Page 1 of 24 Roll No.... Membership No The Institute of
Chartered Accountants of India Forex & Treasury Management
Certificate Course Evaluation Test Booklet Paper 112th January,
2014 Duration- 3 Hours Total Marks- 100 INSTRUCTIONS: 1. Please
read the instructions carefully given in the question paper and
solve it in the space provided. 2.
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asked. 6. The candidates may use the simple calculator. 7. The
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LEAVING THE EXAMINATION HALL Date :12th January, 2014 Centre:New
Delhi/ Mumbai /Chennai/Kolkata/Bangalore/Ahmedabad (Do not write
your Roll No. and Membership number anywhere in the answer sheet
except as mentioned above) Checked byVerified by Page 2 of 24
CERTIFICATION COURSE ON FOREX AND TREASURY MANAGEMENT S. No. Total
Number of Questions Questions to be answered Total Marks Marks
Obtained Multiple Choice - Section A10010050 Multiple Choice
Section B505050 Total150150100 Page 3 of 24 Section ANumber of
questions: 100 Marks: 50 Multiple choices: There may be more than
one correct answer, but there is at least one. Q1. Which of the
following functions not pertains to Treasury(a)Treasury Front
Office (b)Treasury Middle Office (c)Treasury Back Office (d) Loan
department Q2. What do you mean by Swap Annualized Premium (a)It is
a Repo rate charged by RBI from banks (b)It is a Reverse repo rate
charged by banks from RBI (c)Excess rate charged by one bank over
other on overnight basis (d)
Itis%equivalentofpremiumreceivedorpaidbyexporterorimporterover spot
rate Q3. Which one of the following is odd man out in respect to
Treasury Front Office (a)Buy and Sell of FX in Interbank market
(b)Buy and Sell of Securities in Interbank market (c)Taking new and
reversing of old positions as per Corporate mandate (d) Taking care
of documentation of Treasury function Q4: Which one is the exact
role of Treasury Middle Office (a)Buy and Sell of FX in Interbank
market (b)Buy and Sell of Securities in Interbank market (c)Taking
new and reversing of old positions as per Corporate mandate (d)
Managingexistingandnecessaryamendmentstocreatenewrisk
managementpolicies Q5. Which one is the exact role of the Treasury
Back Office (a)Buy and Sell of FX in Interbank market (b)Buy and
Sell of Securities in Interbank market
(c)Managingexistingandnecessaryamendmentstocreatenewriskmanagement
policies (d)
TakingcareofrespectiveTreasurydocumentationasperapprovedcorporate
risk management policies Q6. Which of the following is odd man out
in spot sales (a)Cash Spot (b)Cash Tom (c)Overnight (d) Spot Week
Page 4 of 24 Q 7.
Asanimporterwhatwouldbethenetoutrightrateforyouwhilebuying$1Mn
USD/INR which is trading at 62.00 having Cash Spot at 2.75 / 3 P
(a)62.0000 (b)61.9800 (c)61.9725(d)61.9700 Q8.
IfUSD/INRSpotistradingat62.00withoneyearforwardpremiumistradingat
5.10/5.12 then what would be lock rate for exporter of $ 1 Mn (a)
67.1000(b)67.0975 (c)67.1200 (d)67.1175 Q9. If JPY/USD is trading
at 104.25 and AUD/USD is trading at 1.03 then what would be the
cross rate for JPY/AUD (a)104.00 (b)101.2130 (c)101.2136(d)102.3136
Q10. If JPY/USD is trading at 104.25 and one year forward rates are
trading at-97/-98 Basis Points then what would be the net outright
rate for an exporter (a) 103.2800(b)103.2795 (c)103.2700
(d)103.2695 Q11. Which among the following is not amongst the
volatility gauges in FX markets (a) USD/INR(b)AUD/USD (c)EUR/USD
(d)GBP/USD Q12. Which amongst the following is a direct FX pair
(a)USD/INR (b) AUD/USD(c)USD/PHP (d)None of these Q13. Which
amongst the following is not a commodity currency pair
(a)Australian Dollar ( AUD) (b)Canadian Dollar ( NZD ) (c)New
Zealand Dollar ( NZD) (d)Chinese Yuan ( RMB) Q14. Which amongst the
following is not a discounted money market instrument (a)Commercial
Paper Page 5 of 24 (b)Certificate of Deposits (c)Treasury Bills
(d)Treasury Notes Q15.
WhichamongstthefollowingisoddmanoutwhenitcomestoTreasuryDiscounted
Instruments (a)Bond Equivalent Yields (b)Bond Discounted Yields
(c)Zero Coupon Instruments(d)None of these Q16.
IfUSD/INRspotistradingat63.00andTreasurerwouldliketocreateaBuyPut
Contract at 58.00 then he would be termed as(a)In the Money (ITM)
(b)Deep Out of the Money (OTM)(c)At the Money (d)None of the above
Q17. What exactly is the difference between Buy Put and Sell Call
Contracts (a)Former is having right to Buy while later is right to
Sell (b)Former is having right to Sell while later is right to Buy
(c)Former is having right to Sell while later obligation to
Sell(d)Both are at sell position however with obligations Q18. If
USD/INR is trading at 63.00 and Treasurer booked Buy Put at 58 and
now would like to reverse the deal. What is odd man out??
(a)Treasurer would pay the difference of Rs 5 to Bank (b)Treasurer
would get the difference of Rs 5 from Bank (c)Treasurer would
square off the net premiums first paid and now received from bank
as in Options you are having right but not the obligation to honor
your trade(d)None of these Q19. Which of the following is acting as
Asian Financial Centre in the world (a)Australia (b)
Singapore(c)London (d)India Q20.
IfUSDInterestratesareat.25%andINRat9%.Currently
UD/INRtradingat63then what would be the outright rate for 1 Year
(a)68.4900 (b)68.4975 (c)68.49875(d)68.5000 Q21. Which one is odd
man out when it comes to booking of USD/INR NDF Trade
(a)AustraliaPage 6 of 24 (b)Singapore (c)New York (d) India Q22.
What is the exact combination of exporting Collars using Options
Contracts (a) Buy Put and Sell Call (b)But Call and Sell Put (c)Buy
Call + Buy Put and Sell Call (d)All of the above Q23. USD/INR Non
Deliverable Forwards (NDF) contracts are settled at(a)USD/INR end
of day spot rate(b)USD/INR end of day closing rate (c)USD/INR RBI
Fixing Rate(d)USD/INR rate quoted by WSJ at end of day Q24. Which
of the following is not an Asian Non Deliverable Forward Contracts
currency Pair (a) Australian Dollar / USD(b)USD/ Indian Rupee
(c)USD/ Philippines Peso (d)USD/ Singapore Dollar Q25. As an
exporter you sold $ 1Mn USD/INR NDFat 63.20 foronemonthandfixing
rate done at 63.00 then how much would be your local currency Gain/
(Loss) (a) Gain of Rs 200,000(b)Loss of Rs 200,000 (c)Gain of
Present value of Rs 200,000 (d)Loss of Present Value of Rs 200,000
Q26. Buy Call Option would be a suitable for which of the following
Options(a)You are an exporter and would like to Buy $ (b)You are an
Importer and would like to Sell $ (c)You are an Importer and would
like to Buy $(d)You are an importer and want to do both sell and
buy $ Q27. Buy Put contracts are also known as(a)Insurance
Contracts (b)Bullish Contracts (c)Getting a right to sell foreign
currency in local currency(d) Both 1 & 3 Currency2007 Exchange
Rate ( Per USD) 2008 Exchange Rate ( Per USD ) Euro.99541.0747
Japanese Yen 102.20114.90 CanadCanadian1.441.50 Page 7 of 24 Dollar
Q28.
ThetableaboveshowstheexchangeratesbetweenvariouscurrenciesandtheU.S.
dollar.Between2007and2008,theU.S.dollar________againsttheeuroand________
against the Japanese Yen (a)Depreciated; appreciated(b)Appreciated;
depreciated (c)Depreciated; depreciated(d) Appreciated; appreciated
Q29.
ThetableaboveshowstheexchangeratesbetweenvariouscurrenciesandtheU.S.
dollar. Between2007 and 2008, the Japanese yen ________ against the
U.S dollar and the euro ________ against theU.S. dollar
(a)Depreciated; appreciated(b) Depreciated;
depreciated(c)Appreciated; appreciated(d)Appreciated; depreciated
Q30.If the price level in the U.S. is 120, the price level in South
Africa is 140, and the nominal exchange rate is 7 South African
Rand (ZAR) per dollar, then the real exchange rate is (a)1.4 South
African goods per U.S. good(b)9.8 South African goods per U.S. good
(c)6 South African goods per U.S. good(d)8.4 South African goods
per U.S. good Q31. With everything else the same, in the foreign
exchange market the(a)The higher the exchange rate, the cheaper are
U.S.-produced goods and services (b)The lower the exchange rate,
the smaller is the expected profit from buying dollars
(c)LargerthevalueofU.S.exports,thegreateristhequantityofdollars
demanded(d)Lower the exchange rate, the smaller the amount of U.S.
exports Q32. If the exchange rate falls, then the expected profit
from holding the currency(a) Increases(b)Decreases (c)Does not
change (d)Can either increase or decrease
InvestorExpectedfuturevalueofa(francsper dollar) Investor A 120
Investor B100 Investor C85 Q33. Using the table above, if the
current market value of the dollar is 125 francs per dollar
(a)Investor A expects dollar depreciation, but B and C expect
appreciation (b)All three investors expect the dollar to appreciate
(c)Investor A expects dollar appreciation, but B and C expect
depreciation (d) All three investors expect the dollar to
depreciatePage 8 of 24 Q34. Using the table above, if the current
market value of the dollar is 125 francs (a) All three investors
hold francs(b)Investor A holds francs, but B and C hold dollars
(c)Investor A holds dollars, but B and C hold francs (d)All three
investors hold dollars Q35. Using the table above, if the current
market value of the dollar is 70 francs (a) All three investors
expect the dollar to appreciate(b)All three investors expect the
dollar to depreciate (c)Investor A expects dollar appreciation, but
B and C expect depreciation (d)Investor A expects dollar
depreciation, but B and C expect appreciation Q36. As a Treasurer
selling your $ in INR on one week ahead of spot is known as(a)Cash
Spot (b)Cash Tom (c)Spot Next (d) Spot Week Q37. In Options Pricing
Collars are also known as except(a)Range Forward(b)Zero Cost
Collars (c)Cylindrical Options (d) Seagull Q38. Treasury Management
Systems (TMS) refers to except (a)Automated Software that takes
care of all Treasury Functions (b)Software that computes
revaluation of all Foreign Currency hedges in books (c)Translation
of all local currency balances in books into foreign currency (d)
Booking of Accounts receivables entry and linking the same with
payment site Q39. Treasury Risk Management Policy covers the
following(a)Risk Management objectives of the company (b)Foreign
Exchange Hedging Program (c)Hedging in onshore and Offshore
Treasury Markets (d) All of the above Q40. Suppose a Treasurer
booked sell position of $ 1 Mn at 63.20 for 1 Year. On maturity he
ishavingshortageinEEFCA/csandwhatallaretheavailableoptionstohonorthe
trade (a)Cancellation of existing contract (b)Prematurity of
existing contracts (c)Rollover of existing contracts (d) Options 1
& 3 Q41.
WithreferencetoabovequestionwhatwouldbecancellationcostifUSD/INRtrading
at 65.00 (a)Gain of USD 27,692Page 9 of 24 (b) Loss of USD
27,692(c)No Gain /(Loss) on cancellation as delivery would happen
at 63.20 (d)As per RBI Policy there is no cancellation allowed Q42.
With reference to Question No 40 what would be Rollover Cost and
new contract rate if USD/INR 1 months premium is trading at Rs 5/$
(a)Loss of USD 27,692 at new outright rate of Rs 70 / $ (b) Loss of
USD 27,692 at new outright rate of Rs 65 / $(c)Gain of USD 27,692
at new outright rate of Rs 70 / $ (d)Loss of USD 27,692 at new
outright rate of Rs 65 / $
Q43.WithreferencetoQuestionNo40.WouldthatbepossibleforTreasurertocancel
capital a/c transaction of $ 1 Mn (a)Yes and take cancellation
Gain/(Loss) in the books (b)No and take cancellation Gain/(Loss) in
the books
(c)CapitalA/ccancellationispermittedprovidednodrawdownofCapitalA/c
remittances (d) Options 1 & 3 Q44. Treasurer booked one Buy Put
Contract of USD/INR of $ 1 Mn at 65 for 1 year maturity.
Thereisapremiumof$100,000forthatBuyPutdeal.Whatwouldbeeffective
accounting of that Premium? (a)
TreasurerisallowedtocapitalizethePremiumover1Yearinthebooksand
Treasurer is also allowed to deferred the payment with banks
(b)Treasurerhavetohavepayentirepremiumatonegoandnocapitalizationis
allowed
(c)ThereisnoprovisionofdeferredpaymentstobanksandTreasurerhavetopay
entire $ 100,000 in one go and take in books (d)Treasurer can pay
on deferred and do deferred capitalization in books Q45. With
reference to Question no 44 what would be max loss in the books to
be taken by Treasurer in case of cancellation of Buy Put Contract
(a)Premiumof$100,000paidtobankprovidednodeferredpaymentand
Capitalization (b)Deferred Premium taken in books and no
Capitalization (c)Deferred Premium taken in books provided
Capitalization (d) Premium Capitalize in books and ignore deferred
payment to be done till now Q46.When large credit proposals are
considered by banks for sanction, (a)They need to be prior cleared
by the treasury department (b)They need subsequent approval by the
treasury department (c)The ALM committee has to approve(d) Treasury
department does not have any role in it Q47. CLS, earlier known as
Continuous Linked System(a)Is owned by the world's leading
financial institutions Page 10 of 24
(b)SettlespaymentinstructionsrelatingtounderlyingFXtransactionsin17major
currencies
(c)Operatesthelargestmulticurrencycashsettlementsystemtomitigatesettlement
risk for the FX transactions of its Members and their customers.
(d) Has all the features a to c above Q48. The Clearing Corporation
of India Ltd was set up for providing(a)
exclusiveclearingandsettlementfortransactionsinMoney,GSecsand
Foreign Exchange (b)settlement services in imports and exports
(c)guarantee of payments in interbank transactions (d)services to
banks in clearing the cheques Q49. The Clearing Corporation of
India Ltd (a)Is a wholly owned subsidiary of RBI(b) Is majority
owned by banks (c)Is wholly owned by select banks (d)Is a publicly
held company Q50.The types of trades that are currently settled
through The Clearing Corporation of India Ltd are (a)All forex
interbank transactions (b) All Forex inter-bank Cash, Tom, Spot and
Forward USD/INR transactions (c)All Forex inter-bank Cash, Tom,
Spot transactions (d)All Forex inter-bank Cash, Tom, Spot and
Forward transactions Q51. Banks which are authorized to handle
international business (a)Are ipso facto permitted to import gold
(b) Can trade in foreign exchange through their treasury department
(c)Handle gold trading through their commodity desk (d)are
considered as international banks Q52. The Capital Adequacy Ratio
of a bank is roughly the equivalent of(a) Debt equity ratio of a
company(b)Current ratio of a company (c)Quick current ratio of a
company (d)DSCR of a company Q53.Asian Clearing Union with AMU as
the accounting unit is an example of(a)Unified currency (b)Regional
trade block(c)Arrangement for payments for intra-regional
transactions (d)All the above Q54. Mark the odd one out in the
following in the context of balance sheet exposure (a)Forward
contracts (b)Swaps (c)Term loans Page 11 of 24 (d)Options Q55.
Trading books of a bank refer to(a)The records maintained
supporting the trading activities of a bank (b)Commodities traded
by a bank (c)Audit functions of a bank (d) The treasury of a bank
Q56. One common link between credit management and treasury in a
bank is(a)The Board of Directors (b)The Chairman of the bank (c)The
ALCO committee (d)The common General Manager heading the
departments Q57. A large corporate needs to maintain good
relationship with its bankers(a)Only if the corporate is a large
borrower (b)Only if the corporate desires to avail any type of
service from the bank (c)Since banks offer financial services to
all categories of corporates (d)As a corporate social
responsibility Q58. Which of the following statement is true with
reference to treasury functions? (a)All corporates have to
necessarily have a treasury department (b)RBI guidelines on
treasury functions apply only to treasuries of banks (c)Bank
treasuries have to adhere to guidelines issued by RBI and SEBI (d)
Treasury in a bank is a separate profit center. Q59.Between
drawings against unavailable balance and an unsecured overdraft,
banks(a) Feel more comfortable in taking a credit risk in the
former case (b)Do not distinguish between the two (c)Have greater
interest income in the latter case (d)Have different provisioning
norms Q60. For a treasurer, sweep facility offered by banks helps
in(a)Reducing interest burden (b)Enhancing interest income
(c)Managing liquidity (d) All the above Q61. Bank decides the value
of an account exclusively based on (a)Interest earned out of that
account (b)RBI guidelines uniformly across all banks (c)Scientific
calculations after accounting for cost of funds (d)Non-fund based
income earned from that account Q62. Volume of transactions handled
at Clearing Houses will decline due to(a)Electronic remittance
schemes (b)Mobile payment systems (c)ATM enabled transfers(d) Due
to all these developments Page 12 of 24 Q63. As per RBI guidelines
on reconciliation of Nostro accounts (a)The bank statements should
be received atleast once in fifteen days (b) The bank statements
should be received atleast once a week
(c)Thebasedocumentsforreconciliationarethemirroraccountandrecordof
transactions during that period
(d)BankshavetoplacebeforetheManagingDirectorthesummaryofreconciliation
every month Q64. The mirror account of a Nostro account is
maintained (a)In Indian rupees (b)In corresponding foreign
currency(c)In US Dollar (d)
Incorrespondingforeigncurrencywithitsrupeeequivalentforeach
transaction Q65. In case of reconciliation of Nostro
accounts,(a)Any error could have impact on the profit figure of the
bank (b)Errors will result in accounting inaccuracy
(c)Valuationisbasedontheoutstandingrupeeequivalentinthemirroraccount&
hence reconciliation is important (d) All the above are true Q66.
The net float for a company is(a) The difference between the cash
balance shown in the company's Ledger and the available balance in
its bank account (b)The cash balance shown in the company's Ledger
plus cheques deposited (c)The cash balance shown in the company's
Ledger less cheques issued (d)The unveiled overdraft balance in the
bank Q67.The total amount of Cheques issued but not presented for
payment at the bank is known as (a)Collection float (b)
Disbursement float (c)Net float (d)Gross float Q68.In a lock box
system covering collection of cheques, there is a saving on account
of the following activities and the reasons. Match the activities
and the reasons. Activities A.Cuts down the mailing time B.shortens
the availability delay C.reduces the processing timeReasons i.The
company does not have to open the envelopes and deposit the Cheques
for collection ii.Because the Cheques are typically drawn on local
banks. iii.Cheques are received at a nearby post office instead of
at corporate headquarters Which of the following pairing is correct
Page 13 of 24 (a)A andi (b) A and iii (c)B andi (d)B & C and
iii Q69.Following is not an alternative for lock box facility for
cheques collection(a)Door step banking (b)Electronic payment (c)Pan
India clearing system (d) Payment through DDs Q70.The corporates
should have a risk management policy for their forex treasury
functions because (a)RBI has advised so (b) to minimize the effects
of adverse exchange rate fluctuations(c)Senior management should
feel happy (d)It helps in avoiding risk
Q71.Balancesheetexposurethatresultsfromtheconsolidationoffinancialstatementsof
foreign entities into the home currency is called as (a)
Translation exposure (b)Transaction exposure (c)Operating exposure
(d)Economic exposure
Q72.Essentially,fourdifferentstrategiesareavailabletoacompanyformanagingforeign
currency risk and following is not one of them (a)Take no action
(b)Always hedge everything (c)Selectively hedge risk (d) Trading
position hesitatingly Q73.The global trend in risk management
structure is (a) Centralizing risk management with integrated
treasury management (b)Decentralized set up to take care of local
features (c)Decentralized set up with separate treasuries for
different activities (d)To separate treasury activity from risk
management issues Q74.The software to be used by treasury of a
bank(a)Is advised by RBI (b) Should conform to the guidelines
prescribed by RBI (c)Is a pure commercial decision taken by the
bank (d)Is always developed in house, in view of sensitivity
Q75.Flexcube core banking application including treasury functions
(a)Is a product of Infosys (b) Is a product of Oracle (c)Is a
product originally by a company called I Flex Solutions Ltd taken
over by Infosys (d)Is not used by banks in India Page 14 of 24
Q76.The treasury software used by banks need to have the following
features [mark the odd one] (a)Should ensure functional separation
(b)Dealers can capture data through proper login credentials
(c)Thetradingdate,time&serialnumberaretobenecessarilyenteredbythe
dealer (d)Provision to enter late deals data with remarks
accordingly
Q77.ExchangeratesystemwheretheCentralBankintervenestosmoothentheexchange
rate fluctuation is called (a)Floating rate system (b) Dirty float
(c)Clean float (d)Free float Q78.As per FEDAI rules, a spot
contract shall be deliverable on(a)Next business day following the
day when the transaction is closed. (b)The same business day when
the transaction is closed. (c)Second day following the day when the
transaction is closed. (d)
Secondsucceedingbusinessdayfollowingthedaywhenthetransactionis
closed provided there is no holidays in between Q79.In India, the
exchange rate is quoted in direct terms.(a)This is at the
discretion of the banks (b)This is the market practice (c)This is
as per FEDAI rule (d)This is as per RBI circular
Q80.Incaseofcancellationofaforwardcontractattherequestofthecustomerthe
differencebetweenthecontractedrateandtherateatwhichthecancellationis
effected (a)Is absorbed by the bank (b) Is passed on to the
customer (c)Is passed on to the customer if it results in loss
(d)Is passed on to the customer if it results in gain Q81.A forward
purchase contract is cancelled at the banks (a) Spot T.T. selling
rate on the date of cancellation (b)Spot T.T. purchase rate on the
date of cancellation (c)Spot T.T. selling rate on the date of
contract (d)Spot T.T. purchase rate on the date of contract
Q82.AbankdealerhasalongpositioninUSDollarwhenhisquotewas65.60/65.90.He
wants to square or near square position. What his quote will be?
(a)65.30/65.60 (b)65.45/65.75 (c)65.45/66.05 Page 15 of 24
(d)65.75/66.05 Q83.An Indian exporter is expecting to receive US
dollar after three months. Indian interest rates are higher than
that of US Dollar. A possible strategy of hedging in money market
is (a)Borrowing and investing in USD(b)Borrowing and investing in
INR (c)Borrowing in USD and investing in INR (d)Borrowing in INR
and investing in USD Q84.The J-curve relating to exchange rate
impact is linked to the concept of (a) Elasticity (b)Interest rate
parity (c)Purchasing power parity (d)Capital asset pricing model
Q85.A non-deliverable forward [NDF] market exists for a currency
if(a)It is a highly traded currency (b) It is subject to capital
controls (c)It is not an approved currency in the market
(d)Delivery of that currency is not possible Q86.Which is a true
descriptionof anon-deliverable forward [NDF]: (a)An illegal market
(b) A foreign currency financial derivative contract (c)Results in
physical delivery of the currencies at maturity (d)It develops in
the onshore market Q87.The value of a fixed-income investment
is(a)The sum of all of its cash flows(b) The sum of all of its cash
flows discounted at an interest rate that reflects the inherent
investment risk (c)The sum of all of its cash flows discounted at
the market rate(d)The sum of all of its cash flows discounted at
the current interest rate Q88.In general, changes in the value of a
bond(a)Are directly related to changes in the rate of return
(b)Have no relation to changes in the rate of return (c)Are exactly
equal to changes in the rate of return (d) Are inversely related to
changes in the rate of return Q89.Macaulay
Duration(a)Measuresthenumberofyearsrequiredtorecoverthetruecostofabond,
considering the present value of all coupon and principal payments
received in the future (b)It is the only type of duration which is
measured in years (c)It assumes that interest rates are
continuously compounded (d) All the above are true Page 16 of 24
Q90.The convexity of a bond is(a)A measure of the curvature of its
price/yield relationship
(b)Aconfirmationthatthepricechangeonaccountofchangeininterestrateisnot
linear
(c)Itovercomesthelimitationofdurationasameasureofinterestrate/price
sensitivity (d) All the above are true Q91.If theValueat Risk[VAR]
onan asset is $ 100 million at a one-week, 95% confidence level, it
means(a)
Thereisonlya5%chancethatthevalueoftheassetwilldropmorethan$ 100
million over any given week. (b)There is only a 5% chance that the
value of the asset will drop by $ 100 million over any given week.
(c)The maximum loss on the portfolio will be $ 100 million over any
given week. (d)There will surely be a loss of $ 100 million over
any given week in this portfolio. Q92.The Value at Risk [VAR] can
be specified for(a)An individual asset only (b)A portfolio of
assets only (c)An entire firm only (d) An individual asset, a
portfolio of assets or for an entire firm Q93.In Value at Risk
[VAR] calculation, the focus is on (a)Credit risk (b) Market risk
(c)Interest rate risk (d)Liquidity risk Q94.The term structure of
interest rates (a)Is the inverse of yield curve (b)Is a graph that
plots interest rates on different dates
(c)Isagraphthatplotstheyieldsofsimilar-qualitybondsagainsttheir
maturities, from shortest to longest (d)Is the interest rate chart
displayed by banks on their deposit spread Q95.An increase in NPA
level of a bank can be contained (a)By increasing the total
advances portfolio of the bank (b)If the bank takes effective
recovery steps (c)By changing the way in which accounts are
classified as NPAs (d)By taking all the steps a, b & c above
Q96.Chart showing coupon rates against different maturities is
called (a)Yield curve (b) Spot curve (c)Forward curve (d)Term
structure curve Q97.A 2 X 7 forward loan in a fixed interest rate
market Page 17 of 24 (a) Commences two months from the spot date
and lasts for five months (b)Commences two months from the spot
date and lasts for seven months (c)Commences from the spot date and
lasts for five months (d)Commences from the spot date and lasts for
seven months Q98.A zero coupon bond is known by that name because
(a)There is no yield in such bonds (b) There is no payout before
maturity (c)The coupon attached carries zero interest rate (d)There
is no payment received on such bonds Q99.Which of the following
statement is not true? (a)A zero coupon bond can never trade at
premium prior to maturity
(b)Aninvestorwhotradesinzerocouponbondpriortomaturitymayexperiencea
capital gain or a capital loss
(c)Aninvestorwhobuysazerocouponbondandholdsittillmaturityisalways
assured of capital gain (d) Zero coupon bond is different from deep
discount bond Q100.Reinvestment risk in case of bonds (a)Arises due
to intermediate cash flows getting reinvested at rates lower than
earlier anticipated (b)Does not arise in case of zero coupon bonds
(c)Is not taken into account in case of YTM calculation of plain
vanilla bonds (d) All the above statements are true Section B
Number of questions: 50 Marks: 50 Multiple choices: There may be
more than one correct answer, but there is at least one. Q101.Which
is not true of A normal yield curve? It (a) Is also called inverted
yield curve (b)Slopes upwards (c)Indicates long term yield are
higher than short term yield (d)Is also called positive yield curve
Q102.If a bond has a duration of 5 years and interest rates
increase by 1%, the bond's price will(a)Grow by approximately 5%
(b)Grow by approximately 1% (c)Decline by approximately 5%
(d)Decline by approximately 1% Q103.What is a Government security?
(a)It is a debt instrument issued by Government Page 18 of 24 (b)
ItisatradableinstrumentissuedbytheCentralGovernmentortheState
Governments (c)It is a bond issued by Government (d)A security
which is guaranteed to be repaid on due date by the Government
Q104.Dated Government securities are (a)Government securities which
carry a date of issue (b)Government securities which have a fixed
maturity date
(c)Governmentsecuritieswhicharelongtermsecuritiescarryingafixedorfloatingcoupon
rate (d)Government securities which are already matured Q105.In
case of Government securities, the following rule applies if the
payment date falls on Sunday or holiday (a) If it is the coupon
payment date, then it is made on the next working day (b)If it is
the coupon payment date, then it is made on the previous working
day (c)If it is the redemption date, then it is made on the next
working day (d)Both for redemption & coupon, the payment will
be on the next working day Q106.What is a shut period in government
securities market? (a)Period during which government securities
cannot be bought (b) Period during which government securities
cannot be delivered (c)Period during which government securities
are not auctioned (d)Period during which government securities are
not available for trading Q107.Which is not true of the following?
(a)InDeliveryVersusPaymentsettlement,transferofsecuritiesandfundshappen
simultaneously (b)Delivery Versus Payment settlement eliminates
risk (c)InDeliveryVersusPaymentsettlementbuyingandsellingtakesplace
simultaneously (d)There are three types of Delivery Versus Payment
settlements Q108.Which of the below is not commonly used by
investors to measure the potential return from investing in a
bond(a)Coupon yield (b)Current yield (c)Yield to maturity (d)
Coupon rate Q109.Which of the following is not a money market
instrument? (a)Call money (b)Repos& Reverse Repo (c)Treasury
bills& CMB (d) Treasury Bonds Q110.In securities market, face
value of an instrument is not the following: (a)The amount that is
paid to the investor at the time of maturity (b) The amount that is
paid by the investor for acquiring that security Page 19 of 24
(c)The redemption value (d)The repayment amount Q111.Commercial
Paper is(a)
Anunsecuredmoneymarketinstrumentissuedintheformofapromissory note
(b)A secured money market instrument issued in the form of a
promissory note (c)An unsecured money market instrument issued in
the form of a Bill of exchange(d)A secured money market instrument
issued in the form of a Bill of exchange Q112.Which of the
following is not true (a)Treasury bills are issued only by Central
Government (b)Treasury bill offers short term investment
opportunities (c)Generally the maturity of treasury bills is ten
years (d)The minimum amount of treasury bill is Rs 25,000 Q113.The
following is not a post-sale finance option (a)Factoring
(b)Forfeiting (c)Packing credit advance (d)Bills discounting by
banks Q114.When a bill is forfeited, the risk is borne by (a)Seller
(b) Avail bank (c)Buyer (d)The discounting bank Q115.While
factoring an export bill, the factoring agency (a)Carries the
credit risk invariably (b) Can factor with or without recourse
(c)Can approach a bank to offload the risk (d)Does not have any
risk at all Q116.The interest rate on export bill discounted by
banks is(a)Exactly as advised by RBI (b) A concessional interest
rate (c)Purely at the discretion of the bank concerned (d)Advised
by FEDAI
Q117.Fullrangeofserviceslikecollection,salesledgermaintenanceetcareofferedbythe
agency which offers (a) Factoring (b)Forfeiting (c)Bill discounting
Page 20 of 24 (d)All the above types of services Q118.When an
export bill is discounted by a bank without backed by an LC (a)The
bank recovers the money from ECGC if there is default (b) The bank
reserves the right to recover the advance from the exporter (c)The
bank has no right to recourse against the exporter (d)The banks
right of recovery is against the importer Q119.In India, banks
offer to their exporter clients the facility of(a) Bill
discounting(b)Factoring and bill discounting (c)Bill discounting
and forfeiting(d)Factoring and forfeiting
Q120.Asamarketpractice,thefollowingserviceisofferedforthefullportfolioofthe
exporter and not case wise (a)Bill discounting (b) Factoring
(c)Forfeiting (d)Bill refinancing
Q121.AnIndianregisteredcompanyengagedincommoditytradingandpromotedby
foreign insurance companies desires to make a public issue to
Indian public. Who is the regulator for the public issue? (a)RBI
(b)IRDA (c)FMC(d) SEBI Q122.The following entity cannot register as
Qualified Foreign Investor [QFI] (a)Resident in a country which is
not a member of FATF (b)Resident in India (c)Registered with SEBI
as FII (d) All the above Q123.As per the Prevention of Money
Laundering Act 2002 and the rules thereunder, all cash transactions
more than the following amount are to be reported by the
intermediaries in capital market (a)Rs One lac (b)Rs Five lac (c)Rs
Ten lac (d)Rs Twenty five lac Q124.Example of an intermediary which
does not belong to the primary market is(a)Lead manager (b) Stock
broker (c)Transfer agent (d)Underwriter Q125.Which is not correct
in respect of Foreign Currency Convertible BondsPage 21 of 24
(a)Can be issued by foreign companies in Indian markets (b)Are not
debt instruments (c)Can be issued by Indian companies in overseas
markets (d)Are not subject to ECB guidelines Q126.Depository
Receipts in a GDR issue (a)Are not negotiable securities (b)Are
issued in India (c)Represent the rupee denominated equity shares of
the company (d)Are issued by a custodian bank Q127.In case of
ADR/GDR issues, (a)The custodian bank is outside India (b) They are
listed on European or US Stock exchanges (c)The depository is in
India (d)The custodian deposits the underlying shares with the
company Q128.Foreign investment in partnership firm in India (e) Is
allowed on non-repatriation basis (f)Is not allowed at all (g)Is
allowed by NRIs, PIOs & other foreigners (h)Always needs RBI
permission Q129.Foreign currency exchangeable bond (a)Is same as
foreign currency convertible bond (b)Is denominated in foreign
currency and issued by Offered company (c)Is denominated in foreign
currency and issued by Issuing company (d)Can be issued in US
Dollar only Q130.Refinancing of existing FCCBs(a)Is not allowed (b)
Can be allowed by the designated AD banks (c)Is allowed subject to
RBI permission (d)Is allowed under approval route only Q131.After
availing ECB loan and obtaining LRN from RBI, if following changes
are required, it invariably needs RBI permission (a)Change in
currency of borrowing
(b)Changeinrepaymentschedulewhethertheaveragematurityperiodchangesor
not (c)Change of Designated AD Bank (d) Increase in the amount of
ECB beyond the automatic route ceiling Q132.Which of the following
pairing is correct? (a) Domestic banking : IBA = forex banking :
FEDAI (b)Domestic banking : RBI = forex banking : FEDAI (c)Forex
banking : RBI = domestic banking : IBA (d)Domestic banking : SEBI =
forex banking : RBI Page 22 of 24 Q133.A credit rating agency rates
(a)At the cost of the enquirer (b)The company which issues the
instrument (c)By denoting the ratings with alphanumerical symbol
(d) By evaluating the financial condition of issuers of debt
instruments
Q134.TheratingsofCreditRatingAgencies[CRA]maybeusedbybanksforassigningrisk
weights for credit risk (a)If the CRA is approved by SEBI (b)
Subject to consistently using it for each type of claim, for both
risk weighting and risk management purposes (c)Only unsolicited
rating can be used (d)Both solicited and unsolicited rating can be
used subject to different weightage Q135.Venture capital
investments(a)Are generally considered illiquid (b)Are risky (c)Are
generally in startup companies (d) Have all the above features
Q136.A Sovereign Wealth Fund (a)Is not necessarily a State owned
investment fund (b)
IsaStateownedinvestmentfundthatinvestinStrategicassetsacrossthe
world (c)Created out of borrowings by any Government (d)Includes
foreign currency reserve assets held for BOP or monetary policy
purpose Q137.Portfolio Management Service [PMS](a) Results in
exposure to variety of products for the investor (b)Results in
exposure to variety of products for the service provider like the
MF (c)Does not result in individual investor owning the securities
(d)Does not enable the manager to buy or sell securities on behalf
of the investor Q138.Certificate of Deposit [CD] in India is (a)Not
a negotiable instrument(b)Issued only as usance promissory note
(c)Issued by corporates to raise funds (d)Issued by Scheduled
Commercial Banks & FIs. Q139.Primary Dealer [PD](a)Is an
individual like a broker (b)Is involved in selling government
securities to investing public like an agent (c)Acts like a market
maker for Government securities (d)Is another name for an
Authorised Dealer Page 23 of 24 Q140.PDs can (a)Maintain Current
account with RBI (b)Maintain SGL account with RBI (c)Access LAF of
RBI (d) Have all the above facilities Q141.Between Over the Counter
[OTC] market & Exchange traded market (a)OTC is more liquid
(b)OTC is more formal (c)Exchange traded market is considered as
bilateral (d) OTC isless transparent and operate with fewer rules
Q142.A traveler sells his unused currency notes on his return from
travel abroad to the same bank from where he had bought it earlier.
The bank will apply (a) Its currency note buying rate (b)Its
currency note selling rate (c)The rate at which the bank had
earlier sold the notes to the traveller
(d)Therateatwhichthebankhadearliersoldthenotestothetravelerorthedays
rate whichever is lower Q143.The rates quoted by a bank for spot
and 3 month forward transaction in US Dollar are: 61.35/36 &
5000/5500. What is the rate applicable for a 3rd month delivery
export bill, ignoring transit period? (a)61.91 (b)61.86 (c)60.85
(d) 61.85 Q144. If USD/INR spot is trading at 63.20 and one year
fwd premium is trading at 63.40 then which of the following
statements are true (a) Forward curve is almost At the Money
(ATM)(b)Forward curve is Deep In the Money (ITM) (c)Forward curve
is Out of the Money (OTM) (d)None of these Q145. If USD/INR spot is
trading at 63.20 and one year Swap annualized premium is trading at
6.8% then what would be the net outright rate (a)66.4500 (b)67.4500
(c)68.4500 (d) 67.4976 Q146. If USD/INR is trading at 63.20 and
Cash Spot is trading at 2.75/3.00 P then what would be outright
rate for exporter to sell $ 1 Mn(a) 63.1700(b)63.1725 Page 24 of 24
(c)63.1675 (d)63.1000 Q147. If USD/INR is trading at 63.20 and
Value Tom is trading at 1.75/2P then what would be outright rate
for exporters to see $ 1 Mn (a) 63.1800(b)63.1775 (c)62.3000
(d)62.2000 Q148. US dollar is quoted today as: spot $ 1 = Rs 60 and
six months forward $1 = Rs 63.(a)This means $ is at discount
(b)This means future of rupee is uncertain (c)This means future of
rupee is unclear (d) This means $ is at premium Q149.US dollar is
quoted today as: spot $ 1 = Rs 60 and six months forward $1 = Rs
63. The annualized forward margin is (a) 10% (b)5% (c)3% (d)6%
Q150.The forward premium is a function of(a)Exchange rate
differential (b) Interest rate differential or Interest Rate Parity
(c)Demand and supply (d)Intervention by Central Banks