Caiib Abm Case Studies

CAIIB ABM CASE STUDIES & NUMERICALS FOR DEC2018
ULTIMATE STUDY MATERIAL MACMILLIAN ONLY
ABM is one of the compulsory subjects for CAIIB. Most of the people find difficult to
clear this paper. Today, I will tell you how to study for ABM subject.
This subject also contains 4 modules
MODULE – A: Economic Analysis

MODULE – B : Business Mathematics
MODULE – C : HRM in banks
MODULE – D : Credit Management
As we are bank employees we get very less time for study, so how to decide which
topics to be read, which topics to be skipped?
-As I had told you in my previous blog article that generally paper consists of 60%
theoretical & 40% numerical or case studies, so choose the module to be study in deep
so as to clear the paper easily depending upon your personal strength and weakness.
If you observed all the modules, you will realize that Module A and Module C are most
scoring modules. Do not skip these modules. Module B contains Business Mathematics
which many people find difficult to study as the level of mathematics is tough, especially
for non-engineering background people. Those who works in Credit/Loan Department
will find that Module D easy as well as interesting. Module D is most important not only
exam point of view but also for your daily working in Credit Department. So do not skip
Module D.
IMPORTANT TOPICS FROM EACH MODULE

Module A- Supply and Demand, Money Supply and Inflation, Business Cycles, GDP
Concepts and Union Budget.
No need to read McMillan Book line by line for thise module, short notes will be quite
useful for studying this module. Don’t read stats given in these chapters. In GDP
Concepts and Union Budget chapters numerical are asked which are quite easy
provided you know the components and formula.
Module B-Time Value of Money, Sampling Methods, Simulation, Bond Investment

Don’t go to deep for study this module as mathematical calculations are difficult to
understand especially for non engineering background people. Practice the examples
given in McMillan. Those who are not good at math can skip this module and focus
more on remaining modules.
Module C-Development of Human Resources, Human Implications of Organisations,
Performamce Management, HR & IT
Compiled by Srinivas Kante Facebook Group https://www.facebook.com/groups/iibfcertifications/
Email: srinivaskante4u@gmail.com https://iibfadda.blogspot.com/ jaiibcaiibmocktest.com
Page 1
You need to read thoroughly all the topics from this module from McMillan. It is quite
easy and theoretical only. Repeatedly read MCQs from N.S. Toor book of this module.
Module D-Overview of Credit Management, Analysis of Financial Statement, Working

Capital Finance, Credit Control and Monitoring, Rehabilitation and Recovery.
Read this module from McMillan book only. The chapters in this module are not lengthy
as compared to other modules. Practice Numerical from Financial statement and
balance sheet.
Overall, you have to study at least three modules in detail so as to achieve the 50 score.
You can choose the modules to study more depending upon your strength. I would
suggest that you can keep module B at last, just read formulas from this module, as this
module is quite boring, lengthy and hard to understand.
Facebook Group https://www.facebook.com/groups/iibfcertifications/

Email: srinivaskante4u@gmail.com https://iibfadda.blogspot.com/
http://www.jaiibcaiibmocktest.com/
Use the jaiibcaiibmocktest.com for practice

Page 2
Important formulas
1. Net worth =
A) assets over liabilities
B) Capitals + Reserve (for company)
2. Networking Capital =
A) Total of current asset-Total of current liability
B) long term source - long term use
3. Debt Equity ratio (DER) =

A) Term loan/Tangible networth
B) Long term debt/Share holders equity
C) Total liability/Share holders equity
4. DSCR =
A) Total cash flow before interest/Total repayment obligation
B) ( Net profit + Depriciation + Interest on long term liability )/ (Instalment +
interest on long term liability)
5. Return on asset = Operating profit/(Total asset-intangible asset)
6. ICR(Interest coverage ratio )= EBIT / Interest on long term

borrowings Where EBIT = Earning before interest and taxes
7.Total outside liabilities= current liability + long term liability
8. Total tangible asset = CA+ Fixed asset+ other non currrent asset
9. Tangible networth = Networth - intangible asset
10. Current Ratio = CA:CL
11. Quick Ratio = ( CA - Inventories )/ CL
12. Quick asset = CA - Inventory
13. Heads come under current asset→

Inventory
Preliminary Expenses/prepaid expenses
Cash and bank balance
Sundry debtors/Bill reicivables
Investment in qouted securities such as Govt sec , FDR
Heads that come under

liabilities
Sundry creditors/Bills
payable

Page 3
a) Installment of term loan payable in a

ear
b) prefrential capital
c) Provisions to paid in a year
d) WCTL( Working capital term loan )
14. Narrow Money ( M1)= Currency with public + Demand deposits with banking
system + ' other deposits with RBI
15. M2=M1+ Savings deposits of post office savings banks
16. M3= M1+ Time deposits with banking system
17. M4= M3+ All deposits with post office savings banks( Excluding National
savings certificate )
18. Inflation = ( Price index in current year- Price index in base year)*100
19. GDP = C+I+G+(X-M)

GNP = GDP+ NR( net income from assets abroad( net income receipts ))
20. GDP at factor cost = GDP at market price -( Indirect taxes- Subsidies )
21. Total revenue receipts = Net tax revenue + Total Non-Tax revenue
22. Present value(PV)= Discount factor × Cn
23. Cash flow for n period = Cn= PV(1+r)^n where r = interest rate
24. Discount factor = 1/(1+r)^n

Where r = int rate , n = period in year
25. Effective int rate (EIR)= (1+r/n)^n -1
26.Current yield on coupon = (coupon or nominal yield)× 100 / (current market

price of coupon)
27. Rate of return = (coupon+ price change)/investment
28. YTM = [ C+ ( A-P)/n ] × 100 / ( A + P)/2

Where C- Coupon
A- Face value/ Maturity value of bond
P- Price paid for bond
n - term to maturity
29.Yield on discounted instuments :- The issue price of a discounted instrument

can be calculated by using formula
D = F / 1+ { (r×n)/36500 }
Where D = Discounted value of the instrument
F = Maturity Value
Page 4
r = Effective rate of return per annum

n = Tenure of the investment in days.
30.conversely to find out the yield from a discounted instrument, the following
formula can be derived from the above one
r = ( F- D ) / D × 365/ n × 100
Where D = Discounted value of the instrument
F = Maturity value
r = Effective rate of interest per annum
n = Tenure of the instrument ( in days )
31. When you invest in a bond , you receive a regular coupon payment. As
bond prices change , you may also make a capital gain or loss.
The Rate of Return can be calculated using
ROR = ( Coupon income + Price change ) ÷ Investment
32. Zero coupan bond is a long term bond that pays no interest. This bond is
sold at discount. This can be calculated by using formula
ZC = FV / ( 1+r )^n
Where FV = Face value of
bond r = return
required
n = Maturity period
33. Future Value of an annuity(End of period) = A/r × [( 1+r)^n - 1]
34. Present Value of an annuity ( End of period )= A/r ×[ ( 1+r)^n-1] /(1+r)^n
35. FV ( at the beginning )= A/r×(1+r)[( 1+r)^n -1]
36. ¤ Value of Bond = PV( Coupon)+ PV( Face value )

¤ PV( A,r,n)+ PV(Face value)
37. Standard error of the mean= x = / sqrt ( n)
38.PV of perpertuity = A/r

Where A = Annuity
r = int rate
39. If S is the sample space & E is the even of occurance

Then Probablity of occurance of even E for n time = P(E) = n(E)/n(S)
40. Equation of estamating of straight

line Y^ = a+bx
Where Y^ = estimating value of dependent
variable x = is an independent variable
a = y intercept when
x=0 b = the slop of
trend line
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41. If x and Y are the two variables then corrleation of

cofficient 'r' r = cov{(x,y)/▲x▲y}
42. Return on capital empolyed (ROCE)=( Net profit after tax × 100)/ total
capital employed
Liabilities Assets
Net worth/Equity : Fixed Assets :
Funds brought in by the promoters as Assets which are purchased for long term
their investment in and not meant to be
business or generated by and retained
in business, Share sold but used for production.
capital/partner's capital/ Paid up equity
share Land & Building,Plant & Machinery
capital,/owners funds Vehicles,Furniture & Fixture
Reserves & Surplus e.g. General Office equipment,Capital Work in Progress
Reserve, CapitalReserve, These are
Revaluation Reserve and Other
Reserves),Retained represented as under:
Earnings, Undistributed Original value (Gross Bock) Less
Profits,Preference share capital depreciation
(not redeemable within 12 years) Net Block or book value or written down
Value Method
Long term liabilities: Non Current Assets:
Liabilities which are not due for payment Assets which cannot be classified as current
within 12 months or
fixed or intangible assets Book Debts or
from the date of the Balance Sheet) Sundry Debtors more
than 6 months old/ Disputed Debts,
Term loans from financial institutions; Investment of long term
Term loan from banks;
Debentures/Bonds; nature in shares,
Deferred payment liability;Preference
Shares redeemable govt. securities, associates or sister firms or
companies. Long term security deposits.
within 12 years; Unquoted investments;
Investments in subsidiaries or sister
Fixed Deposits maturing after one year; concerns; Loans & Advances
to directors, officers; Accounts receivables in
Provision for gratuity; Unsecured Loans respect of sale of
plant &
machinery; Advances to concerns in which
directors are
Page 6
interested; Deposits with customs port trust

etc
Intangible & fictitious Assets Which do
not have physical
existence. For example: Goodwill, Patents,
Trade Mark, Copy
Right, Preliminary or pre operative expenses,
other formation
expenses, debit balance of P & L
account, accumulated losses,
bad debts, Capital issue expenses e.g.
discount on issue of share
& debentures, commission on
underwriting of shares &
debentures; Deferred revenue expenditure
Short term or CurrentyLiabilities : Current Assets :

Liabilities which are due for payment
within 12 months Cash in hand, Bank balance
from the date of the balance sheet and including fixed ,deposits with banks.
are to be repaid Stocks/inventory (such as
out of proceeds of current assets,Short raw material, stock in process, finished
term borrowings goods, consumable stores
from banks (C/C, 0/D or B/P, B/D limits) and spares),Book debts/Sundry debtors/Bills
for working Receivable/
capital.,Sundry/trade creditors/creditors/ Accounts receivable/ debtors, Government
Account and other trustee
payable,Bills Payable / trade
acceptances securities
Fixed Deposits from public payable (other than for long term purposes e.g.
within one year,Short sinking funds, gratuity
funds etc.),Readily Marketable/quoted govt.
duration loans or deposits or other securities
Provision for taxation, Proposed
Dividends, Provision for meant for sale,Interest accrued and
bonus, unclaimed dividend. receivables,Advance payment of taxes,
Deposits from dealers, selling agents pre-paid expenses,Advance payments for
etc. merchandise; unexpired
Advance payments from customers, insurance
outstanding expenses and Accruals e.g.
wages & salaries,
rent; expenses payable
e.g. Advertisement

Page 7
1. Mean ẋ = ∑x /n
2. Variance x = ∑x^2 /n -(Mean ẋ )^2
3.Standared deviation X =√var
4. Variance y = ∑y^2 /n -(Mean ȳ )^2
5. Cov (x,y) = ∑x y /n - ẋ.ȳ
6. r = cov(,y) / std deviation x. std deviation y
7. x- ẋ = r *( std deviation x.)/ std deviation y (y- ȳ) small r multiply

with std dev x by std dev y multiply with (y- ȳ)
8. Y = a + b X,
a= ȳ - b* ẋ b = cov(x,y) / Std dev x)2
9. sampling distribution equation …………. sigma multiplied by xbar is equal to

sigma divided by Square root of n
10.Z is equal to is divided by sigma multiplied by xbar [X bar minus mu]
11. Mean means average

12. median means Middle
13.Mode means The value has occurs most often
14

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15.

Page 9

Page 10
Q1. We have given you the percentages of actual to moving average in the following
table from a bank data describing the amount of cash circulation in a small branch.
Year Spring Summer Fail Winter
1998 87 106 86 125
1999 85 110 83 127
2000 84 105 87 128
Calculate the seasonal index for each quarter.

Page 11
Answer
Year Spring Summer Fail Winter SUM Avg A A/AA
1998 87 106 86 125 404 101 99.94
1999 85 110 83 127 405 101.25 100.19
2000 84 105 87 128 404 101 99.94

404 101 99.94
Seaso
nal
Avg index
SUM A A/AA
404 101 99.94
101.2
405 5 100.19
404 101 99.94
404 101 99.94
404.2
5
Avg of
A/AA
=Total
/4=101.
06
Q2. Given,
Currency with public - Rs. 120000 Crores
Demand deposit with banking system - Rs. 200000 Crores
Time deposits with banking system - Rs. 250000 Crores
Other deposit with RBI - Rs. 300000 Crores
Savings deposit of post office savings banks - Rs. 100000
Crores
All deposit with post office savings bank excluding NSCs - Rs.
50000 Crores
1. Calculate M1.
a. Rs. 570000 Crores
Page 12
b. Rs. 620000 Crores

c. Rs. 670000 Crores
d. Rs. 720000 Crores
Ans - b
.............................................
2. Calculate M2.
Ans - d
.............................................
3. Calculate broad money M3.
Ans - d
.............................................
Solution :
1. M1 = currency with public + demand deposit with the
banking system + other deposits with RBI
M1 = 120000+200000+300000
M1 = 620000
485
2. M2 = M1+Savings deposit of post office savings banks
So,
M2 = 620000+100000
M2 = 720000 Crores
3. M3 = M1+Time deposit with banking system
So,
M3 = 620000+250000
M3 = 870000 Crores
Q3. Given
1. Consumptions - Rs. 50000

2. Gross investment - Rs. 40000
3. Govt spending - Rs. 10000
4. Export - Rs. 90000
5. Import - Rs. 60000
6. Indirect Taxes - Rs. 10000
7. Subsidies(on production and import) - RS. 5000
8. Compensation of employee - Rs. 500
9. Property Income - Rs. 500
7,8,9 - Net receivable from aboard
10.Total capital gains from overseas investment - Rs. 15000
11.Income earned by foreign national domestically - Rs. 5000

Page 13
1. Calculate GDP
a. Rs. 125000
b. Rs. 130000
c. Rs. 135000
d. Rs. 140000
Ans - b
.............................................
2. Calculate GDP at cost factor
a. Rs. 125000
b. Rs. 130000
c. Rs. 135000
d. Rs. 140000
Ans - c
.............................................
3. Calculate GNP
a. Rs. 110000
b. Rs. 120000
c. Rs. 130000
d. Rs. 140000
Ans - d
.............................................
Solution :
1. GDP = Consumption + Gross investment + Government
spending + (Exports - Imports)
GDP = C+I+G+(X-M)
= 50000+40000+10000+(90000-60000)
= 130000
2. GDP at factor rate
= GDP-(Indirect taxes-subsidies)
= 130000-(10000-5000)
= 135000
3. GNP=GDP+NR(total capital gains from Overseas
investment-income earned by foreign national
domestically)
= 130000 + (15000-5000)
= 140000
Q4. The airlines company is interested in decreasing waiting time spent by customers
while buying air-tickets. So the relationship between waiting time y (in minutes), and
number of counters x operating to sell tickets has been studied.
Therefore, customers were randomly selected and data was collected.
x 2 3 5 4 2 6 1 3 4 3 3 2
Page 14
4
y 12.8 11.3 3.2 6.4 11.6 3.2 8.7 10.5 8.2 11.3 9.4 12.8
8.2
Calculate the regression equation that best fits the data.
Calculate the coefficient of determination and coefficient of correlation.
Give your comments on the results.
If you want to reduce the waiting time to 5 minutes, what should you do
ANSWER:
X Y X^2 Y^2 XY
2 12.8 4 163.84 25.6
3 11.3 9 127.69 33.9
5 3.2 25 . .
4 . . . .
. . . . .
. . . .
. .
. . .
.
4 8.2 16 67.24 32.8
TOTA 1187.8
L 42 117.6 158 4 337
Mean
for
total /n 3.23 9.05 12.15 91.37 25.92

Page 15
Use the snap formules then variance x=1.72

Std devx=1.31
Variance y =9.54
Std dev y=3.09
Cov (x,y) =-3.30
Coff of correlation r = -.82
Coff of determination =.67
Y=a+b*x
B=-1.92
A=15.26 substitute values use snaps for the formulas
Q5.Ram purchased two bonds bond-1 & bond-2 with face value of Rs. 1000 each and
Coupon
of 8% and maturity of 4 years & 6 years respectively. If YTM is increased by 1%, the %
change in prices of bond-1 & bond-2 would be ......
a. 2.39 & 4.84
b. 3.29 & 4.84
c. 3.29 & 4.48
d. 2.39 & 4.48
Ans - c
Explanation :
Page 16
Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)

Bond 1:
If YTM is 9%, then bond’s price
= [80 × (1.09^4 – 1) ÷ 0.09 + 1000] ÷ 1.09^4
= 967.64
Bond 2:
= [80 × (1.09^6 – 1) ÷ 0.09 + 1000] ÷ 1.09^6
= 955.14
So, % change in price of bond 1
= (1000 – 967.04) ÷ 1000
= 0.03296
= 3.29%
& % change in price of bond 2
= (1000 – 955.14) ÷ 1000
= 0.04486
= 4.48%
………………………………………………………………………………………………………
…
Q6.Monica purchased a bond with face value of Rs. 1000 and Coupon of 8% and
maturity of 4
years. If YTM is increased by 1%, the change in price of bond would be......
a. 23.69
b. 32.69
c. 23.96
d. 32.96
Ans - d
Explanation :
= [80 × (1.09^4 – 1) ÷ 0.09 + 1000] ÷ 1.09^4
= 967.604
So, change in price of the bond
= 1000 - 967.64
= 32.96 decrease
(Since Coupon rate < YTM, so Bond’s Value < FV)
.............................................
Q7.Priya purchased a bond with face value of Rs. 1000 and Coupon of 8% and maturity
of 4
years. If YTM is reduced by 2%, the change in price of bond would be......
a. 63.90
b. 69.30
c. 36.90
d. 39.60
Ans - b
Explanation :
If YTM = 6%, bond’s price
= [80 × (1.06^4 – 1) ÷ 0.06 + 1000] ÷ 1.06^4
= 1069.30,
Page 17

= 1069.30 - 1000
= Rs. 69.30
.............................................
You bought a 5 year Zero Coupon bond with a Rs 1000 face value for Rs 735.67. What
is
the YTM of this bond?
a. 10.36%
b. 6.33%.
c. 4.69%
d. 8.18%
Ans - b
........................................................
Q8 A 10%, 6-years bond, with face value of Rs. 1000 has been purchased by Mr. x for
Rs.
900. What is his yield till maturity?
a. 12.47
b. 14.27
c. 11.74
d. 11.27
Ans - a
Explanation :
Here,
FV = 1000
CR = 10%
R (YTM) =?
T = 6 years
Coupon = FV × CR = 100
Bond’s price = 900
Since FV > Bond’s Value, Coupon rate < YTM (based on above three observations)
So, we have to use trial and error method. We have to start with a value > 10 and find
the
price until we get a value < 900.
So,
If YTM = 11%, price =957.69 (> 900, so keep guessing)
If YTM = 12%, price = 917.78 (> 900, so keep guessing)
If YTM = 13%, price = 880.06 (< 900, so stop)
So, YTM must lie between 12 and 13.
So, using interpolation technique,
YTM
= 12 + (917.78 – 900) ÷ (917.78 – 880.06)
= 12 + 17.78 ÷ 37.72
= 12.47%
.............................................
Q9.A bond with a par-value of Rs. 100 is purchased for 95.92 and it paid a Coupon rate
of 5%.
Calculate its current yield.
Page 18
a. 5.12
b. 5.21
c. 5.34
d. 5.43
Ans - b
Explanation :
Coupon = Face value × Coupon Rate
And annual interest paid = Market Price × Current Yield
5 = 95.92 × CY
CY = 0.0521 = 5.21%
Q.10 A gas company has supplied cooking gas to the city of Mumbai. It has supplied,
18, 20, 21, 25, 26 lakh cubic feet of gas for the years 1996 to 2000, respectively.
3. Find the linear equation that best describes the data.
4. Calculate the per cent of trend for this data.
5. Calculate the Relative cyclical residual for this data.
6. In which years does the largest fluctuation from trend occur?
Is it the same for both methods?
X=
YEAR- Y=
MEAN SALE
YEAR MEAN Y S X.Y X^2
1996 1998 -2 18 -36 4
1997 1998 -1 20 -20 1
1998 1998 0 21 0 0
1999 1998 1 25 25 1
2000 1998 2 26 52 4
TOTA
L 110 21 10

Page 19
Y=22+.19x
Maximum fluctuation in 1996
Q. 11. An undergraduate is interested in purchasing a used TV. She randomly

selected 125 advertisements and found that the average price of a TV in this sample
was Rupees 3,250. She knows that the standard deviation of used TV prices in this
city is Rupees 615.
(a) Establish an interval estimate for the average price of a TV so that she can be 68.3
per cent certain that the population mean lies within this interval.
Establish an interval estimate for the average price of a TV so that she can
be 95.5 per cent certain that the population mean lies within this interval
Ans
1 st read and understand the problem

Given
Variance = V is not given

we have to find the interval estimates with 68 % and 95%
Sample size n= 125

Mean = 3250
Std deviation =615
find std error = std dev / √n = 55.01 Interval estimate
For 68 % confidence =+/- 55.01 3305.0 3194.9

Page 20
1 9
3360.0 3139.9
For 95 % confidence =+/- 110.01
1 9
3415.0 3082.9
For 99 % confidence=+/- 165.02
2 8
Q 12.. A CHS manager wants to inform potential renters about how much electricity
they can expect to use during each month. She randomly selects 61 residents and
discovers their average electricity usage in August to be 894 kilowatt hours (kWh). She
believes the variance in usage is about 131 (kWh)2.
Establish an interval estimate for the average August electricity usage so he can
be 68.3 per cent certain the true population mean lies within this interval.
Repeat part (a) with a 99.7 per cent certainty
Answer:

Given
Variance = V =131
Sample size n= 61
Mean = 894
Std deviation =√V= 11.45

For 68 % confidence =+/- 1.47 895.47 892.53
For 95 % confidence =+/- 2.93 896.93 891.07
Page 21
For 99 % confidence=+/- 4.40 898.4 889.6
Q.13 . A company managing the flyover is concerned about the number of

cars 'running' the toll gates and is considering altering the toll-collection
procedure to make it more be cost-effective. It randomly sampled 75 hours to
determine the rate of violation. The resulting average violations per hour
were 7. If the population standard deviation is known to be 0.9, estimate an
interval that has 95.5 per cent chance of containing the true mean.

Given
Variance = V is not given

Sample size n= 75
Mean = 7
Std deviation =.90

For 68 % confidence
0.1
=+/- 7.1 6.9
For 95 % confidence
0.21
=+/- 7.21 6.79
For 99 % confidence
0.31
=+/- 7.31 6.69

Page 22
Q.15. A computer store that buys wholesale, untested computer chips, is

considering switching to another supplier who would provide tested and
guaranteed chips for a higher price. In order to determine whether this is a
cost-effective plan, Pascal must determine the proportion of faulty chips that
the current supplier provides. A sample of
chips was tested and of these, 5 per cent were found to be defective.
(a) Estimate the standard error of the proportion of defective chips.
(b) Construct a 98 per cent confidence interval for the proportion of defective chips
supplied.
ANSWER
Number of trails n=200
Probability of success p = .05
Probability of failure q= .95
Mean mu = n*p=10
Std deviation = √ (n*p*q)=3.08
Std error = √ pq/n = 0.02 interval estimate

For 68 % confidence
0.02
=+/- 10.02 9.98
For 95 % confidence
0.03
=+/- 10.03 9.97
For 99 % confidence
0.05
=+/- 10.05 9.95

Page 23
Q 16.A 15 year bond is trading at Rs. 958 with face value of Rs. 1000. The Coupon rate
is 8%.
What is the yield to maturity?
Explanation :
Since trading value < face value, YTM is > CR
At 7%, price = 1091.08 > 958
And at YTM = 9%, price = 919.39 < 958,
so YTM lies somewhere between 7 and 9.
= 7 + (9-7) × (1091.08 – 958) / (1091.08 – 919.39)
= 7 + 2 × 133.08 / 171.69
= 8.5%
Q17 A 3 year bond with par value Rs. 1000 has Coupon rate 12%. If the required rate of
return is
10% and interest is payable semi - annually, find the value of the bond.
Explanation :
Here, interest is calculated semi-annually,
so Coupon = 1000 × 12% ÷ 2 = 60,
YTM = 10%/2 = 0.05,
T = 3 × 2 = 6 years
So, price = 1050
Q 18. The yield on a 6-year bond is 12% while that of 4-year bond is 9%. What should
be the
yield on a 2-year bond beginning from now?
Explanation :
(1+12%)^6 = (1+9%)^4 × (1+r)^2
R = 18%

Page 24
Q19.A bond is issued with a face value of 1000 that pays a Rs. 25 Coupon semi-
annually. Find
its Coupon rate.
Explanation :
Coupon = Face Value × Coupon Rate
25 = 1000 × CR ÷ 2
So, CR = 5%
Q20 .A 2-year bond offers a yield of 6% and a 3-year bond offers a yield of 7.5%. Under
the
expectation theory, what should be the yield on a 1-year bond in 2 years?
Explanation :
(1+7.5%)^3 = (1+6%)^2 × (1+r)^1
R = 10.56%
Q22 . A Company was considering national distribution of its regionally successful

product and was compiling proforma sales data. The average monthly sales figures (in
thousands of Rupees) from its 30 current distributors are listed. Treating them; as (a) a
sample and (b) a population, compute the standard deviation.
7.3 5.8 4.5 8.5 5.2 4.1
2.8 3.8 6.5 3.4 9.8 6.5
Answer:
Mean (x-mean
x x x- mean x x)2
7.3 5.68 1.62 2.61
5.8 5.68 0.12 0.01
4.5 5.68 -1.18 1.4
8.5 5.68 2.82 7.93
5.2 5.68 -0.48 0.23
4.1 5.68 -1.58 2.51
2.8 5.68 -2.88 8.31
3.8 5.68 -1.88 3.22
6.5 5.68 0.082 0.67
3.4 5.68 -2.28 5.21
9.8 5.68 412 16.95
6.5 5.68 0.82 0.67
Total 68.2 50.06
variance of sample = sumof x-meanx values by n you will get

4.17
Page 25
variance of population = sumof x-meanx values by n-1 you

will get 4.55
std deveation for sample 2.04
population 2.13
Q23.In a sample of 25 observations from a normal distribution with mean 98.6 and
standard deviation 17.2
(a) What is P (92 below xbar below102)?
i b) Find the corresponding probability given a sample of 36.
N is equal to25, mu is equalto98.6 and sigma is equal to 17.2 Sigma
multiplied by xbar is equal to sigma divided by square root of n Is
equal to 17.s divided by square root of 25 is equal to 3.44
P (92below xbar below 102) is equal to P [(92 minus98.6) divided by 3.44is below (xbar
minus mu) divided by sigma multiplied by xbar is below (100 minus98.6) divided by 3.44]
Is equal to P multiplied by (-19.2 is below z is below 0.99) is equal to 0.4726 plus
0.3389 is equal to0.8115.
(b) n is equal to 36
sigma multiplied by xbar is equal to sigma divided by square root of n is equal to

17.2divided by square root of 36is equal to2.87
P (92 is below xbar is below 102) is equal to P [(92 Minus 98.6) divided by2.87] below (x
bar minus mu) divided by sigma multiplied by xbar is below (100 Minus 98.6) divided
by2.87]

Page 26
Is equal to P (-2.30 below z below 1. 18) is equal to.4893 Plus 0.3 8 10 is equal to 0.
8703
Q.24. Kamala, an auditor for a large credit card company knows that than on average,
the monthly balance of any given customer is Rs112, and the standard deviation is
Rupees If Mary audits 50 randomly selected accounts, what is the probability that the
sample average monthly balance is
a.Below Rupees 100?
b. Between Rupees 100 and Rupees 130
The sample size of 50 is large enough to use the central limit theorem
mu is equal to 112, sigma equal to 56, n is equal to 50, and sigma xbar is equal to 56
divided by square root of 50 is equal to 7.920
(a)P( xbar below100)is equal to P multiplied by [(xbar minus mu)divided by sigma
multiplied by xbar below (100 - 112) divided by7.9201]
Is equal to P(z below minus 1.52) is equal to 0.5 minus 0.4357 is equal to 0.0643
b.P(100belowxbelow130)is equal to P[(100 minus 112)divided by7.920below(xbar

minus mu)divided by sigma multiplied by xbar below(130-112)divided by,7.920]
is equal to P (Minus 1.52 below z below 2.27) is equal to 0.4357 plus 0.4884 is equal to
0.9241

Page 27
Q25 . A meteorologist for a television station would like to report the average
rainfall for today on this evening's newscast. The following are the rainfall
measurements (in inches) for today's date for 16 randomly chosen past years.
Determine the sample mean rainfall.
0.47 0.27 0.13 0.54 0.00 0.08 0.75 0.06
0.00 1.05 0.34 0.26 0.17 0.42 0.50 0.86
ANSWER:
Simple problem 16 samples randomly taken so find out the average simple
S avg= .36875
Q26. As each customer enters his barbershop, Shyam yells out the number of minutes
that the customer can expect to wait before getting his haircut. The only statistician in
town, after being frustrated by Shyam’s inaccurate point estimates, has determined that
the actual waiting time for any customer is normally distributed with mean equal to
Shyam's estimate in minutes and standard deviation equal to 5 minutes divided by the
customer's position in the waiting line. Help Shyam's customers to develop 95 per cent
probability intervals for the following situations:
(a) the customer is second in line and Shyam's estimate is 25 minutes.
(b) the customer is third in line and Shyam's estimate is 15 minutes.
Customer ‘s number in line p = 2.00

n =not given sample size
Mean = 25
Std error 5/p =2.5 interval Estimate
For 68 % confidence
2.5
=+/- 27.5 22.5
For 95 % confidence
5
=+/- 30 20
For 99 % confidence
7.5
=+/- 32.5 17.5
Page 28
Q27 . A bank is trying to determine the number of tellers available during the lunch rush
on
Fridays. The bank has collected data on the number of people who entered the bank
during the last three months on Fridays from 11 a.m. to 1.00p.m. Using the data below,
find point estimates of the mean and standard deviation of the population from which
the sample was drawn.
242 275 289 306 342 385 279 245 269 305 294 328
Mean (x-mean
x x x- mean x x)2
296.5
242 8 -54.58 2979.34
296.5
275 8 -21.58 465.84
296.5
289 8 -7.58 57.51
296.5
306 8 9.42 88.67
296.5
342 8 45.42 2062.67
296.5
385 8 88.42 7817.51
296.5
279 8 -17.58 309.17
296.5
245 8 -51.58 2660.84
296.5
269 8 -27.58 760.84
296.5
305 8 8.42 70.84
296.5
294 8 -2.58 6.67
296.5
328 8 31.42 987.01
296.5
Total 3559 8 18266.92
variance of
sample=su
mof x-
meanx
Page 29
values by n-
1 you will
get 1660.63
STD DEV
40.75
Q28. From a population known to have a standard deviation of 1.4, a sample of

60 individuals is taken. The mean for this sample is found to be 6.2.
Find the standard error of the mean.
Establish an interval estimate around the sample mean, using one standard
error of the mean
ANSWER
Variance = V
Sample size n= 60
Mean = 6.2
Std error =.018
Inter estimate
For 68 % confidence
0.18
=+/- 6.38 6.02
For 95 % confidence
0.36
=+/- 6.56 5.84
For 99 % confidence
0.54
=+/- 0.674 5.66

Page 30
Q29 . A social psychologist, surveyed 150 top graduate students and found that 42
per cent of them were unable to add fractions correctly.
(a) Estimate the standard error of the proportion.
(b) Construct a 99 per cent confidence interval for the true proportion of graduate
students who cannot correctly add fractions.

Mean mu = n*p=63
Std deviation = √ (n*p*q)=6.04

Inter estimate
For 68 % confidence
0.04
=+/- 63.04 6296
For 95 % confidence
0.08
=+/- 63.08 62.92
For 99 % confidence
0.012
=+/- 63.12 62.88

Page 31
Q.30 The owner of the Home Loan Company randomly surveyed 150 of the
company's 3,000 accounts and determined that 60 percent were in excellent
standing.

Page 32
CAIIB ABM CASE STUDIES & NUMERICALS FOR DEC2018 ULTIMATE STUDY
MATERIAL MACMILLIAN ONLY
Find a 95 per cent confidence interval for the proportion in excellent standing.
Based on part (a), what kind of interval estimate might you give for the absolute number of accounts that
meet the requirement of excellence, keeping the same 95 per cent confidence level?
ANSWER:

Mean mu = n*p=90.00
Std deviation = √ (n*p*q)=6
For 68 % confidence
0.04
=+/- 90.04 89.96
For 95 % confidence
0.08
=+/- 90.08 89.92
For 99 % confidence
0.012
=+/- 90.12 89.88

Page 33
Q 31 . From a population with known standard deviation of 1.65, a sample of 32 items resulted in
34.8 as an estimate of the mean.
Find the standard error of the mean.
Compute an interval estimate that should include the population mean 99.7 percent of the time.
ANSWER
Variance = V
Sample size n= 32
Mean = 34.8
For 68 % confidence
0.29
=+/- 35.09 34.51
For 95 % confidence
0.58
=+/- 35.38 34.22
For 99 % confidence
0.88
=+/- 35.68 33.92

Page 34
Q 32. The Pizza Shop has developed business by delivering pizza orders promptly. The shop
guarantees that Pizzas will be delivered in 30 minutes or less from the time the order was placed,
and if the
delivery is late, the pizza is free. The time that it takes to deliver each pizza order that is on time is
recorded and the delivery time for those pizzas that are delivered late is recorded as 30 minutes. Twelve
random entries from the register are listed.
15.3 29.5 30.0 10.1 30.0 19.6
10.8 12.2 14.8 30.0 22.1 18.3
Find the mean for the sample.
Can this sample be used to estimate the average time that it takes for the shop to deliver a pizza?
Explain.
ANSWER:
Simple like above problems find
Mean (x-mean
x x x- mean x x)2
15.3 20.23 -4.93 24.26
- - - -
- - - -
Total689.72
Then total =242.70 mean x20.23
Then find variance of sample Answer 62.70

Std dev =7.92

Page 35
Q.33 Following information has been released by RBI for the fortnight ended Jun 26.
Mar 31 Jun 26
Currency with the Public 13,863 14,302
Demand Deposits with Banks 8,907 9,134
Time Deposits with Banks 82,538 84,992
`Other' Deposits with Reserve
Bank 147 91
Term deposits include deposits of 10000 and 12000, with original maturity up to one year. On the basis
of the given information, answer the following questions:
What is the amount of MO as on Mar 31:
105455,
a b 32917, c 14010, d 15346
Explanation : MO = currency with public + other deposit with RBI. Hence MO = 13863 + 147 = 14010.
M I = MO + 15% of demand deposit's = 14010 + 1336 = 15346.
M2 = MI + 85% of demand deposits + Term deposits with original maturity up to one year = 15346 4-
7571 ÷ 10000 = 32917
M3 = M2 + term deposits with original maturity above one year. = 32917 + 72538 = 105455
What is the amount of Narrow Money, as on Mar 31:
a 105455, b 32917, c 14010, d 15346
Explanation : MO = currency with public + other deposit with RBI. Hence MO = 13863 + 147 =
14010.
M
1 (Narrow Money) = MO + 15% of demand deposits = 14010 + 1336 = 15346.
M = M1 + 85% of demand deposits + Term deposits with original maturity up to one year =
2 15346 + 7571 + 10000 = 32917
M (Broad Money) = M2 + term deposits with original maturity above one year. = 32917 +
3 72538 = 105455
What is the amount of M2 as on Mat' 31:
105455,
a b 32917, c 14010 , d 15346
Explanation : MO = currency with public + other deposit with RBI. Hence MO = 13863 + 147 =
14010.
M
1 = MO + 15% of demand deposits = 14010 + 1336 = 15346.
M = M 1 + 85% of demand deposits + Term deposits with original maturity up to one year =
2 15346 + 7571 + 10000 = 32917
M
3 = M2 + term deposits with original maturity above one year. = 32917 + 72538 = 105455
What is the amount of Broad Money as on Mar 31:
105455,
a b 32917, c 14010, d 15346
Explanation : MO = currency with public + other deposit with RBI. Hence MO = 13863 + 147 = 14010.
MI = MO + 15% of demand deposits = 14010 + 1336 = 15346.
M2 = MI + 85% of demand deposits + Term deposits with original maturity up to one year = 15346 +
7571 + 10000 = 32917
M3 = M2 + term deposits with original maturity above one year. = 32917 + 72538 = 105455

Page 36
Q34.While releasing the data relating to inflation by the Govt., it is observed that
1. the consumer price index based inflation increased by 9% and 2.whole-sale price index based
inflation has increased by 7%.
3.The govt. claims that due to implementation of recommendations of 6th Pay Commission, there is
increase in demand of goods and services leading to increase in consumer prices. 4. Further due to
increased wages and salaries, there is increase in cost of inputs leading to increase in whole-sale
price index. Based on the above information, answer the following questions:
The inflation rate of 7%, represented by the whole-sale prices, is called:
a Core inflation b Headline inflation c Demand Pull inflation d Cost-push
inflation
The inflation rate of 9%, represented by the consumer prices, is called:
a Core inflation b Headline inflation c Demand Pull inflation d Cost-
push inflation
The inflation caused by the information given at point no. 3 in the question, is called:
a Core inflation b Headline inflation c Demand Pull inflationd. Cost-push inflation
The inflation caused by the information given at point no. 4 in the question, is called:
a Core inflation , b Headline inflation, c Demand Pull inflation, d Cost-
push inflation
Explanation:
Inflation due to consumer price index is called core inflation and inflation due to whole-sale
prices is called headline inflation. Further, the demand pull inflation is the result of increased demand
for goods and services and cost push inflation is due to increase in cost of production of goods and
services.
services.
services.
services.
Answers: 1:b 2:a 3:c 4:d

Page 37
Q
Q.35
We are provided following information relating to economies in three countries:
Feature of the
economy Country A Country B Country C
Individuals, private
Who takes most of the firms. But
economic decisions govt. oversees the
relating to functioning
production and
distribution of the market.
Govt. Individuals,
Ownership of means of private
firms. Public sector,
production private
sector and joint sector
co-
exist.
Consumption decisions Individuals Individuals Individual
Based on above information, Answer the following Questions -

01 Country A is following which of the following Economic System :
command economy b. Market capitalistic economy d. Mixed
a Economy c economy
02 Country B is following which, of the following Economic system:
a Economy c economy
03 Country C is following which of the following Economic System :
a Economy c economy
Answers: 1:a 2:b 3:d
Explanatio
n:
Where the economic decisions are taken by Govt. and ownership of means of production is with the
govt., such economy is called command economy or socialistic economy (used to be followed by
USSR earlier).
2 : Where the economic decisions are taken by private firms and individuals and ownership of means
of production is with private firms and individuals, such economy is called market economy or
capitalistic economy (used to be followed by USA earlier).
3 : Where the economic decisions are taken by private firms and individuals and govt. oversees the
functioning of the market and ownership of means of production is with private firms and individuals
(public sector, private sector and joint sector co-exist), such economy is called mixed economy
(followed by most of the countries).

Page 38
Q.35. Case Study/Concept Based questions: Shift in Demand
& Supply Read the following situations carefully to answer the
questions given at end :
I. During the year 2016, Central Govt. announced implementation of recommendations of 7th Pay
Commission and increased the salary of it employees. It is observed that quantity demanded of cars
and other consumer goods has increased substantially and this trend last for few months.
The demand for landline telephone connections declined substantially during the last few years
because people opted for Mobile Phones despite high cost of Cell phone sets.
Companies manufacturing toys in China increased their exports of toys to India, since these
companies were able to manufacture the toys at a low cost compared to the cost incurred by them
earlier.
The demand for lap tops manufactured by Company-A increased substantially when the company
reduced the price of its lap tops, as a result of reduced cost, due to technology innovations.
Questions:
Law of demand applies on which of the above situations.
a 1 to 4 all, b only I, 2 and 4, c only 3, d only 4
E xplanation : The law of demand operates when there is change in quantity demanded as a result of
change in price of the commodity, which is the case with situation No.4 only. In other cases, the change
is due to factors other than price.
The increase in quantity demanded in situation No.I above, will be termed as:
operation of Law of demand, b equilibrium of demand and supply, c shift in demand, d shift in
supply
Explanation : Shift in demand is a situation where quantity demanded changes (increases or decreases)
as result of change in factors other than price. Here the change in demand is due to increase in income
and not because of change in price of cars or consumer durables.
The demand for landline phones declined and for mobile phones increased. This will be called..
a operation of Law of demand, b increase in demand, c shift in demand, d
shift in supply
Explanation : Shift in demand is a situation where quantity demanded changes as result of change in
factors other than price. Here the change in demand is due to convenience or habit of the consumers,
which is a factor the factors other than price.
The situation given in case No.3 above is known as:
a operation of Law of supply, b increase in supply, c shift in demand, d
shift in supply
Explanation : Shift in supply is a situation where quantity supplied changes as a result of factors other
than price. Here the supply has increased because of decline in cost of manufacturing.

Page 39
Q36.
Case Study/Problems : Demand and Supply Equilibrium
Read the information relating to motor-bikes, as provided in the table carefully :
Situation Price Quantity Quantit
demanded y
A 80000 1550000 2770000
B 70000 1980000 2490000
C 65000 2250000 2250000
D 60000 2600000 1940000
E 50000 3000000 1650000
Based on the given information, answer the following situation?

1.What will be state of the market and what type of pressure will be there on the prices of the motor-bike
for situation — A or B
the market is having surplus supply and there will be reduction in price
the market is having surplus supply and there will be increase in price
the market is having short supply and there will be reduction in price
the market is having short supply and there will be increase in price
Explanation : In situation A and B, there is excess supply of motorbikes compared with demand which is
less. This will force the price to decmase.
What will be state of the market and what type of pressure will be there on the prices of the motor-
bike for situation — D or E a. the market is having surplus supply and there will be reduction in price , b.
the market is having surplus supply and there will be increase in price, c. the market is having short
supply and there will be reduction in price
d.the market is having short supply and there will be increase in price
Explanation : In situation A and B, there is excess demand of motorbikes compared with supply which
is short. This will force the price to increase.
3.What is equilibrium price, demand and supply in the
given problem? a. equilibrium price is Rs.70000 and
demand and supply 1980000 units b.equilibrium price is
Rs.65000 and demand and supply 2250000 units
c.equilibrium price is Rs.50000 and demand and supply 3000000 units, d. information is
inadequate. No conclusion is possible. Explanation : Situation C is the equilibrium where the
equilibrium price is Rs.65000 and demand and supply 2250000 units.
Q.37 : Business Cycle

Half-yearly growth rates of an economy are provided for 3 major segments of gross domestic
product for 5 years:
1 2 3 4 • 5 6 7 8 9 10 11
Segment June Dec June Dec June Dec June Dec June Dec
2012 2012 2013 2013 2014 2014 2015 2015 2016 2016
Agriculture 5 4 3 2 2 -1 -1 2 3 4
Industry 10 10 8 7 5 2 0 1 5 7
Services 11 10 9 9 7 4 2 4 7 8
Aggregate 9 8 7 6 4 2 1 2 4 6
Growth rates are given in percentage, over the corresponding period of previous year.
The comparison of information provided in Column 3 and 4 confirms that:
a business cycle shows a waive-like movement , b a business cycle is synchronic , c.a
business cyclical fluctuations are recurring in nature d.there is no definite period of a business
cycle

Page 40
Explanation : When the decline in growth rate is across all the segments of the economy, it is call
that 'the business cycle is synchronic. In the given case there is decline in growth rates in all the
sectors.
The information given in column No.2, 8 and 11, suggests that
a a business cycle shows a waive-like movement, b a business cycle is synchronic
C a business cyclical fluctuations are recurring in nature, d there is no definite period of a

business cycle
Explanation : When the period of prosperity (see Co1.2 and then 11) and depression (see column 8)
are seen alternatively, this is called that 'business cycle shows a waive-like movement'.
The combined information of column No.6, 7, 8, 9 and 10 represents:
boom, recession and recovery, b recession, depression and boom, c recession, depression and
recovery
ddepression, recovery and boom
Explanation : Information in column No.6 and 7 is part of recession which started from column No.3.
Information in column No.8 is depression, which is lowest aggregate growth rate. Information in
column No.9 and 10 is part of recovery phase of a business cycle.
Q38.Example Bonds prices and yields

In certain cases, the bonds are listed on stock exchange, where trading takes place, in these bonds. Let
us calculate the bond price with the help of an example.
Bond prices with half-yearly coupon
In the above case, the coupon payment was yearly. But if the payment is on a half yearly basis, the
compounded return would be halved i.e. 5.6 / 2 = 2.8% and time interval would be doubled. In this case
the value would be Rs.1010.91 as calculated as under:
PV = Rs.30 + Rs.RO Rs.20 + Rs.R0 +
+ Rs.20 Rs.1030
(1.028 (1.028) (1.028 (1.028
(1.028) )2 3
)4 (1.028) 5 )6
PV =
Rs.1010.91
It will be observed that with reduction in compounding intervals (say from annual to half-yearly), the yield
increases.
Bond prices and varying interest rates
With change in interest rates, bond prices change. The price can be worked out if the discount rate is 6%
PV at 6% = Rs.6o + Rs.6o + Rs.106o
(1.06) (1.06)2 (1.06) 3 PV,= Rs.1000.00
It means that if interest rate is same as the coupon rate, the bond sells for face value.
If the interest rate change from 6% to say, 15%, the bond price would be Rs.794.51 as under:
PV at 15% = Rs.6o + Rs.6o + Rs.106o

(1.15) (1.15)2 (1.15) 3 PV = Rs.794.51
Hence this bond can sell at 79.45 % of its face value.

Page 41
Quotation of bond price in market : The bond prices are quoted as a percent of their face value. For
example, if the bond with face value of Rs. moo is current priced at Rs.1o22.13, the quote would be
102.213% of face value. It would be called 102.213
Q39
Q
.
3
9 Case study / Case lets : GVA concepts
You are provided the following information for the financial year ended Mar 31, 2016:
Value
(Rs.in
crores)
Employees contribution 14000
Operating surplus 18000
Mixed income:.
(a) employment income 140000
(b) profits of self-employed persons 90000
Consumption of fixed capital i.e. depreciation 20000
Production Subsidies such as to railways, input subsidies to farmers, village and small industries, administrative
subsidies 8000
Production taxes such as land revenues, stamps and registration fees, tax on profession 24000
Product taxes such as excise duty, sales tax, service tax, import and export duties 60000
Product subsidies such as food, petroleum and fertilizer subsidies, interest subsidies to farmers,
households etc. 28000
through banks]
Based on the above, answer the following questions:
1. What is the gross value added (GVA) at factor cost?
1. 330000 , b. 282000 c. 298000, d. data is not sufficient
2. What is the gross value added (GVA) at basic prices?
a 330000, b 282000, c 298000, d data is not sufficient
3. What is the amount of GDP at market price?
4. 330000, b. 282000, c. 298000, d data is not sufficient
Answers: 1: b 2:c 3:a
Explanation-1: OVA at factor cost = CE + OS/MI CFC
[Contribution of employees + Operating Surplus / Mixed income (employment income and profits
of self employed persons) + Consumption of fixed capital 1= 14000 + 248000 + 20000 = 282000_
Explanation-2 : GVA at basic prices = CE + OS/MI + CFC +
Production Taxes — Production Subsidies OR
GVA at basic prices = GVA at factor cost + Production Taxes Production Subsidies.
= 14000 + 248000 + 20000 + 24000 — 8000 = 298000
Explanation-3 : GDP at market price = GVA at basic price + Product Tax — Product Subsidies =
298000 + 60000 — 28000 =
330000

Page 42
CAIIB ABM CASE STUDIES & NUMERICALS FOR DEC2018 ULTIMATE
STUDY MATERIAL MACMILLIAN ONLY
Q41 When chicken prices rise 40%, the quantity of KFC fried chicken
supplied rises by 20%. Calculate the price
elasticity of supply.
a. 0.25
b. 0.50
c. 0.75
d. 0.85
Ans - a
Solution :
Price Elasticity of Supply = (% change in quantity supplied) / (%
change in price)
= 20/40 = 0.5
Q42 When the price of a commodity falls from Rs. 60 per unit to
Rs. 48 per unit, the quantity supplied falls by
20%. Calculate the price elasticity of supply.
a. 1
b. 1.5
c. 2
d. 2.5
Ans – a
495
Solution :
Price Elasticity of Supply = (% change in quantity supplied) / (%
change in price)
= 20/((60-48)*100/60)
= 20/(12*100/60)
= 20/20
=1
Q43 21 bricks have a mean mass of 24.2 kg, and 29 similar bricks
have a mass of 23.6 kg. Determine the
mean mass of the 50 bricks.
a. 18.35 kg
b. 20.35 kg
c. 23.85 kg
d. 32.85 kg
Ans - c
Solution :
Mean value = ((21 x 24.2) + 29 x 23.6 )) / (21+29)
= 1192.6 / 50
= 23.85 kg
.............................................
Page 43
Q44 Net income available to stockholders is ₹150 and total assets

are ₹2,100 then return on total assets
would be ......
a. 0.07%
b. 7.14%
c. 0.05 times
d. 7.15 times
Ans - b
Solution
Return on Assets Ratio=Net Income/Average Total Assets*100
=150/2100*100
=0.0714
=7.14
.............................................
Q45 Given,
Recoveries of loan and advance - Rs. 3000 Crores
Misc capital receipt - Rs. 600 Crores
Market loAns - Rs. 600 Crores
Short term borrowings - Rs. 1200 Crores
External assistance (Net) - Rs. 500 Crores
State provident fund - Rs. 600 Crores
Other receipts (Net) - Rs. 1200 Crores
Securities issued against small savings - Rs. 600 Crores
Recoveries of short term loans and advances from states and
loans to govt servants - Rs. 1000 Crores
Total Non Tax Revenue - Rs. 5000 Crores
Net Tax Revenue - Rs. 2000 Crores
Draw down cash balance - Rs. 4000 Crores
Calculate Debt Receipt ...
a. Rs 2500 Crores
b. Rs 3700 Crores
c. Rs 4700 Crores
d. Rs 5400 Crores
Ans - c
.............................................
Calculate Non Debt Receipt ...
a. Rs 2500 Crores
b. Rs 3700 Crores
c. Rs 4700 Crores
d. Rs 5400 Crores
Ans - a
.............................................
Calculate Capital Receipt ...
a. Rs 4700 Crores
b. Rs 5400 Crores
c. Rs 6200 Crores
Page 44
d. Rs 7200 Crores
Ans - c
.............................................
Solution :
1. Debt Receipt = Market Loans + Short Term Borrowings +
External assistance(NET) + Securities issued
against Small savings + State provident fund + other
Receipts(Net)
= 600 + 1200 + 500 + 600 + 600 + 1200
= 3700 Crores
2. Non Debt Receipt = Recoveries of loan & advances (deduct
recoveries of short term loans & advance
from state and loans to govt sarvants) + MISC Capital receipts
= (3000-1000)+500
= 2500 Crores
3. Capital Receipt = Non Debt Receipt + Debt Receipt
= 3700 + 2500
= 6200 Crores
Q46 Given,
Crores
50000 Crores
1. Calculate M1.
Ans - b
.............................................
2. Calculate M2.
Ans - d
.............................................
3. Calculate broad money M3.
Page 45
Ans - d
.............................................
Solution :
1. M1 = currency with public + demand deposit with the
banking system + other deposits with RBI
M1 = 120000+200000+300000
M1 = 620000
485
2. M2 = M1+Savings deposit of post office savings banks
So,
M2 = 620000+100000
M2 = 720000 Crores
3. M3 = M1+Time deposit with banking system
So,
M3 = 620000+250000
M3 = 870000 Crores
Q47 Given

4. Export - Rs. 90000
5. Import - Rs. 60000
1. Calculate GDP
a. Rs. 125000
b. Rs. 130000
c. Rs. 135000
d. Rs. 140000
Ans - b
.............................................
2. Calculate GDP at cost factor
a. Rs. 125000
b. Rs. 130000
c. Rs. 135000
d. Rs. 140000
Ans - c
.............................................
3. Calculate GNP
a. Rs. 110000

Page 46
b. Rs. 120000
c. Rs. 130000
d. Rs. 140000
Ans - d
.............................................
Solution :
1. GDP = Consumption + Gross investment + Government
spending + (Exports - Imports)
GDP = C+I+G+(X-M)
= 50000+40000+10000+(90000-60000)
= 130000
2. GDP at factor rate
= 130000-(10000-5000)
= 135000
3. GNP=GDP+NR(total capital gains from Overseas
investment-income earned by foreign national
domestically)
= 130000 + (15000-5000)
= 140000
.............................................
Savings deposit of post office savings banks - Rs. 60000 Crores

50000 Crores
Calculate M4.
Ans - b
Solution :
M4 = M3+All deposit with post office savings bank excluding
NSCs
M3 = M1+Time deposit with banking system
M1 = currency with public + demand deposit with the banking
system + other deposits with RBI
M1 = 90000+180000+260000
M1 = 530000
So,
M3 = 530000+220000
M3 = 750000 Crores
So,
M4 = M3+All deposit with post office savings bank excluding
NSCs
M4 = 750000+50000
M4 = 800000 Crores
Page 47
Q49 Calculate the present value of 6 year bond with 9 per cent
coupon rate with FV Rs. 1000/-. Current
interest rate is 12 per cent.
a. Rs.843.83
b. Rs.1025.57
c. Rs.876.66
d. Rs.768.68
Ans - c
Solution
FV = 1000
Coupon Rate (CR) = 0.9%
t = 6 year
R (YTM) = 0.12
Annual interest rate payable=1000*9%=90
Principal repayment at the end of 6 year = Rs. 1000
=90 (PVIFA, 12%,6 years)+1000(PVIF,12%, 6 Years)
PVIFA= ((1+r)^t -1)/ r+ PVIF=1/(1+R)^t
=90(1.12^6-1/0.12*(1.12)^6+1000(1/1.12^6)
=90*1.97382-1/0.12*1.1.97382+1000(1/1.97382)
=90*0.97382/0.12*1.97382+1000*0.0.50663
=90*0.97382/0.23685+506.63
=90*4.11154+506.63
=370.03+506.63
=876.66
Q50 Mr x is to receive Rs. 10000, as interest on bonds by end of

each year for 5 years @ 5% roi. Calculate the
present value of the amount he is to receive.
a. 43925
b. 43295
c. 49325
d. 49235
Ans - b
Explanation :
Here,
P = 10000
R = 5% p.a.
T=5Y
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV to be received, if the amount invested at end of each year:
So,
FV = (100000÷0.05) * {(1+0.05)^5 – 1} ÷ (1+0.05)^5
= 43295

Page 48
Q51 A company has net worth of Rs. 15 lac, term liabilities are Rs.
10 lac. Fixed Assets worth Rs. 16 lac and
current assets are Rs. 25 lac. There is no intangible assets or
the non current assets. Calculate it's net
working capital.
a. 6 lac
b. 7 lac
c. 8 lac
d. 9 lac
Ans - d
Total Assets = Total liabilities
Total Assets = Fixed Assets + current assets
= 16 + 25
= 41
So total liabilites must be 41 lac
Now out of 41 lac, the long term liability is 25 lac (15 + 10)
Hence CL = 41 - 25 = 16 lac
Now we have CA = 25 lac and CL = 16 lac
NWC = 25 - 16
= 9 lac
.............................................
Calculate Standard Error from the given data : X = 10,

20,30,40,50
a. 6.1071
b. 6.0711
c. 7.1071
d. 7.0711
Ans - d
Explanation :
Total Inputs (N) = (10,20,30,40,50)
Total Inputs (N) =5
First find Mean:
Mean (xm) = (x1+x2+x3...xn)/N
Mean (xm) = 150/5
Mean (xm) = 30
Then find SD:
SD = √(1/(N-1)*((x1-xm)2+(x2-xm)2+..+(xn-xm)2))
= √(1/(5-1)((10-30)2+(20-30)2+(30-30)2+(40-30)2+(50-30)2))
= √(1/4((-20)2+(-10)2+(0)2+(10)2+(20)2))
= √(1/4((400)+(100)+(0)+(100)+(400)))
= √(250)
= 15.811
Then Find Standard Error:
Standard Error=SD / √(N)
= 15.8114/√(5)
Page 49
= 15.8114/2.2361
= 7.0711
A sack contains 4 black balls 5 red balls. What is probability to

draw 1 black ball and 2 red balls in one
draw ?
a. 12/21
b. 9/20
c. 10/21
d. 11/20
Ans – c
Solution :
Out of 9, 3 (1 black & 2 red. are expected to be drawn)
Hence sample space
n(S) = 9c3
= 9!/(6!×3!)
= 362880/4320
= 84
Now out of 4 black ball 1 is expected to be drawn hence
nb. = 4c1
=4
Same way out of 5 red balls 2 are expected be drawn hence
n(R) = 5c2
= 5!/(3!×2!)
= 120/12
= 10
Then P(B U R) = n(B)×n(R)/n(S)
i.e 4×10/84 = 10/21
........................................................
Quantity supplied of a product at Rs. 8 per unit is 200 Units. If

the price elasticity of supply is 1.5, what
will be the quantity supplied at Rs. 10 per unit?
a. 150
b. 175
c. 250
d. 275
Ans - d
Solution :
Price Elasticity of Supply = (% change in quantity supplied. / (%
change in price)
1.5 = ((x-200)*100/200)/((10-8)*100/8)
1.5 = ((x-200)/2)/(200/8)
1.5 = ((x-200)/2)/25
1.5 = (x-200)/50
75 = x-200

Page 50
x = 75+200
x = 275
X opened a recurring account with a bank to deposit Rs. 16000

by the end of each year @ 10% roi. How
much he would get at the end of 3rd year?
a. 52960
b. 52690
c. 52069
d. 52096
Ans - a
Explanation :
Here,
P = 16000
R = 10% p.a.
T = 3 yrs
FV = P / R * [(1+R)^T - 1]
FV = 16000 * (1.13 – 1) ÷ 0.1
= 52960
.............................................
Find Correlation coefficient for X and Y values given below :
X= (1,2,3,4,5)
Y= {11,22,34,43,56}
a. 0.8899
b. 0.9989
c. 1.0899
d. 1.0989
Ans - b
Explanation :
Step 1: Find Mean for X and Y
X=15/5=3
Y=166/5=33.2
Step 2: Calculate Standard Deviation for Y inputs:
σx=
359
√(1/(N-1)*((x1-xm)2+(x2-xm)2+..+(xn-xm)2))
=√(1/(5-1)((11-33.2)2+(22-33.2)2+(34-33.2)2+(43-33.2)2+(56-
33.2)2))
=√(1/4((-22.2)2+(-11.2)2+(0.8)2+(9.8)2+(22.8)2))
=√(1/4((492.84)+(125.44)+(0.64)+(96.04)+(519.84)))
=√(308.7)
=17.5699
Step 3: Standard Deviation for X Inputs:
σx=
√(1/(N-1)*((x1-xm)2+(x2-xm)2+..+(xn-xm)2))
=√(1/(5-1)((1-3)2+(2-3)2+(3-3)2+(4-3)2+(5-3)2))

Page 51
=√(1/4((-2)2+(-1)2+(0)2+(1)2+(2)2))
=√(1/4((4)+(1)+(0)+(1)+(4)))
=√(2.5)
=1.5811
Σ((X - μx) (Y - μy))
=(1-3)(11-33.2)+(2-3)(22-33.2)+(3-3)(34-33.2)+(4-3)(43-
33.2)+(5-3)(56-33.2)
=(-2*-22.2) + (-1*-11.2) + (0* 0.8) + (1 *9.8) + (2* 22.8)
=44.4 + 11.2 + 0 + 9.8 + 45.6
=111
Correlation Coefficient = 111/((5-1)*1.5811*17.5699)
Correlation Coefficient (r) = 0.9989
Hence the correlation coefficient between the two given data
set is 0.9989
Albert purchased 8%, 3 years bond of Rs. 10 lac, with annual

interest payment and face value payable on
maturity. The YTM is assumed@ 6%. Calculate the duration
and modified duration.
a. 2.36
b. 2.79
c. 2.63
333
d. 2.97
Ans - c
Explanation :
Bond’s Duration = ΣPV×T ÷ ΣP
ΣP = 1053421
Now, a = 0.943396 and a^t = 0.839619
So, ΣPV×T = 80000 × 16.666 × (0.160381÷0.056604 –
2.518857) + 2518857
= 419370.767 + 25188579
= 2938227.77
So, Duration of the Bond
= 2938227.77 / 1053421
= 2.79 years
& Modified Duration
= Mckauley Duration ÷ (1 + R)
= 2.79 ÷ 1.06
= 2.63
Mr. Raj is to invest Rs. 100000 by end of each year for 5 years
@ 5% roi. How much amount he will
receive?
a. 556253
b. 553562
c. 552563

Page 52
d. 555263
Ans - c
Explanation :
Here,
P = 1000000
R = 5% p.a.
T=5Y
FV = P / R * [(1+R)^T - 1]
FV, if invested at end of each year, is:
So,
FV = (100000÷0.05) * {{1+0.05}^5 – 1}
= 552563
An urn contains 10 black balls and 5 white balls. 2 balls are

drawn from the urn one after other without
replacement. What is the probability that both drawn are
black ?
a. 2/7
b. 3/7
c. 4/7
d. 6/7
Ans - b
Solution :
Let E and F denote respective events that first and second ball
drawn are black.
We have to find here P(E n F ) and P(E/F)
Now P(E) = P(Black in first drawn) = 10/15
Also given that the first ball is drawn i.e events E has occurred.
Now there are 9 black balls and 5 white
balls left in the urn. Therefore the probability that the second
ball drawn is black, given that the ball first
drawn is black nothing but conditional probability of F given
that E has occurred already.
Hence P(E/F) = 9/14
Now by the multiplication rule of probability
P(E n F) = P(E) × P(E/F)
= 10/15 × 9/14
= 3/7
........................................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1

year. If interest is compounded on halfyearly
basis, the amount payable shall be ......
a. 109060
b. 100960
c. 103090

Page 53
d. 106090
Ans – d
265
Explanation :
Here,
P = 100000
R = 6% half-yearly = 3%@ p.a. = 0.03 p.a.
T = 1 yr = 2 half yrs
FV = P * (1 + R)^T
So,
FV = 100000 * (1+0.03)^2
= 106090
Ranjit borrowed an amount of Rs. 50000 for 8 years @ 18%

roi. What shall be monthly payment?
a. 986
b. 968
c. 896
d. 869
Ans - a
Explanation :
Here,
P = 50000
R = 18% = 18 % ÷ 12 = 0.015% monthly
T = 8 yrs = 96 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 50000 * 0.015 * 1.01596 ÷ (1.01596 – 1
= 986
Ajit wants to receive Rs. 40000 p.a. for 20 years by investing

@ 5%. How much he will have to invest
now?
a. 498489
263
b. 498849
c. 498948
d. 498984
Ans - a
Explanation :
Here,
P = 40000
R = 5% p.a.
T = 20 yrs
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV = (40000 ÷ 0.05) * {(1.0520 – 1) ÷ 1.0520}
= 498489
.................
Page 54
Priyanka made an investment of Rs. 18000 and he expects a

return of Rs. 3000 p.a. For 12 years. What is
the present value and net present value of the cash flow @
10% discount rate?
a. 2114
b. 2414
c. 2441
d. 2141
255
Ans - c
Explanation :
PV = 20441
NPV = PV – 18000
= Rs. 2441
The cash flow expected from a project is Rs. 700, Rs. 1000 and
Rs. 1200 in the 1st, 2nd, & 3rd year. The
discounting factor @ 10% roi is 1.10, 1.21 and 1.331. What is
the total present value of these cash
flows?
a. 3264
b. 3246
c. 2346
d. 2364
Ans - d
Explanation :
NPV = Σ {C÷ (1+r)T} – 1
Total Present Value
= Σ {C÷ (1+r)T}
= (700 ÷ 1.1) + (1000 ÷ 1.21) + (1200 ÷ 1.331)
= Rs. 2364
.............................................
A 10%, 6-years bond, with face value of Rs. 1000 has been
purchased by Mr. x for Rs. 900. What is his
yield till maturity?
a. 12.47
b. 14.27
c. 11.74
d. 11.27
Ans - a
Explanation :
Here,
FV = 1000
CR = 10%
R (YTM) =?
Page 55
T = 6 years
Since FV > Bond’s Value, Coupon rate < YTM (based on above
three observations)
So, we have to use trial and error method. We have to start
with a value > 10 and find the price until we
get a value < 900.
So,
YTM
= 12 + (917.78 – 900) ÷ (917.78 – 880.06)
= 12 + 17.78 ÷ 37.72
= 12.47%
.............................................
A bond with a par-value of Rs. 100 is purchased for 95.92 and

it paid a Coupon rate of 5%. Calculate its
current yield.
a. 5.12
b. 5.21
c. 5.34
d. 5.43
Ans - b
Explanation :
5 = 95.92 × CY
CY = 0.0521 = 5.21%
My grandfather, starts giving me gifts of Rupees 1 lakh for the

next 4 years. If the interest rate is 10 per
cent pa, how much will I get at the end of 4 years?
a. 414600
b. 416400
c. 461400
d. 464100
Ans - d
Solution
FV=P/R {(1+r)^n-1}
=100000/0.10{(1+.1)^4-1}
=1000000 (1.4641-1)

Page 56
=100000
Find Coefficient of Variance for the values given :

{13,35,56,35,77}
a. 0.4156
b. 0.5164
161
c. 0.5614
d. 0.6514
Ans - c
Explanation :
Number of terms (N) = 5
Mean:
Xbar = (13+35+56+35+77)/5
= 216/5
= 43.2
Standard Deviation (SD):
Formula to find SD is
σx= √(1/(N - 1)*((x1-xm)2+(x2-xm)2+..+(xn-xm)2))
=√(1/(5-1)((13-43.2)2+(35-43.2)2+(56-43.2)2+(35-43.2)2+(77-
43.2)2))
=√(1/4((-30.2)2+(-8.2)2+(12.9)2+(-8.2)2+(33.8)2))
=√(1/4((912.04)+(67.24)+(163.84)+(67.24)+(1142.44)))
=√(588.2)
=24.2528
Coefficient of variation (CV)
CV = Standard Deviation / Mean
= 24.2528/43.2
= 0.5614
Hence the required Coefficient of Variation is 0.5614
Calculate the relative variability (coefficient of variance) for

the samples 60.25, 62.38, 65.32, 61.41, and
63.23 of a population
a. 0.0301
b. 0.0307
c. 0.0103
d. 0.0107
Ans - b
Solution
Mean = (60.25 + 62.38 + 65.32 + 61.41 + 63.23)/5
= 312.59/5
= 62.51
calculate standard deviation
= √( (1/(5 - 1)) * (60.25 - 62.51799)2 + (62.38 - 62.51799)2 +
(65.32 - 62.51799)2 + (61.41 - 62.51799)2 +
(63.23 - 62.51799)2)
= √( (1/4) * (-2.267992 + -0.137989992 + 2.802012 + -
Page 57
1.107992 + 0.712012))
= √( (1/4) * (5.14377 + 0.01904 + 7.85126 + 1.22764 +
0.50695))
= √ 3.68716 σ = 1.92
calculate coefficient of variance
Coefficient of Variance = (Standard Deviation (σ) / Mean (μ))
= 1.92 / 62.51
= 0.0307
alculate the Linear Regression whose input values are

X = [5,20,40,80,100] & Y = { 10,20,30,40,50}
a. 10.0914 + 0.3894 X
b. 10.9194 + 0.8934 X
c. 10.9194 + 0.3894 X
d. 10.9994 + 0.8934 X
Ans - c
Solution
Linear regression formula
Y = A + BX
To find X Mean
Total Inputs(N) =(5,20,40,80,100)
Total Inputs(N)=5
Mean(xm)= (x1+x2+x3...xn)/N
Mean(xm)= 245/5
Mean(xm)= 49
To find Y Mean
Total Inputs(N) =(10,20,30,40,50)
Total Inputs(N)=5
Mean(Ym)= (y1+y2+y3...yn)/N
Mean(Ym)= 150/5
Mean(Ym)= 30
To find Slope
Slope = (ΣXY - N x X x Y)/(ΣX2 - N x X)

= [(50+400+1200+3200+5000) - (5 x 30 x
49)]/[(25+400+1600+6400+10000) -( 5x492)]
= (9850 - 7350) /(18425 - 12005)
= 2500/6420
= 0.3894
To find Intercept Value:
A = Ybar - Slope x Xbar
= 30 - (0.3894 x 49)
= 10.9194.
To find Linear Regression:
Y = A + Bx
Answer = 10.9194 + 0.3894 X

Page 58
.............................................
Calculate the relative variability (coefficient of variance) for
the samples 60.25, 62.38, 65.32, 61.41, and
63.23 of a population
a. 0.0301
b. 0.0307
c. 0.0103
d. 0.0107
Ans - b
Solution
Mean = (60.25 + 62.38 + 65.32 + 61.41 + 63.23)/5
= 312.59/5
= 62.51
calculate standard deviation
= √( (1/(5 - 1)) * (60.25 - 62.51799)2 + (62.38 - 62.51799)2 +
(65.32 - 62.51799)2 + (61.41 - 62.51799)2 +
(63.23 - 62.51799)2)
= √( (1/4) * (-2.267992 + -0.137989992 + 2.802012 + -
1.107992 + 0.712012))
= √( (1/4) * (5.14377 + 0.01904 + 7.85126 + 1.22764 +
0.50695))
= √ 3.68716 σ = 1.92
calculate coefficient of variance
Coefficient of Variance = (Standard Deviation (σ) / Mean (μ))
= 1.92 / 62.51
= 0.0307
.............................................
Given,
Crores
80000 Crores
Calculate M1.
Ans - c
.............................................
Calculate M2.
Page 59

Ans - c
.............................................
Calculate broad money M3.
Ans - d
.............................................
Solution :
3
M1 = 230000+320000+420000
M1 = 970000
M2 = M1+Savings deposit of post office savings banks
So,
M2 = 970000+140000
M2 = 1110000 Crores
So,
M3 = 970000+360000
M3 = 1330000 Crores
A company has total assets at 1,50,000 and its total liabilities are
50,000. Based on the accounting
equation, we can assume the total equity is 1,00,000. Find the
Debt Ratio.
a. 0.33
b. 0.5
c. 0.67
d. 0.75
Ans - a
Solution :
DR = TL / TA
= 50000 / 150000
= 0.33
Asha wants to receive a fixed amount for 15 years by investing Rs.

9 lacs @ 9% roi. How much she will
receive annually?
a. 116153
b. 111563
c. 115163
d. 111653

Page 60
Ans - d
Explanation :
Here,
P = 9 lac
R = 9% p.a.
T = 15 yrs
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 900000 * 0.09 * 1.0915 ÷ (1.0915 – 1)
= 111653
Go through the following data and Ans wer the question.

1. Consumptions - Rs. 100000 Cr
2. Gross investment - Rs. 75000 Cr
3. Govt spending - Rs. 25000 Cr
4. Export - Rs. 100000 Cr
5. Import - Rs. 75000 Cr
6. Indirect Taxes - Rs. 15000 Cr
7. Subsidies(on production and import) - RS. 10000 Cr
8. Compensation of employee - Rs. 500 Cr

9. Property Income - Rs. 500 Cr
10.Total capital gains from overseas investment - Rs. 20000 Cr
11.Income earned by foreign national domestically - Rs. 10000 Cr
Calculate GDP
a. Rs. 220000 Cr
b. Rs. 225000 Cr
c. Rs. 230000 Cr
d. Rs. 235000 Cr
Ans - b
Solution :
GDP = Consumption + Gross investment + Government spending +
(Exports - Imports)
GDP = C+I+G+(X-M)
= 100000+75000+25000+(100000-75000)
= 225000
ABC & co's balance sheet included the following accounts:

Cash: 10,000
Accounts Receivable: 5,000
Inventory: 5,000
Stock Investments: 1,000
Prepaid taxes: 500
Current Liabilities: 15,000
Find the Quick Ratio
a. 1.02
b. 1.05
Page 61
c. 1.07
d. 1.09
Ans - c
Solution :
Quick Ratio = Cash + Cash Equivalents + Short Term Investments +
Marketable Securities + Accounts
Receivable) / Current Liabilities
= (10000+5000+1000) / 15000
= 16000 / 15000
= 1.07
.................................
ABC & co's balance sheet included the following accounts:
Inventory : 5,000
Prepaid taxes : 500
Total Current Assets : 21,500
Current Liabilities : 15,000
a. 1.02
b. 1.05
c. 1.07
d. 1.09
Ans - c
Solution :
Quick Ratio = (Current assets – Inventory - Advances -
Prepayments Current Liabilities) / Current
Liabilities
= (21500 - 5000 - 500) / 15000
= 16000 / 15000
= 1.07
If you wish an annuity to grow to Rs. 17000 over 5 years so that

you can replace your car, what monthly deposit would be required if you could invest @
12% compounded
monthly?
a. 208
b. 280
c. 204
d. 240
Ans - a
Explanation :
Here,
FV = 17000
T = 5 years = 60 months
R = 12% yearly = 0.01% monthly
P =?
FV = P / R * [(1+R)^T - 1]
17000 = P × (1.01^60 – 1) ÷ 0.01
Page 62
17000 = P × 81.6697
So,
P = 17000 / 81.6697 = 208
Given,
50000 Crores
Calculate M2.
Ans – d
Solution
M1 = 120000+200000+300000
M1 = 620000
So,
M2 = 620000+100000
M2 = 720000 Crores
The amount of term loan instalment is Rs 30000/- per month, Monthly average interest on
TL is Rs 15000/-. If the amount of depreciation is Rs 100000/- p.a and PAT is Rs 800000/-.
What would be the DSCR?
a. 1
b. 1.5
c. 2
d. 2.5
Ans - c
Let me Explain
Since DSCR = (interest + PAT + Depriciation) / (interest + instalment of TL)
= (15000×12 + 800000 + 100000)/(15000×12 + 30000×12)
= (180000 + 800000 + 100000) / (180000 + 360000)
= 1080000
Page 63
card is drawn at random from a deck of cards. Find the probability of getting 3 of diamond.
a. 1/52
b. 1/38
c. 3/56
d. 3/38
Ans - a
Since a pack consist 52 cards and among that cards there are 13 diamonds.
Now for same space, A card is drawn out of 52 cards i.e
n(S) = (52,a. = n(S) = 52
Now for event for occurring 3 of diamonds in one drawn out of 13 =
n(E) = 1
Hence probability of occurrence of getting 3 of diamond
P(E) = n(E)/n(S)
= 1/52
Summary of a Balance sheet of XYZ Company

Current Liabilities (in Crores)
Cash Credit - 3200
Trade Creditors - 9500
Other Current Liabilities - 2000
Total Current Liabilities - 14700
Current Assets (in Crores)
Cash - 5000
Inventory - 14000
Debtors - 4200
Other Current Assets - 2000
Total Current Assets - 25200
Find out
1. Current Ratio
a. 1.61
b. 1.71
c. 1.81
d. 1.91
Ans - b
Current Ratio = CA/CL = 25200/14700 = 1.71
2. Acid-Test Ratio
a. 0.71
Page 64
b. 0.76
c. 0.81
d. 0.86
Ans - b
Acid-Test Ratio = Quick Assets/CL = (CA-Inv)/CL = (25200-14000)/14700 = 11200/14700
=
0.76
3. Net Working Capital
a. 10000
b. 10500
c. 11000
d. 11500
Ans - b
Net Working Capital = CA - CL = 25200 - 14700 = 10500
4. Working Capital Gap
a. 12700
b. 13200
c. 13700
d. 14200
Ans - c
Working Capital Gap = CA - (CL - BB) = 25200 - (14700 - 3200(CC)) = 25200 - 11500 =
13700
5. MPBF as per Tandon Committee - Method-I
a. 10275
b. 10775
c. 13700
d. 17300
Ans - a
MPBF as per Tandon Committee - Method-I = WCG - 25% of WCG = 13700 - 25% of
13700 = 13700 - 3425 = 10275
6. MPBF as per Tandon Committee - Method-II
a. 6200
b. 6700
c. 7200
d. 7400
Ans - d
MPBF as per Tandon Committee - Method-II = WCG - 25% of CA = 13700 - 25% of 25200
= 13700 - 6300 = 7400
7. Current Ratio as per Tandon Committee - Method-I
a. 1.01
b. 1.06
c. 1.11
d. 1.16
Ans - d
Current Ratio as per Tandon Committee - Method-I = CA / (MPBF + Trade Creditors +
Other CL) = 25200 / (10275+9500+2000) = 25200 / 21725 = 1.16
8. Current Ratio as per Tandon Committee - Method-II
a. 1.07
Page 65
b. 1.09
c. 1.23
d. 1.33
Ans - d
Current Ratio as per Tandon Committee - Method-II = CA / (MPBF + Trade Creditors +
Other CL) = 25200 / (7400+9500+2000) = 25200 / 18900 = 1.33
9. Borrowing by the way of Cash Credit when compared with Tandon Committee -
Method-
I
a. 7025
b. 7075
c. 7125
d. 7175
Ans - b
Borrowing by the way of Cash Credit = 3200
MPBF as per Tandon Committee - Method-I = 10275
So, Borrowing by the way of Cash Credit is short by (10275 - 3200) = 7075 Crores
Method-II
a. 4200
b. 4600
c. 5000
d. 5400
Ans - a
MPBF as per Tandon Committee - Method-II = 7400
Find Correlation coefficient for X and Y values given below :
X= (1,2,3,4,5)
Y= {11,22,34,43,56}
a. 0.8899
b. 0.9989
c. 1.0899
d. 1.0989
Ans - b
Explanation :
Step 1: Find Mean for X and Y
X=15/5=3
Y=166/5=33.2
Step 2: Calculate Standard Deviation for Y inputs:
σx=
√(1/(N-1)*((x1-xm)2+(x2-xm)2+..+(xn-xm)2))
=√(1/(5-1)((11-33.2)2+(22-33.2)2+(34-33.2)2+(43-33.2)2+(56-33.2)2))
=√(1/4((-22.2)2+(-11.2)2+(0.8)2+(9.8)2+(22.8)2))
=√(1/4((492.84)+(125.44)+(0.64)+(96.04)+(519.84)))
=√(308.7)
=17.5699
Step 3: Standard Deviation for X Inputs:
Page 66
σx=
√(1/(N-1)*((x1-xm)2+(x2-xm)2+..+(xn-xm)2))
=√(1/(5-1)((1-3)2+(2-3)2+(3-3)2+(4-3)2+(5-3)2))
=√(1/4((-2)2+(-1)2+(0)2+(1)2+(2)2))
=√(1/4((4)+(1)+(0)+(1)+(4)))
=√(2.5)
=1.5811
Σ((X - μx) (Y - μy))
=(1-3)(11-33.2)+(2-3)(22-33.2)+(3-3)(34-33.2)+(4-3)(43-33.2)+(5-3)(56-33.2)
=(-2*-22.2) + (-1*-11.2) + (0* 0.8) + (1 *9.8) + (2* 22.8)
=44.4 + 11.2 + 0 + 9.8 + 45.6
=111
Correlation Coefficient = 111/((5-1)*1.5811*17.5699)
Correlation Coefficient (r) = 0.9989
Hence the correlation coefficient between the two given data set is 0.9989
.............................................
Calculate Standard Error from the given data : X = 10, 20,30,40,50
a. 6.1071
b. 6.0711
c. 7.1071
d. 7.0711
Ans - d
Explanation :
Total Inputs (N) = (10,20,30,40,50)
Total Inputs (N) =5
First find Mean:
Mean (xm) = (x1+x2+x3...xn)/N
Mean (xm) = 150/5
Mean (xm) = 30
Then find SD:
SD = √(1/(N-1)*((x1-xm)2+(x2-xm)2+..+(xn-xm)2))
= √(1/(5-1)((10-30)2+(20-30)2+(30-30)2+(40-30)2+(50-30)2))
= √(1/4((-20)2+(-10)2+(0)2+(10)2+(20)2))
= √(1/4((400)+(100)+(0)+(100)+(400)))
= √(250)
= 15.811
Then Find Standard Error:
Standard Error=SD / √(N)
= 15.8114/√(5)
= 15.8114/2.2361
= 7.0711
.............................................
A sack contains 4 black balls 5 red balls. What is probability to draw 1 black ball and 2 red
balls in one draw ?
a. 12/21
b. 9/20
c. 10/21
d. 11/20
Page 67
Ans – c
Solution :
Out of 9, 3 (1 black & 2 red. are expected to be drawn)
Hence sample space
n(S) = 9c3
= 9!/(6!×3!)
= 362880/4320
= 84
Now out of 4 black ball 1 is expected to be drawn hence
nb. = 4c1
=4
Same way out of 5 red balls 2 are expected be drawn hence
n(R) = 5c2
= 5!/(3!×2!)
= 120/12
= 10
Then P(B U R) = n(B)×n(R)/n(S)
i.e 4×10/84 = 10/21
…………………………………………………………………………………………………………
…………………………………
A company has net worth of Rs 5 lac , term liabilities are Rs 10 lac. Fixed Assets worth Rs
16 lac and current assets are Rs 25 lac. There is no intangible assets or the non current
assets. Calculate it's net working capital.
a. 1 lac
b. 2 lac
c. 3 lac
d. 4 lac
Ans - a
Here Net worth = capital + reserve = 5 lac
Since capital is a kind of liability hence liability = 5 lac
Liabilities = 10+5 = 15 lac
Assets= 16+25= 41 lac
But as per balance sheet Total assets = Total liabilities
Hence liabilities must be 41 lac also
In 41 lac ( 41-15= 26 ) i.e 26 lac will be CL
Hence NWC = CA-CL
= 1 lac
.............................................
A firm has the following financial figures from its balance sheet :
Capital→ Rs 12 lac
Reserve → Rs 4 lac
Unsecured loan→ Rs 5 lac
Current assets → Rs 16 lac
Pre operative expenses→ Rs 2 lac
Its net worth = ?
a. 12 lac
b. 14 lac
c. 16 lac
Page 68
d. 18 lac
Ans - b
.............................................
The balance sheet of a firm has shown total asset of Rs 20 lacs. The long term uses are
Rs 11 lacs and current ratio 1.5:1. What is the amount of current liabilities ?
a. Rs 11 lacs
b. Rs 9 lacs
c. Rs 7 lacs
d. Rs 6 lacs
Ans - d
…………………………………………………………………………………………………………
…………………………………
When the price of a product increases from 40 to 50, the demand for the product
decreases by 25%. What is the price elasticity of demand for the product?
a. 1
b. 1.5
c. 2
d. 2.5
Ans - a
Solution :
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
% Change in Quantity Demanded = 25
% Change in Price = 10/40*100 = 25
Price Elasticity of Demand = 25/25 = 1
…………………………………………………………………………………………………………
…………………………………
A sum of Rs. 25, 000 is borrowed over 8 years. What will be the monthly repayments @
18% compounded monthly?
a. 439
b. 493
c. 394
d. 349
Ans - b
Explanation :
Here,
PV = Rs. 25000
T = 8 years = 8 × 12 = 96 months
R = 18% = 18% ÷ 12 = 0.015% monthly
PV = P / R * [(1+R)^T - 1]/(1+R)^T
25000 = P × (1.01596 – 1) ÷ (0.015 × 1.01596)
25000 = P × 50.7017
P = 25000 / 50.7017
= 493
.............................................
An investment at 10% is compounded monthly, what shall be the effect interst rate for this?
a. 10.18 %
b. 10.25 %
c. 10.47 %
Page 69
d. 10.51 %
Ans - c
Solution :
= (1+0.10/12)^12-1
= 10.47
.............................................
Find the present value of quarterly payment of Rs. 250 for 5 years @ 12% compounded
quarterly.
a. 3179
b. 3019
c. 3109
d. 3719
Ans - d
Explanation :
Here,
P = Rs. 250
T = 5 years = 5 × 4 = 20 quarters
R = 12% = 12% ÷ 4 = 0.03% quarterly
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV = 250 × (1.0320 – 1) ÷ (0.03 × 1.0320)
= 3719
.............................................
What is the discount factor for Re. 1 to be received at the end of 2 yr with prevalent rate of
8% ?
a. 0.890
b. 0.873
c. 0.857
d. 0.842
Ans - c
Solution :
= 1/(1+r)n
= 1/(1.08)^2
= 0.857
.............................................
A quarterly repayments of a loan carry an interest rate of 8 % per annum. What is the
effective annual interest rate?
a. 8.4 %
b. 8.2 %
c. 8.3 %
d. 8.5 %
Ans - b
Solution :
EAR i = (1 + r/m)^m - 1]
= (1+8/4)^4-1)
= 8.2
............................................
You are receiving Rs. 10000 every year for the next 5 years (at the end of the period) and
you invest each payment @ 5%. How much you would have at the end of the 5-year
Page 70
period?
a. 55526
b. 55652
c. 55265
d. 55256
Ans - d
Explanation :
Here,
P = 10000
R = 5% p.a.
T = 5 yrs
If invested at the end,
FV = P / R * [(1+R)^T - 1]
FV = 10000 × (1.05^5 – 1) ÷ 0.05
= 55256
…………………………………………………………………………………………………………
…………………………………
Ratio Analysis - Liquidity Ratios
-------------------------------------
Calculate Current Ratio from the following information:
Inventories - 50,000
Trade receivables - 50,000
Advance tax - 4,000
Cash and cash equivalents - 30,000
Trade payables - 1,00,000
Short-term borrowings (bank overdraft) - 4,000
a. 1:1.21
b. 1:1.29
c. 1.21:1
d. 1.29:1
Ans - d
Solution:
Current Ratio = Current Assets/Current Liabilities
Current Assets = Inventories + Trade receivables + Advance tax + Cash and cash
equivalents
= Rs. 50,000 + Rs. 50,000 + Rs. 4,000 + Rs. 30,000
= Rs. 1,34,000
Current Liabilities = Trade payables + Short-term borrowings
= Rs. 1,00,000 + Rs. 4,000
= Rs. 1,04,000
Current Ratio = Rs.1,34,000/Rs.1,04,000
=1.29:1
.......................................
Calculate the current ratio from the following information:
Total assets = Rs. 3,00,000
Non-current liabilities = Rs. 80,000
Shareholders’ Funds = Rs. 2,00,000
Non-Current Assets:
Page 71
Fixed assets = Rs. 1,60,000

Non-current Investments = Rs. 1,00,000
a. 1:1.5
b. 1:2
c. 1.5:1
d. 2:1
Ans - d
Solution:
Total assets = Non-current assets + Current assets
Rs. 3,00,000 = Rs. 2,60,000 + Current assets
Current assets = Rs. 3,00,000 – Rs. 2,60,000 = Rs. 40,000
Total assets = Equity and Liabilities
= Shareholders’ Funds + Non-current liabilities + Current liabilities
Rs. 3,00,000 = Rs. 2,00,000 + Rs. 80,000 + Current Liabilities
Current liabilities = Rs. 3,00,000 – Rs. 2,80,000 = Rs. 20,000
Current Ratio = Current Assets/Current Liabilities
= Rs. 40,000/Rs. 20,000
= 2:1
.......................................
Calculate quick ratio from the following information:
Inventories - 50,000
Trade receivables - 50,000
Advance tax - 4,000
Cash and cash equivalents - 30,000
Trade payables - 1,00,000
Short-term borrowings (bank overdraft) - 4,000
a. 1:0.66
b. 1:0.77
c. 0.66:1
d. 0.77:1
Ans - d
Solution:
Quick Ratio = Quick Assets/Current Liabilities
Quick Assets = Current assets – (Inventories + Advance tax)
= Rs. 1,34,000 – (Rs. 50,000 + Rs. 4,000)
= Rs. 80,000
Current Liabilities = Trade payables + Short-term borrowings
= Rs. 1,00,000 + Rs. 4,000
= Rs. 1,04,000
Quick Ratio = Rs. 80,000/Rs. 1,04,000
= 0.77:1
.......................................
Calculate ‘Liquidity Ratio’ from the following information:
Current liabilities = Rs. 50,000
Current assets = Rs. 80,000
Inventories = Rs. 20,000
Advance tax = Rs. 5,000
Prepaid expenses = Rs. 5,000
Page 72
a. 1:1.5
b. 1:1.33
c. 1:1
d. 1.33:1
Ans - c
Solution :
Liquidity Ratio = Liquid Assets/Current Liabilities
Liquidity Assets = Current assets –(Inventories + Prepaid expenses + Advance tax)
= Rs. 80,000 – (Rs. 20,000 + Rs. 5,000 + Rs. 5,000)
= Rs. 50,000
Liquidity Ratio = Rs. 50,000/Rs. 50,000
= 1:1
.......................................
X Ltd., has a current ratio of 3.5:1 and quick ratio of 2:1. If excess of current assets over
quick assets represented by inventories is Rs. 24,000, calculate
current assets and current liabilities.
a. 42000, 12000
b. 49000, 14000
c. 56000, 16000
d. 63000, 18000
Ans - c
Solution :
Current Ratio = 3.5:1
Quick Ratio = 2:1
Let Current liabilities = x
Current assets = 3.5x
and Quick assets = 2x
Inventories = Current assets – Quick assets
24,000 = 3.5x – 2x
24,000 = 1.5x
x = Rs.16,000
Current Liabilities = Rs.16,000
Current Assets = 3.5x = 3.5 × Rs. 16,000 = Rs. 56,000.
Verification :
Current Ratio = Current assets : Current liabilities
= Rs. 56,000 : Rs. 16,000
= 3.5 : 1
Quick Ratio = Quick assets : Current liabilities
= Rs. 32,000 : Rs. 16,000
=2:1
…………………………………………………………………………………………………………
…………………………………
When the price of a product increases by 20%, the demand for the product decreases for
800 to 600. What is the price elasticity of demand for the product?
a. 1
b. 1.25
c. 1.5
d. 1.75
Page 73
Ans - b
Solution :
% Change in Quantity Demanded = 200/800*100 = 25
% Change in Price = 20
Price Elasticity of Demand = 25/20 = 1.25
.............................................
At Rs. 20 demand for sugar is 300 Kg. When the price falls to Rs. 18, the demand
increases to 390 Kg. The price elasticity of demand of sugar is ......
a. 2
b. 2.5
c. 3
d. 3.5
Ans - c
Solution :
% Change in Price = 2/20*100 = 10
.............................................
When pizza prices rise 40%, the quantity of pizzas supplied rises by 26%. Calculate the
price elasticity of supply.
a. 0.50
b. 0.65
c. 0.75
d. 0.85
Ans - b
Solution :
Price Elasticity of Supply = (% change in quantity supplied. / (% change in price)
= 26/40 = 0.65
.............................................
When the price of a commodity falls from Rs. 75 per unit to Rs. 60 per unit, the quantity
supplied falls by 40%. Calculate the price elasticity of supply.
a. 1
b. 1.5
c. 2
d. 2.5
Ans - c
Solution :
Price Elasticity of Supply = (% change in quantity supplied) / (% change in price)
= 40/(75-60)*100/75
= 40/15*100/75
= 40/20
=2
.............................................
When chicken prices rise 40%, the quantity of KFC fried chicken supplied rises by 30%.
Calculate the price elasticity of supply.
a. 0.50
Page 74
b. 0.65
c. 0.75
d. 0.85
Ans - c
Solution :
B is the right ans.
= 30/40 = 0.75
…………………………………………………………………………………………………………
…………………………………
While releasing the data relating to inflation increased by the Govt, it is observed that
1) The consumer price index based inflation increased to 11% and
2) Whole sale price index based inflation increased to 8%
3) The govt. claims that due to implementation of Banks Bi-partite Settlement, there is
increase in demand of goods and services leading to increase in consumer prices.
4) Further due to increased wages and salaries, there is increase in cost of inputs leading
to increase in whole-sale price index.
Answer the following questions, based on the above information.
1. The inflation caused by the the information given at point no.3 in the question, is not
called as ...... (i) Core inflation, (ii) Demand Pull inflation (iii) Cost-push inflation
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - b
2. The inflation rate of 8%, represented by the whole sale price, is called:
a. Core inflation
b. Headline inflation
c. Demand Pull inflation
d. Cost-push inflation
Ans - b
3. The inflation rate 11% represented by the consumer price, is called:
a. Core inflation
Ans - a
4. The inflation caused by the information given at point no.4 in the question, is not called
as ...... (i) Core inflation, (ii) Demand Pull inflation (iii) Cost-push inflation
Ans - a
…………………………………………………………………………………………………………
…………………………………
Calculate Inflation, if Price index in current year is 15 and price index in base year is 12.
a. 20
Page 75
b. 25
c. 30
d. 35
Ans - b
solutions :
Inflation = (price index in current year-price index in base year)/(price index in base year)
*100
= (15-12)/12*100
= 3/12*100
= 25
.............................................
Calculate Inflation, if Price index in current year is 13 and price index in base year is 10.
a. 20
b. 25
c. 30
d. 35
Ans - c
solutions :
Inflation = (price index in current year-price index in base year)/(price index in base year)
*100
= (13-10)/10*100
= 3/10*100
= 30
…………………………………………………………………………………………………………
…………………………………
Given,
Market loans - Rs. 500 Crores
Recoveries of short term loans and advances from states and loans to govt servents - Rs.
600 Crores
Calculate Total Receipt ...
a. Rs 5700 Crores
b. Rs 9900 Crores
c. Rs 10300 Crores
d. Rs 11700 Crores
Ans – c
Solution :
Total Receipt = Total Revenue Receipt + Capital Receipt + Draw down cash balance
Let us first calculate Total Revenue Receipt,
Page 76
Total Revenue Receipt=Net Tax Revenue + Total Non Tax Revenue

= 1000 + 3000
= 4000 Crores
Now, let us calculate Capital Receipt,
Capital Receipt = Non Debt Receipt + Debt Receipt
Let us first calculate Non Debt Receipt,
Non Debt Receipt = Recoveries of loan & advances (deduct recoveries of short term loans
& advance from state and loans to govt servants) +
MISC
Capital receipts
= 1200-600+600
= 1200 Crores
Now, let us calculate Debt receipt,
Debt Receipt = Market Loans + Short Term Borrowings + External assistance (NET) +
Securities issued against Small savings + State provident fund + other
Receipts(Net)
= 500 + 800 + 300 + 300 + 400 + 800
= 3100 Crores
= 1200 + 3100
= 4300 Crores
So,
Total Recepipt = Total Revenue Receipt + Capital Receipt + Draw down cash balance
= 4000 + 4300 + 2000
= 10300 Crores
.............................................
Given,
Corporation tax - Rs. 500 Crores
Income tax - Rs. 400 Crores
Other taxes and duties - RS. 200 Crores
Customs - RS. 500 Crores
Union exercise tax - Rs. 400 Crores
Service tax - Rs. 700 Crores
Tax of union territories- Rs. 200 Crores
Interst receipt - Rs. 500 Crores
Devident & profit - Rs. 800 Crores
External grant - Rs. 200 Crores
Other non tax revenue - Rs. 900 Crores
State Share - Rs. 500 Crores
Receipt of union territories - Rs. 700 Crores
Trf to NCCD (National calamity Contingency fund. - Rs. 200 Crores
Calculate Net Tax revenue ...
a. Rs 1900 Crores
b. Rs 2200 Crores
c. Rs 2900 Crores
d. Rs 3800 Crores
Ans - b
Solution :
Page 77
Net Tax Revenue = Gross tax revenue - NCCD transferred to the National Calamity
Contingency fund - state share
Gross Tax revenue = Corporation Tax + Income tax + other tax & duties + customs +
union
excise duties + service Tax + taxes on union territories
= 500+400+200+500+400+700+200
= 2900 Crores
= 2900-200-500
= 2200 Crores
.............................................
Given,
calculate Total Revenue Receipt ...
a. Rs 5100 Crores
b. Rs 5300 Crores
c. Rs 5500 Crores
d. Rs 5700 Crores
Ans - b
Solution :
Total Revenue Receipt = Net Tax Revenue + Total Non Tax Revenue
Let us first calculate Net Tax Revenue,
NTR=GTR-NCCD-State share
union
= 500+400+200+500+400+700+200
= 2900 Crores
Net Tax Revenue = Gross tax revenue - NCCD - state share
= 2900-200-500
= 2200 Crores
Now, let us calculate Total Non Tax Revenue,
Total Non Tax Revenue = Interest Receipt + Dividen
Given,
Page 78

600 Crores
Calculate Total Receipt ...
a. Rs 5700 Crores
b. Rs 9900 Crores
c. Rs 10300 Crores
d. Rs 11700 Crores
Ans – c
Solution :
Total Receipt = Total Revenue Receipt + Capital Receipt + Draw down cash balance
Let us first calculate Total Revenue Receipt,
Total Revenue Receipt=Net Tax Revenue + Total Non Tax Revenue
= 1000 + 3000
= 4000 Crores
Now, let us calculate Capital Receipt,
& advance from state and loans to govt servants) +
MISC
Capital receipts
= 1200-600+600
= 1200 Crores
Debt Receipt = Market Loans + Short Term Borrowings + External assistance (NET) +
Receipts(Net)
= 500 + 800 + 300 + 300 + 400 + 800
= 3100 Crores
= 1200 + 3100
= 4300 Crores
So,
Total Recepipt = Total Revenue Receipt + Capital Receipt + Draw down cash balance
= 4000 + 4300 + 2000
= 10300 Crores
.............................................
Page 79
Given,
Calculate Net Tax revenue ...
a. Rs 1900 Crores
b. Rs 2200 Crores
c. Rs 2900 Crores
d. Rs 3800 Crores
Ans - b
Solution :
union
= 500+400+200+500+400+700+200
= 2900 Crores
= 2900-200-500
= 2200 Crores
.............................................
Given,
Page 80

calculate Total Revenue Receipt ...
a. Rs 5100 Crores
b. Rs 5300 Crores
c. Rs 5500 Crores
d. Rs 5700 Crores
Ans - b
Solution :
Let us first calculate Net Tax Revenue,
NTR=GTR-NCCD-State share
union
= 500+400+200+500+400+700+200
= 2900 Crores
Net Tax Revenue = Gross tax revenue - NCCD - state share
= 2900-200-500
= 2200 Crores
Now, let us calculate Total Non Tax Revenue,
Total Non Tax Revenue = Interest Receipt + Dividend & profit + External grants + other
Non-Tax revenue + Receipt of union territories
= 500+800+200+900+700
= 3100 Crores
So,
Total Revenue Receipt = 2200 + 3100
= 5300 Crores
.............................................
Given,
600 Crores
a. Rs 2700 Crores
b. Rs 3900 Crores
c. Rs 4300 Crores
d. Rs 5100 Crores
Page 81
Ans - c
Solution :
& advance from state and loans to govt servants) + Misc Capital receipts
= 1200-600+600
= 1200 Crores
Debt Receipt = Market Loans + Short Term Borrowings + External assistance(NET) +
Receipts(Net)
= 500 + 800 + 300 + 300 + 400 + 800
= 3100 Crores
= 1200 + 3100
= 4300 Crores
…………………………………………………………………………………………………………
…………………………………
All deposit with post office savings bank excluding NSCs - Rs. 50000 Crores
Calculate M2.
Ans – d
Solution
M1 = currency with public + demand deposit with the banking system + other deposits with
RBI
M1 = 120000+200000+300000
M1 = 620000
So,
M2 = 620000+100000
M2 = 720000 Crores
.............................................
Given,
Page 82

Ans - d
Solution :
RBI
M1 = 120000+200000+300000
M1 = 620000
So,
M3 = 620000+250000
M3 = 870000 Crores
.............................................
Given,
Calculate M4.
Ans - b
Solution :
M4 = M3+All deposit with post office savings bank excluding NSCs
RBI
M1 = 90000+180000+260000
M1 = 530000
So,
M3 = 530000+220000
M3 = 750000 Crores
So,
M4 = M3+All deposit with post office savings bank excluding NSCs
M4 = 750000+50000
M4 = 800000 Crores
.............................................
Given,
Page 83

Calculate M2.
Ans - c
Solution :
RBI
M1 = 250000+400000+600000
M1 = 1250000
So,
M2 = 1250000+200000
M2 = 1450000 Crores
.............................................
Given,
Ans - c
Solution :
RBI
M1 = 250000+400000+600000
M1 = 1250000
So,
M3 = 1250000+500000
M3 = 1750000 Crores
…………………………………………………………………………………………………………
…………………………………
Go through the following data and answer the question.
Page 84

Calculate GDP
a. Rs. 220000 Cr
b. Rs. 225000 Cr
c. Rs. 230000 Cr
d. Rs. 235000 Cr
Ans - b
Solution :
GDP = Consumption + Gross investment + Government spending + (Exports - Imports)
GDP = C+I+G+(X-M)
= 100000+75000+25000+(100000-75000)
= 225000
.............................................
Given,
4. Export - Rs. 90000
5. Import - Rs. 60000
Calculate GDP at cost factor
a. Rs. 125000
b. Rs. 130000
c. Rs. 135000
d. Rs. 140000
Ans - c
Solution :
GDP = C+I+G+(X-M)
= 50000+40000+10000+(90000-60000)
= 130000
GDP at factor rate
= 130000-(10000-5000)
Page 85
= 135000
.............................................
Go through the following data and answer the questions (all in Indian Rupees in Crores)
4. Export - Rs. 90000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
Calculate GNP
a. Rs. 110000
b. Rs. 120000
c. Rs. 130000
d. Rs. 140000
Ans – d
Solution :
GDP = C+I+G+(X-M)
= 50000+40000+10000+(90000-60000)
= 130000
GNP=GDP+NR(total capital gains from Overseas investment-income earned by foreign
national domestically)
= 130000 + (15000-5000)
= 140000
.............................................
Calculate GNP
a. Rs. 220000 Cr
b. Rs. 225000 Cr
c. Rs. 230000 Cr
Page 86
d. Rs. 235000 Cr
Ans - d
Solution :
GDP = C+I+G+(X-M)
= 100000+75000+25000+(100000-75000)
= 225000
= 225000 + (20000-10000)
= 235000
.............................................
a. Rs. 220000 Cr
b. Rs. 225000 Cr
c. Rs. 230000 Cr
d. Rs. 235000 Cr
Ans - a
Solution :
GDP = C+I+G+(X-M)
= 100000+75000+25000+(100000-75000)
= 225000
GDP at factor rate
= 225000-(15000-10000)
= 220000
…………………………………………………………………………………………………………
…………………………………
A 3 year bond with par value Rs. 1000 has Coupon rate 12%. If the required rate of return
is 10% and interest is payable semi - annually, find the value of the bond.
a. 1020
b. 1030
c. 1040
d. 1050
Page 87
Ans - d
Explanation :
so Coupon = 1000 × 12% ÷ 2 = 60,
YTM = 10%/2 = 0.05,
T = 3 × 2 = 6 years
So, price = 1050
.............................................
Assume that you have a 6% Coupon console bond. The original face value is Rs. 1000
and the interest rate is 9%. Find the current value of this bond.
a. 567
b. 576
c. 667
d. 676
Ans - c
Explanation :
Current value of console bond
= Coupon ÷ interest rate
= 60 ÷ 0.09
= Rs. 667
.............................................
Current yield on an 8% Rs. 100 bond is 7.5%. The price of the bond is ......
a. 104.67
b. 105.67
c. 106.67
d. 107.67
Ans - c
Explanation :
(Here, t = 1
So, price
= (Coupon + Face Value) ÷ (1 + R)
= (8 + 100) ÷ 1.075 = 100.465)
But, since Coupon Interest = Current Yield × Current Market Price
So, Price = 8 ÷ 7.5% = 8000 ÷ 75 = 106.67
.....................................
Calculate the present value of 6 year bond with 9 per cent coupon rate with FV Rs. 1000/-.
Current interest rate is 12 per cent.
a. Rs.843.83
b. Rs.1025.57
c. Rs.876.66
d. Rs.768.68
Ans - c
Solution
FV = 1000
Coupon Rate (CR) = 0.9%
t = 6 year
R (YTM) = 0.12
Page 88
Annual interest rate payable=1000*9%=90

Principal repayment at the end of 6 year = Rs. 1000
=90 (PVIFA, 12%,6 years)+1000(PVIF,12%, 6 Years)
PVIFA= ((1+r)^t -1)/ r+ PVIF=1/(1+R)^t
=90(1.12^6-1/0.12*(1.12)^6+1000(1/1.12^6)
=90*1.97382-1/0.12*1.1.97382+1000(1/1.97382)
=90*0.97382/0.12*1.97382+1000*0.0.50663
=90*0.97382/0.23685+506.63
=90*4.11154+506.63
=370.03+506.63
=876.66
.............................................
A bond has been issued for a 10 year 12% coupon bond. The face value of the bond is Rs
1000.00 and the bond makes annual coupon payments. If the bond is trading at Rs 967.25
, what is the bond's yield to maturity?
a. 12.00%
b. 12.59%
c. 11.26%
d. 13.27%
Ans - a
........................................................
ABC Corporation has just issued a 10 year 12% bond. The face value of the bond is Rs
1000.00 and the bond makes semiannual coupon payments. If the bond is trading at Rs
867.25, what is the bond's YTM?
a. 12.00%
b. 12.37 %
c. 14.56%
d. 10.86%
Ans - c
........................................................
The real return is 10% and the expected rate of return is 4.5% . What is the nominal rate
of
return?
a. 4.50%
b. 14.95%
c. 10.00%
d. 8.69%
Ans – b
…………………………………………………………………………………………………………
…………………………………
Ratio Analysis - Solvency Ratios
---------------------------------------
A company has 1,00,000 of bank lines of credit and a 5,00,000 mortgage on its property.
The shareholders of the company have invested 12,00,000. Calculate the debt to equity
ratio.
DER = TL / Total Equity
= (100000+500000) / 1200000
= 600000 / 1200000
Page 89
= 0.5
.................................
A company has total assets at 1,50,000 and its total liabilities are 50,000. Based on the
accounting equation, we can assume the total equity is 1,00,000. Find the Equity Ratio.
ER = Total Equity / TA
= 100000 / 150000
= 0.67
.................................
accounting equation, we can assume the total equity is 1,00,000. Find the Debt Ratio.
DR = TL / TA
= 50000 / 150000
= 0.33
.................................
The shareholders of the company have invested 12,00,000. Calculate the debt to equity
ratio.
a. 0.25
b. 0.5
c. 0.75
d. 1
Ans - b
Solution :
= (100000+500000) / 1200000
= 600000 / 1200000
= 0.5
.................................
accounting equation, we can assume the total equity is 1,00,000. Find the Equity Ratio.
a. 0.33
b. 0.5
c. 0.67
d. 0.75
Ans – c
Solution :
= 100000 / 150000
= 0.67
.............................................
In balance sheet, amount of total assets is Rs 10 lac, current liabilities Rs 5 lac and capital
and reserves Rs 2 lac. What is the debt-equity ratio?
a. 1:1
b. 1.5:1
c. 1.75:1
d. 2:1
Ans - b
Let me Explain
Page 90
As per Balance sheet rule Total assets = Total liabilities

Since total assets here is Rs 10 lac hence total liabilities must be 10 lac.
Now Long term debt = 10-(5+2) = 3 lac and capital + reserve(TNW i.e tangible net worth)
=
2 lac
Since DER = TL/TNW or debt/equity or TL/equity hence 3/2 = 1.5 : 1
.............................................
DER is 3:1, the amount of total assets Rs 20 lac, current ratio is 1.5:1 and owned funds
Rs
3 lac. What is amount of current assets?
a. 3 lac
b. 5 lac
c. 12 lac
d. 15 lac
Ans - c
Let me Explain
Owned fund = equity = 3 lac
Since DER = 3:1
i.e Debt : equity = 3:1
Hence Debt = 9 lac
(if we consider debt and equity as long term liabilities then term liability works out to
12(9+3 lac)
Here total assets is 20 lac
Now as per balance sheet equation total Assets = total liabilities
Hence here total liabilities will also be 20 lac.
Now as the term liabilities is Rs 12 lac, current liabilities will be Rs 8 lac (20-12=8)
CR=1.5:1, so
1.5:1=CA:8
i.e CA= 1.5×8=12 lac
.............................................
and reserves Rs 2 lac. What is the debt-equity ratio?
a. 1:1
b. 1.5:1
c. 1.75:1
d. 2:1
Ans - d
Let me Explain
= 5 lac
Since DER = TL/TNW or debt/equity or TL/equity hence 10/5 = 2 : 1
.............................................
DER is 2:1, the amount of total assets Rs 40 lac, current ratio is 1:1 and owned funds Rs
10 lac. What is amount of current assets?
a. 8 lac
b. 10 lac
Page 91
c. 12 lac
d. 15 lac
Ans - b
Let me Explain
Since DER = 2:1
Hence Debt = 20 lac
(if we consider debt and equity as long term liabilities then term liability works out to 30
(20+10 lac)
Now as the term liabilities is Rs 30 lac, current liabilities will be Rs 10 lac (40-30=10)
CR=1:1, so
1:1=CA:10
i.e CA= 1x10=10lac,
As on end of previous financial year, XYZ Bank has :
Total Advances - Rs. 80,000 Cr
ANBC (Adjusted Net Bank Credit) - Rs. 75000 Cr
Agriculture Advances - Rs. 13500 Cr
MSE Advances - 5000 Cr
Weaker Section Advances - Rs. 8500 Cr
Total Priority Sector Advances - Rs. 29000 Cr
Answer the following based of the above information
Whether the Bank has achieved the target for Agriculture Advances?
a. Yes. The Bank has just achieved the target
b. Yes. the Bank has exceeded the target
c. No. The Bank has defaulted in achieving the target
d. No such target for Agriculture Advances
Ans - a
.............................................
Whether the Bank has achieved the target for MSE Advances?
Ans - d
.............................................
Whether the Bank has achieved the target for Weaker Section Advances?
Ans - b
.............................................
Whether the Bank has achieved the target for Priority Sector Advances?
Page 92

Ans - c
…………………………………………………………………………………………………………
…………………………………
The amount of term loan installment is Rs 10000/- per month, monthly average interest on
a. 1.75
b. 2
c. 1.65
d. 1.33
Ans - b
Let me Explain
Hence (5000×12 + 270000 + 30000)/(5000×12 + 10000×12)
i.e 360000/18000
i.e 2
.............................................
a. 1
b. 1.5
c. 2
d. 2.5
Ans - c
Let me Explain
Since DSCR = (interest + PAT + Depriciation) / ( interest + instalment of TL )
= (10000×12 + 300000 + 30000)/(10000×12 + 15000×12)
= (120000 + 330000) / (120000 + 180000)
= 450000/300000
= 1.5
.............................................
a. 1.75
b. 2
c. 1.65
d. 1.33
Ans - b
Let me Explain
DSCR = (7500×12 + 350000 + 100000)/(7500×12 + 15000×12)
= (90000 + 350000 + 100000) / (90000 + 180000)
= 540000 / 270000
Page 93
=2
.............................................
a. 1
b. 1.5
c. 2
d. 2.5
Ans - c
Let me Explain
= (15000×12 + 800000 + 100000)/(15000×12 + 30000×12)
= (180000 + 800000 + 100000) / (180000 + 360000)
= 1080000 / 540000
=2
…………………………………………………………………………………………………………
…………………………………
card is drawn at random from a deck of cards. Find the probability of getting 3 of diamond.
a. 1/52
b. 1/38
c. 3/56
d. 3/38
Ans - a
Since a pack consist 52 cards and among that cards there are 13 diamonds.
Now for same space, A card is drawn out of 52 cards i.e
n(S) = (52,a. = n(S) = 52
Now for event for occurring 3 of diamonds in one drawn out of 13 =
n(E) = 1
Hence probability of occurrence of getting 3 of diamond
P(E) = n(E)/n(S)
= 1/52
........................................................
A jar contains 3 red marbels , 7 green marbels and 10 white marbles. If a marble is drawn
at random , What is the probability that marble drawn is white ?
a. 2/5
b. 1/2
c. 3/8
d. 10/13
Ans - b
........................................................
An urn contains 10 black balls and 5 white balls. 2 balls are drawn from the urn one after
other without replacement. What is the probability that both drawn are black ?
a. 2/7
b. 3/7
3 4/7
d. 6/7
Ans - b
Page 94
........................................................
A jar contains 3 red marbels, 7 green marbels and 10 white marbles. If a marble is drawn
at random, What is the probability that marble drawn is white?
a. 2/5
b. 1/2
c. 3/8
d. 10/13
Ans – 2
Solution :
Here Red = 3
Green = 7
White = 10
Hence total sample space is (3+7+10)= 20
Out of 20 one ball is drawn n(S) = {c(20,a.} = 20
To find the probability of occurrence of one White marble out of 10 white ball
n(R)={c(10,a.} = 10
Hence P(R) = n(R)/n(S)
= 10/20 = 1/2
........................................................
We have six students say A, B, C, D, E, F participating in a quiz contest. Out of six
students only two can reach to the final. What is the probability of reaching to the final of
each student ?
a. 1/2
b. 2/3
c. 1/3
d. 1/6
Ans – c
Since out of 6, 2 can reach the final. Hence sample space is
n(S) = 6 c2 = 6!/(6-b.!×2! = 15
Here event of occurrence of probability of each student out of six (A B C D E F) = (AB AC
AD AE AF) = n(E) = 5
Now P(E) = 5/15 = 1/3
........................................................
An bag contains 10 black balls and 5 white balls. 2 balls are drawn from the bag one after
other without replacement. What is the probability that both drawn are black ?
a. 2/7
b. 3/7
c. 4/7
d. 6/7
Ans - 2
Solution :
Let E and F denote respective events that first and second ball drawn are black.
We have to find here P(E), P(E/F) and P(E n F )
Now P(E) = P(Black in first drawn) = 10/15
Also given that the first ball is drawn i.e events E has occurred. Now there are 9 black
balls
and 5 white balls left in the urn. Therefore the probability that the second ball drawn is
black, given that the ball first drawn is black nothing but conditional probability of F given
Page 95
that E has occurred already.

Hence P(E/F) = 9/14
Now by the multiplication rule of probability
P(E n F) = P(E) × P(E/F)
= 10/15 × 9/14 = 3/7
…………………………………………………………………………………………………………
…………………………………
A firm has Capital of Rs. 200, Reserve Rs. 230 Term Loan of Rs. 180, Advance from
customers Rs. 40, sundry creditor Rs. 100, Bank CC limit balance Rs. 400, Fixed Assets
Rs. 300, Preliminary expenses Rs. 80, Debit balance of profit and loss account balance
Rs. 30, advance tax paid Rs. 20, cash on hand Rs. 20, Stock Rs. 400 and sundry creditor
Rs. 300. on the basis of the above information:
01. Tangible Net worth of the firm
a. Rs. 430
b. Rs. 200
c. Rs. 350
d. Rs. 320
Ans - d
Solution
Tangible Networth= Networth-inttengible assets
Capital+reserve-(preliminary expeses+p&L debit balance)
= 200+230-(80+30)
= 430-110
= 320
.........................
02. in the above problem, the current ratio would be ......
a. 1.25:1
b. 1.28:1
c. 1.33:1
d. 1.37:1
Ans - d
Solution
Current Ratio=Current Assets / Current Liabilities
CA=(20+20+400+300)=740
CL=(40+100+400)=540
= 740/540
= 1.37:1
.........................
03. in the above problem, the total outside liabilities to tangible netwoth ......
a. 1:1
b. 1.8:1
c. 2.1:1
d. 2.25:1
Ans - d
Solution
Total outsiders liabilities/Tangible networth
=720/320
=2.25:1
Page 96
.........................
04. if the sales are Rs. 2000, stock turnover Ratio is ......
a. 5 times
b. 6 times
c. 3 times
d. 2 times
Ans - a
Solution
Stock turn over ratio= Sales/stock
=2000/400
=5 times
.........................
05. if the sales are Rs. 3000, the debt collection period and debit turnover ratio would
be ......
a. 1 month and 12 times
b. 1.2 month and 10 times
c. 1.5 month and 8 times
d. 2 month and 6 times
Ans - b
Solution
Debt Collection period = No. days or months or Weeks in a year/Debt Turnover Ratio.
12 month in year
=12/10
= 1.2
Debtors Turnover Ratio = Net Credit Sales / Average Debtors.
=3000/300
=10 times
1.2 month and 10 times
…………………………………………………………………………………………………………
…………………………………
As on end of previous financial year, XYZ Bank has :
Total Advances - Rs. 80,000 Cr
ANBC (Adjusted Net Bank Credit) - Rs. 75000 Cr
Agriculture Advances - Rs. 13500 Cr
MSE Advances - 5000 Cr
Weaker Section Advances - Rs. 8500 Cr
Total Priority Sector Advances - Rs. 29000 Cr
Answer the following based of the above information
What is the target for Agriculture Advances in terms of amount?
a. 12500
b. 13000
c. 13500
d. 14000
Ans - c
.............................................
What is the target for MSE Advances in terms of amount?
a. 7500
b. 9000
Page 97
c. 10500
d. No such target for MSE
Ans - d
.............................................
What is the target for Weaker Section Advances in terms of amount?
a. 7500
b. 9000
c. 10500
d. 12000
Ans – a
.............................................
What is the target for Priority Sector Advances in terms of amount?
a. 15000
b. 22500
c. 30000
d. 37500
Ans – c
…………………………………………………………………………………………………………
…………………………………
Summary of a Balance sheet of XYZ Company
Current Liabilities (in Crores)
Cash Credit - 800
Trade Creditors - 4500
Other Current Liabilities - 1200
Total Current Liabilities – 6500
Current Assets (in Crores)
Cash - 1500
Inventory - 5000
Debtors - 1400
Other Current Assets - 600
Total Current Assets - 8500
Find out
1. Current Ratio
a. 1
b. 1.31
c. 1.5
d. 2
Ans - b
Current Ratio = CA/CL = 8500/6500 = 1.31
2. Acid-Test Ratio
a. 0.33
b. 0.54
c. 0.66
d. 0.75
Ans - b
Acid-Test Ratio = Quick Assets/CL = (CA-Inv)/CL = (8500-5000)/6500 = 3500/6500 = 0.54
3. Net Working Capital
a. 2000
Page 98
b. 3500
c. 6500
d. 8500
Ans - a
Net Working Capital = CA - CL = 8500 - 6500 = 2000
4. Working Capital Cap
a. 1400
b. 2800
c. 5700
d. 6500
Ans - b
Working Capital Cap = CA - (CL - BB) = 8500 - (6500 - 800(CC)) = 8500 - 5700 = 2800
5. MPBF as per Tandon Committee - Method-I
a. 700
b. 1400
c. 2100
d. 3000
Ans - c
MPBF as per Tandon Committee - Method-I = WCG - 25% of WCG = 2800 - 25% of 2800
= 2800 - 700 = 2100
6. MPBF as per Tandon Committee - Method-II
a. 675
b. 750
c. 875
d. 950
Ans - a
MPBF as per Tandon Committee - Method-II = WCG - 25% of CA = 28000 - 25% of 8500
=
2800 - 2125 = 675
7. Current Ratio as per Tandon Committee - Method-I
a. 1
b. 1.09
c. 1.33
d. 1.66
Ans - b
Current Ratio as per Tandon Committee - Method-I = CA / (MPBF + Trade Creditors +
Other CL) = 8500 / (2100+4500+1200) = 8500 / 7800 = 1.09
8. Current Ratio as per Tandon Committee - Method-II
a. 1
b. 1.09
c. 1.33
d. 1.66
Ans - c
Current Ratio as per Tandon Committee - Method-II = CA / (MPBF + Trade Creditors +
Other CL) = 8500 / (675+4500+1200) = 8500 / 6375 = 1.33
Method-
I
Page 99
a. 700
b. 1000
c. 1300
d. 1800
Ans - c
MPBF as per Tandon Committee - Method-I = 2100
Method-II
a. 100
b. 125
c. 150
d. 175
Ans - b
MPBF as per Tandon Committee - Method-II = 675
So, Borrowing by the way of Cash Credit is excess by (800 - 675) = 125 Crores
…………………………………………………………………………………………………………
…………………………………
Find Coefficient of Variance for the values given : {13,35,56,35,77}
a. 0.4156
b. 0.5164
c. 0.5614
d. 0.6514
Ans - c
Explanation :
Number of terms (N) = 5
Mean:
Xbar = (13+35+56+35+77)/5
= 216/5
= 43.2
Standard Deviation (SD):
Formula to find SD is
σx= √(1/(N - 1)*((x1-xm)2+(x2-xm)2+..+(xn-xm)2))
=√(1/(5-1)((13-43.2)2+(35-43.2)2+(56-43.2)2+(35-43.2)2+(77-43.2)2))
=√(1/4((-30.2)2+(-8.2)2+(12.9)2+(-8.2)2+(33.8)2))
=√(1/4((912.04)+(67.24)+(163.84)+(67.24)+(1142.44)))
=√(588.2)
=24.2528
Coefficient of variation (CV)
CV = Standard Deviation / Mean
= 24.2528/43.2
= 0.5614
Hence the required Coefficient of Variation is 0.5614
.............................................
A bank calculates that its individual savings accounts are normally distributed with a mean
of Rupees 2,000 and a standard deviation of Rupeess600. If the bank takes a random
Page 100
sample of 100 accounts, what is the probability that the sample mean will lie between
Rupees 1,900 and Rupees 2,050?
a. 0.4792
b. 0.7492
c. 0.7942
d. 0.9742
Ans - b
Explanation :
Standard Error = SD / √(N)
= 600 / √100
= 600 / 10
= 60
Using the equation
z = (x bar minus Mu)/SE
we get 2 z values
for x bar = Rs. 1900,
z = (1900 - 200) / 60
= (-100) / 60
= -1.67
for x bar = Rs. 2050,
z = (2050 - 200) / 60
= 50 / 60
= 0.83
Probability table gives us probability of 0.4525 corresponding to a z value of –1.67, and it
gives probability of 0.2967 for a z value of 0.83. If we add these two together, we get
0.7492 as the total probability that the sample mean will lie between Rs. 1900 and Rs.
2,050.
.............................................
Suppose that a population with N is equal to 144 has p is equal to 24. What is the mean of
the sampling distribution of the mean for samples of size 25?
a. 24
b. 12
c. 4.8
d. 2
Ans – a
.............................................
We have six students say A, B, C, D, E, F participating in a quiz contest. Out of six
students only two can reach to the final. What is the probability of reaching to the final of
each student?
a. 2/5
b. 1/2
c. 1/3
d. 1/4
Ans - c
........................................................
Suppose a population with N = 144 has u(Mean)=24. What is the mean of sampling
distribution of the mean for samples of size of Rs 25 ?
a. 24
Page 101
b. 2
c. 4.8
d. 3.2
Ans - a
…………………………………………………………………………………………………………
…………………………………
M/s Raj&co's balance sheet included the following accounts:
Cash: 10,000
Inventory: 5,000
Prepaid taxes: 500
Quick Ratio = (Cash + Cash Equivalents + Short Term Investments + Marketable
Securities + Accounts Receivable) / Current Liabilities
= (10000+5000+1000) / 15000
= 16000 / 15000
= 1.07
.................................
Inventory : 5,000
Prepaid taxes : 500
Quick Ratio = (Current assets – Inventory - Advances - Prepayments Current Liabilities) /
Current Liabilities
= (21500 - 5000 - 500) / 15000
= 16000 / 15000
= 1.07
.................................
XYZ Pvt Ltd has the following assets and liabilities as on 31st March 2015 (in Lakhs) :
Non Current Assets
Goodwill 75
Fixed Assets 75
Current Assets
Cash in hand 25
Cash in bank 50
Short term investments 45
Inventory 25
Receivable 100
Current Liabilities
Trade payables 100
Income tax payables 60
Non Current Liabilities
Bank Loan 50
Deferred tax payable 25
Page 102

Quick Ratio = (Cash in hand + Cash at Bank + Receivables + Marketable Securities) /
Current Liabilities
= (25+50+45+100) / 160
= 220 / 160
= 1.375
…………………………………………………………………………………………………………
…………………………………
Cash: 10,000
Inventory: 5,000
Prepaid taxes: 500
Quick Ratio = (Cash + Cash Equivalents + Short Term Investments + Marketable
= (10000+5000+1000) / 15000
= 16000 / 15000
= 1.07
.................................
Inventory : 5,000
Prepaid taxes : 500
Current Liabilities
= (21500 - 5000 - 500) / 15000
= 16000 / 15000
= 1.07
.................................
Non Current Assets
Goodwill 75
Fixed Assets 75
Current Assets
Cash in hand 25
Cash in bank 50
Inventory 25
Receivable 100
Current Liabilities
Trade payables 100
Page 103
Bank Loan 50
Current Liabilities
= (25+50+45+100) / 160
= 220 / 160
= 1.375
…………………………………………………………………………………………………………
Practice Yourself - Ratio Analysis - Solvency Ratios
-------------------------------------------------------------
and reserves Rs 2 lac.
What is the debt-equity ratio?
.............................................
10 lac.
What is amount of current assets?
…………………………………………………………………………………………………………
Salim purchased 8%, 3 years bond of Rs. 10 lac, with annual interest payment and face
value payable on maturity. The YTM is assumed@ 6%. Calculate % change in the price of
the bond when the decrease in YTM is 100 basis points from 6% to 5% and the duration is
2.79 years and modified duration is 2.63 years.
a. 2.36
b. 2.63
c. 3.26
d. 3.62
Ans - b
Explanation :
Percentage change in price of bond
= -MD × Change in Price
= -2.63 × (6% - 5%)
= 2.63%,
That means a fall in YTM by 1% increases the price of the bond by 2.63%.
.............................................
What is the price of a 20-year, zero-coupon bond with a 5.1% yield and Rs. 1000 face
value?
a. Rs. 359
b. Rs. 369
c. Rs. 379
d. Rs. 389
Ans - b
Solution :
PV = 1000/(1+0.051)^20
= 369
........................................................
A bond has been issued with a face value of Rs. 1000 at 8% Coupon for 3 years. The
required rate of return is 7%. What is the value of the bond?
Page 104
a. 1062.25
b. 1625.25
c. 1026.25
d. 1052.25
Ans – c
Explanation :
Here,
FV = 1000
Coupon Rate (CR) = 0.08
t = 3 yr
R (YTM) = 0.07
So, Value of bond = 1026.25
(Since Coupon rate > YTM, so Bond’s Value > FV)
.............................................
A 5-year Govt. bond with a coupon rate of 8% has a face value of 1000. What is the
annual interest payment?
a. 80
b. 40
c. 100
d. None of the above
Ans - a
.............................................
ABC Inc has a 12 year bond outstanding that makes 9.5% annual coupon payments. If the
appropriate discount rate is for such a bond is 7% , what is the appropriate price of bond ?
a. 1254.87
b. 1198.57
c. 1158.57
d. 1232.56
Ans - b
........................................................
A 5-year Govt. bond with a coupon rate of 8% has a face value of 1000. What is the
annual interest payment?
A. 80
B. 40
C. 100
D. None of the above
Ans - a
.............................................
…………………………………………………………………………………………………………
4. Export - Rs. 70000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
Page 105

a. Rs. 90000
b. Rs. 94000
c. Rs. 96000
d. Rs. 104000
Ans - c
Solution :
GDP = C+I+G+(X-M)
= 30000+40000+20000+(70000-60000)
= 100000
GDP at factor rate
= 100000-(5000-1000)
= 96000
.............................................
4. Export - Rs. 70000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
9. Property Income(net receivable from aboard. - Rs. 500
Calculate GNI
a. Rs. 96000
b. Rs. 105000
c. Rs. 110000
d. Rs. 115000
Ans - b
Solutions :
GDP = C+I+G+(X-M)
= 30000+40000+20000+(70000-60000)
= 100000
GNI = GDP+(taxes-subsidies)+Compensation of Employees(Net receivable from abroad)
+property income(Net receivable from abroad)
= 100000+(5000-1000)+500+500
= 105000
.............................................
Page 106
4. Export - Rs. 70000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
Calculate GNP
a. Rs. 100000
b. Rs. 101000
c. Rs. 110000
d. Rs. 111000
Ans - b
Solution :
GDP = C+I+G+(X-M)
= 30000+40000+20000+(70000-60000)
= 100000
= 100000 + (1500-500)
= 101000
.............................................
Go through the following data and answer the question (all in Indian Rupees in Crores)
4. Export - Rs. 70000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
Calculate GDP
a. Rs. 70000
b. Rs. 90000
c. Rs. 100000
d. Rs. 220000
Ans - c
Page 107
Solution :
GDP = C+I+G+(X-M)
= 30000+40000+20000+(70000-60000)
= 100000
.............................................
4. Export - Rs. 90000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
Calculate GDP
a. Rs. 100000
b. Rs. 110000
c. Rs. 120000
d. Rs. 130000
Ans - d
Solution :
GDP = C+I+G+(X-M)
= 50000+40000+10000+(90000-60000)
= 130000
…………………………………………………………………………………………………………
4. Export - Rs. 70000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
a. Rs. 90000
b. Rs. 94000
c. Rs. 96000
Page 108
d. Rs. 104000
Ans - c
Solution :
GDP = C+I+G+(X-M)
= 30000+40000+20000+(70000-60000)
= 100000
GDP at factor rate
= 100000-(5000-1000)
= 96000
.............................................
4. Export - Rs. 70000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
9. Property Income(net receivable from aboard. - Rs. 500
Calculate GNI
a. Rs. 96000
b. Rs. 105000
c. Rs. 110000
d. Rs. 115000
Ans - b
Solutions :
GDP = C+I+G+(X-M)
= 30000+40000+20000+(70000-60000)
= 100000
GNI = GDP+(taxes-subsidies)+Compensation of Employees(Net receivable from abroad)
+property income(Net receivable from abroad)
= 100000+(5000-1000)+500+500
= 105000
.............................................
4. Export - Rs. 70000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
Page 109

Calculate GNP
a. Rs. 100000
b. Rs. 101000
c. Rs. 110000
d. Rs. 111000
Ans - b
Solution :
GDP = C+I+G+(X-M)
= 30000+40000+20000+(70000-60000)
= 100000
= 100000 + (1500-500)
= 101000
.............................................
4. Export - Rs. 70000
5. Import - Rs. 60000
6. Taxes - Rs. 5000
Calculate GDP
a. Rs. 70000
b. Rs. 90000
c. Rs. 100000
d. Rs. 220000
Ans - c
Solution :
GDP = C+I+G+(X-M)
= 30000+40000+20000+(70000-60000)
= 100000
.............................................
Page 110
4. Export - Rs. 90000

5. Import - Rs. 60000
6. Taxes - Rs. 5000
Calculate GDP
a. Rs. 100000
b. Rs. 110000
c. Rs. 120000
d. Rs. 130000
Ans - d
Solution :
GDP = Consumption +
The measures of money including Bank deposit with RBI, Demand deposit with the
banking system, Term deposit of banking system, currency with public, and other deposits
with RBI are shown as M0,M1,M2,M3.
1. The liabilities such as current deposits, demand liabilities portion of saving bank,
margins held against letter of credit or bank guarantee, balances in overdue fixed deposits
are included initially, in ......
a. M0
b. M1
c. M2
d. M3
Ans-b
2. The demand deposit of banks are included in ...... (i) M1, (ii) M2, (iii) M3
Ans - a
3. The term deposit of banks are included in ......(i) M1, (ii) M2, (iii) M3
Ans - c
4. Major portion of which of the following contains, interest free funds and is the most
liquid
part of money supply.
a. M0
b. M1
c. M2
d. M3
Ans - a
Page 111
.....................................................
Given,
Calculate Narrow money M1.
Ans - b
Solution
RBI
M1 = 90000+180000+260000
M1 = 530000
.............................................
Given,
Calculate M2.
Ans - c
Solution
RBI
M1 = 90000+180000+260000
M1 = 530000
So,
M2 = 530000+60000
M2 = 590000 Crores
.............................................
Given,
M2 - 700000 Crores
Page 112

Calculate Other deposit with RBI
Ans - c
Solution :
RBI
So,
RBI + Savings deposit of post office savings banks
Other deposit with RBI = M2 - currency with public - demand deposit with the banking
system - Savings deposit of post office savings banks
Other deposit with RBI = 700000 - 100000 - 150000 - 60000
Other deposit with RBI = 390000 Crores
.............................................
Given,
Ans - d
Solution :
RBI
M1 = 90000+180000+260000
M1 = 530000
So,
M3 = 530000+220000
M3 = 750
Given,
Page 113

Trf to NCCD (National calamity Contingency fund) - Rs. 300 Crores
calculate Net Tax revenue ...
a. Rs 2900 Crores
b. Rs 3700 Crores
c. Rs 4000 Crores
d. Rs 4600 Crores
Ans - b
Solution :
Gross Tax revenue = Corporation Tax + Income tax + other tax & duties + costoms +
union
= 1000+800+600+800+600+500+300
= 4600 Crores
= 4600-300-600
= 3700 Crores
.............................................
Given,
Calculate Gross Tax Revenue ...
a. Rs 6800 Crores
b. Rs 7150 Crores
c. Rs 7550 Crores
d. Rs 8300 Crores
Page 114
Ans - c
Solution :
union
= 1800+1200+1000+1300+1100+750+400
= 7550 Crores
.............................................
Given,
calculate Net Tax revenue.
a. Rs 5800 Crores
b. Rs 6200 Crores
c. Rs 6650 Crores
d. Rs 7100 Crores
Ans - b
Solution :
union
= 1800+1200+1000+1300+1100+750+400
= 7550 Crores
= 7550-450-900
= 6200 Crores
.............................................
Given,
Page 115

Recoveries of short term loans and advances from states and loans to govt servants - Rs.
1200 Crores
a. Rs. 8600 Crores
b. Rs. 10100 Crores
c. Rs. 11600 Crores
d. Rs. 12800 Crores
Ans – c
Solution :
Non Debt Receipt = Recoveries of loan & advances (dud
Solution :
Non Debt Receipt = Recoveries of loan & advances (duduct recoveries of short term loans
& advance from state and loans to govt sarvants) + MISC Capital receipts
= 5000-1200+1500
= 5300 Crores
Securities issued against Small savings + State provident fund + other Receipts(Net)
= 1200 + 1800 + 450 + 750 + 600 + 1500
= 6300 Crores
= 5300 + 6300
= 11600 Crores
.............................................
Given,
Recoveries of short term loans and advances from states and loans to govt servants - Rs.
800 Crores
Page 116

a. Rs 3700 Crores
b. Rs 4200 Crores
c. Rs 4700 Crores
d. Rs 5400 Crores
Ans - d
Solution :
Non Debt Receipt = Recoveries of loan & advances (duduct recoveries of short term loans
& advance from state and loans to govt sarvants) + MISC Capital receipts
= 2000-800+500
= 1700 Crores
Securities issued against Small savings + State provident fund + other Receipts(Net)
= 500 + 1000 + 300 + 500 + 400 + 1000
= 3700 Crores
= 1700 + 3700
= 5400 Crores
.............................................
Given,
600 Crores
Calculate Financing of Fiscal Deficit ...
a. Rs 3100 Crores
b. Rs 4700 Crores
c. Rs 5100 Crores
d. Rs 5700 Crores
Ans - c
Solution :
Financing of Fiscal Deficit = Debt Receipt + Draw down cash balance
Securities issued against Small savings + State provident
fund +
Page 117
other Receipts(Net)
= 500 + 800 + 300 + 300 + 400 + 800
= 3100 Crores
So,
Financing of Fiscal Deficit = Debt Receipt + Draw down cash balance
= 3100 + 2000
= 5100 Crores
…………………………………………………………………………………………………………
Working capital turn over ratio is 6 and current ratio is 2:1. If current liabilities are Rs 10
lac
and net profit to sales percent 5% . What is the amount of net profit?
a. Rs 10 lac
b. Rs 8 lac
c. Rs 7 lac
d. Rs 6 lac
Ans - d
Let me Explain
Since CR=2:1 and liabilities are 10 lac
Hence current asset will be 20 lac
Now since wc turn over is 6 that means the total turn over will be 20×6= 120 lac
Then profit should be 120×5%=6 lac
.............................................
XYZ shoes sells shoes. It is applying for loans to help fund to increase the inventory. The
bank asks for its balance sheet so they can analysis the current debt levels. According to
XYZ shoes's balance sheet it reported 10,00,000 of current liabilities and only 2,50,000 of
current assets. Will the loan get approved?
a. 0.25
b. 0.5
c. 0.75
d. 1
Ans - a
Solution :
Current Ratio = Current Assets / Current Liabilities
= 250000 / 1000000
= 0.25
XYZ shoes only has enough current assets to pay off 25 percent of his current liabilities.
This shows that XYZ shoes is highly leveraged and highly risky. Banks would prefer a
current ratio of at least 1 or 2, so that all the current liabilities would be covered by the
current assets. Since XYZ shoes's ratio is so low, it is unlikely that it will get approved for
his loan.
.................................
ABC Agency has several loans from banks for equipment they purchased in the last five
years. All of these loans are coming due which is decreasing their working capital. At the
end of the year, they had 1,00,000 of current assets and 1,25,000 of current liabilities.
Find
out its Working Capital Ratio.
a. 0.6
b. 0.8
Page 118
c. 1
d. 1.2
Ans - b
Solution :
The working capital ratio is calculated by dividing current assets by current liabilities.
WC Ratio = CA/CL
= 100000 / 125000
= 0.80
.................................
Working capital turn over ratio is 4 and current ratio is 3:1. If current liabilities are Rs. 15
lac and net profit to sales percent 7%, what is the amount of net profit?
a. Rs. 10.2 lac
b. Rs. 11.4 lac
c. Rs. 12.6 lac
d. Rs. 13.8 lac
Ans - c
Solution :
Since CR=3:1 and current liabilities are Rs. 15 lac
Current assets will be Rs. 45 lac
Now since wc turn over ratio is 4 that means the total turn over will be 45 × 4 = 180 lac
Then profit should be 180 × 7% = 12.6 lac
.............................................
Govind's Furniture Company sells industrial furniture for office buildings. During the
current
year, it reported cost of goods sold on its income statement of 10,00,000. Govind's
beginning inventory was 30,00,000 and its ending inventory was 40,00,000. Govind's
turnover is ...... times.
a. 0.25
b. 0.29
c. 0.33
d. 0.37
Ans - b
Solution :
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
= 1000000 / ((3000000+4000000)/2)
= 1000000 / (7000000/2)
= 1000000 / 3500000
= 0.29 Times
This means that Govind only sold roughly a third of its inventory during the year. It also
implies that it would take Govind approximately 3 years to sell his entire inventory or
complete one turn. In other words, Govind does not have very good inventory control.
.................................
Raju's Furniture Company sells industrial furniture for office buildings. During the current
year, Raju reported cost of goods sold on its income statement of 25,00,000. Raju's
beginning inventory was 40,00,000 and its ending inventory was 60,00,000. Calculate
Raju's Furniture Company's Inventory Turnover Ratio.
a. 0.25
b. 0.33
Page 119
c. 0.5
d. 0.67
Ans - c
Solution :
Inventory Turnover Ratio = Cost of goods sold / Average inventory for that period
= 2500000 / ((4000000 + 6000000)/2)
= 2500000 / 5000000
= 0.5
.................................
A company has net worth of Rs 10 lac, term liabilities are Rs 10 lac. Fixed Assets worth
Rs
16 lac and current assets are Rs 25 lac. There is no intangible assets or the non current
assets. Calculate it's net working capital.
a. 1 lac
b. 2 lac
c. 3 lac
d. 4 lac
Ans - d
Here Net worth = capital + reserve = 10 lac
Since capital is a kind of liability hence liability = 10 lac
Liabilities = 10+10 = 20 lac
Assets= 16+25= 41 lac
But as per balance sheet Total assets = Total liabilities
Hence liabilities must be 41 lac also
In 41 lac ( 41-20= 21 ) i.e 21 lac will be CL
NWC = CA-CL
= 25 - 21
= 4 lac
.............................................
accounting equation, we can assume the total equity is 1,00,000. Find the Debt Ratio.
a. 0.33
b. 0.5
c. 0.67
d. 0.75
Ans - a
Solution :
DR = TL / TA
= 50000 / 150000
= 0.33
.................................
Seela's Tech Company is a tech start up company that manufactures a new tablet
computer. Seela is currently looking for new investors and has a meeting with an angel
investor. The investor wants to know how well Seela uses her assets to produce sales, so
he asks for her financial statements. Here is what the financial statements reported:
Beginning Assets: 50,000
Ending Assets: 1,00,000
Net Sales: 25,000
Page 120
The total asset turnover ratio is ......

a. 0.33
b. 0.5
c. 0.67
d. 0.75
Ans - a
Solution :
Asset Turnover Ratio or Total Asset Turnover Ratio = Net Sales / Average Total Assets
= 25000 / ((50000+100000)/2)
= 25000 / (150000/2)
= 25000 / 75000
= 0.33
As you can see, seela's ratio is only 0.33. This means that for every Rupee in assets,
seela only generates 33 Paisa. In other words, Seela's start up is not very efficient with its
use of assets.
…………………………………………………………………………………………………………
The top management of ABC. Bank was in a triumphant mood after engaging XYZ Ltd,
one of the top IT Companies as a consultant for a massive technology upgradation in the
Bank. Their enthusiasm was short lived, as the project did not progress well and the
consultants were not able to deliver the desired results even after several months. In fact
the Consultants were of the view that it may never be possible to implement the project
with 100% success as they seemed to be facing resistance from the employees at
multilevels.
The employees at all levels seemed reluctant to cooperate. Their fear of Role
erosion seemed palpable.
What does “Role erosion” mean in this context?
a. The fear of the employee that he will be sent out
b. Fear that the responsibility and the power will reduce
c. Fear that he will no more be an indispensable
d. a & b
Ans - d
.............................................
The critical issue in this case is:
a. Attitudes of individuals
b. Training of people
c. Group behavior due to a sense of the unknown
d. All the above
Ans - c
.............................................
How could this situation have beenmanaged better?
a. By issuing project details and time frame mentioning punishments in case of delay
b. By roping in the HR professionals to act as coordinator
c. By recognizing that any change brings its own reactions and co-opting the managers
even before Consultants moved in
d. b & c
Ans - d
.............................................
The Bank should deal with the employee resistance by:
Page 121
a. Co-opting the employees

b. Communicating strategically about the potential benefits
c. Conducting simultaneous training to familiarize the staff with the new software
d. All of the above
Ans - d
…………………………………………………………………………………………………………
a. 1
b. 1.25
c. 1.5
d. 1.75
Ans - b
Solution :
% Change in Price = 15/75*100 = 20
Price Elasticity of Demand = 25/20 = 1.25
.............................................
When chiken prices rise 30%, the quantity of KFC fried chicken supplied rises by 15%.
Calculate the price elasticity of supply.
a. 0.50
b. 0.65
c. 0.75
d. 0.85
Ans - a
Solution :
= 15/30 = 0.5
.............................................
Demand for a product at Rs. 25 per unit is 1000. If the price elasticity of demand is 1.5,
how much the demand will be at Rs. 40 per unit?
a. 240
b. 200
c. 160
d. 120
Ans - c
Solution :
% Change in Quantity Demanded = 1000-x/1000*100 = (1000-x)/10
% Change in Price = 15/25*100 = 60
1.5 = ((1000-x)/10)/60
90 = (1000-x)/10
900 = 1000-x
x = 1000-900
x = 100
…………………………………………………………………………………………………………
Page 122
…………………………………
Practice Yourself - Ratio Analysis - Liquidity Ratios
------------------------------------------------------------
1. Current liabilities of a company are Rs. 5,60,000, current ratio is 2.5:1 and quick ratio is
2:1. Find the value of the Inventories.
.............................................
2. Current ratio = 4.5:1, quick ratio = 3:1.Inventory is Rs. 36,000. Calculate the current
assets and current liabilities.
.............................................
3. Current assets of a company are Rs. 5,00,000. Current ratio is 2.5:1 and Liquid ratio is
1:1. Calculate the value of current liabilities, liquid assets and inventories.
.............................................
4. Calculate the current ratio from the following information:
Total assets = Rs. 5,00,000
Non-current liabilities = Rs. 1,50,000
Shareholders’ Funds = Rs. 3,00,000
Non-Current Assets:
Fixed assets = Rs. 2,50,000
Non-current Investments = Rs. 1,50,000
.............................................
5. Calculate ‘Liquidity Ratio’ from the following information:
Current liabilities = Rs. 40,000
Current assets = Rs. 1,20,000
Inventories = Rs. 25,000
Advance tax = Rs. 5,000
Prepaid expenses = Rs. 10,000
…………………………………………………………………………………………………………
Cash = Rs. 100000
Debtors = Rs. 200000
Inventories = Rs. 300000
Current liabilities = Rs. 200000
Total current assets = Rs. 600000
The quick ratio = ?
a. 1.5:1
b. 2.5:1
c. 2:1
d. 3:1
Ans - a
Let me Explain
Since Quick ratio = Quick asset / CL
Here Quick asset = CA - Inventory
Now CA= (Cash + Debtor.....etc ) = Rs. 600000
Here inventories = 300000/-
So, Quick Assets = 600000 - 300000 = Rs. 300000
CL = Rs. 200000
Hence QR = 300000/200000
i.e 1.5:1
.............................................
Page 123
Current ratio of a unit is 3:1 and quick ratio is 1:1. The level of current assets is Rs 15 lac.
What is the amount of quick asset?
a. Rs 3 lac
b. Rs 5 lac
c. Rs 7 lac
d. Rs 9 lac
Ans - b
Let me Explain
Since CR = CA: CL
CR= CA:CL = 3:1
i.e. 15:CL= 3:1
i.e CL = 5 lac
Now QR= 1:1
Since QR= Quick asset/CL ( here quick asset is CA-Inventory )
Hence QA= CL ~ 5 lac
.............................................
Non Current Assets
Goodwill 75
Fixed Assets 75
Current Assets
Cash in hand 25
Cash in bank 50
Inventory 25
Receivable 100
Current Liabilities
Trade payables 100
Bank Loan 50
a. 1.38
b. 1.42
c. 1.46
d. 1.52
Ans - a
Solution :
Current Liabilities
= (25+50+45+100) / 160
= 220 / 160
= 1.38
…………………………………………………………………………………………………………
Quantity supplied of a product at Rs. 8 per unit is 200 Units. If the price elasticity of supply
is 1.5, what will be the quantity supplied at Rs. 10 per unit?
a. 150
Page 124
b. 175
c. 250
d. 275
Ans - d
Solution :
Price Elasticity of Supply = (% change in quantity supplied. / (% change in price)
1.5 = ((x-200)*100/200)/((10-8)*100/8)
1.5 = ((x-200)/2)/(200/8)
1.5 = ((x-200)/2)/25
1.5 = (x-200)/50
75 = x-200
x = 75+200
x = 275
.............................................
Demand for a product at Rs. 4 per unit is 50. If the price elasticity of demand is 2, how
much the demand will be at Rs. 3 per unit?
a. 25
b. 40
c. 60
d. 75
Ans - d
Solution :
% Change in Quantity Demanded = x-50/50*100 = (x-50)*2 = 2x-100
% Change in Price = 1/4*100 = 25
2 = 2x-100/25
50 = 2x-100
50+100 = 2x
2x = 150
x = 150/2 = 75
.............................................
a. 2
b. 2.5
c. 3
d. 3.5
Ans - c
Solution :
% Change in Price = 6/30*100 = 20
…………………………………………………………………………………………………………
…………………………………
bond has been issued with a face value of Rs. 1000 at 10% Coupon for 3 years. The
required rate of return is 8%. What is the value of the bond if the Coupon amount is
Page 125
payable on half-yearly basis?

a. 1520
b. 1052
c. 1205
d. 1025
Ans - b
Explanation :
Here,
FV = 1000
CR = 10% half-yearly = 5% p.a.
R = 8% yearly = 4% p.a.
t = 3 years
= 1052
(Since Coupon rate > YTM, so FV < Bond’s Value)
.............................................
A console bond of Rs. 10000 is issued at 6%. Coupon current interst rates and 9%. Find
out the current value of the console bond.
a. Rs.7660
b. Rs.6760
c. Rs.6667
d. Rs.6676
And - c
Solution :
= 10000*0.06/0.09
= 6000/0.09
= 6670
.............................................
A 15 year, 8 % Rs 1000 face value bond is currently trading at Rs 958. The YTM of this
bond must be......
a. less than 8%
b. equal to 8%
c. greater than 8%
d. unknown
Ans - c
........................................................
Of the following bonds, which one has the highest degree of interest rate risk?
a. 20 years 8% bond
b. 5 years 8% bond
c. 10 years 8% bond
d. not enough information
Ans - a
........................................................
XYZ Ltd has just issued a 10 year 7 % coupon bond. The face value of the bond is Rs
1000 and the bond makes annual coupon payments. If the required return on the bond is
10%, what is the bond's price?
a. Rs 815.66
Page 126
b. Rs 923.67
c. Rs 1000.00
d. Rs 1256.35
Ans - a
........................................................
ABC Ltd just issued a 10 year 7% coupon bond. The face value of the bond is Rs 1000
and the bond makes semiannual coupon payments. If the required return on the bond is
10% , what is the price of bond?
a. Rs 815.66
b. Rs 1000.00
c. Rs 813.07
d. Rs 1035.27
Ans - c
........................................................
Suppose you purchased a bond Rs.1000 for Rs.920. The interest is 10 percent, and it will
mature in 10 years. Calculate Yield to maturity
a. 10.75 %
b. 11.00 %
c. 11.25 %
d. 11.50 %
Ans –c
Solution :
C=Coupon payment
F=Face value
P=Price
n=Years to maturity
Yield To Maturity=C+(F-P/n)/(F+P/2)
=100+(1000-920/10)/(1000+920/2)
=100+(80/10)/(1920/2)
=100+8/960
=108/960
=0.1125
=11.25%
.............................................
a. 20595
b. 29095
c. 25095
d. 20995
Ans - d
Explanation :
Here,
FV = 20000
t = 3 yr
R (YTM) = 0.10
Page 127

So, Value of bond = 20995
Explanation :
Here,
FV = 1000
t = 3 yr
R (YTM) = 0.07
So, Value of bond = 1026.25
(Since Coupon rate > YTM, so Bond’s Value > FV)
.............................................
Explanation :
Here,
FV = 20000
t = 3 yr
R (YTM) = 0.10
So, Value of bond = 20995
.............................................
required rate of return is 8%. What is the value of the bond if the Coupon amount is
payable
on half-yearly basis?
Explanation :
Here,
FV = 1000
CR = 10% half-yearly = 5% p.a.
R = 8% yearly = 4% p.a.
t = 3 years
= 1052
.............................................
A 10%, 6-years bond, with face value of Rs. 1000 has been purchased by Mr. x for Rs.
900.
Page 128
What is his yield till maturity?

Explanation :
Here,
FV = 1000
CR = 10%
R (YTM) =?
T = 6 years
Since FV > Bond’s Value, Coupon rate < YTM (based on above three observations)
So, we have to use trial and error method. We have to start with a value > 10 and find the
price until we get a value < 900.
So,
YTM
= 12 + (917.78 – 900) ÷ (917.78 – 880.06)
= 12 + 17.78 ÷ 37.72
= 12.47%
(Verification: Putting R = 12.47% in bond’s price formula leads to value of 899.80 which is
closest to 900, so YTM = 12.47% is the right answer).
.............................................
Ram purchased two bonds bond-1 & bond-2 with face value of Rs. 1000 each and
Coupon
of 8% and maturity of 4 years & 6 years respectively. If YTM is increased by 1%, the %
change in prices of bond-1 & bond-2 would be ......
Explanation :
Bond 1:
= [80 × (1.09^4 – 1) ÷ 0.09 + 1000] ÷ 1.09^4
= 967.64
Bond 2:
= [80 × (1.09^6 – 1) ÷ 0.09 + 1000] ÷ 1.09^6
= 955.14
So, % change in price of bond 1
= (1000 – 967.04) ÷ 1000
= 0.03296
= 3.29%
& % change in price of bond 2
= (1000 – 955.14) ÷ 1000
= 0.04486
= 4.48%
Page 129
.............................................
Monica purchased a bond with face value of Rs. 1000 and Coupon of 8% and maturity of
4
Explanation :
= [80 × (1.09^4 – 1) ÷ 0.09 + 1000] ÷ 1.09^4
= 967.604
= 1000 - 967.64
= 32.96 decrease
.............................................
Ashwini purchased a bond with face value of Rs. 1000 and Coupon of 8% and maturity of
6
Explanation :
= [80 × (1.09^6 – 1) ÷ 0.09 + 1000] ÷ 1.09^6
= 955.14
= 1000 - 955.14
= Rs. 44.86 decrease
.............................................
Priya purchased a bond with face value of Rs. 1000 and Coupon of 8% and maturity of 4
years. If YTM is reduced by 2%, the change in price of bond would be......
Explanation :
If YTM = 6%, bond’s price
= [80 × (1.06^4 – 1) ÷ 0.06 + 1000] ÷ 1.06^4
= 1069.30,
= 1069.30 - 1000
= Rs. 69.30
CAIIB - ABM- CASE STUDIES / NUMERICAL QUESTIONS
Kumar invested in 10%, 3-year bond of face value of Rs. 1000. The expected market rate
is
12%. What is the duration of the bond?
Explanation :
Bond’s Duration = ΣPV×t ÷ ΣP
ΣP = {100 × (1.123 -1) ÷ 0.12 + 1000} ÷ 1.123
= 951.6
Here 1 ÷ 1.12 = 0.89286, so a^t = 0.711787
ΣPV × t = 100 × 8.33336 × [0.288213 ÷ 0.10714286 – 3 × 0.711787] + 3000 × 0.711787
= 833.336 × (2.689988 – 2.135361) + 2135.361
= 462.19 + 2135.36 = 2597.55
Page 130
= 2597.55 ÷ 951.6
= 2.73 years
.............................................
Gaurav invested in 12.5%, 5-year bond of face value of Rs. 100. The expected market
rate
is 15%. What is the duration of the bond?
Explanation :
ΣP = {12.5 × (1.155 -1) ÷ 0.15 + 100} ÷ 1.155
= 91.6196
Here a = 0.86956 and a^t = 0.497176
So, ΣPV × T = 12.5 × 6.66636 × {0.502824 ÷ 0.13044 – 2.4588} + 248.588
= 116.33046 + 248.588 = 364.92
= 364.92 / 91.6196
= 3.98 years
.............................................
Albert purchased 8%, 3 years bond of Rs. 10 lac, with annual interest payment and face
value payable on maturity. The YTM is assumed@ 6%. Calculate the duration and
modified
duration.
Explanation :
ΣP = 1053421
Now, a = 0.943396 and a^t = 0.839619
So, ΣPV×T = 80000 × 16.666 × (0.160381÷0.056604 – 2.518857) + 2518857
= 419370.767 + 25188579
= 2938227.77
= 2938227.77 / 1053421
= 2.79 years
& Modified Duration
= Mckauley Duration ÷ (1 + R)
= 2.79 ÷ 1.06
= 2.63
.............................................
Salim purchased 8%, 3 years bond of Rs. 10 lac, with annual interest payment and face
value payable on maturity. The YTM is assumed@ 6%. Calculate % change in the price of
the bond when the decrease in YTM is 100 basis points from 6% to 5% and the duration is
2.79 years and modified duration is 2.63 years.
Explanation :
Percentage change in price of bond
= -MD × Change in Price
= -2.63 × (6% - 5%)
= 2.63%,
That means a fall in YTM by 1% increases the price of the bond by 2.63%.
.............................................
Page 131
A 12%, 4-year bond of Rs. 100 was purchased by x for Rs. 100. If the market interest rate
increased by 1%, what will the market price?
Explanation :
P = 100
CR = 12%
YTM = 12 + 1 = 13%
So, Price = 97.03
.............................................
Mitalee is to receive Rs. 60000 from bank at the end of 3 years, being the maturity value
of
a term deposit. How much he is depositing now, if the interest rate is 10%?
Explanation :
PV
= FV ÷ (1+r)T
= 60000 ÷ 1.3331
= Rs. 45078
.............................................
The cash flow expected from a project is Rs. 700, Rs. 1000 and Rs. 1200 in the 1st, 2nd,
&
3rd year. The discounting factor @ 10% roi is 1.10, 1.21 and 1.331. What is the total
present value of these cash flows?
Explanation :
NPV = Σ {C÷ (1+r)T} – 1
Total Present Value
= Σ {C÷ (1+r)T}
= (700 ÷ 1.1) + (1000 ÷ 1.21) + (1200 ÷ 1.331)
= Rs. 2364
.............................................
Priyanka made an investment of Rs. 18000 and he expects a return of Rs. 3000 p.a. For
12
years. What is the present value and net present value of the cash flow @ 10% discount
rate?
Explanation :
PV = 20441
NPV = PV – 18000
= Rs. 2441
.............................................
Current yield on an 8% Rs. 100 bond is 7.5%. The price of the bond is ......
Explanation :
(Here, t = 1
So, price
= (Coupon + Face Value) ÷ (1 + R)
= (8 + 100) ÷ 1.075 = 100.465)
But, since Coupon Interest = Current Yield × Current Market Price
So, Price = 8 ÷ 7.5% = 8000 ÷ 75 = 106.67
.............................................
A 6 year bond is selling at Rs. 9500 with face value of Rs. 10000. The annual Coupon
Page 132
amount is 800. What is the yield to maturity?

Explanation :
Since Coupon rate = 8% and market price < Face Value, so YTM must be > CR
Let CR be 9%. So, bond’s price = 9551.41 > 9500
Let CR be 10%, so price = 9128.95 < 9500
So, YTM must lie between 9 & 10.
Using interpolation technique,
YTM = 9% + (10-9) % × (9551.41 – 9500) ÷ (9551.41 – 9128.95)
= 9+51.41/422.46
= 9.12%
.............................................
A 15 year bond is trading at Rs. 958 with face value of Rs. 1000. The Coupon rate is 8%.
What is the yield to maturity?
Explanation :
Since trading value < face value, YTM is > CR
At 7%, price = 1091.08 > 958
And at YTM = 9%, price = 919.39 < 958,
so YTM lies somewhere between 7 and 9.
= 7 + (9-7) × (1091.08 – 958) / (1091.08 – 919.39)
= 7 + 2 × 133.08 / 171.69
= 8.5%
.............................................
A 3 year bond with par value Rs. 1000 has Coupon rate 12%. If the required rate of return
is
10% and interest is payable semi - annually, find the value of the bond.
Explanation :
so Coupon = 1000 × 12% ÷ 2 = 60,
YTM = 10%/2 = 0.05,
T = 3 × 2 = 6 years
So, price = 1050
.............................................
The yield on a 6-year bond is 12% while that of 4-year bond is 9%. What should be the
yield on a 2-year bond beginning from now?
Explanation :
(1+12%)^6 = (1+9%)^4 × (1+r)^2
R = 18%
.............................................
A bond is issued with a face value of 1000 that pays a Rs. 25 Coupon semi-annually. Find
its Coupon rate.
Explanation :
Coupon = Face Value × Coupon Rate
25 = 1000 × CR ÷ 2
So, CR = 5%
.............................................
A 2-year bond offers a yield of 6% and a 3-year bond offers a yield of 7.5%. Under the
expectation theory, what should be the yield on a 1-year bond in 2 years?
Explanation :
Page 133
(1+7.5%)^3 = (1+6%)^2 × (1+r)^1

R = 10.56%
.............................................
Find the price of a zero-Coupon bond maturing in 5 years and has a par value of 1000 and
a
required yield of 6%.
Explanation :
Using bond’s price formula, here Coupon = 0 and hence,
Zero-Coupon Bond’s price = Face Value ÷ (1 + R)T = 1000 ÷ 1.065
But, unless otherwise mentioned, the required yield of most zero-Coupon bonds is based
on
a semi-annual Coupon payment.
So, Price
= 1000 ÷ 1.0310
= 744
.............................................
A bond with a par-value of Rs. 100 is purchased for 95.92 and it paid a Coupon rate of 5%.
Calculate its current yield.
Explanation :
5 = 95.92 × CY
CY = 0.0521 = 5.21%
.............................................
A zero-Coupon bond has a future value of Rs. 1000 and matures in 2 years and can be
currently purchased for Rs. 925. Calculate its current yield.
Explanation :
Here
1000 = 925 × (1 + r)^2
So,
r = 1.0398 – 1
= 0.0398
= 3.98%
.............................................
You are receiving Rs. 1000 every year for the next 5 years at the beginning of the period
and you invest each payment @ 5%. How much you would at the end of the 5-year period?
Explanation :
Apply FV formula to get the Answer = 5802
.............................................
An annuity consists of monthly repayments of Rs. 600 made over 20 years and if rate is
14% monthly. What is the future value of the annuity?
Explanation :
Apply FV formula to get the Answer
Here
R = 14% / 12 = 0.01166
T = 20 × 12 = 240
FV = 781146
Page 134
The measures of money including Bank deposit with RBI, Demand deposiit with the
banking system, Term deposit of banking systerm, currency with public, and other
deposits
with RBI are shown as M0,M1,M2,M3.
1. The liabilities such as current deposits, demand liabilities portion of saving bank,
margins
held against letter of credit or bank guarantee, balances in overdue fixed deposits are
included initially, in ......
a. M0
b. M1
c. M2
d. M3
Ans-b
2. The demand deposit of banks are included in ......
a. M0,M1
b. M1,M2
c. M2,M3
d. M1,M2,M3
Ans - b
3. The term deposit of banks are included in ......
a. M0,M1
b. M1,M2
c. M2,M3
d. M1,M2,M3
Ans - c
4. Major portion of which of the following contains, interest free funds and is the most
liquid part of money supply:
a. M0
b. M1
c. M2
d. M3
Ans - a
.....................................................
While releasing the data relating to inflation increased by the Govt, it is observed that
1) The consumer price index based inflation increased to 11% and
2) Whole sale price index based inflation increased to 8%
3) The govt. claims that due to implementation of Banks Bi-partite Settlement, there is
increase in demand of goods and services leading to increase in consumer prices.
4) Further due to increased wages and salaries, there is increase in cost of inputs leading
to
increase in whole-sale price index.
Answer the following questions, based on the above information.
1. The inflation caused by the the information given at point no.3 in the question, is not
called as ...... (i) Core inflation, (ii) Demand Pull inflation (iii) Cost-push inflation
Page 135
Ans - b
2. The inflation rate of 8%, represented by the whole sale price, is called:
a. Core inflation
Ans - b
3. The inflation rate 11% represented by the consumer price, is called:
a. Core inflation
Ans - a
4. The inflation caused by the information given at point no.4 in the question, is not called
as ...... (i) Core inflation, (ii) Demand Pull inflation (iii) Cost-push inflation
Ans - a
.........................................
By using the monetary policy, RBI regulates the money supply, availability of money and
also cost of money i.e.rate of interest. For this purpose, RBI makes use of no. of tools that
include Repo Rate, Bank Rate, Reverse Repo Rate, MSF Rate, SLR, CRR, Market
Stabilization scheme.
Based on this information answer the following question:
1. Which of the following ensures the solvency of commercial banks ?
a. Statutory Liquidity Ratio
b. Market Stablization Scheme
c. Cash Reverse Ratio
d. Repo and Reverse repo transaction
Ans - a
2. Change in which of the following reduce the funds available with banks for lending
purpose ?
a. Repo rate
b. Bank rate
c. Cash reverse Ratio
d. All the above
Ans - c
3. The rate of discount which is used by RBI for rediscounting of commercial instruments
from banks is represented by ......
a. Repo rate
b. Bank rate
c. MSF rate
d. Reverse Repo rate
Ans - b
4. Which of the following is used in the process of neutralizing the effect generated by
foreign exchange flows in india ?
Page 136
a. Statutory Liquidity Ratio

b. Market Stablization Scheme
c. Cash Reverse Ratio
d. Repo and Reverse repo transaction
Ans - b
You are receiving Rs. 10000 every year for the next 5 years (at the beginning of the period)
and you invest each payment @ 5%. How much you would have at the end of the 5-year
period?
Explanation :
Here,
P = 10000
R = 5% p.a.
T = 5 yrs
If invested at the beginning,
FV = P / R * [(1+R)^T - 1] * (1+R)
FV = 55256 × 1.05
= 58019
.............................................
If you wish an annuity to grow to Rs. 17000 over 5 years so that you can replace your car,
what monthly deposit would be required if you could invest @ 12% compounded monthly?
Explanation :
Here,
FV = 17000
T = 5 years = 60 months
P =?
FV = P / R * [(1+R)^T - 1]
17000 = P × (1.01^60 – 1) ÷ 0.01
17000 = P × 81.6697
So,
P = 17000 / 81.6697
= 208
.............................................
What amount you would need to invest in the annuity if you want to get paid Rs. 20,000 a
year for 20 years when the roi is 5%?
Explanation :
Here,
20000 is to be get paid each year, so the formula is derived from EMI formula:
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV = 20000 × (1.0520 – 1) ÷ (0.05 × 1.0520)
= 249244
.............................................
Find the present value of quarterly payment of Rs. 250 for 5 years @ 12% compounded
quarterly.
Explanation :
Here,
P = Rs. 250
Page 137
T = 5 years = 5 × 4 = 20 quarters
R = 12% = 12% ÷ 4 = 0.03% quarterly
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV = 250 × (1.0320 – 1) ÷ (0.03 × 1.0320)
= 3719
.............................................
A sum of Rs. 25, 000 is borrowed over 8 years. What will be the monthly repayments @
18% compounded monthly?
Explanation :
Here,
PV = Rs. 25000
T = 8 years = 8 × 12 = 96 months
R = 18% = 18% ÷ 12 = 0.015% monthly
PV = P / R * [(1+R)^T - 1]/(1+R)^T
25000 = P × (1.01596 – 1) ÷ (0.015 × 1.01596)
25000 = P × 50.7017
P = 25000 / 50.7017
= 493
.............................................
How much money will a student owe at graduation if she borrows Rs. 3000 per year @
5%
interest during each of her four years of school?
Explanation :
Here,
P = Rs. 300
T = 4 years
R = 5%
FV = P / R * [(1+R)^T - 1]
FV = 3000 × (1.054 – 1) ÷ 0.05
= 12930
.............................................
A construction company plans to purchase a new earthmover for Rs. 350000 in 5 years.
Determine the annual savings required to purchase the earthmover if the return on
investment is 12%.
Explanation :
Here,
FV = Rs. 350000
T = 5 years
R = 12%
FV = P / R * [(1+R)^T - 1]
350000 = P × (1.125 – 1) ÷ 0.12
350000 = P × 6.3528
P = 350000 / 6.3528
= 55094
.............................................
A man borrowed a certain sum of money & paid it back in 2 years in two equal
installments.
If the roi (compound) was 4% p.a. and if he paid back Rs. 676 annually, what sum did he
Page 138
borrow?
Explanation :
Here,
PV =?
P = Rs. 676
T = 2 years
R = 4% = 0.04
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV = 676 × (1.042 – 1) ÷ (0.04 × 1.042)
= 1275
.............................................
A sum of Rs. 32800 is borrowed to be paid back in 2 years by two equal annual
installments
allowing 5% compound interest. Find the annual payment.
Explanation :
Here,
PV =?
P = Rs. 32800
T = 2 years
R = 5% = 0.05
PV = P / R * [(1+R)^T - 1]/(1+R)^T
32800 = P × (1.052 – 1) ÷ (0.05 × 1.052)
P = 32800 ÷ 1.8594
P = 17640
.............................................
A loan of Rs. 4641 is to be paid back by 4 equal annual installments. The interest is
compounded annually @ 10%. Find the value of each installment.
Explanation :
Here,
PV =?
P = Rs. 4641
T = 4 years
R = 10% = 0.10%
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 4641 × 0.1 × 1.14 ÷ (1.14 – 1)
= 1464
.............................................
A loan of Rs. 1 lac is paid back in 5 equal annual installments. The roi charged is 20%
annually. Find the amount of each loan?
Explanation :
Here,
FV = Rs. 100000
T = 5 years
R = 20% p.a. = 0.2%
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 100000 × 0.2 × 1.25 ÷ (1.25– 1)
= 33438
.............................................
Page 139
A person wants to borrow Rs. 25000 immediately and another Rs. 20000 after a period of
2
years @ 10% interest. He wants to pay it in monthly installments for 5 years. Calculate the
amount of monthly payment?
Explanation :
Here,
PV of 20000 for 2 years @ 10% = 20000 ÷ 1.0083324 = 16388.07
So, total amount = 25000 + 16388.07 = 41388.07
Now, T = 5 × 12 = 60 months and R = 10% p.a. = 10/1200 = 0.00833
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 41528.93 × 0.00833 × 1.0083360 ÷ (1.0083360 – 1)
= 879
.............................................
You will be receiving Rs. 204000 at the end of each year for the next 20 years. If the
current
discount rate for such a stream of cash flow is 10%, find the present value of cash flow.
Explanation :
Here,
P = 204000
R = 10
T = 20
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV = 1736770
X wants to borrow Rs. 25000 immediately and another Rs. 20000 after a period of 2 years
@ 10% roi. He wants to pay it in monthly installments for 5 years. Calculate the amount of
monthly payment.
Explanation :
Here,
First find PV of 20000 for 2 years @ 10%.
Here, t = 2*12 = 24 months and r = 10% ÷ 12 = 0.00833
PV = P / (1+R)^T
So,
PV = 20000 ÷ (1+0.0083)^24
= 16388.07
So, total amount = 25000 + 16388.07 = 41388.07
Now,
P = 41388.07,
R = 10% ÷ 12 = 0.00833,
T = 5 * 12 = 60 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = (41388.07 * 0.00833) * {(1.0083)^60 ÷ (1.0083)^60 – 1)}
= 879
.............................................
A person wants to receive Rs. 1250 every quarter for 5 years @ 12% roi. How much he
should invest now?
Explanation :
Here,
Page 140
P = 1250
R = 12% quarterly = 3% p.a.
T = 5 yrs = 20 quarters
PV = P / R * [(1+R)^T - 1]/(1+R)^T
So, PV = (1250 ÷ 0.03) * (1.0320 – 1) ÷ 1.0320
= 18597
.............................................
Ranjit borrowed an amount of Rs. 50000 for 8 years @ 18% roi. What shall be monthly
payment?
Explanation :
Here,
P = 50000
R = 18% = 18 % ÷ 12 = 0.015% monthly
T = 8 yrs = 96 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 50000 * 0.015 * 1.01596 ÷ (1.01596 – 1
= 986
.............................................
Ajit wants to receive Rs. 40000 p.a. for 20 years by investing @ 5%. How much he will
have to invest now?
Explanation :
Here,
P = 40000
R = 5% p.a.
T = 20 yrs
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV = (40000 ÷ 0.05) * {(1.0520 – 1) ÷ 1.0520}
= 498489
.............................................
Asha wants to receive a fixed amount for 15 years by investing Rs. 9 lacs @ 9% roi. How
much she will receive annually?
Explanation :
Here,
P = 9 lac
R = 9% p.a.
T = 15 yrs
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 900000 * 0.09 * 1.0915 ÷ (1.0915 – 1)
= 111653
.............................................
A firm needs Rs. 170000 to replace its machinery at the end of 5 years. At 12% roi, how
much it should contribute every month?
Explanation :
Here,
FV = 170000
R = 12% p.a. = 0.01% monthly
T = 5 Y = 60 months
(Here, the firm has to contribute monthly, so we have converted rate and time to monthly
Page 141
equivalent values)
FV, if invested at end of each month / year, is:
FV = P / R * [(1+R)^T - 1]
170000 = P * (1.0160 -1) ÷ 0.01
170000 = P * 81.66967
P = 170000 / 81.66967
= 2082
.............................................
For carrying out his studies, a student borrows Rs. 3 lac from a bank at concessional rate
of
5% p.a. for 4 years of his professional course. What is the total amount payable by him at
the end of the 4th year?
Explanation :
Here,
P = 3 lac
R = 5% p.a.
T = 4 yrs
FV = P / R * [(1+R)^T - 1]
FV = 300000*(1.054 – 1) ÷ 0.05
= 1293038
.............................................
X wants to send his daughter to a management school after 5 years and will need onetime
payment of charges amounting to Rs. 7 lac. At 12% roi, how much he should invest
annually?
Explanation :
Here,
FV = 7 lac
R = 12% p.a.
T = 5 yrs
FV = P / R * [(1+R)^T - 1]
700000 = P * (1.125 – 1) ÷ 0.12
700000 = P * 6.352847
P = 110187
.............................................
X opened a recurring account with a bank to deposit Rs. 16000 by the end of each year @
10% roi. How much he would get at the end of 3rd year?
Explanation :
Here,
P = 16000
R = 10% p.a.
T = 3 yrs
FV = P / R * [(1+R)^T - 1]
FV = 16000 * (1.13 – 1) ÷ 0.1
= 52960
.............................................
Alka borrowed Rs. 65600 for 2 years at 5% p.a., to be returned in 2 equal installments.
What is the amount of installment?
Explanation :
Page 142
Here,
P = 65600
R = 5% p.a.
T = 2 yrs
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 65600 × 0.05 × 1.052 ÷ (1.052 – 1)
= 35280
.............................................
Amrita obtained a loan of Rs. 92820 @ 10%, which he has to pay in 4 equal annual
installments. Calculate the amount of installment?
Explanation :
Here,
P = 92820
R = 10% p.a.
T = 4 yrs
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 92820 × 0.1 × 1.14 ÷ (1.14– 1)
= 29282
.............................................
The compound interest on a sum for 2 years is Rs. 153 and simple interest is 225 for 3
years. What are the roi & the principal amount?
Explanation :
Let,
principal amount = P,
ROI = R,
simple interest = SI,
compound interest = CI
SI for 3 years = 225, so SI for 2 years = 150
CI for 2 years = 153, so difference of Rs. 3 = interest for Rs. 75 (225-150)
So, R = 3/75 *100 = 4%
P = (SI × 100) ÷ (R×T)
= (225×100) ÷ (4×3)
= 1875
.............................................
X purchased a house and payment terms are - Rs. 10 lac immediately and balance Rs.
7.50
lac after 2 years. The roi is 6% p.a. and to be compounded semi-annually. What is the
cash
value of the house?
Explanation :
Here,
PV of Rs. 7.50 lac = 750000 ÷ 1.034 = 666370
So, total cash value = 10 lacs + 666370 = Rs. 16,66,370
.............................................
X had to pay certain amount to z and had 2 options - a) to make payment of lump sum
amount of Rs. 120000 immediately or b) to pay Rs. 150000 in 5 years @ 5% p.a. roi
(halfyearly compounding). Which option is more beneficial for x?
a. Option a
Page 143
b. Option b
c. Both are equal
d. None of the above
Ans - b
Explanation :
If X goes with option b, PV = 150000 ÷ 1.0255×2 = 117180 which is < 120000.
So, option b is more beneficial for X.
.............................................
You will be receiving Rs. 204000 at the end of each year for the next 20 years. If the
current
discount rate for such a stream of cash is 10%, find the present value of cash flow.
Explanation :
Here,
Since 204000 is like EMI. So, to find P, we use the formula of EMI
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
204000 = P × 0.1 × 1.1^20 ÷ (1.120 – 1)
204000 = P × 0.1174596
P = 1736767
.............................................
You are receiving Rs. 10000 every year for the next 5 years (at the end of the period) and
you invest each payment @ 5%. How much you would have at the end of the 5-year
period?
Explanation :
Here,
P = 10000
R = 5% p.a.
T = 5 yrs
If invested at the end,
FV = P / R * [(1+R)^T - 1]
FV = 10000 × (1.05^5 – 1) ÷ 0.05
= 55256
An annuity consists of monthly repayments of Rs. 600 made over 20 years and if rate is
14% monthly. What is the present value of the annuity?
Explanation :
Apply FV formula to get the Answer
Here
R = 14% / 12 = 0.01166
T = 20 × 12 = 240
PV = FV ÷ (1+r)t = 48278
.............................................
Assume that you have a 6% Coupon console bond. The original face value is Rs. 1000
and
the interest rate is 9%. Find the current value of this bond.
Explanation :
Current value of console bond
= Coupon ÷ interest rate
= 60 ÷ 0.09
Page 144
= Rs. 667
.............................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is
compounded on half-yearly basis, the amount payable shall be ......
Explanation :
Here,
P = 100000
R = 6% half-yearly = 3%@ p.a. = 0.03 p.a.
T = 1 yr = 2 half yrs
FV = P * (1 + R)^T
So,
FV = 100000 * (1+0.03)^2
= 106090
.............................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is
compounded on quarterly basis, the amount payable shall be ......
Explanation :
Here,
P = 100000
R = 6% quarterly = 0.015% p.a.
T = 1 yr = 4 quarters
FV = P * (1 + R)^T
So,
FV = 100000 * (1+0.015)^4
= 106136
.............................................
A person deposited Rs. 10000 in a post-office scheme @ 8% p.a. with quarterly
compounding, for 2 years. What is the amount payable?
Explanation :
Here,
P = 10000
R = 8% quarterly = 0.02% p.a.
T = 2 Y = 8 quarters
FV = P * (1 + R)^T
So,
FV = 10000 * (1+0.02)^8
= 11717
.............................................
A person borrowed Rs. 10000 from the bank @ 12% p.a. for 1 year, payable on EMI basis.
What is the amount of EMI?
Explanation :
Here,
P = 10000
T = 1 Y = 12 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
So,
EMI = 10000*0.01*(1+0.01)^12 ÷ {(1+0.01)^12 – 1}
Page 145
= 889
.............................................
A person raised a house loan of Rs. 10 lac @ 12% roi repayable in 10 years. Calculate
EMI.
Explanation :
Here,
P = 1000000
R = 12% monthly = 0.01% p.a.
T = 10 Y = 120 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
So,
EMI = 1000000*0.01*(1+0.01)^120 ÷ {(1+0.01)^120 – 1}
= 14347
.............................................
Mr. Raj is to invest Rs. 100000 by end of each year for 5 years @ 5% roi. How much
amount he will receive?
Explanation :
Here,
P = 1000000
R = 5% p.a.
T=5Y
FV = P / R * [(1+R)^T - 1]
FV, if invested at end of each year, is:
So,
FV = (100000÷0.05) * {{1+0.05}^5 – 1}
= 552563
.............................................
Mr x is to receive Rs. 10000, as interest on bonds by end of each year for 5 years @ 5%
roi.
Calculate the present value of the amount he is to receive.
Explanation :
Here,
P = 10000
R = 5% p.a.
T=5Y
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV to be received, if the amount invested at end of each year:
So,
FV = (100000÷0.05) * {(1+0.05)^5 – 1} ÷ (1+0.05)^5
= 43295
.............................................
Population of a town is 100000. The rate of change is 4% p.a. what it will be after 5 years?
Explanation :
Here,
P = 100000
R = 4%
T = 5 yrs
FV = P*(1+R)^T
Page 146
So,
FV = 10000*(1+0.04)^5
= 121665
.............................................
Population of a town is 100000. The rate of change is 4% p.a. what is was 5 years ago?
Explanation :
Here,
P = 100000
R = 4%
T = 5 yrs
FV = P*(1+R)^-T
So,
FV = 100000*(1+0.04)^-5
= 82193
.............................................
Xyz purchased machinery of Rs. 100000. The rate of depreciation is 10%. At wdv method,
what is the amount of depreciation for 4 years?
Explanation :
Here,
P = 100000
R = 10%
T = 5 yrs
FV = P*(1-R)^T
So,
FV = 100000*(1-0.1)^4
= 65610
So, amount of depreciation
= 100000 – 65610
= 34390
.............................................
Xyz purchased machinery of Rs. 100000. The rate of depreciation is 10%. At wdv method,
what is the average rate of depreciation for 4 years?
Explanation :
Here,
P = 100000
R = 10%
T = 5 yrs
FV = P*(1-R)^T
So,
FV = 100000*(1-0.1)^4
= 65610
So, amount of depreciation
= 100000 – 65610
= 34390
Average rate of depreciation
= (34390 ÷100000) * (4÷10) %
= 13.76%

Page 147
Ratio means a comparison of two items which are having cause and relationship.
Ratios can be expressed in percentage or in number of times. Depending upon the
nature, the ratios are broadly classified in to four categories viz., Liquidity Ratios,
Leverage Or Solvency Ratios, Activity Ratios and Profitability Ratios
Types of Ratios
There is a two way classification of ratios: (1) traditional classification, and

(2) functional classification. The traditional classification has been on the basis
of financial statements to which the determinants of ratios belong. On this basis
the ratios are classified as follows:
1. ‘Statement of Profit and Loss Ratios: A ratio of two variables from the
statement of profit and loss is known as statement of profit and loss
ratio. For example, ratio of gross profit to revenue from operations is
known as gross profit ratio. It is calculated using both figures from
the statement of profit and loss
2. Balance Sheet Ratios: In case both variables are from the balance
sheet, it is classified as balance sheet ratios. For example, ratio of
current assets to current liabilities known as current ratio. It is
calculated using both figures from balance sheet.
3. Composite Ratios: If a ratio is computed with one variable from the
statement of profit and loss and another variable from the balance
sheet, it is called composite ratio. For example, ratio of credit revenue
from operations to trade receivables (known as trade receivables
turnover ratio) is calculated using one figure from the statement of
profit and loss (credit revenue from operations) and another figure
(trade receivables) from the balance sheet.
Although accounting ratios are calculated by taking data from financial
statements but classification of ratios on the basis of financial statements is
rarely used in practice. It must be recalled that basic purpose of accounting is
to throw light on the financial performance (profitability) and financial position
(its capacity to raise money and invest them wisely) as well as changes occurring
in financial position (possible explanation of changes in the activity level). As
such, the alternative classification (functional classification) based on the purpose
for which a ratio is computed, is the most commonly used classification which is
as follows:
1. Liquidity Ratios: To meet its commitments, business needs liquid
funds. The ability of the business to pay the amount due to
stakeholders as and when it is due is known as liquidity, and the
ratios calculated to measure it are known as ‘Liquidity Ratios’. These
are essentially short-term in nature.
2. Solvency Ratios: Solvency of business is determined by its ability to
meet its contractual obligations towards stakeholders, particularly
towards external stakeholders, and the ratios calculated to measure
solvency position are known as ‘Solvency Ratios’. These are essentially
long-term in nature.
3. Activity (or Turnover) Ratios: This refers to the ratios that are
Page 148
calculated for measuring the efficiency of operations of business based

on effective utilisation of resources. Hence, these are also known as
‘Efficiency Ratios’.
4. Profitability Ratios: It refers to the analysis of profits in relation to
revenue from operations or funds (or assets) employed in the business
and the ratios calculated to meet this objective are known as ‘Profitability
Ratios
1. LIQUIDITY RATIOS: These Ratios helps to find out the ability of the business
concern to pay the short term liability of its liquidity. Any adverse position in liquidity
leads to sudden fall of the unit.
i) Current Ratio: Current Ratio denotes the capacity of the business concern to
meet its current obligation out of the total value of the Current Assets. Current Ratio
= Current Assets / Current Liabilities. Term Loan installments falling due for payment
in next 12 months are to be taken as Term Liability for the purpose of calculation of
Current Ratio /MPBF. Inter-corporate deposits are to be treated as Non-Current
Assets. Ideal Current Ratio is 2:1. Acceptable Ratio as per our Loan Policy
guidelines is 1.33:1 for the limits enjoying above `6.00 crores and 1.15:1 for the
business concerns availing limits of below `6.00 crores. Any deviation below the
required ratio requires ratification of Higher Authority.
ii) Quick Ratio Or Acid Test Ratio: This ratio is a comparison of Quick Assets to
Current Liabilities. Quick Assets mean the assets which have instant liquidity of the
business concern. Though the Inventory and Prepaid expenses are part of Current
Assets, it may be difficult to sell and realize the inventory. Hence, Inventory and
Prepaid expenses are to be excluded for arriving the Quick Asset Ratio.
Current Assets – (Inventory+Prepaid Exp) Quick
Ratio or Acid Test Ratio = ----------------------------------------------
Current Liabilities
Ideal Quick Ratio is 1:1. Current Ratio is always to be read along with Quick Ratio. A
fall in the Quick Ratio in comparison to the Current Ratio indicates high inventory
holdings.
2. LEVERAGE AND SOLVENCY RATIOS: These Ratios helps to find out the Long
Term Financial stability of the business concern
i)Debt Equity Ratio: Long Term Debt / Equity – Here, Equity refers Tangible Net
worth. The Ideal ratio is 2:1 and the higher may also be considered as safe.
ii) Debt Service Coverage Ratio: It helps to know the capacity of the firm to
repay the Long Term Loan Instalment and Interest. Ideal DSCR is 2:1. The higher
the DSCR, we may fix the lower repayment period. However, banks may also
consider DSCR 1.20:1 where fixed income generation is assured, such as Rent
Receivables etc.
Net Profit After Tax + Depreciation +Int. on TL
DSCR = -------------------------------------------------------------
Int. on TL + Instalment on TL
iii) Fixed Assets Coverage Ratio (FACR): This ratio indicates the extent of Fixed
assets met out of long term borrowed funds. Ideal Ratio is 2:1
Net Block
FACR = --------------------------- (Net Block means Total Assets– Depreciation)
Long Term Debt
Page 149
iv) Interest Coverage Ratio:

EBIDT
Interest Coverage Ratio = ---------------
Interest
Where EBIDT is Earning Before Interest, Depreciation and Tax. This ratio indicates
the interest servicing capacity of the unit. Higher the ratio has probability of nonservicing
of interest and hence avoidance of slippage of asset.
3. ACTIVITY RATIOS:
i) Inventory Turnover Ratio: Inventory constitutes raw material, work in process,
finished goods etc. The ratio is arrived by dividing Inventory by average monthly Net
sales to arrive at inventory levels in number of months. Lower the ratio, the faster
the movement of inventories and Higher the ratio slower the movement of
inventories. It also indicates the time taken to replenish the inventories. Separate
parameters are laid down for fabrication units & seasonal industries (maintaining
peak level inventories as at March) where operating cycle is longer compared to
other businesses and others.
Inventory x (RM+WIP+FG) x 12 (OR ) Cost of Goods Sold
Net Sales = Average Stock ((Opening Stock+Closing stock)/2)
ii) Debtors Velocity Ratio: Debtors
------------ x period
Credit sales
Lower the collection period indicates efficiency in realization of receivables and viceversa.
iii) Creditors Velocity Ratio: Trade Creditors
---------------------- x period
Credit Purchase
Higher velocity denotes that the company is enjoying credit from its suppliers and it
has bearing on Maximum Permissible Bank Finance (MPBF)
iv) Assets Turnover Ratio:
Net Sales
ASSET TURNOVER RATIO=-----------------------------
Total Operating Assets
Total Operating Assets= Total Assets – Intangible Assets. Higher the ratio indicates
favorable situation of optimum utilization of all the fixed assets.
4. PROFITABILITY RATIOS:
i) Gross Profit Ratio -> Gross Profit/Net Sales*100 – Gross Profit Ratio
indicates the manufacturing efficiency and Pricing policy of the concern. Higher
percentage indicates higher sales volume, better pricing of the product or lesser cost of
production
ii) Net Profit Ratio: Net Profit After Tax
----------------------------------- X 100
Net Sales
A decline trend is a pointer to some unhealthy development unless the company had
made usurious profits in the past and has consciously decided to reduce its profits by
lowering the prices of its product.
iii) Return on Equity: Net Profit After Tax
----------------------------------- X 100
Tangible Networth
Working Capital Assessment
Page 150
i) Turnover Method: (for WC limits up to & inclusive of `6.00 Crore)

A. Accepted Projected Sales Turnover
B. 25% of Sales Turnover
C. Margin @ 5 % of Sales Turnover
D. Actual NWC available as per latest Audited Balance Sheet
E. B-C
F. B-D
G. M.P.B.F = E or F, whichever is less.
ii) Inventory Method – For WC limits up to & inclusive of `6.00 Crore
A. Total Current Assets
B. Current Liabilities (other than Bank Borrowings)
C. Working Capital Gap = A – B
D. Margin @ 13% of Projected Current Assets
E. Actual NWC available as per latest Audited Balance Sheet
F. C-D
G. C-E
H. M.P.B.F = F or G, whichever is less.
_ Maximum Working Capital credit limit up to which Turn Over method can be
extended is `6 Crores. Where the limits of above `6.00 Crore, the margin is to be
taken as 25% projected current assets. If actual NWC is less than required
margin, the borrower has to bring in the short fall.
_ The minimum acceptable Current Ratio for working capital credit facility up to `6
crore & above `6 crore is 1.15 & 1.33 respectively.
_ Maximum acceptable level of Total Debt- Equity Ratio is 4.
_ Maximum permissible Gearing Ratio while assessing the eligibility for nonfunded
limits is 10.
_ Standard average DSCR specified for all Term Loans is 1.50 to 2.00. However,
in case of assured source of income, it can be taken as 1.20. Lower DSCR can be
accepted for Rural Godowns.

Page 151
Terms used inFinancial statement analysis
1 Net Sales Gross Sales minus returns, discounts, excise duty.

Raw Materials Opening Stock of raw materials plus purchases of raw
2 consumed materials less Closing stock of raw
material .
Raw materials consumed, stores and spares consumed, power
3 Cost of Production and fuel, direct labour,
repairs and maintenance, other manufacturing expenses and
depredation plus opening
stock of stock in process minus dosing stock of stock in
process.
Cost of production (3) plus opening stock of finished goods

4 Cost of Sales minus dosing stock of finished
goods.
5 Gross Profit Net Sales - Cost of Sales (Item 1 minus Item 4)
Gross Profit (5) minus interest, selling general and

6 Operating Profit administrative expenses.
7 Net Profit before tax Operating profit plus other incomes minus other expenses
8 Net Profit after tax Profit before taxation minus provision for taxes.
9 Retained Profit Net profit minus dividend paid / dedared
Profit before charging Depreciation (Net Profit +

10 Cash Profit Depredation)
11 Cash-Loss Loss before charging Depredation (Net Loss — Depredation)
Things owned by a business Not converted into cash in normal

_12 Assets course of business, These
are acquired to use them in the production of other goods and
13 Fixed Assets services.
Assets which are meant to be converted into cash or

14 Current Assets consumed in normal course of
business say within 1 year. These are also called as gross
working capital.

Page 152
15 Intangible assets Expenditure on invisible assets, likely to yield benefit to the

company in future e.g
goodwill, patent, trade marks, designs.
16 Fictitious Assets Which have notional value only e.g. losses, preliminary expenses.
Miscellaneous Assets or Non current Which can't be classified as

current, fixed or intangible e.g. inter Corporate investment assets
18 Tangible Assets Total asset side of balance sheet minus intangible assets.
Assets which can be converted to cash quickly. Cash, bank

19 Quick Assets balances, marketable
investments, bills receivables and sundry debtors considered goal.
(Current Assets
minus-Inventories & Prepaid Expenses)
20 Liabilities Things owed by the business.
Owners Equity Paid up share capital, reserves and surplus, preference shares with
21 (Net more than 12 years
Worth) maturity.
Long term liabilities or Outsiders funds, payable in more than 12 months. Term loan
22 Debt (exduding instalment
payable within 12 months) plus debentures maturing within more
than one year,
preference shares redeemable within 12years, deposits payable
beyond one year.
Liabilities which are payable in less than one year e.g. sundry
23 Current Liabilities creditors, unsecured loans,
advances from customers, interest accrued but not due, dividends
payable, statutory
liabilities, provisions, Bank borrowings for working capital etc
24 Total Outside Liabilities Total of the liability side of balance sheet minus net worth
Total tangible assets minus total outside liabilities. Owner's funds

25 Tangible Net Worth minus Intangible &
Fictitious assets ; Paid up capital plus reserves minus intangible
assets
26 Gross Working Capital Total of Current Assets

Current assets minus total current liabilities. Long Term Sources
27 Net Working Capital minus long term uses

Page 153
Current Assets minus current liabilities other than Bank

28 Working Capital gap Borrowings.
Paid up capital, reserves and surplus (excluding specific reserves)

29 Long term sources i.e. Net Worth and long
term liabilities.
30 Short Term Sources Current Liabilities

Fixed Assets, Miscellaneous or Non. current assets, Intangible and
31 Long Term Uses Fictitious Assets
(assets other than current assets)
32 Short Term Uses Current Assets

Likely liability which may or may not arise on the happening or
33 Contingent Liabilities non happening of an
event

Page 154
Liabilities
Net worth/Equity Funds brought in by the
promoters as their investment in business or
generated by and retained in business
Page 155
Share capital/partner's capital/ Paid up equity

share capital,/owners funds
Reserves & Surplus e.g. General Reserve,
Capital Reserve, Revaluation Reserve and
Other Reserves),Retained Earnings
Undistributed Profits,Preference share capital
(not redeemable within 12 years
Long term liabilities:

Liabilities which are not due for payment within
12 months from the date of the Balance Sheet)
Term loans from financial institutions;
Term loan from banks; Debentures/Bonds;
Deferred payment liability;Preference Shares
redeemable within 12 years;
Fixed Deposits maturing after one year;
Provision for gratuity; Unsecured Loans
Short term for CurrentyLiabilities Liabilities which
are due for payment within 12 months from the
date of the balance sheet and are to be repaid
out of proceeds of current assets,Short term
borrowings from banks (C/C, 0/D or B/P, B/D
limits) for working capital.,Sundry/trade
creditors/creditors/ Account payable,Bills
Payable / trade acceptances
Fixed Deposits from public payable within one
year,Short duration loans or deposits
Provision for taxation, Proposed Dividends,
Provision for bonus, unclaimed dividend.
Deposits from dealers, selling agents etc.
Advance payments from customers,
outstanding expenses and Accruals e.g. wages
Assets
Fixed Assets :Assets which are purchased for long

term and not meant to be sold but used for production.
Land & Building,Plant & Machinery
Vehicles,Furniture & Fixture
Office equipment,Capital Work in Progress These are
represented as under:
Original value (Gross Bock) Less depreciation
Net Block or book value or written down
Value Method
Non Current Assets:

Assets which cannot be classified as current or
Page 156
fixed or intangible assets Book Debts or Sundry

Debtors more than 6 months old/ Disputed Debts,
Investment of long term nature in shares,
govt. securities, associates or sister firms or
companies. Long term security deposits. Unquoted
investments; Investments in subsidiaries or sister
concerns; Loans & Advances to directors, officers;
Accounts receivables in respect of sale of plant &
machinery; Advances to concerns in which directors
are interested; Deposits with customs port trust etc
Intangible & fictitious Assets Which do not have
physical existence. For example: Goodwill, Patents,
Trade Mark, Copy Right, Preliminary or pre operative
expenses, other formation expenses, debit balance of
P & L account, accumulated losses, bad debts,
Capital issue expenses e.g. discount on issue of
share & debentures, commission on underwriting of
shares & debentures; Deferred revenue expenditure
e.g. Advertisement
Current Assets : Cash in hand, Bank balance

including fixed ,deposits with banks. Stocks/inventory
(such as raw material, stock in process, finished
goods, consumable stores and spares),Book
debts/Sundry debtors/Bills Receivable/ Accounts
receivable/ debtors, Government and other trustee
securities
(other than for long term purposes e.g. sinking funds,
gratuity funds etc.),Readily Marketable/quoted govt. or
other securities meant for sale,Interest accrued and
receivables,Advance payment of taxes,
pre-paid expenses,Advance payments for
merchandise; unexpired insurance

Page 157

Page 158

Page 159

Page 160

Page 161

Page 162

Page 163
Numericals:

Page 164
Assets
Net Fixed Assets - 800
Inventories - 300
Preliminary Expenses - 100
Receivables - 150
Investment In Govt. Secu - 50
Total Assets - 1400
Liabilities
Equity Capital - 200
Preference Capital - 100
Term Loan - 600
Bank C/C - 400
Sundry Creditors - 100
Total Liabilities – 1400
1. Debt Equity Ratio = ?

a. 1:1
b. 1:2
c. 2:1
d. 2:3
Ans - c
Explanation :
600 / (200+100) = 2 : 1
2. Tangible Net Worth = ?
a. 100
b. 200
c. 300
d. 400
Ans - b
Explanation :
Only equity Capital i.e. = 200
3. Total Liabilities to Tangible Net Worth Ratio = ?
a. 7:2
b. 11:2
c. 13:2
d. 15:2
Ans - b
Explanation :
Total Outside Liabilities / Total Tangible Net Worth : (600+400+100) / 200 = 11 : 2
4. Current Ratio = ?
a. 1:1
b. 1:2
c. 2:1
d. 3:1
Ans - a
Explanation :
(300 + 150 + 50 ) / (400 + 100 ) = 1 : 1
Page 165
Q.2
Assets
Net Fixed Assets - 265
Cash - 1
Receivables - 125
Stocks - 128
Prepaid Expenses - 1
Intangible Assets - 30
Total - 550
Liabilities
Capital + Reserves - 355
P & L Credit Balance - 7
Loan From S F C - 100
Bank Overdraft - 38
Creditors - 26
Provision of Tax - 9
Proposed Dividend - 15
Total - 550
1. Current Ratio = ?
= (1+125 +128+1) / (38+26+9+15)
= 255/88
= 2.89 : 1
2. Quick Ratio = ?
(125+1)/88
= 1.43 : 11
3. Debt Equity Ratio = ?
= LTL / Tangible NW
= 100 / (362 – 30)
= 100 / 332
= 0.30 : 1
4. Proprietary Ratio = ?
= (T NW / Tangible Assets) x 100
= [(362 - 30 ) / (550 – 30)] x 100
= (332 / 520) x 100
= 64%
5. Net Working Capital = ?
= CA - CL
= 255 - 88
= 167
6. If Net Sales is Rs.15 Lac, then What would be the Stock Turnover Ratio in Times ?
= Net Sales / Average Inventories/Stock
= 1500 / 128
= 12 times approximately
7. What is the Debtors Velocity Ratio if the sales are Rs. 15 Lac?
= (Average Debtors / Net Sales) x 12

Page 166
= (125 / 1500) x 12
= 1 month
8. What is the Creditors Velocity Ratio if Purchases are Rs.10.5 Lac?
= (Average Creditors / Purchases ) x 12
= (26 / 1050) x 12
= 0.3 months
.............................................
Q.3 Current Ratio of a firm is 1 : 1. What will be the Net Working Capital ?
a. 0
b. 1
c. 100
d. 200
Ans - a
Explanation :
It suggest that the Current Assets is equal to Current Liabilities hence the NWC would be
0
(since NWC = C.A - C.L)
.............................................
Q.4 Suppose Current Ratio is 4 : 1. NWC is Rs.30,000/-. What is the amount of Current
Assets ?
a. 10000
b. 30000
c. 40000
d. 50000
Ans - c
Explanation :
Let Current Liabilities = a
4a - 1a = 30,000
a = 10,000 i.e. Current Liabilities is Rs.10,000
Hence Current Assets would be
4a = 4 x 10,000 = Rs.40,000/-
.............................................
Q.5 The amount of Term Loan installment is Rs.10000/ per month, monthly average
interest
on TL is Rs.5000/-. If the amount of Depreciation is Rs.30,000/- p.a. and PAT is
Rs.2,70,000/-. What would be the DSCR ?
a. 1
b. 1.5
c. 2
d. 2.5
Ans - C
Explanation :
DSCR = (PAT + Depr + Annual Intt.) / Annual Intt + Annual Installment
= (270000 + 30000 + 60000 ) / 60000 + 12000
= 360000 / 180000
=2
Page 167
.............................................
Q. 6 A Company has Net Worth of Rs.5 Lac, Term Liabilities of Rs.10 Lac. Fixed Assets
worth
RS.16 Lac and Current Assets are Rs.25 Lac. There is no intangible Assets or other Non
Current Assets. Calculate its Net Working Capital.
a. 1 lac
b. 2 lac
c. - 1 lac
d. - 2 lac
Ans - c
Explanation :
Total Assets = 16 + 25 = Rs. 41 Lac
Total Liabilities = NW + LTL + CL = 5 + 10 + CL = 41 Lac
Current Liabilities = 41 – 15 = 26 Lac
Therefore Net Working Capital = CA – CL = 25 – 26 = (-) 1 Lac
.............................................
Q. 7 Merchandise costs - Rs. 250000, Gross Profit - Rs. 23000, Net Profit - Rs. 15000.
Find
the amount of sales.
a. 227000
b. 235000
c. 265000
d. 273000
Ans - d
Explanation :
Amount of sales = Merchandise costs + Gross Profit
= 250000 + 23000
= 273000
.............................................
Q.8 Total Liabilities of a firm is Rs.100 Lac and Current Ratio is 1.5 : 1. If Fixed Assets
and
Other Non Current Assets are to the tune of Rs. 70 Lac and Debt Equity Ratio being 3 :
1. What would be the Long Term Liabilities?
a. 40 Lacs
b. 60 Lacs
c. 80 Lacs
d. 100 Lacs
Ans - b
Explanation :
Total Assets = Total Liabilities = 100 Lac
Current Asset = Total Assets - Non Current Assets
= Rs. 100 L - Rs. 70 L
= Rs. 30 L
If the Current Ratio is 1.5 : 1
then Current Liabilities works out to be Rs. 20 Lac.
Page 168
That means, Net Worth + Long Term Liabilities = Rs. 80 Lacs.

If the Debt Equity Ratio is 3 : 1,
then Debt works out to be Rs. 60 Lacs and equity Rs. 20 Lacs.
Therefore the Long Term Liabilities would be Rs.60 Lac.
.............................................
Q.9 Current Ratio = 1.2 : 1.
Total of balance sheet being Rs.22 Lac.
The amount of Fixed Assets + Non Current Assets is Rs. 10 Lac.
What would be the Current Liabilities?
a. 10 Lacs
b. b. 12 Lacs
c. 16 Lacs
d. 22 Lacs
Ans - a
Explanation :
Total Assets is Rs.22 Lac.
Fixed Assets + Non Current Assets is Rs. 10 Lac
Then Current Assets = 22 – 10 = Rs. 12 Lac.
Current Ratio = 1.2 : 1
Current Liabilities = Rs. 10 Lac
.............................................
Q.10 M/s Raj&co's balance sheet included the following accounts:

Cash: 10,000
Inventory: 5,000
Prepaid taxes: 500
Quick Ratio = Cash + Cash Equivalents + Short Term Investments + Marketable
= (10000+5000+1000) / 15000
= 16000 / 15000
= 1.07
.................................
Q.11 M/s Raj&co's balance sheet included the following accounts:
Inventory : 5,000
Prepaid taxes : 500
Current Liabilities
= (21500 - 5000 - 500) / 15000
Page 169
= 16000 / 15000
= 1.07
.................................
Q.12 XYZ Pvt Ltd has the following assets and liabilities as on 31st March 2015 (in
Lakhs) :
Non Current Assets
Goodwill 75
Fixed Assets 75
Current Assets
Cash in hand 25
Cash in bank 50
Inventory 25
Receivable 100
Current Liabilities
Trade payables 100
Bank Loan 50
Current Liabilities
= (25+50+45+100) / 160
= 220 / 160
= 1.375
.................................
Q.14 GHI Ltd. manufacturers two products :Product G and Product H. The Variable cost of
the manufacture is as
follows:
Product G Product H
Direct Material 3 10
Direct Labour (Rs.6 per hour) 18 12
Variable Overhead 4 4
Product G sells for Rs.40 and Product H at Rs.30. During the month of January, the
Company is having
only 21000 of direct labour. The maximum production capacity of Product G is 5000 units
and Product H is
10000 units.
From the above facts, answer the following:
I. The contribution from Product G and H together is-----
a) Rs.32
b) Rs.19
Page 170
c) Rs.27
d) Rs.40
II. The contribution per labour hour from Product H is-----
e) Rs. 4
f) Rs. 2
g) Rs. 3
h) Rs. 5
III. The contribution per labour hour from Product G is-----
a) Rs.2
b) Rs.5
c) Rs.15
d) Rs.3
Q.15 Read the following and answer

Cost / unit
Raw material 50
Direct labour 20
Overheads 40
Total cost 110
No. of units 10,000
No. of units
Sold on credit 8000
Average raw material in stock : 1 month
Average work in progress : ½ month
Average finished goods in stock : ½ month
Credit by supplier : 1 month
Credit to debtor : 2 months
Take 1 year = 12 months
1) Investment of working capital in raw material inventory is
(a) 41666
(b) 50000
(c) 33333
(d) 10000
2) Investment in working capital for finished goods is
a) 45833
b) 49090
c) 56453
d) 50000
3)current assets in respect of debtors
a) 174541
b) 146666
c) 152500
d) 154326

Page 171
Q.16 A company with equity of Rs. 10 crore earns PBIDT of Rs. 40 crore. It incurs
interest of Rs.5 crore, depreciation of Rs. 5 crore and pays tax of Rs. 10 crore. It
has reserves of Rs. 30 crore (Excluding current years profits) and long term debt
of Rs. 50 crore. It pays 100% dividend and transfers remaining profit to reserves.
Its share of Rs. 10 face value is quoted at price of Rs. 200. Find the following :
(i) Book value of share after current year's profit transferred to reserves.
Book Value = Equity + Reserves + Current year’s (PAT – Div)
= 10 + 30 + (20 – 10) = Rs..50
(ii) Earning per share
40 – ( 5+5+10)
EPS = PAT / Equity = ------------------ x 10
10
20
--- x 10 = Rs.20
23
10
(iii) Return on net worth
PAT x 100 20
40% Return on net worth = ------------ = ------- x 100 = 40%
NW 50
(iv) Debt-equity ratio
50
1:1 Debt equity ratio = ------ = 1:1
50
(v) P/E ratio
10 M.P. = EPs x PE
200 = 20 x PE
PE = 10
(vi) Payout ratio
50%
Dividend 10
----------- = ---- = 50%
PAT 20
Q.17 Following information is given by a company from its books of accounts as on
March 31, 2018:

Page 172
Particulars Rs.
Inventory 1,00,000
Total Current Assets 1,60,000
Shareholders’ funds 4,00,000
13% Debentures 3,00,000
Current liabilities 1,00,000
Net Profit Before Tax 3,51,000
Cost of revenue from operations 5,00,000
Calculate:
i) Current Ratio
ii) Liquid Ratio
iii) Debt Equity Ratio
iv) Interest Coverage Ratio
v) Inventory Turnover Ratio
Solution:
i) Current Ratio =
Current Assets
Current Liabilities
=
Rs. 1,60,000
Rs. 1,00,000
= 1.6
ii) Liquid Assets = Current assets – Inventory

= Rs. 1,60,000 – Rs. 1,00,000
= Rs. 60,000
Liquid Ratio =
Liquid Assets
Current Liabilities
=
Rs. 60,000
Rs. 1,00,000
= 0.6 : 1
iii) Debt-Equity Ratio =
Long-term Debts
Shareholders' Funds
=
Rs. 3,00,000
Rs. 4,00,000
= 0.75 : 1
iv) Net Profit before Interest = Net Profit before Tax + Interest on Long
& Tax term Debts
= Rs. 3,51,000 + (13% of Rs. 3,00,000)
= Rs. 3,51,000 + Rs. 39,000 = Rs. 3,90,000
Interest Coverage Ratio =
Net Profit before Interest & Tax
Interest on Long Term Debts
=
Page 173
Rs. 3,90,000
Rs. 39,000
= 10 times
v) Inventory Turnover Ratio =
Cost of Revenue from Operations
Average Inventory
=
Rs. 5,00,000
Rs. 1,00,000
= 5 times
Q.18 Gross profit ratio of a company was 25%. Its credit revenue from operations was
Rs. 20,00,000 and its cash revenue from operations was 10% of the total revenue
from operations. If the indirect expenses of the company were Rs. 50,000,
calculate its net profit ratio.
Solution:
Cash Revenue from Operations = Rs.20,00,000 × 10/90
= Rs.2,22,222
Hence, total Revenue from Operations are = Rs.22,22,222
Gross profit = 0.25 × 22,22,222 = Rs. 5,55,555
Net profit = Rs.5,55,555 – 50,000
= Rs.5,05,555
Net profit ratio = Net profit/Revenue from Operations
× 100
= Rs.5,05,555/Rs.22,22,222 × 100
= 22.75%.
Q.19 From the following details, calculate Return on Investment:
Share Capital : Equity (Rs.10) Rs. 4,00,000 Current Liabilities Rs. 1,00,000
12% Preference Rs. 1,00,000 Fixed Assets Rs. 9,50,000
General Reserve Rs. 1,84,000 Current Assets Rs. 2,34,000
10% Debentures Rs. 4,00,000
Also calculate Return on Shareholders’ Funds, EPS, Book value per share
and P/E ratio if the market price of the share is Rs. 34 and the net profit after tax
was Rs. 1,50,000, and the tax had amounted to Rs. 50,000.
Solution:
Profit before interest and tax = Rs. 1,50,000 + Debenture interest + Tax
= Rs. 1,50,000 + Rs. 40,000 + Rs. 50,000
= Rs.2,40,000
Capital Employed = Equity Share Capital + Preference Share
Capital + Reserves + Debentures
= Rs. 4,00,000 + Rs. 1,00,000 + Rs. 1,84,000
Page 174
+ Rs. 4,00,000 = Rs. 10,84,000

Return on Investment = Profit before Interest and Tax/
Capital Employed × 100
= Rs. 2,40,000/Rs. 10,84,000 × 100
= 22.14%
Shareholders’ Fund = Equity Share Capital + Preference Share Capital
+ General Reserve
= Rs. 4,00,000 + Rs. 1,00,000 + Rs. 1,84,000
= Rs. 6,84,000
Return on Shareholders’ Funds = Profit after tax/shareholders’ Funds × 100
= Rs. 1,50,000/Rs. 6,84,000 × 100
= 21.93%
EPS = Profit available for Equity Shareholders/
Number of Equity Shares
= Rs. 1,38,000/ 40,000 = Rs. 3.45
Preference Share Dividend = Rate of Dividend × Prefence Share Capital
= 12% of Rs. 1,00,000
= Rs. 12,000
Profit available to equity = Profit after Tax – Preference dividend on
Shareholders preference shares
where, Dividend on Prefrence = Rate of Dividend × Preference Share Capital
shares = 12% of Rs. 1,00,000
= Rs.12,000
= Rs. 1,50,000 – Rs. 12,000 = Rs. 1,38,000
P/E Ratio = Market price of a share/ Earnings per share
= 34/3.45
= 9.86 Times
=
Rs. 4,00,000
Rs.10
= Rs. 40,000
Book Value per share = Equity Shareholders’ fund/No. of
equity shares
where, Number of Equity Shares =
Equity share capital
Face value per share
Hence, Book value per share = Rs. 5,84,000/40,000 shares = Rs. 14.60
Some more problems for Practice::

Current Ratio of a firm is 1 : 1. What will be the Net Working Capital ?
a. 0
b. 1
c. 100
d. 200
Ans - a
Explanation :
It suggest that the Current Assets is equal to Current Liabilities hence the NWC would be
0
Page 175
(since NWC = C.A - C.L)

.............................................
Suppose Current Ratio is 4 : 1. NWC is Rs.30,000/-. What is the amount of Current
Assets ?
a. 10000
b. 30000
c. 40000
d. 50000
Ans - c
Explanation :
Let Current Liabilities = a
4a - 1a = 30,000
a = 10,000 i.e. Current Liabilities is Rs.10,000
Hence Current Assets would be
4a = 4 x 10,000 = Rs.40,000/-
.............................................
The amount of Term Loan installment is Rs.10000/ per month, monthly average interest
on TL is Rs.5000/-. If the amount of Depreciation is Rs.30,000/- p.a. and PAT is
Rs.2,70,000/-. What would be the DSCR ?
a. 1
b. 1.5
c. 2
d. 2.5
Ans - C
Explanation :
DSCR = (PAT + Depr + Annual Intt.) / Annual Intt + Annual Installment
= (270000 + 30000 + 60000 ) / 60000 + 120000
= 360000 / 180000
=2
.............................................
A Company has Net Worth of Rs.5 Lac, Term Liabilities of Rs.10 Lac. Fixed Assets worth
RS.16 Lac and Current Assets are Rs.25 Lac. There is no intangible Assets or other Non
Current Assets. Calculate its Net Working Capital.
a. 1 lac
b. 2 lac
c. - 1 lac
a. - 2 lac
Ans - c
Explanation :
Total Assets = 16 + 25 = Rs. 41 Lac
Total Liabilities = NW + LTL + CL = 5 + 10 + CL = 41 Lac
Current Liabilities = 41 – 15 = 26 Lac
Therefore Net Working Capital = CA – CL = 25 – 26 = (-) 1 Lac
.............................................
Merchandise costs - Rs. 250000, Gross Profit - Rs. 23000, Net Profit - Rs. 15000.
Find
the amount of sales.
a. 227000
Page 176
b. 235000
c. 265000
d. 273000
Ans - d
Explanation :
Amount of sales = Merchandise costs + Gross Profit
= 250000 + 23000
= 273000
.............................................
Total Liabilities of a firm is Rs.100 Lac and Current Ratio is 1.5 : 1. If Fixed Assets
and
Other Non Current Assets are to the tune of Rs. 70 Lac and Debt Equity Ratio
being 3 :
1. What would be the Long Term Liabilities?
a. 40 Lacs
b. 60 Lacs
c. 80 Lacs
d. 100 Lacs
Ans - b
Explanation :
Total Assets = Total Liabilities = 100 Lac
Current Asset = Total Assets - Non Current Assets
= Rs. 100 L - Rs. 70 L
= Rs. 30 L
If the Current Ratio is 1.5 : 1
then Current Liabilities works out to be Rs. 20 Lac.
That means, Net Worth + Long Term Liabilities = Rs. 80 Lacs.
If the Debt Equity Ratio is 3 : 1,
then Debt works out to be Rs. 60 Lacs and equity Rs. 20 Lacs.
Therefore the Long Term Liabilities would be Rs.60 Lac.
.............................................
Current Ratio = 1.2 : 1.
Total of balance sheet being Rs.22 Lac.
The amount of Fixed Assets + Non Current Assets is Rs. 10 Lac.
What would be the Current Liabilities?
a. 10 Lacs
b.b. 12 Lacs
c. 16 Lacs
d. 22 Lacs
Ans - a
Explanation :
Total Assets is Rs.22 Lac.
Fixed Assets + Non Current Assets is Rs. 10 Lac
Then Current Assets = 22 – 10 = Rs. 12 Lac.
Current Ratio = 1.2 : 1
Current Liabilities = Rs. 10 Lac
..........................................
Page 177
The shareholders of the
company have invested 12,00,000. Calculate the debt to equity ratio.
= (100000+500000) / 1 200000
= 600000 / 1200000
= 0.5
.................................
accounting equation, we can
assume the total equity is 1,00,000. Find the Equity Ratio.
= 100000 / 150000
= 0.67
.................................
assume the total equity is 1,00,000. Find the Debt Ratio.
DR = TL / TA
= 50000 / 150 000
= 0.33
.................................
The shareholders of the
company have invested 12,00,000. Calculate the debt to equity ratio.
a. 0.25
b. 0.5
c. 0.75
d. 1
Ans - b
Solution :
= (100000+500000) / 1 200000
= 600000 / 1200000
= 0.5
......... ........................
Page 178
assume the total equity is 1,00,000. Find the Equity Ratio.

a. 0.33
b. 0.5
c. 0.67
d. 0.75
Ans – c
Solution :
ER = Tota l Equity / TA
= 100000 / 150000
= 0.67
.......... ...................................
and reserves Rs 2 lac. What
is the debt-equity ratio?
a. 1:1
b. 1.5: 1
c. 1.75:1
d. 2:1
Ans - b
Let me Explain
= 2 lac
Since DER = TL/TNW or debt/equity or TL/equity hence 3/2 = 1.5 : 1
.............................................
DER is 3:1, the amount of total assets Rs 20 lac, current ratio is 1.5:1 and owned funds
Rs 3 lac. What is amount of
current assets?
a. 3 lac
b. 5 lac
c. 12 lac
d. 15 lac
Ans - c
Let me Explain
Since DER = 3:1
Hence Debt = 9 lac
(if we consider debt and equity as long term liabilities then term liability works out to
12(9+3 lac)
Now as the term liabilities is Rs 12 lac, curren t liabilities will be Rs 8 lac (20-12=8)
CR=1.5:1, so
1.5:1=CA:8
Page 179
i.e CA= 1.5× 8=12 lac

................................ .............
and reserves Rs 2 lac. What
is the debt-equity ratio?
a. 1:1
b. 1.5: 1
c. 1.75:1
d. 2:1
Ans - d
Let me Explain
= 5 lac
Since DER = TL/TNW or debt/equity or TL/equity hence 10/5 = 2 : 1
.............................................
10 lac. What is amount of
current assets?
a. 8 lac
b. 10 la c
c. 12 lac
d. 15 lac
Ans - b
Let me Explain
Since DER = 2:1
Hence Debt = 20 lac
(if we consider debt a nd equity as long term liabilities then term liability works out to 30
(20+10 lac)
Now as the term liabilities is Rs 30 lac, curren t liabilities will be Rs 10 lac (40-30=10)
CR=1:1, so
1:1=CA:10
i.e CA= 1× 10=10 lac
TL is Rs 5000/-. If the

Page 180
amount of depreciation is Rs 30000/- p.a and PAT is Rs 270000/-. What would be the
DSCR?
a. 1.75
b. 2
c. 1. 65
d. 1.33
Ans - b
Let me Explain
Hence (5000×12 + 270000 + 30000)/(5000×12 + 10000×12)
i.e 360000/18000
i.e 2
....... ......................................
DSCR?
a. 1
b. 1 .5
c. 2
d. 2 .5
Ans - c
Let me Explain
Since DSCR = (interest + PAT + Depriciation) / ( interest + instalment of TL )
= (10000×12 + 300000 + 30000)/(10000×12 + 15000×12)
= (120000 + 330000) / (120000 + 180000)
= 450000/300000
= 1.5
......... ....................................
DSCR?
a. 1.75
b. 2
c. 1. 65
d. 1.33
Ans - b
Let me Explain
DSCR = (7500×12 + 350000 + 100000)/(7500×12 + 15000×12)
= (90000 + 350000 + 100000) / (90000 + 180000)
= 540000 / 270000
=2

Page 181
Union Budget 2018-19:
Budget 2018 Takeaways-

 As per the FM in the Union Budget, India is expected to become the fifth largest
economy very soon.
 The Growth rate is expected between 7.2-7.5% in the second half of 2017-18.
 Exports are expected to grow 15% in 2018.
 As per the FM, India is a Rs2.5 trillion economy.
 Minimum Support Price (MSP) of all crops shall increase to at least 1.5 times that
of the production cost.
 The government will set up a fund of Rs 2,000 crore for developing agricultural
markets.
 Our focus is on productive and gainful on-farm and non-farm employment for
farmers and landless families, says Jaitley.
 MSP for Kharif cost will be 1.5 times the cost of production.
 As per the FM, APMCs will be linked with ENAM.
 The government will develop 22,000 Gramin agricultural markets.
 The cluster-model approach will be adopted for agricultural production.
 Allocation in food production sector doubled to Rs 1400 crore.
 Operation Green will be launched for agriculture and the Minister allocates Rs500
crore for this.
 Agricultural corpus worth Rs 2000 crore will be set up. 470 APMCs have been
connected to eNAM network, the rest to be connected by March 2018.
 A fund for the fishery, aquaculture development and animal husbandry will be set
up with a total corpus to be Rs 10,000 crore. We will also allocate Rs 1290 crore for a
bamboo mission, as it is green gold.
 In all, we are providing Rs 10 lakh crore to Rs 11 lakh crore as credit for agricultural
activities.
 Jaitley proposes to increase the target of providing free LPG connections to 8 crore
to poor women.
 Ujjwala Yojana, the free LPG connection scheme expanded to eight crore
households.
 Six crore toilets have been built already, and in the next year, two crore additional
toilets will be constructed.

Page 182
 The government will provide 4 crore electricity connections to the poor under
Saubhagya Yojana.
 Kisan credit card to be extended to fisheries,animal husbandry farmers.
 The government will establish a dedicated affordable housing fund.
 Loans to self-help groups will increase to Rs75,000 crore.
 Govt. allocated Rs5,750 crore to National Livelihood Mission and Rs2,600 crore to
the groundwater irrigation scheme.
 24 new government medical colleges.
 Government is implementing a comprehensive social security scheme.
 Govt. will initiate an integrated B-Ed programme for teachers.
 Government proposes to launch the Revitalising of Infrastructure and Systems of
Education (RISE) by next year.
 Govt. proposed to set up two new full-fledged schools of planning and architecture.
 18 new schools of planning and architecture will be set up in the IITs and NITs.
 Rs. 1 lakh crore over 4 years for initiative for Infrastructure Devt. in education.
 2 major initiatives as part of Ayushman Bharat program.
 National health protection scheme to cover 10 cr poor families. Health cover of up
to 5 lakh per family per year for poor & vulnerable. National health protection scheme to
benefit 50 crore people.
 24 new govt medical college & hospitals.
 Rs. 600 crore for nutritional support to all TB patients.
 Rs. 1200 crore for health and wellness centres.
 Loans to women self-help groups of women to be increased to 75,000 cr by March
19.
 Govt. is launching a new national health protection scheme – Rashtriya Samaj
Beema Yojana. This will have 50 crore beneficiaries and 10 crore families will get 5 lakh
per year for their families to cover secondary and tertiary hospital expenses. This is the
world's largest government-funded healthcare program.
 A Rs 600 crore corpus is being set up to help Tuberculosis patients. This will build
a new India in 2022 and enhance productivity and will also generate lakhs of jobs for
women.
 PM Jeevan Beema Yojana benefitted more than 2 crore families.
 Jan Dhan Yojana will be extended to all 60 crore bank accounts.
 The government increased allocation for SC-ST earmarked programmes: Rs
56,000 crore for SCs and Rs 39,000 crore for STs.
 By 2022, every block with more than 50% ST population and at least 20,000 tribal
people will have 'Ekalavya' school at par with Navodaya Vidyalas.
 The government will announce measures to address non-performing assets of
MSMEs.
 As per the FM, Rs. 3 lakh crore for lending under is being allocated in FY 19 for
PM's MUDRA Yojana.
Page 183
 Smart city Mission and AMRUT discussed.

 Smart city command control centre discussed.
 Govt to contribute 12% of wages of new employees to EPF for 3 yrs.
 Rs. 7148 crore allocation for the textile sector.
 Govt. will launch a scheme for Galvanising Organic Bio-Agro Resources Dhan
(GOBARDHAN).
 Under the Smart City mission, 99 cities selected with the outlay of Rs. 2.04 lakh
crores.
 EPF contribution has been reduced to 8% for the first 3 years of employment and
12% government contribution to EPF in sectors employing a large number of people,
however, there will be no changes in employer contribution.
 10 tourist cities to be developed into iconic tourist destinations.
 600 railway stations to be redeveloped.
 Over 3600 km railway track renovation targeted in the current year.
 Scheme for revitalizing school infrastructure, with an allocation of 1 lakh crore
rupees over four years. Called RISE - Revitalizing Infrastructure in School Education.
 The Bharatmala project has been approved and we are confident of completing
9000 km of highway construction.
 In Railways, 18,000 kms of doubling of tracks would eliminate capacity constraints.
 We are moving towards optimum electrification of the railway. Over 3,600 km of
track renewal is being targeted in 2018-19.
 150 km additional suburban railway network at the cost of Rs. 40,000 cr.
 Regional air connectivity scheme shall connect 56 unserved airports.
 Airport capacity to be hiked to handle 1 billion trips per year.
 Training for 50 lakh youth by 2020.
 Govt. to eliminate over 4,267 unmanned level crossings in the next two years.
 All railway stations and trains will have WiFi and 150 kilometres of additional
suburban corridors in being planned.
 Rs. 17,000 crore is being set aside for Bengaluru Metro.
 UDAN will connect 56 unserved airports and 36 unserved heliports.
 Rs 11,000 crore is being allocated for Mumbai Suburban Railways.
 5 lakh WiFi spots to be installed for benefit of 5 crore rural citizens.
 As per the FM, The Airport Authority of India has 124 airports.
 The government announced AMRUT program to focus on water supply to all
households in 500 cities. Water supply contracts for 494 projects worth 19,428 core will be
awarded.
 Proposal for railway university in Vadodara.
 Niti Aayog to establish a national program to direct efforts in artificial intelligence.
 Department of Science will launch a national program for cyberspace.

Page 184
 Allocation of Digital India has been doubled and the government proposes to set up
5 lakh WiFi hotspots.
 Government does not consider cryptocurrency as legal tender and will work
towards eliminating illicit transactions going on through crypto assets.
 Disinvestment target of Rs. 80,000 crore for 2018-19.
 Bank recap to help banks lend additional Rs. 5 lakh crores.
 24 Public Sector Units to be divested.
 The government will involve a scheme to assign every enterprise a unique ID just
like Aadhaar.
 The Department of Investment and Public Asset Management will come up with
debt Exchange Traded Fund.
 Gold monetisation scheme to be revamped.
 Govt revised fiscal deficit for 2017-18 was Rs 5.95 lakh crore or 3.5% of GDP.
Jaitley projects deficit of 3.3% of GDP next fiscal.
 National Logistics Portal as a single online window will link all stakeholders, to be
developed by Department of Commerce.
 Government insurance companies to be merged into a single entity, and
subsequently listed in the stock exchange, as part of the disinvestment programme.
 Target for 2017-18 has been exceeded and will reach Rs 1 lakh crores.
 Salaries of President, VP and Governors will be increased. Rs. 5 lakh for President,
Rs 4.0 lakh for VP and Rs 3.5 lakh for governors. Salaries of Members of Parliament will
also be raised.
 A new law will be introduced that will automatically revise MPs' emoluments every
five years, indexed to inflation.
 Govt. announced a Rs 150 crore fund to celebrate the 150th anniversary of
Mahatma Gandhi.
 Rs 11,000 crores will be allocated to Mumbai rail network.
 GST revenue for only 11 months, instead of the usual 12 months, is 21.5 lakh
crore.
 Tax buoyancy for 2017-18 is at 2.11%.
 Number of tax payers has increased from 6.47 lakh crores to 8.27 lakh crores.
 Government to set up two industrial defence industrial development corridors in
2018-19.
 100% tax deduction for farmer production firms with 100 cr turnover.
 100% tax deduction for the first five years to companies registered as farmer
producer companies with a turnover of Rs 100 crore and above.
 12.6% growth in direct taxes in 2017-18.
 18.7% growth in indirect taxes in 2017-18.
 Employment-based tax incentives will be extended to footwear and leather
industry.

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 The benefits of corporate tax by bringing down the tax rate to 25% for firms that
reported turnover up to Rs 250 crores.
 No change in income tax slabs, but assesses can avail of a standard deduction of
Rs40,000.
 Long term capital gains over Rs. 1 lakh to be taxed at the rate of 10%.
 Railway Capital Expenditure is set at Rs. 1.48 lakh crore.
 All stations and trains to have WiFi.
 Relief on tax for senior citizens from income coming from bank interest increased
from 10,000 to 30,000.
 Fixed Deposit/Post office interest to be exempt till Rs 50,000 {80D benefit
enhanced to Rs 50,000 (from 30,000)}.
 Short-term capital gains taxed at 15% to continue for a one-year hold period.
 Standard deduction of Rs 40,000 with respect to transport reimbursements.
 Standard deduction is in lieu of travel and medical expense reimbursement, which
amounts to Rs 30,000. So the actual tax benefit would Rs 10,000 for each taxpayer.
 Customs duty increased on mobile phones from 15% to 20%.
 4% health and education cess; currently it's 3%.
 Estimates 1.38 trillion rupees expenditure on health, education and social security.
Railway capital expenditure set at 1.49 trillion rupees for 2018/19.
ABM Module A
Economics – 100 Questions
Q.1 Which economist defined the Economics as “Enquiry into Nature and Causes of
Wealth of Nations”
Ans Adam Smith – father of Economics
“Economics is study of mankind in the ordinary business of life”. Who defined like
Q.2 this?
Ans Alfred Marshal
Q.3 Which economist called Economics as “Science of Human Welfare”?
Ans Alfred Marshal
Q.4 Economics is a science which studies human behavior as a relationship between
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ends
and scarce means which have alternative uses. Therefore economics is study of
means
and ends. Which economist gave this definition of Economics?
Ans Lionel Robbins.
Q.5 Study of behavior of Individual, Household, Firm or Company is
___________ Economics as defined by
Robbins.
Ans Micro
Industry, Economy of entire country, whole world like
Q.6 Study of behavior of inflation,
deflation
, Income, Saving, Investment, GDP and Employment is called
_________Economi
cs
Ans Macro
Economy in which Private firms make major decisions is called
Q.7 _________
Ans Capitalist Economy or Market Economy
Q.8 Economy in which Govt plays major role is called ________________
Ans Socialist Economy or Command Economy
Q.9 Which type of economy India is?
Ans Mixed economy in which both Pvt. sector and Govt. sector play important role.
Q.10 How will you define Laisez-Fair economy?
It is extreme case of market economy in which Govt. does not interfere in
Ans economic
decisions.
Q.11 What is the slope of Demand curve?
Ans It is negative because of the fact that price and quantity demanded have inverse
relationship. Price rises and Quantity demanded falls and vice-versa. We can
also say
that Demand Curve falls downward from left to
right.
With rise in Income, demand rises and Demand curve shifts upward. This is
Q.12 called
___________in demand. (Increase/Extension)
Increas
Ans e
Q.13 With fall in price, demand rises on the same demand curve. This is called
___________in demand. (Increase/Extension)
Ans Extension
positiv
Q.14 In case of Giffen goods, Demand curve is e because of the fact
that_____________
_
Ans Demand falls even if there is fall in price.
Demand of Coffee rises with rise in the price and the curve is negative because
Q.15 of
inverse relationship Tea and Coffee are _____________ goods

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.
(Substitute/Supplementary).
Ans Substitute
Pen and Ink, Car and Petrol are supplementary goods. The rise in price of one
Q.16 item

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results in fall of quantity demanded of other. In this case, the slope of demand
curve is
___________ (Positive/Negative).
Ans Negative
Q.17 Equilibrium price is the point where___________________
Ans Demand Curve and Supply curve intersect each other.
Q.18 The slope of supply curve is _____________(Positive/Negative).
Ans Positive
Q.19 Demand Schedule is relationship between ___________and _____________.
i) Demand and Quantity bought ii) Price and Quantity bought
Ans Price and Quantity bought
Q.20 How will you define Narrow money?
Narrow money i.e. M1 = Currency with Public + Demand Deposits with Banks +
Ans Other
deposits with RBI.
Q.21 What is M3
M3 is a concept of Wide money which includes M1 + Saving Deposits of Post
Ans offices +
Time deposits with banking system.
Increase in cost of production leads to inflation. Which type of Inflation is it
Q.22 (Demand
Pull/Cost Push).
Ans Cost Push Inflation.
Q.23 DA of public sector employees is determined/guided by which index?
Ans Consumer Price Index for Industrial workers. (CPI-IW).
Q.24 What do you mean by GDP deflator?
It is a measure of level of prices of all new domestically produced, final goods
Ans and
services in an economy.
JM Keynes explained that Rate of Interest is determined by Demand and Supply
Q.25 of
money. Which are 3 motives as explained by Keynes for Which people hold
money?
Ans 1) Transaction Motive
2) Speculative Motive
3) Precautionary Motive
If Current rate is higher than expected rate in future. People will hold
Q.26 more
___________(Money/Bonds)
Bond
Ans s
Q.27 Keynes believes in Two Asset Economy. Which are these?
Ans Money and Bonds
In two asset economy, the demand for money by the people depends how they
Q.28 decide
to balance their portfolio between ________and __________.
Ans Money and Bonds
Keynes explains that Rate of Interest is determined by Demand and Supply.
Q.29 Demand is
affected by Liquidity Preference. This is why, Keynes theory is called
_______________

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Ans Liquidity Preference Theory.

Q.30 This theory also explains that Higher Nominal Rate of Interest and Lower will be
_____________
Ans Demand for Speculative purpose.
Q.31 Higher Nominal Income will lead to more ______________
Ans Portfolio Investment.
Q.32 What are names of Curves in Hicks-Hanson Synthesis?
Ans IS (Investment Saving Curve) and LM (Liquidity Money Supply) curve.
IS Curve is Demand Curve, has negative slope and is derived from Classical
Q.33 theory.

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Similarly explain LM Curve.

Ans LM curve id Supply curve has positive slope and is derived from Keynes’ Liquidity
Preference Theory.
Production capacity is fully utilized and profits are maximized. This period is
Q.34 known as
______________
Ans Boom
Q.35 Demand comes down from peak. Supply exceeds demand stocks start piling up.
Producers give up plan to expand. This situation is called
__________(Recession/Depressi
on)
Ans Recession
Rise of Unemployment, Fall in general demand and Cost is not covered by the
Q.36 price.
This situation is called _______________ (Recession/Depression)
Ans Depression
Q.37 Workers come forward to work at lower wages, Consumption starts, banks are
prepared to sanction easy loans and demand starts increasing. This is the
situation of
___________(Recovery/Inflation)
Ans Recovery
Q.38 State of Rising Prices is called__________.
Ans Inflation
Q.39 Classify the Industrial Sector in 4 categories.
1.
Ans Manufacturing 2. Mining
7. Electric generation 3. Gas and water supply
Q.40 Business Cycle is also known as __________Cycle.
Economic
Ans Cycle
Q.41 Growth rate of GDP in India.
1950-80-----------
Ans -- 3.5%
2010-11-----------
-- 8.4%
2011-12-----------
-- 6.5%
2012-13-----------
-- 4.9%
2013-14-----------
-- 4.7%
2014-15----------- 5.4%
-- (Projected)
Agriculture is basically Primary Sector, Industry is Secondary Sector and
Q.42 Services are
classified under ___________sector.
Tertiary
Ans sector.
Q.43 What is growth of GDP (Sector wise) in the year 2011-12

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Agriculture------
Ans -- 2.8%
Industry ---------
-- 3.4%
Services---------
-- 8.9%
Aggregate------
-- 6.5%
( In 2012-13, GDP growth is 4.9% and in 2013-14, it is 4.7%)
Q.44 What is share of GDP sector wise in the year 2011-12
Agriculture and allied activities-----
Ans ---- 14%
Industry ---------------------------------
---- 20%
Service----------------------------------
---- 66%
Q.45 What is domestic Saving Rate in the year 2011-12 and 2012-13
Ans 34% of GDP(2011- 12) & 30.1% (2012-13)
There is complete transformation of India’s economy. The share of Agriculture in
Q.46 the
GDP of the country has come down from 38% in 1980-81 to 14% in 2011-12.
What is
position of share of service
sector.

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Ans It has increased from

34% in 1950-51 to
45% in 1980-81 and
64% in 2010-11 and
66% in 2011- 12 and 67% in 2012-13
Liberalization process started and Economic Reforms ushered in the year----------
Q.47 -
Ans 1991
Narsimham Committee submitted report in 1988 and the same was implemented
Q.48 in the
year 1991. Which two major reforms were introduced in Financial sector?
Ans 1. Capital adequacy
2. Asset Classification and Provisioning norms.
Q.49 What is full form of BCSBI?
Banking Code and Standard Board of India. It has introduced “Code of Conduct”
Ans in the
banks
.
Q.50 What reforms have been brought in the money market?
Ans 1. CD and CP
2. LAF (Repo and Reverse Repo transactions)
3. MSF (Marginal Standing Facility)
4. CBLO (Collateralized Borrowing and Lending Obligations)
5. IRS (Interest Rate Swaps) and FRA (Forward Rate Agreement)
Q.51 What reforms have been brought in G-Sec market?
Ans 1. Ways and Means Finance i.e. loan to govt. by RBI to contain Fiscal deficit.
2. Yield on G-sec i.e. Treasury bills etc. provide benchmark for interest rates.
RBI does not participate in the Primary segment of G-sec market. It has
3. become
more market oriented.
Q.52 What reforms have been brought in Forex Market?
Ans 1. Exchange rate flexibility
C) EEFC, RFC and RFCD accounts
D) Liberalized Remittance Scheme (Up to USD 75000/-) per financial year.
E) Introduction of Derivatives to control risk.
F) 100% convertibility in Current account transactions and Partial
convertibility in Capital account transactions.
G) Liberalization in Imports and Exports
Q.53 What reforms have been brought in Capital Market?
Ans 1. Primary and Secondary market under direct control of SEBI
2. Corporatization of Exchanges
3. Book Building system and Free pricing of shares in primary market
4. Options and Futures as derivatives introduced.
5. Indian Depository Receipt introduced.
6. Rolling settlement replaced 14 days settlement.
7. All Securities are applied on ASBA and issued in Demat form.
Q.54 What reforms have been brought in Payment and Settlement System?
Ans 1. RTGS and NEFT through INFINET
2. Mobile Banking through IMPS (Internet Mobile Payment System)
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3. CTS (Cheque Truncation System)

4. ECS (Electronic Clearing Service)
Q.55 How many industries are covered with 100% FDI under automatic route?
Ans 34 industries

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Q.56 What do you know about External Commercial Borrowings?

External Commercial Borrowings are medium and long term loans as permitted
Ans by RBI
for the purpose of :
Fresh investments
Expansion of existing facilities
Trade Credit (Buyers’ Credit and Sellers’ Credit) for 3 years or more.
Automatic Rout
ECB for investment in Real Estate sector , Industrial sector and
Infrastructure do not require RBI approval
It can be availed by Companies registered under Indian Company Act.
Funds to be raised from internationally recognized sources such as
banks, Capital markets etc.
Maximum amount is USD 20 million with minimum average maturity of 3
years
and USD 750 million with average maturity of 5 years.
All in cost ceiling is 6M LIBOR+350 bps for ECB up to 5 years and 6M
LIBOR+500 bps for ECBs above 5 years.
Under this route, funds are borrowed after seeking approval from RBI.
The ECBs not falling under Automatic route are covered under Approval
Route.
Under this route, Issuance of guarantees and Standby LC are not allowed.
Funds are to be raised from recognized lenders with similar caps of all-in-cost
ceiling.
Q.57 What is Fiscal Policy?
Ans It is policy of Govt. spending and Govt revenues which influences the country’s
economy.
Q.58 RBI’s Monetary Policy is issued __________in a year.
Ans Once. However Bi-monthly reviews are issued by RBI.
Q.59 In order to curb inflation, what tools are adopted by RBI
Contraction of money supply by increase in Repo and Sale of Govt Securities in
Ans Open
Market Operations
Q.60 What is MSF (Marginal Standing Facility).
Overnight lending by RBI @ 9% (1% above Repo) against purchase of Govt.
Ans Securities
to the extent of 2% of DTL.
What are the provisions of FRMB (Fiscal Responsibility and Budget
Q.61 Management) Act.
Act requires to place before Parliament 3 statements viz. Budget, Fiscal
Ans Policy
Strategy and Macroeconomics framework.
Centre will reduce Fiscal Deficit up to 3%
Govt. will not borrow from RBI for deficit financing except under
exceptional circumstances.
Ceiling on Govt. Guarantee @0.5% of GDP.
Sterilization Operations under Market Stabilization scheme.
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Q.62 How will you calculate GDP?

Market Value of goods and services produced in a country in a financial
Ans year?
Q.63 GDP +Net factor Income from abroad = ?
Ans GNP
Q.64 GNP- Depreciation = ?
Ans NNP at market prices
Q.65 NNP at market price + Subsidy – Indirect Taxes = ?
Ans NNP at factor cost. It is also called National Income.

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Q.66 What is real National Income?

Ans NNP at factor cost
Q.67 What is Personal Income (PI)
NI – Corporate taxes – payment for social security norms + Govt. Transfer
Ans Payments
Q.68 What is DI (Disposable Income)
Ans PI – Personal Taxes
Q.69 How will you calculate GDP through Expenditure method?
Ans C+I+G+(X-M)
Consumption + Expenditure + Govt spending + Net factor income from abroad
Q.70 How will you calculate GDP through Income method?
Interest + Wages (Compensation to employees) + Rent (Property Income) +
Ans Profit
Q.71 How will you calculate Per Capita Income?
Ans National Income / Population
Q.72 What is per capita Income of India in 2013?
Ans $1504
Q.73 Which type of receipts are these?
1. Income tax, Service tax, Excise tax, Corporation Tax
2. Interest, Dividend, Profit and non-tax receipts
Ans Revenue Receipts
Q.74 Which type of Receipts are these?
7. Debt Receipts such as Loans, borrowings, External Assistance, Small
savings
8. Non- debt receipts such as Recovery of loans etc.
Ans Capital Receipts
Which type of Payments are
Q.75 these?
14. Expenditure on interest, defense, subsidies and expenses on general and
social services
15. Expenditure on Salary, Pension and other economic services
Ans Revenue Payments
Q.76 Which type of Payments are these?
Purchase of Tanks for defense, Loans to Private Enterprises, States, UTs and
Foreign
Govt. , Payments for creating infrastructure – roads, dams, bridges etc.
Ans Capital Payments
Q.77 What is Revenue deficit?
Ans Revenue Payments - Revenue Receipts
Q.78 What is Budgetary Deficit?
Ans Total Payments - Total Receipts
Q.79 How Fiscal Deficit is calculated?
Total Expenditure (Revenue + Capital) - (Revenue Receipts + Non- Debt
Ans Receipts)
Q.80 What is Net Fiscal Deficit?
Ans Gross Fiscal Deficit – Net Lending
Q.81 What is Gross Primary Deficit?
Ans Gross Deficit – Interest Payments
Q.82 What is Net Primary Deficit?
Ans Net Fiscal Deficit – Net Interest Payments
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Q.83 What is %age of Fiscal Deficit in the year 2011-12 and 2013-14
Ans 5.9% of GDP in 2011-12
4.5% in 2013-14 ( Road map to bring it further down up to 3.6% in 2015-16)
Q.84 What are Highlights of Union Budget 2013-2014
Ans Time bound FI Mission launched on 15th August

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Banks permitted to raise long term funds for lending to Infrastructure.

Requirement to infuse 240000 crore as equity in our banks by 2018 as per
BASEL-III
6 new DRTs to be set up
Rs. 10000 crore fund for Venture Capital in MSME
sector Gross Receipts ---------1364524 crore
Gross Payments--------1794892 crore
Fiscal Deficit-------------4.7% of GDP (4.1 %expected 2014-
2015) Revenue Deficit---------3.3% of GDP
Target for Agriculture Credit--------800000
crore. Saving Rate ----------30.1%
Investment Rate-----34.8%
Interest Tax exempted up to ---
---- 10000 per financial year on SB accounts
Income Tax Exemption limit raised to-------------
----- Rs. 2.50 lac
For Senior citizens -----------------------------------
------ Rs. 3.00 lac
Investment limit U/S 80C rose to 1.5
lac (Prev. 1.00 lac).
Deduction of Interest on HL raised from 1.50 lac to 2.00 lac
Income Tax slab on taxable Income @ 10% up to 5.00 lac, 20% up to 10 lac and
30%
above 10 lac + Education tax on Income tax @ 3% (2+1).
Q.85 What are conditions of Perfect Competition Market?
Large nos. of Buyers and
1. Sellers
Homogeneous
2. commodity
3. Same Price
4. Free entry and Exit of Firms
5. Average Revenue = Marginal Revenue
Q.86 What is the position of Cost Curves in Perfect Competition Market?
Ans Both AC and MC fall, but MC is below AC
After a certain point, AC becomes constant and MC is equal
to AC When AC starts rising, MC is above AC
MC cuts AC at the lowest ebb.
Normal Profits are earned under the situation of Perfect Competition Market.
Q.87 What are the features of Monopoly
Ans Under monopoly, there is a single seller, who is Price taker. He adopts Price
discrimination to boost sales. Therefore AR and MR are falling curves. In long
run,
Monopolist earns Super normal profits.
Q.88 When a firm achieves Equilibrium i.e. position of Optimum utilization.
Ans When Average Revenue = Marginal Revenue i.e. AR = MR
Q.89 What is Monopolistic Competition?
When large number of firms selling differentiated models of same product
Ans i.e.
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commodity is not homogeneous and price is also not the same. Firm achieves
equilibrium when AR = MR
Q.90 What is Consumer Equilibrium
Difference between what Consumer is Willing to pay and what the consumer
Ans Actually
pays.
Q.91 What is Utility?
Ans Utility is the satisfaction derived from consumption of particular product.
Q.92 What is Marginal Utility.
Ans Extra satisfaction derived from consumption of one additional unit.
Q93 What do you know about Elasticity of Demand?

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It is responsiveness of change in demand due to change in price, income or price

Ans of
other commodity. It is of 3 types: Price Elasticity, Income Elasticity and Cross
Elasticity.
Q.94 What are kinds of Elasticity of Demand?
Highly Elastic Demand is when proportionate change in demand is higher
Ans than
proportionate change in price. (ED>1)
Less Elastic Demand is when proportionate change in demand is lesser
than proportionate change in price.(ED<1)
Unitary Elastic Demand is when proportionate change in demand is
equal to proportionate change in price.(ED=1)
Perfect Elastic Demand is the situation when small change in price
results into unusual large variations in Demand. (Ed=Infinite).
Perfect Inelastic Demand is the situation when there is no variation in
Demand due to rise or fall in price. Demand Curve is parallel to Y axis.
(Ed=0)
Q.95 Name four factors of Production.
Ans Land, Labour, Capital Organization or Entrepreneur
Q.96 What is meant by Marginal cost?
Ans Cost of Producing one additional unit
Q.97 Name the direct taxes. Whether these are progressive or regressive?
Direct Taxes are Income tax, Wealth Tax, Gift Tax and Estate Duty etc.. The rate
Ans of tax
increases as Income rises. This is why it is called Progressive tax system.
Q.98 Why Indirect taxes like Vat, Service Tax, Excise Duty are called Regressive?
Because Rate of tax is uniform and poor people have to pay equal amount as is
Ans paid by
rich people having more income.
Q.99 What is Balance of Trade?
Difference between Value of Exports and Imports Merchandise. It is unfavorable
Ans if
value of Imports is more than the Value of exports.
Q.10 What is Balance of Payment?
0
It has two sides Receipts and Payments. It is neither favorable nor un-favorable
but
always Balanced.
Receipts side includes Current Items and Capital Items. Similarly Payment side
includes Current and Capital Items.
Current Receipts
Export of goods (visible), Services to rest of world such as Air, Banking and
Insurance,
Transfers and Income from Rest of world.
Capital Receipts
Foreign private loans, Inflow of banking capital, Loans by Govt, International Sale
of
Gold etc.

Page 201
Current Payments
Import of goods, Services from rest of world, Transfers to rest of world, Incomes
to rest
of world.
Capital Payments
Repayment of Pvt. Loans, Outflow of banking capital, Repayment of Govt loans
and
loans to other countries, Purchase of Gold in international market.
Rating of India
BBB-
CAD (Current Account Deficit)

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It is difference between Current Receipts and Current Payments. CAD increased to

4.7% in 2012-13. It was serious concern for India and Government took remedial steps
which resulted in decrease in CAD from 4.7% to 1.7% in 2013-14.
Consumer Price Index (IW)
It is applicable in determining Dearness Allowance in
banks. Labour Bureau Shimla calculates and keeps
record of it.
It includes 24 consumer
items. Base Year is
2001=100
Periodicity -Monthly
At present CPI is 252 (July 2014)
Wholesale Price Index
Office of Economic Affairs (Ministry of Commerce and Industry) calculates and
circulates It is used to measure inflation and formulation of Govt. policies.
Periodicity is monthly
Base Year is 2004-2005 =
100 At present it is 184.6
(July 2014)
RBI has recently adopted new CPI as a measure of inflation

Page 203
QUESTIONS BASED ON MEMORY
1) Net Interest income is: a)Interest earned on loans and advances only b)Interest
earned on investments only
c)Total interest earned on advances and investment d)Difference between interest
earned and interest paid
2) Investment made by a bank in its subsidiary is considered in the following category in
its balance sheet:
a) Secured advances b)Other assets c)Investments d) Unsecured advances
3) Net Interest Income (NII) is calculated using the following formula : a) Interest income
- Total expenses
b)Total income - Interest expenses c)Interest income - Interest expenses d) Total
income - Total expenses
4) N.I.M. calculated using the following formula:a) Nil /Average total liabilities b)NII
/Average Total Assets
c)Total Interest Income /Average Total Assets d)Total interest Income /Average Total
Liability
5) Economic Equity Ratio is used to assess sustenance capacity of the,bank• It is
calculated using the formula:
a) Net Interest Income / Shareholder Funds b)Total Income / Shareholder Funds
c)Shareholder Funds Total of Assets & Liabilities d)Shareholder Funds Total Assets
6) Risk of having to compensate for non-receipt of expected cash flows by a bank is
called:
a) Call risk b)Funding risk c)Time risk d) Credit risk
7) 'Time risk' in the context of liquidity risk of an institution is caused due to:
a) Systematic risk b)Swaps and options c)Loss of confidence d) Temporary problems in
recovery
8) Crystallisation of contingent liabilities in a bank is called: a) Call risk b)Funding risk
c)Time risk d) Credit risk
9) If the volatility per annum is 25% and the number of trading days per annum is 252,
find the volatility per day.: a)
58% b)1.60% c)158% d) 15.8%
10)RBI has put in place real time gross settlement system (RIGS) to mitigate the
following risk:
a)Markel risk b)Settlement risk c)Operational risk d) Strategic risk
11) A bank is having Rs 500 Crore liabilities @ 7% of one year maturity to fund Rs 500
Crore assets @ 9% with 2

Page 204
year maturity. The bank is exposed to: a) Gap Risk b)Basis Risk c)Price Risk d) Yield
Curve Risk
12) In India, type of options are permitted now: a) American b)European c)Asian d) A &
B
13) Interest rate risk is a type of :a) Credit risk b)Market risk c)Operational risk d) All the
above
14) If Regulatory Authority of the country feels that the Capital held by a bank is not
sufficient, it could require the bank
to: a) Reduce it's Risk b)Increase its Capital c)Both of these d) Either of these
15) When a bank sanctions a loan to a large borrower, which of the following risks it
may not face:
a) Liquidity b)Market c)Credit d) Operational
16) A firm has an opening of stock of Rs.70,000. Closing stock of Rs.90,000 and Cost of
goods sold
Rs.2,40,000. What the Inventory Turnover Ratio? a)5 b)4 c)3 d) 2
17-18) Based on the following information, solve questions number 17&18.
Credit Sales - Rs.3,00.000
Opening Balance of Accounts Receivable - Rs 40,000
Closing Balance of Accounts Receivable - Rs.60,000
Credit Purchases - Rs.1,80,000
Opening Balance of Account Payable - Rs 20,000
Closing Balance of Accounts Payable - Rs.40.000
17) The Debtors' Turnover Rati6 is: a) 6 b)8 c)10 d) 12
18) The Creditors' Turnover Ratio is: a) 8b)6 c)4 d) 2
19) To solve a standard maximization problem using the Simplex method,we take the
steps which are jumbled.
Mark the correct order of steps.
Step 1: Determine which variable to bring into solution Step 2: Determine which variable
to replace
Step 3: Formulate problem in terms of an objective function and a set of
constraints
Step 4: Update remaining Row values Compute new z

Step 5: Calculate new row values for entering variable and insert into new tableau.
Step 6: Set up initial Tableau with slack variables
Step 7: If there is no positive (c-z) value found, the solution is optimum. If there
is a positive value, then iterate again (repeal earlier three steps)
Choose the correct sequence of steps.: a) 3,5,4,5.7,1,2 b)3,6,2,1,5,4,7 c)3,6,2,1,4,5,7 d)
3,6,1,2,5,4,7
20) Which of the following is not a motive for the companies to hold cash?: a)
Transaction motive
b)Precautionary motive c)Lack of proper synchronizationbetween cash inflows &
outflows d)Capital Investments
21) VaR means:a) Volume of Business at Risk b)Value at Risk c)Volume on Risk d)
Value as Risk
22) The maximum loan against NRE/FCNR Term deposit was Rs.20 lakh earlier. RBI
has now increased it to:

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a) Rs.25 lakh b)Rs. 1 crorec)Rs.50 lakh d) No change

23) Credit Risk Assessment of the borrowal units is for: a) Assessing the repayment
capacity b)To fix the pcing of the
product c)To review the units performanced) None of the above
24) Pricing is equals to :a) Cost of the product b)Break Even Point of the firm
c)Function of Risk rating d) All of the above
25) The bond prices can be estimated using modified duration. The formula for
calculating %age change
in price of a bond is: a)Modified duration x yield change b)Yield change /modified
duration
c)Modified duration 1 Yield change d)Modified duration + Yield change
26) If both the Regression coefficients are negative, the correlationcoefficient would be :
a) Positive b)Negative c)Zero d) None
27) The most frequently used Average is: a) Mode b)Median c)Mean d) Geometric
Mean
28) Advance in the form of Pledge cannot be granted in respect of
a) Stock-in-process b)Raw material c)Finished goods d) Stores
29) In which of the following methods of capital budgeting annual returns of the future
years are discounted to
their present value : a) Pay back period b)Internal rate of return c)Present value method
d) Both 'a' & 'c'
30) Bonds may be secured by :a) Floating charge on assetsb)Fixed charge on assets
c)Without charge d) All of these
31) Which of the following statement is correct? :a)Forex markets are localized markets
b)Forex markets are International
markets only c)Forex markets are dynamic & round the clock markets d)Forex markets
are used only for trade transactions
32) If market quotes USD(INR as 53.61/63,at what rate can you buy USD at the given
quote?:
a) 53 61 b)53 62 c)53 33 d)53 61
33) The main role function of the Welfare secretary was to meet the needs of the
workers and prevent them from .:
a) Forming Unions b)Leaving the job c)Gossiping during duty d) Disturbing other
workers
34) Union formations were seen in the_______phase of development of HRM:
a) First phase b)Second Phase c)Third phase d) Unions have been present even before
HRM came in to existence
35) Climate Management is possible by using HRIT. Climate information is gathered
using: a)Job satisfaction surveys
b)Performance appraisals by superiors c)Studying attendance patterns in different
weathers d)AIL of the above
36) Job Analysis technique involves: a) Job Description b)Job Specification c)Job
Evaluation d) All of the above
37) Mechanistic (or Behaviorist) theories, Cognitive theories and Organismic
(humanistic)theories are three
theories of learning. Which one of these theories equates man with his brain?

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a) Behaviorist or mechanistic theories b)Cognitive theories c)Organismic or humanistic

theories d) All of the above
38) The Concept of Career path relates to of movements and deciding the_____for
each stage.:
a) Sequence, time period b)Number, candidates c)Decision, number d) Type, time
period
39) Johari Window is most useful for:
a) Understanding others b)Self-Awareness c)Working in Teams d) Improving inter-
personal relations
40) The process of capturing the tacit knowledge of people in a systematic manner for
future use is called:
a) Data entry b)Information technology c)Knowledge management d) All of the above
together
41) Mandatory feature of a Letter of Credit: a)Must have an applicant and a beneficiary
b)Should have an advising bank and a
confirming bank c)Should be confirmed to be operative d)Must be confirmed by the
reimbursing bank
42-45)The top management of ABC Bank was in a triumphant mood after engaging
XYZ Ltd, one of the top IT
Companies as a consultant for a massive technology upgradation in the Bank. Their
enthusiasm was short lived, as the
project did not progress well and the consultants were not able to deliver the desired
results even after several months. In
fact the Consultants were of the view that it may never be possible to implement the
project with 100% success as they
seemed to be facing resistance from the employees at multi-levels. The employees at
all levels seemed reluctant to cooperate.
Their fear of Role erosion seemed palpable.
42) What does "Role erosion" mean in this context?: a)The fear of the employee that he
will be sent out b)Fear that the
responsibility and the power will reduce c)Fear that he will no more be an indispensable
d) a & b
43) The critical issue in this case is:
a)Attitudes of individuals b)Training of people c)Group behavior due to a sense of the
unknown d)All the above
44) How could this situation have been managed better?: a)By issuing project details
and time frame mentioning
punishments in case of delay b)By roping in the HR professionals to act as coordinator
c)By recognizing that any
change brings its own reactions and co-opting the managers even before the
Consultants moved in d)b & c
45) The Bank should deal with the employee resistance by: a)Co-opting the employees
b)Communicating strategically about
the potential benefits c)Conducting simultaneous training to familiarize the staff with the
new software d)All of the above
46) Mr. Ganguli is a brilliant manager in ABC Bank. He is one of the few persons picked
up by the top management

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from an IIM after MBA. Always on two phones at a time, he boasts about
having no patience with tt laggards. Often,
he can be heard aggressively yelling at people on small issues. What type of person is
Mr. Ganguli?:
a)Type B personality b)Type A personality c)Type C person d) Type D person
47)What ismost essential for achievingWork-Life balance?:
a) Time management b)Efficiency c)Assertiveness d) Emotional maturity
48) A sales man in a shop showed a suit piece and told the customer that the cloth is
very good, but costly. He was
using the following transaction: a) Duplex b)Angular c)Complementary d) None of the
above
49) A prominent politician was heard saying that that people state was incapable of
joining the army. He was
:a)Stereotyping b)Projecting c)Hallucinating d) All of the above
50) Mr. A is the Branch Manager in ABC Bank. He makes it a point to visit the
prominent deposit customers himself to
deliver their deposit receipts. He does not even take the "Relationship Manager"
appointed for this purpose. Mr. A
believes that none of the new generation staff is good enough to deal with such tasks.
What is the "Life position" taken
by Mr. A as regards the "Relationship Manager" as per the "Theory of Lifr position"
propounded by Dr. Thomas
Harris?: a) I are OK, you are OK b)I am Ok, You are not OK c)I am not OK, you are not
Ok d) I am not OK, you are not OK
51) Translation losses are significant for banks as they affect the Bank's: a) Markel
value b)Interest income c)Both (a) &
(b)above d) All of the above
ANSWER
1D2C3C4B5D
6 C 7 D 8 A 9 A 10 B
11 A 12 D 13 B 14 C 15 B
16 C 17 A 18 B 19 D 20 D
21 B 22 B 23 B 24 C 25 A
26 B 27 C 28 A 29 0 30 D
31 C 32 C 33 A 34 A 35 A
36 D 37 B 38 A 39 B 40 C
41 A 42 D 43 C 44 D 45 0
46 A 47 D 48 B 49 A 50-B 51-A
BASED ON RECOLLECTED QUESTIONS

1) As per RBI guidelines, Banks have to report their business, for public reporting
purposes, based on segments,
segments as and :a) Locational; Domestic; Global b)Market; Domestic , International
c)Price; Dollars; Euro. d)

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Value; Quantitative; Qualitative.e) Geographical; Domestic, International

2) As per RBI guidelines, banks have adopted the business segments, for public
reporting purposes:
a) Treasury b)Corporate! Wholesale Banking c)Retail banking d) Other Banking
Business e) All of the above
3)is used for the purpose of segment reporting which includes the entire investment
portfolio.:
a) Treasury b)Retail banking c)Wholesale banking d) Corporate banking
4) The Retail Banking would include exposures which fulfill the following four criteria:
a)Orientation b)Product, c)Granularity d)Low value of individual exposures. e) All of the
above
5) BCBS stands for: a) Basel committee on banking supervision b)Blue cross blue
shield
c)Basel centre on banking supervision d) None of these
6) What type of information is given by the financial statements of Auditor's report'? ': a)
Diversion of funds b)Financial
health c)Realization of debts d) Profitability e) All of the above
7) Orientation Criterion is an exposure to the _ :a) Group of people b)Individuals c)Small
business d) Both b&c
8) Annual turnover of the Small business is as per segment reporting: a) More than 80
crore b)Less than 50 crore
c)More than 50 crore d) Less than 80 crore
9) Product Criterion is the exposure which takes the form of________credits: a)
Revolving credit b)Lines of credit
c)Liquidity credit' d) Both a & b e) All of the above
10) In case of Granularity Criterion, aggregate exposure to one counterpart should not
exceed_____ of the
overall portfolio:a) .5% b).2% c).10% d) .4% e) None of the above
11) Aggregate exposure means__of all forms of debt exposures: a)Net amountb)Gross
amount c)Balance d) Net loss
12) Corporate Banking includes advances to thefirms: a)
Partnership firms b)Trusts c)Companies d) Statutory bodies e) All of the above
13) Which factors affect the probable consequences likely if a risk does occur:
a) Risk cost b)Risk timing c)Risk scope d) Risk resources e) Both b & c
14) The exposure of a bank to a single NBFC-AFC should not
exceed_________percentage:
a) 20-25% b)15-20% c)10-15% d) 5-10%
15) What is the exemption limit for all MSME for obtaining collateral security?
a) Rs 2 lakh b)Rs 5 lakh c)Rs.10 lakh d) Rs15 lakh
16) How much percentages of core assets are required in case of Third
Method of Lending as proposed by Tandon
committee: a) 100% b)50% c)200% d) 80%

17) ABC analysis divides on-hand inventory into three classet, generally based upon:a)
Item quality b)Unit price
c)The number of units on hand d) Annual demand e) Annual dollar volume

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18) What are the objectives of Credit Audit? a) Improvement in the quality of credit
portfolio b))Review sanction
process and compliance status of large loans c)Feedback on regulatory compliance
d)Independent review of Credit
Risk Assessment e) All of the above
19) What are the methods of Return on Investment?:a) NPV b)IRR payback period
c)Cost benefit ratio d) Accounting
rate of return e) All of the above
20) A project with a high Break-even point is considered_______risky compared to the
one with lower break-even
point: a) Less b)More c)Equal d) None of the above
21) is the difference between gross fiscal deficit and net lending:
a) Gross fiscal deficit b)Net fiscal deficit c)Net primary deficit d) Revenue deficit
22) Which of the lending arrangement is called Consortium?:
a)When two or more banks get into a formal arrangement to finance the working capital
needs of a borrower b)When
two or more banks get into a informal arrangement to finance the working capital needs
of a borrower.c)When two or
more banks get into a informal arrangement to finance the basic needs of a borrower d)
None of the above
23) Credit Default Swaps is a bilateral contract in which the risk seller pays a____to the
buyer for protection against
credit default. a) Discount b)Premium c)Par d) None of the above
24) CDS is a standardized instruments of : a) Credit linked notes b)International Swaps
& Derivatives Association
c)Internal Swaps and Derivatives Association d) Credit default swaps
25) As per RBI guidelines, only____CDSs are allowed:a) Double vanilla b)Plain vanilla
c)Both d) None of the above
26) Stressed assets include which of the following:a) Exit from the accounts
b)Rescheduling/Restructuring
c)Rehabilitation d) Compromise e) All of the above
27) Which of the following is a tool available to the bank for credit monitoring: a)
Analysis of financial statements
b)Examine conduct of borrower a/c c)Periodic visits to the business place for inspection
d) All of the above
28) What Is the main purpose of Stock audit? : a) To cross check the reliability of the
statements b)To examine adequacy
of documentation c)To reduce the liquidity d) To increase the turnover e) All of the
above
29) Which of the following is the guidelines of RBI for discounting Rediscounting of bills
by bank: a)Bank should open
LCs and negotiate the bill under LC only b)Bank should mention working capital limit,
Bills limit to borrowers after
proper appraisal of there credit needs c)Bank should provide credit requirements to the
purchaser d)Both a & b
30) Which of the following are non-fund based facilities: a) Negotiate the bills b)Opening
of LCs

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c)Providing Guarantees d) b & c

31) Which of the following aspects covered under economic feasibility of the project:
a)Return on investment b)Break
even analysis c)Marketing arrangements d) Both a & b
32) The stages of complete Business Cycle are: a)Boom, Recession, Depression,
Recovery b)Boom, Depression,
Recovery, Recession. c)Peak, Contraction, Trough, Expansion.d) Both a and c.
33) One negative aspect of a Business cycle boom: a)A declining rate of inventory
investment. b)A reduction in
government budget deficits. c)A declining rate of unemployment d) An increasing rale of
inflation
34)is the excess of revenue expenditure over revenue receipts:a) Revenue deficit
b)Capital deficit c)Gross fiscal deficit
d) None of these
35) The low point in the business cycle is referred to as the:a) Expansion b)Boom
c)Depression d)Peak
36)The trough of a business cycle occurs when______hits its lowest point.:a) Inflation
b)The money supply c)Aggregate
economic activity d) The unemployment rate
37)T h e me a s u r e o f p r o d u c t i o n t h a t v a l u e s p r o d u c t i o n u s i n g c u r
rentpricesiscalled:a)
Un d e r g r o u n d GDP b )Nomi n a l GDP c )Re a l GDP d ) Va l u e a d d e d GDP
38)_____= GDP + Non Resident:a) GNI b)GNP c)GDP d) None of the above
39) C+I+G+(X-M) is the formulae for:a) GNP b)GDP c)GNI d) NR
40)______ price is the nominal price for which a good or services is offered in the
market place:a) Market price
b)Economic price c)Marginal price d) Deficit price
41) Which of the following is another derivative of GDP?:a)Income distribution b)Per
capita Income c)Human
development Index
42) HDI stands for:a) Human democracy Index b)Human development Index c)Higher
development Index d) None
43) Which of the following is newest concept of GDP:a) Green GDP b)Blue GDP c)Red
GDP d) Yellow GDP
44) The National Income is equal to: a) GNP- Subsidies –Taxes b)NNP-Direct taxes+
Subsides c)NNP- Direct taxes -
Subsidies d) GNP- Subsidies +Taxes
45) Which of the following is not true?:a) GNP=Depreciation = NNP b)GNP = GDP +
Net income from abroad c)NNPat
Factor cost=NNPat Market price + Subsidies - Indirect taxes d)GNP=NNP-Depreciation
46) The difference between GNP and GDP is equal to : a) Gross domestic Investment
b)Net foreign
Investment c)Net imports d) Net factor income from abroad
47) Net tax revenue + Total non tax revenue = a)Capital receipts b)Total
revenuereceipts c)Debt receiptsd) None of these
48) Which of the following items comes under capital expenditure?:a) Defence b)Loan
to foreign Governments c)Loan to

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public enterprisesd) All of the above

CASE STUDY - 01
Mr. Mihir is the AGM in charge of Bank street, Hyderabad branch of ABC Bank. He is
approached by XYZ Company
regarding a TT remittance the Company has to make urgently in favour of
Siemens, Singapore for USD One million
on Thursday, the 250 of Oct. This is the first time the Company is making such a
remittance. it is an advance
remittance for import of services. The Chairman of XYZ Company is particular that the
transaction should go through
smoothly. In this regard, please answer the following: •
49) ABC Bank should call for and verify the IlE code of the Company. a) True b)False
50) The exchange rate that would be applicable for this transaction is: a)TT buying b)TT
selling c)Bill buying d)Bill selling
51) The Company has to produce a Bank guarantee or Standby Letter of Credit from a
First class Bank backing up the
remittance because: a)The Advance payment is for a sum exceeding USD 100,000
b)The Advance payment is for a
sum exceeding USD 500,000 c)All Advance remittances require BG/SBLC d)BG/SBLC
not required any more
52) What is the form that the Company has to submit to the Bank for such an Advance
remittance?:
a) Form A-2b)Form A-1 c)Form A-3 d) Form ETX
CASE STUDY - 02
Mr. Mihir, AGM of ABC Bank has arranged for a "Customer Awareness" programme in
his branch on 25th Oct. The
meeting is attended by customers from all categories such as Exporters, Importers,
NRIs etc. A question answer
session as follows takes place. Please mark the answers that Mr. Mihir must give in
correct response to the
customers:
53) Mr. Amrit, CEO of one of the big four auditing firms is a VIP customer residing in
Hyderabad. He wishes to know
whether he can invest in a residential property in the USA as house prices have
become very attractive there now:
a)Yes, he can invest and buy the house. b)No, he cannot invest in a house abroad.
c)Yes, he can buy a house abroad
but the maximum remittance per calendar year is USD 100,000 under LRS. d)Yes, he
can buy a house abroad.
Maximum remittance per FY is USD 200,000 under LRS
54) Mr. Amrit says that he will definitely make a remittance in the next few months
towards the house purchase within
the permitted limit. However, he is worried that the Dollar: Rupee rates are not moving
in his favour:
a)He can book a forward contract for USD 200,000 b)He can book a forward contract
for USD 100,000 c)The
maximum tenor of the contract is 12 months d)He should be informed of both a & c .

Page 212
55) Mr. Anand is a NRI living in Richmond, U.S.A. Currently he is on a visit home. He
has saved money in dollars in
FCNR deposits maturing in three months time. He wishes to know whether he can book
a ForwarrtiF contract to
receive the maturity proceeds in GBP. He also wants to know whether the Bank can
make a remittance in GBP on
maturity date to a third party directly (to his son studying in London School of
Economics).: a)No, he cannot book a
Forwara contract and has to receive the proceeds in dollars only. b)Yes, he can book a
Cross currency forward contract
such that the proceeds can be paid in GBP. c)Bank can pay in GBP but to him
only.d)Bank can make a direct remittance
to his son in GBP as third party remittances are now allowed. e)Mr. Anand has to be
informed of b & d
56) Mr. Mohandas from Omni exports wanted to know whether the interest subvention
is applicable to his packing
credit. His firm deals with manufacture of pickles and has an original investment of Rs.4
crore in plant and
machinery:a)Yes, interest subvention of 2% applicable because it is food-processing
industry b)No, interest
subvention not applicable. c)Yes, interest subvention is applicable because it is a SME
unit. d)Interest subvention
scheme has been scrapped now.
57) Mr. Mohandas also wanted to know if he can give some credit (time to pay) to his
buyers abroad. He has sent his
export bill on collection bask through the Bank. His unit is situated in the vicinity of the
branch and not in SEZ:a)Yes,
time limit for realization of export proceeds is 180 days b)Yes, time limit for realization of
export proceeds is 12 months
c)Yes, time limit for realization of export proceeds is 15 months. d)Yes, there is no time
limit for realization of export
proceeds now for all exporters.
ANSWER
1E2E3A4E5A6E7D
8 B 9 D 10 B 11 B 12 E 13 A 14 C
15 C 16 A 17 E 18 E 19 E 20 B 21 B
22 A 23 B 24 B 25 B 26 E 27 D 28 A
29 D 30 D 31 D 32 D 33 D 34 A 35 C
36 C 37 B 38. B 39 B 40 A 41 B 42 B
43 A 44 B 45 D 46 D 47 B 48 D 49 A
50 B 51 B 52 B 53 D 54 D 55 E 56-C, 57-B
MEMORY BASED RECOLLECTED QUESTIONS PREVIOUS YEAR

Page 213
1) Banks must augment their provisioning cushions to ensure that their total
provisioning coverage ratio, including
floating provisions, is not less than by September 2010. Provisioning Coverage Ratio
(PCR)
is the ratio of provisioning to gross NPA and indicates the extent of funds a
bank has kept aside for covering loan
losses.: a) 50% b)60% c) 70% d) 100%

2) As per current guidelines, the plan of realization for reconstruction of assets by a
Securitization or Asset
Reconstruction Company should not exceed five years from the date of acquisition of
asset. RBI in the revised
guidelines has extended the time frame___years.: a) 6 b)7 c) 9 d) 10
3) As per Nayak committee, the margin contribution of the Small Mfg Enterprises is % of
annual projected
turnover a) 5% b)10% c)Rs 20% 0) 25% e) None
4) As per the second method of lending of Tandon Committee, the Current ratio should
be:
a) Less than 1 b)Exactly 1 c)More than 1.33 d) 1.33 e) 1.17:1
5) The Exposure Ceiling limits for banks would be______percent of capital funds in
case of single borrower and______
% of capital funds in the case of a borrower group.:(a) 40, 15 b)15, 40 c)20, 50 d) 50, 20
6) On scrutiny of a Balance Sheet of Mis Techno Inc, you observe that the long term
uses of funds are more than long
term sources. The position of the Balance Sheet indicates: a) Negative NetWorking
Capital b)Positive NetWorking Capital
c)Negative Working Capital Gap d) Positive Working Capital Gap e) None of the above
7) SARFAESI Act 2002 is not applicable in : a)Any security interest not exceeding Rs 1
lac. B)Any security interest in
agriculture land c)Pledge of movable as per Section 172 of Contract Act d)Rights of
unpaid seller under Section 47 of Sales of
Goods Act e)All of the above
The Balance Sheet of M/S Vipin & Co reveals that the capital and free reserves are Rs
12 lac, term loans from banks for
Rs.22 lac, CC (Nye) limit from bank showing balance outstanding of Rs 10 lac, sundry
creditors of Rs 10 lac and
provisions of Rs 6 lac. On the assets side. fixed assets are Rs 15 lac, non-Current
assets are 3 lac, preliminary and preoperative
expenses Rs. 2 lacs and Current assets Rs 40 lac (cash Rs 2 lac, sundry debtors Rs 13
lac, stocks Rs 25 lac).
The Profit & Loss statement shows following important operational results:
-Sales : Rs 100 lac.
-Purchases : Rs 80 lac,
-Net profit : Rs 5 lac.
-Number of units sold : 1 lac units

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-Total Fixed cost Rs 4.5 lac.

-Total Variable cost : Rs 90.5 lac
8) The Creditor's velocity ratio is: a) 1 month b)1.5 months c)2 months d) 2.5 months
9) The Net Working Capital is : al Rs 10 lac b)14 lac c)Rs. 16 lac d) 18 lac
10) The Working Capital Gap is: a) Rs 20 lac b)Rs 24 lac c)Rs 26 lac d) Rs 28 lac
11) Working Capital turnover ratio is: al 1.5 times b)2 times c)2.5 times d) 3 5 times
12) Accumulated losses are to be classified as:
a) Fixed liability b)Rolling liability c)Concurrent liability d) Current liability e) Fictitious
Assets
13) In the Keynes model above, which is independent?:
a) Investment b)Consumption c)National income d) Consumption and investment
14) The domestic Commercial Banks have a target of ____ % for total priority sector
measured as a percentage of
ANBC or CE-OBE whichever is higher.: a) 32% b)50% c)18% d) 40%
15)___of Small Enterprises advances should go to the Micro Enterprises: a) 60%
b)40%c)25% d) 50%
16) In which of the following kinds of financing, the banks take up financing exposure for
medium term (5.7 years) out of
the very longterm nature of the projects (15.20 years):
a) Take Out financing b)Securitisation c)Project participationd) Consortium
17) Debt Equity denotes position of the firm: a) Profitability b)Solvency c)Liquidity d)
None
18) In a Balance Sheet, profit is shown under: a) Liabilities b)Current assets c)Fixed
assets d) None
19) Limitation period in case of Cash Credit Pledge Aic is: a)3 years from the date of
pledge
b)3 years from the date of documentation c)5 years from the date of legal notice d) No
limit
20) A Micro Mfg Enterprise had been sanctioned CC(Hyp) limit of Rs 10 lac with 20%
margin against paid stocks. The
unit submits stock statement, which indicates the value of stocks as Rs. 14 lac with
sundry creditors to the extent of Rs 9
lac. What will be the drawing power": a) Rs 1 50 lac b)Rs. 2 lac c)Rs 4 lac d) Rs. 6 lac
21) Accumulated loss will be deducted from: a) Paid-up capital b)Surplus capital c)Tier I
capital d) Tier II capital
22) The Corporate Debt Restructuring Scheme (CDRS) introduced as per Vepa
Kamesam committee has been modified
under a special group headed by RBI Dy Governor Smt S.Gopinath. Accordingly, the
scheme's scope has now been
extended to cover entities having multiple banking exposure with outstanding exposure
of Rs ______crores and
above.: a) 10 b)20 c)5 d) 15
23) Category - Ii, CDR is meant for cases where the alcs have been classified
as______in the books of creditors:
a) Standard b)Substandard c)Doubtful d) Loss
24) What is the minimum & maximum denomination amount for a Commercial Paper?:
a) 5 lac. 5 lac b)10 lac. 5 lac c)10 lac, 10 lac d) 5 lac. 10 lac e) None of above

Page 215
25) Recession is associated with fall in: a) Demand b)Supply c)Disinvestment d)

Investment
26) Devaluation means: a) Fall in Marginal utility of Money b)Fall in printing of currency
c)Risk in black money d)Fall in the value of money in terms of foreign currency
27) From the Bank's perspective, the main difference between extending a Term loan
and extending a Deferred
Payment Guarantee is: a)In Term loan, Bank faces outlay of funds b)In DPG Bank faces
inflow of funds c)a & b d)
Neither a nor b
28) Marginal utility curve of a given consumer is also his:
a) Indifference curve b)Demand curve c)Supply curve d) Total utility curve
29) The total utility is maximum when: a) MU is zero b)AU is the highest c)MU is the
highest d) MU is equal to AU
30) How many motives for demanding money has been given by Keynes: a) 1 b)2 c)3 d)
4
31) In calculating a country's GNP at market prices one of the following is not included:
a) Depreciation b)Net factor income from abroad c)Net indirect taxes d) Transfer
Payment
32) Indian Economy can be best described as:
a) Developed economy b)Undeveloped economy c)Developing economy d)
Underdeveloped
33) The open market operations (0M0) refer to the sale and purchase by the RBI of:
a) Foreign exchange b)Gob c)Government securities d) All of the above
34) Which of the following is a direct tax?: a) Sales tax b)Entertainment tax c)Excise
duty d) Estate duty
35) Capital deficit in India is: a) Positive b)Zero c)Negative d) None of the above
ANSWERS
1C2B3A4A5B
6 A 7 E 8 B 9 B 10 B
11 C 12 E 13 A 14 D 15 A
16 A 17 B 18 A 19 D 20 C
21 C 22 A 23 C 24 A 25 A
26 D 27 A 28 B 29 A 30 C
31 D 32 C 33 D 34 BD 35 A
ABM- Module D
CREDIT MANAGEMENT
01. Statutory corporations are controlled by which act for credit management.

Page 216
a) Indian contract act

b) Company act
c) Act that created them
d) Indian partnership act
e) Indian trust act and public act
Ans: c
02. Which one of the following is not a non fund base credit?
a) Letter of credit
b) Bill discounting
c) Co-acceptance of bills
d) Forward contract
e) Derivatives
Ans: b
03. Mr. Shyam has a house in a rural village, very near to Agra. His house is very old
and
required some repairing work. So, Mr. Shyam visited Agra main branch for a loan, how
much
amount of loan he can avail from bank under housing finance.
a) 1 lakh
b) 2 Lakh
c) 5 Lakh
d) 10 Lakh
e) 20 Lakh
Ans: a
04. Small enterprises advance and export credit does not financed by both public sector
and
PSU (export does not comes under priority sector advance) what percentage of small
enterprises advance and export credit is supposed to be given ___ and ___ respectively.
a) 40 and 32 %
b) 18 and 10%
c) 10 and 12%
d) No target and 12%
e) 10% and no target
Ans: c
05. RBI to free the landing rates of scheduled commercial banks for credit limit over ___.
a) 01 Lakh
b) 02 Lakh
c) 05 lakh
d) 10 Lakh
e) 20 Lakh
Ans: b
06. BPLR system of lending rates replaced by base rate system it was effected from
____.
a) 01 Jun 2010
b) 01 Jul 2011
c) 01 Jan 2010
d) 01 Jul 2010

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e) 01 Jul 2003
Ans: d
07. No penal interest should be charged with effect from 10 Oct 2000 to borrower� s
loan
under priority sector up to Rs _____.
a) 10000
b) 20000
c) 25000
d) 50000
Ans: c
08. No collateral security is required loan under MSME both manufacturing and
production and
providing or rendering of services up to Rs ___.
a) 1 lakh
b) 2 lakh
c) 5 lakh
d) 10 lakh
e) 20 lakh
Ans: C
09. Which accounting standard makes it mandatory for some enterprises to prepare
cash Flow
Statement for the accounting period?
a) AS-1
b) AS-3
c) AS-9
d) AS-17
Ans: b
10. Industries & business enterprises whose turnover for the accounting period exceeds
Rs.
50 crore has to submit segment-wise reporting as per _____.
a) AS-3
b) AS-7
c) AS-17
d) AS-21
e) AS-22
ANS: C
11. MR. Rohit want to invest some money in XYZ co., he want to purchase some stocks
of this
co. How Mr. Rohit can assess to financial statement of the XYZ co.
a) By balance sheet
b) By EPS
c) By financial statement
d) all
Ans: d (EPS- earning per Share)
12. Basic concept used in preparing of financial statements is given below pick up the
odd
one.

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a) Entity concept
b) Money market concept
c) Going concern concept
d) Dual aspect concept
e) Accrual concept
ANS: b
13. As per company act the maximum period of financial period is 15 months, MR
Charles is
GM of ABC co. due to some contingency he is unable to prepare his Financial
statement so he
want to extend his financial to another 03 months i.e. 18 months maximum period of
financial
statement so MR Charles has to approach to whom for such extension.
a) Income Tex office
b) Reserve bank of India
c) Accountant general of region
d) Registrar of company
Ans: d
14. The companies Act classifies liabilities which shown on the left side of the horizontal
form
pick up the odd one.
a) Share capital
b) Reserve & surplus
c) Miscellaneous expenditure
d) Secured & unsecured loans
e) Current liability & provisions
Ans: c
15. Revenue reserve represents accumulated retained earnings from the profits of
normal
business operations. These are held in various forms that are given below pick up odd
one
___.
a) General reserve
b) Investment allowance reserve
c) Advance payment received
d) Capital redemption reserve
e) Dividend equalization reserve
Ans: c
16. 17. Current liabilities and provisions as per classification under the co. act consist of
the
following except one given below.
a) Advance payments received
b) Accrued expenses
c) Pre-paid expenses
d) Unclaimed dividend & dividends
e) Provisions for taxes
f) Gratuity and pensions

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Ans: c
17. Which committee has prescribed inventory norms for various industries?
a) Narasimham committee
b) Raghawan committee
c) Tandon committee
d) Chakraborty committee
Ans: c
18. ____ % of small enterprises advances should go to micro enterprises in case of
foreign
banks.
a) 20
b) 40
c) 60
d) 80
Ans: c
19. In order to avoid the problem in delay in realization of bills, bank may take
advantage of
improved computer/communication network ___.
a) GUI
b) SFMS
c) ETF
d) SWIFT
ANS: b
20. Bank guarantee should normally have a maturity of more than ___.
a) 5 years
b) 10 years
c) 15 years
d) 20 years
e) 25 years
Ans: b
21. The conduct of LC business is governed by� � � � ..
a) RBI
b) IRDA
c) UCPDC 600
d) AMFA
e) GOI
Ans: c
22. What should bank do if the owner of the collateral security is someone other than
the
borrower?
a) Reject the loan
b) Transfer security to the name of borrower
c) He should become first guarantor of the loan and create charge over the security
d) Security should be hypothecated to the banker
Ans: c
23. What bank should do to avoid asset-liability maturity mismatch that may arise out
extending long tenor to infrastructure projects.

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a) Return on investment
b) break- even analysis
c) Liquidity support from IDFC
d) Take-out financing arrangement
e) Sensitivity analysis
Ans: d
24. Frequency of review should vary depending on the magnitude of risk for the average
risk
account.
a) 01 month
b) 03 months
c) 06 Months
d) 12 Months
Ans: c
25. In case of company, the charge should be registered with ROC within ___ days from
the
date of execution of documents.
a) 15 days
b) 30 days
c) 45 days
d) 2 m
Ans: b
26. What is Priority sector target of Direct & Indirect Agriculture for Domestic banks?
a) 13.5% of ANBC or Off Balance Sheet Items whichever is higher. 4.5% for Indirect
Agri.
b) 10% of anbc or 6% for indirect agri
c) 12% of anbc or 4.5% for indirect agri
d) No target
Ans: a (it is 18% in total 13.5 % is direct Ans 4.5% is indirect agric)
27. What are targets and sub-targets of DRI advances?
a) 1% of total outstanding advances of previous year
b) Out of which 40% should go to SC/St
c) 2/3rd must route though Rural and Semi Urban branches
d) All of these
ANS: d
28. What are prudential norms for individuals and Groups as per RBI guidelines? Pick
up odd
one.
a) Individuals Groups General 15% of Capital Funds
b) 40% of Capital Funds of borrower group
c) Infrastructure 20% of Capital Funds single borrower
d) 50% of Capital Fund to gp infrastructure project
e) Oil Companies 25% of Capital Funds
f) All correct
ANS: f
29. Monetary and Credit policy is issued by RBI how many times in a year?
a) Monetary Policy is issued annually

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b) With quarterly review

c) Credit Policy twice a year
d) All of these
Ans: d
30. RBI has restricted bank to finance against/to _______________.
a) Bank� s own shares
b) Relatives of Directors and Senior Officers
c) Sensitive commodities under selective control measures
d) FDRs of other banks, CDs, Companies for buy back of shares and Industries
consuming
Ozone Depleting Substance (ODS)
e) All of these
Ans: e
31. Explain Delivery of credit for WC limits of 10 crore and above.
a) CC component -20% & WCTL component-80%
b) WCTL component-80% & CC Components-20%
c) WCTL components-50% & CC Components-50%
d) CC Components-15% & WCTL components-85%
ANS: a- The proportion is not fixed but is flexible according to requirement of borrower.
32. What are provisioning norms for Standard Assets? Pick up odd one.
a) Direct SME and Direct Agriculture 0.25%
b) Others 0.40%
c) Commercial Real Estate 1%
d) Teaser Housing Loans 2%
e) None of these
Ans: e (It is Classification Rate of provision)
33. In how many years, Foreign banks with 20 branches and above in India need to
achieve
PS target of 40%?
a) 2 years
b) 3 years
c) 4 years
d) 5 years
e) 7 years
Ans: d -starting from 1.4.2013 up to 1.4.2018.
34. What is ANBC?
a) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions +
Investment
in Non-SLR bonds under HTM category + other investments eligible to be treated as PS
b) Bank Credit in India + Investment in Non-SLR bonds under HTM category + other
investments eligible to be treated as PS
c) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions +
Investment
in Non-SLR bonds under HTM category
d) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions + other
investments eligible to be treated as PS.
Ans: b

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(Now amended) as per

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7460&Mode=0
35. Base Rate is determined in each bank by ___.
a) ALCO
b) BPLR
c) ALM
d) DSCR
e) SFMS
Ans: a (Asset Liability Management Committee)
36. The target given for advances to weaker sections in percentage of ANBC is ___.
a) 10% for domestic banks
b) 12% for foreign banks
c) No target for domestic banks
d) 10% for foreign banks
Ans: a
37. Mark the incorrect statement.
a) No target is given to domestic banks for small enterprise advances
b) No target is given for agriculture advances in for foreign banks
c) Export credit does not form a part of priority sector for domestic banks
d) Export credit does not form a part of priority sector for foreign banks
Ans: d
38. Gain on revaluation of asset is a ____.
a) General reserve
b) Investment allowance reserve
c) Capital reserve
d) Revenue reserve
Ans: c
39. Banks can file a civil suit for recovery of their dues in civil courts. This option is used
for
dues ____.
a) Up to 5 lacs
b) Up to 10 lacs
c) Above 10 lacs only
d) Above 20 lacs only
Ans: c
40. What are provisioning norms for NPAs? Classification of assets Provision on
Secured
Provision on Unsecured
a) Sub-Standard 15% 25%
b) Doubtful (D1) 25% 100%
c) Doubtful (D2) 40% 100%
d) Doubtful (D3) 100% 100%
e) Loss Assets 100% 100%
f) All correct
Ans: f
41. You are a loan in charge of ABC one of your a/c of personal loan in the name of Mr.

Page 223
subhash is not paying his dues in time lots of reminder have been send by you for
recovery ,
you have approached him for rehabilitation, he has agreed for that. What will be next
step?
a) Rescheduling/restructuring
b) Legal action
c) Exit from the account
d) Compromise
e) Write off
Ans: d
42. Lok adalat (peoples� court) at present resoling issue of NPAs, the enhanced limit
from
Aug 2004 is ___.
a) 5 lakh
b) 10 lakh
c) 20 lakh
d) 25 lakh
e) 25 lakh above
Ans: 20
43. Banks and FIs for expediting the recovery cases to DRTs (Debt Recovery Tribunals)
for
NPAs value in excess of ___.
a) 05 lakh
b) 10 lakh
c) 20 lakh
d) 25 lakh
e) 25 lakh above
Ans: b
44. SARFAESI Act 2002 has been extended to cover co-operative banks by
notitification dated
___.
a) 21 June 2002
b) 21 Jul 2002
c) 21 Jul 2010
d) 28 Jan 2003
e) 01 Jan 2003
Ans: d
45. CDR is a ____ mechanism.
a) Statutory
b) Non-statutory
c) Core
d) None of these
Ans: b (Corporate Debt Restructuring)
46. Define Small Business on the basis of annual Turnover?
Ans. Whose Annual turnover is less than 50 crore.
47. How will you define Retail Customers?
Ans. Borrowers with exposure of more than 5.00 crore

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48. What is Priority sector target of Direct & Indirect Agriculture for Domestic banks?
Ans. 13.5% of ANBC or Off Balance Sheet Items whichever is higher. 4.5% for Indirect
Agri.
49. What are targets and sub-targets of DRI advances?
Ans. 1% of total outstanding advances of previous year. Out of which 40% should go to
SC/St
and 2/3rd must route though Rural and Semi Urban branches.
50. Priority Sector Target For Housing Loan
Ans. Housing Loan ----Rs. 25 lac for Metro stations having population 10.00 lac and
above. Rs.
15 Lac for other cities.
For Repair-----------up to 2.00 (Rural and SU) and Rs. 5.00 lac (Urban and Metro)
51. Define Small and Marginal farmer.
Ans. Farmers having land up to 1 hector are Marginal Farmers and others having land
up to 2
Hector are Small Farmers.
52. Define Micro, Small and medium for manufacturing and service units.
Ans. Investment in Plant and Machinery for Manufacturing Units
Investment in Equipment For Service Units
Micro Up To Rs. 25 lac Up To Rs. 10 lac
Small Up To Rs. 5.00 crore Up to Rs. 2.00 crore
Medium Up To Rs. 10.00 crore Up To Rs. 5.00 crore
53. What are provisioning norms for NPAs?
Classification of assets Provision on Secured Provision on Unsecured
Sub-Standard 15% 25%
Doubtful (D1) 25% 100%
Doubtful (D2) 40% 100%
Doubtful (D3) 100% 100%
Loss Assets 100% 100%
54. What are Prudential norms for individuals and Groups as per RBI guidelines?
Ans. Individuals Groups
General 15% of Capital Funds 40% of Capital Funds
Infrastructure 20% of Capital Funds 50% of Capital Funds
Oil Companies 25% of Capital Funds
55. How much amount of loan can be sanctioned to Agriculture and SME without
Collateral?
Ans. Agriculture --------------1.00 lac
SME----------------------10.00 lac
56. Monetary and Credit policy is issued by RBI how many times in a year?
Ans. Monetary Policy is issued annually with quarterly review and credit Policy twice a
year.
57. RBI has restricted bank to finance against/to _______________?
Ans.
1. Bank� s own shares
2. Relatives of Directors and Senior Officers.
3. Sensitive commodities under selective contro measures.

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4. FDRs of other banks, CDs, Companies for buy back of shares and Industries
consuming
Ozone Depleting Substance (ODS)
58. Explain Delivery of credit for WC limits of 10 crore and above.
Ans. CC component --------20%
WCTL component-----80%
The proportion is not fixed but is flexible according to requirement of borrower.
59. What are provisioning norms for Standard Assets?
Ans. Classification Rate of provision
Direct SME and Direct Agriculture 0.25%
Others 0.40%
Commercial Real Estate 1%
Teaser Housing Loans 2%
60. What are PS targets for Micro and Small Enterprises?
Ans. All MSE loans will be treated as PS. But sub-targets within overall MSE loans are
as
under:
40% 20% 40%
Manufacturing units
having Investment in Plant and Machinery
Up to Rs. 5.00 lac
Above 5.00 up Rs. 25.00 lac
Above 25.00 lac
Service Units having Investment in Equipment
Up to Rs. 2.00 lac
Above Rs. 10.00 lac
Above Rs. 10.00 lac
61. What are PS targets for Foreign Banks having less than 20 branches in India?
Ans. Total Priority Sector 32% of ANBC or Off Balance Sheet Items (Higher)
Agriculture No specific target but forms part of Total PS
MSE units No specific target but forms part of Total PS
Export No specific target but forms part of Total PS
Weaker sector No specific target but forms part of Total PS
62. In how many years, Foreign banks with 20 branches and above in India need to
achieve
PS target of 40%?
Ans. 5 years starting from 1.4.2013 up to 1.4.2018.
63. What are PS targets of weaker sector for Domestic banks and Foreign banks having
20
and above branches in India?
Ans. 10% of ANBC or Off Balance Sheet Items whichever is higher.
64. What is ANBC?
Ans. Bank Credit in India + Bills Rediscounted with RBI/other approved institutions +
Investment in non-SLR bonds under HTM category + other investments eligible to be
treated
as PS.
65. Base Rate is determined in each bank by ____.

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Ans. Asset Liability Management Committee (ALCO)Top of Form
1. ˜Credit Rating Agencies in India are regulated by: RBI

2. ˜CRISIL stands for: Credit Rating Information Services of India Ltd.
3. ˜Deferred Payment Guarantee is : Guarantee issued
when payment by applicant of guarantee is to be made in installments over a period of
time.
4. ˜If Break Even Point is high, it can be construed that the margin of safety is ____:
Low.
5. ˜Long Term uses – 12; total Assets – 30; Long Term source 16; What is net working
capital : 4
6. ˜On which one of the following assets, depreciation is applied on Straight line method:
Computers.
7. ˜Projected Turnover is Rs.400 lacs, margin by promoter is Rs. 20 lacs. What is
maximum bank
finance as per Annual Projected Turnover method: 80 lakhs.
8. ˜Rohit was a loanee of the branch and news has come that he has expired. On
enquiry, it was
observed that he left some assets. Upto what extent the legal heirs are liable to the
Bank? Legal heirs are
liable for the liabilities upto the assets inherited by them.
9. ˜The appraisal of Deferred Payment Guarantee is same as that of a) Demand Loan b)
OD c) Term
Loan d) CC : Term Loan.
10. A cash credit account will be treated as NPA if the CC limit is not renewed within
___days from the
due date of renewal: 180 days.
11. A director of a bank wants to raise loan of Rs 10 lakh from his bank against Life
Insurance Policy with
surrender value of more than Rs 15 lakh. What will be done?: Bank can sanction.
12. A firm is allowed a limit of Rs.1.40 lac at 30% margin. It wants to avail the limit fully.
How much will
be the value of security : Rs.2 lac
13. A guarantee issued for a series of transactions is called: Continuing guarantee
14. A lady who has taken a demand loan against FD come to the branch and wants to
add name of her
minor son, as joint a/c holder. What you will do?: Name can be added only after
adjustment of the loan.
15. A letter of credit which is issued on request of the beneficiary in favour of his
supplier: Back to Back
LC
16. A loan is given by the bank on hypothecation of stock to Mr. A. Bank receives
seizure order from
State Govt. What should bank do?: Bank will first adjust its dues and surplus if any wilt

Page 227
be shared with
the Govt.
17. A loan was sanctioned against a vacant land. Subsequently a house was
constructed at the site.
What security is available now to the bank? : Both
18. A minor was given loan. On attaining majority he acknowledges having taken loan
and promises to
pay. Whether the loan can be recovered? : He can not ratify the contract. Hence
recovery not possible.
19. A negotiating bank and issuing bank are allowed days each for scrutiny of
documents drawn
under Letter of credit to ensure that documents are as per LC: 5 banking days each.
20. Age limit staff housing loan: 70 years;
21. An L/C is expiring on 10.05.2008. A commotion takes place in the area and bank
could not open.
Under these circumstances can the LC be negotiated?: The L/C can not be negotiated
because expiry date
of LC can not be extended if banks are closed for reasons beyond their control.
22. As per internal policy of certain banks, the net worth of a firm does not include: a.
Paid up capital b.
Free Reserve c. Share Premium d. Equity received from Foreign Investor : Revaluation
Reserves
23. Authorised capital is Rs.10 lac. Paid up capital Rs.6 lac. The loss of previous year is
Rs.1 lac. Loss in
current year is Rs3 _ lac. The tangible net worth is : Rs.2 lac
24. Authorised capital= 10 lac, paid-up capital = 60%, loss during current year = 50000,
loss last year =
2 lacs, what is the tangible net worth of the company? : 3.5 lac
25. Bailment of goods by a person to another person, to secure a loan is called : Pledge
26. Balance outstanding in a CC limit is Rs.9 lakh. Value of stock is Rs.5 lakhs. It is in
doubtfUl for more
than two years as on 31 March 2012. What is the amount of provision to be made on
31-03-2013?: Rs.9
lakhs (100% of liability as account is doubtful for more than 3 years)
27. Balance Sheet of a firm indicates which of the following – Balance Sheet indicates
what a firm
owes and what a firm owns as on a particular date.
28. Bank limit for working capital based on turn over method: 20% of the projected sales
turnover
accepted by Banks
29. Banks are required to declare their financial results quarterly as per provisions of :
SEBI
30. Banks are required to maintain -a margin of ___ for issuing Guarantee favouring
stock exchange on
behalf of share Brokers.
31. Banks are required to obtain audited financial papers from non corporate borrowers
for granting

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working capital limit of: Rs.25 lakh &above

32. Banks provide term loans and deferred payment guarantee to finance capital assets
like plant and
machinery. What is the difference between these two: Outlay of funds.
33. Benchmark Current Ratio under turn over method is: 1.25
34. Break Even Point: No profit no loss. ( TR-TC=Zero)
35. Calculate Debt Equity ratio – Debenture – Rs 200, capital 50; reserves – 80; P& L
account credit
balance – Rs 20: 4: 3 ( 200 divided by 150).
36. Calculate Net working capital– Total assets 1000; Long Term liabilities 400; Fixed
assets, Intangible
assets and Non current assets (i.e. long term uses) Rs 350; What is net working capital :
400- 350= Rs
50
37. Calculate Tangible Net Worth: Land and building: 200 Lacs; Capital:80000
intangible asset:15000:
65,000
38. CALCULATION OF INTEREST IN LOAN ACCOUNT: MONTHLY
39. CARE stands for : Credit Analysis & Research Ltd
40. Cash Budget method is used for sanctioning working capital limits to : Seasonal
Industries
41. CC limit Rs 4 lacs. Stock 6 lacs. Margin 25% . What is drawing power? : NOTIONAL
- 4.5 lacs, BUT
ACTUAL Rs. 4 LAC.
42. Central Registry of Securitization Asset Reconstruction and Security Interest of India
(CERSAI) is a
government company licensed under Section 25 of the Companies Act, has been
incorporated to operate
and maintain the Central Registry under the provisions of _____: SARFAESI Act 2002.
43. CIBIL is the agency that provides information to the member banks on (i) Credit
Rating (ii)
Information on credit History: Information on Credit History of borrowers
44. Contribution means : profit + fixed cost
45. Current Assets 600, Long Term sources - 600, Total Assests1000, what is NWC
and Current Ratio: CR
1.5 : 1; NWC = 200 .
46. Current Liabilities are those liabilities which are to be paid: within one Year
47. Current Ratio = 2:1, Net working Capital=60000, What is the Current Liability of the
firm? : 60000
48. Current ratio indicates: Liquidity of the firm (ability of a firm to pay current liabilities in
time)
49. Current Ratio is 1.33:1, Current Assets is 100, what will be the amount of Current
Liability: 75 lakhs
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Canara Bank, Govt. Link Cell,
Nagpur 138 | P a g e
50. Debt Equity Ratio indicates: Long term solvency or capital structure of the firm.
51. Debt Securitization refers to: Conversion of receivables into debt instruments.

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52. Debt Service coverage ratio is used for: Sanction of Term Loans
53. Deferred Payment guarantee is: Financial Guarantee
54. Deferred payment guarantee issued by a bank is a : Contingent Liability.
55. Difference between Long Term Source and Long Term Use is called: Net Working
capital.
56. DSCR indicates: Ability of firm to repay term loan instalments
57. DSCR is for evaluating: Term Loan repayment-surplus generating capacity.
58. Duty of confirming bank: Only to verify the genuineness of L/C.
59. Equitable Mortgage is created by deposit of title deeds with bank at – (a) any where
in India; (b)
state capital; (c) only at Mumbai, Chennai or Kolkatta; (d) Any place notified by state
government for this
purpose: Correct answer is (d).
60. Excess of current liability over current assets means the firm may face difficulties in
meeting its
financial obligations in short term.
61. Expand CRILC: Central Repository of Information on large credits.
62. Expand IRR : Internal Rate of Return
63. Finance for construction of road and port is classified as: Infrastructure Finance.
64. For ascertaining that a firm will be able to generate sufficient profit to repay
instalments of term
loan, which ratio is computed?: Debt Service Coverage Ratio
65. For assessing Fund Based Working Capital limit for MSME upto _______Turnover
method is followed
under Nayak committee: Rs.5 crore.
66. For classification of assets in consortium accounts, which of the following is to be
considered?: In
consortium accounts, each bank will classify the account as per its record of recovery.
67. For Takeover of accounts from other Banks, the account copies of all the borrower
accounts with the
present bankers / financial institution shall be obtained at least for the last ______: 12
months.
68. Formation of consortium, when essential : When bank touches its exposure ceiling
69. Full form of DSCR: Debt Service coverage ratio;
70. Gold is pledged with bank as security for a Bank Guarantee by a borrower. Bank
Guarantee stands
expired. Whether a temporary overdraft availed by the borrower which is overdue can
be got adjusted by
selling the Gold held as security for issue of guarantee: Yes, because Bankers lien is a
general lien and is
an implied pledge. Further, the Gold was deposited in the ordinary course of business.
71. Green field project is related to : setting up new projects
72. Guarantee issued by a bank in favour of Custom department that party will fulfill
export obligation for
availing exemption from custom duty regarding tax. Such guarantee is called: Financial
Guarantee
73. Guarantee issued by a bank which is still outstanding is shown in the Balance Sheet

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as: Contingent
Liability.
74. Guarantors Liability: Recall the a/c and cause demand against the borrower and
guarantor. Balance
in guarantor's SB a/c cannot be appropriated directly.
75. Holiday period given for repayment of installements in a loan is termed as:
Moratorium period
76. How DSCR is calculated?: (Profitafter tax + Depreciation + Interest on Term Loan)
divided by (Annual
instalment of term loan+ interest on term loan)
77. How much additional risk weight has been provided on restructured loans?: 25%
78. Hypothecation can be converted to pledge by: taking possession with the consent of
the borrower.
79. Hypothecation described under SARFEASI Act.
80. If a businessman start a business with a Capital investment of Rs.3,00,000/- and
withdraw
Rs.25,000/- later. If Net Profit is Rs.1,20,000/- and income tax paid thereon is
Rs.30,000/-, what is the
position of capital account (net worth) at the end of the year – 395000; 365000; 360000;
nil:
Rs.3,65,000/-
81. If a LC contains a clause "about" regarding the amount and quantity of goods, how
much tolerance is
permitted?: 10%
82. If current ratio is 2:1, net working capital is Rs 20,000, current asset will be: Rs
40,000
83. If debtors are Rs 4 lac, annual sale is 60 lac, what is the Debt collection period: 0.8
months
84. If Debtors velocity ratio increases, it means debt collection period has increased or
sales have
decreased.
85. If documents are to be presented in about July month: these can be presented
within 5 days before
or 5 days after.
86. If in a Guarantee issued is silent, what will be the limitation period: 3 yrs and in case
of Govt
guarantee it is 30 years.
87. If in a LC words around is written with date then variation of is allowed in the period:
+/- 5 calendar
days
88. If limit is 3 lacs, margin is 25% what should be stock to avail full limit?: Rs4 lac
89. If on a letter of credit it is not mentioned whether it is revocable or irrevocable, then
as UCPDC 600, it
will be treated as : Irrevocable LC
90. If on a Letter of Credit, date is mentioned as "end of the month", then as per
UCPDC 600, it will
mean: 21st to last day of the month.

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91. If stock statement is not submitted for 3 months from its due date and DP is allowed
on the basis of
old stock report, then the account will be considered NPA after:90 days
92. If the projected sale of a-small (manufacturing) enterprise is Rs 80 lakh, margin
available with the
borrower is Rs 4 lakh, then as per turnover method, working capital limit will be: Rs 16
lakh.
93. If working capital limit to a borrower is Rs 10 crore and above, then as per RBI
guidelines, the loan
component should be at least: as per bank's discretion.(earlier it used to be 80%).
94. In a company, the registration of charges is required for: a)loan against FD b)lien on
Govt Securities
c) assignment of Book Debts d) lien on Shares : Book Debts
95. In A current account OD of Rs. 12000 is made. The FDR has become due later on if
the right of
appropriation can be used. The borrower has objected that he never requested for
overdraft, hence
payment can not be appropriated. The customer is right.
96. In a letter of credit, it is written that documents can be negotiated about 30th June.
In this case, the
documents can be negotiated: Before or after 5 clays of 30th June.
97. In case of a loan under consortium, each bank can have Maximum working capital
limit of Rs-No
rule in this regard. Rules of consortium to be framed by members of consortium.
98. In case of loan given by more than one bank under a consortium, how the asset
classification is done
by various banks?: Each bank will classify the account based on its record of recovery.
99. In case of revaluation of fixed assets, what percentage of revaluation reserve will be
added to Tier
II capital of the bank?: 45%
100. In Letter Of Credit jmporter is called: Opener of Letter of Credit
101. In project finance, Debt Equity Ratio requirement for other than Infrastructure
finance is: 2:1
102. In respect of a project report, the feasibility which is given least importance by the
preparers of the
report, but very important for a banker is : a) Commercial b) Technical c) economic d)
financial Ans: C
103. In the Balance Sheet of a bank, Contingent Liabilities are shown as: footnote to the
Balance Sheet.
104. In the case of advance to a limited company for purchase of vehicle, the charge is
registered with
Regional Transport Authority in addition to registration of charge with. Registrar of
Companies. Why this is
done?:So that borrower can not sell the vehicle without intimation to the bank
105. Interest rate on advances is related to – Bank rate; Base Rate; PLR: MCLR Rate
106. Limit sanctioned Rs 5 lac; Stock Rs 6 lac; Margin 25%; What will be Drawing

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power: Rs 4.5 lac

107. Loan Delivery System is not applicable to: a) Loan to Soft ware industry b) export
credit: export
credit
108. Loan Delivery System suggested by Rashid Mani Committee is applicable on
borrowers with working
capital limits of: Rs 10 crore and above
109. Loan is in the name of A&B. Both have signed documents. A signs the Balance
Confirmation but B
does not. In this case limitation will extend against: both
110. Lorry Receipts issued by Transport Operators approved by IBA are preferred. The
reason is the
Transport Operators will take care of: Carriers Risk.
111. Stand by LC is just like : Financial guarantee (A guarantee of payment issued by a
bank on behalf of a
client that is used as "payment of last resort" should the client fail to fulfill a contractual
commitment with
a third party. Standby letters of credit are created as a sign of good faith in business
transactions, and are
proof of a buyer's credit quality and repayment abilities)
112. Standard Score under CIBIL: 300 to 900
113. Stock Audit is required in respect of loans of : Rs.1.00 crore & above
114. Subordinate Debt is shown as part of in the Balance Sheet of a bank: Other
Liabilities and
Provisions
115. Tangible Net Worth (TNW) is calculated as: Total paid up capital + Reserves –
Intangible Assets.
116. The appraisal of deferred payment guarantee is similar to term loan: The difference
is outlay of funds.
117. THE APPRAISAL OF DEFERRED PAYMENT GUARANTEE IS SIMILAR TO:
TERM LOAN
118. The Audited Balance sheet for the latest financial year is to be obtained within
______ to finalise
credit rating and re-fix interest accordingly: 6 months.
119. The Bank did not disclose all material facts regarding loan to the guarantor while
obtaining
guarantee. Can guarantor escape liability?: Guarantor cannot escape from his liability
as it is not
necessary to disclose all the materials facts with regards to the loan.
120. The Borrower has to bring funds as his contribution for loan from: Long term
Sources
121. The charge on stocks is created by: Hypothecation ( also by pledge or lien)
122. The concept of Base Rate is not applicable in the case of: Loan against Bank’s
own deposit
123. The limitations of financial statements are : only quantitative not qualitative.
124. The long term liability to tangible net worth ratio implies : Long term solvency of the
firm .

Page 233
125. The main distinction between Hypothecation and Pledge is on accountof :

Possession
126. The Meaning of Debtor Velocity Ratio is: Cycle of Debt Collection Period
127. The procedure used for ascertaining Customers Credit worth is called: Credit
Rating
128. Time Limit for registration of equitable mortgage with CERSAI: 30 days from date
of deposit of
title deeds. (Normally 30days and then delay can be condoned up to 30days on
payment of penalty).
129. To improve Current Ratio of 2:1, what has to be done? a) Recover cash from
Receivables b) Cash
sales c) Decrease the Bills payables.
130. Total Indebtedness Ratio is represented by: Total outside liabilities divided by
Tangible Net Worth
131. What is "pari passu" means: Sharing in the ratio of outstanding.
132. What is a Break even point-The level of sales at which a firm does not earn any
profit and does not
incur any loss.
133. What is cash loss : net loss before depreciation (Net loss minus depreciation)
134. What is Deffered Payment Guarantee?: Guarantee issued when payment by
applicant of
guarantee is to be made in instalments over a period of time.
135. What is Mortgage? Transfer of interest in specific immovable property to secure an
existing
or future debt.
136. What is nature of Banker's Lien?: It is implied pledge because Banker can dispose-
off the goods after
giving notice to the borrower.
137. What is Pari Passu charge?: In case of consortium advance sale proceeds of
security will be
shared among banks in proportion to their outstanding.
138. What is Real Rate of Interest?: Prevailing interest rate minus inflation rate
139. What is the meaning of Group in Exposure Norms: Commonality of management &
Effective Control
140. What is the relationship between bank and customers in case of overdraft?:
Creditor and Debtor
141. What is the risk weight for Personal Loans? 125%
142. What is the risk weight for Unrated companies?: 100%
143. What is the type of liability for the bank on account of issue of Bank Guarantee?:
Contingent Liability
144. What type of bank gaurentee bank gives when a customer purchases a machine
on instalment basis?:
Deferred Payment guarantee.
145. What type of Guarantee is Deffered Payment Guarantee: Financial Guarantee
146. What type of liability is represented by Bank Guarantee?: Contingent Liability and
shown as a
footnote in the Balance Sheet.

Page 234
147. What will be the tangible net worth if total assets are Rs 35 crore; total outside
liability Rs 30 crore;
intangible assets Rs 3 crore: Rs 2 crore
148. What will happen in case of negative working capital limit: Current Liabilities are
more than
Current Assets
149. Which is not a Credit Rating Agency – CRISIL, CARE, SMERA, ICRA, CIBIL:
CIBIL
150. Which is not found in operating expenses statement of P&L statement - Salaries,
Rent, Power: Power
151. Which is not included in Contingent liability – Bank Guarantee; Letter of Credit;
Forward Contract;
Bills Payable: Bills payable
152. Which of the following is a contingent liability – deposits, borrowings, capital,
guarantee: Bank
Guarantee
153. Which of the following is a Credit Information company – CIBIL, FIMDA, AMFI,
CRISIL: CRISIL
154. Which of the following is part of the Solvency Ratios: debt equity ratio.
155. Which of the following represent Debt Service Coverage Ratio: (Net Profit after tax
+ Depreciation
+ Interest on Term loan) divided by (Annual instalment of term loan + interest on term
loan)
156. Which of the items will not be an asset in banks bal sheet: Advances/Fixed Asset /
Deposits :
Deposits
157. Which one of following is credit information company?: Equifax
158. Which system replaced Benchmark Prime Lending rate in banks: Base Rate
159. While arriving Drawing Power for financing against book debts, only Book Debts
_____and below are
to be taken in to consideration. (other than MSME advances): 90 days
160. While doing Project Appraisal, sensitivity analysis is useful for: Viability and
sustainability of project.
161. While financing for TL, Bank should look for the ability of the firm to generate the
income to service
the debt
162. While granting loans to a partnership, banks generally insist that the firm should be
registered
whereas registration of a partnership firm is optional. What is the reason for the same?:
An
unregistered firm can not sue its debtors for recovery of its dues whereas other can sue
the
firm for recovery of their dues
163. While undertaking technical appraisal, the following is not considered: cost of
production and sales (it
is used for economic viability).
164. Who is bound to file particulars of charge with the Registrar of Companies under

Page 235
MCA 21, when a

company creates charge of somebody on its movable or immovable property except by
way of
pledge?: officials of the company.
165. Why banks do not grant loan to a minor?: A minor is not competent to contract
Therefore, Ioan given
to a minor can not be recovered.
166. Why banks ensure that charge created on any asset of the company should be
registered with ROC
within stipulated period?: If charge is not registered, bank will become unsecured
creditor.
167. Why banks prefer financing of bills?: because the advance is self liquidating
168. Why fund flow statement is taken from the borrower?: To know sources from
where funds have been
raised and how funds have been utilized and to know changes in net working capital
position.
169. Why loan against Partly Paid Shares are not preferred by banks?: Because partly
paid shares
represent contingent liability. In case company makes demand and the borrower does
not pay the
amount then the bank will have to pay the amount otherwise share may be forfeited.
Moreover it is
prohibited by RBI
170. Working capital requirement of a firm is required to be met through : Short term
sources and surplus
of long term sources over long term uses
CAIIB ABM most important Recollected::

CRR &; SLR Calculation Given Big Table - 5 Marks
Narrow Money, Broad Money (M1, M2, M3 & M4) - 5 M
Macro Economics - 1M
Types of Economics ( Market, Socialistic & Mixed) - 1 M
Price & Demand relation - 1M
Cost pull Inflation - 1 M
WPI - 1M
Characteristics of Business Cycle - 1M
CSO (3 Segments) - 1M
Real GDP - 1M

Page 236
PV & FV - 2 M
PV of perpetuity 1 M
Sampling Numerical - 3M
Y=a+bx ( Given ∑X, ∑Y values find a, b, x values - 5M
Variance, Standard deviation, Mean related que - 5 M
YTM - 1 M
3 Parts of job analysis ( Job Description, Job Specification & Job Evaluation) - 1M
Theories of Nadler ( Mechanistic, Cognitive, Organistic) - 1M
Attitude - 1 M
External locus of control - 1 M
Abraham Maslow 5 Needs order - 1M
HRIS Abbreviation - 1M
Case study related new project & Training Case study - 5 M
One more Case Study HRM - 5 M
Consortium, Multiple Lending - 1M
Provision for Standard Assets in MSE -0.25% - 1 M
Unsatisfactory/ Doubtful features of Borrower - 1 M
As per CIBIL willful defaulters 25L & Suit files 1 Cr - 1M
Quick ratio, Acid test ratio,Tandom Comm I & II Method Bank finance - 5M
ICR, DER, TOL/TNW, Creditor Turnover ratio- 5 M
Calculate the lc with eoq method

laissez fair economy is market economy
ends refer to wants
market equilibrium price quqntity demanded is quantity supplied
m3 = m1+ time dep with banking system
cpl is more relevant for consumers
Keynes theoy liquidity preferance theory of interest
Market economy is also known as...? Ans. capitalistic economy
depression phase is followed by recovery phase
higher growth in service sector
Questions based on mean, variance and standard deviation of 5 marks
interest is awarded for using capital and taking risk
Working capital gap
Tol and tnw calculative problem
simple question on calculating amount for compound intrest
queston on fvof bop annuity
standard deviation of sampling is called standard error
a portion of element choosen is called sample
second degree equation isrs in timseries analysis
You cannot see others dark blind etc
Numeric on capital
Nature and wealth management book s author
Reason for shift in demand curve,market economy,laissez faire economy
Govt Measures to control inflation,5 marks pblms to find narrow monew,broad mny etc
CPI issued by whom?
Full form of cso

Page 237
Base rate,crr,slr,GDP
Calculation of pv,fv ,annuity
5 mrks pblm frm correlatin, regression, linear programming
Many questions frm hrm like emotional intlgnce,career anchors,knowles theorems,type
A nd type B persons,hersbergs
theory, etc
turnovr method of assesmnt, 5 marks questn frm LC relating to its lead time usance
period etc,current assets,working
capital etc etc etc...
Please find recollected question of ABM;-
Standard Error, Mean, coefficient approx 10 questions..
What is Broad Money
What is Narrow Money
M3?
Stressed Assets ?
HR related 2 paragragh
CPI related??
LM curve : theory??
Deffered Payment Guarantee??
Business cycle?
Sampling : systemic/ stratified?
Laissez faire economy??
Depression is followed by....??
Group Formation ka order??
Calculate ---
working capital gap
Gross working capital
Fiscal deficit
Expenditure Non expenditure.
5ques reg (m1 - m4)..Gwc 5 ques...Hrm 5 ques..standard deviation 5 ques and in
primary gross & fiscal deficit 5 ques
one que was on Lc..if transit period comes down
One que on wc gap
Gross working capital..
Hrm..zohari window..one que was there
Effect of shift in demand due to????
Gdp deflator
Cso 3 segments of industrial sector
Fixed period between the stages of business cycle .ans- not any fixed period
Wht is not stressed asset
Narrow money?
Drt -conditions
...is it can be only filed when it is fully secured
Or if loan amt is more then 10 lac
ends define...answer is wants
2 wpi announced ....monthly
3 cpi is released by ...labour bureau

Page 238
Gdp announced ......
A question on herzberg's two factor on motivation-hygiene theory

schien's three dimension movements viz vertical, circumferential and radial
johari window concept: closed- known to self but not known to others
WPI
calculation of RD amount
numeicals on sampling
correlation regression
bonds
a set of quest on M1,M2,M3,M4
2 paragraphs based on risk mgt, and hrm
and 10 ques based on them
numericals on union budget
statified n clustr sampling
numericals on point and interval estimation.
Major portion of today's exam
Case study on Him
Numerical on standard deviation, variance ,mean
Fiscal deficit numerical
Numerical on fv
Group formation
Numerical on share
Inflation CPI
Eri motivation theory
Case study on Lc
Narrow money
LM curve
Standard deviation
Covariance
Mean
CR ratio
5 questions fr calculation of M1 M2 M3 M4
About ITES
1) Table based question on money supply m1 M2 M3

2)Working cap limit …first method, 2nd metbod.
3)Table based question on LC
4)Johari window
5)5 Question on Fv Pv and of formua pv=fv/(1+r)2
6)corrilation regression table based.
7)type I and type ll person 3 Questions
8)demand and supply equilibrium 1 Question
9) broad money and narrow money 2 Que.
10) 40% Hrm question.
1. End refer to ---- Wants.
2. Cash Budget method is applied bet for appraisal of ......... business (seaspnal)

Page 239
3. An Enqury into the Nature and causes of the wealthe off nations written by .......
Adam Smith.
4. Narrow money M1
5. Broad Money M3
6. Micro enterised in manufacturing sector under MSMED 2006 cost of machines ect
upto 25 Cr.
8. Phase of business follow Depression ---- Recovery.
9. Find the FV.
10 Find Current ratio.
11. Case study on S.D, Variance etc.12. case of Export finance.
13. case of training need in HRM.
14. 3-4 on sampaling, Linear programming .
15. case study on Tondon 1 & 2.
CAIIB ABM TODAY EXAM 55 QUESTIONS RECOLLECTED by Srinivas

Kante 1.Hicks -Hansen synthesis 2.Basic difference between IS and LM
curve 3.Increase in money supply Lowe interest rate and raising inflation
4.NDP @factor cost 5.Demand –pull inflation means 6.Erosion as per the
role 7.Climate Survey 8.Case study one related to Budget 9.Central limit
theorem 10.sampling methods . 11. job erosion 12 curreneaccountdefficit 13
Gross deficit etc. case 14..standard deviations mean related 15 .Case 3 Xyz
jewellery shop Related But the level oh complexity is very high..n .. 16 fiscal
policy ,monetary policy 17.demand supply curve etc... 18.Correlation and
regression numerical 19.NNP @ factor cost 20working capital 21. bank
guarantee 22.Performance Appraisal 23. Halo effect Tendency.. 24.NNP at
market price 25.In correct characteristics in Business cycle 26 Notional
income also known as.. 27.Least squre method used in.. 28.Fctoring of
services the factor 29.Lender to sensitising test and scenerion analysis..Type
of loans 30. Debt to equity of enter prises raatio is.05 its... 31.Bank
Gaurantee to commoidity brokarage (margin %).. 32.find P(x bar >/85) ?
33Std error of the mean is???? 34 Estimate of the population proportion is..
35 Commericial paper issued multiples of.. 36.Commericial paper issued
maximum period 37.Find P(88| 39.HRM 40.monetary policy 41.Annuity due
prblems 42. Future Value problem 43.Estimation 44.Bond price 45.Revenue
dediciat problem 46.Job evealution Job specfication case study 47. Turn
over methodeapplied on leass than 5 cr 48. Factor of Supply schedule
49.Lional econmic statement. 50. GDP calculation 51. GNP at amrket price
calculation 52. Sampling Methodes 53.Hallo effect 54 Cov(X,Y)=150 mean
X=20 mean Y=10 standard deviation x=25 then equation of regression line is
55. 3 questions from HRM 5 marks each Thank you all, Srinivas Kante

Page 240

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Caiib Abm Case Studies

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CAIIB ABM CASE STUDIES & NUMERICALS FOR DEC2018

ULTIMATE STUDY MATERIAL MACMILLIAN ONLY

This subject also contains 4 modules

MODULE – A: Economic Analysis

IMPORTANT TOPICS FROM EACH MODULE

Module B-Time Value of Money, Sampling Methods, Simulation, Bond Investment

Module D-Overview of Credit Management, Analysis of Financial Statement, Working

Facebook Group https://www.facebook.com/groups/iibfcertifications/

Use the jaiibcaiibmocktest.com for practice

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3. Debt Equity ratio (DER) =

5. Return on asset = Operating profit/(Total asset-intangible asset)

6. ICR(Interest coverage ratio )= EBIT / Interest on long term

7.Total outside liabilities= current liability + long term liability

9. Tangible networth = Networth - intangible asset

10. Current Ratio = CA:CL

11. Quick Ratio = ( CA - Inventories )/ CL

12. Quick asset = CA - Inventory

13. Heads come under current asset→

Heads that come under

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a) Installment of term loan payable in a

15. M2=M1+ Savings deposits of post office savings banks

16. M3= M1+ Time deposits with banking system

19. GDP = C+I+G+(X-M)

22. Present value(PV)= Discount factor × Cn

24. Discount factor = 1/(1+r)^n

25. Effective int rate (EIR)= (1+r/n)^n -1

26.Current yield on coupon = (coupon or nominal yield)× 100 / (current market

27. Rate of return = (coupon+ price change)/investment

28. YTM = [ C+ ( A-P)/n ] × 100 / ( A + P)/2

29.Yield on discounted instuments :- The issue price of a discounted instrument

r = Effective rate of return per annum

33. Future Value of an annuity(End of period) = A/r × [( 1+r)^n - 1]

34. Present Value of an annuity ( End of period )= A/r ×[ ( 1+r)^n-1] /(1+r)^n

35. FV ( at the beginning )= A/r×(1+r)[( 1+r)^n -1]

36. ¤ Value of Bond = PV( Coupon)+ PV( Face value )

37. Standard error of the mean= x = / sqrt ( n)

38.PV of perpertuity = A/r

39. If S is the sample space & E is the even of occurance

40. Equation of estamating of straight

41. If x and Y are the two variables then corrleation of

interested; Deposits with customs port trust

Short term or CurrentyLiabilities : Current Assets :

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2. Variance x = ∑x^2 /n -(Mean ẋ )^2

3.Standared deviation X =√var

4. Variance y = ∑y^2 /n -(Mean ȳ )^2

5. Cov (x,y) = ∑x y /n - ẋ.ȳ

6. r = cov(,y) / std deviation x. std deviation y

7. x- ẋ = r *( std deviation x.)/ std deviation y (y- ȳ) small r multiply

9. sampling distribution equation …………. sigma multiplied by xbar is equal to

10.Z is equal to is divided by sigma multiplied by xbar [X bar minus mu]

11. Mean means average

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Compiled by Srinivas Kante Facebook Group https://www.facebook.com/groups/iibfcertifications/

Compiled by Srinivas Kante Facebook Group https://www.facebook.com/groups/iibfcertifications/

Year Spring Summer Fail Winter

1998 87 106 86 125

1999 85 110 83 127

2000 84 105 87 128

Calculate the seasonal index for each quarter.

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