CAIIB 2020 Bank Financial Management Mock Tests Set 11

A claim of ? 60 lacs has been settled by ECGC in favour of a bank against default of ? 80 lacs. Subsequently the bank realizes ? 20 lacs with the collaterals available to the loan. What is the loss suffered by the bank on this loan?


Options are :

  • ? 25 lacs
  • ? 20 lacs
  • ? 15 lacs
  • ? 10 lacs

Answer :? 15 lacs

CAIIB 2020 Bank Financial Management Mock Tests Set 12

Your customer imports goods worth £100,000 per annum from the same suppliers in January each year. Instead of buying all goods in January they would like to import goods on a monthly basis. They would like to know if this is possible under a documentary credit. Can you suggest what type of documentary credit will suit their requirements?


Options are :

  • Revocable letter of credit.
  • Transferable letter of credit.
  • Clean letter of credit.
  • Revolving letter of credit.

Answer :Revolving letter of credit.

Bank B of Baroda negotiated on 12.3.2005 documents under a revocable letter of credit opened by Bank C of California. On 13.3.2005 before the documents were dispatched by Bank B to Bank C, it receives a notice from the latter, dated 11.3.2005 canceling the letter of credit.


Options are :

  • Bank B cannot get reimbursement from Bank C since the documents are negotiated after the cancellation of the letter of credit.
  • Bank B cannot get reimbursement from Bank C, but have recourse to the exporter.
  • Bank B can get reimbursement from Bank C because the documents were negotiated before the notice of cancellation could reach it.
  • Bank B can get reimbursement from Bank C since the notice of cancellation is invalid.

Answer :Bank B can get reimbursement from Bank C since the notice of cancellation is invalid.

Bank of Rajasthan issued an LC of USD 1,00,000 on May 10, 2016, in favor of ABC ltd New York. The last date for shipment is June 10, 2016 and last date for negotiation is 30th June 2016. The goods were shipped on 5th May 2016. The documents were presented to negotiating bank on 15th May 2016. When the documents were sent to Bank of Rajasthan for reimbursement by the negotiating bank, Bank of Rajasthan refused the payment on following grounds

(a) Date of shipment is prior to date of opening of LC

(b) Date of invoice is prior to date of opening of LC




Options are :

  • As per article 14 of UCP-600 documents cannot be dated prior to opening of LC thus non-payment is justified
  • As per article 14 of UCP-600 date of shipment cannot be prior to date of opening of LC
  • Both i & ii
  • None of the above

Answer :None of the above

CAIIB 2020 Bank Financial Management Mock Tests Set 13

A credit issued by Bank A, available with Bank B by Payment included the expiry date as 04 February XX. The beneficiary couriered documents to Bank B on 31 January XX. However on account of a general strike, Bank B was unable to receive and process documents. The beneficiary re-routed the documents directly to Bank A which was received by them on 5th February XX. Which of the following statements reflects Bank A’s position?


Options are :

  • Bank A must pay the beneficiary if documents are credit compliant
  • Bank A is not obliged to pay, since the documents were presented after expiry date
  • Bank A is not obliged to pay since the documents were not presented through the nominated bank
  • Bank A must request the beneficiary to re-present documents to Bank B for payment

Answer :Bank A is not obliged to pay, since the documents were presented after expiry date

A Kerala based bank with huge non-resident Indian customers has entered into rupee drawing arrangement with a large number of private exchange houses in Middle East to facilitate their inward remittances.


Options are :

  • This results in large number of Vostro accounts and audit work of the exchange companies’ accounts
  • This results in large number of Nostro accounts resulting in higher reconciliation work
  • This results in large number of Nostro accounts and audit work of the exchange companies’ accounts
  • This results in large number of Vostro accounts requiring close monitoring of debits & funding

Answer :This results in large number of Vostro accounts requiring close monitoring of debits & funding

Francine is the CFO for a mid-sized corporation based in the USA. Her corporation needs to pay a German company 10,000 Euros in 30 days for materials Francine’s corporation is importing to the USA. Today’s spot rate for the exchange rate between the US Dollar and Euro is 1.2534. The 30-day forward rate is 1.2313. Ignoring interest rates,


Options are :

  • The dollar is at a discount against the Euro in the spot market and undervalued in the forward market.
  • The dollar loses purchasing power over the next 30 days.
  • The dollar gains purchasing power over the next 30 days.
  • The dollar is at a premium against the Euro in the spot market and overvalued in the forward market

Answer :The dollar gains purchasing power over the next 30 days.

CAIIB 2020 Bank Financial Management Mock Tests Set 14

[Case Study on Letter of Credit] -M/s Export Private Limited has received a letter of credit for the export of textile items for an amount of $ 50000 approximately. The company manufactured the goods, made the shipment and presented the documents for negotiation to the negotiating bank for a total invoice value of $ 52356. The negotiating bank refused to negotiate the document as the amount exceeded the amount of letter of credit. What is the position of exporter in the given situation?


Options are :

  • Negotiating bank has all discretion to point out any discrepancy. Hence, it need not pay.
  • The discrepancy pointed out by the negotiating bank does not correct.
  • The Negotiating bank should seek advice of the opening bank in such matters
  • The Information given is complete to take a decision.

Answer :The discrepancy pointed out by the negotiating bank does not correct.

[ Case Study on Letter of Credit ]

An LC provides for Shipment of 500 pieces of trousers in 200 cartons. It also provides that partial shipment is not allowed. The beneficiary hands over 100 cartons to the shipping company on Jul 10 and another 100 cartons on Jul 16. Two bills of landing with dates Jul 10 and Jul 16, are issued. The cartons are to be carried in a single vessel to sail on Jul 20. The documents are negotiated by the negotiating bank put these are returned back by the opening bank, stating that the LC did not permit partial shipment.


Options are :

  • The opening bank cannot be forced to pay because the part shipment is not permitted
  • The opening bank should pay, as it is not partial shipment, since vessel is one.
  • By negotiating defective documents, the negotiating bank has made mistake, hence it cannot force the opening bank to reimburse.
  • The negotiating bank has made mistake. It should recover the payment from the beneficiary.

Answer :The opening bank should pay, as it is not partial shipment, since vessel is one.

[Case Study Letter of Credit] -Universal Bank (the issuing bank) received the documents under LC from Popular Bank (the negotiating bank) on Dec 22 (Tuesday). It took one day to check the documents and forwarded the documents for acceptance by the applicant. On Dec 29, the applicant pointed out that the insurance policy was in a currency different from the one as mentioned in LC. (Dec 25 was a holiday due to Xmas and Dec 27 was Sunday). The opening bank immediately informed the negotiating bank about this discrepancy by way of an Email and sought directions for disposal of the documents. The negotiating bank pointed out that the opening bank could convey the objection if any, within 5 days and not later, due to which it should it should make the payment.


Options are :

  • The observation made by the negotiating bank is not correct. It has received the Objection in time.
  • Observation made by the negotiating bank is correct. Opening bank has conveyed the objection 2 days late.
  • The observation made by the negotiating bank is not correct. It should convey this to the beneficiary and recover the amount.
  • Loss would be to the account of applicant, as he took more than 5 days.

Answer :The observation made by the negotiating bank is not correct. It has received the Objection in time.

CAIIB 2020 Bank Financial Management Mock Tests Set 2

Suppose that Swiss wrist watches priced in Swiss francs become very popular among U.S. consumers while Britain experiences relatively higher inflation than the United States at the same time. Assuming that all other economic parameters remain constant, which one of the following statements is most accurate?


Options are :

  • The U.S. dollar will appreciate relative to both the Swiss franc and the British pound.
  • The U.S. dollar will depreciate relative to both the Swiss franc and the British pound.
  • The U.S. dollar will appreciate relative to the Swiss franc and depreciate relative to the British pound.
  • The U.S. dollar will depreciate relative to the Swiss franc and appreciate relative to the British pound

Answer :The U.S. dollar will depreciate relative to the Swiss franc and appreciate relative to the British pound

A Canadian-based tire company is due a $2,500,000 SGD payment from its Singapore-based distributor in two months. The Canadian firm hedges the exchange rate risk using a forward contract priced at $0.80 CAD/SGD. If the Singapore dollar depreciates over the next two months to a spot rate of $0.73 CAD/SGD, how much more or less will the Canadian-based tire firm receive in Canadian dollars by hedging, versus an unhedged position?


Options are :

  • $175,000 CAD more
  • $175,000 CAD less
  • $70,000 CAD more
  • $29,167 SGD less

Answer :$175,000 CAD more

Extract from a LC: Shipment : From any Indian Airport to Chinese Airport

Documents: Full set of airway bills consigned to order of ABC Ltd evidencing the flight number Transshipments: Not allowed

Which of the following documents are ACCEPTABLE under this LC?

I. Full set airway bill showing shipment from Chennai to Chinese airport, consigned to ABC Ltd on Flight No. 172

II. House airway bill showing shipment from Chennai to Shanghai, consigned to ABC Ltd on Flight No. 172

III. Airway bill showing shipment from Chennai to Shanghai, consigned to order of ABC Ltd stating Flight No. 172 in “Requested Flight” box

IV. Airway bill marked “Original for shipper” showing shipment from Chennai to Beijing, consigned to ABC Ltd on Flight No. 171 from MAA to SIN and Flight No. 173 from SIN to PEK (i.e. using IATA codes)

Options:


Options are :

  • I and II
  • II and III
  • IV only
  • I and IV

Answer :IV only

CAIIB 2020 Bank Financial Management Mock Tests Set 3

Country risk analysis involves seeing what the world will look like in the future, not what it looks like today. Many countries are suffering from massive amounts of debt and political upheaval. As such, there are basic procedures that rating agencies follow when undertaking country risk analysis. Which of the following statements is most likely incorrect regarding how rating agencies measure sovereign default risk? The ratings process includes:



Options are :

  • A rating review process where ratings are reviewed on a periodic basis.
  • A local currency rating that is worse than a country’s corresponding foreign currency rating.
  • Evaluating key country risk factors, such as economic growth life cycle and political risks, which may contribute to default?
  • A ratings recommendation, where an analyst prepares a draft recommendation and a committee of 5 to 10 people decides on the final rating after scoring country risk factors.

Answer :A local currency rating that is worse than a country’s corresponding foreign currency rating.

[Case Study - Haircut]A bank has an exposure towards a term loan facility of ? 100 Crores. The tenor of the loan is 1 year. The bank has received debt security as collateral which is rated A+. There is no maturity mismatch between the exposure and the collateral. The collateral offered by the customer is ? 100 crores, which is eligible collateral as per regulator.

Given – Haircut appropriate to the collateral < 1 year = 1%

Haircut appropriate to the exposure = 0%

Also note that exposure and collateral are in different currencies.

The exposure value after risk mitigation will be-


Options are :

  • ? 9 crores
  • ? 12 crores
  • ? 5 crores
  • ? 18 crores

Answer :? 12 crores

XYZ is a public manufacturing company. Latest financial results of the company are

Working Capital = ?50,00,000

Retained Earnings = ?10,00,000

Operating Income = ?1,00,00,000

Market Value of Equity = ?20,00,000

Book Value of Total Liabilities = ?5,00,000

Sales = ?1,50,00,000

Total Assets = ?30,00,000\

Altman Ratio X1 for the firm is?



Options are :

  • 1.67
  • 1.60
  • 1.50
  • 1.25

Answer :1.67

CAIIB 2020 Bank Financial Management Mock Tests Set 4

If the yield to maturity (YTM) of bond X is greater than the yield to maturity of bond Y, with the same coupon rate and maturity, then which of the following is/are true?

1. The price of bond X will change more than the price of Bond Y for a given change in YTM

2. The market price of bond Y is more than that of X

3. The current yield of both the bonds would be same


Options are :

  • Only (I) above
  • Both (I) and (II) above
  • Both (I) and (III) above
  • Both (II) and (III) above

Answer :Both (I) and (II) above

Central Bank of India is a much bigger bank than Federal Bank Ltd in various banking parameters. Hence naturally, the limits fixed by the boards of the respective banks for their forex treasuries are likely to be higher in Central Bank of India. This limit is higher because the following is more in Central Bank of India


Options are :

  • Total of Tier I & Tier II capital
  • The number of dealers
  • The counterparty limits available in international markets
  • The forex customers base

Answer :Total of Tier I & Tier II capital

Given the following spot and forward rates:

Current 1-year spot rate is 5.5%.

One-year forward rate one year from today is 7.63%.

One-year forward rate two years from today is 12.18%.

One-year forward rate three years from today is 15.5%.

The value of a 4-year, 10% annual-pay, $1,000 par value bond is closest to:


Options are :

  • $996.
  • $1,009.
  • $1,086.

Answer :$1,009.

CAIIB 2020 Bank Financial Management Mock Tests Set 5

Mr. Anil purchased a commercial paper of Zenith Inc. issued for 6 months in the market for ? 9,61,000. The company issued the CP with a face value of ? 10,00,000. Determine the rate of return which Mr. Anil earns.


Options are :

  • 8.11%
  • 9.65%
  • 2.96%
  • 4.89%

Answer :8.11%

A bond portfolio consists of a AAA bond, a AA bond, and an A bond. The prices of the bonds are $1,050, $1,000, and $950 respectively. The durations are 8, 6, and 4 respectively. What is the duration of the portfolio?


Options are :

  • 6.00.
  • 6.07.
  • 6.67.
  • 6.97.

Answer :6.07.

An Australian firm purchased a patent for USD20,000 and machinery for USD21,500 from a U.S. firm when the exchange rates were as follows: (Please note- Rates used are for example purposes only and should not be compared with current prevailing rates)

The impact of these transactions on the capital account of Australia (in AUD) is closest to:


Options are :

  • 19,225.
  • 20,667.
  • 20,806.

Answer :19,225.

CAIIB 2020 Bank Financial Management Mock Tests Set 6

Spot and one-month forward exchange rates are as follows:

Based on these exchange rates, the EUR is closest to a 1month forward:


Options are :

  • premium of 1% to the GHI.
  • discount of 1% to the JKL.
  • premium of 1% to the DEF.

Answer :premium of 1% to the GHI.

In early 2018, a New Zealand traveler returned from Singapore with SGD7,500 (Singapore dollars). A foreign exchange dealer provided the traveler with the following quotes:

The amount of New Zealand dollars (NZD) that the traveler would receive for his Singapore dollars is closest to: (Please note- Rates used are for example purposes only and should not be compared with current prevailing rates)



Options are :

  • 4,565.
  • 7,248.
  • 7,761.

Answer :7,248.

The frequency of submission of Statement on Liquidity Coverage Ratio (LCR)-BLR-1 is


Options are :

  • Monthly
  • Quarterly
  • Weekly
  • Annually

Answer :Monthly

CAIIB 2020 Bank Financial Management Mock Tests Set 7

[Case Study- Altman – Z Score] Following is the data from 2019 annual Report of leading consumer goods manufacturer Godrej Consumer

Godrej Consumer

Z-Score Ratio X1 for the year 2016 is?



Options are :

  • 0.12
  • 0.10
  • 0.15
  • 4.23

Answer :0.10

The following data is given wrt to Telangana Urban bank

Calculate the ratio that Measures the extent to which assets are funded through stable deposit base.



Options are :

  • 45%
  • 50%
  • 55%
  • 60%

Answer :45%

A new-issue, 15-year, ?1,000 face value 6.75% semi-annual coupon bond is priced at ?1,075.

Which of the following describes the bond and the relationship of the bond's market yield to the coupon?



Options are :

  • Premium bond, required market yield is less than 6.75%.
  • Premium bond, required market yield is greater than 6.75%
  • Discount bond, required market yield is greater than 6.75%.

Answer :Premium bond, required market yield is less than 6.75%.

CAIIB 2020 Bank Financial Management Mock Tests Set 1

Interest rates have fallen over the seven years since a ?1,000 par, 10-year bond was issued with a coupon of 7%. What is the present value of this bond if the required rate of return is currently four and one-half percent? (For simplicity, assume annual payments.)


Options are :

  • ?1,052.17.
  • ?1,044.33.
  • ?1,068.72

Answer :?1,068.72

The RBI offers 91-days T-Bill to raise ? 1500 Crores. The following bids have been received.

What is the yield for each of the price at which the bid has been made?


Options are :

  • 4.26%,4.34%,4.38% Respectively
  • 4.26%,4.34%,4.38% Respectively
  • 4.26%,4.34%,4.38% Respectively
  • 4.26%,4.34%,4.38% Respectively

Answer :4.26%,4.34%,4.38% Respectively

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