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 applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Consider the following statements :
A mutual fund helps the investor in securing -
1. Professional management 
2. Diversification of risk
3. Steady appreciation
4. Lower cost of operation
Of these statement following is correct :

  1. 1, 2, 3 and 4

  2. 1, 2 and 4

  3. 2 and 3

  4. 3 and 4
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Mutual funds provide professional management, risk diversification, potential for appreciation, and economies of scale, which effectively lowers the cost of operation for individual investors.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

"The cost of capital declines when the degree of financial leverage increases." Who advocated it?

  1. Net operating income approach

  2. Net income approach

  3. Modigliani-Miller approach

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

According to Net income Approach the capital structure decision is relevant to valuation of the firm. This means that a change in financial leverage will automatically lead to corresponding change in overall cost of the capital as well as the total value of the firm. Hence, if the financial leverage increases the weighted average cost of capital decreases and the value of firm and market price of equity share increases and vice versa. 

Multiple choice

Money used to invest, lend or borrow

  1. Capital

  2. Extra money

  3. Change

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

Capital refers to financial assets or the money used to invest in a business or project. The other terms are too general or describe different concepts like currency exchange.

Multiple choice commercial applications marketing mix - 4 p's meaning and objectives of pricing pricing strategies pricing

Pricing policies may be classified into.

  1. Target rate of return

  2. Stability in prices

  3. Maximising profit

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

Pricing policies are often categorized by their objectives, such as maximizing profit, maintaining stability, or minimizing costs. Minimizing cost is a valid strategic objective for pricing policy.

Multiple choice geography hazards hazards and types of hazards introduction to disaster natural disasters and hazards

Which of the following statements are true:

A. Risk transfer refers to instruments that share or hedge economic risks before losses occur.

B. Disaster Risk Management includes the areas of risk identification, risk reduction and transfer, adverse event management and recovery.

  1. Only A

  2. Only B

  3. Both A and B

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

Risk Transfer refers to instruments that share/hedge economic risks before losses occur. Examples include: Budget self-insurance, Market Insurance and Reinsurance, Public asset coverage, Risk pooling and diversification and Risk financing.

DRR is a part of sustainable development, so it must involve every part of society, government, non-governmental organizations and the professional and private sector. It therefore requires a people-centered and multi-sector approach, building resilience to multiple, cascading and interacting hazards and creating a culture of prevention and resilience. Consequently DRM includes strategies designed to:

  1. Avoid the construction of new risks
  2. Address pre-existing risks
  3. Share and spread risk to prevent disaster losses being absorbed by other development outcomes and creating additional poverty

Multiple choice commercial applications concept of market and marketer meaning, types, stages and role of marketing meaning and definition of marketer role of marketing

Capital structure describes

  1. The mix of long term funding used to finance the assets of a business

  2. The mix of short term funding used to finance the assets of a business

  3. Both (a) and (b)

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

Capital structure refers to the specific mix of debt and equity used to finance a company's assets and operations over the long term.

Multiple choice commercial applications concept of market and marketer meaning, types, stages and role of marketing meaning and definition of marketer role of marketing

The optimum capital structure is the point at which

  1. The value of a firm is the highest

  2. The cost of capital is the lowest

  3. Both (a) and (b)

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

The optimum capital structure is achieved when the weighted average cost of capital (WACC) is minimized, which simultaneously maximizes the firm's total value.

Multiple choice commercial applications concept of market and marketer meaning, types, stages and role of marketing meaning and definition of marketer role of marketing

The 'going' required rate of return in the market for a given amount of systematic risk is called

  1. The market portfolio

  2. Beta co-efficient

  3. Market price of the shares

  4. Security market line
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Security Market Line (SML) represents the expected return of an investment as a function of its systematic risk (beta) in the capital asset pricing model.

Multiple choice commercial applications concept of market and marketer meaning, types, stages and role of marketing meaning and definition of marketer role of marketing

Which is / are the essential feature(s) of a call money market?

  1. Maturity period of 1 - 14 days

  2. Market determined interest rates

  3. low liquidity

  4. High agency costs

  5. Both (A) and (B) above
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

The call money market is most liquid of all short term money market segments and the maturity period for call loans vary from 1 to 14 days. In call money market any amount could be lent or borrowed at an interest rate which is acceptable to both borrower and lender, i.e. they are market-determined interest rates. 

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Capital Gearing Ratio denotes the relationship between ______________.

  1. Assets and capital

  2. Loans and capital

  3. Equity share holder's funds and long-term borrowed funds

  4. Debentures and share capital
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Capital Gearing Ratio measures the proportion of a company's capital that is funded by fixed-interest securities (long-term debt) compared to equity shareholder funds.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

The ratios which measure the relative contribution of financing by owners and financing provided by outsiders are called ______________.

  1. Liquidity ratios

  2. Leverage ratios

  3. Activity ratios

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

Leverage ratios, also known as solvency ratios, compare the amount of debt (outsider financing) to equity (owner financing) to assess a company's long term financial risk.

Multiple choice elements of business sole trade meaning, features and merits of sole proprietorship sole proprietorship - meaning & features formation, characteristics, merits & demerits and objectives of sole proprietorship

Which of the following is/ are advantage of LLP?

  1. Perpetual existence

  2. Internationally renowned form of business in comparison to Company

  3. No requirement of minimum capital contribution

  4. All of above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
LLP stands for Limited liability partnership which refers to a company form of business where the only the partners contribute in the capital and their liability remains limited to the extent of their capital contribution in the business. LLP  has perpetual existence due separate legal entity and their is no requirement minimum capital contribution by any partner. Moreover, it is the most internationally renowned form of business. 
Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

Select the most appropriate alternative from those given below:
Interest on Investment is ______ of business concern.

  1. a profit

  2. a loss

  3. an expense

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

Interest on Investment is an income of business concern. Investment is purchasing of an asset with the goal of generating income. Likewise interest in investment will be recorded as an income.