BFM- MCQ ON TREASURY PRODUCTS

1) Which of the following currency is not fully convertible?
a) USD
b) EURO
c) INR
d) GBP


2) What are the Spot Trades?
a) It is the process of settlement where payment and receipts of funds are settled in respective currencies.
b) The settlement takes place within 2 working days from the trade   date.
c) Currency may be bought or sold with settlement on the same date i.e. To day (TOD)
d) The settlement can be on the -next day he. Tomorrow  (TOM)


3) Which of the following is significant about spot   trade?
a) All rates quoted on the screen are for spot trade unless otherwise   mentioned
b) TOD and TOM rates are generally quoted at a discount to    the spot rate.
c) TOD and TOM rates are less favourable to buyer
d) All these


4) What is forward contract?
a) It is a contract for purchase and sale of currency at a future date.
b) The exchange rate for a future contract is quoted on the day of    contract.
c) The contract between buyer and seller is called forward   contract.
d) All the above


5) Which of the following is true regarding a forward   contract?
a) Treasury may have forward contracts with customers or Banks as   counterparties.
b) Customers cover currency risk through forward  contract.
c) Treasury may cover its customer exposure by taking reverse position in Inter-Bank   market.
d) All the above


6) The features of forward rates are:
a) They are not projected on the basis of exchange rate movement in the market
b) Forward rates are decided on the basis of interest rate differential of two currencies.
c) The interest rate differential is added to the spot rate for low interest yielding currency and deducted from the spot rate for high interest yielding   currency
d) All the above


7) Which of the following are  True?
a) Forward rate reflects interest rate differential only in prefect   markets.
b) Perfect markets are where currency is fully convertible and highly   liquid.
c) When currency is not fully convertible the demand for forward contract influences the forward exchange rate
d) All these


8) The features of a swap  are:
a) A combination of spot and forward transactions is called a swap.
b) Buying in the spot market and selling same amount in forward market or vice-versa is swap.
c) Swap is mainly used for funding requirements
d) All these


9) A Bank may have foreign exchange surpluses from the following   sources:
a) Profit from overseas Branch  operations
b) Forex Borrowing in foreign domestic  market
c) Foreign currency and convertible rupee deposits with   branches
d) All the above


10) A Treasury may have surplus forex from the following   sources:
a) Surpluses net of Bank's -lending in foreign   currency
b) Floating funds on account of customer  transactions
c) EEFC funds maintained in current account
d) All these


11) The surplus forex can be invested by a Treasury in:
a) Inter-Bank loans
b) Short term investments
c) Nostro Account
d) Any or all of  these


12) Which of the followings are the sources for short-term investments?
a) Treasury Bills issued by foreign  governments
b) Commercial paper
c) Other debt instruments issued by multi lateral  institutions
d) All the above


13) What is a Nostro Account?
a) This is a current account denominated in foreign currency maintained by a Bank with the correspondent Bank in the home country of the currency.
b) Nostro Account does not attract any  interest.
c) Many correspondent Banks provide automatic investment facility for funds held overnight which earn nominal interest.
d) All these

14) What is Money Market?
a) It is place for raising and deploying short term resources where maturity does not exceed one year.
b) Inter-Bank market is divided as call money and term   money.
c) Call money market is also overnight market where borrowed funds are repaid on the next working day.
d) Notice money market is where funds are placed beyond overnight and upto 14 days.


15) The participants in call/notice money market  are:
a) The major players are Banks and primary  dealers.
b) Non-Banking financial companies can only lend the surplus funds upto specified limit_
c) NBFC can not participate in this market
d) Both (a) and (c)


16) Which of the followings are the features to Treasury Bills?
a) The T-Bills are issued by the RBI on behalf of central govt. for pre-determined amount.
b) The interest is by way of  discount.
c) The price is determined through an auction process
d) All these


17) The maturity period of T-Bills  is:
a) 91 days
b) 364 days
c) (a) and (b) both
d) None of these


18) Which of the followings is relevant to  T-Bills?
a) Each issue of 91 days T-Bill is for Rs_ 500 crore and auction is conducted weekly on Wednesday.
b) Each issue of 364 days is for Rs. 1000 crore and it is auctioned fortnightly
c) The Banks park short term funds in T-Bills
d) All these


19) The Benefits of T-Bills are:
a) It is Risk free  investment
b) It yields interest higher than the call money  market.
c) It is possible to trade T-Bill in secondary market
d) All these


20) Which of the followings is correct regarding  T-Bill?
a) It is in the Electronic form and held in SGL Account maintained by Banks with RBI.
b) Depository participants can also operate through SGL  Account.
c) The settlement of T-Bills is through Clearing Corporation of India
d) All these


21) If a T-Bill is of 91 days is priced at 99.26, what does it signify?
a) It will yield interest at  2.99%
b) This is known as implicit  yield.
c) (a) and (b) both
d) None of these


22) The_ features of the commercial paper  are:
a) It is an unsecured money market instrument issued in the form of promissory note.
b) The highly rated corporate Borrowers can raise short term funds through this   instrument.
c) It is an additional instrument to the investing community
d) All these


23) -The time limit for issuing a CP  is:
a) Minimum maturity 7 days
b) Maximum maturity one year
c) (a) and (b) both
d) None of these


24) The requirements for issuing a commercial paper  are:
a) The company issuing CP should have minimum credit rating of   P2.
b) Banks can invest in CP only if it    is issued in D-mat form
c) The minimum amount of CP is Rs. 5 lac
d) All these

25) Who issues guidelines for issue of  CP?
a) RBI
b) Market practices prescribed by FIMMDA (Fixed Income and Money Market and Derivatives Association of India) 
c) (a) and (b) both
d) None of these


26) A company issuing CP must satisfy the  conditions:
a) Tangible Net worth of the company should not be less than Rs. 4 crore
b) The company should be enjoying working capital limit with Bank/financial   institution
c) The Borrowal Account should be classified as standard Asset
d) All these


27) How does Tangible Net Worth is arrived  at?
a) Capital
b) Free Reserves
c) (a) + (b) — Intangible Assets if   any
d) None of these


28) Which of the following is relevant about commercial paper?
a) It is issued for discounted amount i.e. less than face value
b) The price is quoted for face  value
c) It is negotiable instrument
d) All these


29) Which of the following statements regarding commercial paper is not  correct?
a) CP is a substitute to working  capital
b) Interest rates are at par with  PLR
c) It should be compulsory in D-mat  form
d) Purchase and sale of CP is effected through the depository participants


30) Banks prefer to invest in CP through Treasury because   :
a) Credit Risk is relatively low.
b) Yield on CP is higher than inter-bank money  market.
c) There is no liquidity risk
d) All these


31) Which of the following- Credit Rating Agencies have been authorized by RBI for Rating?
a) ICRA
b) CRISIL
c) CARE and FITCH Ratings India Ltd.
d) All   these


32) The provisions for issue of commercial paper  are:
a) Maximum period for subscription to an issue of CP is two weeks from the date of opening of issue.
b) CPs can be issued on a single date or in parts on different dates.
c) The same issue of CP should have the same date of maturity
d) All these


33) The process of issue a CP  involves:
a) The Bank is appointed as issuing and paying   agent.
b) The Bank would assess the requirement and the extent to which the CP issue is linked with credit limit.
c) The potential investors are given a copy of IPA certificates
d) All these


34) The features of certificate of Deposit  are:
a) It is a debt instrument issued-by Bank against deposit of funds
b) It is a negotiable  instrument
c) It bears interest rate higher than regular deposits of the Bank.
d) All these


35) The requirements of certificate of Deposit are:
a) Minimum amount of deposit is Rs. 1 lac
b) The maturity period may range from 7 days to one   year
c) It is an additional source for investment to Banks and corporates
d) All these


36) What is a Reverse  Repo?
a) It is a contract to buy securities and then to sell them back at an agreed future date and price.
b) It provides opportunity for short term investments of surplus   funds
c) (a) and (b) both
d) None of these


37) What is Repo?
a) It is an instrument of borrowing funds for a short   period.
b) It involves selling a security and simultaneously agreeing to repurchase it at a future date for a slightly higher price.
c) The price difference is called interest
d) All these


38) The significance of Repo is:
a) It is a tool used by RBI for open market   operations.
b) It affects liquidity in the  system.
c) None of these
d) Both (a) and (b)

39) The commercial Banks participate in Repo transactions because   of:
a) To meet short fall of CRR --
b) To meet short fall in  SLR
e) The interest on Repo is lower than call market
d) All these


40) Repo transactions are regulated  by:
a) RBI
b) Securities Contracts Regulations Act
c) (a) and (b) both
d) None


41) Which of the following statements is  correct?
a) Repo is a short term money market  instrument
b) The Repo Rate and period is announced by RBI
c) (a) and (b) both
d) None of these


42) What is the Repo Rate with effect from 16th Sept 2010?
a) 5%
b) 5.25%
C) 5.75%
d) 6%
e) None of these


43) What is the Reverse Repo Rate with effect from lSept 2010?
a) 4%
b) 4.25%
c) 4.75%
d) 5%
e) None of these


44) The process of Repo transaction  is:
a) A Bank may sell securities to the counterparty with an agreement to repurchase the same securities after a certain period at pre determined price.
b) The bank gets cash in exchange of securities and pays back the cash after a certain period and get back the securities.
c) The difference between sale price and repurchase price is interest
d) All these


45) The advantage to the counterparty under a Repo transaction is:
a) It earns interest on secured  [ending.
b) It holds securities which serves the purpose of meeting SLR  requirements.
c) The value of securities is higher by a margin to cover price Risk.
d) All these


46) Which of the following statements is correct?  .
a) The margin maintained on Repo securities is called hair cut as principal amount exchanged against securities is lower than the market value of  securities
b) RBI uses Repo to control  liquidity
c) Banks and primary dealers sell govt. securities to RBI and avail liquidity
d) All these


47) Which of the following statements is not  correct?
a) RBI uses Repo Transactions under liquidity adjustment   facility
b) Liquidity is not affected through lending to Banks under a Repo    Transaction.
c) Absorption of liquidity is done by accepting deposits from   Banks.
d) Absorption of    liquidity by accepting deposits from Banks is known as Reverse Repo.


48) Which of the following statements is  correct?
a) RBI has commercial repo auctions on overnight  basis.
b) Repo and Reverse Repo Rates have been  pre-fixed.
c) RBI has full discretion to change the frequency of    auction.
d) All these


49) The process of Bill Re-discounting  is:
a) Treasury will discount Bill of Exchange of short term nature which are already discounted with the banks.
b) Rediscounting is done at money market  rates.
c) The rediscounting rates are negotiable between the lending Bank and borrowing Bank. 
d) All the  above


50) The advantage to the lending Bank  is:
a) The surplus funds are invested at term money  rate
b) Credit Risk is low as lending Bank has recourse to the discounting Bank
c) (a) and (b) both
d) None of these


51) The benefits to borrowing Bank is  :
a) It is able to infuse liquidity from out of existing   Assets
b) Its capital adequacy ratio is improved or rediscounted bills are added to Inter-Bank liability 
c) (a) and (b) both 
d) All  these


52) Which of the followings is significant regarding government   securities?
a) They are issued by Public Debt Office of   RBI.
b) State govts. Issue state development  Bonds.
c) Govt. securities are sold through auction conducted by RBI
d) All these


53) Which of the followings is  correct?
a) Interest is paid on face value of the bond at coupon   rate.
b) RBI arrives at a cut off price based on bids submitted by Banks and primary dealers.
c) The price may be higher or lower than the face value 
d) All these


54) Price movement of Bond depends  on:
a) Demand of the Bond which depends on liquidity in the   system.
b) The yield on Bond is different from coupon  rate.
c) (a) and (b) both
d) None of these


55) If 10 years G. sec. at 7.37 per cent is priced at 104.80, what would be the yield' 
a) 6.67%
b) 5.42%
c) 6.15%
d) None of these


56) The interest rates in the economy depends  on:
a) Rate of inflation
b) GDP growth
c) Other economic indicators
d) A combination of all  these


57) The variety of Bonds may include:
a) Step up coupons 
b) Coupons    linked to inflation
c) Floating rate coupons
d) Any of  these


58) What is STRIPS:
a) Separately registered interest and principal  securities
b) Under this process principal and interest are treated as separate zero coupon securities 
c) (a) and (b) both
d) None of these


59) What is corporate debt paper?
a) It includes medium and long term bonds and debentures issued by corporates and financial institutions
b) Yield on Bonds is higher than the govt.   securities
c) They are called non-SLR securities where banks can invest
d) All    these


60) Which of the following statements is not  correct?
a) Tier-2 capital Bonds issued by Banks fall under the category of corporate debt paper.
b) Bonds issued by corporates are not that  liquid_
c) The bonds are issued in D-mat  form.
d) Bank Treasury finds an attractive investment in corporate debt   paper.


61) Which of the following statements is correct regarding corporate debt   paper?
a) Higher the credit risk higher is the  yield.
b) Global ratings are necessary if the debt paper is issued    in International market.
c) Treasury can invest FCNR deposit funds and other forex surpluses in global debt paper.
d) All the  above


62) Which of the followings is  correct?
a) Debentures are issued by private  companies.
b) Bonds mainly issued by public sector  companies.
c) Government does not provide guaranter on  PSU Bonds
d) All these


63) The material difference between debentures and bonds  is:
a) Debentures are governed by relevant provisions of company   law.
b) Debentures are transferable on  registration
c) Bonds are negotiable instrument governed by Law of Contract.
d) All these


64) The Bond can be :
a) Zero Coupon Bond
b) Floating Rate Bond
c) Deep Discount   Bond
d) Any of these


65) Which of the followings is not  correct?
a) Debenture and Bonds can be issued with redemption in instruments over a period.
b) They can be issued with a premium or   redemption.
c) There are no Bonds with put and call  option
d) Bonds secured by stocks or other collateral are called collaterised obligations


66) Which of the followings is relevant regarding issue of Bonds and    debentures?
a) The holders have prior legal claim over the equity and preference stock   holders.
b) The Trustee appointed by issuing company protects the rights of debenture    holders.
c) The Trustee can initiate legal action against the company in case of any default.
d) All of the above


67) ) Companies issuing unsecured debentures and bonds have to comply with  the provision of :
a) Companies Acceptance of Deposit Rules 1975 
b) SEBI
c) (a) and (b) both 
d) None of  these


68) What is a convertible  Bond?
a) It is a mix of Debt and  Equity.
b) Bond holder has an option to convert debt into equity on a fixed date.
c) The conversion price is pre-determined 
d) All  these


69) The advantages of convertible Bonds  are:
a) If the stock price is higher than prefixed conversion price, the investor would convert debt into Equity.
b) Company will have no debt  repayment
c) The Equity of the company will be strengthened
d) All these


70) Which of the followings are derivative products treated on stock   exchange?
a) Index features
b) Index options
c) Stock futures and options
d) All these


71) Provisions to invest in Equities  are:
a) Banks can invest in Equities upto 20% of their net owned   funds
b) Stock prices are highly  volatile
c) Banks prefer low risk investments
d) All these


72) The provision on Fll investments  are:
a) Foreign currency funds are converted into rupee for portfolio   investors.
b) Rupee funds with profits are converted into foreign currency for   repatriation
c) Flls are allowed to invest in debt market
d) All these


73) What is External Commercial Borrowings?
a) Indian companies can borrow on global market through Bank loan or issue of debt   paper.
b) The debt can be repaid by reconversion of    rupee funds into foreign currency
c) (a) and. (b) both
d) None of these


74) The guidelines for investment of foreign currency funds of Banks are?
a) FCNR deposits can be invested in overseas market and for domestic lending :n foreign currency.
b) Banks are permitted to borrow/invest in overseas market 50% of Tier-I   Capital.
c) (a) and (b) both
d) None of these


75) What is Export Earners Foreign Currency  Account?
a) Exporters are allowed to hold 100% export proceeds in a Current Account.   wtth
b) No interest is paid on such  deposits
c) (a) and (b) both
d) None of these


76) What is Gilts?
a) Securities issued by government or  Treasuries.
b) They do not have any credit Risk, 
c) (a) and (b) both   
d) None of these


77) SGL Account is:
a) Subsidiary General Ledger
b) It is maintained by public debt office of   RBI
c) Banks maintain exclusively government Securities Accounts 
d) All of  these


78) Which of the followings is  correct?
a) Counterparty is the other party to a   Transaction
b) Yield is internal rate of return where interest is also reinvested at original coupon rate.
c) Foreign currency deposits are denominated in  foreign currency
d) All of these


79) The features of FCNR deposit  are:
a) They are denominated either in USD, GBP, JPY or EURO, Can- Dollar and Aus Dollar.
b) The deposits are maintained by non-resident  Indians.
c) Interest on FCNR deposits is regulated by RBI
d) All of these


80) Broad money or M3 consists of  :
a) Currency in circulation
b) Demand and time deposits with   Banks
c) Deposits of Banks and other deposits with RBI
d) All of these


81) Monetary policy of RBI aims  at:
a) Controlling rate of inflation
b) Ensuring stability of financial market
c) Regulating money supply
d) All of these


82) The tools in the hands of RBI for direct control of  money supply are:
a) CRR
b) SLR
c) (a)-and (b) both
d) None of these


83) CRR is calculated on net Demand and Time liabilities which  contain:
a) Demand deposits and Time  deposits
b) Overseas Borrowings
c) Foreign outward remittances and other demand and time liabilities
d) All of   these


84) The Demand deposits include:
a) Current and Savings Deposits
b) Margin Money for Letter of  Credits
c) Overdue Fixed Deposits
d) All these


85) Other Demand and Time Liabilities  include:
a)Accrued Interest
b) Credit Balance in Suspense  Account
c) Any other liability
d) All these


86) In which of the following categories only 3% minimum CRR is required to be maintained?
a) Net Inter-Bank call borrowing/deposits where maturity does not exceed 14   days,
b) Credit Balance in ACU (Asian Currency Unit)  Accounts
c) Demand and Time liabilities in respect of off shore Banking units
d) None of these


87) Banks need not maintain CRR on  :
a) Paid up capital, reserves, retained profits, refinance from apex   institutions.
b) Excess provision for Income tax .
c) Claims received from DICGC/ECGC
d) All these


88) Which of the followings is  correct?
a) CRR need not be maintained on Inter-Bank term deposits of original maturity upto one year
b) RBI does not pay interest on CRR   Balance
c) The Demand and Time l iabilities as on the reporting Friday of second previous fortnight will be basis for CRR calculation
d) All these


89) SLR can be maintained in the form of following   Assets:
a) Cash Balance in excess of CRR  requirements
b) ,Gold at current market price
c)  Approved securities valued as per  RBI norms
d) All these


90) What is Liquidity Adjustment  Facility?
a) It is the mechanism whereby RBI lends funds to Banking sector through repo   instrument
b) This is used to monitor day to day market  liquidity
c) This is exclusively applicable to repo and reverse repo transactions with    RBI
d) All these


91) The features of Negotiated Dealing System  are:
a) This is a system where securities clearing against assured payment is handed by Clearing Corporation of India.
b) Physical delivery of  cheques are not  required.
c) All Inter-Bank Money Market deals are done through Negotiated Dealing   System
d) All the above


92) The feature of Real Time Gross Settlement System   are:
a) All Inter-Bank payments are settled  instantly.
b) Banks' Accounts with all the Branch offices of RBI are also    integrated.
c) Since it is instant payment system, Banks need to maintain adequate funds throughout the day.
d) All the above


93) Which of the following is  correct?
a) Asian currency unit is a mechanism for payment to/from members of Asian clearing   union.
b) Off shore Banking units render special Banking services only to    overseas customers.
c) SWIFT is a secure worldwide financial messaging system exclusive to    Banks.
d) All the above


94) What is DVP?
a) Delivery vesus Payment system where one account is debited and another account is credit at the same time.
b) In case of securities purchase funding account is debited and securities account is   credited.
c) This facilitates prompt settlement of security transactions.
d) All these



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