01 Class Quiz

MCQs SECURITIES, CHARGES , DP , MARGIN AND INSURANCE

1. A partnership firm has been allowed a cash credit pledge limit of Rs.5 lac for which it
maintains stocks of Rs.8 lac but obtains insurance for Rs.6 lac. A hire has occurred
due to which stock worth Rs.1 lac have been damaged. What is the amount of claim
which the insurance company would settle for this loss:
a. Rs.1 lac
b. Rs.80000
c. Rs.75000
d. Rs.50000
e. Rs.25000
2. Your branch has sanctioned a cash credit limit of Rs.12 lac to a trading firm with 40
% margin against the goods in trade. To avail this limit fully, what should be amount
of stocks with the party:
a. Rs.20 lac
b. Rs.18 lac
c. Rs.16 lac
d. Rs.14 lac
e. Rs.12 lac
3. When banks sanction credit facilities, they insist on margin from the borrowers also,
which means:
a: Market value of security less amount of loan is known as margin
b: Contribution of the borrower from long term sources in the business
c: Current assets minus current liabilities
d: a to b
e: a to c
4. Margin maintained by the bank on the securities depends on:
a. The price fluctuations of security
b. Credit reputation of the party
c. RBI/banks own guidelines for certain securities
d. All the above
5. In what respect, a charge of hypothecation is different from pledge. The goods are:
a. In possession of bank but ownership with the borrower
b. Both the possession and ownership rest with borrower
c. Neither the possession nor the ownership is with the bank
d. Both (b) and (c) above
e. There is no difference and both are similar
6.

In an agreement of hypothecation, the borrower undertakes to:

a. Hand over the possession of the security when asked by the bank
1

b. The bank according to its will, can convert hypothecation into pledge at any time by giving
notice
c. Hypothecated goods are with the borrower as a trustee for the bank
d. A and b
e. a to c
7. Through a charge on assets:
a. The banker becomes the owner of the security
b. The bank gets certain rights in the security
c. Security is transferred in favour of the bank
d. Rights can be enforced without court intervention
e. None of the above
8. After the conversion of hypothecation into pledge the bank will have the same right
as that of:
a. Pledgee
b. Mortgagee
c. Pledger
d. Hypothecatee
e. Hypothecator
9. Which of the following mortgages is not required to be registered with Registrar of
Assurances?
a. Equitable mortgage
b. Simple mortgage
c. Registered mortgage
d. Legal mortgage
e. All of the above
10. On which among the following, the charge of assignment cannot be created
a. Land and building
b. Plant and machinery
c. Claim on a Debtor
d.

a and b above

e. All the above

11. Define security: Security is a physical or financial asset on which a legal interest is
created in favour of the lender for security of the loan given.
12. Elaborate equitable mortgage: This is a mortgage where the owner of property deposits
the tile deeds of the property with the branch of the lender (at a notified town for this
propose of creating equitable mortgage) with intent to create mortgage on the property for
security of repayment of a loan from the lender. It does not require registration or stamp
duty but only a few states levy stamp duty on value of the transaction.