In discount instruments, coupons are paid periodically.

In India, the household sectors have more claims on Banks as compared to the Insurance sector.

Auction Market is a Primary Market.

In the direct market, (ceteris Paribus), the cost of borrowing is lower than the direct market .

Liquid Financial Assets are redeemable.

In SDL, coupon payment is made quarterly.

Higher Resource Gap implies the requirement of funds for financing investment is more than availability of funds.

Auction Market is a Primary Market.

RBI is an eligible participant in the auction market of GOI instruments.

Borrowings are a liability.

The rising trend in Over Subscription in the auction market of G-Sec reflects more funds availability with eligible participants.
Deposits constitute the highest share in the pool of financial savings of the household sector in India.

If G-Sec is traded at a premium in the secondary market, then the current yield is higher than the coupon rate.

Financial Institutions operates in the indirect market.

In the Uniform price mechanism, all successful bidders buy the instrument at a cut-off price.

GOI dated securities are mapped to Short Term Financial Market.

Actual Borrowing occurs in the Secondary market.

Household Financial Savings contributes to the supply side of funds in the market

Financial Instruments are an obligation to the buyer.

If demand for loanable funds increases (ceteris Paribus), the yield of the instrument will come down.

In the Green shoe option, the issuer can retain more amount than notified amount.

Household Physical Savings reduces the fund availability in the market .

Risk Premium in SDL is lower than G-Sec in India.

Financial Assets are claims.

If the face value of the instruments is lower than the issue price, then the instrument is issued at a premium.
N

---

YES

YES

YES
Yes

NO

YES

YES

N -----

YES

Y --

Y
N

YES
QUESTIONS

State Bank of India can not issue Bonds.

0 I do not want to answer this Question
1 Yes
2 No

In variable reverse repo transaction conducted by RBI, LIC can be a counterparty to RBI.
0 I do not want to answer this Question
1 True
2 False

A floating Rate Bond of 10 years original maturity with a semi-annual coupon, the principal amount to be paid, is also floating.
0 I do not want to answer this Question
1 Yes
2 No
Munis are issued by Local Governments.

If the yield goes up for a par bond, then the price change will be zero.
0 I do not want to answer this Question
1 Yes
2 No

Successful bidders in SDL market will get yield that is higher than cut-off yield.
0 I do not want to answer this Question
1 Yes
2 No

The volume of corporate debt issued in India as percentage of GDP is lower than other BRIC countries.
0 I do not want to answer this Question
1 Yes
2 No

In variable repo transaction of 10 days, repo rate will be paid by repo buyer to repo seller.
0 I do not want to answer this Question
1 True
2 FalseIn variable repo transaction of 10 days, repo rate will be paid by repo buyer to repo seller.
0 I do not want to answer this Question
1 True
2 False

For a plain vanilla bond, the price change is un-even for a given change in yield in both upward and downward direction.

0 I do not want to answer this Question

1 Yes
2 No

If coupon payment is monthly for a Bond of 7 years original maturity, then total cashflows will be 85 nos.
0 I do not want to answer this Question
1 Yes
2 No

In a uniform yield based auction system of SDL, the cut off-yield will be the lowest yield among successful biders.
0 I do not want to answer this Question
1 True
2 False
The current yield for a 7 year 8.24% coupon bond selling for Rs.10,300.00 per bond is 8%, if the face value is Rs.10,000.
0 I do not want to answer this Question
1 Yes
2 No

In fixed-rate LAF repo in India helps banks to maintain both CRR and SLR.
0 I do not want to answer this Question
1 True
2 False

Fixed rate Repo Transaction is always a collateralized transaction.

0 I do not want to answer this Question
1 True
2 False

In overnight Repo traction, interest is paid for one day only.

0 I do not want to answer this Question
1 True
2 False

Munis are issued by Local Governments.

0 I do not want to answer this Question
1 Yes
2 No

Fixed-rate Reverse Repo Transaction is always a Non -collateralized transaction.

0 I do not want to answer this Question
1 True
2 False

In a floating Rate Bond only the coupon rate is linked to the floater.
0 I do not want to answer this Question
1 Yes
2 No

In SDLs auction of Gujarat Govt, Tamilnadu Govt can participate as eligible Non-competitive bidder.
0 I do not want to answer this Question
1 True
2 False

Buying a Bond is a claim.

0 I do not want to answer this Question
1 Yes
2 No

Rising and sustained rise in LAF reverse repo transaction implies that there rising liquidity in the market.
0 I do not want to answer this Question
1 True
2 False

If the Bond is issued before 5 Years with a Term to Maturity of 12 years, then residual maturity of the Bond is 8 years.
0 I do not want to answer this Question
1 Yes
2 No

Issuing a Bond is an obligation.

0 I do not want to answer this Question
1 Yes
2 No
In SDLs auction of Gujarat Govt, Tamilnadu Govt can participate as eligible competitive bidder.
0 I do not want to answer this Question
1 True
2 False

The current yield for a 10 year Bond with 8.24% coupon, selling for Rs.1030.00 per bond is 8%, if the face value is Rs.1000.
0 I do not want to answer this Question
1 Yes
2 No
ANSWERS

N - doubt
Y

no

No

no

Y
TRUE

TRUE

Yes

YES

TRUE

Yes

TRUE

Y
F

Y
 QUESTIONS
The LTRO is an instrument under which the RBI provides one-year to three-year funds to banks at the prevailing repo rate,
accepting government securities with matching or higher tenure as the collateral.
Short Term Market Instruments are different from long term market instruments.
For a Bajaj Finance (ceteris paribus), the cost of borrowing will be less if it issues a bond as compared to a loan from a Bank.

Only Banks can borrow in the call money market conducted by RBI.
Call Money Market is a collateralized market.

SLTRO is only given to Small Financial Banks to on-lend to MSMEs.

Certificate of Deposits is a liability instrument of Banks.
Higher information asymmetry leads to the higher presence of financial intermediaries
Commercial Papers issued by PFC ltd. Will be treated as a liability in its Balance sheet.
Repo was purchased by Hindustan Liver Ltd. will be treated as a liability in its Balance Sheet.
Rating of Commercial Paper is mandatory in India.
Cutt off yield is derived from the primary market.
All new instruments are mapped to the secondary market.

The money market is a market for short-term financial assets/liabilities having residual maturity is less than one year.

Return on Investment is a proxy for Productivity of Investment.

Deficit Units issue Financial Instruments
Liquidity intermediation is making the liability instrument highly liquid while loans to borrowers are relatively less liquid.
Default Risk intermediation is the Willingness to give loans to risky borrowers without hurting the returns to savers.
Commercial Papers are asset instruments of Corporates.
Higher information asymmetry leads to more “Advesrion Selection”.
Primary Dealers can quote both sales price and buy price of financial interest at a particular point in time.
One Financial Instrument can exist in multiple financial markets.
Maturity intermediation is the inability to create loans whose maturities may mismatch with the deposit maturity profile.
G-Sec market in India is different from GOI dated securities market.
All Repo Transaction made by RBI happens in E-Kuber.
ANSWERS

TRUE
TRUE
TRUE

TRUE
FALSE

TRUE
TRUE
FALSE
TRUE
FALSE
Yes
FALSE
Yes

Yes
Yes
yes
TRUE
TRUE
FALSE
TRUE
TRUE
FALSE
TRUE
FALSE
FALSE
Liquid Financial Assets are redeemable. TRUE

A floating Rate Bond of 10 years original maturity with a semi-annual coupon, the principal amount FALSE
to be paid, is also floating.

The market price of 5 year Corporate Bond with a coupon of 8.24% is Rs.103.00. What is the current
yield?

0 I do not want to answer this Question

1 8.30% 8
2 8.20%
3 8.00%
4 can not be estimated from given data

In overnight Repo traction, interest is paid for one day only. TRUE

Default Risk intermediation is the Willingness to give loans to risky borrowers without hurting the
returns to savers. TRUE

The market price of 10 year G-Sec with a coupon of 8.24% is Rs.98.00. What is the current yield?
0 I do not want to answer this Question
1 8.40% 8.4
2 8.50%
3 8.60%
4 can not be estimated from given data

Higher information asymmetry leads to more“ Adversion Selection”. TRUE

In variable repo transaction of 10 days, repo rate will be paid by repo buyer to repo seller. TRUE

Fixed-rate Reverse Repo Transaction is always a Non -collateralized transaction FALSE

The volume of corporate debt issued in India as percentage of GDP is lower than other BRIC
countries. TRUE

Bond is a non-debt instrument. FALSE

Short Term Market Instruments are different from long term market instruments. TRUE

Fixed rate Repo Transaction is always a collateralized transaction. TRUE

For a plain vanilla bond, the price change is uneven for a given change in yield. TRUE
Issuing a Bond is an obligation. TRUE

In fixed-rate LAF repo in India helps banks to maintain both CRR and SLR. TRUE

Liquidity intermediation is making the liability instrument highly liquid while loans to borrowers are TRUE
relatively less liquid.
The Gross Financial Asset Ratio (% GDP) of the Household sector in India is 11%. The Gross Financial
Asset Ratio (% GDP) of the Household sector is 3.2%. Then, Net Financial Saving Ratio will be

0 I do not want to answer this Question

1 7.8%
2 7.5%
3 can not be estimated from given data 7.8

Certificate of Deposits is a liability instrument of Banks. TRUE

A Bank has SLR securities amounting to Rs.220 crore in its Balance Sheet. RBI has set a haircut of 10%
for REPO transactions. In this case, what is the maximum amount of REPO Borrowing the Bank can
have?

0 I do not want to answer this Question

1 200 crore
2 220 crore
3 240 crore
4 can not be estimated from given data 200
Call Money Market is a collateralized market. FALSE
Actual Borrowing occurs in the Secondary market. FALSE
Buying a Bond is a claim. TRUE

The real interest rate in India is 3%. The inflation rate is 5%. The nominal interest rate will be

0 I do not want to answer this Question

1 8.15%
2 8.16%
3 can not be estimated from given data CBD

The deposit rate of a Bank is 4%. The lending (loan rate) rate is 8%. The spread is
0 I do not want to answer this Question
1 3%
2 5%
3 4%
4 can not be estimated from given data 3 - 4%
The Gross Financial Asset Ratio (% GDP) of the Household sector in India is 11%. Out of which,
deposit constitutes 2% of % GDP. The share of deposit in the portfolio of financial assets Then, Net
Financial Saving Ratio will be

0 I do not want to answer this Question

1 18.16%
2 18.18%
3 can not be estimated from given data 2 (18.18)

Maturity intermediation is the inability to create loans whose maturities may mismatch with the
deposit maturity profile. FALSE

Commercial Papers are asset instruments of Corporates. FALSE

In India, the household sectors have more claims on Banks as compared to the Insurance sector. Yes

Only Banks can borrow in the call money market conducted by RBI. TRUE

In the direct market, (ceteris Paribus), the cost of borrowing is lower than the direct market . TRUE

SLTRO is only given to Small Financial Banks to on-lend to MSMEs. TRUE

The 91 T-Bill is issued at Rs.98.20. What is the YTM?

0 I do not want to answer this Question

1 7.35%
2 8.35%
3 6.35%
4 can not be estimated from given data 7.35%

If the yield goes up for a par bond, then the price change will be zero. FALSE

Rising and sustained rise in LAF reverse repo transaction implies that there rising liquidity in the
market. TRUE

If the same T-Bill is traded at Rs. 99 on 40th Day. Then what will be the YTM?
0 I do not want to answer this Question
1 6.30%
2 7.30%
3 8.30%
4 can not be estimated from given data 7.30%

All Repo Transaction made by RBI happens in E-Kuber. TRUE

In the Green shoe option, the issuer can retain more amount than notified amount. TRUE
A Commercial Paper with a face value of Rs.350 is issued at Rs.345 for 3- months. What is the
annualized yield?
0 I do not want to answer this Question
1 5.60%
2 5.70%
3 5.80%
4 can not be estimated from given data 3 - 5.80%

The LTRO is an instrument under which the RBI provides one-year to three-year funds to banks at the
prevailing repo rate, accepting government securities with matching or higher tenure as the
collateral. TRUE