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Internal test -3 T.Y.B.Com. Business Economics Paper III Module-3 Financial Markets Total 10 questions for 10 marks Time limit 10 minutes Correct answer is in bold letters and underlined A) Money market Note :- Ask any 2 questions for 2 marks 1. _____________refers to the net work of institutions, agencies and individuals which deal in lending and borrowings of short term funds. Foreign exchange market Money market Capital market None of the above 2. The transactions that take place in the money market are __________volume involving large amounts. High Low Medium None of the above 3. ___________is the most important constituent of Indian money market RBI SBI Commercial bank All of the above 4. __________perform the function of discounting and rediscounting the commercial banks, treasury bills etc. Discount house Corporates Banks None of the above 5. __________market deals in many instruments like call money, treasury bills, commercial bills, CDs, CPs, repos and so on. Money market Capital market Foreign exchange market None of the above 6. The Narasimham committee ________recommended that call/notice money market in India should be made purely an inter-bank market. a) 1991 b) 1998 c) a+ b d) none of the above 7. The RBI holds about ______% of the outstanding treasury bills. 90% 100% 50% None of the above 8. Treasury bills are tradable in __________market which is quite active. Secondary market

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Primary market Both None of the above 9. At present government of India issues ___________ through auctions namely 91 days, 182 days and 364 days. Commercial bills Treasury bills Commercial paper None of the above 10. MMMFs are introduced by the RBI in April 1994 April 1996 April 1992 None of the above 11. _________market, borrowing and lending of funds are carried out just for one day. Repo market Call money market Treasury bill market Commercial bill market 12. _____________market. Is a money market which helps in collateralized short term borrowing and lending through sale/purchase operations in debt instruments. Commercial bill market Repo market Call money market None of the above 13. The certificate deposit can be issued only by the commercial banks in multiples of Rs.______ 50 lacks 25 lacks 1 lacs None of the above 14. Indigenous banks are _____________banks a) Organized banks b) Unorganized banks c) both a & bll d) none of the above 15. ___________is an unsecured money market instrument in the form of a promissory note with fixed maturity. Commercial paper Certificate deposit Treasury bill None of the above 16. Under __________, the seller gets immediate funds by selling specified securities with an agreement to repurchase the same at a maturity decided future date and price. Repo Mutual fund Commercial paper None of the above

17. In the year 1969 ________commercial banks were nationalized. 20 16 14 None of the above 18. In the year 1980 ________commercial banks were nationalized. 10 8 5 6 19. _________are some sort of mutual funds because their dealings are restricted only to the members. Chit funds Nidhis Commercial banks None of the above 20. The policy of using repos and reverse repos is called __________ Liquidity adjustment facility Cash reserves Discount None of the above 21. _________were set up to facilitate quicker recovery of loans arrears. High court District court Special recovery tribunal None of the above B. Capital Market Note: Ask any 2 questions for 2 marks 22. ____________market is the market for long term funds Money market Capital market Foreign exchange market None of the above 23. ___________deals in government and semi government securities. Industrial securities market Gilt edged market Repo market None of the above 24. The new issues market is known as ____________ Primary market Secondary market Repo market None of the above

25. The old issues market is known as _________

Primary market Secondary market

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Repo market None of the above 26. __________market refers to the market for shares and debentures of old and new companies. a) Industrial securities market b) Foreign exchange market c) a+b d) none of the above 27. CRISIL refers to Credit ranking information services of India Limited Credit rating infotic services of India Limited Credit Rating Information Services of India Limited None of the above 28. STC refers to: Service Trading Corporation of India Security Transmission Corporation of India Security Trading Centre of India Securities Trading Corporation of India 29. SEBI refers to: Securities & Exchange Board of India Stock Exchange Board of India Securities Enabled Board of India None of the above 30. SEBI has been entrusted with the following: To regulate all the above merchant banks To supervise working of mutual funds To oversee the working of stock exchanges in India All the above 31. _________is known as Golden Triangle Information technology, railways & entertainment Oil sector, railways & education Information technology, telecommunications and entertainment All the above 33.___________are associations or trusts of public members who wish to make investment in the financial instruments of the business sector for the mutual benefit of its members. Shares Chit funds Mutual funds None of the above 32. ____________mutual funds are funds with contributions from members collected during a definite frame of a few days to a few months. Close ended Open ended Domestic None of the above 33. ___________mutual funds are purchased and sold through out the year and a member can enter the scheme any time

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Close ended Open ended Domestic None of the above 34. ___________funds are launched with a view to mobilize the savings of a foreign country for the purpose of investment in the Indian securities. Domestic mutual funds Open ended mutual funds Off-shore mutual funds None of the above 35. ___________funds are those that invest pre-dominantly in equity share of companies. Debt funds Balanced funds Equity funds None of the above 36. _____________provides an ideal expose to equity markets, without the investor having to bear the risks and costs arising from the market views that a fund manager may take: Index funds Sectoral funds Equity funds None of the above

37. ____________funds are those that predominantly invest in debt securities. Debt Equity Index None of the above 38. __________fund invests only in securities that are issued by the Government. Debt funds Sectoral funds Equity funds Gilt funds 39. ____________are the funds, that invest both in debt and equity markets. Balanced funds Equity funds Index funds None of the above 40. RBI announced _____________in April 1992, to enable small investors to participate in the money market. Money Market Mutual Funds General Insurance Corporation Life Insurance Corporation None of the above 41. ___________market comprises of instruments like shares and debentures that are long term sources of finance companies. Equity market Derivative market Commodity market

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None of the above U7jy 42. The portion of authorized capital offered by the company to the investors is the Equity capital Issued capital Unissued capital None of the above 43. In __________rule voting under which the number votes held by shareholders equals number of shares held by him multiplied by the number of directors to be elected. a) Majority b) Proportional c) a+b d) none of the above 44. _________value of ordinary shares refers to the paid up capital plus reserves and surplus (net worth) divided by the number of outstanding shares. Market value Book value Issue price None of the above 46._____________share is a unique type of long term capital market instrument that combines some of the features of equity shares and as well as some of the debentures Preference Bonus Equity None of the above

47. Fixed income security is also called _____________ Equity shares Preference shares Bonus shares None of the above

48. The preference share is _______in the sense, that all the above unpaid dividends are carried
forward and payable before any ordinary dividend is paid. Cumulative Non-cumulative Non-convertible None of the above 49. In the _________market, an investor can go long and short on the same asset at the same time. Equity Derivative Commodity None of the above 50. __________derivatives have emerged as hedging devices against fluctuations in commodity prices. Commodity Financial Both None of the above

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51. ____________contract is an agreement to exchange an asset for cash, at a pre-determined future date specified today. Future contract Option Forward contract None of the above 52. ___________contracts are agreements between two counter parties to fix the terms of an exchange/lock-in the price today of an exchange that will take place between them at some fixed future date. Forward Options Swaps Future

53. ______________contracts that give the holder the right to buy or sell at a pre-determined
price within a specified period. Future contract Forward contract Options None of the above 54. ___________are agreements between two parties to exchange one set of financial obligations for another as per the terms of agreement. Option Futures Forward Swaps 55. In the _________market, transactions take place via telephone and other electronic means of communications. Over the Counter Derivatives Credit Derivatives Swaps None of the above 56. _______participate in the derivatives markets to lock the price at which they will be able to do a buy or sell transaction in the future. Hedges Speculators Arbitrages None of the above MODULE-5 International Trade and WTO Note: Ask any 4 questions for 4 marks 57. When the export price of a country is greater than its import price, terms of trade is said to be __________for that country. Favorable Unfavorable Balanced None of the above

58. When the import price of a country is greater than its export price, terms of trade is said to be ______for that country. Favorable Unfavorable Balanced None of the above

59. ____________advocated the theory of reciprocal demand

Ricardo Marshall J.S.Mill None of the above 60. The theory of offer curve has been formulated by Ricardo J.S.Mill Marshall & Edge worth None of the above 61. Balance of trade includes only ___________items a) b) c) d) invisible visible a+b none of the above

62. ________relate to inflows of capital into foreign business ventures by residents of a country. Direct investment Portfolio investment Both None of the above 63. ________refers to the acquisition of financial assets in foreign countries. Direct investment Portfolio investment Both None of the above 64. __________account records the inflows and outflows of gold bullion. Specie Current Capital None of the above 65. The different phases of trade cycles like prosperity and depression cause _________equilibrium in the balance of payment. Cyclical Structural Long term None of the above 66. __________ equilibrium is caused b y structural changes in some sectors of the economy at home or aboard/

Technological Short-term Structural None of the above 67. _________disequilibrium arises due to unexpected contingencies like failure of rains, strikes, industrial unrest etc. Short-term Long-term Cyclical None of the above 68. _____disequilibrium refers to a persistent deficit on a surplus in the balance of payments of a country. Short-term Structural Long-term None of the above 69. ______________means decline in the rate of exchange of domestic currency in terms of foreign currency. Deflation Exchange depreciation Devaluation None of the above 70. _____________means reducing the value of domestic currency in terms of foreign country. Depreciation Devaluation Deflation None of the above 71. _________refers to the restrictions on the use of foreign exchange by the central bank. Exchange control Devaluation Depreciation None of the above 72. __________refers to duties on imports to restrict imports. Quotas Tariffs Both None of the above 73. Under _______system, the government may fix and permit the maximum quantity or value of a commodity to be imported during a given period. Tariffs Quotas Export promotion None of the above 74. WTO refers to: World Trade Order World Transport Organization World Trade Organization None of the above 75. TRIMS refers to Tariffs Related Investment Methods Trade Related Investment Measures Trade Related Intellectual Methods None of the above 76. TRIPS refers to

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Trade Related Intellectual Property Rights Transport Related Investment Property Rights Trade Related Investment Personal Rights None of the above 77. GATS refers to General Arrangement on Tariff Services General Agreement on Trade in Services Government Agreement on Trade Services None of the above 78. NIEO refers to National Information Economic Organization New International Economic Order New International Economic Offer None of the above 79. World Bank is also known as: IBRD WTO Asian Development Bank None of the above 80. MFA refers to Multi-Fiber agreement Money & Finance Agreement Monetary Foreign Agency None of the above 81. Agreement on _________provide for treatment of foreign investment on par with domestic investment. TRIMs TRIPs AOA None of the above 82. Agreement on _____deals granting patent right to the natives. TRIMs TRIPs AOA None of the above 83. __________means integrating the domestic economy with the world economy Global economy Globalization Global integration All the above 84. As a member of WTO India has removed ________restrictions on foreign trade since April 2001. Quantitative Tariff Duty All the above 85. Which one of the following statement is incorrect? WTO shall facilitate the implementation of world trade agreements WTO is not a legal entity and its members have none of the above legal privileges or immunities. WTO also handles trade disputes WTO provides technical assistance and training to developing countries.

86. Which are popularly known as twin organization at the global level.? IMF & WTO IMF& IBRD

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IBRD & WTO IBRD & GATT

87. Balance of payment is a _________ Systematic record of all trade transaction between two countries. Systematic record all economic transaction between the residents of one country and the residents of the rest of the world in a year. Systematic records of all debts to and debts from other countries. None of the above 88. Balance of Trade is a ___________concept than Balance of Payments. Broader Narrower Unrelated None of the above 89. Balance of payments include _________transactions Visible Invisible Both visible and invisible None of the above 90. Balance of payments on current account includes such as _________from and to the foreign countries. Transportation Insurance Banking receipts and payments All the above 91. Sum of the balance of current account and balance of capital account is known as ________accounts. Balance of transaction Balance of trade Balance of debts Balance of payment 92. There are many measures to correct disequilibrium in the balance of payments. The important ones are Loans from foreign government Loans from IMF Devaluation All the above 93. Devaluation means The reduction of the official rate at which the foreign currency is exchanged for local currency. The reduction of the official rate at which the national currency is exchanged for internationally accepted foreign currencies. The reduction of the official rate at which the currencies of two foreign countries are exchanged. None of the above 94. At present, WTO has a membership of ________countries. 185 190 153 170 95. What arrangement existed before the creation of WTO to deal with international trade? MIA PTA IDA GATT 96. Which is not the function of WTO? WTO monitors national trade polices

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WTO handles trade disputes WTO facilitates implementation of World Trade Agreements WTO stabilizes exchange rates. 97. MTAs stand for: Multilateral Tariff Agreements Multinational Trade Agreements Multilateral Trade Agreements None of the above 98. The main features of WTO are: It is a forum of trade negotiations among its members It administers a united package of agreements to all members that are committed. Mostly decision making under WTO is carried out by consensus. All the above 99. World Bank (IBRD) was formed in the year: 1945 1946 1947 1950 100. 1945 1946 1950 1951 International Monetary Fund (IMF) was established in the year

101. The main focus of world bank is on : Health and Education Social development Protection of environment All the above 102. 1991 1995 1950 1945 World Trade Organization (WTO) came into existence in the year

103. The WTO aims at making the whole world into a big __________where there will be free flow of goods and services with no barriers. Village Trade zone Country All the above 104. 185 190 153 170 At present, WTO has a membership of _______countries.

Module-6 Exchange Rate determination Note: Ask any 2 questions for 2 marks 105. ___________refers to foreign currencies possessed by a country for making payments to other countries. Money exchange Foreign exchange Spot exchange

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None of the above 106. __________ refers to the price of foreign currency in terms of domestic currency payable for the immediate delivery of the foreign currency. Spot exchange Forward exchange Foreign exchange None of the above 107. ____________refers to a contract to buy or sell foreign currency at a fixed date in future at a price agreed at present. Forward rate Spot rate Arbitrage None of the above 108. _________refers to simultaneously buying a currency in market and selling it in another market to make a profit by taking advantage of the differences in the exchange rate in the two markets. Forward rate Spot rate Arbitrage None of the above

109.

The purchasing power parity theory was restated in modern times by the Swedish economist __________

Gustav Cassel J.S.Mill David Ricardo None of the above 110. There are _________ versions of purchasing power parity theory they are: 1 2 3 None of the above 111. All payments imports have to be made only through RBI NRIs Authorized dealers None of the above 112. FEDAI refers to: Foreign Exchange Dealers Association of India Fixed Exchanges Dealers Association of India Flexible Exchange Dealers Association of India None of the above 113. FERA was replaced by FEMA in 1996 1997 1999 None of the above 114. Since 1993, the RBI has followed the exchange rate system hat can be termed a system of Pegged exchange rate system Managed float exchange rate system Flexible exchange rate management system None of these 115. Which of the following is not a major participant in the foreign exchange market Commercial banks Individuals Central banks Non-banking financial institutions

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116. Spot transactions usually means Transactions carried on the spot Transaction carried out within a period of two days Transaction carried out within a time span of one week None of these 117. If the forward rate is below the present spot rate, the foreign currency is said to be at a Forward premium Forward discount Forward at par None of the above 118. If the forward rate is above the present spot rate, the foreign currency is said to be at a Forward premium Forward discount Forward at par None of the above 119. If the forward rate is above the present spot rate, the foreign currency is said to be at a Forward premium Forward discount Forward at par None of the above 120. Which of the following is not a function of foreign exchange market Providing credit for foreign trade Hedging foreign exchange risk International transfer of purchasing power Carrying out foreign trade in goods and services

121. Which of the following is a function of foreign exchange market Providing credit for foreign trade Hedging foreign exchange risk International transfer of purchasing power All of the above 122. Which of the following does not account for demand for foreign exchange in India Commodity imports Travel expenditure by foreigners in India Government expenditure by India abroad Interest and dividend on Indian securities owned by foreigners 123. Which of the following does account for demand for foreign exchange in India Commodity imports Government expenditure by India abroad Interest and dividend on Indian securities owned by foreigners All the above 124. Which of the following does not account for supply of foreign exchange in India Services rendered to foreigners Imports of long term capital Increase in Indian bank balance abroad Gold exports 125. Which of the following does account for supply of foreign exchange in India Services rendered to foreigners Imports of long term capital Gold exports All the above 126. As the domestic currency depreciates in terms of the foreign currency the supply of foreign exchange Decreases Increases Has no effect

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None of these 127. ________________ refers to the rate at which a countrys currency is exchanged some other countrys currency Rate of exchange Balance of payment Foreign exchange Currency exchange 128. The intersections of the demand and supply curves of foreign exchange determines Fixed rate of exchange Flexible rate of exchange Equilibrium rate of exchange None of these 129. _____________ are agents who purchase and sell foreign exchange with the intension of making a profit by taking advantage of changes in exchange rates Hedgers Speculators Arbitrageurs None of these

130. _____________ are agents who enter the forward exchange market to protect themselves against the risk arising out of exchange rate fluctuations. Hedgers Speculators Arbitrageurs None of these

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