Professional Documents
Culture Documents
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
Government
Banks
The brokers who stuck in deal
The exchange
The buyer and seller
Middle office
Front office
Back office
All
Interest income
Fees for services
None
Deposits from public
Grants from Central banks
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.
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.
11.
12.
a)
b)
c)
d)
e)
16.
i.
ii.
iii.
a) I
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)
19.
a)
b)
c)
d)
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.
Annual rate of return (also called Coupon, Fixed, Stated or Nominal Yield)
Higher the credit rating, the lower the Yield
21.
b) All
c) None
d) Concession
e) Managers Fee
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.
26.
27.
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)
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.
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.
d) Outbound calls
31.
Which of the following is NOT an example of an option?
a)
b)
c)
d)
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)
35.
Which is NOT a Captive finance company?
a) Bank of America
b)
c)
d)
e)
37.
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.
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.
45.
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.
d) Standby
e) Revolving
48.
a) Operational effectiveness
b) Market discipline
c) Minimum capital requirements
d) Supervisory review
49.
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.
55.
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)
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
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
58.
59.
c) AAA,AA+,D
d) D,CB,A
Bond Rating
Moody's
60.
a)
b)
c)
d)
Grade
Risk
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
e) Front Arena
Treasury Management Systems are
Sungard / Front Arena
Summit
Calypso
Wall Street Systems
61.
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.
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.
64.
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.
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?
72.
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.
75.
b) Settlement
c) Netting
d) Trading
77.
The type of loan in which spread varies over the life of the loan
is called ____
a) Positive spread loan
78.
None
Credit risk and foreign exchange risk
Liquidity risk and credit risk
Credit risk and interest rate risk
79.
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)
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.
e) IV
85.
d) Transactions
86.
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.
88.
c) By telephone
d) SWIFT network
89.
b) Amex
c) Tsys
d) First Data Corporation
First Data Corp (Processor)
TSYS (Processor)
American Express (Acquirer, Card Organization & Issuer)
90.
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.
92.
93.
FACTORS IN CHOOSING THE MODE OF FINANCING Costs, Time frame, risk factors,
government guarantee program and exporters funds.
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?
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.
101.
d) All
104.
b) Secondary market
c) All
d) Primary market
e) Through private placement
105.
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.
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
110.
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.
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.
114.
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
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
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
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
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
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
_____
Marks: 2
b. 4
c. 3
d. 5
e. 2
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
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
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
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
Marks: 1
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
60 Annuities are:
d. Return Rate
e None of the listed Options
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
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
Marks: 3
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
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
_____________
_________
Marks: 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
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 $50000 year.
80. Which is true about retail banking?
a. The business focuses on small no. of high net worth individuals.
D) Demand loan
E) Discounted loan
88. Who are involved in the preparation of prospectus of IPO?
A) Commercial bankers
B) Investment Bankers
C) None
D) Company Management
E) Company Management and Investment Bankers
89. Bankers Acceptance differs from Sight Draft in that
A) Bankers Acceptance reduces lending capacity
B) Sight Drafts are negotiable instruments
C) Bankers Acceptance demands immediate payment.
D) None
E) Banks can raise funds by selling acceptance.
90. Clients of a private banker are generally not segregated on the basis of
A) Investible assets
B) Location
C) Age
D) Net worth
E) Name
91. The initial sale of the security is in the market, while subsequent
trading in the security is in the .. market
A) Spot, futures
B) Debt , Equity
C) Primary , Secondary
D) Money, Capital
E) Secondary, Primary
92. Under what category can services like asset/liability analysis, asset
allocation, cash projection, compliance reporting, fund administration,
investment Management universe etc. provided by an institution can be
classified?
A) Investment Management
B) Asset Servicing
C) None
D) Trading
E) Investor Services.
93. CIP in the context of anti-money laundering is
A) All
B) Stands for Suspicious Activity Reports
C) Customer Identification Program
D) Requiring Businesses, which were only to report cash transactions involving more
than 1.00,000?
94. On a trading day at a stock exchange a broker undertakes the foll trades:
Buy 100 IBM shares for 10$ 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
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.
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.
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.
11.
12.
13.
14.
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.
17.
18.
19.
20.
21.
22.
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.
25.
26.
27.
28.
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.
31.
32.
33.
Standby letter is _____ secure than documentary collection and cheaper than ____
a. More, commercial LOC
34.
35.
36.
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.
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.
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
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
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..
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
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
a. 4,1,3,2,5
b. 4,5,2,3,1
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
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
d. Front Office
b. Personal Loans
e. Auto Loans
e. Specialists
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
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?
b. Trading Loans
e. Undrawn Loan
c. Committed Loans
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
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
b. Corporate Bonds
e. Swaps
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
b. Negotiate
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
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
b. The treasury
d. The government
e. The Fed
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.
$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
7.84
# shares outstanding
59.2 Mn
Selling,
General
Administrative Expense
& $ 53.34
Other expenses
1.9
$ 45.1 Mn
$ 35.5 Mn
$ 34.56 Mn
$ 52.94 Mn
a)
b)
c)
d)
Working Capital
Asset
Owners Equity
Borrowings
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.
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.
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
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
SEC
Junk bonds
None of the
Stock Exchanges
Investors
Freely transferable
Cant be sold except on maturity
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.
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.
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
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
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.
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
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
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
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
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
Issuing bank
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
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
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
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
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
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
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.
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%
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
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
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
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
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
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
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
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
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
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
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
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.
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
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%
458. What date represents the announcement by the board of directors that a dividend will be
paid?
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
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
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
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
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
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
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
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
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
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
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)
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.
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
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.
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
(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
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
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)
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
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:
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)
a.
b.
c.
d.
e.
Munis
Junk Bonds
Corporate bonds
Treasury Bills
Yarkee Bonds
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
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.
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
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
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?
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..
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:
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
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
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!
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
$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
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
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
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.
-> 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?
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
B)
C)
D)
E)
Documents
Physical instrument like check and draft
Electronic data files
Cash
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
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
G)
H)
I)
J)
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.
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?
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
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
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
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
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.
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
Increase in price
Decrease in price
Very high change in price
Economy crises
Currency Crises
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
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.
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.
138.
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.
141.
142.
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.
148.
149.
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.
153.
e.
f.
g.
h.
154.
e.
f.
g.
h.
155.
156.
157.
e.
f.
g.
h.
158.
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.
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
171.
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)
177.
F)
G)
H)
I)
J)
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)
182.
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)
186.
J)
K)
L)
M)
N)
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)
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)
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)
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.
203.
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.
207.
f.
g.
h.
i.
j.
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.
213.
i.
j.
k.
l.
214.
i.
j.
k.
l.
215.
k.
l.
m.
n.
o.
216.
c.
217.
i.
j.
k.
l.
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)
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)
223.
K)
L)
M)
N)
O)
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)
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
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)
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.
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
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
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?
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
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.
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
"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
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:
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:
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
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
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
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
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
1.
269.
270.
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.
273.
274.
275.
to:
a.
Market risk
b.
c.
d.
e.
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
279.
280.
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
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
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)
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
a. True
b. False
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
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.
49.
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.
52.
53.
54.
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.
57.
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.
60.
61.
62.
63.
Standby letter is _____ secure than documentary collection and cheaper than ____
a. More, commercial LOC
64.
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
a.
b.
c.
d.
e.
None
Auto loans
Demat
Hire purchase
Personal loan
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.
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
77. Which
a.
b.
c.
d.
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
is
Unregulated and unsafe
Regulated and unsafe
Unregulated and safe
Regulated and safe
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.
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
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
3.
4.
5.
6.
True or False
a. In hire purchase the m/c will be owned by the customer after the payment period
7.
8.
CORPORATES
b. Banks
9.
Overdraft(This is my guess)
A bank is getting deposit from a customer and lending it to other customer. Which is the correct
one
a.
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
Reverse of (a)
Munis
b. T-Bills
c.
d. Stock
13.
Holders of Debt
Who will get the money back first in case of default of a company
a.
Holders of Debt
15.
16.
Primary Market
b. Secondary Market
c.
17.
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.
a.
b. They dont know how to advertise to sell and buy the instruments
c.
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.
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
23.
Citigroup
b. JPMorgan
c.
24.
banking and
securities businesses
25.
26.
Credit Card
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.
Distant transfer
30.
31.
Discretionary means what? The banks portfolio managers make investment decisions
on behalf of the customer.
32.
Private Banking
b. Trade Finance
c.
33.
Retail Banking
Private Banking focuses on retail investors while asset management is targeted towards
institutional investors
34.
35.
Held For Sale (my guess. The question was like that)
b. Accrual
c.
36.
Trading
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
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?
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
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..
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.
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
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
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?
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