Management of Financial Services Set 4

QN1. All of the following are financial intermediaries except

a. Insurance companies

b. Pension funds

c. Mutual funds

d. None of the above

Answer

Answer: d. None of the above

QN2. Lease which includes a third party (a lender) is known as:

a. Sale and leaseback

b. Direct lease

c. Inverse Lease

d. Leveraged Lease

Answer

Answer: c. Inverse Lease

QN3. Financial instruments issued by government agencies or corporations that promise to pay certain amounts of money to the holder on specific future dates are called:

a. Venture Capital.

b. preferred stock.

c. Equity Shares.

d. bonds.

Answer

Answer: d. bonds.

QN4. The purpose of financial markets is to:

a. increase the price of common stocks.

b. lower the yield on bonds.

c. allocate savings efficiently.

d. control inflation.

Answer

Answer: c. allocate savings efficiently.

QN5. Financial intermediaries:

a. channel funds from savers to borrowers

b. greatly enhance economic efficiency

c. have been an source of many financial innovations

d. have done all of the above

Answer

Answer: a. channel funds from savers to borrowers

QN6. ______are the economies Central nervous system.

a. Financial Instruments

b. Financial Markets

c. Financial Institutions

d. Financial Companies

Answer

Answer: a. Financial Instruments

QN7. Financial markets and institutions

a. involve the movement of huge quantities of money.

b. affect the profits of businesses.

c. affect the types of goods and services produced in an economy.

d. do all of the above.

Answer

Answer: d. do all of the above.

QN8. All merchant bankers have to be registered with…..

a. RBI.

b. SEBI

c. AMFI

d. All of the above

Answer

Answer: b. SEBI

QN9. A mutual fund can operate as a venture capital fund.

a. True

b. False

c. Cannot say

d. None of the above

Answer

Answer: a. True

QN10. How are funds allocated efficiently in a market economy?

a. The most powerful economic unit receives the funds.

b. The economic unit that is willing to pay the highest expected return receives the funds.

c. the economic unit that considers itself most in need of funds receives them.

d. Receipt of the funds is rotated so that each economic unit can receive them in turn.

Answer

Answer: b. The economic unit that is willing to pay the highest expected return receives the funds.

QN11. Funds do not have a fixed date of redemption.

a. Open ended funds

b. Closed ended funds

c. Diversified funds

d. Botha&b

Answer

Answer: a. Open ended funds

QN12. In lease system, interest rate is calculated on:

a. Cash down payment

b. Cash price Outstanding

c. Hire purchase price

d. None of the above

Answer

Answer: b. Cash price Outstanding

QN13. A short term lease which is of tern cancellable is known as:

a. Finance lease

b. Net lease

c. Operating lease

d. Leveraging lease

Answer

Answer: a. Finance lease

QN14. Which of the following is not a usual type of lease arrangement?

a. Sale & leaseback

b. Goods on Approval

c. Leverage Lease

d. Direct lease

Answer

Answer: b. Goods on Approval

QN15. Under income-tax provisions, depreciation on lease asset is allowed to:

a. Lessor

b. Lessee

c. Any of the two

d. None of the two

Answer

Answer: b. Lessee

QN16. A lease which is generally not cancellable and coers full economic life of the asset is known as:

a. Sale & leaseback

b. Operating lease

c. Finance lease

d. Economic lease

Answer

Answer: c. Finance lease

QN17. One difference between Operating & Finance lease is:

a. There is often an option to buy in operating lease

b. There is often a call option in financial lease

c. An operating lease is generally cancellable by lessee.

d. A financial lease in generally cancellable by lessee.

Answer

Answer: b. There is often a call option in financial lease

QN18. C.R.A. is banking parlance stands for

a. Credit Rating Association

b. Credit Rating Agency

c. Credit Risk Assessment

d. None of these

Answer

Answer: b. Credit Rating Agency

QN19. From the point of view of the lessee, a lease is a:

a. Working capital decion

b. Financial decision

c. Buy or make decision

d. Investment decision

Answer

Answer: b. Financial decision

QN20. Which of the following is not true for a “Lease or Buy” decision for the lessee?

a. Helps in project selection

b. Helps in project financing

c. Helps in project location

d. All of the above

Answer

Answer: c. Helps in project location

QN21. Bad debt cost is not borne by factor in case of

a. Pure factoring

b. Without recourse

c. With recourse

d. None of the above

Answer

Answer: a. Pure factoring

QN22. If a company sells its receivable to another party to raise funds, it is known as

a. Securitization

b. Factoring

c. Pledging

d. None of the above

Answer

Answer: b. Factoring

QN23. For a lessor, a lease is a

a. Investment decision

b. Financing Decision

c. Dividend Decision

d. None of the above

Answer

Answer: a. Investment decision

QN24. Which of the following is true for mutual funds in India?

a. Exit load is not allowed

b. Entry load is allowed

c. Entry load is not allowed

d. Exit load allowed is some cases

Answer

Answer: c. Entry load is not allowed

QN25. Debt/Income funds invest in

a. Tax saving schemes

b. Money Market Instruments

c. High Rate fixed income bearing instruments

d. Both debt and equity

Answer

Answer: c. High Rate fixed income bearing instruments

QN26. Which one of the following is not a feature or characteristics of hire purchase?

a. A small initial outlay (deposit) is required

b. The user of the asset never becomes the owner

c. The hirer can use the asset immediately (or within a few days) of agreement

d. Regular interest and capital payments (e.g. monthly) are made by the user to the hire purchase company

Answer

Answer: d. Regular interest and capital payments (e.g. monthly) are made by the user to the hire purchase company

QN27. Which of the following is not a service provided by factoring companies?

a. The provision of finance

b. Bond issuance facilities

c. Sales ledger administration

d. Credit insurance

Answer

Answer: b. Bond issuance facilities

QN28. Which of the following is not regulated by SEBI

a. Foreign institutional investors

b. Foreign direct investment

c. Mutual funds

d. Depositories

Answer

Answer: b. Foreign direct investment

QN29. Which one of the following most accurately describes an operating lease?

a. A short term leasing contract in which the lessee conveys the right to the lessor to receive interest payments from an asset leased out to another firm.

b. A short-term leasing contract or a contract which can be terminated at short notice. The lessor conveys the right to use equipment in return for regular rental payments.

c. A lease agreement in which a firm sells equipment firm sells equipment to a finance house, which then permits the firm to continue to use it in return for regular rental payments

d. A lease agreement in which the finance provider expects to recover the full cost (or almost the full cost) of the equipment, plus interest, over the period of the lease

Answer

Answer: c. A lease agreement in which a firm sells equipment firm sells equipment to a finance house, which then permits the firm to continue to use it in return for regular rental payments

QN30. Mutual Funds provide the benefits of

a. Portfolio management

b. Diversification

c. Investment Avenues

d. All of the above.

Answer

Answer: d. All of the above.

QN31. Mutual Funds investor can not earn following return

a. Dividend

b. Capital Gain

c. Increase in NAV

d. Fixed interest earning

Answer

Answer: d. Fixed interest earning

QN32. The major difference between hire purchase (HP) and leasing is:

a. With HP, the user of the equipment generally owns it eventually after a set number of payments, whereas with leasing the user never owns the equipment.

b. HP is easy to arrange at point of sale, whereas leasing involves a prolonged legal process.

c. The effective rate is much higher on HP than on leasing.

d. In HP the payments are made annually, whereas with leasing monthly payments are more common.

Answer

Answer: a. With HP, the user of the equipment generally owns it eventually after a set number of payments, whereas with leasing the user never owns the equipment.

QN33. Mutual funds are valued with help of their

a. NAV’s

b. NFO

c. IPO

d. None of the above

Answer

Answer: a. NAV’s

QN34. One of the following, what is not true in respect of factoring?

a. Continuous Arrangement between factor and seller

b. Sale of receivables to the factor

c. Factor provides cost free finance to seller

d. None of the above

Answer

Answer: c. Factor provides cost free finance to seller

QN35. An asset management company is formed

a. To manage bank’s assets

b. To manage mutual funds investments

c. To construct infrastructure projects

d. To run a stock exchange

Answer

Answer: b. To manage mutual funds investments

QN36. Which of the following is not an advantage of Hire Purchase?

a. Hire purchase is often available when other sources of finance are not

b. Hire purchase agreements can be cancelled at short notice with no penalty

c. Hire purchase is easy to arrange

d. Hire purchase usually represents a fixed rate form of finance

Answer

Answer: b. Hire purchase agreements can be cancelled at short notice with no penalty

QN37. Balanced funds provide:

a. Steady return

b. High return

c. Increase volatility

d. None of the above

Answer

Answer: a. Steady return

QN38. Prime duty of merchant banker is:

a. Maintaining records of clients

b. Giving loans to clients

c. Working as a capital market intermediary

d. None of the above

Answer

Answer: d. None of the above

QN39. Basic objective of a money market mutual fund is:

a. Guaranteed rate of return

b. Investment in short – term securities

c. Both a & b

d. None of a & b

Answer

Answer: d. None of a & b

QN40. Mutual funds that charge a sales commission when shares are purchases are called

a. No-load funds

b. Loaded funds

c. Sinking funds

d. Sinking-charge funds

Answer

Answer: b. Loaded funds