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

Identify the limitation of retained earnings ___________________.

  1. It is an uncertain source of funds as the profits of business are fluctuating.

  2. It does not create any charge on the assets of the firm while providing funds.

  3. It is a convenient and continuous source of funds.

  4. It needs to promote the sales of an organisation.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Limitation of retained earnings:It is an uncertain source of funds as the profits of business are fluctuating. Retained earning refers to the accummulated net income of a company or a business organization.
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

Which of the following is not a merit of retained earnings?

  1. As the funds are generated internally, there is a greater degree of operational freedom and flexibility.

  2. Retained earnings is a permanent source of funds available to an organisation.

  3. It is an uncertain source of funds as the profits of business are fluctuating.

  4. It enhances the capacity of the business to absorb unexpected losses.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A part of the net profits that are usually kept for use in the future is termed as retained earnings. Retained earnings are uncertain sources of funds as the profits of a business are fluctuating and can't be always determined. This is a demerit of retained earnings.

Multiple choice economics consumption and investment functions determinants of consumption function and savings function production, consumption, saving and economic units ex ante and ex post

Which among the following is a type of propensity to save?

  1. Marginal propensity to save

  2. Average propensity to save

  3. Total propensity to save

  4. Both A & B
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Marginal Propensity to save refers to the percentage change in savings for every one rupee of change in the income. It is the ratio between the change in income and its corresponding change in savings.

Marginal propensity to save = ΔS/ΔY where ΔS is the Change in savings and ΔY is the change in income in the economy. 

APS refers to Average Propensity to save which defines the amount of savings in every 1 rupee of income for all level of income. 

Average propensity to save = S/Y where S is the savings and Y is the income in the economy. 

Multiple choice accountancy accounting using data base management system (dbms) applications of dbms in generating accounting information accounting and database management system accounting and database system

Broad classification of assets is ______________.

  1. Fixed Assets

  2. Investments

  3. Currents Assets

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

Assets are broadly classified into fixed assets, investments, and current assets to reflect their liquidity and purpose within the business.

Multiple choice accountancy accounting using data base management system (dbms) applications of dbms in generating accounting information accounting and database management system accounting and database system

Which of the following is related to owner's fund?

  1. Capital

  2. Secured Loans

  3. Unsecured Loans

  4. Current Liabilities and Provisions
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital represents the owner's investment in the business, making it the primary component of the owner's fund.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

____________ is created to provide fund for redemption of debentures as and when they become due for redemption.

  1. Investment fluctuation reserve.

  2. Sinking fund

  3. Dividend equalization reserve

  4. Debenture redemption reserve
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Debenture Redemption Reserve (DRR) is a statutory requirement created by companies to ensure funds are available for the redemption of debentures.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

Which is not the salient feature of sinking fund method?

  1. Interest is an integral part

  2. Amount released is affected by fluctuations in interest rate

  3. Investment in securities

  4. Premium is paid in advance at the beginning of year
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The sinking fund method involves periodic contributions to a fund that earns interest. It does not involve paying a premium in advance at the beginning of the year.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

The following is common in sinking fund method:

  1. The amount received at the end of the life of an asset is fixed

  2. The amount received at the end of the life of an asset is not fixed

  3. The amount received at the beginning of the life of an asset is fixed

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

In the sinking fund method, the final amount depends on the interest earned on the investments, which can fluctuate, making the final value variable rather than fixed.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

Which is not the salient feature of sinking fund method?

  1. Interest is an integral part

  2. Amount released is affected by fractionations in interest rate

  3. Investment in securities

  4. Premium is paid in advance at the beginning of year
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Similar to question 412249, paying a premium in advance at the beginning of the year is not a feature of the sinking fund method.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

Identify the statement which is common in sinking fund method from the following.

  1. The amount received at the end of the life of an asset is fixed

  2. The amount received at the end of the life of an asset is not fixed

  3. The amount received at the beginning of the life of an asset is fixed.

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

This is a duplicate of question 412251. In the sinking fund method, the amount received at the end of an asset's life is NOT fixed because it depends on investment returns that fluctuate with market interest rates. If the amount were fixed, it would be characteristic of an annuity or insurance policy method. The variability of the final amount is specifically due to interest rate fluctuations affecting the accumulated sinking fund.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

Sinking fund is _________.

  1. always general purpose fund

  2. always for some specific purpose

  3. both purposes (A & B)

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

A sinking fund is always created for a specific purpose, such as the redemption of debentures or the replacement of a specific asset.

Multiple choice organization of commerce and management emerging modes of services e-advertising, e-marketing and e-security structure of business introduction to internet and e-commerce

_______ refers to the probability of any mis-happening that can result into financial, reputational or psychological losses to the parties involved in a transaction.

  1. Loss

  2. Distress

  3. Virus

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

Risk refers to the chances or probability of any mis-happening to certain activities of the business that can destroy the image of the parties involved in the business transaction by hampering the financial, reputational and psychological factors of the business.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

Following are items of capital fund account:

  1. Legacies

  2. Life membership fee

  3. Donation

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

In Non-profit organizations, the capital funds are accumulated along with capital receipts and receipts that are capitalized by further increasing the surplus or decrease by the deficit during the year. Legacies, Life membership fee and donation are capital receipt because these are of non-recurring nature. Capital receipts accumulate and form capital fund account of Non-profit organisation. 

Multiple choice introduction of business laws business law and contract act business studies

Which of the following is not normally one of the reasons for a change in an investor's circumstances?

  1. Change in market conditions

  2. Change in legal considerations

  3. Change in time horizon

  4. Change in tax circumstances
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An investor's circumstances typically change due to personal factors like time horizon, liquidity needs, or tax situation. Market conditions are external factors affecting the investment environment rather than the investor's personal circumstances.

Multiple choice elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

Difference between the opening and closing capital after adjusting drwaings and capitals introduced during the year is profit for the year.

  1. True

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

Under the single entry system, profit is calculated using the equation: Closing Capital + Drawings - Capital Introduced - Opening Capital = Profit.