1. Which of the following is true?

a) Depreciation is claimed by financier in Lease & not in case of hire purchase b) Tax deduction can be claimed for the full value of the rental paid in case of lease c) All d) The financier owns the asset both in case of lease and Hire Purchase
Lease is a long-term rental agreement for the asset, while Hire Purchase is allows the user to own the asset after all the payments have been made to the lender. Lease Two main types operating, financial preciation is claimed by the financier.

Hire Purchase borrower.

2. Annuities are: a) Discounted loan b) Capitalized loan c) Amortized loan d) True discounted loan e) A loan that is paid in periodic installments with capitalized interest 3. The counterparty in futures contracts trade is a) Government b) Banks c) The brokers who stuck in deal d) The exchange e) The buyer and seller A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Index futures are all futures contracts where the underlying is the stock index and helps a trader to take a view on the market as a whole. 4. A person purchases a share at 50$. After 2 years the price is at 75$ and he decides to sell the share at that price. What is the annualized return that person has earned? FV = 75 PV=50 Fv=pv(1+i)n i : Interest rate per unit time period n : Number of time periods I = 0.2247 5. Bank operations are divided into? a) Middle office 1

b) Front office c) Back office d) All Private Banking Front Office covers functions like Sales & Client prospecting, Contact Management, Account Aggregation and Financial Advisory services.

Private Banking Middle/Back Office covers functions like Asset Allocation, Research, Portfolio Analysis, Risk Management, Trade Processing, Compliance and documentation 6. Primary source of income for banks? a) Interest income b) Fees for services c) None d) Deposits from public e) Grants from Central banks A bank makes a profit by investing or lending money that is earning a higher rate of interest than it pays to its depositors. They borrow money from individual or businesses who have money, and lend it to those who need money, by adding a mark up, to pay for expenses and profit. The difference between the rates, which banks offer to depositors and lenders, is generally referred to as Spread. 7. If a bank charges 8% for 1 year from customer A and 10% from customer B for similar loan, this can be attributed to a) Interest rate risk b) Credit risk c) Liquidity risk d) Operational risk e) Market risk Market risk is the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The associated market risks are:

Equity risk, the risk that stock prices and/or the implied volatility will change. Interest rate risk is the risk (variability in value) borne by an interest-bearing asset, such as a loan or a bond, due to variability of interest rates. Currency risk, the risk that foreign exchange rates and/or the implied volatility will change. Commodity risk, the risk that commodity prices (e.g. corn, copper, crude oil) and/or implied volatility will change.

Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised. 2

Liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). An operational risk is, as the name suggests, a risk arising from execution of a company's business functions. 8. Expand NOE a) Note of execution b) Notice of error c) Note of enrichment d) Net outstanding error 9. Check 21 act facilitates: a) Netting of checks at day end b) Netting and substitution of checks at day end c) Netting and pooling of checks at day end d) Clearing check by manually processing the check e) Check truncation and creation of substitute check The law allows the recipient of the original paper check to create a digital version of the original checkcalled a "substitute check," thereby eliminating the need for further handling of the physical document. 10. Tax and insurance premiums collected as part of loan repayment are handled through which of the following type of account? a) Escrow b) DMAT c) MFA Escrow account - A trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums. 11. Pick the odd one a) Agency loans b) FHA loans c) VA loans d) Interest only loans Agency loan - A conventional loan is a mortgage that is not guaranteed or insured by any government agency, including the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA) and the Department of Veterans Affairs (VA). It is typically fixed in its terms and rate. FHA loans - A mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low to moderate income borrowers who are unable to make a large down payment. FHA loans allow the borrower

to borrow up to 97% of the value of the home. The 3% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time buyers. VA loans - A mortgage loan program established by the United States Department of Veterans Affairs to help veterans and their families obtain home financing Interest only loans - Mortgage in which the borrower pays only interest for a set term. At the end of this term, typically five to ten years in the United States, the loan converts to a fully amortizing loan in which both interest and principal are paid. An interest-only loan reduces loan payments in the early years of a loan, so borrowers who expect their income will grow over the loan term can take out a larger Mortgage for purchase of a home. 12. Bank A, bases in US, provides safekeeping services for securities to its US clients. IT also has clients in France & Belgium and provides securities safekeeping services to these clients through Banks C and D respectively. Which of the following terms best describes Bank A? a) Secondary custodian b) Global custodian c) None d) Main custodian e) Sub custodian A global custodian provides custody services for cross-border securities transactions. In addition to providing core custody services in a number of foreign markets, a global custodian typically provides services such as executing foreign exchange transactions and processing tax reclaims. A global custodian typically has a sub-custodian, or agent bank, in each local market to help provide custody services in the foreign country. 13. In Normal distribution 99% confidence interval corresponds to __ a) 1.65sd b) 1sd c) 3sd d) 2.33sd e) 1.96sd Value at Risk is an estimate of the worst expected loss on a portfolio under normal market conditions over a specific time interval at a given confidence level. VaR Calculation: 99% = 2.33 * standard deviation 14. All of following are benefits of netting EXCEPT: a) Reduction in cost of settlement b) Reduction in the no. of deliveries and receipts c) Reduction in compliance risk d) Reduction in systemic risk

Clearing is the process of determination of obligations, i.e. who owes what, to whom and how much. Settlement on net basis reduces the number of transactions to be settled drastically reducing the overall transaction cost for everyone. As per an estimate, netting reduces the number of settlements needed by more than 95%. Settlement for clearing cheques presented to the clearing houses takes place on a netting basis at a particular time either same day or on the next day. This system gives rise to risks such as credit risk, liquidity risk, legal risk, operational risk and systemic risk. Compliance risk are Associated with Custody Services. 15. All the following statements concerning US government securities are correct EXCEPT: a) Treasury bills have their interest paid in a lump sum at maturity b) Treasury bonds have maturity dates up to 30 years c) Treasury notes have maturity dates up to 10 years d) Treasury bills have a greater interest rate risk than either Treasury bonds or Treasury notes. Treasury bills are short-term obligations issued for one year or less. They are sold at a discount from face value and don't pay interest before maturity. The interest is the difference between the purchase price of the bill and the amount that is paid to the investor at maturity (face value) or at the time of sale prior to maturity. Treasury notes and bonds bear a stated interest rate, and the owner receives semiannual interest payments. Treasury notes have a term of more than one year, but not more than 10years. 16. SPV = Special purpose vehicle 17. Which of the options best describes the sequence of the following events? 1. Issuing bank arranges for advising bank payment 2. Freight forwarder sends documents to advising bank 3. Issuing bank issues the letter of credit(LC) 4. Advising bank advises seller that an LC has been opened 5. Advising bank sends documents to the issuing bank 18. VISA is involved in which of the following i. Provide the interchange systems to transfer data and funds between members ii. Set credit limits iii. Issue credit cards a) I b) II c) III d) I and II Visa does not issue cards, extend credit or set rates and fees for consumers; rather, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers 19. In reality people hold part of their loans as cash. This makes the multiplier: a) Same as if people did not hold cash b) Larger c) Zero d) smaller

20. The share price of a company may drop considerably from its current levels. In scenario, what type of risk are the investors facing? a) Liquidity risk b) Company risk c) Market risk d) Business risk e) Credit risks 21. Securities functionality is a function of _____ a) Back office b) Specialists c) Front office d) Mid office

e) Traders
Security is a financial instrument that signifies ownership in a company (a stock), a creditor relationship with a corporation or government agency (a bond), or rights to ownership (an option). Private Banking Front Office covers functions like Sales & Client prospecting, Contact Management, Account Aggregation and Financial Advisory services. Private Banking Middle/Back Office covers functions like Asset Allocation, Research, Portfolio Analysis, Risk Management, Trade Processing, Compliance and documentation. Traders facilitate the buying and selling of stock, bonds, or other securities such as currencies, either by carrying an inventory of securities for sale or by executing a given trade for a client. Traders deal with transactions large and small and provide liquidity (the ability to buy and sell securities) for the market. (This is often called making a market.) Traders make money by purchasing securities and selling them at a slightly higher price. This price differential is called the "bid ask spread." 22. Generally if bond X had a lower rating than bond Y, the yield on bond X would be a) Same as that of Bond y b) Lower than that of bond Y

c) Higher than that of Bond Y

d) Volatile Annual rate of return (also called Coupon, Fixed, Stated or Nominal Yield) Higher the credit rating, the lower the Yield 23. Trade Finance primarily helps in a) Facilitating corporate lending b) Facilitating setting up of new factories c) Facilitating intercompany transaction

d) Facilitating international transactions

e) Facilitating intra=company transactions 6

The main objective of trade finance is to facilitate transactions. There are many financing options available to facilitate international trade such as pre-shipment finance to produce or purchase a product, and post-shipment finance of the receivables. 24. Which of the following is a type of underwriting spread? a) Underwriters allowance

b) All
c) None d) Concession e) Managers Fee An Underwriter is a broker/dealer or an investment bank. He guarantees that the capital issue will be subscribed to the extent of his underwritten amount. He will make good of any shortfall. The contract between the issuer and the Lead or Managing Underwriter is the Underwriting Agreement. The agreement states the terms and conditions of the offering, such as, the Underwriting Spread (the amount the underwriters make on sales), the Public Offering Price (POP), and the amount of proceeds from the offering that will go to the issuer. Underwriters earn 3 types of Underwriting Spread: Manager's fee - The lead underwriter receives this fee on all securities sold. Underwriter's Allowance is the total spread minus the Manager's fee. This fee is shared by syndicate members based on the type of syndicate account. Concession - It is typically the largest part of the spread and is paid to the broker/dealer that actually took the clients order. 25. Coming together of BNY and Mellon together is an example of ____ a) All b) Takeover c) Acquisition

d) Merger
e) Brokerage 26. ABC co wants to identify the best way for making salary credits to its huge employee base. Can you select the best option? a) Paper checks b) Contactless payments c) Cash d) Automated clearing house 27. In private banking PTA is Payable thorough account 28. Loc is Letter of credit 29. On trading day at an exchange, a broker undertakes the following trades. Buy/Sell Company No of shares Share price Buy MS 200 $10 Sell MS 100 $10.5 Buy Google 100 $20 Sell MS 30 $ 11 Sell Google 50 20.5 7

Sell

MS

40

$9

How much did the broker payout to exchange on total in-case of a) gross settlement system b) net settlement system? a) (a) $4000 (b) $1235 b) (a) $1235 (b) $2235 c) (a) $260 for Microsoft $ 975 for Google & $260 for MS d) None e) (a) $ 1235 (b) $ 4000
Gross Buy Buy 200 100 $10 $20 -$2,000 -$2,000

$ 4000 needs to be paid to exchange to get 200 MS share and 100 google shares. Netting Net position for MS: +200-100-30-40 = 30 Net position for Google: +100-50 = 50 So broker would receive 30 MS shares and 50 Google shares from the exchange. The broker has to pay $1235 only to get 30 MS shares and 50 Google shares from the exchange. Buy Sell Buy Sell Sell Sell Total 200 100 100 30 50 40 $10 $10.50 $20 $11 20.5 $9 -$2,000 $1,050 -$2,000 $330 $1,025 $360 -$1,235

30. There are 5 participants A, B, C, D, E in a 25M USD syndicated loan and A is the lead manager. The borrower has agreed to pay 0.4% ($ 1,00,000) participant fee. How much each participant will share in participant fee? a) ($ 1,00,000) will be received every time money is withdrawn b) None c) (%$1,00,000) will be charged towards undrawn portion

d) ($ 1,00,000) will be received affront

e) ($1,00,000) will be received every month 31. Find out the one which does NOT come under retail banking service? a) Personal loans b) Credit card services

c) Trade finance
d) Electronic banking

Retail Banking o Electronic Banking o Credit Card services o Retail Lending Personal Loans, Home Mortgages, Consumer Loans, Vehicle Loans o Private Banking o Asset Management

32. Which of the following is NOT a feature of online trading a) Fund transfer b) Bill payment c) Secure chat

d) Outbound calls
33. Which of the following is NOT an example of an option? a) LEAPS (Long term options) b) Call option c) swaption d) put option
e)

oil futures

An option is a contract, which gives the buyer the right, but not the obligation to buy or sell shares of the underlying security at a specific price on or before a specific date. There are two kinds of options: Call Options and Put Options. Call Options are options to buy a stock at a specific price on or before a certain date. Put Options are options to sell a stock at a specific price on or before a certain date. Long-Term Options are options with holding period of one or more years, and they are called LEAPS (Long-Term Equity Anticipation Securities). Swaps are the exchange of cash flows or one security for another to change the maturity

34. What could be the type of mortgage interest?

a) All
b) Fixed c) Floating d) Hybrid
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. The two basic types of amortized loans are the fixed rate mortgages (FRM) and adjustable rate mortgages (ARM) (also known as a floating rate or variable rate mortgage). Combinations of fixed and floating rate are also common, whereby a mortgage loan will have a fixed rate for some period, and vary after the end of that period.

35. Banks are financial intermediaries that a) Help connect public to the central banks b) Do not operate efficiently in the financial system c) Should not be allowed to open savings accounts d) Are not required

e) Link depositors to borrowers

9

36. In electronic check conversion (ECC), what happens once the check is processed? a) Receive cash immediately

b) The customer signs a receipt authorizing the store to present the check to bank electronically and deposit the funds into the stores account
c) All d) The customer can present a check to store cashier 37. Which is NOT a Captive finance company?

a) Bank of America
b) c) d) e) Ford Motor credit Hyundai Motor Finance Company General Motors Acceptance Corporation None
Captive finance company is a subsidiary whose purpose is to provide financing to customers buying the parent company's product. The captive finance company is usually wholly owned by the parent company. Although there are numerous examples of these, the best ones occur in the automotive industry. General Motors has General Motors Acceptance Corporation (GMAC), Daimler Chrysler has Chrysler Financial, and Ford Motor Company has Ford Motor Credit Company (FMCC) Similarly Hyundai Motor Finance Company serves Hyundai dealers 38. What is OTC? a) Operating the company

b) Over the counter

c) Options on the counter d) None 39. XYZ Corporation is a large client of bank and on average for a period it maintains $20 million in its bank account. However the bank allows the authorized representatives off XYZ to utilize funds up to 15% over the balance maintained. This is an example of which of the following option? a) Accrual loan b) Committed loans c) Held for sale loans

d) Overdraft
e) Undrawn loan

Overdraft limits are extended to help the corporate manage the day-to-day cash flow needs of the business. The bank makes available a certain sum of money for a period of time (say, USD 20.0 million for a period of 1 year). There would be a separate account called the overdraft account created to monitor withdrawals under this loan. Whenever the corporate has a deficit in its main business account, it can draw money from the overdraft account (up to the limit of USD 20.0 million). It can also put back money in the overdraft account as and when they have surpluses in the business account.

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40. You purchase a stock for $40. One year later you receive $2 as dividend and sold the share for $48. How much is the return of holding period? a) 45% b) None

c) 25%
d) 10% e) 50% 41. Which of the following is NOT a core private banking function? a) Investment analysis and advise b) sales and marketing c) deposit mobilization d) client management e) research 42. Treasury bills can be transacted and settled on the same date? (TRUE) 43. Identity the odd one out a) Equities b) Shares c) Stocks d) Common stock

e) Conversible bond
Corporates raise money by issuing Securities in the form of Debt and Equity. Debt is money owed by one person or firm to another. Examples are Bonds, loans, and commercial paper. Bonds: An investor loans money to an entity (company or government) that needs funds for a specified period of time at a specified interest rate. Bonds are issued in three basic physical forms: Bearer Bonds - bearer of the bond is presumed to be the owner. (owners name does not appear on the bond) Registered As to Principal Only - Bonds that are registered as to principal only have the owners name on the bond certificate, but since the interest is not registered these bonds still have coupons attached. Fully Registered Bonds - Bonds that are registered to both interest and principal Corporate bond A bond issued by a corporation. Corporations generally issue three types of bonds: Secured Bonds (Mortgage, Equipment Trust Certificates, Collateral Trust Bonds), Unsecured Bonds (Debentures), and Subordinated Debentures. Municipal bond (Munis) A bond issued by a municipality. These are generally tax free, but the interest rate is usually lower than a taxable bond. Treasury Securities Treasury bills, notes, and bonds are marketable securities the U.S. government sells in order to pay off maturing debt and raise the cash needed to run the federal government Zero coupon bonds Zeros generate no periodic interest payments but they are issued at a discount from face value.The return is realized at maturity Commercial paper An unsecured, short-term loan issued by a corporation, typically for financing accounts receivable and inventories. It is usually issued at a discount to face value, reflecting prevailing market interest rates. EQUITY: Equity (Stock) is a security, representing an ownership interest. Common stock Common stock represents an ownership interest in a company. Owners of stock also have Limited Liability (i.e.) the maximum a shareholder can lose is their original investment. Most of the stock traded in the markets today is common. An individual with a majority shareholding or

11

controlling interest controls a company's decisions and can appoint anyone he/she wishes to the board of directors or to the management team. Corporations seeking capital sell it to investors through a Primary Offering or an Initial Public Offering (IPO). Before shares can be offered, or sold to the general public, they must first be registered with the Securities and Exchange Commission (SEC). Once the shares have been sold to investors, the shareholders are usually free to sell or trade their stock shares in the Secondary Markets (such as the New York Stock Exchange NYSE). From time to time, the Issuer may choose to repurchase the stock they previously issued. Such repurchased stock shares are referred to as Treasury Stock, and the shares that remain trading in the secondary market are referred to as Shares Outstanding. Treasury Stock does not have voting rights and is not entitled to any declared dividends. Corporations may use Treasury Stock to pay a stock dividend, to offer to employees. Preferred Stock Preference shares carry a stated dividend and they do not usually have voting rights. Preferred shareholders have priority over common stockholders on earnings and assets in the event of liquidation. American Depository Receipts (ADR) The purpose of an ADR is to facilitate the domestic trading of a foreign stock. An ADR is a receipt for a specified number of foreign shares owned by an American bank. ADRs trade like shares, either on a U.S. Exchange or Over the Counter. The owner of an ADR has voting rights and also has the right to receive any declared dividends. An example would be Infosys ADRs that are traded in NASDAQ. 44. The amount owed by a company to suppliers in the next one year will be categorized under ____

a) Current liabilities
b) Deferred liabilities c) Annual liabilities d) Accrued liabilities 45. Company ABC has a gross profit of $50000. The operating expenses amounts to $10000. The interest on loans availed amounts to $5000 and taxes to be paid amounts to $5000. Calculate the EPS if there are total of 20000 shares.

a) 1.5
b) 1.25 c) 2.5 d) 2
Gross profit = 50000 Operating expenses = 10000 Operating Income = Gross profit - Operating expenses = 40000 EBIT (Earnings Before Interest and Taxes) = Operating Income + other income other expenses = 40000 Profit Before Tax (PBT) = EBIT - Interest Expenses = 40000 5000 = 35000 Net Income or PAT (Profit after Tax) = Profit Before Tax (PBT) income taxes = 30000 EPS (Earnings Per Share) = Profit after Tax / No. of Shares = 30000/20000 = 1.5

46. If you invest $500 for 3 years at 8% simple interest, how much you have at the end of 3 years? PTR/100 = 500*3*0.08 = 120 P+SI = 500+120 = 620 47. In an account earning simple interest from the first year is reinvested at the beginning of the second year. FALSE 48. An investor has multiple investment options yielding various dollar returns at various points of time, while he is comfortable with a return of X% pa. Which method should he use to compare the various investments? a) External rate of return

b) Net present value

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c) Simple interest d) Compound interest

Net Present Value (NPV) is a concept often used to evaluate projects/investments using the Discounted Cash Flow (DCF) method. The DCF method simply uses the time value concept and discounts future cash flows by the applicable interest rate factor to arrive at the present value of the cash flows.

49. P & L statements represent transactions over a period of time while the balance sheet information as of a specific date. TRUE
one that distinguishes P & L statement from a balance sheet, is that the amounts shown on this statement represent transactions over a period of time while the items represented on the balance sheet show information as of a specific date (or point in time).

50. Which of the following LCs is similar to a bank guarantee? a) Straight b) Negotiable c) Back to back

d) Standby
e) Revolving
The letter of credit (LC) allows the buyer and Seller to contract a trusted intermediary (a bank) that will guarantee full payment to the seller provided that he has shipped the goods and complied with the terms of the agreement. four parties are involved in any transaction using an LC Buyer or Applicant The buyer applies to his bank for the issuance of an LC. If the buyer does not have a credit arrangement with this issuing bank then he must pay in cash or other negotiable securities. Issuing bank The issuing or applicants bank issues the LC in favor of the beneficiary (Seller) and routes the document to the beneficiarys bank. The applicants bank later verifies that all the terms, conditions, and documents comply with the LC, and pays the seller through his bank. Beneficiarys bank The sellers or beneficiarys bank verifies that the LC is authentic and notifies the beneficiary. Beneficiary or Seller The beneficiary must ensure that the order is prepared according to specifications and shipped on time. He must also gather and present the full set of accurate documents, required by the LC, to the bank. Letters of credit can be flexible. Some LC variations include: Revolving, Negotiable, Straight, Red Clause, Transferable, and Restricted. But perhaps the safest type of letter of credit from the sellers point of view, is the Standby letter of credit. The standby LC is like a bank guarantee. It is not used as the primary payment method but as a fail safe method or guarantee for long-term projects. This LC promises payment only if the buyer

13

fails to make an arranged payment or fail to meet pre-determined terms and conditions. Should the buyer default, the seller must then apply to the bank for payment - a relatively simple process without complicated documentation. Since the standby LC can remain valid for years (Evergreen Clause) it eliminates the cost of separate LCs for each transaction with a regular client. Back to Back LC allows a seller to use the LC received from his buyer as collateral with the bank to open his own LC to buy inputs necessary to fill his buyers order.

51. The BASEL 2 frameworks has 3 main pillars. From the options given below, find the one that is NOT a part of it.

a) Operational effectiveness
b) Market discipline c) Minimum capital requirements d) Supervisory review 52. Premature withdrawal of principal attracts penalty in a CD account. TRUE 53. _____ is the legal and professional proceeding in which a lender. Obtains a court ordered termination of a borrowers equation right of redemption a) Securitization

b) Foreclosure
c) Sub-prime d) Credit freeze 54. The BSE is large primary financial market in which the initial issuer receives the proceeds for the sale of securities. TRUE 55. FICO score represents the credit worthiness of the borrower.
The FICO score is a key tool used by many lenders to assess the creditworthiness of a borrower; it conducts a probability analysis on a borrowers credit report assessing the ability of an individual to repay his/her debts. 56. If total spread of underwriting is $100000. What is the amount which will be distributed in the syndicate? a) 100000 b) 400000 c) 500000 d) Cannot be determined e) 600000 Syndicate - To share the risk, and more efficiently distribute the offering to the public, broker/dealers will join together in a Joint Trading Account. The syndicate profits by selling the securities and earning a Spread (i.e., the POP less the amount paid to the issuer). Syndicate members share the risk and are responsible for any unsold securities.

57. Purchase of account receivables at a discount is called FACTORING

Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business.

58. Choose the right option a) None of the mutual funds are listed on stock exchanges

b) Only close ended mutual funds are listed on stock exchanges

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c) Only open ended mutual funds are listed on stock exchanges d) Both close and open ended funds are listed on stock exchanges
You can buy mutual funds when mutual fund companies make initial public offerings. Filling out an application form with a payment of some initial deposit is all it takes. Buying mutual funds called closed end funds is from stock exchanges. Closed end funds are initially sold by fund companies in limited numbers and they are listed in a stock exchange to facilitate trading by investors. These will be usually at premium prices or as dictated by demands in the market (higher demands for various reasons attract higher premiums). You can also buy mutual funds (open end funds - funds purchasable perpetually from the company). Here the price at which you buy will be a figure called as NAV in the industry circles. 59. Warrants are the combination of which of these instruments? a) Put options and swaps b) Cash and call options c) Call and put options d) Equities and futures

e) Equities and call options

Warrants are call options variants of equity.

60. On trading at NYSE, a broker undertakes the following trades

Buy Sell Buy Sell Sell Sell IBM IBM MS IBM MS IBM 100 50 100 20 10 30 $11 $10.50 $20 $11 20.5 $9

How much did the broker pay to exchange? A) gross B)net Answer : 3100 (gross) 1880 (Net)
Buy Sell Buy Sell Sell Sell IBM IBM MS IBM MS IBM 100 50 100 20 10 30 $11 $10.50 $20 $11 20.5 $9 -$1,100 $525 -$2,000 $220 $205 $270 100 -50 100 -20 -10 -30

Netting Gross

-$1,880 -$3,100

30 IBM 90 MS to by 100 IBM & 100 MS

61. Which institution is responsible for monetary policy for the country? CENTRAL BANK 15

Monetary policy is the process by which the government, central bank controls (i) the supply of money (ii) availability of money (iii) cost of money or rate of interest to attain a set of objectives oriented towards the growth and stability of the economy.

62. Which of the following is NOT true about LC? I. Shifts credit risk from the importer to the importers bank (issuing bank) II. Deals with products and not with documents III. Are typically revocable unless specified otherwise IV. Advising bank has the liability for the payment of the LC 63. Which of the following represents the correct hierarchy of corporate ratings (highest to lowest)? a) AAA, AA, D, BBB b) D,AA,B,AAA

c) AAA,AA+,BBB,D
d) D,CB,A
Bond Rating Moody's Aaa Aa A Baa Ba, B Caa/Ca/C C Grade Standard & Poor's AAA AA A BBB BB, B CCC/CC/C D Investment Investment Investment Investment Junk Junk Junk Risk Lowest Risk Low Risk Low Risk Medium Risk High Risk Highest Risk In Default

64. Which of the following is treasury management system? a) Pinnacle b) Flex cube c) TS2 d) Finnacle

e) Front Arena
Treasury Management Systems are Sungard / Front Arena Summit Calypso Wall Street Systems

65. Corporate loans are: a) Never secured b) Never unsecured

c) Secured or unsecured
d) Always unsecured e) Always secured
Corporate Lending refers to various forms of loans extended by banks to corporate bodies like proprietorship, partnership, private limited companies or public limited companies. Banks lend to such entities on the strength of their balance sheet and business cash flows.

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Corporate loans are provided by banks for various purposes like new projects, capacity expansion or plant modernization, daily cash flow requirements (working capital) etc. Depending on the nature of the requirement, loans may be long-term or short-term in nature. Loans can be either secured or unsecured in nature. In case of secured loans, if the corporate defaults on payment of principal or interest on the loan, the bank can take possession of the security and sell off the same to meet principal or interest payment on the loan. Security is usually in the form of land, buildings, plant and machinery, physical stock of the raw material, goods for sale etc.

66. Two major functions of corporate finance division of investment banks are? a) Technology and m&a s b) Risk management and underwriting c) Security trading and underwriting

d) Mergers and acquisitions advisory and underwriting

e) Short selling
CORPORATE FINANCE The bread and butter of a traditional investment bank, corporate finance generally performs two different functions: Mergers and acquisitions advisory - Banks assist in negotiating and structuring a merger between two companies. If, for example, a company wants to buy another firm, then an investment bank will help finalize the purchase price, structure the deal, and generally ensure a smooth transaction. Underwriting - The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).An Underwriter guarantees that the capital issue will be subscribed to the extent of his underwritten amount. He will make good of any shortfall.

67. Which of the following are NOT the benefits of using credit derivatives? a) Credit derivatives can be used either to take more risk or to avoid (hedge) it b) Credit derivatives can be used to credit positions that can otherwise not easily be established in cash market.

c) Increasing the credit limit of a corporate

d) Credit derivatives can be used both to diversify their credit risk exposures and free up capital from regulatory constraints.
Uses of Credit Derivatives Like any other derivative instrument, credit derivatives can be used either to take on more risk or to avoid (hedge) it. credit derivatives can be used to create positions that can otherwise not easily be established in the cash market. Banks use credit derivatives both to diversify their credit risk exposures and to free up capital from regulatory constraints

68. Which of the following represents that the company is incorporated in USA? a) LTD b) PTE c) PLC d) INC 17

Ltd. or Ltd, is a business incorporated under the laws of England, Wales, Scotland, certain Commonwealth countries, the Republic of Ireland, Cyprus and Israel. A public liability company (legally abbreviated to plc with or without full stops) is a limited liability company that sell shares to the public in United Kingdom company law, in the Republic of Ireland and other Commonwealth jurisdictions

69. GE shares are selling for $15 each. You bought 200 shares one year ago at $12 are received dividend payments of $2 per share. What was your total dollar capital gain this year? a) 200

b) 600
c) None d) 1000 e) 400
A capital gain is a profit that results from investments into a capital asset, such as stocks, bonds or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor.

70. If the nominal interest rate is 10% and rate of inflation in 2%, what is the real interest rate? Prepare the problem in This model. Value changes. Or pbls based on reshuffiling formula may come. Formula is R=N-I. a) 12

b) 8
c) 20 d) 5 e) None 71. The current value of future cash flow or series of cash flows is called? a) NPV b) Future value c) Nominal value

d) Present value
Present Value is the current value of a future cash flow or of a series of future cash flows. Future Value is the value that a sum of money invested at compound interest will have after a specified period. The formula for Future Value is: FV = PV*(1 + i)n

72. A card holder swipes his card for USD 100. How much does the merchant i. Deduct from the card holder? ii. Receive from the acquirer? Assume merchant discount at 2% a) USD 100, USD 100 b) USD 100, USD 98 c) USD 100, USD 2 18

d) USD 98, USD 98

Following are the Income and Expense sources in an Acquirer business Income: Merchant discount (14% of transaction value) Processing fees ($ 0.20 $ 0.40 per transaction) Monthly minimum fees Customer service fees POS Equipment sales/service Expense: Interchange fees paid to Issuer ISO/MSP fees Data processing & Communications expenses Risk Management Losses on Merchant Charge backs & Fraud

73. Which of the following operations cannot be done on LC? a) Purchase b) Discount

c) None
d) Acceptance 74. When would a company pay nominal interest on committed position? i) Always ii) In some cases iii) If it wishes to pay a) All b) III only c) I only

d) II only
Interest is usually paid on the disbursed amount of the loan. In some cases, a nominal interest if also payable on the committed amount of the loan. Also, in most cases, the corporate would have to pay a certain amount as processing fees for the loan. This would cover the banks overhead costs in the loan process.

75. Securities with an original maturity of lesser than 1-year are traded on money markets? TRUE
Money market is for short term financial instruments, usually a day to less than a year. The most common instrument is a repo, short for repurchase agreement. A repo is a contract in which the seller of securities, such as Treasury Bills, agrees to buy them back at a specified time and price. Treasury bills of very short tenure, commercial paper, certificates of deposits etc. are also considered as money market instruments.

76. Product development in sales and marketing refers to which of the following option? a) Collateral e.g. cars in case of car loans, houses in case of mortgages 19

b) Products that are bought using online payment such as e-commerce c) Developing and differentiating deposits, loans etc d) All e) Identifying products such as SAP, Oracle for the bank 77. ___ of securities trade involves the transfer of the securities from the seller to the buyer. a) Clearing

b) Settlement
c) Netting d) Trading
Settlement of securities is a business process whereby securities or interests in securities are delivered, usually against (in simultaneous exchange for) payment of money, to fulfill contractual obligations, such as those arising under securities trades A number of risks arise for the parties during the settlement interval, which are managed by the process of clearing, which follows trading and precedes settlement. Clearing involves modifying those contractual obligations so as to facilitate settlement, often by netting and novation. clearing denotes all activities from the time a commitment is made for a transaction until it is settled.

78. The type of loan in which spread varies over the life of the loan is called ____ a) Positive spread loan

b) Floating rate loan

c) Semi-fixed rate loan d) Negative spread loan e) Fixed rate loan A fixed rate mortgage (FRM) is a mortgage loan first developed by the Federal Housing Administration (FHA) where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float." 79. Which two risks of a financial institution may gain as well as losses?

a) Interest rate risk and foreign exchange risk

b) None c) Credit risk and foreign exchange risk d) Liquidity risk and credit risk e) Credit risk and interest rate risk 80. What is the settlement standard followed in the US? a) T+2

b) T+3
c) T+4 d) T+1 In the U.S., the settlement date for marketable stocks is usually 3 (three) business days after the trade is executed, and for listed options and government securities it is usually 1 (one) day after the execution.

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81. What is the difference between residential and commercial mortgage? a) Type of property being collateralized b) Range of loan tenure

c) All
d) Type of customer 82. What are Yankee bonds also known as? junk bonds
Yankee bond, a US dollar-denominated bond issued by a non-US entity in the US market. Yankee bonds, ... are rated below investment-grade, commonly known as high-yield securities or junk bonds

83. Var can be measure at: 99%

VaR Calculation: 99% = 2.33 * standard deviation

84. Who is participating bank? a) A bank which participates in every process of syndication b) Bank which underwrites a loan c) Bank which participates in arranging a loan d) Bank which participates in disbursing a loan

e) Bank that participates in the syndication by lending a portion of the total amount required
85. Dividend declaration is an example of a) Private banking b) Initial public offer c) Merger & acquisition d) Investment banking

e) Corporate action
Corporate Action refers to dividend declarations, stock splits etc. The Corporate Action department makes sure that the rightful owners (as on the Record Date) receive the dividends, Splits etc.

86. From the given options identify the services that can be categorized under asset servicing line of business i. Corporate action processing iii. Transfer agency services ii. Income processing iv. All a) I only b) Iii only c) II only d) Both I and II

e) IV
Asset servicing is acoreongoing service provided by custodians. This service includes collecting dividends and interest payments, processing corporate actions and applying for tax relief from foreign governments on behalf of customers. list of services under the asset servicing

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 Corporate Actions 24-hour customer service center provides responses to all client inquiries on active corporate events using the latest SWIFT 15022 corporate action messaging standards. Income Pr ocessing Receiving global I ncome payments on due dates in the client-specified currency. Daily on-line reports keep clients informed of conditional dividend projection as well as the status of provisional, confirmed and credited income payments. Transfer Agency and Distribution Solutions Services These services offer a single source for comprehensive mutual fund servicing, integrating global transfer agency and distribution solutions with fund accounting, fund administration, cash management and custody, depending on client needs. Custody Custody service handles trade processing and settlement, asset servicing and electronic information delivery in multiple time zones and languages on a fully integrated platform. Financial Reporting Fund companies meet their financial reporting requirements to shareholders and regulators using real-time financial accounting systems. Pricing/Holdings Valuation, Tax Information Services, Tax Processing, Trade Instruction and Settle ment, Cash Sweep

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87. How would you categorize account activity alerts in mobile banking? a) Account information b) Support c) Investment

d) Transactions
88. Which of the following is involved in the retail brokerage business in US? a) Freddie Mac b) Sallie Mae c) Ginnie Mae d) Federal Reserve

e) E-Trade
A brokerage that primarily serves retail investors rather than institutional investors is referred to as a retail brokerage. Registered representatives who work for these retail brokerage firms are expected to market their services directly to individual investors and offer investment advice.

89. Money laundering refers to which of the following option? a) Extending loans to corporate b) All c) Short term borrowing & placements

d) Converting the profits from criminal activities into legitimate funds

Money laundering is generally regarded as the practice of engaging in financial transactions to conceal the identity, source, and/or destination of illegally gained money by which the proceeds of crime are converted into assets which appear to have a legitimate origin. Money laundering occurs over a period of three steps, which include the physical distribution of the cash (placement), the second step involves carrying out complex financial transactions in order to camouflage the illegal source (layering), and the final step which entails acquiring wealth generated from the transactions of the illicit funds (integration).

90. All of the following are valid means for custody client to communicate trade instructions to its custodian EXCEP a) FEDWIRE b) By Fax

c) By telephone
d) SWIFT network 91. The term settlement cycle referes to the which of the following option? Answer: Time period between the date on which the trade is executed and the date when the trade is settled. This settlement cycle is known as "T+3," 92. On a trading day at the NYSE, a broker undertakes the following trades Given that a net settlement system is being used, find out the net position of the broker at the end of the day.

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Buy Sell Buy Sell Sell Sell

Dell Dell Cisco Dell Cisco Dell

120 70 200 20 50 10

10 10.5 20 11 20.5 9

Answer: To get 20 dell and 150 cisco shares the broker needs to pay 3130 93. Which of the following is an issuer and acquirer? a) Elavon

b) Amex
c) Tsys d) First Data Corporation
First Data Corp (Processor) TSYS (Processor) American Express (Acquirer, Card Organization & Issuer)

94. If a financial instrument has a 20% chance of paying 80% and an 80% chance of paying 50% what would be the expected return? a) 0.2 b) 0.44 c) 0.28

d) 0.56 E(R)= Sum( probability (in scenario i) * the return (in scenario i))
ER = ( 0.2 * 0.8 ) + (0.8 * 0.5) = 0.16 + 0.4 = 0.56 95. Who is known as the drawer in check processing?

a) Person who receives the check

b) Person receiving the payment c) Makers bank d) The clearing house
"Drawer" of a check means a person whose name appears thereon as the primary obligor, whether the actual signature be that of (himself/herself) or of a person purportedly authorized to draw the check in (his/her) behalf.

96. An open end funds with 10,000 units outstanding had the total assets of Rs 120,000 and the liabilities of Rs 25,000. Calculate the funds NAV per unit.

Answer: NAV = Assets liabilities / no. of outstanding shares = (95,000/10,000) = 9.5

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Net asset value," or "NAV," of an investment company or a mutual fund is the company/funds total assets minus its total liabilities. For example, if an investment company has securities and other assets worth $100 million and has liabilities of $10 million, the investment companys NAV will be $90 million. Because an investment companys assets and liabilities change daily, NAV will also change daily. NAV might be $90 million one day, $100 million the next, and $80 million the day after. The investment company/fund calculates the NAV of a single share (or the "per share NAV") by dividing its NAV by the number of shares that are outstanding.

97. Which of the following is not an index? a) FTSE b) DAX c) HangSeng d) NASDAQ 100

e) NYSE ------------ (is a Stock Exchange)

A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.

98. Which of the following is not a stock exchange? a) LSE b) BSE c) NYSE d) NASDAQ

99. The components to determine the rate of exchange in a Forward contract are: a) Cross currency Rate and forward rate adjustment b) Current spot rate and forward rate adjustment c) Forward rate adjustment and amount of currency bought/sold d) Current spot rate, amount of currency bought/sold
The most basics tools of forex risk management are 'spot' and 'forward' contracts. These are contracts between end users and financial institutions that specify the terms of an exchange of two currencies. In a spot transaction the currency that is bought will be receivable in two days whilst the currency that is sold will be payable in two days. Most market participants want to exchange the currencies at a time other than two days in advance but would like to know the rate of exchange now. This is done through a forward contract to exchange the currencies at a specified exchange rate at a specified date. In determining the rate of exchange in six months time there are two components: the current spot rate (is simply the current market rate as determined by supply and demand) the forward rate adjustment (Forward rate (Local currency/USD) = Spot rate *(1+ interest rate in US) / (1+ local interest rate))

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100. In trade finance, which of the following factors are considered while choosing mode of financing?

a) Exporters fund, risk factors, cost of financing, time frame

b) None c) Time frame, cost of financing, buyers trade associates d) Government guarantee program, seller preference
FACTORS IN CHOOSING THE MODE OF FINANCING Costs, Time frame, risk factors, government guarantee program and exporters funds.

101. A custodian processes interest proceeds from the fixed income securities held under its custody. Which division, within the custodian company, is responsible for carrying out the position a) Transaction management b) Income management

c) Cash management
d) Brokerage services e) Fund administration 102. A bank has a portfolio of %50 million worth of loans of which it wants to hedge $20 million worth of loan. What is the processes called?

a) Held for sale loans

b) c) d) e) Committed loans Undrawn loans Trading loans Accrual loans

CLASSIFICATION OF LOANS BY THE BANK 1. Classification of Drawn Loans Loans are classified and accounted for as follows: AccrualLoans that management has the intent and the ability to hold for the foreseeable future or until maturity/loan payoff. Accrual loans are reported on the balance sheet at the principal amount outstanding, net of charge-offs, allowance for loan losses, unearned income, and any net deferred loan fees. Held-for-saleLoan or loan portfolios that management intends to sell or securitize. TradingLoans where management has the ability and intent to trade or make markets (i.e., sell/hedge the credit risk.) Loans held for trading purposes are included in Trading Assets and are carried at fair value, with the gains and losses included in Trading Revenue provided that the criteria outlined in this policy are met. 2. Classification of Undrawn Loan Commitments Loan commitments are generally classified as accrual and recorded off-balance sheet. Differences between loan and commitment are as follows; Loans are reflected in the asset side of the banks balance sheet. Commitments are off-balance sheet items and are reflected in the contingent asset side of the balance sheet. The amount of the loan that is disbursed is credited to the account of the borrower. In case of a commitment, there is no disbursement or credit to a borrowers account. The fee charged on a loan is a function of the disbursed amount. The fee charged on commitment is a function of the amount of commitment that is not utilized.

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103. What term is used to describe an LC that remains valid for years there by eliminating the cost of separate LCs for each transaction with a regular client? a) Revolving LC

b) Evergreen clause
c) Green clause d) Irrevocable LC e) Fixed clause
The standby LC can remain valid for years (Evergreen Clause) it eliminates the cost of separate LCs for each transaction with a regular client.

104. Interest rate spread is equal to? a) Cap-current rate b) Current rate floor

c) Current rate base rate

d) None e) Base rate floor

105. A settlement can be considered as final only if : a) The settlement is unconditional b) The settlement is irrevocable c) The transfer of funds and securities take place simultaneously d) The settlement is unconditional as well as irrevocable 106. Credit derivatives can be used to reduce the regulatory capital requirement and a diversify credit risk. (Be careful here the blanks may be interchanged so answer according to the blanks in the question.) 107. The details of trade obligation are created by a) Broker b) Depository c) Exchange d) Clearing house 108. Which of the following combination holds true? a) Documentation collection, strict compliance rules apply

b) Standby letter of credit, less costly than documentary collection

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c) Wire transfer, more costly than other payment alternatives d) Foreign checks, not useful for cross border trade e) Commercial letter of credit, improves applicants credit facilities 109. Increasing the cash reserve ratio for banks would have an impact on which of the following a) Increased interest rates b) Increased money supply in the economy c) Profitability of firms

d) Reduced money supply the economy

110. In defined benefit plans, the benefits is expressed as an ___ and in defined contribution plans, the benefit is expressed as an_____ a) Account balance, account balance b) Account balance, annuity c) Annuity, annuity

d) Annuity, account balance

111. Identify the services offered by retail banks: a) Savings and checking accounts b) Personal loans c) Debit cards

d) All
112. Trading of previously issued securities takes place where? a) At company headquarters

b) Secondary market
c) All d) Primary market e) Through private placement
The primary market is where securities are created (by means of an IPO) while, in the secondary market, investors trade previously-issued securities without the involvement of the issuing-companies. The secondary market is what people are referring to when they talk about the stock market. It is important to understand that the trading of a company's stock does not directly involve that company.

113. Which of the following is NOT a settlement method for bank loans? a) Preclosure b) Participation c) Securities repository d) Sub-participation e) Assignment 114. NASDAQ is based out of __________ a) London b) Chicago

c) None
d) Singapore e) Hong kong

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NASDAQ, is an American stock exchange (located in New York). "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations. 115. In a securities lending transaction, if the buyer of securities provides cash as collateral, then the seller of securities has to provide the buyer with a interest amount for the cash. What is this interest amount called? a) Collateral interest b) None c) Interest rate

d) Rebate rate
e) Return rate
Securities lending or stock lending refers to the lending of securities by one party to another. The terms of the loan will be governed by a "Securities Lending Agreement", which requires that the borrower provides the lender with collateral, in the form of cash, government securities, or a Letter of Credit of value equal to or greater than the loaned securities. The agreement is a contract enforceable under relevant state law, which is often specified in the agreement. As payment for the loan, the parties negotiate a fee, quoted as an annualized percentage of the value of the loaned securities. If the agreed form of collateral is cash, then the fee may be quoted as a "rebate", meaning that the lender will earn all of the interest which accrues on the cash collateral, and will "rebate" an agreed rate of interest to the borrower

116. Which of the following is NOT a commonly used term in the contest of banking? a) Social banking b) Investment banking c) Corporate

d) Personal banking
e) Retail banking 117. Inflation represents which of the following option?

a) Increase in prices
b) Very high change in prices c) Currency crisis d) Decrease in prices e) Economic crises 118. In terms of computation, which of the following is the fastest method for calculating VaR? a) Variance-covariance matrix b) A combination of Monte Carlo and historical simulation c) Historical simulation d) All would take equal time if done using a software e) Monte Carlo simulation 119. TARP stands for: Troubled Asset Relief Program 120. In a syndicated loan of 100M, each participant commits for 25% of loan. But due to exigencies if one participant reduces his share to 22% and others to share equally. What will be revised share of other participants? 29

a) 0.3 b) 0.24 c) 0.31

d) 0.26
e) 0.29 121. Which of the following debt instrument involves lowest risk? Mutual Funds or municipal bonds 122. Ram deposits $100 in xyz bank. Puja takes a loan of $100 from XYZ bank. Which of the following is most likely to happen? a) None b) Bank is charging 3% interest to Puja and paying 5% interest to Ram c) Bank is charging 5% interest to Ram and paying 5% interest to Puja

d) Bank is charging 5% interest to Puja and paying 3% interest to Ram

e) Bank is charging 3% interest to Puja and paying 5% interest to Ram 123. Due to which of the following reason is rebalancing performed? a) Change in original asset allocation due to market performance b) Change in risk profile of the investor

c) All
d) Occurrence of major life events in the investors life 124. If a bank gets a deposit of $5000, assuming a reserve requirement (CRR) of 10% and that it circulates through 2 more banks, leading to which of the following money multiplier effect? a) It creates a loan of $1210 b) It creates a reserve of $500

c) It creates a loan of $8550

d) None e) It creates a reserve of $ 4000
When a bank gets a deposit of $100, assuming a reserve requirement of 10%, the bank can then lend out $90. That $90 goes back into the economy, purchasing goods or services, and usually ends up deposited in another bank. That bank can then lend out $81 of that $90 deposit, and that $81 goes into the economy to purchase goods or services and ultimately is deposited into another bank that proceeds to lend out a percentage of it. In this way, money grows and flows throughout the community in a much greater amount than physically exists. This is also called multiplier effect. An initial deposit of $100 has created a reserve of $27, and loan of $244. 5000 Bank 1 (10% = 500) ------------------ 4500 Bank 2 (10% = 450) ------------------ 4050 Reserve = $950 and loan is $8550

125. If the limit = $2000, margin = 20% and asset value = $ 2000, then drawing power for an open ended loan is equal to? a) 2000

b) 1600
c) 2200 30

d) 2400 e) None Drawing Power (DP) - lower of L and (1-M)*AV

Limit (L) max outstanding allowed Margin (M) percentage of limit that can be drawn Asset value (AV) value of underlying asset L=2000 => max value for DP is not greater than 2000 (1-M)AV = (1-0.2)2000 = 1600

126. Direct investment in stock markets can be a better option investing through mutual funds if:

a) The investor has large capital, knowledge and resources for research
b) The investor has identified a bullish phase in the stock market c) The investor wants to invest for the long term d) The investor wants better returns than those offered by mutual funds 127. The process of creating buffer against the potential loss of non-performed loans is called: a) Loan classifying b) Loan provisioning c) Loan buffering d) Loan monitoring 128. Retail loans are asset products offered by the bank. TRUE 129. Which of the following is a corporate action? a) All b) Declaring dividend

c) Stock split
d) Rights issue e) M&A 130. An investor indulging in short selling on a share expects the share price to decrease. TRUE

131. With reference to settlement, FOP stands for: FREE OF PAYMENT

132.Go through FOP in Book.

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