Indian Economy Test 80

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Indian Economy Test 80

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Weekly Quiz Competition

Question 1
1 / -0

What is correct about the concept ' bond ratio' frequently used regarding the financial crises of the Western economies?

A
It is the measure of a bond issuer's borrowed capital represented by bonds, expressed as a percentage.

B
It is the ratio of the face value and the market value of a government bond.

C
A ratio of the earning on corporate bonds and the government bonds.

D
A ratio to measure the per annum yield on a bond in comparison to the earnings in the share market during the same period.

Solution

Bond ratio is a measure of a bond issuer's leveraged (borrowed) capital represented by bonds, expressed as a percentage. Bond ratio above 33 per cent is considered high, except for utility companies, which are, as a rule, highly leveraged (formula - bonds due after one year multiplied by 100 divided by (Bonds due after one year + Equity capital).
Question 2
1 / -0

Official Development Assistance,external concessional loans, India get, can be used by _____________________.

A
only Central Government.

B
Centre and States.

C
Centre, States as well as the private sector.

D
only social sector.

Solution

Private sector cannot use sch assistance. There is no sectoral compulsion though the areas that are outlined before loan is availed.
Question 3
1 / -0

What is correct about the stock market term 'debt-equity swap' used frequently in the crises-driven western economies?

A
A method of converting banks' loans into equity shares of a concerned listed company.

B
A way out of long-term loans by replacing them with preference shares used by a listed company.

C
An arrangement in which a firm exchanges its newly issued common stock for its already-issued bonds.

D
A short-term relief from the long-term liabilities of company given by the lender.

Solution

The stock market term debt-equity swap is an arrangement in which a firm exchanges its newly issued common stock (i.e., equity shares) fr its already-issued bonds. Many companies in USA and Europe have gone for this route to restructure their debts, shares and assets post-financial crises in the Western economies. Some of the Asian listed companies are also proposing to do the same-in India, the Kingfisher Airlines is believed to thinking about a similar leverage t get rid of its tight financial position.
Question 4
1 / -0

Which of the following can be inferred if a country continues to devalue its currency to promote its exports?
1. The country's production capacity might have gone heavily oriented to the external markets.
2. The country is selling its precious assets to the world at throwaway prices which may turn out to be self-defeating in the long-run.

A
Only 1

B
Only 2

C
Both 1 and 2

D
Neither 1 nor 2

Solution

Such a case has been seen in the case of China till first half of the year 2016. But China has not followed it as its long-term trade policy and is intensely busy today in orienting its production line to its domestic market.
Question 5
1 / -0

Which one of the following is not among the functions of the Asian Development Bank?

A
Providing financial and technical support to the member countries which face balance of payment crises.

B
Providing loans to member countries for economic and social advancements.

C
Providing technical assistance and advisory services to the member countries.

D
Coordinating development policies and plans of the member countries.

Solution

It pays no role in the area of bailing out its member countries in the times of balance of payment crises.
Question 6
1 / -0

What is correct about the security market term 'fallen angel', used frequently in the world?

A
A share, which has lost sheen after a crash in the share market.

B
A bond that was investment grade when issued but now has much lower rating.

C
A company takeover is through an open bid by its closest competitor.

D
A situation when a listed company turns out to be a liability on the stock exchange due to its higher weight in the stock exchange index.

Solution

Fallen Angel is the 'bond' that was investment grade when issued but now has much lower rating. As happened in the case of the US Government Securities recently when nation states of the world were investing in them, it was among the best of the investments in the world but once the Monday's downgraded the 'Sovereign rating' of the USA the same Securities lost the sheen and their past glory.
Question 7
1 / -0

Which of the following will be the outcomes once an economy is under an inflationay pressure? Select your answer using the code given below:
1. Domestic currency heads for depreciation.
2. Exports become less competitive with imports getting costlier.
3. Cost of borrowing decreases.
4. Bond-holders get benefitted.

A
1 and 2

B
Only 2

C
1 and 3

D
Only 3

Solution

Inflation is directly seen converting into proportionate depreciation in the domestic currency. In such situations exports become cheaper for other countries (which make it more competitive in the world market), besides imports becoming costlier (as the domestic currency loses value in front of the external currency). Real cost of borrowing is calculated by deducting the current rate of inflation (which is higher) from the 'nominal rate of interest banks announce on a certain category of loan). Bond-holders are basically lenders so they duffer-interest income sees dilution.
Question 8
1 / -0

Select the correct objectives of the 'term ropes' started by the RBI, using the code given below:
1. It checks the ad-hocism in the day-to-day banking operation in the country.
2. It will promote stability in the bank's lending business.
3. Lending rates will become more transparent to the loan seekers.

A
1 and 2

B
Only 2

C
2 and 3

D
1,2 and 3

Solution

This practice has been started to make banks think in long-term which will be the need of the banking industry when it complies to the Basel III norms. As per these norms, banks have to maintain two ratios-one regarding short-term fund. Term repo will make them meet these twin aims.
Question 9
1 / -0

What is correct about the stock market term 'divided rollover'?

A
It is an act of trading strategy of buying securities shortly before their ex-dividend dates and selling them after collecting dividends.

B
An act of postponement of dividend distribution by a company to the next year.

C
When dividend distribution is put off by a company for over one year.

D
A situation in dividend distribution when listed companies offer choice to its shareholders of leaving their dividends with the company itself for some time at some interest charges given to them.

Solution

The term dividend rollover is an act of 'trading strategy' of buying shares shortly before their dividend distribution dates and selling them after collecting dividends.
Question 10
1 / -0

Which of the following is correct about the 'reserve tranche' member nations maintain with the International Monetary Fund?

A
This must be maintain in the form of either hard currencies or gold.

B
Nation states need not take permission from the IMF to use this fund and neither need to pay any interest.

C
It is fourth of the Special Drawing Rights quota of the member nation.

D
This is generally used by the member nations to pay their current payments.

Solution

Rest of the SDRs (three fourth) a member nation may be maintained with the IMF in local currency which can be withdrawn in any foreign currency if need be. But for this, the member nations needs to procure permission from the IMF and it involves payment of interest cost also.

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Indian Economy Test 80

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Indian Economy Test 80

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Question 1

It is the measure of a bond issuer's borrowed capital represented by bonds, expressed as a percentage.

It is the ratio of the face value and the market value of a government bond.

A ratio of the earning on corporate bonds and the government bonds.

A ratio to measure the per annum yield on a bond in comparison to the earnings in the share market during the same period.

Solution

Question 2

only Central Government.

Centre and States.

Centre, States as well as the private sector.

only social sector.

Solution

Question 3

A method of converting banks' loans into equity shares of a concerned listed company.

A way out of long-term loans by replacing them with preference shares used by a listed company.

An arrangement in which a firm exchanges its newly issued common stock for its already-issued bonds.

A short-term relief from the long-term liabilities of company given by the lender.

Solution

Question 4

Only 1

Only 2

Both 1 and 2

Neither 1 nor 2

Solution

Question 5

Providing financial and technical support to the member countries which face balance of payment crises.

Providing loans to member countries for economic and social advancements.

Providing technical assistance and advisory services to the member countries.

Coordinating development policies and plans of the member countries.

Solution

Question 6

A share, which has lost sheen after a crash in the share market.

A bond that was investment grade when issued but now has much lower rating.

A company takeover is through an open bid by its closest competitor.

A situation when a listed company turns out to be a liability on the stock exchange due to its higher weight in the stock exchange index.

Solution

Question 7

1 and 2

Only 2

1 and 3

Only 3

Solution

Question 8

1 and 2

Only 2

2 and 3

1,2 and 3

Solution

Question 9

It is an act of trading strategy of buying securities shortly before their ex-dividend dates and selling them after collecting dividends.

An act of postponement of dividend distribution by a company to the next year.

When dividend distribution is put off by a company for over one year.

A situation in dividend distribution when listed companies offer choice to its shareholders of leaving their dividends with the company itself for some time at some interest charges given to them.

Solution

Question 10

This must be maintain in the form of either hard currencies or gold.

Nation states need not take permission from the IMF to use this fund and neither need to pay any interest.

It is fourth of the Special Drawing Rights quota of the member nation.

This is generally used by the member nations to pay their current payments.

Solution

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