CAIIB-BFM-Mock Test-1

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Caitlin Jackson
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1) These are the instruments used by foreign investors for making investments in the stock markets of IndiaThey are offered outside India for making investments in India through foreign institutional

1 1) These are the instruments used by foreign investors for making investments in the stock markets of IndiaThey are offered outside India for making investments in India through foreign institutional investors (FIIs) and their sub-accountsidentify this financial Instrument a) American depositary receipts (ADRs) b) Global Depository Receipts (GDRs) c) Participatory notes (PNs / P-Notes) d) Inflation Indexed Bonds (IIBs) 2) Which section of Foreign Exchange Management Act (FEMA), 1999,defines the term'foreign exchange'? a) Section 1 b) Section 2 c) Section3 d) Section 4 3) If the Forex Settlement of funds takes place on the same day it is called a) Ready or Cash b) Spot c) TOM d) Forward 4) If the forex Settlement of funds takes place on the next working day of the date of deal,it is called a) Ready b) TOM c) SPOT d) Forward 5) f the forex Settlement of funds takes place on the second working day of the date of deal,it is called a) TOM b) CASH c) SPOT d) FUTURE 6) If the Delivery of funds takes place on any day after Spot date,it is called a) SPOT TOM b) TOM SPOT c) SPOT d) FORWARD wwwccevijayawadacom

2 7) In the Forex market, all exchange rates quoted are generally a) TOM rates b) Spot Rates c) Forward Rates d) None 8) when the delivery of the currencies is to take place at a date beyond the Spot date, ie, beyond two working days, then it is a a) TOM transaction b) Spot Transaction c) Forward Transaction d) Future transaction 9) The rate applied to such FOREX transactions,where the delivery of the currencies is to take place at a date beyond the Spot date, ie, beyond two working days,is a) Spot Rate b) Tom Rate c) Forward Rate d) Futuer Rate 10) Forward rates are derived from a) Spot Rate b) Tom Rate c) MIBOR rate d) None 11) Spot rate + Premium (or) - Discount) gives a) Actual Spot rate b) Premium spot rate c) Forward rate d) Future Rate 12) If the value of the currency is more than that being quoted for Spot, then it is said to be at a) Equlibrium b) Discount c) Premium d) Dear wwwccevijayawadacom

3 13) If the value of the currency is cheaper than that being quoted for Spot, then it is said to be at a) Dear b) Cheaper c) Discount d) Premium 14) Which of the following the currencies are quoted as indirect rates in a Forex Transaction? a) GBP b) AUD c) EURO d) ALL 15) Which of the following the currencies are quoted asdirect rates in a Forex Transaction? a) USD b) AUD c) GBP d) EURO 16) If a quote is 1 USD = Rs 4810, then such a price quotation is called a) Direct Quote b) Indirect QUOTE c) straight Quote d) None 17) If a quote is Rs 100 = 205 USD, then such a price quotation is called a) Direct quote b) Indirect Quote c) Soft Quote d) Hard Quote 18) When we deal in a market where rates for a particular currency pair are not directly available, the price for the said currency pair is then obtained indirectly with the help of another rate mechanism, which is called a) Forward Rate b) Home Rate c) Straight Rate d) Cross rate wwwccevijayawadacom

4 19) India switched to a floating exchange rate regime in the year a) 1991 b) 1992 c) 1993 d) ) Under floating exchange rate, the value of the currency is decided by a) Interest rates across the world b) crude oil Rates c) supply and demand factors for a particular currency d) Demand for dollors 21) The date on which a payment of funds has actually taken place or the date of settlement of funds is known as a) Spot Date b) Home date c) Value date d) Settlement Date 22) Simultaneous buying and selling of a commodity/currencies in two or more markets to take advantage of temporary differences in prices is known as a) Hawala b) Murath c) Arbitrage d) Spot Fix 23) Which of the following is a type of corporate bond issued by an Indian listed company in an overseas market, giving the overseas investor an option to convert the bonds into equity? a) External commercial borrowing (ECB) b) Foreign currency convertible bond (FCCB) c) Hedge funds d) All the Above 24) The various components of money (or) Monetray aggregates such as M1/M2/M3/M4 etc can be aggregated or calculated together in order of a) Solvency b) Liquidity c) Demand d) Supply wwwccevijayawadacom

5 25) Broad money (M3) divided by Reserve Money (M0) gives the value of a) Monetray demand b) Money Multiplier c) Money Index d) Money supply Index 26) As per amendment to the RBI Act in 2006, which of the following 'policy rate' can be altered by RBI at its discretion without any floor or ceiling rate? a) SLR b) CRR c) Base Rate d) MSF rate 27) As per the stipulations of RBI, Every Scheduled Commercial Bank shall continue to maintain SLR, in assets as prescribed, the value of which shall not, at the close of business on any day, be less than prescribed per cent of the total NDTL (Currently prescribed SLR is 215%) as computed on the a) Last preceding fortnight b) Last working day of preceding fortnight c) Last Friday of the Month d) Last Friday of the second preceding fortnight 28) Since October 2013, the Reserve Bank has introduced term REPOs of different tenors, such as a) 91/182/364 days b) 7/14/28 days c) 15/30/45 days d) 30/60/120 days 29) RTGS is a funds transfer systems where transfer of money takes place from one bank to another on a "real time" and on "gross" basis Settlement in "real time" means payment transaction is not subjected to any waiting period "Gross settlement" means a) That the transaction is made for larger amounts only b) That the transaction is settled on a gross electronic platform maintained by RBI c) The transaction is settled on one to one basis without bunching or netting with any other transaction d) None of the Above 30) Who plays the crucial role of a Central Counter Party (CCP) in the government securities, USD INR forex exchange (both spot and forward segments) and Collaterised Borrowing and Lending Obligation (CBLO) markets? a) National Payments Corporation of India Ltd(NPCIL) b) Discount and Finance House of India (DFHI) c) Clearing Corporation of India Limited (CCIL) d) Staock Holding Corporation of India Ltd (SHCIL) wwwccevijayawadacom

6 31) Who is the head of front office in atreasury? a) Chief Risk Officer b) Chief Dealer c) Chief of Treasury d) Chief Front Officer 32) Exposure Ceiling Limits are imposed on trading transactions of the treasury to protect the bank from a) Market and operational risk b) Default risk and settlement risk c) Liquidity risk and interest rate risk d) Currency Risk and Volatility Risk 33) The main component(s) of market risk is/are a) Liquidity risk b) Interest rate risk c) Currency risk d) All the Above 34) What is a statistical measure indicating worst possible movement of a market rate, over given period of time, under normal market conditions, at a defined confidence level? a) Value at Duration b) Value at Risk(VaR) c) Volatility Index d) Gini index 35) Derivatives are used to protect treasury transactions from a) Market risk b) Managing balance sheet risk c) Exchange rate risk d) All the Above 36) Which of the following is not a Derivative product? a) Swaps b) Optins c) Futures d) Contracts 37) What are the special types of contracts which are standardized and exchange-traded? a) Forwards b) Futures c) Warrants d) All the above wwwccevijayawadacom

7 38) Privately negotiated derivative contracts are called as a) OTC derivatives b) Exchange traded derivatives c) Private traded derivatives d) Stealth derivatives 39) Which Committee constituted by SEBI had laid down the regulatory framework for derivative trading in India? a) Dr LC Gupta Committee b) Dr CRanga Rajan Committee c) Dr Tandon Committee d) Dr Malhotra Committee 40) The responsibility for the regulation of all interest rate, forex and credit derivatives, including OTC derivatives, vests with a) RBI b) SEBI c) FIMMDA d) Central Government 41) There is a requirement that for an OTC derivative transaction to be legally valid, one of the parties to the transaction has to be a) RBI b) SEBI c) A RBI regulated entity such as bank/financial Institution d) Any corporate body 42) The kind of options that can be exercised only on the expiration date are known as a) American Option b) European option c) Deep in-the-money option d) At-the-money-option 43) A company is paying a fixed rate of interest at 7% on its 5-year debenture As the interest rates are on a declining trend, the company thinks that it would benefit if the interest rate is linked to market rate of interest So the company entered into an agreemnt with their bankersexchanging the fixed rate on thuier debenture with floating rate (Floating rate of T-bill + 2%),with T-bill rate as benchmark ratewhat is this type of agreement Known as? a) Currency Swap b) Swaption Agreement c) Interest Rate Swap d) Interest Rate Future wwwccevijayawadacom

8 44) An investor in England intends to invest in Indian market and hence is in need of Rupee funds At the same time there is an Indian company needing Euro funds for taking over a company in, Europe The English investor is in a strong position to raise Euro funds, at a relatively low rate, as compared to the Indian company seeking to raise a Euro loanthe position is reverse in case of a Rupee loan, where the Indian company, with a good domestic rating, is in a position to raise Rupee funds at a lower rate It is hence the two parties raise the loans in domestic currencies and swap the loans to serve their respective objectiveswhat is this agreement known as? a) Currency Futures b) Currency Swap c) External Commercial Borrowings(ECB) d) Hedge Currency Funding 45) What is the process of replacement of a contract between two counterparties (Transferor, who steps out of the existing deal, and Remaining Party) to an OTC derivatives transaction with a new contract between Remaining Party and a third party (Transferee)? a) Subjugation b) Novation c) Counter Contract d) Counter party Contract 46) If you are going to purchase 100 US dollars using Japanese yen at a rate of USD/JPY 10475/10485, you need a) 100 x = 10,485 Japanese yens b) 100 x = 10,475 Japanese yens c) Japanese yens d) Japanese yens 47) A combination of spot and forward transactions or a combination of two forward transactions is called a a) Swaption b) Option c) Swap d) None 48) What is this market, where commercial banks and primary dealers can both borrow and lend, but financial institutions (LIC, UTI, GIC, IDBI, NABARD, ICICI) and mutual funds can only lend and RBI, as regulator, routinely participates in the market to inject liquidity (lend) or to mop up liquidity (borrow)? a) Term Money Market b) Call money Market c) Debt market d) Credit Market wwwccevijayawadacom

9 49) What is the name of the money market instrument issued by RBI on behalf of Government to raise short-term funds to bridge seasonal or temporary gaps between government receipts (revenue and capital) and expenditure? a) Government Securities(G-Secs) b) Treasury Bills(T-Bills) c) Bridge Loans d) Development Loans 50) Absence of default risk is found in which of the following Instruments? a) T-Bills b) G-Secs c) Government Bonds d) All the Above 51) Which of the following statements are true with regard to Treasury Bills? 1 Treasury bills are available for a minimum amount of '25,000 and in multiples there of 2 Treasury Bills are issued at a discount and redeemed at face value 3 At present, there are 91-day, 182-day, and 364-day T-bills in vogue 4 Tax deducted at source (TDS) is not applicable on T-bills a) 1 and 3 true b) 1 and 4 are true c) 3 and 4 are true d) All statements are true 52) A money market Instrument issued in the form of a short-term usance promissory note with fixed maturity, by creditworthy and highly rated corporations is known as a) Certifiacate of Deposits(CDs) b) Commercial Paper (CP) c) Collective Investment Paper (CIP) d) Debenture 53) What is true about Collateralized Borrowing and Lending Obligation (CBLO)? 1 CBLO is a money market instrument launched by Clearing Corporation of India Ltd (CCIL) 2 CBLO is essentially a Repo instrument, which is used not only by banks and primary dealers, but also by all other players like financial institutions, insurance companies, mutual funds and corporates who cannot access call money market 3 A borrower can deposit Government securities with CCIL and borrow against such securities from others at a fixed term ranging from 1 day to 1 year 4CCIL acts as an intermediary, so that the lenders and borrowers do not have counterparty risk a) Only 1 and 2 are true b) Only 2 and 4 are true c) Only 1 and 3 are true d) All are true wwwccevijayawadacom

10 54) What is the important base for Risk Identification? a) Sensitivity b) Volatility c) Downside Potential d) All the Above 55) What is the most comprehensive measure of risk which integrates sensitivity and volatility with the adverse effect of uncertainty and is most relied upon by banking and financial service industry to measure and identify risk factors? a) Downside Potential b) Upside Potential c) Set aside Potential d) Lowside Potential 56) Since all assets and liabilities in the banking book are held until maturity, and accrual system of accounting is applied on them, so maturity mismatch between assets and liabilities result in excess or shortage of liquidity This is commonly known as a) Credit Risk b) Liquidity Risk c) Market Risk d) Default Risk 57) The risk of failure of the whole banking system is known as a) Systemic risk b) Systematic risk c) Systemised risk d) Systematically slow down risk 58) Which of the following body issued 'The Basel Accords'? a) The Bank for International Settlements (BIS) at Basel city Switzerland b) Basel Committee comprising Group of Governors and Heads of Supervision (GHOS) c) Basel Committee on Banking Supervision (BCBS) d) Sveriges Riksbank, Sweden 59) Which risk did Basel I, or the Basel Accord 1988, primarily focus on? a) Market Risk b) Credit Risk c) Liquidity Risk d) Default Risk wwwccevijayawadacom

11 60) Basel II uses a "three pillars" concept of which,one of the following is not one such pillar? a) Minimum Capital Requirements b) Supervisory Review c) Market Discipline d) Monetary Discipline 61) The first pillar namely 'Minimum Capital Requirements' under Basel-2 norms deals with maintenance of *regulatory capital calculated for major components of risks that a bank faceswhat is/are those Risk(s) explained under first pillar? a) Credit risk only b) Credit risk and Operational risk c) Operational risk and Market risk d) Credit risk, Operational risk, Market risk 62) The Basic Indicator Approach (BIA),The Standardized Approach (SA),Advanced Measurement Approach (AMA) are the important approaches to measure /Calculate which of the following risk under Basel-2 Accord? a) Credit risk b) Operational risk c) Market risk d) All the Above 63) In India, the RBI has issued the guidelines to the banks that they should have an internal supervisory process which is called ICAAP This acronym refers to a) Internal Core Capital Adequacy Assessment Process b) Internal Capital Adequacy Assessment Process c) Internal Capital Adequacy Augmentation Process d) Internal Core Adequacy Advancement Process 64) Basel III Capital Regulations are being implemented in India with effect from April 1, 2013 in a phased manner and it will be fully implemented as on a) March 31, 2016 b) March 31, 2018 c) March 31, 2019 d) March 31, ) Who is eligible to take Export turnover policy from ECGC? a) Exporters with turnover not exceeding Rs 10 lakhs per year b) Exporters with turnover exceeding Rs 10 lakhs per year c) Exporters who contribute not more than Rs 10 lakhs towards premium d) Exporters who contribute not less than Rs 10 lakhs towards premium wwwccevijayawadacom

12 66) Who are eligible for support under Product Liability Insurance (PLI) of Exim Bank? a) Exporters with IEC number b) Registered Indian exporters c) Registered Indian exporters endeavoring to export to OECD countries d) All exporters 67) SWIFT has introduced new system of authentication of messages between banks replacing Bilateral Key Exchange(BKE) with RMA RMA stands for a) Resources Maximization Application b) Real Management Accounts c) Relationship Management Application d) Relational Management Approach 68) How many Diamond Dollar Accounts can an Exporter maintain? a) Only one b) Two accounts c) Five d) At the discretion of the bank 69) Given that Tier I capital is Rs 500 crores and Tier II capital Rs 800 crores and further given that RWA for credit risk Rs 5000 crores, capital charge for market risk and operational risk Rs 200 crores and Rs 100 respectively, answer the following questions if the regulatory CAR is 8% What is the Tier I capital adequacy ratio? a) b) c) d) ) SBI maintains USD account with Bank of America, New York and when it conducts transactions through this account, it passes entries in its books at Mumbai through the following account a) Vostro account b) Loro account c) Nostro account d) Mirror account 71) RBI guidelines require banks in India to classify their assets and liabilities into buckets a) 8 b) 9 c) 10 d) 16 wwwccevijayawadacom

13 72) Which of the following shipments out of India are exempt from export declaration forms? a) Gifts of goods, valuing not over Rs50000 along with declaration of exports b) Goods or software, when accompanied by a declaration by the exporter that they are not more than USD in value c) Gifts of goods, valuing not over Rs along with declaration of exports d) Goods not exceeding in value USD per transaction exported to Myanmar under bilateral trade agreement 73) All foreign currency inward remittances upto what amount shall, as per FEDAI guidelines, be converted immediately into Indian Rupees? a) USD 5000 b) USD c) USD d) USD ) The office created in a treasury exclusively to provide information to the management and implement risk management systems is known as a) Front office b) Mid office c) Back office d) Integrated Treasury 75) An 8-year 8% semi-annual bond has a BPV of Rs 125 The yield on the bond has increased by 5 basis points What is the profit or loss suffered due to increase in yield?a profit of Rs 1000 a) A profit of Rs 1000 b) A loss of Rs 1000 c) A profit of Rs 625 d) A loss of Rs ) What is the beta factor for retail banking under Standardized approach? a) 12% b) 15% c) 18% d) 19% 77) If a company revalues its assets,its networth a) Will improve b) Will remain same c) Will be positively affected d) None of the above wwwccevijayawadacom

14 78) An effective ALM technique aims to manage the volume, mix, maturity, rate sensitivity, quality and liquidity of assets and liabilities as a whole so as to attain a predetermined a) acceptable risk / reward ratio b) Acid test Ratio c) Volume of Volatility d) None 79) The expert group on Foreign Exchange Markets in India is known as a) SODHANI b) SATABDI c) SODEX d) SODASHI 80) According to Basel committee, Banks are required to hold capital equal topercent of risk weighted value of assets a) 8% b) 9% c) 10% d) 6% 81) Debentures are classified as a) Long Term Debt b) Short Term Loan c) Net Owned fund d) Medium Term debt 82) What is the present value of Rs 10,000/- to be received three years from now at a interest rate of 45%? a) Rs b) Rs c) Rs d) Rs ) Find the interest rate, if the present value is Rs 100/- and future value becomes Rs in three years: a) 4% b) 5% c) 6% d) 7% wwwccevijayawadacom

15 84) Money has time value because a) The individual prefer future consumption to present consumption b) A rupee today can be productive, deployed to generate real returns tomorrow c) A rupee today is worth more than a rupee tomorrow in terms of purchasing power d) Both b and c above 85) In the case of country risk, banks will adopt the country risk classification given by the following agency a) Reserve Bank of India b) ECGC c) Exim Bank d) All 86) RBI has permitted banks to borrow and invest through their overseas correspondents in foreign currency subject to a ceiling of % of their Tier I Capital or USD, whichever is a) 25%, 5 million, lower b) 20%, 10 million, lower c) 50%, 10 million, higher d) 25%, 5 million, higher 87) CCIL takes over the settlement risk, for which, it creates a large pool of resources What is it called? a) Contingency fund b) Market development fund c) Buffer reserves d) Settlement Guarantee Fund(SGF) 88) Under Basel II while prescribing minimum capital ratio of 8%, what additional risk BIS has added to the existing risks? a) Credit risk b) Market risk c) Operational risk d) Liquidity risk 89) Quantitative measures of risks can be classified into three categories 1) based on sensitivity 2) based on downside potential What is the third one? a) Based on volumes b) Based on volatility c) Based on seasonality d) Based on sensex wwwccevijayawadacom

16 90) Notice Money period is a) 1 day b) 1day to 14 days c) 14 days to 1 year d) more than 1 year 91) If Strike price is less than forward rate in case of a put option so it called: a) In-Time Money b) Out-of Money c) At-Time Money d) None of above 92) Capital charge computation is a function of which of the following parameters under IRB approach? a) Probability of default (PD) b) Loss given the default (LGD) c) Maturity (M) d) All the Above 93) 1 day VaR of a portfolio is Rs with 95% confidence level In a period of six months (125 working days) how many times the loss on the portfolio may excedd Rs ? a) 4 days b) 5 days c) 6 days d) 8 days 94) CRISL, ICRA, FITCH and CARE are a) Autghorised Dealers-category-1 in FOREX market b) Credit Rating Agencies c) Primary Dealers in Gilts market d) Authorised Risk Assessors 95) A bank expects fall in price of a security if it sells it in the market What is the risk that the bank is facing? a) Market risk b) Operational risk c) Asset liquidation risk d) Market liquidity risk wwwccevijayawadacom

17 96) The liquidity corridor that RBI uses to control short term interest rates is defined/dictated by a) Repo and reverse repo rates b) Call money market c) Bank rate d) SLR and CRR 97) A bank holds Rs 100 crore liabilities at 9% of one year maturity to fund assets of Rs 100 crore at 10% with two year maturity Over the first year, bank is getting a profit spread of 1 % amounting to Rs 1 crore However, its profits for second year are not certain If interest rate remains unchanged, the profits will continue to be the same However, since the liabilities are for one year and need to be rolled over for second year, bank is exposed to a) Interest rate Risk b) Liquidity Risk c) Credit Risk d) Profit margin Risk 98) What is the difference between the amount of assets and liabilities on which the interest rates are reset during a given period? a) Gap b) Yield c) Spread d) None 99) As per RBI guidelines, any credit through international transactions/instruments up to a period of less than three years is called credit, while credits for three years and more are called External Commercial Borrowing(ECB) a) Trade credit b) Overseas Credit c) Offshore Credit d) International OD 100) Under Basel II,capital requirement under the accord is a) The maximum capital that is required to be maintained b) The minimum capital that is required to be maintained c) The capital as specified by the regulatory authority is required to be maintained d) None wwwccevijayawadacom

BANK FINANCIAL MANAGEMENT

BANK FINANCIAL MANAGEMENT Q1. If the daily volatility of stocks is 0.2%, what is its 10-day volatility? 1) 0.63 2) 2.00 3) 0.75 4) 0.68 Q2. Given that Tier I capital is Rs. 500 crores and Tier II capital