Banking Financial Awareness · Economics

Financial Markets and Instruments

1,985 Questions

Financial markets and instruments cover mutual funds, risk management, portfolio optimization, and investment strategies. These topics are critical for banking and financial awareness sections in competitive exams. Practice these questions to understand operational risk, asset valuation, and market regulations.

Portfolio optimizationOperational risk managementMutual funds valuationInvestment income typesHedging strategies

Financial Markets and Instruments Questions

Multiple choice

What are the two distinct phases of a deferred annuity?

  1. Waiting and Starting phases

  2. Loading and Unloading phases

  3. Accumulation and Payout phases

  4. Commutation and Continuation phases
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A deferred annuity is where periodic benefits are scheduled to begin after a period, say at least 12 months after the date of purchase of the annuity. Every deferred annuity in turn has two periods – an accumulation period between when the annuity is purchased and the annuity payments begin, and a payout or liquidation period during which the insurer makes the annuity payments.

Multiple choice

The most common form of bonus is

  1. cash bonus

  2. compound bonus

  3. dividend

  4. reversionary bonus
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Reversionary bonus is the bonus declared every year as a percentage of (Guaranteed Maturity Benefit/Sum Assured + Earlier Reversionary Bonuses). It is payable on death of the life assured or maturity of the policy.

Multiple choice

Which plan is suitable for accumulation of specific sum of money?

  1. Whole life

  2. Endowment

  3. Money back

  4. Term insurance
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An endowment policy is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness.

Multiple choice

Which of the following is incorrect?

  1. Financial planning is for wealthy individuals only.

  2. A disciplined approach and dedicated savings are necessary.

  3. An unplanned impulsive approach could spell financial distress.

  4. An investment should suit one’s risk appetite.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Financial planning is not only for wealthy individuals, but for everyone. Everyone should have confidence in their finances and a financial plan that can help them live a comfortable life. 

Multiple choice

In case of ULIPs, which of the following statements is correct?

  1. Entire premium is invested in units.

  2. Premium less charges are invested.

  3. Premium less bonuses are invested in units.

  4. Premium less risk charges are invested.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

ULIP is a life insurance product which provides risk cover for the policy holder along with investment options to invest in any number of qualified investments such as stocks, bonds or mutual funds. In ULIPs, premium allocation charges, deducted from the premium, are for expenses incurred in issuing the policy.

Multiple choice

Under deferred annuity, the premium has to be paid

  1. in regular installments

  2. in lump sum

  3. Both (1) and (2)

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

These annuities may be purchased with a single payment or, as is more often the case, with a series of periodic payments.  

Multiple choice

At what stage in one’s life will savings make an impact on him?

  1. Post retirement

  2. While he is earning

  3. While he is a student

  4. When he is just married
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Most of the benefits of savings are realised post retirement and also at that time when there is no source of income. Hence, a person's life savings will make an impact on him post retirement.

Multiple choice

Annuity belongs to

  1. one where the annuity amount is fixed (guaranteed)

  2. one where the annuity amount is variable (linked to investment performance)

  3. Both (1) and (2)

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Annuity belongs to one where annuity amount is fixed and one where the annuity amount is variable. 

Multiple choice

Which of the following is/are incorrect?

A. Mutuality means funds from various individuals are combined. B. Diversification means spreading out funds to various destinations.

  1. A is correct.

  2. B is correct

  3. Both A and B are correct.

  4. None of the above is correct.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Mutuality means flow of resources from many to one. Diversification is a risk management technique that mixes a wide variety of investments within a portfolio.

Multiple choice

Which of the following plans have several limitations?

  1. Traditional cash value plans

  2. Non-traditional plans

  3. Both (1) and (2)

  4. Neither (1) nor (2)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Traditional cash value plans have several limitations, like reduced benefits among older and long-tenured workers, etc.