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 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 meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Which one of the following is not the characteristic of a negotiable instrument?

  1. It must be in writing

  2. It must be freely transferable

  3. It must be registered

  4. It must contain definite amount of money
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Negotiable instruments are characterized by being in writing, freely transferable, and containing a definite amount of money. Registration is not a requirement for an instrument to be considered negotiable.

Multiple choice meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Characteristics of Negotiable Instruments
Which of the following can be considered as characteristic/s of negotiable instruments?
A. The holder in due course is entitled to sue on the instrument in his own name.
B. The instrument is transferable till maturity and in case of cheques, till it becomes stale.
Select the correct answer from the options given below-

  1. A only

  2. B only

  3. Both A & B

  4. None of above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Important characteristics of Negotiable Instruments are:
  • Negotiable instrument does not simply give ownership of the instrument but right to property as well. The property in negotiable instrument can be moved without any formality. In the case of bearer instrument, the possessions pass by meager delivery to the transferee. In case of order instrument, endorsement & delivery are necessary for transfer of property.
  • The transferee of negotiable instrument is called ‘holder in due course.’ A genuine transferee for value is not affected by any flaw of title on the part of transferor or of any of the previous holders of instrument.
  • The transferee of negotiable instrument can take legal action in his own name, in case of dishonour. A negotiable instrument can be reassigned any number of times till it is attains maturity. The holder of instrument need not give notice of transfer to the party legally responsible on the instrument to pay.
  • Certain presumptions are applicable to all negotiable instruments. It is not essential to write in promissory note the words ‘for value received’ or alike expressions for the reason that the payment of consideration is acknowledged. The words are typically included to generate additional substantiation of consideration.
  • A negotiable instrument facilitates the holder to anticipate prompt payment because dishonour refers to the ruin of credit of all persons who are parties to the instrument.
Multiple choice meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Classification of Negotiable Instruments
In the case of bill of exchange, the expression "after sight" means -.

  1. After acceptance

  2. After noting for non-acceptance

  3. After acceptance, or after noting for non-acceptance or after protest for non-acceptance

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

In a promissory note or bill of exchange the expressions "at sight" and "on presentment" means on demand. The expression "after sight" means, in a promissory note, after presentment for sight, and, in a bill of exchange after acceptance, or noting for non-acceptance, or protest for non-acceptance.In both the situations the payment cannot be demanded unless it is presented before the banker.

Multiple choice meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Classification of Negotiable Instruments
A promissory note or a bill of exchange payable after a fixed period, or after sight, or on specific day, or on the happening of an event which is certain to happen, is known as a/an -

  1. Time instrument

  2. Demand instrument

  3. Foreign instrument

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

The types of Negotiable instruments are largely determined based upon the scope of definition given to negotiable instruments and specification of the instruments legally recognized as negotiable in that country’s law. A time instrument is payable at a definite future time and the event is certain to happen. For instance, an instrument payable 3 months after date is payable 3 months after the date written on its face. 

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.

Multiple choice long-term and short-term finance sources of business finance business studies

Short-term planning covers short-term financial plan called budget.

  1. True

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

Companies develop short-term financial plans to meet budget and investment goals within one fiscal year. These plans have a higher degree of certainty compared to long-term plans. Short-term plans often are amended as financial and investment goals change. Businesses and individuals alike use short-term plans to manage short-term cash deficits