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Question 1 of 10
1. Question
2 points
Which of the following statements are true regarding the Foreign Currency Non-Resident (FCNR) Accounts:
Correct
ANSWER – (b)
Foreign Currency Non-Resident (FCNR) Account can be opened only by NRI’s/PIO’s. This account can be maintained in any freely convertible foreign currency but only in the form of term/fixed deposits. The interest and principal are non-taxable and freely repatriable.
Incorrect
ANSWER – (b)
Foreign Currency Non-Resident (FCNR) Account can be opened only by NRI’s/PIO’s. This account can be maintained in any freely convertible foreign currency but only in the form of term/fixed deposits. The interest and principal are non-taxable and freely repatriable.
Question 2 of 10
2. Question
2 points
The term “Nostro Account” was recently in the news is related to:
(i) It is an account that one bank holds in another bank
(ii) It is used to facilitate international transactions
Select the correct answer using the code given below:
Correct
ANSWER – . (c)
Nostro account refers to an account that a bank holds in a foreign currency in another bank. Nostro account and vostro account refer to the same thing from a different perspective. For example, Bank X has an account with Bank Y in Bank Y’s home currency. To Bank X, that is a nostro account, meaning “our account on your books,” while to Bank Y, it is a vostro, meaning “your account on our books.” These accounts are used to facilitate foreign exchange and international trade transactions.
Incorrect
ANSWER – . (c)
Nostro account refers to an account that a bank holds in a foreign currency in another bank. Nostro account and vostro account refer to the same thing from a different perspective. For example, Bank X has an account with Bank Y in Bank Y’s home currency. To Bank X, that is a nostro account, meaning “our account on your books,” while to Bank Y, it is a vostro, meaning “your account on our books.” These accounts are used to facilitate foreign exchange and international trade transactions.
Question 3 of 10
3. Question
2 points
The term “SWIFT” is sometimes seen in the news, is related to:
Correct
ANSWER – (b)
SWIFT stands for the ‘Society for Worldwide Interbank Financial Telecommunications’. It is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes. SWIFT code is an 8 digit or 11- digit code and is interchangeably also called Bank Identifier Code (BIC).
Incorrect
ANSWER – (b)
SWIFT stands for the ‘Society for Worldwide Interbank Financial Telecommunications’. It is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes. SWIFT code is an 8 digit or 11- digit code and is interchangeably also called Bank Identifier Code (BIC).
Question 4 of 10
4. Question
2 points
Which of the following investors/ agencies can purchase government of India securities/bonds?
Correct
ANSWER – (d)
Incorrect
ANSWER – (d)
Question 5 of 10
5. Question
2 points
Which of the following is the largest holder of Government securities?
Correct
ANSWER – (a)
As commercial banks are required to keep SLR (cash, gold, government securities) of 18.25% , they keep the maximum percent of government securities. Out of cash, gold an
government securities, the government securities give the best returns (interest), so they prefer this instrument. Cooperative banks also keep government securities under SLR but since cooperative banks overall share in deposit and lending is around 10 percent of the Scheduled commercial banks, so commercial banks have the highest share of government securities.
Incorrect
ANSWER – (a)
As commercial banks are required to keep SLR (cash, gold, government securities) of 18.25% , they keep the maximum percent of government securities. Out of cash, gold an
government securities, the government securities give the best returns (interest), so they prefer this instrument. Cooperative banks also keep government securities under SLR but since cooperative banks overall share in deposit and lending is around 10 percent of the Scheduled commercial banks, so commercial banks have the highest share of government securities.
Question 6 of 10
6. Question
2 points
Consider the following statements regarding “State Development Loans”
(i) It is a Government security
(ii) RBI manages the public debt of states
(iii) It can be used under SLR by banks
Select the correct answer using the code given below:
Correct
ANSWER : (d)
Incorrect
ANSWER : (d)
Question 7 of 10
7. Question
2 points
Which of the following statements are true regarding “Cash Management Bills”?
(i) Issued by Central Government and not by state governments
(ii) It is used to fund fiscal deficit
(iii) It can be used for temporary mismatches in the cash flow of the government
Select the correct answer using the code given below:
Correct
ANSWER – (d)
In 2010, Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs). It is not used to fund the Fiscal deficit but is used to meet the temporary mismatches in the cash flow of the Government of India. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days
Incorrect
ANSWER – (d)
In 2010, Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs). It is not used to fund the Fiscal deficit but is used to meet the temporary mismatches in the cash flow of the Government of India. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days
Question 8 of 10
8. Question
2 points
Which of the following statements will be true if the inflation in the economy is increasing?
(i) Bond price will decrease
(ii) Bondholders will loose
(iii) The yield on bonds will increase
Select the correct answer using the code given below:
Correct
ANSWER – (d)
A bond (debt paper) holder is expected to get a fix interest regularly and principal at maturity. But if the inflation in the economy starts increasing the price of the bond decreases (because now the actual value of the principal and interest which the bondholder will get will be of less value) and bondholders lose. When the price of the bond decreases in the market, the person who will purchase the bond will have to pay less price and hence he will get more return/yield. (The interest rate on the bond remains fixed but its price fluctuates in the market and hence the return also fluctuates. If the market price of the bond is low, then the return/yield on the bond will be high. This is because the person who will purchase the bond will have to pay less price to get the same bond).
Incorrect
ANSWER – (d)
A bond (debt paper) holder is expected to get a fix interest regularly and principal at maturity. But if the inflation in the economy starts increasing the price of the bond decreases (because now the actual value of the principal and interest which the bondholder will get will be of less value) and bondholders lose. When the price of the bond decreases in the market, the person who will purchase the bond will have to pay less price and hence he will get more return/yield. (The interest rate on the bond remains fixed but its price fluctuates in the market and hence the return also fluctuates. If the market price of the bond is low, then the return/yield on the bond will be high. This is because the person who will purchase the bond will have to pay less price to get the same bond).
Question 9 of 10
9. Question
2 points
The price of government securities is influenced by which of the following?
(i) Interest rate in the economy
(ii) Liquidity in the market
(iii) Developments in forex, money and capital markets
Select the correct answer using the code given below:
Correct
ANSWER – (d)
When the interest rate moves up in the economy, government securities (bonds) prices goes down.
Incorrect
ANSWER – (d)
When the interest rate moves up in the economy, government securities (bonds) prices goes down.
Question 10 of 10
10. Question
2 points
Which one of the following statements correctly describes the meaning of legal tender money?
Correct
ANSWER – b)
As per the RBI Act 1934, Section 26, rupee notes (and coins) are legal tenders. It means that notes and coins cannot be refused by any person of the country for payment/discharge of debt.
Incorrect
ANSWER – b)
As per the RBI Act 1934, Section 26, rupee notes (and coins) are legal tenders. It means that notes and coins cannot be refused by any person of the country for payment/discharge of debt.
