BFM- MCQ ON TREASURY MANAGEMENT
1. Which of the following are the functions of a Treasury?
a) Maintaining adequate Cash Balance
b) Deploying surplus funds
c) Meeting fund requirement in case of short fall
d) All of these
2. The significance of Treasury management in case of Banks is:
a) To maintain CRR as per RBI guidelines
b) To meet SLR requirements
c) It is the function of liquidity management
d) All of these
3. Treasury management was earlier classified as:
a) A service centre
b) Fund management department
c) Investment centre
d) Core Business Division
4. Which of the following activities of a Bank the Treasury management is more relevant?
a) Deposit function
b) Asset liability management
c) (a) and (b) both
d) None of these
5. Which of the following are integrated activities of Treasury management?
a) Investment in securities
b) Foreign Exchange Business
c) (a) and (b) both
d) None of these
6. The Treasury management operations mainly deals with:
a) Short term funds flows
b) Long term fund flows
c) None of the above
d) All of these
7. For which of the following activities the Treasury management also deals with the long
term flows?
a) For the purpose of SLR requirements
b) Long term investments
c) Investment in Treasury Bills
d) All of these
8. What is integrated Treasury management services?
a) Money Market operations
b) Securities Market operations
c) Foreign Exchange operations
d) Integration of all these
9. Which of the followings has given new dimension to Treasury management operations?
a) Financial Sector reforms
b) Deregulation of interest rates
c) Convertibility of Rupee
d) All of these
10. Which of the following foreign exchange operations have been useful in Treasury management operations?
a) Arbitrage
b) Swaps
c) (a) & (5) both
d) None of these
11. Which of the followings are the sources of foreign currency funds for Banks?
a) NRI deposits
b) Cash Balance in EEFC Accounts
c) External Commercial Borrowings
d) All of these
12. What are The recent important development in financial market in India which have facilitated treasury management operations?
a) Instant payment and settlement system. -
b). Easy transfer of funds from securities market to money market.
c) Transfer of funds from one currency to another.
d) All of these
13. Integrated Treasury management can operate:
a) Across the sectors
b) Across the currency
c) (a) & (b) both
d) None of these
14. Integrated Treasury management helps in Integrated Risk management through:
a) use of derivatives
b) Money market instruments
c) Capital Market instruments
d) All of these
15. The functions of Derivatives are:
a) It is useful in providing flexibility to market products
b) It is an important tool for hedging market risk
c) (a) and (b)- both
d) None of these
16. The Treasury Transactions with customers are known as:
a) Merchant Banking Finance
b) Financial Market operations
c) Money Market operations
d) none of these
17. Generally, Customers use Treasury services of a Bank for the following purposes:
a) To Hedge export receivables
b) To raise foreign currency loans
c) Overseas investments
d) All of these
18. The driving forces of integrated Treasury management are:
a) Integrated cash flow management
b) Interest arbitrage
c) Risk management
d) All of these
19. The main functions of integrated Treasury management are:
a) To meet reserve requirements
b) Efficient Merchant Banking services
c) International cash flow
d) All of these
20. Under the Treasury management services, profits can be optimized through the combination of:
a) Forex market
b) Money market operations
c) Securities market operations
d) All of these
21. Which of the following is the function of integrated Treasury management?
a) Asset liability management in Banks
b) Risk management
c) (a) and (b) both
d) None of these
22.The Treasury management comprises of:
a) Funds management
b) Investment management
c) Trading in forex operations
d) All of these
23. Globalization is the process of:
a) Free flow of services and goods
b) Free capital flows among the nations
c) A minimum regulatory intervention d) All of these
24. Which of the following statements is correct?
a) Foreign capital flows involve direct and indirect investment which facilitates repatriation of returns.
b) The RBI regulates the capital flows from abroad.
c) (a) and (b) both d) None of these
25. Which of the following Departments of RBI has been renamed since January 2004?
a) Exchange Control Department b) Foreign Exchange Department
c) (a) and (b) both d) None of these 26.The process of globalization in India has directly influenced:
a) Interest rate b) Exchange rate c) (a) and (b) both d) None of these
27. Which of the following organizations have supported the financial market in the recent past?
a) Clearing Corporation of India Ltd.
b) National Securities Depository Corporation Ltd.
c) (a) and (b) both d) None of these
28. The growth of new institutions has helped the development of Treasury management operations by the process of:
a) Widening and deepening the debt market.
b) Minimizing counterparty risk
c) (a) and (b) both d) none of these
29. Which of the following instruments have been used to hedge interest and currency risks?
a) Swaps b) Forwards c) Options d) All of these
30. The RBI has allowed the Banks to borrow or invest in foreign currency subject to a ceiling of:
a) 25% of their tier-I capital.
b) US Dollar 10 Million or 50% of their tier-I-capital whichever is higher
c) (a) and (b) both d) All of these
31. Why Treasury activities are attractive?
a) These activities operate in a market which are almost free of credit risk. .b) It needsiess capital
c) (a) and (b) both d) None of these
32. Which of the following is not true regarding Treasury operations?
a) The operational cost is very low.
b) The activities can be managed by any of the staff.
c) It trades in narrow spreads. d) All of these 33.What is spread?
a) The difference between buying and selling rates is spread.
b) This is profit for the Bank.
c) It is a source of fee based income d) All of these 34.Which of the following is correct?
a) Banks buy foreign currency mainly from exporters.
b) Banks sell foreign currency in the Inter-Bank market
c) Banks also sell foreign currency to importers d) All of these
35. . W hich of the following is not correct? The Banks do not buy from Inter-Bank market.
a) Banks may use foreign currency in squaring up the foreign exchange transactions
b) Banks generally do not maintain large stock of foreign currency for merchant Banking activities.
c) The Banks prefer to buy and sell in the Inter-Bank market.
36. What is open position?
a) The overbought or oversold position at the end of the day.
b) When transactions are not backed by the proper securities
c) (a) and (b) both d) None of the above 37.The features of open position are:
a) It involves exchange risk
b) Banks maintain limited open position
c) The exchange rate may change overnight d) All of these 38.Investment opportunities available for a Ba-nk consists of:
a) Govt. securities
b) Investment in strategic Assets such as subsidiary and associate companies
c) Corporate Debt market d) All of these
39. The Treasury profits in large quantity can be derived from the following market operations:
a) Buying and Selling b) Borrowing and Lending
c) Investment in Tradable Assets d) All of these
40. What is interest arbitrage?
a) A favourable position where interest rates are different across the overseas market.
b) The Treasury may buy or sell in the Inter-Bank market depending on the interest -rates in the Home Country and Foreign market.
c) (a) and (b) both d) none of these 41.Interest arbitrage can be done through:
a) Borrowing in money market and investment in short term securities
b) Borrowing in one currency and lending in another currency
c) (a) or (b) d) None of these 42.The features of Trading Activity are:
a) It is speculative activity.
b) The profit depends on favourable movements of price during the interval period of Buying and Selling.
c) The open position on Treasury is known as proprietary or trading position
d) All of the above
43. In which of the following conditions, the trading activity can be profitable if an investment is made in US Dollars?
a) When US Dollar is sold at higher rate.
b) When US Dollar is sold at lower rate.
c) When US Dollar price is equivalent to Rupee price. d) All of these
44. The Trading in currencies and securities are subject to the following Risks:
a) Price Risk b) Market Risk c) Exchange Risk d) Any of these 45.Banks may use Derivatives for:
a) Trading activities for treasury b) Risk management
c) (a) & (b) both d) none of these
46. The purpose of selling structured loans to corporate by treasury is:
a) Reduction in interest cost b) Minimising Exchange Risk
c) (a) and (b) both d) Any of the above
47. If a company buy a forward rate agreement to fix interest rate for an instrument, what can be the consequences?
a) The Treasury may offer a currency swap.
b) It will reduce the interest cost to the company.
c) Treasury will have a profit margin d) All of these
48. A specialized independent Bank branch for Treasury operations have the following
.advantages:
a) It can act as authorized dealer.
b) It can participate in clearing and settlement system directly.
c) It can maintain own accounting system d) All of these 49.The Treasury operations may have the following departments:
a) Dealing Room b) Back office c) Middle office d) All of these
50. What is a dealing room?
a) It is a front office. b) It directly buys and sells in the market
b) The dealers are specialized in various transactions d) All of these
51. The categories of Dealers in the Dealing Room can be:
a) Chief Dealer (Incharge of the office) b) Corporate Dealer
c) Specialised Dealer d) All of these
52. Which of the following statements is correct regarding dealing room?
a) The securities dealer deals only in secondary market.
b) A dealer may also participate in the auction of government securities and Treasury Bills.
c) The primary market comprises of new issues of non govt. debt paper
d) All the above
53. The functions of Back office are:
a) It verifies and settles the deals
b) It maintains proper record of Book Keeping
c) It submits financial returns of RBI d) All of these 54.Which of the following accounts are maintained by the Back Office?
a) Nostro Account b) Security Account with RBI
c) Demat, Account with Depository participant d) All of these
55. Which of the following is foreign currency account with correspondent bank?
a) Nostro Account b) Vostro Account c) Loro Account d) All of these 56.The Treasury is required to maintain adequate margin for settlement with the-
e) RBI b) Clearing corporation c) Foreign Department d) None 57.What is settlement?
a) It is the process of receipts and payments for the deals made by the dealers
b) All payments and receipts should take place on value date
c) (a) and (b) both d) None of these
58.A delay in settlement would result in:
a) Financial loss to the Bank b) Default by the Bank
c) Adverse affect on Banks reputation d) All of these
59. Middle office is responsible for:
a) It provides management information
b) It also implements risk management system
c) It monitors exposure limits and stop loss limits d) All of these
60. How the arbitrage is beneficial?
a) When the traders play in different markets simultaneously taking advantage of exchange rate or interest rate differentials
b) Profit accrue as market are imperfect
c) (a) and (b) both' d) All of these
61. A Derivative is a financial contract:
a) To buy or sell at a future date
b) The price is based on market price of an underlying Asset
c) It can be with or without obligation to exercise the contract. d) All of these 62.The underlying asset may be:
a) Financial Asset b) Real Asset c) (a) or (b) both d) None of these
63. Which of the following is not a Real Asset?
a) Commodity b) Bonds c) Metals d) Oil
64. What is Leveraging?
a) It is the process of building up large volume of Business on relatively small eapitai.
b) A difference between income and cost of funds
c) It is like spread d) None of these 65.Which of the following are tradable Assets?
a) Govt. securities b) Commercial paper c) Derivatives d) All of these
66. What is short sale?
a) When volume of sale is relatively less.
b) Selling on Asset which is yet to be purchased.
c) It is a speculation d) None of these 67.The features of a D-mat Account are:
a) It is a process of holding securities in electronic (de-materialised) form
b) Transfer of securities can be affected by credit or debit the D-mat Account directly
c) There is no physical movement of documents. d) All of these
68. What is integrated activities in the Treasury operations?
a) Use of derivatives
b) Participation in money market
c) Merchant Banking activities
d) A combination of the above
ANSWER SHEET-
a) Maintaining adequate Cash Balance
b) Deploying surplus funds
c) Meeting fund requirement in case of short fall
d) All of these
2. The significance of Treasury management in case of Banks is:
a) To maintain CRR as per RBI guidelines
b) To meet SLR requirements
c) It is the function of liquidity management
d) All of these
3. Treasury management was earlier classified as:
a) A service centre
b) Fund management department
c) Investment centre
d) Core Business Division
4. Which of the following activities of a Bank the Treasury management is more relevant?
a) Deposit function
b) Asset liability management
c) (a) and (b) both
d) None of these
5. Which of the following are integrated activities of Treasury management?
a) Investment in securities
b) Foreign Exchange Business
c) (a) and (b) both
d) None of these
6. The Treasury management operations mainly deals with:
a) Short term funds flows
b) Long term fund flows
c) None of the above
d) All of these
7. For which of the following activities the Treasury management also deals with the long
term flows?
a) For the purpose of SLR requirements
b) Long term investments
c) Investment in Treasury Bills
d) All of these
8. What is integrated Treasury management services?
a) Money Market operations
b) Securities Market operations
c) Foreign Exchange operations
d) Integration of all these
9. Which of the followings has given new dimension to Treasury management operations?
a) Financial Sector reforms
b) Deregulation of interest rates
c) Convertibility of Rupee
d) All of these
10. Which of the following foreign exchange operations have been useful in Treasury management operations?
a) Arbitrage
b) Swaps
c) (a) & (5) both
d) None of these
11. Which of the followings are the sources of foreign currency funds for Banks?
a) NRI deposits
b) Cash Balance in EEFC Accounts
c) External Commercial Borrowings
d) All of these
12. What are The recent important development in financial market in India which have facilitated treasury management operations?
a) Instant payment and settlement system. -
b). Easy transfer of funds from securities market to money market.
c) Transfer of funds from one currency to another.
d) All of these
13. Integrated Treasury management can operate:
a) Across the sectors
b) Across the currency
c) (a) & (b) both
d) None of these
14. Integrated Treasury management helps in Integrated Risk management through:
a) use of derivatives
b) Money market instruments
c) Capital Market instruments
d) All of these
15. The functions of Derivatives are:
a) It is useful in providing flexibility to market products
b) It is an important tool for hedging market risk
c) (a) and (b)- both
d) None of these
16. The Treasury Transactions with customers are known as:
a) Merchant Banking Finance
b) Financial Market operations
c) Money Market operations
d) none of these
17. Generally, Customers use Treasury services of a Bank for the following purposes:
a) To Hedge export receivables
b) To raise foreign currency loans
c) Overseas investments
d) All of these
18. The driving forces of integrated Treasury management are:
a) Integrated cash flow management
b) Interest arbitrage
c) Risk management
d) All of these
19. The main functions of integrated Treasury management are:
a) To meet reserve requirements
b) Efficient Merchant Banking services
c) International cash flow
d) All of these
20. Under the Treasury management services, profits can be optimized through the combination of:
a) Forex market
b) Money market operations
c) Securities market operations
d) All of these
21. Which of the following is the function of integrated Treasury management?
a) Asset liability management in Banks
b) Risk management
c) (a) and (b) both
d) None of these
22.The Treasury management comprises of:
a) Funds management
b) Investment management
c) Trading in forex operations
d) All of these
23. Globalization is the process of:
a) Free flow of services and goods
b) Free capital flows among the nations
c) A minimum regulatory intervention d) All of these
24. Which of the following statements is correct?
a) Foreign capital flows involve direct and indirect investment which facilitates repatriation of returns.
b) The RBI regulates the capital flows from abroad.
c) (a) and (b) both d) None of these
25. Which of the following Departments of RBI has been renamed since January 2004?
a) Exchange Control Department b) Foreign Exchange Department
c) (a) and (b) both d) None of these 26.The process of globalization in India has directly influenced:
a) Interest rate b) Exchange rate c) (a) and (b) both d) None of these
27. Which of the following organizations have supported the financial market in the recent past?
a) Clearing Corporation of India Ltd.
b) National Securities Depository Corporation Ltd.
c) (a) and (b) both d) None of these
28. The growth of new institutions has helped the development of Treasury management operations by the process of:
a) Widening and deepening the debt market.
b) Minimizing counterparty risk
c) (a) and (b) both d) none of these
29. Which of the following instruments have been used to hedge interest and currency risks?
a) Swaps b) Forwards c) Options d) All of these
30. The RBI has allowed the Banks to borrow or invest in foreign currency subject to a ceiling of:
a) 25% of their tier-I capital.
b) US Dollar 10 Million or 50% of their tier-I-capital whichever is higher
c) (a) and (b) both d) All of these
31. Why Treasury activities are attractive?
a) These activities operate in a market which are almost free of credit risk. .b) It needsiess capital
c) (a) and (b) both d) None of these
32. Which of the following is not true regarding Treasury operations?
a) The operational cost is very low.
b) The activities can be managed by any of the staff.
c) It trades in narrow spreads. d) All of these 33.What is spread?
a) The difference between buying and selling rates is spread.
b) This is profit for the Bank.
c) It is a source of fee based income d) All of these 34.Which of the following is correct?
a) Banks buy foreign currency mainly from exporters.
b) Banks sell foreign currency in the Inter-Bank market
c) Banks also sell foreign currency to importers d) All of these
35. . W hich of the following is not correct? The Banks do not buy from Inter-Bank market.
a) Banks may use foreign currency in squaring up the foreign exchange transactions
b) Banks generally do not maintain large stock of foreign currency for merchant Banking activities.
c) The Banks prefer to buy and sell in the Inter-Bank market.
36. What is open position?
a) The overbought or oversold position at the end of the day.
b) When transactions are not backed by the proper securities
c) (a) and (b) both d) None of the above 37.The features of open position are:
a) It involves exchange risk
b) Banks maintain limited open position
c) The exchange rate may change overnight d) All of these 38.Investment opportunities available for a Ba-nk consists of:
a) Govt. securities
b) Investment in strategic Assets such as subsidiary and associate companies
c) Corporate Debt market d) All of these
39. The Treasury profits in large quantity can be derived from the following market operations:
a) Buying and Selling b) Borrowing and Lending
c) Investment in Tradable Assets d) All of these
40. What is interest arbitrage?
a) A favourable position where interest rates are different across the overseas market.
b) The Treasury may buy or sell in the Inter-Bank market depending on the interest -rates in the Home Country and Foreign market.
c) (a) and (b) both d) none of these 41.Interest arbitrage can be done through:
a) Borrowing in money market and investment in short term securities
b) Borrowing in one currency and lending in another currency
c) (a) or (b) d) None of these 42.The features of Trading Activity are:
a) It is speculative activity.
b) The profit depends on favourable movements of price during the interval period of Buying and Selling.
c) The open position on Treasury is known as proprietary or trading position
d) All of the above
43. In which of the following conditions, the trading activity can be profitable if an investment is made in US Dollars?
a) When US Dollar is sold at higher rate.
b) When US Dollar is sold at lower rate.
c) When US Dollar price is equivalent to Rupee price. d) All of these
44. The Trading in currencies and securities are subject to the following Risks:
a) Price Risk b) Market Risk c) Exchange Risk d) Any of these 45.Banks may use Derivatives for:
a) Trading activities for treasury b) Risk management
c) (a) & (b) both d) none of these
46. The purpose of selling structured loans to corporate by treasury is:
a) Reduction in interest cost b) Minimising Exchange Risk
c) (a) and (b) both d) Any of the above
47. If a company buy a forward rate agreement to fix interest rate for an instrument, what can be the consequences?
a) The Treasury may offer a currency swap.
b) It will reduce the interest cost to the company.
c) Treasury will have a profit margin d) All of these
48. A specialized independent Bank branch for Treasury operations have the following
.advantages:
a) It can act as authorized dealer.
b) It can participate in clearing and settlement system directly.
c) It can maintain own accounting system d) All of these 49.The Treasury operations may have the following departments:
a) Dealing Room b) Back office c) Middle office d) All of these
50. What is a dealing room?
a) It is a front office. b) It directly buys and sells in the market
b) The dealers are specialized in various transactions d) All of these
51. The categories of Dealers in the Dealing Room can be:
a) Chief Dealer (Incharge of the office) b) Corporate Dealer
c) Specialised Dealer d) All of these
52. Which of the following statements is correct regarding dealing room?
a) The securities dealer deals only in secondary market.
b) A dealer may also participate in the auction of government securities and Treasury Bills.
c) The primary market comprises of new issues of non govt. debt paper
d) All the above
53. The functions of Back office are:
a) It verifies and settles the deals
b) It maintains proper record of Book Keeping
c) It submits financial returns of RBI d) All of these 54.Which of the following accounts are maintained by the Back Office?
a) Nostro Account b) Security Account with RBI
c) Demat, Account with Depository participant d) All of these
55. Which of the following is foreign currency account with correspondent bank?
a) Nostro Account b) Vostro Account c) Loro Account d) All of these 56.The Treasury is required to maintain adequate margin for settlement with the-
e) RBI b) Clearing corporation c) Foreign Department d) None 57.What is settlement?
a) It is the process of receipts and payments for the deals made by the dealers
b) All payments and receipts should take place on value date
c) (a) and (b) both d) None of these
58.A delay in settlement would result in:
a) Financial loss to the Bank b) Default by the Bank
c) Adverse affect on Banks reputation d) All of these
59. Middle office is responsible for:
a) It provides management information
b) It also implements risk management system
c) It monitors exposure limits and stop loss limits d) All of these
60. How the arbitrage is beneficial?
a) When the traders play in different markets simultaneously taking advantage of exchange rate or interest rate differentials
b) Profit accrue as market are imperfect
c) (a) and (b) both' d) All of these
61. A Derivative is a financial contract:
a) To buy or sell at a future date
b) The price is based on market price of an underlying Asset
c) It can be with or without obligation to exercise the contract. d) All of these 62.The underlying asset may be:
a) Financial Asset b) Real Asset c) (a) or (b) both d) None of these
63. Which of the following is not a Real Asset?
a) Commodity b) Bonds c) Metals d) Oil
64. What is Leveraging?
a) It is the process of building up large volume of Business on relatively small eapitai.
b) A difference between income and cost of funds
c) It is like spread d) None of these 65.Which of the following are tradable Assets?
a) Govt. securities b) Commercial paper c) Derivatives d) All of these
66. What is short sale?
a) When volume of sale is relatively less.
b) Selling on Asset which is yet to be purchased.
c) It is a speculation d) None of these 67.The features of a D-mat Account are:
a) It is a process of holding securities in electronic (de-materialised) form
b) Transfer of securities can be affected by credit or debit the D-mat Account directly
c) There is no physical movement of documents. d) All of these
68. What is integrated activities in the Treasury operations?
a) Use of derivatives
b) Participation in money market
c) Merchant Banking activities
d) A combination of the above
ANSWER SHEET-
1
|
D
|
2
|
D
|
3
|
A
|
4
|
B
|
5
|
C
|
6
|
A
|
7
|
A
|
8
|
D
|
9
|
D
|
10
|
C
|
11
|
D
|
12
|
D
|
13
|
C
|
14
|
A
|
15
|
C
|
16
|
A
|
17
|
D
|
18
|
D
|
19
|
D
|
20
|
D
|
21
|
C
|
22
|
D
|
23
|
D
|
24
|
C
|
25
|
B
|
26
|
C
|
27
|
C
|
28
|
C
|
29
|
D
|
30
|
B
|
31
|
C
|
32
|
B
|
33
|
A
|
34
|
D
|
35
|
A
|
36
|
A
|
37
|
D
|
38
|
D
|
39
|
D
|
40
|
C
|
41
|
C
|
42
|
D
|
43
|
A
|
44
|
D
|
45
|
C
|
46
|
C
|
47
|
D
|
48
|
D
|
49
|
D
|
50
|
D
|
51
|
D
|
52
|
D
|
53
|
D
|
54
|
D
|
55
|
A
|
56
|
B
|
57
|
C
|
58
|
D
|
59
|
D
|
60
|
C
|
61
|
D
|
62
|
C
|
63
|
B
|
64
|
A
|
65
|
D
|
66
|
B
|
67
|
D
|
68
|
D
|
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