1.Which of the following is false with respect to asset-backed securitization?

a. It is generally backed by easily traceable movable property like real estate

b. Asset need not exist at the time of securitization such as future cash flows can also be securitized
c. Process takes into consideration depreciation in the value of the assets
d. They give high yields to the investor
e. Legal hassles are relatively less as compared to mortgage backed securities.

2.The devolvement of RBI in auction of T-Bills is

a. 20% of the total devolvement
b. 25% of the total devolvement
c. 75% of the total devolvement
d. 80% of the total devolvement
e. Residuary after the devolvement of all the primary dealers.

3.The stamp duty payable on a commercial paper of maturity above 9 months but less than 12 months is -
______%.
a. 0.125
b. 0.250
c. 0.375
d. 0.500
e. 0.575

4.Which of the following is true with respect to mortgaged backed bonds?

I. Use of collateral is more efficient than in case of mortgage pass throughs
II. Certainty of cash flow is more predictable than in case of collateral mortgage backed bonds
III. Liquidity is more excellent than treasury bills.
A. Only (I) above
b. Only (II) above
c. Both (I) and (II) above
d. Both (II) and (III) above
e. None of the above.

5.The maximum amount of deposits AA rated NBFC having net owned funds of more than Rs.25 lakhs and
complying all prudential norms with capital adequacy capital ratio of 15% can mobilize is______ times its
net owned funds.
a. 1.00
b. 2.50
c. 4.00
d. 6.00
e. 10.00.

6.The minimum net worth required to qualify as a merchant banker as per the latest guidelines of SEBI is
a. Rs.2.50 crores
b. Rs.5.00 crores
c. Rs.6.00 crores
d. Rs.7.50 crores
e. Rs.10.00 crores

7.As per the SEBI Guidelines one of the conditions an existing private or closely held company should fulfil
to freely price its issue is to have networth of not less than________ in 3 out of last______ years with
minimum networth in the immediately preceding_ _____ years.
a. Rs.10 lakhs, 7, 3
b. Rs.50 lakhs, 5, 2
c. Rs.100 lakhs, 5, 2
d. Rs.100 lakhs, 4, 2
e. These stipulations are done away as per the latest amendments.
8.Akash Finance wants to register itself with SEBI as a Category I Registrar. The minimum net worth Akash
Finance should have is
a. Rs.2 lakhs
b. Rs.3 lakhs
c. Rs.5 lakhs
d. Rs.6 lakhs
e. Rs.10 lakhs.

9.The minimum underwriting obligation of a lead manager is

a.5% of total underwriting commitment
b.3% of total underwriting commitment
c. Rs.25 lakhs
d. Maximum of (b) and (c) above
e. Minimum of (a) and (c) above.

10.The applicant in a public issue is required to quote his Permanent Account Number (PAN) in the
application form if the size of the application exceeds
a. Rs. 10,000
b. Rs. 25,000
c. Rs. 50,000
d. Rs. 75,000
e.Rs.1,00,000

11.Tilak Tazza Tea is coming up with a public issue, which opens on July 28, 2001. The issue announcement
advertisement should be released on
a. July 8, 2001
b. July 14, 2001
c. July 18, 2001
d. July 23, 2001
e. July 28, 2001.

12.The US dollar denominated bond issued by foreign borrowers in the US market is known as
a. Alpine bonds
b. Bulldog bonds
c. Samurai bonds
d. Shibosai bonds
e. Yankee bonds.

13.The credit rating obtained for a commercial paper cannot be more than_____ old as per the RBI
Guidelines.
a. 1 month
b. 2 months
c. 3 months
d. 6 months
e.1 year.

14.Which of the following is false with respect to credit rating?

a. A credit rating reflects borrower\u2019s accountability
b. A credit rating reflects the borrower\u2019s expected capability and interest to pay the interest and principal
amount on time
c. A credit rating is a general purpose evaluation of the issuer
d. A credit rating is not an extensive audit of the issuing company
e. A credit rating involves issue specific evaluation.
15.Prudential Factoring Services Ltd. discounts the L/C backed bills of its clients at 25% p.a. The effective
rate of interest per annum of such a bill of usance period 90 days (assuming 360 days a year) is_______ %.
a. 25.00
b. 26.37
c. 26.67
d. 27.44
e. 29.45

16.In which of the following types of factoring the factor provides an advance generally varying between 75-
85 % of the value of the receivables factored and the balance is paid upon collection or on the guaranteed
payment date?
a. Recourse factoring
b. Maturity factoring
c. Advance factoring
d. Supplier guarantee factoring
e. Full factoring.

17.Elegant Emeralds have taken a machine worth Rs.1000000 in hire purchase from Fabulous Finance
Limited at the following terms:
Rate of interest 14% flat
Repayment period 4 years
Frequency of payment Monthly in arrears
Down payment 25%
If after paying the 30th installment Elegant Emeralds want to repay the loan and purchase the machine,
what interest rebate it can enjoy according to the Rule of 78 method?
a. Rs.50,000
b. Rs.56,965
c. Rs.60,000
d. Rs.61,071
e. Rs.62,465.

18.Which of the following can operate as both lender and borrower in the call/notice money market?
a. LIC
b. UTI
c. SBI Mutual Fund
d. Discount and Finance House of India Ltd
e. Export Credit and Guarantee Corporation of India.

19.Which of the following is false regarding Hire Purchase?

I. The interest component of each hire purchase installment is computed on the basis of a flat rate of interest
II. Only goods of merchantable quality can be utilized for a hire purchase scheme
III. Sales tax cannot be levied on hire purchase transactions structured by finance companies provided these
companies are not dealers in the class of goods let on hire
a. Only (I) above
b. Only (II) above
c. Both (I) and (II) above
d. Both (I) and (III) above
e. None of the above.

20.Which of the following is not required to be disclosed in a Finance Lease in the books of the lessee as per
the provisions of IAS: 17?
a. Amount of each asset that is subject to finance lease on each balance sheet date
b. Liabilities related to these assets differentiating between the current and long term portions
c. Commitments for minimum lease payments in summary form giving the amounts and the periods in which
these payments will become due.
d. Significant financing restrictions, renewal or purchase options, contingent rentals, etc., included in the
finance lease contract.
e. None of the above.

21.Which of the following risks are relevant for a lease portfolio?

a. Default risk
b. Residual value risk
c. Political risk
d. Both (a) and (b) above
e. All (a), (b) and (c) above.

22.The following data pertains to a particular lease contract, where the lease rental, which is payable annually
increases at a constant rate per annum.
Initial annual lease rental Rs.12,000
Duration of lease 3 years
Pre-tax yield p.a. 21%
Constant rate of increase p.a.10%
The present value of such lease rental stream is
a. Rs.24,840
b. Rs.25,840
c. Rs.27,131
d. Rs.31,131
e. Rs.32,716.

23.Which of the following model does not assume that lease is a substitute of debt?
a. Weingartner’s Model
b. Equivalent Loan Model
c. Bower-Herringer-Williamson Model
d. Bower Model
e. None of the above.

24.Which of the following statements is false?

a. In operating lease the lessee enjoys the right to terminate the lease at short notice without any significant
penalty.
b. A dry lease is a finance lease where the lessee bears the costs of insuring and maintaining the leased
equipment.
c. In finance lease the lease term is for a major part of the useful of the asset.
d. A direct lease can only be of two types – bipartite or tripartite.
e. Cross-border leases offer funding on a long-term basis at fixed rates of interest, which may not be
available to the lessee in his country.

25.Which of the following is\are true regarding consumer credit transactions?

I. They can be structured either as a down payment or deposit linked schemes.
II. They can be structured in the form of hire purchase transactions.
III. They are unsecured transactions.
a. Only (II) above
b. Both (I) and (II) above
c. Both (II) and (III) above
d. Both (I) and (III) above
e. All (I), (II) and (III) above.

26. As per the latest amendments of SEBI the minimum amount for listing in a stock exchange is
a. Rs.2 crores
b. Rs.5 crores
c. Rs.7 crores
d. Rs.10 crores
e. Decided by the individual stock exchanges.
27.LYONS are
a. Optionally convertible debentures
b. Third party convertible debentures
c. Zero coupon convertible notes
d. Tax saving bonds
e. Cumulative convertible preference shares.

28.In case of warrants, the currency of the instrument should not exceed beyond______ months from the date
of issue of the relevant instrument.
a. 18
b. 24
c. 30
d. 36
e. There is no such stipulation.

29.Which of the following is/are true regarding charge card?

a. It is built around revolving credit concept
b. The issuer does not charge any interest to the card holder.
c. It is a pay now product.
d. Bank account should essentially be opened by the cardholder.
e. Both (a) and (b) above.

30.The maximum amount of sub-ordinated debt that can be included in the Tier II capital of a finance
company is
a. 100% of Tier I capital
b. 80% of Tier I capital
c. 50% of Tier I capital
d. 50% of Tier II capital after inclusion of such debt
e. None of the above.

1.The role of the Depository in the capital market is

a. Corporate advisory services
b. Market making in Government securities
c. To subscribe to unsubscribed portion of the securities
d. To ensure exchange in currencies
e. To hold the securities in electronic form on behalf of the investors.

2.Which of the following is/are true regarding accounting of lease transaction as per Accounting Standard 19 of
ICAI?
I. The lessor has to capitalize the leased asset in its books at the fair market value of the asset.
II. Only finance charges of the lease rentals have to be debited to profit & loss account in the books of the
lessee.
III. The lessor must show the net investment in lease as a current asset in the balance sheet.
a. Only (I) above
b. Only (II) above
c. Only (III) above
d. Both (I) and (II) above
e. Both (II) and (III) above.

3.Which of the following is not an objective of the lender of funds in the credit market?
a. Maximum spreads
b. Minimum terms and conditions attached with the usage of the funds
c. Adequate coverage for the various risk exposures
d. Satisfy the statutory reserve requirements
e. Satisfy the capital adequacy norms.

4.Hindustan Factors Ltd. gives an advance of 80% against receivables worth Rs.10,00,000 purchased from Aniket
Ltd. payable after 90 days. The advance carries an interest rate of 17% per annum compounded quarterly and
the factoring commission is 1.8% of the value of factored receivables. Both the interest and commission are
collected up-front. The amount actually made available to Ankit Ltd. is
a. Rs.7,28,000
b. Rs.7,48,000
c. Rs.7,66,000
d. Rs.7,82,000
e. Rs.8,00,000.

5.Which of the following is a banking sector security?

a. Certificate of Deposit
b. Commercial Paper
c. Factorization Bill
d. Inter-Corporate Deposit
e. None of the above.

6.Which of the following statements is false?

a. In advance factoring, the factor provides an advance between 35-40 % of the value of the receivables
received and the balance is paid upon collection or on the guaranteed payment date
b. In recourse factoring, the factor purchases the receivables on the condition that the loss arising on account of
irrecoverable receivables will be borne by the client
c. In maturity factoring, the factor does not make any advance payment
d. Bank participation factoring is an extension of advance factoring
e. None of the above.

7.Which of the following statements describe the Gensaki rate?

a. It is the short-term bench market rate used in Japanese markets
b. It is the bench mark rate used to price the Samurai bonds
c. It is the long-term prime rate used in the Swiss markets
d. It is the treasury rate used in the US market
e. None of the above.

8.Which of the following is/are the benefit(s) of CMO to the issuer?

a. Compared to pass through securities, funds can be raised more cheaply due to segmentation
b. Wider diversification of investor base can be achieved
c. More efficient use of collateralization than mortgage backed bonds
d. Both (b) and (c) above
e. All (a), (b) and (c) above.

9.The face value of a 14 days T-Bill is Rs.100. If the purchase price is Rs.99.50, then the yield on such a bill is
a. 10.7%
b. 12.5%
c. 13.1%
d. 14.0%
e. 15.2%.
10.Which of the following is false with respect to real estate investment?
a. It requires substantial outlay of funds
b. Transaction cost tend to be higher
c. It is a good hedge against inflation
d. Tax treatment is not favourable for real estate investments
e. It is a durable investment.

11.Which of the following is/are true regarding issue of debentures?

I. Credit rating is mandatory for an issue of debentures irrespective of the maturity period
II. Appointment of Debenture Trustee is mandatory if the maturity period exceeds 15 months
III. Creation of Debenture Redemption Reserve is optional in case of debenture issue whose maturity period is
15 months.
a. Only (II) above
b. Only (III) above
c. Both (I) and (III) above
d. Both (II) and (III) above
e. All (I), (II) and (III) above.

12.Which of the following venture capital financing is provided to a company which is intending to go public
within six months?
a. Bridge financing
b. Seed financing
c. Start-up financing
d. First stage financing
e. Mezzanine financing.

13.Which of the following statements regarding treasury bills is/are not true?
I. Capital depreciation in these bills is very high
II. Individuals and private firms are not allowed to participate in the auctions on competitive bidding
III. These bills are issued in the form of promissory notes.
a. Only (II) above
b. Only (III) above
c. Both (I) and (II) above
d. Both (I) and (III) above
e. Both (II) and (III) above.

14.The maximum amount of general provisions/loss reserves that can be included in the Tier II capital while
computing capital adequacy ratio of a leasing company is
a.1.00 percent of Tier I capital
b.1.25 percent of Tier I capital
c.1.25 percent of Tier II capital excluding the general provisions and reserves
d.1.25 percent of risk weighted assets
e.1.00 percent of risk weighted assets.

15.Which of the following is/are true regarding financial intermediaries?

I. The intermediaries in the capital market include underwriters, primary dealers, etc.
II. The cost of lending and borrowing reduces due to the presence of intermediaries
III. If the markets are not well regulated the presence of intermediaries increases the risks to the investors
a. Only (I) above
b. Only (III) above
c. Both (I) and (III) above
d. Both (II) and (III) above
e. None of the above.
16.First Class Leasing Company has leased an equipment costingRs.50 lakhs for a monthly rental of Rs.26 ptpm
payable monthly in advance for 5 years. The add on yield on the lease transaction is
a. 10.00%
b. 11.20%
c. 15.00%
d. 19.53%
e. 20.00%.

17.The networth of ABC Ltd., a registered underwriter is Rs.25 lakhs. The maximum total outstanding
underwriting obligation at any point of time can be
a. Rs.250 lakhs
b. Rs.400 lakhs
c. Rs.500 lakhs
d. Rs.825 lakhs
e. No limit.

18.Given the flat rate of interest of 13% repayment period of 3 years, frequency of payment being quarterly in
advance, which of the following will reflect the annual percentage rate?
a. 14.00%
b. 16.00%
c. 23.80%
d. 24.00%
e. 28.36%

19.Which of the following istrue regarding repo transactions?

a. A reverse repo is an agreement which involves a sale of security with an undertaking to buy back the same
security at a predetermined future date and price
b. A repo transaction is generally done for instruments with long maturities
c. Provident funds are eligible to participate in repo auctions but are not eligible to
participate in a reverse repo auction
d. Unlike call loans, repos are secured in nature
e. RBI enters into reverse repos to suck out liquidity from the system.

20.Which of the following statements is/are true regarding hire purchase?

I. The title to the goods is transferred to the hirer on the payment of the first instalment
II. The hirer has to indemnify the owner against any loss that results from his negligence
III. Some occasional delays in payment over the hire period does not empower the owner to terminate the
contract
a. Only (I) above
b. Only (II) above
c. Both (I) and (II) above
d. Both (II) and (III) above
e. All (I), (II) and (III) of the above.

21.In book building way of issuing equity shares, at least ___% of the issue size is reserved for allocation to
individual investors applying up to 10 tradable lots through the syndicate member.
a. 5
b. 10
c. 15
d. 20
e. 25.
22.Aditya has taken a consumer loan of Rs.45,000 for a period of 2 years. If the total charge for credit is 10,800,
the flat rate of interest is
a. 12%
b. 14%
c. 15%
d. 18%
e. 24%.

23.Ankita Toys is listed on Kolkata Stock Exchange. The minimum net worth it should have if it seeks listing on
Mumbai Stock Exchange is
a. Rs.10 crore
b. Rs.20 crore
c. Rs.25 crore
d. Rs.50 crore
e. There is no such stipulation.

24.Das Agro Equipments has leased an equipment costing Rs.20 lakhs for a period of 4 years at an annual lease
rental of Rs.410 ptpa payable annuallyin advance. The opportunity cost of debt of the company is 15% and cost
of capital is 18%. If the applicable tax rate is 35%, according to equivalent loan model, the amount of debt that
will be raised in lieu of lease is equal to
a. Rs.20.00 lakhs
b. Rs.22.06 lakhs
c. Rs.23.41 lakhs
d. Rs.26.92 lakhs
e. Rs.28.68 lakhs.

25.Which of the following is/aretrue regarding risk exposure in money market instruments?
a. As the maturity of money market instruments is short, these instruments are not exposed to reinvestment
risk
b. All the money market instruments including government securities are considered as risk free
c. Compared to long term securities, money market instruments have minimal inflation risk
d. The interest rate risk is minimum in the money market
e. Both (a) and (d) above.

26.A ‘Bow Tie’ arrangement is

a. Intended to protect both the borrower and the lender against volatile interest rates
b. Designed in such a way that the interest rate charged is generally higher than the market rate
c. A medium-term loan and provides bridge finance till the real estate developer obtains the financing of a more
permanent nature
d. Made to cover the difference between the bank loan for construction and total cost of the project
e. Both (a) and (b) above.

27.Vijay Limited is planning a rights issue of equity shares in the ratio of 1 right share for every 5 shares held. If
the current market price of the share is Rs.45 and ex-rights price should not fall below Rs.43, subscription price
should be more than
a. Rs.10
b. Rs.30
c. Rs.33
d. Rs.42
e. Rs.44.

28.Which of the following is/are the feature/s of a charge card?

a. There are no interest charges collected by the issuer from the holder.
b. The discount collected from the member establishments is the principle source of income for the issuer.
c. The cardholder has to make a consolidated payment to the issuer for all purchases effected during a specified
period.
d. Both (a) and (b) above.
e. All (a), (b) and (c) of the above.

29.Following data pertains to Small Time Equipments Ltd. which is planning to take an equipment on lease.
P.V. of loan payments Rs.10,00,000
P.V. of lease payments Rs.9,50,000
P.V. of lease related tax shields Rs.3,30,000
P.V. of loan related tax shields Rs.3,50,000
P.V. of residual value Rs.25,000
The financial advantage arising out of the lease transaction as per BHW Model is Rs.______.
a. – 50,000
b. – 45,000
c. – 5,000
d. 45,000
e. 50,000

30.The required amount of successful bids by a primary dealer who participated in the bidding of treasury bills is
Rs.400 crores. The commitment to aggregate bidding would have been
a. Rs.1,000 crores
b. Rs.1,200 crores
c. Rs.1,400 crores
d. Rs.1,600 crores
e. Rs.2,000 crores.

1. Currently the settlement in the Indian stock exchanges is done on a

a. T + 1 system
b. T + 2 system
c. T + 3 system
d. T + 5 system
e. 7-day settlement cycle.

2. Which of the following measures were taken by the Central Government to enhance the level of efficiency of
the Indian Credit Market?
a. Deregulating the interest rate environment
b. Withdrawing the Government funds as a source of funds to Financial Institutions
c. Permitting offshore banking
d. Both (a) and (b) above
e. All (a), (b) and (c) above.

3. The Capital Indexed Bond (CIB) issued by the RBI was an instrument designed to eliminate / minimize the
a. Interest rate risk
b. Inflation risk
c. Currency risk
d. Both (b) and (c) above
e. All (a), (b) and (c) above.
4. Which of the following risks is/are not covered by Export Credit and Guarantee Corporation?
a. Failure of the buyer to make the payment with a specified period from the due date
b. War, civil war etc. in the buyer\u2019s country
c. Fluctuations in exchange rate
d. Imposition of restrictions by the government of the buyer\u2019s country
e. All the above are covered by ECGC.

5. Which of the following intermediaries in the Indian Capital Market neednot be registered by SEBI?
a. Share Transfer Agents
b. Custodians of Securities
c. Collective Investment Schemes like Plantation Schemes
d. Advertising Agents
e. All the above-mentioned intermediaries in the Indian Capital Market need to be registered by SEBI.

6. Which of the following is not a part of \u201cDefensive Audit\u201d carried out by the merchant bankers to
assess the vulnerability to takeovers?
a. Analysis whether the market price reflects the intrinsic value of the share and if not, the reason for under-
valuation
b. Analysis whether the valuation of the company can be enhanced by restructuring
c. Review of the company\u2019s shareholders\u2019 profile
d. Review of the company\u2019s Memorandum and Articles of Association
e. None of the above.

7. Kilburn Chemicals has recently made a debenture issue of Rs.50 lakhs which was totally underwritten by
Cindrella Consultants. If the amount devolved on Cinderella Consultants is Rs.20 lakhs, the maximum
underwriting commission Kilburn can pay to Cinderella is
a. Rs. 20,000
b. Rs. 30,000
c. Rs. 40,000
d. Rs. 70,000
e. Rs.1,00,000.

8. Sanwaria Agro Products is coming up with an equity issue worth Rs.250 crore. Sanwaria has applied for
registration in BSE, NSE and CSE. The registration fee payable to SEBI for this equity issue is
a. Rs. 15,000
b. Rs. 25,000
c. Rs. 50,000
d. Rs.2,50,000
e. Rs.5,00,000.

9. Which of the following statements is false regarding different types of leases?

a. In a leveraged lease transaction, the loan participant obtains an assignment of the lease and the rentals to be
paid by the lessee, and a first mortgage on the leased asset
b. A leveraged lease transaction entitles the lessor to claim tax shields on depreciation
c. In a sales-aid lease the equipment supplier catalyzes the lease transaction
d. In a single investor lease, the debt funds raised by the leasing company are with recourse to the lessee
e. An upgrade lease is an operating lease which has in-built facilities like up-gradation of the equipment.

10.The following data pertains to a lease transaction as offered by Mukta Financial Services to one of its clients:
Value of asset leased Rs.60 lakhs Lease rentals Rs.32 ptpm Lease period 4 years Payment pattern Payable
monthly in advance The add-on yield on the above transaction is
a. 13.00 %
b. 13.40 %
c. 13.67 %
d. 14.00 %
e. 14.33 %.

11.On interest earned in hire purchase transactions, the service tax payable by the hire purchase companies is
a. 2.00 %
b. 3.50 %
c. 5.00 %
d. 7.50 %
e. 8.00 %.

12.LiveWell Financial Services Ltd. is offering a consumer loan of Rs.32,000 for 3 years for a monthly installment
of Rs.1000 payable in advance. The effective rate of interest by approximation method is
a. 25.71%
b. 12.50%
c. 8.57%
d. 8.11%
e. 7.50%

13.Freelife Finance Ltd. discounts the L/C backed bill with a usance period of 30 days at the rate of 18% p.a. The
annual effective rate of interest is
a. 19.89 %
b. 20.00 %
c. 20.89 %
d. 21.34 %
e. 23.06 %.

14.Which of the following statements is / are not true regarding factoring and forfaiting?
I. In both factoring and forfaiting advances are short term in nature.
II. In both factoring and forfaiting, 100 percent finance is provided to the client.
III. Factor in factoring can be relieved of default risk whereas availling bank cannot in forfaiting.
a. Only (I) above
b. Both (I) and (II) above
c. Both (I) and (III) above
d. Both (II) and (III) above
e. All (I), (II) and (III) above.

15.Which of the following is false with respect to Mortgage Backed Securitization?

a. This is backed by easily traceable immovable property like real estate
b. Mortgage has to exist necessarily at the time of securitization
c. The process takes into consideration appreciation in the value of assets
d. This gives lower yield to the investor compared to asset backed securitization
e. Stamp duty may vary irrespective of the location, as the assets may not be based at one place.

16.A clause in the lease agreement, which reiterates the unconditional obligation of the lessee to pay rentals for
the entire lease term, regardless of any event affecting the usage of the asset or any changes in the
circumstances of the lease is known as
a. Unconditional Clause
b. Full Pay-out Clause
c. Hell or High Water Clause
d. Non Skipped-payment Clause
e. Praecipium Clause.
17.The total refinancing by the NHB to a HFC cannot exceed ___ % of the total loan funds of the HFC.
a. 20
b. 25
c. 50
d. 75
e. 80.

18.Which of the following venture capital financing is provided to companies completing product development
and initial marketing?
a. Seed Financing
b. Early Financing
c. Start-up Financing
d. First Stage Financing
e. Bridge Financing.

19.For which of the following purposes, DFIs arenot permitted to onlent recycled ECB funds?
a. Investment in real estate
b. Investment in stock markets including secondary market trading
c. General corporate purposes
d. Both (a) and (b) above
e. All (a), (b) and (c) above.

20.Garima Glasses is coming up with an IPO of Rs.380 crore by book building process. The minimum amount of
the issue that should be reserved for allocation to individual investors applying up to 10 tradeable lots through
the syndicate members is
a. Rs.19.00 crore
b. Rs.28.50 crore
c. Rs.38.00 crore
d. Rs.47.50 crore
e. Rs.57.00 crore.

21.The maximum public deposit a Government company can accept is

a. 10% of its paid-up capital and free reserves
b. 15% of its paid-up capital and free reserves
c. 25% of its paid-up capital and free reserves
d. 35% of its paid-up capital and free reserves
e. This stipulation is recently abolished by SEBI.

22.As per the latest SEBI Guidelines pertaining to Takeover Code, when an acquirer obtains 15% equity stake in
a company, he has to make a mandatory public offer to acquire further ___ of equity of the target company.
a. 5%
b. 10%
c. 15%
d. 20%
e. As per the latest amendments, this clause is removed by SEBI.

23.Sandy Agro Products Ltd. comes up with a rights issue that opens on July 1, 2003. The earliest and latest
closing dates of this rights issue are
a. July 7, 2003 and July 15, 2003
b. July 10, 2003 and July 15, 2003
c. July 15, 2003 and July 30, 2003
d. July 25, 2003 and August 15, 2003
e. July 30, 2003 and August 29, 2003.

24.In a hire purchase agreement the borrower is to pay 36 installments. Immediately after paying the 16th
installment, he wishes to repay the outstanding loan and purchase the equipment. If the total charge for credit
is Rs.2400, the interest rebate as per the Hire Purchase Act, 1972 is
a. Rs.444.44
b. Rs.577.77
c. Rs.633.33
d. Rs.711.11
e. Rs.888.88.

25.M/s. Champakali Chemicals is listed on Hyderabad Stock Exchange. The minimum net worth it should have if
it seeks listing on Mumbai Stock Exchange is
a. Rs. 20 crore
b. Rs. 25 crore
c. Rs. 50 crore
d. Rs.100 crore
e. There is no such stipulation for listing in another Stock Exchange.

26.General provisions and loss reserves and the risk-weighted assets of an NBFC are Rs.17.5 cr. and Rs.265 cr.
respectively. The maximum amount of these reserves that can be included in Tier II capital is
a. Rs.3.00 cr
b. Rs.3.12 cr
c. Rs.3.31 cr
d. Rs.3.51 cr
e. Rs.5.30 cr.

27.Which of the following Floating Rate Notes (FRNs) are known as ‘undated issues’?
a. Mini-max FRNs
b. Mismatch FRNs
c. Perpetual FRNs
d. Perpetual Floaters
e. Both (c) and (d) above.

28.M/s Novice Financial Services Ltd (NFSL) has recently structured a lease transaction involving an asset whose
fair market value is Rs.140 crore and has an useful life of 8 years. In which of the following situations, the lease
can be classified as finance lease according to FASB?
I. PV of lease payments is Rs.105 lakhs and the lease term is 5 years.
II.PV of lease payments is Rs.105 lakhs and the lease term is 6 years.
III.PV of lease payments is Rs.126 lakhs and the lease term is 5 years.

a. Only (II) above

b. Only (III) above
c. Both (I) and (II) above
d. Both (II) and (III) above
e. All (I), (II) and (III) above.

29.Finbank proposes to borrow on June 30, 2003, an amount of Rs.50 crores from Bank XYZ for a period of 3
days at an interest of 12% p.a.as against 13% GOI Securities, which have a face value of Rs.50 crores trading at
Rs.52 crores and maturing on September 30, 2007.The interest payments on these securities is due on March
31 and September 30 every year.The amount actually borrowed by Finbank Ltd. in this repo transaction is
a. Rs.50.315 crores
b. Rs.51.625 crores
c. Rs.53.556 crores
d. Rs.53.625 crores
e. Rs.53.685 crores.

30.Which of the following statements is/are true with respect to ADR Level I?
I. The company need not comply with the US GAAP.
II. They are traded in AMEX/NYSE.
III. The issuer is not allowed to raise fresh capital or list on any one of the national stock
exchanges.
a. Only (I) above
b. Only (II) above
c. Only (III) above
d. Both (I) and (III) above
e. Both (II) and (III) above.

1.Which of the following is/aretrue regarding Participation Certificates?

I. They are issued by banks to other banks to share the credit assets of the banks.
II. They provide long term funds while they are also used for risk reduction.
III. The rate of these instruments is negotiable.
a. Only (I) above
b. Only (III) above
c. Both (I) and (II) above
d. Both (I) and (III) above
e. All (I), (II) and (III) above.

2.Which of the following is/aretrue regarding reverse repos?

I. Simultaneous buying and selling of same security at a predetermined future date and predetermined price is
referred to as reverse repo
II.NBFCs cannot enter into reverse repos
III. The minimum maturity for repo transaction is 1 day.
a. Only (I) above
b. Only (II) above
c. Only (III) above
d. Both (I) and (II) above
e. Both (I) and (III) above.

3.The maximum intra-day trading limit for a broker, as set by SEBI, is

a.33.33% of the base minimum capital
b.33.33% of the base minimum capital and additional capital
c. Equal to base minimum capital and additional capital
d.33.33 times the base minimum capital
e.33.33 times the base minimum capital and additional capital.

4.Which of the following is/aretrue regarding Bankers to the Issue?

I. A scheduled bank can be a banker to the issue.
II. Registration with SEBI to act as banker to the issue is not mandatory
III. There are no restrictions on the number of banks that can be associated with an
issue.
a. Only (II) above
b. Only (III) above
c. Both (II) and (III) above
d. Both (I) and (II) above
e. Both (I) and (III) above.

5.Which of the following is/aretrue regarding financial and operating leases?

a. According to FASB, if the present value of lease payments exceed 75 per cent of the fair market value of the
asset at the inception of the lease, then the lease is termed as financial lease.
b. In operating leases, the leases fully amortize over the lease period.
c. In an operating lease if the lessee bears the cost of insuring, maintaining , then the lease is referred to as dry
lease.
d. The lessee enjoys the right to terminate the lease at short notice without significant penalty in case of
financial leases.
e. Operating leases are generally structured for leasing investment intensive assets.

6.Easy Finance offers hire purchase plan for its corporate borrowers on the following terms: Flat rate of interest
10 per cent Repayment period 4 years Frequency of payment Quarterly in advance Down payment 25 per cent
The annual percentage rate using the approximation formula is
a. 28.4%
b. 26.7%
c. 21.3%
d. 18.8%
e. 16.0%.

7.Which of the following is/are true regarding Mortgage Backed securitization?

I. Mortgage has to exist necessarily at the time of securitization
II. It is backed by movable and easily traceable immovable property
III. It gives high yields to the investor compared to asset backed securitization
a. Only (I) above
b. Only (II) above
c. Both (I) and (II) above
d. Both (II) and (III) above
e. All (I), (II) and (III) above.

8.Recently, RBI issued a tender notification for 91-day treasury bills of Rs.100 each for Rs.500 crores. Mr.X, one
of the competitive bidders who responded to the notification has submitted the tender quoting a price of
Rs.98.95. If the cut-off price was determined as Rs.98.45 and the tender of Mr.X was accepted, the yield that
would be earned by Mr.X will be
a. 3.95%
b. 3.97%
c. 4.26%
d. 5.21%
e. 6.31%.

9.Appointment of which of the following intermediaries is/are mandatory for an issue?

a. Brokers to the issue
b. Underwriters to the issue
c. Legal advisor
d. Bankers to the issue
e. Both (a) and (d) above.

10.Which of the following is/aretrue regarding Pledged-account Mortgages (PAMs)? I. The repayments under
PAMs resemble graduated payment mortgages from the borrower\u2019s point of view II.Under PAMs, a
pledged account is created by the seller out of his profits in order that additional amounts required may be
drawn and paid along with the mortgage payments III.PAMs are used by borrowers who have sufficient cash on
hand, but face an income or cash flow shortage for the first few years.
a. Only (I) above
b. Only (II) above
c. Both (I) and (II) above
d. Both (I) and (III) above
e. All (I), (II) and (III) above.

11.In which of the following forms of factoring, service elements of factoring are not carried by the factor?
a. Invoice Discounting
b. Supplier Guarantee Factoring
c. Bulk Factoring
d. Old Line Factoring
e. Both (a) and (c) above.

12.Which of the following conditions should a company fulfill to raise capital through ADR level -III issue?
a. The company has to comply with the US GAAP
b. The company has to be registered with SEC
c. The company has to comply with listing requirements of AMEX/ NYSE
d. Both (a) and (b) above
e. All (a), (b) and (c) above.

13.Consider the following information regarding a finance scheme offered by Flexi Finance Ltd.: Repayment
Period 60 months Equated monthly Installment Rs. 3,500 Deposit Rs. 10,000 Cost of the asset Rs.1,25,000. The
flat rate of interest of the above scheme is
a. 11.1%
b. 12.0%
c. 13.6%
d. 15.2%
e. 16.5%

14.The US dollar denominated bond issued by foreign borrowers in the US market is known as
a. Alpine bonds
b. Bulldog bonds
c. Samurai bonds
d. Shibosai bonds
e. Yankee bonds.

15.Which of the following is/aretrue regarding Commercial Papers (CPs)?

I. Primary dealers are not allowed to raise funds through CPs
II. Foreign institutional investors are allowed to invest in CPs
III. Issuers are allowed to buy-back their own CPs.
a. Only (II) above
b. Both (I) and (II) above
c. Both (I) and (III) above
d. Both (II) and (III) above
e. All (I), (II) and (III) above.

16.XYZ Ltd. has accepted public deposits amounting to Rs.25 lakhs that are payable after 15 months. The
maximum amount of brokerage payable for soliciting these deposits is
a. Rs.25,000
b. Rs.30,000
c. Rs.37,500
d. Rs.50,000
e. Rs.62,500.

17.Rights issue should be kept open for a minimum period of

a. 15 days
b. 30 days
c. 40 days
d. 45 days
e. 60 days.

18.Vani Agro Products Ltd has leased an equipment costing Rs.100 lakhs at an annual lease rental of Rs.36 ptpm
for a period of 3 years. The cost of capital and cost of pre-tax debt of the company is 9 per cent and 15 per cent
respectively. If the effective tax rate of the company is 25%, according to Bower Model the amount of debt
which will be raised in lieu of lease will be equal to
a. Rs. 98.63 lakhs
b. Rs.100.00 lakhs
c. Rs.113.42 lakhs
d. Rs.125.54 lakhs
e. Rs.130.60 lakhs.

19.Which of the following forms of real estate loans advanced by savings and loan associations in addition to
the bank construction loan enables the developer to obtain 100% financing for the real estate development
without the need to bring in personal funds?
a. Mini-perms
b. Gap loans
c. Bow-tie arrangement
d. Both (a) and (b) above
e. None of the above.

20.Which of the following is/are true regarding hire purchase contract?

I. On early repayment, if interest rebate is calculated as per Rule of 78, the effective rate of interest on
completed transaction will be lower than the effective interest rate of original transaction
II. Interest rebate calculated as per Hire purchase Act, 1972 (i.e. × × D nt 32 will be lower than the
interest rebate as per Rule of 78 if the number of unpaid and not- due installments exceed 2/3× (number of
installments – 1)
III. Interest rebate calculated as per Modified Rule of 78 will be zero if not-due and outstanding installments is
less than or equal to the deferment period
a. Only (II) above
b. Only (III) above
c. Both (I) and (II) above
d. Both (II) and (III) above
e. All (I), (II) and (III) above.

21.The maximum reservation in a proposed public issue to the employees of the issuer company is
a. 3%
b. 5%
c. 10%
d. 20%
e. 25%
22.If a bank issued a Certificate of Deposit of face value of Rs.5 lakhs with maturity period of 91 days and at a
discount rate of 9 per cent per annum, the discounted value of the deposit is
a. Rs.4,89,027
b. Rs.4,58,716
c. Rs.4,57,422
d. Rs.2,85,321
e. Rs.3,63,750.

23.Second Factors Ltd. has agreed to advance a sum of Rs.75 lakhs against the receivables purchased from ABC
Ltd. The factoring agreement provides for an advance payment of 75% of value of the factored receivables and for
guaranteed payment after 3 months from the date of purchasing the receivables. The advance carries a rate of
interest of 16% p.a. compounded quarterly and the factoring commission is 1 percent of the value of the factored
receivables. Both the interest and commission are collected upfront. The per annum effective cost of funds made
available to ABC Ltd. is
a. 16.92%
b. 17.74%
c. 18.02%
d. 23.10%
e. 24.49%.

24.Consider the following information: Aggregate value of the house Rs.12,00,000 Land component 30% Progress
of construction 75% Borrower’s contribution Rs.2,00,000 Cumulative disbursement made Rs.4,00,000 The amount
of disbursement that will be made by the housing finance company is
a. Rs.2,41,000
b. Rs.3,90,000
c. Rs.5,90,000
d. Rs.7,90,000
e. Rs.9,60,000.

25.Which of the following is/are true regarding rights issue by listed companies?
I. If the rights issue exceeds Rs.40 lakhs, appointment of SEBI registered merchant banker is mandatory
II. If the company does not receive atleast 90% of the issue amount (including devolvement from underwriters)
within 42 days from the date of closing the issue, the amount received should be refunded.
III. No bonus issue should be made within 1 year from the date of issue.
a. Only (I) above
b. Only (II) above
c. Both (I) and (II) above
d. Both (II) and (III) above
e. All (I), (II) and (III) above.

26.In which of the following types of plastic money, revolving credit payment is available to the user?
a. Credit card
b. Debit card
c. Charge card
d. Both (a) and (c) above
e. None of the above.

27.Which of the following isfalse with respect to credit rating?

a. A credit rating reflects borrower’s accountability
b. A credit rating reflects the borrower’s expected capability and interest to pay the interest and principal
amount on time
c. A credit rating is a general purpose evaluation of the issuer
d. A credit rating is not an extensive audit of the issuing company
e. A credit rating involves issue specific evaluation.

28.Videsh Electronics Limited has leased an equipment costing Rs.70 lakhs from Perfect Leases Limited for a
period of 4 years at a lease rental of Rs.350 ptpa payable annually in advance. If the marginal cost of debt and
marginal cost of capital of Videsh is16 per centand 12 per cent respectively, of Perfect Leases Ltd. is 12 percent
and 10 percent respectively, the asset should be capitalized at (Assume negligible salvage value of the asset).
a.Rs.70.00 lakhs in the books of Videsh Electronics Ltd.
b.Rs.70.00 lakhs in the books of Perfect Leases Ltd.
c.Rs.74.41 lakhs in the books of Perfect Leases Ltd.
d.Rs.79.52 lakhs in the books of Videsh Electronics Ltd.
e.Rs.79.52 lakhs in the books of Perfect Leases Ltd.

29.ABC Finance Ltd. had share underwriting obligations worth Rs.5 lakhs in its off balance sheet items. The risk
adjusted value of the item while calculating the capital adequacy ratio is
a. Rs.1.25 lakhs
b. Rs.2.50 lakhs
c. Rs.3.75 lakhs
d. Rs.5.00 lakhs
e. Rs.7.50 lakhs.

30.Quasi-equity instruments for funding venture companies entailing a minimum obligation at reasonably low
levels of performance and an upside sharing component
a. Are the least preferred financial instruments by the venture companies
b. Involve payments during the growth phase of the investee company
c. May carry with them a number of protective covenants
d. Cannot be structured
e. Both (b) and (c) above.