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06 C

MCQs SECURITIES, CHARGES, DP, MARGIN AND INSURANCE

1. A firm, trading in goods and services obtains an insurance policy for various risks
for Rs. 15 lac whereas they maintain average inventory in the range of Rs. 20 lac.
Unfortunately a fire takes place and the goods worth Rs. 4 lac are destroyed. What
will be amount of insurance claim the party will be able to obtain from the
insurance company in case their claim is accepted:
a. Due to under insurance, no claim will be entertained
b. The amount of claim will be restricted to 50% of the amount of loss.
c. Since the loss is 1/4th of the value stocks, the insurance cover will be 25%
d. The claim for loss will be in the ratio of insurance amount as percentage of the
value of stocks (i.e.75%)
e. b or c, whichever is lower
2. A bank branch while sanctioning a loan for purchase of a motor vehicle, obtains
insurance policy for various kinds of risks in:
a. Banks name with bank clause
b. Borrowers name with bank clause
c. Joint name of bank and borrower
d. An open policy
e. A policy with all the above features
3. 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
4. A firm has been sanctioned a cash credit limit of Rs.4 lac. It submits stock statement
for stock value of Rs.6 lac. The margin on the security is 25%. What is the amount
of drawing power in the account?
a. Rs.6 lac
b. Rs.4.50 lac
c. Rs.4 lac
d. Rs.3 lac
e. Rs.3.50 lac
5. 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
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b. Rs.18 lac
c. Rs.16 lac
d. Rs.14 lac
e. Rs.12 lac
6. When banks sanction credit facilities, they insist on margin from the borrowers also,
which means:
a: Market value of security less amount of loan
b: Contribution of the borrower from long term sources in the business
c: Current assets minus current liabilities
d: a to c
e: b & c
7. Why a banker should keep margin:
a. There can be fluctuation in the price of security
b. Due to application of interest, the debt pressure on the borrower goes on
increasing
c. With the passage of time value of security may deplete.
d. All the above
e. None of the above
8. Margin maintained by the bank on the securities depends on:
a. The price fluctuations
b. Credit reputation of the party
c. RBI/banks own guidelines for certain securities
d. All the above
PLEDGE & HYPOTHECATION
1 . In what respect, a charge 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
2 . Your branch has allowed an advance against stocks but the stocks are lying with a 3rd
party warehouse. On the direction for the borrower the said 3rd party has acknowledged
that the stocks shall be kept on behalf of the bank. Such an advances is called:
a. Unsecured advance
b. Cash credit hypothecation advance
c. Cash credit lock & key or pledge
d. Any of the above
e. advances against warehouse receipts
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3 . In case of hypothecation, the borrower can:


a. Take goods out of godown and use them
b. Keep new goods inside the godown in place of the old once
c. Sell the goods hypothecated and replenish the stocks
d. Can avail bank finance on the security of these goods
e. All of the above
4. In case of pledge, there are two parties:
a. Bailor and bailee
b. Bailor and possessor
c. Bailee and manufacturer
d. Pledger and pledgee or pawner and pawnee
e. A and b
5 . In an agreement of hypothecation, the borrower undertakes to:
a. Hand over the possession of the security when asked by the bank
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
6 . 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
7 . You grant a loan against the security of goods relating to a firm.
Which kind of charge on goods can be created?
a. Pledging the goods
b. Hypothecation the goods
c. Assignment
d. A or b
e. A to c
8. . Which of the following definition is most appropriate in the case of the charge
called pledge:
a. A loan against goods by keeping in a godown under lock and key of lender
b. A limit for working capital by offering them under lock and key
c. Bailment of goods with an intention to create security for a debt
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d. All the above


9. The charge on movables to be created would be charge known as:
a. Lien
b. Assignment
c. Mortgage
d. Hypothecation
e. Set off
10. After the conversion of hypothecation into pledge the bank will have the same right
as that of:
a. Pledgee
b. Mortgagee
c. Pledger
d. Hypothecate
e. Hypothecator
11. . Hypothecation is defined in:
a. Indian Contract Act 1872
b. Transfer of Property Act
c. Negotiable Instruments act
d. Securitization & Reconstruction of Financial assets and Enforcement of Security
Interest Act 2002
12. . A borrower keeps the goods with a third party and instructs them to hold the goods
for and on behalf of the creditor:
a. The 3rd party will not agree
b. When the third party agrees hold goods for his creditors, it will be treated as
constructive pledge
c. This type of pledge will not be valid
d. None of the above
13. . When the borrower needs continuous use of the goods charged to the bank, he
should:
a. Hypothecate such goods to bank
b. Pledge such goods to bank
c. Mortgage such goods to bank
d. None of the above
MORTGAGE/ ASSIGNMENT
1. The mortgage has been defined U/s. of Transfer of Property Act:
a. 57
b. 58
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c. 59
d. 60
e. None of the above
2. The amount of loan secured by mortgage of property is called
a. Principal amount
b. Mortgage money
c. Borrowed money
d. Hot money
e. None of the above
3. Can the same property be equitably mortgaged to two banks:
a.Yes, with the consent of the first mortgagee
b. No
c.Yes when first one keeps the deeds as agent for the second
d. (a) and (b) above
e.None of the above
4. Which of he following mortgages is not required to be registered with Registrar of
Assurances?
a. Equitable mortgage
b. Simple mortgage
c. English Mortgage
d. Usufructuary mortgage
e. Mortgage by conditional sale
5. You are in the process of getting an equitable mortgage created. What among the
following precautions would be taken:
a. An instrument in writing is necessary
b. The mortgagor will have to put his statement in the records of the mortgagee.
c. The mortgagor should not sign any document nor submit any memo in writing at
the time of creation of mortgage
d. Mortgage will be registered with registrar of Assurances.
e. Mortgage can be created at any place for any property
6. Generally which charge is created on the book debts by banks:
a. Pledge
b. Assignment
c. Hypothecation
d. Mortgage
e. None of the above
7.

On which among the following, the charge of assignment cannot be created


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a. Land and building


b. Plant and machinery
c. Claim on a Debtor
d. A and b above
e. All the above
8. The instrument through which an interest in an immovable property is transferred is
called
a. Mortgage deed
b. Mortgage transfer
c. Mortgage agreement
d. Mortgage-cum-loan deed
e. Any of the above
9.

One property has been mortgaged equitably and by some other type of mortgage as
well. Which of the mortgages will have a priority:
a. The mortgage which has been created earlier
b. Both the mortgages will be treated on the same footings
c. Legal mortgage
d. Equitable mortgage, if created
e. None of the above

10. . An equitable mortgage:


a. Attracts stamp duty and registration charges in all states
b. Does not attract stamp duty and registration charges in some states
c. Attracts stamp duty at reduced rates
d. None of the above
11. When a debt, in the form of actionable claim is offered as security, which charge
should be created:
a. Assignment
b. Hypothecation
c. Pledge
d. None of the above

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