE
Instinet
None of the listed Options
Core Custody Services performs the following functions except
Price securities positions
Record Keeping
Fiduciary and compliance monitoring
Reporting services
Processes corporate actions

Money laundering refers to


Money facilitating criminal offences
Extending loans to corporate
Short term borrowing & placements
All of the listed options
None of the listed Options
Federal authorities attack money laundering through
Regulations
Criminal sanctions
Forfeiture
All of the listed options
None of the listed Options
Three pillars of the new capital accord, Basel II, are
Quantitative; Supervisory; General
Qualitative; Market Forces; Geographic
Quantitative; Operational; Supervisory
Quantitative; Qualitative; Market Forces
Qualitative; Mandatory; Quantitative
Capital adequacy ratio refers to
Amount of banks capital expressed as percentage of the risk weighted credit exposure
Amount of banks capital expressed as percentage of the risk weighted credit exposure &
operational risk
Amount of banks capital expressed as percentage of the risk weighted credit exposure, &
market risk
Amount of banks capital expressed as percentage of the risk weighted credit exposure,
operational risk & market risk
None of the listed Options

2) Simple interest is calculated on which of the following


beginning principal only
3) An investment manager handles all of the following except -------Guaranteeing that the investor doesnt suffer a loss in any investment
5) In retail banking the term PDC stands for which of the following
post dated cheques
6) A company would pay the interest on what portion of the loan?
Disbursed amount
7) Pick the odd one out
f. Notes
g. Stocks
h. Debentures
i. T-Bills
j. Minus

8) A formal, legal commitment to extend credit up to some maximum amount over a


stated period of time in a description of ________ Line of credit
9) As nominal interest rates increases in the economy the inflation should ideally
Increase
11) What is the maximum maturity for commercial paper? 270 days
13) In a financial instrument has a 20% chance of paying 20% & a 80% chance of paying
50%, its expected return would be 44%
15) Which of the following instruments will carry the lowest interest rate
T-note
16) Which of the following instruments will carry the highest interest rate?
Commercial Paper

1. Preferred stock dividends are paid


a)
b)
c)
d)
e)

Each year on a contractual basis, but before common dividends


After common dividends are paid.
Before interest is paid on debt.
If declared by the board of directors.
After both interest and common dividends are paid

2. Collateral is
a) A form of loan
b) Asset put up as security
4) Expansion for CPI
Ans is consumer price indices
6) Which term is not include in banking
a) Investment banking
b) Public banking
c) Private banking
d) Retail banking
8) Basel capital accord was instituted to coordinate global regulatory efforts to institute
_______________ capital requirements to eliminate the threat posed by _____________
Ans is Minimum; undercapitalized banks

9) Does Asset Allocation help reduce the investment risk?


a)
b)
c)
d)

yes
No - It only maximizes return
It increases risk
It increases choice No impact on risk

10) Dow Jones Industrial Average (DJIA) and Bombay Stock Exchange Index (Sensex)
are
Ans is price weighted index
12) The money multiplier is 1 if the cash reserve is
a) less than 100%
b) more than 100%
c) none of the options
d) zero
e) 100
13) Currency reflects
a) Economy of the country
b) gdp of the country
c) Political situation of the country
d) cpi of the country
I think the ans is a
14) Is the interest earned by simple interest and compound interest same say true or false
The ans is false
15 In the simple interest the interest is also accumulate for the next year calculation
Ans is false
17 Assume that you have a holding in IBM Stock worth 100000. You have calculated the
standard deviation (SD) of change over ten day in IBM
Ans We have to take the square root for 10 and we have to multiply with 100000.
18. The fastest method for calculating risk is
Ans: variance covariance method.
19. Monte-Carlo Simulation
It is a simulation technique.
20. Asset/Liability Analysis,Asset Allocation, Asset Manager Solutions ,Cash Projection,
Compliance Reporting, Securities Lending, Fund Administration, Information, Products &
Services, Investment Manager Universe, Local Fund Servicing
These terms are related with
Ans is Investment Management
21 Buy/Sell Quantity Sock Price

10:00 Buy 100 IBM $10.00


10:30 Sell 50 IBM $10.50
11:00 Buy 100 MSFT $20.00
11:30 Sell 20 IBM $11.00
12:00 Sell 10 MSFT $20.50
3:30 Sell 30 IBM $9.00
What the broker purchase and what he sold is equal
Say yes or no
22. Buy/Sell Quantity Sock Price
10:00 Buy 100 IBM $10.00
10:30 Sell 50 IBM $10.50
11:00 Buy 100 MSFT $20.00
11:30 Sell 20 IBM $11.00
12:00 Sell 10 MSFT $20.50
3:30 Sell 30 IBM $9.00
Calculate the net profit and gross profit.
23. Expansion for OTC
Ans is over the counter.
24. Defined contribution plans have gained popularity because
Ans: employers have begun to ask their employees to share responsibility for their retirement.
25. Monetary losses resulting from inadequate or failed internal processes, people, and systems
or from external events. The events characterize the inherent risks in doing business.This risk is
known as
Ans is operational risk
26 IRD in check 21 act is
Ans is Image Replacement Document
29 largest part of the spread and is paid to the broker/dealer that
actually took the clients order is known as
Ans : Concession
27 share A is more volatile than share B The risk associated with Share A
Ans is more
30The total spread is 400000.The managers fee is 100000.The underwriters
allowance is
Ans is 400000-100000=300000
61 3 Marks
Capital adequacy ratio refers to ___________________________.
Answer:
a. Amount of banks capital expressed as percentage of the risk weighted credit
exposure
b. Amount of banks capital expressed as percentage of the risk weighted credit
exposure & operational risk
c. Amount of banks capital expressed as percentage of the risk weighted credit
exposure, & market risk

d. Amount of banks capital expressed as percentage of the risk weighted credit


exposure, operational risk & market risk
e. None of the listed Options

1.

If an investment pays interest at an annual rate of 5% per year, compounded


twice a year than the effective yield larger than 5.5%
a. True
b. False

269.

In a 2 way quote for a share the bid is


a. 2% less than offer
b. Less than offer
c. More than offer
d. Dependent on dealers skill
e. Equal to offer

270.

Which of the following is usually not participant in stock market


a. Small individuals investors
b. Central banks
c. Companies
d. Financial institutions

In an account saving simple interest from the first year is reinvented at the
beginning of the second year?
a. True
b. False

271.

272.

Which of the following is a not current asset?


a. Goods for sale inventory
b. Terms loans
c. Cash
d. Raw material inventory
e. Receivables

273.

Which of the following in not a feature of private banking?


a. Specialist advice
b. Lot of research
c. Commercial lending
d. High investment in technology
e. Understanding the capital and investment needs.

274.

Retail loans are asset product offered by the bank


a. True
b. False

275.

If the price of share pf cognizant changes from 65 to 60 this can be attributed

to:
a.

Market risk

b.
c.
d.
e.

Interest rate risk


Credit risk
Operational risk
Liquidity risk

Account maintained in the home currency by one bank in the name of


another bank based abroad is called as:
a. Current account
b. Nostro account
c. Vostro account
d. Forex account
e. Overseas account

276.

277.

Which of the following is not the settlement method for bank loans?
a. Pre-closure
b. Assignment
c. Participation
d. Sub participation
e. Securities repository

278.
The process
Ans:Novation

of transferring obligation from one party to another is called

279.

The purchase of any stock for immediate delivery is a __ market transaction.


a. Futures
b. Spot
c. Forward
d. Stock
e. Option

280.

In the historical simulation method of VaR calculation:


a. Return are assumed to be not normally distributed
b. No assumption is made about the distribution
c. Random returns are generated to calculate VaR
d. Return are assumed to be normally distributed
e. Returns are not required at all.

14. What happens when interest rate fall:


a. Bond prices increase
b. Bond prices decrease
c. Bond prices do not change
d. Economy goes into deflation
e. Interest rate never fall, they always go up.
15. If the price of a security on day 1&2 is $102 and $100 respectively. The return is
a. -2%
b. 2%

c. -1.96%
d. Very high
e. 1-2%
16. If you invest $1000 for 3 years at 7% compound interest, how much will you
have at the end of the 3 years?
a. $1225
b. None of listed option
c. $1000
d. $1070
e. $1270
18. What is need for banks in the society?
a. Small investor are protected, hence it is a low risk investment avenue.
b. Banks are in the best position to lend out money at competitive
c. Depositors are participant in primary and secondary markets.
d. All of listed options.
19. A is more risk averse investor than B .therefore.
a. For the same return, B tolerates lesser risk than B.
b. For the same return, A tolerates higher rate of return.
c. For the same return, A tolerates lower rate of return.
d. For the same return, A takes higher risk.
20. Liquidity issues of credit can be addressed by:a. Sweep facility
b. Structured lending to client
c. All
d. Short term credit facilities
e. Overdraft
22. Fastest method for calculating VaR.
a. Monte- Carlo simulation.
b. All equal time with software.
c. Variance-Covariance matrix.
d. Combination of Monte- Carlo and Historical Simulation.
23. Which is not banks primary use for deposits?
a. Payment to employers
b. None
c. Investment
d. Loan
e. Withdrawal
24. If the 5 bids available for stock are 64, 65, 63, 62.5 and 66 which one u will sell?
-> 66

25. When a bank issue a loan its liabilities & reserves increases by the amount of the
loan.
a. True
b. False
26. If the corporate isnt able to raise money from the market to pay off some loans
the risk can be refer.
a. Market risk
b. Interest rate risk
c. Commodity risk
d. Operational risk
e. Liquidity risk
27. On the trading day at the NYSE a broker undertakes the following trades
Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MFST share for $20.00 each
Sell 20 IBM shares $11 each
Sell 10 MFST share at 20.50 each
Sell 30 IBM shares for 9.00 each
How much did the broker pay out to the exchange in total in case of (i) Gross
settlement system (ii) Net Settlement System?
a. (i) $1780 (ii) $3000
b. (i) 0 for IBM, $1795 for MSFT (ii) $1780.
c. (i) $3000 (ii) $1780
d. None
e. (i) $1780 (ii) 0 for IBM, $1795 for MSFT

28. US export and Europe import agree to carry out the transaction of goods word
$100000 under a confirmed term LC with a maturity date of 60 days from the time
of shipment. The acceptance commission @ 1.5 % PA equals
A)
B)
C)
D)
E)

$2500
$3000
$300
none
$250

29. Operational risk is defined as?


fail because of weakness in people, processes, systems or external events.

30. The basic four parties involved in any transaction using LC are the following
EXCEPT
A) Issuing Bank
B) Reimbursement Bank
C) Beneficiary Bank
D) Seller
E) Buyer
31. While providing security lending services to its clients which risk will a
custodian have to manage for its clients
A) Liquidity risk
B) Both Credit risk and interest rate risk
C) Interest rate risk
D) Credit risk
E) Both credit risk and liquidity risk.
32. If the price of securities on day 1 and 2 are $100 and $102 respectively .Returns
is
A) A very high
B) 2
C) -1
D) -2
E) 1
33. Following are the list of risk that Cognizant faces at organizational level
A) Currency risk
B) Attrition
C) Credit risk
D) All of the above
E) Protective legislation by US/UK
34. Which of the following is not a core private banking function?
A) Client management
B) Deposit Mobilization
C) Investment analysis and advice
D) Research
E) Sales and Marketing
35. A mutual fund with investment objective of achieving high capital growth
approaches investor services firm for advice. The firm advices the mutual fund to
invest 80% of the fund in govt debt and 20% in equity. The allocation towards debt
advised by the firm

A) Cannot be determined
B) is too high
C) Is about right
D) is too low
36. Which of the following operations can be done on a LC?
A) All the listed option
B) Acceptance
C) Negotiate
D) Purchase
E) Discount
37. Who among the following is most likely to be a private banking client of a bank?
A) A fresh engineer in his first job at cognizant
B) Tiger Woods
C) Any of the above
D) A cricket player who has never played national / international cricket
E) A manager at a manufacturing plant.
38. Which of the following method eliminate country risk and commercial risk upon
confirmation?
A) Documentary collection
B) Back to back LC
C) LC
D) Standby LC
E) Both standby LC and LC
42. The act of the loan amount being handed over to the borrower by the bank is
known as disbursement. State TRUE or FALSE -> TRUE
39) On the trading day at the NYSE a broker undertakes the following trades
Buy 100 IBM shares for $10.00 each
Sell 50 IBM shares for $10.50 each
Buy 100 MFST share for $20.00 each
Sell 20 IBM shares $11 each
Sell 10 MFST share at 20.50 each
Sell 30 IBM shares for 9.00 each
Given that a net settlement system is being used, find out the net position of the
broker at the end of the day
A) IBM no exchange of shares ; MFST 90 shares to receive ; $1780 to pay out to
the exchange

B) None of these
C) IBM no exchange of shares ; MFST 90 share to receive ; $3000 to pay out to
exchange
D) IBM 70 shares to given out ; MFST 90 shares to receive ; $3000 to pat out to
exchange
E) IBM no exchange of shares ; MFST 90 share to receive ; $1780 receive from the
exchange
40. ACH transaction involves the transmission of _________
A) All of the listed option
B) Documents
C) Physical instrument like check and draft
D) Electronic data files
E) Cash
41. What should one use while using comparing mortgages?
A) APR
B) None
C) IRR
D) NPV
E) Rate of interest applicable for the loan
43. Which one of the following is not offered by investment banking division of a
bank?
A) learning services
B) None
C) Merger and Acquisition
D) Valuation of firm
E) Underwriting and distribution of equity issues.
44. If total spread on underwriting is $500000 and manager fee is $100000. What is
the amount which will be distributed in the syndicate?
A)
B)
C)
D)
E)

500000
100000
400000
600000
Can not be determined

45. HPPL shares are currently selling for $25 each. You bought 200 shares one year
ago at $24 each and received dividend payment as $1.50 per share what was total
dollar capital gain this year
A) 200

B)
C)
D)
E)

500
None
300
400

46. The brokerage firm is regulated by


A) State regularity agency
B) SEC
C) Industry wide SRO
D) All of the listed option
47) Pick odd one out
f. Demat
g. Personal loan
h. None
i. Hire Purchase
j. Auto loans
48. I deposited 100 in a bank .Bank loan out 90 out of it to someone else, who then
invest the money in setting u a new factory. This process is called
A) Monetary policy
B) None
C) Money multiplier effect
D) Profit making tendency of a bank
E) Fiscal policy
50. Which of the following is not a treasury management system?
A) Calypso
B) Summit
C) Wall street system
D) Front arena
E) Flex cube
51. Syndicate helps in all of the following activity but
A) Managing large bond issues
B) Raising huge money from the bank
C) Managing large capital raising act
D) Managing conflict between investment banks.
E) IPO distribution.
52. All of the following statements concerning US govt securities are correct
EXCEPT
A) Treasury bills have their interest paid in a lump sum at maturity
B) None

C) Treasury bills have greater interest risk than either treasury bond or treasury
note
D) Treasury note has maturity dates up to 10 yrs
E) Treasury bonds have maturity dates up to 30 yrs
53. In defined benefit plan the benefit is expressed as ________ and in defined
contribution plan the benefit is expressed as an ________
A)
B)
C)
D)
E)

Account balance , Annuity


Annuity , Annuity
Account balance , Account balance
None
Annuity , Account balance

54. What is the term used to indicate the arrangement of LARGE borrowing for a
corporate by a group as lenders
A) none
B) Syndicate
C) Allocation
D) Assignment
E) Secondary
55. Card associate provide which of the following service
A) issue card
B) Set credit limits
C) Set interest rates
D) Set card fees
E) Security/ Risk management
56. in an international securities transaction, which of the following participant will
not be involved
A) Global custodian , domestic sub custodian , depository in foreign country and
sometime stock exchange in foreign country
B) Depository in foreign country
C) Global Custodian
D) stock exchange in foreign country
E) domestic sub custodian
57. An insurer undertakes an analysis of a portfolio of insurance policy by exploring
scenarios for the path followed by swap rates, policy surrender rates, mortgage
prepayment rates for the mortgage backed security in the portfolio, what is this
process called
A) Cash projection
B) Investment manages universe

C) Asset allocation
D) Fund administration
E) Asset / liabilities analysis
58 Trade finance helps in
A) Facilitating international transaction
B) Facilitating intra company transaction
C) Facilitating international transaction , corporate lending and settling up of new
factories
D) Facilitating corporate lending
E) Facilitating setting up of new factories
59. A choice quote is
A) a price at which a firm is ready to buy or sell
B) When bid is equal to offer
C) When the firm has a choice of deciding the securities to take
D) a price at which a firm is ready to buy or sell it also means when bid is
equal to offer
60. Which of the following is likely to have the highest interest rate?
A) 6 month deposit of min balance of $1000
B) 3 month deposit of min balance of $4000
C) 12 month deposit of min balance of $1000
D) None
E) 6 month deposit of min balance of $2000
61. If 1 day VaR is $1 million, 9 day Var is
A) $3mn
B) $4.5 mn
C) $9mn
D) $4.4mn
E) $1mn
62. If a bank gets a deposit of $1000 assuming a CRR of 10% and that it circulates
through 2 more banks, leading to the following money multiplier effect
A) Loan of $2439
B) Loan of $1710
C) None
D) Create a reserve of $100
E) Create a reserve of $190
63. Which among the following is an investment company that pools money from
unit holders and invest in a variety of security?
A) Mutual Fund
B) Mortgage Company
C) None

D) Stock Exchange
64. You purchased a stock for $40. 1 year later you received $2 as Dividend. You sold
it at $48. What is your return?
a. 45%
b. 10%
c. 25%
d. 50%
e. None
65. A formal Legal commitment to extend credit to some max amount over a state
period of time is description of
a. Trade Credit
b. Revolving Credit
c. Agreement Irrevocable Credit
d. Line of Credit
e. Letter of Credit
66. Odd 1 out
a. Warren Buffet
b. George Soros
c. Bill Gates
d. Ben Graham
e. Peter Lynch
67. Development of Investment Objective and Investment policy falls under the
Purview of
a. Investment manager Universe
b. Asset Allocation
c. Asset Liability Analysis
d. Fund Admin
e. Compliance Reporting
68. Interest Rate Spread is equal to
a. Current rate Base Rate
b. Cap Current Rate
c. Current Rate Floor
d. Base Rate Floor
69. Which of the following factors affect the choice of Payment Method?
a. Exporters Fund
b. All
c. Government Guarantee Program
d. Time Frame
e. Cost of Financing

70. The NYSE is a large financial market in which the initial issue receives the
proceeds for the Sale of securities.
a. True
b. False
71. Which of the following trading services reduces the trading cost for institutional
investors?
a. Stock Repurchase Program
b. Transition Management
c. Transition Management & Commission Recapture
d. Commission Recapture
e. None
72. A CALL option on futures gives the buyer
a. the obligation to buy a futures contract
b. the obligation to sell a futures contract
c. the right & obligation to buy a futures contract
d. the right but not the obligation to buy a futures contract
e. the right but not the obligation to sell a futures contract
73. Which is not an example of Option?
a. Call Option
b. Swaption
c. Leaps
d. Oil Futures
e. Put Options
74. Some banks pay interest on Checking A/c while many do not.
a. True
b. False
75. The advising bank is called as trusted bridge between the ___________ &
__________ when they do not have active relationship. Options wrong
a. Beneficiary Bank & Reimbursing Bank
b. Importer Exporter
c. Reimbursing Bank & Beneficiary Bank
d. Issuing Bank & Confirming Bank
The advising bank is used as a trusted bridge between the applicants/issuing bank and
the beneficiarys bank when they do not have an active relationship.

76. Which of the following according to you has resulted in defining contribution
plans gaining popularity over defined benefit plans
a. DC plans fix the monthly contribution from the employee making his financial
planning easier.
b. DC plans are seen by employees as investment which to accumulate retirement
income.

c. All
d. Employer increasing wants employees to share responsibility for retirement
77. ________is typically largest part of spread and is paid to broker\dealer or that
actually took clients order
a. Salary
b. Manager fee
c. Wage
d. Concession
e. Underwriter
78. NASD is not an SRO for
a. Listed market
b. Over the counter market
c. Third market
d. Fourth market
79. High net worth individuals generally have ____________.
a. Market capitalization more than $200000
b. All
c. Net worth greater than $500000
d. Household income of max $50000 year.
80. Which is true about retail banking?
a. The business focuses on small no. of high net worth individuals.
b. The business focuses on small and medium enterprises.
c. The business focuses on large no. of individuals.
d. The business focuses on large no. of corporation bodies.
81. Offer is price at which a firm
a. Trades in securities
b. Quotes to its bets customer
c. Intends to buy
d. Intends to sell
e. Quotes when it does not want to trade.
82. Securities with original maturity greater than 1 year are traded on money
market.
a. True
b. False
83. Which is not a banking service?
a. Stock market
b. Retail banking
c. Corporate banking
d. Customer lending
84. Which is true?
a. Financer owns the asset both in case of Lease and hire Purchase.

b. Tax deduction cab be claimed fro the full value of the rental paid in case of lease
c. All
d. Depreciation in claimed by the financer in lease and not in case of hire
purchase.
85. Bank a based in US provides safe keeping services for securities to its US clients.
It also has clients in France and Belgium and provides securities safe keeping
services to these clients through banks C & D respectively. Which best describes
bank A?
a. Global custodian
b. None
c. Main custodian
d. Sub custodian
e. Secondary custodian
86. All following statements relating to Bonds are correct except.
A) Bonds sell at a discount when Coupon Rate is less than Market Interest rate.
B) None
C) Bond is debt instrument giving issues.
87. Which of the following type of loan requires the amount of interest that
would be earned on the loan to be paid upfront by the borrower?
A) Capitalized loan
B) True Discounted loan
C) Amortized loan
D) Demand loan
E) Discounted loan
88. Who are involved in the preparation of prospectus of IPO?
A) Commercial bankers
B) Investment Bankers
C) None
D) Company Management
E) Company Management and Investment Bankers
89. Bankers Acceptance differs from Sight Draft in that
A) Bankers Acceptance reduces lending capacity
B) Sight Drafts are negotiable instruments
C) Bankers Acceptance demands immediate payment.
D) None
E) Banks can raise funds by selling acceptance.
90. Clients of a private banker are generally not segregated on the basis of
A) Investible assets
B) Location
C) Age
D) Net worth

E) Name
91. The initial sale of the security is in the market, while subsequent
trading in the security is in the .. market
A) Spot, futures
B) Debt , Equity
C) Primary , Secondary
D) Money, Capital
E) Secondary, Primary
92. Under what category can services like asset/liability analysis, asset
allocation, cash projection, compliance reporting, fund administration,
investment Management universe etc. provided by an institution can be
classified?
A) Investment Management
B) Asset Servicing
C) None
D) Trading
E) Investor Services.
93. CIP in the context of anti-money laundering is
A) All
B) Stands for Suspicious Activity Reports
C) Customer Identification Program
D) Requiring Businesses, which were only to report cash transactions involving more
than 1.00,000?
94. On a trading day at a stock exchange a broker undertakes the foll trades:
Buy 100 IBM shares for 10$ each
Sell 50 IBM shares for 10.5 $each
Buy 100 MSFT shares for 20$ each
Sell 20 IBM shares for 11$ each
Sell 10 MSFT shares for 20.5 each
Sell 30 1bm shares for 9$ each
At the end of the day, the broker owes 1780 to the exchange while exchange owes
him 90 shares of MSFT. Is it possible?
A) Yes under RTGS
B) No
C) Yes under net-settlement system
95. Dow Jones industrial average is made of
A) 30 stocks
B) 20 stocks
C) 40 stocks
D) 10 stocks
E) 50 stocks

96. Which risks bring gain and losses?


A) Interest rate and foreign exchange
B) Liquidity and credit
C) Credit and Interest rate
D) Credit and Foreign exchange
E) All
97. Find the future value of $1200 invested at 5.25 % per annum payable
annually after 6 months? Marks: 2
1. 1345.1
2. 1243.1
3. 1231.1
4. None
5. 1235
98. Investor services like brokerage, cash management and short term
investments, commission re-capture, foreign exchange transactions,
transaction management etc. can be classified under ____ group of services.
Marks: 1.
1. Trading
2. Investment Management
3. Investor service
4. None
5. Asset Servicing
102 What are the risks associated with the Hedge funds? Marks: 3
1. All of the above
2. High exposures in derivatives
3. High Leveraging
4. High Speculation
103. The trade terms 15/2 net 30indicates that _____. Marks: 3
a. 2% discount is offered if payment is made within 15 days.
b. 15% discount is offered if payment is made within 2 days; the payment
should however be made in 30 days.
c. 30% discount is offered if payment is made before 15 of the month.
d. 15% discount is offered if payment is made between 2 & 30 days;
e. 15% discount is offered if payment is made within 30 days.
104. A bank is required to hold reverses at least equal to a pre-scribed fraction of its
total deposit liabilities.

a. True

b. False

106 Who appoints investment manager to manage a benefit plan?


a. Plan sponsor
b. Plan administrator
c. Fund trustee
d. None
e. Government
107 A company would pay the interest on what portion of loan?
a. Committed amount
b. Either disbursed or committed loan
c. Unused amount of loan
d. Disbursed amount
e. None
108 In the exchange on a particular trading there is a buy market order for 100
CTSH shares and two sell market orders for 50 and 40 CTSH shares each, can the
buy order be matched against the two sell orders.
a. Yes
b. No
c. Yes, but if prices on the buy & sell side match.
109 If the limit = $2000, margin = 20% and asset value = $2000 then drawing power
for an open ended loan is equal to?
a. None
b. $1600
c. $2200
d. $2400
e. $2000
110 Risk cannot be migrated by
a. Setting risk limits
b. Hedging
c. Diversification
d. Arbitrage
e. Insurance
111 A fixed income analyst will analyze all but
a. Municipal bonds
b. Bonds of govt. sponsed enterprise
c. Corporate bonds
d. US treasuries
e. Shares

112 In benefit administration what are the relationships that exists between the plan
administrator and the investment manager, and between Trustee and the investment
manager.
a. None
b. Plan administrator & trustee both have outsourced plan administration as well as
fund management to investment manager
c. Any
d. Plan administrator gives investment instruction to investment manager while
trustee appoints the investment manager.
e. Trustee gives investment instruction to investment manager, while plan
administrator appoints the investment manager.
113 Which entity provides credit scores that are used by issuers to process card
application?
a. Issuer processor
b. Collection agency
c. Issuing bank
d. Authorization engine
e. Credit bureau.
114 CPI stands for which of the following?
a. Consolidated Price index
b. Consument popularity index
c. Consumer product index
d. Consumer price index
e. None
115 A bank decides to sanction only 10% of the loan sought by a company. The
company goes and pledges extra assets with the bank and the bank then agree to
sanction 50% of the loan sought. The company has indulged in the process of
a. Credit scoring
b. Credit increase
c. Credit incrementation
d. Credit revision
e. Credit enhancement.
116 FX spot deal assumes maturity of how many business days ahead ?
a) 4
b) 5
c) 3
d) 1
e) 2
117 Which of the following is best VaR estimation Model?
a) Monte- Carlo
b) Historical

c) Variance-Covariance
d) Variance-Covariance and Monte- Carlo
118 Which of them represent company is incorporated in USA?
a) Plc
b) Pte
c) Ltd
d) Inc
120 Organization level risk appetite is determined by:
a) Risk management
b) Front office
c) Back office
d) Trade
e) Board of director
121 Risk management is function of:
a) Traders
b) Back office
c) Specialist
d) Front office
e) Mid office
122 Purely competitive financial market is not characterized by
a) Govt. regulation
b) Many traders
c) Full info
d) Cost effective trading
123 NOT player in typical trade cycle;
a) Custodian bank
b) Clearing bank
c) Clearing member
d) Trading member
e) Regulator
124 Once syndicate has sold all other trades participant, sub participant and
assignment are considered trade in what market?
a) Primary
b) Secondary
c) Participant
d) OTC
e) Index
125 Question relates to price weighted index?

1.
2.
3.
4.
5.

DJIA
Hangseng
EAFE index
NASDAQ composite index
S&P 500

126 In defined contribution retirement plan .Tax sheltered annuities fall under
section of _________ERISA
403b
401k
401b
403k
None
126 In benefits administration, trustee and plan administrator submit compliance
report to______ which in turn qualifies the plan.
Participant
None (answer is TRUST)
Government
Investment manager
Sponsor
127 Full form of ADR
Answer: American Depository Receipts
128 Question related to BASEL II
Answer: Capital adequacy
129 What is interest rate charged on asset based loan?
Answer: The interest rate charged is lower than personal loans
130 Question related to credit derivatives as which of the following function is not done by
credit derivatives

Answer: Answer was something as Transfer to over the counter


131 Question related to credit derivatives it was fill up the blanks? Exactly dont remember
the question/

Answer: option having TRANSFER


132 Question related to non-discretionary Investment Management

Answer: the bank offers investment recommendations based on the Clients


approval.
133 Question having few options like Income Processing, Tax Information Services, Cash
Sweep

Answer: ASSET SERVICING

134 Question related to Underwriting?


Options:
1. Underwriting Spread
2. Public Offering Price (POP),
3. Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it)
4. All

Answer is ALL the listed option


Risk Matrices was developed by:- JP Morgan, Bank of California, Credit Suisse,
SBI
2. Research analyst may recommend to :- buy, hold and sell
3. Reducing CRR for banks would have impact on:e. Increased money supply
f. Reduced interest rates
g. Reduced money supply in the economy
h. Profitability of firms
i. None
46. Under corporate stock repurchase program
a. Corporate purchase their own shares from shareholders
1.

47.

Private banking providing risk management services strives to:a. Eliminate risk and maximize returns
b. Eliminate risk without worrying about returns
c. Reduce risk and optimize returns
d. Avoid risk and returns
e. All

48.

One would go for bank deposits because


a. Money easily available
b. Interest earned
c. Insurance cover available
d. All

49.

From sellers point of view which method has least risk


a. LC
b. Direct debit
c. Documentary collection
d. Counter trade
e. Cash in advance

50.

ABC rated as AA+ and XYZ rated D. Who gets loan from bank
a. Equally unlikely
b. Equally likely
c. ABC
d. XYZ
e. None

51.

Which is correct hierarchy of corporate ratings (high to low)?


a. AAA,AA+,BBB,D

52.

Inflation- 9%. Future value of 100 units of money after 2 years:


a. 118.8
b. Exactly 100
c. Exactly 200
d. Around 109
e. None

53.

Brokerage firms are regulated by


a. SEC
b. Industry wide SROs
c. State regulatory Agency
d. All

54.

Odd man out:a. SEC


b. NYSE
c. NASDAQ
d. LSE
e. NSE

55.

From investor stand point a debenture issued by excellent company will appear
risky than share of preferred stock issued by excellent company
a. True
b. False

56.

Not a feature of private banking:a. High investment in technology


b. Lot of research
c. Commercial lending
d. Specialist advice
e. Understanding capital and investment needs

57.

Security settlement is function of


a. Specialist
b. Traders
c. Back office
d. Front office
e. Mid office

58.

Which of these instruments is not included as part of asset servicing services and
the category Pricing/ Holdings Valuation which includes accurate pricing, rating
etc.
a. Equities
b. Certificate of participation
c. Government securities
d. Certificate of deposit
e. Services may be provided for all

59.

Which of the following is involved in retails brokerage business in US


a. E-trade
b. Charles Schwab
c. Sallie Mae
d. Federal reserve
e. a and b both

60.

Measures of performance of an investment portfolio are all of the following


except:a. Risk adjusted return
b. Style maps score
c. Profit/loss on portfolio
d. Alpha
e. Up/down market analysis

61.

Who insures stocks in stock market


a. Security and exchange commission
b. Federal deposit insurance corporation
c. Us department of treasury
d. None

62.

Over the counter market is also called


a. Unlisted market
b. 2nd , unlisted and OTC market
c. Unlisted
d. Super
e. 2nd market

63.

Standby letter is _____ secure than documentary collection and cheaper than ____
a. More, commercial LOC

64.

Interest rates falls


a. Bond prices increase
b. Bond prices decrease
c. Do not change
d. Economy goes to deflation

65.

Rate at which bank purchases US dollars against home currency is :a. Bid rate
b. Indirect
c. Direct
d. Cross currency
e. Ask rate

66. Bid price is the price at which the firm


The price at which market makers will buy or sell a particular security.

41 Presence of risk implies


a. Standard deviation of return is 0
b. Uncertainties of final outcome
c. Final wealth is lower
d. Investment gain
67. Odd man out?
a. Equity
b. Stocks
c. Shares
d. Convertible bonds
e. Common stock
68. A bank cannot cover the money demanded by depositor, then it goes out to
a. Federal reserve bank
69. Institutions involved in benefit administration process, discussing plans
a. Sponsor
b. Custodian
c. Plan administration
d. Record keeper
e. Participant
70. Which of the following eliminates both country risk and commercial risk?
a. Both standby LOC and LOC
71. When bank goes to the fed to borrow funds then the interest rate charged by fed is
known as
a. Prime rate
b. Bond rate
c. Discount rate
d. Federal rate
Which will have highest interest rate
a. 3 months deposit with min balance of $4000
b. 12 months -> $1000
c. Cannot determine
d. 6 months -> $2000
e. 6 months -> $1000
73. Odd man out
72.

a.
b.
c.
d.
e.

None
Auto loans
Demat
Hire purchase
Personal loan

when was US PATRICAT ACT passed


a. 2001
75. Risk averse
a. less risk/avoid risk
74.

67. which of the following is online settlement method


a.
RTGS
71. Which of the following is true for The Fed funds rate
a.
It is cost of borrowing immediately available funds for one day.
72. corporate bonds are
a. always secured
75.if one day var is $ 1M, calculate var for 9 days
a. $3M
76. Which of the following is not a repayment method?
Ans .collateral
79.
ATM stands for
1) Automatic Transaction Machine; Almost anytime banking
2) Automated Teller Machine; Remote location transactions
3) Automatic Transaction Machine; Fund transfer between accounts
4)
Automated Teller Machine; Direct Deposit
5) Automatic Transaction Machine; Personal Banking
80. A Revocable LC (Letter of Credit)
can be revoked without the consent of the Exporter
can be revoked without the consent of the Exporters bank
can be revoked without the consent of the Importers bank
cant be revoked with the consent of the Advising bank
cant be revoked without the consent of Exporter.
81. Which of the following are disadvantages of using LC (Letter of Credit)?(check box)
a. Time consuming
b. Costly
c. Specific and Binding
d. Deals with documents and not with products
e. Credit Line tied up.
83. Banker acceptances are ________________ credit investment created by
___________ and used for financing imports, exports and domestic shipping
Long term; financial firms
Long term; non-financial firms

Short term; non-financial firms


Short term; financial firms
Medium terms; banks
84.

Mutual funds
a. Are less riskier than individual stocks as the fund managers invest in a
diversified portfolio
85. Warrants
a. Warrants are call options variants of equity. They are usually offered as bonus or
sweetener
86.
bank are least interested in giving a personal
a. credit scores
b. document verification
87.
difference between lease & hire purchase
a. all
88. To compare the cost of different Mortgages deals one should look at the
a. APR
89.
securitizing cash flows from future monthly sale of oil explored from its specified
offshore
a.
asset securtisation
90.
not a Treasury Management Systems Inter-bank
91. pre shipment loans
a. Banks provide Pre-shipment finance - working capital for purchase of raw materials,
processing and packaging of the export commodities.
92.
93.
95.

function of A card Association


a. security/risk management
funtions of private banking
not a Personal Investment Companies and private bank

96.
risk associated with hedge funds
97. function of CORPORATE FINANCE
a. all
98.
sales and brokers responds to which department when institution transfer their
custody service from one to another
a. Transition management
99. two questions from Netting and RTGS from pdf at page number 180-181
100. who is at risk in defind benefit
a. employer
101. difference between DB (defined benefit) and DC (defined contribution)
103. Corporate loans are .. Secured or unsecured , secured, unsecured
104. Pick odd one out ..

1) merril lynch
2) george soros
3) bell graham
4) bill gates
5) warren buffet
105. not investment bank
1) bear starter
2) lehmen brothers
3) icici securities
4) goldman sachs
106. newyork, delhi, Jakarta, thimpu --- > least risk in investing
107. US, india, Pakistan, burma, Bhutan -- > beneficial for loan purpose
109. Which is not the charge type ??
Pledge, hypothecation, lien, collateral
112. Private banking is a fee driven business
114. Open ended loan allow the borrower to borrow additional amount subject to the
maximum amount less then a set value.
1) True
2) False
115. investment bank assists in merger & aqisition..
1) Structure and deals
2) All
3) smooth transaction
4) structure and deals
116. card association do ??
1. Security/Risk management
2. Issue cards
3. Set credit limits
4. Set interest rates
117. which is not a pre shipment loan
1. bill discounting
2. raw material
118. nominal rate 8% , rate of inflation 2%, real rate of inflation ???
1. 6%
2. 10%
119. two way quote for share the bid
120. funding cost goes up due to Hardening interest rate
Risk ???

121. Federal funds rate: The rate domestic banks charge one another on overnight loans
to meet Federal Reserve requirements. This rate tracks very closely to the discount rate,
but is usually slightly higher.
122 . Warrant is combination of ..
1. equities & futures
2. call & put options
3. call options
123. KYC refers to
1. checking old account
2. checking sponsors credentials
3. checking of credential of the customer
4. checking of bank credential by the federal bank
124. STP stands for .. Straight Through Processing
125. Price weighted index
Dow Jones Industrial Average

126. involved in IPO prospectus


1. invester banks
2. commercial banks
3. investor banks & corporate management
4. corporate management
5. none
127. 4.8% interest per annum- same as
1. 0.4% per month & 1.6% per quarter
2. 0.4% per month & 1.2% per quarter
3. none

Question Bank for


CCP in Fundamentals of Banking
42. Which of the following types does SWIFT belong?
a. Proprietary Network
b. Private Network
c. Proprietary and Messaging Service

43. A Share Holder has


a. Got ownership
b. Voting Rights
c. All the above
44. If Reliance Industries Limited wants to sell shares in USA, what should they do?
a. Use American Depository Receipt
45. Current account maintained by one bank with another bank abroad in the latters
home currency
a. VOSTRO
b. NOSTRO
46. Compound Interest is calculated based on
a. Principal Only
b. Principal and Accumulated Interest
47. What is an Operational Risk?
a. Possibility of loss resulting from errors in instructing payments or
settling transactions.
b. Possibility that a firm will be unable to generate funds to meet contractual
obligations as they fall due.
c. Possibility of loss as a result of default, such as when a customer defaults
on a loan, or more generally, any type of financial contract.
d. Possibility of loss over a given period of time related to uncertain
movements in market factors, such as interest rates, currencies, equities,
and commodities.
48. Which of the following is not a possible risk while doing a project in Cognizant?
No idea of the options and the answer
49. ICICI bank in India comes under the category of
a. Private Bank
b. Public Bank
c. Co operative Bank
d. Corporation Bank
50. What are FreddieMac and GinnieMae?

a. Regulatory bodies of Insurance


b. Institutions in Mortgage Markets
c. Investment Banks
d. Brokerage Firms
51. Losing which of the following cards will have more impact?
a. Credit Card
b. Debit Card
c. Stored Card
d. Gift Voucher
52. If you have 100 units of money and inflation being 5% what is the future value
after 1 year?
a. 105
b. 95
c. 90
d. 110
53. If banks increase their cash reserve ratio what will be the impact?
a. Money flow will be more
b. Money flow will be less
c. Reserve amount will be less
d. None of the above
e.
54. Which of the following is not a Retail Bank in India?
a. HSBC
b. ICICI
c. JPMC
d. SCB
55. Central Bank of a country is called as
a. Bankers Bank
56. Details about 3 tiers of Federal communications privacy law.
57. US Government passed the USA PATRIOT Act in response to

a. November 30, 1982


b. September 11, 2001
c. June 09, 1984
d. August 10, 1984
58. Benefits of Check 21.
59. SuperDot is used in which Stock Exchange?
a. NYSE
b. BSE
c. FSE
d. LSE
60. FTSE index is used in which stock exchange?
a. New York
b. Bombay
c. London
d. Singapore
61. If the current market price of a share is $90 and you have placed a sell stop order
for $85 and Limit order for $87. Which of the following statements is correct?
a. Will be sold immediately but at a price >$87
b. Will be sold immediately but at a price >$85
c. Will be sold but at a price between $85 and $87
62. What are warrants?
63. Pick the odd man out.
a. Stocks
b. Shares
c. Equity
d. Convertible Bonds
e. Common Stocks
64. Define risk in financial terms.
a. Probability of loss
76. What does BAFT stand for
a. Bankers Association For Foreign trade

77. Which
a.
b.
c.
d.

of the following are regulatory authorities?


SEC
SEBI
FSA (Financial Security Authority), UK
All OF the ABOVE

6. ATM is
a. Banking enabled through a terminal used to make transactions
without a human teller.
7. Where is the initial prospectus filed?
a. SEC
b. BAFT
c .None of the above
10. As per an estimate, netting reduces the number of settlements needed by
a. 60 %
b. 75 %
c. 95 %
d. 50 %
11. SWIFT uses ___________ messaging system
a. 15022
b. 5022
c. 196
d.2000
13. Who starts the process of issuing a LOC
a.
b.
c.
d.

Issuer Bank
Buyer
Seller
Beneficiary Bank

14. What is a choice quote?


a. Quote at which one wants to buy or sell
15. Bank
a.
b.
c.
d.

is
Unregulated and unsafe
Regulated and unsafe
Unregulated and safe
Regulated and safe

16.Bank is a common place


a. For Borrower and depositor
17.Rohit deposits XYZ amount into bank A. Payal borrows XYZ amount from bank A.
How will the bank benefit?
a. Lending rate less than deposit rate.
b. Lending rate greater than deposit rate.
c. Lending rate equal to deposit rate.

d. All of the above


18.Which
a.
b.
c.
d.
e.

of the following is more risky


An asset with standard deviation 5
An asset with standard deviation 4
An asset with standard deviation 3
An asset with standard deviation 2
An asset with standard deviation 1

19. Find the odd man out about Hedge Fund


a. Higher Liquidity higher risk
b. Leverage
c. Speculation
d. Risk aversion
20. What is GDR?
a. Global Depository Receipt
21. ACH
a. are electronic clearing transactions in which information about debits
and credits are passed across the clearing system through electronic data
files
22. Trade finance is used in
a. International trade
23. Intsinet is used in
a. Listed Market
b. Primary Market
c. Secondary Market
d. Third Market
e. Fourth Market
26. Find the odd man out
a. NASDAQ
b. NYSE
c. LSE
d. SEC
28. Retail lending is for
a. Large investors
b. Small and medium investors
c. Financial Institutions
30. Lending money to which of the following country is not risky?
a. US
b. India
c. Pakistan
d. Bangladesh
31. Sweep transfers
a. Excess money from one account into another
b. Money from one persons account into another.

L0 Questions
81. Which of the following are disadvantages of using LC (Letter of Credit)?(check box)
a. Time consuming
b. Costly
c. Specific and Binding
d. Deals with documents and not with products
e. Credit Line tied up.
91. pre shipment loans
a. Banks provide Pre-shipment finance - working capital for purchase of raw materials,
processing and packaging of the export commodities.
92.
93.
95.

function of A card Association


a. security/risk management
funtions of private banking
not a Personal Investment Companies and private bank

96.
risk associated with hedge funds
97. function of CORPORATE FINANCE
a. all
98.
sales and brokers responds to which department when institution transfer their
custody service from one to another
a. Transition management
99. two questions from Netting and RTGS from pdf at page number 180-181
100. who is at risk in defind benefit
a. employer
101. difference between DB (defined benefit) and DC (defined contribution)
103. Corporate loans are .. Secured or unsecured , secured, unsecured
104. Pick odd one out ..
6) merril lynch
7) george soros
8) bell graham
9) bill gates
10) warren buffet
105. not investment bank
5) bear starter
6) lehmen brothers
7) icici securities
8) goldman sachs
106. newyork, delhi, Jakarta, thimpu --- > least risk in investing
107. US, india, Pakistan, burma, Bhutan -- > beneficial for loan purpose

109. Which is not the charge type ??


Pledge, hypothecation, lien, collateral
113. Purely competitive financial market not characterized by,
1) govt. regulation
2) cost effective trading
3) full information
4) many traders
114. Open ended loan allow the borrower to borrow additional amount subject to the
maximum amount less then a set value.
1) True
2) False
120. funding cost goes up due to Hardening interest rate
Risk ???
126. involved in IPO prospectus
6. invester banks
7. commercial banks
8. investor banks & corporate management
9. corporate management
10. none
127. 4.8% interest per annum- same as
4. 0.4% per month & 1.6% per quarter
5. 0.4% per month & 1.2% per quarter
6. none

281. Question related to Underwriting?


Options:
5.Underwriting Spread
6.Public Offering Price (POP),
7.Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it)
8.All

78. Inflation- 8%. Future value of 100 units of money after 2 years:
a. 118.8

b.
c.
d.
e.

Exactly 100
Exactly 200
Around 109
None

79. Bid price is the price at which the firm:


The price at which market makers will buy or sell a particular security
80. Sales and brokers responds to which department when institution transfer their custody service
from one to another
a. Transition management
81. Who is at risk in defined benefit
a. Employer
2.
Salary 50,000, increased to 55000. Inflation rate 20% in 2005. In 2006 what will be the
employees position
a.
b.

Living standard will be down


Salary will be increased to 65000

3.
4.

Private Bankings functions 5 options had been given


Which is not the Retail bankings functionality
a. Current Account
b. Credit Card
c. Trade Finance
d. Loans

5.

Which one of the following is not done by Retail banking


a. Auto Loan
b. House Loan
c. Hire purchase
d. Lease Loan

6.

True or False
a. In hire purchase the m/c will be owned by the customer after the payment period

7.

US Patriot Act Question 2

8.

Retail banking customers


a.

CORPORATES

b. Banks
9.

Allowing to withdraw 20 %extra from Customer As account is know as


a.

Overdraft(This is my guess)

b. And some options had been given in that


10.

A bank is getting deposit from a customer and lending it to other customer. Which is the correct
one

a.

This is known as Money Multiplier effect(This is my guess)

b. Bank is trying to increase its profit


11.

One person is having Rs.100 in hand. Which one of the following is correct
a.

Having 100 now in hand is valuable than having the same 100 one year later

b. Both are same


c.
12.

Reverse of (a)

Odd man out


a.

Munis

b. T-Bills
c.

T-notes and bonds

d. Stock
13.

Who will get the voting rights


a.

Common Share holders

b. Preferred share holder


c.
14.

Holders of Debt

Who will get the money back first in case of default of a company
a.

Common Share holders

b. Preferred share holder


c.

Holders of Debt

15.

Read something about Arbitrage. 2 questions were there in this

16.

Where are we releasing the companys share First time


a.

Primary Market

b. Secondary Market
c.
17.

Some other options were there

One country (Country name had been given) is doing the business in one currency. Another
country is doing the business in another currency. How did they do the business?
a.

Currency swap (My guess)

b. Some other options were also given in that


18.

Which is not the Role of Central bank

a.

Appointing Finance Minister

b. And some central banks role were given


19.

Why people are going to portfolio managers


a.

They dont have time to monitor their portfolio

b. They dont know how to advertise to sell and buy the instruments
c.

Their investment is less

d. All of the above (my guess)


20.

VAR is used in one of the following


a.

Measuring Risk

b. Risk mitigation
c.
21.

Risk Analysis

Diversification Questions were there. Like Diversifications means one of the following and some
options were given in that

22.

Some questions in the following were there

WHAT IS A BANK?
The term Bank is used generically to refer to any financial institution that is licensed to accept deposits
and issue credit through loans.
Banks are the backbone of any economy, as all monetary transactions end up touching banks. The main
functions of banks are to:

Channelize Savings
Provide credit facilities to borrower
Provide investment avenues to investors
Facilitate the trade and commerce dealings
Provide financial backbone to support economic growth of the country
Minimize Cash Transactions
Provide Services

WHY DO WE NEED A BANK?

23.

They provide a return (pay interest) on our saving


Safety of principal and interest
Convenience of being able to write checks and use debit cards
Raising funds when we need
The first bank in the size
a.

Citigroup

b. JPMorgan
c.

24.

Some other banks had been given

Glass-Steagall Act of 1933, created a Chinese wall between commercial

banking and

securities businesses
25.

Which is not involved in the Open ended loan


a.
b.
c.
d.
e.

26.

Limit (L) max outstanding allowed


Margin (M) percentage of limit that can be drawn
Asset value (AV) value of underlying asset
Drawing Power (DP) - lower of L and (1-M)*AV
Something else had been given other than the above. That was the answer

Acquiring bank is involved in the following


a.

Credit Card

b. Something else were also given


27.

Read about the Retail Services done by retail banking 2 questions were there in that

28.

Which is not coming under EFT? Read all the EFT transfer

29.

ACH is meant for what?


a.

Large amount in single transfer

b. Small amount in multiple transfers


c.

Distant transfer

d. All of the above


e.

None of the above

30.

Read about Private Banking services.

31.

Discretionary means what? The banks portfolio managers make investment decisions
on behalf of the customer.

32.

Private Client Services is done by which of the following


a.

Private Banking

b. Trade Finance
c.
33.

Retail Banking

What is the difference between Private Banking and Asset Management?


a.

Private Banking focuses on retail investors while asset management is targeted towards
institutional investors

34.

Passive Investment or some question related to Passive was there!!!!

35.

The loan a bank is holding to sell it is known as


a.

Held For Sale (my guess. The question was like that)

b. Accrual
c.
36.

Trading

Read Letter Of Credit Thoroughly


Beneficiary bank, Issuing bank come in Trade Finance

Some important questions:


There will be 1,2,3 marks questions
There will be 121 questions
2) Page 6
INFLATION
There will be three questions based on this formula:The relationship between the R (real rate of interest), N (nominal rate of interest)
and I (rate of inflation) is as:
R= N-I.
3) Page 8
One question on future value
The formula for Future Value is:
FV = PV*(1 + i)n
4) Page 8
One question on Intra-year compounding

Question was like this if rate of interest is 4% and compounded quaterley for 4
years then what is the value of r and t
5) Page 10
NPV of a project:
Increases with increase in future cash inflows for a given initial outlay
Decreases with increase in initial outlay for a given set of future cash inflows
Decreases with increase in required rate of return

6) Page 14
Read all the type of securities and their sub parts
7) Page 15
Types of secured bonds.
Mortgage Bonds are secured by real estate owned by the issuer
Equipment Trust Certificates are secured by equipment owned and used in the issuers business
Collateral Trust Bonds are secured by a portfolio of non-issuer securities. (usually U.S.
Government securities)

8) Page 16
Treasury Securities
Treasury bills issued for one year or less.
Treasury notes have a term of more than one year, but not more than 10 years
Treasury bonds greater than ten years
9) Page 16
What are zero coupon bonds?
Zeros generate no periodic interest payments but they are issued at a discount from face value.
10) Page 17
Commercial paper
An unsecured, short-term loan issued by a corporation, typically for financing accounts receivable
and inventories.
11) Page 19
What is meant by Preferred stock ?
Preference shares carry a stated dividend and they do not usually have voting rights
12) Page 20
American Depository Receipts (ADR)
The purpose of an ADR is to facilitate the domestic trading of a foreign stock.
13) Page 20
Warrants
Warrants are call options variants of equity.
14) Page 20
What are derivatives?
A derivative is a product whose value is derived from the value of an underlying asset, index or
reference rate.
15) Page 21
Forward contract
A forward contract is an agreement to buy or sell an asset (of a specified quantity) at a certain
future time for a certain price. No cash is exchanged when the contract is entered into.
Futures contract
A futures contract is an agreement between two parties to buy or sell an asset at a certain time in
the future at a certain price. Index futures are all futures contracts where the underlying is the
stock index and helps a trader to take a view on the market as a whole.
16) page21
Two questions will come:
Hedging involves protecting an existing asset position from future adverse price movements. In
order to hedge a position, a market player needs to take an equal and opposite position in the
futures market to the one held in the cash market.
Arbitrage: An arbitrageur is basically risk averse. He enters into those contracts were he can
earn risk less profits. When markets are imperfect, buying in one market and simultaneously
selling in other market gives risk less profit. Arbitrageurs are always in the look out for such
imperfections.
17) Page 22
Which is not a option?
Call Options

Put Options
LEAPS
Swaps
Oil futures( Answer)
18) Page 21
What is call and put option?
19) Page 22
Currency Swap involves the exchange of principal and interest in one currency for the same in
another currency.
20) Page25
What are primary and secondary markets?
21) Page 26
Which is not a stock market?
The important stock exchanges are as follows:
New York Stock Exchange (NYSE)
National Association of Securities Dealers Automated Quotations (NASDAQ)
London Stock Exchange (LSE)
Bombay Stock Exchange (BSE),
National Stock Exchange of India (NSE)
One will be different
22) Page 27
What is the name of central bank in America?
Federal Reserve
23) Page 27
What will haven if market rates go up?
Bond price will fall
Ie Bond price is inversely proportional to market interest rates
24)Page 29
What is Money Market?
Money market is for short term financial instruments, usually a day to less than a year.
25) Page 29
What is a repo?
A repo is a contract in which the seller of securities, such as Treasury Bills, agrees to buy them
back at a specified time and price.
26) Page 30
regulator(s) and supervisor(s) forthe financial markets.
Thus India has Securities and Exchange Board of India (SEBI)
and the US has Securities and Exchange Commission (SEC).
27) Page 30
What do u mean by portfolio management system?
These systems allow the investment managers to choose the instruments to invest in, based on
the requirements or inputs such as amount to be invested, expected returns, duration (or tenure)
of investment, risk tolerance etc. and analysis of price and other data on the instruments and
issuers

Just read Chapter Financial Statements only 1 question can come


28) Page 49
What is not a function of central bank?
Read all the functions of central bank
Answer- To appoint some governor
29) Page 50
There will two or three questions from CRR..
What do u mean by CRR (Cash Reserve Ratio).
There will be two numericals also..
Same from book example?
30) Page 52
Read the services offering by banks
31) Page 54
What is Glass-Steagall Act ?
Glass-Steagall Act of 1933, created a Chinese wall between commercial banking and securities
businesses in US. That act was intended to address the perceived causes of bank failures during
the Great Depression of 1929.
32)Page 57
Read this page carefully .. three questions will come
Checking Accounts
Quick, convenient and, frequent-access to the money.
Some banks pay interest while many do not.
Money Market Deposit Accounts
Pays a higher rate of interest than a checking or savings account
MMDAs often require a higher minimum balance to start earning interest
Savings Account
Allows making withdrawals, but checks writing facility is not there.
Number of withdrawals or transfers one can make on the account each month is limited.
Time Deposits (Certificates of Deposit)
Guaranteed rate of interest for a term or length of time specified by the account holder.
The rate of interest is often higher than savings or any other account
Basic or No Frill Banking Accounts
Checking accounts, but with a limit on the number of checks one can write and the number of
deposits and withdrawals one can make
Interest is generally not paid.
33) Page 60
What are the ways of Money Transfer?
Cheques/Checks
o Bearer Checks
o Account Payee Checks
o Travelers Checks
o Bankers Checks

Debit Cards
Demand Drafts
Automated Clearing House (ACH)
Standing Instructions
Electronic Transfer
34)Page 61
What is EFT?
Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic
technology as a substitute for checks and other paper transactions. EFTs are initiated through
devices like ATM cards or codes that let one to access your account. Many financial institutions
use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose.
35) Page 63
Read section Lost or Stolen ATM or Debit Cards
If unauthorized use occurs before reporting, the liability of the customer varies depending on the
delay in reporting the loss to the card issuer.
Within two business days Liability limited to $50 for unauthorized use.
Between 2 - 60 days Liability limited to $500 because of an unauthorized transfer.
If the loss is not reported within 60 days, the liability has no limits.
36) page 64
What is EBPP and its advantages?

ELECTRONIC BILLING PRESENTATION AND PAYMENT


37) page 65-66
Read thoroughly.. Some of the questions were
What is Fedwire?
Fedwire is an electronic transfer system developed and maintained by the Federal Reserve
System. The system connects Federal Reserve Banks and Branches, the Treasury and other
government agencies
What is latest version of SWIFT?
SWIFT 15022
38) Page 69
Read thoroughly..
Which is non secure loan?
Answer: Personal loan
Auto loans have Interest rate is lower as compared to Personal loans
39) Page 70 VVimp
One question ie numerical atleast on :
c. Limit (L) max outstanding allowed
d. Margin (M) percentage of limit that can be drawn
e. Asset value (AV) value of underlying asset
f. Drawing Power (DP) - lower of L and (1-M)*AV

There will be atleast 2 questions on difference between Lease and Hire..


Lease
Two main types operating, financial
The Financier owns the asset.
Depreciation is claimed by the financier.
Tax deduction can be claimed for the full value of the rental paid.
Financier takes care of maintenance, insurance etc.
Hire Purchase
The asset is owned by the financier.
Depreciation can be claimed by the borrower.
Tax deduction can be claimed only to the extent of the interest repayment.
40) Page 71
One question which is not a repayment kind?
Kinds of repayments
o EMI same installment amount
o Fixed Principal constant principal, decreasing interest amt
o Step-up principal amount increases in steps
o Step-down principal amount decreases in steps
o Balloon notional amount initially, large last payment
o Bullet interest payment initially, entire principal at one shot
o Random schedule & amount of installments undecided
o Special products combination of above
one will be extra given
41)Page 72
What is Floating Rate of Interest?
The rate of interest is linked to one of the rates prevailing in the market, for example it can be
linked to PLR (Prime Lending Rate) or LIBOR (London Interbank Offered Rate).
42) Page 73
What is Collar and Spread?
Spread= current rate base rate
Collar = cap-floor
43) Page 73
Charge Types
Pledge gold, bank has possession
Hypothecation vehicle, borrower has possession
Lien against bank deposits
Assignment insurance policies, rights get transferred to bank
Shares - periodic drawing power calculation
Mortgage immovable property
44) Page 76
What are Freddie Mac, Ginnie Maes & Fannie Mae?
Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage
Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or
Freddie Mac) are all "secondary market lenders".

45)Page 76-77
Read auto loans and student loans ? only one two question will come?
46) Page 82
What is the meaning of corporate lending?
Corporate Lending refers to various forms of loans extended by banks to corporate bodies like
proprietorship, partnership, private limited companies or public limited companies.
Why they are given by banks?
Corporate loans areprovided by banks for various purposes like new projects, capacity expansion
or plant modernization, daily cash flow requirements (working capital) etc.
Interest is usually paid on the disbursed amount of the loan.
47) page 83
Credit ratings
Rating levels might vary from AAA(highest), AA+, AA- to default ratings like D.
48) Page 84
What do u mean by Lines of Credit?
These are short term loans sanctioned for a fixed validity period, allowing the corporate to draw
the loan as and when required within the validity period and repay the loan after a certain period
(repayment period). Interest is either repayable in certain intervals or in one bullet installment at
the end of the repayment period
49) Page 85
What do u mean by Commercial Paper?
Commercial Paper (CPs as commonly known) is an instrument by which a corporate borrows
money from banks for short periods of time. A CP binds the corporate to make a payment equal
to the face value of the CP to the issuing bank on a specified due date. In this sense, a CP is like
a short term unsecured loan.
Read page 84-85 topics little bit.
50) page 86
What is the classification of loans:
Loans are classified and accounted for as follows:
AccrualLoans
Held-for-sale.
Trading
51) page 87
Atleast two questions will come from credit derivatives
Credit derivatives are financial contracts that transfer credit risk from one party to another,
facilitating greater efficiency in the pricing and distribution of credit risk among market players.
In market parlance, the corporate bond investor in this example is the buyer of protection, the
dealers the protection seller, and the issuer of the corporate bond is called the reference entity
Uses of Credit Derivatives
52) Page 89
Definition of treasury services and its functions?

53) Page 90
What do u mean by:
Forward Rate Agreement (FRA) - A contract that determines the rate of interest,
or currency exchange rate, to be paid, or received, on an obligation beginning at a some
future start date. It is also referred to as Future Rate Agreement.
Interest Rate Swap (IRS) - A deal between banks or companies where borrowers switch
floating-rate loans for fixed rate loans in another country. These can be either the same
or different currencies. The motive may be the competitive advantage of one company to
have access to lower fixed rates than another company. The other company may be
competitively placed to have access to lower floating rates. A swap would be beneficial
to both. The swap is measured by its notional principal.
54) page 91
What do u mean by CMS?
Cash Management Services - CMS is a service provided by banks to its corporate clients for
a fee to reduce the float on collections and to ease the bulk payment transactions of the
client. The three elements of CMS are:
Receivables Management
Payables Management
Liquidity Managemet
55) Page 92
What are the causes of interest rate risk?
Repricing risk
Yield curve risk.
Basis risk
Optionality
56) Page 94
One numerical on:
INR/USD quote: 45.26/.36 (here, 0.01 is the smallest count, referred to as one pip)
EUR/USD quote: 1.2458/.2461 (here, 0.0001 is the smallest count, referred to as one pip)
While the derived cross currency rate would be:
INR/Euro quote: (45.26*1.2461)/ (45.36*1.2458) = 56.40/.51
Definitions of:
Nostro (Our/my account with you): Current account maintained by one bank with another
bank abroad in the latters home currency
Vostro (Their account with me/us): Current account maintained in the home currency by one
bank in the name of another bank based abroad
How many business days are required for spot deal?
Answer two days
Read topic Spot and Forward Foreign Exchange Contracts
57) Page 95
Which are the interbanks:
Front Arena
Summit
Calapso
Wall Street Systems
58) Page 97

Read CMS functions..


59) Page 99
What do u mean by lock box service?
60) Page 99-100
What is pooling and netting ?
61) page 100
What is New Act - Check 21?
62)page 102
What is RGTS?
63)page 103
Read what is ACH?
66) page 105

PAYMENT METHODS
Cash in advance
Letter of credit
Documentary collection
Open account or credit
Counter-trade or Barter
67) page 106
Advantages or disadvantages of LC (commercial letter of credit) in check box question
69)page 108
Read the steps..
70) page 110( positively come)
The standby LC is like a bank guarantee. It is not used as the primary payment method but as a
fail safe method or guarantee for long-term projects.
Back to Back LC allows a seller to use the LC received from his buyer as collateral with the bank
to open his own LC to buy inputs necessary to fill his buyers order.
71) page 110
DOCUMENTARY COLLECTION
Documentary collection carries the risk that the buyer will not or cannot pay for the goods upon
receipt of the draft and documents.
Drafts
A draft (sometimes called a bill of exchange)
Read sight draft and Time Drafts thoroughly..

72) page 111

OPEN ACCOUNT
This can be a very risky method for the seller, unless he has a long and favorable relationship
with the buyer or the buyer has an excellent credit rating.

73) page 113


Full form of BAFT?
74) page 114
two questions will at least come from the table:

INTERNATIONAL PAYMENT INSTRUMENTS COMPARISON CHART


75)Page 117
What are chip cards?
76) page 119
What are the key activities in credit card market? Pls learn which comes under which category..
77)page 120
What are issuing anf acquiring services?
78) page 121
A card Association
Do Not Provide These Functions
Security/Risk management( this function is provided, it is odd one out)
Issue cards
Set credit limits
Set card fees
Set interest rates
Solicit merchants
Set discount rates
79) page 122
Only read the functions little bit
80) page 127
Private Banking covers banking services, including lending and investment management(true)
Investment Management and Advice
A client relationship Manager understands the clients liquidity, capital and investment needs. He
strives to develop an integrated approach to manage client investments and capital markets
trading. Access to specialist advice and extensive research is a key feature of private banking.
Self-directed or non-discretionary: This is largely investment advisory in which the bank offers
investment recommendations based on the Clients approval. The client may choose to ignore
this.
Discretionary: In this case, the banks portfolio managers make investment decisions on behalf
of the customer.
81) page 128-129

COMMON PRIVATE BANKING PRODUCTS


Personal Investment Companies (PICs)
Payable Through Account (PTA)
Hedge Funds
82) page 131-132
See the diagram and learn all the front office and back office functions? Two questions will
atleast come

84) page 135-136


Active vs passive approach
Top Down Approach vs Bottom Up Approach
85) page 137
There are three dimensions to portfolio execution:
Cost of execution
Trading speed
Portfolio Risk Management
86) page 139
Read mutual funds ..two questions will atleast come..
87) page 141
What do u mean by NAV?
Some of the leading companies that offer mutual funds are:
Fidelity Investments
Vangaurd
ING Direct
Mellon
88) page 142
Difference between SMA and Mutual Funds?
Advantages and disadvantages of SMA?
89) page 143
What is the name of pension funds?
401k,IRA
90) page 148
2 questions

SYNDICATE
The hub of the investment banking wheel, syndicate provides a vital link between salespeople
and corporate finance. Syndicate exists to facilitate the placing of securities in a public offering, a
knock-down drag-out affair between and among buyers of offerings and the investment banks
managing the process. In a corporate or municipal debt deal, syndicate also determines the
allocation of bonds.
91) page 148-149
Full form of IPO? What it is?
An initial public offering (IPO) is the process by which a private company transforms itself into a
public company.(this will come)
The IPO process consists of these three major phases:
Hiring the Managers
Due Diligence and Drafting
Marketing
92) page 149

What do u mean by THE CHINESE WALL?

93) page 150

UNDERWRITING
Underwriters earn 3 types of Underwriting Spread:
Manager's fee - The lead underwriter receives this fee on all securities sold.
Underwriter's Allowance is the total spread minus the Manager's fee. This fee is shared by
syndicate members based on the type of syndicate account.
Concession - It is typically the largest part of the spread and is paid to the broker/dealer that
actually took the clients order.
Question: which is the largest part of spread?
Answer : concession
94) page 151

SECONDARY MARKET TRADING


there will three questions atleast come, read it carefully:
Examples: Stock Exchanges: NYSE, AMEX
NASDAQ is a good example of OTC market.
Another name for fourth market: Instinet
What is OTC?
95) page 153
Bid or ask rate:
An individual firm could act as a broker on one trade and a dealer on another. When acting as a
broker, the firm is taking customer orders and acting as their agent to buy or sell the security. For
this service, the broker charges a commission. A firm acting as a dealer is the actual buyer or
seller, taking the other side of a trade. The price at which market makers will buy or sell a
particular security is known as the Bid or Ask Price.
96) page 154
Order Types (Based on Volume)
Fill or Kill (FOK) The order must be immediately filled in one trade or canceled completely.
All or None (AON) - The entire order must be filled or canceled completely, but unlike FOK, AON
can remain good till cancelled.
Immediate or Cancel (IOC) must immediately be filled for as much of the order as possible in
one trade, with the remainder being cancelled.
Market Not Held order The floor broker has the discretion concerning time and price. A key
point is that Market Not Held orders are never on the Specialist's Book.
Question: diff between FOK and AON?
97)page 160
The important markets and the indices used are presented below:
US Diversified market Dow Jones Industrial Average (Dow)
US Technology NASDAQ 100
UK (London) Financial Times Stock Exchange Index (FTSE)
Germany (Frankfurt) DAX
France (Paris) CAC
Switzerland (Zurich) SMI

Japan (Tokyo) Nikkei


Hong Kong Hang Seng
Singapore Strait Times Index (STI)
98) page 164
See XL sheet sure three questione will come from risk
Credit risk is the possibility of loss as a result of default, such as when a customer defaults on a
loan, or more generally, any type of financial contract.
Liquidity risk is the possibility that a firm will be unable to generate funds to meet contractual
obligations as they fall due.
Operational risk is the possibility of loss resulting from errors in instructing payments or settling
transactions.
Legal risk is the possibility of loss when a contract cannot be enforced -- for example, because
the customer had no authority to enter into the contract or the contract turns out to be
unenforceable in a bankruptcy.
Market risk is the possibility of loss over a given period of time related to uncertain movements in
market factors, such as interest rates, currencies, equities, and commodities.
99) page 164

MEASURING RISKS
The probability
monetary impact
100) page 164
What is var?
101) page 165
Numerical..
Example VaR Calculation
Assume that you have a holding in IBM Stock worth $10 million. You have calculated the
standard deviation (SD) of change over one day in IBM is $ 0.20.
Therefore for the entire position, SD of change over 1 day = $200,000
The SD of change over 10 days = $200,000 * (10) = $632,456
The 99% VaR over 10 days = 2.33 * 632,456 = $1,473,621
102) page 165
What is monto-carlo?
Ans: A simulation technique
103) page 166
Variance-Covariance method
it is the computationally fastest method known today.
Which is the best VAR method? Ans- Cant say
104) page 166

MANAGING RISKS
There are multiple strategies to manage risks. Some of the commonly followed ones are:
1. Diversification
2. Hedging or Insurance
3. Setting Risk Limits
4. Ignore the risk!
105) page 170
Read this page..
U should know what do u mean by core and global custodian?
What are custodian services?

106) page 172


Read in depth Asset/Liability Analysis
107) page 177
What is exchange?
An exchange is a regulated market place, where buyers and sellers come together to exchange
what they want.
Examples: Stock Exchanges: NYSE, AMEX
Ques: What is NYSE?
Over the Counter Market
Over The Counter (OTC) market is different from the exchanges in the sense that there is no
single physical location
NASDAQ is a good example of OTC market.
108) page 180-181
Two three numerical will come same as it is as given in IBM shares

What is clearing? What is netting?


109) page 184-185
The primary employee benefits are
Defined Benefits
Defined Contribution
Health and Welfare
Defined contribution plans have gained popularity as employers have begun to ask their
employees to share responsibility for their retirement. The main purpose of a defined
contributionplan is to provide an investment vehicle for employees to accumulate
retirement income.( state true or false) true
diff between Defined Benefit Plan vs Defined Contribution Plan ?

110) page 186


The following plans are designated as defined contribution plans:
Profit Sharing Plans
Cash Or Deferred Arrangements Or 401(k) Plans
Stock Bonus Plans And Employee Stock Ownership Plans
Simplified employee pensions (SEP)
Tax Sheltered Annuities Or 403(b) Arrangements

111) page 187


What is there is peraby tax check?
SPO
SAR
Discrimination test
415 LIMIT
5500 REPORTING
1059 Reporting
Reporting and compliance
See the diagram..

112) page 188


What are the categories in Health and welfare?
Categories of health and welfare plans

Health Care
o Medical
o Prescription drug
o Behavioral health
o Dental
o Vision
o Long-term care

Disability Income

o Sick leave
o Short-term disability

o Long term disability


Survivor Benefits
o Term life
Some common questions:
1) Which is the best market? New York
2) Which is not a function of private bank?
Ans: to print notes
3) Reliance Industries Limited, India would like to raise money in NYSE for expanding its
operations in the domestic market (India). The securities issued would be
American Depository Receipt

You might also like