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Institute of Chartered Accountants of India
Certificate Course of Forex and Treasury
Management
Paper: 1
Answer all the questions
Each question carries one credit. Mark the correct answer from the
alternatives provided
1. The term pooling as used in Treasury Management is indicative of
a. Pooling of incoming cash from recurring and non-recurring sources
b. Pooling of all divisional assets and liabilities to determine the true value
of the company
c. Consolidation of funds from a number of different accounts of the same
corporate to improve value or yield
d. All of the above.
2. D & B Services Ltd. Offers credit to C&A Manufacturing Ltd. On terms
8/15, net 90. For a particular transaction, C & A Manufacturing Ltd.
Makes the payment within a period of 15 days. Which of the following is
true?
a. C & A Manufacturing Ltd. has to pay only 90% of the total billed
amount.
b. C & A Manufacturing Ltd. Will get a cash discount of 15% on the
transaction immediately.
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c. C&A Manufacturing Ltd. Will get a cash discount of 15% on the
transaction, payable after 90 days.
d. C&A Manufacturing Ltd. Will get a cash discount of 8% on the
transaction.
3. Which statement is true about terms of trade credit of 4/10, net 30?
a. A 10% cash discount is offered for payment before 30 days.
b. A 4% cash discount can be taken for payment before the 10th of the
following month.
c. A 10% cash discount can be taken if paid by the fourth day after
invoicing.
d. No cash discount is offered after the eleventh day.4. Apex Corporation purchase raw materials on the terms on 5/10, net 60, but
can pay in 90 days if it does not want to take discounts. The effective cost of
the non-free trade credit is
a. 20%
b. 21%
c. 22%
d. 23%
5. Which of the following is the difference between subjective and objective
methods?
a. Subjective methods are statistical methods; objective methods are used
based on the judgments / opinions of individuals within the company.
b. Subjective methods are based on the judgments/opinions of individuals
within / outside the company; objective methods use judgments /
opinions within the company.
c. Subjective methods use judgments / opinions of individuals within the
company; objective methods use judgments / opinions of individuals
outside the company.
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d. Subjective methods are based on the judgments / opinions of individuals
within the company, objective methods are statistical methods.
6. Centralization of treasury function in a multi-division corporation
a. Increases the effectiveness of cash management through Netting
b. Increases the total amount of cash to be maintained
c. Allows the corporation to benefit from Leading and / or Lagging
d. Both (a) and (c) above
7. Forecasting inconsistencies can be minimized by:
a. Allowing managers to establish their own forecasts
b. Establishing a standardized economic forecast to be used by the firm,
year in, year out
c. Generating current economic forecasts that are used throughout the firm
d. Requiring managers to establish their own forecasts
8. Which of the following is a source of funds?
a. Decrease in current liabilities
b. Increase in current assets
c. Increase in cash
d. All of the above
9. A letter of credit which allows the Issuing bank to make payment to thebeneficiary in installments is known as
a. Red clause L/cb. Green clause L/cc. Revolving L/cd. Deferred L/c.
10. Which of the following conditions is/are to be satisfied, in order to ensurethat there is no triangular arbitrage?
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d. Both (a) and (c) above
11. Which of the following is not an assumption of the Theory of ComparativeAdvantage?
a. In both the markets perfect competition existsb. Technological innovation is a continuous process in both the marketsc. The marginal product of labor is constantd. Labor is perfectly mobile within the country
12. Which of the following is/are a subjective measure(s)?a. Regression analysisb. Trend analysisc. Sales force estimatesd. Mean
13. If the current ratio is 2.00 and the quick ratio is 0.5 the proportion of quickassets to total current assets is
a. 10%b. 25%c. 40%d. 50%
14. Which of the following is/are true in respect of Modigliani & Miller positionregarding dividend payout?
a. The model assumes that there are no flotation costs on securities issued
by the firm.b. The model assumes that there are no taxesc. The model concludes that the dividend payout significantly influences
the current value of the firm.d. Both (a) and (b) above
15. Which of the following is not a benefit of storing inventories?
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a. Avoidance of lost sales.b. Availing of quantity discountsc. Reduction of order costs.d. Reduction of carrying costs.
16. Cash management techniques are used
a. To step up the cash inflows and outflowsb. To decelerate accounts payablesc. To hasten the disbursements of accountsd. To make audits
17. The term net float represents
a. The total sum of cheques deposited but not yet collectedb. The total sum of cheques issued but not yet presentedc. The total sum of (a) and (b) aboved. The difference of (a) and (b) above
18. Functions of Chief Financial Officer are broadly categorized as
a. Controller and auditorb. Controller and internal auditorc. Controller and treasurerd. Auditor and treasurer
19. Which of the following is not necessary while determining the capital gains?
a. Acquisition cost determination.b. Determination of indexed cost of improvementc. Calculation of full value of consideration.d. Virtual losses
20. Which of the following is an example of Secondary Reserves?a. Cash on hand and Balances with other banks in current accountb. Balances with RBI for CRR
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c. Investment in Government Securities for SLRd. Investment in Commercial Paper
21. The Lock box system
a. Is a system where customer payments are transferred electronically tocompanies
b. Is a system where a post box is placed outside the residence of creditorsso that receivables are collected on a regular basis.
c. Is also known as the Home Banking systemd. Is a system by which customer payments are received, processed,
deposited and transferred to the bank account in the headquarters of acompany.
22. Legally, the right of managing a company belongs to
a. The Managing Directorb. The Chairmanc. The Shareholdersd. The Controller
23. The factor(s) which affects(s) P/E ratio is/are
a. Growth rateb. Retention ratioc. Quality of managementd. All of the above.
24. Which of the following is/are spontaneous liabilities?
a. Sundry creditorsb. Salary accrued but not due.c. Provision for payment of bonusd. All of (a), (b) and (c) above.
25. Current liabilities are Rs.20,000 and current assets are Rs.30,000. If debtorsrealized amount to Rs.6,000, raw materials purchased on credit amount to
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Rs.3,000 and Rs.6,000 worth of preference shares are converted into equity,the impact on the net working capital (NWC) would be:
a. Decrease of Rs.3,000 in NWCb. Increase of Rs.3,000 in NWCc. No change in NWCd. Increase of Rs.9,000 in NWC
26. Which of the following is related to the control function of the financialmanager?
a. Interaction with the bankers for arranging a short-term loanb. Comparing the costs and benefits of different sources of finance
c. Analysis of variance between the targeted costs and actual costs incurredand reporting on the same
d. Assessing the costs and benefits of a project under consideration
27. Which of the following is a source of cash in a funds flow statement drawnon cash basis?
a. Increase in inventoryb. Decrease in accrued taxes
c. Increase in receivablesd. Increase in accounts payable.
28. If the degree of operating leverage is 3 and the degree of financial leverageis 2, it means that
a. 1% change in EPS will be caused by 5% change in salesb. 1% change in EBIT will result in 3% change in EPSc. 1% change in sales will result in 3 percent change in EBIT and 6%
change in EPSd. 1% change in EPS will be caused by 6% change in EBIT
29. Carewell Products Ltd. provides the following information for the next year:
Expected increase in assets Rs. 9 lakhs
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Expected increase in spontaneousliabilities
Rs. 4 lakhs
Expected increase in retained earnings Rs. 2 lakhs
The external funds required for the firm isa. Rs. 2 lakhsb. Rs. 3 lakhsc. Rs. 8 lakhsd. Insufficient data
30. Which of the following is considered while preparing funds flow statementon working capital basis?
a. Increase in pre-paid expensesb. Payment of dividendc. Decrease in sundry creditorsd. Decrease in provision for tax
31. Which of the following statements is/are true regarding the degree offinancial leverage (DFL)?
i. It measures the financial risk of the firm
ii. It is undefined at financial breakeven pointiii. It increases as the EBIT increases above the financial breakeven point.
a. Only (I) aboveb. Only (II) abovec. Only (III) aboved. All (I), (II) and (III) above
32. Growth with internal equity will decrease with the
a. Increase in debt-equity ratiob. Increase in dividend pay-out ratioc. Increase in net profit margind. Decrease in assets to sales ratio
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33. The accurate doubling period in given a rate of return R can be calculated by
a. (I + R)n = 2
b. 72 / R
c. 0.35 + 69/R
d. Anyone of the formulas in (a), (b) and (c)
34. While evaluating a capital expenditure decision, usage of NPV as criterion
poses a Problem of non-comparability of differing project sizes / outlays.
One of the ways to overcome this problem is to make use of
a. Internal Rate of Return (IRR)
b. Payback Periodc. Accounting Rate of Return
d. Profitability Index (PI)
35. Which of the following statements is/are true?
a. The cost of retained earnings is nil.
b. Cost of equity capital is generally higher than cost of debt.
c. Cost of equity capital is generally lower than cost of debt.d. Cost of corporate debt does not include any risk premium.
36. The following information is provided to you:
Variable costs/sales price 0.80
The earlier sales level Rs. 7,20,000
Earlier credit period 30 days
Changed credit period 60 days Additional sales because of liberalized credit terms Rs. 3,60,000.
The investment by the firm in additional receivables is:
a. Rs. 48,000
b. Rs. 96,000
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c. Rs. 24,000
d. None of the above
37. The price of the share will increase if
a. The dividend decreases
b. The required rate of return increases
c. The growth increases
d. Both (b) and (c) above
38. Which of the following would affect the Dividend yield directly?
a. Retention ratio
b. Book value per share
c. Face value of a share
d. Debt-equity ratio.
39. A project with higher than average risk offers an expected return of 16%.
Which statement is correct if the companys opportunity cost of capital is12% and the projects opportunity cost of capital is 18%?
a. Project NPV is positive; it should be accepted.
b. Project NPV is negative; it should be rejected.
c. Project NPV is positive but it should be rejected.
d. Project NPV is negative but it should be accepted.
40. According to the system of pre-authorized debts
a. The vendor submits a list of debit items to the bank who debits customer
accounts
b. The vendor can receive his own payments by drawing funds from the
buyers bank account
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c. The bank is authorized to receive payments from creditors of its
customers
d. The payer authorizes its bank to debit its account and credit the account
of its payee
41. The demand for call money tends to widen during
a. January, February
b. July, September, November
c. December, March, June
d. February
42. While doing the time series analysis you found that the ROE is decreasing.
Which of the following may be a probable reason?
a. The net profit margin is increasing
b. Assets turnover is decreasing
c. The debt assets ratio is decreasing
d. Both (a) and (b) above
43. If a country were to experience deflation while foreign countries experienceinflation, which of the following would be true if the country allows itscurrency to float?a. Demand for domestic currency would fallb. The countrys reserve account would decreasec. The value of domestic currency would rised. The supply of domestic currency would rise
44. Which of the following is not a part of the current account of a countrysbalance of payments?a. Export of goodsb. Import of servicesc. Portfolio investment
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d. Investment income
45. Inflation in UK is 5% and that in US is 2%. What should be the three monthsforward premium on the dollar?a. 0.700%b. 0.735%c. 1.96%d. 1.98%
46. Which of the following is false under a currency board system?a. The interest rates are automatically set by the market mechanismb. The Central Bank of a country cannot act as the lender of the last resort
c. Exchange rates under the currency board system are stabled. When there is a higher demand for the anchor currency, the reserveswith the currency board gets enhanced.
47. The Eurodollar interest rates in London are as under
1 month 3.00% p.a.
2 months 3.60% p.a.
3 months 4.00% p.a.
The one month interest rate after 2 months is expected to be
a. 4.44% p.a.b. 4.55% p.a.c. 4.66% p.a.d. 4.77% p.a.
48. If the cash turnover ratio is 4.00 and if the credit availed and extended is forthe same period, the sum of procurement, processing and storage time is
a. 60b. 80c. 90d. Cannot be determined
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49. A company is expecting a monthly outflows Rs. 6.00 lakhs. The yield oninvestments is 10% while the cost per transaction is Rs. 500. The optimalsize of the transaction is (nearest thousand)
a. Rs. 12,000b. Rs. 60,000c. Rs. 1,20,000d. Rs. 2,68,000
50. Which of the following real life factors go against the initial dividend theorypropounded by Modigliani-Miller?
a. Different tax rates applicable to income and capital gains.b. The presence of flotation costs.c. The presence of transaction costs.d. All of the above.
51. Which of the following investments has / have no default risk?
a. Inter-Corporate Deposits.
b. Treasury Bills.c. Commercial Papers.d. Money Market Mutual Funds.
52. Which of the following relationships is true?
a. NBCR = BCR + 1b. NBCR = BCRIc. NBCR = BCR1
d. NBCR = BCR + I
53. Bill finance is either repayable on demand or
a. Within 46 daysb. Can be payable on a fired date, generally 90 days
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c. Before a period not exceeding 182 daysd. Within 30 days.
54. Which of the following countries makes use of a banking system which
enables funds to be cleared on the date of issuei. Italy
ii. USAiii. U.Kiv. Switzerland
a. (i)b. (i) and (ii)c. (ii)
d. (ii) and (iii)
55. The firm is now operating at the BEP. Then
a. The DTL will increase if the quantity produced increases.b. The DTL will be negative if the quantity increasesc. The DTL will start decreasing as the quantity increasesd. The DTL will not be affected by quantity unless the fixed costs also
change.
56. Netting helps in
a. Reducing cash requirementsb. Reducing interest costsc. Better control of subsidiariesd. Reducing transaction costs
57. Devaluation of a currency means
a. Government lowering the value of the local currency under fixedexchange rate system
b. Market forces lowering the value of the local currency under fixedexchange rate system
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c. Market forces lowering the value of a local currency under flexibleexchange rate system
d. Government lowering the value of the local currency
58. Under a Transferable Letter of Credit, the LC can be transferred by
a. The importer to another importerb. The Banker who has opened the LC to another personc. First beneficiary of LC to another persond. The Banker who is authorised to transfer the LC
59. When there is heavy forex inflow into the country, the RBIs immediate
concern is
a. Repayment of foreign debtb. Depreciation of the rupeec. Appreciation of the rupeed. Threat of recession
60. If interest rate parity holds and the transaction costs are zero, coveredforeign financing will result in an effective borrowing rate that is
a. Less than the domestic interest rateb. Greater than the domestic interest ratec. Equal to the domestic interest rated. Greater than the domestic interest rate if the forward rate exhibits a
premium and less than the domestic interest rate if the forward rateexhibits a discount.
61. The method of translating financial statements in which items are classified
based on whether they are valued at historical basis or on market price basisis known as
a. Current/non-current methodb. Monetary/non-monetary methodc. Temporal methodd. Current rate method
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62. If a borrower promises to pay Rs.40,000 nine years from now in return for aloan of Rs.23,680 today, what effective annual interest rate is being offered?(Round off your answer to the nearest integer).
a. 2.00%b. 5.00%c. 6.00%d. 7.00%
63. If the yield to maturity (YTM) of bond X is greater than the yield to maturityof bond Y, with the same coupon rate and maturity, then which of the
following is/are true?i. The price of bond X will change more than the price of Bond Y for agiven change in YTM
ii. The market price of bond Y is more than that of Xiii. The current yield of both the bonds would be same
a. Only (I) aboveb. Both (I) and (II) abovec. Both (I) and (III) aboved. Both (II) and (III) above
64. If 91-day T-bills of face value Rs.100 are issued at a yield of 12%, then theissue price is
a. Rs.96.10b. Rs.96.70c. Rs.97.10d. Rs.98.02
65. As per the Rule of 69, if the amount deposited today doubles in four yearsand seven months, the effective interest rate per annum is
a. 15.1 percentb. 15.5 percentc. 15.8 percent
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d. 16.3 percent.
66. Which of the following statements is/are true?i. Current yield is equal to the coupon rate if the market price is equal to
the face value of the bondii. Current yield is equal to the coupon rate if the bond is trading at its face
valueiii. Current yield is equal to the interest paid divided by the face value of the
bond
a. Only (I) aboveb. Both (I) and (II) abovec. Both (I) and (III) above
d. Both (II) and (III) above
67. If the stock turnover is 6, cost of goods sold is Rs.54,000 and opening stockis Rs.8,000 then, the closing stock is
a. Rs. 8,000b. Rs. 9,000c. Rs.10,000d. Rs.12,000
68. The present value interest factor of annuity is equal to
a. (1 + k)n1 / k(1 + k)n
b. FVIFA(k,n) / FVIF(k,n)c. FVIFA (k,n) / (1 + k)n
d. All of the above.
69. Consider the following data:Face value and maturity value of a deep discount bond = Rs.1,00,000Time period of redemption = 20 yearsYield to maturity = 12% p.a.Issue price of the bond is
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a. Rs.10,367b. Rs.12,000c. Rs.15,033d. Rs.22,460
70. The functions of the Chief Financial Officer are categorized as that of
a. Controller & Treasurerb. Finance Manager & Treasurerc. Treasurer & Accountantd. Accountant & Finance Manager
71. Which of the following is not an underlying assumption of Purchasing
Power Parity?
a. Goods can move freely across the globeb. Capital can move freely across the globec. There are no tariffs on goodsd. There are no transaction costs in buying and selling goods
72. Which of the following is not an appropriate hedging strategy for a likelydevaluation of a currency?
a. Reduce the level of cashb. Reduce the local borrowingc. Delay account payabled. Sell the weak currency forward
73. The following rupee interest rates are prevailing in the money market:
6 months 6%
9 months 8%
The expected 3 month interest rate after 6 month isa. 5.00%b. 7.50%c. 9.25%
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d. 11.65%
74. Consider the following statements
i. A money market instrument is one which has a short maturity
ii. A money market instrument is one which is maturing shortly
iii. A money market instrument may be a long-term instrument with very
high liquidity.
Which of the above statement(s) is/are true?
a. (i) only
b. (ii) only
c. (iii) only
d. (i) and (iii) only
75. Cross-elasticity of demand for a product refers to the responsiveness of the
a. Quantity demanded to a given change in its price
b. Quantity demanded to a given change in the price of a related product
c. Price change to a given change in the supply of a product
d. Price change to a given change in the supply of a related product
76. Which of the following is not a principle underlying measurement of cash
flows from the long-term funds point of view?
a. All non-cash charges should be added back to PAT.
b. Cash flows should be defined in pre-tax terms.
c. Only incremental cash flows should be considered.d. Interest on long-term loans should not be deducted from profit.
77. The nominal rate of interest
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a. Is lesser than the effective rate of interest under inflationary conditions
b. Is equal to the effective rate of interest minus inflation
c. Does not consider risk premium
d. Is the real rate of interest plus inflation
78. The Chief Finance Officer is a member of
a. Middle management
b. Top management
c. Liasion between middle and top management
d. General management
79. A bill in which no time for payment is specified is
a. Time bill
b. Usance bill
c. Demand bill
d. Documentary bill
80. Given two suppliers A & B with the terms of sale 2/10 net 60; 2/15 net 30
respectively, which of the following is/are true?
a. The company would be better off if it chooses supplier A, because it has
a longer credit periods.
b. The cost of trade credit is higher for Supplier B than that of Supplier A.
c. If the opportunity cost of cash is equal to cost of trade credit of supplier
B, it is better to choose supplier A and avail cash discount.
d. If the credit period of supplier A is reduced to 30 then the company is
indifferent in choosing the supplier with respect to cost of trade credit.
81. The difference between the time of introduction of a product in one countryand the time when the producers in the other country start producing it istermed as
a. Production lag
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b. Substitution lagc. Imitation lagd. Replacement lag
82. The PAT of an unlevered company is Rs. 16 lakhs and the required return onequity is 16%. If the value of the firm is to become Rs. 120 lakhs bybecoming a levered company, then the value of the tax shield is
a. Rs. 16.65 lakhsb. Rs. 19.20 lakhsc. Rs. 20.00 lakhsd. Rs. 21.76 lakhs
83. The present value of cash inflows in respect of payment in advance is higher
than payment in arrears. If a 5 year lease warrants an annual payment of Rs.1,00,000 and the discount rate is 16%, then the difference will be
a. Rs. 20,000b. Rs. 47,611c. Rs. 52,384d. Rs. 86,207
84. The company cost of capital for a firm with a 40/60 debt/equity split, 8%
cost of debt, 15% cost of equity, and a 40% tax rate would be:
a. 8.88%b. 10.80%c. 10.92%d. 12.20%
85. Which of the following may not be a reason of low working capital?
a. Reasonable payables.b. Excessive stock piling.c. Abnormal bad debts.d. Bad collection mechanism
86. Funded debt is a
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a. Form of ordinary treasury billb. Debt funded by the governmentc. Undated government securityd. Surplus funds provided by banks
87. Which of the following do not fall into the definition of institutionalinvestors?a. Mutual Fundsb. Analystsc. Insurance Companiesd. Professional Fund Managers
88. Which of the following services does a factor provide under nonrecourse
basis?
a. Purchasing of the accounts receivablesb. Collecting the accounts receivablesc. Assuming the losses arising from bad debts.d. All of the above.
89. The product of PVIF, FVIF, FVIFA and Capital Recovery Factor is
a. FVIFb. PVIFAc. PVIFd. FVIFA
90. If the current yield on a bond is 9% and its face value is Rs. 1,000 with acoupon rate of 7% its current market price is
a. Rs. 700
b. Rs. 778c. Rs. 845d. Rs. 1175
91. Which of the following is not a current account item in Indias balance ofpayment?
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a. Receipts in foreign exchange from foreign travelersb. Deposits of NRIs with banksc. Profit remitted by the foreign branch of an Indian company to the parent
companyd. Premium on all kinds of insurance services provided by Indian insurance
companies to non-resident clients
92. If the slope of the Security Market Line is zero then, which of the followingis true?a. Beta is equal to zerob. Risk free return = Market return = Expected return of the given securityc. The returns on the given security are not correlated with the returns on
the market
Risk free rate of return Market return
93. If the beta of a stock is 1.63 and the standard deviation of the return on themarket is 16.25%, then the covariance of returns of the stock and market is
a. 99.39%2b. 162.00%2c. 250.02%2d. 430.42%2
94. If the dividend for the year is Rs.2.00, growth rate of dividends is 12% andthe present market price of the stock is Rs.52.50, the required return on thestock will be
a. 16.27%b. 15.81%c. 15.00%d. 8.19%
95. Which of the following is not a diversifiable risk?
a. Lock-out in a company due to workers demanding a wage hikeb. Recession in the economyc. Lack of strategy for the management of a companyd. A change in the product portfolio of a company
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96. Which of the following is/are true in describing the benefits due tointegration of financial markets?
a. Efficient transfer of resources from surplus units to deficient unitsb. Smoother consumption pattern enjoyed by all the countries over a period
of timec. Possibility of enjoying the benefits of diversificationd. All of the above.
97. Which of the following statements is not true in respect of SDRs?
a. SDRs are reserves created by IMF and allocated to member countriesb. SDRs are only used to cover current account deficitc. Interest is paid to those who hold SDRs and by those who draw down
their SDRsd. The interest rate of SDRs is based on an average money market rates in
major countries.
98. Exchange rate system where the central bank intervenes to smoothen outexchange rate fluctuations is known as
a. Currency board systemb. Dirty floatc. Clean floatd. Fixed rate system
99. The applicant of a foreign letter of credit (L/c) is the
a. Importerb. Exporterc. L/c Issuing Bankd. L/c Advising Bank
100. When the seller places the goods at his premises at the disposal of the buyeror any other named place, say works, factory, warehouse etc., then it is acontract of
a. Free carrier (FCA)b. Exworks (EXW)c. Cost and Freight (CFR)
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d. Free on Board (FOB)
101. The IDBI deep discount bond offers investors Rs. 2,00,000 after 25 years,
for an initial investment of Rs. 5,500. The interest rate implied in the offer is
a. 14.80%
b. 15%
c. 15.5%
d. Not possible to determine from the above data.
102. The prime lending rate is/are
a. The minimum lending rate of a commercial bankb. The rate at which a commercial bank lends working capital to the best
rated borrowers
c. The rate at which a commercial bank discounts first class commercial
bills
d. Both (b) and (c) above
103. Statutory Liquidity Ratio is unique in Indian banking system. The
objective(s) of this is/are
a. To restrict expansion of bank credit
b. To ensure solvency of the banks
c. To augment banks investments in Government securities
d. All of the above
104. Which of the following money market instrument(s) require(s) statutory
credit rating?
a. TBs
b. Ad hoc TBs
c. CPs
d. CDs
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105. Government securities are issued by
a. Auctions
b. Inviting tenders from general publicc. Public debt office of the RBI
d. Ministry of Finance
106. Prabhasa Constructions Ltd. Is showing a low dividend yield and high price
earnings ratio. Then,
a. Price of its share is high
b. There is growth in the companyc. The investors in this share can expect capital gains
d. All of the above
107. How would unanticipated tight monetary policy and loose fiscal policyaffect value of a nations currency and current account in the short run?Assume a highly mobile international financial markets.
a. Currency value will increase, current account will decreaseb. Currency value will increase, current account will increasec. Currency value will decrease, current account will decreased. Currency value will decrease, current account will increase
108. Sterling denominated foreign bonds issued in the U.K. are called?
a. Geisha bondsb. Yankee bondsc. Bulldog bondsd. Samurai bonds
109. The exchange rate between two currencies was determined on the basis ofthe rates at which the respective currencies could be converted in to gold.This is called the
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a. Purchasing power parityb. Mint parityc. Currency parityd. Interest rate parity
110. Which of the following will not cause a change in the bid-ask spread?
a. High market volatilityb. Trading volumec. Decrease in forward maturityd. Market downturn
111. Which of the following statements is true, in case of a direct quote?
a. Exchange margin is to be added to the bid rate and ask rateb. Exchange margin is to be added to the bid rate and deducted from the
ask ratec. Exchange margin is to be deducted from the bid rate and the ask rated. Exchange margin is to be deducted from the bid rate and added to the
ask rate
112. Forward spread means
a. The spread between two forward rates of different maturitiesb. The spread between two option forward ratesc. The spread between outright forward rate and option forward rated. The spread between forward rate and spot rate.
113. A letter of credit which cannot be cancelled by the issuing bank without theconsent of the beneficiary is called
a. Revocable creditb. Irrevocable creditc. Revolving creditd. Red clause credit
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114. The supply of domestic currency (assume full convertibility) in the foreignexchange market falls when:
I. Foreign inflation is greater than domestic inflationII. Foreign income rises
III. Foreign real interest rate is greater than domestic real interest rate
a. Only (I) aboveb. Only (II) abovec. Both (II) and (III) aboved. Both (I) and (III) above
115. A companys monthly sales are Rs. 60 lakhs of which 60% are on creditbasis. 60% of the credit sales of first month are realized during the second
month while the rest will be realized in the third month. The monthly cashflow from the third month onwards is
a. Rs. 21.60 lakhsb. Rs. 36.00 lakhsc. Rs. 45.60 lakhsd. Rs. 60.00 lakhs
116. Which of the following is the assumption of the MM model on dividend
policy?
a. The firm is an all equity firm.b. The investments of the firm are financed solely by retained earnings.c. The investors are rationald. The firm has an infinite life.
117. Which of the following is not a part of the money market?
a. Call money market
b. Treasury bills marketc. Commercial paper marketd. Stock market
118. Following is the probability distribution of rates of return of a stock:
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Return 10 12 15 20
Probability 0.30 0.10 0.40 0.20
The expected rate of return from the stock is
a. 12.0%b. 14.2%c. 15.0%d. 16.8%
119. Which of the following forms of trading block permits no barriers to tradeamong the member countries and the member countries individually decideupon their trade policies for non-member countries?
a. Free trade areab. Customs unionc. Common marketd. Economic union
120. Which of the following categories are protected by an agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS)?
a. Copy rights, Trade marks, Geographical indications, industrial designs
and patentsb. Copy rights, Trade marks, and Geographical indicationsc. Copy rights, Trade marks, Geographical indications and industrial
designs.d. Copy rights, Trade marks, Geographical indication, industrial designs,
patents, integrated circuits and Trade secrets
121. One of the services given by banks of dealing in money market instrumentsto meet the treasury needs of the company is categorized under the functionof:
a. Collectionsb. Disbursementc. Cash controld. Investment / Financing
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122. The book value approach is criticized because
a. It can be established easilyb. It values the firms share without any future projectionsc. It is based on accounting figures which can be manipulatedd. Both (b) and (c) above
123. Which of the following represents cash from operations?
a. Net profit + non-cash expensesb. Net profit + decrease in current liabilitiesc. Net profit + increase in current assetsd. Earnings before interest, depreciation and tax + decrease in current
assets.
124. When do preference shares carry voting rights?
a. When the dividend on cumulative preference shares has been in arrearsfor two or more years.
b. When the dividend has been due for one or more consecutive precedingyears.
c. When the dividend has not been paid in three out of the preceding fouryears.
d. Preference shares never carry voting rights.
125. The two call rates in India are
i. Interbank call rate
ii. Lending rates of DFHI
iii. Lending rates of RBI
iv. Borrowing rates of DFHI
v. Borrowing rates of RBI
a. (i) and (ii)b. (i) and (iv)
c. (ii) and (iv)
d. (iii) and (v)
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126. The major issuers of CDs in India are:
a. The scheduled commercial banks
b. Reserve Bank of India
c. The central and state governmentd. The municipalities
127. While planning the inventory the finance manager has to consider both the
ordering cost and the carrying cost. Which of the following statements is
true with respect to these costs?
a. Ordering cost and carrying cost vary inversely with the order size.
b. Ordering cost and carrying cost vary directly with the order size.
c. There is an inverse relationship between ordering cost and carrying cost.
d. There is a direct relationship between ordering cost and carrying cost.
128. A selling dealer sells $20 million (face value) six-month bills to an investor
for $19.19 million with a promise to repurchase the bills three days later at a
price of $19.21 million. For the selling dealer, this transaction.
(i)Is a Repo transaction
(ii) Is a reverse Repo transaction
(iii) Enables to pass on the interest rate risk associated with the securities
to the investor
Which of the above statement(s) is/are true?
a. (i) only
b. (ii) only
c. (i) and (iii) only
d. (ii) and (iii) only
129. An ageing schedule illustrates the relationship between:
a. Corporate personnel and job seniority.
b. Profit and present value
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c. The ratio of accounts receivable to sales.
d. Accounts receivable and their average time outstanding.
130. A Yankee bond is:
a. A dollar denominated bond issued for global markets by a non USentity
b. A dollar denominated bond issued in the US by a nonUS entityc. A dollar denominated bond issued by a US resident in UK marketd. A dollar denominated bond issued in US by a US resident
131. Which of the following is not a feature of a commercial paper (CP)?
a. It is an unsecured instrumentb. It is issued in multiples of Rs.5 lakhsc. Buy-back facilities are not available for CPsd. It is negotiable by endorsement and delivery
132. The risk arising out of the use of debt financing is called
a. Price riskb. Credit risk
c. Trading riskd. Financial risk.
133. A short-term cash budget does not exhibit
a. Investing activitiesb. Cash paymentsc. Financing activitiesd. Issuing of bonus shares
134. The capitalization rate of a company whose market price per share is Rs. 28,net income is Rs. 20 lakhs and the number of outstanding shares is 5.6 lakhsis:
a. 0.039b. 0.078
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c. 0.127d. 0.156
135. Finacle, a banking treasury framework software was devised by:
a. Cobitb. Infosysc. Tcsd. KPMG and PWC
136. XYZ Ltd. advertised on television inviting the public to subscribe to theshare capital of the company. The advertisement is considered asa. Prospectusb. Deemed prospectus
c. Statement in lieu of prospectusd. Not a prospectus
137. Shanmugam in Chennai has a farm on which onions are grown. He enteredinto a contract without force majeure clause to supply 100 tons of onions toShinde in Mumbai. The crop largely failed due to a pest.
Which of the following statements is/are true?
a. The contract is discharged due to difficulty of performanceb. The contract is discharged due to commercial impossibilityc. The contract is discharged due to destruction of subject matterd. The contract is not discharged and Shanmugam has to perform the
contract
138. When a bank obtains payment on a crossed cheque on behalf of its customer,the fact that the customers title to the cheque is defective will not render thecollecting bank liable for conversion to the true owner, if
a. The collecting bank advances money to the customer against the chequeeven before the cheque is realized
b. The uncrossed cheque given to the collecting bank for collection iscrossed by the banker
c. The payment is received by the collecting bank on behalf of a personwho is not a customer of the bank
d. The collecting bank is acting as an agent for receiving the payment.
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139. Which of the following instruments is not considered a promissory note?
a. Anupam signs a note reading - Mr. Arvind, I owe you Rs.20000.b. Vasundhara signs a note reading Received from Uday Kiran
Rs.20000, which I promised to pay on demand with interest.c. Rajat signs a note reading I am liable to Anand in a sum of Rs.20000,
which is to be paid by installments for rent.d. Kiran signs a note reading Deposited with me Rs.20000 to be
returned on demand.
140. A firm earning profits can increase its return on investment bya. Increasing sales revenue and operating expenses by the same percentageb. Decreasing sales revenue and operating expenses by the same
percentagec. Increasing sales revenue and operating expenses by the same rupee
amountd. Increasing investment and operating expenses by the same rupee amount
141. If an investment project has a profitability index of 1.20, the
a. Cost of capital of the project is greater than its internal rate of returnb. Cost of capital used in the index calculation has to be less than 20%c. Projects internal rate of return is 20%d. Net present value of the project is positive
142. An efficiency variance is known as
a. Actual unit price minus budgeted unit price, times the actual unitsproduced
b. A flexible budget amount minus a static budget amountc. Budgeted unit price times the difference between actual inputs and
budgeted inputs for the actual activity level achieved
d. Actual operating income minus flexible budget operating income
143. The continuous process of comparing products and operations against thebest practices in the industry is known as:
a. Strategic planningb. Benchmarking
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c. Continuous process improvementd. Process quality teaming
144. Which of the following is true?
a. Effective rate of interest is always lower than the nominal interest rateb. The effective rate of interest increases with increase in the frequency of
compoundingc. The nominal interest rate increases with increase in the frequency of
compoundingd. The effective and nominal interest rates are equal if the frequency of
compounding is less than 4
145. Who among the following players in the international capital markets collect
the rupee dividends on the underlying shares and repatriate the same to thedepository in US dollars/foreign equity?
a. Lead Managersb. Underwritersc. Custodiand. Corporate borrowers
146. Which of the following euro instruments is a medium-term legally bindingcommitment under which a borrower can issue short-term paper, of up toone year?
a. Note Issuance Facilities (NIFs)b. Commercial paperc. Straight debt bondsd. Floating Rate Notes (FRNs)
147. To which of the following categories of ratios does Debt-Asset ratio belong?
a. Earnings ratiosb. Coverage ratiosc. Capital structure ratiosd. Liquidity ratios
148. If the Degree of Financial Leverage of M/s Twiky's Ltd. is zero, which ofthe following statements is/are true?
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a. The company is not paying any preference dividendb. The interest expense for the firm is zeroc. The company has only fixed costs and no variable costsd. The EBIT of the company is zero
149. Which of the following represents the amount that can be realized by acompany if it terminates its business and sells all its assets?
a. Book valueb. Liquidation valuec. Replacement valued. Going concern value
150. Which of the following is not true with respect to valuation of bonds?
a. An increase in the redemption value of the bond, other things remainingthe same, will increase the bond value.
b. For a given difference between YTM and coupon rate, the longer theterm to maturity of the bonds, the greater will be the change in pricewith a change in YTM
c. For a given maturity, the change in thebonds price will be lesser with adecrease in thebonds YTM than the change in bond price with an equalincrease in the bonds YTM
d. For a given change in YTM, the percentage price change in case ofbonds with high coupon rate will be smaller than in case of bonds withlow coupon rate, other things remaining the same