Securities Market and Financial Awareness MCQs for SEBI Grade A / RBI Grade B 2020 Exam Part - 8

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                            Securities Market and Financial Awareness MCQs for the upcoming SEBI Grade A and RBI Grade B examination. It will be also helpful your your banking examination such as IBPS, SBI PO, IRDAI, etc. For all MCQs Archive CLICK HERE

Securities Market and General Awareness for SEBI Grade A/ RBI Grade B

Q1.  Derivatives is a risk management tool that drives its value from underlying ______?

A. Stocks

B. Currency

C. Commodities

D. Any one of the above

Explanation: (D)  In finance, a derivative is a contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, forex, stocks, commodities or interest rate, and is often simply called the "underlying".

• A derivative is a financial contract that derives its value from an underlying asset. The buyer agrees to purchase the asset on a specific date at a specific price. 

• A derivative is a security, that forms a contract between two or more parties. These types of contracts are often based on asset classes like commodities (eg. Oil or Silver) and for currencies (like the USD/INR). They are used for company stocks and even for interest rates.

Q2. Recently Mutual Fund Advisory Committee of SEBI issued guidelines  for product labeling in mutual funds. Which among the following category of risk has been added?

A. Very High

B. High

C. Low

D. Moderate

Explanation: (A) Very High Risk category has been added in Risk-o-Meter.

• Risk Level of a scheme will be depicted by “Risk-o-meter”, as shown below:

                                                                    PC: SEBI Website.

• Risk-o-meter shall  have following  six levels of  risk  for mutual  fund schemes:

i. Low Risk

ii. Low to Moderate Risk

iii. Moderate Risk

iv. Moderately High Risk

v. High Risk

vi.Very High Risk

Q3. What is the limit has been decided for Government under WMA for the second half of the Financial Year 2020-21?

A. 1.45 Lakh Crore

B. 1.50 Lakh Crore

C. 1.25 Lakh Crore

D. 1.05 Lakh Crore

Explanation: (C)  It has been decided, in consultation with the Government of India, that the limits for Ways and Means Advances (WMA) for the second half of the financial year 2020-21 (October 2020 to March 2021) will be ₹1,25,000 crore.

• The Reserve Bank may trigger fresh floatation of market loans when the Government of India utilizes 75 per cent of the WMA limit.

• The Reserve Bank retains the flexibility to revise the limit at any time, in consultation with the Government of India, taking into consideration the prevailing circumstances.

• The interest rate on WMA/overdraft will be:

WMA: Repo Rate

Overdraft: Two percent above the Repo Rate

Q4. Which of the following options can be exercised at the expiration date of the option?

A. American Option

B. European Option

C. Bermudan Option

D. None of the Above

Explanation: (B) In finance, the style of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American options, and Bermudan etc.

• Exercise Option is an option which gives buyer or seller a chance to exercise the contract only at the maturity date. European options specify that a trader can only choose to exercise (or not) his option on the date of expiration.

• An American option on the other hand may be exercised at any time before the expiration date.

• A Bermudan option may be exercised on any of several specified exercise dates.

Q5. Under Basel III Framework what does F stands for in NSFR?

A. Functional

B. Framework

C. Fund

D. None of the above

Explanation: (C) NSFR stands for Net Stable Funding Ratio (NSFR) under Basel III Framework on Liquidity Standards. The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding.

• The net stable funding ratio  (NSFR) is a liquidity standard requiring banks to hold enough stable funding to cover the duration of their long-term assets.

• The NSFR will require banks to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities.

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