Banking Financial Awareness · Economics

Financial Markets and Instruments

1,955 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

DCF is known in Accounting as

  1. Discounted Cash Flow

  2. Demand Cash Flow

  3. Demand Current Flow

  4. Discounted Current Fund
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Right  answer because  the DCF is known in accounting by Discounted Cash Flow so  Discounted Cash Flow is right answer here. 

Multiple choice

The provident fund (PF) contribution rate for employees was hardly coded (made part of the program) in a payroll system. Whenever rate changes, it meant program modification. Which of the following is most appropriate?

  1. It would have been better to have designed PF rates to be input from the console

  2. It would have been more efficient to have designed PF rates as batch inputs

  3. Hard coding has helped in minimizing input errors and in faster execution time

  4. Data that changes rarely can be hardly coded
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Hard coding values that rarely change is a standard practice in software development to avoid unnecessary complexity. If a value changes frequently, it should be externalized, but for static or rarely changing data, hard coding is acceptable.

Multiple choice

An unmarried professional working in HLL wanted to invest in mutual fund. Which type of scheme should he invest in?

  1. 80% debt scheme

  2. 50% equity and 50% income and liquid scheme

  3. 90% in high P/E ratio funds in the market

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

Unmarried professionals would like to earn high profits and would be willing to take more risk. So, they choose the investment with higher profit-earnings ratio, i.e. 90% in high P/E ratio funds in the market.

Multiple choice

Cost of investing is the most important in a/an

  1. balanced fund

  2. bond fund

  3. growth fund

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

Because bonds typically gain less than stocks, over time their costs become a heavier burden. Costs are the most important factor when evaluating bond funds.

Multiple choice

Opportunity cost does not involve

  1. cash inflow

  2. cash outflow

  3. cash outlay

  4. either (1) or (2)

  5. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Opportunity cost represents the benefit foregone by choosing one alternative over another. It is a notional cost and does not involve actual cash outflow.

Multiple choice

Find the appropriate word from the given options and fill blank (iii).

Directions: The following passage has some blanks, each of which has been numbered. These numbers are printed below the passage and against each, five words are suggested, one of which fits the blank appropriately. 

The traditional method of managing credit risk is ____(i)____ diversification. Although ____(ii)____ credit risk through diversification is effective, institutions are often constrained by _____(iii)____ of diversification ____(iv)_____ on account of limited area of _____(v)_____. During the last few years, managing credit risk through selling assets by way of securitisation has _____(vi)_____ in popularity. The market for securitised assets has grown _____(vii)_____ in the last few years and is expected to grow further in the _____(viii)_____ years. This mode of credit risk mitigation is most _____(ix)_____ to loans with standardised payment schedules and similar credit risk characteristics such as housing loans, auto loans, credit card receivables, etc. Further, shedding loans through securitisation might _____(x)____ client relationship. In this context, credit derivatives provide a new technique for managing credit risk.

  1. lack

  2. supply

  3. scarcity

  4. void

  5. want
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

You are constrained by lack of something. So, the correct answer is option 1 (lack).

Multiple choice

Find the appropriate word from the given options and fill blank (iii).

Directions: The following passage has some blanks, each of which has been numbered. These numbers are printed below the passage and against each, five words are suggested, one of which fits the blank appropriately. 

The traditional method of managing credit risk is ____(i)____ diversification. Although ____(ii)____ credit risk through diversification is effective, institutions are often constrained by _____(iii)____ of diversification ____(iv)_____ on account of limited area of _____(v)_____. During the last few years, managing credit risk through selling assets by way of securitisation has _____(vi)_____ in popularity. The market for securitised assets has grown _____(vii)_____ in the last few years and is expected to grow further in the _____(viii)_____ years. This mode of credit risk mitigation is most _____(ix)_____ to loans with standardised payment schedules and similar credit risk characteristics such as housing loans, auto loans, credit card receivables, etc. Further, shedding loans through securitisation might _____(x)____ client relationship. In this context, credit derivatives provide a new technique for managing credit risk.

  1. lack

  2. supply

  3. scarcity

  4. void
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

You are constrained by lack of something. So, the correct answer is option 1 (lack).

Multiple choice

Find the appropriate word from the given options and fill blank (vii).

Directions: The following passage has some blanks, each of which has been numbered. These numbers are printed below the passage and against each, five words are suggested, one of which fits the blank appropriately. 

The traditional method of managing credit risk is ____(i)____ diversification. Although ____(ii)____ credit risk through diversification is effective, institutions are often constrained by _____(iii)____ of diversification ____(iv)_____ on account of limited area of _____(v)_____. During the last few years, managing credit risk through selling assets by way of securitisation has _____(vi)_____ in popularity. The market for securitised assets has grown _____(vii)_____ in the last few years and is expected to grow further in the _____(viii)_____ years. This mode of credit risk mitigation is most _____(ix)_____ to loans with standardised payment schedules and similar credit risk characteristics such as housing loans, auto loans, credit card receivables, etc. Further, shedding loans through securitisation might _____(x)____ client relationship. In this context, credit derivatives provide a new technique for managing credit risk.

  1. gigantically

  2. slowly

  3. slightly

  4. impressively

  5. needlessly
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The latter part of the sentence indicates that we are talking about growth. So, a positive word is required. The correct answer is 'impressively'.

Multiple choice

Find the appropriate word from the given options and fill blank (vii).

Directions: The following passage has some blanks, each of which has been numbered. These numbers are printed below the passage and against each, five words are suggested, one of which fits the blank appropriately. 

The traditional method of managing credit risk is ____(i)____ diversification. Although ____(ii)____ credit risk through diversification is effective, institutions are often constrained by _____(iii)____ of diversification ____(iv)_____ on account of limited area of _____(v)_____. During the last few years, managing credit risk through selling assets by way of securitisation has _____(vi)_____ in popularity. The market for securitised assets has grown _____(vii)_____ in the last few years and is expected to grow further in the _____(viii)_____ years. This mode of credit risk mitigation is most _____(ix)_____ to loans with standardised payment schedules and similar credit risk characteristics such as housing loans, auto loans, credit card receivables, etc. Further, shedding loans through securitisation might _____(x)____ client relationship. In this context, credit derivatives provide a new technique for managing credit risk.

  1. gigantically

  2. slowly

  3. slightly

  4. impressively

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

The latter part of the sentence indicates that we are talking about growth. So, a positive word is required. The correct answer is 'impressively'.