Money markets

1. Which of the following is NOT a money markets instrument? [A]National Savings Certificates [B]A 3-month certificate of deposit [C]A treasury bill with 7 days to maturity [D]A 14-day repurchase agreement of Treasury 8% 2007

National Savings Certificates

Money Markets are the markets where securities with less than one year maturity are traded. NSC does not come under money markets.

2. All of the following are money market instruments except__: ? [A] Certificate of deposit [B]Commercial paper [C]Indian Depository Receipt [D]Commercial bill

Indian Depository Receipt

Indian Depository Receipt is a capital market instrument. Money market instruments in India include Call Money / Notice Money / Term Money Market, Treasury Bill (T – Bills), Commercial Bills, Certificate Of Deposits (CDs), Commercial Papers (CP), Money Market Mutual Funds (MMMFs), The Repo / Reverse Repo Market etc.

3. Which is the most active Money Market Instrument in India ? [A]Treasury Bill [B]Commercial Papers [C]Repo [D]Notice Money

Repo

The most active segment of the money market is “Overnight Call market” or repo.

4. Which of the following segments of Money Markets is indicator of day to day interest rates? [A]Term Money Market [B]Call Money / Notice Money Market [C]Money Market Mutual Funds [D]Commercial Bills

Call Money / Notice Money Market

Call Money / Notice Money market is most liquid money market and is indicator of the day to day interest rates. If the call money rates fall, this means there is a rise in the liquidity and vice versa. Interest Rates in Call / Notice Money Markets are market determined i.e. by the demand and supply of short term funds. The intervention of RBI is prominent in the short term funds money market in India and it can influence the rates prominently.

5. Which among the following can be used to channelize surplus funds from savers to institutions for short term use?

[A]Stocks [B]Bonds [C]Debentures [D]Commercial paper

Commercial paper

While first three belong to capital market, last one is an instrument of Money Markets. Money Markets are essentially short term markets.

6. Which of the following is used by RBI for sterilization of the Capital Inflows?

[A]Base Rate System [B]CRAR Obligations [C]Open Market Operations [D]Credit Authorization Scheme

Open Market Operations

To check the reverse Capital Inflows, central banks often attempt what is known as the “sterilization” of capital flows. In a successful sterilization operation, the domestic component of the monetary base (bank reserves plus currency) is reduced to offset the reserve inflow. Theoretically, this can be done by encouraging private investment overseas, or allowing foreigners to borrow from the local market. The classical form of sterilization, however, has been through the use of open market operations, that is, selling Treasury bills and other instruments to reduce the domestic component of the monetary base.

7. What is sold and purchased during Open Market Operations by RBI?

[A]Government Securities [B]Commercial Papers [C]Certificates of Deposits [D]Global Depository Receipts

Government Securities

OMOs are conducted by the RBI via the sale/purchase of government securities to/from the market with the primary aim of modulating rupee liquidity conditions in the market OMOs are an effective quantitative policy tool in the armoury of the RBI, but are constrained by the stock of government securities available with it at a point in time

8. In context with banking, a Certificate of Deposit is _ : [A] Money Market Instrument [B]Negotiable Instrument [C]Transferable instrument [D]All of above

All of above

9. With reference to Commercial papers (CP), which of the following is not a correct statement? [A] Prior approval of RBI is needed to issue CP [B] Issued in the multiples of Rs. 5 lakh [C] Issued in the form of usance promissory note [D] Issued at a discount to face value

Prior approval of RBI is needed to issue CP 

To issue CPs, no prior approval of RBI is needed and underwriting the issue is not mandatory.

10. Who among the following is / are eligible to issue Commercial papers in India? [A]Corporates [B]Primary dealers [C]All-India Financial Institutions [D]All of the above

All of the above

The Commercial Papers can be issued by listed company which have working capital of not less than Rs. 5 Crores. The corporates, primary dealers (PDs) and the All-India Financial Institutions (Fis) are eligible to issue CP.

CoNTD...............

11. Which among the following denotes the Market Capitalization of a company? [A]Current market value of its authorized capital [B]Current market value of its issued shares [C]Current market value of its paid-up capital [D]Current market value of issued shares and debentures  

Current market value of its issued shares

12. Which one of the following is an example for Long Term Investment Option? [A]Fixed deposit [B]Money market [C]Public provident fund [D]Saving accounts

Public provident fund

The short term investment options are savings bank account, money market/liquid funds and fixed deposits with banks. The Long term investments typically comprise the Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds and Debentures, Mutual Funds etc.

13. Which of the following is not a property of all kind of shares of public company? [A]They are immovable property [B]Transferable in manner [C]Treated as goods [D]None of the above

They are immovable property

The shares of public company are movable property.

14. Which one of the following type of companies is not found in India? [A]Unlimited company [B]Company limited by shares [C]Company limited by guarantee [D]Private company

Unlimited company

Unlimited companies are not found in India; instead, their space is occupied by the proprietary kind of businesses.An unlimited company is a company having no limit on the liability of its members. The members of such a company are liable to the full extent of their fortunes to meet the obligations of the company by contributing to its assets in the event of its being wound up. Thus, such a company does not carry the benefit of limited liability which is available to the members of all the other types of company. So far as the risk of the members is concerned, there is no difference between a partnership firm and an unlimited company.

15. Which of the following is not a type of mutual fund? [A]Open-ended scheme [B]Closed-ended scheme [C]Long forward scheme [D]Exchange-traded funds

Long forward scheme

There are three types of mutual fund schemes in which an investor can invest in. These are open-ended schemes, closed-ended schemes, and exchange-traded funds (ETFs).

16. A customized contract between two parties, where settlement takes place on a specific date in future at a price agreed today is called ___? [A]Future contracts [B]Forward contracts [C]Option contracts [D]Warrant contracts

Forward contracts

A forward contract is a customized contract between two parties, where settlement takes place on a specific date in future at a price agreed today.

17. Which one of the following is an example for Long Term Investment Option? [A]Fixed deposit [B]Money market [C]Public provident fund [D]Saving accounts

Public provident fund

The short term investment options are savings bank account, money market/liquid funds and fixed deposits with banks. The Long term investments typically comprise the Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds and Debentures, Mutual Funds etc.

18. In which year the first organised future market was established in India? [A]1855 [B]1875 [C]1919 [D]1956

1875

The first organized futures market in India was established in 1875, under the name of ‘Bombay Cotton Trade Association’ to trade in cotton derivative contracts. This was followed by institutions for futures trading in oilseeds, food grains, etc.

19. A customized contract between two parties, where settlement takes place on a specific date in future at a price agreed today is called ___? [A]Future contracts [B]Forward contracts [C]Option contracts [D]Warrant contracts

Forward contracts

A forward contract is a customized contract between two parties, where settlement takes place on a specific date in future at a price agreed today.

20. Which of the following gives the right, but not an obligation, to buy the underlying at a stated date and at a stated price? [A]Call Option [B]Put Option [C]Forward Option [D]Forward contract

Call Option

An Option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and at a stated price.

21. All mutual funds in India must be compulsorily registered with? [A]SEBI [B]IrDA [C]RBI [D]Department of Company Affairs

SEBI

Mutual funds are compulsorily registered with the Securities and Exchange Board of India (Sebi), which also acts as the first wall of defence for all investors in these funds.

22. Which among the following is a correct statement about Open Ended Mutual Fund? [A]It can be bought and sold any time [B]It has fixed rates of returns [C]It has fixed maturity [D]None of them

 It can be bought and sold any time

An open-ended fund is the one which is usually available from a mutual fund on an ongoing basis that is an investor can buy or sell as and when they intend to at a NAV-based price.

23. Which among the following is NOT a real asset?

[A]House [B]Jewellery [C]Gold [D]Post office savings

Post office savings

A person can invest in Physical assets like real estate, gold/jewellery, and commodities etc or Financial assets such as fixed deposits with banks, small saving instruments with post offices, insurance/provident/pension fund etc. Apart from that an investor can invest in securities market related instruments like shares, bonds, debentures etc. Report Error

24. Which of the following is a major difference between swaps and futures contracts? [A]Swaps are typically short term, whereas futures contracts tend to extend over several years [B]Swaps are derivative securities, but futures contracts are not [C]A futures contract involves only one future transaction, whereas a swap typically involves several future transactions [D]Swaps are usually marked to market, whereas futures contracts are not

Swaps are usually marked to market, whereas futures contracts are not

25. What are the main functions performed by the IRDA? [A]Protect the rights of policy holders [B]Adjudication on insurance related matters [C]Promoting insurance business [D]All of these All of these

All of these The functions of IRDA are: 1. Protect the rights of policy holders 2. Provide registration certification to life insurance companies 3. Renew, Modify, Cancel or Suspend this registration certificate as and when appropriate. 4. Promoting efficiency in the conduct of insurance business; 5. Promoting and regulating professional organisations connected with the insurance and reinsurance business 6. Regulating investment of funds by insurance companies; 7. Adjudication of disputes between insurers and intermediaries or insurance intermediaries