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 elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Which of the following is a requirement of financing a plan?

  1. Matching financial resources to physical targets

  2. Realisation of Plan target through correct implementation

  3. Raising financial resources to implement the Plan

  4. To make the Plan smaller in size to be met by the available resource.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Financing a plan requires aligning the available financial resources with the physical targets set in the plan to ensure feasibility.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Which of the following will result into sources of funds?
(i) Increase in current assets
(ii) Decrease in current assets
(iii) Increase in current liabilities
(iv) Decrease in current liabilities

  1. (i) and (iv)

  2. (ii) and (iii)

  3. (i) and (iii)

  4. (ii) and (iv)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A source of funds occurs when there is a decrease in current assets (releasing cash) or an increase in current liabilities (borrowing cash).

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

The sources of funds can be categorized on the basis of _______________.

  1. Time period

  2. Ownership

  3. Source of generation

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

The sources of funds can be categorized on the basis of:

Time period for which the funds are borrowed.
Ownership of the funds that are raised can be public or investors or shareholders.
The sources of funds are the category by which the funds are raised largely categorized into two i.e shareholders funds and borrowed funds.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Short-term financing is most common for financing of ____________.

  1. Fictitious assets

  2. Current assets

  3. Fixed assets

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

Every business needs to invest into in current assets. These assets are also known as working capital to facilitate smooth working of day-to-day activities. Short term financing  is raised to cope up with these day-to-day activites to run a business and has to be repaid within a year's time.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

 The funds required for a period of less than one year are called ___________.

  1. Long-term finance

  2. Medium-term finance

  3. Short-term finance

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

The funds that are borrowed for less than a year's period of time are known as short-term finances. Some of the sources of short term finances are trade credits, bank credits, customer's advances, cash credit, overdrafts, etc.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

On basis of time period, the different sources of funds can be categorized into _____ categories.

  1. Two

  2. Three

  3. Four

  4. Five
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Sources of funds can be classified into three categories on the basis of the duration of the financing available. They are : 

Long-term sources: These are for a long period of time, exceeding 5 years.
Medium- term sources : These are for a medium period of time, i.e more than a year and less than 5 years.
Short- term sources: These are for a short period of time, i.e not exceeding one year.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

On the basis of period, the different sources of funds are ______.

  1. Medium-term sources

  2. Long-term source

  3. Short-term sources.

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

Sources of funds can be classified into three categories on the basis of the duration of the financing available. They are : 

Long-term sources: These are for a long period of time, exceeding 5 years.
Medium- term sources : These are for a medium period of time, i.e more than a year and less than 5 years.
Short- term sources: These are for a short period of time, i.e not exceeding one year.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

The funds required for a period of more than one year but less than five years is called ____________.

  1. long-term finance

  2. medium-term finance

  3. short-term finance

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

The classification of sources of funds on the basis of period are related to the duration of time. The medium-term sources of funds are the ones that provide financing for a time period of more than a year and not exceeding five years of time.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Funds required for period exceeding 5 years is _______.

  1. Long-term financing

  2. Short-term financing

  3. Medium-term financing

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

The funds that are required for a long period of time are known as long-term financing. These types of financing is required for a period exceeding 5 years.

Multiple choice economics consumption and investment functions keynesian law of consumption and propensity to consume ex ante and ex post concept of consumption function, saving function and investment function

When marginal propensity to consume is greater than marginal propensity to save, the value of investment multiplier will be greater than 5.

  1. True

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

False. 

If MPC = 0.6, then MPS = 0.4 but 
Multiplier (k) = 1/MPS = 1/0.4 = 2.5. 
So even if the value of MPC is greater than MPS then also multiplier is smaller than 5.

Multiple choice economics consumption and investment functions keynesian law of consumption and propensity to consume ex ante and ex post concept of consumption function, saving function and investment function

There is an Inverse relationship between the value of marginal propensity to save and investment multiplier. 

  1. True

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

True.

 The value of multiplier and MPS are inversely related as multiplier is the reciprocal of MPS. 
Multiplier(k) = 1/ MPS. 

Multiple choice economics how does production take place? entrepreneur land,labour, capital and entrepreneur production mechanism

The key to managing return on funding in social enterprises is to offer ________.

  1. consistent risk and return to all investors.

  2. different risks and returns to different kind of investor.

  3. return on the basis of type of social enterprise

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

To ensure a smooth return on funding accumulated by social entrepreneurs, different kind of investors should be offered with different risk which they will have to bear if they invest their money.

Multiple choice business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

According to Modigilani & Miller (MM) theory which of the following statement is correct?

  1. Dividend policy has no effect on value of firm

  2. Firm value depend on its investment policy instead of dividend policy

  3. Key assumption of MM theory is clientele effect

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

Clientele effect states that a firm will attract shareholders whose preferences for payment pattern and stability of dividend corresponds to the firm's payment patterns and stability of dividends. 

Multiple choice business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

In binomial approach of option pricing model, fourth step is to create ________________.

  1. equalize domain of payoff

  2. equalize ending price

  3. riskless investment

  4. high risky investment
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Binomial option pricing model is a risk-neutral model used to value path-dependent options. Under the binomial model, current value of an option equals the present value of the probability-weighted future payoffs from the options.

Multiple choice organisation of commerce and management recent trends of business e-commerce and mobile commerce introduction to internet and e-commerce emerging modes of services

Purchase option's advantage (S) is (are) ________________.

  1. No financing is required. The risk of system obsolescence is shifted to the lessor

  2. The flexibility of modifying the system at work

  3. Insurance, maintenance and other expenses which are included in the rental charge

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

The purchase option (often in leasing or equipment acquisition) can include various benefits like no immediate financing, shifting obsolescence risk, and bundled services like maintenance.