BFM- MCQ ON TREASURY RISK MANAGMENT

1) Leverage means ability of a business concern:
a) To with stand pressures in the times of   crisis
b) To meet its liabilities in  time
c) To borrow or build up assets on the basis of given capital
d) none of these


2) In case of banks, lev-erage is expressed by:
a) Return on Assets
b) Net NPA ratio
c) Capital adequacy ratio
d) Capital to outside liabilities
e) None of these


3) Treasury deals are normally done over phone or over a dealing screen_ The deal terms are-con-firmed in writing by
a) Front office
b) back office
c) middle office
d) any of  these


4) Delivery versus payment means one account is debited and another is credited:
a) on the same day
b) by next day
c) at the same time
d) none of these


5) lh Treasury Operations, the term 'carry' means
a) Interest cost of funds locked in a trading   position
b) Carrying forward the contract to next trading  period
c) Carrying forward the settlement to next day
d) none of these


6) "Marked to Market" means valuation of trading positions applying
a) Purchase price
b) current market value
c) current market value or purchase price whichever is lower
d) None of these


7) Mismatch refers to:
a) Difference in interest rates paid and  received
b) Difference in sale and purchase  price
c) Difference in duration of assets and liabilities
d) all  of these
e) None of these


8) Which of the following is a reason for importance of Treasury risk management
a) Adverse market movements may result in instant  losses
b) Treasury transactions are of high value needing relatively low   capital
c) Large size of transactions done at the sole discretion of    the Treasurer
d) Both (a) & (b) only
e) All of these


9) High leverage means:
a) Very low capital requirement
b) Very high capital requirement
c) Very high profits compared to  capital
d) Very high productivity
e) None of these


10) Which of the following is/are not a conventional tool of management control on a treasury function
a) Back office which checks all transactions of   dealers
b) Exposure limits for counterparties avoiding concentration  risk
c) Intra day and overnight ceiling on open positions and stop loss   limits
d) Value at risk and duration techniques
e) None of these


11) Which of the following is not a function of Back office of a treasury
a) Generating deals i.e. purchase and sale of foreign exchange, securities etc.
b) Settling the trade after verifying internal  controls
c) Obtaining independent confirmation of deal from the  counterparty
d) Verifying that rates / prices mentioned in the deal slip are conforming to the market rates at the time of the deal
e) None of these


12) Which of the following is responsible for ensuring compliance with various risk limits imposed by the Management and RBI as well as accuracy and objectivity of the transaction?
a) front office
b) back office
c) middle office
d) both (a) & (b) only
e) All of   these


13) Middle office in a treasury is responsible  for:
a) Validating deal wise information from accounting point of   view
b) Overall risk management and MIS
c) Both (a) & (b)
d) None of these

14) Default risk in Treasury means:
a) Failure of the borrowing bank in the call money market to repay the amount on due date to the lending bank
b) Possible failure of the counterparty to the transaction to deliver I settle their part of transaction
c) Both (a) & (b)
d) None of these


15) The exposure limits for counterparties are fixed on the basis of   counterparty's
a) net worth
b) market reputation
c) track record
d) size of treasury operations
e) all of these


16) The Exposure limits for counterparties  are:
a) Vary in relation to period of  exposure
b) Remain same irrespective of  period
c) Fixed only as per net worth irrespective  of period
d) none of these


17) In which of the following areas trading limits are not fixed by management?
a) limits on deal size
b) limits on open position
c) stop loss limits
d) all of these
e) None of these


18) Open Position refers to:
a) Trading positions where the buy / sell positions are not matched
b) Trading positions where the securities are bought in the open   market
c) Open market operations
d) none of these


19) Limit on open positions are fixed  because
a) There may be loss if there is adverse movement in   rates
b) There is 'carry' cost
c) Both (a) & (b)
d) None of these


20) Which of the following is incorrect regarding open position in   forex?
a) Position limits are prescribed currency wise as also for aggregate position in Rupees
b) There are separate limits for 'day light' and  'over night'
c) None of these


ANSWER SHEET-

1	C	2	C	3	B	4	C	5	A	6	B	7	C	8	E	9	A	10	D
11	A	12	D	13	B	14	C	15	E	16	A	17	E	18	A	19	C	20	C