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 book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

_________ is a secret reserve usually created to, provide for the lose by way of fluctuation in the value of investment.

  1. Investment Fluctuation Reserve

  2. Foreign Exchange Fluctuation Fund

  3. General Reserve

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

An Investment Fluctuation Reserve is specifically created to absorb potential losses arising from the volatility in the market value of investments.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

______ is a secret reserve usually created to provide for the loss by way of fluctuation in the value of investment.

  1. Investment Fluctuation Reserve

  2. Foreign Exchange Fluctuation Fund

  3. General Reserve

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

Investment Fluctuation Reserve: To bear any loss in case of decrease in value of such investments, business enterprises sets aside a part of profit in Investment Fluctuation Reserve, so that any loss arising on account of decrease in value of such investment can be met from this reserve.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Sinking funds is created for___________.

  1. redemption of long term liabilities

  2. replacement of depreciable assets

  3. both (A & B)

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

Option C is the correct One.

there are two main purpose of creating Sinking fund
1. Repayable of long term debt
2.Certain amount keep a side for the payment of regular expenses for the specific purpose.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Purchase of RBI bonds for cash would lead to ____________.

  1. No change in total assets

  2. Total assets to decrease

  3. Total assets to increase

  4. Total liabilities to increase
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bonds are considered to be an investment and part of assets, similarly cash is also an asset. If RBI bonds are purchased that will increase the assets against the cash which is going to be reduced. Hence there will be no change in assets. 

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

Which of the following is an advantage of HUF?

  1. Favourable Credit Standing

  2. Greater Management Ability

  3. Profit Incentive

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

The options provided (Favourable Credit Standing, Greater Management Ability, Profit Incentive) are generally not considered inherent advantages of an HUF compared to other business forms like a company or partnership.

Multiple choice organization of commerce and management emerging trends in business definition, scope and benefits of e-business emerging service business in india emerging modes of services

Limitations of the fixed ${k} {o}$ theory____________.

  1. The theory concludes that there is no optimum capital structure

  2. It ignores the use of the favourable financial leverage

  3. It ignores taxes and does not consider transaction costs

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

The limitations of such a theory is that it does not conclude any optimum capital structure for a company, it ignores the use of the favorable financial leverage set differently for different types of companies, and it does not consider the taxes and transaction cost in the formation of capital structure for a company. 

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers meaning, importance and components of voucher bank book and petty cash book source documents

Which of the following approaches advocates that the costs of equity capital ad debt capital remain unaltered when the degree of leverage varies?

  1. Net Income Approach

  2. Net Operating Income Approach

  3. Traditional Approach

  4. Modigillani-Miller Approach

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

According to the net income approach the cost of equity capital and the cost of debt capital remain unchanged when degree of leverage varies.

Multiple choice organization of commerce and management markets and marketing meaning, nature and importance of services introduction to services nature and types of services

Which of the following external factors influences capital structure?
I. Level of interest rates
II. Level of stock prices
III. Dilution of value
IV. Tax policy on interest and dividends
Of these:

  1. I and IV are correct

  2. II and III are correct

  3. I, II and IV are correct

  4. All are correct
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

C.

The capital structure of a company consists of debt and equity. When the interest rates increase, the company relies more on equity and when the interest rate decreases, the company will borrow more funds. 
When the share prices increase, the lending agencies are willing to give loans to the company and vice-versa.
When tax rates are high the business will borrow more funds rather than raising equity capital.

Multiple choice business maths linear programming problems structure of linear programming model linear programming problem operations research

Linear programming model which involves funds allocation of limited investment is classified as

  1. ordination budgeting model

  2. capital budgeting models

  3. funds investment models

  4. funds origin models
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
In linear programming, $\text{Capital budgeting models}$ to minimize the total capital cost. 
The solutions from the model are used to decide the best combination of capital resources and best times to start and finish projects and to determine the net capital cost.

Multiple choice business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

When the price of a divided by the price of the preceding year, we, get:

  1. Value index

  2. Link relative

  3. Simple relative

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

$\Rightarrow$  When the price of divided by the price of the preceding year, we get : $Link\,\,relative.$

$\Rightarrow$  This method is based on the assumption that the trend is linear and cyclical variations are of uniform pattern. 
$\Rightarrow$  The link relatives are percentages of the current period (quarter or month) as compared with the previous period. With the computations of the link relatives and their average, the effect of cyclical and the random components is minimized. Further, the trend gets eliminated in the process of adjustment of chain relatives
$\Rightarrow$  This method is less complicated than the ratio to moving average and the ratio to trend methods.However, this method is based upon the assumption of a linear trend which may not always hold true.

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

Long-term equity anticipation security is usually classified as ______________.

  1. short-term options

  2. long-term options

  3. short money options

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

LEAPS (Long-term Equity Anticipation Securities) are options contracts with expiration dates longer than one year, making them long-term options.

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).