Some model illustrative questions

Choose the correct answer for the questions given below from the options.

1. Fall in interest rates causes the prices of government securities to go up.

A. False

B. True

C. Difficult to say

2. Risk arising out of changes in interest rate levels is considered as

  1. Operational risk
  2. Credit risk
  3. Systemic risk
  4. Market risk

3. Capital Market is a market for ……………………….

a. Raising capital for long term use and trading in the same

b. Lending and borrowing of money

c. Dealing in foreign currency

d. None of the above

4. In India, the credit rating agencies mostly rate

  1. The companies
  2. The instruments

5. Credit rating provides the credit standing of an entity. It is, however, considered a

  1. Lagged indicator
  2. Lead indicator
  1. Falling interest rates cause NAVs of debt mutual funds to go down
  1. False
  2. True
  3. Difficult to say

7. The underlying in a derivative can be …………………..

a. A share or any other financial asset

b. An index

c. A commodity

d. All of the above

8. Money market is a market for …………..

a. Securities of long term nature

b. Exchanging foreign currencies

c. Securities of short term nature

d. None of the above

9. An Asset Management Company (AMC) is formed …………….

a. To manage banks’ assets

b. To recover Non-performing assets

c. To make decisions regarding investments in assets

d. To launch and manage mutual fund schemes

10. A bond with ‘BBB’ rating will carry lower interest rates than the one with ‘ A ‘rating.

  1. false
  2. true
  3. difficult to say

11. Capital charge for credit risk requires inputs on PD, LGD, EAD and M. Under advanced IRB approach, who provides the input for LGD?

A. The bank

B. The supervisor

C. The Basel Committee of Banking Supervisors ( BCBS )

D. None of the above

12. A merchant banker’s prime duties include……………..

a. Maintaining accounts of merchants

b. Granting overdraft to merchants

c. Helping companies raise funds and act as manager for public issues

d. None of the above.

13. Money market embraces the following:

a. Long term debt

b. Markets for near-money liquid assets

c. Equity instruments

d. All abov

14.When the interest rates fall, the market price of a fixed rate bond

A . falls

B . rises

C . remains unchanged

15. Operational risk arises from

A .inadequate or failed internal processes

B .people and systems

C .external events

D defaults

Which of the following is true?

  1. all of them
  2. none of them
  3. A, B & C
  4. A, B & D

16. Basel- I Accord (1988 ) frame work addressed

A. Credit risk

B. Market risk

C. Operational risk

D. Defined capital component

Which of the following is correct?

1. All of them

2. A, B & D

3. A, C & D

4. A, B & C

  1. Under Basel- II, capital requirement under the accord is
  1. The maximum capital that is required to be maintained
  2. The minimum capital that is required to be maintained
  3. The capital as specified by the regulatory authority

D. None of the above

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