1. Which of the following is true?
a) Depreciation is claimed by financier in Lease & not in case of hire purchase b) Tax deduction can be claimed for the full value of the rental paid in case of lease c) All d) The financier owns the asset both in case of “lease” and “Hire Purchase” Lease is a long-term rental agreement for the asset, while Hire Purchase is allows the user to own the asset after all the payments have been made to the lender. Lease Two main types – operating, financial The Financier owns the asset. Depreciation is claimed by the financier. Tax deduction can be claimed for the full value of the rental paid. Financier takes care of maintenance, insurance etc. Hire Purchase The asset is owned by the financier. Depreciation can be claimed by the borrower. Tax deduction can be claimed only to the extent of the interest repayment.
2. Annuities are: a) b) c) d) e)
Discounted loan Capitalized loan Amortized loan True discounted loan A loan that is paid in periodic installments with capitalized interest
3. The counterparty in futures contracts trade is a) b) c) d) e)
Government Banks The brokers who stuck in deal The exchange The buyer and seller
4. A person purchases a share at 50$. After 2 years the price is at 75$ and he decides to sell the share at that price. What is the annualized return that person has earned? FV = 75 PV=50 Fv=pv(1+i)n i : Interest rate per unit time period n : Number of time periods I = 0.2247
5. Bank operations are divided into? a) b) c) d)
Middle office Front office Back office All
6. Primary source of income for banks? a) b) c) d) e)
Interest income Fees for services None Deposits from public Grants from Central banks
A bank makes a profit by investing or lending money that is earning a higher rate of interest than it pays to its depositors. They borrow money from individual or businesses “who have money”, and lend it to those “who need money”, by adding a mark up, to pay for expenses and profit. The difference between the rates, which banks offer to depositors and lenders, is generally referred to as “Spread”. 7. If a bank charges 8% for 1 year from customer A and 10% from customer B for similar loan, this can be attributed to a) Interest rate risk b) Credit risk c) Liquidity risk d) Operational risk e) Market risk
Market risk is the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The associated market risks are:
Equity risk, the risk that stock prices and/or the implied volatility will change. Interest rate risk is the risk (variability in value) borne by an interest-bearing asset, such as a loan or a bond, due to variability of interest rates. Currency risk, the risk that foreign exchange rates and/or the implied volatility will change. Commodity risk, the risk that commodity prices (e.g. corn, copper, crude oil) and/or implied volatility will change.
Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised. Liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). An operational risk is, as the name suggests, a risk arising from execution of a company's business functions.
8. Check 21 act facilitates: a) b) c) d) e)
Netting of checks at day end Netting and substitution of checks at day end Netting and pooling of checks at day end Clearing check by manually processing the check Check truncation and creation of substitute check
The law allows the recipient of the original paper check to create a digital version of the original check—called a "substitute check," thereby eliminating the need for further handling of the physical document. 9. Tax and insurance premiums collected as part of loan repayment are handled through which of the following type of account? a) Escrow b) DMAT c) MFA Escrow account - A trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums. Pick the odd one a) Agency loans b) FHA loans c) VA loans d) Interest only loans
10.
Agency loan - A conventional loan is a mortgage that is not guaranteed or insured by any government agency, including the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA) and the Department of Veterans Affairs (VA). It is typically fixed in its terms and rate. FHA loans - A mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low to moderate income borrowers who are unable to make a large down payment. FHA loans allow the borrower to borrow up to 97% of the value of the home. The 3% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time buyers.
VA loans - A mortgage loan program established by the United States Department of Veterans Affairs to help veterans and their families obtain home financing Interest only loans - Mortgage in which the borrower pays only interest for a set term. At the end of this term, typically five to ten years in the United States, the loan converts to a fully amortizing loan in which both interest and principal are paid. An interest-only loan reduces loan payments in the early years of a loan, so borrowers who expect their income will grow over the loan term can take out a larger Mortgage for purchase of a home.
11.
Bank A, bases in US, provides safekeeping services for securities to its US clients. IT also has clients in France & Belgium and provides securities safekeeping services to these clients through Banks C and D respectively. Which of the following terms best describes Bank A? a) Secondary custodian b) Global custodian c) None d) Main custodian e) Sub custodian A global custodian provides custody services for cross-border securities transactions. In addition to providing core custody services in a number of foreign markets, a global custodian typically provides services such as executing foreign exchange transactions and processing tax reclaims. A global custodian typically has a sub-custodian, or agent bank, in each local market to help provide custody services in the foreign country.
12. a) b) c) d) e)
In Normal distribution 99% confidence interval corresponds to __ 1.65sd 1sd 3sd 2.33sd 1.96sd
Value at Risk is an estimate of the worst expected loss on a portfolio under normal market conditions over a specific time interval at a given confidence level. VaR Calculation: 99% = 2.33 * standard deviation 13. a) b) c) d)
All of following are benefits of netting EXCEPT: Reduction in cost of settlement Reduction in the no. of deliveries and receipts Reduction in compliance risk Reduction in systemic risk
Clearing is the process of determination of obligations, i.e. who owes what, to whom and how much. Settlement on “net” basis reduces the number of transactions to be settled drastically reducing the overall transaction cost for everyone. As per an estimate, netting reduces the number of settlements needed by more than 95%. Settlement for clearing cheques presented to the clearing houses takes place on a netting basis at a particular time either same day or on the next day. This system gives rise to risks such as credit risk, liquidity risk, legal risk, operational risk and systemic risk. Compliance risk are Associated with Custody Services. 14. All the following statements concerning US government securities are correct EXCEPT: a) Treasury bills have their interest paid in a lump sum at maturity
b) Treasury bonds have maturity dates up to 30 years c) Treasury notes have maturity dates up to 10 years d) Treasury bills have a greater interest rate risk than either Treasury bonds or Treasury notes. 15. SPV = Special purpose vehicle
16.
i.
ii. iii. a) I
VISA is involved in which of the following Provide the interchange systems to transfer data and funds between members Set credit limits Issue credit cards b) II c) III d) I and II
Visa does not issue cards, extend credit or set rates and fees for consumers; rather, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers 17. In reality people hold part of their loans as cash. This makes the multiplier: a) Same as if people did not hold cash b) Larger c) Zero d) Smaller
18. a) b) c) d) e)
The share price of a company may drop considerably from its current levels. In scenario, what type of risk are the investors facing? Liquidity risk Company risk Market risk Business risk Credit risks
19.
a) b) c) d)
Securities functionality is a function of _____ Back office Specialists Front office Mid office
e) Traders Security is a financial instrument that signifies ownership in a company (a stock), a creditor relationship with a corporation or government agency (a bond), or rights to ownership (an option).
Private Banking Front Office covers functions like Sales & Client prospecting, Contact Management, Account Aggregation and Financial Advisory services.
Private Banking Middle/Back Office covers functions like Asset Allocation, Research, Portfolio Analysis, Risk Management, Trade Processing, Compliance and documentation. Traders facilitate the buying and selling of stock, bonds, or other securities such as currencies, either by carrying an inventory of securities for sale or by executing a given trade for a client. Traders deal with transactions large and small and provide liquidity (the ability to buy and sell securities) for the market. (This is often called making a market.) Traders make money by purchasing securities and selling them at a slightly higher price. This price differential is called the "bid ask spread." 20. Generally if bond X had a lower rating than bond Y, the yield on bond X would be a) Same as that of Bond y b) Lower than that of bond Y
c) Higher than that of Bond Y d) Volatile
Annual rate of return (also called Coupon, Fixed, Stated or Nominal Yield) Higher the credit rating, the lower the Yield
21.
Trade Finance primarily helps in a) Facilitating corporate lending b) Facilitating setting up of new factories c) Facilitating intercompany transaction
d) Facilitating international transactions e) Facilitating intra=company transactions
The main objective of trade finance is to facilitate transactions. There are many financing options available to facilitate international trade such as preshipment finance to produce or purchase a product, and post-shipment finance of the receivables. 22.
Which of the following is a type of underwriting spread? a) Underwriter’s allowance
b) All
c) None d) Concession e) Manager’s Fee
An Underwriter is a broker/dealer or an investment bank. He guarantees that the capital issue will be subscribed to the extent of his underwritten amount. He will make good of any shortfall. The contract between the issuer and the Lead or Managing Underwriter is the Underwriting Agreement. The agreement states the terms and conditions of the offering, such as, the Underwriting Spread (the amount the underwriters make on sales), the Public Offering Price (POP), and the amount of proceeds from the offering that will go to the issuer.
Underwriters earn 3 types of Underwriting Spread: · ·
Manager's fee - The lead underwriter receives this fee on all securities sold. Underwriter's Allowance is the total spread minus the Manager's fee. This fee is shared by syndicate members based on the type of syndicate account. · Concession - It is typically the largest part of the spread and is paid to the broker/dealer that actually took the client’s order. 23. Coming together of BNY and Mellon together is an example of ____ a) All b) Takeover c) Acquisition
d) Merger
e) Brokerage ABC co wants to identify the best way for making salary credits to its huge employee base. Can you select the best option? a) Paper checks b) Contactless payments c) Cash
24.
d) Automated clearing house 25.
In private banking PTA is Payable thorough account
26. 27.
Loc is Letter of credit On trading day at an exchange, a broker undertakes the following trades. Buy/Sell Compan No of shares Share y price Buy MS 200 $10 Sell MS 100 $10.5 Buy Google 100 $20 Sell MS 30 $ 11 Sell Google 50 20.5 Sell MS 40 $9
How much did the broker payout to exchange on total in-case of a) gross settlement system b) net settlement system? a) (a) $4000 (b) $1235 b) c) d) e)
(a) $1235 (b) $2235 (a) $260 for Microsoft $ 975 for Google & $260 for MS None (a) $ 1235 (b) $ 4000
Gross Buy Buy
200 100
$10 $20
-$2,000 -$2,000
$ 4000 needs to be paid to exchange to get 200 MS share and 100 google shares.
Netting Net position for MS: +200-100-30-40 = 30 Net position for Google: +100-50 = 50 So broker would receive 30 MS shares and 50 Google shares from the exchange. The broker has to pay $1235 only to get 30 MS shares and 50 Google shares from the exchange. Buy Sell Buy Sell Sell Sell
200 100 100 30 50 40
$10 $10.50 $20 $11 20.5 $9
Total
-$2,000 $1,050 -$2,000 $330 $1,025 $360 -$1,235
28.
There are 5 participants A, B, C, D, E in a 25M USD syndicated loan and A is the lead manager. The borrower has agreed to pay 0.4% ($ 1,00,000) participant fee. How much each participant will share in participant fee? a) ($ 1,00,000) will be received every time money is withdrawn b) None c) (%$1,00,000) will be charged towards undrawn portion
d) ($ 1,00,000) will be received affront e) ($1,00,000) will be received every month
29.
Find out the one which does NOT come under retail banking service? a) Personal loans b) Credit card services
c) Trade finance
d) Electronic banking Retail Banking o Electronic Banking o Credit Card services o Retail Lending – Personal Loans, Home Mortgages, Consumer Loans, Vehicle Loans o Private Banking o Asset Management
30.
Which of the following is NOT a feature of online trading a) Fund transfer b) Bill payment c) Secure chat
d) Outbound calls 31. Which of the following is NOT an example of an option? a) b) c) d)
LEAPS (Long term options) Call option swaps put option
e) oil futures · · · ·
Call Options are options to buy a stock at a specific price on or before a certain date. Put Options are options to sell a stock at a specific price on or before a certain date. Long-Term Options are options with holding period of one or more years, and they are called LEAPS (Long-Term Equity Anticipation Securities). Swaps are the exchange of cash flows or one security for another to change the maturity
32. What could be the type of mortgage interest? a) All b) Fixed c) Floating d) Hybrid
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. The two basic types of amortized loans are the fixed rate mortgages (FRM) and adjustable rate mortgages (ARM) (also known as a floating rate or variable rate mortgage). Combinations of fixed and floating rate are also common, whereby a mortgage loan will have a fixed rate for some period, and vary after the end of that period.
33.
a) b) c) d)
Banks are financial intermediaries that Help connect public to the central banks Do not operate efficiently in the financial system Should not be allowed to open savings accounts Are not required
e) Link depositors to borrowers 34. In electronic check conversion (ECC), what happens once the check is processed? a) Receive cash immediately
b) The customer signs a receipt authorizing the store to present the check to bank electronically and deposit the funds into the store’s account c) All d) The customer can present a check to store cashier
35. Which is NOT a Captive finance company? a) Bank of America b) c) d) e)
Ford Motor credit Hyundai Motor Finance Company General Motors Acceptance Corporation None
Captive finance company is a subsidiary whose purpose is to provide financing to customers buying the parent company's product. The captive finance company is usually wholly owned by the parent company. Although there are numerous examples of these, the best ones occur in the automotive industry. General Motors has General Motors Acceptance Corporation (GMAC),
Daimler Chrysler has Chrysler Financial, and Ford Motor Company has Ford Motor Credit Company (FMCC) Similarly Hyundai Motor Finance Company serves Hyundai dealers 36. What is OTC? a) Operating the company
b) Over the counter c) Options on the counter d) None
37.
XYZ Corporation is a large client of bank and on average for a period it maintains $20 million in its bank account. However the bank allows the authorized representatives off XYZ to utilize funds up to 15% over the balance maintained. This is an example of which of the following option? a) Accrual loan b) Committed loans c) Held for sale loans
d) Overdraft
e) Undrawn loan Overdraft limits are extended to help the corporate manage the day-to-day cash flow needs of the business. The bank makes available a certain sum of money for a period of time (say, USD 20.0 million for a period of 1 year). There would be a separate account called the overdraft account created to monitor withdrawals under this loan. Whenever the corporate has a deficit in its main business account, it can draw money from the overdraft account (up to the limit of USD 20.0 million). It can also put back money in the overdraft account as and when they have surpluses in the business account.
38.
You purchase a stock for $40. One year later you receive $2 as dividend and sold the share for $48. How much is the return of holding period? a) 45% b) None
c) 25% d) 10% e) 50%
39. a) b) c) d) e)
40.
Which of the following is NOT a core private banking function? Investment analysis and advise sales and marketing deposit mobilization client management research
Treasury bills can be transacted and settled on the same date? (TRUE) 41. Identity the odd one out a) Equities b) Shares c) Stocks
d) Common stock
e) Conversible bond 42.
The amount owed by a company to suppliers in the next one year will be categorized under ____
a) Current liabilities b) Deferred liabilities c) Annual liabilities d) Accrued liabilities 43. Company ABC has a gross profit of $50000. The operating expenses amounts to $10000. The interest on loans availed amounts to $5000 and taxes to be paid amounts to $5000. Calculate the EPS if there are total of 20000 shares.
a) 1.5 b) 1.25 c) 2.5 d) 2 Gross profit = 50000 Operating expenses = 10000 Operating Income = Gross profit - Operating expenses = 40000 EBIT (Earnings Before Interest and Taxes) = Operating Income + other income – other expenses = 40000 Profit Before Tax (PBT) = EBIT - Interest Expenses = 40000 – 5000 = 35000 Net Income or PAT (Profit after Tax) = Profit Before Tax (PBT) – income taxes = 30000 EPS (Earnings Per Share) = Profit after Tax / No. of Shares = 30000/20000 = 1.5
44.
In an account earning simple interest from the first year is reinvested at the beginning of the second year. FALSE
45.
An investor has multiple investment options yielding various dollar returns at various points of time, while he is comfortable with a return of X% pa. Which method should he use to compare the various investments? a) External rate of return
b) Net present value c) Simple interest d) Compound interest
Net Present Value (NPV) is a concept often used to evaluate projects/investments using the Discounted Cash Flow (DCF) method. The DCF method simply uses the time value concept and discounts future cash flows by the applicable interest rate factor to arrive at the present value of the cash flows.
46.
P & L statements represent transactions over a period of time while the balance sheet information as of a specific date. TRUE 47. Which of the following LCs is similar to a bank guarantee? a) Straight b) Negotiable c) Back to back
d) Standby
e) Revolving
48.
The BASEL 2 frameworks has 3 main pillars. From the options given below, find the one that is NOT a part of it.
a) Operational effectiveness b) Market discipline c) Minimum capital requirements d) Supervisory review
49.
Premature withdrawal of principal attracts penalty in a CD account. TRUE 50. _____ is the legal and professional proceeding in which a lender. Obtains a court ordered termination of a borrower’s equation right of redemption a) Securitization
b) Foreclosure
c) Sub-prime d) Credit freeze 51. The BSE is large primary financial market in which the initial issuer receives the proceeds for the sale of securities. TRUE 52. FICO score represents the credit worthiness of the borrower. The FICO score is a key tool used by many lenders to assess the creditworthiness of a borrower; it conducts a probability analysis on a borrower’s credit report assessing the ability of an individual to repay his/her debts. 53. If total spread of underwriting is $100000. What is the amount which will be distributed in the syndicate? a) 100000 b) 400000 c) 500000
d) Cannot be determined e) 600000
Syndicate - To share the risk, and more efficiently distribute the offering to the public, broker/dealers will join together in a Joint Trading Account. The syndicate profits by selling the securities and earning a Spread (i.e., the POP less the amount paid to the issuer). Syndicate members share the risk and are responsible for any unsold securities.
54.
Purchase of account receivables at a discount is called FACTORING Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business.
55.
Choose the right option a) None of the mutual funds are listed on stock exchanges
b) Only close ended mutual funds are listed on stock exchanges c) Only open ended mutual funds are listed on stock exchanges
d) Both close and open ended funds are listed on stock exchanges You can buy mutual funds when mutual fund companies make initial public offerings. Filling out an application form with a payment of some initial deposit is all it takes. Buying mutual funds called closed end funds is from stock exchanges. Closed end funds are initially sold by fund companies in limited numbers and they are listed in a stock exchange to facilitate trading by investors. These will be usually at premium prices or as dictated by demands in the market (higher demands for various reasons attract higher premiums). You can also buy mutual funds (open end funds - funds purchasable perpetually from the company). Here the price at which you buy will be a figure called as NAV in the industry circles.
56. a) b) c) d)
Warrants are the combination of which of these instruments? Put options and swaps Cash and call options Call and put options Equities and futures
e) Equities and call options On trading at NYSE, a broker undertakes the following trades
57.
Buy
IBM
100
$11
Sell
IBM
50
$10.50
Buy
MS
100
$20
Sell
IBM
20
$11
Sell
MS
10
20.5
Sell
IBM
30
$9
How much did the broker pay to exchange? A) gross B)net Answer : 3100 (gross) 1880 (Net) Buy
IBM
100
$11
Sell Buy
-$1,100
100
IBM
50
$10.50
$525
-50
MS
100
$20
-$2,000
100
Sell
IBM
20
$11
$220
-20
Sell
MS
10
20.5
$205
-10
Sell
IBM
30
$9
$270
-30
Netting
-$1,880
30 IBM 90 MS
Gross
-$3,100
to buy 100 IBM & 100 MS
58.
Which institution is responsible for monetary policy for the country? CENTRAL BANK
59.
Which of the following represents the correct hierarchy of corporate ratings (highest to lowest)?
a) AAA, AA, D, BBB b) D,AA,B,AAA
c) AAA,AA+,D d) D,CB,A
Bond Rating Moody's
60.
a) b) c) d)
Grade
Risk
Standard & Poor's
Aaa
AAA
Investment
Lowest Risk
Aa
AA
Investment
Low Risk
A
A
Investment
Low Risk
Baa
BBB
Investment
Medium Risk
Ba, B
BB, B
Junk
High Risk
Caa/Ca/C
CCC/CC/C
Junk
Highest Risk
C
D
Junk
In Default
Which of the following is treasury management system? Pinnacle Flex cube TS2 Finnacle
e) Front Arena Treasury Management Systems are Sungard / Front Arena Summit Calypso Wall Street Systems
61.
Corporate loans are: a) Never secured b) Never unsecured
c) Secured or unsecured d) Always unsecured e) Always secured Corporate Lending refers to various forms of loans extended by banks to corporate bodies like proprietorship, partnership, private limited companies or public limited companies. Banks lend to such entities on the strength of their balance sheet and business cash flows. Corporate loans are provided by banks for various purposes like new projects, capacity expansion or plant modernization, daily cash flow requirements (working capital) etc. Depending on the nature of the requirement, loans may be long-term or short-term in nature. Loans can be either secured or unsecured in nature. In case of secured loans, if the corporate
defaults on payment of principal or interest on the loan, the bank can take possession of the security and sell off the same to meet principal or interest payment on the loan. Security is usually in the form of land, buildings, plant and machinery, physical stock of the raw material, goods for sale etc.
62.
Two major functions of corporate finance division of investment banks are? a) Technology and m&a ‘s b) Risk management and underwriting c) Security trading and underwriting
d) Mergers and acquisitions advisory and underwriting
e) Short selling 63. Which of the following are NOT the benefits of using credit derivatives? a) Credit derivatives can be used either to take more risk or to avoid (hedge) it b) Credit derivatives can be used to credit positions that can otherwise not easily be established in cash market.
c) Increasing the credit limit of a corporate
d) Credit derivatives can be used both to diversify their credit risk exposures and free up capital from regulatory constraints. Uses of Credit Derivatives Like any other derivative instrument, credit derivatives can be used either to take on more risk or to avoid (hedge) it. credit derivatives can be used to create positions that can otherwise not easily be established in the cash market. Banks use credit derivatives both to diversify their credit risk exposures and to free up capital from regulatory constraints
64.
Which of the following represents that the company is incorporated in USA? a) LTD b) PTE c) PLC d) INC
65.
GE shares are selling for $15 each. You bought 200 shares one year ago at $12 are received dividend payments of $2 per share. What was your total dollar capital gain this year? a) 200
b) 600
c) None d) 1000 e) 400
66.
If the nominal interest rate is 10% and rate of inflation is 2%, what is the real interest rate?
a) 12
b) 8
c) 20 d) 5 e) None 71. A card holder swipes his card for USD 100. How much does the merchant i. Deduct from the card holder? ii. Receive from the acquirer?
Assume merchant discount at 2% a) USD 100, USD 100 b) USD 100, USD 98
c) USD 100, USD 2 d) USD 98, USD 98
Following are the Income and Expense sources in an Acquirer business Income: Merchant discount (1–4% of transaction value) Processing fees ($ 0.20 – $ 0.40 per transaction) Monthly minimum fees Customer service fees POS Equipment sales/service Expense: Interchange fees paid to Issuer ISO/MSP fees Data processing & Communications expenses Risk Management Losses on Merchant Charge backs & Fraud
72.
Which of the following operations cannot be done on LC? a) Purchase b) Discount
c) None
d) Acceptance 73. When would a company pay nominal interest on committed position? i) Always ii) In some cases iii) If it wishes to pay a) All b) III only c) I only
d) II only Interest is usually paid on the disbursed amount of the loan. In some cases, a nominal interest if
also payable on the committed amount of the loan. Also, in most cases, the corporate would have to pay a certain amount as processing fees for the loan. This would cover the bank’s overhead costs in the loan process.
74.
Securities with an original maturity of lesser than 1-year are traded on money markets? TRUE Money market is for short term financial instruments, usually a day to less than a year. Treasury bills of very short tenure, commercial paper, certificates of deposits etc. are also considered as money market instruments.
75.
Product development in sales and marketing refers to which of the following option? a) Collateral e.g. cars in case of car loans, houses in case of mortgages b) Products that are bought using online payment such as e-commerce c) Developing and differentiating deposits, loans etc d) All e) Identifying products such as SAP, Oracle for the bank 76. ___ of securities trade involves the transfer of the securities from the seller to the buyer. a) Clearing
b) Settlement c) Netting d) Trading
Settlement of securities is a business process whereby securities or interests in securities are delivered, usually against (in simultaneous exchange for) payment of money, to fulfill contractual obligations, such as those arising under securities trades A number of risks arise for the parties during the settlement interval, which are managed by the process of clearing, which follows trading and precedes settlement. Clearing involves modifying those contractual obligations so as to facilitate settlement, often by netting and novation. clearing denotes all activities from the time a commitment is made for a transaction until it is settled.
77.
The type of loan in which spread varies over the life of the loan is called ____ a) Positive spread loan
b) Floating rate loan c) Semi-fixed rate loan d) Negative spread loan e) Fixed rate loan
78.
Which two risks of a financial institution may gain as well as losses?
a) Interest rate risk and foreign exchange risk b) c) d) e)
None Credit risk and foreign exchange risk Liquidity risk and credit risk Credit risk and interest rate risk
79.
What is the settlement standard followed in the US? a) T+2
b) T+3
c) T+4 d) T+1 80. What is the difference between residential and commercial mortgage? a) Type of property being collateralized b) Range of loan tenure
c) All d) Type of customer 81. What are Yankee bonds also known as? junk bonds 82. Who is participating bank? a) A bank which participates in every process of syndication b) c) d) e)
83.
a) b) c) d)
Bank which underwrites a loan Bank which participates in arranging a loan Bank which participates in disbursing a loan Bank that participates in the syndication by lending a portion of the total amount required Dividend declaration is an example of Private banking Initial public offer Merger & acquisition Investment banking
e) Corporate action Corporate Action refers to dividend declarations, stock splits etc. The Corporate Action Department makes sure that the rightful owners (as on the Record Date) receive the dividends, Splits etc.
84.
From the given options identify the services that can be categorized under asset servicing line of business i. Corporate action processing iii. Transfer agency services ii. Income processing iv. All a) I only b) Iii only c) II only d) Both I and II
e) IV 85.
How would you categorize account activity alerts in mobile banking? a) Account information b) Support c) Investment
d) Transactions 86.
Which of the following is involved in the retail brokerage business in US? a) Freddie Mac b) Sallie Mae c) Ginnie Mae d) Federal Reserve
e) E-Trade A brokerage that primarily serves retail investors rather than institutional investors is referred to as a retail brokerage. Registered representatives who work for these retail brokerage firms are expected to market their services directly to individual investors and offer investment advice.
87.
Money laundering refers to which of the following option? a) Extending loans to corporate b) All c) Short term borrowing & placements
d) Converting the profits from criminal activities into legitimate funds Money laundering is generally regarded as the practice of engaging in financial transactions to conceal the identity, source, and/or destination of illegally gained money by which the proceeds of crime are converted into assets which appear to have a legitimate origin. Money laundering occurs over a period of three steps, which include the physical distribution of the cash (“placement”), the second step involves carrying out complex financial transactions in order to camouflage the illegal source (“layering”), and the final step which entails acquiring wealth generated from the transactions of the illicit funds (“integration”).
88.
All of the following are valid means for custody client to communicate trade instructions to its custodian EXCEP a) FEDWIRE b) By Fax
c) By telephone d) SWIFT network
89.
Which of the following is an issuer and acquirer? a) Elavon
b) Amex
c) Tsys d) First Data Corporation First Data Corp (Processor) TSYS (Processor) American Express (Acquirer, Card Organization & Issuer)
90.
If a financial instrument has a 20% chance of paying 80% and an 80% chance of paying 50% what would be the expected return?
a) 0.2 b) 0.44 c) 0.28
d) 0.56 E(R)= Sum( probability (in scenario i) * the return (in scenario i)) ER = ( 0.2 * 0.8 ) + (0.8 * 0.5) = 0.16 + 0.4 = 0.56 91.
An open end funds with 10,000 units outstanding had the total assets of Rs 120,000 and the liabilities of Rs 25,000. Calculate the fund’s NAV per unit.
Answer: NAV = Assets – liabilities / no. of outstanding shares = (95,000/10,000) = 9.5 Net asset value," or "NAV," of an investment company or a mutual fund is the company/fund’s total assets minus its total liabilities. For example, if an investment company has securities and other assets worth $100 million and has liabilities of $10 million, the investment company’s NAV will be $90 million. Because an investment company’s assets and liabilities change daily, NAV will also change daily. NAV might be $90 million one day, $100 million the next, and $80 million the day after. The investment company/fund calculates the NAV of a single share (or the "per share NAV") by dividing its NAV by the number of shares that are outstanding.
92.
The components to determine the rate of exchange in a Forward contract are: a) Cross currency Rate and forward rate adjustment
b) Current spot rate and forward rate adjustment
c) Forward rate adjustment and amount of currency bought/sold d) Current spot rate, amount of currency bought/sold The most basics tools of forex risk management are 'spot' and 'forward' contracts. These are contracts between end users and financial institutions that specify the terms of an exchange of two currencies. In a spot transaction the currency that is bought will be receivable in two days whilst the currency that is sold will be payable in two days. Most market participants want to exchange the currencies at a time other than two days in advance but would like to know the rate of exchange now. This is done through a forward contract to exchange the currencies at a specified exchange rate at a specified date. In determining the rate of exchange in six months time there are two components: · the current spot rate (is simply the current market rate as determined by supply and demand) · the forward rate adjustment (Forward rate (Local currency/USD) = Spot rate *(1+ interest rate in US) / (1+ local interest rate))
93.
In trade finance, which of the following factors are considered while choosing mode of financing?
a) Exporter’s fund, risk factors, cost of financing, time frame b) None c) Time frame, cost of financing, buyers trade associates d) Government guarantee program, seller preference
FACTORS IN CHOOSING THE MODE OF FINANCING Costs, Time frame, risk factors, government guarantee program and exporter’s funds.
94. A custodian processes interest proceeds from the fixed income securities held under its custody. Which division, within the custodian company, is responsible for carrying out the position a) Transaction management b) Income management
c) Cash management
d) Brokerage services e) Fund administration 95. A bank has a portfolio of %50 million worth of loans of which it wants to hedge $20 million worth of loan. What is the process called?
a) Held for sale loans b) c) d) e)
Committed loans Undrawn loans Trading loans Accrual loans
96.
What term is used to describe an LC that remains valid for years there by eliminating the cost of separate LCs for each transaction with a regular client? a) Revolving LC
b) Evergreen clause c) Green clause d) Irrevocable LC e) Fixed clause
The standby LC can remain valid for years (Evergreen Clause) it eliminates the cost of separate LCs for each transaction with a regular client.
97. Interest rate spread is equal to? a) Cap-current rate b) Current rate –floor
c) Current rate – base rate d) None e) Base rate – floor
98. A settlement can be considered as final only if : a) The settlement is unconditional b) The settlement is irrevocable c) The transfer of funds and securities take place simultaneously d) The settlement is unconditional as well as irrevocable
99. Credit derivatives can be used to reduce the regulatory capital requirement and a diversify credit risk. 100.
Which of the following combination holds true? a) Documentation collection, strict compliance rules apply
b) Standby letter of credit, less costly than documentary collection c) Wire transfer, more costly than other payment alternatives d) Foreign checks, not useful for cross border trade e) Commercial letter of credit, improves applicant’s credit facilities
101.
Increasing the cash reserve ratio for banks would have an impact on which of the following a) Increased interest rates b) Increased money supply in the economy c) Profitability of firms
d) Reduced money supply the economy 102.
In defined benefit plans, the benefits is expressed as an ___ and in defined contribution plans, the benefit is expressed as an_____ a) Account balance, account balance b) Account balance, annuity c) Annuity, annuity
d) Annuity, account balance 103.
Identify the services offered by retail banks: a) Savings and checking accounts b) Personal loans c) Debit cards
d) All
104.
Trading of previously issued securities takes place where? a) At company headquarters
b) Secondary market
c) All d) Primary market e) Through private placement
105.
NASDAQ is based out of __________ a) London b) Chicago
c) None
d) Singapore e) Hong Kong NASDAQ is an American stock exchange (located in New York). "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations”. 106. In a securities lending transaction, if the buyer of securities provides cash as collateral, then the seller of securities has to provide the buyer with an interest amount for the cash. What is this interest amount called? a) Collateral interest b) None c) Interest rate
d) Rebate rate e) Return rate
Securities lending or stock lending refers to the lending of securities by one party to another. The terms of the loan will be governed by a "Securities Lending Agreement", which requires that the borrower provides the lender with collateral, in the form of cash, government securities, or a Letter of Credit of value equal to or greater than the loaned securities. The agreement is a contract enforceable under relevant state law, which is often specified in the agreement. As payment for the loan, the parties negotiate a fee, quoted as an annualized percentage of the value of the loaned securities. If the agreed form of collateral is cash, then the fee may be quoted as a "rebate", meaning that the lender will earn all of the interest which accrues on the cash collateral, and will "rebate" an agreed rate of interest to the borrower
107. Inflation represents which of the following option? a) Increase in prices b) c) d) e)
108.
Very high change in prices Currency crisis Decrease in prices Economic crises
TARP stands for: Troubled Asset Relief Program
109.
Ram deposits $100 in xyz bank. Puja takes a loan of $100 from XYZ bank. Which of the following is most likely to happen? a) None b) Bank is charging 3% interest to Puja and paying 5% interest to Ram c) Bank is charging 5% interest to Ram and paying 5% interest to Puja
d) Bank is charging 5% interest to Puja and paying 3% interest to Ram
e) Bank is charging 3% interest to Puja and paying 5% interest to Ram
110.
If the limit = $2000, margin = 20% and asset value = $ 2000, then drawing power for an open ended loan is equal to? a) 2000
b) 1600
c) 2200 d) 2400 Drawing Power (DP) - lower of L and (1-M)*AV Limit (L) – max outstanding allowed Margin (M) – percentage of limit that can be drawn Asset value (AV) – value of underlying asset L=2000 => max value for DP is not greater than 2000 (1-M)AV = (1-0.2)2000 = 1600
111.
Direct investment in stock markets can be a better option investing through mutual funds if:
a) The investor has large capital, knowledge and resources for research
b) The investor has identified a bullish phase in the stock market c) The investor wants to invest for the long term d) The investor wants better returns than those offered by mutual funds
112.
The process of creating buffer against the potential loss of nonperformed loans is called: a) Loan classifying
b) Loan provisioning c) Loan buffering d) Loan monitoring
113.
Retail loans are asset products offered by the bank. TRUE
114.
Which of the following is a corporate action? a) All b) Declaring dividend
c) Stock split d) Rights issue e) M&A
115. With reference to settlement, FOP stands for: FREE OF PAYMENT Bank of America charges a lower rate of interest to Lockheed Martin than to General Electric. This can be attributed to lower ________ risk from Lockheed as compared to GE for Bank of America Market Risk Credit Risk Liquidity Risk Legal Risk None of Above If Bank of New York has found errors in settlement of transactions with some of its customers, as there is some mistake in some of its systems. This would be classified as Liquidity Risk Market Risk Credit Risk Country Risk Operational Risk What would be the most accurate VaR estimation method? Monte Carlo Simulation Historical Simulation Variance-Covariance Matrix Cannot Say Analytical Methods If a financial instrument has a 35 percent chance of paying 29 percent and a 65 percent chance of paying - 13 percent, it expected return would be 0.008 0.036 0.053 0.017 -0.029 Money Multiplier effect would imply An increase in the total money lent out into the system An increase in the total money in the bank reserves in the system A decrease in the total money in the bank reserves in the system Both An increase in the total money lent out into the system and an increase in the total money in the bank reserves in the system Both An increase in the total money lent out into the system and a decrease in the total money in the bank reserves in the system Which of the following is associated with the purpose of regulating financial institutions? To provide stability of the money supply To serve certain social objectives To prevent failure of any financial institution To offset the moral hazard incentives provided by deposit insurance and other guarantees. Both To serve certain social objectives and To offset the moral hazard incentives provided by deposit insurance and other guarantees The central bank in the US is called
Federal Reserve Federal Reserve Board Reserve Bank of United States Central Bank of United States Reserve Bank of America If the Limit = $1500, margin = 20% and Asset Value = $2000 then Drawing Power for an Open ended loan is equal to $1,500 $1,200 $1,600 $900 None of the listed Options Which of the following is the most profitable for Credit Card Company? Customers who always pay in time Customers who never pay Customers who default but finally pay all of the listed options None of the listed Options Which of the following is not involved in a credit card transaction? Independent sales organization Merchant Payment gateway Associations Who checks for the credit limit of the card before approving the transaction? Payment processor Acquiring banks Payment gateway Issuing bank None of the listed Options One should have the Time Deposits if one is looking for? Quick, convenient and, frequent-access to the money A high rate of interest Guaranteed rate of interest Low fee None of the listed Options EFTA stands for Electronic Funds Trading Act Electronic Financial Transfer Act Electronic Funds Transfer Act Electronic Fee Transfer Act Electronic Funds Telecommunication Act CHIPS stand for Clearing House for International Payments Settlement Clearing House for Interbank Payment System Clearing Head of Interbank Payment Settlement Clearing Head of international Payment Settlement Clearing House for Interbank Payment Settlement The process flow in a Private banking firm goes as
Servicing Specialist => Client Representative => Middle Office => Back Office Client Representative => Servicing Specialist => Middle Office => Back Office Client Representative => Servicing Specialist => Back Office => Middle Office Middle Office => Back Office => Servicing Specialist => Client Representative Client Representative => Middle Office => Servicing Specialist => Back Office Which of the following roles and responsibilities are correctly stated? Services Provider; Tax Services Middle Office; Statements & Advices Front Office; Client Reporting Back Office: Risk Management Middle Office; Custodial Services The below stated responsibilities are carried out by which of the following players. Cash Services/Client Reporting/Statements & Advices/Domestic & Global Settlements Services Provider Client Representative Back office Front Office Middle Office Private banking offers “structured lending” that provides Customized asset-based credit solutions Long-term liquidity to clients Advice-led credit solutions Credit solutions to High Net worth individuals All of the listed options Financial planning involves all EXCEPT Cash flow management Retirement planning Risk management Tax planning Portfolio management Loan can take many of the following basic forms EXCEPT Overdrafts Bills and promissory notes Corporate bonds Advances Credit line If a fund purchases a loan in the Primary, they also use another word for that. Which term is used to indicate the initial group of lenders (Primary Lenders)? Allocation Syndicate Secondary Assignment None of the listed Options Which of the following is not a secured loan? Equity Loans Secured Loans with Savings Equity Lines of Credit Personal Loans Car Loan
Which if the following is true in the case of sight draft? Buyer can refuse to take the delivery Quality of the Good is guaranteed Buyer is expected to make the payment after specified credit days Payments made based on only bill of lading None of the listed Options The basic four parties involved in any transaction using LC (Letter of Credit) are the following EXCEPT Issuing Bank Reimbursement Bank Seller Beneficiary’s 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 Banker’s Overdraft Limit Bank of London Bill of Leasing Bill of Lading BAFT stands for Bankers Acceptance for Factoring Transactions Bankers Association for Foreign Trade Bankers Acceptance for Foreign transactions Bankers Association for Forfaiting & Factoring transaction Bankers association for Factoring Trade Bill of Lading is a contract between Importer and Exporter for transportation of goods a receipt issued by importer to exporter for goods received for transportation a contract between a carrier and a shipper for the transportation of goods A receipt issued by exporter to importer for goods delivered. None of the listed options Which of the following methods eliminate country risk and commercial risk upon confirmation? Back to back Letter of Credit Standby Letter of Credit
Documentary Collection Letter of Credit Both Standby Letter of Credit & Letter of Credit Cash management techniques include Pooling Netting Swapping Both Pooling and Netting Pooling, Netting and Swapping All of the following are payment modes except EFT Cheque Debit to account through Debit card Lockbox None of the listed Options Which of the following are principles used by an asset manager? Diversification Screens and Filters Capital preservation All of the listed options Only Diversification and Screens and Filters Bid-Ask spread refers to Difference in price between buying one asset and another similar one Difference in opinion between the seller and buyer on the price of an asset Difference between the buying and selling price of the same asset Both Difference in price between buying one asset and another similar one and Difference in opinion between the seller and buyer on the price of an asset None of the listed Options The process of ‘Hiring of the Lead Managers’ in the case of IPO is referred to as Red Herring Road-show Investment Manager Contest Advisor Contest Beauty Contest The difference between “Fill or Kill” and “All or None” order is “Fill or Kill” allows multiple trades “All or None” can be a Good Till Cancelled order They are synonyms “Fill or Kill” can be valid till end of day “Fill or Kill” allows partial execution What is the key regulatory authority over the American securities industry? Federal Reserve FDIC DTCC ASA Securities Exchange Commission What is the Third Market? NASDAQ
OTC NYSE Instinet None of the listed Options The “Fourth Market” refers to NASDAQ OTC NYSE Instinet None of the listed Options Core Custody Services performs the following functions except Price securities positions Record Keeping Fiduciary and compliance monitoring Reporting services Processes corporate actions Services like the settlement, safekeeping, and reporting of customers’ marketable securities and cash are provided by _________________ Custodian Broker Investment bank Fund Administrator Dealer Three pillars of the new capital accord, Basel II, are Quantitative; Supervisory; General Qualitative; Market Forces; Geographic Quantitative; Operational; Supervisory Quantitative; Qualitative; Market Forces Qualitative; Mandatory; Quantitative
1. Auto loans are given by which of the following entities? Marks: 1 Answer: a. All of the listed Options b. Banks C. Dealerships d. Auto manufacturers’ e. Credit Unions
2. XYZ corporation is a large client of bank and on a average for a period it maintains $20 million in its bank account However. the bank allows the authorized representatives off XYZ to utilize funds up to 1 5% over the balance maintained This is an example of which of the
following option? Marks: 1 Answer: a. Committed Loans b. Undrawn Loan c. Held for Sale Loans d Accrual Loan e. Overdraft 3. Company ABC has a gross profit of $50000. The operating expenses amounts to $10000. The interest on loans availed amounts to $5000 and the taxes to be paid amounts to $5000. Calculate the EPS if there are total of 20000 shares. Marks: 3 Answer: a. 2.5 b.1.25 c.2 d. 1.5 5. Which of the following is a corporate action? Marks: 3 Answer: a. All of the listed options b. Rights Issue c. M&A d. Declaring Dividend e. Stock split
7. BAFT stands for: Marks: 1 Answer a. Bankers Association for Foreign Trade b. Bankers Acceptance for Foreign transactions c. Bankers association for Factoring Trade. d. Bankers Acceptance for Factoring Transactions e. Bankers Association for Forfaiting & Factoring transaction
9 In a economy where inflation is 4%, future value of 100 units of
money after 2 year would be which of the following option? Marks: 2 Answer: a. Around Rs 104 b. None of the listed options c. Exactly 108 d.108.16 e. Exactly 100 ‘
10. The type of loan in which spread varies over the life of the loan is called Marks: 3 Answer: a. Fixed rate loan b. Semi-fixed rate loan c. Positive spread loan d. Negative spread loan e. Floating rate loan
11 Simple interest is calculated on which of the following basis? Marks: 1
Answer: a. Beginning principal only b Accumulated interest in each period c. beginning principal + accumulated interest in each period d. None of the listed Options
12 Bank ABC interest rate on deposits is 7.20% and its interest rate on loans is 9.25% during 2009. What is the spread for Bank ABC? Marks: 3 Answer: a. ‘10195 b. 00225 c. None of the listed options d. 01655 16. With continuous compounding at 10 percent for 3 years. the future value of an initial investment of $2000 is closest to Marks: ____________
3 Answer: a. 2870 b. 2662 c. 3000 d. 2700
17. Which are true in a ‘Basic or No Frill Checking’ Account?
Marks:
3 I: Limit the number of checks written II: Interest paid III: Limit the number of withdrawals made Answer: a. All of the listed Options b. II and III c. I and III d. I and II
18. When Checks are deposited they are converted into digital files and then images are transferred to financial intermediaries. What is the process of clearing and settlement called? Marks: 3 Answer: a. Check Imaging b. Paper check processing c. None ofthe listed options d. Certified check
19. VISA is involved in which of the following?
Marks: 2 I: Provide the interchange systems to transfer data and funds between members II: Set credit limits Ill: Issue credit cards Answer: a. I only b. Both I and II
c. II only d III only
20. Tax and Insurance premiums collected as part of Loan repayment are handled through which of the following type of account? Marks: 2 Answer: a. Mutual fund account b. Fixed deposit c. DMAT account d. Escrow account
21 Number of stages in loan syndication are Answer: a. 1
_____
Marks: 2
b. 4 c. 3 d. 5 e. 2
22. Choose the correct order of occurrence of following activities: Marks. 3 Answer: a. Trade execution. Trade confirmation, Trade matching. Trade clearance, Trade settlement b. Trade execution, Trade matching. Trade clearance. Trade confirmation, Trade settlement c. Trade execution. Trade matching, Trade confirmation. Trade clearance. Trade settlement d. Trade matching. Trade execution. Trade confirmation. Trade clearance, Trade settlement -
23. The counterparty in a futures contracts trade is: Answer a. The brokers who struck the deal
Marks: 3
b. Banks c. The Exchange d. Government seller 24. P&L Statements represent transactions over a period of time while the balance sheet show information as of a specific data State True or False Marks: 1 Answer: True False 29. Hedge Funds are now regulated by: Marks: 3 Answer: a.SEC b. Industry wide SROs c. State regulatory agencies d. None of the listed options 30. What happens when the interest rates rise? Marks: 1 Answer: a. Bond prices decrease b. Bond prices do not change c. Interest rates never fall, they always go up d. Bond prices increase
31. Bank A, based in the US, provides safekeeping services for securities to its US clients. It also has clients in France and Belgium. and provides securities safekeeping services to these clients through Banks C and D respectively. Which of the following terms best describes Bank A? Marks: 2
Answer: a. Secondary Custodian b. None of the listed Options c. Sub Custodian d. Global Custodian e. Main Custodian 32 SMA oners investors a customized approach to investing. Rawer than a generic product State True or False. Marks: 2 Answer: True False
33 What is the role of a Central Bank in Forex market of a country? Marks: 2 , Answer: a. Regulatory role depending on country’s economic policies b. Acts as a trader for maximum profit making c. Encouraging trading in all currencies and not be limited to USD only d. Seller of USD 34 What are Yankee bonds also known as? Marks: 3 Answer: a. Shares b. T-Bills c. None of the listed Options d. Call Options e. Junk bonds 35. Which of the following LCs is similar to a Bank Guarantee? Marks: 2 Answer: a. Stand by b. Negotiable c. Back to Back d. Straight e. Revolving 36. You purchased a stock for $40. One year later you received $2 as
dividend and sold the share for $48. How much is the return of holding period? Marks: 3 Answer: a. 10 percentage b. 50 percentage c. None of the listed options d. 45 percentage e. 25 percentage
37. Banks operations are divided into which of the following option? Marks: 2 Answer: a. Back Office b. All of the listed options c. Middle Office d. Front office 39 Which of the following Mechanisms is used for financing for auto loans? Marks: 2 Answer: a. Dealer financing b. Direct Lending c. Leasing d. All of the listed Options 41. Which of the following methods eliminate country risk and commercial risk upon confirmation? Marks: 1 Answer: a. Documentary Collection, Letter of Credit b Letter of Credit, Back to back Letter of Credit c. Stand by Letter of Credit, Letter of credit d. Documentary collection. Stand by letter of credit e. Back to back Letter of Credit. Documentary collection
42. Which of the following methods of payment is most risky to the Buyer? Marks: 2 Answer: a. Open Account
b. Letter of Credit c. Documentary Collection d. Cash in Advance e. Counter trade 44. TARP stands for which of the following option? Marks: 1 Answer: a. Term Assets Relief Program b. Troubled Assets Relief Program c. Troubled Assets Reform Program d. Term Assets Reform Program e. None of the listed options
45. Hedge Funds can use which of the following investment Strategies? Marks: 1 Answer a. Short Bias b. All of the listed options c. Short Selling d. Regulation D e. Credit Arbitrage
46. Which two risks of a financial institution may bring gains as well as losses? Marks: 3 Answer: a. Interest rate risk and foreign exchange risk b. None of the listed options c. Liquidity risk and credit risk d. Credit risk and foreign exchange risk e. Credit risk and interest rate risk
47. Which of the following is NOT a core private banking function? Marks: 3 Answer: a. Investment Analysis and Advise b. Client Management
c. Sales and Marketing d. Deposit Mobilization e. Research
50 There are 5 participants A, B, C, D, E in a 25M USD syndicated loan and A is the lead manager. The borrower has agreed to pay 0.4% ($1 , 00,000) participant fee How much each participants will share in participant fee? Marks: 3 Answer: a. $1 ,00.000 will be received every time money is withdrawn b. $1 ,00.000 will be charged towards undrawn portion c. None of the listed Options d. $1 ,00.000 will be received every month e. $1 ,00.000 will be received affront
51 A Custodian processes Interest proceeds from the fixed income securities held under its custody. Which division within the custodian company is responsible for carrying out the process. Marks: 2 Answer: a. Transaction management b. Income processing c. Brokerage services d. Cash Management e. Fund administration 52 Check 21 Act facilitates Marks: 1 Answer: a. Netting and pooling of checks at day end b. Check truncation and creation of substitute check c. Netting and substitution of checks at day end
d. Clearing check by manually processing the check e. Netting of checks at day end 54 assumes the counter party risk of each member and guarantees financial settlement. Marks: 3 Answer: a. Depository b. Custodian c. clearing house d. Stock Exchange ______________
55 Which of the following is a Top 10 US Bank? Answer: a. HDFC b. INC Bank c. Rabo bank d. Morgan Stanley e. Wells Fargo
Marks: 1
56 SPV means: Marks: 2 Answer: a. Special Purpose Vehicle b. Security Purpose Vehicle c. Special Principal Vehicle d. Securitized Planning Vehicle e. None of the listed options
57 The term OTC usually stands for which ofthe following in the context of financial markets? Marks: 1 Answer: a. Over the cash b. Overview of trading courses c. Online trading in commodities
d. Out of the cash e. Over the counter
58 Company A has higher credit rating than Company B. What does this means? Marks: 1 Answer: a. Company B is more risky b. All of the listed options c. Both are equally risky d. There is no relation between credit rating and risk e. Company A is more risky Marks: 3 Answer: a. True discounted Loan b. A loan that is paid in periodic equated installments with capitalized interest c. Amortized Loan d. Discounted loan e. Capitalized Loan
60 Annuities are:
63 An investor has multiple investment options yielding various dollar returns at various points of time. While he is comfortable with a return of X%. Which method should he use to compare the various investments? Marks: 3 Answer: a. Net Present Value b. Internal Rate of Return c. Simple Interest d. External Rate of Return e. Compound Interest
65 What is NOT true about Back to Back LC (letter of Credit)? Marks: 3
I: Buyer to open new LC against an already issued LC II: Seller to use the LC received from his buyer in favor of another Ill: Buyer to use the LC received from his seller to open his own LC IV: Seller to receive one more LC against an already issues LC from his buyer Answer: a. I only b. I. III and IV c. III only d. IV only e. II only 67. Which of the following is NOT a Settlement Method for Bank Loans? Marks: 3 Answer: a Securities Repository b. Assignment c Participation d Sub-Participation e Pre closure
68 Which of the following operations cannot be done on a LC (Letter of Credit)? Marks: 2 , Answer: a Purchase b None of the listed Options c Discount d. Acceptance 71 In a Securities lending transaction, if the buyer of securities provides cash as collateral. Then the seller of securities has to provide the buyer with a interest amount for the cash What is this interest amount called? Marks: 3 Answer: a Interest Rate b Rebate Rate c Collateral Interest
d. Return Rate e None of the listed Options
72 The term ‘settlement cycle’ refers to which of the following option? Marks: 1 Answer: a time period between the date on which an investor first makes the decision to enter a trade and the date when the trade is settled b None of the listed option are correct c time period between the date on which the trade is cleared and the date when the trade is settled d time period between the date on which the trade is executed and the date when the trade is settled 74 Jet Airways and Citibank have tied up to offer this type of credit card what type of card is it? Marks: 2 Answer: a. Gift Card b Co Branded card c Smart Card d Affinity Card 77 The share price of a company may drop considerably from its current levels. In this scenario, what type of risk are the investors facing? Marks: 3 Answer: a. Market Risk b. Credit Risk c. Company Risk d. Business Risk e Liquidity Risk
81 represents the credit worthiness of the borrower 2 Answer: a. LOAN score b. score __________
Marks:
c. FICO score d. Interest score 82 In Trade Finance, which of the following factors are considered while choosing mode of financing? Marks: 2 Answer: a. Exporter’s 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. Buyer’s trade associates 83 How would you categorize account activity alerts in mobile banking? Marks: 2 Answer: a Transactions b Support c Investment d Account Information 85 The BASEL 2 framework has 3 main pillars From the options given below. find the one that is NOT a part of it: Marks: 1 Answer: Q a. Operational Effectiveness b Minimum Capital Requirements c. Market Discipline d. Supervisory Review 91 In any task undertaken by a company, the presence of risk implies that Marks 1 Answer: a. The shareholders of the company will lose money b. The outcome of the tasks undertaken by the company is uncertain c. The company will not fare better than its competitors
d. The company’s management has not done a good job e. The standard deviation of the return is zero
92 Trading of a corporation’s stock or other securities (eg bonds or stock options) by individuals with potential access to non-public information about the company is called: Marks: 2 Answer: a. Insider Holdings b. Lock in Period c Insider Trading d Hedging e Initial Public Offer
93 If total spread on underwriting is $ 500000 and Manager’s fee is S 100000. What is the amount which will be distributed in the syndicate? Marks:3 Answer a. Cannot be determines b. 100000 c. 400000 d. 600000 e. 500000 •....
94 If an investment company has securities and other assets worth $100 million and has liabilities of $10 million. the investment company’s NAV will be? Marks: 2 Answer a. $110 million b. $10 million c. $100 million d. $90 million
95 is the amount of net income related to each share. Marks: 1 Answer a. EBIT
b. PAT c. PBT d. LEPS 98 What is Line of credit? Marks: 2 Answer: a. None of the listed Options b. Irrevocable credit provided by financial institution c. A formal, legal commitment to extend credit up to some maximum amount over a stated period of time d. Similar to credit card e. Removing credit agreement
100 Dividend declaration is an example of: Answer: a. Private Banking b. Investment Banking c. Merger and acquisition d. Initial Public Offer e. Corporate action
Marks: 3
101 Which is NOT a type of corporate bond? Answer: a. Unsecured bonds b. Sub-ordinated debentures c. T-BiIIs d. Secured Bonds
Marks: 1
105 At the end of the trade cycle. the trades are to determine the obligation of the trading members to deliver securities/funds as per settlement schedule. Marks: 2 Answer: a. Offset b. Grossed
c. Netted d. Aggregated 107 From the given options identify the service(s) that can be categorized under Asset Servicing line of business. I: Corporate Action processing Marks: 1 II: Income Processing Ill: Transfer Agency services IV: All of the listed options Answer: a. Ill only b. I only c. Both I and II d .IV 0 e. II only 108 Identify the odd one out: Answer: a. Treasury Notes b. Stocks c. Treasury Bills d. Bill of Exchange e. Commercial Papers
Marks: 1
109 Which of the following is NOT an example of an option? Marks: 1 Answer: a. Oil Futures b. Call Option c. LEAPS (Long Term Options) d. Swap option e. Put Option
111 of a securities trade involves the transfer of the securities from the seller to the buyer. Marks:2 Answer: a. Settlement b. Netting c _____________
115. In Electronic Check Conversion (ECC), what happens once the check is processed? Marks: 3 Answer: a. Receive Cash immediately b. The customer signs a receipt authorizing the store to present the check to the bank electronically and deposit the funds into the store’s account c. The customer can present a check to a store cashier d. All of the listed options 117 Open ended loan allow the borrower to borrow additional amount subject to the maximum amount less then a set value. State True or False Marks: 1 Answer: True False 118 Private Banking Clients have high Answer a Investible Assets b. Net worth. Investible assets and Income c. Income d. Net worth
_________
Marks: 1
_
119 Which of the following risks for the investor is associated with corporate bonds but NOT U.S. Treasury securities? Marks: 2
Answer: a. Credit Rating Risk b. Interest Rate Risk c. None of the listed options d. Default Risk e. Reinvestment Risk 121 On a trading day at an exchange. a broker undertakes the following trades: Marks: 3 Buy 200 Microsoft shares for S10.00 each Sell 100 Microsoft shares for S10.00 each Buy 100 Google shares for $20.00 each Sell 30 Microsoft shares for $11. 00 each Sell 50 Google shares for $20.50 each Sell 40 Microsoft shares for $9.00 each How much did the broker pay out to the exchange in total in case of (a) gross settlement system (b) net settlement system? Answer: a. (a) $4000 (b) $1285 b. (a) $1235 (b) $2235 c. (a) $260 for Microsoft $975 for Google (b) $975 for Google & $260 for Microsoft d. (a) $1235 (b) $4,000 e. None ofthe listed Options
122 On a trading day at the NYSE. a broker undertakes the following trades: Marks: 2 Buy 120 Dell shares for $10.00 each Sell 70 Dell shares for $10.50 each Buy 200 Cisco shares for $20.00 each Sell 20 Dell shares for $1 1.00 each Sell 50 Cisco shares for $20.50 each Sell 1 0 Dell shares for $9.00 each Given that a net settlement system is being used, find out the net position
of the broker at the end of the day. Answer: a. Dell: 70 shares to give out: Cisco: 90 shares to receive: $3,000 to pay out to the exchange b. Dell: 20 shares to receive: Cisco: 1 50 shares to receive: $31 30 to pay out to the exchange c. Dell: 150 shares to receive: Cisco: 20 shares to receive: $3130to receive from the exchange d. None of the listed Options e. Dell: 20 shares to pay out: Cisco: 1 50 shares to receive: $3,780 to pay out to the exchange
123 The process of netting: Marks. 1
Answer: a. Increases the number of settlements b. Neither reduces nor increases the number of settlements c. Increases the transaction costs d Reduces the number of settlements .
124 On a trading day at the NYSE. a broker undertakes the following trades: Marks: 3 Buy 100 IBM sharesfor$11.00 each Sell 50 IBM shares for $10.50 each Buy I 00 MSFT shares for $20.00 each Sell 20 IBM shares for $1 1 .00 each Sell 1 0 MSFT shares for $20.50 each Sell 30 IBM shares for $9.00 each How much did the broker pay outto the exchange in total in case of (a) gross settlement system (b) net settlement system? Answer: a. (a) $3100 (b) $1880 b.(a) $1880 (b) $3100 c. None of the listed Options d. (a) 0 for IBM, $1 ,795 for MSFT (b) $1,780 e. (a) $1 .780 (b) 0 for IBM. $1 ,795 for MSFT
126 If a financial instrument has a 50% chance of paying 20% and a 50% chance of paying 60% percent, what would be the expected return? Marks: 2 Answer: a. 0.2 b. 0.8 c.0.4 d. 0.5 127 Warrants are the combination of which of these instruments? Marks: 3 Answer: a. Put Options and Swaps b. Cash and Call Options c. Equities and Call Options d. Equities and Futures e. Call and Put Options
128 is the legal and professional proceeding in which a lender, obtains a court ordered termination of a borrower’s equitable right of redemption. Marks: 3 Answer: a. Credit-Freeze b. Foreclosure c. Securitization d. Sub-Prime 129 The components to determine the rate of exchange in a Forward Contract are: Marks: 2 , Answer
a. Current Spot Rate and Forward rate adjustment b. Forward rate adjustment and amount of currency bought 7 sold c. Current Spot Rate, amount of currency bought / sold d. Cross Currency Rate and forward rate adjustment
130 Money laundering refers to which of the following option? Marks. 1 Answer: .
a Extending loans to corporate b. Converting the profits from criminal activities into legitimate funds c. Short term borrowing & placements d. All of the listed options 1.
If the price of share pf cognizant changes from 65 to 60 this can be attributed to: a. Market risk b. Interest rate risk c. Credit risk d. Operational risk e. Liquidity risk
2.
Account maintained in the home currency by one bank is the name of another bank based abroad is called as: a. Current account b. Nostro account c. Vostro account d. Forex account e. Overseas account
23. Which is not banks primary use for deposits? a. Payment to employers b. None c. Investment d. Loan e. Withdrawal 27. On the trading day at the NYSE a broker undertakes the following trades Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MFST share for $20.00 each
Sell 20 IBM shares $11 each Sell 10 MFST share at 20.50 each Sell 30 IBM shares for 9.00 each How much did the broker pay out to the exchange in total in case of (i) Gross settlement system (ii) Net Settlement System? a. (i) $1780 (ii) $3000 b. (i) 0 for IBM, $1795 for MSFT (ii) $1780. c. (i) $3000 (ii) $1780 d. None e. (i) $1780 (ii) 0 for IBM, $1795 for MSFT 31. While providing security lending services to its clients which risk will a custodian have to manage for its clients A) Liquidity risk B) Both Credit risk and interest rate risk C) Interest rate risk D) Credit risk E) Both credit risk and liquidity risk. 50. Which of the following is not a treasury management system? A) Calypso B) Summit C) Wall street system D) Front arena E) Flex cube 51. Syndicate helps in all of the following activity but A) Managing large bond issues B) Raising huge money from the bank C) Managing large capital raising act D) Managing conflict between investment banks. A) IPO distribution 56. in an international securities transaction, which of the following participant will not be involved A) Global custodian , domestic sub custodian , depository in foreign country and sometime stock exchange in foreign country B) Depository in foreign country C) Global Custodian D) stock exchange in foreign country E) domestic sub custodian 65. A formal Legal commitment to extend credit to some max amount over a state period of time is description of
a. b. c. d. e.
Trade Credit Revolving Credit agreement Agreement Irrevocable Credit Line of Credit Letter of Credit
69. Which of the following factors affect the choice of Payment Method? a. Exporters Fund b. All c. Government Guarantee Program d. Time Frame e. Cost of Financing
76. Which of the following according to you has resulted in defining contribution plans gaining popularity over defined benefit plans a. DC plans fix the monthly contribution from the employee making his financial planning easier. b. DC plans are seen by employees as investment which to accumulate retirement income. c. All d. Employer increasing wants employees to share responsibility for retirement 77. ________is typically largest part of spread and is paid to broker\dealer or that actually took clients order a. Salary b. Manager fee c. Wage d. Concession e. Underwriter 78. NASD is not an SRO for a. Listed market b. Over the counter market c. Third market d. Fourth market 79. High net worth individuals generally have ____________. a. Market capitalization more than $200000 b. All c. Net worth greater than $500000 d. Household income of max $50000 year. 80. Which is true about retail banking? a. The business focuses on small no. of high net worth individuals.
b. The business focuses on small and medium enterprises. c. The business focuses on large no. of individuals. d. The business focuses on large no. of corporation bodies. 81. Offer is price at which a firm a. Trades in securities b. Quotes to its bets customer c. Intends to buy d. Intends to sell e. Quotes when it does not want to trade. 82. Securities with original maturity greater than 1 year are traded on money market. a. True b. False 83. Which is not a banking service? a. Stock market b. Retail banking c. Corporate banking d. Customer lending 84. Which is true? a. Financer owns the asset both in case of ‘Lease’ and ‘hire Purchase’. b. Tax deduction cab be claimed fro the full value of the rental paid in case of lease c. All d. Depreciation in claimed by the financer in lease and not in case of hire purchase. 85. Bank a based in US provides safe keeping services for securities to its US clients. It also has clients in France and Belgium and provides securities safe keeping services to these clients through banks C & D respectively. Which best describes bank A? a. Global custodian, b. None c. Main custodian d. Sub custodian e. Secondary custodian 86. All following statements relating to Bonds are correct except. A) Bonds sell at a discount when Coupon Rate is less than Market Interest rate. B) None C) Bond is debt instrument giving issues. 87. Which of the following type of loan requires the amount of interest that would be earned on the loan to be paid upfront by the borrower? A) Capitalized loan B) True Discounted loan C) Amortized loan
D) Demand loan E) Discounted loan 88. Who are involved in the preparation of prospectus of IPO? A) Commercial bankers B) Investment Bankers C) None D) Company Management E) Company Management and Investment Bankers 89. Bankers Acceptance differs from Sight Draft in that A) Bankers Acceptance reduces lending capacity B) Sight Drafts are negotiable instruments C) Bankers Acceptance demands immediate payment. D) None E) Banks can raise funds by selling acceptance. 90. Clients of a private banker are generally not segregated on the basis of A) Investible assets B) Location C) Age D) Net worth E) Name 91. The initial sale of the security is in the ………market, while subsequent trading in the security is in the …….. market A) Spot, futures B) Debt , Equity C) Primary , Secondary D) Money, Capital E) Secondary, Primary 92. Under what category can services like asset/liability analysis, asset allocation, cash projection, compliance reporting, fund administration, investment Management universe etc. provided by an institution can be classified? A) Investment Management B) Asset Servicing C) None D) Trading E) Investor Services. 93. CIP in the context of anti-money laundering is A) All B) Stands for Suspicious Activity Reports C) Customer Identification Program
D) Requiring Businesses, which were only to report cash transactions involving more than 1.00,000? 94. On a trading day at a stock exchange a broker undertakes the foll trades: Buy 100 IBM shares for 10$ each Sell 50 IBM shares for 10.5 $each Buy 100 MSFT shares for 20$ each Sell 20 IBM shares for 11$ each Sell 10 MSFT shares for 20.5 each Sell 30 1bm shares for 9$ each At the end of the day, the broker owes 1780 to the exchange while exchange owes him 90 shares of MSFT. Is it possible? A) Yes under RTGS B) No C) Yes under net-settlement system 95. Dow Jones industrial average is made of A) 30 stocks B) 20 stocks C) 40 stocks D) 10 stocks E) 50 stocks 96. Which is the key feature of Letter of Credit? A) basis for devising proper currency hedging strategy B) Distributes risk between buyer n sellers. C) basis for devising proper currency hedging strategy and opportunity for receiving payment in advance of the due date. D) All E) Opportunity for receiving payment in advance of the due date. 97. Which risks bring gain and losses? A) Interest rate and foreign exchange B) Liquidity and credit C) Credit and Interest rate D) Credit and Foreign exchange E) All 98. Find the future value of $1200 invested at 5.25 % per annum payable annually after 6 months? Marks: 2 1. 1345.1 2. 1243.1 3. 1231.1 4. None 5. 1235
99. Investor services like brokerage, cash management and short term investments, commission re-capture, foreign exchange transactions, transaction management etc. can be classified under ____ group of services. Marks: 1. 1. Trading 2. Investment Management 3. Investor service 4. None 5. Asset Servicing 101. The term CP is used in corporate lending for ____. Marks: 1 1. Collateral provision 2. Client Partner 3. Commercial Paper 4. Commodity Put options 5. Credit Provision 102 What are the risks associated with the Hedge funds? Marks: 3 1. All of the above 2. High exposures in derivatives 3. High Leveraging 4. High Speculation
103. The trade terms “15/2 net 30”indicates 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 LC’s for each transaction with a regular client?(not sure bout the answer) a. Irrevocable LC b. None
c. Red clause d. Revolving LC e. Evergreen clause 106 Who appoints investment manager to manage a benefit plan? a. Plan sponsor b. Plan administrator c. Fund trustee d. None e. Government 107 A company would pay the interest on what portion of loan? a. Committed amount b. Either disbursed or committed loan c. Unused amount of loan d. Disbursed amount e. None 108 In the exchange on a particular trading there is a buy market order for 100 CTSH shares and two sell market orders for 50 and 40 CTSH shares each, can the buy order be matched against the two sell orders. a. Yes b. No c. Yes, but if prices on the buy & sell side match. 109 If the limit = $2000, margin = 20% and asset value = $2000 then drawing power for an open ended loan is equal to? a. None b. $1600 c. $2200 d. $2400 e. $2000 110 Risk cannot be migrated by a. Setting risk limits b. Hedging c. Diversification d. Arbitrage e. Insurance 111 A fixed income analyst will analyze all but a. Municipal bonds b. Bonds of govt. sponsed enterprise c. Corporate bonds d. US treasuries e. Shares
112 In benefit administration what are the relationships that exits between the plan administrator and the investment manager, and between Trustee and the investment manager. a. None b. Plan administrator & trustee both have outsourced plan administration as well as fund management to investment manager c. Any d. Plan administrator gives investment instruction to investment manager while trustee appoints the investment manager. e. Trustee gives investment instruction to investment manager, while plan administrator appoints the investment manager. 113 Which entity provides credit scores that are used by issuers to process card application? a. Issuer processor b. Collection agency c. Issuing bank d. Authorization engine e. Credit bureau. 114 CPI stands for which of the following? a. Consolidated Price index b. Consument popularity index c. Consumer product index d. Consumer price index e. None 115 A bank decides to sanction only 10% of the loan sought by a company. The company goes and pledges extra assets with the bank and the bank then agree to sanction 50% of the loan sought. The company has indulged in the process of a. Credit scoring b. Credit increase c. Credit incrementation d. Credit revision e. Credit enhancement. 116 FX spot deal assumes maturity of how many business days ahead ? a) 4 b) 5 c) 3 d) 1 e) 2 117 Which of the following is best VaR estimation Model? a) Monte- Carlo b) Historical
c) Variance-Covariance d) Variance-Covariance and Monte- Carlo 118 Which of them represent company is incorporated in USA? a) Plc b) Pte c) Ltd d) Inc 119 Which of the factors affect the choice of payment methods? a) Govt. guarantee Program b) Time frame c) All d) Cost of financing e) Exporter fund. 120 Organization level risk appetite is determined by: a) Risk management b) Front office c) Back office d) Trade e) Board of director 121 Risk management is function of: a) Traders b) Back office c) Specialist d) Front office e) Mid office 122 Purely competitive financial market is not characterized by a) Govt. regulation b) Many traders c) Full info d) Cost effective trading 123 NOT player in typical trade cycle; a) Custodian bank b) Clearing bank c) Clearing member d) Trading member e) Regulator 124 Once syndicate has sold all other trades participant, sub participant and assignment are considered trade in what market?
a) b) c) d) e)
Primary Secondary Participant OTC Index
125 Question relates to price weighted index? 1. DJIA 2. Hangseng 3. EAFE index 4. NASDAQ composite index 5. S&P 500 126 In defined contribution retirement plan .Tax sheltered annuities fall under section of _________ERISA 403b 401k 401b 403k None 126 In benefits administration, trustee and plan administrator submit compliance report to______ which in turn qualifies the plan. Participant None (answer is TRUST) Government Investment manager Sponsor 127 Full form of ADR Answer: American Depository Receipts 128 Question related to BASEL II Answer: Capital adequacy 129 What is interest rate charged on asset based loan? Answer: The interest rate charged is lower than personal loans 130 Question related to credit derivatives as which of the following function is not done by credit derivatives
Answer: Answer was something as Transfer to over the counter 131 Question related to credit derivatives it was fill up the blanks? Exactly don’t remember the question/
Answer: option having “TRANSFER” 132 Question related to non-discretionary Investment Management
Answer: the bank offers investment recommendations based on the Client’s approval. 133 Question having few options like Income Processing, Tax Information Services, Cash Sweep
Answer: ASSET SERVICING 134 Question related to Underwriting? Options: 1. Underwriting Spread 2. Public Offering Price (POP), 3. Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it) 4. All
Answer is ALL the listed option Risk Matrices was developed by:- JP Morgan, Bank of California, Credit Suisse, SBI 2. Research analyst may recommend to :- buy, hold and sell 3. Reducing CRR for banks would have impact on:a. Increased money supply b. Reduced interest rates c. Reduced money supply in the economy d. Profitability of firms e. None 4. Under corporate stock repurchase program a. Corporate purchase their own shares from shareholders 1.
5.
Private banking providing risk management services strives to:a. Eliminate risk and maximize returns b. Eliminate risk without worrying about returns c. Reduce risk and optimize returns d. Avoid risk and returns e. All f.
6.
One would go for bank deposits because a. Money easily available b. Interest earned c. Insurance cover available d. All
7.
Basic 4 parties involved in any transaction using letter of credit are following except a. Issuing bank b. Buyer c. Reimbursement bank d. Seller
e.
Beneficiary bank
8.
From seller’s point of view which method has least risk a. LC b. Direct debit c. Documentary collection d. Counter trade e. Cash in advance
9.
ABC rated as AA+ and XYZ rated D. Who gets loan from bank a. Equally unlikely b. Equally likely c. ABC d. XYZ e. None
10.
Which is not the settlement method for bank loans? a. Pre-closure b. Assignment c. Participation d. Sub participation e. Securities repository
11.
Which is correct hierarchy of corporate ratings (high to low)? a. AAA,AA+,BBB,D
12.
Inflation- 9%. Future value of 100 units of money after 2 years: a. 118.8 b. Exactly 100 c. Exactly 200 d. Around 109 e. None
13.
Brokerage firms are regulated by a. SEC b. Industry wide SROs c. State regulatory Agency d. All
14.
Odd man out:a. SEC b. NYSE c. NASDAQ d. LSE e. NSE
15.
From investor stand point a debenture issued by excellent company will appear risky than share of preferred stock issued by excellent company a. True b. False
16.
Risk associated with hedge funds:a. High exposure in derivatives b. All c. High speculation d. High leveraging
17.
Not a feature of private banking:a. High investment in technology b. Lot of research c. Commercial lending d. Specialist advice e. Understanding capital and investment needs
18.
Which of the following affects the choice of payment method a. All b. Government guarantee method c. Exporter’s fund d. Time frame e. Cost of financing
19.
Which risk may bring gains and losses? a. Credit risk and interest rate risk b. All c. Liquidity risk and foreign exchange risk d. Credit risk and foreign exchange risk
20.
Bankers acceptance differs from sight draft in that a. Sight drafts are negotiable instruments b. Bankers acceptance demand immediate payments c. Bank can raise funds by selling acceptance d. Bank acceptance reduces banks lending capacity e. None
21.
Formal legal commitment to extend credit up to some maximum amount over a period of time is a description of a. Line of credit b. Irrevocable credit c. Letter of credit d. Revolving credit agreement e. Trade credit
22.
Security settlement is function of a. Specialist b. Traders c. Back office d. Front office e. Mid office
23.
Which of these instruments is not included as part of asset servicing services and the category “Pricing/ Holdings” Valuation which includes accurate pricing, rating etc. a. Equities b. Certificate of participation c. Government securities d. Certificate of deposit e. Services may be provided for all
24.
Which of the following is involved in retails brokerage business in US a. E-trade b. Charles Schwab c. Sallie Mae d. Federal reserve e. a and b both
25.
Measures of performance of an investment portfolio are all of the following except:a. Risk adjusted return b. Style maps score c. Profit/loss on portfolio d. Alpha e. Up/down market analysis
26.
Interest rate spread:a. Current rate – floor b. Cap – current rate c. Current rate-base rate d. Base rate-floor rate e. None
27.
Who insures stocks in stock market a. Security and exchange commission b. Federal deposit insurance corporation c. Us department of treasury d. None
28.
NASD is not an SRO for a. 4th market
b. c. d. e.
3rd market Listed market 2nd market OTC market
29.
Which of the following loan requires the amount of interest that would be earned on the loan to be paid upfront by borrower:a. Discounted loans b. True discount – check not sure c. Capitalized d. Demand e. Amortized
30.
Limit = $2000 Margin=20% Asset value=2000 a. Drawing power = 1600
31.
Over the counter market is also called a. Unlisted market b. 2nd , unlisted and OTC market c. Unlisted d. Super e. 2nd market
32.
Liquidity issues of credit can be addressed by:a. Sweep facility b. Structured lending to client c. All d. Short term credit facilities e. Overdraft
33.
Standby letter is _____ secure than documentary collection and cheaper than ____ a. More, commercial LOC
34.
Which is not an option a. Call b. Put c. Swaption d. Oil futures e. Leaps
35.
question on top 10 US bank – REBO
36.
ACH transaction involves a. Cash b. Electronic data
Docs Checks and drafts All 37. Interest rates falls a. Bond prices increase b. Bond prices decrease c. Do not change d. Economy goes to deflation 38. Rate at which bank purchases US dollars against home currency is :a. Bid b. Indirect c. Direct d. Cross currency e. Ask rate c. d. e.
39 Offer price is the price at which the firm f. Intends to buy g. Intends to sell h. Trades in securities i. None 39. Bid price is the price at which the firm The price at which market makers will buy or sell a particular security. 41 Presence of risk implies a. Standard deviation of return is 0 b. Uncertainties of final outcome c. Final wealth is lower d. Investment gain 40. Company would pay interest on what portion of the loan? a. Disbursed amount b. Committed amount c. Both d. Either e. None 41. Odd man out? a. Equity b. Stocks c. Shares d. Convertible bonds e. Common stock 42. A bank cannot cover the money demanded by depositor, then it goes out to – a. Federal reserve bank 43. Institutions involved in benefit administration process, discussing plans a. Sponsor b. Custodian c. Plan administration
Record keeper Participant 44. Which of the following eliminates both country risk and commercial risk? a. Both standby LOC and LOC 45. When bank goes to the fed to borrow funds then the interest rate charged by fed is known as a. Prime rate b. Bond rate c. Discount rate d. Federal rate d. e.
Some important questions: There will be 1,2,3 marks questions There will be 121 questions 1) Page 5 State T/F Simple interest is calculated only on the beginning principal.
2) Page 6 INFLATION There will be three questions based on this formula:The relationship between the R (real rate of interest), N (nominal rate of interest) and I (rate of inflation) is as: R= N-I. 3) Page 8 One question on future value The formula for Future Value is: FV = PV*(1 + i)n 4) Page 8 One question on Intra-year compounding
Question was like this if rate of interest is 4% and compounded quaterley for 4 years then what is the value of r and t 8) Page 16 Treasury Securities Treasury bills issued for one year or less. Treasury notes have a term of more than one year, but not more than 10 years Treasury bonds greater than ten years
12) Page 20 American Depository Receipts (ADR) The purpose of an ADR is to facilitate the domestic trading of a foreign stock. 16) page21 Two questions will come: Hedging involves protecting an existing asset position from future adverse price movements. In order to hedge a position, a market player needs to take an equal and opposite position in the
futures market to the one held in the cash market. Arbitrage: An arbitrageur is basically risk averse. He enters into those contracts were he can earn risk less profits. When markets are imperfect, buying in one market and simultaneously selling in other market gives risk less profit. Arbitrageurs are always in the look out for such imperfections. 24)Page 29 What is Money Market? Money market is for short term financial instruments, usually a day to less than a year. 25) Page 29 What is a repo? A repo is a contract in which the seller of securities, such as Treasury Bills, agrees to buy them back at a specified time and price. 26) Page 30 regulator(s) and supervisor(s) forthe financial markets. Thus India has Securities and Exchange Board of India (SEBI) and the US has Securities and Exchange Commission (SEC). 27) Page 30 What do u mean by portfolio management system? These systems allow the investment managers to choose the instruments to invest in, based on the requirements or inputs such as amount to be invested, expected returns, duration (or tenure) of investment, risk tolerance etc. and analysis of price and other data on the instruments and issuers 29) Page 50 There will two or three questions from CRR.. What do u mean by CRR (Cash Reserve Ratio). There will be two numericals also….. Same from book example? 31) Page 54 What is Glass-Steagall Act ? Glass-Steagall Act of 1933, created a Chinese wall between commercial banking and securities businesses in US. That act was intended to address the perceived causes of bank failures during the Great Depression of 1929. 32)Page 57 Read this page carefully .. three questions will come… Checking Accounts Quick, convenient and, frequent-access to the money. Some banks pay interest while many do not. Money Market Deposit Accounts Pays a higher rate of interest than a checking or savings account MMDAs often require a higher minimum balance to start earning interest Savings Account Allows making withdrawals, but checks writing facility is not there. Number of withdrawals or transfers one can make on the account each month is limited.
Time Deposits (Certificates of Deposit) Guaranteed rate of interest for a term or length of time specified by the account holder. The rate of interest is often higher than savings or any other account Basic or No Frill Banking Accounts Checking accounts, but with a limit on the number of checks one can write and the number of deposits and withdrawals one can make Interest is generally not paid. 34)Page 61 What is EFT? Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic technology as a substitute for checks and other paper transactions. EFTs are initiated through devices like ATM cards or codes that let one to access your account. Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose. 35) Page 63 Read section Lost or Stolen ATM or Debit Cards If unauthorized use occurs before reporting, the liability of the customer varies depending on the delay in reporting the loss to the card issuer. Within two business days – Liability limited to $50 for unauthorized use. Between 2 - 60 days – Liability limited to $500 because of an unauthorized transfer. If the loss is not reported within 60 days, the liability has no limits. 36) page 64 What is EBPP and its advantages?
ELECTRONIC BILLING PRESENTATION AND PAYMENT 37) page 65-66 Read thoroughly.. Some of the questions were What is Fedwire? Fedwire is an electronic transfer system developed and maintained by the Federal Reserve System. The system connects Federal Reserve Banks and Branches, the Treasury and other government agencies Full form of CHIPS? Clearing House Interbank Payments System What is SWIFT? The Society for Worldwide Interbank Financial Telecommunication (SWIFT) runs a worldwide network by which messages concerning financial transactions are exchanged among banks and other financial institutions What is latest version of SWIFT? SWIFT 15022 39) Page 70 VVimp One question ie numerical atleast on :…
c. Limit (L) – max outstanding allowed d. Margin (M) – percentage of limit that can be drawn e. Asset value (AV) – value of underlying asset f. Drawing Power (DP) - lower of L and (1-M)*AV 40) Page 71 One question which is not a repayment kind? Kinds of repayments o EMI – same installment amount o Fixed Principal – constant principal, decreasing interest amt o Step-up – principal amount increases in steps o Step-down – principal amount decreases in steps o Balloon – notional amount initially, large last payment o Bullet – interest payment initially, entire principal at one shot o Random – schedule & amount of installments undecided o Special products – combination of above 42) Page 73 What is Collar and Spread? Spread= current rate – base rate Collar = cap-floor 43) Page 73 Charge Types Pledge – gold, bank has possession Hypothecation – vehicle, borrower has possession Lien – against bank deposits Assignment – insurance policies, rights get transferred to bank Shares - periodic drawing power calculation Mortgage – immovable property 44) Page 76 What are Freddie Mac, Ginnie Maes & Fannie Mae? Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all "secondary market lenders". 46) Page 82 What is the meaning of corporate lending? Corporate Lending refers to various forms of loans extended by banks to corporate bodies like proprietorship, partnership, private limited companies or public limited companies. 49) Page 85 What do u mean by Commercial Paper? Commercial Paper (CPs as commonly known) is an instrument by which a corporate borrows money from banks for short periods of time. A CP binds the corporate to make a payment equal to the face value of the CP to the issuing bank on a specified due date. In this sense, a CP is like a short term unsecured loan. 51) page 87 Atleast two questions will come from credit derivatives Credit derivatives are financial contracts that transfer credit risk from one party to another,
facilitating greater efficiency in the pricing and distribution of credit risk among market players. In market parlance, the corporate bond investor in this example is the buyer of protection, the dealers the protection seller, and the issuer of the corporate bond is called the reference entity 53) Page 90 What do u mean by: Forward Rate Agreement (FRA) - A contract that determines the rate of interest, or currency exchange rate, to be paid, or received, on an obligation beginning at a some future start date. It is also referred to as Future Rate Agreement. Interest Rate Swap (IRS) - A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. The motive may be the competitive advantage of one company to have access to lower fixed rates than another company. The other company may be competitively placed to have access to lower floating rates. A swap would be beneficial to both. The swap is measured by its notional principal. 54) page 91 What do u mean by CMS? Cash Management Services - CMS is a service provided by banks to its corporate clients for a fee to reduce the float on collections and to ease the bulk payment transactions of the client. The three elements of CMS are: Receivables Management Payables Management Liquidity Managemet 55) Page 92 What are the causes of interest rate risk? Repricing risk Yield curve risk. Basis risk Optionality 56) Page 94 One numerical on: INR/USD quote: 45.26/.36 (here, 0.01 is the smallest count, referred to as one ‘pip’) EUR/USD quote: 1.2458/.2461 (here, 0.0001 is the smallest count, referred to as one ‘pip’) While the derived cross currency rate would be: INR/Euro quote: (45.26*1.2461)/ (45.36*1.2458) = 56.40/.51 How many business days are required for spot deal? Answer – two days 57) Page 95 Which are the inter banks: Front Arena Summit Calapso Wall Street Systems 64)page 104 What are risk factors choosing the mode of financing? Costs Time frame Risk factors
Govt gurantee programs Exporters funds 66) page 105
PAYMENT METHODS Cash in advance Letter of credit Documentary collection Open account or credit Counter-trade or Barter 68)page 107 four parties are involved in any transaction using an LC: 1. Buyer or Applicant 2. Issuing bank 3. Beneficiary’s 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 buyer’s order. 71) page 110 DOCUMENTARY COLLECTION Documentary collection carries the risk that the buyer will not or cannot pay for the goods upon receipt of the draft and documents. 72) page 111
OPEN ACCOUNT This can be a very risky method for the seller, unless he has a long and favorable relationship with the buyer or the buyer has an excellent credit rating. 82) page 131-132 See the diagram and learn all the front office and back office functions? Two questions will atleast come… 83)page 133 In achieving the above goals, an Investment Manager uses the following approaches/principles: Asset Mix International Diversification Screens/Filters. Capital preservation Alternative Investments 86) page 139 Read mutual funds ..two questions will atleast come..
89) page 143
What is the name of pension funds? 401k,IRA 92) page 149
What do u mean by THE CHINESE WALL? 93) page 150
UNDERWRITING Underwriters earn 3 types of Underwriting Spread: Manager's fee - The lead underwriter receives this fee on all securities sold. Underwriter's Allowance is the total spread minus the Manager's fee. This fee is shared by syndicate members based on the type of syndicate account. Concession - It is typically the largest part of the spread and is paid to the broker/dealer that actually took the client’s order. 94) page 151
SECONDARY MARKET TRADING there will three questions atleast come, read it carefully: Examples: Stock Exchanges: NYSE, AMEX NASDAQ is a good example of OTC market. Another name for fourth market: Instinet 95) page 153 Bid or ask rate: An individual firm could act as a broker on one trade and a dealer on another. When acting as a broker, the firm is taking customer orders and acting as their agent to buy or sell the security. For this service, the broker charges a commission. A firm acting as a dealer is the actual buyer or seller, taking the other side of a trade. The price at which market makers will buy or sell a particular security is known as the Bid or Ask Price.
96) page 154 Order Types (Based on Volume) Fill or Kill (FOK) – The order must be immediately filled in one trade or canceled completely. All or None (AON) - The entire order must be filled or canceled completely, but unlike FOK, AON can remain good till cancelled. Immediate or Cancel (IOC) must immediately be filled for as much of the order as possible in one trade, with the remainder being cancelled. Market Not Held order – The floor broker has the discretion concerning time and price. A key point is that Market Not Held orders are never on the Specialist's Book. Question: diff between FOK and AON? 97)page 160
The important markets and the indices used are presented below: US Diversified market Dow Jones Industrial Average (Dow) US Technology NASDAQ 100 UK (London) Financial Times Stock Exchange Index (FTSE) Germany (Frankfurt) DAX France (Paris) CAC Switzerland (Zurich) SMI Japan (Tokyo) Nikkei Hong Kong Hang Seng Singapore Strait Times Index (STI) 98) page 164 See XL sheet sure three questione will come from risk Credit risk is the possibility of loss as a result of default, such as when a customer defaults on a loan, or more generally, any type of financial contract. Liquidity risk is the possibility that a firm will be unable to generate funds to meet contractual obligations as they fall due. Operational risk is the possibility of loss resulting from errors in instructing payments or settling transactions. Legal risk is the possibility of loss when a contract cannot be enforced -- for example, because the customer had no authority to enter into the contract or the contract turns out to be unenforceable in a bankruptcy. Market risk is the possibility of loss over a given period of time related to uncertain movements in market factors, such as interest rates, currencies, equities, and commodities. 101) page 165 Numerical.. Example VaR Calculation Assume that you have a holding in IBM Stock worth $10 million. You have calculated the standard deviation (SD) of change over one day in IBM is $ 0.20. Therefore for the entire position, SD of change over 1 day = $200,000 The SD of change over 10 days = $200,000 * √(10) = $632,456 The 99% VaR over 10 days = 2.33 * 632,456 = $1,473,621 102) page 165 What is monto-carlo? Ans: A simulation technique 104) page 166
MANAGING RISKS There are multiple strategies to manage risks. Some of the commonly followed ones are: 1. Diversification 2. Hedging or Insurance 3. Setting Risk Limits 4. Ignore the risk! 109) page 184-185 The primary employee benefits are Defined Benefits Defined Contribution Health and Welfare Defined contribution plans have gained popularity as employers have begun to ask their employees to share responsibility for their retirement. The main purpose of a defined contributionplan is to provide an investment vehicle for employees to accumulate retirement income.( state true or false) true
diff between Defined Benefit Plan vs Defined Contribution Plan ?
110) page 186 The following plans are designated as defined contribution plans: Profit Sharing Plans Cash Or Deferred Arrangements Or 401(k) Plans Stock Bonus Plans And Employee Stock Ownership Plans Simplified employee pensions (SEP) Tax Sheltered Annuities Or 403(b) Arrangements
Some common questions: 1)Which is the best market ? New York 2) which is not a function of private bank? Ans: to print notes 3) Reliance Industries Limited, India would like to raise money in NYSE for expanding its operations in the domestic market (India). The securities issued would be American Depository Receipt
1.An underwriter ______________. a. guarantees & makes good of any shortfall in subscription to the extent of his underwriting b. decides the insurance premium c. is typically an investment bank d. guarantees that the capital issue will be subscribed at premium e. All of the listed options 2. Which of the options best describes the sequence of following events? 1. Issuing bank arranges for advising bank to make payment 2. Freight forwarder sends documents to the advising bank 3. Issuing bank issues the letter of credit (LC) 4. Advising bank advises seller that an LC has been opened 5. Advising bank sends documents to the issuing bank
a. 4,1,3,2,5
b. 4,5,2,3,1
c. 1,2,3,4,5 d. 3,4,2,5,1 e. 2,5,1,3,4
3. Corporate Lending refers to: a. Loans provided by companies to individuals b. Loans provided to high net worth individuals c. Loans provided to individuals d. Loans provided to companies by Government e. Loans provided to companies 4. A choice quote is _______________. a. price at which a firm is ready to buy or sell. It also means when bid is equal to offer b. when bid is equal to offer c. where the firm has a choice of deciding the security to take
d. price at which a firm is ready to buy or sell
5. In an international securities transaction, which of the following participants will NOT be involved? a. Domestic Sub-custodian b. b. Stock exchange in foreign country c. c. Global Custodian, Domestic Sub Custodian, Depository in Foreign Country and Sometimes Stock exchange in foreign Country d. d. Depository in foreign country e. Global Custodian 6. Stock A is more volatile than Stock B. Which stock is more risky? a. Data on SD is required for this b. A c. B d. Depends e. Both are equally risky 7. Which of the following would be most attractive private banking destination a. Delhi b. Jakarta c. Thimpu d. NewYork e. Lahore 8. a. b. c. d. e.
A good risk management system sends alerts automatically when the risk crosses a defined tolerance limit. allows the risk managers to drill down the risk to lowest components All of the given options carries out sensitivity, what-if analyses, generates customizable reports
9. On a trading day at the NYSE, a broker undertakes the following trades: Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MSFT shares for $20.00 each Sell 20 IBM shares for $11.00 each Sell 10 MSFT shares for $20.50 each Sell 30 IBM shares for $9.00 each How much did the broker pay out to the exchange in total in case of (a) gross settlement system (b) net settlement system? a. (a) $1,780 (b) 0 for IBM, $1,795 for MSFT b. (a) $1,780 (b) $3,000 c. (a) 0 for IBM, $1,795 for MSFT (b) $1,780 d. None of the listed Options e. (a) $3,000 (b) $1,780 10. Which of the following is likely to have the highest interest rate a. 12 month deposit with minimum balance of 1000$ b. Cannot be determined c. 6 month deposit with minimum balance of 1000$ d. 3 month deposit with minimum balance of 4000$ e. 6 month deposit with minimum balance of 2000$ 11. A Central Bank in an economy is also known as: a. The Retail Depositors' Bank b. The Banking Boss c. None of the listed Options d. The Big Boss e. The Bankers' Bank 12. Retail loans are asset products offered by the bank. State True or False . True False 13. Which of the following methods of payment is most risky to the Seller?
a. Counter trade Letter of Credit
b. Open Account e. Documentary Collection
c. Cash in Advance
d.
14. If the price of a security on day 1 & 2 are $ 100 and $ 102 respectively the return is a. 1% b. 2% c. Very high d. -1% e. -2% 15. Cash management solutions help corporations to ___________ a. manage surpluses and deficits b. reduce float on collections c. outsource collections d. All of the listed options e. automate collections 16. What is the role of a Central Bank in Forex market of a country? a. Acts as a trader for maximum profit making b. Encouraging trading in all currencies and not be limited to USD only c. Seller of USD d. Regulatory role depending on country's economic policies e. No role 17. If a bank gets a deposit of $1000, assuming a reserve requirement (CRR) of 10%, and that it circulates through 2 more banks, leading to the following money multiplier effect a. Loan of $1710 b. Create reserve of $190 c. None of the listed Options d. Create a reserve of $100 e. Loan of $2439
18. High-Net worth individuals generally have _______. a. Networth greater than $500,000 b. All of the listed options c. Market capitalization more than $200,000 d. Household income of maximum $50,000 per year 19. Which of these instruments is not included as part of Asset servicing services under the category "Pricing/Holdings Valuation", which includes accurate pricing, ratings, etc. ? a. Equities b. The service may be provided for all of these instruments c. Government securities d. Certificates of participation e. Certificates of deposit 20. In the Historical Simulation method of VaR calculation a. no assumption is made about the distribution of returns b. random returns are generated to calculate VaR c. returns are assumed to be not normally distributed d. returns are assumed to be normally distributed e. returns are not required at all 21.Which is the most risky of the following: a. An asset with a standard deviation of 3 b. An asset with a standard deviation of 1 c. An asset with a standard deviation of 2 d. An asset with a standard deviation of 5 e. An asset with a standard deviation of 4
22. A mutual fund with investment objective of achieving high capital growth approaches an investor services firm for advice. The firm advises the mutual fund to invest 80% of the fund in govt. debt, and 20% in equity. The allocation towards debt advised by the firm: a. Cannot be determined, depends on market conditions prevailing at the time b. Is too high c. Is about right d. Is too low 23. In which of the following cases can the Securities Lending service of a custodian be used to borrow securities? a. A broker has made a sale of securities, but some of the securities were delivered defective b. All of the listed options c. A hedge fund manager wants to trade with borrowed shares as part of his arbitrage strategy d. A broker has made a short sale of a security, and wants to cover it 24. The process of transferring obligation from one party to another is called _________ a. Settlement b. Novation c. Netting d. None of the listed Options e. Counterparty risk 25. Which of the following methods eliminate country risk and commercial risk upon confirmation? a. Standby Letter of Credit b. Both Standby Letter of Credit & Letter of Credit c. Letter of Credit d. Back to back Letter of Credit e. Documentary Collection
26. ADR stands for which of the following? a. American Demand of Russian bond b. American Demand of Rented homes c. American Demand Receivables d. American Dollar Receivables e. American Depository Receipts 27. Which of the following are examples of Payment Methods? a. Letter of credit b. Open account or credit c. Cash in advance d. All of the listed options e. Documentary collection 28. All broker/dealers involved in the underwriting of non-exempt securities must be a. NASDAQ Member b. No such membership is required c. NYSE Member d. SEC Member e. NASD Member 29. Credit derivative have all of the following characteristics EXCEPT: a. Traded over the counter b. Financial Instrument c. None of the listed Options d. Transfers risk e. Facilitate greater efficiency 30. Risk Management is a function of a. Back Office b. Mid Office c. Traders 31. Pick the odd one out a. Demat d. Hire Purchase
d. Front Office
b. Personal Loans e. Auto Loans
32. The term CP is used in Corporate Lending for: a. Client Partner b. Credit Provision d. Commodity Put Options e. Collateral Provision
e. Specialists
c. None of the listed Options
c. Commercial Paper
33. In defined contribution retirement plans, Tax-sheltered Annuities fall under Section ______ of ERISA a. 401(b) b. None of the listed Options c. 401(k) d. 403(b) e. 403(k) 34._____________ is typically the largest part of the spread and is paid to the broker/dealer that actually took the client’s order. a. Underwriter's Allowance b. Wage c. Manager's fee d. Concession e. Salary 35. Which of the following type of loan requires the amount of interest that would be earned on the loan to be paid upfront by the borrower? a. True discounted Loan b. Discounted Loan c. Capitalized Loan d. Demand loan e. Amortized Loan 36. Auto loans are loans financed for vehicles for business use. State True or False. True False 37. The real rate of interest is 9.50% while the nominal rate of interest is 11.70%. The applicable inflation rate is: a. 2.2 b. 2.1 c. None of the listed Options d. 0 e. -2.2 38. If the price of a security on day 1 & 2 are $ 102 and $ 100 respectively the return is a. 2% b. -2% c. -1.96% d. 1 to 2% e. Very high 39. Which of the following is NOT a category of health & welfare plan? a. Property insurance b. Survivor benefits c. All of these are valid categories d. Disability income e. Health care plan 40. If total spread on underwriting is $ 500000 and Manager's fee is $ 100000, what is the amount which will be distributed in the syndicate? a. $400,000 b. $500,000 c. $600,000 d. Cannot be determined e. $100,000 41. What are the risks associated with Hedge Funds? a. High Leveraging b. High Speculation c. High Exposure in Derivatives d. All of the listed options 42. Which is the best VaR estimation model a. Variance-Covariance Matrix b. Cannot Say - depends on case to case c. Historical Simulation d. A combination of Monte Carlo and Historical Simulation e. Monte Carlo Simulation 43. A bank decides to sacntion only 10% of the loan sought by a company. The company goes and pledges extra assets with the bank and the bank then agrees to sanction 50% of the loan sought. The company has indulged in the process of: a. Credit Revision d. Credit Enhancement
b. Credit Increase e. Credit Incrementation
c. Credit scoring
44. A purely competitive financial market is not characterized by: a. Many Traders b. Government Regulation c. Cost effective Trading d. Full Information 45. On a trading day at the NYSE, a broker undertakes the following trades: Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MSFT shares for $20.00 each
Sell 20 IBM shares for $11.00 each Sell 10 MSFT shares for $20.50 each Sell 30 IBM shares for $9.00 each Given that a net settlement system is being used, find out the net position of the broker at the end of the day. a. IBM: 70 shares to give out; MSFT: 90 shares to receive; $3,000 to pay out to the exchange b. IBM: no exchange of shares; MSFT: 90 shares to receive; $3,000 to pay out to the exchange c. IBM: no exchange of shares; MSFT: 90 shares to receive; $1,780 to pay out to the exchange d. None of the listed Options e. IBM: no exchange of shares; MSFT: 90 shares to receive; $1,780 to receive from the exchange 46. Card associations provide which of the following services ? a. Set interest rates b. Set card fees c. Issue cards d. Set credit limits e. Security/Risk management 47. FX Spot Deal in US assumes a maturity of how many business days ahead? a. Five days b. Three days c. Four days d. Two days e. One days 48. A fixed income analyst will analyze all but a. Municipal Bonds b. Shares c. US Treasuries d. Corporate Bonds e. Bonds of Government Sponsored Enterprises 49. Which of the following is not correct for a personal loan? a. Loan amount is not linked to borrowers’ repayment capacity b. No security required c. The financer is not interested in the intention of the loan d. They are short term loans e. None of the listed Options 50. In Check 21, IRD stands for: a. Investor Replacement Document c. Internal Rating Document
b. Institutional Replacement Document d. Image Replacement Document
51. In an account earning simple interest, the interest from the first year is reinvested at the beginning of the second year. State True or False. True False 52.Which of the following is not a Charge Type a. Hypothecation b. Pledge c. Collateral
d. Lien
53.Jo inherited an antique tie pin. It was valued at $1350. Each year its value appreciated by 5%. Approximately how much was the tie pin expected to be worth 5 years later a. $1,723 b. $1,450 c. None of the listed options d. $1,688 e. $1,045 54. Which of the following represents the correct hierarchy of corporate ratings (highest to lowest)? a. AAA, AA+, BBB, D b. AAA, AA-, D, BBB c. D,C,B,A d. D, AA-, B, AAA e. AAA, AA+, D, AA-
55. The rate at which the bank will purchase US dollars against home currency is called as ___________. a. Direct Rate b. Ask Rate c. Bid Rate d. Indirect Rate e. Cross Currency Rate 56. Which among the following is an investment company that pools money from unitholders and invests in a variety of securities? a. Mutual Fund b. None of the listed options c. Stock Exchange d. Mortgage Company 57. Pick the odd one out. a. George Soros b. Bill Gates
c. Warren Buffet
d. Ben Graham
e. Peter Lynch
58. USExport and EURImport agree to carry out the transaction, goods worth $1,000,000 under a confirmed term Letter of Credit with a maturity date of 60 days from the time of shipment. The Acceptance commission @ 1.5% pa equals ___________. a. 2500 b. None of the listed Options c. 300 d. 250 e. 3000 59. Which of the following, according to you, has resulted in defined contribution plans gaining popularity over defined benefit plans? a. All of the listed options b. Employers increasingly want employees to share responsibility for their retirement c. DC plans fix the monthly contribution from the employee, making his financial planning easier d. DC plans are seen by employees as an investment vehicle to accumulate retirement income
60. Which of the following financial institutions are covered under the Anti-money laundering, US Patriot Act a. Mutual Funds b. Securities brokers and dealers c. All of the listed options d. Banks and Trust companies 61. All the following statements concerning U.S. Government securities are correct EXCEPT: a. Treasury bills have a greater interest rate risk than either Treasury bonds or Treasury notes. b. None of the listed options c. Treasury notes have maturity dates up to 10 years. d. Treasury bonds have maturity dates up to 30 years e. Treasury bills have their interest paid in a lump sum at maturity. 62. Legitimate ways to cancel the credit card transactions within a limited time frame are _________________ a. Chargeback and Chargeback reversals b. Chargeback reversals c. Chargeback d. Presentment 63. Syndicate helps in all the following activities but a. raising huge money from the banks b. managing large capital raising activity c. IPO Distribution d. managing conflicts between investment banks e. managing large bond issues 64. Bank New has a portfolio of $30 million worth of loans, which it wants to hedge. This is an example of what kind of loan?
a. Held for Sale Loans d. Accrual Loans
b. Trading Loans e. Undrawn Loan
c. Committed Loans
65. Operational Risk is defined as a. the risk of loss resulting from errors in processes, people and systems b. he possibility of loss as a result of default, such as when a customer defaults on a loan c. the possibility of loss over a given period of time related to uncertain movements in market factors d. the possibility that a firm will be unable to generate funds to meet contractual obligations as they fall due. e. the possibility of loss when a contract cannot be enforced 66. Open ended loan allow the borrower to borrow additional amount subject to the maximum amount less then a set value. State True or False. True False 67. Which risks may bring gains as well as losses? a. Credit risk and interest rate risk b. Liquidity risk and credit risk c. All these risks may lead to profits as well as losses d. Credit risk and foreign exchange risk e. Interest rate risk and foreign exchange risk
68. Banks are financial institutions that are licensed to accept deposits and issue loans True False 69. Bank A, based in the US, provides safekeeping services for securities to its US clients. It also has clients in France and Belgium, and provides securities safekeeping services to these clients through Banks C and D respectively. Which of the following terms best describes Bank A? a. Sub Custodian b. Secondary Custodian c. None of the listed Options d. Main Custodian e. Global Custodian 70. Credit derivatives can be used to ___________ the risk and ___________ the regulatory capital requirements. a. Diversify; reduce b. Manage; avoid c. Transfer; increase d. Assess; estimate e. Eliminate; improve 71. Liquidity refers to the ease with which an asset can be converted into cash. State True or False. True False 72. Trade Finance helps in: a. Facilitating corpoate lending b. Facilitating intra-company transactions c. Facilitating International transactions, corporate lending and setting up of new factories d. Facilitating International transactions e. Facilitating setting up of new factories 73. Which of the following is not a core private banking function? a. Investment Analysis and Advise b. Sales and Marketing c. Deposit Mobilization d. Client Management e. Research
74. An insurer undertakes an analysis of a portfolio of insurance policies by exploring scenarios for the paths followed by swap rates, policy surrender rates, mortgage prepayment rates for the mortgage-backed securities in the portfolio, etc. What is this process called? a. Cash projections b. Fund Administration c. Asset/Liability analysis d. Investment Manager Universe e. Asset allocation 75. The Brokerage firms are regulated by: a. State regulatory agencies b. Industry wide SROs
c. SEC d. All of the listed options
76. Which of the following factors affect the choice of payment methods? a. Government Guarantee Program b. All of the listed options c. Cost of financing d. Time frame e. Exporter’s Fund
77. Which of the following is associated with the purpose of regulating financial institutions? a. To offset the moral hazard incentives provided by deposit insurance and other guarantees. b. To provide stability of the money supply c. None of the listed options d. To prevent failure of any financial institution e. To serve certain social objectives
78. Retail banking is banking services provided for corporates. State True or False. True
False
79. If the funding cost of a Company goes up due to hardening of interest rates, this can be attributed to a. Commodity Risk d. Legal Risk
b. Liquidity Risk e. Interest Rate Risk
c. Operational Risk
80. I deposit $100 in a bank. Bank loans out $90 out of it to someone else who then invests the money in setting up a new factory. This process is called? a. Profit making tendancies of the Bank b. None of the listed options c. Monetery Policy d. Money Multiplier Effect e. Fiscal Policy 81. Which of the following is NOT an example of an Asset Based Loan? a. Auto Loan b. Home Loan c. Personal Loan d. All of the listed Options 82. The purchase of any stock for immediate delivery is a ______ market transaction. a. Option b. Forward c. Spot d. Futures e. Stock 83. Universal banks provide commercial banking as well as investment bank services under one roof. State True or False. True False 84. If 1 day VaR is $ 1 million, 9 Day VaR is a. $ 9 Mn b. $ 3 Mn c. $ 4.5 Mn
d. $ 4.4 Mn
e. $ 1 Mn
85. Which of the following is NOT a potential benefit of Straight Through Processing ? a. Increased diversity in IT systems of various players supporting the trade cycle b. Increased liquidity c. Reduction in trade processing time d. Drastic reduction in operational risk through reduction of human element e. Elimination of delays in settlement
86. The "Compliance reporting" service, offered as part of Investor services in the US, provides automated, __________, information highlighting potential violations of pre-agreed investment guidelines, external regulations & internal risk exposure limits a. Risk-based b. Exception-based c. Rule-based d. Client instruction-based 87. The Advising bank is used as a trusted bridge between the __________ and _______________ when they do not have an active relationship a. Issuing bank; Confirming bank b. Beneficiary bank; Reimbursing bank c. Issuing bank; Beneficiary bank d. Importer; Exporter e. Reimbursing bank; Beneficiary bank 88. Pick the odd one out a. Merill Lynch b. Federal Reserve e. Saloman Smith Barney
c. CSFB
d. UBS
89. Which of the following are disadvantages of using LC (Letter of Credit)? a. Credit Line tied up. b. Costly c. Specific and Binding d. Deals with documents and not with products e. Time consuming 90. CPI stands for which of the following? a. Consumer Popularity Index b. Consumer Product Index c. Consumer Price Index d. None of the listed options e. Consolidated Price Index 91. Which of the following holds true for an LC (Letter of Credit) a. Are typically revocable unless specified otherwise. b. Advising bank has the liability for the payment of the LC. c. Shifts credit risk from the Importer to the Importer's Bank (Issuing Bank). d. Deals with products and not with documents e. One of the relatively cheaper forms of payment guarantee.
92. Which of the following is not a derivatives instrument? a. Futures
b. Corporate Bonds
c. Put Options d. Call Options
e. Swaps
93. In a 2 way quote for a share the bid is a. more than offer d. 2% less than offer
b. equal to offer c. less than offer e. dependent on dealer's skill
94. HPPL shares are currently selling for $25.00 each. You bought 200 shares one year ago at $24 and received dividend payments of $1.50 per share. What was your total dollar capital gain this year? a. $300 b. $200 c. $400 d. $500 e. None of the listed options 95. A bank providing custody services is in a good position to offer securities lending services to its clients as well. State True or False.
True
False
96. Which of the following operations can be done on a LC (Letter of Credit)? a. Purchase
b. Negotiate
c. Acceptance d. All of the listed Options
e. Discount
97. Under what category can services like asset/liability analysis, asset allocation, cash projection, compliance reporting, fund administration, investment manager universe, etc. provided by an institution be classified? a. Asset servicing b. Investment management c. Investor services d. Trading e. None of the listed Options 98. Which of the following best describes bank systems? a. Unregulated and safe b. Unregulated and unsafe c. Regulated and unsafe d. None of the listed Options e. Regulated and safe 99. In a economy where inflation is 9%, future value of 100 units of money after 2 year would be which of the following? a. Around Rs 109 b. None of the listed options c. 118.8 d. Exactly 120 e. Exactly 100 100. An investor wants to undertake a cross-border transaction in a security. Which of the following does NOT correctly represent a way in which such a trade may be settled? a. Directly through a local agent who is a member of the local depository b. All of these are valid ways for settling the cross-border trade c. Through a Global Custodian, operating through a local agent, who is a member of the local depository d. Through an International Central Securities Depository, which has direct links with the local depository e. Through direct communication link between investor's depository and local depository 101. You purchased a stock for $40. One year later you received $2 as dividend and sold the share for $48. What was your holding period return? a. 10% b. 50% c. 45% d. None of the listed options e. 25% 102. NASD is an not an SRO for ____________. a. Over the counter market b. Second Market d. Listed Market e. Third Market
c. Fourth Market
103. A successful wealth manager needs to know about ___________. a. All of the listed options b. 401 k rollovers c. tax and estate planning d. fixed income investments e. equity investments 104. Offer is the price at which a firm a. intends to buy b. trades in securities c. quotes when it does not want to trade d. quotes to its best customers e. Intends to sell
105. Which of the following best describes how banks make loans? a. None of the listed Options b. Reasonably, not depending upon risk c. Without limitation d. Blindly with equal offers to all customers e. Reasonably, depending upon risk 106. Which of the following is not an example of an option? a. Oil Futures b. Call Option c. Put Option d. Swaption e. LEAPS (Long Term Options) 107. If the price of shares of Cognizant change from $ 65 to $ 60, this can be attributed to a. Credit Risk b. Interest Rate Risk c. Operational Risk d. Liquidity Risk e. Market Risk
108. A company would pay the interest on what portion of the loan?
a. Disbursed amount b. Unused amount of the loan c. None of the listed Options d. Either disbursed or committed amount e. Committed amount 109. A bank is required to hold reserves at least equal to a prescribed fraction of its total deposit liabilities. State True or False True False 110. Securities with an original maturity of greater than 1-year are traded on money markets. State True or False. True False 111. Interest rates are ____________. a. the prices paid for the use of a real asset b. the prices paid for the use of a real liability c. the prices paid for the use of a financial liability d. the prices paid for the use of a financial asset e. the prices paid for the use of a financial liability and the prices paid for the use of a financial asset 112. Basel capital accord was instituted to coordinate global regulatory efforts to institute _______________ capital requirements to eliminate the threat posed by _____________ a. Minimum; undercapitalized banks b. Maximum; undercapitalized financial institutions c. Minimum; overcapitalized banks d. Maximum; overcapitalized financial institutions e. None of the listed Options
113. Which of the following trading services reduces the trading costs for institutional investors? a. Transition management b. None of the listed Options c. Transition management and commission recapture d. Commission recapture e. Stock repurchase program 114. Money Market accounts never require a minimum balance to operate. State True or False. True False 114. which of the following is not a feature of private banking? a. Specialist Advice b. Commercial Lending c. Lot of research d. High Investment in technology e. Understanding the capital and investment needs
115. What happens when the interest rates fall? a. Interest rates never fall, they always go up b. Economy goes into a deflation c. Bond prices decrease d. Bond prices do not change e. Bond prices increase 116. What are the two types of portfolio management services? a. Penny wise and Pound wise b. X and Y c. Directed and Straight d. Discretionary and Non Discretionary e. Universal and Local 117. Who backs the dollar? a. None of the listed Options c. Private companies
b. The treasury d. The government
e. The Fed
118. Warrants are the combination of which of these instruments? a. Cash and Call Options b. Equities and Futures c. Call and Put Options d. Equities and Call Options e. Put Options and Swaps 119. Which of the following is computationally the fastest method for calculating VaR a. Monte Carlo Simulation b. Historical Simulation c. All would take equal time if done using a software d. Variance-Covariance Matrix e. A combination of Monte Carlo and Historical Simulation 120.Factoring is______________ a. Purchase of account receivables at a discount b. works mostly with capital goods c. sharing risk with third party d. works with medium and long term receivables e. a discounting method without recourse
121.A life insurance company has guaranteed a payment of $ 8 Million to a pension fund, 4 years from now. If the Insurance company has received a total premium of $ 6.5 million, and can invest this entire amount for 3 years at 6.75 %, will it have sufficient funds to meet the $ 8 million obligation? a) No b) Yes c) Insufficient data to draw any conclusions You have invested $5000, for 5 years and 3 months @ an annual interest rate of 6%. What is the future value of this amount? a) $ 6890.42 b) $ 6789.31 c) $ 6780.24 d) $ 7346.51 122.
123. An investor is considering the purchase of a financial instrument, that promises to make the following payments: Year 1 $ 100 Year 2 $ 100 Year 3 $ 100 Year 4 $ 1,200 What is the price she should pay for this instrument, assuming she wants a 7% annual interest rate?* * PV Values of $ 1: PV(1,0.7) (i.e. discounted over 1 period by 7%) = 0.9346 PV(2,0.7)=0.8734; PV(3,0.7) = 0.8163; PV(4,0.7)= 0.7629600 a. b. c. d.
$1500 $ 1231.31 $ 1177.91 $ 1096.28
Data for questions 4-7: The following data is gathered from Cognizant’s annual report 2002 (it is not an exact copy).Use this to answer the next 3 questions. (all $ values in millions) Total Revenue : $ 229.08 Direct Cost
$ 122.7
Tax
23.35%
Interest Income
$
1.8
Depreciation & Amortization
$
7.84
# shares outstanding
59.2 Mn
Selling, General Administrative Expense
& $ 53.34
Other expenses
$
1.9
124.What is the Gross Profit? a. $ 106.38 Mn b. $ 227.18 Mn c. $ 104.48 Mn d. $ 51.14 Mn 125. What is the EBIT? a. $ 106.38 Mn b. $ 53.04 Mn c. $ 52.94 Mn d. $ 45.10 Mn 126. What is the PAT? a) b) c) d)
$ 45.1 Mn $ 35.5 Mn $ 34.56 Mn $ 52.94 Mn
127. What is the EPS? a. 0.76 b. 0.599 c. 0.58 d. 0.63 128. .A firm’s undistributed profit falls under which category in the balance sheet?
a) b) c) d)
Working Capital Asset Owner’s Equity Borrowings
Leary Corporation's snapshot as of December 31, 2002 is presented below in random order. Accounts receivable $60,000 Shareholders' equity $377,000 Short term debt $130,000 Accounts payable $37,000 Inventory $165,000 Equipment $500,000 Long-term debt payable $ 350,000 Land $194,000 Cash $25,000 Prepare the balance sheet for December 31, 2003, and answer questions 9-13. Assume depreciation @ 10%, using straight-line method 129. With the above data, what is the total of the assets /or liabilities+shareholders’ equity ? a) $ 944,000 b) $ 894,000 c) $ 900,000 d) $ 874,600 130. What is the total of the Current Assets? a. $ 250,000 b. $ 85,000 c. $ 225,000 d. $ 190,000 131. What is the total of the Current Liabilities? a) $ 165,000 b) $ 377,000 c) $ 350,000 d) $ 167,000 132.What is the amount of depreciation? a. $ 0 b. $ 19,400 c. $ 50,000 d. $ 69,400
133. What is the total of short term liabilities? a) $ 727,000 b) $ 377,000 c) $ 350,000 d) $ 167,000 134. ABC
Corporation Ltd.’s capital structure is given below. How much minimum cash will the company need to meet its necessary payment obligations to investors this year? Pref. equity $ 1,000,000 dividend rate 9% Debentures $ 500,000 8% interest rate Secured Loans$1,200,000 5% interest rate Common shares $1,000,000 Assume that principal need not be repaid this year on any debt, and that ABC Corp is making no profits this year. a. $0 b. $190,000 c. $100,000 d. $60,000 135. The following are the cash flows for a trader over the next 7 days. He has Rs. 10,000 in his current account with the bank. The bank also offers an overdraft facility. Does the trader need to use overdraft on his account? If yes, how much should be the minimum overdraft allowed by the bank? Assume that all payments are made using checks on the account and similarly all incoming payments are deposited directly in the same account. Assume that he gets a 1-day float on the payments made using checks, and checks he receives get credited immediately. Also assume that debits and credits for a day take place at the same time. Day 1: Pay supplier Rs. 5,400 Day 2: Pay telephone bill Rs. 4,000 Receive payment Rs. 1,800 Day 3: Pay instalment on Loan Rs. 5,200 Day 4: Receive payments Rs. 3,900 Day 5: Pay salaries Rs. 2,500 Receive payments Rs. 1,700 Pay to Supplier Rs. 5,500 Day 6: Reimburse expenses Rs. 1,400 Day 7: Receive payment Rs. 1,950 a. b. c. d.
No, he doesn’t need an overdraft Yes, and the min. limit should be Rs. 4,650 Yes, and the min. limit should be Rs. 6,600 Yes, and the min. limit should be Rs. 5,200
136. Using the data of the question above: The following are the cash flows for a trader over the next 7 days. He has Rs. 10,000 in his current account with the bank. The bank also offers an overdraft facility. Does the trader need to use overdraft on his account? If yes, how much should be the minimum overdraft allowed by the bank? Assume that all payments are made using checks on the account and similarly all incoming payments are deposited directly in the same account. Assume that he does not get a 1-day float on the payments he makes using checks. Checks he receives get credited immediately. Also assume that debits and credits for a day take place at the same time. Day 1: Pay supplier Rs. 5,400 Day 2: Pay telephone bill Rs. 4,000 Receive payment Rs. 1,800 Day 3: Pay instalment on Loan Rs. 5,200 Day 4: Receive payments Rs. 3,900 Day 5: Pay salaries Rs. 2,500 Receive payments Rs. 1,700 Pay to Supplier Rs. 5,500 Day 6: Reimburse expenses Rs. 1,400 Day 7: Receive payment Rs. 1,950 a. b. c. d.
No, he doesn’t need an overdraft Yes, and the min. limit should be Rs. 4,650 Yes, and the min. limit should be Rs. 6,600 Yes, and the min. limit should be Rs. 5,200
1. You invest Rs.5000 at 8% p.a. compound interest in a bank. After 5 years, what is the amount you have received from the bank? Rs.12346 Rs. 7000 Rs. 2346 Rs. 7346 Rs. 7546 2. Your friend invests Rs.8000 in the some bank at 10% p.a. His interest is getting compounded each year. At the end of 5 years, how much interest will he have earned on his investment? Rs. 4845.6 Rs. 4000 Rs. 12000 Rs. 4884.08 None of the listed Options 3. Your brother calls you, saying that he has found a great plot of land, which requires a payment of Rs.50, 000 immediately, which he has made. He asks you to pay the Rs.2, 50,000 which is due after one year. You have Rs.2, 25,000 right now, and want to invest it right away, to yield the desired amount after one year. However, it is also your hard-earned money, and rather than simple go for the highest return, you want to find the right risk-return balance. Here the options open to you, which one would you chose? a. Investment Option: Bank Fixed Deposit 1, Rate of return offered: 11% p.a. b. Investment Option: Bank Fixed Deposit 2, Rate of return offered: 11 % semi annually – compounded every 6 mths c. Investment Option: Co-operative Bank FD, Rate of return offered: 14% p.a d. Investment Option: Friend’s business, Rate of return offered: 18% p.a. e. Investment Option: Share market 4. Present Value of Rs.600 received one year from now (using 15% time value rate) is
510
521.7
690
517.2
None of the listed Options
5. An investor is considering the purchase of a financial instrument that promises to make the following payments: Yrs from now Promised Payments 1 Rs. 2000 2 Rs. 2000 3 Rs. 22500 Investor wants exactly 6% return on the investment. At what price should the investor buy the instrument? 22512 22558 23021 21000 21500 6. A person borrows $12,000 from a private money lender at a rate of 9.50% for a period of 1 year, when the average inflation rate for the period is 4%. The real rate of interest is ____ while the nominal rate of interest is _____. 9.50%, 13.50% 9.50%, 5.50% 9.50%, 9.50% 9.50%, information not sufficient for finding real rate of interest None of the listed Options 7. The real rate of interest is 7.60% while the nominal rate of interest is 9.70%. The applicable inflation rate is: 2.10% -2.10% 13.10% 0% None of the listed Options 8. As nominal interest rates increase in the economy, the inflation should ideally: Decrease Remain same Increase Depends on rate of increase in real interest rates None of the listed Options 9. A person wants to borrow money from the banking system for the purpose of an overseas holiday. Bank A offers him an interest rate of 5.15% p.a. payable monthly, bank B offers him 5.20% p.a. payable semi-annually while Bank C offers him 5.25% p.a. payable annually. Which is the cheapest option for the borrower? Bank A Bank B Bank C All of them are the same Both Bank B & Bank C 10. Find the future value of $1200 invested at 5.25% p.a. payable quarterly, after 5 years? 1465.2 1280.95 1557.55 1987.4 None of the listed Options 11. Find the future value of $1200 invested at 5.25% p.a. payable annually, after 6 months? 1231.1 1243.1 1235 1345.1 None of the listed Options 12. Find the present value of $1200 payable after 2 years, assuming the applicable interest rate is 5.10%? 1131.1 1078 1065 1086.36 None of the listed Options 13. Person A wins a lottery and the lottery organizers give the man the following options: Receive $120,000 no or receive $135,000 after 18 months? Assuming bank rates are at 8% p.a. payable quarterly, which is the better option? Receive $120,000 now Receive $135,000 after 18 months Both options are equally good Depends on bank rates at the end of 18 months None of the listed Options 14. An investment of 12,000 at the beginning of Year 1 yields $1000 at the end of Year 1, $1200 at the end of Year 2 and $1300 at the end of Year 3, apart from recovery of principal. What is the NPV of the investment assuming re-investment and a cut-off yield of 9.00%? $201.20 $3,500.00 $1,012.20 $181.20 None of the listed Options
15. An investment of 10,000 at the beginning of Year 1 yields $1200 at the end of Year 1, $1500 at the end of Year 2. What should be the return at the end of Year 3, apart from principal recovery, to justify the investment with a cut-off yield of 15.00%? $14,000.00 $13,423.67 $11,896.75 $12,345.90 None of the listed Options 16. A consumer goods company has a market share of 23% in the Flat screen television industry. The company is weighing the option of investing an additional $1.2 million in modernization and expansion, which is expected to yield additional revenues of $0.4 million over the first 3 years while it would yield $0.3 million and $0.1 million each in years 4 and 5. Assuming that the time window for the investment is 5 years and the hurdle rate for investments is 15%, should the company go for the investment from a purely financial perspective? No Yes Maybe Insufficient information None of the listed Options 17. An investor has multiple investment options yielding various dollar returns at various points of time, while he is comfortable with a return of X% p.a. Which method should he use to compare the various investments? IRR NPV Either of these Insufficient information None of the listed Options 18. An investor estimates an investment of $15,000 to yield returns of $1200 each at the end of the first 3 years apart from return of principal at the end of 3 years. Assuming that the inflation rate is 5%, should the investor opt for the investment? No Yes Maybe Insufficient information None of the listed Options 19. What is the IRR for an investment of $ 10,000 that yields a return of $1000 at the end of each of the first 3 years, $600 at the end of the 4th and 5th years and principal recovery at the end of 5 years? 5.55% 7.65% 8.47% Insufficient information None of the listed Options 20. The following concepts are derived from the basic concept of time value of money except: Present value Future value IRR Net Present Value None of the listed Options 21. A young student looking for monthly income should invest most of his savings in Bank deposits & Fixed Interest instruments Regular dividend paying companies Blue-chip shares Zero coupon bonds Real estate 22. Savings bonds are: Issued by department of Treasury Unregistered Transferable without registration Issued by department of Treasury and Transferable without registration Unregistered and Transferable without registration 23. The interest rate on a bond doesn’t 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 bond’s typically issued in US? Physical, Registered Electronic, Registered Physical, Registered and Electronic, Registered Physical, Unregistered Electronic, Unregistered 27. What is the backing for a Mortgaged Bond? No backing Bank Guarantee The credit worthiness of the issuing company Real estate owned by the Issuer None of the listed Options 28. What secured debt securities are generally backed by a portfolio of non-issuer securities, usually U.S. Government Securities? Debentures Bearer Bonds Collateral Trust Bonds Junk bonds Equipment Trust Debenture 29. What bondholders would have a general creditor status? Debentures Bearer bonds Unsecured bonds Junk bonds debenture
Equipment Trust
30. What is the S & P ratings below which bonds are considered to be speculative? Less than AAA Less than BBB Less than CCC D Junk grade 31. What securities experience Reinvestment Risk? Cumulative Interest Bonds Callable bonds None of the listed Options 32. What are the current maturities for T-Bills? 1, 2 and 3 months 3, 6 and 12 months listed Options
1, 2 and 3 years1 month only
33. What is the maximum maturity for Commercial Paper? 90 days 180 days 270 days 360 days 34. Who sets the Fed Funds Rate? Federal Reserve Banks 35. Negotiable securities are: Sale price can be negotiated Can only be sold to the issuer Have a lock in period
SEC
Zero coupon bonds
Junk bonds
None of the
None of the listed Options
Stock Exchanges
Investors
Freely transferable Can’t be sold except on maturity
36. Mutual funds Are often riskier than investing in individual stocks. Require investors to invest very large sums of money, which eliminates small investors. Are less riskier than individual stocks as the fund managers invest in a diversified portfolio Give much greater returns than the stock index Carry no risk 37. Hybrid securities are Combination of Preference and Common stock Combination of put and call Combination of debt and equity Combination of growth and income None of the listed Options
1
38. Why would an investor choose to invest in Money Market Securities? Investor looking for capital gains Investor looking for liquidity Arbitrageur Investor looking for regular income None of the listed Options 39. Which of the following bonds involves highest risk? Subordinated debenture bonds. Debenture bonds. Collateral bonds. Mortgage bonds None of the listed Options 40.Which of the following statements is true about futures? Future prices are paid for current transactions Risk is often increased when dealing in futures because buyers and sellers may be required to accept a price other than the one to which they agreed. Financial futures are traded primarily at the New York Stock Exchange. Investors may hedge their risk by entering into futures Futures are same as Options 41.The responsibility of enforcing futures contracts is taken on by A clearing house. The brokers who struck the deal. Banks The buyer and seller. Arbitrageurs 42.What provides the incentive for someone to sell an option when that individual has no rights, just obligations? The seller stands to gain from changes in interest rates. The seller stands to gain from changes in prices. Selling options is relatively risk free The seller earns commission The buyer must pay an option premium to the seller. 43. Which of the following is used primarily by financial intermediaries to hedge interest rate risk for long periods of time (up to 15 years)? Swaps. Put options. Futures Call options LEAPS 44. Which of the following is not an example of a derivative? Financial futures Options Preferred stock of a company Swaptions
Swaps
45. Company ABC Inc. Declares bankruptcy. Now, $180 million has been accumulated through liquidation of its assets. The main stake holders in the firm are debt holders (Bank of New York $140 million, Union Bank of California - $30 Million) and equity holders (Templeton Investments $100 million). What is the amount that the three stake holders end up with (in $ million)? (In the order, BNY, UBC and TI) 30, 140 and 10 60, 60 and 60 93, 20 and 67 140, 30 and 10 140, 30 and 0 46. If General Electric would borrow $300 million from Bank of America, how would its balance sheet be affected in terms on leverage ratio? Leverage ratio would remain the same Leverage ratio would increase Leverage ratio would decrease Leverage ratio has no relation with borrowing None of the listed options 47. People who buy stock in a corporation such as Coca Cola become Part owners of Coca Cola, so the benefits of holding the stock depend on Coca Cola’s profits Part owners of Coca Cola, but the benefits of holding the stock do not depend on Coca Cola’s profits
Receive interest Creditors of Coca Cola, so the benefits of holding the stock depend on Coca Cola’s profits Creditors of Coca Cola, but the benefits of holding the stock do not depend on Coca Cola’s 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 doesn’t mind the risk but he would definitely like his money to grow as fast as possible. He would like to invest in a Mutual Fund which would satisfy these criteria. What would the consultants choice for his profile? Income Fund
Liquid Fund
Growth Fund
Balanced Fund
Bank Deposit
52. Reliance Industries Limited, India would like to raise money in NYSE for expanding its operations in the domestic market (India).The securities issued would be American Depository Receipt Indian Share Public offering in India Global Depository Receipt None of the listed options 53. If I expect the price CTS share price to rise by $5 from its current levels within 1 month, then which would be the best option? Buy a put option on CTS stock Sell a put option on CTS stock Buy a call option on CTS stock Sell a put option on CTS stock Buy a put as well as a call at different strike prices 54. Casablanca Inc. Issues $100 million worth of securities which will continue to pay a fixed coupon of 2% annually for next five years.The investors also have an option of converting the security into equity after the first year. Such a security would be termed as Convertible Bond Preferred Stock Stock Option Forward Contract Futures 55. State and local government or municipal bonds have one unique feature that makes them attractive to wealthy investors.Which of the following is that unique feature of "muni" bonds? They are exempt from state taxation for all investors They are exempt from federal and state (resident investors) income taxation State and municipal bonds usually have coupon rates State and local municipal bonds are all revenue bonds They have high credit rating
56. If IBM finds it much cheaper to raise money in US and Vodafone in UK. However, both IBM would like to raise money in UK and Vodafone in US, both of which are costlier propositions for the firms. What would be best possible solution to this problem? Future contract LEAPS Vanilla Call Option Forward Contract Currency Swap 57.Forward contracts are promises to buy or sell foreign exchange: On a futures exchange at some time in the future. On a specific future date at a price established on that specific future date. At a specific forex rate at some time during the contract period. At a specific price on a specified future date. None of the listed Options 58. If the forward rate (Forex/U.S. dollar) is selling at a premium over the spot rate, which of the following statements best reflects the expectations of the foreign exchange market? No forecast can be made with forward contracts The U.S. dollar is expected to appreciate The foreign currency is expected to appreciate The spot rate is expected to remain constant None of the listed Options 59. A U.S. importer who owes 1 million Canadian $ in 90 days and wishes to hedge his/her foreign exchange risk would: Take no action Wait and buy Canadian in the spot market in 90 days Sell Canadian dollars forward for delivery in 90 days Buy Canadian dollars forward for delivery in 60 days Buy Canadian dollars forward for delivery in 90 days 60. A U.S. importer of Canadian nickel ore with an invoice to pay $1 million U.S. dollars in thirty days would Pay the invoice in thirty days. Buy a forward contract in U.S. dollars for delivery in thirty days. Sell Canadian dollars in the futures market. Sell US dollars in futures market Purchase Canadian dollars for delivery in thirty days. 61. A U.S. importer who has agreed to pay 1 million Euros to a French exporter in 60 days decides to wait the full 60 days before paying. The importer is A foreign exchange speculator Expecting the dollar to depreciate against the Euro A hedger in the foreign exchange market Planning to pay a set amount of dollars for the items purchase None of the listed Options 62. A hedger in the financial futures market Usually buys financial futures to hedge Usually sells financial futures to hedge Either buys or sells financial futures contracts so that the underlying asset spot gains/losses are directly related to futures contract gains/losses Either buys or sells financial futures contracts so that the underlying asset spot gains/losses are inversely related to financial futures contract gains/losses None of the listed Options 63. Who will lose money if the price of any underlying instrument falls? The seller of a futures contract The buyer of a put.
The writer of a call. None of the listed Options
The buyer of a futures contact.
64. The value of options Varies inversely with the price variance of the underlying asset. Varies directly with the length of time to expiration. Varies inversely with the level of interest rates Increases with the decreased volatility of the underlying asset. None of the listed Options 65. A Standard and Poor's bond rating of AAA refers to High quality investment grade bonds. Bonds of high quality, but with an elevated risk of long-term default. Non-investment grade bonds, with uncertain long-term prospects. Government bonds only None of the listed Options 66. The first time a company issues stock to the public the issue is called An initial public offering (IPO). A secondary offering. A stock option. Internal financing. An initial public offering (IPO) and Internal financing 67. Common stockholders usually trade ________ to preferred stockholders in return for __________. Interest income; voting rights A prior claim on dividends; higher dividend income A prior claim on dividends; voting rights Their residual claim on assets in liquidation; preferred claim on dividends Both 2 and 3 68. Leverage financing refers to Using Promoter’s credibility to raise money Leveraging brand value to issue equity Using debt finance Selling assets to raise money Use of retained profits for expansion 69. Preferred stock dividends are paid Each year on a contractual basis, but before common dividends. After common dividends are paid. Before interest is paid on debt. If declared by the board of directors. After both interest and common dividends are paid 70. The purchase of U.S. Treasury bonds for immediate delivery is a ______ market transaction Stock Option Spot Futures Forward 71. Suppose Ruthie has the option of receiving a $10,800 payment today or a $15,868.7 payment in six years. Which of the following statements is true if the interest rate is 8 percent? She should take the $10,800 today because the present value of the $15,868 paid in six years is only $9,752.54. The present value of the $10,800 is $15,868.74. She should take the $15,000 in six years because $15,000 is more than $10,000.
She should take the $15,000 in six years because the future value of $10,800 is only $15,000. Both are equal 72. The buying or selling of securities with the hope of profiting from privileged information is known as Speculation. The spot market. Arbitraging The futures market. The term to maturity. 73. If the issue price of a 5 year zero-coupon bond is $940 and its redemption price is $1000, market price $955,then the difference amount of $45 stands for The interest for the 5-year period The return on the investment of $960 Both The interest for the 5-year period and The return on the investment of $960 Only 1 Premium on the bond 74. The effective interest rate on a bond, (when the price of the bond is greater than its par value) Is lower than the coupon rate. Is always equal to the coupon rate. Increases as the bond price decreases. Is greater than the coupon rate. None of the listed Options 75. John holds 2007 maturity government security which pays a semi-annual coupon of 8%. What should John do with this security? Sell it, if interest rate is increasing Sell it, if interest rate is decreasing Sell it with the next coupon date, irrespective of interest rates movement Sell it now or hold it till maturity Can never sell 76. If bond portfolio managers expect interest rates to increase They will anticipate a decrease in bond prices. They will probably buy bonds now to avoid capital losses. They will wait for the rates to actually change before taking any action. They will probably sell more bonds now before the bond prices decreases. They will buy short-term bonds. 77. Which of the following is not a characteristic of money markets? They trade in a central location. They have an active secondary market. They are wholesale markets. They are beyond the reach of small investors. They trade in short term instruments 78. Investors use the money market To reduce the liquidity of their funds. To reduce the opportunity cost of idle funds. To gain from expected declines in future interest rates. To earn high returns on their investments. To manage long-term cash requirements 79. Which of the following is true for The Fed funds rate It can be raised if the Govt. buys securities from the public. It can be raised if the Treasury will sell more bills. It can be raised if the Govt. announces an increase in the rate at its regular meeting. It is cost of borrowing immediately available funds for one day.
The Fed can’t do anything because it is market determined. 80. If John, a foreign exchange trader sees that EUR/USD, EUR/JPY and USD/JPY show that he could make money by buying two of them and selling the other, then what is he trying to do? Arbitrage trading Hedging Taking high risks to get high returns Both arbitrage trading and hedging Can’t say 81.One potential problem that could be caused by the tremendous growth of the international financial system in recent years is Lower standards of living around the world. That a disturbance in one financial market can spread more quickly to other countries. That the additional transactions will make the international financial markets less efficient. That economic growth will be likely to slow down in many countries Higher Income inequality 82. Primary markets Are markets in which primary goods and service, i.e. raw materials are traded. Are markets in which short-term debt is traded. Are markets in which claims that have already been issued are sold by one investor to another. Are markets in which newly issued claims are sold to initial buyers. Are markets in which shares are actively traded. 83. The current market interest rate is 10%. A coupon bond with a coupon payment of $70, a face value of $1000, and with still ten years to maturity, will trade at what discount? $1000. $0. $300. $200. $70 84. "Liquidity" is a term that is used to refer to The ease with which assets can be converted into goods and services. Financial assets in general. The practice of converting financial assets into money. Money. The devaluation of assets in general. 85. Discount bonds are Bonds that are currently trading below their face value. Bonds that are currently trading above their face value. Bonds that are sold below their face value, which yield interest payments in one lump sum at the day of maturity. Bonds that are sold at face value, but which yield interest payments in one lump sum at the day of maturity. Bonds that can be redeemed anytime at a discount 3 86. The money market trades debt of a short-term maturity. of a medium-term maturity. of a medium-to-long-term maturity. of a long-term maturity. of all types of maturities. 87. Say you buy a bond with a face value of $1000 at a discount for $750. The bond still has 10 years to maturity, and the coupon rate on the bond is 10%. The yield to maturity of this bond is approximately 70%. 14%. 10% 7% 12.5% 88. Which of the following classifies financial markets by term to maturity? Debt vs. equity market
Money vs. capital market Spot vs. futures market Primary vs. secondary market None of the listed Options 89. The initial sale of a security is in the ______ market, while subsequent trading in the security is in the ________ market Primary; secondary Secondary; primary Money; capital Spot; futures Debt; equity 90. Which of the following functions of financial markets best describes the primary functions of the financial futures market where trading is done for delivery some time in the future? Speculation; raise funds Payments system; risk management Risk management; speculation Funds intermediation; risk management Raise funds; payment system 91. The financial system Provides risk sharing, liquidity and information services. Provides liquidity services only. Provides information services only. Refers to the banking system only. Where only financial assets are bought & sold 92. While the primary market provides ________ for spenders, the secondary market provides ________ for investors Funds; liquidity A place for investing; liquidity Funds; low risk Securities; funds Low risk; high returns 93. Which of the following is associated with increased liquidity of a security? Increased transactions costs Increased time it takes to sell a security Increase in taxes for every transaction Increased number of dealers trading the security All of the listed options 94. Which of the following is not associated with money market securities? Short-term Marketable High quality Equity securities Repo 95. The second largest amount of capital market securities outstanding, after common stock, is Corporate and foreign bonds Mortgages U.S. Treasury securities U.S. Agency securities Municipal Bonds 96. Regulations limiting risk taking of financial institutions are imposed for which of the following reasons? The social costs to shareholders of a general bank failure are more than the private cost of the bank failure.
The costs of regulation exceed the benefits. The private costs of a bank failure exceed the social costs of general bank panic. The social costs of a general bank failure exceed the private costs to the shareholders of the bank that failed. Private costs to the shareholders of the bank exceeds the social costs of the a general bank failure. 97. Which of the following is associated with the purpose of regulating financial institutions? To provide stability of the money supply To serve certain social objectives To prevent failure of any financial institution To offset the moral hazard incentives provided by deposit insurance and other guarantees. All of the listed options 98. Regulatory balance sheet restrictions are designed to Limit the size of depository institutions. Limit risk-taking and to encourage diversification. Limit excessive diversification. Encourage high risk-taking by proper diversification. Limit diversification and encourage risk taking 99. Regulators' attempting to limit competition by restricted entry, exclusive services, etc. was an attempt to serve which of the following purposes of regulation? To promote competition in the financial services markets. To promote limited quantities of financial services at maximum prices. To promote safety and soundness of depository institutions. To protect the soundness of the deposit insurance fund. None of the listed Options 100. Which of the following are involved in the regulation of Capital Markets in the US? Ginnie Mae Fed SEC The US government None of the listed Options 101. Who among the following would not be a participant in the money-markets Banks Central Bank Small Investor Companies Financial Institutions 102. Repo’s are considered the safest financial instruments as They are backed by the government They are of very short-term maturity They come in very small denominations They are backed by all big banks and companies They offer lowest interest rates. 103. Individual investors are most likely to trade securities in The primary market a brokered market an auction market a block transaction a direct search market 104. Financial intermediaries differ from other businesses in that both their assets and their liabilities are mostly illiquid. owned by government real. financial regulated. 3 105. Insurance or a guarantee to cover losses of a financial institution may create a moral hazard Which is an increase in the chance that a random negative economic event will occur. Which is an incentive to decrease risk-taking by the insured. Which is an incentive to increase risk-taking by the insurance authority. Which is an incentive to increase risk-taking by the insured.
Which is an incentive to decrease risk-taking by the insured 106. In what roles do investment bankers perform? design securities with desirable properties market new stock and bond issues for firms provide advice to the firms as to market conditions, price, etc. None of the listed options All of the listed options 107. Financial intermediaries exist because small investors cannot efficiently gather information advertise for needed investments monitor their portfolios diversify their portfolios All of the listed options 108. Exchange rate risk results from changes in the exchange rates in the currencies of the investor and the country in which the investment is made. can be hedged by using a forward or futures contract in foreign exchange. cannot be eliminated. Both results from changes in the exchange rates in the currencies of the investor and the country in which the investment is made and can be hedged by using a forward or futures contract in foreign exchange. results from changes in the exchange rates in the currencies of the investor and the country in which the investment is made, can be hedged by using a forward or futures contract in foreign exchange and cannot be eliminated. 109. A coupon bond is a bond that does not pay interest on a regular basis but pays a lump sum at maturity pays interest on a regular basis (typically every six months) can always be converted into a specific number of shares of common stock in the issuing company always sells at par None of the listed options 110. Under the present international monetary system, Exchange rates fluctuate freely without government intervention. Central banks determine the exchange rates in all countries Supply and demand are the only factors for price determination. Central banks don’t intervene Supply and demand are the primary forces that determine exchange rates, but central banks may intervene if they believe currency values are over- or undervalued. It is illegal for central banks of major countries to coordinate their intervention activities. 111. The presence of risk means that Few outcomes possible Investors will lose money Investors will gain money The standard deviation of the return is large Final wealth will be lower than the initial wealth 112. Which asset class would provide highest returns for the lowest risk? Property Shares Bonds Cash Can’t be answered 113. Which asset class would provide lowest returns for the highest risk? Property Gold Bank deposits Cash Can’t be answered
114. If REAL rate of return was 10% last year and inflation was 3%, what was your investment returned? 3.30% 7% 13% 30% 10% 115. Which of the following statements regarding risk-averse investors is true? They will only accept lower returns and low risk They accept investments that provide high returns. They only care about rate of return. They will only accept higher returns and low risk None of the listed options
116. Alex is a more risk-averse investor than Olivia. Therefore For the same risk, Alex requires a higher rate of return than Olivia. For the same return, Alex tolerates higher risk than Olivia. For the same risk, Alex requires a lower rate of return than Olivia. For the same return, Olivia tolerates lesser risk than Alex. Both 2 and 3 117. If a T-bill pays 5 percent, which of the following investments would not be chosen by a risk-averse investor? An asset that pays 10 percent with a probability of 0.60 or 2 percent with a probability of 0.40. An asset that pays 10 percent with a probability of 0.40 or 2 percent with a probability of 0.60. An asset that pays 10 percent with a probability of 0.30 or 3.75 percent with a probability of 0.70. An asset that pays 10 percent with a probability of 0.20 or 3.75 percent with a probability of 0.80 An asset that pays 10 percent with a probability of 0.50 or 2.75 percent with a probability of 0.50 118. You purchased a share of stock for $20. One year later you received $1 as dividend and sold the share for $29. What was your holding period return 45% 5% 50% 40% None of the listed options 119. Bank of America charges a lower rate of interest to Lockheed Martin than to General Electric. This can be attributed to lower ________ risk from Lockheed as compared to GE for Bank of America Market Risk Credit Risk Liquidity Risk Legal Risk None of Above 120. If Bank of New York has found errors in settlement of transactions with some of its customers, as there is some mistake in some of its systems. This would be classified as Liquidity Risk Market Risk Credit Risk Country Risk Operational Risk 121. VaR is used for which of the following Risk Measurement Risk Mitigation Risk Taking Risk Assumption None of the listed options 122. A trader lost more than $50 million as the market moved against his positions. However, when measured the previous day by hisrisk manager, his VaR for a single day was defined at $20 million. Is this possible that the VaR is right Yes because VaR does not cover 100% of the outcomes
No, it is impossible Yes but only if the trader must have broken the VaR limit purposely Both a and c None of the listed options 123. Risk is best measured when looked at At a Macro level At the lowest possible level At a sub-macro level At organizational level At country level 124. Which percentage of confidence for VaR is the most conservative? 99% 95% 96% 90% 68% 125. Which of the following is not a risk management measure? Diversification Hedging Insurance Budgeting All are risk management techniques 126. Risk is best measured when looked at At a Macro level At the lowest possible level At a super-macro or organizational level At a macro level and at the lowest possible level
At a sub-macro level
127. Value-at-Risk can be estimated using Monte Carlo Simulation Historical Simulation Variance-Covariance Matrix Parametric methods All of the listed options 128. Is time horizon of importance when calculating VaR? Only for certain instruments Yes, for all financial instruments No. It is not a factor used for calculations. Yes but only time horizons lesser than a week Yes but only high value financial instruments 2 129. What would be the most accurate VaR estimation method? Monte Carlo Simulation Historical Simulation Variance-Covariance Matrix Cannot Say Analytical Methods 130. VaR helps in describing which of the following? How big the loss would be on a bad day. How to minimize the loss on bad days Approximately predict movements of asset to help minimize losses Explains the loss on a bad day as compared to other days None of the listed options 1 131. A 2.33 sigma limit for calculating risk would refer to what level of confidence? 95% 99% 99.99% 50% 100% 132. Risk-based capital requirements, under the Basel Accord, focused on what area of commercial bank risk? Default risk Interest rate risk Liquidity risk Political risk None of the listed options 133. An investor's strategy of holding many risky assets in an attempt to reduce overall risk is called ------------
Spread management Securitization.
Specialization Diversification
Coincidentialization
134. If a financial instrument has a 35 percent chance of paying 29 percent and a 65 percent chance of paying - 13 percent,it expected return would be 0.008 0.036 0.053 0.017 -0.029 4 135. Risk is usually measured as the Potential loss. Variability of outcomes around some expected value. Probability of expected values. Potential expected loss. None of the listed options 136. The term "risk averse" means that An individual refuses to take risks. Most investors and businessmen seek risk. An individual will seek to avoid risk or be compensated with a higher return. Only investment proposals with no risk should be accepted. Both An individual refuses to take risks and Only investment proposals with no risk should be accepted 137. If one project has a higher standard deviation than another It has a greater risk. It has a higher expected value. It has more possible outcomes. It may be riskier, but this can only be determined by the coefficient of variation. Both It has a greater risk and It has a higher expected value 1 138. Which of the following is a false statement? Risky investments may produce large losses. Risky investments may produce large gains. The standard deviation of returns is a risk measure. Risk-averse investors cannot be induced to invest in risky assets. Both Risky investments may produce large losses and Risky investments may produce large gains 4 139. Risk, as used in financial markets, means The probability of a loss. The probability of a gain. The probability of a gain and the probability of a loss. The overall rate of return. The present value of a financial instrument.
3
140. Legal risk is the Possibility that you will face legal action Loss you could incur when legal action is taken against you Possibility of loss when a contract cannot be enforced Possibility of loss from errors in instructing payments or settling transactions None of the listed options 141. The monetary value at risk is expressed as A number between 0 and 1 Possible impact in Dollars (1) * (2) can’t be assigned None of the listed options 142. A Portfolio Manager is examining the stock performance of Company Dee. She sees that, in the past, the maximum the stock has ever fallen is 5%. She buys 1 million worth of Company Dee stock. Which of the following statements is true? Her VaR is $50,000 with a confidence level of 100% Her VaR is $ 5,000 with a confidence level of 100%
Her VaR is $ 50,000 with a confidence level of 0% Her VaR is $1 Million with a confidence level of 100% Her VaR is $ 1 Million with a confidence level of 0% 143. State which of the following statement(s) is (are) true There is no risk without reward There is no reward without risk Increasing business in Europe also reduces a certain risk to Cognizant’s business Both There is no reward without risk and Increasing business in Europe also reduces a certain risk to Cognizant’s business Risk doesn’t change with time 144. State which of the following statement(s) is (are) true Microsoft stock is the safest investment It is better not to spend time and effort to identify and measure a risk if in the end we may not undertake any risk mitigation measure Risk management initiatives should reduce the risk to zero to obtain maximum benefit All of above None of the listed options 145. It is estimated that the probability of a particular risk in a project is 0.3 and the impact, should the risk materialize, is $ 5,000, while the project is worth $ 3 million. The Project Manager should Compare the cost of risk management with the value at risk and decide on optimum strategy Take immediate action to reduce the probability to as low as possible Ignore the risk – the monetary value is negligible Cannot say Shouldn’t take up the project 146. In 2002, interest earned on bank deposits was higher than profit from stock market investments, even though deposits were supposed to have less risk associated with them. It means Bank deposits are actually riskier form of investment than share prices, since reward has to be proportional to risk The scenario described above is impossible; there must be an error in measurement The risk-reward principle holds true over a long period, while in the short term it is less certain Cannot say The risk-reward principle holds true over a short period, while in the long term it is less certain 147. Following are the list of risks that Cognizant faces at an organization level EXCEPT exchange rate fluctuation protective legislation by U.S/U.K attrition payment default None of the listed Options 148. Following are the list of risks that your project or a typical project in Cognizant is exposed to EXCEPT attrition cost & time over-run incorrect requirements requirement evolution None of the listed Options 149. The extent of diversification affects the following EXCEPT risk return liquidity total investment None of the listed Options 150. Indian software firms lost a lot of money due to the Dollar appreciating against the Indian Rupee. This risk could be term
Liquidity Risk
Market Risk
Credit Risk
Legal Risk
Price Risk
151. Fill in the blanks: The liability of a bank include ____________, while the assets of a bank include _____________ Deposits, loans. Savings accounts and large time deposits, checking accounts. Long term deposits and short term loans Loans, deposits. None of the listed Options 152. What is the best basis for the comparison of dividend paying stocks with other investments such as bonds, certificates of deposits etc interest spread exchange rate interest rate equity yield dividend yield 153. Banks are financial intermediaries that a) Link lenders (depositors) to borrowers b) Evaluate the likelihood of borrower repayment, reducing risk by developing a diversified portfolio rather than lending to a single borrower. c) Create monopolies, monetary & fiscal policies. d) Both Link lenders (depositors) to borrowers and Create monopolies, monetary & fiscal policies. e) Both Link lenders (depositors) to borrowers and Evaluate the likelihood of borrower repayment, reducing risk by developing a diversified portfolio rather than lending to a single borrower 154. A bank failure is more likely to occur when bank increases its equity capital bank holds more short-term riskless securities bank large loans outflows bank increases its holdings of excess reserves capital adequacy ratio is reduced 155. When you deposit $200 in currency into your bank its assets decline by $200 its reserves decline by $200 its liabilities increase by $200 each of the above occur its assets decline by $200 and its reserves decline by $200 156. Which of the following is NOT under the purview of the Central Bank Monitoring foreign currency inflow and outflow Stability of the financial system Conducting the nations fiscal policy Regulating the Banking institutions Conducting the nations monetary policy 157. Which of the following represent tools available to the Fed to control the money supply? a) The capacity to make direct commercial loans to the public. b) The ability to inject or remove money held by the public by buying or selling U.S. Treasury Bonds. c) The ability to write legislation to generate increased government spending on public works projects such as building trails, parks, and bridges. d) The ability, through its Internal Revenue Service division, to change federal income tax rates, and thus vary cash holdings by the public. e) all of the listed options. 158. CRR stands for which of the following Cash Reserve Ratio Common Reserve Ratio Cash Re-service Ratio Cash Reserve Risk
Cash Refund Ratio
159. Increasing the Cash Reserve Ratio for banks would have an impact on which of the following Increased Money Supply in the economy Reduced interest rates Reduced Money Supply in the economy Profitability of firms Both Increased Money Supply in the economy and Reduced interest rates 3 160. Which two risks of a financial institution may bring gains as well as losses? Credit risk and interest rate risk Interest rate risk and foreign exchange risk Credit risk and foreign exchange risk Liquidity risk and credit risk None of the listed options 161. How does the central bank increase money supply in the economy? By reducing the Cash Reserve Ratio (CRR) By buying foreign currency By increasing the wages of the salaried class By selling Government Securities in the open market By maintaining a high interest rate 162. When the interest rate rises, people are Less likely to borrow, that is, sell a financial asset. More likely to borrow, that is, sell a financial asset. Less likely to borrow, that is, purchase a financial asset. More likely to borrow, that is, purchase a financial asset. Would be neutral to borrowing 163.Banks must keep a percentage of their deposits on hand as Required reserves. Excess reserves. Savings accounts. Home loans Safe deposit reserves. 1 164. When a large majority of a bank's depositors lose faith in it and attempt to withdraw their deposits, the bank a) Will not experience difficulties because its required reserves will be adequate to meet withdrawals b) Will not experience difficulties because it will hold sufficient excess reserves to meet withdrawals c) Will experience difficulties but will not fail d) Will fail unless it can obtain additional reserves or government assistance e) Both Will not experience difficulties because its required reserves will be adequate to meet withdrawals and Will not experience difficulties because it will hold sufficient excess reserves to meet withdrawals 165. A financial asset is liquid a) If it can be carried easily from one place to another. b) If it can be readily exchanged for another asset or good. c) Only if it takes the form of cash. d) If it is held by the public and earning interest. e) Both If it can be carried easily from one place to another and If it can be readily exchanged for another asset or good. 166. In Harvey, N.D. three local banks have issued no-interest loans in the form of Harvey Bucks. They can be spent in local stores. Retailers get 95 U.S. cents for each Harvey Buck. From this information you can conclude that Harvey Bucks
a) Although less liquid than Fed Notes, are money because they are accepted as money. b) Although less liquid than Fed Notes, are money because they are assets of everyone who holds them. c) Are not money because they are liabilities for consumers who have been issued Harvey Bucks. d) Are not money because they are not backed by the Federal government. e) None of the listed options 167. If Bank of Japan was buying Dollars fervently, it would most likely be for which of the following reasons a) To protect Japanese exporters from loss due to movement in Yen b) To protect Japanese importers from loss due to movement in Yen c) For speculative purposes d) Both To protect Japanese exporters from loss due to movement in Yen and For speculative purposes e) None of the listed options 168. A Commercial bank would be able to make money in which of the following ways a) Make the lending rate below the deposit rate b) Make the lending rate equal to the deposit rate c) Keep the lending rate above the deposit rate but play the volume game d) Either Make the lending rate below the deposit rate or Make the lending rate equal to the deposit rate e) Either Make the lending rate equal to the deposit rate or Keep the lending rate above the deposit rate but play the volume game 169. Retail Banking division in a bank would not include which if the following departments Personal Loans Home Mortgages Vehicle Loans
Derivatives Trading
Consumer Loans
170. Glass-Steagall act (1933) was created to ensure which of the following a) Create a Chinese wall between Commercial Banking and Securities Business b) Create a Chinese wall between Corporate Banking and Retail Banking Business c) To make the banks more efficient d) To promote the concept of Universal Banking e) Both To make the banks more efficient and To promote the concept of Universal Banking 171. Money Multiplier effect would imply a) An increase in the total money lent out into the system b) An increase in the total money in the bank reserves in the system c) A decrease in the total money in the bank reserves in the system d) Both An increase in the total money lent out into the system and An increase in the total money in the bank reserves in the system e) Both An increase in the total money lent out into the system and a decrease in the total money in the bank reserves in the system 172. Cash Reserve Ratio is maintained for which of the following reasons? a) To ensure that the Bank doesn’t face a cash crunch due to heavy withdrawals b) To ensure that the Central Bank can take this cash in case of its need c) To contribute towards government needs in times of crisis
d) Both To ensure that the Central Bank can take this cash in case of its need and To contribute towards government needs in times of crisis e) None of the listed Options 173. The Fed has been reducing the interest rates with aim of achieving which of the following a) Increasing the growth rate of the economy b) Decreasing the growth rate of the economy c) Help interest-rate traders book profit d) Both Increasing the growth rate of the economy and Help interest-rate traders book profit e) To help the government raise funds 174. Which of the following is NOT a function of the bank? Ensure super-normal returns to its small depositors Channelize Savings Provide credit facilities to borrower Provide investment avenues to investors Facilitate the trade and commerce dealings 1 175. Regulations limiting risk taking of financial institutions are imposed for which of the following reasons? a) The social costs to shareholders of a general bank failure are more than the private cost of the bank failure. b) The costs of regulation exceed the benefits. c) The private costs of a bank failure exceed the social costs of general bank panic. d) The social costs of a general bank failure exceed the private costs to the shareholders of the bank that failed. e) None of the listed Options 176. Which of the following is associated with the purpose of regulating financial institutions? To provide stability of the money supply To serve certain social objectives To prevent failure of any financial institution To offset the moral hazard incentives provided by deposit insurance and other guarantees. Both To serve certain social objectives and To offset the moral hazard incentives provided by deposit insurance and other guarantees. 177. Regulators' attempting to limit competition by restricted entry, exclusive services, etc. was an attempt to serve which of the following purposes of regulation? a) To promote competition in the financial services markets. b) To promote limited quantities of financial services at maximum prices. c) To promote safety and soundness of depository institutions. d) To protect the soundness of the deposit insurance fund. e) Both To promote limited quantities of financial services at maximum prices and To promote safety and soundness of depository institutions 178. Regulatory balance sheet restrictions are designed to Limit the size of depository institutions. Limit risk-taking and to encourage diversification. limit excessive diversification to promote Universal Banking encourage high risk-taking by proper diversification 2
179. A bank that is earning 7% on its earning assets and is paying 4% on its interest-earning liabilities is said to Have a negative spread. Have a positive GAP position. Have a positive spread. Will always have positive net earnings. Both Have a negative spread and Will always have positive net earnings 180. Which of the following is not a commonly used term in the context of Banking? Corporate banking Investment banking Public banking Retail banking Private banking 181. The term ‘Spread’ refers to a) The amount of profit a bank makes after clearing all its costs including payment of interest to deposit holders. b) The difference in the purchase and sale prices of any financial instrument quoted by any financial “intermediary” such as a bank, a broker, etc. c) The difference between the lending rates and deposit rates of a bank. d) Both The difference in the purchase and sale prices of any financial instrument quoted by any financial “intermediary” such as a bank, a broker, etc. and The difference between the lending rates and deposit rates of a bank. e) None of the listed Options 182. Why do we need banks? a) Banks are in the best position to lend out money at competitive rates to businesses and individuals b) Deposits are participants in primary and secondary markets c) Banks are in the best position to lend out money at competitive rates to businesses and individuals and Deposits are participants in primary and secondary markets d) All of above of small investors are protected, hence it is a low risk investment avenue e) Banks 183. CRR stands for Cash Requirement Ratio Cash Requirement Reserve
Cash Reserve Requirement Capital Reserve Requirement
184. The central bank in the US is called Federal Reserve Federal Reserve Board Central Bank of United States
Cash Reserve Ratio
Reserve Bank of United States Reserve Bank of America
185. Investment Banking division of a bank offers all of the following except Underwriting and distribution of equity issues Leasing services Mergers and acquisitions Valuation of firms None of the listed Options 186. Which division provides services to High Net Worth individuals? Corporate banking Investment banking Retail banking Private banking None of the listed Options 187. Which of the following statements is true a) Banks may loan out all the money they receive through deposits b) When the central bank reduces CRR, amount of money in circulation in the economy goes up c) When the central bank issues securities in the market, amount of liquidity in the economy goes up
d) All of the listed options e) None of the listed Options 188. Which of the following US banks is the biggest based on the asset size as on July 2003 Bank of America J.P. Morgan Chase & Co Citigroup, Inc ABN AMRO Bank One Corporation 189. If a bank gets a deposit of $100, assuming a reserve requirement (CRR) of 10%, and that it circulates through 2 more banks, leading to the following money multiplier effect create a reserve of $10 loan of $244 create reserve of $19 loan of $171 None of the listed Options 190. Today, the most important monetary policy tool is bank examination and supervise capital requirements discount rate policy open market policy required reserves policy 191. Which of the following is not covered under retail operations of a Bank? Loan for Consumer durables Hire Purchase Bill Discounting Lease Auto Loans 192. Which of the following is not correct for a personal loan? The financer is not interested in the intention of the loan Loan amount is linked to borrowers’ repayment capacity They are short term loans No security required None of the listed Options 193. "Thumb rules for calculation of Maximum loan amount in case of auto loan are? a) Not greater than 3 times the yearly income of the borrower b) Not greater than 2 times the yearly income of the borrower c) The EMI should be less than 70 pct of the gross monthly income d) The EMI should be less than 60 pct of the gross monthly income" (b) and (c) (a) and (d) (a) and (c) (b) and (d) None of the listed Options 194. Interest rate charged on asset based loans is Greater than the personal loans Always equal to the personal loans Lesser than the personal loans all of the listed options None of the listed Options 196. Which is true for a closed ended loan? There is no end to such loans Overdraft is not allowed in such loans Interest is calculated on daily outstanding balance The borrower gets a credit card along with the loan None of the listed Options 197. If the Limit = $1500, margin = 20% and Asset Value = $2000 then Drawing Power for an Open ended loan is equal to $1,500 $1,200 $1,600 $900 None of the listed Options 198. If the Limit = $1200, margin = 20% and Asset Value = $1200 then Drawing Power for an Open ended loan is equal to? $1,500 $1,200 $960 $900 None of the listed Options 199. Which of the following is true?
a) The financier owns the asset in case of “Lease” but not in case of “Hire Purchase” b) Depreciation is claimed by the financier both in Lease and Hire Purchase c) Callable bonds d) Tax deduction can be claimed for the full value of the payment in lease but only to the extent of interest paid in Hire Purchase e) None of the listed Options 200. Which of the following is the most profitable for Credit Card Company? Customers who always pay in time Customers who never pay Customers who default but finally pay all of the listed options None of the listed Options 201. Which of the following is not a repayment method? Post dated checks Salary deductions Direct debits None of the listed Options 202. Which of the following is not a kind of repayment? Slice payment Step up Step down Bullet payment
Direct receipts
None of the listed Options
203. Interest rate spread is equal to? Current rate – Base rate Current rate – Floor Base rate – Floor Cap – Current rate None of the listed Options 204. Collateral is? A form of loan Asset put up as security Obligations to be fulfilled by the borrower A bad loan None of the listed Options 205. While comparing mortgages, one should use? Internal rate of return Annual Percentage Return Net present Value Rate of Interest applicable for the loan None of the listed Options 206. While taking a Mortgage, one needs a large sum to furnish the home, then which interest rate deal should be chosen? Discounted interest rate Capped rate Standard variable rate Standard variable rate with cash back None of the listed Options 207. In a) b) c)
case of discounted interest rate deal for a mortgage the following is true? One receives a substantial cash sum when one takes the loan. Interest rate is guaranteed to be set amount below the base rate The payments are set at less than that lender’s going rate for a fixed period of time. d) The payments go up and down as the mortgage rate changes but are guaranteed not to go above a set level e) None of the listed Options
208. Capped rate of interest in case of Mortgage implies a) The rate of interest can’t move above a set level b) The rate of interest can’t move below a set level c) The collar of the interest rate can’t move above a set level d) The spread of the interest rate can’t move above a set level e) None of the listed Options
209. Which is not true in case of Repayment Mortgage? a) Monthly payments goes partly towards the interest and partly towards the principal b) If all the monthly payments are made, the loan will be repaid by the end of the term c) Monthly payments would increase if interest rates rise d) Monthly payments would decrease in interest rates fall e) None of the listed Options 210. Endowment mortgage refers to the following? a) An interest only mortgage, along with a endowment policy to mature at the same time as the term of the loan b) An interest only mortgage that comes with life insurance policy c) Another name of interest only mortgage d) An interest only mortgage combined with tax saving investment policies e) None of the listed options 211. Annual Percentage Rate for a loan takes into account the following? a) The interest rate charged b) When and how often the interest must be paid c) Other charges such as arrangement fee d) When and how often these other charges must be paid e) All of the listed options 212. Freddie Mac, Ginnie Maes & Fannie Mae are? a) Marketing institutions selling home loans b) Lenders to the banks for home loan bought by retail customers c) Regulatory bodies governing home loan market in US d) Primarily asset management companies e) None of the listed Options 213. Which is not true for an Acquiring bank a) They approve a merchant for accepting credit cards b) They collect the merchant's online payments c) They are members of Visa and Master Card Associations d) They are members of Dinner’s club e) None of the listed Options 214. Which of the following is not true Independent sales organization? a) They provide merchant accounts b) They process the funds of merchants c) They keep reports of all the activity of merchant accounts d) They work on behalf of Acquiring banks e) None of the listed Options 215. Which of the following is not involved in a credit card transaction? Independent sales organization Merchant Payment gateway Associations None of the listed Options 216. After a credit card transaction is initiated by a customer in a shop, the transaction’s information is sent to? Payment Processor Merchant’s payment gateway Issuing bank’s payment gateway Acquiring bank’s payment gateway None of the listed Options 217. Who checks for the credit limit of the card before approving the transaction? Payment processor Acquiring banks Payment gateway
Issuing bank
None of the listed Options
218. When the merchant clicks the Bill Orders button in the store to "capture" the funds, the store sends the capture information to? Payment Processor Merchant’s payment gateway Issuing bank’s payment gateway Acquiring bank’s 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 one’s consolidated financial information from the Credit Report b) Its a number calculated based on one’s 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 one’s credit report? Bank account balance Personal Assets One’s 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
4
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
5
230. Which one is true for a capitalized loan? a) Monthly payments go towards the interest, while a lump sum payment at the end of the term goes towards the principal b) Monthly payments goes partly towards the interest and partly towards the principal c) The interest due and not paid is added to the principal balance of the loan. interest becomes part of the principle of the loans d) Such loans come at a very low processing fee e) None of the listed Options 231. The term “Capture” in context of credit cards refers to? a) Capture of credit card number by the issuing bank during a transaction for authentication b) Capture of the person using a card not owned by him c) Conversion of the authorization amount into a billable transaction record. d) Recording of a person’s credit details in the credit report. e) None of the listed Options 232. Considering the amount of competition in the retail market, which of the following are the upcoming challenge/s for the banks a) Single customer interface across multiple departments b) Increasing their cross-sell opportunities to customers c) Improving internal processing efficiency and quality d) all of the listed options e) None of the listed Options 233. "A bank has provided the following options to the borrower for $50,000 of lending for duration of 5 years. a. Pay $80,525.5 at the end of 5 years b. Pay $25,500 now and $50,000 at the end of 5 years c. Pay $16,105.1 end of every year for 5 years d. Pay $16,105.1 beginning of every year for 5 years Considering 10% as IRR for the borrower" Option (a) is the cheapest for the borrower Option (b) is the cheapest for the borrower Option (c) and (d) are equally costly to the borrower all of the listed options None of the listed Options 234. Electronic banking doesn’t covers the following service/s Pay-by Phone system ATM System Point of Sale system all of the listed options None of the listed Options 235. EFT act covers Prepaid Telephone cards ‘Gift’ cards Both Prepaid Telephone cards & ‘Gift’ cards
Mass transit passes None of the listed Options
236. What is Checking Account? a) An account at a bank where funds have been deposited against which checks may be written b) An account, folder, or file where checks are stored
c) A type of bank account that allows withdrawals by phone or Internet d) A form of documentation for transactions between you and the bank e) None of the listed Options 237. Net Settlement stands for Settlement of funds over the Internet Real time settlement all of the listed options
Posting net debit or net credit None of the listed Options
238. Direct debits Authorizes specific deposits to your account on regular basis Authorizes all deposits directly to your account Pre-Authorized direct withdrawal Pre-authorization to withdraw from others account
None of the listed Options
239. EFTA stands for Electronic Funds Trading Act Electronic Financial Transfer Act Electronic Funds Transfer Act Electronic Fee Transfer Act Electronic Funds Telecommunication Act 240. ______________ preauthorizes banks to pay recurring bills like insurance premium, utility bills automatically Pay-by-Phone System EFT Direct Debit Direct Credit Direct Deposit
241. ATM stands for a) Automatic Transaction Machine; Almost anytime banking b) Automated Teller Machine; Remote location transactions c) Automatic Transaction Machine; Fund transfer between accounts d) Automated Teller Machine; Direct Deposit e) Automatic Transaction Machine; Personal Banking 242. Debit Card is a ‘stored value’ card
provide credit line
transfer money at Point of Sale
Only provide credit line and transfer money at Point of Sale None of the listed Options 5 243. EFT systems are a major form of electronic payment systems in banking and retailing industries. EFT is an acronym for Electronic Financial Transactions Encrypt Fund Transfer Electronic Fund Transactions Electronic Fund Transfer External Fund Transfer 244. EFT services require institution to tell the following to the customers a) Summary of Customer’s assets for unauthorized transfers b) Summary of institution's liability if it fails stop certain transactions. c) List of institute holidays d) Circumstances under which institute will not disclose information to third party. e) None of the listed Options
245. A transaction error has occurred in customer’s 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 can’t be extended even in the case of extenuating circumstances. e) There can’t 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 don’t have privileges for any transaction e) None of the listed Options 249. Terminal Receipts a) issued for regularly occurring electronic payments that are pre-authorized b) entitled to customer only when the electronic transaction is terminated c) provides statement of all the transactions terminated for a given period d) must show the amount and date of the transfer, and its type, such as "from savings to checking” e) None of the listed Options 250. The Federal Reserve offers financial services to banks and the U.S. government for all of the following reasons except to
make a profit
promote competition
foster innovation
promote efficiency in the payments system None of the listed Options 251. Which of the following statements about the Fed's involvement in electronic banking is true? a) each year the Fed conducts billions of transactions valued in the trillions of dollars b) funds transfers are originated and received through a sophisticated telecommunications network called FedWire c) financial institutions can move their balances at the Fed or send funds to another institution through electronic banking d) all of the listed options e) None of the listed Options 252. The Federal Reserve System processes about ___ of all checks written in the country 1/5 2/3 1/3 4/5 All 253. Just after you write a check at a store to make a purchase a) your checking account at a financial institution is instantly reduced by the value of the check b) the store manager sends the check to a Federal Reserve Bank to be processed c) the store manager deposits the check in the store’s account at a local financial institution d) your checking account at a financial institution is increased by the value of the check after it has been processed by a Federal Reserve Bank or a correspondent bank e) All of the listed options 254. A one-time written order that instructs a financial institution to transfer funds from your account to the account of an individual or business is called check Automatic Clearinghouse (ACH) transaction. currency debit credit 1 255. CHIPS stand for Clearing House for International Payments Settlement Clearing House for Interbank Payment System Clearing Head of Interbank Payment Settlement Clearing Head of international Payment Settlement Clearing House for Interbank Payment Settlement 256. FEDWIRE involves the following intermediaries for the fund transfer EXCEPT Inter District Settlement Fund Federal Reserve bank Treasury & Government agencies Depository institutions None of the listed Options
257. CHIPS uses ______________ to & from special settlement account on the booking of the _____________ ACH; Federal Reserve Bank EFT; Federal Reserve Bank FEDWIRE; New York Fed Inter District Settlement Fund; Federal Reserve Bank FEDWIRE; Federal Reserve bank 258. Following are all Private-sector payment systems EXCEPT Check Clearing System Inter District Settlement Fund Automated Clearing Houses CHIPS FEDWIRE 259. "Two Financial Institutions conducted the following transactions over CHIPS on 30th Jan 2004. A transferred $5m to B at 9:45 AM B transferred $10m to A at 11:30 AM A transferred $12m to B at 2PM B transferred % 15m to A at 3:30PM Which of the following holds true?" a) At the of the day, $17m will be transferred to B b) At the end of the day, $25m will be transferred to A c) At the end of the day, $8m will be transferred to A d) All the transactions would settle individually real-time e) Both At the of the day, $17m will be transferred to B and At the end of the day, $25m will be transferred to A 260. EFT offers the following services EXCEPT Electronic check Conversion Pay by Phone Direct Debit Direct Deposit All Stored value cards 261. What is the electronic payment delivery system most often used to process lowdollar repetitive retail payments? Check Funds transfer Treasury payments Automated Clearinghouse (ACH) FEDWIRE 262. Which of the following results in a direct, immediate, electronic payment from the cardholder's checking account to a merchant? Credit Card Money Order Checks Debit card ATM card 263. If you use your debit card to make a purchase, the amount will be transferred out of your account Typically within one day In whole-dollar amounts The next business day The amount is not transferred, but added to your credit card bill Depends on the billing cycle
264. The Federal Reserve System is responsible for regulating banks and financial institutions creating a stable economic environment managing regional and national check clearing monetary policy All of the listed options 5 265. Which of the following is probably the most familiar form of electronic banking? ATM Debit card Credit card POS system ACH 266. Which of the following transactions would cost the most? ATM deposit Deposit at Teller window Direct deposit Electronic fund transfer None of the listed Options 267. FEDWIRE transfer involves relatively large no. of book keeping entries are free of cost handle high volume of small transactions are settled on net settlement basis handle high value transactions 268. Which of the following transactions costs the least? Payment by personal check Payment via ACH Debit card for point of sale purchase ATM withdrawal Withdrawal at teller window 269. FEDWIRE differs from CHIPS in that a) FEDWIRE is gross settlement system b) FEDWIRE is a private sector fund transfer system c) CHIPS provide international fund settlement d) FEDWIRE offers free services e) FEDWIRE provides domestic fund settlement 270. Which of the following transfers are covered by the Electronic Funds Transfer Act? a) Bob’s purchase of an electronic toilet seat with a wire transfer b) Joe’s transfer, made in person, from his checking to his savings account, to post bail from prison c) Larry’s check written at the Three Strikes and Your Out Bowling Alley d) Tim’s point of sale purchase from his business account to buy that new hardware store he has always wanted e) None of the listed Options 271. Inter District Settlement Fund is a a) Fund Transfer System b) Electronic Bill Presentment System c) Settlement Account d) Booking System
e) Transaction System
272. John loses his ATM card, which has his PIN written on the back of the card. He doesn’t discover this until two weeks later and immediately notifies the bank. During the two weeks that his card was lost, $9,000 worth of withdrawals have been made from his account. Tim is liable for which of the following a) $500 b) 40 hours of community service teaching classes on why to not write your PIN on the back of your card c) Half of the $9,000 d) $50 e) None of the listed Options
273. ‘Stored value’ cards a) are like prepaid mobile cards, mass transit passes etc., b) are all covered by EFT act c) stores encrypted code for accessibility d) are used for accessing personal bank account e) are like debit cards, credit cards etc., 274. What does the ‘Federal Reserve Supervisory Letter’ define private banking as? a) “personalized services such as money management, financial advice, and investment services for high net worth clients” b) “personalized services such as cheque collection and other retail banking services for high net worth clients” c) “service provided by private banks to all clients” d) “personalized services provided by private and public banks to all clients” e) None of the listed Options
275. Structured Lending a) Investment Management and Advice b) Issuer Capital Formation c) Trade Finance Management and Advice d) Access to investment banking and institutional services e) Structured Lending 276. Private Banking clients can be based on a) Volume of business b) Traditional banking business c) Net Worth d) Retail Banking business e) All of the listed options 277. Which of the following is true for the Personal Investment Companies (PICs) setup a) Tax benefit b) Huge startup fee c) Annual Administration Fee d) Foreign Check Writing Services
e) None of the listed Options 278. Typical Fee charged for private banking services a) Less than 1% b) Between 1 to 4% c) Between 6 to 10% d) More than 10% e) None of the listed Options 279. Client relationship manager doesn’t have to understand which of the following need/s for investment management and advice a) Liquidity requirement b) Capital Base c) Tax planning d) Arbitrage trading e) None of the listed Options 280. High-Net worth individuals generally have a) Household income atleast $50,000 b) Networth greater than $500,000 c) Market capitalization more than $200,000 d) all of the listed options e) None of the listed Options 281. The process flow in a Private banking firm goes as a) Servicing Specialist => Client Representative => Middle Office => Back Office b) Client Representative => Servicing Specialist => Middle Office => Back Office c) Client Representative => Servicing Specialist => Back Office => Middle Office d) Middle Office => Back Office => Servicing Specialist => Client Representative e) Client Representative => Middle Office => Servicing Specialist => Back Office 282. In the case of ‘self directed investment management’ in Private banking a) Bank’s portfolio managers make investment decisions only after customer approval b) Bank’s portfolio managers make ‘self-directed’ investment decisions c) Bank’s portfolio managers make investment decisions on behalf of the customer d) Bank’s portfolio managers make investment decisions behalf of all the customer e) None of the listed Options 283. Which of the following roles and responsibilities are correctly stated? a) Services Provider; Tax Services b) Middle Office; Statements & Advices c) Front Office; Client Reporting d) Back Office: Risk Management e) Middle Office; Custodial Services 284. “High net worth” individuals are normally defined based on the a) Household income b) Net Worth c) Value of shares held by the household + household income d) Both Net Worth and Value of shares held by the household + household income e) Both Household income and Net Worth 285. Which of the following is/are not a responsibility of the Middle office? a) Account Aggregation b) Domestic Global Settlement
c) Cash Processing d) Sales & Brokerage e) Both Account Aggregation and Sales & Brokerage 286. Private Banking doesn’t 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 client’s liquidity assumes paramount importance in private banking, it involves a) Short term credit facilities b) Flexible cash management c) Optimizing returns on short term cash d) all of the listed options e) None of the listed Options 291. The two most distinguishing features of Private banking are _____________ and _____________. a) Liquidity management; risk management b) Specialist advice; risk management c) Wealth management; financial advice d) Extensive research; specialist advice e) Liquidity management; structured lending 292. Private Banking providing Risk management services thereby strives to a) Eliminate risk and maximize returns
b) Reduce risk and optimize returns c) Avoids risk and optimize returns d) Transfers risk and maximize returns e) all of the listed options 293. Private Banking provides plethora of specialized services to it clients. Which of the following statements holds true? a) It is less dependent on accepting deposits than retail banking. b) Client portfolios are reflected on the liability side of the bank’s balance sheet c) Client portfolios are reflected on the asset side of the bank’s balance sheet d) Both It is less dependent on accepting deposits than retail banking and Client portfolios are reflected on the asset side of the bank’s balance sheet e) Both Client portfolios are reflected on the liability side of the bank’s balance sheet and Client portfolios are reflected on the asset side of the bank’s balance sheet 294. Which of the following companies offer Private banking services? a) Credit Suisse b) Fidelity c) Merrill Lynch d) all of the listed options e) None of the listed Options 295. _____________ provides Private banking in the Trust or Investment management division whereas _______________ provides Private Client Services (PCS) a) Credit Suisse; Salomon Smith Barney b) Fidelity; UBS c) Mellon and Bank One; Salomon Smith Barney d) All of above e) None of the listed Options 296. The below stated responsibilities are carried out by which of the following players. Cash Services/Client Reporting/Statements & Advices/Domestic & Global Settlements a) Services Provider b) Client Representative c) Back office d) Front Office e) Middle Office 297. Private banking offers “structured lending” that provides a) Customized asset-based credit solutions b) Long-term liquidity to clients c) Advice-led credit solutions d) Credit solutions to High Net worth individuals e) All of the listed options 298. Private Banking customers can be categorized based on the following parameters a) Risk taking capability b) Investible assets c) Networth d) Both Investible assets and Networth e) All of the listed options 299. In the case of ‘discretionary investment management’ in Private banking a) Bank’s portfolio managers make investment decisions only after customer approval b) Bank’s portfolio managers make ‘self-directed’ investment decisions c) Bank’s portfolio managers make investment decisions on behalf of the customer
d) Bank’s portfolio managers make investment decisions behalf of all the customer e) None of the listed Options
300. Jim Morrison, 52 years old, founder, chairman and largest shareholder of a small Australian listed company, seeking to borrow A$8 million secured against his 45 percent shareholding (valued at A$30 million) to diversify his asset base and invest in a separate business venture. He has existing relationship with the bank. Given the fact that loan represented quasi-equity as it would be almost impossible to offload the shares into the market, what kind of solution can be provided by the bank to the client? a) Issuer Capital formation b) Investment Management Services c) Structured Lending d) Hedge Funds e) Payable Through Account
301. Increasing numbers of hedge funds are locating to ‘Cayman Islands’ because al EXCEPT a) Tax haven b) Flexible legislation c) Highly sophisticated venue d) Numerous capable professionals e) None of the listed Options 302. Hedge funds have attracted investors' attention due to some spectacular & successes & failures, but in fact they aim to provide a low risk investment solution. Which of the following does hold true for hedge funds? a) Highly speculative b) Private investment partnership c) Highly leveraged d) Consistent performance e) Investor needs to be fully accredited
303. Financial planning involves all EXCEPT a) Cash flow management b) Retirement planning c) Risk management d) Tax planning e) Portfolio management 304. Which of the following is not a secured loan? a) Overdraft on checking. b) Personal lines of credit. c) Study loan d) Credit cards e) All of the listed options 305. Which of the following statements is true? a) Requires "collateral" or something, which the lender can easily sell and use to pay off the loan if the borrower defaults. b) Rates are generally lesser for unsecured loans.
c) If a person with a less than perfect credit history gets a loan it will be at a lower interest rate. d) Having a good credit record of lender is a critical factor because higher interest rate can be charged to that individual. e) Rates are generally greater for secured loans 306. Which of the following statements is false about loan? a) The amount of the loan that is disbursed is an asset for the bank b) The interest rate on a loan depends on the disbursed amount and Schedule. c) Loans can be disbursed in multiple currencies with different schedules. d) Loan is considered as a liability for the customer. e) Loan can be prepaid with or without penalty 307. Which of the following statement is faulty about ‘credit enhancement’? a) Enhancing the duration of the credit given to the corporate b) Evaluating the feasibility of extending the credit facility to the borrower. c) Mechanism to improve the original rating of the credit for the borrower. d) Increasing the credit limit for the corporate e) None of the listed Options 308. Which of the following is true about Working Capital? a) Working capital requirements depends on the current assets and current liabilities of the corporate. b) 25% of the Working capital gap has to be fulfilled by long term funding and 75% by short term loans and overdrafts. c) Overdraft limit is extended to corporate to manage their day to day cash flow needs d) Part of the current liabilities need to be funded through the current assets. e) None of the listed Options 309. Supplier or Dealer loans provide a) Assurance from the Corporate in case of default by suppliers and dealers b) Immediate loans to the suppliers and dealers of the corporate at higher rate of interest. c) Long term loans to the suppliers and dealers by the banks d) all of the listed options e) None of the listed Options 310. Which of the following is NOT a Settlement Method for Bank Loans? a) Assignment b) Participation. c) Securities Repository. d) Sub-Participation e) Preclosure 311. Once the Syndicate has closed, all other trades, Participations, Sub-participations and Assignments are considered trades in what market? a) Primary market b) Index market c) Secondary market d) Participation market e) Over the counter market 312. Consider a loan of USD 10,000 which is agreed to be lent for a period of six months on Jan 1, 2004 at an interest rate of LIBOR + 2%. Here, the base rate is LIBOR and the spread is 2%. Further, consider that the LIBOR was 7% p.a. on Jan 1, 4% p.a. on May 1. What would be the interest paid at the end of six months? a) 600 USD
b) 400 USD c) 1400 USD d) 1350 USD e) 350 USD 313. Consider a one-year loan of USD 10,000 given by bank to a borrower on Jan 1, 2004. The loan carries an interest rate of 10% p.a. As per the terms and conditions of the loan, the borrower has to pay the interest amount together with principal amount on Dec 31, 2004. The Bank follows straight-line accrual with monthly frequency. What would be bank’s income as on June 31, 2004? a) 11,000 USD b) 600 USD c) 1,000 USD d) 5,500 USD e) 10,000 USD 314. Which of the following type of loan requires the amount of interest that would be earned on the amount of interest paid upfront by the borrower? a) Demand loan b) True discounted Loan c) Discounted Loan d) Capitalized Loan e) Amortized Loan 315. Interest rates are a) The prices paid for the use of a real liability. b) The prices paid for the use of a real asset. c) The prices paid for the use of a financial liability. d) The prices paid for the use of a financial asset. e) The price paid for the use of a contingent asset 316. A loan that can be paid in periodic equated installments with capitalized interest is called a) Amortized Loan b) Capitalized Loan c) Annuities d) Discounted loan e) True discounted Loan 317. Loan can take many of the following basic forms EXCEPT a) Overdrafts b) Bills and promissory notes c) Corporate bonds d) Advances e) Credit line 318. If a fund purchases a loan in the Primary, they also use another word for that. Which term is used to indicate the initial group of lenders (Primary Lenders)? a) Allocation b) Syndicate c) Secondary d) Assignment e) None of the listed Options 319. In the case of floating rate loan, which of the following is false? a) Base rate can be reset at mutually agreed time period or it can be periodic. b) Spread is applied over and above the base rate. c) The spread varies over the life of the loan.
d) Spread can be negative. e) None of the listed Options 320. What does ‘loan provisioning’ stand for? a) To create the provisions for doing business in different lines of businesses. b) Loan provisioning is done to classify and grade the loans. c) All of above d) To create buffer against the loss of the non-performing loans. e) None of the listed Options 321. Credit risk in the swap market is a) Extensive. b) Equal to the total value of the payments that the floating rate payer was obligated to make c) Limited to the difference between the values of the fixed rate and floating rate obligations. d) Both Extensive and Limited to the difference between the values of the fixed rate and floating rate obligations. e) None of the listed Options 322. When a firm needs short-term funds for a specific purpose, the bank loan will likely be a a) Compensating balance arrangement b) Revolving credit agreement c) Transaction loan. d) Line of credit e) Term Loan 323. Which of the following are the benefits of using credit derivatives? a) Credit derivatives can be used either to take on more risk or to avoid (hedge) it. b) Credit derivatives can be used to create positions that can otherwise not easily be established in the cash market. c) Credit derivatives can be used both to diversify their credit risk exposures and free up capital from regulatory constraints. d) All of above e) None of the listed Options 324. A formal, legal commitment to extend credit up to some maximum amount over a stated period of time a) Letter of credit b) Revolving credit agreement c) Line of credit d) Trade credit e) Irrevocable Credit 325. Utility companies and medical service organizations commonly offer (fill in the blank) credit a) Revolving b) Single payment c) Installment d) Retail e) Corporate 326. A common advantage of using credit is a) less impulse buying b) lower cost for items purchased c) ability to obtain needed items now d) lower chance of overspending
e) None of the listed Options
327. A Company has negotiated a $500,000 revolving credit agreement with a National Bank. The agreement calls for an interest rate of 10% on fund used and a commitment fee of 1% on the unused amount of the credit line. The effective annual interest cost if the firm borrows $200,000 for one year is closest to a) 11.50% b) 15% c) 26.50% d) 13.25% e) 11.50%
328. Which of the following is not a credit derivative? a) Credit linked Notes. b) Total return swaps. c) Credit default swap. d) Currency swap. e) All of the listed options 329. Secondary loan trading refers to ______________ of _____________ on the secondary market.
a) Approving; new debts b) Buying/Selling; only bad debts c) Selling; new debts d) Buying/Selling; existing debts e) Reassignment; debts 330. Asset securitization refers to a) financing vehicle consisting of pooling of existing debts as collateralized asset for the issuance of the debt b) financing vehicle consisting of pooling of government securities as collateralized asset for the issuance of debt c) financing vehicle consisting of the pooling financial assets, and the issuance of debt collateralized by these assets d) financing vehicle consisting of pooling of corporate bonds and equities as collateralized asset for the issuance of debt e) None of the listed Options
331. Credit derivatives can be used to ___________ the risk and ___________ the regulatory capital requirements a) Transfer; increase b) Diversify; reduce c) Eliminate; improve d) Manage; avoid e) Assess; estimate
332. Credit derivative is all BUT a) Financial Instrument
b) Transfers risk c) Traded over the counter d) Facilitate greater efficiency e) None of the listed Options 333. Which of the following is not a secured loan? a) Equity Loans b) Secured Loans with Savings c) Equity Lines of Credit d) Personal Loans e) Car Loan 334. In the inflationary economy, which of the following is the best option for the bank while lending, $10,000 to a corporate borrow (Assume IRR at 10%) A. Discounted loan @ 10% interest rate B. Bullet payment loan @10% interest rate C. True discounted loan @10% rate of interest D. Equated installed loan @10% interest rate a) Option A b) Option B c) Option C d) Option D e) All of the listed options 335. The key feature of letter of credit a) Basis for devising proper currency hedging strategy b) Distributes risk between buyer and seller c) Opportunity to receive payment in advance of the due date d) Basis for devising proper currency hedging strategy and Opportunity to receive payment in advance of the due date e) All of the listed options 336. USExport and EURImport agree to carry out the transaction, goods worth $1,000,000 under a confirmed term Letter of Credit with a maturity date of 60 days from the time of shipment. The Acceptance commission @ 1.5% pa equals a) 3000 b) 250 c) 2500 d) 300 e) None of the listed Options 337. A company called FixImport Co. awards USExport a contract that requires not only making a large quantity of widgets, but also installing and integrating them into an existing manufacturing process at FixImport's plant. So, USExport asks for 25% down payment to finance the preshipment production. FixImport agrees provided that an Advance Payment Guarantee is issued on its behalf. To what risk has CanExport exposed itself as a result of issuing the Advance Payment Guarantee? a) Wrongful demand against the Advance Payment Guarantee. b) Country risk c) The remainder of the payment might not be made on time d) Risk of default. e) Interest Risk 338. Which if the following is true in the case of sight draft? a) Buyer can refuse to take the delivery
b) Quality of the Good is guaranteed c) Buyer is expected to make the payment after specified credit days d) Payments made based on only bill of lading e) None of the listed Options 339. UKImport, a financially sound G-7 company, convinces to buy widgets from USExport on open account basis, with 60 days credit. The goods were dispatched by USExport on 15th Oct, value being 10,000$. Therefore, the payment was due on 14th of Dec. However the payment was made by UKImport on 21st Feb. The delay in payment cost USExporter$…………. because of overdrawn account (consider 9% pa interest rate) a) 1700 b) 1900 c) 190 d) 170 e) 2100 340. USExport and CanImport agree to carry out transaction under a confirmed letter of credit with maturity date of 180 days from the time of shipment. But after shipping the goods, USExport realizes that it doesn’t have the cash flow to wait 180 days to receive the payment? Which of the following options can USExport use to collect the payment before the maturity date? a) Requesting a Sight Letter of Credit b) Applying for Bank Loan c) Discounting the term letter of credit d) Taking Advance from the Issuing Bank e) Not Possible before date of maturity 341. The trade terms "15/2, net 30" indicate that a) 2% discount is offered if payment is made within 15 days b) 15% discount is offered if payment is made within 2 days c) 2% discount is offered if payment is made within 30 days d) 15% discount is offered if payment is made between 2 and 30 days e) 30% discount is offered if payment is made before 15 of the month 342. The basic four parties involved in any transaction using LC (Letter of Credit) are the following EXCEPT a) Issuing Bank b) Reimbursement Bank c) Seller d) Beneficiary’s Bank e) Buyer 343. The Advising bank is used as a trusted bridge between the __________ and _______________ when they do not have an active relationship a) Issuing bank; Confirming bank b) Beneficiary bank; Reimbursing bank c) Importer; Exporter d) Issuing bank; Beneficiary bank e) Reimbursing bank; Beneficiary bank 344. Which of the following is the safest type of letter of credit from seller point of view? a) Confirmed Letter of Credit b) Irrevocable Letter of Credit c) Red Clause d) Standby Letter of Credit e) Revolving Letter of Credit.
345. Credit cards a) Create financial liabilities for those who use them. b) Create financial liabilities for the issuer once they are used by the holder c) Create money for those who use them d) Create money for those who issue them e) Create financial asset for those who use them 346. Which of the following operations can’t be done on a LC (Letter of Credit)? a) Discount b) Purchase c) Acceptance d) Collection e) None of the listed Options 347. A Revocable LC (Letter of Credit) a) can be revoked without the consent of the Exporter b) can be revoked without the consent of the Exporter’s bank c) can be revoked without the consent of the Importer’s bank d) can’t be revoked with the consent of the Advising bank e) can’t be revoked without the consent of Exporter. 348. Standby LC (letter of Credit) a) Is used as primary payment method. b) Promises payment only if the buyer fails to make an arranged payment c) Promises payment only if the seller fails to meet pre-determined terms and conditions d) Can remain valid for short duration only. e) Involves complex process and complicated documentation 349. Back to Back LC (letter of Credit) allows a) buyer to open new LC against an already issued LC b) seller to use the LC received from his buyer to open his own LC c) buyer to use the LC received from his seller to open his own LC d) seller to receive one more LC against an already issues LC from his buyer e) Buyer to open one more LC based on an already issued LC 350. ________________ evidences delivery of goods and services whereas _______________ relates to the apparent performance / non-performance of an obligation of the applicant a) Transferable LC; Confirmed LC b) Confirmed LC; Red Clause c) Green Clause; Back to Back LC d) Confirmed LC; Standby LC e) None of the listed Options 351. What term is used to describe an LC that remains valid for years thereby eliminating the cost of separate LCs for each transaction with a regular client? a) Evergreen Clause b) Red Clause c) Irrevocable LC d) Revolving LC e) None of the listed Options 352. Which of the following holds true for an LC (Letter of Credit) a) Shifts credit risk from the Importer to the Importer's Bank (Issuing Bank). b) Deals with products and not with documents c) Are typically revocable unless specified otherwise.
d) One of the relatively cheaper forms of payment guarantee. e) Advising bank has the liability for the payment of the LC. 353. Draft can a) be called bill of exchange b) be a written order by one party directing a second party to pay a third party c) be a negotiable instruments that facilitate international payments through respected intermediaries d) offer more flexibility than LCs e) not be transferred from one party to another party 354. Banker’s acceptance defers from sight draft in that a) Sight drafts are negotiable instruments b) Banker’s acceptance demands immediate payment. c) Banker’s acceptance reduces bank’s lending capacity d) Bank can raise funds by selling the acceptance e) None of the listed Options 355. Counter-trade or barter is most likely used when buyer a) has access to convertible currency b) finds that rates are favorable c) will compensate the seller in a manner other than transfer or money or products d) can’t exchange for products or services desirable to the seller e) None of the listed Options 356. Factoring is a) a discounting method with recourse b) works with short term receivables c) works mostly with capital goods d) works with medium and long term receivables e) sharing risk with third party 357. Fundamental difference between factoring and forfeiting lies in a) transferring the credit risk to the third party (Factor) b) removal of contingent liabilities from balance sheet c) term of the contract viz., short, medium or long term d) difference in the risk profiles of the receivables e) the structuring of the contract with the third party 358. An Asian Importer wants to purchase machinery that he is unwilling or unable to pay for in cash until that machinery begins to generate income. At the same time, the exporter wants immediate payment in full in order to meet his on-going business commitments. Which of the following solutions best suit the situation? a) Bill Discounting b) Factoring c) Forfaiting d) Letter of Credit e) Consignment 359. Which of the following methods of payment is most risky to the Seller? a) Documentary Collection b) Open Account c) Letter of Credit d) Counter trade e) Cash in Advance
360. Which of the following are disadvantages of using LC (Letter of Credit)? a) Time consuming b) Costly c) Specific and Binding d) Deals with documents and not with products e) Credit Line tied up. 361. BOL stands for a) Bill of Letter b) Banker’s Overdraft Limit c) Bank of London d) Bill of Leasing e) Bill of Lading 362. BAFT stands for a) Bankers Acceptance for Factoring Transactions b) Bankers Association for Foreign Trade c) Bankers Acceptance for Foreign transactions d) Bankers Association for Forfaiting & Factoring transaction e) Bankers association for Factoring Trade. 363. Bill of Lading is a) a contract between Importer and Exporter for transportation of goods b) a receipt issued by importer to exporter for goods received for transportation c) a contract between a carrier and a shipper for the transportation of goods d) A receipt issued by exporter to importer for goods delivered. e) None of the listed options
364. Foreign Credit Insurance Underwriters and Brokers is a) A collection of banking institutions, dedicated to promoting American exports, international trade, and finance and investment between U.S. firms and their trading partners b) A forum for analysis, discussion and action among international financial professionals on a wide range of topics affecting international trade and finance, including legislative/regulatory issues. c) A forum to insure repayment of export credit against nonpayment due to political and/or commercial causes d) A forum to set up a trade finance database with a grant from the U.S. Department of Commerce e) None of the listed Options
365. An Asian Buyer entered into deal with Swedish Exporting company on open account terms. The Asian Buyer obtained 60 days credit, calculated from the date of the invoice. The value of the order was USD 100, 000 and the goods were dispatched and invoiced by the Swedish Exporter on the 15th July 2003. The payment from Asia was due on the 15th Sept 2003. The payment eventually arrived on the 15th Nov 2003, over two months late leading to interest loss for two months @ 9%. However if confirmed Letter of credit had been required, what would have been the exporter benefit? Given that the Confirmation Fee & Acceptance Commission is 1.5% each, Negotiation Fee of $150, and other administration expenses of about $60. a) $1,200 b) $1,700 c) $710 d) $990 e) $250
366. Which of the following combinations holds true? a) Wire transfer; more costly than other payment alternatives b) Foreign Checks; Useful when information/documentation must accompany payment
c) Commercial letter of credit; Improves applicant’s credit facilities d) Standby letter of credit; less costly than documentary collection e) Documentary collection; strict compliance rules apply 367. Standby letter of credit is __________ secure than documentary collection and cheaper than __________________ a) Less; open account b) More; documentary collection c) More; commercial letter of credit d) Less; commercial letter of credit e) None of the listed Options
368. Banker acceptances are ________________ credit investment created by ___________ and used for financing imports, exports and domestic shipping a) Long term; financial firms b) Long term; non-financial firms c) Short term; non-financial firms d) Short term; financial firms e) Medium terms; banks
369. Discounting method for long term account receivables on non-recourse basis is termed as a) Factoring b) Leasing c) Forfaiting d) Bill discounting e) None of the listed Options 370. Due Diligence is performed to a) Assess the risk b) Performed by the buyer c) Performed on the seller d) Executed after contract is signed e) All of the listed options 371. Which of the following methods eliminate country risk and commercial risk upon confirmation? a) Back to back Letter of Credit b) Standby Letter of Credit c) Documentary Collection d) Letter of Credit e) Both Standby Letter of Credit & Letter of Credit
372. Documentary Letter of credit provides all BUT a) Cheaper than letter of credit b) More rigid than letter of credit c) No strict compliance rules d) No credit facilities required e) No guarantee of payment by bank 373. Which of the following factors affect the choice of payment methods? a) Time frame b) Exporter’s Fund c) Government Guarantee Program d) Cost of financing e) All of the listed options 374. The treasury services department performs all of the following functions except a) Research market factors e.g., Interest rate monitoring b) Managing corporate collections and payments c) Managing liquidity and cash position d) Risk Management services e) None of the listed Options 375. A bank treasury manages investment of surplus cash in which of the following instruments EXCEPT
a) Money market instruments b) Treasury securities c) Debt d) Deposits with other banks e) None of the listed Options 376. Assume that Bank A treasury borrows $2.0 million for 2-years from another bank at US Treasury Bill rate and lends it to a corporate borrower in US for 2 years at LIBOR + 1.5%. Which of the following risks is the bank exposed to? a) Forex risk b) Repricing risk c) Optionality d) Basis risk e) All of the listed options
377. The following are interest rate risk management instruments EXCEPT? a) Interest rate swap b) Forward rate agreement c) Swaption d) Interest rate guarantee e) None of the listed Options 378. The following forex risk management instruments used for foreign exchange risk EXCEPT? a) Cross currency swap
b) Spot Forex contract c) Options d) Forward Forex contract e) Both Cross currency swap and Options 379. On October 15, ABC Limited enters in to a 3-month forward contract with Bank A for delivering USD 20.0 million at INR 46.50 /USD, while the spot rate is INR 46.20/USD. Subsequently, USD depreciates to INR 47.05/USD by the end of 3 months. Assuming this as a stand-alone deal, which of the following is true a) Bank A loses money in the deal b) ABC Limited loses money in the deal c) There is insufficient information to answer the question d) Loss/Gain depends on forward rate at the end of 3 months e) Neither party loses money in the deal
380. Bank A has significant investments in 10-year treasury bonds at a coupon rate of 4.9% and Bank B has significant investments in 10-year treasury bonds at a coupon rate of 5.2%. When market yield for 10-year treasury bonds start moving upwards from the current level of 5.0%, a) Both banks see an increase in portfolio value b) Bank A portfolio value increases while Bank B’s decrease c) Bank B portfolio value decreases while Bank A’s increase d) Both banks see a decrease in portfolio value e) Insufficient information for answering the question
381. A corporate has on books a 5-year floating rate loan at LIBOR+2%. Suppose interest rates are anticipated to rise in the near term. The corporate should ideally a) Retain the floating rate loan b) Convert to fixed rate loan immediately c) Wait for the interest rates to rise and then go for a fresh fixed rate loan to repay the old loan d) Wait for the interest rates to rise and then go for a fresh floating rate loan to repay the old loan e) None of the listed Options
382. Assume hypothetically that Bank A has hedged a long position in 5 year government bonds with a short position in 3 year government notes. When the yield curve steepens a) Bank A stands to lose money b) Bank A stands to gain money c) Depends on interest rates of the instruments d) Insufficient information e) None of the listed Options
383. A financial entity XYZ Ltd borrows 5-year money from Bank A at LIBOR+2.25% and lends the money to a corporate borrower ABC Ltd at 5-year T-bill rate + 2.00%. XYZ Ltd is exposed to the following risk a) Repricing risk b) Basis risk c) Yield curve risk
d) Political risk e) None of the listed Options 384. ABC Ltd in US has to make an import payment of Euro 2.3 million after 3 months. Market feels that Euro will appreciate against the US dollar in the near term however the final rate would depend on the results of the US presidential elections which would be happening after 1 month. Prima facie, ABC Ltd should go for a) 3-month forward purchase of Euro b) Purchase of a 3-month Euro future c) Purchase a 3-month Call option on the Euro d) Sell a 3-month put option on the Euro e) 3-month forward sale of Euro
385. Assume that Euro/USD is quoting at 1.2476/0.2481 and GBP/USD is at 1.8195/0.8200. What would be the cross currency rate for Euro/GBP? a) 1.2476/0.8200 b) 0.6793/0.6802 c) 0.6854/0.6860.. d) 1.2481/0.8195 e) None of the listed Options
386. Assume that INR/USD is quoting at 45.35/0.36 and Euro/USD is at 1.2476/0.2481. What would be the cross currency rate for Euro/INR? a) 55.2344/0.4565 b) 36.3300/0.4016 c) 56.3849/0.5231 d) 56.5787/0.6138.. e) None of the listed Options
387. Which of the following is a valid forex risk management strategy? a) Purchase a put option on a currency which is anticipated to appreciate b) Purchase a call option on a currency which is anticipated to appreciate c) Sell a call option on a currency which is anticipated to appreciate d) Both Purchase a put option on a currency which is anticipated to appreciate and Purchase a call option on a currency which is anticipated to appreciate e) Both Purchase a put option on a currency which is anticipated to appreciate and Sell a call option on a currency which is anticipated to appreciate
388. The USD/INR spot rate is 45.35/0.36 and the 3-month forward premium quote is 0.02/0.04. What is the forward rate applicable? a) 45.37/45.32 b) 45.37/45/46 c) 45.37/45.40 d) 45.39/45.38 e) None of the listed Options
389. Which of the following is true theoretically? a) As interest rates in India rise, forward premium for USD/INR rise
b) As interest rates in India rise, forward premium for USD/INR fall c) As interest rates in India fall, forward premium for USD/INR fall d) Both As interest rates in India rise, forward premium for USD/INR rise and As interest rates in India fall, forward premium for USD/INR fall e) None of the listed Options
390. Which of the following is correct? a) Swaps are not derivative instruments b) Swaption is a combination of a swap and an option c) Swaps can be used for covering interest rate risk and forex risk d) Both Swaption is a combination of a swap and an option and Swaps can be used for covering interest rate risk and forex risk e) None of the listed Options
391. ICICI Bank has an account with Chase Manhattan for settling forex transactions. Such an account is called a) Nostro account of ICICI Bank b) Vostro account of ICICI Bank c) Correspondent Vostro account d) Both Vostro account of ICICI Bank and Correspondent Vostro account e) None of the listed Options
392. Cash management techniques include a) Pooling b) Netting c) Swapping d) Both Pooling and Netting e) Pooling, Netting and Swapping 393. Cheque Lock box refers to a) The main method of collections management b) The main method of payments management c) Electronic Finds transfer d) Both The main method of collections management and Electronic Finds transfer e) None of the listed Options 394. The following happens in zero-balance structure a) Cash balances are pooled to a central account b) Cash balances of surplus accounts are use to top up deficit accounts c) Cash balances are made zero in surplus accounts d) All of the listed options e) None of the listed Options 395. All of the following are payment modes except a) EFT b) Cheque c) Debit to account through Debit card d) Lockbox
e) None of the listed Options 396. A traditional cash management system takes care of the following except a) Pooling collections to one central account b) Electronic bill presentment and payment c) Cash funding for purchase of capital equipment d) Netting receipts and payments globally e) Providing customized MIS for cash flow monitoring 397. ACH payments are usually used for a) Large value, single transfers b) Small value, periodic transfers c) Transfers to distant parties d) All of the listed options e) None of the listed Options 398. The following parties can act as clearing members a) National Banks b) Regional banks c) Corporates d) National Banks and Regional Banks e) National Banks, Regional Banks and Corporates 399. In RTGS, the following is true a) All members need to maintain a central account with the nodal agency b) Settlements are done at a transaction level c) Settlements are done on a batch mode d) Both All members need to maintain a central account with the nodal agency and Settlements are done at a transaction level e) All members need to maintain a central account with the nodal agency, Settlements are done at a transaction level and Settlements are done on a batch mode
400. A traditional end-of-day settlement process results in the following risks except a) Credit risk b) Interest rate risk c) Operational risk d) Systemic risk e) None of the listed Options 401. Continuous Linked Settlement is applicable to a) Domestic cash payment b) Domestic collections c) Electronic Funds Transfer d) International forex transfers e) All of the listed options 402. Continuous Linked Settlement removes which of the following risks primarily
a) Exchange risk b) Temporal risk c) Country risk d) All of these e) None of the listed Options 403. Treasury & cash Management takes care of all of the following except a) Liquidity risk b) Interest rate risk c) Forex risk d) Credit risk of corporate borrowers e) None of the listed Options 404. Asset Managers uses which of the following principles/approaches a) Screens and Filters b) Capital Preservations c) Alternatives investments d) All of the listed options e) None of the listed Options 405. The difference between private banking and asset management lies in a) Investment management techniques b) Type of returns promised c) Type of investors d) Extensive Research techniques e) Both Investment management techniques and Extensive Research techniques 406. The following major players provide asset management services a) UBS b) Aberdeen Asset Management c) JP Morgan Chase d) All of the listed options e) None of the listed Options 407. Active Approach to Asset Management refers to a) Diversification to minimize risk and maximize return b) Successful market timing c) Invest in a single line of assets d) Both Diversification to minimize risk and maximize return and Successful market timing
e) Both Diversification to minimize risk and maximize return and Invest in a single line of assets
408. The philosophy that ‘if prices go up, they tend to keep going up, is known as a) Contrarians Investing b) Market Timing c) Momentum Investing
d) Passive Value Investing e) None of the listed Options 409. The philosophy that ‘markets systematically undervalue certain companies’, is known as a) Contrarians Investing b) Market Timing c) Momentum Investing d) Passive value Investing e) None of the listed Options 410. For portfolio objectives of growth of income and capital appreciation, which of the following securities will most likely have to be in the portfolio? a) Common stocks b) Corporate bonds c) Preferred stock d) U.S. Treasury bonds e) Municipal Bonds
411. Which of the following is best associated with asset allocation in portfolio management? a) The choice of assets to use for consumption for the year. b) The selection of asset classes within which to invest portfolio funds. c) The selection of the proportion of funds for each asset class. d) The selection of asset classes for investment and the proportion of each asset class for portfolio funds. e) The selection of assets in a particular asset class.
412. A portfolio strategy associated with little trading or change once established is called a) resistance management. b) active management. c) passive management. d) resilient management. e) Top-down management 413. Which of the following are principles used by an asset manager? a) Diversification b) Screens and Filters c) Capital preservation d) All of the listed options e) Only Diversification and Screens and Filters 414. A buy-and-hold strategy is representative of a(n) ___ portfolio management style a) active. b) passive. c) indecisive. d) rebalanced. e) resilient
415. The components involved in the cost of portfolio execution are a) Bid-ask Spread b) Illiquidity c) Tax impact d) All of the listed options e) Only Bid-ask Spread and Tax impact 416. The dimensions to portfolio execution could be a) Cost of execution b) Trading speed c) Portfolio Risk Management d) All of the listed options e) Both Cost of execution and trading speed 417. “Momentum investing” would refer to a) Follow fundamental financial ratios to make decisions b) Invest in high dividend yield stocks c) Following charts and indicators to trade d) Create portfolio similar to index e) Try best to market 418. The performance of an internationally diversified portfolio may be affected by a) currency selection b) country selection c) stock selection d) All of the listed options e) None of the listed Options 419. In the long run, diversifying into international markets is most likely to benefit U.S. investors a) Under all U. S. market conditions. b) When U.S. markets are performing well. c) When U.S. markets are performing poorly. d) Under no circumstances. e) Only when currency risk is hedged. 420. When an investor adds international stocks to her portfolio a) it will raise her risk relative to the risk she would face just holding U.S. stocks. b) she needs to seek professional management because she doesn't have access to international stocks on her own. c) she will increase her expected return, but must also take on more risk. d) it will have no significant impact on either the risk or the return of her portfolio. e) she can reduce its risk relative to the risk she would face just holding U.S. stocks.
421. “Contrarian Investing” refers to investing on the basis of a) Market correction due to accelerated movement b) Single direction market movement – Bull or Bear run
c) Market timing for greater gains d) Momentum Investing e) None of the listed Options 422. "Don't put all your eggs in one basket" is a phrase used to describe which of the following? a) risk averse b) diversification c) risk/return tradeoff d) time value of money e) budgeting 423. By alternative investments (other than debt and equity), what are the investment avenues for a asset manager? a) Hedge funds b) Futures c) Savings bank accounts d) All of the listed options e) Both Hedge funds and Futures
424. Bid-Ask spread refers to a) Difference in price between buying one asset and another similar one b) Difference in opinion between the seller and buyer on the price of an asset c) Difference between the buying and selling price of the same asset d) Both Difference in price between buying one asset and another similar one and Difference in opinion between the seller and buyer on the price of an asset e) None of the listed Options
425. Which of the following statements concerning correlation coefficients is (are) correct? I. A correlation coefficient of -1 for the returns of two securities would indicate that both of them should be carefully considered for inclusion in a portfolio since maximum risk reduction could be achieved by including both. II. The returns of security B would increase 8% if the returns of security A increased 8% if the correlation coefficient for the returns of the two securities was +1. a) I only b) II only c) Both I and II d) Neither I or II e) None of the listed Options
426. Beverly Drake has two stocks with a correlation coefficient of zero. Which of the following is true?
a) These stocks are well diversified because as one stock appreciates in value, the other decreases.
b) c) d) e)
These stocks are well diversified because they will move in unison. These stocks are not well diversified because they move in unison. These stocks will move independently of each other. None of the listed options.
427. Which of the following are major categories of investments? a) Cash (or cash equivalents such as money market funds) b) Stocks c) Bonds d) Real Estate (including Real Estate Investment Trusts) e) All of the listed options 428. A very effective way to employ a passive strategy is to a) Invest in an indexed portfolio b) Buy all Stocks on the index c) Invest money in a bank d) Buy few securities which reflect the index e) Both Invest money in a bank and Buy few securities which reflect the index 429. Risk reduction (Diversification) in a stock portfolio can be achieved by a) Investing in a few less risky stocks b) Investing is as many stocks on the index as possible c) Buying an option to hedge risk on all stocks in portfolio d) Investing in an index option e) None of the listed Options 430. A buy-and-hold strategy would be with the aim of a) Reducing Transaction costs b) Reduce costs involved in constant researching of stocks c) Wait till the investors objective is met d) All of the listed options e) Both Reduce costs involved in constant researching of stocks and Wait till the investors objective is met
431. The derivatives market provide the asset manager a tool to a) Increase trading speed b) Reduce cost of execution c) Hedge portfolio risks d) Both Increase trading speed and Reduce cost of execution e) Both Reduce cost of execution and Hedge portfolio risks 432. Which of the following statements concerning diversification is (are) correct? I. Studies suggest a portfolio of 100 or more different common stocks is needed to substantially reduce unsystematic risk. II. The key to effective risk reduction through diversification is combining assets whose returns show negative, low, or no correlation over time. III. Security analysis will permit investors to consistently earn returns superior to the market. a) I only b) I and II only c) I and III only d) II and III only e) I, II, and II
433. Bottom-Up approach would involve a) Building country-by-country forecasting models b) Validating the forecasting models and investing in portfolio of high yield countries c) Selecting few scripts, forecasting their performance and investing based on the forecasts
d) Both Building country-by-country forecasting models and Validating the forecasting models and investing in portfolio of high yield countries e) Both Validating the forecasting models and investing in portfolio of high yield countries and Selecting few scripts, forecasting their performance and investing based on the forecasts 434. Underwriting in Investment banking stands for a) Process of understanding the risks and return profile for investment portfolio b) Guarantees the capital issue and making good for any shortfall c) Processed of getting the shortfall insured from an insurance company d) All of the listed options e) None of the listed Options 435. The process of ‘Hiring of the Lead Managers’ in the case of IPO is referred to as a) Red Herring b) Road-show c) Investment Manager Contest d) Advisor Contest e) Beauty Contest 436. The top tier investment banks are EXCEPT a) Salomon Smith Barney b) Sallie Mae c) Credit Suisse First Boston d) UBS e) None of the listed Options 437. The “Chinese Wall” in an investment bank refers to a) The separation of Legal and Marketing b) The separation of Sales and Trading c) The separation of Corporate Finance and Research d) The separation of Senior Management and Brokers e) The separation of Underwriting and Sales 438. Syndicate in Investment banking refers to all Except a) Hub of the investment banking wheel b) Determination of allocation of bonds c) Merger and Acquisition advisory d) Facilitating placing of securities in public offering e) None of the listed Options 439. Sales function in Investment banking takes the form of
a) Retail Broker b) Institutional Sales Person c) Private client service representative d) All of the listed options e) None of the listed Options 440. The ECNs (like Instinet) offer after the market trading facilities. They a) Involve Stock Exchange Brokers b) Don’t Involve Stock Exchange Brokers c) Also called as “Fourth Market” d) Both Involve Stock Exchange Brokers and Also called as “Fourth Market” e) Both Don’t Involve Stock Exchange Brokers and Also called as “Fourth Market” 441. “Specialist” in broking parlance refers to one a) Specializes in one or few stocks and offer buy as well as sell quotes b) Employee of stock exchange c) Specializes in all equities d) Only person authorized to buy or sell a particular stock e) Charges commission for trades 442. “Dealer” in broking parlance refers to one a) Employee of stock exchange b) Matches customer orders with other brokers c) Acts as a “Principal” and executes trades for his/her personal account d) Only person authorized to buy or sell a particular stock e) Charges commission for trades 443. The latest quote for IBM is $ 90. A “Stop Order” to sell IBM at $ 85 means a) The order will get released only when the Market Price hits $ 85 b) The stock will get sold immediately at Current Market Price – but not less than $ 85 c) The stock will get sold immediately at Current Market Price – but not less than $ 90 d) The order will get released immediately and the stock will get sold between $ 85 - $ 90 e) The order will get released at $ 85 as a limit order at $ 90 444. The latest quote for IBM is $ 90. A “Stop Limit Order” to sell IBM at $ 85 stop & $ 87 limit means
a) The stock will get sold immediately at Current Market Price – but not less than $ 85 b) The stock will get sold immediately at Current Market Price – but not less than $ 87 c) The order will get released immediately and the stock will get sold between $ 85 - $ 87 d) The order will get released only when the Market Price hits $ 85 as a Market Order e) The order will get released at $ 85 as a limit order at $ 87 445. The difference between “Fill or Kill” and “All or None” order is a) “Fill or Kill” allows multiple trades b) “All or None” can be a Good Till Cancelled order c) They are synonyms d) “Fill or Kill” can be valid till end of day e) “Fill or Kill” allows partial execution
446. The quote for CTSH in NASDAQ was $ 43. The best buyer was at $ 42.5 and the best seller at $ 43.5. How much is the bid-ask spread a) $0.50 b) ($0.50) c) $1.00 d) ($1.00) e) $86
447. “Figuration” in brokerage industry means a) Monetary value of a transaction b) Number of shares bought/sold c) Settlement details d) Payment instrument details e) Dividend payable/receivable 448. Movement of securities and funds within a brokerage firm is done by a) Margin Department b) Cashiering department c) Corporate Actions team d) Purchase and Sales e) Accounting Department 449. CTSH has announced a stock split of 3 shares for 1 share. The record date for the same is Dec 19, 2003. The holder will be eligible for the bonus only if he holds the shares as of close of business on a) Jan 01, 2003 b) Dec 19, 2003 c) Dec 18, 2003 d) Dec 20, 2003 e) Dec 31, 2003
450. A brokerage or analyst report will contain all of the following except? a) Detailed description of the company, and its industry. b) Opinion on why the analyst believes the company will succeed or fail. c) Recommendations to buy, sell, or hold the company. d) Target price or performance prediction for the stock in a year. e) Track record of the analyst writing the report. 451. Dow Jones Industrial Average (DJIA) and Bombay Stock Exchange Index (Sensex) are a) Both are Price Weighted b) Both are Value Weighted c) DJIA is Value Weighted & Sensex is Price Weighted d) DJIA is Price Weighted & Sensex is Value Weighted e) None of the listed options 452. A “Value Weighted Index” has stocks in
a) Equal proportion b) Each stock in proportion to its intrinsic value c) Each stock in proportion to its free float d) Each stock in proportion to its equity capital e) Each stock in proportion to its market value 453. Consider an index with only 3 stocks Stock A – 2 million shares – Market Price $ 50 Stock B – 4 million shares – Market Price $ 40 Stock C – 8 million shares – Market Price $ 30 The Weightage for Stock A in Value Weighted Index is a) 14.14% b) 20% c) 33.33% d) 50% e) 41.66%
454. The FTSE (Footsie) Index reflects share prices in a) London b) Europe c) Asia d) Americas e) Australia 455. Which equity securities provide for the domestic trading of foreign stock? a) Eurodollars b) American Depository Receipts c) Foreign stocks d) Sterling shares e) International equities 456. In general, how frequently do companies declare Cash Dividends? a) Annual b) Half Yearly c) Quarterly d) Monthly e) Irregular 457. What would happen to Convertible Preferred Stock if the underlying common stock experienced a 2 for 1 stock split? a) Conversion price would be reduced, and the number of convertible shares would increase. b) Conversion price would be reduced, and the number of convertible shares remain the same c) Conversion price remains the same, and the number of convertible shares would increase d) No impact e) Conversion price would be increased, and the number of convertible shares would increase
458. What date represents the announcement by the board of directors that a dividend will be paid?
a) Book Closure date b) Record Date c) Declaration Date d) Dividend date e) Payment Date 459. If the payable date is Friday, December 6, and the record date is Monday Jan 12, when is the Ex-Dividend Date? a) December 4 b) December 6 c) January 12 d) January 10 e) January 8
460. Which term refers to securities that are sold by the issuer to investors? a) Secondary Offering b) Outright Sale c) Primary Offering d) Select Sale e) None of the listed Options 461. When are shareholders of record determined for dividend purposes? a) Primary Offering b) Secondary Offering c) Outright Sale d) Select Sale e) None of the listed Options 462. If a stock trades on Wednesday, May 2, when will Regular Settlement occur in US markets? a) May 3 b) May 4 c) May 5 d) May 7 e) May 8 463. Consider an index with only 3 stocks Stock A – 2 million shares – Market Price $ 50 Stock B – 4 million shares – Market Price $ 40 Stock C – 8 million shares – Market Price $ 30 The Weightage for Stock A in Price Weighted Index is a) 14.14% b) 20% c) 33.33% d) 50%
e) 41.66% 464. All of these are different types of brokerage accounts except? a) Margin Account b) Nostro Account c) Cash Account d) IRA Account e) Power of Attorney Account 465. The NYSE is an example of a) Primary Market b) Secondary Market c) OTC Market d) Fourth Market e) None of the listed Options 466. What is the key regulatory authority over the American securities industry? a) Federal Reserve b) FDIC c) DTCC d) ASA e) Securities Exchange Commission 467. If a company announces a 2 for 1 Stock Dividend, what will happen to the price and number of shares outstanding on the ex-date? a) Price will go down by 50% while shares outstanding would double b) Price will go down by 50% while shares outstanding would remain the same c) Price will remain the same while shares outstanding would double d) Price and shares outstanding would double e) Price and shares outstanding would remain the same
468. What is the term for previously issued stock that has been re- purchased by the issuer in the secondary market? a) Treasury Stock b) Preference Stock c) Promoter Stock d) Trade able Stock e) Non voting Stock
469. If a corporate bond which pays its coupon on April 1 and October 1 is traded on Wed, June 10, how many days of accrued interest does the buyer owe the seller? a) 0 b) 70 days c) 71 days d) 74 days e) 75 days
470. What is the Effective Yield for a bond trading at a discount? a) Less than interest indicated in the bond b) Same as interest indicated in the bond c) More than interest indicated in the bond d) No relationship between the interest and effective yield e) None of the listed Options 471. What securities do not require proof of ownership to receive interest or principal payments? a) Bearer bonds b) Registered Securities c) Unregistered Securities d) Warrants e) Debentures 472. Who is at risk during a best efforts underwriting? a) Investor b) Underwriter c) Issuer d) Stock Exchanges e) Securities Exchange Commission 473. When must GTC orders be reconfirmed? a) End of every day b) End of every week c) End of every month d) End of every quarter e) End of April and October 474. What is the term for the difference between bid and ask? a) Difference b) Spread c) Profit d) Quote e) None of the listed Options 475. What is the Third Market? a) NASDAQ b) OTC c) NYSE d) Instinet e) None of the listed Options 476. What is the term for a broker/dealer that maintains an inventory of stock and disseminates quotes on that stock to other broker/dealers? a) Issuer b) Investor c) Underwriter
d) Stock Exchanges e) Market Maker 477. “Corporate Action” refers to a) All company announcements b) All stock exchange announcements c) Dividends/Stock Splits d) New investments e) None of the listed options 478. Dow Jones Industrial Average (DJIA) has a) All companies listed at NYSE b) 30 large companies listed at NYSE c) Top 10% of NYSE d) Top 10% of NASDAQ e) 30 large companies listed at NASDAQ 479. “Insiders” of the company cannot sell any shares for a specified period of time, this is known as
a) Holding Period b) Blackout Period c) Buy & Hold Period d) Book Closure Period e) None of the listed Options 480. In a “Rights” offering of shares, which of the following is used? a) Firm commitment b) Stand by underwriting c) Best Efforts underwriting d) Outright Sales e) None of the listed Options 481. The “Fourth Market” refers to a) NASDAQ b) OTC c) NYSE d) Instinet e) None of the listed Options
482. The coming together of Daimler AG of Germany and Chrysler of US to form Daimler Chrysler can be termed as a) Chrysler acquiring Daimler b) Merger of Daimler & Chrysler to form a new company c) An informal arrangement between the two companies to manufacture and sell each other’s products d) Daimler acquiring Chrysler e) A technical collaboration
483. What is a meant by a buy limit at 46?
a) Buy at exactly 46 + brokerage b) Buy Price + Brokerage exactly equal to 46 c) Buy at 46 or lower + brokerage d) Buy Price + Brokerage equal to or lower than 46 e) None of the listed Options 484. Which of the following risks need to be managed while lending securities a) Foreign exchange risk b) Liquidity risk c) Credit risk d) Equity risk e) All of the listed options 485. Development of investment objectives and investment policy falls under the purview a) Fund Administration b) Asset Allocation c) Compliance reporting d) Investment Manager Universe e) Asset Liability Analysis 486. Schroeder’s PLC presently has State Street as its custodian. They would like to move the assets to JP Morgan Chase as the new custodian because of better pricing and services. Which of the following teams in JPMC will handle this change? a) Account Management b) Transition Management c) Brokerage Services d) Administration e) Treasury
487. Core Custody Services performs the following functions except a) Price securities positions b) Record Keeping c) Fiduciary and compliance monitoring d) Reporting services e) Processes corporate actions 488. “Transition Management” under the purview of trading services help a) Multi-currency collateral management and reporting b) Brokerage to minimize costs and maximize efficiency c) Institutional investors reduce their trading costs d) Setting brokerage rates e) None of the listed options 489. Which of the following trading services provide institutional investors reduce their trading costs
a) Stock repurchase program b) Transition management
c) Commission recapture d) Both 2 and 3 e) None of the listed Options 490. “Alternate Investments” refer to a) Diversification from equity into debt b) Investment into non-regular asset categories c) Forex trading d) Arbitraging e) None of the listed Options 491. Corporate Actions are communicated to the clients by custodians using a) MT 15022 b) MT 5022 c) MT 2001 d) MT 199 e) None of the listed Options 492. Which one of the following is NOT an “Alternate Asset” a) Distressed debt b) Private Equity c) Venture Funds d) IBM stock e) LBOs 493. “Income Processing” team of a custodian takes care of: a) Stock splits b) Trade Processing c) Global income and payments on due dates d) Settlements e) Clearing 494. Asset-Liability analysis results in a) Determining excess of assets over liabilities b) Estimating Future economic wealth c) Effect of return volatility d) Both 2 and 3 e) Term mismatch of assets and liabilities 495. Which of the following services doesn’t 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 doesn’t fall under the purview of Trading? a) Performance management b) Investor management universe c) Cash projection d) Cash & short term management e) Fund administration 497. Fund administration covers the administrative and legal services to meet the needs of the fund. Which of the following items are not covered? a) Fund Development b) Portfolio evaluation c) Transfer agency d) Corporate Stock Repurchase e) Fiduciary and compliance monitoring
498. Transition management is a systematic, controlled process that utilizes all available sources of liquidity to simultaneously _____________ and _____________ a) Minimize risk; maximize profits b) Maximize liquidity; minimize risk c) Minimize cost ; maximize efficiency d) Minimize liquidity; maximize efficiency e) None of the listed Options
499. Securities lending experts specializes in market information and negotiation skills to provide profitability to the lender while managing a) Credit risk b) Liquidity risk c) Interest rate risk d) Both Credit risk and Liquidity Risk e) Both Credit risk and Interest Rate Risk
500. In the case of securities lending services, the “Third party intermediaries” a) Conduct transactions directly with the lender and borrower b) specialize in particular types of securities loaned c) target clients that are dissatisfied with the performance of their custody banks d) become a principal to the transaction e) Both Conduct transactions directly with the lender and borrower and 501. In the case of securities lending services, the “Wholesale intermediaries” a) conduct transactions directly with the lender and borrower b) specialize in particular types of securities loaned c) target clients that are dissatisfied with the performance of their custody banks d) becoming a principal to the transaction e) Both conduct transactions directly with the lender and borrower & becoming a principal to the transaction
502. ______________ for securities lending, which bring lenders and borrowers together, may eliminate _______________ a) Wholesale intermediaries; Niche intermediaries b) Internet auction systems; custodian and third party intermediaries c) Custodian and third party intermediaries: Niche intermediaries d) Niche intermediaries; custodian and third party intermediaries e) Internet auction systems; Niche intermediaries
503. “Offshore” securities lending markets required a) the settlement of securities lending transactions on the books of Global custodians b) the settlement of securities lending transactions on the books of domestic custodians c) the settlement of securities lending transactions on the books of foreign sub custodians d) the settlement of securities lending transactions on the books of foreign sub domestic custodians e) None of the listed Options
504. The reason for the development of “offshore” securities lending is a) Unfavorable tax treatment b) Assorted securities restrictions c) Legalities of transaction d) All of the listed options e) None of the listed Options 505. “Distressed debt” refer to a) distressed state of market for debts/loans b) loan/debt that has become watchlist or impaired c) corporate bonds of companies that have filed for bankruptcy d) All of the listed options e) None of the listed Options 506. Besides providing core custody services, the global custodian typically provides which of the following services? a) Foreign exchange transactions b) Futures & Options Clearing and Execution c) Tax reclaims processing d) Both Foreign exchange transactions and Futures & Options Clearing and Execution e) Both Foreign exchange transactions & Tax reclaims processing
507. When an entity is able to control a majority of shares by using borrowed money, it is called a) Corporate stock repurchase b) Leveraged buyout c) Corporate lending d) Busted takeover e) Management buyout
508. Managers' returns are analyzed using a market factor-based performance analysis model that allows us to create accurate manager peer groups based on market exposures, what is it called as a) Financial reporting b) Income processing c) Investment manager universe d) Investment manager portfolio e) None of the listed Options
509. What is one of the best investment strategies to protect an investor from volatility? a) Hedging b) Market timing c) Insurance d) Diversification e) None of the listed Options 510. Standard & Poor's and Moody's are companies that would be examples of a) Stockbrokers b) securities exchanges c) stock regulations d) investor's services e) stock underwriter 511. The most readily available source of information for an investor a) the daily newspaper b) government publications c) corporate reports d) investor newsletters e) business periodicals 512. In the case of Single Premium Deferred Annuities (SPDA), a) Premium is an asset for the bank b) Premium is a liability for the customer c) Deferred annuities are an asset for the bank d) Deferred annuities are liability for the customer e) None of the listed Options 513. Asset allocation process generate a) Lowest possible risk b) Highest possible returns c) Meet planned objectives d) All of above e) None of above 514. SWIFT is a a) Proprietary network interface b) Open standard network interface
c) Message based network interface d) Both Open standard network interface & Message based network interface e) Both Proprietary network interface & Message based network interface 515. Compliance reporting a) Provides exception-based information b) Provides standard template based information c) Highlights potential violations for internal regulations d) All of the listed options e) None of the listed Options 516. Compliance reporting covers all of the following services EXCEPT a) Hedging and gearing reports b) Weighted average analytics c) Prohibited investments d) Suspicious activity reports e) Sharing holding restrictions 517. Custody clients' trade instructions are typically communicated using a) SWIFT network b) FEDWIRE c) CHIPS d) Clearing e) None of the listed Options
518. Tax processing investor services include a) make reclamations for client accounts b) pursue tax relief at the source c) manage clients' investment-related tax issues d) All of the listed options e) None of the listed Options 519. _____________, the largest discount brokerage house, uses the Internet to deliver both high-tech and high-touch services to its clients a) Charles Schwab b) Brown & company, J P Morgan Chase c) Ameritrade d) All of the listed options e) None of the listed Options
520. Private Equity a) Requires very large investment b) Quoted on the stock market c) Listed on stock exchange d) All of the listed options e) None of the listed Options 521. Asset Allocation involves a) “Immunization” techniques b) Use of options
c) Use of emerging market equities d) Use of venture funds e) All of the listed options 522. Does Asset Allocation help reduce the investment risk? a) No - It only maximizes return b) It increases risk c) Yes d) It increases choice – No impact on risk e) None of the listed Options 523. Services like the settlement, safekeeping, and reporting of customers’ marketable securities and cash are provided by _________________ a) Custodian b) Broker c) Investment bank d) Fund Administrator e) Dealer
524. Asset Allocation in an investment policy is designed to meet the required rate of return. If the investment objective is “Generate as much income as possible”. Which of the following asset allocation strategy would be suitable for the above objective? a) Invest in high quality bonds b) Invest in shares of rapidly growing companies c) Investment in both shares and bonds d) Invest in lower quality bonds e) None of the listed Options
525. Custody as an industry is going through a period of massive change. What do you think are the major driver/s changing the way the business is done? a) Increasing regulation and transparency b) Infrastructure rapidly changing towards tight cost base and automated trade workflows c) Disintegration of the Global custody market d) Increasing regulation and transparency and Infrastructure rapidly changing towards tight cost base and automated trade workflows e) All of the listed options
526. Sarbanes-Oxley Act comprises of a) Section 401 seek to improve objectivity of research by recommending rules b) Section 201 specifies enhanced financial disclosures c) Section 501 prohibits non audit services d) all of the listed options e) None of the listed Options 527. Federal communication privacy law features a) Three tiered system
b) prohibits electronic eavesdropping on telephone conversations, face-to-face conversations, or computer and other forms of electronic communications c) privacy protection covers telephone records, e-mail held in third party storage d) All of the listed options e) None of the listed Options 528. Which of the following financial institutions are covered under the Anti-money laundering, US Patriot Act a) Securities brokers and dealers b) Mutual Funds c) Banks and Trust companies d) All of the listed options e) None of the listed Options
529. The US Patriot act deals with the following money laundering crime a) Proceeds from foreign crimes of violence and political corruption b) Proceeds from cyber crime c) Counterfeiting d) All of the listed options e) None of the listed Options 530. Check21 provides a) Fully automated Day 1 processing b) Decreased collection float due to faster clearing process c) Compressed processing windows to enable later branch cutoff times d) Only privately-held companies that are headquartered in the U.S. e) None of the listed Options 531. The US Patriot Act doesn’t allows for a) US enforcement of foreign forfeiture orders b) Seizure of correspondent accounts held in U.S. financial institutions for foreign banks c) Confiscation of property located in US for crimes committed in violation of foreign laws d) All of the listed options e) None of the listed Options 532. Under the new rules, an accounting firm that does an audit is prohibited from providing many other accounting services. Which of the following is specifically permitted under SarbanesOxley? a) Broker or dealer, investment adviser, or investment banking services b) Financial Information Systems Design and Implementation c) Appraisal or Valuation Services d) Tax services e) All of the listed options
533. Not all possible services that might be provided by the auditing firm are expressly prohibited by Sarbanes-Oxley. If a non-audit service is not expressly prohibited, the auditing firm may provide that service
a) If no one on the board objects b) If the audit committee gives its prior approval If the audit committee gives its prior approval c) Only in an emergency and only if the company being audited has not been able to find another accounting firm to provide this service after making a good-faith effort d) Without any prohibitions or pre-conditions whatsoever e) None of the listed Options
534. Sarbanes-Oxley Act, section 501, specifies a) Book Keeping and Actuarial Services b) Balance sheet transactions c) Commission rules on pro forma figures d) Rules for greater public confidence in securities research e) None of the listed Options 535. The stated objectives of the stringent rules under Sarbanes-Oxley Act are a) To protect the interest of investors b) To improve the accuracy and reliability of corporate disclosures c) To deter and punish corporate and accounting frauds d) To ensure justice for wrongdoers e) All of the listed options 536. USA PATRIOT Act enforces which of the following a) Criminal Investigations b) Foreign Intelligence Investigations c) Money Laundering d) All of the listed options e) None of the listed Options 537. Money laundering refers to a) Money facilitating criminal offences b) Extending loans to corporate c) Short term borrowing & placements d) All of the listed options e) None of the listed Options 538. Money laundering can best be described as the process by which a) Money gained from criminal activity is processed so it appears to be gained from legitimate sources b) Criminals attempt to defraud the government c) Money gained from legitimate sources is hidden to avoid taxes d) The police attempt to investigate organized crime e) None of the listed Options
539. Which of the following is not an example of money laundering during the placement stage? a) Exchanging many small denomination bills (i.e. tens, twenties and fifties) for larger bills and bank drafts
b) Repeated deposits of cash into a financial institution just below mandatory reporting threshold
c) Setting up an offshore "shell" corporation to "lend" yourself money for a new house
d) All of the listed options e) None of the listed Options 540. Federal authorities attack money laundering through a) Regulations b) Criminal sanctions c) Forfeiture d) All of the listed options e) None of the listed Options 541. The US Patriot Act expands the authority of the ________________ to regulate the activities of U.S. financial institutions, particularly their relations with ______________and entities a) Secretary of the Treasury; domestic individuals b) Secretary of the Treasury; foreign individuals c) Securities Exchange Corporation; domestic individuals d) Securities Exchange Corporation; foreign individuals e) None of the listed Options
542. SARs in the context of anti money laundering a) stands for Suspicious activity reports b) Needs to be filed by Securities brokers and dealers as well as commodity merchants c) Requiring businesses, which were only to report cash transactions involving more than $1,000,000 to the IRS to file d) Both stands for suspicious activity reports & Needs to be filed by Securities brokers and dealers as well as commodity merchants e) All of the listed options
543. Which of the following regulations are not covered under the US Patriot act? a) Encouraging financial institutions and law enforcement agencies to keep confidential information concerning suspected money laundering and terrorist activities b) Prohibiting U.S. financial institutions from maintaining correspondent accounts for foreign shell banks c) Establishing minimum new customer identification standards and record-keeping d) Requiring financial institutions to maintain anti-money laundering programs which must include at least a compliance officer e) None of the listed Options
544. Forfeiture regulation under the US patriot act allows a) permits confiscation of any property derived from or used to facilitate domestic or international terrorism b) Calls for the seizure of correspondent accounts held in foreign financial institutions for domestic banks who are in turn holding forfeitable assets c) Permits foreign enforcement of domestic forfeiture orders d) All of the listed options
e) None of the listed Options 545. US Patriot act incorporates the following new crimes a) terrorist attacks on mass transportation facilities b) for biological weapons offences c) for fraudulent charitable solicitation d) All of the listed options e) None of the listed Options 546. Federal communications privacy law features a three tiered system under US Patriot act First level: prohibits electronic eavesdropping on telephone conversations, face-to-face conversations, or computer and other forms of electronic communications Second level: telephone records, e-mail held in third party storage, and the like Third level: in the case of serious criminal cases, law enforcement officers may seek a court order authorizing them to secretly capture conversations Which of the above levels are correctly described? a) All the levels b) First & Second c) Only Second level d) Second & third e) None of the listed Options
547. Which of the following institutions are not covered under the AMR guidelines? a) Credit unions b) Securities brokers and dealers c) Mutual funds d) Futures commission e) None of the listed Options
548. The Customer Identification program includes all of the following EXCEPT a) Collecting information b) Verifying identity c) Checking terrorist list d) Reliance on other financial institution e) None of the listed Options 549. For the customer identification program, the AMR guidelines a) dictates which forms of identification documents financial institutions can accept b) financial institutions responsible for assessing and minimizing the risk associated with the documents c) risk based approach to determine the form of identification d) Both financial institutions responsible for assessing and minimizing the risk associated with the documents and risk based approach to determine the form of identification e) All of the listed options
550. Which of the following risk categories are covered under Basel II A. Interest risk B. Market risk C. Foreign exchange risk
D. Liquidity risk E. Credit risk F. Operational risk G. Qualitative risk a) A, C, F b) E,B,F c) A, B, G d) B,D,G e) E,C,A
551. The deadline for the implementation of BASEL II for all the foreign and financial institutions is
a) December 2005 b) December 2007 c) December 2006 d) December 2004 e) None of the listed Options 552. The aim of Basel II is a) To promote safety and soundness in the financial system by allocating capital in organizations to reflect risk more accurately b) To promote efficiency in the financial system by allocating capital in organizations efficiently to minimize risk and maximize returns c) To promote standardization in the financial system by allocating capital in organizations to obtain optimal risk return profile d) To establishing a more sophisticated framework for banks to measure risk and ensure sufficient capital to cover losses from market and credit risk e) None of the listed Options
553. How many countries so far have signed the new capital accord Basel II a) 10 b) 92 c) 110 d) 176 e) 21 554. Basel capital accord was established in a) 1998 b) 1978 c) 1988 d) 1992 e) None of the listed Options 556. Three pillars of the new capital accord, Basel II, are a) Quantitative; Supervisory; General b) Qualitative; Market Forces; Geographic c) Quantitative; Operational; Supervisory d) Quantitative; Qualitative; Market Forces
e) Qualitative; Mandatory; Quantitative 557. Basel capital accord was instituted to coordinate global regulatory efforts to institute _______________ capital requirements to eliminate the threat posed by _____________ a) Maximum; overcapitalized financial institutions b) Minimum; overcapitalized banks c) Maximum; undercapitalized financial institutions d) Minimum; undercapitalized banks e) None of the listed Options
558. The “Qualitative” pillar of the Basel II encompasses a) Capital management processes b) Trading book changes c) Disclosure requirements d) Operational risk e) Capital structure 559. Which of the following risks has been incorporated in the new framework for the first time? a) Operational risk b) Market risk c) Interest risk d) Exchange risk e) Credit risk 560. Which of the following method can be utilized for the evaluation of operational risk? a) Basic indicator approach b) Internal ratings based approach c) Advanced internal rating based approach d) all of the listed options e) None of the listed Options 561. Under the “standardized approach” for credit risk assessment, bank a) Allocates risk weights to each of the assets and off-balance sheet positions b) Calculates sum of risk-weighted asset values c) Risk weights depend on the broad category of borrower d) Risk weights can be refined by reference to external ratings e) All of the listed options 562. Capital adequacy ratio refers to a) Amount of bank’s capital expressed as percentage of the risk weighted credit exposure b) Amount of bank’s capital expressed as percentage of the risk weighted credit exposure & operational risk c) Amount of bank’s capital expressed as percentage of the risk weighted credit exposure, & market risk d) Amount of bank’s capital expressed as percentage of the risk weighted credit exposure, operational risk & market risk e) None of the listed Options
563. Operational risk results from inadequate a) Internal processes b) People c) System or from External events d) All of above e) None of the listed Options 564. Under “standardized approach” for operational risk a) Capital charge is calculated by multiplying a bank’s broad financial indicator by a ‘beta’ factor b) Capital charge is calculated by multiplying a bank’s broad financial indicator by a ‘alpha’ factor c) Capital charge is calculated by multiplying a bank’s broad financial indicator by a ‘gamma’ factor d) Factor can applied for any bank regardless of its complexity or sophistication e) None of the listed Options
565. The “internal rating based approach” differs from “standardized approach” for credit risk assessment, in that a) IRB results in lesser risk sensitivity b) IRB uses diverse range of risk weights c) IRB is simpler approach d) IRB leads to lower capital charges e) All of the listed options
567. USA PATRIOT Act has been enacted in response to a) Very high profile corporate scandals such as Enron b) The terrorists’ attacks of September 11, 2001 c) Growing complexity, volatility, and interdependence among international financial markets
d) High tax payers defaults e) None of the listed Options 568. In order to implement new capital adequacy framework by 2006, banks are planning to go for different approaches for credit and operational risks, as specified in the framework, based on its readiness in terms of systems and processes. What could be the challenges that would be faced by these financial institutions? a) Availability of historic data b) System Integration c) Re-engineer business process d) Only Availability of historic data and System Integration e) All of the listed options 569. Which of the following benefits can accrue to the banks implementing the new capital adequacy norms besides reduced capital adequacy requirements? a) Better risk based pricing b) Improved capital allocation c) Increased corporate and emerging markets lending
d) Only Better risk based pricing and improved capital allocation e) All of the listed options
570. The migration to Check21 environment requires substantial investment in imaging, storage and image exchange technology. Some of these investments can be avoided by outsourcing some of these processes to third party ASP Solutions. Which of the following factors are likely to influence the decisions of the banks to outsource or not? a) Capacity planning b) Security Analysis c) ‘AS IS’ process analysis d) All of the listed options e) None of the listed options
571. Which of the following activities can invite the application of Anti Money Laundering guidelines?
a) b) c) d) e)
Purchase or sale of same good Multiple transfer of money Depositing cash in big amounts Only Purchase or sale of same good and Multiple transfer of money Only Multiple transfers of money and Depositing cash in big amounts
572. Which of the following methods, parameters used, for measuring credit risk is more reliable while processing credit application, assume that the calculation engine allocate equal weightage to different factors: a) Method A b) Method B c) Method C d) Method D e) Both Method A and Method D
573. Assume that you have a holding in IBM Stock worth $10 million. You have calculated the standard deviation (SD) of change over one day in IBM is $ 0.20. Therefore for the entire position, SD of change over 1 day = $200,000 The SD of change over 10 days = $200,000 * √(10) = $632,456 The 99% VaR over 10 days = 2.33 * 632,456 = $1,473,621
1. 2. 3. 4. 5. 6. 7. 8. 9.
vaR is a measure of _________ (164) Expand vaR Value at Risk Best method for vaR _______________variance co-variance model Rate of Inflation R=N-I Check21 Liquidity DC and DB differences hedge,syndicate Back to Back LC
10. Electronic BFS L0 LATEST DUMPS 1. Which of the following is NOT a settlement Method for Bank Loans a. Securities Repository b. Sub-Participation c. Assignment d. Participation e. Preclosure 2. Tax and insurance Premiums Collected as part of Loan repayment are handled through which of the following type of account? a. DMAT account b. Mutual fund account c. Escrow account d. Fixed despoait 3. What is the difference between Banker’s acceptance and sight draft a. Bank can raise funds by selling the acceptance b. Sight drafts are negotiable instruments c. Banker’s acceptance reduces bank’s leading capacity d. None of the listed Options e. Banker’s acceptance demands immediate payment 4. Red herring prospectus is issued during _______________ a. When a divided is declared b. Poat-Acquisition c. During Securitization d. During a IPO e. A merger 5. Which of the following is NOT a banking service? a. Retail Banking b. Private Banking c. Stock market regulation d. Corporate Banking e. Consumer Lending 6. Who among the following offers private banking services? a. Bank of New-York Melon b. Bank One c. All of the listed options d. UBS
e. Credit Suisse 7. Ram deposits $100 in XYZ Bank. Puja takes a loan of $ 100 from XYZ Bank. Which of the following is most likely to happen? a. Bank is charging 3% interest to Puja and paying 5% interest to Ram b. Bank giving 3% interest to Ram and Take 5% interest from Puja c. …………………. d. …………………… 8. Bank ABC interest rate on deposits is 7.30% and its interest rate on loans is 9.25% dur………………. Find the spread for Bank ABC? a. 0. b. 0. c. N d. 0. 9.25 – 7.30 = 1.95
9. If a bank gets a deposit of $5000, assuming reserve requirement(CRR) of 10%, and it Circulate through 2 more banks, leading to which of the following money multiper effect? a. None b. It crea…………………….. c. It crea…………………….. d. It crea…………………….. e. It crea……………………... Solution: CRR (Cash Reserve Ratio). 1 2 3
Deposit 5000 4500 4050
10% Reserve 500 450 405
Loaned Out 4500 4050 3645
An initial deposit of $5000 has created a reserve of $1355, and loan of $12195.
10. What does a CALL option give the buyer? a. The right, but not the obligation, to sell b. The Obligation to sell c. The right and obligation to buy d. The obligation to buy e. The right, but not the obligation, to buy Put Options - The right, but not the obligation, to sell
11. What is the purpose of rebalancing a. To keep investments in line with original investment strategy b. To Maximize the portfolio return by effectively timing the market c. All of the listed options d. Reallocation of assets classes to gain competitive advantage 12. Which two risks of a financial institution may bring gains as well as losses? a. Credit risk and interest rate risk b. Credit risk and foreign exchange risk c. Liquidity risk and credit risk d. None of the listed options e. Interest rate risk and foreign exchange risk 13. Institution specializing transactions of mortgage loans for US banks are a. Gennie Mae and indymac b. Gennie Mae & Fannie Mae c. ………………………… d. ………………………… Fannie Mae and Ginnie Mae are examples of institutions specializing in securitisation transactions of mortgage loans for US banks. Freddie Mac, Ginnie Maes & Fannie Mae - Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all "secondary market lenders".
14. Assuming a 4% annual inflation rate, in how many years will the purchasing power of $1,000 be cut in half? a. 18 Years b. 16 Years c. 20 Years d. 12 Years e. 24 Years 15. The term “Settlement cycle” refers to which of the following options? a. time period between the date on which the trade is executed and the date when the trade is settled b. Time period between the date on which an investor first makes the decision to enter a trade and the date when the trade is settled. c. Time period between the date on which the trade is cleared and the date when the trade is settled. d. None of the listed option are correct 16. When is a bank failure more likely to occur? a. Capital adequacy ratio is increased b. Cash Reserve ratio is increased
c. Bank increases its equity capital d. Capital adequacy ratio is reduced e. Bank holds more short-term riskless securities 17. GDR stand for which of the following option? a. Gold Deposit Report b. Global Depository Receivables c. Global Deposit Report d. Global Depositary Receipt e. Global Derivatives Report 18. If the entry load is 2% and the NAV is Rs 10, then how much the investor will have to pay for 100 units? a. Rs. 1020 b. Rs 1500 c. Rs. 1200 d. Rs. 800 NAV – Net Asset Value
(10+(2/100*10))*100 =1020 19. After a buyer and a seller enter into a trade agreement, who initiates the issues of LC? a. None of the listed Options b. Buyer’s bank c. Seller d. Advising bank e. Seller’s bank 20. If a financial instrument has a 50% chance of paying 20% and a 50% chance of paying 60% percent. What would be the expected return? a. 0.4 b. 0.2 c. 0.5 d. 0.8 = (50/100)*(20/100) + (50/100)*(60/100) = 0.4
21. Does a pure play investment bank accept deposits? a. No b. Only during IPO c. Yes d. Yes , if it is below e. None of the listed Option 22. Which of the following is a corporate action? a. Declaring Dividend b. All of the listed options
c. Rights issue d. M & A e. Stock Split 23. In a typical credit card transaction processing cycle, which of the following is I: The issuer and acquirer route authorization through the Association II: Issuer transfers funds to the Acquirer a. I only b. Both I and II c. II only d. None of the listed options Answer: I & II
24. Choose the correct order of occurrence of the following activities a. Trade execution, Trade matching, Trade clearance, Trade confirmation, Trade Settlement b. Trade execution, Trade matching, Trade confirmation, Trade clearance, Trade Settlement c. Trade matching, Trade execution, Trade confirmation, Trade clearance, Trade Settlement d. Trade execution, Trade confirmation, Trade matching, Trade clearance, Trade Settlement 25. From the given options the service(s) that can be categorized under A……………….. I: Corporate Action processing
II: income Processing a. ………………………………… b. ………………………………… c. ………………………………… d. ………………………………… 26. There are 5 participants A, B, C, D, E in a 25M USD syndicated loan and A is the lead m has agreed to pay 0.4% ($1,00,000) participant fee. How much each participant will share in participant fee? a. $1,00,000 will be received every time money is withdrawn b. $1,00,000 will be received every month c. $1,00,000 will be received affront d. $1,00,000 will be charged towards undrawn portion e. None of the listed Options 27. Which of the following are NOT the benefits of using credit derivatives? a. Increasing the credit limit of a corporate b. Credit derivatives can be used both to diversity their credit risk exposures and free up capital from regulatory constraints c. Credit derivatives can be used to create positions that can otherwise not established in the case market d. Credit derivatives can be used either to take on more risk or to avoid (hedge) it 28. The counterparty in a futures contracts trade is a. The Exchange b. Banks c. The buyer and Seller d. The brokers who……………………… e. Government 29. What is OTC? a. Over The Counter b. .……………………… c. ………………………. d. ………………………. e. ………………………. 30. All the following statement concerning U.S Governmernt securities are Correct EXCEPT a. Treasury notes have maturity dates up to 10 years b. Treasury bonds have maturity dates up to 30 years c. Treasury bills have a greater interest rate risk than either Treasury bill d. Treasury bills have their interest paid in lump sum at maturity.
31. Interest rate spread is equal to? a. Capital Rate – Base Rate b. Base Rate – Current Rate c. Current Rate d. Current Rate – Base Rate e. None of Listed Options 32. Universal banks provide commercial banking as well as investment bank services under one head . State True or False a. True b. False 33. Dividend declaration is an example of a. Corporate Action b. . ……………………… c. . ……………………… d. . ……………………… 34. VISA involved in which of the following? I: Provide the interchange systems to transfer data and funds between members II: Set credit limits III: Issue credit cards a. I Only b. II only c. I & II d. I, II & III 35. On a trading day at the NYSE, a broker undertakes the following trades: Buy 120 DELL shares for $ 10.00 each Sell 70 DELL shares for $ 10.50 each Buy 200 CISCO shares for $ 20.00 each Sell 20 DELL shares for $ 11.00 each Sell 50 CISCO shares for $ 20.50 each Sell 10 DELL shares for $ 9.00 each Given that a net settlement system is being used. Find out the net position of the broker a. Dell 70 Shares to give out, Cisco 90 shares to receive, $3,000 to pay out to the exchange b. Dell 20 Shares to pay out, Cisco 150 shares to receive , $3,780 to pay out to the exchange c. Dell 20 Shares to receive, Cisco 150 shares to receive , $3,130 to pay out to the exchange d. None of the listed Options e. Dell 150 shares to receive, Cisco 20 shares to receive, $3130 to receive from the exchange
Solution: Sock DELL DELL CISCO DELL CISCO DELL Total
Buy/Sell Buy Sell Buy Sell Sell Sell
Quantity 120 70 200 20 50 10
Price $10.00 $10.50 $20.00 $11.00 $20.50 $9.00
Amount (1200) 735 (4000) 220 1025 90 (3130)
Net position for DELL: +120 – 70-20-10 = 20 Net position for CISCO: +200 – 50 = 150 So exchange will need to deliver 20 DELL & 150 CISCO shares to the broker. This was what exchange owes to broker. So the broker has to pay $3130 only and he gets 20 DELL & 70 CISCO shares from the exchange.
36. In syndicate loan, borrowers will be charged even if they don’t utilize the committed fu……………………… a. True b. False 37. Inflation represents which of the following option? a. Ver……………………… b. Increase in price……………………… c. Eco……………………… d. Curr……………………… e. Dec……………………… 38. Loan Servicing starts after underwriting state True or False a. True b. False 39. All of the following investments are examples of “debt” investments Except a. Cash Value b. Gold c. Certificate of……………………… d. Company Bond e. Fixed Annuity 40. What is a credit union? a. Operated for the purpose of promoting thrift b. Providing other financial services to its members c. Providing credit at reasonable rate d. A cooperative financial institution that is owned and controlled b e. All of the listed Options 41. Coming together of BNY and Mellon is an example of __________________
a. b. c. d. e.
Brokerage Takeover Acquisition Merger All of the listed options
42. CIP in the context of anti money laundering a. Requiring businesses, which were only to report cash transactions involving more than $1,000,000 to the IRS to file b. Stands for Suspicious activity reports c. Stands for customer identification program d. N e. eeds to be filled by Securities brokers and dealers as well as commodity merchants f. All of the listed Options 43. Which among the following is a key feature of letter of credit? a. All of the listed options b. Opportunity to receive payment in advance of the due date c. Basis for devising proper currency hedging strategy and opportunity to receive payment in advance of the due date d. Distributes risk between buyer and seller e. Basis for devising proper currency hedging strategy 44. Find out the one which does NOT come under the retail banking Service a. Personal Loan b. Transfer Fund c. Credit Services d. Electronic Transfer 45. How would you categorize account activity alerts in mobile banking? a. Account information b. Transactions c. Investment d. Support 46. Pooling and repackaging of cash-flow-producing financial assets into securities, which are then sold to investors is called ____________ a. Leveraging b. Securitization c. Initial Public Offer d. Short Selling e. None of the listed options 47. An investor indulging in short selling on a share expects the share price to decrease. State True or False
a. True b. False 48. GE shares are currently selling for $15.00 each. You bought 200 shares one year ago at $12 and received dividend payments of $2 per share. What was your total capital gain this year? a. 600 b. 400 c. 1000 d. None of the listed options e. 200 Solution: (200*15) + (200*2) – (200*12) = 1000
49. Securities with an original maturity of lesser than 1-year are traded on money markets. State True or False a. True b. False 50. Bank a based in US provides safe keeping services for securities to its US clients. It also has clients in France and Belgium and provides securities safe keeping services to these clients through banks C & D respectively. Which best describes bank A? a. Secondary custodian b. Global Custodian c. Sub Custodian d. None of the listed Options e. Main Custodian 51. In Trade Finance, Which of the following factors are considered while choosing made of financing? a. Time frame, cost of financing, Buyer trade associates b. Government Guarantee Program, Seller Preference c. None of the listed options d. Exporter’s Fund, Risk Factors, Cost of financing, Time frame 52. Company ABC has a gross profit of $50000. The operating expenses amounts to $10000. The interest on loans availed amounts to $5000 and the taxes to be paid amounts to $5000. Calculate the EPS if there are total of 20000 shares. a. 2.5 b. 2 c. 1.25 d. 1.5 Solution:
Operating Income = Gross Profit - Operating Expenses EPS (Earnings Per Share) = (Operating Income – Interest on Loan – Taxes Paid) / Number of shares = (50000-10000-5000-5000) / 20000 = 1.5
53. Netting reduces the number of settlements needed by more than 95% state True or False a. True b. False 54. The Components to determine the rate of exchange in a Forward Contract are a. Cross Currency Rate and forward rate…… b. Current Spot Rate and Forward rate a…… c. Current Spot Rate, amount of currency…… d. Forward rate adjustment and amount …… 55. High-Net worth individuals generally have ____________________. a. Net worth greater than $500,000 b. Household income greater than $500,000 c. Market capitalization more than $200,000 d. Household income of maximum $50,000…… 56. Product development in sales and marketing refers to which of the following option? a. Developing and differentiating deposits, loans etc b. Products that are bought using online payment such as e-commence c. All of the listed Options d. Identifying products such as SAP, Oracle for the bank e. Collateral e.g. Cars in case of car loans, houses in case of mortg…… 57. Which of the following methods of payment is most risky to the Buyer? a. Open Account b. Documentary Collection c. Letter of Credit d. Counter trade e. Cash in advance Methods of payment is most risky to the Seller – Open Account
58. on a trading day at the NYSE, a broker undertakes the following trades Buy 100 IBM shares for $11.00 each Sell 50 IBM shares for $10.50 each Buy 100 MSFT shares for $20.00 each Sell 20 IBM shares for $11.00 each Sell 10 MSFT shares for $20.50 each Sell 30 IBM shares for $9.00 each
How much did the broker pay out to the exchange in total in case of (a) gross settlement (b) Net settlement system? a. None of the Listed Option b. (a) $1880 (b)$ 3100 c. (a) $1,780 (b) 0 for IBM, $1795 for MSFT d. (a) 0 for IBM, $1795 for MSFT (b) $1880 e. (a) $3100 (b) $1880 Solution: Sock IBM IBM MSFT IBM MSFT IBM Total
Buy/Sell Buy Sell Buy Sell Sell Sell
Quantity 100 50 100 20 10 30
Price $11.00 $10.50 $20.00 $11.00 $20.50 $9.00
Amount (1100) 525 (2000) 220 205 270 (1880)
Net position for IBM: +100 – 50-20-30 = 0 Net position for MSFT: +100 – 10 = 90 So broker would not receive any IBM shares from the exchange as he sold all the shares that he bought during the day. But exchange will need to deliver 90 MSFT shares to the broker. This was what exchange owes to broker. So the broker has to pay $1880 only and he gets 90 MSFT shares from the exchange 0 for IBM, $1,795 for MSFT, It is worth understanding that, we have some markets where settlement happens on a gross basis, meaning no netting is done and all the transactions need to be settled individually. This is prevalent in Fixed Income markets in the US and the settlement mechanism is known as Real Time Gross Settlement (RTGS). - (Page No 181 in BFS PDF)
59. How much will be the 1% legal fee on 30M USD a. 0.03M b. 30M c. None of listed Option d. 3M e. 0.3M 60. The arrangement fee paid by the borrower will be paid to: a. Facility manager / agent b. Every participant expect lead manager c. Will be retained by lead manager d. Underwriting bank e. Every participant
61. In a securities lending transaction, if the buyer of securities provides cash as collateral, then the seller of securities has to provide the buyer with a interest amount for the cash. What is this interest amount called? a. Rebate rate b. Collateral Interest c. Interest Rate d. None of the listed Options e. Return Rate 62. Corporate Loans are. a. Never unsecured b. Never secured c. Always secured d. Always unsecured e. Secured or unsecured 63. Who is a underwriting Bank? a. Bank which underwrites a IPO(not sur shd b thz) b. Bank which commits supply of funds in a syndicated loan c. Bank which does not insures a loan d. Bank which underwrites a insurance e. Bank which insures a loan 64. The amount owed by a company to suppliers in the next one year will be categorized under __________________ a. Annual liabilities b. Deferred Liabilities c. Accrued Liabilities d. Current Liabilities 65. What is a mutual fund? a. A pool of funds used to purchase securities on behalf of investors b. A collective investment vehicle c. All of the listed options d. A portfolio of stocks, bonds and other securities 66. The Advising bank is used as a trusted bridge between the ____________ and _____________ when they do not have an active relationship a. Reimbursing bank; beneficiary bank b. Issuing bank; Confirming bank c. Importer; Exporter d. Applicant bank; Beneficiary bank (Issuing bank; Beneficiary bank) e. Beneficiary bank; Reimbursing bank 67. Which of the following debt instrument involves lowest risk?
a. b. c. d. e.
Munis Junk Bonds Corporate bonds Treasury Bills Yarkee Bonds
68. Following are the types of market risks except a. Currency Risk b. Commodity Risk c. Interest Rate Risk d. Credit Risk e. Equity Risk 69. When the Central Bank of a country decides to change the interest rates, it is a manifestation of which of the following? a. Money Policy b. Money Making c. Money Market d. ………………. e. ………………. 70. In terms of computation, which of the following is the fastest method for calculating VaR? a. All would take equal time if done using a software b. Variance-Covariance Matrix c. Morte carlo Simulation d. Historical Simulation e. A combination of Morte Carlo and Historical Simulation 71. ABC co. wants to identity the best way for making salary credits to its huge employee base. Can you select the best option? a. Paper Checks b. Automated Clearing House c. Cash d. Contactless Payments 72. In a economy where inflation is 4%, future value of 100 units of money after 2 year would be which of the following option? a. Exactly 108 b. None of the listed options c. Exactly 100 d. Around Rs. 104 e. 108.16 Solution: FV = PV*(1 + i)n = 100(1+0.04)2 = 108.16
FV: Future Value at the end of n time periods, PV: Beginning value OR Present Value i: Interest rate per unit time period n: Number of time periods
73. if R is the real rate of interest, N is the nominal rate of interest and I is the rate of inflation, then: a. R = N – I b. R = N * I c. R = N + I d. R = N/I 74. FFELP or the Federal Family Education Loan Program can be of which type? a. Federal Stafford b. Consolidation loans c. Federal PLUS d. Graduate Plus (its not their in FFELP type) e. All of the listed Options 75. What is the settlement standard followed in the US? a. T+1 b. T+4 c. T+2 d. T+3 Normal T+3 settlement cycle. When confirmation /affirmation completed are -> T+2
76. P&L Statements represent transactions over a period of time while the balance sheet shows information as on Specific date. State True or False. a. True b. False 77. Which of the following is not the example of options?…………………………… a. Put Option b. Oil Futures c. Swaption d. Call Option e. LEAPS (Long Term Options) 78. What are Yankee bonds also Know as? a. Junk bonds b. None of the listed Options c. Shares d. Call Options e. T-Bills
79. The share price of a company may drop considerably from its current levels. In this scenario, what type of risk are the investors facing? a. Market Risk b. Business Risk c. Credit Risk d. Company Risk e. Liquidity Risk 80. From the following options, find what type of risks that a software export company may face? a. Operational Risk b. It can face all the risks c. Legal Risk d. Currency Risk e. Credit Risk 81. The Federal funds rate a. Is the rate commercial banks use as a benchmark for evaluating their largest borrowers b. Is inversely related to the prime rate c. None of the listed Options d. Is a primary policy target of the Fed in conducting monetary policy e. Is the rate the Fed charges on overnight loans to commercial banks 82. A bank has a portfolio of $50 million worth of loans out of which it wants to sell $20 million worth of loan to another financial institution. What is this process called? a. Held for Sale Loans b. Trading Loans c. Accrual Loans d. Undrawn Loan e. Committed Loans 83. You purchased a stock for $40. One year later you received $2 as dividend and sold the share for $48. How much is the return of holding period? a. 50 percentage b. 45 percentage c. 10 percentage d. 25 percentage e. None of the listed options 84. Money laundering refers to which of the following option? a. All of the listed options b. Extending loans to corporate c. Short term borrowing & placements d. Converting the profits from criminal activities into legitimate funds
85. Banks are financial institutions that are licensed to accept deposits and issue loans. State True or False a. True b. False 86. In FOP mode of Settlement, there is no simultaneous exchange of securities and payment State True or False a. True b. False 87. The type of loan in which spread varities over the life of the loan is called ___________. a. Positive spread loan b. Fixed rate loan c. Semi-fixed rate loan d. Negative spread loan e. Floating rate loan 88. Which of the following combination holds true? a. wire transfer, more costly than other payment alternatives b. commercial letter of credit, Improves applicant’s 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. Customer’s usually interact extensively with the bank’s mid and back offices. State True or False a. True b. False 94. In Normal Distribution 99% confidence interval corresponds to __________ a. 2.33 Sd b. 1.65 Sd c. 1.96 sd d. 3 Sd e. 1 Sd 95. At the end of an active trading day, a broker sees that he has a net position in 6 securities, and owes the system some money. How many settlement transactions will take place at the end of the settlement cycle? a. 6 any 5 as transfer of securities and 1 as securities-versus-cash b. Neither the number of securities nor the number of cash tranactions can be determined c. 7, 6 as transfers of securities and 1 as transfer of cash d. 6, all 6 as securities-verus-cash e. 1 as transfer of cash, but the number of transactions for securities cannot be determined. 96. A person purchases a share at $50. After 2 years, the price is at $75 and he decides to sell the share at that price. What is the annualized return that the person has earned? a. 0.6667 b. 0.3333 c. 0.5 d. 0.2247 e. None of the listed options
97. Which of the following operations cannot be done on a LC (Letter of Credit)? a. Purchase b. Discount c. Acceptance d. None of the Listed options 98. Which of the following are involved in the retail brokerage business in US? a. Freddie Mae b. E-Trade c. Ginnie Mae d. Sallie Mae e. Federal Reserve 99. Which of the following methods eliminate county risk and commercial risk upon confirmation? a. Back to back Letter of Credit. Documentary collection b. Documentary Collection, Letter of Credit c. Letter of Credit, Back to back Letter of credit d. Standby Letter of credit, Letter Credit e. Documentary Collection, Stand by letter of Credit 100. All of the following are valid means for a custody client to communicate trade instructions to its custodian, EXCEPT a. SWIFT networks b. FEDWIRE c. By Fax d. By Telephone 101.
SPV means a. Security Purpose vehicle b. None of the listed options c. Securitized planning Vehicle d. Special principal vehicle e. Special purpose vehicle
102.
NPV stands for a. Net Present Value b. New Present Value c. No Present Value d. Net Past Value
103. SMA offers investors a customized approach to investing. Rather than a generic product. State True or False a. True b. False
104. If total Spread on underwriting is $ 500000 and Manager’s fee is $100000. What is the amount which will be disturbed in the syndicate? a. Cannot be determined b. 600000 c. 400000 d. 100000 e. 500000 105. An investor has multiple investment options yielding various dollar returns at various points of time, while he is comfortable with a return of X% p.a. Which method should he use to compare the various investments? a. External Rate of Return b. Compound Interest c. Simple Interest d. Internal Rate of Return e. Net present value 106. In case of Auto finance, monthly lease payments are usually lower than monthly loan payments because of which reason? a. Customer is paying only for depreciation b. Customer is paying only for Fees c. All of the listed Options d. Customer is paying only for Taxes e. Customer is paying only for Rent Charges 107. In Electronic Check Conversion (ECC). What happens once the check is processed? a. The customer can present a check to a store cashier b. The customer signs a receipt authorizing the store to present the check to the bank electronically and deposit the funds into the bank account c. Receive Cash immediately d. All of the Listed options Missing Question 1. Which of the following represents the correct hierarchy of corporate ratings (highest to lowest)? a. AAA, AA+, BBB, D b. AAA, AA-, D, BBB c. D,C,B,A d. D, AA-, B, AAA e. AAA, AA+, D, AAMutual funds can not invest in a. Bond b. Equity
c. Share d. None 2. There are five participant A, B, C, D, E and A is a manager. Profit is 500000 and operating charges is 100000. Then how the profit will be distributed among all? Ans: 20000 3. The initial sale of the security is in the ………market, while subsequent trading in the security is in the …….. market a. Spot, futures b. Debt , Equity c. Primary , Secondary d. Money, Capital 4. Among which is Issuer as well as Acquirer a. Amex b. T-sys c. Elavon d. Front Data Company 1) Page 5 State T/F Simple interest is calculated only on the beginning principal.
2) Page 6 INFLATION There will be three questions based on this formula:The relationship between the R (real rate of interest), N (nominal rate of interest) and I (rate of inflation) is as: R= N-I. 3) Page 8 One question on future value The formula for Future Value is: FV = PV*(1 + i)n 4) Page 8 One question on Intra-year compounding
Question was like this if rate of interest is 4% and compounded quaterley for 4 years then what is the value of r and t 5) Page 10 NPV of a project: Increases with increase in future cash inflows for a given initial outlay Decreases with increase in initial outlay for a given set of future cash inflows Decreases with increase in required rate of return
6) Page 14 Read all the type of securities and their sub parts 7) Page 15
Types of secured bonds. Mortgage Bonds are secured by real estate owned by the issuer Equipment Trust Certificates are secured by equipment owned and used in the issuers business Collateral Trust Bonds are secured by a portfolio of non-issuer securities. (usually U.S. Government securities) 8) Page 16 Treasury Securities Treasury bills issued for one year or less. Treasury notes have a term of more than one year, but not more than 10 years Treasury bonds greater than ten years 9) Page 16 What are zero coupon bonds? Zeros generate no periodic interest payments but they are issued at a discount from face value. 10) Page 17 Commercial paper An unsecured, short-term loan issued by a corporation, typically for financing accounts receivable and inventories. 11) Page 19 What is meant by Preferred stock ? Preference shares carry a stated dividend and they do not usually have voting rights 12) Page 20 American Depository Receipts (ADR) The purpose of an ADR is to facilitate the domestic trading of a foreign stock. 13) Page 20 Warrants Warrants are call options – variants of equity. 14) Page 20 What are derivatives? A derivative is a product whose value is derived from the value of an underlying asset, index or reference rate. 15) Page 21 Forward contract A forward contract is an agreement to buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No cash is exchanged when the contract is entered into. Futures contract A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Index futures are all futures contracts where the underlying is the stock index and helps a trader to take a view on the market as a whole. 16) page21 Two questions will come: Hedging involves protecting an existing asset position from future adverse price movements. In order to hedge a position, a market player needs to take an equal and opposite position in the futures market to the one held in the cash market. Arbitrage: An arbitrageur is basically risk averse. He enters into those contracts were he can earn risk less profits. When markets are imperfect, buying in one market and simultaneously selling in other market gives risk less profit. Arbitrageurs are always in the look out for such
imperfections. 17) Page 22 Which is not a option? Call Options Put Options LEAPS Swaps Oil futures( Answer) 18) Page 21 What is call and put option? 19) Page 22 Currency Swap involves the exchange of principal and interest in one currency for the same in another currency. 20) Page25 What are primary and secondary markets? 21) Page 26 Which is not a stock market? The important stock exchanges are as follows: New York Stock Exchange (NYSE) National Association of Securities Dealers Automated Quotations (NASDAQ) London Stock Exchange (LSE) Bombay Stock Exchange (BSE), National Stock Exchange of India (NSE) One will be different… 22) Page 27 What is the name of central bank in America? Federal Reserve 23) Page 27 What will haven if market rates go up? Bond price will fall… Ie Bond price is inversely proportional to market interest rates 24)Page 29 What is Money Market? Money market is for short term financial instruments, usually a day to less than a year. 25) Page 29 What is a repo? A repo is a contract in which the seller of securities, such as Treasury Bills, agrees to buy them back at a specified time and price. 26) Page 30 regulator(s) and supervisor(s) forthe financial markets. Thus India has Securities and Exchange Board of India (SEBI) and the US has Securities and Exchange Commission (SEC). 27) Page 30
What do u mean by portfolio management system? These systems allow the investment managers to choose the instruments to invest in, based on the requirements or inputs such as amount to be invested, expected returns, duration (or tenure) of investment, risk tolerance etc. and analysis of price and other data on the instruments and issuers Just read Chapter Financial Statements only 1 question can come………… 28) Page 49 What is not a function of central bank? Read all the functions of central bank… Answer- To appoint some governor 29) Page 50 There will two or three questions from CRR.. What do u mean by CRR (Cash Reserve Ratio). There will be two numericals also….. Same from book example? 30) Page 52 Read the services offering by banks 31) Page 54 What is Glass-Steagall Act ? Glass-Steagall Act of 1933, created a Chinese wall between commercial banking and securities businesses in US. That act was intended to address the perceived causes of bank failures during the Great Depression of 1929. 32)Page 57 Read this page carefully .. three questions will come… Checking Accounts Quick, convenient and, frequent-access to the money. Some banks pay interest while many do not. Money Market Deposit Accounts Pays a higher rate of interest than a checking or savings account MMDAs often require a higher minimum balance to start earning interest Savings Account Allows making withdrawals, but checks writing facility is not there. Number of withdrawals or transfers one can make on the account each month is limited. Time Deposits (Certificates of Deposit) Guaranteed rate of interest for a term or length of time specified by the account holder. The rate of interest is often higher than savings or any other account Basic or No Frill Banking Accounts Checking accounts, but with a limit on the number of checks one can write and the number of deposits and withdrawals one can make Interest is generally not paid. 33) Page 60 What are the ways of Money Transfer? Cheques/Checks
o Bearer Checks o Account Payee Checks o Travelers’ Checks o Bankers Checks Debit Cards Demand Drafts Automated Clearing House (ACH) Standing Instructions Electronic Transfer 34)Page 61 What is EFT? Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic technology as a substitute for checks and other paper transactions. EFTs are initiated through devices like ATM cards or codes that let one to access your account. Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose. 35) Page 63 Read section Lost or Stolen ATM or Debit Cards If unauthorized use occurs before reporting, the liability of the customer varies depending on the delay in reporting the loss to the card issuer. Within two business days – Liability limited to $50 for unauthorized use. Between 2 - 60 days – Liability limited to $500 because of an unauthorized transfer. If the loss is not reported within 60 days, the liability has no limits. 36) page 64 What is EBPP and its advantages?
ELECTRONIC BILLING PRESENTATION AND PAYMENT 37) page 65-66 Read thoroughly.. Some of the questions were What is Fedwire? Fedwire is an electronic transfer system developed and maintained by the Federal Reserve System. The system connects Federal Reserve Banks and Branches, the Treasury and other government agencies Full form of CHIPS? Clearing House Interbank Payments System What is SWIFT? The Society for Worldwide Interbank Financial Telecommunication (SWIFT) runs a worldwide network by which messages concerning financial transactions are exchanged among banks and other financial institutions What is latest version of SWIFT? SWIFT 15022 38) Page 69 Read thoroughly.. Which is non secure loan?
Answer: Personal loan Auto loans have Interest rate is lower as compared to Personal loans… 39) Page 70 VVimp One question ie numerical atleast on :… c. Limit (L) – max outstanding allowed d. Margin (M) – percentage of limit that can be drawn e. Asset value (AV) – value of underlying asset f. Drawing Power (DP) - lower of L and (1-M)*AV There will be atleast 2 questions on difference between Lease and Hire.. Lease Two main types – operating, financial The Financier owns the asset. Depreciation is claimed by the financier. Tax deduction can be claimed for the full value of the rental paid. Financier takes care of maintenance, insurance etc. Hire Purchase The asset is owned by the financier. Depreciation can be claimed by the borrower. Tax deduction can be claimed only to the extent of the interest repayment. 40) Page 71 One question which is not a repayment kind? Kinds of repayments o EMI – same installment amount o Fixed Principal – constant principal, decreasing interest amt o Step-up – principal amount increases in steps o Step-down – principal amount decreases in steps o Balloon – notional amount initially, large last payment o Bullet – interest payment initially, entire principal at one shot o Random – schedule & amount of installments undecided o Special products – combination of above one will be extra given… 41)Page 72 What is Floating Rate of Interest? The rate of interest is linked to one of the rates prevailing in the market, for example it can be linked to PLR (Prime Lending Rate) or LIBOR (London Interbank Offered Rate). 42) Page 73 What is Collar and Spread? Spread= current rate – base rate Collar = cap-floor 43) Page 73 Charge Types Pledge – gold, bank has possession Hypothecation – vehicle, borrower has possession
Lien – against bank deposits Assignment – insurance policies, rights get transferred to bank Shares - periodic drawing power calculation Mortgage – immovable property 44) Page 76 What are Freddie Mac, Ginnie Maes & Fannie Mae? Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all "secondary market lenders". 45)Page 76-77 Read auto loans and student loans ? only one two question will come? 46) Page 82 What is the meaning of corporate lending? Corporate Lending refers to various forms of loans extended by banks to corporate bodies like proprietorship, partnership, private limited companies or public limited companies. Why they are given by banks? Corporate loans areprovided by banks for various purposes like new projects, capacity expansion or plant modernization, daily cash flow requirements (working capital) etc. Interest is usually paid on the disbursed amount of the loan. 47) page 83 Credit ratings Rating levels might vary from AAA(highest), AA+, AA- to default ratings like D. 48) Page 84 What do u mean by Lines of Credit? These are short term loans sanctioned for a fixed validity period, allowing the corporate to draw the loan as and when required within the validity period and repay the loan after a certain period (repayment period). Interest is either repayable in certain intervals or in one bullet installment at the end of the repayment period 49) Page 85 What do u mean by Commercial Paper? Commercial Paper (CPs as commonly known) is an instrument by which a corporate borrows money from banks for short periods of time. A CP binds the corporate to make a payment equal to the face value of the CP to the issuing bank on a specified due date. In this sense, a CP is like a short term unsecured loan. Read page 84-85 topics little bit…. 50) page 86 What is the classification of loans: Loans are classified and accounted for as follows: Accrual—Loans 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 latter’s home currency Vostro (Their account with me/us): Current account maintained in the home currency by one bank in the name of another bank based abroad How many business days are required for spot deal? Answer – two days
Read topic Spot and Forward Foreign Exchange Contracts 57) Page 95 Which are the interbanks: Front Arena Summit Calapso Wall Street Systems 58) Page 97 Read CMS functions.. 59) Page 99 What do u mean by lock box service? 60) Page 99-100 What is pooling and netting ? 61) page 100 What is New Act - Check 21? 62)page 102 What is RGTS? 63)page 103 Read what is ACH? 64)page 104 What are risk factors choosing the mode of financing? Costs Time frame Risk factors Govt gurantee programs Exporters funds 65)page 105 What is BOL? Full form of BOL? 66) page 105
PAYMENT METHODS Cash in advance Letter of credit Documentary collection Open account or credit Counter-trade or Barter 67) page 106 Advantages or disadvantages of LC (commercial letter of credit) in check box question 68)page 107 four parties are involved in any transaction using an LC:
1. Buyer or Applicant 2. Issuing bank 3. Beneficiary’s 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 buyer’s order. 71) page 110 DOCUMENTARY COLLECTION Documentary collection carries the risk that the buyer will not or cannot pay for the goods upon receipt of the draft and documents. Drafts A draft (sometimes called a bill of exchange) Read sight draft and Time Drafts thoroughly..
72) page 111
OPEN ACCOUNT This can be a very risky method for the seller, unless he has a long and favorable relationship with the buyer or the buyer has an excellent credit rating. 73) page 113 Full form of BAFT? 74) page 114 two questions will at least come from the table:
INTERNATIONAL PAYMENT INSTRUMENTS COMPARISON CHART 75)Page 117 What are chip cards? 76) page 119 What are the key activities in credit card market? Pls learn which comes under which category.. 77)page 120 What are issuing anf acquiring services? 78) page 121 A card Association Do Not Provide These Functions Security/Risk management( this function is provided, it is odd one out) Issue cards Set credit limits Set card fees
Set interest rates Solicit merchants Set discount rates 79) page 122 Only read the functions little bit… 80) page 127 Private Banking covers banking services, including lending and investment management(true) Investment Management and Advice A client relationship Manager understands the client’s liquidity, capital and investment needs. He strives to develop an integrated approach to manage client investments and capital markets trading. Access to specialist advice and extensive research is a key feature of private banking. Self-directed or non-discretionary: This is largely investment advisory in which the bank offers investment recommendations based on the Client’s approval. The client may choose to ignore this. Discretionary: In this case, the bank’s portfolio managers make investment decisions on behalf of the customer.
81) page 128-129
COMMON PRIVATE BANKING PRODUCTS Personal Investment Companies (PICs) Payable Through Account (PTA) Hedge Funds 82) page 131-132 See the diagram and learn all the front office and back office functions? Two questions will atleast come… 83)page 133 In achieving the above goals, an Investment Manager uses the following approaches/principles: Asset Mix International Diversification Screens/Filters. Capital preservation Alternative Investments 84) page 135-136 Active vs passive approach Top Down Approach vs Bottom Up Approach 85) page 137 There are three dimensions to portfolio execution: Cost of execution Trading speed Portfolio Risk Management 86) page 139 Read mutual funds ..two questions will atleast come..
87) page 141 What do u mean by NAV? Some of the leading companies that offer mutual funds are: Fidelity Investments Vangaurd ING Direct Mellon 88) page 142 Difference between SMA and Mutual Funds? Advantages and disadvantages of SMA? 89) page 143 What is the name of pension funds? 401k,IRA 90) page 148 2 questions
SYNDICATE The hub of the investment banking wheel, syndicate provides a vital link between salespeople and corporate finance. Syndicate exists to facilitate the placing of securities in a public offering, a knock-down drag-out affair between and among buyers of offerings and the investment banks managing the process. In a corporate or municipal debt deal, syndicate also determines the allocation of bonds. 91) page 148-149 Full form of IPO? What it is? An initial public offering (IPO) is the process by which a private company transforms itself into a public company.(this will come) The IPO process consists of these three major phases: Hiring the Managers Due Diligence and Drafting Marketing 92) page 149
What do u mean by THE CHINESE WALL? 93) page 150
UNDERWRITING Underwriters earn 3 types of Underwriting Spread: Manager's fee - The lead underwriter receives this fee on all securities sold. Underwriter's Allowance is the total spread minus the Manager's fee. This fee is shared by syndicate members based on the type of syndicate account. Concession - It is typically the largest part of the spread and is paid to the broker/dealer that actually took the client’s order. Question: which is the largest part of spread? Answer : concession
94) page 151
SECONDARY MARKET TRADING there will three questions atleast come, read it carefully: Examples: Stock Exchanges: NYSE, AMEX NASDAQ is a good example of OTC market. Another name for fourth market: Instinet What is OTC? 95) page 153 Bid or ask rate: An individual firm could act as a broker on one trade and a dealer on another. When acting as a broker, the firm is taking customer orders and acting as their agent to buy or sell the security. For this service, the broker charges a commission. A firm acting as a dealer is the actual buyer or seller, taking the other side of a trade. The price at which market makers will buy or sell a particular security is known as the Bid or Ask Price.
96) page 154 Order Types (Based on Volume) Fill or Kill (FOK) – The order must be immediately filled in one trade or canceled completely. All or None (AON) - The entire order must be filled or canceled completely, but unlike FOK, AON can remain good till cancelled. Immediate or Cancel (IOC) must immediately be filled for as much of the order as possible in one trade, with the remainder being cancelled. Market Not Held order – The floor broker has the discretion concerning time and price. A key point is that Market Not Held orders are never on the Specialist's Book. Question: diff between FOK and AON? 97)page 160 The important markets and the indices used are presented below: US Diversified market Dow Jones Industrial Average (Dow) US Technology NASDAQ 100 UK (London) Financial Times Stock Exchange Index (FTSE) Germany (Frankfurt) DAX France (Paris) CAC Switzerland (Zurich) SMI Japan (Tokyo) Nikkei Hong Kong Hang Seng Singapore Strait Times Index (STI) 98) page 164 See XL sheet sure three questione will come from risk Credit risk is the possibility of loss as a result of default, such as when a customer defaults on a loan, or more generally, any type of financial contract. Liquidity risk is the possibility that a firm will be unable to generate funds to meet contractual
obligations as they fall due. Operational risk is the possibility of loss resulting from errors in instructing payments or settling transactions. Legal risk is the possibility of loss when a contract cannot be enforced -- for example, because the customer had no authority to enter into the contract or the contract turns out to be unenforceable in a bankruptcy. Market risk is the possibility of loss over a given period of time related to uncertain movements in market factors, such as interest rates, currencies, equities, and commodities. 99) page 164
MEASURING RISKS The probability monetary impact 100) page 164 What is var? 101) page 165 Numerical.. Example VaR Calculation Assume that you have a holding in IBM Stock worth $10 million. You have calculated the standard deviation (SD) of change over one day in IBM is $ 0.20. Therefore for the entire position, SD of change over 1 day = $200,000 The SD of change over 10 days = $200,000 * √(10) = $632,456 The 99% VaR over 10 days = 2.33 * 632,456 = $1,473,621 102) page 165 What is monto-carlo? Ans: A simulation technique 103) page 166 Variance-Covariance method it is the computationally fastest method known today. Which is the best VAR method? Ans- Cant say 104) page 166
MANAGING RISKS There are multiple strategies to manage risks. Some of the commonly followed ones are: 1. Diversification 2. Hedging or Insurance 3. Setting Risk Limits 4. Ignore the risk!
Some common questions: 1)Which is the best market ? New York 2) which is not a function of private bank? Ans: to print notes 3) Reliance Industries Limited, India would like to raise money in NYSE for expanding its operations in the domestic market (India). The securities issued would be American Depository Receipt
You purchased a share of stock for $20. One year later you received $1 as dividend and sold the share for $29. What was your holding period return 45% 5% 50% 40% None of the listed options Bank of America charges a lower rate of interest to Lockheed Martin than to General Electric. This can be attributed to lower ________ risk from Lockheed as compared to GE for Bank of America Market Risk Credit Risk Liquidity Risk Legal Risk None of Above If Bank of New York has found errors in settlement of transactions with some of its customers, as there is some mistake in some of its systems. This would be classified as Liquidity Risk Market Risk Credit Risk Country Risk Operational Risk Risk is best measured when looked at At a Macro level At the lowest possible level At a sub-macro level At organizational level At country level What would be the most accurate VaR estimation method? Monte Carlo Simulation Historical Simulation Variance-Covariance Matrix Cannot Say Analytical Methods If a financial instrument has a 35 percent chance of paying 29 percent and a 65 percent chance of paying - 13 percent, it expected return would be simple {0.35 * 0.29+0.65 * (-0.13)} 0.008 0.036 0.053 0.017 -0.029
The term "risk averse" means that
An individual refuses to take risks. Most investors and businessmen seek risk. An individual will seek to avoid risk or be compensated with a higher return. Only investment proposals with no risk should be accepted. Both An individual refuses to take risks and Only investment proposals with no risk should be accepted CRR stands for which of the following Cash Reserve Ratio Common Reserve Ratio Cash Refund Ratio Cash Re-service Ratio Cash Reserve Risk Money Multiplier effect would imply An increase in the total money lent out into the system An increase in the total money in the bank reserves in the system A decrease in the total money in the bank reserves in the system Both An increase in the total money lent out into the system and An increase in the total money in the bank reserves in the system Both An increase in the total money lent out into the system and a decrease in the total money in the bank reserves in the system Which of the following is NOT a function of the bank? Ensure super-normal returns to its small depositors Channelize Savings Provide credit facilities to borrower Provide investment avenues to investors Facilitate the trade and commerce dealings Which of the following is associated with the purpose of regulating financial institutions? To provide stability of the money supply To serve certain social objectives To prevent failure of any financial institution To offset the moral hazard incentives provided by deposit insurance and other guarantees. Both To serve certain social objectives and To offset the moral hazard incentives provided by deposit insurance and other guarantees The central bank in the US is called Federal Reserve Federal Reserve Board Reserve Bank of United States Central Bank of United States Reserve Bank of America If a bank gets a deposit of $100, assuming a reserve requirement (CRR) of 10%, and that it circulates through 2 more banks, leading to the following money multiplier effect create a reserve of $10 loan of $244 create reserve of $19 loan of $171 None of the listed Options If the Limit = $1500, margin = 20% and Asset Value = $2000 then Drawing Power for an Open ended loan is equal to
$1,500 $1,200 $1,600 $900 None of the listed Options Which of the following is the most profitable for Credit Card Company? Customers who always pay in time Customers who never pay Customers who default but finally pay all of the listed options None of the listed Options Interest rate spread is equal to? Current rate – Base rate Current rate – Floor Base rate – Floor Cap – Current rate None of the listed Options Freddie Mac, Ginnie Maes & Fannie Mae are? Marketing institutions selling home loans Lenders to the banks for home loan bought by retail customers Regulatory bodies governing home loan market in US Primarily asset management companies None of the listed Options Which of the following is not involved in a credit card transaction? Independent sales organization Merchant Payment gateway Associations None of the listed Options Who checks for the credit limit of the card before approving the transaction? Payment processor Acquiring banks Payment gateway Issuing bank None of the listed Options Which is not a banking account? Checking Accounts Money Market Deposit Accounts Demat Account Time Deposits None of the listed Options
One should have the Time Deposits if one is looking for? Quick, convenient and, frequent-access to the money
A high rate of interest Guaranteed rate of interest Low fee None of the listed Options EFTA stands for Electronic Funds Trading Act Electronic Financial Transfer Act Electronic Funds Transfer Act Electronic Fee Transfer Act Electronic Funds Telecommunication Act The Federal Reserve offers financial services to banks and the U.S. government for all of the following reasons except to make a profit promote competition foster innovation promote efficiency in the payments system None of the listed Options CHIPS stand for Clearing House for International Payments Settlement Clearing House for Interbank Payment System Clearing Head of Interbank Payment Settlement Clearing Head of international Payment Settlement Clearing House for Interbank Payment Settlement The process flow in a Private banking firm goes as Servicing Specialist => Client Representative => Middle Office => Back Office Client Representative => Servicing Specialist => Middle Office => Back Office Client Representative => Servicing Specialist => Back Office => Middle Office Middle Office => Back Office => Servicing Specialist => Client Representative Client Representative => Middle Office => Servicing Specialist => Back Office Which of the following roles and responsibilities are correctly stated? Services Provider; Tax Services Middle Office; Statements & Advices Front Office; Client Reporting Back Office: Risk Management Middle Office; Custodial Services The below stated responsibilities are carried out by which of the following players. Cash Services/Client Reporting/Statements & Advices/Domestic & Global Settlements Services Provider Client Representative Back office Front Office Middle Office
Private banking offers “structured lending” that provides Customized asset-based credit solutions
Long-term liquidity to clients Advice-led credit solutions Credit solutions to High Net worth individuals All of the listed options Financial planning involves all EXCEPT Cash flow management Retirement planning Risk management Tax planning Portfolio management Loan can take many of the following basic forms EXCEPT Overdrafts Bills and promissory notes Corporate bonds Advances Credit line If a fund purchases a loan in the Primary, they also use another word for that. Which term is used to indicate the initial group of lenders (Primary Lenders)? Allocation Syndicate Secondary Assignment None of the listed Options Which of the following is not a credit derivative? Credit linked Notes. Total return swaps. Credit default swap. Currency swap. All of the listed options Which of the following is not a secured loan? Equity Loans Secured Loans with Savings Equity Lines of Credit Personal Loans Car Loan Which if the following is true in the case of sight draft? Buyer can refuse to take the delivery Quality of the Good is guaranteed Buyer is expected to make the payment after specified credit days Payments made based on only bill of lading None of the listed Options
The basic four parties involved in any transaction using LC (Letter of Credit) are the following EXCEPT
Issuing Bank Reimbursement Bank Seller Beneficiary’s 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 Banker’s Overdraft Limit Bank of London Bill of Leasing Bill of Lading BAFT stands for Bankers Acceptance for Factoring Transactions Bankers Association for Foreign Trade Bankers Acceptance for Foreign transactions Bankers Association for Forfaiting & Factoring transaction Bankers association for Factoring Trade Bill of Lading is a contract between Importer and Exporter for transportation of goods a receipt issued by importer to exporter for goods received for transportation a contract between a carrier and a shipper for the transportation of goods A receipt issued by exporter to importer for goods delivered. None of the listed options Which of the following methods eliminate country risk and commercial risk upon confirmation? Back to back Letter of Credit Standby Letter of Credit Documentary Collection Letter of Credit Both Standby Letter of Credit & Letter of Credit The following are interest rate risk management instruments EXCEPT? Interest rate swap Forward rate agreement Swaption Interest rate guarantee None of the listed Options Cash management techniques include Pooling
Netting Swapping Both Pooling and Netting Pooling, Netting and Swapping All of the following are payment modes except EFT Cheque Debit to account through Debit card Lockbox None of the listed Options Which of the following are principles used by an asset manager? Diversification Screens and Filters Capital preservation All of the listed options Only Diversification and Screens and Filters Bid-Ask spread refers to Difference in price between buying one asset and another similar one Difference in opinion between the seller and buyer on the price of an asset Difference between the buying and selling price of the same asset Both Difference in price between buying one asset and another similar one and Difference in opinion between the seller and buyer on the price of an asset None of the listed Options The process of ‘Hiring of the Lead Managers’ in the case of IPO is referred to as Red Herring Road-show Investment Manager Contest Advisor Contest Beauty Contest Syndicate in Investment banking refers to all Except Hub of the investment banking wheel Determination of allocation of bonds Merger and Acquisition advisory Facilitating placing of securities in public offering None of the listed Options The difference between “Fill or Kill” and “All or None” order is “Fill or Kill” allows multiple trades “All or None” can be a Good Till Cancelled order They are synonyms “Fill or Kill” can be valid till end of day “Fill or Kill” allows partial execution The NYSE is an example of Primary Market Secondary Market OTC Market Fourth Market None of the listed Options What is the key regulatory authority over the American securities industry? Federal Reserve
FDIC DTCC ASA Securities Exchange Commission What is the term for the difference between bid and ask? Difference Spread Profit Quote None of the listed Options What is the Third Market? NASDAQ OTC NYSE Instinet None of the listed Options The “Fourth Market” refers to NASDAQ OTC NYSE Instinet None of the listed Options Core Custody Services performs the following functions except Price securities positions Record Keeping Fiduciary and compliance monitoring Reporting services Processes corporate actions Services like the settlement, safekeeping, and reporting of customers’ marketable securities and cash are provided by _________________ Custodian Broker Investment bank Fund Administrator Dealer Money laundering refers to Money facilitating criminal offences Extending loans to corporate Short term borrowing & placements All of the listed options None of the listed Options Federal authorities attack money laundering through Regulations Criminal sanctions Forfeiture All of the listed options None of the listed Options Three pillars of the new capital accord, Basel II, are Quantitative; Supervisory; General
Qualitative; Market Forces; Geographic Quantitative; Operational; Supervisory Quantitative; Qualitative; Market Forces Qualitative; Mandatory; Quantitative Capital adequacy ratio refers to Amount of bank’s capital expressed as percentage of the risk weighted credit exposure Amount of bank’s capital expressed as percentage of the risk weighted credit exposure & operational risk Amount of bank’s capital expressed as percentage of the risk weighted credit exposure, & market risk Amount of bank’s capital expressed as percentage of the risk weighted credit exposure, operational risk & market risk None of the listed Options Doc 111
Some pattern questions: 1)The central bank in US is called______ Federal reserve 2) Simple interest is calculated on which of the following beginning principal only 3) An investment manager handles all of the following except -------Guaranteeing that the investor doesn’t suffer a loss in any investment 4) Pick the odd one out a. Rakesh Jhunjunwala b. Sachin Tendulekar c. Warren Buffet d. George Soros e Peter Ujnah 5) In retail banking the term PDC stands for which of the following post dated cheques 6) A company would pay the interest on what portion of the loan? Disbursed amount 7) Pick the odd one out a. Notes b. Stocks c. Debentures d. T-Bills e. Minus 8) A formal, legal commitment to extend credit up to some maximum amount over a stated period of time in a description of ________ Line of credit
9) As nominal interest rates increases in the economy the inflation should ideally Increase 10) Which of the following is associated with the purpose of regulating financial institution To prevent failure of any financial institution 11) What is the maximum maturity for commercial paper? 270 days 12) The below stated responsibilities are carried out by which of the following players Cash services/ client reporting/ statements & advice/ domestic & global settlements Back office 13) In a financial instrument has a 20% chance of paying 20% & a 80% chance of paying 50%, its expected return would be 44% 14) Which division provides services to high net worth individual Private banking 15) Which of the following instruments will carry the lowest interest rate T-note 16) Which of the following instruments will carry the highest interest rate? Commercial Paper
3. If an investment pays interest at an annual rate of 5% per year, compounded twice a year than the effective yield larger than 5.5%
a. True
b. False
4. In a 2 way quote for a share the bid is a. 2% less than offer b. Less than offer c. More than offer d. Dependent on dealer’s skill e. Equal to offer 5. Which of the following is usually not participant in stock market a. Small individual’s investors b. Central banks c. Companies d. Financial institutions 6. In an account saving simple interest from the first year is reinvented at the beginning of the second year? a. True b. False 7. Which of the following is a not current asset? a. Goods for sale inventory b. Terms loans c. Cash d. Raw material inventory e. Receivables 8. Which of the following in not a feature of private banking? a. Specialist advice b. Lot of research c. Commercial lending d. High investment in technology e. Understanding the capital and investment needs. 9. Retail loans are asset product offered by the bank a. True b. False 10. If the price of share pf cognizant changes from 65 to 60 this can be attributed to: a. Market risk b. Interest rate risk c. Credit risk d. Operational risk e. Liquidity risk 11. Account maintained in the home currency by one bank is the name of another bank based abroad is called as: a. Current account b. Nostro account c. Vostro account d. Forex account e. Overseas account 12. Which of the following is not the settlement method for bank loans? a. Pre-closure b. Assignment c. Participation d. Sub participation
e. Securities repository 13. The process of transferring obligation from one party to another is called Novation 14. The purchase of any stock for immediate delivery is a __ market transaction. a. Futures b. Spot c. Forward d. Stock e. Option 15. In the historical simulation method of VaR calculation: a. Return are assumed to be not normally distributed b. No assumption is made about the distribution c. Random returns are generated to calculate VaR d. Return are assumed to be normally distributed e. Returns are not required at all. 16. What happens when interest rate fall: a. Bond prices increase b. Bond prices decrease c. Bond prices do not change d. Economy goes into deflation e. Interest rate never fall, they always go up. 17. If the price of a security on day 1&2 is $102 and $100 respectively. The return is a. -2% b. 2% c. -1.96% d. Very high e. 1-2% 18. If you invest $1000 for 3 years at 7% compound interest, how much will you have at the end of the 3 years? a. $1225 b. None of listed option c. $1000 d. $1070 e. $1270 19. The trade finance the term LC stands for; a. Letter of commercials b. Letter of credit worthiness c. Letter of credit d. Letter of commerce e. Letter of complaints 20. What is need for banks in the society? a. Small investor are protected, hence it is a low risk investment avenue. b. Banks are in the best position to lend out money at competitive c. Depositors are participant in primary and secondary markets. d. All of listed options. 21. A is more risk averse investor than B .therefore. a. For the same return, B tolerates lesser risk than B. b. For the same return, A tolerates higher rate of return.
c. For the same return, A tolerates lower rate of return. d. For the same return, A takes higher risk.
22. Liquidity issues of credit can be addressed by:a. Sweep facility b. Structured lending to client c. All d. Short term credit facilities e. Overdraft 23. Which is associated with purpose of regulating financial institution? a. None b. To provide stability of money supply. c. To serve certain social objectives. d. To prevent failure of any financial institution. e. To offset moral hazard incentive provided by deposit insurance and other guarantees. 24. Fastest method for calculating VaR. a. Monte- Carlo simulation. b. All equal time with software. c. Variance-Covariance matrix. d. Combination of Monte- Carlo and Historical Simulation. 25. Which is not banks primary use for deposits? f. Payment to employers g. None h. Investment i. Loan j. Withdrawal 26. If the 5 bids available for stock are 64, 65, 63, 62.5 and 66 which one u will sell?
-> 66
27. When a bank issue a loan its liabilities & reserves increases by the amount of the loan. a. True b. False 28. If the corporate isn’t able to raise money from the market to pay off some loans the risk can be refer. a. Market risk b. Interest rate risk c. Commodity risk d. Operational risk e. Liquidity risk 29. On the trading day at the NYSE a broker undertakes the following trades Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MFST share for $20.00 each Sell 20 IBM shares $11 each Sell 10 MFST share at 20.50 each Sell 30 IBM shares for 9.00 each How much did the broker pay out to the exchange in total in case of (i) Gross settlement system (ii) Net Settlement System?
a. (i) $1780 (ii) $3000 b. (i) 0 for IBM, $1795 for MSFT (ii) $1780. c. (i) $3000 (ii) $1780 d. None e. (i) $1780 (ii) 0 for IBM, $1795 for MSFT
30. US export and Europe import agree to carry out the transaction of goods word $100000 under a confirmed term LC with a maturity date of 60 days from the time of shipment. The acceptance commission @ 1.5 % PA equals A) $2500 B) $3000 C) $300 D) none E) $250 31. Operational risk is defined as? 32. The basic four parties involved in any transaction using LC are the following EXCEPT A) Issuing Bank B) Reimbursement Bank C) Beneficiary Bank D) Seller E) Buyer 33. While providing security lending services to its clients, which risk will a custodian have to manage for its clients? A) Liquidity risk B) Both Credit risk and interest rate risk C) Interest rate risk D) Credit risk E) Both credit risk and liquidity risk. 34. If the price of securities on day 1 and 2 are $100 and $102 respectively .Returns is A) A very high B) 2 C) -1 D) -2 E) 1 35. Following are the list of risk that Cognizant faces at organizational level A) Currency risk B) Attrition C) Credit risk D) All of the above E) Protective legislation by US/UK 36. Which of the following is not a core private banking function? A) Client management B) Deposit Mobilization C) Investment analysis and advice D) Research E) Sales and Marketing
37. A mutual fund with investment objective of achieving high capital growth approaches investor services firm for advice. The firm advices the mutual fund to invest 80% of the fund in govt debt and 20% in equity. The allocation towards debt advised by the firm A) Cannot be determined B) is too high C) Is about right D) is too low
38. Which of the following operations can be done on a LC? A) All the listed option B) Acceptance C) Negotiate D) Purchase E) Discount 39. Who among the following is most likely to be a private banking client of a bank? A) A fresh engineer in his first job at cognizant B) Tiger Woods C) Any of the above D) A cricket player who has never played national / international cricket E) A manager at a manufacturing plant. 40. Which of the following method eliminate country risk and commercial risk upon confirmation? A) Documentary collection B) Back to back LC C) LC D) Standby LC E) Both standby LC and LC 41. The act of the loan amount being handed over to the borrower by the bank is known as disbursement. State TRUE or FALSE a. True b. False 42. On the trading day at the NYSE a broker undertakes the following trades Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MFST share for $20.00 each Sell 20 IBM shares $11 each Sell 10 MFST share at 20.50 each Sell 30 IBM shares for 9.00 each Given that a net settlement system is being used, find out the net position of the broker at the end of the day A) IBM no exchange of shares ; MFST 90 shares to receive ; $1780 to pay out to the exchange B) None of these C) IBM no exchange of shares ; MFST 90 share to receive ; $3000 to pay out to exchange D) IBM 70 shares to given out ; MFST 90 shares to receive ; $3000 to pat out to exchange E) IBM no exchange of shares ; MFST 90 share to receive ; $1780 receive from the exchange 43. ACH transaction involves the transmission of _________ A) All of the listed option
B) C) D) E)
Documents Physical instrument like check and draft Electronic data files Cash
44. What should one use while using comparing mortgages? A) APR B) None C) IRR D) NPV E) Rate of interest applicable for the loan 45. Which one of the following is not offered by investment banking division of a bank? A) learning services B) ‘None C) Merger and Acquisition D) Valuation of firm E) Underwriting and distribution of equity issues. 46. If total spread on underwriting is $500000 and manager fee is $100000. What is the amount which will be distributed in the syndicate? A) B) C) D) E)
500000 100000 400000 600000 Can not be determined
47. HPPL shares are currently selling for $25 each. You bought 200 shares one year ago at $24 each and received dividend payment as $1.50 per share what was total dollar capital gain this year A) B) C) D) E)
200 500 None 300 400
48. The brokerage firm is regulated by A) State regularity agency B) SEC C) Industry wide SRO D) All of the listed option 49. Pick odd one out a. Demat b. Personal loan c. None d. Hire Purchase e. Auto loans 50. I deposited 100 in a bank .Bank loan out 90 out of it to someone else, who then invest the money in setting u a new factory. This process is called A) Monetary policy B) None
C) Money multiplier effect D) Profit making tendency of a bank E) Fiscal policy 51. Capital adequacy ratio refers to A) Amount of bank capital expressed as % of the risk weighted credit exposure & market risk. B) Amount of bank capital expressed as % of the risk weighted credit exposure C) Amount of bank capital expressed as % of the risk weighted credit exposure & operational risk. D) Amount of bank capital expressed as % of the risk weighted credit exposure operational risk & market risk. E) None 52. Which of the following is not a treasury management system? F) Calypso G) Summit H) Wall street system I) Front arena J) Flex cube 53. Syndicate helps in all of the following activity but E) Managing large bond issues F) Raising huge money from the bank G) Managing large capital raising act H) Managing conflict between investment banks. I) IPO distribution. 54. All of the following statements concerning US govt securities are correct EXCEPT A) Treasury bills have their interest paid in a lump sum at maturity B) None C) Treasury bills have greater interest risk than either treasury bond or treasury note D) Treasury note has maturity dates up to 10 yrs E) Treasury bonds have maturity dates up to 30 yrs 55. In defined benefit plan the benefit is expressed as ________ and in defined contribution plan the benefit is expressed as an ________ A) B) C) D) E)
Account balance , Annuity Annuity , Annuity Account balance , Account balance None Annuity , Account balance
56. What is the term used to indicate the arrangement of LARGE borrowing for a corporate by a group as lenders B) none C) Syndicate D) Allocation E) Assignment F) Secondary 57. Card associate provide which of the following service
A) B) C) D) E)
issue card Set credit limits Set interest rates Set card fees Security/ Risk management
58. In an international securities transaction, which of the following participant will not be involved? F) Global custodian , domestic sub custodian , depository in foreign country and sometime stock exchange in foreign country G) Depository in foreign country H) Global Custodian I) stock exchange in foreign country J) domestic sub custodian
59. An insurer undertakes an analysis of a portfolio of insurance policy by exploring scenarios for the path followed by swap rates, policy surrender rates, mortgage prepayment rates for the mortgage backed security in the portfolio, what is this process called? A) Cash projection B) Investment manages universe C) Asset allocation D) Fund administration E) Asset / liabilities analysis 60. Trade finance helps in A) Facilitating international transaction B) Facilitating intra company transaction C) Facilitating international transaction , corporate lending and settling up of new factories D) Facilitating corporate lending E) Facilitating setting up of new factories 61. A choice quote is A) a price at which a firm is ready to buy or sell B) When bid is equal to offer C) When the firm has a choice of deciding the securities to take D) a price at which a firm is ready to buy or sell it also means when bid is equal to offer 62. Which of the following is likely to have the highest interest rate? A) 6 month deposit of min balance of $1000 B) 3 month deposit of min balance of $4000 C) 12 month deposit of min balance of $1000 D) None E) 6 month deposit of min balance of $2000 61. If 1 day VaR is $1 million, 9 day VaR is A) $3mn B) $4.5mn C) $9mn D) $4.4mn E) $1mn 63. If a bank gets a deposit of $1000 assuming a CRR of 10% and that it circulates through 2 more banks, leading to the following money multiplier effect
A) B) C) D) E)
Loan of $2439 Loan of $1710 None Create a reserve of $100 Create a reserve of $190
64. Which among the following is an investment company that pools money from unit holders and invest in a variety of security? A) Mutual Fund B) Mortgage Company C) None D) Stock Exchange 65. You purchased a stock for $40. 1 year later you received $2 as Dividend. You sold it at $48. What is your return? a. 45% b. 10% c. 25% d. 50% e. None 66. A formal Legal commitment to extend credit to some max amount over a stated period of time is description of f. Trade Credit g. Revolving Credit h. Agreement Irrevocable Credit i. Line of Credit j. Letter of Credit 67. Odd 1 out a. Warren Buffet b. George Soros c. Bill Gates d. Ben Graham e. Peter Lynch 68. Development of Investment Objective and Investment policy falls under the Purview of a. Investment manager Universe b. Asset Allocation c. Asset Liability Analysis d. Fund Admin e. Compliance Reporting 69. Interest Rate Spread is equal to a. Current rate – Base Rate b. Cap – Current Rate c. Current Rate – Floor d. Base Rate – Floor 70. Which of the following factors affect the choice of Payment Method? f. Exporters Fund g. All h. Government Guarantee Program i. Time Frame j. Cost of Financing
71. The NYSE is a large financial market in which the initial issue receives the proceeds for the Sale of securities. a. True b. False 72. Which of the following trading services reduces the trading cost for institutional investors? a. Stock Repurchase Program b. Transition Management c. Transition Management & Commission Recapture d. Commission Recapture e. None 73. A CALL option on futures gives the buyer a. the obligation to buy a futures contract b. the obligation to sell a futures contract c. the right & obligation to buy a futures contract d. the right but not the obligation to buy a futures contract e. the right but not the obligation to sell a futures contract
74. Which is not an example of Option? a. Call Option b. Swaption c. Leaps d. Oil Futures e. Put Options 75. Some banks pay interest on Checking A/c while many do not. a. True b. False 76. The advising bank is called as trusted bridge between the ___________ & __________ when they do not have active relationship. Options wrong a. Beneficiary Bank & Reimbursing Bank b. Importer Exporter c. Reimbursing Bank & Beneficiary Bank d. Applicant’s bank & Beneficiary’s bank 77. Which of the following according to you has resulted in defining contribution plans gaining popularity over defined benefit plans e. DC plans fix the monthly contribution from the employee making his financial planning easier. f. DC plans are seen by employees as investment which to accumulate retirement income. g. All h. Employer increasing wants employees to share responsibility for retirement 78. ________is typically largest part of spread and is paid to broker\dealer or that actually took clients order f. Salary g. Manager fee h. Wage i. Concession j. Underwriter
79. NASD is not an SRO for e. Listed market f. Over the counter market g. Third market h. Fourth market 80. High net worth individuals generally have ____________. e. Market capitalization more than $200000 f. All g. Net worth greater than $500000 h. Household income of max $50000 year. 81. Which is true about retail banking? e. The business focuses on small no. of high net worth individuals. f. The business focuses on small and medium enterprises. g. The business focuses on large no. of individuals. h. The business focuses on large no. of corporation bodies. 82. Offer is price at which a firm f. Trades in securities g. Quotes to its bets customer h. Intends to buy i. Intends to sell j. Quotes when it does not want to trade. 83. Securities with original maturity greater than 1 year are traded on money market. b. True b. False 84. Which is not a banking service? e. Stock market f. Retail banking g. Corporate banking h. Customer lending 85. Which is true? e. Financer owns the asset both in case of ‘Lease’ and ‘hire Purchase’. f. Tax deduction cab be claimed from the full value of the rental paid in case of lease g. All h. Depreciation is claimed by the financer in lease and not in case of hire purchase. 86. Bank a based in US provides safe keeping services for securities to its US clients. It also has clients in France and Belgium and provides securities safe keeping services to these clients through banks C & D respectively. Which best describes bank A? f. Global custodian, g. None h. Main custodian i. Sub custodian j. Secondary custodian 87. All following statements relating to Bonds are correct except. D) Bonds sell at a discount when Coupon Rate is less than Market Interest rate. E) None F) Bond is debt instrument giving issues. 88. Which of the following type of loan requires the amount of interest that would be earned on the loan to be paid upfront by the borrower? F) Capitalized loan
G) H) I) J)
True Discounted loan Amortized loan Demand loan Discounted loan
89. Who are involved in the preparation of prospectus of IPO? F) Commercial bankers G) Investment Bankers H) None I) Company Management J) Company Management and Investment Bankers 90. Bankers Acceptance differs from Sight Draft in that F) Bankers Acceptance reduces lending capacity G) Sight Drafts are negotiable instruments H) Bankers Acceptance demands immediate payment. I) None J) Banks can raise funds by selling acceptance. 91. Clients of a private banker are generally not segregated on the basis of F) Investible assets G) Location H) Age I) Net worth J) Name 92. The initial sale of the security is in the ………market, while subsequent trading in the security is in the …….. market F) Spot, futures G) Debt , Equity H) Primary , Secondary I) Money, Capital J) Secondary, Primary 93. Under what category can services like asset/liability analysis, asset allocation, cash projection, compliance reporting, fund administration, investment Management universe etc. provided by an institution can be classified? F) Investment Management G) Asset Servicing H) None I) Trading J) Investor Services. 94. CIP in the context of anti-money laundering is E) All F) Stands for Suspicious Activity Reports G) Customer Identification Program H) Requiring Businesses, which were only to report cash transactions involving more than 1.00,000? 95. On a trading day at a stock exchange a broker undertakes the foll trades: Buy 100 IBM shares for 10$ each Sell 50 IBM shares for 10.5 $each Buy 100 MSFT shares for 20$ each Sell 20 IBM shares for 11$ each Sell 10 MSFT shares for 20.5 each Sell 30 1bm shares for 9$ each
At the end of the day, the broker owes 1780 to the exchange while exchange owes him 90 shares of MSFT. Is it possible? D) Yes under RTGS E) No F) Yes under net-settlement system 96. Dow Jones industrial average is made of F) 30 stocks G) 20 stocks H) 40 stocks I) 10 stocks J) 50 stocks 97. Which is the key feature of Letter of Credit? A) basis for devising proper currency hedging strategy B) Distributes risk between buyer n sellers. C) basis for devising proper currency hedging strategy and opportunity for receiving payment in advance of the due date. D) All E) Opportunity for receiving payment in advance of the due date. 98. Which risks bring gain and losses? F) Interest rate and foreign exchange G) Liquidity and credit H) Credit and Interest rate I) Credit and Foreign exchange J) All 99. Find the future value of $1200 invested at 5.25 % per annum payable annually after 6 months? Marks: 2 1. 1345.1 2. 1243.1 3. 1231.1 4. None 5. 1235 100. Investor services like brokerage, cash management and short term investments, commission re-capture, foreign exchange transactions, transaction management etc. can be classified under ____ group of services. Marks: 1. 1. Trading 2. Investment Management 3. Investor service 4. None 5. Asset Servicing 101.
The term CP is used in corporate lending for ____. Marks: 1 1. Collateral provision 2. Client Partner 3. Commercial Paper 4. Commodity Put options 5. Credit Provision
102. What are the risks associated with the Hedge funds? Marks: 3 1. All of the above 2. High exposures in derivatives
3. High Leveraging 4. High Speculation 103. The trade terms “15/2 net 30”indicates 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 LC’s 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 don’t remember the question/ Answer: option having “TRANSFER” 133. Question related to non-discretionary Investment Management Answer: the bank offers investment recommendations based on the Client’s approval. 134. Question having few options like Income Processing, Tax Information Services, Cash Sweep Answer: ASSET SERVICING 135. Question related to Underwriting? Options: 5.Underwriting Spread 6.Public Offering Price (POP), 7.Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it) 8.All BFS L0 1 Which of the following are not the benefits of using Credit derivatives?
a. A increasing the credit limit of the corporate b. Credit derivatives can be used to create positions that can otherwise not easily be established in the cash market c. Credit derivates can be used either to take on more risk or to avoid (hedge) it d. Credit derivatives can be used both to diversify their credit risk exposures and free up capital from regulatory constraints 2. What is OTC? a. On the counter b. options on the counter c. operating the company d. over the counter e. None of the listed options 3. In active approach, Asset allocation is more influenced by which of the following option? a. value of Investment b. Market Views c. None of the listed options d. Investors risk preferences 4. A person purchase a share @ $50.00, after 2 years, the price is at $75 and he decides to sell the share at that price. What is the annualized return that the person has earned? a. 0.5 b. 0.3333 c. 0.2247 d. 0.6667 e. None of the listed options 5. An open end fund with 10,000 units outstanding had the total assets of Rs. 120, 000 and the liabilities of Rs. 25,000. Calculate the funds NAV per unit. a. Rs. 10 b. Rs. 12 c. Rs. 9.5 d. Rs. 14.5 6. Product development in sales and marketing refers to which of the following options a. Collateral e.g. cars in case of car loans, houses in case of mortgages b. Products that are bought using online payment such as e-commerce c. Developing and differentiating deposits, loans, etc d. All of the listed options e. Identifying products such as SAP, Oracle for the Bank
7. A bank has portfolio of $50 million worth of loans out of which it wants to sell $20 million worth of loan to another financial institution, what is this process called? a. Accrual loan b. Undrawn loan c. Trading Loans d. Committed 1oans e. Held for sale loans 8. Trading occurs between clearing and settlement. State true of false a. True b. false 9. Which of the following are examples of emerging payments? a. All of the listed options b. Digital Cash c. Proximity payments d. EBPP 10. In defined benefits plan, the benefit is expressed as an ___________ and in defined contributions plans, the benefit is expressed as an __________ a. account balance, annuity b. account balance, account balance c. annuity, account balances d. annuity, annuity 11. Loan Serving starts after underwriting. State true or false a. True b. False 12. An investor has multiple investment options yielding various dollar returns at various points of time, while he is comfortable with a return of X% p.a. Which method should he use to compare the various investments? a. Compound Interest b. External rate of return c. Net present value d. Simple Interest e. Internal rate of return 13. Ram deposits $100 in XYZ Bank. Puja takes a loan of a %100 from XYZ bank. Which of the following is most likely to happen? a. Bank is charging 3% interest to Puja and paying 5% interest to Ram b. Bank is paying 5% interest to Ram and charging 5% interest to Puja c. None of the listed options d. Bank is paying 3% interest to Puja and charging 5% interest to Ram e. Bank is charging 5% interest to Puja and paying 3% interest to Ram 14. At the end of the trade cycle, the trades are ________ to determine the obligation of the trading members to deliver securities/funds as per settlement schedule a. Grossed b. Aggregated c. Netted d. Offset
15. Principle- Strip and Coupon-Strips are used in reference to _________ a. Swaps b. Bonds c. Futures d. Equity e. Forwards 16. What is the difference between bankers acceptance and single draft a. None of the listed options b. Bankers acceptance demands immediate payment c. Single draft are negotiable instruments d. Bankers acceptance reduces banks lending capacity e. Bank can raise funds by selling the acceptance 17. An institutional investor holds 50000 Microsoft shares. A custodian does the safe keeping on the investor behalf. During this period, Microsoft announces dividend. Based on this scenario which is the correct option from the following a. The dividend amount will be processed by the custodian and credited to the institutional investor account b. None of the listed options c. Because the assets are with the custodian the dividend amount will be credited to the custodian account d. The custodian and the investor share a part of the dividend 18. Which a. b. c. d. e.
of the following is a type of underwriting spread Underwriters allowance Managers fee None of the listed options Concession All of the listed options
19. A custodian has different types of assets under its custody and those assets earn returns to the original investor in various forms. What are the type of returns that can be taxed? I. Dividend II. Interest III. Capital Gain IV. All of the listed options a. b. c. d. e.
III only I only II only Both I and II IV
20. A company ABC has a gross profit of $50000. The operating expenses amount to $10000. The interest on loans availed amounts to $5000 and the taxes to be paid amount to $5000. Calculate the EPS if there are total of 20000 shares a. 2.5 b. 1.25 c. 2 d. 1.5
21. Coming together of BNY and Mellon is an example of ____________ a. All of the listed options b. Merger c. Acquisition d. Takeover e. Brokerage 22. Which a. b. c. d. e.
of the following is NOT a TOP 10 US bank? Bank of America JP Morgan Chase Well Fargo Citigroup Lloyds TSB
23. Interest rate spread equal to? a. b. c. d. e.
Current Rate- Base Rate Current Rate-Floor Base Rate – Floor None of the listed options Cap- Current Rate
24. Which are true in a ‘Basic or No fill Checking’ Account? I. Limit the number of checks written II. Interest paid III. Limit the number of withdrawals made a. II and III b. I and III c. All of the listed options d. I and II 25. In case of auto finance, monthly lease payments are usually lower than monthly loan payments because of which reason? a. Customer is only paying for depreciation b. Customer is only paying for taxes c. Customer is only paying for Fees d. All of the listed options e. Customer is only paying for rent charges 26. Which of this is a tax heaven? a. Bermuda b. US c. Japan d. Singapore e. India
27. SPV means a. Special principle vehicle b. Security purpose vehicle c. Special purpose vehicle d. none of the listed option e. Securitized planning vehicle 28. What does single EURO payment area (SEPA) do? a. Creates a single payment market b. Removes differences in intra and cross border payments c. Applicable to direct debits, Credits and credit cards d. All of the listed options 29. Which of the following is not Core private banking function? a. Research b. Investment analysis and advice c. Client management d. Deposit mobilization e. Sales and marketing 30. The advising bank is used as trusted bridge between the _______ and ______ when they do not have an active relationship a. Applicant bank, Beneficiary bank b. Importer, Exporter c. Beneficiary Bank, Reimbursing bank d. Beneficiary bank and advisory Bank (answer not in above 3 options) confirm 31. What is the primary source of incoming for the bank? a. Deposits from public b. Grants from central bank c. Interest income d. Fees for services e. None of the listed options 32. Tax and insurance premiums collected as part of loan repayment are handled through which of the following type of account a. Escrow account b. Fixed Deposit c. DMAT Account d. Mutual Account 33. Which of the following risks for the investor is associated with corporate bonds but NOT U. S. Treasury Securities? a. Interest rate risk b. Reinvestment Risk c. Credit Rating Risk d. Default Risk e. None of the listed options
34. On a trading day, at the NYSE, a broker undertakes the following trades Buy 100 IBM shares for $11.00 each Sell 50 IBM shares for $10.50 each Buy 100 MSFT share for $20.00 each Sell 20 IBM shares for $11.00 each Sell 10 MSFT shares for $20.50 each Sell 30 IBM shares for $9.00 each How much did the broker pay out to the exchange in total in case of (a) Gross settlement system (b) Net settlement system? a. (a) $1780 (b) 0 for IBM, $1795 for MSFT b. (a) $1880 (b) $3100 c. (a) $3100 (b) $1880 d. (a) 0 for IBM, $1795 for MSFT (b) $1780 e. None of the listed options 35. Number of stages in syndicate loans are ________ a. 4 b. 5 c. 1 d. 2 e. 3 36. Investment bank assists in Mergers and acquisitions through which of the following options? a. All of the listed options b. Negotiating between the parties c. Valuation of companies d. Structuring the deals e. Ensuring smooth transactions 37. The purpose of Community Development Banks (CDB) is to serve residents and spur economic development in low to moderate income (LM) geographical areas. State True of False 38. On a trading day at exchange, a broker undertakes the following trades Buy 200 Microsoft shares for $10.00 each Sell 100 Microsoft shares for $10.50 each Buy 100 Google share for $20.00 each Sell 30 Microsoft shares for $11.00 each Sell 50 Google shares for $20.50 each Sell 40 Microsoft shares for $9.00 each How much did the broker pay out to the exchange in total in case of (a) Gross settlement system (b) Net settlement system? a. (a) $4000 (b) $1235 b. (a) $1235 (b) $2235 c. (a) $260 for Microsoft, $975 for Google (b) $975 for Google, #260 for Microsoft d. (a) $1235 (b) $4000 e. None of the listed options
39. What are Secondary markets defined as? a. Market in which securities are resold after they are originally issued b. Market where security is sold during IPO c. None of the listed options d. Either auction or dealers market are being OTC market 40. Annuities are a. Discounted Loan b. Capitalized Loan c. A loan that is paid in periodic equated installments with capitalized interest d. True discounted loan e. Amortized loan 41. __________ is the legal and professional proceeding in which a lender, obtains a court order terminations of a borrowers equitable right of redemption a. Foreclosure b. Securitization c. Sub-Prime d. Credit –Freeze 42. All of the following are valid means for a custody client to communicate trade instructions to its custodian, EXCEPT a. By fax b. FEDWIRE c. By Telephone d. SWIFT Network 43. In a nominal T+3 settlement cycle, when is the confirmation/ affirmation completed? a. True b. None of the listed options c. T+2 d. T+3 e. T+1 44. Bank a base din US, provides safe keeping services for securities to its US clients. It also has clients in France and Belgium, and provides securities safe keeping services to these clients through banks C and D respectively. Which of the following term best describes Bank A a. Global Custodian b. Secondary Custodian c. None of the listed options d. Main Custodian e. Sub Custodian
45. In Electronic Check conversion (ECC), what happens once the check is processed? a. The customer can present a check to a store cashier b. Receive cash immediately c. All of the listed options d. The customer signs a receipt authorizing the store to present the check to the bank electronically and deposit the funds into the store’s account 46. P & L statements represent transactions over a period of time while the balance sheet shows information as of a specific date. State True of False 47. Which two risks of a financial institution may brings gains as well as losses? a. liquidity Risk and Credit Risk b. Credit Risk and Foreign Exchange Risk c. Credit Risk and interest rate risk d. None of the listed options e. Interest rate Risk and Foreign Exchange Risk 48. Which of the following is a corporate action? a. Declaring Dividend b. All of the listed options c. M & A d. Rights Issue e. Stock split 49. NPV stands for a. Net Past value b. Net Present value c. New present value d. No present value 50. What are Yankee Bonds also known as a. Junk Bonds b. T- Bills c. None of the listed options d. Call options e. Shares 51. The suitable strategy for an investor following active approach is to a. Purchase both types of stocks b. Purchase Undervalued stock and sell overvalued stock c. Sell both type of stocks d. Sell Undervalued stocks and purchase overvalued stock 52. The risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit) is a. Liquidity Risk b. Credit Risk c. Business Risk d. Financial Risk
53. Which of the following is not a barter trade or a counter trade? I. Compensate the seller in the currency buyer likes II. Compensate the seller through bank draft III. Compensate the seller in the currency Seller likes IV. Compensate the seller in a manner other than transfer of money a. I only b. II only c. IV only d. I, II, and II e. III only 54. The components to determine the rate of exchange in a forward contract are a. Cross currency rate and forward rate adjustment b. Current spot rate, amount of currency bought/Sold c. Forward rate adjustment and amount of currency bought of sold d. Currency spot rate and forward rate adjustment 55. Which of the following are the functions of the relationship manager in a retails bank? a. New account opening b. All of the listed options c. Product Sales d. Account Maintenance 56. An investment strategy that arms to capitalize on the continuance of existing trends in the market is called __________ a. Passive Investing b. Momentum Investing c. Contrarian Investing d. Technical analysis 57. If the money multiplier is 1, the required reserve ratio must be a. Zero b. 0.5 c. 1 d. Greater than 100% 58. During Q1, 2008 the investment bank _________ was merged with JPMC after it was unable to continue borrowing to finance its operations a. Lehman Brothers b. Bear Steams c. AIG d. Fannie- Mae e. Washington Mutual 59. All of the following are the benefits of netting EXCEPT a. Reduction in compliance risk b. Reduction in the cost of the settlement c. Reduction in the systemic Risk d. Reduction in the number of deliveries and receipts
60. Which of the following is not a player in a typical trade cycle? a. Clearing bank b. Trading Members c. Clearing members d. Regulator e. Custodian bank 61. Which of the following operation can not be done on LC (Letter of Credit)? a. Acceptance b. Discount c. None of the listed options d. Purchase 62. On a trading day, at the NYSE, a broker undertakes the following trades Buy 120 Dell shares for $10.00 each Sell 70 Dell shares for $10.50 each Buy 200 CISCO share for $20.00 each Sell 20 Dell shares for $11.00 each Sell 50 CISCO shares for $20.50 each Sell 10 Dell shares for $9.00 each Given that a net settlement system is being used. Find out the net position of the broker at the end of the day a. Dell 20 shares to receive, CISCO 150 shares to receive, $3130 to pay out to the exchange b. Dell 70 shares to give out, CISCO 90 shares to receive, $3000 to pay out to the exchange c. None of the listed options d. Dell 150 shares to receive, CISCO 20 shares to receive, $3130 to receive from exchange e. Dell 20 shares to pay out, CISCO 150 shares to receive, $3780 to pay out to exchange 63. A bank is required to hold reserves at least equal to a prescribed traction of its total deposit liabilities is called a. SLR b. ALM c. ERP d. SAR 64. XYZ Corporation is a large client of a bank and on a average for a period it maintains $20 million in its bank account. However, The bank allows the authorized representatives of XYZ to utilize the funds up to 15% over the balance maintained. This is example of which of the following options? a. Undrawn Loan b. Accrual Loan c. Overdraft d. Held for sale loans e. Committed loans
65. Which of the following methods of payment is most risky to the buyer? a. Cash in Advance b. Counter trade c. Open account d. Letter of credit e. Documentary collection 66. Which of the following is not a example of an option? a. Oil Futures b. Swaption c. Put option d. LEAPS (Long term options) e. Call option 67. IF the point of purchase is $52 and the amount given to the issuer is $50. What is the underwriter spread? a. 50 b. None of the listed options c. 102 d. 52 e. 2 68. A card holder swipes his card for USD 100. How much the merchant I. Deduct form the card holder II. Receive from the acquirer Assume merchant discount at 2% a. I. USD 98 II. USD 98 b. I. USD 100 II. USD 98 c. I. USD 100 II. USD 2 d. I. USD 100 II. USD 100 69. The counterparty in a futures contract trade is a. Banks b. The buyer and Seller c. Government d. The exchange e. The brokers who struck the deal 70. Identify the odd one out a. Treasury Bills b. Commercial papers c. Bill of exchange d. Stocks e. Treasury Notes 71. GE shares are currently selling for $15.00 each. You bought 200 shares one year ago @ $12 and received dividend payments of $2 per share. What was your total dollar capital gain this year? a. 1000 b. 500 c. None of the listed options
d. 400 e. 200 72. Find out the one which does not come under the retail bank service? a. Trade finance b. Credit card services c. Electronic banking d. Personal loans 73. What does the call option gives buyer? a. The right but not call option to buy b. The right but not the obligation to sell c. The obligation to sell d. The right and obligation to buy e. _______________ 74. The money the bank receives ad deposits becomes a banks a. Liability b. Losses c. All of the options d. Assets e. Profit 75. Trade finance primarily helps in a. Facilitating intra-company transactions b. Facilitating setting up of new factories c. Facilitating inter company transactions d. Facilitating corporate lending e. Facilitating international transactions 76. Which of the following is a valid repayment type? a. Bullet payment b. All of the listed options c. Step down d. Step up e. Balloon 77. Most common reason for a corporate seeking a loan from a bank includes all of the following EXCEPT a. Paying bonuses to the top executives b. Daily cash flow requirements c. Capacity expansions d. Plain Modernization e. New Projects 78. _________ are profit of the business that have not been distributed to the owner as of the balance sheet date a. Share capital b. Gross profit c. Revenue d. Retained earnings
79. Treasury bills can be transacted and settled on the same date. State true or false. 80. If you invest $200 for 3 year @ 8% compound interest. How much will you have at the end of the 3 years? a. b. c. d. e.
None of the listed options 248 252 272 310
81. In trade finance which of the following factors are considered while choosing mode of financing? a. Government guarantee program, Seller preference b. Exporters fund, Risk factors, Cost of financing, time frame c. None of the listed options d. Time frame, Cost of financing, Buyers trade associates 82. What is line of credit? a. Revolving credit agreement b. A formal legal commitment to extend credit up to maximum amount over a stated period of time c. Similar to credit card d. None of the listed options e. Irrevocable credit provided by financial institution 83. TARP stands for which of the following options? a. Troubled assets reform program b. None of the listed options c. Troubled asset relief program d. Term asset Relief program e. Term asset reform program 84. The type of loan in which spread varies over the life of the loan is called ________ a. Positive spread loan b. Floating rate loan c. Fixed rate loan d. Semi- fixed rate loan e. Negative spread loan 85. _________ of a securities trade involves the transfer of the securities from the seller to the buyer a. Trading b. Settlement c. Netting d. Clearing 86. Banks are financial inter-mediatory that a. should not be allowed to open saving accounts b. link depositors to the borrowers c. Do not operate efficiently in the financial system
d. Help connect public to the central banks e. Are not required 87. Expand CNS a. Continuous netting of securities b. Company’s net securities c. Clearing Net settlement d. Continuous Net settlement 88. If the limit= $2000, margin =20%, and asset value =$2000, then drawing power for an open ended loans is equal to? a. 2000 b. 1600 c. 2400 d. 2200 e. None of the listed options 89. In normal distribution 99% confidence interval corresponds to _________ a. 1.96 Sd b. 2.33 Sd c. 1 Sd d. 1.65 Sd e. 3 Sd 90. An investor indulging in short selling on share expects the share price to decrease. Sate true or false 91. Inflation represents which of the following option a. b. c. d. e.
Increase in price Decrease in price Very high change in price Economy crises Currency Crises
92. Participation of more number of banks reduces the risk of lead bank. State true or false 93. Money laundering refers to which of the following option a. b. c. d.
All of the listed options Extending loans to corporate Converting the profits from common activities into legitimate funds Short term borrowing and placements
94. VISA is involved in which of the following? I. Providing the interchange the systems to transfer data and funds between the members II. Set credit limits III. Issue Credit cards a. both I and II b. III only
c. I only d. --------95. Which of the following combinations hold true? a. Wire Transfer, more costly than other payment alternatives b. Commercial letter of credit, improves applicants credit facilities c. Foreign checks, not useful for cross border trade d. Documentary collection, strict compliance rule apply e. Standby letter of credit, less costly than documentary collection 96. There are 5 participants A, B, C, D, E in a 25 million USD syndicated loan and A is the lead manager. The borrower has agreed to pay 0.4% ($1, 00,000) participant with share in participants will share in participant fee? a. $1,00,000 will be received every month b. $1,00,000 will be received affront c. $1,00, 000 will be changed towards undrawn portion d. None of the listed options e. $1,00, 000 will be received every time money is withdrawn 97. The price paid for use of a financial liability and financial asset is called ___________ a. Financial Asset b. Principal Interest c. Interest d. Financial liability 98. If an invest pays an interest at an annual rate of r % per year, compounded twice a year, then what is the effective yield? a. All of the listed options b. Greater than r % c. Equal to r % d. Less than r % 99. VaR is measure of _______ a. Market Risk b. Liquidity Risk c. Credit Risk d. Legal Risk e. Operation Risk 100. Open ended loan allows the borrower additional amount subject to the maximum amount less than a set value. State true or false 101. In private banking PTA stands for _______ a. b. c. d. e.
payment to automate Payable through account Payable to automated means Pay through action Permission to act
102. Which of the following is not a derivatives instrument? a. Equity b. Swaps c. Overdraft d. Put option e. Call option 103. Bank ABC interest rate on deposits is 7.30% and the interest rate on loans is 9.25% during 2009. What is the spread for the bank? a. 0.1655 b. 0.0225 c. None of the listed options d. 0.0195 104. If a bank gets a deposit of $5000. Assuming a reserve requirement of 10% and that it circulates through 2 more banks, leading to which of the following money multiplier effect? a. It create a loan of $8550 b. None of the listed options c. It creates a loan of $12195 d. It creates a reserve of $500 e. It create a reserve of $1000 105. In a syndicated loan of 100M, each participant commit for 25% of loan. But due to exigencies if one participant reduces his shares to 22% and offers to share equality, what will be reserved share of other participants? a. 0.3 b. 0.26 c. 0.29 d. 0.31 e. 0.24 106. You purchased stock for $40. One year later you received $2 as dividend and sold the share for $48, How much is the return of the holding period? a. 45 % b. 10 % c. 25 % d. 50 % e. None of the listed options 107. The share price of a company may drop considerably from its current level, in this scenario, what type of risk are the investors facing? a. Company Risk b. Liquidity Risk c. Business Risk d. Market Risk e. Credit Risk
108. If R is the real rate of interest, N is the nominal rate of interest and I is the rate of inflation, then a. R= N - I b. R= N * I c. R= N / I d. R= N + I 109. A clearing system in which a payment instructions between banks are processed and settled individually and continuously through out the day is called a. RTGS b. Clearing Services c. Continuous linked settlement d. Automated clearing house e. Collection Services 110. If a bank erroneously posts the interest proceeds from a security held by a investor A, into the account of investor B, this can be attributed to a. Interest rate risk b. Market Risk c. Security Risk d. Operational Risk e. Liquidity Risk 111. Which of the following represents the correct hierarchy of corporate rating (highest to lowest)? a. D, AA, B, A b. AAA, AA+, B, D c. AAA, AA+, D, B, d. AAA, AA, D, BB 112. The initial sale of security is in the _____ market, while subsequent trading in the security is in the market ______ a. Money, Capital b. Debt, Equity c. Spot, Futures d. Primary, Secondary e. Secondary, primary 113. Purchase of account receivables at a discount is called ________ a. Bill of La___ b. Bills purchase c. Discount d. Forfeiting e. Factoring 114. If total spread on underwriting $500000 and managers fee is $100000, What is the amount which will be distributed in the syndicate a. 500000 b. 400000
c. 100000 d. 600000 115. Dividend declaration is an example of a. initial public offering b. Investment banking c. Merger and acquisition d. Corporate action e. Private banking 116. I deposit $100 in a bank. Banks loans out $90 out of it to someone else who then invest the money in setting up new factory, what is this process called? a. Profit making tendencies of the investors b. Sub-Prime effect c. Economic boom effect d. Money multiplier effect e. None of the listed options 117. The term ‘settlement cycle’ refers to which of the following option? a. Time period between the date on which the investor first makes the decision to enter a trade and the date when the trade is settled b. Time period between the date on which the trade is executed and the date on which the trade is settled c. None of the listed options are correct d. Time period between the date on which the trade is cleared and the date on which the trade is settled 118. If a finance instrument has 50% chance of paying 20% and 50% chance of paying 60%. What would be the expected return? a. 0.8 b. 0.5 c. 0.4 d. 0.2 119. which of the following is not correct for a personal loan a. They are short term loans b. The finance is not interested in the intention of the loan c. No security required d. Loan amount is not linked to borrowers repayment capacity e. None of the listed options 120. Which of the following is not a measurement technique for Credit risk? a. EAD b. FIRB c. Basic indicator approach d. LGD e. Probability of default 121. Which of the following is a treasury management system? a. Front Arena b. Pinnacle c. Finnacle
d. TS2 e. Flex Cube 122. Which of the following is not a settlement method for a bank loans? a. Participation b. Securities Repository c. Pre-closure d. Sub-participation e. Assignment 123. Company A has higher credit rating than company B, What does this mean? a. All of the listed options b. Both are equally risky c. Company B is more risky d. Company A is more risky e. There is no relation between credit rating and risk 124. Customer usually interact extensively with the banks mid and back office. State true or false. 125. Secured bonds _______ a. are secured by assets of the issuing company and also have a higher priority for repayment than unsecured debt b. are only issued by large and financially sound companies c. are secured by assets of the issuing company d. have higher priority for repayment than unsecured debt 126. After a buyer and seller enter into a trade agreement, who indicates the issue of LC? a. None of the listed options Issuing bank b. Buyer’s bank c. Advising Bank d. Sellers bank e. Seller 127. Which of the following is true for stock market? a. individual small investors can never make money in stock market b. stock markets are always self regulated c. stock markets are never fair d. stock market facilitate secondary buying and selling of the shares e. There can only be one stock market in the country 128. Securities with an original maturity of lesser than one year are traded on money market. State true or false
129. From the given options identify the service(s) that can be categorized under asset servicing line of the business I. Corporate Action processing II. Incoming Processing III. Transfer agency services IV. All of the listed options a. I only b. both I and II c. III only d. II only e. IV 130. Identify the services offered by retail banks a. b. c. d.
All of the listed options Saving and checking accounts Personal Loans Debit Cards
136. If an investment pays interest at an annual rate of 5% per year, compounded twice a year than the effective yield larger than 5.5% a. True b. False 137.
In a 2 way quote for a share the bid is a. 2% less than offer b. Less than offer c. More than offer d. Dependent on dealer’s skill e. Equal to offer
138.
Which of the following is usually not participant in stock market a. Small individual’s investors b. Central banks c. Companies d. Financial institutions
139. In an account saving simple interest from the first year is reinvented at the beginning of the second year? a. True b. False 140.
Which of the following is a not current asset? a. Goods for sale inventory b. Terms loans c. Cash d. Raw material inventory e. Receivables
141.
Which of the following in not a feature of private banking? a. Specialist advice b. Lot of research c. Commercial lending d. High investment in technology e. Understanding the capital and investment needs.
142.
Retail loans are asset product offered by the bank a. True b. False
143.
If the price of share pf cognizant changes from 65 to 60 this can be attributed to: a. Market risk b. Interest rate risk c. Credit risk d. Operational risk e. Liquidity risk
144. Account maintained in the home currency by one bank is the name of another bank based abroad is called as: a. Current account b. Nostro account c. Vostro account d. Forex account e. Overseas account 145.
Which of the following is not the settlement method for bank loans? a. Pre-closure b. Assignment
c. Participation d. Sub participation e. Securities repository 146.
The process of transferring obligation from one party to another is called Novation
147.
The purchase of any stock for immediate delivery is a __ market transaction. a. Futures b. Spot c. Forward d. Stock e. Option
148.
In the historical simulation method of VaR calculation: a. Return are assumed to be not normally distributed b. No assumption is made about the distribution c. Random returns are generated to calculate VaR d. Return are assumed to be normally distributed e. Returns are not required at all.
149.
What happens when interest rate fall: f. Bond prices increase g. Bond prices decrease h. Bond prices do not change i. Economy goes into deflation j. Interest rate never fall, they always go up.
150.
If the price of a security on day 1&2 is $102 and $100 respectively. The return is f. -2% g. 2% h. -1.96% i. Very high j. 1-2%
151. If you invest $1000 for 3 years at 7% compound interest, how much will you have at the end of the 3 years? f. $1225 g. None of listed option h. $1000 i. $1070 j. $1270 152. f. g. h. i. j.
The trade finance the term LC stands for; Letter of commercials Letter of credit worthiness Letter of credit Letter of commerce Letter of complaints
153. e. f. g. h.
What is need for banks in the society? Small investor are protected, hence it is a low risk investment avenue. Banks are in the best position to lend out money at competitive Depositors are participant in primary and secondary markets. All of listed options.
154.
A is more risk averse investor than B .therefore.
e. f. g. h.
For the same return, B tolerates lesser risk than B. For the same return, A tolerates higher rate of return. For the same return, A tolerates lower rate of return. For the same return, A takes higher risk.
155.
Liquidity issues of credit can be addressed by:f. Sweep facility g. Structured lending to client h. All i. Short term credit facilities j. Overdraft
156.
Which is associated with purpose of regulating financial institution? f. None g. To provide stability of money supply. h. To serve certain social objectives. i. To prevent failure of any financial institution. j. To offset moral hazard incentive provided by deposit insurance and other guarantees.
157. e. f. g. h.
Fastest method for calculating VaR. Monte- Carlo simulation. All equal time with software. Variance-Covariance matrix. Combination of Monte- Carlo and Historical Simulation.
158.
Which is not banks primary use for deposits? k. Payment to employers l. None m. Investment n. Loan o. Withdrawal
159.
If the 5 bids available for stock are 64, 65, 63, 62.5 and 66 which one u will sell?
160.
When a bank issue a loan its liabilities & reserves increases by the amount of the loan. b. True b. False
-> 66
161. If the corporate isn’t able to raise money from the market to pay off some loans the risk can be refer. f. Market risk g. Interest rate risk h. Commodity risk i. Operational risk j. Liquidity risk 162. On the trading day at the NYSE a broker undertakes the following trades Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MFST share for $20.00 each Sell 20 IBM shares $11 each Sell 10 MFST share at 20.50 each Sell 30 IBM shares for 9.00 each
How much did the broker pay out to the exchange in total in case of (i) Gross settlement system (ii) Net Settlement System? a. (i) $1780 (ii) $3000 b. (i) 0 for IBM, $1795 for MSFT (ii) $1780. c. (i) $3000 (ii) $1780 d. None e. (i) $1780 (ii) 0 for IBM, $1795 for MSFT
163. US export and Europe import agree to carry out the transaction of goods word $100000 under a confirmed term LC with a maturity date of 60 days from the time of shipment. The acceptance commission @ 1.5 % PA equals F) $2500 G) $3000 H) $300 I) none J) $250 164. 165.
Operational risk is defined as? The basic four parties involved in any transaction using LC are the following EXCEPT A) Issuing Bank B) Reimbursement Bank C) Beneficiary Bank D) Seller E) Buyer
166. While providing security lending services to its clients, which risk will a custodian have to manage for its clients? A) Liquidity risk B) Both Credit risk and interest rate risk C) Interest rate risk D) Credit risk E) Both credit risk and liquidity risk. 167. If the price of securities on day 1 and 2 are $100 and $102 respectively .Returns is A) A very high B) 2 C) -1 D) -2 E) 1 168. Following are the list of risk that Cognizant faces at organizational level A) Currency risk B) Attrition C) Credit risk D) All of the above E) Protective legislation by US/UK 169. Which of the following is not a core private banking function? A) Client management B) Deposit Mobilization C) Investment analysis and advice D) Research
E) Sales and Marketing 170. A mutual fund with investment objective of achieving high capital growth approaches investor services firm for advice. The firm advices the mutual fund to invest 80% of the fund in govt debt and 20% in equity. The allocation towards debt advised by the firm A) Cannot be determined B) is too high C) Is about right D) is too low
171.
Which of the following operations can be done on a LC?
A) All the listed option B) Acceptance C) Negotiate D) Purchase E) Discount 172.
Who among the following is most likely to be a private banking client of a bank? A) A fresh engineer in his first job at cognizant B) Tiger Woods C) Any of the above D) A cricket player who has never played national / international cricket E) A manager at a manufacturing plant.
173. Which of the following method eliminate country risk and commercial risk upon confirmation? A) Documentary collection B) Back to back LC C) LC D) Standby LC E) Both standby LC and LC 174. The act of the loan amount being handed over to the borrower by the bank is known as disbursement. State TRUE or FALSE a. True b. False 175. On the trading day at the NYSE a broker undertakes the following trades Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MFST share for $20.00 each Sell 20 IBM shares $11 each Sell 10 MFST share at 20.50 each Sell 30 IBM shares for 9.00 each Given that a net settlement system is being used, find out the net position of the broker at the end of the day F) IBM no exchange of shares ; MFST 90 shares to receive ; $1780 to pay out to the exchange G) None of these H) IBM no exchange of shares ; MFST 90 share to receive ; $3000 to pay out to exchange I) IBM 70 shares to given out ; MFST 90 shares to receive ; $3000 to pat out to exchange J) IBM no exchange of shares ; MFST 90 share to receive ; $1780 receive from the exchange
176. F) G) H) I) J)
ACH transaction involves the transmission of _________ All of the listed option Documents Physical instrument like check and draft Electronic data files Cash
177. F) G) H) I) J)
What should one use while using comparing mortgages? APR None IRR NPV Rate of interest applicable for the loan
178. F) G) H) I) J)
Which one of the following is not offered by investment banking division of a bank? learning services ‘None Merger and Acquisition Valuation of firm Underwriting and distribution of equity issues.
179. If total spread on underwriting is $500000 and manager fee is $100000. What is the amount which will be distributed in the syndicate? F) G) H) I) J)
500000 100000 400000 600000 Can not be determined
180. HPPL shares are currently selling for $25 each. You bought 200 shares one year ago at $24 each and received dividend payment as $1.50 per share what was total dollar capital gain this year F) G) H) I) J)
200 500 None 300 400
181. E) F) G) H)
The brokerage firm is regulated by State regularity agency SEC Industry wide SRO All of the listed option
182.
Pick odd one out a. Demat b. Personal loan c. None d. Hire Purchase e. Auto loans
183. I deposited 100 in a bank .Bank loan out 90 out of it to someone else, who then invest the money in setting u a new factory. This process is called F) Monetary policy G) None H) Money multiplier effect I) Profit making tendency of a bank J) Fiscal policy 184. Capital adequacy ratio refers to F) Amount of bank capital expressed as % of the risk weighted credit exposure & market risk. G) Amount of bank capital expressed as % of the risk weighted credit exposure H) Amount of bank capital expressed as % of the risk weighted credit exposure & operational risk. I) Amount of bank capital expressed as % of the risk weighted credit exposure operational risk & market risk. J) None 185. K) L) M) N) O)
Which of the following is not a treasury management system? Calypso Summit Wall street system Front arena Flex cube
186. J) K) L) M) N)
Syndicate helps in all of the following activity but Managing large bond issues Raising huge money from the bank Managing large capital raising act Managing conflict between investment banks. IPO distribution.
187.
All of the following statements concerning US govt securities are correct EXCEPT F) Treasury bills have their interest paid in a lump sum at maturity G) None H) Treasury bills have greater interest risk than either treasury bond or treasury note I) Treasury note has maturity dates up to 10 yrs J) Treasury bonds have maturity dates up to 30 yrs
188. In defined benefit plan the benefit is expressed as ________ and in defined contribution plan the benefit is expressed as an ________ F) G) H) I) J)
Account balance , Annuity Annuity , Annuity Account balance , Account balance None Annuity , Account balance
189. What is the term used to indicate the arrangement of LARGE borrowing for a corporate by a group as lenders G) none H) Syndicate I) Allocation
J) Assignment K) Secondary 190. F) G) H) I) J)
Card associate provide which of the following service issue card Set credit limits Set interest rates Set card fees Security/ Risk management
191. In an international securities transaction, which of the following participant will not be involved? K) Global custodian , domestic sub custodian , depository in foreign country and sometime stock exchange in foreign country L) Depository in foreign country M) Global Custodian N) stock exchange in foreign country O) domestic sub custodian
192. An insurer undertakes an analysis of a portfolio of insurance policy by exploring scenarios for the path followed by swap rates, policy surrender rates, mortgage prepayment rates for the mortgage backed security in the portfolio, what is this process called? F) Cash projection G) Investment manages universe H) Asset allocation I) Fund administration J) Asset / liabilities analysis 193. F) G) H) I) J) 194. E) F) G) H) 195. F) G) H) I) J)
Trade finance helps in Facilitating international transaction Facilitating intra company transaction Facilitating international transaction , corporate lending and settling up of new factories Facilitating corporate lending Facilitating setting up of new factories A choice quote is a price at which a firm is ready to buy or sell When bid is equal to offer When the firm has a choice of deciding the securities to take a price at which a firm is ready to buy or sell it also means when bid is equal to offer Which of the following is likely to have the highest interest rate? 6 month deposit of min balance of $1000 3 month deposit of min balance of $4000 12 month deposit of min balance of $1000 None 6 month deposit of min balance of $2000
61. If 1 day VaR is $1 million, 9 day VaR is F) $3mn G) $4.5mn H) $9mn I) $4.4mn
J) $1mn 196. If a bank gets a deposit of $1000 assuming a CRR of 10% and that it circulates through 2 more banks, leading to the following money multiplier effect F) Loan of $2439 G) Loan of $1710 H) None I) Create a reserve of $100 J) Create a reserve of $190 197. Which among the following is an investment company that pools money from unit holders and invest in a variety of security? E) Mutual Fund F) Mortgage Company G) None H) Stock Exchange 198. You purchased a stock for $40. 1 year later you received $2 as Dividend. You sold it at $48. What is your return? f. 45% g. 10% h. 25% i. 50% j. None 199. A formal Legal commitment to extend credit to some max amount over a stated period of time is description of k. Trade Credit l. Revolving Credit m. Agreement Irrevocable Credit n. Line of Credit o. Letter of Credit 200.
Odd 1 out f. Warren Buffet g. George Soros h. Bill Gates i. Ben Graham j. Peter Lynch
201. f. g. h. i. j.
Development of Investment Objective and Investment policy falls under the Purview of Investment manager Universe Asset Allocation Asset Liability Analysis Fund Admin Compliance Reporting
202. e. f. g. h.
Interest Rate Spread is equal to Current rate – Base Rate Cap – Current Rate Current Rate – Floor Base Rate – Floor
203.
Which of the following factors affect the choice of Payment Method? k. Exporters Fund l. All
m. Government Guarantee Program n. Time Frame o. Cost of Financing 204. The NYSE is a large financial market in which the initial issue receives the proceeds for the Sale of securities. b. True b. False 205. f. g. h. i. j.
Which of the following trading services reduces the trading cost for institutional investors? Stock Repurchase Program Transition Management Transition Management & Commission Recapture Commission Recapture None
206. f. g. h. i. j.
A CALL option on futures gives the buyer the obligation to buy a futures contract the obligation to sell a futures contract the right & obligation to buy a futures contract the right but not the obligation to buy a futures contract the right but not the obligation to sell a futures contract
207. f. g. h. i. j.
Which is not an example of Option? Call Option Swaption Leaps Oil Futures Put Options
208. Some banks pay interest on Checking A/c while many do not. c. True d. False 209. The advising bank is called as trusted bridge between the ___________ & __________ when they do not have active relationship. Options wrong e. Beneficiary Bank & Reimbursing Bank f. Importer Exporter g. Reimbursing Bank & Beneficiary Bank h. Applicant’s bank & Beneficiary’s bank 210. Which of the following according to you has resulted in defining contribution plans gaining popularity over defined benefit plans i. DC plans fix the monthly contribution from the employee making his financial planning easier. j. DC plans are seen by employees as investment which to accumulate retirement income. k. All l. Employer increasing wants employees to share responsibility for retirement 211. ________is typically largest part of spread and is paid to broker\dealer or that actually took clients order k. Salary l. Manager fee
m. Wage n. Concession o. Underwriter 212. i. j. k. l.
NASD is not an SRO for Listed market Over the counter market Third market Fourth market
213. i. j. k. l.
High net worth individuals generally have ____________. Market capitalization more than $200000 All Net worth greater than $500000 Household income of max $50000 year.
214. i. j. k. l.
Which is true about retail banking? The business focuses on small no. of high net worth individuals. The business focuses on small and medium enterprises. The business focuses on large no. of individuals. The business focuses on large no. of corporation bodies.
215. k. l. m. n. o. 216. c.
Offer is price at which a firm Trades in securities Quotes to its bets customer Intends to buy Intends to sell Quotes when it does not want to trade. Securities with original maturity greater than 1 year are traded on money market. True b. False
217. i. j. k. l.
Which is not a banking service? Stock market Retail banking Corporate banking Customer lending
218. i. j. k. l.
Which is true? Financer owns the asset both in case of ‘Lease’ and ‘hire Purchase’. Tax deduction cab be claimed from the full value of the rental paid in case of lease All Depreciation is claimed by the financer in lease and not in case of hire purchase.
219. Bank a based in US provides safe keeping services for securities to its US clients. It also has clients in France and Belgium and provides securities safe keeping services to these clients through banks C & D respectively. Which best describes bank A? k. Global custodian, l. None m. Main custodian n. Sub custodian o. Secondary custodian 220. G) H) I)
All following statements relating to Bonds are correct except. Bonds sell at a discount when Coupon Rate is less than Market Interest rate. None Bond is debt instrument giving issues.
221. Which of the following type of loan requires the amount of interest that would be earned on the loan to be paid upfront by the borrower? K) Capitalized loan L) True Discounted loan M) Amortized loan N) Demand loan O) Discounted loan 222. K) L) M) N) O)
Who are involved in the preparation of prospectus of IPO? Commercial bankers Investment Bankers None Company Management Company Management and Investment Bankers
223. K) L) M) N) O)
Bankers Acceptance differs from Sight Draft in that Bankers Acceptance reduces lending capacity Sight Drafts are negotiable instruments Bankers Acceptance demands immediate payment. None Banks can raise funds by selling acceptance.
224. Clients of a private banker are generally not segregated on the basis of K) Investible assets L) Location M) Age N) Net worth O) Name 225. The initial sale of the security is in the ………market, while subsequent trading in the security is in the …….. market K) Spot, futures L) Debt , Equity M) Primary , Secondary N) Money, Capital O) Secondary, Primary 226. Under what category can services like asset/liability analysis, asset allocation, cash projection, compliance reporting, fund administration, investment Management universe etc. provided by an institution can be classified? K) Investment Management L) Asset Servicing M) None N) Trading O) Investor Services. 227. I) J) K) L)
CIP in the context of anti-money laundering is All Stands for Suspicious Activity Reports Customer Identification Program Requiring Businesses, which were only to report cash transactions involving more than 1.00,000?
228. On a trading day at a stock exchange a broker undertakes the foll trades: Buy 100 IBM shares for 10$ each Sell 50 IBM shares for 10.5 $each
Buy 100 MSFT shares for 20$ each Sell 20 IBM shares for 11$ each Sell 10 MSFT shares for 20.5 each Sell 30 1bm shares for 9$ each At the end of the day, the broker owes 1780 to the exchange while exchange owes him 90 shares of MSFT. Is it possible? G) Yes under RTGS H) No I) Yes under net-settlement system 229. K) L) M) N) O)
Dow Jones industrial average is made of 30 stocks 20 stocks 40 stocks 10 stocks 50 stocks
230. Which is the key feature of Letter of Credit? A) basis for devising proper currency hedging strategy B) Distributes risk between buyer n sellers. C) basis for devising proper currency hedging strategy and opportunity for receiving payment in advance of the due date. D) All E) Opportunity for receiving payment in advance of the due date. 231. K) L) M) N) O)
Which risks bring gain and losses? Interest rate and foreign exchange Liquidity and credit Credit and Interest rate Credit and Foreign exchange All
232. Find the future value of $1200 invested at 5.25 % per annum payable annually after 6 months? Marks: 2 1. 1345.1 2. 1243.1 3. 1231.1 4. None 5. 1235 233. Investor services like brokerage, cash management and short term investments, commission re-capture, foreign exchange transactions, transaction management etc. can be classified under ____ group of services. Marks: 1. 1. Trading 2. Investment Management 3. Investor service 4. None 5. Asset Servicing 234.
The term CP is used in corporate lending for ____. Marks: 1 1. Collateral provision 2. Client Partner 3. Commercial Paper 4. Commodity Put options 5. Credit Provision
235. What are the risks associated with the Hedge funds? Marks: 3 1. All of the above 2. High exposures in derivatives 3. High Leveraging 4. High Speculation 236. The trade terms “15/2 net 30”indicates 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 LC’s 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 don’t remember the question/ Answer: option having “TRANSFER” 266. Question related to non-discretionary Investment Management Answer: the bank offers investment recommendations based on the Client’s approval. 267. Question having few options like Income Processing, Tax Information Services, Cash Sweep Answer: ASSET SERVICING 268. Question related to Underwriting? Options: 9.Underwriting Spread 10. Public Offering Price (POP), 11. Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it) 12. All
Question Bank for CCP in Fundamentals of Banking 1. Which of the following types does SWIFT belong? a. Proprietary Network b. Private Network c. Proprietary and Messaging Service 2. A Share Holder has a. Got ownership b. Voting Rights c. All the above 3. If Reliance Industries Limited wants to sell shares in USA, what should they do? a. Use American Depository Receipt 4. Current account maintained by one bank with another bank abroad in the latter’s home currency a. VOSTRO b. NOSTRO 5. Which of the following is not a Banking Activity? a. Private Banking b. Public Banking c. Investment Banking d. Retail Banking 6. What is LC in Banking Terms? a. Line of Control b. Legislative Council c. Letter of Control d. Letter of Credit 7. What is EMI? a. Equated Monthly Installment b. Equi Monthly Installment
c. Equal Monthly Installment d. End Month Installment 8. What is CP? a. Commercial Paper b. Commercial Profit 9. Expand EFT. a. Electronics Fund Transfer 10. Expand CLS. a. Continuous Linked Settlements 11. Which of the following risks are avoided by Continuous Linked Settlements? a. Temporal Risk b. Spatial Risk c. Market Risk 12. Which of the following locations is not specialized for Private Banking? a. Switzerland b. Mauritius c. India d. Cayman Islands 13. Don’t put all your eggs in the same basket. – This is a famous saying insisting what? a. Hedging b. Active aapproach c. Diversification 14. Calulate the amount you will receive by the end of two years if you have invested Rs.5000 at 10% rate of interest compounded annually: a. 6050 b. 6000 c. 7200 d. 5050 15. Simple Interest is calculated based on a. Principal Only
b. Principal and Accumulated Interest 16. Compound Interest is calculated based on a. Principal Only b. Principal and Accumulated Interest 17. What is an Operational Risk? a. Possibility of loss resulting from errors in instructing payments or settling transactions. b. Possibility that a firm will be unable to generate funds to meet contractual obligations as they fall due. c. Possibility of loss as a result of default, such as when a customer defaults on a loan, or more generally, any type of financial contract. d. Possibility of loss over a given period of time related to uncertain movements in market factors, such as interest rates, currencies, equities, and commodities. 18. Which of the following is not a possible risk while doing a project in Cognizant? No idea of the options and the answer 19. ICICI bank in India comes under the category of a. Private Bank b. Public Bank c. Co operative Bank d. Corporation Bank 20. What are FreddieMac and GinnieMae? a. Regulatory bodies of Insurance b. Institutions in Mortgage Markets c. Investment Banks d. Brokerage Firms 21. Which of the following is not a Rating Agency? a. RBI 22. What are the 3 pillars of Basel 2? a. Quantitative, Qualitative and Market Forces 23. Losing which of the following cards will have more impact?
a. Credit Card b. Debit Card c. Stored Card d. Gift Voucher 24. If you have 100 units of money and inflation being 5% what is the future value after 1 year? a. 105 b. 95 c. 90 d. 110 25. If banks increase their cash reserve ratio what will be the impact?(not the same one but similar) a. Money flow will be more b. Money flow will be less c. Reserve amount will be less d. None of the above 26. Which of the following is not a bank account? a. Money Market Deposit Account b. Demat Account c. Checking Account d. Time Deposits 27. Expand IRR. a. Internal Rate of Return 28. Which of the following is not a Retail Bank in India? a. HSBC b. ICICI c. JPMC d. SCB 29. Central Bank of a country is called as a. Banker’s Bank 30. Servicing High Net worth Clients is called
a. Asset Management b. Private Banking c. Retail Banking 31. PTA stands for a. Payable Through Account 32. Which of the following is not a repayment method? a. Direct Receipt b. Direct Debit c. Post Dated Cheques d. Salary Deductions e. None of the above 33. Details about 3 tiers of Federal communications privacy law. 34. US Government passed the USA PATRIOT Act in response to a. November 30, 1982 b. September 11, 2001 c. June 09, 1984 d. August 10, 1984 35. Benefits of Check 21. 36. SuperDot is used in which Stock Exchange? a. NYSE b. BSE c. FSE d. LSE 37. FTSE index is used in which stock exchange? a. New York b. Bombay c. London d. Singapore 38. If the current market price of a share is $90 and you have placed a sell stop order for $85 and Limit order for $87. Which of the following statements is correct? a. Will be sold immediately but at a price >$87
b. Will be sold immediately but at a price >$85 c. Will be sold but at a price between $85 and $87 39. What are warrants? 40. Pick the odd man out. a. Stocks b. Shares c. Equity d. Convertible Bonds e. Common Stocks 41. Define risk in financial terms. a. Probability of loss
1. A brokerage or analyst report will contain all of the following except? a. Detailed description of the company, and its industry. b. Opinion on why the analyst believes the company will succeed or fail. -c. Recommendations to buy, sell, or hold the company. d. Target price or performance prediction for the stock in a year. e. Track record of the analyst writing the report.
2. 2 Marks One should have the MMDA if one is looking for _______________________. a. Quick, convenient and, frequent-access to the money -b. A high rate of interest c. Guaranteed rate of interest d. Low fee e. None of the listed Options
3. 2 Marks ______________ for securities lending, which bring lenders and borrowers together, may eliminate _______________. a. Wholesale intermediaries; Niche intermediaries b. Internet auction systems; custodian and third party intermediaries c. Custodian and third party intermediaries: Niche intermediaries d. Niche intermediaries; custodian and third party intermediaries -e. Internet auction systems; Niche intermediaries
4. 2 Marks Money laundering can best be described as the process by which ____________________________________________. -a. money gained from criminal activity is processed so it appears to be gained from legitimate sources b. criminals attempt to defraud the government c. money gained from legitimate sources is hidden to avoid taxes d. the police attempt to investigate organized crime e. None of the listed Options 5. 3 MarksA U.S. importer who has agreed to pay 1 million Euros to a French exporter in 60 days decides to wait the full 60 days before paying. The importer is ______________________. -a. a foreign exchange speculator b. expecting the dollar to depreciate against the Euro c. a hedger in the foreign exchange market d. planning to pay a set amount of dollars for the items purchase e. None of the listed Options 6. 1 Marks The term POP stands for?
a. Private Offer Price b. Private Option Price -c. Public Offer Price d. Public Option Price e. Potential Offer Price 7. 1 Marks Continuous Linked Settlement removes which of the following risks primarily a. Exchange risk -b. Temporal risk c. Country risk d. All of the listed options e. None of the listed Options 8. 2 Marks Which of the following is correct with reference to Indian banks? a. Indian banks are unregulated b. Saraswat Bank is the largest Indian bank -c. Reserve Bank of India regulates the Indian banks d. Indian banks cannot open branches outside of India e. India's banking system is one of the weakest in the world 9. 1 Marks EFT stands for _______________. a. Express Funds Transfer b. Electrical Funds Transfer c. Elevated Funds Transfer d. Emergency Funds Transfer -e. Electronic Funds Transfer 10. 1 Marks Banks are financial intermediaries that ____________________. -a. link lenders (depositors) to borrowers b. have been in existence now for over 50000 years c. are not required d. cause problems as their sales reps keep calling people to buy new products e. should not be allowed to open Savings Accounts
11Which of the following is not a type of Swap? Answer:a. Currency Swap' b. Forward Swap c. Swaption -d. Interest Rate 12 Forfeiture regulation under the US patriot act allows _____________________________
Answer: -a. permits confiscation of any property derived from or used to facilitate domestic or international terrorism b. Calls for the seizure of correspondent accounts held in foreign financial institutions for domestic banks who are in turn holding forfeitable assets c. Permits foreign enforcement of domestic forfeiture orders d. All of the listed options e. None of the listed Options 13.Annual Percentage Rate for a loan takes into account the following? Answer: a. The interest rate charged b. When and how often the interest must be paid c. Other charges such as arrangement fee d. When and how often these other charges must be paid -e. All of the listed options 14. A young investor comes to an Investment Consultant and asks him for advice for his investments. He declares that he doesn’t mind the risk but he would definitely like his money to grow as fast as possible. He would like to invest in a Mutual Fund which would satisfy these criteria. What would be the consultants choice for his profile? Answer: a. Income Fund b. Liquid Fund -c. Growth Fund d. Balanced Fund e. Bank Deposit 15 ABC corporation is a large client of BankNew and maintains $40 million in cash with the bank. BankNew however allows authorized representatives off ABC to write checks up to 10% over the balance maintained. This is an example of ____________________________________. Answer: -a. Overdraft b. Accrual Loan c. Held for Sale Loans d. Undrawn Loan e. Committed Loans 16.Which of the following is associated with the purpose of regulating financial institutions? a. To ensure everyone makes money in the market b. To ensure companies can cheat small investors in buying their securities -c. To prevent failure of any financial institution d. To ensure that various government departments can be created for regulation thus giving employment to many people
e. All of the listed options 17.Which of the following is true about Retail Banking business? Answer: a. The business focuses on small number of high net worth individuals -b. The business focuses on large number of individuals each of whom may have a small amount of money to deposit with the Bank c. The business focuses on large corporate bodies d. The business focuses on small and medium enterprises e. The business focuses on giving financial advice to customers to generate maximum returns on their investments 18. What is the best basis for the comparison of dividend paying stocks with other investments such as bonds, certificates of deposits etc? Answer: a. Interest spread b. Exchange rate -c. Interest rate d. Equity yield e. Dividend yield 19. Corporate Loans are ___________________________________ Answer: a. always secured -b. secured or unsecured c. never secured d. always unsecured e. None of the listed Options 20.Services like the settlement, safekeeping, and reporting of customers’ marketable securities and cash are provided by _________________. Answer: -a. Custodian b. Broker c. Investment bank d. Fund Administrator e. Dealer 21. CRR stands for which of the following? Answer: -a. Cash Reserve Ratio b. Common Reserve Ratio c. Cash Refund Ratio d. Cash Re-service Ratio e. Cash Reserve Risk
22 1 Marks The term CLS stands for Answer: -a. Cautious Linked Settlement b. Continuous Linked Settlement c. Competitive Linked Settlement d. Comparitive Linked Settlement e. Clearing Linked Settlement 23.1 Marks Which of the following is not a risk management measure? Answer: a. Diversification b. Hedging c. Insurance -d. Budgeting e. All are risk management techniques 24 2 Marks The quote for CTSH in NASDAQ was $ 43. The best buyer was at $ 42.5 and the best seller at $ 43.5.
How much is the bid-ask spread? Answer: a. $0.50 b. ($0.50) -c. $1.00 d. ($1.00) e. $86 25 1 Marks The easiest way to calculate IRR is ________________________________________________. Answer: a. writing a Java program with 100 FPs -b. using MS-Excel c. using a supercomputer d. using a 2GHz processor e. writing JCLs running on a powerful Mainframe 26 3 Marks You invest Rs.5000 at 10% p.a. compound interest compounded annually in a bank. After 2 years, what is the amount you have received from the bank? Answer: a. Rs. 12346 b. Rs. 7000 c. Rs. 2346 -d. Rs. 6050
e. Rs. 7546 27 1 Marks The central bank in the US is called ________________. Answer: -a. Federal Reserve b. Federal Reserve Board c. Reserve Bank of United States d. Central Bank of United States e. Reserve Bank of America 28 ABC corporation is a large client of BankNew. BankNew extends a loan to XYZ corporation which is a supplier of ABC. This is an example of _______________________. Answer: a. Bill Discounting -b. Supplier Loan c. Asset Securitization Loan d. Working Capital Loan e. Revolving Line of Credit 29 2 Marks The act of a loan amount being handed over to the borrower by the Bank is know as? Answer: -a. Disbursement b. Distribution c. Displacement d. Dispersement e. Diversification 30 1 Marks Momentum investing” would refer to ___________________________. Answer: a. follow fundamental financial ratios to make decisions b. invest in high dividend yield stocks c. following charts and indicators to trade d. create portfolio similar to index -e. try best to market 31 3 Marks Private clients trade in ____________ volumes and ___________ fees and commissions. Answer: -a. larger; larger b. small; larger
c. small; small d. larger; small e. Either small; larger or larger; small 32 1 Marks Bid-Ask spread refers to ________________________________. Answer: a.difference in price between buying one asset and another similar one b. difference in opinion between the seller and buyer on the price of an asset -c. difference between the buying and selling price of the same asset d. both difference in price between buying one asset and another similar one and difference in opinion between the seller and buyer on the price of an asset e. None of the listed Options 33 1 Marks The process in which a privately held company offers its shares to public for the first time is known as? a. Public Offering b. Corporate Action c. Underwriting -d. Initial Public Offering e. None of the listed Options 34 3 Marks Not all possible services that might be provided by the auditing firm are expressly prohibited by Sarbanes-Oxley. If a non-audit service is not expressly prohibited, the auditing firm may provide that service ___________________________ Answer: a. If no one on the board objects. -b. If the audit committee gives its prior approval. c. Only in an emergency and only if the company being audited has not been able to find another accounting firm to provide this service after making a good-faith effort. d. Without any prohibitions or pre-conditions whatsoever. e. None of the listed Options. 35 1 Marks The performance of an internationally diversified portfolio may be affected by ________________________. Answer: a. currency selection b. country selection c. stock selection -d. All of the listed options e. None of the listed Options 36 1 Marks Primary markets ____________________ Answer: a. are markets in which primary goods and service, i.e. raw materials are traded.
b. are markets in which short-term debt is traded. c. are markets in which claims that have already been issued are sold by one investor to another. -d. are markets in which newly issued claims are sold to initial buyers. e. are markets in which shares are actively traded. 37 3 Marks What does the ‘Federal Reserve Supervisory Letter’ define private banking as? Answer: -a. “personalized services such as money management, financial advice, and investment services for high net worth clients” b. “personalized services such as cheque collection and other retail banking services for high net worth clients” c. “service provided by private banks to all clients” d. “personalized services provided by private and public banks to all clients” e. None of the listed Options 38 1 Marks The term PTA refers to ______________________. Answer: a. Permission to Act b. Payable Through Automated Means c. Payment To Automate -d. Payable Through Account e. None of the listed Options 39 1 Marks The city of Basel is located in which country? Answer: a. USA b. India c. Japan d. UK -e. Switzerland 40 1 Marks Inflation represents which of the following? Answer: -a. Increase in prices b. Decrease in prices c. Very high change in prices d. Economic crisis e. Currency crisis 41 1 Marks Financial intermediaries exist because small investors cannot efficiently ________________________.
Answer: a. gather information b. advertise for needed investments c. monitor their portfolios d. diversify their portfolios -e. All of the listed options 42 1 Marks Which is not a banking account? Answer: a. Checking Accounts b. Money Market Deposit Accounts -c. Demat Account d. Time Deposits e. None of the listed Options 43 1 Marks Pick the odd one out. Answer: a. Warren Buffet b. Peter Lynch c. George Soros -d. Sachin Tendulkar e. Rakesh Jhunjhunwala 44 1 Marks In a economy where inflation is 5%, future value of 100 units of money after 1 year would be which of the following? a. More than 100 -b. Less than 100 c. Exactly 100 d. 105, as inflation is 5% e. None of the listed Options 45 2 Marks What term is used to describe an LC that remains valid for years thereby eliminating the cost of separate LCs for each transaction with a regular client? Answer: -a. Evergreen Clause b. Red Clause c. Irrevocable LC d. Transferable LC e. None of the listed Options 46 2 Marks When the Central Bank of a country decides to change the interest rates, it is a manifestation of which of the following?
Answer: a. Money Policy b. Money Market c. Money Multiplier Effect -d. Monetary Policy e. Money making 47 3 Marks Which of the following is not a rating agency? Answer: a. S&P -b. Reserve Bank of India c. Moody's d. Fitch e. Crisil 48 2 Marks When you deposit $200 in currency into your bank _________________ Answer: a. its assets decline by $200. b. its reserves decline by $200. -c. its liabilities increase by $200. d. each of the above occur. e. its assets decline by $200 and its reserves decline by $200. 50 2 Marks Bank of America charges a lower rate of interest to Lockheed Martin than to General Electric. This can be attributed to lower ________ risk from Lockheed as compared to GE for Bank of America. Answer: a. Market Risk -b. Credit Risk c. Liquidity Risk d. Legal Risk e. None of the listed Options 51 1 Marks "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:
a. Employee of stock exchange b. Matches customer orders with other brokers -c. Acts as a “Principal” and executes trades for his/her personal account d. Only person authorized to buy or sell a particular stock e. Charges commission for trades 64 1 Marks Pick the odd one out with respect to Private Banking services. Answer: a. Switzerland b. Luxembourg c. Caymen Islands -d. Mumbai e. Mauritius 65 Why do we need banks? Answer: a. Banks are in the best position to lend out money at competitive rates to businesses and individuals b. Deposits are participants in primary and secondary markets c. Banks are in the best position to lend out money at competitive rates to businesses and individuals d. Small investors are protected, hence it is a low risk investment avenue -e. All of the listed options 66 The key feature of letter of credit is ________________________________________. Answer: a. basis for devising proper currency hedging strategy -b. distributes risk between buyer and seller c. opportunity to receive payment in advance of the due date d. basis for devising proper currency hedging strategy and Opportunity to receive payment in advance of the due date e. All of the listed options 67 Which of the following is not a function of a Custodian? Answer: a. Core Custody b. Asset Servicing -c. Corporate Lending d. Securities Lending e. Corporate Actions 68 1 Marks The treasury services department performs all of the following functions EXCEPT ___________________________. Answer: a. Research market factors e.g., Interest rate monitoring
b. Managing corporate collections and payments c. Managing liquidity and cash position d. Risk Management services -e. None of the listed Options 69 1 Marks Which of the following is not covered under retail operations of a Bank? Answer: a. Loan for Consumer durables b. Hire Purchase -c. Bill Discounting d. Lease e. Auto Loans 70 IRR stands for which of the following? Answer: a. International Rate of Malaysian Ringit b. International Rating of Rwanda -c. Internal Rate of Return d. Indian Rate of Return e. International Rate of Return 71 3 Marks Inter District Settlement Fund is a _____________. Answer: -a. Fund Transfer System b. Electronic Bill Presentment System c. Settlement Account d. Booking System e. Transaction System 72 Following are the list of risks that Cognizant faces at an organization level EXCEPT ______________________________________. Answer: a. Exchange rate fluctuation b. Protective legislation by U.S/U.K c. Attrition d. Payment default e. Cognizant faces all of the risks mentioned in the listed options 73 1 Marks Which of the following is not a Retail Banking service? Answer: a. Current accounts b. Savings accounts c. Cheque book facility -d. Investment advice
e. ATM facility 74 Warrants are the combination of which of these instruments? Answer: -a. Equities and Call Options b. Call and Put Options c. Equities and Futures d. Cash and Call Options e. Put Options and Swaps 75 1 Marks Core Custody Services performs the following functions except ________________________. Answer: a. Price securities positions b. Record Keeping -c. NAV calculation d. Reporting services e. Processes corporate actions
76 What is the key regulatory authority over the American securities industry? Answer: a. Federal Reserve b. FDIC c. DTCC d. ASA -e. Securities Exchange Commission 77 After a buyer and a seller enter into a trade agreement, who initiates the issue of LC? Answer: a. Seller b. Seller's bank -c. Buyer's bank d. Buyer e. None of the listed Options 78 Which of the following is a foreign bank not operating in India as a retail bank? Answer: a. Citibank b. HSBC -c. JP Morgan Chase d. Standard Chartered e. ABN Amro 79 Legal risk is the __________________________________________. Answer:
a. possibility that you will face legal action b. loss you could incur when legal action is taken against you -c. possibility of loss when a contract cannot be enforced d. possibility of loss from errors in instructing payments or settling transactions e. None of the listed Options 80 The term EMI stands for which of the following? Answer: a. Equal Monthly Income b. Equalised Monetary Installments c. Equated Money Inflow d. European Monetary Inflows -e. Equated Monthly Installments 81 Which of the following are involved in the mortgage business in US? Answer: a. Ginnie Mae b. Fannie Mae -c. Both Ginnie Mae and Fannie Mae d. Sallie Mae e. Federal Reserve 82 In Banking , the term LIBOR stands for? Answer: a. Limited Borrowing b. Limited International Banking Operations -c. London Interbank Offered Rate d. Lending to International Borrowers e. None of the listed Options 83 Loss of which of the following type of cards can cause the maximum financial impact for the customer? a. Debit Card -b. ATM Card c. Stored Card d. Gift Voucher e. Any of the listed options 84 Individual investors are most likely to trade securities in ________________________. Answer: a. Forex market b. Money Market -c. Stock Market d. Mortgage Market e. New York 85 A share represents __________________.
Answer: a. ownership in a company b. right to vote in important matters of the company c. an instrument whose value might appreciate in secondary market d. an instrument which can potentially earn dividends -e. All of the listed options 86 Cash management techniques include ____________________________________. Answer: a. Pooling b. Netting c. Swapping -d. Both Pooling and Netting e. Pooling, Netting and Swapping 87 A very effective way to employ a passive strategy is to _____________________________. Answer: a. invest in an indexed portfolio b. buy all Stocks on the index c. invest money in a bank -d. buy few securities which reflect the index e. both invest money in a bank and buy few securities which reflect the index 88 In context of Treasury services, FRA stands for which of the following? Answer: a. Frivolous Rate Agreement -b. Forward Rate Agreement c. Free Rate Agreement d. Factored Rate Agreement e. Forfeited Rate Agreement 89 Which of the following is not associated with debt? Answer: a. Corporate Bonds b. Debentures -c. Shares d. Loans e. Government Bonds 90 Electronic banking doesn’t cover the following services. Answer: a. Pay-by Phone system b. ATM System c. Point of Sale system d. Internet payment -e. Address check for verification of a loan application
91 Which kind of an investor should choose to invest in Money Market Securities? Answer: -a. Investor looking for capital gains b. Investor looking for liquidity c. Arbitrageur d. Investor looking for regular income e. None of the listed Options 92 SWIFT is a ______________________. Answer: a. Proprietary network interface b. Open standard network interface c. Message based network interface d. Both open standard network interface AND message based network interface -e. Both proprietary network interface & message based network interface 93 Two Financial Institutions A & B conducted the following transactions over CHIPS on 30th Jan 2004.A transferred $5m to B at 9:45 AM B transferred $10m to A at 11:30 AM A transferred $12m to B at 2PM B transferred $15m to A at 3:30PM Which of the following holds true? Answer: a. At the end of the day, $17m will be transferred to B b. At the end of the day, $25m will be transferred to A -c. At the end of the day, $8m will be transferred to A d. All the transactions would settle individually real-time e. Both, at the end of the day, $17m will be transferred to B AND at the end of the day, $25m will be transferred to A 94 Research analysts do all of the following except ____________________. Answer: a. Follow stocks b. Follow bonds -c. Invest on behalf of the Investment Bank d. Make buy / sell recommendations e. Collect and analyse data on stocks and bonds 95 Which of the following is not a repayment method? Answer: a. Post dated checks b. Salary deductions c. Direct receipts d. Direct debits -e. All of the listed options are repayment methods 96 Coupon rate on a bond represents which of the following? Answer:
a. Face value of the bond b. Maturity duration of the bond c. Credit rating of the bond -d. Interest paid to the bondholders e. Financial performance of the bond issuer
97 Which of the following is not a characteristic of money markets? Answer a. They trade in a central location. b. They have an active secondary market. c. They are wholesale markets. d. They are beyond the reach of small investors. e. They trade in short term instruments. 98 VaR is used for which of the following? Answer: -a. Risk Measurement b. Risk Mitigation c. Risk Taking d. Risk Assumption e. None of the listed Options 99 The Japanese Index is known as? Answer: a. Straits Times -b. Nikkei c. Footsie d. DAX e. CAC 100 Which of the following is the most profitable for Credit Card Company? Answer: a. Customers who always pay in time b. Customers who never pay -c. Customers who default but finally pay d. All of the listed options e. None of the listed Options
You purchased a share of stock for $20. One year later you received $1 as dividend and sold the share for $29. What was your holding period return 45% 5% 50% 40% None of the listed options
If Bank of New York has found errors in settlement of transactions with some of its customers, as there is some mistake in some of its systems. This would be classified as Liquidity Risk Market Risk Credit Risk Country Risk Operational Risk Risk is best measured when looked at At a Macro level At the lowest possible level At a sub-macro level At organizational level At country level
What would be the most accurate VaR estimation method? Monte Carlo Simulation Historical Simulation Variance-Covariance Matrix Cannot Say Analytical Methods If a financial instrument has a 35 percent chance of paying 29 percent and a 65 percent chance of paying - 13 percent, it expected return would be simple {0.35 * 0.29+0.65 * (-0.13)} 0.008 0.036 0.053 0.017 -0.029 The term "risk averse" means that An individual refuses to take risks. Most investors and businessmen seek risk. An individual will seek to avoid risk or be compensated with a higher return. Only investment proposals with no risk should be accepted. Both An individual refuses to take risks and Only investment proposals with no risk should be accepted Money Multiplier effect would imply An increase in the total money lent out into the system An increase in the total money in the bank reserves in the system A decrease in the total money in the bank reserves in the system Both An increase in the total money lent out into the system and an increase in the total money in the bank reserves. Both An increase in the total money lent out into the system and a decrease in the total money in the bank reserves in the system Which of the following is NOT a function of the bank? Ensure super-normal returns to its small depositors Channelize Savings Provide credit facilities to borrower Provide investment avenues to investors
Facilitate the trade and commerce dealings If a bank gets a deposit of $100, assuming a reserve requirement (CRR) of 10%, and that it circulates through 2 more banks, leading to the following money multiplier effect create a reserve of $10 loan of $244 create reserve of $19 loan of $171 None of the listed Options If the Limit = $1500, margin = 20% and Asset Value = $2000 then Drawing Power for an Open ended loan is equal to $1,500 $1,200 $1,600 $900 None of the listed Options
Freddie Mac, Ginnie Maes & Fannie Mae are? Marketing institutions selling home loans Lenders to the banks for home loan bought by retail customers Regulatory bodies governing home loan market in US Primarily asset management companies None of the listed Options Which of the following is not involved in a credit card transaction? Independent sales organization Merchant Payment gateway Associations None of the listed Options Who checks for the credit limit of the card before approving the transaction? Payment processor Acquiring banks Payment gateway Issuing bank None of the listed Options One should have the Time Deposits if one is looking for? Quick, convenient and, frequent-access to the money A high rate of interest Guaranteed rate of interest Low fee None of the listed Options EFTA stands for Electronic Funds Trading Act Electronic Financial Transfer Act Electronic Funds Transfer Act Electronic Fee Transfer Act
Electronic Funds Telecommunication Act The Federal Reserve offers financial services to banks and the U.S. government for all of the following reasons except to make a profit promote competition foster innovation promote efficiency in the payments system None of the listed Options CHIPS stand for Clearing House for International Payments Settlement Clearing House for Interbank Payment System Clearing Head of Interbank Payment Settlement Clearing Head of international Payment Settlement Clearing House for Interbank Payment Settlement The process flow in a Private banking firm goes as Servicing Specialist => Client Representative => Middle Office => Back Office Client Representative => Servicing Specialist => Middle Office => Back Office Client Representative => Servicing Specialist => Back Office => Middle Office Middle Office => Back Office => Servicing Specialist => Client Representative Client Representative => Middle Office => Servicing Specialist => Back Office Which of the following roles and responsibilities are correctly stated? Services Provider; Tax Services Middle Office; Statements & Advices Front Office; Client Reporting Back Office: Risk Management Middle Office; Custodial Services The below stated responsibilities are carried out by which of the following players. Cash Services/Client Reporting/Statements & Advices/Domestic & Global Settlements Services Provider Client Representative Back office Front Office Middle Office Private banking offers “structured lending” that provides Customized asset-based credit solutions Long-term liquidity to clients Advice-led credit solutions Credit solutions to High Net worth individuals All of the listed options Financial planning involves all EXCEPT Cash flow management Retirement planning Risk management Tax planning Portfolio management Loan can take many of the following basic forms EXCEPT Overdrafts
Bills and promissory notes Corporate bonds Advances Credit line If a fund purchases a loan in the Primary, they also use another word for that. Which term is used to indicate the initial group of lenders (Primary Lenders)? Allocation Syndicate Secondary Assignment None of the listed Options Which of the following is not a credit derivative? Credit linked Notes. Total return swaps. Credit default swap. Currency swap. All of the listed options Which of the following is not a secured loan? Equity Loans Secured Loans with Savings Equity Lines of Credit Personal Loans Car Loan Which if the following is true in the case of sight draft? Buyer can refuse to take the delivery Quality of the Good is guaranteed Buyer is expected to make the payment after specified credit days Payments made based on only bill of lading None of the listed Options The basic four parties involved in any transaction using LC (Letter of Credit) are the following EXCEPT Issuing Bank Reimbursement Bank Seller Beneficiary’s 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 Banker’s Overdraft Limit Bank of London Bill of Leasing Bill of Lading BAFT stands for Bankers Acceptance for Factoring Transactions Bankers Association for Foreign Trade Bankers Acceptance for Foreign transactions Bankers Association for Forfaiting & Factoring transaction Bankers association for Factoring Trade Bill of Lading is a contract between Importer and Exporter for transportation of goods a receipt issued by importer to exporter for goods received for transportation a contract between a carrier and a shipper for the transportation of goods A receipt issued by exporter to importer for goods delivered. None of the listed options
Which of the following methods eliminate country risk and commercial risk upon confirmation? Back to back Letter of Credit Standby Letter of Credit Documentary Collection Letter of Credit Both Standby Letter of Credit & Letter of Credit The following are interest rate risk management instruments EXCEPT? Interest rate swap Forward rate agreement Swaption Interest rate guarantee None of the listed Options All of the following are payment modes except EFT Cheque Debit to account through Debit card Lockbox None of the listed Options Which of the following are principles used by an asset manager? Diversification Screens and Filters Capital preservation All of the listed options Only Diversification and Screens and Filters The process of ‘Hiring of the Lead Managers’ in the case of IPO is referred to as
Red Herring Road-show Investment Manager Contest Advisor Contest Beauty Contest Syndicate in Investment banking refers to all Except Hub of the investment banking wheel Determination of allocation of bonds Merger and Acquisition advisory Facilitating placing of securities in public offering None of the listed Options The difference between “Fill or Kill” and “All or None” order is “Fill or Kill” allows multiple trades “All or None” can be a Good Till Cancelled order They are synonyms “Fill or Kill” can be valid till end of day “Fill or Kill” allows partial execution The NYSE is an example of Primary Market Secondary Market OTC Market Fourth Market None of the listed Options What is the term for the difference between bid and ask? Difference Spread Profit Quote None of the listed Options What is the Third Market? NASDAQ OTC NYSE Instinet None of the listed Options The “Fourth Market” refers to NASDAQ OTC NYSE Instinet None of the listed Options Core Custody Services performs the following functions except Price securities positions Record Keeping Fiduciary and compliance monitoring Reporting services Processes corporate actions
Money laundering refers to Money facilitating criminal offences Extending loans to corporate Short term borrowing & placements All of the listed options None of the listed Options Federal authorities attack money laundering through Regulations Criminal sanctions Forfeiture All of the listed options None of the listed Options Three pillars of the new capital accord, Basel II, are Quantitative; Supervisory; General Qualitative; Market Forces; Geographic Quantitative; Operational; Supervisory Quantitative; Qualitative; Market Forces Qualitative; Mandatory; Quantitative Capital adequacy ratio refers to Amount of bank’s capital expressed as percentage of the risk weighted credit exposure Amount of bank’s capital expressed as percentage of the risk weighted credit exposure & operational risk Amount of bank’s capital expressed as percentage of the risk weighted credit exposure, & market risk Amount of bank’s capital expressed as percentage of the risk weighted credit exposure, operational risk & market risk None of the listed Options
2) Simple interest is calculated on which of the following beginning principal only 3) An investment manager handles all of the following except -------Guaranteeing that the investor doesn’t suffer a loss in any investment 5) In retail banking the term PDC stands for which of the following post dated cheques 6) A company would pay the interest on what portion of the loan? Disbursed amount 7) Pick the odd one out f. Notes g. Stocks h. Debentures i. T-Bills j. Minus
8) A formal, legal commitment to extend credit up to some maximum amount over a stated period of time in a description of ________ Line of credit 9) As nominal interest rates increases in the economy the inflation should ideally Increase 11) What is the maximum maturity for commercial paper? 270 days 13) In a financial instrument has a 20% chance of paying 20% & a 80% chance of paying 50%, its expected return would be 44% 15) Which of the following instruments will carry the lowest interest rate T-note 16) Which of the following instruments will carry the highest interest rate? Commercial Paper
1. Preferred stock dividends are paid a) b) c) d) e)
Each year on a contractual basis, but before common dividends After common dividends are paid. Before interest is paid on debt. If declared by the board of directors. After both interest and common dividends are paid
2. Collateral is a) A form of loan b) Asset put up as security 4) Expansion for CPI Ans is consumer price indices 6) Which term is not include in banking a) Investment banking b) Public banking c) Private banking d) Retail banking 8) Basel capital accord was instituted to coordinate global regulatory efforts to institute _______________ capital requirements to eliminate the threat posed by _____________ Ans is Minimum; undercapitalized banks
9) Does Asset Allocation help reduce the investment risk? a) b) c) d)
yes No - It only maximizes return It increases risk It increases choice – No impact on risk
10) Dow Jones Industrial Average (DJIA) and Bombay Stock Exchange Index (Sensex) are Ans is price weighted index 12) The money multiplier is 1 if the cash reserve is a) less than 100% b) more than 100% c) none of the options d) zero e) 100 13) Currency reflects a) Economy of the country b) gdp of the country c) Political situation of the country d) cpi of the country I think the ans is a 14) Is the interest earned by simple interest and compound interest same say true or false The ans is false 15 In the simple interest the interest is also accumulate for the next year calculation Ans is false 17 Assume that you have a holding in IBM Stock worth 100000. You have calculated the standard deviation (SD) of change over ten day in IBM Ans We have to take the square root for 10 and we have to multiply with 100000. 18. The fastest method for calculating risk is Ans: variance covariance method. 19. Monte-Carlo Simulation It is a simulation technique. 20. Asset/Liability Analysis,Asset Allocation, Asset Manager Solutions ,Cash Projection, Compliance Reporting, Securities Lending, Fund Administration, Information, Products & Services, Investment Manager Universe, Local Fund Servicing These terms are related with Ans is Investment Management 21 Buy/Sell Quantity Sock Price
10:00 Buy 100 IBM $10.00 10:30 Sell 50 IBM $10.50 11:00 Buy 100 MSFT $20.00 11:30 Sell 20 IBM $11.00 12:00 Sell 10 MSFT $20.50 3:30 Sell 30 IBM $9.00 What the broker purchase and what he sold is equal Say yes or no 22. Buy/Sell Quantity Sock Price 10:00 Buy 100 IBM $10.00 10:30 Sell 50 IBM $10.50 11:00 Buy 100 MSFT $20.00 11:30 Sell 20 IBM $11.00 12:00 Sell 10 MSFT $20.50 3:30 Sell 30 IBM $9.00 Calculate the net profit and gross profit. 23. Expansion for OTC Ans is over the counter. 24. Defined contribution plans have gained popularity because Ans: employers have begun to ask their employees to share responsibility for their retirement. 25. Monetary losses resulting from inadequate or failed internal processes, people, and systems or from external events. The events characterize the inherent risks in doing business.This risk is known as Ans is operational risk 26 IRD in check 21 act is Ans is Image Replacement Document 29 largest part of the spread and is paid to the broker/dealer that actually took the client’s order is known as Ans : Concession 27 share A is more volatile than share B The risk associated with Share A Ans is more 30The total spread is 400000.The managers fee is 100000.The underwriter’s allowance is Ans is 400000-100000=300000 61 3 Marks Capital adequacy ratio refers to ___________________________. Answer: a. Amount of bank’s capital expressed as percentage of the risk weighted credit exposure b. Amount of bank’s capital expressed as percentage of the risk weighted credit exposure & operational risk c. Amount of bank’s capital expressed as percentage of the risk weighted credit exposure, & market risk
d. Amount of bank’s capital expressed as percentage of the risk weighted credit exposure, operational risk & market risk e. None of the listed Options
1.
If an investment pays interest at an annual rate of 5% per year, compounded twice a year than the effective yield larger than 5.5% a. True b. False
269.
In a 2 way quote for a share the bid is a. 2% less than offer b. Less than offer c. More than offer d. Dependent on dealer’s skill e. Equal to offer
270.
Which of the following is usually not participant in stock market a. Small individual’s investors b. Central banks c. Companies d. Financial institutions
In an account saving simple interest from the first year is reinvented at the beginning of the second year? a. True b. False
271.
272.
Which of the following is a not current asset? a. Goods for sale inventory b. Terms loans c. Cash d. Raw material inventory e. Receivables
273.
Which of the following in not a feature of private banking? a. Specialist advice b. Lot of research c. Commercial lending d. High investment in technology e. Understanding the capital and investment needs.
274.
Retail loans are asset product offered by the bank a. True b. False
275.
If the price of share pf cognizant changes from 65 to 60 this can be attributed
to: a.
Market risk
b. c. d. e.
Interest rate risk Credit risk Operational risk Liquidity risk
Account maintained in the home currency by one bank in the name of another bank based abroad is called as: a. Current account b. Nostro account c. Vostro account d. Forex account e. Overseas account
276.
277.
Which of the following is not the settlement method for bank loans? a. Pre-closure b. Assignment c. Participation d. Sub participation e. Securities repository
278. The process Ans:Novation
of transferring obligation from one party to another is called
279.
The purchase of any stock for immediate delivery is a __ market transaction. a. Futures b. Spot c. Forward d. Stock e. Option
280.
In the historical simulation method of VaR calculation: a. Return are assumed to be not normally distributed b. No assumption is made about the distribution c. Random returns are generated to calculate VaR d. Return are assumed to be normally distributed e. Returns are not required at all.
14. What happens when interest rate fall: a. Bond prices increase b. Bond prices decrease c. Bond prices do not change d. Economy goes into deflation e. Interest rate never fall, they always go up. 15. If the price of a security on day 1&2 is $102 and $100 respectively. The return is a. -2% b. 2%
c. -1.96% d. Very high e. 1-2% 16. If you invest $1000 for 3 years at 7% compound interest, how much will you have at the end of the 3 years? a. $1225 b. None of listed option c. $1000 d. $1070 e. $1270 18. What is need for banks in the society? a. Small investor are protected, hence it is a low risk investment avenue. b. Banks are in the best position to lend out money at competitive c. Depositors are participant in primary and secondary markets. d. All of listed options. 19. A is more risk averse investor than B .therefore. a. For the same return, B tolerates lesser risk than B. b. For the same return, A tolerates higher rate of return. c. For the same return, A tolerates lower rate of return. d. For the same return, A takes higher risk. 20. Liquidity issues of credit can be addressed by:a. Sweep facility b. Structured lending to client c. All d. Short term credit facilities e. Overdraft 22. Fastest method for calculating VaR. a. Monte- Carlo simulation. b. All equal time with software. c. Variance-Covariance matrix. d. Combination of Monte- Carlo and Historical Simulation. 23. Which is not banks primary use for deposits? a. Payment to employers b. None c. Investment d. Loan e. Withdrawal 24. If the 5 bids available for stock are 64, 65, 63, 62.5 and 66 which one u will sell? -> 66
25. When a bank issue a loan its liabilities & reserves increases by the amount of the loan. a. True b. False 26. If the corporate isn’t able to raise money from the market to pay off some loans the risk can be refer. a. Market risk b. Interest rate risk c. Commodity risk d. Operational risk e. Liquidity risk 27. On the trading day at the NYSE a broker undertakes the following trades Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MFST share for $20.00 each Sell 20 IBM shares $11 each Sell 10 MFST share at 20.50 each Sell 30 IBM shares for 9.00 each How much did the broker pay out to the exchange in total in case of (i) Gross settlement system (ii) Net Settlement System? a. (i) $1780 (ii) $3000 b. (i) 0 for IBM, $1795 for MSFT (ii) $1780. c. (i) $3000 (ii) $1780 d. None e. (i) $1780 (ii) 0 for IBM, $1795 for MSFT
28. US export and Europe import agree to carry out the transaction of goods word $100000 under a confirmed term LC with a maturity date of 60 days from the time of shipment. The acceptance commission @ 1.5 % PA equals A) B) C) D) E)
$2500 $3000 $300 none $250
29. Operational risk is defined as? fail because of weakness in people, processes, systems or external events.
30. The basic four parties involved in any transaction using LC are the following EXCEPT A) Issuing Bank B) Reimbursement Bank C) Beneficiary Bank D) Seller E) Buyer 31. While providing security lending services to its clients which risk will a custodian have to manage for its clients A) Liquidity risk B) Both Credit risk and interest rate risk C) Interest rate risk D) Credit risk E) Both credit risk and liquidity risk. 32. If the price of securities on day 1 and 2 are $100 and $102 respectively .Returns is A) A very high B) 2 C) -1 D) -2 E) 1 33. Following are the list of risk that Cognizant faces at organizational level A) Currency risk B) Attrition C) Credit risk D) All of the above E) Protective legislation by US/UK 34. Which of the following is not a core private banking function? A) Client management B) Deposit Mobilization C) Investment analysis and advice D) Research E) Sales and Marketing 35. A mutual fund with investment objective of achieving high capital growth approaches investor services firm for advice. The firm advices the mutual fund to invest 80% of the fund in govt debt and 20% in equity. The allocation towards debt advised by the firm
A) Cannot be determined B) is too high C) Is about right D) is too low 36. Which of the following operations can be done on a LC? A) All the listed option B) Acceptance C) Negotiate D) Purchase E) Discount 37. Who among the following is most likely to be a private banking client of a bank? A) A fresh engineer in his first job at cognizant B) Tiger Woods C) Any of the above D) A cricket player who has never played national / international cricket E) A manager at a manufacturing plant. 38. Which of the following method eliminate country risk and commercial risk upon confirmation? A) Documentary collection B) Back to back LC C) LC D) Standby LC E) Both standby LC and LC 42. The act of the loan amount being handed over to the borrower by the bank is known as disbursement. State TRUE or FALSE -> TRUE 39) On the trading day at the NYSE a broker undertakes the following trades Buy 100 IBM shares for $10.00 each Sell 50 IBM shares for $10.50 each Buy 100 MFST share for $20.00 each Sell 20 IBM shares $11 each Sell 10 MFST share at 20.50 each Sell 30 IBM shares for 9.00 each Given that a net settlement system is being used, find out the net position of the broker at the end of the day A) IBM no exchange of shares ; MFST 90 shares to receive ; $1780 to pay out to the exchange
B) None of these C) IBM no exchange of shares ; MFST 90 share to receive ; $3000 to pay out to exchange D) IBM 70 shares to given out ; MFST 90 shares to receive ; $3000 to pat out to exchange E) IBM no exchange of shares ; MFST 90 share to receive ; $1780 receive from the exchange 40. ACH transaction involves the transmission of _________ A) All of the listed option B) Documents C) Physical instrument like check and draft D) Electronic data files E) Cash 41. What should one use while using comparing mortgages? A) APR B) None C) IRR D) NPV E) Rate of interest applicable for the loan 43. Which one of the following is not offered by investment banking division of a bank? A) learning services B) ‘None C) Merger and Acquisition D) Valuation of firm E) Underwriting and distribution of equity issues. 44. If total spread on underwriting is $500000 and manager fee is $100000. What is the amount which will be distributed in the syndicate? A) B) C) D) E)
500000 100000 400000 600000 Can not be determined
45. HPPL shares are currently selling for $25 each. You bought 200 shares one year ago at $24 each and received dividend payment as $1.50 per share what was total dollar capital gain this year A) 200
B) C) D) E)
500 None 300 400
46. The brokerage firm is regulated by A) State regularity agency B) SEC C) Industry wide SRO D) All of the listed option 47) Pick odd one out f. Demat g. Personal loan h. None i. Hire Purchase j. Auto loans 48. I deposited 100 in a bank .Bank loan out 90 out of it to someone else, who then invest the money in setting u a new factory. This process is called A) Monetary policy B) None C) Money multiplier effect D) Profit making tendency of a bank E) Fiscal policy 50. Which of the following is not a treasury management system? A) Calypso B) Summit C) Wall street system D) Front arena E) Flex cube 51. Syndicate helps in all of the following activity but A) Managing large bond issues B) Raising huge money from the bank C) Managing large capital raising act D) Managing conflict between investment banks. E) IPO distribution. 52. All of the following statements concerning US govt securities are correct EXCEPT A) Treasury bills have their interest paid in a lump sum at maturity B) None
C) Treasury bills have greater interest risk than either treasury bond or treasury note D) Treasury note has maturity dates up to 10 yrs E) Treasury bonds have maturity dates up to 30 yrs 53. In defined benefit plan the benefit is expressed as ________ and in defined contribution plan the benefit is expressed as an ________ A) B) C) D) E)
Account balance , Annuity Annuity , Annuity Account balance , Account balance None Annuity , Account balance
54. What is the term used to indicate the arrangement of LARGE borrowing for a corporate by a group as lenders A) none B) Syndicate C) Allocation D) Assignment E) Secondary 55. Card associate provide which of the following service A) issue card B) Set credit limits C) Set interest rates D) Set card fees E) Security/ Risk management 56. in an international securities transaction, which of the following participant will not be involved A) Global custodian , domestic sub custodian , depository in foreign country and sometime stock exchange in foreign country B) Depository in foreign country C) Global Custodian D) stock exchange in foreign country E) domestic sub custodian 57. An insurer undertakes an analysis of a portfolio of insurance policy by exploring scenarios for the path followed by swap rates, policy surrender rates, mortgage prepayment rates for the mortgage backed security in the portfolio, what is this process called A) Cash projection B) Investment manages universe
C) Asset allocation D) Fund administration E) Asset / liabilities analysis 58 Trade finance helps in A) Facilitating international transaction B) Facilitating intra company transaction C) Facilitating international transaction , corporate lending and settling up of new factories D) Facilitating corporate lending E) Facilitating setting up of new factories 59. A choice quote is A) a price at which a firm is ready to buy or sell B) When bid is equal to offer C) When the firm has a choice of deciding the securities to take D) a price at which a firm is ready to buy or sell it also means when bid is equal to offer 60. Which of the following is likely to have the highest interest rate? A) 6 month deposit of min balance of $1000 B) 3 month deposit of min balance of $4000 C) 12 month deposit of min balance of $1000 D) None E) 6 month deposit of min balance of $2000 61. If 1 day VaR is $1 million, 9 day Var is A) $3mn B) $4.5 mn C) $9mn D) $4.4mn E) $1mn 62. If a bank gets a deposit of $1000 assuming a CRR of 10% and that it circulates through 2 more banks, leading to the following money multiplier effect A) Loan of $2439 B) Loan of $1710 C) None D) Create a reserve of $100 E) Create a reserve of $190 63. Which among the following is an investment company that pools money from unit holders and invest in a variety of security? A) Mutual Fund B) Mortgage Company C) None
D) Stock Exchange 64. You purchased a stock for $40. 1 year later you received $2 as Dividend. You sold it at $48. What is your return? a. 45% b. 10% c. 25% d. 50% e. None 65. A formal Legal commitment to extend credit to some max amount over a state period of time is description of a. Trade Credit b. Revolving Credit c. Agreement Irrevocable Credit d. Line of Credit e. Letter of Credit 66. Odd 1 out a. Warren Buffet b. George Soros c. Bill Gates d. Ben Graham e. Peter Lynch 67. Development of Investment Objective and Investment policy falls under the Purview of a. Investment manager Universe b. Asset Allocation c. Asset Liability Analysis d. Fund Admin e. Compliance Reporting 68. Interest Rate Spread is equal to a. Current rate – Base Rate b. Cap – Current Rate c. Current Rate – Floor d. Base Rate – Floor 69. Which of the following factors affect the choice of Payment Method? a. Exporters Fund b. All c. Government Guarantee Program d. Time Frame e. Cost of Financing
70. The NYSE is a large financial market in which the initial issue receives the proceeds for the Sale of securities. a. True b. False 71. Which of the following trading services reduces the trading cost for institutional investors? a. Stock Repurchase Program b. Transition Management c. Transition Management & Commission Recapture d. Commission Recapture e. None 72. A CALL option on futures gives the buyer a. the obligation to buy a futures contract b. the obligation to sell a futures contract c. the right & obligation to buy a futures contract d. the right but not the obligation to buy a futures contract e. the right but not the obligation to sell a futures contract 73. Which is not an example of Option? a. Call Option b. Swaption c. Leaps d. Oil Futures e. Put Options 74. Some banks pay interest on Checking A/c while many do not. a. True b. False 75. The advising bank is called as trusted bridge between the ___________ & __________ when they do not have active relationship. Options wrong a. Beneficiary Bank & Reimbursing Bank b. Importer Exporter c. Reimbursing Bank & Beneficiary Bank d. Issuing Bank & Confirming Bank The advising bank is used as a trusted bridge between the applicant’s/issuing bank and the beneficiary’s bank when they do not have an active relationship.
76. Which of the following according to you has resulted in defining contribution plans gaining popularity over defined benefit plans a. DC plans fix the monthly contribution from the employee making his financial planning easier. b. DC plans are seen by employees as investment which to accumulate retirement income.
c. All d. Employer increasing wants employees to share responsibility for retirement 77. ________is typically largest part of spread and is paid to broker\dealer or that actually took clients order a. Salary b. Manager fee c. Wage d. Concession e. Underwriter 78. NASD is not an SRO for a. Listed market b. Over the counter market c. Third market d. Fourth market 79. High net worth individuals generally have ____________. a. Market capitalization more than $200000 b. All c. Net worth greater than $500000 d. Household income of max $50000 year. 80. Which is true about retail banking? a. The business focuses on small no. of high net worth individuals. b. The business focuses on small and medium enterprises. c. The business focuses on large no. of individuals. d. The business focuses on large no. of corporation bodies. 81. Offer is price at which a firm a. Trades in securities b. Quotes to its bets customer c. Intends to buy d. Intends to sell e. Quotes when it does not want to trade. 82. Securities with original maturity greater than 1 year are traded on money market. a. True b. False 83. Which is not a banking service? a. Stock market b. Retail banking c. Corporate banking d. Customer lending 84. Which is true? a. Financer owns the asset both in case of ‘Lease’ and ‘hire Purchase’.
b. Tax deduction cab be claimed fro the full value of the rental paid in case of lease c. All d. Depreciation in claimed by the financer in lease and not in case of hire purchase. 85. Bank a based in US provides safe keeping services for securities to its US clients. It also has clients in France and Belgium and provides securities safe keeping services to these clients through banks C & D respectively. Which best describes bank A? a. Global custodian b. None c. Main custodian d. Sub custodian e. Secondary custodian 86. All following statements relating to Bonds are correct except. A) Bonds sell at a discount when Coupon Rate is less than Market Interest rate. B) None C) Bond is debt instrument giving issues. 87. Which of the following type of loan requires the amount of interest that would be earned on the loan to be paid upfront by the borrower? A) Capitalized loan B) True Discounted loan C) Amortized loan D) Demand loan E) Discounted loan 88. Who are involved in the preparation of prospectus of IPO? A) Commercial bankers B) Investment Bankers C) None D) Company Management E) Company Management and Investment Bankers 89. Bankers Acceptance differs from Sight Draft in that A) Bankers Acceptance reduces lending capacity B) Sight Drafts are negotiable instruments C) Bankers Acceptance demands immediate payment. D) None E) Banks can raise funds by selling acceptance. 90. Clients of a private banker are generally not segregated on the basis of A) Investible assets B) Location C) Age D) Net worth
E) Name 91. The initial sale of the security is in the ………market, while subsequent trading in the security is in the …….. market A) Spot, futures B) Debt , Equity C) Primary , Secondary D) Money, Capital E) Secondary, Primary 92. Under what category can services like asset/liability analysis, asset allocation, cash projection, compliance reporting, fund administration, investment Management universe etc. provided by an institution can be classified? A) Investment Management B) Asset Servicing C) None D) Trading E) Investor Services. 93. CIP in the context of anti-money laundering is A) All B) Stands for Suspicious Activity Reports C) Customer Identification Program D) Requiring Businesses, which were only to report cash transactions involving more than 1.00,000? 94. On a trading day at a stock exchange a broker undertakes the foll trades: Buy 100 IBM shares for 10$ each Sell 50 IBM shares for 10.5 $each Buy 100 MSFT shares for 20$ each Sell 20 IBM shares for 11$ each Sell 10 MSFT shares for 20.5 each Sell 30 1bm shares for 9$ each At the end of the day, the broker owes 1780 to the exchange while exchange owes him 90 shares of MSFT. Is it possible? A) Yes under RTGS B) No C) Yes under net-settlement system 95. Dow Jones industrial average is made of A) 30 stocks B) 20 stocks C) 40 stocks D) 10 stocks E) 50 stocks
96. Which risks bring gain and losses? A) Interest rate and foreign exchange B) Liquidity and credit C) Credit and Interest rate D) Credit and Foreign exchange E) All 97. Find the future value of $1200 invested at 5.25 % per annum payable annually after 6 months? Marks: 2 1. 1345.1 2. 1243.1 3. 1231.1 4. None 5. 1235 98. Investor services like brokerage, cash management and short term investments, commission re-capture, foreign exchange transactions, transaction management etc. can be classified under ____ group of services. Marks: 1. 1. Trading 2. Investment Management 3. Investor service 4. None 5. Asset Servicing 102 What are the risks associated with the Hedge funds? Marks: 3 1. All of the above 2. High exposures in derivatives 3. High Leveraging 4. High Speculation 103. The trade terms “15/2 net 30”indicates that _____. Marks: 3 a. 2% discount is offered if payment is made within 15 days. b. 15% discount is offered if payment is made within 2 days; the payment should however be made in 30 days. c. 30% discount is offered if payment is made before 15 of the month. d. 15% discount is offered if payment is made between 2 & 30 days; e. 15% discount is offered if payment is made within 30 days. 104. A bank is required to hold reverses at least equal to a pre-scribed fraction of its total deposit liabilities.
a. True
b. False
106 Who appoints investment manager to manage a benefit plan? a. Plan sponsor b. Plan administrator c. Fund trustee d. None e. Government 107 A company would pay the interest on what portion of loan? a. Committed amount b. Either disbursed or committed loan c. Unused amount of loan d. Disbursed amount e. None 108 In the exchange on a particular trading there is a buy market order for 100 CTSH shares and two sell market orders for 50 and 40 CTSH shares each, can the buy order be matched against the two sell orders. a. Yes b. No c. Yes, but if prices on the buy & sell side match. 109 If the limit = $2000, margin = 20% and asset value = $2000 then drawing power for an open ended loan is equal to? a. None b. $1600 c. $2200 d. $2400 e. $2000 110 Risk cannot be migrated by a. Setting risk limits b. Hedging c. Diversification d. Arbitrage e. Insurance 111 A fixed income analyst will analyze all but a. Municipal bonds b. Bonds of govt. sponsed enterprise c. Corporate bonds d. US treasuries e. Shares
112 In benefit administration what are the relationships that exists between the plan administrator and the investment manager, and between Trustee and the investment manager. a. None b. Plan administrator & trustee both have outsourced plan administration as well as fund management to investment manager c. Any d. Plan administrator gives investment instruction to investment manager while trustee appoints the investment manager. e. Trustee gives investment instruction to investment manager, while plan administrator appoints the investment manager. 113 Which entity provides credit scores that are used by issuers to process card application? a. Issuer processor b. Collection agency c. Issuing bank d. Authorization engine e. Credit bureau. 114 CPI stands for which of the following? a. Consolidated Price index b. Consument popularity index c. Consumer product index d. Consumer price index e. None 115 A bank decides to sanction only 10% of the loan sought by a company. The company goes and pledges extra assets with the bank and the bank then agree to sanction 50% of the loan sought. The company has indulged in the process of a. Credit scoring b. Credit increase c. Credit incrementation d. Credit revision e. Credit enhancement. 116 FX spot deal assumes maturity of how many business days ahead ? a) 4 b) 5 c) 3 d) 1 e) 2 117 Which of the following is best VaR estimation Model? a) Monte- Carlo b) Historical
c) Variance-Covariance d) Variance-Covariance and Monte- Carlo 118 Which of them represent company is incorporated in USA? a) Plc b) Pte c) Ltd d) Inc 120 Organization level risk appetite is determined by: a) Risk management b) Front office c) Back office d) Trade e) Board of director 121 Risk management is function of: a) Traders b) Back office c) Specialist d) Front office e) Mid office 122 Purely competitive financial market is not characterized by a) Govt. regulation b) Many traders c) Full info d) Cost effective trading 123 NOT player in typical trade cycle; a) Custodian bank b) Clearing bank c) Clearing member d) Trading member e) Regulator 124 Once syndicate has sold all other trades participant, sub participant and assignment are considered trade in what market? a) Primary b) Secondary c) Participant d) OTC e) Index 125 Question relates to price weighted index?
1. 2. 3. 4. 5.
DJIA Hangseng EAFE index NASDAQ composite index S&P 500
126 In defined contribution retirement plan .Tax sheltered annuities fall under section of _________ERISA 403b 401k 401b 403k None 126 In benefits administration, trustee and plan administrator submit compliance report to______ which in turn qualifies the plan. Participant None (answer is TRUST) Government Investment manager Sponsor 127 Full form of ADR Answer: American Depository Receipts 128 Question related to BASEL II Answer: Capital adequacy 129 What is interest rate charged on asset based loan? Answer: The interest rate charged is lower than personal loans 130 Question related to credit derivatives as which of the following function is not done by credit derivatives
Answer: Answer was something as Transfer to over the counter 131 Question related to credit derivatives it was fill up the blanks? Exactly don’t remember the question/
Answer: option having “TRANSFER” 132 Question related to non-discretionary Investment Management
Answer: the bank offers investment recommendations based on the Client’s approval. 133 Question having few options like Income Processing, Tax Information Services, Cash Sweep
Answer: ASSET SERVICING
134 Question related to Underwriting? Options: 1. Underwriting Spread 2. Public Offering Price (POP), 3. Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it) 4. All
Answer is ALL the listed option Risk Matrices was developed by:- JP Morgan, Bank of California, Credit Suisse, SBI 2. Research analyst may recommend to :- buy, hold and sell 3. Reducing CRR for banks would have impact on:e. Increased money supply f. Reduced interest rates g. Reduced money supply in the economy h. Profitability of firms i. None 46. Under corporate stock repurchase program a. Corporate purchase their own shares from shareholders 1.
47.
Private banking providing risk management services strives to:a. Eliminate risk and maximize returns b. Eliminate risk without worrying about returns c. Reduce risk and optimize returns d. Avoid risk and returns e. All
48.
One would go for bank deposits because a. Money easily available b. Interest earned c. Insurance cover available d. All
49.
From seller’s point of view which method has least risk a. LC b. Direct debit c. Documentary collection d. Counter trade e. Cash in advance
50.
ABC rated as AA+ and XYZ rated D. Who gets loan from bank a. Equally unlikely b. Equally likely c. ABC d. XYZ e. None
51.
Which is correct hierarchy of corporate ratings (high to low)? a. AAA,AA+,BBB,D
52.
Inflation- 9%. Future value of 100 units of money after 2 years: a. 118.8 b. Exactly 100 c. Exactly 200 d. Around 109 e. None
53.
Brokerage firms are regulated by a. SEC b. Industry wide SROs c. State regulatory Agency d. All
54.
Odd man out:a. SEC b. NYSE c. NASDAQ d. LSE e. NSE
55.
From investor stand point a debenture issued by excellent company will appear risky than share of preferred stock issued by excellent company a. True b. False
56.
Not a feature of private banking:a. High investment in technology b. Lot of research c. Commercial lending d. Specialist advice e. Understanding capital and investment needs
57.
Security settlement is function of a. Specialist b. Traders c. Back office d. Front office e. Mid office
58.
Which of these instruments is not included as part of asset servicing services and the category “Pricing/ Holdings” Valuation which includes accurate pricing, rating etc. a. Equities b. Certificate of participation c. Government securities d. Certificate of deposit e. Services may be provided for all
59.
Which of the following is involved in retails brokerage business in US a. E-trade b. Charles Schwab c. Sallie Mae d. Federal reserve e. a and b both
60.
Measures of performance of an investment portfolio are all of the following except:a. Risk adjusted return b. Style maps score c. Profit/loss on portfolio d. Alpha e. Up/down market analysis
61.
Who insures stocks in stock market a. Security and exchange commission b. Federal deposit insurance corporation c. Us department of treasury d. None
62.
Over the counter market is also called a. Unlisted market b. 2nd , unlisted and OTC market c. Unlisted d. Super e. 2nd market
63.
Standby letter is _____ secure than documentary collection and cheaper than ____ a. More, commercial LOC
64.
Interest rates falls a. Bond prices increase b. Bond prices decrease c. Do not change d. Economy goes to deflation
65.
Rate at which bank purchases US dollars against home currency is :a. Bid rate b. Indirect c. Direct d. Cross currency e. Ask rate
66. Bid price is the price at which the firm The price at which market makers will buy or sell a particular security.
41 Presence of risk implies a. Standard deviation of return is 0 b. Uncertainties of final outcome c. Final wealth is lower d. Investment gain 67. Odd man out? a. Equity b. Stocks c. Shares d. Convertible bonds e. Common stock 68. A bank cannot cover the money demanded by depositor, then it goes out to – a. Federal reserve bank 69. Institutions involved in benefit administration process, discussing plans a. Sponsor b. Custodian c. Plan administration d. Record keeper e. Participant 70. Which of the following eliminates both country risk and commercial risk? a. Both standby LOC and LOC 71. When bank goes to the fed to borrow funds then the interest rate charged by fed is known as a. Prime rate b. Bond rate c. Discount rate d. Federal rate Which will have highest interest rate a. 3 months deposit with min balance of $4000 b. 12 months -> $1000 c. Cannot determine d. 6 months -> $2000 e. 6 months -> $1000 73. Odd man out 72.
a. b. c. d. e.
None Auto loans Demat Hire purchase Personal loan
when was US PATRICAT ACT passed a. 2001 75. Risk averse a. less risk/avoid risk 74.
67. which of the following is online settlement method a. RTGS 71. Which of the following is true for The Fed funds rate a. It is cost of borrowing immediately available funds for one day. 72. corporate bonds are a. always secured 75.if one day var is $ 1M, calculate var for 9 days a. $3M 76. Which of the following is not a repayment method? Ans .collateral 79. ATM stands for 1) Automatic Transaction Machine; Almost anytime banking 2) Automated Teller Machine; Remote location transactions 3) Automatic Transaction Machine; Fund transfer between accounts 4) Automated Teller Machine; Direct Deposit 5) Automatic Transaction Machine; Personal Banking 80. A Revocable LC (Letter of Credit) can be revoked without the consent of the Exporter can be revoked without the consent of the Exporter’s bank can be revoked without the consent of the Importer’s bank can’t be revoked with the consent of the Advising bank can’t be revoked without the consent of Exporter. 81. Which of the following are disadvantages of using LC (Letter of Credit)?(check box) a. Time consuming b. Costly c. Specific and Binding d. Deals with documents and not with products e. Credit Line tied up. 83. Banker acceptances are ________________ credit investment created by ___________ and used for financing imports, exports and domestic shipping Long term; financial firms Long term; non-financial firms
Short term; non-financial firms Short term; financial firms Medium terms; banks 84.
Mutual funds a. Are less riskier than individual stocks as the fund managers invest in a diversified portfolio 85. Warrants a. Warrants are call options – variants of equity. They are usually offered as bonus or sweetener 86. bank are least interested in giving a personal a. credit scores b. document verification 87. difference between lease & hire purchase a. all 88. To compare the cost of different Mortgages deals one should look at the a. APR 89. securitizing cash flows from future monthly sale of oil explored from its specified offshore a. asset securtisation 90. not a Treasury Management Systems – Inter-bank 91. pre shipment loans a. Banks provide Pre-shipment finance - working capital for purchase of raw materials, processing and packaging of the export commodities. 92. 93. 95.
function of A card Association a. security/risk management funtions of private banking not a Personal Investment Companies and private bank
96. risk associated with hedge funds 97. function of CORPORATE FINANCE a. all 98. sales and brokers responds to which department when institution transfer their custody service from one to another a. Transition management 99. two questions from Netting and RTGS from pdf at page number 180-181 100. who is at risk in defind benefit a. employer 101. difference between DB (defined benefit) and DC (defined contribution) 103. Corporate loans are .. Secured or unsecured , secured, unsecured 104. Pick odd one out ..
1) merril lynch 2) george soros 3) bell graham 4) bill gates 5) warren buffet 105. not investment bank 1) bear starter 2) lehmen brothers 3) icici securities 4) goldman sachs 106. newyork, delhi, Jakarta, thimpu … --- > least risk in investing 107. US, india, Pakistan, burma, Bhutan -- > beneficial for loan purpose 109. Which is not the charge type ?? Pledge, hypothecation, lien, collateral 112. Private banking is a fee driven business 114. Open ended loan allow the borrower to borrow additional amount subject to the maximum amount less then a set value. 1) True 2) False 115. investment bank assists in merger & aqisition.. 1) Structure and deals 2) All 3) smooth transaction 4) structure and deals 116. card association do ?? 1. Security/Risk management 2. Issue cards 3. Set credit limits 4. Set interest rates 117. which is not a pre shipment loan 1. bill discounting 2. raw material 118. nominal rate – 8% , rate of inflation – 2%, real rate of inflation ??? 1. 6% 2. 10% 119. two way quote for share the bid 120. funding cost goes up due to Hardening interest rate … Risk ???
121. Federal funds rate: The rate domestic banks charge one another on overnight loans to meet Federal Reserve requirements. This rate tracks very closely to the discount rate, but is usually slightly higher. 122 . Warrant is combination of ….. 1. equities & futures 2. call & put options 3. call options 123. KYC refers to … 1. checking old account 2. checking sponsors credentials 3. checking of credential of the customer 4. checking of bank credential by the federal bank 124. STP stands for .. Straight Through Processing 125. Price weighted index Dow Jones Industrial Average
126. involved in IPO prospectus 1. invester banks 2. commercial banks 3. investor banks & corporate management 4. corporate management 5. none 127. 4.8% interest per annum- same as … 1. 0.4% per month & 1.6% per quarter 2. 0.4% per month & 1.2% per quarter 3. none
Question Bank for CCP in Fundamentals of Banking 42. Which of the following types does SWIFT belong? a. Proprietary Network b. Private Network c. Proprietary and Messaging Service
43. A Share Holder has a. Got ownership b. Voting Rights c. All the above 44. If Reliance Industries Limited wants to sell shares in USA, what should they do? a. Use American Depository Receipt 45. Current account maintained by one bank with another bank abroad in the latter’s home currency a. VOSTRO b. NOSTRO 46. Compound Interest is calculated based on a. Principal Only b. Principal and Accumulated Interest 47. What is an Operational Risk? a. Possibility of loss resulting from errors in instructing payments or settling transactions. b. Possibility that a firm will be unable to generate funds to meet contractual obligations as they fall due. c. Possibility of loss as a result of default, such as when a customer defaults on a loan, or more generally, any type of financial contract. d. Possibility of loss over a given period of time related to uncertain movements in market factors, such as interest rates, currencies, equities, and commodities. 48. Which of the following is not a possible risk while doing a project in Cognizant? No idea of the options and the answer 49. ICICI bank in India comes under the category of a. Private Bank b. Public Bank c. Co operative Bank d. Corporation Bank 50. What are FreddieMac and GinnieMae?
a. Regulatory bodies of Insurance b. Institutions in Mortgage Markets c. Investment Banks d. Brokerage Firms 51. Losing which of the following cards will have more impact? a. Credit Card b. Debit Card c. Stored Card d. Gift Voucher 52. If you have 100 units of money and inflation being 5% what is the future value after 1 year? a. 105 b. 95 c. 90 d. 110 53. If banks increase their cash reserve ratio what will be the impact? a. Money flow will be more b. Money flow will be less c. Reserve amount will be less d. None of the above e. 54. Which of the following is not a Retail Bank in India? a. HSBC b. ICICI c. JPMC d. SCB 55. Central Bank of a country is called as a. Banker’s Bank 56. Details about 3 tiers of Federal communications privacy law. 57. US Government passed the USA PATRIOT Act in response to
a. November 30, 1982 b. September 11, 2001 c. June 09, 1984 d. August 10, 1984 58. Benefits of Check 21. 59. SuperDot is used in which Stock Exchange? a. NYSE b. BSE c. FSE d. LSE 60. FTSE index is used in which stock exchange? a. New York b. Bombay c. London d. Singapore 61. If the current market price of a share is $90 and you have placed a sell stop order for $85 and Limit order for $87. Which of the following statements is correct? a. Will be sold immediately but at a price >$87 b. Will be sold immediately but at a price >$85 c. Will be sold but at a price between $85 and $87 62. What are warrants? 63. Pick the odd man out. a. Stocks b. Shares c. Equity d. Convertible Bonds e. Common Stocks 64. Define risk in financial terms. a. Probability of loss 76. What does BAFT stand for a. Bankers Association For Foreign trade
77. Which a. b. c. d.
of the following are regulatory authorities? SEC SEBI FSA (Financial Security Authority), UK All OF the ABOVE
6. ATM is a. Banking enabled through a terminal used to make transactions without a human teller. 7. Where is the initial prospectus filed? a. SEC b. BAFT c .None of the above 10. As per an estimate, netting reduces the number of settlements needed by a. 60 % b. 75 % c. 95 % d. 50 % 11. SWIFT uses ___________ messaging system a. 15022 b. 5022 c. 196 d.2000 13. Who starts the process of issuing a LOC a. b. c. d.
Issuer Bank Buyer Seller Beneficiary Bank
14. What is a choice quote? a. Quote at which one wants to buy or sell 15. Bank a. b. c. d.
is Unregulated and unsafe Regulated and unsafe Unregulated and safe Regulated and safe
16.Bank is a common place a. For Borrower and depositor 17.Rohit deposits XYZ amount into bank A. Payal borrows XYZ amount from bank A. How will the bank benefit? a. Lending rate less than deposit rate. b. Lending rate greater than deposit rate. c. Lending rate equal to deposit rate.
d. All of the above 18.Which a. b. c. d. e.
of the following is more risky An asset with standard deviation 5 An asset with standard deviation 4 An asset with standard deviation 3 An asset with standard deviation 2 An asset with standard deviation 1
19. Find the odd man out about Hedge Fund a. Higher Liquidity higher risk b. Leverage c. Speculation d. Risk aversion 20. What is GDR? a. Global Depository Receipt 21. ACH a. are electronic clearing transactions in which information about debits and credits are passed across the clearing system through electronic data files 22. Trade finance is used in a. International trade 23. Intsinet is used in a. Listed Market b. Primary Market c. Secondary Market d. Third Market e. Fourth Market 26. Find the odd man out a. NASDAQ b. NYSE c. LSE d. SEC 28. Retail lending is for a. Large investors b. Small and medium investors c. Financial Institutions 30. Lending money to which of the following country is not risky? a. US b. India c. Pakistan d. Bangladesh 31. Sweep transfers a. Excess money from one account into another b. Money from one persons account into another.
L0 Questions 81. Which of the following are disadvantages of using LC (Letter of Credit)?(check box) a. Time consuming b. Costly c. Specific and Binding d. Deals with documents and not with products e. Credit Line tied up. 91. pre shipment loans a. Banks provide Pre-shipment finance - working capital for purchase of raw materials, processing and packaging of the export commodities. 92. 93. 95.
function of A card Association a. security/risk management funtions of private banking not a Personal Investment Companies and private bank
96. risk associated with hedge funds 97. function of CORPORATE FINANCE a. all 98. sales and brokers responds to which department when institution transfer their custody service from one to another a. Transition management 99. two questions from Netting and RTGS from pdf at page number 180-181 100. who is at risk in defind benefit a. employer 101. difference between DB (defined benefit) and DC (defined contribution) 103. Corporate loans are .. Secured or unsecured , secured, unsecured 104. Pick odd one out .. 6) merril lynch 7) george soros 8) bell graham 9) bill gates 10) warren buffet 105. not investment bank 5) bear starter 6) lehmen brothers 7) icici securities 8) goldman sachs 106. newyork, delhi, Jakarta, thimpu … --- > least risk in investing 107. US, india, Pakistan, burma, Bhutan -- > beneficial for loan purpose
109. Which is not the charge type ?? Pledge, hypothecation, lien, collateral 113. Purely competitive financial market not characterized by, 1) govt. regulation 2) cost effective trading 3) full information 4) many traders 114. Open ended loan allow the borrower to borrow additional amount subject to the maximum amount less then a set value. 1) True 2) False 120. funding cost goes up due to Hardening interest rate … Risk ??? 126. involved in IPO prospectus 6. invester banks 7. commercial banks 8. investor banks & corporate management 9. corporate management 10. none 127. 4.8% interest per annum- same as … 4. 0.4% per month & 1.6% per quarter 5. 0.4% per month & 1.2% per quarter 6. none
281. Question related to Underwriting? Options: 5.Underwriting Spread 6.Public Offering Price (POP), 7.Lead or Managing Underwriter is the Underwriting Agreement.(not sure about it) 8.All
78. Inflation- 8%. Future value of 100 units of money after 2 years: a. 118.8
b. c. d. e.
Exactly 100 Exactly 200 Around 109 None
79. Bid price is the price at which the firm: The price at which market makers will buy or sell a particular security 80. Sales and brokers responds to which department when institution transfer their custody service from one to another a. Transition management 81. Who is at risk in defined benefit a. Employer 2. Salary 50,000, increased to 55000. Inflation rate 20% in 2005. In 2006 what will be the employee’s position a. b.
Living standard will be down Salary will be increased to 65000
3. 4.
Private Banking’s functions 5 options had been given Which is not the Retail banking’s functionality a. Current Account b. Credit Card c. Trade Finance d. Loans
5.
Which one of the following is not done by Retail banking a. Auto Loan b. House Loan c. Hire purchase d. Lease Loan
6.
True or False a. In hire purchase the m/c will be owned by the customer after the payment period
7.
US Patriot Act Question – 2
8.
Retail banking customers a.
CORPORATES
b. Banks 9.
Allowing to withdraw 20 %extra from Customer A’s account is know as a.
Overdraft(This is my guess)
b. And some options had been given in that 10.
A bank is getting deposit from a customer and lending it to other customer. Which is the correct one
a.
This is known as Money Multiplier effect(This is my guess)
b. Bank is trying to increase its profit 11.
One person is having Rs.100 in hand. Which one of the following is correct a.
Having 100 now in hand is valuable than having the same 100 one year later
b. Both are same c. 12.
Reverse of (a)
Odd man out a.
Munis
b. T-Bills c.
T-notes and bonds
d. Stock 13.
Who will get the voting rights a.
Common Share holders
b. Preferred share holder c. 14.
Holders of Debt
Who will get the money back first in case of default of a company a.
Common Share holders
b. Preferred share holder c.
Holders of Debt
15.
Read something about Arbitrage. 2 questions were there in this
16.
Where are we releasing the company’s share First time a.
Primary Market
b. Secondary Market c. 17.
Some other options were there
One country (Country name had been given) is doing the business in one currency. Another country is doing the business in another currency. How did they do the business? a.
Currency swap (My guess)
b. Some other options were also given in that 18.
Which is not the Role of Central bank
a.
Appointing Finance Minister
b. And some central bank’s role were given 19.
Why people are going to portfolio managers a.
They don’t have time to monitor their portfolio
b. They don’t know how to advertise to sell and buy the instruments c.
Their investment is less
d. All of the above (my guess) 20.
VAR is used in one of the following a.
Measuring Risk
b. Risk mitigation c. 21.
Risk Analysis
Diversification Questions were there. Like Diversifications means one of the following and some options were given in that
22.
Some questions in the following were there
WHAT IS A BANK? The term ‘Bank’ is used generically to refer to any financial institution that is licensed to accept deposits and issue credit through loans. Banks are the backbone of any economy, as all monetary transactions end up touching banks. The main functions of banks are to:
Channelize Savings Provide credit facilities to borrower Provide investment avenues to investors Facilitate the trade and commerce dealings Provide financial backbone to support economic growth of the country Minimize Cash Transactions Provide Services
WHY DO WE NEED A BANK? 23.
They provide a return (pay interest) on our saving Safety of principal and interest Convenience of being able to write checks and use debit cards Raising funds when we need The first bank in the size a.
Citigroup
b. JPMorgan c.
24.
Some other banks had been given
Glass-Steagall Act of 1933, created a Chinese wall between commercial
banking and
securities businesses 25.
Which is not involved in the Open ended loan a. b. c. d. e.
26.
Limit (L) – max outstanding allowed Margin (M) – percentage of limit that can be drawn Asset value (AV) – value of underlying asset Drawing Power (DP) - lower of L and (1-M)*AV Something else had been given other than the above. That was the answer
Acquiring bank is involved in the following a.
Credit Card
b. Something else were also given 27.
Read about the Retail Services done by retail banking 2 questions were there in that
28.
Which is not coming under EFT? Read all the EFT transfer
29.
ACH is meant for what? a.
Large amount in single transfer
b. Small amount in multiple transfers c.
Distant transfer
d. All of the above e.
None of the above
30.
Read about Private Banking services.
31.
Discretionary means what? The bank’s portfolio managers make investment decisions on behalf of the customer.
32.
Private Client Services is done by which of the following a.
Private Banking
b. Trade Finance c. 33.
Retail Banking
What is the difference between Private Banking and Asset Management? a.
Private Banking focuses on retail investors while asset management is targeted towards institutional investors
34.
Passive Investment or some question related to “Passive” was there!!!!
35.
The loan a bank is holding to sell it is known as a.
Held For Sale (my guess. The question was like that)
b. Accrual c. 36.
Trading
Read Letter Of Credit Thoroughly… Beneficiary bank, Issuing bank come in Trade Finance
Some important questions: There will be 1,2,3 marks questions There will be 121 questions 2) Page 6 INFLATION There will be three questions based on this formula:The relationship between the R (real rate of interest), N (nominal rate of interest) and I (rate of inflation) is as: R= N-I. 3) Page 8 One question on future value The formula for Future Value is: FV = PV*(1 + i)n 4) Page 8 One question on Intra-year compounding
Question was like this if rate of interest is 4% and compounded quaterley for 4 years then what is the value of r and t 5) Page 10 NPV of a project: Increases with increase in future cash inflows for a given initial outlay Decreases with increase in initial outlay for a given set of future cash inflows Decreases with increase in required rate of return
6) Page 14 Read all the type of securities and their sub parts 7) Page 15 Types of secured bonds. Mortgage Bonds are secured by real estate owned by the issuer Equipment Trust Certificates are secured by equipment owned and used in the issuers business Collateral Trust Bonds are secured by a portfolio of non-issuer securities. (usually U.S. Government securities)
8) Page 16 Treasury Securities Treasury bills issued for one year or less. Treasury notes have a term of more than one year, but not more than 10 years Treasury bonds greater than ten years 9) Page 16 What are zero coupon bonds? Zeros generate no periodic interest payments but they are issued at a discount from face value. 10) Page 17 Commercial paper An unsecured, short-term loan issued by a corporation, typically for financing accounts receivable and inventories. 11) Page 19 What is meant by Preferred stock ? Preference shares carry a stated dividend and they do not usually have voting rights 12) Page 20 American Depository Receipts (ADR) The purpose of an ADR is to facilitate the domestic trading of a foreign stock. 13) Page 20 Warrants Warrants are call options – variants of equity. 14) Page 20 What are derivatives? A derivative is a product whose value is derived from the value of an underlying asset, index or reference rate. 15) Page 21 Forward contract A forward contract is an agreement to buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No cash is exchanged when the contract is entered into. Futures contract A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Index futures are all futures contracts where the underlying is the stock index and helps a trader to take a view on the market as a whole. 16) page21 Two questions will come: Hedging involves protecting an existing asset position from future adverse price movements. In order to hedge a position, a market player needs to take an equal and opposite position in the futures market to the one held in the cash market. Arbitrage: An arbitrageur is basically risk averse. He enters into those contracts were he can earn risk less profits. When markets are imperfect, buying in one market and simultaneously selling in other market gives risk less profit. Arbitrageurs are always in the look out for such imperfections. 17) Page 22 Which is not a option? Call Options
Put Options LEAPS Swaps Oil futures( Answer) 18) Page 21 What is call and put option? 19) Page 22 Currency Swap involves the exchange of principal and interest in one currency for the same in another currency. 20) Page25 What are primary and secondary markets? 21) Page 26 Which is not a stock market? The important stock exchanges are as follows: New York Stock Exchange (NYSE) National Association of Securities Dealers Automated Quotations (NASDAQ) London Stock Exchange (LSE) Bombay Stock Exchange (BSE), National Stock Exchange of India (NSE) One will be different… 22) Page 27 What is the name of central bank in America? Federal Reserve 23) Page 27 What will haven if market rates go up? Bond price will fall… Ie Bond price is inversely proportional to market interest rates 24)Page 29 What is Money Market? Money market is for short term financial instruments, usually a day to less than a year. 25) Page 29 What is a repo? A repo is a contract in which the seller of securities, such as Treasury Bills, agrees to buy them back at a specified time and price. 26) Page 30 regulator(s) and supervisor(s) forthe financial markets. Thus India has Securities and Exchange Board of India (SEBI) and the US has Securities and Exchange Commission (SEC). 27) Page 30 What do u mean by portfolio management system? These systems allow the investment managers to choose the instruments to invest in, based on the requirements or inputs such as amount to be invested, expected returns, duration (or tenure) of investment, risk tolerance etc. and analysis of price and other data on the instruments and issuers
Just read Chapter Financial Statements only 1 question can come………… 28) Page 49 What is not a function of central bank? Read all the functions of central bank… Answer- To appoint some governor 29) Page 50 There will two or three questions from CRR.. What do u mean by CRR (Cash Reserve Ratio). There will be two numericals also….. Same from book example? 30) Page 52 Read the services offering by banks 31) Page 54 What is Glass-Steagall Act ? Glass-Steagall Act of 1933, created a Chinese wall between commercial banking and securities businesses in US. That act was intended to address the perceived causes of bank failures during the Great Depression of 1929. 32)Page 57 Read this page carefully .. three questions will come… Checking Accounts Quick, convenient and, frequent-access to the money. Some banks pay interest while many do not. Money Market Deposit Accounts Pays a higher rate of interest than a checking or savings account MMDAs often require a higher minimum balance to start earning interest Savings Account Allows making withdrawals, but checks writing facility is not there. Number of withdrawals or transfers one can make on the account each month is limited. Time Deposits (Certificates of Deposit) Guaranteed rate of interest for a term or length of time specified by the account holder. The rate of interest is often higher than savings or any other account Basic or No Frill Banking Accounts Checking accounts, but with a limit on the number of checks one can write and the number of deposits and withdrawals one can make Interest is generally not paid. 33) Page 60 What are the ways of Money Transfer? Cheques/Checks o Bearer Checks o Account Payee Checks o Travelers’ Checks o Bankers Checks
Debit Cards Demand Drafts Automated Clearing House (ACH) Standing Instructions Electronic Transfer 34)Page 61 What is EFT? Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic technology as a substitute for checks and other paper transactions. EFTs are initiated through devices like ATM cards or codes that let one to access your account. Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose. 35) Page 63 Read section Lost or Stolen ATM or Debit Cards If unauthorized use occurs before reporting, the liability of the customer varies depending on the delay in reporting the loss to the card issuer. Within two business days – Liability limited to $50 for unauthorized use. Between 2 - 60 days – Liability limited to $500 because of an unauthorized transfer. If the loss is not reported within 60 days, the liability has no limits. 36) page 64 What is EBPP and its advantages?
ELECTRONIC BILLING PRESENTATION AND PAYMENT 37) page 65-66 Read thoroughly.. Some of the questions were What is Fedwire? Fedwire is an electronic transfer system developed and maintained by the Federal Reserve System. The system connects Federal Reserve Banks and Branches, the Treasury and other government agencies What is latest version of SWIFT? SWIFT 15022 38) Page 69 Read thoroughly.. Which is non secure loan? Answer: Personal loan Auto loans have Interest rate is lower as compared to Personal loans… 39) Page 70 VVimp One question ie numerical atleast on :… c. Limit (L) – max outstanding allowed d. Margin (M) – percentage of limit that can be drawn e. Asset value (AV) – value of underlying asset f. Drawing Power (DP) - lower of L and (1-M)*AV
There will be atleast 2 questions on difference between Lease and Hire.. Lease Two main types – operating, financial The Financier owns the asset. Depreciation is claimed by the financier. Tax deduction can be claimed for the full value of the rental paid. Financier takes care of maintenance, insurance etc. Hire Purchase The asset is owned by the financier. Depreciation can be claimed by the borrower. Tax deduction can be claimed only to the extent of the interest repayment. 40) Page 71 One question which is not a repayment kind? Kinds of repayments o EMI – same installment amount o Fixed Principal – constant principal, decreasing interest amt o Step-up – principal amount increases in steps o Step-down – principal amount decreases in steps o Balloon – notional amount initially, large last payment o Bullet – interest payment initially, entire principal at one shot o Random – schedule & amount of installments undecided o Special products – combination of above one will be extra given… 41)Page 72 What is Floating Rate of Interest? The rate of interest is linked to one of the rates prevailing in the market, for example it can be linked to PLR (Prime Lending Rate) or LIBOR (London Interbank Offered Rate). 42) Page 73 What is Collar and Spread? Spread= current rate – base rate Collar = cap-floor 43) Page 73 Charge Types Pledge – gold, bank has possession Hypothecation – vehicle, borrower has possession Lien – against bank deposits Assignment – insurance policies, rights get transferred to bank Shares - periodic drawing power calculation Mortgage – immovable property 44) Page 76 What are Freddie Mac, Ginnie Maes & Fannie Mae? Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all "secondary market lenders".
45)Page 76-77 Read auto loans and student loans ? only one two question will come? 46) Page 82 What is the meaning of corporate lending? Corporate Lending refers to various forms of loans extended by banks to corporate bodies like proprietorship, partnership, private limited companies or public limited companies. Why they are given by banks? Corporate loans areprovided by banks for various purposes like new projects, capacity expansion or plant modernization, daily cash flow requirements (working capital) etc. Interest is usually paid on the disbursed amount of the loan. 47) page 83 Credit ratings Rating levels might vary from AAA(highest), AA+, AA- to default ratings like D. 48) Page 84 What do u mean by Lines of Credit? These are short term loans sanctioned for a fixed validity period, allowing the corporate to draw the loan as and when required within the validity period and repay the loan after a certain period (repayment period). Interest is either repayable in certain intervals or in one bullet installment at the end of the repayment period 49) Page 85 What do u mean by Commercial Paper? Commercial Paper (CPs as commonly known) is an instrument by which a corporate borrows money from banks for short periods of time. A CP binds the corporate to make a payment equal to the face value of the CP to the issuing bank on a specified due date. In this sense, a CP is like a short term unsecured loan. Read page 84-85 topics little bit…. 50) page 86 What is the classification of loans: Loans are classified and accounted for as follows: Accrual—Loans 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 latter’s home currency Vostro (Their account with me/us): Current account maintained in the home currency by one bank in the name of another bank based abroad How many business days are required for spot deal? Answer – two days Read topic Spot and Forward Foreign Exchange Contracts 57) Page 95 Which are the interbanks: Front Arena Summit Calapso Wall Street Systems 58) Page 97
Read CMS functions.. 59) Page 99 What do u mean by lock box service? 60) Page 99-100 What is pooling and netting ? 61) page 100 What is New Act - Check 21? 62)page 102 What is RGTS? 63)page 103 Read what is ACH? 66) page 105
PAYMENT METHODS Cash in advance Letter of credit Documentary collection Open account or credit Counter-trade or Barter 67) page 106 Advantages or disadvantages of LC (commercial letter of credit) in check box question 69)page 108 Read the steps.. 70) page 110( positively come) The standby LC is like a bank guarantee. It is not used as the primary payment method but as a fail safe method or guarantee for long-term projects. Back to Back LC allows a seller to use the LC received from his buyer as collateral with the bank to open his own LC to buy inputs necessary to fill his buyer’s order. 71) page 110 DOCUMENTARY COLLECTION Documentary collection carries the risk that the buyer will not or cannot pay for the goods upon receipt of the draft and documents. Drafts A draft (sometimes called a bill of exchange) Read sight draft and Time Drafts thoroughly..
72) page 111
OPEN ACCOUNT This can be a very risky method for the seller, unless he has a long and favorable relationship with the buyer or the buyer has an excellent credit rating.
73) page 113 Full form of BAFT? 74) page 114 two questions will at least come from the table:
INTERNATIONAL PAYMENT INSTRUMENTS COMPARISON CHART 75)Page 117 What are chip cards? 76) page 119 What are the key activities in credit card market? Pls learn which comes under which category.. 77)page 120 What are issuing anf acquiring services? 78) page 121 A card Association Do Not Provide These Functions Security/Risk management( this function is provided, it is odd one out) Issue cards Set credit limits Set card fees Set interest rates Solicit merchants Set discount rates 79) page 122 Only read the functions little bit… 80) page 127 Private Banking covers banking services, including lending and investment management(true) Investment Management and Advice A client relationship Manager understands the client’s liquidity, capital and investment needs. He strives to develop an integrated approach to manage client investments and capital markets trading. Access to specialist advice and extensive research is a key feature of private banking. Self-directed or non-discretionary: This is largely investment advisory in which the bank offers investment recommendations based on the Client’s approval. The client may choose to ignore this. Discretionary: In this case, the bank’s portfolio managers make investment decisions on behalf of the customer. 81) page 128-129
COMMON PRIVATE BANKING PRODUCTS Personal Investment Companies (PICs) Payable Through Account (PTA) Hedge Funds 82) page 131-132 See the diagram and learn all the front office and back office functions? Two questions will atleast come…
84) page 135-136 Active vs passive approach Top Down Approach vs Bottom Up Approach 85) page 137 There are three dimensions to portfolio execution: Cost of execution Trading speed Portfolio Risk Management 86) page 139 Read mutual funds ..two questions will atleast come.. 87) page 141 What do u mean by NAV? Some of the leading companies that offer mutual funds are: Fidelity Investments Vangaurd ING Direct Mellon 88) page 142 Difference between SMA and Mutual Funds? Advantages and disadvantages of SMA? 89) page 143 What is the name of pension funds? 401k,IRA 90) page 148 2 questions
SYNDICATE The hub of the investment banking wheel, syndicate provides a vital link between salespeople and corporate finance. Syndicate exists to facilitate the placing of securities in a public offering, a knock-down drag-out affair between and among buyers of offerings and the investment banks managing the process. In a corporate or municipal debt deal, syndicate also determines the allocation of bonds. 91) page 148-149 Full form of IPO? What it is? An initial public offering (IPO) is the process by which a private company transforms itself into a public company.(this will come) The IPO process consists of these three major phases: Hiring the Managers Due Diligence and Drafting Marketing 92) page 149
What do u mean by THE CHINESE WALL?
93) page 150
UNDERWRITING Underwriters earn 3 types of Underwriting Spread: Manager's fee - The lead underwriter receives this fee on all securities sold. Underwriter's Allowance is the total spread minus the Manager's fee. This fee is shared by syndicate members based on the type of syndicate account. Concession - It is typically the largest part of the spread and is paid to the broker/dealer that actually took the client’s order. Question: which is the largest part of spread? Answer : concession 94) page 151
SECONDARY MARKET TRADING there will three questions atleast come, read it carefully: Examples: Stock Exchanges: NYSE, AMEX NASDAQ is a good example of OTC market. Another name for fourth market: Instinet What is OTC? 95) page 153 Bid or ask rate: An individual firm could act as a broker on one trade and a dealer on another. When acting as a broker, the firm is taking customer orders and acting as their agent to buy or sell the security. For this service, the broker charges a commission. A firm acting as a dealer is the actual buyer or seller, taking the other side of a trade. The price at which market makers will buy or sell a particular security is known as the Bid or Ask Price. 96) page 154 Order Types (Based on Volume) Fill or Kill (FOK) – The order must be immediately filled in one trade or canceled completely. All or None (AON) - The entire order must be filled or canceled completely, but unlike FOK, AON can remain good till cancelled. Immediate or Cancel (IOC) must immediately be filled for as much of the order as possible in one trade, with the remainder being cancelled. Market Not Held order – The floor broker has the discretion concerning time and price. A key point is that Market Not Held orders are never on the Specialist's Book. Question: diff between FOK and AON? 97)page 160 The important markets and the indices used are presented below: US Diversified market Dow Jones Industrial Average (Dow) US Technology NASDAQ 100 UK (London) Financial Times Stock Exchange Index (FTSE) Germany (Frankfurt) DAX France (Paris) CAC Switzerland (Zurich) SMI
Japan (Tokyo) Nikkei Hong Kong Hang Seng Singapore Strait Times Index (STI) 98) page 164 See XL sheet sure three questione will come from risk Credit risk is the possibility of loss as a result of default, such as when a customer defaults on a loan, or more generally, any type of financial contract. Liquidity risk is the possibility that a firm will be unable to generate funds to meet contractual obligations as they fall due. Operational risk is the possibility of loss resulting from errors in instructing payments or settling transactions. Legal risk is the possibility of loss when a contract cannot be enforced -- for example, because the customer had no authority to enter into the contract or the contract turns out to be unenforceable in a bankruptcy. Market risk is the possibility of loss over a given period of time related to uncertain movements in market factors, such as interest rates, currencies, equities, and commodities. 99) page 164
MEASURING RISKS The probability monetary impact 100) page 164 What is var? 101) page 165 Numerical.. Example VaR Calculation Assume that you have a holding in IBM Stock worth $10 million. You have calculated the standard deviation (SD) of change over one day in IBM is $ 0.20. Therefore for the entire position, SD of change over 1 day = $200,000 The SD of change over 10 days = $200,000 * √(10) = $632,456 The 99% VaR over 10 days = 2.33 * 632,456 = $1,473,621 102) page 165 What is monto-carlo? Ans: A simulation technique 103) page 166 Variance-Covariance method it is the computationally fastest method known today. Which is the best VAR method? Ans- Cant say 104) page 166
MANAGING RISKS There are multiple strategies to manage risks. Some of the commonly followed ones are: 1. Diversification 2. Hedging or Insurance 3. Setting Risk Limits 4. Ignore the risk! 105) page 170 Read this page.. U should know what do u mean by core and global custodian? What are custodian services?
106) page 172 Read in depth Asset/Liability Analysis 107) page 177 What is exchange? An exchange is a regulated market place, where buyers and sellers come together to exchange what they want. Examples: Stock Exchanges: NYSE, AMEX Ques: What is NYSE? Over the Counter Market Over The Counter (OTC) market is different from the exchanges in the sense that there is no single physical location NASDAQ is a good example of OTC market. 108) page 180-181 Two –three numerical will come same as it is as given in IBM shares
What is clearing? What is netting? 109) page 184-185 The primary employee benefits are Defined Benefits Defined Contribution Health and Welfare Defined contribution plans have gained popularity as employers have begun to ask their employees to share responsibility for their retirement. The main purpose of a defined contributionplan is to provide an investment vehicle for employees to accumulate retirement income.( state true or false) true diff between Defined Benefit Plan vs Defined Contribution Plan ?
110) page 186 The following plans are designated as defined contribution plans: Profit Sharing Plans Cash Or Deferred Arrangements Or 401(k) Plans Stock Bonus Plans And Employee Stock Ownership Plans Simplified employee pensions (SEP) Tax Sheltered Annuities Or 403(b) Arrangements
111) page 187 What is there is peraby tax check? SPO SAR Discrimination test 415 LIMIT 5500 REPORTING 1059 Reporting Reporting and compliance See the diagram..
112) page 188 What are the categories in Health and welfare? Categories of health and welfare plans
Health Care o Medical o Prescription drug o Behavioral health o Dental o Vision o Long-term care
Disability Income
o Sick leave o Short-term disability
o Long term disability Survivor Benefits o Term life Some common questions: 1) Which is the best market? New York 2) Which is not a function of private bank? Ans: to print notes 3) Reliance Industries Limited, India would like to raise money in NYSE for expanding its operations in the domestic market (India). The securities issued would be American Depository Receipt
