SLO

[Banking Awareness 2015-2016] Money Markets Quiz -2

1.

Which of the following can participate as lenders only in call/notice money market for adjusting their cash reserve requirements?
[A]Life Insurance Corporation of India (LIC)
[B]Life Insurance Corporation of India (LIC)
[C]Unit Trust of India(UTI)
[D]All of the above

All of the above
In call/notice money market, Life Insurance Corporation of India (LIC), Unit Trust of India(UTI), National Bank for Agriculture and Rural Development (NABARD) can participate only as lenders.

2.

The maturity of Treasury Bills in India is always less than __:
[A]91 Days
[B]182 Days
[C]365 days
[D]730 Days

365 days
The maturity of Treasury Bills in India is less than 365 days. At present, the active T-Bills are 91-days T-Bills, 182-day T-Bills and 364-days T-Bills.

3.

What does DFHI stand for?
[A]Discount and Finance House of India Ltd.
[B]Discount and Fiscal House of India Ltd.
[C]Discount and Financial House of India Ltd.
[D]Discount and Fund House of India Ltd.

Discount and Finance House of India Ltd.(DFHI)
The Discount and Finance House of India Ltd.(DFHI) was set up in April 1988 by the Reserve Bank of India (RBI) to develop the money market and to provide liquidity to money market instruments.

4.

The treasury bills are short-term money market instruments. They are issued in the form of__:
[A]Promissory notes in physical form
[B]by credit to Subsidiary General Ledger (SGL) account
[C]Gilt account in dematerialised form
[D]All of the above

All of the above
Treasury bills are issued in the form of promissory notes in physical form or by credit to Subsidiary General Ledger (SGL) account or Gilt account in dematerialised form.

5.

The Certificate of Deposit (CD) is a negotiable money market instrument and issued in the form of
[A]Derivative Usance Promissory Note
[B]Usance Promissory Note
[C]Demand Promissory Note
[D]Both a & b

Usance Promissory Note
The Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period. ( Usance Promissory Note has to be paid after certain time period).

6.

What is the minimum maturity period of Certificate of Deposit (CD) issued by banks?
[A]7 days
[B]14 days
[C]91 days
[D]182 days

7 days
The maturity period of Certificates of Deposit (CDs) issued by banks should not be less than 7 days and not more than one year, from the date of issue. The CDs are negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period.

7.

In what denominations Commercial Paper (CP) can be issued?
[A]Rs. 25,000
[B]Rs. 1 lakh
[C]Rs. 5 lakh
[D]None of the above

Rs. 5 lakh
The CPs shall be issued in denominations of Rs 5 lakh and multiples thereof. The amount invested by a single investor should not be less than Rs.5 lakh (face value).

8.

What is the minimum denomination of Treasury bills to issue in India?
[A]Rs. 25,000
[B]Rs. 5 lakh
[C]Rs. 10,000
[D]Rs. 10 lakh

Rs. 25,000
The Treasury bills are available for a minimum denomination of Rs.25,000 and in multiples of Rs. 25,000. They are issued at a discount and are redeemed at par.

9.

Which of the following is included in money supply of the country?
[A]Money held with the households
[B]Money held by Government in treasury
[C]Money held by Reserve Bank as CRR
[D]All of Above

Money held with the households
Money Supply is that part of this Total Stock of Money which is with public. By public we refer to the households, firms, local authorities, companies etc. Thus, public money does not include the money held by the government and the money held as CRR with RBI and SLR with themselves by commercial banks.

10.

Which of the following includes narrow money:
1. Currency held by the public
2. Demand Deposits
3. Time Deposits
Choose the correct option from the codes given below:
[A]Only 1
[B]Only 1 & 2
[C]1, 2 &3
[D]Only 1 & 3

Only 1 & 2
At any point of time, the money held with the public has two most liquid components viz.
Currency Component: This consists of all the coins and notes in the circulation; and
Demand Deposit Component: Demand Deposit component is the money of the general public with the banks, which can be withdrawn by them using cheques, withdrawals and ATMs.
The above two components i.e. currency component and demand deposit component of the public money is called Narrow Money and is denoted by the RBI as M1. Thus, M1 = Currency with the public + Demand Deposits of public in Banks

Comments