DECEMBER 2012 EXAMINATION

eFM06 Financial Services Time : Three Hours

Note : 1. 2. 3. 4.

Maximum Marks : 100

The paper is divided in three sections: Section A, Section B and Section C. Section A consists of 30 Multiple Choice Questions, each of 2 Marks. Examinees are required to attempt all of them. Section B has 10 Short Answer Type Questions, each of 5 Marks. Attempt any six. Section C consists of a Case Study, followed by two case based questions, each of 5 Marks. Attempt both the questions.

Section A (2 marks each)

1. Which among the following body promoted securities Trading Corporation of India Limited (STCI) jointly with the Public sector Banks? (a) SEBI (b) Reserve bank Of India IDBI Ltd. (d) ICICI Ltd 2. What do we call an agreement whereby an issuing Bank at the request of the Importer (Buyer) undertakes to take payment to the exporter (Beneficiary) against stipulated documents? (a) Bill of exchange (b) Letter of Exchange (c) Letter of Credit (d) Bill of entry 3. Mutual funds are regulated in India by which among the following? (a) RBI (b) SEBI

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(c) Stock exchanges (d) RBI and SEBI both 4. Which among the following is the only correct statement? (a) Money market meets long term financing needs (b) Recession in industrial sector in India is normally due to fall in exports (c) Ways and means advances is given by RBI are nowhere related to states revenue (d) Exchange rate is fixed by RBI 5. Consider the following statements in context with Treasury Bulls? 1. They are issued by Government of India on behalf of RBI 2. They are mostly for short term borrowings 3. Treasury Bills cannot be purchased by any person resident of India Which among the above is/are correct? (a) All are correct (b) 2 & 3 are correct (c) Only 2 is correct (d) Only 3 is correct 6. Bring out the only incorrect statement: (a) Reserve Repo operation by RBI aims are injecting/increasing liquidity (b) SDR refers to special drawing Rupee appreciation results in decrease in imports (d) Increase in inflation rate leads to decline in real interest rate 7. Which among the following is the correct character of the Foreign Exchange Markets? (a) Foreign Exchange markets are localized markets (b) Foreign exchange markets operate within a countrys time zone

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 Foreign exchange markets are dynamic and round the clock markets (d) Foreign exchange markets are used only for trade related transactions 8. Which among the following is correct about the Vostro Account? (a) It is an account maintained by a foreign bank with a bank in India in Indian Rupees. (b) It is an account maintained by an Indian bank with a bank in foreign country in foreign currency It is an account maintained by a Indian Bank Branch with a Foreign Bank in Foreign currency. (d) It is an account maintained by a Foreign bank Branch with a Indian bank in foreign currency. 9. Commercial papers is a: (a) Medium term source of finance (b) Long term source of finance (c ) short term source of finance (d) none of the above. 10. Which of the following statements are true/false? (i) Factoring is a method of financing where a firm sells its trade credit at discount to a financial institution (ii) A factoring arrangement can be both with recourse and as well as without recourses. (a) i only (b) ii only (c ) both i & ii (d) none. 11. The following are not a part of the organized sector of Financial institutions: A. Banking institutions B. Non banking institutions C. Indigenous bankers D. Insurance and housing finance companies 12. The market of new issues is called A. Money market

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B. C. D.

Capital Market Secondary market Primary market

13. Which of the following is correct A. Financial institutions can be categorized into organized and unorganized sector. B. Organized sector can be classified into capital and money market intermediaries. C. The capital market deals with both primary and secondary securities D. All the above 14. A transaction whereby an equipment owner conveys the equipment user the right to use the equipment in return for a rental is regarded as a: A. Lease financing B. Hire purchase C. E Commerce D. Borrowing 15. When the company offers its existing shareholders the privilege to specific number of new shares it is called: A. Pure prospectus method B. Private placement method C. Offer for sale method D. Right issue method 16. The following is true of venture capital: A. The financial capital can be provided at any stage. B. No risk of investment is involved. C. Both are correct. D. Both A & B are incorrect. 17. The banks are regulated by: A. Reserve bank of India B. SEBI C. RBI & SEBI D. Department of commerce 18. Department of company affairs(DCA) administers :

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A. The partnership act B. Companies act ,1956 C. None of the above D. Both the above. 19. Eurodollar implies the following: A. Dollar deposited in European banks. B. Euro deposited in US banks. C. Eurodollar currency D. Dollars in Europe under the jurisdiction of federal reserves. 20. The venture capital fund : A. Needs to be registered with the RBI. B. Is Raised to invest funds in undertakings. C. Both are true D. None of the above are true. 21. A small businessmen in India earning in foreign currency would probably open a: A. A EEFC A/C. B. A NRO A/C. C. A NRE A/C. D. A FCNR A/C. 22. The following features are true for a leasing contract : A. The lessor is the owner of the product. B. The lessee has the ownership right for an agreed period of time. C. The asset has to be immovable in nature. D. All statements are true. 23. Financial lease has the following features: A. Selection of the equipment is done by the lessee. B. The are long term in nature. C. The present value of the minimum lease payment should exceed 90% of the fair market value. D. All conditions have to be fulfilled. 24. An agreement would be regarded as a Hire Purchase agreement when:

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A. The ownership of the property gets transferred with the last agreement. B. C. D. The person does not have the right to terminate the agreement. The maintenance of the equipment is in the hands of the owners. All above are true.

25. The following institutions were set up for promoting venture capital in India : A. IDBI bank B. IFCI C. SBI D. Both a and b. 26. The process through which financial assets are combined and repackaged is called: A. Amortication. B. Mutual funds C. Securitization. D. None of the above. 27. Securitization of credit card balances are called.: A. Grantor trust. B. Master trust. C. Trade receivables securitization. D. None of the above. 28. The load funds have the following features : A. An entry commission is charged. B. An exit commission is charged. C. Both entry and exit commission is charged. D. All are correct. 29. The functions of a merchant banker are as follows: A. Deposit and loans. B. Providing letter of credit. C. Corporate advisory services. D. Providing advances to account holders. 30. A broker which provides a bunch of services such as investment research advice, tax planning and recruitment planning is regarded as an:

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A. Sub- broker. B. Full-service broker. C. Discount broker. D. Direct-Access broker. Section B (6 marks each)
1. 2. 3. 4. markets explain. 5. 6. explain the challenges faced in financial services market. 7. agreement? 8. 9. examples. 10. any other credit rating company. what is credit rating process explain the process with respect to CRISIL or explain the types of financial services in india? Differentiate the Forfeiting with factoring with the help of relevant What is lease financing and how it is different from hire purchase what are the modes of venture capital financing in india Explain the present Scenario of the financial services in India and also What is stock broking services and guidelines issued by SEBI. Explain Nostro and Vostro account. What is financial services and explain its scope? Financial services play an important role in the development of financial

Section C A small firm has credit sales of rs 80 lakhs and its average collection period is 80 days. Experiences of previous year show that bad debts are 1% of credit sales. Firm spend 1200000 rs for its credit management which include the salaries of the credit department staff and other related exp. such as telephone etc. these costs can be avoided. A factor services are available @2% commission. He will pay up to 90% of the credit sales on which firm can earn an interest of 18% p.a. 1. Advice the firm about factoring service. 2. It msakes sense for the companies that pay no taxes to lease from companies that do explain 5+5

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