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Question 1 of 19
1. Question
A bank uses an FX forward to hedge a known foreign-currency payable. The hedge is most effective when the contract:
Correct
Correct answer: Matches the payable‘s currency and maturity as closely as practical. Currency and maturity matching reduces residual exposure, although amount differences, timing changes and counterparty risk can leave basis or mismatch 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: Matches the payable‘s currency and maturity as closely as practical. Currency and maturity matching reduces residual exposure, although amount differences, timing changes and counterparty risk can leave basis or mismatch 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: Matches the payable‘s currency and maturity as closely as practical. Currency and maturity matching reduces residual exposure, although amount differences, timing changes and counterparty risk can leave basis or mismatch 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 2 of 19
2. Question
If a bank funds long-term fixed-rate loans with short-term deposits, it is exposed particularly to:
Correct
Correct answer: Refinancing/liquidity risk and interest-rate risk. Short-term funding may need renewal and can reprice before fixed-rate assets, creating refinancing, liquidity and margin risks. 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: Refinancing/liquidity risk and interest-rate risk. Short-term funding may need renewal and can reprice before fixed-rate assets, creating refinancing, liquidity and margin risks. 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: Refinancing/liquidity risk and interest-rate risk. Short-term funding may need renewal and can reprice before fixed-rate assets, creating refinancing, liquidity and margin risks. 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 19
3. Question
A positive repricing gap means rate-sensitive assets exceed rate-sensitive liabilities in a bucket. If rates rise, net interest income may initially:
Correct
Correct answer: Increase, all else equal. A positive gap can benefit from rising rates because more assets than liabilities reprice upward, all else equal; behavioural effects and basis risk matter. 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, all else equal. A positive gap can benefit from rising rates because more assets than liabilities reprice upward, all else equal; behavioural effects and basis risk matter. 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, all else equal. A positive gap can benefit from rising rates because more assets than liabilities reprice upward, all else equal; behavioural effects and basis risk matter. 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 19
4. Question
Which approach helps assign the cost of liquidity to a business line that uses longer-term funding?
Correct
Correct answer: Maturity- and liquidity-sensitive funds transfer pricing. FTP should reflect tenor, liquidity and relevant funding characteristics so business lines see the economic cost of the resources they consume. 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: Maturity- and liquidity-sensitive funds transfer pricing. FTP should reflect tenor, liquidity and relevant funding characteristics so business lines see the economic cost of the resources they consume. 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: Maturity- and liquidity-sensitive funds transfer pricing. FTP should reflect tenor, liquidity and relevant funding characteristics so business lines see the economic cost of the resources they consume. 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 19
5. Question
A bank uses a credit derivative to transfer credit exposure but retains exposure to the protection seller. This illustrates that:
Correct
Correct answer: Risk transfer can introduce counterparty risk. Credit protection may reduce reference-entity risk but create counterparty exposure to the protection provider and basis/legal risks. 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: Risk transfer can introduce counterparty risk. Credit protection may reduce reference-entity risk but create counterparty exposure to the protection provider and basis/legal risks. 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: Risk transfer can introduce counterparty risk. Credit protection may reduce reference-entity risk but create counterparty exposure to the protection provider and basis/legal risks. 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 19
6. Question
A 182-day bill with face value ₹100 is purchased for ₹96. What is the rupee discount earned at maturity, ignoring transaction costs?
Correct
Correct answer: ₹4. Discount earned is face value minus purchase price: ₹100 − ₹96 = ₹4. 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: ₹4. Discount earned is face value minus purchase price: ₹100 − ₹96 = ₹4. 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: ₹4. Discount earned is face value minus purchase price: ₹100 − ₹96 = ₹4. 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 19
7. Question
A bond has face value ₹1,000 and annual coupon ₹80. Its current market price is ₹950. What is its current yield?
Correct
Correct answer: 8.42% approximately. Current yield = annual coupon / current price × 100 = 80/950 × 100 ≈ 8.42%. It is not the same as yield to maturity. 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: 8.42% approximately. Current yield = annual coupon / current price × 100 = 80/950 × 100 ≈ 8.42%. It is not the same as yield to maturity. 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: 8.42% approximately. Current yield = annual coupon / current price × 100 = 80/950 × 100 ≈ 8.42%. It is not the same as yield to maturity. 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 19
8. Question
A portfolio is worth ₹200 crore and has a one-day 99% VaR of ₹3 crore. What is VaR as a percentage of portfolio value?
Correct
Correct answer: 1.5%. VaR percentage = ₹3 crore / ₹200 crore × 100 = 1.5%. The estimate remains conditional on the model and horizon. 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: 1.5%. VaR percentage = ₹3 crore / ₹200 crore × 100 = 1.5%. The estimate remains conditional on the model and horizon. 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: 1.5%. VaR percentage = ₹3 crore / ₹200 crore × 100 = 1.5%. The estimate remains conditional on the model and horizon. 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 19
9. Question
A bond‘s modified duration is 5.0. Yields fall by 0.40 percentage points. Using duration only, the approximate price change is:
Correct
Correct answer: A rise of 2.0%. Approximate percentage price change = −duration × change in yield. A −0.40% yield change gives −5 × (−0.004) = +2.0%, ignoring convexity. 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 rise of 2.0%. Approximate percentage price change = −duration × change in yield. A −0.40% yield change gives −5 × (−0.004) = +2.0%, ignoring convexity. 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 rise of 2.0%. Approximate percentage price change = −duration × change in yield. A −0.40% yield change gives −5 × (−0.004) = +2.0%, ignoring convexity. 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 19
10. Question
A bank has a ₹50 crore position limit and a current position of ₹43 crore. How much additional position can be taken without breaching the limit, ignoring other constraints?
Correct
Correct answer: ₹7 crore. Available headroom = limit − current position = ₹50 crore − ₹43 crore = ₹7 crore. 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: ₹7 crore. Available headroom = limit − current position = ₹50 crore − ₹43 crore = ₹7 crore. 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: ₹7 crore. Available headroom = limit − current position = ₹50 crore − ₹43 crore = ₹7 crore. 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 19
11. Question
If NDTL is ₹10,000 crore and the hypothetical applicable CRR is 4%, what CRR balance does the percentage imply?
Correct
Correct answer: ₹400 crore. Required balance under the stated hypothetical rate = ₹10,000 crore × 4% = ₹400 crore. The actual rate must be verified from current RBI directions. 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: ₹400 crore. Required balance under the stated hypothetical rate = ₹10,000 crore × 4% = ₹400 crore. The actual rate must be verified from current RBI directions. 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: ₹400 crore. Required balance under the stated hypothetical rate = ₹10,000 crore × 4% = ₹400 crore. The actual rate must be verified from current RBI directions. 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 19
12. Question
If a payment system settles each transaction individually in real time, which settlement-risk characteristic is most directly supported?
Correct
Correct answer: Reduced accumulation of unsettled payment obligations. RTGS reduces the build-up of unsettled obligations by settling transaction by transaction, but participants still need liquidity and operational 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: Reduced accumulation of unsettled payment obligations. RTGS reduces the build-up of unsettled obligations by settling transaction by transaction, but participants still need liquidity and operational 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: Reduced accumulation of unsettled payment obligations. RTGS reduces the build-up of unsettled obligations by settling transaction by transaction, but participants still need liquidity and operational 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 13 of 19
13. Question
An issuer raises USD 10 million when USD/INR is ₹83. Ignoring fees, what is the initial rupee equivalent?
Correct
Correct answer: ₹83 crore. USD 10 million × ₹83/USD = ₹830 million, which equals ₹83 crore. 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: ₹83 crore. USD 10 million × ₹83/USD = ₹830 million, which equals ₹83 crore. 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: ₹83 crore. USD 10 million × ₹83/USD = ₹830 million, which equals ₹83 crore. 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 19
14. Question
A borrower has USD 2 million of debt service due. If USD/INR rises from ₹82 to ₹85, the rupee cost rises by:
Correct
Correct answer: ₹60 lakh. Increase = USD 2,000,000 × (₹85 − ₹82) = ₹6,000,000, or ₹60 lakh. 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: ₹60 lakh. Increase = USD 2,000,000 × (₹85 − ₹82) = ₹6,000,000, or ₹60 lakh. 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: ₹60 lakh. Increase = USD 2,000,000 × (₹85 − ₹82) = ₹6,000,000, or ₹60 lakh. 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 19
15. Question
A forward contract fixes USD/INR at ₹84 for USD 1 million. At settlement, the relevant market rate is ₹86. For a buyer needing USD, the contract‘s gross economic advantage versus spot is:
Correct
Correct answer: ₹20 lakh. The buyer obtains dollars at ₹84 instead of ₹86, a ₹2 difference per USD. On USD 1 million, the gross advantage is ₹2 million = ₹20 lakh, before costs and contract details. 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: ₹20 lakh. The buyer obtains dollars at ₹84 instead of ₹86, a ₹2 difference per USD. On USD 1 million, the gross advantage is ₹2 million = ₹20 lakh, before costs and contract details. 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: ₹20 lakh. The buyer obtains dollars at ₹84 instead of ₹86, a ₹2 difference per USD. On USD 1 million, the gross advantage is ₹2 million = ₹20 lakh, before costs and contract details. 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 19
16. Question
A bank has rate-sensitive assets of ₹600 crore and rate-sensitive liabilities of ₹520 crore in a particular bucket. What is the repricing gap?
Correct
Correct answer: Positive ₹80 crore. Repricing gap = rate-sensitive assets − rate-sensitive liabilities = ₹600 crore − ₹520 crore = positive ₹80 crore. 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: Positive ₹80 crore. Repricing gap = rate-sensitive assets − rate-sensitive liabilities = ₹600 crore − ₹520 crore = positive ₹80 crore. 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: Positive ₹80 crore. Repricing gap = rate-sensitive assets − rate-sensitive liabilities = ₹600 crore − ₹520 crore = positive ₹80 crore. 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 19
17. Question
A bank‘s fixed-rate assets yield 7.2% and matched funding costs 5.8%. Ignoring operating costs and credit losses, the gross spread is:
Correct
Correct answer: 1.4 percentage points. Gross spread = asset yield − funding cost = 7.2% − 5.8% = 1.4 percentage points. 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: 1.4 percentage points. Gross spread = asset yield − funding cost = 7.2% − 5.8% = 1.4 percentage points. 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: 1.4 percentage points. Gross spread = asset yield − funding cost = 7.2% − 5.8% = 1.4 percentage points. 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 19
18. Question
A dealer proposes to exceed an overnight position limit because a market view appears strong. What should the supervisor require?
Correct
Correct answer: Prior authorised limit change or position reduction under policy. Limits can only be changed through the authorised governance process. A strong market view does not justify unauthorised risk-taking. 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: Prior authorised limit change or position reduction under policy. Limits can only be changed through the authorised governance process. A strong market view does not justify unauthorised risk-taking. 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: Prior authorised limit change or position reduction under policy. Limits can only be changed through the authorised governance process. A strong market view does not justify unauthorised risk-taking. 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 19
19. Question
Which product is typically used by banks to borrow or lend funds overnight on an unsecured basis between eligible participants?
Correct
Correct answer: Call money. Call money is very short-term, typically overnight, unsecured borrowing and lending among eligible participants in the money market. 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: Call money. Call money is very short-term, typically overnight, unsecured borrowing and lending among eligible participants in the money market. 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: Call money. Call money is very short-term, typically overnight, unsecured borrowing and lending among eligible participants in the money market. Exam takeaway: understand the underlying treasury principle and verify changeable regulatory rates, eligibility criteria and operating rules against the latest RBI/IIBF instructions.