241. Statutory regulation is likely to create larger compliance costs than self-regulation because:
A. self-regulation does not involve lawyers and the courts.
B. consumers are better able to assess risk under self-regulation.
C. statutory regulators are often over-cautious.
D. statutory regulation is controlled by consumers.
Answer
C. statutory regulators are often over-cautious.
242. Moral hazard caused by regulation can only be removed from financial transactions if:
A. regulations are regularly revised to keep pace with the changing circumstances of the market.
B. the regulations prevent agency capture.
C. all regulation is self-regulation.
D. participants in the finance industry do not feel protected by the regulations.
Answer
D. participants in the finance industry do not feel protected by the regulations.
243. The public debt of a country is not necessarily a burden on the economy to the extent that:
A. it grows less rapidly than GDP.
B. people receive good public services.
C. people are happy to hold government bonds.
D. it can be financed without adding to inflation.
Answer
A. it grows less rapidly than GDP.
244. If the public debt can be financed without adding to inflation or causing interest ratesto rise, it is said to be:
A. only a burden on future generations.
B. following the golden rule of the public finances.
C. in primary balance.
D. sustainable
Answer
D. sustainable
245. Interest rate expectations have been thought to be an important influence on bond sales because:
A. government bond-holders are, by and large, are income risk averse.
B. interest rates have always been very unstable.
C. the bond market is dominated by people interested mainly in capital gains.
D. government bond-holders hold extrapolative expectations.
Answer
C. the bond market is dominated by people interested mainly in capital gains.
246. The sale of government bonds overseas:
A. causes a fall in the domestic money supply.
B. causes a deficit in the balance of payments.
C. causes a smaller increase in interest rates than the sale of bonds to the domestic banking sector.
D. causes a smaller increase in interest rates than the sale of bonds to the domestic private sector.
Answer
D. causes a smaller increase in interest rates than the sale of bonds to the domestic private sector.
247. In indirect finance:
A. lenders loan to borrowers.
B. an institution borrows from the lender and provides funds to the borrower.
C. occurs between a borrower and lender, with or without an intermediary.
D. the borrower is required to have collateral.
Answer
B. an institution borrows from the lender and provides funds to the borrower.
248. Aloan:
A. is an asset for both the lender and the borrower.
B. is an asset for the lender and a liability for the borrower.
C. is a liability for the lender and an asset for the borrower
D. is a liability for both the lender and the borrower.
Answer
B. is an asset for the lender and a liability for the borrower.
249. Which of the following is not a characteristic of a financial instrument?
A. The financial instrument is always issued by a bank.
B. A financial instrument is a written legal obligation of one party to transfer something of value, usually money.
C. The transaction in a financial instrument is specified to take place at a future date.
D. A financial instrument specifies certain conditions.
Answer
A. The financial instrument is always issued by a bank.
250. Securities backed by ___ layed an important role in the financial crisis of 2007- 2009?
A. asset backed securities.
B. bonds.
C. sub-prime mortgages.
D. small business loans
Answer
C. sub-prime mortgages.
251. Financial instruments are used
A. as a unit of account, as a store of value, and as a means of payment.
B. as a unit of account, as a means of payment, and to transfer risk.
C. as a store of value, as a means of payment, and to transfer risk.
D. as a unit of account, as a store of value, and to transfer risk.
Answer
C. as a store of value, as a means of payment, and to transfer risk.
252. Two important characteristics of financial instruments are:
A. information communication and risk neutrality.
B. risk neutrality and liquidity.
C. standardization and information communication.
D. liquidity and standardization.
Answer
C. standardization and information communication.
253. Benefits of the merger between the NYSE and Paris-based Euronext, a pan European stock exchange include:
A. lower costs and speedier transactions for international financial markets.
B. foreign ownership of domestic assets.
C. international consolidation of financial services.
D. greater the uncertainty.
Answer
A. lower costs and speedier transactions for international financial markets.
254. Which of the following increases the value of a financial instrument?
A. smaller payments.
B. payments made further in the future.
C. payments that are made when we need them.
D. payments that are less likely to be made.
Answer
C. payments that are made when we need them.
255. An example of financial instruments that are primarily used as stores of value is:
A. insurance contracts.
B. home mortgages.
C. options.
D. futures contracts.
Answer
B. home mortgages.
256. Financial markets serve which three purposes?
A. Financial markets allow-risk sharing, pool and communicate information, and offer stability.
B. Financial markets allow risk sharing, offer stability, and offer liquidity.
C. Financial markets offer stability, pool and communicate information, and offer liquidity.
D. Financial markets allow-risk sharing, pool and communicate information, and offer liquidity.
Answer
D. Financial markets allow-risk sharing, pool and communicate information, and offer liquidity.
257. SEBI operates to fulfill the needs of these three groups, choose the one which is not in those three:
A. the issuers of securities
B. the police
C. the investors
D. the market intermediaries
Answer
B. the police
258. SEBI has not been vested with the following powers:
A. to approve by-laws of stock exchanges.
B. to require the stock exchange to amend their by-laws.
C. inspect the books of accounts and call for periodical returns from recognized stock exchanges.
D. inspect the books of accounts of financial intermediaries.
Answer
B. to require the stock exchange to amend their by-laws.
259. SEBI signs MoUs with different country’s financial jurisdictions who are not a signatory to the multilateral MoU of International Organization of Securities Commissions (IOSCO).
A. True
B. False
C. all
D. none
Answer
B. False
260. Which of the following is the disadvantage of SEBI
A. Ease of Trading
B. Tax saving
C. Money Laundering
D. All of them
Answer
A. Ease of Trading
261. The difference between a primary market and a secondary market is
A. primary market is the stock market and secondary market is the market for second hand sale of securities
B. a primary market helps in long-term credit and secondary market offers short-term credit
C. a primary market helps in the issue of new securities those which are offered for the first time and the secondary market is for second hand sale of securities listed on the stock exchange
D. a primary market is the unorganized sector and the secondary market is the organized sector for sale and purchase of securities.
Answer
C. a primary market helps in the issue of new securities those which are offered for the first time and the secondary market is for second hand sale of securities listed on the stock exchange
262. As a part of the capital adequacy requirement, the base minimum capital prescribed by SEBI:
A. varies from exchange to exchange.
B. is based on the recommendations of the Kaul committee.
C. is based on the recommendations of the Justice Bhagwati Committee.
D. is the same across members of all exchanges.
Answer
A. varies from exchange to exchange.
263. Primary and secondary markets:
A. Compete with each other
B. Complement each other
C. Function independently
D. Control each other
Answer
B. Complement each other
264. Clearing and settlement operations of NSE are carried out by:
A. NSDL
B. NSCCL
C. SBI
D. CDSL
Answer
B. NSCCL
265. Which of the following is not a function of SEBI:
A. Development of the Securities market
B. Investor Protection
C. Making the Rules and Regulation for the securities market
D. Framing policies for central government operations
Answer
B. Investor Protection
266. The function of a financial system is to
A. establish a link between savers and investors
B. link commercial banks with the Central Bank of a country
C. create regulators for influencing the intermediaries
D. help traders and moneylenders in the capital market
Answer
A. establish a link between savers and investors
267. The liquidity status of certificate of deposit which is more negotiable is considered as
A. certified liquidity
B. term liquidity
C. more liquid
D. less liquid
Answer
A. certified liquidity
268. Which of the following statements about financial markets and securities are true?
A. A bond is a long-term security that promises to make periodic payments called dividends to the firm’s residual claimants.
B. A debt instrument is intermediate term if its maturity is less than one year.
C. A debt instrument is long term if its maturity is ten years or longer.
D. The maturity of a debt instrument is the time (term) to that instrument’s expiration date.
Answer
C. A debt instrument is long term if its maturity is ten years or longer.
269. Which of the following statements about financial markets and securities are true?
A. Few common stocks are traded over-the-counter, although the over-the-counter markets have grown in recent years.
B. A corporation acquires new funds only when its securities are sold in the primary market.
C. Capital market securities are usually more widely traded than longer term securities and so tend to be more liqu
Answer
A. Few common stocks are traded over-the-counter, although the over-the-counter markets have grown in recent years.
270. At present, the apex institution with regard to rural credit is
A. RBI
B. NABARD
C. ARDC
D. SBI
Answer
B. NABARD
271. Which of the following in India is an exchange bank?
A. ICICI bank
B. CITI bank
C. EXIM bank
D. UCO bank
Answer
B. CITI bank
272. Exchange banks specialize in:
A. Financing foreign trade
B. Promoting foreign investment
C. Financing domestic trade
D. All the above
Answer
A. Financing foreign trade
273. The IDBI was started in
A. 1949
B. 1964
C. 1982
D. 1962
Answer
B. 1964
274. The declining profits made banks to undertake the business of:
A. Merchant banking
B. Mutual funds
C. Venture capital
D. all of the above
Answer
D. all of the above
275. Retail banking means granting loans for:
A. Construction of houses
B. Purchases of consumer durables
C. Educational purposes
D. All of these
Answer
D. All of these
276. Investment banking was developed by
A. Japan
B. England
C. USA
D. None of the above
Answer
B. England
277. The presence of transaction costs in financial markets explains, in part, why
A. financial intermediaries and indirect finance play such an important role in financial markets.
B. equity and bond financing play such an important role in financial markets.
C. corporations get more funds through equity financing than they get from financial intermediaries.
D. direct financing is more important than indirect financing as a source of funds.
Answer
A. financial intermediaries and indirect finance play such an important role in financial markets.
278. Financial intermediaries can substantially reduce transaction costs per dollar of transactions because their large size allows them to take advantage of
A. poorly informed consumers.
B. standardization.
C. economies of scale.
D. their market power.
Answer
C. economies of scale.
279. The presence of in financial markets leads to adverse selection and moral hazard problems that interfere with the efficient functioning of financial markets.
A. noncollateralized risk
B. free-riding
C. asymmetric information
D. costly state verification
Answer
C. asymmetric information
280. When the lender and the borrower have different amounts of information regarding a transaction, ___
A. asymmetric information
B. adverse selection
C. moral hazard
D. fraud
Answer
A. asymmetric information
