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Question 1 of 20
1. Question
Which money-market instrument is generally unsecured and issued by a company to meet short-term funding needs?
Correct
Correct answer: Commercial paper. Commercial paper is an unsecured short-term promissory instrument issued by eligible corporates and other permitted entities. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Commercial paper. Commercial paper is an unsecured short-term promissory instrument issued by eligible corporates and other permitted entities. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Commercial paper. Commercial paper is an unsecured short-term promissory instrument issued by eligible corporates and other permitted entities. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 2 of 20
2. Question
A bank enters a repo and receives cash against securities while agreeing to repurchase them. From the bank‘s perspective, the transaction is commonly used to:
Correct
Correct answer: Raise secured short-term liquidity. Repo financing enables short-term borrowing against securities; collateral and margin arrangements affect the effective funding cost. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Raise secured short-term liquidity. Repo financing enables short-term borrowing against securities; collateral and margin arrangements affect the effective funding cost. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Raise secured short-term liquidity. Repo financing enables short-term borrowing against securities; collateral and margin arrangements affect the effective funding cost. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 3 of 20
3. Question
Which risk is especially relevant when a bank holds a thinly traded bond that may be difficult to sell quickly without a large price concession?
Correct
Correct answer: Market liquidity risk. Market liquidity risk is the risk that a position cannot be sold or unwound promptly at a reasonable price. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Market liquidity risk. Market liquidity risk is the risk that a position cannot be sold or unwound promptly at a reasonable price. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Market liquidity risk. Market liquidity risk is the risk that a position cannot be sold or unwound promptly at a reasonable price. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 4 of 20
4. Question
A foreign-exchange swap typically combines:
Correct
Correct answer: A spot transaction and an opposite forward transaction. FX swaps generally involve exchanging currencies on one date and reversing the exchange at a later date, often for liquidity or funding management. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: A spot transaction and an opposite forward transaction. FX swaps generally involve exchanging currencies on one date and reversing the exchange at a later date, often for liquidity or funding management. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: A spot transaction and an opposite forward transaction. FX swaps generally involve exchanging currencies on one date and reversing the exchange at a later date, often for liquidity or funding management. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 5 of 20
5. Question
An Indian firm earns rupees but raises USD ECB debt. If the rupee depreciates and the firm has no hedge, the rupee cost of repayment will generally:
Correct
Correct answer: Increase. Depreciation means more rupees are needed to purchase each dollar, increasing the local-currency burden of unhedged foreign-currency debt. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Increase. Depreciation means more rupees are needed to purchase each dollar, increasing the local-currency burden of unhedged foreign-currency debt. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Increase. Depreciation means more rupees are needed to purchase each dollar, increasing the local-currency burden of unhedged foreign-currency debt. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 6 of 20
6. Question
Which statement about a rupee-denominated bond issued abroad is most accurate for the issuer?
Correct
Correct answer: The bond‘s principal and coupon are denominated in rupees, while applicable rules still govern issuance. A rupee-denominated offshore bond uses INR denomination, but issuer eligibility, issuance conditions and reporting remain subject to the applicable framework. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: The bond‘s principal and coupon are denominated in rupees, while applicable rules still govern issuance. A rupee-denominated offshore bond uses INR denomination, but issuer eligibility, issuance conditions and reporting remain subject to the applicable framework. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: The bond‘s principal and coupon are denominated in rupees, while applicable rules still govern issuance. A rupee-denominated offshore bond uses INR denomination, but issuer eligibility, issuance conditions and reporting remain subject to the applicable framework. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 7 of 20
7. Question
A foreign company seeks Indian investors through IDRs. The receipt represents:
Correct
Correct answer: Underlying shares of that foreign company held through a depositary/custodian structure. IDRs allow Indian-market investment exposure to a foreign company‘s underlying shares through a depository receipt structure, subject to rules. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Underlying shares of that foreign company held through a depositary/custodian structure. IDRs allow Indian-market investment exposure to a foreign company‘s underlying shares through a depository receipt structure, subject to rules. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Underlying shares of that foreign company held through a depositary/custodian structure. IDRs allow Indian-market investment exposure to a foreign company‘s underlying shares through a depository receipt structure, subject to rules. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 8 of 20
8. Question
Why should treasury verify the latest ECB all-in-cost and maturity requirements before execution?
Correct
Correct answer: The regulatory framework can prescribe limits and conditions that may change. ECB terms must comply with the prevailing framework; eligibility, maturity, cost ceilings or benchmarks, end-use and reporting can be prescribed. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: The regulatory framework can prescribe limits and conditions that may change. ECB terms must comply with the prevailing framework; eligibility, maturity, cost ceilings or benchmarks, end-use and reporting can be prescribed. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: The regulatory framework can prescribe limits and conditions that may change. ECB terms must comply with the prevailing framework; eligibility, maturity, cost ceilings or benchmarks, end-use and reporting can be prescribed. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 9 of 20
9. Question
A bank‘s NDTL rises while the applicable CRR percentage remains unchanged. The required CRR balance will generally:
Correct
Correct answer: Rise proportionately with the reserve base. CRR is calculated as a prescribed percentage of the applicable NDTL base, so a larger base generally increases the required cash balance. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Rise proportionately with the reserve base. CRR is calculated as a prescribed percentage of the applicable NDTL base, so a larger base generally increases the required cash balance. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Rise proportionately with the reserve base. CRR is calculated as a prescribed percentage of the applicable NDTL base, so a larger base generally increases the required cash balance. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 10 of 20
10. Question
Which asset is normally associated with SLR maintenance rather than CRR maintenance?
Correct
Correct answer: Eligible government securities. SLR is maintained in eligible liquid assets, commonly including specified cash, gold and unencumbered approved securities; CRR is cash with RBI. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Eligible government securities. SLR is maintained in eligible liquid assets, commonly including specified cash, gold and unencumbered approved securities; CRR is cash with RBI. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Eligible government securities. SLR is maintained in eligible liquid assets, commonly including specified cash, gold and unencumbered approved securities; CRR is cash with RBI. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 11 of 20
11. Question
The main monetary-policy purpose of RBI liquidity operations is to:
Correct
Correct answer: Manage system liquidity and guide short-term money-market conditions. RBI liquidity facilities help manage short-term liquidity conditions and transmission of monetary policy; their design and rates depend on current policy. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Manage system liquidity and guide short-term money-market conditions. RBI liquidity facilities help manage short-term liquidity conditions and transmission of monetary policy; their design and rates depend on current policy. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Manage system liquidity and guide short-term money-market conditions. RBI liquidity facilities help manage short-term liquidity conditions and transmission of monetary policy; their design and rates depend on current policy. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 12 of 20
12. Question
In RTGS, ‘gross‘ settlement means:
Correct
Correct answer: Each transfer is settled individually rather than being netted with other transfers. RTGS settles transactions individually and continuously in real time, unlike systems that first net batches of payments. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Each transfer is settled individually rather than being netted with other transfers. RTGS settles transactions individually and continuously in real time, unlike systems that first net batches of payments. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Each transfer is settled individually rather than being netted with other transfers. RTGS settles transactions individually and continuously in real time, unlike systems that first net batches of payments. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 13 of 20
13. Question
A portfolio‘s 10-day VaR is estimated by scaling 1-day VaR by the square root of 10. This scaling is based on an assumption of:
Correct
Correct answer: Independent, identically distributed returns with suitable statistical behaviour. Square-root-of-time scaling is a simplifying assumption, often relying on independent returns and stable volatility; it can fail under autocorrelation, jumps or stressed markets. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Independent, identically distributed returns with suitable statistical behaviour. Square-root-of-time scaling is a simplifying assumption, often relying on independent returns and stable volatility; it can fail under autocorrelation, jumps or stressed markets. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Independent, identically distributed returns with suitable statistical behaviour. Square-root-of-time scaling is a simplifying assumption, often relying on independent returns and stable volatility; it can fail under autocorrelation, jumps or stressed markets. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 14 of 20
14. Question
A bond portfolio has modified duration of 4.2. For a small 1 percentage-point increase in yield, the approximate percentage price change is:
Correct
Correct answer: A fall of about 4.2%. For a small yield change, percentage price change is approximately −modified duration × change in yield. A 1% yield rise implies roughly −4.2%, before convexity effects. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: A fall of about 4.2%. For a small yield change, percentage price change is approximately −modified duration × change in yield. A 1% yield rise implies roughly −4.2%, before convexity effects. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: A fall of about 4.2%. For a small yield change, percentage price change is approximately −modified duration × change in yield. A 1% yield rise implies roughly −4.2%, before convexity effects. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 15 of 20
15. Question
Which risk measure captures the curvature in the price-yield relationship beyond duration‘s linear approximation?
Correct
Correct answer: Convexity. Convexity measures curvature in the bond price-yield relationship and improves estimates for larger yield changes. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Convexity. Convexity measures curvature in the bond price-yield relationship and improves estimates for larger yield changes. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Convexity. Convexity measures curvature in the bond price-yield relationship and improves estimates for larger yield changes. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 16 of 20
16. Question
A dealer‘s position exceeds an approved stop-loss threshold. The appropriate response is to:
Correct
Correct answer: Escalate and act under the approved breach-management process. Stop-loss and limit breaches should be escalated promptly, documented and resolved under approved policy; concealment undermines controls. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Escalate and act under the approved breach-management process. Stop-loss and limit breaches should be escalated promptly, documented and resolved under approved policy; concealment undermines controls. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Escalate and act under the approved breach-management process. Stop-loss and limit breaches should be escalated promptly, documented and resolved under approved policy; concealment undermines controls. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 17 of 20
17. Question
A company agrees today to buy USD at a fixed INR rate three months later. This is most directly a:
Correct
Correct answer: Forward foreign-exchange contract. An FX forward fixes an exchange rate today for a currency exchange on a future value date, creating a contractual obligation for both parties. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Forward foreign-exchange contract. An FX forward fixes an exchange rate today for a currency exchange on a future value date, creating a contractual obligation for both parties. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Forward foreign-exchange contract. An FX forward fixes an exchange rate today for a currency exchange on a future value date, creating a contractual obligation for both parties. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 18 of 20
18. Question
The buyer of an option pays a premium because the option provides:
Correct
Correct answer: A right without a corresponding obligation to exercise. The premium compensates the option seller for granting the buyer a right. The buyer can let the option expire if exercise is unattractive. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: A right without a corresponding obligation to exercise. The premium compensates the option seller for granting the buyer a right. The buyer can let the option expire if exercise is unattractive. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: A right without a corresponding obligation to exercise. The premium compensates the option seller for granting the buyer a right. The buyer can let the option expire if exercise is unattractive. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 19 of 20
19. Question
Exchange-traded futures usually require initial margin to:
Correct
Correct answer: Provide a financial buffer against potential losses. Initial margin helps cover potential future exposure; variation margin reflects mark-to-market changes. Neither removes market risk. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: Provide a financial buffer against potential losses. Initial margin helps cover potential future exposure; variation margin reflects mark-to-market changes. Neither removes market risk. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: Provide a financial buffer against potential losses. Initial margin helps cover potential future exposure; variation margin reflects mark-to-market changes. Neither removes market risk. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
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Question 20 of 20
20. Question
In a plain-vanilla interest-rate swap, the notional principal is usually:
Correct
Correct answer: A reference amount used to calculate interest cash flows, not exchanged. Interest payments are calculated using the notional amount, but that amount is typically not exchanged in a standard interest-rate swap. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Incorrect
Correct answer: A reference amount used to calculate interest cash flows, not exchanged. Interest payments are calculated using the notional amount, but that amount is typically not exchanged in a standard interest-rate swap. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.
Unattempted
Correct answer: A reference amount used to calculate interest cash flows, not exchanged. Interest payments are calculated using the notional amount, but that amount is typically not exchanged in a standard interest-rate swap. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.