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 commercial studies sources of business finance - 2 gdrs, adrs and idrs depository receipts international sources

_____ is/are the disadvantage(s) of Global Depository Receipts.

  1. Dividends are paid in domestic countrys currency which is subject to volatility in the forex market.

  2. It is mostly beneficial to High Net-Worth Individual (HNI) investors.

  3. GDR is one of the expensive sources of finance.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
GDR is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors. GDR stands for Global Depository Receipt. It is a bank certificate issued in more than one country for shares in a foreign company. Disadvantages of GDR are:
a) Dividends are paid in domestic countrys currency which is subject to volatility in the forex market.
b) It is mostly beneficial to High Net-Worth Individual (HNI) investors.
c) GDR is one of the expensive sources of finance.
Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

Lease financing enables the lessee to acquire the asset with a ________ investment.

  1. Higher

  2. Medium

  3. Lower

  4. Both a and b
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Lease financing in other words is renting of an asset for some specific period. The lessee pays a fixed periodic amount called lease rental to the lessor for the use of the asset. This enables the lessee to acquire  the assets with a lower investment.

Multiple choice organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

Which one of the following statements regarding 'financial literacy' is not true?

  1. Its objective is to make people aware of the risks and rewards of investments so that they can make an informed choice.

  2. India has a formal nationwide structured financial education programme.

  3. This would enhance the effectiveness and integrity of financial markets.

  4. It reduces the government burden in protecting the common person from elements of market failure.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

While India has various financial literacy initiatives, it does not have a single, unified, formal nationwide structured financial education program that covers the entire population in the way implied by the statement.

Multiple choice organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

The _________ aim of financial management is to maximize shareholder's wealth, which is referred to as the wealth maximization.

  1. primary

  2. secondary

  3. final

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

The most widely accepted objective of the firm is to maximize the value of the firm for its owners, that is, to maximize shareholder wealth. Shareholder wealth is represented by the market price of a firm’s common stock.

The shareholder wealth maximization goal states that management should seek to maximize the present value of the expected future returns to the owners (that is, shareholders) of the firm. 

Multiple choice commercial studies finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance introduction to business capital/finance

Interest paid by other than financial enterprises is shown in cash flow statement under ________________.

  1. Operating activities

  2. Investing activities

  3. Financing activities

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

Interest paid by non-financial enterprises is classified as a financing activity in the cash flow statement because it relates to the cost of obtaining financial resources. Operating activities typically involve the core revenue-generating activities of the business.

Multiple choice commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

The size of money that can be raised through commercial paper is ________ to the excess liquidity available with the suppliers of funds at a particular time.

  1. limited

  2. unlimited

  3. equal

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

Commercial paper is an unsecured promissory note given by a firm to raise finances for a short period of time. 

The size of money that can be raised through commercial paper is limited to the excess liquidity available with the suppliers of funds at a particular time.

Multiple choice commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

Which of the following is a limitation of commercial paper?

  1. The size of money that can be raised through commercial paper is limited to the excess liquidity available with suppliers of funds at a particular time.

  2. A commercial paper is sold on an unsecured basis,

  3. As it is freely transferable instrument, it has high liquidity.

  4. It provides more funds compared to other sources.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Commercial paper is an unsecured promissory note given by a firm to raise finances for a short period of time. Only financially sound and highly rated firms can raise money through commercial papers. 

The size of money that can be raised through commercial paper is limited to the excess liquidity available with the suppliers of funds at a particular time.

Multiple choice business organisation and correspondence commerce and modern civilization history of commerce in india hindrances of commerce historical background of commerce in the sub-continent

Capital gearing refers to __________________________.

  1. The proportion between net interest and non-fixed interest or dividend bearing funds in the capital employed

  2. The proportion between fixed interest or dividend bearing funds and non-fixed interest or dividend bearing funds in the total capital employed in the business

  3. Both (A) and (B)

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

Capital gearing is the ratio of fixed-interest-bearing capital (like debt and preference shares) to equity capital (non-fixed interest/dividend bearing).

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers business transactions and source document source documents voucher and transactions

A risk which is classified as its contribution to risk of portfolio is classified as __________.

  1. classified risk

  2. contributed risk

  3. irrelevant risk

  4. relevant risk
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Relevant risk is the risk that cannot be diversified away and is measured by its contribution to the risk of a portfolio, often represented by beta.

Multiple choice elements of business marketing and sales difference between marketing and sales marketing and sales department ideologies/concepts/views of marketing management

Modigliani-Miller approach is based on the following assumptions:
I. All firms have equity capital
II. There is a perfect market
III. Investors act rationally
IV. Information about the market conditions is imperfect
Of these:

  1. I and IV are correct

  2. I, II and IV are correct

  3. I, II and III are correct

  4. All are correct
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Modigliani-Miller theorem assumes perfect capital markets, rational investors, and no transaction costs or taxes, which implies perfect information rather than imperfect information.

Multiple choice investement and financial planning banking compound interest comparing quantity maths

Which statement is wrong regarding Systematic Investment Plan:

  1. Advantage of long terms and short-term gains

  2. It has huge risks but high returns

  3. Redemption of units can be done

  4. Safe and transparent mode of investment
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Systematic Investment Plan (SIP) is an investment vehicle offered by mutual funds to investors, allowing them to invest small amounts periodically instead of lump sums. It is good for investors who don't have much financial market's understanding. It involves lesser risks and low returns because investment is done in small amounts over a period of time.

Multiple choice investement and financial planning banking compound interest comparing quantity maths

Mutual Fund is a professionally managed investment scheme, run by an AMC i.e. Asset Management Company and they invest their own money in different schemes.

  1. True

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

Mutual Fund is a professionally managed investment scheme, which is run by AMC. Mutual Fund is a mediator that brings together a group of people and invests 'their' money in stocks, bonds and other securities.

Multiple choice commercial studies industrial relations, trade unions and social security concept, scope and social security in india concept of social security insurance - introduction and importance

A _______ is a tax-efficient way to save for your retirement.

  1. pension

  2. income

  3. fund

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

Pension is a type of after retirement payment to the retired employees of the business which is cut from the salary every year and is not taxable under the income tax act, 1961. 

Multiple choice income tax direct taxes commerce black money and tax evasion meaning of tax

The methods of appraising capital expenditure proposals can be divided into ____.

  1. unsophisticated and sophisticated

  2. average rate of return and discounted cash flow techniques

  3. average rate of return and pay back method

  4. net present value method and net terminal value method
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital expenditure appraisal methods are broadly categorized into unsophisticated (non-discounting) methods like Payback Period or Accounting Rate of Return, and sophisticated (discounting) methods like Net Present Value or Internal Rate of Return.

Multiple choice organisation of commerce and management sources of business finance - 2 equity and preference shares equity shares and preference shares non-institutional sources - long-term

A project has an equity beta of 1.2 and debt beta of 0. This project is finance by combination of $30\%$ debt and $70\%$ equity, then project beta is _______.

  1. 0

  2. 1

  3. 0.84

  4. 0.64
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

$\beta _p$ = $\frac{{\beta equity X E}}{D + E}$ + $\frac{{\beta debt X D}}{D + E}$.