Banking

2nd Year Commerce

Section “A” Multiple Choice Questions (MCQs)

Q1. Choose the correct answer for each from the given options.

1. A notice must be served in case of dishonor of:

a) Promissory note
b) Cross cheque
c) Bill of exchange
d) Cheque
2. When an endorser signs his or her name only on the instrument then this is known as:
a) Restricted Endorsement
b) Conditional Endorsement
c) Blank Endorsement
d) Special endorsement
3. When two parallel transverse lines are put across the cheque with or without “& Co”
between them, these parallel lines are called:
a) Special crossing
b) Not negotiable crossing
c) Plain crossing
d) All of these
4. Which of the following is not the principle of employment of bank funds:
a) Liquidity
b) Safety
c) Instability
d) Profitability
5. SBP was established on :
a) 2nd September 1948
b) 1st July 1948
c) 8th November 1947
d) 1st July 1949
6. Bank acts as the custodian of its customers’:
a) Salaries
b) Property
c) Valuables
d) Jewelry
7. Bank overdraft is allowed by bank for:
a) A fixed limit
b) Unlimited time
 c) A certain limit
d) All of the above
8. Which of the following is not a credit instrument:
a) Promissory note
b) Cheque
c) Shares
d) Bill of exchange
9. Current account holder can withdraw his money from the bank:
a) After one year
b) During any banking hours
c) After every thirty days
d) All of these
10. The person who writes the cheque is known as:
a) Creditor
b) Drawee
c) Drawer
d) None of these
11. The party to whom the bill is endorsed is known as:
a) Borrower
b) Payee
c) Endorser
d) Endorsee
12. The Letter of credit (L/C) states:
a) The purpose of the bill
b) The amount
c) Period
d) All of the above
13. The foreign Bank Draft is always payable on:
a) The bank’s counter
b) Demand
c) After one week of its issue
d) Specified date
14. The state of having assets or investments that can easily be converted into cash without
incurring substantial cost is called:
a) Profitability
b) Diversity of risk
c) Liquidity
d) Prudence
15. Exchange pegging refers to:
a) Keep up exchange rate
b) Keep up budgetary deficit
c) Keep up budgetary surplus
d) None of the above
16. Open market operation refers to
a) Marketing activities
b) Buying and selling government securities
c) Receiving deposits from markets
d) Selling treasury bills

Section “B” Short Answer Questions

Attempt any seven questions from this section:
Q2.
i. Discuss the primary functions of Commercial Bank.
ii. Name the different types of Bank Accounts. Explain any two of them?
iii. Distinguish between promissory note and a cheque.
iv. Discuss various types of endorsement.
v. Under what circumstances a cheque is dishonored by a bank?
vi. Explain the clearing house function of a central bank.
vii. Explain the advantages of E- Banking.
viii. What is meant by credit creation?
ix. Explain purchasing power parity theory.
x. Distinguish between balance of trade and balance of payment.

Section “C” Detailed Answer Questions

Attempt any three questions from this section:

Q3.

i. Discuss in detail the functions of State Bank of Pakistan.

ii. What is exchange rate and how is it determined? Explain the factors that affect the
rate of exchange?
iii. Explain the profitable and non profitable uses of bank funds.