Money and Banking online Test

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Money and Banking online Test - 28

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Weekly Quiz Competition

Question 1
1 / -0

Money market mutual funds ____________________________.

A
Enable individuals and small business to invest indirectly in money-market instruments

B
Are available only to high net-worth individuals

C
Highly liquid and short term investment vehicle

D
Are mostly tradable on stock exchange

Solution

Money market mutual funds can be referred to short-run liquid investments which invest in high quality money market instruments. It helps to provide investors with a reasonable return over a period up to 1 year.
Question 2
1 / -0

All of the following are essentials of a valid acceptance of an instrument, except _____.

A
must be conditional.

B
signed by drawee or his agent.

C
accepted must appear on the holder.

D
accepted of valid Acceptance.
Question 3
1 / -0

Liquidity of asset is dependent on __________.

A
the term of amatively of the asset

B
existence of organized secondary Markets

C
both a & b

D
none of the above
Question 4
1 / -0

When the liquidity trap occurs the demand for money.

A
Is perfectly interest elastic

B
Is perfectly interest inelastic

C
Means that an increase in money supply leads to a fall in the interest rate

D
Means that an increase in the money supply leads to an increase in the interest rate

Solution

A liquidity trap is an economic situation where people hoard financial capital instead of investing or spending it as the interest rates are low and savings rates are high which renders monetary policy ineffective. So, people believe that the interest rates will soon rise, which might decrease the prices of the bonds. Therefore, the demand for money depends on the rate of interest in the economy which hence makes the demand for money perfectly interest elastic.
Question 5
1 / -0

Bank rates are the rate at which ____________.

A
Central bank changes from all commercial rates regarding the deposit made by the commercial banks

B
Rates at which central bank gives credit to commercial banks

C
Rate at which commercial bank gives loan to browsers

D
None of the above

Solution

Bank rate refers to the rate charged on the credits or loans offered by the Central bank to the commercial banks without any collateral. Bank rate is a quantitative credit control measure under the monetary policy of the government as it is used to control the overall supply of the money in the economy. It is increased at the time of inflation to reduce the total money supply in the economy and decreased at the time of deflation to increase the total money supply in the economy.
Question 6
1 / -0

The depository receipts issued by a company in the USA are known as____________.

A
Global Depository Receipts

B
American Depository Receipts

C
Foreign Currency Convertible Bonds

D
All of the above

Solution

The depository receipts issued by a company in the USA are known as American Depository Receipts. ADRs are bought and sold in American markets like regular stocks. It is similar to Global Depository Reciepts.
Question 7
1 / -0

Which of the following is a financial instrument used in international capital market?

A
Global Depository Receipts

B
American Depository Receipts

C
Foreign Currency Convertible Bonds

D
All of the above

Solution

There are various avenues for organizations to raise funds internationally. Modern companies depend upon sizeable borrowings from the international capital market. Financial Instruments like the Global Depository Receipts, American Depository Receipts, Foreign Currency Convertible Bonds are used in international capital market.
Question 8
1 / -0

The FCCB's are issued in a foreign currency and carry a ________ interest rate which is ________ than the rate of any other similar non-convertible debt instrument.

A
fixed, higher

B
fixed, lower

C
fluctuating, lower

D
fluctuating, higher

Solution

Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period. The FCCB's are issued in a foreign currency and carry a fixed interest rate which is lower than the rate of any other similar non-convertible debt instrument.
Question 9
1 / -0

As a measure of value money provides

A
Its holder with perfect liquidity

B
Its fixed return in future

C
A common denominator for determining value of goods

D
A mechanism for allocating resources and distributing output

Solution

Money as a measure of value, helps in determining the value of goods and services in the economy. Money is taken as the common denominator while measuring the value of goods and services in the economy. Therefore, with the help of this function everything can be measure in a common denominator or unit.
Question 10
1 / -0

With the help of cash reserve deposited by commercial banks with Central bank, commercial banks can _______________.

A
Increase their credit in the market

B
A cash reserve ratio can be formed

C
Both A and B

D
None of the above

Solution

The commercial banks have to maintain a proportion of their total deposits as reserves in the form of cash with the central bank as a part of legal requirement. With the help of these cash reserve deposited with the central bank, the commercial banks can increase their credit in the market by using these deposits to create credit in the economy. They can even form a cash reserve ratio which will be the proportion of their total deposits that they have to maintain with the central bank as reserves in the form of cash.

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Re-Attempt Weekly Quiz Competition

Money and Banking online Test - 28

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Money and Banking online Test - 28

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SHARING IS CARING

Question 1

Enable individuals and small business to invest indirectly in money-market instruments

Are available only to high net-worth individuals

Highly liquid and short term investment vehicle

Are mostly tradable on stock exchange

Solution

Question 2

must be conditional.

signed by drawee or his agent.

accepted must appear on the holder.

accepted of valid Acceptance.

Question 3

the term of amatively of the asset

existence of organized secondary Markets

both a & b

none of the above

Question 4

Is perfectly interest elastic

Is perfectly interest inelastic

Means that an increase in money supply leads to a fall in the interest rate

Means that an increase in the money supply leads to an increase in the interest rate

Solution

Question 5

Central bank changes from all commercial rates regarding the deposit made by the commercial banks

Rates at which central bank gives credit to commercial banks

Rate at which commercial bank gives loan to browsers

None of the above

Solution

Question 6

Global Depository Receipts

American Depository Receipts

Foreign Currency Convertible Bonds

All of the above

Solution

Question 7

Global Depository Receipts

American Depository Receipts

Foreign Currency Convertible Bonds

All of the above

Solution

Question 8

fixed, higher

fixed, lower

fluctuating, lower

fluctuating, higher

Solution

Question 9

Its holder with perfect liquidity

Its fixed return in future

A common denominator for determining value of goods

A mechanism for allocating resources and distributing output

Solution

Question 10

Increase their credit in the market

A cash reserve ratio can be formed

Both A and B

None of the above

Solution

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