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 book keeping and accountancy principles of double entry system objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Other factors held constant, but lesser project liquidity is because of ______________.

  1. Shorter payback period

  2. Greater payback period

  3. Less project return

  4. Greater project return
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Other factors held constant, but lesser project liquidity is because of greater payback period. Payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point.

Multiple choice business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

Which of the following is / are true?

  1. A company following an aggressive working capital policy will finance its current assets more from long-term sources

  2. A company following a conservative working capital policy will finance its current assets from long-term sources

  3. A company having a conservative working capital policy will have a higher current ratio than one following an aggressive working capital policy.

  4. Both (A) and (C) above

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

The investment in current assets for a given level of forecasted sales will be higher if the management follows a conservative attitude. Hence statements (B) and (C) are true.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

If operating income is negative, a business will likely require additional outside funding to remain in operation.

  1. True

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

Operating profit is the profit earned through the normal operations and activities of the business. However, while calculating operating profit expenses which are of financial nature are not taken into consideration. Operating profit is the excess of operating revenue over operating expenses. If operating income is negative, a business will likely require additional outside funding to remain in operation.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Valuing closing stock at a cost is an application of which concept?

  1. Consistency

  2. Dual aspect

  3. Prudence

  4. Money measurement
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The prudence concept (or conservatism) dictates that assets should not be overstated. Therefore, closing stock is valued at the lower of cost or market value to avoid recognizing unrealized profits.

Multiple choice business organisation and correspondence meaning and factors of business environment dimensions of business environment business environment and its dimensions business environment

Financial factors consist of ___________.

  1. financial policies

  2. financial positions

  3. capital structure

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

Financial factors consist of financial policies, financial positions and capital structure. It is an important internal factor which has a substantial impact on business functioning and performance. Financial facilities are required to start and operate the organization.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Which of the following is not followed in capital budgeting?

  1. Cash flows Principle

  2. Interest Exclusion Principle

  3. Accrual Principle

  4. Post-tax Principle
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Capital budgeting has five principles that plays a crucial role in the allocation of money and the process of capital budgeting.

The five principles are:-

(1) Decision are based on cash flows, not accounting income,

(2) Cash flow are based on opportunity cost,
(3) The timing of cash flows are important,
(4) Cash flows are analysed on an after tax basis
(5) Financing costs are reflected on projects required rate of return.
 
Accrual principle is not followed in capital budgeting.

Multiple choice book keeping and accountancy bases of accounting cash and mercantile system basis of accounting basis of accounting system

Greater chance of lower actual return than expected return and greater variation is indicated by _____________________.

  1. smaller standard deviation

  2. larger standard deviation

  3. smaller variance

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

Standard deviation measures the dispersion of returns. A larger standard deviation indicates higher volatility and a greater range of potential outcomes, including lower returns.

Multiple choice book keeping and accountancy bases of accounting cash and mercantile system basis of accounting basis of accounting system

The relationship between potential unsystematic risk and reward is given by ____________.

  1. Excess return to beta ratio

  2. Excess return to security

  3. Excess return to square security

  4. Excess return to beta square ratio
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Treynor ratio, or excess return to beta ratio, measures the return earned in excess of that which could have been earned on a riskless investment per unit of market risk.

Multiple choice history industrial sector growth of banks in india nationalisation and privatisation of banks private sector anddifference between public and private sector

Very often we read in newspapers/magazines about "Sovereign Wealth Funds". Which of the following is/are the correct description of the same?
A. These are the funds or the reserves of a government or central bank of a country which are invested further to earn profitable returns.
B. These are the funds which were accumulated by some people over the years but were not put in active circulation as they retain them as Black Money for several years.
C. The funds which are created to be used as relief funds or bailout packages are known as sovereign funds.

  1. Both (B) and (C) only

  2. Only (B)

  3. Only (C)

  4. Only (A)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Sovereign Wealth Funds are state-owned investment funds that invest in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity funds or hedge funds.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Which of these is not a stage of capital formation?

  1. Saving

  2. Mobilization of savings

  3. Investment

  4. Consumption
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
The 3 stages of capital formation-
1)creation of savings
2)mobilization of savings
2)converting savings into investment
Thus,consumption is not included in capital formation process.
Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Which of the following are true or false?
a) Capital formation means the increase in the stock of real capital in a country 
b) Saving is not essential for capital formation

  1. Both (a) and (b) are true

  2. (a) is true, but (b) is false

  3. (a) is false, but (b) is true

  4. Both (a) and (b) are false
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
1)Capital formation refers to the net capital accumulation during an accounting period for a particular area.Thus 1st statement is true.
2)Savings is essential for capital formation as savings leads to investment in an economy which in turn leads to more capital formation.
Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

What is marginal efficiency of capital ?

  1. Expected rate of return on new investment

  2. Expected rate of return of existing investment

  3. Difference between rate of profit and rate of interest

  4. Value of output per unit of capital invested
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

It is calculated in order to make the future prediction and to check the efficiency of the return which the investors will receive when they will invest in that new investment opportunity.It is extremely important in order to draw more shareholders in the financial market.