Question 1

In borrowing and lending of federal funds, the federal funds rate is result of function between
A)assets and liability
B)cost and marketing
C)supply and demand
D)income and expense

Accepted Answer

The federal funds rate is determined by the supply and demand for federal funds, which are reserves held at the Federal Reserve that banks can lend to each other overnight.

Question 2

The demand for heavy loans can cause
A)excess funds for banks
B)deficiencies for banks
C)organized reservation
D)competitive reservations

Accepted Answer

The demand for heavy loans can lead to deficiencies for banks as they may not have enough reserves to meet the demand, potentially leading to a shortage of available funds.

Question 3

The agreement which incurs the transaction between two parties and promise held that second party will sell security at specific maturity is classified as
A)repurchasing commercial notes
B)repurchase bills
C)purchase agreement
D)reverse repurchase agreement

Accepted Answer

A reverse repurchase agreement is a transaction in which one party sells securities to another with the promise to repurchase them at a specific date and price, effectively a loan secured by the securities.

Question 4

Which among the following is correct regarding BPLR or bench mark prime lending rate?
A)It is lowest interest rate below PLR charged by a bank from the best customer of the financial year
B)It is highest interest rate above PLR charged by a bank from the any customer of the financial year
C)Both (a) & (b)
D)None of the above

Accepted Answer

BPLR is the lowest interest rate below PLR charged by a bank from the best customer of the financial year.

Question 5

Which among the following coined the term "Second generation Reforms"?
A)World Bank
B)International Monetary Fund
C)Reserve bank of India
D)SBI

Accepted Answer

The answer of Which among the following coined the term...

Question 6

The commercial paper issued with low interest rate thus the commercial paper are categorized as
A)payables rating
B)commercial rating
C)poor credit rating
D)better credit rating

Accepted Answer

Commercial papers issued at low interest rates indicate that the issuer has a high credit quality, meaning they are considered a better credit risk, which translates to a better credit rating. This is because investors accept lower interest rates for entities they believe are less likely to default.

Question 7

In primary markets, first time issued shares to be publicly traded in stock markets is considered as
A)traded offering
B)public markets
C)issuance offering
D)initial public offering

Accepted Answer

Initial Public Offering (IPO) is the process through which a private company issues its first shares of stock to the public for the first time.

Question 8

Transaction cost of trading of financial instruments in centralized market is classified as
A)flexible costs
B)low transaction costs
C)high transaction costs
D)constant costs

Accepted Answer

Centralized markets typically offer lower transaction costs due to their structured and efficient trading systems, which streamline the process and reduce the expenses associated with trading financial instruments.

Question 9

Stocks or shares that are sold to investors without transacting through financial institutions are classified as
A)direct transfer
B)indirect transfer
C)global transfer
D)pension transfer

Accepted Answer

Direct transfer refers to the sale of stocks or shares directly from the issuer to the investor, bypassing financial intermediaries like banks or brokers. This method is often used in private placements or direct public offerings.

Question 10

Type of financial security which have linked payoff to another issued security is classified as
A)linked security
B)derivative security
C)payable security
D)non-issuing security

Accepted Answer

Derivative securities derive their value from the value of another security or asset.

Question 11

In primary markets, property of shares which made it easy to sell newly issued security is considered as
A)increased liquidity
B)decreased liquidity
C)money flow
D)large funds

Accepted Answer

Increased liquidity in primary markets makes it easier to sell newly issued securities because it implies a higher level of interest and activity in those securities, facilitating their sale.

Question 12

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

Accepted Answer

Certificates of deposit that are more negotiable are considered more liquid because they can be easily bought or sold in the market without significantly affecting their price, making them readily convertible into cash.

Question 13

Commercial paper issued with low interest rate thus commercial paper are categorized as
A)payables rating
B)commercial rating
C)poor credit rating
D)better credit rating

Accepted Answer

Commercial paper issued with a low interest rate indicates that the issuer has a high credit quality, as investors accept lower returns due to the lower risk of default. This is why it is associated with a better credit rating.

Question 14

In borrowing and lending of federal funds, federal funds rate is result of function between
A)assets and liability
B)cost and marketing
C)supply and demand
D)income and expense

Accepted Answer

The federal funds rate is determined by the supply and demand for overnight loans of reserves held at the Federal Reserve banks.

Question 15

A "hybrid" fund is one that:
A)invests in both bonds and stocks
B)started as a closed-end investment company, but changed to a mutual fund
C)has different "loads" for different classes of investors in the fund
D)can serve as an investment vehicle, but also provides check-writing privileges.

Accepted Answer

The answer of A "hybrid" fund is one that:
A)invests in...

Question 16

A mutual fund that invests solely in stocks would be categorized as a/an:
A)bond fund
B)fixed income fund
C)money market fund
D)equity fund

Accepted Answer

The answer of A mutual fund that invests solely in...

Question 17

A large number (about 25%) of long-term mutual funds are _____________ funds, buying securities in proportions similar to those of a major stock index.
A)small cap
B)large cap
C)fixed income
D)index

Accepted Answer

Index funds aim to replicate the performance of a specific market index by buying securities in proportions similar to those of the index, making them a popular choice for long-term investments.

Question 18

The bulk of the nation's money supply is created within the private banking system and is sometimes called:
A)inside money
B)net money
C)base money
D)outside money

Accepted Answer

The answer of The bulk of the nation's money supply...

Question 19

A type of bank account designed to compete with money market mutual funds, and having limited check-writing services, is known as:
A)wholesale CDs
B)demand deposit
C)repurchase agreement
D)NOW account

Accepted Answer

The answer of A type of bank account designed to...

Question 20

__________would encompass fees received by the bank, but not revenues coming from interest charges on loans.
A)Net interest margin
B)Spread
C)Non interest income
D)Non interest expense

Accepted Answer

The answer of __________would encompass fees received by the bank,...

Quiz 4: Financial Markets and Instruments

In borrowing and lending of federal funds, the federal funds rate is result of function between

The demand for heavy loans can cause

The agreement which incurs the transaction between two parties and promise held that second party will sell security at specific maturity is classified as

Which among the following is correct regarding BPLR or bench mark prime lending rate?

Which among the following coined the term "Second generation Reforms"?

The commercial paper issued with low interest rate thus the commercial paper are categorized as

In primary markets, first time issued shares to be publicly traded in stock markets is considered as

Transaction cost of trading of financial instruments in centralized market is classified as

Stocks or shares that are sold to investors without transacting through financial institutions are classified as

Type of financial security which have linked payoff to another issued security is classified as

In primary markets, property of shares which made it easy to sell newly issued security is considered as

Liquidity status of certificate of deposit which is more negotiable is considered as

Commercial paper issued with low interest rate thus commercial paper are categorized as

In borrowing and lending of federal funds, federal funds rate is result of function between

A "hybrid" fund is one that:

A mutual fund that invests solely in stocks would be categorized as a/an:

A large number (about 25%) of long-term mutual funds are _____________ funds, buying securities in proportions similar to those of a major stock index.

The bulk of the nation's money supply is created within the private banking system and is sometimes called:

A type of bank account designed to compete with money market mutual funds, and having limited check-writing services, is known as:

__________would encompass fees received by the bank, but not revenues coming from interest charges on loans.