Question and Answer Bank in Financial Markets - Part 2

(200 questions and answers)

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  1. When two companies issue bonds otherwise on the same basis, a difference in the coupon offered will typically reflect a difference in: {Corporate Actions}
    1. Corporate structure
    2. Credit risk
    3. International representations
    4. Recent probability

  2. A nil-paid security will normally involve what type of corporate actions? {Corporate Actions}
    1. Rights issue
    2. Open offer
    3. Scheme of arrangement
    4. Consolidation

  3. What type of event is an open offer? {Corporate Actions}
    1. Voluntary
    2. Optional
    3. Mandatory with options
    4. Mandatory

  4. Which one of the following is used to determine who receives the dividend on a share? {Corporate Actions}
    1. Payment date
    2. Ex-date
    3. Record date
    4. Announcement date

  5. Which of the following methods of bond redemption can be considered as elective corporate actions? {Corporate Actions}
    1. Bullet
    2. Put option
    3. Call option
    4. Drawing by lottery

  6. What is the entitlement on a bonus issue if the client is holding 100 shares in a bonus with a ratio of 50 for every 1, assuming the ex-date is the 15th of the month and the client sold 10 on the 15th and purchased 50 on the 14th? {Corporate Actions}
    1. 4,000
    2. 5,000
    3. 7,000
    4. 7,500

  7. Deferred shareholders will only receive a dividend if: {Corporate Actions}
    1. Exceptional profits are declared
    2. Ordinary shareholders have been paid a specific minimum
    3. The issuer goes into liquidation
    4. The shares are held until the maturity date

  8. By definition, a corporate action will affect a company’s share: {Corporate Actions}
    1. Capital
    2. Dividend
    3. Price
    4. Ownership

  9. An investor buys 100 call warrants for a premium of £0.40 each and a strike price of £1.00. What will the share price have to reach for the investor to make a profit of £50? {Corporate Actions}
    1. £51.00
    2. £1.90
    3. £1.40
    4. £0.90

  10. Which one of the following statements regarding poison pill rights is true? {Corporate Actions}
    1. They are common in the UK
    2. They are illegal in the US
    3. They are meant to deter aggressive takeovers
    4. They are usually in the form of low cost convertible bonds

  11. When a share is traded as a special-ex transaction, this signifies that: {Corporate Actions}
    1. The buyer will be entitled to any dividend
    2. The buyer is prohibited from trading again until after the ex-date
    3. The seller will be entitled to any dividend
    4. The seller is prohibited from trading again before the ex-date

  12. What is stock situation notice? {Corporate Actions}
    1. A market notification published by a listed company about its own shares
    2. An investment bank analyst’s view of the potential performance of a share
    3. A market notification published by the London Stock Exchange
    4. Euroclear’s view of the potential performance of a bond

  13. Which of the following is eligible to appoint a proxy? {Corporate Actions}
    1. Proxy agent
    2. Shareholder
    3. Nominee company
    4. Issuing company

  14. An investor holds 5,000 shares in a company priced at £8.50 per share. The company subsequently makes a one-for-five share rights issue at £6.50. Nil-paid rights on the share issue therefore will be worth: {Corporate Actions}
    1. £1.67
    2. £2.00
    3. £6.50
    4. £8.17

  15. Dividend on US shares are usually paid: {Corporate Actions}
    1. Three-monthly
    2. Four-monthly
    3. Six-monthly
    4. Annually

  16. Lazy money is usually referred to around which type of corporate action? {Corporate Actions}
    1. Warrants
    2. Rights
    3. Open offers
    4. Takeovers

  17. A zero coupon bond usually pay interest: {Corporate Actions}
    1. Annually
    2. Bi-annually
    3. Monthly
    4. Never

  18. Which of the following will assist a company that might require funds for research and development? {Corporate Actions}
    1. Rights
    2. Scrip
    3. Consolidation
    4. Bonus

  19. On which of the following dates will stock movement normally take place? {Corporate Actions}
    1. Record date
    2. Effective date
    3. Ex-date
    4. Expiry date

  20. Following a liquidation there are sufficient funds to pay preference shareholders. Consequently, they will receive: {Corporate Actions}
    1. The pre-liquidation market price
    2. The nominal value
    3. The equitable value decided by the liquidator
    4. The unpaid net dividends only

  21. Shares which were issued with a restriction are now deemed to be ranking pari passu. Which one of the following is therefore true? {Corporate Actions}
    1. The share price has been reduced
    2. They attract a reduced level of dividend
    3. They are now treated like a company’s existing non-restricted shares
    4. The company must now offer additional shares of the same value

  22. Investors who hold depository receipts will receive dividends: {Corporate Actions}
    1. In their own currency
    2. In the currency of the issuer
    3. Only if the security has been issued on a sponsored basis
    4. Only if they are eligible for rights issues

  23. MT565 - Corporate actions narrative will be used specifically when: {Corporate Actions}
    1. Cash is to be credited to client accounts only
    2. Cash has been debited from clients accounts only
    3. There is a change in status of a corporate action event
    4. Complex instructions or details need to be provided

  24. A lead manager is primary responsible for: {Corporate Actions}
    1. Safekeeping of the securities issued and asset servicing
    2. Handling security purchase payments and stock movements
    3. Taking on the credit risk in new security transactions
    4. Overseeing syndicate activities in the issue of new securities

  25. When a corporate letter of representation is issued, the investor concerned: {Corporate Actions}
    1. Is legally obliged to attend the company meeting in person
    2. Has nominated a specific person to attend the company meeting and register a vote
    3. Has expressed an intention to vote by post by a specified date
    4. Has given the company authority to vote on his behalf

  26. Which one of the following is a recognised asset servicing risk when there is failure to inform the customer of the existence of a forthcoming event? {Corporate Actions}
    1. The fund manager may miss the opportunity to take part in a particular event
    2. The asset servicer will have breached the client money rules
    3. The fund manager will have to rely on other information sources
    4. The asset servicing department may be unable to reconcile the position to the market

  27. A warrant has been exercised “at-the-money”. This means that the market price. {Corporate Actions}
    1. Equalled the strike price
    2. Was lower than the strike price
    3. Was higher than the strike price
    4. Was lower following the exercise

  28. One of the main reasons for a “redenomination” of shares is: {Corporate Actions}
    1. Low profits
    2. Excessive trading activity
    3. High inflation levels
    4. Stamp duty

  29. The purpose of FATCA is to: {Corporate Actions}
    1. Obtain personal tax information on non-US resident holders of US securities
    2. Obtain personal tax information on UK resident holders of US securities
    3. Identify revenue earned on foreign investments held by US residents
    4. Identify revenue earned on foreign investments held by UK residents

  30. A significant difference between scrip dividends and dividend reinvestment schemes is that: {Corporate Actions}
    1. Scrip dividends require compulsory share purchase
    2. Scrip dividends require payment of broker’s commission
    3. Dividend reinvestment plans primarily benefit major shareholders
    4. Dividend reinvestment plans are offered without a reference price

  31. The primary role of a central counterparty is to: {Corporate Actions}
    1. Guarantee the performance of contracts to trade in securities
    2. Administer securities settlement and provide asset servicing
    3. Hold all securities within a particular market centrally
    4. Ensure securities are properly safeguarded

  32. When a company offers to buy shares by the Dutch auction method, rather than by tender, the difference in process means that: {Corporate Actions}
    1. Shareholders must sell at the price specified by the company
    2. At least 50% of the holding must be sold
    3. Minimum and maximum purchase prices are offered
    4. The purchase price will be below current market price

  33. What is the main difference between the clean price and the dirty price of a bond? {Corporate Actions}
    1. The dirty price includes accrued interest
    2. The dirty price is net of taxation
    3. The clean price includes broker fees
    4. The clean price is for companies with higher credit ratings

  34. Compulsory liquidation of securities generally occurs when: {Corporate Actions}
    1. Payment of interest has been deferred for 21 days
    2. The company’s board of directors passes a resolution to proceed
    3. The company’s creditors take action to obtain payment
    4. Extension terms of 60 days or more are required

  35. Shareholders have been offered pre-emption rights. This means that: {Corporate Actions}
    1. Taking up the option will dilute the value of their holdings
    2. Their holdings will be transferred to another company following a takeover
    3. The value of the new rights offered will be sufficient to compensate for the reduction in share price
    4. The number of shares held following the issue will be at least three times the number originally held

  36. A bondholders’ meeting is: {Corporate Actions}
    1. An annual event corresponding to an annual general meeting of shareholders
    2. An event designed for the issuer to keep the bondholders abreast of current developments
    3. A meeting that is called if and when there is the need for bondholders to agree to the restructuring of a bond issue
    4. A meeting that is called only if 10% of the bondholders request it

  37. In order to set up an open market share buyback scheme the issuer has to {Corporate Actions}
    1. Obtain approval in principal at an AGM or EGM
    2. Advertise the fact to each investor
    3. Offer a higher than market price to interested investors
    4. Advertise the fact to each investor and offer a higher than market price to interested investors

  38. If two counterparties have a number of claims against each other for the same corporate action: {Corporate Actions}
    1. They must settle each and every claim individually
    2. They may make a net settlement of the total value of the claims
    3. They must take into account any netting that the exchange/clearing house has already carried out
    4. They should take the matter up with the clearing house concerned

  39. A shareholder is entitled to lapsed rights proceeds when: {Corporate Actions}
    1. It has not taken up some or all of its rights, and the new shares have been sold by the underwriters
    2. It has not taken up any of its rights
    3. It has not taken up some or all of its rights, and the new shares have been sold by the underwriters at a profit
    4. It has sold some or all of its rights

  40. An agreement whereby two parties agree to exchange a set of cash flows is: {Corporate Actions}
    1. A repo
    2. A buy/sellback
    3. A swap
    4. A warrant

  41. Which one of the following investors is liable to pay an amount equal to the dividend due on dividend record date? {Corporate Actions}
    1. A holder of a long position in the equity concerned
    2. A lender of the equity concerned
    3. A holder of a long position in a CFD based on the equity concerned
    4. A borrower of the equity concerned

  42. Units of __________ must be listed on the stock exchange {Mutual Funds}
    1. Sector funds
    2. Arbitrage funds
    3. Close ended funds
    4. Liquid funds

  43. Open-ended schemes generally offer exit option to investors through a stock exchange {Mutual Funds}
    1. True
    2. False

  44. Sector funds invest in a diverse range of sectors. {Mutual Funds}
    1. True
    2. False

  45. High yield bond schemes invest in junk bonds {Mutual Funds}
    1. True
    2. False

  46. Investment objective is closely linked to ______________ {Mutual Funds}
    1. Scheme
    2. Option
    3. Plan
    4. SIP

  47. The assets of the mutual fund are held by ____________ {Mutual Funds}
    1. AMC
    2. Trustees
    3. Custodian
    4. Registrar

  48. AMC directors are appointed with the permission of Trustees {Mutual Funds}
    1. True
    2. False

  49. Most investor service centers are offices of _____________ {Mutual Funds}
    1. Trustees
    2. Registrar
    3. Custodian
    4. Fund Accountant

  50. Fund accounting activity of a scheme is to be compulsorily outsourced. {Mutual Funds}
    1. True
    2. False

  51. SEBI regulates _______________ {Mutual Funds}
    1. Mutual Funds
    2. Depositories
    3. Registrar & Transfer Agents
    4. All of the above

  52. Investment objective defines the broad investment charter. {Mutual Funds}
    1. True
    2. False

  53. Unit holders can hold their units in demat form{Mutual Funds}
    1. True
    2. False

  54. Institutional distributors build reach through ______________ {Mutual Funds}
    1. Employees
    2. Agents
    3. Sub-brokers
    4. Any of the above

  55. The distributor can charge a fee from the investor {Mutual Funds}
    1. True
    2. False

  56. Stock exchange brokers are permitted to distribute mutual funds without the requirement of passing the certifying test. {Mutual Funds}
    1. True
    2. False

  57. Trail commissions are linked to valuation of portfolio in the market {Mutual Funds}
    1. True
    2. False

  58. Net assets of a scheme are nothing but its investment portfolio {Mutual Funds}
    1. True
    2. False

  59. The difference between NAV and re-purchase price is __________ {Mutual Funds}
    1. Entry load
    2. Exit load
    3. Expense
    4. Dividend stripping

  60. As per SEBI regulations, foreign nationals are permitted to invest in Indian mutual funds, subject to KYC. {Mutual Funds}
    1. True
    2. False

  61. Investments in mutual funds can be made using ___________ {Mutual Funds}
    1. Cheque / DD
    2. Remittance
    3. ASBA
    4. Any of the above

  62. Cut-off timing guidelines are not applicable for ___________ {Mutual Funds}
    1. NFOs
    2. International Funds
    3. Both of the above
    4. None of the above

  63. Fundamental analysis is evaluation of the strength of the company's price-volume charts. {Mutual Funds}
    1. True
    2. False

  64. In a top-down approach, sector allocation precedes stock selection. {Mutual Funds}
    1. True
    2. False

  65. Which of the following is truly international asset class? {Mutual Funds}
    1. Real Estate
    2. Equity
    3. Debt
    4. Gold

  66. Loads and taxes may account for the difference between scheme returns and investors return. {Mutual Funds}
    1. True
    2. False

  67. The most appropriate measure of returns for a scheme in existence for several years is _____________. {Mutual Funds}
    1. Simple return
    2. Dividend return
    3. Annualised return
    4. CAGR (Compunded Annual Growth Rate)

  68. Risk can be measured by _____________. {Mutual Funds}
    1. Variance
    2. Standard Deviation
    3. Beta
    4. Any of the above

  69. Equity markets are more predictable in the long term than the short. {Mutual Funds}
    1. True
    2. False

  70. Arbitrage funds are meant to give better equity risk exposure {Mutual Funds}
    1. True
    2. False

  71. The comparable for a liquid scheme is ____________ {Mutual Funds}
    1. Equity scheme
    2. Balanced scheme
    3. Gilt Fund
    4. Savings bank account

  72. Which of the following aspects of portfolio would an investor in a debt scheme give most importance. {Mutual Funds}
    1. Sector selection
    2. Stock selection
    3. Weighted Average Maturity
    4. Number of securities in portfolio

  73. Mutual fund ranking and rating amount to the same. {Mutual Funds}
    1. True
    2. False

  74. Gold Futures are superior to ETF Gold as a vehicle for life-long investment in gold. {Mutual Funds}
    1. True
    2. False

  75. As regards wealth tax, ETF Gold is superior to physical gold. {Mutual Funds}
    1. True
    2. False

  76. The Indian National Pension System is regulated by _____________ {Mutual Funds}
    1. SEBI
    2. IRDA
    3. PFRDA
    4. AMFI

  77. An investor under the Indian National Pension System can choose which of the following asset classes? {Mutual Funds}
    1. Equities
    2. Corporate debt
    3. Government securities
    4. All of the above

  78. Today's costs can be translated into future requirement of funds using the formula: {Mutual Funds}
    1. A = P(1+i)n
    2. A = P/(1+i)n
    3. P = An x (1+i)
    4. P = An x (1+i)

  79. Providing funds for a daughter's marriage is an example of ___________ {Mutual Funds}
    1. Goal-oriented financial plan
    2. comprehensive financial plan
    3. Financial goal
    4. None of the above

  80. According to the Certified Financial Planner - Board of Standards (USA), the first stage in financial planning is ___________. {Mutual Funds}
    1. Analyse and Evaluate Client's Financial Status
    2. Establish and Define the Client-Planner Relationship
    3. Gather Client Data, Define Client Goals
    4. Develop and Present Financial Planning Recommendations and/or options

  81. Investor can get into long term investment commitments in ____________ {Mutual Funds}
    1. Distribution phase
    2. Transistion phase
    3. Inter-generational phase
    4. Accumulation phase

  82. Distribution phase of Wealth Cycle is a parallel of Retirement Phase of Life Cycle. {Mutual Funds}
    1. True
    2. False

  83. Risk appetite of investors is assessed through _____________ {Mutual Funds}
    1. Risk Appetizers
    2. Asset Allocators
    3. Risk Profilers
    4. Financial Plan

  84. The objective of asset allocation is risk management {Mutual Funds}
    1. True
    2. False

  85. The asset allocation that is worked out for an investor based on risk profiling is called _______________. {Mutual Funds}
    1. Tactical asset allocation
    2. Fixed asset allocation
    3. Flexible asset allocation
    4. Strategic asset allocation

  86. Model portfolios are a waste of time for financial planners. {Mutual Funds}
    1. True
    2. False

  87. On value date June 10, 2000, what is the term to maturity in years, of a government security maturing on 23rd March 2004? {Deb Markets}
    1. 3.562 years
    2. 3.786 years
    3. 4.13 years
    4. 4.426 years

  88. Which of the following about a callable bond is true? {Debt Markets}
    1. Callable bonds are trade at a discount to non-callable bonds
    2. Callable bonds expose issuers to the risk of reduced re-investment return
    3. Callable bonds are actually variable tenor bonds
    4. Callable bonds are not as liquid as non-callable bonds

  89. Coupon of a floating rate bond is ___________ {Debt Markets}
    1. modified whenever there is a change in the benchmark rate
    2. modified at pre-set intervals with reference to a benchmark rate
    3. modified for changes in benchmark rates beyond agreed levels
    4. modified within a range, for changes in the benchmark rate

  90. Which of the following about the market capitalisation of corporate bonds in the NSE WDM is true? {Debt Markets}
    1. Corporate bonds account for over 10% of the total market capitalisation
    2. Corporate bonds represent the second largest segment of bonds, after Government securities
    3. Market capitalisation of corporate bonds is lower than that of listed state loans.
    4. None of the above

  91. The most active participants in the WDM segment of the NSE are: {Debt Markets}
    1. Primary dealers
    2. Scheduled banks
    3. Trading members
    4. Mutual funds

  92. Which of the following statements are true about NDS-OM? {Debt Markets}
    1. NDS-OM is a screen based anonymous order matching system
    2. NDS-OM became operational with effect from August 1, 2005
    3. NDS-OM is faster, transparent and cheaper and provides benefits like audit trail
    4. All of the above

  93. Which of the following is true about a uniform price auction? {Debt Markets}
    1. An auction in which all successful bids are made for the same price
    2. An auction in which all bidders have bid a uniform price
    3. An auction in which all successful bidders are allotted bonds at the same price
    4. An auction in which the cut-off price is derived as the weighted average of all successful bids.

  94. A treasury bill maturing on 28th June 2002 is trading in the market on 3rd July 2001 at a price of Rs. 92.8918. What is the discount rate inherent in this price? {Debt Markets}
    1. 7.6513%
    2. 7.7584%
    3. 7.1532%
    4. 7.6715%

  95. What is the price at which a treasury bill maturing on 23rd March 2002 would be valued on July 13, 2001 at a yeild of 6.8204%? {Debt Markets}
    1. 95.3216
    2. 95.4858
    3. 95.4932
    4. 95.1346

  96. What is the day count convention in the treasury bill market in India? {Debt Markets}
    1. 30/360
    2. Actual/Actual
    3. Actual/360
    4. Actual/365

  97. Which of the following about state government borrowings in India is true? {Debt Markets}
    1. State government bonds are issued by the respective Finance Department of the State.
    2. State government bonds are fully guaranteed by the central government
    3. Most State government bonds are issued by the RBI
    4. State government bonds are issued by the RBI, at the same rates, along with central government bonds

  98. Which of the following participants in the call markets in India are allowed to lend as well as borrow? {Debt Markets}
    1. Mutual funds
    2. Banks and Primary dealers
    3. Corporates
    4. Financial institutions

  99. The non-bank entities are allowed to participate in the call money market in India? Is the statement true or false? {Debt Markets}
    1. True
    2. False

  100. What are the features of NDS-CALL system in India? {Debt Markets}
    1. Electronic dealing platform
    2. Direct one to one negotiation
    3. Online exposure monitoring
    4. All of the above

  101. Which of the following statements is true about the offer document in India? {Debt Markets}
    1. An offer document has to be filed with SEBI for all debenture issues, whether public or privately placed.
    2. Offer document has to be filed for all public issues only
    3. An offer document need not be filed if the debentures are issued for maturities below 18 months
    4. In the case of private placement, an abridged offer document is to be filed with SEBI.

  102. Which of the following statements is false regarding credit rating of corporate debentures in India? {Debt Markets}
    1. All public issues of debentures should be compulsorily credit rated.
    2. Ratings have to be sought from agencies registered with SEBI
    3. Debentures with maturity less than 18 months need not be rated
    4. Mutual funds are not permitted to subscribe to unrated corporate paper

  103. Which of the following is the largest investor in CPs? {Debt Markets}
    1. Mutual funds
    2. Corporate treasuries
    3. Financial institutions
    4. Scheduled banks

  104. Which of the following entities cannot issue CPs? {Debt Markets}
    1. Banks
    2. Finance companies
    3. Primary dealers
    4. None of the above

  105. If the RBI in India announces that it has done repos of Rs. 3,000 crores, what does this imply? {Debt Markets}
    1. RBI has lent securities worth Rs. 3,000 crore through the repo markets to the participants.
    2. RBI has reversed the repo deals of participants who entered into a repo with RBI
    3. RBI has inducted funds amounting to Rs. 3,000 crores into the market.
    4. RBI has borrowed securities from the banking system, and lent them onward in the repo markets.

  106. What does re-balancing of a bondindex mean? {Debt Markets}
    1. Changing teh weightages in the index so that the market capitalisation of bonds is kept constant
    2. Adjusting the index for changes in the composition of the index portfolio to ensure that artificial capital gains or losses are not included in the index
    3. Adjusting the composition of the index, whenever copons are paid, such that the index is not impacted by changes in accrued interest.
    4. Changing the composition of the index when yield alters, such that duration of the index is kept constant

  107. What is the information gathered from market participants in the poll to determine NSE MIBOR? {Debt Markets}
    1. The rate at which they would be able to lend and borrow in the markets
    2. The rate at which they are willing to lend and borrow amongst one another
    3. Their view of the market rates for lending and borrowing
    4. Their view of the lending and borrowing rates for specific market participants

  108. The day count convention for coporate bonds in India is: {Debt Markets}
    1. 30/360 US NASD
    2. Actual/365
    3. Actual/360
    4. 30/360 European

  109. If the yield curve is upward sloping, which of the following is false?{Debt Markets}
    1. The market expects short term interest rates to increase
    2. The liquidity premium is increasing with increase in tenor
    3. There is an excess of demand over supply in shorter maturities
    4. The interest rates are positively related to term, along the yield curve.

  110. The duration of a coupon paying bond is always lower than its term to maturity, because: {Debt Markets}
    1. Since duration is the measure of average maturity, it has to be lower than the tenor
    2. Duration measures the weighted maturity, and therefore cannot be compared to tenor of a bond
    3. As long as the cash flows are received prior to maturity, the weightage of the terminal cash flows cannot be 1

  111. An interest rate swap transforms the nature of _____________ {Derivatives}
    1. an existing liability only
    2. an existing asset only
    3. an notional liability or an asset
    4. an existing liability or an asset

  112. A swap can be interpreted as a stip of ______________ {Derivatives}
    1. Fixed rate agreements only
    2. Future contracts only
    3. Fixed rate agreements or future contracts
    4. None of the above

  113. Forward rates cannot be _____________ {Derivatives}
    1. positive
    2. negative
    3. zero
    4. higher than spot rate

  114. There are various investment avenues available to an investor and they call it as ________ {Mutual Funds}
    1. Mutual fund
    2. Asset classes
    3. Networth
    4. Schemes

  115. Cash/Liquid mutual fund schemes are the best fit for short term investment. {Mutual Funds}
    1. True
    2. False
    3. Cannot say

  116. Rising interest rates will cause ______________ {Debt Markets}
    1. A higher volume on settlement
    2. Government borrowing to fall
    3. Bond prices to rise in response to higher interest rates
    4. Bond prices to fall

  117. Even if the money is available to be invested for long term, it cannot be allocated to equity unless there is risk appetite. {Mutual Funds}
    1. True
    2. False

  118. The forex market functions out of a centralized marketplace. {Foreign Exchange}
    1. True
    2. False

  119. This is what the person making the quote charges to sell one unit of the base currency to the other party. {Foreign Exchange}
    1. Bid
    2. Ask
    3. Spread

  120. Who among the following is a participant in the foreign exchange market? {Foreign Exchange}
    1. Large commercial and investment banks
    2. Corporates - Institutions and Individuals
    3. Speculators and Arbitragers
    4. Governments and Central banks
    5. Money changers
    6. All of the above

  121. The numeraire currency for currency markets is ______________ {Foreign Exchange}
    1. US dollar
    2. Euro
    3. GBP
    4. Japanese Yen

  122. When a customer calls a bank with a commercial requirement {Foreign Exchange}
    1. The bank will see whether or not it can handle the need before responding
    2. The bank will fill the customer need and find ways to handle the market separately
    3. If the market situation is unprofitable the bank will refuse to complete the transaction for the customer
    4. The bank will make a loss if it has to; but will fill the need.

  123. Exchange rate fluctuations are a risk to ______________ {Foreign Exchange}
    1. Exporter
    2. Importer
    3. Corporate dealing in domestic market only
    4. Both A and B

  124. According to trade balance theory the currency of the country with net imports will drop because of the importing country's currency being heavily sold to obtain exporting country's currency to be paid to the exporting country. {Foreign Exchange}
    1. True
    2. False

  125. Which of the following factors are considered the determinants of changes in the exchange rates? {Foreign Exchange}
    1. Trade balances
    2. Interest rate differentials
    3. Purchasing power parity
    4. All of the above

  126. For its oil imports, India will pay Saudi Arabia in ___________ {Foreign Exchange}
    1. Saudi Riyals
    2. Indian Rupee
    3. Euro
    4. US dollar

  127. Between JPY and EUR: {Foreign Exchange}
    1. JPY is the variable currency
    2. JPY is the base currency
    3. EUR is the base currency
    4. EUR is the variable currency
    5. Both a and c are true
    6. Both b and d are true

  128. Charges applicable for the investors is low when they are ___________ {Mutual Funds}
    1. Direct investors
    2. Institutional investors
    3. When they use an independent financial advisor
    4. When they use distributors

  129. A fund manager manages his fund by mimicking a benchmark index. He is a __________ {Mutual Funds}
    1. Hedge fund manager
    2. Pension fund manager
    3. Insurance fund manager
    4. Passive fund manager

  130. An investor selects mutual funds that invest only in technology stocks such as Apple Inc. He is making a ___________. {Mutual Funds}
    1. Direct investment
    2. Indirect investment
    3. Roundabout investment
    4. Directed investment

  131. Fund A reports 25% per annum as returns. The benchmark index is up 35% in the same period. The fund manager has ________ the index. {Mutual Funds}
    1. Underperformed
    2. Outperformed
    3. None of the above

  132. Exchange trade funds (ETFs) are different from the other investment funds in that ______________ {Mutual Funds}
    1. They have continuous real-time pricing so that investors can trade at any time
    2. They are traded at the Net Asset Values
    3. There are no fund management or fund administration charges
    4. They are not marketed to retail investors

  133. Closed-ended collective investment schemes - mutual Funds are __________ {Mutual Funds}
    1. of limited lifespan
    2. only equity funds
    3. perpetual
    4. not for retail investors

  134. Mutual fund managers are assessed by comparing with the _____________ {Mutual Funds}
    1. Market
    2. Index
    3. With other fund managers
    4. Hedge fund managers

  135. Net Asset Value or NAV is calculated by dividing net assets of the fund by ____________ {Mutual Funds}
    1. Assets of the fund
    2. Liabilities of the fund
    3. Number of outstanding units in the fund
    4. Fund manager's fees

  136. The usual restrictions put on the fund managers by the regulators are ___________ {Mutual Funds}
    1. not to violate mandate
    2. not to take excessive risk
    3. limits and constraints on the use of derivatives
    4. restrictions on taking short positions
    5. a, c and d
    6. All of the options given

  137. Which of the following is not a feature of investment mandate for an investment manager? {Mutual Funds}
    1. It specifies the investment style
    2. It specifies the asset classes in which investment is permitted
    3. It specifies percentage allocation to each asset class
    4. It specifies indicative returns

  138. The ____________ provides a source of funds to the issuer. {Capital Markets}
    1. Primary market
    2. Secondary market
    3. Derivatives market
    4. Money market

  139. This is where the securities are traded after being issued in an IPO. {Capital Markets}
    1. Primary market
    2. Secondary market
    3. Tertiary market
    4. Commodity market

  140. Which of the following are financial assets? {Capital Markets}
    1. Shares/Stocks
    2. Bonds
    3. Bank Deposits
    4. Derivatives
    5. All of the given options

  141. Which of the following is not a function of the financial markets? {Capital Markets}
    1. Raise capital for companies
    2. Provide funds transformation by channeling short-term savings into long-term business investment
    3. Bring buyers and sellers together in organized marketplaces to reduce search and transaction costs
    4. Provide visibility to companies and products
    5. Alloate capital efficiently from low-growth to high-growth areas
    6. Transfer risk from risk-averse to risk-seeking investors

  142. A financial asset is an asset whose value arises from __________ {Capital Markets}
    1. Its features
    2. Physical appearance
    3. A contractual relationship
    4. All of the above options

  143. Which of the following is not a secondary market? {Capital Markets}
    1. Stock market
    2. Bond market
    3. Money market
    4. IPO market

  144. Which of the following is not the purpose of an exchange? {Capital Markets}
    1. To provide liquidity to the investors
    2. To provide a barometer to the companies
    3. To provide access to capital
    4. Social networking for issuers and subscribers

  145. This is banking, investment and other financial services provided by banks to private individuals who invest sizeable assets. {Wealth Management}
    1. Private banking
    2. Commercial banking
    3. Investment banking
    4. Wealth management

  146. This is an investment advisory discipline that incorporates financial planning and investment portfolio management primarily for high net worth individuals. {Wealth Management}
    1. Mutual fund management
    2. Wealth management
    3. Risk management
    4. None of the above

  147. The financial services provider engaged in stock broking is known as a __________ firm. {Capital Markets}
    1. Buy side
    2. Sell side

  148. Common stock represents _______________ {Capital Markets}
    1. Liability
    2. Ownership
    3. Employment
    4. Speculation

  149. Holding shares in a company means _____________ {Capital Markets, Equity}
    1. Being full liability towards the company
    2. Having an ownership stake in that company
    3. Having full ownership
    4. All of the above options

  150. When an economy booms __________ {Capital Markets}
    1. All companies do well
    2. All industries do well but cannot say the same amount companies
    3. Different industries get impacted differently based on stage of economic cycle
    4. None of the above

  151. Which of the following would you NOT normally associate as a risk of holding equities? {Capital Markets, Equity}
    1. Seniority risk
    2. Issuer risk
    3. Liquidity risk
    4. Price risk

  152. Shares are _________ than bonds. {Capital Markets, Equity}
    1. Less risky
    2. Equally risky
    3. More risky
    4. None of the above

  153. The source of capital when business is proven to be technically viable but commercial production is yet to begin is __________. {Capital Markets}
    1. Angel investors
    2. Venture capitalists
    3. Private equity
    4. IPO market

  154. A company that is eyeing expansion is likely to have a __________ dividend cover. {Capital Markets, Equity}
    1. Low
    2. High
    3. Moderate

  155. Capital Markets providing financing through the issuance of shares or common stock and enable the subsequent trading thereof are called as _______________ {Capital Markets}
    1. Bond markets
    2. Stock markets
    3. Money markets

  156. Owners of shares are exposed to ___________ {Capital Markets, Equity}
    1. Market / Price risk
    2. Liquidity risk
    3. Issuer risk
    4. All of the given options

  157. Which of the following statements is true? {Capital Markets, Equity}
    1. Fundamental analysis and Technical analysis are mutually exclusive
    2. Technical analysis tries to spot market inefficiences and create trading ideas
    3. Fundamental analysis is a superior technique of stock analysis
    4. Fundamanetal analysis (FA) and Technical analysis (TA) can be complementary with FA recommending what to buy and TA indicating when to buy
    5. All of the above

  158. In the event a company being liquidated, who will be paid last ____________ {Capital Markets, Equity}
    1. Preferred stockholders
    2. Bank loans
    3. Common stockholders
    4. Bondholders

  159. Which of the following is NOT a factor influencing equity investments? {Capital Markets, Equity}
    1. Size of the company
    2. Liquidity risk
    3. Industry prospects
    4. Management quality
    5. All of the above
    6. None of the above

  160. Investors wishing to take higher risk in their investment portfolio are likely to __________ {Capital Markets, Equity}
    1. Choose low volatility portfolios and enjoy higher returns
    2. Choose high volatility portfolios and are guaranteed to enjoy higher returns
    3. Choose high volatility portfolios and are guaranteed to enjoy lower returns
    4. Choose high volatility portfolios and could potentially enjoy higher returns

  161. A technical analyst will NOT consider the following factors in evaluating a stock. {Capital Markets, Equity}
    1. Historical price
    2. Volume of trade
    3. Price patterns
    4. Profit trends
    5. All of the above

  162. Which of the following statements is true. {Capital Markets, Equity}
    1. High P/E ratio stocks are expensive
    2. Low P/E ratio stocks are stocks that have no future
    3. PEG ratio should be used to evaluate whether a stock is expensive
    4. Nothing can be stated with certainity

  163. The financial services provider engaged in selling mutual fund units is known as __________ firm. {Mutual Funds}
    1. Sell side
    2. Buy side

  164. Which part of the investment bank-brokerage house interacts with clients in the trade lifecycle? {Trade lifecycle}
    1. Front office
    2. Middle office
    3. Back office
    4. All of the above
    5. None of the above

  165. This mechanism enables the entire trade process for capital markets and payment transactions to be conducted electronically without the need for re-keying or manual intervention, subject to legal and regulatory restrictions. {Trade lifecycle}
    1. Straight through processing
    2. Central counterparty clearing (CCP)
    3. Society for Worldwide Interbank Financial Telecommunication (SWIFT)
    4. Financial Information Exchange (FIX)

  166. Which of the following differentiates the exchange system from other types of the markets? {Trading}
    1. Availability of trading space
    2. Guranteed trade settlement
    3. Services of broker-dealers
    4. Electronic trading platform

  167. In a trade lifecycle, ________________ denotes determining buy-sell obligation of exchange members {Trading}
    1. Order initiation
    2. Order routing
    3. Clearing
    4. Settlement
    5. Payment

  168. This is a process whereby securities are delivered against payment of money to fulfill contractual obligations. {Trading}
    1. Settlement
    2. Clearing
    3. Pay Out
    4. Pay In

  169. This refers to any trading platform or method by which the firm completes buy-sell orders in the market place.{Trading}
    1. Trading system
    2. Buying system
    3. Selling system
    4. Margin system

  170. The financial institution holds customer's securities for safekeeping so as to minimize the risk of their theft or loss. {Custodial Services}
    1. Stock brokerage
    2. Custodian
    3. Investment bank
    4. Stock exchange
    5. Regulator

  171. Exchange of securities against funds when the large financial institutions transact (bought or sold) securities is typically carried out by ______________. {Custodial Services}
    1. Custodian banks
    2. Exchange
    3. Depositories

  172. Which of the following servies are offered by global custodians? {Custodial Services}
    1. Safekeeping of a variety of securities in a range of jurisdictions
    2. Making arrangements for the receipt and delivery of securities and cash
    3. Collecting and repatriating dividends and interest
    4. Notifying clients of corporate actions and executing their instructions
    5. All of the above

  173. The entity processing cross-border security trades keeping financial assets safe and servicing the associated portfolios is: {Custodial Services}
    1. Depository
    2. Global Custody
    3. Exchange
    4. Regulator

  174. The main central securities depository in the U.S is the _____________, which is responsible for corporate stocks and bonds, municipal bonds and money market instruments. {Custodial Services}
    1. Euroclear
    2. JASDEC
    3. LCH.Clearnet
    4. Depository Trust Company (DTC)

  175. Custodians provide services to ___________ {Custodial Services}
    1. Mutual funds
    2. Investment managers
    3. Retirement plans
    4. Bank fiduciary and agency accounts
    5. All of the above

  176. Which of the following services are provided by the custodian banks? {Custodial Services}
    1. Settlement services
    2. Asset services
    3. A and B
    4. None of the above

  177. Which of the value-added services do custodians provide to their clients? {Custodial Services}
    1. Valuation
    2. Performance measurement
    3. Tax reclaims processing
    4. Compliance reporting
    5. Security lending
    6. All of the above

  178. Which of the following products are targetted at high net-worth indviduals (HNIs)? {Wealth Management}
    1. Relationship banking
    2. Private banking
    3. Preferred banking
    4. Priority banking
    5. Wealth management
    6. All of the above

  179. Which of the following is true of the scope of operations of a typical large retail bank? {Wealth Management}
    1. It will not offer additional products like asset management and insurance
    2. It will offer additional products like asset management and insurance
    3. It will offer insurance but not asset management
    4. It will offer asset management but not insurance

  180. This is done for ensuring that an individual takes appropriate steps to ensure that their accumulated wealth passes to their intended beneficiaries and in as tax-efficient a method as possible. {Wealth Management}
    1. Tax planning
    2. Estate planning
    3. Trust planning
    4. Beneficiary planning

  181. Which of the following does not reflect a sub-category of client in wealth management? {Wealth Management}
    1. Mass retail
    2. Mass affluent
    3. High net worth
    4. Ultra high net worth

  182. The creation of various products with combinations of risk and return is important to _____________ {Wealth Management}
    1. Savers looking to invest
    2. Businesses looking for various forms of capital
    3. Both savers as well as businesses
    4. Show that the economy is virant

  183. Services of this category of banks are normally targetted at clients with a certain minimum sum of investable cash or minimum net worth. {Wealth Management}
    1. Commercial banks
    2. Investment banks
    3. Public banks
    4. Private banks

  184. Which of the following range of offerings reflects the select world of wealth management? {Wealth Management}
    1. A narrow range of products
    2. A wide range of products
    3. A select range of products
    4. A few high-end products

  185. Which details about the client are necessary to obtain for an adviser to be able to determine the client needs? {Wealth Management}
    1. Assets and liabilities
    2. Life assurance or protetion products
    3. Family circumstances
    4. Health status
    5. Future plans and expectations
    6. All of the above

  186. Which of the following is true? {Wealth Management}
    1. The bank makes recommendations and investors decide
    2. The investor makes decisions and the bank carries them out
    3. The bank decides on its own regarding the client's investment
    4. Any of the above is possible

  187. Which of the following makes wealth management an attractive business for banks? {Wealth Management}
    1. Earning margins on deposits placed with the banks
    2. Earnign brokerage and commission on trades
    3. Earning investment management fees
    4. Earning low-risk margins on the loans taken against assets
    5. All of the above

  188. Corporate benefits such as dividends accrue to those shareholders who are on the register of the company as on _________ date. {Corporate Actions}
    1. Ex-date
    2. Record date
    3. IPO date
    4. Declaration date

  189. Investors in a public limited company have ________ liability towards the company's financial failure. {Equity}
    1. Unlimited
    2. Zero
    3. Limited
    4. Absolute

  190. If a company has totally 1000 shares and Mr. X owns 250 of them, then _________ {Equity}
    1. He is 250% owner
    2. He is 2.5% owner
    3. He is 25% owner
    4. He has full ownership
    5. He has no ownership

  191. Which of the following represents liquidity as an investor requirement? {Corporate Actions}
    1. Money available for the short term
    2. Money available for investment
    3. Money which is needed in the immediate period
    4. Money which is needed in the long term

  192. Which of the following are valid goals of wealth management? {Wealth Management}
    1. Helping a client become wealthy
    2. Gracefully accepting losses
    3. Preserving and enhancing a client's wealth
    4. Ensure the client earns more than what fund management might offer

  193. Which of the following statements reflects wealth management as a business? {Wealth Management}
    1. Standardised products
    2. Investment in mutual funds
    3. High-end banking
    4. Tailor-made solutions

  194. Which of the following is NOT a part of wealth management services bouquet? {Wealth Management}
    1. Customised banking products
    2. Investment management
    3. Trusts and Estate management
    4. Tax and Estate planning
    5. Checking accounts

  195. Repos and SBL (Stock Lending and Borrowing) are in essence{Corporate Actions, Security Lending and Borrowing}
    1. Very similar if the collateral is some other security
    2. Very similar if the collateral is cash
    3. Different
    4. Same in flows but the structure is different

  196. Collateral for Stock Lending and Borrowing transactions in most geographies of the world is _________. {Corporate Actions, Security Lending and Borrowing}
    1. A minimum of 100%
    2. Exactly 100%
    3. Can be any number acceptable to the lender
    4. Unregulated

  197. Extent of lending to one counterparty level is typically restricted to: {Corporate Actions, Security Lending and Borrowing}
    1. The borrowing counterparty
    2. The issuer of the collateral accepted
    3. Either of these
    4. Both of these

  198. As an agency organizing lending, the agent bank: {Corporate Actions, Security Lending and Borrowing}
    1. Must make sure it has authorisation from the beneficial owner
    2. Need not have specific authorisation so long as proper collateral is accepted
    3. Make sure the benefits pass to the lender
    4. Both a and c

  199. The value of collateral can change due to __________ {Corporate Actions, Security Lending and Borrowing}
    1. Change in market prices only
    2. Change in currency rates only
    3. Both of these where cross border exposures are involved

  200. Which of the following asset does not qualify as collateral for the purpose of securities lending? {Corporate Actions, Securities Lending and Borrowing}
    1. Cash
    2. Securities
    3. Assets in kind
    4. Letter of credit