RBI GRADE B

FINANCE AND MANAGEMENT – MOCK TEST 1

Note – Question 1 to 35 are of 2 marks each and question 36 to 65 are of 1 mark.

QUESTION 1

With reference to ‘Maslow’s Hierarchy of Needs Theory’ the Self-respect, achievement and autonomy
all are examples of:

a. Physiological factors
b. Internal esteem factors
c. Social factors
d. External esteem factors
e. None of the above
Correct Answer – Option b - Internal esteem factors.

Explanation – In the Maslow’s Hierarchy of Needs Theory, esteem need (self respect, achievement,
reputation, recognition and Attention) are classified in two categories, one is internal and other are
external – Internal are those which are related to self-esteem nature like self respect, autonomy etc.

QUESTION 2

SIDBI was set up in ___ as a wholly owned subsidiary of_______

a. 1990 – IDBI
b. 1985 – EXlM
c. 1969 – RRBI
d. 1975 - IFCI
e. None of these
Correct answer – Options a – 1990 – IDBI

Explanation – SIDBI – Small Industrial development bank of India, is set-up in year 1990, by IDBI, with
objective of aiming at need to Small enterprises.

QUESTION 3

What is meant by 360 degree appraisal?

a. line manager rates subordinates simultaneously

b. person himself gives feed back
c. senior manager rates all line managers simultaneously
d. Where every employee rates another employee chosen at random
e. where feedback is obtained from peers, subordinates and supervisors
Correct Answer – Option e - where feedback is obtained from peers, subordinates and supervisors

Explanation – 360 name suggests, all the corners to whom person deals so it is a system if appraisal
where feedback from all the concerned – peers, subordinates and supervisor are obtained.

QUESTION 4

Find the Current Account Deficit from the given information:

I) Imports of Visible Items are INR 2000 crore

II) Exports of Visible Items are INR 1000 crore

III) Deficit from Invisible Items are INR 700 crore

a. 1300 Crore
b. 300 Crore
c. 2300 Crore
d. 1700 Crore
e. None of these
Correct answer – Options d – 1700 Crore

Explanation –

Step 1 - Balance of Trade = Imports - Exports of Visible Items

2000 -1000 = INR 1000 Crore

Step 2 - Current Account Deficit = Balance of Trade - Balance of Services

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1000-(-700) = INR 1700 Crore.

QUESTION 5

Which of the following problems may result due to skill gaps?

a. Delays developing new products.

b. Increased business.
c. Poor customer service.
d. Quality issues.
e. None of these
Correct Answer – Option c - Poor customer service.

Explanation – Delays developing new products require R&D rather skill, Increased business require
resources rather skills, Quality issues are matters of technical conformity to production standard. But
customer service are interpersonal in nature and required certain individual skills hence due skill gap
problem of poor customer service can be arises. Option e not applies.

QUESTION 6

Registration under GST is required, if turn over in previous year exceeds INR

a. 12 lakhs
b. 20 lakhs
c. 5 lakhs
d. 50 lakhs
e. 75 lakhs
Correct answer – Options b – 20 lakhs

Explanation – As per section 22(1) limit of INR 20 lakhs is provided for compulsory registration,
However 11 states are specified under article 279A (4) (g), where such limit is 10 lakhs

QUESTION 7

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Using the rule of 144 in how many years INR 10000 will be 40000 @ 6% p.a.

a. 24
b. 20
c. 28
d. 12
e. 18
Correct answer – Options a – 24 years

Explanation – 144/6=24, it will take 24 years The "Rule of 144" is a simplified way to determine
how long an investment will take to be 4 times, given a fixed annual rate of interest. This is not
exact time, this rule provide only rough estimate.

QUESTION 8

Incremental changes are ____________.

a. more dramatic than radical change

b. less dramatic than radical change
c. infrequently encountered
d. usually very expensive
e. None of above.
Correct Answer – Option b - less dramatic than radical change

Explanation – In Incremental changes, changes are launched in step-to-step basis (phased

implementation) rather in one go (big bang or radical change)

QUESTION 9

You have opted in a SIP that invests INR500 at the end of first year, INR1000 at the end of
2 year and INR1500 at the end of 3 rd year. calculate what amount you will get at the end of
3 year if the rate of return is 6% per annum.

a. 3212.8
b. 3012.8
c. 3112.8
d. 3221.8

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 e. 3121.8

Correct answer – Options e – INR 3121.8

Explanation – INR 500 is invested only for 2 years, INR 1000 is invested for one year and INR
1500 is invested for 0 year Therefore, the amount that you will get is

500(1+0.06) 2 +1000(1+0.06) 1 +1500(1+0.06) 0

561.8+1060+1500

INR 3121.8

QUESTION 10

Which of the following are the primary functions of all organizations?

a. operations, marketing, and quality

b. sales, quality control, and operation
c. advertising, human resources, and finance/accounting
d. marketing, operations, and finance/accounting
e. none of the above
Correct Answer – Option d - marketing, operations, and finance/accounting

Explanation – Marketing, Operation/Production and Finance/Accounting are considered as primary

function of all organisations, because without these organisation can’t function, even it is fully
automated, operates in goods or services.

QUESTION 11

Financial information related to the year ended 31 st march 2018.

Sales Rs. 80,00000
Return on net worth 25%
Rate of income tax 50%
Net Profit to sales ratio 6.25%
Cost of goods sold Rs.20,00,000

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Interest on Debentures Rs. 50000

What will be operating expenses and Profit before Interest and Tax for the year 31 st march,
2018

a. 51,30,000 & 10,70,000

b. 10,00,000 & 52,40,000
c. 10,50,000 & 49,50,000
d. 10,50,000 & 60,00,000
e. 11,70,000 & 52,30,000

Correct answer – Options e – 13.45%

Explanation

Net Profit (6.25% of sales) 500000

Add Income tax @ 50% 500000

Profit Before tax 1000000

Interest on debenture 50000

Profit Before Interest and Tax 1050000

Operating Expense = Sale – (Cost of goods sold + Profit Before Interest and Tax)

8000000-(2000000+1050000) = 4950000

QUESTION 12

Which of the following is/are the internal stakeholder group

a. Debt holders
b. Customers
c. Shareholder
d. Suppliers
e. a & c only

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Correct Answer – Option c – Shareholder

Explanation – Stake holders are those who can make impact over business and business can have
impact upon then. They are classified in three categories namely internal, connected and external.
Shareholders are only internal stakeholder group among given option. Debenture holder are not real
owner, may be consider as connected but not internal.

QUESTION 13

Good luck company produce 1 million units of toys. The annual fixed cost is INR 0.5 million. The per
unit variable cost INR 3. Selling price is 50% above unit variable cost.

What is the degree of operating leverage?

a. 1.3
b. 1.4
c. 1.5
d. 1.6
e. 1.7
Correct answer – Options e – All of the above

Explanation – Degree of operating leverage = Contribution/EBIT (risk due to fixed cost – committed
nature)

(No. of Units) * (SP – VC)/[(No. of Units)(SP – VC) – FC]

(1000000) * (3 * 1.5-3)/[(1000000) * (3 * 1.5-3) - 5000000] = 1.5 times

QUESTION 14

As per RBI benchmark for allocation of bank credit, women beneficiaries should receive at least ____%
of net bank credit.

a. 2
b. 5
c. 10
d. 8
e. 1
Correct answer – Options b – 5%

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Explanation – As per RBI benchmark for allocation of bank credit, certain sector or group are
notified to ensure minimum benefits – like minimum credit/advance for primary sector are
reserved. Similar way minimum credit for woman are reserved at 5%

QUESTION 15

Which one of the following is a role of board of director?

a. To define vision mission and values of the company and make necessary changes, as and when
required.
b. To ensure effective communication with the stake holders and monitor the relationship with
them.
c. To give ultimate direction to the company.
d. To safe-gaurd asset of company
e. All of the above
Correct Answer – Option e – All of the above

Explanation – Board of directors are responsible for overall management of company with all
respects. They act as agent of shareholder but for all the stakeholders.

QUESTION 16

Which is/are solvency ratios out of following

a. Gearing ratio
b. Current ratio
c. Capital Adequacy ratio
d. Interest coverage ratio
e. None of these

Correct answer – Options b – Current Ratio

Explanation – Current ratio measures the Relation between Current asset and Current
Liabilities, (Current Asset/Current Liability = how many times we can meet our current
liabilities) hence tell about cover of current asset over current liabilities means solvency.

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QUESTION 17

Find the YTM on the bond which pays an annual interest of 12% and has been bought at INR
50 discount. The face value of the bond is INR 1000 and it matures in 5 years.

a. 12.45 %
b. 12.85 %
c. 13.85 %
d. 14.45 %
e. 13.45 %

Correct answer – Options e – 13.45%

Explanation

F = Face value = 1000

P = Market Price/Discounted Price = 1000 – 50 = 950
I = Annual interest = 12% of 1000 = 120
n = Years to maturity = 5
YTM = [I +(F-P)/n]/[(F+P)/2] = (120+50/5)/(1950/2) = 131/975 = 13.44% say 13.45%

QUESTION 18

In ________, bonus paid to a worker is equal to 50% of time saved multiplied by rate per hour.

a. Hasley Plan
b. Bedaux Plan
c. Barth Scheme
d. Rowan Plan
e. None of these
Correct Answer – Option a – Hasley Plan

Explanation – Hasley plan suggest share of benefit of time saved among worker and organisation.
Such share ratio is 50:50.

QUESTION 19

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What do you understand by the term insider trading?

a. is the voluntary release of non public information , as a moral protest , by a member or former
member of an organization outside the normal channels of communication to an appropriate
audience about illegal and /or immoral conduct in the organization .
b. opinion on the future ability of the issue of a specific fixed income securities to make timely
payments on principles and interest thereon
c. is an illegal practice of buying and selling shares of corporate securities based on fiduciary
information, which known only to small group of persons, such as executive and their friends
d. is trading of shares of company by person who is on roll employee of company
e. none of these
Correct Answer – Option c – is an illegal practice of buying and selling shares of corporate securities
based on fiduciary information, which known only to small group of persons, such as executive and
their friends

Explanation – It is criminal activity under SEBI Act 1992 and Companies Act 2013. Person is insider,
having price sensitive information, dealing in securities of company, either for himself for other, using
such information, for making any kind of gain.

QUESTION 20

NABARD has been established on the recommendation of

a. Talwar committee
b. Tandon committee
c. Narasimhan Committee
d. Shivaraman committee
e. None of these
Correct answer – Options d – Shivaraman committee

Explanation – NABARD was established on the recommendations of B. Shivaraman Comm ittee,

on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act
1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell
(RPCC) of Reserve Bank of India, and Agricultural Refinance and De velopment Corporation
(ARDC).

QUESTION 21

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Which of the following are to be followed by Commercial Banks for risk management?

a. Basel II norms
b. Basel III norms
c. Basel I norms
d. Solvency II norms
e. Solvency I norms
Correct answer – Options a – Basel II norms

Explanation – The Basel II Accord was published initially in June 2004 and was intended to amend
international banking standards that controlled how much capital banks were required to hold to
guard against the financial and operational risks banks face.

QUESTION 22

According to Census on Foreign Liabilities and Assets of Indian Direct Investment Companies 2016-17
released by RBI _____________ was the largest source of FDI in India.

a. USA
b. Singapore
c. UK
d. Mauritius
e. None of these
Correct Answer – Option d - Mauritius

Explanation - Mauritius was largest source of FDI in India (21.8% share at market value) followed by
USA, UK, Singapore and Japan.

QUESTION 23

'Veblen effect' can be defined as practice of giving everyone

a. Random ratings.
b. Average ratings.
c. Low ratings.
d. High ratings.
e. None of these

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Correct Answer – Option b – Average ratings.

Explanation – Veblen effect works on the basis of central tendency, means assigning the same
number without considering the individual characteristics of person/article under consideration.

QUESTION 24

Contextual leadership ____________.

a. Static approach of leading – believe business environment is not dynamic at all

b. Believe leader and manger are same
c. Assumes decreasing complexity up in the organization
d. Defined plan need to be followed by leader, no need to change their response
e. stresses that, a leader’s responsiveness to the evolving trends
Correct Answer – Option e - stresses that, a leader’s responsiveness to the evolving trends

Explanation – Anthony Mayo and Nitin Nohria explains Contextual Leadership as intelligence to
understand an evolving (changing) environment, and making gain by responding to those evolving
trends.

QUESTION 25

Which of the following are quantitative control methods

a. Bank rate
b. CRR
c. Statutory Liquidity ratio
d. Open market operations
e. All of the above
Correct answer – Options e – All of the above

Explanation – Quantitative measure are those, which are relates to rate and ratios all the options
are relates to quantitative measures.

QUESTION 26

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Theory Y given by Douglas McGregor's rest on the belief that managers would assume that
employees would:

a. Dislike work
b. Need to be controlled
c. Exercise self direction
d. Avoid responsibility
e. It not related to employee at all
Correct Answer – Option c - Exercise self direction.

Explanation – There are two theories given by Douglas McGregor's, named Theory X and Theory Y for
leader on nature of worker. Theory Y believes that people in the workforce are internally motivated
and self directed and self controlled. Whereas Theory X is based on presumption that typical worker
are pessimistic.

QUESTION 27

The National Housing Bank (NHB) was set up in India as a wholly-owned subsidiary of

a. Reserve Bank of India

b. HDFC
c. State Bank of India
d. ICICI Bank
e. None of the above
Correct answer – Options a – Reserve Bank of India

Explanation – National Housing Bank, a wholly owned subsidiary of Reserve Bank of India, was set
up on 9 July 1988 under the National Housing Bank Act, 1987.

QUESTION 28

Which of the following connect all business functions and become the basis for all managerial
decisions?

a. Marketing
b. Technology
c. Leadership
d. motivation
e. Information

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Correct Answer – Option e - Information

Explanation – Information communicated is the basis of all decisions and bring all business function in
alignment to each other.

QUESTION 29

_________________is popular, internet based modern means of communication.

a. Tele-call
b. Fax
c. Electronic mail
d. letter
e. None of these
Correct Answer – Option c – Electronic mail

Explanation – E-mail is most commonly used internet based mode of communication, in rest of option
it is either personnel delivery or telecommunication channel

QUESTION 30

Retail Banking means

a. Credit facilities extended to retail traders

b. Providing personal banking services directly to the consumers
c. Collection of large number of dividend/interest warrants
d. Both of a and b
e. All of the above
Correct answer – Options b – Providing personal banking services directly to the consumers

Explanation – Retail banking, also known as consumer banking, is the provision of services by a bank
to the general public, rather than to companies, corporations or other banks, which are often
described as wholesale banking.

QUESTION 31

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Find the approximate yield to maturity (YTM) on a bond which is maturing after 5 years and
carrying a coupon rate of 14 percent. The par value of the bond is INR 1000 and the market
price is INR 1050.

a. 11.58%
b. 13.58%
c. 10.25%
d. 14.58%
e. 12.68%

Correct answer – Options e – 12.68%

Explanation – The approximate value of the YTM will be calculated as:

(C+(P-M)/n)/ (P+M)/2

Here, C = 14%*1000 =140, P=1000, M=1050, n=5

(140+(1000-1050)/5)/ (1000+1050/2) = 12.68%

QUESTION 32

Theory X given by Douglas McGregor's relates relate to:

a. Maslow’s lower level needs.

b. Maslow’s higher level needs.
c. Maslow’s middle level needs
d. Neither level of Maslow’s hierarchy of needs.
e. Both levels of Maslow’s hierarchy of needs.
Correct Answer – Option a - Maslow’s lower level needs.

Explanation – In the Maslow’s Hierarchy of Needs Theory, need are classified in two, lower and higher,
in lower worker seeking respect from others and in case of higher he looks for self respect.

Theories given by Douglas McGregor's, named Theory X and Theory Y for leader on nature of worker.
Theory Y believes that people in the workforce are internally motivated and self directed and self
controlled. Whereas Theory X is based on presumption that typical worker are pessimistic.

Therefore one who is self regulated looks for self respect means higher needs (Theory Y and Higher
Need) and vice versa (Theory X and Lower Need)

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QUESTION 33

When did the National Bank of Agriculture and Rural Development establish?

a. July, 1982
b. July, 1969
c. June, 1981
d. June, 1982
e. July,1981
Correct answer – Options a – July, 1982

Explanation – National Bank for Agriculture and Rural Development is an apex development
financial institution in India, headquartered at Mumbai, established on 12th July 1982 with seed
capital of 100 crore.

QUESTION 34

What is the full form of CBS?

a. Core Banking Solution

b. Core Banking Software
c. Core Banking System
d. Core Banking Service
e. None of these

Correct answer – Options a – Core Banking Solution

Explanation – CBS is core banking solution. It is the software which connect the banks branched to
each other.

QUESTION 35

Communication sent to the speaker from the listener. These are called...

a. Feedback
b. Channels
c. Encodings

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 d. Speaks
e. Decoding

Correct Answer – Option a – Feedback

Explanation – Communication is two way process, and response provided to speaker by listener is
called feedback.

QUESTION 36

The Authentic leadership ____________.

a. Virtually the same as ethical leadership

b. Not a very widely discussed approach
c. Not one that emphasizes knowing thyself
d. One that might serve as a base for numerous other leadership theories
e. It is not a leadership concept
Correct Answer – Option d - One that might serve as a base for numerous other leadership theories

Explanation – Authentic leadership is leadership which focus on building the leader's legitimacy with
followers through honest relationships. Leader in this value their input. Hence can be foundation to all
theories.

Note; in authentic leadership; honest relation are built on an ethical foundation but it is different from
ethical leadership.

QUESTION 37

The ______________ style of leadership is where the focus of power is with the manager. The manager
alone exercises decision-making, authority and the control of rewards or punishments.

a. authoritarian
b. democratic
c. laissez-faire
d. Contextual
e. None of the above
Correct Answer – Option a - authoritarian

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Explanation – As depicted from name itself authoritarian leadership follows the principle of authority
and use of same for decision making rest with manger only (subordinate just have to follow, what is
instructed to them)

QUESTION 38

Regulator for stock markets in India is ____________

a. SEBI
b. RBI
c. MCA
d. MoF
e. None of these
Correct answer – Options a – SEBI

Explanation – SEBI (security exchange board of India) is constituted under SEBI act 1992 for
regulation of security market in India.

QUESTION 39

Who is the chairman of the working group to review the Benchmark Prime Lending Rate constituted
by RBI?

a. M.S. Verma
b. R.N. Malhotra
c. J.V. Shetty
d. Deepak Mohanty
e. None of these
Correct answer – Options d – Deepak Mohanty

Explanation – working group to review the Benchmark Prime Lending Rate was constituted in June
2009, under chairman ship of Deepak Mohanty, who was executive director, RBI then.

QUESTION 40

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What are the correct three levels of strategic planning in sequence order starting from up to down;

a. Operational, intermediate and strategic

b. Corporate, Business and functional
c. Head Office, Regional and local
d. Top, middle and bottom
e. Divisional, Functional and personal
Correct Answer – Option b - Corporate, Business and functional

Explanation – Strategic plans are formulated at corporate level – Company as whole, then at Business
level (SBU or Divisions), then at functional level of each division. (e.g. firstly for ITC as whole, then for
Hotel Division, FMGC, Agro and lastly finance, HR, operations etc. Of all division individually.

QUESTION 41

Which one of following PMJDY relates to

a. Female Education
b. Food Safety
c. Literacy
d. Financial Inclusion
e. none of the above
Correct answer – Options d – Financial Inclusion

Explanation – PMJDY is stands for Pradhan Mantri Jan Dhan Yojana and is aiming for Financial
Inclusion to ensure every one must have access to banks. It launched on 28.08.2014

QUESTION 42

IPO stands for ____________

a. Initial payment option

b. Initial public option
c. Initial price offer
d. Interim public offer
e. Initial public offer
Correct answer – Options e – Initial Public Offer

Explanation – IPO stands for initial public offer, when for first time company issue its

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securities in primary market

QUESTION 43

What distinguishes the levels of communication

a. Number of people, environment involved and channels used

b. Noise occurring, channels used and the formality of situation
c. Environment involved, noise occurring, and feedback opportunity
d. Number of people, channels and environment involved
e. Number of people, formality of situation and feedback opportunity
Correct Answer – Option e – Number of people, formality of situation and feedback opportunity

Explanation – level of communication depends upon factor like Number of people – decide the level of
complexity, Formality of situation – channel and mode, Feedback opportunity.

QUESTION 44

Well-functioning financial markets promote

a. inflation
b. deflation
c. unemployment
d. growth
e. none of the above
Correct answer – Options d – growth

Explanation – Financial market is system where savings are mobilised to generate advances
through credit creation, if this operates at optimal level, then finance is easily and
competitively available, which lead to growth of business at micro and economy at macro
level.

QUESTION 45

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Theory which believes that employees will exercise self-direction and Self-control when they are
committed to the objectives is known as:

a. Theory A
b. Theory X
c. Theory Z
d. Theory Y
e. None of above
Correct Answer – Option d - Theory Y

Explanation – There are two theories given by Douglas McGregor's, named Theory X and Theory Y for
leader on nature of worker. Theory Y believes that people in the workforce are internally motivated
and self directed and self controlled. Whereas Theory X is based on presumption that typical worker
are pessimistic.

QUESTION 46

Budget deficits are important to monetary authorities because

a. The financing of government budget deficits may affect the conduct of monetary policy.
b. Budget deficits may increase interest rates, putting pressure on the monetary authorities to
expand the quantity of money to keep interest rates from rising.
c. Budget deficits may put pressure on reserve bank to increase the growth rate of the money
supply.
d. Only a and c
e. All of the above.

Correct answer – Options e – all of the above.

Explanation – Budget deficits is as situation where expenditure of government is more than its
revenue, hence in such situation monetary policy will be affected, interest rate may be shoot
up to reduce money with public for disposal, such deficits may be finance with printing new
currency.

QUESTION 47

Organizations develop through training and development, which bring benefits to employees as well
as to the organizations. Which of the following would not be regarded as a common feature that

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would result from training in today's modern workplace?

a. Same job as no new skill learned

b. Improve chances of promotion
c. Be able to move more easily between jobs and other organizations
d. Develop a range of transferable skills
e. None of these
Correct Answer – Option a - Same job as no new skill learned

Explanation – Training and development inculcate new skills in each of employee, hence they can also
take shift in job, due to newly learned skills.

QUESTION 48

If the CPI in 2017 is 200, and in 2016 the CPI is 180, the rate of inflation from 2016 to 2017 is

a. 20%.
b. 10%.
c. 0%.
d. −10%.
e. −20%.
Correct Answer – Options d – -10%

Explanation – 180-200/200 = 10%, mean consumer goods prices are declined by 10%

QUESTION 49

The contingency theory that focuses on the followers’ readiness is

a. Trait theory
b. Expectancy theory
c. Hersey and Blanchard’s situational leadership theory
d. Fiedler’s contingency theory
e. Path-goal leadership theory
Correct Answer – Option c – Hersey and Blanchard’s situational leadership theory

Explanation – contingency means high probability of varied results, to manage this flexibility is
required. Hersey and Blanchard Situational Leadership Theory suggest leaders should be flexible so
that they match their style to the experience and ability of those they are leading.

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QUESTION 50

Futures markets have grown rapidly because futures

a. are standardized
b. have lower default risk
c. are liquid
d. regulated
e. all of the above.
Correct Answer – Options e – all of these

Explanation – Futures are exchange traded contracts, hence standardized – prefixed contract
size and delivery date, Marked to margin – hence no default, can be trade – hence liquid and
regulated by exchange/regulator.

QUESTION 51

The process of communication is aimed at delivering a clear message from a sender to a receiver,
using…………………..

a. verbal channels
b. written channels
c. Gestural means
d. Only a & b
e. all a, b and c
Correct Answer – Option e – all a, b and c

Explanation – Ultimate aim is to provide the clear message through any of channel, it may be verbal –
speak, Non-verbal – written, gestural – signs.

QUESTION 52

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Forward contracts are of limited usefulness to financial institutions because of ;

a. Default risk.
b. Impossible to hedge risk.
c. Lack of liquidity.
d. All three above.
e. Both (a) and (c) of the above.
Correct Answer – Options e – both (a) and (c) of the above

Explanation – Forward contracts are good to hedge the risk but some residual risk remains
there due to lack of liquidity and default risk. hence hold limited usefulness.

QUESTION 53

Communication is used by people to share and analyses the,

Thoughts,____________ and ideas.

a. Information
b. Data
c. Skill
d. Knowledge
e. All of these
Correct Answer – Option a – Information

Explanation – Only information can be shared through communication and useful for analysis, data is
raw form of information, skill and knowledge are personnel in nature they can be learned or applied
but can’t be shared through communication only.

QUESTION 54

By hedging a portfolio, a bank manager

a. Reduces interest rate risk.

b. Increases reinvestment risk.
c. Increases exchange rate risk.
d. Increases the probability of gains.
e. None of these
Correct Answer – Options a – reduces interest rate risk

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Explanation – Hedging is technique to reduce risk, hence only option a is correct.

QUESTION 55

Communication is a __________of giving and receiving information through any number of channels.

a. one-way process
b. two-way process
c. three-way process
d. multi-way process
e. All of these
Correct Answer – Option b – two-way process

Explanation – Communication is two way process, where on one end there is sender and receiver on
another end.

QUESTION 56

Which of the following is not true about Bitcoins?

I. Bitcoins are a digital currency that can be used to buy products and services without
any intermediary.
II. The Indian government and the Reserve Bank of India have issued several warnings
against dealing in Bitcoins, the former even comparing it with a Ponzi scheme.
III. India has banned Bitcoins

a. I Only
b. III Only
c. Both I & II
d. Both II & III
e. All of the Above

Correct Answer – Options b – III only

Explanation - Bitcoins are a digital currency that can be used to buy products and services
without any intermediary. The Indian government and the Reserve Bank of India have issued
several warnings against dealing in Bitcoins, the former even comparing it with a Ponzi
scheme. India has not banned Bitcoins, although eight countries including China have
prohibited the digital currency.

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QUESTION 57

Which of the following categories of body movement is correctly defined?

a. Emblems are movements that directly translate into words.

b. Illustrators are movements that are universally recognized across cultures.
c. Regulators control the rate of speech at which the speakers are talking.
d. Adaptors are a form of feedback, signalling the listener's disagreement with the speaker.
e. None of these
Correct Answer – Option a – Emblems are movements that directly translate into words

Explanation – Emblems are movement, which can be translated into words. These are part of gestural
language.

QUESTION 58

Banking Regulation (Amendment) Act, 2017 is majorly focused on to deal with _____ ______

a. Fixed Assets
b. Retail Assets
c. Stressed Assets
d. Performing Assets
e. None of these
Correct Answer – Option c – Stressed Assets

Explanation - The Banking Regulation (Amendment) Act, 2017 seeks to amend the Banking
Regulation Act, 1949 to insert provisions for handling cases related to stress assets.

QUESTION 59

________________Is also important for instructing employees on certain tasks and projects.

a. Oral Communication
b. Report
c. interview
d. Written communication
e. None of these

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Correct Answer – Option d – Written communication

Explanation – Written Communication is needed to be used for instruction (need for record purposes
and clarity of direction) to employees.

QUESTION 60

Financial derivatives include

a. stocks
b. bonds
c. future
d. debt
e. none of the above
Correct Answer – Option c – Future

Explanation – Future are exchange traded derivatives, where contract size are also fixed and
rest all are financial instrument for raising fianance.

QUESTION 61

What does the governance framework determines

a. Who the organisation is there to serve

b. The regulatory framework in which the organisation operates
c. The legal framework for the administration of the organisation
d. Who the organisation is there to serve and how the purposes and priorities of the organisation
should be decided
e. All of these
Correct Answer – Option d – Who the organisation is there to serve and how the purposes and
priorities of the organisation should be decided

Explanation – Corporate governance is determining the best way of conducting the affairs of
corporate by director on behalf of stakeholders; hence option d is best fit here.

QUESTION 62

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The disadvantage of swaps is that they

a. lack liquidity
b. are difficult to arrange for a counterparty
c. suffer from default risk
d. Only a and B
e. all of the above

Correct Answer – Option e – All of Above

Explanation – Swaps are financial derivative, usually not held for trade hence lacks liquidity, it
is not always easy to find the counterparty – whose need are equally opposite or willing to
enter into swap obligation; other party can default.

QUESTION 63

With reference to principles of corporate governance._________ protect shareowners rights, treat all
shareholders including minorities, equitably and provide effective redress for violations.

a. Transparency
b. Responsibility
c. Fairness
d. Accountability
e. Independence
Correct Answer – Option c – Fairness

Explanation – Fairness means fair/equity to all, no oppression by any class of stakeholder over
another class of stakeholder.

QUESTION 64

The Reserve Bank relaxed norms for issuance of rupee-denominated overseas bonds, popularly
known as Masala bonds, saying they will be treated as ________________

a. Euro Bond
b. American Depositary Receipt
c. Global Depositary receipt

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 d. External Commercial Borrowings
e. None of these

Correct Answer – Option d - External Commercial Borrowings

Explanation - Recently, RBI stated that masala bonds will no longer form part of the limit for
FPI investments in corporate bonds. They will form part of the External Commercial Borrowings
(ECBs) and will be monitored accordingly. As a result, INR 44,001 crore arising out of shifting
of masala bonds will be released for foreign portfolio investor (FPI) investment in corporate
bonds over the next two quarters

QUESTION 65

The Fiscal Responsibility and Budget Management Act, 2003, have which of following
objectives

a. to introduce transparent fiscal management systems in the country

b. to introduce a more equitable and manageable distribution of the country's debts over the
years
c. to aim for fiscal stability for India in the long run
d. only a and b
e. all a, b and c
Correct Answer – Option e – all a, b and c

Explanation – FRBM act 2003, was enforced to institutionalize financial discipline, reduce
India's fiscal deficit, improve macroeconomic management and the overall management of the
public funds by moving towards a balanced budget and strengthen fiscal prudence. For these
objectives power are assigned to RBI.

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