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SEBI Grade A/ RBI Grade B Securities Market and Financial Awareness MCQs. If you want to crack SEBI Grade A / RBI Grade B examination, you need to read the relevant material. READ and REVISE it Multiple times because if you can't replicate whatever you have studied then it is of no use. For All MCQs Archive CLICK HERE
Securities Market and General Awareness for SEBI Grade A/ RBI Grade B
Q1. Calling feature in bonds is most prevalent when_______?
A. When it favours the investors
B. When interest rates are expected to fall
C. When interest rates are expected to rise.
D. When interest rates remain stable
Explanation: (B) A callable bond gives the borrower (issuer) the right to pay back obligation (borrowed amount) to the lender (bondholder) before the stated maturity date.
- There is a call option embedded in callable bonds. So when the interest rates fall the issuer of bond has the option to call back bonds (to pay back the borrowed amount to the lender or bondholders).
- For Example-- Exam Together Limited, issues a callable bond with a maturity period of 10 years at a 6% premium. However, 7 years down the line, the interest rates in the economy falls to 5%. So, the issuer (Exam Together) can exercise call option and will redeem the bonds at a premium of 5%. This helps the issuer to save major chunk of money that goes to the bondholders as interest payments.
- The callable bonds are known to deliver a higher interest or coupon rate to the investors, the companies issuing the same can look forward to benefitting from the same.
Q2. What does 'I' stands for in CHIPS?
A. Interest
B. Interbank
C. Immediate
D. Indian
Explanation: (B) CHIPS Stands for The Clearing House Interbank Payments System. It is the primary clearing house in the U.S. for large banking transactions.
Founded : 1970
Q3. When interest rates fall in the economy
A. Bond prices rise
B. Bond prices remain same
C. Bond Prices fall
D. There is no correlation between interest rates and bond prices.
Explanation: (A) The bond price depends on the interest rates prevalent in the market on which it can either sold at premium or discounted rate. There is a inverse relationship between interest rates and bond prices.
- When interest rates fall, bond prices rise.
- When interest rates rise, bond prices fall.
- When interest rates rise, the market value of bonds falls. If you have a bond with a coupon of 6% and the interest rates rise from 6% to 7%, Then the coupon rate on the bond will now seem less attractive to investors so they'll be willing to pay less for it.
Q4. As per SCRA 1956, the term securities include which of the following?
A. Bonds
B. Derivatives.
C. Shares, scrips or bonds
D. All of the above.
Explanation: (D) The term "securities" has been defined in section 2(h) of Securities Contracts (Regulation) Act, 1956
- Shares, scrips, stocks, bonds, debentures,
- Derivatives,
- Government securities,
- Rights or interest in securities etc.
Q5. What is the Statutory Liquidity Ratio at present? (September 2020)
A. 19%
B. 18%
C. 20.5%
D. 18.5%
Explanation: (B) Statutory Liquidity Ratio (SLR): The share of NDTL or Net Demand and Time Liabilities that a bank is required to maintain in safe and liquid assets, such as, unencumbered government securities, cash and gold. Changes in SLR often influence the availability of resources in the banking system for lending to the private sector.
- The SLR percentage is of the percentage of the total bank deposits available as far as the particular bank is concerned and it keeps changing as per the RBI monetary policy.
- SLR is used to increase or decrease the flow of bank credit.
- The money invested under the SLR window earn some interests for banks. But they can’t access this fund for lending purposes.
Read Also: MCQs Part- 5
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