BFM B - Unit 12 - Motivational Banker

1. Financial Risk is defined as...............?

Uncertainties resulting in adverse variation of profitability or outright losses

Uncertainties that result in outright losses

Uncertainties in cash flow

Variations in net cash flows

Question 1 of 31

2. Strategic Risk is a type of.......?

Interest rate risk

Credit risk

Liquidity risk

None of these

Question 2 of 31

3. A bank funds its assets from a pool of composite liabilities. Apart from credit and operational risks, it faces..............?

Basis risk

Strategic risk

Reputational risk

Compliance risk

Question 3 of 31

4. A branch sanctions Rs. 1 crore loan to a borrower, which of the following risks the branch is taking: 1. Liquidity risk 2. Interest rate risk 3. Market risk 4. Credit risk 5. Operational risk

All of them

1, 2 and 3 only

1, 4 and 5 only

1, 2, 4 and 5 only

Question 4 of 31

5. Premature payment of a term loan will result in interest rate risk of type

Basis risk

Yield curve risk

Embedded option risk

Mismatch risk

Question 5 of 31

6. An entity has a credit sale of Rs. 20 crores for the financial year ended 31st March, 2021. The profit on the sales is 10%. The entity has booked a profit of Rs. 2 crores as on 31/03/21 on the credit sales before actually getting the cash from the debtors. From the statement, it can be deduced that the firm is following___________________

Cash system of accounting.

Discounting system of accounting

Accrual system of accounting.

Forecast system of account.

Question 6 of 31

7. How do banking services differ for different client segments?

They remain the same across all segments

They are tailored to the specific needs of each segment

They are limited to retail consumers only

They focus solely on mid-market corporate clients

Question 7 of 31

8. What does specialized finance entail in banking?

Offering standard financial products to all clients

Providing customized financial solutions for large and risky transactions

Exclusively focusing on lending to small businesses

Restricting financial activities to specific industries only

Question 8 of 31

9. Which of the following is an example of structured financing?

Mortgage lending

Personal loans

Project financing

Credit card services

Question 9 of 31

10. How do banks deliver specialized financing to their clients?

By offering standardized financial products

By tailoring financial solutions to meet specific client needs

By limiting their services to retail banking only

By focusing solely on mid-market corporate clients

Question 10 of 31

11. What are the characteristics of assets and liabilities in the banking book?

They are actively traded in the market.

They are held until maturity.

They are subjected to daily mark-to-market exercises.

They are not subject to capital charges.

Question 11 of 31

12. What accounting method is applied to assets and liabilities in the banking book?

Cash accounting

Accrual accounting

Market-to-market accounting

Historical cost accounting

Question 12 of 31

13. Which type of risk is NOT associated with the banking book?

Liquidity risk

Credit risk

Market risk

Operational risk

Question 13 of 31

14. What is the primary risk faced by assets and liabilities in the banking book due to changes in interest rates?

Liquidity risk

Credit risk

Operational risk

Interest rate risk

Question 14 of 31

15. What is the term used to describe the risk arising from human failures, system deficiencies, and external events in the banking book?

Market risk

Operational risk

Credit risk

Liquidity risk

Question 15 of 31

16. Which of the following is NOT a characteristic of assets in the trading book?

Held until maturity

Liquidated in the market after a certain period

Subject to mark-to-market system

Mainly comprises marketable assets

Question 16 of 31

17. What accounting system is followed for assets in the trading book?

Accrual accounting

Historical cost accounting

Mark-to-market accounting

Cash accounting

Question 17 of 31

18. What is the primary risk faced by assets in the trading book due to adverse movement in market prices?

Liquidity risk

Credit risk

Market risk

Operational risk

Question 18 of 31

19. What type of investments are classified under the Held for Trading category according to RBI norms?

Investments held for long-term capital appreciation

Investments held for hedging purposes

Investments expected to be sold within 90 days for gains from market movements

Investments held for regulatory compliance

Question 19 of 31

20. Which of the following risks is NOT associated with the trading book?

Market risk

Credit risk

Liquidity risk

Interest rate risk

Question 20 of 31

21. What are off-balance sheet exposures primarily contingent upon?

Revenue generation

Cash outflow

Customer obligations

Insurance purchases

Question 21 of 31

22. What types of instruments are considered off-balance sheet market exposures?

Fixed income securities

Equities

Derivatives

Commodities

Question 22 of 31

23. How do off-balance sheet exposures differ from on-balance sheet exposures?

Off-balance sheet exposures involve immediate cash outflow.

On-balance sheet exposures have due dates or maturity dates.

Off-balance sheet exposures do not affect revenue generation.

On-balance sheet exposures are contingent upon customer obligations.

Question 23 of 31

24. Which risks are associated with off-balance sheet exposures?

Only liquidity risk

Only credit risk

Liquidity risk, interest rate risk, market risk, credit risk, and operational risk

Only operational risk

Question 24 of 31

25. What is the definition of basis risk?

The risk of interest rate changes on assets and liabilities occurring simultaneously.

The risk of interest rate changes in different assets, liabilities, and off-balance sheet items varying in magnitude.

The risk of interest rate changes being identical across all assets and liabilities.

The risk of interest rate changes causing net interest income to remain constant.

Question 25 of 31

26. In what scenario does basis risk occur?

When interest rates on assets and liabilities move in tandem.

When interest rates on assets and liabilities change at different rates.

When interest rates on assets and liabilities remain constant.

When interest rates on assets and liabilities are identical.

Question 26 of 31

27. How does basis risk affect a bank's net interest margin (NIM)?

It causes the NIM to remain constant regardless of interest rate changes.

It leads to fluctuations in the NIM based on changes in interest rates.

It ensures a consistent increase in the NIM over time.

It reduces the NIM to zero in volatile interest rate scenarios.

Question 27 of 31

28. What are the two broad channels through which climate-related risks impact the financial sector?

Physical risks and economic risks

Physical risks and transition risks

Economic risks and transition risks

Environmental risks and regulatory risks

Question 28 of 31

29. Which of the following is an example of an acute physical risk associated with climate change?

Rising sea levels

Ocean acidification

Heatwaves

Extreme weather variability

Question 29 of 31

30. How do physical risks associated with climate change affect the financial sector?

By causing a decrease in technological advances

By leading to shifts in public sentiment

By damaging property and infrastructure

By increasing subsidies for fossil fuel use

Question 30 of 31

31. How can transition risks impact businesses and the economy?

By reducing financial valuation of businesses

By increasing the use of fossil fuels

By encouraging investment in high-carbon industries

By decreasing subsidies for energy-efficient goods

Question 31 of 31

BFM B – Unit 12

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