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

Euronext Europe's leading exchange was formed in 2000 with the merger of the exchanges of Amsterdam Brussels and

  1. New York

  2. London

  3. Paris

  4. Frankfurt
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Euronext, Europe's leading stock exchange, was formed in 2000 through the merger of the stock exchanges of Amsterdam, Brussels, and Paris. This pan-European exchange was created to compete with other major exchanges and facilitate cross-border trading in European markets. Euronext has since expanded to include other European exchanges and went public in 2007.

Multiple choice

OTCEI is a/an

  1. atomic submarine of China

  2. economic policy of USA

  3. Indian share market

  4. defence research organisation
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

OTCEI (Over The Counter Exchange of India) was an electronic, screen-based stock exchange established in 1992. It was India's first exchange with fully automated trading and aimed to improve transparency and efficiency in share trading, though it later ceased operations.

Multiple choice

Which of the following is the advantage of financing through SHG?

  1. Poor individual gains strength

  2. Reduces transaction costs

  3. Lenders have to maintain only one single SHG account

  4. Options (1), (2) and (3)

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Yes, the advantage of financing through SHG is to strengthen the economical condition of poor, reduce the transaction cost and the lenders have to maintain only a single SHG account.

Multiple choice

Which of the following are risk free assets?

  1. Housing loans

  2. Venture capital investments

  3. Government approved securities

  4. Loans against jewellery

  5. All of the above
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Yes, all the above options are risk free assets.

Multiple choice

The Balance of Payments statement is divided into two major accounts. They are

  1. Saving Account and Current Account

  2. Recurring Deposit Account and Current Account

  3. Current Account and Capital Account

  4. Saving Account and Recurring Deposit Account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Balance of Payments (BoP) is divided into Current Account and Capital Account. The Current Account records trade in goods/services and income flows, while the Capital Account records capital transfers and investments. It is not about bank savings or recurring deposits.

Multiple choice

Topix index is a broad based index of

  1. the USA

  2. Japan

  3. Australia

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

TOPIX (Tokyo Stock Price Index) is a broad-based market index tracking all domestic companies listed on the First Section of the Tokyo Stock Exchange, making it representative of the Japanese equity market. It differs from American indices like the S&P 500 or European indices in composition and methodology.

Multiple choice

Long-term funds in the capital market can be raised either by borrowing from certain institutions or through

  1. Issue of note

  2. Taking loan from Government

  3. Issue of securities

  4. Taking loan from foreign institutions
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Companies raise long-term capital in capital markets primarily by issuing securities like shares and bonds to investors. Borrowing from government or foreign institutions are specific sources, not the primary mechanism, while issuing notes is a central bank function.

Multiple choice

According to the passage, investments in service are comparable to investments in production and distribution in terms of the

Directions: This question is based on the following reading passage. Choose the best answer to the  question on the basis of what is stated or implied in the passage.

The fact that superior service can generate a competitive advantage for a company does not mean that every attempt at improving service will create such an advantage. Investments in service, like those in production and distribution, must be balanced against other types of investments on the basis of direct, tangible benefits such as cost reduction and increased revenues. If a company is already effectively on a par with its competitors because it provides service that avoids a damaging reputation and keeps customers from leaving at an unacceptable rate, then investment in higher service levels may be wasted, since service is a deciding factor for customers only in extreme situations. This truth was not apparent to managers of one regional bank, which failed to improve its competitive position despite its investment in reducing the time a customer had to wait for a teller. The bank managers did not recognize the level of customer inertia in the consumer banking industry that arises from the inconvenience of switching banks. Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy. The only merit of the improvement was that it could easily be described to customers.

 

  1. tangibility of the benefits that they tend to confer

  2. increased revenues that they ultimately produce

  3. basis on which they need to be weighed

  4. insufficient analysis that managers devote to them

  5. degree of competitive advantage that they are likely to provide
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The passage states that investments in service, like those in production and distribution, must be balanced against other types of investments on the basis of direct, tangible benefits. This establishes that all three types of investments need to be weighed on the same basis - direct, tangible benefits like cost reduction and increased revenues. The comparison is about the evaluation basis, not about the specific benefits they produce.

Multiple choice

What is a gilt-edged stock?

  1. A stock backed by gold.

  2. Bonds issued by the government whose likelihood of default is zero.

  3. Stocks which are linked to the inflation rate.

  4. Stocks doing well in the capital market.

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Gilt-edged stocks (or gilts) are bonds issued by governments, particularly associated with the UK. They are called 'gilt-edged' because of their high reliability and minimal default risk, being backed by the government's creditworthiness.

Multiple choice

Which of the following is termed as 'Hot money'?

  1. FDI

  2. FII

  3. ADR

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

Hot money refers to Foreign Institutional Investment (FII) - funds that move quickly between markets in search of higher short-term returns. Unlike FDI (Foreign Direct Investment) which is long-term and stable, FII is volatile and can exit rapidly, hence the term 'hot money'.

Multiple choice

Which of the following is not true according to the situation?

Directions: Study the situation given below to answer the question.
Satish Vrati's New Year resolution for the past three years has been the same; to buy a new house in New Delhi at the earliest. With every hike in salary, he would scramble through newspapers to find out good properties and housing loans. Meanwhile, he received conflicting advice about the pros and cons of owning a flat. If one friend pointed out the risk involved in leasing out the property. Another would say his money was being locked up without good returns. Vrati became indecisive.

With the cut in Cash Reserve Ration (CRR) by the Reserve Bank of India (RBI), many banks decided to trim interest rates for housing loans. But Vrati still wondered whether real estate was a safe investment. With the entry of corporate sector, the real estate sector has become reliable�, says Rajendra Varshney, chartered accountant and real estate adviser. Today,� it can compete with any available investment option.�

  1. Satish Vrati is a well-to-do man.

  2. Leasing out a house is not an advisable proposition in every circumstance.

  3. Interest rates are linked to CRR.

  4. The attractive rates have now convinced Vrati to buy a flat.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The passage explicitly states 'But Vrati still wondered whether real estate was a safe investment' - this indicates he has NOT been convinced by the attractive rates to buy a flat. His indecision persists despite lower interest rates. Options A, B, and C are all supported by the passage: Vrati is well-to-do (salary hikes, considering property investment), there are valid concerns about leasing (mentioned by friends), and the passage directly links interest rates to CRR cuts by RBI.

Multiple choice

Which of the following is true according to the situation?

Directions: Study the situation given below to answer the question.
Satish Vrati's New Year resolution for the past three years has been the same; to buy a new house in New Delhi at the earliest. With every hike in salary, he would scramble through newspapers to find out good properties and housing loans. Meanwhile, he received conflicting advice about the pros and cons of owning a flat. If one friend pointed out the risk involved in leasing out the property. Another would say his money was being locked up without good returns. Vrati became indecisive.

With the cut in Cash Reserve Ration (CRR) by the Reserve Bank of India (RBI), many banks decided to trim interest rates for housing loans. But Vrati still wondered whether real estate was a safe investment. With the entry of corporate sector, the real estate sector has become reliable�, says Rajendra Varshney, chartered accountant and real estate adviser. Today,� it can compete with any available investment option.�

  1. Newspapers carry information regarding real estate.

  2. New Year resolutions seldom get realized.

  3. People are biased about buying property.

  4. CRR is the amount that banks have to keep with the RBI.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The passage directly states Vrati 'would scramble through newspapers to find out good properties and housing loans,' confirming that newspapers carry real estate information. Option B cannot be definitively concluded - Vrati's resolution hasn't been fulfilled in three years, but this doesn't prove resolutions seldom succeed generally. Option C makes a generalization about people's bias when the passage only shows Vrati received conflicting advice. Option D is factually incorrect - CRR is Cash Reserve Ratio, not the amount banks keep with RBI (that would be reserves or deposits). Only A is explicitly supported by evidence in the passage.