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

The objective of Common Wealth Equity-Fund is

  1. to help poor countries

  2. to contribute to the stock market

  3. long term capital appreciation to equity

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

The Commonwealth Equity Fund was established to provide long-term capital appreciation by investing in equity markets within Commonwealth countries.

Multiple choice

What is the full form of “FMP”?

  1. Fixed Maturity Plan

  2. Fixed Maturity Policy

  3. Fringe Money Plan

  4. Fringe Money Policy
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

FMP stands for Fixed Maturity Plan, which is a type of closed-ended debt mutual fund scheme. It invests in debt instruments with a maturity period matching the tenure of the scheme.

Multiple choice

Directions: Read the passage/argument and answer the question that follows it.

In the esoteric world of finance, no new idea is complete without its Greek symbol. In the distant past, picking the best stocks was just seen as being clever; now that skill is known as 'alpha'‌. The letter 'beta‌ is for the boring, old style of simply tracking the market. But what if you can find exciting, new markets to track markets that do not move in step with shares or government bonds? That could be extremely valuable. ___________________

Which of the following would complete the above paragraph?

  1. Though it may involve greater risk, it certainly has the potential of generating superior returns over the long term.

  2. It could be more profitable in terms of providing a certain stability and consistency to your overall returns.

  3. Hence the “alternative beta” which refers to non-traditional source of return-based market validity or arbitrage between the spot and futures rates.

  4. But what about “gamma”- the X or zing sector that makes every fund manager or investor a unique animal in the jungle of investment?

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

Option (1) is not factually supported by the paragraph as the paragraph only talks of particular avenues of investment, which may or may not yield some returns. So the question of superior returns or the potential thereof, does not arise at all. Again, option (2) can be similarly ruled out because stability and consistency - these two concerns are hardly addressed by the newer avenues (at least, the paragraph does not support it). Option (4) introduces an interesting, but irrelevant aside in the form of that unknown zing factor. Option (5) represents a possible closing line, but is hardly supported by the contents given in the paragraph. The focus of the paragraph remains on the idea of encoding everything in finance with as symbol. Go back to the first line, the emphasis is on Greek letter. Hence, option (3).

Multiple choice

Directions: This question presents a sentence, all or part of which is underlined. Beneath the sentence you will find five ways of phrasing the underlined part. The first of these repeats the original; the other four are different. If you think the original is best, choose the first answer; otherwise choose one of the others.

Although not quite as liquid an investment as a money-market account, financial experts recommend a certificate of deposit for its high yield.

  1. Although not quite as liquid an investment as

  2. Although it is not quite as liquid an investment as

  3. While not being quite as liquid an investment as

  4. While it is not quite as liquid as an investment

  5. Although not quite liquid an investment as
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Explanation for (1): The sentence has a misplaced modifier as what is not quite as liquid is not answered.

Justification for (2): The sentence has a misplaced modifier as what is not quite as liquid is not answered. Option (2), clarifies by the use of 'it' for the certificate of deposit.

Explanation for (3): The option fails to correct the error of misplaced modifier.
Explanation for (4): The option fails to correct the error of misplaced modifier. Explanation for (5): The option fails to correct the error of misplaced modifier.

Multiple choice

Short term sources of funds can be utilized for long term applications.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Explanation: When we source funds on a short term basis i.e, generally current liabilities repayable in one year the application or use of funds should be within the period. Any application beyond the period will block the funds and we fail to repay the current obligation. The image of the company gets tarnished and there would be no chances of recovery. The same thing has happened in South Asia Crisis of 1997. Countries and companies are treated on the same footing