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

International Finance Corporation , a member of world bank group recently issued a masala bond to the international investors. The subscribers in dollar are promised a certain interest rate. They buy the bond with certain dollars and those dollars are fully protected irrespective of the exchange rate fluctuations. In the these context read the following statements and answer which ones among them is correct:

  1. IFC takes the exchange rate risks.

  2. The bond purchasers takes the exchange risks

  3. Both takes the exchange rate risks

  4. Neither takes the exchange rates risks.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

 (a)

Multiple choice

Ratio analysis focuses on

  1. liability

  2. profitability

  3. solvency

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Correct Answer: All of the above

Multiple choice

Time value of money means

  1. a sum of money received today has more value than the same amount of money to be received in future because the money received today can be invested today to get some more earning

  2. since there is risk involved in future, an individual would always like to receive money today than to wait for future and be under risk

  3. the money received today can be used for any consumption which one may not be able to do because of future inflation and price rise

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Correct Answer: All of the above

Multiple choice

Sensitivity analysis for NPV determination identifies

  1. areas of concern in an investment opportunity

  2. those factors which are sensitive to the profitability of the investment opportunity

  3. those areas where more efforts are required to be made to explore more information

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Correct Answer: All of the above

Multiple choice

Ratios act as indicators of

  1. financial soundness

  2. strength

  3. position

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Ratios act as indicators of good position of the company because it shows the financial position of the company. If a company is sound, it will ultimately result in good position and strength.

Multiple choice

In comparing two projects where their cash flows are not the same in terms of volumes and signs,

  1. IRR method is helpful

  2. IRR method not very helpful

  3. IRR method is not applicable at all

  4. IRR method is applicable
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

IRR method wil not be applicable here as internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability of potential investments. When comparing two projects where their cash flows are not the same in terms of volumes and signs, IRR method is not applicable at all.

Multiple choice

Even when two projects are mutually exclusive, capital rationing results in accurate ranking by

  1. NPV method only

  2. IRR method only

  3. NPV as well as IRR method

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

Mutually exclusive projects are projects in which acceptance of one project excludes the others from consideration. In such a scenario, the best project is accepted. NPV and IRR conflict, which can sometimes arise in case of mutually exclusive projects, becomes critical. The conflict either arises due to the relative size of the project or due to the different cash flow distribution of the projects. Since NPV is an absolute measure, it will rank a project adding more dollar value higher regardless of the original investment required. IRR is a relative measure, and it will rank projects offering best investment return higher regardless of the total value added.

Multiple choice theme, main idea and purpose of a passage reading comprehension english

A passage is given below followed by several inference . You have to examine each interference separately in the context of the passage and decide upon its degree of truth or falsity , Mark your answer as:

Investors today have more investment options than were available just a few years ago. Choice in any decision-making is good in so far it provides variety, differentiation and bench-marking. It could also, however, at times lead to clutter and "noise" if the options are mostly similar and undifferentiated. To make sense of this choice conundrum, it is imperative for an investor to define objective - both returns and digestible risk and then identify the possible options. The investor also needs to select the mix and regularly monitor that objectives and investment outcomes remain aligned. Sounds simple, but can present the most confounding situation which multiplies with the quantum of wealth. 
Multiple investment options of similar types helps in making better investment decisions.

  1. If the inference is 'definitely true'

  2. If the inference is 'probably true'

  3. if the 'data provide in inadequate'

  4. If the inference is 'probably false'
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Refer to the second and the third sentences of the passage. They say that choice is good, but they lead to clutter and noise if the products are similar. So, the inference is probably false.

Multiple choice theme, main idea and purpose of a passage reading comprehension english

A passage is given below followed by several inference . You have to examine each interference separately in the context of the passage and decide upon its degree of truth or falsity , Mark your answer as:

Investors today have more investment options than were available just a few years ago. Choice in any decision-making is good in so far it provides variety, differentiation and bench-marking. It could also, however, at times lead to clutter and "noise" if the options are mostly similar and undifferentiated. To make sense of this choice conundrum, it is imperative for an investor to define objective - both returns and digestible risk and then identify the possible options. The investor also needs to select the mix and regularly monitor that objectives and investment outcomes remain aligned. Sounds simple, but can present the most confounding situation which multiplies with the quantum of wealth. 
Present day investors need to use their judgement more critically before investing.

  1. If the inference is 'definitely true'

  2. If the inference is 'probably true'

  3. if the 'data provide in inadequate'

  4. If the inference is 'probably false'
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
According to the first sentence, it says that investors `today have more investment options' and then later in the paragraph says that investors need to evaluate risk. This means that investors today need to use their judgement mat critically. So, the inference is definitely true.

Multiple choice

Which of the following policies of the financial sectors is basically designed to transfer local financial assets into foreign financial assets freely, and at market determined exchange rates?

  1. Capital Account Convertibility

  2. Financial Deficit Management

  3. Minimum Support Price

  4. Restrictive Trade Practices

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

Capital Account Convertibility refers to the freedom to convert local financial assets into foreign financial assets and vice versa at market-determined exchange rates, which is a key policy for financial integration.