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1.

Net Interest income is

(i) Interest earned on advances


(ii) Interest earned on investments
(iii) Total interest earned on advances and investment
(iv) Difference between interest earned and interest paid

2. Interest rate risk is a type of

(i) Credit risk


(ii) Market risk
(iii) Operational risk
(iv) All the above

3. 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 ?

(i) Market Risk


(ii) Operational Risk
(iii) Market Liquidation Risk
(iv) Credit Risk

4.Which of the following is not a type of credit risk ?

(i) Default risk


(ii) Credit spread risk
(iii) Intrinsic risk
(iv) Basis risk

5. 8% Government of India security is quoted at RS 120/- The current yield on the


security, will be----

(i) 12%
(ii) 9.6%
(iii) 6.7%
(iv) 8%

6. Decrease in the amount of creditors result in:

(i)Decrease in cash
(ii) Increase in assets
(iii)No change in assets
(iv)Increase in cash

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7. 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----

(i) 20%
(ii) 4%
(iii) 40%
(iv) 2.5%

8. The risk that arises due to worsening of credit quality is

(i) Intrinsic Risk


(ii) Credit spread Risk
(iii) Portfolio risk
(iv) Counterparty risk

9. 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 ?

(i) Rs.100
(ii) Rs.120
(iii) Rs.150
(iv) Rs.125

10. In order to develop an capability to actively manage an credit portfolio one must have
in place the following:

Credit Rating Model (or models for different categories of loans and advances)
Develop and maintain necessary data on defaults of borrowers rating category wise, i.e.,
‘Rating Migration’.

(i) Both 1 and 2 are required


(ii) Only 1 is required
(iii) Only 2 is required
(iv) None of the above

11. The rent paid to landlord is credited to:-


(i) cash A/C
(ii)Rent A/c
(iii) Londlord,s A/c
(iv)None of the above

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12. An increase in cash reserve ratio will cause yield curve to

(i) Shift downward


(ii) Remain unchanged
(iii) Become steeper
(iv) Become flatter

13. 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 ?

(i) Market risk


(ii) Operational risk
(iii) Market liquidation risk
(iv) Credit risk

14. A transaction where financial securities are issued against the cash flow generated
from a pool of assets is called

(i) Securitization
(ii) Credit Default Swaps
(iii) Credit Linked Notes
(iv) Total Return Swaps

15. Growth Fund is a mutual fund that

(i) assures growth in income


(ii) invests in fixed income securities
(iii) gives fixed return
(iv) invests primarily in equities

16. Sunset Torus has aRs 3500 account receivable from Mohan.On Jan 20,the Rotary
makes a paratial payment of Rs 2100 to Sunset Torus.The journal entry made on Jan 20
by Sunset to record this transaction includes:-
(i) A credit to the cash received account of Rs.2100
(ii) A credit the account receivable account of Rs2100
(iii) A debit to the cash account of Rs 1400
(iv)Adebit to the account recevvable account of Rs1400

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17 . Operational Risk arises from

(i) Inadequate or failed internal processes


(ii)People and systems
(iii)External Events
(iv)Defaults

18. Which of the following is true ?

(i) All of them


(ii) None of them
(iii) (a) , (b) and (c)
(iv) (a) , (b) and (e)
(v)

19. A decline in cash reserve ratio will cause the yield curve to

(i) shift upward


(ii) shift downward
(iii) become flatter
(iv) remain unchanged

20. The third consultative paper recommended for


(a) Cause based classification
(b) Effect based classification
(c) Event based classification

21. After the preparation of ledgers the next step is preparation of


(i)Trading A/C
(ii) P and L A/C
(iii) Trial Balance
(iv) None of above

22. For operational risk. Which of the following is true

(i) (a)
(ii) None of them
(iii) (c)
(iv) (b)

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23. 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.....

(i) Rs. 120


(ii) Rs.133.3
(iii) Rs. 109
(iv) Rs. 140

24. The Preparatiopn of Trial balance is for:-


(i) Locating errors of principle
(ii Locating errors of commission
(iii)Locating clerical errors
(iv) All of the above

25. Rewards of proper management of operational risks are

(a) Lesser risk capital


(b) Cost reductions in operations
(c) Competitive edge

26. A fall in long term interest rates on Government securities will make the yield curve
become

(i) flatter
(ii) steeper
(iii) shift downward

27.A bank expects fall in price of a security if it sells it in the market. What is the risk
that the bank is facing ?

(i) Market risk


(ii) Operational risk
(iii) Asset Liquidation risk
(iv) Market liquidity risk

28. 11% Government of India security is quoted at Rs. 110, the yield will be –

(i) 11%
(ii) 10%
(iii) 9%
(iv) None of these

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29. 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 ?

(i) 4 days
(ii) 5 days
(iii) 6 days
(iv) 7 days

30. A fall in interest rates will make prices of Government Securities -

(i) Go down
(ii) Go up
(iii) Remain unchanged
(iv) None of these

31. Cash book is type of _____but can also treated as part of ____
(i)Subsidiary book, Principal book
(ii) Principal book, Subsidiary book
(iii)Subsidiary book, Subsidiary book
(iv) Principal book, Principal book

32. Systemic risk the risk of

(i) Failure of a bank, which is not adhering to regulations


(ii) Failure of two banks simultaneously due to bankruptcy of one bank
(iii) Where a group of banks fail due to contagion effect
(iv) Failure of entire banking system

33. If the yield on long dated Govt. securities falls, then the yield curve will became:-

(i) Steeper
(ii) Flatter
(iii) Shift downward

34. 11% Govt. of India security is quoted at Rs.110. If the interest rates go down by 1%
the market price of the security will be

(i) Rs.110
(ii) Rs.109
(iii) Rs.122.2
(iv) Rs.130

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35. Balanced fund is a mutual fund that

(i) Assures income


(ii) Invests in debt and equity
(iii) Assure growth
(iv) Gives fixed returns

36. Interest on investment received from UTI:-


(i) Capital receipt
(ii) Revenue receipt
(iii)Capital expenditures
(iv) Revenue expenditures

37. Back testing is done to

(i) Test a model


(ii) Compare model results and actual performance
(iii) Record performance
(iv) None of the above

38. Under Basel II, Capital requirement under the accord is

(i) The maximum Capital that is required to be maintained


(ii) The minimum Capital that is required to be maintained
(iii) The capital as specified by the regulatory authority is required
to be maintained
(iv) None of the above

39. A fall in the interest rates causes Govt. Securities to

(i) Remain stable


(ii) Fall
(iii) Rise

40. Capital charge for credit risk requires input for PD, LGD, EAD and M. Under
advanced IRB approach, who provide the input for LGD.

(i) Bank
(ii) Supervisor
(iii) Function provided by BCBS
(iv) None of the above

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41. A debenture of Rs.100 carrying 15% coupon rate is quoted in the market at Rs.135/-.
The current yield on this debenture will be

(i) 13.5%
(ii) 15%
(iii) 11.11%
(iv) 10%

42. Investment in Post Office time deposit is

(i) Zero risk investment


(ii) Low risk investment
(iii) Medium risk investment
(iv) High risk investment

43. If the short term interest rates are temporarily higher than the long term interest rates,
the yield curve will be

(i) Sloping upward


(ii) Inverted
(iii) Zigzag
(iv) Horizontal

44. Premature payment of a term loan will result in interest rate risk of type

(i) Basis risk


(ii) Yield curve risk
(iii) Embedded option risk
(iv) Mismatch risk

45. The going concern concept is the underlying basis for :-


(i) Stating fixed assets at their historical cost
(ii) Disclosing the market value of securities
(iii) Disclosing the sales and other operating information in the income
statement
(iv) Nona of the above

46. A company with equity capital of Rs.50 crores (Face Value of Rs.10/- per share)
makes gross profit of Rs.70 crores and net profit after tax of Rs.25 crores. If the market
price of its equity share is Rs.50, the PE ratio will be

(i) 50
(ii) 5
(iii) 10
(iv) 20

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47. Daily volatility of a stock is 1%. What is its 10 days volatility approximately ?

(i) 3%
(ii) 10%
(iii) 1%
(iv) 4%

48. If call money rates are temporarily higher than the long term interest rates, the yield
curve will be

(i) Slopping upwards


(ii) Zigzag
(iii) Inverted
(iv) Horizontal

49. Capital charge component of pricing accounts for

1) Cost of capital
2) Internal generation of capital
3) Loss provision

50. Which of the following is true.?

(i) All the statements are correct


(ii) Statements 1 and 2 are correct
(iii) Statements 2 and 3 are correct
(iv) Statements 3 and 1 are correct

51. Under inflationary conditions ,which of the methods will not show greatest value of
cost of goods sold?
(i) FIFO
(ii)LIFO
(iii)Weighted Average
(iv)Both a and c

52. Equity oriented mutual funds

(i) Assure income


(ii) Assure growth
(iii) Invest in debentures
(iv) Invest in shares

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53 A bank funds its assets from a pool of composite liabilities. Apart from credit and
operational risks, it faces

(i) Basis risk


(ii) Mismatch risk
(iii) Market risk
(iv) Liquidity risk

54. A branch sanctions Rs.1 core 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
5) Operational risk

(i) All of them


(ii) 1,2 and 3 only
(iii) 1,4 and 5 only
(iv) 1,2,4 and 5 only
(v)

55. For charging depreation on which of the following assets ,the depletion method is
adopted?
(i) Plant and machinery
(ii) land and building
(iii) goodwill
(iv) wasting assets like mines and quarries

56. A rise in Government securities prices will make yield curve –

(i) Slope upward


(ii) Shift downward
(iii) Remain stable
(iv) Shift upward

57. Risk mitigation measures result in

1) Reducing downside variability


2) Reducing upside potential which of the following is true

(i) Both the statements are correct

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(ii) Both the statements are not correct
(iii) Statement 1 is correct
(iv) Statement 2 is correct

58.Sales are equal to


(i) cost of goods sold-gross profit
(ii) cost of goods sold+ gross profit
(iii)gross profit- cost of goods sold
(iv) cost of goods sold + Net profit

59. 9% Government of India security is quoted at Rs.120. The current yield on the
security will be –

(i) 12%
(ii) 9%
(iii) 7.5%
(iv) 13.3%

60. Financial Risk is defined as

(i) Uncertainties resu1ting in adverse variation of profitability or


outright losses
(ii) Uncertainties that result in outright losses
(iii) Uncertainties in cash flow
(iv) Variations in net cash flows

61. Written down value method of depreciation machinery year after year due to
(i) Comparability
(ii) convenience
(iii)consistency
(iv) all of the above

62. Strategic Risk is a type of

(i) Interest Rate Risk


(ii) Operation Risk
(iii) Liquidity Risk
(iv) None of the above

63. Objective of liquidity management is to:

(i) Ensure profitability


(ii) Ensure liquidity
(iii) Either of two
(iv) Both

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64. A mutual fund charges 1% entry load and no exit load. Its NAV is Rs.16; its sale and
repurchase price will -----

(i) Rs.16 and Rs.15.80


(ii) Rs.16.16 and Rs.15.84
(iii) Rs.15.84 and Rs.16
(iv) Rs.16.16 and Rs.16

65.Rectifying the error of a credit purchase of goods worth #10000 recorded as credit sale
to Mr A, discovered 2 month later will be in:
(i)Journal Proper
(ii)sales book
(iii)cash book
(iv)Purchase book

66. Banks need liquidity to:

(i) Meet deposit withdrawal


(ii) Fund loan demands
(iii) Both of them
(iv) None of them

67.Rent outstanding is ________________


(a). a liability (b).an asset (c). an income.

68. Trial balance as on 31.03.05 shows sundry debtors as Rs.50,500. Also Write off Rs.
500 as bad debts. The amount of provision for Bad and Doubtful debts at5% will be
________
a). Rs. 2525 b). Rs. 2600 c). Rs. 2500

69. Under Single entry system, capital of a business is ascertained by preparing.


a). Statement of profit or Loss b). Trading A/C. c). Statement of
Affairs.

70. In complete records are generally used by


a). Small traders b). Company c).government

71. Profit made on sale of fixed asset is debited to _________

a). profit and loss a/c b). Fixed asset A/c c). Depreciation A/C

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72. Under Written down Value Method, depreciation _____________
a). increase every year b). is constant every year c). decrease
every year.

73. All solvency rations are expressed in terms of _____________


a). proportion b). Times c). Percentage.

74. All profitability ratios are expressed in terms of


a). percentage b). Times c). Proportion.

75.The total of the purchases day book is posted periodically to the debit of:-
(i) Purchase book
(ii) cash book
(iii)journal proper
(iv) nona of these

76.. Budget is expressed in terms of ______________


a). money b). Physical units c). Money and physical units.

77. The opening balance of cash in January is Rs. 15,000. The estimated cash receipts are
Rs. 20,000 and the estimated cash payments are Rs. 10,000. The opening balance
of cash in February will be ____________
a). 25,000 b). Rs. 35,000 c). Rs. 45,000

78. The new partner does not bring in cash for his share of goodwill under ___________
a). Revalution method b). premium method
c). memorandum revaluation method.

79. Purchases of office furniture Rs.1200 has been debited to General Exp.A/C.It is:-
(i) Clerical error
(ii) error of principle
(iii) error of omission
(iv) compensating error

80. Decrease in the value of liabilities, at the time of admission of a new partner, results
in ____________ to old partners
a).profit b). loss c). expenses.

81. In admission, undistributed profit or loss is transferred to __________


a). new partners only b). Old partners only c). all the
partners.

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82. Capital Reserve is shown on the __________ side of the balance sheet.
a). liability b). asset c). both.

83. The amount credited to share forfeiture account is Rs. 3,000. The discount on reissue
of forfeited share is Rs. 1,500. capital Reserve will be ____________
a). Rs. 2,500 b). Rs. 4,500 c). Rs. 1500.

84.Which of the following method the cost of the asset is spread over in equal proportion
during its useful economic life:-
(i) straight line method
(ii) written down value method
(iii)units of production method
(iv)all above

85.Goods worth Rs.2000 sold to Vijay was entered in purchase account;


The rectification is
a) Credit purchases and credit sales to the extent of Rs.2000 each & debit Vijay by
Rs.2000
b) Debit purchases and debit sales to the extent of Rs.2000 each & credit Vijay.
c) Debit sales to the extent of Rs.4000.
d) Credit purchases to the extent of Rs.4000.

86.Sales return of amount Rs.1000 from Vijay was wrongly entered in purchase book.
The rectification is
a) Debit sales to the extent of Rs.2000.
b) Credit purchases to the extent of Rs.2000
c) Credit Vijay Rs.2000, debit sales and purchases to the extent Rs.1000, each.
d) Debit sales return by Rs.1000 and credit purchases by Rs.1000

87.A withdrawal of cash from business by the proprietor should be credited to:-
(i) Drawing A/C
(ii) Capital A/C
(iii) cash A/C
(iv) purchase A/C

88.Which of the following will not affect Trial Balance


a) Goods sold on credit not recorded in books.
b) Overstating of sales register.
c) Rent account credited instead of debit.
d) Salary debited to the extent ½ the amount.

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89. In purchases book the record is in respect of:-
(i) cash purchase of good
(ii) credit purchase of goods dealt in
(iii)All purchases of goods

90. Suspense a/c is not used in which of the following cases.


a) before trial balance.
b) after trial balance.
c) before final accounts.
d) none of the above.

91. Freight expenses for moving new machinery to factory is


a) Revenue expenses
b) Deferred revenue expenditure
c) Capital expenditure
d) None of the above

92. Technique of finding the net balance of an a/c after considering the total of both
debits and credits appearing in the a/c is known as:-
(i) posting
(ii) purchase
(iii)balancing of an a/c
(iv) Arithmetically accuracy test

93. Which of the following is false


a) Replacement of defective part of machinery is revenue expenditure
b) Daily wages paid for erection /installing of machinery is capital expenditure
c) Underwriting commission for issue of shares is revenue expenditure
d) Excess of sale price of Machinery over its W D Value but less than cost price is
treated as revenue receipt

94. Which of the following is not a deferred revenue expenditure


a) Preliminary expenses for setting up a company.
b) Amount raised through Rights issue.
c) Huge sales promotion expenditure in launch of new product
d) Cost of preparing project report

95. Salaries due for the month of march will appear


(i) on the receipt side of the cash book
(ii)on the payment side of the cash book
(iii) as a contra entry
(iv) nowhere in cash book

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96. For an expense to be classified as revenue or capital depends on
a) Kind of expense
b) Duration of the benefit of the expenditure
c) Effect on revenue earning capacity
d) All of the above

97.Under statement of closing work in closing WIP in period will:-


(i) Understate cost of goods manufactured in that period
(ii)overstate current assets
(iii) overstate gross prifit from sales in that period
(iv) understate net income in that period

98. Cost of goods sold is


a) Opening stock + purchases + closing stock
b) Opening stock + purchases – closing stock
c) Opening stock – purchases + closing stock
d) None of above

99. In LIFO method of inventory valuation


a) Issue of stocks to production is at latest price
b) Closing stock is at latest price
c) Both a) & b)
d) Neither a) nor b)

100.Bills receivable of Rs.1000,which was received from a debtor in full settlement for a
claim of Rs 1100 is dishonoured:-
(i) Purchase return book
(ii)Bills receivable book
(iii) Purchase book
(iv) journal book

101. In FIFO method of inventory valuation


a) Closing stock is at latest price
b) Issue of stocks to production is at earliest price
c) Both a) & b)
d) Neither a) nor b)

102.Which of the following is most desirable


a) Pricing issue of goods to match current material costs
b) Overstating profits
c) Understating profits
d) none of the above

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103.Subsidy os $ 40000 received from the govt. by a manufacturing concern can be best
treated as :-
(i) capital receipt
(ii) Revenue receipt
(iii)capital expenditures
(iv) Revenue expenditures

104. As per accounting standards which of the following is not a preferred method
a) LIFO
b) FIFO
c) WACM
d) All of them

105. Consider the following:


01/04 Opening stock of 1000 units at Rs. 10/- each
10/04 Purchases of 500 units at Rs. 9/- each
16/04 Purchases of 300 units at Rs. 11/- each
18/04 Goods of 300 units released to production
31/04 Books closed
Answer the following: under LIFO under FIFO under WACM
Goods released to production @ Rs 11/- @ Rs. 10/- @ Rs. 9.89/-
Closing stock @ Rs.10/- @ Rs. 11/- @ Rs. 9.89/

106.Read the following and answer :


Drawer is ‘A’
Drawee is ‘B’
Endorsee is ‘C’

In the books of ‘A’, Bills receivable a/c is debited and B’s a/c is credited, then
a) Bill accepted by ‘A’
b) Bill accepted by ‘ B’
c) Bill retired by ‘B’
d) None of the above

In the books of B , Bills payable a/c is debited and bank account is credited
a) Bill accepted by ‘B’
b) Bill retired by ‘B’
c) Bill dishonoured by ‘B’
d) Bill sent by ‘A’ for payment

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107. Which of the following is not true
a) there is no difference in appearance between trade
and accommodation bill.
b) A bill of exchange must be accepted
c) Drawee is maker of a bill
d) Accommodation bill is for an imaginary transaction

108.Noting charges are


a) Paid to bank for dishonour
b) Paid to drawer for dishonour
c) Paid to notary public for recording dishonour
d) None of the above.

26. Goods lost in transit is


a) Nominal loss
b) Abnormal loss
c) Casual loss
d) Conditional loss

109. If purchase return of Rs 84 has been wrongly posted to the debit of sales return a/c,
but had been correctly entered in the suppliers a/c the total of the trial balance would be:-
(i) credit side to be Rs84 more than debit side
(ii) debit side to be Rs84 more than credit side
(iii)debit side to be Rs168 more than credit side
(iv)cresit side to be Rs168 more than debit side

110.Due to heavy flooding a truck carrying consignment goods sinks. This loss is called
a) contingent loss
b) Nominal loss
c) Abnormal loss
d) Casual loss

111. Which of the following is true for leasing and hire purchase
a) Lessor and vendor can claim depreciation.
b) Lessor and hirer can claim depreciation.
c) Lessee and hirer can claim depreciation.
d) Lessee and vendor can claim depreciation.

112.Which of the following is true


a) Total lease rent = cost of asset - total finance income + residual value
b) Total finance income = total lease rent – cost of asset + residual value
c) Total finance income = cost of asset – total lease rent + residual value

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d) Cost of the asset = total lease rent + residual value + total finance income

113.In operating lease the period is


a) Less than the useful life of the asset.
b) Greater than the useful life of the asset.
c) Equal to the useful life of the asset.

114.In comparing lease & hire purchase (H P) there are differences & similarities.
Of the following which one is not true?
a) In lease the user of the asset does not retain it, while in H P he does.
b) In lease the user does not claim depreciation while he does in H P.
c) Payment of rentals is on instalment basis in both.
d) The users of assets in both lease & H P run the risk of obsolescence.

115.Receipts and payments statement shows


a) Only revenue receipts and payments during a year.
b) Only capital receipts & payments during a year.
c) Both capital and revenue receipts during a year.
d) ‘Cash Only’ transactions.

116. For a Non- Trading Organization, a P & L A/c called an Income & Expenditure A/c
because.
(a) They often make losses.
(b) They are forbidden by statute to make profits
(c) By object of their association they are non profit making bodies.
(d) Their income & expenditure statement are a combination of capital & revenue
receipts.

117. Which of the following is not true


(a) Depreciation is an expense charged to the P & L a/c.
(b) Depreciation is not a part of the operating costs.
(c) Assets that are depreciated are tangible assets.
(d) Depreciation is like an insurance expense.

118. Under written down value method of Depn., the W D V of the asset is always
a) equal to zero
b) < zero
c) > zero

119.Which of the following items would not appear in a debtors control account?
A. Cash received
B. Returns inwards
C. Discount received
D. Interest charged on overdue accounts.

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120.In a bank reconciliation, deposits in transit are:
A. deducted from the cash book balance.
B. added to the cash book balance.
C. added to the bank statement balance.
D. deducted from the bank statement balance.

121. Which of the following records is not a book of prime entry?


A. Bank statements
B. Petty cash book
C. Journal
D. Sales returns day book.
122. IAS-2, does not recommend the following method of stock valuation for
incorporating its value in financial statements.
A. FIFO method
B. The weighted average method
C. LIFO method
D. None of the Above
123. The method that ignores scrap value in determining the amount of depreciation is
the:
A. straight-line method.
B. units-of-activity method.
C. declining-balance method.
D. None of these options.

124.Wages and salaries payable are classified as a:


A. Current liability.
B. Long-term liability.
C. Non-current liability.
D. Intangible liability.

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