Banking Financial Awareness · Economics

Financial Markets and Instruments

1,985 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 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 commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

Commercial papers represent a new financial instrument issued for the purpose of _______________.

  1. Project financing

  2. Working capital

  3. Leasing of plant and equipment

  4. Import of capital goods
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Commercial papers are short-term debt, unsecured instrument which is issued by the companies to meet their short term obligations that is to meet their working capital requirements. They are usually issued for 15 days to 1 year.

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 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

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

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.