Model Ques Dec 2017 by Deepak - Hooda 2 PDF

CAIIB BFM Model Questions for Dec 2017
Dec 2017
Ultimate Study Material MacMillian Book Only
Use the following information about a hypothetical government security dealer named M.P.
Jorgan. Market yields are in parenthesis, and amounts are in millions.
da
Assets $ Liabilities and Equity $
Cash 10 Overnight Repos 170
1 month T-bills (7.05%) 75 Subordinated debt 7-year fixed rate (8.55% 150
3 month T-bills (7.25%) 75
2 year T-notes (7.50%) 50
oo
8 year T-notes (8.96%) 100
5 year munis (floating rate) 25 Equity 15
(8.20% reset every 6 months)
Total Assets 335 Total Liabilities & Equity 335
What is the funding or repricing gap if the planning period is 30 days? 91 days? 2 years? Recall
that cash is a noninterest-earning asset.
-$95 million, $20 million, +$55 million

-$95 million, -$20 million, -$55 million
H
-$95 million, -$20 million, +$55 million--
$95 million, -$20 million, $55 million
What is the impact over the next 30 days on net interest income if all interest rates rise 50 basis
ak
points?
Net interest income will decline by = $0.475m.--
Net interest income will increase by = $0.7125m.
Net interest income will decline by = $0.7125m
.
p
What is the impact over the next 30 days on net interest income if all interest Decrease 75 basis
points?
Net interest income will decline by =- $0.475m.
Net interest income will increase by = $0.7125m.--
ee
Net interest income will increase by =- $0.475m.

Net interest income will decline by = $0.7125m
The following one-year runoffs are expected: $10 million for two-year T-notes, and $20 million
for eight-year T-notes. What is the one-year repricing gap?
+$35 million.
D
-$35 million
-$40million
+$40 million
https://www.facebook.com/groups/191786717948391/ Deepak Hooda

Questions Collected from Various Sources. These Questions are not exhaustive in nature. Page 1
MacMillan Book is the Ultimate Study Material for CAIIB BFM
Dec 2017
If runoffs are considered, what is the effect on net interest income at year-end if interest rates rise
50 basis points
Net interest income will increase by = $0.175m.--
da
Net interest income will decrease by = -$0.2625m.
Net interest income will decrease by = $0.175m.
Net interest income will increase by = -$0.2625m.
If runoffs are considered, what is the effect on net interest income at year-end if interest rates rise
Decrease 75 basis points?
oo
Net interest income will decrease by = -$0.2625m.--
Net interest income will decrease by = $0.175m.
Net interest income will increase by = -$0.2625m.
Calculate the repricing gap and the impact on net interest income of a 1 percent increase in interest
+$100 million , $1,000,000--

-$100 million , $1,000,000
-$100 million , $1,000,000
H
rates for each of the following positions:
Rate-sensitive assets = $200 million. Rate-sensitive liabilities = $100 million

ak
-$100 million , -$1,000,000
Rate-sensitive assets = $100 million. Rate-sensitive liabilities = $150 million.

$50 million, $500,000
-$50 million, -$500,000--
$50 million, -$500,000
-$100 million , -$1,000,000
p
Rate-sensitive assets = $150 million. Rate-sensitive liabilities = $140 million.

+$10 million. , $100,000.--
ee
+$10 million. , -$100,000.

-$10 million. , -$100,000.
-$100 million , -$1,000,000
D

Dec 2017
Imitational Bank has the following repricing assets and liabilities:
Call money -Rs.300 Cr
Cash Credit loans -Rs.240 Cr
Cash in hand - Rs.200 Cr
da
Saving bank -Rs.300 Cr
Fixed Deposits - Rs.300 Cr
Current deposits - Rs.250 Cr
On the basis of above information, answer the following questions:
What is the adjusted gap in re-pricing assets and liabilities?

R5540 Cr
oo
Rs.60O Cr
Rs.60 Cr negative--
Rs.60 Cr positive
What is the change in net interest income, if interest falls by 200 points across the board i.e. for all
assets and liabilities?
improves by Rs.1.20 Cr--
declines by Rs.1.20 Cr
changes by Rs.1 Cr
there is no change
H
If the interest rates on assets and liabilities increase by 2%, what is the change in net interest
ak
income?
improves by Rs.1.20 Cr
declines by Rs.1.20 Cr--
changes by Rs.1 Cr
there is no change
If interest rate falls on call money by 1%, on Cash Credit by 0.6%, on saving bank by 0.2% and on
FD by 1%, what is change in net interest income?
p
decline by Rs.0.84 Cr--
ee
If interest rate increases on call money by 0.5%, on Cash Credit by 1%, on saving bank by 0.1%
and on FD by 0.8%, what is change in net interest income?
D
improves by Rs.1.20 Cr--

Dec 2017
International Bank has the following re-pricing assets and liabilities:
Call money - Rs.500 Cr
Cash Credit loans - Rs.400 Cr
Cash in hand - Rs.100 Cr
da
Saving bank - Rs.500 Cr
Fixed Deposit - Rs.500 Cr
Current deposits - Rs.200 Cr
There is reduction in rate of interest by 0.5% in call rates, 1% for cash Credit, 0.1% for saving bank
and 0.8% for FD. On the basis of above information, answer the following questions:
oo
What is the adjusted gap in repricing assets and liabilities?
a Rs.200 Cr positive
b Rs.200 Cr negative
c Rs.100 Cr positive
d Rs.100 Cr negative--
a Rs.700 Cr
b Rs.650 Cr--
c Rs.600 Cr
d inadequate information
H
Taking into account, the change in interest rate, calculate the amount of repricing assets as per the
standard gap method in repricing assets and liabilities
ak
Taking into account, the change in interest rate, calculate the amount of repricing liabilities as per
the standard gap method in repricing assets and liabilities?
a Rs.450 Cr--
b Rs.400 Cr
c Rs.300 Cr
d insufficient information
p
04 What is the standard gap of the bank in repricing assets and liabilities?
Rs.150 Cr negative
b Rs.175 Cr positive
ee
c Rs.200 Cr positive--
d Rs.250 Cr negative
A method that may be employed by banks to lower required reserves is

a. To transfer deposits offshore on Friday and to transfer them back on Monday
D
b. To sweep demand deposits into higher interest-bearing accounts on Friday with a return sweep
on Monday
c. To rely more heavily on zero explicit interest-rate deposits
d. A and B above --
e. A, B and C above
Ans:- d

Dec 2017
The International Bank, provides following data regarding rate sensitive assets and liabilities of the
bank as on 31st Mar 2010. The NII spread in percentage terms for the bank is 1.5%
Time Buckets Assets Liabilities Gap Cumulative gap
da
1 to 28 days 800 1000 -200 -200
29 days to 3 650 550 100 -100
months
3-6 months 2700 3150 -450 -550
6-12 months 450 600 -150 -700
1-3 years 150 300 -150 -850
oo
3-5 years 450 200 250 -600
Over 5 years 1000 200 800 200
Non sensitive 300 500 -200 0
Total 6500 6500 0
Using the details given above, answer the following questions.

If interest rate falls by 25 bps, in the first time bucket, the likely impact on the NII for the bank
shall be:
+15.50 Cr
+0.50 Cr--
Overall impact will be nil
+0.05 Cr
H
ak
In terms of extant RBI guidelines on ALM, the maximum non-sensitive assets, a bank can have in
percentage to total assets is.
a 25%
b 10%
c no such restriction by RBI--
d 20%
p
The total rate sensitive assets for the bank is Rs.

6500
6200--
6300
ee
6000
In rising interest scenario, the bank will have a impact of interest rate changes on NII:
a favorable --
b adverse
c insufficient input
D
d neutral

Dec 2017
The International Bank, provides following data regarding rate sensitive assets and liabilities of the
bank as on 31 Mar 2010. The NII spread in percentage terms for the bank is 2.00%.
Time Buckets Assets Liabilities Gap Cumulative gap
1 to 28 days 2100 2400 -300 -300
da
29 days to 3 2400 2200 200 -100
months
3-6 months 3100 2700 -600 -700
6-12 months 1200 1400 -200 -900
1-3 years 30 500 -200 -1100
3-5 years 800 300 500 -600
oo
Over 5 years 900 100 800 200
Non sensitive 800 1000 -200 0
Total 11600 11600 0
Using the details given below, answer the following questions.
If interest rate falls by 30 bps, in the 3rd time bucket (3-6months), the likely impact on the NII for
the bank shall be:
+18.00 Cr
+9.00 Cr
- 18.00 Cr
+1.80 Cr--
H
ak
In terms of extant RBI guidelines on ALM, the minimum non-sensitive assets, a bank must have in
percentage to total assets is.
a 15%
b 5%
c 1%
d no such restriction by RBI--
p
The total rate sensitive assets for the bank is Rs.

a 11600
b 11300
c 11100
ee
d 10800--
In declining interest scenario, the bank will have a __ impact of interest rate changes on NH:
a favourable
b adverse
c insufficient input
D
d neutral.--

Dec 2017
International Bank raised funds by ways of 91 days term deposit at 6% rate of interest. It has
following options to invest these funds:
(a) 91 days treasury bills @ 8%
(b) 91 days floating rate loan @ 8% with monthly re-pricing.
da
(c) 3 year term loan @ 8%.
If bank makes investment in 91 days treasury bills @ 8% and during the 91 days period, there is
1% increase in interest late, what will be change in the net interest income, on reinvestment after
91 days?
1%
0.5%
oo
no change--
inadequate information to take decision
If bank invests the funds in 91 days floating rate loan @ 8% with monthly repricing and there is
interest rate rise, what will be impact on net interest income of the bank.
NII will increase--
NII will decrease
No change in NII
information is inadequate. H
If bank invests the funds in 91 days floating rate loan @ 8% with monthly repricing and there is
interest rate fall, what will be impact on net interest income of the bank.
ak
N11 will increase
NH will decrease--
No change in NH
information is inadequate.
If hank invests these funds in a 3 year term loan @8%, what will be impact on net interest income
of the bank, if there is increase in interest rates. -
NII will increase
p
NII will decrease--

No change in NII
ee
If bank invests these funds in a 3 year term loan @8%, what will be impact on net interest income
of the bank, if there is fall in interest rates.
NII will increase--
NII will decrease
No change in NII
D
information is inadequate

Dec 2017
International Bank raised funds by way of 182 days term deposit at 7% rate of interest. It has
following options to invest these funds:
(a) 182 days treasury bills @ 9%
(b) 182 days commercial paper at floating rate of @ 9% with monthly repricing.
da
(c) 3 year term loan @ 9%.
If the bank makes investment in 182 days treasury bills @ 9% and during the 182 days period,
there is 1% increase in interest rate, what will be change in the net interest income, on reinvestment
after 182 days?
B 2°/0
b 1% l
oo
c 0.5%
d no change .--
If the bank invests the funds in 182 days floating rate commercial paper @ 9% with monthly
repricing and there is interest rate rise, what will be impact on net interest income of the bank.
NII will increase--
NII will decrease
No change in NII
information is inadequate. H
If bank invests the funds in 182 days floating rate commercial paper @ 9% with monthly repricing
and there is interest rate fall, what will be impact on net interest income of the bank.
ak
NH will increase
NII will decrease--
No change in NII
of the bank, if there is increase in interest rates.
NII will increase .
p
NII will decrease--

No change in NII
ee
of the bank, if there is fall in interest rates.
a NII will increase--
b NH will decrease
c No change in NII
D
d information is inadequate

Dec 2017
You are provided the following information about the no. of loan accounts with different rating, in
International Bank as on Mar 31, 2009 and Mar 31,2010.
Rating 31Mar 2009 31 Mar 2010
AAA AA+ AA A+ A BBB C Default
da
AAA 100 70 16 4 4 2 2 2
AA+ 100 10 10 14 10 2 2 2
AA
A+
A 200 20 160 12 4 4
BBB 400 20 240 60 80
oo
C 60 10 40 10
Default
What is the %age of AAA rated borrower that remained at the same rating level during the
observation period?
70% --
65%
60%
d 55%
H
What is the no. of AAA rated accounts as at the end of observation period:
100
80--
ak
70
60
What is the percentage of migration of borrowers from A and BBB category to default category
1%, 20%
2%, 20%--
1°/o, 10°/0
p
2%, 10%
What is the percentage of migration of loan accounts from C rated to default category?
10°/o
ee
12.50%
15.5%
16.7%--
What is the total no. of borrower in the default category at the beginning and end of the observation
period?
D
nil, 80.
nil, 90
nil, 96--
inadequate information to answer the question

Dec 2017
Calculate the percentage for migration of AA+ account to AA category.
10%
12%
14%--
da
16%
What is the percentage of BBB category accounts, that did not change their category during the
observation period?
70%
60%--
50%
oo
40%
08 What is the percentage of A category accounts that were upgraded to A+ category?

10%--
12.5%
15°/0
d 17.5%
AAA AA+
H
You are provided the following information about the no. of loan accounts with different rating, in
international Bank as on Mar 31, 2009 and Mar 31,2010
Rating 31Mar 2009
AA A+
31 Mar 2010
A BBB C Default
ak
AAA 200 150 10 12 14 8 6 4
AA+
AA 50 4 6 32 4 2 2
A+ 100 1 16 80 3
A
BBB 400 20 20 330 20 10
C 100 20 60 20
p
Default
Based on this information, answer the following questions.

What is the percentage of AA rated and BBB rated account that retained their existing rating:
ee
a 64%, 85°/o
b 64%, 82.5%--
c 65.5%, 80%
d 60%, 78%
What is the no. of A+ account at the end of observation period?

D
a 100
b 110
c 118 --
d information inadequate

Dec 2017
What is the change percentage in no. of accounts in AAA category?
a 20% increase
b 22.5% decrease
c 24% decrease
da
d 25% decrease--
What is the percentage of account in all categories that have been shifted to default category?
a 5.4% --
b 6.2%
c 6.8%
d 7.5%
oo
What is the Percentage of AAA category accounts that has been shifted to BBB and AA category?
a 3%, 6% --
b 3%, 5%
c 4%, 6%
d 4%, 5%
b 17.5%
c 20% --
d 25%
H
What is the percentage change in AA category accounts?
a 15%
ak
In which category of accounts, the migration has been highest (in % age terms) during the
observation period?
a AAA
b AA
c BBB
d C--
p
In which category of accounts, the migration has been lowest, during the observation period?
aC
b BBB
ee
c A+ --
d AA
D

Dec 2017
International Bank has
paid up capital of Rs.400 Cr,
free reserves of Rs.300 Cr,
provisions and contingencies reserves Rs.200 Cr,
da
revaluation reserve of Rs.300 Cr,
Perpetual non-cumulative preference shares of Rs.100 Cr,
subordinated debt of Rs.300 Cr.
The risk weighted assets for Credit and operational risk are Rs.10000 Cr and for market risk
Rs.4000 Cr.
Based on the above information, answer the following questions?
oo
What is the amount of Tier-1 capital?
a 900 Cr
b 800 Cr--
c 750 Cr
d 610 Cr
Calculate the amount of Tier -2 capital?

a 900 Cr
b 800 Cr
c 750 Cr
d 610 Cr--
H
ak
Calculate the amount of capital fund.
a 895 Cr
b 1255 Cr
c 1410 Cr--
d 1675 Cr
What is the capital adequacy ratio of the bank?

p
a 9%
b 9.65%
c 10.05%
ee
d 10.07%--
What is amount of minimum capital to support Credit and operational risk?

lire?
900 Cr --
950 Cr
D
1000 Cr
1250 Cr

Dec 2017
What is the amount of minimum Tier 1 and maximum Tier 2 to support the Credit and operational
risk?
900 Cr, 900 Cr
600 Cr, 900 Cr
da
600 Cr, 300 Cr --
300 Cr, 450 Cr
What is the amount of Tier 1 capital fund, to support market risk?

250 Cr
200 Cr--
150 Cr
oo
185 Cr
What is the amount of Tier -2 capital fund, to support market risk?

410 Cr--
350 Cr
250 Cr
160 Cr
International Bank has

paid up capital of Rs.800 Cr,
free reserves of Rs.600 Cr,
H
provisions and contingencies reserves Rs.400 Cr,
ak
revaluation reserve of Rs.600 Cr,
Perpetual non-cumulative preference shares of Rs.200 Cr,
subordinated debt of Rs-.600 Cr.
The risk weighted assets for Credit and operational risk are Rs.20000 Cr and for market risk
Rs.8000 Cr.
Based on the above information, answer the following questions?

p
What is the amount of Tier-1 capital?

a 1800 Cr
b 1600 Cr--
ee
c 1500 Cr
d 1220 Cr
Calculate the amount of Tier2 capital?

a 1800 Cr
b 1600 Cr
D
c 1500 Cr
d 1220 Cr --

Dec 2017
Calculate the amount of capital fund.
a 1790 Cr
b 2510 Cr
c 2820 Cr --
da
d 3350 Cr
What is the capital adequacy ratio of the bank?

a 9%
b 9.65%
c 10.05%
d 10.07%--
oo
What is amount of minimum capital to support Credit and operational risk?
a 1800 Cr--
b 1900 Cr
c 2000 Cr
d 2500 Cr
b 1200 Cr, 1800 Cr

c 1200 Cr, 600 Cr --
d 600 Cr, 900 Cr
H
What is the amount of minimum Tier 1 and Tier 2 to support the Credit and operational risk?
a 1800 Cr, 1800 Cr
ak
What is the amount of Tier -1 capital fund, to support market risk?
a 600 Cr
b 400 Cr--
c 300 Cr
d 270 Cr
What is the amount of Tier-2 capital fund, to support market risk?

p
a 320 Cr
b 500 Cr
c 700 Cr
ee
d 820 Cr--
D

Dec 2017
International Bank provides following information:
Rs. In Cr 1st Year 2nd Year

Net profit 120 150
da
Provisions 240 290
Staff expenses 280 320
Other operating expenses 160 240
Other income 320 460
Based on the above information, answer the following questions What is the amount of capital
oo
charge for operational risk, on the basis of 1st year results alone as per Basic indicator approach.
a 100 Cr
b 120 Cr --
c 150 Cr
d 135 Cr
What is the amount of capital charge for operational risk, on the basis of 2 year results alone as per
Basic indicator approach.
a 100 Cr
b 120 Cr
c 150 Cr --
d 135 Cr
H
ak
What is the amount of capital charge for operational risk, on the basis of 1 and 2 year results as per
Basic indicator approach.
a 100 Cr
b 120 Cr ,
c 135 Cr --
d 150 Cr
p
What is the amount of risk weighted assets for operational risk as per Basel II recommendations,
on the basis of 1st year results alone, as per Basic indicator approach?
a 1500 Cr --
b 1687.50 Cr
ee
c 1875 Cr
d Inadequate data--
on the basis of 2nd year results alone?
a 1500 Cr
D
b 1687.50 Cr
c 1875 Cr --
d Inadequate data

Dec 2017
What is the amount of risk weighted assets for operational risk as per Basel I1 recommendations,
on the basis of 1st year and 2nd year results?
a 1500 Cr
b 1687.50 Cr--
da
c 1875 Cr
d Inadequate data
International Bank provides following information:
oo
Rs. in Cr 1st Year 2nd Year
Net profit 300 400
Provisions 200 300
Staff expenses 300 400
Other operating expenses 200 300
Other income 400 600
150 Cr--
180 Cr
210 Cr
H
What is the amount of capital charge for operational risk, on the basis of 1st year results alone.
120 Cr
ak
What is the amount of capital charge for operational risk, on the basis of 2nd year results alone.
120 Cr
150 Cr
180 Cr
210 Cr-
p
What is the amount of capital charge for operational risk, on the basis of 1st and 2nd year results.
120 Cr
150 Cr
180 Cr --
ee
210 Cr
on the basis of 1st year results alone?
1875 Cr--
2625 Cr
D
2250 Cr
d Inadequate data

Dec 2017
on the basis of 2nd year results alone?
1875 Cr
2625 Cr--
da
c 2250 Cr
d Inadequate data
on the basis of 15th year and 2nd results?
a 1875 Cr
b 2625 Cr
oo
c 2250 Cr --
d Inadequate data
The assets side of balance sheet of International Bank provides the following information:
Fixed Assets -500 Cr,
House Loans- Rs.3000 Cr H

Investment in Central govt. securities -Rs.5000 Cr.
In standard loan accounts, the Retail loans -Rs.3000 Cr,
(all individual loans below Rs.30 lac and fully secured by mortgage),
Other loans -Rs.10000 Cr.
Sub-Standard secured loans —Rs.500 Cr,
ak
Sub-Standard unsecured loans --Rs.150 Cr,
Doubtful loans Rs.800 Cr
(all DF-1 category and fully secured)
other assets- Rs.200 Cr.
Based on this information, by using Standard Approach for Credit risk, answer the following
questions.
p
What is the amount of risk weighted assets for retail loans?

Rs.3000 Cr
Rs.2500 Cr
ee
Rs 2250 Cr--
Zero, as retail loans are risk free
What is the amount of risk weighted assets for housing loans?

a Rs.2000 Cr
b Rs.1800 Cr--
D
c Rs.1500 Cr
d Rs.1000 Cr

Dec 2017
What is the amount of risk weighted assets for investment in govt. securities
a Rs.5000 Cr
b Rs.2500 Cr
c Rs. 1000 Cr
da
d nil--
What is the amount of risk weighted assets for sub—standard secured accounts?
a Rs.250 Cr
b R5500 Cr
c Rs.750 Cr --
d Rs.1000 Cr
oo
What is the amount of risk weighted assets for sub—standard unsecured accounts? ‘
a Rs.75 Cr
b Rs.112.50 Cr
c Rs.150 Cr --
d Rs.225'cr
b Rs.600 Cr
c Rs,800 Cr --
d Rs.1600 Cr
H
06 What is the amount of risk weighted assets for doubtful accounts?
a Rs.400 Cr
ak
The assets side of balance sheet of International Bank provides the following information:
Fixed Assets -600 Cr,
Investment in Central govt. securities -Rs.6000 Cr.
In standard loan accounts, the Retail loans -Rs.4000 Cr,
House Loans-Rs. 1000 Cr
(all individual loans above Rs.30 lac and properly secured by mortgage),
Other loans -Rs.8000 Cr.
p
Substandard secured loans —Rs. 400 Cr,

Substandard unsecured loans Rs.100 Cr,
Doubtful loans Rs.500 Cr
ee
(all DF-3 category and fully secured )

other assets- Rs.100 Cr.
Based on this information, by using Standard Approach for Credit risk, answer the following
questions.
D
What is the amount of risk weighted assets for retail loans?

a Rs.3000 Cr--
b Rs.2500 Cr
c Rs.2250 Cr
d Zero, as retail loans are risk free

Dec 2017
What is the amount of risk weighted assets for housing loans?
a Rs.500 Cr
b Rs.750 Cr--
c Rs. 1000 Cr
da
d Rs.1250 Cr
What is the amount of risk weighted assets for investment in govt. securities
B Rs.5000 Cr
b Rs.2500 Cr
c Rs.1000 Cr
d nil--
oo
What is the amount of risk weighted assets for sub-standard
secured accounts?
a Rs.200 Cr
b Rs.400 Cr
c Rs.600 Cr --
d Rs.900 Cr
unsecured accounts?
a Rs.100 Cr --
b Rs.112.50 Cr
H
What is the amount of risk weighted assets for substandard
ak
c Rs.150 Cr
d Rs.250 Cr
What is the amount of risk weighted assets for doubtful

a Rs.250 Cr --
b Rs.400 Cr
c Rs.500 Cr
d Rs.1000 Cr
p
ee
D

Dec 2017
The financial results of International Bank as on Mar 31, 2010 provide the following information:
Interest earned - Rs.24000 Cr,
other non-interest income -Rs.3600 Cr,
profit on sale of fixed assets -Rs.240 Cr,
da
income on sale of 3rd party
products -Rs.160 Cr,
interest paid -Rs.15600 Cr,
operating expense -Rs.7600,
provisions Rs.3200 Cr.
On the basis of given information, answer the following questions.
oo
What is the amount of operating profit?
a Rs. 1600 Cr
b Rs.4800 Cr--
c Rs.6400 Cr
b Rs.15600 Cr
b Rs.12000 Cr--
b Rs.8400 Cr
H
What is the amount of gross income as per Basic Indicator Approach for operational risk?
8 Rs.24000 Cr-
ak
What is the amount of capital charge for operational risk under basic indicator approach?
a Rs.1200 Cr
b Rs.1800 Cr--
c Rs.2400 Cr
d Rs.3000 Cr
What is the amount of risk weighted assets for operational risk under basic indicator approach?
p
a Rs.18000 Cr
b Rs.20000 Cr
c Rs.22500 Cr .--
ee
d RS-25500 Cr
D

Dec 2017
The financial results of International Bank as on Mar 31, 2010 provide the following information:
Interest earned - Rs.28000 Cr,
other non-interest income -Rs.4700 Cr,
profit on sale of fixed assets - Rs.350 Cr,
da
income on sale of 3rd party products -Rs.250 Cr,
interest paid -Rs.17800 Cr,
operating expense -Rs.8800,
provisions Rs.1100 Cr.
On the basis of given information, answer the following questions.
oo
01 What is the amount of operating profit?
a Rs.5600 Cr --
b RS.5800 Cr
c Rs.6200 Cr
d Rs. 6700 Cr
b Rs.15600 Cr
c Rs.16000 Cr
d Rs.15400 Cr
H
02 What is the amount of gross income as per Basic Indicator Approach for operational risk?
a Rs. 14900 Cr --
ak
What is the amount of capital charge for operational risk under basic indicator approach?
a Rs.1800 Cr
b Rs.2075 Cr
c Rs.2235 Cr --
d Rs.2430 Cr
What is the amount of risk weighted assets for operational risk under basic indicator approach?
a Rs.18540.50 Cr
p
b Rs.22507.75 Cr
c Rs.22511.50 Cr
d Rs.27939.50 Cr--
ee
D

Dec 2017
Popular Bank has provided following details:
Tier 1 capital = 2000 Cr
Tier 2 capital = 2400 Cr
Risk weighted assets for Credit risk = Rs.20,000 Cr
da
Risk weighted assets for market risk = Rs.1000 Cr
Capital charge for operational risk = Rs.600 Cr
Based on the given information, please calculate the amount of total risk weighted assets, if the
CAR is 9%:
a Rs.21600 Cr
b Rs.23200 Cr
oo
c Rs.33457 Cr
d Rs.37779 Cr--
Based on the given information, please calculate the amount of Tier I capital adequacy ratio of the
bank ‘ _ .
a 6%
b 5.81%
c 5.29% --
d 4.89% H
Based on the given information, please calculate the total capital to risk assets ratio; -
9%
ak
10.59% --
11.12%
11.67%
p
ee
D

Dec 2017
As per RBI, guidelines on ALM , Capital and reserves are to be placed in over 5 years bucket,
saving bank and Current Deposits may be classified into volatile and core potions. Savings Bank
(10%) and current (15%) Deposits are generally withdraw able on demand . This portion may be as
treated as volatile. While volatile portion can be placed in the time bucket 14 days, the core portion
da
may be placed in 1- 3 years bucket The term deposits are to be placed respective maturity
buckets.
The international Bank has following liabilities as at 31 Mar 2010

capital- Rs.1180 Cr,
Reserves - Rs.12000 Cr.
Current account '- Rs.1000 Cr,
oo
Saving Bank - R.s.'4000 Cr,
Term deposits 1 month maturity bucket —Rs.400 Cr,
1 to less than 3 month maturity bucket - Rs.800 Cr,
3 month to less than 6 maturity bucket - Rs.1200 Cr,
6 month to less than 12 maturity bucket - Rs.2000 Cr,
1- year to less than 3 year maturity bucket - Rs.1200 Cr,
Borrowing from RBI-Rs.400 Cr. H

3 year to less than 5 year maturity bucket - Rs.600 0' and
above 5 year maturity bucket - Rs.800 Cr.
Based on the given information, answer the following questions:
What is the amount of current account deposit that can be placed in 14 days bucket?
ak
a Rs.100 Cr
b Rs.150 Cr --
c Rs.200 Cr
d nil
What is the amount of saving bank deposit that can be placed in 14 days bucket?
B R5.100 Cr
b Rs.200 Cr
p
c Rs.300 Cr
d Rs.400 Cr--
ee
What is the amount of current account deposit that can be placed in 1-3 year bucket?
a Rs.100 Cr
b Rs.400 Cr
c Rs.800 Cr
d Rs.850.Cr --
D
What is the amount of saving bank deposit that can be placed in ~ 1~3 year bucket?
a Rs.4000 Cr
b Rs.3600 Cr--
c Rs.32DO Cr
d Rs.3000 Cr

Dec 2017
What is the total of amount of term deposit that will be placed in various maturity buckets up to
less than 12 months?
a 2400 Cr
b 2800 Cr
da
c 3200 Cr
d 4400 Cr--
Sanded Bank has following assets and liabilities in its balance sheet in its on Mar 31, 2010:
Capital-Rs.4000 Cr,
Reserves - Rs.24000 Cr,
Current accounts - Rs.120000 Cr,
oo
Saving Bank accounts - Rs. 120000 Cr,
Term deposits - Rs. 120000 Cr,
Borrowing from RBI - Rs.12000 Cr,
cash balances - Rs.27600 Cr,
balances with other banks - Rs.60000 Cr,
investment in securities -Rs. 60000 Cr,
cash Credit -Rs. 80000 Cr,
term loans - Rs.80000
fixed assets - Rs. 12400 Cr. H
Total assets and total liabilities-Rs 400000
The term loans have fixed rate of interest. Based on this information answer the following
ak
questions.
What is the amount of interest rate sensitive assets?

Rs 252000
Rs.320000
Rs.360000 --
Rs.400000
p
What is the amount of interest rate sensitive liabilities?

Rs 252000--
Rs.320000
ee
Rs.360000
Rs.400000
In this case, how much and what type of gap in rate sensitive assets and liabilities, the bank is
having?
Rs.108000 Cr, Negative 930
D
Rs.108000 Cr, Positive gap

Rs.120000 Cr, negative gap--
information is inadequate

Dec 2017
What is the amount of Tier-1 capital of the bank?
a Rs.4000 Cr
b Rs.24000 Cr
c Rs.28000 Cr--
da
oo
Modem Bank has the following assets liabilities (other than capital and reserves) in its balance
sheet:
current deposits Rs.1500
Saving deposits Rs.1000 Cr,
term deposits Rs-3000 Cr,
cash in hand Rs-300cr
call money Rs.400 Cr
cash Credit loans Rs.4000
There is a change in interest rates under
saving bank increase from 3.5% to 4%
FD from 7 5% to 8 5%
Call money from 5% to 6% and
H
ak
cash Credit from 12% to 12.5%
Calculate the adjusted gap in repricing assets and liabilities

Rs.200 Cr negative
Rs.200 Cr positive
Rs.400 Cr negative--
Rs.400 Cr positive
p
On the basis of change in interest rate, calculate the amount of as per standard gap method in re-
pricing assets and liabilities.
a Rs.3000 Cr
ee
b Rs.3500 Cr--
c Rs.2500 Cr
d Rs.240O Cr--
On the basis of change in interest rate, calculate the amount of repricing assets, as per standard gap
method in repricing assets and liabilities.
D
a Rs.3000 Cr
b Rs.350O Cr
c Rs.2500 Cr --
d Rs.2400 Cr

Dec 2017
On the basis of above information, calculate the standard gap of the bank in re—pricing assets and
liabilities:
a 1000 Cr negative
b 1000 Cr positive
da
C 1100 Cr negative
d 1100 Cr positive
The bank has following assets and liabilities in its balance sheet Mar 31, 2010:
Capital Rs.4400
Reserves Rs.8600 Cr,
Demand deposits - Rs.16000
oo
Bank deposits Rs.82000 Cr,
Term deposits -Banks Rs.5200
Term deposits -Public Rs. 123200 Cr
Borrowing from financial UIIJ - Rs.800 Cr,
NABARD refinance -Rs.600 Cr,
Bills payable Rs.200 Cr,
Interest accrued Rs.80 Cr,
Subordinated debt Rs.800 Cr
suspense account Rs.120 Cr.
Total liabilities Rs.252000 Cr.
H
Based on this information, answer the following questions.
ak
What is the amount of liabilities that will not be included in net demand and time liabilities for the
purpose of CRR calculation?
a R5.13000 Cr
b Rs.13600 Cr
c Rs.18200 Cr
d Rs.18B00 Cr--
What is the amount of Net demand and time liabilities (NDTL), on which the CRR is to be
p
maintained?
a Rs.233200 Cr --
b ' Rs.238600 Cr
ee
c Rs.248300 Cr
d Rs.252000 Cr
At 5% of ND1i_ prescribed rate for CRR by RBI, what will be the average balance to be
maintained by the bank with RBI?
a R$.10960 Cr
D
b R5.11660 Cr--
c Rs.11860 Cr
d Rs.12960 Cr

Dec 2017
What is the minimum balance in the CRR account with RBI, in the above situation which should
be available if the minimum requirement is 90% of average fortnightly balance?
a Rs.11712 Cr
b Rs.9514 Cr
da
c Rs.10494 Cr --
d Rs.8092 Cr
While calculating the net demand and time liabilities, for CRR purpose, which of the following
liability is to be excluded?
capital and reserves
refinance from NABARD, NHB, SIDBI
oo
interbank deposits with original maturities of 15 days or above
d all the above--
International bank has maintained following balance with RBI in its CRR account for the fortnight
ended Feb 2017
1st 10 days- Minimum balance of 70%
11th to 12th day Rs 1600 Cr
H
The average balance required to maintained is Rs 700cr
On product basis, what is the CRR balance for fortnight, to comply with the CRR requirement
a Rs.10500 Cr
ak
b Rs.9800 Cr --
c Rs.6880cr
d inadequate information.
On product basis, what balance has been maintained by the bark during first 10 days of the
fortnight
a Rs.4900 Cr--
b Rs.5600 Cr
p
c Rs. 6300 Cr
d Rs.7000 Cr
ee
On product basis, what balance has been maintained by the bark on 11th and 12th day
Rs.1600 Cr
Rs.3200 Cr --
Rs.3600 Cr
Rs.4800 Cr
D
On product basis, what balance has been maintained by the bank for 1st 12 days for of the
fortnight
Rs.3200 Cr
Rs.4900 Cr
Rs.4900 Cr --
Rs.9800 Cr

Dec 2017
How much minimum balance the bank will be required to maintain 0n 13th and 14th day to
ensure compliance of CRR requirement during the fortnight
Rs.700 Cr
da
Rs.760 Cr
Rs.810 Cr
Rs.850 Cr --
Intentional Bank has provided following information on its advances portfolio
Rating AAA AA A BBB BB B CCC
oo
3 year 0.04 % 0.15% 0.30% 1.10% 6.0% 25% 40%
5 year 0.10 % 0.40% 0.60% 2% 10% 35% 45%
The base rate of the bank = 11% which is charged for AAA category borrowers for a 3 year loan.
The load factor is added to base rate by 1% for AA, 2% for A, 3% for BBB, 4% for BB accounts.
The load factor is further increased by 0.5% for each additional maturity year over 3 years.
H
Based on this information, answer the following questions?
01 Which of the following loans shall have the highest expected loss, if there is no amortization
and entire loan is payable on maturity only.
Rs.600 lac - 3 year loan to A rated borrower
Rs.50 lac - 5 year loan to BB rated borrower
ak
Rs.400 lac - 3 year loan to BBB rated borrower
Rs.2500 lac - 5 year loan to AA rated borrower--
Banks has given a loan of Rs.400 lac to an A rated company for S years out of which 2 year period
has already lapsed and there has been no default. Present outstanding is Rs.300 lac in the loan.
EAD is 100% and LGD 50%. What is the expected loss on this account?
Rs.45000
p
Rs.54000
Rs.63000
Rs.72000--
ee
Taking into account the above risk policy of the bank, which loan shall earn the lowest return?
BB - 3 year --
BBB - 5 year
A - 5year
AAA - 3year
D
Bank wants to sanction a loan to AA rated borrower which is repayable in 5 years. What interest
rate should be charged by the bank?
11.0%
11.5%
12.5%
13%--

Dec 2017
As on Mar 31.3.2009, bank had 200 BBB rated account out of which 10% account migrated to
default category by 31.3.2010. ‘ What is increase in no. of accounts in default category?
20 --
da
25
30
35
Intentional Bank has provided following information on its advances portfolio
oo
3 year 0.05 % 0.20% 0.40% 1% 5% 20% 50%
5 year 0.8 % 0.30% 0.70% 1.80% 8% 40% 60%
The base rate of the bank = 12% which is charged for AAA category borrowers for a 3 year loan.
The load factor is added to base rate by 1% for AA, 2% for A, 3% for BBB, 4% for BB accounts.
H
The load factor is further increased by 1% for each additional maturity year over 3 years.
Based on this information, answer the following questions?
Which of the following loans shall have the highest expected loss, if there is no amortization and
entire loan is payable on maturity only.
ak
Rs.2600 lac -5 year loan to A rated borrower--
Rs.60 lac -5 year loan to BB rated borrower
Rs.300 lac -3 year loan to BBB rated borrower
Rs.500 lac - 3 year loan to AA rated borrower
Banks has given a loan of Rs.500 lac to an A rated company for 4 years out of which 1 year period
has already lapsed and there has been no default. Pnwerit outstanding is Rs.400 lac in the loan.
p
EAD is 100% and LGD 50%. What is the expected loss on this account?
a Rs.80000 --
b Rs.71000
c Rs.63000
ee
d Rs.52000
Taking into account the risk policy of the bank as indicated above, which loan shall earn the
highest rectum?
a BB-3year
b BBB-5year--
D
c A - 5 year
d . AAA - 3 year

Dec 2017
Bank wants to sanction a loan to BBB rated borrower which is repayable in 5 years. What interest
rate should be charged by the bank?
a 12.0%
b 14%
da
c 16%
d 18%--
As on Mar 31.3.2009, bank had 300 BBB rated account out of which 12% account migrated to BB
category by 31.3.2010. What is decline in no. of accounts in default category?
a 20
b 25
oo
c 30
d 36--
The bank wise maturity profile of select deposit category of banks in %age terms of select maturity
buckets, as on Mar 31, 2010 is as under: (figures in %age)
Liability/Asset
Deposits
Up to 1 year
Over 1 to 3 year
100
33
37
PSU Bank
H100
54
33
Old Private
Bank
52
44
New Pvt Bank
100
Foreign Bank
100
44
44
ak
Over 3 to 5 year 13 6 3 4
Over 5 years 17 7 1 8
There is decline in rate of interest of 2% for a period up to 1 year. The bank group which will gain
most is:
PSU Bank
Old Private Banks --
p
New Private Banks

Foreign Banks
There is decline in rate of interest of 2% for a period up to 1 year. The bank group which will gain
ee
least is:
PSU Banks --
Old Private Banks
New Private Banks
Foreign Banks .
D
There is increase in rate of interest of 1% for deposit with a period above 1 year to 5 years. The
bank group which will be most affected adversely is:
PSU Banks--
Old Private Banks
New Private Banks
Foreign Banks

Dec 2017
There is increase in rate of interest of 1% for deposit with a period above 1 year to 5 years. The
bank group which will be least affected adversely is:
PSU Banks
da
Old Private Banks--
New Private Banks
Foreign Banks
The bank group which is more relaying on long term deposits above 3 years.
PSU Banks--
Old Private Banks
oo
New Private Banks
Foreign Banks
Liability/Asset
Deposits
Up to 1 year
Over 1 to 3 year
Over 3 to 5 year
100
81
15
2
PSU Bank
H100
84
3
6
Old Private
Bank
51
45
2
New Pvt Bank
100
84
11
2
Foreign Bank
100
ak
Over 5 years 2 7 2 2
There is increase in rate of interest of 2% for a period over 5 years. The bank group which will lost
most is:
PSU Banks
Old Private Banks--
p
New Private Banks

Foreign Banks
There is increase in rate of interest of 2% for a period over 1 years up to 3 years. The bank group
ee
which will loose most is:

PSU Banks
Old Private Banks
New Private Banks--
Foreign Banks
D
There is decrease in rate of interest of 0.5% for a period of over 3 years to 5 years. The bank group
which will gain most is:
PSU Banks
Old Private Banks--
New Private Banks
Foreign Banks

Dec 2017
There is decrease in rate of interest of 0.5% for a period of up to 1 year. The bank group which will
gain least is:
PSU Banks
da
Old Private Banks
New Private Banks--
Foreign Banks
The bank group which is depending most on over 3 years borrowing is:
PSU Banks
Old Private Banks--
oo
New Private Banks
Foreign Banks
The bank—wise maturity profile of select deposit category of banks in %age terms of select
maturity buckets, as on Mar 31, 2010 is as under: (figures in %age)
Liability/Asset
Deposits
Up to 1 year
Over 1 to 3 year
Over 3 to 5 year
100
39
37
11
PSU Bank
H100
42
32
6
Old Private
Bank
New Pvt Bank
100
42
31
12
54
18
4
Foreign Bank
100
ak
Over 5 years 13 20 15 24
There is increase in rate of interest of 0.5% for a period of up to 1 year. The bank group which will
gain most is:
PSU Banks
Old Private Banks
New Private Banks
p
Foreign Banks--
There is increase in rate of interest of 0.5% for a period of up to 1 year. The bank group which will
gain least is:
ee
PSU Banks--
Old Private Banks
New Private Banks
Foreign Banks
There is decrease in rate of interest of 1.5% for a period of above 1 year to 3 years. The bank
D
group which will loose least is:

PSU Banks
Old Private Banks
New Private Banks
Foreign Banks--

Dec 2017
There is decrease in rate of interest of 1.5% for a period of above 1 year to 3 years. The bank group
which will loose most is
PSU Banks--
Old Private Banks
da
New Private Banks
Foreign Banks
If there is upward movement in interest rate scenario for loans, the bank group having highest
%age of loans due for repricing for up to one year term is:
PSU Banks
Old Private Banks
oo
New Private Banks
Foreign Banks --
Liability/Asset
Deposits
Up to 1 year
Over 1 to 3 year
100
13
16
PSU Bank
H 100
14
13
Old Private
Bank
New Pvt Bank
100
53
42
Foreign Bank
100
45
34
ak
Over 3 to 5 year 22 9 2 5
Over 5 years 49 64 3 16
There is decrease in average yield of 0.75% for up to 1 year maturity. The bank group which will
loose most is:
PSU Banks
Old Private Banks
p
New Private Banks--

Foreign Banks
There is decrease in average yield of-0.60% for over 5 year M maturity. The bank group which will
ee
loose least is:

PSU Banks
Old Private Banks
New Private Banks--
Foreign Banks
D
There is increase in average yield of 1.05% for over 5 years maturity. The bank group which will
gain most is:
PSU Banks
Old Private Banks--
New Private Banks
Foreign Banks

Dec 2017
There is increase in average yield of 1.05% for over 5 years maturity. The bank group which will
gain least is:
PSU Banks
da
Old Private Banks
New Private Banks--
Foreign Banks
Assume that most of the investment comprise investment in govt. bonds and have negligible
investments in shares and debentures. There is increase in market rate of interest of 1%. The
highest diminution in the value of investment will be faced by i in the over 5 year category:
oo
PSU Banks
Old Private Banks--
New Private Banks
Foreign Banks
H
Imitational Bank is having following investments in other banks:
Rs.200 Cr in an RRB (CAR 8%) in the form of refinance for priority sector on-lending.
Rs.50 Cr. in a scheduled cooperative bank (CAR 5%), in the form of 91 days’ certificate of deposit
Rs.100 Cr in a nationalized bank (CAR 4.5%) in inter-bank participation certificate of 180 days
with risk sharing arrangement, representing priority sector loans. ‘
ak
Rs.300 Cr lent in interbank notice money market to a State Bank group bank (CAR 10.2%) for 10
days.
RBI rules on calculation of risk weight assets relating to claims on scheduled commercial banks,
provide as under:
a) If CAR is 9% or above, 100% for investments and 20% for other claims.
b) If CAR is between 6% to less than 9%, 150% for investments and 50% for other claims.
c) If CAR is between 3% to less than 6%, 250% for investments and 100% for other claims.
p
d) If CAR is between 0% to less than 3%, 350% for investments and 150% for other claims.
e) If CAR is negative, 625% for investments and 625% for other - claims.
ee
What is the amount of risk weighted asset for loan granted to RRB by the bank?
a Rs.200 Cr
b Rs.150 Cr
c Rs.100 Cr --
d Rs.40 Cr
D
What is the amount of risk weighted asset for investment made in Certificate of Deposit issued by
the cooperative bank?
a Rs.50 Cr --
b Rs.100 Cr
c Rs.200 Cr
d Rs.250 Cr

Dec 2017
What is the amount of risk weighted asset for investment made in with risk inter—bank
participation certificate of a nationalized bank?
a Rs.50 Cr
da
b Rs.100 Cr--
c Rs.200 Cr
d Rs.250 Cr
What is the amount of risk weighted asset for funds lent in notice money market by the bank?
Rs.60 Cr --
Rs.120 Cr
oo
Rs.150 Cr
Rs.300 Cr
What is the total amount of risk weighted assets, in all the four claims of the bank.
Rs.415 Cr
Rs.310 Cr--
Rs.260cr
Rs.250 Cr
H
ak
International bank is having following loan account:
(a) a cash Credit accounts in favour of of a medium enterprise, where sanctioned limit is Rs.100
lakh (which is not unconditionally cancellable) and where the drawn portion is Rs. 60 lakh and the
undrawn portion of Rs. 40 lakhs.
(b) a TL of Rs. 700 Cr is sanctioned or a large project which can be drawn down in different
stages over a 3 years period - Rs.150 Cr in Stage 1, Rs 500 Cr in Stage II and Rs. 350 Cr in Stage
III. Where the borrower
p
needs the bank's explicit approval for draw down under Stages II and III after completion of certain
formalities. The borrower as already drawn Rs. 50 Cr under Stage I.
ee
What Credit conversion factor will be used to convert the unavailed exposure into a fund based
exposure
a 20% --
b 50%
c 75%
d 100%
D
For the undrawn portion of Rs.40 lac, the risk weight value will be.
a Rs.40 lac
b Rs.25 lac
c Rs.20 lac
d Rs.8 lac --

Dec 2017
On the term loan, for application of Credit conversion factor, the undrawn portion will be taken
into account for:
1st stage only--
2nd and 3rd stage only
da
all the stages
entire amount
On the term loan, for application of Credit conversion factor, the undrawn amount that will be
taken into account is
a Rs.700 Cr
b Rs.550 Cr
oo
c Rs.150 Cr
d Rs.100 Cr--
If Stage I is scheduled to be completed within one year, the CCF value of undrawn amount of
Rs.100 Cr shall be: .
a Rs.20 Cr --
b Rs.50 Cr
c Rs.100 Cr
d Rs.150 Cr H
If Stage I is scheduled to be completed in a period of more than one year, what will be the CCF
value?
ak
a Rs.20 Cr
b Rs.50 Cr--
c Rs.100 Cr
d Rs.150 Cr
p
ee
D

Dec 2017
RBI rules regarding risk weights, as part of Basel II implementation, is provided as under
Long term claims on Corporates :
AAA AA A BBB BB & Unrated
da
Below
Risk 20% 30% 50% 100% 150% 100%
Weighted
Short term claims (CRISIL rated): .

A1+ = 20%, A1= 30%, A2 = 50%., A3 = 100% , A4 & 5 = 150%, unrated = 100%
oo
The bank has sanctioned following loans: . _
Term loan of Rs.200 Cr to finance a project in participation with other banks. The borrower has
Credit rating of A.
Corporate loan (for meeting working capital) repayable in 2years for Rs.100 Cr to a corporate
having Credit rating of AA for long term claims and P2 for short term claims.
H
Working capital limits of Rs.400 Cr to a large company on consortium basis, having long term
rating of AAA and short term rating of P1 from CRISIL
On the basis of given information, answer the following questions?

ak
For term loan of Rs.200 Cr, the risk weight value shall be:
a Rs.200 Cr
b Rs.150 Cr
c Rs.100 Cr --
d Rs.50 C
What is the risk weight value for the corporate loan of Rs.100cr?
a Rs.20 Cr
p
b Rs.30 Cr --
c Rs.50 Cr
d Rs.100 Cr
ee
What is the risk weight value for the working capital limit?
a Rs.50 Cr
b Rs.120 Cr--
c Rs.200 Cr
d Rs.400 Cr
D
What is the total risk weight value for all the three loans of the bank:
Rs.100 Cr.
Rs.200 or
Rs.250 Cr--
Rs.350 Cr

Dec 2017
What is the minimum amount of capital fund prescribed by RBI in India, which is required for the
above exposure?
a Rs.22.50 Cr --
da
b Rs.30 Cr
c Rs.31.75 Cr
d Rs.34.55 Cr
RBI rules relating to risk weight, as part of Basel II implementation, provide as under:
Specific risk capital charge for Corporate Bonds held by banks under HFT category:
oo
AAA to BBB rated : Residual maturity 6 months or less = 0.28% .
: More than 6 months up to 24 months = 1.14%
: Exceeding 24 months = 1.80%
BB and below : All maturities = 13.5%
Unrated (if permitted) : All maturities = 9%
H
The break-up of investment of International Bank in corporate. bonds in HFT category, is as under:
Rs.100 Cr - AAA rated bonds with residual maturity of 4 months
Rs.50 Cr - AA rated bonds with residual maturity of 13 months
Rs.50 Cr — A rated bonds with residual maturity of 4 months
Rs.20 Cr — B rated bonds with residual maturity of 3 months
Rs.10 Cr — unrated rated bonds with residual maturity of 7 months
ak
What is the amount of Specific risk capital charge for market risk on AA rated bonds as part of the
HFT securities?
0.14 Cr
0.57 Cr--
2.70 Cr
p
4.59 Cr
What is the amount of Specific risk capital charge for market risk on A rated bonds as part of the
ee
HFT securities?
0.14 Cr --
0.57 Cr
2.70 Cr
4.59 Cr
D
What is the amount of specific risk capital charge for market risk on B rated bonds as part of the
HFT securities?
0.14 Cr
0.57 Cr
2.70 Cr--
4.59 Cr

Dec 2017
What is the amount of Specific risk capital charge for market risk on all the bonds as part of the
HFT securities?
0.14 Cr
da
0.57 Cr
2.70 Cr
4.59 Cr--
Credit facility Sanctioned Outstanding Credit conversion factor for

Credit amount non-fund
oo
Cash Credit 500 300
Bills 100 50
Export loans 200 100
Term Loans 300 100
Financial Guarantees 100 80 100%
Performance Guarantees 100 100 50%
Stand by LC
Documentary Credit
Unconditional take out
finance
Conditional take out
finance
100
400
100
100
H 50
300
100
100
100%
20%
100%
50%
ak
Total 2000 1280
Balance amount of 200 of term loan to be withdrawn as Within one year 100 and after 1 year 100
In case of un-drawn portion. the exposure is to be taken as under:
1. Cash Credit = 20%..

p
2. TL to be withdrawn within one year = 20% and

3. TL to be withdrawn after one year = 50%.
The exposure for undrawn amount of fund based limits other than term loans to be taken at:
ee
20
50
70--
140
The exposure for undrawn amount of term loans to be taken at:

D
20
50
70--
140

Dec 2017
The amount of exposure for undrawn amount for fund based limit does not match on which of the
following: cash Credit, bills and export loans 70.
term loan to be withdrawn in one year 20
term loan to be withdrawn after one year 20--
da
total amount for non-withdrawn amount 140
What is the Credit equivalent of non fund based exposure in respect of letter of Credit:
a 130
b 110--
c 150
d 390
oo
What is the Credit equivalent of non-fund based exposure in respect of bank guarantees:
a 130 --
b 110
c 150
d 390
b 110
c 150--
d 390
H
What is the Credit equivalent of non fund based exposure in respect of take out finance:-
a 130
ak
What is the Credit equivalent of total non-fund based exposure:
a 130
b 110
c 150
d 390 --
What is the total exposure on account of the borrower:

p
2090
1280
1080--
ee
900
You are working as an Executive with International Bank. The MIS Department of the bank has
submitted the following data relating to the bank, from which you are required to estimate the
likely Capital Funds required by the Bank as on March, 31st, 2010 taking into account the Basel II
D
implementation compliance of RBI in India.
i) Risk-Weighted Assets for Credit Risk likely to be Rs.62,854 Cr

ii) Capital Allocation for Market Risk to be Rs.100 Cr
iii) For Operational risk, the following Data available.
The gross income of the bank is Rs.3600 Cr for 31.3.08

Dec 2017
Rs.4000 Cr for 31 3 09
Rs.4400 Cr for 31.3.10.
The bank is required to calculate Capital Charge for Operational Risk by Basic Indicator Approach.
You are required to take into account the Capital Adequacy prescription applicable to Indian Banks
da
for calculation of capital fund.
As per RBI directives, the Minimum Capital Adequacy Ratio and minimum Tier I capital the Bank
is required to maintain as on 31.03.2019 should be ___________ respectively
8% and 4.5%
9% and 6%
9% and 4.5% --
oo
12% and not specified
Based on the Gross Income given above, the likely Capital Charge as on March 31, 2010 to cover
Operational Risk under Basic Indicator Approach shall be:
(a) 475 Cr
(b) 540 Cr
(c) 590 Cr
(d) 600 Cr--
H
What is the total Capital Funds requirement of the bank, for covering Credit Risk as on March
31,2010 to comply Basel II norms
Rs.5656.86 Cr --
ak
Rs.6767.97 Cr
Rs.4848.87 Cr
Rs.4949.57 Cr
What is the minimum Tier I Capital Fund requirement of the bank for covering Credit Risk as on
March 31, 2010 to comply Basel II norms
a) Rs.3387.22 Cr
b) Rs.3467.43 Cr
p
c) Rs.3641.10 Cr
d) Rs.3771.24 Cr--
ee
You are working as an officer with International Bank. The MIS Department of the bank has
submitted the following data relating to the bank, from which you are required to estimate the
likely Capital Funds required by the Bank as on March, 31, 2010 taking into account the Basel II
implementation compliance of RBI in India.
i) Risk Weighted Assets for Credit Risk likely to be Rs.70,000 Cr

D
ii) Capital Allocation for Market Risk to be Rs.200 Cr

ii) For Operational Risk following data is available.
The gross income of the bank is Rs.1000 Cr for 31.3.08
Rs.5000 Cr for 31.3.09
Rs.6000 Cr for 31.3.10.

Dec 2017
The bank is required to calculate Capital Charge for Operational Risk by following Basic Indicator
Approach. You are required to take into account the Capital Adequacy prescription applicable to
Indian Banks for calculation of capital fund.
da
As per RBI directives, the Minimum Capital Adequacy Ratio and maximum Tier II capital, the
Bank is required to maintain as on 31.03.2010 should be respectively.
9% and 50% of capital fund--
9% and 100% of capital fund
oo
Based on the Gross Income given above, the likely Capital Charge as on March 31, Z010 to cover
Operational Risk under Basic Indicator Approach shall be:
750 Cr --
700 Cr
600 Cr
S00 Cr
Rs.5400 Cr
Rs.6000 Cr
Rs.6300 Cr --
H
What is the total Capital Funds requirement of the bank, for covering Credit Risk as on March
31,2010 to comply Basel II norms.
ak
Rs.6600 Cr
What is the minimum Tier I Capital Fund requirement of the bank, for covering Credit Risk as on
March 31,2010 to comply Basel II norms.
Rs.4200 Cr. --
Rs.3900 Cr
Rs.3600 Cr
Rs.3300 Cr
p
ee
D

Dec 2017
At International Bank, the Treasury Branch has the following data available on 31.12.2109. You
are required to prepare a structural liquidity statement as on Dec 31,2009. Additional information
for current and saving bank deposit volatility pattern given for the bank is as under. The max
volatility in current deposit over the last 3 years has been 15.3%. Hence bank has decided to treat
da
15.3% of CD as volatile and the balance portion as Core deposit. Similarly 8.60% is the volatility
in SB
Head of the account Amount Initial date Maturity date Re-pricing date
Fixed Deposit 100 28 Jan 2007 28 Jan 2010 Fixed
100 24 May 2004 24 Feb 2010 Fixed
50 19 Mar 2006 19 Mar 2011 Fixed
oo
50 08 Apr 2007 08 Apr 2010 Fixed
200 29 Mar 2008 29 Mar 2013 Fixed
200 30 Apr 2005 30 Apr 2011 Fixed
200 30 Mar 2004 30 Mar 2011 Fixed
100 30 Jul 2004 30 Jul 2010 Fixed
50 09 Apr 2006 09 Sep 2010 Fixed
Total
Interbank term borrowing
140
100
100
1390
50
H 10 Mar 2006
10 Mar 2006
10 Mar 2006
28 Oct 2009
10 Mar 2010
10 Dec 2010
10 Nov 2011
30 Jan 2010
Fixed
Fixed
Fixed
Fixed
Call money 20 29 Dec 2009 02 Jan 2010 Fixed
ak
Repo 30 29 Dec 2009 02 Jan 2010 Fixed
CD 150 29 Aug 2009 30 Jul 2010
SB Deposit 740
Current account 410
Total Liability 2790
The core part of current deposit which is to be shown in 1-3 years time bucket for the bank would
p
be Rs.
a 262.73
b 347.47--
c 363.64
ee
d 410
The amount of SB deposit balance to be shown in the time bucket 1-14 days would be Rs.
a 740
b 74
D
c 63.64--
d 111

Dec 2017
The interbank borrowing would be shown in the time bucket of:
a 1-14 clays
b 15-28 days
c It is out-side the structural liquidity statement
da
d 29 days to 3 months--
The total amount for the time bucket 1-14 days for the Treasury branch will be Rs...
a 170.37--
b 140.83
c 115.92
d 109.20
oo
The total amount falling under the time bucket of 1-3 years for the treasury branch shall be Rs...
a 1690.22
b 1676.36
c 1713.63 --
d 2790
H
International Bank analyzed the Operating Profits of 5 regions for last 5 years. The Standard
Deviation and Standard Deviation to Mean for the 5 years are given in the following table.
ak
Nome of 1 Year 2 Year 3 Year 4 Year 5 Year Total Mean SD SD to
Zones Mean
Jaipur 10 3 4 8 11 36 7.20 3.56 0.49
Chandigarh 3 8 1 6 4 22 4.40 2.70 0.61
Bangalore 12 8 9 2 4 35 7.00 4.00 0.57
Lucknow 6 9 2 3 5 25 5.00 2.74 0.55
p
Patna 7 12 5 8 6 38 7.60 2.70 0.36

Total 38 40 21 30 30 156 31.20 7.85
From business risk point of view, the performance of the zone which is subjected to maximum risk
ee
exposure appears to be
Jaipur
Patna
Chandigarh --
Lucknow
D
From business risk point of view, the performance of the zone which is subjected least risk
exposure appears to Bangalore
Patna
Chandigarh--
Lucknow

Dec 2017
The ratio of Standard Deviation to Mean for ali zones put together for ABC Bank Limited is.
7.85
31.20
0.516
da
0.25--
The Zones having wide variance of results from year to year is

Jaipur
Lucknow
Chandigarh
Bangalore--
oo
You have the following information available regarding closing stock price movement of share
price of ABC limited for 12 months period ended December 2009:
Jan
Feb
Mar
Apr
Month
20
22
38
20
Closing Price
H
ak
May 24
Jun 34
Jul 46
Aug 82
Sep 76
Oct 90
Nov 42
p
Dec 102
What is the mean price of this stock for the observation period
ee
Rs.51.37
Rs.53.17--
Rs.55.79
Rs.56.22
The variance of the 12 months will be approximately

D
a 974.15 --
b 986.12
c 997.16
d inadequate information to calculate

Dec 2017
The volatility of this stock for these 12 months period is:
a 34.67
b 33.41
c 32.39
da
d 3111--
International Bank an investment in bonds as under, on Sept 30, 2009:
FV Yield Price Cost

7% GOI Bond 16 At par 7.12% 108.40 108400
oo
9% GOI Bond 18 At Par 7.34% 124.00 124000
Due to change in yield of these securities, the yield and price changed as under as on Mar 31,
2010:
7% GOI Bond 16 At par 7.32% 105.80 105800
9% GOI Bond 18 At Par 7.65% 120.50 120500
14.5 Paise --
13.1 paise
12.5 paise
12.34 paise
H
What is the change in basis point value for each basis point increase in yield for 7% Gol bonds
during this period?
ak
What is the change in basis point value for each basis point increase in yield for 9% GoI bonds
during this period?
a 10.02 paise
b 11 paise
c 11.29 raise --
d 11.90 paise
p
If there is increase in yield by 100 basis points during this period, what will be the price of 7% G01
bonds.
a Rs.95.20
ee
b Rs.93.90--
c Rs.92.10
d no change will take place
If there is increase in yield by 100 basis points during this period, what will be the price of 9% G01
bonds.
D
a Rs.112.71 -
b Rs.111.96
c Rs.111.12
d Rs.110.87

Dec 2017
The bank decides to sell the 7% G01 bonds on Mar 31, 2010 itself, to Stop the loss. How much it
will lose on this sale transaction ?
a Rs.1210
b Rs.1670
da
c Rs.2400
d Rs.2600--
The bank decides to sell the 9% G01 bonds on Mar 31 2010 itself, to stop the loss. How much it
will lose on this sale transaction ?
a Rs.3500 --
b Rs.3100
oo
c Rs.2800
d Rs-2600
FV Yield Price Cost

9% GOI Bond 16 At par 8.40% 107.60 215200
11% GOI Bond At Par 8.80% 110.50 221000
18
2010:
9% GOI Bond 16 At par
11% GOI Bond
18
At Par
H
Due to change in yield of these securities, the yield and price changed as under as on Mar 31,
8.20%
8.60%
109.80
113.30
105800
226600
ak
What is the change in basis point value for each basic point increase in yield for 9% G01 bonds
during this period
a 12 paise
b 11 paise--
c 10 paise
d no change
p
What is the change in basis point value for each basic point increase in yield for 11% G01 bonds
during this period
a 12 paise
ee
b 13 paise
c 14 paise --
d no change
If there is decrease in yield by 100 basis points during this period, what will be the price of 9%
G01 bonds.
D
a Rs.118.60 --
b Rs.116.90
c Rs.114.80
d no change

Dec 2017
If there is decrease in yield by 100 basis points during this period, what will be the price of 11%
GOI bonds.
a Rs.105.20
b Rs.109.90
da
c Rs.119.10
d Rs.124.50--
Due to expected adverse change, the bank decides to sell the 9% GOI bonds on Mar 31, 2010 itself,
to make the profit. How much profit it will be able to make on this sale?
a Rs.4200 --
b Rs.4000
oo
c Rs.3800
d Rs.3750
Due to expected adverse change, the bank decides to sell the 11% G01 bonds on Mar 31, 2010
itself, to make the profit. How much profit it will be able to make on this sale?
a Rs.4210
b Rs.4670
c Rs.5400
d Rs.5600-- H
Pune branch of International Bank (with HQ iri Mumbai) has received an investment proposal for
investing in commercial paper issued by a company known as XYZ Limited. The bank has
ak
received the request for subscribing to the CP up to Rs.50 Cr for 182 days at 8% p.a. rate of interest
and submitted the following information / documents on Feb 10,2010
i) Copy of Credit rating certificate (PR1) issued by CARE which is dated Jan 25, 2010
ii) Copy of resolution passed by Board of Directors of the company to this effect which
restricts issued of up to Rs., with a tenor maximum tenure of 182 days.
iii) The company has submitted the letters from two non bank finance companies subscribing
to the commercial Paper up to Rs.50 Cr in line first tranche on Feb 28, 2010
p
Which of the following other, information / confirmation is not required by the bank to ensure that
company fulfills the eligibility Criteria:
proof of sanction of working capital limits by a bank or financial institutions
ee
copy of latest audited balance sheet to ensure that company has required net worth of at least Rs.4
Cr.
c proof that their loan accounts with other banks are standard loan account
d none of the above--
Which of the following steps will be initiated by the branch:

D
a the branch will immediately subscribe the commercial paper

b the branch will decline, the subscription, as banks cannot invest in in commercial papers .
c thee branch will refer the proposal to Treasury Department of the bank in H0, as it is an
investment proposal --
d the branch will refer this case to its Regional Head, as case is to be sanctioned in the form of a
loan.

Dec 2017
What is the amount as balance amount, the can get subscribed as commercial paper? '
a Rs.100 Cr
b Rs.50 Cr--
c Rs10 Cr
da
d none of the above
If the bank decides to subscribe the commercial paper to the extent of Rs.10 Cr, what amount will
the bank pay to the company?
a Rs.10 lac
b Rs.961538--
c Rs.958276
oo
d Rs.952945
If the bank subscribes the CP on Feb 14, 2010, the company shall repay back the amount of
commercial paper on:
a August 13, 2010
b August 14, 2010--
c August 15, 2010
d August 16, 2010
H
International Bank successfully contacted an FCNR (B) deposit of 10 million USD for a period of
5 years. Out of these funds, the bank retains USD 4 million as deposit with a high rated US bank in
it NOSTRO account and converts the remaining amount to Indian currency at prevailing USD rate
ak
= Rs.46. On the basis of the given information, answer the following questions:
If the foreign currency rate moves to Rs.46.50:

a the bank will gain Rs.3 mio (million)
b the bank will loose Rs.3 mio (million)--
c the bank will gain Rs.6 mio (million)
d the bank will loose Rs.6 mio (million)
p
What type of position the bank is having presently after this transaction?
an oversold position of USD 4 million
an oversold position of USD 6 million
ee
an overbought position of USD 6 million--

an overbought position of USD 4 million
If the foreign currency rate moves to Rs 45.00

a the bank will gain Rs.3 mio (million)
b the bank will loose Rs.3 mio (million)
D
c the bank will gain Rs.6 mio (million)--

d the bank will loose Rs.6 mio (million)

Dec 2017
To square its position, the bank will have to undertake which of the following transaction?
Sell USD assets of at least USD 6 million--
Sell USD assets of at least USD 4 million
Buy USD liabilities of at least USD 4 million
da
Buy USD liabilities of at least USD 6 million
If the bank decides to invest the amount received as FCNR deposit in a 3-year US govt. security at
6 months LIBOR related rate of interest, the bank faces the following type of risk
foreign exchange risk
liquidity risk
basis risk--
oo
d no risk
A Gujarat based cooperative bank permitted loans amounting to Rs.1500 Cr to the group
companies of M/s Patel and shah limited. against overpriced shares of group companies. The
following modus operandi was followed by the bank in disbursing these loans
The bank will issue pay orders to the borrower without having any real cash balance in their
H
account or without ensuring funding requirements as necessary in case of pre-paid instruments. On
request of M/s Patel and Shah Limited having account with bank B at a branch in Ahmedabad.
Bank B discounted the pay order issued by the cooperative bank amounting to Rs.112 Cr and
presented these through clearing house. But the cooperative Bank Failed to honour the pay order
due to lack of fund. Resultantly, the pay orders were dishonored. The clearing house regulator put
embargo on the cooperative Bank.
ak
Bank B is still to recover Rs.90 Cr from M/s Patel and Shah Limited out of total of Rs.112 Cr.
Later on the investigations revealed that on the day of failure to make payment by the cooperative
Bank, 65% of the pay orders discounted by Bank B belonged to the cooperative Bank.
Bank b now hold its manager responsible for inadequate management control.
It is also found that around 65% of total loans given by the said cooperative Bank were restricted to
12 entities. The collapse of the said cooperative Bank had a chain reaction in other cooperative
banks.
Based on the above facts, answer the following questions:
p
Bank B's loss of Rs.90 Cr in discounting the pay orders is falls under:
Credit risk
ee
operational risk
market risk
combination of Credit risk and operational risk--
Cooperative Bank's outstanding loans to M/s Patel and Shah Limited group was more than 38% of
their capital funds. Such high exposure to a single group by a bank is against the regulatory
D
guidelines to avoid:
a concentration risk --
b systemic risk
c funding risk
d reputational risk

Dec 2017
RBI is hesitant, for the time being to put embargo or ordered liquidation of the said cooperative
Bank, as it could lead to possible:
a legal risk
b systemic risk--
da
c counterparty risk
d liquidity risk
As per existing guidelines of RBI, the cooperative Bank was required to disclose their exposure to
capital market under the heading of:
segment reporting
transactions with related parties
oo
exposure to sensitive sectors--
d maturity pattern of assets and liabilities
International Bank has come out with a policy for its branches for acceptance of deposits and
granting of advances. It branches have allowed taken deposits and allowed loans as under:
H
One of its branches accepted a deposit of Rs.10 lac which is to double in 10 years. These funds
have been invested by the bank in a 3 year bond carrying interest rate of 13%. Which of the
following kind of risk the bank is facing:
yield curve risk
embedded option risk
basis risk
ak
reinvestment risk--
The deposits as we'll as advance are linked by the bank to floating rate. The bank has been facing:
real interest rate risk
basis risk-
reinvestment risk
volatility risk
p
A branch has given a loan out of deposits at floating rate. The rate of interest on deposit has been
linked by the bank with 91 days treasury bill rate and for the loan it is linked to 364 days treasury
bill rate. The risk from such situation is called:
ee
gap or mismatch risk

interest risk
yield curve risk--
basis risk
The bank has advised its branches that while sanctioning a term loans, they must put a condition
D
that premature payment will not be accepted in any circumstances. By putting this condition, the
bank has avoided which type of interest rate risk?
a Yield curve risk
b Embedded option risk--
c Mismatch risk
d Basis risk

Dec 2017
The depositors at times, have the tendency to withdraw the deposits before maturity, which leads to
yield curve risk
embedded option risk--
da
basis risk
reinvestment risk
An exporter approaches the Popular Bank for pre shipment and post-shipment loan with estimated
sales of Rs. 100 lakh. The bank sanctions a limit of Rs. 50 lakh, with 25 % margin for pre shipment
loan on FOB value and margins on bills of 10 % on foreign demand bills and 20 % on foreign
usance bills.
oo
The firm gets an order for USD 50,000 (CIF) to Australia. On 1.1.2011 when the USD/INR rate
was Rs.43.50 per USD, the firm approached the Bank for releasing pre-shipment loan (PCL),
which is released.
On 31.3.2011, the firm submitted export documents, drawn on sight basis for USD 45,000 as full
and final shipment. The bank purchased the documents at Rs.43.85, adjusted the PCL outstanding
and credited the balance amount to the firm’s account, after recovering interest for Nominal Transit
Period (NTP).
H
The documents were realized on 30.4.2011 after deduction of foreign bank charges of USD 450.
The bank adjusted the outstanding post shipment advance against the bill.
Bank charged interest for pre shipment loan @ 7 % up to 90 days and, @ 8% over 90 clays up to
180 days.
For Post shipment Credit the Bank charged interest @ 7 % for demand bills and @ 7.5 % for
ak
usance (D/A) documents up to 90 days and @ 8.50 % thereafter and on all overdue interest @ 10%
What is the amount that the Bank can allow as PCL to the exporter against the given export order,
considering the profit margin of 10% and insurance and frieght cost of 12%
a) Rs.2200000
b) Rs.1650000
c): Rs.1485000
d) Rs 1291950--
p
what is the amount of shipment advance that can be allowed by the bank under foreign bill
purchase, for the bill Submitted by the exporter?
ee
a) Rs.1980000
b) Rs.1775925
c) Rs.1973250 --
d) Rs. 2192500
what will be the period for which the Bank Charges concessional interest on DP bills, from date of
D
purchase of the bill

a) 90 days
b) 25 days--
c) 31 days
d) Up to date of realization

Dec 2017
In the above case when should the bill be Crystallized (latest date) if the bill remains unrealised for
over two months, from the date of Purchase (ignore holidays)?
a) On 30.4.2011
b) On 24 4 2011
da
c) On 24.5.2011 --
d) On 31.5.2011
What rate of interest will be applicable for charging interest on the export bull at time of
realisation, for the days beyond Normal Due Date (NDD);
a) 8 %
b) 7 %
oo
c) 7.5%
d) 10 %--
Following are the Interbank quotes on a certain date:

Spot USD/INR 44.60/65 .
1 month 8/10
2 month 18/20
3 month 28/30
Spot GBP USD 1.7500/7510
1 month 30/20
2 month 50/40
3 month 70/60
H
ak
All the above differences are for the month and fixed dates and the bank margin is 3 paise
An exporter has presented an export demand bill (sight document) for USD 300000 under
irrevocable letter of Credit. What will be the rate at which the documents will be negotiated
a. 44.5700 --
b. 44.6000
c. 44.6500
p
d. 44.6800
An Exporter has submitted 60 days usance bill for USD 25000 for purchase. At what rate the
ee
document will be purchased

a, 44.7500 --
b. 44.7800
c. 44.8400
d. 45.8700
D
Your bank has opened a letter of Credit for imports at the end of 2 months for GBP 30000. At what
rate, the forward exchange will be booked?
a, 78.4700
b. 78.3830--
c. 78.6300
d. 78.6325

Dec 2017
If the exchange margin is 3 Paise for buying as well as selling. what is the bank's spread in % on
customer transaction
a. 0.2465 --
b. 0.3000
da
c. 0.6000
d .0.6275
A customer tenders export bill for GBP 10,00,099 Payable 45 from sight. The transit period is 15
days He wants to retain 10% of bill value in the foreign currency. Banks margin is 10 paise. What
amount will be Credited to customer account
a. 71310030
oo
b. 702369900--
c. 70110270
d. 70018510
On Jan 10, 2011, the Mumbai branch of popular bank entered into following foreign currency sale
and purchase transactions.
H
(1) With Mr. A for sale of USD 2000 to be delivered on the Jan 10.
(2) With Mr. B for purchase of USD 2000 to be delivered on Jan 11
(3) With Mr. C for purchase of USD 2000 to be delivered on Jan 14 (Jan 12 and 13 being bank
holidays) .
(4) With Mr. D for sale of USD 2000 to be delivered on Feb 11.
ak
The inter-bank foreign currency rates on Jan 10, 2011 are as under .
Cash rate or ready rate USD = Rs.45.50/60, Tom rate Rs.45.55/65,
Spot rate Rs.45.60/70
and one month forward rate Rs.45.80/85.
On the basis of above, answer the following questions:
What rate will be used for the transaction with A and what amount in Rupees will be involved:
Rs..45.50, Rs.91000
p
Rs.45.55, Rs.91100
Rs.15.60, Rs.91200--
Rs.45.65, Rs.91300
ee
What rate will be used for the transaction with B and what amount in Rupees will be involved:
Rs.45.50, Rs.91000
Rs.45.55, Rs.91100--
Rs.45.60, Rs.91200
Rs.45.65, Rs.91300
D
What rate will be used for the transaction with C and what amount in Rupees will be involved:
Rs.4S.50, Rs.91000
Rs.45.55, Rs.91100
Rs.45.60, Rs.91200--
Rs.45.6S, Rs.91300

Dec 2017
What rate will be used for the transaction with D and what amount in Rupees will be involved:
Rs.45.50, Rs.91000
Rs.45.55, Rs.91100
da
Rs.45.80, Rs.91600
Rs/15.85, Rs.91700--
Your customer has received an advance of US 10000 against export to UK, which the importer in
UK has got Credited to NOSTRO account of the bank in London. The current interbank market
rate USD = 45.10/15. Bank- retains a margin of 0.15% on purchase and 0.16% on sale. What
amount will be Credited to customer's account:
oo
a Rs.451676.50
b Rs.450323.50--
c Rs.451721.60
d Rs.450278.40
An exporter submitted an export bill of USD 100000 drawn on 120 days usance basis from date of
(1) The due date is Dec 01, 2011

(2) The exchange margin is 0.20 %
H
shipment, which took place on Aug 03, 2011
The following further information is provide -
(3) Spot inter-bank USD rate is Rs.45.00/ 05.

(4) Premium spot Nov 0.40/45
ak
(5) Rate is to quoted to nearest 0.25 paise and rupee amount to be rounded off -
(6) Interest rate is 8% for period up to 180 days.
(7) Commission on bill purchase is 0.05%
What is the rate at which the bill be purchased if it is a demand bill after adjustment of bank
margin, without taking into account, the premium?
Rs.44.91--
Rs.45.09
p
Rs.45.31
Rs.45.51
ee
What is the rate at which at which the bill will be purchased if it is a demand bill after adjustment
of bank margin and the premium.
Rs.44.91
Rs.45.09
Rs.45.31--
Rs.44.51
D
What is the gross amount before application of interest and commission:

Rs.4531000--
Rs.4410174
Rs.4407908.50
Rs.4407909

Dec 2017
What is the amount of the bill without deduction of Bank commission

Rs.4531000
Rs.4410174 --
da
Rs.4407908.50
Rs.4407909
what amount will be Credited to exporter's account

Rs.4531000
Rs.4410174
Rs.4407922.50
oo
Rs.4407909--
An importer customer wants to retire an import bill drawn under letter of Credit opened by you,
which is falling due on Oct 12, 2011, of pound sterling 10000. The TT margin is 0.10%. The
interbank rates are GPB/USD-1.5975/1.6000 and USD/INR - Rs44.90/45.00, on the basis of given
information , answer the following
Rs.71.7276
Rs.71.9085
Rs.72.0000--
H
what rate will be quoted by the bank for this transaction in terms of GBP/INR without taking into
account the TT margin
ak
Rs.7.0720
what rate will be quoted by the bank for this transaction in terms of GBP/INR after taking into
account the TT margin
Rs.71.7276
Rs.71.9085
Rs.72.0000
Rs.7.0720--
p
what amount will be to cash Credit or overdraft or current account of the customer for retirement of
this bill
ee
Rs.7000000
Rs.7207200--
Rs.7218300
Rs.7222070
If this bill is not retired bill the importer Customer , the Crystallisation of this import bill will be on
D
which of the following dates:

Oct 12, 2011
Oct 21, 2011
Oct 22, 2011--
Nov 22, 2011

Dec 2017
On Apr 15, 2011, XYZ Ltd expects to receive USD 20000 within July 2011. The company wants
to book a forward contract for July 2011. The USD/INR interbank spot rate is Rs.45.10 / 20. The
forward premium is 18/20 paise for May, 31 / 33 for June and 45/47 for July. The margin to be
retained by the bank is 0.10 paise per USD.
da
What is the FC rate at which the forward contract will be booked if the margin is not taken into
account:
a Rs.45.31
b Rs.45.41--
Rs.45.55
Rs.45.57
oo
What is the FC rate at which the forward contract will be booked if the margin is taken into
account:
Rs.45.31--
Rs.45.41
Rs.45.55
Rs.45.57
H
The importer requests on Sep 01, 2011 to book a forward contact for payment of an import bill of
USD 50000 due for Dec 15, 2011. Spot rate USD/INR = 45.10/20. Forward premium for Sep 10/14
paise. Oct 22/ 24 paise, Nov 33 / 35 paise, Nov to Dec 15 - 12/14 paise. Bank is to charge margin
of 0.20%.
ak
Without taking into account the margin, the rate that will be quoted by the bank is:
a Rs.45.2000
b Rs.45.5500
C Rs.45.6900--
d Rs.457814
By taking into account the margin, the rate that will be quoted by the bank is:
p
a Rs.45.2000
b Rs.45.5500
c Rs.45.6900
ee
d Rs.457814--
Your correspondent bank in UK wants to Credit Rs.50 million in its NOSTRO account maintained
by you in New Delhi. The bank is ready to Credit the equivalent USD in your NOSTRO account in
London. The interbank rate is USD rate is Rs.45.10/15. If exchange margin is ignored, how much
amount, the correspondent bank will Credit to the NOSTRO account in London and at what rate.
D
a 110864745--
b 1107419.71
c 1107022.13
d inadequate information to make the calculation

Dec 2017
M/s XYZ imported goods worth Japanese Yen (JPY) 50 million. They request to remit the amount.
The USD/INR rate is Rs.45.1500 /1700 and USD/JPY is 9130/ 50. The bank will load a margin of
0.20%.
da
What rate will be quoted (per 100 yen)?
Rs.49.0456
Rs.49.4743
Rs.49.5730--
Rs.49.8712
What amount the importer has to pay in Indian currency?
oo
Rs.2572100
Rs.2478500--
Rs.2428400
Rs.2408300
A customer wants to book the following forward contracts:
Given spot rate = 45.1000 I 45.1200. H

(1) Forward purchase of USD 50000 for delivery 3rd month
(2) Forward sale of USD 50000 for delivery 2nd month.
Premium = 1 m - 0800 / 0900, 2m - 1700 / 1900 and 3m - 2800/2900.

Exchange margin = for purchase 0.20% and for sale — 0.25%.
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What is the rate for forward purchase transaction:
a 45.4233
b 45.2705
c 45.1795--
d 45.1700
What is the rate for forward sale transaction:

45.4233--
p
45.3243
45.4882
45.3456
ee
Bank had booked a forward purchase contract 3 months back at Rs.45.60, due for delivery 3 days
later for USD 10000. Due to delay in realisation of export bill, the customer has requested for
cancellation of the contract and rebook it for one month fixed date or option contract beginning one
month from spot date. The interbank spot rate is 45.2000/2200. One month forward premium is
0800/1000 paise. The TT selling and buying margin 0.20%.
D
1- What will be the rate at which the contract will be cancelled:

a . 45.2200
b.45.2000
c. 45.3104--
d.45.3908

Dec 2017
What amount will be debited or Credited to customer account ng difference:

R5.3202 debited
Rs.3202 Credited
da
Rs.2996 Credited--
Rs.2996 debited
At what rate, the contract would be rebooked:

45.2200
45.2000
45.1895--
oo
45.0965
An exporter customer has received an advance of USD 100000, which has been Credited to
NOSTRO account of the Popular Bank in New York.
What rate would be quoted to the customer if prevailing rate is 1USD =46.50/55
46.50--
46.55
45.50
45.55 H
An exporter has tendered an export bill of USD 100000 on 3.5.2010 (shipment date 3.5.2010),
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drawn 120 days from the date of shipment The due date is 1.9.2010. On the basis of following
information, calculate the amount payable to the exporter
1. exchange margin 0.15%. Rate to be quoted to nearest 0.25 paise and rupee is be rounded off.
2. Spot rupee rate 46.20/25 and forward premium August 30/35 paise.
3. Rate of interest is 7% for period up to 180 days. Commission to be charged upfront at 0.0625% .
4533245--
4733245
p
4933245
5533245
ee
The due date for an export bill is fall in during July 2010. On April 15 the exporter requests for
booking a forward contract. The USD/INR spot rate is 46.10/15 . The forward premium is 15/16
paise for MaY/ 30/32 for June and 43/46 for July . Margin to be recovered by bank is 0.05 paise
per USD.
Calculate the rate.
43.35
D
44.35
48.35
46.35--

Dec 2017
On April 1, 2010, an importer request to book a forward contract against payment of an import of
USD 5000, due on payment on July 12, 2010. The spot rate is USD/INR 46.30/35. The forward
premium rates are:
Spot April 9/10,
da
Spot May 19/20,
Spot June 29/30,
Spot July 39/40.
Spot for June to 15th July 7/8.
Calculate the rate, if margin is to be charged at 0.20%.

46.86
oo
47.86
46.83--
46.77
A UK based bank is maintaining its NOSTRO account with a Popular Bank in New Delhi.
Overseas bank wants to fund its NOSTRO account for an amount of Rs.50 Cr against GBP. Spot
H
GBP/INR is 78.70/80. No exchange margin is involved. If the Popular Bank agrees to fund the
account,
what rate will be quoted and what amount will Popular Bank will get in GBP.
78.70
79.70
78.80
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78.90
An importer has to make payment of Japanese Yen 10 million by TT value spot, against import of
electronic goods. USD/INR rate is 46.50/55 and USD/JPY is 90.70/80. Bank is to load 0.15%
margin to the exchange rate.
Calculate the rate to be quoted and the amount that will be paid by the importer.
51.40*10 million
51.50*10 million
p
51.60*10 million
51.70*10 million
ee
Bank has been approached by an exporter for booking a forward contract for Euro 100000, for
delivery in 3rd month. An importer has also approached to book a forward contract for Euro
200000 for delivery in 2nd month. The spot Euro/INR 54.10/20.
Exchange margin for purchase is 0.15% and for sale 0.20%.
The forward premium rates (in paise) are
9/10 for 1st month, 19/20 paise for 2nd month and 29/30 paise for 3rd month.
D
Calculate the rate for booking the contracts and selling contract
54.2075 and 545100
545100 and 54.2075
55.2075 and 55.5100
56.2075 and 56.5100

Dec 2017
An exporter has booked a 3 month forward contract at Rs.46.8000 for USD 100000, which is due
for delivery with 3 days. Exporter now wants to cancel the contract and book a new one, as the
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payment is delayed by
one month.. The spot rate is 46.20/25 and the one month premium 10/11 paise. The margin on TT
buying and TT selling is assumed at 0.15%.
Calculate the rate at which contract is to be cancelled and also the rate at which the new contract
will be booked. Further, for what amount the exporters account will be debited or Credited for
cancellation.
oo
Total = 46.3194
Amount payable to customer at contract rate of Rs.46.80 = 4680000
Amount recoverable from customer at 46.3200 = 4532000
Net amount to be Credited to customer account = 43000
Rate for rebooking of contract:
Spot rate = 46.2000
Less margin 0.15% = 000593
Rate = 46.1307 (say 46.1300)
Add 1 month premium = 0049 (10 parse)
Rate to be quoted = 4513
H
ak
In interbank forex market, the USD is being quoted as under on January 27th
Spot rate = 65.40/50
Forward margin February = 3000 / 4500
Forward margin March = 5500 / 6500
Calculate the forward rate for February and March.
The forward points (margin) are given in ascending order, which means at the forward is at a
p
premium. Premium is added in the buying and selling rate, while the discount is deducted.
The spot rate for USD is Rs.60 and rate of interest in India is 10% and 4% in US. The bank has
ee
been asked to quote 3 months selling rate to the customer for an amount of USD 20000. It is
assumed that the entire loss
or gain is passed on to the customer.
Indian Bank receive an email from its London Correspondent bank that it has received USD 10000
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in NOSTRO account of Indian Bank to Credit account of a customer with Indian Bank, maintained
in Mumbai
On July 23, an exporter in India, submits a USD demand bill drawn at sight, on an importer in US.
The normal transit period is 25 days The interbank currency rates are as under
Spot rate 1 USD = Rs.65.0000/ 5000

Dec 2017
July forward margin = 0.3500 / 0.4000
August forward margin 0.6000/0.7000
September forward margin = 0.8500 / 0.9000
da
What rate should be quoted? If the bill had been a 2 month Usance bill what will be the rate?
65.85--
65.95
65.75
65.65
On July 23, an exporter in India, submits a USD demand bill drawn at sight, on an importer in US.
oo
The normal transit period is 25 days The interbank currency rates are as under
Spot rate 1 USD = Rs.65.0000/ 5000
July forward margin = 0.4000/ 0.3500
August forward margin 0.7000/0.6000
September forward margin = 0.9500 / 0.8500
65.95
65.75
65.65
H
What rate should be quoted? If the bill had been a 2 month Usance bill what will be the rate?
65.85--
ak
M/s Exports Private Limited have received a letter of Credit for export of textile items for an
amount of $ 50000 approximately. The company manufactured the goods, made the shipment and
presents documents for negotiation to the negotiating bank for a total invoice value of $ 52356 The
negotiating bank refused to negotiate the document as the amount exceeded the amount of letter of
Credit. What is the position of exporter in the given situation?
a negotiating bank has all discretion to point out any discrepancy. Hence, it need not pay.
b the discrepancy pointed out by the negotiating bank does not correct. Hence it should pay--
c the negotiating bank should seek advice of the opening bank in such matters
p
d the information given is incomplete to take a decision.

Ans: b
ee
M/s Exports Private Limited received a letter of Credit for export of certain products but the letter
of Credit does not state the quantity in terms of a stipulated number of packing units or individual
items. The exporter manufactured the goods and presented the documents for negotiation which
have been negotiated by the negotiating bank. However, the opening bank refused to honour the
documents on the premise that there
is variation of around 3 percent in the quantity of goods supplied. The negotiating bank demands
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the return of money from the exporter.

What is the exporter's position in this case?
a once the documents have been found correct, the negotiating bank cannot ask for refund of the
money from the beneficiary
b if the applicant refuses to pay, the beneficiary will have to return the money

Dec 2017
c the objection raised by the opening bank is justified and this should have been seen by the
negotiating bank beforehand.
d the opening bank's objection is not justified and it has to pay the documents
Ans: d
da
International Bank, New Delhi received a letter of Credit issued by a bank in UK in favour of M/s
Exports Private Limited, a customer of International Bank. The negotiation is restricted to
International Bank. On the date of
receipt of LC, riots took place in the locality where the branch of the bank is located. As a result
the LC could not be advised by the bank to the exporter immediately. Later on when the situation
became normal the bank advised the LC to the exporter but by that time the expiry date for
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negotiation of documents had expired. The exporter insists on negotiation of documents by the
International Bank, as delay is not on the part of the exporter but on the part of International Bank.
What is the position of the International Bank vis-a-vis the exporter in the given situation?
a International Bank is liable due to which it should negotiate the documents
b Exporters Pvt Limited has the right to get the payment of the documents
c International Bank is not liable
H
d given information is not enough to take any decision
Ans: c
M/s Exports Private Limited have received a letter of Credit in the favour for export of certain
goods to UK. The date of expiry of the Credit in on and about 31st December 2008. Since the
process involved in manufacturing of goods was little longer, the exporter could present the
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documents for negotiation on 3rd Jan 09. The document were negotiated by the negotiating bank
under reserve to which the exporter objected. In the opinion of the exporter, there is no deficiency
in the document and in the opinion of the bank, the documents have not been
presented for negotiation, in time. What is the position of the exporter and bank
a the bank has to negotiate the documents as it gets 5 banking days to check the documents and the
documents have been presented in that period.
b the beneficiary has the right to present with in 5 calendar days since date is written as around Dec
p
31. Hence the negotiating bank cannot re use the payment

c the bank is not under obligation to negotiate the documents as the last date negotiation is over
d the bank should seek instruction of the opening bank and applicant and move accordingly.
ee
Ans: b
Popular Bank issued an LC of USD 50000 on Jan 05, 2011, in favour of John and John of London.
The last date for shipment is Jan 15 and last date for negotiation is Jan 31, 2011. The goods were
shipped on Jan 02, 2011 and documents were presented for shipment by the beneficiary for
D
negotiation to South Hall Bank on Jan 14, 2011, which were negotiated on Jan 16, 2011. When the
documents were sent to Popular Bank for reimbursement by the South Hall Bank, the opening
bank found the following discrepancies:
1. the date of shipment was Jan 02, 2011 while the date of LC was Jan 05, 2011.
2. the date of invoice was Jan 03, 2011 and date of packing list and inspection certificate was Dec
31, 2010.

Dec 2017
The opening bank returned the documents to the negotiating bank.
a the return is not justified due to which the negotiating bank should send the documents back to
opening bank for payment
da
b the return is justified, as the date of LC is subsequent to date of documents
c the return is justified, as the date of different documents is different
d the opening bank should seek opinion of the applicant and then take decision
Ans: a
An LC provides for shipment of 500 pieces of trousers in 200 cartons. It also provides that partial
shipment is not allowed. The beneficiary hands over 100 cartons to the shipping company on Jul 10
oo
and another 100 cartons on Jul 16. Two bills of lading with dates Jul 10 and Jul 16, are issued. The
cantons are to be carried in a single vessel to sail on Jul 20. The documents are negotiated by the
negotiating bank but these are returned back by the opening bank, stating that the LC did not
permit partial shipment.
a opening bank cannot be forced to pay because the part shipment is not permitted .
b opening bank should pay, as it is not partial shipment, since vessel is one
H
c by negotiating defective documents, the negotiating bank has made mistake, hence it cannot
force the opening ban to reimburse
d negotiating bank has made mistake. It should recover payment from the beneficiary.
Ans: b
Universal Bank (the issuing bank) received the documents under LC from Popular Bank (the
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negotiating bank) on Dec 22 (Tuesday). it took one day to check the documents and forward the
documents for acceptance by the applicant . On Dec 29, the applicant pointed out that the insurance
policy was in a currency different from the one was mentioned in LC. (Dec 25 was a holiday due to
Xmas and Dec 27 was Sunday). The opening bank immediately informed the negotiating bank
about this discrepancy by way of an emial and sought direction for disposal of the documents. The
negotiating bank pointed that opening bank could convey the objection if any, within 5 days and
not later. due to which it should make the payment
a observation made by the negotiating bank is not correct. It has received the objection in time
p
b observation made by the negotiating bank is correct. Opening bank has conveyed the objection 2
days late
c observation made by the negotiating bank is not correct it should convey this to the beneficiary
ee
an recover the amount

d loss would be to the account of applicant, as he took more than 5 days.
Ans:-a
The dealer at Popular Bank purchased 5000 share of a public sector undertaking at Rs 200 per
shares totaling Rs. 10,00,000. it the price change is 1%, there will be impact of Rs.10000. The
D
price can go up to 4%. that may result into a loss of Rs.93040.

In this transaction, the stock price is known as:
market factor--
market factor sensitivity
volatility
defeasance period

Dec 2017
What is the market factor sensitivity:

5000 shares
Rs.200 per shares
da
Rs. 10 lac
Rs.10000--
the price can go up to 4%. This mean the daily_______ is 4%

defeasance factor
market factor
volatility--
oo
value at risk
The defeasance period in this transaction is:

one day--
2 days
4 days
7 days
Rs.93040--
Rs.100000
Rs.105900
H
What is the value at risk (VaR) in this transaction:
ak
Rs.120000
Commercial Bank advanced a term loan of Rs.20 Cr to Delhi Corporation. As per terms of the
loan, there will be a moratorium period of one year before the repayment starts. The repayment
period will be 7 years after moratorium. The loan has been funded out of fixed deposits of (1)
Rs.10 Cr with 5 years maturity period, (2) Rs.5 Cr with 3 years and (3) Rs.5 Cr with 2 years
maturity period. The borrower can pre-repay the loan at his discretion. The depositors also have die
option to withdraw the deposit before maturity. Bank has also issued a performance bank guarantee
p
on behalf of the borrower for Rs.60 lac. Based on this information, answer the following Ques
If fixed deposit is withdrawn before maturity or it is not renewed on maturity, the bank will require
ee
new sources to keep funding the term loan. This situation in risk terminology is called
call risk
funding risk--
time risk .
basis risk
D
If loan installment is not paid on time by the borrower after the FDRs mature, bank will be
requiring additional resources to make up the short fall. It is called:
call risk--
funding risk
time risk--
basis risk

Dec 2017
In case the borrower fails to perform the obligation under bank guarantee and the bank is asked by
the beneficiary to pay the amount. This will be known as:
call risk
da
funding risk
time risk
basis risk--
There is maturity mismatch between the term loan and deposits, used to fund the term loan. This
can result into which of the following type of risk:
Credit risk--
oo
market risk
operational risk
liquidity risk
In case the borrower defaults and the loan account becomes a non-performing advance, there is:
Credit risk
market risk
mismatch or gap risk--
liquidity risk H
In this case, the term loan has been funded from FDRs of different amount and of different
maturities. There will be early repricing in case of deposits which may Create in expected change
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in interest margin . this is called
Credit risk
market risk
mismatch or gap risk
basis risk--
If term loan and FDRs are at floating rate of interest, the interest will change in different
magnitude over a period of time, which will affect net interest margin, such risk is called
p
credit risk
ee
basis risk
As per terms of the agreement, the borrower can repay the loan and the depositors are allowed to
withdraw the FDRs before maturity. This exposes the bank to
reinvestment risk
D
embedded option risk--

basis risk

Dec 2017
When repayment of term loan begins after one year, bank Will be required to invest these funds at
different interest rates. This exposes
reinvestment risk--
da
net interest position risk
basis risk
If the term loan was partly was funded from current account balances the net interest income of the
bank will decline, if there is downward movement of interest rates. This exposes bank to
reinvestment risk
oo
net interest position risk--
basis risk
In this case, if the borrower make use of tem loan for a different purpose, exposing himself and the
bank to loss, this is called:
Credit risk
operational risk --
default risk
counterparty risk H
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Popular Bank want to invest Rs.1 lac. It has option to make investment in the following two
securities. The expected return is also given.:
Cash flow Year 1 Year 2 Year 3 Year 4 Year 5 Total

Investment 8000 8000 80000 8000 8000 4000
1
Investment 5000 7000 14000 6000 12000 44000
p
If time value of money is not taken into account, the rate of return on these investments is:
ee
8% and 3%
8% and 8.5%
8% and 8.8%--
8.5% and 83%
Out of these 2 investment, which one would be more preferable the bank:
D
Investment 1 because it provides stable return--

Investment 2 because it provides higher return
Investment 1 or 2 at judgment of the bank based on risk
Inadequate information is given. Decision not possible

Dec 2017
If return from both the investments is taken as equal taking into account the risk associated with
volatility, what is the risk adjusted rate of return and what is the risk premium:
8.8% , 8%
8% , 8.8%
da
8.8% , 0.8%
8%, 0.8%--
Mumbai branch of Popular Bank granted a term loan of Rs.2 Cr to a reputed corporate client for 6
oo
years at 2% + Base rate. Presently, the base rate of the bank is 10%. The loan will be repaid by the
company in 20 equal quarterly installments with a moratorium period of 12 months. The loan has
been funded by the bank out of fixed deposit @ 7% fixed rate of interest, of equal amount, with a
maturity period of 4 years. The CRR and SLR are to be ignored for the purpose of any calculations.
In this case, the loan is carrying floating rate and deposit is carrying fixed rate. If rate of interest is
funding risk
basis risk--
gap or mismatch
H
reduced during the first 4 years i.e. during the period of FDR, what type of risk, the bank is
exposed to:
ak
The rate of interest at the end of 4 years on loan and on the fresh deposi to be raised for funding
this loan tan be different. This is called
reinvestment risk
basis risk
gap or mismatch--
p
with quarterly repayment of the loan, the repayment amount have to be deployed by the bank
elsewhere and the rate of interest may not be a par with the interest being charged on the loan. Due
to this, the bank is exposed to;
ee
reinvestment risk--
basis risk
gap or mismatch
There is a possibility that the company may pre-pay the loan or the depositor may withdraw the
D
deposit prematurely. Due to this the bank is exposed to:

reinvestment risk
basis risk--
gap or mismatch

Dec 2017
Which of the following other risk is not associated with this transaction:
a liquidity risk
b market risk--
c Credit risk
da
d operational risk
Mumbai branch of Popular Bank has following cash flow from its loan portfolio from different
segments:
Cash flow Year 1 Year 2 Year 3 Total Mean SD SD/Mean

Corporate 40 31 36 107 35.66667 4.50925 0.1264
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MSE 20 28 19 67 22.33333 4.932883 0.2209
Retail 15 17 17 49 16.33333 1.154701 0.0707
Personal 5 8 6 19 6.333333 1.527525 0.2412
Total 80 84 78 242 80.66667 3.05505 0.0379
The risk associated with cash flow in case ‘of corporate business segment (measured by way of
ratio of standard deviation to mean) is.
35.66%
4.50%
12.64%--
3.79%
.
H
ak
The highest risk in all the 4 segments of business in the above case in terms of cash flows, is in
case of:
corporate business
MSE business
Retail business
personal business--
p
The lowest risk in all the 4 segments of business, in the above case in terms of cash flows is in
case of:
corporate business
MSE business
ee
Retail business--
personal business
The variation in net cash flows arising out of all the business line is
unidirectional
not unidirectional--
D
very volatile
adequate information is not available.

Dec 2017
The overall risk, to the portfolio at the branch is____ and the variation in different segments ranges
between____
a 3.79%, 3.79% to 24.12%
b 3.79%, 7.07% to 24.12%--
da
c 7.07%, 7.07% to 24.12%
d 7.07%, 3.79% to 24.12%
Popular Bank has a Credit exposure of Rs.80 Cr which is secured by financial collateral security of
A+ rated bonds of Rs.40 Cr issued by a Public Sector Undertaking of Govt. of India. The period of
this exposure is 4 years and the residual maturity of the financial collateral is 3 years. The financial
collateral is an eligible Credit risk mitigant. There is no currency mismatch. (As per RBI guidelines
oo
the haircut applicable to this collateral is 6% and the haircut on account of currency mismatch is 0
if no currency mismatch is there and 0.08, if there is currency mismatch
Based on the above information, calculate the haircut adjusted collateral value:
Rs. 40.00 Cr
Rs.37.60 Cr--
Rs.27.57 Cr
Rs.12.43 Cr
H
On the basis of above information, what is value of haircut adjusted collateral after adjustment on
account of maturity mismatch.
ak
Rs. 40.00 Cr
Rs. 37.60 Cr
Rs.27.57 Cr--
Rs.12.43 Cr
On the basis of above information, calculate the value of exposure at Risk

a Rs. 40.00 Cr
b Rs. 37.60 Cr
p
c Rs. 27.57 Cr
d Rs.12.43 Cr--
ee
A company has raised a loan of Rs. 100 Cr and collateral in this account is a bank term deposit of
Rs.40 Cr. Calculate the net exposure-qualifying for capital adequacy purpose, if there is no
maturity mismatch
a Rs. 100 Cr
b Rs. 60 Cr--
c Rs. 40 Cr
D
d Rs. 80 Cr

Dec 2017
Bank has an exposure of Rs. l00 Cr (residual maturity 3 years) which is collaterally secured by RBI
relief Bonds of Rs.20 or with a residual maturity of 3 years and AA rated bonds of-Rs.30-Cr. There
is no maturity mismatch. The applicable haircut as per RBI: guidelines for relief bonds is 2%’ and
for AA rated bonds 4% . What is the adjusted collateral value of this security for the purpose of
da
risk mitigation
a Rs. 100 Cr
b Rs. 50 Cr
c Rs. 49.20 Cr--
d Rs. 50.80 Cr
Bank has an exposure of Rs.10O Cr (residual maturity 3 years) which is secured collaterally by
oo
RBI relief Bonds of Rs.20 Cr with a residual maturity of 3 years and AA rated bonds of Rs.30 Cr.
There is no maturity mismatch. The applicable haircut as per RBI guidelines for relief bonds is 2%
and for AA rated bonds 4%. Calculate the value of exposure at risk for the purpose of risk
mitigation:
a Rs. 100 Cr
b Rs. 50 Cr
c Rs. 49.20 Cr
d Rs. 50.80 Cr--
H
X purchased 2000 shares at Rs.50 per share (total amount Rs.10 lac) with his own capital plus
borrowing from market (his borrowing limit being 9 times of his capital. Hence ratio 1:9. In a few
days , there is 2% decline in the value of shares, which reduced the value of his portfolio to Rs.
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98000 and also the amount of his capital Rs. 20000 (leaving capital of Rs.8000)
In the light of reduction in capital to Rs.80000, he is required to liquidate the holding by Rs.2 lac
(10 times of reduced capital) to pay the excessive borrowing (due to capital reduced) But the
market expects further fall in the value of this stock due to which the investment has become
illiquid . In such circumstances, he can liquidate the holding at a loss only which will further
deplete his capital, which forces him for further liquidation of his holding for keeping the
borrowing in permissible limit of 9 times of capital.
p
In case the liquidity position of the market suffers, it will further drive the share price down, which
would results in loss On the basis of this information, answer the following questions
ee
The risk of adverse movement in the price of shares has reduced the the capital. This is called:
price risk --
asset liquidity risk
market liquidity risk
liquidation risk
D
For a specific security, as in the above case, when the liquidity in the market is reduced, it is called:
price risk
asset liquidity risk--
market liquidity risk
liquidation risk

Dec 2017
In case the liquidity position of the market suffers, it will further drive the share price down, which
would result in losses. This is called:
price risk
da
asset liquidity risk
market liquidity risk--
liquidation risk
Popular Bank made an investment in govt. bonds worth Rs.5 Cr. The ‘maturity Period of the bonds
is 5 years, the face value is Rs. 100 and the coupon rate is 8 %. The bond. has a market yield of
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10% and the price is Rs. 92.00. Due to change in interest rates, the market yield changes to 9.90%
and the market value to Rs.92.50.
Based on the above information, please calculate the basis point value of the bond:
0.02
0.05--
0.10
0.20
H
What will be the change in value of investment, for the total investment of Rs.5 Cr for per basis
point change in the yield?
Rs.25000--
ak
Rs.20000
Rs.15000
Rs.10000
If there is 0.10% change in the yield, what will be change in the value of the bond on an investment
of Rs.5 Cr:
100000
200000
p
250000--
500000
ee
International bank purchased 8% Govt securities with the face value of Rs.1000 at Rs.1060 each
for 8.5 yield. Due to change in yield to 9%, the value of the securities declined to Rs. 1020
On the basis of above information, if calculate change in basis point value for each basis point
increase in the yield -
Rs.40
D
50 paise
80 paise--
90 paise

Dec 2017
If there is increase in yield by 100 BPV instead of 50 BPV as above, during this period, what will
the price of the security
Rs.960-
Rs.980
da
Rs.1040
Rs.1080
The bank decides to sell the security immediately, to stop the loss. How much it will lose on the
sale transaction .
a Rs.20 per bond
b Rs.30 per bond
oo
c Rs.40 per bond--
d Rs. 50 per bond
Universal Bank is engaged in three business lines namely lending, investment and remittance. The
information related to operating profits of these 3 business lines is as under:
Business Lines
Lending
Investment
Remittance
Total
200
150
50
400
2013
H 310
160
55
525
2014
190
230
65
485
2015
ak
What is mean of all business lines in the bank.
525
485
470--
400
out of these business lines, which one is more volatile

p
Lending--
Investment
Remittance
all equally volatile
ee
out of these business lines, which one is least volatile

Lending
Investment
Remittance--
D
Which of these lines carry least risk

Lending--
Investment
Remittance

Dec 2017
which of these lines carry highest risk
Lending
Investment
Remittance
da
all equally volatile--
Bank holds 3 years bonds with face value of Rs 1000 and coupon rate of 6% payable yearly The
current yield is 10% on this bond
The duration of the bond is

2.6643--
oo
3.6643
2.7896
2.9868
Change in yield for 10 BPS

26.64--
27.64
28.64
29.64
New Price of the bond is

900.79--
H
ak
800.79
950.79
925.79
Bank holds 3 years bonds with face value of Rs.1000 and coupon rate of 6% payable half yearly.
The current yield is 10% on this bond.
What is the present market value of the bond
Rs.1000
p
Rs.942.34
Rs.898.49--
Rs.857.91
ee
What is the duration in the above case:

3 years
2.9054 years
2.7761 years--
2.6190 years
D
Calculate the modified duration in the above case:

3 years
2.9054 years
2.7761 years
2.6190 years--

Dec 2017
In me above case, if the yield changes from 10% to 10.5% what will be percentage in value:
1.3095%--
1.2293%
1.1205%
da
1.0000%
What will be change in the value of the bond?

Rs.10.00
Rs.10.50
R$.11.21
Rs.11.77-
oo
What will be the new value of bond after increase in yield from 10 % to 10.5%
898.49
892.13
886.82--
871.13
What is duration of the bond

3 years
2.86 years--
H
Bank Z purchased 5%, 3 year bond with face value Rs.1000 at Rs.973.27 when expected yield was
6%.
ak
2.7 years
2 years
what is modified duration of the bond?

3 years
2.86 years
2.7 years--
2 years
p
If there is further change of expected yield to 7%, what will be change in the price
Rs. 26.27--
ee
Rs. 28.29
Rs. 30.12
Rs. 34.08
If there is further change of expected yield to 7%, what will be the new price
973.27
D
961.13
947.00--
934.56

Dec 2017
A corporate client has requested the bank for sanction of a term loan of Rs.200 Cr for Setting up a
project .The loan will be repaid within 5 years. Due to industry exposure ceiling, the bank is unable
da
to undertake the exposure, In view of the long standing relationship with the customer, the hank
wants to accommodate the customer. If this loan is sanctioned, to hedge the loan concentration,
which of the following will be used by
Credit default swap
total return swap--
Credit linked notes
Credit spread options
oo
A corporate client needs a corporate loan of Rs.1000 Cr to be withdrawn immediately and availed
for one year. Among other banks, Universal Bank is also approached for this. The bank is ready to
sanction a loan up to Rs.250 Cr (due to exposure ceiling), while the company has requested for a
loan of Rs.500 Cr, as the balance part has been managed by the company, from other banks. In
order to retain the customer, for accommodating the party to the extent of R5500 Cr, which of the
following will be used by the bank:
Credit default swap--
total return swap
Credit linked notes
Credit spread options
H
ak
The VaR of a Govt. of India bond security is 0.70%. The current yield is 8.10%.
1. In the worst case scenario, the prospective:
a buyer of the security can expect, the yield to fall to 7.40% by next day
b buyer of the security can expect, the yield to rise to 8.80% by next day
c seller of the security can expect, the yield to fall to 7.40% by next day
d none of the above
In the worst case scenario, the prospective:

p
a seller of the security can expect, the yield to fall to 7.40% by next day
b buyer of the security can expect, the yield to rise to 8.80% by next day I
c buyer of the security can expect, the yield to rise to 8.80% by next day I
ee
d none of the above
In the above case, the VaR at 95% confidence means:

there is 5% possibility for the yield to be higher than 0.70%
there is 1% possibility for the yield to be lower than 0.70%
there is 5% possibility of adverse change being higher than 0.70%
D
none of the above

Dec 2017
X is the seller of an option and Y is the buyer of the option. As per this option, the option buyer
can buy USD 100000 at a strike price of Rs.45 per USD with expiry at the end of 3 months.
According to this contract,
da
Y has the right to sell USD 100000 to X
Y has the right to buy USD 100000 from X--
X has the right to buy USD 100000 from Y
Y has the obligation to buy USD 100000 from X
In the above case (i.e. call option), if the spot price of USD is Rs.45.50 on the expiry day, it is an:
at the-money option
oo
out-of money option
in the money option--
American option
In the above case (i.e. call option), if the spot price of USD is Rs44.50 on the expiry day, it is an:
at the-money option
out of money option--
in the-money option
American option H
In the above case (i.e. call option), if the spot price of USD is Rs45.00 on the expiry day, it is an:
at the-money option--
ak
out of money option
in the-money option
American option
A futures contract of USD 10000 is traded at National Stock Exchange for delivery on Aug 28,
2011 at one USD = Rs.45.00 as against the spot rate of Rs.44.30.
The contract implies that :

p
a buyer would deliver the holder of the contract USD 10000 against payment of equivalent rupees
at the agreed rate of Rs.45.00
b seller would deliver the holder of the contract USD 10000 against payment of equivalent rupees
ee
at the agreed rate of Rs.45.00--

c seller would deliver to the buyer of the contract USD 10000 against payment of equivalent rupees
at the agreed rate of Rs.44.30
d buyer would deliver to the buyer of the contract USD 10000 against payment of equivalent
rupees at the agreed rate of Rs.44.30
D
In the above case, if the market rate of USD is Rs.45.90

a the seller will pay to the holder, the difference in contract price and spot price on that date--
b the buyer will pay to the holder, the difference in contract price and spot price on that date
c the seller will pay to the buyer, the difference in contract price and spot price on that date
d the seller will pay to the holder, the amount of contact price

Dec 2017
In the above case, if the market price is less than the contract price
the buyer of the contract will get the profit
the buyer of the contract will bear the losses--
da
the seller of die contract will bear the losses
the profit or loss, if any, will be shared between the buyer and the seller
International Bank has provided the following information relating to its advance portfolio as on
Mar , 31 2012
Total advances Rs. 40000 Cr.
oo
Gross NPA 9%
Net NPA 2%
Based on the information, answer the following questions
Considering that all the standard loan accounts represents general advances, what is the amount of
provision for standard loan accounts:
Rs.160 Cr
Rs.151.90 Cr
Rs.145.60 Cr--
Rs.141.50 Cr
H
ak
What is the provision on NPA accounts?
Rs.3600 Cr
Rs.3200 Cr
Rs.2800 Cr--
Rs.3500 Cr
What is the total amount of provisions on total advances, including the standard accounts?
Rs.3612.30 Cr
p
Rs.2945.60 Cr--
Rs.2840.20 Cr
Rs. 2596.32 Cr
ee
What is the amount of gross NPA ?

a Rs.4000 Cr
b Rs.3600 Cr--
c Rs.3200 Cr
d Rs.2800 Cr
D
What is the amount of net NPA?

a Rs.800 Cr--
b Rs.1000 Cr
c Rs.1200 Cr
d Rs.1500 Cr

Dec 2017
What is the provision coverage ratio for NPA?

a 70%
b 74.3%
da
c 75.2%
d 77.8%--
What is the minimum amount of provisions to be maintained by the bank to meet the provisioning
coverage ratio of 70%.
Rs.3600 Cr
Rs.3Z00 Cr
oo
Rs.2880 Cr
Rs.2520 Cr--
International Bank provides following information about its NPA accounts as on Mar 31, 2010.
Total loans — Rs 40000 Cr
Doubtful up to 1 year Rs. 800 Cr

H
Standard accounts Rs.38000 Cr including direct agriculture and SME loans of Rs 10000 Cr
Substandard Rs.800 Cr out of which sub secured Rs.200 Cr
Doubtful above 1 year up to 3 year Rs.200 Cr

Doubtful above 3 year Rs.120 Cr
ak
Loss accounts Rs.80 Cr.
All doubtful loans are fully secured
What is the provision on standard accounts?

a Rs.25 Cr
b R5112 Cr
c Rs.137 Cr--
d Rs.151 Cr
p
What is the amount of provision on sub-standard loan accounts?

a Rs.120 Cr
ee
b Rs.140 Cr--
c Rs.160 Cr
d Rs.240 Cr
What is the amount of provision on doubtful loan accounts.

a Rs.400 Cr--
D
b Rs.340 Cr
c Rs.320 Cr
d Rs.260 Cr

Dec 2017
What is the total provision on NPA loan?
a Rs.120 Cr
b Rs.560 Cr
c Rs.580 Cr
da
d RS.620 Cr--
05 What is the total provision on standard and NPA loans

Rs. 813 Cr
Rs.757 Cr--
Rs.689 Cr
Rs.716 Cr
oo
What is the provision coverage ratio of the bank?
28.6%
30.8%
32.9%-
34.1%
Rs.90 Cr--
Rs.85 Cr
Rs.80 Cr
H
If the security value in secured sub-standard accounts is Rs.500 Cr, what Will be the provision on
sub-standard accounts.
ak
Rs.75 Cr
if security value in DF~1 category accounts is Rs.600 Cr, what will be amount of provision for
DF-1 category accounts?
Rs.800 Cr
Rs.600 Cr
Rs.350 Cr--
Rs.190 Cr
p
If security value is Rs.150 Cr in DF-2 accounts, the provision shall be: -

Rs.110 Cr --
ee
Rs.95 Cr
Rs.80 Cr
Rs.75 Cr
What is the Percentage of Cross NPA?
8%
6%
D
5% --
4%

Dec 2017
Rs.2000 Cr
Rs.1380 Cr--
Rs.1170 Cr
da
Rs.1080 Cr
What is the percentage of net NPA?

3.29%
3.41%
3.50%--
4.01%
oo
International Bank has following information relating to NPA loans portfolio on its records as on
Mar 31, 2010.
Sub-standard secured loans Rs.1200 Cr (security value Rs.1000 Cr)
Sub-standard unsecured loans Rs.200 Cr (security value Rs.18 Cr),
Doubtful up to 1 year loans Rs.800 Cr (security value Rs.600 Cr),
H
Doubtful above 1 year up to 3 year loans Rs.800 Cr (security value Rs.400 Cr),
Doubtful above 3 years loans Rs.800 Cr (security value Rs.200 Cr),
Loss loans Rs.200 Cr (security value Rs.18cr),
Total advances - Rs.40000 Cr.
Total NPA Rs.4000 Cr
ak
What is the amount of gross NPA?
a 10%--
b 11%
c 12%
d 8%
What is the amount of provision for substandard account?

a Rs.320 Cr
p
b Rs.240 Cr
c Rs.230 Cr--
d Rs.180 Cr
ee
What is the amount of provision for doubtful loans?

a Rs.1710 Cr--
b Rs.1660 Cr
c Rs. 1520 Cr
d Rs. 1490 Cr
D
What is the amount of total provisions?

a Rs.1640 Cr
b.Rs.l760 Cr
c Rs.1840 Cr
d Rs.2140 Cr--

Dec 2017
a 5.18%
b 4.91%--
c 4.65%
da
d 9.2%
.
What is the provision coverage ratio?
a 51. 5%
b 53.5%--
c 57.9%
d 64-5%
oo
Popular Bank has following loan accounts :
1. a term loan, for purchase of transport vehicle, was being repaid regularly till recently but the
installments for the last two months have been not been paid although the interest has been paid
2. a cash Credit account, the balance of which is within its sanctioned limit and drawing power but
H
the party has not renewed the Which had fallen due more than 6 months earlier.
3. a cash Credit account, the balance of which is within its sanctioned limit and drawing power, but
the party has not submitted stock report for the last two months.
4. a term loan to a farmer for purchase of tractor the installments of which had fallen due 5 months
ak
back but the farmer has not deposited the installment and interest.
What will be asset classification of these assets. State with the rule applied for the purpose of such
classification.
Bank—B has to make regulatory adjustment of Rs.300 Cr. This amount relates to deferred tax
assets.
p
RBI rules relating to regulatory adjustment under Basel III provide that adjustments are to be
phased—in to the extent of 20% as on 1.4.2013 from Common Equity Tier 1 only. The complete
phase-in is to be done by March 31, 2017. During this transition period, the remainder not deducted
ee
from Common Equity Tier 1 / Additional Tier 1 / Tier 2 capital will continue to be subject to
treatments given under Basel II capital adequacy framework.
Based on above information, answer the following questions:
If the deduction amount is taken off from Common Equity Tier I under Basel III, what amount will
be deducted from CET1?
D
Rs.300 Cr
Rs.240 Cr
Rs.60 Cr--
Rs.20 Cr

Dec 2017
What amount will be deducted from Tier 1 capital as per these rules ?
Rs.300 Cr
Rs.240 Cr--
Rs.60 Cr
da
Rs.20 Cr
RBI rules provide as under:

1. Claims on foreign sovereigns will attract risk weights as per the rating assigned to those
sovereigns/ Sovereign claims by international rating agencies as follows:
AAA to AA rating : 0%,
A rating : 20%,
oo
BBB rating: 50%,
BB to B : 100%,
Below B : 150%
Unrated : 100%
2. Claims denominated in domestic currency of the foreign sovereign met out of the resources in
SBI makes following’ investments: H

the same currency raised in the jurisdiction of that sovereign will, however, attracts a risk weight
of zero percent
1. SBI branch in London makes investments equal to USD 10 million, in A rated Treasury bill
2. SBI branch in New York makes investments equal to USD 15 million, in A rated Treasury Bills.
ak
Based on these rules answer the following questions:
What will be the risk weight for the investment/made by New York branch of SBI:
a: 0%--
b: 20%
c: 50%
d:70% .
p
What will be the risk weight for the investment made’ by London branch of SBI:
a: 0%
ee
b: 20% --
c: 50%
d:70%
D

Dec 2017
Indira Nagar branch of Popular Bank has made the following housing loans:
1. Loan Of RS.15 lac to Mr. X (LTV 85%), of Rs.35 lac to Mr. Y (LTV 80%) and of Rs.80 lac to
Mr. Z (LTV 75%).
2. Loan of Rs.200 Cr to commercial real estate residential housing and another loan of Rs.300 Cr
da
for commercial real estate.
RBI rules on risk weight for housing loans as under:

(a) Individual House loans: Risk weight
(i) up to Rs.30 lac with Loan to value (LTV) ratio up to 80% 35%
(ii) up to Rs.30 lac with Loan to value (LTV) ratio up to 90% 50%
(m) above Rs.30lac up to Rs. 75 lac with LTVR up to 75% 35%
oo
(iv) above Rs.30lac up to Rs. 75 lac with LTVR of 80% 50%
(v) above Rs.75 lac with LTV of 75% 75%
(b) Commercial real estate Residential Housing 75%
(c) Commercial Real Estate 100%
H
Based on the above information, answer the following questions:
If the total capital adequacy ratio is to be maintained at 9% of risk weighted assets, what will be
total amount of capital for housing loan given to X, Y and Z.
Rs.7.65 lac--
Rs.15.30 lac
Rs.30.60 lac
ak
Rs.130 lac
If the total capital adequacy ratio is to be maintained at 9% of risk weighted assets, what will be
amount of capital for commercial real estate residential housing and for commercial real estate
loans.
Rs.18 Cr
Rs.27 Cr
Rs.45 Cr
p
Rs.40.50 Cr--
ee
Bank A earned a net profit after tax and provisions of Rs.3000 and Bank B of Rs. 1200 Cr .
Common Equity Tier I capital ratio of Bank A is 6.72% after including the current period of
retained profits The ratio of Bank B is 7%. Both the banks propose to mobllize fresh capital
through public issue and ot make issue attractive, want to pay highest dividend.
RBI rules regarding CCR provide as under:
Ratio after including the current periods Minimum Capital conservation ratios
D
retained earning (expressed as a percentage of earnings)

5.5% - 6.125% 100%
>6.125% - 6.75% 80%
>6.75% - 7.375% 60%
>7.375% - 8.0% 40%
>8.0% 0%

Dec 2017
what is the amount of net profit which the Bank-A is required not to distribute to ensure
compliance of Basel III prescription.
a: Rs.3000 Cr
da
b: Rs.2400 Cr--
c: R5600 Cr
d: Rs.600 Cr
What is the maximum amount which the Bank-A can distribute as dividend to ensure compliance
of Basel III prescription.
a: Rs.3000 Cr
oo
b: Rs.2400 Cr
c: R5600 Cr
d: Rs.600 Cr--
what is the amount of net profit which the Bank-B can distribute as dividend to ensure compliance
a: Rs.1200 Cr
b: Rs.720 Cr--
c: Rs.480 Cr
d: Rs.240 Cr
H
What is the maximum amount which the Bank-B can distribute as dividend to ensure compliance
ak
a: Rs.1200 Cr
b: Rs.720 Cr
c: Rs.480 Cr --
d: Rs.240 Cr
p
Popular Bank granted a corporate loan of Rs.10 Cr to XYZ Limited repayable over 3 years. The
ee
Credit rating of the company is A. The value of collateral in the account is Rs.10 Cr in the form of
unrated Bonds issued by another bank with a residual maturity of 3 years. As per RBI guidelines,
risk weight of loan to A rated borrower is 50%. The haircut on such bonds is 6% and the haircut for
such exposure is zero.
What is the value of collateral security after prescribed haircut.

D
a: Rs.10 Cr
b: Rs.9.40 Cr--
c: Rs.0.60 Cr
d: Rs.0.30 Cr

Dec 2017
What is, the value of net exposure after Credit risk mitigation taking into account the collateral
security with prescribed haircut.
a. Rs.10 Cr
b: Rs.9.40 Cr
da
c: Rs.0.60 Cr --
d. Rs.0.30 Cr
What is die value of risk weight assets after Credit risk mitigation based on the collateral security. .
a. Rs.10 Cr
b: Rs.9.40 Cr
c: Rs.0.60 Cr
oo
d. Rs.0.30 Cr--
Bank-B purchased a Govt. of India dated security (face value Rs.10000, residual maturity 5 years
and coupon 6%) from Bank-C at current market price of Rs.10500. Cash borrowed by the bank for
this purpose is Rs.10500. The modified duration of the security is 4.5 years. The bank holds this
security for min 5 business days under a repo transaction. As per RBI guidelines, the scaled down
H
haircut for the security is 1.4% (actual haircut 2%) and haircut on cash is 0%. The change in the
yield for computing capital charge for general market risk is 0.7%.
What is the exposure adjusted for haircut?

a: Rs.10000
b: Rs.10500
ak
c: Rs.10647 --
d: Rs.10650
02 What is the amount of net exposure?

a: Rs.647 --
b: Rs.500
c: nil
d: inadequate information
p
What is the risk weight value for the asset:

a: Rs.10500
ee
b: Rs.10000
c: Rs.647 --
d: Rs.129.40
What is the amount of capital charge for counterparty Credit risk?

a: Rs.647
D
b: Rs.129.40
c:Rs 11.60--
d: incomplete data

Dec 2017
What is the amount of capital charge for counterparty market risk?
a: Rs.945
b: Rs.900
c:Rs 116.60
da
d:Rs 330.70--
What is the amount of total capital required for counterparty Credit risk and market risk?
a: Rs.342.3.--
b: Rs. 330.70
c:Rs 116.60
d:Rs 11.60
oo
Universal bank calculated the capital adequacy ratios as under:
Common Equity Tier 1 Ratio 8.5% of risk weighted assets
Capital conservation buffer 2.5% of risk weighted assets
PNCPS/ PDI 3.5% of risk weighted assets
Tier 2 capital issued by bank 2.5% of risk weighted assets
Total capital available
H 17% of risk weighted assets

As per Basel III rules of RBI, for the purpose of reporting Tier 1 capital and CRAR, any excess
Additional Tier 1 (AT1) capital and Tier 2 (T2) capital will be recognized in the same proportion
as that applicable towards minimum capital requirements. At min 9%‘ total capital, the max AT1
can be 1.5% and T2 can be max 2%.
ak
What is the amount of total CET1 capital:
a: 9%
b: 10%
c: 11% --
d: 12%
What is the amount of PNCPS / PDI eligible for Tier I?

p
a: 3%
b: 2.5% .
c: 2.125% --
d: 1.375%
ee
03 What is the amount of PNCPS / PDI not eligible for Tier I?

a: 3% a
b: 2.5%
c: 2.125% --
d 1.375%
D
What is the amount of Tier 2 eligible for CRAR?

a: 2%
b: 2.5%
c: 2.833% --
d: 0.333%

Dec 2017
What is the amount of PNCPSI PDI eligible for Tier 2?
a: 2%
b: 2.5%
c: 2.833%
da
d: 0.333%--
What is the amount of PNCPS / PDI not eligible for Tier 2 capital?
a: 1.375%
b: 1.042%--
c: 2.125%
d: 0.333%
oo
What is the total amount of eligible capital?
a: 17%
b: 16.43%
c: 15.96%--
d: 14.13%
Common Equity Tier 1 ratio

H
Universal bank reported the following information relating to its business (rupees in 000 Cr):
85.00
ak
Capital conservation buffer 25.00
Total amount of PNCPS / PDI 35.00
Eligible PNCPS / PDI for AT1 21.25
Eligible Tier I capital 106.25
Tier 2 capital available 25.00
Tier 2 capital eligibility 28.33
Excess PNCPS / PDI eligible for Tier 2 capital 3.33
p
Total Eligible capital 134.58

Credit and operational risk weighted assets 1200
Market risk weighted assets 100
ee
On the basis of given information, answer the following questions:
What is the min Common Equity Tier-1 (CET1) capital to support Credit and operational risk:
108
66--
24
D
18

Dec 2017
What is the max Additional Tier-1 (AT1) capital to support Credit and operational risk:
108
66
24
da
18--
What is the max Tier 2 (T2) capital to support I Credit and operational risk:
108
66
24--
18
oo
What is the amount of total capital to support Credit and operational risk:
108--
66
24
18
19--
4.33
3.25
H
What is the min Common Equity Tier -1 (CET1) capital to support market risk:
26.58
ak
What is the max Additional Tier -1 (AT1) capital to support market risk:
15.53
19--
4.33
3.25
What is the max Tier 2 (T2) capital to support market risk:

p
26.58
19
4.33
ee
3.25--
What is the amount of total capital to support market risk:

a: 26.58 --
b: 19
c: 4.33
D
d: 3.25

Dec 2017
Calculation of Components of Capital Fund and CAR under Banking Corporation provided the
following information, as on 31, 2016
Type of capital Amount in Rs. Cr
da
Authorised capital 5000
Paid up capital as at end of previous financial year 3000
Statutory reserve 2250
Perpetual non commutative preference shares 2000
Premium on issue of Perpetual non-cumulative preference 200
Debt instruments eligible for Tier-2 with a residual of 3 years and 6 months 800
oo
General Provision and Loss reserves 1600
Revaluation reserve 2500
Total risk weighted assets 90000
What is the amount of Common Equity Tier-1 capital

5250 Cr--
2200 Cr
1350 Cr
1800 Cr
H
What is the Common Equity Tier 1 capital ratio
1.5%
2.0%
ak
5.5%
5.83%--
What is amount of Additional Tier-1 capital.

a 5250 Cr
b 2200 Cr
c 1350 Cr--
p
d 1800 Cr
What is the Additional Tier-1 capital ratio ?

a 1.5%--
ee
b 2.0%
c 5.5%
d 5.83%
What is the amount of Tier r-2 capital?

a 5250 Cr
D
b 2200 Cr
c 1350 Cr
d 1800 Cr--

Dec 2017
What is total amount of eligible capital funds?
a 1.5%
b 2.0%
c 5.5%
da
d 5.83%--
What is the total capital adequacy ratio?

a 8.83%
b 9.03%
c 9.33%--
oo
d 9.83%
Blank-Z has the following loans In its books.

1. Secured Staff loans : Rs.5000 Cr
2. Home loans to public (all loans below Rs.25 lac within prescribed LTV ratio) : 15000 Cr
3. Loans against shares of AAA rated companies : Rs.2000 Cr
4. MSE loans guaranteed by CG!‘-MSE guarantee : Rs.30000 Cr
H
What is capital ratio required for staff loans?

a 9%
b 3.15%
ak
c 1.80%--
d 0%
What is required capital ratio for home loans?

a 9%
b 3.15%--
c 1.80%
d 0%
p
03 What is required ‘Fer-1 capital ratio for loans against shares?

a 9%
ee
b 8.75%--
c 1.80%
d 0%
What is the required capital ratio for MSE loans?

a 9%
D
b 8.75%
c 1.80%
d 0%--

Dec 2017
Bank-A had capital adequacy ratio of 11.33% as on March 31, 2016 and risk weighted assets of
Rs.50000 Cr. Bank paid annual average dividend of Rs.200 Cr during the previous 3 years. In the
current year, bank earned a net profit of Rs.1O0 Cr in the first quarter (Jun 2016) and Rs.130 Cr in
the 2nd quarter (Sep 2016).
da
01 What is the amount of profit eligible for inclusion in capital fund at the end of 2nd quarter.
Rs.230 Cr
Rs.200 or
Rs.130 Cr--
oo
Rs.100 Cr
Out of the following, the capital fund increase will be represented by increase in
Common Equity Tier1 capital--
Additional Tier 1 capital
Tier-2 capital
Capital conservation buffer
H
If the level of risk weighted assets remains at Rs.54000 Cr as on Sept 30, 2016, what is the capital
adequacy ratio of the bank as on 30.09.16?
11.33%
ak
11.57%--
11.77%
11.98%
Bank Z has surplus funds and plans to:

1. invest Rs.5O0 Cr in the equity issued by bank X
2. invest Rs.200 Cr in the capital of a subsidiary company, being promoted by the bank.
3. Lend Rs.400 Cr against fully paid up equity shares of Bank Y with a paid up equity capital of
p
Rs.1000 Cr.
The paid-up capital and reserves of Bank Z are Rs.l00 Cr and its capital funds as calculated as per
Basel III are Rs.600 Cr.
ee

RBI guidelines : When banks invest in equity of other banks and financial institutions, they have to
comply with the following:
1. Max investment in equity can be up to 10% of their capital funds.

2. Investment should not be more than 5% of investee bank's equity capital.
D
3. Investment in. subsidiary company can be up to 10% of paid-up capital

and reserves .
4. The bank can hold as owner, mortgagee or pledge, the shares of another company max»30% of
its own paid up capital and reserves or 30% of paid up capital of the company, whichever is lower.

Dec 2017
What is the maximum amount that Bank-Z can invest in equity issued by Bank-X?
Rs.500 Cr
Rs.120 Cr
da
Rs.60 Cr--
Rs.40 Cr
02 What is the maximum amount that Bank-Z can invest in equity of its subsidiary company?
Rs.200 Cr
Rs.120 Cr
Rs.60 Cr
oo
Rs.40 Cr--
03 What is the maximum amount that Bank-Z can lend against equity shares issued by Bank-Y?
Rs.400 Cr
Rs.120 Cr--
Rs.60 Cr
Rs.40 Cr
Minimum Capital Apr, 1 Mar, 1

H
RBI plan to implement Basel 3 requirements is provided in the following table.
Mar, 31 Mar, 31 Mar, 31

(RWA in %)
Mar, 31 Mar, 31
Ratio 2013 2014 2015 2016 2017 2018 2019
ak
Minimum Common 4.5 5 5.5 5.5 5.5 5.5 5.5
Equity Tier
Capital conservation 0.625 1.25 1.875 2.5
buffer (CCB)
Minimum CET + 4.5 5 5.5 6.125 6.75 7.375 8
CCB
Minimum Tier 1 6 6.5 7 7 7 7 7
p
capital
Minimum total 9 9 9 9 9 9 9
capital*
ee
Minimum total 9 9 9 9.625 10.25 10.875 11.5

capital + CCB
Phase in all 20 40 60 80 100 100 100
deduction form CET
1#
D
* The difference between the minimum total capital requirement oi 9% and the Tier 1 requirement
can ire met with Tier 2 and higher forms of capital
# The same transition approach will apply in deductions from Additional Tier 1 and Tier 2 capital.

Dec 2017
All regulatory deductions from CET 1 capital shall be completed by:
31.03.19
31.03.18
31.03.17--
da
31.03.16
Banks start maintaining capital conservation buffer (CCB) from:

31.03.14
31.03.15
31.03.16--
31.03.17
oo
Common Equity Tier 1 regulatory ratio is to be achieved by banks by:
31.03.14
31.03.15--
31.03.16
31.03.17
H
Popular Banks has following inter-bank assets in its balance sheet as at 31.03.16:
1. Amount of Rs.300 Cr lent to Bank-A as notice money. Bank A’s compliance of regulatory
capital (CET+CCB) is 112%.
2. Amount of Rs.50 Cr invested in certificate of deposit issued by Bank-B. Bank-B's compliance of
ak
regulatory capital (CET+CCB) is 97%.
3. Balance of Rs.20 Cr in current account opened with Bank-C. Bank-C's compliance of regulatory
capital (CET+CCB) is 47%.
RBI rules provide the risk weight for different category of banks as under:
1. Banks with compliance level 100% or above of minimum CEF1 and applicable CCB = Risk
Weight : 20%
2. Banks with compliance level 75% to < 100% of minimum CET1 and applicable CCB = Risk
Weight : 50%
p
3. Banks with compliance level 50% to <75% of minimum CET1 and applicable CCB = Risk
Weight : 100%
4. Banks with compliance level 0% to <50% or above of minimum CET and applicable CCB=Risk
ee
Weight:150%
5. Banks with compliance of minimum CET1 less than applicable: 625%
What is the risk value of exposure in respect of Bank-A?

D
a Rs.300 Cr
b Rs.150 Cr
c Rs.60 Cr--
d0

Dec 2017
How much min Tier 1 capital is required for exposure in case of Bank-B?
Rs.2.25 Cr
Rs.1.75 Cr--
Rs.1.25 Cr
da
0
What is the minimum amount of regulatory capital for exposure for Bank C
a Rs.2.70 Cr--
b Rs.1.80 Cr
c Rs.1.35 Cr
d.0
oo
What is the total amount of risk weighted value for the portfolio.
a Rs.185 Cr--
b Rs. 165 Cr
c Rs.135 Cr
d Rs.115 Cr--
Rs.12.85 Cr
Rs.10.35 Cr--
Rs.8.45 Cr
H
What is the total amount of regulatory capital required to cover the portfolio.
Rs.15.50 Cr
ak
As on 31.03.2016, International Bank has following portfolio of loans:
1. Agriculture loans (max amount of individual loan Rs.55 lac) = 3.50 or
2. Vehicle loans (max amount of individual loan Rs.30 lac) = 1.20 Cr
3. Loans against shares of reputed companies = Rs.2.30 Cr
4. Personal loans and consumer loans = 0.40 Cr
5. Loans to staff which are covered by superannuation benefits = 0.60 Cr
6. Credit cards = 0.70 Cr.
p
As per RBI guidelines, the risk weight for regulatory retail loans, the risk weight is 75%, for Credit
cards, consumer loans. and loan against shares 125% and for secured staff loans 20%.
ee
Calculate the amount of retail loans?

a Rs.350 lac
b Rs.470 lac--
D
c Rs.8l0 lac
d Rs.870 lac

Dec 2017
What is the total minimum capital funds required to cover the retail loans?
Rs.42.35 lac
Rs.36.125 lac
Rs.31.725 lac--
da
Rs.29.76 lac
What is the risk weight value of total loan portfolio.

a Rs.789.50--
b Rs.712.90
c Rs.i-378.45
d Rs.452.67
oo
What is the amount of regulatory capital required for the portfolio?
Rs.55.60 lac
Rs.59.625 lac
Rs.66.932 lac
Rs.71.055 lac--
H
Bank—Z has made following investment in different types of securities:
1. Central Govt. dated securities maturing within 3 years = 500 Cr
2. State Govt. development loans maturing within 2 years = 100 Cr
3. A rated Foreign central govt. securities maturing within 2 years = 50 Cr
ak
4. AA rated corporate bonds maturing within 18 months = 20 Cr.
What is the amount of regulatory capital for specific risk as part of market risk for these
investments:
Rs.9.25 Cr
Rs.11.28 Cr--
p
Rs.16.89 Cr
Rs.22.67 Cr
ee
What is the risk weight value of the investment?

a Rs.678.09 Cr
b Rs.541.98 Cr
c Rs.238.93 Cr
d Rs.125.33 Cr--
D

Dec 2017
Under Pillar-2 of Basel III, there are 4 principles of Supervisory Review.
Based on these principles, answer the following questions:
Supervisor should have the ability to require the banks to hold capital in excess of minimum
da
required capital as per
Principle-1
Principle-2
Principle-3--
Principle-4
Supervisor should review and evaluate a bank's compliance with the regulatory capital, as per I
oo
Principle-1
Principle-2--
Principle-3
Principle-4
Supervisor should seek to intervene at an early Stage to Prevent capital from falling below the
minimum regulatory level as per:
Principle-1
Principle-2
Principle-3
Principle-4--
H
Bank-Z sanctioned a loan of Rs.100 Cr to XYZ Limited (BB Rated) repayable over 2 year which is
ak
secured by collateral of govt. securities valuing Rs.100 Cr maturing in 2 years. Calculate the risk
weighted value of the exposure and capital fund required for that. Applicable haircut is 2%
Bank-Z sanctioned an loan of USD 100 Cr (current exchange rate assumed USD = Rs.40) to XYZ
Limited (BBB rated) repayable over 6 years secured by collateral BBB rated corporate bonds,
Valuing Rs.4000 maturing in 6 years. Calculate the risk weighted value of the exposure and
capital funds required for that
p
Popular Bank Ltd has provided following information as on 31.03.16

(amount in Cr of rupees)
Equity capital 8000
ee
Statutory reserves 1500

Perpetual non-cumulative preference share 4000
Capital reserve 400
PCPS/RNCPS/RCPS 2000
Other disclosed free reserves 2400‘
Stock surplus eligible for Addl Tier-1 capital 500
D
General provisions and loss reserves 3000

Revaluation reserve 1200
Forex Translation Reserve 300
The amount of risk weighted assets is Rs.200000 Cr.

Dec 2017
Based on this information, answer the following questions:
What is amount of eligible Common Equity Tier-1 Capital?

a 13065 --
da
b 13800
c 12500
d 11795
What is the amount of eligible Additional Tier-1 capital, which can be included in the capital
funds?
a 4500
oo
b 4000
c 3500
d 3000--
What is the amount of Tier 2 capital which can be included in Capital funds:
4500
4000--
3500
3000 H
What is the amount of total eligible Capital funds:
19805
ak
22565--
2178
22075
What is common equity Tier1 capital adequacy ratio of the bank?

a 5.3%
b 5.85%
c 6.1%
p
d 6.53% --
06 What is capital adequacy ratio of the bank (rounding to first decimal point)?
ee
a 10.76%
b 10.30%
c 11.28% --
d 9.50%
D

Dec 2017
Popular Bank Ltd has provided following information as on 31.03.16
(amount in Cr of rupees)
Open position in foreign currency-200
Term loan to an Indian corporate with A rating-300
da
Staff loans fully secured as per bank policy-1500
Loans guaranteed by CGTMSE-1600
Housing loans guaranteed by CRGFLIG-100
Individual house loans amount < 30 lac. LTV 75% -2000
Retail loans-1000
Other loans-600
Cash with other banks with CAR of 9%-300
oo
Credit cards issued by the bank-200
Total 78000
as on this information, answer the following questions;
What is the amount of risk weight of assets In respect of individual home loans:
a 2000
b 1000
c 700--
d Zero H
Which is the amount of Weight of assets in respect of loans to Indian Corporates:
a 300
ak
b 375
c 60
d 150--
What is the capital ratio requirement for Credit cards?

a 9%
b 11.25%--
c 075%
p
d 4.50%
ee
What is the amount of total risk weight of all assets?

a 7800
b 3010--
c 5030
d 6040
D
What is the amount of total capital requirement?

a 270.90 --
b 165.55
c 45.15
d.50.20

Dec 2017
what is the required amount of Common Equity Tier 1 capital
a 270.90
b 165.55--
c 45.15
da
d 60.20
The following information relating to 5 different banks is available:

Bank Common Equity Tier 1 Net profit after tax and
In % provisions (Rs.Cr)
oo
Bank-A 5.75 800
Bank-B 6.5 1200
Bank-C 6.8 600
Bank-D 7.75 1700
Bank-E 8.1 1100
a.Rs.800 Cr --
b:Rs.640 Cr
c.Rs.480 Cr
d: Rs.320 Cr
H
What is the amount of net profit which the Bank A is required not to distribute to ensure
ak
What is the maximum amount which the Bank B can distribute as dividend to ensure compliance
a.Rs.300 Cr
b: Rs.240 Cr--
c.Rs.160 Cr
d: Rs.60 Cr
p
What is the amount of net profit which the Bank C is required not to distribute to ensure
a.Rs.600 Cr
ee
b: Rs.360 Cr
c.Rs.240 Cr --
d: Rs.120 Cr
What is the maximum amount which the Bank D can distribute as dividend to ensure compliance
D
a: Rs.1700 Cr
b.Rs.1520 Cr
c: Rs.1280 Cr
d.Rs.1020 Cr--

Dec 2017
What is the maximum amount which the Bank E can distribute as dividend to ensure compliance of
Basel III prescription.
a: Rs.1100 Cr--
a: Rs.880 Cr
da
c: Rs.660 Cr
a: Rs.440 Cr
What is the maximum amount which these can distribute as dividend to ensure compliance of
Basel III prescription.
a: Rs.3200 Cr
oo
a: Rs.2980 Cr
c: Rs.2600 Cr--
a: Rs.2440 Cr
Mr. Amit purchases a call option for 100 shares of Deliance Company with strike price of
individual on the transaction?

a. Gain of Rs. 2000
b. Gain of Rs. 4000
c. Gain of Rs. 680
H
Rs. 100 having maturity after 03 months at a premium of Rs. 40. On maturity, shares of A
were priced at Rs. 160. Taking interest cost @ 12% p.a. What is the profit/loss for the
ak
d. Gain of Rs. 1880
Ans - d
LIC of India buys a specified no of futures at NSE on a stock at strike price of Rs 100
each spot price of the stocks is Rs 110. At the maturity of the contract the Fl takes
delivery of the During the period, the spot price of the stock decreases by Rs 3. What is
the acquisition cost to the per share’?
a. Rs. 107
p
b. Rs. 103
c. Rs. 100
d. Rs. 97
ee
Ans: c
Ms Neha purchases a put option for 200 shares of Star Company with strike price of Rs.
220, having maturity after 02 months for Rs. 50 each. On maturity, shares of A were
priced at Rs. 230
What is the profit/loss for the individual on the transaction (without taking the interest cost
D
and exchange commission into calculation)?

a. Profit of Rs. 6000
b. Profit of Rs. 10,000
c. Loss of Rs. 10,000
d. Loss of Rs. 16000
Ans-c

Dec 2017
Ms Neha purchases a put option for 200 shares of Star Company with strike price of Rs.
da
220 having maturity after 02 months for Rs. 50. On maturity, shares of A were priced at
Rs. 190. What is the profit/loss for the individual on the transaction (without taking the
interest cost and exchange commission into calculation)?
b. Profit of Rs. 10,000
c. Loss of Rs. 10,000
d. Loss of Rs. 6000
oo
Ans - d
A bank borrows US $ for O3 months @ 3.0% and swaps the same in to INR for 03
months for deployment in CPs @ 5%. The 3 months premium on US $ is 0.5%. What is
the margin(gain/loss) generated by the bank in the transaction?
a. 2%
b. 3%
c. 1.5%
d. 2.5%
Ans-c
H
Kaynat purchases a call option for 200 shares of A with strike price of Rs. 100 having
ak
maturity after 03 months for Rs. 20 and also buy a put option for 100 shares of B with
strike price of Rs. 150 having maturity after 03 months for Rs. 30. On maturity, shares of
A were priced at Rs. 150 and shares of B were priced at Rs. 170. What is the profit/loss
for the her on the transaction (without taking the interest cost and exchange commission
into calculation)?
b. Profit of Rs. 2000
c. Loss of Rs. 1000
p
d. Profit of Rs. 1000

Ans - d
ee
A company enjoys cash Credit account with a bank. lt also has a term loan account with
o/s balance of Rs.10 Cr as on 31-03-2014. The bank has also subscribed to the bonds
issued by the borrower company amounting to Rs. 1Cr0res. As on 31-03-2014, the CC
account with 0/s balance of Rs 2 Crs is required to be classified as NPA. There is no
default in payment of interest and installment in the term loan and bonds. What will be the
amount that will become NPA on account of this company? -
D
a. Rs. 2 Cr b.
b. Rs. 12 Cr
c. Rs. 13 Cr
d. None of the above
Ans- C.

Dec 2017
A bank has deposits worth 2,00,000 Cr. The interest rate on this is 10%. SLR to be
maintained by the bank is 22 %. What will be the effective cost to deposit?
a. 12%
b. 12.82%
da
c. 10%
Ans-b
In a loan a/c, the balance outstanding is Rs. 10 lacs and a cover of 75% is available from
CGTMSE. The a/c has been doubtful since 01.04.2010 and the value of security held is
oo
Rs. 2 lacs. What will be the total provision to be made for this account as on 31.03.2012?
a. Rs. 7.5 lakh
b. Rs. 8.00 lakh
c. Rs. 2.8 lakh
d. Rs. None of the above
Ans-C
H
A claim of Rs. 60 lacs have been settled by ECGC in favour of a bank against default of
Rs. 80 lacs. Subsequently the bank realizes Rs. 20 lacs with the collaterals available to
the loan. What is the loss suffered by the bank on this loan?
a. Rs. 25 lacs
b. Rs. 20 lacs
ak
c. Rs. 15 lacs
d. Rs. 10 lacs
Ans - c
A claim of Rs. 49 lacs have been settled by ECGC in favour of a bank against default of
Rs. 70 lacs. Subsequently the bank realizes Rs. 15 lacs with the collaterals available to
the loan. What will be actual amount settled by ECGC after realization of security by the
bank?
p
a. Rs. 49 lacs
b. Rs. 42.5 lacs
c. Rs. 38.5 lacs
ee
d. Rs. 34 lacs
Ans - c
An advance of Rs. 600000/- has been declared substandard on 31/05/2013. lt is covered

by securities with realizable value of Rs. 250000/-. What will be the total provision in the
account as on 30/04/2014?
D
a. 12500
b. 75000
c. 255000
d. 50000
Ans-a

Dec 2017
A bond with a coupon rate of 7% maturing in 2015 and trading at Rs 125 will have current
yield of
a. 4.89%
b. 5.6%
da
c. 6.25%
d. 7%
Ans - b
Inflow of USD 200,000.00 by TT for Credit to your exporter's account, being advance
payment for exports (Credit received in Nostro statement received from New York
correspondent). What rate you will take to quote to the customer, if the market is
oo
55.21/25. And bank margin is 3 paise on buying and 5 paise on selling.
a. 55.21
b. 55.18
c. 55.25
d. 55.30
Ans - b
a. 76.5480
b. 76.6985
c. 77.1140
H
Retirement of import bill for GBP 100,000.00 by TT Margin 0.20%, ignore cash
discount/premium, GBP/USD 1.3965/75, USD/INR 55.16/18. Compute Rate for Customer.
ak
d. 77.2682
Ans-d
OBC Bank's foreign correspondent maintaining a Nostro Rupee account with OBC bank,
wants to fund his account by purchase of Rs. 10.00 million, against US dollars. Assuming
that the USD/INR interbank market is at 56.2380/2420, what rate would be quoted to the
correspondent, ignoring exchange margin?
a. 56.2380
p
b. 56.2400
c. 56.2420
d. 56.2425
ee
Ans-a
A bank has computed its

D
Tier l capital - Rs. 1000 Cr.

Tier-ll Capital - Rs 1200 Cr.
RWAs for Credit Risk - Rs 19,000 Cr.
Capital charge for market risk - Rs 450 Cr.
Capital charge for operational risk - Rs 550 Cr.

Dec 2017
What would be the bank's total RWAs?
a. 14,257 Cr
b. 23,176 Cr
c. 26,111 Cr
da
d. 30,111 Cr
Ans-d
calculate the CRAR of the bank

a. 9%
b.8%
c 7.72%
oo
d.6. 64%
Ans: d
Structural
liquidity
position
Cash outflow 400 1569
H
Given below is the structural liquidity statement of SBI Bank.
1 day 2 to 7 days 8 to 14
days
1720
15 to 28
3999
days
29 days to 3
month
5467
ak
Cash outflow 390 1456 1210 3467 5209
ln which bucket cumulative mismatch is positive

a. 1day
b.15-28 days
c. 2-7 days
d. none of these
Ans: d
p
Is there any breach in prudential limits? lf so in which bucket

a. 1day
ee
b.15-28 days
c. 2-7 days
d. 8-14 days
Ans: d
As per regulatory guidelines structural liquidity statement needs to be reported to RBI on

D
a. daily basis
b. fortnightly basis
c. monthly basis
d. need not be reported
Ans: B

Dec 2017
A bank’s G sec portfolio has 100 day VaR at 99% confidence level of 4% based on yield.
What is the worst case scenario over 50 days?
a. Increase in yield by 4%
b. Decrease in yield by 0.4%
da
c. increase in yield by 2.82%
d. cannot be determined
Ans-c
A bond having a McCauley’s duration of 8 Yr. is yielding 10% at present. What will be the
modified duration?
a) 8.8181
oo
b) 8.2323
c) 7.5353
d) 7.2727
Ans d
A bond having duration of 8 years is yielding 10% at present. If yield increase by .60%,
b) Bond price would fall by 4.36%

c) Bond price would go up by 10%
d) Bond price would fall by 8.75%
Ans-b
H
what would be the impact on price of the bond?
a) Bond price would go up by 4.36%
ak
Spot Rate - 35.6000/6500
Forward 1M=3500/3000 2M=5500l3000 3M=8500/8000
Transit Period - 20 days.
Exchange Margin - 0.15%.
Find 2 M Forward Buying Rate.
a. 31.1971
p
b. 34.1971
0. 31.6976
d. 34.6976
ee
Ans—d
Asset in Doubtful-l category — Rs. 300,000/-, Realization value of security — Rs.

100000/-
What will be the provision requirement?
a. Rs. 3000O0/-
D
b. Rs. 100000/-
c. Rs. 225000/-
d. Rs. 250000/-
Ans - c

Dec 2017
Two stocks A and B have negative correlation of 70% between them. The portfolio
consists of 100 units of stock A (market price Rs 50) and 100 units of stock B (market
price Rs 80). If price of stock A moves up by 15 % what would be the gain/loss on the
portfolio?
da
a) Gain of Rs. 750
b) Loss of Rs. 90
c) Gain of Rs. 90
d) None of the above
Ans-b
What would be the issue price of a CP (Face value of Rs. 100) carrying an interest rate of
oo
10 % and maturity of 1 year expressed as % of notional value?
a. 100
b. 96.15
c. 90.90
d. 90.09
Ans - d
a. Rs. 500000/-
b. Rs. 32000o/-
c. Rs. 20oo00/-
H
Asset in doubtful category for 2 years Rs. 500000/- Realization value of security - Rs.
300000/- What will be the provision requirement?
ak
d. Rs. 175000/-
Ans - b
Two stocks A and B have negative correlation of 90% between them. The portfolio
consists of 250 units of stock A (market price Rs 120) and 100 units of stock B (market
price Rs 170). If price of stock. A moves up by 40 % what would be the gain/loss on the
portfolio?
a) Gain of Rs. 12000
p
b) Loss of Rs. 1120

c) Gain of Rs. 1120
d) Loss of Rs. 12000
ee
Ans-c
Asset in doubtful category for 4 years - Rs. 500000/- Realization value of security — Rs.
300000/- What will be the provision requirement?
a. Rs. 500000/-
b. Rs. 290000/-
D
c. Rs. 180000/-
d. Rs. 150000/-
Ans - a

Dec 2017
12% government of India security is quoted at RS 120. lf interest rates go down by 1%,
the market price of the security will be? .
a. 120
b. 133.3
da
c. 109
d. 140
Ans- b
What will be the annualized yield of the treasury bill face value Rs.100 with maturity after
85 days which is being traded at Rs 98/-?
a. 8.59
oo
b. 8.76
c. 8.19
d. 8.26
Ans - b
An exporter of Rs 80 lakhs is backed by lien on fixed deposit of Rs 20 lakhs. There is no
b. 0.70 lakh
c. 0.00 lakh
d. 30 lakhs
Ans - c
H
maturity mismatch. What should be Hair cut for Credit risk mitigation?
a. 70 lakhs
ak
What is the risk capital if the traded value is of 100 million and volatility is 9% and VaR is
99 % over the year?
(a) 18.67 million
(b) 41.94 million
(c) 16.00 million
(d) 39.12 million
Ans - b
p
If the YTM is 8% and the coupon rate of 10 % is payable annually, if maturity period is 5
years, the value of the bond will be? (PVIFA (8%,5) =3.9927, PVIF (8%,5) =.6806
ee
a. Rs 1451.72
b. Rs 1056.36
c. Rs 1112.84
d. Rs. 1231.04
Ans-b
D

Dec 2017
A bond with coupon of 7 % is with 3 years to maturity is available for you to purchase. lf
yield is 8%, what price you should pay for the bond.
a. 95.53
b.103.14
da
c. 97.42
d. 101.20
Ans: c
A bond with face value Rs 1000, pays annual coupon rate of 5 % and has 2 years left to
maturity. If yield in market is 6 %, what should be the market price of this bond?
a. 981.67
oo
b.1035.52
c. 999.66
d.971.84
Ans: a
A bond is presently trading at premium. lf face value is Rs 100 and coupon is 8% with
b.10s.52
c. 104.83
d.106.94
Ans: d
H
remaining maturity of 4 years, what is the present market value given market yield is 6 %
a.101.89
ak
Your investment consultant has informed you about bond of XYZ company which is
presently available at the price of Rs 97. The bond has face value of Rs 100, coupon of
8% with maturity of 5 years and present market yield is 9 %. Should you buy this bond at
Rs 97?
Yes-- , No
p
A bond having face value of Rs 1000 and maturity of 6 years pays coupon of 6%. lf
interest rate in the market is 7 % what is the value of the bond.
a.941.30
ee
b.952.29
c. 1032.89
d.1016.94
Ans: b
A bond has face value of Rs 100. If annual coupon is 12 % and maturity period is 8 years.
D
Find the value of the bond if market yield is 11%.

a.101.30
b. 95.29
c. 105.14
d.106.94
Ans: C

Dec 2017
A bond has face value of Rs 100 with coupon rate of 10 % and maturity period is 8 years.
If coupon is paid semi-annually, Find the value of the bond if market yield is 12%.
a.101.30
da
b. 92.29
c. 97.23
d.89.89--
A bond has face value of Rs 100 with coupon rate of 6 % and maturity period is 5 years. lf
coupon is paid semi-annually, Find the value of the bond if market yield is 8%.
a.91.89
oo
b. 92.29
c. 97.23
d.93.65
Ans: A
a 6-year bond is selling at Rs 9500 with face value of Rs 10,000. The annual coupon
b. 9.83
c. 8.65
d.9.12
Ans: d
H
amount is Rs 800. Find the YTM of this bond.
a.9.05
ak
A bank issues 3-year bond of face value Rs 100 and coupon of 8 %. lf selling price of the
is 97.41, what is the yield to maturity of this bond
a. 9.00
b. 9.74
c. 8.65
d. 8.88
Ans: a
p
Next five are based on the date given below. A bank has compiled following data for
computing CRAR as on 31 March 2015
ee
Tier I capital 2500

Tier ll capital 3000
RWA for Credit risk other than retail assets 30,000
(include 2000 Cr of commercial real estate)
Exposure on retail assets 8500
D
Total eligible financial collaterals available for retail assets 1000

Capital charge for general market risk net position 650
Capital charge for specific risk 190
Vertical adjustment 20
Horizontal adjustment 18
Total capital charge for options 110

Dec 2017
Total Capital Charge for equities 180
Gross income for the previous year 520
Gross income for the year before previous year 480
Gross income for 2nd year before previous year 410
da
The capital required for Credit risk at minimum required rate as per RBI is .... ..
a. Rs. 3206 Cr
b. Rs. 3410 Cr
c. Rs. 3701 Cr
d. Rs. 3337 Cr
Ans: A
oo
Total Risk weighted assets for market risk is
a Rs 11542 Cr
b. Rs. 9553 Cr
c Rs 10533 Cr
d. Rs. 12978 Cr
Ans:-
a. Rs. 4944 Cr
b. Rs. 5222 Cr
c. Rs. 4898 Cr
H
Total weighted assets for operational risk is
ak
d. Rs. 6212 Cr
Ans: b
The CRAR of the bank as on 31.03.15 .... ..

a. 7.35 %
b. 9.29 %
c. 9.22 %
d. 10.23 %
p
Ans- b
The bank compares its CRAR with minimum required CRAR and finds
ee
a. its CRAR is more and exceeds requirement by 155.75Crs

b. its CRAR is more and exceeds requirement by 290 Crs
c. its tier I CRAR falls short by Rs 155.75 Crs
d. None of these
Ans: a
D

Dec 2017
The date is given in respect of options of ABC Ltd has been given below. if Strike Price is
Rs 110 and Lot Size is of 100 shares, answer the next five questions
Moth Call premium Put premium
da
Feb 15 5
Mar 18 7
Apr 21 9
May 24 11
if Suman has purchased 1 lot of Call option of February month and spot price on option
oo
expiry date is Rs 120. How much money has she made or lost in this transaction without
considering the
premium cost?
a. Rs. 1200 loss
b. Rs. 1000 gain
c. Rs. 1000 loss
d. none of the above
Ans: b
H
If suman has purchased 1 call option contract of April month and stock price is Rs 155 on
the date of expiry of contract. Calculate her net gain or loss on this contract.
a. Rs. 4500 loss
b. Rs. 1000 gain
ak
c. Rs. 2400 gain
Ans c
Suppose Suman has purchased Put option with April expiry. What is the maximum gain
she can have on this contract?
a. Rs 11000
p
b. Rs. 10100 gain

c. Unlimited
Ans: b
ee
Mona is the seller of May call contract. What is the maximum gain she can have on this
contract?
a. Rs 1000 b.
b. Rs. 2400
D
c. Unlimited
Ans: b

Dec 2017
Kunal is the seller of April call option contract. What is the maximum loss he can suffer on
this contract?
a. Rs 1000
b. Rs. 2400
da
c. Unlimited
Ans: c
Given below is the position of liabilities of Bank of Woman on 31.03.2015.

Paid up capital - 1000 Cr
oo
Amount received from DICGC towards claims and held by banks pending adjustments
thereof Rs.100 Cr
Amount received from ECGC by invoking the guarantee Rs 90 Cr
Amount received from insurance company on ad hoc settlement of claims pending
judgment of the Court;- Rs 73 Cr ;
Refinance taken from Exim Bank- Rs 413 Cr
Refinance taken NHB Rs 200 Cr
Unclaimed deposits Rs 80 Cr H
Amount received from the court receiver Rs 20 Cr
Credit balances in the Cash Credit account - Rs 480 Cr

Deposits held as security for advances which are payable on demand- Rs 520
Current deposits,- Rs 5000 Cr
ak
Demand liabilities portion of saving bank- Rs 3000 Cr,
Time liability portion of saving bank — Rs 17000 Cr,
Fixed deposits — Rs 30,000 Cr ;
Suspense ac- 600 Cr
Participation certificate- Rs 300 Cr.
Deposits- bank (maturity 180 days)- Rs 4000
Total amount of liabilities not to be included in computing DTLs in RS

p
A 5896 Cr
B 3450 Cr
C 4677 Cr
ee
D 4897 Cr
Ans: a
Total amount of DTL on which CRR is to be maintained

A 59980 Cr
B 62450 Cr
D
C 56980 Cr
D 67134 Cr
Ans: c

Dec 2017
If CRR of 4% is to be maintained, what is the amount of CRR which will be maintained
A 2180
B 2905
C 1749
da
D 2280
Ans: D
On the insistence of FM to improve liquidity position in the market, RBI decides to cut
CRR by 25 basis points. If the total of DTL of all SCBs in India stands at Rs 68 lakh Cr.
What will be the impact of cut on the market?
a 23500
oo
b 17000
c Cannot be determined
d data insufficient
Ans: B
the fortnight ended 12th June 2015.

1- 7 days- Minimum balance of 95 %
8-12- Rs 600 Cr daily
H
Based on the data given below answer questions from 61-65
Bank of Uttar Pradesh has maintained following balance with RBI in its CRR account for
Average balance required to be maintained is Rs 600 Cr

ak
What is the CRR which needs to be maintained by the Bank for the fortnight
a 6700cr
b 7800 Cr
c 1500 Cr
d 8400 or
Ans: D
p
On product basis what balance has been maintained by bank during the first 7 days
a 2222cr
b 2940cr
ee
c 3990 Cr
d 3150 Cr
Ans c
On product basis what balance will be maintained by the bank during the last 2 days to
comply with the CRR requirement
D
a 3169 Cr
b 2940cr
c 2010 Cr
d 2890 Cr
Ans c

Dec 2017
if CRR is to be maintained at 4 %, what is the DTL of the bank
a 210000 Cr
b 1,40,000 Cr
c cannot be determined
da
d data insufficient
Ans a
If interbank deposit with maturity of 180 days are Rs 7200 Crore. What is the SLR to be
maintained at the rate of 22 %
a 210000 Cr
b 217200 Cr
oo
c cannot be determined
d data insufficient
Ans b
Bank X has Rs 38000 Cr to invest which can be done under given 4 options. Answer the
questions given below based on the information given in table
Particular
H
Investment in G Sec Security with 5% yield
Investment in AAA rated Corporate security with 6%
yield
Investment in BBB rated Corporate security with 8 %
I II III
20000 10000 7000
10000 15000 9000
8000
IV
11000
6000
12000 10000 13000

ak
yield
Investment in BB rated Corporate security with 9 % yield -- 1000 12000 8000
If Bank chooses option I what would be the yield of the bank

a. 8.00
b. 8.76
c. 6.76
p
d. 5.89--
What is the risk weighted assets if Bank chose option Ill?

a. 29800
ee
b. 11900
c. 19800
d. 11800
Ans: a
which option gives the maximum yield to bank

D
a. Option ll
b. Option Ill
c. Option lV
d. Cannot be determined
Ans -option Ill

Dec 2017
If Bank is risk averse which option it should choose
a. Option I .
b. Option Ill
c. Option IV
da
d. Option ll
Ans a
What are risk weighted asset if bank chooses option 4

a. Option I
b. Option Ill
c. Option IV
oo
d. Option ll
Ans a
Please read the information of BC bank ltd which has following repricing assets &
liabilities as on 31/03/2015
Call money - Rs1500 Cr
Cash Credit advances - Rs1200 Cr
Cash in hand- Rs1000 Cr
Saving bank deposit - Rs1500 Cr
Fixed deposit - Rs1500 Cr
Current bal a/c - Rs1250 Cr
H
ak
Adjusted gap in repricing assets & liabilities?
a. 2700
b. 3000
c. 1200
d. 300
Ans: d
lf interest falls by 1%across the board for all assets &liabilities the net interest income will
p
be?
a. Fall by 15 Crore
b. improve by 30 Crore
ee
c. improve by 3 Crore
d. data insufficient
Ans:c
lf interest increases by1.5% across the board for all assets &liabilities the net interest
income will be?
D
a. Improve by 4.5 Crore

b. Fall by 4.5 Crore
c. Improve by 1.5 Crore
Ans: a

Dec 2017
If interest on call money falls by 1% on cash Credit by 0.5% on‘SB a/c by 0.30% & on FD
by1% the net interest income?
a. Improve by 4.5 Cr
b. Fall by 1.5 Cr
da
c. Improve by 1.5 Cr
Ans: b
Next questions are based on the information given for ABC bank ltd on 15/10/2014 as
follows. All
figures are in Rs Cr
oo
Paid up capital - 500
Reserves & surplus - 25
Statutory reserves - 650
Capital reserves representing Surplus arising out of sale proceeds of assets -50
Other disclosed free reserves -120
General provision& loss reserves -150
Revaluation reserves- 100 H

Specific provision on NPA at portfolio level -15
Provision in lieu of diminution in fair value of assets in case of restructured adv. -10
infusion of capital after published balance sheet 50

RWA under Credit/standardised approach - 6000
Capital charge for market risk - 270
ak
Capital chare for operational risk - 180
What is the eligible tier1 capital?

a. 1345 Cr
b. 1090 Cr
c. 1245 Cr
d. 1230 Cr
Ans: a
p
what is the Eligible tier2 capital?

a. 113.50
ee
b. 182.5
c. 137.50
Ans: b
Eligible CRAR of the bank will be?

D
a. 11.76
b. 12.05
c. 12.45
d. 13.89
Ans: a

Dec 2017
As per guidelines exposure ceiling of ABC bank on15/10/2014 to a borrower group in the
infrastructure space?
a. 1577.50 Cr
b. 788.75 Cr
da
c. 1527.50 Cr
Ans: b
Next questions are based on the information given for Lena bank ltd as follows. All figures
are in Rs Cr
oo
For 3 0.03 0.12 0.25 1.05 6 25 40
year
For 5 0.10 0.35 .055 1.90 10 35 25
year
a/c. H
Base rate of 11% is charged to AAA category of borrowers for a 3yr loan.
Load factor to be added to base rate as follows: 1%0f AA, 2%of A, 3% of BBB & 4% of BB
Load factor to be further increased by 0.5% for each additional maturity year over 3yrs will
be
ak
A loan of Rs400 Cr for 5yrs was given to an A rated COMP two years back. There has
been no default. Current outstanding is Rs20o Crore. Exposure at default is 100% and
loss given default is 50%. The expected loss on this a/c will be?
a. Rs 1 Crore
b. Rs 25 thousand
c. Rs 25 Lakh
d. Rs 2 Crore
Ans: a
p
As per risk policy of the bank the loan that shall earn the lowest return will be?
3 year to AAA
ee
5 year to AA
3 year to BBB
5 year to BB
Ans: a
Received a proposal from an A rated borrower for a loan repayable in 5yrs.what rate of
D
interest should be charged to the borrower?

a. 14%
b. 13.5%
c.13%
d.11%
Ans: a

Dec 2017
As on 31/O3/2014, the bank had 200 BBB rated a/c out of which 10% a/c migrated to
default category by 31/03/2015.what is the increase in the number of a/c’s in the default
category?
a. 200
da
b. 20
c. 120
Ans: b
Next questions are based on the data of Bandhan bank ltd which has a capital of Rs400
oo
Crore as on
31 Oct 2014 following additional details are also given
1. Cash & Balance with RBl - 200
2. Bank balances - 200
3. Investments Held for trading 50
Available for sale 1000
4. Advances(net) 2000
5. Other assets 300
6. Total assets 4700
H
Held to maturity 500
In terms of counter party, the investments break up is as follows

Government 1000
ak
Banks 500
Others 500
The breakup of investments as under
Govt Sec Bank Bonds Others
HFT 100 100 300
AFS 600 400 --
HTM 300 -- 200
p
Risk weights assigned as follows
Cash& Balance with RBI 0%

Bank Balance 20%
ee
Investments
Govt Bonds 2.5%
Banks 22.5%
Others 102.5%
Advances and other assets 100%
D
Total risk weighted assets are?

A 2990 Cr
B 2940 Cr
C 3060 Cr
D 2890 Cr
Ans A

Dec 2017
What is the % of total risk weighted assets to the book value of assets?
A 100%
B 102.5%
da
C 90.70%
D 63.61%
Ans d
Capital adequacy of the bank will be?

A 9.89%
B 10.25%
oo
C 13.38%
D 12.39%
Ans: c
What is the difference between the maximum &minimum risk weighted assets under
investments?
A25 Cr
B487.5 or
C512.50 Cr
D400 Cr
Ans: B
H
ak
What is the capital held by Bandhan bank in excess of the minimum regulatory
requirement comes to ---------------- Cr?
A 290.87 Cr
B 187.5 Cr
C 311.50 Cr
D 130.90 or
Ans: D
p
Nest question are based on fact that the Export bill for USD 5mio drawn 120 days from
the date of shipment, Shipment date is 3rd october2014. Due date is 1st feb 2015.
Exchange margin 0.15% Spot rupees :63.15/20 Premium spot-january 55/60 paise. Rate
ee
to be quoted to nearest 0.25 paise & rupee amount is to be rounded off. Rate of interest
on post shipment export up to 180 days is 9%p. a Commission on bills purchased is
0.075% Interest &commission to be charged up front
What is the bill buying rate’?

63.050--
D
64.050
65.050
66.050

Dec 2017
The interest to be recovered from the exporter will be?
9410689
9410054--
9510054
da
9610054
The commission charged to the transaction will be close to’?

Rs 2,38,519--
Rs 2,68,519
Rs 2,78,519
Rs 2,88,519
oo
Amt payable to the exporter will be?
30,83,76,427--
40,83,76,427
50,83,76,427
70,83,76,427
Net Worth
RSA
H
Next question are based upon the information given below for Bank of Mumbai.
Based upon this answer the following
1280
27650
ak
RSL 24570
DA Weighted Modified duration of asset 1.89
DL Weighted modified duration of liability 1.32
What is the weight

0.89--
0.99
0.66
p
0.77
What is the modified duration Gap?

ee
0.72--
0.99
0.77
0.68
What is modified duration of equity

D
16.24
15.55-
18.56
14.56

Dec 2017
Under a Letter of Credit, a commercial invoice has been presented, made out in the name
of the LC applicant. However, the applicant's address has not been mentioned. The
issuing bank rejects the documents due to the missing address referring to Art. 2 UCP600
is this rejection correct?
da
a. yes, as per article 2 full address is required
b. No. the definition in Art. 2 of the UCP600 relates only to the name of the LC applicant
there is no requirement for the address of the applicant to be mentioned.
c. The article 2 is not clear about this
Ans- b
oo
Bank of Rajasthan issued an LC of USD 1,00,000 on May 10, 2016 in favour of ABC ltd
New York. The last date for shipment is June 10, 2016 and last date for negotiation is
30th June 2016. The goods were shipped on 5th May 2016. The documents were
presented to negotiating bank on 15th May 2016. When the documents were sent to Bank
of Rajasthan for reimbursement by the negotiating bank, Bank of Rajasthan refused the
payment on following grounds
H
(a) Date of shipment is prior to date of opening of LC
(b) Date of invoice is prior to date of opening of LC
(i) As per article 14 of UCP-600 documents cannot be dated prior to opening of LC thus
non-payment is justified
(ii) As per article 14 of UCP-600 date of shipment cannot be prior to date of opening of LC
ak
(iii) Both i & ii
(iv) None of the above
Ans: iv
Mr. Prakash Kumar —Branch Manager LPBC bank, Camp branch, Pune, was
approached by their client Mr.Suresh Chandra with a request to open an lmport LC. The
LC was sanctioned by an appropriate authority and the importer Mr.Suresh Chandra
p
required some time to comply with the sanction conditions like depositing of margin
money etc. The importer Mr. Suresh Chandra requested Mr. Prakash Kumar —Branch
Manager LPBC bank, Pune Camp branch that though the bank cannot open LC until
ee
sanction terms are compiled with, the bank should send a pre-advice of LC by SWlFT
message as under: -
Opened LC No.185/2008 on 24 April, 2008 for US$ 50000.00 Applicant: Sharmila

Enterprises Pvt. Ltd. Beneficiary: Clarisa INC, New York, USA Covering: Titanium Plates
D
Whether the above Pre advice will act as LC and negotiation is possible
a. Yes b. No.--

Dec 2017
What should be further words in Pre advice to written as per UCP600 so that Pre advice
does not become LC under UCP 600
a. Pre advice
b. Only consent of opening
da
c. Details to follow--
d. No words are required.
Following information is available with respect to Bandan bank as on 31.03.2016.

Based on this answer the following
oo
Assets Rs. in lakhs
(i) Standard (Value of security Rs. 6,000 lakhs) 7,000

(ii) Sub-standard (full secured) 3,000
(iii) Doubtful
(a) Doubtful for less than one year 1,000
H
(Realisable value of security Rs.500 lakhs
(b) Doubtful for more than one year, but less than 3 years 500
(Realisable value of security Rs.300 lakhs
(c) Doubtful for more than 3 years (No security)
What is the provision with respect to standard account

500
300
ak
a. 17.5
b. 15.0
c. 24.00
d. 28.00--
What is the provision for Substandard account

a. 450--
p
b. 750
c. 3000
ee
What is the provision for DF 1

a. 250
b. 400
c. 625--
D
What is the provision for DF- ll

a. 320--
b. 500
c. 450

Dec 2017
What is the provision for DF- Ill
a. 30.00
b. 450
c. 45.00
da
d. 300--
MIs Bakchan LLP, a bank of China, is maintaining an account with Bank of India Nariman
point branch. lf you are the forex officer, there answer the following questions .
The account maintained by Bakchan LLP with your branch is ............. ..for you
a. Nostro a/c
b. Vostro account
oo
c. Loro account
d. Mirror account
Ans: b
M/s Bakchan LLP wants to purchase 20 million rupees against USD for funding their
account with you. Assuming interbank rates are 31.2500/3250 what rate would be quoted
to them
a. 31.2500
b. 31.3250
c. 31.7500
d. 32. 5000
Ans: a
H
ak
123. If the deal is struck, what amount will be Credited in your branch account
a. Rs 6,40,000
b. USD 6,40,000
c. Rs 6,38,467
d. USD 6,38,467
Ans: b
p
You have received a SWIFT advice from Doha Correspondent stating that a sum of USD
2,75,000 has been Credited to your New York correspondent to Credit their rupee account
with you. Interbank rate in Mumbai are USD 1 = Rs 48,0650/0750. Based on the
ee
information above answer the following
The rupee account of Doha correspondent with you is ........... ..

a. Nostro a/c
b. Vostro account
c. Lora account
D
d. Mirror account
Ans: b

Dec 2017
What type of transaction is this for your branch
a. buying transaction--
b. Selling transaction
c. Forward transaction
da
What amount will be Credited in the rupee account of New York correspondent
a. 1,32,17,875--
b. 1,32,20,625
c. Rs 57215
oo
You are working as a Middle Level Executive with ‘World Class Bank Ltd, The MIS
Department has submitted the following Statistics from which you are required to estimate
the likely Capital Funds required by the Bank as of March,31st, 2014 taking into account
the Basel lll implementation compliance. Risk-Weighted Assets for Credit Risk likely to be
Rs. 53,889.50 Cr Capital Allocation for Market Risk to be Rs.100l- Cr
Gross Income
H
For Operational Risk following Data available. The bank is required to calculate Capital
Charge for Operational Risk by Basic Indicator Approach. (Amount in Crore)
Year 31-03-2013 31-03-2014 31-03-2015

2600.00 3000.00 3400.00
ak
Based on the Gross Income given above, the likely Capital Charge for World class Bank
Ltd., as on March 31, 2016 to cover Operational Risk under Basic Indicator Approach
shall be
a. 375 Cr
b. 540 Cr
c. 450 Cr
d. 360 Cr
Ans c
p
The World class Bank Ltd., will require total Capital Funds for covering Credit Risk. As on
March31,2016 to comply Basel lll norms of Rs. ______Cr.
ee
a. 5400 Cr
b. 4850 Cr
c. 4800 Cr
d. 4311.16 Cr
Ans: b
D
What is the RWA for Market risk

a. 100 Cr
b. 900 Cr
c. 1000 Cr
d. 1111.11 Cr
Ans: d

Dec 2017
What is the RWA for Operational risk

a. 540 Cr
b. 450 Cr
da
c. 500 Cr
d. 5000 Cr
Ans: d
What is the minimum CET-I capital bank should have

a. 4000 Cr
b. 3300 Cr
oo
c. 4200 Cr
d. 5400 Cr
Ans: b
Supposing Bank has CET-I capital of Rs 4100 Crore and bank has issued PNCPS of Rs
2000 what amount can be included in PNCPS for Additional Tier l
a. 1116.01 Cr
b. 800 Cr
c. 4100 Cr
H
Following information with respect to a bank in india is available as
ak
Amount Sourced from Invested/advanced to
Rs. 100 Cr Saving bank, fixed ROI 4% 364 days T Bill 6.75 yield
Rs. 250 Cr Fixed deposit 4 years fixed Floating rate loans 5 years, priced quarterly
6.5 % currently 8 %
Rs. 400 Cr 90 days CD at the rate of 8% 1-year loan at 3 % above 91 days T bill rate
Saving bank amount is considered non-volatile and is not expected to be withdrawn
during the full year. Based on this answer the following
p
If the interest during the year 1 changed in following manner, calculate NII for bucket 2 of
Rs 250 Cr
3.75cr
ee
4.6875
4.4120
None of the above
Ans: b
Had the ROI remain fixed during the entire year for bucket 2 what would be the Nll of the
D
bank
a 3.75 Cr
b 4.6875 Cr
c 4.4120
d None of the above
Ans: a

Dec 2017
Whether the bank will lose or gain in case of bucket 2 if ROI on its floating loans remain
same for the full year
a. gained
da
b. lost
c. cannot be determined
Ans: b
In bucket 3 of Rs 400 Cr, what risks are faced by the bank. Pick the most correct
a. Gap risk & embedded option risk
oo
b. Gap risk, embedded option risk & Yield curve risk
c. Gap risk, yield curve risk and reinvestment risk
Ans: c
lf 91 days t bill yield is 6.25 %, what would be the Nll of the bank in bucket 3 for first 90
days
Rs 5 Cr
Rs 1.25 Cr--
Rs 3.16 Cr
None of the above
H
ak
Following information has been presented to the CEO of Ratnakar Tata Bank Ltd.
Assuming VAR @ 95% level, answer the following
Particular Estimated profit Capital Volatility

Option A 5 million $ 80 million $ 7%
Option B 8 million $ 140 million $ 9%
p
What is the risk capital of option A

a. $ 8.25 million
ee
b. $ 9.24 million
c. $ 7.76 million
Ans: b
What is the risk capital of option B

D
a. $ 20.79 million
b. $1.188 million
c. $ 11.88 million
Ans: a

Dec 2017
What is the RAPM of option A
a. 0.54 million
b. 77%i
c. 9.24%
da
d. . 54.11%
Ans: d
What is the RAPM of option B

a. 14.85 %
b. 0.1485 %
c. 38.48%
oo
Ans:- c
As CEO which option will be chosen by you

Option A
Option B
Insufficient information '
d. Both
Ans: A H
ak
Following data pertains to Standard Bank of India. Based on this answer the following
Net worth as on 31.03.2016 3000

RSA 23450
RSL 27591
Weighted modified duration of asset 1.79
p
Weighted modified duration of liability 1.56
What is the gap of the bank

4141
ee
Negative 4141
20450
d. Insufficient information
Ans: b
In case interest rate rises by 1.5% what would be the impact on Nll of the bank
D
a. Increase by Rs 62.11 Cr
b. Decrease by Rs 62.11
c. Increase by 4.5 Crore
d. Decrease by 4.5 Crore
Ans: b

Dec 2017
RBI in its next review of monetary policy is expected to make changes in the interest rate
Under which circumstances bank will be positively impacted
a. RBI increases the interest rates
b. RBI reduces the interest rates
da
c. RBI keeps the rates unchanged
Ans: b
In terms of modified duration gap what is the weight (W)

a. 1.17
b. 0.86
oo
c. RBI keeps the rates unchanged
Ans: a
What is the modified duration gap

a. 0.04
b. 0.04
c. 0.79
d. 0.46
Ans: a
H
The following information relates to PBB Inidranagar Bangalore Branch of SBI(figures in
ak
Rs Crore)
Capital & Reserves 30,000
Current account deposit 23517
Demand drafts 375
Unclaimed deposits 100
Saving Bank deposits (demand liability portion) 16458
Fixed deposits 380201
Cash certificates 1500
p
Margins held against LC 2005

Saving Bank deposits (term liability portion) 93262
Interest accrued on bills payable 69
ee
Unclaimed dividends 45
Suspense account 50
Borrowings from RBI 9775
Interbank term deposit (maturity 14 days) 3253
Interbank borrowings (maturity 91 years) 4976
D
What are the demand liabilities of the bank

40,450
43,703
48679
None of the above
Ans:- a

Dec 2017
What are the term liabilities of the bank

4,84,838
4,84,738
da
4,74,963
4,76,968
Ans:- d
What are the other demand and term liabilities of the bank
264
3517
oo
164
None of the above
Ans:- c
What are assets with the banking system of the bank

3253
8229
18004
None of the above
Ans: a
H
What is the sum total of DTL on which CRR will be maintained
ak
5,20,845
4,76,094
5,41 ,876
None of the above
Ans:- a
What are the liabilities on which CRR is not to be maintained

14751
p
44751
30,000
None of the above
ee
Ans:-b
If rate of CRR is 4% what is the average balance to be maintained by bank with RBI
a. 20,762
b. 19,043
c. 21,675
D
d. 20,834
Ans: d

Dec 2017
What is the daily balance to be maintained with RBI
a. 19792
b. 14583
c. 20834
da
Ans: a
The diversified company has forex exposure as follows as on 2th March 2016
Nature of transaction Amount Maturity date

Export receivable 2 million 24 -30 mar 2016
oo
Import payable 1 million Immediate
Import payable 3 million 30 Jun 2016
Export receivable 4 million 24 to 31 Jul 2016
ECB- 3 years 5 million 31 Mar 2016
Export receivable 2 million 31 Aug to 7 Sep 2016
March 9/10
April 21/22
May 32/33
June 38/39
H
The customer also enjoys Credit facility of Rs 100 Cr from the Bank. Spot USD rate on 2
March 2016 was 44.3500/44.3800. Forward premium up to September is as follows
ak
July 44/45
Aug 50/51
Sept 55/56
If he wants to keep part of the foreign exchange realized from exports for payment of
import. He should open
a. Resident Foreign currency account
p
b. Exchange earners foreign currency account

c. Resident foreign currency (domestic) account
d. Any of the above
Ans: b
ee
What rate would be applied if he books an option forward cover for period between 24
March to 30th March
D
44.35
44.44
Greater than 44.44
Greater than 44.35 but lesser than 44.44
Ans: d

Dec 2017
What rate would be quoted for immediate import as well as for forward import contract for
delivery 30th June 2016
a. 44.35 and 44.77
b. 44.38 and 44.72
da
c. 44.35 and 44.73
d. 44.38 and 44.77
Ans: d
The best way to use ECB proceeds domestically without incurring exchange rate risk is
a. Forex swap
b. Outright forward purchase
oo
c. No hedging mechanism available for ECB
Ans: a
What rate will be applicable for forward booking of export transaction maturing between
31st August to 7th September
a. 44.3800
b. 44.8500
c. 44.8900
d. 44.8600
Ans: b
H
ak
Study the case and answer the following
Borrowing cost
Firm ABC Bank XYZ
Fixed USD 6% 4.5 %
Floating USD LIBOR+1% LIBOR
Fixed CHF 4% 3.5%
The firm and the bank can achieve the total gain by doing aplain vanilla coupon swap
p
(Fixed USD against floating USD borrowing of)

a. 1.5%
b. 2.5%
c. 1%
ee
d. 0.5%
Ans: d
The firm desires fixed rate funding in dollars. The bank desires Swiss franc funding. Both
can achieve lower borrowing cost
a. lf the bank borrows francs and firm borrows dollars
D
b. lf the bank borrows dollars and on lend to firm at 5.5%

c. if the firm borrow francs, bank borrows dollars and they do a currency swap
d. if the firm borrows dollars, bank borrows francs and they do a currency swap
Ans: c

Dec 2017
In the above question what would be the effective cost of borrowing for the firm and the
bank, provided gains from swap if any are divided equally
a. 6% & 4%
b. 5.5% and 3 %
da
c. 4 % and 4.5%
d. 6 % and 3.5%
Ans: b
In a plain vanilla coupon swap the floating payment is

a. set in advance paid in arrears
b. set and paid in arrears
oo
c. paid in advance and set in arrears
d. set and paid in advance
ans. A
In a callable coupon swap -

a. The fixed rate payer has the option to set fixed rate
H
b. The floating rate payer has the option to set a spread over the index
c. The floating rate payer has the option to terminate the swap before maturity
d. The fixed rate payer has the option to terminate the swap before maturity
Ans: D
A dealer has a $200 million open position. He finds that his VaR for a one-day period with
ak
a one percent probability is $1000,000. Which of the following is true?
a) This means that the dealer can expect to lose at least $1000,000 in any given day
about one percent of the time, or in other words, 2.5 times in a year (assuming 250
trading days).
b) This means that the dealer can expect to lose at least $1000,000 in any given day
about 99 percent of the time, or in other words, 247.5 times in a year (assuming 250
trading days).
c) This means that the dealer can expect to lose at least $2,000,000 in any given day
p
trading days).
d)This means that the dealer can expect to lose at least $ 4000,000 in any given day
ee
trading days).
Ans: a
D

Dec 2017
From the following information calculate operational risk.
Profit for last two years Year 1 Rs 300 Cr, Year 2 Rs 380 Cr. the bank has provided
provisions for unpaid interest in the year 2 Rs 30 Cr. In year 1 the bank has sold out
certain securities in the banking book and booked the profit of Rs 10 Cr.
da
a. Rs.30cr
b. Rs.49.50cr
c. Rs.33.99cr
d. Rs.52.50cr
Ans:- d
oo
Given below is the balance sheet of Roger Bank as on 31 03 2016
Liabilities Rs Assets Rs
Paid up capital 10000 Building 10000
Current account 180000 Car 20000
SB 450000 Cash Credit 1000000
Fixed deposit
Interest accrued
Margin on LC
Refinance from N H
B
CBLO
600000
10000
2000
1000
600000
H Term Loan
Suspense account
Branch adjustment
800000
10000
20000
ak
ECGC Claims 7000
Demand Liabilities in the above case works out to

a. 632000
b. 638000
c. 1238000
p
Ans a
Time Liabilities is equal to ............ ..

a. 120000
ee
b. 600000
c. 127000
Ans: b
Which of the following can be included for DTL/NDTL computation

D
a. Amount received from DlCGC Claims

b. Amount received from insurance company on ad hoc settlement of claims
c. Amount received from the court receiver
d. Amount held as margin
Ans: d

Dec 2017
Other demand and time Liabilities amounts to ...................... ..

a. 10000
b.17000
da
c. 18000
Ans: a
If CRR is 4 % what is the amount of CRR balance to be maintained by the bank

a. 49,280
b. 45,430
oo
c. 51,250
Ans: a
An import customer wants to retire an import bill drawn under letter of Credit opened by
H
your branch which is falling due on 27th August 2016 of GBP 2,00,000. TT margin is
0.10%. The interbank rates are GBPIUSD = 1.4765/4790 and USDIINR = 44.80I44.90
What rate will be quoted by the bank to the customer after considering the margin
a. 66.4071
b. 66.4735
c. 66. 4425
ak
Ans; b
What amount will be debited to the cash Credit or overdraft or current account of the
customer for retirement of this bill
a. 1,32, 81,420
b. 1,32, 88, 500
c. 1,32,94,700
p

Ans: c
ee
A customer offers you a sight bill for USD $ 20,000 on 01.03.2016 under a letter of Credit
established in his favour by an American bank. Assuming the following:
Interbank US $ 1 = 50.7800/50
Transit period 25 days, Interest at 9% per annum
Exchange margin 0.150%
What rate will be quoted to the customer
D
a. 50.78
b. 50.93
c. 50.63
d. 50.70
Ans: d

Dec 2017
What is the interest which is charged to the customer:
a. No interest
b. Rs 6251
c. 91,260
da
Ans: b
What amount will be Credit to the account of the customer

a. 10,14,000
b. 10,07,749
c. 10,20,251
oo
Ans: b
On 02.01.2016, you had purchased a demand bill for USD 10,000 @ Rs 52.03 and the
exporter was paid in rupees immediately. The bill when presented on 10.01.2016 at New
H
York was not honoured. The advice of non-payment was received and conveyed to the
exporter on 13.01.2016. The exporter requested that
a. the bill amount plus charges (Rs 250) be recovered from him
b. The bill be treated on collection basis and represented for payment
c. 5 % rebate be allowed to overseas importer
on 03.02.2016 the bank in New York telexed having recovered and Credited the proceeds
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less their charges USD20 with value date 03.02.2016. Meanwhile the market has moved
and TT selling rate on 13.01.2016 was Rs 52.07 and TT buying rate on 03.02.2016was
Rs 51.81
At what rate the bill will be cancelled

a.52.03
b. 52.07
p
0. 51.81
Ans: b
ee
By what amount account of the customer will be debited

a. Rs 5,20,700
b. Rs 5,20,950
c. Rs 5,2O,450
D

Ans: b
What would be the amount of export bill realised on 03.02.2012

Dec 2017
a. Rs 5 01 340
b. Rs 4,79,86
c. Rs 4,91,159
da
Ans: c
What is the profit or loss of the customer in this transaction

a 29,791
b. 31,450
c. 23.897
oo
Ans: a
You work as forex dealer of a reputed bank. You had sold pound sterling 1,00,000 in the
interbank market at Pd.stg = Rs 81.0700 in cover of an inward TT reported by your branch
H
in lndia. However, it was detected that the transaction had been erroneously reported
twice and you are therefore required to cancel your sale.
Assuming that sterling was quoted in the local interbank market as under
Spot TT Pd Stg 1 = Rs 81.0700I81.1150
One-month forward = Rs 81.2000l81.2400
At what rate the sale contract would be cancelled
ak
a. 81.0700
b. 81.1150
c. 81.2000
d. 812400
Ans b
What is the amount received when you had originally entered into sale contract.
a. Rs 81,11,500
p
b. Rs 81,07,000
c. Rs 81, 20,000
ee
Ans: b
What amount will be received by you when you cancel the contract
a. Rs 81,11,500
b. Rs 81,07,000
c. Rs 81,20,000
D

Ans: a
What is the loss/gain incurred in this transaction

Dec 2017
a. Rs 5500
b. Rs 4500
c. Rs 11,000
da
Ans: b
Bank of Hindustan earned a net profit after tax and provision of Rs 5000cr and Bank of
India Rs 6000 Cr. CET ratio of Bank of Hindustan is 6.50% after including the current
period retained profits. The ratio of Bank of India is 7%. Both the banks are in need of
fresh capital.
RBI rules regarding Capital conservation ratio is as under Ratio after including the current
oo
period Min CCR as % of earnings retained earnings
Ratio after including the current period retained Min CCR as % of earnings
earnings
5.5 % - 6.125% 100
> 6.125% - 6.75 % 80
> 6.75% -7.375%
> 7.375% - 8%
> 8.00% H 60
40
0
What is the amount of net profit which Bank of Hindustan is required not to distribute to
ensure compliance of Basel III prescription
ak
a. Rs 4000 Cr
b. Rs 5000 Cr
c. Rs 325 Cr
d None of the above
Ans: a
What is the maximum amount which Bank of Hindustan can distribute as dividend to
p
ensure compliance of Basel Ill prescription

a. Rs 4000 Cr
b. Rs 1000 Cr
c. Rs 325 Cr
ee

Ans: b
What is the amount of net profit which Bank of India is required not to distribute to ensure
compliance of Basel Ill prescription
D
a. Rs 4000 or
b. Rs 3600 Cr
c. Rs 6000 or
d None of the above
Ans: b

Dec 2017
197. What is the maximum amount which Bank lndia can distribute as dividend to ensure
compliance of Basel Ill prescription
a. Rs 2000 Cr
b. Rs 2400 or
da
c. Rs 800 or
Ans: b
Given Below is the information of Bank of Baroda
Performing Assets NPA
oo
interest earned Interest interest Interest received
received earned
Term Loan 300 270 160 10
Cash Credit 400 360 120 20
Bill 100 90 40 05
purchased
b. 320
c. 460
d.310
H
What income would be recognised for term loan portfolio of the bank
a. 280
ak
Ans: d
What income would be recognised for cash Credit portfolio of the bank
a. 380
b. 420
c. 460
d. 480
p
Ans: b
What income would be recognised for Bill purchased portfolio of the bank
a. 105
ee
b. 95
c. 130
d. 45
Ans: a
D

Dec 2017
Using Altman’s (1968) model compute the Z value of business ‘A Ltd.’, from the provided
data (Balance Sheet extract) and comment whether it is on the verge of financial ruin
da
A Ltd Balance Sheet(extract)
Liabilities Rs Assets Rs
Share capital of `10 each 1,00,000 Fixed Assets 2,10,000
Reserves & Surplus 30,000 Inventories 90,000
10% Debentures 1,50,000 Book Debts 35,000
oo
Sundry Creditors 40,000 Loans and advances 10,000
Outstanding Expenses 30,000 Cash and bank 5,000
3,50,000 3,50,000
Additional information:
(i) Market value per share Rs 15
(ii) Operating profit (25% on sales) Rs. 2,00,000
Working capital to total assets

0.20--
0.30
0.40
H
ak
Retained earnings to total assets
0.06
0.07
0.08
0.09---
EBIT to total assets

p
0.47
0.57--
0.67
0.77
ee
Market value of shares to book value of total debts

0.68--
0.37
0.57
0.57
D
Sales to total assets

1.29

Dec 2017
2.29--
3.29--
4.29
da
Z score is
2.945
3.945
4.945--
5.945
oo
Which of the following rankings of liabilities is correct if they are ranked by withdrawal risk from
riskiest to least risky?
A. Demand deposits; money market demand accounts;- certificates of deposit
B. Federal funds; demand deposits; certificates of deposit
C. Repurchase agreements; money market demand accounts; certificates of deposit
D. Certificates of deposit; federal funds; demand deposits
H
E. Passbook savings accounts; money market demand accounts; certificates of deposit
Ans a
What is the fundamental reason why depository institutions are subjected to bank run risk?
A. DIs typically have high leverage.
B. DIs typically take excessive risks.
C. Deposit contract typically implies a ‘first come, first served’ principle.
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D. Depositors go to practice material are typically paid based on the value of the bank and their
shares in the total deposits. E. None of the above.
Ans: c
Demand deposits
A. Have the same amount of withdrawal risk as do interest-bearing transaction accounts
B. Have less withdrawal risk than do interest-bearing transaction accounts
p
C. Have more withdrawal risk than do money market demand accounts-

D. Have less withdrawal risk than do money market demand accounts
E. Have the same amount of withdrawal risk as do money market go to practice material demand
ee
accounts
Ans c
The minimum daily average reserve requirement is computed by

A. Multiplying the reserve ratio by the daily closing deposit balance
B. Multiplying the reserve ratio by the daily average closing deposit balance-
D
C. Dividing the reserve ratio by the daily average closing deposit balance
D. Dividing the reserve ratio by the daily closing deposit balance
E. Adding up daily closing deposit balances and dividing by 14
Ans b
Which of the following is considered the ultimate liquid asset?

Dec 2017
A. T-notes
B. T-bills
C. Cash-
D. T-bonds
da
E. Wholesale CDs
Ans:- c
Managing the balance sheet to reduce the risk of a liquidity Crisis can be achieved by
A. Efficiently managing the liquid asset position
B. Borrowing heavily in the short-term money markets
C. Efficiently managing the liability structure of the bank
oo
D. A and B are correct
E. A and C are correct-
Ans:- e
Which of the following is an outcome of a decrease in the reserve requirement ratio?

A. DIs must hold more reserves against the transaction accounts on their balance sheets
H
B. DIs are able to lend out a smaller percentage of their deposits
C. Decreased Credit availability in the economy
D. A multiple contraction in deposits and a decrease in the money supply
E. A multiplier effect on the supply of DI deposits and thus the money supply-
Ans:- e
ak
Buffer reserves are
A. Reserves in excess of the minimum required reserves
B. Government securities that do not qualify as required reserves, but that can be converted to cash
quickly -
C. The portion of reserves that are calculated at a rate of ten percent of deposits
D. Non-government securities and loans that must be converted into cash
E. The portion of life insurance company assets that require minimum reserves
Ans:- b
p
ee
Which of the following is an outcome of an increase in the reserve requirement ratio?

A. DIs may hold fewer reserves against their transaction accounts
B. DIs are able to lend out a greater percentage of their deposits
C. Increased Credit availability in the economy
D. DIs are only able to lend out a smaller percentage of their deposits than before-
E. A multiplier effect on the supply of DI deposits and thus the money supply
D
Ans:- d
Why do FIs face a return or interest earnings penalty by holding large amounts of assets such as
cash, T-bills and T-bonds to reduce liquidity risk?
A. These assets invite a reserve requirement tax

Dec 2017
B. These assets bear low returns -
C. These assets offer higher returns that reflect their risk
D. Inflation increases the purchasing power value of these assets
E. All of the above are correct
da
Ans:- b
What are major mechanisms to deal with sovereign risk exposure?

A. Debt-for-equity swap
B. Loan sales
C. Multi-year restructuring of loans
D. Loan-for-bond swap
oo
E. All of the above-
Ans:- e
What are the possible ways that the bank can meet an expected net deposit drain using stored
liquidity management techniques?
A. Borrowing heavily in the short-term money markets.
B. Issue commercial paper.
C. Utilize repurchase agreements.
H
D. Liquidate some liquid securities and/or loans.-
E. All of the above.
Ans:- d
ak
The current term structure for Treasury and corporate debt
Treasury percen 3.5 percent 4.25

BBB Corporate Debt 8.2 percent 10.45 percent
Using the term structure of default probability, the implied default probability for BBB corporate
p
debt during the first year is

A. 0.39 percent
B. 2.25 percent
ee
C. 3.50 percent
D. 4.34 percent
E. 6.87 percent
Ans:- d
D
Using the term structure of default probability, the implied default probability for BBBcorporate
debt during the second year is
A. 0.39 percent
B. 2.25 percent

Dec 2017
C. 3.50 percent
D. 4.34 percent
E. 6.87 percent
Ans:- e
da
As follows is the information about loan allocation of Bank A:
National Benchmark Bank A
Consumer Loans 50 percent 35 percent
Commercial Loans 50 percent 65 percent
What is the standard deviation of Bank A’s asset allocation proportions relative to the national
benchmark.
oo
A. 40.44 percent
B. 34.32 percent
C. 29.89 percent
D. 21.21 percent
E. 15.00 percent
Ans: e
H
Bank ABC has a loan lent to firm DEF. The interest rate charged for this loan is 8% per annum.
The bank also charges various fees which amount to 2% of the loan amount per annum. The
compensating balance (b) is 5%, and there is 10% reserve requirement (RR). What is the
contractually promised rate of return on this loan (rounded to the closest basis points, i.e., 0.01%)?
ak
a). 8.38%
(b) 8%
(c) 6.70%
(d)10.48%
(e)1.68%
Ans:- d
The contractually-promised return on a 1-year loan is 15% per annum. If the borrower defaults,
p
90% of the principal and interest payments are expected to be recovered. If the borrower is
expected to default with a 20% probability, what is the expected rate of return on this loan?
(a.) 15%
ee
(b) 12.7%
(c) 12%
(d) 5.8%
(e) . -8%
Ans:- b
D
Assuming the two Critical values of Zs for loan decisions (approval or rejection) are 1.85 and 2.99,
should the bank approve the loan for this client?
(a) Yes, because the Z-score for this client is higher than the cut-off value 2.99.
(b) Yes, because the Z-score for this client is lower than the cut-off value 2.99.

Dec 2017
(c) No, because the Z-score for this client is higher than the cut-off value 1.85.-
(d) No, because the Z-score for this client is lower than the cut-off value 1.85.
(e) This client's case is indecisive.
Ans:- d
da
Duration is a direct measure of the interest rate sensitivity of an asset or liability, which means that:
(a) The smaller the duration, the more sensitive the price of that asset or liability.
(b) The larger the duration, the less sensitive the price of that asset or liability.
(c) The larger the duration, the more sensitive the price of that asset or liability. -
(d) The larger the duration, the greater the change in interest rates.
oo
Ans:- c
Consider a security with a duration of 3.25 years. The current interest rate level is 10% p.a. How
does the price of the security change if interest rates decrease by 1% (round to two decimals)?
a. The price of the security will increase by 2.95%-.
b. The price of the security will decrease by 2.5%.
H
c. The price of the security will decrease by 2.95%.
d. The price of the security will not be influenced by the change in interest rates.
e. The price of the security will increase by 2.5%
Ans:- a
What are the possible ways that the bank can meet an expected net deposit drain using purchased
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liquidity management techniques?
A. Issue commercial paper.
B. Utilize repurchase agreements.
C. Liquidate all cash holdings.
D. Only a and b of the above.-
E. All of a, b and c.
Ans:- d
p
Which of the following observations is NOT true of a liquid asset?

A. It can be turned into cash quickly
B. It helps reduce the liquidity risk.
ee
C. It typically bears low returns or interest rates.

D. It will be typically sold at a big discount to its fair value if liquidated.-
E. None of the above.
Ans:- d
D
Rashi Gupta Bank has determined that its return on equity is 15 percent. Management is interested
in the various components that went into this calculation. You are given the following
information:
total debt/total assets = 0.35 and
asset utilisation = 2.8.
What is the profit margin?

Dec 2017
(a) 3.48%
(b) 5.42%
(c) 6.96%
(d) 2.1%
da
(e) None of the above answers
Ans:- a
Which of the following is an appropriate change to make on a bank's balance sheet when repricing
gap is negative and interest rates are expected to rise?
oo
(a) Restructure the bank’s liabilities by replacing floating rate borrowings with fixed rate
borrowings.-
(b) Restructure the bank’s liabilities by replacing fixed rate certificate of deposits with floating rate
of deposits.
(c) Restructure the bank’s assets by replacing floating rate mortgage loans with fixed rate corporate
loans.
(d) Restructure the bank’s assets by replacing floating rate corporate loans with floating rate rate
mortgage loans.
Ans:- a
H
The higher the market yield of a security :
ak
(a) The lower its duration. -
(b) Market yield has no impact on a security’s duration.
(c) The higher its duration.
(d) The higher the price of a fixed rate security.
(e) None of the given answers.
Ans:- a
Advantages of depositing funds into a typical bank account instead of directly buying corporate
p
securities include all of the following, EXCEPT :

(a) monitoring done by the bank on your behalf.
(b) increased liquidity if funds are needed quickly.
ee
(c) increased transactions costs. -

(d) less price risk when funds are needed.
(e) better diversification of deposited funds.
Ans:- c
D
The following is a bank’s balance sheet
Assets Amount($ Annual rate Liabilities Amount($ Annual Rate

Million) Million)
1 year Bond $60 7% 1 year CD $50 5%
10 year Loan $40 12% 2 year CD $40 6%

Dec 2017
Equity $10
Total $100 Total $100
Based on maturity of the assets and liabilities, which of the following statements is true?
da
(a) An increase in interest rates will benefit the financial institution since the increase in the market
value of assets will be greater than the increase in the market value of liabilities.
(b) An increase in interest rates will harm the financial institution since the increase in the market
(c) A decrease in interest rates will harm the financial institution since the increase in the market
(d) A decrease in interest rates will benefit the financial institution since the increase in the market
oo
value of assets will be smaller than the increase in the market value of liabilities.
(e) An increase in interest rates will harm the financial institution since the decrease in the market
value of assets will be greater than the decrease in the market value of liabilities.
Ans:- e
A bank invests in an 18-month, 8 percent (semiannual) coupon Treasury note selling at par. What
is the duration of this Treasury note?
(a) 1.5 years.
(b) 1.371 years.
(c) 2.882 years.
(d) 1.234 years.
(e) 1.443 years.-
H
ak
Ans:- e
A bank manager is quite certain that interest rates are going to decrease within the next six months.
How should the bank manager adjust the bank’s leverage-adjusted duration gap to take advantage
of this anticipated fall ?
(a) The bank should set its leverage adjusted duration gap to a negative position by lengthening
duration of the liability relative to the asset or shortening duration of asset relative to the liability
(b) The bank should set its leverage adjusted duration gap to a positive position by lengthening
p
duration of the asset relative to the liability or shortening duration of liability relative to the asset-
(c) The bank should set its leverage adjusted duration gap to a positive position by lengthening
duration of the liability relative to the asset or shortening duration of asset relative to the liability
ee
(d) The bank should set its leverage adjusted duration gap to a neutral position.
(e) None of the above answers.
Ans:- b
Consider a financial institution with a positive maturity gap and the scenario of decreasing interest
D
rates. Which of the following statements is true?

(a) The value of both assets and liabilities will increase. The increase in liability values will
however be larger than the increase in asset values, resulting in a decrease in the FI’s equity
position.
(b) The value of both assets and liabilities will fall. The fall in liability values will however be
larger than the fall in asset values, resulting in an increase in the FI’s equity position.

Dec 2017
(c) The value of both assets and liabilities will increase. The increase in asset values will however
be larger than the increase in liability values, resulting in an increase in the FI’s equity position.-
(d) The value of both assets and liabilities will fall. The fall in asset values will however be larger
than the fall in liability values, resulting in a decrease in the FI’s equity position.
da
(e) The value of both assets and liabilities will not be affected, the value of equity will remain
unchanged.
Ans:- c
Duration is a less accurate predictor for the change in a financial institution’s net worth in case of
large interest rate shocks because:
(a) It assumes a linear relationship between the change in an asset or liability’s price and the
oo
change in the interest rate, while the true relationship is convex. -
(b) It assumes a linear relationship between the change in an asset or liability’s price and the
change in the interest rate, while the true relationship is concave.
(c) It assumes a convex relationship between the change in an asset or liability’s price and the
change in the interest rate, while the true relationship is linear.
(d) It assumes a concave relationship between the change in an asset or liability’s price and the

Ans:- a H
change in the interest rate, while the true relationship is linear.
During periods of high and volatile inflation, a financial institution’s:

ak
(a) interest rate risk exposure and Credit risk exposure tends to decrease.
(b) interest rate risk exposure and Credit risk exposure tends to be unaffected.
(c) interest rate risk exposure tends to increase but Credit risk exposure tends to be unaffected.
(d) interest rate risk exposure and Credit risk exposure tends to increase-.
Ans :- d
With regard to market value risk, rising interest rates

p
(a) increase the value of fixed rate liabilities.

(b) increase the value of fixed rate assets.
(c) increase the value of variable-rate assets.
ee
(d) decrease the value of fixed rate liabilities -

(e) Statements A& B are correct
Ans:- d
Consider a financial institution with the following assets and liabilities. Asset A has a maturity of 5
years and a market value of $30,000 and asset B has a maturity of 6 years and a market value of
D
$90,000. Liability A has a maturity of 1 year and a market value of $60,000 and liability B has a
maturity of 9 years and a market value of $40,000. Based on maturity of the assets and liabilities,
what will happen to the financial institution’s value of equity if interest rates increase?
(a) The value of equity will remain unchanged as equity does not have a maturity.
(b) The value of equity will fall.
(c) The value of equity will increase-.

Dec 2017
(d) The value of equity will remain unchanged as both the value of assets and the value of
liabilities will increase by the same amount if interest rates decrease.
(e) The value of equity will remain unchanged as both the value of assets and the value of
liabilities will decrease by the same amount if interest rates decrease
da
Ans:- b
If a financial institution’s repricing gap is positive, then

(a) it is deficient in its required reserves.
(b) it is deficient in its capital ratiogo to practice material requirement.
(c) its liability costs are more sensitive to changing market interest rates than are its asset yields.
(d) its liability costs are less sensitive to changing market interest rates than are its asset yields.-
oo
(e) the duration of the FI's liabilities exceeds the duration of FI's assets.
Ans:- d
Which of the following statements is true?

(a) Duration is the time until funds can be profitably invested.
(b) Duration is the average life of an asset or liability.-
(e) None of the given answers

Ans:- b

H
(c) Duration is another word for the maturity of an asset or liability.
(d) Duration is the time it takes for an FI to hedge against interest rate risk.
ak
(a) The more diversified a financial intermediary, the higher the probability that it will default on
its obligations and the more risky the assets.
(b) The less diversified a financial intermediary, the higher the probability that it will default on its
obligations and the more risky the assets.-
(c) The more diversified a financial intermediary, the higher the probability that it will default on
its obligations but the less risky the assets.
(d) The less diversified a financial intermediary, the lower the probability that it will default on its
obligations and the less risky the assets.
p

Ans:- b
ee
Which of the following situations pose a reinvestment risk for a financial institution ?
(a) A financial institution issues $10 million of liabilities of one-year maturity to finance the
D
purchase of $10 million of assets with a two-year maturity.

(b) A financial institution issues $10 million of liabilities of two-year maturity to finance the
purchase of $10 million of assets with a two-year maturity.
(c) A financial institution issues to practice material issues $10 million of liabilities of three-year
maturity to finance the purchase of $10 million of assets with a two-year maturity.-
(d) A financial institution matches the maturity of its assets and liabilities.

Dec 2017
(e) None of the above answers.
Ans:- c
Holdings of U.S. Treasury securities are classified on a bank's balance sheet as
da
(a) assets, because U.S. Treasury securities are default risk-free.
(b) liabilities, because the bank must pay cash in order to acquire the securities.
(c) assets, because securities holdings represent a use of funds for investment.-
(d) liabilities, because the Treasury securities must be pledged as collateral against discount
window borrowing.
(e) assets, because the market for U.S. Treasury securities is the most liquid in the world
Ans:- c
oo
An FI that funds long-term fixed-rate loans with at-call variable rate deposits exposes itself to:
a. liquidity risk, Credit risk, and interest-rate risk.-
b. liquidity risk, Credit risk, market risk and interest-rate risk.
c. Credit risk, market risk and interest-rate risk.
d. liquidity risk, foreign exchange rate risk, and interest-rate risk.
e. None of the given answers.
Ans:- a
H
Assume an FI issues a security with a face value of $1000 and a promised coupon payment of 12%.
Which of the following statements is true for this scenario?
a. The FI benefits from falling interest rates, as it now has to pay less in coupon payments.
ak
b. The FI does not benefit from falling interest rates as the value of the security increases. -
c. The FI does not benefit from rising interest rates, as it now has to pay more in coupon
payments.
d. The FI benefits from falling interest rates as the value of the security increases. e. None of the
given answers
Ans:- b
Consider a security with a face value of $100,000 to be repaid at maturity. The maturity of the
p
security is 2 years. The coupon rate is 7% p.a. and coupon payments are made semi-annually. The
current discount rate is 12% p.a. What is the security’s price (round your answer to two decimals)?
a. $94,802.34
ee
b. $173,668.38.
c. $91,337.24 -
d. $142, 624
Consider a bond with a face value of $100 and an annual coupon of 12%. Current market rates are
15% p.a. What is the change in price of the bond if current market rates increase by 1% and the
D
remaining time to maturity is one year? Use duration model and round to two decimals.
a. -0.88%.
b. -0.87%
c. 0.86%.
d. 0.87%.
e. 0.78%

Dec 2017
Ans:- b
You observe that a bank’s profit margin is below the industry average, while its return on equity
and equity multiplier ratio exceed the industry average. What can you conclude?
da
a. Return on assets must be below the industry average.
b. Asset utilization must be above the industry average.
c. Asset utilization must be below the industry average.
d. Statements a and c are correct.
e. None of the statements above is correct.
Ans:- b
oo
An Australian FI that invests €75m in 4-year maturity loans and partially funds these loans with
€50m 3-year deposits is exposed to the following risks.
a. A depreciation of the Euro against the Australian dollar plus Credit risk plus reinvestment risk,
i.e. decreasing interest rates in the Euro zone.
b. A depreciation of the Euro against the Australian dollar plus Credit risk plus refinancing risk, i.e.
increasing interest rates in the Euro zone.-
H
c. An appreciation of the Euro against the Australian dollar plus refinancing risk, i.e. increasing
interest rates in the Euro zone.
d. An appreciation of the Euro against the Australian dollar plus Credit risk plus reinvestment risk,
i.e. decreasing interest rates in the Euro zone.
e. A depreciation of the Euro against the Australian dollar plus refinancing risk, i.e. increasing
interest rates in the Euro zone.
ak
Ans:- b

a. The major focus of the repricing gap is the capital loss effect.
b. The major focus of the repricing gap is the capital gains effect.
c. The repricing gap focuses on all three, the capital gains, the capital loss and the interest income
effect.
d. The major focus of the repricing gap is the interest income effect. -
p

Ans:- d
ee
security is 1.5 years. The coupon rate is 7% p.a. and coupon payments are made semi-annually.
The current market rate is 12% p.a. What is the security’s duration (round your answer to two
D
decimals)?
a. 1.44 half-years.
b. 1.44 years.
c. 1.45 years.
d. 1.45 half-years

Dec 2017
Ans:- c
Assume you are the manager of an FI. How would you structure your balance sheet using the
repricing gap model if you expected interest rates to increase?
da
a. It would depend on my FI’s current profitability.
b. I would Create a negative gap.
c. I would Create a positive gap.
d. I would Create a neutral gap.
Ans:- c
oo
An FI invests $100,000 in a one-year loan that is being repaid by the borrower in a lump sum
payment at maturity. The loan is funded with a one year bond and coupon payments are made
semi-annually. Is the FI hedged against interest rate risk?
a. Yes, because the FI has matched the maturity of the asset and the maturity of the liability.
b. No, because the FI has matched the maturity of the asset and the maturity of the liability.
c. Yes, because it will recover the invested funds earlier than it has to repay the borrowed funds.
invested funds.-
Ans:- e
H
d. No, because it will recover the invested funds earlier than it has to repay the borrowed funds.
e. No, because it has to repay the interest on the borrowed funds earlier than the recovery of the
In which of the following situations is an Australian FI exposed to a depreciation of the Euro

ak
against the Australian dollar?
a. The FI holds €150m in assets and €85m in liabilities.-
b. The FI holds €85m in assets and €150m in liabilities.
c. The FI holds €100m in assets and €100m in liabilities.
d. The FI does not hold any assets or liabilities in Euros, but considers doing so in the future.
Ans:- a
p
ee
A 10-year Treasury bond has an 8 percent coupon. An 8-year Treasury bond has a 10 percent
coupon. Both bonds are exposed to the same market interest rates, hence the same required rate of
returns. If the market interest rates of both bonds decrease by the same amount, which of the
following statements is most correct?
D
a. Both bonds will decline in price, but the 10-year bond will have a greater percentage decline in
price than the 8-year bond.
b. The prices of both bonds will decrease by the same amount.
c. The prices of the two bonds will remain the same.
d. Both bonds will decline in price, but the 8-year bond will have a greater percentage decline in
price than the 10-year bond.

Dec 2017
e. Both bonds will increase in price, but the 10-year bond will have a greater percentage increase in
price than the 8-year bond.-
Ans:-e
da
Consider an asset with a current market value of $500,000 and a duration of 7 years. Assume the
asset is partially funded through zero-coupon bonds which currently sells for $475,000 and has a
maturity of 4 years. The current discount rate is 15% and interest rates are expected to increase by
150 basis points. Which of the following statements is true?
a. The current net worth of the position is $25,000 and if interest rates increase the net worth will
increase, too.
b. The current net worth of the position cannot be determined, however, if interest rates increase
oo
the net worth will increase, too.
c. The current net worth of the position is $25,000 and if interest rates decrease the net worth will
decrease too.
d. The current net worth of the position cannot be determined, however, if interest rates increase
the net worth will decrease. e. The current net worth of the position is $25,000 and if interest rates
increase the net worth will decrease.
Ans:- d
H
Fleming Bank and Nicolo bank both have the same return on assets (ROA). However, Nicolo has a
higher asset utilisation and a higher equity multiplier than Fleming . Which of the following
ak
statements is most correct?
a. Nicolo has a higher return on equity (ROE) than Fleming.
b. Nicolo has a lower profit margin than Fleming.
c. Nicolo has a lower equity multiplier than Fleming.
d. Fleming has a higher return on equity (ROE) than Nicolo
e. Statements a and b are correct.
Ans:- e
p
ee
Consider the following repricing buckets
Repricing Bucket Assets Liabilites

1 day $150,000 $240,000
D
1 day to 3 months $200,000 $140,000

3 months to 6 months $200,000 $200,000
6 months to 12 months $500,000 $160,000
1 year to 5 year $150,000 $260,000
Over 5 yera $50,000 $200,000

Dec 2017
What is the annualised change in the bank’s future net interest income if the average rate
change for assets and liabilities that can be repriced within one year is an increase of 0.5%?
a. $155
b. -$155
da
c. $1550.
d. -$1550
e. None of the given answers
Ans:- c
Consider an FI with a negative maturity gap and the scenario of increasing interest rates. Which of
oo
the following statements is true?
a. The value of both assets and liabilities will increase. The increase in liability values will
however be larger than the increase in asset values, resulting in a decrease in the FI’s equity
position.
b. The value of both assets and liabilities will fall. The fall in liability values will however be larger
than the fall in asset values, resulting in an increase in the FI’s equity position.-
H
c. The value of both assets and liabilities will increase. The increase in asset values will however
be larger than the increase in liability values, resulting in an increase in the FI’s equity position.
d. The value of both assets and liabilities will fall. The fall in asset values will however be larger
than the fall in liability values, resulting in a decrease in the FI’s equity position.
Ans:- b
ak
Consider a security with a duration of 3.25 years. The current interest rate level is 10% p.a. How
does the price of the security change if interest rates decrease by 1% (round to two decimals)?
a. The price of the security will increase by 2.95%.
b. The price of the security will decrease by 2.5%.
c. The price of the security will decrease by 2.95%.
d. The price of the security will not be influenced by the change in interest rates.
e. The price of the security will increase by 2.5%.
p
Ans:- a
ee
ABC Bank has a $1 million position in a five-year, zero-coupon bond with a face value of $1 402
552. The bond is trading at a yield to maturity of 7.00 per cent. The historical mean change in daily
yields is 0.0 per cent, and the standard deviation is 12 basis points.
What is the maximum adverse daily yield move given that we desire no more than a 5 per cent
D
chance that yield changes will be greater than this maximum?

(a) .001980-
(b) .101980
(c) .201980
(d) .301980
Ans:- a

Dec 2017
What are the daily earnings at risk for this bond?

(a) $8252
(b) $9252-
da
(c) $ 4252
(d) $6252
Ans:- b
What is meant by value at riskgo to practice material (VAR)? What would be the VAR for the
bond held by ABC Bank for a 10-day period?
oo
(a) $39 257.39
(b) $59 257.39
(c) $29 257.39-
(d) $99 257.39
Ans:- c
Which of the following statements is true in the context of securitisation?
H
(a) If off-balance sheet, the issuer saves on reserve requirements.
(b) If off-balance sheet, the issuer saves on deposit insurance premiums.
(c) If off-balance sheet, the issuer saves on capital adequacy requirements.
(d) All of the given answers.-
Ans:- d
ak
Assume the interest rate in the market for one-year zero-coupon government bonds is i = 8% and
the rate for one-year zero-coupon grade BBB bonds is k = 10.2%. What is the implied probability
of repayment on the corporate bond (round to two decimals)?
(a) 2.00%.
(b) 2.04%.
(c) 97.96%.
p
(d) 98.00%.-
(e) 98.96%
Ans:- d
ee
Assume the dollar market value of an FI’s position is $200,000 and the calculated price volatility is
1.25%. What is the VAR of the position if the FI is required to hold the position for 6 days (round
to two decimals)?
(a) $2,683.28.
(b) $6,123.72. -
(c) $200,000.00.
D
(d) $489,897.95.
Ans:- b

Dec 2017
A small local bank failed because housing market collapsed following the departure of the area’s
largest employer. What type of risk applies to the failure of the institution?
(a) Technological risk.
(b) Operational risk.
da
(c) Sovereign risk.
(d) Insolvency risk.
Ans:- d
A disadvantage of using stored liquidity management to manage a FI's liquidity risk is

(a) the resulting shrinkage of the FI's balance sheet.-
oo
(b) the high cost of purchased liabilities.
(c) the accessibility of international money markets.
(d) tax considerations.
(e) loss of flexibility as a result of dependence upon purchased liabilities
Ans:- a
H
Assume a $500,000 loan has a duration of 2.5 years. The current interest rate level is 10% and a
sudden change in the Credit premium of 1% is expected. Further assume that the one-year income
on the loan is $2,500. What is the loan’s RAROC (round to two decimals)?
(a) 10.00%.
(b) 11.00%.
(c) 22.00%.-
ak
(d) 50.00%.
Ans:- c
Investors in mortgage-backed pass-through securities are exposed to a variety of risks. Compared

to other fixed-income securities, the most unique of these risks is
(a) prepayment risk
(b) default riskgo to practice material
p
(c) Credit risk

(d) interest rate risk
(e) liquidity risk
ee
Ans:- a
The Basel I capital requirements differ from flat (risk unadjusted) capital standards in all except
one of the following ways :
(a) More stringent capital standards for large banks than for small banks.-
D
(b) Inclusion of off balance sheet assets in the asset base.

(c) Risk weighting of assets on the basis of Credit risk and market risk exposure.
(d) Risk weighting of off balance sheet contingencies.
(e) Minimum capital requirements are linked to the risks of the assets.
Ans:- a

Dec 2017
Assume you are the manager of a financial institution. How would you structure your balance sheet
using the repricing gap model if you expected interest rates to decrease?
(a) It would depend on my FI’s current profitability.
(b) I would Create a negative gap.
da
(c) I would Create a positive gap.
(d) I would Create a neutral gap.
Ans: b
oo
security is 3 years. The coupon rate is 9% p.a. and coupon payments are made semi-annually. The
current discount rate is 12% p.a. What is the security’s price (round your answer to two decimals)?
(a) $127,000.
(b) $73,668.38.
(c) $100,000.
(d) $76,046.0
(e) $92,624.01.
Ans:- e
H
Why are money market managed funds and general insurance companies more exposed to Credit
risk than, for instance, Credit unions or banks?
(a) Because the average maturities of their assets are longer than those of banks/Credit unions.
ak
(b) Because the average maturities of their assets are shorter than those of banks/Credit unions.
(c) They are not.
(d) Because they are not specialised in Credit risk management.
(e) Because banks and Credit unions have more stringent Credit controls
Ans:- c
A decline in an FI’s asset quality due to, for instance, increasing loan defaults:
(a) exposes the FI to increasing Credit risk.
p
(b) can have an impact on the FI’s funding cost.

(c) might lead to refusal of lenders to renew or issue new loans to the FI.
(d) might threaten the FI’s solvency.
ee
(e) All of the given answers.

Ans:- e
Which of the following statements best describes the treatment of adjusting for Credit risk of off-
balance-sheet activities under Basel II risk based capital ratio ?
D
(a) All OBS activities are treated equally in making Credit-risk adjustments.
(b) Standby letter of Credit guarantees issued by banks to back commercial paper have a 0 percent
conversion factor.
(c) The Credit or default risk of over-the-counter contracts is approximately zero.
(d) The treatment of forward, option, and swap contracts differs from the treatment of contingent or
guarantee contracts. -

Dec 2017
Ans:- d
A Criticism of the Basel I risk-based capital ratio is
da
(a) the incorporation of off-balance-sheet risk exposures.
(b) the inclusion of a leverage ratio.
(c) the more systematic accounting of Credit risk differences. (d) the lack of appropriate
consideration of the portfolio diversification effects of Credit risk -
(e) Answers B and C only.
Ans:- d
oo
Losses in asset values due to adverse changes in interest rates are borne initially by the
(a) equity holders of an FI
(b) liability holders of an FI.
(c) regulatory authorities.
(d) taxpayers.
(e) insured depositor
Ans:- a
H
Which of the following statements is NOT true?
(a) Stored liquidity management involves liquidation of assets.
(b) Traditionally Depository Institutions have stored cash reserves at the Central bank and in their
ak
vaults to overcome liquidity risk.
(c) When a Depository Institution uses its cash to fund a net deposit drain, both sides of its balance
sheet contract.
(d) DIs hold cash reserves in excess of the minimum required to meet liquidity drains.
(e) Bank sustains no cost under stored liquidity risk management
Ans: e
Operational Risk does not occur if;

p
(a) Strike at the port

(b) Non loading of goods on the desired ship, due to rains.
(c) Delay in supplies by sub-suppliers.
ee
(d) Delay in payment by the buyers.

Ans: - b
A risk is:
(a) Related to illness, which does not affect the human life
(b) Related to events which do not affect the profits of the organization.
D
(c) Related to unplanned event with financial consequences resulting in loss.

(d)A certain event, where outcome is known.
Ans: - c
In an LC transaction, following parties are not involved ......

(a) The exporter

Dec 2017
(b) The issuing bank
(c) The advising bank
(d) The opening banks representative office in beneficiary's country, who helps source business
for the is
da
Ans:- d
For the following three questions, assume that Antarctica is the home country, and its currency is
the Antarctica dollar (AAD), and Greenland is the foreign country and its currency is the Crown
(GRK).
Choose the correct answer.
oo
All else being equal, an increase in income in Greenland leads to:
(a) an increase in consumption in Antarctica, and therefore an increase in imports, resulting in an
appreciation of the AAD.
(b) a decrease in consumption in Antarctica, and therefore an increase in exports, resulting in a
depreciation of the AAD.
(c) an increase in consumption in Greenland, and therefore an increase in imports, resulting in an

Ans:- c
H
(d) an increase in consumption in Greenland, and therefore an increase in imports, resulting in a
All else being equal, a decrease in the interest rate r∗ in Greenland leads to: (a) decreased demand
ak
for assets in Greenland, and therefore a depreciation of the GRK.
(b) decreased demand for assets in Greenland, and therefore a depreciation of the AAD.
appreciation of the GRK.
(d) an increase in consumption in Antarctica, and therefore an increase in exports, resulting in a
Ans:- a
p
ee
All else being equal, a decrease in prices in Greenland leads to:

(a) an increase in exports to Antarctica, and therefore an appreciation of the AAD.
(b) an increase in exports to Antarctica, and therefore a depreciation of the AAD.
D

(d) a decrease in consumption in Greenland, and therefore a decrease in imports, resulting in a
Ans:- b
Risk aggregation in ICAAP implies ......

Dec 2017
(a) Sum total of risks measured across various risks
(b) Sum total of risks measured in terms of pillar I guidelines
(c) Sum total of risks measured after accounting for risk diversification
(d) Assessment of bank’s internal capital, capital adequacy assessment and strategy
da
Ans - c
Two basic procedures for translation are currently used in most of the world. They are:
(a) Translation method and Temporal method
(b) Monetary method and Non-monetary method
(c) Temporal method and Current rate method
(d) Dollar-based method and Euro-based method
oo
(e) Accounting method and Translation method
Ans:- c
One day VaR of a portfolio is Rs.500,000 with 95% confidence level. In a period of six
months(125 working days) how many times the loss on the portfolio may exceed Rs.500,000 ?
(a)4 days
(b)5 days
(c)6 days
(d)7 days
Ans:- c
H
A bank expects fall in price of a security if it sells it in the market. What is the risk that the bank is
ak
facing ?
(a)Market risk
(b)Operational risk
(c)Asset Liquidation risk
(d)Market liquidity risk
Ans:-c
Operational Risk does not arise from

p
(a)Inadequate or failed internal processes

(b)People and systems
(c)External Events
ee
(d)Defaults by own customer

Ans:-d
A transaction where financial securities are issued against the cash flow generated from a pool of
assets is called
(a)Securitization
(b)Credit Default Swaps
D
(c)Credit Linked Notes

(d)Total Return Swap
Ans:-a
From following table find number of accounts that have suffered rating migration during 2006-07
Last Rating No of Accounts A+ A+ A B+ B C Default

Dec 2017
+
A 100 1 1 79 10 4 3 2
da
(a)2
(b)19
(c)21
(d)25
Ans:-b
oo
An increase in cash reserve ratio will cause yield curve to
(a)Shift downward
(b)Remain unchanged
(c)Become steeper
(d)Become flatter
Ans:-a
(a)Rs.100
(b)Rs.120
(c)Rs.150
H
A debenture of face value of As. 100 carries a coupon of 15%. If the current yield is 12.5%.What is
the current market price ?
ak
(d)Rs.125
Ans:-b
8% Government of India security is quoted at RS 120/- The current yield on the security, will be---
(a)12%
(b)9.6%
(c)6.7%*
p
(d)8%
Ans:- c
ee
A bank suffers loss due to adverse market movement of a security. The security was however held
beyond the defeasance period. What is the type of the risk that the bank has suffered ?
(a)Market Risk
(b)Operational Risk
(c)Market Liquidation Risk
D
(d)Credit Risk
Ans:- b
VaR is not enough to assess market risk of a portfolio. Stress testing is desirable because
(a)It helps in calibrating VaR module

Dec 2017
(b)It helps as an additional risk measure
(c)It helps in assessing risk due to abnormal movement of market parameters
(d)It is used as VaR measure is not accurate enough
Ans:- c
da
If a firm based in the Netherlands wishes to avoid the risk of exchange rate movements, and is due
to receive USD100,000 in 90 days, it could:
(a) enter into a 90-day forward sale of US dollars for euros;
(b) purchase US dollars 90 days from now at the spot rate;
(c) enter into a 90-day forward purchase of US dollars for euros;
(d) sell US dollars 90 days from now at the spot rate.
oo
Ans:- a
Under a fixed exchange rate system:

(a) central bank intervention in the foreign exchange market is not permitted.
(b) a forward foreign exchange market does not exist as it would be pointless since rates do not
move;
H
(c) central bank intervention in the foreign exchange market is not necessary since rates do not
move;
(d) central bank intervention in the foreign exchange market is often necessary;
Ans:- d
Given a home country and a foreign country, purchasing power parity suggests that:
ak
(a) the home currency will depreciate if the current home inflation rate exceeds the current foreign
inflation rate.
(b) the home currency will depreciate if the current home interest rate exceeds the current foreign
interest rate;
(c) the home currency will depreciate if the current home inflation rate exceeds the current foreign
interest rate;
(d) the the home currency will appreciate if the current home inflation rate exceeds the current
foreign inflation rate;
p
Ans:- a
ee
If purchasing power parity were to hold even in the short run, then:
(a) real exchange rates should tend to decrease over time;
(b) real exchange rates should tend to increase over time;
(c) quoted nominal exchange rates should be stable over time.
(d) real exchange rates should be stable over time;
D
Ans:- d
If Euro-sterling interest rates were consistently below Eurodollar interest rates, then for the
international Fisher effect to hold:
(a) the real value of the British pound would remain constant most of the time;

Dec 2017
(b) the value of the British pound against the dollar would appreciate in some periods and
depreciate in others, but on average, there would be a zero rate of appreciation.
(c) the value of the British pound would tend to appreciate against the dollar;
(d) the value of the British pound would tend to depreciate against the dollar;
da
Ans:- d
Net interest income of a bank is

(a) Gross profit of the bank plus operating expenses
(b) Net profit of the bank plus provisions
(c) Interest income net of interest expenses--
(d) Interest income plus non-interest income
oo
Ans:- b
Under the managed float system of exchange rates, a fall in the market price of a currency is called:
(a) Devaluation.
(b) Depreciation.
(c) Appreciation.
(d) Both (a) and (b).
Ans:- b H
European currency options can be exercised _______; American currency options can be exercised
ak
_______)
(a) any time up to the expiration date; any time up to the expiration date
(b) any time up to the expiration date; only on the expiration date
(c) only on the expiration date; only on the expiration date
(d) only on the expiration date; any time up to the expiration date
Ans:- d
Futures contracts are typically _______; forward contracts are typically _______.
p
(a) sold on an exchange; sold on an exchange

(b) offered by commercial banks; sold on an exchange
(c) sold on an exchange; offered by commercial banks
ee
(d) offered by commercial banks; offered by commercial banks

Ans:- c
Which of the following would likely have the least direct influence on a country's current account?
(a) inflation.
(b) national income.
D
(c) exchange rates.

(d) tariffs.
(e) A tax on income earned from foreign stocks.
Ans:- E

Dec 2017
Which of the following is NOT a motivation identified by the authors as a function of the foreign
exchange market?
(a) The transfer of purchasing power between countries.
(b) Obtaining or providing Credit for international trade transactions.
da
(c) Minimizing the risks of exchange rate changes.
(d) All of the above were identified as functions of the foreign exchange market.
Ans:- d
A / An ________ is an agreement between a buyer and seller that a fixed amount of one currency
will be delivered at a specified rate for some other currency.
oo
(a) Eurodollar transaction
(b) import / export exchange
(c) foreign exchange transaction
(d) interbank market transaction
Ans:- C
H
Assume you are an American exporter and expect to receive 50 pounds sterling at the end of 60
days. You
can remove the risk of loss due to a devaluation of the pound sterling by:
(a) Selling sterling in the forward market for 60-day delivery
(b) Buying sterling now and selling it at the end of 60 days
(c) Selling the dollar equivalent in the forward market for 60-day delivery
ak
(d) Keeping the sterling in Britain after it is delivered to you
Ans:- a
Which of the following tends to cause the U.S. dollar to appreciate in value?
(a) An increase in U.S. prices above foreign prices
(b) Rapid economic growth in foreign countries
(c) A fall in U.S. interest rates below foreign levels
(d) An increase in the level of U.S. income
p
Ans:- b
ee
Concerning the covering of exchange market risks—assuming that a depreciation of the domestic
currency is anticipated, one can say that there is an incentive for:
(a) Exporters to rush to cover their future needs
(b) Importers to rush to cover their future needs
(c) Both exporters and importers to rush to cover their future needs
D
(d) Neither exporters nor importers to rush to cover their future needs
Ans:- b
When short-term interest rates become lower in Tokyo than in New York, interest arbitrage
operations will most likely result in a (an):
(a) Increase in the spot price of the yen

Dec 2017
(b) Increase in the forward price of the dollar
(c) Sale of dollars in the forward market
(d) Purchase of yen in the spot market
Ans:- c
da
An appreciation in the value of the U.S. dollar against the British pound would tend to:
(a) Discourage the British from buying American goods
(b) Discourage Americans from buying British goods
(c) Increase the number of dollars that could be bought with a pound
(d) Discourage U.S. tourists from traveling to Britain
Ans:- a
oo
Concerning the foreign exchange market, one can best say that:
(a) There is a spot market for virtually every currency in the world
(b) The market is highly centralized like the stock exchange
(c) Most foreign exchange payments are made with bank notes
(d) The values of the forward and spot rates are always in agreement
Ans:- a
mice.
H
Suppose researchers discover that Swiss beer causes cancer when given in large amounts to British
This finding would likely result in a (an):

(a) Increase in the demand for Swiss francs
ak
(b) Decrease in the demand for Swiss francs
(c) Increase in the supply of Swiss francs
(d) Decrease in the supply of Swiss francs
Ans:- b
Suppose that real incomes increase more rapidly in the United States than in Mexico. In the United
States, this situation would likely result in a (an):
(a) Increase in the demand for pesos
p
(b) Decrease in the demand for pesos

(c) Increase in the supply of pesos
(d) Decrease in the supply of pesos
ee
Ans:- a
A depreciation of the dollar refers to a (an):
(a) Fall in the dollar price of foreign currency
(b) Increase in the dollar price of foreign currency
(c) Loss of foreign-exchange reserves for the U.S.
(d) Intervention in the international money market
D
Ans:- b
If Canadian speculators believed the Swiss franc was going to appreciate against the U.S. dollar,
they would:
(a) Purchase Canadian dollars
(b) Purchase U.S. dollars

Dec 2017
(c) Purchase Swiss francs
(d) Sell Swiss francs
Ans:- c
da
A major difference between the spot market and the forward market is that the spot market deals
with:
(a) The immediate delivery of currencies
(b) The merchandise trade account
(c) Currencies traded for future delivery
(d) Hedging of international currency risks
Ans:- a
oo
The exchange rate is kept the same in all parts of the market by:
(a) Forward cover
(b) Hedging
(c) Exchange speculation
(d) Exchange arbitrage
H
198 Test Bank for International Economics,
Ans:- d
If you have a commitment to pay a friend in Britain 1,000 pounds in 30 days, you could remove the
risk of
loss due to the appreciation of the pound by:
ak
(a) Buying dollars in the forward market for delivery in 30 days
(b) Selling dollars in the forward market for delivery in 30 days
(c) Buying the pounds in the forward market for delivery in 30 days
(d) Selling the pounds in the forward market for delivery in 30 days
Ans:- c
An increase in the dollar price of other currencies tends to cause:

(a) U.S. goods to be cheaper than foreign goods
p
(b) U.S. goods to be more expensive than foreign goods

(c) Foreign goods to be more expensive to residents of foreign nations
(d) Foreign goods to be cheaper to residents of the United States
ee
Ans:- a
The balance on merchandise trade:

(a) Must be negative
(b) Must be positive
(c) Must be zero
D
(d) May be negative, positive, or zero

Ans:- d
Which of the following would not induce the U.S. demand curve for foreign exchange to shift
backward to the left?
(a) Worsening American tastes for goods produced overseas

Dec 2017
(b) Decreasing interest rates in the U.S. compared to those overseas
(c) A fall in the level of U.S. income
(d) A depreciation in the U.S. dollar against foreign currencies
Ans:- d
da
A U.S. export company scheduled to receive 1 million pounds six months from today can hedge its
foreign exchange risk by:
(a) Buying today 1 million pounds in the forward market for delivery in six months
(b) Buying 1 million pounds in the spot market for delivery in six months
(c) Selling 1 million pounds in the spot market for delivery in six months
(d) Selling today 1 million pounds in the forward market for delivery in six months
oo
Ans:- d
Over time, a depreciation in the value of a nation’s currency in the foreign exchange market will
result in:
(a) Exports rising and imports falling
(b) Imports rising and exports falling
(c) Both imports and exports rising
(d) Both imports and exports falling
Ans:- a H
Grain shortages in countries that buy large amounts of grain from the United States would increase
the demand for American grain and:
ak
(a) Reduce the demand for dollars
(b) Increase the demand for dollars
(c) Reduce the supply of dollars
(d) Increase the supply of dollars
Chapter 12: Foreign Exchange 199
Ans:- b
p
ee
Suppose the exchange rate between the Japanese yen and the U.S. dollar is 100 yen per dollar. A
Japanese stereo with a price of 60,000 yen will cost:
(a) $60
(b) $600
(c) $6,000
(d) None of the above
D
Ans:- b
The supply of foreign currency may be:

(a) Upward-sloping
(b) Backward-sloping
(c) Vertical

Dec 2017
Ans:- d
Suppose that a Swiss watch that costs 400 francs in Switzerland costs $200 in the United States.
da
The exchange rate between the franc and the dollar is:
(a) 2 francs per dollar
(b) 1 franc per dollar
(c) $2 per franc
(d) $3 per franc
Ans:- a
oo
In the early 1980s, the Federal Reserve pursued a tight monetary policy. All else being equal, the
impact of that policy was to __________ interest rates in the United States relative to those in
Europe and cause the dollar to __________ against European currencies.
(a) Decrease, depreciate
(b) Decrease, appreciate
(c) Increase, depreciate
(d) Increase, appreciate
Ans:- d
H
Under a system of floating exchange rates, the Swiss franc would depreciate in value if which of
the following occurs?
(a) Price inflation in France
ak
(b) An increase in U.S. real income
(c) A decrease in the Swiss money supply
(d) Falling interest rates in Switzerland
Ans:- d
p
A depreciation of the dollar will have its most pronounced impact on imports if the demand for
ee
imports is:
(a) Constant
(b) Inelastic
(c) Elastic
(d) Unitary elastic
Ans:- c
D
During the era of dollar appreciation, from 1981 to 1985, a main reason why the dollar did not fall
in value was:
(a) Flows of foreign investment into the United States
(b) Rising price inflation in the United States
(c) A substantial decrease in U.S. imports

Dec 2017
(d) A substantial increase in U.S. exports
Ans:- a
Which financial instrument provides a buyer the right to purchase or sell a fixed amount of
da
currency at a prearranged price, within a few days to a couple of years?
(a) Letter of Credit
(b) Foreign currency option
(c) Cable transfer
(d) Bill of exchange
Ans:- b
oo
Given the foreign currency market for the Swiss franc, the supply of francs slopes upward, because
as the dollar price of the franc rises:
(a) America’s demand for Swiss merchandise rises
(b) America’s demand for Swiss merchandise falls
(c) Switzerland’s demand for American merchandise rises
(d) Switzerland’s demand for American merchandise falls
Ans:- c
H
In a supply-and-demand diagram for Japanese yen, with the exchange rate in dollars per yen on the
vertical axis, the demand schedule for yen is drawn sloping:
(a) Upward
(b) Vertical
ak
(c) Downward
(d) Horizontal
Ans:- c
Suppose there occurs an increase in the Canadian demand for Japanese computers. This results in:
(a) An increase in the demand for yen
(b) A decrease in the demand for yen
(c) An increase in the supply of yen to Canada
p
(d) A decrease in the supply of yen to Canada

Ans:- a
ee
A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is
(a) speculating.
(b) demonstrating purchasing power parity.
(c) engaging in interest rate arbitrage.
(d) responding to fluctuations in the business cycle.
(e) ignoring the nominal rate of exchange.
D
Ans:- a
A (an) __________ is an arrangement by which two parties exchange one currency for another and
agree that the exchange will be reversed at a stipulated date in the future.
a. Arbitrage

Dec 2017
b. Swap
c. Option
d. Hedg
Ans:- c
da
A country's balance of payments accounts record
(a) its international trading, borrowing, and lending.
(b) only its official transactions with other governments.
(c) the country's net indebtedness to foreigners.
(d) the flow of human and nonhuman resources between it and its trading partners.
Ans:- a
oo
A country records its international finance accounts in its
(a) balance of payments accounts.
(b) import/export log accounts.
(c) trade payments accounts.
(d) net exports payments account.
Ans:- a
(a) military account.

(b) capital account.
(c) current account.
H
A country's balance of payments accounts include all of the following EXCEPT
ak
(d) official settlements account.
Ans:- a
The balance of payments accounts include the

(a) non-performing account.
(b) export bank account.
(c) current account.
(d) exim bank account.
p
Ans:- c
In part, a country's current account measures

ee
(a) its current debt as opposed to its long-term debt.

(b) receipts from the sale of goods and services to foreigners and payments for goods and services
bought from foreigners.
(c) net increases and decreases in a country's holdings of foreign currency.
(d) borrowing and lending activity between the country's residents and foreigners.
Ans:- b
D
The balance of payments account used to record payments for imported goods and services is the
(a) exim account.
(b) current account.
(c) capital account.
(d) import account.

Dec 2017
Ans:- b
The official settlements account of a country measures

(a) the receipts from goods and services bought and sold, and transfers to and from foreigners.
da
(b) borrowing and lending between the country's residents and foreigners.
(c) net transfer payments between the country's citizens and foreigners.
(d) the net increase or decrease in the country's official reserves.
Ans:- d
If portable disk players made in China are imported into the United States, the Chinese
manufacturer is paid with
oo
(a) international monetary Credits.
(b) dollars.
(c) yuan, the Chinese currency.
(d) euros, or any other third currency.
Ans:- c
(a) currency; currency

(b) currency; financial instruments
(c) currency; goods
(d) goods; goods
H
In the foreign exchange market, the ________ of one country is traded for the ________
of another country.
ak
Ans:- a
The balance of payments account that records foreign investment in the United States is the
(a) capital account.
(b) current account.
(c) exim account
(d) non-performing account.
Ans:- a
p
By definition, currency appreciation occurs when

ee
(a) the value of all currencies fall relative to gold.

(b) the value of all currencies rise relative to gold.
(c) the value of one currency rises relative to another currency.
(d) the value of one currency falls relative to another currency.
Ans:- c
D
Given a home country and a foreign country, purchasing power parity suggests that:
(a) the home currency will appreciate if the current home inflation rate exceeds the current foreign
inflation rate;
interest rate;

Dec 2017
inflation rate.
(d) the home currency will depreciate if the current home inflation rate exceeds the current foreign
interest rate;
da
Ans:- c
If purchasing power parity were to hold even in the short run, then:
(a) real exchange rates should tend to decrease over time;
(b) quoted nominal exchange rates should be stable over time.
(c) real exchange rates should tend to increase over time;
oo
Ans:- d
Interest Rate Parity (IRP) implies that:

(a) Interest rates should change by an equal amount but in the opposite direction to the difference
in inflation rates between two countries
(b) The difference in interest rates in different currencies for securities of similar risk and maturity
H
should be consistent with the forward rate discount or premium for the foreign currency
(c) The interest rates between two countries start in equilibrium, any change in the differential rate
of inflation between the two countries tends to be offset over the longterm by an equal but opposite
change in the spot exchange rate
(d) In the long run real interest rate between two countries will be equal
(e) Nominal interest rates in each country are equal to the required real rate plus compensation for
ak
expected inflation
Ans:- b
A forward currency transaction:

(a) Is always at a premium over the spot rate
(b) Means that delivery and payment must be made within one business day USA/Canada or two
business days after the transaction date
(c) Calls for exchange in the future of currencies at an agreed rate of exchange
p
(d) Sets the future date when delivery of a currency must be made at an unknown spot exch rate
(e) None of the above is correct
Ans:- c
ee
If inflation is expected to be 5 per cent higher in the United Kingdom than in Switzerland:
(a) purchasing power parity would predict that the UK spot rate should decline by about 5 per cent;
(b) the theory of purchasing power parity would predict a drop in nominal interest rates in the
United Kingdom of approximately 5 per cent;
(c) expectations theory would suggest that the spot exchange rates between the two countries
D
should remain unchanged over the long run;

(d) the efficient market hypothesis suggests that no predictions can be made under a system of
freely floating rates.
Ans:- a
The date of settlement for a foreign exchange transaction is referred to as:

Dec 2017
(a) Clearing date
(b) Swap date
(c) Maturity date
(d) Value date
da
(e) Transaction date
Ans:- d
Hedging is used by companies to:

(a) Decrease the variability of tax paid
(b) Decrease the spread between spot and forward market quotes
(c) Increase the variability of expected cash flows
oo
(d) Decrease the variability of expected cash flows
(e) Increase the variability of tax paid
Ans:- d
Which of the following is not a type of foreign exchange exposure?

(a) Tax exposure
(b) Translation exposure
(c) Transaction exposure
(d) Balance sheet exposure
(e) Economic exposure
Ans:- a
H
ak
Which of the methods below may be viewed as most effective in protecting against
economic exposure?
(a) Futures market hedging
(b) Forward contract hedges
(c) Geographical diversification
(d) Money market hedges
(e) None of the above
Ans:- c
p
ee
When an enterprise has an unhedged receivable or payable denominated in a foreign

currency and settlement of the obligation has not yet taken place, that firm is said to have:
(a) Tax exposure
(b) Operating exposure
(c) Infinite exposure
(d) Accounting exposure
D
(e) Transaction exposure

Ans:- e
The potential for an increase or decrease in the parent's net worth and reported net income
caused by a change in exchange rates since the last consolidation of international operations is a
reflection of:

Dec 2017
(a) Translation exposure
(b) Exchange rate exposure
(c) Strategic exposure
(d) Economic exposure
da
(e) Operating exposure
Ans:- a
If one anticipates that the pound sterling is going to appreciate against the US dollar, one
might speculate by _______ pound call options or ______ pound put options.
(a) buying; buying
(b) selling; buying
oo
(c) selling; selling
(d) buying; selling
Ans:- d
Which of the following is true of foreign exchange markets?

(a) The futures market is mainly used by hedgers while the forward market is mainly used
for speculating.
H
(b) The futures market and the forward market are mainly used for hedging.
(c) The futures market is mainly used by speculators while the forward market is
mainly used for hedging.
(d) The futures market and the forward market are mainly used for speculating.
Ans:- c
ak
The difference between the value of a call option and a put option with the same
exercise price is due primarily to:
(a) The greater liquidity of call options
(b) The use of continuous as opposed to discrete discounting
(c) The differential between the current stock price and the exercise price in present
value terms
(d) The effect of dividends on the two securities
p
(e) The volatility of the price of the underlying stock

Ans:- c
ee
Which of the following is not an interest rate derivative used for interest rate management?
(a) Swap
(b) Cap
(c) Floor
(d) Interest rate guarantee
(e) All of the above are interest rate derivatives
D
Ans:- e
Counterparty risk is:

(a) The risk of loss when exchange rates change during the period of a financial contract
(b) Based on the notional amount of the contract
(c) The risk of loss if the other party to a financial contract fails to honour its

Dec 2017
obligation
(d) Present only with exchange-traded options
(e) Eliminated by the use of compulsory insurance
Ans:- c
da
The impact of Foreign exchange rate on firm is called as
(a) Operating Exposure
(b) Transaction exposure
(c) Translation exposure
(d) Business risk
Ans:- a
oo
Foreign currency forward market is
(a) An over the counter unorganized market
(b) Organized market without trading
(c) Organized listed market
(d) Unorganized listed market
Ans:- a
(a) Currencies fluctuation

H
Forward premium / differential depends upon
(b) Interest rate differential between two countries

(c) Demand & supply of two currencies
ak
(d) Stock market returns
Ans:- b
If transaction exposure are in same dates, then it can be hedged

(a) By purchasing single forward contract
(b) By purchasing multiple forward contract
(c) Cannot be hedged by forward contracts
p
Ans:- a
ee
Interest rate swaps are usually possible because international financial markets in different
countries are
(a) Efficient
(b) Perfect
(c) Imperfect
(d) Both a & b
D
Ans:- c
The exchange rate is the

(a) total yearly amount of money changed from one country’s currency to another country’s
currency
(b) total monetary value of exports minus imports

Dec 2017
(c) amount of country’s currency which can exchanged for one ounce of gold
(d) price of one country’s currency in terms of another country’s currency
Ans:- d
da
Exchange rates
(a) are always fixed
(b) fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
(c) fluctuate to equate imports and exports
(d) fluctuate to equate rates of interest in various countries
Ans:- b
oo
If the U.S. dollar appreciates relative to the British pound,
(a) it will take fewer dollars to purchase a pound
(b) it will take more dollars to purchase a pound
(c) it is called a weakening of the dollar
(d) both a & c
Ans:- a
H
An arbitrageur in foreign exchange is a person who
(a) earns illegal profit by manipulating foreign exchange
(b) causes differences in exchange rates in different geographic markets
(c) simultaneously buys large amounts of a currency in one market and sell it in another
market
ak
Ans:- c
A speculator in foreign exchange is a person who

(a) buys foreign currency, hoping to profit by selling it a higher exchange rate at some
later date
(b) earns illegal profit by manipulation foreign exchange
(c) causes differences in exchange rates in different geographic markets
p

Ans:- a
ee
The Purchasing Power Parity (PPP) theory is a good predictor of

(a) all of the following:
(b) the long-run tendencies between changes in the price level and the exchange rate of two
countries
(c) interest rate differentials between two countries when there are strong barriers preventing
trade between the two countries
D
(d) either b or c
Ans:- b
According to the Purchasing Power Parity (PPP) theory,

(a) Exchange rates between two national currencies will adjust daily to reflect price level
differences in the two countries

Dec 2017
(b) In the long run, inflation rates in different countries will equalize around the world
(c) In the long run, the exchange rates between two national currencies will reflect pricelevel
da
Ans:- c
A floating exchange rate

(a) is determined by the national governments involved
(b) remains extremely stable over long periods of time
(c) is determined by the actions of central banks
(d) is allowed to vary according to market forces)
oo
Ans:- d
Under a gold standard,

(a) a nation’s currency can be traded for gold at a fixed rate
(b) a nation’s central bank or monetary authority has absolute control over its money supply
Ans:- a
The Bretton Woods accord

H
(c) new discoveries of gold have no effect on money supply or prices
(d) a & b
(a) of 1879 Created the gold standard as the basis of international finance
ak
(b) of 1914 formulated a new international monetary system after the collapse of the gold
standard
(c) of 1944 formulated a new international monetary system after the collapse of the gold
standard
Ans:- c
p
ee
The current system of international finance is a

(a) gold standard
(b) fixed exchange rate system
(c) floating exchange rate system
(d) managed float exchange rate system
Ans:- d
D
Ask quote is for

(a) Seller
(b) Buyer
(c) Hedger
(d) Speculator

Dec 2017
Ans:- a
A simultaneous purchase and sale of foreign exchange for two different dates is called
(a) currency devalue
da
(b) currency swap
(c) currency valuation
(d) currency exchange
Ans:- b
If your local currency is in variable form and foreign currency is in fixed form the quotation
will be:
oo
(a) Indirect
(b) Direct
(c) Local form
(d) Foreign form
Ans:- b
(b) Exchange Agreement

(c) International Trade
(d) Fisher Effect
Ans:- a
H
In 1944 international accord is recognized as
(a) Breton Wood Agreement
ak
In a quote exchange rate, the currency that is to be purchase with another currency is called
the
(a) liquid currency
(b) foreign currency
(c) local currency
(d) base currency
Ans:- d
p
ee
An economist will define the exchange rate between two currencies as the:
(a) Amount of one currency that must be paid in order to obtain one unit of another
currency
(b) Difference between total exports and total imports within a country
(c) Price at which the sales and purchases of foreign goods takes place
(d) Ratio of import prices to export prices for a particular country
D
Ans:- a
The Purchasing Power Parity should hold:

(a) Under a fixed exchange rate regime
(b) Under a flexible exchange rate regime
(c) Under a dirty exchange rate regime

Dec 2017
(d) Always
Ans:- b
Which of the following is NOT a Criticism of a flexible exchange rate system?
da
(a) Flexible exchange rates tend to be variable and therefore cause more uncertainty
(b) Flexible exchange rate systems require discipline on the part of central banks that may
not be forthcoming
(c) Under flexible exchange rates, trading countries tend to rely more heavily upon
tariffs and other restrictions
(d) The flexible exchange rate system reduces the power of fiscal policy
Ans:- c
oo
Arbitrageurs in foreign exchange markets:
(a) attempt to make profits by outguessing the market)
(b) make their profits through the spread between bid and offer rates of exchang(e)
(c) take advantage of the small inconsistencies that develop between markets)
(d) need foreign exchange in order to buy foreign goods)
12
Ans:- c
H
It is very difficult to interpret news in foreign exchange markets because:
(a) very little information is publicly available
(b) most of the news is foreign
ak
(c) it is difficult to know which news is relevant to future exchange rates
(d) it is difficult to know whether the news has been obtained legally
Ans:- c
Covered interest rate parity occurs as the result of:

(a) the actions of market-makers
(b) interest rate arbitrage
p
(c) purchasing power parity

(d) stabilizing speculation
Ans:- b
ee
A/An ________ is an agreement between a buyer and seller that a fixed amount of one
currency will be delivered at a specified rate for some other currency)
(b) import/export exchange
D

Ans:- c
Which of the following may be participants in the foreign exchange markets?

(a) bank and nonbank foreign exchange dealers
(b) central banks and treasuries

Dec 2017
(c) speculators and arbitragers
(d) All of the above
Ans:- d
da
A forward contract to deliver British pounds for U)S) dollars could be described either as
________ or ________)
(a) buying dollars forward; buying pounds forward
(b) selling pounds forward; selling dollars forward
(c) selling pounds forward; buying dollars forward
(d) selling dollars forward; buying pounds forward
Ans:- c
oo
Exchange Rate means the ...... at which one currency is exchanged for another currency.
(a) Price
(b) Ratio
(c) Value
(d) Any one of the above
Ans:- d
H
Exchange of streams of interest structures are called as ...... Swaps.
(a) Financial
(b) Interest
ak
(c) Currency
(d) Forex
Ans:- b
Data on transactions related to FCNRB deposits is submitted to the RBI in ...... form.
(a) STAT 5
(b) STAT 8
p
(c) NRDCSR
(d) IBS
Ans:- a
ee
Data on transactions related to NRE and NRO deposits is submitted to the RBI in ...... form.
(a) STAT 5
(b) STAT 8
(c) NRDCSR
(d) IBS
D
Ans:- b
Fortnightly data on forex operations is submitted to the RBI in ...... form.

(a) R Return
(b) NRDCSR
(c) FEMIS

Dec 2017
(d) BES
Ans:- a
The seller bank has to pay interest at ...... % above the prime rate of the currency of the specified
da
banks in case of delayed payment of interbank foreign currency funds.
(a) 1
(b) 1.5
(c) 2
(d) 4
Ans:- c
oo
All contract which have matured and have not been collected, shall be automatically cancelled on
the .....working day after the maturity date.
(a) 5th
(b) 7th
(c) 10 th
(d) 15th
Ans:- b
contract, the rate is called ......

(a) T T Rate
(b) Bills Rate
H
When the delivery under a forex deal is completed on the 2nd working day following the date of
ak
(c) Forward Rate
(d) Spot Rate
Ans:- a
All the exchange rates quoted on the screen or in print are for mentioned unless otherwise ......
(a) Forward transactions
(b) Cash transactions
(c) Spot transactions
p
(d) Tom transactions

Ans:- c
ee
Protection of risk in a transaction usually through derivatives product is called ......

(a) insurance
(b) swap
(c) hedge
(d) arbitrage
Ans:- c
D
Which type of risk arises When banks have more earnings assets than paying liabilities ?
(a) Liquidity
(b) Operational
(c) Interest rate

Dec 2017
(d) Market
Ans:- c
Which of the following methods to measure market risk is based on downside potential?
da
(a) BPV (Basis Point Value)
(b) Duration
(c) VaR
(d) none of these
Ans:- c
In the event of default Credit risk (potential changes in the Credit quality of the borrower), a
oo
fraction of
the obligations is pai(d) This is known as ...... rate.
(a) market
(b) Credit
(c) recovery
(d) NPA
Ans:- c
India in
(a) Loro
(b) FCNR
H
For the purpose of foreign exchange transactions, foreign banks maintain accounts with ADs in
ak
(c) Vostro
(d) Nostro
Ans:- c
Foreign exchange implies

(a) US $ Currency
(b) Conversion of Re. to US$
(c) Conversion of US$ to Rs
p
(d) ALL of them

Ans:- d
ee
Who publishes prime rates for major currencies on the monthly basis ?
(a) RBI
(b) EXIM bank
(c) FEDAI
(d) FEMA
Ans:- c
D
What is the most Critical function of Risk Management?

(a) Measurement of risk
(b) Identification of risks
(c) Estimating the costs of risk
(d) Controlling the level of risk to an organization's capacity

Dec 2017
Ans:- d
What kind of risk on settlements is covered by 'Herstatt Risk' for which BCBS was formed?
(a) Exchange rate risk
da
(b) Time difference risk
(c) Interest rate risk
(d) None
Ans:- b
Financial Risk is defined as ......

(a) Uncertainties resulting in adverse variation of profitability or outright losses
oo
(b) Uncertainties that result in outright losses
(c) Uncertainties in cash flow
(d) Variations in net cash flows
Ans:- d
Worsening in Credit quality of a borrower Creates ...... risk.

1. default
2. Credit spread
3. downgrade
4. portfolio
(a) 1
(b) 2 and3
H
ak
(c) 4
(d) 1 or 4
Ans:- b
The International Chamber of Commerce (ICC)was established in 1919 headquartered at ......

(a) New York
(b) Paris
(c) Brussels
p
(d) Switzerland
Ans:- b
ee
The portfolio when diversified fully (which reduces portfolio risk), gets ...... risk.
1. systematic
2. concentration
3. intrinsic
4. default
D
(a) 1 or2
(b) 2
(c) 1 or3
(d) 3 and4
Ans:- c

Dec 2017
In post- shipment advance, the concessional rate of interest cannot exceed ...... days from the date
of shipment.
(a) 90
(b) 120
da
(c) 180
(d) 360
Ans:- c
_______account means your accounts with us.

(a) Nostro
(b) Vostro
oo
(c) Loro
(d) Mirror
Ans:- b
Mirror account is the shadow account of _______account.

(a) Vostro
(b) Loro
(c) Nostro
(d) All the aobve
Ans:- c
H
The minimum period for NRE term deposit is _______ year.
ak
(a) One
(b) Three
(c) Five
(d) Ten
Ans:- a
p
Rupee is convertible on current account as well as capital account owing to the relaxations allowed
ee
by RBI in the area of ......

1. FDI
2. ECB
3. ODI
(a) both 1 and 2
(b) both 2 and 3
D
(c) both 3 and 1

(d) all of these
Ans:- d
Investment in Post Office time deposit is ......

(a) Low- risk investment

Dec 2017
(b) Medium- risk investment
(c) High- risk investment
(d) Zero- risk investment
Ans:- d
da
Daily volatility of a stock is 0.5%. What is its 10- day volatility?
(a) 5%
(b) 0.25%
(c) 1.58%
(d) None of these
Ans
oo
...... term refers an account that cannot be converted and repatriated into foreign currency.
(a) Non- Resident Ordinary Rupee or NRO Account
(b) Non- Resident Rupee or NRE Account
(c) FCNR Account
(d) Retail Account
Ans:- a
H
...... term refers an account in which balances held in the account are freely repatriable.
(a) Non- Resident Ordinary Rupee or NRO Account
(b) Non- Resident Rupee or NRE Account
(c) FCNR Account
ak
(d) Retail Account
Ans:- b
Which of the following is not foreign currency?

(a) Rs draft drawn in US$ payable in UK
(b) US$ draft payable in India
(c) Rs draft drawn in US$ payable in US
(d) ALL are foreign currency
p
Ans:- d
Counter party Risk is a type of ......

ee
(a) Interest Rate Risk

(b) Market Risk
(c) Credit Risk
(d) Operational Risk
Ans:- c
D
FCNRB Accounts are necessarily _______deposit accounts maintained in designated foreign

currencies.
(a) Saving
(b) Current
(c) Term

Dec 2017
Ans:- c
Which of the following is a real time settlement system in Europe?

(a) Target
da
(b) Fedwire
(c) Chips
(d) Chaps
Ans:- a
Risk can be mitigate through ......

(a) Crystilization
oo
(b) Diversification
(c) Portfolio risk
(d) b & c
Ans:- b
The period of validity of specific approval under guarantee given to high political risk countries is
...... months.
(a) 2
(b) 3
(c) 4
(d) 6
Ans:- d
H
ak
Banking books does not include which of the following?
(a) All deposit and loans
(b) All borrowings
(c) Capital
(d) All of these
Ans:- c
p
Bill rediscounting is done at ...... market rate.

ee
(a) foreign exchange

(b) money
(c) securities
(d) global
Ans:- b
D
Which of the following is not a participant of foreign exchange markets participants?

(a) Central Banks
(b) Commercial Banks
(c) Foreign banks
(d) Forex Brokers
Ans:- c

Dec 2017
In Exchange Rate Mechanism Spot Rate means settlement & delivery taken place on ...... day
(a) Equals to TOM (tomorrow) rate
(b) T+1
da
(c) T+2
(d) T+3
Ans:- c
An amount up to USD _______ can be repatriated every year out of balances held in NRO account,
for permissible transactions.
(a) One million
oo
(b) Twenty million
(c) Ten million
(d) Five million
Ans:- a
The payments made in same day, so that no gain or loss of interest accrues to either party is called
......
(a) Valuer Compense
(b) Simply here and there
(c) Either of a or b
(d) None of these
Ans:- c
H
ak
Foreign citizen of Indian origin is called as ......
(a) PIO
(b) NRI
(c) Resident Indian
(d) Foreigner
Ans:- b
p
Debentures are not governed by ......

ee
(i) Law of Contract,

(ii) BR Act,
(iii) Company Law
(a) Only (i) and (ii)
(b) Only (i) and (iii)
(c) Only (ii) and (iii)
D
(d) (i), (ii) and (iii)

Ans:- c
The maximum period for FCNRB deposits is _______ years.

(a) One
(b) Ten

Dec 2017
(c) Three
(d) Five
Ans:- d
da
The Purchasing Power Parity (PPP) theory is a good predictor of
(a) all of the following:
(b) the long- run tendencies between changes in the price level and the exchange rate of two
countries
(c) interest rate differentials between two countries when there are strong barriers preventing trade
between the two countries
(d) either b or c
oo
Ans:- b
A bank has deposits worth 5,00,000 Cr. The interest rate on this is 10%. SRR to be maintained by
the bank is 8%. What will be the effective cost to deposit?
(a) 10.67%
(b) 10.87%
(c) 11.37%
(d) 11.67%
Ans:- b
Exchange rates ......

(a) are always fixed
H
ak
(b) fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
(c) fluctuate to equate imports and exports
(d) fluctuate to equate rates of interest in various countries
Ans:- b
p
For protecting against the _______ risk, the bank has to resort to control the mismatches between
maturities of assets and liabilities.
ee
(a) Liquidity
(b) Interest
(c) Basis
(d) Net interest position
Ans:- a
D
In the foreign exchange market, the ________ of one country is traded for the ________ of another
country.
(a) currency; currency
(b) currency; financial instruments
(c) currency; goods
(d) goods; goods

Dec 2017
Ans:- a
Which of the following examples definitely illustrates a depreciation of the U.S. dollar?
(a) The dollar exchanges for 1 pound and then exchanges for 1.2 pounds.
da
(b) The dollar exchanges for 250 yen and then exchanges for 275 francs.
(c) The dollar exchanges for 100 francs and then exchanges for 120 yen.
(d) The dollar exchanges for 120 francs and then exchanges for 100 francs
Ans:- d
RBI may impose a penalty of Rs ...... for contravention of any direction under FEMA u/s 11(3) of
FEMA 199This penalty is extended up to Rs ...... per day in case of continuing contravention.
oo
(a) 1000, 1000
(b) 5000, 2000
(c) 10000, 2000
(d) 100000, 5000
Ans:- c
(b) Foreign Exchange Regulation Act

(c) Both the above
(c) None of these
Ans - a
H
Which act relating to foreign exchange has replaced arbitrageur one ?
(a) Foreign Exchange Management Act
ak
Which of the following is not a type of foreign exchange exposure?
(a) Tax exposure
(c) Transaction exposure
(d) Balance sheet exposure
Ans:- a
p
A documentary Credit is a link provided by an _______between a buyer and a seller to facilitate

international trade.
ee
(a) Opening Bank

(b) Advising Bank
(c) Confirming Bank
(d) Reimbursing bank
Ans:- a
D
In case of Domestic banks risk weights are assigned depends on?

(a) CRAR
(b) ECA
(c) CSU
(d) None
Ans:- a

Dec 2017
If portable disk players made in China are imported into the United States, the Chinese
manufacturer is paid with ......
(a) international monetary Credits.
da
(b) dollars.
(c) yuan, the Chinese currency.
(d) euros, or any other third currency.
Ans:- c
An LC which allows the openers/opening bank to bank out, and cancel the LC is called _______
oo
Letter of Credit.
(a) Irrevocable
(b) Revocable
(c) Transferable
(d) Red clause
Ans:- a
Forex Markets in middle east are closed on

(a) Friday
(b) Saturday
(c) Sunday
(d) Monday
H
ak
Ans:- a
Which of the followings are components of portfolio risk are?

(a) Default risk and systematic risk
(b) Down - gradation and concentration risk
(c) Concentration risk and intrinsic risk
(d) Default risk and down - gradation risk
Ans c
p
For retail exposures, ...... IRB approach is prescribe(d)

(a) only foundation
ee
(b) only advanced

(c) both
(d) none of these
Ans:- c
In general, banks' required capital would ...... with respect to Credit risks and ...... with respect to
D
operational risks.
(a) increase, increase
(b) decrease, decrease
(c) increase, decrease
(d) decrease, increase
Ans:- d

Dec 2017
How capital charge is calculated under basic indicator approach for operational risk?
(a) capital charge equals internally generated measure based on internal and external loss data
(b) 15% of average gross income over 3 years
da
(c) sum of capital charges across business lines
(d) none of these
Ans:- b
The Bretton Woods accord ......

(a) of 1879 Created the gold standard as the basis of international finance
(b) of 1914 formulated a new international monetary system after the collapse of the gold standard
oo
(c) of 1944 formulated a new international monetary system after the collapse of the gold standard
Ans:- c
Statement showing balances in nostro and vostro accounts are submitted to the RBI in ...... form.
(a) R Return
(b) BAL Statement
(c) XOS
(d) BES
Ans:- b
H
ak
Which of the following T- bills are issued weekly on each Wednesday?
(a) 91 days T- bill
(b) 182 days T- bill
(d) both b andc
Ans:- a
p
On which of the following TT buying rate will be applied?

(i) purchase of foreign DD drawn abroad,
ee
(ii) Payment of DO drawn on the paying bank,

(iii) Conversion of proceeds of instruments sent for collection
D
Ans:- c
RBI has put in place real time gross settlement system (RTGS) not to mitigate the ...... risk.
(i) Market risk
(ii) Operational risk,
(iii) Strategic risk

Dec 2017
da
Ans:- d
The Forward price of a currency against another can be worked out with the following factors pick
up odd one
(a) Spot price of the currencies involved
(b) The Interest rate differentials for the currencies.
(c) The term i.e. the future period for which the price is worked out.
oo
(d) none of these
Ans:- d
A claim of Rs. 49 lacs has been settled by ECGC in favour of a bank against default of Rs. 70 lacs.
Subsequently the bank realizes Rs. 15 lacs with the collaterals available to the loan. What will be
actual amount settled by ECGC after realization of security by the bank?
(a) Rs. 49 lacs
(b) Rs. 42.5 lacs
(c) Rs. 38.5 lacs
(d) Rs. 34 lacs
Ans:- c
H
ak
The current system of international finance is a ......
(a) gold standard
(b) fixed exchange rate system
(d) managed float exchange rate system
Ans:- d
p
Ask quote is for ......

(a) Seller
ee
(b) Buyer
(c) Hedger
(d) Speculator
Ans:- a
Globalization does not refer to ......

D
(i) The process of integrating domestic market with global markets,

characterized by free capital flows and minimum regulatory intervention, (ii) Full convertibility of
all currencies in the world,
(iii) Removal of all trade barriers in the world

Dec 2017
Ans:- c
da
Treasury discount bills of exchange, of short term nature with a tenure of ...... months.
(a) 1 to3
(b) 3 to 6
(c) 6 to 9
(d) 9 to 12
Ans:- b
oo
A simultaneous purchase and sale of foreign exchange for two different dates is called ......
(a) currency devalue
(b) currency swap
(c) currency valuation
(d) currency exchange
Ans:- b
H
An arbitrageur in foreign exchange is a person who ......
(a) earns illegal profit by manipulating foreign exchange
(b) causes differences in exchange rates in different geographic markets
(c) simultaneously buys large amounts of a currency in one market and sell it in another market
ak
Ans:- c
p
According to the Purchasing Power Parity (PPP) theory, ......

(a) Exchange rates between two national currencies will adjust daily to reflect price level
ee

(b) In the long run, inflation rates in different countries will equalize around the world
(c) In the long run, the exchange rates between two national currencies will reflect pricelevel
Ans:- c
D
In a quote exchange rate, the currency that is to be purchase with another currency is called the ......
(a) liquid currency
(b) foreign currency
(c) local currency
(d) base currency

Dec 2017
Ans:- d
Which of the following is not a component of market risk?

(a) currency
da
(b) liquidity
(c) interest rate
(d) price
Ans:- d
If the U.S. dollar appreciates relative to the British pound, ......

(a) it will take fewer dollars to purchase a pound
oo
(b) it will take more dollars to purchase a pound
(c) it is called a weakening of the dollar
(d) both a & c
Ans:- a
The difference between buying and selling rate is called ......

(a) spread
(b) profit
(c) a only
(d) a & b
Ans:- d
H
ak
Which of the following is not a characteristic of Forex Markets?
(a) Immediate settlement
(b) Highly liquid markets
(c) Over the counter market
(d) Round the clock market
Ans:- a
p
All the exchange rates quoted on the screen or in print are for mentioned unless otherwise
ee

Ans:- c
To approve finance against exports on deferred payment basis, the sponsoring bank refers the
D
proposal to EXIM bank for value not exceeding ......,

(a) 50 Cr
(b) 100 Cr
(c) 150 Cr
(d) 200 Cr
Ans:- b

Dec 2017
The SLR to be maintained is mentioned in ......

(a) RBI Act 1934
(b) BR Act 1949
da
(c) Companies Act 1956
(d) NI Act 1885
Ans:- b
Placement of funds for overnight is called ......

(a) notice money
(b) call money
oo
(c) term money
(d) all the above
Ans:- b
Dealing room operation does not include

(a) Issuing of foreign currency draft
H
(b) Managing foreign currency assets and liabilities
(c) Managing nostro accounts
(d) Proprietary trading In foreign currency
Ans:- a
Which is not a function of the Forex dealing room ?

ak
(a) A service branch to meet the requirement of customers of other branches/divisions to buy or
sell foreign currency,
(b) Manage foreign currency assets and liabilities,
(c) Fund Manager for Nostro Accounts as also undertake proprietary trading in currencies.
(d) Processing of Deals, Account, reconciliation etc
Ans d
p
Select the incorrect sentence / sentences from the following:

In direct quotes, local currency is variable.
ee
In direct quotes, local currency is fixe(d)

In indirect quotes, local currency is variable.
In indirect quotes, local currency is fixed
(a) 1 and 2
(b) 1 and 3
(c) 2 and 3
D
(d) 2 and 4
Ans:- c
NOSTRO account means ......

(a) An account opened by foreign citizens other than NRIs in India with Indian banks in INR for
their expenses in Indi(a)

Dec 2017
(b) An account opened by foreign citizens other than NRIs in India with foreign banks in foreign
currency to convert Indian rupee to that currency and remit back to their own country.
(c) An account opened by an Indian bank in the foreign countries in their banks and in that country
currency for settlement in that country's currency.
da
(d) An account opened by a foreign bank in India with their corresponding banks in INR for
settlements in INR.
Ans:- c
An option may be exercised and the underlying stock may be bought or sold at a price. This price
is called as ......
oo
(a) Buy Price
(b) Sale Price
(c) Buy or sale price
(d) Strike Price
Ans:- d
(b) VOSTRO
(c) LORO
(d) Mirror
Ans:- c
H
Their account is with them refers to ...... account.
(a) NOSTRO
ak
Retirement of import bill for GBP 100,000.00 by TT Margin 0.20%, ignore cash
discount/premium, GBP/USD 1.3965/75, USD/INR 55.16/18. Compute Rate for Customer.
(a) 76.5480
(b) 76.6985
(c) 77.1140
(d) 77.2682
Ans:- d
p
Which of the following shipments out of India are exempt from export declaration forms?
(a) Goods or software, when accompanied by a declaration by the exporter that they are not more
ee
than USD 50000 in value

(b) Gifts of goods, valuing not over Rs.50000 along with declaration of exports
(c) Gifts of goods, valuing not over Rs.500000 along with declaration of exports
(d) Goods not exceeding in value USD 10000 per transaction exported to Myanmar under bilateral
trade agreement
Ans:- c
D
Who manages Export Marketing Fund in Indi(a)...

(a) EXIM bank
(b) RBI
(c) GOI
(d) ECGC

Dec 2017
Ans:- a
Indian working with foreign govt abroad is a ......

(a) PIO
da
(b) NRI
(c) Resident Indian
(d) Foreigner
Ans:- b
Forex transactions are classified according to date of deal and date of delivery. Which of the
following are correct regarding type of exchange transaction?
oo
(i) TOM: delivery of foreign exchange takes place on the next working day of the contract,
(ii) spot: which is to be settled on the same day,
(iii) Forward: delivery of foreign exchange takes place beyond second working day of the contract

Ans:- b H
Export bills drawn in foreign currency, purchased/ Discounted/ negotiated, must be Crystallized
into rupee liability. The same would be done at
ak
(a) Market price
(b) TT selling rate.
(c) TT buying rate
(c) Forward rate
Ans:- b
p
In risk measurement, the parameter that is used to capture deviation of a target variable due to unit
movement of a single market parameter, say 1% change in interest rate is called
(a) Downside potential
ee
(b) Volatility
(c) Sensitivity
(d) Mitigation
Ans:- c
Registered Indian exporters who endeavor to export to OECD countries are eligible for support
D
from EXIM bank under ......

(a) EMF (Export Marketing Fund)
(b) PLI (Product Liability Insurance)
(c) EVDLP (Export Vendor Development Lending Program)
(d) None of these
Ans:- b

Dec 2017
...... is the possibility of a major bank failing and the resultant losses to counter parties
reverberating into a banking Crisis.
(a) Sovereign Risk
da
(b) Contrary risk
(c) Legal risk
(d) Systematic Risk
Ans:- d
In case of exports through approved Indian- owned warehouses abroad, the time limit for
realization in post shipment finance is ...... months.
oo
(a) 6
(b) 12
(c) 15
(d) 18
Ans:- c
(b) 1977
(c) 1993
(d) 1997
Ans:- c
H
India switched to a floating exchange rate regime in ......
(a) 1973
ak
The projects which involve supply of equipment along with related services like design, detailed
engineering, civil construction, etc are known as (a) turnkey projects
(b) construction projects
(c) both a and b
(d) none of these
Ans:- a
p
Dealing room operation consists of

(a) Undertaking market activities
(b) Buck office operations
ee
(c) Mid-office
(d) ALL of them
Ans:- d
Mismatch in fund position Creates

(a) Credit risk
D
(b) Interest rate risk

(c) Operation risk
(d) Legal risk
Ans:- b

Dec 2017
If Rashi Gupta wants to send money to his brother Robin in US in Federal Reserve bank through
FEDWIRE, banks use a code / number known as ......
(a) Swift
(b) RTGS
da
(c) ECS
(d) ABA
Ans:- d
Exchange Fluctuation Risk Cover Scheme is valid for a period beyond ...... up to a maximum
period of
(a) 6 months, 1 year
oo
(b) 12 months, 3 years
(c) 15 months, 12 years
(d) 12 months, 15 years
Ans:- d
A speculator in foreign exchange is a person who ......
H
(a) buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
(b) earns illegal profit by manipulation foreign exchange
(c) causes differences in exchange rates in different geographic markets
Ans:- a
ak
Mismatch in currency position Creates
(a) Credit risk
(c) Operational risk
(d) Exchange rate risk
Ans:- d
p
Nostro reconciliation is responsibility of

(a) Dealers
ee
(b) Back office

(c) Mid office
(d) None of these
Ans:- b
A floating exchange rate ......

D
(a) is determined by the national governments involved

(b) remains extremely stable over long periods of time
(c) is determined by the actions of central banks
(d) is allowed to vary according to market forces
Ans:- d

Dec 2017
Which of the following is not a trading limit in the context of foreign exchange
(a) Deal size
(b) Exposure ceiling
(c) Stop loss
da
(d) open position
Ans - b
Export bills drawn in foreign currency, purchased/ Discounted/ negotiated, must be Crystallized
into rupee liability. The same would be done at
(a) Market price
oo
(b) TT selling rate
(c) TT buying rate
(d) Forward rate
Ans:- b
FEDIA was formed with the approval of RBI in the Year

(a)1951
(b)1958
(c)1973
(d)1993
Ans:- b
H
ak
A purchased export bill must be Crystallized within a period approved
by a Bank. This Crystallization period cannot exceed
(a) 7 days
(b) 10 days
(c) 30 days
(d) 60 days
Ans:- d
p
Sight Bills drawn under import letters of Credit should be Crystallized within how many days from
date of receipt.
(a) 7th day
ee
(b) 10th day

(c) 30th day
(d) 60th day
Ans:- b
W.e.f. 01- 07- 2007, which will be applicable for foreign LC

D
(a) UCPDC- 400

(b) UCPDC- 600
(c) UCPDC- 500
(d) UCPDC 700
Ans:- b

Dec 2017
The beneficiary gets the payment on presentation of documents at nominated bank's counters under
...... LC
(a) Acceptance
(b) Deferred payment
da
(c) Revocable
(d) Sight
Ans:- d
Commercial bills which are authorised to deal in foreign exchange can rediscount their short term
export bills with a usance period of ...... days.
(a) 90
oo
(b) 120
(c) 180
(d) 360
Ans:- c
What is the statutory time limit for export proceeds to be treated as deferred payment exports?
(a) 3 months
(b) 6 months
(c) 9 months
(d) 12 months
Ans:- b
H
ak
The sponsoring bank can approve finance against exports on deferred payment basis for a
maximum amount of ......
(a) 1 Crore
(b) 10 Crore
(c) 25 Crore
(d) 50 Crore
Ans:- c
p
...... LC is opened for procurement of goods on the backing of an export LC

(a) Transferable
(b) Red clause
ee
(c) Back to back

(d) Negotiation
Ans:- c
The bill of exchange or draft is drawn under ...... L(c)

(a) Acceptance
D
(b) Deferred payment

(c) Both a and b
(d) None of these
Ans:- b
The set of international rules (published by IC(c) for the interpretation of trade terms are known as

Dec 2017
(a) UCDPC
(b) Incoterms
(c) ISP
(d) URR
da
Ans:- b
The concessional rate of interest in case of PCL is ...... and is valid for first ...... days.
(a) maximum PLR - 2.50 %, 120
(b) maximum PLR - 2.50 %, 180
(c) maximum PLR - 2.50 %, 120
(d) minimum PLR - 2.50 %, 180
oo
Ans:- b
In case of PCL being on CIF basis, if the dispatch is through air, the FOB value is arrived at by
deducting __ % (representing freight and insurance) from the CIF value.
(a) 5
(b) 10
(c) 15
(d) 25 H
A Red Clause Letter of Credit enables the beneficiary to avail pre- shipment Credit from ......
(a) L/C Issuing Bank
ak
(b) L/C Confirming Bank
(c) L/C Advising Bank or Nominated Bank
(d) Any bank preferred by the beneficiary
Ans b
In case of PCL being on CIF basis, if the dispatch is through sea, the FOB value is arrived at by
p
deducting __ % (representing freight and insurance) from the CIF value.

(a) 5 %to10%
(b) 10 %to 12%
ee
(c) 13 %to14 %
(d) 25 %to 35%
Ans:- c
Which of the following definitions is most correct? UCPDC 500 is

(a) Set of rules applicable to CC transactions
D
(b) Set of rule having 500 articles

(c) Set of rules framed by ICC governing LC business globally
(d) Set of universally applicable rules governing LC business in India only
Ans:- c

Dec 2017
In case where advances for PCL are covered under Whole Turnover Policies of ECGC, the
disbursing branch should inform ECGC the details of limit sanctioned in the prescribed format
within ...... days.
(a) 7
da
(b) 10
(c) 21
(d) 30
Ans:- d
When the strike price is above the spot price for the call option, the option is ......
(a) at the money
oo
(b) out of money
(c) in the money
(d) any of the above
Ans b
A 91 day T- bill with remaining maturity of 73 days is priced at Rs 99. What is the yield?
(a) 5%
(b) 5.05%
(c) 4.95%
(d) 5.20%
Ans:- b
H
ak
Which of the following statement is false for a Forward Contract?
(a) An OTC Product
(b) Credit Risk on counter parties exists
(c) Can be for odd amount
(d) Works on Margins requirement
Ans:- d
p
How many times, a transferrable LC can be transferred?

(a) 1
(b) 2
ee
(c) 3
(d) 5
Ans:- a
A 10 year 8.75% bond with semi- annual interest yielding 8% has 7 years remaining for maturity:
Modified duration of the bond is 6.40 years. This would be equivalent to receiving by way of bullet
D
(b) Rs. 191 25 per bond after 2246 days

(b) Rs. 161 25 per bond after 2246 days
(c) Rs. 156.00 per bond after 2246 days
(d) Rs 161 252 per bond after 2336 days
Ans:- b

Dec 2017
Export proceeds from any of the ACU countries is settled through a separate ...... account
maintained by the AD for this purpose.
(a) Rupee
(b) EEFC
da
(c) Dollar / Euro
(d) DDA
Ans:- c
The total period of PCL should not exceed ...... days and this period can be extended by banks up to
...... days (for availing concessional rate of interest).
(a) 30, 60
oo
(b) 60, 120
(c) 120, 180
(d) 180, 360
Ans:- d
A bank's treasury portfolio is worth Rs. 9,500 Cr. Its 10 day VaR at 90% confidence level is Rs.
(b) Rs. 187.41 Cr

(c) Rs. 187.38 Cr
(d) None of These
Ans:- c
H
265 Cr. What is its weekly VaR at 90% confidence interval? (Assume 5 working days in a week)
(a) Rs. 132.50 Cr
ak
Which of the following is not exempt from EDF (Export Declaration Forms)?
(a) Goods or software exceeding USD 25,000 in value
(b) Gifts of goods worth not over Rs 5, 00, 000
(c) Goods not exceeding USD 1000 per transaction, exported to Myanmar, under bilateral trade
agreement
(d) All are exempted from EDF
Ans:- a
p
Cancellation of forward contracts should be done in which day after

maturity date
(a) 7th day
ee
(b) 10th day

(c) 30th day
(d) 60th day
Ans:- a
Cancellation of forward purchase contract should be done at

D
(a) Spot rate

(b) TT buying rate
(c) Bill buying rate
(d) TT selling rate
Ans:- d

Dec 2017
ICC is ......
(a) The issuer of the LC under UCPDC
(b) The trade body governing the UCPDC rules
(c) A trade body for Indian exporters helping to increase exports
da
(d) The confirming bank, which governs rules for LC drawn under UCPD(c)
Ans:- b
Verification and settlement of the deals concluded by the dealers is not performed by ......
(i) front office,
(ii) Treasury administration,
(iii) Risk management
oo
Ans:- b
(a) 100% of CIF value

(b) 110 of FOB value
(c) 110 of CIF value
(d) 110 of Export Bills discount limit
H
In term of Article 28 UCPDC , in case of invoices made on CIF basis, unless otherwise specified
insurance must be of at least ......
ak
Ans:- c
p
Your importer customer has to retire his import bill. The rate of exchange to be applied will not be
(i) Bills buying,
(ii) Bills selling,
ee
(iii) TT selling
Ans - b
D
Under UCPDC 600, what is maximum number of days allowed for examination of documents by
issuing bank and negotiating bank?:
(a) 5 banking days each
(b) 5 days each
(c) 7 banking days in total

Dec 2017
(d) 7 banking days
Ans:- a
Cancellation of forward sale contract should be done at
da
(a) Spot rate
(b) TT buying rate
(c) Bill buying rate
(d) TT selling rate
Ans:- b
Which of the following may be participants in the foreign exchange markets?
oo
(a) bank and nonbank foreign exchange dealers
(b) central banks and treasuries
(c) speculators and arbitragers
Ans:- d
(a) 5
(b) 10
(c) 15
H
A company earns PBT of Rs. 20 Cr and PAT of Rs. 15 Cr. The paid up capital of the company is
Rs. 10 Cr and price of its share of Rs.10 Face value is quoted at Rs. 150. The P/E ratio will be
ak
Ans:- b
Which of the following currency is quoted as 100 units of foreign currency per rupee
(a) Kenyan schilling
(b) Austrian schilling
(c) Bangladesh taka
(d) Italian lira
Ans:- a
p
Which of the methods below may be viewed as most effective in protecting against economic
exposure?
(a) Futures market hedging
ee
(b) Forward contract hedges

(c) Geographical diversification
(d) Money market hedges
Ans:- c
The following questions are based on the following information:

D
(a) USD-INR spot and forward rate
Spot USD 45.60/62

O/N 1/2
T/N 2/3

Dec 2017
2 weeks 7/8
1 month 15/17
2 months 31/33
3 months 47/50
da
6 months 95/100
(b) The AD loads margin of 7 paisa for purchase transactions and 10 paisa for sale transactions.
What is the bid rate for overnight dollar
oo
(a) 45.59
(b) 46.61
(c) 45.60
(d) 45.64
Ans:- b
What is the asking rate for Tom dollars

(a) 45.59
(b) 46.65
(c) 45.58
(d) 45.62
Ans:- b
H
ak
TT buying rate for customer transaction |n spot dollar IS
(a) 45.60
(b) 45.62
(c) 45.67
(d) 45.53
Ans:- d
p
Quote the forward TT buying rate for 2 months USD

(a) 45.91
(b) 45.95
(c) 45.98
ee
(d) 45.84
Ans:- d
TT selling rate for customer transactions in spot dollar

(a) 45.62
D
(b) 45.72
(c) 45.52
(d) 45.70
Ans:- b
Quote forward TT selling rate for one month USD

Dec 2017
(a) 45.69
(b) 45.89
(c) 45.55
(d) 45.85
da
Ans:- b
What is the rate at which AD can buy spot dollars from market
(a) 45.60
(b) 45.62
(c) 45.67
(d) 45.69
oo
Ans:- a
What is the rate at which AD may sell spot dollars in the market
(a) 45.60
(b) 45.62
(c) 45.70
(d) 45.72
Ans:- b
H
AD purchases USD 100,000 in a merchant transaction and sells them in the market at ? 45.63 per
dollar. What is the profit that AD earns in the transaction?
(a) Rs 10,000
ak
(b) USD10,000
(c) Rs 3,000
(d) Rs 1,000
Ans:- a
AD sold 1 month forward USD 500,000 to a merchant and then covered up his position by buying
in the market one month forward dollars at Rs 45.82 per dollar. What is the profit or loss in the
transaction?
p
(a) Rs 35,000
(b) Loss Rs 50,000
(c) Loss Rs 15,000
ee
(d) None of these

Ans:- a
AD is requested by his customer to purchase US$ bill maturing after 73 days. AD charges interest
at 10% on FBPs and commission @10%. Quote an all inclusive rate for the transaction.
(a) 44.99
D
(b) 46.87
(c) 44.95
(d) None of these
Ans:- c
What rate the AD will quote for bill buying for a bill maturing in 60 days drawn in US$.

Dec 2017
(a) 45.84
(b) 45.88
(c) 46.02
(d) None of these
da
Ans:- a
What would be the bill selling rate for one month forward USD?
(a) 45.69
(b) 45.85
(c) 45.65
(d) None of these
oo
Ans:- d
Given GBP/USD 1.6111/1.611s, compute bill buying rate for GBP Indian rupee.
(a) 13.63
(3) 13.42
(C) 73.21
(d) None of these
Ans:- b
H
Given GBP/USD 1.6117/1.6118, compute bill selling rate for GBP in Indian rupee.
(a) 73.63
ak
(b) 73.42
(c) 73.21
(d) None of these
Ans:- a
In NRE account, rate of interest is linked to?

(a) LIBOR
(b) Bank rate
p
(c) PLR
(d) MIBOR
Ans:- a
ee
A customer requests for a forward contract for export bills maturing

in the 3rd month. What would be the rate?
(a) 46.00
(b) 46.05
(c) 45.84
D
(d) None of these

Ans:- c
A person has returned from abroad and is having some unspent foreign exchange with him. What is
the maximum amount he can retain ......
(a) Nil

Dec 2017
(b) USD 500
(c) USD 2500
(d) USD 2000
Ans:- d
da
A customer requests for a forward contract for import bills maturing after 5 months in a currency
that is at a premium to Indian rupee. Will you pass on the premium to customer and if so, then how
much?
(a) No premium would be passed on to the customer
(b) Yes, 4 months forward premium would be passed on to the customer
(c) Yes, 5 months forward premium would be passed on to the customer
oo
(d) Yes, 6 months forward premium would be passed on to the customer
Ans:- c
The Purchasing Power Parity should hold ......

(d) Always
Ans:- b H
Arbitrageurs in foreign exchange markets ......
(a) attempt to make profits by outguessing the market
ak
(b) make their profits through the spread between bid and offer rates of exchange
(c) take advantage of the small inconsistencies that develop between markets
(d) need foreign exchange in order to buy foreign goods
Ans:- c
A customer requests for a forward contract for export bills after 5 months in a currency that is at a
discount to Indian Rupee. How much discount you will apply on the spot rate?
(a) 4 months discount
p
(b) 5 months discount

(c) 6 months discount
(d) None of these
ee
Ans:- c
The exposure arising due to normal business operations consequent to which the value of
transactions _______risk is the risk of failure of the counter party, due to bankruptcy, closure or
any other reason, before maturity of the contract.
(a) Translation
D
(b) Transaction
(c) Operational
Ans:- b

Dec 2017
The guarantees given by ECGC, to cover loss on advances for incentives receivable by exporters at
preshipment stage, is called ......
(a) Post- Shipment Export Credit Guarantee
(b) Packing Credit Guarantee
da
(c) Export Production Finance Guarantee
(d) Export Finance Guarantee
Ans:- c
A _______ contract conveys an agreement to buy a specific amount of a commodity or financial

instruments at a particular price on a stipulated future date.
oo
(a) Option
(b) Future
(c) Forward
Ans:- c
(a) 46.05
(b) 46.22
(c) 46.14
(d) None of these
H
A customer requests for a forward contract for import bills maturing in the 3rd month. What would
be the rate?
ak
Ans:- b
The potential for an increase or decrease in the parent's net worth and reported net income caused
by a change in exchange rates since the last consolidation of international operations is a reflection
of
(a) Translation exposure
p
(b) Exchange rate exposure

(c) Strategic exposure
(d) Economic exposure
ee
Ans:- a
A customer requests for a forward contract for import bill maturing after 5 months in a currency
that is at a premium to Indian rupee. Will you load the premium in the rate quoted to him and if so,
then how much?
(a) No premium would be loaded
D
(b) Yes. 4 months forward premium would be loaded

(c) Yes, 5 months forward premium would be loaded
(d) Yes, 6 months forward premium would be loaded
Ans:- d

Dec 2017
A customer requests for a forward contract for import bill maturing after 5 months in a currency
that is at a discount to Indian rupee.
How much discount you will apply on the spot rate
(a) 4 months discount
da
(b) 5 months discount
(c) 6 months discount
(d) None of these
Ans:- b
Consider the following statements

(a) Forward sale contract is booked by customer for import bills
oo
(b) Forward sale contract is booked by customer for export bills
(c) Forward purchase contract is booked by customer for export bills
(d) Forward purchase contract is booked by customer for import bills
Which of the following statements are correct?
(a) a & c
(b) b & d
(c) a & d
(d) b & c
Ans:- a H
A forward purchase contract is due for delivery one month later. The customer approaches for
cancellation of the contract. At what rate the contract would be cancelled?
ak
(I) 45.79
(b) 45.89
(0) 45.75
(d) None of these
Ans:- b
Exchange Fluctuation risk of ECG(c)

(a) Covers all exports payments up to six months period
p
(b) Covers 100% exchange fluctuation of India exporters.

(c) Covers exchange fluctuation above 2% and up to 50% only
(d) Covers exchange fluctuation above 2% and up to 35% only.
ee
Ans:- d
The date of settlement of funds is known as __________ date.

(a) Due
(b) Settlement
(c) Maturity
D
(d) Value
Ans:- d
The rate at which the quoting party is ready to buy the currency is called ______ rate.
(a) Offer
(b) Spot

Dec 2017
(c) Bid
(d) Currency
Ans:- c
da
A forward sale contract is due for delivery two months later. The customer approaches for
cancellation of the contract. At what rate the
contract would be cancelled?
(a) 45.89
(b) 46.02
(c) 45.98
oo
(d) None of these
Ans:- c
Derivatives are used for

(a) Hedging and trading
(b) Hedging and investment
(c) Trading and investment
(d) ALL of these
Ans:- a H
ak
Derivatives can be used to hedge aggregate risks as reflected in the asset- liability mismatches. In
this case a dynamic management of hedge is necessary not because
(i) The risks are dynamic,
(ii) The composition of assets and liabilities is always changing,
p
(iii) A close monitoring of hedge is an RBI requirement

ee

Ans:- b
The dealers are official, who are actually involved in the _______ of currencies.
(a) Buying
D
(b) Selling
(c) Buying & Selling
Ans:- c
Which of the following is not a derivative

Dec 2017
(a) Forward Contracts
(b) Swaptions
(c) Futures
(d) Bill of exchange
da
Ans:- d
The participants in the derivatives market generally exchange the following agreement
(a) IFEMA
(b) ICON
(c) ISDA
(d) A stamped agreement devised by respective banks
oo
Ans:- c
Adding derivatives to a portfolio may result in

(a) Increasing uncertainty profile
(b) Decreasing uncertainty profile
(c) Neutralizing uncertainty profile
(d) ALL of these
Ans:- d
Margin is usually required for

(a) Buying options form exchange
(b) Futures
H
ak
(c) Forward Contracts
(d) Swaps
Ans:- b
Which of the followings is / are not derivative?

(a) Swap
(b) Cover Deal
(c) Option
p
(d) Futures
Ans:-
ee
Going long on options results in

(a) Expenditure
(b) Income
(c) Margin requirement
(d) Furnishing bank guarantee
Ans:- a
D
which of the following are free currency in the foreign exchange market? (i) USD,
(ii) Rupee,
(iii) EUR

Dec 2017
Ans:- b
da
Margin is usually not required for
(a) Buying options
(b) Selling options
(c) Going long on futures
(d) Going short on futures
Ans:- a
oo
Premium is paid for
(a) Writing call option
(b) Writing put option
(c) Buying call options
(d) ALL of these
Ans:- c
Premium is paid for

(b) Writing put option
(c) Buying put options
(d) ALL of these
H
ak
Ans:- c
Premium is received for

(b) Buying call option
(c) Buying put option
p
(d) ALL of these

Ans:- a
ee
Premium is received for

(a) Writing put option
(b) Buying call option
(c) Buying put option
(d) ALL of these
Ans:- a
D
For reducing uncertainty profile of an exposure we may

(a) Add a derivative with +ve correlation with the exposure
(b) Add a derivative with -ve correlation with the exposure
(c) Add a derivative with perfect +ve correlation with the exposure
(d) Any one of these

Dec 2017
Ans:- b
For neutralizing uncertainty profile of an exposure we may

(a) Add a derivative with +ve correlation with the exposure
da
(b) Add a derivative with -ve correlation with the exposure
(c) Add a derivative with perfect +ve correlation with the exposure
(d) Add a derivative with perfect —ve correlation with the exposure
Ans:- d
Daily mark to market adjustment is carried out in case of

(a) Call options
oo
(b) Put options
(c) Futures
(d) Swaptions
Ans:- c
Risk management of forex exposure is done by

(a) Setting exposure limits
(b) Setting loss limits
(c) Using derivatives
(d) ALL of these
Ans:- d
H
ak
Exchange risk is a type of

(a) Market risk
(b) Credit risk
p
(d) ALL of these

Ans:- a
ee
Security dealers deals with of the following market.

(a) Primary market
(b) Secondary market
(c) Open market
(d) OTC
Ans:- b
D
A dealer has executed the following deals on a day Purchased spot US$ 1.5 million, Sold US$ 1
month forward 1.00 million and Sold US$ 3 months forward 2.00 million.
what is his open position
(a) 4.50 million
(b) 2.50 million

Dec 2017
(c) 1.50 million
(d) 0.50 million
Ans:- c
da
A dealer as executed the following deals on a day purchased spot US$ 1.5 million, Sold US$ 1
month forward 1.00 million and Sold US$ 3 months forward 2.00 million What is his gap position?
(a) 4.50 million
(b) 2.50 million
(c) 1.50 million
(d) 0.50 million
Ans:- a
oo
Exchange rate risk can be avoided by entering into a ......
(a) swap
(b) forward rate contract
(c) option contract
(d) either b or c
Ans:- d
(a) Ten
(b) Four
(c) Five
H
The exchange rates of major currencies fluctuate every ________ seconds.
ak
(d) Seven
Ans:- b
Exchange risk is managed through

(a) Deal size limit
(b) Counter party limit
(c) Overnight Limit
p
(d) ALL of these

Ans:- d
ee
Business operation that exposes a company to currency risk is

(a) Transaction exposure
(c) Operating exposure
(d) None of these
Ans:- a
D
Exposure arising out of revaluation of assets and liabilities is

(C) Operating exposure
(d) None of these

Dec 2017
Ans:- b
Exposure affecting bottom line that arises on account of external factors is

da
(C) Operating exposure
(d) None of these
Ans:- c
Who manages Export Marketing Fund in India?

(a) EXIM bank
oo
(b) RBI
(c) GOI
(d) ECGC
Ans:- a
Settlement risk is a type of

(a) Market risk
(b) Credit risk
(d) ALL of these
Ans:- b
H
ak
If your local currency is in variable form and foreign currency is in fixed form the quotation will be
(a) Indirect
(b) Direct
(c) Local form
p
(d) Foreign form

Ans:- b
ee
Communication Risk is a type of

(b) Market Risk
(c) Credit Risk
Ans:- d
D
purpose of NRE account is ......

(a) To park overseas earnings remitted to India
(b) To park current Indian earnings and overseas earnings remitted to India
(c) To park funds, in foreign currency, remitted from overseas to India

Dec 2017
(d) To park funds for returning Indians (for permanent settlement)
Ans:- a
Main factors effecting exchange rates are technical,_________ and speculation.
da
(a) Technical
(b) Fundamental
(c) Speculation
(d) a & b above
Ans:- b
Loss possibility is maximum which arises on account of
oo
(a) Settlement risk
(b) Pre-settlement risk
(c) Exchange risk
(d) Interest rate risk
Ans:- a
(b) ITM
(c) OTM
(d) none of these
Ans:- c
H
If the strike price is more than the forward rate in case of a call option, the option is known to be
(a) ATM
ak
Credit guarantees are on risk sharing basis, means that ......

(a) The buyer and seller share the risk of default of any one of them.
(b) The buyer shares the defaulted amount with the insurance company.
(c) The seller shares the risk with the financier.
p
(d) The financer shares the risk with the insurance company.
Ans:- d
ee
Basis Risks are type of

(b) Market Risk
(c) Credit Risk
Ans:- a
D
An option without any conditionality's is called a ......

(a) stock option
(b) plain vanilla option
(c) zero cost option
(d) barrier option

Dec 2017
Ans:- b
Settlement risk is managed by setting appropriate limit for

(a) Country exposure
da
(b) Counter party exposure
(c) Dealer limit
(d) Deal size limit
Ans:- b
VaR is not enough to assess market risk of a portfolio. Stress testing is desirable because
(a) It helps in calibrating VaR module
oo
(b) It helps as an additional risk measure
(c) It helps in assessing risk due to abnormal movement of market parameters
(d) It is used as VaR measure is not accurate enough
Ans:- c
Account of a bank in India with a foreign correspondent bank abroad in foreign currency is not
called as
(i) Loro,
(ii) Vostro,
(iii) Nostro

H
ak
Ans:- a
Portfolio risk is called the risk at

(a) Branch level
(b) Regional/Zonal level
p
(c) Aggregated level

(d) None of these
Ans:- c
ee
(d) None
D
Ans:- d
For gold card status holder exporters, the concessive rate of interest on post shipment rupee export
Credit may be extended for a maximum period of ...... days.
(a) 120
(b) 180

Dec 2017
(c) 360
(d) 365
Ans:- d
da
In _____ swap, the borrower has completely eliminated the currency risk and interest rate risk
(zero risk).
(a) PoS (Principal only Swap)
(b) CoS (Coupon only Swap)
(c) P + I Swap
(d) none of these
Ans:- c
oo
If short term liability of an entity increases at a faster rate than its short term assets, then we may
conclude that
(a) Potential for liquidity risk is increasing
(b) Potential for liquidity risk is decreasing
(c) Potential for liquidity risk remains unaffected
(d) It is difficult to conclude
Ans:- a
H
_______banking eliminates the need to have a global network of branches.
(a) Interest
(b) Retail
ak
(c) Correspondent
(d) Wholesale
Ans:- c
Which of the following statements regarding CD is not correct?

(a) CD is not a negotiable instrument.
(b) CD bears higher interest rate than deposits in the bank.
(c) CD attracts stamp duty.
p
(d) CD is issued in demat form or as promissory notes.

Ans:- a
ee
The minimum amount for which a CD can be issued is Rs ......

(a) 1 lac
(b) 2 lacs
(c) 5 lacs
(d) 10 lacs
D
Ans:- a
In a spot contract, settlement of funds take place on the_______ following the date of contract.
(a) Second working day
(b) On the spot
(c) Due date

Dec 2017
(d) Next day
Ans:- a
Liquidity risk is controlled through
da
(a) Reducing open position
(b) Controlling mismatches between maturing assets and liabilities
(c) Fixing limits for maturity mismatches
(d) ALL of these
Ans:- d
A foreign country defaults payment due on the bonds issued by it in
oo
foreign currency. This is
(a) Country risk
(b) Sovereign risk
(c) Settlement risk
(d) Pre settlement risk
Ans:- b
(a) Country risk

(b) Sovereign risk
(c) Settlement risk
H
A country bans outgo of foreign exchange through a government
notification, This results in
ak
(d) Pre-settlement risk
Ans:- a
Which of the following is NOT a Criticism of a flexible exchange rate system?

(a) Flexible exchange rates tend to be variable and therefore cause more uncertainty
(b) Flexible exchange rate systems require discipline on the part of central banks that may not be
forthcoming
p
(c) Under flexible exchange rates, trading countries tend to rely more heavily upon tariffs and other
restrictions
(d) The flexible exchange rate system reduces the power of fiscal policy
ee
Ans:- c
Government securities are issued by ......

(a) RBI on behalf of GOI
(b) GOI
(c) SEBI on behalf of RBI
D
(d) CCIL on behalf of GOI

Ans:- a
The currency with lower interest rate would be at a _______premium in future.

(a) Lower
(b) Higher

Dec 2017
(c) Double
(d) Zero
Ans:- b
da
Country risk is mitigated through
(a) Country wise exposure limit
(b) Subjecting counterparties to third-party jurisdiction
(c) Guarantee from a party in another country
(d) ALL of these
Ans:- d
oo
A party holds US$ forward contract maturing in 3 months. in the meanwhile, 3 months risk free
interest rate in India goes up by 1%.
The party will
(1) Gain
(b) Loose
(c) Remain unaffected
H
(d) Can't be decided based on available information
Ans:- c
As per RBI guidelines, which of the following, among others, is / are the principal requirements for
issue of CP?
(a) Issuing company should have minimum Credit rating of P2
ak
(b) Net worth as per last balance sheet must not be below Rs 2 Crore
(c) both a and b
(d) none of these
Ans:- a
Banks can allow resident individuals (who are banking with them) to book forward contracts up to
a limit of USD ...... and with a maximum tenor of ...... only (provided the notional value should not
exceed USD 100,100.00).
p
(a) 100,000.00 and 1 year

(b) 100,000.00 and 2 years
(c) 10,000.00 and 1 year
ee
(d) 100,000.00 and 1 year

Ans:- a
The failure of the counter party during the course of settlement due to time zone differences
between the two currencies to be exchanged is not known as ...... risk.
(a) Temporal
D
(b) Settlement
(c) Herstatt
(d) Exchange
Ans:- d

Dec 2017
As per Reserve Bank of India directives the Minimum Capital Adequacy Ratio and minimum Tier
I capital the Modern Bank is required to maintain as on 31.03.2007 should be ...... respectively.
(a) 8% and 4%
(b) 9% and 4.5%
da
(c) 9% and 4.0%
(d) 12% and not specified
Ans:- b
The exemptions from DTL include

(a) Time deposits
(b) Foreign outward remittances in transit
oo
(c) Transactions in CBLO with CCIL
(d) Overseas borrowings
Ans:- c
The salient feature of convertible bond is

(a) Conversion of physical bonds into demat form
H
(b) Option to convert the bond in to equity on a fixed date or during a fixed period and the price is
pre-determined
(c) Automatic reinvestment in another bond on maturity
(d) Absence of coupon
Ans:- b
ak
_______option can be exercised only at maturity date (fixed date ).

(a) American
(b) European
p
(c) Both a & b

Ans:- b
ee
Party is long on call option for US$ expiring in 3 months. In the meanwhile, 3 months risk free
interest rate in India goes up by 1%.
Given the strike price at ruling spot rate, the party will
(a) Gain
(b) Loose
D

Ans:- a
The liquidity corridor that RBI uses to control short term interest rates is defined/dictated by
(a) Repo and reverse repo rates

Dec 2017
(b) Call money market
(c) Bank rate
(d) SLR and CRR
Ans:- a
da
Party is long on put option for US$ expiring in 3 months. In the meanwhile, 3 months risk free
interest rate in India goes up by 1%. Given the strike price at ruling spot rate, the party will
(a) Gain
(b) Loose
oo
Ans:- b
Dividend yield refers to ......

(a) The ratio of dividend receive in the previous year to the anticipated market price of a share
(b) The ratio of anticipated dividend to the current market price of a share
(c) The ratio of current dividend to the current market price of a share
Ans:- c
H
ak
Future is a type of derivative where

(a) There is an obligation to buy or sell on a stated exchange a stated quantity of foreign exchange
at a future date at agreed price.
p
(b) There is an obligation to buy or sell on the stated exchange a stated quantity of foreign
exchange at a future date at market price.
(c) There is an obligation to only buy on the stated exchange a stated quantity of foreign exchange
ee
at a future date at agreed price

(d) There is an obligation to only sell on the stated exchange a stated quantity of foreign exchange
at a future date at agreed price.
Ans:- a
Value Date for a foreign exchange transaction refers to?

D
(a) It is a value of discount on which cash flows are to take place

(b) It is the date on which cash flows are to take place
(c) It is a value of premium which cash flows are to take place
Ans:- b

Dec 2017
...... is issued by ECGC in the nature of a counter guarantee to the bank against possible losses that
they may suffer on account of the guarantees issued by them on behalf of its exporter clients.
(a) Export finance guarantee
(b) Post shipment export Credit insurance
da
(c) Export production finance guarantee
(d) Export performance indemnity
Ans:- d
FEDAI requires banks to undertake profit / loss evaluation of forex positions at the end of each ......
(a) week
(b) month
oo
(c) quarter
(c) year
Ans:- b
If a bank financing an overseas project provides a foreign currency loan to the contractor, it can
H
protect itself from the risk of non- payment by the contractor by obtaining ......
(b) Export finance (overseas lending) guarantee
(c) Export production finance guarantee
(d) Export performance indemnity
Ans:- b
ak
Authorised persons - Category II was earlier known as ......

(a) Full Fledged Money Changers
(b) Restricted Money Changers
p
(c) Authorised dealers

(d) None of these
Ans:- a
ee
VaR does not measure risk under any particular market conditions. This limitation of VaR can be
get over by ......
1. back testing
2. model calibration
3. scenario analysis
D
4. stress testing
(a) 1, 2, and 3
(b) 2, 3, and 4
(c) 1, 2 and 4
(d) all of these
Ans:- d

Dec 2017
In which rate the currencies are mostly bought and sold?

(a) swap
(b) forward
da
(c) spot
(d) repo
Ans:- c
A mismatch in assets / liabilities and receivables / payables is ...... risk.

(a) Credit
(b) Exchange
oo
(c) Gap
(d) Interest
Ans:- b
Value at Risk (VaR) refers to ......
H
(a) Measurement or an estimate of potential loss in a position of asset or portfolio of assets over a
given level or certainty
(b) Maximum probable market loss over a given period of time horizon expressed as a degree of
certainty
(c) All of the above
ak
Ans:- b
As per Basel II, under which approach, categories of assets has been classified under corporate,
retail, sovereign and project finance.
(a) Standardizes Approach
(b) Basic Indicator Approach
p
(c) Internal Rating Based Approach

(d) Advanced Measurement Approach
Ans:- a
ee
Put option in a derivative contract refers to ......

(a) Where the customer has option to sell
(b) Where the customer has option to buy
(c) Where the customer has option to take delivery
D
Ans:- a
A party has written a call option in US$ expiring in 3 month. In the meanwhile, 3 months risk free
interest rate in India goes up by 1% Given the strike at riling rate, the party will
(a) Gain

Dec 2017
(b) Loose
Ans:- b
da
A party has written a put option in US$ expiring in 3 month. In the meanwhile, 3 months risk free
interest rate in India goes up by 1% Given the strike at riling rate, the party will
(a) Gain
(b) Loose
oo
Ans:- a
As per Basel II, Risk weighted assets for Operational risk are worked out as :
(a) Capital for operational risk x 9
(b) Capital for operational risk x 12.5
(c) Capital for operation risk x 8.33
(d) Capital for operational risk x 8
Ans:- b
H
As per Basle II ( revised ) framework banks have to adopt Standardized Approach and Basle
indicator Approach for operational risk w.e.f ......
(a) 31st March 2006
ak
(b) 30th December 2006
(c) 31st March 2007
(d) 1st April 2007
Ans:- c
The Basle II revised framework consists of three mutually reinforcing pillars. Out of the following
which of this is not the reinforcing pillar?
(a) Minimum capital requirement
p
(b) Supervisory review of the capital adequacy

(c) Market discipline
(d) None
ee
Ans:- d
The June 1999 Basel Committee on Banking Supervision issued proposals for reform of its 1988
Capital Accord (the Basle II Proposals). These proposals contained MAINLY.
I) Settlement risk management
II) Capital requirements
D
III) Supervisory review

IV) The handling of hedge funds
V) Contingency plans
VI) Market discipline
(a) I,III and VI
(b) II, IV and V

Dec 2017
(c) I,IV and V
(d) II, III and VI
Ans:- d
da
Advance against undrawn balance can be made at a concessive rate of interest for a maximum
period of ...... days.
(a) 30
(b) 45
(c) 60
(d) 90
Ans:- d
oo
In post- shipment advance, the concessional rate of interest cannot exceed __ days from the date of
shipment.
(a) 90
(b) 120
(c) 180
(d) 360
Ans:- c
H
Which was the immediate cause which prompted G- 10 countries to from the basel committee on
the banking supervisions ?
(a) Deregulation
ak
(b) Competition
(c) Herstatt incident
(d) Globlization
Ans:- c
Who has the overall responsibilities for management of risks of a company?

(a) Risk management committee
(b) Assets liability management committee
p
(c) Board of officers

(d) RBI
Ans:- c
ee
Approved market risk limits for factor sensitivities and value at risk are duly set by ......
(a) Risk policy committee
(b) Board of directors
(c) ALCO
D
Ans:- a
Net Interest income is

(a) Interest earned on advances
(b) Interest earned on investments

Dec 2017
(c) Total interest earned on advances and investment
(d) Difference between interest earned and interest paid
Ans:- d
da
Interest rate risk is a type of
(a) Credit risk
(b) Market risk
(d) All the above
Ans:- b
oo
......risk can be controlled by putting in place state of art system, specified contingencies.
(a) Sovereign Risk
(b) Country risk
(c) operational risk
(d) Systematic Risk
Ans:- c
H
If Floating interest rates based on one bench mark is swapped with floating interest rates based on
another bench mark, it is called as ...... Swaps.
(a) Financial
(b) Coupon
ak
(c) Currency
(d) Index
Ans:- d
A customer wants to subscribe to a magazine published in Paris. The exchange rate for draft will
be ......
(i) TT selling,
(ii) Bills selling
p
(a) Only (i)

(b) Only (ii)
(c) Either (i) or (ii)
ee
(d) Neither (i) nor (ii)

Ans:- a
An AD has to obtain receipt of bill of entry in the cases where the value of foreign exchange
remitted for import exceeds USD ......, within a period of __ months from the date of remittance.
(a) 100000, 3
D
(b) 50000, 3
(c) 100000, 1
(d) 50000, 6
Ans:- a
Normally, who will request for the confirmation of LC from the confirming bank?

Dec 2017
(a) Exporter
(b) Importer
(c) Opening Bank
(d) Advising Bank
da
Ans:- c
mortgage of residential property and investment in mortgage backed securities has been increased
to ...... %.
(a) 25
(b) 50
(c) 75
oo
(d) 100
Ans:- c
The main purpose of capital adequacy norms is to ensure that a bank has sufficient capital to ......
(a) Provide loans
(b) Repay its depositors
Ans:- c H
(c) Provide a stable resources to absorb any losses arising from the risks in its business
(d) Have adequate infrastructure of its on
Pillar III Market Discipline does not consist of ......

(a) Enhance disclosures
ak
(b) Core disclosures and Supplementary disclosures
(c) Review Market ups and down
(d) Timely at least semi annual disclosures
Ans:- c
Standardized Approach allows banks to measure Credit Risk in a Standardized manner based on
(a) Internal Rating Based (IRB)
(b) Export Credit Agency (ECA)
p
(c) Risk Weighted Assets

(d) External Credit Assessment
Ans:- d
ee
FII are permitted to invest in debt instruments issued by ......

(a) private corporate
(b) government
(c) both a and b
(d) None of these
D
Ans:- c
How forward rates are calculated?

(a) By adding a mark up to spot rates
(b) By adding premium or discount to spot rates
(c) By deducting premium or discount from spot rates

Dec 2017
(d) By adding premium to and deducting discount from spot rates
Ans:- d
A Bank received an LC for USD 2 Mio issued by MT 700 and opened on Jan 25, 2011. The Credit
da
calls for shipment of 200 tonnes of good quality wheat cultivated in Punja(b) What is the time
available for issuing bank for examination of documents under UCP600?
(a) 21 days
(b) Reasonable time not exceeding 7 days
(c) Reasonable time not exceeding 7 banking days
(d) Five banking days
Ans:- d
oo
(b) Gifts of goods, valuing not over Rs.50000 along with declaration of exports
(c) Gifts of goods, valuing not over Rs.500000 along with declaration of exports
trade agreement
Ans:- c H
ak
A rating model combines financial ratios using reported accounting instruction and equity values to
forecast the probability of a company entering bankruptcy with in 12 month period This model is
known as
(a) Altman,s Z score model
(b) Credit metrics model
(c) Credit risk model
p
(d) None of the Above

Ans:- a
ee
A bank holds stocks of a company

(a) Take a long position in the stock futures
(b) Take a short position in the stock futures
(c) Purchase call option on the stock
(d) Sell put option
D
Ans:- d
Redeemable Cumulative Preference shares comes under ......

(a) Tier I Capital
(b) Tier II Capital
(c) Tier III Capital

Dec 2017
Ans:- b
A company with equity capital of Rs.50 Cr (Face Value of Rs.10/- per share) makes gross profit of
da
Rs.70 Cr and net profit after tax of Rs.25 Cr. If the market price of its equity share is Rs.50, the
PE ratio will be
(a) 50
(b) 5
(c) 10
(d) 20
Ans:- c
oo
In foreign exchange, 'Our Account with You' is known as ...... account.
(a) Vostro
(b) Nostro
(c) Mirror
(d) Loro
Ans:- b
H
An import bill not retired by the importer should be Crystallized by the bank on what day?
(a) On 21st day from the date of Bill of Lading
(b) On the 10th day from the receipt of documents at the counters of the bank
(c) On the expiry of five banking days
ak
(d) On the day of receipt of the Bill
Ans:- b
Authorised persons - Category III was earlier known as ......

(c) Number of times surplus covers interest & instalments of Term Loans
(d) Effective utilization of assets
p
Ans:- c
A license to deal in foreign exchange to authorized dealers is not issued by ......

ee
(i) RBI,
(ii) DGFT,
(iii)FEDAI

D

Ans:- c
The difference between buying and selling rate quoted by an Authorised Dealer is not called as ......
(i) Dealers spread,

Dec 2017
(ii) Dealer's Margin,
(iii) Dealer's commission
da
Ans:- c
In a perfect market, with no restriction on finance and trade, the ...... is the basic factor in arriving
at the forward rate.
(a) Fixed exchange rate
oo
(b) Interest factor
(c) Interest rate differentials
(d) Floating Exchange rate
Ans:- b
.
All foreign currency inward remittances up to ......, as per FEDAI guidelines, be converted
immediately into Indian Rupees?
(a) Rs. 50000 equivalent
(b) USD 10000
(c) USD 5000
(d) £ 1000
Ans:- c
H
ak
All foreign exchange transactions in India are governed by :
(a) Foreign Exchange Regulation Act, 1973
(b) Reserve Bank of India Act, 1934
(c) Foreign Exchange Management Act, 1999
(d) Banking Regulation Act,1949
Ans:- c
p
Risk which arises due to mismatches in the maturity patterns of assets and liabilities is called as
(a) Liquidity Risk
ee
(b) Exchange Risk

(c) Market Risk
(d) Settlement Risk
Ans:- a
As per the recommendations of Chore Committee banks have been asked to ensure ......
D
(a) Borrowers deposit 50% of their net profit in time deposits

(b) Relax norms prescribed by Tandon Committee
(c) Adopt 2nd Method of lending
(d) Borrowers do not contribute more than 25% as margin
Ans:- c

Dec 2017
As per Nayak Committee, the margin contribution of the SSI unit is ...... % of the annual projected
turnover.
(a) 5%
(b) 10%
da
(c) 20%
(d) 25%
Ans:- a
Risk of Reduction in Mark- to- Market value of equities is ......

(b) Market Risk
oo
(c) Credit Risk
Ans:- b
A bank borrows US $ for 03 months @ 3.0% and swaps the same in to INR for 03 months for
deployment in CPs @ 5%. The 3 months premium on US $ is 0.5%.
(b) 3%
(c) 1.5%
(d) 2.5%
Ans:- c
H
What is the margin(gain/loss) generated by the bank in the transaction?
(a) 2%
ak
A dealer has position that results in gain as dollar appreciates against rupee. He is
(a) Overbought in US$
(b) Oversold in Re
(c) Oversold in US$
(d) Not determinable
p
Ans:- a
CCIL clears and settles

ee
(a) Repos and CBLOs

(b) Gilts
(c) Interbank forex deals
(d) ALL of these
Ans:- d
D
Highest amount of deal that dealer can make is called

(a) Dealer limit
(b) Deal Size limit
(c) Day light limit
(d) counter party limit
Ans:- a

Dec 2017
A dealer is holding a position in DM. He would have to neutralize the

position when exchange
(a) Increases by 10%
da
(b) Decreases by 10%
(c) On breaching stop loss limit
(d)He may carry it as long it is within over night limit
Ans:- c
Currency options trading was first introduced in

(a) Chicago mercantile exchange
oo
(b) Philadelphia stock exchange
(c) London Stock exchange
(d) Singapore mercantile exchange
Ans:- c
ADs may allow advance remittance for import of goods without any ceiling. However, if the
H
amount of advance remittance exceeds USD 50,00,000 or its equivalent it is mandatory to obtain
(a) unconditional irrevocable stand by L/C of an international bank of repute situated outside India
(b) guarantee from an international bank of repute situated outside India
(c) guarantee of an AD in India, if such guarantee is issued against counter guarantee of an
international bank of repute situated outside India
(d) any
ak
(b) USD 10000
(c) USD 5000
(d) £ 1000
Ans:- c
p
RTGS has been fully activated by RBI from ....... Where the settlements are on ...... basis rather
than ...... day end settlement of cheques in clearing house.
ee
(a) August 2003, net, gross

(b) October 2004, gross, net
(c) October 2004, net, gross
(d) August 2004, gross, net
Ans:- b
D
All contract which have matured and have not been collected, shall be automatically cancelled on
the .....working day after the maturity date.
(a) 5th
(b) 7th
(c) 10 th
(d) 15th

Dec 2017
Ans:- b

1. In direct quotes, local currency is variable.
da
2. In direct quotes, local currency is fixe(d)
3. In indirect quotes, local currency is variable.
4. In indirect quotes, local currency is fixe(d)
(a) 1 and2
(b) 1 and3
(c) 2 and 3
(d) 2 and 4
oo
Ans:- c
Interest rate futures were first introduced in

(a) 1970
(b) 1975
(c) 1980
(d) 1983
Ans:- b
H
ak
If the entire world is linked to a single time zone, then which of the following risk would stand
almost eliminated.
(a) Settlement risk
(b) Pre-settlement risk
(c) Liquidity risk
(d) Exchange risk
Ans:- a
p
Which of the following services would necessitate opening of an account with correspondent bank?
(a) LC Advising
ee
(b) LC Confirmation
(c) Credit report on parties
(d) Reimbursement of LC Claims
Ans:- d
Which of the following services would not necessitate opening of an account with correspondent
D
banks?
(a) Collection of bills
(b) Reimbursement of LC claims
(c) LC Confirmation
(d) Handling of outward payments
Ans:- c

Dec 2017
Which of the following implies Vostro account

(a) Our account with you
(b) Your account with us
da
(c) His account with them
(d) None of these
Ans:- b
A foreign bank (ABC Ltd.) opens a rupee account with a bank's branch
in India. This account will be designated in the books of the branch as
(a) Nostro account
oo
(b) vostm account
(C) Loro account
(d) Correspondent account
Ans:- b
Which of the following accounts are maintained in two currencies?

(a) Nostro account
(b) vostro account
(C) Loro account
(d) Mirror account
Ans:- a
H
ak
Which one of the following is a Euro payment system?
(a) RTGS
(b) Chips
(c) Target Plus
(d) Target
Ans:- d
p
Who among the following is not NRI

(a) Indian Ambassador to USA
(b) Students going abroad for higher studies
ee
(c) Spouse of an Indian citizen who is employed overseas and residing with him/her
(d) spouse Of an NRI who stays back in India
Ans:- d
Who among the following is treated as a person of Indian origin but not NRI
(a) Spouse of an Indian citizen who is a foreign citizen
D
(b) Indian Ambassador to USA

(c) Students going abroad for higher studies
(d) Spouse of an Indian citizen who is employed overseas and residing with him/her
Ans:- a
NRI account can't be opened by way of

Dec 2017
(a) TT remittance from abroad
(b) Transfer from another non-resident account
(c) Transfer from rupee account of the person intent to open account
(d) Foreign currency traveler's cheques if he is on the temporary visit to India
da
Ans:- c
NRE accounts can be opened

(a) In the name of individual who is resident Indian
(b) Joint account along with a resident individual
(c) Joint account along with a non-resident individual
(d) In the name of a partnership firm
oo
Ans:- c
which of the following account types are not permitted to be opened by NRI's
(a) Current account
(b) Five years recurring deposit account
(c) Five years term deposit account
H
(d) Fixed deposit account maturing in six months
Ans:- d
ak
When there is outward remittance and handling of import bills is involved, which of the following
rates will not be applied?
(i) Bills Buying Rate,
(ii) Bills Selling Rate,
(iii) TT Selling Rate
p

Ans:- b
ee
You had negotiated an export bill of your customer in May, 2015. This bill has been returned by
the overseas buyer for some reasons and the AD has to debit his customer's account with Indian
rupees. The rate to be applied will be
(i) Bills buying,
(ii) Bills selling,
(iii) TT selling
D

Ans:- a

Dec 2017
Interest income on balances held in NRE accounts qualify for tax deduction at the rate of
(a) 10%
(b) 20%
(c) 30%
da
(d) 40%
Ans:- d
An NRE account is being operated on the basis of power of attorney

granted by the account holder. Which of the following operations can't be carried out by the holder
of the power of attorney?
(a) Investment in shares/security
oo
(b) Repayment of housing loan raised by the account holder
(c) Payment of electricity bill of the account holder
(d) Remitting a part of the balance back to the account holder for
Credit of his account overseas
Ans:- d
H
An NRI having an NRE savings account request the bank for temporary overdraft for 10 days to be
ak
repaid by remittance from abroad. The bank may allow a maximum overdraft of
(a) No overdraft facility can be given
(b) Rs 10,000
(c) Rs 50,000
(d) Rs 1,00,000
Ans:- c
Interest payable on NRE savings account as per extant rule is

p
(a) Maximum of LIBOR + 175 basis points ‘

(5) Maximum of LIBOR + 100 basis points
(c) 3.5%
ee
(d) Interest is not payable on NRE savings account

Ans:- c
Non-resident ordinary rupee account can be opened by

(a) Foreigners
(b) Foreign Tourists
D
(c) Non-resident Indians

(d) ALL of them
Ans:- d
An Irrevocable Letter of Credit can be amended with the consent of following parties.

Dec 2017
(a) The Applicant (Buyer) and The Beneficiary (Seller).
(b) Issuing Bank and Confirming Bank.
(c) The Advising Bank & Reimbursing Bank.
(d) (a) & (b) only
da
Ans:- d
Maximum amount that can be repatriated from NRO account is

(a) Rs 10,000
(b) US$ 1 million
(c) US$ 10 million
(d) No amount is permitted for repatriation from NRO account
oo
Ans:- b
A foreign tourist had upon arrival in India opened an NRO account with US$ 10 million After 3
months when he leaves the country he requests for remittance of the balance held in his account As
a branch manager what will you do?
(a) You will permit the remittance as requested
(d) You will not allow the remittance

Ans:- a
H
(b) You will permit remittance up to an amount equivalent to one million US$
(c) You will approach Reserve Bank of India for necessary permission
Foreign Currency Non Resident account (Banks) or FCNR(B) accunts can be opened in
ak
(a) Any foreign currency
(b) US$, Great Britain Pounds, Japanese Yen & Euro
(c) U$$, Great Britain Pounds, Japanese Yen & Canadian Dollars
(d) U$$, Euro Great Britain Pounds, Japanese Yen, Canadian Dollars and Australian Dollars
Ans:- d
FCNR deposits can be made

(a) For a minimum period of one year and maximum of five years
p
(b) For any period up to five years

(c) For any period up to three years
(d) For a minimum period of one year and a maximum of three years
ee
Ans:- a
A FCNR(B) account is being operated on the basis of power of attorney granted by the account
holder. Which of the following operations can't be carried out by the holder of the power of
attorney?
(a) investment in shares/security
D
(b) Repayment of housing loan raised by the account holder

(c) Payment of electricity bill of the account holder
(d) ALL of these
Ans:- d

Dec 2017
A Debt fund charges 1% entry load and no exit load Its NAV is Rs.16; its sale and repurchase price
will
(a) Rs.16 and Rs.15.80
(b) Rs.16.16 and Rs.15.84
da
(c) Rs.15.84 and Rs.16
(d) Rs.16.16 and Rs.16
Ans:- d
NRIs can invest in shares/securities in India

(a) On repatriation basis only
(b) On non-repatriation basis only
oo
(c) On repatriation basis as weII as non-repatriation basis
(d) NRIs can‘t invest in shares/securities in India
Ans:- c
Sale proceeds of securities purchased on non-repatriable basis can be

(a) Credited in NRE account
(b) Credited in NRO account
H
(c) Credited in NRE as well as NRO account
(d) Repatriated overseas
Ans:- b
ak
NRI can invest in derivative contracts subject to RBI and SEBI guidelines provided the investment
is made out of
(a) Rupee resources held in India on non-repatriation basis
(b) Rupee resources held in India on repatriation basis
(c) Rupee resources held in India on repatriation as weII as non-
repatriation basis
(d) NRIs are not permitted to invest in derivative contracts
Ans:- a
p
NRIs may invest in company deposits on repatriable basis provided

(a) Deposits are held for a minimum period of 3 years
ee
(b) Is within the ceiling prescribed by RBI for the company to accept
deposits
(c) Funding is done through fresh remittance or from balances held
In NRE/FCNR(B) accounts
(d) ALL of these
Ans:- d
D
NRI: may invest in a partnership firm engaged in

(a) Agricultural/plantation activities
(b) Real estate business
(c) Dealing in immovable property

Dec 2017
(d) Export of agricultural produce
Ans:- d
NRI is not permitted to acquire
da
(a) shopping mall
(b) A shop in a shopping mall
(c) Farm house
(d) Residential building
Ans:- c
Which of the following is not true
oo
(a) An NRI may gift a property to another NRI
(b) An NRI may gift a property to a person resident in India
(c) An NRI may receive gift of a property from another NRI
(d) An NRI may not gift a property to a person resident in India
Ans:- d
Rupee loans to NRIs may be Credited in

(a) NRO account
(b) FCNR(B) account
(c) NRE account
H
(d) A separate account opened for the purpose
Ans:- a
ak
Rupee loans to NRIs may be repaid from
(a) Remittance from abroad
(b) NRE account
(c) NRO account
(d) ALL of these
Ans:- d
p
Maximum rupee loan that can be extended to NRIs against NRE/FCNR deposits is
(a) Any amount
(b) Equivalent of US$ 100 million
ee
(c) Rs 1 Cr
(d) None of these
Ans:- c
Margin. requirement for rupee loans to NRIs against NRE/FCNR

deposits is
D
(a) 5%
(b) 10%
(c) 25%.
(d) As decided by the bank on a case to case basis
Ans:- d

Dec 2017
Rupee loan to NRIs may be allowed against NRE/FCNR deposits for
the purpose of
(a) Relending
(b) Plantation activities
da
(c) investment in real estates
(d) Personal Purposes
Ans:- d
Foreign currency loans to NRIs may be allowed against

(a) Deposits held in FCNR(B) account
(b) NRE savings account
oo
(c) NRO account
(d) ALL of these
Ans:- a
Foreign currency loans to NRIs may not be allowed for

(a) Investment in a business
(b) Personal needs
(c) Foreign currency to an NRI
(d) loans to NRI may be repaid from
Ans:- c
H
ak
Foreign currency loans to NRIs may be repaid from
(a) Remittance from abroad
(b) NRE account
(c) NRO account
(d) ALL of these
Ans:- a
Rupee housing loan to NRIs may be Credited in their

p
(a) NRE account

(b) NRO account
(c) Both NRE and NRO account
ee
(d) FCNR(B) account

Ans:- b
Third party loans against non-resident deposits account may be

(a) Allowed by banks freely
(b) Allowed by bank subject to certain conditions
D
(c) Allowed by bank with RBI's permission

(d) It is not permitted
Ans:- b
Third party loans against non-resident deposits account may be

allowed for the purpose of

Dec 2017
(a) Re-lending
(b) Investment in real estates
(c) Agricultural activities
(d) None of these
da
Ans:- d
Interest income on the following deposits account is chargeable as per income tax rule
(a) NRE account
(b) FCNR account
(c) NRO account
(d) ALL of these
oo
Ans:- c
Return on Zero- Risk investment would be ...... as compared to other opportunities available in the
market.
(a) High
(b) Low
(c) Equal
(d) Either Low or High
Ans:- b H
ak
When return on business is worked out by netting the risk in business, it is called as?
(a) Return on investment
(b) Risk netted return on equity
(c) Risk adjusted return on investment
(d) Risk based system
Ans:- c
Treasury essentially deals with ...... term funds flow.

p
(a) short
(b) mid
(c) long
ee
(d) none of these

Ans:- a
Purchase or sale of a currency on a future date is known as ......

(a) swap
(b) forward
D
(c) spot
(d) repo
Ans:- b
Market Risk involves ......

(a) Risk Identification

Dec 2017
(b) Risk Measurement
(c) Risk monitoring and control
(d) All of them
Ans:- d
da
Pre- payment of Loan Amount or Withdrawal of deposit amount will add ...... risk.
(a) Credit Risk
(b) Funding Risk
(c) Embedded Option Risk
(d) Liquidity Risk
Ans:- c
oo
Due to vastness of the market, operating in different time zones, most of the Forex deals in general
are done on ........
(a) TOM basis
(b) SPOT basis
(c) Ready or cash
(d) Forward
Ans:- b H
The beneficiary of an LC insists that another bank should give guarantee for payment to the
ak
opening bank. What type of LC will be opened?
(a) Confirmed LC
(b) Restricted LC
(c) Standby LC
(d) Transferable LC
Ans:- a
Beneficiary of an LC is
p
(a) Buyer
(b) Seller
(c) LC opening bank
ee
(d) LC negotiating bank

Ans:- b
Primary liability to honour bills drawn under LC if documents are otherwise in order
(a) LC opening bank
(b) LC confirming bank
D
(c) LC reimbursing bank

(d) Buyer on whose on whose behalf LC has been opened
Ans:- b
Proceeds of payment made on bills drawn under LC is to be sent to

(a) The confirming bank

Dec 2017
(b) The sellers bank for Crediting seller s account
(c) Negotiating bank
(d) Reimbursing bank
Ans:- c
da
The main role of LC advising bank is to
(a) Pay on behalf of LC issuing bank
(b) Authenticate the KC issued by LC issuing bank
(c) Negotiate the bills drawn under LC
(d) None of these
Ans:- b
oo
Which of the following types of LC have ceased to exist under UCP 600
(a) Red clause LC
(b) Transferable LC
(c) Revocable LC
(d) Back to back LC
Ans:- c
H
A 'Green Clause' letter of Credit is not an extension of ......
ak
(i) transferable Credit,
(ii) confirmed irrevocable Credit,
(iii) red clause Credit
Ans:- a
p
Which of the following is not an activity of treasury?

(a) forex operations
ee
(b) trading and risk management

(c) investment and fund management
(d) none of these
Ans:- d
The forward premium and discount are generally based on the .........of the two currencies involved
D
(a) Market rate

(b) Future rate
(d) Ready or cash
Ans:- b

Dec 2017
A bond with remaining maturity of 5 years is presently yielding 6%. Its modified duration is 5
years. What is its McCauley's duration?
(a) 5.05%
(b) 3.77%
da
(c) 5.30%
(d) 6.00%
Ans:- c
The maximum borrowing on any day is limited to ___ % of capital, and maximum lending is
limited to ____ % of capital.
(a) 100, 25
oo
(b) 125, 50
(c) 200, 50
(d) 200, 100
Ans:- b
What is the normal balance for an asset account?

(a) Debit
(b) Credit
(c) Either a or b
(d) None of these
Ans a
H
ak
A Party enters into a contract for sale of dollars and receives the rupees from the counter party.
Due to delay in receipt of expected funds in nostro account, it fails to settle. What kind of risk has
arisen?
(a) settlement Risk
(b) Liquidity Risk
(c) Pre- settlement Risk
(d) Mismatch Risk
Ans:- a
p
Your account is with us refers to ...... account.

(a) NOSTRO
ee
(b) VOSTRO
(c) LORO
(d) Mirror
Ans:- b
The value of the currency is decided supply and demand factors for a particular currency under......
D
(a) Direct exchange rate

(b) Indirect exchange rate
(c) Fixed exchange rate
(d) Floating exchange rate
Ans:- d

Dec 2017
The risk in treasury activity is known as ______ risk.
(a) Credit
(b) market
(c) liquidity
da
(d) operational
Ans:- b
Physical movements of goods into India is regulated by ......formulated by the ......

(a) DGFT, exim policy
(b) exim policy, DGFT
(c) exim policy, RBI
oo
(d) RBI, trade policy
Ans:- b
Return on Zero- Risk investment would be ...... as compared to other opportunities available in the
market.
(a) High
(b) Low
(c) Equal
(d) Either Low or High
Ans:- b
H
ak
Downside potential has 2 components. These are ......
(a) Potential Losses and Profit Potential
(b) Potential Losses and probability of occurrence
(c) Profit Potential and probability of occurrence
Ans:- b
Which is not to be taken into account for risk pricing?

p
(a) Operating Expenses

(b) Loss Probabilities
(c) Profit Probabilities
ee
(d) Capital Charges

Ans:- c
A bank which has negotiated bills drawn under confirmed LC is required to submit hrs claim to
(a) LC issuing bank
D
(b) LC Confirming bank

(c) Either (a) or (b)
(d) First to issuing bank and if not paid then to the confirming bank
Ans:- b
An LC advising bank may also function if it so desires, as

Dec 2017
(a) LC confirming bank
(b) LC negotiating bank
(c) Both (a) & (b)
(d) Neither (a) nor (b)
da
Ans:- c
How many beneficiaries can be of a transferable LC

(a) one
(b) two
(c) three
(d) Any number of beneficiaries is possible
oo
Ans:- d
A foreign buyer intends to finance the exporter for the raw material required by him for the order
The buyer will request his banker to open
(a) Back to back LC
(b) Green clause LC
(c) Red clause LC
(d) Transferable LC
Ans:- c
Back to back LC is opened on behalf of

H
ak
(a) Importer
(b) Exporter
(c) Exporter's supplier
(d) None of these
Ans:- c
Under UCP-600 maximum time allowed to banks to honour or dishonour documents is

(a) 7 days
p
(b) 5 days
(c) 7 banking days
(d) 5 banking days
ee
Ans:- d
In dealing with discrepant documents, which of the following options

to banks is not available under UCP-600?
(a) Hold documents pending further instruction from presenter
(b) return the documents
D
(c) Pay under reserve

(d) Act as per instruction previously received
Ans:- c
The parties concerned with bank to bank reimbursements are bound by

(a) UCP 600

Dec 2017
(b) URR 525
(c) ISP 98
(d) Incoterms
Ans:- b
da
According to URR 525, which of the following is a bank that has issued a Credit and the
Reimbursement Authorization under that Credit?
(a) Issuing bank
(b) Paying bank
(c) Advising bank
(d) Confirming bank
oo
Ans:- a
Which of the following is not a category of incoterm?

(a) Departure
(b) Main carriage paid / unpaid
(c) Arrival
(d) All are incoterm categories
Ans:- d
H
In dealing with LC and its documents, banks are responsible for
ak
(a) Genuineness of the documents submitted
(b) For the acts of correspondent banks
(c) Errors in translation/interpretation of technical terms
(d) None of these
Ans:- d
Mark which statement is correct:

(a) The LC must have an applicant and a beneficiary.
p
(b) The LC must have an advising bank and a confirming bank.

(c) The negotiating bank is not responsible to examine the documents.
(d) The advising bank has no option decide whether it wants to advice the LC or not.
ee
Ans:- a
Under UCP 600, which of the following refers to the term presentation
(a) Delivery of goods to importer
(b) Advising Letter of Credit
(c) Delivery of documents under a Credit to issuing bank or nominated bank
D
(d) Delivery of commercial invoice to a importer

Ans:- c
What are the Important documents called for under the Letter of Credit : Pick up odd one
(a) Invoice
(b) Bill of Lading

Dec 2017
(c) Letter of confirmation
(d) Packing List, Weight List and other Documents
Ans:- c
da
Select the incorrect statement.
(a) Export / import trade is regulated by the DGFT
(b) DGFT regulates trade control through exim policy
(c) RBI regulates exchange control and receipt / payments of foreign exchange under FEMA
guidelines
(d) The registration number of the firm / company for international trade is known as BI(c)
Ans:- d
oo
Which of the following issues LC?
(a) Sellers bank
(b) Buyers Bank
(c) Negotiating Bank
(d) Advising Bank
Ans:- b
H
The bill of exchange or drafts are drawn with certain Usance period and are payable upon
acceptance, at a future date, subject to receipt of documents conforming to the terms and condition
ak
of the LC
(a) A Deferred Payment Credit
(b) Under the Acceptance Credit
(c) In a Negotiation LC,
(d) Under a Sight LC,
Ans:- b
LC documents must be consistent with the requirement of

p
(a) Incoterms
(b) UCPDC
(c) Exchange control guidelines
ee
(d) ALL of these

Ans:- d
As per Article 36 of UCPDC 600, (Force Majeure clause) a bank assumes no liability or
responsibility for the consequences arising out of the interruption of its business by Acts of God,
riots, civil commotions, insurrections, wars, acts of terrorism, or by any strikes or lockouts or any
D
other causes beyond its control. Which of these items has been added in UCPDC 600?
(a) acts of terrorism
(b) wars
(c) riots
(d) Both a & b
Ans:- a

Dec 2017
Which of the following can be used as an alternative to the transferable letter of Credit?
(a) Back to back letter of Credit
(b) Irrevocable confirmed letter of Credit
da
(c) Revolving Credit
(d) Transferable letter of Credit
Ans:- a
The Incoterms which confirms that the price of the goods inclusive of Insurance and Freight up to
the port of destination, is called ......
(a) C & F
oo
(b) CIF
(c) CPT
(d) CFI
Ans:- b
Bill of exchange, arising out of LC transaction is
H
(a) Drawn by LC applicant on LC issuing bank
(b) Drawn by LC applicant on beneficiary's bank
(c) Drawn by beneficiary on LC issuing bank--
(d) Drawn by beneficiary on his bank
Registered Indian exporters endeavoring to export to.......countries are eligible for support under
the PLI programme.
ak
(a) EXIM bank
(b) RBI- FED
(c) ECGC
(d) OECD
Ans:- d
In documentary Credit, which of the following banks is usually a foreign bank?

(a) Issuing bank
p
(b) Paying bank

(c) Advising bank
(d) Confirming bank
ee
Ans:- c
Which of the following documents must bear LC number of issuing bank

(a) Bill of exchange
(b) invoice
(c) Bill of Lading
D
(d) ALL of these

Ans:- d
A company declares RS 3/- dividend on the equity share of face value of RS 5/- . The share is
quoted in the market at RS 60/- the dividend yield will be
(a) 3%

Dec 2017
(b) 30%
(c) 5%
(d) 6%
Ans:- c
da
Truck out sheet
(a) Invoice
(b) Bill of lading
(c) Packing list
(d) Transit receipt
Ans:- c
oo
Number of non-negotiable copies that must accompany a bill of lading is
(a) 3
(b) 5
(c) 7
(d) As mentioned in LC
Ans:- d
H
Which of the following details must be mentioned in invoice accompanying LC document
(a) Terms of sale contract
ak
(b) Bill of lading number
(c) Name of LC issuing bank and LC number
(d) ALL of these
Ans:- d
Mark which statement is correct:

(a) Irrevocable LC cannot be revoked or cancelled, but can be amended without the concurrence of
the parties concerned
p
(b) Red clause LC is called so because it is all over printed in RED letters.
(c) Confirmed LC is confirmed by a bank, usually in the country of the exporter, for giving
additional comfort to the exporter.
ee
(d) Transferable LC can be further transferred by the first, second, and third, even without specific
mention in the original LC
Ans:- c
Currency of issuance of insurance policy that accompanies documents under LC must be the
(a) Currency of the LC applicants country
D
(b) Currency of the LC beneficiary’s country

(c) Currency of the LC
(d) Any one of the above
Ans:- c

Dec 2017
stands for society for worldwide Interbank Financial Telecommunications has built in security
system with an automatic authentication of financial messages, through
(a) BIC
(b) RMA
da
(c) BKE
(d) AMA numbers
Ans:- c
An importer from India fails to retire the bills received under LC, although he holds a forward
contract for the amount. The LC issuing Crystallize the liability in Indian rupees
(a)Within 10 days
oo
(b)Within 15 days if requested by the importers
(c) Either (a)or (b)
(d) Neither (a)nor (b)
Ans:- a
SWIFT stands for society for worldwide Interbank Financial Telecommunications, this is an...
(a) Statutory
(b) Non- statutory
(c) non- profit making body
(d) co operative society
Ans:- d
H
ak
A company with equity capital of Rs.15 Cr makes PBIDT of Rs.15 Cr and PAT of Rs.10 Cr. The
face value of its share is Rs.5 and PE is 10, the market price will be
(a) Rs.50
(b) Rs.66
(c) Rs.33.34
(d) Rs.100
Ans:- c
p
A company equity capital of Rs.10 Cr ( fACE VALUE OF RS. 10 makes PBIDT of Rs.10 Cr and
PAT of Rs.5 Cr.if the market price of the share is Rs. 50, the PE ratio will be ......
(a) Rs.5
ee
(b) Rs.10
(c) Rs.20
(d) Rs.15
Ans:- b
In the above example, the Crystallization would be done at

D
(a) selling rate

(b) Rate at which forward contract was booked
(c) Either (a)or (b)
(d) Neither (a)nor (b)
Ans:- c

Dec 2017
Goods imported under LC must be insured at, if not specifically mentioned
(a) 100% of invoice value
(b) 110% of invoice value
(c) 120% of invoice value
da
(d) None of these
Ans:- b
Issuance of commercial stand by LCs attract provisions of

(a) ISP 98
(b) UCPDC 600
(e) URR 25
oo
(d) ALL of these
Ans:- d
VaR is not enough to assess market risk of a portfolio. Stress testing is desirable because ......
H
(d) Its use as VaR measure is not accurate enough
Ans:- c
A commercial stand by LC may be used for the purpose of

ak
(a) Financial guarantee
(b) Performance guarantee
(c) Import of goods
(d) ALL of these
Ans:- c
A company declares RS 2/- dividend on the equity share of face value of RS 5/- . The share is
quoted in the market at RS 80/- the dividend yield will be ......
p
(a) 20%
(b) 4%
(c) 40%
ee
(d) 2.5%
Ans:- d
Buying of USD (with Rupees) in the market and selling same in forward market or vice versa is
called ...
(a) Spot transaction
D
(b) Forward transaction

(c) Swap transaction
(d) Convertible transaction
Ans:- c

Dec 2017
An LC provides for reimbursement to negotiating bank through a reimbursing bank and sends
instructions to the reimbursing bank. The reimbursing bank may honour reimbursement claim
(a) lf it is otherwise in order
(b) Provided it has received the instruction by an authenticated means
da
(c) Provided it has accepted the reimbursement authorization from
issuing bank
(d) Provided it has received the instruction by an authenticated
means along with a copy of the documentary Credit
Ans:- c
Reimbursement authority issued by LC issuing bank has a validity period
oo
(a) In accordance with the LC
(b) Of seven banking days from the date of negotiation
(c) Of 5 banking days from the date of negotiation
(d) The reimbursement authority must not have an expiry date
Ans:- d
H
Which of the following sentences is not correct?
(a) Reimbursement authority must be issued by an authenticated means
(b) Mail confirmation should be sent for such tele transmission
(c) The reimbursement authority must not have an expiry date
(d) Reimbursement authorization must state that they are subject to URR-525
Ans:- b
ak
Yield curve risk with respect to different maturity sectors, is a type of a ......
(a) Liquidity risk
(c) Basis risk
(d) Market risk
Ans:- c
p
Market Risk involves

(a) Risk Identification
(b) Risk Measurement
ee
(c) Risk monitoring and control

(d) All of them
Ans:- d
A reimbursement bank has given reimbursement undertaking, which has

D
accepted by the reimbursing bank. Issuing bank can

(a) Cancel its reimbursement authorization by issuing a notice
(b) Amend its reimbursement authorization without issuing any notice
(c) Cancel its reimbursement authorization without issuing a notice
(d) Can't cancel its reimbursement authorization by issuing a notice
Ans:- d

Dec 2017
The reimbursing bank must process reimbursement claim within

(a) 5 banking days
(b) 7 banking days
da
(c) 3 banking days
(d) Next day
Ans:- c
Reimbursement claims should not be presented to reimbursing bank earlier than

(a) 10 days prior to due date
(b) 7 days prior to due date
oo
(c) 3 days prior to due date
(d) Date of negotiation
Ans:- a
Reimbursing banks are liable for consequences arising out of

(a) Delay/loss of any message in transit
(b) Lock out of their premises
(c) Strike .
(d) None of these
Ans:- d
H
ak
Trading book includes ......
(a) All assets
(b) All liabilities
(c) All marketable assets
(d) All long term liabilities
Ans:- c
A PCL allowed without prior lodgment of LC or firm export order is called ...... account facility.
p
(a) incoterm
(b) rupee
(c) running
ee
(d) rediscount
Ans:- c
In Credit Running Account facility provided to commodities covered under 'Selective Credit
Control', the LC or firm order should normally be produced in the bank within ...... from the date of
sanction.
D
(a) 7
(b) 15
(c) 21
(d) 30
Ans:- d

Dec 2017
Cash reserve ratio is maintained as a fortnightly average balance. On a daily basis, it should be
minimum ...... of the average balance:
(a) 95%
(b) 70%
da
(c) 50%
(d) 25%
Ans:- a
INCOTERMs deal with

(a) Relationship between seller and buyer
(b) Relationship between parties to LC
oo
(c) Relationship between issuing bank and reimbursing bank
(d) ALL of these
Ans:- a
Documents accompanying a claim must not be

(a) Dated prior to the date of LC
(b) Dated after the date of LC
H
(c) Dated after the date of bill of lading
(d) Dated after the date of presentation
Ans:- d
ak
An irrevocable LC can be
(a) Revoked
(b) Cancelled
(c) Amended with the concurrence of parties concerned
(d) Amended without the concurrence of parties concerned
Ans:- c
A back to back LC is
p
(a) LC opened for meeting export obligation

(b) LC opened for meeting import obligation
(c) LC opened against a master LC where master LC is an export LC
ee
(d) LC opened against a master LC where master LC is an import LC

Ans:- c
The incoterms FCA implies

(a) inclusive of main carriage
(b) inclusive of main carriage and insurance
D
(c) Excluding main carriage

(d) Nonr of these
Ans:- c
The incoterms CIP implies

(a) inclusive of cost and freight

Dec 2017
(b) inclusive of cost Insurance and freight
(c) inclusive of carriage and insurance
(d) inclusive of carriage
Ans:-
da
Incoterms DDP means
(a) Delivered ex ship
(b) Delivered ex works
(c) Delivered duty unpaid
(d) Delivered duty paid
Ans:- d
oo
Bill of entry evidences
(a) Goods have been imported
(b) Customs duty have been paid on goods
(c) Goods have arrived without incurring any damage
(d) ALL of these
Ans:- d
H
ak
Bill of entry is required to show that ......
(a) The goods have been exported out of the country.
(b) The invoice contains fair price and there is no over/under invoicing
(c) The goods have come into the country of import
(d) The importer has paid the import bill
Ans:- c
The authority who issue IEC number

p
(a) DGFT
(b) RBI
(c) Commission of Customs
ee
(d) AD
Ans:-a
IEC number is required for:

(a) Import of capital goods.
(b) Filing of bill of entry with customs.
D
(c) Undertaking any export or import transaction.

(d) Receiving gift from relatives abroad
Ans:- c
Exporters are required to submit export declaration forms to

(a) DGFT

Dec 2017
(b) RBI
(c) Commission of Customs
(d) AD
Ans:- d
da
Physical movements of goods into India is regulated by ________ and formulated by the ......
(a) DGFT, Exim policy
(b) Exim policy, DGFT
(c) Exim policy, RBI
(d) RBI, trade policy
Ans - b
oo
Which of the following documents are required to be submitted for exports made by post
(a) GR
(b) PP
(c) SOFTEX
(d) SDF
Ans:- b
H
ak
Which of the following exports EDFs need not be submitted
(a) Gift of worth US$ 25 000
(b) Exports to Myanmar valued at US$ 5,000
(c) Tran-shipment
(d) Goods supplied under orders of Central Government
Ans:- a
An exporter must submit export documents to an AD within

p
(a) 21 days
(b) 12 months
(c) 15 months
ee
(d) None of these

Ans:- a
Export bills relating to goods exported to a warehouse overseas must be realized and repatriated
into India
(a) On realization of sale proceeds
D
(b) 15 months from date of export

(c) (a) or (b) whichever is earlier
(d) (a) or (b) whichever is later
Ans:- c
No. of countries in the Asian Clearing union are

Dec 2017
(a) 6
(b) 7
(6) 6
(d) None of these
da
Ans:- d
Requests for reduction in invoice value relating to an export bill already sent for collection are
dealt with by
(a) DGFT
(b) AD
(c) Commissioner of Customs
oo
(d) Such reductions are not permitted
Ans:- b
Reduction in invoice value may be allowed

(a) Up to 25% subject to certain conditions
(b) Up to any amount subject to certain conditions
(d) None of these.

Ans:- c H
(c) Up to any amount without any conditions
ak
An export bill is outstanding for 11 months and the exporter needs extension of time period by
another 4 months. Total export bill outstanding 750,000. His last 3 years average export realization
amounted to US$ 1.2 million. The authority who may allow such extension is
(a) AD
(b) RBI
(c) Enforcement of Directorate
(d) DGFT
Ans:- a
p
Effective date of realization of a foreign currency export bill is

(a) Date on which the drawee pays the bill
ee
(b) Date on which the nostro account of exporter's bank is Credited

(c) Date on which the nostro account of exporter's Credited
(d) Date on which the Vostro account is debited
Ans:- b
Effective date of realization of a rupee export bill is

D
(a) Date on which the drawee pays the bill

(b) Date on which the nostro account of exporter's bank is Credited
(c) Date on which the nostro account of exporter's Credited
(d) Date on which the Vostro account is debited
Ans:- d

Dec 2017
Mr. A participated in an international trade fair. He opened there a foreign currency account. At the
close of the fair his outstanding balance stood at US$ 26,500. He may
(a) Continue to keep the account as long as he desires
(b) Repatriate the balance to India within one month
da
(c) Repatriate the balance to India within one week
(d) Repatriate the balance to India within one year
Ans:- b
Gift of goods up to what value can be freely exported?

(a) 1 Lakh
(b) 2 Lakhs
oo
(c) 5 Lakhs
(d) 10 Lakhs
Ans:- c
Diamond Dollar account can be opened by exporters/importers of rough/polished diamonds or

diamond jeweIIery provided he has a track record of
H
(a) 3 years and average turnover of Rs 5 Crore
(b) 2 years and average turnover of Rs 5 Crore
(c) 2 years and average turnover of Rs 3 Crore
(d) 3 years and average turnover of Rs 3 Crore
Ans:- c
ak
How many Diamond Dollar account can be opened by exporters/importers of rough/polished
diamonds or diamond jeweIIery
(a) 2
(b) 3
(c) 5
(d) 1
Ans:- c
p
IEC (Importer Exporter Code) is issued by ......

(a) RBI
(b) DGFT
ee
(c) SEBI
(d) Central government
Ans:- b
ICC is .... Governing the UCPDC rules.

(a) statutory
D
(b) Non- statutory

(c) trade body
(d) Self oriented body
Ans:- c

Dec 2017
Rate of interest payable in EEFC account is
(a) As decided by the AD concerned
(b) Rate of interest as applicable for NRE savings account
(c) Rate of interest as applicable for current account
da
(d) None of these
Ans:- c
Which of the following is/are the purpose(s) of Duty Drawback?

(a) to refund excise and customs duty
(b) to make certain domestic commodities competitive in the overseas market
oo
(c) to provide export incentives under the Export Promotion Scheme
(d) all of these
Ans:- d
An exporter who availed packing Credit facility exports the goods

does not avail post-shipment finance. The bank in such case, would
H
(a) Continue the packing Credit advance till export proceeds are realized
(b) Treat the packing Credit advance as unsecured advance charge interest as per rates in force
(c) Convert the packing Credit advance into post shipment finance
(d) Report the matter to RBI for their instruction
Ans:- c
ak
The exporters has availed packing Credit but fails to export. The bank would
(a) Report the matter to RBI for their instructions
(b) Recall the advance and charge penal interest for the period beyond 180 days
(c) Treat the advance ab initio as an advance for non-export activities
penal rate from the date of advance
(d) None of these
Ans:- c
p
In India export trade is regulated by the ........

(a) EXIM Bank
(b) FEDAI
ee
(c) BCBS
(d) DGFT
Ans:- d
An exporters submits an LC authorizing dispatch of certain goods by

a sea having a CIF value of US$ 1 million and requests for packing Credit loan against his
D
sanctioned limit The bank may allow him a rupee loan equivalent to
(a) US$ 1 million less stipulated profit margin
(b) US$ 1 million less less stipulated profit margin
(c) US$ 1 million less 13/14% of CIF value
(d) US$ 1 million less 13/14% of CIF value less stipulated profit margin
Ans:- d

Dec 2017
The bank may allow pre-shipment finance under running account facility
(a) Without prior lodgment of LCs/firm export orders
(b) LC/firm export order
da
(c) Based on undertaking from the exporters
(d) Only with the lodgment of LCs/firm Export orders
Ans:- a
An exporter submits a DA bill drawn on a foreign importer for availing finance against it. The
bank will extend the finance by way of
(a) Exports bills purchased
oo
(b) Exports bills discounted
(c) Exports bills negotiated
(d) Short term loan
Ans:- b
Priyanka wants to start Export- import trade, so she has to obtain importer- exporter code Number
(b) FEDAI
(c) BCBS
(d) DGFT
Ans:- d
H
(IFC number), he has to approach to whom for such number....
(a) EXIM Bank
ak
Gift of goods up to what value can be freely exporte(d)
(a) 1 Lakh
(b) 2 Lakhs
(c) 5 Lakhs
(d) 10 Lakhs
Ans:- c
p
The concessional rate of interest in case of advances against duty

drawback is applicable for
(a) Transit period
ee
(b) 45 days
(c) 90 days
(d) Up to 180 days
Ans:- c
Documents submitted by an exporter is found discrepant. The bank having regard to the value of
D
the exporters business does not want

to refuse its negotiation. The bank may
(a) Make payment against the guarantee of the beneficiary
(b) Make payment under reserve to beneficiary's banker
(c) Obtain necessary authority of the LC opening bank
(d) Follow any one of these options

Dec 2017
Ans:- d
Normal transit period applicable to export bills on Bangladesh is

(a) 15 days
da
(b) 21 days
(c) 25 days
(d) None of these
Ans:- c
Which of the following countries does not comes under Asian Clearing UNION.
(a) Maldives
oo
(b) Myanmar
(c) Pakistan
(d) china
Ans:- d
In case of a 90 days DA (Usance) bill in US$ tendered to the bank on 01 Apr 2015, the NTP will
(b) 25, 25 Apr 2015

(c) 25, 24 Jul 2015
(d) 30, 30 Apr 2015
Ans - c
H
be ...... days and NDD will be ...... (date)
(a) 21, 25 Apr 2015
ak
In case of post shipment finance, the shipping documents along with relative GR form must be
submitted to an AD within ...... days from the date of shipment.
(a) 7
(b) 14
(c) 21
(d) 30
Ans:- c
p
Duty drawback claim is made to

(a) RBI before exporting the goods
ee
(b) RBI alter exporting the goods

(c) Customs before exporting the goods
(d) Customs after exporting the goods
Ans:- d
Normal transit period allowed in case of a fixed due date export bill is
D
(a) 25 days inclusive of the date the bill is submitted

(b) 25 days excluding the date the bill is submitted l
(c) No transit period is allowed in such cases
(d) None of these
Ans:- c

Dec 2017
DDA, Diamond Dollar Account can be opened if average export turn over of last 03 year of Rs. 5
Crore and this limit has been revised in Oct 2014 to last 02 year turn over is reduced to Rs. 3 Cr,
can have a maximum how many DDA a/c at a time.
(a) 1
da
(b) 2
(c) 5
(d) 10
Ans:- c
PCFC can be allowed initially for a maximum period of ...... days.

(a) 90
oo
(b) 120
(c) 180
(d) 360
Ans - c
PCFC can't be allowed in

(a) USD
(b) DM
(c) Pound Sterling
(d) Yen
Ans:- b
H
ak
Banks may fund its PCFC/EBR assets from
(a) Foreign currency liabilities in its book
(b) Rupee/Foreign currency swap
(c) Borrowing from the overseas bank
(d) ALL of these
Ans:- d
p
An exporter who is a gold card holder, request his bank for an adhoc limit, The bank must process
ee
the request within

(a) 25 days
(b) 15 days
(c) 7 days
(d) None of these
Ans:- c
D
In case of gold card holders, concessive rate of interest on post-shipment is extended up to

(a) 180 days
(b) 270 days
(c) 365 days
(d) 2 years

Dec 2017
Ans:- c
An importer has engaged one factor based in his country to facilitate

financing debts. The arrangement is called
da
(a) Single factor system
(b) Direct export system
(c) Direct import system
(d) None of these
Ans:- c
A factor would normally finance up to
oo
(b) 75% of invoice value
(c) 50% of invoice value
(d) 90% of invoice value
Ans:- b
(a) Banker
(b) Factor
(c) Forfeiter
H
An agency finances exporter by discounting export receivable without recourse on a fixed rate
basis for fuII value of invoice. The agency is a
ak
(d) None of these
Ans:- c
JHG Co. incurs cleanup expense of 5000 on December 30. The supplier's invoice states that the
5000 is due by January 10 and JHG will pay the invoice on January 9. ABC follows the accrual
basis of accounting and its accounting year ends on December 31. What is the effect of the cleanup
service on the December balance sheet of JHG?
p
(a) Assets Decreased

(b) Liabilities Increased
(c) No Effect On Owner's Equity
ee

Ans
A forfeiter would normally finance up to

(b) 75 A of invoice value
D
(c) 50% Of invoice value

(d) 90% Of invoice value
Ans:- a
Time limit for import payments under trade Credit is

(a) 6 months

Dec 2017
(b) 1 year
(c) 3 years
(d) 5 years
Ans:- c
da
ALL cases of advance remittance beyond a limit are to be referred to
RBI. The limit is
(a) US$ 100.000
(b) US$ 1 million
(c) US$ 5 million
(d) US$ 10 million
oo
Ans:- c
Credit extended by the overseas supplier for a period of 05 years is termed as....
(a) Trade Credit
(b) Overseas borrowings
(c) ECB
(d) Long term Credit
Ans:- c
H
ak
Physical imports against advance remittance for capital goods should be made within
(a) 6 months
(b) 1 year
(c) 3 years
(d) 5 years
Ans:- c
An importer makes an advance remittance of US$ 1 million but fails

p
What the concerned AD would do

(a) Ensure that advance remittance is repatriated into India
(b) Ensure that advance remittance is utilized for other
ee
(c) Either a or b
(d) Report the matter to RBI
Ans:- c
Which of the following may be accepted as an evidence for import of good in India
(a) Copy of the bill of entry
D
(b) Postal appraisal form

(c) Custom's assessment certificate approved by custom's
(d) ALL of these
Ans:- d

Dec 2017
International trade largely dependent of financing by banks to take care of Credit risks of the
export financing institutions, countries. .......... takes care of such risk.
(a) EXIM Bank
(b) FEDAI
da
(c) BCBS
(d) ECGC
Ans:- d
Credit extended by an overseas supplier to an Indian importer for a

period of 4 years would be classified as
(a) Trade Credit
oo
(b) External commercial borrowings
(c) Trade finance
(d) Short term finance
Ans:- b
Banks can approve proposals for suppliers Credit with maturity up to less than 3 years subject to a
limit of
(a) US$ 5 million per transaction
(b) US$ 10 million per transaction
(c) US$ 20 million per transaction
(d) US$ 100 million per transaction
Ans:- c
H
ak
The present ceiling for all inclusive cost for one year buyers/suppliers Credit is
(a) LIBOR + 100 BPs
(b) LIBOR + 200 BPs
(c) LIBOR + 250 BPs
(d) LIBOR + 300 BPs
Ans:- b
p
Under AMA approach (Estimated Probability of Occurrence), Probability is mapped on scale of

(a) 3
(b) 4
ee
(c) 5
(d) 6
Ans:- c
Portfolio risk is called the risk at

(a) Branch level
D
(b) Regional/Zonal level

(c) Aggregated level
(d) None of these
Ans:- c

Dec 2017
In India, conventionally, bonds are issued by institutions in _____ sector while debentures by
corporate in _____ sector.
(a) private, public
(b) public private
da
(c) either of a or b
(d) none of these
Ans:- b
Debentures are governed by ......

(a) Law of Contract
(b) BR Act
oo
(c) Company Law
(d) none of these
Ans:- c
For market risk the minimum capital requirement is expressed in terms of two separately calculated
charges which are
(a) specific risk and general market risk
(b) special risk and general risk
(c) liquidity risk and liquidation risk H
(d) counterparty Credit risk and trading partners risk
Ans:- a
ak
FEDAI is a ..... body.
(a) Statutory
(b) Non- statutory
(c) Self oriented body
(d) Non- profit making body
Ans:- d
p
Futures related to interest rates are known as ......

(a) currency futures
ee
(b) bond futures

(c) stock/index futures
(d) none of these
Ans:- b
Bank at their level can give supplier Credit under exim policy for the period of 6 to 03 years up to
D
US(d)..
(a) 10 million
(b) 20 million
(c) 50 million
(d) 100 million
Ans:- b

Dec 2017
Risk weighted assets for Credit of a bank is basically a five stage process, which one is the third
stage.
(a) Determining Adjusted Exposure
da
(b) determining applicable risk weight
(c) determining RWA for the exposure
(d) determining allowable reduction
Ans:- b
A 'Revolving Credit' doesn't means a letter of Credit ......

(i) which is available for use in any country,
oo
(ii) covering many shipments up to a particular period of time or a particular amount or both,
(iii) which can be easily transferred by the beneficiary to his suppliers
Ans:- b
H
ak
Market value of a portfolio varies with stress testing techniques. Stress testing covers many
different techniques, find out which one specifies the shocks that might plausibly affect a number
of market risk factor simultaneously if an extreme, but possible, event occurs.
(a) simple sensitivity test
(b) scenario analysis
(c) Maximum loss
(d) extreme value theory
Ans:- b
p
Credit events are ISDA defined Credit event and includes events. Pick up odd one
(a) Bankruptcy
ee
(b) Obligation acceleration

(c) Obligation default
(d) Nonperforming assets
Ans:- d
Which of the following regulations governs payments of imports of goods into India on the basis of
D
FEMA 1999?
(a) trade regulations
(b) exchange control regulations
(c) exim policy
(d) None of these
Ans:- b

Dec 2017
One year T- bill rate is 10% and the rate on one year zero coupon debenture issued by ABC Ltd is
11%. What is the probability of default?
(a) 1%
da
(b) 2%
(c) 3%
(d) 4%
Ans:- a
Which of the following statements is correct?

(a) Higher the risk in a business, higher would be return expectation
oo
(b) Higher the risk in a business, higher would be capital requirement
(c) Higher the risk in a business, higher would be capital requirement and higher would be return
expectation
(d) None of the statements is correct
Ans:- b
(b) Seller risk

(c) Shipping risk
(d) Credit risk
Ans:- c
H
Which of the following additional risk arises in International trade?
(a) Buyer risk
ak
Risk of legal or regulatory sanction, financial loss or reputation loss that a bank may suffer as a
result of its failure to comply with any or all of the applicable laws, regulations et(c) is called as
(a) Transaction risk
(b) Compliance risk
(c) legal risk
(d) Systems risk
Ans:- b
p
An Indian exporter exports certain goods to country A. The goods however reach country B. This
risk is
ee
(a) Shipping risk

(b) Country risk
(d) None of these
Ans:- a
D
A risk is:
(a) Related to illness, which does not effect the human life
(b) Related to events which do not effect the profits of the organization.
(c) Related to unplanned event with financial consequences resulting in loss.
(d) A certain event, where outcome is known.
Ans:- c

Dec 2017
Risk is managed by the following except ......

(a) Limits and Triggers
(b) Risk Monitoring
da
(c) Models of Analyses
(d) None of these
Ans:- d
In a floating interest scenario, bank may price their assets and liabilities based on different
benchmarks, pick up the odd one.
(a) Treasury bills yield
oo
(b) Fixed deposit rates
(c) Call money rates
(d) Forward rates
Ans:- d
Which one is not included in Banking books?

(a) all deposit and loans
(b) all borrowings
(c) capital
(d) all of these
Ans:- c
H
Futures related to equity prices are known as ......
ak
(b) bond futures
(d) none of these
Ans:- c
Home currency fluctuations against a foreign currency give rise to

(a) Political risk
p
(b) Country risk

(c) Credit risk
(d) Exchange risk
ee
Ans:- d
Country risk is best mitigated if

(a) Finance extended is secured by assets held in home country
(b) Finance extended is guaranteed by a corporate registered in third country
(c) Finance extended is guaranteed by the counterparty’s banker
D
(d) Finance extended is guaranteed by a bank in home country

Ans:- d
How many categories of country risk classification is done by

ECGC?
(a) 7

Dec 2017
(b) 9
(c) 5
(d) 8
Ans:- b
da
Which of the following is the most popular instrument to hedge interest rate risk?
(a) exchange rates futures
(b) interest rates futures
(c) equity prices futures
(d) none of these
Ans:- b
oo
A claim of Rs. 60 lacs has been settled by ECGC in favour of a bank against default of Rs. 80 lacs.
Subsequently the bank realizes Rs. 20 lacs with the collaterals available to the loan. What is the
loss suffered by the bank on this loan?
(a) Rs. 25 lacs
(b) Rs. 20 lacs
(c) Rs. 15 lacs
(d) Rs. 10 lacs
Ans c H
Select the incorrect statement regarding MIFOR.
ak
(a) It is a combination of LIBOR and forward premium of USD / INR.
(b) It is suitable for foreign currency borrowings swapped into Rupees.
(c) It is used as a benchmark rate only for interbank dealings.
(d) Corporates are also permitted to use MIFOR as benchmark rate.
Ans:- d
For which country classification, ECGC approves revolving limits

valid for one year
p
(a) Very high risks

(b) Low risk
(c) Restricted cover group I
ee
(d) Restricted cover group II

Ans:- c
For which country classification, ECGC approves on a case by case basis

(a) Very high risks
(b) Low risk
D
(c) Restricted cover group I

(d) Restricted cover group II
Ans:- d

Dec 2017
Which of the following risks is not covered by ECGC?
(a) Political Risk
(b) Credit Risk
(c) Operational Risk
da
(d) Commercial Risk
Ans:- c
Operational Risk does not occur if;

(a) Strike at the port
(b) Non loading of goods on the desired ship, due to rains.
(c) Delay in supplies by sub- suppliers.
oo
(d) Delay in payment by the buyers.
Ans:- b
Standard shipment (comprehensive risk) policy issued by ECGC covers

(a) Commercial risk from date of shipment
(b) Political risk from date of shipment
H
(c) Commercial and political risk from date of contract
(d) Commercial and political risk from date of shipment
Ans:- d
ECGC policies do not cover;

ak
(a) Exchange fluctuation risk.
(b) Risk due to insolvency of the buyer.
(c) Risk due to default by the shipping company.
(d) Risk due to new licensing imposed by the buyers country.
Ans:- a
Maximum cover granted by ECGC on standard policies is

(a) Two-thirds of value of export
p
(h) 75% of value of exports

(c) 90% of the value of exports
(d) 100% of the value of exports
ee
Ans:- c
A small exporter is defined as an exporter whose projected 6Xp0r[

turnover is not more than
(a) 10 lacs
(b) 25 lacs
D
(c) 50 lacs
(d) 1 Crore
Ans:- c
A small exporter , who has taken out standard comprehensive risk

policy fails to receive payment from the buyer. When can he invoke

Dec 2017
the guarantee?
(a) If the buyer fails to pay within 15 days from due date
(b) If the buyer fails to pay within 1 month from due date
(c) If the buyer fails to pay within 2 months from due date
da
(d) If the buyer fails to pay within 3 months from due date
Ans:- c
Small exporter policy covers losses arising out of

(a) Loss or damage to goods which can be covered by general insurers
(b) Non-payment under LC due to discrepancy pointed out by LC
opening bank
oo
(c) Causes inherent in a nature of goods
(d) Non-payment due to new import restrictions
Ans:- d
Small exporters policy provides the following coverage

(a) 95% of loss due to commercial risk
H
(b) 100% of the loss caused by political risk
(c) Both (a) and (b)
(d) 75% of losses due to commercial risk and political risk
Ans:- c
Buyers' Credit or suppliers' Credit for ...... years or above come under the category of EC(b)
ak
(a) 1
(b) 2
(c) 3
(d) 4
Ans:- c
An RFCD account can be opened by ...... with an A(d)

(a) returning Indians who were non residents earlier and are now returning to India for permanent
p
settlement to keep their foreign currency assets held outside India

(b) resident Indians, companies or firms to transact forex business.
(c) a person resident in India to keep his/her foreign currency assets (notes / traveller cheques, etc
ee
(d) diamond exporters

Ans:- c
PNB maintains USD account with Bank of America, New York and when it conducts transactions
through this account, it passes entries in its books at Mumbai through the following account.
(a) Nostro account
D
(b) Vostro account

(c) Loro account
(c) Mirror account
Ans:- a
Short term specific shipment policy provides cover for a period

Dec 2017
(a) Not exceeding 90 days
(b) Not exceeding 180 days
(c) 1 month
(d) 1 year
da
Ans:- b
Which of the following risks are covered by short term policies

(a) Insolvency of the buyer
(b) Failure of the buyer to make payment within specified period
from due date .
(c) Buyers failure to accept the goods
oo
(d) ALL of these
Ans:- d
Buyer exposure policy covers exposure based cover on a selected

buyer covering
(a) Commercial and political risk under LC transaction
H
(b) Commercial risk arising out of Non-LC transaction
(c) Political risk arising in non-LC transaction
(d) Commercial and political risk arising out of both LC and Non-LC
transaction
Ans:- d
ak
What are the two reserve requirements that treasury has to comply with?
(a) PLR and SLR
(b) CRR and SLR
(c) Repo and CRR
(d) VaR and CRR
Ans:- b
Ability of a business concern to borrow or build up assets on the basis of a given capital is
p
calle(d)..
(a) DSCR
(b) good will
ee
(c) reputation
(d) Leverage
Ans:- d
Export turnover policy may be availed by exporters who are likely to pay annual premium to
ECGC at least to the extent of
D
(a) ? 10 lakhs
(b) t 20 lakhs
(c) t 25 lakhs
(d) None of these
Ans:- a

Dec 2017
Export turnover policies are issued with the validity period of
(a) Six months
(b) One year
(c) 2 years
da
(d) None of these
Ans:- b
Consignment exports (stock holding agent) policy provides cover

where the agent's responsibilities is/are
(a) Receiving the shipment
(b) Holding the goods in stock
oo
(c) Selling the goods to buyers on behalf of the exporter
(d) ALL of these
Ans:- b
Packing Credit insurance is not extended by ECGC for

(a) Manufacturing
(b) Purchasing
H
(c) Pre-shipment receivables such as incentives
(d) Packing
Ans:- c
ak
Packing Credit insurance extended to banks covers
(a) ALL packing Credit advances made by the bank
(b) ALL packing Credit advances, which have been notified to ECGC
(c) ALL packing Credit advances sanctioned by banks within its discretionary limit
(d) ALL packing Credit advances sanctioned by banks with prior
approval of ECGC
Ans:- a
p
Insurance premium on packing Credit insurance payable by bank is

(a) @ 6 to 10 paise per Rs1Q0 on outstanding balance of packing
Credit extended
ee
(b) @ 6 to 10 paise per Rs100 on outstanding limit sanctioned

(c) a or b whichever is more
(d) a or b whichever is less
Ans:- a
Claim on packing Credit insurance becomes payable if Credit allowed is not paid
D
(a) Within 4 months from due date

(b) Within 4 months from the date loan is disbursed
(c) Within 3 months from the date loan is disbursed
(d) Within 2 months from the date loan is disbursed
Ans:- a

Dec 2017
Any limit sanctioned by bank under its discretionary limits is to be notified to ECGC within
(a) One week
(b) 15 days
(c) 30 days
da
(d) 3 months
Ans:- c
Export production finance guarantee is extended by ECGC to cover finance extended for
(a) Manufacturing
(b) Purchasing
(c) Receivables
oo
(d) Incentives receivable at pre-shipment stage
Ans:- d
Export Credit insurance is extended to banks to cover finance extended against

(a) Overseas receivable
(b) Stock in trade
(c) Export incentives
(d) ALL of these
Ans:- a H
Premium charged by ECGC from banks for packing Credit insurance is normally
ak
(a) More than that charged for export Credit insurance
(b) Less than that charged for export Credit insurance
(c) Equal to that charged for export Credit insurance
(d) There is no such relationship
Ans:- a
Export finance guarantee is extended by ECGC to cover finance extended for

(a) Incentives receivable at pre-shipment stage
p
(b) Incentives receivable at post-shipment stage

(c) ALL incentives receivable
(d) None of these
ee
Ans:- b
A bank has extended foreign currency loan to its customers and have obtained export financial
(Overseas lending) guarantee of
ECGC. The premium is to be paid in
(a) US$
D
(b) Indian Re
(c) Currency in which loan has been allowed
(d) In any foreign currency
Ans:- b

Dec 2017
A bank has issued an overseas bid bond guarantee to its client. Appropriate financial guarantee of
ECGC for this purpose would be
(a) Export finance (Overseas lending) guarantee
(b) Export finance guarantee
da
(c) Export performance indemnity
(d) ECGC does not cover such transactions
Ans:- c
A bank in India adds its confirmation to foreign LC. Which of the following cover is available to it
from ECGC.
(a) Export finance (Overseas lending) guarantee
oo
(b) Export finance guarantee
(c) Export performance indemnity
(d) Transfer guarantee
Ans:- d
A customer covers its receivable under exchange fluctuation risk cover scheme of ECGC. On due
(a) 2%
(b) 10%
(c) 8%--
(d) None of these
H
date the currency appreciates by 10%. The customer will gain on the transaction due to currency
fluctuation
ak
An exercise of option in future and part of option call value depends specifically on
(a) PV of exercising cost
(b) FV of exercising cost
(c) PV of cost volatility
(d) FV of cost volatility
Ans:- a
According to Black Scholes model, stocks with call option pays the
p
(a) dividends
(b) no dividends
(c) current price
ee
(d) past price

Ans:- b
Maximum period for which ECGC covers exchange fluctuation risk

under its scheme is
(a) 1 year
D
(b) 5 years
(c) 10 years
(d) 15 years
Ans:- d
Minimum period for which ECGC covers exchange fluctuation risk

Dec 2017
under its scheme is
(a) 6 months
(b) 1 year
(c) 3 months
da
(d) 1 month
Ans:- b
A customer covers its receivable under exchange fluctuation risk cover scheme of ECGC. On due
date the currency appreciate by 45%. The customer will gain on the transaction due to currency
fluctuation
(Z) 45%
oo
(b) 12%
(c) 10%
(d) 2%
Ans:- b
Extent of finance ECGC provides under its factoring services is

(a) 100%
(b) 90%
(c) 75%
(d) 60%
Ans:- b
H
ak
The NDD of the demand bill (foreign currency export bill) is ...... days from the date of handling.
(a) 21
(b) 25
(c) 28
(d) 30
Ans:- b
Which of the following can be included for DTL/NDTL computation

p
(a) Amount received from DICGC Claims

(b) Amount received from Insurance company on ad hoc settlement of claims
(c) Amount received from the court receiver
ee
(d) Amount held as margin against LC

Ans:- d
A claim of Rs 45 lacs has been settled by ECGC in favour of a bank against default amount of Rs
60 lacs. Subsequently the bank realizes Rs 20 lacs from coLlaterals available to it. What is the loss
suffered by the bank on this loan
D
(a) Rs 10 lacs
(b) Rs 5 lacs (gain)
(c) Rs 20 lacs
(d) None of these
Ans:- a

Dec 2017
A claim of Rs 45 lacs has been settled by ECGC in favour of a bank against default amount of € 60
lacs. Subsequently the bank realizes Rs 20 lacs from collaterals available to it. What is the net
amount paid by ECGC?
(a) Rs 30 lacs
da
(b) Rs 45 lacs
(c) Rs 20 lacs
(d) None of these
Ans:- a
If market quotes USD/INR as 43.61/63, at what rate can you buy USD at the given quote ......
(a) 43.61
oo
(b) 43.62
(c) 43.63
Ans:- b
Under standardized approach for Credit risk, loans considered past due is risk weighted at ......%
(under normal case).
(a) 50
(b) 100
(c) 150
(d) 200
Ans:- c
H
ak
The exposures to retail and SME sectors are assigned a uniform risk weight of ......% under
standardised approach for capital risk.
(a) 25
(b) 50
(c) 75
(d) 150
Ans:- c
p
Tier II capital should not be more than ......% of total capital.

(a) 25
ee
(b) 50
(c) 75
(d) 100
Ans:- b
D
A 'Back to Back' letter of Credit is ......

(i) one on the strength of which another bank's guarantee is obtained,
(ii) a second set of fresh LC opened in favour of second beneficiary on the strength of original LC
(a) Only (i)
(b) Only (ii)

Dec 2017
(d) Both (i) and (ii)
Ans:- b
da
Coupon of a floating rate bond is ......
(a) Modified whenever there is a change in the benchmark rate
(b) Modified at preset intervals with reference to a benchmark rate
(c) Modified for changes in benchmark rate beyond agreed levels
(d) Modified within a range, for changes in the benchmark rate
Ans:- b
oo
ECGC covers country risk of countries listed under restricted cover on a case by case basis. What
is the period of validity of such approval?
(a) 1 year
(b) 6 months
(c) 3 months
(d) 1 month
Ans:- b
H
ak
Exim Bank's role does not include
(a) Promoting exports
(b) Promoting imports g
(c) Arranging lines of Credit to governments of other countries
(d) Financing of export-import trade
Ans:- b
Guidelines for export and import Credit are governed by ......

p
(a) RBI
(b) DGFT
(c) SEBI
ee
(d) FEDAI
Ans:- b
Exim bank promotes exports by

(a) Offering finance at competitive rates 8- softer terms
(b) Identifying new export opportunities
D
(c) Persuing policy resolution

(d) ALL of these
Ans:- d
CCIL (Clearing Corporation of India Lt., takes over the Settlement Risk, for which it Creates a
large pool of resources, called settlement Guarantee Fund, which is used to cover outstanding of

Dec 2017
any participant. The Clearing Corporation of India Lt(d) (CCIL) was set up in April, 2001 for
providing exclusive clearing and settlement for transactions in Money, GSecs and Foreign
Exchange Six 'core promoters' for CCIL find out odd one.
(a) State Bank of India (SBI),
da
(b) Industrial Development Bank of India (IDBI),
(c) NABAD
(d) ICICI Lt(d),
Ans:- c
Exim bank extends project finance for

(a) Setting up export oriented units
oo
(b) Financing projects set up abroad by Indian firms
(c) Guarantees payments for investment made by Indian firms
(d) None of these
Ans:- a
The level of CRR to be maintained by scheduled banks with RBI is mentioned in ......
(a) RBI Act 1934
(b) BR Act 1949
(c) Companies Act 1956
(d) NI Act 1885
Ans:- a
H
ak
Which part of treasury performs the confirmation, accounting and settlement of the deals?
(a) front office
(b) mid office
(c) back office
(d) top office
Ans:- c
What is the beta factor for corporate finance under Standardised approach?
p
(a) 15%
(b) 18%
(c) 12%
ee

Ans:- b
Notice money refers to

(a) Funds placed overnight
(b) Placement of funds beyond overnight but not exceeding 14 days
D
(c) Funds placed for periods in excess of 3 months but not exceeding 1 year
(d) Funds placed after giving a notice of placement
Ans:- b
Supplier's Credit is extended by Exim Bank to

(a) Indian importers to finance imports

Dec 2017
(b) Indian exporters to enable them to extend Credit to foreign buyers
(c) Indian exporters to enable them to extend deferred Credit to foreign buyers
(d) Pre-shipment finance to Indian exporters
Ans:- c
da
Overseas Investment finance is extended by Exim Bank for
(a) Equity participation by Indian companies in joint ventures abroad
(b) Setting up export oriented units
(c) Financing projects set up abroad by Indian firms
(d) Guarantees payments for investment made by Indian firms
oo
Ans:- a
liquidity risk is reflected as

(a) Maturity mismatch, cash inflow and outflow
(b) Total cash held, receipts and payments
(c) Committed lines, lines utilized and unutilized
H
(d) NPAs, total assets and performing loans
Ans:- a
ak
Which of the following is the liquidity risk ?
(a) Time risk
(b) Call risk
(c) Price risk
(d) Funding risk
Ans:- c
Export bills rediscounting facility is extended by Exim Bank to

p
(a) Indian Companies

(b) Commercial banks in India
(c) Foreign importers
ee
(d) Overseas financial institutions

Ans:- b
If a letter of Credit and UCPDC have contradictory provisions which of the following statements
will be 'false' in this regard ......
(i) Provisions of UCPDC will prevail over those of Credit,
D
(ii) Provisions of Letter of Credit will prevail over those of UCPDC,

(iii) Better of the provisions of UCPDC or Credit as applicable to beneficiary will prevail

Dec 2017
Ans:- b
Overseas buyers Credit is extended by Exim bank to
da
(a) Indian importers
(b) Foreign importers
(c) Indian commercial bank
(d) Foreign banks
Ans:- b
The NDD of the usance bill (foreign currency export bill) is ...... days.
oo
(a) 21
(b) usance period + 21 days NTP
(c) 25
(d) usance period + 25 days NTP
Ans:- d
(b) Foreign financial institutions

(c) Both of them
(d) None of them
Ans:- a
H
Lines of Credit is extended by Exim bank to
(a) Foreign government
ak
Deferred payment exports are those where export proceeds (fuIIy or
partly) are received after
(a) 6 months
(b) 9 months
(c) 1 year
(d) None of these
Ans:- a
p
A proposal to avail finance from Exim bank for deferred payment ex-
port for ? 20 orore can be approved by
(a) Sponsoring bank
ee
(b) Sponsoring bank with prior reference to Exim Bank

(c) Institutional working group constituted by Exim Bank
(d) None of these
Ans:- a
Project exports refers to

D
(a) Export of engineering goods on deferred payment terms

(b) Turnkey projects
(c) Construction contracts abroad
(d) ALL of these
Ans:- d

Dec 2017
In respect of the three distinct roles the treasury is expected to play, which of the following is
managed by the treasury for its internal risk management?
(a) ALM book
(b) Trading book
da
(c) Merchant book
(d) Investment book
Ans:- a
managed by the treasury for managing its proprietary positions?
(a) ALM book
oo
(b) Trading book
(c) Merchant book
(d) Investment book
Ans:- b
(b) Trading book

(c) Merchant book
(d) Investment book
Ans:- c
H
managed by the treasury for its client - related currency and derivative transactions?
(a) ALM book
ak
Exim Bank manages ‘Export Marketing Fund‘ as nodal agency of government of India for the
purpose of
(a) Payment of product liability Insurance premium for new products
introduced in industrialised countries
(b) Accelerating export growth of target products in industrialized countries
(c) For financing import from third countries for exports overseas
(d) ALL of these
p
Ans:- b
Activities eligible for EMF support are/is

ee
(a) Overseas travel

(b) Travel to India by overseas buyers
(c) Promotional expenditure for establishing overseas operations
(d) ALL of these
Ans:- d
D
Export Refinance is provided by RBI at the rate of % of eligible outstanding export Credit?
(a) 15%
(b) 25%
(c) 50%
(d) 100%
Ans:- c

Dec 2017
Exim bank allows refinance to commercial banks for term loans tended by them for identified
purposes up to the extent of (a) Violation of provisions of FEMA are dealt with under Criminal law
(a) 65%
da
(b) 75% law
(C) 90%
(d) 100%
Ans:- d
Fortnightly data on forex operations are submitted to RBl through

(a) R Return
oo
(b) BAL statement
(c) stat-5
(d) Stat-8
Ans:- a
Which of the following statements pertains to forex dealing room operations

(a) XOS
(b) BEF
(c) FEMIS
(d) NRDCSR
Ans:- c
H
ak
R Return is submitted to RBI on which of the following dates of the month?
(a) 7th and 21st
(b) 15th & last day
(c) 101h, 20th and last day
(d) None of these
Ans:- b
p
Which act relating to foreign exchange has replaced earlier one ?

ee
(c) Both the above

(d) None of these
Ans:- a
Capital, Reserves and Surplus are ......

(a) Non interest rate sensitive
D
(b) Interest Rate Sensitive

(c) Both a and b
(d) None of above
Ans:- a
Data on transactions related to FCNR(B) deposits is submitted to

Dec 2017
RBI through
(a) Stat-5
(b) Stat-8
(c) NRDCSR
da
(d) IBS
Ans:- a
Foreign exchange management Act (FEMA) 1999 came into force in

(a) June, 1999
(b) December, 1999
(c) June, 2000 '
oo
(d) December, 2000
Ans:- c
Which of the following is correct?

(a) Violation of provisions of FEMA were dealt with under Criminal law
(b) Violation of provisions of FERA were dealt with under civil law
(d) None of these

Ans:- c H
(c) Violation of provisions of FERA were dealt with under Criminal law
ak
A resident individual going to US has requested for US$15,000 as far
as possible in cash. How much the AD will pay him in cash dollars?
(a) U$$15.000
(b) U$$ 5.000
(c) U$$ 3.000
(d) U$$ 1.000
Ans:- c
p
A resident individual returning from US has US$10,000 in Cash with him

How much of it he can retain with him
(a) US$ 10,000
ee
(b) US$ 5,000

(c) US$ 3,000
(d) US$ 1,000
Ans:- d
Who among the following can't draw foreign exchange worth US$ 100,000
D
(a) Person going abroad for employment

(b) Person going abroad on immigration
(c) Person going abroad for studies abroad
(d) Person going abroad for business visits
Ans:- d

Dec 2017
Which of the following remittances are/is prohibited
(a) Donation of US$ 5,000 in one calendar year for charitable purposes
(b) Purchase of lottery tickets
(c) Subscription for periodicals
da
(d) None of these
Ans:- b
FEMA regulations prohibits following entity from investing abroad

(a) Mutual funds
(b) Registered partnership firms
(c) Individual
oo
(d) Trusts
Ans:- d
Resident Indians may invest abroad through

(a) Purchase of foreign exchange from rupee resources
(b) Balances hem in EEFC account
(c) Proceeds of ADR/GDRs
(d) ALL of these
Ans:- d H
ak
The validity period of packing Credit insurance is ......
(a) 3 months
(b) 6 months
(c) 1 year
(d) 15 months
Ans:- c
Registered partnership firms may invest in JVs or WOSs through AD

p
subject to the following limits

(a) US$ 1 million
(b) US$ 100,000
ee
(c) USd$ 10 million bank would

d) Up to 100% of the net worth
Ans:- d
Resident foreign currency account can be opened by

(a) Resident persons
D
(b) Returning Indians for permanent settlements

(b) NRIs
(b) All of these
Ans:- b
Which of the following can be repatriated by NRI

Dec 2017
(a) rent
(b) pension
(c) interest
(d) all the above
da
Ans:- d
which of the following is a real time settlement system in Europe?

(a) Target
(b) Fedwire
(c) Chips
(d) Chaps
oo
Ans:- a
Resident foreign currency (Domestic) account can be opened by

(a) Returning Indians for permanent settlements
(b) NRIs
(c) Resident persons
H
(d) Resident persons who have acquired foreign exchange while on foreign visit
Ans:- d
ak
A resident Indian intends to visit Nepal for which he requests AD for release of foreign exchange
equivalent to US$1,000. What the AD would do
(a) AD will release US$ 1,000
(b) AD will release US$ 500
(c) AD will release not more than US$200
(d) None of these
Ans:- d
p
What is the notional transit period for rupee bills not drawn under LC?
(a) 25 days
(b) 20 days
ee
(c) 7 days
(d) 3 days
Ans:- b
A US$ sight bill purchased by the bank stands realized on 18th day. The bank had charged interest
for the notional transit period. The bank would
D
(a) Refund the customer excess interest charged

(b) Claim from customer premium passed to him
(c) Both a & b
(d) Neither a nor b
Ans:- c

Dec 2017
ALL foreign currency in ward remittances must be converted into Indian rupees immediately
provided the amount is
(a) Up to US$ 5,000
(b) Above US$ 5,000
da
(c) Upto US$ 3.000
(d) Upto US$ 100
Ans:- a
A beneficiary of inward remittance of US$ 10,000 has claimed interest

for delayed payment. What is the compensation he is entitled to?
(a) At the prime rate for US$ for the period of delay
oo
(b) At the savings rate for Indian Re. for the period of delay
(c) At 2% over savings rate for Indian Re. for the period of delay
(d) At inter-bank rate for US$ for 3 months for the period of delay
Ans:- c
A customer requests for booking a forward contract with an option period. The AD
(a) May not book such a contract
H
(b) May book the contract if otherwise in order
(c) May book the contract if option period is within one month
(d) May book the contract if option period is within six months
Ans:- c
ak
ADs will deal with accredited exchange brokers. The accreditation for this purpose is given to
brokers by
(a) RBI
(b) SEBI
(c) FEDAI
(d) By the board of respective Ads
Ans:- c
p
ECB under automatic route can be raised by

(a) Banks
(b) Housing finance companies
ee
(c) Individuals
(d) Companies registered under Companies Act
Ans:- d
The maximum amount that can be raised under ECB through automatic route is
(a) US$ 20 million with average maturity of 3 years @ 300 BPs over 6 months LIBOR
D
(b) US$ 500 million with average maturity of 5 years @ 500 BPs over 6 months LIBOR
(c) US$ 500 million with average maturity of 10 years @ 500 BPs over 6 months LIBOR
(d) US$ 20 million with average maturity of 5 years @ 300 BPs over 6 months LIBOR
Ans:- a
An overseas investor is holding GDR of a listed Indian company. He

Dec 2017
wants to liquidate the investment. He may
(a) SeII the GDRs at the foreign stock exchange where it is listed
(b) Convert GDR into the shares and seII it at Indian stock exchange where it is listed
(c) Both (a) & (b)
da
(d) Request the company for redeeming the GDRs
Ans:- c
A company, which is listed in Indian bourses, issues FCCBs to finance

its project It will be beneficial for the company to buy back its FCCBs
(a) When its shares are quoted at lower rates
(b) When its shares are quoted at higher rates
oo
(c) When interest rate has come down
(d) Share price/interest rate may not have any impact
Ans:- b
Proceeds of the unsponsored ADRs are received by

(a) The company whose shares are underlying of ADRs
H
(b) The broker who initiates the process
(c) The banker who acts as depository to Create ADRs
(d) None of these
Ans:- c
ak
Market risk in treasury can be controlled by
(a) Overnight limit alone
(b) Gap limit only
(c) Counter party limit only
(d) Both a and b
Ans:- d
When was the Export Credit Guarantee Corporation of India established?

p
(a) 1938
(b) 1957
(c) 1973
ee
(d) 1971
Ans:- c
On which rate bases, overnight money is needed by bank from RBI?

(a) MSF
(b) Repo rate
D
(c) Reverse repo

(d) Bank rate
Which one of the following is a financial ratio that gives a measure of a company's ability to meet
its financial losses?
(a) Cash Reverse Ratio

Dec 2017
(b) Leverage Ratio
(c) Statutory Liquidity Ratio
(d) Loan- to- Value Ratio
Ans:- b
da
(a) Inclusive of cost &freight
(b) Inclusive of cost insurance & freight
(c) Inclusive of carriage and insurance
(d) Inclusive of carriage
Ans:- c
oo
Basically variations in business performance results from
(a) Uncertainties associated with risk elements
(b) Uncertainties in cash outflows
(c) Uncertainties in cash inflows
(d) ALL of these
Ans:- a
H
ak
In analyzing risks in a business model, which of the following would not be a risk element?
(a) Capital invested in business
(b) Fixed assets
(c) Market borrowings
(d) Product pricing
Ans:- a
Risk capital may be increased through borrowings provided

p
(a) Borrowings are short term

(b) Borrowings are long term
(c) Borrowings are subordinated
ee
(d) Borrowings carry no interest

Ans:- c
In general, portfolio risk

(a) Equals the sum total of risk of all its elements
(b) Exceeds the sum total of risk of all its elements
D
(c) Is less than the sum total of risk of all its elements
(d) May equal or exceed or be less than the sum total of risk of all its
Ans:- c
Pricing of risk is based on cost of capital and

(a) Loss provisions

Dec 2017
(b) Operating expenses
(c) Cost of funds
(d) Loss probabilities
Ans:- d
da
At times risk mitigation may be 8‘/Oided because
(a) lt would cap profit potential
(b) lt would cap loss possibilities
(c) lt would add other risks
(d) (a) and (c), both
Ans:- d
oo
lf RORAC of a business is
(a) More than RAROC
(b) Equal to RAROC
(c) Less than RAROC
(d) may be any one of the above possibilities
Ans:- a
H
ak
Objective of risk management is t°
(a) Reduce risks to minimum
(b) Control risks to the desired level
(c) Assess maximum possible losses
(d) Eliminate all risks
Ans:- b
p
Risk measurement processes may be based 00

(a) Sensitivity
(b) Volatility
ee
(c) Possible adverse impact

(d) Sensitivity, volatility and possible adverse impact
Ans:- d
High risk business would have

(a) Higher upside potential and lower downside potential
D
(b) Lower upside potential and lower downside potential

(c) Higher upside potential and higher downside potential
(d) None of these
Ans:- c
Performance indicator that combines profits, risk and capital is

Dec 2017
(a) ROC
(b) Capital adequacy
(c) profit growth
(d) RAROC
da
Ans:- d
Normally, framing of risk management policy guidelines would be a responsibility of

(a) Risk management support group
(b) Committee of senior level executives
(c) Board of directors
(d) Risk management committee of the board
oo
Ans:- c
Given monthly volatility of a stock at 10%, its daily volatility (based on 25 working days in a
month) would be
(a) 2%
(b) 1.6%
(c) >8%
(d) None of these
Ans:- a H
ak
One of the statements listed below may be correct, Please identify.
(a) Higher risk implies higher losses
(b) Higher risk implies higher profits
(c) Higher risk implies possibility of higher profits or losses
(d) ALL the above statements are correct
Ans:- c
The tenor of state government securities is normally ......

p
(a) Five year

(b) seven years
(c) thirty years
ee
(d) Ten year

Ans:- d
owned capital in a business must be such that

(a) It takes care of the long term investment required
(b) It takes care of the long term investment required and provides margin for working capital
D
(c) It takes care of the long term investment required, provides margine for working capital and
meet business losses, if incurred
(d) It ensures business continuity even after the business incurs extraordinary losses
Ans:- d
Which of the following investment has lowest risk

Dec 2017
(a) Treasury Bills
(b) Government Bonds
(c) Equities of Senses companies
(d) Deposits in post office savings bank
da
Ans:- d
Treasury uses derivatives ......

(a) to manage risks including ALM (Assets Liabilities Management) risk
(b) to cater to the requirements of the corporate customers
(c) to trade, i.e., to take a trading position in derivative products.
(d) all of these
oo
Ans:- d
Which of the following derivatives are the off balance sheet exposure ?
(a) Swaps
(b) Futures
(c) Forward contracts
(d) Options
(a) a, b, & d only
(b) b & d only
(c) a & c only
(d) All of them
Ans:- d
H
ak
The section which handle processing of deals, reconciliation is called _______ .
(a) Dealing room
(b) Back office
(c) Mid office
Ans:- b
p
Treasury bill is issued for 91 days to 364 days by GOI 91 days t bill is auction on weekly basis for
amount Rs... Crore.
(a) 100
ee
(b) 200
(c) 500
(d) 1000
Ans:- c
What is the maximum amount of foreign currency notes that a person resident in India can possess
D
or retain?
(a) USD 1000
(b) USD 1500
(c) USD 2000
(d) no such limit
Ans:- c

Dec 2017
Standard policy of ECGC covers ...... and the period covered under commercial risk is ...... months.
In case of free currencies, forward premium or discount is exactly equal to the difference between
(a) Risk- free interest rates of the two currencies
da
(b) Inflation rates in both the countries
(c) Spot rate and Tom rate
(d) LIBOR and RBI reference rate
Ans:- a
A put option is in the money (ITM) if

(a) the strike price is less than market price
oo
(b) the strike price is more than the market price
(c) the market price is equal to the strike price
(d) a put option can never be in the money
Ans:- b
FEMA allows residents to make gift remittance to relatives, friends etc abroad up to USD ...... in
one calendar year.
(a) 1000
(b) 5000
(c) 10000
(d) 100000
Ans:- b
H
ak
Exchange for current account transaction with any person resident in ...... or ...... is prohibited
(a) Pakistan, Sri Lanka
(b) Nepal, Bhutan
(c) China, Myanmar
(d) None of these
Ans:- b
p
Forward rates fully reflect interest rate differentials only in

(a) Controlled economies
(b) Developing economies
ee
(c) Economies where interest rates are free

(d) In perfect markets where the currencies are fully convertible and the markets are highly liquid
Ans:- d
When a bank sanctions a loan to a large borrower, which of the following risks it may face ......
(i) Liquidity,
D
(ii) Market,
(iii) Credit


Dec 2017
Ans:- b
Which of the following is not a method by which Indian can invest abroad?
da
1. swap of shares
2. capitalization of exports made to the investee company abroad
3. balances held in EEFC accounts
(a) only 1
(b) only 2
(c) both 1 and 3
(d) none of these
oo
Ans:- d
Globalization refers to
(a) Full convertibility of all currencies in the world
(b) Removal of all trade barriers in the world
(c) The process of integrating domestic market with global markets, characterized by free capital
flows
and minimum regulatory intervention
H
(c) Fixed rate of exchange for all currencies of the world
Ans - c
ak
Treasury bills are available for a minimum amount of .
(a) Rs.25000 and in multiples of Rs. 25000
(b) Rs.10000 and in multiples of Rs. 10000
(c) Rs.5000 and in multiples of Rs. 5000
(d) Rs.1000 and in multiples of Rs. 1000
Ans - a
Which of the following statement is incorrect

p
(a) Risk mitigation results in reducing downside potential

(b) Risk mitigation results in reducing upside potential
(c) Risk mitigation leads to opportunity gains
ee
(d) Risk mitigation may add to the costs

Ans:- c
Which treasury bill auction on non- reporting week

(a) 364 days
(b) 91 days
D
(c) 182 days

(d) all the above
Ans:- c
Which of the following T- bills are issued fortnightly on Wednesday preceding non- reporting
Friday

Dec 2017
(a) 91 days T- bill
(c) 364 days T- bill
(c) both b and c
da
Ans - b
Banks may not be able to mitigate risks in their Credit portfolio, if they
(a) Secure loans by mortgagees
(b) Secure loans through third Part guarantees
(c) Diversify their portfolio across all regions
oo
(d) Take exposures on few select industries
Ans:- d
Which treasury bill auction on reporting week

(a) 91 days
(b) 182 days
(c) 364 days
(d) all the above
Ans:- c H
ak
Implicit volatility of a financial instrument is computed using (b) B
(a) Simulation processes
(b) Historical volatility
(c) Option prices
(d) factor sensitivities
Ans:- c
The counter party to every cleared futures or futures option trade is

p
(a) The customer's futures commission merchant.

(b) The exchange's clearinghouse.
(c) The customer who took the opposite side of the trade.
ee
(d) all the above

Ans:- b
Zero risk investment would mean an investment which

(a) Comes with zero cash flow
(b) Has zero default probability
D
(c) Is like deep discount bonds with zero interest

(d) Comes with a cash flow that does not change
Ans:- d
At present, there are Central Government dated securities with a tenor up to in the market
(a) 10 years

Dec 2017
(b) 30 years
(c) 12 years
(d 05 years
Ans - b
da
Who among the following must avoid investing in high risk investment
(a) Salaried people
(b) Speculators
(c) Retired persons
(d) Any person not having risk bearing capacity
oo
Ans:- d
Which of the following are macro-economic factors

(i) GDP growth rate,
(ii) stock markets and commodity markets,
(iii) relative inflation
Ans - a
H
ak
Following three questions are based on the data given below in respect of cash flow of 4 different
business options:
Options Mean of Cash Flow Standard Deviation

Over last 4 years
Business option A Rs 24 lacs 2,50
Business option B Rs 32 lacs 2,50
p
Business option C Rs 20 lacs 1,50

Business option D Rs 10 lacs 0,50
Based on the data given above, business option with lowest risk is
ee
(a) A
(b) B
(c) C
(d) D
Ans:- d
D
Based on the data given above, business option with highest risk is
(a) A
(b) B
(c) C
(d) D
Ans:- a

Dec 2017
The standard deviation of the cash flows of the portfolio containing

all the business options is
(a) 1.75
da
(b) Around 0.30
(c) 7
(d) Can't be determined based on the data given
Ans:- d
Which of the following business lines include ‘Government debts’ activity of banks in terms of
Revised framework from BCBS
oo
(a) Asset Management
(b) Private Banking
(c) Corporate Finance
(d) None of These
Ans:- c
Concentration risk is a type of

(a) Liquidity Risk
(b) Operational Risk
(c) Market Risk
(d) Credit Risk
Ans:- d
H
ak
Market Risk in treasury can be controlled by ......
(a) Overnight open position limit
(b) Aggregate Gap Limit only
(d) a and b above
Ans:- d
p
Call risk is a type of

(a) Liquidity Risk
ee
(c) Market Risk

(d) Credit Risk
Ans:- a
Banking book exposures are

(a) Held until maturity and income is booked on accrual basis
D
(b) Held until maturity and income is booked as and when realized
(c) Held for a period and income is booked on accrual basis
(d) Held for a period and income is booked as and when realized
Ans:- a
Which of the following risks the banking book is NOT exposed to?

Dec 2017
1. liquidity
2. market
3. operational
4. Credit or default
da
5. interest
(a) only 1
(b) only 2
(c) only 3
(d) both 4 and 5
Ans:- b
oo
Zero- risk investment implies
(a) Investment in government securities
(b) Investment in zero coupon bonds
(c) Zero variation in cash flow from investment
(d) Investment in bank fixed deposit
Ans:- c
H
ak
(a) Higher the risk- higher would be risk premium
(b) Higher the risk- lower would be risk premium
(c) Lower the risk- higher would be risk premium
Ans:- a
Banks experience decrease in Embedded Option Risk

p
(a) Only when interest rates changes marginally

(b) Only when Interest rates move up
(c) Only when interest rates comes down
ee
(d) Only when Interest rates are volatile

Ans:- a
One of the essential differences between an OTC and an Exchange traded derivative is
(a) OTC derivatives are cheaper while Exchange traded derivatives are costly
(b) OTC derivatives are for customers while Exchange traded derivatives are for banks
D
(c) In OTC derivatives, counter party risk is prominent, whereas in exchange traded derivatives,
counter party risk is totally absent
(d) OTC derivatives are for hedging risks whereas Exchange traded derivatives are used for
speculation
Ans:- c

Dec 2017
Which of the following business lines include Debt Syndication activity of banks in terms of
Revised framework from BCB
(b) Private Banking
da
(d) None of These
Ans:- c
Asset side of the banking book generates ...... risk arising from defaults in payments of principal
and/or interest by the borrowers.
(a) default
oo
(b) Credit
(c) market
(d) both a and b
Ans:- d
Select the correct sentence.
H
(a) Banking book is exposed to market risk because it is open to market.
(b) Banking book is exposed to market risk because it is not open to market.
(c) Banking book is not exposed to market risk because it is open to market.
(d) Banking book is not exposed to market risk because it is not open to market.
Ans:- d
ak
Methods of assessment of Market risk are ...
1. Basis Point Value
2. Duration method
(a) Only 1
(b) Only 2
(c) Both 1 and 2
(d) None of these
Ans:- c
p
Risk mitigation results in ......

Reduction of downside potential
ee
Reduction in profit potential

Which of the following is true?
(a) All the statements are correct
(b) Statement 1 is correct
(c) Statement 2 is correct
(d) Both are incorrect
D
Ans:- a
A/An ________ is an agreement between a buyer and seller that a fixed amount of one currency
will be delivered at a specified rate for some other currency
(b) import/export exchange

Dec 2017
Ans:- c
da
A bank borrows USD for 03 months @ 2.5% and swaps the same in the INR for 03 months for
deployment in CPs @ 5.5%. The 03 Months premium on USD is 0.75% the margin generated by
the bank in the transaction is ......
(a) 3%
(b) 2.25%
(c) 5.5%
(d) Non of these
oo
Ans:- b
Under the financial guarantees, banks are required to file with ECGC, a notice of default within
...... months from the due date or ...... month(s) from the date of recall, and the claims are to be filed
within ...... months from the date of lodging default notice.
(a) 2, 3, 5
(b) 4, 1, 6
(c) 4, 2, 3
(d) 2, 4, 6
Ans:- b
H
For a majority of countries, the corporation places a limit for covering political risks, such
ak
countries are referred to as
(a) open cover countries
(b) closed cover countries
(c) restricted countries
(d) None of these
Ans:- a
Exim bank has been permitted by RBI to facilitate financing of medium term export bills through .
p
(a) factoring
(b) forfeiting
(c) both of these
ee
(d) none of these

Ans:- b
When the delivery under forex deal is completed on the 2nd working day following the date of
contract the rate is called
D
(a) TT Rate
(b) Bills Rate
(c) Forward Rate
(d) Spot rate
Ans:- d

Dec 2017
Forward Rate=Spot rate (+) ......(- ).....

(a) Discount, Commission
(b) Premium, Discount
da
(c) Premium, Commission
(d) Discount, Premium
Ans:- b
To grant extension of an export bill beyond 12 months from the date of export, the total export ......
oo
outstanding of the exporter should not be more than USD or __ % of the average of export
realizations during the preceding __ years, whichever is higher.
(a) USD 1.00 million, 5, 1
(b) USD 2.00 million, 5, 2
(c) USD 1.00 million, 10, 3
(d) USD 2.00 million, 10, 4
Ans:- c
H
Concessional rate of interest for post- shipment finance is allowed for __ days in case of demand
bills.
ak
(a) Rs. 40
(b) Rs. 50
(c) Rs. 60
(d) Rs. 70
(d) 10, financial
Ans:- d
In case of foreign currency bills, the effective date of realization of an export bill is the date of ......
p
in the banks's ...... account.

(a) debit, vostro
(b) debit, nostro
ee
(c) Credit, vostro

(d) Credit, nostro
Ans:- d
Buffer capital means...

(a) To take over other banks
D
(b) To cover total Credit and market risk

(c) To cover uncertainties related to the market
(d) None of these
Ans c
Which of the following is a category or element of the balance sheet?

Dec 2017
(a) Expenses
(b) Gains
(c) Liabilities
(d) Losses
da
Ans c
Which of the following is an asset account?

(a) Accounts Payable
(b) Prepaid Insurance
(c) Unearned Revenue
(d) All of these
oo
Ans b
A forward contract to deliver British pounds for U.S. dollars could be described either as ________
or ________
(a) buying dollars forward; buying pounds forward
(b) selling pounds forward; selling dollars forward
Ans:- c H
(c) selling pounds forward; buying dollars forward
(d) selling dollars forward; buying pounds forward
If Fixed interest rates are swapped with floating interest rates, it is called as ...... Swaps.
(a) Financial
ak
(b) Coupon
(c) Currency
(d) Interest
Ans:- b
Advance against export bill, when the shipment is already made, is called ......
(a) PCL
(b) PCFC
p
(c) PSEF
(d) EBRD
Ans:- c
ee
An irrevocable LC, inter alia, should be obtained if the amount of advance remittance (for import
of goods) exceeds USD ......
(a) 10000
(b) 20000
(c) 50000
D
(d) 100000
Ans:- d
Interest rate Risk can be reduced by ......

(a) Accepting Collaterals
(b) Entering into Forward Contracts

Dec 2017
(c) Derivatives of Interest Rate Swaps
(d) Diversification of Advances
Ans:- c
da
In reverse repo transaction, banks ____ from / to RBI.
(a) lend
(b) borrow
(c) do nothing
(d) none of these
Ans:- a
oo
A contract where the buyer has a right but no obligation to exercise the contract is known as ......
(a) forward contracts
(b) futures
(c) options
(d) swaps
Ans:- c
H
Which of the following cannot participate in auction of T- bills?
(a) individuals
ak
(b) banks
(c) financial institutions
(d) none of these
Ans:- d
An FCNR deposit received from NRI in US $ can be viewed by the bank as...
(a) Euro- rupee deposit
(b) Petro- dollar deposit
p
(c) Rupee- dollar deposit

(d) Euro- dollar deposit
Ans d
ee
Commercial papers are short- term debt market paper issued by _____, with a minimum maturity
of _____ and maximum maturity of ...... Select the best combination.
(a) commercial banks, 1 year, 10 years
(b) RBI, 6 months, 1 year
(c) Corporates, 7 days, 1 year
D
(d) financial institutions, 1 day, 14 days

Ans:- c
The balances in temporary foreign accounts (which are opened by participants in international
trade fairs / exhibitions) have to be repatriated to India within ...... month from the ...... of the
exhibition / trade fairs.

Dec 2017
(a) 1, opening
(b) 1, closing
(c) 3, opening
(d) 6, closing
da
Ans:- b
Purchase or sale of an asset or a currency, not for an end- use but only for resale or repurchase of
the same asset with a profit is known as ......
(a) leverage
(b) hedging
(c) speculation
oo
(d) carry
Ans:- c
Which of the following business lines include Securities lending activity of banks in terms of
Revised framework from BCBS
(b) Private Banking
(d) Agency Services
Ans:- d
H
Which of the following is external cost of currency?
ak
(a) interest rate
(b) exchange rate
(c) both of these
(d) none of these
Ans:- b
Which of the following components not issued by CCIL?

(a) Negotiated Dealing System (NDS)
p
(b) settlement of Forex transactions

(c) Collateralized Borrowing and Lending Obligation (CBLO), a money market product based on
Gilts as collaterals
ee
(d) All of these

Ans:- d
Reinvestment risk is a type of

(a) interest Rate Risk
D
(c) Market Risk

(d) Credit Risk
Ans:- a
The features of Interest Rate Risk are

(a) It is an exposure of Bank's financial condition to adverse movements in interest rates.

Dec 2017
(b) It has direct effect on Net Interest Margin.
(c) It may also affect the market value of Equity
(d) All these
Ans:- d
da
Reputation risk is a type of
(a) Operational Risk
(b) Market Risk
(c) Credit Risk
(d) None of these
Ans:- d
oo
Trading book exposures are
(a) Held until maturity and income is booked on accrual basis
(b) Held until maturity and income is booked as andwhen realized
(c) Held for a period and income is booked on accrual basis
(d) Held for a period and income is booked as and when realized
Ans:- d
H
Funding risk, time risk and call risk are the types of ...... risk.
(a) market
ak
(b) Credit
(c) liquidity
(d) operational
Ans:- c
An economist will define the exchange rate between two currencies as the
(a) Amount of one currency that must be paid in order to obtain one unit of another currency
(b) Difference between total exports and total imports within a country
p
(c) Price at which the sales and purchases of foreign goods takes place
(d) Ratio of import prices to export prices for a particular country
Ans:- a
ee
The Purchasing Power Parity should hold

(d) Always Ans - b
D
Strategic risk is a type of

(a) Operational Risk
(b) Market Risk
(c) Credit Risk
(d) None of these

Dec 2017
Ans:- d
Basis risk is a type of

(a) interest Rate Risk
da
(c) Market Risk
(d) Credit Risk
Ans:- a
In case of excess of assets over the liabilities, the dealer will have __________ position.
(a) Short
oo
(b) Long
(c) Top
(d) Down
Ans:- b
Find the odd man out :

(a) Futures
(b) Value at Risk (VAR) --
(c) Options
(d) Swaps
H
Sight bills drawn under import letters of Credit would be Crystallized on the ...... day after the day
of receipt if not yet paid
ak
(a) 10th
(b) 11th
(c) 15th
(d) 30th
Ans:- a
Next Five Questions are based on the following transaction.

A bank’s branch plans to extend a loan of Rs 1 Cr for a period of one year at a rate of interest 2%
p
over base rate, base rate being 9%. The loan is to be repaid in equal quarterly installments. Funding
of the loan is to be done by 5 years deposit, interest rate on it being 8%. The branch is analyzing
the risks associated with the transaction. In doing so they have not taken into account CRR/SLR
ee
requirements. The borrower is rated AAA, which has zero default probability over one year.
The branch may face liquidity problem over one year horizon because the transaction is associated
with
(a) Call risk
(b) Funding risk
D
(c) Time risk

(d) Embedded option risk
Ans:- d
The branch may see variation in its net interest income in one year because the transaction is
associated with

Dec 2017
(a) Gap risk
(b) Yield curve risk
(c) Basis risk
(d) Re-pricing risk
da
Ans:- d
The loan may get repaid within 4 months of disbursement. This would be
(a) Call risk
(b) Gap risk
(c) Embedded option risk
(d) Funding risk
oo
Ans:- c
Futures contracts can be settled ......

(a) Only by delivery.
(b) Only by cash- settlement.
(c) Either by delivery or cash settlement
(d) none of the above
Ans:- c
H
6 months after the transaction, interest rate in the market hardens and the borrowing cost goes up
by 2%. The bank also revises its base rate upwards by 1%. As a result the branch would be affected
ak
(a) Favorably
(b) Unfavorably
(c) Neither favorably nor unfavorably
(d) Can't be determined
Ans:- a
Nine months after the transaction the borrower's Credit rating is revised and it becomes AA . The
branch would term this as
p
(a) Default risk

(b) Down-gradation risk
(c) Counterparty risk
ee
(d) Market risk

Ans:- b
ECGC of India classifies the country into seven categories, in that B2 indicate...
(a) insignificant risk
(b) low risk
D
(c) moderately low risk

(d) Moderate risk
Ans
When price of underlying asset increases then best option is ......

(a) buy call option

Dec 2017
(b) sell call option
(c) buy put option
(d) sell put option
Ans:- a
da
A Government of India 10 year bond is held in AFS category. This is an exposure that may be
grouped under
(a) Banking book exposure
(b) Trading book exposure
(c) Off balance sheet exposure
(d) Contingent exposure
oo
Ans:- b
The banking book does not include

(a) advances
(b) borrowings
(c) equities
(d) all of these
Ans:- c
H
A letter of Credit issued by a bank tor Rs 10 Crs devolves and is paid by the bank. The resultant
exposure would not have
(a) Default risk
ak
(c) Liquidity risk
(d) Market risk
Ans:- d
Consider call option writing, probability that a buyer would have positive payoff increases with the
(a) increase in stock price
(b) decrease in stock price
p
(c) increase in maturity duration

(d) decrease in maturity duration
Ans:- b
ee
Another name for the balance sheet is

(a) Statement Of Operations
(b) Statement Of Financial Position
(c) both a & b
D
Ans b
In an LC transaction, following parties are not involved ......

(a) The exporter
(b) The issuing bank
(c) The advising bank

Dec 2017
(d) The opening banks representative office in beneficiary's country, who helps source business for
the issuing bank.
Ans:- d
da
The balance sheet heading will specify a
(a) Period Of Time
(b) Point In Time
(c) both a & b
Ans b
oo
A 9 month loan with interest linked to 91 days T-bill rate and reset date every alternate Monday is
an exposure that may be grouped under
(a) Banking book exposure
(b) Trading book exposure
(c) Off balance sheet exposure
(d) Contingent exposure
Ans:- a
H
Poor quality of compliance with regulatory requirements results in
(a) Reputation risk
(b) Strategic risk
ak
(d) None of these
Ans:- c
Option that can be exercised only at date of expiration is classified as ......

(a) European option
(b) Canadian option
(c) Australian option
p
(d) American option

Ans a
ee
A bank receives compensation from one of its suppliers for noncompliance with certain contractual
terms. The sum so received would
have the following risk
(a) Default risk
(b) Liquidity risk
(c) Operational
D
(d) None of these

Ans:- d
Futures related to exchange rates are known as ......

(b) bond futures

Dec 2017
(d) none of these
Ans:- a
da
Consider buying of put option, probability that a buyer would have negative payoff increases with
the
(a) increase in stock price
(b) decrease in stock price
(c) increase in maturity duration
(d) decrease in maturity duration
oo
Ans:- a
H
The following 5 Questions are based on the following transaction.
A bank borrows Rs 50 Cr from call money market on a daily basis to fund the following assets:
ak
(a) A 2 month loan for Rs 10 Cr to one AAA rated client (i.e. zero default probability over one
year) at a rate of interest 2.50% over call money rate to be reset on a daily basis.
(b) 5 years government of India bonds with YTM of 7.10% having market value of Rs 40 Cr, with
a plan to sell these bonds within 20 days.
The bank may face liquidity problem because the entire transaction is associated with
(a) Call risk
p
(b) Funding risk

(c) Time risk
(d) Default risk
ee
Ans:- b
The bank may see variation in its net interest income over O days in respect of asset ‘a' because the
transaction is associated with
(a) Gap risk
D

(d) Default risk
Ans:- a
There is a sudden rise in interest rates. The bank would

(a) Gain due to asset ‘a’

Dec 2017
(b) Suffer losses due to asset ‘a
(c) Gain due to asset ‘b’
(d) Suffer losses due to asset ‘b’
Ans:- d
da
The asset acquired under item ‘b’ above would have the following risk
(a) Yield curve risk
(b) Gap risk
(d) Market risk
Ans:- d
oo
The bond could not be sold within 10 days due to over sight and as a result the bank had to incur
loss. This loss would be the result of
(a) Market risk
(b) Operational risk
(c) Down-gradation risk
(d) Interest rate risk
Ans:- b
H
The following 5 Questions are based on the following transaction.
A bank raises a floating rate corporate deposit of Rs 50 Crs for 2 years at a rate 50 BPs over 91
ak
days T bill rates that gets re-priced at every calendar quarter. The proceeds of the deposit is used to
finance
(A) a project loan of Rs 25 Cr for a period of 5 years having moratorium of 2 years. interest rate is
set at 300 BPs over 5 year GOI bond with reset date at the end of each calendar year.
(B) The balance of Rs 25 Cr is invested in 5 year GOI bond with remaining period of 2 years
p
These transactions stood recorded in the books of the bank on 01.01.2010
The bank may face liquidity problem over one year because the entire transaction is associated
ee
with
(a) Call risk
(b) Funding risk
(c) Time risk -
(d) Default risk
Ans:- a
D
The bank may see variation in its net interest income over 1year in
respect of asset ‘a’ because the transaction is associated with
(a) Gap risk
(h) Yield curve risk
(c) Market risk

Dec 2017
(d) This is interest rate risk neutral transaction
Ans:- b
There is a sudden fall in interest rates. The bank would
da
(a) Gain on asset A and loose on asset B
(bi Gain on asset A and gain on asset B
(c) Loose on asset A and loose on asset B
(d) Loose on asset A and gain on asset B
Ans:- b
The asset acquired under item ‘B’ above would have the following risk
oo
(b) Gap risk
(e) Embedded option risk
(d) Market risk
Ans:- d
After 2 years the bank would face

(a) Market risk
H
ak
(c) Liquidity risk
(d) interest rate risk
Ans:- d
A bank has disbursed 6 months loan at a fixed rate of 11% out of funds raised through 6 month
CDs of same amount. The bank stands exposed to
(a) No risk
(b) Default risk and operational risk
p
(c) Operational risk and Ca Fisk

(d) Default risk, operational risk and embedded option risk
Ans:- d
ee
A bank funds its loans through composite liabilities. in a scenario where interest rate changes
across the board the bank immediately stands exposed to
(b) Basis risk
D

Ans:- b
Next 5 questions are based on the following transaction.

Dec 2017
A bank's branch plans to extend a project loan of f 100 Crs for a period of 7 years at a fixed rate of
interest of 15%. The loan is to be repaid in equal quarterly installments but with 2 year
moratorium. Funding of the loans to be done by composite liabilities, present cost of funds being
7%. The branch is analyzing the risks associated with the transaction. The borrower is rated AA,
da
which has negligible default probability over one year.
The type of interest rate risk the branch may face is

(b) Gap risk
(c) Basis risk
(d) ALL of these
oo
Ans:- c
The loan may be prepaid by the borrower if the interest rate falls resulting in fall in NII. This
would be called
(a) Call risk
(b) Gap risk
(d) Re-pricing risk
Ans:- c H
After 2 years the loan defaults. Ignoring changes in cost of funds, the branch‘s NII would fall by
(a) Rs 7 Cr
ak
(b) Rs 15 Cr
(c) Rs 8 Cr
(d) None of these
Ans:- b
6 months after the transaction, interest rate in the market hardens and the borrowing cost goes up
by 2%. The bank also revises its base rate upwards by 1%. As a result the branch would be affected
(a) Favorably
p
(b) Unfavorably
(c) Neither favorably nor unfavourably
(d) Can't be determined
ee
Ans:- b
One year after the transaction the borrower's Credit rating is revised and it becomes AA. The
branch would term this as
(a) Default risk
(b) Down gradation risk
D
(c) interest rate risk

(d) Counterparty risk
Ans:- b
NII earned by banks are exposed to

(3) Yield curve risk

Dec 2017
(b) Reinvestment risk
(c) Gap risk
(d) Basis risk
Ans:- b
da
The securities contracted basically on account of long term investment relationships or for steady
income and statutory obligations are classified under
(i) Held- To- Maturity,
(ii) Held for Trading
(a) Only (i)
(b) Only (ii)
oo
Ans:- a
classified under
(i) Held- To- Maturity,
H
The investments on the securities made to earn profits from the short- term price movements are
ak
(ii) Held for Trading
(a) Only (i)
(b) Only (ii)
Ans:- b
Held for Trading Securities are normally sold in ...... days.

p
(a) 30
(b) 60
(c) 90
ee
(d) 120
Ans:- c
A depositor may prefer cumulative fixed deposit scheme to fixed deposit scheme that pays interest
every quarter because
(a) it is tax beneficial
D
(b) it saves him time

(c) it gives him a good amount at the end of investment period
(d) It protects him from reinvestment risk
Ans:- d

Dec 2017
Which of the following may not be one of the goals of regulatory framework for banks in an
economy?
(a) Ensuring a level playing field for all the banks operating in the economy
(b) Ensuring that depositor’s interest is protected
da
(c) Ensuring that the banking system is free from possible systemic risk
(d) Ensuring that all banks earn sufficient surplus
Ans:- d
Systemic Risk may arise because of

(a) Market volatility
(b) Contagion effect
oo
(c) High fiscal deficit
(d) More than usual monetary growth
Ans:- b
H
The seller of goods shipped the goods on time but due to some mistake, the goods have been
delivered at some other destination. Such risk to the buyer is called ......
(a) Seller Risk
ak
(b) Buyer risk
(c) Market Risk
(d) Shipping Risk
Ans:- d
Deregulation in banking industry did not result in

(a) Allowing the banks to function freely without any restrictions
p
(b) Increased competition

(c) Globalisation
(d) improved efficiency in the functioning of banks
ee
Ans:- a
Herstatt Risk is
(a) Default in making payment by banks to its customers
(b) Default in making payment by a banks to another bank
(c) Risk of settlement between banks that may arise due to time difference
D
(d) Risk of losses that may be incurred by banks in forex trade

Ans:- c
Basel I guidelines classified assets for the purpose of Credit risk assessment in to
(a) 3 categories
(b) 4 categories

Dec 2017
(c) 5 categories
(d) 6 categories
Ans:- c
da
Pillar II Supervisory Review consists of ......
(a) Evaluate Risk Assessment
(c) Ensure maintenance of maximum capital with PCA for shortfall
(d) Prescribe differential Capital, where necessary i.e. where the internal process are slack.
Ans:- c
Pillar III Market Discipline consists of except ......
oo
(d) Timely at least semiannual disclosures
Ans:- c
(a) Tier- I
(b) Tier- II
H
Which is called as supplementary capital ?
ak
(c) Tier- III
(d) None of these
Ans:- b
(a) Internal Rating Based (IR(b)
(b) Export Credit Agency (EC(a)
p
(d) External Credit Assessment

Ans:- c
ee
On the basis of risk weightage, pick up the odd one.

(a) Under Standard Approach retail and SME exposures attract a uniform Risk weightage of 75%
(b) Lending fully secured by mortgage on residential property will have a Risk Weightage of 35%.
(c) The Loans secured by commercial property will have 100% Risk Weightage
(d) All the above
Ans:- d
D
The Market Risk positions that require Capital Charge are ......
(a) Interest rate related Instruments in Trading Book
(b) Equities in Trading Book
(c) Foreign Exchange open positions throughout the Bank.
(d) All the above

Dec 2017
Ans:- d
Zero risk is not having which of the following features?

(a) There will be no variation in net cash flow
da
(b) Return on investment would be higher
(c) low return on investment
(d) All the above
Ans:- b
Which is not one among the core promoters for CCIL ?

(a) State Bank of India (SBI)
oo
(b) Industrial Development Bank of India (IDBI)
(c) NABARD
(d) ICICI Ltd
Ans:- c
(a) JPY
(b) Indonesian Rupiah
H
Which one is not being quoted as per Units of foreign currency = INR?
ak
(c) GBP
(d) Kenyan Schilling
Ans:- c
In case of direct shipment of goods, the exporter is required to submit the export documents to the
bankers within ...... days.
(a) 07
(b) 21
p
(c) 14
(d) 30
Ans:- b
ee
The maximum time for realization of export bills (proceeds) is ...... months from the date of
shipment (not date of export).
(a) 1
(b) 3
(c) 6
D
(d) 12
Ans:- d
If an export bill remains unrealized (i.e., overdue bills) beyond 6 months from the date of export, it
should be reported to the RBI in ...... statement, on half yearly basis (June and December).
(a) ETX

Dec 2017
(b) XOS
(c) PP
(d) SDF
Ans:- b
da
The eligibility to open a DDA (Diamond Dollar Account) is a track record of ...... years and
average turnover of Rs ...... Cr.
(a) 2, 3
(b) 2, 5
(c) 3,2
(d) 3, 5
oo
Ans:- a
is restricted to which of the following:

H
As per Basel III the investment of a bank in the capital of a banking or financial or insurance entity
(i) 10% of capital funds (after deductions) of the investing bank,

(ii) 5% of the investee bank's equity capital,
ak
(iii) 30% of paid up capital and reserves of the bank or 30% of
paid up capital of the company, whichever is lower
Ans:- d
p
As per Basel 3 which of the following is an element of Common Equity Component of Tier 1
(1)common shares i.e. paid up equity capital
(2)stock surplus i.e. Share premium
ee
(3) statutory reserves

(4) capital reserves representing surplus arising out of sale of proceeds of assets (5)balance in profit
and loss account at the end of the previous year.
(a) 1 to 5 all
(b) 1 to 4 only
(c) 1 4 & 5 only
D
(d) 1 2 & 3 only

Ans:- a
Identify the Basel III norms from following that, recently RBI has extended the time line for
implementation for banks in India
(a) Minimum regulatory capital requirement

Dec 2017
(b) Market discipline
(c) Holding the minimum capital to risk weighted assets ratio to 10.25%
(d) All the above
Ans:- d
da
Risk of having to compensate for non- receipt of expected cash flows by a bank is called ......
(i) Time risk,
(ii) Credit risk
(a) Only (i)
(b) Only (ii)
oo
Ans:- a
1. market
2. liquidity
3. Credit or default
H
Off balance sheet exposures is not exposed to ...... risk.
ak
4. operational
5. interest
(a) only 1
(b) only 3
(c) both2 and4
(d) none of these
Ans:- d
p
Under Basel 3 the risk weight is ___% for capital charge for Credit risk on the basis of
standardized approach for claims included in regulatory retail portfolio
(a) 20%
ee
(b) 50%
(c) 75%
(d) 100%
Ans:- c
'Time risk' in the context of liquidity risk of an institution is not caused due to ......
D
(i) Systematic risk,

(ii) Swaps and options,
(iii) Temporary problems in recovery

Dec 2017
Ans:- a
Which of the following is not one of the 3 main pillars of Basel II ?
da
(a) Capital for market risks
(b) Supervisory review process
(d) Minimum capital requirements
Ans a
RBI implemented the Basel 3 recommendations in India, wef:
oo
(a) 01.01.2013
(b) 31.03.2013
(c) 01.04.2013
(d) 30.09.2012
Ans:- c
(a) 31.03.2018
(b) 31.03.2019
(c) December 2011
H
Basel 3Basel 3 recommendations shall be completely implemented in India by:
ak
(d) December 2012
Ans:- a
When a bank is unable to undertake profitable business opportunities when it arises, risk occurs.
(a) funding risk
(b) time risk
(c) call risk
(d) market
p
Ans:- c
Under Basel 3 the risk weight for capital charge for Credit risk on the basis of standardized
ee
approach is ____ % for staff loans other than secured by superannuation benefits or mortgage of
flats/house being eligible under regulatory retail portfolio
(a) 20%
(b) 50%
(c) 75%
(d) 100%
D
Ans:- c
Certain specific prescription of Basel 2 capital adequacy framework will continue to apply along
with Basel 3 till :
(a) 31.03.2019
(b) 31.03.2018

Dec 2017
(c) 31.03.2017
(d) 31.03.2016
Ans:- c
da
Which of the following is not covered under 'Market Discipline' pillar of Basel II ?
(a) Ensure maintenance of minimum capital - with PCA for shortfall
(b) Core disclosures
(c) Enhance Disclosure
(d) Supplementary disclosures
Ans a
oo
Crystallisation of contingent liabilities in a bank is called ......
(i) Call risk,
(ii) Credit risk
(a) Only (i)
(b) Only (ii)
Ans:- a
H
Under Basel 3 the risk weight for open foreign currency and open gold position is
(a) 50%
(b) 75%
ak
(c) 100%
(d) 125%
Ans:- c
The capital charge for open foreign exchange position and open gold positions under Basel 3 for
market risk is
(a) 6%
(b) 7%
p
(c) 8%
(d) 9%
Ans:- d
ee
Funding of long term assets by short term liabilities Creates ...... risk.
(a) market
(b) Credit
(c) liquidity
(d) interest
D
Ans:- c
The risk of settlement that arises due to time zone differences is known as
(a) Credit
(b) operational
(c) herstatt

Dec 2017
(d) reputation
Ans:- c
Capital charge for market risk for banks using proprietary model is
da
prescribed at
(a) Higher of previous day’s VAR or 3 times average daily VAR of the preceding 60 days
(b) Higher of previous day's VAR or average daily VAR of the preceding 60 days
(c) Higher of previous day’s VAR or 3 times average daily VAR of the preceding 90 days
(d) Lower of previous day's VAR or 3 times average daily VAR of the preceding 60 days
Ans:- a
oo
Basel I guidelines provided for 100% risk weight for all corporate exposures. This Created a scope
for
(a) Corporate dissatisfaction
(b) Regulatory arbitrage
(c) Encouraged banks to treat all corporate accounts uniformly
(d) Increased capital charge on Credit risk for all banks
Ans:- b
H
Banks of which countries were permitted an extended period to be in confirmation to 1988 Basel
Accord which were enforced a law by G- 10 countries in 1992?
(a) American
(b) England
ak
(c) Japan
(d) India
Ans:- c
Basel l guidelines did not allow risk mitigation on exposures secured by

(a) Deposits under lien
(b) Government securities
(c) Shares
p
(d) NSCs
Ans:- c
ee
Which of the following cannot participate in the call money market?

1. banks (including cooperative banks)
2. land development banks
3. primary dealers
4. financial institutions
5. mutual funds players
D
(a) 1, 3 and4
(b) 1, 2 and 3
(c) 2,3 and4
(d) 2, 4 and 5
Ans:- d

Dec 2017
According to 1988 Basel accord, banks were required to hold capital equal to ......% of the risk
weighted value of assets. This requirement is still the same according to Basel II accord
(a) 7
(b) 8
da
(c) 9
(d) 13
Ans:- b
What are the parameters on which assets of a bank are classified?

(a) counterparty
(b) collateral
oo
(c) maturity
(d) all of these
Ans:- d
(a) Basel I guidelines

(b) Basel II guidelines
(c) Basel I & Basel II guideline .
H
Interest rate risk in trading book stands accounted for under
ak
(d) it has been ignored by both the guidelines
Ans:- a
Liquidity risk, strategic risk and reputation risk has

(a) Been taken in to account in Basel II under its Pillar 1 guidelines
(b) Been taken in to account in Basel II under its Pillar 2 guidelines
(c) Been taken in to account in Basel II under its Pillar 3 guidelines
(d) Been ignored in Basel II guidelines
p
Ans:- b
Interest rates prevailing in the inter - bank market constitute benchmark rates because
ee
(a) it does not carry any risk at all.

(b) it carries a little risk (counterparty risk).
(c) it is floating
(d) none of these
Ans:- b
D
When a bank in India binds itself to honor the drafts drawn by the beneficiary of the LC without
recourse to it (i.e., the bank adds its confirmation to a foreign LC), this guarantee is known as ......
(a) packing Credit insurance
(b) export finance guarantee
(c) transfer guarantee
(d) exchange fluctuation risk cover scheme

Dec 2017
Ans:- c
Tier 2 is also known as ...... capital.

(a) core
da
(b) supplementary
(c) complementary
(d) none of these
Ans:- b
Basel II guidelines classified unimpaired corporate assets for the

purpose of Credit risk assessment in to
oo
(a) 3 categories
(b) 4 categories
(c) 5 categories
(d) 6 categories
Ans:- c
Short term funds flow have maturity ......H

(a) more than 6 months but less than 1 year
(b) less than 1 year
(c) more than 1 year but less than 2 years
ak
(d) none of these
Ans:- b
The salient feature of convertible bond is ......

(b) Option to convert the bond in to equity on a fixed date or during a fixed period and the price is
predetermined
p
(d) Absence of coupon

Ans:- b
ee
The exchange rates for forward sale or forward purchase are quoted ......
(a) today
(b) tomorrow
(c) third day from today
(d) none of these
Ans:- a
D
Failure of the whole banking system is known as ...... risk.

(a) strategic
(b) systemic
(c) bank
(d) operational

Dec 2017
Ans:- b
Tier 1 is also known as ...... capital.

(a) core
da
(b) supplementary
(c) complementary
(d) none of these
Ans:- a
When variation in market interest rate causes the NII to contract, the basis risk would move ...... the
banks.
oo
(a) against
(b) in favor of
(c) no effect
(d) none of these
Ans:- a
which of the following asset category?

(a) Retail exposures
(b) SME exposures
H
Basel II guidelines provides for risk weight based on external Credit assessment in respect of
ak
(c) Sovereign exposures
(d) Residential mortgage exposures
Ans:- c
Basic Criteria based on which Basel II guidelines provides for reduced risk weights for retail assets
is
(a) To encourage lending in the retail sector
(b) To reduce the cost of borrowing of retail sector
p
(c) That exposure on individual accounts is less

(d) That number of retail exposures is large and hence the exposure is diversified
Ans:- d
ee
AIRB approach for Credit risk does not allow banks to determine
(a) Maturity
(b) PD
(c) Risk weight function
(d) EAD
D
Ans:- c
Number of years of historical data required before banks may be allowed to estimate PD is
(a) Minimum 15 years
(b) Minimum 7 years
(c) Minimum 5 years

Dec 2017
(d) Minimum 3 years
Ans:- c
Number of years of historical data required before banks may be al-
da
lowed to estimate LGD is
(a) Minimum 15 years
(b) Minimum 7 years
(c) Minimum 5 years
(d) Minimum 3 years
Ans:- b
oo
Risk weight function for IRB approaches has following VARiable(s)
(a) PD
(b) EAD & LGD
(c) PD, LGD and EAD
(d) PD, LGD, EAD and Maturity
Ans:- d
H
Risk mitigation under Basel II guidelines for operational risk is
(a) Allowed under Basic indicator Approach
(b) Allowed under all the approaches provided for estimating operational risk
(c) Allowed under Advanced Management Approach
ak
(d) Basel II guidelines does not allow any risk mitigation for operational risk
Ans:- c
Please consider following statements:

1. Pillar 1 guidelines provide approach for determining minimum regulatory capital
2. Pillar 2 guidelines provide for risks that are not captured or not adequately captured
3. Pillar 1 and Pillar 2 guidelines attempt to align regulatory capital to economic capital
Which of the above statements is/are true
p
(a) 1 and 2
(b) 2 and 3
(c) 1 and 3
ee
(d) ALL of them

Ans:- d
Regulatory capital estimated under Basel II is likely to be more than

that estimated under Basel l because
1. Higher risk weight assigned for impaired assets
D
2. Inclusion of operational risk

3. Higher risk weight assigned for speculative assets
(a) 1 and 2
(b) 2 and 3
(c) 1 and 3
(d) ALL of them

Dec 2017
Ans:- d
Banks which have implemented Basel-II framework effective 31st

March, 2009, are required to maintain minimum capital to risk weighted ratio (CRAR) for the
da
financial year 2010 - 11
(a) Minimum capital at 9% of risk weighted assets calculated as per Basel-II framework or 7.2% of
risk weighted assets calculated based on Basel-I framework, whichever is more.
(b) Minimum capital at 9% of risk weighted assets calculated as per
Basel-II framework or 7.2% of risk weighted assets calculated based on Basel-l framework,
whichever is less.
oo
(c) Minimum capital at 9% of risk weighted assets calculated as per
whichever is less.
(d) Minimum capital at 9% of risk weighted assets calculated as per
whichever is less.
Ans:- a
(a) Strategic risk

(b) Compliance risk
(c) Specific risk for equities
H
Capital assessment under revised approach (Basel II Pillar 1) does not include capital for
ak
(d) Performance guarantees issued
Ans:- a
Capital assessment under revised approach (Basel II Pillar 1) includes capital for
(a) Liquidity risk
(b) Interest rate risk of banking book
p
(d) Business risks

Ans:- c
ee
Capital assessment under revised approach (Basel II- Pillar 1) does not include capital for
(a) Liquidity risk
(b) Retail assets
(d) Performance guarantees issued
Ans:- a
D
Revised Capital Accord or Basel II defines the capital requirement as

(a) Capital = Min Capital Ratio (8%) x (Credit Risk + Market Risk)
(b) Capital = Min Capital Ratio (9%) x (Credit Risk + Market Risk)
(c) Capital = M Capital Ratio (8%) X (Credit + Market+ operational risk)
(d) Capital = M Capital Ratio (9%) X (Credit + Market+ operational risk)

Dec 2017
Ans:- c
Basel 1 Accord of 1988 has defined capital requirement as

(a) Capital = Min Capital Ratio (8%) x (Credit Risk + Market Risk)
da
(b) Capital = Min Capital Ratio (9%) x (Credit Risk + Market Risk)
(c) Capital = M Capital Ratio (8%) X (Credit Risk)
(d) Capital = M Capital Ratio (9%) X (Credit Risk)
Ans:- c
oo
H
Next five questions are based on the following
A bank has compiled following data for computing its CRAR as on 30th Rs in Crs
ak
September 2010
Tier 1 Capital 2,500
RWAs for Credit risk other than retail assets 35,500
(including Rs 2,000 commercial real estate)
Exposure on retail assets 87,00
Total eligible financial collaterals available for retail assets 12,00
p
Capital charge for general market risk net position 450

ee
Total Capital charge for equities 150

Total Capital charge for options 70
Gross Income for the previous year 495
Gross Income for the year before previous year 450
Gross Income for 2nd year before previous year 390
D
The capital required (rounded off) for Credit risk at minimum required rate as per RBI is
(a) Rs 3,355 Cr
(b) Rs 4,385 Cr
(c) Rs 3,701 Cr

Dec 2017
(d) None of these
Ans:- c
Total risk weighted assets for market risk is
da
(a) Rs 7,156 Cr
(b) Rs 8,972 Cr
(c) Rs 9,553 Cr
(d) None of these
Ans:- d
Total risk weighted assets for operational risk is
oo
(a) Rs 4,944 Cr
(b) Rs 4,323 Cr
(c) Rs 5,121 Cr
(d) None of these
Ans:- a
(a) 9.35%
(b) 8.05%
(c) 10.22%
H
The CRAR of the bank as on 30th September 2010 is
ak
(d) None of these
Ans:- b
The bank compares its tier I CRAR with minimum required tier I CRAR and finds
(a) Its tier l CRAR is more and exceeds requirement by 675 Cr
(b) Its tier I CRAR is more and exceeds requirement by 355 Cr
(c) Its tier l CRAR falls short by Rs 854 Cr
(d) None of these
p
Ans:- c
ee
Next Five question are based on the following
A bank has compiled following data for computing its CRAR as on 30th Rs in Crs
September 2010
D

RWAs for Credit risk other than retail assets 95,500
(including Rs 2,000 commercial real estate)
Exposure on retail assets 15,800
Total eligible financial collaterals available for retail assets 3,500
Capital charge for general market risk net position 1,360

Dec 2017
Total Capital charge for equities 670
da
Total Capital charge for options 290
Gross Income for the previous year 980
Gross Income for the year before previous year 870
Gross Income for 2nd year before previous year 580
oo
The capital required (rounded off) for Credit risk at minimum required
(a) Rs 9,425 Cr
(b) Rs 9,350 Cr
(c) Rs 10,100 Cr
(d) None of these
Ans:- a
(b) Rs 31,167 Crs

(c) Rs 29,553 Crs
(d) None of these
H
Total risk weighted assets for market risk is
(a) Rs 37,156 Crs
ak
Ans:- b
Total risk weighted assets for operational risk is

(a) Rs 9,000 Cr
(b) Rs 9,323 Cr
(c) Rs 10,121 Cr
(d) None of these
p
Ans:- a
The CRAR of the bank as on 30‘ September 2010 is

(a) 9.35%
ee
(b) 8.05%
(c) 10.90%
(d) None of these
Ans:- c
Core portion of Cash Credit advances may be shown under ......

D
(a) 1- 3 year time bucket.

(b) over 3 year time bucket.
(c) Over 5 years time bucket.
(d) None of above.
Ans:- a

Dec 2017
1988 Capital Accord framework accounted for

1. Credit risk
2. Market Risk
da
3. Operational risk
4. Defined capital component
(a) All of them

(b) 1,2and4
oo
(c) 1,3 and4
(d) 1,2and3
Ans:- b
(a) 0.25%
(b) 0.50%
(c) 0.75
H
What is the Provision rate for Standard assets on Direct advances to Commercial Real Estate
(CRE) sector?
ak
(d) 1.0%
Ans d
The bank compares its tier l CRAR with minimum required tier l CRAR and finds _
(a) Its tier 1 CRAR is more and exceeds requirement by Rs 93.50 Crs
(b) its tier I CRAR is more and exceeds requirement by Rs 155 Crs
(c) its tier I CRAR falls short by 85 Crs
(d) None of these
p
Ans:- a
Next three questions is based on the table below

ee
Business lines Last three average income (Rs Crs)

Corporate Finance
Trading and Sales
Retail Banking
Commercial Banking
D
Payment and Settlement

Agency Services
Asset Management
Retail Brokerage
Total

Dec 2017
The capital required under Standardised Approach for operational risk is

(a) Rs 1,632.50 Crs
(b) Rs 1,687.50 Crs
da
(c) Rs 1,692.50 Crs
(d) None of these
Ans:- b
The Capital required under Basic Indicator Approach for operational risk is
(a) Rs 1,566 Crs
(b) Rs 1,534 Crs
oo
(C) Rs 1,578 Crs
(d) None of these
Ans:- a
(b) Trading and Sales

(c) Retail Banking
(d) Commercial Banking
H
Maximum variation in risk capital required is noticed in case of
(a) Corporate Finance
ak
Ans:- a
Allowable reduction in exposure backed by approved financial collateral depend upon

(a) Haircut applicable for exposure
(b) Haircut applicable for collateral
(d) Either (a) or (b)
Ans:- c
p
Back testing is done to

(a) Test a model
ee
(b) Compare model results and actual performance

(c) Record performance
Ans:- b
Which of the following would not be taken as a trading book exposure?

D
(a) GOI dated securities having defeasance period of two months

(b) Position in derivative for hedging banking book exposure
(c) Position in derivative for hedging trading book exposure
(d) Position in derivative for trading purpose
Ans:- b

Dec 2017
A considerable adverse deviation is noticed in the market price of a
stock from its fair value. This may be termed as
(a) Down-gradation risk
(b) Credit risk
da
(c) Asset liquidity risk
(d) Market liquidity risk
Ans:- c
Human error Creates ...... risk.

(a) Credit risk
oo
(c) Market risk
(d) System risk
Ans:- b
H
We may say that a market is highly liquid if
1. Market participants are able to liquidate positions at current market prices
2. Market price of assets are much higher than their fair value
3. Market participants are unable to liquidate positions at fair value
(a) 1 and 2
ak
(b) 3 only
(c) 2 only
(d) 1 only
Ans:- c
Counterparty risk in a derivative

1 Equals the mark to market value if it in favour of the holder
2. Equals the mark to market value if it is in favour of the counterparty
p
3. potiential future value of the derivative over its remaining life

(a) 1 and 3
(h) 2 only
ee
(c) 1 only
(d) 3 only
Ans:- a
RBI has introduced RTGS to eliminate

(a) Herstatt risk
D
(b) Settlement risk

(c) Counterparty risk
(d) Systemic risk
Ans:- b
Articulating interest rate view of the bank is the responsibility of

Dec 2017
(a) Board of directors
(b) Risk management committee of the Board
(c) ALCO '
(d) Mid-office
da
Ans:- c
Change in interest rates will not affect ......

(i) Net interest income,
(ii) Other income,
(iii) Staff expenses
oo
Ans:- c
H
A 5 year 9% semi-annual bond @ market yield of 7.50% has a price of Rs 106.16, which rises to
Rs 107.45 at a yield of 7.20%. What is the BPV of the bond?
(a) Rs 43 per Rs 1,000 of book value.
(b) Rs 4.30 per Rs 1,000 of book value.
ak
(c) Rs 0.43 per Rs 1,000 of book value.
(d) None of these
Ans:- a
A 8 year 9% semi-annual bond @ market yield of 7.20% has 5 years remaining for maturity.
McCauley's duration of the bond is 3.2 years. What is the approximate change in price if market
yield goes up to 7.50%?
(a) Price increases by 0.93%
p
(b) Price increases by 0.96%

(c) Price decreases by 0.93%
(d) Price decreases by 0.96%
ee
Ans:- c
A bank's treasury portfolio is worth t 9,500 Cr. Its 10 day VAR at 90% confidence level is ? 265
Cr. What is its weekly VAR at 90% confidence interval? (Assume 5 working days in a week)
(Assume 250 working days in a year)
(a) Rs 132.50 Cr
D
(b) Rs 187.41 Cr
(e) Rs 187.38 Cr
(d) None of these
Ans:- b
For the organization point of view treasury is considered to be ______

Dec 2017
(a) Investment centre
(b) Fund management department
(c) service centre
(c) commercial bank
da
Ans - c
A bank is holding a bond portfolio having a BPV of t 51,000 per Cr. The book value of the holding
is ? 9,780 Cr having present market value of Rs 10,543 Cr. Total face value of the holding is Rs
10,124 Cr. What would be the gain/loss on the holding if the portfolio yield increases by 12 basis
points?
(a) Loss of Rs 1265.16
oo
(b) Loss of Rs 1214.88
(c) Loss of Rs 612,000
(d) insufficient data
Ans:- c
(b) Prepaid Insurance

(c) Unearned Revenue
(d) All of these
H
Which of the following is an asset account?
(a) Accounts Payable
ak
Ans:- b
Operational Risk does not include:

(a) Movement in exchange rates
(b) Human errors
(c) Technical Faults
(d) Systemic failures
Ans:- a
p
Which of the following approach is proposed to be adopted in indi(a) Select wrong match
(a) Credit risk - standard approach
ee
(b) Operational basic indicator approach

(c) Market risk - standard duration approach
(d) None of these
Ans:- d
Cancellation of forward contacts is to be done at

D
(a) Opposite Bill rate

(b) Opposite Cash rate
(c) Opposite, TT rate
d)Opposite TC rate
Ans:- c

Dec 2017
Crystallization of export bills is to be done
(a) On the 10th day from the due date of the bills.
(b) Before the due date.
(c) On the 30th day from the notional due date / actual due date
da
(d) On the due date itself.
Ans:- c
Correspondent banking does not include

(a) Account Maintenance
(b) Opening of branch on behalf of a bank
oo
(c) Authentifying and advising of LCs
(d) Collection of cheques and bills.
Ans:- b
H
By definition, currency appreciation occurs when
(a) the value of all currencies fall relative to gold
(b) the value of all currencies rise relative to gold
(c) the value of one currency rises relative to another currency.
(d) the value of one currency falls relative to another currency.
ak
Ans:- c
Spot dealing in FX market means:

(a) Delivery of funds is on the 30th working day from the date of deal.
(b) Delivery of funds is on the second working day from the date of deal.
(c) Delivery of funds is next date from the date of deal.
(d) Delivery of funds is one week after the date of deal.
p
Ans:- b
If purchasing power parity were to hold even in the short run, then ......
ee
(a) real exchange rates should tend to decrease over time

(b) quoted nominal exchange rates should be stable over time
(c) real exchange rates should tend to increase over time
Ans:- d
D
Interest Rate Parity (IRP) implies that ......

(a) Interest rates should change by an equal amount but in the opposite direction to the difference
in inflation rates between two countries
(b) The difference in interest rates in different currencies for securities of similar risk and maturity
should be consistent with the forward rate discount or premium for the foreign currency (c) The
interest rates between two countries start in equilibrium, any change in the differential rate of

Dec 2017
inflation between the two countries tends to be offset over the long- term by an equal but opposite
change in the spot exchange rate
(d) In the long run real interest rate between two countries will be equal e) Nominal interest rates in
each country are equal to the required real rate plus compensation for expected inflation
da
Ans:- b
A forward currency transaction ......

(a) Is always at a premium over the spot rate
(b) Means that delivery and payment must be made within one business day (USA/Canada or two
business days after the transaction date
(c) Calls for exchange in the future of currencies at an agreed rate of exchange
oo
(d) Sets the future date when delivery of a currency must be made at an unknown spot exchange
rate
e) None of the above is correct
Ans:- c
H
If inflation is expected to be 5 per cent higher in the United Kingdom than in Switzerland ......
(a) purchasing power parity would predict that the UK spot rate should decline by about 5 per cent
(b) the theory of purchasing power parity would predict a drop in nominal interest rates in the
United Kingdom of approximately 5 per cent
(c) expectations theory would suggest that the spot exchange rates between the two countries
ak
should remain unchanged over the long run
(d) the efficient market hypothesis suggests that no predictions can be made under a system of
freely floating rates.
Ans:- a
The date of settlement for a foreign exchange transaction is referred to as (a) Clearing date
(b) Swap date
(c) Maturity date
p
(d) Value date

Ans:- d
ee
The difference between the value of a call option and a put option with the same exercise price is
due primarily to
(a) The greater liquidity of call options
(b) The use of continuous as opposed to discrete discounting
(c) The differential between the current stock price and the exercise price in present value terms
D
(d) The effect of dividends on the two securities

Ans:- c
The liquidity corridor that RBI uses to control short term interest rates is defined/dictated by ......
(a) Repo and reverse repo rates
(b) Call money market

Dec 2017
(c) Bank rate
(d) SLR and CRR
Ans:- a
.
da
RTGS has been fully activated by RBI from ....... Where the settlements are on ...... basis rather
than ...... day end settlement of cheques in clearing house.
(a) August 2003, net, gross
(b) October 2004, gross, net
(c) October 2004, net, gross
(d) August 2004, gross, net
Ans:- b
oo
The trading book does not include ......
(a) foreign exchange holdings
(b) fixed income securities
(c) deposits
(d) all of these
Ans:- c
(a) capital
(b) swaps
(c) futures
H
Which of the following is not an exposure to off- balance sheet?
ak
(d) options
Ans:- a
Forward rates fully reflect interest rate differentials only in ......

(a) controlled economies
(b) developing economies
(c) economies where interest rates are free
(d) in perfect markets where the currencies are fully convertible and the markets are highly liquid
p
Ans:- d
Which test is not applied in Stress Testing ?

ee
(a) Simple sensitivity test

(b) Scenario test
(c) Minimum loss
(d) Maximum loss
Ans:- c
D
If the strike price is more than the forward rate in case of a put option, the option is known to be (a)
ATM
(b) ITM
(c) OTM
(d) none of these

Dec 2017
Ans:- b
An exchange of cash flow is ......

da
(b) futures
(c) options
(d) swaps
Ans:- d
Swaps (IRS - Interest Rate Swap) which collapse at a knock- out level of market rates and swap
with builtin options are known as _____ swaps.
oo
(a) Quanto
(b) Coupon
(c) Swaptions
(d) Plain vanilla
Ans:- c
H
In a loan a/c, the balance outstanding is Rs. 5 lacs and a cover of 75% is available from CGTMSE.
The a/c has been doubtful since 01.10.2011 and the value of security held is Rs. 2 lacs. What will
be the total provision to be made for this account as on 31.03.2015?
(a) Rs. 500000
(b) Rs. 275000
(c) Rs. 225000
ak
(d) Rs. 75000
Ans:- b
If only currency is hedge(d) the type of currency swap would be ......

(c) P+ I Swap
p
(d) none of these

Ans:- a
ee
Which of the following components is exempted from DTL calculation?

(a) Foreign outward remittances in transit
(b) Net interbank borrowings / deposits with maturity not exceeding 14 days (call/notice money
liability)
(c) demand and time deposits
(d) overseas borrowings
D
Ans:- b
LAF (Liquid Adjustment Facility) is used to monitor ____ liquidity in the market.
(a) day- to- day
(b) weekly
(c) monthly

Dec 2017
(d) none of these
Ans:- a
The following institutions facilitate delivery vs. payment(DVP)for secondary market deals in
da
equity and debt paper
(a) IDRBT
(b) NDS
(c) NSDL and CSDL
(d) NEFT
Ans:- c
oo
(a) Time deposits
Ans:- c
(b) Treasury and Head office

(c) Front office and IT department
H
For ensuring effective risk control, RBI expects banks to facilitate functional segregation between
(a) Their Head office branches
(d) Front office, Mid office and back office

ak
Ans:- d
The most important and well pronounced risk in treasury is ......

(a) Credit risk
(b) Liquidity risk
(c) Market risk
Ans:- c
p
Forward premium / differential depends upon ......

(a) Currencies fluctuation
ee
(b) Interest rate differential between two countries

(c) Demand & supply of two currencies
(d) Stock market returns
Ans:- b
D
Interest rate swaps are usually possible because international financial markets in different
countries are
(a) Efficient
(b) Perfect
(c) Imperfect
(d) Botha& b

Dec 2017
Ans:- c
Hedging is used by companies to ......

(a) Decrease the variability of tax paid
da
(b) Decrease the spread between spot and forward market quotes
(c) Increase the variability of expected cash flows
(d) Decrease the variability of expected cash flows
e) Increase the variability of tax paid
Ans:- d
LORO account is:
oo
(a) My account with you,
(b) Mirror of a nostro account
(c) Your account with me
(d) His account with a third bank.
Ans:- d
(a) 6
(b) 12
(c) 15
(d) 18
H
In case of exports through approved Indian- owned warehouses abroad, the time limit for
realization in post shipment finance is ...... months.
ak
Ans:- c
Price volatility is degree of variance in price. This depends upon

(a) Yield volatility and market value
(b) Yield volatility, BPV and market value
(c) Yield volatility, market value and yield
(d) Yield volatility, market value, BPV and yield
Ans:- d
p
A 10 year 8% semi-annual bond having 6 years remaining maturity with market yield of 9.20% has
a price of I 94.56, which falls to Rs 94.34 at a yield of 9.25%. What is the BPV of the bond?
ee
(a) Rs 43 per Rs 1,000 of book value.

(b) Rs 4.30 per Rs 1,000 of book value.
(c) Rs 0.43 per Rs 1,000 of book value.
(d) None of these
Ans:- d
D
A 20 year 11% semi-annual bond @ market yield of 9.80% has 15 years remaining for maturity.
McCauley’s duration of the bond is 9.2 years. What is the approximate change in price if market
yield goes down by 1%’?
(c) Price decreases by 8.87%

Dec 2017
Ans:- b
SWIFT is a ......
da
(a) National messaging system
(b) System to transmit financial messages between banks globally
(c) National RTGS system of India
(d) System managed by a large corporate house in Belgium.
Ans:- b
oo
Say Mr. X purchases 2,000 shares of stock ‘A’ at I125 per share and 1,000 shares of stock ‘B’ at I
90 per share. The price is expected to fluctuate 2% daily for stock ‘A’ and 1.25% daily for stock B
(a) Rs 6,350
(b) Rs 3.000
(c) Rs 6.35
H
(daily volatility figure estimated from past data). He estimates daily potential loss to be Rs 6,350
approximately. The market factor sensitivity of the portfolio is
ak
(d) None of these
Ans:- b
A bond portfolio having a bond A (Market Value I 300 Crs and MD of 3.5 years) and bond B
(market value I 500 Cr and MD of 5 years). What is the BPV of the portfolio?
(a) Rs 44,375 per Cr
(b) Rs 4,437.50 per Cr
(c) Rs 44,375 per million
p
(d) Rs 4,437.50 per million

Ans:- c
ee
The components of broad money(M3) are

(a) Cash in circulation with the public
(b) Cash in currency chests with RBI and Banks
(c) Credit availed by Central Government from RBI
(d) Currency in circulation, demand and time deposits with banks and post office saving deposits
Ans:- b
D
Stress testing using Simple Sensitivity Test involves

(a) Assessing impact on a portfolio’s value for a series of predefined changes in a particular market
risk factor.
(b) Assessing potential consequences on a portfolio for an extreme, but possible, state of the world.

Dec 2017
(c) Assessing the risks of a portfolio by identifying the most potentially damaging combination of
moves of market risk factors.
(d) Assessing risks of a portfolio based on predefined values in a particular risk factor.
Ans:- d
da
Stress testing using Extreme value theory involves
(a) Assessing impact on a portfolio‘s value for a series of predefined changes in a particular market
risk factor.
oo
(d) Assessing risks of a portfolio based on predefined values in a particular risk factor.
Ans:- b
A 12 year 9% semi-annual bond having 6 years remaining maturity With market yield of 6.20%
(I) Rs I3 plr Rs 1,000 of book value.

(b) Rs 43 per Rs 1,000 of book value.
(0) Rs 8.30 par Rs 1,000 of book value.
(d) Rs 4.30 per Rs 1,000 of book value.
H
has a price of Rs 113.85, which falls to Rs Rs 132.32 a yield of 6.30%. What is the BPV of the
bond?
ak
Ans:- a
A bank's treasury portfolio is worth ? 9,500 Cr. its 10 day VAR at 90% confidence level is Rs 265
Cr. This implies that under normal circumstances its (Assume 250 working days in a year)
(a) Daily loss may not exceed Rs 83.80 Cr for 225 days in a year.
(b) Daily loss may exceed Rs 265 Cr for 25 days in a year.
(c) Daily loss may exceed Rs 83.80 Cr. For 20 days in a year.
(d) Daily loss may exceed Rs 26.50 Cr for 25 days in a year.
p
Ans:- a
Say Mr. X purchases 2,000 shares of stock ‘A’ at Rs 125 per share and 1,000 shares of stock ‘B’ at
ee
? 90 per share. The price is expected to fluctuate 2% daily for stock ‘A’ and 1.25% daily for stock
‘B’(daily volatility figure estimated from past data). He estimates daily potential loss to be Rs
6,350 approximately. What is the VAR of the portfolio at 99% confidence interval (corresponding
to 2.33 standard deviation)
(a) Rs 14,795.50
(b) Rs 6,350.00
D
(c) Rs 19,050.00
(d) None of these
Ans:- a
All the exchange rates quoted on the screen or in print are for mentioned unless otherwise

Dec 2017
Ans:- c
da
The buyer of the goods, opening an LC is also called an ......
(a) Applicant
(b) Beneficiary
(c) Creditor
(d) Drawer
Ans:- a
oo
RBI pays interest on the cash balances in excess of which of the following to bank, of their NDTL?
(a) 2%
(b) 3%
(c) 5%
(d) 6%
Ans:- b
H
ak
As per Basel III implementation in India, within total capital of 9%of risk weighted assets, the Tier
2 capital can be:
(a) max equal to Tier I capital
(b) min equal to Tier I capital
(c) max equal to 2% of risk weighted assets
(d) min equal to 2% of risk weighted assets
Ans:- c
p
ee

Ans:- d
A binding contract for purchase or sale at a future date is known as ...... contract.
(a) Future
D
(b) Swap
(c) Forward
(d) Legal
Ans:- c
Foreign Exchange Management Act (FEMA) is administered by ......

Dec 2017
(i) RBI, (ii) Govt. of India,
(iii) SEBI
da
Ans:- a
oo
When Nostro account of the bank is Credited later than the payment to the tenderer of foreign
exchange, which of the following rates will not be applied?
(i) TT Buying Rate,
(ii) Bills Buying Rate,
H
ak
Ans:- b
Given the following,

Probability of occurrence = 4,
Potential financial impact = 4,
Impact of internal controls = 0%.
p
What is the estimated level of operational risk?

(a) 3
(b) 2
ee
(c) 0
(d) 4
Ans d
Capital charge for Credit risk requires input for PD, LGD, HAD and M. Under advanced IRB
approach, who provide the input for LG(d)
D
(a) Bank
(b) Supervisor
(c) Function provided by BCBS
Ans:- a

Dec 2017
A 10 year 8.75% bond with semi-annual interest yielding 8% has 7 years remaining for maturity.
Modified duration of the bond is 6.40 years. This would be equivalent to receiving by way of bullet
payment
(a) Rs 156.00 per bond after 2336 days
da
(b) Rs 161.25 per bond after 2246 days
(c) Rs 156.00 per bond after 2246 days
(d) Rs 161.25 per bond after 2336 days
Ans:- b
The risk arises due to Crystallization of contingent liabilities.

(a) funding risk
oo
(b) time risk
(c) call risk
(d) gap or mismatch risk
Ans:- c
From the operational risk management point of view banking business lines have been grouped in
how many major heads?
(a) 4
(b) 3
(c) 5
(d) 2
Ans:- b
H
ak
As per the Reserve Bank of India in the draft guidelines for implementation of the new capital
adequacy framework has modified the Gross Income definition slightly. The Net Interest Income
has been replaced by
(a) Net Profit
(b) Operating Profit
(c) No Changes made
(d) Interest Expended
p
Ans:- a
Which of following documents does not contains Zero risk ?

ee
(a) Investments in shares

(b) Investment in bonds and debentures
(c) Investment in term deposit
(d) Investment in government bonds
Ans:- a
D
Identify which of the following sentences is incorrect.

(a) Funding liquidity risk arises due to asset-liability mismatch.
(b) Asset liquidation risk refers to a situation where a specific asset
faces lack of trading liquidity.
(c) Market liquidation risk refers to a situation where the market
faces lack of trading liquidity.

Dec 2017
(d) Liquidation risk and liquidity risk are same.
Ans:- d
Capital charge computation is a function of the following parameters. In other words, the IRB
da
calculation of risk weighted assets for exposures to sovereigns, banks or corporate entities relies on
the following parameters:
PD (Probability of Default)
LGD (Loss Given the Default)
EAD (Exposure at Default)
M (Maturity)
(a) 1 and 2
oo
(b) 1, 2 and 3
(c) all of these
(d) none of these
Ans c
Which of the followings is not a mismatch Risk?
H
(a) Holding Assets and Liabilities with different maturity dates and amount
(b) Adverse movement in Interest Rate
(c) When liability is reprised on a maturity date and this causes variation in the Interest Rate
(d) All the above
Ans:- b
ak
identity which of the following sentences is incorrect.
(a) When rating of a bond is lowered, its price declines.
(b) When rating of a bond is lowered, its price increases.
(c) When rating of a bond is upgraded, its price declines.
(d) Unless rating of a bond changes, there is no change in its price.
Ans:- a
A 10 year 7% semi-annual bond @ market yield of 8% has a price of Rs 97.80, which rises to Rs
p
98.60 at a yield of 7.92%. What is the BPV of the bond?

(a) Rs 10000 per million of book value.
(b) Rs 10000 per million of face value.
ee
(c) Rs 10000 per million of market value

(d) Rs 1000 per million of face value.
Ans:- d
A seven years 7.50% bond with semi-annual interest yielding 8% has

5 years remaining for maturity. McCauley’s duration of the bond is 3.9 years. What is the
D
approximate change in price if market yield goes down to 7.90%?

(c) Price increases by 0.406%
Ans:- b

Dec 2017
A bank having 10 day VAR of Rs 100 million with 99% confidence interval. This implies that
under normal circumstances its (Assume 260 working days in a year)
(a) Daily loss may exceed Rs 31.65 million 3 days in a year.
da
(b) Daily loss may exceed Rs 100 million 3 days in a year.
(c) Daily loss may exceed Rs 31.65 million 2 days in a year.
(d) Daily loss may exceed Rs 100 million 2 days in a year.
Ans:- a
Stress testing involves

(a) Identification of market parameters
oo
(b) Stress quantum
(c) Determining time horizon
(d) ALL of these
Ans:- d
Say Mr. X takes a position in stock ‘A’ and teIIs his Boss that he purchased 1,000 shares of stock
‘A’ at Rs 650 per share. The price is expected to fluctuate 3% daily (daily volatility figure
(a) Rs 19,500
(b) Rs 6,500
(c) Rs 42,500
H
estimated from past data). He estimates daily potential loss to be ? 42,500 approximately. The
market factor sensitivity is
ak
(d) Rs 6,50,000
Ans:- b
Identify which of the following sentences is correct.

(a) Adverse deviations of prices are lower in poor liquidity environment
(b) Adverse deviations of prices are higher in poor liquidity environment.
(c) Adverse deviations of prices are higher when liquidity environment is good.
(d) Adverse deviations of prices are independent of liquidity environment.
p
Ans:- b
ee
A derivative position may result in Credit risk exposure, which is estimated based on:
(a) Its current liquidation value.
(b) Potential upward deviations of liquidation value from the current value during the life of the
instruments.
(c) Both, i.e. (a) plus (b)
(d) A derivative position results in market risk exposure and not Credit risk exposure.
D
Ans:- c
A bank is holding a bond having a BPV of i‘ 500 per million. The book value of the holding is ?
9.78 million having present market value of Rs 10.12 million. Total face value of the holding is Rs
10 million. What would be the gain/loss on the holding if market yield on the bond increases by 3
basis points?

Dec 2017
(a) Gain of Rs 14,670
(b) Gain of Rs 15,000
(c) Gain of Rs 15.180
(d) Loss of Rs 14,670
da
Ans:- b
A seven year 7.50% bond with semi-annual interest yielding 8% has 5 years remaining for
maturity. Modified duration of the bond is 3.75 years. This would be equivalent to receiving by
way of bullet payment
(a) Rs 137.50 per bond after 3.9 years.
(b) Rs 152.50 per bond after 3.9 years.
oo
(c) Rs 137.50 per bond after 3.75 years.
(d) Rs 152.50 per bond after 3.75 years.
Ans:- a
Yield volatility is degree of variance in yield. This depends upon

(a) Time
(b) Duration
(c) Both, time and duration
H
(d) It does not depend upon time or duration
Ans:- b
Stress testing using Scenario Analysis involves

(a) Assessing impact on a portfolio‘s value for a series of predefined changes in a particular market
ak
risk factor.
(d) Assessing risks of a portfolio based on the statistical behavior of the tails of probability
distributions.
Ans:- b
p
Which of the following risks is also known as price risk?

(a) market
ee
(b) liquidity
(c) Credit
(d) country
Ans:- a
Say Mr. X takes a position in stock ‘A’ by purchasing 1,000 shares at Rs 650 per share. The price
D
is expected to fluctuate 3% daily (daily volatility figure estimated from past data). He estimates
daily potential loss to be Rs 42,500 approximately. He intends to reduce the risk by 60% using
stock futures. His strategy would be to
(a) Buy 600 stock futures
(b) Sell 600 stock futures
(c) Buy 400 stock futures

Dec 2017
(d) Sell 400 stock futures
Ans:- b
Risk mitigation of a market portfolio may be achieved by
da
(a) Reducing the size of the portfolio
(b) Enhancing the portfolio size
(c) Adding new investments having positive correlation with the portfolio
(d) Adding new investments having negative correlation with the portfolio
Ans:- d
oo
A 5 year 9% semi-annual bond @ market yield of 7.50% with present market price of Rs 107 is
sought to be hedged using IRS. You would take
(a) A short position on variable interest rate
(d) None of these

Ans:- b
H
(b) A long position on variable interest rate
(c) A long position on fixed interest rate
You are holding 1000 stocks of a company, present market price being Rs 250 per share. You may
ak
like to use option to hedge the stock from price risk. You would take a position
(a) Long on call option
(b) Long on put option
(c) Short on put option
(d) None of these
Ans:- b
Two stocks A and B have negative correlation of 80% between them. The portfolio consists of 100
p
units of stock A (market price ? 100) and 200 units of stock B (market price ? 200). If price of
stock A moves up by 10%, what would be gain/loss on the portfolio?
(a) Gain Rs 4,200 '
ee
(b) Loss Rs 2,200

(c) Loss Rs 600
(d) None of these
Ans:- b
You are holding 2000 units of stock A and you expect that stock price may fall. You would like to
D
hedge 70% of your exposure using the stock future. You would
(a) Go long on 2000 stock futures
(b) Go long on 1800 stock futures
(c) Go long on 1400 stock futures
(d) Go short on 1400 stock futures
Ans:- d

Dec 2017
Which of the following may be called transaction risk

(a) Default risk and intrinsic risk
(b) Credit spread risk and concentration risk
da
(c) Concentration risk and systematic risk
(d) Default risk and Credit spread risk
Ans:- d
The risk that is generally viewed as a transient financial risk associated with trading rather than as
standard Credit risk?
(a) Default risk
oo
(b) Intrinsic risk
(d) Counterparty risk--
Which is not an approach to measure Credit Risk
(a) Basic Indicator Approach
(b) Standardized approach
(c) IRB (IRB Foundation approach)
(d) IRB (IRB Advanced approach
Ans - a
Components of portfolio risk are

H
ak
(b) Down-gradation and concentration risk
(d) Default risk and down-gradation risk
Ans:- c
Intrinsic risk is
(a) Associated with Credit portfolio
(b) Associated with each Credit transaction
p
(c) Associated with the economy

(d) None of these
Ans:- c
ee
Country risk is a type of

(a) Concentration risk
(b) Counterparty risk
(c) Default risk
(d) Systematic risk
D
Ans:- c
Basically Credit rating helps us in

(a) Credit risk identification
(bl Credit risk measurement
(c) Credit risk monitoring

Dec 2017
(d) Credit risk control
Ans:- b
Credit rating together with their respective default probabilities help us to estimate
da
(a) Expected losses
(b) Unexpected losses
Ans:- c
oo
(a) their head office branches
(b) treasury and head office
(c) front office and IT department
Ans - d
Credit rating models seek to

H
(c) front office, mid office and back office
(a) Differentiate borrowers based on their financial strength

ak
(b) Differentiate borrowers based on their past performance
(c) Differentiate borrowers’ Credit worthiness
(d) Differentiate borrowers based on degree of stability in revenue generation
Ans:- d
Test of the quality of a rating model is assessed based on whether

1. Rating model takes in to account all relevant risk factors
2. Rating given on accounts match rating given by other market players such as rating agencies
p
3. Rating migration developed based on the model maps fairly well with market standards
Which of the following is correct?
(a) 1, 2 and 3
ee
(b) 2 and 3
(c) 1 and 2
(d) 1 and 3
Ans:- d
What type of risk conceptualizes in a condition when you are leading a big branch with thousands
D
of customers? The systems (connectivity) have been down for past 2 days?
(a) operational Risk
(b) Market Risk
(c) Capital Risk
(d) Strategic Risk
Ans:- b

Dec 2017
A bank has issued a guarantee to BSNL stating that Mr Ashish Mittal will complete his work in 2
years at the site. What type of guarantee the bank has given ......
(a) Time Guarantee
da
(b) Financial Guarantee
(c) Performance Guarantee
(d) Quality Guarantee
Ans:- c
oo
A debtor makes default in repayment of a bank loan and which type of risk is this for a lending
bank?
(a) Liquidity risk
(d) Credit risk
Ans:- d H
Your client requests issuance of a Credit requiring shipment from the seller's warehouse in Hong
Kong to their warehouse in China Documents required by the applicant are
ak
a) Signed tax invoice in 3 originals and
b) Dispatch note in 2 fold
Which of the following Incoterms best suit this type of Credit?
(a) DDP
(b) EXW
(c) FCA
(d) CIP
Ans:- b
p
A rating model that is based on actuarial calculation of expected and

l unexpected losses from default is known as:
ee
(a) Altman's Z Score model

(b) Credit Metrics model
(c) Credit Risk+ model
(d) None of these
Ans:- c
D
Following five questions are based on the relevant details of a Bank’s Credit portfolio, which is
given below:

Dec 2017
Asset Category Default Probability LGD EAD Exposure (Rs Crs)
A 0% 50% 70% Rs 1,500
B 1% 50% 80% Rs 3,500
C 2% 60% 90% Rs 7,000
da
D 3% 60% 100% Rs 4,500
E 5% 70% 110% Rs 1,600
Total Exposure Rs 18,100
NPAs at the beginning of Rs 450
the year
NPAs adjusted in the year Rs 220
oo
440. What is expected incremental NPAs of the bank
(a) Rs 377 Cr
(b) Rs 390 Cr
(c) Rs 238.50 Cr
(d) None of these
Ans:- a
H
What is expected loss on account of incremental NPAs of the bank
(a) Rs 238.50 Cr
(b) Rs 232.20 Cr
ak
(c) Rs 235.35 Cr
(d) None of these
Ans:- b
What is the level of NPAs at the end of the year

(a) Rs 620.00 Cr
(b) Rs 468.51 Cr
p
(c) Rs 607 Cr
(d) None of these
Ans:- c
ee
GNPA of the bank at the end of the year

(a) 3.52%
(b) 3.33%
(c) 3.29%
(d) None of these
Ans:- c
D
Portfolio default rate is

(a) 2.08%
(b) 2.33%
(a) 3.29%

Dec 2017
(b) None of these
Ans:- a
da
oo
A branch of the said bank has the following Rating wise distribution of number of accounts (other
than NPAs) at the beginning of financial year
One Year rating (Average based on 5 years data)

Migration
Rating
AAA
AA
A
BBB
AAA AA A
95
0
1
3
96
0
1
1
1
88
2
H BBB
1
1
3
84
BB
0
1
3
6
B
0
1
3
3
C
0
0
1
2
Default
0
0
1
2
Total
100
100
100
100
ak
BB 1 3 78 10 5 3 100
B 1 1 70 21 7 100
C 1 3 20 66 10 100
Total 96 100 93 94 92 107 95 23 700
Rating wise distribution of number of accounts (other than NPAs)
at the beginning of Financial year
Rating AAA AA A BBB BB B C Total
p
No of Accounts 60 40 88 223 53 20 16 500
No of accounts likely to default in one year (Nearest to whole number)

(a) 8
ee
(b) 9
(c) 10
(d) 11
Ans:- c
No of AA rated accounts expected at the end of the year (Nearest to whole number)
D
(a) 40
(b) 42
(c) 44
(d) 46
Ans:- b

Dec 2017
No of BBB rated accounts expected at the end the year

(a) 201
(b) 199
da
(c) 193
(d) None of these
Ans:- c
oo
In case banks have surplus liquidity, i.e., funds in excess of demand in the money market, they can
_____ securities from / to RBI in exchange of cash deposit.
(a) buy
(b) sell
(c) do nothing with it
(d) none of these
Ans:- a
H
CBLO is a ...... market instrument issued by ......
(a) foreign exchange, RBI
(b) money, CCIL
ak
(c) securities, GOI
(d) domestic SEBI
Ans:- b
Infusion of liquidity, by RBI, is done through _____ from / to banks under a _____ transaction.
(a) borrowing, repo
(b) borrowing, reverse repo
p
(c) lending, repo

(d) lending, reverse repo
Ans:- c
ee
.
The deal size limit restrict the ...... risk on large deals.
(a) legal
(b) operational
(c) Credit
D
(d) liquidity
Ans:- b
When the strike price is below the spot price for the put option, the option is ......
(a) at the money
(b) out of money

Dec 2017
(c) in the money
Ans b
da
The bank plans to add 100 accounts in the current financial year. How many BBB rated accounts it
must have so that such accounts constitute 32% of the portfolio? (ignore fractions)
(a) Reduce 5 accounts
(b) Add 15 accounts
(c) Reduce 1 account
(d) Add 3 accounts
oo
Ans:- c
No of likely standard accounts at the end of the year (ignore fractions)

(a) 496
(b) 495
(c) 490
(d) 493
Ans:- c
H
In the context of Credit appraisal process ‘Grid’ means
(a) Multi-tier Credit approving system
(b) A committee set up for the purpose of approving Credit
ak
(c) The network of MIS that supports Credit sanction process
(d) None of these
Ans:- b
Prudential limit on Single Credit Exposure serves the purpose of

(a) Keeping a limit on the default loss per account
(b) Reducing concentration risk
(c) Reducing systematic risk
p
(d) Avoiding concentration of resources in fewer hands

Ans:- b
ee
Default probability impacts Credit spread over cost of funds through

1. Cost of capital
2. Expected losses on the asset
3. Transaction cost in handling the asset
Which of the following is true
(a) 1 only
D
(b) 1 am 2
(c) 2 only
(d) 1,2 and 3
Ans:- b
Information on Credit portfolio rating distribution helps

Dec 2017
(a) In identification of Credit weaknesses in advance
(b) Estimating possible defaults
(c) Estimating provisioning requirement
(d) ALL of these
da
Ans:- d
Active Credit portfolio management involves

(a) Continuous monitoring of portfolio constituents
(b) Managing Credit portfolio for low defaults
(c) Managing Credit portfolio for higher returns
(d) managing Credit portfolio to keep up with the dynamics of the economy
oo
Ans:- d
Loan review mechanism is designed.

1. To identify incipient deterioration in portfolio quality
2. To provide feedback on effectiveness of Credit sanction processes
3. To report on adherence to internal policies/procedures _ '
(a) 1 and 2
(b) 2 and 3
(c) 1 and 3
(d) 1,2 and 3
Ans:- d
H
ak
Loan reviews of high value accounts are usually carried out
(a) Before sanction of Credit
(b) Within one year of sanction
(c) Within three months of the sanction
(d) Within six months of sanction
Ans:- c
p
Which of the following statements is not true?

(a) Portfolio diversification results in risk mitigation
(b) Asset securitization is used for risk mitigation
ee
(c) Credit derivatives are used to transfer risks and in mitigating risk
(d) Collateralisation of debts results in risk mitigation
Ans:- b
The value of a derivative is determined by ......

D
(c) In OTC derivatives, counter party risk is prominent, whereas in Exchange traded derivatives,
counter
party risk is totally absent

Dec 2017
(c) OTC derivatives are for hedging risks, whereas Exchange traded derivatives are used for
speculation
Ans - c
da
The type of swaps in which the fixed payments of interest are exchanged by two counter parties for
floating payments of interest are called
(a) float- fixed swaps
(b) interest rate swaps
(c) indexed swaps
(d) counter party swaps
Ans:- b
oo
The markets in which the derivatives are traded are classified as ......
(a) assets backed market
(b) cash flow backed markets
(c) mortgage backed markets
(d) derivative securities markets
Ans:- d
H
Credit derivatives are used in managing Credit portfolio
(a) For mitigating risks in the portfolio
(b) For portfolio diversification
ak
(c) For developing a portfolio with desired characteristics
(d) ALL of these
Ans:- d
The value of a derivative is determined by ......

(a) The value of the underlying
(b) Notional principal amount
(c) FIMMDA
p
(d) FEDAI
Ans:- a
ee
FEDAI rules provide that in case of unpaid usance bills, the period of Crystalization is ......th day
after the ...... at the prevailing ...... rate.
(a) 21, NTP, TT buying
(b) 30, NTP, TT selling
(c) 30, NTP, TT buying
(d) 30, NDD, TT selling
D
Ans:- d
A 12 yr 9% semi- annual bond having 6 years remaining maturity with market yield of 6.20% has a
price of Rs 113.85, which falls to Rs 113.32 at a yield of 6.30%. What is the BPV of the bond?
(a) 5.10
(b) 5.20

Dec 2017
(c) 5.30
(d) 5.40
Ans c
da
Central Bank Governors of G- 10 countries participate in the Basel Committee on Banking
Supervision. Total number of members is:
(a) 10
(b) 11
(c) 12
(d) 13
Ans:- d
oo
A bank, to manage its Credit portfolio
(A) Transfers ownership of a part of its special purpose vehicle which in turn issues financial
securities with the responsibility to service interest and repayments. The SPV paid the value for the
part of the portfolio transferred to the bank and would enjoy the cash flow arising from the pool.
H
Operational management of the pool remained with the bank.
(B) Transfers ownership of another part of its portfolio to four commercial banks and these banks
paid the value for the part of the portfolio transferred to the bank and would enjoy the cash flow
arising from the pool. Operational management of the pool remained with the bank.
Please identify which of the following is correct:

ak
(a) (A) is a securitization transaction
(b) (B) is a securitization transaction
(c) (A) and (B) both are securitization transactions
(d) (A) and (B) both are not securitization transaction
Ans:- a
For foreign currency export bills, the NTP allowed is ...... days at present.
(a) 21
p
(b) 25
(c) 28
(d) 30
ee
Ans:- b
Market risk in treasury can be controlled by ......

(a) Overnight limit alone
(b) Gap limit only
D
(d) Both a and b

Ans:- d
Quantitative disclosures in respect of capital requirements for market risk in trading book not
include?
(a) Foreign Exchange Risk

Dec 2017
(c) Securitization exposures
(d) Equity position Risk
Ans:- c
da
YTM of a bond depends upon ......
(a) Coupon rate and market value only
(b) Market value and residual maturity only
(c) Residual maturity and coupon rate only
(d) Coupon rate market value and residual maturity
Ans:- b
oo
(d) Sell put option
Ans:- d
i. stock approach
ii. Slandered approached
iii. Flow approach
H
Which approaches are used for measuring and managing funding requirement?
ak
iv. Quantitative approach
(a) i) and iii) only
(b) ii) and iv) only
(c) ii) and iii) only
(d) i) and iv) only
Ans:- a
Export packing Credit is normally computed on the basis of

p
(a) FOB value of Export

(b) CIF value of export
(c) CFR value of export
ee
(d) C & I value of export

Ans:- a
A bank in Mumbai quotes a FRA on 10th March 6*9 FRA at MIBOR 5.15- 5.25. What is the
settlement date maturity date of the FRA (June 2016)
(a) 10th Dec : 10th Dec
D
(b) 10th Sep : 10th Dec

(c) 10Th Sep : 10th Sep
(d) 10th Dec : 10th Sep
Ans:- b
A bank identifies 4 assets (a, b, c and d) with a view to add them to

Dec 2017
its portfolio for reducing portfolio risk. it has to choose one of them.
Which of the following Criteria would be most relevant for the purpose’?
(a) Risk capital required for each assets
(b) Return on risk capital vis-a-vis that for the portfolio
da
(c) Correlation of assets with the portfolio
(d) income earned on assets
Ans:- c
oo
A 10 year 7% semi- annual bond @market yield of 8% has a price of Rs.97.80, which rises to
98.60 at yield of 7.92 %, what is the BPV of the bond ?
(a) 10
(b) 12
(c) 14
(d) 16
Ans a
H
As per Basel III, the value of revaluation reserve is to be taken at ...... % discount to include in Tier
2 capital
(a) 60%
ak
(b) 55%
(c) 50%
(d) 45%
Ans:- b
Which of these gives a right to the holder to buy an underlying product (currency / bonds /
commodities) at a prefixed rate on a specified future date.
(a) call option
p
(b) put option

(c) either of these
(d) both of these
ee
Ans:- a
Which among the following is the key factor (most reliable tool) in investment decision?
(a) Return on equity
(b) RAROC (Risk Adjusted Return On Capital)
D
(c) Risk pricing

(d) None of these
Ans:- b
The prefixed rate on which the call options or put options are executed is known as ......

Dec 2017
(a) spot
(b) cost price
(c) strike price
(d) none of these
da
Ans:- c
The higher the risk, the higher would be ......

(a) return expectation
(b) capital requirement
(c) both a and b
(d) none of these
oo
Ans:- b
If the strike price is less than the forward rate in case of a call option, the option is known to be ......
(a) ATM
(b) ITM
(c) OTM
(d) none of these
Ans:- b
(a) LIBOR
(b) MIBOR
(c) Fed Rate
H
The benchmark rates for overnight lending for USD are generally ......
ak
(d) MIFOR
Ans:- c
calls for shipment of 200 tonnes of good quality wheat cultivated in Punja(b) By default, whether
the provisions of UCP 600 apply to this Credit?
(a) Yes, UCP 600 applies to this Credit
(b) No, UCP 600 does not apply
p
(c) Only certain articles of UCP 600 apply to the Credit

(d) Yes, UCP 600 applies with permission from ICC
Ans:- b
ee
When the strike price is above the spot price for the put option, the option is ......
(a) at the money
(b) out of money
(c) in the money
D
Ans:- c
TARGET is a payment system in ......

(a) UK
(b) US
(c) Europe

Dec 2017
(d) China
Ans:- c
da
Which of the followings are Components of portfolio risk are?
(b) Down - gradation and concentration risk
(d) Default risk and down - gradation risk
Ans:- c
oo
Which of the following is a tool to cover direct exchange risk?
(a) forward cover
(b) future
(c) option
(d) all of these
Ans:- d
risks, it faces...
(a) Basis risk
(b) Mismatch risk
H
A bank funds its assets from a pool of composite liabilities. Apart from Credit and operational
ak
(c) Market risk
(d) Liquidity risk
Ans:- a
Which of following instruments not eligible for Credit risk Mitigation?

(a) Cash
(b) Gold
(c) Life Insurance
p
(d) OTC
Ans:- d
ee
'Your Account with Us' is called ...... account.

(a) Vostro
(b) Nostro
(c) Mirror
(d) Loro
Ans:- a
D
A branch sanctions Rs 1 Cr loan to a borrower, which of the following risks the branch is taking?
1. Liquidity risk
2. Interest rate risk
3. Market risk
4. Credit risk

Dec 2017
5. Operational risk
(a) All of them

(b) 1, 2 and 3only
da
(c) 1,4 and5only
(d) 1, 2,4and5only
Ans:- d
oo
How many Diamond Dollar Accounts can an exporter maintain?
(a) Only one
(b) Two accounts
(c) It is matter of discretion for the bank
(d) Five
Ans:- d
H
GDRs are normally traded on ...... exchange and traded at two other places besides the place of
listing - OTC market in London and private placement market in USA
(a) Shanghai
(b) Luxembourg
ak
(c) Mumbai
(d) Dubai
Ans:- b
An RFC account can be opened by ...... with an AD

p
(c) a person resident in India to keep his/her foreign currency assets (notes / traveler cheques, etc
Ans:- a
ee
The quotation of 1 Rs = $ 0.01667 in Indian Rupee is an example of ......

(a) Direct quotation
(b) Indirect quotation
(c) Competitive quotation
(d) Aggressive quotation
D
Ans:- b
Who is eligible to take Export turnover policy from ECGC?

(a) Exporters with turnover not exceeding Rs 10 lakhs per year
(b) Exporters who contribute not less than Rs. 10 lakhs towards premium

Dec 2017
(c) Exporters with turnover exceeding Rs 10 lakhs per year
(d) Exporters who contribute not more than Rs. 10 lakhs towards premium
Ans:- b
da
GDRs are normally traded on ...... exchange and traded at two other places besides the place of
listing - OTC market in London and private placement market in US(a)
(a) Shanghai
(b) Luxembourg
(c) Mumbai
(d) Dubai
Ans:- b
oo
Counter party Risk is a type of ......
(b) Market Risk
(c) Credit Risk
Ans:- c
H
Recently, most of the Governments and Central Bankers went in to a major drive to support their
major Banks and prevent their failures. This is because; they wanted to avoid the contagion effect
and Systemic Risk. Systemic risk is the risk due to:
(a) Failure of a bank, which is not adhering to regulations
ak
(b) Failure of two banks simultaneously due to bankruptcy of one bank
(c) Where a group of banks fail due to contagion effect
(d) Failure of entire banking system
Ans:- d
For small exporters, the projected export turnover for the period of 12 months should not exceed __
lacs.
(a) 1
p
(b) 10
(c) 20
(d) 50
ee
Ans:- d
A bank identifies 4 assets (a, b, c and d) with a view to add them to

its portfolio for reducing portfolio risk. It has to choose one of them,
Which of the following would be most suitable for the purpose?
(a) Asset A with high positive correlation with the portfolio
D
(b) Asset B with moderately positive correlation with the portfolio

(c) Asset C with high negative correlation with the portfolio
(d) Asset D with marginally positive correlation with the portfolio
Ans:- c
Collateralized loan obligations (CLOs) are securitized pools of

Dec 2017
(a) Debt obligation
(b) Commercial loans
(c) Housing loans
(d) Government bonds
da
Ans:- b
Credit risk mitigation techniques reduce or transfer Credit risk. But, it may add
(a) Operational risk
(b) Liquidity risk
(c) Market risk
(d) ALL these risks
oo
Ans:- d
A bank originating a securitization offer to retain 10% of the securitization amount which would be
repaid last. This may be called as
(a) Clean-up call
(b) Synthetic securitisation
(c) Credit enhancement
(d) Traditional securitization
Ans:- c H
A seven year 7.50% bond with semi- annual interest yielding 8% has 5 years remaining for
Maturity. Macaulay's duration of the bond is 3.9 year. What is the approximate change in price if
ak
market yield
(c) Price increases by 0.406%
Ans:- b
As per Basel III, adjustments / deductions are required to be made from Tier I and Tier 2 capital,
p
relating to which of the following

(i) goodwill and other intangible assets
(ii) deferred tax assets
ee
(iii) Investment in own shares (treasury stock)

Ans:- d
D
Basel - II accord prescribes that housing loan portfolio be given risk weight of ......
(a) 100%
(b) 75%
(c) 35%
(d) 150%

Dec 2017
Ans:- c
A securitized exposure provides for an option for payment of remaining amount before the
repayments due on underlying assets have been repaid. This may be called
da
(a) Clean-up call
(b) Synthetic securitisation
(c) Credit enhancement
(d) Traditional securitisation
Ans:- a
oo
Credit derivatives help in
1.Managing risk return characteristics of a portfolio
2.Results in reducing portfolio size
3. Does not affect prudential capital requirements
Which of the following is true:
(a) 1 and 2
(b) 2 and 3
(c) 1 and 3
(d) None of these
Ans:- d
H
ak
Protection buyers of Credit derivatives enjoy
(a) Yield enhancement
(b) Diversification of Credit risk
(c) Hedging of Credit risk
(d) ALL of these
Ans:- c
A company declares Rs. 2 Dividend on the the equity share of face value of Rs. 5. the share is
p
quoted in the market at Rs. 80 the dividend yield will be ......

(a) 20%
(b) 4%
ee
(c) 40%
(d) 2.50%
Ans d
As per Basel III, general provisions and loss reserves are included in Tier- 2 capital maximum to
the extent of:
D
(a) 1.25% of total risk weighted assets under standardized approach and 0.6% of total risk weighted
assets under IRB approach
(b) 0.6% of total risk weighted assets under standardized approach and 0.6% of total risk weighted
(c) 0.6% of total risk weighted assets under standardized approach and 1.25% of total risk weighted

Dec 2017
(d) 1.25% of total risk weighted assets under standardized approach and 1.25% of total risk
weighted assets under IRB approach
Ans:- a
da
Protection sellers of Credit derivatives enjoy
(a) Transfer of Credit risk without transferring the asset
(b) Relief in regulatory capital
(c) Yield enhancement .
(d) ALL of these
Ans:- d
oo
A financial contract that provides protection against down-gradation
risk of an assets is called Chapter
(a) Credit default swap
(b) Total return swap
(c) Credit linked notes
(d) Credit spread option
Ans:- d
H
Operational risk is likely to be most in case of a
(a) Traditional bank with normal growth
(b) Traditional bank which is computerizing its processes
ak
(c) Traditional bank which is expanding its existing business
(d) Traditional bank where business is stagnating
Ans:- b
Operational risk gets reflected in the revenues by way of

(a) Additional expenses
(b) Loss of opportunities
(c) Both
p

Ans:- c
ee
Fill up the blank from the options given below

Restitution is ...........based classification of operational risk
(a) Event Based
(b) Cause-based
(c) Effect Based
(d) There is no correct option
D
Ans:- c
European type option can be exercised

(a) any time before the expiry period
(b) any time after the expiry period
(c) on the expiry date

Dec 2017
(d) none of these
Ans:- c
Under Simplified Standardised Approach (SSA), risk weight for corporates is prescribed as ......
da
a) 150%
b) 100%
c) 50%
d) 20%
Ans:- b
oo
For Substandard Secured Assets, the provision required is ...... of the outstanding amount.
a) 15%
b) 20%
c) 10% of the realizable value of security (RVS)
d) None of these
Ans:- a
specific clients are classified under

(a) Internal Fraud
H
Losses arising from an unintentional or negligent failure to meet a professional obligation to
(b) Employment Practices and Work Place Safety

ak
(c) Clients, Products and Business Practices
(d) Execution, Delivery and Process Management
Ans:- c
Fill up the blank from the options given below.

Write-downs is .............. .. based classification of operational risk.
(a) Event Based
(b) Cause-based
p
(c) Effect Based

Ans:- c
ee
Losses from failed transaction processing is classified under Event

Type Classification as
(a) Business Disruptions & System Failure
(b) Execution, Delivery and Process Management
(c) Clients, Products and Business Practices
D
(d) None of these

Ans:- b
If the forward value of the currency is cheaper, it is said to be at a

(a) Discount
(b) Premium

Dec 2017
(c) Forward rate
Ans:- a
da
Basel II defines capital requirement as ......
(a) Capital = Min capital ratio (8%) * (Credit Risk + Market Risk + Operational Risk)
(b) Capital = Min capital ratio (8%) * (Credit Risk + Market Risk)
(c) Capital = Min capital ratio (8%) * Credit Risk + Market Risk * Operational Risk
(d) Capital = Min capital ratio (18%) * (Credit Risk + Market Risk + Operational Risk)
Ans:- a
oo
Inadequate segregation of duties is .............. .. based classification
of operational risk.
(a) Event Based
(b) Cause-based
(c) Effect Based
Ans:- b H
Basel II accord is based on 3 pillars. These pillars are ......
(a) Minimum capital requirement
ak
(b) Supervisory review process
(d) all of these
Ans:- d

Operational failures of a third party is...........based classification of operational risk
(a) Event Based
p
(b) Cause-based
(c) Effect Based
ee
Ans:- b
If the currency is costlier in forward, it is said to be at a ......

(a) Discount
(b) Premium
(c) Forward rate
D

Ans:- b

Loss of recourse is .............. .. based classification of operational risk.

Dec 2017
(a) Event Based
(b) Cause-based
(c) Effect Based
da
Ans:- c
Covered interest rate parity occurs as the result of ......

(a) the actions of market- makers
(b) interest rate arbitrage
(c) purchasing power parity
(d) Stabilising speculation
oo
Ans:- b

Losses from failed transaction processing is............based
classification of operational risk.
(a) Event Based
(b) Cause-based
(c) Effect Based
Ans:- a
H
It is very difficult to interpret news in foreign exchange markets because ......
ak
(a) very little information is publicly available
(b) most of the news is foreign
(c) it is difficult to know which news is relevant to future exchange rates
(d) it is difficult to know whether the news has been obtained legally
Ans:- c

Losses from system failures is ................ based classification of
p
operational risk.
(a) Event based
(b) Cause based
ee
(c) Effect Based

Ans:- a
Operational risk quantification that is based on operational loss

measurement is
D

(b) Standardized Approach
(c) Advanced Management Approach
(d) (a) and (b) both
Ans:- c

Dec 2017
Gross income defined for the purpose of capital for operational risk
calls for exclusion of
(a) Unpaid interest
(b) Fees paid for outsourcing
da
(c) Profits earned from sale of securities in trading book
(d) Profits earned from sale of securities in banking book
Ans:- d
oo
The Forward price of a currency against another can be worked out with the following factors:
(b) The Interest rate differentials for the currencies
(c) The term i.e. the future period for which the price is worked out
(d) All of these
Ans:- d
(a) 20%
(b) 18%
(c) 15%
H
Beta factor prescribed for ‘Retail Brokerage’ is
ak
(d) 12%
Ans:- d
On a 5 point scale (very high, high, average, moderate & low), probability of occurrence of an
activity has been estimated at an average level. Potential financial impact is estimated at high level.
Given that the impact of internal control is 40%, what is estimated level of operational risk?
(a) Very high to high
(b) High to average
p
(c) Average to moderate

(d) Moderate to low
Ans:- c
ee
Risk arising on account of human errors, technical faults, infrastructure breakdown, faulty systems
and procedures or lack of internal controls is called as ......
(a) Exchange Risk
(c) Market Risk
D
(d) Legal Risk

Ans:- b
Factoring was introduced in India after the recommendations of ...... committee.

(a) Narasimhan
(b) Kalyanasundaram

Dec 2017
(c) Tandon
(d) None of these
Ans:- b
da
activity has been estimated at very high level. Potential financial impact is estimated at high level.
Given that the impact of internal control is 50%, what is estimated level of operational risk?
(b) High to average
(d) Moderate to low
oo
Ans:- b
The number of parties involved in factoring is ...... and that in forfaiting ......
(a) 5, 3
(b) 2, 3
(c) 3,5
(d) 5, 3
Ans:- c
H
activity has been estimated at an average level. Potential financial impact is also estimated at
average level. Given that the impact of internal control is 60%, what is estimated
ak
level of operational risk?
(b) High to average
(d) Moderate to low
Ans:- d
For estimating level of operational risk, a bank estimates probability of occurrence on historical
p
frequency and maps it on a 5 point scale where

1. implies negligible risk
2. implies low risk
ee
3. implies medium risk

4. implies high risk
5. implies very high risk
For estimating potential financial impact it relies on past obsen/ations and severity of impact is also
mapped on a scale of 5 as mentioned above. In one of the OR category the bank finds that
probability of occurrence stands mapped at 2 and potential financial impact is mapped at 5.
D
Estimated impact of internal controls is 50%. What is the level of operational risk for the given OR
category?
(a) Low risk
(b) Medium risk
(c) High risk
(d) Very high risk

Dec 2017
Ans:-b
Which of the following would not be a current asset?

(a) Accounts Receivable
da
(b) Land
(c) Prepaid Insurance
(d) Supplies
Ans:- b
oo
For estimating level of operational risk, a bank estimates probability of occurrence on historical
frequency and maps it on a 5 point scale where 1. implies negligible risk, 2. implies low risk
3. implies medium risk
4. implies high risk
5. implies very high risk
For estimating potential financial impact it relies on past observations and or severity of impact is
H
also mapped on a scale of 5 as mentioned above. In one of the OR category the bank finds that
probability of occurrence stands mapped at 3 and potential financial impact is mapped at '4'.
Estimated impact of internal controls is 50%. What is the level of operational risk for the given OR
category?
(a) Low risk
(b) Medium Risk
ak
(c) High Risk
(d) Very High Risk
Ans:- b
Implementation of integrated risk management helps in

(a) Aligning strategic aspects of risk with day to day operational activities
(b)Facilitates greater transparency for investor and regulator
(c) Control downside risk potential
p
(d) All of these

Ans:- d
ee
Operational risk mitigation is allowed under

(a) Basic indicator Approach
(b) standardized A roach
(d) Advanced Management Approach
(d) All of these
Ans:- c
D
Which of the following would normally be a current liability?

(a) Note Payable Due In Two Years
(b) Unearned Revenue
(c) Botha and b

Dec 2017
Ans:- b

1. Business Challenges influence Fisk management for risk management
da
2. Regulatory requirement provide primary impetus for risk management
(a) Statement 1 only is true
(b) Statement2 only is true
(c) Statements 1 and 2 both are true
(d) Statement 1 and 2 both are incorrect
Ans:- d
oo
1. Integrated risk management Can go beyond reducing Fisk
2. Integrated risk management Can help find way to Capitalize on upside potential of risk
(b) Statement2 only is true
(c) Statements 1 and 2 both are true
Ans:- c

H
ak
1. Risk management has become a real time concern
2. Cultural limitations of an organisation make it difficult to collect
risk data
which of the following is true?
(b) Statement 2 only is true
(b) Statement a and 2 both are true
p
Ans:- c
Consider the following statement

ee
(1) profit/loss of an organization is the sum total of all profits and losses that are generated through
various activities.
(2) Total risks of an organization may not be the same as sum total of all risks. We Which of the
following is true?
(a) Only (1) is correct
(b) Only (2) is correct
D
(c) Both (1) and (2) is correct

(c) Both (1) and (2) is wrong
Ans:- c
Integrated treasury does not deal in

(a) Money Market

Dec 2017
(b) Foreign exchange market
(c) Real estate market
(d) Commercial market
Ans:- c
da
oo
What would be the issue price of a CP (Face value of Rs. 100) carrying an interest rate of 10 % and
maturity of 1 year expressed as % of notional value?
(a) 100
(b) 96.15
(c) 90.90
(d) 92.50
Ans:- c
(a) Having a common dealing room

(b) Having a common Mid/back offices
H
What is the important operational feature of integrated treasury
(c) Looking for interest arbitrage across currency markets and be in a position to shift swiftly, a
ak
placement in Rupee denominated commercial paper to lending in USD in global interbank market
and also being to source funds in global markets and swap the funds into domestic currency or vice
versa depending on market opportunities
(c) All the above
Ans - d
Indexed return on CP is used as a benchmark rate for _____ term advances.

(a) short
p
(b) mid
(c) long
(d) all of these
ee
Ans:- a
Import bills drawn under Letter of Credit must be Crystallized into Rupees on the ____ day from
the date of receipts of documents, if not paid by that date.
(a) 7th
(b) 30th
D
(c) 10th
(d) 21st
Ans:- c
Which of the following statements regarding CP is not correct?

(a) CP is a negotiable instrument.

Dec 2017
(b) CP is issued in the form of a promissory note.
(c) Banks can invest in CP if it is issued in demat form
(d) CP, being a tradable instrument, carries liquidity risk.
Ans - d
da
Which of the following is not a money market operation
(a) Interbank borrowing
(b) Purchase of GOI dated securities
(c) Sale of commercial paper
(d) Purchase of certificate of deposits
Ans:- b
oo
Debentures are classified as
(a) Long Term Debt
(b) Short Term Loan
(c) Owned funds
H
(d) Owned funds if raised from shareholders
Ans:- a
A bank intends to raise funds through issuance of CDs . It would be operating in

(a) Securities market
(b) Money market
ak
(c) Forex market
(d) Any one of them
Ans:- b
Participating certificate is a
(a) Money market instrument
(b) Securities market instrument
(c) Commodities interment
p
(d) None of these

Ans:- a
ee
The maturity period of CDs (Certificate of Deposit) issued by banks should not be less than _____
and not more than _____, from the date of issue.
(a) 7 days, 6 months
(b) 7 days, 1 year
(c) 15 days, 6 months
(d) 15 days, 1 year
D
Ans:- b
A bank, as per RBI guidelines can borrow up to USD 10 million in foreign currency. The bank’s
their 1 capital is equivalent to
(a) USD 100 million

Dec 2017
(b) USD 20 million
(c) USD 20 million or less
(d) None of these
Ans:- c
da
A dealer sells USD for Indian rupees. He may be doing so to
(a) Augment rupee resources
(b) Take advantage of interest arbitrage
(c) Protect against expected depreciation of USD
Ans:- d
oo
External commercial borrowing refers to
(a) Borrowing by banks in forex market
(b) Borrowing by overseas investors in Indian money market
(c) Borrowing by Indian corporate in foreign currency from banks
(d) Borrowing by Indian corporate in foreign currency in overseas debt market
Ans:- d
H
A bank liquidates its holding in bonds of a corporate and invests the
proceeds in CP. The bank may be doing so to
(a) improve asset liability mismatch
(b) Protect from anticipated rise in long term rates
ak
(c) Protect from anticipated deterioration in the rating of the corporate
Ans:- d
Which of the following is call money market participant(s)

(a) Mutual funds
(b) HNIs
(c) Large corporate
p
(d) None of these

Ans:- d
ee
A bank purchases USD 1 million from its exporter client. Subsequently it squares up its USD
position. The second transaction is a
(a) Merchant book transaction
(b) Proprietary transaction
(c) ALM related transaction
(d) None of these
D
Ans:- a
Which of the following is a capital account transaction

(a) Payment for import of Crude oil
(b) Payment received for export of Tea
(c) Inward remittance for investment in FCNR deposit

Dec 2017
(d) Forex sold to an individual for travel abroad for business
Ans:- c
da
Sovereigns tend to regulate capital flows to control
(a) Transfer of wealth
(b) Volatility in interest rates
(c) Volatility in exchange
(d) ALL of these
Ans:- d
oo
An Indian corporate ‘A’ borrows money in an overseas debt market through issuance of bonds.
Another Indian corporate ‘B’ negotiates with a foreign investor to invest in the company by way of
term loan.
(a) Both ‘A’ & ‘B’ have raised ECB
(b) Both ‘A’ & ‘B’ have arranged FDI
H
(c) A has raised ECB while B has arranged for FDI
(d) A has raised ECB while B has arranged for portfolio investment
Ans:- c
Massive withdrawal of funds by foreign investors may result in

ak
(a) Currency depreciation
(b) Hardening of interest rates
(c) Contraction in aggregate demand
(d) ALL of these
Ans:- d
A bank is active in the area of corporate finance, treasury activities, retail banking and commercial
banking. Regulatory capital requirement per unit exposure would be least for
p
(a) Corporate finance

(b) Treasury activities
(c) Retail banking
ee
(d) Commercial banking

Ans:- b
A bank is active in the areas of corporate finance, retail banking, commercial banking and treasury.
Cost per unit transaction is expected to be least in case of
(a) Corporate finance
D
(b) Retail banking

(c) Commercial banking
(d) Treasury
Ans:- d
Pass-through certificates are

Dec 2017
(a) Certificate of deposits duly rated
(b) Securitized Credit receivables
(c) In the nature of Credit default swaps
(d) None of these
da
Ans:- b
oo
Treasury of a bank engages in Stock-trading. Which of the following
activity related to share trading is not permitted
(a) Taking a long position on a given stock
(b) Taking a position in stock future
(c) Taking a position in stock options
(d) Short sale of a stock
Ans:- d
H
ak
(c) In OTC derivatives, counter party risk is prominent, whereas in exchange traded derivatives,
counter party risk is totally absent
(d) OTC derivatives are for hedging risks whereas Exchange traded derivatives are used for
speculation
Ans:- c
Activities of a dealer in a treasury does not include

(a) dealing in forex market
p
(b) dealing in money market

(c) dealing in primary market
(d) dealing in secondary market
ee
Ans:- c
investment department in an integrated treasury would normally deal with

(a) Purchase and sale of government bonds in open market
(b) Purchase and sale of securities in OTC market
(c) Primary issues
D
(d) ALL of these

Ans:- c
Freely convertible currency is one which can be bought and sold

(a) Without any restrictions
(b) Without any restrictions for capital account transactions

Dec 2017
(c) Without any restrictions for current account transactions
Ans:- a
da
Indian Rupee is considered partially convertible currency because
(a) Restrictions on current account transactions
(b) Restrictions on capital account transactions
(c) Both (a) & (b)
(d) None of these
Ans:- c
oo
Relatively lower buy sell spread in currency quotes indicate
(a) Very high demand for the currency in the market
(b) Very high supply of the currency in the market
(c) Both (a) & (b)
(d) Demand and supply of the currency in the market is relatively low
Ans:- d
(b) Forward rates are at discount

(c) it is always so
(d) There is no such relationship
H
Generally, TOM rates are quoted at a discount to spot rates if
(a) Forward rates are at premium
ak
Ans:- a
Risk free interest rate of currency ‘A’ is more than that of currency
‘B’. The forward exchange rate of '
(a) Currency ‘A’ would be at discount to that of currency ‘B’.
(b) Currency ‘A’ would be at premium to that of currency ‘B’
(c) Currency ‘B’ would be at discount to that of currency ‘A’
(d) None of these
p
Ans:- a
To determine forward exchange rate for a given period, assuming perfect market one would
ee
(a) Add interest computed based on interest rate differential for the
given period to the spot rate of lower interest Yielding currency
(b) Add interest computed based on interest rate differential for the
given period to the spot rate of higher interest yielding currency
(c) Deduct interest computed based on interest rate differential for the
given period to the spot rate of lower interest yielding currency
D
(d) None of these

Ans:- a
swap is a combination of
(a) Spot and forward transaction
(b) TOM and spot transaction

Dec 2017
(c) Two forward transactions
(d) ALL of these .
Ans:- d
da
oo
A coupon Swap is defined as
(i) interest rate swap, where underlying benchmark interest rates are exchanged,
(ii) Interest rate swap, where fixed rate is exchanged with floating rate
(a) Only (i)
(b) Only (ii)
Ans:- c
H
Risk free interest rate for 3 months for currency ‘A’ is lower than currency ‘B’ by x%. 3 months
forward rates for currency ‘A’ is trading at a discount of y%. Given x>y, to take advantage of
arbitrage you will.
(a) Deploy in currency ‘A’ ; arbitrage profit would be (x-y)
ak
(b) Deploy in currency ‘B’ ; arbitrage proft would be (y-x)
(c) Deploy in currency ‘B'; arbitrage profit would be (x-y)
(d) None of these
Ans:- a
A bank sells currency ‘A’ at spot rate and buys back 3 months forward. If ‘B’ is at a discount to
‘A’ then cost of funds so generated would be
p
(a) 3 months risk free rate for currency ‘A’ + Discount

(b) 3 months risk free rate for currency ‘B’ - Discount
(c) 3 months risk free rate for currency ‘A’ -Discount
ee
(d) None of these

Ans:- c
In general, which of the following placement alternatives of surplus forex funds yield highest
returns for a given maturity
(a) inter-bank loans
D
(b) Treasury bills of foreign sovereigns

(c) Redis counting of foreign bills
(d) Gilts issued by foreign governments
Ans:- c
In general, money market instruments have maturity

Dec 2017
(a) Not exceeding 1 day
(b) Not exceeding 1 month
(c) Not exceeding 6 months
(d) Not exceeding 1 year
da
Ans:- d
oo
Funds lent in call money market is received beck
(a) Next day
(b) Next working day
(c) Second working day
(d) As per agreement
Ans:- b
(b) Cooperative banks

(c) Primary dealers
(d) Land development banks
H
Who among the following may not participate in call money market
(a) Banks
ak
Ans:- d
A bank deploys its surplus funds in interbank market for 7 days. In ;

books of account ,it will be controlled as
(a) Call money
(b) Notice money
(c) Term money
(d) None Of these
p
Ans:- b
Notice money refers to placement of funds for period not exceeding ......
ee
(a) over night

(b) two days
(c) 7 days
(d) 14 days
Ans:- d
D
In the notice money (a money market instrument), funds borrowed by banks need to be repaid
(a) Within 6 months
(b) On the next working day
(c) Within a fortnight
(d) Within a year
Ans - c

Dec 2017
Select the incorrect statement(s):

(a) Downside potential captures possible profits.
(b) Downside potential captures possible losses.
da
(c) Downside potential ignores profit potential.
(d) Probability of occurrence is one of the two components of downside potential.
Ans:- a
oo
Which of the following statement is not correct relating to TOD and TOM?
(a) Rates are generally quoted at discount to the spot rate
(b) Rates are less favorable to the buyer of the currency
(c) Rates are generally quoted at a premium to the spot rate
(d) None of these
Ans:- c
(b) 02 yr
(c) 03 yr
(d) 05 yr
H
Term money refers to placement of funds for period not exceeding
(a) 01yr
ak
Ans:- a
In the term money (a money market instrument), funds borrowed by banks need to be repaid
(a) Within 6 months
(b) On the next working day
(c) Within a fortnight
(d) Within a year
Ans - d
p
The minimum amount for which CP is to be issued is Rs ......

(a) 1 lac
ee
(b) 2 lacs
(c) 5 lacs
(d) 10 lacs
Ans c
The interest rate differential is added to the spot rate of

D
(a) Low interest yielding currency

(b) High interest yielding currency
(c) Both
(d) None of these
Ans:- A

Dec 2017
Risk pricing is ......
(a) portfolio based
(b) transaction based
(c) both a and b
da
(d) none of these
Ans:- b
oo
Call money refers to placement of fund ...
(a) same day
(b) overnight
(c) next day
(d) Two days
Ans:- b
(a) Domain Net Settlement (DNS)

(b) Defined Net Settlement (DNS)
(c) Declared Net Settlement (DNS)
H
NEFT is an electronic fund transfer system that operates on a ...... basis which settles transactions
in batches.
ak
(d) Deferred Net Settlement (DNS)
Ans:- d
T bills may have maturity of

(a) 91 days
(b) 182 days
(c) 364 days
(d) ALL of these
p
Ans:- d
182 days T bills are auctioned

ee
(a) Every day

(b) Every Wednesday
(c) Every Wednesday preceding non reporting Friday
(d) Every Wednesday preceding reporting Friday
Ans:- c
D
A 91 day T bill with remaining maturity of 73 days is priced at 99%

What is the yield?
(a) 5%
(b) 5.05%
(c) 4.95%
(d) 5.20%

Dec 2017
Ans:- b
RBI has launched new restructuring tool S4A to raise bank moral hazard
(a) Scheme for Systematic Structuring of Stressed Assets
da
(b) Scheme for Sustainable Structuring of Stressed Assets
(c) Scheme for Sustainable Structuring of Scholastic Assets
(d) Scheme for Sustainable Strength of Stressed Assets
Ans:- b
oo
Commercial papers are issued with minimum maturity of
(a) 1 month and maximum maturity of 6 months
(b) 7 days and maximum maturity of 1 year
(c) 1 day and maximum maturity of 1 year
(d) 15 days and maximum maturity of 1 year
Ans:- b
(b) Corporate
(c) Primary dealers
(d) Financial Institutions
H
Which of the following are not permitted to issue CP
(a) Banks
ak
Ans:- a
Which of the following corporate(s) may issue CP

(a) Credit rating - P1 +, Net worth -3 Cr
(b) Credit rating - P3, Net worth - 10 Cr
(c) Credit rating -P1, Net worth -5 Cr
(d) ALL of these
Ans:- c
p
What would be issue price of a CP carrying an interest rate of 8% 26.

and maturity of 6 months expressed as % of notional value?
ee
(a) 100%
(b) 92,59%
(c) 96.15%
(d) None of these
Ans:- c
D
Certificate of deposits (CDs) can be issued by

(a) Banks
(b) Financial Institutions
(C) Primary dealers
(d) All of these
Ans:- a

Dec 2017
CDs can be issued with a minimum maturity of

(a) 7 days and maximum maturity of one year
(b) one month and maximum maturity of one year
da
(c) 15 days and maximum maturity of one year
(d) 1 day and maximum maturity of one year
Ans:- c
oo
Reverse repo refers to
(a) Sale of securities with commitment to repurchase next working day
(b) Purchase of securities with commitment to sell next working day
(c)Purchase of securities with commitment to sell on a preset day
(d) Sale of securities with commitment to repurchase on a preset day
Ans:- c
H
Consider the following statements in context with Treasury Bulls?
(i)They are issued by Government of India on behalf of RBI
(ii) They are mostly for short term borrowings
(iii) Treasury Bills cannot be purchased by any person resident of India Which among the above
is/are correct?
ak
(a) All are correct
(b) ii & iii are correct
(c) Only ii is correct
(d) Only iii is correct
Ans:- c
Permitted underlying security for repo transactions is/are

p
(a) Government securities

(b) Corporate bonds rated AAA
(c) Corporate bonds rated AA+
ee
(d) ALL of these

Ans:- d
In the context of liquidity adjustment facility, repo implies

(a) Absorption of liquidity by RBI
(b) Borrowing by banks from RBI
D
(c) Placement of funds by banks with RBI

(d) None of these
Ans:- b

(a) Reverse repo rate is indicative of upper band of call money market rate

Dec 2017
(b) Repo rate is indicative of upper band of call money market rate
(c) Repo rate is indicative of lower band of call money market rate
(d) None of these
Ans:- b
da
oo
Consider the following statements in context with Treasury Bulls?
(i)They are issued by Government of India on behalf of RBI
(ii) They are mostly for short term borrowings
(iii) Treasury Bills cannot be purchased by any person resident of India
Which among the above is/are correct?
(a) All are correct
(b) ii & iii are correct
(c) Only ii is correct
(d) Only iii is correct
Ans:- c
H
Transactions under CBLO may have a term ranging from
ak
(a) 7 days to one year
(b) 1 month to one year
(c) 15 days to one year
Ans:- d
CBLO is a money market investment launched by

(a) NSC
(b) RBI
p
(c) CCII
(d) Govt. of India
Ans:- c
ee
A bank lends certain sum of money to a mutual fund under CBLO.

The counterparty of the bank is
(a) The banker of the mutual fund
(b) The mutual fund
(c) RBI
D
(d) CCIL
Ans:- d
Tier II capital bonds issued by banks fall under the category of

(a) SLR securities
(b) Money market securities

Dec 2017
(c) Non-SLR securities
(d) Equity exposure
Ans:- c
da
Which of the following is not included in Tier I capital?
(a) disclosed reserves
(b) undisclosed reserves
(c) equity
(c) both a and c
Ans - b
oo
Which of the following is not included in Tier II capital?
(a) disclosed reserves
(b) undisclosed reserves
(c) equity
(c) both a and c
Ans - d
could require the bank to ......

(i) Reduce it's Risk,
(ii) Increase it's Capital
H
If Regulatory Authority of the country feels that the Capital held by a bank is not sufficient, it
ak
(a) Only (i)
(b) Only (ii)
Ans:- d

(a) Debentures are governed by law of contracts
p
(b) Bonds are governed by law of contracts

(c) Debentures are non-negotiable instruments
(d) Bonds are non-negotiable instruments
ee
Ans:- c
Monthly mark to market is carried out for securities

(a) Held under HTM
(b) Held under AFS
(c) Held under HFT
D
(d) ALL of these

Ans:- c
A bond issued with put option implies

(a) The company issuing the bond may repay the bond on pre set date
(b) The investor holding the bond may encash the bond on pre set date

Dec 2017
(c) The investor holding the bond may convert a part of the bond to
equity of the company on a pre-set date
(d) None of these
Ans:- b
da
RBI has issued GOI bonds for maturities ranging from
(a) 6 months to 30 years
(b) 1 yearto 24 years
(c) 1 year to 30 years
(d) 1 yearto 40 years
Ans:- c
oo
A bond having duration of 8 Yr is yielding 10% at present. If yield increase by .60%, what would
be the impact on price of the bond
a) Bond price would go up by 4.36%
b) Bond price would fall by 4.36%
c) Bond price would go up by 2.82%
d) Bond price would fall by 2.82%
Ans:- b
STRIPS are instruments where

H
(a) Principal and interest are treated as zero coupon securities
(b) Principal is traded as zero coupon security
ak
(c) Interest is treated as zero principal security
(d) (b) and (c) both
Ans:- d
The components of broad money(M3) are

(a) Cash in circulation with the public
(b) Cash in currency chests with RBI and Banks
(c) Credit availed by Central Government from RBI
p
(d) Currency in circulation, demand and time deposits with banks and post office saving deposits
Ans:- b
ee
How many Diamond Dollar Accounts can an Exporter maintain?

(a) Only one
(b) Two accounts
(c) It is matter of discretion for the bank
(d) Five
Ans:- d
D
Exchange of payments in different currencies at predetermined exchange rates are called as ......
Swaps.
(a) Financial
(b) Interest
(c) Currency

Dec 2017
(d) Forex
Ans:- c
Due to vastness of the market, operating in different time zones, most of the Forex deals in general
da
are done on ........
(a) TOM basis
(b) SPOT basis
(c) Ready or cash
(d) Forward
Ans:- b
oo
Trustees, appointed by issuer of bonds/debentures are responsible for
(a) Acting in the fiduciary capacity to protect the interest of investors
(b) Monitoring the security which secured the bonds/debentures
(c) initiate legal action for recovery in case of default
(d) ALL of these
Ans:- d
(b) Unsecured bonds

(c) Secured convertible debentures
(d) Secured bonds with a call options
H
Of the following securities, the coupon is likely to be lowest in case of
(a) Secured debentures
ak
Ans:- c
Major investor in domestic stock market are

(a) FIIs, MFs & insurance companies
(b) FIIs, MFs & banks
(c) MFs, banks and Insurance companies
(d) FIIs, banks and insurance companies
Ans:- a
p
Foreign currency forward market is ......

(a) An over the counter unorganized market
ee
(b) Organized market without trading

(c) Organized listed market
(d) Unorganized listed market
Ans:- a
As per FEMA, a non resident is ......

D
(a) A person working in Dubai for last three years.

(b) A tourist touring European countries for last fifteen days.
(c) A software engineer working on a project in California USA, from his site in Hydraba(d)
(d) A student on a visit to Australia on study tour, while doing his MBA at IIM Indore.
Ans:- a

Dec 2017
An NRI cannot open following accounts in India
(a) FCNR deposit in Australian dollars for a period of two years.
(b) NRE savings bank account, with cheque book facility.
(c) FCNR deposit in Canadian Dollars for a period of 10 years.
da
(d) An NRE term deposit for a period of 5 years.
Ans:- d
oo
Back to Back LC is ......
(a) LC opened on the backing of an Export Order.
(b) LC opened on the backing of an Import Order.
(c) LC opened on the backing of an Export L(c)
(d) LC opened on the backing of an Import L(c)
Ans:- c
Find the odd man out :

(a) Futures
(b) Value at Risk (VAR)
(c) Options
(d) Swaps
H
ak
Ans:- b
Which of the following is not an interest rate derivative used for interest rate management?
(a) Swap
(b) Cap
(c) Floor
(d) All of the above are interest rate derivatives
Ans:- d
p
Counterparty risk is ......

(a) The risk of loss when exchange rates change during the period of a financial contract
ee
(b) Based on the notional amount of the contract

(c) The risk of loss if the other party to a financial contract fails to honour its obligation
(d) Present only with exchange- traded options
Ans:- c
The impact of Foreign exchange rate on firm is called as ......

D
(a) Operating Exposure

(d) Business risk
Ans:- a

Dec 2017
If transaction exposure are in same dates, then it can be hedged ......
(a) By purchasing single forward contract
(b) By purchasing multiple forward contract
(c) Cannot be hedged by forward contracts
da
Ans:- a
oo
How many countries have been placed in Restricted Cover Group I and how many in Group II?
(a) 10, 7
(b) 20, 13
(c) 20, 15
(d) 21,9
Ans:- b
(b) out of money

(c) in the money
H
When the strike price is equal to the spot price for the put option, the option is ......
(a) at the money
ak
Ans:- a
Normally, who makes the payment against the documents in a LC transaction?

(a) Negotiating Bank
(b) Confirming Bank
(c) Opening Bank
(d) Advising Bank
Ans:- a
p
The delivery period in case of option contract can not exceed beyond ...... month.
(a) 1
ee
(b) 2
(c) 3
(d) 4
Ans:- a
Banks are allowed to charge interest on PCFC and EBR for 180 days not exceeding __% over the
D
benchmark (LIBOR /EURO LIBOR/EURIBOR).

(a) 0.5
(b) 1.5
(c) 2.0
(d) 2.5
Ans:- c

Dec 2017
The risk arising owing to non- enforceability of contract against a counter party is the ...... risk.
(a) Legal
da
(b) Systematic
(c) Credit
(d) Liquidity
Ans:- a
oo
Taking advantage by selling and buying of a currency in two different markets to take advantage of
price differential prevailing at these markets is called as ......
(a) Hedging
(b) Arbitration
(c) Swap
(d) Speculation
Ans:- b
(a) Option
(b) Call Option
(c) Put Option
H
Right to sell at a fixed price on or before a fixed date in an option is called as ......
ak
(d) Future Option
Ans:- c
Notes Payable could not appear as a line on the balance sheet in which classification?
(a) Current Assets
(b) Current Liabilities
(c) Long- term Liabilities
p
Ans a
ee
Public offer of bonds/debentures are governed by

(a) Regulations issued by SEBI
(b) Regulations issued by RBI
(c) Regulations under Indian Companies Act
(d) Regulations prescribed by FIMMDA
Ans:- c
D
Multiplier effect in money supply is induced through

(a) Govt. spending
(b) Printing of notes
(c) Increasing interest rates
(d) Chain of relending Creating new deposits

Dec 2017
Ans:- d
In India, note issuing authority is

(a) Govt. of India through ministry of finance
da
(b) Mints
(c) RBI
(d) None of these
Ans:- c
oo
Money in circulation is indicated by
(a) M1
(b) M2
(c) M3
(d) M1 + M2 + M3
Ans:- c
H
A Bank received an LC for USD 2 Mio issued by MT 700 and opened on Jan 25, 20The Credit
calls for shipment of 200 tonnes of good quality wheat cultivated in Punjab What is the time
(a) 21 days
ak
Ans:- d
In foreign exchange, 'His account with Them' is known as ...... account

(a) Vostro
(b) Nostro
(c) Mirror
p
(d) Loro
Ans:- d
ee
Currency in circulation is indicated by

(a) M1
(b) M2
(c) M3
(d) M1 + M2 + M3
Ans:- a
D
Money multiplier in an economy can be determined if we know

(a) M1 & M2
(b) M2 & M3
(c) M3 & M1
(d) None of these

Dec 2017
Ans:- c
Sources of M3 is/are
(a) Credit availed by public and Government
da
(b) Credit availed by public and net foreign currency asset of banking system
(c) Credit availed by public and RBI
(d) Credit availed by public and deficit financing of Government
Ans:- c
oo
CGC of India classifies the country into seven categories, in that B2 indicates ......
(a) insignificant risk
(b) low risk
(c) moderately low risk
(d) moderate risk
Ans:- d
(b) 10
(c) 21
(d) 30
H
Export bill is generally Crystallized on ...... th day from the due date / notional due date.
(a) 07
ak
Ans:- d
A bank funds its assets from a pool of composite liabilities. Apart from Credit and operational
risks, it faces
(a) Basis risk
(b) Mismatch risk
(c) Market risk
(d) Liquidity risk
p
Ans:- a
There are basically three kinds of derivatives. Which of the following is not one of them?
ee

(b) futures
(c) options
(d) swaps
Ans:- b
D
(a) Internal Rating Based (IRB)
(b) Export Credit Agency (ECA)
(d) External Credit Assessment.
Ans:- d

Dec 2017
Which of following instruments not eligible for Credit risk Mitigation?

(a) Cash
(b) Gold
da
(c) Life Insurance
(d) OTC
Ans:- d
oo
Which of the following method is used to calculate VaR?
(a) historical simulation method
(b) monte carlo simulation method
(c) correlation method
(d) all of these
Ans:- d
(a) Only (i)

(b) Only (ii)
H
The investments on the securities made to earn profits from the short- term price movements are
classified under ...... (i) Held- To- Maturity, (ii) Held for Trading
ak
Ans:- b
In which method of calculating VaR, the change in the value of a portfolio is calculated using a
sample of randomly generated price scenarios.
p
(d) none of these

Ans:- b
ee
Under advanced IRB, who provides the inputs on the M?

(a) bank
(b) suprvisor
(c) either of them
(d) none of these
Ans:- c
D
Component of M3 are
(a) M1 + Currency in circulation
(b) M1 + Demand and time deposits with banking system
(c) M1 + Demand and time deposits with banking system + Post office savings deposit
(d) Items mentioned under (b) + budgetary expenses of Governments

Dec 2017
Ans:- c
If cash reserve ratio is increased then

(a) Money multiplier increases
da
(b) Money multiplier decreases
(c) Money multiplier remains by and large unaffected
(d) None of these .
Ans:- c
oo
RBI can prescribe CRR requirement at
(a) Min 3% and max 20% of DTL
(b) Min 3% of DTL and without any upper limit
(c) No lower limit but max at 20% of DTL
(d) No lower limit as well as no upper limit
Ans:- d
RBI can prescribe SLR requirement at

(a) Min 25% and max 40% of NDTL H
(b) Min 25% of NDTL without any upper limit
(c) No lower limit but max 40% of NDTL
(d) No lower limit as well as no upper limit
ak
Ans:- c
Under floating exchange rate, the value of the currency is decided by ...... for a particular currency.
(a) market rate
(b) supply and demand factors
(d) chain rule
Ans:- b
p
A company enjoys cash Credit account with a bank. It also has a term loan account with o/s
balance of Rs. 15 Cr as on 31- 03- 2015. The bank has also subscribed to the bonds issued by the
ee
borrower company amounting to Rs. 3 Cr. As on 31- 03- 2015, the CC account with o/s balance of
Rs 1.20 Crs is required to be classified as NP(a) There is no default in payment of interest and
installment in the term loan and bonds. What will be the amount that will become NPA on account
of this company?
(a) Rs. 1.20 Cr
(b) Rs. 4.20 Cr
D
(c) Rs. 16.20 Cr

(d) Rs. 19.20 Cr
Ans:- d
Liquidity in the economy refers to

(a) Cash balances held by banks

Dec 2017
(b) Balances held with RBI by banks for CRR purpose
(c) Surplus funds available with banks
(d) None of these
Ans:- c
da
Excess of liquidity in an economy leads to
(a) Lower interest rates
(b) Higher inflation
(c) Higher investments
(d) ALL of these
Ans:- d
oo
Stability of financial markets implies
(a) Maintaining price stability
(b) Maintaining stable interest rates
(c) Maintaining stable exchange rates '
(d) Markets without fluctuations in interest rates and exchange rates
Ans:- d
H
As per Basel- II norms which one is not correct?
(a) Tier- II capital is restricted to 100% of tier- I capital
(b) Long term subordinate debit may not exceed 50% of tier I Capital
(c) Tier III capital will be limited to 250% of tier I capital
ak
(d) None of these
Ans d
Under Standard Approach retail and SME exposures attract a uniform Risk weightage of ......
(a) 75%.
(b) 50%
(c) 85%
(d) 100%
p
Ans:- a
ee
Which of the following is/are operating instruments of RBI to control

money supply? 1
(a) Repo/Reverse repo rates
(b) Bank rate
D
(c) CRR/SLR/LAF
(d) ALL of these
Ans:- c
The primary responsibility of a bank's treasury is

(a) Fund management

Dec 2017
(b) Functioning as a profit centre
(c) Meet reserve requirements prescribed by RBI
(d) Market risk management
Ans:- c
da
CRR is computed based on
(a) DTL as of last Friday of preceding fortnight
(b) DTL as of last Friday of second preceding fortnight
(c) NDTL as of last Friday of preceding fortnight
(d) NDTL as of last Friday of second preceding fortnight
Ans:- b
oo
SLR is computed based on
(a) DTL as of last Friday of preceding fortnight
(b) DTL as of last Friday of second preceding fortnight
(c) NDTL as of last Friday of preceding fortnight
Components of DTL include .

(a) Credit balances in ACU accounts
(b) Claims received from ECGC
H
(d) NDTL as of last Friday of second preceding fortnight
Ans:- c
ak
(c) Overseas borrowing
(d) Liabilities under CCIL with ceII
Ans:- c
Components of DTL does not include

(a) Accrued interest on term deposits
(b) Credit balances in suspense accounts
(c) Refinance availed from NABARD
p
(d) Foreign currency liability net of foreign currency assets l

Ans:- c
ee
Components of NDTL does not include

(a) Net interbank liabilities with maturity of 15 days to 1 year
(b) Net interbank liabilities with maturity of 14 days or less
(c) Net interbank liabilities with maturity of More than 1 year
(d) ALL of these
Ans:- b
D
CRR compliance on a daily basis requires min. balance of

(a) 100% of CRR requirement

Dec 2017
(b) 90% of CRR requirement
(c) 70% of CRR requirement
(d) 50% of CRR requirement
Ans:- c
da
CRR requirement is to be maintained by bank by way of
(a) Balance with RBI account
(b) Balance with RBI account net of cash held in currency chest
(c) Balance with RBI account net of cash held in currency chest +
(d) items under C + balances held with other bank's
Ans:- a
oo
Which of the following assets are not permitted for the purpose of SLR
(a) Cash held by Bank‘s branches
(b) Gold valued at market price or less
(c) Treasury bills
(d) Balances held with other banks
Ans:- d
(a) @ 5%
(b) @ 3%
(c) Reverse repo rate
H
The rate at which RBI pays interest on CRR balances kept by banks with them is
ak
(d) RBI does not pay any interest on CRR balances
Ans:- d
Which of the following actions of RBI would have maximum impact on money supply?
(a) Increasing repo by 1 %
(b) Increasing reverse repo rate by 1%
(c) Increasing SLR requirement by 1%
(d) Increasing CRR requirement by 1%
p
Ans:- d
Day to day liquidity is managed by RBI through

ee
(a) Changes in CRR

(b) Changes in SLR
(c) Liquidity adjustment facility‘
(d) ALL of these
Ans:- c
D
LAF refers to
(a) Open market operations of RBI
(b) Auction of Govt. bonds by RBI on behalf of Government
(c) Repo/reverse repo transactions with banks
(d) Sale/purchase of bonds on tap
Ans:- c

Dec 2017
ABC Co. has current assets of 5,00,000 and total assets of 15,00,000. ABC has current liabilities of
3,00,000 and total liabilities of 8,00,000. What is the amount of ABC's owner's equity?
(a) 2,00,000
da
(b) 3,00,000
(c) 7,00,000
(d) 12,00,000
Ans c
oo
Under Standardized method within each business line gross income is broad indicator for ......
(a) Capital Risk exposure
(b) Operational Risk exposure.
(c) Credit Risk mitigation
(d) Financial Risk Exposure
Ans b
Trading
(a) Only (i)
(b) Only (ii)
H
The securities contracted basically on account of long term investment relationships or for steady
income and statutory obligations are classified under...... (i) Held- To- Maturity, (ii) Held for
ak
Ans:- a
Which of the following is/are operating instruments of RBI to control

fluctuations in money market interest rates?
p
(a) Repo/reverse repo rates

(b) Bank rate
(c) CRR/SLR/LAF
ee
(d) ALL of these

Ans:- a
Corridor of the policy rates imply

(a) Office where decisions on policy rates are taken ‘D
(b) Determinations of coupons on Govt. bonds of VARious maturities
D
(c) Band specified by repo and reverse repo rate set by RBI
(d) None of these
Ans:- c
Banks may borrow in call and notice money market

(a) Without any ceiling

Dec 2017
(b) 100% of their tier I capital on fortnightly average basis
(c) 100% of capital funds on fortnightly average basis
(d) None of these ,/
Ans:- c
da
Banks may lend in call and notice money market
(a) Without any limit
(b) Up to 25% of their tier I capital on fortnightly average basis
(c) Up to 25% of capital funds on fortnightly average basis
(d) None of these
Ans:- c
oo
Maximum borrowing on a day by banks in call/notice money market
may not exceed.
(a) 150 % of capital funds
(b) 125% of capital funds
(c) 150% of their capital
(d) 125% of their capital
Ans:- b
H
Where the results into a banking or financial Crisis for the entire system on account of failure of a
large
bank, it is called
ak
(a) Liquidity Risk
(b) Settlement Risk
(c) Systematic Risk
(d) Legal Risk
Ans:- c
ECGC provides Credit insurance for export allowed by banks/exporters its policies and guarantees
p
fall
under the purview of ......
(a) EXIM Bank
ee
(b) IRDA
(c) BCBS
(d) DGFT
Ans:- b
Under FEMA, for contravention of any direction or failure to file any return under this act, in case
D
of continuing contravention an additional penalty, which may extend up to Rs.... Per day for which
such contravention continues, may be impose(d)
(a) 100
(b) 500
(c) 1000
(d) 2000

Dec 2017
Ans:- d
Un- spend foreign exchange can be deposited by the resident in the ....a/c with any authorise(d)
(a) NCFM
da
(b) NRE
(c) RFCD
(d) NRO
Ans:- c
oo
Govt security are issued by ......
(a) Central finance ministry
(b) Ministry of commerce
(c) Central govt
(d) RBI
Ans:- d
(b) 75% of capital funds

(c) 50% of capital funds
(d) 25% of capital funds
H
Maximum lending on a day by banks in call/notice money market may not exceed.
(a) 100% of capital funds
ak
Ans:- c
Gross settlement system implies

(a) Clearing of payment/receipts on an aggregated basis
(b) Clearing of payment/receipts on a net basis
(c) Clearing of payment/receipts on a batch basis 39_
(d) Clearing of payment/receipts on one by one basis
Ans:- d
p
In Real time Gross Settlement System

ee
(a) Credits and debits are effected simultaneously

(b) Credits are applied first followed by debits in respective account 4°
(c) Debits are applied first followed by Credits in respective accounts
(d) Transactions are prioritised based on amount
Ans:- c
D
The most important reason behind introduction of RTGS by RBI is

(a) It is a paperless system
(b) It reduces time for clearing payments/receipts
(c) It reduces systemic risks in payment settlements
(d) It reduces operating costs.
Ans:- c

Dec 2017
Negotiated dealing system (NDS) membership is open to

(a) ALL operators in financial markets
(b) ALL operators in financial markets who have SGL account with RBI
da
(c) ALL operators in financial markets who have SGL account with RBI or have constituent SGL
accounts through banks/DPs
(d) Banks, Primary dealers and financial institutions
Ans:- c
oo
NDS-OM is a system that provides
(a) A platform for trading in securities for telephonically negotiated trading
(b) A platform for trading in securities that is quote driven
(c) Forex dealing system for foreign exchange transactions
(d) Centralised clearing for all securities traded on a day to day basis
Ans:- b
(b) National clearing cell of RBI

(c) ECIL
(d) None of these
H
Deals done using NDS are cleared for settlement by
(a) RTGS
ak
Ans:- c
Which of the following is/are depository institutions

(a) IDRBT
(b) CSDL
(c) CCIL
(d) ALL of these
Ans:- b
p
Treasury activities adds to

(a) Credit risk
ee
(b) Counter party risk

(c) Down gradation risk
(d) ALL of these
Ans:- d
Which of the following risks affect treasury exposures most?

D
(a) Counterparty risk

(b) Price risk
(d) Liquidity risk
Ans:- b

Dec 2017
A Re/USD SWAP deal with a counter party bank of USD 50 million is
being considered. The most relevant risks would be
(a) Interest rate risk and liquidity risk
(b) Liquidity risk and counter party risk
da
(c) Counterparty risk and interest rate risk
(d) Counterparty risk and price risk
Ans:- b
oo
If only interest rate is hedge(d) the type of currency swap would be ......
(c) P + I Swap
(d) none of these
Ans:- b
H
Which of following statements are correct relating to TOD and TOM?
(i) Rates are generally quoted at a premium to the spot rate,
(ii) Rates are generally quoted at discount to the spot rate,
(iii) Rates are less favorable to the buyer of the currency
ak
Ans:- c
The validity period of export turnover policy is ......

(a) 6 months
(b) 1 year
p
(c) 15 months
(d) 18 months
Ans:- b
ee
What will be the annualized yield of the treasury bill face value Rs. 1 lac with maturity after 85
days which is being traded at Rs 98000/- ?
(a) 8.59
(b) 8.76
(c) 8.19
D
(d) 8.26
Ans:- b
Redeemable Cumulative Preference shares comes under ......

(a) Tier I Capital
(b) Tier II Capital

Dec 2017
(c) Tier III Capital
Ans:- b
da
The interest rate differential is added to the spot rate of (i) Low interest yielding currency,
(ii) High interest yielding currency
(a) Only (i)
(b) Only (ii)
Ans:- a
oo
What is the risk capital if the traded value is of 200 million and volatility is 8%?
(a) 18.67 million
(b) 37.28 million
(c) 16.00 million
(d) 39.12 million
Ans:- b
H
An exporter of Rs 100 lakhs is backed by lien on fixed deposit of Rs 30 lakhs. There is no maturity
mismatch. What should be Hair cut for Credit risk mitigation?
(a) 70 lakhs
(b) 0.70 lakh
ak
(c) 0.00 lakh
(d) 30 lakhs
Ans:- c
Risk of Reduction in Mark- to- Market value of equities is ......

(b) Market Risk
(c) Credit Risk
p

Ans:- b
ee
A volatile market implies

(a) Prices are falling which is beyond normal
(b) Prices are rising which is beyond unusual
(c) Prices are fluctuating beyond what is usual
(d) None of these
D
Ans:- d
Which of the following regulations governs payments of imports of goods into India on the basis of
FEMA 1999?
(b) Exchange control regulations

Dec 2017
(c) Exim policy
(d) None of these
Ans:- b
da
Which of the following securities are affected most by marginal changes in the interest rates.
(a) Treasury Bills
(b) Dated Securities
(c) Shares
(d) Certificate of deposits
Ans:- b
oo
The NDD of the demand bill (foreign currency export bill) is ...... days from the date of handling.
(a) accounts meant for reconciliation
in the home country of the currency
(d) short term investments with AAA rated foreign banks
(b) accounts of foreign banks with Indian banks
(c) current accounts dominated in foreign currency maintained by banks with their correspondent
banks
Ans:- c
H
Treasury activities are a matter of concern to banks because of
(a) Highly leveraged transaction
(b) Large transaction size
ak
(C) Market volatility
(d) ALL of these
Ans:- d
Treasury activities are basically controlled by

(a) Front office and back office
(b) Back office and mid office
(c) Mid office and front office
p
(d) Front office , back office and mid office

Ans:- b
ee
For better organizational control, which of the following may not report to head of treasury?
(a) Front office
(b) Mid office
(c) Back office
(d) ALL of these must report to head of treasury
Ans:- b
D
Your non- resident customer presents a draft in foreign currency for which cover has already been
provided in Nostro account. The rate of exchange to be applied to the transaction will be ......
(i) TT selling,
(ii) Bills selling

Dec 2017
(a) Only (i)
(b) Only (ii)
da
Ans:- d
oo
Day light limit is put in place to
(a) Reduce cost of carry
(b) Limit exchange risk
(c) Both (a) & (b)
(d) None of these
Ans:- b
Overnight limit is put in place to

(a) Reduce cost of carry
(b) Limit exchange risk
(c) Both (a) & (b)
(d) None of these
H
ak
Ans:- c
Gap limit is put in place to

(a) Limit exchange risk in forward positions
(b) Limit exchange risk in unmatched forward positions
(c) Limit exchange risk in open position
(d) Limit exchange risk in unmatched open position
Ans:- b
p
Counterparty limit is put in place to

(a) Limit default risk
ee
(b) Limit settlement risk

(c) Limit down gradation risk
(d) None of these
Ans:- a
A bank has put in place a set of limits on exposures maturing on a single day on its counterparties.
D
This control has been put in place to mitigate

(a) Counter-party risk
(b) Liquidity risk
(c) Settlement risk
(d) Operational risk
Ans:- c

Dec 2017
The FIs can issue CDs for a period not less than _____ and not exceeding _____ from the date of
issue.
(a) 7 days, 6 months
da
(b) 15 days, 1 year
(c) 1 year, 3 years
(d) 1 year, 5 years
Ans:- c
oo
Banks can borrow and lend (under call money) overnight up to a maximum of ____ % and ____ %
respectively of their capital funds.
(a) 10, 25
(b) 50, 75
(c) 100, 25
(d) 100, 50
Ans:- c
Notice money refers to ......

(a) funds placed overnight
H
(b) funds placed after giving a notice of placement
(c) funds placed for periods in excess of 3 months but not exceeding 1 year
ak
(d) placement of funds beyond overnight but not exceeding 14 days
Ans:- d
Deal size limit is put in place to limit

(a) Counter-party risk
(b) Liquidity risk
(c) Settlement risk
(d) Operational risk
p
Ans:- d
Maximum amount that a dealer can keep in open positions during operation hours are Called
ee
'Dealer Limit' This is Put in Place for?

(a) Limiting operational risk
(b) Limiting exchange risk
(c) Limiting liquidity risk
(d) Administration purposes
Ans:- d
D
Which of following documents does not contain Zero risk ?

(a) Investments in shares
(b) Investment in bonds and debentures
(c) Investment in term deposit

Dec 2017
(d) Investment in government bonds
Ans:- a
As per the Reserve Bank of India in the draft guidelines for implementation of the new capital
da
adequacy framework has modified the Gross Income definition slightly. The Net Interest Income
has been replaced by ......
(a) Net Profit
(b) Operating Profit
(c) No Changes made
(d) Interest Expended
Ans:- a
oo
(a) 5.05%
(b) 3.77%
(c) 5.30%
(d) 6.00%
Ans:- c
H
The most Critical controls exercised in case of trading portfolio in govt. securities is/are
(a) Deal size and holding period
(b) Holding period and stop loss limit
ak
(c) Stop loss limit and deal size
(d) Deal size, holding period and stop loss limit
Ans:- b
Which of the following securities does not require mandatory rating?

(a) Certificate of deposits
(b) Commercial papers
(c) Corporate debentures
p
(d) Equity shares

Ans:- d
ee
The most Critical risk in a repo transaction is

(a) Liquidity risk
(d) None of these
Ans:- d
D
Liquidity risk in a bank exists if

(a) There are more maturing assets than maturing liabilities
(b) There are more maturing liabilities than maturing assets
(c) There are more maturing assets than maturing assets on a daily basis
(d) There are more maturing assets than maturing liabilities on a

Dec 2017
Ans:- d
Investing long term funds to Create short term assets result in

(a) Liquidity risk
da
(b) Liquidity risk and interest rate risk
(c) Affects net interest income adversely
(d) None of these
Ans:- c
oo
Match the following beta factors with the business lines under standardised approach:
Corporate finance (a) 12% ,Retail banking (b) 15% ,Commercial banking (c) 18%
(a) 1- a, 2- b, 3- c
(b) 1- b, 2- c, 3- a
(c) 1- c, 2- a, 3- b
(d) 1- a, 2- c, 3- b
Ans:- c
(a) Liquidity risk

(b) Liquidity risk and interest rate risk
(c) Affects net interest income adversely
H
Investing short term funds to Create long term assets result in
ak
(d) None of these
Ans:- b
A bank while reviewing its liquidity position over 30 days notices that its maturing assets equals
maturing liability. The bank may conclude that
(a) Liquidity risk exists as maturing assets may not equal maturing liabilities on a daily basis
(b) Liquidity risk may arise if maturing assets fail to realize
(c) Liquidity risk may arise if maturing liabilities are paid before maturity
p
(d) All of these

Ans:- d
ee
A bank issued CDs for 6 months period and its proceeds are utilized
for making advances. It will not add to its interest rate risk if
(a) Advances made are of maturity exceeding 6 months
(b) Advances made are of maturity less than 6 months
(c) Advances are equally distributed between (a) & (b) q Y
(d) Advances are maturing in 6 months
D
Ans:- d
Increase in Yield will effect NII over a period

(a) Positively, if liabilities are more than assets
(b) Positively if assets are more than liabilities l
(c) Positively, if assets are more than liabilities over the period

Dec 2017
(d) Positively, if liabilities are more than assets over the period
Ans:- c
91 days T bill yield increases as evident from RBI auctions. Impact
da
on the 91 days T-bill portfolio would be
(a) By Way of loss of interest income
(b) By way of reduction in market value of 91 day T-bill portfolio
(c) By way of increase in market value of 91 day T-bill portfolio
(d) There will be no impact on the portfolio for now
Ans:- b
oo
182 day T-bill which is maturing in 90 days is funded by a 3 months de
posit raised from a corporate body it will result in adverse impact on NII if
(a) 182 days T bill yield rise
(b) CD rates in the market increase
(c) 182 days T bill yield fall
(d) There will be no impact on NII
Ans:- d
H
A bank borrows a certain sum of money at 3 months T-bill rate for 364 days which is repriced
every day and deploys the same in 364 days T-bill on the date it is issued. Its NII will be impacted
(a) if 3 months T-bill rate changes
(b) If 364 days T-bill rate changes
ak
(c) Both (a) & (b)
(d) Its NII will not be impacted
Ans:- a
A foreign exchange swap transaction would add to

(a) Interest rate risk
(b) Currency risk
(c) Liquidity risk
p
(d) All of these

Ans:- c
ee
Open positions across VARious maturities result in

(a) Interest rate risk and currency risk
(b) currency risk and Liquidly risk
(c) Liquidly risk and interest rate risk
(d) Interest rate risk, currency risk and liquidity risk
Ans:- d
D
Funds raised in Call money market at Singapore is deployed in 364

days T bill of Govt of India. This transaction will be open to
(b) Currency risk
(c) Liquidity risk

Dec 2017
(d) ALL of these
Ans:- d
VAR of stocks of a company is estimated at 3% with 99% confidence
da
(a) 3%
(b) More than 3%
(c) Less than 3%
(d) Cannot be determined
Ans:- d
oo
A bank's G Sec portfolio has 100 day VAR at 95% confidence level of 4% based on yield. What is
the worst case scenario over 25 days?
(a) Increase in yield by 0.4%
(b) Decrease in yield by 0.4%
(c) increase in yield by 2%
(d) Decrease in yield by 2%
Ans:- c
H
In case the portfolio size of the bank's (mentioned above) G Sec portfolio is Rs 10,000 Cr with
average modified duration of 3, then worst case loss that the bank may suffer overnight is
(a) Rs 120 Cr in terms of market value
(b) Loss of Rs 40 Cr by way of interest income
ak
(c) Gain of Rs 40 Cr by way of interest income
(d) None of these
Ans:- a
A model determines VAR of 10 years G Sec based on the factors that affect the yield of 10 years
G Sec determined through discriminate analysis. This approach is called
(a) Monte Carlo Simulation
(b) Historical Simulation
p
(c) Parametric approaches

(d) None of these
Ans:- c
ee
100 days VAR of a given security is 5% with 90% confidence interval In a year (250 working
days), how many days VAR may be observed at more than 5%
(a) 12.5 Days
(b) 10 Days
(c) 25 Days
D
(d) None of these

Ans:- c
VAR for USD/INR rate at 95% confidence interval is 50 BPs overnight. lf the day closes at Rs
44.30 spot for USD, what is the worst possible rate for imports the day after?
(a) Rs 44.80

Dec 2017
(b) Rs 43.80
(c) Rs 45
(d) Rs 45.01
Ans:- d
da
YTM of a bond depends upon
(a) Coupon rate and market value
(b) Market value and residual maturity
(c) Residual maturity and coupon rate
(d) Coupon rate, market value and residual maturity
Ans:- d
oo
A 10 year bond with semiannual coupon @ 8% is being traded in at Rs 95 the YTM of the bond is
(a) 8.42%
(b) It cannot be determined based on data given
(c) It may be determined and is expected to be above 8%
(d) It may be determined and is expected to be below 8%
Ans:- c
H
30% of a portfolio is having a class of security with duration of 3.5
40% of the portfolio is another Class of Security with duration of 4.0
The remaining portion of the portfolio has duration of 5.0. What is the duration of the portfolio
(a) 4.10
ak
(b) 4.20
(c) 4.00
(d) None of these
Ans:- d
A bond having a duration of 6 years is yielding 8% at present. If yield increases by 0.50%, what
would be the impact on price of the bond?
(a) Bond price would go up by 2.7%
p
(b) Bond price would fall by 2.7%

(c) Bond price would go up by 2.8%
(d) Bond price would fall by 2.8%
ee
Ans:- d
Bank treasuries take position in derivatives for

(a) investment, hedging and trading
(b) Hedging, trading and to meet customer's requirements
(c) Meeting customer's requirements, trading and Investment
D
(d) Trading‘ Investment and to meet customer's requirements

Ans:- b
Which of the following statements is/are not correct

(a) Derivative is a financial contract
(b) Derivatives always refer to spot price

Dec 2017
(c) Value of derivatives depend on spot market
(d) ALL of these
Ans:- b
da
Which of the following derivatives are not traded in exchanges
(a) Options
(b) Currency Swaps
(c) Forex futures
(d) ALL of them are traded in exchanges
Ans:- b
oo
Which of the following is/are not characteristic(s) of OTC products?
(a) Customised contracts
(b) Negotiated pricing
(c) No counterparty risk
(d) Available from banks/financial institutions
Ans:- c
(b) No counter party risk

(c) Products are for specified period
(d) can be settled on any trading day
H
Which of the following is/are not characteristic(s) of exchange traded products?
(a) Standardised products
ak
Ans:- d
Which of the following cannot freely participate in futures market ‘M’

(a) Banks and financial institutions
(b) individuals
(c) NRI
(d) Corporates
Ans:- c
p
NRI, is a person resident outside India who is a citizen of India i.e.

(a) Indian Citizen who proceed abroad for employment or for carrying on any business or vocation
ee
or for any other purpose in circumstances indicating indefinite period of stay outside India
(b) Indian Citizens working abroad on assignment with Foreign government, government agencies
or International MNC
(c) Officials of Central and State Governments and Public Sector Undertaking deputed abroad on
assignments with Foreign Govt Agencies/ organization or posted to their own offices including
Indian Diplomatic Missions abroad
D
(d) All of these

Ans:- d
Forward option facility in a forex forward contract implies

(a) it is an option on forward contract where customer has no obligation but right to exercise
(b) Banks may allow delivery to take place within a month before expiry date

Dec 2017
(c) Banks may allow delivery to take place within a month after expiry date
(d) None of these
Ans:- b
da
Given interest rate of currency A is more than that of B and interest rate of currency B is more than
that of C. Which of the following is true?
(a) Forward rate of currency A would be at premium to that of C
(b) Forward rate of currency ‘A’ would be at discount to that of B
(c) Forward rate of currency ‘C’ would be at discount to that of B
(d) Forward rate of currency ‘B’ would be at premium to that of A
Ans:- b
oo
The difference between spot rate and forward rate (interest rate differential) is _____ the _____
rate for low- interest yielding currency and this is known as forward ......
(a) added to, spot, premium
(b) added to, forward, premium
(c) subtracted from, spot, discount
(d) subtracted from, forward discount
Ans:- a
H
Which of the following is not a characteristics of forward contracts
(a) Forward contracts are zero risk contracts
(b) Forward contracts are OTC contracts
ak
(c) Forward contract have opportunity costs associated with it
(d) Forward contracts eliminates currency risk
Ans:- a
For forward discount, the interest rate differential is ____ from the ____ rate for high- interest
yielding currency.
(a) added to, spot
(b) added to, forward
p
(c) subtracted from, spot

(d) subtracted from, forward
Ans:- c
ee
Currency ‘X’ having 6% risk free rate of 6 months has a spot rate of
30Y. Where Y is another currency and has 4% risk free rate for 6 months period. The 6 months
forward rate of ‘X’ in terms of Y would be
(a) 29.70 B
(b) 29.71 B
D
(c) 30.30 B
(d) 30.29 B
Ans:- b
Which of the following is/are the purpose(s) of Duty Drawback?

(a) to refund excise and customs duty

Dec 2017
(b) to make certain domestic commodities competitive in the overseas market
(c) to provide export incentives under the Export Promotion Scheme
(d) all of these
Ans:- d
da
In a market where a given security's price is rising, profit potential is unlimited for
(a) Call option holder on the security
(b) Put option holder on the security
(c) Call option seller on the security
(d) Put option seller on the security
Ans:- a
oo
In a market where a given security Price is falling, Profits can be earned by
(a) Call option buyer and call option seller
(b) Call option seller and put option buyer
(c) Put option buyer and put option seller
(d) Put option seller and Call option buyer
Ans:- b
H
Intrinsic value of a call option on forex forward is (a) The option premium
(b) The difference between strike price and spot price
(c) The difference between strike price and current forward rate
(d) The difference between spot price and current forward rate
ak
Ans:- c
Time value of an option is maximum when the option is

(a) ATM
(b) ITM
(c) OTM
(d) It is indeterminate
Ans:- a
p
If the strike price is same as the forward rate on the start date, the option is known to be
(a) ATM (at the money)
ee
(b) ITM (in the money)

(c) OTM (out of money)
(d) none of these
Ans -a
D
A call option on AUD at a given AUD/EURO strike is a

(a) Call option on Euro
(b) Put option on AUD
(c) AUD call & EURO put
(d) EURO call & AUD put
Ans:- c

Dec 2017
A put option is in the money (ITM) if ......

(a) the strike price is less than the market price
da
(c) the strike price is equal to the market price
Ans -b
oo
Most important risk that a call option holder faces is
(a) Price risk
(c) Counter party risk
(d) Liquidity risk
Ans:- c
H
An individual purchases a call option for 500 shares of ‘A’ with strike price at Rs 120 (Present
price Rs 100) and remaining maturity of 3 months at a premium of Rs 40. On maturity shares of A
was priced at Rs 140. Taking interest cost @ 12% p.a., what is the profit earned by the individual
on the transaction?
(a) No loss no profit
ak
(b) Rs 600 loss
(c) Rs 10,600 loss
(d) None of these
Ans:- c
A 15 year bond issued by a bank carries a call option at the end of 10th year. This implies
(a) Investor can sell back the bond at the end of 10th year
(b) Bank would buy back the bond at the end of 10th year
p
(c) Bank may or may not buy bank bond at the end of 10th year
(d) None of these
Ans:- c
ee
Which of the following financial papers are option contracts

(a) Shares issued by joint stock companies
(b) FCCBs
(c) Debentures issued by a company repayable in 3 installments
(d) GOI bonds
D
Ans:- b
Premium on an exchange traded option on a given underlying at a

given strike price varies on a day to day basis. This variation does
not depend upon
(a) Price of the underlying

Dec 2017
(b) Strike price
(c) Remaining time to maturity
(d) Volatility
Ans:- b
da
The underlying of interest rate future in a given currency is
(a) The currency
(b) Bonds issued by respective sovereigns
(c) Bonds issued by corporate in the given currency
(d) Gold
Ans:- b
oo
A financial institution buys a specified no. of futures at NSE on a
stock at Rs 90/- each when spot price of the stock is Rs 95. At the maturity of the contract the Fl
takes delivery of the shares. During the period of holding the stock price had averaged Rs 97 with
standard deviation of Rs 3. The acquisition cost to the Fl per share is (ignore any commission
charged by exchange)
(a) Rs 95
(b) Rs 90
(c) Rs 97
(d) None of these
Ans:- b
H
Daily mark-to-market in case of an exchange trade futures contract implies
ak
(a) Daily difference in spot price is settled between exchange and holder
(b) Daily difference in futures price is settled between exchange and holder
(c) Daily difference in futures price is adjusted from the margin held
(d) Daily difference in spot price is adjusted from the margin held
Ans:- b
Exchange traded futures resemble most the following derivative

(a) Swaps
p
(b) Options
(c) Forward contracts
(d) None of these
ee
Ans:- c
Which of the following forex futures are/is traded in Indian exchanges

(a) USD/EURO V
(b) GBP/AUD
(c) JPY/INR
D
(d) ALL of these

Ans:- c
In a swap transaction
(a) There are no buyer/seller
(b) Fixed rate receiver is the buyer

Dec 2017
(c) Floating rate receiver is the seller
(d) Fixed rate payer is the buyer
Ans:- d
da
MIFOR is
(a) Mumbai inter-bank offered rate for fortnight
(b) Combination of LIBOR & forward premium discount
(c) A Combination of MIBOR & forward premium/discount
(d) Management information on forex submitted to RBI
Ans:- b
oo
(a) risk- free interest rate of the two currencies
(b) inflation rate in both the countries
(c) LIBOR and RBI reference rate
Ans - a
Quanto swaps refer to

H
(a) Paying interest in foreign currency at rates applicable to home currency
(b) Paying interest in home currency at rates applicable to foreign currency
(c) Paying interest in foreign currency at rates applicable to foreign currency
(d) None of these
ak
Ans:- b
____ swap refers to paying interest in home currency at rates applicable to a foreign currency.
(a) Quanto
(b) Coupon
(c) Swaptions
(d) Plain vanilla
Ans -a
p
Who is eligible to take Export turnover policy from ECGC?

(a) Exporters with turnover not exceeding Rs 10 lakhs per year
ee
(b) Exporters who contribute not less than Rs. 10 lakhs towards premium
(c) Exporters with turnover exceeding Rs 10 lakhs per year
(d) Exporters who contribute not more than Rs. 10 lakhs towards premium
Ans:- b
Which of the following is not a free currency in the foreign exchange market?
D
(a) USD
(b) Rupee
(c) EUR
(d) None of these
Ans:- b

Dec 2017
Mirror accounts are shadows or reflections of ...... account.

(a) Loro
(b) Vostro
da
(c) Nostro
(d) None of these
Ans:- c
oo
(a) NRE term deposit is opened for a minimum tenor of 1 year and for a maximum tenor of 3 years
(b) NRE account is exempted from income tax, wealth tax and gift tax
(c) NRE account can be opened jointly with a person resident in India
(d) The maximum temporary overdrawing permitted in NRE account is Rs 50,000
Ans:- c

H
(a) Power of attorney can be granted by an NRE account holder to residents to operate this account
(b) NRO account is exempted from income tax, wealth tax and gift tax
(c) NRO account can be opened jointly with a person resident in India
(d) An amount up to Rs 1 lac can be repatriated out of funds held in NRO account
ak
Ans:- d
In Indi(a) market for currency futures commenced in

(a) August 2008
(b) August 1993
(c) October 2004
(d) the market yet to commence operations
Ans -a
p
A fixed for floating swap on a notional amount of Rs 10 Cr exchanges 9% fixed against 2% over
MIBOR. Settlement is up front based on closing MIBOR of the immediately preceding quarter. If
ee
the Mibor is 4% on the last day of the quarter, what is amount of settlement and who pays it?
Given risk free rate is 5%.
(a) Rs 12,50,000 floating rate payer
(b) Rs 12,34,567 fixed rate payer
(c) Rs 7,4O,740 fixed rate payer
(d) Rs 7,50,000 fixed rate payer
D
Ans:- c
A 3/6 FRA for ?1 Crore at 5% implies that

(a) Rs 1 Crore would be made available after 3 months for 6 months @ 8% interest
(b) Rs 1 Crore would be made available @8% interest for 6 months

Dec 2017
(c) 3 months fund is fixed at 8% after 3 months from date on a notional amount of Rs 1 Crore
(d) None of these
Ans:- c
da
A corporate body raises funds in US market in USD and enters into
principal only USD/INR swap with a bank. Under the arrangement
(a) He will pay interest in USD and repay in USD
(b) He will pay interest in USD and repay in INR
(c) He will pay interest in INR and repay in INR
(d) He will pay interest in INR and repay in USD
Ans:- b
oo
A corporate body raises funds in US market in USD and enters into USD/INR coupon only swap
with a bank Under the arrangement
H
(d) He will pay interest in INR and repay in USD l
Ans:- d
A corporate body raises funds in US market in USD and entered into

USD/INR P&I swap with a bank under the arrangement
ak
(d) He will pay interest in INR and repay in USD
Ans:- c
A domestic company raises funds in his home country for investment overseas. The company
would consider currency swap because
(a) Interest rate advantage the company enjoys in domestic market
p
(b) To derive the benefit of interest arbitrage

(c) Revenue accrues on investment in foreign currency
(d) None of these
ee
Ans:- c
Principal and coupon swap may be considered as

(a) A series of currency forwards
(b) A series of interest rate forward
(c) Both (a) & (b)
D
(d) It is different from currency forwards and/or interest rate forwards

Ans:- c
Which of the following methods of calculating VAR does not need a variance/covariance matrix?
(a) Historical simulation method
(b) Monte carlo simulation method

Dec 2017
(c) Correlation method
(d) none of these
Ans -a
da
Banks have been permitted by RBI to engage into interest rate swaps for
(a) Hedging only
(b) Trading only
(c) Market making
(d) ALL of these
Ans:- d
oo
MIFOR as a bench mark for interest rate swaps can be used by banks for
(a) Bank to corporate deals
(b) Bank to Bank deals
(c) Bank to mutual funds deals
(d) ALL of these
Ans:- b
(a) 1998
(b) 2003
(c) 2008
H
USD/Rupee options were allowed in Indian market in the year
ak
(d) None of these
Ans:- b
In which of the following exchanges forex futures is/are not traded

(a) MCX-SX
(b) NCDEX
(c) NSE -
(d) Forex futures are traded in all these exchanges
p
Ans:- b
The oldest derivative product in Indian market is

ee
(a) Futures
(b) Forward contracts
(c) Options
(d) Swap
Ans:- b
D
Banks engage in maturity intermediation. This implies

(a) Accepting deposits of various maturities
(b) Extending Credit of varying maturity
(c) Creating assets of various maturities which is independent of maturities of individual liabilities

Dec 2017
(d) None of these
Ans:- c
Risk intermediation by banks imply
da
(a) Reducing risk on its asset portfolio
(b) Reducing risk on liabilities contracted by banks
(c) Absorbing Credit and market ‘risks and ensuring lower risk for depositor's funds
(d) None of these
Ans:- c
oo
Maturity intermediation results in
(a) Liquidity risk
(b) Net interest income risk
(c) Net-worth risk
(d) ALL of these
Ans:- d
In ALM parlanace, cash inflows represent

(a) Liabilities
(b) Maturing liabilities
(c) Assets
(d) Maturing assets
H
ak
Ans:- d
Asset liability maturity mismatch results in

(a) Net interest income risk
(b) Liquidity risk
(c) Net worth risk
(d) ALL of these
Ans:- d
p
ALM mismatch results in interest loss if

(a) Interest rates on advances decline
ee
(b) interest rates on deposits increase

(c) Net interest income falls
(d) ALL of these
Ans:- c
Funding assets with relatively shorter-term liabilities results in

D
(a) Relatively lower spread

(b) Higher NII if interest rate declines
(c) Higher NII if interest rate goes up
(d) None of these
Ans:- b

Dec 2017
Funding assets with relatively longer-term liabilities results in
(a) Relatively higher spread
(b) Higher NII if interest rate declines
(c) Higher NII if Interest rate goes up
da
(d) None of these
Ans:- c
oo
Liquidity risk can be reduced by using the following derivatives
(a) Interest rate swaps
(b) Interest rate futures
(c) FRAs
(d) None of these
Ans:- d
(b) Interest rate futures

(c) FRAs
(d) ALL of these
H
Interest rate risk can be reduced by using the following derivatives.
(a) Interest rate swaps
ak
Ans:- d
In terms of RBI guidelines, next day liquidity as indicated by asset

liability maturity mismatch gap should not fall below
(a) 5%
(b) (-) 5%
(c) 10%
id) (-)10%
p
Ans:- b
For the purpose of assessing interest rate risk in a bank using ‘Gap
ee
Method, assets and liabilities are placed in VARious term buckets

(a) Based on their respective maturities
(b) Based on their respective remaining maturities
(c) Based on their respective remaining period for repricing
(d) None of these
Ans:- c
D
A bank secures large deposits for a period of one year and deploys
the same in a government bond having remaining maturity of 3 years. it was decided to hedge the
transaction by way of
(i) swapping one year interest rate into a 3 year interest rate or
(ii)swapping 3 year interest rate into one year interest rate.

Dec 2017
Hedging achieved by
(a) (i) only
(b) (ii) only
(c) Both (i)& (ii)
da
Ans:- c
oo
A bank holds stocks of a company ‘A’ and wants to pr
downside risk on it. It may
(d) Sell put option
Ans:- b H
A bank borrows US$ for 3 months @ 2.5% and swaps the same into INR for 3 months for
deployment in CPs @ 5.5%. The 3 months premium on US$ is 0.75%, the margin generated by the
ak
bank in the transaction is
(a) 3%
(b) 2.25%
(c) 5.5%
(d) None of these
Ans:- b
Conventional Credit is converted into tradable assets through a process called

p
(a) PTCs
(b) Credit default swaps
(c) Securitization
ee
(d) ALL of these

Ans:- c
Credit derivatives help the issuer

(a) To increase income and reduce capital requirement
(b) Reduce capital requirement and reduce risk
D
(c) Reduce risk and increase income

(d) Reduce capital requirement and risk and augment income
Ans:- b
Credit default swap is very profitable for protection seller because

(a) CDs are highly leveraged

Dec 2017
(la) Regulatory capital is not required 4
(c) Premium is earned without any investment
(d) Credit default seldom happens
Ans:- c
da
Basic assumption(s) in transfer price mechanism is/are
(a) Purchase of deposits contracted by branches by treasury
(b) Sale of loans contracted by branches to treasury
(P) Recovery of hedging cost and cost of reserve maintenance
(d) ALL of these
Ans:- d
oo
Transfer pricing policy may be considered as a component of
(a) Investment policy
(b) Derivatives policy
(c) Integrated risk management policy
(d) ALM Policy
Ans:- d
(a) Cost of Deploying funds

(b) Operating Expenses
H
Which of the following is not included in (risk) pricing ?
ak
(c) Capital Charge
Ans - c
Revaluation reserve is a type of

(a) Deposit liability
(b) Capital
(c) Investment
(d) Fixed asset
p
Ans:- b
In bank‘s balance sheet interest accrued on borrowings are included under

ee
(a) Borrowings
(b) Profit & Loss Account
(c) Other Liabilities & Provisions
(d) Other Assets
Ans:- c
D
The main source of funds for banks is

(a) Capital
(b) Borrowings
(c) Deposits
(d) Contingent Liabilities
Ans:- c

Dec 2017
Second most liquid asset in a bank's book is

(a) Investment in government securities
(b) Money at call
da
(c) CRR Balance with RBI
(d) Cash in hand
Ans:- b
oo
Net interest income of a bank is
(a) Gross profit of the bank plus operating expenses
(b) Net profit of the bank plus provisions
(c) Interest income net of interest expenses
(d) Interest income plus non-interest income
Ans:- c
Net-interest margin is
H
(a) Net interest income to average total assets
(b) Interest income net of interest expenses
(c) Yield on advances net of cost of deposits
(d) Interest income plus non-interest income to average assets
ak
Ans:- a
The ratio of shareholders funds’ to total assets is called

(a) Capital adequacy ratio
(b) Economic equity ratio
(c) Return on assets
(d) Capital ratio
Ans:- b
p
Return on asset is a measure of

(a) Profitability
ee
(b) Asset quality

(c) Asset growth
(d) Adequacy of capital
Ans:- a
Net NPA is a measure of

D
(a) Profitability
(b) Quality of Credit portfolio
(c) Asset growth
Ans:- b

Dec 2017
Capital adequacy ratio is a measure of
(a) Profitability
(b) Asset quality
(c) Asset growth
da
Ans:- d
oo
Provision for expenses made is included in
(a) Other liabilities
(b) Other assets -
(c) Operating expenses
(d) Reserves and surplus
Ans:- a
(b) Capital and reserves

(c) Other liabilities
(d) Other assets
H
Provision for loan losses are accounted for under
(a) Advances
ak
Ans:- a
Depreciation in investment is accounted for under

(a) Advances
(b) Capital and reserves
(c) Other liabilities
(d) Investment
Ans:- d
p
Bills rediscounted is a
(a) Liability Item
ee
(b) Asset item

(c) Contingent liability item
(d) Profit and loss item
Ans:- a
Back ended subsidy is held in bank's book as

D
(a) Liability
(b) Asset
(c) Contingent liability
(d) None of these
Ans:- a

Dec 2017
Counter guarantee obtained from a borrower against guarantee issued at his request is held in
bank's book as
(a) Liability
(b) Contingent asset
da
(c) Contingent liability
(d) This is not held in books
Ans:- d
oo
Repo (sale of securities with repurchase agreement) is a
(a) Liability item
(b) Asset item
(d) None of these
Ans:- a
(b) Asset item

(d) Contingent asset item
H
Reverse repo (purchase of securities with sale agreement) is a
(a) Liability item
ak
Ans:- b
Future foreign exchange bought is a

(a) Liability item
(b) Asset item
(d) None of these
Ans:- c
p
Future exchange sold is a

(a) Liability item
ee
(b) (Asset item

(d) Contingent asset item
Ans:- c
To improve liquidity position a bank may

D
1) Increase long term assets,

2) Increase short term assets,
3) increase long term liabilities,
4) Decrease contingent liabilities
(a) 1 and 2 only
(b) 2 and 3 only

Dec 2017
(c) 3 and 4 only
(d) 4 and 1 only
Ans:- b
da
oo
Profitability of a bank may increase if it
1) Increases long term assets sets,
2) increases short term assets,
3) Increases long term liabilities,
4) Increases contingent liabilities
(a) 1 & 2 only
(b) 2 & 3 only
(c) 3 & 4 only
(d) 4 & 1 only
Ans:- d
H
Asset Liability Management is carried out in banks
ak
(a) To ensure that deposit and Credit targets set are achieved
(b) To ensure that profit planned is achieved
(c) To ensure that bank is aware of liquidity and interest rate risk in
the books of bank
(d) To ensure that asset and liabilities remain matched
Ans:- c
Net-interest margin indicates most importantly

p
(a) Profitability of core business of banks

(b) Overall profitability
(c) Proper asset pricing
ee
(d) Proper pricing of dep0sits

Ans:- a
Economic Equity Ratio resembles most with

(a) Debt equity ratio
(b) TOL to TNW
D
(c) TNW to total liabilities

(d) Long term assets to long term liability
Ans:- c
Confidence of Banks depositors regarding safety of their deposits arise from

(a) Adequacy of capital

Dec 2017
(b) Deposit insurance
(c) Confidence in the banking system
(d) ALL of these
Ans:- d
da
The Cooke ratio is
(a) A measure of Credit exposure
(b) A measure of capital in relation to risks
(c) A measure of risk weighted assets covering Credit exposure
(d) A measure of risks in off balance sheet items
Ans:- b
oo
A contract of GBP 25000 is traded at LIFFE for delivery on 28 March, say at 1.6650, as against
spot exchange rate of 1.60. The contract implies that on 28th March the seller would deliver to the
holder of the contract, GBP 25000 against payment of equivalent USD at the rate of 1.6650. On the
settlement date, if the market rate of GBP is 1.70, the seller will pay to the holder the difference in
contracted price and spot price on that date
(a) USD 0.035 per pound
(b) USD 0.065 per pound
(c) USD 3.265 per pound
(d) USD 3.365 per pound
Ans:- a
H
ak
A bank identified 4 assets (a, b, c and d) with a view to reduce risk. it has to choose one of them
Which one of the following Criteria would be most relevant for the purpose?
(a) Risk capital required for each assets
(b) Return on risk capital vis- à- vis that for the portfolio
(c) Correlation of assets with the portfolio
(d) Income earned on assets
Ans:- c
p
A type of derivative where the customer has options to exercise his option at any time during the
period covered by the contract is ......
(a) American Options
ee
(b) European Options

(c) Hybrid Options
(d) Vanilla Options
Ans:- a
An export bill has been 'Crystallized'. The bill was retired by the importer abroad later. The rate to
D
be applied for Crediting exporter's a/c is ......

(a) Bill buying rate
(b) Bill selling rate
(c) TT buying rate
(d) TT Selling rate
Ans:- C

Dec 2017
Full fledged money changers are the firms/ organizations authorized to undertake ...... (i) purchase
of foreign currency notes, coins and travelers' cheques from the public (ii) sale of foreign currency
notes, coins and travelers' cheques to the public
da
(a) Only (i)
(b) Only (ii)
Ans:- d
oo
Special Purpose Vehicle (SPV) mechanism is suggested in the budget for development of ......
(a) Infrastructure
(b) Money Market
(c) Govt. Security Market
(d) Gold Market
Ans:- a
Repo transaction refers to ......

(a) Absorption of liquidity by RBI H
(b) Sale of security which is Held To Maturity (HTM)
(c) Injection of liquidity by RBI
(d) Sale of security which is Available for Sale
ak
Ans:- c
Reverse Repo transaction refers to ......

(a) Injection of liquidity by RBI
(b) Absorption of liquidity by RBI
(c) Sale of security which is Held To Maturity (HTM)
(d) Sale of security which is Available for Sale
Ans:- b
p
The capacity of a bank or business organization to absorb losses on account of market risk.
(a) Risk absorption capacity
ee
(b) Risk aversion capacity

(c) Risk taking capacity
(d) Risk appetite
Ans:- d
Foreign Exchange markets participants are except one

D
(a) Central Banks

(b) Commercial Banks
(c) Foreign banks
(d) Investment Funds/Banks
Ans:- c

Dec 2017
The Forward price of a currency against another can be worked out with the following factors. Pick
up odd one
(b) The Interest rate differentials for the currencies.
da
(c) The term i.e. the future period for which the price is worked out.
(d) none of these
Ans:- d
oo
Qualitative difference between Tier I capital and Tier II capital is
(a) Tier l capital is long term debt and Tier II capital is short term debt
(b) Tier I capital is equity equivalent but Tier II capital is long term debt
(c) Tier I capital is free from any kind of lien or earmarking but Tier II
capital is earmarked for a possible liability
(d) ALL of these
Ans:- c
immediately, is called ......

(a) liquidation of the bank
(b) failure of bank
H
A situation where the depositor of a bank lose confidence in the bank and withdraw their balances
ak
(c) run on the bank
(d) out of the money
Ans:- c
Level of Tier II capital

(a) May not be less than Tier I capital
(b) May only be equal to Tier I capital
(c) May not exceed Tier I capital
p
(d) May be of any amount

Ans:- d
ee
On acceptance of an order for supply of goods to the buyer, the seller may face the situation of non
(a) seller Risk
(b) buyer Risk
(c) Market Risk
(d) Shipping Risk
Ans:- b
D
Under floating exchange rate, the value of the currency is decided by .....for a particular currency.
(a) Market rate
(b) Supply and demand factors
(c) Floating exchange rate system
(d) Chain rule

Dec 2017
Ans:- b
floating exchange rate regime in .....

(a) 1973
da
(b) 1981
(c) 1990
(d) 1993
Ans:- d
oo
For the purpose of capital adequacy, .
(a) Tier II capital is limited to the level of Tier I capital
(b) Tier l capital is limited to the level of Tier II capital
(c) Both a & b
(d) None of these
Ans:- a
IPDIs are
(b) Debts and qualify for Tier I capital

H
(a) Free reserves and qualifies for Tier II capital
(c) Free reserves and qualifies for Tier I capital

(d) Debts and qualify for Tier II capital
ak
Ans:- b
When seller fails to ship the goods on receipt of advance payment, the risk to the buyer under such
a situation is called:
(a) Seller Risk
(b) Buyer Risk
(c) Market Risk
(d) Shipping Risk
p
Ans:- a
The International Chamber of Commerce (ICC)was established in 1919 headquartered at

ee
(a) Newyork
(b) Paris
(c) Brussels
(d) switzerland
Ans:- b
D
PNCPS are
(a) In the nature of capital and qualifies for Tier II capital
(b) Debts and qualify for Tier I capital
(c) Debts and qualifies for Tier II capital
(d) In the near future of capital and qualifies for Tier I capital
Ans:- d

Dec 2017
Revaluation reserves
(a) Qualify for Tier l capital but limited to 55% of it
(b) Qualify for Tier II capital but limited to 55% of it
da
(c) Qualify for Tier | capital but limited to 45% of it
(d) Qualify for Tier II capital but limited to 45% of it
Ans:- d
oo
A bank makes provision in an account with outstanding balance of Rs 100 Cr (Risk Weight 150%)
of Rs 30 Cr. The amount that will qualify for Tier II capital is
(a) Rs 1.25 Cr
(b) Rs 30 Cr
(c) Nill
(d) None of these
Ans:- c

(b) USD 10000
H
ak
(c) USD 5000
(d) £ 1000
Ans:- c
In UCPDC- 600 what does 600 mean?

(a) It has total 600 rules
(b) It is group of 600 countries
(c) Publication no 600 is the latest version
p
(d) It is amended 600 times since implemented

Ans:- c
ee
A bank makes a floating provision of f 100 Cr against its Credit exposure. The amount that will
qualify for Tier II capital is
(a) Rs 100 Cr
(b) Rs 100 Cr provided it is within the limit allowed for the purpose
(c) Nil
(d) None of these
D
Ans:- b
The instrument(s) that does not qualify for upper Tier II capital is/are
(a) PCPS
(b) RNCPS
(c) PNCPS

Dec 2017
(d) ALL of these
Ans:- c
The schemes of ECGC are governed by ......
da
(a) SEBI
(b) RBI
(c) IRDA
(d) ICC
Ans:- c
oo
Eligible portion of subordinated debts that qualify for Tier II may not exceed
(a) 50% of total Tier II capital
(b) 100% of Tier I capital
(c) 50% of Tier I capital
(d) 100% of upper Tier II capital
Ans:- c
H
A bank has invested in equity capital of a company amounting to Rs 80 Crs and is 80% of the total
equity of the company. The bank would be required to provide capital against it by way of
(a) 9% of risk weighted asset equivalent of the investment
(b) Deduction of Rs 80 Cr from its Tier l capital
(c) Deduction of Rs 80 Cr from its Tier II capital
ak
(d) Deduction of Rs 40 Cr from its Tier I capital and deduction of Rs 40 Cr from its Tier II capital
Ans:- d
Credit enhancement provided by banks on securitized instruments originated by them by way of

Second Loss Facility requires capital allocation by way of
(a) 100% deduction from Tier I capital
(b) 100% deduction from Tier II capital
(c) 56% deduction from Tier l capital and 50% deduction from Tier II capital
p
(d) 9% of risk weighted asset equivalent of the facility

Ans:- c
ee
Securitized instruments originated by banks and held by them to the

extent of 5% would require capital allocation by way of
(a) 100% deduction from Tier I capital
(b) 100% deduction from Tier II capital
(c) 50% deduction from Tier I capital and 50% deduction from Tier II capital
(d) 9% of risk weighted asset equivalent of the holding
D
Ans:- c
In terms of 1988 Basel Accord risk weight for corporate exposure

rated ‘A’ and that rated ‘B’ is
(a) 50% & 100% respectively
(b) 50% 8. 50% respectively

Dec 2017
(c) 100% & 50% respectively
(d) 100% & 100% respectively
Ans:- d
da
Under Basel II, capital requirement under the accord is
(a) The maximum capital that is required to be maintained
(b) The minimum capital that is required to be maintained
(c) The minimum capital as specified by the regulatory authority is required to be maintained
Ans:- c
oo
The portfolio when not diversified gets ...... risk.
1. systematic
2. concentration
3. intrinsic
4. default
(a) 1 or 2
(b) 2
(c) 1 or 3
(d) 3 and 4
Ans:- b
H
ak
LC in which a second set of fresh LC opened in favour of second beneficiary on the strength of
original LC is ...... LC
(i) Back to Back,
(ii) Green Clause
(a) Only (i)
(b) Only (ii)
p
Ans:- a
Basel Committee will test a minimum Tier 1 leverage ratio of___% during the parallel run period
ee
from 01.01.13 to 01.01.17

(a) 4%
(b) 3%
(c) 2%
(d) 1%
Ans:- b
D
Net Stable Funding Ratio (NSFR) are to be introduced in ......

(a) 2017
(b) 2016
(c) 2018
(d) 2019

Dec 2017
Ans:- c
As per Basel 3 implementation in India Common equity tier 1 capital must be _____%of risk
weighted assets on ongoing basis:
da
(a) 5.5%
(b) 7%
(c) 9%
(d) 11%
Ans:- a
oo
In terms of 1988 Basel Accord risk weight for bank exposures is
(a) Dependant on its rating
(b) Dependant on its rating and its location
(c) 20% for all banks
(d) None of these
Ans:- c
(a) 60%
(b) 55%
(c) 50%
H
As per Basel 3 the value of revaluation reserve is to be taken at _____% discount to include in tier
2 capital
ak
(d) 45%
Ans:- b
In a regulatory system, where all Credits have uniform risk weight

irrespective of its rating, banks would
(a) Lend in least risky assets
(b) Lend in riskier assets as they would earn more for a given capital
(c) Lend without taking into account risk content of the exposure
p
(d) Price all assets equally

Ans:- b
ee
Which of the following differentiates Basel I and Basel II

(a) Risk sensitive approach
(b) Capital to risk weighted asset ratio
(c) Market risk
(d) ALL of these
Ans:- a
D
Which of the following approaches have been described under Basel I for market risk?
(a) Standardised Maturity method
(b) Standardised duration method
(c) Internal Models method
(d) None of these

Dec 2017
Ans:- d
Basel II is mandatory for which of the following class of banks

(a) Banks operating within a country
da
(b) Banks operating within a local area
(c) Banks operating in its home country and beyond
(d) ALL of these
Ans:- c
oo
Revised capital adequacy norms in India is not applicable for
(a) Commercial banks who are not operating outside India
(b) Branches of banks registered overseas
(c) Regional rural banks
(d) None of these
Ans:- c
(b) seven years

(c) thirty years
(d) Ten year
H
The tenor of state government securities is normally ......
(a) Five year
ak
Ans:- d
Prescriptions under Basel II and Basel I differ in respect of

(a) CRAR
(b) Inter-se ratio of Tier I and Tier II capital
(c) Capital requirement for market risk
(d) None of these
Ans:- d
p
Basel II prescribes Advance Management Approach for

(a) Assessment of capital for Credit risk
ee
(b) Assessment of capital for market risk

(c) Assessment of capital for operational risk
(d) Assessment of capital for liquidity risk
Ans:- c
Basel II prescribes Basic Indicator Approach for

D

Ans:- c

Dec 2017
Basic Indicator Approach (BIA) is one of the methods for computation of capital charge for:
(b) Market risk
da
(d) Credit risk
Ans:- c
oo
Basel II prescribes Internal Model Method for
Ans:- b
Basel II prescribes FIRB Approach for

H
ak
Ans:- a
For standard assets, the provision required is ...... of the outstanding amount.
(a) 0.10%
(b) 0.20%
(c) 0.40%
(d) 0.25%
Ans:- c
p
Basel II prescribes AlRB Approach for

ee

Ans:- a
Subordinated bonds with original maturity of 2 years qualify for

D
(a) Tier I capital

(b) Tier II capital
(c) Tier III capital
(d) ALL of these
Ans:- c

Dec 2017
Banks using the Basic Indicator approach must hold capital for operational risk equal to the
average over the previous _____ years of 15% of positive annual gross income.
(a) 2
(b) 3
da
(c) 4
(d) 5
Ans - b
oo
Basel II provides for Tier ILL capital but limits it to
(a) 100% of Tier I capital
(b) 100% Of Tier II Capital
(c) 100% of Tier I capital
(d) No limit
Ans:- c
H
Banks are required to maintain regulatory CRAR
(a) On the date of their quarterly closing
(b) On the date of their half yearly closing
(c) On the date of their yearly closing
(d) None of these
ak
Ans:- d
In repo transaction, banks ____ from / to RBI.

(a) Interest arbitrage exists only when one of the currencies exchanged is fully convertible.
(b) No interest arbitrage exists between free currencies as the forward premium / discount equals
interest rate differentials.
(c) The swap is used to widen the mismatch between currency and interest rate.
(d) both b and c
p
Ans:- b
As per Basel II, to ensure that required capital level is maintained by banks on an ongoing basis is
ee
a responsibility of
(a) Banks
(b) Supervisors
(c) Both banks and supervisors
(d) Basel II does not prescribe such responsibility
Ans:- c
D
SRP does not cover

(a) Risks not taken in to account in terms of Pillar l
(b) Risks not fully captured in terms of Pillar I
(c) Regulatory disclosures
(d) Risk assessment processes

Dec 2017
Ans:- c
ICAAP and SREP are the two important components ......

(a) Minimum Capital Requirements
da
(b) Supervisory Review process
(c) Market Discipline
(d) All the above
Ans:- b
oo
Liquidity risk is reflected as _____ which is the gap in ......
(a) maturity mismatch, cash inflow and outflow
(b) total cash hel(d) receipts and payments
(c) committed lines, lines utilized and unutilized
(d) NPAs, total assets and performing loans
Ans:- a
H
Next 12 Questions are based on the following: -
Risks in banking business may be categorized in to following 4 categories:

Category 1 - Risks that are reasonably captured under Pillar I guidelines
Category 2 - Risks that are not captured under Pillar I guidelines
ak
Category 3 - Risks that are partially captured under Pillar I guidelines
Category 4 -Risks that may be underestimated under Pillar I guidelines
interest rate risk in trading book may be categorized as

(a) Category 1
(b) Category 2
(c) Category 3
(d) Category 4
p
Ans:- a
ee
Interest rate risk in banking book may be categorized as

(a) Category1
(b) Category 2
(c) Category 3
(d) Category 4
Ans:- b
D
Credit concentration risk may be categorized as

(a) Category 1
(b) Category 2
(c) Category 3
(d) Category 4

Dec 2017
Ans:- b
Strategic risk may be categorized as

(a) Category1
da
(b) Category 2
(c) Category 3
(d) Category 4
Ans:- b
oo
Reputational risk may be categorized as
(a) Category 1
(b) Category 2
(c) Category 3
(d) Category 4
Ans:- b
Model risk may be categorized as

(a) Category 1
(b) Category 2
(c) Category 3
(d) Category 4
H
ak
Ans:- d
Liquidity risk may be categorized as

(a) Category 1
(b) Category 2
(c) Category 3
(d) Category 4
Ans:- b
p
Credit risk under standardized approach may be categorized as

(a) Category 1
ee
(b) Category 2
(c) Category 3
(d) Category 4
Ans:- d
Credit risk under AIRB approach may be categorized as

D
(a) Category 1
(b) Category 2
(c) Category 3
(d) Category 4
Ans:- a

Dec 2017
In case of risks categorized as category 2, Basel II
(a) Does not prescribe additional capital
(b) Prescribes for additional capital at the discretion of supervisors
(c) Relies on disclosures prescribed under Pillar II
da
(d) Both b and c
Ans:- b
oo
In case of risks categorized as category 3, Basel II
(c) Relies on disclosures prescribed under Pillar III
(d) Both b and c
Ans:- c
H
In case of risks categorized as category 4. Basel II
(c) Relies on disclosures prescribed under Pillar IIl
(d) Both b and c
ak
Ans:- d
A treasury transaction with a customer is known as ......

(a) Merchant banking business
(b) Trading business
(c) Investment business
(d) Commercial banking
Ans:- a
p
Since all assets and liabilities in the banking book are held until maturity, maturity mismatch
between assets and liabilities result in excess or shortage of liquidity. This is known as risk.
ee
(a) market
(b) interest
(c) operational
(d) liquidity
Ans:- d
D
Under SRP
1. Supervisors should review and evaluate banks‘ ICAAP
2. Banks must have capital for projected growth
3. Supervisors may advise banks to hold capital in excess of regulatory capital
(a) 1 and 2 are true

Dec 2017
(b) 2 and 3 are true
(c) 3 and 1 are true
(d) ALL are true
Ans:- c
da
Credit Risk can't be mitigated by ......
(b) Credit Derivatives
(c) Entering into Forward Contracts
(c) Diversification of Advances
Ans - c
oo
Under SRP
1. Banks should have ICAAP process
2. Supervisors may intervene to ensure that capital does not fall below the required level
3. Supervisors have authority to order closure of bank for non compliance with capital
requirements
(a) 1 and 2 are true
(d) ALL are true
Ans:- d
H
ak
Which of the following risks is not included in capital requirement under Basel II?
(a) liquidity risk
(b) interest risk (of banking book)
(c) strategic and business risks
(c) all of these
Ans - d
Interest risk can be mitigated in which of the following way(s)?

p
(a) by using interest rate swaps

(b) by forward rate agreements
(c) by financial futures
ee
(d) none of these

Ans:- d
ICAAP document of the bank may not contain

(a) Anticipated capital expenditure
(b) Monitoring system for compliance with internal policies
D
(c) Strategic plan of the bank

(d) ALL these may be included in ICAAP document
Ans:- d
Principle of proportionality in ICAAP implies

(a) Increasing capital as business level increases

Dec 2017
(b) Apportioning of capital across VARious risk categories proportionally
(c) Additional capital for risks not covered under Pillar I guidelines in
proportion to capital requirement assessed
(d) Higher degree of sophistication in risk assessment methodologies as complexity of banking
da
operation increases
Ans:- d
oo
Risk aggregation in ICAAP implies
(a) Sum total of risks measured across various risks
(b) Sum total of risks measured in terms of Pillar I guidelines
(c) Sum total of risks measured after accounting for risk diversification
(d) Assessment of bank's internal capital, capital adequacy assessment and strategy
Ans:- c
Pillar 3 of Basel II framework requiresH

(a) Banks to maintain discipline in_ marketing their products
(b) Regulatory authorities to monitor the banks’ dealing in the financial market
(c) Banks to mandatorily disclose certain information to the public
ak
(d) Banks to publish annual accounts regularly within a specified time period
Ans:- c
Mandatory disclosures to the market by banks as prescribed under Basel II

(a) Result in increased market acceptance of banks
(b) Helps market to analyse banks financial strength correctly
(c) Helps market to assess risks that a bank is carrying
(d) None of these
p
Ans:- c
Under Pillar 3 guidelines, banks with capital funds of Rs 500 Cr or

ee
more are required to

1. Make interim disclosures on the quantitative aspects on a standalone basis every half year
2. Disclose some capital related information on a quarterly basis
Which of the flowing is correct?
(a) 1 only
(b) 2 only
D
(c) 1 and 2, both

(d) None of these
Ans:- c
Under Pillar 3 guidelines, banks with capital funds of Rs 100 Crs or

more are required to

Dec 2017
1. Make interim disclosures on the quantitative aspects on a standalone basis every half year
2. Disclose some capital related information on a quarterly basis
(a) 1 only
da
(b) 2 only
(c) 1 and 2, both
(d) None of these
Ans:- a
oo
Validation of disclosures imply
1. Disclosed information should be audited by external auditors
2. Disclosed information should be consistent with the way the bank's assets and manage its risks
3. Disclosed information should be subjected to internal controls Which of the flowing is correct?
(a) Only 1 is true
(d) All are true
Ans:- c H
ak
Disclosures made under Pillar 3 of Basel II framework
(a) Should be audited by external auditors
(b) Should be audited by internal auditors -
(c) Should be certified by Board of Directors
(d) Should be subjected to internal controls
Ans:- d
Materiality concept as applicable for disclosure requirements under

p
Pillar 3 implies that an information is material if

1. Omission of the information leads to wrong assessment
2. Misstatement of the information leads to wrong assessment
ee

(a) 1 only
(b) 2 only
(c) 1 and 2, both
(d) Neither 1 nor2
Ans:- c
D
Banks may not disclose certain information under Pillar 3 guidelines if the information is
(a) Proprietary and material
(b) Material and confidential
(c) Confidential and proprietary
(d) Proprietary, confidential and material

Dec 2017
Ans:- d
da
oo
Next 11 Questions are based on the following information:
Pillar 3 prescribes qualitative and quantitative disclosures under the following 13 areas
1. Scope of application
2. Capital structure
3. Capital adequacy
4. Credit risk -general disclosures
H
5. Credit risk -disclosures for portfolios, under standardized approach
6. Credit risk -disclosures for portfolios, under IRB approach
7. Credit risk mitigation - disclosures for standardized and IRB approaches
8. Securitisation - disclosures for standardized and IRB approaches
9. Market risk - disclosures under standardized approach
10. Market risk -disclosures under internal models approach
ak
11. Operational risk
12. Equities - disclosures of banking book positions
13. interest rate risk in the banking book
Disclosures regarding subsidiaries of banks would be included in the

area number
(a) 1
p
(b) 2
(c) 3
(d) 12
ee
Ans:- a
Disclosures regarding main features of PNCPSs would be included in the area number
(a) 1
(c) 2
(d) 3
D
(d) 12
Ans:- b
Disclosures regarding tier I capital ratio would be included in the area number
(a) 1
(c) 2

Dec 2017
(d) 3
(d) 12
Ans:- c
da
Disclosures regarding geographic distribution of Credit exposure
would be included in the area number area number
(a) 4
(c) 5
(d) 6
(d) 7
Ans:- a
oo
Disclosures regarding exposure amount after risk mitigation carrying 100% risk weight would be
included in the area number
(a) 4
(b) 5
(c) 6
(d) 7
Ans:- b
H
Disclosures regarding exposures covered by eligible collaterals would be included in the area
number
(a) 4
ak
(c) 5
(d) 6
(d) 7
Ans:- d
Disclosures regarding comparative position for two years in regard to

securitization exposure would be included in the area number
(a) 5
p
(c) 6
(d) 7
(d) 8
ee
Ans:- d
Disclosures regarding foreign exchange risk would be included in the area number
(a) 9
(c) 11
(d) 13
D
(d) 12
Ans:- a
Disclosures regarding operational risk capital would be included in the area number
(a) 10
(b) 11

Dec 2017
(c) 12
(d) 13
Ans:- b
da
Disclosures regarding changes in earnings on account of rate shock would be included in the area
number
(a) 1o
(b) 11
(c) 12
(d) 13
Ans:- d
oo
Disclosures regarding changes in economic value on account of rate shock would be included in
the area number
(a) 10
(b) 11
(c) 12
(d) 13
Ans:- d
H
Disclosures regarding movement of NPAs would be included in the area number
(a) 4
(b) 5
ak
(c) 6
(d) 7
Ans:- a
A term borrower having due date for payment of monthly interest and installment on 15‘ of every
month is yet to clear 50% of monthly interest amount on 15th of the month. The account is
(a) NPA
(b) Out of order
p
(c) Overdue
(d) None of these
Ans:- c
ee
A term borrower having due date for payment of monthly interest and installment on 1st of every
month is yet to clear 50% of interest charged over last one year on 15th of the month. The account
is
(a) NPA
(b) Out of order
D
(c) Overdue
(d) None of these
Ans:- a

Dec 2017
Balance outstanding in a cash Credit account remains in excess of its
da
drawing power for five days. The account is
(a) NPA
(b) Out of order
(c) Overdue
(d) None of these
Ans:- c
oo
A cash Credit account shows Credits amounting to ? 50,000 over last two months. Interest debited
during the period amounts to 1 65,000. The account is
(a) NPA
(b) Out of order
(c) Overdue
(d) None of these
Ans:- d
(a) Where Crop season is 6 months

H
Which of the following would be treated as long duration Crop? '
(b) Where Crop season is more than 6 months

(c) Where Crop season is 12 months
ak
(d) Where Crop season is more than 12 months
Ans:- d
An agriculture loan having a Crop season of 9 months was allowed

nearly one year before has been repaid but a portion of interest on it
is overdue. The account is
(a) NPA
(b) Out of order
p
(c) Overdue
(d) None of these
Ans:- c
ee
An agriculture loan for rice cultivation remains outstanding for 11

months from its due date. The account is
(al NPA
(b) Out of order
(c) Overdue
D
(d) None of these

Ans:- a
Outstanding amount on account of bills purchased/discounted turns

NPA after
(a) 90 days of date of discount/purchase

Dec 2017
(b) 90 days from date of payment
(c) 180 days of date of discount/purchase
(d) 180 days from date of payment
Ans:- b
da
oo
An agriculture loan for a Crop having Crop season of one and half
year extended on 1st January 2011 would, in case installments and interest remains overdue,
become NPA on
(a) 1st January 2012
(b) 1st January 2013
(c) 1st January 2014
(d) None of these
Ans:- c
H
Banks are required to classify an account as NPA if interest charged
during any quarter is not serviced within
(a) 90 days from the date interest is charged
ak
(b) The quarter
(c) 90 days from the end of the quarter
(d) None of these
Ans:- c
Interest on government guaranteed account is recognized on accrual basis

(a) lf the account is standard
(b) If the account is NPA
p
(c) In case of all accounts whether standard or NPA

(d) In case of all accounts whether standard or NPA provided it is
guaranteed by Central Government
ee
Ans:- a
Interest is recognized in case of NPA accounts on

(a) Accrual basis
(b) Actual basis
(c) Actual basis but after outstanding NPA is realised
D
(d) a or b or c but as per bank's policy

Ans:- b
An advance account becomes NPA at the end of a given year.

Which of the following debits made in the previous year need not be
reversed or provided for

Dec 2017
(a) interest accrued on the account
(b) Interest realized in the account
(c) Renewal charges debited in the account
(d) Legal charges debited in the account
da
Ans:- b
oo
Banking Book relates to assets which are ......
(a) held till maturity and reflected in Balance sheet at acquisition cost.
(b) held till maturity and reflected in Banking book at market cost.
(c) None of above.
(d) all of above.
Ans:- a
(a) enter into swap

(b) enter into forward rate contract
(c) enter into option contract
H
If an asset is highly sensitive to interest rate changes, and if we have a view that rates are likely to
rise, what should we do?
ak
(d) none of these
Ans:- a
Trading book includes :

(a) assets a which normally not held till maturity and mark to market system is followed)
(b) assets which are held till maturity.
(c) assets which are purchased in market.
(d) none of above.
p
Ans:- a
A borrower pays a certain sum of money in an account which has been classified as NPA. The
ee
bank may appropriate the same

(a) Towards interest due on the account
(b) Towards principal amount outstanding
(c) Either ‘a’ or ‘b’
(d) As per bank's own policy adopted for the purpose
Ans:- d
D
Current account balance is ......

(a) Rate sensitive.
(b) Rate non sensitive.
(c) None of above.
(d) All of above.

Dec 2017
Ans b
da
oo
Next 6 questions are based on the table given below, which pertains to a bank's branch as on
31.12.2010.
In Rs Lacs
Account Limit Balance Outstanding Date of becoming NPA
X1 55 57 30 Sep 10
X2 35 38 30 Sep 07
X3
X4
X5
X6
X7
40
110
140
80
100
38
57
76
H
105
105
The account(s) which would fall under the category Doubtful is/are
31 Mar 07
31 Oct 10
30 Jun 05
31 Mar 09
31 Mar 05
ak
(I) X2 and X3
(b) X4 and X5
(0) X2, X3, X5 & X6
(d) X2, X3, X5 & X7
Ans:- c
The account(s) which would fall under the category Sub standard is/are
p
(a) X1 and X4
(b) X1, X4 and X6
(c) X1, X4, X5 & X6
(d) X2, X3, X5 & X6
ee
Ans:- a
The account(s) which would fall under the category Loss is/are
(a) X1, X2 and X4
(b) X1, X4 and X7
(c) X4, X5 & X6
D
(d) None of these

Ans:- d
Total sub standard assets equal

(a) Rs 162 Lacs

Dec 2017
(b) Rs 209 Lacs
(c) Rs 105 Lacs
(d) None of these
Ans:- a
da
Total doubtful assets equal
(a) Rs 162 Lacs
(b) Rs 209 Lacs
(c) Rs 105 Lacs
(d) None of these
Ans:- b
oo
Total loss assets equal
(a) Rs 162 Lacs
(b) Rs 209 Lacs
(c) Rs 105 Lacs
(d) None of these
Ans:- c
H
A company enjoys cash Credit account with a bank. He also has a term loan account with o/s
balance of t 15 Crs as on 31.03. 2010. The bank has also subscribed to the bonds issued by the
borrower company amounting to Rs 3 Crs. As on 31.03.2010 the CC account with 0/s balance of t
1.20 Crs is required to be classified as NPA. There is no default in payment of interest and
installment in the term loan and bonds. The amount that will become NPA on account of this
ak
borrower company is
(a) Rs 1.20 Crs
(b) Rs 16.20 Crs
(c) Rs 19.20 Crs
(d) None of these
Ans:- c
A cash Credit account has a limit of ? 1 Cr. The maximum and minimum o/s balances in the
p
account over last three months were Rs 70 lacs and Rs 62 lacs respectively. The borrower has an
o/s balance in suspense account of Rs 45 lacs over last three months, which is on account of a
guarantee which has devolved. The account is
ee
(a) NPA .
(b) Out of order
(c) Overdue
(d) None of these
Ans:- a
D
A consortium account with bank ‘A’ has been classified by another

member bank as NPA. The bank ‘A’
(a) Must classify the account as NPA
(b) The bank may not classify the account as NPA but treat it as out of order
(c) The bank would decide on the classification based on its recovery performance
(d) None of these

Dec 2017
Ans:- c
A project loan sanctioned on 1.1.11 for Rs 30 Crs with moratorium on

payment of interest and installments for 15 months would become NPA in absence of any
da
repayment of interest and/or installment on
(a) 1.4.11
(b) 1.7.12
(c) 1.4.12
(d) None of these
Ans:- b
oo
Prudential exposure limits for single and group borrowers other than infrastructure projects is ......
(a) 15% of the capital (Tier I and Tier II Capital) of the Bank for single and 40% for the group of
borrowers
(b) 25% for individual borrowers and 50% for group of borrowers
(c) 20% of the capital of the Bank for individual and 50% for the group of borrowers
Ans:- a
H
In which method of calculating VaR, the change in the value of the position is calculated by
combining the sensitivity of each component to price changes in the underlying assets(s)?
ak
(d) none of these
Ans:- c
p
Under advanced IRB, who provides the inputs on the EAD?

(a) bank
(b) suprvisor
ee
(c) none of them

(d) both of them
Ans:- a
calls for shipment of 200 tonnes of good quality wheat cultivated in Punja(b) What is the time
D

(a) 21 days
Ans:- d

Dec 2017
da
(b) Gifts of goods, valuing not over Rs.50000 along with declaration of exports (c) Gifts of goods,
valuing not over Rs.500000 along with declaration of exports
trade agreement
Ans:- c
Failure of the counter party during the course of the settlement (due to time zone differences
oo
between the two currencies to be exchanged is the ...... risk.
(a) Operational
(b) Market
(c) Settlement
(d) Legal
Ans:- c
H
An EEFC account can be opened by ...... with an A(d)
ak
(c) a person resident in India to keep his/her foreign currency assets (notes / traveller cheques, etc
Ans:- b
The minimum and maximum period of FCNR deposits are ...... and ...... years respectively.
(a) 1, 3
(b) 1, 5
(c) 2, 3
p
(d) 2, 5
Ans:- b
ee
Select the incorrect statement (s) from the following (if any).
1. NRI can acquire property by purchase out of balances held in NRE accounts.
2. NRI cannot invest in any partnership firm as owners / partners.
3. NRI can acquire shares on repatriable basis.
4. NRI cannot acquire shares or property by way of inheritance from a person resident outside
Indi(a)
D
(a) 1 & 2
(b) 1 & 3
(c) 2 & 3
(d) 2 & 4
Ans:- d

Dec 2017
When currency is bought, the treasury is said to ......
(a) go short
(b) go long
(c) leverage
da
(d) none of these
Ans:- b
Ability of a business concern to borrow or build up assets on the basis of a given capital is called
oo
(a) debt service coverage ratio
(b) good will
(c) reputation
(d) Leverage
Ans:- d
(b) back office

(c) Risk management
(d) none of these
Ans:- b
H
All related book- keeping and submission of periodical returns to RBI is taken care by ......
(a) Dealing room
ak
Restricted money changers are the firms/organizations authorized to undertake ......
(i) purchase of foreign currency notes from the public,
(ii) purchase of foreign coins and travelers' cheques from the public,
(iii) sale and purchase of foreign currency notes, coins, travelers' cheques to / from the public
p

Ans:- a
ee
An LC which facilitates financing to the supplier prior to shipment is known as ...... L(c)
(a) Red Clause
(b) Negotiation
(c) Back to Back
(d) Revocable
D
Ans:- a
Under Standard Approach retail and SME exposures attract a uniform Risk weightage of ......
(a) 50%
(b) 75%
(c) 80%

Dec 2017
(d) 85%
Ans:- c
The seller agrees to deliver to the buyer a specified security / currency or commodity on specified
da
date, at a fixed price in ......
(b) futures
(c) options
(d) swaps
Ans:- b
oo
Corprate debt paper refers to
are tradable.
(a) short
(b) medium
(c) long
(d) both b and c
Ans:- d
(a) 2
(b) 3
(c) 4
H
According to the mode of settlement, options are divided into ____ types.
ak
(d) 5
Ans:- a
An American type option can be exercised ......

(a) any time before the expiry period
(b) any time after the expiry period
(c) on the expiry date
p
(d) none of these

Ans:- b
ee
A convertible option may give the bond- holder option of converting the debt into equity on
specified terms. Such options are called ______ and have a direct effect on pricing of the bon(d)
(a) stock option
(b) plain vanilla option
(c) embedded option
(d) barrier option
D
Ans:- c
Bank's investment in government securities are classified in to ......

(a) HTM (Held Till Maturity)
(b) AFS (Available For Sale)

Dec 2017
(c) HFT (Held For Training)
(d) all of these
Ans:- d
da
Which of the following is not true regarding ETD (Exchange Traded Derivatives)?
(a) Forward contracts traded on only organized future exchanges are known as future contracts.
(b) It is mostly used for trading and speculation.
(c) Counter party risk is not present.
(d) Price is quoted by the bank, as the pricing is not transparent.
Ans:- d
oo
Which of the following is not true regarding OTC?
(a) It is a derivative product that can be directly negotiated and obtained from authorized banks and
investment institutions.
(b) It is mostly used for hedging underlying risks.
(c) Settlement is mostly by physical delivery.
(d) No counter party risk at all.
Ans:- d
(a) fixed rate to floating rate

(b) floating rate to fixed rate
(c) floating rate to floating rate
H
______ swap is also known as a basis swap.
ak
(d) none of these
Ans:- c
Bonds are governed by ......

(a) Law of Contract
(b) BR Act
(c) Company Law
(d) none of these
p
Ans:- a
What is the limit up to which an individual is permitted to remit overseas without the approval of
ee
RBI?
(a) USD 100000
(b) USD 200000
(c) USD 500000
(d) There is no such limit
Ans:- b
D
Bank's activities under standardised approach are divided into ...... business lines.
(a) 4
(b) 6
(c) 8

Dec 2017
(d) 10
Ans:- c
Which capital is called supplementary capital?
da
(a) Tier- I
(b) Tier- II
(c) Tier- III
(d) none of these
Ans:- b
Pillar III Market Discipline does not consist of ......
oo
(d) Timely at least semi annual disclosures
Ans:- c
(a) 4
(b) 8
(c) 5
(d) 2
H
From the operational risk management point of view banking business lines have been grouped in
how many major heads?
ak
Ans:- b
Which of the following feature(s) apply to a 'Transferable Credit'?

(i) Transfer of such Credit by second
beneficiary back to first beneficiary is not permitted,
(ii) Transferable L/C is one which is expressly written to be 'Transferable',
p
(iii) Transferable L/C can be transferred only once but can be transferred to more than one parties.
ee

Ans:- c
Which of the following institutions facilitate DVP (delivery v/s payment) for secondary market
deals in equity and debt paper?
D
(a) IDRBT
(b) NDS
(c) NSDL and CSDL
(d) NEFT
Ans:- c

Dec 2017
In risk measurement, the parameter that is used to capture deviation of a target variable due to unit
movement of a single market parameter, say 1% change in interest rate is called ......
(a) Downside potential
(b) Volatility
da
(c) Sensitivity
(d) Mitigation
Ans:- c
Potential loss in loan assets is known as ______ risk.
oo
(a) Credit
(b) market
(c) liquidity
(d) operational
Ans:- a
A 'Red Clause' LC is one in which ......
H
(i) the beneficiary can avail pre- shipment finance up to the amount specified in LC,
(ii) there are certain restrictive clauses as to period of shipment negotiation of bills etc
(a) Only (i)

(b) Only (ii)
ak
Ans:- a
Treasury bills are issued by _____ through _____ for maturities of 91 days, 182 days and 364 days
for predetermined amounts.
(a) RBI, GOI
p
(b) GOI, RBI

(c) RBI, Exim bank
(d) GOI, Exim bank
ee
Ans:- b
When return on business is worked out by netting the risk in business, it is called ......
(a) Return on investment
(b) Risk netted return on equity
(c) Risk adjusted return on investment
D
(d) Risk based system

Ans:- c
Which is not an approach to measure Operational Risk?


Dec 2017
(c) IRB Foundation approach
(d) Advanced Measurement approach
Ans:- c
da
Pre- payment of loan amount or withdrawal of deposit amount will add ...... risk.
(a) Credit Risk
(b) Funding Risk
(c) Embedded Option Risk
(d) Liquidity Risk
Ans:- c
VaR (Value at Risk) measure can be used to assess the following risks. Select the incorrect option.
oo
(a) currency
(b) liquidity
(c) interest rate
(d) price
Ans:- b
(a) 10
(b) 20
(c) 30
(d) 50
H
The recognition of insurance mitigation is limited to ...... % of total Operational Risk Capital
Charge calculated under AM(a)
ak
Ans:- b
Tier ___ capital bonds issued by banks fall under corporate debt paper.
(a) 1
(b) 2
(c) 3
(d) none of these
Ans:- b
p
Securities issued by governments are referred to as _____ which do not have any Credit risk.
ee
(a) derivative
(b) gilt
(c) demat A/C
(d) yield
Ans:- b
D
Banks maintain their security accounts (exclusively for government securities) with RBI which is
known as _____ account.
(a) CGL
(b) SGL
(c) BGL
(d) none of these

Dec 2017
Ans:- b
At present, money multiplier moves within a range of 3.5 to 4 times. This money multiplier is
calculated
da
(a) M1*M2
(b) M2 +M3
(c) M3 ÷ M1
(d) M4 ÷M2
Ans:- c
In a perfect market, with no restriction on finance and trade, the ....... is the basic factor in arriving
oo
at the forward rate.
(a) Fixed exchange rate
(b) Interest factor
(d) Floating Exchange rate
Ans:- b
(b) Only (ii)

H
Interest rate risk is a type of ...... (i) Credit risk (ii) Market risk
(a) Only (i)
ak
Ans:- b
Advance granted against which of the following security may not be

treated as NPA as long as o/s balance stands fully secured?
(a) Gold
(b) Government Securities
(c) KVP
(d) Corporate bonds
p
Ans:- c
ee
Next 10 questions are based on the table given below, which pertains to
a bank's branch as on 31.12.2010.
In Rs Lacs
Account Limit Balance Outstanding Date of becoming NPA
D
X1 55 57 30 Sep 10
X2 35 38 30 Sep 07
X3 40 38 31 Mar 07
X4 110 105 31 Oct 10
X5 140 57 30 Jun 05
X6 80 76 31 Mar 09

Dec 2017
X7 100 105 31 Mar 05
Provision required against accountX1 is

(a) Rs 11.40 Lacs
da
(b) Rs 38 Lacs
(c) Rs 10.50 Lacs
(d) None of these
Ans:- a
Provision required against account X2 is

(a) Rs 7.60 Lacs
oo
(b) Rs 38 Lacs
(c) Rs 3.80 Lacs
(d) None of these
Ans:- b

(a) Rs 7.60 Lacs
(b) Rs 38 Lacs
(c) Rs 3.80 Lacs
(d) None of these
Ans:- b
H
ak
(a) Rs 21 Lacs
(b) Rs 38 Lacs
(c) Rs 10.50 Lacs
(d) None of these
Ans:- c

p
(a) Rs 5.70 Lacs

(b) Rs 57 Lacs
(c) Rs 11.40 Lacs
ee
(d) None of these

Ans:- b
(a) Rs 28 Lacs
(b) Rs 7.60 Lacs
(c) Rs 15.20 Lacs
D
(d) None of these

Ans:- a

(a) Rs 10.50 Lacs
(b) Rs 21 Lacs

Dec 2017
(c) Rs 105 Lacs
(d) None of these
Ans:- c
da
Total provision required on sub standard assets is
(a) Rs 8.50 Lacs
oo
(b) Rs 15.40 Lacs
(c) Rs 21.90 Lacs
(d) None of these
Ans:- c
Total provision required on doubtful assets is

(a) Rs 85 Lacs
(b) Rs 161 Lacs
(c) Rs 105 Lacs
(d) None of these
Ans:- b
H
ak
Total provision required on loss assets is
(a) Rs 100 Lacs
(b) Rs 161 Lacs
(c) Rs 105 Lacs
(d) None of these
Ans:- c
Objectives of asset liability management are

p
(a) Growth and liquidity

(b) Liquidity and profitability
(c) Growth and profitability
ee
(d) Growth, profitability and liquidity

Ans:- b
Major demand for liquidity arises from

(a) Deposit withdrawals and loan disbursements
(b) Expenses and loan disbursements
D
(c) Devolvement of LCs and guarantees

(d) Loan assets becoming NPAs
Ans:- a
Bank liquidity is unfavourably impacted, if

(a) Long term liabilities increase

Dec 2017
(b) Short term borrowings increase
(c) Acquisition of a major asset or an entity
(d) Capital funds increase
Ans:- c
da
Bank liquidity is favourably impacted, if
(a) Business opportunity expands
oo
(b) Rating is down graded
(c) Acquisition of a major asset or an entity
(d) Liquid assets are disposed
Ans:- d
Which of the following may be classified as ‘Funding Risk’?

(a) Deterioration in asset quality
(b) Loss of confidence
(c) LC devolvement
(d) Prepayment of loans
Ans:- b
H
ak
Which of the following may be classified as Time Risk?
(a) Premature withdrawal of deposits
(b) Deferment of repayment
(c) Prepayment of loans
(d) Devolvement of guarantees
Ans:- b
Which of the following may be classified as Call Risk?

p
(a) Unanticipated withdrawals affecting outflows

(b) Expected inflows not being realised {
(c) Conversion of non fund based commitment in to fund based exposure
ee
(d) Increased exposure on non fund based business

Ans:- c
A bank with strong liquidity management would have

(a) Good MIS, centrally managed liquidity control & diversified funding resources
(b) Centrally managed liquidity control, diversified funding resources
D
and contingency planning

(c) Good MIS, diversified funding resources and contingency planning
(d) Good MIS, Centrally managed liquidity control, dlV6lS‘fl,€d funding resources and
contingency planning
Ans:- d

Dec 2017
Which of the following is/are Critical for management of liquidity risk in a bank?
(a) Development of an organisation structure for managing liquidity risk -
(b) Setting tolerance level for liquidity risk
(c) Measuring liquidity risk and its monitoring
da
(d) ALL of these l
Ans:- d
Senior most authority overseeing asset liability management function should be

(a) Board of directors
oo
(b) Committee of senior executives
(c) CEO -
(d) Head, ALM function
Ans:- a
For banks with international presence, options available for back up liquidity in foreign currency
may not include
(a) Home currency sources
(b) Credit lines in foreign currency
(c) Borrowings from central banks
(d) Customer deposits
Ans:- c
H
ak
Net loans to total deposit ratio is tracked in measuring liquidity under stock approach. The net
loans refer to
(a) Term loans and demand loans
(b) Term loans net of accrued interest
(c) Total advances net of accrued interest
(d) Total advances net of provisions and interest suspense
Ans:- d
p
Core deposits to total assets ratio is tracked in measuring liquidity under stock approach. The core
deposit refers to
ee
(a) Savings bank deposit

(b) Public deposit in the normal course of business
(c) Total deposit net of volatile portion
(d) Term deposits with one year or more remaining maturity
Ans:- b
D
Prime asset to total asset ratio is tracked in measuring liquidity under stock approach. Prime asset
refers to
(a) Cash and gold
(b) Loans extended to AAA rated companies
(c) Government securities
(d) Cash and balances with bank including central bank

Dec 2017
Ans:- d
Market liabilities to total asset ratio is tracked in measuring under stock approach. Market
liabilities refer to
da
(a) Money market borrowing
(b)Interbank liabilities
(c) Money market borrowings and Inter-bank liabilities
(d) Money market borrowings, inter-bank liabilities and short term deposits
Ans:- c
Which of the following ratio is considered better if lower, in measuring liquidity under stock
oo
approach?
(a) Core deposit to total asset
(b) Net loans to total deposit
(c) Time deposit to total deposit
(d) Liquid asset to total asset
Ans:- b
(a) Volatile liabilities to total assets

(b) Prime assets to total assets
(c) Market liabilities to total assets
H
approach?
ak
(d) Core deposit to total asset
Ans:- a
approach?
(a) Time deposit to total deposit
(b) Liquid asset to total asset
(c) Short term liabilities to total assets
p
(d) Prime assets to total assets

Ans:- c
ee
Which of the following ratio is considered better if more, in measuring liquidity under stock
approach?
(a) Volatile liabilities to total assets
(b) Short term liabilities to total assets
(c) Short term liabilities to liquid assets
(d) Prime assets to total assets
D
Ans:- d
Which of the following ratio is considered better if more, in measuring liquidity under stock
approach?
(a) Net loans to total deposits
(b) Short term liabilities to total assets

Dec 2017
(c) Liquid asset to total assets
(d) Volatile liabilities to total assets
Ans:- c
da
In Flow Approach in managing liquidity is based on
(a) VARious liquidity ratios are controlled and managed
oo
(b) Net funding requirement is accessed periodically
(c) Net funding requirement is accessed on daily basis
(d) (d) Both a and b
Ans:- c
In Gap Method for measuring liquidity is based on

(a) Contractual maturities
(b) Residual maturities
(c) Residual period for re-pricing
(d) Both a and b
Ans:- b
H
ak
Following 10 questions are based on the following table in respect of a
bank that has adopted ‘Flow Approach’ in managing its liquidity
In Rs Crs
Structural 1 day 2 to 7 days 8 to 14 days 15 to 28 days 29 days to 3 months
Liquidity
Cash outflow 307.5 1446 1545 3085 5186
Cash Inflow 296.5 1325 1215 2788 5417
p
In which bucket(s) cumulative mismatch is positive?

ee
(a) 2 to 7 days and 15 to 28 days bucket

(b) 15 to 28 days bucket
(c) In 29 days to 3 months bucket
(d) None of these
Ans:- d
Is there any breach in prudential limit? If so, then in which bucket?
D
(a) Yes; 2 to 7 days bucket

(b) No
(c) Yes; 8 to 14 days bucket
(d) Yes; 15 to 28 days bucket
Ans:- c

Dec 2017
Assuming no other changes, what is the maximum borrowing possible with 2 to 7 days maturity
within prudential limit?
(a) Rs 132 Crs
(b) Rs 26 Crs
da
(c) Any amount
(d) None of these
Ans:- b
Assuming no other changes, what is the maximum lending possible

with 2 to 7 days maturity within prudential limit?
oo
(a) Rs 132 Crs
(b) Rs 26 Crs
(c) Any amount
(d) None of these
Ans:- c
(a) Yes; in all buckets

(b) No
(c) Yes; in first three buckets
(d) Yes; in first bucket
H
Assuming that the bank observes call risk in its first four buckets and estimates it at 5% of
liabilities in each bucket. Is there any breach in prudential limit? If so, then in which bucket(s)?
ak
Ans:- c
In which bucket(s) cumulative mismatch is negative?

(c) In all the buckets
(d) None of these
Ans:- c
p
Assuming that the bank observes time risk in its first five buckets and estimates it at 3% of assets
in each bucket that gets realised after 3 years. Is there any breach in prudential limit? lf so, then in
ee
which bucket(s)?
(b) No
Ans:- c
D
In which bucket(s) cumulative mismatch is negative?

(c) In all the buckets
(d) None of these

Dec 2017
Ans:- c
Assuming that the bank combines the effect of call risk and time risk as estimated
Is there any breach in prudential limit? If so, then in which bucket(s)?
da
(b) No
Ans:- c
As compared with original position the cumulative mismatch in-
oo
Creases/decreases by an amount (to the nearest hundred Crs)
(a) Rs 600 Crs
(b) Rs 500 Crs
(c) Rs 400 Crs
(d) None of these
Ans:- b
Debentures are governed by ......

(a) Law of contract
(b) Company Law
(c) Negotiable instrument
(d) None of these
H
ak
Ans:- b
The basis point value is associated with ......

(a) risk pricing
(b) risk measurement
(c) risk mitigation
(d) risk control
Ans:- b
p
All exposure limit are reviewed ......

ee
(a) once in a qtr

(b) once in half yr
(c) once in a yr
(d) None of these
Ans:- c
D
Interest cost of funds locked in a trading position is called ......

(a) swap
(b) pre- settlement
(c) carry
(d) Speculation
Ans:- c

Dec 2017
Held for Trading Securities are normally sold in ...... days.

(a) 30
(b) 60
da
(c) 90
(d) 120
Ans:- c
When Foreign currency is fixed and value of home currency is variable, it is called ......
(a) Direct Rate
oo
(b) Indirect Rate
(c) Cross Rate
(d) Variable Rate
Ans:- a
Who publishes prime rates for major currencies on the monthly basis.
(a) RBI
(b) Ex- im bank
(c) FEDAI
(d) FEMA
Ans:- c
H
ak
Export bill is generally Crystallized on .... from the due date/notional due date.
(a) 7
(b) 10
(c) 21
(d) 30
Ans:- d
p
Who does issue IEC no Export & Import Code)?

(a) RBI
(b) Custom Authority
ee
(c) DGFT
(d) Union foreign ministry
Ans:- c
At present MSF can be maximum ...... % of Banks NDTL

(a) 2.50%
D
(b) 1.50%
(c) 2..00%
(d) 1.00%
Ans:- a
under Basel III, Tier I Capital should be Minimum ...... %

Dec 2017
(a) 6
(b) 7
(c) 8
da
Ans:- b
oo
H
p ak
ee
D

Dec 2017
Loss assets attracts ...... % provision

(a) 150%
da
(b) 125%
(c) 100%
(d) 50%
Ans:- c
Basel III is Associated With ...... Risks

(a) Credit
oo
(b) Market
(c) Operational
(d) All the above
Ans:- d
Capital Conservation Buffer under Basel III is ...... %

(a) 1
(b) 2
(c) 1.5
(d) 2.5
Ans:- d
H
ak
Under notice money market, the funds are transacted by banks for ......
(a) one day
(b) over night
(c) 2 to 14days
(d) 15 days and above
Ans:- c
Under ...... market, the funds are transacted by banks on an overnight basis
p
(a) money market

(b) call money market
(c) notice money market
ee
(d) term money market

Ans:- b
What are Contingent Liabilities?

(a) Loans
(b) Deposits
D
(c) Guarantees which can become liabilities in future

(d) NPA
Ans:- c

Dec 2017
The employees of the bank went on strike and when it comes to risk what do you mean by this?
(a) Operational risk
(b) Employee risk
(c) Credit risk
da
(d) Market risk
Ans a
While Red claused Letter of Credit permits packing Credit to the exporter, Green Claused letter of
Credit permit ......
(a) Credit Against duty draw back scheme of Govt.
oo
(b) Export Credit Guarantee
(c) Advance against cost of warehousing in Customs of exportable goods
(d) Discounting of Export Bills
Ans:- c
1 Basis point = ...... %

(a) 1/10
(b) 1/100
(c) 10
(d) 100
Ans:- b
H
ak
INR is ...... currency
(a) Non- convertible
(b) partly convertible
(c) Fully convertible
(d) Majority convertible
Ans:- b
p
Which of the following may be termed Bank specific Crises in managing liquidity?
(a) Market liquidity has dried down
ee
(b) Interest rate expectations hardens

(c) Bank has been downgraded
(d) Depositors are not rolling over due to low yield
Ans:- c
Which of the following may be termed ‘General market Crises’ in I Chapter

D
managing liquidity?
(a) Run on a Bank
(b) Prepayment of loans on account of falling interest rates
(c) A Bank stands downgraded
(d) Depositors are not rolling over due to low yield
Ans:- d

Dec 2017
Contingency planning in managing liquidity refers to

(a) Plan of action in managing funding requirement under bank specific Crisis
(b) Plan of action in managing funding requirement under normal
da
market conditions
(c) Plan of action in managing funding requirement undergeneral mzketcnsis
(d) Both a and c
Ans:- d
RBI has prescribed regulatory guidelines for interest rate risk which
(a) Gaps in predefined time bands
oo
(b) Overall duration gap
(c) Fall in economic value of equity
(d) RBI has not prescribed any regulatory guidelines for interest rate risk
Ans:- d
In a rising interest rate scenario, the risk of erosion of NII is on account of ......
H
(a) advances with floating rate of interests and deposits with fixed ROI
(b) advances with fixed ROI and deposits with floating ROI
(c) advances with floating ROI and deposits with floating ROI
(d) advances with fixed ROI and deposits with fixed ROI
Ans:- b
ak
VARiations in interest rates affect banks’
(a) Net interest income
(b) Net interest margin
(c) Economic value of equity
(d) All of these
Ans:- d
p
Banks hold assets and liabilities which have different re-pricing

dates This result in
(a) Gap risk
ee
(b) Basis risk

(d) Yield curve risk
Ans:- a
Interest rate changes seldom affect asset items and liability items by
D
the same degree. This result in

(a) Gap risk
(b) Basis risk
Ans:- b

Dec 2017
The participants in the derivatives market generally exchange the following agreement:
(a) IFEMA
(b) ICON
(c) ISDA
da
(d) a stamped agreement devised by respective banks
Ans:- c
If loans are priced based on average cost of liabilities, then banks would be exposed to
(a) Gap risk
(b) Basis risk
oo
Ans:- b
ALM system is built on three pillars, which are among them?

(i) Capital adequacy,
(ii) Information system,
(iii) organization
Ans:- c
H
ak
Which of the following statements is correct regarding Yield Curve Risk?
(a) When Interest Rates are floating Banks may price Assets and Liabilities on different
instruments such as Treasury Bills, Call Money Rates, MIBOR etc
(b) A Bank needs to evaluate the movement in Yield Curves and impact of the curve on portfolio
value and income
(c) If a liability is raised through 91 days T Bill and is used to fund on Asset for 364 days it could
be a Yield urve Risk
p
(d) All these

Ans:- d
ee
FEMA 1999?
(b) exchange control regulations
(c) exim policy
(d) None of these
D

Dec 2017
Change in interest rates will not affect ......
(i) Net interest income,
(ii) Other income,
(iii) Staff expenses
da
Ans:- c
If interest earning assets > interest paying liabilities
oo
(a) NII would increase if interest rates fall
(b) NII would decrease if interest rates fall
(c) NII would decrease if interest rates rise
(d) None of these
Ans:- d
(a) Gap risk

(b) Basis risk
H
The customers enjoy the right of premature payment of fixed depos-
its. This result in
ak
Ans:- c
Which method is used to determine possible changes in the market value of a portfolio that could
arise due to non - normal movement in one or more market parameters?
(a) stress testing
(b) back testing
(c) volatility
(d) simulation
p
Ans:- a
Currency futures are forward contracts

ee
(i) With standard size,

(ii) With standard maturity date,
(iii) Traded on the exchange
D

Ans:- d

Dec 2017
A bank lends Rs 10 Crs linked to 91 days T-bill rate for one year. This loan is funded by a deposit
of Rs 10 Crs maturing in one year but is linked to call rate. The bank is exposed to
(a) Gap risk
(b) Basis risk
da
Ans:- d
Which of the following methods is the leading stress testing tecnique?

(a) simple sensitivity test
(b) scenario analysis
oo
(c) maximum analysis
(d) EVT (Extreme Value Theory)
Ans:- b
Liquidity risk is reflected as ......

(i) Maturity mismatch,
(ii) cash inflow and outflow,

H
(iii) NPAs, total assets and performing loans
ak
Ans:- a
A depositor would face minimum reinvestment risk over 10 years if he opts for
(a) 10 year deposit with quarterly interest payment
(b) 5 year deposit with quarterly interest payment and roll it over for another 5 years
(c) 10 year cumulative deposit
(d) 5 year cumulative deposit and roll it over for another 5 years
Ans:- c
p
In order to reduce reinvestment risk, a bank would like to manage its business such that
(a) Duration of their assets is more than that of its liabilities
ee
(b) Duration of their liabilities is more than that of its assets

(c) Duration of their assets match that of its liabilities
(d) Reinvestment risk is hardly related to duration
Ans:- c
D

Dec 2017
In a rising interest rate scenario, which of them following are least preferred?
(i) Deposits with fixed rates and advances with fixed rates,
(ii) Advances with floating rate of interest and Deposits with fixed rate of interest,
(iii) Deposits with floating rates and advances with fixed rates
da
Ans:- b
A bank uses maturity schedules for measurement of interest rate risk. in preparing maturity
oo
schedule it would place its assets, liabilities and OBS items in predefined time bands based on
(a) Their respective maturities ‘
(b) Their period of re-pricing
(c) Their respective remaining maturity period
(d) Their respective remaining period for re-pricing
Ans:- d
(a) 20
(b) 40
(c) 60
H
Stock XYZ whose earning per share is Rs 50 is trading in the market at Rs 2000. What is the price
to earnings ratio for XYZ?
ak
(d) 10
Ans:- b
FEDAI rules provide that in case of unpaid usance bills, the period of Crystalization is ......th day
after the ...... at the prevailing ...... rate.
(a) 21, NTP, TT buying
(b) 30, NTP, TT selling
(c) 30, NTP, TT buying
p
(d) 30, NDD, TT selling

Ans:- d
ee
D

Dec 2017
Following 4 questions are based on Interest Rate Sensitivity Position of a bank, which is given
below:
In Rs Crs
Interest Rate Sensitivity 1 to 28 29 days to 3 3 months to 6 months to
da
position days months 6 months 1 year
(1) (2) (3) (4)
Total liabilities 1,848 2,571.2 3,825.6 7,608
Total assets 2,353.6 376 4,542.4 1,227.2
Which of the buckets would affect bottom line adversely, if intrest rates rise?
oo
(a) Buckets 1 & 2
(b) Buckets 2 & 3
(c) Buckets 2 & 4
(d) Buckets 1 & 4
Ans:- c
Which of the buckets would affect bottom line most adversely, if interest rates falls uniformly
across all the buckets?
(a) Bucket1
(b) Bucket2
(c) Bucket3
(d) Bucket4
Ans:- c
H
ak
Assuming that the position is as of 31/12, what is interest rate risk for 1% change in rate of interest
across all buckets for the remaining period of the financial year?
(a) Rs 4.22 Crs if interest rate increases
(b) Rs 4.22 Crs if interest rate decreases
(c) Rs 18.38 Crs if interest rate increases
(d) Rs 18.38 Crs if interest rate decreases
p
Ans:- a
The bank goes long on floating rate interest rate swap for ? 1,000 Crs
against 6 months fixed. This will affect the gap position in buckets
ee
(a) Buckets 1 & 3

(b) Buckets 2 & 3
(c) Buckets 2 & 4
(d) Buckets 1 & 4
Ans:- a
D
The bank using gap analysis of re-pricing schedule does not capture
(a) Basis risk
(b) Embedded option risk
(c) Yield curve risk
(d) ALL of these
Ans:- d

Dec 2017
Gap analysis of re-pricing schedule provides a measurement for

(a) VARiation in NII for changes in interest rates
(b) VARiation in NII and equity value for changes in interest rates
da
(c) VARiation in economic equity for changes in interest rates -
(d) None of these
Ans:- a
Duration gap analysis provides a measurement for

oo
(c) VARiation in economic equity for changes in interest rates
(d) None of these
Ans:- c
Duration gap schedule may be drawn

(a) Based on re-pricing scheduling interest
(d) None of these

Ans:- b
Duration gap analysis helps to capture l

H
(b) Based on actual computation of duration of each asset, liability and OBS items
(c) Either a or b both
ak
(a) Effect of basis risk on economic equity
(b) Effect of basis risk on NII
(c) Effect of re-pricing risk on economic equity
(d) Effect of re-pricing risk on NII
Ans:- c
Simulation approaches may be used to measure

p

(c) VARiation in economic equity tor changes in interest rates
ee
(d) None of these

Ans:- b
Approach, in Which customer behavior vis-a-vis changes in Interest

rate is taken in to account in assessing interest rate risk is (a) Duration gap analysis
(b) Gap analysis
D
(c) Static simulation

(d) Dynamic simulation
Ans:- d

Dec 2017
Approach, in which shifts of the yield curve is considered in assessing interest rate risk is
(a) Duration gap analysis
(b) Gap analysis
(c) Simulation
da
(d) None of these
Ans:- c
Embedded option risk gets captured in which of the following approaches for assessing interest
rate risk?
(a) Duration gap analysis
(b) Gap analysis
oo
(C) static simulation
(d) Dynamic simulation
Ans:- d
One of the options for reducing asset sensitivity is

(a) Increasing floating rate advances
(b) Increasing short term borrowings
(c) increase long term deposits
(d) Increase short term advances
Ans:- b
H
One of the options for reducing liability sensitivity is
ak
(a) Increase long term deposits
(b) Increase long term advances
(c) Reduce long term deposits
(d) Increase floating rate deposits
Ans:- a
Non-performing assets result in 30. Duration of the gap for the bank is estimated at
(a) Increase in rate sensitive assets
p
(b) Increase in rate sensitive liabilities

(c) Decrease in rate sensitive assets
(d) Decrease in rate sensitive liabilities
ee
Ans:- a
lf RSA > RSL, then

(a) (RSA - RSL) is liability sensitive gap
D
(b) (RSA - RSL) is negative gap

(c) (RSA -RSL) is asset sensitive gap
(d) None of these
Ans:- c

Dec 2017
In terms of Basel guidelines on interest rate risk management, a bank is considered an outlier if
(a) Bank's equity drops by 10% or more for interest rate shock of 100 basis points
(b) Bank's equity drops by 10% or more for interest rate shock of 200 basis points
(c) Bank's equity drops by 20% or more for interest rate shock of 100 basis points
da
(d) Bank's equity drops by 5% or more for interest rate shock of 100 basis points
Ans:- a
Next 4 questions are based on the data pertaining to a bank which is given below:
oo
Net Worth -Rs 1500 Crs
Tier l + Tier II capital -Rs 3500 Crs
RSA -Rs 22500 Crs
RSL -Rs 21000 Crs
Weighted modified duration of assets -1.80
Weighted modified duration of liabilities -1.10
(b) 0173
(c) 0.62
(d) None of these
H
Duration of the gap for the bank is estimated at
(a) 0.77
ak
Ans:- a
Leverage ratio is
(a) 6.43
(b) 15.00
(c) 14.33
(d) 6.14
Ans:- a
p
Modified duration of equity is

(a) 4.97
ee
(b) 3.99
(c) 3.68
(d) 9.56
Ans:- b
D
If interest rate rises by 100 BPs, what would be its impact on the equity?
(a) Equity value would go up by nearly 5% y
(b) Equity value would go up by nearly 4%
(c) Equity value would fall by nearly 5%
(d) Equity value would fall by nearly 4%
Ans:- d

Dec 2017
A bank has entered into a interest rate swap where it pays fixed and receives floating MlBOR4 The
swap would mature in three years. This transaction would be bucketed for the purpose of interest
rate sensitivity as
da
(a) +ve in 3 to 5 years bucket
(b) -ve in less than 1 month bucket
(c) -ve in 3 to 5 years bucket and +ve in less than 1 month bucket
(d) +ve in 3 to 5 years bucket and -ve in less than 1 month bucket
Ans:- c
A bank is long on call option for 1000 shares on a stock with strike price of Rs 100 . The option
oo
would expire in 20 days. The stock is presently being quoted at Rs 99. This transaction would be
bucketed for the purpose of interest rate sensitivity as.
(a) Outflow of Rs 100,000 in less than 1 month bucket
(b) Inflow of Rs 100,000 in less than 1 month bucket
(c) Outflow of Rs 99,000 in less than 1 month bucket
(d) Inflow of Rs 99,000 in less than 1 month bucket
Ans:- a
(a) Interest income from advances

(b) Interest income from investments
(c) Profit from sale of securities
H
Bank usually earn maximum revenue by way of
ak
(d) Profit from sales of fixed assets
Ans:- a
Generally, the item which accounts for maximum revenue outgo from among the following
(a) Salary and allowance
(b) Rent
(c) Stationary
(d) Legal expenses
p
Ans:- a
Basis Risks are type of ......

ee

(b) Market Risk
(c) Credit Risk
Ans:- a
D
Repo is used for lending and borrowing money market funds, for terms extending from ...... to ......
(a) 1 day, 3 months
(b) 1 day, 6 months
(c) 1 day, 1 year
(d) 3 months, 1 year
Ans:- c

Dec 2017
da
Ans:- c
Match the following three methods to measure operational loss with the methods on which these
are based:
1. Basic Indicator Approach (a) Operational loss
oo
2. Standardised Approach (b) income
3. Advanced Measurement Approach (c) income
(a) 1- a, 2- b, 3- c
(b) 1- b, 2- a, 3- c
(c) 1- c, 2- a, 3- b
(d) 1- b, 2- c, 3- a
Ans:- d
1.Interest income
2.reasury income
3.Fee based income
H
Arrange the following earning items in descending order
ak
4.Sale of assets
(a) 1,2,3,4
(b) 1,3,2,4
(c) 2,1,2,3
(d)1,4,2,3
Ans:- b
p
Overnight interbank rates (difference between repo and reverse repo rates) should normally move
within the bandwidth of ......
(a) 50 bp
ee
(b) 100 bp
(c) 150 bp
(d) 200 bp
Ans:- c
D

Dec 2017
Arrange the following earning items in descending order
1.Interest income
2.reasury income
3.Fee based income
da
4.Sale of assets
(a) 1,2,3,4
(b) 1,3,2,4
(c) 2,1,2,3
(d) 1,4,2,3
Ans:- a
oo
Next 4 Questions are based on the following table:
A bank's branch has been asked to deploy Rs 20 Crs in loans and advances. The branch has lined
up following options based on certain portfolio characteristics desired The options are given below:
In Rs Crs
Assets
AAA rated - Yield 9%
(Risk Weight 20%)
AA rated - Yield 11%
(Risk Weight 30%)
A rated - Yield 12%
H
Option 1
4.00
4.00
4.00
Option 2
10.00
5.00
5.00
Option 3
2.00
2.00
6.00
Option 4
5.00
ak
(Risk Weight 50%)
BBB rated - Yield 14% 4.00 5.00 5.00
(Risk Weight 100%)
C - Yield 17% 4.00 5.00 10.00
(Risk Weight 150%)
Total 20.00 20.00 20.00 20.00
p
The option that gives highest yield on deployment is

(a) option 1
(b) Option 2
(c) Option 3
ee
(d) Option 4
Ans:- d
The option that requires minimum capital is

(a) Option 1
(b) Option 2
D
(c) Option 3
(d) Option 4
Ans:- b

Dec 2017
The option that gives highest return per unit capital is
(a) Option 1
(b) Option 2
(b) Option 2
da
(c) Option 3
Ans:- b
A branch sanctions Rs 1 Crore loan to a borrower, which of the following risks the branch is
taking?
1. Liquidity risk
oo
2. Interest rate risk
3. Market risk
4. Credit risk
5. Operational risk
(a) All of them
(b) 1, 2 and 3 only
(c) 1, 4 and 5 only
(d) 1, 2, 4 and 5 only
Ans:- d H
The higher management approves option 3 but directs that there should be no deployment in C
rated account. The amount earmarked for C rated asset may be deployed in which of the assets so
ak
that Yield is maximised.
(a) AAA rated asset
(b) AA rated asset
(c) A rated asset
(d) BBB rated asset
Ans:- d
Which of the following risk is managed at Portfolio level?

p
(a) Credit Risk

(b) Market Risk
(c) Liquidity Risk
ee

Ans:- C
Capital necessary for unexpected losses is called

(a) Economic capital
(b) Equity capital
D
(d) Prudential capital

(d) Risk capital
Ans:- a

Dec 2017
12% government of India security is quoted at RS 120. If interest rates go down by 1%, the market
price of the security will be?
(a) 120
(b) 133.3
da
(c) 109
(d) 140
Ans b
Capital necessary to maintain minimum capital adequacy ratio is called

(b) Equity capital
oo
(d) Risk capital
Ans:- c
Tier I and Tier II Capital that bank carries is called

(b) Equity capital
(d) Risk capital
Ans:- d
H
A bank must bring in more capital even if its capital is sufficient to
ak
meet regulatory CRAR where
(a) Economic capital < Equity capital
(b) Equity capital < Prudential capital
(c) Prudential capital < Risk capital
(d) Risk capital < Economic capital
Ans:- d
In estimating RAROC which of the following approach is used

p
(a) Expected losses are adjusted against profits

(b) Actual losses are adjusted against profits
(c) Expected losses are adjusted against capital
ee
(d) Actual losses are adjusted against capital

Ans:- a
In estimating RORAC which of the following approach is used

(a) Expected losses are adjusted against profits
(b) actual losses are adjusted against profits
D
(c) Expected losses are adjusted against capital

(d) Actual losses are adjusted against capital
Ans:- c

Dec 2017
Which of the following is not a risk based performance measure?
(a) RAROC
(b) RORAC
(c) ROE
da
(d) EVA
Ans:- c
Working Capital Gap means:

(a) Excess of Current Assets over Current Liabilities
(b) Excess of Current Assets over Current Liabilities other than bank borrowings
(c) Excess of Current Assets over Current Liabilities including working Capital term loan
oo
(d) None of these
Ans b
ALM system is built on three pillars, which are among them? (i) Capital adequacy, (ii) Information
system, (iii) organization
Ans:- c
H
______ rates indicate liquidity available in the interbank market.
ak
(a) call money
(b) notice money
(c) term money
(d) all of these
Ans:- a
The wisely used benchmark rate for floating rate debt paper as well as for OIS (Overnight Interest
rate Swaps) is ......
p
(a) LIBOR
(b) O/N MIBOR
(c) both of these
ee
(d) none of these

Ans:- b
Volatility of exchange rates arises in case of ......

(a) currency
(b) securities
D
(c) rupee account

(d) all of these
Ans:- a

Dec 2017
Which of the following is true of foreign exchange markets?
(a) The futures market is mainly used by hedgers while the forward market is mainly used for
speculating
(b) The futures market and the forward market are mainly used for hedging
da
(c) The futures market is mainly used by speculators while the forward market is mainly used for
hedging
(d) The futures market and the forward market are mainly used for speculating
Ans:- c
If one anticipates that the pound sterling is going to appreciate against the US dollar, one might
speculate by _______ pound call options or ______ pound put options.
oo
(a) buying; buying
(b) selling; buying
(c) selling; selling
(d) buying; selling
Ans:- d

(c) Authorised dealers
(d) None of these
Ans:- c
H
Authorised persons - Category I was earlier known as ......
ak
What is the limit for Crystallisation period?
(a) 15 days
(b) 30 days
(c) 45 days
(d) 60 days
Ans:- d
p
A proportion per thousand is called as ......

(a) per cent
(b) per mile
ee
(c) chain rule

(d) none of the above
Ans:- b
VaR is used to measure and manage ...... risks in trading portfolio and ...... portfolio.
(a) market, business
D
(b) market, investment

(c) Credit, legal
(d) operational, stress
Ans:- b

Dec 2017
The process where model based VaR is compared with the actual performance of the portfolio is
known as
(a) stress testing
(b) back testing
da
(c) volatility
(d) simulation
Ans:- b
Which method is also known as variance / covariance matrix method?

oo
(d) all of these
Ans:- c
Middle East or other Islamic Countries, Forex markets usually operate ......
(a) From Monday to Friday
H
(b) From Monday to Saturday but are closed on Friday
(c) From Monday to Sunday
(d) From Saturday to Thursday (but function on Saturday and Sunday with restrictions)
Ans:- d
When banks have more earning assets than paying liabilities, ...... risk arises.
ak
(a) market
(b) Credit
(c) liquidity
(d) interest
Ans:- d
When assets are sold before their stated maturities, ...... risk occurs.
(a) price
p
(b) liquidity
(c) market
(d) both a and c
ee
Ans:- d
Turning of performing assets into NPA, i.e., non receipt of expected cash inflow arises ......
(a) funding risk
(b) time risk
D
(c) call risk

(d) market risk
Ans:- b

Dec 2017
Changing of interest rate of different assets, liabilities and off- balance sheet items in different
magnitude is termed as ...... risk.
(a) gap
(b) basis
da
(c) yield curve
(d) embedded option
Ans:- b
The risk arising owing to non- enforceability of contract against a counter party is the ...... risk.
(a) Legal
(b) Systematic
oo
(c) Credit
(d) Liquidity
Ans:- a
The gap between the buying rate and selling rate of a currency is called as ......
(a) Dealer's Margin
(b) Exchange Margin
(c) Bid- Ask Spread
Ans:- c
H
ak
Entities which are authorised only to buy foreign currency notes and traveller's cheques are known
as
(a) Authorised Person - Category I
(b) Authorised Person - Category II
(c) Authorised Person - Category III
(d) Authorised Person - Category IV
Ans:- c
p
The seller of goods shipped the goods on time but due to some mistake, the goods have been
delivered
at some other destination. Such risk to the buyer is called
ee
(a) Seller Risk

(b) Buyer risk
(c) Market Risk
(d) Shipping Risk
Ans:- d
D
All rates quoted in foreign exchange are generally ____ rates.

(a) Spot
(b) Tom
(c) Forward
(d) Value
Ans:- a

Dec 2017
An LC provides for warehouse storage of good and also pre shipment Credit for the beneficiary. It
is called ......
(a) Confirmed LC
da
(b) Red clause LC
(c) Green clause LC
(d) Transferable LC
Ans:- c
The uniform rules for bank to bank reimbursement have been framed by ......
(a) RBI
oo
(b) World bank
(c) ICC
(d) FEDAI
Ans:- c
(b) time risk

(c) call risk
(d) market risk
Ans:- a
H
Unanticipated withdrawal / non- renewal of deposits in wholesale or retail segment is called ......
(a) funding risk
ak
Interest Rate Risk refers to potential adverse impact on ...... Select the correct option.
(a) NII
(b) NIM
(c) MVE
(d) all are correct
Ans:- d
p
Derivatives can be used to hedge aggregate risks as reflected in the asset- liability mismatches. In
this case a dynamic management of hedge is necessary not because ......
ee
(i) The risks are dynamic,

(ii) The composition of assets and liabilities is always changing,
(iii) A close monitoring of hedge is an RBI requirement
D

Ans:- b

Dec 2017
The participants in the derivatives market generally exchange the following agreement ......
(a) IFEMA
(b) ICON
(c) ISDA
da
Ans:- c
Which of the following are free currency in the foreign exchange market?
(i) USD,
(ii) Rupee,
(iii) EUR
oo
Ans:- b
(b) two days

(c) 7 days
(d) 14 days
Ans:- d
H
Notice money refers to placement of funds for period not exceeding ......
(a) over night
ak
Term money refers to placement of funds for period not exceeding ......
(a) 01 yr
(b) 02 yr
(c) 03 yr
(d) 05 yr
Ans:- a
p
Unexpected changes in the level of market interest rates due to ...... Creates gap or mismatch risk.
(a) different principal amounts
(b) different maturity dates
ee
(c) different repricing dates

(d) all are correct
Ans:- d
Our account is with you refers to ...... account.

(a) NOSTRO
D
(b) VOSTRO
(c) LORO
(d) Mirror
Ans:- a

Dec 2017
(a) 15%
(b) 18%
(c) 12%
da
Ans:- b
In a rising interest rate scenario, which of them following are least preferred?
(i) Deposits with fixed rates and advances with fixed rates,
(ii) Advances with floating rate of interest and Deposits with fixed rate of interest,
(iii) Deposits with floating rates and advances with fixed rates
oo
Forex Risk can be reduced by

(a) Entering into Forward Contracts
(b) Futures
(d) Both a and b
Ans:- d
H
ak
The value of the currency is decided by supply and demand factors for a particular currency in ......
rates mechanism.
(a) Fixed
(b) Floating
(c) Both a and b
(d) None of these
Ans:- b
p

(a) Higher the risk- higher would be risk premium
(b) Higher the risk- lower would be risk premium
ee
(c) Lower the risk- higher would be risk premium

Ans:- a
...... scheme is available for payments specified in foreign currency (US dollar, Pound Sterling,
Euro , etc).
D
(a) packing Credit insurance

(b) export finance gurantee
(c) transfer gurantee
(d) exchange fluctuation risk cover scheme
Ans:- d

Dec 2017
Banking books does not include which of the following.
(a) All deposit and loans
(b) All borrowings
(c) Capital
da
(d) All of these
Ans:- c
Which of the following risk is managed at Unit level?

(c) Liquidity Risk
oo
(d) None of these
Ans:- b
Volatility will be ...... if Time horizon is more.

(a) More
(b) Less
(c) Equal
(d) None of these
Ans:- a H
Which method of risk measurement combines sensitivity of target variables with the stability or
instability of underlying parameters (like earnings or market value)?
ak
(a) sensitivity
(b) volatility
(c) downside potential
(d) none of these
Ans:- b
Which method of risk measurement uses deviation of a target variable due to unit movement of a
single market parameter like change in interest rate or exchange rate or stock prices)?
p
(a) sensitivity
(b) volatility
ee
(d) all of these

Ans:- a
Black and Scholes option pricing formula is used to calculate ......

(a) sensitivity
(b) implicit volatility
D
(c) upside potential

(d) none of these
Ans:- b

Dec 2017
Volatility over a time horizon 'T' is calculated as follows:
(a) Volatility over a time horizon T = Daily Volatility * vT
(b) Volatility over a time horizon T = v Daily Volatility * T
(c) Volatility over a time horizon T = Daily Volatility * T
da
(d) Volatility over a time horizon T = v Daily Volatility * vT
Ans:- a
If daily volatility of a stock is 1.5%, what would be its monthly volatility?

(a) 8.22
(b) 4.50
(c) 36.74
oo
(d) none of these
Ans:- a
In the call money (a money market instrument), funds borrowed by banks need to be repaid ......
(a) on the same day
(b) on the next working day
(c) within a fortnight
(d) within a year
Ans:- b H
Currently RBI has extended fixed rate Repo of ___ days to improve liquidty of banks.
(a) 30
ak
(b) 60
(c) 90
(d) 120
Ans:- c
An SSI unit has been sanctioned Working Capital limit of Rs.60 La(c) What is the annual projected
turnover of the unit?
p
(a) Rs. 2.40 Cr.

(b) Rs. 3.00 Cr.
(c) Rs. 4.00 Cr.
ee
(d) Rs. 5.00 Cr.

Ans:- b
Entities which are authorised only to buy foreign currency notes and traveller's cheques are known
as
(a) Authorised Person - Category I
D
(b) Authorised Person - Category II

(c) Authorised Person - Category III
(d) Authorised Person - Category IV
Ans:- c

Dec 2017
RTGS has been fully activated by RBI from ......
(a) Aug 2003
(b) Oct 2004
(c) Oct 2003
da
(d) Aug 2004
Ans:- b
What is the maximum time period for Crystallisation period?

(a) 15 days
(b) 30 days
(c) 45 days
oo
(d) 60 days
Ans:- d
Failure of the counter party during the course of the settlement (due to time zone differences
between the two currencies to be exchanged is the ...... risk.
(a) Operational
(b) Market
(c) Settlement
(d) Legal
Ans:- c
H
ak
Ans:- d
p
An import bill not retired by the importer should be Crystallized by the bank on what day?
(a) On 21st day from the date of Bill of Lading
(b) On the 10th day from the receipt of documents at the counters of the bank
ee
(c) On the expiry of five banking days

(d) On the day of receipt of the Bill
Ans:- b
Systemic risk is the risk of

(a) Failure of a bank, which is not adhering to regulations
D
(b) Failure of two banks simultaneously due to bankruptcy of one bank

(c) Failure of entire banking system
(d) Where a group of banks fail due to contagion effect
Ans:- c

Dec 2017
An exchange of specific streams of payments over an agreed period of time is known as ......
(a) Future
(b) Swap
(c) Premium
da
(d) Option
Ans:- b
The value of the currency is decided by supply and demand factors for a particular currency under
(a) Direct exchange rate
(b) Indirect exchange rate
(c) Fixed exchange rate
oo
(d) Floating exchange rate
Ans:- d
The exposure relates to valuation of foreign currency assets and liabilities at the end of accounting
year at current realizable values.
(a) Foreign exchange risk
(d) Operating exposure
Ans:- c
H
ak
The treasury is segragated into three main divisions. Of the three divisions, the front office is also
known as ......
(a) Dealing room
(b) Treasury administration
(c) Risk management
(d) none of these
Ans:- a
p
Buying or selling an asset only for the purpose of making profit from movement of the asset price
over a period of time is known as ......
ee
(a) leveraging
(b) speculation
(c) arbitrage
(d) deployment
Ans:- b
D
A combination of two forward transactions is called a ......

(a) spot
(b) forward
(c) swap
(d) none of these
Ans:- c

Dec 2017
settlement takes place on the third day (two working days from trade days).
(a) swap
(b) forward
da
(c) spot
(d) repo
Ans:- c
The most Critical function of risk management is ......

(a) risk identification
(b) estimating risk cost
oo
(c) measuring risk
(d) controlling the level of risk
Ans:- d
Risks may arise at ......

(a) transaction level
(b) portfolio level
(c) bothaandb
(d) none of these
Ans:- c
Select the incorrect statement:

H
ak
(a) The rate of discount at which the present value equals the market price of a bond is known as
YTM (Yield To Maturity).
(b) Duration is a weighted average measure of life of a bon(d) where the time of receipt of a cash
flow is weighted by the future value of the cash flow.
(c) MD (Modified Duration) indicates price sensitivity of a bond per unit of change in the yield
levels.
(d) Difference in the duration of assets and duration of liabilities is expressed as duration gap and is
useful for macro- hedging of balance sheet risk.
p
Ans:- b
A contract to deliver foreign currency on a future date at a fixed exchange rate is known as ......
ee

(b) futures
(c) options
(d) swaps
Ans:- a
D
What are the two reserve requirements that treasury has to comply with?
(a) PLR and SLR
(b) CRR and SLR
(c) Repo and CRR
(d) VaR and CRR
Ans:- b

Dec 2017
The treasury is segragated into three main divisions. Of the three divisions, the back office is also
known as
(a) Dealing room
da
(c) Risk management
(d) none of these
Ans:- b
The treasury is segragated into three main divisions. Of the three divisions, the mid office is also
known as
oo
(a) Dealing room
(c) Risk management
(d) none of these
Ans:- c
(a) added
(b) deducted
(c) either of the two
(d) none of these
H
Forward exchange rates are arrived at on the basis of interest rate differentials of two currencies,
...... from spot exchange rate.
ak
Ans:- c
Integrated Treasury in Banking set up refers to ......

(a) Computerization of all bank branches
(b) Computerization of all treasury operations
(c) Centralization of all back office operations of forex branches
(d) Integration of money market, securities market and foreign exchange operations
Ans:- d
p
What is most Critical function of Risk Management?

(a) Controlling the level of risk to an organization's capacity
ee

(d) Measurement of risk
Ans:- a
In India, market for currency futures commenced in

D
(a) August 2008

(b) August 1993
(c) The market yet to commence operations
(d) The currency futures markets were existing for a long time but were lying dormant
Ans:- a

Dec 2017
For currency market to be more liquid, the buy- sell spread should be ......
(a) narrower
(b) wider
da
(c) equal
(d) none of these
Ans:- a
Select the incorrect statement:

(a) FRA (Forward Rate Agreement) is for a single payment in future.
(b) IRS covers a series of periodical interest payments.
oo
(c) The floating rate of interest is always linked to a benchmark rate.
(d) The fixed rate of interest is always linked to a benchmark rate.
Ans:- d
______ swap refers to exchange of floating rate in one currency to fixed rate in another currency.
(a) Quanto
(b) Coupon
(c) Swaptions
(d) Plain vanilla
Ans:- b
H
ak
Building up large volumes of business on relatively small capital is known as ......
(a) derivative
(b) arbitrage
(c) swapping
(d) leveraging
Ans:- d
A coupon Swap is defined as ......

p
(i) interest rate swap, where underlying benchmark interest rates are
exchanged,
(ii) Interest rate swap, where fixed rate is exchanged with floating rate
ee
(a) Only (i)

(b) Only (ii)
Ans - c
D
Operations in forex carried to cover the risk of fluctuations in forex rates is called as ......
(a) Hedging
(b) Arbitration
(c) Swap
(d) Speculation
Ans:- a

Dec 2017
If the exporter has opted for commercial and political risks cover, failure of the LC opening bank
in respect of exports against LC will be covered for the banks with World Rank up to ...... as per
da
latest Banker's almanac
(a) 1000
(b) 2000
(c) 15000
(d) 25000
Ans:- d
oo
Which of the following risks may occur at portfolio level in addition to transaction level?
(a) Credit risk
(b) market risk
(c) operational
(d) all of these
Ans:- d
(b) forward
(c) TOM
(d) ready
H
The value of derivative depends on ______ market.
(a) spot
ak
Ans:- a
In case of post shipment finance, the shipping documents along with relative GR form must be
submitted to an AD within ...... days from the date of shipment.
(a) 7
(b) 14
(c) 21
(d) 30
p
Ans:- c
A loan given to an exporter for the manufacture, processing, purchasing or packing of goods meant
ee
for export against a firm order or LC qualifies for ...... insurance / guarantee.
(b) Export performance indemnity
(c) Packing Credit insurance
(d) Transfer guarantee
Ans:- c
D

Dec 2017
Interest rate Risk can be reduced by ......
(b) Entering into Forward Contracts
da
Credit directly extended by the overseas supplier of goods to the importer is called ......
(a) supplier's Credit
(b) buyer's Credit
(c) import letter of Credit
(d) None of these
oo
Ans:- a
If the overseas supplier of goods extends Credit to the importer for a period of more than 6 months
but for less than 3 years, it is called ...... and if the period is more than 3 years, it is called ......
(a) PCL, PCFC
(b) Trade Credit, ECB
(c) ECB, Trade Credit
(d) EBR, trade Credit
Ans:- b
H
Credit arranged by the importer from a bank / FI outside his country, to settle the payment of
ak
imports is called ...... Here no period is prescribed
(a) supplier's Credit
(b) buyer's Credit
(c) import letter of Credit
(d) None of these
Ans:- b

p
(a) Higher the risk in a business, higher would be return expectation

(b) Higher the risk in a business, higher would be capital requirement
(c) Higher the risk in a business, higher would be capital requirement and higher would be return
ee
expectation
Ans:- b
Premature payment of a term loan will result in which type of interest rate risk ?
(a) Basis risk
D

(d) Mismatch risk
Ans:- c

Dec 2017
Tier II capital should not be more than ......% of Total Capital.
(a) 25
(b) 50
(c) 75
da
(d) 100
The following limits in treasury are meant for controlling market risk
(a) Counter party interbank exposure limits
(b) Settlement and pre- settlement limits
(c) Intra- day, overnight open position limit and stop loss limits
(d) Overseas borrowing limit prescribed by RBI
oo
Ans:- c
Value at risk( VaR) is a statistical measure to capture ......

(a) Actual loss in portfolio
(b) Probable loss in a portfolio within a time horizon at a given confidence level
(c) Loss or profit in a trading activity
(d) Operational risk in treasury
Ans:- b
Yield and price of a bond move ......

(a) In inverse proportion
(b) In direct proportion
H
ak
(c) In unrelated fashion
(d) As determined by bond issuer
Ans:- a
A put option is in the money (ITM) if ......

p

Ans:- b
ee
An Asset is ......
(a) Sources of funds
(b) Use of funds
(c) Inflow of funds
(d) None of these
Ans:- b
D

Dec 2017
Diversification occurs at ...... level.
1. obligor (borrower)
2. geographical
3. trades
da
4. industries
(a) 1
(b) 1 and 2
(c) 1, 2 and 3
(d) 1, 2, 3 and 4
Ans:- d
oo
An arbitrage transaction conducted between more than two centers is known as ......
(a) Simple arbitrage
(b) Direct arbitrage
(c) Compound arbitrage
Ans:- c
H
A bank holds a security that is rated A+. The rating of the security migrates to
(a) What is the risk that the bank has faced?
(a) Market risk
(b) Market liquidation risk
ak
(d) Credit risk
Ans:- d
In Forex Markets, on an average the exchange rates of major currencies fluctuate every ......
seconds.
(a) 2
p
(b) 3
(c) 4
(d) 5
ee
Ans:- c
Which is not a function of Back Office ?

(a) Deals
(b) Account
(c) Funds position
D
(d) Reconciliation
Ans:- c

Dec 2017
Banks can approve proposals for availing buyer's Credit for a period with maturity up to ......, for
import of all items remissible under the Exim Policy, up to US ...... million per import transaction.
(a) 3 months, 10
(b) 6 months, 20
da
(c) 1 year, 10
(d) 1 year, 20
Ans:- d
Export packing Credit is normally computed on the basis of ...... (June 2016)
(a) FOB value of Export
(b) CIF value of export
oo
(c) CFR value of export
(d) C & I value of export
Ans:- a
YTM of a bond depends upon ......

(a) Coupon rate and market value only
H
(b) Market value and residual maturity only
(c) Residual maturity and coupon rate only
(d) Coupon rate market value and residual maturity
Ans:- b
If there is an assets of Rs. 120 in the doubtful- I cat and the realization value of security is Rs. 100
ak
only,what will be the provision requirement?
(a) Rs. 40
(b) Rs. 45
(c) Rs. 50
(d) Rs. 60
Ans:- b
In case of Domestic banks risk weights are assigned depends on?

p
(a) CRAR
(b) ECA
(c) CSU
ee
(d) None
Ans:- a
Who advices the weekly average rates for FCNR(B) deposits to the ADR ......
(a) Forex Association of india
(b) FEDAI
D
(c) EXIM Bank

(d) RBI
Ans:- b

Dec 2017
Loans against balances held in FCNR (B) account can be permitted up to (a) Rs 50 lakh with 35%
margin
(b) Rs 100 lakh with 35% margin
(c) USD 1 MIO without any margin
da
(d) Any amount subject to usual margin requirements.
Ans:- d
Which one of the following ratios does not take into account risks in banking business?
(a) ROC
(b) Capital adequacy
(c) RORAC
oo
(d) RAROC
Ans:- a
Financial Risk is defined as

(a) Uncertainties resulting in adverse variation of profitability or outright losses
(d) Variations in net cash flows

Ans:- d
H
(b) Uncertainties that result in outright losses
(c) Uncertainties in cash flow
1 day VaR of a portfolio is Rs 500 with 95% confidence level. In a period of six months (125
ak
working days) how many times the loss on the portfolio may exceed Rs 500?
(a) 4 days
(b) 5 days
(c) 6 days
(d) 7 days
Ans:- c
Deferred Credits will appear on the balance sheet with the

p
(a) Assets
(b) Liabilities
(c) Owner's/Stockholders' Equity
ee

Ans:- b
Risk which arises due to inability or unwillingness of the counterparty to meet the obligations at
maturity is called as ......
D
(a) Exchange Risk

(b) Credit Risk
(c) Market Risk
(d) Settlement Risk
Ans:- b

Dec 2017
Forex markets usually operate ...... globally, except for the Middle East or other Islamic Countries.
(a) From Monday to Thursday
(b) From Monday to Friday
da
(c) From Monday to Saturday
(d) From Monday to Sunday
Ans:- b
What is the most Critical function of Risk Management?

(a) Measurement of risk
oo
(d) Controlling the level of risk to an organization's capacity
Ans:- d
(d) None
Ans b
H
1988 Capital Accord framework accounted for
ak
1. Credit risk
2. Market Risk
3. Operational risk
4. Defined capital component
(a) All of them

(b) 1,2and4
p
(c) 1,3 and4

(d) 1,2and3
Ans:- b
ee

(a) Test a model
D

Ans:- b

Dec 2017
Communication Risk is a type of ......
(b) Market Risk
(c) Credit Risk
da
Ans:- d
Which of them are important divisions of Treasuries? (i) Front Office, (ii) Middle Office, (iii) Rear
office.
oo
Ans:- a
Overdue forward contracts should be automatically cancelled on the ......th working day, from the
due date of contract.
(a) 7
(b) 15
(c) 21
(d) 30
Ans:- a
H
ak
Under supplier Credit scheme, the EXIM bank offers:
(a) Credit to indian exporters for manufacturing
(b) Credit to indian exporter for offering deferred Credit to overseas buyers
(c) Credit to overseas importers to import from indian exporters
(d) Credit to indian importers to import from other countries.
Ans:- d
p
Which are not responsible for the compliance with risk limits imposed by the management?
(i) Front Office,
ee
(ii) Middle Office,

(iii) Back office.
D
Ans:- a

Dec 2017
What is the maximum amount of foreign currency coins that a person resident in India can possess
or retain?
(a) USD 1000
(b) USD 1500
da
(c) USD 2000
(d) no such limit
Ans:- d

(a) The contract size in futures market is USD 1000 and all settlements take place in Dollars.
(b) The contract size in interest rate futures market is Rs 2 lacs.
oo
(c) If an exporter needs to hedge receivables of USD 560,700, he would need to buy 561 forward
sale
contracts of USD 1000 each, aggregating to USD 561,000. The small difference is called basis risk.
(d) all are correct
Ans:- a
(b) from floating rate to fixed rate

(c) fixed floating rate to floating rate
(d) all of these
H
An interest rate swap is shifting of basis of interest rate calculation ......
(a) from fixed rate to floating rate
ak
Ans:- d
The benchmark rates for term lending for USD are generally ......
(a) LIBOR
(b) MIBOR
(c) Fed Rate
(d) MIFOR
Ans:- a
p
Select the incorrect pair:

(a) excess of liquidity - lead to inflation and reduction in money supply
ee
(b) shortage of liquidity - lead to high interest rate and exchange rate
(c) absorption of liquidity by RBI - increase in CRR and SLR requirement
(d) none of these
Ans:- d
To obtain foreign exchange for remittance abroad or use abroad or usee abroad by resident indian,
D
which of the following application form is used:

(a) A1 where the amount exceeds $500
(b) A2 where the amount exceeds $5000
(c) A2 where the amount exceeds $500
(d) A2 where the amount exceeds $25000
Ans:- d

Dec 2017
Import bills should be Crystallized on the ......th day, if not paid by the due date.
(a) 7
(b) 10
da
(c) 15
(d) 21
Ans:- b
The cost one pay for an option is called as ......

(a) Charge
(b) Premium
oo
(c) Discount
(d) Margin
Ans:- b
A shadow account of the NOSTRO account maintained by the opening bank is called as ......
account.
(a) NOSTRO
(b) VOSTRO
(c) LORO
(d) Mirror
Ans:- d
H
ak
Downside potential has 2 components. They are ......
(a) Potential Losses and Profit Potential
(b) Potential Losses and probability of occurrence
(c) Profit Potential and probability of occurrence
Ans:- b
Which is not to be taken into account for pricing?

p
(a) Operating Expenses

(b) Loss Probabilities
ee
(d) Capital Charges

Ans:- c
Which type of risk arises When banks have more earnings assets than paying liabilities ?
(a) Liquidity
D
(b) Operational
(c) Interest rate
(d) Market
Ans:- a

Dec 2017
RBI has permitted banks to borrow and invest through their overseas currency subject to a ceiling
of ...... % of their ...... capital, or USD ...... million, whichever is higher.
(a) 25, Tier- I,1
(b) 25,TIer- II,5
da
(c) 50, TIer- I,10
(d) 50, TIer - II, 10
Ans:- d
correspondents, in foreign Banks generally do not maintain a stock of foreign currency for the
purpose of merchant business. The residual position of the bank at the end of the day - overbought
or oversold - is known as ...... position and it involves ...... risk.
oo
(a) open, market
(b) open, exchange
(c) closed, funding
(d) open, liquidity
Ans:- b
(a) Dealing room

(c) middle office
H
The providing of information to the management (MIS) and to implement risk management
systems is Created by ......
ak
(d) none of these
Ans:- c
The TOD (today) and TOM (tomorrow) rates are generally quoted at a discount to the ...... rate.
(a) swap
(b) forward
(c) spot
(d) repo
p
Ans:- c
ee
Investment in Post Office time deposit is

(a) Low- risk investment
(b) Medium- risk investment
(c) High- risk investment
(d) Zero- risk investment
Ans:- d
D

Dec 2017
Capital charge component of pricing accounts for
1. Cost of capital
2. Internal generation of capital
3. Loss provision
da
(a) All the statements are correct
(b) Statements 1 and 2 are correct
(c) Statements 2 and 3 are correct
(d) Statements 3 and 1 are correct
Ans:- d
Risks can be measured based on ......
oo
(a) sensitivity
(b) volatility
(d) all of these
Ans:- d
(a) Market risk

(c) Asset liquidation risk
H
facing?
ak
Ans:- c
Absorption of liquidity, by RBI, is done through _____ from / to banks under a _____ transaction.
(a) borrowing, repo
(b) borrowing, reverse repo
(c) lending, repo
(d) lending, reverse repo
Ans:- b
p
Derivates refer to _____ price.

(a) past
ee
(b) present
(c) future
(d) none of these
Ans:- c
Concessional rate of interest for post- shipment finance is allowed for __ days in case of usance
D
bills.
(a) 25
(b) 90
(c) 180
(d) None of these
Ans:- d

Dec 2017
Any person who wants to make a remittance for imports, exceeding USD ...... or its equivalent,
should make an application in form A1 to A(d)
(a) 500
da
(b) 1000
(c) 50000
(d) 100000
Ans:- a
Post shipment finance in foreign currency is called ......

(a) EBRD
oo
(b) EEFC
(c) PSEF
(d) PCFC
Ans:- a
The remittance against import should be completed not later than __ months from the date of
shipment.
(a) 3
(b) 6
(c) 9
(d) 12
Ans:- b
H
ak
ECGC classifies countries into __ categories according to the country risk.
(a) 3
(b) 5
(c) 7
(d) 9
Ans:- c
p
Risk can be mitigate through ......

(a) Crystilization
(b) Diversification
ee
(c) Portfolio risk

(d) b & c
Ans:- b
If Daily Volatility is 1.5%, what will be the monthly Volatility ?

(a) 8.33
D
(b) 8.22
(c) 9.22
(d) 9.33
Ans:- b

Dec 2017
Credit Risk can't be mitigated by
(b) Credit Derivatives
(c) Entering into Forward Contracts
da
Ans:- c
The benefit accruing to traders who play in different markets, simultaneously - profits accrue, as
markets are imperfect, is known as
(a) leverage
(b) arbitrage
oo
(c) derivative
(d) swap
Ans:- b
Treasury uses a variety of money market instruments to optimize return on funds. Which of the
(b) CBLO
(c) Corporate debt paper
(d) Certificate of deposit
Ans:- a
H
following is not a money market instrument?
(a) Treasury bills
ak
While the exposure limits are generally left to the banks discretion. RBI has imposed which ceiling
of total business in a year with individual brokers.
(a) 2%
(b) 5%
(c) 10%
(d) 15%
Ans:- b
p
Protection of risk in a transaction usually through derivatives product is calle(d)

(a) insurance
ee
(b) swap
(c) hedge
(d) arbitrage
Ans:- c
The most important and well pronounced risk in treasury is

D
(a) Credit risk

(b) Liquidity risk
(c) Market risk
Ans:- c

Dec 2017
The following limits in treasury are meant for controlling market risk
(a) Counter party interbank exposure limits
(b) Settlement and pre- settlement limits
(c) Intra- day, overnight open position limit and stop loss limits
da
(d) Overseas borrowing limit prescribed by RBI
Ans:- c
As per Basel II norms which of the following approach is adopted in Indi(a) Select wrong match
(a) Credit risk - standard approach
(b) Operational basic indicator approach
(c) Market risk - standard duration approach
oo
(d) None of these
Ans d
An Asset is ......
(a) Sources of funds
(b) Use of funds
(c) Inflow of funds
(d) None of these
Ans b H
With volatility, it is possible to estimate ...... of the target variable with a reasonable accuracy.
(a) upside potential
ak
(b) downside potential
(c) both a and b
(d) none of these
Ans:- c
What is the normal balance for contra asset accounts?

(a) Debit
(b) Credit
p
(c) Either a or b
(d) None of these
Ans:- b
ee
lient Jay pays ABC Co. 10,000 in December for ABC to perform services for Jay in 45 days. ABC
uses the accrual basis of accounting. In December ABC will debit Cash for 10,000. What will be
the other account involved in the December accounting entry prepared by ABC (and what type of
account is it)?
D
(a) Accounts Receivable (asset)

(b) Prepaid Services (asset)
(c) Service Revenues (revenue)
(d) Unearned Revenues (liability)
Ans a

Dec 2017
Which of the following methods of calculating VaR needs a variance / covariance matrix?
da
(d) none of these
Ans:- c

(a) The currency carrying higher rate of interest is always at a discount.
(b) Domestic interest rate of Rupee is generally lower than interest rate of US(d) hence Rupee is at
oo
a discount to Dollar.
(c) Forward rate of USD / INR is higher than spot rate, or Dollar on a forward date is worth more
rupess than today.
(d) Interest rate of EURO is higher than interest rate of US(d) hence forward EURO is at a discount
to US(d)
Ans:- b
(b) ITM
(c) OTM
(d) none of these
H
If the strike price is less than the forward rate in case of a put option, the option is known to be ......
(a) ATM
ak
Ans:- c
Which is not a function of the Mid Office ?

(a) Risk management for forex dealing operations
(b) Look after the compliance of various guidelines/instructions
(c) Processing of Deals, Account, reconciliation etc
Ans:- c
p
Which is not a function of the Forex dealing room?

(a) A service branch to meet the requirement of customers of other branches/divisions to buy or
ee
sell foreign currency,

(b) Manage foreign currency assets and liabilities
(c) Fund Manager for Nostro Accounts as also undertake proprietary trading in currencies.
(d) Processing of Deals, Account, reconciliation etc
Ans:- d
D
When the local currency is variable, it is called as ......

(a) Direct Quote
(b) Home Currency
(c) Price Quotations
(d) All the above
Ans:- d

Dec 2017
Article 28 of UCP 600 deals with ......

(a) Commercial invoice
(b) Transport documents
da
(c) Insurance documents
(d) Disclaimers
Ans:- c
When Nostro account of the bank is Credited before the payment to the tenderer of foreign
exchange, which of the following rates will not be applied?
(i) TT Buying Rate,
oo
(ii) Bills Buying Rate,
Ans:- c
Treasury in the normal course will manage

(a) All funds raised through deposits
H
(b) ALM book, Merchant book and Trading book
(c) Liquidity
ak
(d) All deployment of funds through advances
Ans:- b
What is the important operational feature of integrated treasury ?

(a) Having a common dealing room
(b) Having a common Mid/back offices
(c) Looking for interest arbitrage across currency markets and be in a position to shift swiftly, a
placement in Rupee denominated commercial paper to lending in USD in global interbank market
p
and also being to source funds in global markets and swap the funds into domestic currency or vice
versa, depending on market opportunities
(d) All the above
ee
Ans:- d
Where the currency rate is not directly available for a particular currency and has to be worked out
indirectly through some other currency, it is called ......
(a) Direct Rate
(b) Indirect Rate
D
(c) Cross Rate

(d) Spot cum Forward Rate
Ans:- c

Dec 2017
Which act relating to foreign exchange has replaced earlier one ?
(c) Both the above
da
(d) None of these
Ans:- a
Pre shipment finance in foreign currency is called ......

(a) EBRD
(b) EEFC
(c) PSEF
oo
(d) PCFC
Ans:- d
Value at risk( VaR) is a statistical measure to capture Yield and price of a bond move
(a) In inverse proportion
Ans:- a H
For the organization point of view treasury is considered to be ......
ak
(a) Investment centre
(b) Fund management department
(c) service centre
(d) commercial bank
Ans:- c
An 8- year 8% semi- annual bond has a BPV of Rs 125. The yield on the bond has increased by 5
basis points. What is the profit or loss suffered due to increase in yield?
p
(a) A profit of Rs 1000

(b) A profit of Rs 625
(c) A loss of Rs 1000
ee
(d) A lossof Rs 625

Ans:- d
1 day VaR of a portfolio is Rs 500.000 with 95% confidence level. In a period of six months (125
working days) how many times the loss on the portfolio may exceed Rs 500.000?
(a) 4 days
D
(b) 5 days
(c) 6 days
(d) 7 days
Ans:- c

Dec 2017
When mismatched is Created in assets and liabilities borrowing and lending,such mismatch is
called:
(a) liquidity Risk
(b) Mismatch Risk
da
(c) Gap Risk
(d) Movement Risk
Ans:- a

(a) 5%
(b) 0.25%
oo
(c) 1.58%
(d) None of these
Ans:- c

1. In direct quotes, local currency is variable.
H
2. In direct quotes, local currency is fixe(d)
3. In indirect quotes, local currency is variable.
4. In indirect quotes, local currency is fixe(d)
a) 1 and 2
b) 1 and 3
c) 2 and 3
ak
d) 2 and 4
Ans:- c
Goods exported to warehouse established outside India, for sale in other countries, is realised in a
maximum time of ...... months from the date of exports.
(a) 3
(b) 6
(c) 12
p
(d) 15
Ans:- d
ee
Under Supervisory Review Process, a bank would be called outlier if the bank is under ...... basis
point interest rate shock and faces reduction in capital by ......% or more.
(a) 100, 10
(b) 100, 20
(c) 200, 10
D
(d) 200, 20
Ans:- d

Dec 2017
In which method of calculating VaR, the user doesn't have to make assumptions about correlation
and dynamics of the risk factors because the simulation follows every historical move?
da
(d) none of these
Ans:- a
Treasury in the normal course will manage ......

(b) ALM book, Merchant book and Trading book
oo
(c) Liquidity
(d) All deployment of funds through advances
Ans:- b
For longer periods, VaR can be calculated as _____, where 'n' is the period for which VaR is
require(d)
(a) overnight VaR + n
(b) overnight VaR * n
(c) overnight VaR + vn
(d) overnight VaR * vn
Ans:- d
H
ak
Verification and settlement of the deals concluded by the dealers is performed by ......
(a) front office
(c) Risk management
(d) none of these
Ans:- b
In which method of calculating VaR, the user has to make assumptions about market structure,
p
correlations between risk factors and volatility of these factors?

ee

(d) none of these
Ans:- b
If an export bill is not realised within the time limit prescribed by RBI, the exporter can apply to
AD for extension of time in ...... form.
D
(a) SDF
(b) Softex
(c) ETX
(d) XOS

Dec 2017
For attaining a comparison or ratio between two quantities that are linked together through another
and consist of a series of equations, which of the following is used:
(a) Chain Rule
(b) Per Cent
da
(c) Per Mile
(d) Value Rule
Ans:- a
Which of the following is not a macro- economic factor?

(a) GDP growth rate
(b) stock markets and commodity markets
oo
(c) relative inflation
(d) none of these
Ans:- d
In india export trade is regulated by the ......

(a) EXIM Bank
(b) FEDAI
(c) BCBS
(d) DGFT
Ans:- d
H
Date on which the option is automatically exercised is called as ......
ak
(a) Last date
(b) Expiry date
(c) Maturity date
(d) Final date
Ans:- c
SBI account with citi bank in New Jersey in US $ is called as ...... account.
(a) NOSTRO
p
(b) VOSTRO
(c) LORO
(d) Mirror
ee
Ans:- a
In terms of article 3 of UCP 600, if nothing is mentioned, LC will be treated as what type of LC?
(a) Revocable LC
(b) Irrevocable LC
(c) Confirmed LC
D
(d) Back to back LC

Ans:- b

Dec 2017
da
Ans:- d
Mr. Raj purchases a call option for 500 shares of A with strike price of Rs. 140 having maturity
after 03 months at a premium of Rs. 40. On maturity, shares of A were priced at Rs. 180. Taking
interest cost @ 12% p.(a) What is the profit/lost for the individual on the transaction?
(a) Profit of Rs. 20000
oo
(b) Profit of Rs. 600
(c) Loss of Rs. 20600
(d) Loss of Rs. 600
Ans:- d
Which is not an approach to measure Credit Risk?

H
(c) IRB (Internal Rating Base(d) Foundation approach
(d) IRB (Internal Rating Base(d) Advanced approach
Ans:- a
ak
Premature closing of a deposit will result in interest rate risk of type ......
(i) Yield curve Risk,
(ii) Embedded Option Risk
(a) Only (i)
(b) Only (ii)
Ans:- b
p
A bank holds a security that is rated A+. The rating of the security migrates to (a) What is the risk
that the bank has faced?
ee
(a) Market risk

(b) Market liquidation risk
(d) Credit risk
Ans:- d
D
Which is not an approach to measure Operational Risk?

(c) IRB Foundation approach
(d) Advanced Measurement approach
Ans:- c

Dec 2017
Premature payment of a term loan will result in ......
(b) Embedded option risk
(c) Mismatch risk
da
(d) Basis risk
Ans:- b
In a rising interest rate scenario, the risk of erosion of Nil is on account of

(a) Advances with floating rate of interest and deposits with fixed rate of interest
(b) Deposits with floating rates and advances with fixed rates
(c) Deposits with floating rates and advances with floating rates
oo
(d) Deposits with fixed rates and advances with fixed rates
Ans:- b
(a) IFEMA
(b) ICON
(c) ISDA
Ans:- c H
Credit derivatives segregate from the assets through instruments known as and transfer the risk
from the owner to another person who is in a position to absorb the Credit risk for
ak
(a) The bad assets, NPAs, commission
(b) The Credit risk, Credit default swaps, a fee
(c) Income, warrants, consideration
(d) Good assets, securitization, discount
Ans:- b
An advance of Rs. 400000/- has been declared sub standard on 31/05/2015. It is covered by
securities with realizable value of Rs. 250000/- .
p
What will be the total provision in the account as on 31/03/2015?

(a) 150000
(b) 75000
ee
(c) 55000
(d) 50000
Ans:- b
...... is the possibility of a major bank failing and the resultant losses to counter parties
reverberating
D
into a banking Crisis.

(a) Sovereign risk
(b) Country risk
(c) Legal risk
(d) Systematic risk
Ans:- d

Dec 2017
Forex Operations do not include ......

(a) Forex Dealer
da
(b) Forex Office
(c) Back Office
(d) Mid Office
Ans:- b
Risk which arises out of adverse movement of market variables when the players are unable to exit
the positions quickly is called as ......
oo
(a) Exchange Risk
(c) Market Risk
(d) Legal Risk
Ans:- c
(a) Market risk

(c) Asset liquidation risk
H
facing?
ak
Ans:- c
An 8- year 8% semi- annual bond has a BPV of Rs 12The yield on the bond has increased 5 basis
points. What is the profit or loss suffered due to increase in yield?
(b) A profit of Rs 625
(c) A loss of Rs 1000
(d) A loss of Rs 625
p
Ans:- d
If a company revaluates its fixed assets, the current ratio of the company will:
ee
(a) Improve if assets are revalued upward

(b) Remain unaffected
(c) Improve if assets are revalued downwards
(c) Undergo change only if liabilities are remaining constant
Ans:- b
D
What is the normal balance for liability accounts?

(a) Debit
(b) Credit
(c) Either a or b
(d) None of these
Ans:- b

Dec 2017
A financial institution buys a specified no of futures at NSE on a stock Rs 100 each when spot
price of the stocks Rs 110. At the maturity of the contract the FI takes delivery of the shares.
During the period, the spot price of the stock decreases by Rs 3. What is the acquisition cost to the
da
FI per share?
(a) Rs. 107
(b) Rs. 103
(c) Rs. 100
(d) Rs. 97
Ans:- c
oo
The most important and well pronounced risk in treasury is
(a) Credit risk
(b) Liquidity risk
(c) Market risk
Ans:- c
H
Value at risk( VaR) is a statistical measure to capture
(a) Actual loss in portfolio
(b) Probable loss in a portfolio within a time horizon at a given confidence level
(c) Loss or profit in a trading activity
(d) Operational risk in treasury
ak
Ans:- b
Yield and price of a bond move

(a) Inb inverse proportion
Ans:- a
p
(a) Risk- free interest rates of the two currencies
ee
(b) Inflation rates in both the countries

(d) LIBOR and RBI reference rate
Ans:- a
A put option is in the money (ITM) if

D

Ans:- b

Dec 2017
In a rising interest rate scenario, the risk of erosion of Nil is on account of
(a) Advances with floating rate of interest and deposits with fixed rate of interest
(b) Deposits with floating rates and advances with fixed rates
(c) Deposits with floating rates and advances with floating rates
da
(d) Deposits with fixed rates and advances with fixed rates
Ans:- b
(a) IFEMA
(b) ICON
(c) ISDA
oo
Ans:- c
Spot dealing in FX market means:

(a) Delivery of funds is on the 30th working day from the date of deal.
(b) Delivery of funds is on the second working day from the date of deal.
Ans:- b H
(c) Delivery of funds is next date from the date of deal
(d) Delivery of funds is one week after the date of deal.
The rate at which the quoting bank is ready to sell the currency is called
(a) Bid rate
ak
(b) Offer Rate
(c) TT Buying Rate
(d) Swap rate
Ans:- b
Back to Back LC is
(a) LC opened on the backing of an Export order
(b) LC opened on the backing of an Import Order
p
(c) LC opened on the backing of an Export LC

(d) LC opened on the backing of an Import L(c).
Ans:- c
ee
Crystallisation of export bills is to be done:

(a) On the 10th day from the due date of the bills.
(b) Before the due date
(c) On the 30th day from the notional due date / actual due date
(d) On the due date itself
D
Ans:- c

Dec 2017
License to deal in foreign exchange to authorized dealers is issued
(a) DGFT
(b) FEDAI
(c) RBI
da
(d) EXIM Bank
Ans:- c
Import licences are normally issued for the ....... of the goods to be imported
(a) FAS
(b) CIF
(c) FOB
oo
(d) EX- SHIP
Ans:- b
If daily volatility of the exchange rate of a particular o currency were 0.75%, its fortnight volatility
would be around
(a) 3.75%
(b) 2.25%
(c) 2.80%
(d) 7.5%
Ans:- c
H
The profit and lose figures of a bank for the last 4 financial years are given below. Based on these
ak
figures the amount of the capital to be provided for operational risk will be
31.03.12 : Rs 245 Crore
31.03.13 : RS 135 Cr
31.03.14 : loss of Rs 20 Cr
31.03.15 : Rs 160 Cr
(a) 18
(b) 24
(c) 27
p
(d) 36
Ans:- c
ee
IEC number is allotted to exporter / importer by :

(a) RBI
(b) DGFT
(c) Customs Authorities
(d) both a& B
Ans:- b
D

Dec 2017
Funding Risk arise due to
(a) Swap and option
(b) Temporary problems in recovery
(c) Standard assets becoming NPAs
da
(d) systemic
Ans:- a
Given that GBP / USD 1.5850/60, USD/INR 47.09/12, TT margin 0.15% , ignore cash discount /
premium, at what rate can be GBP be bought in the market
(a) Rs 74.6376
(b) Rs 74.7496
oo
(c) Rs 74.7323
(d) Rs 74.5727
Ans:- d
Country Risk is also a type of ..... risk

(a) market
(b) transaction
(c) Credit
(d) Operational
Ans:- c
H
How many Diamond Dollar account can an exporter maintain ?
ak
(a) 1
(b) 2
(c) 5
(d) 7
Ans:- c
what is the recommended capital charge for Operational Risk under Basic Indicator Approach ?
(a) 15% of average annual income
p
(b) 15 % of previous 3 years average annual income

(c) 15 % of previous 3 years average positive annual income
(d) 15 % of previous 3 years average annual gross income
ee
Ans:- c
CBLO, a money market instrument was launched by

(a) RBI
(b) SEBI
(c) FIMMDA
D
(d) CCIL
Ans:- d

Dec 2017
SBI maintains Us dollar account with bank of America in Newyork and when it conducts
transactions this account , it passes entries in its books at Mumbai through which of the following
accounts?
(a) NOSTRO
da
(b) VOSTRO
(c) LORO
(d) MIRROR
Ans:- d
The office Created exclusively to provide information to the management and implement risk
management systems is knows
oo
(a) Front Office
(b) mid office
(c) Back office
(d) Sensitised Office
Ans:- c
(b) daily
(c) quarterly
(d) half yearly
Ans:- d
H
Interest on reinvestment plan under FCNR (b) is compounded on Basis.
(a) monthly
ak
The overall responsibility for risk management in a bank vests with
(a) Board of Directors
(b) Risk management committee
(c) Credit policy committee
(d) ALCO
Ans:- a
U
p
nder UCPDC, 2007, in the absence of clears stipulation, the minimum amount for which insurance
document must indicate the Insurance cover would be
(a) 110% of CIF or CIP value
ee
(b) 110% of FOB value

(c) 100% of FOB value
(d) 100 CIF or CIP value
Ans:- a
Exchange Fluctuation Risk Of ECGC covers

D
(a) all export payment up to 6 month

(b) 100% exchange fluctuation of Indian exporters
(c) exchange fluctuation above 2% and up to 50% only
(d) exchange fluctuation above 2 %and up to 35% only
Ans:- d

Dec 2017
The model that combines 5 financial ratios using accounting information and equity values to
produce an objective measure of borrowers Financial health is
(a) Credit metrics
(b) Credit Risk
da
(c) Altman Z score
(d) None of these
Ans:- c
The guarantees given by ECG(c) to cover loss on advances for incentives receivable by exporters
at pre-shipment stage, is called;
(a) Post- Shipment Export Credit Guarantee
oo
(b) Packing Credit Guarantee
(c) Export Production Finance Guarantee
(d) Export Finance Guarantee
Ans:- c
Which of the following statements is not correct regarding Basel 3 implementation in India:
H
(a) minimum tier 1 capital ratio should be 8%
(b) tier 2 capital should be maximum 2%
(c) minimum total capital ratio should be 9%
(d) minimum total capital ratio plus capital conservation ratio should be 11.5%
Ans:- a
ak
When the strike price is below the spot price for the call option, the option is ......
(a) at the money
(b) out of money
(c) in the money
Ans:- d
SBI account with citi bank in New Jersey in US $, is used by BOB For BOB this account is called
p
as ...... account.
(a) NOSTRO
(b) VOSTRO
ee
(c) LORO
(d) Mirror
Ans:- c
An 8- year 8% semi- annual bond has a BPV of Rs 125. The yield on the bond has increased by 5
basis points. What is the profit or loss suffered due to increase in yield?
D

(c) A profit of Rs 625
(b) A loss of Rs 1000
(d) A loss of Rs 625
Ans:- d

Dec 2017
1 day VaR of a portfolio is Rs 500.000 with 95% confidence level. In a period of six months (125
working days) how many times the loss on the portfolio may exceed Rs 500.000?
(a) 4 days
(c) 6 days
da
(b) 5 days
(d) 7 days
Ans:- b
A bank holds a security that is rated A+. The rating of the security migrates to (a) What is the risk
that the bank has faced?
(a) Market risk
oo
(c) Market liquidation risk
(d) Credit risk
Ans:- d
(a) 5.05%
(c) 5.30%
(b) 3.77%
(d) 6.00%
Ans:- b
H
ak
SBI account with citi bank in New Jersey in US $, for citi bank is called as ...... account.
(a) NOSTRO
(b) VOSTRO
(c) LORO
(d) Mirror
Ans:- b
p
Export Credit in India is guaranteed by ......

(a) RBI
(b) Government
ee
(c) SEBI
(d) ECGC
Ans:- d
D

Ans:- c

Dec 2017
Given the following
Probability of occurrence = 4
Potential financial impact = 4
Impact of internal controls =5 0%
da
What is the estimated level of operational risk?
(a) 3
(b) 2
(c) 0
(d) 4
Ans:- b
oo
(a) 15%
(b) 18%
(c) 12%
Ans:- b
H
Integrated Treasury in Banking set up refers to ......
(a) Computerization of all bank branches
(b) Computerization of all treasury operations
(c) Centralization of all back office operations of forex branches
(d) Integration of money market, securities market and foreign exchange operations
ak
Ans:- d
Treasury in the normal course will manage ......

(b) All deployment of funds through advances
(c) Liquidity
(d) ALM book, Merchant book and Trading book
Ans:- d
p
The value of the currency is decided by supply and demand factors for a particular currency in
____ rates mechanism.
ee
(a) Fixed
(b) Floating
(c) Both a and b
(d) None of these
Ans:- b
D

(a) 5%
(b) 0.25%
(c) 1.58%
(d) None of these
Ans:- c

Dec 2017
Bank funds its assets from a pool of composite liabilities. Apart from Credit and operational risks,
it faces
(a) Basis risk
da
(b) Mismatch risk
(c) Market risk
(d) Liquidity risk
Ans:- a
Premature payment of a term loan will result in interest rate risk of type ......
(a) Basis risk
oo
(d) Mismatch risk
Ans:- c
Basic Indicator Approach (BIA) is one of the methods for computation of capital charge for:
(b) Market risk
(d) Credit risk
Ans:- c
H
ak
For standard assets, the provision required is ...... of the outstanding amount.
(a) 0.10%
(b) 0.20%
(c) 0.40%
(d) 0.25%
Ans:- c
Foreign Exchange markets are ......

p
(a) Regional markets

(b) Domestic markets
(c) Global markets
ee
(d) Localized exchange traded markets

Ans:- c
Out of the several factors, the following factor does not have an effect in the movement of
exchange rates:
(a) Political instability
D
(b) Increase in domestic interest rates

(c) Change in Taxation policy
(d) Increase in domestic tourism
Ans:- d

Dec 2017
Foreign exchange does not include:
(a) Deposits payable in foreign currency.
(b) Instruments drawn in foreign currency and payable in a foreign currency.
(c) Instruments drawn in Indian rupees on a checking account of the drawer and payable abroa(d)
da
(d) Instruments drawn in Indian rupees on a current account of an Indian company and payable in
India
Ans:- d
Out of the several factors, the following factor does not have an effect in the movement of
exchange rates:
(a) Political instability
oo
(b) Increase in domestic interest rates
(c) Change in Taxation policy
(d) Increase in domestic tourism
Ans:- d
Given a home country and a foreign country, purchasing power parity suggests that ......
H
(a) the home currency will appreciate if the current home inflation rate exceeds the current foreign
inflation rate
(d) the home currency will depreciate if the current home inflation rate exceeds the current foreign
interest rate;
ak
Ans:- c
Capital charge for Credit risk requires input for PD, LGD, HAD and M. Under advanced IRB
approach, who provide the input for LGD
(a) Bank
(b) Supervisor
(c) Function provided by BCBS
p
Ans:- a

ee
(a) Test a model

Ans:- b
D
All the exchange rates quoted on the screen or in print are for mentioned unless otherwise ......
Ans:- c

Dec 2017
The salient feature of convertible bond is
(b) Absence of coupon
da
(d) Option to convert the bond in to equity on a fixed date or during a fixed period and the price is
predetermined
Ans:- d

(a) Time deposits
oo
Ans:- c
The following institutions facilitate delivery vs. payment(DVP) for secondary market deals in
equity and debt paper
(a) IDRBT
(b) NDS
(c) NSDL and CSDL
(d) NEFT
Ans:- c
H
ak
For ensuring effective risk control, RBI expects banks to facilitate functional segregation Between
Ans:- d
When the strike price is equal to the spot price for the call option, the option is ......
p
(a) at the money

(b) out of money
(c) in the money
ee

Ans:- a
CHIPS is a payment system in ......

(a) UK
(b) US
D
(c) Hong Kong

(d) China
Ans:- b

Dec 2017
CHAPS is a payment system in ......
(a) UK
(b) US
(c) Hong Kong
da
(d) China
Ans:- a
FEDAI requires banks to undertake profit / loss evaluation of forex positions at the end of each
(a) week
(b) month
(c) quarter
oo
(d) year
Ans:- b
If the volatility per annum is 25% and the number of trading days per annum is 252, find the
volatility per day.
(a) 1.58%
(b) 15.8%
(c) 158%
(d) 0.10%
Ans:- a
H
Where the currency rate is not directly available for a particular currency and has to be worked out
ak
indirectly through some other currency, it is called
(a) Direct Rate
(b) Indirect Rate
(c) Cross Rate
(d) Spot cum Forward Rate
Ans:- c
For attaining a comparison or ratio between two quantities that are linked together through another
p
and consist of a series of equations, which of the following is used:

(a) Chain Rule
(b) Per Cent
ee
(c) Per Mile

(d) Value Date
Ans:- a
Which of the following positions are maintained by a foreign exchange dealer in a forex dealing
room:
D
(a) Dollar and Rupee position

(b) Balance of payment Position and forex Reserves position
(c) Fund Positions and Currency Positions
(d) Reserve position and forex position.
Ans:- c

Dec 2017
Valuation of foreign exchange profits and losses by dealer is carried on the basis of:
(a) IBA approved accounting guidelines
(b) FEDAI prepared Uniform standard Account Procedure
(c) RBI framed valuation norms for foreign Exchange Transaction
da
(d) GDFT guidelines on valuation
Ans:- b
The quotation US $ 1 = Rs. 44.40 - Rs. 44.50 is:

(a) average rate
(b) indirect rate
(c) direct rate
oo
(d) Cross rate
Ans:- c
Forward transaction in foreign exchange means a transaction in which delivery of foreign exchange
doesn't take place ......
(i) on the second working day of the contract,

H
(ii) on the next working day of the contract,
(iii) beyond second working day of the contract
ak
Ans:- a
On account of Sale and purchase of various currencies there could be mismatch between assets and
liabilities, which is called:
(a) Liquidity Risk
(b) Gap Risk
(c) Exchange Risk
(d) Market Risk
p
Ans:- b
ee
Consider the following statements regarding Cash Reserve Ratio (CRR) kept with RBI by
commercial banks:
(i)It ensures safety to the people’s deposits in banks
(ii) It ensures solvency of banks
(iii) It increases the cost of funds for the banks
(iv) Banks earn interest on CRR
D
Select the correct answer using the code given below:

(a) (i) only
(b) (i) & (ii) only
(c) (i), (ii) & (iii) only --

Dec 2017
Consider the following statements:

(i) Open Market Operation is a monetary policy tool
(ii) Open Market Operations take place in secondary market
da
(iii) Sterilization is a Market Stabilization Scheme
(iv) Sterilization is a day to day phenomenon
(a) (i) & (ii) only
(b) (i) & (iv) only
(c) (ii) & (iv) only
(d) (i), (ii), (iii) only--
oo
Consider the following statements regarding Open Market Operations:
(i) It is conducted by Commercial Banks
(ii) It is conducted by RBI
(iii) It is about debt securities
(iv) It is about equity securities Select the correct answer using the code given below:
(a) (ii) only
(b) (ii) & (iii) only --
(c) (ii), (iii) & (iv) only
H
Which of the following constitute Capital Account in Balance of Payment (BoP)?
ak
(i) Global Depository Receipts (GDRs)
(ii) Trade Credit
(iii) Government securities purchased by foreign Investors
(iv) Securities purchased by foreign portfolio investors Select the correct answer using the code
given below:
(a) (i) & (ii) only
(b) (iii) & (iv) only
(c) All of the above
p
(d) None of the above--

ee
Which of the following institutions offers direct credit ?

(i) EXIM Bank
(ii) National Housing Bank (NHB)
(iii) Small Industries Development Bank of India (SIDBI)
(iv) NABARD
D
(a) (i) & (ii) only

(b) (i) & (iii) only--
(c) (i), (ii) & (iii) only

Dec 2017
The central government is recapitalizing the Public Sector Banks to achieve the following:
(i) To meet Basel III norms
(ii) To increase the capital adequacy ratio
(iii) To improve the bank's balance sheet and prevent them from going bankrupt
da
(iv) To increase the money supply in the system Select the correct answer using the code given
below:
(a) (i) & (ii)
(b) (i), (ii) & (iii) only --
(c) (i) & (iii) only
(d) (iii) & (iv) only
oo
The Public Debt of Government of India includes which of the following:
(i) Treasury Bills
(ii) External Commercial Borrowing (ECB)
(iii) NRI deposits
(iv) Foreign Direct Investment in India (FDI)
(b) (i) & (iii) only

(c) (i), (ii) & (iii) only
(d) (ii) & (iv) only
H
(a) (i) only--
ak
The balance of payments of a country on current account is equal to
A. Balance of trade plus short term
B. Balance of trade plus net invisible exports--
C. Balance of payment minus capital flows
D. Balance of invisible trade plus imports
In balance of payment accounts, all goods exported and imported are recorded in
p
A. Capital account
B. Visible Accounts--
C. Invisible Account
ee
D. Merchandise Accounts
The balance of payments account is conventionally divided into

A.Current Account and Capital Account--
B.Visible Account and Invisible Account
C.Long-term capital Account and short term capital account
D
D.None of the above

Dec 2017
Given a home country and a foreign country, purchasing power parity suggests that: a) the home
currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate;
b) the home currency will depreciate if the current home interest rate exceeds the current foreign
interest rate;
da
c) the home currency will depreciate if the current home inflation rate exceeds the current foreign
inflation rate. --
d) the home currency will depreciate if the current home inflation rate exceeds the current foreign
interest rate;
The payoffs for financial derivatives are linked to
oo
(a) securities that will be issued in the future.
(b) the volatility of interest rates.
(c) previously issued securities.
(d) government regulations specifying allowable rates of return.
(e) none of the above.
Answer: C
Financial derivatives include

(a) stocks.
(b) bonds.
(c) futures.
(d) none of the above.
H
ak
Answer: C
Financial derivatives include

(a) stocks.
(b) bonds.
(c) forward contracts.
(d) both (a) and (b) are true.
Answer: C
p
Which of the following is not a financial derivative?

(a) Stock
ee
(b) Futures
(c) Options
(d) Forward contracts
Answer: A
By hedging a portfolio, a bank manager

D
(a) reduces interest rate risk.

(b) increases reinvestment risk.
(c) increases exchange rate risk.
(d) increases the probability of gains.
Answer: A

Dec 2017
Which of the following is a reason to hedge a portfolio?
(a) To increase the probability of gains.
(b) To limit exposure to risk.
(c) To profit from capital gains when interest rates fall.
da
(d) All of the above.
(e) Both (a) and (c) of the above.
Answer: B
Hedging risk for a long position is accomplished by

(a) taking another long position.
(b) taking a short position.
oo
(c) taking additional long and short positions in equal amounts.
(d) taking a neutral position.
Answer: B
Hedging risk for a short position is accomplished by

(a) taking a long position.
(b) taking another short position.
H
(c) taking additional long and short positions in equal amounts.
(d) taking a neutral position.
Answer: A
ak
A contract that requires the investor to buy securities on a future date is called a
(a) short contract.
(b) long contract.
(c) hedge.
(d) cross.
Answer: B
A long contract requires that the investor

p
(a) sell securities in the future.

(b) buy securities in the future.
(c) hedge in the future.
ee
(d) close out his position in the future.

Answer: B
A person who agrees to buy an asset at a future date has gone

(a) long.
(b) short.
D
(c) back.
(d) ahead.
(e) even.
Answer: A
A short contract requires that the investor

Dec 2017
(a) sell securities in the future.
(b) buy securities in the future.
(c) hedge in the future.
(d) close out his position in the future.
da
Answer: A
A contract that requires the investor to sell securities on a future date is called a
(a) short contract.
(b) long contract.
(c) hedge.
(d) micro hedge.
oo
Answer: A
If a bank manager chooses to hedge his portfolio of treasury securities by selling futures contracts,
he
(a) gives up the opportunity for gains.
(b) removes the chance of loss.
(c) increases the probability of a gain.
Answer: D H
To say that the forward market lacks liquidity means that
(a) forward contracts usually result in losses.
ak
(b) forward contracts cannot be turned into cash.
(c) it may be difficult to make the transaction.
(d) forward contracts cannot be sold for cash.
Answer: C
A disadvantage of a forward contract is that

(a) it may be difficult to locate a counterparty.
p
(b) the forward market suffers from lack of liquidity.

(c) these contracts have default risk.
(d) all of the above.
ee
(e) both (a) and (c) of the above.

Answer: D
D
Forward contracts are risky because they

(a) are subject to lack of liquidity
(b) are subject to default risk.
(c) hedge a portfolio.
Answer:

Dec 2017
The advantage of forward contracts over future contracts is that they

(a) are standardized.
(b) have lower default risk.
da
(c) are more liquid.
Answer: D
The advantage of forward contracts over futures contracts is that they

oo
(c) are more flexible.
Answer: C
Forward contracts are of limited usefulness to financial institutions because

(a) of default risk.
(b) it is impossible to hedge risk.
(c) of lack of liquidity.
(e) both (a) and (c) of the above.
Answer: E
H
ak
Futures contracts are regularly traded on the
(a) Chicago Board of Trade.
(b) New York Stock Exchange.
(c) American Stock Exchange.
(d) Chicago Board of Options Exchange.
Answer: A
Hedging in the futures market

p
(a) eliminates the opportunity for gains.

(b) eliminates the opportunity for losses.
(c) increases the earnings potential of the portfolio.
ee
(d) does all of the above.

(e) does both (a) and (b) of the above.
Answer: E
When interest rates fall, a bank that perfectly hedges its portfolio of Treasury securities in the
futures market
D
(a) suffers a loss.

(b) experiences a gain.
(c) has no change in its income.
Answer: C

Dec 2017
Futures markets have grown rapidly because futures
(c) are liquid.
da
Answer: D
Parties who have bought a futures contract and thereby agreed to _____ (take delivery of) the
bonds are said to have taken a ____ position.
(a) sell; short
(b) buy; short
oo
(c) sell; long
(d) buy; long
Answer: D
Parties who have sold a futures contract and thereby agreed to _____ (deliver) the bonds are said to
have taken a ____ position.
(a) sell; short
(b) buy; short
(c) sell; long
(d) buy; long
Answer: A
H
ak
By selling short a futures contract of $100,000 at a price of 115 you are agreeing to deliver
(a) $100,000 face value securities for $115,000.
(b) $115,000 face value securities for $110,000.
(c) $100,000 face value securities for $100,000.
(d) $115,000 face value securities for $115,000.
Answer: A
By selling short a futures contract of $100,000 at a price of 96 you are agreeing to deliver
p
(a) $100,000 face value securities for $104,167.

(b) $96,000 face value securities for $100,000.
(c) $100,000 face value securities for $96,000.
ee
(d) $96,000 face value securities for $104,167.

Answer: C
By buying a long $100,000 futures contract for 115 you agree to pay
(a) $100,000 for $115,000 face value bonds.
(b) $115,000 for $100,000 face value bonds.
D
(c) $86,956 for $100,000 face value bonds.

(d) $86,956 for $115,000 face value bonds.
Answer: B
On the expiration date of a futures contract, the price of the contract

(a) always equals the purchase price of the contract.

Dec 2017
(b) always equals the average price over the life of the contract.
(c) always equals the price of the underlying asset.
(d) always equals the average of the purchase price and the price of underlying asset.
(e) cannot be determined.
da
Answer: C
The price of a futures contract at the expiration date of the contract

(a) equals the price of the underlying asset.
(b) equals the price of the counterparty.
(c) equals the hedge position.
(d) equals the value of the hedged asset.
oo
Answer: A
Elimination of riskless profit opportunities in the futures market is

(a) hedging.
(b) arbitrage.
(c) speculation.
(d) underwriting.
(e) diversification.
Answer: B
H
If you purchase a $100,000 interest-rate futures contract for 110, and the price of the Treasury
ak
securities on the expiration date is 106
(a) your profit is $4000.
(b) your loss is $4000.
(c) your profit is $6000.
(d) your loss is $6000.
(e) your profit is $10,000.
Answer: B
p
If you purchase a $100,000 interest-rate futures contract for 105, and the price of the Treasury
securities on the expiration date is 108
ee

(e) your profit is $5000.
Answer: A
D
If you sell a $100,000 interest-rate futures contract for 110, and the price of the Treasury securities
on the expiration date is 106

Dec 2017
(e) your profit is $10,000.
Answer: A
da
If you sell a $100,000 interest-rate futures contract for 105, and the price of the Treasury securities
on the expiration date is 108
oo
(e) your profit is $5000.
Answer: B
If you sold a short contract on financial futures you hope interest rates
(a) rise.
(b) fall.
(c) are stable.
(d) fluctuate.
Answer: A H
If you sold a short futures contract you will hope that interest rates
(a) rise.
ak
(b) fall.
(c) are stable.
(d) fluctuate.
Answer: A
If you bought a long contract on financial futures you hope that interest rates (a) rise.
(b) fall.
(c) are stable.
p
(d) fluctuate.
Answer: B
ee
If you bought a long futures contract you hope that bond prices
(a) rise.
(b) fall.
(c) are stable.
(d) fluctuate.
Answer: A
D
If you sold a short futures contract you will hope that bond prices
(a) rise.
(b) fall.
(c) are stable.
(d) fluctuate.

Dec 2017
Answer: B
To hedge the interest rate risk on $4 million of Treasury bonds with $100,000 futures contracts,
you would need to purchase
da
(a) 4 contracts.
(b) 20 contracts.
(c) 25 contracts.
(d) 40 contracts.
(e) 400 contracts.
Answer: D
oo
If you sell twenty-five $100,000 futures contracts to hedge holdings of a Treasury security, the
value of the Treasury securities you are holding is
(a) $250,000.
(b) $1,000,000.
(c) $2,500,000.
(d) $5,000,000.
(e) $25,000,000.
Answer: C
H
Assume you are holding Treasury securities and have sold futures to hedge against interest rate
risk. If interest rates rise
(a) the increase in the value of the securities equals the decrease in the value of the futures
ak
contracts.
(b) the decrease in the value of the securities equals the increase in the value of the futures
contracts.
(c) the increase in the value of the securities exceeds the decrease in the values of the futures
contracts.
(d) both the securities and the futures contracts increase in value.
(e) both the securities and the futures contracts decrease in value
Answer: B
p
Assume you are holding Treasury securities and have sold futures to hedge against interest rate
risk. If interest rates fall
ee
(a) the increase in the value of the securities equals the decrease in the value of the futures
contracts.
(b) the decrease in the value of the securities equals the increase in the value of the futures
contracts.
(c) the increase in the value of the securities exceeds the decrease in the values of the futures
contracts.
D
(d) both the securities and the futures contracts increase in value.
(e) both the securities and the futures contracts decrease in value.
Answer: A
When a financial institution hedges the interest-rate risk for a specific asset, the hedge is called a
(a) macro hedge.

Dec 2017
(b) micro hedge.
(c) cross hedge.
(d) futures hedge.
Answer: B Question
da
When the financial institution is hedging interest-rate risk on its overall portfolio, then the hedge is
a
(a) macro hedge.
(b) micro hedge.
(c) cross hedge.
(d) futures hedge.
oo
Answer: A
The number of futures contracts outstanding is called

(a) liquidity.
(b) volume.
(c) float.
(d) open interest.
(e) turnover.
Answer: D H
Which of the following features of futures contracts were not designed to increase liquidity?
(a) Standardized contracts
ak
(b) Traded up until maturity
(c) Not tied to one specific type of bond
(d) Marked to market daily
Answer: D
Which of the following features of futures contracts were not designed to increase liquidity?
(a) Standardized contracts
(b) Traded up until maturity
p
(c) Not tied to one specific type of bond

(d) Can be closed with off setting trade
Answer: D
ee
Futures differ from forwards because they are

(a) used to hedge portfolios.
(b) used to hedge individual securities.
(c) used in both financial and foreign exchange markets.
(d) a standardized contract.
D
Answer: D
Futures differ from forwards because they are

(a) used to hedge portfolios.
(b) used to hedge individual securities.
(c) used in both financial and foreign exchange markets.

Dec 2017
(d) marked to market daily.
Answer: D
The advantage of futures contracts relative to forward contracts is that futures contracts
da
(a) are standardized, making it easier to match parties, thereby increasing liquidity.
(b) specify that more than one bond is eligible for delivery, making it harder for someone to corner
the market and squeeze traders.
(c) cannot be traded prior to the delivery date, thereby increasing market liquidity.
(e) both (a) and (b) of the above.
Answer: E Question Status:
oo
If a firm is due to be paid in deutsche marks in two months, to hedge against exchange rate risk the
firm should
(a) sell foreign exchange futures short.
(b) buy foreign exchange futures long.
(c) stay out of the exchange futures market.
Answer: A
H
If a firm must pay for goods it has ordered with foreign currency, it can hedge its foreign exchange
rate risk by
(a) selling foreign exchange futures short.
ak
(b) buying foreign exchange futures long.
(c) staying out of the exchange futures market.
Answer: B
firm should _____ foreign exchange futures _____.
(a) sell; short
p
(b) buy; long

(c) sell; long
(d) buy; short
ee
Answer: A
If a firm must pay for goods it has ordered with foreign currency, it can hedge its foreign exchange
rate risk by _____ foreign exchange futures _____.
(a) selling; short
(b) buying; long
D
(c) buying; short

(d) selling; long
Answer: B
Options are contracts that give the purchasers the

(a) option to buy or sell an underlying asset.

Dec 2017
(b) the obligation to buy or sell an underlying asset.
(c) the right to hold an underlying asset.
(d) the right to switch payment streams.
Answer: A
da
The price specified on an option that the holder can buy or sell the underlying asset is called the
(a) premium.
(b) call.
(c) strike price.
(d) put.
Answer: C
oo
The price specified on an option that the holder can buy or sell the underlying asset is called the
(a) premium.
(b) strike price.
(c) exercise price.
(d) both (b) and (c) are true.
Answer: D
The seller of an option has the

H
ak
(a) right to buy or sell the underlying asset.
(b) the obligation to buy or sell the underlying asset.
(c) ability to reduce transaction risk.
(d) right to exchange one payment stream for another.
Answer: B
The seller of an option is ______ to buy or sell the underlying asset while the purchaser of an
option has the ______ to buy or sell the asset.
p
(a) obligated; right

(b) right; obligation
(c) obligated; obligation
ee
(d) right; right

Answer: A
The amount paid for an option is the

(a) strike price.
(b) premium.
D
(c) discount.
(d) commission.
(e) yield.
Answer: B
An option that can be exercised at any time up to maturity is called a(n)

Dec 2017
(a) swap.
(b) stock option.
(c) European option.
(d) American option.
da
Answer: D
An option that can only be exercised at maturity is called a(n)

(a) swap.
(b) stock option.
(c) European option.
(d) American option.
oo
Answer: C
Options on individual stocks are referred to as

(a) stock options.
(b) futures options.
(c) American options.
(d) individual options.
Answer: A
H
Options on futures contracts are referred to as
(a) stock options.
(b) futures options.
ak
(c) American options.
(d) individual options.
Answer: B
An option that gives the owner the right to buy a financial instrument at the exercise price within a
specified period of time is a
(a) call option.
(b) put option.
p
(c) American option.

(d) European option.
Answer: A
ee
A call option gives the owner

(a) the right to sell the underlying security.
(b) the obligation to sell the underlying security.
(c) the right to buy the underlying security.
(d) the obligation to buy the underlying security.
D
Answer: C
A call option gives the seller


Dec 2017
Answer: B
An option allowing the holder to buy an asset in the future is a
da
(a) put option.
(b) call option.
(c) swap.
(d) premium.
(e) forward contract.
Answer: B
oo
An option that gives the owner the right to sell a financial instrument at the exercise price within a
specified period of time is a
(a) call option.
(b) put option.
(c) American option.
(d) European option.
Answer: B
H
ak
A put option gives the owner
Answer: A
p
A put option gives the seller

ee

Answer: D
An option allowing the owner to sell an asset at a future date is a

(a) put option.
D
(b) call option.

(c) swap.
(d) forward contract.
(e) futures contract.
Answer: A

Dec 2017
If you buy a call option on treasury futures at 115, and at expiration the market price is 110,
(a) the call will be exercised.
(b) the put will be exercised.
(c) the call will not be exercised.
da
(d) the put will not be exercised.
Answer: C
oo
Answer: A
If you buy a put option on treasury futures at 115, and at expiration the market price is 110,
Answer: B H
If you buy a put option on treasury futures at 110, and at expiration the market price is 115,
ak
Answer: D
If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 110,
and at the expiration date the price is 114
p

ee
(e) your loss is $1000.

Answer: C
If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 114,
D

Answer: E

Dec 2017
If, for a $1000 premium, you buy a $100,000 put option on bond futures with a strike price of 110,
da
Answer: E
oo
Answer: C
themselves is that
H
The main advantage of using options on futures contracts rather than the futures contracts
(a) interest rate risk is controlled while preserving the possibility of gains. (b) interest rate risk is
controlled, while removing the possibility of losses. (c) interest rate risk is not controlled, but the
ak
possibility of gains is preserved.
(d) interest rate risk is not controlled, but the possibility of gains is lost. Answer: A
The main reason to buy an option on a futures contract rather than the futures contract is
(a) to reduce transaction cost.
(b) to preserve the possibility for gains.
(c) to limit losses.
p
(d) remove the possibility for gains.

Answer: B
ee
The main disadvantage of hedging with futures contracts as compared to options on futures
contracts is that futures
(a) remove the possibility of gains.
(b) increase the transactions cost.
(c) are not as an effective a hedge.
(d) do not remove the possibility of losses.
D
Answer: A
If a bank manager wants to protect the bank against losses that would be incurred on its portfolio of
treasury securities should interest rates rise, he could
(a) buy put options on financial futures.
(b) buy call options on financial futures.

Dec 2017
(c) sell put options on financial futures.
(d) sell call options on financial futures.
Answer: A
da
Hedging by buying an option
(a) limits gains.
(b) limits losses.
(c) limits gains and losses.
(d) has no limit on option premiums.
(e) has no limit on losses.
Answer: B
oo
All other things held constant, premiums on options will increase when the
(a) exercise price increases.
(b) volatility of the underlying asset falls.
(c) term to maturity increases.
(d) (a) and (c) are both true.
Answer: C
falls.
H
All other things held constant, premiums on call options will increase when the (a) exercise price
(b) volatility of the underlying asset falls.

(c) term to maturity decreases.
ak
(d) futures price increases.
Answer: A
An increase in the exercise price, all other things held constant, will ______ the call option
p
premium.
(a) increase
(b) decrease
ee
(c) increase or decrease

(d) Not enough information is given.
Answer: B
All other things held constant, premiums on options will increase when the
(a) exercise price increases.
D
(b) volatility of the underlying asset increases.

(c) term to maturity decreases.
(d) futures price increases.
Answer: B

Dec 2017
An increase in the volatility of the underlying asset, all other things held constant, will ______ the
option premium.
(a) increase
(b) decrease
da
(c) increase or decrease
(d) Not enough information is given.
Answer: A
A tool for managing interest rate risk that requires exchange of payment streams is a
(a) futures contract.
(b) forward contract.
oo
(c) swap.
(d) micro hedge.
(e) macro hedge.
Answer: C
A financial contract that obligates one party to exchange a set of payments it owns for another set
(b) call option.

(c) put option.
(d) swap.
Answer: D
H
of payments owned by another party is called a
(a) hedge.
ak
A swap that involves the exchange of a set of payments in one currency for a set of payments in
another currency is a(n)
(a) interest rate swap.
(b) currency swap.
(c) swaptions.
(d) national swap.
Answer: B
p
ee
A swap that involves the exchange of one set of interest payments for another set of interest
payments is called a(n)
(a) interest rate swap.
(b) currency swap.
(c) swaptions.
(d) national swap.
D
Answer: A
A firm that sells goods to foreign countries on a regular basis can avoid exchange rate risk by
(a) buying stock options.
(b) selling puts on financial futures.
(c) selling a foreign exchange swap.

Dec 2017
(d) buying swaptions.
Answer: C
The most common type of interest rate swap is
da
(a) the plain vanilla swap.
(b) the basic swap.
(c) the swaption.
(d) the notional swap.
(e) the ordinary swap.
Answer: A
oo
If Second National Bank has more rate-sensitive assets than rate-sensitive liabilities, it can reduce
interest rate risk with a swap that requires Second National to
(a) pay fixed rate while receiving floating rate.
(b) receive fixed rate while paying floating rate.
(c) both receive and pay fixed rate.
(d) both receive and pay floating rate.
Answer: B
H
If a bank has more rate-sensitive assets than rate-sensitive liabilities
(a) it reduces interest rate risk by swapping rate-sensitive income for fixed rate income.
(b) it reduces interest rate risk by swapping fixed rate income for rate-sensitive income.
(c) it increases interest rate risk by swapping rate-sensitive income for fixed rate income.
ak
(d) it neutralizes interest rate risk by receiving and paying fixed-rate streams. (e) it cannot reduce
its interest rate risk.
Answer: A
If Second National Bank has more rate-sensitive liabilities then rate-sensitive assets, it can reduce
interest rate risk with a swap that requires Second National to
(a) pay fixed rate while receiving floating rate.
(b) receive fixed rate while paying floating rate.
p
(c) both receive and pay fixed rate.

(d) both receive and pay floating rate.
Answer: A
ee
One advantage of using swaps to eliminate interest rate risk is that swaps
(a) are less costly than futures.
(b) are less costly than rearranging balance sheets.
(c) are more liquid than futures.
(d) have better accounting treatment than options.
D
Answer: B Question
A advantage of using swaps to hedge interest rate risk is that swaps

(a) are less costly than futures.
(b) can be written for long horizons.
(c) are not subject to default risk.

Dec 2017
(d) are more liquid than futures.
(e) have better accounting treatment than options.
Answer: B
da
The disadvantage of swaps is that they
(a) lack liquidity.
(b) are difficult to arrange for a counterparty.
(c) suffer from default risk.
Answer: D
oo
A disadvantage of using swaps to control interest rate risk is that
(a) swaps cannot be written for long horizons.
(b) swaps are more expensive than restructuring balance sheets.
(c) swaps, like forward contracts, lack liquidity.
(d) all of the above are disadvantages of swaps.
(e) only (a) and (b) of the above are disadvantages of swaps.
Answer: C
(a) government regulation.

(b) writing complex contracts.
H
The problems of default risk and finding counterparties for interest rate swaps has been reduced by
(c) commercial and investment banks serving as intermediaries.

ak
(e) both (b) and (c) of the above.
Answer: C
A) your profit is $4000.
B) your loss is $4000.
p
C) your profit is $3000.

D) your loss is $3000.
E) your loss is $1000
ee
Answer: E
The payoffs for financial derivatives are linked to

A) the volatility of interest rates.
B) securities that will be issued in the future.
D
C) previously issued securities.

D) government regulations specifying allowable rates of return.
E) none of the above.
Ans:- C

Dec 2017
Which of the following is a reason to hedge a portfolio?
A) To limit exposure to risk.
B) To increase the probability of gains.
C) To profit from capital gains when interest rates fall.
da
D) All of the above.
E) Both A and C of the above.
Ans:-a
A person who agrees to buy an asset at a future date has gone

A) long.
B) back.
oo
C) short.
D) even.
E) ahead.
Ans:-a
The advantage of forward contracts over future contracts is that they

A) are standardized.
B) are more liquid.
C) have lower default risk.
D) none of the above.
Ans:-d
H
ak
5) By selling short a futures contract of $100,000 at a price of 115 you are agreeing to deliver
A) $115,000 face value securities for $115,000.
B) $115,000 face value securities for $110,000.
C) $100,000 face value securities for $115,000.
D) $100,000 face value securities for $100,000.
Ans:-c
If you bought a long contract on financial futures you hope that interest rates
p
A) rise.
B) fall.
C) are stable.
ee
D) fluctuate.
Ans:-b
firm should
D
A) sell foreign exchange futures short.

B) stay out of the exchange futures market.
C) buy foreign exchange futures long.
D) none of the above.
Ans:-a

Dec 2017
To hedge the interest rate risk on $4 million of Treasury bonds with $100,000 futures contracts,
you would need to purchase
A) 25 contracts.
B) 40 contracts.
da
C) 400 contracts.
D) 4 contracts.
E) 20 contracts.
Ans:-b
9) Options on individual stocks are referred to as

A) individual options.
oo
B) stock options.
C) futures options.
D) American options.
Ans:-b
A) the call will be exercised.
B) the put will be exercised.
C) the call will not be exercised.
D) the put will not be exercised.
Ans:-c
H
ak
A tool for managing interest rate risk that requires exchange of payment streams is a
A) futures contract.
B) macro hedge.
C) forward contract.
D) swap.
E) micro hedge.
Ans:-d
p
The most common type of interest rate swap is

A) the ordinary swap.
B) the basic swap.
ee
C) the plain vanilla swap.

D) the notional swap.
E) the swaption.
Ans:- c
One advantage of using swaps to eliminate interest rate risk is that swaps
D
A) are less costly than futures.

B) are more liquid than futures.
C) are less costly than rearranging balance sheets.
D) have better accounting treatment than options.
Ans:- c

Dec 2017
The problems of default risk and finding counterparties for interest rate swaps has been reduced by
A) writing complex contracts.
B) commercial and investment banks serving as intermediaries.
da
C) government regulation.
D) all of the above.
E) both B and C of the above
Ans:-b
what does duration directly measure?

interest sensitivity
oo
Credit sensitivity
Market risk
Price risk
Ans:-a
what does a positive gap in the repricing model for NII show?
H
a rise in interest rates would increase net interest income--
a rise in interest rates would decrease net interest income
a rise in interest rates would increase net interest income
what does a negative gap in the repricing model for NII show?
ak
a rise in interest rates would decrease net interest income--
p
ee
D

Dec 2017
Sl ✓/ Ans Sl ✓/x Ans Sl ✓/x Ans Sl ✓/x Ans

x
1 51 101 151
da
2 52 102 152
3 53 103 153
4 54 104 154
5 55 105 155
6 56 106 156
7 57 107 157
oo
8 58 108 158
9 59 109 159
10 60 110 160
11 61 111 161
12 62 112 162
13 63 113 163
14 64 114 164
15
16
17
18
19
65
66
67
68
69
H 115
116
117
118
119
165
166
167
168
169
20 70 120 170
ak
21 71 121 171
22 72 122 172
23 73 123 173
24 74 124 174
25 75 125 175
26 76 126 176
p
27 77 127 177
28 78 128 178
29 79 129 179
30 80 130 180
ee
31 81 131 181
32 82 132 182
33 83 133 183
34 84 134 184
35 85 135 185
36 86 136 186
D
37 87 137 187
38 88 138 188
39 89 139 189
40 90 140 190
41 91 141 191

Dec 2017
42 92 142 192
43 93 143 193
44 74 144 194
45 95 145 195
da
46 96 146 196
47 97 147 197
48 98 148 198
49 99 149 199
50 100 150 200
oo
H
p ak
ee
D


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CAIIB BFM Model Questions for Dec 2017

-$95 million, $20 million, +$55 million

Net interest income will increase by =- $0.475m.

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

+$100 million , $1,000,000--

Rate-sensitive assets = $200 million. Rate-sensitive liabilities = $100 million

Rate-sensitive assets = $100 million. Rate-sensitive liabilities = $150 million.

Rate-sensitive assets = $150 million. Rate-sensitive liabilities = $140 million.

+$10 million. , -$100,000.

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

What is the adjusted gap in re-pricing assets and liabilities?

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

A method that may be employed by banks to lower required reserves is

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

Time Buckets Assets Liabilities Gap Cumulative gap

Using the details given above, answer the following questions.

The total rate sensitive assets for the bank is Rs.

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

Using the details given below, answer the following questions.

The total rate sensitive assets for the bank is Rs.

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

NII will decrease--

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

NII will decrease--

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

08 What is the percentage of A category accounts that were upgraded to A+ category?

Based on this information, answer the following questions.

What is the no. of A+ account at the end of observation period?

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

Based on the above information, answer the following questions?

Calculate the amount of Tier -2 capital?

What is the capital adequacy ratio of the bank?

What is amount of minimum capital to support Credit and operational risk?

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

What is the amount of Tier 1 capital fund, to support market risk?

What is the amount of Tier -2 capital fund, to support market risk?

International Bank has

Based on the above information, answer the following questions?

What is the amount of Tier-1 capital?

Calculate the amount of Tier2 capital?

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

What is the capital adequacy ratio of the bank?

b 1200 Cr, 1800 Cr

What is the amount of Tier-2 capital fund, to support market risk?

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

Rs. In Cr 1st Year 2nd Year

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International Bank provides following information:

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

House Loans- Rs.3000 Cr H

What is the amount of risk weighted assets for retail loans?

What is the amount of risk weighted assets for housing loans?

https://www.facebook.com/groups/191786717948391/ Deepak Hooda

Substandard secured loans —Rs. 400 Cr,

(all DF-3 category and fully secured )

What is the amount of risk weighted assets for retail loans?

https://www.facebook.com/groups/191786717948391/ Deepak Hooda