7) It comprises of fixed income bearing instruments like corporate/gilt edged bonds, debentures,

preference stock, fixed term deposit, etc. a) Secondary Securities

8) The criteria for classifying instruments under this sub-category depend on practices applied in
financial markets of the given country. Normally, this sub-category includes instruments with maturity
from 1 to 5 years. b) Medium-term securities

9) Asset based service also called d) Fund based

10) Non-fund based activities also called c) Fee based

11) is an unsecured promissory note and money-market instrument, issued by large corporate houses
for raising funds with a view to meeting their short-term debt obligations such as payroll. b) Commercial
Paper

12) Capital Market constitutes a) Primary and Secondary Market

13) The market regulator of Indian Capital Market is c) SEBI

14) Financial institutions are also known b) Financial intermediaries

15) They may be called a trust or a corporation which facilitates an individual to invest in different
diversified and professionally managed securities by arranging pool of funds from other investors. c )
Investrnent Companies

16) Which is/are the functions of financial system? d) All of these

17) Which of the following is NOT considered a money market instniment? b) repurchase agreement

11 The minimum shareholding a RBI in Sill should be % as per SBI Act. d) 55

2) RBI pays interest on CRR balances of banks at d) Zero %

3) Who issues currency notes on behalf of the Central government in India? b) Reserve Bank of India
(RBI)

4) Which of the following is called APEX Bank? a) Reserve Bank of India

18) is a whole sale market for short-term debt inswment. c) Money market

19) In India, forfeiting services are offered by c) EXIM bank

20) companies create a risk pool by way of collection of premium from the people at large who wishes
to buy a protection either for a person or for a Property. b) Insurance Companies

5) Which of the following is not the function of Reserve Bank of India? d) Regulating Diesel and
Petroleum prices
6) Which Act empowered the Reserve Bank of India (RBI) to regulate, control, and inspect the banks in
India? c) BR Act 1949

7) Reserve Bank of India was set-up on the recommendations of which of the following
commission/committee? b) Hilton Young Commission

8) The Central bank of India, RBI, reviews the monetary policy for every a) Three Months

I) The structure that is available in an economy to mobilise the capital from various surplus sectors of
the economy and allocate and distribute the same to the various needy sectors is known as c) Financial
System

2) Which of the following are functions of a financial system? i) The operation of a payments system. ii)
Providing the means of portfolio adjustment. iii) Helping to reduce unemployment. iv) Channelling funds
between lenders and borrowers. v) Helping speculators to bet on price movements. c) (i). (ii)and (iv)

3) Which of the following are characteristics of a financial intermediary? i) It introduces borrowers to

lenders. ii) It has assets which exceed liabilities. iii) It increases liquidity for lenders. iv) It reduces
transaction costs for borrowers and lenders. v) It makes excess profit. d) (iii) and (iv)

4) are the ones who fulfil the short-term requirement of funds of corporate as well as the individual
clients. c) RBI

5) Which of the following is not a regulatory institution in Indian financial system? b) CIBIL

6) is regarded as a queen of Indian financial system. b) RBI

17) Functions of Reserve Bank are d) All of the above.

18) How many Deputy Governors will be there in RBI d) 4

19) In periods of boom. which leads to econor. instability, the Reserve Bank of India (RBI) resorts to? b)
Buying of approv. securities in the market as a mea.sure of open markct operations.

20) Which of the following instruments of credit control adopted by the Reserve Bank of India (RBI) does
not 191 within 'general' or 'quantitative' methods a credit control? c) Stipulation of certain minimum
margin in respect of advance against specified commodities.

21) rbi started functioning on a) 1-4-1935

22) Any company making a public issue of value of more than Z is required to file a draft offer
document with SEBI. c) 50

23) Committee was constituted by SEBI for deciding about derivatives trading. a) L.C. Gupta

24) RBI is the lender of last reson for d) Commercial Banks

25) If the cash reserve ratio is lowered by the RBI, its impact on credit creation will he to a) Increase it
26) In pursuance with the recommendations of Narsimhan Committee. the RBI has framed new
guidelines: a) To govern entry of new private sector banks to make the banking sector more
competitive.

27) If the RBI adopts an expansionist open market operations policy, this means that it will c) Offer
commercial banks more credit in the open market.

28) The headquarter of RBI is in c) Mumbai

29) Secondary market in India is regulated by b) Securities and Exchange Board of India

30) SEBI was established in . a) 1988

31) The market regulator of Indian capital market is c) SEBI

32) SEB1 was established in c) 1988

33) The working of SEBI includes: d) All of the above.

34) has the statutory powers to regulate and promote the Indian capital market. c) sebi

35) In the first ever merger of two regulators, ihe commodity market regulator FMC was merged u ith
capital markets watchdog SEBI recently. Thc term FMC stands for c) Forward Markets Commission.

36) The forward contracts in commodities are regulated as per_ by this body. c) F.C.(R) Act. 1952

37) Forward Markets Commission is financial regulator of a) Commodity Future Markets

38) The Forward Markets Commission (FMC), which regulates commodity trading, is under the d)
Ministry of consumer affairs

39) Consider the following statements related to Forward Markets Commission and determine which of
the above statements are wue? i) FMC statutory body set-up under Forward Contracts (Regulation) Act.
1952. ii) It regulates the commodity market for edible oilseeds. metals. spices. fibre. gut.. rubber. natural
gas, crude oil. etc. iii) Government proposed the merger. of Forward Macke. Commission (FMC) with
stock market watchdog Securities and Exchange Board of India (SEBI). d) All

40) PFRDA regulates the a) Pension System

41) Which of the following statements are correct'? d) All of the above

42) Insurance companies in India are regulated by d) IRDA

43) Insurance Regulatory and Development Authority )IRDA). the regulatory body for Indian insurance
industry. has its head office situated at which city? c) Hyderabad
1) A is a mechanism that allows people to buy and .11 (trade) financial securities (such as stocks and
bonds). commodities (such as precious metals or agricultural goods). and other tangible items of value
at low transaction costs and at prices that reflect the efficient-market hypothesis c) Financial Malice

2) market is a market for old issues. c) Second, market

3) Money market deals with instruments. b) Short-term

4) Major players of Indian money market is . c) Commercial banks

5) are drawn by contractors on the Govenunent departments for the goods supplied to them. b) Supply
bill

6) Financial institutions are also known as b) Financial intermediaries

7) Equity shareholder rights arc listed below. One of the right is incorrect a) Right to have first claim in
the case of winding of the company.

44) The recommendations of which committee paved the way for establishment of IRDA as the regulator
for Indian insurance sector? a) Malhotra Committee

8) In the case of non-voting shares a) The right of voting stock and non-voting stocks are similar.

9) Zero coupon bonds h. its origin in ,.. a) U.S. Security

10) Commercial paper are a) Unsecured promissory notes

11) Which of the following is not a money market security? b) National saving certificate

12) In primary markets, first time issued shares to be publicly traded in stock markets is considered as d)
Initial public offering

13) In primary markets, property of shares which made it easy to sell newly issued security is considered
as a) Increased liquidity

14) is a process by which corporates determine the 'demand' and the 'price' of a proposed issue of
securities through public bidding. b) Book Building

15) has the statutory powers to regulate and promote the Indian capital market. c) SEBI

16) Stock exchange d) All the above

17) In governing body of stock exchange, certain percentage of the elected members retires at annual
general meeting. That is a) One year

18) The rolling settlement period introduced in the stock exchanges is c) T + 2

19) In settlement T+ 2, 'T' stands for b) Trade day

20) NSE was recognised on a permanent basis in b) 1993

21) The Sensex has b) 30 stocks

9) What is a Repo Rate? b) It is a rate at which banks borrow rupees from RBI.

10) Whenever RBI does some Open Market Operation Transaction. actually it wishes to regulate which
of the following? c) Liquidity in economy

11) Which of the following is called the Bankers' Bank in India? c) Reserve Bank of India

12) Which of the following statements is/are correct about Reserve Bank of India? d) All of the above

13) The Governor of Reserve Bank of India is d), Raghuram Rajan

14) The RBI is bound to maintain a reserve against the issue whatever may be the amount. This system is
called as a) Minimum reserve system

15) Interest rates on which of the following deposit schemes is fixed by RBI? b) Saving deposits

16) Which one of the following is not a function of RBI? b) Opening Savings Accounts for general public

1) Financial services through the network of elements such , serve the needs of individuals. institutions
and corporate. d) All of the above

2) Objectives of financial services are: i) Fund raising ii) Funds deployment iii) Specialised services iv)
Regulation of Economic growth a) c) All

3) Chief characteristics of financial services are: if kntangibility ii) Customer orientation iii) Inseparability
of Dynamism d) All

4) Which of the following is not a fee-based financial service? b) Lease financing

5) Functions of financial services exclude d) Collection of tax

6) Which of the following services are fund based? c) Project preparation

7) Which of the following services are fee based? b) Issue of DD

8) Merchant banks in India started in b) 1969

9) Merchant banks concept in India introduced by c) ANZ Grindlays

Functions of Merchant Banking include b) Registrar

II) Is the services of Merchant Banker a) Primary and Secondary Market

12) The merchant banker coordinating a public issue is called as d) Lead manager
13 The First stage in Venture Capital Financing is c) Seed Capital

14) Which of the following is a characteristic feature of venture capital firms? a) Developing a portfolio
of companies.

15) is a long-term risk capital to finance high technology projects whkh involve risk but at same time
have strong potential for growth. a) Venture capital

16) capital is needed for product development and initial marketing. b) Start-up capital

7) stage of financing includes financing development, expansion, buyout, etc. b) Later stage financing

18) is it interest-free loan provided by VCFs without any predetermined repayment schedule. b)
Conditional loan

19) of the venture capital fund created by government and operated through IDBI. a) TDICI

20) is a fund based financial service, provides resources of finance receivable as well as facilities the
collection of receivables b) Factoring

21) Under factoring. the factor's obligation to the client becomes absolute on the due-date a the invoice.
irrespective of the payment made or not made by the trade debtor. a) Non-recourse Factoring

221 Which one a the following most accurately describes factoring as a source of finance? c) A factor will
give an advanced payment on the security of outstanding invoices. When the invoices are paid. the
factor provides the company with the amount of thc invoice not advanced, less fees and Interest.

23) A firm discounts its export receivables of up to 5 years without recourse to the exporter under which
of the following arrangement? a) Forfeiting

24) Which of the following is not necessarily a party to a forfeiting transaction? c) Broker

25) A transaction where financial securities are issued against the cash now generated from a pool of
assets is called of a) Securitisation

26) In Securitisation process. the securities backed by underlying mortgages are: a) Mortgage Based
Sccuritisation

27) In Securitisation process, the securities backed by assets are b) Assets Backed Securities

28) A mutual fund is not b) A company that managttu investment portfolios

29) After UTI, the first mutual funds were started by b) Public sector banks

30) Mutual fund can benefit from economic of scale because of c) Large volume of trades

31) Equity linked savings scheme does not have which of the following features? d) None of the above
32) A close-ended mutual fund has a fixed b) Fund size

33) Of the following fund types, the highest risk is associated with c) Equity growth funds

34) The Custodian of a mutual fund a) Is appointed for safe-keeping of securities.

35) An investment company that will repurchase shares at any time is called a(n)_ fund. c) Open-end

36) Growth fund is a mutual fund that d) Invests primarily in equities.

37) Which of the following is the least likely advantage of mutual fund investing? d) Mutual fund returns
are normally higher than market average returns.

38) Of the following types of mutual funds, an investor that wishes to invest in a diversified portfolio of
stocks worldwide (including the U.S.), should choose b) Global funds

39) Which one of the following &scribes an investment company that generally has an unrestricted
investment strategy and is not accessible to the general public? d) Hedge fund

40) Which mutual fund type will most likely incur the greatest tax liability for its investors? c) Income
fund

41) Which mutual fund type will most likely incur the smallest tax liability for its investors? b) Municipal
bond fund

42) Which mutual fund type is most likely to own stocks paying the highest dividend yields? b) Equity
income fund

43) are those funds whose portfolio includes a blend of equities, debts and money market securities.
They have an equal proportion of debt and equity in their portfolio. a) Hybrid funds

44) fund invests in highly liquid securities like commercial paper. d) Money market mutual funds

45) Syndicated loan means - d) Loan given by the group of banks to single borrower.

46) are transactions under which the borrower self-syndicates the loan to the market, using i. existing
relationship banks b) Club Deals

47) is the fee payable to the agent bank which takes care of disbursement of the loan after sanction.
recovery of loan instalments and thstribution of principal plus interest to the panicipants and this is an
annual fee, c) Agency Fee

48) Which of them/these are the participants in than syndication? d) All of these

49) Which of the following is a function of the agent bank relating to flow of money in the process of
loan syndication? c) Receiving the fee from the borrower and distributing among the participating
banks.
50) Which of the following is not a phase/step in the formation of loan syndication? a) Finalisation of
supply agreement.

51) is the process by which physical share certificates (share certificates in paper form) are converted
to an equivalent number of securities in electronic form. b) Dematerialisation

52) The term is defined as a central location for keeping securities on deposit. a) Depository

53) When was CDSL formed? c) February 1999

54) Which organisation provides for maintenance of ownership records in a book entry form? c)
Depositories

55) Who has permitted NSDL to allot an ISM for demat shares? d) SEBI

56) Which act in 1996 was passed to provide free transferability of securities with speed and accuracy?
a) Depositories Act

57) What is the namc4 IN cotnpany set-up by NSE in order to promote dematerialisation of securities? d)
NSDL

1) is a financial institution whose primary activity is to act as a payment agent for customers and to
borrow and lend money. c) bank

2) Which bank deals with short-term credit? b) Commercial Bank

3) The primary function of a central cooperative bank is to: c) Both of these

4) India has different categories of Commercial banks. Which of the following is not one of such
category? b) Commodity Banks

5) Non-Banking Financial Company (NBFC) is a company registered under b) Companies Act

22) The Nifty has d) 50 stocks

23) The BSE base period is a) 1978-79

24) The NSE-Nifty's base period is d) 1995

25) The whole sale market segment for NSE is meant for b) Government securities

26) Method of trading in NSE is c) Screen Based-Order Driven

27) is an "index". An index is basically an indicator. It gives a general idea about whether most of the
stocks have gone up or most of the stocks have gone down. b) Sensex

28) SENSEX is the index of a) BSE

29) NIFTY is the index of b) NSE

30) The first Indian equity index is b) Sensex

31) The dollar version of Index of BSE is b) DoIlex

32) In BSE, T 2 rolling settlement began in the year a) 2002

10) Which of the following is the role of NABARD? d) All of the above

I I) National Rural Credit Stabilisation Fund is an institution of purpose-specific funds, in which of the
following? c) NABARD

12) The SIDBI was set-up in c) 1989

13) SIDBI is fully owned subsidiary of a) IDBI

14) National Housing Bank (NHB) was set-an in d) 1988

15) National Housing Bank is a fully owned subsidiary of d) HUDCO

16) When did the Government of India set up the Export-Import Bank of India? a) January, 1982

17) The main objectives of the Export-Import Bank (EXIM Bank) are: i) To ensure an integrated and
coordinated approach to solve the problems of exporters. ii) To provide special attention to capital
goods export and export of technical services. iii) To tap domestic and overseas markets for resources,
undertake development and finance activities in the areas of exports. iv) To provide financial assistance
to the exporters and importers and act as the principal financial institution for coordinating the working
of other institutions engaged in financing exports and imports. v) To provide refinance facilities to
commercial banks and financial institutions against their export-import financing activities. b) Only (iii),
(iv) and (v)

18) declares a company as a sick company. a) BIFR

19) The full form of BIFR is: b) Board for Industrial and Financial Reconstruction

20) State Financial Corporations give assistance mainly to develop: d) Small- and medium-scale
industries

21) CRISIL has been promoted by and a) ICICI. UTI

22) Factors affecting assigned ratings d) All of the above

23) is the opinion of the rating agency on the relative ability and willingness of the issuer of debt
instrument to meet the debt service obligations ..d when they arise. a) Credit rating

24) Which of the following is not a rating agency? d) FTSE

25) Credit rating indicates of a company. a) Financial status

26) Credit rating is only a/an . a) Opinion

27) Type of rating to which all credit rating agencies does not consider is classified as: a) Split rating

28) What is the full form of CRISIL? a) Credit Rating Information Services of India Limited

29) Which of the following debt obligation ratings are provided by CRISIL? d) All of the above

30) Which of the following is a source of financial information about suppliers? b) Credit rating agencies

31) Which one of the following most accurately describes the function of credit rating agencies, such as
Moody's or Standard and Poors? c) An assessment of the likelihood of a bond or loan interest and/or
capital not being paid and the extent to which the lender is protected in the event of a default.

32) What is full form of ICRA? b) Investment Information and Credit Rating Agencies of India

33) Credit rating helps in measuring the credit risk and facilitates? d) Pricing of a loan.

34) When was Life Insurance sector nationalised? d) 1956

35) The central office of the Life Insurance Corporation of India (LIC) is located at d) Mumbai

36) The punch line of the advertisement of which of the following organisation is "zindagi ke sath bhi
zindagi ke bad bhi"? d) Life Insurance Corporation of India.

37) GIC was nationalised in the year? c) 1973

38) When was the General Insurance Corporation of India incorporated? b) 1972

39) Which of the following was the parent company of New India Assurance? b) GIC

40) General Insurance (Public Sector) Association of India's HQ is situated in c) Delhi

Q.3. Which of the following are deposit-taking institutions (DTIs)? 1) Building societies. 2) Insurance
companies. 3) Investment trust companies. 4) Retail banks. 5) Pension funds.b) 1 and 4

Ans: b

Q.4. Financial services through the network of elements such as needs of individuals, institutions and
Corporate. a) Financial institutions b) Financial markets c) Financial instruments d) All of the above

Ans: d

Q.5. is regarded as the fourth element of the financial system. a) Financial services b) Financial markets
c) Financial instruments d) Financial institutions Ans: a
Q.6. Objectives of financial services: 1) Fund raising 2) Funds deployment 3) Specialized services 4)
Regulation 5) Economic growth c) 1, 2, 3, 4, 5

Ans: c

Q.7. Chief characteristics of financial services: 1) Intangibility 2) Customer orientation 3) Inseparability 4)

Dynamism d) 1, 2, 3, 4

Q.B. Functions of financial services exclude d) Collection of tax

Ans: d

Q.9. Financial service companies exclude c) Sole proprietorship

Q.10.At present most of the Indian Banks are falling under the a) Chain Banking System b) Unit Banking
System c) Branch Banking System d) None of the above

Ans: c

Q.11. Match the following List I (a) Khusro Committee (b) Goporia Committee (c) Ghosh Committee

(d) Nayak Committee

List II I. To lock into customer services in banks in India II. To review the agriculture III. To examine the
adequacy of institutional credits and other related aspects IV. To enquire into the various aspects of
frauds and malpractices in the banks

ans d) iv ii i iii

Q.12.Assertion (A). Bank have control over a large part of the supply of money in circulation. Reason (R).
They cannot influence the nature and character of production in any country. a) Both (A) and (R) are
true and (R) is correct explanation of (A). b) (A) is true but (R) is false and it is not correct explanation of
(A). c) (R) is true but (A) is false. d) (A) is true but (B) is false Ans: b

Q.13.Main objective of CRR and SLR is to ensure (i) Liquidity position of Bank (ii) Financial position of
Bank (iii) Profit position of Bank a) Only (i) is correct c) Only (iii) is correct

Ans:

b) Only (ii) is correct d) All are correct

Q.14.In order to provide efficiency, liquidity & transparency, NSE introduced a nation wide on-line fully
automated a) Screen based trading system. b) State based ticketing system. c) Small based ticketing
system. d) Screen based fast system.

Ans: a
Q.15.The branch manager receives end of day reports for all the under 011, branch. a) Dealers. b)
Corporate manager. c) Clients. d) NCFM certificate holders.

Ans: a

Q.16.The statement of Banking Definition is given by a) T.G. Hart b) White Head c) Kinely d) All of these

Ans: d

Q.17.How many types of Bank are there on the Basis of ownership? a) Two Types b) 5 types c) 4 types d)
3 types

Ans: d

Q.18.The statement "A Banker is a person or corporation which holds itself out to receive from the
public, deposit payable on demand on cheque." is given by a) Findlay shirras b) Kinley c) T.G. Hart d)
Walter leaf

Ans: d

Q.19.Bank classifications according to law are d) Both (b) and (c)

Q.20.Bank classification is possible according to d) All of the above

Q.21.Read the following events a) Allowing convertibility of rupee at the market rate in the current
account. b) Nationalisation of general insurance business. c) Establishment of IDBI d) Capital adequacy
norms for commercial banks. Ans: a

Q.22.State-level financial institutions are a) State Financial Corporation's (SFCs). b) State Industrial
Development Corporations (SIDC) c) State Industrial Investment Corporations (SIIC) d) All of the above
Ans: d

Q.23.Which bank was earlier known as the Imperial bank of India? a) State Bank of India b) Reserve Bank
of India c) Bank of Baroda d) Syndicate Bank

Ans: a

Q.24.AIl India financial Institutions are a) Industrial Development Bank of India (IDBI) b) Industrial
Finance Corporation of India (IFCI) c) Industrial Credit and Investment Corporation of India (ICICI) d) All
of the above Ans: d

Q.25.The financial institute IFCI established in b) 1948

Ans: b

Q.26.Reserve bank of India founded in which year? c) 1935

Ans: c
Q.27.Reserve Bank of India Nationalised in Which year ? a) 1947 b) 1949 c) 1945 d) 1950

Ans: b

Q.28.Who is RBI First Indian Governor? a) C D Deshmukh

Q.29.Reserve bank of India has number of Zonal offices? d) 4

Q.30.RBI Central board consists of not more than deputy governors b) 4

Ans: b

Q.31.RBI has number of Regional Offices? c) 19

Q.32.RBI has two Training colleges for officers training. One is at Pune and the other one is at ? a)
Hyderabad b) Chennai c) Bangalore d) Kolkata

Ans: b

Q.33.RBI logo consists of this following animal? d) Tiger

Q.34.Which of the following scheme was formulated by RBI? a) Rashtriya Swasthya bima yojana b)
Mahatma gandhi National rural employment guarantee scheme c) Jan dhan yojana d) The banking
ombudsman scheme Ans: d

Q.35.SEBI stands for a) Securities and Exchange Bank in India b) Securities and Exchange Board for
Investment c) Securities and Exchange Board of India d) None of These Ans: c

Q.36.Headquarter of SEBI is located at b) Mumbai

Ans: b

Q.37.SEBI was established in the year b) 1988

Ans: b

Q.38.Which among the following complaints not dealt by SEBI? a) Complaints falling under the purview
of the regulatory bodies like RBI, IRDA, PFEDA, CCI, FMC etc. b) Complaints regarding Pension Fund c) All
of Above d) None of These Ans: d

Q.39.SCORES stands for a) SEBI Complaints Redress System b) Special Complaints Redress System c)
Sources for Complaints Redress System d) None of These Ans: a

Q.40.Basic functions of the Securities and Exchange Board of India is a) To protect the interest of
investors in securities b) To promote the development of securities market c) To Regulate the securities
market and all matters connected therewith or incidental thereto d) All of the Above Ans: d
Q.41.SEBI conducts and action in its executive function and it pass, ruling and orders in its judicial
capacity: a) Efficient and Effective b) Investigation and Enforcement c) Regulation and Leadership d)
None of These Ans: b

Q.42.The rolling cycle of T + 2 means, Settlement is done in after trade date a) 2 Days b) 2 Months c) 2
Weeks d) None of These

Ans: a

Q.43.IRDAI stands for: a) Insurance Regulatory and Development Authority of India b) Investment
Regulatory and Development Authority of India c) Insurance Reforms and Development Authority of
India d) None of The Above Ans: a

Q.44.Headquarter of IRDAI is located at: a) Hyderabad

Q.45.IRDAI is an autonomous body set up under the a) IRDA Act, 1999 b) IRDA Act, 2000 c) IRDA Act,
1995 d) None of The Above

Ans: a

Q.46.Which among the following is correct about IRDA's mission: a) To protect the interest of policy
holders b) To regulate and develop the insurance industry c) Both of Above d) None of The Above Ans: c

Q.47.Now the FDI limit in insurance sector is a) 47% b) 49% c) 50% d) None of The Above

Ans: b

Q.48.Who announced the term insurance repository system in India a) Prime Minister b) Finance
Minister

c) T.S. Vijayan d) None of The Above

Ans: b

Q.49.If RBI hikes the CRR by 0-25 basis points. What immediate impact will it have on the functioning of
banks? 1) Banks will have to lock some additional fund with the RBI without any income generation to
the banks on these funds. 2) Banks will have to raise their capital base by bringing IPOs or by taking
money from the 3) Govt. of India 4) Banks will have to give more funds to priority sectors and less to
corporate sector. a) Only 1 b) Only 2 c) Only 3 d) All 1, 2 and 3

Ans: a

Q.50.When the Reserve Bank says that the Rupee is over-valued, it means? a) RBI has shortage of hard
currency and it has to order for printing of new notes to the press concerned b) Rupee is appreciating
against other currencies whereas other currencies are weakening against US Dollar c) Money is locked in
banks and people do not have enough to make their day to day purchases. It is a strategy which brings
the inflation down d) More and more people are selling their stocks. As a result stock market may crash,
as there is no hard cash for such voluminous transactions Ans: b

Unit 3

Q.51.3-month CDs are trading at a discount rate of 5 3/8, while 1-month CDs are trading at a rate of 5
5/8. The difference in rates is: a) 0.25 basis points. b) 0.5 basis points. c) 25 basis points. d) 0.5 percent.

Ans: c

Q.52.On which of the following instruments is the rate of return calculated on a 'disco. basis'? 1)
Certificates of deposit. 2) Interbank deposits. 3) Commercial paper. 4) Repurchase agreements. 5)
Commercial bills. b) 3 and 5

Q.53.A central bank wishing to reduce the rate of credit expansion would typically a) refuse reserves to
the banking system. b) sell treasury bills to the general public. c) lower the price of repurchase
agreements with the banking system. d) raise the price of repurchase agreements with the banking
system. A Ans: d

Q.54.Which of the following is not a characteristic of money? a) Store of value. b) Method of accrual. c)
Means of payment. d) Unit of account. A Ans: b

C Q.55.The characteristic of money as a store of value implies: a) money is acceptable as payment for
goods and services. b) money allows us to quote prices and record debts. c) money will remain valuable
from one day to the next. d) none of the above. Ans: c

Q.56.Wealth: a) is the value of assets minus liabilities. b) serves as a means of payment. c) is the same
thing as money. d) is measured as liabilities plus assets. Ans: a

Q.57.Which among the following is world's largest foreign exchange market ? a) New York b) London c)
Tokyo d) none of the above Ans: b

Q.58.Financial market is classified into money market and' capital market. Which of these are money
market instruments? 1) T-Bills 2) Preference shares 3) Commercial papers Select the correct answer
using the codes given below. a) 1 and 2 only b) 1 and 3 only c) 2 and 3 only d) 1,2 and 3

Ans: b

Q.59.Which of the following is NOT a function of money? a) It facilitates the barter system. b) It serves
as a store of wealth. c) It serves as a unit of value. d) It serves as a medium of exchange. Ans: a

Q.60.In 2006, Reserve bank of India had set up a panel under Shri S C Gupta to recommend the
legislations related to regulation of which of the following? a) Capital markets b) Money lending c)
Financial Inclusion d) None of the Above

Ans: b
Q.61.Which among the following helps RBI to manage liquidity conditions in the economy with banks
having an avenue to surplus funds or avail funds? a) Repos b) Reverse repos c) Money market Mutual
Funds d) None of the Above Ans: a

Q.62.The bond markets are important because a) They are easily the most widely followed financial
markets in the United States. b) They are the markets where interest rates are determined. c) They are
the markets where foreign exchange rates are determined. d) They are the markets where derivatives
are traded. Ans: b

Q.63.Long-term debt and equity instruments are traded in the market a) Primary b) Secondary c) Capital
d) Money

Ans: c

Multiple Choice Questions

Unit 1

Q.1. Which of the following are functions of a financial system? 1) The operation of a payments system.
2) Providing the means of portfolio adjustment. 3) Helping to reduce unemployment. 4) Channelling
funds between lenders and borrowers. 5) Helping speculators to bet on price movements.

a) 1, 2 and 4 c) 2 to 5

Ans: a

Q.2. Which of the following are characteristic of a financial intermediary? 1) It introduces borrowers to
lenders. 2) It has assets which exceed liabilities. 3) It increases liquidity for lenders. 4) It reduces
transaction costs for borrowers and lenders. 5) It makes excess profit. b) 3 and 4

Q.71.A firm that chooses to finance a new plant by issuing money market securities a) Must incur the
cost of issuing new securities to roll over its debt. b) Runs the risk of having to pay higher interest rates
when it rolls over its debt. c) Incurs both the cost of reissuing securities and the risk of having to pay
higher interest rates on the new debt. d) Is more likely to profit if interest rates rise while the plant is
being constructed. Ans: c

Q.72.A spot transaction in the foreign exchange market involves the a) Exchange of exports and imports
at a specified future date. b) Exchange of bank deposits at a specified future date. c) Immediate (within
two days) exchange of exports and imports. d) Immediate (within two days) exchange of bank deposits.
Ans: d

Q.73.A capital market financing is most likely to finance: a) New plant and equipment. b) Seasonal
inventory needs. c) A quarterly dividend payment. d) The sale of common stock. Ans: a)
Q.74.The money market is an important financial market because: a) The money market is the world's
liquidity market. b) It is the market in which the central bank does not conducts monetary policy. c) The
government finances most of its credit needs in the capital market. d) It is very volatile market Ans: a

Q.75.Which of the following is not a characteristic of a money market instrument? a) Liquidity b) Long
maturity and liquidity premium c) Long maturity d) Liquidity premium Ans: b

Q.76.(I) Firms issue common stock in far greater amounts than preferred. (II) The total volume of stock
issued is much less than the volume of bonds issued. a) (I) is true, (II) false. b) (I) is false, (II) true. c) Both
are true. d) Both are false.

Ans: c

Q.77.Preferred stockholders hold a claim on assets a) That has priority over the claims of both common
stockholders ar bondholders. b) That has priority over the claims of neither common stockholders r-
bondholders. c) That has priority over the claims of common stockholders, but after that bondholders.
d) That has priority over the claims of bondholders but after that of corn,. stockholders.

Ans: c

Q.78.(I) Preferred stockholders hold a claim on assets that has priority over the claims common
stockholders, but after that of bondholders. (H) Firms issue preferr, stock in far greater amounts than
common stock. a) (I) is true, (II) false. b) (I) is false, (II) true. c) Both are true. d) Both are false.

Ans: a

Q.79.(I) Preferred stockholders hold a claim on assets that has priority over the claims common
stockholders. (II) Bondholders hold a claim on assets that has pncr - over the claims of preferred
stockholders. a) (I) is true, (II) false. b) (I) is false, (II) true. c) Both are true. d) Both are false.

Ans: c

Q.80.(I) A share of common stock in a firm represents an ownership interest in that fir' (II) A share of
preferred stock is as much like a bond as it is like common stock. a) (I) is true, (II) false. b) (I) is false, (II)
true. c) Both are true. d) Both are false.

Ans: c

Unit 4 Q.81.Which of the following services are fund based a) locker facility b) Cash Credit, c) Project
preparation d) Consultancy

Ans: c

Q.82.Which of the following services are fee based b) Issue of DD,

33.For managing receivables of Rs. 20 lakhs and converting them in to cash, which option may be
adopted b) Factoring
Q,84.As per guidelines of SEBI, a merchant banker has to complete the whole process of issue of shares
in a) 60 days b) 70 days c) 80 days d) none of the above

Ans: c

Q.85.For managing a new issue of shares of Rs. 100 Crores , number of Merchant Banks may go up to a)
2 b) 3 c) 4 d) 5

Ans: c

Q.86.What is the minimum net worth condition for a merchant banker a) Rs. 10 crores b) Rs. 5 crores c)
Rs. 1 crore d) Rs. 100 crores

Ans: c

Q.87.Merchant Banking is to be traced to during the 17th and 18th century. a) Rome, France c) Vietnam,
Rome b) Italy, France d) USA, Europe

Ans: b

Q.88.A merchant bank is a financial institution conducting money market activities and a) Lending b)
Underwriting and financial advice c) Investment service d) All of the above Ans: d

Q.89.State Bank of India started merchant banking in c) 1973, 1974

Q.90.The early growth of merchant banking in the country is assigned to the a) FERA b) Foreign
Exchange Regulation Act, 1973 c) Securities Contracts Act d) Income-tax Act Ans: b

Q.91.In India, merchant Banks operate in the form of divisions of India and fore banks and financial
institution, Subsidiary companies established by-1) SBI Capital Markets Ltd. 2) Can Bank Financial
Services Ltd. 3) PNB Capital Services Ltd. 4) BOI Finance Ltd. 5) Indian Bank Merchant Banking Services
Ltd. a) 1, 2, 4, 5 b) 2, 3, 4, 5 c) 1, 2, 3, 4, 5 d) 1, 3, 4, 5

Ans: c

Q.92.Overseas mutual funds in existence: 1) UTI's India fund 2) UTI's India growth fund 3) SBI's India
Magnum Fund-A & Fund-B 4) Can bank Himalayan fund 5) Commonwealth equity fund 6) Grind lays
bank India investment funds a) 1, 2, 4, 5, 6 c) 1, 2, 3, 4, 5, 6

Ans: c

Q.93.Match the following: 1. S.Chakravarty Committee 2. G.S.Patel committee

3. M.Narasimham committee 4. Shah committee a) 1-ii, 2-iv, 3-I, 4-iii c) 1-iv, 3-ii, 4-I ) 2, 3, 4, 5, 6 d) None
of the above

i. Working on monetary system, 1985 ii. Organization & management of Stock Exchange, 1986 iii.
Financial System, 1991 iv. Financial companies, 1992 b) 1-I, 2-ii, 4-iv d) All of the above Ans: b
Q.94. The criteria for authorization of merchant bankers includes: 1) Professional qualification in
finance, law or business management 2) Infrastructure like adequate office space, equipment and
manpower 3) Employment of two persons who have the experience to conduct business of merchant
bankers 4) Capital adequacy 5) Past track record, experience, general expectation and fairness in all
transaction a) 1, 2, 4, 5 b) 1, 2, 3, 4, 5 c) 2, 3, 4, 5 d) None of the above

Ans: b

Q.95.The lead merchant banker holding a certificate under: a) Category I b) Category II c) Category III d)
Category IV

Ans: a

Q.96.. Issue management is an important function of a) Merchant banker, lead manager b) Public
banker, Merchant banker c) Lead banker, Private banking d) None of the above Ans: a

and

Q.97.Financial services through the network of elements such as , serve the needs of individuals,
institutions and Corporate. a) Financial institutions b) Financial markets c) Financial instruments d) All of
the above

Ans: d

Q.98.. is regarded as the fourth element of the financial system. a) Financial services

Q.99.The financial services industry has seen growth in the last few years. d) Mushroom

0.100. Objectives of financial services: 1) Fund raising 2) Funds deployment 3) Specialized services 4)
Regulation 5) Economic growth a) 1, 2, 4, 5 c) 1, 2, 3, 4, 5

Ans: c

Q.101. Chief characteristics of financial services: 1) Intangibility 2) Customer orientation 3) Inseparability

4) Dynamism d) 1, 2, 3, 4

Q.102. Match the following: 1.Fund based activities i. Underwriting of/or investment in shares 2. Non-
fund based activities ii. Dealing in secondary market iii. Arrangement of funds from financial institutions
iv. Managing the capital issues a) 1-I, ii and 2-iii, iv b) 1-ii, iv and 2-I, iii c) 1-I, iv and 2-ii, iii d) 1-iii, iv and
2-I, ii

Ans: a

Q.103. With the globalization of financial services and the liberalization of the econorn, rapid
development in , has been witnessed. 1) Leasing 2) Hire purchase 3) Consumer durable financing 4) Real
estate financing 5) Stock broking 6) Factoring mutual fund 7) Merchant banking 8) Portfolio
management a) 1, 4, 5, 7, 8 b) 2, 4, 5, 6, 7 c) 1, 3, 4, 6, 7,8 d) All of the above Ans: d
0.104. Financial services are: b) Intangible

Q.105. State whether the given statements are true or not: 1) Services cannot be sold like goods
wherever the customer wants it. 2) Services are heterogeneous, inseparable. 3) The marketing mix
philosophy implies that there is an optional mix of the four factors for a given market segment at a given
point of time. 4) Services provided by all the banks are similar. a) 1-F, 2-F, 3-T, 4-T b) 1-T, 2-F, 3-T, 4-F c)
1-T, 2-T, 3-T, 4-F d) All are true

Ans: c

Unit 5

Q.106. State level financial institutions are: 1) IFCI 2) SFCs 3) SIDCs 4) IRBI 5) SIICs

a) 1, 2, 4 b) 2, 3, 5 c) 1, 3, 5 d) 1, 4, 5

Ans: b

Q.107. is basically a savings and investment corporation. a) UTI b) IDBI c) SBI d) RBI Ans: a

Q.108. The is the apex organization in the Indian money market. a) SBI b) RBI c) ICICI d) IDBI Ans: a

Q.109. The portion of total deposits of a commercial bank which it has to keep with RBI in the form of
cash reserves in termed as a) CRR b) SLR c) Bank Rate d) Repo Rate

Ans: a

0.110. 1' August of every year is observed as a) KYC Compliance Day b) KYC Compliance of AML Days c)
Computer Security Day d) KYC Compliance and Fraud Prevention Day Ans: d

Q.111. Annual report on currency and finance is published by a) SIDBI b) RBI c) Ministry of finance d)
None of the above

Ans: b

Q.112. Total number of RRBs now functioning is a) 84

Q.113. SEBI is

a) Regulatory Authority b) Statutory Authority c) Both (a) and (b) d) None of these Ans: c

Q.114. Match the following List-I List -II (a) Unit Trust of India I. 1921 (b) Banking Regulation Act II. 1949
(c) Imperial Bank of India 111.1964 (d) NABARD IV. 1982 a) (a) (b) (c) (d) I III II IV b) (a) (b) (c) (d) IV I II III
c) (a) (b) (c) (d) II IV III I d) (a) (b) (c) (d) III II I IV Ans: d

0.115. Which one of the following is the apex institution in finance sector of India? a) IDBI b) NABARD c)
NHB d) RBI Ans: d
Q.116. Match the items of List-I with items of List-II List II (a) Reserve Bank of India I. NDA (b) EXIM Bank
II. Facilitating small scale industries (c) SIDBI III. Credit control (d) Capital Adequacy IV. Export/Import
Finance a) (a) (b) (c) (d) I II III IV b) (a) (b) (c) (d) IV III II I c) (a) (b) (c) (d) II III IV I d) (a) (b) (c) (d) III IV II I
Ans: d

List

Q.117. Match the following: List-I List-II (a) Credit control I. MCA (b) Corporate control II. SEBI (c) IPO
control III. IRDA (d) ULIP control IV. RBI a) (a) (b) (c) (d) IV II III I b) (a) (b) (c) (d) IV I II III c) (a) (b) (c) (d) II
III IV I d) (a) (b) (c) (d) IV I III II Ans: b

Q.118. On which of the following banks the Reserve Bank of India depends a) Co-operative Banks b)
Regional Rural Banks c) Commercial Banks d) Development Banks

Ans: c

Q.119. The origin of Credit rating can be traced to the a) 1842 b) 1840 c) 1841 d) 1845

Ans: b

Q.120. The first mercantile credit agency was established by a) Louis Tappan. New York, 1841 b) CRISIL,
Russia, 1840 c) Henry Fayol, Europe. 1845 d) None of the above Ans: a

IV

Q.121. In India, the Credit Rating and information services of India ltd.(CRISIL) was se: up as the first
agency in followed by ICRA Ltd. in and CARE

a) 1987, 1990, 1996 b) 1990, 1992, 1995 c) 1987, 1991, 1994 d) 1897, 1901, 1992

Ans: c

Q.122. Factors affecting assigned ratings: a) The character and terms of the particular security being
issued. b) The probability that the issuer will default the security and the ability arc willingness of the
issuer to make timely payments c) The degree of protection extended to investors if the securities are
liquidated reorganized, and/or if the organization declares bankruptcy. d) All of the above Ans: d

Q.123. Identify the benefits of credit-rating to investors: 1) Safeguard against bankruptcy 2) Lower cost
of borrowing 3) Saving of resources 4) Reduction of cost in public issues 5) Credibility of issues 6) Wider
audience for borrowing a) 1, 3, 5 c) 1, 4, 5, 6

Ans: a

Q.124. CRISIL has been promoted by and a) ICICI, UTI

Q.64.The stock market is important because a) It is where interest rates are determined. b) It is the most
widely followed financial market in the United States. c) It is where foreign exchange rates are
determined. d) All of the above. Ans: b

Q.65.The money market is the market in which are traded. a) New issues of securities b) Previously
issued securities c) Short-term debt instruments d) Long-term debt and equity instruments Ans: c

Q.66.Intermediaries who are agents of investors and match buyers with seie securities are called a)
Investment bankers. b) Traders. c) Brokers. d) Dealers.

Ans: c

Q.67.Intermediaries who link buyers and sellers by buying and selling securities at stated prices are
called a) Investment bankers. b) Traders. c) Brokers. d) Dealers. Ans: d

Q.68.When a bond's price falls, its yield to maturity and its current yield b) Rises; rises

Q.69.Compared to money market securities, capital market securities have a) More liquidity. b) Longer
maturities. c) Lower yields. d) Less risk, Ans: b

Q.70.The riskiest capital market security is b) Common stock.

Q.125. Different kinds of rating are: 1) Bond/Debenture rating 2) Equity rating 3) Preference share rating
4) Commercial paper rating 5) Fixed deposits rating a) 1, 2, 4, 5 c) 1, 2, 3, 4, 5

Ans: c