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Dcc3 OBJECTIVE TYPE QUESTIONS FOR PRACTICE (COVERS ALL MODULES) Net Interest income is (i) (ii) (iii) (iv) Interest earned on advances Interest earned on investments Total interest earned on advances and investment Difference between interest earned and interest paid Interest rate risk is a type of (i) (ii) (iii) (iv) Credit risk Market risk Operational risk All the above European opinion can be exercised on any day at the option of the buyer on or before the expiry of the option. (i) (ii) Tru
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  Dcc3OBJECTIVE TYPE QUESTIONSFOR PRACTICE (COVERS ALL MODULES)  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 Interest rate risk is a type of (i)Credit risk  (ii)Market risk  (iii)Operational risk (iv)All the aboveEuropean opinion can be exercised on any day at the option of the buyer on or  before the expiry of the option.(i)True (ii)False What is the beta factor for corporate finance under Standardized approach ?(i)15% (ii)18% (iii)12%(iv)None of the aboveA bank suffers loss due to adverse market movement of a security. The securitywas however held beyond the defeasance period. What is the type of therisk that the bank has suffered ?(i)Market Risk  (ii)Operational Risk  (iii)Market Liquidation Risk (iv)Credit Risk  1  The June 1999 Basle Committee on Banking Supervision issued proposals for reform of its 1988 Capital Accord (the Basle II Proposals). These proposalscontained MAINLY.(I)Settlement risk management(II)Capital requirements(III)Supervisory review(IV)The handling of hedge funds(V)Contingency plans(VI)Market discipline(i)I, III and VI(ii)II, IV and V(iii)I, IV and V (iv)II, III and VI Which of the following is not a type of credit risk ?(i)Default risk  (ii)Credit spread risk  (iii)Intrinsic risk (iv)Basis risk 8% Government of India security is quoted at RS 120/- The current yield on thesecurity, will be----(i)12%(ii)9.6% (iii)6.7% (iv)8%Risk of a portfolio with over exposure in steel sector will be (i)More than systematic risk  (ii)Equal to intrinsic risk (iii)Less than intrinsic risk (iv)None of theseA 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% 2  (iv)2.5% How many accounts have suffered rating migration in the following tableRating Migration of 100 A Rated AccountsMigration between 31.03.06 and 31.03.07 LastRatingNo. of AccountsPresent RatingA++A+AB+BCDefault A100117910432 (i)2 (ii)19(iii)21(iv)25The risk that arises due to worsening of credit quality is(i)Intrinsic Risk  (ii)Credit spread Risk  (iii)Portfolio risk (iv)Counterparty risk A debenture of face value of As. 100 carries a coupon of 15%. If the current yield is12.5%. What is the current market price ?(i)Rs.100 (ii)Rs.120 (iii)Rs.150(iv)Rs.125In order to develop an capability to actively manage an credit portfolio one musthave in place the following:(a)Credit Rating Model (or models for different categories of loans andadvances)(b)Develop and maintain necessary data on defaults of borrowers ratingcategory 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 3  An increase in cash reserve ratio will cause yield curve to(i)Shift downward(ii)Remain unchanged(iii)Become steeper  (iv)Become flatter The model that combines five financial ratios using reported accountinginformation and equity values to produce on objective measure of  borrower’s financial health is (i)Altman’s 2 score (ii)‘Credit Metrics’(iii)Credit Risk +(iv)None of the aboveA 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  When interest rates go up, prices of fixed interest bonds – (i)Go up (ii)Go down (iii)Remain unchangedVaR is not enough to assess market risk of a portfolio. Stress testing is desirable because(i)It helps in calibrating VaR module(ii)It helps as an additional risk measure (iii)It helps in assessing risk due to abnormal movement of marketparameters (iv)It is used as VaR measure is not accurate enough STUDY THE FOLLOWING STATEMENTS AND ANSWER  4
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