CAIIB 2020 Advanced Bank Management Mock Tests Set 5

The net present value method and the internal rate of return method will always yield the same decision when:


Options are :

  • A single project is evaluated
  • Mutually exclusive projects are evaluated
  • A limited number of projects must be selected from a large number of opportunities
  • All of the above are correct (Correct)

Answer :All of the above are correct

The first step in the process of hypothesis testing is:


Options are :

  • the collection of the sample.
  • to state the hypotheses. (Correct)
  • selecting the test statistic.

Answer :to state the hypotheses.

CAIIB 2020 Retail Banking Mock Tests Set 14

In the process of hypothesis testing, what is the proper order for these steps?


Options are :

  • State the hypotheses. Specify the level of significance. Collect the sample and calculate the test statistics. Make a decision. (Correct)
  • Collect the sample and calculate the sample statistics. State the hypotheses. Specify the level of significance. Make a decision.
  • Specify the level of significance. State the hypotheses. Make a decision. Collect the sample and calculate the sample statistics.

Answer :State the hypotheses. Specify the level of significance. Collect the sample and calculate the test statistics. Make a decision.

Which of the following statements about hypothesis testing is least accurate?


Options are :

  • A Type II error is failing to reject a false null hypothesis.
  • If the alternative hypothesis is H : µ > µ , a two tailed test is appropriate. (Correct)
  • The null hypothesis is a statement about the value of a population parameter.

Answer :If the alternative hypothesis is H : µ > µ , a two tailed test is appropriate.

A Type I error:


Options are :

  • rejects a true null hypothesis. (Correct)
  • rejects a false null hypothesis.
  • fails to reject a false null hypothesis.

Answer :rejects a true null hypothesis.

CAIIB 2020 Advanced Bank Management Mock Tests Set 6

When creating intervals around the mean to indicate the dispersion of outcomes, which of the following measures is the most useful? The:


Options are :

  • variance.
  • standard deviation. (Correct)
  • median.

Answer :standard deviation.

Which of the following statements regarding the terms population and sample is least accurate?


Options are :

  • A sample includes all members of a specified group. (Correct)
  • A descriptive measure of a sample is called a statistic.
  • A sample's characteristics are attributed to the population as a whole.

Answer :A sample includes all members of a specified group.

A simple random sample is a sample drawn in such a way that each member of the population has:


Options are :

  • some chance of being selected in the sample.
  • an equal chance of being included in the sample. (Correct)
  • a 1% chance of being included in the sample.

Answer :an equal chance of being included in the sample.

CAIIB 2020 Advanced Bank Management Mock Tests Set 3

Sampling error is defined as:


Options are :

  • an error that occurs when a sample of less than 30 elements is drawn.
  • an error that occurs during collection, recording, and tabulation of data.
  • the difference between the value of a sample statistic and the value of the corresponding population parameter. (Correct)

Answer :the difference between the value of a sample statistic and the value of the corresponding population parameter.

Which of the following statements about hypothesis testing is most accurate?


Options are :

  • A Type II error is rejecting the null when it is actually true.
  • The significance level equals one minus the probability of a Type I error.
  • A two-tailed test with a significance level of 5% has z-critical values of ±1.96. (Correct)

Answer :A two-tailed test with a significance level of 5% has z-critical values of ±1.96.

The multiplication rule of probability is used to calculate the:


Options are :

  • unconditional probability of an event, given conditional probabilities.
  • joint probability of two events. (Correct)
  • probability of at least one of two events.

Answer :joint probability of two events.

CAIIB 2020 Bank Financial Management Mock Tests Set 11

Which of the following probabilities is an example of an unconditional probability? The probability that the economy will enter a recession:


Options are :

  • any time in the next three years. (Correct)
  • in the next year if tax rates increase.
  • in the next two years if interest rates increase.

Answer :any time in the next three years.

The mean age of all CAIIB candidates is 28 years. The mean age of a random sample of 100 candidates is found to be 26.5 years. The difference of 1.5 years is called the:


Options are :

  • random error.
  • sampling error. (Correct)
  • population error.

Answer :sampling error.

Which of the following statements about hypothesis testing is most accurate?


Options are :

  • If you can disprove the null hypothesis, then you have proven the alternative hypothesis.
  • The power of a test is one minus the probability of a Type I error.
  • The probability of a Type I error is equal to the significance level of the test. (Correct)

Answer :The probability of a Type I error is equal to the significance level of the test.

CAIIB 2020 Retail Banking Mock Tests Set 18

Which of the following option is true regarding “Regression” and “Correlation” ?

Note: y is dependent variable and x is independent variable.


Options are :

  • The relationship is symmetric between x and y in both.
  • The relationship is not symmetric between x and y in both.
  • The relationship is not symmetric between x and y in case of correlation but in case of regression it is symmetric.
  • The relationship is symmetric between x and y in case of correlation but in case of regression it is not symmetric. (Correct)

Answer :The relationship is symmetric between x and y in case of correlation but in case of regression it is not symmetric.

Rohan believes that the average return on equity in the amusement industry, µ, is greater than 10%. What is the null (Ho ) and alternative (Ha ) hypothesis for his study?


Options are :

  • Ho : ? 0.10 versus Ha : > 0.10. (Correct)
  • Ho : > 0.10 versus Ha : ? 0.10.
  • Ho : > 0.10 versus Ha : < 0.10.

Answer :Ho : ? 0.10 versus Ha : > 0.10.

To test linear relationship of y(dependent) and x(independent) continuous variables, which of the following plot best suited?


Options are :

  • Scatter plot (Correct)
  • Barchart
  • Histograms
  • None of these

Answer :Scatter plot

CAIIB 2020 Retail Banking Mock Tests Set 13

Sinking fund factor is the reciprocal of :


Options are :

  • Present value interest factor of a single cash flow.
  • Present value interest factor of an annuity.
  • Future value interest factor of a single cash flow.
  • Future value interest factor of an annuity. (Correct)

Answer :Future value interest factor of an annuity.

To find the present value of a sum of ? 10,000 to be received at the end of each year for the next 5 years at 10% rate, we use:


Options are :

  • The present value of a single cash flow table
  • The present value of the annuity table. (Correct)
  • Future value of a single cash flow table
  • Future value of an annuity table

Answer :The present value of the annuity table.

A company says that whether its earnings increase depends on whether it increased its dividends. From this we know:


Options are :

  • P(dividend increase or earnings increase) = P(both dividend and earnings increase).
  • P(both dividend increase and earnings increase) = P(dividend increase).
  • P(dividend increase - earnings increase) is not equal to P(earnings increase).
  • P(earnings increase - dividend increase) is not equal to P(earnings increase). (Correct)

Answer :P(earnings increase - dividend increase) is not equal to P(earnings increase).

CAIIB 2020 Advanced Bank Management Mock Tests Set 2

The rule of 72 is used to find;


Options are :

  • Approximate doubling period, given the interest rate (r)
  • The approximate interest rate, given the doubling period (n)
  • Both (a) and (b) above. (Correct)

Answer :Both (a) and (b) above.

Which of the following statements about the correlation coefficient is TRUE? The correlation coefficient is:


Options are :

  • bounded between 0 and +1.
  • boundless.
  • bounded between -1 and 0.
  • bounded between -1 and +1. (Correct)

Answer :bounded between -1 and +1.

John purchased 60% of the stocks in a portfolio, while Andrew purchased the other 40%. Half of John's stock picks are considered good, while a fourth of Andrew's are considered to be good. If a randomly chosen stock is a good one, what is the probability John selected it?


Options are :

  • 0.40.
  • 0.30.
  • 0.75. (Correct)

Answer :0.75.

CAIIB 2020 Bank Financial Management Mock Tests Set 3

Which of the following statements is most correct concerning a project with normal cash flows (i.e., a cash outflow in Year 0 followed by cash inflows in all subsequent years)?


Options are :

  • If the NPV of a project is positive then the payback period rule will always accept the project
  • If the NPV of a project is negative, then the profitability index of the project will always be greater than one.
  • If the PI of a project is greater than one, then the IRR will always be less than the project’s cost of capital
  • If the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project. (Correct)
  • If the discount rate of a project is zero, then the project will always be accepted.

Answer :If the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.

A parking lot has 100 red and blue cars in it. 40% of the cars are red. 70% of the red cars have radios. 80% of the blue cars have radios. What is the probability of selecting a car at random that is either red or has a radio?


Options are :

  • 28%.
  • 88%.
  • 76%. (Correct)

Answer :76%.

There is a 40% probability that the economy will be good next year and a 60% probability that it will be bad. If the economy is good, there is a 50 percent probability of a bull market, a 30% probability of a normal market, and a 20% probability of a bear market. If the economy is bad, there is a 20% probability of a bull market, a 30% probability of a normal market, and a 50% probability of a bear market. What is the joint probability of a good economy and a bull market?


Options are :

  • 20%. (Correct)
  • 12%.
  • 50%.

Answer :20%.

CAIIB 2020 Retail Banking Mock Tests Set 12

The covariance of the returns on investments X and Y is 18.17. The standard deviation of returns on X is 7%, and the standard deviation of returns on Y is 4%. What is the value of the correlation coefficient for returns on investments X and Y?


Options are :

  • +0.85.
  • +0.65. (Correct)
  • +0.32.

Answer :+0.65.

If a two tailed hypothesis test has a 5% probability of rejecting the null hypothesis when the null is true, it is most likely that the:


Options are :

  • probability of a Type I error is 2.5%.
  • significance level of the test is 5%. (Correct)
  • power of the test is 95%.

Answer :significance level of the test is 5%.

If we fail to reject the null hypothesis when it is false, what type of error has occured?


Options are :

  • Type II. (Correct)
  • Type I.
  • Type III.

Answer :Type II.

CAIIB 2020 Bank Financial Management Mock Tests Set 4

Which of the following statements is correct?


Options are :

  • A zero coupon bond is a promise to pay a single lump sum at some point in the future.
  • The price of a bond moves in the opposite direction to changes in market interest rates.
  • A bond that has a yield to maturity that is greater than its coupon rate will sell at a premium.
  • (a), (b), and (c) are all correct.
  • (a) and (b) are both correct. (Correct)

Answer :(a) and (b) are both correct.

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