Treasury Products Questions Answers – IIBF Certifications

1) Which of the following currency is not fully convertible?
a) USD b) EURO c) INR d) GBP
2) What are the Spot Trades?
a) It is the process of settlement where payment and receipts of funds are settled in respective currencies.
b) The settlement takes place within 2 working days from the trade date.
c) Currency may be bought or sold with settlement on the same date i.e. To day (TOD)
d) The settlement can be on the -next day he. Tomorrow (TOM)
3) Which of the following is significant about spot trade?
a) All rates quoted on the screen are for spot trade unless otherwise mentioned
b) TOD and TOM rates are generally quoted at a discount to the spot rate.
c) TOD and TOM rates are less favourable to buyer d) All these
4) What is forward contract?
a) It is a contract for purchase and sale of currency at a future date.
b) The exchange rate for a future contract is quoted on the day of contract.
c) The contract between buyer and seller is called forward contract.
d) All the above
5) Which of the following is true regarding a forward contract?
a) Treasury may have forward contracts with customers or Banks as counterparties.
b) Customers cover currency risk through forward contract.
c) Treasury may cover its customer exposure by taking reverse position in Inter-Bank market.
d) All the above
6) The features of forward rates are:
a) They are not projected on the basis of exchange rate movement in the market
b) Forward rates are decided on the basis of interest rate differential of two currencies.
c) The interest rate differential is added to the spot rate for low interest yielding currency and deducted
from the spot rate for high interest yielding currency
d) All the above
7) Which of the following are True?
a) Forward rate reflects interest rate differential only in prefect markets.
b) Perfect markets are where currency is fully convertible and highly liquid.
c) When currency is not fully convertible the demand for forward contract influences
the forward exchange rate d) All these
8) The features of a swap are:
a) A combination of spot and forward transactions is called a swap.
b) Buying in the spot market and selling same amount in forward market or vice-versa is swap.
c) Swap is mainly used for funding requirements_ d) All these
9) A Bank may have foreign exchange surpluses from the following sources:
a) Profit from overseas Branch operations
b) Forex Borrowing in foreign domestic market
c) Foreign currency and convertible rupee deposits with branches
d) All the above

10) A Treasury may have surplus forex from the following sources:
a) Surpluses net of Bank’s -lending in foreign currency
b) Floating funds on account of customer transactions
c) EEFC funds maintained in current account d) All these
11) The surplus forex can be invested by a Treasury in:
a) Inter-Bank loans b) Short term investments c) Nostro Account
d) Any or all of these
12) Which of the followings are the sources for short-term investments?
a) Treasury Bills issued by foreign governments
b) Commercial paper
c) Other debt instruments issued by multi lateral institutions
d) All the above
13) What is a Nostro Account?
a) This is a current account denominated in foreign currency maintained by a Bank with the correspondent Bank in the
home country of the currency.
b) Nostro Account does not attract any interest.
c) Many correspondent Banks provide automatic investment facility for funds held
overnight which earn nominal interest. d) All these
14)What is Money Market?
a) It is place for raising and deploying short term resources where maturity does not exceed one year.
b) Inter-Bank market is divided as call money and term money.
c) Call money market is also overnight market where borrowed funds are repaid on the next working day.
d) Notice money market is where funds are placed beyond overnight and upto 14 days.
15) The participants in call/notice money market are:
a) The major players are Banks and primary dealers.
b) Non-Banking financial companies can only lend the surplus funds upto specified limit_
c) NBFC can not participate in this market d) Both (a) and (c)
16) Which of the followings are the features to Treasury Bills?
a) The T-Bills are issued by the RBI on behalf of central govt. for pre-determined amount.
b) The interest is by way of discount.
c) The price is determined through an auction process d) All these
17) The maturity period of T-Bills is:
a) 91 days b) 364 days c) (a) and (b) both d) None of these
18) Which of the followings is relevant to T-Bills?
a) Each issue of 91 days T-Bill is for Rs_ 500 crore and auction is conducted weekly onWednesday.
b) Each issue of 364 days is for Rs. 1000 crore and it is auctioned fortnightly
c) The Banks park short term funds in T-Bills d) All these
19) The Benefits of T-Bills are:
a) It is Risk free investment
b) It yields interest higher than the call money market.
c) It is possible to trade T-Bill in secondary market d) All these
20) Which of the followings is correct regarding T-Bill?
a) It is in the Electronic form and held in SGL Account maintained by Banks with RBI.
b) Depository participants can also operate through SGL Account.
c) The settlement of T-Bills is through Clearing Corporation of India d) All these
21) If a T-Bill is of 91 days is priced at 99.26, what does it signify?
a) It will yield interest at 2.99%
b) This is known as implicit yield.
c) (a) and (b) both d) None of these
22) The_ features of the commercial paper are:
a) It is an unsecured money market instrument issued in the form of promissory note.
b) The highly rated corporate Borrowers can raise short term funds through this instrument.
c) It is an additional instrument to the investing community d) All these
23) -The time limit for issuing a CP is:
a) Minimum maturity 7 days b) Maximum maturity one year
c) (a) and (b) both d) None of these
24) The requirements for issuing a commercial paper are:

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a) The company issuing CP should have minimum credit rating of P2.
b) Banks can invest in CP only if it is issued in D-mat form
c) The minimum amount of CP is Rs. 5 lac d) All these
25) Who issues guidelines for issue of CP?
a) RBI
b) Market practices prescribed by FIMMDA (Fixed Income and Money Market and Derivatives Association of India) c) (a)
and (b) both d) None of these
26) A company issuing CP must satisfy the conditions:
a) Tangible Net worth of the company should not be less than Rs. 4 crore
b) The company should be enjoying working capital limit with Bank/financial institution
c) The Borrowal Account should be classified as standard Asset d) All these
27) How does Tangible Net Worth is arrived at?
a) Capital b) Free Reserves c) (a) + (b) — Intangible Assets if any
d) None of these
28) Which of the following is relevant about commercial paper?
a) It is issued for discounted amount i.e. less than face value
b) The price is quoted for face value
c) It is negotiable instrument d) All these
29) Which of the following statements regarding commercial paper is
not correct?
a) CP is a substitute to working capital
b) Interest rates are at par with PLR
c) It should be compulsory in D-mat form
d) Purchase and sale of CP is effected through the depository participants
30) Banks prefer to invest in CP through Treasury because :
a) Credit Risk is relatively low.
b) Yield on CP is higher than inter-bank money market.
c) There is no liquidity risk d) All these
31) Which of the following- Credit Rating Agencies have been authorized by RBI for
a) ICRA b) CRISIL c) CARE and FITCH Ratings India Ltd. d) All these
32) The provisions for issue of commercial paper are:
a) Maximum period for subscription to an issue of CP is two weeks from the date of opening of issue.
b) CPs can be issued on a single date or in parts on different dates.
c) The same issue of CP should have the same date of maturity d) All these
33) The process of issue a CP involves:
a) The Bank is appointed as issuing and paying agent.
b) The Bank would assess the requirement and the extent to which the CP issue is linked with credit limit.
c) The potential investors are given a copy of IPA certificates d) All these
34) The features of certificate of Deposit are:
a) It is a debt instrument issued-by Bank against deposit of funds
b) It is a negotiable instrument
c) It bears interest rate higher than regular deposits of the Bank. d) All these
35) The requirements of certificate of Deposit are:
a) Minimum amount of deposit is Rs. 1 lac
b)_ The maturity period may range from 7 days to one year
c) It is an additional source for investment to Banks and corporates d) All these
36) What is a Reverse Repo?
a) It is a contract to buy securities and then to sell them back at an agreed future date and price.
b) It provides opportunity for short term investments of surplus funds
c) (a) and (b) both d) None of these
37) What is Repo?
a) It is an instrument of borrowing funds for a short period.
b) It involves selling a security and simultaneously agreeing to repurchase it at a future date for a slightly higher price.
c) The price difference is called interest d) All these
38) The significance of Repo is:
a) It is a tool used by RBI for open market operations.

b) It affects liquidity in the system.
c) None of these d) Both (a) and (b)
39) The commercial Banks participate in Repo transactions because of:
a) To meet short fall of CRR —
b) To meet short fall in SLR
e) The interest on Repo is lower than call market d) All these
40) Repo transactions are regulated by:
a) RBI b) Securities Contracts Regulations Act c) (a) and (b) both d) None
41) Which of the following statements is correct?
a) Repo is a short term money market instrument
b) The Repo Rate and period is announced by RBI,c) (a) and (b) both d) None of these
42) What is the Repo Rate with effect from 16th Sept 2010?
a) 5% b) 5.25% C) 5.75% d) 6% e) None of these
43) What is the Reverse Repo Rate with effect from lSept 2010?
a) 4% b) 4.25% c) 4.75% d) 5% e) None of these
44) The process of Repo transaction is:
a) A Bank may sell securities to the counterparty with an agreement to repurchase the same securities after a certain
period at pre determined price.
b) The bank gets cash in exchange of securities and pays back the cash after a certain period and get back the securities.
c) The difference between sale price and repurchase price is interest d) All these
45) The advantage to the counterparty under a Repo transaction is:
a) It earns interest on secured [ending.
b) It holds securities which serves the purpose of meeting SLR requirements.
c) The value of securities is higher by a margin to cover price Risk. d) All these
46) Which of the following statements is correct? .
a) The margin maintained on Repo securities is called hair cut as principal amount exchanged against
securities is lower than the market value of securities
b) RBI uses Repo to control liquidity
c) Banks and primary dealers sell govt. securities to RBI and avail liquidity d) All these
47) Which of the following statements is not correct?
a) RBI uses Repo Transactions under liquidity adjustment facility
b) Liquidity is not affected through lending to Banks under a Repo Transaction.
c) Absorption of liquidity is done by accepting deposits from Banks.
d) Absorption of liquidity by accepting deposits from Banks is known as Reverse Repo.
48) Which of the following statements is correct?
a) RBI has commercial repo auctions on overnight basis.
b) Repo and Reverse Repo Rates have been pre-fixed.
c) RBI has full discretion to change the frequency of auction. d) All these
49) The process of Bill Re-discounting is:
a) Treasury will discount Bill of Exchange of short term nature which are already discounted with the banks.
b) Rediscounting is done at money market rates.
c) The rediscounting rates are negotiable between the lending Bank and borrowing Bank. d) All the above
50) The advantage to the lending Bank is:
a) The surplus funds are invested at term money rate
b) Credit Risk is low as lending Bank has recourse to the discounting Bank
c) (a) and (b) both d) None of these
51) The benefits to borrowing Bank is :
a) It is able to infuse liquidity from out of existing Assets
b) Its capital adequacy ratio is improved or rediscounted bills are added to Inter-Bank liability c) (a) and (b) both
d) All these
52) Which of the followings is significant regarding government securities?
a) They are issued by Public Debt Office of RBI.
b) State govts. Issue state development Bonds.
c) Govt. securities are sold through auction conducted by RBI d) All these
53) Which of the followings is correct?
a) Interest is paid on face value of the bond at coupon rate.
b) RBI arrives at a cut off price based on bids submitted by Banks and primary dealers.

c) The price may be higher or lower than the face value d) All these
54) Price movement of Bond depends on:
a) Demand of the Bond which depends on liquidity in the system.
b) The yield on Bond is different from coupon rate.
c) (a) and (b) both d) None of these
55) If 10 years G. sec. at 7.37 per cent is priced at 104.80, what would be the yield’
a) 6.67% b) 5.42% c) 6.15% d) None of these
56) The interest rates in the economy depends on:
a) Rate of inflation b) GDP growth c) Other economic indicators
d) A combination of all these
57) The variety of Bonds may include: a) Step up coupons b) Coupons linked to inflation c) Floating rate coupons
d) Any of these
58) What is STRIPS:
a) Separately registered interest and principal securities
b) Under this process principal and interest are treated as separate zero coupon securities c) (a) and (b) both
d) None of these
59) What is corporate debt paper?
a) It includes medium and long term bonds and debentures issued by corporates and financial institutions
b) Yield on Bonds is higher than the govt. securities
c) They are called non-SLR securities where banks can invest d) All these
60) Which of the following statements is not correct?
a) Tier-2 capital Bonds issued by Banks fall under the category of corporate debt paper.
b) Bonds issued by corporates are not that liquid_
c) The bonds are issued in D-mat form.
d) Bank Treasury finds an attractive investment in corporate debt paper.
61) Which of the following statements is correct regarding corporate debt paper?
a) Higher the credit risk higher is the yield.
b) Global ratings are necessary if the debt paper is issued in International market.
c) Treasury can invest FCNR deposit funds and other forex surpluses in global debt paper. d) All the above
62) Which of the followings is correct?
a) Debentures are issued by private companies.
b) Bonds mainly issued by public sector companies.
c) Government does not provide guaranter on PSU Bonds d) All these
63) The material difference between debentures and bonds is:
a) Debentures are governed by relevant provisions of company law.
b) Debentures are transferable on registration
c) Bonds are negotiable instrument governed by Law of Contract. d) All these
64) The Bond can be : a) Zero Coupon Bond b) Floating Rate Bond c) Deep Discount Bond
d) Any of these
65) Which of the followings is not correct?
a) Debenture and Bonds can be issued with redemption in instruments over a period.
b) They can be issued with a premium or redemption.
c) There are no Bonds with put and call option
d) Bonds secured by stocks or other collateral are called collaterised obligations
66) Which of the followings is relevant regarding issue of Bonds and debentures?
a) The holders have prior legal claim over the equity and preference stock holders.
b) The Trustee appointed by issuing company protects the rights of debenture holders.
c) The Trustee can initiate legal action against the company in case of any default.
d) All of the above
67) Companies i s suing unsecured debentures and bonds have to compl y wi th the
provision of :
a) Companies Acceptance of Deposit Rules 1975 b) SEBI
c) (a) and (b) both d) None of these
68) What is a convertible Bond?
a) It is a mix of Debt and Equity.
b) Bond holder has an option to convert debt into equity on a fixed date.

c) The conversion price is pre-determined d) All these
69) The advantages of convertible Bonds are:
a) If the stock price is higher than prefixed conversion price, the investor would convert debt into Equity.
b) Company will have no debt repayment
c) The Equity of the company will be strengthened d) All these
70) Which of the followings are derivative products treated on stock exchange?
a) Index features b) Index options c) Stock futures and options d) All these
71) Provisions to invest in Equities are:
a) Banks can invest in Equities upto 20% of their net owned funds
b) Stock prices are highly volatile
c) Banks prefer low risk investments d) All these
72) The provision on Fll investments are:
a) Foreign currency funds are converted into rupee for portfolio investors.
b) Rupee funds with profits are converted into foreign currency for repatriation
c) Flls are allowed to invest in debt market d) All these
73) What is External Commercial Borrowings?
a) Indian companies can borrow on global market through Bank loan or issue of debt paper.
b) The debt can be repaid by reconversion of rupee funds into foreign currency
c) (a) and. (b) both d) None of these
74) The guidelines for investment of foreign currency funds of Banks are?
a) FCNR deposits can be invested in overseas market and for domestic lending :n foreign currency.
b) Banks are permitted to borrow/invest in overseas market 50% of Tier-I Capital.
c) (a) and (b) both d) None of these
75) What is Export Earners Foreign Currency Account?
a) Exporters are allowed to hold 100% export proceeds in a Current Account. wtth
b) No interest is paid on such deposits
c) (a) and (b) both d) None of these
76) What is Gilts?
a) Securities issued by government or Treasuries.
b) They do not have any credit Risk, c) (a) and (b) both d) None of these
77) SGL Account is:
a) Subsidiary General Ledger
b) It is maintained by public debt office of RBI
c) Banks maintain exclusively government Securities Accounts d) All of these
78) Which of the followings is correct?
a) Counterparty is the other party to a Transaction
b) Yield is internal rate of return where interest is also reinvested at original coupon rate.
c) Foreign currency deposits are denominated in foreign currency d) All of these
79) The features of FCNR deposit are:
a) They are denominated either in USD, GBP, JPY or EURO, Can- Dollar and Aus Dollar.
b) The deposits are maintained by non-resident Indians.
c) Interest on FCNR deposits is regulated by RBI d) All of these
80) Broad money or M3 consists of :
a) Currency in circulation b) Demand and time deposits with Banks
c) Deposits of Banks and other deposits with RBI d) All of these
81) Monetary policy of RBI aims at:
a) Controlling rate of inflation b) Ensuring stability of financial market
c) Regulating money supply d) All of these
82) The tools in the hands of RBI for direct control of money supply are:
a) CRR b) SLR c) (a)-and (b) both d) None of these
83) CRR is calculated on net Demand and Time liabilities which contain:
a) Demand deposits and Time deposits
b) Overseas Borrowings
c) Foreign outward remittances and other demand and time liabilities d) All of these
84) The Demand deposits include:
a) Current and Savings Deposits b) Margin Money for Letter of Credits
c) Overdue Fixed Deposits d) All these
85) Other Demand and Time Liabilities include:
ayAccrued Interest b) Credit Balance in Suspense Account
c) Any other liability d) All these
86) In which of the following categories only 3% minimum CRR is required to be
a) Net Inter-Bank call borrowing/deposits where maturity does not exceed 14 days,
b) Credit Balance in ACU (Asian Currency Unit) Accounts
c) Demand and Time liabilities in respect of off shore Banking units d) None of these
87) Banks need not maintain CRR on :
a) Paid up capital, reserves, retained profits, refinance from apex institutions.
b) Excess provision for Income tax .
c) Claims received from DICGC/ECGC d) All these
88) Which of the followings is correct?
a) CRR need not be maintained on Inter-Bank term deposits of original maturity upto one year
b) RBI does not pay interest on CRR Balance
c) The Demand and Time l iabil i ties as on the report ing Friday of second previous
fortnight will be basis for CRR calculation d) All these
89) SLR can be maintained in the form of following Assets:
a) Cash Balance in excess of CRR requirements
b) ,Gold at current market price
c) Approved securities valued as per RBI norms d) All these
90) What is Liquidity Adjustment Facility?
a) It is the mechanism whereby RBI lends funds to Banking sector through repo instrument
b) This is used to monitor day to day market liquidity
c) This is exclusively applicable to repo and reverse repo transactions with RBI
d) All these
91) The features of Negotiated Dealing System are:
a) This is a system where securities clearing against assured payment is handed by Clearing Corporation of India.
b) Physical delivery of cheques are not required.
c) All Inter-Bank Money Market deals are done through Negotiated Dealing System
d) All the above
92) The feature of Real Time Gross Settlement System are:
a) All Inter-Bank payments are settled instantly.
b) Banks’ Accounts with all the Branch offices of RBI are also integrated.
c) Since it is instant payment system, Banks need to maintain adequate funds
throughout the day.
d) All the above
93) Which of the following is correct?
a) Asian currency unit is a mechanism for payment to/from members of Asian clearing union.
b) Off shore Banking units render special Banking services only to overseas customers.
c) SWIFT is a secure worldwide financial messaging system exclusive to Banks.
d) All the above
94) What is DVP?
a) Delivery vesus Payment system where one account is debited and another account is credit at the same time.
b) In case of securities purchase funding account is debited and securities account is credited.
c) This facilitates prompt settlement of security transactions. d) All these

1 C 2 A 3 D 4 D 5 D 6 D 7 D 8 D 9 D 10 D
11 D 12 D 13 A 14 A 15 A 16 D 17 C 18 D 19 D 20 D
21 C 22 D 23 C 24 D 25 A 26 D 27 C 28 D 29 B 30 D
31 D 32 D 33 D 34 D 35 D 36 C 37 D 38 D 39 D 40 C
41 C 42 D 43 D 44 D 45 D 46 D 47 B 48 D 49 D 50 C
51 C 52 D 53 D 54 A 55 A 56 D 57 D 58 C 59 D 60 B
61 D 62 D 63 D 64 D 65 C 66 D 67 C 68 B 69 D 70 D
71 D 72 D 73 C 74 D 75 C 76 C 77 D 78 D 79 D 80 D
81 D 82 C 83 D 84 D 85 D 86 D 87 D 88 D 89 D 90 D
91 D 92 D 93 D 94 D

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